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Annual Report
ofthe
Secretary of the Treasury
on the
State of the Finances
For the Fiscal Year Ended June 30, 1958
-^
TREASURY DEPARTMENT
DOCUMENT NO. 3210
Secretary
UNITED
STATES GOVERNMENT
PRINTING
O F F I C E , W A S H I N G T O N : 1959
For sale by the Superintendent of Documents. U. S. Government Printing Office
Washington 25, D. C. - Price 32.25 (paper cover)
CONTENTS
Page
1
Transniittal and s t a t e m e n t by t h e Secretary of t h e Treasury
R E V I E W O F FISCAL O P E R A T I O N S
S u m m a r y of fiscal operations
„
Budget receipts a n d expenditures
'
Budget receipts in 1958
Estimates of receipts in 1959 and 1960
Budget expenditures in. 1958
Estimates of expenditures in 1959 and 1960
T r u s t account and other transactions
Account of t h e Treasurer of t h e 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 t h e United
States Government
"
.,
Securities owned by t h e United States Government
Taxation developments
International financial a n d m o n e t a r y developments
5
7
7
11
17
18
19
21
22
26
33
37
40
41
52
ADMINISTRATIVE R E P O R T S
M a n a g e m e n t improvement program
Comptroller of t h e Currency, Bureau of t h e
Customs, Bureau of
Defense Lending, Office of
•
Engraving and Printing, Bureau of
Fiscal Service
•
Internal Revenue Service
International Finance, Officeof
Mint, Bureau o f t h e
Narcotics, Bureau ofUnited State.s Coast Guard
United States Savings Bonds Division
United States Secret Service
.
.:
:
-_^
^_-._
71
76
78
92
94
100
129
138
139
143
147
165
168
EXHIBITS
PUBLIC DEBT OPERATIONS AND CALLS OF GUARANTEED OBLIGATIONS
Treasury Certificates of I n d e b t e d n e s s , Treasury Notes, and Treasury Bonds
Offered and Allotted, and Treasury Bonds Called for Redemption
Page
1. Treasury certificates of indebtedness
......
175
• 2. Treasury n o t e s .
•
_'_..
183
3. Treasury bonds
- _ - — ___
_-_
190
4. Call, F e b r u a r y 14, 1958, for redemption on J u n e 15, 1958, of 2% percent
Treasury bonds of 1958-63, dated J u n e 15, 1938 (press release of
F e b r u a r y 14, 1958)
J
200
5. Call, M a y 14, 1958, for redemption on September 15, 1958, of 2K percent Treasury bonds of 1956-59, dated February 1, 1944, and 2 ^
percent Treasury bonds of 1957-59, dated March 1, 1952' (press
release of M a y 14, 1958)
_-_-i
_---'_
:
200
Treasury Bills Offered and Accepted
6. Treasury bills___.
III
201
IV
CONTENTS
United States Savings Bonds Regulations
Page
7. Third amendment, July 1, 1957, to Department Circular No. 677,
Second Revision, am.ending various provisions affecting the interest
rate, investment yield, and the payroll savings plan of United
States savings bonds
8. First amendment, December 23, 1957, to Department Circular No.
905, Revised, enlarging the group of investors permitted to buy
Series H savings bonds
:9. First amendment, December 23, 1957, to Department Circular No.
653, Fourth Revision, enlarging the group of investors permitted to
buy Series E savings bonds
10. Eighth Revision, December 26, 1957, of Department Circular No! 530,
regulations governing United States savings bonds
209
209
210
212
United States Savings Stamps Regulations
11. Department Circular No. 1008, April 25, 1958, regulations governing
Treasury savings stamp agents in selling United States savings
stamps at schools
237
Guaranteed Obligations Called
12. Calls for partial redemption, before maturity, of insurance fund
debentures
239
Legislation
13. An act temporarily increasing the public debt limit
14. An act to increase the public debt limit
^
244
244
PUBLIC DEBT MANAGEMENT
15. Statement by Secretary of the Treasury Anderson, January 17, 1958,
before the House Ways and Means Committee in support of H. R.
9955 and H. R. 9956, bills to amend the statutory debt limitation._
16. Statement by Secretary of the Treasury Anderson, August 15, 1958,
before the Senate Finance Committee in support of H. R. 13580, a
bill to amend the statutory debt limitation
17. Statement by Secretary of the Treasury Anderson, January II, 1958,
at the Budget Press Conference, Treasury Department
18. Statement by Secretary of the Treasury Anderson, February 7, 1958,
before the Joint Economic Committee on the January 1958 Economic
Report of the President
19. Remarks by Secretary of the Treasury Anderson, April 7, 1958, at the
opening of the "Share in America" savings bonds campaign. New
York City, N. Y
__20. Remarks by Secretary of the Treasury Anderson, April 18, 1958,
before the American Society of Newspaper Editors, Washington,
D. C
1--1
21. Statement by Under Secretary, of the Treasury Baird, February 7,
1958, before the Joint Economic Committee on debt management
problems
22. Remarks by Under Secretary of the Treasury Baird, May 9, 1958,
at the 38th Annual Conference of the National Association of
Mutual Savings Banks, Boston, Mass__
244
253
257
258
262
265
270
274
TAXATION DEVELOPMENTS
23. Statement by Secretary of the Treasury Anderson, January 16, 1958,
before the House Ways and Means Committee on general revenue
matters.
24. Statement by Secretary of the Treasury Anderson, February 18, 1958,
before the Subcommittee on Intergovei-nmental Relations of the
House Government Operations Committee
25. Statement by Secretary of the Treasury Anderson, March 12, 1958,
concerning the economic situation
280
282
285
10'
CONTENTS
^^
V
Page
26. Letter of Secretary of the Treasury Anderson, April 10, 1958, to the
Chairmen of the Senate Finance and House Ways and Means Committees concerning permanent legislation for taxation of life insurance companies
27. Letter of the President, May 26, 1958, to the Vice President and the
Speaker of the House recommending continuation of corporation
and excise tax rates
28. Statement by Secretary of the Treasury Anderson, May ^28, 1958,
before the House Ways and Means Committee concerning extension
of corporation-and excise tax rates. _•___
29. Statement by Secretary of the Treasury Anderson, June 12, 1958,
before the Senate Finance Committee in executive session on continuation of corporation and excise tax rates
30. Miscellaneous revenue legislation enacted by the Eighty-fifth Congress,
Second Session
^
:.
285
288
288
289
290
INTERNATIONAL FINANCIAL AND MONETARY DEVELOPMENTS
31. Remarks by Secretary of the Treasury Anderson, January 28, 1958,
before the Mississippi Valley World Trade Conference, New Orleans,
La
.
_32. Statement by Secretary of the Treasury Anderson, March 18, 1958,
before the Subcommittee on International Finance of the Senate
Banking and Currency Committee on the proposed establishment
of an International Development Association.
33. Letter from Secretary of the Treasury Anderson, August 18, 1958, to
the President on the adequacy of the resources of the International
Monetary Fund and the International Bank for Reconstruction and
Development
__.
34. Letter from the President, August 26, 1958, to Secretary of the Treasury Anderson outlining a three-point program for consideration at
the annual meetings in New Delhi of the International Monetary
Fund and the International Bank for Reconstruction and Development
.
...
35. Statement by Secretary of the Treasury Anderson as Governor for
the United States, October 6, 1958, at the opening joint session of the
International Bank for Reconstruction and Development and the
International Monetary Fund, New Delhi, India
36. Statement by Secretary of the Treasury Anderson as Governor for
the United States, October 7, 1958, at the discussion of the Annual
Report of the International Monetary Fund, New Delhi, India
37. Statement by Assistant Secretary of the Treasury Coughrah as
Temporary Alternate Governor of the International Finance Corporation, October 8, 1958, New Delhi, India
38. Joint announcement by the Treasury Department-, the Department
of State, and the Export-Import Bank, January 30, 1958, relating
to financial discussions between the United States and France
39;. Statement by Under Secretary of the Treasury Baird, February 18,
1958, before the House Ways and Means Committee in support of
the trade agreements program
40. Remarks by Assistant Secretary of the Treasury Coughran, April 3,
1958, at a meeting of the League of Women Voters on financing
economic development overseas, San Francisco, Calif
41. Statement by Assistant Secretary of the Treasury Coughran, May 19,
1958, before the Bankers Association for Foreign Trade on financing
economic development overseas, Virginia Beach, Va
42. Statement by Assistant Secretary Robbins, June 19, 1958, before the
Subcommittee on Economic and Social Affairs of the Senate Foreign
Relations Committee in support of a proposed amendment to the
International Claims Settlement Act of 1949
43. Press release, August 10, 1957, on the signing of an exchange agreement between the United States and Paraguay
^__
44. Press release, October 18, 1957, on the signing of an exchange agreement between the United States and Nicaragua.
45. Press releases on extending the exchange agreement between the
United States and Bolivia (November 25, 1957, January 2, 1958)._
292
295
299
300
302
'303
304
305
306
308
312
316
318
318
318
VI
CONTENTS
Page
46. Press release, December 30, 1957, on the signing of an extension of the
stabilization agreement between the United States and Mexico
47. Press release, February 7, 1958, on the signing of a replacement of the
exchange agreement between the United States and Peru
48. Press release, April 1, 1958, on an extension of the exchange agreement
between the United States and Chile
^
.
49. Press release, April 30, 1958, announcing the revocation of the Egyptian
Assets Control Regulations
'
319
319
320
320
ADDRESSES AND STATEMENTS ON OTHER TREASURY POLICIES AND OPERATIONS
50. Statement by Secretary of the Treasury Anderson, Chairman of the
Federal Representatives, August 9, 1957, at the opening session of the
joint Federal-State Action Committee, Hershey, Pa
51. Remarks by Secretary of the Treasury Anderson, December 2, 1957,
before the Advertising Council, New York, N . Y
52. Letter from the Acting Secretary of the Treasury, February 28, 1958,
reporting to Congress on the financial condition and fiscal operations
of the highway trust fund
53. Remarks by Secretary of the Treasury Anderson, April 25, 1958, on
Law Day, University of Texas, Austin, Tex
54. Remarks by Secretary of the Treasury Anderson,, May 21, 1958, at
the Governors' Conference, Bal Harbour, Fla
55. Remarks by Secretary of the Treasury Anderson, September 23, 1958,
at the American Ba^nkers Association Convention, Chicago, 111
56. Extracts from remarks by Under Secretary of the Treasury Scribner,
February 17, 1958, before the Tax Executive Institute, Washington,
D. C
:__
57. Remarks by Under Secretary of the Treasury Scribner, March 28, 1958,
at the opening of the Rochester Area Savings Bonds Campaign, Rochester, N. Y..__
.
58. Remarks by Assistant Secretary of the Treasury Kendall, November
14, 1957, before the National Council of Importers, New York,
N.Y
59. Statement by Assistant Secretary of the Treasury Flues, March 26,
1958, before the Senate Finance Committee in support of a bill,
H . R . 6006, to amend certain provisions of the Antidumping Act
60. Remarks by Assistant Secretary of the Treasury Flues, June 19, 1958,
at the National Conference on Keeping America Strong, Washington,
D. C
61. Press release, January 28, 1958, announcing the effective date of the
Customs Simplification Act of 1956
1
__.
62. Principal provisions of law enacted in 1958 (85th Cong., 2d sess.) relating to acquisition and use of foreign currencies by the United
States Government
320
321
324
330
334
338
344
346
350
352
354
356
357
ORGANIZATION AND PROCEDURE
63. Treasury Department orders relating to organization and procedure. _
359
REPORTING AND ACCOUNTING .
64. Revised regulations and fiscal requirements governing the utilization of
imprest funds for small purchases (General Accounting Office Joint
Regulation, Supplement 1, July 15, 1957; Department Circular No.
908 (Revised) February 10, 1958)
65. Regulations governing reporting bn contract authorizations (Department Circular No. 993, September 4, 1957)
66. 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, Amendment 3, September
11, 1957)
.
67. Regulations governing the issuance of substitutes for checks drawn on
the Treasurer of the United States (Department Circular No. 1001,
December 18, 1957)
.
367
371
372 .
374
. CONTENTS
VII
Page
68. Regulations governing the implementation of the act to improve
governmental budgeting and accounting methods and procedures
(Department Circular No. 987 (Revised), March 19, 1958)
376
69. Regulations governing the deposit with Federal Reserve Banks and
depositary banks of certain taxes (Department Circular No. 848
(Second Revision) May 2, 1958)
____. „ 377.
70. Instructions for reporting Federal grants-in-aid to States and payments
to individuals (Department Circular No. 1014, August 8, 1958)
381
TABLES
Bases of tables
Description of accounts relating to cash operations
385
388
SUMMARY OF FISCAL OPERATIONS
1. Summary of fiscal operations, fiscal years 1932-58 and monthly 1958_.
390
RECEIPTS AND EXPENDITURES
2. Receipts and expenditures, fiscal years 1789-1958
3. Budget receipts and expenditures, monthly for fiscal year 1958 and
totals for 1957 and 1958
4. Public enterprise revolving funds, receipts and expenditures for fiscal
year 1958, and net 1957 and 1958
5. Trust and other receipts and expenditures, monthly for fiscal year
1958 and totals for 1957 and 1958
.
6. Investments of Government agencies in public debt securities,
(net), monthly for fiscal year 1958 and totals for 1957 and 1958--7. Sales and redemptions of obligations of Government agencies in
market (net), monthly for fiscal year 1958 and totals for 1957 and
1958
8. Budget receipts by sources and expenditures by major functions,
fiscal years 1951-58
9. Trust account and other transactions by major classifications, fiscal
years 1951-58
__,
.
10. Budget receipts and expenditures, based on existing and proposed
legislation, actual for the fiscal year 1958 and estimated for 1959
and I960
11. Trust account and other transactions, actual for the fiscal year 1958
and estimated for 1959 and I960.-12. Effect of financial operations on the public debt, actual for the fiscal
year 1958 and estimated for 1959 and 1960
_--_
13. Internal revenue collections by tax sources, fiscal years 1929-58
14. Customs collections and refunds, fiscal years 1957 and 1958
15. Deposits by the Federal Reserve Banks representing interest charges
on Federal Reserve notes, fiscal years 1947-58
16. Postal receipts and expenditures, fiscal years 1916-58
l
17. Cash income and outgo, fiscal years 1950-58
-r--
392
398
426
428
438
440
442
445
447
451
453
454
460
460
461
462
PUBLIC DEBT, GUARANTEED OBLIGATIONS. ETC.
I.—Outstanding
18.
19.
20.
21.
22.
23.
24.
25.
Principal of the public debt, 1790-1958
-_.
469
Public debt and guaranteed obligations outstanding June 30, 1934-58471
Public debt outstanding by security classes, June 30, 1946-58
472
Guaranteed obligations held outside the Treasury classified by issuing
Government corporations and other business-type activities, June
. 30, 1946-58
•
. 474
Maturity distribution of marketable, interest-bearing public debt
and guaranteed obligations, June 30, 1946-58
'.
475
Summary of public debt and guaranteed obligations by security
classes, June 30, 1958
-___
476
Description of public debt issues outstanding June 30, 1958
477
Description of guaranteed obligations held outside the Treasury,
* June 30, 1958
492
VIII
CONTENTS
Page
26. Postal'Savings Systems' deposits and Federal Reserve notes outstanding J u n e 30, 1 9 4 7 - 5 8 - .
-__
27. S t a t u t o r y limitation on the p u b l i c ' d e b t and guaranteed obligations.
J u n e 30, 1958
1
..
28. Changes in the s t a t u t o r y debt limitation, 1941-58
-_..
493
494
495
II.—^Operations
29. Public debt receipts and expenditures by securit}^ classes, monthly
for fiscal year 1958 and totals fof 1957 and 1958
496
30. Changes in public debt issues, fiscal year 1958
504
31. Issues,' maturities, a n d redemptions of interest-bearing public d e b t
securities, excluding special issues, July 1957-June 1958
522
32. Allotments by investor classes on subscriptions for marketable issues
of Treasury bonds, notes, and certificates of indebtedness, fiscal
.years 1954-58,
-_-_
-__- . . . 542
33. Certificates of indebtedness, special series, issues and redemptions,
fiscal year 1958
544
34. Public debt increases and decreases, and balances in t h e account of the.
Treasurer of t h e United States, fiscal years 1916-58
545
35. S t a t u t o r y debt retirements, fiscal years 1918-58-.546
36. Cumulative sinking fund, fiscal years 1921-58
.
547
37. Transactions of t h e cumulative sinking fund, fiscal year 1958
• 548
III.—United States savings bonds
38. S u m m a r y of sales a n d redemptions of savings bonds by series, fiscal
years 1935-58 and monthly 1958
549
39. Sales and redemptions of Series E through K savings bonds by series,
fiscal years 1941-58 and monthly 1958
550
40. Sales and redemptions of Series E and H savings bonds by denominations, fiscal years 1941-58 and monthly 1958
" 554
41. Sales of Series E and H savings bonds by States, fiscal years 1957,
1958, and curnulative
555
42. Percent of savings bonds sold in each year redeemed through each
yearly period thereafter, by denominations
556
IV.—Interest
43. A m o u n t of interest-bearing public debt outstanding, t h e computed
annual interest charge, and t h e computed r a t e of interest, June 30,
1916-58, and a t end of each m o n t h during 1958
. 563
44. C o m p u t e d annual interest r a t e and computed annual interest charge
on t h e public debt by security classes, June 30, 1939-58
_.
564
45. Interest on t h e public debt by security classes, fiscal years 1955-58-_
566
46. Interest on t h e public debt and guaranteed obligations, fiscal years
1940-58 classified by tax status
. 567
V.—Prices and yields of securities
47. Average yields of taxable long-term Treasury bonds by months,
October 1941-June 1958
_--._ — . . 568
48. Prices and yields of marketable public debt issues, June 30, 1957, and
J u n e 30, 1958, and price range since first traded
569
VI.—^Ownership pf governmental securities
49. E s t i m a t e d ownership of interest-bearing governmental securities outstanding June 30, 1941-58, by tj^pe of issuer
50. E s t i m a t e d distribution of interest-bearing governmental securities
outstanding June 30, 1941-58, by tax status and t y p e of issuer
51. Summary of Treasury survey of ownership of interest-bearing public
; debt and guaranteed obligations, J u n e 30, 1957 and 1958
572
574
576
•CONTENTS
IX-
ACCOUNT OF THE TREASURER OF THE UNITED STATES
Page
52; Assets and liabilities in the account of the Treasurer of the United
States, June 30, 1957 and 1958
53. Analysis of changes in tax and loan account balances.
_::.:
578
579
STOCK AND CIRCULATION OF MONEY IN THE UNITED STATES
54. Stock of money, money in the Treasury, in the Federal Reserve
Banks,'and in circulation, by kinds, June 30, 1958
._
'55. Stock of money, money iii the Treasury, in the Federal Reserve
Banks, andin circulation,'June 30, 1913-58
56. Stock of money, by kinds, June 30, 1913-58
_-__..:_..
57. Money in circulation, by kinds, June 30, 1913-58
58. Location of gold, silver bullion at monetarv value, and coin held by
the Treasury on June 30, 1958
59. Paper currency issued and redeemed during the fiscal year 1958, and
outstanding June 30, 1958, by classes and denominations
,.
580
'582
583
584
585
585
TRUST FUNDS AND CERTAIN OTHER ACCOUNTS OF THE FEDERAL GOVERNMENT
I.—Trust funds
Page
60. Holdings of Federal securities by Government agencies and accounts,
at par value, June 30, 1947-58... > _ _ 61. Ainsworth Library fund, Walter .Reed General Hospital, June 30,
1958
.
62. Civil service retirement and disability fund, June 30, 1958
63. District of Columbia teachers' retirement and annuity fund, June 30,
1958
64. District of Columbia, Workmen's Compensation Act, relief and
rehabilitation, June 30, 1958
__65. District of Columbia other funds—Investments as of June 30, 1957
and 1958-.-.
-l:
-.____
66. Employees' life insurance fund. Civil Service Commission, June 30,
1958
__-_:
-._-•-_
67. Federal disability insurance trust fund, June 30, 1958
68. Federal old-age and survivors insurance trust fund, June 30, 1958-_
69. Foreign service retirement and disability fund, June 30, 1958
70. Highway trust fund, June 30, 1958
i.
71. Judicial, survivors annuity fund, June 30, 1958
72. Library of Congress trust funds, June 30, 1958
-_
73. Longshoremen's and Harbor Workers' Compensation Act, relief and
rehabilitation, June 30, 1958
74. National Archives, trust.fund, June 30, 1958
.75. National park trust fund, June 30, 1958
:____•
76. National service life insurance fund, June 30, 1958. _
77. Pershing Hall Memorial fund, June 30, 1958....
78. Philippine pre-1934 bonds, payment as of June 30, 1958
79. Public Health Service gift funds, June 30, 1958
80. Railroad retirement account, June 30, 1958.
81. Unemployment trust fund, June 30, 1958
-_
82. U. S. Government life insurance, fund, June 30, 1958
83. U. S. Naval Academy general gift fund, June 30, 1958
586
590
590
592
593
594
596
597
598
600
601
602
603
604
605 :
605
606
607
608
609
610
611
616
617
II.—Certain other accounts
84. Colorado River Dam fund, Boulder Canyon project, status by operating years ending May 31, 1933 through 1958. _.
.
85. Refugee Relief Act of 1953, loan program through June 30, 1958.--
618
619
FEDERAL AID TO STATES
86. Expenditures for Federal aid to States, individuals, etc.,. fiscal years
1930, 1940, 1950, and 1958
87. 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 1958
620
628
X::
CONTENTS
CUSTOMS STATISTICS
,
88.
89.
90.
91.
92.
93.
94.
95.
96.
•
Page
Summary of Customs collections and expenditures, fiscal year 1958.Customs collections and payments by districts, fiscal year 1958
Merchandise entries by number, fiscal years 1957 and 1958
Vehicles and persons entering the United States by number, fiscal
years 1957 and 1958
Aircraft and aircraft passengers entering the United States by number, fiscal years 1957 and 1958
----'
Drawback transactions, fiscal years 1957 and 1958
^
Principal commodities on which drawback was paid, fiscal years 1957
and 1958
-.
_--_
Seizures for violations of customs laws, fiscal years 1957 and 1958
Investigative activities, fiscal years 1957 and 1958
-
645
646
648
648
649
650.
650
651
652
ENGRAVING AND PRINTING PRODUCTION
97. Postage stamps dies engraved by the Bureau of Engraving and Printing, fiscal year 1958
-98. Deliveries of finished work by the Bureau of Engraving and Printing,
fiscal years 1957 and 1958
653
654
INTERNATIONAL CLAIMS
99. Awards of the Mixed Claims Commission, United States and Germany, certified to the Secretary of the Treasury by the Secretarv
of State, through June 30, 1958
I
100. Mexican claims fund as of June 30, 1958
---_
101. Yugoslav claims fund as of June 30, 1958.
"
656
658
658
GOLD AND CURRENCY TRANSACTIONS AND FOREIGN GOLD AND DOLLAR HOLDINGS
102. United States net gold transactions with foreign countries and international institutions, fiscal years 1952-58
.
103. Estimated gold reserves and dollar holdings of foreign countries as of
June 30, 1957 and 1958104. Assets and liabilities of the exchange stabilization fund as of June 30,
1957 and 1958..
.,
105. Summary of receipts, withdrawals, and balances of foreign currencies.
acquired by the United States without purchase with dollars, July 1,
1957, to June 30, 1958
-106. Foreign currency balances held by the United States, June 30, 1958.
659
660
662
664
666
INDEBTEDNESS OF FOREIGN GOVERNMENTS
107. Indebtedness of foreign governments to the United States arising
from World War I, and payments thereon as of June 30, 1958
108. World War I indebtedness, payments and balances due under agreements between the United States and Germany as of June 30, 1958109. Outstanding indebtedness of foreign countries on United States Government credits (exclusive of indebtedness arising from World
War I) as of June 30, 1958, by area, country, and major program. _
110. Status of accounts under lend-lease and surplus property agreements
(World War II) as of June 30, 1958
667
668
669
671
CORPORATIONS AND CERTAIN OTHER BUSINESS-TYPE ACTIVITIES OF THE UNITED
STATES GOVERNMENT
111. Capital stock, notes, and bonds, of Government agencies held by the
Treasury or other Government agencies, June 30, 1957 and 1958, .
and changes during 1958^
674
112. Borrowing authority and outstanding issues of Government corporations and certain other business-type activities whose obligations
are issued to the Secretary of the Treasury, June 30, 1958
676
113. Comparative statement of obligations of (government corporations
and certain other business-type activities held by the Treasury,
June 30, 1948-58
677
114. Description of obligations of Government corporations and certain
other business-type activities held by the Treasury, June 30, 1958-.
678
CONTENTS
XI
Page
115. Comparative statement of the assets, liabilities, and net investment
of Government corporations and certain other business-type activities, June 30, 1949-58.__
.,
116. Statement of financial condition of Government corporations and
certain other business-type activities, June 30, 1958
'
117. Income and expense of Government corporations and certain other
business-type activities, fiscal year 1958
118. Source and application of funds of Government corporations and
certain other business-type activities, fiscal year 1958
119. Restoration of amounts of capital impairment of the Commodity
Credit Corporation, pursuant to the act of March 8, 1938, as
amended
120. Dividends, interest, and similar earnings received by the Treasury
from Government corporations and certain other business-type
activities, fiscal years 1957 and 1958
1
682
684
690
692
694
695
GOVERNMENT LOSSES IN SHIPMENT
121. Government losses in shipment revolving fund
696
FEDERAL PERSONAL AND REAL PROPERTY
122. Personal and real property inventory of the United States Government as of June 30, 1956, 1957, and 1958
123. Federa.1 personal and real property inventory by departments and
agencies, as of June 30, 1958
697
698
PERSONNEL
124. Number of employees in the departmental and field services of the
Treasury Department, quarterly from June 30, 1957, to June 30,
1958
125. Cash awards paid to employees and estimated savings under the incentive awards program, fiscal years 1957 and 1958
700
INDEX
701
-
-
---
700
SECRETARIES, UNDER SECRETARIES, AND ASSISTANT SECRETARIES
OF THE TREASURY DEPARTMENT FROM JANUARY 21, 1953, TO
JANUARY 16, 1959 i
Term of service
From—
Official
To-
Secretaries of the \Treasury
J a n . 21, 1953
July 29, 1957
July 28, 1957
George M. H u m p h r e y , Ohio.
Robert B. Anderson, Connecticut.
Under Secretaries 2
J a n . 28, 1953
Aug. 3, 1954
Aug. 3, 1955
Aug. 9,.1957
Sept. 30, 1957
July 31, 1955
Sept. 25, 1957
J a n . 31, 1956
Marion B. Folsom, New York.
W. Randolph Burgess, Maryland.
H . C h a p m a n Rose, Ohio.
Fred C. Scribner, Jr., Maine.
Julian B. Baird, Minnesota.
Assistant Secretaries
Jan.
Jan.
Sept.
Aug.
Apr.
Dec.
Dec.
Dec.
24,
28,
20,
3,
18,
4,
16,
17,
1952
1953
1954
1955
1957
1957
1957
1958
Feb. 28, 1957
Aug. 2, 1955
Dec. 15, 1957
Aug. 8, 1957
Dec. 15, 1958
Andrew N . Overby, District of Columbia.
H . Chapm.an Rose, Ohio.
Laurence B. Robbins, Illinois.
D a v i d W. Kendall, Michigan.
Fred C. Scribner, Jr., Maine.
T o m B. Coughran, California.
A. Gilmore Flues, Ohio.
T. Graydon Upton, Pennsylvania.
Deputies to the Secretary
Jan.. 21, 1953
Jan.
9, 1957
Aug. 2, 1954
J a n . 15, 1959
W. Randolph Burgess, New York.
D a n Throop Smith, Massachusetts.
Fiscal Assistant Secretaries
Mar. 16, 1945
J u n e 19, 1955
J u n e 17, 1955
E d w a r d F . Bartelt, Illinois.
William T. Heffelfinger, District of Columbia.
• Administrative Assistant Secretary
Aug.
2, 1950
William W. Parsons, California.
1 For officials from September 11, 1789, through Januarj^ 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 an act approved July 22,1954 (5 U.S.C. 244, 246).
XIII
PRINCIPAL ADMINISTRATIVE AND STAFF OFFICERS OF THE TREASURY
DEPARTMENT AS OF JANUARY 16, 1959
SECRETARY
ROBERT B. ANDERSON
Fred C. Scribner, Jr
Eugene T. Rossides
William W. Parsons
James H. Stover
Paul McDonald
John D. Larson
Willard L. Johnson
Howard M. Nelson
S. T. Adams
Nils A. Lennartson
Stephen C. Manning, Jr
Henry C. Wallich
Douglas H. Eldridge
Nathan N. Gordon-Francis J. Gafford...
Julian B. Baird
Charles J. Gable, Jr
William T. Heffelfinger
Martin L. Moore
George F. Stickney
'
Under Secretary.
Assistant to the Under Secretary.
Administrative Assistant Secretary.
Head, Management Analysis Staff.
Director of Administrative Services.
Assistant Director of Administrative Services.
Budget Officer.
Assistant Budget Ofiicer.
Director of Personnel.
Assistant to the Secretary (for public
affairs).
Deputy to Assistant to the Secretary (for
public affairs).
Assistant to the Secretary.
Chief, Tax Analysis Staff.
Chief, International Tax Staff.
Assistant to the Secretary and Personnel
Security Officer.
i- Under Secretary for Monetary Affairs.
Assistant to the Secretary.
Fiscal Assistant Secretary.
Assistant to the Fiscal Assistant Secretary.
: •-. Technical Assistant to the Fiscal Assistant
Secretary (Systems and Methods Staff).
Hampton A. Rabon, Jr
Technical Assistant to the Fiscal Assistant
Secretary.
Boyd A. Evans-Technical Assistant to the Fiscal Assistant
Secretary.
Frank F. Dietrich
Technical Assistant to the Fiscal Assistant
Secretary.
Sidney S. Sokol
Technical Assistant to the Fiscal Assistant
Secretary.
Frank A. Southard, Jr
Special Assistant to the Secretary.
Robert P. Mayo
-_-Chief, Debt Analysis Staff.
Laurance B. Robbins
Assistant Secretary.
Robert W. Benner
Assistant to the Assistant Secretary.
A. Gilmore Flues
Assistant Secretary.
James P. Hendrick
.
Assistant to the Secretary.
Myles J. Ambrose
Assistant to the Secretary for Law
Enforcement.
Captain Q. R. Walsh, U.S.C.G.- Aide to the Assistant Secretary.
T. Graydon Upton
Assistant Secretary.
Nelson P. Rose
General Counsel.
David A. Lindsay-'
Assistant to the Secretary and Head, Legal
Advisory Staff.
XIV
PRINCIPAL ADMINISTRATIVE AND STAFF OFFICERS
XV
OFFICE OF T H E GENERAL COUNSEL
Nelson P. Rose
Elting Arnold
Arch M. Can trail
John K. Carlock
Jay W. Glasmann
John P. Weitzel
David A. Lindsay
---_
-- General Counsel.
Assistant General -Counsel.
Assistant General Counsel.
Assistant General Counsel.
Assistant General Counsel.
Assistant General Counsel.
Head, Legal Advisory Staff (Assistant to
the Secretary).
Associate Head, Legal Advisory Staff.
Assistant Head, Legal Advisory Staff."
Assistant Head, Legal Advisory Staff.
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.
Chief Counsel, Bureau of Customs.
Chief Counsel, Office of Fiscal Assistant
Secretary.
._ Chief Counsel, Foreign Assets Control,
._ Chief Counsel, Internal Revenue Service.
. Chief Counsel, Office of International
Finance.
Chief Counsel, Bureau of Narcotics.
Chief Counsel, Bureau of the Public Debt.
.
..
Raphael Sherfy. 1
Edward C. Rustigan
Frederick C. Lusk
Hugo A. Ranta
Lawrence Lin ville.
Kenneth S. Harrison..
Roy T. Englert
Robert Chambers
George F. Reeves
.
Edwin F. Rains
Arch M. Can trail
Elting Arnold
Alfred L. Tennyson
Thomas J. Winston, Jr
OFFICE OF INTERNATIONAL FINANCE
George H. Willis
Elting Arnold
Director.
Acting Director, Foreign Assets Control.
OFFICE OF THE COMPTROLLER OF THE CURRENOY
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 of the Currency.
Chief National Bank Examiner.
BUREAU OF CUSTOMS
Ralph Kelly
David B. Strubinger
Walter G. Roy
C. A. Emerick
Lawton M. King
Commissioner of Customs.
Assistant Commissioner of Customs.
Deputy Commissioner of Appraisement
Administration.
Deputy Commissioner of Investigations.
Deputy Commissioner of Management and
Controls.
Chief, Division of Entry, Value; ;-and
Penalties.
' .',;j.\
Chief, Division of Classification and
Drawbacks.
Chief, Division of Marine Administration.
Chief, Division of Technical Services;
^
B. H. Flinn
W. E. Higman
J. W. Gulick
George Vlases, Jr
BUREAU OF ENGRAVING AND P R I N T I N G
Henry J. Holtzclaw
Frank G. Uhler
•
..- Director, Bureau of Engraving
Printing.
Assistant to the Director.
and
XVI
PRINCIPAL ADMINISTRATIVE AND.. STAFF OFFICERS
BUREAU OF ACCOUNTS (IN T H E FISCAL SERVICE)
Robert W. MaxwelL
Harold R. Gearhart--.1
Howard A. Turner
Ray T. Bath
Commissioner of Accounts.
Assistant Commissioner.
Deputy Commissioner—Central Accounts.
. Deputy Commissioner—Accounting Systems.
Deputy Commissioner—Central Reports.
Deputy Commissioner—Deposits and
Investments.
Assistant Commissioner for Administration (Acting).
Chief Auditor.
Chief Disbursing Officer.
Assistant Chief Disbursing Officer.
Assistant Chief Disbursing Officer.
Technical Assistant.to .the Commissioner.
Executive Assistant to the Commissioner.
Samuel J. Elson
Edmund C. Nussear
Roger E. Smith
Harold A. Ball
Julian F. Cannon-:.
Charles 0. Bryant
Maurace E. Roebuck
George Friedman
Louis L. Collie
.
BUREAU OF T H E PUBLIC DEBT (IN THE FISCAL SERVICE)
Edwin L. Kilby
Donald M. Merritt
Ross A. Heffelfinger, Jr
•
Charles D. Peyton
Commissioner of the Public Debt.
Assistant Commissioner.
Deputy Commissioner in Charge, Washington Office.
Deputy Commissioner in Charge, Chicago
Office.
OFFICE OF T H E TREASURER OF T H E UNITED STATES (IN T H E FISCAL SERVICE)
Ivy Baker Priest
William T. HoAvell
AVillard E. Scott
Treasurer of the United States.
Deputy Treasurer.
Assistant Deputy Treasurer.
.
. -
I N T E R N A L REVENUE SERVICE
Dana Latham
0. Gordon Delk
Harry J. Trainor
William H. Loeb
Harold T. Swartz
Bertrand M. Harding
Commissioner of Internal Revenue.
Deputy Commissioner.
Assistant Commissioner (Inspection).
Assistant Commissioner (Operations).
Assistant Commissioner (Technical).
Assistant Commissioner (Planning and
Research) (Acting).
Adro.inistrative Assistant to the Commissioner.
Fiscal Management Officer.
Chief Counsel.
Director of Practice.
Technical Advisor to the Commissioner.
Wilber A. Gallahan
Gray W. Hume
Arch M. Cantrall
George C. Lea
Leo Speer
BUREAU OF T H E M I N T
William H. Brett
Leland Howard
.._ Director of the Mint.
Assistant Director.
BUREAU OF NARCOTICS
Harry J. Anslinger
Henry L. Giordano
AVayland L. Speer
,-'-
Commissioner of Narcotics.
Deputy Commissioner.
Assistant to the Commissioner.
OFFICE OF D E F E N S E L E N D I N G
Edward T. Stein
Director.
PRINCIPAL ADMINISTRATIVE AND STAFF OFFICERS
XVII
U N I T E D STATES COAST GUARD
Vice Admiral Alfred C. Richmond
Rear Admiral James A. Hirshfield
Captain Walter C. Capron
Rear Admiral.Edward H. Thiele
Rear Admiral Henry T. Jewell
•Rear Admiral' Ira E. Eskridge
Rear Admiral Richard M. Ross
Captain Paul E. Trimble
Commandant, U. S. Coast Guard.
Assistant Commandant and Chief of Staff.
Deputy Chief of Staff.
.: Engineer in Chief.
Chief, Office of Merchant Marine Safety.
Chief, Office bf Operations.
Chief, Office of Personnel.
Comptroller.
U N I T E D STATES SAVINGS BONDS DIVISION
James F. Stiles, Jr
Bill McDonald
L National Director.
Assistant Naitional Director.
UNITED STATES SECRET SERVICE
U. E. Baughman
Russell Daniel
E. A. Wildy
Michael W. Torina
George W. Taylor
Chief, U.S. Secret Service.
Deputy Chief.
Assistant Chief—Security.
Chief Inspector.
Administrative Officer.
TREASURY M A N A G E M E N T C O M M I T T E E
William W. Parsons
Chairman.
Captain Walter C. Capron, U.S.C.G- Member.
John K. Carlock
Member.
Henry L. Giordano
Member.
Russell Daniel
._ Member.
0. Gordon Delk
Member.
Harold R. Gearhart
Member.
Ross A. Heffelfinger, Jr
Mem.ber.
William T. Heffelfinger
Member.
Leland Howard
Mem.ber.
WilHam T. Howell
Member.
L.A.Jennings
Member.
Bill McDonald
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.
Captain Walter C. Capron, U.S.C.G_ Member.
John K. Carlock
Member.
0. Gordon Delk
Member.
Leland Howard
.
Member.
Lawton M. King
.
Member.
Martin L. Moore
_'
Member.
Franklin W. Chapin
Member.
WAGE BOARD
S. T. Adams
Wilham T. Heffelfinger
Willard L. Johnson-
.Chairman.
Member.
Member.
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
Ivy Baker Priest
Chairman.
E M P L O Y M E N T POLICY OFFICER
Willard E. Scott.
479641—59
2
•ORGANIZATION OF THE DEPARTMENT OF THE TREASURY-
January 16,1959
UNDER SECRETARY
Office \
ofthe
)
Secretary/
t i a i to the
Secretory for Lo»
Enforcement!/
ASSISTANT
TO THE
SECRETARY
ASSISTANT
TO THE
SECRETARY
ADMINISTRATIVE
ASSISTANT
SECRETARY
ASSISTANT
TO THE
SECRETARY
ASSISTANT
TO THE
SECRETARY
dZI
Bureau of
Engraving and
Printing
CHART
llnternal Revenue |
Service
Bureau of
the Mint
Office of the
Comptroller of
the Currency
1.
1 The General Counsel serves as legal advisor to the Secretary, his associates, and heads of bureaus
Revenue^Service^^ ^^^ "^^^^ Enforcement coordinates enforcement activities of the U.S. Secret Service, U.S. Coast.Guard, Bureau of Customs, Bureau of Narcotics, and Internal
ANNUAL REPORT ON THE FINANCES
TREASURY DEPARTMENT,
Washington J D. C.j January 30, 1959.
Sirs: I have the honor to report to you on the finances of the
Federal Government for the fiscal year ended June 30, 1958.
The decline in economic activity which characterized the greater
part of the fiscal year had a strong impact on revenues, which were
lower than had been anticipated. As a result, the Federal Government had to close the gap between revenues and expenditures by
additional new money borrowing, and this has been necessary also
during the current year.
With the strong recovery now in process, the Government's, fiscal
position should show considerable improvement in the period ahead.
ROBERT B .
ANDERSON,
Secretary oj the Treasury.
T o THE P R E S I D E N T OP T H E S E N A T E .
T o THE S P E A K E R OF T H E H O U S E OF R E P R E S E N T A T I V E S .
-
1
REVIEW
OF F I S C A L
OPERATIONS
Summary of Fiscal Operations
Net budget receipts were $69.1 billion and budget expenditures
were $71.9 billion in the fiscal year 1958. To finance the deficit of
$2.8 billion and to increase the cash balance in the account of the
Treasurer of the United States, Treasury borrowing during the year
resulted in an increase of $5.8 billion in the public debt. As of June
30, 1958, the public debt outstanding amounted to $276.3 billion as
compared with $270.5 billion a year earlier. The following summary
outlines the Government's fiscal operations and their effect on the
public debt in the fiscal years 1957 and 1958.
Budget results:
Netreceipts
Net expenditures..
Budget deficit, or surplus (•^)Plus:
Trust account and other transactions, excess of expenditures, or receipts (—)
Change in Treasurer's balance:
Increase, or decrease (—)
Equals: Public debt increase, or decrease (—) _
1 Includes net trust account transactions, etc.; net investments 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.
The President's 1960 Budget Message estimates a balanced budget
for the fiscal year 1960. Net budget receipts are estimated at $77.1
billion and expenditures are estimated at $77.0 billion. For the fiscal
year 1959 net budget receipts are estimated at $68.0 billion and expenditures at $80.9 billion.
Budget receipts in 1958 declined because of the recession in business
activity. The business downturn began and ended in the fiscal year
1958. However, because tax collections lag behind the accrual of
tax liabilities, especially in the corporate tax area, the impact of the
recession was only partially reflected in 1958 revenues. Receipts
from all principal tax sources, individual and corporate income taxes
and excise taxes, declined in 1958, but the extent of the decline was
lessened by the lag in collectioins. The balance of the revenue impact of the recession will be reflected in receipts fof fiscal 3^ear 1959,
5
6
1958 REPORT OF THE SECRETARY OF THE TREASURY
C H A R T 2.
THE BUDGET
$Btl.
80
2.8--^Defictt
'55
-Fiscal Years-
which will fall below fiscal year 1958 receipts, principally because of
the large drop in corporation income taxes. The fiscal year 1960 will
be the first year in which receipts will be relatively unaffected by the
declines in incomes which occurred during the 1957-58 recession.
Expenditures were somewhat higher in 1958 because of antirecession
ineasures; procurement was speeded up and programs to aid economic
recovery were initiated. Partly because of these programs and partly
because of certain large nonrecurring expenditures, budget expenditures are estimated to rise substantially in 1959. However, a decline
is anticipated for 1960. '<
Since receipts in 1959 are estimated to be lower than in 1958 and
expenditures to be higher, the budget deficit in 1959 is estimated to
be $12.9 billion as compared with the deficit of $2.8 billion in 1958.
The Treasury's cash balance is expected to decline in 1959 from the
unusuall}^ high 1958 3^ear-end level. Thus the increase in public debt
in 1959 is estimated at $8.7 billion, substantially less than the budget
deficit. In 1960 receipjt^ and. expenditures are estimated to be in
approximate balance and no change is anticipated in the public debt
In that year.
One of the important factors in Treasury financing operations is
the uneven flow of receipts into the Treasury in the course of a fiscal
year, as compared with the relatively stable outflow of expenditures.
'
REVIEV^ OF FISCAL OPERATIONS
7
During fiscal 1958 expenditures were almost equally divided between
the two halves of the year; receipts, however, were more than $10^
billion greater in the second half.
Receipts from the individual income tax, representing tax liability
not collected through withholding at the source, and receipts from the
corporation income tax are concentrated in the second half of the fiscal
year. This is a necessary consequence of the tax payment calendars
prescribed by the revenue laws. In the case of un withheld indi^^idual
income taxes, this situation is permanent. In the case of the corpora-^
tion income' tax, the situation is partly transitory. I t results from
the gradual acceleration of corporation income tax payments in process,
which began in fiscal 1956, to provide a transition to a system of
quarterly tax payments. The transition will be completed substantially in fiscal 1960. Thereafter, corporation tax receipts will be more
evenly divided between the two halves of the year. As already noted,
individual income taxes not withheld at the source will also continue
to cause some unevenness in the flow of tax receipts. The disparity
between the flows into and the flows out of the Treasury due to these
two factors will remain an important aspect of the Government'^
financing operations.
The effect of these factors on budget operations by quarters is shown
below.
Period
Net
budget
receipts
1956-1957
1957-1958
Net
Budget Surplus, or
expend- deficit.(-) budget
receipts
itures
Budget Surplus, or
expend- deficit ( - )
itures
In billions of dollars
July-September
October-December
•
Total first half.'.
January-March
April—June
--'-
Total second half , Total fiscal year . _
_ _
14.7
13.4
16.4
17.4
-1.7
-4.0
28.1
33:8
21.7
21.2
17.4
•18.2
r 43. 0
71.0
. 15.4
13.9
17.9
18.1
-2.5
-4.2
-5.7
29.3
36.0
-6.7
4.3
3.0
-20.6
19.2
17.3
18.6
3.3
6
35.6
7.3
39.8
35.9
3 9
69.4
1.6
69.1
71.9
- 2 8-
' Revised.
BUDGET RECEIPTS AND EXPENDITURES
BUDGET RECEIPTS IN 1958
Net budget receipts amounted to $69.1 billion in the fiscal year 1958,
a decrease of $1.9 billion from the record receipts of $71.0 billion in
1957.
The decrease reflected lower corporate profits in the calendar year
1957 than in 1956, and a leveling off in personal income. The further
8
1958 REPORT OF THE SECRETARY OF THE TREASURY
sharp fall in corporate profits during the first half of calendar 1958
will be refiected in fiscal year 1959 tax receipts.
A comparison of receipts, by major sources, in the fiscal years 1957
and 1958 is shown in the following table.
Increase, or decrease (—)
1957
Source
1958
Amount
Percent
In millions of dollars
Internal revenue:
Individual income taxes
Corporation income taxes
Excise taxes
Employment taxes
Estate and gift taxes - _
._
Internal revenue not otherwise classified
Total internal revenue
Customs
___
Miscellaneousreccipts
--
-
___
.-
,
39,030
21, 531
10, 638
7,581
1,378
15
. 38,569
20, 533
10, 814
8,644
1,411
7
-461
-997
177
1,064
33
-8
-1.2
—4.6
1.7
14.0
2.4
-54. 6
80,172
754
2,749
79, 978
800
3,196
-193
45
447-
—.2
6.0
16.2
83, 675
83, 974
298
.4
Deduct:
Transfers to:
Federal old-age and survivors insurance trust
fund
_Federal disability insurance trust fund
Highway trust fund
Railroad retirement account
6,301
333
1,479
616
6,870
863
2,116
575
569
530
637
-41
9.0
158.9
43.1
-6.7
Refunds of receipts:
Internal revenue:
Individual income taxes .
_
Corporation income taxes
Excise taxes
Employment taxes .
Estate and gift taxes
Internal revenue not otherwise classified-_
3,410
364
103
3
13
1
3,845
459
86
4
18
1
435
96
-17
1
5
12.7
26.3
-16.4
40.2
35.9
3,894
20
3
4,413
18
2
Gross budget receipts
.
Total internal revenue-.
Customs
Miscellaneous receipts
._ ___
_
Total refunds of receipts,
Net budget receipts -._
_
618
-2
-^1 .
13.3
—10.4
-33.9
3,917
4,433
515
13.2
71,029
69,117
-1,912
-2.7
The income taxes, individual and corporation, declined on both a
gross and net basis, that is, before and after deduction of refunds.
The corporation income tax drop was the more abrupt. Excise taxes,
on the other hand, increased slightly on a gross basis, but were lower
in fiscal 1958 than in 1957 after deduction of refunds and the transfer
REVIEW
OF FISCAL
9
OPERATIONS
to the highway trust fund. Customs duties and estate and gift taxes
were up by small amounts, and miscellaneous receipts registered a
substantial rise.
The following discussion is in terms of net changes, after the deduction of refunds and transfers.
Individual incorne taxes.—Receipts from individual income taxes
amounted to $34,724 mfllion in the fiscal year 1958, a decline of $896
million as compared with receipts of $35,620 mfllion in 1957. Taxes
withheld from salaries and wages were actually larger in fiscal 1958,
but this gain was converted to a net decline of almost $500 mfllion by
a substantial fall in the amount of taxes collected through declarations
and final payments, and an increase of over $400 mfllion in refunds of
individual income taxes.
Corporation income taxes.—Corporation income tax receipts
amounted to $20,074 mfllion in fiscal 1958 as compared with receipts
of $21,167 mfllion in 1957. The $1,093 mfllion decrease reflected
smaller profits in the tax liabflity year 1957 than in 1956, the liabilities
which primarily determined receipts in the fiscal years 1957 and 1958.
Excise taxes.—Receipts from this source are listed in the following
table.
Increase, or decrease (—)
1957
1958
Source
Amount
Percent
I n millions of dollars
Alcohol taxes
_
Tobacco taxes.
__
_ _ _ ' _
T a x e s o n 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
cards
_ _
__ _
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 d e p o s i t a r y receipts a n d u n a p p l i e d collections
-Gross excise taxes
___
_'
Deduct:
R e f u n d s of receipts.._ . _ - _ .
Transfer t o h i g h w a y t r u s t fund
N e t excise taxes
1 Percentage comparison inappropriate.
.
2,973
1,674
2,946
1,734
-27
60
-.9
3.6
108
3,762
336
1,719
109
3,974
342
1,741
2
212
6
23
1.8
5.6
1.6
1.3
66
-33
-99
10, 638
10, 814
177
1.7
103
1,479
86
2,116
-17
637
-16.4
43.1
9, 055
8, 612
-443
-4.9
(1)
10
19 5S REPORT OF THE SECRETARY OF THE TREASURY
Gross excise taxes of $10,814 million in 1958 represented an increase
of $177 million over 1957. All excise tax sources, with the exception
of the alcohol taxes, contributed to the rise with the principal gains
coming from the manufacturers' excise taxes and the tobacco taxes.
Within these groups, the important gains occurred in the receipts from
taxes on gasoline and cigarettes.
This gross expansion of excise tax receipts was not reflected in net
budget, receipts, however, because of the transfer of certain tax cate. gories to the highway trust fund. Transfers to the highway trust
fund increased $637 million in the fiscal year 1958; this increase is
exaggerated, however, because the transfers were fully effective in
fiscal 1958 but had not been in 1957.
Employment taxes.—Receipts from the various emplojonent taxes
are shown in the following table.
Increase, or decrease (—)
1957
1958
Amount
Percent
In millions of dollars
Federal Insurance Contributions Act and Self-Employment Contributions Act
Railroad Retirement Tax Act
Federal Unemployment Tax Act
Gross employment taxes
_.
Deduct:
Refunds of receipts
Transfers to:
Federal old-age and survivors insurance trust
fund
Federal disabiUty insurance trust fund
Railroad retirement account
Net employment taxes
6,634
616
330
7,733
575
336
7,581
8,644
1,064
14.0
3
4
1
40.2
6,301
333
616
6,870
863
575
569
530
-41
9.0
158.9
-6.7
328
333
16.6
-0.6
1.8
Higher levels of taxable wages and the first full year collection for
the Federal disability insurance trust fund account for the increases
in the employment taxes. Raflroad Retii'ement Tax Act collections
declined because of lower railroad wage payments.
Estate and gift taxes.—Receipts from estate and gift taxes amounted
to $1,393 million in fiscal 1958, $28 million above receipts of $1,365
million in 1957.
Customs.—Customs receipts increased $47 million, reaching $782
mUlion in fiscal 1958:
REVIEW OP. FISCAL OPERATIONS
.
11
Miscellaneous receipts.—Miscellaneous receipts increased to $3,193
mfllion in fiscal 1958. The growth of $448 million came primarfly
from larger interest payments by Government enterprises, increased
deposits by the Federal Reserve Board, and higher amounts of recoveries and refunds.
ESTIMATES OF RECEIPTS IN 1959 AND 1960
The Secretary of the Treasury is required each 3^ear 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 (5 U. S. C. 265)).
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 estimates are based on the assumption that the expansion in
economic activity which resumed in the second quarter of calendar
year 1958. and was strongly evident in the third and fourth quarters will continue through the period underlying fiscal year 1960 receipts.
I t is also assumed for fiscal year 1960 that legislation wiU be enacted
extending corporation income and certain excise tax rates at theh
present levels for a year beyond June 30, 1959, as recommended by
the President.
Budget receipts in the fiscal year 1960 are estimated to be $77.1
bUlion, an increase of $9.1 billion over the amount estimated for the
fiscal year 1959 and $8.0 billion over actual receipts of the fiscal year
1958. Receipts in 1960 are thus estimated to attain a record level,
exceeding the previous peak of $71.0 bfllion achieved in the fiscal year
1957.
Detailed estimates of .budget receipt§ under both existing and
proposed legislation are contained in table 10.
• •Receipts by major sources
Actual receipts for 1958 and estimated receipts for 1959 and 1960
are compared by major sources in the following table. The amount
shown for each receipt source is the net amount after deduction of
refunds and transfers to trust funds.
12
1958 REPORT OF THE SECRETARY OF THE TREASURY
1958
actual
Source
1959
estimate
1960
estimate
Increase
1960 over
1959
In millions of dollars
Individual income taxes
Corporation income taxes
Excise taxes
___•.
Employment taxes..
Estate and gift taxes..
Taxes not otherwise classified.
Customs
._.
Miscellaneous receipts
Net budget receipts
34, 724
20, 074
8,612
36. 900
17; 000
8,'467 =
40, 700
21,448
. 8,945
333
328
340
1,393
. 6
1, 365
1,415
782
9
840
9
900
3,800
4,448
478
12
50
3,193
3,091
3,343
60
252
69,117
68,000
77,100
•9,100
In the estimates for 1959 and 1960, the individual income tax
continues to be, by far, the most important tax source. Revenues
from individual income taxes are about double the corporation income
tax; together, the two income taxes are estimated to account for more
than 80 percent of receipts in 1960.
The corporation income tax, although producing substantially less
revenue than the individual income tax, provides a larger share of the
increase in receipts estimated for fiscal 1960. Receipts from the
corporation income tax are estimated to be $4,448 million gTeater in
1960 than in 1959 and thus exceed the substantial rise of $3,800 million
estimated for individual income tax receipts. Significant increases in
receipts are also estimated for excise taxes and miscellaneous receipts^
prunarily a nontax source. Some increase is expected from all the
major revenue sources in 1960.
The contribution of each tax source to the increase in net budget
receipts in 1960 is substantially different when the comparison is
made with the last actual year, 1958, instead of with the estimates
for 1959. The individual uicome tax provides almost $6.0 billion of
the total increase of $8.0 billion estimated for 1960 over actual receipts
in 1958, the corporation income tax accounts for $1.4 bfllion, excise
taxes for $0.3 billion, and miscellaneous receipts for $0.2 billion.
Estimated budget receipts for 1960 are $6.1 billion greater than the
peak level of actual receipts reached in the fiscal year 1957. The estimated rise in receipts from the individual income tax accounts for $5.1
bfllion or 84 percent of the total iacrease. The increase in miscellaneous receipts, of $0.6 billion is next most important. The rise in
corporation income tax receipts is less than $300 million.
Individual income taxes.—The yield from this source on a gross and
net basis is shown in the following table.
13
KEVIEW OF FISCAL OPERATIONS
1958
actual
Source
1959
estimate
1960
estimate
Increase
1960 over
1959
In millions of dollars
Individual income taxes:
Withheld
Other
_
Gross individual income taxes
T^ess refunds of receipts .
, .
Net individual income taxes
._ .
_
27,041
11, 528
28,700
12.100
31.900
13,100
3,200
1,000
38, 569
• 3,845
40, 800
3,900
45,000
4,300
4,200
400
34, 724
36,900
40,700
3,800
Individual income tax receipts in 1958 fell $896 million from the
level of the preceding year. Reflecting the rise in personal incomes
which commenced in the second quarter of the calendar 3^ear 1958,
receipts in the fiscal year 1959 are estimated to rise $2,176 mfllion over
the depressed 1958 level and to rise further by $3,800 mfllion in fiscal
1960 to a total of $40,700 million. The 1-year increase of $3,800
million estimated for. 1960 exceeds any year-to-3'^ear gain since 1952.
But the 2-year rise of $5,976 mfllion for 1959 and 1960 falls short of
the $6,873 mfllion reached in 1956 and 1957.
Corporation income taxes.—Corporation receipts on a gross and net
basis are shown in the following table.
1958
actual
Source
1959
estimate
1960
estimate
Increase,
or decrease
( - ) , 1960
over 1959
In millions of dollars
Corporation income taxes
Less refunds
_
Net corporation income taxes
20, 533
459
17, 650
650
22,048
600
4,398
—50
20,074
17,000
21, 448
4,448
Receipts of corporation income taxes in each fiscal year are determined primarily by corporate profits of the calendar year ending in
the fiscal year. Thus receipts in the fiscal year 1959 largely reflect
calendar year 1958 profits, and receipts in the fiscal year 1960, calendar
year 1959 profits. Corporate profits declined sharply in the fourth
quarter of the calendar year 1957 and the first half of the calendar
year 1958. Substantial gains have been reported in profits for the
third quarter of 1958 and are indicated for the fourth quarter also,
but it is expected that the average for the calendar year 1958 wfll be
substantially below the calendar year 1957 average. As a result.
14
1958 REPORT OF THE SECRETARY OF THE TREASURY
-corporation income tax receipts are estimated to decrease from $20,074
miflion in flscal 1958 to $17,000 million in fiscal 1959.
I t is estimated that profits in the calendar year 1959 wfll increase
over second half 1958 profits and that the av^erage for 1959 will be
substantially greater than the calendar year 1958 average. Receipts
in fiscal year 1960 are expected to recoup all of the decrease estimated
for fiscal 1959 and to rise to $21,448 million, thus exceeding the 1959
estimate b}^ $4,448 million and actual receipts in 1958 by $1,374
inillion.
The 1-year gain estimated for fiscal 1960 exceeds the increase for
^ny actual year not affected by legislation. However, comparisons
of fiscal years are obscured by variations in the collections data caused
by such factors as the acceleration of payments in the 1951-55 period.
I n terms of the profits on which the taxes are levied, the rebound
-estimated to occur in calendar year 1959 as compared with 1958 wfll
have been exceeded by the proflt recoveries of both calendar years
1950 and 1955.
Excise taxes.—The yield of the excise taxes is shown in the following
table.
1958
actual
Source
1959
estimate
1960
estimate
Increase,
or decrease
( - ) , 1960
over 1959
I n million s of .dollars
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 playing
cards .
_
M a n u f a c t u r e r s ' e x c i s e taxes
Retailers' excise taxes
._
Miscellaneous excise taxes
U n d i s t r i b u t e d depositary receipts a n d u n a p p l i e d collections
-Gross excise taxes
_
D e d u c t : '.'
R e f u n d s of receipts " "
'
.
Transfer to h i g h w a y t r u s t f u n d .
N e t excise taxes
_.
•
•
,
..
2,946
1,734
3,046
1,802
3,119
1,848
73
46
109
3,974
342
1,741
117
3,907
343
1,421
117
5,079
358
1,353
1,172
• 15
-68
-33
51
67
16
10,814
10, 687
11. 941
1, 254
86
2,116
89
2,130
90
2,906
1
776
8,612
8,467
8,945
478
Gross excise taxes, before transfers to the highway trust fund and
before refunds, are estimated to amount to $10,687 million in fiscal
year 1959, a decline of $127 mfllion from actual receipts in 1958. The
loss in receipts from the repeal of the taxes on transportation of property and oU by pipeline, $338 mUlion, and from other legislation of
less revenue importance is greater than the overall decline estimated
for 1959.
In fiscal year 1960 gross excise taxes are estimated to increase by
$1,254 million over fiscal year 1959, to a total of $11,941 million. A
major part of this increase is due to the proposed increase in the
15
REVIEW OF FISCAL OPERATIONS
taxes on gasoline and diesel fuel from 3 cents to 4K cents per gallon
effective July 1, 1959, almost all of which accrues to the highway trust
fund and which therefore will not affect net budget receipts. Increased net budget receipts will result from the proposed new tax on
jet fuel of 4K cents per gallon effective July 1, 1959; and from the
proposal to retain all revenues from the tax on aviation gasoline in
the general fund.
•
A substantial increase in receipts in 1960 is attributable to the
assumption that the increase in business activity which started in
1958 will continue throughout the period affecting 1960 receipts.
Receipts from the tax on passenger automobUes are estimated to
increase substantially in the fiscal year 1960 as automobUe sales in
the calendar years 1959 and 1960 are expected to surpass very appreciably the greatly reduced level of calendar year 1958. Moderate
gains are expected in the revenue from the alcohol and tobacco tax
groups and from telephone taxes. Increases, some of which are substantial on a relative basis, are estimated for virtually all taxes where .
revenues are not adversely affected by legislation. The full year
effect of the repeal of the taxes on transportation of property and oil
by pipeline, effective'August 1, 1958, causes, in addition to the $338
million decline, from 1958 to 1959, a further decline o i $ 160 million in
fiscal 1960. Other legislation is responsible for less important declines in revenue.
On a_net basis after deductions for transfers to the highway trust
fund and for refunds, net excise taxes are estimated to show a relatively
small decline of $145 million in fiscal 1959, but then rise by $478
million to $8,945 million in fiscal year 1960.
Employment taxes.—The yield of the employment taxes is shown in
the following table.
1959
estimate
1958
actual
1960
estimate
Increase
1960 over
1959
Source
I n m i l h o n s of dollars
F e d e r a l I n s u r a n c e C o n t r i b u t i o n s A c t a n d Self-Employm e n t Contributions Act
Railroad R e t i r e m e n t T a x A c t _
-.
F e d e r a l U n e m p l o y m e n t T a x Act—
Gross e m p l o y m e n t taxes
Deduct:
•
Refunds of receipts
Transfers to F e d e r a l old-age a n d sm-vivors insurance t r u s t fund
_. __
Transfer to Federal disability i n s u r a n c e t r u s t f u n d .
Transfer to railroad r e t i r e m e n t account
..
N e t e m p l o y m e n t taxes
479641—59-
•
7,733
575
336
8,224
560
332
10,216
575
344
1,992
1512
8,644
9,116
11,135
2,019
4
4
4
6, 870
863
575
7,354
870
560
9,276
940
575
1,922
70
15
333
328
340
12
m
1958 REPORT OF THE SECRETARY OF THE TREASURY
Receipts from the Federal Insurance Contributions Act and the
Self-Employment Contributions Act are estimated to increase by
$491 mUlion to $8,224 million in fiscal year 1959 partly because of an
estimated increase in the level of taxable wages but principally because ^
of the increase in the tax rate of }i percent each on employers and employees and the increase in the maximum amount taxable from $4,200 to
$4,800 effective January 1, 1959. In fiscal 1960 an increase of $1,992
million is estimated as a result of higher income levels, the full-year
effect of the January 1, 1959, changes in law, and the part-year effect
of a further increase in the tax rate of % percent each on employeis
and employees effective January 1, 1960.
Small declines and recoveries in 1959 and 1960, respectively, are
estimated for receipts from the Railroad Retirement Tax Act and the
Federal Unemployment Tax Act.
Estate and gift taxes.—The ^deld from estate and gift taxes on a
gross and net basis is shown in the following table.
1958
actual
Source
1959
estimate
1960
estimate
Increase
1960 over
1959
In millions of dollars
Estate and gift taxes
Less refunds
.
Net estate and gift taxes
_..
1,411
18
1,380
15
1,430
15
50
1,393
1,365
1,415
50
Receipts are expected to decline somewhat in 1959 and then to
increase in 1960. Because of the length of time after date of death
permitted in the filing of estate tax returns, receipts do not immediately reflect changes in security and other asset values.
Customs.—The yield of receipts from this source on a gross and net
basis is shown in the table which follows.
Source
1958
actual
1959
estimate
1960
estimate
Increase
1960 over
1959
In millions of dollars
Customs
Less refunds
Net customs
_ _-
800
18
858
18
918
18
60
782
840
900
60
Customs receipts are estimated to increase in both 1959 and 1960
as taxable imports increase as a result of expanded business activity.
Miscellaneous receipts.—Receipts from this source on a gross and
net basis are shown in the following table.
17
REVIEW OF FISCAL OPERATIONS
1958
actual
Source
1959
estimate
1960
estimate
Increase, or
decrease ( - ) ,
1960 over
1959
In millions of dollars
Miscellaneous receipts
Less refunds
Net miscellaneous receipts
3,196
2
3,094
3
3,345
2
251
~1
3,193
3,091
3,343
252
The increase of $252 mfllion in misceUaneous receipts estimated for
1960 is attributable for the most part to larger collections of interest
on loans and of dividends and other earnings. I t includes amouuts
under proposed legislation to increase charges for Government services
which provide special benefits to the recipients.
BUDGET EXPENDITURES IN 1958
The net budget expenditures of $71.9 billion during the fiscal 3^ear
represented a rise of $2.5 billion above those in 1957. Of the increase,
$1.7 biUion was divided about equally between major national security
and the three allied expenditures arising mainly from wars and defense
against threats of wars: Interest on debt and taxes, veterans' services
and benefits, and international affairs and finance. The remainder of
the rise was somewhat widety distributed among ^^other" functions^
with the more substantial increases going for aid to housing, public
assistance, conservation and development of land and water resources,,
postal service, and the promotion of aviation and space flight.
Fiscal year
Major
national
security '
International
affairs and
finance 2
Interest*
Veterans'
services
and
benefits
Other
Total
In billions of dollars
1953
1954
1955
1956
1957.
1958
'50.4
' 46.9
' 40.6
MO. 6
'43.3
44.1
'2.2
'1.7
'2.2
'1.8
'2.0
2.2
6.6
6.5
6.4
6.8
7.3
7.7
4.3
4.3
4.5
4.8
4.8
5.0
10.8
8.4
10.9
'12.5
12.1
12.8
74.3
67.8
64.6
66.5
69.4
71.9
SovRCJi.—Budget ofthe United States G over nment for the Fiscal Year Ending June SO, 1960.
' Revised to conform to classification in the 1960 Budget document.
1 Includes military defense; development and control of atomic energy; stockpiling and defense production
expansion; and military assistance. The last was revised through 1957 to exclude amounts formerly shown
as "Defense support."
2 Revised through 1957 to include "Defense support" formerly shown under "Major national security."'
Major national security expenditures from the beginning of the
administration, since the end of the Korean conflict and especially
since 1955, reflect the adjustment of the military machine to the
extraordinary, attainments in science and technology which are providing the advanced new weapons. Principal increases in 1958 were
18
1958 REPORT OF THE SECRETARY OF THE TREASURY
$623 million for military defense (the mUitary functions of the Department of Defense), and $278 million for the development and
control of atomic energy. The 1958 totals for these were respectively,
$39,062 million and $2,268 mUlion.
As anticipated, veterans' benefits in 1958 continued their gradual
net rise which began in 1955. They have tended increasingly, also
as expected, to concentrate in payments for compensation and pensions and for hospital and medical care while education and readjustment benefits decline.
DetaUs of expenditures for national security and for all other
purposes are shown in table 8 for the fiscal years 1951 through 1958.
A summary of ''Other" expenditures, which had a net rise of $758
million in 1958, is shown in the following table.
Agriculture
Labor and
and
welfare agricultural
resources
Fiscal year
Natural
resources
General
Commerce
and
government
housing
Total
In billions of dollars
1953
1954
1955
1956
1957
1958
----
--
2.4
2.5
2.6
2.8
3.0
3.4
2.9
2.6
4.4
4.9
r4.5
4.4
1.5
1.3
1.2
1.1
1.3
1.5
2.5
.8
1.5
2.0
1.5
2.1
1.5
1.2
1.2
1.6
1.8
1.4
10.8
8.4
10.9
••12.5
]2.1
12.8
f Revised.
The increase of $654 mUlion for commerce and housing included
$279 mUlion for aid to housing, $156 mUlion for the postal service,
and $109 million for the promotion of aviation and space flight. Total
expenditures for the last amounted to $404 mUlion, which included
those attributed to the new Federal Aviation Agency ($277 mUlion)
and the new National Aeronautics and Space Administration ($89
mUlion) both established after the close of the fiscal year 1958. Their
1958 expenditures were made for previously existing functions transferred to their jurisdictions. The decline in the outlays for general
government is due to the change in the method of making the Government's contribution to the civU service retirement fund, which prior
to 1958 was included in this category. - Starting in 1958, this payment
is allocated among all employing agencies.
ESTIMATES OF EXPENDITURES IN 1959 AND 1960
Actual expenditures for the fiscal year 1958 and estimates for the
fiscal years 1959 and 1960 are summarized by agencies in the following
table. Further detaUs wUl be found in table 10. The estimates are
based on those submitted to the Congress in the Budget oj the United
States Government jor the Fiscal Year Ending June SO, 1960.
19
REVIEW OP FISCAL OPERATIONS
Actual budget expendiiures for the fiscal year 1958 and estimated expenditures for
1969 and 1960
]In millions of dollars. On basis of 1960 Budget document]
1958
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 of Washington
Federal Aviation Agency
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...
National Aeronautics and Space Administration
Post Office Department
Small Business Administration. ^
State Departraent
--.
Treasury Department:
Interest on the public debt
Other
Veterans' Administration
_
_
Allowance for contingencies
All other
_.
Net budget expenditui"es..
1959
1960
estimate estimate
44
4,875
2,268
22
327
119
49
- 7,341
2,630
24
418
152
51
6,450
2,745
23
476
39,062
733
441
340
277
425
2,645
199
666
229
567
40,800
769
288
243
466
428
3,051
1,064
809
252
1,007
40, 945
853
215
a?
560
411
3,140
318
757
259
562
2,187
1,424
89
674
79
206
2,312
1,569
153
752
165
277
1,850
1,648
280
109
168
243
7,607
839
5,098
""514'
7,500
2,278
5,286
200
621
8,000
900
5,168
100
654
71,936
80,871
77,030
» Excess of credits (deduct).
TRUST ACCOUNT AND OTHER TRANSACTIONS
Certain financial activities of Government agencies that result in
an increase or decrease in the cash balance of the Treasurer of the
United States or the cash held outside the Treasurer's account are
nonbudgetary in character, i. e., they do not affect the budget surplus
or deficit of the Government. These transactions are shown ia
Treasury reports under the following classifications: Trust and deposit fund transactions; net investments of Government agencies in
public debt securities; and net sales or redemptions of obligations of
Government agencies in the market. DetaUs of the transactions in
these categories are given in the tables section in tables 5, 6, 7, and 9.
The aggregate of these transactions for the fiscal year 1958 was an
excess of receipts of $633 million, as compared with $195 million in
1957.
Trust and deposit fund accounts
As defined under ^'Bases of Tables—Description of Accounts Relating to Cash Operations—Nonbudget Accounts," trust funds are
maintained to accoiint for moneys held by the Government for use in
carrying out programs in accordance with trust agreements or statutes,
20
1958 REPORT OF THE SECRETARY OF THE TREASURY
whUe deposit funds are used to account for moneys held by the Government as banker or agent for others, or to account for funds held in
suspense temporarily and later refunded or paid into some other account of the Government. Transactions relating to the majority of
trust accounts are reported on a gross basis, while some trust accounts
operating as revolving or working funds and deposit fund accounts
are reported net. The principal Government trust accounts include:
The Federal old-age and survivors insurance trust fund; Federal disability insurance trust fund; the employees' life insurance fund, Civil
Service Commission; the veterans' life insurance funds; the civil
service retirement and disability funds; the railroad retirement account; the unemployment trust fund; and the highway trust fund.
The aggregate of net transactions in trust and deposit accounts for
the fiscal year 1958 is an excess of receipts in the amount of $262
miflion, as coinpared with $1,409 million in 1957.
Investments of Government agencies in public debt securities (net)
Transactions in this classification may involve budgetary and nonbudgetary accounts, but are not included in the classification of the
parent account since they have no effect on the operating programs of
the fund involved and represent an exchange of assets. The investments in Uiiited States securities, including securities guaranteed by
the United States, proyide interest earnings for these accounts and
are primarUy made in accordance with statutory provisions which
require investment of moneys not needed to meet current expenditures.
The aggregate of net investment transactions for the fiscal year 1958
is an excess of purchases in the amount of $197 mUlion, as compared
with $2,300 mUlion in 1957. In addition, there were net purchases
of securities for the accounts of Government-sponsored enterprises
in the amouiit of $460 mUlion during the fiscal year 1958, as compared
with $39 mUlion in 1957.
Sales and redemptions of obligations of Government agencies in market (net)
In this classification also, the transactions may involve budgetary
and nonbudgetary accounts but are reported separately from the classification of the parent account. The transactions represent financing
operations between the Government agencies and the public and are
reported at the par value of the securities. Such financing activity
by Government agencies is now confined to nonguaranteed secu-
REVIEW OF FISCAL OPERATIONS
21
rities, except for the debentures issued by the Federal Housing Administration in exchange for foreclosed mortgages, and the redemption of matured guaranteed obligations still outstanding in nominal
amounts for which funds are on deposit with the Treasurer of the
United States. The aggregate of net transactions for the fiscal, year
1958 is an excess of sales of securities in the amount of $567 mUlion,
as compared with $1,085 mUlion in 1957. In addition financing operations of Government-sponsored enterprises during the fiscal j e a r
1958 resulted in excess of redemptions in the amount of $167 million,
as compared with $86 million excess of sales in 1957.
ACCOUNT OF THE TREASURER OF THE UNITED STATES
In the account of the Treasurer of the United States are reported
the items of cash or their equivalent and the statutory, liabilities
against such items. The assets consist of gold, silver, paper currency, cG^ih,' unclassified collections, and funds of the Government
with the Federal Reserve Banks and other depositary banks. Liabilities consist of gold and silver certificates. Treasurer's checks outstanding, funds to the credit of the Board of Trustees of the Postal
Savings System, and uncollected items, exchanges, etc. The difference between the assets and liabilities constitutes the balance in
the account of the Treasurer. This balance may be classified in two
categories: (1) AvaUable operating funds, consisting of the gold
balance, available funds on .deposit in 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 or other depositaries. Figures relating to the assets, liabilities, and balance in
the Treasurer's account are published in the Daily Statement oj the
United States Treasury. A comparative analysis of the assets and
liabilities in the account of the Treasurer of the United States, as of
June 30, 1957, and June 30, 1958, is shown in table 52.
The balance in the account as of June 30, 1958, was $9,749 million,
an increase of $4,159 million during the fiscal year. The daUy balances in the. Treasurer's account ranged from a low of $2,581 mUlion
on August 15, 1957, to a high of $10,747 mUlion on June 25, 1958.
Net change in the balance in the ^'Account of the Treasurer of the
22
1958 REPORT OF THE SECRETARY OF THE TREASURY
United States," on basis of the Baily Statement oj the United States
Treasury, is accounted for as follows:
(/TO millions
of dollars)
Balance June 30, 1957
,___Add:
Net deposits
82,094
Net increase in gross public debt
5, 816
Certain public debt redemptions included as cash
withdrawals below ^
2, G90
5, 590
90,000
"
Total
Deduct:
Cash withdrawals
83,188
Investments of Government agencies in public debt
securities, net
714
Sales of obligations of Government agencies in market,
net
48
Accrual of discount on savings bonds and Treasury
bills
1,890
*
95,590
85,841
Balance June 30, 1958
9, 749
1 Represents principally discount included in savings bond and Treasury bill redemptions.
PUBLIC DEBT OPERATIONS AND OWNERSHIP OF
FEDERAL SECURITIES
A net increase of $5.8 bUlion in the public debt and guaranteed
obligations during the fiscal year brought the total Federal debt outstanding to $276.4 bUlion on June 30, 1958. This increase followed
net declines during the two preceding years aggregating $3.8 bUlion
which were made possible largely by budget surpluses totaling $3.2
bUlion. During 1958 in contrast, there was a budget deficit of $2.8
bUlion. Of the $5.8 bUlion increase in debt, $2.8 billion can be attributed to the deficit and the remaining $3.0 bUlion increase in debt
was reflected in the increase in the Treasury cash balance, which was
higher than usual on June 30, 1958.
Interest-bearing public issues outstanding increased by $6.8 billion
during the fiscal year. In the same period there were decreases of
$0.6 billion in special issues to Government investment accounts and
$0.4 billion in noninterest-bearing debt. The increase in public issues was accounted for by an increase of $11.0 billion in marketable
securities, offset in part.by a decline of $4.2 billion in public nonmarketable issues. The decline in public nonmarketable issues was
largely attributable to the turning in for cash of a large volum.e of
both matured and unmatured Series F and G savings bonds (which
are no longer on sale). The decline in special issue holdings by Government investment accounts reflected the unusually high benefits
23
REVIEW OF FISCAL OPERATIONS
C H A R T 3.
THE PUBLrC DEBT'
1 Including public debt and guaranteed obligations.
2 Excluding. Victory Loan proceeds used to repay debt in 1946.
and other payments made from these accounts during the fiscal year,
a result, in .part, of increased unemployment claims and, in part, of
amendments to the Social Security Act liberalizing benefits of the
old-age and survivors insurance.
A summary of changes in the debt during the year is shown in the
accompanying table. Changes in the level of the debt since 1916 are
illustrated in chart 3.
Increase, or
June 30,1957 June 30,1958 decrease
(—)
Class of debt
Public debt:
Interest-bearing:
Public issues:
Marketable
Nonmarketable
In billions of dollars
155.7
66.0
166.7
61.8
11.0
-4.2
221.7
46.8
228.5
46.2
6.8
-.6
268. 5
.5
1.5
274.7
.6
1.0
6.2
.1
-.5
Total public debt
Guaranteed obligations not owned by the Treasury
270.5
.1
276.3
.1
Total public debt and guaranteed obligations
270.6
276.4
Total public issues
-..
Special issues to Government investment accounts
Total interest-bearing public debt
Matured debt on whicli interest has ceased
Debt bearing no interest-
*Less than $50 million.
-
(*)
58
5.8
24
1958 REPORT OF THE SECRETARY OF THE TREASURY
Progress toward debt management objectives
In addition to Treasury new money borrowing required to cover the
deficit and to augment Treasury cash balances, a total of $60 billion of
marketable Treasury issues (exclusive of regular Treasury bills and tax
anticipation issues) reached maturity during the year and required
refinancing.
Treasury financing in connection with both new money and refunding operations had two broad objectives: To contribute to the growth
and stability of the economy and to improve the structure of the debt.
During most of the year these objectives were carried forward in an
environment of declining economic activity. In the fall of 1957 when
economic activity was declining and credit demands were slackening,
the Federal Reserve moved from a policy of credit restraint to one of
credit ease. This policy of credit ease was continued throughout the
remainder of the fiscal year; discount rates at the Federal Reserve
Banks were lowered in four steps from 3K percent prevaUing in late
August 1957 to 1% percent in effect at the end of the fiscal year.
During the preceding fiscal year credit tightness had made the market situation unfavorable for the issuance of long-term bonds. During
the fiscal year 1958, however, the Treasury made important progress in
lengthening and improving the maturity structure of the debt. .Two
issues of bonds of more than 20 years maturity were issued during the
year, an exchange offering of a 3K percent 32-year bond issued in the
amount of $1.7 bUlion in February 1958, and a 3M percent 26-year
11-month bond issued for cash in the amount of $1.1 billion in June
1958. This addition of $2.9 bUlion to the amount of 20-year and over
debt xepresented an increase of about 65 percent in the volume of such
debt outstanding during the year.
An innovation in the case of the June long-term SYi percent bond was
its issuance at a price of lOOK, to yield 3.22 percent. For many years
the Treasury has characteristically issued new securities at par rather
than at a premium or a discount. Since the coupon rates on new
securities are typically stated in terms of an even % of 1 percent, par
issuance has sometimes impeded more exact pricing of a new issue in a
market where the next lower }^ of 1 percent would make the new issue
unattractive and the next higher % would be higher than needed.
In addition to the two issues of long bonds, over $23.K bUlion of
other bonds and notes having maturities of 4 years or more were
issued for cash or in exchange for maturing obligations during the
course of the year. At the end of the year the amount of marketable
debt within one year of maturity amounted to $67.9 bUlion, as compared with $72.1 bUlion on June 30, 1957, a reduction which was
achieved despite an overall increase of almost $6 billion in the public
debt during the year. Similarly, the average length of the marketable
REVIEW OF FISCAL OPERATIONS
25
debt to final maturity (partially tax-exempt bonds to first call date)
increased from 4 years and 9 months in June 1957 to 5 years and 3
months in June 1958. Thus the Treasury was successful during the
year in not only offsetting the effect of the passage of time, which is
always operating to shorten the average length of the marketable
debt, but in actually lengthening the debt.
The structure of the debt at the end of the 1958 fiscal year is shown
in chart 4.
C H A R T 4.
STRUCTURE OF THE PUBLIC DEBT JUNE 30,1958
1 Callable bonds to earliest call date;
The composition of the short-term debt influences to a marked
extent the amount of market disturbance occasioned by refinancing.
Consequently, the Treasury took steps during the year to improve the
debt structure in the under-one-year category, as well as working
toward debt extension.
The most important of these steps was the further scheduling of
•debt maturities (other than regular bUls and tax anticipation issues)
to fall as largely as possible in the months of February, May, August,
and November. This program works in the direction of reducing
the number of times each year that Treasury financing interferes
with other borrowers such as corporations. States, and municipalities.
It\wUl also permit the Treasury to avoid the ^'churning'^ in the money
markets on the major quarterly corporate income tax dates and it
26
1958 REPORT OF THE SECRETARY OF THE TREASURY
facUitates the effective execution of Federal Reserve monetary
policy. At the close of the fiscal year about 69 percent of outstanding
marketable Treasury securities maturing within the next 10 years
(excluding regular Treasury bUls and tax anticipation securities) had
maturity dates falling in these months, as compared with about 56
percent at the end of the previous year and about 10 percent at the
end of June 1953.
The most significant feature of debt ownership change during the
year was caused by the increased tempo of commercial bank purchases
of Federal securities. The demand from the banks helped strengthen
the price structure of the Government securities market and resulted
in the addition of $9 bUlion of Federal securities to commercial banks*
portfolios. Another $2}2 bUlion was added to Federal Reserve
holdings. Government securities held by private nonbank investors
decluied by $6 bUlion: $2 bUlion by nonfinancial corporations, $2
bUlion by individuals, and $2 bUlion by other investors. Individuals
stUl remained the largest single group of holders of Federal securities,
however.
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.
PUBUC DEBT OPERATIONS
As indicated previously, the Treasury made notable progress during
the year in its efforts to lengthen and improve the structure of the
debt. In the first major financing of the year, which took place in
August 1957, holders of maturing issues were offered a 4 percent 4-year
note, redeemable at the option of the holder in 2 years, in addition to
a 4 percent 1-year certificate and a 3% percent 4-month certificate.
In the next major financing, announced in September 1957, three
types of issues were offered for cash: A 4 percent 12-year bond, a 4
percent note maturing in 4 years and 11 months but redeemable at
the option of the holder in 2 years and 5 months, and the reopening of
the 4 percent 1-year certificate originally issued in August 1957. In
November a 3% percent 16-year llK-month bond and a Sji percent
4-year l l ^ - m o n t h note were offered for cash in addition to an exchange
offering of a 1-year certificate. The February 1958 exchange offering
included, along with a 2 ^ percent 1-year certificate, a 3K percent 32year bond and a 3 percent 6-year bond. Later in February a 3 percent 8-year 5K-nionth bond was issued for cash. In AprU a 2% percent
4-year 10-month note was offered for cash and this was followed by
the cash offering of a 3M percent 26-year 11-month bond in June.
The June financing also included a 2% percent 6-year 8-month bond
REVIEW OF FISCAL OPERATIONS
27
and a 1)^ percent 11-month certificate, both offered in exchange for
maturing obligations. In all, $15.5 bUlion of bonds and notes with
maturities in excess of 4 years were issued in exchange for maturing
obligations and $11.1 billion of securities in this category were issued
for cash.
Part of the seasonal needs in the July-December deficit period were
met through the issuance of a 264-day tax anticipation bill issued in
July (maturing on March 24, 1958) and a 237-day special bill issued
in August (maturing on AprU 15, 1958). The tax anticipation issue
was repaid out of.the seasonally heavy tax receipts in the spring of
1958, and the special bUl was included in the February refunding.
During the first half of the fiscal year seasonal and other cash
borrowing brought the public debt very close to the statutory ceiling
of $275 bUlion. The amount of debt subject to the statutory limit
for the July-December period reached a peak of $274.8 bUlion on
December 30. . In an act approved February 26, 1958, a temporary
increase of $5 billion was authorized in t h e debt limit then in effect,
-bringing the temporary ceiling up to $280 bUlion. The increase was
made effective for the period February 26, 1958, through June 30,
1959. A comparison of the statutory debt limit with the public debt
outstanding subject to the limit since June 30, 1953, is shown in
chart 5.
C H A R T 5.
PUBLIC DEBT SUBJECT TO LIMIT
28
1958 REPORT OF THE SECRETARY OF THE TREASURY
For further detaU on the statutory limit on the public debt and
guaranteed obligations as of June 30, 1958, see table 27, and for
summary data for earlier years see table 28.
The following tables summarize the financing operations during the
fiscal year and show the results of the public offerings of marketable
notes, certificates of indebtedness, and bills.
In the June exchange offering, holders of the securities maturing on
June 15, 1958, elected to take $7, 388 million of the 2% percent Treasm y bonds maturing February 15, 1965, an amount in excess of the
anticipated exchanges at the time of the offering. The weight of an
issue of this size, with large acquisitions b}^ temporary holders, exerted
Public offerings of marketable Treasury securities excluding refinancing, of regular
weekly bills, fiscal year 1958
[In millions of dollars]
Date
of
issue
1957
Apr. 1
Aug. 1
Aug. 1
Aug. 1
Aug. 1«
Sept. 26
Oct. 1
Oct. 1
Nov. 29
Dec. 1
Dec. 2
Description of security and maturity date
Issued for
cash
Issued in
exchange
for other
securities
Total
issued
BONDS, NOTES, AND CERTIFICATES OF INDEBTEDNESS
1H% exchange note—April 1,1962 i.
SH% certificate—Dec. 1,1957
4% certificate—Aug. 1, 1958
4% note—Aug. 1,1961 K..
4% certificate—Aug. 1,1958
4% riote—Aug. 15, 1962 6
-4% bond—Oct. 1,19691}6% exchange note—Oct. 1,1962 i.
3 ^ % note—Nov. 15,1962
3M% certificate—Dec. 1,1958
d7/i% bond—Nov. 15, 1974
3 100
3 100
3 100
933
2,000
657
1,143
""654"
2 471
9,871
10,487
2,509
590
471
9,97]
10,587
2,60C
93c
2, OOC
65' 59(
1,14J
"9," 833
9,83;
65'
9,770
3,854
1,727
9,771
3,851,72'
1,48'
lOi
3,97
1,13
1,81
7,38
1958
Feb. 14
Feb. 14
Feb. 14
Feb. 28
Apr. 1
, Apr. 15
June 3
June 15
June 15
2M% certificate—Feb. 14,1959
3% bond—Feb. 15,1964
33^% bond—Feb. 15,1990
3% bond—Aug. 15,1966
114% exchange note—April 1,1963 L
2^i% note—Feb. 15,1963
S}i% bond—May 15,-1985
1 ^ % certificate—May 15,1959.
2H% bond—Feb. 15, 1965
1,484
3,971
1,135
106
1,817
? 7, 388
58, 422
Total bonds, notes, and certificates of indebtedness. _
70,69
BILLS » (MATURITY VALUE)
July 3 3.485% 264-day tax anticipation bills—Mar. 24,1958.
Aug. 21 4.173% 237-day special bills—Apr. 15,1958
Increase in ofiferings of regular weekly bills during period
Dec. 19, 1957 to Jan. 23, 1958
3,002
1,751
3,00
1,75
600
60
Total bills
Total public offerings.
5,35
17,630
58,422
76,05
1 Issued only on demand of owners in exchange for 2%% Treasury Bonds, Investment Series B-1975-80.
2 Amount issued subsequent to June 30,1957.
3 Issued in special allotment to Government investment accounts.
4 Redeemable at the option of the holder in 2 years (August 1,1959) on three months' advance notice.
5 Issued September 26, 1957 (additional amount of the security dated August 1, 1957).
6 Redeemable at the option of the holder in approximately 23^ years (February 15,1960) on three month:
advance notice.
7 During June and July 1958, $491 million of the 2 ^ % bonds of 1965 were purchased by the Treasury i
the market and retired ($104 million during June and $387 million during July).
8 Amounts are maturity value. Treasury bills are sold on a discount basis with competitive bids fo
each issue. The average sale price gives an approximate yield on a bank discount basis as indicated fc
fiach series.
29
REVIEW OF FISCAL OPERATIONS
Disposition of matured marketable Treasury securities excluding refinancing of
regular weekly bills, fiscal year 1958
[In millions of dollars]
D a t e of
refunding or
retirement
Called or m a t u r i n g s e c u r i t y
Description and m a t u r i t y date
Issue d a t e
Redeemed
for cash or
carried t o
matured
debtl
E.xchanged
for n e w
security
Total
Percent
exchanged
BONDS, N O T E S , AND CERTIFICATES OF I N D E B T E D N E S S
1957
Aug. 1
Aug. 1
Aug. 1
Aug. 1
Dec. 2
254% n o t e — A u e . 1.1957
2 % note-^Aii'g.' 15, 1957
3M%icbrtificate—Oct. 1,1957
13^% exchange note—Oct. 1,1957..
3 ^ ^ % certificate—Dec. i , 1957
J u l y 16,1956
F e b . 15,1955
D e c . 1,1956
Oct.
1,1952
A u g . 1,1957
$342
369
318
49
138
$11,714
3,423
6,953
775
9,833
$12,056
3,792
7,271
824
9,971
97 2
90 3
95.6
94.1
98.6
14 3 H % certificate--Feb. 14,1958
14 23^% b o n d — M a r . 15, 1956-58
14 13^% exchange n o t e - A p r . 1,1958..
14 33^% certificate—Apr. 15, 1958
15 • 2^^% riote—June 15,1958
15 2 ^ % b o n d — J u n e 15, 1958-63,
called J u n e 15, 1958. .
J u n e 15 2^^% b o n d — J u n e 15, 1958
J u n e 15 2^i% b o n d — F e b . 15, 1 9 6 5 - . .
F e b . 15,1957
J u n e 2,1941
A p r . 1,1953
M a y 1,1957
D e c . 1,1955
J u n e 15,1938
257
164
49
357
181
28
10,594
1,285
334
1,995
4,211
891
10,851
1,449
383
2,351
4,392
919
97.6
88.7
87.3
84.8
95 9
97.0
July
1,1952
J u n e 15,1958
143
2 104
4,102
4,245
104
96 6
2,499
56,109
1958
Feb.
Feb.
Feb.
Feb.
June
June
T o t a l b o n d s , n o t e s , a n d certificates of I n d e b t e d n e s s . .
1957
BILLS
Sept. 23
T a x a n t i c i p a t i o n bills—Sept. 23,
1957.
M a y 27,1957
1,501
Special bills—Apr. 15, 1958.
T a x a n t i c i p a t i o n bills—Mar. 24,
1958.
Decrease in offering of regular
w e e k l y bills o f M a r . 13,1958.
A u g . 21,1957
July
.3,1957
607
3,002
-.
58, 608
1,501
1958
F e b , 14
M a r . 14
T o t a l biUs-...• T o t a l T r e a s u r y securities..
1,144
1,751
3,002
5,210
1,144
6,354
7,709
57, 253
64,962
100
65.4
100
. . . 1 Including amounts redeemed for taxes in the case of tax anticipation issues.
'^ » During June and July 1958, $491 million of the 2^^% bonds of 1965 were purchased in the market by the
Treasury for retirement under Se„ction 19 of the Second Liberty Bond'Act, as amended (31 U. S. C. 754a),
$104 million, during June 1958 and $387 million during July 1958.
a disturbing effect on the price structure in the Government securities
market.
Uader these circumstances, and inasmuch as cash balances in thfe
general fund of the Treasury resulting from the collection of the
June 15 income tax installment aggregated nearly $10 bUlion, purchases of this issue for retirement were authorized so as to enable the
market to absorb the new issue more readily. During the period from
Juhe 19 through June 30, 1958, and continuing in July, the Treasury
purchased in the market $625 million, face amount, of 2% percent
Treasury bonds of 1965. Purchases for retirement under Section 19
of the Second Libert}^ Bond. Act, as amended, amounted to $491
million: $104 million during June and $387 million during July. In
30
1958 REPORT .OF. THE SECRETARY OF THE TREASURY
addition, purchases of $134 million of the 2% percent bonds of 1965
were made in June for the account of Treasury investment funds.
In. handling its regular weekly offering of 13-week. Treasury bills
during the year, the Treasury raised a net amount of $0.5 billion of
new cash. The: level' of weekly offerings was increased by approximately $100 mUlion a week for six consecutive weeks beginning with
the issue of December 19, 1957. For the issue dated March 13, however, the level of the offering was decreased by $100 million. The
13 issues of regular weekly bUls outstanding at the close of the fiscal
year 1958 totaled $22.4 billion, as compared with $21.9 biUion at the
close of the previous fiscal year.
To raise additional cash for current requirements, the Treasury,
as already noted, issued $3.0 billion of 264-day tax anticipation bills in
July and $1.8 bUlion of 237-day special- biUs in August. The tax
anticipation bills which matured on March 24, 1958, were acceptable
at par in payment of taxes due-on the fifteenth of that month. The
special bills were included in the February refunding. (For- additional
information on all bill issues see exhibit 6.)
The easing of credit beginning in the late fall of 1957 was reflected in
a decline in borrowing costs for the Treasury. The average rate on
new issues of 13-week Treasury bills, for example, dropped from a high
of 3.660 percent in October to a low of 0.635 percent in May, with only
slightly higher rates in. June. Longer term Tates also dropped, but
less sharply.
The weekly average rates on new bill offerings throughout the year
are shown in exhibit 6, and the trend of long-terms is reflected in
table 47. The average annual interest rate as computed on the total
interest-bearing public debt was 2.638 percent on June 30, 1958, as
compared with 2.730 percent a year earlier. (For further detail on
the computed annual interest rate by security classes see table 44.)
Changes contributing to the net decline of $4.2 billion in the public
nonmarketable debt are shown in the following table.
•
Class of security
June 30,1957
June 30,1958
Increase, or
decrease ( - )
In billions of dollars
United States savings bonds:
SeriesE
Series H
Subtotal E and H
Series F and G
Series J and K
.:
__
-._.
Subtotal savings bonds
Treasury bonds, investment series
Depositary bonds
Total interest-bearing public nonmarketable issues
*Less than $60 million.
.-
38.0
3.5
38.1
4.1
0.1
.5
41.5
10.1
3.0
42.1
7.2
2.7
.6
-2.9
-.3
54.6
11.1
.2
52.0
9.6
.2
—2.6
-1.5
66.0
61. 8 .
(*)
-4.2
REVIEW OF FISCAL
OPERATIONS
31
The decline of $1.5 billiori in investment series bonds outstandings
was due principally to the exchange of $1,167 million of the 2% percent
convertible Series B 1975-80 bonds for marketable 5-year 1}^ percent
notes, and the redemption at par of $213 million of these bonds held
by the Postal Savings System in order to provide funds to meet withdrawals of postal savings deposits.
The largest portion of the nonmarketable debt is in United States
savings bonds. The total of all series of interest-bearing savings
bonds outstanding at the close of the fiscal year was $52.0 billion as
compared with $54.6 billion at the close of the previous fiscal year.
The decline of a little over $2}^ billion in outstanding savings bonds
was due entirely to the large redemption of Series F, G, J, and K
savings bonds, both matured and unmatured.
C H A R T 6.
'
E AND H BONDS, FISCAL YEARS l95l-'58
The amount of E and H bonds outstanding (including accrued
interest) reached an alltime peak of $42.1 billion on June 30, 1958,
as compared with $41.5 billion on June 30, 1957.
An excess of redemptions of E and H bonds over sales during the
fiscal year was more than offset by the automatic accrual of interest on
E bonds. Throughout the period sales of the smaller denomination
E bonds ($200 or under) continued at the high level of last year and
larger denomination bonds showed a small increase over fiscal 1957.
479641—59
4
32
1958 REPORT OF T H E SECRETARY OF T H E TREASURY-
Percent of Series E, F , G, H , J , and K savings bonds sold i n each year redeemed
through each yearly period thereafter ^
[On basis 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—
Series
1
>>
>>>
cn
1 1
03
>>
tri
CO
1
>i
1
0
00
CO
2
03
2
52
>>
CO
CO
CO
Series E 2
E-1941....
E-1942....
E-1943
E-1944 . ,
E-1945
E-1946 .
E-1947
E-1948
E-1949
E-1950
E-1951
E-i952
E-1953
E-1954
E-1955
E-1956.-..
E-1957
3
8
15
19
28
23
21
20
22
26
29
29
28
29
29
32
33
6
15
24
33
38
34
30
30
34
36
38
39
38
38
39
43
10
21
34
41
45
40
37
39
40
41
44
45
44
45
46
14
29
41
47
50
45
43
44
44
45
48
49
49
50
18
35
47
52
54
51
47
47
47
48
52
53
53
23
40
51
56
58
54
50
49
50
51
.55
56
27
44
55
60
61
56
52
52
53
54
•57
30
48
58
62
63
58
55
54
55
57
34
52
61
64
65
60
57
56
57
40
58
65
68
68
64
61
61
62
68
ll
73
69
67
67
71
75
76
76
73
70
74
78
79
79
72
77
80
81
75
79
82
77
81
80
68
60
68
72
72
74
97
95
95
96
97
98
97
97
98
99
98
98
99
99
100
Series F a n d G
F and G 1941
1942
1943
1944
1945
1946
1947
1948
1949
1950
1951
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
n
12
12
9
13
11
14
16
7
11
14
14
14
15
17
11
17
15
17
20
10
14
19
18
18
20
21
13
20
16
20
24
13
18
22
21
21
23
24
16
23
18
26
31
15
21
26
25
24
27
28
18
26
28
33
18
24
29
28
27
30
31
21
34
39
20
28
33
31
30
33
34
31
42
24
31
36
34
32
36
40
43
27
34
39
36
34
39
46
Series H
H-1952.-.
H-l 953...
H-1954-..
H-19551 - .
H-1956--.
H-1957..-
3
3
3
4
4
3
8
8
7
11
11
13
12
13
16
17
17
19
21
21
26
Series J
J-1952 .
J-1953
J-1954.._
J-1955
.T-1956. J-1957
2
2
3
4
6
6
8
14
17
13
14
14
28
27
18
20
40
28
28
37
•7
Series K
K-1952...
K-1953.._
K:-1954
..
K-1955..K-1956...
K-1957._-
2
3
1
2
4
4
6
6
6
12
12
9
10
19
22
12
15
31
19
22
28
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 calendar
years. Both sales and redemptions are taken at maturity value.
' Percentages by denominations may be found in table 42.
2 Similar detail for Series A through E savings bonds may be found in the 1952 annual report, p. 77.
33
REVIEW OF FISCAL OPERATIONS
(For further detail on savings bonds sales by denominations see table
40.)
The redemptions of savings bonds as a percentage of the total sold
b y yearly series are summarized in the accompanying table. Detailed
information on savings bonds from March 1, 1935, when this type of
security was fii'st offered, through June 30, 1958, is given in tables 38
through 42.
OWNERSHIP OF FEDERAL SECURITIES
Private nonbank investors held an estimated $130.2 billion of
Federal securities at the end of the fiscal year 1958^—nearly one-half
of the $276.4 billion total debt outstanding. Private nonbank
investors include individuals, insurance companies, mutual savings
banks, nonfinancial corporations, pension funds, foreign accounts.
State and local governments, and nonprofit associations. Commercial banks and Federal Eeserve Banks together held $90.3
billion, representing about one-third of the debt. The remaining
$55.9 billion of debt was held by Government investment accounts,
primarUy in social security and unemployment trust funds, veterans'
insurance funds, and Government retirement funds.
The major ownership change taking place in fiscal 1958 was an
increase of $11.5 billion by the banking system, an amount equivalent
to nearly aU of the $6.0 billion decrease in holdings by the privateC H A R T 7.
.OWNERSHIP OF THE PUBLIC DEBT JUNE 30,1958.
TOTAL
Gov't. Invest.
Accounts
Bonks
Nonbank Investors
$Bil.
«^56\j
r » n rt n l — U
Individuals
200
Sayings
Inslitufions
100
1072
Corporalions^
K ^ O Q I / ^A
V/yyy}y>\
^
Another ^
ComI
::65'/.
/
h'^%V\
Federal
Reserve
34
1958 REPORT OF THE SECRETARY OF THE TREASURY
nonbank investors as well as the $5.8 billion increase in total debt.
The Government investment accounts absorbed the remainder, m t h
a $0.3 billion increase in their holdings of Federal securities. The
banking system increase was comprised of a $9.0 billion increase
by the commercial banks and a $2.4 billion increase by the FederaL
Reserve System. The following table presents figures on bank and
nonbank ownership together with details on the holdings of FederaL
securities by the various other investor classes. Chart 7 also presents
ownership by class of investor as of June 30, 1958.
Ownership of Federal securities by investor classes on selected dates, 1941-58
[Dollars in billions]
J u n e 30,
1941
Estimated ownership by:
.; Private nonbank investors:
Individuals 3 .
Insurance comoanies
Mutual savings banks
_
Corporations *..
State and local governments
Miscellaneous investors 5
Total private nonbank investors.
Federal Government investment accounts
Banks:
Commercial banks
Federal Reserve Banks.
Total banks.
Total gross debt outstanding
.
$11.2
7 1
3.4
2.0
.6
. .7
F e b . 28,
1946 2
• J u n e 30,
1957
J u n e 30,
.1958 .
r $67. 8
••$64.1
24. 4. --•
.12.3
11.1
7.9
19. 9
r 15. 4
6. 7
16. 9
.
.8.9 :
rie.o
:
130.2
' -$2.1
— 6-.5-2.1
-.8-
25. 0
135, 1:
8.5
28.0
55. 6
55.9
.3:
19.7
2. 2
93.8
22.9
55.8
23.0
64.9
25.4
9.0^
2.4-
21.8
116.7
78.9
90.3
11. 5-
55.3
' 279. 8
270.6'
276.4
5.S-
^
136.2
$65.7
il. 7
7.4
13. 3
16.9
15.2
Change
during
fiscal year
1958
- 6 . 0'
P e r c e n t of total
Percent owned by:
Private nonbank investors:
Individuals
other
Total
Federal G o v e r n m e n t i n v e s t m e n t accounts
Commercial b a n k s . .
Federal Reserve B a n k s
T o t a l gross d e b t o u t s t a n d i n g
25
25
24
23
48
50
47
10
34
8
21
21
8
20
24
9
100
100
• 100
20
25
23
25
45
15
36
4
100
.
f 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.
5 Includes savings and loan associations, nonprofit institutions, corporate pension trust funds, dealers
and brokers, and investments of foreign balances and international accounts in this country.
REVIEW OF FISCAL OPERATIONS
35
Although holdings by individuals declined by $2.1 billion from
$67.8 bUlion in June 1957 to $65.7 bilhon in June 1958, individuals
remained the largest single investor group in the Federal debt ownership structure. Savings bonds comprised nearly three-fourths of
these holdings by individuals, with the E and H Series representing
the major share. The E and H Series are the only series now being
sold. Individuals increased their holdings of E and H bonds by
$0.6 billion in 1958, slightly more than in 1957, but their redemptions
of Series F, G, J, and K bonds amounted $1.7 billion resulting in a
net decline of $1.1 billion in their holdings of all savings bonds.
Individuals' holdings of other securities, principally marketables,
declined $1.0 bUlion in the year.
Federal securities held by insurance companies at the end of the
fiscal year amounted to $11.7 billion, a decrease of $0.6 billion during
the year. Life insurance companies accounted for $6.9 billion, or
almost 60 percent of total insurance holdings at the end of the year.
During 1958 these companies reduced their holdings by $0.3 billion
in order to provide additional'funds for investment in mortgages
and corporate securities, or less than half the liquidation in fiscal
1957.
Fire, casualty, and marine insurance companies held $4.7 billion of
Federal securities on June 30, $0.3 billion less than a year earlier.
The decline in 1958 was about the same as the decline in 1957.
Mutual savings banks' holdings of Federal securities at the end
of the fiscal year were $7.4 billion, $0.5 billion lower than on June 30,
1957. Like the life insurance companies, mutual savings banks have .
continued to increase their mortgage and corporate securities portfolios and have liquidated some of their holdings of Federal securities
to aid in financing these acquisitions.
Although their total holdings of Federal securities declined during
the year, by the end of fiscal year 1958 life insurance companies and
mutual savings banks had acquired $0.8 billion of the $4.2 billion of
over 10-year bonds issued during the year; and the average maturity
of their portfolios of Federal securities had increased. The maturities
of life insurance companies' holdings of marketable issues increased
about 12 months to an average length of 9}^ years, and those of mutual
savings banks increased about 6 months to an average of over 8
years. These levels are slightly below the prewar averages for both
groups.
36
1958 REPORT OF THE SECRETARY OF THE TREASURY
Federal securities held by nonfinancial corporations declined by
$2.1 bUlion to a level of $13.3 biUion on June 30, 1958. This was the
lowest at any postwar fiscal year end. This decline is partly attributed to lower corporate profits associated with the recession and the
resulting lower level of corporate tax liabilities against which many
corporations hold Federal securities as a reserve, and partly to a widespread decline in corporate liquidity.
Holdings of Federal securities by State and local governments
amounted to $16.9 billion at the close of the fiscal year, a level unchanged from that of 1957. Almost 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
$15.2 billion on June 30, 1958, a decrease of $0.8 billion. Savings
and loan associations increased their holdings by $0.2 bUlion to a
level of $3.3 bUlion as they built up their reserves against larger share
balances. Corporate pension trusts decreased their holdings of
Federal securities by $0.2 bUlion, bringing them down to $2.4 billion
at the close of the year. Ownership of Federal securities by foreign
and international accounts declined by $1.2 billion, bringing the totaldown to $6.4 bUlion on June 30, 1958. Holdings of the remaining
classes in this group (nonprofit associations, dealers and brokers, and
certain smaller institutional groups), increased $0.4 billion during the
fiscal year.
Government investment accounts increased their holdings of
Federal securities by $0.3 bUlion. This was in contrast to the $2.1
bUlion increase of the previous fiscal year and primarUy reflected the
heavier than normal payouts from the unemployment trust fund and
the increased payments out of the Federal old-age and survivors
insurance trust fund. Of the $55.9 billion held by all Government
investment accounts, $46.2 billion, or more than 80 percent, was in
the form of special issues held only by these accounts. Details on
the ownership of securities by Government investment accounts are
shown in table 60.
As already noted, holdings of Federal securities by banks increased and holdings by private nonbank investors decreased during
the year. An analysis of the estimated changes in bank versus nonbank ownership of Federal securities during the fiscal year 1958 is
shown by type of issue in the following table.
37
REVIEW OF FISCAL OPERATIONS
Estimated cha7iges in ownership of Federal securities ^ by type of issue, fiscal year 1958
[In billions of dollars]
Change accounted for by
Total
changes
Marketable securities:
13-week Treasury bills
Tax anticipation bills
..Treasury certificates of indebtedness
and notes
Treasury bonds, etc
Total marketable
Nonmarketable securities, etc.:
United States savings bonds
Special issues to Government investment accounts
Treasury bonds, investment series
Other
Total nonmarketable, etc
-.
Total change
.
.
Private Governnonbank ment ininvestors vestment
accounts
.5
-1.5
-3.4
-1.1
1.9
10.1
-1.3
3.9
11.0
-1.9
-2.6
-2.5
-.6
-1.5
-.4
-5.2
-1.2
-.4
-4.1
5.8
-6.0
(*)
Banks
Total
Commer- Federal
cial
Reserve
.1
1.0
3.8
-.4
3.0
5.2
1.4
-.4
3.0
5.2
1.2
11.7
9.3
-.2
-.2
-.6
-.2
(*)
(*)
(*)
(*)
2.4
(*)
2.4
(*)
' (*)
-.8
-.3
-.3
.3
11.5
9.0
2.4
*Less than $50 million.
1 Gross public debt, and guaranteed obligations of the Federal Government held outside the Treasury.
CORPORATIONS AND CERTAIN OTHER BUSINESS-TYPE ACTIVITIES
OF THE UNITED STATES GOVERNMENT
The activities 'of Government corporations and certain other
business-type activities are financed according to law from their
own receipts, from capital stock subscriptions or by appropriations,
from sale of their obligations to the public, or from borrowing from
the United States Treasury. The Secretary of the Treasury is authorized not only to purchase obligations of many of the agencies, but
he is also, under certain circumstances, authorized to approve the
terms and conditions of such obligations. Under provisions of the
Government Corporation Control Act (31 U. S. C. 868), the obligations of most agencies issued to the public must be approved by the
Secretary of the Treasury; the few agencies which are exempt from
this requirement must consult with the Secretary of the Treasury
before issuing obligations to the public. Most Government corporations and all other business-type activities are required to maintain
their checking accounts with the Treasurer of the United States,
although, with the approval of the Secretary of the Treasury, such
accounts may be kept with the Federal Reserve Banks or with private
banks designated as depositaries or fiscal agents of the United States.
38
1958 REPORT OF THE SECRETARY OF THE TREASURY
Financial statements submitted to the Treasury
Under provisions of Circular No. 966, corporations and agencies
operating business-type activities submit balance sheets, income and
expense statements, source and application of funds statements,
and supplemental data to the Treasury pepartment. These reports
are submitted periodically and serve as a basis for consolidation of
data designed to provide full disclosure regarding the financial operations as well as the assets, liabilities, and net investment of the
United States in these enterprises. As pf June 30, 1958, the combined
assets of Government corporations and agencies amounted to $101,563
mUlion, consisting primarily of inventories, fixed assets, and loans
receivable. The combined liabUities amounted to $6,680 million,
consisting primaril}^ of accounts payable and borrowings from the ^
public. Borrowings from the United States Treasury are reported
as part of the Government's investment. The combined total of the
Government's investment in these agencies amounted, to $.94,883
million, exclusive of the United States interest in mixed ownership
Government-sponsored corporations.. .
Individual and combined statements of the financial condition of
the reporting agencies are published quarterly and the operating
statements are published semiannually in the Treasury Bulletin. The
combined financial statements as of June 30, 1958, are shown in this
report in tables 116, 117, and 118. These tables include certain
supplementary financial data.
Borrowing authority and outstanding obligations
. The borrowing authority of Government corporations and activities
is established by law, and the Secretary of the Treasury is authorized^
to purchase the obligations of many of the agencies. During 1958
new borrowing authorizations. were made-available .to Government
agencies in the amount of $5,638 million and there were reductions
in authorizations amounting to. $1,209 million, resulting, in a net
increase in borrowing authority of $4,429 million. As of June 30,
1958, the unused borrowing authority of these agencies amounted
to $22,592 million. Table 112 shows the status of the borrowing
authority and the outstanding obligations of these corporations and
agencies issued to the Secretary of the Treasury.
Advances by the Treasury
The Secretary of the Treasury is authorized by legislation to advance
funds to certain Government corporations and agencies, by the purchase of obligations or by acceptance ofnotes of these agencies. Such
loans or advances are generally applicable to the borrowing authority
of the corporation or agency, but for balance sheet purposes these
f
REVIEW OF FISCAL OPERATIONS
39
advances and repayments are reported under the net investment
of the United States in the enterprise. During the fiscal year 1958
advances made by the Treasury amounted to $7,302 million and
repayments amounted to $8,170 million, resulting in net repayments
of $868 mUlion. The total of loans and advances outstanding as of
June 30, 1958, was $21,859 million. Figures on advances and repayments for 1958 exclude refunding operations. Detailed information
in connection with the loans and advances is shown in table 111.
Interest and other payments made to the Treasury
The rates of interest on borrowings from the Treasury, except
where fixed by statute, are determined by the Treasury from month
to month, taking into account the cost which the Treasury would have
to pay to borrow money in the current market, as reflected by prevailing market yields on Government obligations with maturities corresponding to the approximate duration of the advances to be used
by the agencies for their programs. Information on amounts of
borrowing from the Treasury outstanding as of June 30, 1958, a
description of the securities held, and the applicable rates of interest
are given in table 114.
On the basis of operating results of an enterprise, or as may be
required by statute. Government corporations and agencies make
payments into the Treasury representing interest, dividends, and
other earnings. During the flscal year 1958 the interest paid to the
Treasury by Government agencies amounted to $641 million, and
payments other than interest on borrowings amounted to $56 million.
DetaUs concerning these payments, including interest on borrowings
from the Treasury, are given in table 120.
Guaranteed obligations of Government agencies
The only obligations of Government agencies guaranteed as to
principal and interest by the United States which are currently being
issued are those of the Federal Housing Administration. These are
debentures issued in behalf of its various mortgage insurance funds
in exchange for foreclosed mortgages. During the flscal year 1958
these debenture issues amounted to $53 million and redemptions
amounted to $59 million, resulting in a net decrease of $6 million.
The amount outstanding on June 30, 1958, was $101 million. In
addition, matured guaranteed securities representing obligations
issued by the Federal Farm Mortgage Corporation and the Home
Owners' Loan Corporation in the nominal amount of $0.7 million
were outstanding as of June 30, 1958. Funds for payment of these
obligations and accrued interest thereon are on deposit with the
.40
1958 REPORT OF THE SECRETARY OF THE TREASURY
Treasurer of the United States. Detailed information relating to the
outstanding securities is given in table 25.
Nonguaranteed obligations of Government agencies
Nonguaranteed obligations are issued to the public by Governmentowned trust and sponsored corporations. Among the corporations
issuing such obligations in the market are the Federal National
Mortgage Association, Federal intermediate credit banks. Federal
home loan banks, Federal land banks, and banks for cooperatives.
During the flscal year 1958 the issues of nonguaranteed securities
amounted to $7,021 million, while redemptions amounted to $6,615
mUlion, resulting in a net increase of $406 million. The total outstanding as of June 30, 1958, was $5,453 million.
Subscriptions to and r.epayments of capital stock of Government corporations
A net reduction in the capital stock holdings of Government
corporations in the amount of $61.1 million occurred during the year.
This reduction resulted from repayments and other reductions by
the following corporations: Federal Savings and Loan Insurance
Corporation, $16.2 million; Reconstruction Finance Corporation, $35
million; banks for cooperatives, $5.7 million; and Federal intermediate
credit banks, a net of $4.2 million. During the year the Federal
Farm Mortgage Corporation made flnal repayment of its capital
stock to the Treasury amounting.to $10,000. Details relating to the
capital stock outstanding and the changes during the flscal year are
given in table 111.
SECURITIES OWNED BY THE UNITED STATES GOVERNMENT
In connection with the Government's flnancing of or participation
in certain enterprises, activities, and programs authorized by Congress, various types of secuiitiies are acquired and held by the Treasury
or other Government agencies. Among such securities are: Capital
stock, bonds, and notes of Government corporations and agencies;
notes covering loans to home owners, farmers, railroads, foreign
governments, etc.; mortgages acquired from the sale of Government
REVIEW OF FISCAL OPERATIONS
41
property; and securities evidencing United States participation in the
International Monetary Fund, International Finance Corporation,
and other international organizations. Summaries of the holdings of
such securities are shown in tables 111 and as parts C and D of table
116. These securities are exclusive of Federal securities held by
Government trust funds and certain other accounts.
TAXATION DEVELOPMENTS
The considerations guiding Treasury tax policy during the past
year were the budgetary impact of rising defense expenditures and the
temporary interruption in national economic growth, together with the
President's determination to adhere to sOund principles of government
and flnance. In his message to the Congress transmitting the budget
for the flscal year 1959, th% President identifled these principles as
economy in expenditures, efficiency in operations, promotion of
economic growth and stability, a vigorous Federal-State system, concern for human well-being, priority of national security, revenues
adequate to cover expenditures and permit debt reduction during
periods of high business activity, and revision and reduction of taxes
when possible.
On the basis of these considerations the President recommended
the continuation of corporation income and excise tax rates which, in
the absence of legislation, would have been reduced on July 1, 1958.
(See exhibits 27, 28, and'29.) The 52 percent corporate income tax
would have reverted to 47 percent through a scheduled reduction of
the normal tax rate from 30 to 25 percent. Excise tax rates would
have been reduced by $1.50 per gallon for distilled spirits, $1 per
barrel for beer, 50 cents per thousand of cigarettes, and 3 percent of
manufacturers' sales price for passenger automobiles and automotive
accessories.
The Tax Rate Extension Act of 1958 (Pubhc Law 85-475) was
approved on June 30, 1958. I t extended the corporation income and
excise tax rates until July 1, 1959, and prevented a revenue loss of
about $2.6 billion on a full year basis, of which an estimated $1.9
billion represents collections in the flscal year 1959 and virtually all
42
195 8 REPORT OF THE SECRETARY OF THE TREASURY
the rest in flscal 1960. The estimated revenue effect of the tax rate
extensions are shown in detail in the following table.
Revenue effect of Public Law 85-4-75, extending certain tax rates from June 30, 1958,
to June 30, 1959, and repealing certain excise taxes effective August 1, 1958
[In millions of dollars]
Full year Increase, or decrease
( - ) in receipts
effect,
increase,
or
Fiscal
Fiscal
decrease
year 1959 year 1960
(-)
Changes in rates
Rate extensions:
Corporation income tax.
Excise taxes:
Alcohol taxes:
Distilledspirits
Beer .
Wines
Total alcohol taxes
Tobacco taxes:.
Cigarettes (small)
Manufacturers' excise taxes:
Passenger automobiles.
Parts and accessories for
automobiles
.
Total manufacturers' excise taxes.. _1
Total excise taxes . .
Postponed, fioor stocks refunds
47 percent to 52 percent
$9 to $10.50 per gallon.
$8 to $9 per barrel - ' . Various
$3.50 to $4 per thousand..
7 percent to 10 percent
._
5 percent to 8 percent.
Under rate changes above
Total effect of rate extensions
other provisions:
Repeal 3 percent tax
Transportation of property
Transportation of coal
Repeal 4 cent per ton tax
Transportation of oil by pipe Ime.. Repeal 4\i percent tax..,^
Net effect of Public Law 85-475..
}
1,760
875
150
73
8
150
73
8
231
231
198
198
350
300
50
65
55
10
415
844
355
784
207
60
60
-207
2,594
1,866
728
-487
-40
-360
-30
-487
-40
2,067
1,476
201
1 875
€>-
1 Includes some receipts (approximately $125 million) actually attributable to 1961 and subsequent years.
Contrary to the President's recommendation, the legislation
extending these tax rates also repealed the 3 percent tax on amounts
paid for the transportation of property, the 4 cent per ton tax on the
transportation of coal, and the 4% percent tax on the transportation
of oil by pipeline, effective August 1, 1958. This resulted in an estimated revenue loss of $390 million in the flscal year 1959 and $527
million on a full year basis, reducing the net full year yield of Public
Law 85-475 from $2.6 billion to $2.1 billion.
During the year many proposals were advanced for substantial
reductions in various taxes. (See exhibits 28 and 29.) After consultation with the leadership of both political parties in the Congress
the Treasury successfully opposed these proposals as undesirable in
view of the impending large deflcit. The Departnaent's position on
tax reduction was explained by Secretary Anderson to the House
Committee on Ways and Means on May 28, 1958, as follows:
^We do not believe that at this time * * * a general reduction in
individual income taxes is in the Nation's best interests. Such re-
REVIEW OF FISCAL OPERATIONS
43
ductions would widen the gap between revenues and expenditures and
thereby substantially increase the deficits. Nor can the serious disadvantages of so increasing the deficit be offset by a reasonable certaint}^ that any particular individual income tax adjustment would
predictably assure resumption of growth either in specific areas of
the economy or the economy as a whole. From both the long-term
and short-term point of view, our competitive, private-enterprise
economy is putting on an impressive performance of resistance to
further decline without so-called ^^massive" intervention by the
Government.
^^The Treasury is of the opinion that a reduction of corporate rates
is not justified at a time when the reduction in the rate on individuals
cannot properly be made.
'^We also do not believe that it is appropriate or logical to select
certain excise tax rates for reduction and decline to make reductions
in others. Should any excise taxes be recommended for reduction,
contentions would undoubtedly be made that others were entitled to
like treatment. We believe that in fairness and in the best interest
of the country, the excise rates that currently exist should be extended without change for another year.
''We recognize that the burdens of taxation and the burdens of
debt are exceedingly heavy at all levels of government. We must
continue to be concerned with restraints which weigh on our economic
growth and our system of incentives. The very fact that taxes are
high emphasizes the requirement that we utilize our best efforts to
achieve economical operations at all levels of our Government and to
work diligently to make the tax system as fair and as simple as possible with minimum repressive effects on individual and business
activities.
"We all look forward to a period when the Government can again
operate with a reasonable balance between its expenditures and its
revenues. We must be equally careful not to widen unduly the gap
between revenue and expenditures. To do so would add to the burden of an already heavy debt which encumbers our economy not onl}^
h j the cost of interest but by substantial interference in the financial
markets where private business. States, municipalities, and other
political subdivisions compete for our national savings. Increases in
the debt also make it more difficult for the Federal Reserve System
to discharge its monetary and credit responsibilities.
'^1 think we must bear in mind that we are looking forward not to
a peak of expenditures which we now see sure ways of reducing in
subsequent years but rather to a level of expenditures which in the
absence of changing conditions offer little prospect of declining.
Even with a resumption of a rate of sustainable growth and the con-
44
1958 REPORT OF THE SECRETARY OF THE TREASURY
^
sequent recovery of tax receipts which would result therefrom, the
deficits wUl run into the recovery period."
Relief for small business
Despite the budgetary situation, it was possible to provide in the
budget for tax relief measures for small business in recognition of the
great importance of new and small companies in the American economy. These measures had been developed by the Cabinet Committee on Small Business and recommended by the President to
broaden the opportunities of small business with a minimum revenue
loss. Important parts of :these measures were enacted into law.
By a floor amendment in the Senate, the Small Business Tax
Revision Act of 1958, which had passed the House as H. R. 13382,
was incorporated in the Technical Amendments Act of 1958 (discussed
below) as Title I I of Public Law 85-866. I t consists of several
sections. One provides an ordinary loss rather than a capital loss
deduction on original investors' losses in certain small business stock
up to $25,000 a year ($50,000 in the case of husband and wife filing
a joint return). Another extends the present 2-year net operating
loss carryback to three years. A third provides an additional 20'
percent first-year depreciation allowance on costs up to $10,000 a,
year ($20,000 on joint returns) of both new and used tangible personal
property. In addition, the minimum accumulated earnings credit
for purposes of the tax on improper accumulation of surplus is raised
from $60,000 to $100,000, in order to increase the earnings a small
business may accumulate in liquid form with assurance that no penalty
tax wUl appl}^. Finally, provision is made for installment payment
of estate taxes attributable to investment in closely held business
enterprises.
These small business tax provisions are expected to result in a
budgetary loss of about $260 mUlion in the first full year. However,
these effects on the revenue are largely a matter of timing and represent
tax postponement rather than actual tax reduction.
In addition to these siiiMl business tax provisions in Title 11^
another provision designed to help small business was included in
Title I of the act. I t permits small corporations (corporations having
10 or fewer shareholders) to elect not to be taxed as a corporation.
When such an election is made the corporate tax wUl not apply b u t
the shareholders must pay the individual income tax on their pro
rata share of the corporation's earnings whether or not the earnings
are distributed.
Elimination of tax inequities
Another important tax development was the enactment of legislation to eliminate substantive unintended benefits in income, estate^
REVIEW OF FISCAL OPERATIONS
45
and gift taxes, most of which arose under provisions of the 1939
Code which had been carried over substantially intact into the 1954
Code, and to remove technical errors and. ambiguities in the tax laws
(Title I of the Tecihnical Amendments Act of 1958, approved
September 2, 1958).
The importance of this legislation, introduced during the first
session of the 85th Congress, was stressed by the President in his
message accompanying the budget for the fiscal year 1959:
'^We shall continue our efforts to assure that no one can avoid
paying his fair share of the country's total high tax burden. Pending
legislation (H. R. 8381), which was developed, jointly by the Treasury
Department and the House Committee on Ways and Means to remove
unintended tax benefits and hardships, should be enacted with a
few modifications."
Enactment of this legislation was urged also by Secretary Anderson
on the occasion of his first appearance before the House Committee
on Ways and Means on January 16, 1958:
^'Loopholes or unintended benefits are always a matter of concern.
They are particularly serious when tax rates have to be maintained
at high levels. I t is particularly important that we maintain respect
for our voluhtary tax system, which should continue, to.be a source of
national pride. This gives added emphasis to the necessity of maintaining fairness and equality in the application of our country's
tax burden." (See exhibit 23.)
The Technical Amendments Act is a tax revision measure consisting
of more than 100 sections, too numerous to be detailed here. About
half represent technical adjustments; the other half represent substantive provisions, the majority of which close loopholes or foreclose
unintended benefits in the present law. The remainder of the substantive provisions relate generally to the removal of hardships.
While this is not a revenue raising measure, as such, it wUl have the
general effect of strengthening; the revenue system. I t wUl perf oim a
preventive function in blocking the growth and spread of known
avoidance devices which, even where they do not result in substantial
revenue losses at present, threaten more widespread abuse and loss ot
tax receipts in the future. The immediate net revenue effect of the
legislation is not believed to be sigaificant since the cost of relief
provisions is .generally balanced by those which close loopholes.
Excise tax revision
Approval of the Excise Tax Technical Changes Act of 1958 on
September 2, 1958 (Public Law 85-859), brought to fruition the
revision of the excise tax provisions of the Revenue Code initiated
during the 84th Congress. This area of taxation was left largely
46
1958 REPORT OF THE SECRETARY OF THE TREASURY
1
unchanged because of time limitations during the comprehensive
revision of the Revenue Code in 1954.
The 1958 legislation revises many technical aspects of the excise
taxes. While some changes were made in practically all taxes, major
revisions were made in the terminology of the taxes on communications, the method of computing the stamp taxes on stocks, the statutes
relating to distilled spirits, and those pertaining to the general credit
and refund provisions. A few examples will illustrate the more
important of these changes. To bring the taxes on communications
in line with technical developments in the industry, the categories of
'local telephone service" and ''long distance telephone service" were
redefined and redesignated as "general telephone service" and "toll
telephone service." Both substantive and clerical changes were
made in documentary stamp taxes, including changing the base of
the taxes on issuancie and transfer of stocks from par value to actual
value. In the tax-free sales area, exemption was provided from
retailers', manufacturers', and from transportation and communication taxes for sales to nonprofit educational institutions, provided
the purchases are made for their exclusive use. The period during
which distilled spirits may be maintained in bond was extended from
8 to 20 years. Another change grants credit or refund of certain
manufacturers' excise taxes where taxpaid articles have been exported
prior to any other use, even though not originally sold for export by
the manufacturer.
While this legislation is essentially technical in character, it makes
a number of changes in tax bases and in exemptions with an aggregate
annual revenue loss of nearly $50 million. A major portion of this
loss, $25 million, results from making the general admissions tax of
1 cent per 10 cents of the admissions charge applicable only to the
charge in excess of $1. Under prior law, admissions of 90 cents or
less were exempt but the full amount was taxable if the admissions
charge exceeded 90 cents. A nearly $10 million revenue loss results
from the exemption of assessments for the construction or reconstruction of capital facilities of social clubs from the 20 percent tax on club
dues and initiation fees.
Tax simplification
Further progress can be reported toward tax simplification. A tax
table for the ready determination of the fractional rate self-emplo^^^ment tax for social security was adopted.
The card return Form 1040A was revised to cover employees with
less thari $10,000 of income. Formerly, this simple card form could
be used only for incomes under $5,000. I t ma}'- now be used by any
individual (or husband and wife filing jointly) with total income of
REVIEW OF FISCAL OPERATIONS
47
less than $10,000 consisting of wages reported on Form W-2 and not
more than $200 in dividends, interest, and wages not subject to withholding. Taxpayers using Form 1040A automatically claim the
standard 10 percent deduction allowed for personal expenses such as
contributions, interest payments, medical expenses, and the like. I t
is estimated that as many as 31 million individuals can qualify to use
the new form, as compared with 14 million who filed it for 1957.
I n cooperation with the Department of Health, Education, and
Welfare, a single annual employer report form has been developed to
replace the separate quarterly social security and annual income tax
reports. The bill authorizing use of the simplified form, however,
has not yet been enacted.
To simplify taxpayers' problems in complying with reporting
requirements, a new regulation on travel expenses has been developed
which relieves employees who account to their employer for their
business travel expenses from reporting such expenses in their individual tax returns.
A program has been initiated to simplify tax return forms to reduce
the tax compliance burdens of taxpayers. These efforts, however,
are meeting with difficulty because the complexities of the present
tax return forms originate so largely from the variety of special Code
provisions which have to be accommodated as long as they remain
part of the law.
Administrative clarification of tax laws
A concerted effort was made during the year to expedite the completion of regulations to simplify and increase understanding of the
tax laws. During the past year 58 Treasury Decisions were published.
M a n y of these relate to major sections of the 1954 Internal Revenue
Code, including the definition of gross income, adjusted gross income,
and taxable income, major deductions such as medical expense and
charitable contributions; trade and business deductions; specJial rules
for determining capital gains and losses; income in respect of decedents;
employees' stock options; income from international trade and investment and taxation of nonresident citizens and aliens; the estate tax;
procedural and administrative provisions; withholding of income
taxes on wages; and methods of accounting.
A new regulation has liberalized the provisions relating to deductibility of educational expenses—of special interest to teachers.
Teachers may now deduct such expenditures as a business expense
even if incurred voluntarily and not required to retain a teaching job.
Educational expenses can be deducted if their purpose is to update
and ex:pand knowledge of the subject taught, to learn improved
teaching methods, or otherwise improve teaching effectiveness,
479641—59^
5
48
1958 REPORT OF THE; SECRETARY OF THE TREASURY
Revised regulations were issued on the traffic in firearms and
ammunition under the Federal Firearms Act (15 U. S. C,. 901-909).
The final regulations were much less stringent than the preliminary
draft issued as a Notice of Proposed Rule Making. For instance,
serial numbers were not required to be stamped by the manufacturer
on shotguns and .22 caliber rifles, and dealers were not required to
keep records (including the name of the purchaser) of the sale of pistol
and revolver ammunition.
Other taxation developments
Legislation developed by the Treasury was enacted (Public Law
85-321, approved February 11, 1958) to secure greater compliance
with provisions concerning the collection and payment by employers
and others of moneys representing withheld income and,social security
taxes and excise taxes on facilities and services. As of December 31,
1956, the delinquent withheld income and social security taxes alone
amounted to $279 million, roughly one-flfth of one percent of the total
of these taxes collected over the past six years.
Under the new legislation employers and others who have failed
to collect and pay over the appropriate taxes, and who have been
notifled of such failure must thereafter collect the taxes and deposit
them in a special trust account for the United States Government.
Persons who subsequently faU to deposit the funds as required can be
convicted of a misdemeanor unless the failure was due to reasonable
doubt as to the requirement under law or due to factors beyond theperson's control. The new provisions will have no application to the
vast majority of taxpayers but will reduce compliance difficulties in
certain areas. Regulations have already been issued to clarify the
administration of the new law.
The taxation of life insurance companies has been unsettled and
handled on a year-to-year stopgap basis for several years pending the
development of a plan suitable on a long-range basis for taxing the
life insurance industry. Two approaches to the long-range solution
of the problem were submitted to the congressional tax committees
on AprU 10, 1958 (see exhibit 26), which are currently under examination by members of the industry and the staff of the Joint Comiiiittee
on Internal Revenue Taxation. Pending the enactment of permanent
legislation. Public Law 85-345, approved March'17, 1958, extended
the 1955 stopgap formula to taxable years beginning before January 1,
1958.
, During the second session of the 85th Congress, several 'hundred
tax bUls were introduced providing tax relief for restricted groups.
In accordance with established practice the Treasury prepared
analyses and stated its position on many of these legislative items to
REVIEW OF FISCAL. OPERATIONS
49
the appropriate committees of Congress. In conformity with the
policy of the President to conserve the Government's revenues, the
Department consistently advised against enactment of legisla.tion
which afforded special relief to limited groups of taxpayers thereby
adding to the deflcit, impairing tax equity, and postponing general
tax reduction for all taxpayers.
During the congressional session several bills were enacted to amend
the revenue laws in addition to those described above. Public Law
85-367, approved April 7, 1958, excluded from the deflnition of unrcr
lated business taxable income, under certain specifled conditions, a
charitable trust's share in a limited partnership. Public Law 85-380,
approved April 16, 1958, exempted from the admissions tax concerts
and athletic games conducted for the beneflt of certain nonproflt
activities. Public Law 85-517, approved July 11, 1958, extended for
two years the authority of the Secretary of the Treasury to permit
emergency transfers of distUled spirits for national defense purposes.
Public Law 85-930, approved September 6, 1958, extended the Renegotiation Act of 1951 for six months to June 30, 1959.
An inventory of the miscellaneous amendments to the Revenue
Code enacted during the second session of the 85th Congress is con^
tained in exhibit 30.
Federal-State relations
To strcDgthen the flnances of State and local governments, to reduce
their reliance on Federal flnancial assistance, and to enable them to
accept more governmental responsibility, the President proposed to
the State governors on the occasion of their 1957 annual conference
held in Williamsburg, Va., the establishment of a Joint Federal-Stat6
Action Committee. The governors concurred in the President's
proposal and during the past year the Joint Action Committee com^
posed of governors and Federal representatives has been at work ori.
implementing three objectives:
"(1) To designate functions which the States are ready and willing^
to assume and finance that are now performed or financed wholly or
in part by the Federal Government;
"(2) To recommend the Federal and State revenue adjustments
required to enable the States to assume such functions; and
'
"(3) To identify functions and responsibilities likely to require
State or Federal attention in the future and to recommend the level
of State effort, or Federal effort, or both, that will be needed to assure
effective action."
The Secretary, as the cochairman and one of the Federal members
of the Joint Action Committee, participated in developing the program
submitted in its Progress Report No. 1, dated December 5, 1957.
50
19 58 REPORT OF THE' SECRETARY OF THE TREASURY
The committee recommended that the Federal Government: Discontinue its grants for vocational education and for the construction
of waste treatment facilities; reduce its 10 percent tax on local telephone service to 6 percent to assist the States in assuming financial
responsibility for these programs; and that the tax credit device be
used for the first five years to facilitate the transition from Federal to
State imposition of this portion of the local telephone tax. Legislation (H. R. 12524) incorporating the committee's recommendations
was introduced during the last session of Congress. After the governors, at their 1958 annual conference, recommended that the
proposal be modified "to insure that the revenue source made available
to each State is substantially equivalent to the cost of the functions
to be assumed," the Treasury developed and the joint committee
approved a modification of its original proposal to bring it into accord
with the views of the Governors' Conference.
I n its continuing work the Joint Action Committee is moving
toward the very important objective of decentralizing governmental
authority and responsibility. I t is examining both present and proposed programs with the objective of providing proper distribution
of responsibilities among the Federal Government, the States, the
municipalities, and other political subdivisions—to insure that the
functions of Goverriment are properly and more effectively performed
within the traditional and constitutional structure. (See exhibit 24.)
Social security developments
Public Law 85-840, approved August 28, 1958, amended the oldage, survivors, and disability insurance program in several significant
respects. I t increased benefits for those now on the rolls and for
future beneficiaries on the average by about 7 percent, effective
January 1959. I t increased the rates of the employment tax on both
employers and employees h j % oi 1 percent above present law rates,
effective January 1, 1959, and the tax on self-employment income by
% of 1 percent. Moreover, future increases in rates scheduled under
present law were accelerated to take place at 3-year instead of 5-3^ear
intervals. These changes result in a 2 ^ percent employer and employee tax rate for 1959, increasing thereafter by }^ percent at 3-year
intervals beginning in 1960 to reach a 4 ^ percent permanent level in
1969. The tax on self-employment income is scheduled to increase
correspondingly. The maximum amount of annual earnings subject
to these tax rates was increased from $4,200 to $4,800.
The excess of income over outgo resulting from this legislation is
estimated to be 0.32 percent of payrolls on a level premium basis and
in.the words of.the President "will further strengthen the financial
condition of this system in the years immediately ahead and over the
long-term future. I t is, of course, essential that the old-age, sur
REVIEW OF FISCAL OPERATIONS
51
vivors, and disability insurance program which is so vital to the
economic security of the American people, remains financially sound
and self-supporting."
Changes were made also in the provisions of the Social Security Act
relating to old-age assistance, aid to dependent children, aid to the
blind, and aid to the permanently and totally disabled, to revise the
formula for determining the Federal share of public assistance payments within the area where formerly 50 percent-50 percent matching
applied. Within this area of matching, the 1958 legislation introduced
the concept of variable grants, ranging from 50 percent to 65 percent,
for States with per capita incomes below the national average. The
revisions in the formula for detei mining the Federal share of assistance
payments will increase Federal contributions to the States, on an
annual basis, by an estimated $187 million, assuming that expenditures of State and local funds continue at present rates.
International tax matters
Several of the Internal Revenue Code provisions applicable to
income from foreign sources were amended during the year (Public
Law 85-866, approved September 2, 1958). The credit for foreign
income taxes was revised to provide a carryback and carryover in
cases where the credit cannot be fully utilized in a given year. Contrary to the recommendation of the Treasury, a ^specific credit provision for United Kingdom taxes on patent and copyright royalties
received by an American licensor was enacted retroactive to taxable
years beginning after 1949. The tax return filing requirements were
revised with respect to earned income derived abroad so that such
income must be taken into account in determining whether a tax
return is to be filed by the recipient. However, this amendment does
not disturb the long existing exemption from tax allowed for such
income under certain circumstances, and is intended only to secure
information about foreign income to insure that the taxpayer has
properly treated it for tax purposes. To provide greater flexibility,
additional discretional authority was granted to the Treasury concerning requirements for the filing of returns by aliens leaving the
country. The 30-percent withholding tax on income received by
nonresident aliens and corporations was made applicable to distributions from certain pension plans to which the tax formerly did not
apply. Modifications were made in the estate tax provisions of the
Code so that estates of citizens who became residents of United States
possessions would nevertheless be subject to the Federal estate tax.
The program to negotiate international tax agreements to remove
tax obstacles here and abroad was continued in the interest of facUitate
ing international trade and investment. A supplementary income tax
convention with the United Kingdom to eliminate an area of double
52
1958 REPORT OF THE SECRETARY OF THE TREASURY
taxation with respect to royalties was approved during the 1958
congressional session and the British treaty as modified was extended
to twenty British overseas territories. The income tax convention
with Belgium was also modified to facilitate its extension to overseas
territories and it was extended to the Belgian Congo and Ruanda-Urundi.
The income tax convention with Pakistan, which had been held over
from the preceding session, was approved with a reservation and
awaits exchange of ratifications. The reservation related to the credit
that would have been granted for the first time under a tax convention
for the tax exemption allowed by Pakistan to new investment. The
reservation was based upon the fact that the Pakistan tax exemption
law expired earlier in the year, making the credit provision ineffectual.
A supplement to the income tax convention with Norway modifying
the taxes on dividends flowing between the two countries was signed
and transmitted to the Senate for consent to ratification. Negotiations on a treaty were conducted with Cuba, Mexico, Peru, and
Chile and the start of negotiations with India was announced. Discussions were held with Canada looking toward a revision of the estatetax convention.
International Financial and Monetary Developments
There was some diminution in world economic activity during the
fiscal year. Among the industrialized countries, rates of growth,
which had been declining in the previous year, in some cases became
stabilized and in others showed evidence of actual contraction. In
the less-developed countries, the combined impact of domestic inflationary pressures and falling demand and prices for basic commodities
produced in some instances severe exchange stringency and the need
for reexamination of programs for economic development. The
continuing flow of exports from the industrial countries of Western
Europe to the nonindustrialized countries required the latter to draw
heavUy on their exchange reserves in payment. Although United
States exports were reduced during the year to a greater degree than
those of other industrial countries, total United States imports were
weU maintained and served to cushion the contracting forces acting
on world trade.
The effects of the Suez crisis, which had disturbed the world payments picture in the previous flscal year, had largely run their course
by the middle of, the year under review. The postwar trend toward
reserve accumulation by a number of foreign countries, which was
interrupted during 1957, was resumed by the flrst quarter of 1958.
Several Western European countries were able to add to their gold
holdings during the latter half of the flscal year; the proportion of
REVIEW OF FISCAL OPERATIONS
53
gold to total reserves in some instances reached levels which had been
maintained in earlier postwar years.
The United States Governmentj through its bUateral programs, and
the major international institutions, supplied a substantial volume of
hard currency resources to the rest of the world for both temporary
StabUization purposes and for basic long-term development. The
International Monetary Fund provided resources at a rate much below
its peak rate of the year preceding but stUl well above the rate of
earlier years, whUe the International Bank exceeded past records
in both its disbursements on existing loans and in commitments on new
loans. The United States continued its regular programs of lenduig
through the Export-Import Bank and the Development Loan Fund, of
stabUization of currencies through exchange agreements, and of
lending and other assistance under mutual security legislation. The
tJriited States also took part in multUaterah arrangements for special
assistance for certain countries, including France.
The United Kingdom exercised its option under the Anglo-American
Financial Agreement, as amended, to defer payment of the 1957
installments of principal and interest (totaling $137 mUlion) on the
1945 -loari of $3.75 bUlion and the lend-lease and surplus property
settlements of the same year.
The return of sUver which had been transferred abroad during
World War I I under the Lend-Lease Act continued during the flscal
year 1958.
World economic conditions did not permit much progress toward
liberalizing trade and payments arrangements. A number of countries, however, were able to avoid reimposition of earlier controls in the
face of adverse developments. BUateralism in payments declined
rriarkedly. The European Common Market Treaty came into
effect, and broader proposals for trade integration in Europe were
under consideration at the end of the flscal year.
At the close of the flscal year there was considerable discussion
of the advisability of measures to increase the long-term effectiveness
of the International Monetary Fund and the International Bank.
Subsequently, the United States took the lead in both institutions
in suggesting a study of possible measures to increase their resources.
The United States also considered the feasibUity of an International
Development Association which would be affiliated with the International Bank.
The United States balance of payments and gold and dollar movements ^
Total United States payments to foreigners during the flscal year
1958 amounted to $26.3 billion, representiag a declhae of about $1.2
1 Figures for 1958 are preliminary. Differences between 1957 figures published in the 1957 Annual Report
and those for 1957 cited in this section ariB due to revisions made during the year.
54
1958 REPORT OF THE SECRETARY OF THE TREASURY
bUlion from 1957.^ The decline was mainly a result of the decrease
in the net outflow of United States private capital from the record
level of $4.1 bUlion in 1957 to $2.8 bUlion in 1958. Payments for the
other major items remained at or near the levels of 1957. Merchandise
imports were valued at $13.0 bUlion; payments for nonmUitary services
amounted to $4.3 bUlion; United States mUitary expenditures abroad
were $3.1 bUlion; net United States Government nonmUitary grants,
loans, and other capital outflow totaled $2.5 bUlion; and net remittances and pensions totaled about $700 mUlion.
Foreign payments in the United States for goods and services
amounted to $24.3 bUlion in the flscal year 1958, a decline of about
$1.6 bUlion from the previous year.^ United States nonmUitary
merchandise exports declined by $1.9 bUlion, amounting to $17.3
bUlion as compared with the previous year's record $19.2 bUlion.
United States receipts for nonmUitary services remained constant and
military cash transactions increased by about $300'mUlion.
These United States international payments and receipts resulted
in an increase in net United States payments to foreigners of about
$430 million in the flscal year 1958 as compared with 1957.
All of the flnancial transactions between the United States and the
rest of the world (including international institutions) during flscal
1958 resulted in a recorded gain of $1.4 billion by foreigners in gold
and liquid dollar assets, in contrast to a loss by foreigners during 1957
of about $150 million. This substantial improvement in the recorded
gold and liquid dollar position of foreigners arose only partly from the
increase in the net United States payments cited above. To a larger
extent the improvement was due to the sharp reduction in. the rate of
foreign long-term investment in the United States and to an apparent
cessation in the net inflow of unrecorded foreign capital. Net foreign
long-term investment in the United States amounted to "about
$100 million in 1958, as compared with $550 million during 1957.
Transactions unaccounted for in the balance of payments declined
substantially, from $1.2 billion in flscal 1957 to $450 million in 1958.
This decline may indicate that the relatively large net inflow of unrecorded foreign capital during the previous year had stopped during
1958 and may even have been reversed during the latter part of the
year.
The gold and short-term dollar assets^ of foreign countries (excluding gold holdings of the U.S.S.R. and other Eastern European countries) amounted to an estimated $30.5 billion on June 30, 1958, an
increase of about $2.4 billion over the $28.1 billion held on June 30,
2 These figures exclude net transfers of military supplies and services financed by U. S. Government
military grant aid, amounting to $2.5 billion in the fiscal year 1958 and $2.3 billion in the fiscal year 1957.
3 Includes official gold reserves and official and private holdings of short-term dollar assets as reported by
United States banking institutions. Excludes, for the first time, estimated gold holdings of all ESstern
European countries.
REVIEW OF FISCAL OPERATIONS
55
1957. The United Kingdom made the largest gain of over $900 million.
Continental Western European countries and their dependencies
increased their gold and short-term dollar holdings by $1.4 billion, as
Belgium, the Federal Republic of Germany, Italy, the Netherlands,
and Switzerland each registered gains of roughly $250-$350 million.
Canadian holdings rose by $375 million, and Japanese holdings by
about $175 million. Latin American gold and short-term dollar
holdings declined by approximately $215 million, with Argentine and
Colombian holdings being reduced by roughly $75 million each.
Egyptian holdings declined by about $55 million.
At the end of flscal 1958 foreign countries held $1.0 billion in
United States Government bonds and notes, a net decline of $265
million from the end of 1957. Canadian holdings of bonds and notes
were lower by about $115 million. The holdings of Cuba decreased
by $70 million, of Switzerland by $50 million, and of the United Kingdom by $40 million.
The holdings of gold and liquid dollar assets by international institutions rose by about $50 million during 1958. Their holdings of
gold-and short-term dollars declined by about $30 million and their
holdings of United States Government bonds and notes increased by
$80 miUion.
Total estimated world official gold holdings on June 30, 1958 (exclusive of the U.S.S.R. and other Eastern European countries) were
$39.4 billion, of which the United States held $21.4 billion and international institutions held $1.2 billion. Thus, the United States held
54 percent of world gold reserves and 56 percent of gold reserves
held by individual countries.
Postponement of 1957 Anglo-American Financial Agreement payments
I n December 1957 the Government of the United Kingdom advised
the Treasury Department of its intention to defer payment of the
annual installment of principal and interest due in 1957 on its obligations under the Anglo-American Financial Agreement of 1945 and
under the 1945 agreement covering settlement of Britain's lend-lease
and surplus property obligations to the United States. The British
action was in conformance with an amendment to the Anglo-American
Financial Agreement, which was approved by the Congress on April
20, 1957. (See page 48 and exhibits 18-21 of the 1957 Report of the
Secretary of the Treasury.) The amount deferred was approximately
$136.7 million, of which $80.5 million was interest and $56.3 million
was principal repayment. I t is payable in full the flrst year after the
end of the payment schedule in the original agreement.
There is an interest charge of 2 percent per annum on each deferred
amount. On December 31, 1957, the Government of the United
56
195 8 REPORT OF THE SECRETARY OF THE TREASURY
Kingdom paid $1.6 million to the United States Treasury Department,
representing interest due on the interest portion ($81.6 million) of the
1956 installment. This interest portion had been deferred under the
amendment agreement until the year after all other payments under
the Agreement have been completed.
I n connection with this deferment, the Government of the United
Kingdom also notifled the Canadian Government of its intention to
defer the installment due in 1957 under the flnancial agreement of
March 6, 1946, between the Government of Canada and the Govern^
ment of the United Kingdom.
_
Lend-lease silver
During World War I I the United States transferred a total of 410.8
million ounces of Treasury silver to certain foreign countries under
authority of the Lend-Lease Act of March 11, 1941. Although the
agreements differed somewhat in detail, they provided that the debtor
countries were to return a like kind and quantity of silver withiri
5 years after termination of the National Emergency as determined
by the President. Accordingly, the lend-lease silver was due to be
returned by April 27, 1957, although the agreements with several of
the countries permitted a postponement of partof the repayment for
an additional 2 years. Prior to June 30, 1957, the entire amount of
silver due from the Governments of Australia, Belgium, and. the
United Kingdom (also acting for the Government of the Fiji Islands)
and all but a small amount of the silver due from the Netherlands had
been returned and taken into the account of the Treasurer of ^ the
United States. I n addition, agreements had been concluded with
the Governments of India and Pakistan relative to the return of
225,999,904 ounces of silver furnished during the war'^under lend-lease
for use in undivided India. (See Annual Report for 1957, pp. 49-750.)
As provided in these agreements, title to 122,219,999 flne troy ounces
of silver had been delivered by the Government of India to the,
American Embassy in New Delhi, and title to approximately 15.5
million flne troy ounces of silver had been delivered by the Government
of Pakistan to the American Embassy in Karachi, with shipment to
the United States to be arranged as soon as possible. In addition,
the Government of India had begun shipment to the United States of
50,322,101 ounces of flne sUver.
In the course of flscal 1958 a total of 111 million flne troy ounces of
silver, consisting of 96 million flne troy ounces of the silver due from;
India, and 15 million flne troy ounces of that due from Pakistan, were
returned and taken into the account of the Treasurer of the United
States.
•
REVIEW
OF FISCAL
57
OPERATIONS
Lend-lease silver transactions as of J u n e 80, 1958
[In millions of fine ounces]
Silver trans- • Silver referred from
turned and
the Treasury taken into
Silver being
to lend-lease the accbunt
returned
for account of Treasurer
of foreign
of the United
States
governments
Country
Australia
Belgiura
Ethiopia . . .
Fiji
India
Netherlands
Pakistan
Saudi Arabia
United Kingdom
._ . .
.
.2
99.3
52.4
15.0
1 410. 8
267.0
...
._ .
Total
11.8
.3
11.-8
.3
5.4
.2
172.5
56.7
53.5
122.3
88.1
_
. . __
Silver to b e '
returned
'5.4
73.3
4.3
38.5
88.1
116.1
22.3
27.8
1 Includes 1,031,250 ounces lost at sea while in transit.
Internationa! Monetary Fund
The International Monetary Fund continued during the year to
provide substantial assistance to countries experiencing temporary
exchange difiiculties. Although drawings on the Fund by members
did not approach the high level of the preceding year, they nevertheless
amounted to $598 mUlion, which was more than double the annual
average of drawings in the Fund's entire history. Member countries
also had unused drawing rights of $806 mUlion under standby agreements outstanding as of June 30, 1958. The standby agreement
assures a country of access to a specifled amount of the Fund's resources, during an agreed period and under agreed circumstances.
Total drawings from 1947 through June 30, 1958, were $3,131 mUlion.
A total of $1,250 mUlion has been repaid to the Fund, leaving net
drawings of $1,881 mUlion outstanding on June 30.
Two members made large drawings on the Fund in the flscal year,
whUe numerous other members made drawings of smaller amounts.
In July and August 1957, Japan drew a total of $125 mUlion. Between
February and June 1958, France drew the whole of a $131 mUlion
standby agreement arranged with the Fund in January in conjunction
with other external assistance to alleviate a critical payraents situation. Among the other countries making substantial drawings were:
BrazU ($75 mUlion), ChUe ($37 million), Denmark ($34 mUlion)^
Netherlands ($69 mUlion), Union of South Africa ($36 mUlion), and
Yugoslavia ($23 mUlion). Some of these drawings have already been
reduced by voluntary repurchases.
The unusually heavy drawings on the Fund during the past 2 years
resulted in a heavy reduction in the Fund's holdings of gold and major
convertible currencies. The Fund had $3,837 mUlion in gold and
major conveftible currencies on hand on June 30, 1956. Holdings
58
1958 REPORT OF THE SECRETARY OF THE TREASURY
of gold and major convertible currencies amounted to $2,318 million
on June 30, 1958.
With the acceptance of seven new members during the year, the
membership of the Fund reached 67 by June 30, 1958;* The new
members were (in the order iof joining) Ireland, Saudi Arabia, Sudan,
Ghana, Malaya, Tunisia, and Morocco. As a result of the new
members' quotas and minor upward revisions of existing ones, total
quotas increased by $151 million during the flscal year to $9,088
mUlion. ,
Only one country, Ireland, established an initial par value during
the year ended June 30, 1958. The par value of the Irish pound was
fixed at the rate of Irish £ l equals U.S. $2.80, which had been the
effective rate since 1949. Duririg tKe year, Finland proposed, and
the Fund did not object to, a change in the par value of the markka
from 230 to the United States dollar to 320 to the United States dollar.
In October 1958 Secretary of the Treasury Anderson, in his capacity
as Governor of the three institutions, headed the United States delegation to the Thirteenth Annual Meeting of the International Monetary
Fund and the International Bank, and the concurrent Sedorid Annual
Meeting of the International Finance Corporation, at New Delhi,
India. The delegation included Under Secretary of State C. Douglas
Dillon, who served as United States Alternate Governor, Senators
J. W. Fulbright and A. Willis Robertson of the Senate Banking and
Currency Committee, members of the National Advisory CouncU on
Internatioriai Monetary and Financial Problems, United States
Ambassador to India Ellsworth Bunker, Assistant Secretary of the
Treasury Tom B. Coughran (United States Executive Director of
the International Bank), Special Assistant to the Secretary of the
Treasury Frank A. Southard, Jr. (United States Executive Director
of the International Monetary Fund), and the President'of the Federal
Reserve.Bank of New York, Alfred Hayes.
!•• Secretary Anderson, in his address to the opening joint session,
announced the intention of the United States to put before the Board
of Governors resolutions calling for a study by the Executive Directors
of the advisabUity and feasibUity of a general increase in quotas in
the International Monetary Fund and a general increase in capital
of the International Bank. The Secretary read in the course of his
speech a message from the President of the United States expressing
the President's concern that the Fund and the Bank have the resources to continue their work Over the following decade. \ Secretary
Anderson also referred to the exchange of letters between himself and
the President (see exhibit 35), in which the reasons for the United
• * Since July 1958, Egypt and Syria have been regarded as a single member, the United Arab Republic,
by both' the Fund and' the Bank. Spain and Libya joined both institutions in September-1958. The
feffect of these chahges was to raise total membership iu the Fund and the Bank to 68 as of September 30,
1958.
REVIEW OF FISCAL OPERATIONS
59
States resolutions were set forth. The United States resolutions were
subsequently adopted unanimously by the Boards of Governors, and
the question of increased resources for the Fund and Bank was thereby
referred to the Executive Directors for study and proposal of appropriate action.
I n discussion of the Annual Report of the Fund, the Secretary
commended the role played by the Fund, and spoke of the promising
outlook for a strengthening of the world trade and payments situation.
Assistant Secretary Coughran, addressing the Governors of the
International Finance Corporation, expressed the hope that the following year would bring an expansion in the activities and usefulness
of the Corporation.
Secretary Anderson also made reference in his address to the
opening joint session to the proposal for an International Development Association, to be affiliated with the International Bank. He
indicated that the United States was not offering at this time a blueprint for such an association, but would welcome the informal viewS;
of member governments. These views, together with the results of
preliminary studies within the United States Government, would
guide the United States in its decision on the appropriateness of
further study and negotiation.
Treasury exchange agreements
During the fiscal year the Treasury Department renewed four
existing exchange agreements and concluded two new agreements,
all with countries in Latin America. Such agreements are intended
to assist countries in the maintenance of monetary stability, and of a
trade and payments system free from restrictions. Exchange agreements are often associated with a program of financial and economic
reform.
>
The exchange agreement with Mexico (the oldest agreement in
continuous effect, having been originally negotiated in 1941) was
renewed in the amount of $75 million in January 1958 for a period of
2 years. The exchange agreement with Bolivia in the amount of
$7.5 million was renewed on November 30, 1957, for a period of 1
month, and then was extended for a period of a year from December
31, 1957. The Treasury Department negotiated a 1-year exchange
agreement with Peru for $17.5 million in February. This agreement
replaces a similar one for $12.5 million, which had been periodically
renewed since 1954. The exchange agreement with Chile was
renewed in the amount of $10 million in April 1958 for a period of 1
year. Paraguay entered into a new 1-year exchange agreement for
$5.5 million with the Treasury in August 1957. A short-term exchange
agreement in; the amount of $5 million was in effect with Nicaragua
from October 1, 1957, through March 31, 1958. In aU of these
60
1958 REPORT OF THE SECRETARY OF THE TREASURY
instances except the Mexican one, a standby arrangement was concurrently entered into between the country concerned and the International Monetary Fund. No drawings were made under any of the
Treasury exchange agreements.
Foreign investment, the Export-Import Bank, the International Bank, and the
International Finance Corporation
: i n calendar 1957 American private investment abroad again increased by over $3 billion (including reinvested earnings), bringing
such investment to an estimated total of approximately $37 billion as
of December 31, 1957. The book value of direct investments in
subsidiaries and branches of United States corporations constituted
more than $25 billion, an increase of slightly Over $2 billion during
the year. Other long-term investments (principally portfolio holdings) amounted to an estimated $8.3 billion, and short-term investments to $3.2 billion. During the first half of 1958 United States
private investment abroad (excluding reinvested earnings of subsidiaries) continued at the high rate of about $1% billion for the 6
months.
More than 40 percent of the increase in direct investment in 1957
was in Latin America (about $1.35 billion), while $870 million was
added to the United States investment in Canada and about $475
million to United States direct investment in Western Europe.
Investment in the petroleum industry again predominated, accounting
for about-55 percent of the total increase in direct investment, with
investment in manufacturing increasing by somewhat less than half
as much. Investments in a number of other industries also showed
increases.
I n contrast to the rise in United States investment abroad, foreign
assets and investments in the United States declined somewhat in
1957. A reduction in long-term investments, reflecting a decline in
thcfmarket value of United States corporate stocks held by foreigners,
WAS only partially offset by a relatively small increase in foreign
holdings,of short-term assets and United States Government'obligations.
The indebtedness of foreign countries to the United States Government under various loan and credit agreements, concluded principally
since the end of World War II, amounted to $12.2 billion as of June 30,
•1958. (See table 110.) These agreements included settlement of
lend-lease, surplus property, and similar obligations, the loan under
the Anglo-American Financial Agreeinent, loans by the ExportIiiiiport Bank, and obligations arising under the mutual security and
foreign aid program.
The Export-Import Bank.—During the fiscal year 1958, the ExportImport Bank authorized 191 new credits, totaling $856 milUon, in 30
REVIEW OF FISCAL OPERATIONS
61
countries. The Bank during the same period approved 111 allocations and transactions totaling $46 million under credits authorized
prior to July 1, 1957. Participation by private financial institutions
in Export-Import Bank credits was larger than in any earlier 12month period. These participations, amounting to $223 million,
were made in 21 of the Bank's credits in 11 countries, and were all for
the account and risk of the private institutions.
The largest single credit during the period was to India for $150
million to assist in carrying out the second 5-year plan. Japan
received two credits, totaling $175 million, for the purchase of cotton
and other agriciUtural commodities in the United States, as well as
several project loans for steel mills and the electric power industry.
Colombia received two credits, totaling $138 mUlion. The remaining
credits were of smaller amounts, and were widely dispersed geographically.
The Bank also made its first loans in a foreign currency during the
year, under Public Law 480, the Agricultural Trade Development
and Assistance Act of 1954, as amended (7 U.S.C. 1704(e)). Under
Section 104(e) of this act, the Bank may receive up to 25 percent of
the proceeds in foreign currencies of sales of agricultural commodities
under Public Law 480. Commodity sales agreements negotiated by
the Department of Agriculture included provisions making the currencies of 18 countries available for loans by the Export-Import
Bank, and in June 1958, credits totaling 41 mUlion Mexican pesos
($3.3 mUlion) were authorized to borrowers in Mexico.
In October 1957 the British Government drew $250 million of the
$500 million line of credit which the Export-Import Bank had established in December 1956. This line of credit, which had been authorized to make dollars available for the importation of United States
goods and services, and for dollar costs of petroleum and petroleum
products, was designed to assist in relieving some of the pressure on
the British pound which accompanied the Suez Canal difficulties.
Principial repayments begin 3 years after disbursements and are
to be made in semiannual installments over 4)^ years thereafter.
Interest is chargeable at 4% percent, payable semiannually.
The original deadline for drawing the balance of $250 million under
the line of credit was February 28, 1958. However, the credit
availability was subsequently extended for an additional year.
In accordance with the recommendation contained in the President's
budget message, legislation was enacted by the Congress to increase
the lending authority of the Bank by $2 billion, and was signed by
the President on May 22. Including this increase the uncommitted
lending authority of the Bank on June 30, 1958, was slightly less than
$2.5 billion.
62
1958 REPORT OF THE SECRETARY OF THE TREASURY
Net income for the year amounted to $66.5 million, from which
dividends of $22.5 million were paid on the capital stock of the Bank
held by the Secretary of the Treasury. The net reserves of the Bank,
representing undistributed earnings, stood at $487 mUlion on June 30,
1958.
The International Bank.—During the fiscal year 1958 the International Bank made 34 loans in 18 countries and territories, equivalent
to $711 million. This total was more than three-quarters larger than
the annual average of the preceding 3 years, and disbursements, at
nearly $500 mUlion, were more than 50 percent greater. Asia was
the chief recipient, with India ($165.5 mUlion), Japan ($77 mUlion),
ThaUand ($66 mUlion), Pakistan ($49.2 million), and the Philippines
($21 mUlion) each obtaining one or more loans. Latin Amjerica
received the next largest total, $121 million; the largest single loan,
of $75 mUlion, was to Italy; and a number of loans were made to other
European countries and to Africa. Nearly half the Bank's lending
during the year was for improvements in transportation, with electric
power (long in first place), industry, and agriculture accounting for
the balance. In three instances, involving Belgium, South Africa,
and the Federation of Rhodesia and Nyasaland, respectively, the
Bank's loans were part of joint operations in which the borrowers
simultaneously obtained funds in the private capital market. There
was also participation by private capital in 22 of the year's 34 loans,
and sales of parts of the Bank's loans, including these participations,
totaled $87 mUlion, all without the Bank's guarantee. As of June 30,
1958, the Bank had made .204 loans in 47 member countries and
territories equivalent to $3.7 billion, and had disbursed $2.8 billion.
The funded debt of the Bank increased by $625 million during the
year, and amounted on June 30, 1958, to the equivalent of $1,658
million. Membership in the Bank corresponds to the membership of
the Fund (see supra).
The International Finance Corporation.—The International Finance
Corporation's first complete fiscal year of operation coincided with
the period of this report. On June 30, 1958, the membership of the
Corporation numbered 55 countries, with applications pending from
Ireland and Libya. Members' subscriptions to capital amounted to
$93.3 million of which the United States had subscribed $35.2 million,
or 37.7 percent.
The Corporation had by June 30 made nine investment commitments to companies located in Australia, Brazil (four), Chile, Mexico
(two), and Pakistan. These commitments amounted to $9.5 million,
net of cancellations. The largest single commitment was for $2.45
million for expansion of motor vehicle production facilities in Brazil,
and the smallest ($450,000) was in the same country to enlarge a
REVIEW OF FISCAL OPERATIONS
63
plant producing automotive parts. Disbursements on the Corporation's investments amounted to $3.3 million at the end of the fiscal
year. Negotiations were well advanced for investments by the Corporation in several additional projects.
Coordination of loan policies
In accordance with its statutory authority, the National Advisory
Council on International Monetary and Financial Problems, of which
the Secretary of the Treasury is chairman, continued to coordinate
the policies and operations of the representatives of the United States
on the International Monetary Fund, the International Bank, the
International Finance Corporation, and of all agencies of the Government (such as the Export-Import Bank, the Development Loan Fund,
etc.) which make or participate in making foreign loans or which
engage in foreign financial, exchange, or monetary transactions.
International trade and payments
There was only limited progress toward a freer world trade and
payments system during fiscal 1958. A relatively unfavorable atmosphere in world payments made it necessary for most countries to
concentrate on maintaining measures of liberalization instead of
breaking new ground. To the extent that past gains were maintained,
the year's developments may be considered satisfactory.
Several currencies of Western Europe were made more freely transr
ferable during the period under review. Italy added significantly to
the list of countries among which ^^multilateral lira" arrangements
are effective. France and Sweden took steps in a similar direction.
The so-called ^Taris Club" scheme, by which payments were multilateralized between Argentina aiid 11 Western European countries,
was formalized and extended in November 1957 to include West
Germany. A roughly parallel arrangement between Brazil and eight
Western European countries continued in force during the year.
Finland negotiated arrangements with its Western European trading
partners, enabling it to use its export earnings on a multilateral basis.
There was little net reduction in the use of quantitative restrictions
through the year. However, discrimination against the dollar area,
through quantitative restrictions or otherwise, was further reduced
in many sectors of trade, although it remained an important factor
in trade in manufactured consumer goods. The International
Monetary Fund's drive to simplify or eliminate complex multiple
rate systems in member countries continued, to yield results. Brazil,
China, Ecuador, Nicaragua, Paraguay, 'and Yugoslavia were amorig
those reducing the complexity of their exchange systems.. Finland
moved to a unitary rate system at the time of its devaluation in
September 1957.
479641--59
6
64
1958 REPORT OF THE SECRETARY OF THE TREASURY
The European Payments Union was renewed in June 1958 for
another year (to June 30, 1959) without change in the settlement
basis of 75 percent in gold and 25 percent in credit, which has been
in effect since August 1, 1955, and also without change in the provision for replacing the Payments Union with a European Monetary
Agreement if the Union should be terminated.
The Rome Treaty establishing the European Economic Community, better known as the Common Market, came into force on
January 1, 1958. Belgium, France, Germany, Italy, Luxembourg,
and the Netherlands are member states. The Common Market
provides for the gradual elimination of customs duties and other
obstacles to trade and the free movement of persons, services, and
capital within the Community. Among the institutions established
by the Community are the European Investment Bank, which will
finance projects within the Community, and the Development Fund
which will make grants to the associated overseas territories of the
member states.
Parallel with the establishment of the European Economic Community was the setting up by the same countries of the European
Atomic Energy Community (Euratom) for the purpose of developing
nuclear industries. I t shares the same Court of Justice and Assembly
as the European Economic Community and the European Coal and
Steel Community. The United States is cooperating with the work
of Euratom through the Euratom Cooperation Act of 1958 (Public
Law 85-846).
. A French financial mission headed by M. Jean Monnet held discussions in Washington in January 1958 on the French financial
situation with representatives of the United States Government.
The United States was represented in these talks by the Secretary of
the Treasury, by C. Douglas Dillon, then Deputy Under Secretary
of State for Economic Affairs, and by the President of the ExportImport Bank, Samuel C. Waugh. The French Government simultaneously conducted similar discussions with the International
Monetary Fund and the European Payments Union.
During the discussions the French representatives described the
financial program which was being adopted by the French Government and Parliament for the purpose of eliminating infiation, achieving equilibrium in the French balance of payments, and restoring
financial stability. In view of this French financial program, the
European Payments Union agreed to extend to France credits equivalent to $250,000,000; the International Monetary Fund agreed
to make available to France the equivalent of $131,250,000; and the
United States agreed to extend to France certain financial facilities
amounting to $274,000,000 (see exhibit 38).
' . ' REVIEW OF FISCAL OPERATIONS
65
"Secretary Anderson headed the United States, delegation, to the
Economic Conference of the Organization of American States held in
Buenos Aires in August 1957. I n his statement to the Conference
the Secretary stressed the importance of cooperation among the
American republics, the interest which the United States had in the
expansion of their trade and economic development, and the significance of private capital investment in Latin America. The text
of the Secretary's statement was reprinted as exhibit 17 in the 1957
Annual Report.
. Secretary Anderson and the Chancellor of the Exchequer of the
United Kingdom, the Rt. Hon. Peter Thorneycroft, held a discussion
in September. 1957 on various economic problems of mutual interest.
Informal meetings were also held with British representatives in
Washington in February 1958 and again in May.
The Secretary of the Treasury, together with Secretary of State
Dulles, Secretary of Agriculture Benson, and Secretary of Commerce
Weeks, represented the United States at the third meeting of the
Joint United States-Canadian Committee on Trade and Economic
Affairs held in Washington in October 1957. The Committee examined a wide range of subjects, including domestic economic developments in the United States and Canada, the trade policies of the two
Governments, agricultural policies and surplus disposal activities
(especially those relating to wheat), the trade in,agricultural products
between the two countries. United States investment in Canada,
United States policies affecting Canadian mineral products, and a
number of other specific questions of special interest to both sides.
At the Heads of Government Meeting of the North Atlantic Treaty
Organization in December, decisions were taken on such matters as the
establishment of nuclear stockpUes in the NATO area and the provision of American intermediate-range ballistic missUes to NATO forces.
The Secretary of the Treasury participated in the meeting as a member
of the United States delegation.
In: March meetings were held with the Miriister of Economics of the
Federal Republic of Germany, Dr. Ludwig Erhard, who met with
Secretary Anderson and with the President and the Secretary of State.
These discussions covered the economic situation in the United States
and iri Germany, international trade and payments questions, and
economic development of the lessrdeveloped countries.
The Treasury participated in the twelfth regular meeting of the
Contracting Parties to the General Agreement on Tariffs and Trade
in October 1957, as well as in the April 1958 meeting of the Intersessional Committee consisting of all the Contracting Parties. This
interse^sional meeting was concerned, primarily with problems expected to arise from the creation oi the European Economic Com-
66
1958 REPORT OF THE SECRETARY OF THE TREASURY
munity. Extensive discussions were held in which members of the
European Economic Community participated fully and as a result of
which understandings were reached regarding procedures for consultation between members and nonmembers designed to mitigate the
untoward effects which some nonmember countries anticipate from
the operation of the European Common Market.
As indicated in the last Annual Report, the Contracting Parties at their twelfth session also considered certain proposals of
the International Chamber of Commerce designed to abolish or
ameliorate the incidence of certain onerous customs formalities.
These proposals pertain to the certification of consular invoices, the
nationality of imported goods, and marks of origin. Discussion
revealed that further work would be required in each of these areas,
and therefore additional consideration will be given to these proposals
at the thirteenth meeting of the Contracting Parties.
The Treasury was also represented during the year on United States
delegations to the Organization for European Economic Cooperation,
various United Nations bodies, the Southeast Asia Treaty Organization, and the Colombo Plan Organization.
Foreign assets control
For the purpose of preventing Communist China from obtaining
foreign exchange through the exportation of merchandise to the
United States, the Foreign Assets Control Regulations prohibit the
unlicensed purchase and importation into the United States of
Communist Chinese or North Korean merchandise, as well as numerous other commodities therein specified which are of types that have
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
specific shipments of Chinese-type merchandise certified to be of
non-Communist 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
Go^^ernments now have such certification procedures: Australia,
Formosa, France, Hong Kong, India, Italy, Japan, the Netherlands,
Switzerland, Viet-Nam, and the Republic of Korea. Notices of the
availability 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
India entered into a certification agreement, and a number of addi-
REVIEW OF FISCAL OPERATIONS
67
tional individual items became available for certification under existing
agreements with other governments.
The enforcement measures of the Control resulted in a number of
siiCGessful criminal prosecutions. Substantial amounts representing
crimiria! penalties and fines imposed by the courts and sums paid in
mitigation of civU penalties were paid to the Treasury Department.
The largest of these involved sales and shipments of leaf tobacco to
Communist Chinese-controlled firms in Hong Kong, and in cases
involving illegal importations of Chinese bristles, gallnuts, and tussah
silk waste.
Effective May 1, 1958, the Egyptian Assets Control Regulations
were revoked, under advice of the Department of State, thereby
unblocking assets in the United States of the Suez Canal Company
and the Egyptian Government that were blocked pursuant to these
Regulations.
In addition, the Control exercised responsibilities with respect to
blocked accounts of approximately $9 million received from the sale
of a Czechoslovak-owned steel mill, sold pursuant to an order issued
by the Secretary on March 25, 1954. At the end of the fiscal year, a
bill was pending in Congress to devote these funds to the satisfaction
of the claims of American citizens whose property had been nationalized by Czechoslovakia. The Treasury Department testified in
favor of this bill, which was passed and became Public Law 85-604
on August 8, 1958. Pursuant to this statute, the funds were centralized in an account in the Treasury and will be available for the payment of awards to Americans whose claims are appro^'ed by the
Foreign Claims Settlement Commission.
ADMINISTRATIVE
REPORTS
Management Improvement Program
Achievements of the management improvement program in the
fiscal year 1958 clearly demonstrate the interest and support of the
Bureau heads. Significant actions taken resulted in estimated annual
savings of over $6% million, including more than $1 million from the
incentive awards program. These savings, which are summarized
under various headings in this report and in the Bureau reports which
follow, have been accomplished without adversely affecting the collection of revenue or reducing essential services to the public, despite
major increases in workload throughout the Treasury Department.
Other savings and economies were made also. The Bureau of the
Mint acquired surplus copper from the Navy at $90,000 less than the
commercial market price. Likewise, the Department acquired surplus
equipment, mostly laboratory items, valued at $100,000, from surplus
inventories of other Governmerit agencies. The Department declared
excess to its needs real properties with a total acquisition cost of
$640,000 and reported them to the General Services Admuiistration
for disposal; and the Bureau of the Mint made available to other
Federal agencies space in the Mint Building in San Francisco amounting to 92,000 square feet with an annual rental value of $230,000.
The management improvement program has placed great emphasis
on analysis and review of manpower utilization within the Treasury.
Various evaluations have resulted in more efficient use of available
personnel and limitations on increasing personnel. The number of
civilian employees on the rolls decreased from 78,376 as of June 30,
1957, to 77,467 on June 30, 1958 (see table 124).
In December 1957 Secretary Anderson sent a memorandum to all
Treasury supervisors asking for their cooperation in keeping up with
rising workloads without increasing personnel. The Secretary asked
that each supervisor submit his own economy suggestions and invite
each of his employees to submit suggestions. As a result, 4,749
suggestions were submitted in the first half of calendar 1958 compared
with 3,002 in the last half of 1957. In one bureau alone suggestions
increased from 25 to 802.
The incentive awards program has contributed approximately onesixth of all tangible savings from management improvements. This
program brings employees into active participation in management.
Employee participation in the suggestion program increased 20 percent. The number of awards granted for superior work performance
and special acts or service increased 6 percent each. The Coast
Guard initiated a military awards program designed to reward military personnel for contributions to improving the efficiency and
economy of its operations. A comparison of overall results for fiscal
1957 and 1958 appears in table 125.
Training, executive, and supervisory development
The Department continued to develop and expand its own training
facilities and took advantage, where possible, of training programs
offered by outside sources. Upon nomination by the Department,
one employee received a fellowship offered through the American
Management Association's Management Course Scholarships, and
71
72
195 8 REPORT OF THE SECRETARY OF THE TREASURY
three employees attended the Brookings Institution's Executive
Management Conference. Six employees were awarded scholarships:
Two by the Department of Agriculture Graduate School, three by
Southeastern University, and one by George Washington University.
More than 60 newly appointed management interns attended nine
orientation sessions given by the Ofl&ce of the Secretary. The Internal
Revenue Service conducted summer management development institutes for 836 management oflficials, and 60 officials from several
other Treasury bureaus attended.
Accounting improvements
A number of significant improvements were made in accounting.
As a result of action during the year, accrual accounting, including
monetary property accounting, is now employed with respect to
appropriation and fund accounting throughout the Treasury Department. A study of the Public Debt accounting system has resulted
in discontinuance of posting certain detailed redemption ledgers and
simplification of balance .sheets refiecting audit activity. The
Treasurer's Oflfice no longer maintains detaUed cash accounts of public
debt principal transactions, but records information relating to such
transactions in summary form. This procedure resulted in annual
savings of 8 man-years estimated at $33,600. A comprehensive
statement of accounting developments is contained in the Report on
Accounting Developments in the Treasury Department jor the jiscal year
1958, prepared by the Bureau of Accounts.
Safety program
In May the Treasury Safety Council marked its tenth anniversary.
Since the CouncU's inception there has been a 29 percent improvement
in the accident safety rate. The accident frequency ratio ^ o f t h e
Treasury Department in the calendar year 1957 was 4.7 as compared
with 4.8 in 1956. At the annual M a y meeting of all bureau heads,
the Secretary presented two National Safety Council awards to the
U. S. Coast Guard for exceptional service in the promotion of safety
through its publications: Proceedings oj the Merchant Marine Council,
and Sajety N^ws. The Secretary also presented the Treasury Safety
Award to nine units of the Bureau of Accounts; the U. S. Secret
Service; the Oflfice of the Comptroller of the Currency; and to the
Internal Revenue Service in recognition of the performance of functions for an extended period without a lost-time injury. The Treasury
was one of five Departments with 50,000 or more employees
riominated for the President's Safety Award for its 1957 program.
Equipment modernization
. During the fiscal year 1958, modernization of equipment resulted in
substantial reductions in processing costs. The Bureau of Engraving
and Printing now has in use eight new sheet-fed rotary intaglio presses.
The production attained during the changeover and the 29 percent
increase achieved in the first full month of operation indicate annual
savings of 270 man-years estimated at $1,000,000. The Bureau has
installed five high-speed presses for the production of postage stamps
* The number of disabling injuries per man-hours worked.
ADMINISTRATIVE REPORTS
73
t o replace 29 presses which had been in operation for over 40 years.
Annual savings of 47 man-years are estimated at-$180,000.
• Internal Revenue payroll operations for the Atlanta, Boston,
Cincinnati, New York, and PhUadelphia regions and the national
oflice (approximately .32,000 pay accounts) were centralized in the
Northeast" Service Center at Lawrence, Mass., on tabulating equipment. Personnel analysis reporting, year-end reports, and reports of
1959 financial plans were furnished from this centralized payroll
record.
The Bureau of the Public Debt is installing at its new offices in
Parkersburg, W. Va., a new large-scale computer to handle the
accounting of all Series E savings bonds in punch card form. Installation of equipment, including the central processor unit, was
begun in Marcli 1958 by the DATAmatic Company.
The Coast Guard has installed cardatype equipment to handle its
Reserve personnel accounting, payroll activities, and property
accounting. I B M 305 Ramac computer installations were made in
New York for merchant vessel reporting and at the Coast Guard
Yard, Curtis Bay, for all fiscal functions including payroll operations,
•cost accounting, and materiel control.
.
Paperwork management and records disposal
Control of paperwork was a major management objective of the
bureaus during the year.
The Internal Revenue Service is using copying machines to reproduce copies of examiners' reports; has adopted a simplified method of
requisitioning stock room supplies by a supply issue book; and has
adopted a simplified audit operations production report which reduces
the amount of information to be recorded on examination record
cards by technical audit personnel in field offices.
The Office of the Treasurer has installed a new tape ffiing system
to account for outstanding checks. This is a tape file consisting of
descriptions of checks that remain outstanding and is updated periodically as these checks are paid or additional outstanding checks are
added. Used with the electronic data processing equipment this tape
file reduced machine time by over 40 percent.
The Coast Guard, pursuant to the act of May 10, 1956 (46 U. S. C.
a-g), effective June 1, 1958, must inspect all vessels which carry more
than six passengers. The resulting increase in paperwork has been
eased by a new consolidated form which eliminated 5 report card
forms and replaced 3 others.
Total records disposed of amounted to 110,133 cubic feet and the
total transferred to the Federal Record Centers and the Archives
amounted to 183,102 cubic feet.
Organizational analysis
To achieve greater efficiency in operations. Treasury bureaus give
constant scrutiny to their organizational structures. The following
changes have been made during the year.
The Bureau of Accounts has obtained additional improvements in
operations by merging the Examining Unit and Processing Unit of
74
195 8 REPORT OF THE SECRETARY OF THE TREASURY
the Miscellaneous Payments Branch, abolishing the Check Assignment and Custody Section, and reorganizing the Claims and Correspondence Branch and Payments Service Branch. These improvements resulted in estimated annual savings of $61,000.
The Coast Guard eliriiinated seven manned lights by converting
some to automatic unattended stations and by discontinuing others.
One radarbeacon station was discontinued. As a direct result, 29
billets were released and reassigned to other stations.
Refinery operations at the San Francisco Mint were discontinued at
the end of fiscal 1957, and the mint is now being operated as an assayoffice and depository only. This is resulting in an annual saving estimated at $151,000.
After the adoption of the new punch card savings bonds, the
Chicago and New York savings bonds audit branches of the Bureau
of the Public Debt were closed and operations transferred to the Cincinnati savings bonds audit branch, which will process all transactions
of old bonds. The punch card savings bonds wUl be processed electronically at the new Piairkersburg, W. Va., office.
Procedural changes
Evaluation of operating procedures during the past fiscal year resulted in the adoption of new and more efficient methods for handling
workloads of large volume. Some of these procedural changes are
described in the following paragraphs.
The Bureau of Accounts has adopted a simplified procedure for
verifying income tax refund checks, improved procedures relating to
claims for substitute checks, and combined microfilming and check
signing functions into a single operation.
The Internal Revenue Service reported that although the number of
taxpayers (11 million) assisted was about the same as in 1957, there
was a decrease of 12 percent in the number of man-days required in
1958. Through encouragement of self-help and use of the telephone
question-answering service the number of taxpayers assisted per manday increased from 82 in 1957 to 91 in 1958. Internal Revenue
supervisors-in-charge now determine the frequency and scope of
special inspections to be made at producing and bottling plants on an
individual plant basis rather than an arbitrarUy required number of
special inspections each year.
Manpower utilization surveys
The Treasury's rising workload has made it increasingly necessary
to apply its existing work force in the most effective manner. Examples of attainments in fiscal 1958 in improving utUization of manpower foUow.
Bureau of Customs management teams, in the course of inspecting
50 of the 104 customs districts, reevaluated manpower requirements
in terms of existing and anticipated workloads. Simplified procedures
and other improvements resulted in a net reduction of seven positions.
Following studies of manpower utUization in the United States
Savings Bonds Division, 25 positions were eliminated.
ADMINISTRATIVE REPORTS
75
The Bureau of Engraving and Printing. coii4,ncted a review of its
Guard Services Section, including a physical inspection of all guard
posts. With the overall consideration for manpower requirements but
without relaxing or sacrificing the security protective service, nine
positions were eliminated. A survey of clerical and operating procedures in the Surface Printing Division resulted in a reduction of 16
positions.
Examples of projects under study
The search for ways to improve management is a continual process.
Each Treasury bureau has identified and selected new projects to be
studied and analyzed during the coming year. A few of these major
projects are listed below.
1. The Bureau of Accounts is making a study of the feasibility of
applying automatic data processing systems to the accounting operations in the Division of Central Accounts.'
2. The Division of Disbursement, in cooperation with the Veterans
Administration, is developing coordinated procedures for the mechanization of due-date insurance. Also, both agencies are considering
plans for a centralized computer installation to speed up monthly
benefit checks to veterans.
3. The Comptroller of the Currency conducted an extensive survey
of its Statistical Division to determine the practicability of mechanizing its work. As a result, additional surveys are being made by
the IBM, Remington Rand, and Burroughs companies.
4. On the basis of a proposal by the Post Oflfice Department, the
Bureau of Customs and the Post Office Department worked out a new
system for controlling collections of duties and taxes assessed on merchandise not exceeding $250 imported by mail. By remitting collections
through the 15 regional comptroller offices of the Post Office Department to one central customs office the system will eliminate an estimated 500,000 remittances from hundreds of postmasters.
5. The Bureau of Engraving and Printing is studying the potential
use of electronic equipment for processing requisitions from postmasters. This would enable the Bureau to furnish punch card data to
be used in conjunction with the Post Office IBM equipment.
6. The Internal Revenue Service has under study a long-range project for application of improved mechanical and electronic techniques
to fiscal accounting, budget, and related operations. The program for
fiscal 1959 includes the conversion of payroll operations for the
Chicago, Dallas, Omaha, and San Francisco regions to mechanized
operation in the Western Service Center.
7. The Bureau of the Mint is modernizing the melting and rolling
equipment at its PhUadelphia Mint. This equipment is expected to
reduce production cost of coinage at that plant.
8. The Bureau of the Public Debt is undertaking a study of its
accounting procedures involved in maintaining the Bureau's administrative accounts.
9. The United States Coast Guard is in process of converting the
Atlantic Coast Light List to the Foto-List system of reproduction.
76
195 8 REPORT OF THE SECRETARY OF THE TREASURY
10. The United States Secret Service is analyzing the redemption
procedures of fraudulently altered United States paper money and
coins. Possible elimination of procedures in the Counterfeit Forgery
Section will reduce paperwork throughout the Service.
11. The Office of the Treasurer of the United States is programming
for higher speed electronic equipment. They plan to install IBM 705
Model 3 in the Check Payment and ReconcUiation Division during the
second quarter of fiscal 1960 to replace the present system.
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 4,606 active national banks in the United
States and possessions on June 23, 1958, amounted to $122,469 milrlion, as compared with the total assets of 4,654 banks amounting to
$112,792 million on June 6, 1957, an increase of $9,677 million during
the year. The deposits of the banks in 1958 totaled $110,407 mUlion,
which was $9,112 million more than in 1957. The loans in 1958 were
$50,902 mUlion, exceeding the 1957 figure by $2,342 million. Securities held totaled $45,286 mUlion, an increase of $5,676 mUlion during
the year. Capital funds of $9,476 mUlion were $732 mUlion more
than in the preceding year.
1 More.detailed information concerning the Bureau of the Comptroller of the Currency is contained in
the separate annual report of the Comptroller of the Currency.
ADMINISTRATIVE
77
REPORTS
Abstract of reports of condition of active national banks on the date of each report from
J u n e 6, 1957, to J u n e 23, 1958
[In t h o u s a n d s of dollars]
J u n e 6,
1957 (4,654
banks) :
Oct. 11,
1957 (4,641
banks)
,
Dec. 31,
1957 (4,627
banks)
M a r . 4,
1958 (4,622
banks)
•
J u n e 23, •
1958 (4,606'
banks)
ASSETS
L o a n s a n d discounts, including overdrafts.
U . S. G o v e r n m e n t securities, direct obligations...
-.Obligations g u a r a n t e e d b y U . S. Government
Obligations of States a n d political s u b d i visions
_
O t h e r b o n d s , notes, a n d d e b e n t u r e s
C o r p o r a t e stocks, i n c l u d i n g stocks of F e d eral Reserve B a n k s
.
T o t a l loans a n d securities..
_..
C a s h , balances w i t h other b a n k s , including
reserve balances, a n d cash items in process of collection
B a n k premises o w n e d , f u r n i t u r e a n d fixtures
R e a l estate o w n e d other t h a n b a n k p r e m ises
I n v e s t m e n t s a n d o t h e r assets indirectly
representing b a n k premises or other real
estate
C u s t o m e r s ' liability on acceptances
I n c o m e accrued b u t n o t y e t collected
O t h e r assets
T o t a l assets
48', 560,163
49,895, 576
50, 502, 277
49, 688,857
60, 902, 433
30,432,845
30,904,269
31,335, 767
31, 795, 874
34, 599,192
3,620
2,531
2,309
2,393
2,813
7, 259, 756
1,675,150
7,452, 643
1, 631, 550
7, 495,878
1,880, 706
7, 626, 441
1,927,818
8,364,896
2,045, 247
239,074
251,494
271, 708
274,438
88,170, 608
90,138,063
91,483,986
91,313,091
96,189,019
22, 588, 753
24, 208, 398
26,865,134
23, 633,476
24,032,436
1,141,472
1,177,168
1,187,155
1, 212, 207
1, 252, 651
37, 888
38,091
36,487
38,386
40.858
93,484
286.367
275,118
198, 280
104,147
343,075
252, 266
226, 654
116,139
374, 518
272,846
186, 375
118, 621
437, 646
276, 359
212.350
112, 791,970 116, 487,862 120, 522, 640 117, 242,136
121,
334,
263,
233,
766
949
311
825
122, 468,815
LIABILITIES
D e m a n d deposits of i n d i v i d u a l s , p a r t n e r ships, a n d corporations
T i m e deposits of i n d i v i d u a l s , p a r t n e r s h i p s ,
a n d corporations.__
D e p o s i t s of U . S. G o v e r n m e n t a n d postal
savings
D e p o s i t s of States a n d political s u b d i v i sions
_
Deposits ofbanks
_.
O t h e r deposits (certified a n d cashiers*
checks, etc.)
Total deposits...
D e m a n d deposits
T i m e deposits
Bills p a y a b l e , rediscounts, a n d other liabilities for borrowed m o n e y
.'--.
Mortgages or other liens on b a n k premises
a n d o t h e r r e a l estate
Acceptances o u t s t a n d i n g
I n c o m e collected b u t n o t y e t earned
Expenses accrued a n d u n p a i d .
OtherliabilitiesTotal liabilities..-.
54, 380, 721
56,410,493
58, 715, 522
55,043,742
55,115,495
27, 761, 505
28, 737,084
29,138,727
29,882,234
31,329,692
2,061,630
2,405,939
2,424,137
2,174,693
4,994,800
7, 677, 687
7,967,347
7,176,372
8,403, 799
7,878,315
9,483,436
8,018, 405
8, 688,328
8, 611,982
8, 685,161
1,446,341
1, 274,991
1, 796,174
1,418, 851
1, 669, 619
101, 295,131 104,408, 678 109,436,311 105, 226, 253
110,406, 749
71,102,007
30,193,124
814,874
1,110
294, 708
538,493
613, 800
489, 687
104,047,8
73,320,107 77,880,965 72,437, 659
31,088, 571 31, 555,346 32, 788, 594
1,020,221
1,251
358, 738
588, 700
612, 260
436,827
75, 681,195
34, 725, 654
38,324
610,019
491,502
1,522
388, 616
576, 713
557,082
430,966
1,034
449,038
666.634
722. 667
423, 669
1,062
345, 382
693,004
621, 317
534,145
107,425,676 111, 429,423 107,999,314
112,993,161
CAPITAL ACCOUNTS
Capitalstock
Surplus
U n d i v i d e d profits
_.
Reserves a n d r e t i r e m e n t account for pre; ferred stock
T o t a l capital accounts
2, 706,473
4, 201, 661
1,602,630
2, 772, 530
4,320,927
1, 730,206
2,806, 213
4,416.426
1, 618,857
2,842,903
4, 448,129
1, 694, 533
233, 503
238, 624
. 251,721
267, 267
8, 744,167
9,062,187
9,093,217
9, 242,822
T o t a l liabilities a n d capital accounts. 112, 791,970 116,487; 862 120, 522,640 117, 242,136
2,867,859
4, 514, 485
1,839,600
253,710
9, 475, 664
122,468, 815
78
1958 REPORT OF THE SECRETARY OF THE TREASURY
Summary of changes in number and capital stock of national banks
The authorized capital stock of the 4,602 national banks in existence
on June 30, 1958, consisted of common stock aggregating $2,870
million, and preferred stock aggregating $3.5 million. The common
stock of the 4,647 national banks in existence a year earlier amounted
to $2,709 million and preferred stock to $3.8 million. During the
year charters were issued to 20 national banks having an aggregate
of $6.5 million of common stock. There was a net decrease of 45 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 detailed information regarding the changes in the number
and capital stock of national banks in the fiscal year 1958 is shown
in the following table.
Organizations, capital stock changes, and liquidations of national banks, fiscal year
1958
Number
of banks
Capital stock
Common
Charters in force June 30, 1957, and authorized capital stock..
Increases:
Charters issued
—
Capital stock:
198 cases by statutory sale
354 cases by statutory stock dividends.
......
1 case by s'todk dividerid under.articles of association..
31 cases, by statutory consolidation
17 cases by statutory merger
1 bank by new issue
Restored to solvency
4,647
20
$3.791.170
6, 615,000
76,477,673
70,600,512
35,000
18,900,250
6,209,000
$800,000
250,000
178,987,435
Total increases..
Decreases:
Voluntary liquidations
Statutory consolidations.:
..Statutory mergers
Conversions into State banks
Merged or consolidated with State banks.
Receivership
Capital stock:
2 cases by statutory reduction
2 cases by statutory consolidation
3 cases by statutory merger...
4 cases by retirement.
1,000
4,317, 600
300,000
12,979,000
26,000
16,000
225,010
112,000
136,000'
1,068/000
66
Total decreases.
Net change
$2, 70S, 640,105
Preferred
.
Charters in force June 30, 1968, and authorized capital stock..
4,602
18,094, 610
1,083,000
160,892,926
-283,000
2,869, 533,030
3,508,170
Bureau of Customs
The Bureau of Customs is responsible for 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;dssuance of documents and
signal letters to vessels of the United States; admeasurement of vessels;
ADMINISTRATIVE REPORTS
79
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 certification for payment of the amount of drawback
due upon the exportation of articles produced from duty-paid or taxpaid 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.
Collections
• Revenue collected by the Customs Service during the fiscal ^^^ear
1958 totaled nearly $1,122 million, the largest in history. Compared
with $1,059 million collected in 1957, there was an increase of nearly
6 percent. In addition to customs collections the total included certain internal revenue taxes for the Internal Revenue Service and some
collections for other Government agencies.
Customs collections alone amounted to almost $806 million, an increase of 5.9 percent over the $761 million coUected in 1957. They
consisted of duties, tonnage taxes, fees, and fines and penalties for the
violation of customs and navigation laws, etc. There was again a
substantial increase in collections by Customs of internal revenue
taxes on imported liquors, wines, perfumes, etc., which amounted to
$316 million, 6 percent more than the $298 million collected in 1957.
Of the customs collections more than $799 million were derived
from duties (including import taxes) levied on imported merchandise!
The source of duty collections by type of entiy is shown in table 88.
The tables showing collections by tariff schedules and countries and
values of dutiable imports which are usually included in this report
(tables 86 through 90 in the 1957 report) are omitted this year because
of technical difficiUties. I t is expected that they wUl be published
in the next Annual Report.
In 1958 considerably less than one-half of all imports into the United
States were duty free and included some commodities imported free
for Government stockpile 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 55 percent which was dutiable constituted the
basis of customs duties on imports.
Collections of customs duties were at a higher level during each
month of this fiscal year than at an}^ time in customs history.
By customs districts.—Of the 45 customs districts in which collections
are covered into the Treasury of the United States, all but 11 reported
larger customs collections than in 1957. The collections for each
customs district are shown in table 89.
Extent of operations
Vehicles and persons entering.—More than 39 mUlion vessels, aircraft, automobiles, buses, trains, and other vehicles entered our
harbors or crossed our borders during the fiscal year 1958, bringing
over 137K million persons, and more than 26 million persons walked
across our borders.. All were subject to customs inspection.
The number of various types oi vehicles and the number of persons
entering the United States during 1957 and 1958 is shown in table 91,
479641—59
7
80
195 8 REPORT OF THE SECRETARY OF THE TREASURY
and the number of aircraft and passengers arriving in districts where
this mode of travel is most prevalent is shown in table 92.
Entries oj merchandise.—Imports into the United States reached a
record peak in fiscal 1958. Formal entries of merchandise (consumption and warehouse and rewarehouse entries) exceeded 1 million for
the third consecutive year; the 1,175,271 entries filed were 5.3 percent
more than in 1957. Informal entries and baggage declarations covering both mail importations and other shipments valued at less than
$250 rose 3.2 percent over 1957 to an alltime record of 3,776,940.
All other types of entries showed similar increases. The number of
each type of entry filed during the past 2 fiscal years is shown in
table 90.
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 95 percent of the drawback allowed in 1957 was due to the export
of products manufactured from imported raw materials. The principal imported materials used in manufactured exports in 1958 were
iron anci steel semimanufactures; tobacco, unmanufactured; watch
movements; petroleum and products; aluminum; sugar; paper and
manufactures; cotton cloth; lead ore, waste, pigs and bars; and
tungsten ore.
Tables 93 and 94 show the drawback transactions for the fiscal
years 1957 and 1958.
Appraisement oj merchandise {including Customs Injormation Exchange) .—The number of invoices and packages examined by appraisers' personnel continued to increase in fiscal 1958. There were
1,822,000 invoices filed in 1958, compared with 1,774,000 "^ during
1957, an increase of 2.7 percent. Packages examined in 1958 totaled
1,375,000, a slight increase over those in 1957. Appraising officers
from Washington headquarters, with the assistance of personnel
selected from various field offices, aided ports throughout the country
to reduce the backlog of unappraised invoices. During 1958, this
backlog decreased from 190,000 to 176,000, or by 7 percent.
The valuation provision of the Customs Simplification Act of 1956
(19 U. S. C. 1402) became effective February 27, 1958. The effect
of this provision on appraisement operations cannot yet be evaluated
fully because of the short time it has been in existence.
The Bureau of Customs worked closely with the Office of the Secretary in preparing necessary background and statistical material for
presentation to Congress in connection with the proposed amendment
to the Antidumping Act of 1921. The bill amending the act, passed
by the House of Representatives during the first session of the 85th
Congress, was considered by the Senate during the second session and
was enacted August 14, 1958, as Public Law 85-630.
Thirteen complaints of dumping under the Antidumping Act were
received during the fiscal year 1958 as compared with 41 received in
1957. The probable cause for the decrease in the number of complaints was the pending legislation amending the act. Twenty-five
dumping cases were disposed of during the year, leaving 26 cases
'Revised.
ADMINISTRATIVE, REPORTS
81
under investigation at the end of 1958 as compared with 38 ^ at the
end of 1957.
The volume of countervailing duty cases was lower again in the
fiscal year under review than in the previous year. Seven complaints
were received, as compared with 12 in 1957. Eighteen countervaUing
duty cases were disposed of during the year and 4 remained on hand
at the end of the year.
The activities of the Customs Information Exchange, New York
City, continued on the upward trend as shown by the number of
reports received from and disseminated to appraising officers. Appraisers' reports of classification and value covering a cross section
of importations of merchandise received at each port totaled 63,000
in fiscal 1958, compared with 54,000 in the previous year. These
reports indicate the relative number of commodity items received at
any given port for the first time, as well as regular items received at
new prices or subject to different terms of sale from previous shipments.
Differences in classification and value indicate the number of instances where information varied at different ports and in which additional study and analysis were required before establishment of a
uniform price or rate. The reports of value differences in fiscal 1958
increased to 6,886 from 6,118 in 1957.
The number of differences in classification were 3,355 in 1958, while
in 1957 there were 3,154, reflecting a slight increase in new commodities received.
An increase in the variety of merchandise being imported is reflected in the number of foreign inquiries requiring detailed investigation abroad to procure information sufficient for appraisement purposes. There were 454 such inquiries in 1958 and 412 in 1957.
Technical services.—This branch of the Customs Service furnishes
chemical, engineering, statistical sampling, and other scientific and
technical services; provides proper weighing and gauging equipment;
designs and oversees the construction of border inspection stations;
and directs thc'field operations of customs laboratories. In 1958 the
laboratories analyzed more than 120,000 samples, about one-half of
which consisted of ores and metals, sugar, and wool. The large majority were '^import'' samples of dutiable merchandise analyzed to develop
and report facts needed for tariff classification purposes. Other types
of samples tested included those taken from customs seizures, mostly
narcotics and other prohibited articles; preshipment samples of articles intended for shipment to the United States, analyzed to assist in
establishing their proper classification; and samples tested for other
Government agencies.
Statistical quality control of sample weighing operations, by making
analyses of cargo sample weighing data to assure accuracy and precision within control limits, was continued during fiscal 1958. There
were 786 such weighing operations, consisting of 583 cargoes of raw
sugar, 51 cargoes of refined sugar, 146 cargoes of cigarette tobacco,
and 6 cargoes of other merchandise. Statistical control over the
verification of liquidations (final determination of duties and taxes
due) was continued. The sampling guide, completely revised as a
new part of the Customs Manual, should provide a more uniform and
"•Revised.
82
195 8 REPORT OF THE SECRETARY OF THE TREASURY
equitable assessment of duties and taxes by extending the use of the
proven sampling techniques to a wider range of commodities.
Construction and installation of a 50-ton truck scale in Brooklyn,
N. Y., was completed. In cooperation with the Immigration and
Naturalization Service, three contracts were awarded for construction
of border stations (station and two residences) under the $60,000
limitation. The General Services Administration continued development of plans for construction of 12 border stations over the customsimmigration $60,000 limitation. Plans for the construction of truck
handling facilities by the General Services Administration were
completed and approved at 7 locations. Six sites are in the process of
being procured in anticipation of constructing border stations.
Export control.—Export declarations authenticated declined in 1958
although the number of shipments examined and the number of
seizures increased. The following table shows the volume of export
control activities during fiscal 1957 and 1958.
Activity
1957
E x p o r t declarations a u t h e n t i c a t e d
•Shipments e x a m i n e d .
N u m b e r of seizures
V a l u e of seizures
.
E x p o r t control e m p l o y e e s - . .
4,596,141
' 563, 790
309
^ $738,822
198
1968
4, 562,437
564, 530
358
$460,005
194
Percentage
increase, or
decrease (—)
-0.7
.1
15.9
-37.7
-2.0
«• Revised.
Protests and appeals.—Reversing the trend of 1956 and 1957, there
was a pronounced increase in the number of protests ffled by importers
against the rate and amount of duty assessed and other decisions by
the collectors. Appeals for reappraisement ffled by importers who
did not agree with appraisers as to the value of merchandise were 87.7
percent more than in 1957. The increase was due, in part, to the
Customs Simplification Act of 1956.
The following table shows the number of protests and appeals filed
and acted on during the fiscal years 1957 and 1958.
1957
P r o t e s t s a n d appeals
Protests:
F i l e d w i t h collectors b y i m p o r t e r s
Allowed b y collectors
D e n i e d b y collectors a n d forwarded to customs court
Appeals fo'- r e a p p r a i s e m e n t filed w i t h collectors
.
29,400
2.661
25, 664
15, 272
1958
37, 787
3,182
25,643
28, 664
Percentage
increase, or
decrease ( - )
28.5
20.0
-.1
87.7
Marine activities.—The American merchant marine continued its
steady growth as reflected in the total number of vessels documented
at the close of the fiscal year as compared with 1957. On June 30,
1958, there were 46,071 vessels in the documented fleet compared
with 44,680 "" on the corresponding date of the previous jesn. Of the
total, slightly more than 4,000 were documented as 3'achts while
' Revised.
ADMINISTRATIVE
83
REPORTS
nearly 42,000 were authorized through documentation for commercia]
use in foreign, coasting, or fishing trades. During the year 1,421
vessels were removed from documentation.
The following table shows the volume of marine documentation
activities during the fiscal years 1957 and 1958.
Activity
1967
T o t a l vessels d o c u m e n t e d a t e n d of year
D o c u m e n t s issued (registers, enrollments, a n d licenses)
Licenses r e n e w e d a n d changes of m a s t e r endorsed
Mortgages, satisfactions, notices of lien, bills of sale, a b s t r a c t s
of t i t l e , a n d other i n s t r u m e n t s of title recorded
A b s t r a c t s of title a n d certificates of ownership issued
N a v i g a t i o n fines i m p o s e d
T o n n a g e tax p a y m e n t s
1958
Percentage
increase, or
decrease (—)
r 44, 680
15,371
47, 748
46,071
14, 277
46,153
3.1
-7.1
-3.3
13, 681
6,822
2,414
24, 739
12, 456
5,849
2,496
23, 363
-9.0
-14.3
3.4
-5.6
' Revised.
During the year, vessels of certain foreign countries posed a difficult
problem by presenting two sets of papers describing the tonnage.
Papers for some showed dual tonnages as open and closed shelter
deckers. Others showed dual tonnages as ore or grain carriers.
Since it was not practicable to verify the tonnage used, tonnage tax
was charged upon the higher of the two net tonnages shown. The
entire situation was under consideration at the end of the year for
determining whether any satisfactory method of establishing the
true applicable tonnage could be worked out.
The following tabulation shows the number of entrances and clearances of vessels in fiscal 1957 and 1958.
Vessel movements
Entrances:
Direct from foreign ports
Via other domestic ports.
.
Total
Clearances:
Direct to foreign ports
Via other domestic ports
_
.
Total
1957
.•
.
1958
Percentage
increase, or
decrease (—)
54,423
28,857
51,822
33,067
—4.8
14.6
83,280
84,879
1.9
57, 511
29,630
46,447
32,946
—19.2
11.2
87,141
79,392
-8.9
Regulations were issued under recent congressional legislation
governing the loss of coastwise privileges by vessels rebuilt in foreign
shipyards. Waivers of navigation laws granted during the year
related to various operations in connection with the construction of
the Saint Lawrence Seaway and Power Project.
The Department forwarded to the Congress certain draft legislation
which would repeal existing statutes prohibiting the collection of fees
in connection with the admeasurement, documentation, and inspection of vessels. If the proposed legislation is enacted into law, uniform charges will be prescribed under existing general authority to
recover the Government's cost for the services provided.
84
195 8 REPORT OF THE SECRETARY OF THE TREASURY
Legislation was enacted again during 1958 permitting certain
Canadian vessels to provide service, principally passenger, to those
ports in Alaska where American vessels do not now provide service.
This year the legislation provides for termination of the authority
when the Secretary of Commerce determines that American vessels
are available to furnish such service.
Legal problems and proceedings.'—The Office of the Chief Counsel
considered many legal problems and questions arising in connection
with the administration and enforcement of the customs and navigation laws and other related laws. Among these were various
problems relating to classification and appraisement of imported
merchandise; interpretation of enforcement provisions; rights and
duties of Customs employees; delegations of authority to Customs
officers; activities of customs brokers; drafting proposed legislation;
preparing and reviewing reports on pending legislation; and preparing
and reviewing customs regulations. Many of the questions considered
arose in connection with amendments of the tariff act and other new
legislation.
Special consideration was given to questions arising in connection
with the interpretation and implementation of the Customs Simplification Act of 1956; of laws relating to insular possessions; and to
various matters relating to reimbursement for services and other
benefits furnished to parties in interest.
Much work was done in connection with new customs administrative bills which were introduced in the 85th Congress in August 1957
as H. R. 9424 and H. R. 9425. Attention was given also to matters
that arose in connection with the proposed amendments in H. R. 6006
of the Antidumping Act of 1921.
Assistance was given to the office of the Assistant Attorney General
in charge of the trial and appeal of customs cases in the Customs
Court and the Court of Customs and Patent Appeals, and also the
Department of Justice in connection with litigation in the Court of
Claims.
To improve coordination and supervision of legal activities in
New York, the solicitor to the collector of customs was made solicitor
for the port of New York. The solicitor's function as legal adviser
to the collector was combined with the additional functions of legal
adviser to all other branches of the Customs Service in New York
City, and supervising, on behalf of the Customs Service throughout
the country, liaison with the attorneys of the Department of Justice
charged with the trial of cases in the Customs Court.
Law enforcement and investigative activities.—The Customs Agency
Service conducted 16,282 investigations during fiscal 1958, compared
with 16,473 in fiscal 1957, a decrease of 191 cases. These investigations arose not only under the customs, navigation, and related laws
administered by the Bureau of Customs, but also in connection with
a number of laws administered by other Government agencies and
enforced by Customs. Table 96 shows the investigative activities
for the fiscal years 1957 and 1958. Major enforcement problems
involved the smuggling into the United States of narcotic drugs,
diamonds, and watch movements, and the smuggling out of the country
of arms, ammunition, and implements of war.
ADMINISTRATIVE REPORTS
85
One Customs enforcement officer was killed during this fiscal year,
the first supreme sacrifice in line of duty made by an officer of the
Customs Service since 1947.
There was a substantial increase both in the number and amount
of seizures of narcotic drugs and marihuana taken into custody.
A total of 778 seizures was made during the year compared with
641'" in 1957. The drugs seized included 171 ounces of heroin, 1,710
ounces of smoking opium (of which 77 percent was seized in December
1957)^, 207 ounces of raw opium, and 39,641 ounces of marihuana.
There were 2,275 marihuana cigarettes seized this year as compared
with 7,868 seized in 1957. The largest seizure of marihuana ever
made in the United States, 11,859 ounces, was accomplished in
February 1958. This substantially equaled the total of the 3 largest
seizures made in previous years. The marihuana problem on the
Mexican border, where this type of illegal traffic enters the United
States, shows no sign of abating. There seems to be a shift in the
established ''trade route'' which formerly led from the border to
New York City, but now has shifted to the Midwest, centered in the
area around Chicago. Under the provisions of the Narcotic Control
Act of 1956, which was in effect during the entire fiscal year, 219
arrests under the registration law were made and a total of 187
dispositions reported. In practically ever}^ case where a violator
was sentenced to serve time, it was recommended that he be sent to
a Federal hospital for treatment of narcotic addiction.
Cocaine, which was largely out of the picture for several years,
returned to prominence with three large seizures during the year, one
at Miami and two at New York. Heroin continues to be received
from both Europe and the Far East, while numerous shipments
were intercepted on the Mexican border.
The unlawful entry of watches and watch movements into this
country continues one of the most important enforcement problems.
Diamond smuggling apparently continues on a substantial scale,
undoubtedl}^ motivated by the savings from evasion of income and
luxury taxes and also by avoidance of the customs duty imposed by
this Government. These diamond shipments usually originate in
Belgium, with New York as the ultimate point of destination.
The smuggling of arms, ammunition, and implements of war out
of the country due to the confiict in Cuba has been another problem
confronting our enforcement officers. This activity was confined
principall}^ to New York and Miami and to ports on the Gulf of
Mexico. The Mutual Security Act under which these attempted
exports are prohibited is administered by the Department of State
and enforced by the Bureau of Customs.
Seizures of merchandise throughout the country during 1958 for
violations of laws enforced by the Customs Service numbered 18,807,
with an appraised value of $8,443,568, compared with 14,812 seizures
in 1957, appraised at $11,596,706. This was an increase of 27 percent
in the number of seizures, but a decrease of 27.2 percent in the appraised value. Title to only a small fraction of these seizures actually
passes to the Government, as the majority are destroyed or remitted
to the owners upon payment of fines or penalties. Details of seizures
are shown in table 95. There were 1,268 arrests for violations of
' Revised.
86
195 8 REPORT OF THE SECRETARY OF THE TREASURY
laws enforced by the Bureau of Customs in 1958, or 369 more than
i n 1957. The additional arrests stemmed largely from narcotic
registration act cases and those involving violation of the Mutual
Security Act. The number of arrests exceeds substantially the
number in any one of the last 21 years.
The following tabulation shows the number of arrests and dispositions during fiscal 1957 and 1958.
1958
1957
Activity
899
457
35
86
86
58
285
Arrests
Convictions
Acquittals
Nolle pressed
Dismissed
Not indicted
Under, or awaiting indictment.
1,268
704
25
61
247
13
372
Percentage
increase, or
decrease (—)
41.0
54.0
-28.6
-29.1
187.2
-77.6
30.5
Foreign trade zones.—Duties and intern ah revenue taxes collected
on merchandise entered from Foreign Trade Zone No. 1 at Staten
Island, N. Y., exceeded by more than $1}^ million the amount collected
in fiscal 1957. Other activities in the zone showed a considerable
decrease, however, 70 ships berthed in the zone to lade domestic
ship's stores and 19 vessels used the zone facilities for discharging
cargo from foreign countries. In Foreign Trade Zone No. 2 in New
Orleans, La., the tonnage received declined, but the value of the merchandise received was increased b}^^ 40.5 percent over that in fiscal
1957. There was also an increase of approximately $282,000 in
amount of duties and internal revenue taxes collected over those in
1957. For the second consecutive year, the volume of operations in
Foreign Trade Zone No. 3 in San Francisco, Calif., declined. The
only increase was in the value of merchandise delivered from the
zone. There was a slight rise in the number of entries into Foreign
Trade Zone No. 5 at Seattle, Wash., and in the number of long tons
delivered from the zone. All other activities decidedly decreased.
The following table contains a brief summary of foreign trade zone
operations during fiscal 1958.
Trade zone
New York
New Orleans
San Francisco
Seattle
Number
of entries]
4, 859
5,174
5,744
551
Received in zone
Long
tons
22, 660
33, 734
2,256
5,430
Value
$20, 356, 946
21, 049, 413
2, 276,120
483, 852
Delivered from zone
Long
tons
25,503
26, 517
1,628
11, 606
Value
$19, 245, 507
14,191,306
2, 289,112
765, 250
Duties and
internal
revenue
taxes
collected
$4, 656, 672
1,314,362
169, 368
57, 478
Custoins ports oj entry, stations, and airports.—Ysleta, Tex., was
abolished as a port of entry and by annexation is now within the
port hmits of El Paso, Tex. The designations of Fort Pierce, Fla., and
Taku Inlet, Alaska, as customs stations were revoked and a customs
station at Grammerc}^-, La., was created during the year. The limits
of the following ports were extended to include areas not heretofore
87
ADMINISTRATIVE REPORTS
covered: Fall River, Mass."; Jacksonville, Fla.; Houston, Tex.; Los
Angeles, Calif.; and Green Bay, Wis. The name of the DetroitWa5me Major Airport, Detroit, Mich., was changed to the Detroit
Metropolitan Wayne County Airport.
Cost of administration
During 1958 regular customs employment, both nonreimbursable
and reimbursable, increased slightly, whUe employment financed by
funds from the Departments of Agriculture and Commerce decreased.
The following table shows employment data during the fiscal years
1957 and 1958.
Operation
Regular c u s t o m s operations:
Nom'eimbursable
_
Reimbursable 1
.
1957
_ . . . . _
T o t a l regiilar "customs e m p l o y m e n t
E x p o r t control
A d d i t i o n a l inspection for D e p a r t m e n t of jVgricultui'e
Total employment
-
1958
Percentage
increase, or
decrease ( - )
7,175
289
7,187
291
0 2
.7
7,464
198
171
7,478
194
170
.2
—2 0
-.6
7,833
7,842
.1
1 Salaries reimbursed to the Government by those private firms who received the exclusive services of
these employees.
Customs operating expenses totaled $51,878,261, including export
control expenses for which the Bureau was reimbursed by the Departr
ment of Commerce, and the cost of additional inspection reimbursed
by the Department of Agriculture.
Management improvement program
The Customs management improvement program is designed to
facilitate international trade and travel, and develop an efficient
customs organization. Management actions taken in 1958 to simplify
customs procedures and improve the utilization of personnel, space,
and equipment produced annual recurring savings in manpower equal
to 49 man-years valued at $267,000.
The bulk of these savings consisted of manpower released from
certain areas of Customs activity as a result of management and procedural improvements and reassigned, to other areas where increased
worldoads required additional resources not avaUable from budgeted
funds. In addition, onetime savings of $61,000, representing the
value of equipment obtained without cost to the customs appropriation, were also realized. The total savings of $328,000 enabled
Customs to meet an overall workload increase of approximately 5
percent without significantly increasing the average number of
employees.
Marked progress was also made in the Bureau's continuing program
of customs simplification. Descriptions of some of the more important
legislative and administrative improvements follow.
Legislation.—Two laws sponsored by Customs and enacted during
the 2d Session of the 85th Congress are of particular interest and
benefit to manufacturers who use imported materials in new products
which are subsequently exported. Public Law 85-414, approved
88
1958 REPORT OF THE SECRETARY OF THE TREASURY
May 16, 1958, permits the free importation of merchandise and materials to be used for such purposes under a temporary importation,
bond. Formerly, it was necessary to make a formal entry of the
merchandise and deposit the duties which were then refunded as
drawback when the new products were exported. Public Law 85-673,
approved August 18, 1958, extends to all classes of merchandise the
privilege of substituting domestic merchandise for imported merchandise in order to obtain a refund of duties when the new product
is exported. The provisions of this law will enable manufacturers to
reduce inventory control costs and simplify materials stockpiling.
Other legislation. Public Law^ 85-925, approved September 2, 1958,
permits automobiles rented abroad by United States residents to be
imported free under certain conditions. In view of the increased use
of rented automobUes in recent years, this law will do much to facilitate
motor vehicle travel across United States borders.
Delegations of authority.—To expedite the refund of duties on transactions in field offices and reduce the number of cases referred to
Washington headquarters, collectors of customs were authorized to extend the time allowed for the return to Customs custody and exportation of merchandise not conforming to sample or specification. Collectors were also authorized to approve certain supplemental drawback
statements filed by manufacturers operating under existing rates of
drawback and to amend these rates to cover the desired changes.
Some of the delays and difficulties in recruiting and placing new
personnel were eliminated by giving principal field officers the authority to appoint individuals before completion of qualifications and fitness
investigations when such action is warranted. Authority was delegated also to field officers to approve certain applications to engage
in outside emplo^^ment and acquire private interests in business.
Previously, all such cases were referred to Washington for decision.
Entry of merchandise.—Installation of a modern conveyor belt
system for processing foreign mail parcels at the port of New York
was completed and placed in operation early in the year. This
equipment has reduced the labor required to move some 18 million
mail parcels annually through customs inspection and examination
and has prevented the accumulation of large backlogs that formerly
occurred. In addition, it has been possible to expand the operations
at New York to include the examination of ordinary and insured mail
packages valued at $250 or less which were formerly sent from the
New York Post Office to Baltimore and Philadelphia for customs
treatment. The increased efficiency and capacity of the New York
mail division as a result of this installation effected personnel savings
of 16 man-years with annual recurring savings of $80,000.
Simplified procedures were adopted to clear articles purchased
abroad by United States residents which are shipped or mailed separately, and are entitled to free en try, under tourist exemptions. A
returning resident, who declares such ^'articles to follow" at the port
of arrival is now furnished with a new form of declaration which he
retains until the articles actually arrive. At that time a new declaration, when properly executed, may be tendered to postal or customs
authorities in lieu of duties and taxes levied on the shipment. The
exemptions so allowed are post audited. Under the old procedures,
unaccompanied tourist purchases were released only upon payment of
ADMINISTRATIVE REPORTS
89
the duties which were afterward refunded, or were held by Customs
until the claim for exemption could be verified. In order to make the
new declaration available on as wide a basis as possible, it was also
printed on the reverse of a newly designed entry form used for informal
mail shipments (less than $250 in value)-, and thus will automatically
accompany all informal mail shipments delivered by the post office.
Large passenger vessels operating between New York and foreign
ports have adopted, on an optional basis, a new form of crew declaration which makes unnecessary the preparation by steamship personnel
of a separate itemized list of crew purchases made abroad. Companies
operating vessels with large crews predict substantial savings in administrative costs by utilizing the new procedure.
The application of modern sampling techniques to the inventory of
imported merchandise stored in customs bonded warehouses has
reduced operating costs for warehouse proprietors without significant
loss of customs control. Formerly, a complete physical inventory was
required annually.
Specified periods of time were established for retention by importers
and manufacturers of certain records dealing with leather importations, bonded wool or hair, smelting and refining, imported wheat,
and drawback claims. Since no retention period had ever been specified, these records were being retained indefinitely at considerable
expense.
New instructions were issued providing for immediate processing
of claims for shortages of merchandise and notification to the importer
if no allowance in duties or taxes would be made. Formerly, action
on shortage claims was suspended until final determination of duties
and taxes which could be several months after shortages occurred.
Such clarification of Customs - practice in allowing or disallowing
claims for shortages benefits importers, brokers, and attorneys.
A program was inaugurated on April 10, 1958, of publishing in the
weekly Treasury Decisions a continuing series of abstracts of unpublished Bureau decisions on matters of interest to Customs and the
importing public. Usually issued in response to specific requests
from importers and brokers, they cover a wide range of customs problems including tariff classification, entry requirements, and marking
to indicate country of origin. Wide dissemination of these decisions
assists importers, brokers, and agents in complying with Customs laws
and regulations, and expedites entry and clearance of imported
merchandise.
Information on Customs requirements and procedures in pamphlet
or sheet form is now available for free distribution. These '^Customs
Handouts" are brief nontechnical summaries of the most common
problems encountered by the public. They are used extensively in
the Washington headquarters and in the field offices in answering inquiries from the public.
Other improvements included: A new special customs invoice to
replace a foreign service form made obsolete by elimination of consular
certification; a new mail entry form with a window envelope to eliminate hand addressing of 800,000 envelopes annually; simplified procedures for entering noncommercial mail importations valued at more
than $250 to reduce customs formalities for individuals importing
merchandise for personal or household use; elimination of intransit
'90
195 8 REPORT OF THE SECRETARY OF THE TREASURY
manifests on empt}^ rail cars moving through Canada between the
Niagara and MicJtiigan frontiers, to reduce further the documentation
requirements on the Canadian border; the use of a single unconditionally free entry to enter several shipments of merchandise received
on the same day, each valued at $250 or less, in lieu of one entry for
each shipment; and arrangements to transfer intact merchandise
landed in truck trailers and lift vans to a central distribution facility
for entry, examination, and release.
Liquidation of entries.—Continued efforts were made to increase
liquidation production and reduce the backlog of unliquidated entries.
(Liquidation is the final determination of duties and taxes on imported merchandise.) Measures taken include the transfer of 23,000
entries from ports with heavy backlogs to ports with seasonal surpluses
of manpower, and the liquidation of 37,000 unconditionally free entries
at district subports. In several districts management inspection
teams reorganized entry and liquidating divisions so as to increase
both the total manpower assigned to liquidating and the output of
each liquidator. Additional personnel, obtained from existing manpower resources, were authorized at several ports with critical backlogs. As a result, the number of formal entries liquidated increased
from 1,058,000 in 1957 to 1,152,000 in 1958. Despite this increase,
the number of entries liquidated was 34,000 less than the number
filed b}^ importers, and the total bacldog of unliquidated entries was
increased by a similar number. On June 30, 1958, this backlog
totaled 736,000 entries.
A management survey of staffing requirements and manpower
utilization at New York International Airport resulted in the transfer
of certain liquidating functions and personnel from the customhouse
in New York City to the airport. The liquidators who were transferred are available to assist in the exainination of passengers' baggage
during periods of heavy traffic and certain inspectors are being utilized
as liquidators when their services are not required for baggage examination. This arrangement has, to a large extent, solved a difficult
problem in adequatel}^ staffing the New York International Airport
to meet peak dail}^ and seasonal worldoads without, at the same time,
producing an overstaffing situation during slack periods.
Travel and air commerce.—Preflight baggage examination in effect
at Toronto, Canada, for a number of years, was extended to Dorval
Airport, Montreal, Canada. Under this arrangement air passengers
destined for the United States are cleared by United States Customs
prior to boarding; on arrival in the United States they proceed without
further customs formality.
To assist private aircraft operators who travel abroad and return
in their own aircraft, a list of airports was published where Customs
employees are assigned on a regular schedule, and other airports
where, although no Customs personnel are regularly assigned, landing
rights are ordinarily granted and inspection services ma}^ be obtained.
Simplified procedures were established to transfer air cargo arriving
at New York International Airport to Newark, N. J., for entry,
examination, and release. Previousl}^, importers in the Newark area
were required to make entry at the International Airport for merchandise consigned to them.
ADMINISTRATIVE REPORTS
91
Duplicate baggage declarations were eliminated for returning
residents whose baggage is examined in foreign territory. This action
removed the last remaining requirement for the preparation of more
than one baggage declaration when entering the United States.
Fees and charges.—A complete review of Customs fees and charges
was made tp determine necessary action to meet requirements of the
Bureau of the Budget with respect to user charges for Government
services. As a result of this stud37^, proposed legislation was submitted
to repeal navigation laws which prohibit or restrict reasonable service
charges as described under marine activities; to obtain authority to
include administrative costs in assessment of reimbursable charges,
and to bring about uniformity in charges for various services; and to
permit recovery of the full cost of assigning an employee to a foreign
countiy to provide tentative customs preclearance of articles, passengers, and carriers.
Under existing administrative authority, the prices of salable
customs forms were increased to meet current production and distribution costs. Charges were also established for Customs inspectors'
services required when the owners of merchandise moving in-bond
through the United States are permitted to weigh, sample, or examine it while still in customs custody. Notices have also been
published of the intention to increase certain other charges and to
establish certain minimum charges for services and products so as to
recover actual costs.
Training and orientation.—A booldet entitled Code of Conduct for
Employees covering the standards of conduct and behavior expected
of each emplo3^ee of the Customs Service, and disciplinary actions
that may be taken if the standards are violated, was distributed to
the entire personnel during the year. .
In an effort to achieve maximum efficiency in performance of
services by customs officers for the Immigration and Naturalization
Service, and by immigration officers for the Customs Service on the
Canadian and Mexican borders, Customs and Immigration have
established training and performance standards for the guidance of
supervisory field officers of the opposite service. The training will
be conducted locally and will include all inspectors, both line and
supervisory.
Arrangements were made for a member of the Washington headquarters' legal staff to assist and instruct Customs field officers in
preparing informational reports required by United States attorneys
representing the Government in litigation before the Customs Court.
I t is expected that this will improve reporting which will in turn
contribute to the Government's success in the Customs Court.
Internal check procedures.—Procedures for an internal check of
daily operations in Customs field offices were revised. The internal
check program provides a system of day-to-day checks and post
reviews designed to assure continuous and automatic safeguards in
the collection of revenues and disbursement of public funds, ac-.
counting and reporting, and complying with Bureau policies and
procedures.
Management inspection.—During the fiscal year, management inspection teams visited 50 of the 104 collection, agency, appraisement,
comptroller, and laboratory districts. Improvements attributable
92
19 58 REPORT OF THE SECRETARY OF THE TREASURY
to the management inspection program, or to major projects in which
management inspection personnel were involved, accounted for
$180,000 of the total savings reported.
Paperwork management and records disposal.—General Services
Administration completed a survey of the directives system in the
Washington headquarters and principal field offices. Action is being
taken to implement their recommendations including the establishment of a Bureau issuance office, rescission of obsolete directives, and
classification and reissuance of current directives.
In 1958, a total of 10,191 cubic feet of records were disposed of,
and another 17,000 was transferred to Federal Records Centers.
Records holdings on June 30, 1958, totaled 149,000 cubic feet of
which 121,000 are scheduled for disposal. A revised Comprehensive
Records Schedule including a detailed index was prepared and is
being distributed to the Washington headquarters and all field offices.
As a result of changes in requirements, procedural improvements,
and employee suggestions, a total of 91 customs forms were revised,
11 new forms adopted, and 9 abolished.
Employee incentive awards program.—Customs employees submitted
734 suggestions during 1958. Of this number, 216 were adopted
with awards totaling $6,065. Identifiable savings resulting from
adopted suggestions amounted to $28,823 annually.
Office of Defense Lending
The Office of Defense Lending was established on July 1, 1957, by
Treasury Order No. 185.. There were assigned to this office all of the
following functions which had been transferred to the Secretary of the
Treasury.
(1) Liquidation of various assets and liabilities of the former
Reconstruction Finance Corporation (Reorganization Plan No. 1
of 1957).
(2) Lending activities under Section 302 of the Defense Production Act of 1950, as amended (Section 107 (a) (2) R F C Liquidation Act, and Executive Order No. 10489).
(3) Lending activities under Section 409 of the Federal Civil
Defense Act of 1950 (Section 104 of the R F C Liquidation Act).
Liquidation of Reconstruction Finance Corporation assets
The Reconstruction Finance Corporation was abolished effective
at the close of June 30, 1957, and its remaining assets, liabilities, and
obligations were transferred to the Secretary of the Treasury, the
Administrator of the Small Business Administration, the Housing
and Home Finance Administrator, and the Administrator of General
Services.
The Secretary of the Treasury, functioning through the Office of
Defense Lending, is responsible for completing the liquidation of
business loans and securities with individual balances of $250,000
or more, securities of and loans to railroads, securities of financial
institutions, and the windup of corporate affairs. During the fiscal
year 1958 there was paid into the Treasury as miscellaneous receipts
93
ADMINISTRATIVE REPORTS
$12,125,000, representing proceeds of liquidation on the various
loans, securities, and commitments.
The following table shows the portfolio of R F C loans, securities,
and commitments outstanding at the beginning and end of fiscal 1958
and the reductions effected.
Outstanding June 30
1957
Loans, securities, and commitments
1968
Decrease
In millions of dollars
Business enterprises:
Loans
Undisbursed authorization
...
Deferred participation commitments
Financial institutions __ _.
. .
Railroads
Total
36.9
.8
4.5
4.8
8.6
32.7
.8
3.6
L8
6.4
4.2
.0
.9
3.0
2;i
55.6
45.3
10.2
Civil defense loans
No new loans were authorized during the fiscal year 1958. On
July 1, 1957, direct loans for civil defense purposes amounted to
$1,207,289 and in addition there was outstanding $2,699,640 in
commitments to participate in loans made by banks wherein disbursement of Treasury funds is deferred. By June 30, 1958, these
loans had been reduced to $1,111,033 and the commitments to
$2,538,994.
Activities under the Defense Production Act
No new loans were authorized during 1958. The following table
shows the loans and commitments outstanding at the beginning and
end of fiscal 1958.
Outstanding June 30
1957
Loans, securities, and commitments
1968
Increase, or
decrease (—)
In millions of dollars
T>oans
,
Undisbursed authorization
Deferred participation commitments
, _
Total __
^ .
180. 2
6.0
18.3
181.7
-.0
17.0
1.5
—6.0
—L3
204.5
198. 7
—5.8
During 1958, $6,000,000 was paid out, representing the final disbursement on a loan which had been authorized in an earlier fiscal
year.
Office of Production and Defense Lending
The Office of Production and Defense Lending assisted in the
transfer of assets, liabilities, commitments, administrative property,
and records of the former Reconstruction Finance Corporation to the
various transferee agencies.
94
1958 REPORT OF THE SECRETARY OF THE TREASURY
Treasmy Department Order No. 185, as amended by Order No.
185-1 abolished the Office of Production and Defense Lending effective at the close of October 31, 1957.
Bureau of Engraving and Printing
The Bureau of Engraving and. Printing designs, .engraves, and
prints United States currency, Federal Reserve notes, secmities,
postage and revenue stamps, various commissions, certificates, and
other forms of engraved work for Government agencies. The Bureau
also prints bonds and postage and revenue stamps for the governments of insular possessions of the United States.
Deliveries of all classes of work during the fiscal year 1958 totaled
49,231,137,328 pieces as compared with 49,606,517,931 pieces in fiscal
year 1957. Although the 1958 total reflects a decrease of 375,380,603
pieces in the overall deliveries, there was an increase of 44,728,000 in
the number of currency notes delivered, or approximately 3 percent.
The decrease in deliveries of finished products, other than currency,
is due primarUy to (1) substantial reduction occurring in the number
of requisitions received from the Post Office Department during the
last quarter of the fiscal year for postage stamps pending the final
outcome of proposed postal legislation, (2) discontinuance o£ the
production of Series E bonds which are now being purchased in
punch card form from a commercial firm, and (3) a general reduction
in the requirements for miscella.neous items produced by the Bureau,
such as paper checks and certificates.
Organizational changes
On March 10, 1958, organizational changes were put into effect
which are designed to provide further delegations of authority to previously existing positions and to strengthen the Bureau's management
structure. The title of the Office of Administrative and Maintenance
Services was changed to the Office of Plant Facilities and Industrial
Procurement; an associate chief was designated for the Office of Industrial Relations; an associate controller was designated for the
Office of the Controller; and an assistant chief was designated for the
Office of Currency and Stamp Manufacturing. For management-tj^pe
audits additional responsibility was assigned to the Head, Internal
Audit Staff.
Management improvements
Frequent meetings have been held throughout the year for the purposes of solving problems, reporting on special studies and projects,
identifying areas in which savings could be realized, and determining
ways in which operations might be improved without sacrificing quality or securit}^ Teamwork and exchange of ideas have been emphasized at all levels.
The major portion of the redesigning and modification of the eight
sheet-fed rotary presses installed for the dry intaglio printing of cur-
ADMINISTRATIVE REPORTS
95
rency, 32-subjects to the sheet, has been completed. Research and
testing relating to inks, papers, and press materials used in rotary
currency printings are continuing, and the quality of the printed impression has been improved. As a result of these technical improvements, together with various procedural changes made in this area,
spoilage in 32-subject currency production has decreased from 40 percent in October 1957 to 8.3 percent at the close of the fiscal year, and
the cost per thousand notes has decreased from $13.41 in October 1957
to approximately $7.00 in June 1958. The estimated annual recurring
savings attributable to this phase of the management improvement
program may be as much as $1,000,000 or the equivalent of the salaries
of 270 employees. Savings will be passed on to the Office of the Treasurer of the United States and the Board of Governors, Federal Reserve System, thi'Ough reduced billing rates.
On J u l j 9, 1957, the Bureau began printing the new 1957 series of
one dollar notes bearing the inscription ^^In God We Trust," in accordance with an act of Congress approved by the President on July 11,
1955 (31 U. S. C. 324a). The first delivery of these notes was made
on September 9, 1957, and formal issuance to the general public was
made on October 1, 1957. By the close of the 1958 fiscal year the
Bureau had delivered a total of 417,920,000 notes of this series. This
1957 series is the first paper currency on which the inscription has
appeared.
The gradual installation in recent years of five high speed postage
stamp presses has resulted in annual recurring net savings estimated
at $180,000.
Based on the results of evaluation tests conducted on the prototype
equipment installed in the Bureau in the latter part of the fiscal year
1957 for processing postage stamps in coil form, it was decided to
invite bids for additional equipment to meet production requirements.
These bids were mailed to ten firms, and a contract was awarded to
the only firm which submitted a bid. The contract calls for the furnishing of five coil stamp examining machines, three coil stamp perforatingwinding machines, complete with conveying attachment, and five
coil stamp wrapping machines. Delivery of the first machine is
scheduled for November 1958 and delivery of the last machine is
scheduled for March 1960. I t is expected that the processing of coil
stamps will be greatly expedited and savings will be realized through
use of this equipment. In the meantime the prototype equipment is
being utilized for production purposes to meet the increasing demand
for coil work.
In the program for improved paperwork management, instructions
covering a number of clerical and operational areas have been issued
in manuals and other written forms. A total of 1,153 requests for
form services were processed, resulting in the preparation of 103
new forms, the elimination of 124 nonessential forms, and the improvement and revision of 385 forms. The Bureau disposed of approximately
510 cubic feet of obsolete records.
A study is being made of the potential uses of automatic data
processing equipment for various Bureau operations. Currently, the
479641—59-
^96
195 8 REPORT OF THE SECRETARY OF THE TREASURY
:study is centered principally on considering the installation of equipment for processing postmasters' requisitions for postage stamps,
which would enable the Bureau to furnish data on punch cards which
the Post Office Department could use in their equipment. Studies
of the potential uses of the equipment in improving purchasing, stock
•control, and pa3a'oll procedures also are being made.
Concentrated efforts to improve practices and procedures, together
with the technical improvements in presses and related equipment,
have resulted in more effective utilization of personnel, increased
production, and reduced spoilage in Bureau products. For the fiscal
year 1958 total estimated savings resulting from management improvement efforts, including that reported in the incentive awards
program, amounts to the salary equivalent of 357 employees and
.approximately $1,339,245 on a recurring annual basis.
Long-range research program
Through continuing research and development activities the Bureau
has been able to produce significant technological improvements over a
period of years. In addition to the broad program of developing new
and modern types of operating equipment, new types of nonoffset
inks have been developed and paper improvements have been made.
The program will continue in the coming year with plans for further
refinement of inks, materials, equipment, and procedures. Continued
^studies are being made of materials which may be suitable for use in
remoistenable synthetic adhesives for use on United States postage
:s tamps.
A study by the National Bureau of Standards has been started and
it is expected that during fiscal 1959 findings wUl be available on the
jelative length of the circulation life of currency printed by the wet
and dry intaglio printing processes.
A prototype model machine for automatic replacement of defective
currency notes was delivered during fiscal 1958. Improvements to
the machine are being made and when these are completed, an evaluation test wUl be conducted.
Industrial relations activities
The number of employees on the roU decreased from 3,590 on
J u n e 30, 1957, to 3,479 on June 30, 1958, or a decrease of 111 employees.
The Bureau's training program has included both outside and onthe-job training, particularly when new procedures and methods were
introduced in technical phases of operations. The program has also
ADMINISTRATIVE REPORTS
97
included refresher training courses in shorthand and typing, courses
in correspondence and letter writing practices, and participation in
academic and supervisory training courses.
Increased emphasis has been given the safety program. The
Bureau's frequency rate ^ has been lowered from 10.13 as of June 30,
1957, to 7.44 as of June 30, 1958. This rate is lower than the nationwide frequency rate of 9.2 for the printing and publishing industry.
In the length of service awards program initiated in the Bureau in
April, there were 57 employees with 40 or more years of Government
service. Approximately 57 percent of the Bureau's employees were
eligible for the 15-year award, and 10 percent were eligible for the 30year award, as compared to 19 percent and 5 percent, respectively, on
a Government-wide basis.
Under the Bureau's incentive awards program, 441 contributions
were processed in the fiscal year 1958. Of these contributions, 70
superior work performance awards were approved and 106 suggestions
were adopted. The rate of employee participation in the suggestion
program again showed an increase—to 115 suggestions per 1,000 employees during fiscal 1958 as compared with 104 during 1957. Savings
arising from the suggestion program during the year amounted to
$7,869 on a recurring annual basis.
Wage increases affecting approximately 2,738 ungraded employees,
and amoimting to approximately $454,059 annually, were made to
keep wage rates for Bureau jobs aligned with those for comparable
jobs in the Government Printing Office and the American Bank Note
Company.
Internal auditing
A number of recommendations resulting from the comprehensive
management and inventory audits conducted by the Internal Audit
Staff were adopted. Through this program, many areas have been
identified where savings were possible and where improved methods for
accountabUity, security, and operations were installed.
New issues of stamps and deliveries of finished work
New issues of postage stamps, for which orders had been received
and dies engravecl, are shown in table 97. A comparative statement
for 1957 and 1958 of deliveries of finished work appears in table 98.
i The number of disabling injuries per million man-hours worked.
98
1 9 5 8 REPORT OF T H E SECRETARY OF T H E
TREASURY
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 1958 and comparative balance sheets as of June 30,
1957 and 1958, follow.
Statement of income and expense for the fiscal year 1958
Income:
F r o m sales of printmg
$25,890,982
F r o m operation a n d maintenance of,, incinerator
and space utilized b y other Treasury activities
334, 687
From sales of card chc^cks
1, 104, 245
F r o m other direct cliarges for miscellaneous
services
106, 093
Total income
Expense:
Cost of goods sold:
Purchase of direct materials
D e d u c t : Increase in inventory
materials
$27, 436, 007
5, 010, 059
of
direct
22, 857
Direct materials used
Direct labor
,_
Manufacturing expenses (excluding depreciation and amortization)
Depreciation and amortization
4, 987, 202
10, 265,006
Total manufacturing costs
Add: Decrease in goods in process inventory
26, 153, 080
Subtotal
D e d u c t : Increase in finished goods inventory
26, 179, 540
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 expense: Loss on disposal of fixed
assets
25, 789, 705
Total expense
N e t loss for the fiscal year 1958
9, 381, 633
1, 519, 239
26, 460
389, 835
334, 687
1, 104, 197
105, 955
124, 722
27, 459, 266
i 23, 259
1 In accordance with the act approved August 4,1950 (31 U. S. C. 181-181e), the net loss will be recovered
from surplus accruing to the fund in a subsequent year before any surplus is deposited into the general fund
of the Treasury as miscellaneous receipts.
ADMINISTRATIVE REPORTS
99
Comparative balance sheets as of J u n e 30, 1957 and 1958
June 30, 1957 June 30, 1958
ASSETS
Current assets:
Cash with Treasury. _
Accounts receivable
Inventories:
Raw materials
Goods in process
Finished goods
Stores
Prepaid expenses
'-
Total current assets
.'
Fixed assets: ^
Plant machinery and equipment
Motor vehicles
J
Office machines
Fm'niture and fixtures
Dies, rolls, and plates
Building appurtenances
Fixed assets under construction
Less portion charged off as depreciation
.
$4,461,458
2,380,729
$4,350,258
1,175,087
970,844
2,405, 676
1,109,047
1,169,000
60,698
993, 701
2,379, 216
1,498,882
1, 290,977
69, 242
12, 557,452
11, 757, 363
16,297,761
66,866
161,150
419,013
3,955,961
1,226,817
252, 674
17,683,313
67,970
169,381
437,275
3,955,961
1,593,244
76,624
22,380,242
6, 563,970
23, 883,76a
7,307,078
16,576,690
Excess fixed assets (estimated realizable value)
Total fixed assets..-
---
Deferred charges
Total assets.
.-
1,985
3,045
15, 818,257
16,579,735
452, 391
281,816
--
28,828,100
28,618,914
-.
670,348
433,188
638,838
1,455,463
96,241
746,281
1,661
910,438
1,265,983
99,758
712,110
1,428
3,608,832
3,422,905
3,250,000
22,000,930
3,250,000
22,000,930
25, 250,930
-31,662
25,250,930
-54,921
LIABILITIES AND INVESTMENT OF THE UNITED STATES
Liabilities:
Accounts payable
Accrued liabilities:
Payroll
Accrued leave
other
J
Trust and deposit liabilities
otherliabilities
Totaliiabilities
.
,
Investment of the United States Government:
Principal of the fund:
Appropriation from United States Treasury
Donated assets, net
Total principal
Earned surplus, or deficit (—) 2
Total investment ofthe United States Government
Total liabilities and mvestment of the United States Government.
25, 219,268
25,196,009
28,828,100
28,618, 914
J, Fixed assets acquii-ed 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 i; 1951, all costs of manufacturiag
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 ComptroUer General's decision of October 4,1951 (B-104492), however,
replacements of buildmg facilities and improvements to buildings made on and after July 1,1951, have been
financed by the fund. Such items of significant dollar amounts have been capitalized at cost and appear
in the foregoing balance sheets under the caption "Building appurtenances."
2 Earned surplus or deficit arises through billiug for products at unit prices established prior to the development of actual costs. Sectibn 2 (e) of the act of August 4, 1950, requires that any surplus accruing to
the revolving fund during any fiscal j^ear 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
resuJting from operation in prior years.
100
195 8 REPORT OF THE SECRETARY OF THE TREASURY
Fiscal Service
The Fiscal Assistant Secretary of the Treasury exercises general
supervision over the operations of the Fiscal Service, consisting of the
Office 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.
Among the duties of the Fiscal Assistant Secretary, under the
general direction of the Under Secretary for Monetar}^ Affairs, are
the administration of the financing operations of the Treasury;
preparation of estimates of the future cash position of the Treasury
for use of the Department in its financing; direction of the distribution of funds between the Federal Reserve Banks and other Government depositaries; preparation of calls for the withdrawal of funds
from the special depositaries to meet current expenditures; administration of Treasury responsibilities under Executive orders with respect
to the purchase, custody, transfer, and sale of foreign currencies
acquired under international agreements in connection with United
States programs operated abroad; and direction of fiscal agency
functions in general.
Additional responsibilities of the Fiscal Assistant Secretary include
continuous liaison with other departments and agencies of the Government with respect to and the coordination of their financial operations
with those of the Treasury; supervising the administratipn of accounting functions and related activities of all units of the Treasury Department through the Commissioner of Accounts; and carrying out the
Treasury's participation 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 pursuant
to the provisions of the Budget and Accounting Procedures Act of 1950.
More detailed explanations of the operations involved under the
responsibilities of the Fiscal Assistant Secretary are given in the
reports of the Commissioner of Accounts, the Commissioner of t h e
Public Debt, and the Treasurer of the United States which follow.
BUREAU OF ACCOUNTS
Many functions of the Bureau of Accounts relate to statutory
responsibilities of the Secretary of the Treasury, are of Governmentwide significance, and involve varied operations. Included in the
responsibilities and functions of the Bureau are: Maintenance of a
system of central accounts; participation with the Office of the FiscaL
Assistant Secretary in the joint program for improvement of Government accounting and reporting; preparation of central financial reports
of the Government; accounting and reporting for foreign currencies
in the custody of the Secretary of the Treasury; coordination of the
internal audit activities and giving assistance to Treasury bureaus
in development of comprehensive audit programs; issuance of checks
to Government creditors in payment of obligations incurred by the
executive departments and agencies, with certain exceptions; administrative work relating to the designation of Government depositaries;
determination of qualifications and underwriting limitations of surety
companies to write fidelity and other surety bonds to cover Govern-
ADMINISTRATIVE REPORTS
101
ment activities; investment of social security and other Governmenttrust funds; and administration of the loans and advances by the
Treasury to Government corporations and other Federal agencies.The Bureau of Accounts also administers the payment of claims
under certain international agreements; maintains accounts and collects amounts due from foreign governments under lend-lease and
other agreements; furnishes technical guidance and assistance in
accounting matters to Treasury bureaus and other executive agencies;
and performs such other fiscal work as may be required by the Secre^
tary. By Department Order No. 170-5, dated September 26, 1957,
the functions of the Government Actuary were transferred from the
Bureau of Accounts to the Office of the Secretary.
Accounting, Reporting, and Related Matters
Central accounting
The Treasury's system of central accounts for the Federal Government, (as authorized by Section 114 of the Budget and Accounting
Procedures Act of 1950 (31 U. S. C. 66b) and established pursuant to*
Treasury Department Circular No. 945, dated May 11, 1954, as supplemented), completed its first full ^^^ear of operation with modifications to meet changing conditions. The central accounting system
includes summary controlling accounts comprising cash assets and.
liabilities, .receipts, and expenditures for the cash transactions of the
Government. Subsidiary records show the receipts of the Government by source and the expenditures by each appropriation or fund.
The central accounts provide the accounting basis for compilings
reports of receipts and expenditures published in the official statements of the Government, which include the Monthly Statement o j
Receipts and Expenditures oj the United States Government; the annual
Combined Statement oj Receipts, Expenditures and Balances ojthe United
States Government; the Budget oj the United States Government for
which are furnished the actual figures for the last completed fiscal
year; and a monthly statement of Appropriations and Other Authori
zations. Expenditures and Unexpended Balances oj the Federal Govern
ment. For this last publication, during fiscal 1958, provision wa&
made for the monthly preparation of data, rather than less frequently
in order to provide more timely information for the Congress and the
Government agencies.
A significant development in central accounting was made by revision of public debt accounting procedures involving operations of the
Bureau of Accounts, Office of the Treasurer of the United States, and
the Bureau of the Public Debt. Effective July 1, 1957, on the basis
of monthly reports received from the Bureau of the Public Debt,
public debt transactions are recorded in the central summary accounts
of the Government and appropriation warrants for public debt redemptions are issued by the Division of Central Accounts. As a
result of the revised procedures, the Bureau of Accounts discontinued
recording public debt receipts from certificates of deposit and redemptions from public debt requisitions and accountable warrants.
Also on July 1, 1957, an improved method in recording receipts
collected by the Internal Revenue Service was installed similar to the
system for Customs receipts. Receipts of these two revenue collect-
102
195 8 REPORT OF THE SECRETARY OF THE TREASURY
ing agencies of the Government are now recorded in the central
accounts on the basis of monthly statements of accountability and
statements of transactions rendered by the collectors of customs and
district dhectors of internal revenue, rather than on the basis of
individual certificates of deposit and related debit vouchers. These
changes resulted in a significant decrease in the number of receipt
transactions in 1958.
The volume of accounting items processed through the central and
regional accounting offices of the Division of Central Accounts during
the fiscal years 1957 and 1958 is shown in the following tabulation.
Work volume
Classification
1957
Receipts
Expenditures..
Other items
.
_
Total
. -
- -
- -
1958
2,121,118
3,106, 785
11, 383
1, 621, 582
3,081, 618
13, 536
5, 239, 286
4, 716, 736
Accounting procedures and systems
Bureau staff' continued to render technical assistance to other
Treasury offices in the development and improvement of accounting
systems by furnishing technical advice and counsel when requested.
Attention was dhected chiefly to fulfilling the requhements of Public
Law 863, approved August 1, 1956, (31 U. S. C. 18c, 24, 66a (c), 665
(g)) and Budget Circular 57-5. Department Circular No. 987, relating to the implementation within the Treasury Department of
Public Law 863, was revised" to require all bureaus to maintain adequate monetar}^ property accounting records so that financial reports
can be prepared on an accrual basis, that is, cost of goods and services
received, as of the close of each fiscal year and at such other significant
reporting dates as determined by the head of each bureau (exhibit 68).
The staff also developed procedures, and prepared Treasm-y circulars, accounting bulletins, and instructions concerning: Undeliverable checks, deposits by States under agreements reached with the
Social Securit}^ Administration; deposits of employer and employee
taxes and other receipts with Federal Reserve and depositary banks;
withholding of State income taxes by Government agencies; uncurrent
checks, substitute and unavailable checks; and other matters relating
to various functions of the Fiscal Service. Regulations issued pursuant to Public Law 85-183, approved August 28, 1957 (31 U. S. C.
528), which provided for simplification of procedures for issuing and
accounting for substitute checks for those lost, stolen, destroyed, or
mutilated are included in Department Circular No. 1001, dated
December 18, 1957 (exhibit 67). Regulations relating to the use of
a new certificate of deposit (Form No. 219) are included in Department Circular No. 945 (Revised) Supplement No. 1, Third Amendment, dated September 11, 1957 (exhibit 66). . Current requirements
relating to deposits of employer and emplo3''ee taxes are contained in
Department Circular No. 848, Second Revision, dated May 2, 1958
(exhibit 69).
ADMINISTRATIVE REPORTS
103
The Bureau participated with the General Accounting Office and
the Bureau of the Budget in projects of Government-wide scope
involving: Reviews of proposed changes and issuances of the General
Accounting Office and the Bureau of the Budget; consideration of
matters of interest common to the three agencies; and participation
in working groups under the direction of the steering committee for
the joint accounting improvement program. Studies and reviews
were made of: The requirements for submission of financial reports by
Government agencies to the Bureau of the Budget, the Treasury
Department, and the General Accounting Office; administrative control regulations of Government agencies; allotment practices; indirect
expenses; university grants and contracts; and financial reporting of
the industrial and stock funds of the Department of Defense. In
addition, the joint regulation for small purchases utilizing imprest
funds was revised to permit their use for paying utility bills of less
than $15, emergenc}^ travel expenses not exceeding $50, and reimbursement for travel advances when the payment of the traveler did
not exceed $50. Department Circular No. 908 which governs the use
of imprest funds by Treasury offices was amended accordingly (exhibit
64).
Central reporting
The review and improvement of central financial reporting, a
continuing project of the Bureau through the Division of Central
Reports, was pursued throughout the year.
In response to the annual request from the Committee on Government Operations, Plouse of Representatives, rei3orts on real and
personal property were compiled for use of the committee in its
continuing study and reporting of the assets of the Federal Government. With the receipt of more and comprehensive agency reports,
work is going forward toward the ultimate preparation of a complete
balance sheet of the United States Government. Improvements were
made also in the periodic reports of the Bureau designed to serve the
special needs of congressional committees, staff members of other
Government agencies, and the public. These reports include the
Monthly Statement oj Receipts and Expenditures, the monthly Statement
oj Appropriations, Authorizations, Expenditures and Balances, the
monthly Treasury Bulletin, the Annual Report oj the Secretary oj the
Treasury, and the Combined Statement oj Receipts, Expenditures and
Balances. Work continues with Government agencies and in collaboration with the Bureau of the Budget and the General Accounting
Office to eliminate, wherever possible, duplication and overlapping of
financial reporting and to coordinate agency and central financial
reporting.
The format of the Combined Statement oj Receipts, Expenditures
and Balances was revised to meet the requirements of the act, approved
July 25, 1956, (31 U. S. C. 701-708), and Bureau of the Budget
Circular No. A-11 with respect to the treatment of obligated and
unobligated balances of appropriations. Agencies submitted reports
on unfunded contract authorizations pursuant to Department Circular
No. 993, issued September 4, 1957 (exhibit 65), for inclusion in the
Combined Statement. There was also released on August 8, 1958,
Department Circular No. 1014 (exhibit 70), requiring annual reports
104
1958 REPORT OF THE SECRETARY OF THE TREASURY
from agencies on expenditures by States and Territories for grantsin-aid to and payments within States and Territories.
Control of foreign currencies
Legislation enacted in fiscal 1958 (primarily the extension of the
Agricultural Trade Development and Assistance Act of 1954 and the
M u t u a l Security Act of 1958) continued to expand the Treasury responsibility of controlling the acquisition, custody, transfer, and sale
of foreign currencies acquired without payment of dollars. (See
exhibit 62.) With this expansion, the work of the Division of Central
Reports in reviewing reports, maintaining Treasury accounts, and
preparing summary statements and reports was substantially in'Creased. Uniform procedures, consistent with provisions of the international agreements involved, are prescribed so as to provide data for
adequate Treasury reports. For the first time, all the foreign currency
accounts of this category were to be included in the Combined Statement of Receipts, Expenditures and Balances for the fiscal year 1958.
A comprehensive manual covering the operations of the foreign currency section was prepared and distributed.
During 1958 the amount of foreign currencies collected or acquired
b}^- Government agencies from all sources, without pa^^^ment of dollars,
was the equivalent of $1,196.6 million. Withdrawals of foreign curTencies which the Treasury Department sold to United States Government agencies for dollars amounted to $268.6 million, while transfers
of foreign currencies made without reimbursement, pursuant to provisions of law, were in the equivalent amount of $563.5 million.
'The balances of foreign currencies in Treasury accounts as of June
30, 1958, amounted to the equivalent of $1,454.6 million. In addition,
the unexpended balances of foreign currencies transferred without
reimbursement and held for the account of various Federal agencies,
as of June 30, 1958, were equivalent to $366.0 million. A summary
statement showing foreign currency collections, withdrawals, and
balances for the fiscal year 1958 is included in this report as table 105.
Internal auditing
All Treasury bureaus now have active internal audit programs
tailored to their operating needs. These programs were developed
under the Budget and Accounting Procedures Act of 1950. T h e
internal audit programs, as independent management controls, are
designed to provide surveillance over operating controls. They are
not a part of the operations. Internal auditing inspects, verifies, and
evaluates operating controls; recommends improvements where
weaknesses are found and points up deviations from policies, prescribed procedures, and laws—all to safeguard assets, maintain
integrity, and promote efficiency. The results, year by year, have
been progressive^ constructive. The accountability aspects of. fiscal
control were emphasized in the fiscal year 1958. Audits were participated in covering certain procurement, supply, utilization, and
storage of valuables; the evaluation of reports and financial statements; the study and appraisal of procedures attending the recording
and reconciliation of cash, securities, and deposits. General administration and coordination of the internal audit activities of the Department as a whole were provided through reviews and appraisals of
internal audit programs in operation, including surveys of field office
ADMINISTRATIVE REPORTS
105
operations of certain bureaus; meetings and discussions with the
principal internal auditors of all bureaus for the purpose of exchanging
ideas; and assistance furnished concerning particular internal audit
problems.
The internal audit coverage within the Bureau of Accounts during
fiscal 1958 encompassed segments of the Goverriment central accounts;
the many Government trust funds and special deposit accounts; the
Bureau administrative accounts; and continuing of the comprehensive
audits at regional disbursing and field accounting offices. All regional
offices have now been audited under the cycle program for comprehensive audit except the Cleveland, Ohio, office and an audit will be
made there early in fiscal 1959. Management and procedural
reviews were made at the Kansas City and New York City offices
during fiscal 1958 and a review of operations was made at the Juneau,
Alaska, office. An extensive review of the operations of the Surety
Bonds Branch was nearing completion at the year end.
Bureau of Accounts personnel also make certain other audits or
appraisals for the Treasury Department, such as that of the Comptroller of the Currency, and the Commodity Credit Corporation.
'Commodity Credit Corporation appraisal
The act of March 8, 1938, as amended (15 U. S. C. 713a-l),
requires the Secretary of the Treasury, as of June 30 of each year, to
appraise all assets and liabilities of the Commodity Credit Corporation to determine the Corporation's net worth. This appraisal is the
basis for the Congress to provide funds to the Corporation to remove
any impairment of its capital or for the Corporation to pay any excess
funds or surplus into the Treasury. The amended act defines asset
values, for the purpose of determining the net worth, as the cost of
such assets to the Corporation.
The appraisal, which included an examination of accounting
policies and practices, disclosed an impairment of the Corporation's
capital for the fiscal year ended June 30, 1957, of $1,760,399,886.
This amount does not include losses from programs under specific
legislation authorizing separate appropriations to reimburse the
Corporation for the losses. An amount equivalent to the capital
impairment as determined by the appraisal was appropriated by
Public Law 85-459, approved June 13, 1958.
Disbursing Operations
As the Government's principal check-issuing organization, the
Division of Disbursement provides centralized disbursing for all
executive departments and establishments except the Department of
Defense, the Postal Service, and a few relatively small agencies.
Through its 21 regional offices, the Division processes payments and
issues United States savings bonds for more than 1,400 Government
offices located throughout the United States, its Territories, and the
Philippines. In addition technical supervision is exercised over
officers of other agencies who perform disbursing operations by
delegation pf the Chief Disbursing Officer, such as disbursing officers
of the Department of State stationed at embassies and consulates in
106
195 8 REPORT OF THE SECRETARY OF THE TREASURY
foreign countries. The Division also serves as a focal point in Arranging for foreign disbursing service for all civilian agencies.
Considerable progress was made by the Division during the year
in its continuing program to reduce costs and increase production
through adoption of new electronic machine applications, improvement of manpower utilization, and streamlining procedures. Results
demonstrate the value of a centralized disbursing system wherein a
large volume of work concentrated at a few strategic locations makes
the most effective use of modern, high-speed equipment and a variety
of laborsaving, mass production techniques.
Recurring annual savings of $993,472 were effected under the
management improvement program during 1958. Including improvements begun during 1957, the savings actually realized during
fiscal 1958 were $570,100. Some of the more significant developments
include: Consolidation of social securit}^- benefit pa5^ments to husband
and wife into a single check (in cooperation with the Social Security
Administration); installation of high-speed electronic check processing
equipment in three additional regional offices; realignment of work and
reorganization of production-line activities in the Washington Regional Office; reduction in personnel ceilings based on increased production standards; improvements in procedure for processing claims for
substitute checks; simplification of procedure for verif3dng thermal
piinted checks; and combining of microfilming and check signing
operations b}^ equipping microfilm machines with check-signing
attachments.
The unit cost for processing checks (excluding postage) was 4.16
cents in fiscal 1958, as compared with 4.09 cents in fiscal year 1957.
This increase is attributed to increased costs in 1958 resulting from:
The retroactive pay raise authorized b}^^ the Federal Employees
Salary Increase Act of 1958, approved June 20, 1958; the increased
contribution to the civil service retirement and disability fund required
by law; and nonrecurring costs for changing 2,000,000 payment files
to give eft'ect to the increase in rates of compensation for veterans as
provided by the act approved June 17, 1957, effective October 1, 1957
(38 U. S. C. 2315, 2316, 2335, 2336); and as investments for annual
recurring savings, plate changes to consolidate social security benefit
payments for husband and wife into a single check, and conversion
expenses for the installation of electronic check processing equipment.
The interagency committee designated by the Secretary of the
Treasury, the Director of the Bureau of the Budget, and the Comptroller General of the United States to consider all phases of disbursing
and to prepare a report as a basis for a policy decision completed its
year-long study in December 1957. A major question to be resolved
was whether the large-scale disbursing functions of the Division of
Disbursement could be performed more economically b}^ certain
administrative agencies of the Government. The committee's report
showed that the Government's cost would be greater if the disbursing
work were transferred from the division and recommended against
such action. The report also indicated further improvements and
savings possible under the present system through a joint, cooperative
approach by the administrative agencies and the division. Considerable progress has been made in this direction.
ADMINISTRATIVE
107
REPORTS
The volume of work processed during fiscal 1958 compared with
that in 1957 was as follows:
Number
Classification
1967
Payments made:
Social security._
.
_
Veterans' benefits
J
Income tax refunds
__.__
___Veterans' national service life insm-ance dividend nroeram
other .
Adjustments and transfers
Savings bonds issued
TotaL
_ _.
___
-
1968
^ 103, 573, 424
r 63, 314, 463
35, 333, 566
3, 619,058
•• 34, 084, 735
302, 516
2, 941, 416
115, 804,163
63, 665, 850
36, 794, 293
3, 843, 530
41, 753, 268
278, 458
2, 933, 491
243,169,178
265, 073, 053
' Revised.
Deposits, Investments, and Related Operations
Federal depositary system
At the present time approximately 11,500 banking institutions serve
as depositaries. Of these, 11,341 were designated as special depositaries as of June 30, 1958, to receive proceeds frpm deposits of taxpayers and the sale of public debt securities. Also, 3,964 were
authorized to receive deposits from Government agencies and to
provide other fiscal services. These institutions supplement the Office
of the Treasurer of the United States, the Bureau of the Mint, and
the Federal Reserve Banks and branches. The supervision of 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.
Investments
Pursuant to specific provisions of law, the Secretaiy of the Treasur}^
has the duty of investing trust and other Federal funds in obligations
of the United States. The handling of and the maintenance of records
of investment transactions of the several funds is the responsibilit}^ of
the Investments Branch.
The facilities of the Treasury Department are available also for
handling investments for other agencies of the Government, for
quasi-governmental funds, and for the Government of the District of
Columbia. Investment accounts handled primarily b}^ the Treasury
are shown in table 60. Records regarding securities held in safekeeping by the Treasurer of theUnited States and the Federal Reserve
Banks subject to the order of the Secretarj^ of the Treasury also are
maintained in the Investments Branch.
Highway trust jund.—The Highway Revenue Act of 1956, Section
209 (a), (23 U. S. C. 173), approved June 29, 1956, established the
highway trust fund. The act requires the Secretary of the Treasury to
estimate the amounts of collections of Federal excise taxes on gasoline,
tires, trucks, and other highway-user levies, to be transferred from the
general fund to the highway trust fund, subject to adjustment to
actual tax receipts and to invest such portion of these funds as are not.
108
195 8 REPORT OF THE SECRETARY OF THE TREASURY
in his judgment, needed to meet current withdrawals. After consultation with the Secretary of Commerce, the Secretary of the Treasury,
in accordance with provisions of Sec. 209 (e) (1) of the act, is required
to submit an annual report to Congress on the financial status of the
fund, the results of the preceding year operations, and estimates on its
expected condition and operations through the fiscal year 1973. The
last such report was made on February 28, 1958 (exhibit 52). The
total amount appropriated to the trust fund during fiscal year 1958
was $2,116,028,210.57 highway taxes and $17,686,110.43 representing
interest earned on investments. Expenditures during the year
amounted to $1,601,515,884.93. Table 70 shows the status of the
fund as of June 30, 1958.
Loans and advances by the Treasury
Pursuant to specific provisions of law, the Secretary of the Treasury
is authorized and directed to make loans to Government corporations
and agencies, at interest rates determined by the Secretary of the
Treasury, except in those instances where the rate of interest is established or the basis for its determination is specified in legislation. Loan
agreements are prepared and records maintained regarding these loans
by the Investments Branch. Transactions are processed and records
maintained relating to other advances and subscriptions to capital
stock of Government corporations by the Secretary of the Treasury.
Table 111 shows the status of loans made by the Treasury to Government corporations and business-type activities, and repayments,
cancellations, and balances in the fiscal year 1958.
Saint Lawrence Seaway Development Corporation.—In accordance
with the act of May 13, 1954 (33 U. S. C. 981-985), the Saint Lawrence
Seaway Development Corporation was established for the purpose of
constructing part of the Saint Lawrence Seaway in United States
territory in the interest of national security. To finance its activities
the corporation issues revenue bonds payable from its revenues to the
Secretary of the Treasury who is authorized and directed to purchase
any obligations of the corporation. Public Law 85-108, approved
July 17, 1957 (33 U. S. C. 985), set the total face value of all bonds
which may be issued by the corporation at $140,000,000 and the amount of bonds which may be issued in any one year at 50 percent
of this amount. Any interest accrued on such bonds and deferred by
the Treasury Department during the peiiod prior to the collection of
revenue may not be charged against the debt limitation of $140,000,000.
During the fiscal year the Secretary of the Treasury purchased bonds
totaling $48,400,000. As of June 30, 1958, total, purchases of the
corporation's bonds by the Treasury amounted to $96,700,000.
Rejugee reliej.—^Under the Refugee Relief Act of 1953, Section 16
(50 App. U. S. C. 1971n), the Secretary of the Treasury was authorized
to make loans not to exceed $5,000,000 in the aggregate, to public or
private agencies of the United States, to finance the transportation,
from ports of entry to places of resettlement in the United States, of
persons receiving immigrant visas who lacked the resources to finance
the expense involved. The act expired on December 31, 1956. Loans
totaling $384,000 were made during the life of the program, and under
the loan agreements the borrowing agencies have until June 30, 1963,
to make interest-free repayment of the amounts borrowed. Repay-
ADMINISTRATIVE REPORTS
109'
ments subsequent to June 30, 1963, bear interest at the rate of three
percent per annum on the unpaid balance. During the jesir ended
June 30, 1958, the agencies repaid $183,000. Table 85 shows the
balances due from each of the four borrowing agencies.
District oj Columbia.—The District of Columbia Appropriation Act
of June 2, 1950, as amended (D. C. Code, Section 43-1540, 1951
edition), authorized the Commissioners of the District of Columbia toborrow funds not in excess of $35,000,000 from the United States
Treasury to finance the expansion and improvement of the water
system of the District of Colambia. During the fiscal year loans madeamounted to $2,000,000 and repayments amounted to $76,721.52.
Through June 30, 1958, total loans for this purpose amounted to
$10,100,000, repayments amounted to $153,648.37, leaving a balance
due as of June 30, 1958 of $9,946,351.63 and accrued interest thereon
amounting to $327,190.93. These loans are repayable over a period of
thirty years from date of borrowing at rates of interest from 2%,
percent to 3% percent.
Surety bonds
The Secretary of the Treasury issues certificates of authority to
corporate sureties making application and qualifying under the act
approved July 30, 1947, To U. S. C. 8), to execute bonds in favor of
the United States. A list of companies holding such certificates
(Form 356, Revised) is published annually by the Treasury on or
about M a y 1. The Surety Bonds Branch in the Bureau of Accounts
examines the applications of companies requesting authority to write
Federal bonds and currently reviews the qualifications of the companies so authorized. All bonds in favor of the United States, except
certain Post Office Department and Defense Department bonds, are
examined and approved as to corporate surety in the Bureau of Accounts. The Bureau has custody of a large portion of the bond&
examined with the exception of contract bonds and some special
type bonds.
As of June 10, 1958, 176 companies held certificates of authority
qualifying them as sole sureties on recogaizances, stipulations, bonds,,
and undertakings permitted or required by the laws of the United
States, to be given with one or more sureties. During the fiscal year,
certificates of authority were issued to 11 companies, qualifying them
as sole sureties on bonds in favor of the United States; and the authority of 6 was revoked. In addition, certificates were issued to 3 companies as acceptable reinsurers only, .the authority of one reinsurer
was revoked, and 3 companies changed names. There were 21 companies holding certificates of authority as acceptable reinsurers only,,
issued under Department Circular No. 297, as amended. During the
fiscal year 31,311 bonds and consent agreements were examined for
approval as to corporate surety.
The head of each department and independent establishment in
the executive branch of the Federal Government is required to obtain,,
under the provisions of Public Law 323, approved August 9, 1955
(6 U. S. C. 14), and regulations promulgated by the Secretary of the
Treasury, blanket, position schedule and other types of surety bonds
covering civilian officers and employees and military personnel who
are required to be bonded and to pay bond premiums from any funds
110
1958 REPORT OF THE SECRETARY OF THE TREASURY
available for its administrative expenses. The law permits officials
of the legislative and judicial branches, a t their discretion, to obtain
surety bonds covering officers and employees under their respective)
jurisdictions. The Secretary of the Treasury is required to transmit
to Congress, on or before October 1 of each year, a comprehensive
report on bonding activities under the act.
A summary of the information reported by agencies for transmittal
to Congress, showing, coverage as of June 30, 1958, as compared with
coverage June 30, 1957, follows.
J u n e 30,1957
N u m b e r of officers a n d employees covered:
Executive branch
Legislative a n d judicial b r a n c h e s
Total
._!
Aggregate penal s u m s of b o n d s procured:
Executive b r a n c h . . _
_ . . .
Legislative a n d judicial b r a n c h e s
Total
_
__ _.
.-
Total premiums paid b y Government:
Executive branch
Legislative a n d judicial b r a n c h e s
•
Total
A d m i n i s t r a t i v e expenses:
Executive branch
Legislative a n d judicial branches
Total .
J u n e 30,1958
957, 585
1,263
944,595
1,275
958,848
945,870
$3,459, 393, 385
10, 245, 500
$3,405,432,311
10,280,000
3,469, 638,885
3,415, 712,311
371,728
7,130
293,459
4,494
J 378, 858
1 297,953
20,145
603
2 29,050
456
20, 748
29, 506
1 Premiums on bonds are shown on the basis of the proportionate cost for one year, together with the
premiums on one-year bonds in order to arrive at an annual rate.
2 Administrative expenses were greater for the fiscal year 1958 since most two-year bonds expired December 31,1957, and new bonds were procm-ed.
Foreign Indebtedness
World War I
During the fiscal year 1958 the Treasury received from the government of Finland its semiannual payments of principal and interest
ainounting to $396,489.36, due under funding and moratorium agreements covering indebtedness growing out of World War I. This
amount was made available to the Department of State for financing
educational exchange programs between Finland and the United
States in accordance with provisions of the act of August 24, 1949
•(20U. S. C. 222).
Tables 107 and 108 show the status of the World War I indebtedness
of foreign governments to the United States.
World War II
During the fiscal jesiv 1958 the Treasury Department received
payments from foreign governments under the lend-lease and surplus
property agreements in United States dollars amounting to $139.8
million, foreign currencies having an equivalent value in United
States dollars of approximately $61.2 million, and real propert}^ and
ADMINISTRATIVE REPORTS
'"-'
' '
111
improvements to real property with an estimated valtie'of $0.3 million,
resulting in total credits amounting to $201.3 million.. ^ Fr9m. inception,
of the-lend-lease and surplus property programs, payments in-foi'ei^
currencies and real property and improvements Vrepresei^i''^f|(:(it
estimated dollar value received of $453.9 million, while tjiie^^^
United States dollar receipts and other credits have amouiited tH
$2,981.7 million.
- > i...
Silver bullion totaling 409,782,670.64.fine troy ounces and valued
at $291,401,010.lO'was transferred by the Treasury to certain foreign
governments during World War I I for coinage and industrial use,
pursuant to the Lend-Lease Act of March 11, 1941 (22 U. S. C. 4 1 1 419). A total of 111,040,038 fine troy ounces of silver, valued at
$78,961,805 was received by the Treasury Department as repayinents
during the fiscal year 1958. Through June 30, 1958, foreign governments have returned 267,013,469 fine troy ounces having a dollar
value of $189,876,245. In addition 8,228,398 ounces of silver valued
at $5,851,305 were received by the Bureau of the Mint, but as of June
30, 1958, had not been documented for recording in the central accounts of the Treasury
The status of indebtedness of foreign governments under lend-lease
and surplus property agreements is stated in table 110. As of June 30,
1958, the accounts receivable amounted to $1,939 million, including
the balance of silver transferred under the lend-lease program'.
Credit to the United Kingdom
A loan of $3,750,000,000 was made by the United States to the
United Kingdom under the terms of the financial agreement dated
December 6, 1945. On March 6, 1957, this agreement was amended
permitting the United Kingdom to defer aiiy principal and interest
installment due after 1956, but limiting such deferrals to a total.of
seven. This amendment was approved by the act of April 20, 1957
(22 U. S. C. 2861). Through June 30, 1958, the United Kingdom had
exercised its right to defer payment of the interest installment due
December 31, 1956, amounting to $70,385,447.48, and the principal
and interest installments due December 31, 1957, amounting to
$119,336,250. The balance of principal and deferred interest on the
indebtedness of the United Kingdom as of June 30, 1958, under this
agreement totals $3,470,321,571.94.
Germany, postwar (World War II) economic assistance
Settlement of claims of the United States for postwar (World War
II) economic assistance furnished Germany was provided for in the
agreement signed February 27, 1953, between the Federal'Republic
of Gerrnany and the Government of the United States. Interest payments provided for in the agreement in the amount of $12,500,000.00
due semiannually have been received by the Treasury for the fiscal
year 1958. Payments on the principal start on July 1, 1958.
479641—51)
112
195 8 REPORT OF THE; SECRETARY OF THE TREASURY
Claims Against Foreign Governments and Nationals
Foreign Claims Settlement Commission
The International Claims Settlement Act of 1949, as amended by
Pubhc Law 285, 84th Congress, approved August 9, 1955 (22 U. S. C.
1641-1641q), provides for the adjudication by the Foreign Claims
Settlement Commission of claims of American nationals which arose
during the general period of World War I I against Bulgaria, Hungary,
Italy, Rumania, and the Soviet Union. The Commission is required
to resolve the claims and to certify awards on account of the claims
to the Treasury not later than August 9, 1959, for payment from the
funds established for each country i n accordance with the act. Payments on awards certified are subject to a system of priorities prescribed in the act. Generally, subject to the adequacy of the particular
fund, all awards in principal amounts of $1,000 or less are required to
be paid in full, and an amount of $1,000 is required to be paid on the
principal of awards in excess of $1,000. Additional payments are
rnaid^^.pn a pro rata basis until the fund is exhausted or until the
principal amounts of all awards have been paid in full. Any funds
remaining after payment of principal in full are then applied to interest
when allowed.
Claims of American nationals against the Governments of Bulgaria,
Hungary, and Rumania arose out of their failure: To pay for or restore
property as required in the treaty of peace after World War I I ; to
pay, chiefly, for property lost by confiscation or forced liquidation
before August 9, 1955; and to meet their United States contractual
currency obligations acquired by Hungary and Rumania before
September 1, 1939, and by Bulgaria before April 24, 1941, all of which
became payable before September 15, 1947. No funds were paid to
the United States by any of the three, but for each country claims
funds were provided by net proceeds of liquidation and disposition of
certain of their assets vested by the Office of Alien Property, Department of Justice.
The claims of American citizens against the Government of Italy
arose out of the war in which Italy was engaged from June 10, 1940, to
September 15, 1947, and with respect to which no provision was made
in the treaty of peace with Italy. Under the ^'Lombardo Agreement"
dated August 14, 1947, Italy paid $5,000,000 to the United States in
full settlement of those claims.
The claims against the Soviet Union are founded upon liens obtained
prior to November 16, 1933, by nationals of the United States arising
out of judgments or warrants of attachment against assets of Russian
nationals in the United States, and those of a general nature of citizens
of the United States against the GovernmcDt of the Soviet Union
which arose before November 16, 1933. Under the ''Litvinov Assignment" of 1933, the Soviet Government assigned to the United States
Government certain assets relating to unsettled claims between the
two Governments and these nationals. Under this assignment and
liquidation of the assets, the United States Government collected
$9,114,444, including postal funds due the Soviet Union.
ADMINISTRATIVE
113
REPORTS
The status as of June 30, 1958, of each of the five claims funds and
the awards is shown in the following table.
i
Bulgaria
Net proceeds:
Vested by the Office of Alien
Property
Payment under the "Lombardo
Agreement"
w..:
Collections under the "Litvinov
Assignment"..
Deposited in claims fund 2
Claims filed (number) 1
Awards: .
Certified:
Number
Amount
_.
Amount paid.
Balance in claims fund
^
Hungary
Rumania
Italy
U. S. S. R.
1 $24, 000,000
1 $3,000,000
$5,000,000
$2, 245,198
400
$357, 531
2,700
140
$1, 275, 783
$100, 608
$2,032,330
247
$1, 520,472
$339, 655
$19, 066, 990 $5,000. 000 •
1,000
2,000
;9,114,444;9,114,444
4,000
170
294
$1, 273, 412
$813, 213
$126,250
$181, 631
$17, 987,391 $4, 568, 369
1,257
$5, 601, 888
$1, 633, 273
$7,125,449
1 Estimated.
2 Includes 5 percent deposited to miscellaneous receipts for statutory deduction for administrative
expenses.
Mixed Claims Commission, United States and Germany
Pursuant to the terms of the agreement between the United States
and the Federal Republic of Germany, dated February 27, 1953, the
Treasury Department received the annual payment due in April
1958, amounting to $3,700,000. A summary of the terms of this
agreement was included in the Annual Report for 1954,. page 109.
This payment permitted a distribution of an additional 6.8 percent
on account of interest accrued on Class I I I awards (those over $100,000) of the Mixed Claims Cominission, United States and Germany,
and payments under Private Law No. 509, approved July 19, 1940.
A statement showing payments on awards and the status of the
accounts as of June 30, 1958, is shown in table 99.
Yugoslav claims fund
The litigation that delayed further payment from the Yugoslav
claims fund on awards under the agreement of July 19, 1.948, with
Yugoslavia, terminated favorably to the awardees of the Foreign.
Claims Settlement Commission during the fiscal year 1958, and a
final distribution was authorized. The status of the fund as of June
30, 1958, is shown in table 101.
American-Mexican Claims Commission
Under this program, payments amounting to $10,374.60 were made
during the fiscal year 1958, to individuals who had not previously
submitted an appropriate voucher for the final distribution authorized
during fiscal year 1956 or who had not in previous years furnished
adequate evidence of their right to payment. A statement of the
Mexican claims fund appears as table 100.
Trading With the Enemy Act, as amended
The act of August 6, 1956 (50 App. U. S. C. 6b), required the
Office of Alien Property of the Department of Justice to dispose of
assets remaining in its custody which were seized prior to December
18, 1941, under the Trading with the Enemy Act. Through June
30, i958, there has been received under this^act a total of $803,919.37,
of which $599,539.25 was deposited into miscellaneous receipts. In
114
1958 REPORT OF THE SECRETARY OF THE TREASURY
addition, there were also received participating certificates aggregating $57,434,529.22 issued by the Secretary of the Treasury, in accordance with Section 25 of the Trading with the Enemy Act; and the
contingent remaining interest of certain successors in interest to the
Estate of Morris Littman, deceased, carried on the books of Attorney
General in Trust No. 47683, German claimants.
Divested property of enemy nationals
Pubhc Law No. 285, 84th Congress, approved August 9, 1955 (22
U. S. C. 163 (b)), provides that the net proceeds of any property
vested in the Alien Property Custodian or the Attorney General after
December 17, 1941, pursuant to the Trading with the Enemy Act, as
amended, and which at the date of vesting was owned directly or indirectly by Bulgaria, Hungary, or Rumania, or any national thereof,
shall, after completion of the administration, liquidation, and disposition of such property pursuant to such act, be covered into the
Treasury, except that proceeds of property owned by a natural person at the date of vesting shall be divested and carried in blocked
accounts with the Treasury in the name of the owner thereof subject
to claim.
As of June 30, 1958, mone3^s of 251 individuals had been divested,
certified, and deposited in the Treasury. These funds, totaling
$351,337, were credited to Treasury accounts as follows: For nationals of Bulgaria, $58,001; for nationals of Hungary, $184,670;
and for nationals of Rumania, $108,666.
Other Activities
Management improvement program
Total annual savings for the Bureau from improvements adopted
during the year amounted to $1,064,194 of which the annual recurring
savings are estimated at $1,028,600, the equivalent of 183.7 manyears. These figures do not include carryover savings from prior
years, estimated at $106,034. The savings actually realized during
the fiscal year 1958 were $595,182.
The savuigs indicated above are attributed primarily to the Division
of Disbursement, some significant examples of which are referred to
on page 106 of this report. Examples of money saving achievements
by other divisions in the Bureau include the revisions of reporting and
reproduction procedures for several periodic reports; increased efficiency in operation and utilization of tabulating equipment and manpower; and various adopted suggestions under the employee awards
program.
The Bureau has continued its efforts to provide effective training for
its employees and participation in special safety training sessions.
The procedure for reports control was applied in all divisions of the
Bureau. Employees of the Bureau submitted 221 suggestions during
the year under the cash awards program. Adopted suggestions numbered 89 on which awards aggregating $1,545 were approved. There
were 40 suggestions submitted by employees of other Government
departments and agencies, of which 7 were adopted and awards of
$120 paid. There were also 11 outstanding and superior work performance awards.
ADMINISTRATIVE REPORTS
115
Donations and contributions
During 1958, the Treasury Department deposited in the general
fund, so-called ^'Conscience fund" contributions totaling $60,039,
Other unconditional donations to the United States amounted to
$133,074, including several bequests, the largest of which was $79,802.
Government agencies, other than the Treasury, deposited ''Conscience fund" contributions totaling $27,976 and unconditional donations amounting to $7,769. Deposits to the credit of Library.of
Congress trust funds, permanent loan account, amounted to $120,141,
representing cash donations and proceeds from the sale of seeurities
belonging to the funds. Conditional gifts in the amount of $14,402
were received to further the defense effort.
Government losses in shipment
Under the Government Losses in Shipment Act (5 U. S. C. 134134h; 31 U. S. C. 528, 738a, 757c (i)), approved July 1, 1937, the
Government assumed the risk on its shipments of money, bullion,
securities, and other valuables while in transit between Government
departments and agencies, and depositaries, etc. A revolving fund
was established in the Treasury laiown as the ''Fund for the Payment
of Government Losses in Shipment," from which losses are paid.
The administrative work in connection with processing the claims
filed under the act is supervised by the Bureau of Accounts.
During the fiscal year 1958, claims amounting to $33,669.53 were
paid from the revolving fund, while recoveries amounted to $11,230.25,
making a net expenditure of $22,439.28 for losses. Detailed statements relating to the operation of the Government Losses in Shipment
Act are found in table 121.
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. 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 1958 was $663,728,837.41
as compared with $433,500,481.72 deposited in 1957. The total
deposits since 1947 have amounted to $3,234,671,298.66 as shown in
table 15.
Withholding of income taxes for States and Territories
The act of July 17, 1952 (5 U. S. C. 84b, 84c), authorizes the Secretary of the Treasury to enter into agreements with States and Territories for the withholding of income taxes from the compensation of
Federal employees regularly employed in the States or Territories.
Since the passage of the act, agreements have been entered into with
13 States and Territories. The District of Columbia entered into an
agreement pursuant to the act of March 31, 1956 (77 Stat. 77).
There were no new agreements entered into during fiscal year 1958.
116
1958 REPORT OF THE SECRETARY OF THE TREASURY
Payment of pre-1934 Philippine bonds
Through the use of funds held in a trust account established in the
United States Treasury, the Treasury Department makes payments
of principal and interest on pre-1934 bonds issued by the Government
of the Republic of the Philippines as provided in the act of August 7,
1939,'as amended (22 U. S. C. 1393 (g) (4) (5)). Table 78 shows the
status of this trust account as of June 30, 1958.
Withheld foreign checks
Restrictions against the delivery of United States Government
checks to payees residing in certain foreign areas (in accordance with
Treasury Department Circular No. 655, dated March 19, 1941, as
amended), continued in effect during 1958. These restrictions
applied during the year to Albania, Bulgaria, Communist-controlled
China, Czechoslovakia, Estonia, Hungary, Latvia, Lithuania, Rumania, the Union of Soviet Socialist Republics, the Russian Zone of
Occupation of Germany, and the Russian Sector of Occupation of
Berlin.
Delivery of checks to nationals of North Korea without appropriate
licenses is prohibited also by Foreign Assets Control regulations
issued by the Treasury Department on December 17, 1950.
BUREAU OF THE PUBLIC DEBT
• The Bureau of the Public Debt, in support of the management of the
public debt, has responsibility for the preparation of offering circulars,
the formulation of instructions 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 issues outstanding, 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 authorizing the issue of checks
in payment of interest thereon, and the handhng of claims on account
of lost, stolen, destroyed, or mutilated securities.
Four offices are maintained. The principal office, including the
headquarters of the Bureau, is in Washington, D. C. This office
issues and conducts 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. A departmental office in Chicago, 111., conducts
transactions relating to savings bonds outstanding and maintains the
issue and retirement records of the paper type savings bonds. A
field branch audit office located in Cincinnati, Ohio, audits the retired
paper type savings bonds and records their retirement. All issue and
retirement records of the new punched card type savings bonds are
prepared and maintained in an office located at Parkersburg, W. Va.,
where the major recording and accounting operations are performed
through the use of a large scale electronic data processing system.
Under Bureau supervision many transactions in public debt securities are conducted through nationwide agencies, which are, principally,
Federal Reserve Banks, as fiscal agents of the United States, and their
branches; selected post offices, financial institutions, industrial organi-
ADMINISTRATIVE REPORTS
117
zations, and others, approximately 23,000 in "all, which cooperate in
the issuance of savings bonds; and over 18,000 financial institutions
that redeem savings b t o d s .
•
Bureau administration
Management improvement.—The Bureau continued during the year
to review and reappraise its methods and procedures in order to
employ personnel and equipment so as to reduce operating costs
without impairing adequate servicing of the public debt. Substantial
progress was made to this end in the major project of utilizing the
accuracy, speed, and versatility of electronic equipment applied to
the large volume of registering and accounting operations related to
issuing and retiring United States savings bonds. In August 1957
the new office established in Parkersburg, W. Va., commenced preparations for the initial operations of filming, key punching, and key
verifying the new punched card type savmgs bonds, as all Series E
bonds bearing issue dates of October 1957 and thereafter are from
punched card type bond stock. After key verification the work is
converted to magnetic tape for data processing under electronic procedure. Initial space requirements were met by leasing an existing
building; and arrangements were made to meet projected space requirements by leasing upon completion a newly constructed building
adjacent to and connected with the first building. The new building
is suitably designed and conditioned to house the electronic processing
system units. The first unit of the system, an input converter which
converts source data on punched cards into recorded data on magnetic
tape, was installed and placed in operation April 1, 1958. Thereupon,
the electronic recording began of a substantial backlog of work, nearly
38,000,000 stubs of issued card bonds and over 8,000,000 retired card
bonds. The new electronic S3^stem was expected to be in full operation
in November 1958.
Further implementation of the management improvement program
was made in other areas. As a result of the advent of the punched
card savings bond, the decrease in the number of retired paper bonds
' received for audit during the year made possible the closing of the
savings bond audit branch in New York City. This was one of the
two remaining field offices of the five established years ago to audit,
microfilm, and deliver for destruction the retired savings bonds.
Beginning in March 1958 shipments of retired paper bonds were
diverted, on a staggered basis, to the Cincinnati audit branch; and
the New York office was formally closed on June 27, 1958. The
adoption of the punched card bond also permitted modification of
various operating procedures in handling the bonds prior to issuance,
which resulted in nominal savings.
To further consolidate check issuing operations within the Department, the interest check issue function relating to all registered securities other than savings bonds was transferred from the Division
of Loans and Currency of this Bureau to the regional office of the
Division of Disbursement, Bureau of Accounts, both in Washington.
The transfer was effective for all checks issued subsequent to the
July 1, 1957, interest payment date. A related accounting refinement
in the Division of Loans and Currency facilitated the transition to; a
machine operation of the former method of manual posting of check
118
195 8 REPORT ,OF THE SECRETARY .,OF THE TREASURY
numbers to an individual interest card maintained for each, account
holder. Also, effective August 1, 1957, the interest check issue function relating to current income savings bonds was transferred from
the Chicago departmental office of this Bureau to the Chicago regional
office of the Division of Disbursement.
Since the beginning of the United States savings bond program in
1935, there have accumulated over 78,000 bonds, amounting to
$2,200,000 maturity value, which are unclaimed by the registered
owners. In order to discontinue the work involved in controlling,
auditing, and safekeeping of this large quantity of bonds for an
indefinite period of years, decision was made to destroy bonds unclaimed for two years. This reduced the undeliverable bond file to
6,000 pieces. Prior to destruction, the bonds are arranged iri serial
number sequence by letter series and denomination and microfilmed.
A notation is made on the numerical register against the number of
each such bond. Whenever a claim is received and approved for
any bond so destroyed, the registered owner will be issued a new bond.
This procedure not only reduces the cost of auditing and maintaining
the file, but is most advantageous from the standpoint of security.
The study of the public debt accounting system is in the final stage.
The cash accounting phase of the new system was put into effect on
July 1, 1957. The conversion of all public debt securities accounts
except those relating to savings bonds has been completed. The new
savings bond reporting procedures were initiated on March 1, 1958,
and while the accounts have been established, some work remains to
be done in this area. As a part of the overall system change, the
Chicago office has put into effect revisions of accounting and reporting
procedures and a simplified method of handling adjustments. A
concurrent study of internal accounting and processing in the Washington office has resulted in the development of a double-entry accounting system for controlling securities in the Division of Loans and
Currency. The system has been approved and is being installed.
Continuing attention was given during the year to records management, control of forms and reports, and the safety program, all
of which underwent further desirable developments. Technical
training in the employment and operation of electronic data processing
equipment has been given to programmers and other key personnel.
Emphasis on executive and supervisory development training has
been continued.
One hundred and eighty-two suggestions were adopted under the
incentive awards program; estimated savings totaled $30,035 and
awards paid amounted to $2,575. Superior performance awards were
made to 387 employees, and 204 employees shared in six group
awards. The Bureau has been active in developing plans for recognizing and rewarding employees engaged in measurable work of a
repetitive nature whose production or accuracy is superior.
Bureau operations
The public debt.—^A summary of public debt operations handled by
the Bureau appears on pages 26 to 33 of this report, and a series of
statistical tables dealing with the public debt will be found in tables
,18 to 51.
ADMINISTRATIVE
119
REPORTS
The public debt of the United States falls into two broad categories:
(1) public issues, and (2) special issues. The public issues consist of
marketable obligations, chiefly Treasury bills, certificates of indebtedness. Treasury notes, arid Treasury bonds; and nonmarketable
obligations, chiefly 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 1958 the gross public debt increased by
$5,816 million and the guaranteed obligations held outside the
Treasury decreased by $6 million. The most significant changes in
the composition of the outstanding debt during the year were the
increase of $10,970 million in interest-bearing marketable public
issues, and the decrease of $4,177 million interest-bearing nonmarketable public issues, over three-fifths of which was due to the decrease
during the year of the total of all series of United States savings bonds
outstanding. Total public debt issues, including issues in exchange for
other securities, amounted to $213,717 million during 1958, and retirements amounted to $207,901 million. The following statement
gives a comparison of the changes during the fiscal years 1957 and
1958 in the various classes of public debt issues.
Increase, or decrease (—)
(In millions of dollars)
Classification
1957
Interest-bearing debt:
Treasury bonds, investment series
United States savings bonds
Marketable obligations
Special issues
__--.
Other
Total interest-bearing debt.
Matured debt and debt bearing no mterest.
Total
1958
-874
- 2 , 875
752
1,713
-114
- 1 , 514
- 2 , 638
10, 970
-581
-25
-1,398
-826
6, 212
-396
-2,224
5,816
United States savings bonds.-—In volume of work, the issuance and
redemption of savings bonds represent the largest administrative
problem of this Bureau. Since these bonds are in registered form and
owned by millions of people, the maintaining of alphabetical and
numerical records of nearly 2.0 billion of these bonds, which have been
issued continuously siiice 1935, replacing lost, stolen, and destroyed
bonds, and handling and recording retired bonds are no inconsiderable
undertaking.
Receipts from sales of savings bonds during the year were $4,670
million and accrued discount charged to the interest account and
credited to the savings bonds principal account amounted to $1,226
million, a total of $5,896 million. Expenditures for redeeming savings bonds charged to the Treasurer's account during the year, including about $3,730 million of matured bonds, amounted to $8,544
million. The amount of savings bonds of all series outstanding ori
June 30, 1958, including accrued discount and matured bonds, was
$52,349 million, a decrease of $2,647 million from the amount out-
120
1958 REPORT OF THE SECRETARY OF THE TREASURY
standing on June 30, 1957. Detailed information regarding savings
bonds will be found in tables 38 to 42, inclusive, of this report.
During the fiscal year 1958, 96.6 million stubs representing issued
bonds, of Seiies E were received for registration, making a total of
1,993.5 million, including reissues, received through June 30, 1958.
The original stubs of paper type bonds 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
ia full calendar year file and microfilmed, after which they are destroyed. The microfilms serve as permanent registration records.
The original issue of paper bonds has been discontinued. The issue
stubs of the new punched card type bonds are microfflmed by batches
as they are received. Before being destroyed, the stubs are audited
and recorded by electronic processing equipment. Magnetic tape
ffies of the bond issues, in both alphabetical and numerical sequence,
are established and maintained with each bond ffle item containing
information indicating the location of the microfflm which contains
the complete image of the original bond stub. The following tables
show the processing by steps of the registration stubs of Series E
savings bonds of the paper type and the card type. The table on
the card type bonds also shows the steps taken to retire these bonds.
, .
S t u b s of issued p a p e r t y p e Series E savings b o n d s in. Chicago office
(In millions of pieces)
A l p h a b e t i c a l l y sorted
P.eriod.
Stubs
received
! ••
C u m u l a t i v e t h r o u g h J u n e 30,
' 1953
Fiscal year:
1954 .
_
1955
1956' " . — : .
--_
1957
1958.
Total
Alphabetically
filmed
NumeriDestroyed
cally
after
filming
filmed
,
Restricted
basis sort i
F i n e sort
prior t o
filming 2
1, 539.1
1,518.0
1,468.3
1,437. 7
1,359.4
1,354.6
88.2
87.0
91.5
91.1
37.1
89.0
88.4
87.2
88.9
62.1
82.0
99.3
85.0
90.4
85.7
82.2
88.1
88.0
108.1
89.9
72.7
25.7
5.8
192.3
178.3
73.3
29 9
1, 934.0
1,933. 6
1,910. 7
1,894. 0
1,834. 2
191 3
184 1
.
1,833.2
• 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.
Balance
Microfilmed
Keypunched
Converted
Audited
to magnetic] and classitape
fied
Unfilmed
Not keypunched
Not converted to
magnetic
tape
Unaudited
S t u b s of issued card t y p e Series E savings b o n d s t u P a r k e r s b u r g office
(In millions of pieces)
69.5
i
'
•• .. 17.5
57. 8
41.4
5.7
34.7
1.7
18.1
53.8
24.8
R e t i r e d card t y p e Series E savings b o n d s recorded i n P a r k e r s b u r g office
(In inillions of pieces)
16.7
10.5
.11
7.3
.8
7.0
17. 39
10.2
ADMINISTRATIVE
121
REPORTS
There were 99.3 million retired savings bonds of all series received
during the year.
^
Retired card bonds, issued only in Series E, are handled in a processing center where, after microfilming, the bonds are permanently
recorded and audited by an electronic data processing system prior
to being destroyed.
Retired paper bonds of all seiies are processed through a branch
audit office where they are audited, microfflmed, and destroyed. A
list of the bond serial numbers is transmitted to the Chicago departmental office for posting of retirement reference data to numerical,
ledgers as a permanent record.
The following tables show the status of the operations for the paper
type bonds.
Retired paper type savings bonds of all series in the branch audit offices
(In millions of pieces)
Period
Cumulative through June 30,1953.
Fiscal year:
1954
1955
1966- —
1957
--1958
--Total
Balance
Bonds received
Audited
669 3
667 5
655 4
1 8
13 9
596.0
97 3
99 0
97.4
100.2
81.8
96 0
98 1
96.5
102.1
81.2
95 5
98 7
96.0
99.8
82.6
31
40
4.9
3.0
3.6
46
49
6.3
6.7
5.9
81.6
' 102.0
117.9
100.0
79.3
1145. 0
1141.4
1128. 0
36
5.9
1076.8
Microfilmed
Destroyed
Unaudited Unfilmed 1
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.
Retired paper type savmgs bonds of all series recorded in
Chicago office (In millions of pieces)
Period
Cumulative through June 30, 1953
Fiscal year:'
1954
1955 1956
1957
1958
Total
...
Number of
retired
bonds
reported
Status of posting
Posted
Verified
Unposted
Unverified
1,129. 7
1,129. 7
1,127.0
94.6
101.3
98.2
100.1
84.6
89.9
102.7
96.7
99.0
87.2
88.7
123 7
93 4
102.3
64 0
47
33
48
59
3 3
8.1
4.8
28.0
1, 608. 5
1, 605.2
1, 499 1
33
28.0
2.7
3.9
1 During the period October 1954 to June 1955, only a 7 percent test verification was made of the postings.
Of the 93.8 million Series A - E savings bonds redeemed prior to
release of registration and received in the audit offices during the
year, 90.3 million, or 96.3 percent, were redeemed by more than
18,500 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 $11,297,542,
which was at the average rate of 12.51 cents per bond.
122
1958 REPORT OF THE SECRETARY OF THE TREASURY
The following table shows the number of issuing and paying agents
for Series A - E savings bonds by classes.
Post
offices
J u n e 30
Banks
Building
a n d savings a n d
loan associations
Credit
unions
Companies
operating
payroll
plans
All
others
Total
I s s u m g agents
1945
1950 _
1955
1956
1957...L
1958
24,038
25,060 •
2 2, 476
2 1, 768
2 1, 401
2 1,178
_ _
15,232
15, 225
15, 692
15, 845
15, 978
16, 047
3,477
1,557
1,555
1,606
1,665
1,702
2,081
522
428
411
379
357
1 9,605
3,052
2,942
2,898
2,788
2,640
550
688
626
611
587
.
54, 433
45, 966
23,681
23,154
22,822
22, 511
P a y i n g agents
1945
1950
1955
1956
1957
1958
_.
__
13, 466
15, 623
16, 269
16, 441
16, 613
16, 744
874
1,188
1,300
1,438
1,580
137
139
138
172
171
57
56
54
59
59
13, 466
16, 691
17, 652
17,933
18,282
18, 554
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 1958, 5,749,161 interest checks with a value
of $312,917,141 were issued on current income type savings bonds.
This was a decrease of 618,993 checks from the number issued during
1957, and a decrease of $55,841,020. A total of 215,136 new accounts
was established compared with 217,194 in the previous year. As of
June 30, 1958, there were 2,142,459 active accounts with owners of
this type savings bonds, a decrease of 123,981 accounts from the
previous year. There were reductions of 279,770 in accounts of Series
G bonds which have been maturing since May 1, 1953, and 6,200 in
accounts of Series K which were first sold on May 1, 1952, and discontinued effective at the close of business April 30, 1957, and an
increase of 161,989 in accounts of Series H bonds, which were first sold
on June 1, 1952.
There were 49,616 applications during the 3^ear for the issue of
duplicates of lost, stolen, or destroyed savings bonds, in addition to
1,847 cases on hand at the beginning of the year, making a total of
51,463 cases. In 29,424 cases the bonds were recovered, and in 20,162
cases the issuance of duplicate securities was authorized. On June 30^
1958, 1,877 cases remained unsettled.
Other United States securities.—During the year 17,535 individual
accounts covering publicly held registered securities were opened and
20,347 were closed. This reduced the total of open accounts on June
30, 1958, to 196,152 covering registered securities in the principal
amount of $17.5 billion. There were 379,058 interest checks with a
value of $510,323,770 issued to owners of record during the year..
This was a decrease of 1,664 checks from the number issued during
1957, and a decrease in value of $16,074,350.
Redeemed and canceled securities received for audit included
3,576,000 bearer securities and 116,000 registered securities, a total of
ADMINISTRATIVE REPORTS
123
3,692,000, as compared with 3,223,000 in 1957; and 15,275,000 coupons
were received, which was 1,815,000 more than in 1957,
OFFICE OF THE TREASURER OF THE UNITED STATES
The Treasurer of the United States is charged by law with the receipt, custody, and disbursement, upon proper order, of the public
moneys and is required by law and administrative authority with
maintaining records and making periodic reports on the source, location, and disposition of these funds.
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 throughout the country. These
include the verification and destruction of United States paper currency, the redemption of public debt securities from the Treasurer's
funds, keeping the operating cash accounts of the Treasury, charging
the Treasurer's account for the majority of the checks drawn on the
Treasurer, the acceptance of deposits made by Government officers
for credit of the Treasurer, and maintaining custody of bonds held to
secure public deposits in commercial banks.
Commercial banks within the United States and its possessions, and
in foreign countries also are utilized by the Treasurer to provide banking facilities for local activities of the Government. Information on
the transactions handled in the name of the Treasurer by the Federal
Reserve Banks and commercial banks fiows into Washington where it
is taken into 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
officers, corporations, and agencies; pays checks drawn on the Treasurer of the United States; procures, stores, issues, and redeems Uriited
States currency; audits redeemed Federal Reserve currency; examines
and determines the value of mutilated 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 building 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 oj the United States Treasury and the monthly Circulation
Statement oj United States Money.
Under authority delegated by the Comptroller General of the
United States, the Treasurer acts upon 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,
passes upon claims for 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
124
195 8 REPORT OF THE SECRETARY OF THE TREASURY
savings on deposit in such banks, and miscellaneous securities and
trust funds.
Management improvement and internal audit
The Office continued its program of surveying and evaluating
operations and methods and made many changes which resulted in
increased efficiency and economies. The following are among the
more significant improvements:
The program was completed which provided for conversion to
electronic equipment in the payment of checks drawn on the Treasurer
of the United States. Approximately 356 million checks were paid in
fiscal 1958 through use of electronic equipment and about 42 million
checks were paid under the old procedure. From experience gained
duririg the conversion period, all fourteen programs of the electronic
data processing system were reprogrammed, enabling the Office to
handle a substantially greater volume of checks in less time.
Functions previously performed by the Bureau of Accounts in
handling claims for substitute checks were transferred to this Office on
January 1, 1958. Prior to this transfer before a substitute check was
issued a form was mailed to the claimant for execution. Now, however, in most cases, the Treasurer has authority to approve the
issuance of a substitute check on the basis of the original written
statement of the claimant. This expedites the settlement of this
type of claim and also saves the cost of printing, mailing, and handling
thousands of forms annually.
On July 1, 1957, the maintenance of detailed cash accounts of
public debt principal transactions and preparation of related reports
were transferred from this Office to the Bureau of the Public Debt.
Since then the Treasurer's Office has been receiving and recording
information relating to such transactions in summar}^^ form only.
Acting as fiscal agents of the United States, all Federal Reserve
Banks and certain branch banks redeem, verify, and destroy unfit
United States currency. A representative of this Office visits each
of the banks at least once each year to inspect and discuss the operations with the responsible officials. These inspections also give this
Office an opportunity to determine whether the banks are following
the established standard of fitness when sorting United States currency between that which is fit for return to circulation and t h a t
which is unfit for circulation and should be destroyed. The banks
are satisfactorily performing this currency function.
Internal audits provide management with independent appraisals
•of the fiscal activities of the Office. During the past year the internal
audit program was expanded to include examination and verification
of unused checks of discontinued checking accounts received from
disbursing officers for destruction. Audits were made of cash,
securities, and other assets aggregating many millions of dollars and
yarious money operations were studied by the auditors, Recommendations resulting from the audits were adopted to improve
accountability for and control over the assets for which the Treasurer
is responsible.
Cost accounting, supervisory training, forms and reports analysis
arid control, records management, and periodic safety inspections are
all continuing programs.
ADMINISTRATIVE
REPORTS
.1^5
•yU
Under the incentive awards program, 35 cash a/wards ."wei^e.^m^ide
for suggestions adopted, 27 for superior sustained performance,(ji2ipr
outstanding performance, 6 for special acts or services,,and there we;pe
seven group awards. Six hundred and fifty-seven employees;(71 .ft^rf
cent of the total on the rolls), received length of service pins or buttoris);
of these, 585 were for 15 to 30 years of Government service and 72 for
30 or more years of service.
:, ,,.
,,,:
:..j;i. ;
Moneys received and disbursed by the Treasurer
'^' ' . ' • : , ' • ' : ' J - ^ ^
Moneys collected by Government officers are deposited with thie
Treasurer at Washington, in Federal Reserve Banks, and in designated Government depositaries for credit to the account of the
Treasurer of the United States, and all payments are withdrawn from
this account. Moneys deposited and withdrawn for the fiscal years
1957 and 1958, exclusive of intragovernmental transactions, are
shown in the following table on the basis of the Daily Statement of the
United States Treasury.
Deposits, withdrawals, and balances in Treasurer's account
Cash deposits (net) (includes internal revenue, customs, trust funds,
etc.)
Public debt receipts i
Less accrued discount on U. S. savings bonds and Treasury bills..
Total net deposits
Balance at beginning of fiscal year..
Total
*..
--
--.-
Cash withdrawals (includes budget and trust accounts, etc.)
Net transactions in:
Investments of Government agencies in public debt securities
Sales and redemptions of obligations of Government agencies in
market, excess of redemptions, or sales (—)
Public debt redemptions i
Less redemptions included in cash withdrawals
-..
Total net withdrawals
Balance at close of fiscal year
1957
$81,874, 970,
189,
974, 734,
-1,
950, 818,
432
733
675
$82,
213,
-1,
269,
490
868
293,
070,358
299,
-
898, 886,
546, 183,
6,
276,
445,
093, 702, 765
716, 956, 869
890, 245,129
920, 414, 505
589, 952,362
5,
366,
867
79,182, 970,
490
83,188, 037,
485
459, 870,
530
713,
880,
040
-742,
953,
192,198, 376,
-2,243, 145,
857
486
654
445, 690
207,
900, 911,020
-2,090, 010, 346
855, 117,
589, 952,
996
362
289,
2,
270,
.
1958
5,
510,
9,
761, 263,
749, 102,
889
978
1 For details for 1958, see table 29.
Assets and liabilities in the Treasurer's account.—The assets of the
Treasurer consist of gold and silver bullion, coin and paper currency,
deposits in Federal Reserve Banks, and deposits in commercial banks
designated as Government depositaries.
A summary of the assets and liabilities in the Treasurer's account
a t the close of the fiscal years 1957 and 1958 is shown in table 52.
Gold.—Disbursements of gold during 1958, largely effected during
the final months of the fiscal year, amounted to $1,535.0 million.
Receipts of $268.4 million left a net decline in the gold assets on the
daily Treasury statement basis of $1,266.6 million. The gold assets,
which had reached a five-year high of $22,784.8 million on February
1.9, 1958, were down to $21,356.0 million as the year closed. The gold
assets on June 30, 1958, were held to cover liabilities of $20,798.6
million in gold certificates or credits payable in gold certificates and
$156.0 for the gold reserve against currency, leaving a free gold
balance df $401.4 million.
126
1958 REPORT OF THE SECRETARY OF THE TREASURY
' Silver.—During the year 14.8 million ounces of silver bullion, which
had been carried in the Treasurer's account a t cost value of $13.4
million, were revalued a t the monetary value of $19.1 million. Holdings of silver dollars declined by $16.2 million, leaving a net increase
•of $2.9 million for the year in silver assets at monetary value. These
assets, from which silver bullion at cost and recoinage value and
subsidiary silver coin are excluded, amounted to $2,441.8 million
on June 30, 1958.
Liabilities against these assets on that date consisted of $2,419.7
million of outstanding silver certificates and $1.1 million of outstanding Treasury notes of 1890, leavmg a.balance of $20.9 million of silver
a t monetary value in the Treasurer's general account.
Silver bullion held a t cost value was increased by net purchases of
$103.3 million during the year and reduced by the monet zed amount
of $13.4 million, previously mentioned, and by $34.7 million used
for coinage. The net increase of $55.2 million brought the value of
this bullion at the end of the year to $125.6 million. SUver a t recoinage
value amounted to $1.0 million on June 30, 1958.
Paper currency.—By law the Treasurer is the agent for the issue
and redemption of United States currency. The cashier of the Treasurer's Office procures all United States paper currency from the
: Bureau of Engraving and Printing and places it in circulation throughout the Nation as needed, chiefly through the facilities of the Federal
Reserve Banks and their branches.
The Federal Reserve Banks and branches as agents of the Treasury
also redeem and destroy unfit United States currency, except that
received from local sources in Washington and that which has been
. burned or mutilated.
In the Currency Redemption Division mutilated currency is
examined for approximately 45,000 claimants annually. Charred,
torn, moldy, or claylike chunks of money are identified through use
of special techniques involving rare skill and unlimited patience.
During the year currency valued a t more than $6.7 million was identified for lawful redemption.
Table 59 shows by class and denomination the value of paper currency issued and redeemed during the fiscal year 1958, and the amounts
outstanding at the end of the year. A comparison of the amounts of
paper currency of all classes, including Federal Reserve notes, issued,
redeemed, and outstanding, during the fiscal years 1957 and 1958
follows.
1958
1957 •
Pieces
O u t s t a n d i n g at beginning of year
Issues d u r i n g y e a r . . .
Redempti'^ns d u r i n g year
O u t s t a n d i n g a t e n d of year .
3, 310, 440, 817
1, 743, 010, 238
1, 685, 386, 962
3, 368, 064, 093
Amount
$33,017, 044, 203
8, 087, 208, 000
• 7,661,416,915
33, 442, 835, 288
Pieces
3,368,064,093
1, 751, 734, 454
1, 731, 429, 644
3, 388, 368, 903
Amount
$33, 442, 835, 288
7, 563, 339,000
. 7, 690, 707, 583
33, 315, 466,705
' For further details on stock and circulation of money in the United
States, see tables 54 through 57.
ADMINISTRATIVE
127
REPORTS
Depositaries.—The following table shows the number of each class
of depositaries and balances on June 30, 1958.
Class
Number of
depositaries 1
Federal Reserve Banks and branches
Otherbanfcs in-continental United States:
General, depositaries
Special depositaries. Treasury tax and loan accounts.
Insular and territorial depositaries.Foreign depositaries 3
_
Total...-
.
Deposits to the
credit of the
Treasurer of the
United States
June 30,1958
2 $697, 334, 483.92
301,-372, 960.45
8,217, 726,146. 96
40, 019, 589.22
23, 638, 465. 51
12, 712
9, 280, 091,646. 06
1 Does not include limited depositaries which have been designated for the sole purpose of receiving deposits made by Government ofBcers 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 Includes checks for $286,905,249.06 in process of collection.
3 Principally branches of institutions in the United States.
Checking accounts oj disbursing^ officers and agencies.—As of June
30, 1958, the Treasurer maintained 2,430 disbursing accounts as
compared with 2,503 accounts on June 30, 1957. The number of
checks paid, by categories of disbursing officers, during the fiscal
years 1957 and 1958 follows.
Disbursing officers
Number of checks paid
1957
Treasury.
Army
Navy-J-^Air Force,
other..-.
1958
244, 991,164
27, 963,906
33, 201, 413
28, 376, 769
28, 568, 675
267, 457, 016
28, 825, 786
35,933,564
33, 880, 664
31, 492, 796
363,101, 927
397, 589, 826
Of the 398 million checks paid last fiscal year, 356 million were paid
by the Treasurer in Washington and the remaining 42 million 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.
Approximately one out of every four checks issued by the Government and its agencies in fiscal year 1958 was for a payment from the
Federal old-age and survivors insurance trust fund. Also, one out
of every four checks was for the Department of Defense. These
two categories accounted for approximately 54 percent of the checks
paid in the fiscal year.
Check claims.—The Treasurer of the United States acted upon
122,022 paid check claims during the fiscal year, referring to the
United States Secret Service for investigation those which involved
the forging, altering, counterfeiting; or fraudulent issuance and negotiation of Treasury checks. The Treasurer reclaimed almost $2.0
million from those having liability to the United States as the result
of improperly negotiated checks and made settlements and, adjust479641—59-
-10
128
1958 REPORT OF THE SECRETARY OF THE TREASURY
ments in the sum of $1.8 million from funds recovered duiing and
before the 1958 fiscal year. Disbursements from the check forgery
insurance fund, established by Congress to enable the Treasurer to
expedite settlement of check claims, totaled over $142,000. Claims
for the proceeds of iapproximately 75,000 outstanding checks were
acted upon, resulting in the issuance of over 57,000 substitute checks
totaling $17.8 millidn by the Chief Disbursing Officer to replace
checks which were not received or were lost, stolen, or destroyed.
The Treasurer alsd adjudicated 477 forgery claims for theproceeds
of the Philippine War Damage Commission and Veterans Administration United States depositary checks payable to residents of the
Philippines in indigenous currency and certified 275 disbursements
totaling over 156,000 pesos.
Treasurer's Cash Room.—More than six million commercial checks,
drafts, money orders, etc., were deposited by Government officers
with the Treasurer's Gash Room in Washington for collection during
the fiscal year.
The Cash Division also prepared and sold to collectors approximately 32,000 sets of uncirculated coins minted in 1957. 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 a 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, 1957 and 1958, is shown in
the following table.
'
June 30—
Purpose for which held
1957
A3 collateral:
To secure deposits of public moneys in depositary banks..
To secure postal saving^ funds.In lieu of sureties
•
In custody for Government officers and others:
Secretary of the Treasury i.
Board of Trustees, Postal Savings System
Comptrollerof the Currency..
:
Federal Deposit Insurance Corporation.
Rural Electrification Administration
District of ColumbiaCommissioner of Indian Affairs
-.
Foreign obligations
other 2
_.
For Government security transactions:
Unissued bearer securities
Total
$221, 699, 400
27, 615, 000
6. 588, 700
$194, 646, 600
25, 795, 200
6,370,600
26, 010, 142, 520
1, 096, 937, 000
12, 925, 500
1,197, 509, 000
62, 042, 956
36, 249, 093
36, 081, 435
12, 083, 875,132
108, 916, 090
26,170, 785, 087
829,137, 000
12, 575, 500
1, 267, 900, 000
.73, 543, 411
38,259,371
. 37,571,7.95
12/079.782,132
85,246,106
394,883,550
1, 223, 914, 250
41,295,465,376
42,045, 527, 052
1 Includes those securities listed in table 111 as in custody of the Treasury.
2 Includes United States savings bonds in safekeeping for individuals.
1958
ADMINISTRATIVE
129
REPORTS
Servicing of securities for Federal agericies and for 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 duiing the fiscal year 1958, on the basis
of the daily Treasury statement, were as follows:
Principal
P a y m e n t s m a d e for
F e d e r a l h o m e loan b a n k s
$1, 276, 285, 000
698, 938, 900
Federal land banks
25, 200
Federal F a r m Mortgage Corporation...
58, 832, 400
Federal Housing Administration
F e d e r a l N a t i o n a l M o r t g a g e Association. 2, 407, 592, 000
H o m e Owners' Loan Corporation
23, 625
842, 500
Philippine Islands
335, 500
P u e r t o Rico
Total
4, 442, 875,125
..
Interest paid
w i t h principal
$31,973,916.41
228,129. 73
90.00
482, 541. 45
35, 960, 645.59
326. 25
3, 642. 50
68,649, 291.93
Registered
interest i
$3,084, 507.69
Coupon
interest
$47, 806, 519. 99
2,347 87
3, 513,199. 85
56, 625.00
6, 654, 332. 54
29, 997, 682 34
3,951. 42
168, 795. 00
197,307.50
78,176,604.12
1 On the basis of checks issued.
Internal Revenue Service
The Internal Revenue Service is responsible for the collection of
the internal revenue and for the enforcement of the internal revenue
laws and certain other statutes. These other statutes include the
Federal Alcohol Administration Act (27 U. S. C. 201-212); the
Liquor Enforcement Act of 1936 (18 U. S. C. 1261, 1262, 3615); the
Federal Firearms Act (15 U. S. C. 901-909); and the National Firearms Act (26 U. S. C. 5801-5862).
Review of operations
Collections.—Internal revenue collections for the fiscal year 1958
totaled $80.0 billion, nearly equaling the $80.2 billion collected in
1957. Corporation and individual income tax collections decreased
.as a result of the decline in business activity b u t these decreases were
largely offset by increases in collections of employment taxes and
excise taxes.
Collections by tax sources for the fiscal years 1929-58 are shown
in detail in table 13 in the tables section of this report. Collections
1 More detailed information will be found in the separate annual report of the Commissioner of Internal
Revenue.
130
1958 REPORT OF THE SECRETARY OF THE TREASURY
from the principal sources of tax revenue for the fiscal years 1957
and 1958 are summarized in the following table.
I n thousands-of dollars
Source
1957
I n c o m e a n d profits taxes:
Corporation
.
Individual:
W i t h h e l d b y employers 1 other 1
1.-
.
. .
.
21, 530, 653
20, 533,316.
26,727,543
12,302, 229
27,040, 911
• llr527, 648.
39,029, 772
38, 568, 559'
60,560, 425
59,101,874
_._
6, 634,467
330,034
616.020
7, 733, 223;
335,880
575, 282'
.
7, 580, 522
8, 644. 386-
1, 377,999
1, 410, 925
2, 973,195
1, 674,050
5,990, 299
2,946, 461
1, 734,021
6,133, 786
10, 637, 544
10,814, 268
--_
-
•
T o t a l i n d i v i d u a l income taxes
. - --
T o t a l income a n d profits taxes
E m p l o y m e n t taxes:
Old-ao'e a n d disability insurance '
Unemployment insurance-.
Railroad r e t i r e m e n t
.
__
T o t a l e m p l o y m e n t taxes
E s t a t e a n d gift taxes
-. _
Excise taxes:
Alcohol taxes
Tobacco taxes._
o t h e r excise taxes
__
...
_ - .
._
T o t a l excise taxes
-
Taxes n o t otherwise classified 2.__ .
T o t a l collections
--_
_ __
.J
1958
15.482
;T,;O24
80,171, 971
79, 978, 476
NOTE.—Collections are adjusted to exclude amounts transferred to the Government of Guam under the
act approved August l, 1950 (48 U. S. C. 1421 h). Excluded for 1958 was $3,500,000 in individual income tax
withheld.
1 Estimated. Collections of individual income tax withheld are not reported separately from old-age
and disability insurance .taxes,,on wages and salaries. Similarly, coUections of individual income tax not
withheld are not reported separately from old-age and disability insurance taxes on self-employment income.
The amount of old-age and disabihty insurance tax collections shown is based on estimates-made by the
Secretary of the Treasury pursuant to the provisions of Section 201 (a) of the Social Security Act as amended
(42 U. S. 0. 401 (a)), and includes all old-age and disability insurance taxes. The estimates shown for the
two classes of individual income taxes were derived by subtracting the old-age and disability insurance
tax estimates from the combined totals reported.
2 Includes amounts of unidentified and excess collections and profit from sale of acquired property. For
the fiscal year 1957 this item also includes depositary receipts outstanding six months or more for which
no tax accounts were identified.
Receipt and processing oj returns.—The total number of tax returns
filed during fiscal 1958 was 93.5 million, representing a slight increase
as compared with the 93.2 million returns filed during 1957. Income
tax returns filed by individuals and fiduciaries numbered 60.8 million,
showing a gain of about 0.6 million and accounting for nearly twothirds of the total number received. The number of information
documents received totaled approximately 259 million.
Upon receipt in internal revenue offices, the tax returns are processed
through a series of operations which include the assessment of the
taxes reported, verification of tax credits, computation or verffication
of tax liability, issuance of bills for unpaid accounts, and the scheduling of tax refunds. Duiing 1958 an increased portion of this work was
done in the three service centers, using large-scale machine facilities.
Service center processing of individual income tax returns and decla,rations of estimated tax was extended to cover 50 districts, or 36
States. Service center facilities also were utilized in the matching
of information documents, the mailing of tax return packages to tax-
ADMINISTRATIVE
131
REPORTS
payers for the next year's filing, and in the processing of claims for
refund of Federal tax on gasoline used on farms.
As a means of adding to the consumer spending potential at the time
of recession in the economy, steps were taken to speed up the scheduling of refunds to taxpayers who overpaid their individual income tax
for tax year 1957. Except for cases involving questionable claims
or faultily prepared returns, this work was completed by May 9,
.1958, less than four weeks following the April 15 filing deadline. The
:accelerated scheduling, coupled with an increase in the number of
'Overpayments, brought the number of such refund checks issued
rand credits scheduled to more than 37 million during 1958, about
2 million more than last year.
Tax computations were mathematically verified on 58,365,000
income tax returns, about 3 percent more than were verified in the
preceding year. The number of returns found to contain errors was
1,908,000, with tax increases aggregating $109,674,000 and tax decreases totaling $47,796,000.
Enjorcement activities.—For the third consecutive year, the number
•of returns examined was increased. Income tax examinations rose to
2,496,000 as compared with 2,310,000 in 1957. This continued improvement is directly attributable to a constant appraisal and adjustment of the audit operations. Advances during the year included
the establishment of a program for the classification and examination
of exempt organizations, revision of existing instructions for the disposition of disputed office audit cases, increased training material
and classroom instructions for both new and experienced audit
personnel, and the establishment of guidelines for the assignment of
work to revenue agents in accordance with their training and experience. A comparison of the number of returns examined during the
last two years follows.
I n t h o u s a n d s of r e t u r n s
T y p e of r e t u r n
1957
1958
•
I n c o m e tax:
Corporation
I n d i v i d u a l and
-- .
fiduciary--,
T o t a l income tax
_
E s t a t e a n d gift taxes
_
Excise a n d e m p l o y m e n t taxes ^
G r a n d total
- . - _-_
. _
...
_
-
_-_
. _
.
170
2,140
159
2,336
2, 310
28
284
2,496
28
317
2; 622
2,841
1 Excludes examinations in which there were no tax changes and which were completed as part of examinations covering both income and excise and/or employment tax returns.
The additional tax, interest, and penalties resulting from audit
totaled $1,449,564,000 for 1958, closely approaching last year's total
ol $1,451,674,000 and well above the totals reached in other recent
years.' The amount saved through the audit and disallowance of
improper refund claims totaled $271,168,000 as compared with
$387,815,000" in the preceding year.
In each of the last two fiscal years, over one million investigations
were completed on the basis of preliminary information indicating
r Revised.
132
195 8 REPORT OF THE SECRETARY OF THE TREASURY
that the persons or firms involved had failed to file required returns.
As a result of these investigations and the canvassing operations undertaken to discover nonfilers, a total of 890,882 delinquent returns was
secured during 1958, approximately the same number as in 1957.
The tax, interest, and penalties on these returns aggregated $125,227,000, an increase of 12.3 percent.
A comparison of the enforcement results for 1957 and 1958.follows.
I n t h o u s a n d s of dollars
Source
1957
A d d i t i o n a l tax, interest, a n d penalties resulting from a u d i t
Increase i n income t a x resulting from m a t h e m a t i c a l verification
T a x , interest, a n d penalties o n d e l i n q u e n t r e t u r n s i
T o t a l a d d i t i o n a l tax, interest, a n d penalties
C l a i m s disallowed
1958
1.451,674
' 99,983
111, 557
1,449, 564
109, 674
125,227
' 1, 663,214
r 387, 815
1, 684,465'
271,168
«• Revised.
« Delinquent returns secured by Audit Division are excluded for both years, owing to nonavailability of
data for periods prior to January 1,1957. Amount excluded for 1958 is $21,308,000.
The dollar inventory of past-due tax accounts was reduced for the
third straight year. However, as the result of a 9 percent increase in
the number of accounts becoming overdue during the year, there was
a small increase in the number of accounts on hand at the year-end.
The inventory on June 30, 1958, totaled 1,505,000 cases involving
$1,466,000,000 in unpaid taxes. This was 1.1 percent higher than a
year earlier in number of cases, b u t 6.1 percent lower dollarwise. The
accounts closed by collection, abatement, or other action during 1958
totaled 2,960,000 cases and $1,447,000,000, representing increases of
7.2 percent in number and 9.5 percent in amount as compared with
1957. T h e collections amounted to $1,012,000,000, which is 7.3
percent more than in 1957. T h e increases were accomplished primarily through improved procedures, with expanded use of office
collection methods on easier cases in order to permit the revenue
officer staff to concentrate on the more difficult ones. More authority
in combating tax delinquencies was given the Service b y Public Law
85-321, approved February 11, 1958, which provides that upon notification, taxpayers must make deposits in a special fund in trust of
moneys from withheld income and social security taxes and excise
taxes on facilities and services.
In fraud investigations, emphasis was continued on the identffication and investigation of cases having maximum deterrent value.
Steps also were taken to widen the coverage of such investigations both
as to geographical areas and classes of taxpayers involved. Partly
owing to these policies and partly to a 2 percent decrease in special
agent man-years, the number of full-scale investigations decreased in
1958, totaling 4,184 cases as compared with 4,538 in 1957. However,
the additional tax and penalties involved in these cases increased 25
percent over the previous year. The investigations completed in 1958
ADMINISTRATIVE REPORTS
133
included 1,946 cases in which prosecutions were recommended, as
compared with 2,271 in 1957. Indictments were returned against
1,359 defendants during 1958 compared with 1,666 defendants indicted
in 1957. In the cases reaching the courtroom, 968 defendants pleaded
guilty or nolo contendere, 128 were convicted after trial, 106 were
acquitted, and 325 were dismissed. The following table presents the
record of convictions, including pleas of guilty or nolo contendere, for
the years .1953 through 1958, in cases involving all classes of internal
Tevenue taxes except alcohol or tobacco taxes.
• . ...
1953
1954.
1955
1956
1957
1958
Number of
individuals
convicted
.Fiscalyear
.
:
- .
-
-
- .
s
_
- _ .
-
.
-
.
-
929
1,291
1,339
1,572
1,256
1,096
International operations.—International operations of the Service
are centralized in the International Operations Division with headquarters in Washington, D . C , and permanent field offices in France,
Germany, Canada, the Philippines, and Puerto Rico. Through these
offices and through brief visits made by revenue agents to more than
30 other countries, the Service supplies information and assistance to
United States taxpayers abroad, conducts a program of enforcement
activities, and obtains information needed in tax cases under consideration in its domestic offices. The collection of delinquent taxes due from
overseas military personnel was facilitated through the use of pajroll
deduction agreements obtained by correspondence with the taxpayers
and referred to the Defense Department as authority for salary deductions to cover the unpaid taxes.
Alcohol tax administration.—Efforts to combat illicit production and
sale of alcoholic beverages through revised enforcement procedtires
brought tangible results during 1958. An indication of the success of
the drive against major violators is found in the longer sentences
recently imposed for violations of the Federal liquor laws. An intensified preventive program was carried out through the cooperation of
thousands of dealers who voluntarily refused to sell the essential raw
materials to suspicious persons or known violators. The support of
the press in this preventive approach to the ^'moonshine" problem has
been most gratifying and tends to belie the occasional^ held belief
that ^^moonshining" may be regarded with amused and sympathetic
tolerance. Considerable success has also been achieved by court
actions which sustain the forfeiture of vehicles being used to transport
sugar, yeast, and other materials under circumstances clearly indicating
that they were intended for the manufacture of illicit spirits. Seizures
for violations of alcohol tax laws decreased but the number of arrests
increased slightly as investigations were extended and raids more
134
1958 REPORT OF THE SECRETARY OF THE TREASURY
carefully planned. The following table compares 1958 results with
those for 1957 and earlier years.
N u m b e r of
stills
seized
Fiscal y e a r
1940
1945
1950
1955
1956
1957
1958
- _
—
- -
10,663
8,344
10,030
12, 509
14, 499
11, 820
9,272
W i n e gallons
of m a s h
seized
6, 480, 200
2, 945, 000
4, 892, 600
7, 375, 300
- 8,643,200
6, 756, 600
5,140, 800
N u m b e r of
arrests
madei
25, 638
11,104
10, 236
10, 545
11,380
11, 513
11, 631
1 Includes arrests for firearms violations and, begiiming with 1955, tobacco tax violations. Arrests involving these two classes of violations during 1958 numbered 513 and 9, respectively.
Proposals of the Service for simplifying alcohol tax administration
and bringing up to date the statutory requirements relating to production, warehousing, processing, removal, and use of all types of
distilled spirits are embodied in H. R. 7125, which was under consideration by the Senate Finance Committee during the year, and
was enacted shortly thereafter (September 2, 1958).
Rejunds.—The total amount of internal revenue refunds, plus
interest, for the fiscal year 1958 was $4,651,656,000 ^ as compared with
$4,009,335,000 ^ in the preceding year, with individual income tax
refunds accounting for over 80 percent of the amount for each year.
Interest payments included in these totals amounted to $73,675,000 in
1958 as compared with $57,009,000 in 1957. The amounts refunded
and the interest thereon, as requhed by law, are paid out of appropriations separate from that covering Internal Revenue Service
administrative expenses.
Appeals and civil litigation.—Cases in which an agreement cannot
be reached in the Audit Division are referred at the taxpayer's request
to the Appellate Division for consideration of protests. The volume
of protests referred to the Appellate Division has increased steadily
in recent years as a result of increased audit activity. As of June 30,
1958, the inventory of protested income, profits, estate, and gift tax
cases pending in the Appellate Division totaled 14,268 as compared
with 12,576 cases on hand at the beginning of the year. Notwithstanding the larger worldoad, the policy of considering protested
cases promptly has continued with the result that the inventory at
the close of the year was in a substantially current condition.
The inventory of docketed Tax Court cases, in which the Service
endeavors to reach agreements with taxpayers prior to trial, increased
from 8,761 cases, at the beginning of the year to 10,395 cases at the
close of fiscal 1958.. Litigation and settlement procedures in Tax
Court cases were strengthened, effective May 1, 1958, by assigning
the Regional Counsel full responsibility for settlement of a case on
and after the opening day of the session of the Tax Court at which
the case is calendared for trial. Prior to the opening date of the
1 Figures have not been reduced to reflect reimbursements from the Federal old-age and survivors insurance trust fund amounting to $75,465,000 in 1958 and $58,190,000 in 1957, and from the highway trust fund
amounting to $89,913,000 in 1958 and $17,000 in 1957.
>• Revised.
ADMINISTRATIVE REPORTS
135
session, settlements remain the joint responsibility of the Regional
Counsel and the Appellate Division..
In cases outside the jurisdiction of the Tax Court and in most cases
within the Tax Court jurisdiction, taxpayers who have paid a disputed tax can, if they wish, sue for refund in the Court of Claims or in
a "United States district court. During 1958 receipts of such cases in
courts other than the Tax Court exceeded disposals and backlogs
rose slightly from 2,799 cases as of July 1, 1957, to 2,813 cases pending June 30, 1958.
Technical services.—Technical services include the interpretation of
statutory provisions, 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, continuing
research of tax inequities, and the development of programs 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.
The program for the issuance of new regulations under the Internal
Revenue Code of 1954 was advanced during the year by the publication of a number of important regulations. Included in this group
was the new estate tax regulation (T. D. 6296) which represented the
first major tax regulation completed under the originally enacted
provisions of the 1954 Code. Other important regulations in this
group related to research and experimental expenditures (T. D. 6255),
declarations of estimated income tax and failure by individual or
corporation to pay estimated income tax (T. D. 6267), methods of
accounting (T. D. 6282), and certain itemized deductions for individuals and corporations (T. D. 6291). Of the total of 152 separate
Treasury Decisions (not including alcohol and tobacco tax provisions)
scheduled for preparation and issuance under the 1954 Code, 92 have
now been published in final form and an additional 11 in proposed
form. A total of 32 regulations implementing the alcohol and
tobacco tax provisions of the 1954 Code have now been issued, while
two tobacco tax regulations remain to be issued.
Requests for tax rulings and technical advice totaled 45,170, comprised of 41,378 from taxpayers and 3,792 from field offices.
The total number of revenue rulings and revenue procedures published in the Internal Revenue Bulletin during the year was 687,
compared with 737 in fiscal 1957.
Approximately 223 public-use forms, instructions, and publications, were reviewed and revised to conform with recent legislation or
to incorporate other changes. The simplification of public-use forms
and the reduction of paperwork continued to be primary objectives
of the forms management program.
Personnel.—The employees on Internal Revenue Service rolls at
the close of the year numbered 50,816, consisting of 2,909 employees
iri the national office and 47,907 in the regional and district offices.
At the close of the preceding year the number of persons employed
totaled 51,364, comprising 2,832 national .office employees and
48,532 regional and district office employees.
136
1958 REPORT OF THE SECRETARY OF THE TREASURY
The number of einployees in the vaiious branches of the Internal
Revenue Service a t the close of the fiscal years 1957 and 1958 is shown
in the followiag table.
Number on pa5Toll at
close of fiscal year
Location and type
1957 .....J.;^.-„...1958
B Y LOCATION
2,832
48, 532.
National ofiBce >
Regional and district oflQces
2,909
• 47. 907
B Y TYPE
Permanent personnel:
Supervisory personnel
Enforcement personnel:
Revenue officers 2
OflQce auditors
—.
Returns examiners
Revenue agents
Special agents
Alcohol tax inspectors
Alcohol tax investigators
Storekeeper-gaugers
Total enforcement personnel
^
Legal personnel
Other technical personnel
Clerical personnel, messengers, and laborers
Total permanent personnel
Temporary personnel
Grand total
523
547
5,782
2,137
1,466
10,822
1,542
465
.954
833"
5,476
2,095
1,604
10, 510
1,470
438
, 912
771
24,001
501
3,978
21, 794
23, 276
513
4,252
21, 246
50, 797
567
49,834
982
50, 816
1 National oflQce figures include International Operations Division personnel (headquarters and field
oflQces) numbering 230 for 1957 and 271 for 1958.
2 Formerly designated as collection oflQcers.
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 $337,429,000, as compared with $305,538,000 for 1957. ' The Gov^ernment's contribution
to the civil service retirement fund, included in the obligations of
each agency for 1958 and subsequent fiscal years, accounted for over
half of the increase. Another major factor was the increase in salary
rates, beginning January 12, 1958, under the provisions of t h e Federal Employees Salary Increase Act of 1958.
Management improvements
Significant improvements were reported in every functional area
as personnel at all levels became increasingly aware of the benefits
to be gained through a constant search for more economical ways to
collect taxes and administer the internal revenue laws. Estimated
annual savings totaled $2,861,000 of which $2,361,000 was applied
to cushion the impact of expanding workloads, in essential activities,
and $500,000 was applied to reduce the appropriation request for
1959. The principal management actions and organizational changes
are summarized below.
Executive selection program.—The development and maintenance
of a ^'Blue Ribbon" career service continued bo receive major attention. An executive selection program was initiated to assure that
ADMINISTRATIVE REPORTS
137
•employees in key positions throughout the Revenue Service are
automatically considered for vacancies in regional commissioner,
assistant regional commissioner, and district director positions.
.Placements in assistant district director positions are made on the
basis of nationwide competition through the executive development
program, instituted in July 1955 for the selection and training of
Service personnel who are judged to have the greatest promise as
future executives.
-"^ Organizational changes.—^Treasury Department ..Order No. 150-46
dated May 19, 1958, established the office of Assistant Commissioner
(Planning and Research). This office is responsible fcr the coordination of all proposed modifications of administrative policies and for
developing new approaches whereby the Service's operations may be
improved and the compliance burden on taxpayers reduced. It will
furnish leadership and guidance for planning, research, and systems
activities throughout the Service.
An Employee Relations Branch was established in the Personnel
Pivision of the national office. The new braach provides personnel
^ i d a n c e and permits increased attention and emphasis to be given
.employee relations matters.
A realignment of district collection division office branches was
initiated in the latter part of the year, following tests in the Pittsburgh and Phoenix offices. Through a balanced grouping of the office
•collection functions and a carefully developed supervisory structure,
the realignment wffi encourage sound managerial planning and control and wffi permit the most effective use of employee skills. An
important feature is the establishment of a Taxpayer Service Branch
which concentrates in one central area all taxpayer inquiries pertaining to collection matters.
Control of processing operations.—A work planning and control
system was installed in all district offices to provide uniformly
•effective control over the cashier, accounting, and returns processing
operations of the collection activity. This area represents one of
the major functions of trie Service and is basic to the entire revenue
system, providing the only point of contact with most taxpayers
and the starting point for enforcement activities. The new system
achieves its objectives through establishment and realistic evaluation
of work plans, effective development and justification of budgets,
proper allocation of manpower and other resources, and periodic
review of work status.
Mechanization of payroll operations.—Substantial progress was
made in a long range program to apply improved mechanical and
electronic techniques to payroll, budget, and related operations.
Following successful tests of a mechanized payroll operation for the
Boston region ia the Northeast Service Center, this installation was
assigned to handle payrolls for the Atlanta, Cincinnati, New York
and Philadelphia regions, and the national office. Preparations were
made for the centralization of payroll operations for the four western
regions in the Western Service Center. The centralized payroll
records established under this program serve also to provide personnel
data and other information used in developing financial plans.
Relocation and consolidation of office space.—Steps were taken to
improve the field office quarters through relocation and consolidation.
138
1958 REPORT OF THE SECRETARY OF THE TREASURY
The Columbia and Jacksonville district offices were moved into new
buildings designed primarily for the Internal Revenue Service. The
Camden office was relocated in a completely remodeled air-conditioned
building! A new building is to be erected for the Baltimore office
and completely remodeled buildings are scheduled for the Milwaukee,
Cincinnati, and Lbs Angeles offices. In addition, approximately
68 locatioQS were improved by providing housing that meets standards
for effective operation.
Office 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.
By direction of the Secretary, the responsibilities 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 Stabilization Fund; and the
Foreign Assets Control.
The Office also acts for the Treasury on the financial aspects of
international treaties, agreements, and organizations in which the
United States participates, and it takes part in negotiations with
foreign governments with regard to matters included within its
responsibilities. I t assists the Secretary on the international financial
aspects of problems arising in connection with his responsibilities
under the Tarffi 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 mffitary operations. In conjunction with its other activities, the Office
studies the financial policies of foreign countries, exchange rates,
balances of payments, the fiow 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
ADMINISTRATIVE REPORTS
139
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 areas or their nationals. The Control
•carries on licensing activities in connection with transactions otherwise prohibited, and takes action to enforce the regulations.
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 responsibilities with
respect to blocked accounts of approximately $9 million received from
the sale of a Czechoslovak-owned steel mill sold pursuant to an order
issued by the Secretary on March 25, 1954. (See also exhibit 42.)
Bureau of the Mint ^
The principal functions of the Bureau of the Mint include the
manufacture of coin, both domestic and foreign; the distribution of
.doiiiestic coin between the mints, the Fed.eral Reserve Banks and
"brariches, and 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, asamended (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; the administration of silver
regulations issued under the acts of July 6, 1939 (31 U. S. C. 316c),
and July 31, 1946 (31 U. S. C. 316d); the manufacture of historic
and special Government medals; and other technical services.
Six field institutions were in operation during trie fiscal year 1958,
the Philadelphia, Denver, and San Francisco Mints; the New York
Assay Office; trie Fort Knox Gold Bullion Depository; and the West
.Point Silver Bullion Depository which operates as an adjunct of the
New York Assay Office. "^ Since discontinuance of coinage operations
.in Mapch 1955 aod closing of the electrolytic refinery at the end of
fiscal year 1957 the San Francisco Mint has operated as an assay
office and bullion depository.
Coinage
The Philadelphia and Denver Mints manufactured a total of 2.0
billion domestic coins during the fiscal year 1958, an increase of 6
percent over the previous year's output. Production consisted of
silver subsidiary and minor coins only, as the mint stock of silver
1 More detailed information .concerning the Bureau of the Mint is contained in the separate amiual report
^of the Director of the Mint.
140
195 8 REPORT OF THE SECRETARY OF THE TREASURY
dollars has been adequate since September 1935. A table follows
showing the production of domestic coins in 1958.
Denomination
1-cent pieces.
5-cent pieces
Dimes __
Quarter dollars
Half dollars
Composition
Number of
coins
Face value
produced i
Gross
weight
In millions
Short tOQs
Bronze. ,(95% copper, 5% zinc and tin)
Ciipronickel (75% copper, 25% nickel)
- '900 parts silver, 100 copper
do
- _. do
--
Total
1,401. 7
227.2
• 232.8
124.5
27.7
$14.0
11.4
23:3
31.1
13.8
4,805
1,252
641
858
383
2, 013. 9
93.6
2 7,939
' Includes 788,204 sets of proof coins manufactured.
2 Consists ol 1,693 tons of silver; 5,693 tons of copper; 313 tons of nickel; and 240 tons of zinc and tin.
In addition to domestic coinage the Philadelphia Mint manufactured 77.5 million coins for three foreign governments during the
year, as follows:
Dominican Republic:
1 centavo.
Ethiopia:
10 cents
5 cents . -. -
'
Number of
coins produced (in
millions)
Composition
Government and denomination
'. 95% copper, 5% zinc and. tin
5.0.
95% copper, 5% zinc
do
-
40.6
10.0
50.0
Haiti:
10 centimes
5 centimes
70% copper, 18% zinc, 12% nickel
do
7.5
15.0
22.6
77.5
Total
During the fiscal year 1958 the mints delivered 1.8 billion domestic
coins for circulation. The one-cent pieces and dimes were in greatest
demand. Shipments of the six denominations are shown in the
following table.
Denomination
1-centpieces
'
5-cent pieces. _ .
Dimes
Quarter dollars.
Half dollars
Silver dollars
.
Total
.
_.".'.'". . . 1
__
.
.
.
.
-
1 Includes 791,221 sets of proof coins sold by the Philadelphia Mint.
Number of
couis
Face value
shipped 1
Gross
weight
In millions
Short tons
1,326.1
148.5
234.9
. 95.2
24.1
12.7
$13.3
7.4
23.5
23.8
12.0.
12.7.
4,546
819
647
656
331
•374
1,841.5
92.7
7,373
141
ADMINISTRATIVE REPORTS
The total stock of domestic coins, comprising the amount held in
the mints and other Treasury offices, in Federal Reserve Banks,
commercial banks, and in the hands of the public, is compared at the
beginning and close of the fiscal year in the following statement.
Face value (in millions)
stock of United States coins
Minor coins
Subsidiary sUver colas
Silver dollars
._
Total
_. .
July 1, 1957
June 30, 1958
$484.6
1,382. 5
488.4
$509.8
1,448.8
488.2
$25.2
66.3
1 —.2
2,355. 5
2, 446. 8
91.3
Increase, or
decrease (—)
J Decrease represents the amount of uncurrent (worn) silver dollars withdrawn from circulation and
returned to the mints.
Gold
The three mints and the New York Assay Office received 7.7
million fine ounces of gold valued at $268.3 million during fiscal year
1958. Issues of gold totaled 36.3 million fine ounces valued at
$1,2.69.8: million, of which 0.6 million fine ounces valued at $19.8
million were sold for domestic industrial, professional, and artistic use.
The amount of gold in storage at Fort Knox remained unchanged at
356.7 million ounces valued at $12.5 billion. Total holdings in
custody of the five mint institutions at the beginning and close of the
year, and total receipts and issues, are shown in the following table.
Gold holdings and transactions (excludmg intermint transfers)
Holdings on June 30, 1957
Total receipts during fiscal year 1958.
Total issues during fiscal year 1958..,
Holdiags on June 30, 1958-..
Net decrease
1,001.5
142
19 58 REPORT OF THE SECRETARY OF THE TREASURY
Silver
Silver bullion transactions at the three mints, the New York Assay
Office, and the West Point Depository, are summarized in the following
statement.
Silver bullion holdingS'and'-transactions (excluding iatermiat transfers)
Holdiags on June 30, 1957
Fine ounces
(ia millions)
1 1,741. 8
Receipts during fiscal year 1958:
Newly mined domestic silver, act of July 31, 1946 (31 U. S. C. 316d)
Lend-lease silver from foreign governments:
India
^
1
Pakistan
26.2
104.3
15.0
Total lend-lease silver
Recoiaage bullion from uncurrent United States silver coins
other miscellaneous silver
119.3
1.4
Totalreceipts
Issues during'fiscal year 1958:
Manufactured into United States subsidiary silver coias
Sold under act of July 31, 1946 (31 U. S. C. 316d)
other misceUaneous issues
147..6
49.4
(*)
Total issues
Holdings on June 30, 1958
Net increase in silver bullion
49.5
2 i; 839. <
.1
*Less than 500,000 ounces.
' Includes 1,643.9 million ounces held as security for silver certificates,
3 Includes 1,658.7 million ounces held as secm-ity for silver certificates.
Revenue and monetary assets
Revenue deposited b y the Bureau of the Mint into the general fund
of the Treasury during the fiscal year 1958 totaled $60.5 million, an
increase of $10 million over the amount deposited the previous year.
The principal item consisted of seigniorage which totaled $59.5 million.
Seigniorage on subsidiary silver coinage amounted to $32.3 milliori;
on minor coinage $21.5 million; and on 14.8 million ounces of silver
bullion revalued as security for silver certfficates from cost to monetary value, $5.7 million. Other miscellaneous deposits amourited to
$1.1 milhon.
•• •" -:-~ - ^ - - - : :
Monetary assets of gold and silver bullion, silver and minor coins,
and other .values in the m i n t institutions totaled $24.7 billion at the
beginning of the fiscal year and $23.8 billion at the close of the year.
United States gold and silver production and consumption
The estimates of United States gold and silver production and
issues of gold and silver for domestic industrial, professional, and
artistic use, made annually by the Office of the Director of the Mint,
are on a calendar year basis.
In the calendar year 1957 total domestic gold production amounted
to 1,800,000 fine ounces, and silver production, 38,720,200 fine ounces.
Gold and silver issued for domestic industrial, professional, and artistic
use amounted to 1,450,000 fine ounces and 95,400,000 fine ounces,
respectively.
ADMINISTRATIVE REPORTS
143
Management improvement
The management improvement program of the Bureau of the Mint,
continuing during fiscal year 1958, resulted in total monetary savings
of $172,650 on an annual recurring basis, and a savings in manpower
.requirements of 19 employees.
The major monetary savings in 1958, amounting to $151,000, were
jrealized from curtailment of operations at the San Francisco Mint.
Refinery operations were discontinued at the close of fiscal year 1957
and the mint has since been operated as an assay office and gold and
:silver depository. Equipment and supplies related to both coinage
and refinery activities were transferred to other mint institutions or
.sold.
In addition, various other actions of signfficance contributed to the
general efficienc}^ and economy of the mint. For example, the modernization program of the Philadelphia Mint was continued with the
installation of modernized melting and rolling equipment. Coinage
presses transferred to the Denver Mint from San Francisco increased
the number of presses there from 22 to 29. Denver's coinage production thereb}^ increased 36.9 percent with an increase of only 25
percent in personnel. Other savings at Denver, amounting to $11,650,,
were obtained by remodeled coin storage facilities; improved handling
of coinage ingots and cut blanks; improved transportation of silyer
.and copper from storage to make-up; and the installation of X-ray
.automatic strip gauge control.
As a source of copper for coinage, arrangements were made with
the Navy Department to purchase about 1,800,000 pounds of cathode
copper which were surplus to Navy's needs, at about 5 cents per
pound below the market price. Its use in the manufacture of minor
-coins will result in an increase of approximately $90,000 in seigniorage:.
Continued attention was given to the programs of records-manager
.ment, forms and reports control, safety, coritrol of communication
-costs, and incentive awards. Cash awards amounting to $245 were
granted to employees for suggestions resulting in savings of $2,463
per year and intangible benefits.
Bureaii of Narcotics ^
The Bureau of Narcotics administers. a program designed to. deal
with the control of international, national, and local sources of the
illicit supply of drugs.
Within the United States the Bureaii 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 continues
to enlarge 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, a synthetic known more general^ as meperidine and
internationally as pethidine, was brought under control in 1944; and
under the act of March 8, 1946 (26 U. S. C. 4731 (g)), a total of 26
1 Further iaformation concerning narcotic drugs is available in the separate report of the Bureau of Nar•cotics entitled Traffic in Opium and Other Dangerous Drugs for the Year Ended December 31, 1957.
479641—59
11
144
19 58 REPORT OF THE SECRETARY OF THE TREASURY
other synthetic narcotics have been brought under control through
findings by the Secretary of the Treasury, proclaimed by the President,
that the drugs possess addiction liability similar to morphine.
Internationally, opium, coca leaves, marihuana, and their more
important derivatives have been under control by the terms of the
Opium Conventions of 1912, 1925, and 1931. In addition, under
Article 11 of the 1931 Convention and the iriternational Protocol of
November 19, 1948, two secondary derivatives of opium and 37 synthetic drugs have been found to have addicting qualities similar to
mori3hine or cocaine and have been brought under international control by a procedure similar to that provided in our national legislation. The agreement to limit the production of opium to world
ihedical and scientific needs signed at the United Nations on June 23,
1953, and approved by the United States Senate August 20, 1954,
was followed by Senate Resolution 290 of June 14, 1956, urging other
governments also to rsitiij. This Protocol requires the ratifications
of 25 states including any three of seven named producing countries
and any three of nine named manufacturing countries. As of June 30,
1958, 32 ratifications had been deposited including five from manufacturing countries, but only one from a producing country. When
two additional producing states have deposited their ratification the
Protocol will become eft'ective and should then accomplish a much
further reduction in the amount of opium available to the illicit traffic.
In the United States important and effective aid in discouraging
the illicit traffic in narcotics and marihuana continues to be afforded
by the Narcotics Control Act of 1956 (21 U. S. C. 174).
The effects of these laws continue to be refiected in the sentences
imposed. In Federal courts the average sentence per conviction for
unregistered narcotic violators was 6 years 1 month in 1958 as compared with 5 years 6 months in 1957; and for marihuana violators it
was 4 years 11 months as compared with 4 years 8 months in 1957.
The gradual stiffening of penalties at both national and State levels
is slowly but steadily producing a deterrent to illicit traffic in the
areas affected by the heavier sentences.
Excellent cooperation continues between Federal, State, and municipal narcotic law enforcement agencies in the exchange of narcotic
law enforcement information. The names of 44,146 addicts were
recorded in our central index as of December 31, 1957. The narcotics training school, for State and municipal officers, is staft'ed by 20
experts in narcotic law enforcement. I t has now graduated 376 State
and municipal narcotic law enforcement officers, representing 159
ADMINISTRATIVE REPORTS
145
separate law enforcement agencies from 34 States and Puerto Rico.
Officers from Canada, Afghanistan, Indonesia, Iran, Jordan, Lebanon,
Mexico, Japan, and Turkey also have attended the school.
The Bureau's inservice training program for its own officers was
augmented during the year, and 33 of its agents completed courses
in the Treasury Department law enforcement school; the Bureau's
fiscal procedures were further streamlined in connection with a site
audit by a General Accounting Office team. Cash awards for management improvement suggestions were paid to 21 employees.
The Bureau directs its principal activities toward the suppression of
the illicit traffic in 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 intransit movements of
narcotic drugs and preparations passing through the United States
from one foreign country to another. I t 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 countr}^ 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 1958 the total quantity of narcotics seized
amounted to 2,902 ounces as compared with 2,089 ounces in 1957.
Seizures of marihuana during 1958 amounted to 660 pounds bulk,
and 1,620 cigarettes, as compared with; 1,049 pounds bulk and 3,051
cigarettes in 1957.
Thefts of narcotics from persons authorized to handle the drugs
increased slightly in number during 1958. The quantity stolen, however, was somewhat less, 1,365 ounces as compared with 1,514 ounces
in 1957.
During the fiscal year there were approximately 302,000 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 for the fiscal year 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.
146
1958 REPORT OF THE SECRETARY OF THE TREASURY
Number of violations of the narcotic and marihuana laws reported during the fiscal.......
. year 1958 with their dispositions and penalties
Marihuana laws
Narcotic laws
• Registered persons
Federal
Court
State
Court
Pending July 1,1957
-Reported during 1958:
Federal!
..
Joiat 1
- --.
Total to be disposed
of
_..
Convicted:
Federal . .
Joint
Acquitted:
Federal
Joint - Dropped:
Federal
Joiat
Nonregistered persons
Federal
Court
Federal
Court
Total
752
141
1,508
200
55
2,260
341
2
940
1
197
1
148
34
1
37
9
1
20
2
306
5
15
1
41
5
35
1
3
1
1,549
711
2
18
.
6 5,774
Average sentence per conviction:
1958
1957
Average fine per conviction:
• 1958
1957- —
6
$16,520
$127,124
100
16,520
127,224
Joint
Total
237
104
Yrs. Mos. Yrs. Mos. Yrs. Mos. Yrs. Mos. Yrs. Mos.
2
6 5,769
6
6 766
18
1 731
5
5
-
Fines imposed:
State
Court
16
33
22
—-
State
Court
39
8
Total disposed of
Pending June 30,1958
Sentences imposed:
Federal
Joiat - —
Nonregistered persons
771
.
7
731
6
Yrs. Mos.
2
97
97
2
$9,057
$3,068
$6,200
9,057
3,068
6,200
Yrs. Mos. Yrs. Mos. Yrs. Mos. Yrs. Mos. Yrs. Mos. Yrs. Mos.
6
4
2
3
1
3
3
10
11
2
10
1
4
4
5
.2
6
3
10
9
3
8
4
$2,065
365
$340
$135
199
$46
55
$21
317
$182
16
1 Federal cases are made by Federal officers workiag independently, whUe joint cases are made by Federal
and State officers workiag in cooperation.
I n foreign countries, investigation, surveillance, and negotiation
are undertaken to restrict the amount of narcotic drugs entering this
country. In fiscal 1958 through cooperation with the Canadian,
French, Swiss, Italian, Greek, Turkish, Syrian, Lebanese, Ecuadoran,
and Cuban Governments several large seizures of crude, semiprocessed,
and finished narcotics destined for the United States were effected
and two large clandestine laboratories closed. The Bureau continues
on guard against the large supplies of opium and heroin which are
available in Communist China.
ADMINISTRATIVE REPORTS
147
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 fiavoring extracts.
The quantity of narcotic drugs exported in 1958 was slightly less
than in 1957. 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.
United States Coast Guard
The basic duties of the United States Coast Guard are prescribed
in Title 14 of the United States Code. In general they include:
Enforcement or assistance in enforcing Federal laws on the high seas
and waters over which the United States has jurisdiction, in particular, laws governing navigation, shipping, and other maritime operations, and protection of life and property within this jurisdiction.
The Service is also responsible for promoting the safety and efficiency
of merchant vessels; the development, estabhshment, maintenance,
and operation of aids to maritime navigation to meet the needs of
commerce and the armed forces; maintenance of a state of readiness
to function as a specialized service in the Navy in time of war; and
maintenance and training of an adequate reserve force.
Prevention of loss of life and property due to illegal or unsafe
practices is a major aim of the Coast Guard. The maintenance of
maritime safety and order includes not only strict law enforcement,
but also an educational program to prevent marine casualties by gaining the cooperation and self-regulation of ship operators and boatmen.
Search and rescue operations
A rise in the Nation's waterborne and airborne commerce, together
with the phenomciial growth of pleasure boating, makes ever-increasing demands on the Coast Guard's search and rescue facilities. Lifeboat stations, air stations, and fioating units along both coasts, the
inland waterways, Alaska, Hawaii, Bermuda, Puerto Rico, and Newfoundland are integrated into an effective search and rescue network
by radio stations, communication centers, and rescue coordination
centers. All Coast Guard air and surface craft are available fdr search
and rescue duties primarily, or in conjunction with regularly assigned
duties.
The Coast Guard continued to improve its communication network
as part of its responsibility under the President's National Search and
Rescue Plan for coordinating the facilities of all agencies capable of
assisting in maritime cases in the Atlantic and Pacific Oceans, the
Caribbean, and the Gulf of Mexico. Agreements were completed
with all agencies concerned; lectures were given on procedures;
several seminars were held; and full-scale search and rescue exercises
for airlines' personnel and other agencies were held quarterly in
Honolulu, and begun at Miami on a semiannual basis.
148
195 8 REPORT OF THE SECRETARY OF THE TREASURY
On July 1, 1958, the merchant vessel position reporting program
was inaugurated in the Atlantic. Under this program United States
and foreign merchant vessels are encouraged to send their position
course and - speed to Coast Guard shore-based radio stations and
ocean station vessels for relay to rescue coordination centers. From a
tabulation of reports in the New York center, the names, radio call
signs, and location of merchant vessels in the best position to assist
can be obtained in minutes. This will make unnecessary the diversion
of all merchant ships in a large area to the scene of distress.
Typical examples of assistance by the Coast Guard in 1958 are as
follows:
Pacijic search.—On November 8, 1957, an alert was issued on the
Pan American stratocruiser, Romance oj the Skies, en route from San
Francisco to Honolulu with 36 passengers and eight crew members on
board. The last word from the plane was received by the U. S. C. G. C.
Minnetonka which was occup37ing Ocean Station November. Thereafter ensued the most extensive search that had ever been undertaken
in the Pacific, lasting eight days, crossing and crisscrossing a 150-mile
wide path 1,000 miles long between Ocean Station November and
Honolulu. I t is estimated that 76 land-based planes flew 320,000
miles, 45 carrier-based aircraft and helicopters, 30,000 miles, and 38
assorted surface vessels cruised 30,000 miles.
Eight Coast Guard vessels and three aircraft assisted in the search.
By the sixth day 19 bodies had been recovered, but there were no
survivors. All operations were coordinated in Coast Guard and Navy
rescue centers at Honolulu under the overall direction of the Central
Pacffic Search and Rescue Coordinator, Commander, 14th Coast
Guard District.
Offishore landing.—On July 5, 1957, a P5M Martin seaplane from
the Coast Guard Air Station San Francisco made a successful offshore
landing at the extreme operating range of 950 miles southwest of
San Francisco to remove a seriously ill seaman, who had been transferred from the M/V Kirribilli to the U. S. S. George. The patient
was evacuated without incident to the U. S. Public Health Service
Hospital San Francisco for further treatment.
Cutter assistance.—On September 21, 1957, the German training
barque S. S. Pamir with 90 persons on board, including 54 German
naval cadets, foundered and sank 500 miles west of the Azores. The
U. S. C. G. C. Absecon, manning Ocean Station Delta, intercepted the
SOS message and proceeded to the scene. Tln^ee days later six
survivors were rescued by the Absecon and assisting vessels. The
remaining 84 were lost. The search continued for seven days with
the Absecon dhecting on-scene operations of 60 merchant vessels from
13 nations and American and Portuguese aircraft. Reports from
survivors indicate the Pamir was caught in the northern perimeter
of hurricane ''Carrie" and foundered when caught in extremely rough
seas.
On July 27, 1957, a fire of unknown origin was discovered b}^ the
Boston Captain of the Port patrol vessel at the Mystic Coal Yard.
The U. S. C. G. C. Cactus, 150 coastguardsmen, and portable firefighting equipment were dispatched from the Coast Guard Base,
Boston to assist. The Cactus moved a 450-foot Norwegian freighter
from the burning dock while the fire was brought under control by
ADMINISTRATIVE
149
REPORTS
the shore party with the assistance of local agencies. Eight coastguardsmen were hospitalized for injuries received while fighting the
fire.
Aircraft assistance.—On February 8, 1958, a Navy plane (P5M) en;
route from San Juan to Norfolk lost one engine and changed course
to the island of San Salvador, B. W. I., to attempt a night ditching.
Coast Guard Air Station, Miami sent up a U F amphibian plane, later
reinforced by a second amphibian. The pilot of the first amphibian
contacted the disabled Navy plane, talked the pilot out of attemptirig
to ditch without benefit of illumination, and alerted the commanding
officer of the San Salvador Coast Guard Loran Station for assistance
after ditching. Utilizing an 18-foot boat and a borrowed truck, the
commanding officer was on the scene IK miles offshore when the
Navy plane landed with two minutes pf fuel remaining. One of the
Coast Guard amphibians provided additional illumination while the
Navy plane was guided thi'ough a dangerous reef to a mooring, using
her operative port engine. There were no casualties.
A statistical summary of search and rescue assistance during the
fiscal year 1958 follows.
Rescue operations
Vessels assisted:
Refloated ( n u m b e r )
Towed (number)
o t h e r w i s e aided ( n u m b e r )
P r o p e r t y i n v o l v e d (value i n c l u d i n g cargo)
Miles t o w e d
.
Aircraft assisted:
Escorted ( n u m b e r )
Otherwise aided ( n u m b e r ) -.
P r o p e r t y i n v o l v e d (value i n c l u d i a g cargo)
Miles escorted
. .
Persons assisted
Miscellaneous assisted (floods, forest fires, etc.)
A t t e m p t s to assist (no physical assistance rendered)
Persons involved ( n u m b e r ) :
L i v e s saved or rescued from peril
M e d i c a l assistance furnished .
_
O t h e r assistance
M e n a c e s to n a v i g a t i o n r e m o v e d .
Miscellaneous p r o p e r t y i n v o l v e d ( v a l u e ) .
B y aviation
units
B y vessels!
B y other
equipment 2
83
281
558
195
2,166
504
1,524
9,472
333
1,802
11, 919
1 395
$530, 440, 800
110, 073
340
112
2
40
12
184
547
114
1,997
426
217
1,702
1,496
1,919
5, 234
354
336
$735, 701, 200
52, 051
2,469
2,1,50
8,933
Total
1,984
2 118
71, 791
1 947
$171, 975,100
1 Vessels 56-ft. and over in length.
2 Small boats, vehicular and other equipment.
Rescue and survival training programs for overseas aircraft
This program is conducted by the Coast Guard for the benefit
of civil and militaiy air carrier organizations. Flight crews and other
personnel directly concerned with overwater operations, including
those in such fields as communications and air traffic control, are
given indoctrination in every subject which might contribute to safety
and ultimate survival. Emphasis is placed upon coordination between
•distressed aircraft and search and rescue agencies, procedures for
making emergency landings at sea, use of survival equipment, and
rescue techniques.
Strong, interest in this program is evidenced by the continued and
vigorous participatiori by numerous organizations. In fiscal 1958,
participating organizations numbered 273 with 6,428 persons attending, compared with 120 organizations and 5,088 persons during 1957.
150
1958 REPORT OF THE SECRETARY OF THE TREASURY
Marine inspection and allied safety measures
Promotion by the Coast Guard of safety of life and property on
vessels subject to inspection and navigation laws includes promulgation and related enforcement of regulations. Encompassed are inspection of vessels and their equipment, construction and repair of vessels,
investigation of maiine casualties, manning and citizenship requirements, mustering and drilling of crews, and protection of merchant
seamen. Also included are the licensing of officers and pilots, 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.
As anticipated, the full effect of the law permitting biennial inspection of cargo vessels (46 U. S. C. 391 (a)-(e)) has resulted in a marked
reduction in cargo vessel inspections for certification, and a corresponding increase in reinspections. The act of May 10, 1956 (46
U. S. C. 390 a-g), effective June 1, 1958, requires the inspection and
certification of all small passenger vessels carrying more than six:
passengers. A portion of these small passenger vessels was inspected
on a voluntary basis from January 1 to June 1, 1958. The voluntary
inspections, plus the inspections of small passenger vessels for the
month of June 1958, resulted in the issuance of 1,722 certificates for
the six months ended June 30, 1958.
The American public continues its interest in boating on the navigable waters of the United States as evidenced by the 10 percent increase over the previous fiscal year in the' number of vessels issued
Certfficates of Award of Number under the act of June 7, 1918, as.
amended (46 U. S. C. 288). This represents a signfficant acceleration of the trend in the past few years.
There were 3,970 maiine casualties reported, of which 2,032 were^
the subject of detailed investigations. Five of these casualties were
considered major, and were investigated by marine boards of investigation, which determined that 385 persons lost their lives from
marine casualties, 244 from marine hazards, and 277 from miscellaneous causes such as natural deaths and suicides. There were no
passengers' lives lost during the year from casualties on inspected
passenger vessels or their equipment.
The most serious casualty was the collision between the United
States freight vessel S. S. Mormacsurj and the Argentine passenger
vessel S. S. Ciudad de Buenos Aires in the Rio de La Plata. There
were no injuries or lives lost aboard the Mormacsurj, but the Ciudad
de Buenos Aires sank with a reported loss of 75 to 80 persons. Although
no witnesses from the Argentine vessel were available for interrogation by the Marine Board of Investigation, it was concluded that the
Monnacsur/was not at fault.
New construction and major conversions kept shipbuilding a c tivity at a high level during the year. The Santa Rosa, one of four
large passenger vessels under construction, was delivered to the
owners, and the other three were expected to follow soon. Twolarge passenger vessels, the Matsonia and the Atlantic, were placed
in service after essentially complete rebuilding. The keel was laid
for the N . S. Savannah, the world's first nuclear-powered merchant,
vessel.
ADMINISTRATIVE
151
REPORTS
In September 1957, the State Department received a note from the
British Embassy proposing that a conference be held in the spring of
1960 to draft revisions of the 1948 International Convention on Safety
of Life at Sea and the 1930 International Load Line Convention.
The State Department requested the Commandant of the Coast
Guard to assume overall responsibility for United States preparations for this conference. Accordingly various committees were
established to develop American proposals. As a result of the
Stockholm-Andrea Doria collision, a committee had already made
studies aimed at revising standards for watertight subdivision, damage
stability, and ballasting. This committee was requested to serve as a
construction committee in developing American proposals, and additional committees were appointed to report on lifesaving appliances,
safety of navigation, radio, nuclear power, and load lines.
Stemming from casualties caused by shifting ore cargoes, a panel of
industry representatives was appointed to study the factors involved,
and to make recommendations to the Commandant regarding the
safe stowage of such cargoes on general cargo vessels. This panel
proposed a ^^Code of Good Practice" which has been circulated to the
industry for comment.
In March 1958 the requirements were fulfilled to effect the International Convention establishing the Intergovernmental Maritime
Consultative Organization (IMCO), which will function as a specialized agency of the United Nations. The Coast Guard's role in this
organization will be to encourage adoption of the highest practicable
standards for safety and efficiency of navigation.
A provision of the 1948 International Convention on Safety of Life
at Sea requires that contracting governments cooperate in the interchange of pertinent information regarding major marine casualties to
facilitate the development of any changes which might be necessary
in the safety requirements of the Convention. To comply more
effectively with this requhement, a new committee has been established with representation from the Coast Guard, the Maritime Administration, and the State Department. This committee has the
responsibility of reviewing all reports of major casualties investigated by the Coast Guard, and of disseminating to other signatory
countries information having a bearing on international safety requirements.
Effective March 1, 1958, a Merchant Marine Technical Section was
established in the Coast Guard District Office in New Orleans to
expedite and improve the handling of plan approvals and other technical matters concerning merchant ship construction, conversion, and
alteration for the Gulf and Western Rivers areas.
A digest of certain phases of marine inspection follows.
Number of
vessels
Vessel inspections completed
Dry dock examinations
Reinspections
Miscellaneous inspections
.
Undocumented vessels numbered under provisions of the act of June 7, 1918, as
amended (46 U. S. C. 2 8 8 ) . . ...,
Violations of navigation and vessel inspection laws
Factory inspections
."Merchant vessel plans reviewed
4,514
5,931
5, 272
22, 460
461,117
12,911
1, 004, 796
29, 000
Gross
tonnage
6, 049, 741
15. 866,139
14, 563,094
152
195 8 REPORT OF THE SECRETARY OF THE, TREASURY
The Merchant Marine Council held eight regular meetings and one
public hearing, supplemented by numerous Coast Guard District
Commanders' informal hearings and discussions with affected parties,
' to consider proposed regulations implementing new legislation or
amending present requirements. The regulations considered included
the following: Rules and regulations for small passenger vessels carrying more than six passengers, act of May 10, 1956 (46 U. S. C. 390a390g); private aids to navigation on the outer Continental Shelf and
waters under the jurisdiction of the United States; lights for barges
towed on the Gulf intracoastal waterways or western rivers; requirements for radar observers; alternate stowage requhements for carriage
of bulk grain cargoes; miscellaneous amendments to vessel inspection
regulations; specifications for kapok and fibrous glass life preservers
and buoyant vests on nonpassenger-carrying motorboats; dangerous
cargo regulations and transportation of military explosives on board
vessels (the dangerous cargo regulations were made available as a
separate volume of the Code of Federal Regulations); proposed ^'Code
of Good Practice" for the stowage of bulk cargoes such as ore and
ore concentrates when carried in general cargo vessels; certfficates
issued by the International Cargo Gear Bureau, Inc., for cargo
handling gear; disclosure of information from marine safety records;
and fees and charges for copying, certifying, or searching records and
for duplicating documents and certificates.
The Coast Guard participated in meetings and conferences promoting merchant marine safety, including the marine section of the
National Safety Council's Exposition and Congress in Chicago, 111.,
the Merchant Marine Conference sponsored by the XJ: S. Propeller
Club in Houston, Tex., and the Western Rivers Panel of the Merchant
Marine Council in St. Louis, Mo.
The Secretary of the Treasury sponsored the first National Small
Boat Safety Conference, held in Washington, D. C , December 11
and 12, 1957. The Conference was attended by representatives from
36 industry and boating organizations, boating publications, and
Government agencies, and resulted in 19 recommendations for the
promotion of small boat safety.
The Coast Guard cooperated with the Council of State Governments
in drafting a model State law to supplement H. R. 11078, a bill to
promote boating safety, to enable coordination, cooperation, and
uniformity of boating laws.
. Recognizing the tremendous increase in recreational boating, the
Coast Guard published 200,000. copies of a pamphlet entitled Motorboat Sajety jor 1957-1958. The publication entitled Proceedings oj
the Merchant Marine Council, which contains timely information and
articles of interest to mariners, was distributed monthly to approximately 13,700 persons interested in marine safety activities administered by the Coast Guard.
Merchant marine personnel.—Merchant marine personnel were issued 86,214 documents during the fiscal year, and shipping commissioners supervised the execution of 9,507 sets of shipping articles in
connection with the shipment and discharge of seamen, f^s^**^''
Merchant marine investigating sections 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,.
ADMINISTRATIVE REPORTS
153
as requhed by the act approved July 15, 1954 (46 U. S. C. 239 a and b).
During the year a total of 14,762 investigations of cases involving
negligence, incompetence, and misconduct were conducted. Charges
were preferred and hearings held on 1,498 of these,cases by civilian
examiners.
Security checks were made of 21,723 persons deshing employment
on merchant vessels and 18,268 original merchant mariners^ documents evidencing security clearance were issued.
The Coast Guard was requested by the Customs Service to cooperate in publicizing the requirements of the Narcotic Control Act of
1956 (46 U. S. C. 1407), because of inability to prosecute persons who
fail to register as narcotic offenders, pleading ignorance of the law.
Steps were taken to comply with this request.
Changes in the licensing regulations for merchant marine personnel
made during the year included the following: Requirements were established for qualifications of radar observer, for license as master of
small passenger-carrying vessels, and for license as operator of passenger-carrying vessels (Federal Register, October 5, 1957, Part I I
(referred to as Subchapter T)). Requirements were revised for renewal of hcenses, for license as master of sail vessels to provide for sail
vessels subject to the act of May 10, 1956, for license as motorboat
operator, for licenses issued under the act of May 10, 1956, Subchapter T, and for members of the U. S. Merchant Marine Cadet
Corps,
Law enforcement
The port security operations (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: Control of entry
of merchant vessels into United States ports; supervision of loading
of Class A explosives and administration of the regulations relative to
dangerous and hazardous cargoes; screening of merchant seamen employed on certain categories of United States vessels and waterfront
workers for admittance to waterfront facilities under certain specffied
conditions; and protection of selected vessels and waterfront facilities
in designated port areas from the waterside, and, by spot checks, from
the shoreside.
After appropriate screening of warehousemen, pilots, and other
waterfront workers, 13,392 port security cards were issued. Two
hearings were granted upon appeal by individuals whp had been found
to be poor security risks.
The following statistics reflect the volume of enforcement work of
the Coast Guard during the year.
Vessels boarded
Waterfront facilities inspected
Violations of Motorboat Act reported
Violations of port security regulations reported
Violations of the Oil Pollution Act reported
Violations of other laws reported
Explosives loading permits issued
Explosives loadings supervised
Explosives covered by above permits (tons)
Other hazardous cargoes inspected
Anchorage violations
181, 383
13, 224
12, 514
1, 077
245
124
1, 009
2, 335
81, 310
14, 483
12
154
195 8 REPORT OF THE SECRETARY OF THE TREASURY
The Coast Guard also assisted the Federal agencies having primary
responsibility for enforcing 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.
Cooperation with other Federal agencies
The Coast Guard performed services for other Federal agencies
as follows:
Alcohol and Tobacco Tax Division, Treasury (aircraft days)
Coast and Geodetic Survey: (aerial surveys days)
Fish and Wildlife (censuses taken)
Weather Bureau:
(a) Reports furnished
(b) Warnings disseminated
Aids to navigation
74
52
51
121, 219
18, 318
On June 30, 1958, there were 39,992 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 bases, consisting of loran stations, light stations, lightships,
lighted and unlighted buoys, and minor lights and daybeacons.
During the year 8,190 new aids to navigation were established, and
6,730 aids were discontinued. The increase of 1,460 was required to
mark newly completed river and harbor improvements and areas
having increased maritime commerce as well as to improve the existing
system.
The world-wide loran system now has three major components,
Loran-A, Loran-B, and Loran-C. On June 30, 1958, the system
consisted of 64 stations, of which 54 were operated by the Coast
Guard. Sixty-one of the total are Loran-A stations while three are
Loran-C stations. Two replacement Loran-A and three Loran-B
stations being constructed will be completed in fiscal 1959. During
1958 three Loran-C stations and two Loran-A stations were completed.
The Coast Guard, in cooperation with the St. Lawrence Seaway
Development Corporation and the Corps of Engineers, U. S. Army,
completed the plans and design for the system of aids to navigation to
mark the main channel of the St. Lawrence Seaway between St. Regis,
New York, and Lake Ontario, scheduled to be opened on July 5, 1958.
This entire system includes 83 minor lights, 3 lighted ranges, 33 lighted
buoys, and 33 unlighted buoys. In addition, ten lighted buoys and
one minor light are being maintained temporarily until final dredging
has been completed.
155
ADMINISTRATIVE REPORTS
A summary of aids to navigation maintained at the close of each of
the last two fiscal years follows.
Type
Total number June 30
1957
Loran transmitters
Radiobeacons
Radarbeacons
Fog signals (except sound buoys)
Lights (including lightships)
Daybeacons
Buoys, lighted (including sound)
Buoys, unlighted s:>und
Buoys, unlighted metal
Buoys, Mississippi River t y p e Buoys, spar
-Total
1958
49
192
7
582
10, 360
5,604
3,286
373
13, 434
3,818
827
579^'
10, 344:
5, 641.
3,394
367
13, 353
4,937
1,130
38, 532
39, 992
154
19a-
1 Includes three experimental Loran-C stations.
Northwest Passage
Duiing the summer of 1957, the U. S. Coast Guard Cutters Storis,
Spar, and Bramble were assigned to the Arctic area for surveys in the
Canadian Archipelago. While on this assignment, the three ships were
given the mission of surveying a practicable west to east deep water
passage through the Archipelago. Successfully completing this mission, they were the first American ships to travel from th? Pacific Ocean
to the Atlantic Ocean across the roof of the North American Continent.
One of the ships, the Spar, set an additional record as it became the first
American vessel to completely circumnavigate the North American
Continent in one summer. The Spar departed Bristol, R. I., in May
1957, traveled through the Panama Canal and up the west coast, and
returned to Bristol via the Arctic.
Ocean stations
Throughout fiscal 1958 the Coast Guard maintained four ocean
stations in the North Atlantic Ocean and two in the North Pacific.
Ocean station vessels located at strategic points provided meteorological services for air and marine commerce; communications for
iransoceanic trafiic; air navigation facilities in the ocean areas regularly
traversed by aircraft of the United States and other cooperating
governments; and search and rescue facihties. During the year Coast
Guard vessels transmitted 39,208 weather reports, rendered assistance
in 73 cases, and cruised approximately 470,758 miles in this program.
156
19 58 REPORT OF THE SECRETARY OF THE TREASURY
International Ice Patrol
The International Ice Observation and Ice Patrol Service in the
North Atlantic Ocean completed its calendar 1957 season by conducting a postseason oceanographic cruise during August 1957 and by conducting aerial ice reconnaissance until September 1957. Aerial ice
reconnaissance began during January 1958 for the 1958 ice season.
Oceanographic work of the U. S. C. G. C. Evergreen commenced in
April 1958. After a very light ice year the operations for the calendar
1958 ice season terminated on June 15.
Bering Sea Patrol
The Bering Sea Patrol was carried out by the U. S. C. G. C. Wachusett during July, August, and September 1957. This patrol performs
certain law enforcement duties and assists other Federal agencies in
law enforcement; renders aid to distressed persons, vessels, and aircraft; provides logistic services to outlying Coast Guard units; performs aids to navigation duties and marine inspection; and collects
hydrographic, oceanographic, and meteorological data. During this
patrol, the Wachusett cruised 12,569 miles, carried 39 passengers on
missions in the public interest, and supplied medical treatment to 816
persons and dental treatment to 976 persons in remote areas contiguous
to the Bering Sea and Arctic Ocean.
Facilities, equipment, construction, and development
Floating units.—Large ships in active commission at the end of the
year consisted of 183 cutters and buoy tenders of various types, 80
patrol boats, 33 lightships, 39 harbor tugs, and 11 buoy boats. During
the year they cruised 2,950,118 miles as compared with 2,795,729
miles the previous year. Included in the 183 cutters are two special
units, the U. S. C. G. C. Courier and the U. S. C. G. C. Eagle. The
Courier, a 339-foot vessel equipped with radio broadcasting facihties,
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. A new buo}^ tender, the Azalea, was completed
as a modern replacement for the 40-year old Palmetto. A new class
of 95-foot steel patrol boats is under construction to replace old
wooden 83-foQt patrol boats.
Shore establishments.—New base facilities are under construction
in New York, N. Y. One lifeboat station was disestablished following
the recommendation of a Board of Survey of Coast Guard Facilities in
1955-1956. A reduction of seven manned lights resulted from conversion of some to automatic, unattended, and the elimination of
others. One radiobeacon station was discontinued where the service
was no longer justified. Other changes were the addition of one marine
inspection ofl&ce, five group offices, and one electronic repair shop,
while one section ofl&ce was discontinued. (Construction of new loran
stations is described in an earlier paragraph on aids to navigation.)
Planning continues on problems of water safety. Fifteen mobile
boarding teams, which were very effective and well received, were
operated in the early part of fiscal 1958.
Aviation and aircrajt.—On February 26, 1957, the Secretary of the
Treasury and the Commandant of the Coast Guard transmitted to
Congress their ^'Joint Report on the Requhements of Coast Guard
ADMINISTRATIVE REPORTS
•
157;
Aviation.'' This report, based on a study by a special board of senior
Coast Guard ofl&cers, presents a plan for aircraft replacement and for
meeting the. increasing demands upon Coast Guard aviation. On
January 20, 1958, a revision of this report was transmitted to Congress.;
The principal item of this revision is the development of a new financial
plan. The end of fiscal year 1958 marks the conipletion of the first,
year of the six-year program.
. During 1958 the number of types of aircraft operated by the Coast/.
Guard [was reduced from 14 to 10. The total number of ahcraft
operated has, however, been maintained between 125 and 128.
To replace overage aircraft, 9 new helicopters and 3 new seaplanes
were acquired. Of 32 used aircraft acquired from the Air Force, 25
were placed iri operation as replacements for overage aircraft, and 7
are in storage. Of these 25 operational aircraft 9. are R5Ds and are
being utilized to sustain operations of the long range landplai;ies pending procurement of SC-130B aircraft. To provide logistic support
for the expanding Loran Program, the Coast Guard has requested 6,
G-123 aircraft from the Department of Defense. The procurenient
and disposal of aircraft during the past year have been in accordance with the basic plan established by the Aviation Board.
\ i
The primary mission of Coast Guard aircraft is the support of|
search and rescue missions. In accomplishing this mission Coast;
Guard ah-craft (both fixed wing and rotary) were deployed during
the year at 9 air stations and 13 air detachments. In addition to these
units, the temporary summer deployment of one helicopter at Los
Angeles, Calif., and one at Rockland, Maine, is planned. A helicopter
has also been temporarily assigned to the current Bering Sea Patrol
Vessel,; the U. S. C. G. C. Northwind, for evaluation.
' The development, testing, and manufacture of towing equipment for
larger helicopters was completed. Ten II04S helicopters have beeri;
equipped for towing and those remaining will be equipped by January
1, 1959.
An operational evaluation of the effectiveness of helicopters in
providing logistic support for isolated Coast Guard units is being,
conducted in the First Coast Guard District. Isles of Shoals and
Boon Island Light Stations are, except for fuel and water, receiving
their entire logistic support from heh cop ters operating from Coast
Guard Air Station /Sa(em. Data are being kept to compare cost,/
timeliness, and convenience with other modes of support.
Communications.—The Coast Guard is participating actively in the
work of the Preparatory Committee for the International Radio
Conference to be held in Geneva, Switzerland, in 1959. The chairman
and vice chairman pf a major committee are Coast Guard officers.
Engineering developments
Technical advances, some of which are described below, have provided the Coast Guard with the facilities and equipment to improve
operating efl&ciency and reduce costs.
Tests were completed of equipment and methods that permit a
helicopter to tow to safety small boats and ships as large as a few
hundred tons. A program was begun to develop in-flight refuehng
techniques for helicopters that should lead to increased search and
rescue,capabilities. A new high visibility paint scheme, designed to
158
1958 REPORT OF THE SECRETARY OF THE TREASURY
reduce the danger of midair collisions and to make the aircraft more
visible to persons in distress, was adopted for trial. High intensity
loudspeakers are being developed for installation on aircraft to permit
the pilot to talk to ships and boats during rescue operations.
Construction has been started on a 40-foot plastic utility boat
which is expected to cost less to maintain than conventional steel
boats. The cost of cleaning fuel tanks on large cutters should b e .
reduced materially if tests of chemical cleaning methods are successful.
AL commercial hydrofoil adapted to a Coast Guard boat has led to
greatly improved speed in smooth and slightly rough water, thus
increasing the usefulness of the boat for work in safety programs. An
iriitial record of spectacular rescue work has proved the excellence of
the design and construction of the new 52-foot motor lifeboat. Outstanding characteristics of foreign lifeboats are being studied for
Coast Guard use.
River buoys that are vulnerable to collision are being filled with a
plastic foam to reduce losses. A device that will convert the energy
of sunlight into electrical energy has been put on trial with the objective of providing a low cost power source for minor navigational
lights. A 14 million candlepower light, the first of its kind, was
placed in service at Oak Island, N . C., on top of a new lighthouse
built to modern, low maintenance design criteria. Development was
started on a low cost, high capacity, throwaway storage battery for
service in lighted buoys. A modern buoy lantern, utilizing electronic
circuits in the place of a mechanical flasher mechanism, is being
tested. Lenses are being developed that will increase significantly
the visible range of navigational lights.
A major breakthrough in electronics aids to navigation has been
accomplished in developments extending the loran system. The
loran system can provide highly precise navigational service at short,
medium, and long distances.
The major portion of a program for the installation of modern
electronics equipment to replace obsolete and overage equipment on
ships, aircraft, and shore units was completed during the year. Three
microwave radio links were installed to replace submarine telephone
cables spanning busy harbor areas. Installation of F M communications equipment for port security operations was completed in two
major harbor areas and started in six others.
The Ship Structure Committee, a joint effort of Coast Guard, Navy,
Maritime Administration, and American Bureau of Shipping to improve the hull structures of merchant ships, has published a number
of research findings which will enable larger and faster merchant
ships to be built with greater structural integrity.
Coast Guard Reserve
The purpose of the Coast Guard Reserve is to provide trained units
and qualified persons available for active duty in time of war or
national emergency and at such other times as the national security
requhes.
During the fiscal year, 9,174 applications for enlistment in the
Reserve were considered. Of these applicants 4,151 were found
qualified and enlisted. Procurement of persons between the ages of
17 and 26 for the six-year enlistment program was suspended in the
ADMINISTRATIVE REPORTS
159
fall of 1957 for the remainder of fiscal year 1958. On December 18,
1957, the fiscal year 1958 quota of enlistments in the two-year active
duty Reserve program was filled and the program was temporarily
suspended until resumption in October 1.958.
Procurement of Reservists for the six-months training program was
intensified, however. During the first six months of the fiscal year
recruiting in the under 18K year-age group failed to meet expectations,
and an additional program was established for persons between the
ages of 18K and 21. These two programs accounted for approximately
69 percent of enlisted procurement in fiscal 1958.
On April 1, 1958, the minimum qualifying score required for enlistment in the Coast Guard Reserve was increased frorri 10 percentile
to 31 percentile. This step was taken to provide the Reserve with
enlistees of greater petty ofl&cer potential and to reduce the number of
administrative discharges resulting from enlistment of personnel in
lower mental groups.
On June 30, 1958, the total Ready Reserve strength of the Coast
Guard Reserve was 3,216 ofl&cers and 26,402 enlisted persons, which
represents approximately 75 percent of the planned ultimate strength
of 39,600. Of this number, 1,637 ofl&cers and 8,359 enlisted persons
were assigned to training units. An extensive program of training
was carried out for approximately 6,975 persons. The major portion
of this number participated in training involving port security duties,
and the remainder in shipboard and individual specialty training.
The expansion of the Reserve program has required the establishment
of additional training units to absorb the planned increase in Reservists. As of June 30, 1958, there were 147 organized Reserve training
units, in commission, representing an increase of 18 percent for fiscal
1958.
A program to establish additional types of specialized training
units is under study. The first of these units, a rescue coordination
center unit, was established in San Francisco, Calif., during March
1958 to train personnel for possible duty in the Western Area Rescue
Center in the event of mobilization. If successful, additional units
will be established in other Coast Guard districts during fiscal 1959.
Several other types of units are being established, including one to
provide training in marine inspection and another to provide training
in electronics.
In 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 Reserve components, thus carrying out the intent of Congress that the administration of all Reserve components be as uniform as practicable.
Personnel
On June 30, 1958, the military personnel strength of the regular
Coast Guard on active duty was 30,128, consisting of 2,824 commissioned ofl&cers, 556 chief warrant officers, 419 warrant officers, 417
cadets, and 25,912 enlisted men. The civilian force consisted of
2,244 salaried persons, 2,379 wage board employees, and 347 lamplighters, exclusive of vacancies. The total strength of the Coast
Guard Reserve as of June 30, 1958, was 3,216 officers and 26,402
enlisted persons.
479641--59
12
160.
1958 REPORT OF , THE , SECRETARY OF THE TREASURY
On May 27, 1958, 79 members of the Class of 1958 were graduated
from the Coast Guard Academy with Bachelor of Science degrees.
A total of 417 cadets remained on board. The U. S. C. G. C. Eagle,
U. S. C. G. C. Absecon, a;nd the U. S. C. G. C. Yakutat departed on
May 29 on the long summer practice cruise for cadets. The cruise
ships visited Amsterdam, Netherlands, Dublin, Ireland, Lisbon,'
Portugal, and Hamilton, Bermuda, and returned to New London
about August 14.
During .fiscal 1958, losses of regular commissioned officers totaled
78 through retirements, resignations, revocations, and deaths. In
addition, 169 Reserve oflicers were released from active duty following
completion of their obligated service. These losses were replaced by
the Academy graduates, 203 graduates of the Officer Candidate
School, the recall of 21 Reserve officers to active duty, and the appointment of 20 former merchant marine officers. The net gain is
just sufficient to meet the increased commitments at the beginning of
the fiscal year 1959.
Action taken under the provisions of the act of August 9, 1955 (14
U. S. C. 247 and 248), for the retireinent or retention of captains and
flag officers, resulted in the rethement of five captains. One rear
admiral was retired under other provisions.
Throughout the year enlisted Reservists without previous active
duty were called up for service under the provisions of Section 4 (c) (2)
of the Universal Military Training and Service Act, as amended (50
App. U. S. C. 451-455, 470), and Section 261 of the Armed Forces
Reserve Act of 1952, as amended (50 U. S. C. 1012). I t is estimated
that on June 30, 1958, there were 2,350 Reservists on active duty.
There were 240 voluntary retirements of enlisted men during the
year, 123 of which were for statutory reasons.
Expansion of the cadet procurement program continued during
fiscal year 1958. The 2,616 applications received, for the cadet examination represented an increase of 16 percent over those received in
fiscal 1957. From 2,137 qualified applicants authorized to take the
examinations held in February, .an eligibility list of 419 was established. Approximately 210 selected from this list are expected to be
sworn in as members of the Class of 1962.
A new, limited program to procure aviators of the Navy and
Marine Corps was the only additional officer procurement program
undertaken during fiscal year 1958. The program was established to
provide qualified junior officers needed for fiying billets in the Coast
Guard. Only five lieutenants, junior grade, actually were commissioned and called to active duty. The program will be continued in
fiscal 1959, however, and as many as 30 aviators may be procured.
The program to procure licensed officers of the merchant marine,
pursuant to the act of August 4, 1949 (14 U. S. C. 225a (5)), resulted
in the appointment of 17 commissioned officers and three commissioned
warrant, officers in the regular Coast Guard.
The officer candidate school program, conducted at the Coast Guard
Academy, was the largest officer procurement program conducted in
fiscal 1958. Of the 211 who graduated during the year, 147 from
civilian status were tendered commissions as ensign in the Coast
Guard Reserve, and 64 from enlisted status were tendered temporary
commissions in the regular Coast Guard.
ADMINISTRATIVE REPORTS
161
The direct commissioning program which provides Reserve officers
for assignment to Reserve training units was accelerated during fiscal
1958. New requhements for authorized specialties were developed
and appointment processes standardized. The improvements in the
program resulted in the submission of 227 applications of basically
quahfied individuals to permanent examining boards for evaluation.
Of these, 172 were recommended for appointment, representing an
increase of 85 percent over the previous fiscal year.
Recruiting strength was maintained at substantially the same level
throughout fiscal 1958. At the end of the year there were 52 recruiting stations, 13 substations, and five mobile recruiting units in operation, manned by 265 recruiters. The vehicle allowance for recruiting
purposes was maintained at 79. Of the 1.4,683 persons applying for
enlistment in the regular Coast Guard, 3,247 were accepted. On
February 1, 1958, the mental standards for enlistments in the regular
Coast Guard were raised, requiring that at least one-half of the
regular enlistment quota be filled by applicants who attained a score
of 50 percentile or above on the Armed Forces qualification test, and
the remainder of the quota be met from applicants attaining a minimum of 40 percentile.
Information relating to Reserve enlistments may be found in an
earlier paragraph concerning the Coast Guard Reserve.
Personnel enlisting in the regular Coast Guard are assigned to one
•of the two recruit receiving centers, located at Cape May, N. J., and
Alameda, Calif., for 12 weeks of recruit training. During fiscal 1958,
2,233 recruits were trained at Cape May and 885 at Alameda, representing a decrease of 971 recruits from the number trained in fiscal
1957. Under provisions of the Reserve Forces Act of 1955 (50
U. S. C. 928), 1,733 enlisted men completed six months reserve training. In this group were 381 and 405 who completed their entire training at Cape May and Alameda, respectively, 915 who completed basic
training at Cape May and received advanced training at the Groton
Training Station, and 17 ''critical" skilled persons who completed
training at operational units. In addition, 1,174 persons from organized reserve training units were assigned to the receiving centers
.and Groton Training Station for two weeks of summer training.
During fiscal 1958, 42 officers were assigned to postgraduate training and 47 completed such study, which includes the training of naval
architects, electronics engineers, nuclear research personnel, command
communicators, financial administrators, and legal specialists. A
total of 35 officers entered flight training and 22 completed their training. Twenty-seven aviators completed an eight-week course for
qualification as helicopter pilots, and six were assigned to the eightweek Navy flight safety course given at the University of Southern
California. A program was also initiated for the assignment of the
district search and rescue officers to a short jet ahcraft familiarization
course at Olathe, Kans.
During fiscal 1958 a total of 2,281 enlisted men graduated from basic
petty officer schools and 476 graduated from advanced schools. Of
the total of 2,757, 1,568 petty officers were graduated from Coast
Guard schools, and 1,189 from Navy and other schools.
There were 16,551 new enrollments and 5,680 completions in the
Coast Guard Institute courses and 2,650 new enrollments and 341
162
1958 REPORT OF THE SECRETARY OF THE TREASURY
completions of courses offered by the United States Armed Forces
Institute. Also reported were 364 completions of naval correspondence courses by enlisted men and 964 by officers.
Approximately 75 visitors from foreign countries, under the sponsorship of other Government agencies, were extended the use of Coast.
Guard facilities for training in aids to navigation, loran, search and
rescue procedures, merchant marine safety, vessel inspection, port
security, and law enforcement.
Public Health Service support.—On June 30, 1958, the following
U. S. Public Health Service officers were on duty with the Coast Guard:
46 dental officers, 31 medical officers, 11 nurses, 1 scientist officer, 1
sanitary engineer officer, and 1 pharmacist officer. During the fiscal
year full-time professional Public Health Service complements were
maintained on units authorized to have such services.
Ocean weather station Victor in the Pacific Ocean had 100 percent
coverage by the assignment of a medical officer to each vessel engaged
in operations on that station. Full-time coverage by medical officers
was provided during the year for ocean weather stations Bravo and
Charlie in the Atlantic Ocean. Medical and dental officers were assigned
full-time to the vessel engaged in the Bering Sea Patrol and the vessel
utilized for the operation of Deep Freeze I I I . Full-time officers were
assigned to other cruise vessels whose cruises requhed the services of ,
a medical officer.
Military justice.—The United States Court of Military Appeals
used a Coast Guard case to mark a fundamental change in military law
when it announced on November 15, 1957, in United States v. Rinehart
(8 U. S. C. M. A. 402, 24 C. M. R. 212), that thenceforth the manual
for courts-martial was not to be used by members of courts during
deliberations on the findings and sentence. In another Coast Guard
case. United States v. Turner (9 U. S. C. M. A. 124, 25 C. M. R. 386),
the Court further altered preexisting procedure when it held that the
law officer of a general court-martial and the president of a special
court-martial must instruct members in open court on the maximum
permissible limits of punishment. The Court also wrote an opinionin a third Coast Guard case during the fiscal year, United States v,.
Gray (9 U. S. C. M. A. 208, 25 C. M. R. 470). Petitions for leave to
appeal were denied by the Court in two other cases. No Coast Guard
cases were pending before the Court at the close of the fiscal year.
There were 985 court-martial cases recorded during the year, an
increase of 72 over the preceding year. Of these, 16 were general,
courts-martial, 234 special courts-martial, and 735 summary courtsmartial. The cases of 39 accused were referred to the Board of Review
pursuant to requirements of the Uniform Code of Military Justice.
Opinions written in 14 Coast Guard cases were included in the official
volumes of Courts-Martial Reports published during the year. The,
General Counsel of the Treasury Department in his capacity as Judge,,
Advocate General for the Coast Guard rendered the final action in^
four general courts-martial and 45 special courts-martial cases.
Final review of 160 special and 698 summary courts-martial was made,
in the field by action of district commanders.
Board oj Review, Discharges and Dismissals.—The Board of Review,'.
Discharges and Dismissals, in conformance with the provisions of 33
C. F. R. 51, reviewed 72 discharges and dismissals of former members.
ADMINISTRATIVE REPORTS
163
of the Coast Guard during the year. Of 26 discharges under honorable
conditions reviewed, 10 were changed to honorable discharge. Of 32
undesirable discharges reviewed, six were changed to discharge under
honorable conditions. Review of 13 bad conduct discharges resulted
in the changing of two to discharge under honorable conditions, while
one dishonorable discharge was changed to a bad conduct discharge.
Personnel sajety program.—Duiing 1958, 1,104 accidents aboard ship
and at shore stations were reported. The total exposure waslO,238,458
military man-days and 9,789,588 civilian man-hours. The accidents
resulted in 1,075 disabling injuries and in 34 deaths. There was an
appreciable decrease in disabling injuries to civilian personnel, but
the frequency of disabling injuries to military personnel increased
slightly. The highlight of the safety program was a reduction in the
number of foot and head injuries due to the wider use of improved
protective equipment.
Fiscal and supply management
A study of the Comptroller organization at the Coast Guard Academy during the year resulted in staffing improvements, development
of accounting instructions peculiar to the Academy, and replacement of
the manual pay record and payroll system with a complete mechanized
system. This conversion, affecting 600 cadet accounts, made use
of existing equipment and was effective July 1, 1958.
The recommendations of the Hoover Commission and the General
Accounting Office that the Coast Guard use Department of Defense
sources of logistics support have been further implemented during
the fiscal year. This resulted in direct Navy support of all Coast
Guard units for general stores, ship's parts, and aviation materials.
Negotiations are in progress to obtain direct supply support from the
Navy for electronics and ordnance parts. Standing agreements
for Navy support of common electronics, aviation, and ordnance
•equipment have been revised and updated in line with Coast Guard
and Navy policy. Overall agreement has been reached with the Air
Force and negotiations are in progress with the Army to obtain
logistics support for Coast Guard units within and outside the
continental limits.
Under authorit}^ of the act approved August 7, 1956 (14 U. S. C.
650), materials valued at $346,103 were transferred to the supply
fund, increasing the capital authorization of the supply fund to
$7,013,008. Coast Guard inventories were reduced by $1,963,261 and
excess material amounting to $513,708 was disposed of during the
fiscal year. Additional material with a book value of $1,349,131
awaits disposal. The enthe inventory management program of the
Coast Guard is under exainination to insure that inventory controls
are effective and economical.
Coast Guard Auxiliary
The primary purpose of this voluntary, nonmilitary organization is
the promotion of safety in the maintenance, operation, and navigation
of small boats. Functioning in over 500 communities the Auxiliary
conducts public instruction courses in basic seamanship and safe
boathandling. During the fiscal year these courses given gratuitously
had an enrollment of 50,759. Another phase of the Auxiliary is the
164
1958 REPORT OF THE SECRETARY OF THE TREASURY
courtesy motorboat examination wherein qualified Auxiliarists check
the vessels of fellow boatmen. If the examined boat satisfies all
requhements of the law and additional safety standards of the Coast
Guard Auxiliary, a coveted ^'decaP' is awarded to the boat owner.
Examinations of 68,006 motorboats were conducted during the fiscal
year. The Auxiliary also patrolled 323 regattas and answered 2,227
calls for assistance. On June 30, 1958, the organization had 15,805
members and 9,507 facilities.
A Presidential proclamation was issued for the annual observance
of National Safe Boating Week, an event initially sponsored by
the Auxiliary.
Funds available, obligations, and balances
The following table shows the amount of funds available for the
Coast Guard during the fiscal year 1958, and the amounts of obligations
and unobligated balances.
Funds
available i
Net total
obligations
Appropriated funds:
operating expenses, fiscal year 1958 appropriation
$170,068,000 $170,044, 336
1, 111, 356
Advance procurements from fiscal year 1959 appropriation.
1, 111, 356
Reserve training--.
_
12,398, 500
12, 398, 500
Retired pay
_
26, 060,000
26, 045, 510
Acquisiti'^n, construction, and improvements:
21, 291, 021
Fiscalyear 1958 funds 2
_-.
22,291, 923
Advance procurements from fiscal year 1959 appro5, 968, 815
priation
_.
5, 968, 815
Total appropriated funds.
Reimbursements:
Operating expenses.._
J
Acquisition, construction, and improvements 2..
Total reimbursements
Trust fund, United States Coast Guard gift fundGrand total
Unobligated
balances
$23,664'
14,490
1,000,902
237, 898, 594
236, 859,538
1,039,056
25, 258, 528
12, 321, 376
26, 258, 528
8, 890,180
3,431,196
37, 579, 904
34,148, 708
3, 431,196
15,342
6,344
275, 493, 840
4,476,696
1 Funds available reflect transfers of unobligated balances authorized to cover military and civilian pay
increases as foUows:
From reserve training
$2,601,500
From retired pay
340,000
To operating expenses.
1,068,000
To Internal Revenue Service
1,873,500
2 Funds available include unobligated balances brought forward from prior year appropriations as follows:
Acquisition, construction, and improvements:
Appropriated funds
,
$6,396,923
Reimbursements
6,821,376
• United States Coast Guard gift fund....
—...
10,550
Management improvement
During fiscal 1958 the management improvement program of the
Coast Guard led to more effective use of manpower and facilities in
many areas, thus alleviating personnel shortages and offsetting increased operating costs. Major improvements, some of which have
been described earlier in this report, were: Reorganization of shore
units to permit reassignment of personnel td other stations where
personnel shortages exist; conversion of light stations and radarbeacon
stations to automatic, unattended; reorganization of group commands
to improve effectiveness; use of the ' T o t o - L i s f process for preparation and revision of the light list; new procedures for certification of
ADMINISTRATIVE REPORTS
165
inspected vessels; and implementation of a military incentive awards
program to provide military members of the Coast Guard the opportunity of participating in management improvement.
Incentive awards.—Civilian emplo3^ees submitted 355 improvement
suggestions during the fiscal year, and 140 cash awards were paid for
ideas adopted. Monetar}^ savings from applied suggestions were
estimated at $120,829.
Cash awards for superior performance were made to 87 employees
and 15 others were recognized for special acts or services. Performance type awards brought tangible savings of $12,800, plus other
nonmeasurable benefits stemming from high productivity and outstanding achievements.
Reports management.—A continuing and intensive reports management program is being conducted to prevent duplication of reporting
as well as to consolidate and simplify reporting requirements where
practicable. A significant example of the benefits derived from rigid
analysis and evaluation is the following case: The number of reporting
units submitting a certain required quarterly report was reduced by
453 per quarter, or 1,812 annually. Also during the year, 23 recurring
reports required from field units were discontinued, thus bringing
about a considerable reduction in administrative costs.
United States Savings Bonds Division
The United States Savings Bonds Division serves as a Government
nucleus to promote the sale and holding of United States savings
bonds, and the sale of savings stamps. With the aid and direction
of the Division's staff, thousands of public-spirited men and women
act as a volunteer sales corps or as volunteer issuing agents. Without
this volunteer support, the savings bonds sales program could not
have achieved its present success.
Throughout the 23 3^ears of their continuous sale, savings bonds have
proved a vital instrument in promoting thrift and nationwide saving
by the public. Milhons of Americans have accumulated their first
savings through the payroll savings or bond-a-month plan. Regular
saving has become a pattern for these people. They have found
these ^^save-as-3''ou-earn" plans an ideal way of S3^stematically buildingup financial reserves. Their savings have been translated to mean
more security, better education for children, home ownership, and
the funds to meet countless other individual needs. Furthermore,
the thrift habit acquired tlirough savings bonds purchases has been
reflected in increased savings in many forms.
Savings bonds promotion continues to be an important part of the
Government's effort to encourage the additional savings in aU forms
needed to finance our grooving economy soundly and to provide even
greater future financial security for the American people and Nation.
Investment in these bonds also contributes to economic stability
and a healthy debt structure through keeping the public debt widely
distributed among real savers. I t is estimated that 40 million persons,
or almost one-fourth of the Nation's total population, own Series E
and H savings bonds.
166
19 58 REPORT OF THE SECRETARY OF THE TREASURY
Series E savings bonds, the most popular Government security
investment, attained theh seventeenth anniversary of sales on May 1,
1958. On June 30, 1958, E bonds outstanding, together with their
current-income companion H bonds (on sale since first issued on
June 1, 1952), had a cash value of $42,142 million, an alltime record.
I t represents 15.2 percent of the total public debt. Individuals own
nearly $67 billion of the Government debt and over 72 percent of this
total is held in savings bonds of all series.
Since the savings bonds revision in the spring of 1957, the only
series of savings bonds offered by the Government have been the E
and H bonds. These are the bonds primarfly designed for the millions
of average individual American savers, and it is to this group that the
Division's promotional efforts are directed. However, effective
January 1, 1958, aU investors, except commercial banks, became
eligible buyers up to an annual amount of $10,000 (maturity value) of
each series. This is the same annual purchase limit that applies to
individuals. By broadening the list of eligible buyers, the Treasury
responded to requests from many former buyers of J and K bonds.
When these series were withdrawn from sale on Aprfl 30, 1957, small
institutional investor groups such as labor unions, fraternal, civic,
service, patriotic, and veterans organizations, eleemosynary institutions, etc., did not have available to them any Government security
with guaranteed protection against market fluctuations.
Total purchases.of Seiies E and H bonds combined amounted to
$4.7 billion during fiscal year 1958 and were 1.2 percent more than
the 1957 total. The sales volume increased substantially in the last
six months of the year (January-June 1958), when purchases of the
two series topped the corresponding months of the preceding year
by 7.1 percent. On the other hand, sales in the flirst six months
(July-December 1957) were 4.6 percent lower than in the corresponding months of the previous year.
The redemption record also improved considerably in the second
half of fiscal year 1958. Total cashings of matured and unmatured
E and H bonds were 10.1 percent below the January-June 1957
:amount. In contrast, redemptions in the first half of fiscal year 1958
were 12.2 percent more than the corresponding period in the previous
year.
During the full fiscal year 1958, total redemptions of matured and
unmatured E and H bonds amounted to $5.2 billion, of which $1.9
billion represented retirements of matured E bonds. Aggregate
redemptions, and also those of E bonds after maturity, were approximately the same as in 1957.
Throughout 1958, the retention rate on E bonds after their original
maturity continued at approximately 60 percent of original maturity
value. From May 1951, when the first E bonds started maturing,
through June 1958, approximately $25.6 billion in E bonds came due.
Less than $11 biUion of that amount was turned in for cash; the
balance, nearly $15 billion, is being retained for a longer period under
the automatic extension option, and has earned about $1.5 billion
in additional interest. The cash value of matured E bonds outstanding at the close of fiscal year 1958 was $16.4 billion. During
the extension period, up to ten additional years, E bonds issued from
May 1942 through April 1957 earn, interest at the rate of approxi-
ADMINISTRATIVE REPORTS
167
mately 3 percent per annum, compounded semiannually. E bonds
issued in the year prior to May 1942 yield only slightly less.
Experience has shown, that the payroll savings plan is the most
effective method of channeling regular systematic savings into E
bonds. In the last half of fiscal 1958 ^^Share in America" savings
bonds campaigns were inaugurated in 233 large cities and metropolitan
areas throughout the country to enlarge the number of payroU savings
participants and to encourage more Americans, including the youth
of the Nation, to save for specific purposes and to save regularly.
More than 8 million persons employed in industry and Government
were signed up on the pa3rroll savings plan at the close of fiscal 1958.
Nearly 45,000 separate businesses operate and manage payroll
savings plans for the benefit of their employees as a public service
without charge.
Promotional efforts to increase stamp sales also have been expanded,
to bring new savers into the savings bonds program. Selling stamps
is an important part of the overall sales program. Through stamp
purchases, students at school and others can buy savings bonds on
the installment plan. In the past three years, stamp purchases have
exceeded $19 million annually, representing average annual sales of
over 110 million individual pieces of stamps.
Of importance equal to the savings bonds promotional efforts of
the volunteer sales corps and the 17 years of public service by the
voluntary issuing agents is the generous free advertising donated by
the Nation's advertisers as well as all publicity and advertising media.
Currently the value of the advertising contributed amounts to more
than $50 million a year. As a result of all volunteer support, the
promotional cost of the program to the Government is only slightly
over $1 for every $1,000 of Series E and H bonds sold.
The United States Savings Bonds Division is headed by a National
Dhector and is organized into four principal branches: Sales, Planning,.
Advertising and Promotion, and Administration. The heads of these
branches, together with the National Dhector, comprise the Division's
Management Committee, whose main objective is the improvement
of services of the Division.
Management improvements
During the year decentralized regional organizations were further
strengthened. Realignment of area responsibility boundaries within
State organizations was continued. In some instances, the area
manager's post of duty was relocated. More economical and effective
work schedules resulted in better manpower utilization. Savings
from these improvements are estimated at $145,980.
Better controls have been effected through procedural guides
developed for headquarters and field staffs. Further economies
have resulted by consolidation of certain types of printed material
and more selective distribution methods which have reduced the
volume of promotional material and circular mailings. These economies were eft'ected without curtailing the meeting of requhements.
Moreover, a great deal of progress was made in further standardizing
methods, reports, and forms. These improvements will bring estimated savings of $35,000 on an annually recurring basis.
168
1958 REPORT OF THE SECRETARY OF THE TREASURY
Training courses for personnel throughout the year emphasized
particularly methods that would result in economies and increased
assistance to the volunteer corps as well as effective sales techniques.
United States Secret Service
The major functions of the United States Secret Service 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 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 Section
3056 of Title 18 of the United States Code.
Management improvement
. Improvements in administrative procedures during the year included adoption of a 'Svanted notice" card which facilitates the
distribution of 'Svanted notices" to Secret Service field offices and
police departments and their filing and cancellation; simplification of
the daily reports made by special agents; and standardizing of procedure for reporting on investigative matters. A manual of procedure
for the Purchase and Supply Section was completed and progress was
made in developing manuals for other administrative activities.
A unique program designed to train special agents in the techniques
of handwriting examination to aid in the detection of multiple forgeries was begun this year. Initial results were so successful that it
is planned to extend this training to other personnel.
Protective and security activities
During the year Secret Service agents rendered the usual protection
to the President, members of his family, and the Vice President while
in residence and during various trips made abroad. This included
the trip of the President to Paris, France, in December 1957 to attend
the NATO Conference.
A protective operation which attracted great attention occurred
during the trip of the Vice President to South America in April and
May 1958. During this trip the safety of the Vice President and
Mrs. Nixon was seriously threatened by uncontrolled, vicious, demonstrating mobs which hurled stones at the Vice President and his party
and with clubs and iron bars attacked the car in which the Vice
President was riding. The Secret Service men fought off the mob
without resorting to weapons and received high praise from the Vice
President and many others for their manner of dealing with an extremely dangerous and provocative situation. For their performance
the twelve Secret Service agents who made up the detail were awarded
the Exceptional Civilian Service Award by Secretar3^ of the Treasury
Anderson.
ADMINISTRATIVE REPORTS
169
Enforcement activities
Investigations of all types showed an increase of 34.4 percent.
The sharpest rise, 79.1 percent, was in counterfeiting cases.
During the year Secret Service agents captured 21 plants for the
manufacture of counterfeit paper money compared with 12 plants
in the previous year. A total of $702,753 in counterfeit notes was
seized. Of this amount $568,249 was captured before it could be
placed in circulation and $134,503 was passed on merchants and
cashiers. Representative value of counterfeit coins seized was
$8,540.16, of which $8,118.81 was passed. There were 305 new
issues of counterfeit notes, an increase of 202 percent, and 335 persons
were arrested for violating the counterfeiting laws as compared with
319 persons in 1957. The following cases are summarized.
Two men were arrested in Chicago for manufacturing counterfeit
$1 silver certificates and $10 and $20 Federal Reserve notes. Both
were employed in a printing shop and without the knowledge of the
owner they worked after hours using company supplies and printing
notes, six notes to a sheet. Altogether they printed $60,000 in notes
and sold the entire output to a distributor in payment for narcotics.
The distributor also was arrested along with seven others who purchased notes from him. One passer who had indicated that he would
testify for the Government was later found d3dng in an alley, and
died without recovering consciousness.
Two men and a woman who operated a printing shop were arrested
in Austin, Tex., for the manufacture and passing of counterfeit $20
Federal Reserve notes. The woman made the mistake of passing a
note on the wife of a constable and this ultimately led to seizure of the
plant. At the time of the seizure many counterfeit cashier's checks
:and Texas driving licenses were captured and turned over to State
authorities. Notes representing $4,500 were seized, and the group
-admitted passing 50 of the notes.
• In another case, after several weeks of negotiations, $77,000 in
counterfeit $10 and $20 Federal Reserve notes were delivered to an
undercover agent, and three men were arrested for their manufacture
and sale. Agents raided a 15-room colonial house in. a western
Massachusetts city and captured a complete counterfeiting plant,
seizing $5,500 in additional counterfeit notes plus a large quantity
of unfinished notes. This group had plans for the wholesale counterfeiting of United States and Canadian currency as well as American
Telephone and Telegraph Company stock, plates for which were
seized.
Two men were arrested for making plates and printing counterfeit
$5 and $10 notes. One of the defendants operated a letter service
^nd the other was a printer. They had made $136,000 in counterfeit
notes.
• In California and Illinois eight men were arrested for passing
counterfeit $10 and $20 notes. The notes were printed in Los Angeles
by three of the defendants who planned to establish a counterfeiting
plant in Chicago after passing enough counterfeit notes to finance a
second plant.
Two men and a woman were arrested in Arkansas for passing
counterfeit $20 Federal Reserve notes in fom-teen States. The maker,
who operated a printing shop, was arrested in Tennessee after he had
170
1958 REPORT OF THE SECRETARY OF THE TREASURT
delivered $72,000 in counterfeit notes to an undercover agent. A
fourth man was arrested when execution of a search warrant at his
residence revealed all of the paraphernalia for counterfeiting together
with additional notes. As a sequel to the publicity and arrests.in
this case, a man and his wife were arrested after attempting to pass a
counterfeit note. A large quantity of counterfeit $10 and $20 notes
was seized in the glove compartment of their automobile and $120,000;
in the notes were found in a valise in the trunk of the car. Later the
manufacturer of the notes was arrested in California and counterfeiting
equipment was seized in his home.
In Nice, France, a group of counterfeiters was arrested by French
authorities while in the act of manufacturing counterfeit $100 Federal
Reserve notes. A piinting press, numerous plates, ink, and paper
were seized together with partly completed notes representing
$320,000. The arrests were the culmination of plans made by the:
Secret Service and the Treasury Representative in Charge at Paris
who conducted negotiations with an informant.
The following table summarizes seizures of counterfeit moneys
during the fiscal years 1957 and 1958.
Counterfeit money seized, fiscal years 1.957 and 1958
1957
Counterfeit and altered notes:
After circulation
Before circulation
.
Total
Counterfeit coins seized:
After circulation _.
Before circulation
_.
Percentage
mcrease, or .
decrease (—)
$134, 503. 45
$32, 738. 46
668,249.25 -878,152. 75
32.2:
-60.7-
1, 548,167.00
702, 752. 70 -845, 414. 30
—54 6
8,118. 81
421.35
2, 588. 60
119.31
46.839.6-
8, 640.16
2, 707. 91
46.4
711, 292. 86 -842, 706.39
-54.2-
5, 832.26
.
Increase, or
decrease ( - )
$101, 765.00
1,446, 402.00
6, 530. 21
302.04
Total
Grand total
_ _
1958
1, 653,999.25
Forgery and fraudulent negotiation of Government checks continues to be a major criminal enforcement problem. During the
fiscal year 1958 the Secret Service received 33,648 such cases for
investigation, an increase of 35.4 percent over the previous year.
Agents completed investigation of 27,505 check forgery cases representing $2,577,593.30. There had been 10,034 forged check cases on
hand at the beginning of the year and at the close of the year there
was a backlog of 16,177 awaiting investigation. There were 2,763<
arrests for forgery of Government checks.
Two Air Force noncommissioned officers at Parks Air Force Base,.
Calif., conspired to forge and negotiate checks obtained through
fraudulent payroll vouchers. The two men were arrested and later
ADMINISTRATIVE
171
REPORTS
three others were arrested for complicity in the offense which involved
several hundred checks representing approximately $100,000.
Three men were arrested in Baltimore for forging and negotiating
a number of United States Treasury checks which were part of 225
blank checks stolen in a burglary of a Mar3dand post office. The
cihecks were drawn in varying amounts in the names of fictitious
payees. A fourth member of the group, arrested in Seattle, Washington, committed suicide in a jail cell and a fifth member was arrested
in St. Louis. Analysis of burglary tools seized in the apartment of
one of the defendants demonstrated conclusively that they had been
used in the burglar3^ of the post office.
Two long sought fugitives, inveterate forgers, were arrested. One
admitted stealing, forging, and cashing $100,000 in forged checks,
including Government checks, and the other has admitted to the
theft and forger3^ of more than 50 checks.
During the year the Secret Service received 4,043 investigative
cases concerning the forgery of United States savings bonds, an
increase of 19.5 percent over those in 1957. Agents closed 4,205 cases
having a representative value of $650,872.28 and 72 persons were
:arrested for bond forgeries. There had been 2,189 cases pending
from the previous year and at the close of the 3^ear 2,027 were pending.
The following table shows the number of criminal and noncriminal
-cases completed during the fiscal'years 1957 and 1958.
.Number of criminal and noncriminal investigations coinpleted, fiscal years 1957 and
1958
1957
Cases closed
' C r i m i n a l cases:
Counterfeiting.
Forged G o v e r n m e n t checks
Stolen or forged b o n d s . . .
P r o t e c t i v e research
Miscellaneous (crimiaal)
Total
^"Noncriminal
Grand t o t a l . . .
_ _
1958
Increase
Percentage
increase
1,739
26, 531
3,594
896
296
2,978
27, 505
4,205
1,092
436
1,239
974
611
196
140
71.2
3 7
17 0
21.9
47 3
33,056
1,540
36,216
1,818
3,160
278
9.6
18.1
34, 696
38,034
3,438
9.9
Secret Service agents arrested 173 persons for crimes other than
counterfeiting or forgery, making a total of 3,343 offenders arrested.
There were 3,047 convictions representing 98.9 percent in all cases
prosecuted, some of which were pending from the previous year.
Cases of all types received for investigation, including counterfeiting and forgery cases, aggregated 44,102 and 12,992 had been
pending at the beginning of the year. Although 38,034 were closed
•during the year as of June 30, 1958, there were 19,060 cases pending
.and 1,049 defendants awaiting prosecution.
172
1958 REPORT OF THE SECRETARY OF THE TREASURY
The following table is a statistical summary of Secret Service
arrests and dispositions for the fiscal years 1957 and 1958.
Number of arrests and cases disposed of, fiscal years 1957 and 1958
1957
1958
Increase, Percentage
or deincrease, or
crease (—)
decrease
(-)
Arrests for:
Counterfeiting
Forged Government checks
Violation of Gold Reserve Act
Stolen or forged bonds
Protective research
Miscellaneous
1
Total.Cases disposed of:
Convictions in connection witb:
Counterfeiting
Forged Government checks
Violation of Gold Reserve Act
Stolen or forged bonds
Protective research
Miscellaneous
^
Total convictions..
Acquittals
Dismissed, not indicted or died before trial.
Total cases disposed of
•Less than 0.06%.
319
2,762
4
68
66
53
335
2,763
4
72
78
91
3,272
3, 343
251
2,473
11
65
65
60
259
2, 659
9
69
72
79
2,916
46
217
3,047
33
217
3,178
(*)
5.0
6.9
18.2
71.7
2.2
-2
4
7
132
-13
3.2
3.5
-18.2
6.2
10.8
68.0
4.5
m3
3.7
EXHIBITS
Public Debt Operations and Calls of Guaranteed Obligations
Treasury Certificates of Indebtedness, Treasury Notes, and Treasury Bonds
OjBferedand Allotted, and Treasury Bonds Called for Redemption
ExmBiT 1.—Treasury certificates of indebtedness
Two Treasury circulars containing representative certificate offerings during
the fiscal year 1958 are reproduced in this exhibit. The first circular is a cash
offering of an additional issue and the second is an exchange offering of the regular
series of certificates. Circulars pertaining to the other offerings 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. 994.
PUBLIC DEBT
TREASURY
DEPARTMENT,
Washington, September 16, 1957»
I. OFFERING OF CERTIFICATES
I. The Secretary of the Treasury, pursuant to the authority of the Second
Liberty Bond Act, as amended, invites subscriptions, at par and accrued interest,
from the people of the United States for certificates of indebtedness of the United
States, designated 4 percent Treasury certificates of indebtedness of Series C1958. The amount of the offering under this circular is $750,000,000, or thereabouts. In addition to the amount offered for public subscription, the Secretary
of the Treasury reserves the right to allot up to $100,000,000 of these certificates
to Government investment accounts. The books will be open only on September
16, 1957, for the receipt of subscriptions for this issue.
II. DESCRIPTION OF CERTIFICATES
1. The certificates now offered will be an addition to and will form a part of
the 4 percent Treasury certificates of indebtedness of Series C-1958 issued pursuant to Department Circular No. 991, dated July 22, 1957, will be freely interchangeable therewith, are identical in all respects therewith, and are described
in the following quotation from Department Circular No. 991:
" 1 . The certificates will be dated August 1, 1957, and will bear interest from
that date at the rate of 4 percent per annum, payable semiannually on February
I and August 1, 1958. They will mature August 1, 1958. 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 not be acceptable in payment of taxes.
"4. Bearer certificates 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 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.'.'
4.79641—50—13
175
176
1958 REPORT OF THE SECRETARY OF THE TREASURY
III. SUBSCRIPTION AND ALLOTMENT
1. Subscriptions will be received at the Federal Reserve Banks and branches
and at the Oflfice 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 official 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 50 percent of the combined capital, surplus, and undivided
profits, of the subscribing bank. Subscriptions from all others must be accompanied by payment of 2 percent of the amount of certificates applied for, not
subject to withdrawal until after allotment. Following allotment, any portion of
the 2 percent payment in excess of 2 percent of the amount of certificates allotted
may be released upon the request of the' subscribers.
.2. Commercial banks in submitting subscriptions will be required to certify
that they have no beneficial interest in any of the subscriptions they enter for
the account of their customers, and that their customers have no beneficial interest in the banks' subscriptions for their own account.
3. 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 will
be sent out promptly upon allotment.
IV. PAYMENT
1. Payment at par and accrued interest from August 1, 1957, to September 26
1957 ($6.08696 per $1,000), for certificates allotted hereunder must be made orcompleted on or before September 26, 1957, or on later allotment. In every case'
where payment is not so completed, the payment with application up to 2 percent of the amount of certificates 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 make allotments on the basis and up to
the amounts indicated by the Secretary of the Treasury to the Federal Reserve
Banks of the respective districts, to issue allotment notices, to receive payment
for certificates allotted, to make delivery of certificates on full-paid subscriptions
allotted, and they may issue interim receipts pending delivery of the definitive
certificates.
2. The Secretary of the Treasury may at any time, or from time to time, prescribe supplemental or amendatory rules and regulations governing the offering,,
which will be communicated promptly to the Federal Reserve Banks.
ROBERT B . ANDERSON,
Secretary of the Treasury,
DEPARTMENT CIRCULAR NO. 1003. PUBLIC DEBT
TREASURY
DEPARTMENT,
Washington, February 3, 1958.
1. 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 2H percent
Treasury certificates of indebtedness of Series A-1959, in exchange for which any
EXHIBITS
177
of.the following listed securities, singly or in combinations aggregating $1,000 or
multiples thereof, may be tendered:
3^^ percent Treasury certificates of indebtedness of Series A-1958, maturing
February 14, 1958
2y2 percent Treasury bonds of 1956-58, maturing March 15, 1958
VA percent Treasury notes of Series EA-1958, maturing April 1, 1958
Treasury bills (special issue) maturing April 15, 1958
3>^ percent Treasury certificates of indebtedness of Series B-1958, maturing
April 15, 1958.
Exchanges will be made at par with an adjustment of interest as set forth in see"
tion IV hereof. The amount of the offering under this circular will be limited
to the amount of the eligible securities of the five issues enumerated above tendered
in exchange and accepted. The books will be open only on February 3 through
February 5 for the receipt of subscriptions for this issue.
2. In addition to the offering under this circular, holders of the eligible securities
are also offered the privilege of exchanging all or any part of such securities for
3 percent Treasury bonds of 1964 or 3 ^ percent Treasury bonds of 1990, which
offerings are set forth in Department Circulars Nos. 1004 and 1005, issued simul-^
taneously with this circular.
II. DESCRIPTION O F CERTIFICATES
1. The certificates will be dated February 14, 1958, and will bear interest from
that date at the rate of 2}i percent per annum, payable semiannually on August
14, 1958, and February 14, 1959. They will mature February 14, 1959. 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.
:?i:c
3. The certificates will be acceptable to secure deposits of public''moneys.
They will not be acceptable in payment of taxes.
4. Bearer certificates with two 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 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.
in.
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 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
before February 14, 1958, or on later
securities of the five issues enumerated
at par, and should accompany the
allotted hereunder must be made on or
allotment, and may be made only in thein Section I hereof, which will be accepted
subscription. Interest adjustments per
178
1958 REPORT OF THE SECRETARY OF THE TREASURY
$1,000 will be paid to or collected from subscribers in accordance with the folio wing^table:
Securities surrendered
SH% certificates, Series A-1958
2]^% bonds of 1956-58
lV^%notesof Series EA-1958
Treasury bills
3 ^ % certificates, Series B-1968
Interest Net amount Net amount
Interest
credited to charged to to be paid to be colsubscriber subscriber subscriber lected from
subscriber
. . • $16.78
10.49724
7.50
17.60
$3.17680
4.14365
4.14365
1 $16.78
10.49724
4.32320
13.35636
$4.14365
> Feb. 14, 1958, coupon to be detached by subscriber and cashed when due.
V, A S S I G N M E N T O F REGISTERED BONDS
1. Treasury bonds of 1956-58 in.registered form tendered in payment for
certificates offered hereunder should be assigned by the registered payees or
assignees'ther'eof to ''The Secretary of the Treasury for exchange for 2^ percent
certificates of indebtedness of Series A-1959 to be delivered to
",
in accordance with the general regulations of the Treasury Department governing
assignments for transfer or exchange, and thereafter should be presented and
surrendered with the subscription to a Federal Reserve Bank or branch or to the
Office of the Treasurer of the United States, Washington. The bonds must be
delivered at the expense and risk of the holders.
VI. 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 aliotted, 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.
JULIAN B . BAIRD,
Acting Secretary of the Treasury.
Summary of information pertaining' to Treasury certificates of iiidebtedness issued during the fiscal year 1958
Department
circular
Date of
preliminary announceNumber
ment
Date
Concurrent
offermg,
circular
number
Oertificates of indebtedness issued for cash or in exchange for maturing or called securities
1957
July 18
990
1957
July 22
991,992
3% percent Series E-1957 issued in exchange for—
2 percent Series C-1957 Treasury notes maturing Aug. 15, 1957.
2% percent Series D-1967 Treasury notes maturing Aug. 1, 1967.
July 18
991
July 22
990,992
Sept. 12
Nov. 18
994
998
Sept. 16
Nov. 20
1958
Jan. 29
1003
1958
Feb. 3 1004,1005
4 percent Series C-1958 issued in exchange for—
2 percent Series C-1957 Treasury notes maturing Aug. 15, 1967.
2H percent Serie.s D-1967 Treasury notes maturing Aug. 1, 1957.
3H percent Series D-1967 certificates inaturing Oct. 1, 1957.
IH percent Series E0-1957 Treasury notes maturing Oct. 1, 1967.
4 percent Series C-1968 (additional issue) issued for cash
3% percent Series D-1958 issued in exchange for—
3 ^ percent Series E-1957 certificates maturing Dec. 1,1957.
May 29
1010
June 4
1011
2H percent Series A-1959 issued in exchange for—
_
3H percent Series A-1958 certificates inaturing Feb. 14,1958.
2H percent Treasury bonds of 1956-68 maturing Mar. 15, 1958.
IH percent Series EA-1958 Treasury notes maturing Apr. 1, 1958.
Treasury bills (special issue) maturing Apr. 15, 1968.
3H percent Series B-1968 certificates maturing Apr. 15,1958.
IH percent Series B-1959 issued in exchange for—
2% percent Series A-1958 Treasury notes maturing June 16, 1958.
2% percent Treasury bonds of 1968-63 called for redemption June 15, 1968.
- 2% percent Treasury bonds of 1958 maturing June 15, 1958.
1 Following acceptance of surrendered notes of Series C-1957 with final coupons
attached, accrued interest from Feb. 15 to Aug. 1, 1957 ($9.22652 per $1,000) was paid to
subscribers.
2 Followmg acceptance of surrendered notes and certificates with final coupons attached, accrued interest was paid to subscribers as follows: From Feb. 15 to.Aug. 1,
1967 ($9.22652 per $1,000) on Series C-1957 notes; from Apr. 1 to Aug. 1, 1967 ($10.83333
per $1,000) on Series D-1957 certificates; from Apr. I t o Oct. 1, 1957 ($7.50 per $1,000)
was credited, accrued interest from Aug. 1 to Oct. 1,1957 ($6.63043 per $1,000) on the new
certificates was charged, and the difference ($0.86957 per $1,000) was paid on Series
E 0-1957 notes.
Date of
issue
Allotment
Date sub- payment
Date of scription date on
books or before
maturity
closed
(or on
later
allotment)
1957
Aug. 1
1957
Dec. 1
1967
July 24
1967
I Aug. 1
Aug, 1
1958
Aug. 1
July 24
2 Aug. 1
Aug. 1
Dec. 1
Aug. 1
Dec. 1
Sept. 16 1 Sept. 26
Nov. 22 Dec. 2
g
1958
Feb. 14
1959
Feb. 14
1958
1958
Feb. 5 4 Feb. 14
^
CO
June 15
May 15
June 6 «June 16
H
3 See Department Circular No. 994, sees. I l l and IV, in this exhibit, for provisions
for subscription and payment of interest.
4 See Department (Circular No. 1003, sec. IV, in this exhibit, for provisions for payment
of uiterest.
«All coupons subsequent to June 15,1968, were required to be attached to 2^4 percent
Treasury bonds of 1958-63 when surrendered. Final interest due June 15, 1958, oil
registered bonds was paid by check drawn tu accordance with assignments on bonds
surrendered or by credit in any account maintained by a banking institution with the
Federal Reserve Bank of its district.
^
^
00
O
Allotments of Treasury certificates of indebtedness issued during the fiscal year 1958, by Federal Reserve districts
Ol
00
[In t h o u s a n d s of dollars]
3^i p e r c e n t Series E-1957 certificates
issued i n exchange for—
F e d e r a l Reserve district
Boston
New York
Philadelphia
Cleveland
Cincinnati
Pittsburgh
Richmond
Baltimore
Charlotte
Atlanta
Birmingham...
Jacksonville
Nashville
New Orleans...
Chicago
-.
Detroit
St. L o u i s
Little Rock
Louisville
Memphis
Minneapolis
Kansas City
Denver
Oklahoma City
Omaha...
Dallas
ElPaso
Houston
FRASER
San Antonio
Digitized for
2 percent
254 p e r c e n t
Series C-1957 Series D-1957
Treasury
Treasury
notes m a notes maturing Aug.
turing Aug.
1, 1957 1
15, 1957 1
7,205
606,565
14,630
14, 670
13,015
29, 612
6,396
2,024
1,424
5,905
813
1,277
1,078
7,313
87, 483
25,914
17, 957
2,073
4,260
573
19, 821
12, 683
1,468
5,770
4,041
3.500
100
524
3,141
46,057
8,479, 457
25,406
25,104
2,560
12, 603
3,626
2,800
538
5,467
399
4,609
852
4,397
101,957
8,125
25,786
674
4,645
874
12, 593
10,131
5,244
9,598
1,689
9,087
1,560
395
Total
issued
53,262
9,086, 022
40,036
39,774
15, 575
42,215
10,022
4,824
1,962
11,372
1,212
6,886
1,930
11, 710
189, 440
34,039
43, 743
2,-747
8,805
1,447
32,414
22, 814
6,712
15, 368
5,730
12, 587
100
2,084
3,636
4 p e r c e n t Series C-1958 certificates issued i n exchange for—
3K percent
I H percent
2 percent
2% percent
Series C-1957 Series D-1967 Series D-1957 Series E O Treasury
certificates 1967 T r e a s u r y
Treasury
notes m a t u r notes m a maturing
notes m a ing Oct. 1,
t u r i n g A u g . Oct. 1,1957 3
turing Aug.
1957 3
1, 1957 2
16, 1957 2
36,296
697, 496
54,089
17,867
21,007
13,316
16, 410
8,772
3,610
21, 771
14, 488
7,034
6,912
11, 696
179,333
22, 991
31, 664
5,877
22,480
4,064
34,419
35,645
24, 387
13, 848
13, 009
11, 489
1,717
15, 549
4,254
68,792
847, 527
40, 222
94, 227
10, 892
12, 816
6,664
24, 483
2,177
28, 314
8,686
11, 518
3,529
33, 925
219, 560
14, 998
43. 549
5,103
25, 393
6,605
58, 424
25, 210
12, 869
11,170
8,801
14, 093
1,478
19, 731
5,748
26,
6,202,
12,
19,
7,
9,
11,
9,
2,
14,
4,
7,
2,
11,
104,
10,
19,
4,
26,
1,
23,
• 9,
6,
5,
5,
440
724,752
3,593
314
2,050
312
21
432
200
5,070
3,870
725
649
25
39
225
250
Total
issued
131,774
8,372,183
110, 749
131, 734
41,182
36,180
34,112
43, 228
8,032
64, 957
27, 929
26, 700
12, 993
56, 841
508, 876
51, 896
95, 382
16, 856
74, 319
12, 517
116, 390
70,984
43, 520
30. 835
27,497
33.907
4; 160
45,772
12,042
3% percent
Series D-1958
certificates
4 percent
Series C-1968
issued i n
exchange for
certificates
(additional
3 H percent
issue) issued Series E-1957
for cash *
certificates
maturing
D e c . 1,1957
32, 696
245, 529
44,790
30, 619
11, 666
9,886
25,743
9,838
4,267
12, 536
7,911
10,714
7,836
12,799
117, 274
21, 919
17, 630
2,099
6,982
9,307
34, 711
18,174
7,870
11, 069
10, 803
41. 607
1,719
3,268
3,657
27,322
, 154,010
33,879
42,550
5,512
4,647
3.147
6,721
3,038
12,864
2,676
6,182
2,757
7,002
228,141
16, 369
39,335
2,702
9,855
1,332
48, 062
20, 857
5,702
8,502
3,465
12,767
2,804
4.908
O
?d
o
ZP
o
O
ft)
>
Ul
d
San Francisco
Los Angeles
Portland..
Salt Lake City
Seattle
Treasury
Government mvestment accounts
53,700
2,473
2,384
6,983
4,278
7 321
Total certificate allotments.
Maturmg securities:
Exchanged in concurrent offerings..
978, 374
73,490
24, 914
. 6, 543
1,558
6,346
3, 314
26,073
11, 295
3,013
386
4,537
6,693
129
103
126,148
73,202
14, 484
3,873
15, 629
10, 630
100, 000
743, 203
10, 586, 512
16, 316
6,886
8,681
4, 202
22, 636
125
100, 000
5i,72&
15,481
14,635
6,754
2,934
25, 308
69, 069
37, 412
2,979
7,081
7,342
9,935
100, 000
26,456
36, 890
4,928
1,929
4,746
623
8, 892, 812
9. 971,186
1,327, 050
2, 821, 557
5, 266, 436
2, 096, 203
9, 931, 800
319, 468
32, 243
12. 379, 714
3, 423, 253
11, 714, 369
6, 963,158
775, 446
22, 866, 226
341, 722
317, 784
48, 750
1, 077, 031
138, 467
12, 056, 091
7, 270. 942
824,196
23, 943, 267
9, 971,186
45, 369
34,939
595
98
3,064
2,614
1
2 444 879
Total exchanged
.
Redeemed for cash or carried
to matured debt..
3, 423, 253
Total maturing securities...
3 792 028
368, 775
11, 714, 369 . 15,137, 622
341, 722
710,497
12, 056, 091 16, 848,119
368,775
3,792, 028
1, 782, 569
6, 633, 690
932, 565
9, 832, 719
9, 832, 719
Footnotes at end of table.
H
n
H3
U2
00
Allotments of Treasury certificates of indebtedness issued during the fiscal year 1958, by Federal Reserve districts—Gontinued
00
[In thousands of doUars]
IH percent Series B-1959 certificates issued in
exchange for—
2H percent Series A-1959 certificates issued in exchange for—
2H percent
IH percent
3^/i percent
Treasury
3H percent
Treasury
Series EASeries A-1958
bonds of
1958 Treasury bUls (special Series B-1958
certificates
certificates
1956-68 manotes maissue) mamaturing
maturing
turing Mar. turing Apr. turing Apr.
1, 1958 5
Feb. 14, 1958 51 16,1958 6
15, 1958 8 Apr. 15, 1958 «|
Federal Reserve district
Total
issued
2% percent
2% percent
2H percent
Treasury
Series A-1958
Treasury
bonds of
bonds of
Treasury
notes ma1958-63 called] 1958 maturturing June for redemp- ing June 15,
1958 9
tion June
15,1958 8
15,1968 6
Total
issued
o
o
Boston
New York
Philadelphia
Cleveland
Richmond
Atlanta
Chicago
St. Louis
Minneapolis
Kansas City
Dallas
San Francisco
Treasury
.-.
.
Total certificate.aUotments.
Maturing securities:
Exchanged in concurrent offerings
Total exchanged
Redeemed for cash or carried
to matured debt
Total maturing securities.-.
2,040
35
4,852
1
13, 292
384, 822
8,252
43, 604
22, 315
13, 289
122, 010
10, 610
21, 623
23, 406
18, 015
29, 614
140
42, 669
1, 020,121
31,785
79, 767
34, 311
44, 262
266, 978
40, 462
37,035
95, 334
44,445
87,702
2,661
1. 014, 463
91, 067
710, 992
1, 816, 522
6, 581,197
3,195, 927
799, 868
3, 391, 739
7, 387, 534'
1,994, 528 15, 351, 088
9, 204, 066
67,053
6, 609,176
62, 986
99,171
20, 391
100, 368
197, 917
94, 310
70, 323
73. 756
47, 976
152, 904
6,694
10, 594
210,129
5,144
13, 013
7,147
13,195
39,100
7,675
3,458
5,711
5,207
21, 207
1,051
1,632
145, 961
6,803
7,451
679
359
17, 708
1,254
95
3,313
2,005
7,620
30
27, 752
411, 015
7,120
17,182
3,837
28, 908
116, 040
8,926
22,165
8,664
8,612
14, 996
2,410
20,191
685, 485
10, 880
46, 404
12, 248
38, 078
101, 641
28, 836
12, 867
29, 517
21,169
55, 433
1,160
127, 222
7, 961, 766
81, 933
183, 221
44,302
180, 908
471, 306
14L 001
108, 908
120, 961
84, 968
262,160
11, 246
26. 910
596, 428
15, 211
35, 654
11, 045
29, 965
103, 927
28, 971
15, 313
69, 888
26, 395
63, 236
2,620
2,467
39, 871
8,322
499
951
1,008
30, 041
7, 492,924
342, 631
193, 900
676, 627
1, 063, 809
9, 769, 891
930, 719
140,130
3,100, 646
334, 030
1,144, 440
4, 210, 390
890, 935
4,102, 731
267, Oil
164, 225
48, 765
606, 653
356, 634
1, 433, 288
181, 401
27, 846
142, 080
10, 850, 581
1, 448, 745
382,795
1, 761,093
2, 351,162
16,784, 376
4, 391, 791
918,781
4, 244, 811
10, 693, 670
1, 284, 620
o
fe!
o
fej
361, 327
9, 555, 383
fej
>
1 Series C-1958 Treasury 4 percent certificates and Series A-1961 Treasury 4 percent
notes also offered in exchange for this maturity; see exhibit 2.
2 Series A-1961 Treasury 4 percent notes and Series E-1957 Treasury 3H percent certificates also offered in exchange for this maturity; see exhibit 2.
3 Series A-1961 Treasury 4 percent notes also offered in exchange for this maturity;
see exhibit 2.
* Subscriptions for $100,000 or less were allotted in full and subscriptions in excess of
$100,000 were allotted 22 percent but not less than $100,000.
8 3 percent Treasury bonds of 1964 and 3H percent Treasury bonds of 1990 also offered
in exchange for this maturity; see exhibit 3.
8 2% percent Treasury bonds of 1965 also offered in exchange for this security; seeexhibit 3.
d
w
K|
EXHIBITS
183
EXHIBIT 2.—Treasury notes
Two Treasury circulars, one containing a cash and the other an exchange note
offering during the fiscal year 1958, are reproduced in this exhibit. Circulars
pertaining to the other note offerings during 1958 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 the new notes issued for cash or in exchange for maturing securities are shown
in the second table.
DEPARTMENT CIRCULAR NO. 992.
PUBLIC DEBT
TREASURY
DEPARTMENT,
Washington, July 22, 1957,
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 4 percent Treasury notes of Series
A-1961, in exchange for 2 percent Treasury notes of Series C-1957, maturing
August 15, 1957; 2% percent Treasury notes of Series D-1957, maturing August
I, 1957; 3J4 percent Treasury certificates of indebtedness of Series D-1957,
maturing October I, 1957, or IM percent Treasury notes of Series EO-1957,
maturing October 1, 1957. Exchanges will be made par for par in the case of
the Series D-1957 notes; at par with an adjustment of interest as of August 1,
1957, in the case of the Series C-1957 notes and the Series D-1957 certificates,
and at par with an adjustment of interest as of October 1 in the case of the Series
EO-1957 notes. In addition to the amount offered for exchange, the Secretary
of the Treasury reserves the right to allot up to $100,000,000 of these notes at
par to Government investment accounts. The books will be open only on July
22 through July 24 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 4 percent Treasury certificates of indebtedness of Series C-1958, which offering
is set forth in Department Circular No. 991, issued simultaneously with this
circular, and holders of the two August maturities are also offered the privilege
of exchanging all or any part of such securities for 3^^ percent Treasury certificates
of indebtedness of Series E-1957, which offering is set forth in Department Circular
No. 990, issued simultaneously with this circular.
I I . DESCRIPTION OF NOTES
1. The notes will be dated August 1, 1957, and will bear interest from that
date at the rate of 4 percent per annum, payable semiannually on February 1
and August 1 in each year until the principal amount becomes payable. They
will mature August 1, 1961, and will not be subject to call for redemption prior
to maturity. However, they will be redeemable at the option of the holders
on August 1, 1959, at par and accrued interest, if notice in writing of intention
to redeem on that date is given to the Office of the Treasurer of the United States
or to any Federal Reserve Bank or branch on or before May 1, 1959, and the
notes are temporarily surrendered to the office to which notice is given for the
purpose of having an appropriate stamp placed on them to indicate that they
will be redeemed on August 1, 1959, and for detaching coupons dated subsequent
to that date.
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.'
184
1958 REPORT OF THE SECRETARY OF THE TREASURY
5. The notes will be subject to the general regulations of the Treasury Department, now or hereafter prescribed, governing United States notes.
III. SUBSCRIPTION AND ALLOTMENT
1. Subscriptions will be received at the Federal Reserve Banks and branches
and at the 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.
IV. PAYMENT
1. Payment at par for notes allotted hereunder must be made on or before
August 1, 1957, or on later allotment, and may be made only in Treasury notes
of Series C-1957, maturing August 15, 1957, Treasury notes of Series D-1957,
maturing August 1, 1957, Treasury certificates of indebtedness of Series D-1957,
maturing October 1, 1957, or Treasury notes of Series EO-1957, maturing October
1, 1957, which will be accepted at par, and should accompany the subscription.
Coupons dated August 15, 1957, niust be attached to the notes of Series C-1957
when surrendered, and accrued interest from February 15, 1957, to August 1,
1957 ($9.22652 per $1,000) will be paid to subscribers following acceptance of the
notes. Coupons dated October 1, 1957, must be attached to the certificates of
Series D-1957 when surrendered, and accrued interest from April 1, 1957, to
August 1, 1957 ($10.83333 per $1,000) will be paid to subscribers following
acceptance of the certificates. Coupons dated October 1, 1957, must be attached
to the notes of Series EO-1957 when surrendered, and accrued interest from April
1, 1957, to October 1, 1957 ($7.50 per $1,000) will be credited, accrued interest
from August 1, 1957, to October!, 1957 ($6.63043 per $1,000) on the notes to
be issued will be charged, and the difference ($0.86957 per $1,000) will be paid to
subscribers following acceptance of the notes. In the case of the notes of Series
D-1957, coupons dated August 1, 1957, should be detached by holders and cashed
when due.
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.
G. M. HUMPHREY,
Secretary of the Treasury.
DEPARTMENT CIRCULAR NO. 995.
PUBLIC DEBT
TREASURY
DEPARTMENT,
Washington, September 16, 1957.
I. OFFERING OF NOTES
1. The Secretary of the Treasury, pursuant to the authority of the Second
Liberty Bond Act, as amended, invites subscriptions, at par and accrued interest,
from the people of the United States for notes of the United States, designated
4 percent Treasury notes of Series B-1962. The amount of the offering under
this circular is $1,750,000,000, or thereabouts. In addition to the amount offered
EXHIBITS
185
for public subscription, the Secretary of the Treasury reserves the right to allot
up to $100,000,000 of these notes to Government investment accounts. The
books will be open only on September 16 for the receipt of subscriptions for this
issue.
n . DESCRIPTION OF NOTES
1. The notes will be dated September 26, 1957, and will bear interest from that
date at the rate of 4 percent per annum, payable on a semiannual basis on February 15 and August 15, 1958, and thereafter on February 15 and August 15 in
each year until the principal amount becomes payable. They will mature
August 15, 1962, and will not be subject to call for redemption prior to maturity.
However, they will be redeemable at the option of the holders on February 15,,
1960, at par and accrued interest, if notice in writing of intention to redeem on
that date is given to the Oflfice of the Treasurer of the United States or to any
Federal Reserve Bank or branch on or before November 16, 1959, and the notes
are temporarily surrendered to the office to which notice is given for the purpose
of having an appropriate stamp placed on them to indicate that they will be
redeemed on February 15, 1960, and for detaching coupons dated subsequent to
that date.
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.
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, 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 official 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 50 percent of the combined capital, surplus, and undivided
profits, of the subscribing bank. Subscriptions from all others must be accompanied by payment of 2 percent of the amount of notes applied for, not subject
to withdrawal until after allotment. Following allotment, any portion of the 2
percent pabyment in excess of 2 percent of the amount of notes allotted may be
released upon the request of the subscribers.
2. Commercial banks in submitting subscriptions will be required to certify
that they have no beneficial interest in any of the subscriptions they enter for
the account of their customers, and that their customers have no beneficial interest
in the banks' subscriptions for their own account.
3. 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. Allotment notices will be sent out
promptly upon allotment.
IV. PAYMENT
1. Payment at par and accrued interest, if any, for notes allotted hereunder
must be made or completed on or before September 26, 1957, or on later allotment.
In every case where payment is not so completed, the payment with application
up to 2 percent of the amount of notes allotted shall, upon declaration made by
the Secretary of the Treasury in his discretion, be forfeited to the United States.
186
1958 REPORT OF THE SECRETARY OF THE TREASURY
Any qualified depositary will be permitted to make payment by credit for notes
allotted to it for itself and its customers up to any amount for which it shall be
qualified in excess of existing deposits when so notified by the Federal Reserve Bank
of its district.
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.
ROBERT B . ANDERSON,
Secretary of the Treasury,
Summary of information pertaining to Treasury notes issued during the fiscal year 1958
Date of
issue
AUotment
Date sub- payment
Date of scription date on
books or before
maturity
closed
(or on
later
aUotment)
1967
Aug. 1
1961
Aug. 1
Department circular
Date of
preliminary announce- Number
ment
1967
July 18
Sept. 12
Nov. 18
1958
Apr. 2
992
995
999
1007
Date
1957
July 22
Sept. 16
Nov. 20
1958
Apr. 7
Concurrent offering circular
number
990,991
Treasury notes issued for cash and in exchange for maturing securities
4 percent Series A-1961 issued in exchange for—
2 percent Series C-1967 Treasury notes maturing Aug. 16,1967.
2% percent Series D-1967 Treasury notes maturing Aug. 1,1957.
3H percent Series D-1957 certificates maturing Oct. 1,1957.
I H percent Series EO-1957 Treasury notes maturing Oct. 1,1957.
4 percent Series B-1962 issued for cash
3M percent Series C-1962 issued for cash...:
2 ^ percent Series A-1963 issued for cash
1 See Department Circular No. 992, sec. IV, in this exhibit, for provisions for payment
of interest.
2 See Department Circular No. 995, sees. I l l and IV, in this exhibit, for provisions for
subscription and payment of interest.
3 Commercial banks were permitted to subscribe, without deposit, for their own
account for an amount not exceeding 60 percent of the combined capital, surplus, and
undivided profits of the subscribing bank as of Juue 30, 1957. Qualified depositaries
1967
1957
July 24 lAug. 1
W
»—I
Sept. 26
Nov. 29
1958
Apr. 15
1962
Aug. 15
Nov. 15
1963
Feb. 15
CO
Sept. 16 2 Sept. 26
Nov. 20 "Nov. 29
1958
1958
Apr. 7 *Apr. 15
were permitted to make payment for notes allotted to them and their customers by
credit in Treasury tax and loan accounts.
4 Commercial banks were permitted to subscribe, without deposit, for their own
account for an amount not exceeding 75 percent of the combined capital, surplus, and
undivided profits of the subscribing bank. Qualified depositaries were permitted
to make payment for note^ allotted to them and their customers by credit in Treasury
tax and loan accounts.
00
00
00
Allotments of Treasury notes issued during the fiscal year 1958, by Federal Reserve districts
[In thousands of doUars]
Ox
00
4 percent Series A-1961 Treasury notes issued in exchange for—
Federal Reservo district
Boston
New York
PhUadelphia
Cleveland.
Cincinnati
Pittsburgh
Richmond
Baltimore
_.
Charlotte
Atlanta
Birmingham
JacksonviUe
NashviUe
New Orleans.-..
Chicago
Detroit
St. Louis
Little Rock
. Louisville
Memphis
Minneapolis
Kansas City
Denver
Oklahoma City.
Omaha
D'aUas
El Paso.
Houston
San Antonio
San Francisco
Los Angeles
Portland
Salt Lake City.
Seattle.
4 percent Series 3H percent Series 2% percent Series
B-1962 Treasury C-1962 Treas iry A-1963 Treasury
notes isssued for nctes issued for notes issued for
2 percent Series 2M percent Series l3K..percent Series 114 percent Series
cash 3
cash *
C-1957 Treasury D-1967 Treasury D-1957 certificates] E 0-1967 Treasury! Total issued
cash 5
notes maturing notes maturing maturing Oct. 1 notes maturing
1957
2
Oct.
1,1957
2
Aug. 1, 1957 1
Aug. 15, 1957 I
35, 568
421, 587
21, 259
44, 445
17,101
5,445
13, 957
10,740
1,105
14, 477
2,907
4,170
5,712
11, 859
176, 547
11, 595
29, 4873,055
23, 486
3,328
47, 065
35,162
6,792
12. 587
9,898
18, 934
1. 464
13,193
7,816
44, 779
51, 867
2.372
2, 219
3.293
32, 432
484, 021
37, 015
66,879
10. 552
4,941
5,817
7,084
391
15, 099
2,231
8,023
2,168
8,038
113,025
7,207
22, 492
2,826
11, 439
• 1,602
30, 568
25, 563
5,428
10, 648
6.417
15,860
1,475
6,676
14, 653
50, 620
24, 872
L035
4,813
8,163
17,434
119, 693
5,217
10, 623
2,293
3,398
1,316
1,248
592
5,473
1,366
4,763
2,430
3,042
56,628
1,226
7,168
462
5,933
788
14,837
7,393
1,937
1,964
1,069
5,545
1,101
4,190
1,203
20,009
5,729
55
1,475
1,503
1,252
13,783
692
481
1,042
130
127
185
3
20
3
100
1,253
120
100
820
1,430
235
376
500
4,500
20
'i,'ooo'
1,039, 084
64.183
111,428
30, 988
13, 914
21,217
19, 072
2,088
36,234
6,507
16, 976
10,313
23.039
350,269
20,028
60,390
6,343
40,977
5,818
93,290
69, 538
14, 392
26, 474
16,384
40, 339
4,040
24,069
24,072
119, 908
82, 468
3,482
8,507
13,959
98.584
666,954
17, 979
55. 621
44,115
25, 835
12, 714
14, 870
4,554
14,089
13. 441
13,223
218,018
47,220
^ 41,003
2,861
9,985
7,777
61, 689
36,035
8.199
16,766
12,869
66, 940
4,530
22, 716
5,127
111,448
58,678
12,488
8.384
24,468
53,699
466, 258
35 240
36,548
8,735
25, 637
18, 307
17, 052
7,249
10,110
3,008
8.969
8,654
6,641
98,097
26,123
16, 233
1,397
4,644
4,688
17, 679
9,610
3,560
5,611
4,868
26, 885
1,766
9,476
2,599
53,095
24,425
9,264
4,338
12,663
199,136
1, 565. 641
137, 924
109,224
39, 511
89, 570
76,832
45,171
30, 562
46, 519
15, 319
46,542
27,091
32,873
381,211
120,342
72, 764
6,075
20, 580
21,433
78,709
59,949
17,924
30, 669
26,456
116, 533
6,903
37,927
11, 739
202, 270
105, 484
31, 670
22,149
47,97S
O
o
O
Kl
O
>
zn
Treasm'y
^.=.
Government investment accounts
2.559
Total note aUotments
Maturing securities:
Exchanged in concmrent
offerings
1,117,829
1.038, 988
319,468
1,125
376
a
32, 243
4,062
118
138
120
100,000
100,000
100,000
«100,000
2, 608, 528
2, 000,387
1,142,956
3,970,698
2,305,424
10, 675, 381
6, 633,690
743, 203
20,357, 698
Total exchanged
Redeemed .for cash or
carried to matured d e b t -
3,423, 253
11, 714,369
6, 963,158
776. 446
22, 866 226
368, 775
341, 722
317, 784
48, 750
1,077.031
Total maturing securities
3,792. 028
12, 056,091
7, 270, 942
824,196
23, 943, 257
1 Series E-1957 Treasury 3^i percent and Series C-1958 Treasury 4 percent certificates
also offered in exchange for this maturity; see exhibit 1.
2 Series C-1958 Treasury 4 percent certificates also offered in exchange for this maturity; see .exhibit 1.
3 Subscriptions for $100,000 or less were allotted in full and subscriptions in excess
of $100,000 were aUotted 28 percent but not less than $100,000.
* Subscriptions for $10,000 or less were allotted in fuU and subscriptions in excess of
$10,000 were aUotted 25 percent to savings-type investors and 12 percent to all other
subscribers but not less than $10,000.
«Subscriptions for $25,000 or less were allotted in full and subscriptions in excess of
$26j000 were aUotted 24 percent but not less than $25,000.
fl Includes $10,000,000 aUotted through New York Federal Reserve Bank.
H
CQ
00'
CD
190
1058 REPORT OF THE SECRETARY OF THE TREASURY
E X H I B I T 3.—Treasury bonds
Two Treasury circulars, one containing a cash a n d t h e other an exchange bond
offering during t h e fiscal year 1958, are reproduced in this exhibit. Circulars
pertaining to t h e other bond offerings during 1958 are similar in form a n d therefore
are not reproduced in this report. However, t h e essential details for each issue
are summarized in t h e first table following t h e circulars and t h e final allotments
of new bonds issued for cash or in exchange for maturing securities are shown in
t h e second table,
D E P A R T M E N T C I R C U L A R N O . 1004.
PUBLIC DEBT
TREASURY
DEPARTMENT,
• Washington, February 3, 1958.
I. O F F E R I N G OF
BONDS
1. T h e Secretary of t h e Treasury, p u r s u a n t to. t h e a u t h o r i t y of t h e Second Liberty Bond Act, as amended, invites subscriptions from t h e people of t h e United
States for bonds of t h e United States, designated 3 percent Treasury bonds of
1964, in exchange for which any of t h e following listed securities, singly or in combinations aggregating $500 or multiples thereof, m a y be tendered:
3% percent Treasury certificates of indebtedness of Series A-1958, maturing.
F e b r u a r y 14, 1958
2)4 percent Treasury bonds of 1956-58, maturing March 15, 1958
l}i percent T r e a s u r y notes of Series E A - 1 9 5 8 , m a t u r i n g April 1, 1958
Treasury bills (special issue) maturing April 15, 1958
3 ^ percent Treasury certificates of indebtedness of Series B^1958, m a t u r i n g
April 15, 1958.
Exchanges will be m a d e a t p a r with an adjustment of interest as set forth in section IV hereof. T h e a m o u n t of t h e offering under this circular will be limited tot h e a m o u n t of t h e eligible securities of t h e five issues e n u m e r a t e d above tendered
in exchange and accepted. T h e books will be open only on F e b r u a r y 3 t h r o u g h
F e b r u a r y 5 for t h e receipt of subscriptions for this issue.
2. I n addition to t h e offering under this circular, holders of t h e eligible securities
are also offered t h e privilege of exchanging all or any p a r t of such securities for
2M percent Treasury certificates of indebtedness of Series A-1959 or 3J^ percent
Treasury bonds of 1990, which offerings are set forth in D e p a r t m e n t Circulars
Nos. 1003 and 1005, issued simultaneously with this circular.
n.
DESCRIPTION OF BONDS
1. T h e bonds will be dated F e b r u a r y 14, 1958, and will bear interest from t h a t
d a t e a t t h e r a t e of 3 percent per annum, payable on a semiannual basis on August15, 1958, and thereafter on F e b r u a r y 15 and August 15 in each year until t h e
principal a m o u n t becomes payable. T h e y will m a t u r e February 15, 1964, and
will not be subject to call for redemption prior to m a t u r i t y .
2. T h e income derivied from t h e bonds is subject to all taxes imposed under t h e
Internal Revenue Code of 1954. T h e bonds are subject to estate, inheritance,,
gift, or other excise taxes, whether Federal or State, b u t are exempt from all t a x a tion now or hereafter imposed on t h e principal or interest thereof by any State,
or any of t h e possessions of t h e United States, or by any local taxing authority.
3. T h e 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 t h e interchange of b o n d s
of different denominations and of coupon and registered bonds, and for t h e transfer
of registered bonds, under rules and regulations prescribed by t h e Secretary of
t h e Treasury.
5. T h e bonds will be subject to t h e general regulations of t h e Treasury D e p a r t ment, now or hereafter prescribed, governing United States bonds.
in.
SUBSCRIPTION AND ALLOTMENT
I. Subscriptions will be received a t t h e Federal Reserve Banks and branches
a n d at t h e Office of t h e Treasurer of t h e United States, Washington. Banking institutions generally m a y submit subscriptions for account of customers, b u t only
191
EXHIBITS
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 bonds 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 bonds allotted hereunder must be made on or before
February 14, 1958, or on later allotment, and may be made only in the securities
of the five issues enumerated in section I hereof, which will be accepted at par,
and should accompany the subscription. Interest adjustments per $1,000 will
be paid to or collected from subscribers in accordance with the following table:
Interest
credited to
subscriber
Securities surrendered
3%% certificates. Series A-1968
21^% bonds of 1956-58
1H% notes of Series EA-1958
Treasury bills
3H% certificates, Series B-1958
Interest
charged'to
subscriber
$16.78
10.49724
7.50
.
17.50
$3.81080
4.97102
4. 97102
Net amount
to be paid
subscriber
Net amount
to be collected from
subscriber
I $16. 78
10.49724
3.68920
12. 52898
$4 97102
1 Feb. 14, 1968, coupon to be detached by subscriber and cashed when due.
V. ASSIGNMENT OF REGISTERED
BONDS
1. Treasury bonds of 1956-58 in registered form tendered in payment for
bonds offered hereunder should be assigned by the registered payees or assignees
thereof, in accordance with the general regulations of the Treasury Department
governing assignments for transfer or exchange, in one of the forms hereafter set
forth, and thereafter should be presented and surrendered with the subscription
to a Federal Reserve Bank or branch or to the Office of the Treasurer of the
United States, Washington. The bonds must be delivered at the expense and
risk of the holder. If the new bonds are desired registered in the same name as
the bonds surrendered, the assignment should be to "The Secretary of the Treasury
for exchange for 3 percent Treasury bonds of 1964"; if the new bonds are desired
registered in another name, the assignment should be to "The Secretary of the*
Treasury for exchange for 3 percent Treasury bonds of 1964 in the name of
"; if new bonds in coupon form are desired, the assignment
should be to "The Secretary of the Treasury for exchange for 3 percent Treasury
bonds of 1964 in coupon form to be delivered to
".
VI. GENERAL
PROVISIONS
1. As fiscal agents of the United States, Federal Reserve Banks are authorized
and requested to receive subscriptions, to make allotments on the basis and up to
the amounts indicated by the Secretary of the Treasury to the Federal Reserve
Banks of the respective districts, to issue allotment notices, to receive payment for
bonds allotted, to make delivery of bonds on full-paid subscriptions allotted, and
they may issue interim receipts pending delivery of the definitive bonds.
2. The Secretary of the Treasury may at any time, or from time to time,
prescribe supplemental or amendatory rules and regulations governing the offering
which will be communicated promptly to the Federal Reserve Banks.
JULIAN B . BAIRD,
Acting Secretary of the Treasury.
479641—59'
14
192
1 9 5 8 REPORT OF T H E SECRETARY OF T H E TREASURY
D E P A R T M E N T C I R C U L A R N O . 1006. P U B L I C D E B T
TREASURY DEPARTMENT,
Washington, February 28, 1958.
I. OFFERING OF BONDS
I. T h e Secretary of the Treasury, p u r s u a n t t o t h e a u t h o r i t y of t h e Second
Liberty Bond Act, as amended, invites subscriptions, a t p a r and accrued interest,
from t h e people of t h e United States for bonds of t h e United States, designated
3 percent Treasury bonds of 1966. T h e a m o u n t of t h e offering under this circular
is $1,250,000,000, or thereabouts. I n addition to t h e a m o u n t offered for public
subscription, t h e Secretary of t h e Treasury reserves t h e right t o allot u p t o $100,000,000 of these bonds t o Government investment accounts. T h e books will be
open only on F e b r u a r y 28 for t h e receipt of subscriptions for this issue.
II. DESCRIPTION O F BONDS
1. T h e bonds will be d a t e d F e b r u a r y 28, 1958, a n d will bear interest from t h a t
d a t e a t t h e rate of 3 percent per annum, payable on a semiannual basis on August
15, 1958, a n d thereafter on F e b r u a r y 15 a n d August 15 in each year until t h e
principal a m o u n t becomes payable. T h e y will m a t u r e August 15, 1966, a n d will
n o t be subject t o call for redemption prior t o m a t u r i t y .
2. T h e income derived from t h e bonds is subject to all taxes imposed under t h e
I n t e r n a l Revenue Code of 1954. T h e bonds are subject to estate, inheritance,
gift, or other excise taxes, whether Federal or State, b u t are exempt from all
taxation now or hereafter imposed on t h e principal or interest thereof b y a n y
State, or a n y of t h e possessions of t h e United States, or b y a n y local taxing
authority.
3. T h e bonds will be acceptable t o secure deposits of public moneys.
4. Bearer bonds with interest coupons attached, a n d bonds registered as t o
principal a n d interest, will be issued in denominations of S500, $1,000, $5,000,
$10,000, $100,000, a n d $1,000,000. Provision will be made for t h e interchange
of bonds of different denominations a n d of coupon a n d registered bonds, a n d for
t h e transfer of registered bonds, under rules a n d regulations prescribed b y t h e
Secretary of t h e Treasury.
5. T h e bonds will be subject to t h e general regulations of t h e Treasury D e p a r t ment, now or hereafter prescribed, governing United States bonds.
III.
SUBSCRIPTION AND ALLOTMENT
1. Subscriptions will be received a t t h e Federal Reserve Banks a n d branches
and a t t h e Office of t h e Treasurer of t h e United States, Washington. Commercial
banks, which for this purpose are defined as banks accepting d e m a n d deposits,
m a y submit subscriptions for account of customers, b u t only t h e Federal Reserve
Banks a n d t h e Treasury D e p a r t m e n t are authorized t o act as official agencies.
Others t h a n 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, b u t will be restricted in each case to an
a m o u n t not exceeding 25 percent of t h e combined capital, surplus, a n d undivided
profits of t h e subscribing b a n k . Subscriptions from all others m u s t be accompanied b y p a y m e n t of 15 percent of t h e a m o u n t of bonds applied for, which paym e n t m u s t be m a d e with t h e subscription, t o t h e Federal Reserve Bank or branch,
or t o t h e Treasurer of t h e United States, in immediately available funds or by
credit in a Treasury t a x a n d loan account of t h e bank through which t h e subscription is entered. Following allotment, a n y portion of t h e 15 percent p a y m e n t
in excess of t h e a m o u n t of bonds allotted will be returned t o t h e subscribers.
2. Commercial banks in submitting subscriptions will be required t o certify
t h a t they have no beneficial interest in a n y of t h e subscriptions they enter for t h e
account of their customers, a n d t h a t their customers have no beneficial interest
in t h e b a n k s ' subscriptions for their own account.
EXHIBITS
193
3. The Secretary of the Treasury reserves the right to reject or reduce any
:subscription, and to allot less than the amount of bonds applied for, and to make
different percentage allotments to various classes of subscribers; and any action
he may take in these respects shall be final. The basis of the allotment will be
publicly announced and allotment notices will be sent out promptly upon allotment.
IV. PAYMENT
1, Payment at par and accrued interest for bonds allotted hereunder in excess
of payments accompanying subscriptions must be made or completed on or before
March 10, 1958, or on later allotment. In every case where payment is not so
•completed, the payment with application up to 15 percent of the amount of bonds
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 bonds allotted to it for itself and its customers up to any amount for which it shall be qualified in excess of existing deposits,
-when so notified by the Federal Reserve Bank of its district.
V. GENERAL PROVISIONS
1.. As fiscal agents of the United States, Federal Reserve Banks are authorized
and requested to receive subscriptions, to make allotments on the basis and up
to the amounts indicated by the Secretary of the Treasury to the Federal Reserve
> Banks of the respective districts, to issue allotment notices, to receive payment
for bonds allotted, to make deliver}^ of bonds on full-paid subsciriptions allotted,
and they may issue interim receipts pending delivery of the definitive bonds.
2. The Secretary of the Treasury may at any time, or from time to time, prescribe supplemental or amendatory rules and regulations governing the offering,
-which will be communicated promptly to the Federal Reserve Banks.
ROBERT B . ANDERSON,
Secretary of the Treasury.
CO
Ox
00
S3
Summary of information pertaining to Treasury bonds issued during the fiscal year 1958
O
Department circular
Date of
preliminary announcement Number
Date
Concurrent
offering
circular
number
Treasury bonds issued for cash or in exchange for maturing or called securities
Date of
issue
AUotment
Date sub- payment
Date of scription date on
maturity books or before
closed
(or on
later allotment)
O
CQ
1957
Sept. 12
996
1957
Sept. 16
4 percent of 1969 issued for cash
1957
Oct. 1
Nov. 18
1000
Nov. 20
3J4 percent of 1974 issued for cash
Dec. 2
1004
1958
Feb. 3 1003,1005
1958
Jan. 29
Jan. 29
1005
Feb.
3 1003,1004
Feb. 20
1006
May 29
1009 June
3
May 29
1011 June
4
Feb. 28
1010
1958
Feb. 14
3 percent of 1964 issued in exchange for—._
3% percent Series A-1958 certificates maturing Feb. 14, 1958.
2H percent Treasury bonds of 1966-58 maturing Mar. 15,1968.
13^ percent Series EA-1958 Treasury notes maturing Apr. 1, 1958.
Treasury biUs (special issue) maturing Apr. 15, 1958.
3}4 percent Series B-1958 certificates maturing Apr. 15,1958.
3}4 percent of 1990 issued in exchange for—
3% percent Series A-1958 certificates maturing Feb. 14, 1958.
2K percent Treasury bonds of 1956-68 maturing Mar. 15, 1958.
IH percent Series EA-1968 Treasury notes maturuig Apr. 1, 1958.
Treasury bills (special issue) maturing Apr. 16, 1968.
3K percent Series B-1958 certificates maturing Apr. 15,1958.
3 percent of 1966 issued for cash
Feb. 28
3H percent of 1985 issued for cash
June
2H percent of 1966 issued in exchange for—
2li percent Series A-1968 Treasury notes maturing June 16,1958.
2% percent Treasury bonds of 1958-63 called for redemption on June 15, 1958.
2% percent Treasury bonds of 1968 maturing June 15, 1958.
June 16
Feb. 14-
1957
1957
Oct. 1, Sept. 16 1 Oct. 1
1969
Nov. 16, Nov. 20 2 Dec. 2
1974
1958
1958
Feb. 16, Feb. 5 3 Feb. 14
1964
Feb. 15, Feb.
1990
o
Si
Hi
o
4 Feb. 14
y ^
3
Aug. 15, Feb. 28 5 Mar. 10
1965
May 15, June 3 6 June 18
1985
Feb. 15, June 6 ' June 16
1965
fei
Hi
1 Commercial banks were permitted to subscribe, without deposit, for their own account for an amount not exceeding 60 percent of the combined capital, surplus, and
undivided profits of the subscribing bank. Qualified depositaries were permitted to
make payment for bonds aUotted to them and their customers by credit in Treasury
tax and loan accounts. Payment for iiot more than 60 percent of bonds allotted was
deferred not later than Oct. 21. Payments made subsequent to Oct. 1 were accompanied by accrued interest from that date at the rate of $0.11 per $1,000 per day,
2 Commercial banks were permitted to subscribe, without dejposit, for their own account for an amount not exceeding 26 percent of the combined capital, surplus, and
undivided profits of the subscribing bank as of June 30, 1957. Qualified depositaries
were permitted to make payment for bonds aUotted to them and their customers by
credit in Treasm-y tax and loan accounts.
3 See Department Circular No. 1004, sec. IV, in this exhibit, for provisions for payment of interest.
4 Following acceptance of surrendered securities interest adjustment per $1,000 was
paid to or collected from subscribers as follows: $16.78 was paid on Series A-1958 certificates; $10.49724 was paid on bonds of 1956-58; $7.60 was credited, $4.44594 was
charged and the difference of $3.06406 was paid on Series EA-1958 iiotes; $5.79953 was
coUected on Treasurj'- biUs; and $11.73077 was paid on Series B-1958 certificates.
6 See Department Circular No. 1006, sees. HE and IV, in this exhibit, for provisions
or subscription and payment of interest.
8 Subscriptions from commercial banks for their owii account were restricted to ail
amount not exceeding 2 percent of the combined aniount of time certificates of deposit
(but only those issued in names of individuals, and of corporations, associations, and
other organizations not operated for profit), and of savings deposits, or 5 percent of the
combined capital, surplus, and undivided profits of the subscribing bank, whichever
is greater. Qualified depositaries were permitted to make payment for bonds aUotted
to them and their customers by credit in Treasm-y tax and loan accounts. In the
case of aUotments at a rate exceeding 20 percent of subscription, payment at lOOH and
accrued interest in the amount of $1,335 per $1,000 par amount for bonds aUotted, less
adjustment for amount of deposit, and accrued interest thereon in the amount of
$1,335 per $1,000 was required on June 18 or on later aUotment. Payment for remaining bonds allotted was required on June 18 together with accrued interest at the rate
of $0,089 per day per $1,000 from June 3 to payment date.
7 All coupons subsequent to June 15, 1958, were required to be surrendered attached
to bonds of 1958-63. Final interest due June 15, 1958, on registered bonds was paid
by check drawn in accordance with assignments on bonds surrendered or credited in
any account mauatained by a banking institution with the Federal Reserve Bank of
its district.
ZP
CO
Or
CO
Allotments of Treasury bonds issued during the fiscal year 1958, by Federal Reserve districts
[In thousands of doUars]
fej
o
3 percent Treasm-y b o n d s of 1964 issued In exchange for—
F e d e r a l R e s e r v e district
Boston . .
New York
PhUadelphia
Cleveland
CinciTinati.
Pittsburgh
_
R i c h m o n d -_
Baltimore
Charlotte
- ..
Atlanta.BirTningham, _
JacksonviUe
Nashville _ . . , , .
N e w Orleans
Chicago
Detroit
St. Louis
Little Rock
LouisvUle
Memphis
Minnep.poli.«;
Kansas City
.
Denver
Oklahoma City
Omaha . .
_.
DaUas
_
ElPaso
Houston
FRASERS a n A n t o n i o , , — , - , , . , _ , - - .
Digitized for
4 percent Treasu r y b o n d s of
1969 issued for
cash i
3 % percent
Treasury bonds
of 1974 issued for
cash 2
21,384
252.839
16,774
5.929
6,613
18,211
8,044
5,229
4,333
1,845
2,832
3,970
8,831
3,979
51,837
12,478
11,041
603
2,638
1,161
11,898
5,571
2,337
4,828
2,747
22,346
860
5,489
2,107
48,434
272,529
15, 566
13,568
4,680
9,735
8,395
4,621
2,145
3,607
3,414
4,192
7,063
1,964
54,465
10,661
6,648
208
2,610
2,141
6,943
2,997
992
4.062
1,115
13, 268
455
3,133
1,084
o
3 % percent
Series A-1958
certiflcates
maturing
F e b . 14, 1968 3
2H percent
Treasury bonds
of 1956-58
maturing
M a r . 15, 1968 3
I K percent
Series EA-1968
T r e a s u r y notes
maturing
A p r . 1,1968 3
T r e a s u r y bUls
(special issue)
maturing
A p r . 15, 1968 3
'56,894
852,827
48,184
112,748
24,638
294,673
16,697
28,908
1,055
65,760
609
6,421
11,209
142,768
4,933
35,087
17,811
270,274
24,052
25,612
111, 607
1,616,292
93,476
208,676
46,277
12,614
9,381
.7,600
20,684
96, 666
82,603
3,696
2,277
16,686
37, 798
143,059
3 H percent
Series B-1958
certificates
maturing
A p r . 15, 1958
fei
T o t a l issued
fej
ZP
fej
o
fej
o
fej
321,814
93,962
19, 636
53,467
143,917
632,786
86,776
23,470
4,027
26, 020
21,677
161,970
46,121
68, 520
9,969
22,169
3,438
4,020
17, 604
13, 525
23,276
18,178
100,308
126,412
38,993
9,076
4,348
8,121
25,462
86,000
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San Francisco
_.
Los Angeles . .
Portland
-_.
Salt Lake City
Seattle
Treasury
Government investment accounts
Total bond aUotments, .Maturing securities:
Exchanged in concurrent
offerings
23.636
16,053
8,733
2,627
6,887
343
16,411
11,467
6,294
1,256
9.673
57
100,000
100,000
666,933
663,812
217,029
49,616
869
3,068
1,979,655
691, 555
4,463
115, 435
33,058
166,564
470, 730
1, 692
682
6,311
371,650
795,887
3,854,182
8,613, 915
692,965
218, 595
772,790
1,198, 641
11,496,906
Total exchanged
_. Redeemed for cash or carried to matured debt.. _
10, 593, 570
1,284, 620
334,030
1,144,440
1,994, 528
15,351, 088
267, Oil
164, 226
.48, 765
. 606, 653
356, 634
1,433, 288
Total maturing securities.
10,860, 581
1,448, 746
382, 795
1, 761, 093
2,351,162
16 784 376
Footnotes at end of table.
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(X)
Allotments of Treasury bonds issued during the fiscal year 1958, by Federal Reserve d^'s^nc^s—-Continued
[In thousands of dollars]
2% percent T r e a s u r y b o n d s of 1965 issued i n
exchange for—
3 H p e r c e n t T r e a s u r y b o n d s of 1990 issued i n exchange for—
F e d e r a l R e s e r v e district
Boston
-- ._
New York
P h U a d e l p h i a ._ . - .
Cleveland
Cincinnati
Pittsburgh
Richmond
Baltimore
Charlotte
Atlanta _
__
----_.
Birmingham
Jacksonville
NashvUle
N e w Orleans
Chicago
Detroit
S t . Louis
- . __
Little Rock
Louisville. _
Memphis '
Minneapoli.s .
Kansas City
Denver
Oklahoma City
Omaha
Dallas
E l Paso
Houston
FRASER
. San Antonio
Digitized for
I H per3 H percent Series
2H perc e n t Series c e n t T r e a s - EA-1968
A-1958 cer- u r y b o n d s T r e a s u r y
of 195fr-68
terfi cates
notes
maturing
maturing
maturing
M a r . 15,
A p r . 1,
F e b . 14,
1968 4
1958 4
1968 4
Treasury
bUls
(special
issue)
maturing
A p r . 15,
1958 4
3 H perc e n t Series
B-1958 certerficates
maturing
A p r . 16,
1958 4
Total
issued
13,927
61,679
1,110
836
9,250
66,064
4,468
3,306
83,365
1, 266, 526
42, 262
31,476
10, 915
310
964
31,404
419
194
2,558
18, 731
29,935
881,277
33, 253
20, 285
28,624
240,957
3,381
7,014
19, 225
15, 660
1,629
17,549
50
35
48,159
20,118
2,989
7,665
35,243
114,164
15, 526
2,841
7
5i5
231
i9, i20
2,579
8,469
336
3,619
2,693
1,169
38
90
213
2,634
2,275
8,958
1,386
12,123
16,188
6,137
3 percent 3H percent
Treasury Treasury
2y4 p e i 2 ^ pei2 % perbonds
cent Series cent T r e a s bonds
u r y bonds cent Treasof 1985
of 1966
A-1958
of 1968-63 u r y b o n d s
issued
issued
Treasury
called for
for cash 5 for cash e
of 1968
notes
redempmaturing
maturing
tion o n
J u n e 15,
J u n e 15,
J u n e 15,
1968 7
1968 7
1968 7
69.087
613,133
44,887
37,734
11,842
24,849
28,191
14,825
8,035
14,073
4,119
14,048
9,329
9,435
130,879
47,165
23.088
1,348
7,093
6,471
24,863
14,932
4,394
[8,119
7,606
41,119
1,806
11,589
3,612
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sn
1^
Total
issued
o
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76,103
474,392
24,704
44,396
100, 510
1, 709,508
48, 601
116, 689
47,921
438,926
12,158
7,831
80,156
1,891, 692
81,922
153, 600
228, 687
4, 040,126
142, 681
278,120
48,423
43,379
42,618
50, 650
136, 647
31,840
103,466
6,170
107,348
216,983
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S)
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119, 999
483, 567
i34,999
445,999
1, 064, 665
23,905
96,920
29,544
117,429
242, 893
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23, 772
16,281
86, 666
106,620
8,460
23,618
73, 703
114, 061
^167,819
244, 299
45,968
84,481
9,694
80, 202
174,377
>
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SJ
Hi
San Francisco
Los Angeles
Portland
Salt Lake City
Seattle
Treasmy
Government investment accounts Total bond allotmentsMaturing securities:
Exchanged in concurrent
offerings
Total exchanged
Redeemed for cash or
carried to matured
debt
Total maturing securities
40,839
30,442
2,268
4,683
3,398
81. 530
3,201
600
40
232
16
3,989
1,120,991
350, 334
24,695
96,163
134,832
105, 673
206,810
37,045
188, 361
432, 216
412
10, 721
884
6,716
18,321
100, 000
100, 000
3,195,927
799,868
3, 391,739
7,387, 634
1, 727, 016 1,484, 298 1,134, 868
9,472, 579
934,186
309,335
1,048, 277
1,859, 696 13, 624, 073
1, 014,463
91, 067
710, 992 1 816 522
10, 593, 570
1, 284, 520
334, 030
1,144,440
1,994, 528 15, 351,088
4, 210, 390
890,935
4,102, 731 9, 204 056
257, Oil
164, 225
48, 765
606, 653
356, 634
1,433, 288
181,401
27,846
142,080
351, 327
10, 850, 581
1, 448, 745
382, 796
1, 761, 093
2,361,162
16, 784,376
4, 391, 791
918, 781
4, 244,811
9, 655,383
1 Subscriptions for $50,000 or less were allotted in fuU and subscriptions in excess of
$60,000 were aUotted 10 percent but not less than $60,000.
2 Subscriptions for $10,000 or less were aUotted in fuU and subscriptions in excess of
$10,000 were allotted 26 percent to savings-type investors and 10 percent to aU other
subscribers but not less than $10,000.
3 Series A-1959 Treasury 2H percent certificates and 3H percent Treasury bonds of
1990 also offered in exchange for this matm-ity; see exhibit 1.
4 Series A-1959 Treasury 2H percent certificates and 3 percent Treasury bonds of
1964 also offered in exchange for this maturity; see also exhibit 1.
68, 560
37,488
9,726
12, 293
18, 489
191
5 Subscriptions for $10,000 or less were allotted in full and subscriptions in excess of
$10,000 were aUotted 20 percent but not less than $10,000.
6 Subscriptions for $5,000 or less were allotted in full and subscriptions in excess of
$5,000 were allotted 60 percent to savings-type investors, 40 percent to commercial banks
for their o^vn account and 26 percent to all other subscribers but not less than $6,000.
7 Series B-1959 Treasury IH percent certificates also offered in exchange for this
security; see exhibit 1.
ZP
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200
1 9 5 8 RE.PORT OF T H E SECRETARY OF T H E TREASURY
E X H I B I T 4.—Call, February 14, 1958, for redemption on J u n e 15, 1958, of 2 %
percent Treasury bonds of 1958-63, dated J u n e 15, 1938 (press release of
February 14, 1958)
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 J u n e 15, 1958, of t h e partially tax-exempt 2% percent Treasury bonds of
1958-63, dated J u n e 15, 1938, due J u n e 15, 1963. There are now outstanding
$918,780,600 of these bonds.
I t has been t h e practice of t h e Treasury t o call t h e partially tax-exempt bonds
a t t h e first call dates because t h e total cost of these borrowings t o t h e Treasury,
taking into account interest and t h e t a x advantages t o t h e holders, is greater t h a n
t h e cost based upon current interest rates of new issues of comparable maturities.
T h e text of t h e formal notice of call is as follows:
Two
AND T H R E E - Q U A R T E R S
PERCENT
JUNE
TREASURY
BONDS
O F 1958-63 ( D A T E D
15, 1938)
NOTICE O F CALL F O R REDEMPTION
To Holders of 2% Percent Treasury Bonds of 1958-63, and Others Concerned:
1. Public notice is hereby given t h a t all outstanding 2% percent Treasury
bonds of 1958-63, dated J u n e 15, 1938, due J u n e 15, 1963, are hereby called for
redemption on J u n e 15, 1958, on which d a t e 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 a n official circular governing t h e exchange offering will be
issued.
3. Full information regarding t h e presentation a n d 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 No. 300,
Revised, dated April 30, 1955.
ROBERT B . ANDERSON,
Secretary of the Treasury.
E X H I B I T 5.—Call, M a y 14, 1958, for redemption on September 15, 1958, of 2 %
percent Treasury bonds of 1956-59, dated February 1, 1944, a n d 2 % percent
Treasury bonds of 1957-59, dated M a r c h 1, 1952 (press release of May 14, 1958)
T h e Treasury D e p a r t m e n t today issued t h e official notices of call for redemption
on September 15, 1958, of t h e 2J4 percent Treasury bonds of 1956-59, dated
F e b r u a r y I, 1944, d u e September 15, 1959, a n d t h e 2% percent Treasury bonds
of 1957-59, dated March 1, 1952 d u e March 15, 1959. There are now outstanding $3,818,075,000 of t h e 2H percent bonds a n d $926,811,000 of t h e 2 ^
percent bonds.
T h e texts of t h e formal notices of call are as follows:
Two
AND O N E - Q U A R T E R
PERCENT
TREASURY
FEBRUARY
I,
BONDS
O F 1956-59
(DATED
1944)
NOTICE O F CALL F O R REDEMPTION
To Holders of 2% Percent Treasury Bonds of 1956-59, a n d Others Concerned:
1. Public notice is hereby given t h a t all outstanding 2}^ percent Treasury
bonds of 1956-59, dated February 1, 1944, d u e September 15, 1959, are hereby
called for redemption on September 15, 1958, 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 a n official circular governing t h e exchange offering will be
issued.
3. Full information regarding t h e presentation a n d 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 No. 300,
Revised, dated April 30, 1955.
R O B E R T B . ANDERSON,
Secretary of the Treasury.
EXHIBITS
Two
AND
THREE-EIGHTHS PERCENT TREASURY
MARCH 1,
201
BONDS OF 1957-59
(DATED
1952)
NOTICE OF CALL FOR REDEMPTION
To Holders of 2ys Percent Treasury Bonds of 1957-59, and Others Concerned:
1. Public notice is hereby given that all outstanding 2% percent Treasury
bonds of 1957-59, dated March I, 1952, due March 15, 1959, are hereby called
•for redemption on September 15, 1958, on which date interest on such bonds will
cease.
2. Holders of these bonds may, in advance of the redemption date, be offered
the privilege of exchanging all or any part of their called bonds for other interestbearing obligations of the United States, in which event public notice will hereafter be given and an official circular governing the exchange offering will be
"issued.
3. Full information regarding the presentation and surrender of the bonds for
•cash redemption under this call will be found in Department Circular No. 300,
Revised, dated April 30, 1955.
ROBERT B . ANDERSON,
Secretary of the Treasury.
Treasury Bills Offered and Accepted
EXHIBIT 6.—Treasury bills
During the fiscal year 1958 there were 52 weekly issues of Treasury bills, one
-special issue of 237-day bills, and one issue of the tax anticipation series. Three
press releases inviting tenders and three releases announcing the acceptance of
tenders are reproduced in this exhibit. The press releases of August 12 and 15,
1957, are in a form representative of bills issued for cash only and the releases
of May 8 and 13, 1958, are representative of the weekly series of Treasury bills.
The tax anticipation series is represented by the releases of June 24 and 27, 1957.
The essential details regarding each issue of Treasury bills during the fiscal year
1958 are summarized in the table following the press releases.
PRESS RELEASE OF AUGUST 12, 1957
The Treasury Department, by this public notice, invites tenders for $1,750,000,000, or thereabouts, of 237-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 dated August 21, 1957, and will mature April 15,
1958, when the face amount will be payable without interest. 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 daylight saving time, Wednesday,
August 14, 1957. 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 piay not be used.
It is urged 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 qthers must be accompanied
by payment of 2 percent of the face amount of Treasury bills applied for, unless
the tenders are accompaned bj^^ 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
202
195 8 REPORT OF THE SECRETARY OF THE TREASURY
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. Payment of
accepted tenders at the prices offered must be made or completed at the Federal
Reserve Bank in cash or other immediately available funds on August 21, 1957,
provided, however, any qualified depositary will be permitted to make payment
by credit in its Treasury tax and loan account for Treasury bills 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.
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 betweea 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 AUGUST 15, 1957
The Treasury Department announced last evening that the tenders for
$1,750,000,000, or thereabouts, of 237-day Treasury bills to be dated August 21,
1957, and to mature April 15, 1958, which were offered on August 12, were
opened at the Federal Reserve Banks on August 14.
The details of this issue are as follows:
Total applied for
$3, 177, 328, 000'
Total accepted (includes $296,329,000 entered on a noncompetitive basis and accepted in full at the average
price shown below)
1, 750, 043, 000'
Range of accepted competitive bids (excepting four
tenders totaling $4,690,000):
High, equivalent rate of discount approximately 3.843% per
annum
97. 470'
Low, equivalent rate of discount approximately 4.250% per
annum
97. 202
Average, equivalent rate of discount approximately 4,173% per
annum
1_ 97. 253
(49 percent of the amount bid for at the low price was accepted.)
Total applied for
Federal Reserve district
Boston
New York
PhiladelphiaCleveland „^
^. „. ....^
Richmond
Atlanta ._
. _
_ __
Chicago
St. Louis
Minneapoli.t;
^_.
..
Kansas City
Dallas
San Francisco
Total
._
,
__
_
_
.
"
..
__ _
i.„.
_
._
, . - , - , ... .- . .
Total accepted
$119,737,000
1, 629,083,000
127, 505, 000
118, 662,000
77,023,000
78, 740,000
405,098,000
82, 681,000
95,835,000
61, 210,000
157,147,000
224, 707,000
$86,721,000
540,000,000
102,028,000
90,492,000
69, 748,000
70,816,000
293,719,000
68, 641,000
95, 733,000
53,188,000
156, 790,000
123,167,000
3,177,328, 000
1, 760,043,000
EXHIBITS
203
PRESS RELEASE OF MAY 8, 1958
The Treasury Department, by this public notice, invites tenders for
$1,700,000,000, or thereabouts, of 91-day Treasury bills, for cash and in exchange
for Treasury bills maturing May 15, 1958, in the amount of $1,709,489,000, to
be issued on a discount basis under competitive and noncompetitive bidding as
hereinafter provided. The bills of this series will be dated May 15, 1958, and
will mature August 14, 1958, when the face amount will be payable without
interest. They will be issued in bearer form only, and in denomination 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 daylight saving time, Monday,
May 12, 1958. 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 urged 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
$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 May 15, 1958, in cash or other immediately available funds or in a like face amount of Treasury bills maturing May 15,
1958. 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 MAY 13, 1958
The Treasury Department announced last evening that the tenders for
$1,700,000,000, or thereabouts, of 91-day Treasury bills to be dated May 15 and
to mature August 14, 1958, which were offered on May 8, were opened at the
Federal Reserve Banks on May 12.
"•
204
1958 REPORT OF THE SECRETARY OF THE TREASURY
The details of this issue are as follows:
Total applied for
$2, 635, 044, 000^
Total accepted (includes'$288,696,000 entered on a noncompetitive basis and accepted in full at the average price
shown below)
1, 700, 627, 000'
Range of accepted competitive bids:
High, equivalent rate of discount approximately 1.068%
per annum
99. 730'
Low, eouivalent rate of discount approximately 1.127%
per annum
99. 715Average, equivalent rate of discount approximately
1.112% per annum___
99. 719'
(51 percent of the amount bid for at the low price was accepted.)
Federal Reserve district
Boston
New York
Philadelphia
Cleveland
Richmond
Atlanta
Chicago..
St. Louis
Minneapolis.Kansas City
Dallas
-. -San Francisco
-
-
-._-
- -.
- .
Total
.
-
--- •
_. __
Total applied for
__
_
--
_.^-_-
Total accepted
$36,935,000
1, 875, 284,000
47, 685,000
49,240, 000
15,811, 000
41,176, 000
266,610, 000
21,810, 000
18, 701,000
66, 972,000
29,611, 000
176,210,000
$26 935 000
1,062,324,000
39, 685, 000
49,240,000
15,811,000
37, 790,000
204,140, 000
21,810,000
18,701,000
50,360, 000
23, 611,000
160,220, 000
2, 636, 044,000
1,700,627, OOO
PRESS RELEASE OF JUNE 24, 1957
The Treasury Department, by this public notice, invites tenders for $3,000,000,000, or thereabouts, of 264-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
July 3, 1957, and they will mature March 24, 1958. They will be accepted at face
value in payment of income and profits taxes due on March 15, 1958, 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, 1958, income and profits taxes have the privilege of
surrendering them to any Federal Reserve Bank or branch or to the Office of the
Treasurer of the United States, Washington, not more than fifteen days before
March 15, 1958, 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, 1958, to the District Director of Internal Revenue for the district
in which such taxes are payable. The bills 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 daylight saving time, Wednesday, June 26^
1957. 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 urged 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 bythe 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
205
EXHIBITS
Subject to these reservations, noncompetitive tenders for $400,000 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. Payment of accepted tenders at
the prices offered must be made or completed at the Federal Reserve Bank in cash
or other immediately available funds on July 3, 1957, provided, however, any
qualified depositary will be permitted to make payment by credit in its Treasury
tax and loan account for Treasury bills allotted to it for itself and its customers
up to an}^ amount for 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
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 bj^ 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 Tnternal 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 JUNE 27, 1957
The Treasury Department announced last evening that the tenders for
$3,000,000,000, or thereabouts, of tax anticipation series 264-day Treasury bills
to be dated July 3, 1957, and to mature March 24, .1958, which were offered on
June 24, were opened at the Federal Reserve Banks on June 26.
The details of this issue are as follows:
Total applied for
$4, 545, 824, 000
Total accepted (includes $368,809,000 entered on a noncompetitive basis and accepted in full at the average
price shown below)
3, 000, 004, 000
Range of accepted competitive bids (excepting three tenders totaling $1,200,000):
High, equivalent rate of discount approximately
3.200% per annum
97. 653
Low, equivalent rate of discount approximately
3.560% per annum
97. 389
Average, equivalent rate of discount approximately
3.485% per annum
97. 445
(83 percent of the amount bid for at the low price was
accepted.)
Federal Reserve district
Boston...!!
NewYork
Philadelphia
Cleveland
Richmond
Atlanta
Chicago
St. Loiiis
Minneapolis
Kansas City
Dallas .
San Francisco
.
i
Total apphed for
_ ,
Total
. . .
.
.
--
.
- --
Total accepted
$180,630,000
2, 215,036,000
190,630,000
224,042,000
109,995,000
149,985,000
644,034,000
152,641,000
113,926,000
91,406,000
220,110,000
353,390,000
$180,230,000
1 010 036 000
164,630,000
206 942 000
93, 895,000
139, 685,000
427, 234,000
138 921 000
109,926,000
85,406,000
218, 710,000
234,390.000
4, 545, 824,000
3,000,004.000
bO
o
Summary of information pertaining to Treasury bills ^ issued during thefiscal year 1958
[Dollar amounts in thousands]
CO
cn
00
Maturity value
Prices and rates
Total bids
accepted 2
Tenders accepted
Date
of issue
Date of
maturity
Days
to maturity
Total
applied
for
Competitive bids accepted
.High
Total
accepted
On competitive
basis
On noncompetitive
basis 2
For
cash
In
exchange
Average ! Equivalent
price
average
per
Price
hundred 3 rate*
per
(percent) hundred
Amount
maturing
on issue
date of
new
offering
Low
EquivaPrice
lent
per
rate *
hundred
(percent)
O
o
Equivalent
rate 4
(percent)
03
Weekly Se'ries
1957
July 6
11
18
25
Aue. 1
8
16
22
29
Sept. 5
12
19
26
1957
Oct. 3
10
17
24
31
Nov. 7
14,
21
29
Dec 6
12
19
26
1958
3 Tan. 2
9
10
16
17
23
24
30
31
Nov. 7 Feb. 6
13
14
21
20
29
27
http://fraser.stlouisfed.org/
Oct.
Federal Reserve Bank of St. Louis
o
t?d
90
91
91
91
91
91
91
91
92
91
91
91
91
$2, 312, 828 $1, 599, 216 $1,254.010 $345,206 $1. 526,019
2, 407, 927 1, 599, 742 1,213,247
386, 495
1, 670, 067
2, 719, 015 1, 600, 562 1,190, 580 409, 982
1, 663, 486
2, 279, 233 1, 600, 512 1, 236,944 363. 568
1, 568. 514
2, 414, 848 1, 699, 862 1, 339,155 360; 707
1, 662, 308
2, 645, 409 1, 700,194
1, 335,112 365, 082
1, 669.103
2, 595, 574 1, 699, 926 1, 311, 090 388, 835
1, 671, 565
2, 353,182
1, 799, 723 1, 457, 860 341, 863
1, 682, 012
2, 469, 465 1, 800, 664 1, 476, 377 325, 287
1,690,489
2, 423. 273 1,800,991
1,483, 832 317,159
1, 704. 962
2, 624' 989 1,802, 221
1.373 425
428 796 1, 763, 287
2, 384, 249 1, 600, 444 1,177,926
422, 618
1, 557, 772
2, 610, 676 1,601,601
1,172,076
1, 566, 329
429, 626
$73,197
29, 675
37, 076
31.998
37, 554
31, 091
28, 360
117,711
110,175
96, 029
38, 934
42, 672
36, 272
99.190
99.198
99.218
99. 202
99.160
99.164
99.116
99.152
99.106
99 097
99 096
99.082
99.107
3.239
3.172
3 092
3 158
3.363
3.308
3.498
3 364
3 497
3 571
3 576
3.632
3.634
99.197
99. 206
a 99 229
99 241
6 99.191
7 99.178
8 99.136
9 99 163
10 99 115
11 99 115
12 99 103.
99.115
99.115
3.212
3.141
3.050
3.003
3.200
3.252
3.418
3. 311
3.463
3. 501
3.649
3.501
3.601
99.185
99.195
99. 216
99.179
99.142
99.157
99.110
99.146
99.102
99. 093
99. 094
99.079
99.105
3.260
3.186
3 102
3 248
3 394
3.335
3.521
3.382
3.614
3 588
3 584
3.644
3.641
91
91
91
91
91
91
91
91
90
2, 289, 502
2,200 852
2, 453 480
2, 352, 521
2, 502, 249
2, 475, 547
• 2, 646, 616
2, 688, 097
2, 430, 281
1. 478, 652
1, 565, 316
1, 568, 388
1, 566, 559
1,635.671
1, 650, 599
1, 669,174
1, 770, 601
1,720,806
121. 042
34, 945
41,944
34.189
63, 618
49. 849
30,913
29, 826
79,838
99 108
99 109
99 076
99. 085
99. 085
99. 097
99 122
99 205
99 210
3 628
3 525
3 660
3.619
3. 621
3.672
3.473
3.146
3.158
99 123
99 126
99 116
13 99. 093
99.105
1^ 99.100
99.129
15 99. 209
99. 222
3.469
3.458
3.501
3.588
3.641
3.560
3.446
3.129
3.112
99.104
99.106
99.070
99.083
99.082
99. 095
99.121
99.203
99.207
3 645
3 537
3 679
3.628
3.632
3.580
3 477
3 153
3 172
$1. 603, 630
1, 611, 406
1, 600. 396
1, 600, 412
1, 701, 993
1, 699, 381
1, 700, 033
1,800, 033
1, 800, 624
1, 799, 672
1, 799, 907
1, 600, 298
1, 601, 643
o
te)
te)
t>
1, 599, 694
1,600 260
1,600 332
1,600,7481, 699.189
1, 700, 448
1. 700. 087
1,800, 427
1,800, 644
1, 245, 536
1,206 379
1,188 063
1, 211; 002
1, 326. 613
1.336 715
1, 339,992
1, 427. 424
1, 473, 835
364,158
393. 881
412,269
389,746
372, 576
363, 733
360,095
373,003
326,809
1,
1,
1,
1,
1,
1.
1,
1.
1,
599. 216
699, 742
600, 562
600. 512
699, 862
700,194
699, 926
799, 723
800, 664
d
Dec.
5
12
19
26
5
1958
05 J a n .
2
16
23
30
6
Feb.
13
20
27
Mar. 6
13
20
27
Apr. 3
10
17
24
May 1
8
15
22
Mar.
6
13
20
27
91
91
91
91
Apr.
3
10
17
24
1
8
15
22
29
5
12
19
26
3
10
17
24
31
7
14
21
28
4
11
18
25
91
91
91
91
91
91
91
91
91
91
91
91
91
91
91
91
9l
91
91
91
91
91
91
91
91
91
May
June
July
Aug.
29
June
5
12
19
26
Sept
2, 655,
2, 811,
2. 347,
2. 415,
092
613
513
999
388,184
430,155
681, 962
750, 995
691, 808
356, 068
502, 369
618, 863
597, 304
194, 747
436, 329
506, 518
479, 667
204, 687
271, 980
727, 534
594,000
801, 460
653, 330
634, 444
504,397
383. 651
414. 949
449, 953
471, 776
470, 981
799, 986
802, 558
700,115
700,152
1, 463, 279
1, 380,160
1, 301, 378
1, 312, 802
336, 707
422, 398
398, 737
387, 350
1,
1,
1,
1,
725, 403
764, 489
650, 722
648, 942
74, 583
38, 069
49, 393
51, 210
99. 215
99. 244
99. 206
99.198
3.105
2.991
3.140
3.173
99.220
99. 248
16 99. 225
99. 213
3.086
2.975
3.066
3.113
99. 212
99. 242
99.202
99.195
3.117
2.999
3.157
3.185
1, 800, 991
1, 802, 221
1, 600, 444
1, 601, 601
1, 700, 340
1, 699, 903
1, 700, 648
1, 701, 606
1, 700, 563
1, 699, 718
1, 709, 489
1, 800, 701
1, 802, 235
1, 800,147
1, 699, 839
1, 699, 678
1, 700, 801
1, 700, 087
1, 700,140
1, 701, 300
1, 699,866
1, 701, 714
1, 700, 410
1, 700, 027
1,800, 750
1, 800, 230
1, 800, 204
1, 700, 209
1, 701, 012
1, 700, 384
1, 332, 480
1, 288, 949
1,259, 547
1, 345,129
1, 316, 040
1, 378, 873
1, 393,125
1, 498, 568
1, 533, 551
1, 562, 402
1, 388, 222
1, 370, 341
1, 369, 727
1, 436, 342
1, 407. 086
1, 370; 808
1, 391, 970
1, 411, 765
1, 409, 671
1, 411, 931
1,555,908
1, 609, 615
1, 633, 314
1, 463,063
1, 439. 854
1, 432, 783
367, 860
410, 954
441,101
356, 477
384, 523
320, 845
316, 364
302,143
268, 684
237, 745
311, 617
329, 337
331, 074
263. 745
293, 054
330, 492
307, 896
289, 949
290, 739
288, 096
244, 842
190, 615
166, 890
237,146
261,158
267, 601
1, 671, 705
1, 613, 571
1, 660, 069
1, 558, 697
1, 533, 413
1, 609,815
1, 679, 961
1, 695, 766
1, 778, 607
1,732,339
1, 671, 446
1, 640, 685
1, 661, 800
1, 649, 056
1, 676, 070
1, 651, 812
1, 669,080
1, 563, 791
1, 589, 628
1, 677,147
1, 669, 467
1, 675, 872
1, 660, 573
1, 559, 829
1, 549, 999
1, 523, 391
28, 635
86, 332
40, 579
142, 909
167,150
89, 903
29, 528
104, 935
23, 628
67, 808
28, 393
68, 993
39, 001
51, 031
25, 070
49, 488
30, 786
137, 923
110, 782
22, 880
131, 283
124, 358
139. 631
140, 380
161,013
176, 993
99.304
99.278
99. 345
99. 346
99. 443
99. 600
99. 563
99. 562
99. 696
99. 668
99. 613
99. 661
99. 700
99. 710
99. 729
99. 690
99.733
99. 665
99. 700
99. 719
99. 765
99. 840
99. 817
99. 787
99. 759
99. 746
2.753
2. 858
2. 591
2.687
2.202
1.583
1.730
1.732
1.202
1.351
1.532
L342
1.188
1.148
L074
L226
1.055
1.366
1.187
1.112
0.930
0.635
0.723
0.841
0.953
1.006
99.312
17 99. 288
99. 350
18 99. 369
99.-450
99. 634
99. 620
99. 682
99. 701
99. 670
18 99. 660
99. 671
99. 704
99. 725
99. 740
20 99. 729
21 99. 744
22 99. 671
23 99. 703
99. 730
99.770
99. 852
99. 840
24 99. 803
99. 860
99. 759
2.722
2.817
2. 571
2.536
2.176
L448
1.603
1.654
L183
1.305
1.345
1.302
1.171
L088
1.029
1.072
1.013
1.302
1.175
1.068
0.910
0.585
0.633
0.779
0.593
0.953
99. 272
99. 344
99.344
99. 442
99. 573
99. 558
99. 660
99. 690
99. 646
99. 609
99. 657
99. 696
99. 696
99. 720
99. 688
99. 729
99. 662
99. 699
99. 716
99. 761
99. 830
99. 810
99. 782
99. 755
99. 743
2.777
2.880
2. 595
2. 595
2.207
1.689
1.749
1. 741
1.226
1.400
1. 547
1. 357
1.203
1.203
1.108
1.234
1.072
1.377
1.191
1.127
0.945
0.673
0.752
0.862
0.969
1.017
1, 599,694
1, 600,260
1, 600,332
1, 600,748
1, 699,189
1, 700,448
1, 700,087
1, 800,427
1, 800,644
1, 799,986
1, 802,568
1, 700,115
1, 700,152
1, 700,340
1, 699,903
1, 700,648
1, 701.606
1, 700,563
1, 699,718
1, 709,489
1,800, 701
1,802, 235
1,800, 147
1, 699,839
1, 699,678
1, 700,801
97. 253
4.173
25 97. 470
3.843
97. 202
4.250
97. 444
3.485
26 97. 653
3.200
97. 389
3.560
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Special Issue
1957
A u g . 21
A p r . 16
237
$3,178, 378
$1, 751, 093
$1, 454, 014
$297, 079
$1, 751, 093
T a x A n t i c i p a t i o n Series
1957
July 3
M a r . 24
264
$4, 547, 484
$3, 001, 664
$2, 630, 995 " $370, 669
$3, 001, 664
F o o t n o t e s on following page.
to
o
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 aimouncing acceptance of tenders, 2 days before
date of issue. Figures are final and differ in many instances from those shown in press
release announcing preliminary details of a particular issue.
2 Noncompetitive tenders from any one bidder for $200,000 or less, without stated
price, were accepted in fuU at the average price for accepted competitive bids, except
that for the special issue dated August 21, the amount was $300,000, and the tax anticipation series dated July 3, the amount was $400,000.
•
3 Price at which noncompetitive tenders were accepted.
* Bank-discount basis.
5 Except $11,000 at 99.241.
6 Except $125,000 at 99.241, $100,000 at 99.218, $20,000 at 99.210, $100,000 at 99.202, and
$200,000 at 99.199.
7 Except $2,000 at 99.241.
8 Except $1,000,000 at 99,180, $300,000 at 99.178, $300,000 at 99.165, $10,000 at 99.164,
$275,000 at 99.160, $200,000 at 99.156, and $50,000 at 99.150.
9 Except $15,000 at 99.191.
10 Except $151,000 at 99.185, $1,450,000 at 99.163, $2,000,000 at 99.155, $200,000 at 99.154,
$200,000 at 99.153, and $200,000 at 99.152.
n Except $100,000 at 99.150 and $30,000 at 99.140.
12 Except $100,000 at 99.140, $1,000,000 at 99.127, and $130,000 at 99.116.
i3 Except $200,000 at 99.117, $600,000 at 99.115, and $500,000 at 99.110.
1* Except $300,000 at 99.115.
15 Except $50,000 at 99.216.
is Except $15,000 at 99.248, $100,000 at 99.242, $300,000 at 99.241, and $100,000 at 99.240.
i7 Except $350,000 at 99.304.
is Except $600,000 at 99.368.
is Except $100,000 at 99.684.
20 Except$1,000,000 at 99.760, and $550,000 at 99.750.
21 Except$300,000 at 99.752.
22 Except$200,000 at 99.750, and $200,000 at 99.722.
23 Except$100,000 at 99.709.
24 Except $2,000,000 at 99.820, $20,000 at 99.817, and $2,370,000 at 99.810.
25 Except$300,000 at 97.641, $50,000 at 97.575, $1,880,000 at 97.539, and $2,460,000 at
97.535.
26 Except $500,000 at 97.711.
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EXHIBITS
209
United States Savings Bonds Regulations
E X H I B I T 7.—Third a m e n d m e n t , July 1, 1957, to Department Circular No. 677i
Second Revision, amending various provisions affecting the interest r a t e ,
investment yield, and t h e payroll savings plan of United States savings bonds
TREASURY DEPARTMENT,
Washington, J u l y 1, 1957.
D e p a r t m e n t Circular N o . 677, Second Revision, as amended, is hereby further
aniended in view of t h e provisions of D e p a r t m e n t Circular N o . 653, F o u r t h
Revision, concerning United States savings bonds. Series E, and other requirements.
P a r a g r a p h 6 (g) is amended t o read as follows:
"(gj T h e approximate investment yield, compounded semiannually if held to
m a t u r i t y , of t h e currently offered bond is 3.25 percent per a n n u m . This bond
m a t u r e s 8 years a n d 11 m o n t h s from t h e issue date. All bonds m a y be redeemed
a t t h e owner's option a t a n y time after 2 m o n t h s from t h e issue date a t redemption
values fixed b y t h e United States Treasury D e p a r t m e n t in its Circular N o . 653,
F o u r t h Revision, d a t e d April 22, 1957.''
. P a r a g r a p h 6 (hj is hereby deleted.
P a r a g r a p h 17 is amended t o read as follows:
"17. I n case of d e a t h of a n employee, t h e payroll allotment authorization will
be automatically canceled a n d t h e Government will refund a n y a m o u n t due t h e
employee in accordance with t h e provisions of General Regulations N o . 104,
Second Revision, dated March 5, 1957."
P a r a g r a p h 29 is amended t o read as follows:
"29. T h e bond procured for t h e Chief Disbursing Officer and each regional
disbursing officer under D e p a r t m e n t Circular N o . 969, d a t e d November I, 1955
(31 C F R 226) which covers t h e faithful performance of t h e duties of his office
shall also cover t h e faithful performance of his duties as a bond issuing officer.
E a c h officer shall be responsible for maintaining a d e q u a t e records and safeguards
of his unissued stock; of seeing t h a t bonds are issued in t h e proper form and in t h e
proper a m o u n t s a n d are delivered t o t h e registered owners; a n d t h a t all bond
stocks shipped t o him a r e properly accounted for t o t h e Federal Reserve Bank of
which he is an.issuing a g e n t . "
P a r a g r a p h 31 is hereby deleted.
Detailed information concerning United States savings bonds. Series H , which
are also available t h r o u g h t h e voluntary payroll savings plan for those agencies
served b y t h e Washington Regional Office of t h e Division of Disbursement, is
contained in T r e a s u r y D e p a r t m e n t Circular N o . 905, Revised, dated April 22,
1957.
W.
RANDOLPH BURGESS,
Acting Secretary of the Treasury,
E X H I B I T 8.—First a m e n d m e n t , D e c e m b e r 2 3 , 1957, to D e p a r t m e n t Circular N o ,
905, Revised, enlarging t h e group of investors permitted to buy Series H
savings bonds
TREASURY DEPARTMENT,
Washington, December 23, 1957,
Section 332.8 of D e p a r t m e n t Circular N o . 905, Revised, d a t e d April 22; 1957
(31 C F R 332j, is hereby amended effective J a n u a r y 1, 1958, t o read as follows.
Sec. 332.8. Registration.—(aj General.—Generally, only residents (whether
n a t u r a l persons or othersj of t h e United States, its Territories and possessions, t h e
Commonwealth of Puerto Rico, t h e Canal Zone, a n d citizens of t h e United States
temporarily residing abroad are eligible to invest in bonds of Series H . Full
information regarding eligibility t o invest in savings bonds, a n d authorized forms
of registration and rights thereunder, will.be found in t h e regulations currently
in force governing United States savings bonds.^
(bj Individuals.—The bonds m a y be registered in t h e names of n a t u r a l persons
(whether adults or minorsj in their own right, in single ownership, coownership,
and beneficiary form.
' Department Cii'cular No. 530,
210
195 8 REPORT OF THE SECRETARY OF THE TREASTJRY
(cj Others (only in single ownership formj.—The bonds m a y also be registered
a s follows:
(lj Fiduciaries.—In t h e names of a n y persons or organizations, public or
private, as fiduciaries, except where t h e fiduciary would hold t h e bonds merely or
principally as security for t h e performance of a.duty, obligation, or service.
(2j Private and public organizations.—In t h e n a m e s of private or public
organizations (including private corporations, partnerships a n d unincorporated
.associations, a n d States, counties, public corporations, a n d other public bodiesj
in their own right, b u t not in t h e names of commercial banks, which are defined
for this purpose as those accepting d e m a n d deposits.
JULIAN B . BAIRD,
Acting Secretary of the Treasury.
E X H I B I T 9.—First a m e n d m e n t , D e c e m b e r 23, 1957, to D e p a r t m e n t Circular No.
653, Fourth Revision, enlarging the group of investors permitted to buy Series
E savings bonds
TREASURY DEPARTMENT,
Washington, December 23, 1957.
Sections 316.7, 316.8, and 316.11 (a) of D e p a r t m e n t Circular No. 653, F o u r t h
Revision, dated April 22,1957 (31 C F R 316), are hereby amended effective J a n u a r y
1, 1958, to read as follows:
SEC. 316.7. Registration.—(a) General.—Generally, only residents (whether
n a t u r a l persons or others) of t h e United States, its Territories and possessions, t h e
Commonwealth of Puerto Rico, t h e Canal Zone, and citizens of t h e United States
temporarily residing abroad are eligible to invest in bonds of Series E . Full
information regarding eligibility to invest in savings bonds, and authorized forms
of registration and rights thereunder, will be found in t h e regulations currently
in force governing United States savings bonds.i
(b) Individuals.—The bonds m a y be registered in t h e names of n a t u r a l persons
(whether adults or minors) in their own right, in single ownership, coownership,
and beneficiary form.
(c) Others (only in single ownership form).—The bonds m a y also be registered
as follows:
(1) Fiduciaries.—In t h e n a m e of any persons or organizations, public or
private, as fiduciaries, except where t h e fiduciary would hold t h e bonds merely
or principally as security for t h e performance of a duty, obligation, or service.
(2) Private and public organizations.—In t h e names of private or public
organizations (including private corporations, partnerships, and unincorporated
associations, and .States, counties, public corporations, and other public bodies)
in their own right, b u t not in t h e names of commercial banks, which are defined
for this purpose as those accepting demand deposits.
S E C . 316.8. Limitation on holdings.—The limits on t h e a m o u n t of bonds of
Series E originally issued during any one calendar year t h a t m a y be held by any
one person a t any one.time (which will be computed in accordance with t h e regulations currently in force governing United States savings bonds) are:
(a) General limitation.—$10,000 (maturity Value) for t h e calendar year 1958
and each calendar year thereafter.
(b) Special limitation applicable to employees^ savings plans.—$2,000 (maturity
value) multiplied by t h e highest n u m b e r of participants in an employees' savings
plan (as defined below) ^ at any time during t h e year in which t h e bonds are issued.
1. Definition of plan and conditions of eligibility.—(i) T h e employees' savings
plan m u s t h a v e been established by t h e employer for t h e exclusive and irrevocable
benefit of his employees or their beneficiaries, afford employees t h e means ofmaking regular savings from their wages through payroll deductions, and provide
for employer contributions to be added to such savings.
(ii) T h e entire assets thereof m u s t be credited to t h e individual accounts of
participating employees and assets credited to t h e account of an employee m a y be
distributed only to him or his beneficiary, except as otherwise provided herein.
(iii) Bonds of Series E m a y be purchased only with assets credited t o t h e
accounts of participating employees a n d only if t h e a m o u n t t a k e n from any
1 Department Ckcular No. 530. ^ ^ ,^ ^ ^ ..
^ ^^
,,.....
2 No other investor is authorized to hold bonds.m excess of the general limitation.
EXHIBITS.
211
account at any time for that purpose is equal to the purchase price of a bond or
bonds in an authorized denomination or denominations, and shares therein are
credited to the accounts of the individuals from which the purchase price thereof
was derived, in amounts corresponding with their shares. For example, if $37.50
credited to the account of John Jones is commingled with funds credited to the
accounts of other employees to make a total of $7,500, with which a bond of
Series E in the denomination of $10,000 (maturity value) is purchased in June
1958 and registered in the name and title of the trustee or trustees, the plan
must provide, in effect, that John Jones' account shall be credited to show that
he is the owner of a bond of Series E in the denomination of $50 (maturity value)
bearing issue date of June 1, 1958.
(iv) Each participating employee shall have an irrevocable right at any time
to demand and receive from the trustee or trustees all assets credited to his account or the value thereof, if he so prefers, without regard to any condition other
than the loss or suspension of the privilege of participating further in the plan,
except that a plan will not be deemed to be inconsistent herewith, if it limits or
modifies the exercise of any such right by providing that the employer's contribution does not vest absolutely until the employee shall have made contributions
under the plan in each of not more than sixty calendar months succeeding the
month for which the employer's contribution is made.
(v) Upon the death of an employee, his beneficiary shall have the absolute
and unconditional right to demand and receive from the trustee or trustees all
the assets credited to the account of the employee, or the value thereof, if he
so prefers.
(vi) When settlement is made with an employee or his beneficiary with
respect to any bond of Series E registered in the name and title of the trustee or
trustees in-whichtheemployee has a share (see (ii). hereof), the bondimust.be
submitted for redemption or reissue to the extent, of such share; if an employee
or his beneficiary is to receive distribution in kind, bonds bearing the same issue
dates as those credited to the employee's account will be reissued in the name of
the distributee to the extent to which he is entitled, in authorized denominations,
in any authorized form of registration, upon the request and certification of the
trustee or trustees in accordance with the provisions of the regulations governing
United States savings bonds.
2. Definitions of terms used in this section and related provisions.—(i) The term
"savings plan" includes any regulations issued under the plan with regard to
bonds of Series E; a copy of the plan and any such regulations, together with a
copy of the trust agreement certified by a trustee to be true copies, must be submitted to the Federal Reserve Bank of the district in order to establish, the eligibility of the trustee or trustees to purchase bonds in excess of the general limitation in any calendar year.
(ii) The term "assets" means all funds, including the employees' contributions and the employer's contributions and assets purchased therewith as well as
accretions thereto, such as dividends on stock, the increment in value on bonds
and all other income; but, notwithstanding any other provision of this section,
the right to demand and receive "all assets" credited to the account of an employee
shall, not be construed to require the distribution of assets in kind when it would
not be possible or practicable to make such distribution; for example, bonds of
Series E may not be reissued in unauthorized denominations, and fractional shares
of stock are not readily distributable in kind.
(iii) The term "beneficiary" means the person or persons, if any, designated
by the employee in accordance with the terms of the plan to receive the benefits
of the trust upon his death or the estate of the employee, and the term "distributee" means the employee or his beneficiary.
SEC. 316.11. Purchase of bonds.—(a) Over-the-counter for cash: (1) For natural
persons in their own right only (i) at such incorporated banks, trust companies,
and other agencies as have been duly qualified as issuing.agents; and (ii) at selected
United States post offices; and (2) for all eligible purchasers, at Federal Reserve
Banks and branches and at the Treasury Department, Washington 25, D. C.
JULIAN B . BAIRD,
Acting Secretary of the Treasury.
212
1958 REPORT OF THE SECRETARY OF THE TREASURY
E X H I B I T 10.—Eighth Revision, D e c e m b e r 26, 1957, of D e p a r t m e n t Circular No.
530, regulations governing United States savings bonds
TREASURY DEPARTMENT,
Washington, December 26, 1957.
To Owners of United States Savings Bonds and Others Concerned:
P u r s u a n t to Section 22 of the Second Liberty Bond Act, as amended (49 S t a t .
21, as amended; 31 U. S. C. 757c), D e p a r t m e n t Circular N o . 530, Seventh
Revision, dated M a y 21, 1952 (31 C F R 315), as amended, is hereby further
amended and issued as an eighth revision, effective J a n u a r y 1, 1958, to read as
follows:
SUBPART A — G E N E R A L
INFORMATION
S E C . 315.-0. Applicability of regulations.—These regulations apply generally
t o all United States savings bonds of all series of whatever designation, bearing
a n y issue dates whatever, except as otherwise specifically provided herein.
SEC. 315.1. Official agencies.—The Bureau of t h e Public Debt of t h e Treasury
D e p a r t m e n t is charged with m a t t e r s relating to United States savings bonds.
Transactions in savings bonds after original issue are largely conducted b y t h e
Bureau of the Public Debt, Division of Loans and Currency Branch, 536 South
Clark Street, Chicago 5, Illinois, t h e Federal Reserve Banks and branches, as
fiscal agents of the United States, and the Treasurer of t h e United States, Treasury
D e p a r t m e n t , Washington 25, D . C. Correspondence in regard to any such
transactions and requests for appropriate forms should be addressed to t h e office
in Chicago or t h e Federal Reserve B a n k of the district in which t h e correspondent
is located or t h e Treasurer of t h e United States, except t h a t any specific instructions given elsewhere in this circular for addressing correspondence regarding
particular transactions should be observed. Notices or documents not filed in
accordance with instructions in these regulations will n o t be recognized. T h e
Federal Reserve B a n k s a n d branches are located in t h e cities indicated b y their
names, asfollows:
Federal Reserve B a n k of Boston.
Federal Reserve.Bank of New York:
Buffalo Branch.
Federal Reserve B a n k of Philadelphia.
Federal Reserve Bank of Cleveland:
. .
Cincinnati Branch,
'•
P i t t s b u r g h Branch.
Federal Reserve Bank of Richmond:
Baltimore Branch,
Charlotte Branch.
Federal Reserve Bank of A t l a n t a :
Birmingham Branch,
Jacksonville Branch,
Nashville Branch,
New Orleans Branch.
Federal Reserve Bank of Chicago:
Detroit Branch.
Federal Reserve Bank of St. Louis:
Little Rock Branch,
Louisville Branch,
Memphis Branch.
.
Federal Reserve B a n k of Minneapolis:
.* .
Helena (Montana) Branch.
Federal Reserve Bank of Kansas C i t y :
Denver Branch,
Oklahoma City Branch,
Omaha Branch.
Federal Reser.ve B a n k of Dallas:
.' El Paso Branch,
H o u s t o n Branch,
San Antonio B r a n c h .
s
EXHIBITS
213
Federal Reserve Bank of San Francisco:
Los Angeles Branch,
Portland (Oregon) Branch,
Salt Lake City Branch,
Seattle Branch.
SEC. 315.2. Definition of terms as used in these regulations.
(a) " A n i n c o m p e t e n t " means any person who is under legal disability for
reasons other t h a n minoritj^ and includes individuals whose estates have been
placed under the, administration of a guardian or custodian because of t h e age,
physical disability, or wishes of t h e individual.
(5) " A u t h o r i z e d issuing a g e n t " means an incorporated bank, t r u s t company,
savings bank, Federal savings and loan association, instrumentality of the Uniteci
States, or other organization qualified as an issuing agent under t h e provisions of
D e p a r t m e n t Circular No! 657, as amended and supplemented (31 C F R 317).
(c) "Authorized paying a g e n t " means an incorporated bank, t r u s t company,
savings bank, savings and loan association, or other organization qualified as a
paying agent under t h e provisions of D e p a r t m e n t Circular No. 750, Revised
(31 C F R 321).
(d) " C o u r t " ineans a court which has jurisdiction over t h e parties and subject
matter.
(e) "Federal Reserve B a n k " includes any branch of a Federal Reserve B a n k .
(/) " E x t e n d e d m a t u r i t y d a t e " means t h e date of. expiration of any period
(hereinafter called "optional extension period") after t h e " m a t u r i t y d a t e " during
which t h e owner has t h e option of retaining bonds a t further interest under t h e
provisions of t h e D e p a r t m e n t circular offering t h e m for sale.i
ig) " E x t e n d e d m a t u r i t y v a l u e " means t h e value of a bond at t h e end of t h e
optional extension period.
(h) " M a t u r i t y d a t e " means t h e date on which t h e bond will m a t u r e by t h e
t e r m s of t h e D e p a r t m e n t circular offering it for sale without regard to any optional extension period.
(i) " M a t u r i t y v a l u e " and "face v a l u e " of a bond are used interchangeably
unless otherwise indicated. They refer t o t h e value of a bond on its m a t u r i t y
date.
(jy " P a y m e n t " a n d " r e d e m p t i o n " are used interchangeably, unless otherwise
indicated. They refer to t h e p a y m e n t of a savings bond in accordance with t h e
governing regulations.
(k) "Personal t r u s t e s t a t e " means a t r u s t estate established by natural persons
in their own right, for t h e benefit of themselves or other such natural persons,
in whole or in part, and common t r u s t funds comprised in whole or in p a r t of such
t r u s t estates.
{I) "Presented a n d surrendered" and "presentation a n d surrender" mean t h e
actual receipt of t h e bond, with an appropriate request for t h e particular t r a n s action, by t h e Bureau of t h e Public D e b t , Chicago office or Washington office,
t h e Treasurer of t h e United States, or a Federal Reserve Bank, or, if t h e transaction is one which an authorized paying agent m a y handle, receipt by such authorized paying agent.
(m) "Representative of a minor's estate," "representative of an incompetent's
e s t a t e , " or "representative of an absentee's e s t a t e " m e a n a guardian, conservator,
or similar representative of t h e estate of a minor, incompetent, or absentee a p pointed by court or otherwise legally qualified, regardless of t h e title by which designated. These terms do not refer to a voluntary or natural guardian, such as a
parent, including a p a r e n t to whom custody of a child has been awarded through
divorce proceedings or a parent by adoption, or to t h e executor or administrator
of t h e estate of a decedent.
(n) "Reissue" means t h e cancellation and retirement of a bond and t h e issue
of a new bond or bonds of the same series, a m o u n t (maturity value) (or t h e remainder thereof in case of partial redemption), a n d issue d a t e .
SUBPART
B—REGISTRATION
SEC. 315.5. General.—United States savings bonds are issued only in registered
form. T h e form of registration used m u s t express t h e actual ownership of a n d
interest in t h e bond and, except as otherwise specifically provided in Subpart
E and Sec. 315.48 of S u b p a r t I of these regulations, will be considered as conclu1 Bonds of Series E bearing issue dates prior to May 1,1957, have an optional extension period. Bonds of
other series do not have this feature.
214
1958 REPORT OF THE SECRETARY OF THE TREASURY
sive of such ownership and interest. No designation of an attorney, agent, or
other representative to request or receive p a y m e n t on behalf of t h e owner or a
coowner, nor any restriction on t h e right of. t h e owner or a coowner to receive
p a y m e n t of t h e bond or interest, other t h a n as provided in these regulations,
m a y be made in t h e registration or otherwise. I n order to avoid difficulty when
redemption or reissue is requested or in collecting interest on current income
bonds, and for t h e protection of t h e persons intended to be designated as owners,
coowners, or beneficiaries, it is very i m p o r t a n t t h a t requests for registration be
clear, accurate, a n d complete, t h a t t h e registration conform with one of t h e forms
set forth in this subpart, and t h a t t h e registration of all securities owned by t h e
same person, organization or fiduciary estate be uniform. The post office address
should include, where appropriate, t h e street a n d number, postal zone, a n d route
or any other local feature. The owner, coowner or beneficiary should be design a t e d by t h e name by which he is ordinarily known or t h e one under which he
does business, including preferably at least one full given name. The n a m e should
be preceded by any applicable title, such as " D r . " or " R e v . , " or followed by
" M . D . , " " D . D . " or other similar designation. The designation " S r . " or " J r . "
should be used whenever applicable. The n a m e of a woman should be preceded
by " M i s s " or " M r s . " unless some other applicable title or designation is used.
A married woman's own given name, not t h a t of her husband, should be used,
for example, " M r s . M a r y A. Jones," not " M r s . F r a n k B . Jones."
S E C . 315,6. Restrictions.
(a) Restrictions as to residence.—The registration of savings bonds is restricted
on original issue, b u t not on authorized reissue, to include only persons (whether
n a t u r a l persons or others) who are:
(i) Residents of t h e United States, its Territories and possessions, the
Commonwealth of Puerto Rico, and t h e Canal Zone;
(2) Citizens of t h e United States temporarily residing abroad;
(3) Civilian employees of t h e United States or members of its Armed
Forces, regardless of their residence or citizenship; and
(4) Other n a t u r a l persons as coowners with, or beneficiaries on death of,
n a t u r a l persons of any of t h e above classes;
except t h a t t h e registration of savings bonds, whether on original issue or reissue,
is n o t authorized in any form to include t h e n a m e of any alien who is a resident
of any area with respect to which t h e Treasury D e p a r t m e n t restricts or regulates
t h e delivery of checks d r a w n against funds of t h e United States or any agency
pr instrumentality thereof.^
(6) Restrictions as to minority or incompetency.—
(1) Bonds purchased by another person with funds belonging to a minor
should be registered in t h e n a m e of t h e minor without a coowner or beneficiary. If there- is a representative of t h e minor's estate, t h e bonds should
be registered in t h e n a m e of t h e minor, or in t h e n a m e or names of all such
representatives, followed in either case by an, appropriate reference to t h e
guardianship. Bonds purchased by a representative of two or more minors,
even though appointed in a single proceeding, should be registered in a form
to show each guardianship estate separately. If a bond is purchased as a
gift to a minor and either t h e donor or t h e minor resides in a State which
by s t a t u t e authorizes t h e donor to designate an adult as custodian for t h e
minor, t h e bond m a y be registered as provided in t h e s t a t u t e if such registration includes a clear reference to t h e s t a t u t e . If no reference to t h e s t a t u t e
is included in t h e registration set forth in t h e s t a t u t e a parenthetical reference
identifying t h e s t a t u t e m u s t be added. A father or mother, as such, or as
n a t u r a l guardian, is not considered a representative for purposes of registration. See examples of forms of registration under Sec. 315.7 (b).
A minor, whether or n o t under legal guardianship, m a y be n a m e d as owner,
coowner, or beneficiary on bonds purchased by another person with t h a t
person's own funds. A minor m a y n a m e a coowner or beneficiary on
bonds purchased by him from his wages, earnings, or other funds belonging
t o him and under his controL
(2) Bonds should not be registered in t h e n a m e of an incompetent, unless
there is a legal representative of his estate, except under t h e provisions of
Sec. 315.53. If there is a legal representative t h e provisions of t h e preceding
paragraph, as to registration in t h e n a m e of t h e legal representative or in
t h e n a m e of t h e incompetent followed by reference to t h e guardianship, apply.
2 See Department Circular No. 665, as amended (31 CFR 211).
EXHIBITS
215
SEC. 315.7. Authorized forms of registration.—Subject to any limitations or
restrictions contained in these regulations on the right of any person to be named
as owner, coowner, or beneficiary, savings bonds may be registered in the following forms: ^
(a) Natural persons.—In the names of natural persons in their own right.
(1) Single owner.—Example:
"John A. Jones."
(2) Coownership form—two persons (only).—In the alternative as coowners. Example:
"John A. Jones or Mrs. Ella S. Jones."
No other form of registration establishing coownership is authorized.
(3) Beneficiary form—two persons (only).—Examples:
"John A. Jones payable on death to Mrs. Ella S. Jones."
"John A. Jones P. O. D. Mrs. Ella S. Jones."
"Payable on death" may be abbreviated to "P. 0. D." as indicated in the last
example. The first named person is hereinafter referred to as the owner and the
second named person as the beneficiary.
(b) Fiduciaries and private or public organizations.—Only the single owner form
of registration is available for bonds owned by other than natural persons, and
the registration used must conform to the forms authorized in this subsection.
(1) Fiduciaries.—In the name of any persons or organizations, public or
private, as fiduciaries, except where the fiduciary would hold the bonds
merely or principally as security for the performance of a duty, obligation,
or service.
(i) Guardians, custodians, conservators, etc.—In the name and title
of the legally appointed, designated or authorized representative or
representatives of the estate of a minor, incompetent, aged, absentee,
etc., or in the name bf a minor, incompetent, or absentee, followed by
an appropriate reference to the guardianship. The registration should
show the nature of the incompetency or refer to the statute authorizing
the appointment of the representative*. If the statute requires particular
wording, as in most gift to minors' statutes, the wording required by the
statute should be used. Examples:
"William C. Jones, guardian (or conservator, trustee, etc.) of the
estate of James F. Brown, a minor (or an incompetent, aged,
infirm, or absentee)."
"John Smith, a minor (or incompetent, aged, infirm, or absentee),
under legal guardianship (or conservatorship or trusteeship,
etc.) of Henry C. Smith."
"John Smith, under legal guardianship of Henry Smith pursuant
to Sec. 670.5, Code of Iowa 1950."
"John Smith, a minor (or incompetent) under custodianship by
designation of the Veterans Administration."
"John Smith, an incompetent for whom Henry C. Smith has been
designated trustee by the Department of the Army pursuant
to 37 U. S. C. 351-354."
"William C. Jones, as custodian for John Smith, a minor, under
the California Gifts of Securities to Minors Act."
"William C. Jones, as custodian for John Smith, a minor, under
the laws of the State of Georgia (Chapter 48-3, Ga. Code
Anno.)."
(ii) Executors, administrators, etc.—
(a) In the name of the representative or representatives of the
estate of a decedent appointed by a court or otherwise legally
qualified. The registration should include the name of the decedent and the name or names of all representatives. The name
and title of the representative must be followed by adequate
identifying reference to the estate. Example:
"John Smith, executor of the will (or administrator of the
estate) of Henry J. Smith, deceased."
3 Any question as to the correct form of registration should be promptly submitted to the Federal Reserve
Bank of the district or the Bureau of the Public Debt, Division of Loans and Currency, 636 South Clark
Street, Chicago 5, Illmois.
216
1958 REPORT OF THE SECRETARY OF THE TREASURY
(b) I n t h e n a m e of an executor authorized' to administer a t r u s t
under t h e terms of a will although he is not named as trustee.
Example:
" J o h n Smith, executor of t h e will of H e n r y J. Smith, deceased,
in t r u s t for Mrs. Jane Smith, with remainder over."
(iii) Trustees.—In t h e n a m e and title (or title alone where hereinafter provided) of the trustee or trustees of a single duly constituted
t r u s t estate (which will be considered as an entity), substantially in
accordance with the examples set forth in this paragraph. Unless
otherwise indicated, an adequate identifying reference should be m a d e
t o t h e t r u s t instrument or other authority creating t h e trust. A common t r u s t fund established and maintained according to law by a
financial institution duly authorized to act as a.fiduciary will be considered as a single duly constituted t r u s t estate within t h e meaning of
these regulations.
(a) Will, deed of trust, agreement, or similar instrument.—Examples :
" J o h n Smith and the First National Bank, trustees under t h e
will of H e n r y J. Smith, deceased."
" T h e Second National Bank, trustee under an agreement
with George E. White, dated February 1, 1935."
If t h e authority creating the t r u s t designates by title only an
officer of a board or an organization as trustee, only t h e title of t h e
officer should be used in the registration. Example:
"Chairman, Board of Trustees, First Church of Christ,
Scientist, of Chicago, Illinois, in t r u s t under t h e will of
H e n r y J. Smith, deceased."
If t h e trustees are too numerous to be designated in t h e inscription
by names and title, t h e names or some of t h e names may be
omitted. Examples:
" J o h n Smith, H e n r y Jones, et al., trustees under t h e will of
H e n r y J. Smith, deceased."
"Trustees under the will of H e n r y J. Smith, deceased."
(b) Pension, retirement or similar fund, or employees' savings
plan.—In t h e n a m e and title (or title alone) of the trustee or
trustees of a pension, retirement, or similar fund, or an employees'
savings plan. If t h e instrument creating the t r u s t provides t h a t
t h e trustees shall serve for a limited term, the names of the trustees
m a y be omitted. Examples:
"First National Bank and T r u s t Company, trustee of t h e
Employees' Savings Plan of Jones Company, Inc., U/A
dated
, 195
"
"Trustees of t h e Employees' Savings Plan of Johnson Company, Inc., U/A dated
, 195
"
" F i r s t National Bank, trustee of pension fund of Industrial
Manufacturing Company, under agreement with said
company dated March 31, 1949."
" T r u s t e e s of Retirement F u n d of Industrial Manufacturing
Company, under resolution adopted by its board of
directors on March 31, 1949."
(c) F u n d s of a lodge, church, society, or. similar organization.—If
the funds of a lodge, church, society, or similar organization,
whether incorporated or not, are held in t r u s t by a trustee or
trustees or a board of trustees, only the title should be used in the
registration. Examples:
" T r u s t e e s of t h e First Baptist Church, Akron, Ohio, acting as
a Board under Section 15 of its bj^-laws."
" T r u s t e e s of Jamestown Lodge No. 1,000 Benevolent and P r o tective Order of Elks, under Section 10 of its by-laws.'^
" B o a r d of Trustees of the Lotus Club, Washington, Indiana,
under Article X of its constitution."
(d) Public officers, corporations, or bodies.—If a public officer,
public corporation, or public body acts as trustee under express
a u t h o r i t y of law, only the title should be used in the registration.
EXHIBITS
217
• Examples:
"Sinking F u n d Commission, Trustee of State Highway Certificates of Indebtedness Sinking Fund, under Section
5972. Code of South Carolina."
"WardenJ Illinois State Penitentiary, Joliet Branch, Trustee of
I n m a t e s ' Amusement Fund, under Chapter 23, Sections
34a and 34b, Illinois Revised Statutes, 1941."
(e) School, class, or activity fund.—If the principal or other officer
of a public, private, or parochial school acts as trustee for the benefit
of the s t u d e n t body or a class, group, or acti vity. thereof, only t h e
title should be used in the registration, and if the a m o u n t purchased
for any one fund does not exceed $500 (maturity value), no reference
need be made to a t r u s t instrument. Examples:
"Principal, Western High School, in t r u s t for Class of 1955
Library F u n d . "
" D i r e c t o r of Athletics,, Western High School, in t r u s t for Stud e n t Activities Association under resolution adopted
M a y 12, 1955."
. (iv) Life tenants.—In the name of a life tenant, followed b y adequate
identifying reference t o t h e instrument creating the life tenancy.
Example:
" M r s . Jarie Smith, life t e n a n t under the will of H e n r y J. Smith,
deceased."
(v) Investrnent agents.—In the name of a bank, t r u s t . company, or
. other financial institution, or individual, holding funds of a religious,
educational, charitable, or nonprofit organization, whether or not incorporated, as agent under an agreement with the organization for the
sole purpose of investing and reinvesting t h e funds and paying the
income to t h e organization. T h e name and designation of the agent
should be followed by an adequate identifying reference to t h e agreem e n t . . Examples:
. . .
" B l a c k County National Bank, fiscal agent, under agreement with
t h e Evangelical L u t h e r a n Church of The Holy Trinity, dated
December 28, 1949:"
" F i r s t National Bank and T r u s t Company, investment agent,
under agreement with Central City Post No. 1000, D e p a r t m e n t of Illinois, American Legion."
(2) Private organizations (corporations, associations, and partnerships,
etc.).—In the name of any private organization, b u t not in the names of commercial banks, which are defined for this purpose as those accepting demand
deposits. T h e full legal name of the organization, without mention of any
officer or member by name or title, should be used, as follows:
(i) A corporation.—A business, fraternal, religious, or other private
corporation, followed preferably by the words " a corporation" (unless
the fact of incorporation is shown in the n a m e ) . Examples:
" S m i t h Manufacturing Company, a corporation."
" J o n e s and Brown, I n c . "
(ii) A n unincorporated association.—An unincorporated lodge, society,
or similar self-governing association, followed preferably by the words
" a n unincorporated association." T h e t e r m " a n unincorporated association" should not be used to describe a t r u s t fund, a board of trustees,
a partnership, or a business conducted under a trade name or as a sole
proprietorship. If the association is chartered by or affiliated with a
p a r e n t organization, the name or designation of the subordinate or local
organization should be given first, followed by the name of the p a r e n t
organization. The name of the parent or national organization m a y be
placed in parentheses and, if it is well known, m a y be abbreviated.
Examples:
/ ' T h e Lotus Club, an unincorporated association."
"Local 447, Brotherhood of Railroad Trainmen, an unincorporated
association."
" E u r e k a Lodge N o . 317 (A. F . & A. M.), an unincorporated association."
218
1958 REPORT OF THE SECRETARY OF THE TREASURY
(iii) A partnership.—A partnership (which will be considered as an
e n t i t y ) , followed by the words " a p a r t n e r s h i p . " E x a m p l e s :
" S m i t h and Brown, a p a r t n e r s h i p . "
" A c m e Novelty Company, a p a r t n e r s h i p . "
(iv) Institutions (churches, hospitals, homes, schools, etc.).—In the name
of a church, hospital, home, school, or similar institution conducted b y
a private organization or b y private trustees, regardless of t h e manner
in which it is organized or governed or title to its property is held.
Examples:
" S h r i n e r s ' Hospital for Crippled Children, St. Louis, Missouri."
" S t . M a r y ' s R o m a n Catholic Church, Albany, New York."
" R o d e p h Shalom Sunday School, Philadelphia, Pennsylvania."
(3) Governmental units, agencies, and officers.—In t h e full legal name or
title of t h e owner or official custodian of public funds, other ;than.trust,funds,,
as follows:
(i) Any governmental unit, as a State, county, city, town, village, or
school district. Examples:
' ' S t a t e of M a i n e . "
" T o w n of Rye, New York (Street I m p r o v e m e n t F u n d ) . "
(ii) Any board, commission, Government owned corporation, or other
public body duly constituted by law. E x a m p l e :
" M a r y l a n d State Highway Commission."
(iii) Any public officer designated b y title only. E x a m p l e :
"Treasurer, City of Chicago."
(c) Treasurer of the United States as coowner or beneficiary.—Those who desire
to do so m a y make gifts to t h e United States b y designating t h e Treasurer of the
United States as coowner or beneficiary. Bonds so registered m a y n o t be reissued
to change t h e designation. Examples:
' ' J o h n A. Jones or t h e Treasurer of t h e United States of America."
" J o h n A. Jones P . O. D . t h e Treasurer of t h e United States of America."
S E C . 315.8. Unauthorized registration.—A savings bond inscribed in a form not
substantially in agreement with one of those authorized by this s u b p a r t will n o t
be considered as validly issued, except t h a t once it is established t h a t t h e bond
can.be reissued in a form of registration which is valid under these regulations it
will be considered as having been validly issued from the d a t e of original issue.
S U B P A R T C — L I M I T A T I O N S ON H O L D I N G S
S E C . 315.10. Amount which may be held.—The a m o u n t s of savings bonds of
each series, issued in any one calendar year, which m a y be held by any one person
a t any one time, computed in accordance with the provisions of Sec. 315.11, are
limited as follows: ^
(a) Series E.—$5,000 (maturity value) for each calendar year up to and including the calendar year 1947; $10,000 (maturity value) for t h e calendar years
1948 t o 1951, inclusive; $20,000 (maturity value) for the calendar years 1952 to
1956, inclusive; $10,000 (maturity value) for t h e calendar year 1957 ^ and each
calendar year thereafter; except t h a t trustees of an employees' savings plan (as
defined in Sec. 316.8 of D e p a r t m e n t Circular No. 653, F o u r t h Revision, as
amended) m a y purchase $2,000 (maturity value) multiplied by the highest n u m ber of employees participating in the plan a t any time during t h e calendar year
in which the bonds are issued.
(b) Series H.—$20,000 (maturity value) for each calendar year up to and including the calendar year 1956, and $10,000 (maturity value) for t h e calendar
year 1957 ^ and each calendar year thereafter.
S E C . 315.11. Computation of amount.
(a) Definition of "person''.—The t e r m " p e r s o n " for purposes of this section
shall mean a n y legal e n t i t y and shall include b u t not be limited t o n a t u r a l persons,
corporations (public or private), partnerships, unincorporated associations, a n d
t r u s t estates. T h e holdings of each person individually and his holdings in a n y
* Bonds of Series F, G, J, and K, which are no longer available for purchase, are subject to the limitations
on holdings and rules for computation of holdings set forth in Sees. 315.8 and 315.9 of Department Circular
No. 530, Seventh Revision.
6 Effective May 1,1957. Accordingly investors who purchased $20,000 (maturity value) of bonds of Series
E bearing issue dates of January 1 through April 1 were not entitled to purchase additional bonds of that
series during 1957. The same limitation applies to bonds of Series H bearing those issue dates. Investors
who purchased less than $10,000 (maturity value) of bonds of either series prior to May 1 were entitled
only to pmxhase enough of either series to bring their total for that series for 1957 to $10,000 (maturity value).
EXHIBITS
219
fiduciary capacity authorized b y these regulations, such as, for example, his
holdings as a guardian of t h e estate of a minor, as a life t e n a n t , or as trustee u n der a will or deed of trust, shall be computed separately. A pension or retirem e n t fund or an investment, insurance, a n n u i t y or similar fund or t r u s t will be
regarded as an e n t i t y regardless of t h e n u m b e r of beneficiaries or the m a n n e r in
which their respective interests are established or determined. Segregation of
individual shares as a m a t t e r of bookkeeping or as a result of individual agreements with beneficiaries or t h e express designation of individual shares as s e p a r a t e
trusts will not operate to constitute separate t r u s t s under these regulations.
(b) Bonds that must be included in computation.—Except as provided in p a r a graph (cj of this section, there m u s t be t a k e n into account in computing t h e
holdings of each person:
(1) All bonds registered in t h e name of t h a t person alone;
(2) All bonds registered in t h e n a m e of t h e representative of t h e estate
of t h a t person;
(3) All bonds originally registered in t h e name of t h a t person as coowner
or reissued a t t h e request of t h e original owner t o a d d t h e name of t h a t
person as coowner or t o designate him as coowner instead of as beneficiary.
However, t h e a m o u n t of bonds of Series E a n d H held in coownership form
m a y be applied t o t h e holdings of either of t h e coowners b u t will not be
applied to both, or t h e a m o u n t m a y be apportioned between t h e m .
(c) Bonds that may be excluded from computation.—There need not be taken
into account:
(1) Bonds on which t h a t person is n a m e d beneficiary;
(2) Bonds in which his interest is only t h a t of a beneficiary under a t r u s t ;
(3) Bonds to which he has become entitled under Sec. 315.66 as surviving
beneficiary upon t h e death of t h e registered owner, as an heir or legatee of
t h e deceased owner, or b y virtue of t h e termination of a t r u s t or the happening of a n y other event;
(4) Bonds of Series E purchased with t h e proceeds of m a t u r e d bonds of
Series A, Series C-1938, a n d Series D , where such m a t u r e d bonds were
presented for t h a t purpose;
(5) Bonds of Series E bearing issue dates from M a y 1, 1941, to December
1, 1945, inclusive, held b y individuals in their own right which are not more
t h a n $5,000 ( m a t u r i t y value) in excess of t h e prescribed limit;
(6) Bonds of Series E or Series H reissued under Sec. 315.60 (b) (lj ;(7) Bonds of Series E or Series H reissued in t h e n a m e of a trustee of a
personal t r u s t .estate which did not represent excess holdings prior to such
reissue.
SEC. 315.12. Disposition of excess.—If any person at any time acquires savings
bonds issued during a n y one calendar year in excess of t h e prescribed a m o u n t ,
t h e excess m u s t be immediately surrendered for refund of t h e purchase price, less
(in t h e case of current income bonds) a n y interest which m a y have been paid
thereon, or for such other a d j u s t m e n t as m a y be possible. For good cause found
t h e Secretary of t h e Treasury m a y permit excess holdings to s t a n d in any p a r ticular case or class of cases.
S U B P A R T D — L I M I T A T I O N ON T R A N S F E R OR P L E D G E
S E C . 315.15. Limitation on transfer or pledge.—Savings bonds are not t r a n s ferable and are payable only to t h e owners n a m e d thereon, .except as.specifically
provided in these regulations, and then only in the m a n n e r and. to the,, extent so
provided. A savings "bond m a y not be hypothecated, pledged as collateral, or
used as security for t h e performance of an obligation, except as provided in
Sec. 315.16.
S E C . 315.16. Pledge under Department Circulars Nos. 154 ctnd 657.—A savings
bond m a y be pledged b y t h e registered owner in lieu of surety under the provisions
of D e p a r t m e n t Circular No. 154, Revised, if t h e bond approving officer is t h e
Secretary of the Treasury, in which case an irrevocable power of attorney shall'
be executed authorizing t h e Secretary of t h e Treasury t o request p a y m e n t . A
savings bond m a y also be deposited as security with a Federal Reserve Bank
under t h e provisions of D e p a r t m e n t Circular N o . 657, as amended and supplemented, by an institution certified under t h a t circular as an issuing agent for
savings bonds of Series E .
220
1 9 5 8 REPORT OF T H E SECRETARY OF T H E
S U B P A R T E — L I M I T A T I O N ON J U D I C I A L P R O C E E D I N G S — N o
PERMITTED
TREASURY
S T O P P A G E OR C A V E A T S
S E C . 315.20. General.—No judicial determination will be recognized which
would give effect t o an a t t e m p t e d voluntary transfer inter vivos of a bond or would
defeat or impair t h e rights of survivorship conferred b y these regulations upon
a surviving coowner or beneficiary, and all other provisions of this s u b p a r t are
subject t o this restriction. Otherwise, a claim against an owner or coowner of
a savings bond and conflicting claims as to ownership of, or interest in, such
b o n d as between coowners or between t h e registered owner a n d beneficiary will
be recognized, when established b y valid judicialproceedings, upon presentation
a n d surrender of t h e bond, b u t only as specifically provided in this subpart.
Neither t h e Treasury D e p a r t m e n t nor any agency for t h e issue, reissue, or
redemption of savings bonds will accept notices of adverse claims or of pending
judicial proceedings or u n d e r t a k e t o protect t h e interests of litigants who do
not have possession of a bond.
SEC. 315.21. Payment to judgment creditors.
(a) Creditors.—Payment (but not reissue) of a savings bond registered in single
ownership, coownership, or beneficiary form will be made to t h e purchaser a t a
sale under a levy or to t h e officer authorized to levy upon t h e property of t h e
registered owner or coowner under appropriate process to satisfy a money judgment. P a y m e n t will be m a d e to such purchaser or officer only to t h e extent
necessary to satisfy t h e . j u d g m e n t and will be limited to t h e redemption value
current sixty days after t h e termination of judicial proceedings or current a t t h e
t i m e t h e bond is received, whichever is smaller. P a y m e n t of a bond registered in
coownership form p u r s u a n t to a j u d g m e n t or levy against only one of t h e coowners
will be limited to t h e extent of t h a t coowner's interest in t h e bond; this interest
m a y be established b y an agreement between t h e coowners or b y a judgment,
decree, or order of court entered in a proceeding t o which b o t h coowners are
parties.
(6) Trustees in bankruptcy and receivers.—Payment of a savings bond will be
m a d e to a trustee in b a n k r u p t c y , a receiver of an insolvent's estate, a receiver in
equity, or a similar officer of t h e court, under t h e applicable provisions of subsection (a) of this section, except t h a t p a y m e n t will be made a t t h e redemption
value current on- t h e date of payment..
S E C . 315.22. Payment or reissue pursuant to judgment.
(a) Divorce.—A decree of divorce ratifying or confirming a property settlement
agreement or otherwise settling t h e respective interests of t h e parties in a bond
will not be regarded as a proceeding giving effect, to an atterhpted voluntary
transfer under t h e provisions of Sec. 315.20. Consequently, reissue of a savings
b o n d m a y be made to eliminate t h e n a m e of one spouse as owner, coowner, or
beneficiary, or to substitute t h e n a m e of one spouse for t h a t of t h e other as owner;
coowner, or beneficiary p u r s u a n t to such a decree. T h e evidence required under
Sec. 315.23 must, be s u b m i t t e d in any case. I n cases where t h e decree does not
set o u t t h e terms^ of t h e property settlement agreement a certified copy of t h e
agreement m u s t also be submitted, and in any case where t h e bonds are presently
registered with a person other t h a n one of t h e spouses as owner or coowner there
m u s t be submitted either a request for t h e reissue by such person or a judgment,
decree, or order of court entered in a proceeding to which he was a p a r t y , determining t h e extent of t h e interest in t h e bond held by t h e spouse whose n a m e is to
b e eliminated, and reissue will be permitted only to t h e extent of t h e spouse's
interest in t h e bonds. P a y m e n t r a t h e r t h a n reissue will be m a d e if requested.
(Jb) Gifts causa mortis.—A bond belonging solely to one person will be paid or
reissued on t h e request of t h e person found b y a court to be entitled thereto b y
reason of a gift causa mortis by t h e sole owner.
ic) Date for determining rights.^-For t h e purpose of determining whether or not
reissue shall be m a d e under this section p u r s u a n t to judicial proceedings, t h e rights
of all parties involved shall be those existing under these regulations at t h e time
of t h e e n t r y of t h e final judgment, decree, or order.
SEC. 315.23. Evidence necessary.—To establish t h e validity of judicial proceedings, there m u s t be s u b m i t t e d certified copies of a final judgment, decree, or order
qf court, and of any necessary supplementary proceedings. If t h e judgment,
decree, or order of court was rendered more t h a n six months prior to t h e presentation of t h e bond, there m u s t also be submitted a certificate from t h e clerk of t h e
court, under its seal, dated within six months of t h e presentation of t h e bond showing t h a t t h e judgment, decree, or order of court is in full force. A request for p a y -
EXHIBITS
221
m e n t by a trustee in b a n k r u p t c y m u s t be supported b y duly certified evidence of
his a p p o i n t m e n t and qualification. A request for p a y m e n t by a receiver of an
insolvent's estate m u s t be supported by a copy of t h e order appointing him, certified by t h e clerk of t h e court, under its seal, as being in full force on a date not
more t h a n six m o n t h s prior to t h e date of t h e presentation of the bond. A request for
p a y m e n t b y a receiver in equity or a similar officer of t h e court, other t h a n a receiver of an insolvent's estate, m u s t be supported by a copy of an order authorizing
him to present t h e bond for redemption, certified by t h e clerk of t h e court, under its
seal, as being in full force on a date not more t h a n six m o n t h s prior to t h e presentation of t h e bond.
S U B P A R T F — L O S T , S T O L E N , M U T I L A T E D , D E F A C E D , OR D E S T R O Y E D B O N D S
SEC. 315.25. Relief in case of loss, etc., after receipt by owner.—Relief either b y
t h e issue of a substitute bond marked " D U P L I C A T E " or by p a y m e n t m a y be
given in case of t h e loss, theft, destruction, mutilation, or defacement of a savings
b o n d after receipt b y t h e owner or his representative. Such relief will be granted
only after compliance with t h e provisions of this section; and in cases of loss or
theft relief will not ordinarily be granted until six m o n t h s after t h e date of receipt
b y t h e Treasury D e p a r t m e n t of t h e notice of such loss or theft.*^
(a) Procedure to be followed in applying for relief.—In any such case immediate
notice of t h e facts, together with a complete description of t h e bond (including
series, year of issue, serial number, and n a m e and address of t h e registered owner
or coowners) should be given to t h e Bureau of t h e Public Debt, Division of Loans
a n d Currency Branch, 536 South Clark Street, Chicago 5, Illinois. T h a t office
will furnish t h e proper application form and instructions. I n case of mutilation
or defacement, all available fragments of t h e bond in any form whatsoever should
be submitted. I n all cases t h e bond must be identified and t h e applicant m u s t
s u b m i t satisfactory evidence of loss, theft, or destruction, or a satisfactory explanation of t h e mutilation or defacement.
T h e application m u s t be made by t h e person or persons (including both coowners, if living) authorized under these regulations to request p a y m e n t of t h e
bond, except as follows:
(1) If t h e bond is in beneficiary form and t h e owner and beneficiary are
both living, b o t h will ordinarily be required to join in t h e application.
(2) If a minor who is not of sufficient competency and understanding to
request p a y m e n t on his own behalf is named as owner, coowner, or beneficiary, both parents will ordinarily be required to join in t h e application.
(b) Bond of indemnity.—The Treasury D e p a r t m e n t reserves t h e right to require a bond of indemnity, in accordance with Sec. 8 (b), 50 Stat. 481, as amended
(31 U. S. C. 738a).
(c) Recovery of savings bonds reported lost, stolen, or destroyed.—If a bond reported lost, stolen, or destroyed is recovered before relief is granted, t h e Bureau
of t h e Public Debt, Division of Loans and Currency Branch, should be notified
p r o m p t l y . If t h e original bond is recovered after relief is granted, it should be
surrendered p r o m p t l y to t h e same office for cancellation.
SEC. 315.26. Relief in case of nonreceipt.—If'a savings bond, on original issue
or on reissue, is not received from t h e issuing agent or agency by t h e registered
owner or other person to whom delivery of t h e bond was directed, t h e issuing
a g e n t or agency should be notified as p r o m p t l y as possible and given all t h e information available about t h e transaction. If necessary, appropriate instructions and forms will t h e n be furnished.
SUBPART G — I N T E R E S T
SEC. 315.30. General.—United States savings bonds are issued in one- of two
forms: (1) appreciation bonds, issued on a discount basis and redeemable before
m a t u r i t y at increasing fixed redemption values; and (2) current income bonds,
issued at par, bearing interest payable semiannually ^ and redeemable before mat u r i t y a t par or a t fixed redemption values less t h a n par.^ T h e D e p a r t m e n t
6 See Sec. 8, 50 Stat. 481, as amended (31 U. S. C. 738a).
7 The final interest on bonds of Series H bearing issue dates prior to March 1, 1957, covers a period of two
months, from 9H years to maturity. Since May 1, 1957, the only current income savings bonds on sale are
those of Series H.
8 The sale of savings bonds of SeriesJ and K was terminated at the close of business April 30,1967. The
termsiof these bonds are set forth in Departraent Circular No. 906, as amended.
222
1958 REPORT OF THE SECRETARY OF THE TREASURY
circular offering bonds of a particular series to t h e public designates t h e form in
which bonds of t h a t series will be available.
SEC. 315.31. Appreciation bonds.—Savings bonds issued on a discount basis increase in redemption value a t t h e end of t h e first year or half-year from issue
d a t e and at t h e end of each successive half-year period thereafter until their mat u r i t y date, when t h e full face a m o u n t becomes payable.^ Bonds of Series E
bearing issue dates from M a y 1, 1941, through April 1, 1957, will continue to increase in redemption value after m a t u r i t y for ten years in accordance with t h e
provisions of Sec. 316.13 of D e p a r t m e n t Circular No. 653, F o u r t h Revision, dated
April 22, 1957.10 T h e increment in value on appreciation bonds is payable only
on redemption of t h e bonds, whether before, at, or after m a t u r i t y .
SEC. 315.32. Current income bonds..
(a) Interest rates.—The interest payable on a current income bond is fixed b y
t h e provisions of t h e D e p a r t m e n t circular offering t h e particular series of bonds
to t h e public.11
(b) Method of interest payments.—-Interest due on a current income bond is
payable semiannually beginning six m o n t h s from its issue date a n d will be paid
on each interest p a y m e n t date by check drawn to t h e order of t h e person or
persons in whose names t h e bond is inscribed, in t h e same form as their nam.es
appear in t h e inscription on t h e bond, and mailed t o t h e address of record (that
given for t h e delivery of interest checks in t h e application for purchase or t h e
request for reissue or, if no instruction is given as to t h e delivery of inter,est checks,
t h e address given for t h e owner or t h e first-named coowner), except t h a t :
(1) I n t h e case of a bond registered in t h e form "A payable on d e a t h to B "
t h e check will be drawn t o t h e order of " A " alone until t h e Bureau of t h e
Public D e b t , Division of Loans a n d Currency Branch, receives notice of A's
d e a t h (see p a r a g r a p h (c) of this section), from which time t h e p a y m e n t of
interest will be suspended until t h e bond is presented for p a y m e n t or reissue.
Interest so withheld will be paid t o t h e ^person found to be entitled t o t h e
bond.
(2) U p o n receipt of notice of t h e dealih of t h e coowner t o whom interest
is being mailed (see p a r a g r a p h (c) of this section), p a y m e n t of interest will
be suspended until a request for change of address is received from t h e other
coowner, if living, or, if not, until satisfactory evidence is submitted as t o
who is authorized to endorse and collect such checks on behalf of t h e estate
of t h e last deceased coowner in accordance with t h e provisions of S u b p a r t N .
(3) U p o n receipt of notice of t h e d e a t h of t h e owner of a bond (see paragraph (c) of this section), p a y m e n t of interest on t h e bond will be suspended '
until satisfactory evidence is submitted as to who is authorized to endorse
a n d collect such checks on behalf of t h e estate of t h e decedent, in accordance
with t h e provisions of Subpart N.
(4) Whenever practicable t h e accounts for all current income bonds of t h e
same series, with t h e same inscription, on which interest is payable on t h e
same dates, will be consolidated and a single check will be issued on each
interest p a y m e n t date for interest on all such bonds. T h e check inscription
m a y vary from t h e inscriptions on t h e bonds in cases of very long inscriptions
or where there is lack of uniformity in t h e inscriptions on t h e bonds.
(5) T h e interest due at m a t u r i t y will be paid with t h e principal a n d in t h e
same manner. However, if t h e registered owner of a bond in beneficiary
form dies on or after t h e due date without having presented and surrendered
t h e bond for p a y m e n t or authorized reissue, and is survived by t h e beneficiary, t h e interest m a y be paid to t h e legal representative of or the person
entitled to t h e registered owner's estate. To obtain such p a y m e n t , t h e bonds
with a request therefor by t h e beneficiary should be submitted together
with t h e evidence required in Sec. 315.70.
(c) Notice affecting interest check delivery.—A notice which would affect t h e
8 Series E bonds issued on or before April 30, 1952, and Series F bonds, the sale of which was terminated
April 30,1952, increase in redemption value at the end of the first year from issue date; Series E bonds issued
on and after May 1, 1952, and Series J bonds, the sale of which began on May 1, 1952, increase in redemption value at the end of the first half year from issue date. The last mcrease in redemption value of Series
E bonds issued on or after May 1, 1962, prior to the start of the ten-year extension period, covers a period
of two months, from 9H years through 9 years and 8 months. The last increase in redemption value of
' Series E bonds issued on or after February 1, 1967, covers a period of five months, from 8H years through
8 years and 11 months.
10 See the tables of redemption values at the end of that circular for extended maturity values, and footnote 5 with respect to the extended maturity of bonds bearing issue dates of February l through April 1,1957.
" See Department Circular No. 664, Third Revision, as amended, for Series G, Department Circular No.
905, Revised, for Series H, and Department Circular No. 906, as amended, for Series K.
EXHIBITS
223
delivery of a n interest check will be acted upon as rapidly as possible, b u t if t h e
notice is not received a t least one m o n t h before an interest p a y m e n t date, no
assurance can be given t h a t action can be t a k e n in time to change or suspend t h e
mailing of t h e interest due on t h a t date. Such notice should be sent to t h e Bureau
of t h e Public Debt, Division of Loans a n d Currency Branch, 536 South Clark
Street, Chicago 5, Illinois.
(d) Change of address.—An owner or coowner of current income bonds should
p r o m p t l y notify t h e Bureau of t h e Public Debt, Division of Loans and Currency
Branch (see p a r a g r a p h (c) of this section), of any change in t h e address for delivery
of interest checks.
A notice of change of address given on behalf of a minor or incompetent owner
or coowner under t h e conditions a n d in accordance with t h e provisions of Subpart
J relating t o t h e p a y m e n t of bonds belonging t o a minor or incompetent ordinarily
will be accepted.
E a c h bond should be described in t h e notice by issue date, serial number, series
(including year of issue), and inscription appearing on t h e face of t h e bond. T h e
bonds should not be submitted.
(e) Representative appointed for the estate of a minor, incompetent, absentee, etc.—
Interest on current income bonds will be paid to t h e representative appointed for
t h e estate of t h e owner of such bonds who is a minor, incompetent, absentee, etc.,
in accordance with t h e provisions of Sec. 315.50 relating to p a y m e n t of t h e bonds.
However, if t h e registration of t h e bonds does not include reference t o t h e owner's
status, t h e y should be submitted (to t h e Bureau of t h e Public D e b t , Division of
Loans a n d Currency Branch, 536 South Clark Street, Chicago 5, Illinois, or a
Federal Reserve Bank) for appropriate reissue so t h a t interest checks m a y be
properly drawn and delivered. They m u s t be accompanied by t h e proof of
a p p o i n t m e n t required by Sec. 315.50.
(/) No representative of an adult incompetent's estate appointed.—If an adult
owner of a current income bond is mentally incompetent to endorse and collect
t h e interest checks, if no other person is legally qualified to do so, a n d if t h e interest
is needed for t h e support of t h e incompetent or t h a t of a person legally dependent
upon him for support, t h e relative responsible for his support, or some other person,
m a y be recognized by t h e Treasury D e p a r t m e n t as voluntary guardian for t h e
purpose of receiving, endorsing, a n d .collecting t h e checks. F o r m P D 2513 should
be used in making application for this purpose.
(g) Reissue during interest period.—Physical reissue of a bond will be made as
soon as practicable without regard to interest p a y m e n t dates. If a current
income bond is reissued between interest p a y m e n t dates, interest for t h e entire
period will ordinarily be paid on t h e next interest p a y m e n t date^ by check drawn
to t h e order of t h e person in whose name t h e bond is reissued. However, if reissue
is made during t h e m o n t h preceding a n interest p a y m e n t date, t h e interest due
on t h e first day of t h e next m o n t h m a y in some cases be paid to t h e former owner
or t h e representative of his estate.
(h) Termination of interest.—Interest on current income bonds will cease at
m a t u r i t y or in case of redemption prior to m a t u r i t y on the last day of the interest
period immediately preceding t h e date of redemption, except t h a t , if the date of
redemption falls on an interest p a y m e n t date, interest will cease on t h a t date.
For example, if a bond on which interest is payable on J a n u a r y 1 and July 1 is
redeemed on September 1, interest will cease on the preceding July I, and no adj u s t m e n t of interest will be ihade for the period from July 1 to September 1. T h e
same, rules, shall apply, in case .of ..partial r e d e n ^ p t i o n w i t h respect to the a m o u n t
redeemed.
(i) Endorsement of checks.—Interest checks may be collected upon t h e endorsem e n t of t h e payee or his authorized representative in accordance with the regulations governing the endorsement and p a y m e n t of Government warrants and
checks, which are contained in D e p a r t m e n t Circular No. 21 (31 C F R 360). A
form for the appointment of an attorney in fact for this purpose may be obtained
from t h e Treasurer of the United States or from any Federal Reserve Bank. If
no legal representative has been or will be appointed, the Bureau of the Public
Debt, Division of Loans and Currency Branch, 536 South Clark Street, Chicago 5,
Illinois, or a Federal Reserve Bank will furnish instructions upon request.
(j) Nonreceipt or loss of check.—If an interest check is not received or is lost after
receipt, t h e Regional Disbursing Office, U. S. Treasury D e p a r t m e n t , 536 South
Clark Street, Chicago 5, Illinois, should be notified of the facts and should be given
information concerning t h e amount, number, and inscription of the bonds, as well
as a description of the check, if possible.
479641—59
16
224
1 9 5 8 REPORT OF T H E SECRETARY OF T H E
TREASURY
S U B P A R T H — G E N E R A L P R O V I S I O N S FOR P A Y M E N T AND R E D E M P T I O N
SEC. 315.35. Provisions applicable both before and after maturity.—Payment of
a savings bond will be made to the person or persons entitled thereto under the
provisions of these regulations upon presentation of the bond with an appropriate
request for p a y m e n t . Such p a y m e n t will be made without regard to any notice
of adverse claims to a savings bond and no stoppage or caveat against p a y m e n t in
accordance with the registration of the bond will be entered.
SEC. 315.36. Before maturity.
(a) At option of owner.—Pursuant to its terms, a savings bond may not be called
for redemption by the Secretary of t h e Treasury prior to maturity, b u t may be
redeemed in whole or in p a r t at t h e option of the owner prior to maturity, under
t h e terms and conditions set forth in the offering circular for each series and in
accordance with the provisions of these regulations, following presentation and
surrender as provided in this subpart.
(b) Series E.—A bond of Series E will be redeemed at any time after two
months from t h e issue date without advance notice, at the appropriate redemption
value as shown in the revision of D e p a r t m e n t Circular No. 653 current at the
time of redemption.
(c)- Series F , G, H, J , and K.—A bond of Series F, G, H, J, or K will be redeemed
after six months from t h e issue date, on one m o n t h ' s notice in writing to the Bureau
of the Public Debt, Division of Loans and Currency Branch, a Federal Reserve
Bank, or the Treasurer of the United States, Washington 25, D . C. Such notice
may be given separately or by presenting and surrendering the bond with a duly
executed request for p a y m e n t . P a y m e n t will be made as of the first day of the
first m o n t h following by at least one full calendar m o n t h the date of receipt of
notice. For example, if t h e notice is received on J u n e 1, pa5^ment will be made as
of July, b u t if notice is received between J u n e 2 and July 1, inclusive, p a y m e n t
ordinarily will be made as of August 1. If notice is given separately, the bond must
be presented and surrendered with a duly executed request for p a y m e n t to the
same agency to which the notice is given, not less t h a n twenty days before the date
on which p a y m e n t is to be made. For example, if the notice is received on J u n e
15, the bond should be received not later t h a n July 12. (See Sec. 315.32 (h) for
provisions as to interest in case current income bonds are redeemed prior to
maturity.) A bond of Series H will be redeemed at par. A bond of Series F, G,
J, or K will be redeemed a t t h e appropriate redemption value as shown in the
table printed on the bond, except as provided in subparagraph (d) of this section.
(d) Series G and K: Redemption at par.—
(1) A bond of Series G or K issued in exchange for m a t u r e d bonds of Series
E under the provisions of D e p a r t m e n t Circulars Nos. 885 and 906 is payable
at par.
(2) A bond of Series G or K registered in t h e name of a natural person or
persons in their own right will be paid at par upon the request of the person
entitled to t h e bond upon t h e death of the owner or either coowner.
(3) A bond of Series G or K held b}^ a trustee, life tenant, or other fiduciary
(exclusive of trustees of a pension, retirement, investment, insurance, annuity
or similar fund, or employees' savings plan) will be paid at par upon appropriate request upon the termination, in whole or in part, of a trust, life tenancy,
or other fiduciary estate by reason of the death of a natural person, but in the
case cf partial termination, redemption at p a r will be made to the extent of
not more t h a n the pro r a t a portion of the t r u s t or fiduciary estate so terminated. Bonds of Series G or K held by a financial institution in its name as
trustee of its common trust fund will be paid at par upon the request of the
fiduciary upon t h e termination, in whole or in part, of a participating t r u s t
by reason of the d e a t h of a natural person, to the extent of not more t h a n
t h e pro r a t a portion of t h e common t r u s t fund so terminated.
The option to receive paym-ent at par under subparagraph (d) (2) and (3) of
this section m a y be exercised by a signed request for paj^ment or hy express
written notice, in either case specifying t h a t redemption at par is desired. P a y ment m a y be postponed to t h e second interest p a y m e n t date following t h e date
of death, if so requested; otherwise, p a y m e n t will be made in regular course. A
death certificate or other acceptable evidence of death must be submitted. I n
no case of redemption at par before m a t u r i t y under subparagraph (d) (2) and
(3) will interest be payable beyond t h e second interest p a y m e n t date following
t h e date of death.
(e) Withdrawal of request for redemption.—An owner who has presented and
EXHIBITS
225
surrendered a savings bond to t h e Treasury D e p a r t m e n t or a Federal Reserve
Bank, or an authorized paying agent, for p a y m e n t , with an appropriate request
for p a y m e n t , m a y withdraw such request if notice of intent to withdraw is given
t o and received by t h e same agency to which t h e bond was presented prior to t h e
issuance of a check in p a y m e n t by t h e Treasury D e p a r t m e n t or a Federal Reserve
Bank, or p a y m e n t bj^ t h e authorized paying agent. Such request m a y be withdrawn under t h e same conditions by t h e executor or administrator of t h e estate
of a deceased owner, or by t h e person or persons entitled to t h e bond under Sec.
315.70 (d), or by t h e representative of t h e estate of a person under legal disability,
unless t h e presentation and surrender of t h e bond has cut off tlie rights of survivorship under t h e provisions of Subpart L or Subpart M.
S E C . 315.37. At or after maturity.—Pursuant to its terms, a savings bond of any
series will be paid at or after m a t u r i t y at its full face or m a t u r i t y value, and in no
greater a m o u n t , except t h a t bonds of Series E retained under an extended m a t u r i t y
option under t h e t e r m s of D e p a r t m e n t Circular No. 653 (31 C F R 316), current a t
t h e time of redemption, will be paid at t h e redemption values provided in t h a t
circular.12
S E C . 315.38. Requests for payment.
(a) Form and execution of requests.—A request for p a y m e n t of a savings bond
m u s t be executed on t h e form appearing on t h e back of t h e bond unless (1) t h e
bond is accepted by an authorized paying agent for p a y m e n t or for presentation
t o a Federal Reserve Bank for p a y m e n t without t h e owner's signature to t h e
request for p a y m e n t under t h e provisions of D e p a r t m e n t Circular No. 888,
Revised, or (2) authority is given for t h e execution of a separate or detached
request.
(b) Date of request.—Ordinarily, requests executed more t h a n six m o n t h s before
t h e d a t e of receipt of a bond for p a y m e n t will not be accepted; nor will a bond,
ordinarily, be accepted for redemption more t h a n three calendar m o n t h s prior t o
t h e d a t e redemption is requested under these regulations.
(c) Identification and signature of owner.—Unless t h e bond is presented under
t h e provisions of p a r a g r a p h (a) of this section or section 315,42 (b), an owner in
whose n a m e t h e bond is inscribed or other person entitled to p a y m e n t under t h e
provisions of these regulations m u s t appear before one of t h e officers authorized
t o certify requests for p a y m e n t (see Sec. 315.39), establish his identity, and in t h e
presence of such officer sign t h e request for p a y m e n t in ink, adding in t h e space
provided t h e address to which t h e check issued in p a y m e n t is to be mailed. A
signature m a d e by m a r k (X) m u s t be witnessed by a t least one disinterested
person in addition to t h e certifying officer and m u s t be attested by endorsement
in t h e blank space, substantially as follows: "Witness to t h e above signature by
m a r k , " followed by t h e signature and address of t h e witness. If t h e n a m e of t h e
owner or other person entitled t o p a y m e n t as it appears in t h e registration or in
evidence on file in t h e Bureau of t h e Public D e b t , Division of Loans and Currency
Branch, has been changed by .marriage or in any other legal manner, t h e sign a t u r e to t h e request for p a y m e n t should show both names and t h e manner in
which t h e change was made, for example, "Miss M a r y T. Jones, now by marriage
Mrs. M a r y T. Jones Smith (Mrs. M a r y T. J. Smith, or Mrs. M a r y T. S m i t h ) , "
or " J o h n Doe, now by court order Richard R o e . " I n case of a change of name
other t h a n by marriage, t h e request should be supported by satisfactory evidence
of t h e change. N o request signed in, behalf of t h e owner or person entitled to
p a y m e n t by an agent or a person acting under a power of attorney will be recognized by t h e Treasury D e p a r t m e n t , except as provided in Sec. 315.16, wheri
pledged in lieu of surety under D e p a r t m e n t Circular N o . 154, Revised.
(d) Certification of request.—After t h e request for p a y m e n t has been signed by
t h e owner, t h e certifying officer should complete and sign t h e certificate following
t h e request for p a y m e n t , and t h e bond should t h e n be presented a n d surrendered
as provided in Sec. 315.42 (a).
S E C . 315.39. Certifying officers.—The following officers are authorized to certify
requests for p a y m e n t :
(a) At United States post offices.—Any postmaster, acting postmaster, or
inspector in charge or other post office official or clerk designated for t h a t purpose.
One or more of these officials will be found a t every United States post office,
classified.branch, or station. A post office official or clerk other than-a postmaster,
acting postmaster, or inspector in charge should certify in t h e name of t h e post12 No'extended--maturity option for-Series E bonds with-issue dates after April 1, 1957,-is provided in
Departmerit Circular No. 653, Fourth Revision, dated April 22, 1967.
226
195 8 REPORT OF THE SECRETARY OF THE TREASURY
m a s t e r or acting postmaster, followed by his own signature and official title, for
example, " J o h n Doe, postmaster, by Richard Roe, postal, cashier." Signatures
of these officers should be authenticated by a legible imprint of t h e post office
dating s t a m p .
(6) At banks, trust companies, and branches.—Any officer of any b a n k or t r u s t
company incorporated in t h e United States (including for this purpose its Territories and possessions and t h e Commonwealth of Puerto Rico) or domestic or
foreign branch of such bank or t r u s t company; any officer of a Federal Reserve
Bank, Federal land bank, and Federal home loan b a n k ; any employee of any
such bank or t r u s t company expressly authorized by t h e corporation for t h a t
purpose, who should sign over t h e title "Designated E m p l o y e e " ; and Federal
Reserve agents and assistant Federal Reserve agents located a t t h e several
Federal Reserve Banks. Certifications by any of these officers or designated
employees should be authenticated by either a legible impression of t h e corporate
seal of t h e bank or t r u s t company or, in t h e case of banks or t r u s t companies
a n d their branches which are authorized issuing agents for bonds of Series E,
by a legible imprint of t h e issuing agent's dating s t a m p .
(c) Issuing agents not banks or trust companies.—Any officer of a corporation
not a b a n k or t r u s t company and of any other organization which is an authorized
issuing agent for bonds of Series E. All certifications by such officers m u s t be
authenticated by a legible imprint of t h e issuing agent's dating s t a m p .
(d) Commissioned and luarrant officers of armed forces.—(Commissioned and
w a r r a n t officers of any of t h e armed forces of t h e United States, b u t only for
members and t h e families of members of their respective services and civilian
employees a t posts or bases or stations. Such certifying officer should indicate
his r a n k and state t h a t t h e person signing t h e request is one of t h e class whose
request he is authorized to certify.
(e) United States officials.—Judges, clerks, and d e p u t y clerks of United States
courts, including United States courts for t h e Territories, possessions, t h e Commonwealth of P u e r t o Rico, and t h e Canal Zone; United States Commissioners;
United States Attorneys; United States collectors of customs and their deputies;
regional commissioners and district directors of Internal Revenue and Internal
Revenue agents; t h e officer in charge of any home, hospital, or other facility of
t h e Veterans Administration, b u t only for patients and employees of such facilities;
certain officers of Federal penal institutions designated for t h a t purpose by t h e
Secretary of t h e Treasury; certain officers of t h e United States Public Health
Service Hospitals a t Lexington, Kentucky, and F o r t Worth, Texas, and of Uriited
States Marine Hospitals a t F o r t Stanton, New Mexico, and Carville, Louisiana,
designated for t h a t purpose by t h e Secretary of t h e Treasury (in each case,
however, only for inmates or employees of t h e institution involved).
(/) Officers authorized in particular localities.—Certain designated officers in
t h e Treasury D e p a r t m e n t ; t h e Governors and Treasurers of Hawaii, Puerto Rico,
and Alaska; t h e Governor and Commissioner of Finance of t h e Virgin Islands;
t h e Governor and Director of Finance of G u a m ; t h e Governor and Director of
Administrative Services of American Samoa; t h e Governor, paymaster, or acting
p a y m a s t e r a n d collector, or acting collector of t h e P a n a m a Canal; a n d postmasters
and acting postmasters in t h e Bureau of Posts of t h e Canal Zone.
(g) I n foreign countries.—In a foreign country requests for p a y m e n t m a y be
signed in t h e presence of and be certified by any United States diploniatic or
consular representative, or t h e manager or other officer of a foreign branch of a
b a n k or t r u s t company incorporated in t h e United States whose signature is
attested by an impression of t h e corporate seal or is certified to t h e Treasury
D e p a r t m e n t . If such an officer is not available, requests for p a y m e n t m a y be
signed in t h e presence of and be certified by a n o t a r y or other officer authorized
to administer oaths, b u t his official character and jurisdiction should be certified
by a United States diplomatic or consular officer under seal of his office.
(h) Special provisions.—In t h e event none of t h e officers authorized t o certify
requests for p a y m e n t of savings bonds is readily accessible, t h e Commissioner of
t h e Public Debt, t h e D e p u t y Commissioner of t h e Public D e b t in Charge of t h e
Chicago Office, or any Federal Reserve Bank is authorized to make special
provision for any particular case.
SEC. 315.40. General instructions to certifying officers.—Certifying officers should
require positive identification of t h e person signing a request for p a y m e n t and will
be held fully responsible therefor. I n all cases a certifymg officer must affix to the
certification his official signature, title, seal, or dating s t a m p , address (if not
shown in seal or s t a m p ) , a n d the date of execution. Officers of Veterans Adminis-
EXHIBITS
227
t r a t i o n Facilities, Public H e a l t h Service hospitals. Marine hospitals, and Federal
penal institutions should use t h e seal of the particular institution or service, where
such seal is available. If a certifying officer other t h a n a post office official, officer
of a b a n k or t r u s t company, or officer of an issuing agent does n o t possess an official
seal, a s t a t e m e n t t o t h a t effect should be added to t h e certification b y such officer.
S E C . 315.41. Interested person not to certify.—No person authorized to certify
requests for p a y m e n t m a y certify a request for p a y m e n t of a bond of which he is
t h e owner or in which he has an interest, either in his own right or in any representative capacity.
S E C . 315.42. Presentation and surrender.
(a) All series.—Except for cases coming within t h e provisions of p a r a g r a p h (bj
of this section, after t h e request for p a y m e n t has been duly signed b y t h e owner
a n d certified as above provided t h e b o n d should be presented a n d surrendered t o
(Ij a Federal Reserve Bank, (2j t h e Bureau of t h e Public Debt, Division of Loans
a n d Currency Branch, or (3j t h e Treasurer of t h e United'States,'Wa'shiiigton 25,
D . C. Usually p a y m e n t will be expedited b y surrender t o a Federal Reserve Bank.
I n all cases presentation will be at t h e expense a n d risk of t h e owner. P a y m e n t
will be m a d e b y check drawn t o t h e order of t h e registered owner or other person
entitled and mailed t o t h e address given in t h e request for p a y m e n t , or if no
address is given in t h e request for p a y m e n t , to t h e address given in the instructions
accompanying t h e bond.
(bj Optional procedure limited to bonds of Series A to E, inclusive, in names of
individual owners or coowners only.—Notwithstanding t h e provisions of any D e p a r t m e n t circulars offering t h e bonds for sale a n d notwithstanding a n y instructions
which m a y be.printed on t h e bond, a n a t u r a l person:,whose name is j n s c r i b e d o n t h e
face of a bond of Series A, B, C, D , or E, either as owner or coowner in his own
right, m a y present such bond for redemption (unless marked " D U P L I C A T E " j
t o an authorized p a y i n g agent. T h e owner or coowner m u s t establish his identity
t o t h e satisfaction of t h e paying agent, sign t h e request for p a y m e n t , and add his
home or business address. E v e n t h o u g h t h e request for p a y m e n t has been signed,
or signed and certified, before t h e presentation of the bond, t h e representative of t h e
p a y i n g agent m u s t be satisfied t h a t t h e person presenting t h e bond for p a y m e n t
is t h e owner or coowner and m a y require him t o sign t h e request for p a y m e n t
again. If t h e bond is in order for p a y m e n t , t h e paying agent will make immediate
p a y m e n t at t h e appropriate redemption value w i t h o u t charge to t h e owner. This
procedure is not applicable to partial redemption cases, or t o deceased owner
cases, or other cases in which documentary evidence is required.
SEC. 315.43. P a r t i a l redemption.—A savings bond of any series in a denomination greater t h a n $25 (maturity valuej m a y be redeemed in p a r t a t current redemption value b u t only in a m o u n t s corresponding to authorized denominations,
upon presentation and surrender of t h e bond in accordance with p a r a g r a p h (aj of
Sec. 315.42. In any case in which partial redemption is authorized, before the
request for p a y m e n t is signed t h e phrase " t o t h e extent of $
(maturity
value) and reissue of t h e r e m a i n d e r " should be added to the first sentence of t h e
request. Upon partial redemption of t h e savings bond, the remainder will be
reissued as of t h e original issue date, as provided in Subpart I. For p a y m e n t of
interest on current income bonds in case of partial redemption, see S u b p a r t G.
S E C . 315.44. Nonreceipt or loss of checks issued in payment.—In case a check in
p a y m e n t of a bond surrendered for redemption is not received within a reasonable
time or in case such check is lost after receipt, notice should be given to t h e same
agency to which t h e bond was surrendered for p a y m e n t , accompanied b y a
description of t h e bond b y series, denomination, serial number, and registration.
T h e notice should state whether or not t h e check was received and should give t h e
d a t e - u p o n ' w h i c h t h e bond was surrendered for p a y m e n t . Instructions, will be
given as t o t h e necessary procedure to obtain a duplicate. P a y m e n t of u n m a t u r e d
bonds of Series F , G, H , J, a n d K is ordinarily m a d e on t h e first day of t h e first
m o n t h following b y a t least one full calendar m o n t h t h e date of receipt of notice
of intention to redeem, a n d a check should not be expected until t h a t time.
S U B P A R T I — R E I S S U E AND D E N O M I N A T I O N A L E X C H A N G E
S E C . 315.45. General.—Reissue of a savings bond m a y be made only under t h e
conditions specified in these regulations. Reissue is not authorized solely for t h e
purpose of effecting an exchange as between authorized denominations, b u t in
case of authorized reissue t h e new bond or bonds m a y be issued in any authorized
denomination or denominations. Consistent with other provisions of these regula-
228
195 8 REPORT OF THE SECRETARY OF THE TREASURY
tions, a savings bond m a y be reissued in a form of registration authorized b y the
regulations in effect on t h e original issue date or on t h e date of reissue.
Reissue will not b e made if t h e request therefor is received less t h a n oiie full
calendar m o n t h before t h e m a t u r i t y date, except for bonds of Series E for which
an optional extension period has been provided in D e p a r t m e n t Circular No. 653,
F o u r t h Revision.13 I n t h e case of such bonds reissue will not be m a d e if t h e
request is received less t h a n one full m o n t h before t h e extended m a t u r i t y d a t e .
However, a request for reissue of a bond received prior to its m a t u r i t y , or extended
m a t u r i t y date (in case of a bond for which an extended m a t u r i t y period has been
providedj, will be effective t o establish ownership as though t h e requested reissue
h a d been made.
A request for reissue of a bond received on or after its m a t u r i t y , or extended
m a t u r i t y date (in case of a bond for which an extended m a t u r i t y period has been
provided), will n o t be effective to n a m e a coowner or beneficiary or t o promote
a beneficiary to a coowner, b u t requests for reissue in t h e names of persons who
have become entitled by operation of law will be recognized as establishing t h e
right of those persons to receive p a y m e n t .
Reissues under t h e provisions of this s u b p a r t m a y be made only a t (1) a Federal Reserve Bank, (2) t h e Bureau of t h e Public Debt, Division of Loans and
Currency Branch, or (3) t h e Office of t h e Treasurer of t h e United States, Washington 25, D . C.
S E C . 315.46. Requests for reissue.-—A request for reissue should be made on t h e
prescribed form by the.person authorized under these regulations to m a k e such
request. Appropriate forms m a y be obtained from any Federal Reserve Bank,
t h e Office of t h e Treasurer of t h e United States, or from t h e Bureau of t h e Public
Debt, Division of Loans and Currency Branch.
S E C . 315.47. Effective date.—In any case of authorized reissue, t h e Treasury
D e p a r t m e n t wili t r e a t t h e receipt by a Federal Reserve B a n k or t h e Treasury
D e p a r t m e n t of a bond and an appropriate request for reissue thereof as determining t h e date upon which t h e reissue is effective.
S E C . 315.48. Correction of errors.—Reissue of a bond m a y be made to correct
an error in t h e original issue, upon appropriate request supported by satisfactory
proof of t h e error.
S E C . 315.49. Change of name.—An owner, coowner, or beneficiary whose n a m e
is changed by marriage, divorce, annulment, order of court, or in any other legal
m a n n e r after t h e issue of t h e bond m a y submit t h e bond with a request on F o r m
P D 1474 for reissue to substitute t h e new n a m e for t h e n a m e inscribed on t h e
bond. This action is recommended in case of a change of n a m e of t h e owner or
coowner of a current income bond. T h e signature to t h e request for reissue
should show both names and t h e m a n n e r in which t h e change was made, as,
for example, " J o h n Doe, now by order of court Richard R o e " or "Miss M a r y T .
Jones, now by marriage Mrs. M a r y T . Jones Smith (Mrs. M a r y T. J. Smith or
Mrs. M a r y T. S m i t h ) . " If t h e change of n a m e was m a d e other t h a n by marriage, t h e request m u s t be supported by satisfactory proof of t h e change.
S U B P A R T J — M I N O R S AND P E R S O N S U N D E R O T H E R L E G A L D I S A B I L I T Y , AND
ABSENTEES
S E C . 315.50. Payment to representative of an estate.—If the form of registration
of a savings bond indicates t h a t t h e owner is a minor, an incompetent, or an
absentee and there is a representative of his estate, p a y m e n t will be m a d e t o
such representative. T h e request for p a y m e n t appearing on t h e back of t h e
bond should be signed by t h e representative as such, for example, " J o h n A.
Jones, guardian (committee) of t h e estate of H e n r y W. Smith, a minor (an incompetent, an absentee)." Unless t h e form of registration gives t h e n a m e of
t h e representative requesting p a y m e n t , a certificate or a certified copy of t h e
letters of a p p o i n t m e n t from t h e court making t h e appointment, under t h e seal
of t h e court, or other proof of qualification if not appointed by a court, should be
submitted. Except in t h e case of corporate fiduciaries, such evidence should
s t a t e t h a t t h e a p p o i n t m e n t is in full force and should be dated not more t h a n
one year prior t o presentation of t h e bond for p a y m e n t . Where t h e form of
registration does not indicate t h a t there is a representative of t h e estate of a
minor owner, a notice t h a t there is such a representative will not be-accepted by
t h e Treasury D e p a r t m e n t for t h e purpose of preventing p a y m e n t to t h e minor
or t o a p a r e n t or other person on behalf of t h e minor, as provided in Sees. 315.51
13 Only bonds of Series E with issue dates prior to May 1,1967, have this optional extension period.
EXHIBITS
229
a n d 315.52. However, if such representative presents for p a y m e n t a bond registered in t h e n a m e of his ward accompanied by proof of his qualification, p a y m e n t will be m a d e to such representative. (See S u b p a r t N.)
SEC. 315.51. Payment to minors.—If t h e owner of a savings bond is a minor
and t h e form of registration does not indicate t h a t there is a representative of his
estate, p a y m e n t will be m a d e to him upon his request, provided t h a t he is of
sufficient competency to sign his n a m e to t h e request for p a y m e n t and to unders t a n d t h e n a t u r e of t h e transaction. I n general, t h e fact t h a t t h e request for
p a y m e n t has been signed by a minor and duly certified will be accepted as sufficient proof of competency and understanding.
S E C . 315.52. Payment to a parent or other person on behalf of a minor.—If t h e
owner of a savings bond is a minor and t h e form of registration does not indicate
t h a t there is a representative of his estate, and if such minor owner is not of
sufficient competency to sign his n a m e to t h e request for p a y m e n t and to unders t a n d t h e n a t u r e of t h e transaction, p a y m e n t will be m a d e to either parent of
t h e minor with whom he resides or, if t h e minor does not reside with either
parent, t h e n to t h e person who furnishes his chief support. His p a r e n t or t h e
person furnishing his chief support should execute t h e request for p a y m e n t and
furnish a certificate, which m a y be typed or written on t h e back of t h e bond, as
t o his right t o act for t h e minor. If a p a r e n t signs t h e request, t h e certificate
arid signature thereto should be in substantially t h e following form:
" I certify t h a t I a m t h e mother (or father) of J o h n C. Jones a n d t h e person
with whom he resides. H e is
years of age a n d is not of sufficient
competency and understanding to m a k e this request.
" M r s . M a r y Jones on behalf of J o h n C. Jones."
If a person other t h a n a p a r e n t signs t h e request, t h e certificate and signature
thereto, including a reference t o t h e person's relationship, if any, to t h e minor,
should be in substantially t h e following form:
" I certify t h a t J o h n C. Jones does not reside with either p a r e n t and t h a t
I furnish his chief support. H e is
years of age a n d is not of sufficient
competency a n d understanding to m a k e this request.
" M r s . Alice Brown, grandmother, on behalf of J o h n C. Jones."
T h e Treasury D e p a r t m e n t m a y in a n y case require further proof t h a t t h e minor
is not of sufficient competency and understanding t o execute t h e request for
p a y m e n t and of t h e right of t h e person executing t h e request to act on behalf of
t h e minor.
SEC. 315.53. Payment or reinvestment upon request of voluntary guardian of
incompetent.—If t h e adult owner of a bond is mentally incompetent t o request
a n d receive p a y m e n t thereof a n d no other person is legally qualified to do so,
t h e relative responsible for his support or some other person m a y submit a n
application as voluntary guardian for redemption of t h e bond in t h e following
cases:
(a) Where t h e proceeds of t h e bond are needed for t h e support of t h e incomp e t e n t or t h a t of a person legally dependent upon him for support, and t h e t o t a l
face a m o u n t of United States savings bonds belonging t o t h e incompetent for
which redemption is requested in any ninety-day period does not exceed $1,000;
(b) Where t h e bond has m a t u r e d a n d it is desired to redeem it and reinvest
t h e proceeds in United States savings bonds. T h e entire proceeds m u s t be
invested, so far as possible, in bonds of Series E, except t h a t :
(1) Any p a r t of t h e proceeds which m a y not be invested therein because
of t h e limitation on holdings m a y be invested in Series H bonds so long as
t h e limitation on holdings for t h a t series is not exceeded;
(2) If t h e m a t u r e d bonds are current income bonds, t h e proceeds m a y be
invested in Series H bonds so long as t h e limitation on holdings for t h a t
series is not exceeded.
T h e new bonds must be registered in t h e same form of registration as t h e m a t u r e d
bonds, with t h e words " a n i n c o m p e t e n t " following t h e incompetent's name,
unless a n owner, beneficiary, or coowner named in t h e registration of t h e m a t u r e d
bond is dead or unless such owner, beneficiary, or coowner disclaims interest in
t h e bond a n d consents to t h e elimination of his name. If t h e m a t u r i t y value of
t h e m a t u r e d bond does not correspond t o t h e purchase price of a n authorized
denomination of savings bonds of any series, or a multiple thereof, t h e odd a m o u n t
remaining after t h e reinvestment will be paid t o t h e voluntary guardian for t h e
use a n d benefit of t h e incompetent.
F o r m P D 2513 should be used in applying for p a y m e n t under this section and
should be accompanied by t h e evidence required by t h e instructions on t h e form.
230
195 8 REPORT OF THE SECRETARY OF THE TREASURY
SEC. 315.54. Reissue.—A savings bond of which a minor or other person under
legal disability is t h e owner or in which he has a n interest m a y be reissued u p o n
a n authorized reissue transaction under t h e following conditions:
(1) Reissue will be restricted t o a form of registration which does not
adversely affect t h e existing ownership or interest of t h e minor or such other
person, except t h a t a minor of sufficient competency t o sign his n a m e t o t h e
request a n d t o u n d e r s t a n d t h e n a t u r e of t h e transaction shall have t h e right
t o request reissue t o a d d a coowner or beneficiary t o a bond registered in his
n a m e alone or t o which he is entitled in his own right.
(2) Requests for reissue under this section should be executed by t h e
person authorized t o request p a y m e n t under Sees. 315.50, 315.51, 315.52,
a n d 315.53 of this subpart, arid in t h e same manner.
SUBPART K — A
N A T U R A L P E R S O N AS S O L E O W N E R
SEC. 315.55. Payment.—A savings bond registered in t h e n a m e of a n a t u r a l
person in his own right, w i t h o u t a coowner or beneficiary, will be paid t o him
during his lifetime under S u b p a r t H . U p o n t h e d e a t h of t h e owner such bond
will be considered as belonging t o his estate a n d will be paid under S u b p a r t N,
except as otherwise provided in these regulations.
S E C . 315.56. Reissue for certain purposes.—A savings bond registered in t h e
n a m e of a n a t u r a l person in his own right m a y be reissued u p o n appropriate
request b y h i m (subject to t h e provisions of Sec. 315.54), u p o n presentation and
surrender during his lifetime, for t h e following purposes:
(a) Addition of a coowner or beneficiary.—To n a m e another n a t u r a l person as
coowner or as beneficiary; F o r m P D 1787 should be used.
(b) A trustee of a personal trust estate.—To n a m e t h e t r u s t e e of a personal
t r u s t estate created b y t h e owner; F o r m P D 1851 should be used.
(c) Upon divorce or annulment.—To n a m e as registered owner t h e other p a r t y
t o a divorce or annulment, occurring after issue of t h e b o n d ; F o r m P D 1938
should be used.
(d) Certain degrees of relationship.—To name as registered owner a person related t o t h e owner in a n y of t h e degrees of relationship set forth in Sec. 315.60
(bj (lj (ij, provided, however, t h a t t h e Treasury reserves the right t o reject
a n y application for reissue hereunder as provided in t h a t section; F o r m P D
1938 should be used.
S U B P A R T L — T w o N A T U R A L P E R S O N S AS C O O W N E R S
SEC. 315.60. During the lives of both coowners.—A savings b o n d registered in
coownership form, for example, " J o h n A. Jones or Mrs. M a r y C. J o n e s , " will
be paid or reissued during t h e lives of both, as follows:
(a) Payment.—The b o n d will be paid t o either upon his separate request, and
upon p a y m e n t t o him t h e other shall cease t o have a n y interest in t h e bond.
If b o t h request p a y m e n t jointly, p a y m e n t will be m a d e b y check drawn t o their
order jointly, for example, " J o h n A. Jones A N D Mrs. M a r y C. J o n e s . "
(b) Reissue.—The b o n d m a y be reissued upon t h e request of b o t h if presented
a n d surrendered during t h e lifetime of both, as follows:
(lj I n t h e n a m e of either, alone or with a new coowner or beneficiary:
(ij if t h e coowner whose n a m e is t o remain on t h e bond and t h e coowner whose n a m e is t o be eliminated are related t o each other a s :
h u s b a n d a n d wife; p a r e n t and child (including stepchildj; brother and
sister (including t h e half blood, stepbrother and stepsister, and brother
a n d sister t h r o u g h a d o p t i o n j ; g r a n d p a r e n t and grandchild; great grandp a r e n t and great grandchild; uncle or a u n t and nephew or niece, including as nephew or niece t h e children of a brother or sister of t h e
present spouse; granduncle or g r a n d a u n t and grandniece or grandnephew;
mother-in-law or father-in-law a n d daughter-in-law or son-in-law; sisterin-law or brother-in-law; provided, however, t h a t t h e Treasury reserves
t h e right to reject any application for reissue hereunder, in whole or
in p a r t , u p o n a determination t h a t t h e transaction would t e n d t o evade
or defeat t h e purposes of t h e limitation on holdings or t h e restriction
against t h e transferability of savings b o n d s ;
(iij if one of t h e m marries after t h e issue of the b o n d ; and
(iii) if t h e y are divorced or legally separated from each other, or their
marriage is annulled, after t h e issue of t h e bond.
EXHIBITS
231
Form PD 1938 should be used to request reissue in any of the above three
classes of cases.
The representative of the estate of a minor or incompetent coowner may
request reissue under this paragraph on behalf of the ward to eliminate the
other, but a request to eliminate the name of the minor or incompetent will
not be recognized unless supported by evidence that a court has ordered
the representative to request such reissue (see Sec. 315.23). When no
representative has been appointed for a minor coowner who is not of sufficient
competency to sign his name to the request for reissue and to understand
the nature of the transaction, the person authorized to request payment for
the minor under Sec. 315.52 may sign the request for the minor, but only
for reissue to promote the minor to sole owner. If no representative has
been appointed for the estate of a minor coowner who is of sufficient competency to sign his name to the request for reissue and to understand the nature of the transaction, and if all of the bonds are to be reissued in his name
alone or, if he so requests, with a new coowner or a beneficiary, he may sign
the request. Reissue will not be made if one coowner is incompetent and
a representative of the incompetent's estate has not been appointed, except
to add the words "an incompetent" after his name or to eliminate the other
coowner from the registration.
(2) In the name of a trustee of a personal trust estate created by both
coowners. Requests for reissue should be made on Form PD 1851 and will
not be approved unless both coowners are of full age and legally competent.
No other reissue will be permitted in any form during the lives of both coowners,
except as specifically provided in these regulations.
SEC. 315.61. After the death of one or both coowners.—If either coowner dies
without the bond having been presented and surrendered for payment or authorized reissue, the survivor will be recognized as the sole and absolute owner.
Thereafter, payment or reissue will be made as thpugh the bond were registered in
the name of the survivor alone (see Subpart K), except that a request for reissue
by him must be supported by proof of death of the other coowner, and except
further that after the death of the survivor proof of death of both coowners and
of the order in which they died will be required. The presentation and surrender
of a bond by one coowner for payment establishes his right to receive the proceeds
of the bond, and if he should die before the transaction is completed, payment
will be made to the legal representative of, or persons entitled to, his estate in
accordance with the provisions of Subpart N. If either coowner dies after the
bond has been presented and surrendered for authorized reissue (see Sec. 315.47),
the bond will be regarded as though reissued during his lifetime.
SEC. 315.62. Dpon death of both coowners in a common disaster, etc.—If both
coowners die under such conditions that it cannot be established either by presumption of law or otherwise which died first, the bond will be considered as
belonging to the estates of both equally, and payment or reissue will be made
accordingly. (See Subpart N.)
SUBPART M — T w o NATURAL PERSONS AS OWNER AND BENEFICIARY
SEC. 315.65. During the lifetime of the registered owner.—A savings bond registered in beneficiary form, for example, "John A. Jones payable on death to Mrs.
Mary C. Jones," will be paid or reissued upon presentation and surrender during
the lifetime of the registered owner, as follows:
(a) Payment.—The bond will be paid to the registered owner during his lifetime
upon his properly executed request as though no beneficiary had been named in
the registration. The presentation and surrender of the bond by the registered
owner for payment establishes his exclusive right to the proceeds of the bond,
and if he should die before the transaction is completed, payment will be made
to the legal representative of, or the persons entitled to, his estate upon receipt
of proof of the appointment and qualification of the representative or the identity
of the persons entitled, in accordance with.the provisions of Subpart N.
(b) Reissue.—The bond will be reissued on the duly certified request of the
registered owner:
(1) To name the beneficiary designated on the bond as coowner; Form
PD 1787 should be used.
(2) To eliminate the beneficiary, to substitute another person as beneficiary, or to name another person as coowner, if the request of the registered
• owner is supported by the duly certified consent of the beneficiary to the
232
195 8 REPORT OF THE SECRETARY OF THE TREASURY
elimination of his n a m e or proof of t h e death of t h e beneficiary; F o r m P D
1787 should be used.i^
(3) I n t h e n a m e of a trustee of a persorial t r u s t estate created by t h e
owner, if t h e request of t h e owner is supported by t h e duly certified consent
of t h e beneficiary to t h e elimination of his n a m e or proof of t h e d e a t h of the
beneficiary; F o r m P D 1851 should be used by t h e owner and F o r m P D 1849
by t h e beneficiary.i^
If t h e registered owner dies after t h e bond has been presented and surrendered
for authorized reissue, t h e bond will be regarded as though reissued during his
lifetime.
S E C . 315.66. After the death of the registered owner.—If t h e registered owner dies
without t h e bond having been presented and surrendered for p a y m e n t or authorized reissue and is survived by t h e beneficiary, upon proof of d e a t h of t h e owner
t h e beneficiary will be recognized as t h e sole and absolute owner, and p a y m e n t or
reissue will be m a d e as though t h e bond were registered in his n a m e alone (see
Subpart K).
SUBPART N — D E C E A S E D
OWNERS
SEC. 315.70. Payment or reissue on death of owner.
(a) General.—Upon t h e death of t h e owner of a savings bond who is not survived by a coowner or designated beneficiary and who h a d not during his lifetime
presented and surrendered t h e bond for p a y m e n t or an authorized reissue, t h e
bond will be considered as belonging to his estate and will be paid or reissued
accordingly as hereinafter provided, except t h a t reissue under this s u b p a r t will
n o t be permitted if otherwise in conflict with these regulations. I n such exceptional case t h e person entitled to t h e bond will have t h e right only: (1) to hold
t h e bond without change in registration; (2) to receive p a y m e n t of t h e redemption
value of t h e bond a t any time and, if t h e bond is a current income bond, to receive
t h e interest as it becomes due, b u t if t h e person entitled is an alien who is a
resident of an area with respect to which t h e Treasury D e p a r t m e n t restricts or
regulates t h e delivery of checks drawn against funds of t h e United States or any
agency or instrumentality thereof, p a y m e n t of t h e principal of and interest on t h e
bond will n o t be m a d e to such person until t h e restriction is removed. A creditor
m a y obtain p a y m e n t of a bond b u t not reissue. T h e provisions of this section
shall also. apply to savings bonds registered in t h e names of executors or administrators, except t h a t proof of their a p p o i n t m e n t and qualification m a y n o t
be required under (b) and (c).
.
(b) I n course of administration.—If t h e estate of a decedent is being administered
in court, t h e bond will be paid to t h e duly qualified representative of the estate
or will be reissued in the names of the persons entitled to share in the estate,
•upon t h e request of the representative and compliance with the following requircr
ments:
(1) Where there are two or more legal representatives, all must join in t h e
request for p a y m e n t or reissue, except as provided in Sees. 315.77.and 315.78.
(2) T h e request for p a y m e n t or reissue should be signed in t h e form, for
example, " J o h n A. Jones, administrator of t h e estate (or executor of t h e
will) of H e n r y W.' Jones, deceased," and must be supported by proof of t h e
representative's authority in t h e form of a court certificate or a certified
copy of the representative's letters of appointment. The certificate or t h e
certification to the letters must be under seal of the court and, except in t h e
case of a corporate representative, must contain a s t a t e m e n t t h a t the app o i n t m e n t is in full force and should be dated within six months of t h e d a t e
of presentation of t h e bond, unless the certificate or letters show t h a t t h e
appointment was made within one year immediately prior to such presentation.
(3) I n case of reissue t h e legal representative of t h e estate should certify
t h a t each person in whose n a m e reissue is requested is entitled to t h e extent
specified for each and has consented to such reissue. A request for reissue
by t h e legal representative should be made on Form P D 1455. If a person
in whose n a m e reissue is requested desires to name a coowner or beneficiary,
such person should execute an additional request for t h a t purpose, using
F o r m P D 1787.
(c) After settlement through court proceedings.—If t h e estate of t h e decedent has
been settled in court, t h e bond will be paid to, or reissued in t h e name of, t h e
14 The provisions of this subsection do not apply to bonds on which the Treasurer of the United States
is named as beneficiary.
EXHIBITS
233
person entitled thereto as determined b}^ the court. The request for p a y m e n t or
reissue should be made by the person shown to be entitled, supported by a duly
certified copy of t h e representative's final account as approved by the court,
decree of distribution, or other pertinent court records, supplemented, if there are
two or more persons having an apparent interest in the bond, by an agreement
executed by t h e m concerning the disposition of t h e bond. Form P D 1787 should
be used.
(d) Without administration.—When it appears t h a t no legal representative of
t h e decedent's estate has been or will be appointed, the bond will be paid to, or
reissued in the name of, the person or persons entitled, including those entitled
as donees of a gift causa mortis, p u r s u a n t to an agreement and request by all
persons entitled to share in t h e decedent's estate. A short form of agreement for
settlement without administration (Form P D 1946) may be used for cases in
which t h e total a m o u n t of savings bonds (maturity value) and redemption and
interest checks (face amount) relating to savings bonds which belong to the
decedent's estate is not in excess of $500. A longer form (Form P D 1946-A) is
prescribed for other cases of settlement without administration.- Request for
t h e appropriate form to be used hereunder m a y be made to any Federal Reserve
Bank, the Office of the Treasurer of the Uriited States, or to the Bureau of t h e
Public Debt, Division of Loans and Currency Branch. If the persons entitled
to share in t h e estate include minors or incompetents, p a y m e n t or reissue of t h e
bond will not be permitted without administration except to t h e m or in their
names unless their interests are otherwise protected to the satisfaction of the
Treasury D e p a r t m e n t .
SUBPART 0 — F I D U C I A R I E S
S E C . 315.75. Payment.—A savings bond registered in the name of a fiduciary
or otherwise belonging to a fiduciary estate will be paid to the fiduciary or fiduciaries in accordance with the provisions of Sees. 315.77 and 315.78.
SEC. 315.76. Reissue.
(a) I n the name of person entitled.—
(1) Distribution of trust estate in kind.—A bond to which a beneficiary of a
t r u s t estate has become lawfull}'- entitled in his own right or in a fiduciary
capacity, in whole or in part, under the t e r m s of a trust instrument, will be
reissued in his name to t h e extent of his interest, upon the request of the
trustee or trustees and their certification t h a t such person is entitled and has
agreed to reissue iri his name.
(2) After termination of trust estate.—If the person who would be lawfully
entitled to a bond upon the termination of a t r u s t does not desire to have
distribution made to him in kind, as provided in paragraph (1) above, the
trustee or trustees should present t h e bond for p a y m e n t before the estate is
terminated. If, however, the estate is terminated without such p a y m e n t or
reissue having been made, t h e bond will thereafter be paid to or reissued in
t h e n a m e of t h e person lawfully entitled upon his request and satisfactory
proof of ownership, supplemented, if there are two or more persons having
any a p p a r e n t interest in the bond, by an agreement executed by all such
persons concerning t h e disposition of t h e bond.
(3) Upon termination of guardianship estate.—If the estate of a minor or
incompetent or of an absentee is terminated, during the ward's lifetime, a
bond registered to show t h a t there is a representative of the estate will be
reissued in t h e n a m e of t h e former ward upon the representative's request
and certification t h a t t h e former ward is entitled and has agreed to reissue in
his name (Form P D 1455 should be used), or will be paid to or reissued in t h e
n a m e of t h e former ward upon his own request, supported in either Case by
satisfactory evidence t h a t his disability has been removed or t h a t an absentee
has returned to claim his property. Certification by t h e representative t h a t
a former minor has attained his majority, t h a t a former incompetent has been
legally restored to competency, t h a t a legal disability of a female ward has
been removed by marriage, if t h e State law so provides, or t h a t an absentee
has appeared to claim his property, will ordinarily be accepted as sufficient
(see Sec. 315.77 if t h e representative's name is not shown in t h e registration).
Upon t h e termination of t h e estate as t h e result of the death Of the ward, a
bond registered to show t h a t there is a representative of his estate will be
reissued in accordance with the provisions of Subpart N as though it were
registered iri the name of the ward alone.
'
234
1958 REPORT OF THE SECRETARY OF THE TREASURY
(4) Upon termination of life estate.—Upon t h e death of a life tenant, a bond
registered in his name as life t e n a n t m a y be reissued in t h e name of t h e person
or persons entitled p u r s u a n t to an agreement and request of all of t h e persons
having an interest in t h e remainder.
(Jb) I n the name of a succeeding fiduciary.—If a fiduciary in whose n a m e a bond
is registered has been succeeded by another, t h e bond will be reissued in t h e name
of t h e succeeding fiduciary upon appropriate request and satisfactory evidence of
successorship; F o r m P D 1455 should be used.
(c) I n the name of financial institution as trustee of common trust, fund.—Aibond
held by a bank, t r u s t company, or other financial institution as a trustee; guardian,
or similar representative, executor or administrator m a y be reissued in its n a m e
as trustee of its common t r u s t fund to t h e extent t h a t participation therein by t h e
institution in such capacity is authorized by law or applicable regulations. A request for reissue to t h e institution as trustee of its common t r u s t fund should be
executed on its behalf in t h e capacity in which t h e bond is held a n d by t h e cofiduciary, if a n y ; Form P D 1455 should be used.
S E C . 315.77. Requests for reissue or payment prior to maturity.—Except as specifically provided, t h e following rules apply to both requests for p a y m e n t and
reissue by fiduciaries. A request for reissue or for p a y m e n t prior t o m a t u r i t y ,
or extended m a t u r i t y for those Series E bonds for which an optional extension
period has been provided,!^ must be signed by all acting fiduciaries unless by express s t a t u t e , decree of court, or t h e terms of t h e instrument under which t h e
fiduciaries are acting, some one or more of t h e m m a y properly execute t h e request.
If t h e fiduciaries named in t h e registration of t h e bond are still acting, no further
evidence of authority will be required. I n other cases a request m u s t be supported by evidence as specified below:
(a) Fiduciaries^.by-titlefiOnly.T—Ittheobond is registered in-the-titles/'.without.^the
names, of fiduciaries n o t acting as a board, satisfactory evidence of their incumbency m u s t be furnished, except in t h e case of bonds registered in t h e title of
public officers as trustees.
(b) Succeeding fiduciaries.—If t h e fiduciaries in whose names t h e bond is registered have been succeeded by other fiduciaries, satisfactory evidence of successorship m u s t be furnished.
(c) Boards, committees, etc.—A savings bond registered in t h e name of a board,
committee, commission, or, other body, empowered to act as a unit a n d t o hold
title to t h e property of a religious, educational, charitable, or nonprofit-organization or public corporation will be paid upon a request for p a y m e n t signed in t h e
n a m e of t h e board or other body by an authorized officer thereof. A request so
signed and duly certified will ordinarily be accepted without further evidence of
t h e officer's authority. T h e check in p a y m e n t of t h e bond will be drawn in t h e
n a m e of t h e board or other body as fiduciary for t h e organization named in t h e
registration or shown by satisfactory evidence to be entitled as successor thereto.
(d) Corporate fiduciaries.—If a public or private corporation or a political body,
such as a State or county, is acting as a fiduciary, a request must be signed in t h e
n a m e of t h e corporation or other body in t h e fiduciary capacity in which it is
acting, by an authorized officer thereof. A request so signed and duly certified
will ordinarily be a c c e p t e d w i t h o u t further evidence of t h e •-officer's authority.
(e) Registration not disclosing trust or other fiduciary estate.—If t h e registration
of t h e bond does n o t show t h a t it belongs to a t r u s t or other fiduciary estate or
does n o t identify t h e estate to which it belongs, satisfactory evidence of ownership
m u s t be furnished in addition to any other evidence required by this section.
SEC. 315.78. Requests for payment at or after maturity.—A request for p a y m e n t
a t or after rnaturity, or extended m a t u r i t y for those Series E bonds for which an
optional extension period has been provided,i3 signed by any one or more acting
fiduciaries, will be accepted. P a y m e n t will ordinarily be made by check drawn
as t h e bond is inscribed.
S U B P A R T P — P A Y M E N T OR R E I S S U E OF B O N D S R E G I S T E R E D I N T H E N A M E S OF
P R I V A T E ORGANIZATIONS ( C O R P O R A T I O N S , ASSOCIATIONS, P A R T N E R S H I P S , ETC.)
AND G O V E R N M E N T A L A G E N C I E S , U N I T S , AND O F F I C E R S
S E C . 315.80. Payment io corporations or unincorporated associations.—A savings
bond registered in t h e name of a private corporation or an unincorporated association will be paid to t h e corporation or unincorporated association upon request
for p a y m e n t on its behalf b y a duly authorized officer thereof. T h e signature
13 Only bonds of Series E with issue dates prior to May 1,1957, have this optional extension period.
EXHIBITS
235
to t h e request should be in t h e form, for example, " T h e Jones Coal Company, a
corporation, by J o h n Jones, President," or " T h e Lotus Club, an unincorporated
association, by William A. Smith, Treasurer." A request for p a y m e n t so, signed
a n d duly certified will ordinarily be accepted without further evidence of the
officer's-^authority.
S E C . 315.81. Payment to partnerships.—A savings bond registered in the name
of an existing partnership will be paid upon a request for p a y m e n t signed by a
general partner. T h e signature to the request should be in t h e form, for example,
" S m i t h and Jones, a partnership, by John Jones, a general p a r t n e r . " A request
for p a y m e n t so signed and dul}^ certified will ordinarily be accepted as sufficient
evidence t h a t t h e partnership is still in existence and t h a t the person signing the
request is duly authorized.
S E C . 315.82. Reissue or payment to successors of corporations, unincorporated
associations, or partnerships.—A savings bond registered in the name of a private
corporation, an unincorporated association, or a partnership which has been
succeeded b y another corporation, unincorporated association, or partnership by
operation of law or otherwise, as the result of merger, consolidation, incorporation, reincorporation, conversion, or reorganization, or which has been lawfully
succee.ded in any manner whereby t h e business or activities of t h e original organization are continued without substantial change, will be paid to or reissued in
t h e n a m e of the succeeding organization upon appropriate request on its behalf,
supported b y satisfactory evidence of successorship. F o r m P D 1540 should be
used.
S E C . 315.83. Reissue or payment on dissolution of corporation or partnership.
(a) Corporations.—A savings bond registered in the name of a private corporation which is in t h e process of dissolution will be paid to the authorized representative of the corporation upon a duly executed request for payment, supported
b y satisfactory evidence of the representative's authority. Upon the termination of dissolution proceedings, t h e bond m a y be reissued in the names of those
persons, other t h a n creditors, entitled to the assets of the corporation, to the
extent of their respective interests. Reissue under this subsection will be made
upon t h e duly executed request of the authorized representative of the corporation
and upon proof t h a t all s t a t u t o r y provisions governing the dissolution of the
corporation have been complied with and t h a t the persons in whose names reissue
is requested are entitled and have agreed to the reissue. If the dissolution proceedings are under t h e direction of a court, a certified copy of an order of the
court, showing the a u t h o r i t y of t h e representative to make the distribution requested, m u s t be furnished.
(b) Partnerships.—A savings bond registered in the name of a partnership
which has been dissolved b y d e a t h or withdrawal of a partner, or in any other
manner, will be paid upon a request for p a y m e n t by any partner or partners
authorized by law to act on behalf of the dissolved partnership, or will be paid to
or reissued in the names of the persons, other t h a n creditors, entitled thereto as
t h e result of such dissolution to the extent of their respective interests, upon their
request supported b y satisfactory evidence of their title, including proof t h a t
t h e debts of the partnership have been paid or properly provided for.
S E C . 315.84. Payment to institutions (churches, hospitals, homes, schools, etc.)—
A savings bond registered in the name of a church, hospital, home, school, or
similar institution without reference in t h e registration to the manner in which
it is organized or governed or to the manner in which title to its property is
held will be paid upon a request for p a y m e n t signed on behalf of such institution
b y an authorized representative. For the purpose of this section, a request for
p a y m e n t signed b y a pastor of a church, superintendent of a hospital, president
bf a college, or by any official generally recognized as having authority to conduct
t h e financial affairs of t h e particular institution will ordinarily be accepted without further proof of his authority. T h e signature to the request should be in the
form, for example, "Shriners' Hospital for Crippled Children, St. Louis, Missouri,
b y William A. Smith, superintendent," or " S t . M a r y ' s R o m a n Catholic Church,
Albany, New York, b y J o h n Jones, pastor."
S E C . 315.85. Reissue in name of trustee or agent for investment purposes.—A
savings bond registered in the name of a religious, educational, charitable, or
nonprofit organization, whether or not incorporated, m a y be reissued in the name
of a barik, t r u s t company, or other financial institution, or an individual, as trustee
or agent under an agreement with t h e organization under which the trustee or
agent holds funds of the organization, in whole or in part, for the purpose of investing and reinvesting the principal and paying the income to the organization.
236
1958 REPORT OF THE SECRETARY OF THE TREASURY
F o r m P D 2177 should be used and should be signed on behalf of the organization
by an authorized officer.
SEC. 315.86. Reissue upon termination of investment agency.—A savings bond
registered in the name of a bank, t r u s t company, or other financial institution,
or individual, as agent for investment purposes only, under an agreement with
a religious, educational, charitable, or nonprofit organization, m a y be reissued
in the name of the organization upon termination of the agency. T h e former
agent should reauest such reissue and should certif}^ t h a t the organization is entitled by reason rf t h e termination of the agency, using F o r m P D 1455. If such
request and certification are not obtainable, the bond will be reissued in the name
of t h e organization upon its own request, supported b y satisfactory evidence of
the termination of t h e agency.
SEC. 315.87. Payment to governmental agencies and imits.—A savings bond
registered in t h e name of a State, county, city, town, or village, or in the name of
a Federal, State, or local governmental agency such as a board, commission, or
corporation, will be paid upon a request signed in the name of the governmental
agency or unit by a duly authorized officer thereof. A request for p a y m e n t so
signed and duly certified will ordinarily be accepted without further proof of the
officer's authority.
SEC. 315.88. Payment to Government officers.—A savings bond registered in the
official title of an officer of a governmental agency or unit will be paid upon a request for p a y m e n t signed by the designated officer. T h e fact t h a t the request
for p a y m e n t is so signed and duly certified will ordinarily be accepted as proof
t h a t the person signing is the incumbent of the designated office.
[SUBPART Q — F U R T H E R P R O V I S I O N S
SEC. 315.90. Regulations prescribed.—These regulations are prescribed by the
Secretary of the Treasury as governing United States savings bonds issued under
the authority of Sec. 22 of the Second Liberty Bond Act, as amended, and pursuant to t h e various D e p a r t m e n t circulars offering such bonds for sale. T h e
prO'\^isions of these regulations with respect to bonds registered in the names of
certain classes of individuals, fiduciaries, and organizations are equally applicable to bonds to which such individuals, fiduciaries, and organizations are otherwise shown to be entitled under these regulations. The provisions of .Department
Circular No. 300, Revised, have no application to savings bonds.
SEC. 315.91. Waiver of regulations.—The Secretary of the Treasury reserves
the right, in his discretion, to waive or modify any provision or provisions of
these regulations in any particular case or class of cases for the convenience of
the United States or in order to relieve any person or persons of unnecessary
hardship, if such action would not be inconsistent with law and would not impair
a n y existing rights, and if he is satisfied t h a t such action would not subject the
United States to any substantial expense or liability.
SEC. 315.92. Additional evidence; bond of indemnity.—The Secretary of the Treasury, in any case arising under these regulations, m a y require such additional
evidence as he ma}^ consider necessary or advisable, and m a y require a bond of
indemnity, with or without surety, or an agreement of indemnity in any case
where he m a y consider such a bond or agreement necessary for the protection
of the interests of the United States.
SEC. 315.93. Preservation of rights.—Nothing contained in these regulations
shall be construed to limit or restrict any existing rights which holders of savings
bonds heretofore issued m a y have acquired under the circulars offering the bonds
for sale or under the regulations in force a t the time of purchase.
SEC. 315.94. Supplements, amendments, or revisions.—The Secretary of t h e
Treasury m a y a t any time, or from time to time, prescribe additional, supplemental, amendatory, or revised rules and regulations governing United States savings
bonds.
JULIAN B . BAIRD,
Acting Secretary of the Treasury,
EXHIBITS
237
United States Savings S t a m p s Regulations
E X H I B I T 11.—Department Circular No. 1008, April 25, 1958, regulations governing
Treasury savings stamp agents in selling United States savings stamps at
schools 1
TREASURY DEPARTMENT,
Washington, April 25, 1958.
SEC. 338.1. Authority for circular.—The Secretary of t h e Treasury, p u r s u a n t
to t h e a u t h o r i t y of t h e Second Liberty Bond Act, as amended (49 Stat. 21, as
amended, 31 U. S. C. 757c), hereby prescribes t h e regulations in this p a r t for t h e
qualification and control of Treasury savings s t a m p agents.
SEC. 338.2. Eligibility for applying for agency.—Any individual is eligible to
apply for qualification as a Treasury savings s t a m p agent to sell United States
savings stamps (hereinafter referred to as stamps) a t a specific school or schools
in t h e United States, its Territories and possessions and the Canal Zone, upon
being recommended for qualification by (i) the principal or superintendent, or
other person in charge of a school, (ii) a duly constituted school board, or (iii)
with t h e consent of the appropriate school official or board to the sale of stamps
a t t h e subiect school, an organization, association, or a unit of a State or nationally
federated civic, parents', parent-teachers', service, teachers', veterans', or women's
organization.
SEC. 338.3. Qualification of agents.—An eligible applicant seeking qualification
as a Treasury savings s t a m p agent (hereinafter referred to as an agent) shall file
a duly completed Application-Agreement, Treasury Form P D 2949 (original and
two copies), with the local State Director of t h e Treasury's U. S. Savings.Bonds
Division. T h e t e r m " S t a t e Director" shall include any director appointed by
t h e U. S. Savings Bonds Division for t h e District of Columbia, or for an3^ Territory
or possession of t h e United States, or t h e Canal Zone. If such ApplicationAgreement is accepted, t h e State Director will certify it and distribute a copy
bearing his certification to (i) t h e postmaster of the post office, branch or station
designated in t h e application, and (ii) t h e agent. Upon receipt of such copies,
t h e postmaster and t h e agent are authorized to perform the functions necessary
to effect t h e saie of stamps as provided herein. An applicant is not authorizeci to
act as or to represent himself to be a Treasury savings s t a m p agent unless and
until he receives a completed copy of his Application-Agreement bearing t h e
certification of t h e State Director.
SEC. 338.4. Responsibility of agents.—Each agent will be responsible for t h e
faithful performance of his duties and functions and for full}^ accounting for all
stamps received without prepayment, as provided in these regulations.
SEC. 338.5. Scope of authority of Treasury savings stamp agent.—An.agent qualified p u r s u a n t to this circular is authorized to sell stamps only a t t h e school or
schools designated in t h e agent's Application-Agreement, and in accordance with
t h e provisions of this circular. Agents m a y sell stamps only for cash and a t their
face value. Qualification as a Treasury savings s t a m p agent does not authorize
an individual to act in any other agency capacity for or on behalf of t h e Treasury
Department.
SEC. 338.6. Supplying stamps to agents.— (a) Agents.—Each agent is authorized
to obtain stamps without p r e p a y m e n t in denominations and a m o u n t s sufficient
t o meet t h e agent's anticipated sales for t h e day of a school week designated by
t h e appropriate school official as t h e day when United States savings stamps m a y
be purchased by students of t h e school, provided t h a t t h e agent has properl}^
accouiited for stamps previously obtained without^ p r e p a y m e n t . E a c h agent shall
call a t t h e post office designated in his Application-Agreement to obtain t h e
stamps and in exchange therefor shall sign a Post Office D e p a r t m e n t receipt form
covering t h e full a m o u n t of t h e stamps. T h e stamps m a y be obtained by t h e
agent on t h e day they are to be sold or on t h e preceding business day. T h e po3t
office from which an agent obtains stamps shall be kept advised by t n e agent of
his s t a m p requirements.
(b) Post offices.—The post office, branch, or station designated in an agent's
Application-Agreement (hereinafter referred to as the post office) is authorized
to supply such agent with stamps without prepayment in accordance with the
provisions and limitations of this section. The receipt which the agent is required
to sign shall be retained by the post office subject to return to the agent when all
of the stamps covered by the receipt have been fully accounted for.
1 This is to facilitate the carrying out of the Treasury's school savings program as administered by the
Savmgs Bonds Division of the Treasury Department.
238
195 8 REPORT OF THE SECRETARY OF THE TREASURY
SEC. 338.7. Accounting for stamps by agents.—(a) General.—All stamps obtained by an agent without prepayment, and the proceeds of sales thereof, are
t h e property of t h e United States and shall be held in t r u s t by the agent for t h e
United States until duly accounted for. T h e total value of such stamps must
be accounted for by t h e agent not later t h a n the second business day following
t h e day the stamps were to be sold at the school served by t h e agent. T h e accounting shall be in t h e form of unsold stamps or cash, or both, and shall be made a t
t h e post office from which t h e stamps were obtained. If sickness or other disability
prevents t h e agent from making a timely accounting, he shall cause t h e appropriate
post office to be notified of the reasons for his failure to make such accounting.
(b) Accounting made in fiill.—When the stamps are fully accounted for t h e
postal employee to whom t h e accounting is made shall mark "canceled" over
his signature and t h e current date on the receipt covering t h e stamps (see Sec.
338.6 hereof), and shall immediately return t h e receipt to t h e agent. If such
receipt is not available for any reason t h e postal employee shall, over his signature
and current date, appropriately record t h e facts of t h e accounting and t h e unavailability of t h e receipt on Treasury F o r m P D 2950 (see Sec. 338.8 (b) hereof)
for t h e agent's record.
(c) Accounting not 'made in full.—If t h e agent does not fully account for t h e
stamps, t h e postal employee to whom t h e accounting is made, shall appropriately
note t h e facts, under t h e current date, on t h e agent's receipt and require t h e
agent to endorse such notation. The receipt will be retained by the post office
until a full accounting is made. A similar notation of the facts shall be made and
endorsed by t h e postal employee on Treasury F o r m P D 2950 for the agent's
record.
SEC. 338.8. Records and reports, preparation, maintenance, and destruction
by agents.—(a) Receipts by agents for stamps obtained without prepayment.—
Sections 338.6 and 338.7 cover t h e preparation and distribution of receipts for
stamps obtained by agents without prepayment. A receipt duly canceled and
returned to an agent shall be retained by him one calendar m o n t h after t h e
m o n t h in which it is returned after which the agent m a y retain or destroy t h e
receipt as he m a y elect.
(6) Record of transportation of stamps and proceeds thereof to post office.—Each
agent shall keep a record, in duplicate, by calendar month, of unsold s t a m p s
and/or t h e proceeds of s t a m p sales shipped or otherwise delivered during t h e
m o n t h to t h e post office. A Treasury Form P D 2950 is provided for this purpose.
Entries shall be made on F o r m P D 2950 at t h e time each shipment or delivery
is made. T h e agent shall take the duplicate copy of Form P D 2950 with him each
time he makes an accounting to t h e post office for stamps t h a t he obtained without
p r e p a y m e n t . T h e original and t h e duplicate copy of this form shall be retained
one calendar m o n t h after t h e date of t h e last shipment recorded thereon, after
which t h e agent m a y retain or destroy t h e m : Provided, however, t h a t when
(i) unsold stamps or the proceeds of s t a m p sales are lost, stolen, or destroyed in
transit, or (ii) the agent does not account in full for stamps covered by a receipt,
the Form P D 2950 (both copies) shall be retained by t h e agent until one calendar
m o n t h after t h e deficiency is removed, unless t h e form is delivered to the Treasury.
(c) Other.—Other records prepared and maintained by and for the agent's
own use m a y be disposed of at t h e discretion of the agent: Provided, however,
t h a t any records, affidavits, etc., t h a t are prepared in connection with a loss
which m a y be t h e subject of a claim to the Treasury for relief shall be retained
as provided in Section 338.9 (d) hereof.
SEC. 338.9. Losses in transportation.—(a) General.—The Government Losses
in Shipment Act, as amended, (5 U. S. C. 134-134h) provides protection against
losses arising from shipments of valuables made at the risk of the United States,
if t h e shipments are made in accordance with prescribed regulations. The t e r m
" s h i p m e n t " as used herein is defined (in the same manner as provided in t h e
Government Losses in Shipment Act, as amended) to mean " t h e transportation
or the effecting of transportation of valuables without limitation as to t h e means
or facilities used * * *." The transportation of stamps from the post office to
the school and of unsold stamps and/or cash from the school to the post office
by or in the possession of a Treasury savings s t a m p agent are shipments of valuables at the risk of t h e United States. Accordingly, an agent may be relieved
of his accountability for stamps if they are lost, stolen, or destro3''ed in shipment
(see,Sec. 338.9 (d)).
(b) Preparation for transportation.—The a m o u n t of stamps and/or proceeds
thereof being transported from or to t h e post office m u s t be established, prior
EXHIBITS '
239
to transportation, by actual count by t h e agent. The agent's receipt given at t h e
post office for stamps obtained without p r e p a y m e n t will constitute an adequate
record of the a m o u n t of stamps being transported by the agent to the school.
(c) Procedure for transportation and delivery.—An agent m u s t transport and
deliver t h e stamps and/or the proceeds thereof in person, using due care to prevent
loss, theft, or destruction in transit. The agent's trip may be made on foot or by
private or public transportation facilities.
(d) Report of losses and presentation of claims for relief.—Losses occurring
during t h e transportation by an agent of stamps or the proceeds thereof shall be
p r o m p t l y reported by t h e agent to (i) t h e State Director who certified t h e agent's
Application-Agreement and (ii) t h e post office. Local police authorities should
also be notified if t h e loss is occasioned b y theft. If p r o m p t recovery of t h e loss
does not seem possible, t h e agent should supplement the report of loss by presenting his claim for relief to t h e State Director who, in turn, will present it for consideration by t h e Treasury D e p a r t m e n t . T h e agent's claim should b e supported
by t h e appropriate duplicate copy of Form P D 2950; t h e report of any investigation m a d e ; actiori takeri or expected to be taken and of any results obtained
or expected; s t a t e m e n t s by t h e agent ^s to t h e circumstances and cause of t h e
loss;, and, if available, statements or affidavits of any witnesses to the incident
causing t h e loss. T h e foregoing d a t a need n o t be furnished if it has previously
been furnished to or obtained by t h e Treasury's Secret Service. S t a m p agents
should bear t h e foregoing requirements in mind so t h a t in t h e event of a loss,
t h e y m a y be in a position t o obtain d a t a for iustifying a claim for relief from t h e
loss. Unless t h e records referred to herein have been turned over to t h e Treasury
t h e y should be retained, notwithstanding t h e provisions of Section 338.8 hereof,
until one calendar m o n t h after t h e claim is settled. An agent will be relieved of
liability for a loss occurring during his transportation of stamps or t h e proceeds
thereof, unless it arose as a result of his failure to comply with t h e provisions of
this circular and instructions issued hereunder.
S E C . 338.10. Action by postmasters in connection with an agent's failure to
account.—Postmasters should p r o m p t l y report any failure of an agent t o account,
in whole or in part, for s t a m p s supplied to t h e agent without p r e p a y m e n t . Such
reports should be m a d e to t h e State Director of t h e United States Savings Bonds
Division who certified t h e respective agent's Application-Agreement.
S E C . 338.11. Termination of an agent's qualification.—The Secretary of t h e
Treasury, t h e Fiscal Assistant Secretary of the Treasury, t h e National Director,
or a S t a t e Director of t h e United States Savings Bonds Division m a y terminate
t h e qualification of a Treasury savings s t a m p agent a t any time, by written notice
to t h e agent, in which event a copy of such notice will be sent to t h e post office
concerned. A qualified agent m a y withdraw from and discontinue his agency
by giving an appropriate written notice to t h e office of t h e State Director of t h e
United States Savings Bonds Division who certified t h e agent's ApplicationAgreement: Provided, however, t h a t t h e agent will be obligated to make a full
accounting for all s t a m p s received by him without p r e p a y m e n t .
S E C . 338.12. Miscellaneous.—The Secretary of t h e Treasury reserves t h e right,
in his discretion, to waive or modify any provision or provisions of these regulations arid to provide supplementary instructions for operations hereunder.
Information as to any such actions shall be p r o m p t l y furnished to agents con^
cerned.
JULIAN B . BAIRD,
Acting Secretary of the Treasury.
G u a r a n t e e d Obligations Called
E X H I B I T 12.—Calls for partial redemption, before maturity, of insurance fund
debentures
During t h e fiscal year 1958, there were t w e n t y calls for partial redemption,
before m a t u r i t y , of insurance fund debentures, twelve dated September 20, 1957,
' and t h e others dated March 21, 1958. T h e notices of call were published in t h e
Federal Registers of September 27, 1957, a n d March 29, 1958. T h e notice covering t h e fourth call of t h e 2}^, 2 ) i 2}i, 2%, and 3 percent Series A A m u t u a l iinor tgage
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 t h e notice of call.
479641—59
17
240
1958 REPORT OF THE SECRETARY OF THE TREASURY
NOTICE OF CALL.
FEDERAL REGISTER OF SEPTEMBER 27, 1957
To Holders of 2}i, 2%, ;^^, 2^8, and 3 Percent Mutual Mortgage Insurance Pund
Debentures, Series A A:
NOTICE O F CALL FOR PARTIAL REDEMPTION, B E F O R E MATURITY, O F 2H, 2H, 2 ^ ,
2 ^ , AND 3 PERCENT MUTUAL MORTGAGE INSURANCE FUND DEBENTURES, SERIES
AA
Pursuant to the authority conferred by the National Housing Act (48 Stat*
1246; U. S. C , Title 12, Sec. 1701 et seq.j as amended, public notice is hereby
given that 2M, 2^, 2%, 2%, and 3 percent mutual mortgage insurance fund debentures. Series AA, of the denominations and serial numbers designated below,
are hereby called for redemption, at par and accrued interest, on January I, 1958,
on which date interest on such debentures shall cease:
2^, 2y8, 2%, 2)i, and 3 percent mutual mortgage insurance fund debentures, series AA
Denomination
$50
_---
100
500
1,000
5,000
Inclusive serial
numbers
557 to 900
1,671 to 2,738
513 to 808
1,136 to 2,017
- 571 to 906
10,000
..
201 to 477
The debentures first issued as determined by the issue dates thereof were selected for redemption by the Commissioner, Federal Housing Administration,
with the approval of the Secretary of the Treasury.
No transfers or denominational exchanges in debentures covered by the foregoing call will be made on the books maintained by the Treasury Department on
or after October 1, 1957. This does not affect the right of the holder of a debenture to sell and assign the debenture on or after October 1, 1957, and provision
will be made for the payment of final interest due on January I, 1958, with the
principal thereof to the actual owner, as shown by the assignments thereon.
The Commissioner of the Federal Housing Administration hereby offers to
purchase any debentures included in this call at any time from October I, 1957,
to December 31, 1957, inclusive, at par and accrued interest, to date of purchase.
Instructions for the presentation and surrender of debentures for redemption
on or after January I, 1958, or for purchase prior to that date will be given by
the Secretary of the Treasury.
K?VRON^T>: September 20, 1957
LAURENCE B . ROBBINS,
NORMAN P. MASON,
Commissioner.
Acting Secretary of the Treasury.
Final interest will be paid with principal at the rate of $12.50 per $1,000 for
the 2>^%; $13.13 per $1,000 for the 2 ^ % ; $13.75 per $1,000 for the 2%%; $14.38
per $1,000 for the 2%%, and $15.00 per $1,000 for the 3 % debentures redeemed
on January 1, 1958.
Final interest will be paid with principal at the rate of $0.067935 per day for
each $1,000 for the 2 ^ % ; $0.071332 per day for each $1,000 for the 2J^%;
$0.074728 per day for each $1,000 for the 2?^%; $0.078125 per day for each
$1,000 for the 2%%, and $0.081522 per day for each $1,000 for the 3 % debentures
from July 1, 1957, to date of purchase on those purchased between October 1 and
December 31, 1957.
Summary of information contained in the notices of callfor partial redemption of insurance fund debentures during the fiscal year 1958
2H,2H,2H,2}i,d,nd3
percent m u t u a l
mortgage insurance
fund debentures,
Series A A , fourth
caU
N o t i c e of call
Redemption date
Serial n u m b e r s called
by denominations:
$50
$100
$500
$1,000
$5,000
$10,000
F i n a l 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 n m e n t ) .
R e d e m p t i o n o n call
d a t e , a m o u n t of interest per $1,000 p a i d
i n full w i t h p r i n c i p a l .
P r e s e n t a t i o n for p u r chase, prior to call
date:
Period
.
A m o u n t of accrued
i n t e r e s t per $1,000
per d a y p a i d w i t h
principal.
Sept. 20,1957
J a n . 1, 1968
557-900
1671-2738513-808
1136-2017
671-906
201-477
S e p t . 3 0 , 1967—
2 H , 2 H , 2 H , 2 % . 3,
a n d 3>4 p e r c e n t m u t u a l mortgage insurance fund d e b e n t u r e s , Series A A ,
fifth call
M a r . 21, 1958
J u l y 1, 1968
2% a n d 3 p e r c e n t
h o u s i n g insurance fund deb e n t u r e s , Series
B B , first call
Sept. 20, 1957
-- J a n . 1, 1958
- 901-1169
: . 2739-3808809-1136
2018-2736
907-1239
478-730
M a r . 31,1958
2 H , 2 H a n d 3 perc e n t h o u s i n g ins u r a n c e fund
debentures.
Series B B , seco n d call
- M a r 21, 1958
J u l y 1, 1968
1-3
1-26
1-6
1-18
1-7
- 1-416
__.
S e p t . 30, 1957
2% and 3 percent
servicemen's
m o r t g a g e insurance fund deb e n t u r e s . Series
E E , first call
S e p t . 20, 1957
— J a n . 1, 1968 . .
27-39
19-24
8-9
417-616
M a r . 31,1958
1
1-19
1
1-14.
1
_
Sept. 30, 1967
2 % p e r c e n t serv- 2% p e r c e n t h o u s icemen's m o r t mg msurance
gage i n s u r a n c e
fund d e b e n t u r e s ,
fund debenSeries F , first
t u r e s . Series E E ,
caU
second call
M a r 21, 1958
J u l y 1, 1968
Sept. 20, 1957.
— J a n . 1, 1958.
2-3 =
20
2
15-18
1-6.
1-84.
1-2.
M a r . 31, 1958
1-50.
Sept. 30, 1957.
$12.50 for 2 H % , $13.13
for 2 H % , $13.75 for
234%, $14.38 for
27/i%, $16.00 for 3 % .
$12.60 for 2 H % , $13,125
for 2 H % , $13.75 for
2-%%, $14,375 for
2 W 0 , $15.00 for 3 % ,
$16.25 for 3 K % .
$13.75 for 2 M % ,
$15.00 for 3 % .
$13.75 for 2 % % ,
$15.00 for 3 % .
$14.38 for 2 % % ,
$16.00 for 3 % ,
$14.375
$13.75.
Oct. 1-Dec. 31,1957
A p r . 1-June 30, 1958—
$0.067936 for 2 H % ,
$0.071332 for 2 H % ,
$0.07472S for 2 % % ,
$0.078126 for 27-^%,
$0.081522 for 3 % ,
from J u l y 1, 1957, t o
d a t e of p u r c h a s e .
$0.069061 for 23^%,
$0.072514 for 2H7o,
$0.076967 for 2 % % ,
$0.079420 for 2 % % ,
$0.082873 for 3 % ,
$0.089779 for 3M%,
from J a n . 1, 1968, to
d a t e of p u r c h a s e .
Oct 1-Dee 31
1957.
$0.074728 for 2 % % ,
$0.081522 for 3 % ,
from J u l y 1,
1957, to d a t e of
purchase.
A p r . 1-June 30,
1968.
$0.075967 for 2 % % ,
$0.082873 for 3 % ,
from J a n . 1,
1958, to d a t e of
purchase.
Oct 1-Dec 31
1957.
$0.078125 for 2 % % ,
$0.081522 for 3 % ,
from J u l y 1,
1967, to d a t e of
purchase.
A p r . 1-June 30,
1958.
$0.079420 from
J a n . 1, 1958, t o
d a t e of p u r c h a s e .
Oct 1-Dec 31,
1967.
$0.074728 from
J u l y 1, 1957, t o
d a t e of p u r c h a s e .
^
ZP
to
Summary of information contained in the notices of callfor partial redemption of insurance fund debentures during thefiscal year 1958—Con.
2H and 2% percent armed services housing 2H percent war housing insurance
fund debentures. Series H
mortgage insurance fund debentures, Series F F
First call
Notice of c.all
Redemption date
Serial numbers called
by denominations:
$50
$100
$500
Sept. 20, 1957--Jan. 1, 1968
$1,000
$5 000
$10,000
Final date for transfers
or denommational exchanges (but not for
sale or assignment).
Redemption oh call
date, amount of interest per $1,000 paid
in full with principal.
Presentation for purchase prior to call date:
Period
- .
1-5
1-3
1-284
Sept 30, 1967
Amount of accrued
interest per
$1,000 per day
paid with principal.
Second call
Seventh call
Nineteenth call
Mar. 21, 1958
July 1, 1968
Sept. 20, 1957
Jan. 1, 1958
Mar. 21,1958...— Sept. 20, 1967
July 1, 1958
Jan. 1,1958
6-31:
4
285-683
Mar. 31, 1958
3903-3978
11239-11906
1754-1809, 28.54• 2903.
12402-12985
3233-3354
31219-33468
Sept.-30, 1957—-..
3979-4040
11907-12371
2904-3078
12986-13453
3355-3445
i...
3346^-34837..
Mar. 31, 1958
1-4
1-8
1-5
$12.50 for 21^%, $13.75
for 2%%.
Eighteenth call
2H percent Title I housing insurance
fund debentures. Series L
$12.50 for 2H%, $13.75
for 2%%.
$12.50
Eighth call
Mar. 21,1958
— July 1, 1958
137-140
167-172
80-86
383-406
34-36
Sept. 30, 1957
141-148
173-205
87-101 .
- 407-434
36-46
Mar. 31, 1968
bO
2H percent hous- •
ing insurance
fund debentures,
Series M, first
call
00
Sept. 20, 1957.'
Jan 1, 1958
hd
O
4r-8
5-230
2-102
o
7-415
3-19
89-575
Sept. 30, 1967.
ox
• ^
t ^
ZP
$12.50-
- $12.50.
$12.50
$12.50.
o
>
Si
Kj
Oct. 1-Dec. 31, 1957.. : Apr. 1-June 30, 1958.. Oct. 1-Dec. 31,
1957.
$0.067935 from
$0.069061 for 2H%,
$0.075967 for 2%%,
July 1, 1957', to
from Jan. 1, 1958,
date of purto date of purchase.
chase.
$0.067935 for 2H%,
$0.074728 for 2%%,
from July 1, 1967,
to date of purchase.
Apr. 1-June 30,
1968.
$0.069061 from
Jan. 1, 1968, to
date of purchase.
Oct. 1-Dec. 31,
1957.
$0.067935 from
July 1, 1967, to
date of purchase.
Apr. 1-June 30,
1968.
$0.069061 from
Jan. 1, 1968, to
date of purchase.
Oct. 1-Dec. 31,
1967.
$0.067936 from
July 1, 1967, to
date of purchase.
o
S3
>
ZP
d
2H percent military
housing insurance
fund debentures,
Series N, first call
2H percent housing
insurance fund debentures. Series Q,
first call
2% percent Title I housing insurance fund
debentures. Series R
Fifth call
Notice of call
-_.
Redemption date
Serial numbers called by
denominations:
$50$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 of interest per
$1,000 paid in full with
principal.
Presentation for purchase
prior to call date:
Period
Amount of accrued interest per $1,000 per
day paid with principal.
Sixth call
3 percent Title I housing insurance fund
debentures. Series T
Fourth call
Fifth call
Sept. 20, 1957..
Jan. 1, 1958-.--
Sept. 20, 1957-.
Jan. 1, 1958—.
Mar. 21, 1958..
"July 1, 1958—.
Sept. 20, 1957..
Jan. 1, 1958—.
Mar. 21,1958.
July 1, 1958.
1-10
1-496—.
Sept. 30, 1957..
7-9...
7-10.
650-70
1-6
343-373
...
Sept. 30, 1967..
30-160.104-162.
20-40--.
50-51.-.
36-54.-.
161-203.
163-26941-64....
62-75-..
66-80--.
95-124...
242-390-.
117-178-.
98-163-..
80-139...
Sept. 30, 1957..
Mar. 31, 1968..
Sept. 30,1967..
125-160.
391-595.
179-233,
154-212.
140-185.
5-6.
Mar. 31, 1958.
$12.50-
$12.60.
$13.75.
$13.75.
$15.00-
$15.00.
Oct. 1-Dec. 31, 1957.$0.067935 from July 1,
1957, to date of purchase.
Oct. 1-Dec. 31, 1957... Oct. 1-Dec. 31, 1957... Apr. 1-June 30,1958$0.067935 from July 1, $0.074728 from July 1, $0.075967 from Jan. 1,
1957, to date of pur1957, to date of pur1968, to date of purchase.
chase.
chase.
Sept. 20, 1957..
Jan. 1, 1958—.
1-26.
Oct. 1-Dec. 31,1957..- Apr. 1-June 30, 1958.
$0.081522 from July 1, $0.082873 from Jan. 1,
1967, to date of pur1958, to date of purchase.
chase.
IN3
CO
244
1958 REPORT OF THE SECRETARY OF THE TREASURY
Legislation
EXHIBIT 13.—An act temporarily increasing the public debt limit
[Public Law 85-336, 85th Cong., 2d Sess., H. R. 99561
Be it enacted by the Senate and House of Representatives of the United States of
America in Congress assembled. That, during the period beginning on the date of
the enactment of this Act and ending on June 30, 1959, the public debt Hmit set
forth in the first sentence of section 21 of the Second Liberty Bond Act, as
amended, shall be temporarily increased by $5,000,000,000.
Approved February 26, 1958.
EXHIBIT 14.—An act to increase the public debt limit
[Public Law 85-912, 85th Cong., 2d Sess., H. R. 135801
Be it enacted hy the Senate and House of Representatives of the United States of
America in Congress assembled, That section 21 of the Second Liberty Bdnd Act,
as amended (31 U. S. C , sec. 757b), is amended to read as follows:
'*SEC. 21. The face amount of obligations issued under authority of this Act,
and the face amount of obligations guaranteed as to principal and interest by the
United States (except such guaranteed obligations as may be held by the Secretary of the Treasury), shall not exceed in the aggregate $283,000,000,000 outstanding at any one time. The current redemption value of any obligation issued
on a discount basis which is redeemable prior to maturity at the option of the
holder thereof shall be considered, for the purposes of this section, to be the face
amount of such obligation."
Approved September 2, 1958.
Public Debt Management
EXHIBIT 15.—Statement by Secretary of the Treasury Anderson, January 17,
1958, before the House Ways and Means Committee in support of H. K. 9955
and H. R. 9956, bills to amend the statutory debt limitation.
I am glad to have this opportunity to review with the committee the status of
the statutory limitation on the public debt. The present limitation of $275 billion
is contained in the Second Liberty Bond Act, as amended, which is the current
authority of the Treasury to issue public debt obligations. H. R. 9955 and H. R.
9956, now before the committee for its consideration, would provide a temporary
increase of $5 billion in this limit until June 30, 1959.
I want to make clear at the outset that the need for a debt limit increase is
based on:
(1) The fact that cash balances have been running distressingly low, as I will
show in detail later.
(2) There is need for more flexibility, for more efficient and economical
management of the debt.
(3) Even with a balanced budget there will still be large seasonal fluctuations
in receipts which make operations under the $275 billion limitation most difficult.
This request, made within the framework of our 1959 budget estimates for
revenue and expenditures, emphasizes not only much-needed flexibihty as outlined
above, but takes into account contingencies which might develop in a world filled
with uncertainties.
After I assumed my responsibilities as Secretary of the Treasury last summer,
we reviewed the situation confronting the Treasury and became concerned with
the small margin, then indicated, which would exist between the forecasts of our
financial requirements during this fiscal year and the statutory debt limitation.
We notified this committee and the Senate Finance Committee that we would
do all in our power to operate under the $275 billion limitation. At that time,
the budget for the fiscal year 1958 still projected a surplus of more than $1.5
billion. Since then, as you know, increased defense expenditures, coupled with
a less favorable outlook for revenues, have caused us to project a budget deficit
of $400 million, or a net decline of approximately $2 billion from our position last
summer.
245
EXHIBITS
We have been able to discharge our obligations within the debt limit during
the intervening period only by maintaining cash balances which have been distressingly low at times. We have had little or no margin for contingencies. We
believe that with some flexibility we would have been better able to manage the
public debt to a' better advantage for the public interest.
The combined cash inflow and outflow of the Treasury on all accounts during
fiscal year 1957 amounted to over $400 billion. We disburse approximately $1.5
billion in an average 5-day week for budget expenditures. Our cash balance has
been approximately at that level on several occasions.
Here I should like to call your attention to chart A, which is attached to the
statements. The bars on the left-hand side of chart A show average monthly
budget expenditures over the past 10 years together with our estimates for 1958.
The dotted line shows the average Treasury cash balances during those same
periods. Cash balances during the period 1948 to 1951, as appear on the chart,
were appreciably larger than the monthly budget expenditures, as shown on the
left-hand side.
CHART A
-THE TREASURY GASH BALANCE PROBLEM
$Bil.
Monthly Averages. Fiscal l948-'58
Operating Cash Balance as % of
Budget Expenditures
8-
Operating
Cash Balance
'%!,
,••••"
/
Budget Expenditures
1948
'52
'55
'58
''1948
Fiscal Years
In recent years, however. Treasury cash balances have been declining while
budget expenditures have been increasing. Therefore, in the fiscal year 1958
we estimate that the average Treasury cash balance is sufficient to cover only
about 74 percent of the average month's budget expenditures, and this compares,
of course, with about 140 percent in the years prior to 1952.
Under our Constitution, the Congress has the power to borrow money on the
credit of the United States and this power has traditionally been delegated to
the Secretary of the Treasury. . The Congress has adopted various means of
exercising control over the power which it delegates. The power to borrow
money cannot be exercised without regard to the powers of Congress to lay and
collect taxes and to appropriate moneys from the Treasury.
Prior to World War I the public debt amounted to about $1)1 billion. Up to
that time it was customary for the Congress to enact specific laws each time the
Treasury was authorized to borrow money, which was at infrequent intervals.
This procedure became outmoded in meeting requirements for borrowing due fo
heavy expenditures in World War I. In 1917 the Treasury had general authority
246
1958 REPORT OF THE SECRETARY OF THE TREASURY
to issue bonds subject to a limitation based upon t h e t o t a l a m o u n t s of issues
without regard to interim retirements. We h a d another a u t h o r i t y to issue
certificates of indebtedness based upon t h e a m o u n t outstanding. During t h e
period from 1918 to 1921 t h e Treasury's borrowing authority was increased a n d
extended to include authority to issue Treasury notes, as well as bonds and
certificates of indebtedness.
In 1929 t h e authority was further extended to permit t h e issuance of Treasury
bills. I n 1935, after further increases in a m o u n t s of borrowing authority in 1931
and 1934, t h e limitation applicable to Treasury bonds was changed from one
based upon t h e a m o u n t of bonds issued to one based upon t h e a m o u n t of bonds
outstanding.
I n 1938, t h e separate authorities applicable to different classes of public debt
obligations were consolidated under one limitation applicable to all public debt
obligations outstanding under t h e Second Liberty Bond Act, as amended. T h e
limitation established at t h a t time was $45 billion^ when our public debt amounted
to a b o u t $37 billion. This limit was later raised to $49 billion.
Early in 1941, before this Nation h a d become actively involved in World W a r
I I , t h e debt limitation was increased to $65 billion and t h e public debt was about
$46 billion. During t h e period from 1942 until 1945 t h e debt limitation was
increased each year by substantial a m o u n t s until it reached $300 billion on April
3, 1945, when our public debt amounted to about $234 billion.
After t h e close of World War I I , t h e limitation was reduced from $300 billion
to $275 billion in June 1946. At t h a t t i m e our t o t a l debt a m o u n t e d to about
$268 billion, and t h e balance in t h e general fund of t h e Treasury amounted to
more t h a n $14 billion.
Changes during these periods consistently provided larger margins between t h e
outstanding debt and t h e successive limits t h a n now exist or which would result
from t h e temporary increase under consideration.
Primarily to t a k e care of t h e uneven flow of corporate tax collections, it was
necessary to increase temporarily t h e $275 billion debt limitation to $281 billion
for t h e year ending J u n e 30, 1955. This limit was continued until J u n e 30, 1956,
when t h e t e m p o r a r y increase was reduced to $278 billion for t h e year ending
J u n e 30, 1957. Since J u n e 30, 1957, we have been operating under a limitation
again of $275 billion.
T h e committee m a y refer to table I, which outlines these changes, and to chart
B, which compares t h e debt outstanding in recent years with t h e debt limit. I
should like here to particularly call your attention to chart B. T h e Treasury
operated very close, as you will see, to t h e $275 billion debt limit during t h e
fiscal year 1954. There was somewhat more leeway under t h e temporary increase
in t h e debt h m i t to $281 billion during fiscal 1955, b u t in fiscal 1956 t h e d e b t
was close to t h e limit during substantial p a r t s of t h e winter. There was a little
greater margin under t h e limit a year ago, b u t , if you will notice, during t h e p a s t
m o n t h s t h e Treasury has again been extremely close to t h e s t a t u t o r y debt limit.
I think it is significant t h a t you see from t h e chart t h a t we normally have sufficient
margiil under t h e debt h m i t on J u n e 30 of each year and t h a t it is during t h e
winter when t h e limit is t h e tightest.
Total cash balances in Federal Reserve Banks a n d commercial banks (tax a n d
loan accounts) were down to $1.6 billion in mid-January, and are estimated to
be a b o u t $1.5 billion in mid-February. Here I would like to explain t h a t in
order t o have cash in t h e Federal Reserve Banks with which to p a y w h a t we
anticipate in drawings against t h e Treasury, we are required to draw out of our
accounts in t h e commercial banks (known as tax a n d loan accounts) sufficient
a m o u n t s of money in advance to insure t h a t there will be a d e q u a t e cash on h a n d
t o meet our expected obligations. While t h e deposits carried in commercial
b a n k s are on demand, there are approximately 11,000 banks involved, and t h e
physical problem of handling t h e transfer of deposits from t h e commercial banking
system t o t h e Federal Reserve Banks involves a lag of several days.
As an example of our tight position, during early F e b r u a r y our balances in
commercial banks, less withdrawal notices, which will have been sent out, m a y
be as low as $250 million—or less t h a n an average day's disbursements.
I t is too early to make precise day-to-day projections of our cash balances
t h r o u g h March, b u t a t present it appears it m a y be necessary to resort to substantial direct borrowing from t h e Federal Reserve (if there is a u t h o r i t y under
t h e debt limitation) in view of heavy p a y m e n t s , including interest, and maturing
-.securities due on March 15.
247
EXHIBITS
CHART B
PUBLIC DEBT OUTLOOK.
$Bil.h
280
Legpl
Limit
270
260
250
1954
1955
1956
1957
1958
1959
Fiscal Yeors
Here I might state for the committee, as I am sure most of you realize, we have
an authority granted by the Congress of $5 bilhon borrowing authority from the
Federal Reserve Bank. Proceeds from corporate tax collections do not become
available in large volume to meet expenditures until March 18 and thereafter.
One of the most serious difficulties encountered by the Treasury in operating
under the present limitation is the problem of carrying out our financing in an
orderly and economical manner. A large portion of our pubhc debt is made up
of securities with relative short maturity. More than $25 bilhon of Treasury bills
come due within the next 90 days and more than $50 bilhon of Treasury certificates,
notes, and bonds are coming due in the calendar year 1958.
I should like here to caU your attention particularly to charts C and D. Chart
C shows that our first maturity in calendar 1958 is on February 14 and we have
some further maturities almost every moiith during the rest of the year. Maturities on the chart C total $50.2 bihion, of which $21.3 bilhon is held by Federal
Reserve Banks and Government investment accounts.
I should also like to point out that the figures on this chart do not include $3
billion of tax-anticipation bills which we expect to pay off in March, nor do they
include $22 bilhon of regular 90-day Treasury bills which we normaUy turn over
4 times a year.
On chart D there is iUustrated the total volume of Treasury financing that
has taken place in recent years, which again excludes the $22 billion of regular
Treasury bills that we roll over quarterly. The total, for example, in 19^7 was
$65 bihion, of which we were able to extend $8.8 mihion beyond 1 year in 1- to
5-year notes, and $1.3 bilhon in 12- and 17-year bonds.
Some part of this short-term indebtedness is coming due each month, so that
at all times the Treasury is faced with substantial refunding problems. An
objective of sound fiscal policy is to extend the maturity of new issues whenever
opportunities are available, so as to avoid concentrating too large a portion of
the public debt in the area of short maturities.
In recent years, due to market conditions or the restrictions of the debt limit,
opportunities to accomphsh this objective have not been very frequent. We
should be able to take advantage of opportunities in the period ahead of us.
Under the present debt limit, we would not be able to take f uU advantage of such
248
1958 REPORT OF THE SECRETARY OF THE TREASURY
CHART C
MARKETABLE MATURITIES IN 1958.
Excluding Regular and Tax Anticipation Bills
11.5'
$Bil.
10.9
9.8
, ^
Federal
Reserve Banks'"
. . A i i Other
\ ^ Investors
4.4
4.2
Callable
24
5 ]
3.9: 42
14
El
46
22
19
m.
Z \ % 2'/27o I t o
C.I.
Bd. E.Nt
Feb. 14 Mar. 15 Apr.l
Sp. 3'/2%
Bill C.I.
^Apr.15-'
2V/o 2^/8% 2%%
Nt.
Bd.
Bd.
'
June 15
'
4%
CI.
Aug.l
l'/2%
E Nt.
Oct.l
3%% 2'/2%
C.I.
Bd.
Dec.I Dec. 15
> Including Government investment accomatsi
CHART D .
VOLUME OF TREASURY MARKET FINANCING
(Excluding Weekly Roll-Over of B i l l s )
$Bii.
1.3
60
5'10 Year Bonds
^OtherNotes
Long-Term Bonds^
40 h
^
Certs
andShort
Notes^
20
^Seasonal
'51
'53
- Calendar Years —
1 Notes originally 20 months or less to maturityi
249
EXHIBITS
opportunities. During the past several months, we have been able to issue only
relatively smah amounts of longer maturities on two occasions.
Those are the 12- and 17-year bonds referred to..
The practice of the Government going frequently to the market disturbs not
only the market for Government securities but also the market for corporate,
State, and municipal securities, and for businesses of all kinds.
We should be able to conduct our operations on a scale commensurate with
our needs and in accordance with the conditions which prevail. We should as
far as possible leave the markets freer to absorb new financing by State and local
governments and private businesses.
The circumstances which I have outlined, in our judgment, require a prompt
temporary increase in the present statutory debt limitation. We will still
experience in fiscal year 1959,a continuation of seasonal peaks in the collection
of corpoi-ate income taxes. These collections of corporate taxes are gradually
being leveled off, but there are stih large seasonal fluctuations. Under these
circumstances, it is^necessary for the Treasury to borrow large sums in the JulyDecember period to meet expenditures, and to pay off such borrowings in the
January-June period, even in years when we have balanced budgets.
CHART E
.BUDGET SURPLUS OR DEFICIT-SEMIANNUAL.
Fiscal Years 1955 - ' 5 9
$Bii.
Budget Surplus
•5
r
\
JulyDec.
JulyDec.
JulyDec.
Jan.June
JulyDec.
Jan.June
Jan.June
•5.7
Jan.June
Jan.June
[-6.1
-6.8
-7.9]
-5
JulyDec.
-9.3
Budget Deficit
-10
1955
'56
'57
'58
'59
Here I should like to direct your attention to charts E, F, and G. Chart E
I think shows quite vividly the seasonal peaks and vaheys of the Federal budget
which indicates the extent of which heavy Treasury borrowing is required during
each July through December period in anticipation of a budget surplus in the
following spring.
Chart F is illustrative of the fact that there is no marked seasonal movement
in budget expenditures, but if you look at chart G in relationship to chart F you
see the big seasonal swing in the Government's deficit or surplus position. It
grows out of the way^in which taxes flow into the Treasury.
As I have said, some of this unevenness is being ironed out slowly as a result
of the corporate tax cohection change under the Revenue Code of 1954, but still
it has a way to go.
^ It is difficult to make precise month-to-month forecasts which reflect all operations of the Government, including collection of a great many types of revenues,
250
1958 REPORT OF THE SECRETARY OF THE TREASURY
CHART F
BUDGET EXPENDITURES-SEMIANNUAI
Fiscal Years 1955-'59
JulyDec.
Jan.June
1955-
JulyDec.
Jan.June
-1956-
JulyDec.
Jan.June
-1957-
JulyDec.
Jan.June
-1958-
CHART G
BUDGET RECEIPTS-SEMIANNUAL
Fiscol Yeors l955-'59
JulyDec.
Jan.June
-1959-
EXHIBITS
251
the rates of expenditures under the programs of each agency, the issue, and
retirement of our public-debt obligations, and all of the multitude of operations
reflected in the total inflow and outflow of the Treasury. We have, however,
made estimates of the public debt and cash balances which are based upon our
best judgment as of the moment, and I am submitting for your information
these figures in the attached table III. These figures assume maintaining midmonth and end-of-month cash balances of $3.5 bihion and for an allowance of
$3 billion for flexibility in financing and for contingencies.
^
TABLE I.—Debt limitation under Sec. 21 of the Second Liberty Bond Act, as
ainended—history of legislation
Act ofSept. 24, 1917:
Sec. 1 (40 Stat. 288), authorized bonds in the amount of
i $7,538,945,400
Sec. 5 (40 Stat. 290), authorized certificates of indebtedness outstanding (revolving
authority)
----..
-...
2 4,000,000,000
. Apr. 4,1918:
Amending sec. 1 (40 Stat. 502), increased bond authority t o . . . ^
112,000,000,000
. . Amending sec.. 5 (40 Stat. 504), increased authority for certificates outstanding to.. 2 3, ooo, 000,000
July 9, 1918: Amending sec. 1 (40 Stat. 844), increased bond authonty t o . . .
1 20,000 OOOOOO"
Mar. 3, 1919:
' ' .
Amending sec. 5 (40 Stat. 1311), increased authority for certificates outstanding to.. 210,000,000,000
New sec. 18 added (40 Stat. 1309), authorized notes in the araount of
17,000,000,000
Nov. 23,1921: Amending sec. 18 (42 Stat. 321), increased note authority to outstanding
(establishing revolving authority)
.
2 7^ 500,000,000
June 17,1929: Amending sec. 5 (46 Stat. 19), authorized Treasury bills in lieu of certificates of indebtedness, no change in limitation for the outstanding
2 IQ QOO, 000,000
Mar. 3, 1931: Amending sec. 1 (46 Stat. 1506), increased bond authority to
'28.000,000,000
Jan. 30,1934: Amending sec. 18 (48 Stat. 343), increased authority for notes outstanding
'••
to
2 10,000,000,000
Feb, 4, 1935: Amending sec. 1 (49 Stat. 20), limited bonds outstanding (establishing
revolving authority) t o . .
.
...J
. 2 25,000,000,000
New sec. 21 added (49 Stat. 21) consolidated authority for certificates and bills
(sec. 5) and authority for notes (sec. 18). Same aggregate amount outstanding
• 2 20,000,000,000
(New sec. 22 added (49 Stat. 21) authorized United States savings bonds within
authority of sec. 1.)
"
.
May 26,1938: Amending sees. 1 and 21 (52 Stat. 447), consolidated in sec. 21, authority
for bonds, certificates of indebtedness, Treasm-y bills and notes (outstanding bonds
limited to $30,000,000,000). Same aggregate total outstanding
2 45,000,000,000
July 20, 1939 (53 Stat. 1071): Amending sec. 21, removed limitation on bonds without
change total authorized outstanding of bonds, certificates of indebtedness, Treasury
bills and notes
.
2 45^ 000,000,00()
June 25, 1940 (54 Stat. 526): Sec. 302, sec. 21 of the Second Liberty Bond Act, as
amended, is hereby further amended by inserting "(a)'' after "21." and by adding ..
at the end of such section a new paragraph as follows:
^
"(b) In addition to tbe amount authorized by the preceding paragraph of this section, any-obligations authorized by sections 5 and 18 of this Act, as.amended, not to
.exceed in the aggregate $4,000,000,000 outstanding at any one time, less any retirements made from the special fund made available under section 301 of the Revenue
Act of 1940, may be issued under said sections to provide the Treasury with funds to
meet any expenditures made, after June 30,1940, for the national defense, or to reimburse the general fund of the Treasury therefor, any such obligations so issued shall
be designated 'National Defense Series'."
3 4,000,000,000
Feb. 19,1941 (55 Stat. 7): Amendmg sec. 21, to read "Provided, That the face amount of
obligations issued under the authority of this Act shall not exceed in the aggregate
$65,000,000,000 outstanding at any one time." Eliminates separate authority for
$4,000,000,000 of national defense series obligations
2 55^ 000,000,000
Mar. 28,1942 (56 Stat. 189): Amending sec. 21, increasing limitation to $125,000,000,000. 2125,000,000,000
Apr. 10, 1943 (57 Stat. 63): Amendmg sec. 21, increasing limitation to $210,000,000,000.2 210,000,000,000
June 9, 1944 (58 Stat. 272): Amendmg sec. 21, increasing limitation to $260,000,000,000.2 260,000,000,000
Apr. 3, 1945 (59 Stat. 47): Amendmg sec. 21 to read: "The face amount of obligations
issued under authority of this Act, and the face amount of obligations guaranteed as
. to principal and interest by the United States (except such guaranteed obligations
as may be held by the Secretary of the Treasury), shall not exceed in the aggregate
$300,000,000,000 outstanding at any one time."
2 300,000,000,000
June 26, 1946 (60 Stat. 316): Amending sec. 21, decreasmg limitation to $275,000,000,000
and adding, "the current redemption value of any obligation issued on a discount
basis which is redeemable prior to maturity at the option of the holder thereof shall
be considered, for the pm-poses of this section to be the face amount of such obligation."
2 275,000,000,000
Aug. 28, 1954 (68 Stat. 895): Amendmg sec. 21, effective August 28, 1954, and ending
June 30, 1955, temporarily increasing limitation by $6,000,000,000
2 281,000,000,000
June 30, 1955 (69 Stat. 241): Amendmg Aug. 28, 1954 act, by extending until June 30,
1956, increase in limitation to
-..:
2 281,000,000,000
July 9,1956 (70 Stat. 519): Amending act of Aug. 28,1954, temporarily increasing limitation by $3,000,000,000 for period beginning on July 1,1956, and endhig on Jane 30,
1957, to
--:
2 278,000,000,000
1957: Effective July 1, 1957, temporary increase terminates and limitation reverts, under
actof June 26, 1946, to
2 275,000,000,000
1 Limitation on issue.
2 Limitatiori on outstanding.
8 Limitation on issues less retirements.
252
1958 REPORT OF THE SECRETARY OF THE TREASURY
We want to reemphasize that we are now at the period of the year when the
Treasury finds itself in a most difficult position and at a time when we are facing
major financing operations. We respectfully urge, therefore, that the Congress
give prompt consideration to this matter.
I would like most strongly to say that we of the Treasury assure the members
of this comrnittee and the Congress that we will exert all of our abilities to achieve
the utmost economy in governmental operations and to manage the public debt
as best we can in the national interest.
TABLE II.—Marketable maturities, January 1958 through December 1958'
[In millions of dollars]
Maturity
date,
1968
Feb.
Mar.
Apr.
June
Aug.
Oct.
Dec.
Total amount
outstanding,
Dec. 31,1957
Security (Issue date)
35'6-percent certificate (Feb. 15,1957)
2}^-percent bond (June 2, 1941)...
Ij^-percent exchange note (Apr. 1,1953)..
Special bill (Aug. 21, 1957)
3|^-percent certiiBcate (May 1,1957)...._.
2^^-percent note (Dec. 1,1955)..
2H-percent bond (July 1, 1952)
2?4-percent bond of 1958-63 (June 15,1938)
4-percent certificate (Aug. 1,1957)
iV^-percent exchange note (Oct. 1,1953).—
3^i-percent certificate (Dec. 1,1957)
._
2^^-percent bond (Feb. 15,1953)
10,851
1,449
383
1,751
2,351
4,392
4,245
919
11,519
121
9,830
2,368
Total
50,179
1 Excludes $22,100,000,000 of regular weekly Treasury bills and $3,000,000,000 tax-anticipation bills due
Mar. 24,1958.
2 Partially tax exempt; callable June 15,1958.
TABLE III.^—For costing of cash balance and debt, fiscal year 1959, based on constan*
operating cash balance of $3,500,000,000 (excluding free gold)
[In billion dollars]
Operating
balance, Federal. Reserve Public debt
subject to
banks and
limitation
depositaries
(excludmg
free gold)
1958_Julyl5 _
July 31
Aug. 15Aug.31
Sept. 15 .
Sept.30
Oct. 15 .
-.
Oct. 31
Nov. 15
-.
Nov. 30
Dec. 15
Dec. 31
_
1959—Jan. 15..
Jan. 31
Feb. 15
Feb. 28
Mar. 15.
Mar.31...
Apr. 15
- Apr.30
May 15
MaySl
June 15-- June 30
-
1..
-
-
-.
:
3.5
3.5
3.5
3.5
3.5
3.5
3.5
3.5
3.5
3.5
3.5
3.5
3.5
3.5
3.5
3.5
3.5
3.5
3.5
3.5
3.5
3.5
3.5
3.5
271.6
272.6
273.5
273.6
275.2
271.3
273.4
274.7
275.3
275.0
277.1
275.3
276.9
276.1
27,6.8
275.4
276. 6
271.3
272.8
273.1
273.4
273.1
274.9
269.3
Allowance
to provide
flexibility hi Total publicfinancing
debt limitation required
and for
contingencies
3
1
3
3
3
3
3
3
.3
3
3
3
3
3
3
3
3
3
3
3
3
3
3
274.6
275.6
276.5
276.6
278.2
274.3
276.4
277.7
278.3
278.0
280.1
278.3
279.9
279.1
279.8
278.4
279.6
274.3
275.8
276.1
276.4
276.1
277.9
272.3
NOTE.—When the 15th of a month falls on Saturdav or S'^Tiday, the figures relate to the following business
day.
EXHIBITS
253
|]XHIBIT 16.—Statement by Secretary of the Treasury Anderson, August 15,
1958, before the Senate Finance Committee in support of H. R. 13580, a bill to
amend the statutory debt limitation.
The President requested on July 28, in letters addressed to the Speaker of the
House and the President of the Senate, that the Congress increase the regular
statutory debt limit to $285 billion and provide an additional temporary increase
of $3 billion to expire June 30, 1960. H. R. 13580 was passed by the House on
August 6 to carry out the President's request. I am appearing this morning
to urge your favorable consideration of this bill. I appeared before this committee last January to urge enactment of a bill to provide a temporary increase
of $5 billion in the statutory limit on the public debt. The bill was enacted and
a,pproved on February 26, 1958, and provides a temporary increase from $275
billion to $280 billion until June 30, 1959, in the limit on the public debt.
When I appeared in January, the need for a debt-limit increase was predicated
on the following factors:
(1) The fact that cash balances should be maintained at a more adequate
and prudent level:
(2) There was need for more flexibility to allow efficient and economical
management of the debt.
(3) Even with a balanced budget there would stfll be large seasonal fluctuations in receipts which would make operations under the $275 billion limit most
difficult.
The budget estimates on which we made our recommendation anticipated a
deficit for the fiscal year ending June 30, 1958, of $388 million, and a surplus
for the fiscal year ending June 30, 1959, of about $466 million. At that time,
it was particularly difficult to estimate the extent of the change in economic
conditions. The impact of the recession on corporate profits, which are such an
important source of revenue, and the extent of the duration of the interruption
in the growth of personal income were hard to foresee for a period extending
1:8 months into the future.
Instead of a budget deficit of $388 million for the year ended June 30, we
incurred a deficit of $2.8 billion. This deficit was brought about because our
net revenues amounted to $69.1 billion, against the January estimates of $72.4
billion.
Instead of entering the current fiscal year ending June. 30, 1959, with an
anticipated budget surplus of $466 million, we are now faced with an estimated
budget deficit of about $12 billion. This amount is based on estimates of $79
billion for expenditures and $67 billion for receipts. In giving these estimates
we recognize the difficulty of making predictions this far ahead. They are our
best estimates, and as such, provide a reasonable approach to consideration of
the debt limit.
This substantial change in the outlook of our fiscal situation for the current
year makes it imperative that we again review the statutory debt limit. We
can no longer operate with a $5 billion temporary extension of the $275 billion
limit because we cannot look forward to a debt of $275 billion or less on June
30, 1959. The estimated deficit will result in the public debt outstanding, on
June. 30, 1959, of nearly $285 billion. It is estimated that our cash working
balance will amount to between $4 to $5 billion on that date.
An increase in the debt limit is needed even though the general fund balance
in the Treasury on June 30, 1958, amounted to about $9,750,000,000, as compared to $5,590,000,000 on June 30, 1957. On June 30, 1958, the gross amount
of public debt and guaranteed obligations subject to the debt limit was $276,013,000,000 as compared to the debt subject to limit on June 30, 1957, of $270,188,000,000.
^
The general fund balance on June 30, 1958, amounted to about $9,750,000,000,
but the cash working balance (funds available to meet the day-to-day expenditures representing balances in Federal Reserve Banks in available funds and in
Treasury tax and loan accounts) amounted to $8,628,000,000, or about $4 billion
higher than on June 30, 1957. The lower balance a year ago was due to the fact
that a large part of the tax collections in that month was used to retire public
debt obligations. These reductions (of tax anticipation issues) amounted to
$4,650,000,000 in June 1957, whfle in June 1958 there were no maturing tax
anticipation issues, and outstanding marketable public debt obligations increased
about $650,000,000. However, the lower 1957 balance made it necessary for the
Treasury to borrow $3 bfllion on July 3, 1957, to cover the heavy outlays during
254
195 8 REPORT OF THE SECRETARY OF THE TREASURY
July last year. With the higher balances on June 30, 1958, the Treasury did not
have to do any cash financing this July, even though expenditures are expected
to exceed receipts by $4.7 bihion during the month. We are borrowing $3.5
billion in early August for cash requirements of the next couple of months.
The statutory debt limit should be amended to give recognition to the current
outlook for the year. During the period since 1954, while the Treasury has been
operating under temporary increases in the public debt limit, and public debt
obligations were issued in excess of the permanent debt limit, it could be reasonably estimated that the excess could be repaid from tax collections prior to the
expiration of the temporary increases in the debt hmit, and in fact they were.
In the situation we now face, that is not the case. At this point I would like to
direct your attention to the attached chart which graphically illustrates this
situation..
CHART H
PUBLIC DEBT SUBJECT TO LIMIT
288\
^Bil.
.
285.
Proposal ^
.278
280V^
1957
1958
/ < ^ » 283.3
280
270
260h
250
• Fiscal Years
—
It would appear that the only sound course at the present time is to permanently
increase the statutory limit to $285 billion. In addition, a further temporary
increase of $3 billion will afford us a margin to take care of contingencies. Furthermore, a regular limit of $285 biUion. may present problems to the Treasury
before the end of the fiscal year because there are still substantial seasonal fluctuations in the collection of revenues. We will have to look at the situation
again before the end of the fiscal year to determine our course of action beyond
that date in the light of developments. When budget surpluses are • again in
prospect, the matter of the permanent limit can be reviewed.
The figures we are using today do not include any changes in estimated expenditures which could eventuate due to recent developments in the international
situation. These developments do, however, point up the need for being in a
position to take care of contingencies.
I am appending tables setting forth our forecast of cash balances and outstanding pubhc debt for the period ending June 30, 1959, including actual figures for
the period from January to June 1958.
255
EXHIBITS
T A B L E I V . — A c t u a l cash balances a n d debt J a n u a r y - J u n e 1958, a n d forecast J u l y
1 9 5 8 - J u n e 1959, based on a constant operating cash balance of $3.5 billion
(excluding free gold)
[In billions of dollars. Based on t e n t a t i v e estimates subject to revision]
Operating
balance of
Federal
Reserve B a n k s
a n d depositaries (excluding
free gold)
Fiscal year 1959
Public debt
subject t o
limitation
Allowance
to provide
flexibility in
flnancing a n d
for contingencies
Total public
d e b t limitation required
Actual
J a n . 15, 1958
Jan.31
F e b . 15
F e b . 28 1
M a r . 15
Mar.31
A p r . 15
A p r . 30
M a y 15
M a y 31
J u n e 15
J u n e 30
-._
-_--
,
- .
1.7
2.2
1.7
3.4
2.8
. 5.1
5.0
5.2
4.6
5.1
3.3
8.6
274.1
274. 2
274. 0
274.3
275. 3
272.3
274.9
274. 7
274. 6
275. 3
274.9
276.0
5.5
3.5
3.5
3.5
3.5
3.5
3.5
3.5
3.5
3.5
3.5
3.5
-3.5
3.5
3.5
3.5
3.5
3.5
3.5
3.5
3.5
3.5
3.5
3.5
275. 2
275.2
276.5
276.8
277. 6
275.6
278. 6
279.7
280. 5
• 280. 8
283.0
281.9
283.3
283.3
284.2
283.4
. 284.8
281. 5
283.4
284.5
284. 9
285. 2
287.2
283.0
'
---
Estimated
J u l y 15 (actual)
J u l y 31
A u g . 15
A u g . 31
Sept. 15
Sept. 30
Oct. 15-Oct. 31
N o v . 15
N o v . 30
Dec. 15
Dec. 31
J a n . 15, 1959
J a n . 31
F e b . 15
F e b . 28
M a r , 15
.
M a r . 31
A p r . 15
A p r . 30
M a y 15
May31
J u n e 15
--J u n e 30
_
. ...
-
-
-
:
1-
-
3.0
3.0
3.0
3.0
3.0
3.0
3.0
3.0
3.0
3.0
3.0
3.0
3.0
3.0
3.0
3.0
3.0
3.0
3.0
3.0
3.0
3.0
. 3?0
278 2
279.6
279.8
280 6
288.6
281.6
282.7
283.5
283.8
286.0
284.9
286.3
286.3
287.2
286.4
287.8
284. 5
286.4
287.5
287.9
288.2
290.2
286.0
NOTE.—When the 15th of a month falls on Saturday or Sunday, the flgures relate to the following business
day.
1 Statutory debt limitation of $275 billion was temporarily increased on Feb. 26,1958, to $280 billion until
June 30,1959.
479641—59-
-Ifi
bo
Ol
CO
Ox
00
TABLE V.—Forecast of cash position and debt, fiscal year 1959
(In billions of dollars. Based on tentative estimates subject to revislonl
td
1959
1958
July
August
September
October
June
Total
+.2
3.5
+1.4
3.7
-.2
5.1
—4.8
9.7
4.7
4.5
4.5
6.2
5.2
3.5
3.7
5.1
4.9
4.9
4.0
4.1
2.8
3.9
3.9
5.5
4.6
2.9
3.0
4.5
4.2
4.2
275.9
-1-2.9
278.8
-2.4
276.4
-f-3. 8
280.2
-.2
280.0
+2.2
276.3
+5.9
282.2
+3.0
285.2
-.8
284.4
-3.6
280.8
+3.1
283.9
+2.2
286.1
-2.6
276.3
+7.3
275.9
278.8
276.4
280.2
280.0
282.2
282.2
285.2.
284.4
280.8
283.9
286.1
283.6
283.6
275.6
278.5
276.1
279.9
279.7
281.9
281.9
284.9
284.1
280.5
283.6
285.8
283.3
283.3
6.0
275.7
5.2
277.8
2.2
276.3
5.5
280.2
3.0
279.6
2.9
282.0
5.7
285.1
3.4
283.7
2.8
283.7
4.2
283.7
3.8
284.8
2.2
285.5
4.6
4.3
5.6
276.3
-.4
End_.
Debt subject" to limit
4.6
W
O
.
-
1 This balance differs from the general fund balance as it includes only Treasury accounts in Federal Reserve Banks (collected), Treasury tax and loan accounts, and gold in
general fun (3.
o
>^.
-1.7
6.2
6.2
Midmonth figures:
Operating cash balance (including
gold) '
Debt subject to limit
May
-1.0
6.2
5.0
Public debt outstanding:
Beginning
Change
_ . _
April
+1.7
4.5
+.1
-
March
-5.2
9.7
-1.6
6.2
General fund balance at end
February
+1.1
3.4
+1.2
5.0
Operating cash balance at end (including
gold) 1-
January
-1.3
4.7
3.4
-4.7
9.7
Change in general fund balance
General fund balance at beginning
Novem- Decem- Subtotal
July-Deber
ber
cember
O
>
o
td
>
ZP
d
EXHIBITS
257
EXHIBIT 17.—Statement by Secretary of the Treasury Anderson, January 11,
1958, at the Budget Press Conference, Treasury Department
, The President's budget recognizes the character of our time by emphasizing the
things we must do to remain strong-for the; saj^e of peace in the world. It also
recognizes .our. continued determination to ad=here'to the principles of fiscal soundness which contribute so much to the health of our economy on which our adequate security is based.
Our efforts to keep militarily strong are underscored by the increases in defense spending for the most modern forms of weapons, and decreased defense
spending for military items of declining importance. Our adherence to fiscal
eoundness is underscored by the fact that in fiscal 1959 we will endeavor to pay
as we go for our necessary expenditures; that we propose to postpone, and in
other cases reduce or eliminate, certain nondefense programs; and that we ask
that present tax rates be continued to contribute to paying as we go to the maximum possible extent.
I believe that this budget represents proper and practical recognition of our
military need in the light of changed conditions, while recognizing theneed to keep
our economy strong and growing so as to provide not only for the individual wellbeing of our people but the basic-source of:our military strength! ;;- ,
We are currently estimating budget receipts ^for fiscal 1959 at $74.'4 billion, an
increase of $2 bihion over our current estimates for fiscal 1958. These estimates
are based upon certain assumptions which we must make in the budget process.
In making the revenue estimates for the fiscal years 1958 and 1959 the following
income assumptions for calendar years 1957 and 1958 were used.
Calendar year
Income and profits
1957
1958
In billions of dollars
••
Personal incomerCorporate profits
-.
_-
-
_
343
42
352
42
• The current readjustments in the economy with which we are all familiar are
in part the consequences of a period of rapid expansion during the past several
years. These readjustments, however, require us to scale down our earlier estimates of receipts in the present fiscal year. On the other hand, I believe very
confidently in the continued growth of this Nation once the present period of
adjustment is completed. We have the ingredients for a healthy economy and
for one that will expand to meet our needs. It would be a mistake, I feel, for
anyone to sell our dynamic economy short for any protracted period.
We have a current annual gross national product of inore than; $430 billion.
We have a growing population. We are constantly improving our standard of
living. We have, in addition, a sensitive willingness in our people and our Government to use the mechanisms at our command so as to employ our economic
strength in a way which will assure a reasonable rate of sustainable growth. '
I think, also, that we must remember that the power of economic decision in
this country rests with millions of free people. With this freedom goes responsibility. These responsibilities rest upon the Government, upon businessmen,
workers, farmers, investors, and every citizen who participates in our way of life.
- This very freedom imposes self-discipline and I think we will rise to meet whatever disciplines are required of us; and in the long run we will avoid transient considerations and follow a course of action that will provide necessary security and
a better lot for the people. History records that in a number of countries where
the failure to observe sound fiscal and monetary policies inflicted hardships and
suffering on the people, the citizens did not have the basic understanding and the
self-discipline to which I refer.
During the coming year our large gross national product will include, in addition to. the private expenditures the substantial Government expenditures represented in this budget. I believe that we will all be prudent and that we will all
be confident in the use of these great resources to our best advantage both as
individuals and as a Nation.
258
195 8 REPORT OF THE SECRETARY OF THE TREASURY
Realizing the enormous size of our task, we here in the Treasury want to meet
our responsibility in financing the obligations of the Government in a reasonable,
flexible, and sensible manner..
First of all, we are going to pay for security for our countrj^, as such security
is judged by the people in the best position to know. We are going to regard our
position of strength as a long-time.requirement and think in terms of maintaining
our security over an unknowable period: of time. We are going to try tO: assure
the kind of economic strength and development that is indispensable to our military security. We will neglect neither, and the world should know it!
Whatever choices are required, we will make them. Whatever discipline is
called for, we will exercise it as a free people should.
This budget has had long and arduous consideration by the people responsible
for our military security and for our other essential programs. We believe it is
a practical and prudent budget that will add significantly to our military strength
while recognizing the fundamental importance of a healthy growing economy not
only to support that security, but provide better living for our people.
EXHIBIT 18.—Statement by Secretary of the Treasury Anderson, February 7,
1958, before the Joint Economic Committee on the January 1958 Economic
Report of the President
• I am glad to have this opportunity to appear before the Joint Economic
Committee. The Economic Report of the President and the deliberations and
reports of this committee and its subcommittees, together with the work of the
Council of Economic. Advisers, are.of great value in developing.and maintaining
coordinated economic policies which will facilitate, to the greatest extent possible,
strong and balanced economic growth in our dynamic economy.
Perhaps the one characteristic of our American economy which has persisted
since the beginning of our history has been growth by means of constant change.
Fluctuations and- dislocations are typical of a dynamic, competitive system in
which the energies of free individuals have full scope. We must expect that the
momentum of our economy, will not be the same in all sectors of activity at the
same time. Throughout our economic history there has been constant evolution
of both our needs and wants and our means of satisfying them. We have firm
grounds for our belief that our Nation possesses the basic ingredients of an economic system which will insure a sound maintainable rate of economic growth.
At present we are passing through a period which is presenting certain difficulties and problems. This requires our continued and careful evaluation. But
we must recognize that the need for appraisal, for considered judgment and action,
is one of the responsibilities of membership in a free society. One of our great
strengths is the dedication of our Government and our people to the task of
maintaining the basic health of our econom3^ Neither infiation nor deflation
will be allowed to run a ruinous course.
Our judgments last December in arriving at our estimated budgetary receipts
for the period. 18.months in advance were admittedly difficult. They took into
consideration both the current problems of our economy and a confidence in the
strength of the underlying forces of our system contributing to growth. A
further consideration was the fact that each of our governmental departments
and our monetary agencies would continue to conduct their operations so as to
contribute renewed vitality to our economy.
Some of the specific factors contributing to our judgments will be discussed
later on.
We have not endeavored to judge the movements of our economic system
with exact nicety nor to estimate shifts in the economy at precise moments.
Rather, our judgments s^e predicated upon the belief that the restrictive phases
of economic fluctuations would not continue for a protracted period.
It seems most important to us that our economic outlook in terms of future
growth should be evaluated from the standpoint of long-range factors as well as
those of a shorter term.
Let us first review some of the forces underlying our belief in long-term
progress.
We have a growing, vigorous population. We have a highly competitive,
productive economy. Rapid technological advances have created new products
and processes. Long-range and careful planning is becoming more predominant.
All of these forces are generating new demands and new needs. In order to
EXHIBITS
259
satisfy these and like requirements, we must look to our natural resources, our
expanded industrial capacity, our growing skills, our managerial capacity, and
other like contributors to our productive machinery.
When we view our long-term situation in perspective, therefore, it is clear that
we have on the one side the expanding needs and wants of our growing population
and on the other side the capacity and skill for meeting these wants and needs
with an expanding volume of output.
Moreover, we have the two further essentials of continued high level activity
in a free enterprise economy—a relatively stable currency and an efficient financial
system.
Our financial system is demonstrating ari ability to provide shOrt-term and
long-term financing necessary for increasing activity and growth. We must
continue to exert every effort to achieve stability in the purchasing power of our
dollar.
In order to see just where we stand, it is worthwhile examining the elements
of our current strength a little more closely.
First of all, what are the expanding needs of the American economy?
To answer that question, we have only to look around us. Our population is
growing at the rate of approximately three million a year—the equivalent of
adding a state the size of Kentucky to our consumer population every 12 months.
We have constantly increasing demands for new products and materials from
American business, as the result of scientific and technological advances taking
place in almost every area of activity throughout the economy. We have a
constant desire on the part of all of our people to improve their standards of living and to expand the opportunities available to their children.
Turning now to our capacity for meetirig these needs—^America has demonstrated that we h^ve in this country an industrial mechanism' capable of meeting
any reasonable demands that may be made .upon it, both .military and civilian.
The urgencies of.,World War II unlocked many riew productive powers in the
American industrial machine. Nevertheless, in the period sirice the end of World
War II, American industry has made ari unprecedented investment in plant and
equipment. From 1946 through 1957 such investment totaled over $300 billion—
a total outlay equal to United States military expenditures during World War II,
1941-45. And this investment is continuing. Business plans for fixed investriient in the calendar year 1958 exceed actual spending in any previous year
except 1956 and 1957.
Along with our expand.ing plant and equipment, our labor force is growing
by three-quarters of a million workers a year'^a part of our growth in population.
Yet we are constantly making more efficient use of the contribution of American
workers to output. Output per man hour in the private nonfarm sector of the
economy has been increasing at an average rate of more than 3 percent a year
for the postwar period, reflecting again the tremendous expansion of plant and
equipment and improved techniques and working conditions. Moreover, agricultural productivity has been increasing even more rapidly than that of industry.
A further—and very important—factor in the long-term situation is the willingness of our people and our Government tb use the mechanisms at our command
so as to employ our economic strength in a way which will help assure sustainable
growth.
In the short-term area, a number of favorable factors can be discerned. First,
of all, part of the readjustment has occurred. Reduction of inventory in some
lines and certain adjustments in output and prices have already taken place.
Possibly in reflection of this fact, both sensitive industrial material pricies and the
prices reflected in the all-commodity index of the Bureau of Labor Statistics have
recently showed considerable stability.
The level of personal income has held up well. There has been prompt and
responsive readjustment in certain stock and bond yield and interest rate relationships, and the stock market has shown some elements of strength during the past
month.
Residential housing construction has turned upward slightly, and mortgage
money is becoming more readily available. A sustaining influence can be expected
from the stepped-up pace of certain Federal programs such as highway building,
and from a number of State and local projects having to do with community
facflities. Increased defense spending and.contract placement will also have a
stimulating effect on the economy.
Perhaps one of the most important considerations, however, either long-term
or short-term, is the fact that the confidence of the American people in the basic
260
1958 REPORT OF THE SECRETARY OF THE TREASURY
strength of our economy has remained strong. There is evidence that this confidence is increasing. The American people are recognizing that the period of
adjustment we are now going through is in part the consequence of our rapid
ex;pansion during the past several years. Our power for growth remains unimpaired, and justifies a belief that we have the elements needed for a continuing
healthy economy, capable of expanding and adapting itself to any new demands
which it may be called upon to fulfill.
You are familiar with the contents of the budget message and its recommenda-.
tions for a continuation of existing tax rates on corporation income and excises on
liquor, tobacco, and automobiles for another year.
The economic assumptions underlying our revenue estimates in the 1959 budget,
which you requested in your letter of January 20th, are as follows:
Personal income was assumed to be $343.billion in the calendar year 1957 and
$352 billion in the calendar year 1958.
• Gorporaterprofitswere-assumedtb be $42 bfllion iri each of the two years.
We do not assume smy change in prices from the present.
I should now like to discuss for.a moment some of the problems involved in
making the basic assumptions which we must make in estimating the Government's
income from taxes.
The problem of projecting our revenue receipts, which is a part of the budgetary
process, is always difficult. In the months of November and December it becomes
necessary, as a part of this operation,, to arrive at certain determinations with
reference to income tax receipts for a period 18 months in advance.
This task would be much simpler if we could be content with a range of estimates. However, the budget-making process does not permit such a procedure.
We are required to use a degree of preciseness which involves a number of specific
judgments made with the help of the best evidence and the best experts available.
The difficulties inherent in makirig precise determiriations of future tax income
are clearly evident in the historical records. These show that various relationships between tax receipts and major ecoriomic indicators which might be expected
to be fairly constant over the years do not in fact remain constant. They change
considerably from one year to the next; The individual income tax and the corporate tax provide the bulk of our reveniLies; and personal income and corporate
profits are the two most importantvbases for estimating receipts from these two
tax sources. Corporate profits, however, are not uniformly related to any single
indicator or combination of economic indicators. There is even a lack of corrcT
spondence as to the direction of change between corpprate profits and the gross
national product. In 1952, for example,, there was a large decrease in corporate
profits in spite of a substantial increase iri the gross riational product.
I might add in passing that the best current data on corporate profits are
themselves estimates which are subject to substantial revision, after taxes arq
collected and tax returns tabulated in Statistics of Income. Agaiu referring to
1952, estimated corporate profits were reported at the end of the year as $40.$
billion. This figure was finally revised to $35.9 billion, long after the end of the
year.
Our estimate of $42 billion for corporate profits in both 1957 and 1958 is based
on our own best appraisal and on advice which we have sought from staff experts
in the Department of Commerce, the Council of Economic Advisers, and the
^Federar Reserve Board. The estimate is^ of course, subject to the same hazards
as have been manifest in the past but it represents our best judgment.
With respect to the individual-income tax, we have estimated increases in
receipts from this source, although these expected increases are substantially
less than those which occurred in recent years. Our estimate took into accouut
current economic conditions, as well as pur judgment that growth would be
resumed during the year 1958 and continued on into 1959. Specifically, the
increase estimated for the individual income tax estimated for fiscal 1958 over
fiscal 1957 is $1.6 bihion; and the increase for 1959 over 1958 is $1.3 billion.
Individual income tax receipts increased $3.4 billion in each of the fiscal years
1956 and 1957. Thus the total increase for the two years 1958 and 1959 of $2.9
bihion in individual income taxes is substantially less than the increase in this
category which took place in either one of the years 1956 and 1957.
The personal income level for the calendar year 1958 underlying the budget
estimate assumes a rise of $9 bfllion over the personal income of the preceding
calendar year. This is about one-half of the annual rate of increase of preceding
years.
EXHIBITS
261
As in the case of corporate tax estimates and the economic indicators on which
they are based, the historical record shows that there have been substantial
variations in the relationship between individual income tax receipts and their
major determinant, personal income.
These variations reflect changes in the distribution of persorial income at
different income levels, including varying proportions in the taxable and nontaxable categories, and in the realization of capital gains'which affect tax receiptsbut are not included in the statistical concept of personal income. They indicatethe difficulty of attempting to project tax receipts with complete accuracy, even
if the underlying figure for personal income could be estimatedaccurately..
In the committee's invitation to appear before you, you asked that I give
attention to four questions. With your permission, I should like to address myself to three of them and ask Under Secretary Baird to address himself to thefinal question on our outlook for debt management for the coming year.
With reference to your question as to the proper division of labor.between tax
policy ahd monetary policy ds instruments of economic stabilization during thecurrent year, I should like to suggest the following:
The power of taxation should always first be critically examined as an instrument to provide revenue for the Government upon the most equitable basispossible. Tax changes should be utflized for purposes of economic stimulation
only when economic conditions are sufficiently adverse to warrant it.
I have heretofore stated that I can conceive of situations where tax reductions
might appropriately be brought into play in order to help the resumption of
economic growth. It is our judgment that the present condition of the economy
does not warrant such action now. We continue to believe that growth in our
economic system will reassert itself. We continue to be concerned that we
should avoid if possible adding to our already burdensome debt during periods
of high production. However, we must continue to examine developments as
they progress from month to month with a willingness to use-this or other methods
of stimulation if conditions should require them.
Monetary and credit policy can be used more appropriately during periods of
economic change such as we are now experiencing. The recent sharp reduction
in interest rates, plus an increase in availability of credit, provides easier financing
of business and loQal government capital projects and projects in other areas of
growth, such as residential housing.
With reference to your second question concerning recommendations for
general or structural revisions in tax policy at this- time, I should like to advise
that we are following closely the material which is being developed in the hearingsof the House Committee on Ways and Means and our staff is currently reviewing,
the hearings with the staffs of the House and joint committees. These coopera-.
tive efforts will continue.
We have recently reaffirmed the recommendation of the budget message for a.
continuation of the existing corporation income tax rates and the excises on
liquor, tobacco, and automobiles for another year. There is about $3 billion in
revenue involved. We have also recommended that H. R. 8381 to make certain
technical revisions and eliminate some unintended benefits and hardships be
enacted with some modifications. This bill has now passed the House and isbefore the Senate Finance Committee.
We have also suggested to the House Committee on Ways and Means that
the question of tax simplification is in our judgment exceedingly important. I
have asked the staffs of the Treasury and the Internal Revenue Service to work
closely with the staffs of the Joint Committee on Internal-Revenue Taxation and'the Committee on Ways and Means to determine the most effective way of dealing with this problem. It seems to me to go to the very heart of our voluntary
tax system. I hope that we will be able to develop a mechanism for giving effective consideration to this important matter in the near future.
On the third question as to the relative importance of encouragement of investment and encouragement of consumption, let me be frank to say that Our system
of competitive eriterprise should be such as to encourage increased investment
and to provide the generation through savings of adequate capital to finance
both replacement and expansion. At the same time, the utilization of the products of our enterprise is dependent upon effective demand which, of course, is
the basis for consumption. It would seem, therefore, that any consideration of
tax policy should give weight to both the development of effective capital and
the stimulation of effective demand. Here again, in order to maintain our
voluntary tax system we must be concerned not only with the objectives of eco-
262
1958 REPORT OF THE SECRETARY OF THE TREASURY
nomic stimulation, but at the same time so act as to insure fairness to all taxpayers and the development of a system of tax forms and calculations which can
be fully understood and prepared without undue complications.
EXHIBIT 19.—Remarks by Secretary of the Treasury Anderson, April 7, 1958,
at the opening of the *'Share in America'' savings bonds campaign, New
York City, N. Y.
I am happy to be here with you today at this kick-off luncheon for the "Share
in America" savings bonds campaign in the New York metropolitan area. The
savings bonds program is an activity of top importance not only to sound Government financing and a healthy debt structure, but also to the health of our free
economy. Moreover, it is a program of direct meaning and purpose to every
individual American in helping him to systematically save out of current income
and build financial reserves for the important goals in his personal life.
As you are aware, we are conducting campaigns this spring in 233 large cities
and metropolitan areas throughout the country to enlarge payroll participation
and bring new savers into the savings bonds program. New Y'ork being our
largest area, much of our success will depend upon the vigor and enthusiasm
which you people here today wifl be putting into your persorial campaign to sign
up new payroll savers in your businesses and industries.
I understand that there are over 3 ^ mfllion persons employed by companies
represented in this room. Virtually all have the payroh savings plan in effect.
About 30 percent of the employees are now on paj^roll savings, leaving a potential
of over 2V2 million employees who can start their savings bond program during
New York's "Share-in-America" campaign.
By way of dollars and cents, this is what it would mean to the Treasury to
obtain these 2}^ million new savers—over $625 million a year in savings bond
sales, for the average month's savings now set aside by payroll savers is $20.00.
I have no doubt that you will produce telling results. Nevertheless, in my
time here today, I want to take up with all of you, as I have with the chairmen
of these campaigns throughout the country who met earlier with me in Washington, the reasons why we believe that savings bonds purchases are particularly
important at this moment in world affairs to the financial and economic strength
of America.
The first thing to be recognized in evaluating our financial strength and responsibility is, of course, the immensely increased threat to our security resulting from
the Soviet scientific advances. Our Government must now maintain defense
programs of a magnitude unprecedented in our peacetime history. We must
keep in the lead of scientific progress. We must devise and have in readiness
the most modern instruments of warfare and defense against any possible
aggression.
These programs are costly. They will remain costly for a long time to come.
Every American knows that the necessary funds will be provided. But it is
equally important to make sure that our financing operations contribute in the
highest degree possible to maintaining the strength and stability of the economy.
Our enemies would like nothing better than to see us adopt hastily conceived
measures which would eventually weaken our productive power.
This is where savings bonds enter the picture. The Treasury is pushing sales
as vigorously as possible at the present time because of the major contribution
which the savings bonds program makes to the financial health^ of the economy.
The first way in which this comes about is through the leadership of the savings
bonds, program in encouraging thrift in all forms—a goal which has been stressed
by the Treasury ever since the inception of the program. Savings bonds have
never been promoted at the expense of other types of savings. On the contrary,
the prograni has served a unique purpose in encouraging people to save in many
different ways. We have no way of estimating how much the savings bonds
program has contributed to the total of well over $300 billion, which individuals
have saved in this country during the past two decades. But we do know that
the contribution has been tremendous, and we are extremely proud of the part
which the payroll savings plan in particular has played in helping millions of
American families to establish regular habits of thrift.
. Now, it may be asked how saving part of one's income helps the country as
well as the individual saver. But a moment's reflection will make the point
clear.
EXHIBITS
263
The surest way to maintain our Nation's strength in these critical times is to
provide our economy with the necessary capital to explore new areas of science,
to buy. the plant and equipment needed for efficient use of our working force,
and to maintain sufficient flexibility to move quickly in response to changing
conditions. Our high-speed American economy requires tremendous amounts of
capital to keep going—and to keep up-to-date.
But real capital must be saved. It cannot be created by any form of monetary
magic. Thus, when individual citizens save part of their incomes they are
helping the economy grow by providing needed capital. Their regular purchase
of savings bonds through the payroll savings plan helps to do this.
The money coming into the Treasury from savings bonds sales means that the
Government will need to borrow just that much less from financial institutions,
such as banks and insurance compariies. Thus, more of the funds of these
institutions are made available for private financing uses—a function never
more important than now.
Another way that the purchaser of savings bonds contributes to the financial
soundness of the country is through assisting the Treasury in its task of sound
debt management.
Our Government debt is large, amounting to about $275 billion at the present
time. While this is a heavy burden, good debt management can keep our debt
inheritance from hampering sound economic growth. Good debt management,^
however, depends on selling as many Government securities as possible to people
who are buying bonds out of their earnings. When the Treasury sells securities
to these people, it is able to avoid too much reliance on the commercial banking,
system as a source of funds. This reduces the long-term danger of inflation and
helps safeguard the value of the dollar.
We are striving in our debt management activities in the Treasury to work
toward a better structure of the public debt. Our present debt is too short. We
have more than $75 billion of marketable securities which fall due during the
calendar year 1958. Some part of this debt is coming due each month so that
at all times the Treasury is faced with substantial refunding problems.
A sound objective of fiscal policy is to extend the maturity of new issues
whenever opportunities are available. To the extent that we are able to reduce
the times the Treasury has to borrow money each year, we will be contributing
to a smoother flow of corporate and municipal financing in the capital markets.
We will also be contributing to the amount of free time which the Federal Reserve
has to take effective monetary action without always having to be concerned
with a new Treasury financing which is coming up, or an issue of new securities
which is still in the process of being lodged with the eventual holders of the
securities. This means taking advantage of opportunities whenever they present
themselves to sell Treasury bonds—^which mature in 5 years or more—rather
than Treasury short-term bills, certificates, and notes.
We have had such opportunities in the last six months when the Treasury
sold more than $8 billion of bonds running 5 years or more to maturity. In
addition, since last summer, we have sold more than $9 billion (including our
new $3>^ billion issue which we announced last Wednesday) of Treasury notes in
the 4- to 5-year area. We feel that this has helped us materially in getting a
better balance in our debt structure.
But better balance in debt structure is not just confined to marketable debt.
Over $100 billion of our debt is not marketable—savings bonds, special issues
to trust funds, etc. These issues to the trust funds, like social security, veterans'
life insurance, etc., are firmly placed in that they represent the long-term savings
of individuals being held in trust by the Government. The nonmarketable
debt also includes United States savings bonds. They also represent long-term
savings. Individuals hold on to their E bonds something like 7 years on the
average.
So, for many reasons, savings bonds purchases represent a good deal more than
a wise choice of a personal investment. In buying bonds our people are also
contributing to the sound conduct of the Government's finances and to the
financial strength of the Nation.
Some people may ask you, however, as they have asked me—"Why is the
Government promoting savings bonds sales at this particular time? In view
of the current business decline, wouldn't it perhaps be better to encourage our
people to go out and buy things rather than adding to their financial reserves?"
The question is not a new one. I understand that during every business decline
in the postwar period similar questions have been put to the Treasury.
264
195 8 REPORT OF THE SECRETARY OF THE TREASURY
In any concentration on current business indexes and trends, it is often easy,
of course, to temporarily lose sight of the long-term sustaining forces that have
made our country great. Ranking very high among these forces is the habit of
thrift, which is fundamentally responsible for the sound financing of our Nation's
industrial might as well as a backlog of savings for miUions of our people.
The habit of thrift is not something to be encouraged at one time and discouraged at another. It is much too basic. As a matter of fact, the present
economic downturn is the aftermath of an inflationary boom which would have
been much milder had Americans saved more than they did during recent years.
The Government, as you know, has already taken a number of significant
•steps in the fiscal and monetary areas which are having important and helpful
•economic effects across the Nation. It is important that consumption by individuals be maintained at a high rate. Yet it is equally important that we continue
to build regular savings programs which mean so much to our future strength
and prosperity. In a sense this is the sort of period when the value of regular
savings in building adequate financial reserves is brought home to the average
worker more than at any other time.
Neither individuals nor businesses can operate soundly without reserves; and
these reserves can be built only through the regular setting aside of a portion
of income. It is a patient, gradual process—a habit that must be built over a
period of time.
The current "Share in America" savings bonds campaign is an essential part
•of a long-term program of encouraging more Americans to. save for specific purposes, and to save regularly, even if it is only a few dollars a week. There are
hundreds of thousands of new workers each year in this country. There are
millions of others who would like to save but "just never get around to it." It is
these groups we are particularly interested in adding to the rolls of payroll
savers.
In an econom}^ such as ours where consumers spend between $20 and $25 billion
per month, a national savings bonds sales goal averaging less than $^ billion
per month is obviously a modest one. Moreover, it must be remembered that
the money that goes into savings does not disappear forever from the spending
stream. In fact, regular saving over the years produces big spending—for downpayments on new homes, for college educations for our chfldren, for supple.mentary income in retirement j^ars. Yesterday's savings are being spent for
today's needs and luxuries; today's savings will be stimiflating tomorrow's
economy through helping to keep business throughout the Nation at a reasonably
high and stable level despite temporary fluctuations in our free enterprise
economy.
Also, in this connection it should be kept in mind that when people buy bonds
they are simply temporarily transferring their purchasing power to the Government. In the meantime, however, they are keeping the earning power—interest
which will later add to the amount of purchasing power that comes back to them
when their bonds mature or are cashed.
Whfle I have talked with you primarily today about savings bonds and debt
management, all of us have an awareness of the constant attention that is being
given to our whole economic posture. Whfle there is not time to go into detail
on our current economic problems, it is most important that we keep our thinking
in due perspective.
We are dealing with a complex and varied mechanism that is generating about
430 billions of dollars of gross national product per year. We are generating in
the neighborhood of $340 billion per year in personal income.
. What is the source of this activity? What makes the wheels turn in this tremendous outpouring of goods and services every 12 months? While the answer
can be simply stated, its significance for our present situation is often overlooked.
In our free enterprise system, the source of our economic power lies in the freedom of both producers and consumers to make their owu decisions—decisions on
markets, decisions on new products, decisions on purchases, decisions on spending
versus saving, decisions on what the course of the economy may be in the future.
It is these decisions—the millions of them which are made every day—which determine whether the wheels of our economy will turn at a faster or slower rate.
While we constantly work to achieve a maximum of productive employment,
we must be mindful of the fact that in a competitive economy we can never guar.antee the absence of fluctuations. The whole march of technological advance,
the shifts in strategy and the defense needs of our country, the movements of
industry, and countless other factors will alwaj^s result in change and will require
EXHIBITS
265
us to make economic adjustments. While government action can be helpful in
providing an economic climate in which competitive enterprise can flourish, we
must nonetheless recognize that government plays a secondary role in our kind of
an economic system.
In our free enterprise economy, constantly responsive to the decisions of milhons
of people in every walk of life, there is seldom an occasion when we can cut through
the solution of an economic problem with one short-sharp stroke. Finding the
right answers depends on a long and painful process of studying the data, comparing judgments, and arriving finally at the best of a number of possible solutions.
What is required of all of us is that we bririg our clearest thoughts to bear on the
issues at hand, and that we do our utmost to undertake and support whatever
actions seem to be in the best interest of the whole United States now and over
the long run.
Whatever additional actions on the part of the Government which may be
judged as helpful in assisting an early resumption of sustainable growth in the
economy will be taken. But any action which we take must be gauged in the
light not only of where we are today and of the possible effects of any of our activities in the future.
We must try to do those things which reasonable and prudent government would
do and which would result in confiderice. We must try to avoid those things which
reasonable and prudent government would not do and which would create doubts.
Above all else, we must assure that the best and most competerit thought is
brought to bear ou these problems. It is this kind of a philosophy which lies at
the root of the understanding which has been established that decisions as to
what may or may riot be done in the field of taxation will be taken only after bipartisan consultation with congressional leaders. Such a course should reasonably
avoid competitive or hasty proposals and should bring to bear on this important
problem the most competent judgment, and prudent thought—in the best interests
of all of the American people.
All of us in and out of Government'must make our separate coritributions to
the continuity of confidence in those basic furidamentals and forces which have
brought us to high levels of production and which can assure a sustainable rate of
gi'owth in the years ahead.
We have a growing, vigorous population. We have a highly coriipetitive, productive economy. Rapid technological advances have created new products and
processes. Long-range and careful plannirig is becoming more predominant. All
of these forces are generating new demands arid new needs. In order to satisfy
these and like requirements, we must look to our natural resources, our expanded
industrial capacity, our gi'owing skills, Our riianagerial capacity, and other like
contributors to our productive machinery. When we view our long-term situation
in perspective, therefore, it is clear that we have on the one side the expanding
needs and wants of our growing population arid on the other side the capacity and
skill for meeting these wants .and needs with an expanding volume of output.
Moreover, we have the two further esseritials of contiriued high level activity
in a free enterprise economy—a relatively stable currency and ari efficierit financial
system.
What then should be our attitude? I believe that it should be an attitude of
steady-as-we-go, with a tough-niinded confidence in the future. The job that lies
ahead for us in strengthening the sinews Of our Nation to meet whatever challenges
the future may bring is a job for all America—-business, labor. Govei:nment, and
individuals ahke.
As a part of that job, every American who buys a savings bond, or who puts
time and effort into selling savirigs bonds to others, can truly say: "I am helping
to provide for my own future. I am adding to the strength of my country, both
military and economic. I am putting real meaning into the slogan, 'Share in
America'."
^
EXHIBIT 20.—Remarks by Secretary of the Treasury Anderson, April 18, 1958,
before the American Society of Newspaper Editors, Washington, D. C.
There are some postulates which I hold are basic to thinking about economic
affairs in this great country of ours.
: •
(1) There is every reason to believe in the economic future of the United
States.
266
195 8 REPORT OF THE SECRETARY OF THE TREASURY
(2) A dynamic economy should encourage competition but should seek to
minimize fluctuations and dislocations.
(3) During periods of adjustment, such as the present one, we should remember that no one has all the blame but no one is blameless.
(4) The continued operation of a free society presupposes a growing sense
of responsibility on the part of all who participate commensurate with.the growing
complexity in our economic system.
(5) The employment act is a challenge and demand for our best effort, but
cannot be regarded as a Government guarantee of no fluctuations or of no unemployment in the absence of rigid controls.
(6) Equally as important as jobs is the continuity of the job and the dollars
earned in terms of real goods.
(7) There is no single doctrine or economic theory that is the sine qua non
of growth and development in this country.
(8) Every effort to control the process of sustainable growth by a formula
or a set of rules ignores the constant chainge that is a part of our development
and minimizes judgment.
(9) So long as we are free to make our own decisions the most important
single factor in our economic system is the continuity of confidence.
(10) My faith is strong—I have confidence in the determination of our
people to work and plan and accomplish.. We are not headed for a depression,
but for new horizons of progress.
A number of elements in the cm-rent economic situation are causing concern.
Human problenis are involved; waste of our resources is involved. This loss of
productive ability must not continue for a protracted length of time.
But at the same time we must avoid taking improvident steps which might
undermine our future gi'owth and prosperity potentials.
In a democracy, decisions of national consequence stem from the people. To
do the right things as a Nation, and avoid doing the wrong things, our citizens
must understand the problems involved as well as the practical means for solving
them. In this, you as editors have a great responsibility.
No economic period has ever been so •fully reported, analyzed, and interpreted
by the media of this country as the present one. The distribution of this reporting
to the American people has been speeded up immeasurably by the technological
changes in the newspaper and broadcasting fields. This intensive coverage of our
economy is right and proper and as it should be. The American people must
be honestly and completely informed about everything that is going on which
affects them.
With this in mind, I am sure we all recognize the importance of continuing to
keep the presentation of happenings in our economy in perspective. Enlightened
citizens, objectively informed, can be depended Ori to exercise souud judgment.
Keeping our citizens so informed is a great responsibility.
;'.We have in our country an economic system that gives the widest possible
play to creative genius and technology. These forces bring about constant
change and growth in our society. From the earliest days of our history, Americans have eagerly grasped the opportunities presented them for managing their
own affairs. Individual responsibility, facing problems and getting things done,
has kept Americans working, striving, and above all improving and adding to
the store of ideas and accomplishments.
These personal drives are present, as strong as ever. Keeping pace with them
are the incalculable new opportunities for creative ingenuity which are.being
opened up constantly by modern science.
Under these eonditions, it would be shortsighted indeed to sell our American
economy short for any protracted period.
We have what we need to keep our productive engine operating at a high
level—the manpower, the skills, the managerial ability, the inventive genius.
We are a people with a strong belief in the future.
We have a willingness on the part of our people and their Government to use
such mechanisms as are at our command in a way which will help assure a
reasonable rate of sustainable growth in our economy.
Each time that we examine a proposal, however, let us ask ourselves: Will a
specific proposal increase business incentives? Will it add significantly to purchasing power? Will it foster the.sort of confidence that encourages private
expenditures? Will it do these things without seriously weakening the fiscal
EXHIBITS
267
position of the Government? Is it the sort of activity a prudent government
would engage in? These are questions of the greatest national significance.
We must take a hard look at the particular kind of economic mechanism we
have built in this country. It is an economy that last year turned out more than
$430 billion of gross national product.
This accomplishment results primarily from the freedom of both producers
and consumers to make their own decisions—decisions on markets, decisions on
new products, decisions on purchases, decisions on spending versus saving, decisions on what the course of the economy may be in the future. It is these
decisions, the millions of them which'are made every day, which determine whether
the wheels of our economy will turn at a faster or slower rate.
While the Government can be helpful in providing an economic climate encouraging to competitive enterprise, we must nevertheless recognize that Government
.action necessarily plays a secondary role in our kind of economic system. We
must understand that there necessarily will be some fluctuations in economic
.-activity from time to time. Despite heavy Government spending, the Federal
Government only accounts for one-eighth of the total spending for goods and
services in the country; the rest is determined by private enterprise and decision.
Limitations on the power of the Government to stimulate action are well illustrated in the credit field. The Goverh.ni:eh-t'and the Federal Reserve can make
credit more readily available—and they have done so. But overall measures
to relax credit cannot change the fact that the initial decision to ask for a loan—
to make use of available credit—is a personal or individual business matter. It
depends on the judgment of the borrower with respect to a number of factors
in his own situation and in the economic outlook. Only then does the lender
come into the picture. This shows how the psychological element plays such
.an important role in our individualistic, private, enterprise system.
As justification for confidence, let's look at some of the growth factors that
shape our economic-future.
. Our population has doubled in 50 years. It is expanding at a rate of 3 million
persons per year. The number of American workers is increasing at a rate of
nearly 1 milhon per year. Family income after taxes was at an alltime high in
1957 and continues high. With our ^ production more than doubling every 20
years, milhons of new workers wiir be needed to make, sell, and distribute our
goods. There is around S300 billion of savings held by individuals alone. The
billions of dollars being spent annually for research in industry will mean more
products, more jobs, and better living. During the last 12 years we have spent
S300 billion for new business plant and equipment needs, a figure which may
•easily be dwarfed by our expansion over the next 12 years.
Looking at even broader figures, it took the world something like 5,000 years
of recorded history to have the first billion people alive on this earth at one time.
This occurred in 1830.. It took us only a little over 100 years to have the second
billion people alive at one time on this globe. By 1970 the world will have
three billion inhabitants—and those three billion are the people whose wants
.and demands will make the economy of our country and the economy of the world.
We must concern ourselves not only with needs and demands at home, but
needs arid demands of the peoples of-the^ree world. America has long passed
the age of isolation. In any examination of our productive capacity we must
take into account the requirements of all who belong to the future. What we
should actually fear is standing still.
But we in the United States will need all -the skilled manpower, all the modernized capacity, and all the manageriaL talents we can muster for the expanding
volunie of goods and services which will surely be demanded by this growing
population—not in 1970, but in the very near future.
, Now is the time when Americans should be striving to improve efficiency, to
achieve more production per dollar of cost, to avoid inflation of cost and thus of
prices. In the final analysis real prosperity can come only from the production
of goods and services at prices people are willing and able to pay. All elements
of our economic life must come to this realization. Your own role as editors in
observing and analyzing these developments is a crucial one—and never more
vital than now.
• Continual growth in the demand for the products of. American industry is
inevitable, as inevitable as the march of time. Our'realists are the ories who
recognize this truth.
Let us look at the role of Government in our economy by examining three areas
•of governmental policy—monetary, spending, and revenue.
268
1958 REPORT OF THE SECRETARY OF THE TREASURY
The aim of monetary policy is to foster balanced and orderly economic growth
by discouraging the excessive use of credit during boom times and encouraging
its use for productive purposes during recessionary periods such as the present.
Antiinflationary policies and antideflationary policies are inseparably linked.
Most importantly the Federal Reserve System has demonstrated a flexible
willingness to utilize its powers and since October 1957 through yesterday has
taken a number of steps which have, resulted in substantially increasing the
volume of money and credit. The changes in the interest rate structure which
have occurred during the past 6 months have been the most dramatic in the
history of this country. The price of the cre'dit was among the last to go up and
the quickest to come down.
As for spending, the Government, out of our Treasury, now spends
$1,500,000,000 from Monday morning through Friday night each week. (In
addition $1,600,000,000 a month is being paid out for social benefits of various
kinds by States, by municipalities, and by the Federal Government.)
When one looks at these rates of expenditure within the context of a $400
billion plus economy, who is wise enough to predict with accuracy how much the
ecoriomy would be stimulated if the Federal Goverumerit should spend another
$20 mfllion a week? And yet the cost to the Government of $20 milliori a week
is $1 billion a year.
Federal spending is now higher than a year ago and it is rising steadily. Recent
actions will accelerate expenditures in Federal programs such as highway,, water
resources, and military construction. The Department of Defense in the first
six months of 1958 will place contracts with private industry totaling $5H billion
more than were placed in the last six months of 1957. Whatever the cost we will
defend this country. The cost wfll likely be more rather than less. This is not a
short-run effort.. It will go on until the tensions end, until the Russian rulers seek
real peace and not a propaganda advantage.
When one adds direct military cost, mutual security, the atomic energy cost
related to preparedness, the cost of debt that largely results from war, the cost of
hospitalization, retirement, and benefits to those who have and continue to deferid
us, we are takirig about 83 ceuts out of each dollar collected in Federal revenue.
This emphasizes the necessity to do all we can to assure economical operations in
all areas for by any standard our course is a costly one. Yet all this means there
will be increased spending from the. Federal,Treasury. It also means we have
some choices to make.
.,,. \
The expenditures for the current fiscal year 1958 indicate, by June 30, a level
well over $73-billion. • While revenue receipts are difficult to forecast because of
the irregular pattern in payments, they will likely be, for 1958, in the order of
magnitude of $70 billion. The sum of all programs now in being for all purposes
will probably result in a rate of Federal spending for the fiscal year 1959 in the
order of magnitude of.$78 billion, as the Director of the Budget has said.
On the revenue side for fiscal 1959 it is even more difficult to estimate for more
than a year in,advance. But while we do expect early resumption of economic
growth, we must be aware of the likelihood that we will fall short of our January
estimate.
These figures as to deficits give us concern. They underline the fact that the
Federal Government's overall fiscal situation is something that all of us must
keep in mind as we consider changes in either the spending or revenue programs
of the Federal Government.
They do not warrant pessimism. We confidently believe that our present
recession will not be of long duration and that sustainable growth in our economy
will soon be realized. We believe that the American people want national
decisions to be made in the light of careful thought with the best objective
judgments as to the long-run interest of the Nation.
Already our public debt amounts to a third of all our public and private debt
combined. It is equal to $1,600 for each man, woman, and child in this country.
We must ask ourselves how much more spending we want to concentrate in the
hands of Government—and how much more our Federal debt can be increased
without long-term adverse effects on the economic health of the Nation.
And now, let us turn for a moment to the other side of the fiscal picture—the
situation with respect to possible changes in our tax laws which are being suggested at the present time.
EXHIBITS
269
This problem deserves the considered judgment and thinking of us all. It is
not something to be done competitively. We must weigh the advantage and the
consequences. In some respects ^we are dealing in imponderables. We will be
trying to assess not orily the results of taking less money in taxes, but the attitudes
of people. What will they do with the money?
I am sure many people are thinking that during the years of high economic
activity and high employment, in the absence of substantial surpluses, tax reductions are regarded as inflationary. When receipts are down from slackening
economic activity and expenditures remain high, tax reductions are regarded as
too costly. So the taxpayer asks when can the burden be lessened?
We all look forward to some relief from the present high burden of taxation.
Whatever action should be judged as proper in this field will continue to receive
our daily consideration.
Modification of taxes in an economy as complex as ours, however, must be
based on a very careful review of what in fact can be accomplished—and not on
the theory that a single dramatic action will automatically be all that is required
to assure business recovery. The very fact that the present downturn in business
developed at a time when personal income was at the highest level in history
would seem to indicate many other considerations are involved.
We must, I believe, take into our account in making any decision in this area:
(1) Our present and our future fiscal position, for not only does debt, but the
very management of it, weigh heavily in our economy;
(2) We must see ahead sufficiently clearly to have a reasoned plan and
judgment as to how we pay for what we spend. The Government is the biggest
single buyer of goods and services in this country. Despite any fluctuations which
have occurred, one of the reasons for increasing cost is that the things we buy are
costing more. In judging our ability to pay for what we buy this fact must always
be weighed in the balance.
(3) We must reasonably identify the results of our efforts in terms of the
resumption of a sustained and a sustairiable growth in terms of equitable distribution, in terms of what creates and maintains new job opportunities, new
(expansion, new incentives, real and justified continuation of confidence.
These considerations do not always coincide with the most popular. They
nave, however, motivated the understanding that any action in this field would
L ^ preceded by bipartisan consultation with the leaders in Congress. The
w uifare of the people and not any party must first be served. This country is
indebted to the leaders on both sides of the aisle for an attitude of statesmanship.
Most of us, I think, have faith in our country's future. We believe tomorrow
will be all right, but how about today? Above all else we must apply reasoned
judgment. We are not seeking a stimulant that brings quick change and a new
crisis, but a firm posture of plans, attitudes, and actions that underlie a soundly
enduring prosperity with lasting jobs and lasting growth.
If this is our faith, let us take stock of the good and the bad, but act as Americans
responding to a chaflenge and an opportunity.
Businessmen should realize that while this may well be the most competitive
year since the end of World War II, there is a lot of business for those who go out
for it. Spendable funds are high; personal income in America from the last report
was only 1.7 percent lower than the alltime peak. Savings are high. Credit is
available. The American people are alert to new and better ways of meeting their
wants. They are ready to welcome the almost-forgotten satisfactions of dealing in
a buyers' market.
A wefl-stocked household can "afford to wait"—but it can also be sold. New
technological developments are making yesterday's products obsolete at the same
time that they are creating new products, new services, and new employnaent
opportunities. Our present situation calls for courage and foresight, for a considered evaluation of all practical measures for encouraging renewed growth.
At the same time it calls for understanding and the cooperative efforts of business,
labor, government and individuals alike, to assure sound growth and to resist
expedients which could set in motion a new round of such inflationary pressures
as to leave in its wake even greater problems in the months and years ahead.
I have every confidence that the American people will be wise enough and
perceptive enough to support the right kind of actions for promoting growth in
our competitive economy. We have overcome challenges in the past; we are equal
to the present chaflenge.
270
195 8 REPORT OF THE SECRETARY OF THE TREASURY
EXHIBIT 21.~Statement by Under Secretary ofthe Treasury Baird, February 7,
1958, before the Joint Economic Committee on debt management problems
I am glad to have the opportunity to discuss with you today what we in the
Treasury consider to be our most important debt management problems - during
Ic/Oo.
Debt management, of course, does not take place in a vacuum. If it is to make
its maximum contributiori to sound financial management it must work effectively
with the budget and tax pohcies of the Government and the monetary policies of
an mdependent Federal Reserve System. Even though the Treasury's debt operations run weh over $100 bflhon a year in terms of overafl issuances or retirements,
good debt management rarely makes headlines. The Treasury is making every
effort to handle this very technical and complicated phase of fiscal policy in a way
that wfll contribute to sound and sustainable economic growth and stabflity.
The environment in which debt management operates consists of many factors,
the first of which is the budget outlook. If other conditions are favorable, the debt
tends to be more easfly managed at times when the Government is taking in more
than it IS spending. As a result of the budget surpluses during the past two years,
the pubhc debt has been reduced from $281 bilhon in December 1955, to $275
bfllion in December 1957.
As you know, however, the present budget outlook does not aflow for further
debt reduction in the year ahead, other than the usual seasonal downswing under
the impact of heavy tax collections this spring, which wifl be foflowed by a seasonal
increase in the debt again next fafl. Even with a balanced budget, the Treasury
has substantial amounts of cash financing to do during the July-Deceiriber period
each year in anticipation of heavy tax payments in the January-June period. The
seasonal swings in Treasury receipts are being moderated somewhat from year to
year as a result of corporations paying their taxes more currently as provided for
m the Revenue Code of 1954, but substantial seasonal movements stifl occur.
CHART I
.THE PUBLIC DEBT.
As chart I indicates, there have been only two periods since the end of World
War II in which sizable debt reduction out of budget surplus has been realized—
a reduction of $8 bfllion in 1947, 1948, and early 1949; and a reduction of $6
bilhon during the last two years. We fufly expect, of course, that further debt
271
EXHIBITS
reduction will be possible as we move beyond the period of time, covered by the;
present budget, always keeping in mind that important as it is, the goal of*^debt
reduction should not interfere with whatever steps are necessary to:: assure the
security of our country.
. : .. . ; •. ':•.„•
One of the Treasury's major responsibilities in'the field of debt irianagemerit is
to work toward a better structure of the debt within the overall total' whenever
conditions permit. Chart J shows the structure of the debt as of December 31,
1957.
.. •_ • . : .
• : . • - • :. ;•; ., ' ;-: .• / •
CHART J
STRUCTURE OF THE PUBLIC DEBT DEC. 311957
Total
^
Nonmarketable
Marketable
$Bil.
Time to Maturity!'
Savings Bonds^^Z
($i64>/2Biiiion)
200
.46.
^\^/nye$fmenf
Bonds, etc.
^'Spec/of Issues
fo Trust Funds
2755
IOO
I Partially tax-exempt bonds to earliest call date.
Most of the Treasury's effect on the structure of the public debt is achieved
through its financing decisions affecting the marketable debt, which, on December
31, 1957, accounted for $164^^ billion of the total $275 billion debt. These
marketable issues consist of 91-day bills, 1-year certificates of indebtedness,
1- to 5-year notes, and longer-term bonds—issues which are freely traded in the
Government securities market every day.
It would be better to have less of the public debt coming due each year. If the
$75^^ billion of under one-year debt, which is shown as the bottom bar on chart
J, can be cut down, there will be a reduction in both the frequency and volume
of Treasury financing. To the extent that progress is made toward this objective,
. the Treasury will be contributing to a smoother flow of corporate and municipal
financing to the capital markets. It also will add to the free time which the
Federal Reserve will have to take effective monetary steps without always having
to be concerned with a new Treasury financing which is coming up or financing
which is still in the process of being lodged with the eventual holders of the
securities. The Treasury would prefer to go to the market less frequently than
it had to in 1957. Last year there were financing operations, other than the
regular rollover of Treasury bills, in every month except April, a frequency which
reflected in large part the pressure of an increasingly restrictive debt limit.
The remaining $110J^ bflhon of the public debt is not marketable. As shown
on the right side of chart J, this part of the debt includes securities issued to the
social security and other Government trust funds. It also includes our savings
479641—59-
-19
272
1958 REPORT OF THE SECRETARY OF THE TREASURY
bpnds-^which are at the heart of our efforts to achieve a broader distribution of
the public debt. •
; .
' A t ' t h e present time, approximately 40 million Americans own $41}^ bfllion of
E and H savings bonds. We estimate that something like eight milhon people,
are buying savings bonds regularly throiigh payroU savings plans where they work
or through the thousands of firiancial institutions around the country that sell
these bonds for us as a public service.
.
.
As you know, the rates of interest on Series E and H savings bonds were raised
last winter from 3 percent to 3^/i percent, along with a substantial improvement
in earlier yields in case a bondholder redeems his security before it is due. This
added attractiveness of E- and H bonds, together with their proven appeal of
convenience, safety, indestructibility, and a guaranteed interest rate over a period,
of years, is already showing up in improved sales. Our sales in January 195&^
were $510 million, up 10 percent over Jariuary a year ago.
,
We are riow coriductiug a number of intensive campaigns in leading, cities
across the Nation to encourage further sales of savings bonds. We are reminding;
Americans again that they are adding not only to their own financial well-being,
but also to that of their Nation, when they buy savings bonds. Even though
E and H bonds may be redeemed on short notice by the holder, they in fact remain
outstanding about seven years on the average. As a result, they help to achieve a
broader distribution of the debt beyond the short-term area.
The only way, of course, in which the Treasury can reduce the amount of
marketable debt coming due within one year—short of overall debt retirement—is
by replacing some of the maturing short-term debt with new issues that will come
due over a longer period of time. That is what we mean by extendirig the .debt,:
and we try to do that whenever conditions are favorable. The simple passage of
time brings more and more of the debt into the one-year area so that a substantial
amount of debt extension is required even if we are to prevent the under one-year
debt from growing. As has been so often said, we operate in something like
Alice's Wonderland, and have to run fast in order to stay in the same place—and
even faster if we want to get some place.
Chart K shows what has been done during the last 11 years not only in terms of
CHART K
VOLUME OF TREASURY MARKET FINANCING
(Excluding Weekly Roll-Over of Bills)
$Bil.
60
5'10 Year Bonds y
-^OtherNotes
Long-Term Bonds^
40
' ^ Certs
andShort
Notes'"
11 ^ X ^ Seasonal
'51
'53
— Calendar Years —
* Notes originally 20 months or less to maturity*
273
EXHIBITS
the total amount of Treasury financing that has been required, other than the
rollover of Treasury bills, but also the amount of debt extension which has been
accomplished. "
There was some debt extension back in 1949 and 1950, which helped reduce the
size of the financing job in 1951 and 1952. There was further debt extension in
1952 and even more in 1953, but the most substantial debt lengthening that has
taken place since the war occurred in the calendar year 1954. During a year
when the Treasury had a $62 bihion financing job to do, $31 bilhon—half of
the total—was extended into securities running more than one year to maturity^
with alriiost $22 bihion of the extension in 5- to 10-year bonds. This in turn
helped to reduce the volume of market financing in 1955 and 1956, but the relatively small aniount of debt extension which the Treasury was able to accomplish
under the conditions which existed in 1955 and 1956 meant that again in 1957 our
problem was more difficult. The $65}^ bihion figure shown on this chart for
1957 Treasury financing is inflated by the fact that $10 bilhon of the August
maturities (mostly held by Federal Reserve Banks) were rolled over into a December maturity and were, therefore, counted twice during the year. The fact
remains, however, that even if this doubling-up were excluded, the 1957 job was
among the largest in history.
Our financing job in 1958, including our current financing, is expected to be
somewhat smaller than in 1957. Chart L indicates the marketable maturities,
issue by issue, which are facing us during this calendar year. The subscription
books on the Treasury refinancing this year have just closed and we hope to be
able to announce shortly the results on our offering of a 1-year certificate, a 6-year
bond, and a 32-year bond, which was made to the holders of the five issues maturing from February 14 through April 15, as shown on this chart.
, Although the Treasury decision to include a large block of maturities in the
current financing helps to take some of the burden off of our debt manageriient
activities in the spring, we still face a heavy schedule. Total maturities of
Treasury certificates, notes, and bonds this year amount to $50 billion, of which
$29 billion is held by the public. In addition to this $50 billion, the Treasury
has an issue of $3 billion of tax anticipation bills coming due in March (to be paid
CHART L
MARKETABLE MATURITIES IN 1958.
Excluding Regular and Tax Anticipation Bills
11.5
$Bil.
Held by:
10.9
Public
$28.8 Bil.
Federol Reserve! 21.4
TotaL_
$50.2 Bil.
, ^
9.8
Federal
Reserve Banks
M_ 42
1 Puhlic
24
5.1
3.9
4.6
42
2.2
.1
3%%
2'/2%
l'/2%
Sp. 3'/2%
C.I.
Bd.
E.Nt.
Bill
Feb. 14
Mar. 15 Apr!
C.I
^ A p r 15-^
2V/o
2%%
23/4%
4%
l'/2%
Nt.
Bd.
Bd.
CI
ENt.
Aug.!
Oct.l
'
1 Including'Government investment accounts.
June 15
'
1.9
3 % % 2'/2%
C.I Bd.
Dec. I Dec. 15
274
1958 REPORT OF THE SECRETARY OF THE TREASURY
off in cash), and $22>^ bilhon of regular 91-day Treasury bills which wiU be rolled
over four times during the course of the year. This total of $75>^ bilhon outlines
the basic dimensions of our job in 1958.
Chart M spells out our problem of the passage of time adding to the short-term
debt over the next few years, on the basis of the total amount of marketable debt
as it now stands. If we add up all of the debt that will come into the under oneyear category in 1958, 1959, 1960, and 1961, we would find that the amount of
under one-year debt four years from now, instead of being $751^ biUion, would be
$123H billion, if all refinancing in those years was in the one-year area. That
would mean about 75 percent of the entire marketable debt would be due within
one year in 1961, as compared with 45 percent at the present time.
CHART
M
POTENTIAL GROWTH OF SHORT-TERM DEBT^ DEC. 1957-61 _
( A s s u m i n g No Debt E x t e n s i o n )
Outstanding
Dec.31,1957
Potential Growth during
Each Calendar Year
Potential
Dec.3U96l
$Bil.
120
Debt extension needed
to keep
under i-year
debt ot
present
level
80
Notes
and '
Bonds
40
Ci:s
and'
Bills
;:75!/^i
I Marketable maturities within one year (partially tax-exempt bonds to earliest call date).
To put it another way, we need a net amount of $48 billion of debt extension in
the next four years in order to keep even—and more than that if we are to make
any progress in cutting down the size of our short-term debt.
We continue to believe that it is in the long-range best interest of this country
to offer intermediate- and long-term securities over the next few years whenever
conditions are favorable. Cur recent refunding operation was based on this
principle. It is obvious, however, that a great deal more remains to be done.
In conclusion, I can assure you that the Treasury will continue to discharge its
responsibflities of debt management with broad national interest as the first
consideration.
EXHIBIT 22.—Remarks by Under Secretary of the Treasury Baird, May 9, 1958,
at the 38th Annual Conference of the National Association of Mutual Savings
Banks, Boston, Mass.
Financing your Federal Government
As one of the newer members of the Treasury team, I am indeed happy to have
this opportunity to discuss with this group of leaders in your industry some of
the problems that we currently face in financing your Government.
EXHIBITS
275
At present many areas of the economy are experiencing a downturn. But the
factors making for a long-term growth trend in the economy are as strong as ever.
There is every reason to believe in the economic future of the United States,
provided, of course, that we handle our fiscal and monetary affairs wisely.
Meanwhile, we are naturally concerned about that downturn. It represents a
waste of resources, both human and material. It means disappointment and
misery for many of our fellow Americans.
The Government is not standing idly by. It has undertaken a positive program
for encouraging employment and renewed expansion throughout American industry, keeping in mind short-term needs as well as long-term goals.
I should like to summarize the broad features of that program in just a moment.
However, we must never lose sight of the fact that the improvement in our
present business conditions and the provision of jobs over the long run in a free
country are primarily the responsibility of American business, of employers and
employees, working together, with confidence, to produce the goods and sell the
products which the American people and the people in the rest of the world want
and at a price .they can and will pay. Washington can help do this job, but it
cannot do the job by itself. The task will only be completed when all Americans,
taking a calm reading of the economic signs, move forward with confidence and
strength to the new economic achievements which all of us have reason to expect
in the months and years ahead.
While the major decisions leading to renewed growth rest with individuals
and groups in our type of economic system, the Government, as you know, has
been entrusted with important responsibilities for assisting in the maintenance
of employment activity at high levels. The Employment Act of 1946 reinforces these responsibilities. Let me summarize for you some of the significant
steps which the Federal Government has already taken during the present recession to help get the economy back on an upgrade.
Residential construction, as you know, is now being stimulated by new regulations liberalizing downpayments and other features of FHA and VA loans. This
should begin to show up in increased new housing starts later on this spring. In
addition, more funds have been released for military housing and other building
under federally sponsored programs, and FN MA purchase authority on low cost
homes has been significantly enlarged.
A further encouraging factor affecting not only private construction but also
the tremendous volume of sorely needed State and local building projects—•
schools, highways, hospitals, public buildings, utility services, etc.—has been the
dramatic increase in the availability of credit accompanied by an unprecedented
drop in interest rates, particularly on market securities. Federal Reserve
monetary action during this last 6 months has been very effective in adding to
the supply of available credit. These are developments with which I know you
are thoroughly familiar.
The Government has stepped up greatly the rate of defense contract placements, with $5}i billion more contracts to be let in January-June 1958 than in
July-December 1957. Of course, there is a lag between contract letting and
budget spending, but the stimulus to the contractors is already being felt.
In addition, the military is doing everything possible to see that more procurement is placed through small business and through firms in areas where there is
an adequate supply of available labor.
Civil works projects are being accelerated and many programs in the January
budget, such as urban renewal projects and highway programs, are now expanding
significantly. A total of about $2}^ billion more is to be spent on highways in
1958 and 1959 under present plans than would have been spent at the 1957 rate.
All of these programs are active Federal programs right now. Furthermore,
the administration has put forward other proposals to help counter recessionary
tendencies. These include extended unemployment benefit payments—but
only on a sound basis. There are also other needed programs being urged which
will, as a secondary result, help stimulate activity. They include such things
as additional expenditures on water resources projects, post offices, new programs
to aid small business and to help meet the financial problems of the railroads.
The administration is placing emphasis on desirable expenditures that can be
made over the short range and the acceleration of existing programs and not on
the type of public works that will take many months or years to get under way
and will only get into high gear at a time when they wifl compete with the needs
of the private economy.
Throughout the present recessionary period there has beeii strong pressure on
276
195 8 REPORT OF THE SECRETARY OF THE TREASURY
the administration and on the Congress, as you know, for providing further
stimulus to our economy through tax reduction. This is a proposal which must
have the considered judgment and thinking of all of us. It is not something
which should be done hastily or with any other motives than the national interest.
We must weigh the advantages and the consequences—and there are many
imponderables.
Tax reduction looks to some people like a simple dramatic action which can
immediately put us back on the road to expansion. Frequently, those who urge
it pay little attention to the fact that a major change in tax rates, affecting every
sector of the economy and the fiscal position of the Government for years to come,
must be arrived at only after the most careful examination of all the factors
involved. Tax revision can take many forms and can have many different
effects. It must be considered in the context of the measures which have already
been adopted or are in the process of being adopted to cushion the current decline
and to promote well-justified public confidence. It must be examined in terms
of the fiscal position of the Government, and in terms of the attitudes of people.
We deal with a world where psychology plays a part as well as statistical quantities. We must ask what would people do with the funds released if there were
a cut in taxes?
To answer this question, we need to take a fairly close look at the specific
characteristics of consumer incomes and consumer spending during recent
months.
When we do this, the first fact which stands out is that aggregate spendable
funds in the hands of consumers have remained high; personal income in the
United States, according to the last report, was only 1.7 percent lower than the
alltime peak. Next, we find that consumer expenditures for services were at a
record high during the first quarter of this year, and expenditures for nondurable
goods were almost as well maintained—^less than 1 percent below the record level
of the third quarter of 1957. First quarter expenditures for durable goods, on
the other hand, were 12 percent below their peak of a j^ear ago.
Clearly, the durable goods area of the economy has been the hardest hit.
Looked at realistically would the tax proposals most commonly suggested have a
stimulating effect where such an effect is most needed—in the durable goods area?
The very fact that the present downturn in business developed at a time when
personal income was at the highest level in history would seem to indicate that
many considerations other than the volume of spendable funds are involved.
In one sense, our dilemma grows out of our high standard of living. Our people
are so far above a subsistence level that a substantial proportion of their expenditures are postponable. The public has a way of shifting its demands for various
types of goods and services. In our free societj^, it is difficult to predict whether,
by changing tax policy, we can measurably rechannel the buying demands of the
public.
The question of a tax cut, you may be assured, is under continuous study by
the administration. The administration has stated, however, that it will recommend action only when it has become clearly evident what decision is in the best
interests of the Nation, and only after prior consultation with the leaders of both
parties in Congress.
One of the things that we are trying to do with respect to both revenues and
expenditures is to keep our programs in perspective—to try to look at budget
policy in terms of its objectives through good and bad times alike. Budget
policy is made in the present, but it must, of necessity, look far ahead—months
and even years ahead. In our swiftly moving economy, it is unlikely that even
the best predictions will coincide precisely with events as they unfold. The very
success of the Eisenhower Administration in cutting Government expenditures,
for example, has led most people to forget that the budget as the present adminisr
tration found it—the planned program for the fiscal year 1954—contemplated
expenditures of $78 billion. The present administration succeeded in cutting
expenditures back below $65 billion, thus permitting a tax reduction amounting
to a $7}^ bfllion cut in 1954 and working toward a budget balance which was
achieved in both the fiscal years 1956 and 1957.
...But at about the time that budget balance occurred, both expenditures and
revenues began to rise again. It was an uneasy balance. It was apparent, while
we were still in a boom situation, that if any leveling of business occurred, the
anticipated budget surplus would not be large enough to cushion the probable
decline in revenues. Under these .circumstances, we would be back in a deficit
situation similar to the one which had been corrected earlier.
EXHIBITS
277
The leveling in business has occurred. And it has been accompanied by a new
development, the increased threat to our security raised by Soviet scientific advances—with their new military potentials. These new factors in the international situation, plus the speedup of needed domestic programs, are expected to
carry Federal Government expenditures back to at least $78 billion in the next
fiscal year, with a substantially larger deficit than the prospective $3 billion deficit
for fiscal 1958.
Our setting in the management of the public debt, therefore, is changing abruptly. Budget surpluses made it possible to reduce the debt from $281 billion in
December 1955 to $275 billion at the present time. The debt will now begin to
increase again as our budget deficits mount in the months ahead. This will require a new review of debt limit requirements before the adjournment of Congress.
The debt limit at the present time stands at $280 billion, but even that will go
back to $275 billion on June 30, 1959, according to the present law. When the
Secretary asked the Congress for an increase in the debt limit last winter he did
so on the basis of the need for more adequate cash balances to cover Treasury
operations, more flexibility in handling debt management, and an allowance for
contingencies which might arise. Any new review must incorporate the same
considerations as well as the prospect of increased deficits.
We will continue our efforts in the Treasury to improve the structure of the
public debt. It is an important goal and we believe that it is an essential adjunct
to monetary policy as well as being sound fiscal policy in itself. Good debt management must contribute to the financial soundness of the economy, and 'this
means that it must endeavor to correlate with monetary policy to the greatest
extent practicable, rather than setting up cross currents which would run contrary to appropriate actions in that field.
Debt management can serve this purpose best in two ways—first, by reducing
the volume of refunding operations, and, second, by reducing the number of
times which the Treasury must go to the market. Treasury financing operations, as you know, not only compete for funds with corporate and municipal
financing, but they reduce the period of time during which the Federal Reserve
has relative freedom to operate. When a single borrower accounts for one-third
of the entire debt of the country—as the Federal Government does today—it is
an obvious fact that such a borrower must compete if he is to meet his borrowing
requirements. The Treasury competes when money is tight. It competes when
money is easy. The question isn't whether we compete or not; it is, rather,
.what form our competing takes.
With respect to the number of times the Treasury must enter the market during
a given period, the Federal Reserve and the Treasury both recognize that a major
Treasury offering is an important event in the financial world; the market must
prepare for it ahead of time, and it must have a sufficient period afterwards for
thorough absorption of the new issue. This necessarily limits' the period during
which the Federal Reserve can use monetary policy with greatest effectiveness.
It is our aim to work toward cutting the number of trips to the market. We
believe the best months for our future maturities, except for seasonal borrowing^
are probably Februar}^, May, August, and November. Whatever our intentions,
it will be many j'-ears before the Treasury can hope to attain these goals.
While assistance to monetary policy is a major responsibility of debt management, lengthening the debt is also an important long-run policy goal from the
standpoint of the Treasury alone. First of all, it is necessary to work continually at lengthening the debt in order to keep the, total from shortening as a
result of the mere passage of time. In the last five years, the Treasury has
managed to keep the length of the marketable debt at about five years' average
duration. This has taken unremitting effort. We have issued $6 billion of 20year and over bonds and $33 billion of 5- to 20-year bonds to do this. Difficult
as it niay be at times to pursue our goal of debt-lengthening, we can never lose
sight of our objective. In addition to all the other considerations of monetarypolicy and prudent management of the public's funds, we must leave sufficient
leeway in the short-term area at all times so that a sizable volume of short-term
loans could, be successfully placed should special circumstances require it. It
would be unwise in the extreme to fully employ this source of funds under less
urgent conditions.
. For. all ofthese reasons,, therefore, improvement-in the debt structure through
lengthening debt maturities when possible is an important goal of Treasury debt
management. But when are such actions possible and desirable? This is the
nub of the question.
278
1958 REPORT OF THE SECRETARY OF THE TREASURY
Now, according to classical theory, the Treasury should' go at the'problem by
selling long-term securities when monetary policy is restrictive, thereby helping
to withdraw funds from the private capital markets when demands for such
funds are considered excessive. Likewise, the theory holds that the Treasury
should concentrate on selling short-term securities when the monetary policy is
one of ease, thus strengthening the factors in the economy making for greater
liquidity and readier availability and use of credit.
But in actual fact, there are serious difficulties in the way of putting these fine
principles into effect. I am sure that your own investment experience will confirm
the fact that debt management is one of the many areas where classical economic
theory can be a somewhat unreliable guide to real life as we find it. We must
sell our securities to specific buyers in a real market, not in a hypothetical market
which is perfectly fluid and perfectly responsive to desirable changes in. policy.
If the Treasury tries to force long-term securities on investors during a period
when interest rates are high and funds are being eagerly sought for private purposes, the resulting market disorder might actually interfere with the effectiveness
of Federal Reserve policy rather than contribute to it. If the market threatened
to become so disorderly that the Federal Reserve had to step in to any significant
extent, this might require the Federal Reserve to back up temporarily on policies
which were deemed essential to the good health of the economy at that time.
Furthermore, it would not be in the Treasury's, and hence the taxpayer's,
interest to put out an inordinate amount of long-term debt at the relatively high
interest rates that prevail in a period of firm credit restraint.
Considerations of this sort would seem to indicate that—contrary to classical
theory—the Treasury should not rule out consideration of the sale of long-term
securities when monetary policy is one of credit ease. Yet we must not be
unmindful of what that course involves. During periods when the Federal
Reserve is easing credit to stimulate business activity, the Treasury must weigh
its debt management objectives in the light of both the short- and long-run
welfare of the economy and the desirability of being of assistance by not absorbing
funds which might better serve the economy if used for private purposes.
Having the dual responsibility of bearing in mind the goal of a better maturity
distribution of the debt and equally considering the welfare of the economy,
we in Treasury doubt the wisdom of strict adherence to precise formulas to
guide our actions. We wish debt management were that simple. It seems to us
that, in each instance, we must try to weigh all the factors, such as the technical
position of the market, the availability of credit to the corporate, municipal,
and mortgage markets, the impending corporate and municipal calendar, and
the special needs of various types of investors, and then make the difficult decision
as to what course of action we judge will make the greatest contribution to the
public interest—not only in the weeks immediately ahead but over the longer
range.
Some debt extension can, of course, be accomplished entirely outside the area
of competition for new funds by making it attractive for investors such as mutual
savings banks, insurance companies, pension funds, etc., to lengthen their own
portfolios by replacing some of their short- and intermediate-terms with longerterms. The short- or intermediate-term securities which these savings type of
institutions sell would, for the most part, be acquired by the commercial banks.
The average term to maturity of Government securities held by mutual savings
banks, for example, is about 8 years to first cafl date, as against almost 14 years
in 1946. There may be some merit in encouraging debt lengthening within portfolios even at times when the net amount of new money available for investment
in Federal securities is small, without running the risk of competing unnecessarily
for funds needed to support renewed expansion.
It should also be remembered, of course, that, quite apart from the sale of
long-term bonds, the Treasury can achieve considerable success in debt lengthening by selling intermediate-term securities to commercial banks in a period such
as this. For example, the Treasury made more progress in debt lengthening
during 1954 than in any other calendar year since World War II, yet no issues
running more than 10 years to maturity were put out during that year.
By far the most important part of Treasury new money borrowing during a
recessionary period is properly done through the commercial banks, and we have
no reason to believe that our experience in this recession wifl be any different.
EXHIBITS
'
.
279
As I have suggested, however, in the ..process of concentrating on bank borrowing,
we should not immediately assume that it will all be short-term borrowing or
that consideration of nonbank sources of funds should be neglected entirely.
These are some of the thoughts which I want to leave with you in the hope
they will stimulate you in giving us the benefit of your own thinking on these
important matters. The Treasury, as you are well aware, does not work in an
ivOry tower. It is our job to painstakingly find out what the market wants and
attempt to tailor issues to meet that demand insofar as that can be done consistent with the other objectives which we -have to keep in mind. To aid us in
this, we listen intently to suggestions and ideas from groups such as yours. We
hope that many of you—individuahy, as well as through your Committee on
Government Securities and the Public Debt—will come in and talk, over with us
any thoughts you may have which might help us to do our job better.
And finally I would like to say a word about United States savings bonds.
In our judgment, the savings bond program has been of inestimable help not
only to the Government and the 40 million people who hold the bonds but also
to the whole thrift and savings industry. To some of you the savings bond program
may appear to be only another form of competition and, perhaps, unwarranted
competition. In my judgment—and I have been a banker all my business life—
this has always seemed to me a shortsighted point of view.
I am not so naive as to believe that, if someone walks into one.of your institutions to make a deposit, 3^ou are going to suggest that the person buy a savings
bond instead. On the other hand, I don't think it's good public relations to
do the reverse.
: The savings bond program could not have achieved its great success without
the support of the vast majority of the banking institutions of this country. The
payroll savings plan, which is the mainstay of the savings bond program as it
exists today, does a job that the savings institutions cannot do as effectively.
Very few employers want to put on an active sales campaign in their respective
organizations to sell savings accounts for any single private institution. They
can do so in good conscience with United States savings bonds. Literally millions
of Americans have accumulated their first savings through payroll deductions,
and having once acquired the habit of thrift, they become the customers of other
types of savings institutions who offer a more varied service. These savers accumulate nest eggs that have permitted downpayments on countless homes
which you have financed and on all sorts of durable goods which could not otherwise have been acquired.
'. Now some people may ask you, as they have asked me "Why is the Government promoting savings bond sales at this particular time? In view of the current
business decline, wouldn't it perhaps be better to encourage our citizens to buy
things rather than adding to their financial reserves?"
• The question is hot a new one. I understand that, during every business
decline in the postwar period, similar questions have been put to the Treasury.
• If one concentrates on current business indexes and trends, it is often easy,
of course, to temporarily lose sight of the long-term sustaining forces that have
made our country great. Ranking very high among these forces is the habit of
thrift, upon which depends the sound financing of our Nation's industrial might
as well as providing a backlog of savings for millions of our people.
The habit of thrift is not something to be encouraged at one time and discouraged at another. It is much too basic. As a matter of fact, the present
economic downturn is the aftermath of an inflationary boom which would have
been much milder had Americans saved more than they did during recent years.
When we encourage the habit of thrift, we are strengthening the foundations of
private enterprise and industry which have made our economy the most productive in the world.
I am sure you will continue to give your support to the Government's program
of sharing in America through the purchase of United States savings bonds.
If I have accomplished nothing else today, I hope I have conveyed the idea
that the problems we face are not easy of solution. I can promise you that the
administration will continue to face up to them in the long-range best interests
of the people of America.
280
195 8 REPORT OF THE SECRETARY OF THE TREASURY
' '
Taxatioii Developments ,
EXHIBIT 23.—-Statement by Secretary of the Treasury Andersdri, January 16,
1958, before the House Ways and Means Committee on general revenue
'matters' '
• ''^ '•' '• •/•,.. ' ,;..",
' I am glad to have this opportunity to meet for the first time with this dis-tinguished committee. The distinctive position of the House Comrnittee onWays and Means is known to all students of our governmental processes. My
predecessor has told me of his very pleasant relations with you and of your assistance to him in discharging his responsibilities in the TreasurJ^ I look forward'
to continued • close collaboration with you in developing such tax and otherlegislation as becomes appropriate within your jurisdiction.
You have already received the President's Budget Message. The increased
risquireinents for expenditures for security, even after the strictest reviews of
expenditures in all other programs, bring total estimated spending to a level such
that it is necessary to recommend a continuation of the corporation income tax
and the excise tax rates, which, in the absence of legislation, would be reduced^
on July 1. A reduction in the normal corporation' income tax rate from 30'
percent to 25 percent, which would also have the effect of reducing the rate on
income above $25,000 from 52 percent to 47 percent, would involve a revenue
loss of about $2 billion a year. A reduction in the excise tax rates on liquor,
cigarettes, and automobiles would involve an additional revenue. loss of over
$900 million.
I regret that a continuation of existing rates has to be my first recommendation
to you oh tax matters, because I am anxious for tax reductions of various sorts,'
as I know you are, and as the people of the country are. But under the condi-.
tions as they are foreseen at present, such tax reductions do not seem prudent..'
If present rates are continued, and if business activity resumes its upward growth
during the year, as I believe it will, we estimate a. small surplus for the fiscal
year 1959.
. I am glad to say that we have been able to provide in the budget. i0r.-.the. tax;
relief measures for small business which the President recommended in his letter,
to the chairman bf this committee last July 15. There was not, of course, time
to give full consideration to these proposals in the last session of the Congress,
but we do recommend that they receive attention in the present session. Specifically those recommendations were:
(1) That businesses be given the right to utilize, for purchases of used property
not exceeding $50,000 in any one year, the formulas of accelerated.depreciation?"
that were made available to purchasers of new property by the Internal Revenue
Code of 1954.
(2) That corporations with, say, ten or fewer stockholders be given the option
of being taxed as if they were partnerships.
- (3) That the taxpayer be giyen the option of paying the estate tax over a
period of up to ten years in cases where the estate consists largely of investrnents?'
ill closely held business concerns.
(4) That original investors in small business be given the right to deduct from
their incomes, up to some specified maximum, a loss, if any, realized on a stock
investment in such business. At the present time the deduction of such lossesfrom income is subject to the general limitation on net capital losses of $1,000.
I am especially glad to recommend this tax relief for small business becauseof the great importance of new and small companies in the American economy.Our country has grown strong in competition and in the introduction of new
products and techniques. We must have as many independent business concerns
as possible because each company is a separate center of initiative as well as a
source of livelihood for its employees and owners. Small businesses are a real
and important part of our American way of life. We believe that the foregoing,
recommendations for tax changes will give important relief for the revenue loss
involved.
'
Loopholes or unintended benefits are always a matter of concern. They are-:
particularly serious when tax rates have to be maintained at high levels.. It isparticularly important that we maintain respect for our voluntary tax system,
which should continue to be a source of national pride. This gives added emphasisto the necessity of maintaining fairness and equality in the application of our
.
EXHIBITS
281-
country's tax burden. H. R. 8381, on which this committee worked so long in
the last session, and which is now before the House of Representatives, is important
legislation to close tax loopholes and make technical changes which was^developed
in consultation and cooperation with our staffs. We will always have our tax
laws and regulations under close, continuous observation and will call to your
attention any inequities that we observe.
Last October, the Supreme Court denied a petition for certiorari in a series
of cases dealing with the so-called cutoff point for percentage depletion in the"
manufacture of bricks and cement. The net result of the cases is to apply the
percentage depletion allowance to the price of finished manufactured products,
bricks and cement, rather than to the value of the clay and the cement rock
before it is manufactured. In both cases, the effect of the decision is to increase
the depletion deductions several-fold over the amounts previously allowed under
Treasury regulations. While we support the principle of depletion for these
materials, we do not believe that depletion on this scale is reasonable or was
intended. The problem appears to arise from the application of the phrase "the
commercially marketable mineral product or products" in the statute. I recomniend the law be revised to prevent these excessive depletion deductions. The
revenue loss in the two industries directly covered by the cases is about $50
million a year.
The proper taxation of cooperatives continues to be a troublesome problem."
We have already called to your attention the fact that a series of court decisions
have made largely ineffective the 1951 legislation which was intended to assure
that all cooperative income would be taxed either to the cooperative or to its
members as it was earned. The Treasury rulings under which all patronage
refunds in the form of certificates were held to be taxable at their face value,
which were assumed to be valid at the time of the 1951 legislation, have been held,
invalid where the certificates do not have a determinable market value. Thus,
it is possible for the cooperative to receive a deduction in computing its taxableincome, while its members are not taxable on the certificate they receive. While
we are fully aware of the important place which cooperatives occupy in the life
of our agricultural and farming communities, we believe that some single tax
liability should be assumed by all who participate in the business activities of
the country, as was contemplated in the 1951 legislation, and that legislation which
is fair and reasonable, both from the standpoint of the availability of retained
earnings for expansion and tax benefits to cooperative members, should be
developed. During the course of the deliberations of this committee, the staff
of the Treasury will be available to work cooperatively with the staffs of your
committee in developing such legislation.
We have already advised the committee that the Treasury is agreeable to the.
application of the stopgap legislation concerning taxes to be applied against the
income of life insurance companies for the calendar year 1957. We are giving a
great deal of thought to the development of a fair and equitable system of taxation that can be permanently applied, and will be working cooperatively with yoiir
staff in the development of concrete proposals which we hope to submit to you in,
the near future.
• Simplification in the tax law and in tax computations are important objectives.
Our staffs are studying with great interest the reports of the advisory groups "to
your subcommittee on income taxation on technical aspects of the law concerning
corporate reorganization, partnerships, and the income of estates and trusts.
The 1954 Code made important changes in all of these fields. Experience since
its enactment may well have shown opportunities for still further improvements
to increase the fairness and simplify the application of the laws in these difficult
areas. Testimony which you receive in your hearings will be of help to us, as
it will doubtless be to you, in appraising the current proposals for change.
While I have no additional recommendations at this time for major tax legislation, we shall continue to appraise situations as they develop and shall make,
such recommendations as become appropriate.
We in the Treasury are, of course, following with great interest the material,
presented in these hearings. I am sure these data will be of help to us in developing
recommendations to you. In the meantime, my associates in the Treasury and
I will be ready and anxious to be of such assistance as we can in working with you
and your staffs.
282
1958 REPORT OF THE SECRETARY OF THE TREASURY
EXHIBIT 24.—Statement by Secretary of the Treasury Anderson, February 18,
1958, before the Subcommittee on Intergovernmental Relations of the House
Governinent Operations Committee
On behalf of Governor Dwinell and myself may I first express our great appreciation for the courtesy you have extended us as Cochairmen of the Joint
Federal-State Action Committee in arranging for our initial presentation of this
program to the Congress before your subcommittee. For many reasons, we
think it particularly appropriate that our joint committee's action recommendations should first be reviewed and discussed with the House Intergovernmental
Relations Subcommittee. One of the most important of these is that you are
currently engaged in nationwide hearings gathering information from people
representing all levels of government as well as private organizations of citizens
which will give you a special understanding of the feasibility and desirability of
our proposals. When the specific legislation to carry out these recommended
actions reaches the Congress, we anticipate that your evaluations and judgments
will be a major factor in determining the fate of this first effort by the executive
branches at the Federal and State levels. The purpose of this effort is to
strengthen our Federal system by channeling increased authority and responsibility to the State governments instead of centralizing power in the Nation's
capital. It is therefore a privilege.for us to present to you at this time Progress
Report No. 1 of the Joint Federal-State Action Committee.
One of the characteristics of this report that I feel will most favorably impress
each of you without regard tb your personal reaction to its content is the fact
that it's only 14 pages in length. The conciseness of the report is a striking
indication of the spirit of action with which the joint committee approached its
assignment.
I, for one, believe that the dedication of the members of our task force stems
from a recognition of the validity of the President's repeated conviction that
"unless we preserve the traditional power and responsibilities of State government, with revenues necessary to exercise that power and discharge those responsibilities, then we will not preserve the kind of America we have knowri; eventually,
we will have, instead, another form of government and therefore, quite another
kind of America."
It was in the spirit of this conviction that on June 24, 1957, the President
suggested that the national Governors' Conference join with the executive branch
of the Federal Government in creating a task force for action which would be
charged with three specific responsibilities. In his words, these were:
"(1) To designate functions which the States are ready and wifling to assume
and finance that are now performed or financed wholly or in part by the Federal
Government.
"(2) To recommend the Federal and State revenue adjustments required to
enable the States to assume such functions; and
"(3) To identify functions and responsibilities likely to require State or Federal
attention in the future and to recommend the level of State effort, or Federal
effort, or both, that will be needed to assure effective action."
At the opening session of our first meeting I made an observation which seems
to reflect the constructive attitude of the entire committee.
"The most important thing, it seems to me, that we can hope to accomplish
by our initial effort is an actual agreement embodying certain specific functions
and sources of revenue which can be returned to the States. This will be the
surest evidence of our intention to be objective and of our determination to achieve
accomplishment. When these pegs of progress have been set, we can move from
the area of accomplishment into the more difficult and complex areas of things we
mutually agree ought to be done and to be worthy of our continued efforts."
Within this general framework, the committee began the job of preparing
action recommendations that, in turn, the President and the forty-eight governorsmight recommend to their legislative bodies. It was set up and has operated—not
as a study group—but as an action committee.
I have been deeply impressed by and want to pay public tribute to the dedicated
sense of cooperation which the member governors have shown during our several
meetings. The discussions and decisions reaffirm to me that there is widespread
basic understanding of the proper relationships between the State and Federal
governments. In working to better that relationship the governors with whom we
have worked have demonstrated beyond all question their patriotic desire to do
EXHIBITS
283
what is best not for the short-term result but for the long-range benefit and
welfare for the greatest number of our people.
I am confident that as an action committee in this field we will enjoy the continued fine cooperation we have had in the past. We anticipate that additional
agreements will be reached which will further clarify and strengthen the relationships between the States and Federal Government.
Many of us share President Eisenhower's concern over the trend of our intergovernmental relationships as he summarized it last June . . . "So, slowly at first,,
but in recent times more and more rapidly, the pendulum of power has swung;
from our States toward the central Government.
There are rriany factors behind this shift in governmental power: The economic
problems of the 1930's; the emergency of war; the view of some that almost smy
problem common to localities is to some extent a national problem and therefore
subject to Federal "responsibility"; the reluctance in many cases of State governments to work out solutions to local problems; and on occasion the readiness of
the Federal Government to relieve local interests of local responsibilities. All
these help to account for the growing centralization of governmental power so
evident in recent decades. With this growth of Federal power the position of the
States has been weakened.
The steps taken by the President and the Conference of Governors, and the
recommendations of their Joint Committee, are designed to strengthen State
governments. The States can properly assume a larger share in the work of
government. By the same token many present Federal activities can and should
be relinquished to the States—and without impairment of programs. In our work
as a committee we have examined a number of programs receiving partial Federal
financial support and subject to Federal controls which could more advantageously
be handled entirely by States and localities. In such cases, we believe Federal
intervention is unnecessary.
In our first report two of these programs are proposed for transfer out of Washington to the States—vocational education and waste treatment plant construction. In making this recommendation the committee seeks only to transfer
authority and financial responsibflity—not to curtail or abolish programs. I stress
this point because there are some who seem to think we would adversely influence
these worthwhile activities. Our report to the President and to the Conference
of Governors makes it clear that this is not our purpose at all. The committee,
of course, has a broader interest than just recommending the shift of certain
° programs to full State responsibility. For example, it defines and clarifies a
responsibility that may continue to be shared. This we did in our natural disaster
relief recommendation.
Furthermore, we recommended to the States the assumption of certairi responsibilities that they have not generally undertaken to date. This is the poirit of
our urban renewal proposal.
Additionally, we agreed that the States should be encouraged to exercise their
proper powers in a new field. This is the substance of our suggestion for Federal
and State legislation that woiild permit the States to establish and enforce health
and safety standards in the atomic energy field.
On the revenue side, we proposed that a part of the Federal tax on local telephone
service be relinquished by the Federal Government. This could be used.by the
States where desired.
.
. .
'
All these proposals point in one direction: to increased State/authority arid
responsibility.
•
The committee also proposed criteria for future stimulative grants.' This
could be called a preventive approach. Special situations often seem to call
forth new Federal programs, which sometimes involve grants to stimulate State
action. We know that Federal programs, once started, develop a certain stubborn
capacity to survive. Many times continued Federal support does no more
than supplant local initiative and responsibility.
With this in mind, the committee urged caution in the use of the grant-in-aid
technique. Stimulative grants should be made selectively and only where a
clear-cut national interest exists. Legislation authorizing Federal grants to
States should include a closeout provision to prevent Federal usurpation of State
responsibility. We urged the utmost flexibility and Control for the States in the
administration of such programs.
Again, the point of view is clear and consistent. If we must establish newgrant programs, let them be: (1) Limited to national need; (2) limited in duration;
and (3) limited to the stimulation of State action.
284
195 8 REPORT OF THE SECRETARY OF THE TREASURY
Recommendations
Committee recommendations are set forth in Progress Report No. 1.
Vocational education.—^The committee considered to be unnecessary the continued Federal financial support of vocational education. This program began
in 1917. Since then all States have established such programs, with State and
local funds now comprising over 80 percent of the annual cost. The administration of this work is almost entirely in State-local hands. The President
endorsed the committee proposal by recommending to the Congress in his budget
message that grants for vocational education be continued through fiscal year
1959. This will give the States time to take the necessary steps to handle this
added financial responsibility.
Waste treatrrient construction grants.—These grants were first provided by
Congress in fiscal year 1957. They are intended to encourage accelerated con'struction of municipal waste treatment plants. The committee felt that municipal
sewage treatment problems are essentially the responsibility of the municipalities
themselves. Beyond this, the States should help the municipal governnlents if
help is needed. Here, too, in endorsing the committee's recommendaition, the
President has proposed continuation of Federal grants through fiscal 1959 to
•allow time for orderly readjustment.
' Natural disaster relief .—The immediate problerii was to clarify responsibility.
In the past, neither the Federal Civil Defense Administration nor the States
knew at what point the States should be eligible for Federal aid to restore damaged
public facflities. The committee agreed dn a schedule of minimum amounts
based on fiscal capacity that must be spent or committed during a year from
State sources before the governors were eligible to apply for Federal aid; This
recommendation of the committee does not entail legislation. An Executive
order has already been issued by the President which will make it possible tb
impleihent this recommendation after time has been allowed for preparations
by the States.
,
'
Atomic energy.—Problems raised by the nonmilitary uses of atomic energy
pose difficulties for the States and for the Atomic Energy Commission. The
•Atomic Energy Act gives the Federal Government a monopoly in this field.
'Yet the States have a traditional and inherent right to regulate activities affecting
the health and safety of their citizens. Accordingly, the committee recommended
amending the act to permit the States to adopt standards governing the use of
nuclear materials, to inspect facilities, and to enforce legislation for the protection °
of public health and safety, not in conflict with Federal law.
To handle this work effectively requires the training of State employees.
This we proposed, with the States paying the salaries and expenses of their people
during the training to be provided by the appropriate Federal agencies. The
Budget document for fiscal 1959 reflects the steps being initiated in this direction
by the Atomic Energy Commission. We also proposed certain organizational
and administrative actions for the States to take to ready themselves for the
tasks ahead.
Urban renewal.—The action recommended by the committee on urban renewal
is a first step towards increasing State responsibility for urban problems in the
future. It is proposed that the otates set up planning agencies to give consideration to problems in urban development, housing, and metropolitan planning.
The President's strong support of this proposal is coritairied in his budget message.
Once established, these agencies will be in a position to assume enlarged responsibility in these areas.
Taxes
The President asked the. committee to consider the tax adjustments that
might be made to enable the States to carry the added costs of functions shifted
to them from the Federal Government. A variety of taxes were examined by the
committee. At this point in its work, the committee recommended and the
President endorsed a partial relinquishment of the Federal tax on local telephone
service as a practicable source of State revenue. We also are studying the
Federal estate and cigarette taxes to see if the States should share to a larger
extent in these tax sources. Any tax proposals along these lines will be con•tingent on the States taking over other existing Federal functions.
'•:•••:••••::;•:•.' :,:::•.- -. ) •;•• .EXHIBITS.;.}: :• .0 ..}]:j ]•.:•-•:. ••:•-,: ^
.285
jLegisIative recoihmendations
...As indicated,, the work of the committee has receiyed'wholehea,rted support
from the. President. This is particularly emphasized by that, part qf his budget
/messagein which he s a i d : • , ."
.",. .
"Cooperation of this nature is a. highly desirable and, in my judgment, k long
overdue experiment in public administration and finance. The success of. the
venture depends upon further cooperation among the executive branch, the
.Congress, the governors, the legislative bodies.of .the States, and the local goV.ernments involved. As for this administration, I. can say that the executive
branch is eager, as., well as willing, to. do its part to insure that sucdess."
[As indicated, specific legislation will be submitted, in the near future which wifl
allow adequate time for the States to make necessary adjustments in fiscal and
,administrative policies. The administra.tion attaches great iinportarice to these
.first steps outlined by the committee. The President and the Conference of
.Governors expect the comihi-ttee to., continue its work and to develop further
•proposals for the strengthening of State goyernments. In its work the cominittee
is moving toward the very important objective of decentralizing governmental
.authority, .and responsibility". . I am sure we all agree that every effort should
•be made to assure proper balarice in our Federal system.
We will continue to examine both programs in being and those that are proposed, with the objective of prdviding proper distribution of responsibilities among
.the Federal Government, the States, the municipalities, and other political
subdivisions—this to insure that the functions of government are properly and
.'more effectively performed within our traditional and constitutional structure.
EXHIBIT 25.—Statement by Secretary ofthe Treasury Anderson, March 12, 1958,
concerning the economic situation
The economic situation in all its aspects is under constant study and review.
.The President's discussion, with us this morning was a continuation of this kind
of analysis. .
Of course, this analysis includes tax studies and estiinates of revenue losses
and the benefits which might result frdm various approaches to this problem.
We must carefully weigh both the current implications and the lorig-term effects
..'tvhich niight result. This is a part of the continuing normal function of the
TreasuryDepartment.
The President has already taken a number of executive actions and has made
. a number of recommendations to the Congress, designed within the framework of
.'the proper functions of the Government, to assist in a resumption of sustainable
growth in the economy. A number of the suggestions and actions proposed and
taken will help promote a higher level of private economic activity and employment. Some will result in accelerated expenditures in a number of existing
Federal programs without involving us in huge, slow-acting public works programs
of dubious value.
However, we will continue to examine all the facts and data as they become
avaiilabie ^aiid if, upon the basis of further developments in the economy it appears
that other actions are necessary and desirable, they will be taken.
No decision regarding taxes has been ndade. Whatever decision regarding taxes
.is taken will be reached only when the impact of current developments on the
.future course of the economy has. been clarified and after consultation with
congressional leaders.
EXHIBIT 26.—Letter of Secretary of the Treasury Anderson, April 10, 1958, to
the Chairmen of the Senate Finance and House Ways and Means Committees
concerning permanent legislation for taxation of life insurance companies
M Y DEAR MR. CHAIRMAN: In our letter to you of January 10 concerning tempo• rary legislation for the taxation of life insurance companies, the Treasury indicated
that it would propose a method for more permanent legislation in this field. In
accordance with this :and .subsequent statements made in the public hearings of
-the House' Ways and Means Coniiiiittee on various tax legislative- matters,
January 16, and before the Seriate Finance Committee on the "stopgap" extension
legislation, March '5, there are submitted for your consideration suggested approaches to the taxation of life insurance companies.
286
1958 REPORT OF THE SECRETARY OF THE TREASURY
In developing these recommendations for a more permanent basisrof. taxation,
we have approached the task with full recognition of the difficulties in this complicated area, which stem in part from the complex nature of the life insurance
business as conducted on the level premium basis. We are also aware of the fact
that we are dealing with institutions which are the custodians of the life insurance
protection and savings of millions of American families.
The problem of developing a satisfactory long-range basis of taxation for the
life insurance industry is not a new one. The problem has resisted solution since
1947 when the then applicable formula, adopted in 1942, resulted in no tax whatsoever on the life insurance business, and was replaced by a series of stopgap
formulas. You are familiar with the resulting extensive legislative history in
this area and the long study which has been given to the question by your committee and the Congi-ess over these years. .
A Subcommittee of the Ways and Means Committee on the Taxation of Life
Insurance Companies was established in 1949 which conducted studies and recommended stopgap legislation, deferring a permanent solution of the problem to a
later date. The temporary legislation subsequently adopted, termed the 1950
formula, was applied only to 1949 and 1950 income.
In 1951 further stopgap legislation was enacted, converting the reserve and other
policy liability deduction under the 1950 formula into a reduced rate of tax on net
investment income without deduction for required interest. The 1951 method
was extended from year to year through 1954.
Late in 1954 extensive studies and hearings were conducted by a subcommittee
of the Ways and Means Committee, leading to the adoption of the present law.
This provided, a reserve and other policy liability deduction of 87^^ percent on the
first $1 million of net investment income and 85 percent on net investment income
in excess of $1 million. The 1955 law also provided certain structural improvements, including a broadening of the net investment income base, the correction
of certain abuses, and a more adequate treatment of the health and accident
business of life insurance companies.
The 1955 formula was originally made applicable to 1955 income only, subject
to the provision that the 1942 formula would reapply automatically in any year
if there were not an extension. The 1955 formula was subsequently extended to
1956 and more recently to 1957 income.
The Treasury has reviewed carefully the facts, issues, and alternative approaches
developed in the course of these past deliberations. You are cognizant of the
staff work which the Department has conducted cooperatively with the congressional tax- staffs, and for a considerable period in 1955 and 1956 in consultation
with a group of distinguished actuaries whose services were made available by the
life insurance industry to the Treasury. While the technical assistance of these
actuaries has been invaluable to our work, they do not, of course, have any responsibility for the policy suggestions which have been developed from it.
On the basis of our review and study, it seems evident that there are certain
inadequacies in the present method of taxing life insurance companies. The
present method does not recognize sources of net income other than investment
income.. Furthermore, it utilizes an averaging system, whereby the net taxable
iriCome pf a life insurance company is measured by reference to. an arbitrary or
industry-wide standard of interest deductions, not by the actual experience and
requirements of the individual company.
Two possible solutions are presented herewith. The method of taxation to
which it is suggested the committee give first consideration would proyide a longrarige basis of taxation for life insurance companies bringing their taxable iricome
concept into closer conformity with ^.that of other corporate business. Such
a concept should be designed to reflect, to the fullest extent practicable, the full
net earnings of life insurance companies. It.should at the same time provide
comprehensive deductions for all expenses, interest, and reserve requirements,
and all amounts paid or made available to policyholders.
. .
We suggest that the starting point for measuring the net earnings should be
the figure for "Net Gain From Operations After Dividends to Policyholders"
which appears in each; company's annual statement to the State insurance, departments and'which summarizes the operating results for the year. . This figure
is based on carefully developed life insurance accounting practices which have
general acceptance in the iridustry. Adjustments, such as those for tax-exei?Qpt
interest. Federal income taxes paid, and depreciation on the insurance business
property account, would conform it with general rules for computing taxable
EXHIBITS
287
The resulting tax base would include the margin of investment income above
amounts needed on policy reserves, gain from better than assumed mortality
experience, and profit arising from the difference between the expense "loading"
portion of premiums and actual expenses. Deductions would be allowed for all
dividends paid to policyholders and amounts added to policy reserves.
Under this suggested method, life insurance companies would be entitled to
net operating loss carryovers. To assure the best possible long-range measurement of hfe insurance company earnings and to preclude taxing annual amounts
which are not true net earnings because of uneven experience, a longer loss
carryback provision should be provided for life insurance companies than for
other corporations, ranging up to 10 or 20 years.
Consideration may also need to be given to some kind of special allowance
or relief feature for small and new companies. Such a provision might be designed
to recognize the special problems of the growing company. For example, a
deduction might be allowed of 50 percent, or some other fraction, of amounts up
to some specified amount retained by a company as contingency reserves for
the protection of policyholders.
Provision should be made for a gradual transition to the new method over a
three- to five-year period. During this transition, the tax would be computed
as a weighted average of the tax under the new method and the tax under the
present stopgap method, with gradually increasing weight to the new method.
The taxation of life insurance companies inevitably raises the question of its
possible impact on policyholder savings, benefits, and insurance costs. The tax
base discussed above would exclude all amounts paid to, or set aside irrevocably
for the benefit of any policyholder or group of policyholders. It would exempt
additions to policy reserves including interest thereon; all cash insurance benefits
made available to policyholders or their beneficiaries; and all policy dividends or
similar rebates paid or refunded to policyholders.
In our studies and discussions with the consultants made available by the life
insurance industry, we have given attention to possible adjustments in policy
reserves and related items for tax purposes. The objective of such adjustments
would be to take account of, or in some cases to neutralize, the effect of different methods of reserve valuation, varying reserve interest assumptions, past
and future reserve strengthening operations, and certain other factors.
We believe that there is substantial merit in an adjustment for companies
with reserves based on a preliminary term method of valuation. Such an adjustment would compensate for the fact that in the case of a company using a
preliminary term method the addition to reserves on new business in the first
.policy year is substantially smaller than for a company which uses the net level
premium valuation method.
Another adjustment which appears to deserve favorable consideration is one
which would take account of deficiency reserves in existence on the effective
date of the suggested plan. These particular reserves may be considered equivalent to an allocation of previously accumulated surplus, and in this light their
recovery back into surplus would not constitute current earnings which should
be subject to tax.
At this time we have no recommendations for or against other specific reserve
adjustments. We recognize, however, that other possible refinements and modifications, including contingency reserves, adjustments for reserve strengthening,
and special allowances for some segment of surplus, merit further review in the
light of the expert views and comments of members of the life insurance industry
which will be made available in the course of your future deliberations. However,
every departure from the allowance for policy reserves used in determining the
net gain from operations reported in the annual statement to the State insurance
departments would represent a complication which could be justified only by persuasive equity and technical considerations.
The Treasury is fully aware that problems exist with respect to the plan just
discussed. It wifl, of course, increase the tax paid by some companies, just as it
will relieve others, resulting in shifts in burden as compared with the present stopgap method. This is inevitable in a change from a tax based on an industry-wide
formula to a tax based on the income pf individual companies. Another problem
is that the suggested method may result in a changed approach to policy reserves
: in order to reduce or eliminate tax.
We do not minimize the difficulties which your committee may encounter in its
evaluation of the plan. . Accordingly, you may wish to consider an alternative
479641—59^
20
288
1 9 5 8 REPORT OF THE-SECRETARY OF T H E
TREASURY
m o r e i n line, with t h e p r e s e n t m e t h o d of taxation: of life insurance cornpanies which
will nevertheless m a k e tangible improvements; ;.. • \
•
... ;. UJ.. .. . i
' I n this event,-; we suggest"that you consider modification,of t h e present law which
will increase t h e portion of investment income subject t o t a x to accord m o r e closely
with t h e prevailing; margin of i n v e s t m e n t income a b o v e r e q u i r e d interest for policyrholders, which margin is now about 30 percent for t h e industry as a whole. Such
a revised formula should n o t only bring t h e deduction for interest needs into closer
line with the.current situation, .but should also ;be responsive t o future chianges in
i n d u s t r y conditions from year t o year. . Consideration should be given t o a further
refinement bf t h e present t y p e of special interest deduction for companies with
substantially less t h a n t h e average margin of investment income.
' A second modification of t h e present forniula which t h e committee might con.sider is one-which would assure a more reasonable t a x on those, companies with
relatively small a m o u n t s of investment income a n d substantial earnings from
insurance or underwiiting sources, now entirely exempt from taxation. I t is suggested t h a t this might be m a d e effective by means of a m i n i m u m t a x provision,
which would require t h a t t h e t a x should not be less t h a n t h e liability computed
a t regular corporate t a x rates on a specified.proportion of t h e net gain from operations after policy dividends.
. Whatever t a x formula is applied to t h e ordinary iricome of life insurance com>pariies, their capital gains a n d losses should no longer be disregarded for t a x
purposes..
'.
>..
....
• A'fair a n d more lasting m e t h o d of taxing life irisurance companies t o replace
t h e series of t e m p o r a r y formulas will .fulfill a long-standing need in our t a x
structure.
Sincerely yours,
.
•
'
R O B E R T B . ANDERSON,:
..
Secretary of the Treasury,
JEXHIBIT 27.—Letter of t h e President, M a y 26, 1958, to the Vice P r e s i d e n t and
.: the Speaker of the H o u s e recommending continuation of corporation and excise
•;••• tax .rates
....•,.,
D E A R MTR., V I C E P R E S I D E N T ;
DEAR M R . SPEAKER:
' , • ' . ,
•
,
.
. T h e budget message i n J a n u a r y recommended.a continuation, without change,
of t h e corporation income t a x a n d excise tax- fates which in t h e absence of legislation would be reduced on J u l y 1. This recommendation is now renewed.
This renewed recommendation is m a d e after consiiltation b y t h e Secretary of
.the Treasury with leaders of-both political, parties iii t h e Congress. ',Consideration of fiscal measures will 'continue t o be m a d e in t h e light of t h e developing
economic situation and with full regard t o b o t h t h e short and long-range effects
of any proposal.
. •'•
•
:
.V - . .
.
,
T h e a,dminist'ra;tion deeply appreciates t h e thoughtful and full cooperation with
which t h e leadersliip of b o t h parties in the" Congress has'worked with u s in these
.matters. '
. • •
.- •
^'
. W i t h kind regard, .
,
,
,
Sincerely,
,
-"
DwiGHT D .
EISENHOWER.
E X H I B I T 2 8 . ^ - S t a t e m e n t by Secretary of the Treasury Anderson, M a y 28,
1958, before the H o u s e Ways and M e a n s Committee concerning extension
of corporation and excise tax r a t e s
As you know, t h e President last M o n d a y renewed t h e recommendations m a d e
i n t h e budget message in J a n u a r y asking for t h e continuation of existing t a x rates
on corporation income and certain excise taxes otherwise scheduled for reduction
-July 1. I n J a n u a r y it was. estimated t h a t such reductions would cause a revenue
loss of $2.9 billion. Because of changes in t h e economy we now estimate t h e loss
Jat somewhat less or in t h e neighborhood of $2.6 billion in revenue.
'- W h e n t h e President's budget message for 1959 was sent t o Congress in J a n u ary , J t was t h e n estimated t h a t t h e budget fpr 1959 would be in balance with a
v e r y small surplus.
' - . '•
.'u.:;:'.
Since J a n u a r y additional appropriations for defense and for measures designed
t o help facilitate t h e resumption of growth make it evident; t h a t expenditures for
"
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239
•fiscal year 1959 -wiir rise to an'order of magnitude of 78 to 80 billions of dollarsj
This is an increase'bf from-4 to 6 billion dollars above the January estimate. On
t h e receipts side, economic coriditions are such that in revised • estimates our
budget receipts for the fiscal year 1959 will be in an order of magnitude of 70
billion dollars. Thus, we are cbnfrorited in fiscal 1959 with a probable budget
deficit ranging from 8 to 10 billions of dollars.
The budgetary situation for the year,ending June 30, 1958, now indicates a
deficit of the order of 3 billions Of dollars against the estimate last January of $400
million. Substantially all of this increased deficit will result from a dechne in
reyeriues.
During the past several months, many proposals have been put forth suggesting
that certain selected tax reductions would encourage an early resumption of
economic growth. All of theni have had oiir most careful and serious consideration.
.
We do not believe that at this time to propose a, general reduction in individual
income taxes is in the Nation's best interests. Such reductions would widen the
gap bet-ween revenues and expenditures and thereby substantially increase the
deficits. Nor can the serious disadvafttages of so increasing the deficit be offset
by" a reasonable certainty that any particular individual income tax adjustment
•would predictably assure resumption of growth eithef in specific areas of the
economy Or the economy as a whole. From both the long-term and short-term
point of view, our competitive, private-enterprise economy is putting on an impressive performance of resistance to further dechne without so-called "massive"
intervention by the Goyernment.
The Treasury is of the opinion that a reduction of corporate rates is not justified
at a time when the reduction in the rate ori iridividuals cannot properly be made.
We also do not believe" that it is appropriate or logical to select certain excise
tax rates for reduction and declirie to make reductions in. others.
•
Should any excise taxes be recomriiended for i'eduction, contentions would
undoubtedly be made that others were entitled to like treatment. We believe
that in fairness and in.the best interest of the country, the excise rates that
currently exist should be extended without change for another year. " '
.;:
We recognize that the burdens 'of taxation and the burdens of debt are exceedingly heavy at all levels of governmerit/ We must continue to be concerned with
restraints which weigh on our ecoriomic growth and our system of incentives.
The very fact that taxes are high emphasizes the requirement that we utilize bur'
best efforts to achieve economical operations at all levels of our Government ahd
to work diligently to make the tax system as fair and as simple as possible with
minimum repressive effects on individual and business activities.
>
We air look forward to a period when the Government can again operate -with a
reasonable balance between its expenditures < and its revenues. We must be
equally careful not to widen unduly, the gaip between revenue and expenditures.
To. do so would add to the burden Of an already heavy debt which encumbers our
"economy not only by the cost of interest but by substantial interference in the
financial markets where private business. States, municipalities, and other political
subdivisions compete for our national savirigs. Increases in the debt also make it
m;ore difficult for the Federal Reserve System to discharge its monetary and credit
responsibilities.
I think we must bear in mind that.^we.are.looking forward not to a peak of
expenditures which we now see sure ways of reducing in subsequent years but
rather to a level of expenditures which in the absence of changing conditions offer
little prospect of declining. Even with a resumption of a rate of sustainable
growth and the consequent recovery of tax receipts which would result therefrom,
the deficits will run into the recovery peridd, • '
~
\ .
Mr. Chairman, we of the Treasury are grateful for the thoughtful and cooperative consideration which has been giveri b y t h e leadership of bothparties to this
difficult problem.
EXHIBIT 29.—Statement by Secretary of the Treasury Anderson, June 12, 1958,
before the Senate Finance Committee ini executive session oh continuation
of corporation and excise tax rates
.
^ As yo'u know, the President on May 26 renewed the recommeridation contained
in the January budget message, which asked for a continuation of existing corpdfiatiori' income and certain excise tax rates which otherwise would be reduced on
July 1 of this year. The House last week voted such continuatiori in H. R. 12695:.
290
1958 REPORT OF THE SECRETARY OF THE TREASURY
In January, when the President asked for the continuation of these rates, it was
estimated that such reduction, if allowed to take place, would cause a revenue loss
of $2.9 billion. This figure, because of present conditions, we now estimate t o be
about $2.6 bilhon.
The legislation now before the committee should be considered in the light of the
present Ibudgetary situation. For the fiscal year ending June 30, 1958, we now
face a deficit in the magnitude of $3 billion due in the main to a decline in revenues.
For fiscal 1959 we now expect expenditures in an order of magnitude of $78 to
$80 billion. This increases t h ^ earlier January estimate by $4 to $6 bihion.
Receipts during that same year are expected to be in the general range of those for
1958. Thus we face in fiscal 1959 a budget deficit .probably ranging from $8 to $10
billion.
Many proposals in recent months have been put forward suggesting certain tax
reductions as a means of encouraging prompt resumption of economic improvement. We in the Treasury, as well as you, have given them most careful consideration and analysis. In the best interests of the Nation we cannot at this
time propose any general reduction in individual income taxes. To do so would,
further widen the gap between revenues and expenditures. Nor can the serious
disadvantages of so increasing the deficits be offset by a reasonable certainty that
any particular individual income tax adjustment would predictably assure resumption of growth either in specific areas of the economy or the economy as a whole.
Holding the conviction as we do that there is lack of justification for reducing
the rate of individual income taxes at this time, it follows that to reduce corporate
rates now is not justified.
The suggestion has been made by some that, it ihight be appropriate to select
certain excise tax rates for reduction without similar reduction in others.
Should any excise taxes be recommended for reduction, contentions would
undoubtedly be made that others were entitled to like treatment. We believe
that in fairness and in the best interest of the country, current excise rates should
be extended without change for another year.
This committee, I know, has as its continuing interest the assurance that we
are utilizing .our best efforts at all levels of Government to operate efficiently
and economically. The burdens of taxation and debt are heavy. We must continue to be concerned with these restraints which weigh on our system of incentives in our competitive economy. It follows then that we must continue to work
' diligently toward a tax system as ifair and as simple as possible which will have
the least repressive effects on business activities and individual initiative.
Increases in the public debt would add to the already heavy burden of interest
on an already heavy debt and also further interfere with the normal flow of new
security offerings in the financial market by private businesses. States, municipalities, and other political subdivisions.
In the absence of basic world changes we face a level of Federal expenditures
which offers little prospect of decreasing in the near future. Even with a resump^
tion of a rate of sustainable growth and the consequent recovery of tax receipts
which would result therefrom, the deficits wfll run into the recovery period.
Mr. Chairman, we in the Treasury appreciate sincerely the thoughtful and
cooperative consideration which has been given by the leadership of both parties
to this difficult problem.
EXHIBIT 30.—Miscellaneous revenue legislation enacted by the Eighty-fifth
Congress, Second Session
Public,Law 85-318, February 11, 1958, adds a new. provision to Section 812
(e) (1) (D) of the 1939 Code to make the marital deduction available in the case
of terminable interests passing to a surviving spouse where the event which could
terminate the interest becomes impossible of occurrence within 6 months: of the
death of certain decedents adjudged incompetent before April 2, 1948. The
provision is effective with respect to decedents dying after April 2, 1948. No
interest will be allowed on overpayments resulting from this amendment.
Public Law 85-319, February 11, 1958, amends Section 223 of the Revenue Act
of 1950 to extend its provisions, which exempt certain rents from the provisions of
Section 502 (f) ofthe 1939 Code pertaining to the use of corporation property by
shareholders in the case of personalholding companies, to years ending in 1954 to
which the 1939 Code is applicable. No interest will be allowed on overpayments
resulting from this amendment.
.
EXHIBITS
291
Pubhc Law 85-320, February 11, 1958, adds a new subparagraph (C) to Section
421 (d) (6) of the 1954 Code and repeals subsection (d) of Section 1014 so that,
where an option is held by an employee at the time of his death,^ it receives a new
basis reflecting the appreciation in value of the stock in respect of which the option
was granted, between the time of the granting of the option and the date of death
(or optional valuation date), subject to certain specified adjustments. The
amendments are effective with respect to taxable years ending after December 31,
1956, but only in the case of employees dying after that date.
Pubhc Law 85-321, February 11, 1958, adds a new Section 7512 to the 1954
Code which provides that where an employer is required to collect and pay over
income or employment taxes withheld from an employee or excise taxes on facilities and services, and fails to do so, he can by notice be instructed to collect the
taxes in the future and deposit them in a special trust account. Persons who fail
to comply are, except in certain cases, guilty of a misdemeanor under new Section
7215 and upon conviction will be fined or imprisoned or both.
Public Law 85-323, February 11, 1958. adds a new Section 6423 to the 1954
Code which denies, except in the case of drawbacks and certain withdrawals,
returns, or losses, a credit or refund of alcohol or tobacco tax unless the claimant
establishes that he either bore the ultimate burden of the amount claimed or has
unconditionally repaid the amount claimed; and unless the claimant, except in the
•case of certain suits, files a claim after April 30, 1958, and within the time prescribed by law. The amendment does not apply to any credit or refund allowed
or made before May 1, 1958.
Pubhc Law 85-345, March 17, 1958, extends the 1955 formula for taxing the
income of life insurance companies to taxable years beginning before January 1,
1958.
Pubhc Law 85-367, April 7, 1958, adds a new paragraph 13 to Section 512 (b)
of the 1954 Code which provides that where a limited partnership interest is held
by a charitable trust which meets all of the four conditions enumerated therein,
there shall be excluded from the definition of unrelated business taxable income
the trust's share of gross income and deductions, to the extent such income is
distributed. The amendment applies to taxable vears of trusts beginning after
December 31, 1955.
Pubhc Law 85-380, Aprfl 16, 1958, (1) substitutes the words "certain musical or
dramatic performances" for the word "concerts" in Section 4233 (a) (3) of the
1954 Code, thereby extending to musical comedies and reviews the exemption
from the admissions tax for performances conducted by nonprofit civic or community membership associations; (2) amends Section 4233 (a) (1) (C) to exempt
from tax admissions to athletic games played between college teams where the
proceeds are divided between hospitals for crippled children and the educational
institutions involved; and (3) adds a new paragraph 11 to Section 4233 (a) to
exempt from tax admissions to all-star athletic games played between teams composed of students from various schools or colleges where the proceeds from the
game are turned over to tax-exempt educational, charitable, or religious organizations operated exclusively for the purpose of aiding retarded children.
Public Law 85-441, June 4, 1958, provides, under Section 104 that the total
credits allowed under Section 3302: (c) of the'1954 Code to taxpayers with respect
to wages attributable to a State for taxable years beginning on and after January
1, 1963, are to be reduced in the same manner as that provided by Section 3302
•(c) (2) for the repayment of advances made under Title XII of the Social Security
Act, unless or until it is found that by December 1 of the taxable year certain
amounts paid and certain costs incurred have been restored to the Treasury.
Pubhc Law 85-517, July 11, 1958, extends for two years (untfl July 11, 1960)
the authority of the Secretary of the Treasury to permit emergency transfers of
distilled spirits for national defense purposes.
Public Law 85-785, August 27, 1958, provides social security coverage for certain employees of tax-exempt organizations which did not have in effect, during
the entire period in which the individuals were employed, the required waiver
certificate and which paid the FICA taxes without knowledge that a waiver certificate was necessary or on the assumption that such a certificate had been filed.
Pubhc Law 85-881, September 2, 1958, repeals certain obsolete provisions relating to adulterated butter and filled cheese.
Public Law 85-920, September 2, 1958, provides that a corporation suing for
refund can bring the suit in the judicial district in which is located its principal
place of business or its principal office or agency. If neither of these is located iri
any judicial district, the suit may be brought in the judicial district in which is
292
195 8 REPORT OF THE.SECRETARY OF THE TREASURY
located the office to which the corporation made its return. If no return was
filed, the suit may be brought in the District of Columbia.
Pubhc Law 85-921, September 2, 1958, permits the printing, pubhshing, or
importation of black and white illustrations of postage and revenue stamps, and,
within certain size limitations, of other obligations and securities of the United
States and of a foreign government, bank, or corporation for philatelic, numismatic, educational, historical, or newsworthy purposes in articles, books, journals,
newspapers, or albums (but not for advertising purposes other than certain
illustrations); and permits the making or importation, except for advertising
purposes, of motion picture films, microfilms, and slides of postage and revenue
stamps and other obligations and securities of the United States and of a foreign
government, bank, or corporation. No reproductions may be made from such
films or slides without the permission of the Secretary of the Treasury.
Public Law 85-930, September 6, 1958, extends the Renegotiation Act of 1951
from its present expiration date of December 31, 1958, to June 3, 1959.
International Financial and Monetary Developments
EXHIBIT 31.—Remarks by Secretary of the Treasury Anderson, January 28,
1958, before the Mississippi Valley World Trade Conference, New Orleans,
La.
In the framework of history, America has always been a Nation dedicated to
friendship with others—in actions as well as words. From the time of the.first
ships that sailed from the harbor of New Orleans with.the products of the Mississippi Valley, American traders have opened the way for friendly exchanges
with other nations, exchanges of ideas as well as goods and services.
Today, as the President, recently pointed..out, we are.the world's greatest
trading nation, with worldtrade, providing employmentfor four ^and a ihalf ^million
American workers. Yet our most valuable export, and the one most prized by
others, is still, as it was in 1776, the concept of freedom and humanity for which
our Nation stands.
.
,;
• In recent years, as the threat of communist, enslavement has grown, -we have
extended a helping hand to others on a scale never before known in the world's
history. We have not just talked freedom; we haye entered into arrangements
for mutual security. And the free world has attained a strength which only an
alliance of independent and self-respecting peoples can achieve. No free nation
is cowering in fear of America, and no free nation ever will!
There are certain profound convictions with which I approach all our iriternational relations. They are convictions which I have held throughout a lifetime.
The first conviction, is this: No difference exists between free nations as to the
objectives we seek. They are objectives that can be defined only in terms of
freedom, human well-being, and progress. We all agree that man does not exist
to enhance the importance • and power of the state. The state should- respect
man in his dignity as a child of God, to preserve his rights as an individual, and
provide opportunities which will release the full creativeness of every human
being.
This is the end we seek when we speak of promoting commerce, industry,
agriculture, and development of all of our resources. We promote them because
they make for the better employment of our citizens, better homes for our families,better education for our children, greater satisfaction of our aspirations; in short, a
better world for all of us. .
A second conviction which I hold strongly is that there is no question incapable
of resolution if reasonable men of good will bring to bear on it their best- and
united efforts. This is one of the strengths of our democratic system. .
. My third great conviction is that the progress and welfare of every free nation
is closely related to the progress and welfare of each. We carinot afford to be
indifferent to the problems and the suffering of others. Freedom is indivisible.
Our best interests clearly lie in pursuing, a policy of cooperation..
A basic aspect of this pohcy of cooperation is a firm determination on the pait
of our own country to preserve a climate that will lead to the maintenance of
dynamic growth. A fixed point in our national policy is the avoidance of any.
returri to the. depressed conditioris of an earlier decade. Such avoidance insists
on growing markets, and demands, here and abroad.
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.. Let us look for a moment at the importance of world trade to the Mississippi
•Valley.
•
. In 1956, which is the latest full year for which, we have the figures, nearly
$2 billioh^of world coinmerce moved through the New Orleans district, and almost
two-thirds'of this amount was in exports.
•
; On a national basis, excluding our military aid-to foreign co.untries, ouf merr
chandise exports in that year represented over 4 percent of our Nation's output.
Measured in terms of movable goods—that is to say,:excluding seryices, constructiori, and retail distribution values, which are not exportable—you will find
that our exports were around 9 percent of our national production.
;. *Td give you some indication of the importance of these export figures, they were
as large as our total consumer purchases of automobiles; they equaled dur entire
output of crude and prepared minerals; they were as large as the incomes of farmers
from their crops or livestock.
Perhaps we can best understand the importance of world trade by reviewing
our national experience in retrospect.
. In the.brief years:between the Continental Congress and the Constitutional
Convention-each individual State retained the power to control its trade, not only
with other countries, but with other States as well. That previous experience
made it abundantly'clear that our survival and prosperity of the Nation required
broader opportunities, t o develop our resources and wider markets to employ
therh most effectively.
Our Constitution recognized this requirement by virtually eliminating the
barriers to trade among the States.
There is a storybook flavor to.the success we have attained in enriching our
material well-being through the opportunities for trade which were created and
sustained in the union of our States. The common interest, and. common destiny
which these opportunities offered welded a strong nation politically and economically.
•;.
•
.
The lesson of our experience has not been lost on the other countries of the free
world. In their search for protective strength and growth in material advantages
for their people, they seek to match our'achievements. We can assist them in
pursuing this course, and at the same time gain real benefits for ourselves.
We have already pointed out the iriiportance of world trade in general terms,,
but let us look for a moment at some specific examples, of our own self-interest.
About 40 percent of the track-laying tractors we produce, 26.percent of construction and mining equipment,:.19 percent of the trucks, 14 percisnt of the coal, and
between 25 and 40 percent of the cotton, wheat, rice, fats and oils, and tobaccowe produce are sold abroad.
Perhaps equally important in the long term to our continuing prosperity and the
further:improvement of our standard of living is-our growing .dependence upon
other countries for vital materials and supplies. Our imports may look small in
comparison with our total national production—they are only about 3 percent of
the totalj' or. a little over 6 percent-of the movable goods we produce. But for
many commodities we are much more dependent upon imported supplies. For
example, we now obtain from foreign-: sources almost one-fourth of our iron ore,
one-third.of our copper and rubber, over half of our raw wool, the great bulk of
our supplies of tin, nickel, aluminum, and newsprint, and most of our supplies of
ferro alloying ores and metals which are essential to the manufacture of modern
equipment from machine tools to jet.aircraft.
Looking ahead to the future, we may be certain that as our population grows,,
and our production expands, and as we dip further into our own heritage of resources, we will have "to turn more and more to foreign sources to maintain the
efficiency of our production and our standard of living. To pay for these imports,,
we shall have to find expanding markets for our own exports. A prudent regard
for our own future needs would, alone, favor continued effort to seek reductions
in trade barriers which bar our exports—a policy which we have been following
through t h e authority granted under the various trade agreement acts which,have
been in effect without interruption since 1934 under both major political parties..
.' In recent years, the Sino-Soviet Bloc has added a new weapon in its conflict
with the free world. Beginning in about 1953 the Bloc launched a series of economic programs designed to gain greater influence in the less developed countries
of the free world, particularly in the vast areas of Asia and Africa. In these regions new nations are struggling for economic improvement, and the Bloc is. offering increased trade in. an effort to promote its own political objectives. During
the period from 1954 to. 1956 the trade of.the Bloc with t h e less developed coun-
294
1958 REPORT OF THE SECRETARY OF THE TREASURY
tries rose about 70 percent. In 1956, trade with the Bloc constituted more than
20 percent of the total foreign trade of Afghanistan, Iceland, Egypt, Yugoslavia,
and Burma; about 17 percent of Turkey's foreign trade; and 12 percent of Iran's.
The Bloc is able to carry out an economic offensive of this sort effectively because it conducts its foreign trade as a state monopoly, and so can mix its politics
with its business. Expanded capital goods production in the Bloc, and its demands for food and raw materials, provide an economic basis fof the expansion of
trade with the less developed countries of the free world. Offers of the Bloc tb
increase trade have met a favorable response in many of the less developed countries which are in search of markets for their own products.
These moves to link the economies—and hence the political destinies—of the
less developed countries to the Sino-Soviet Bloc present both a threat and a challenge to the free world. These countries are increasingly aware that trade tied
to political motivations rather than commercial considerations is likely to be
unstable and is not promising in the long term. Some of them also question the
capacity of the Bloc to deliver the types and qualities of goods they require. But
the problem they face is one of alternatives. If the nations of the free world
which are most advanced industrially recede from sound trade policies, the less
developed countries may move into closer relations with the Bloc.
Our choice is particularly fateful at this time because the less developed countries of the free world may stand at the threshold of marked change. As these
countries are moving to expand their economic development, the shape of the
future is being molded. If their growth takes place in economic isolation, they
will fail to achieve their highest destiny. The free world will be fragmented politically and its economies divided. Should the less developed countries turn to
the Sino-Soviet Bloc tp provide markets and supplies for their growing industries,
we would lose vital sources of raw materials and potential markets as well as
political allies.
We must all have regard for the maintenance of our national strength—mflitary
and economic. We must cooperate to exchange not only skills and-resources but
goods and mutual confidence as well.
Only if we affirm now a solid and enduring foundation for the .growth of trade
among the nations of the free world can we hope to link our strength with theirs
and join with them in new achievements of material and spiritual well-being.
In the period since the end of the second World War, there has been a great
resurgence of American private investment in foreign countries. This flow of
private capital has brought with it the managerial skills and technical excellence
which have been the foundation of our own economic growth and which is playing
a vital role in the development of industry and trade throughout the world.
If American investors and businessmen are to continue the expansion of their
activities abroad, they will require assurance that the profits they earn may
eventually be remitted in dollars, and the capital shifted if other ventures are
considered more desirable. The -transfer of values from one country to another
must in the last- analysis be made in the form of goods and services. It will be
clear, then, that the movement of goods across international boundaries on a
mutually beneficial.basis is crucial if we are to encourage ^private enterprise and
private capital to do their part most effectively in developing the industries of the
free world, and so diminish reliance on governments to do the job.
In all these efforts we must take action to assure that the President is amply
authorized to safeguard the markets of American industry and agriculture in the
very important area of the world which has made common market arrangements
and is contemplating the extension of those arrangements through a proposed free
trade area.
We in this country can never permit ourselves to forget that the responsibility
for the ultimate success of this and all national policies lies with the people, with
each of us individually. Leadership can show the way. But as our history has
proved many times, very little can be accomplished in the long run unless the
people themselves understand and support the policies as necessary and right.
In our generation, we are entering a new age, an age in which the physical
distances separating countries and continents have almost lost their meaning.
Four centuries ago the knowledge that mankind lived on a ball whirling in space
was gradually permeating the countries of Western Europe, and this knowledge
underlaid the discovery of the New World.
Today, the vastness of outer space has become the New World. Each nation's
concept of its position in relation to others has taken on a wholly new meaning.
Time is running out for any country that would choose to "go it alone."
EXHIBITS
295
We know that the space age—whatever else it may bring—has created and will
continue to create many new and difficult problems in the field of international
relations. You who have daily contact with the practical problems of world trade
have a serious responsibility in the broader area of national policy.
The Nation deserves not only your understanding, but your enlightened help
in making the relationship between freedom and trade fully appreciated and
understood here and abroad. You could make no greater contribution to peace and
freedom. You could have no greater opportunity to justify the blessings of peace
and material prosperity.
EXHIBIT 32.—Statement by Secretary of the Treasury Anderson, March 18, 1958,
before the Subcommittee on International Finance of the Senate Banking and
Currency Committee on the proposed establishment of an International
Development Association
It is a pleasure to appear before your subcommittee with respect to Senate
Resolution 264, which your distinguished chairman h^s introduced. The resolution proposes that consideration be given to the establishment of an International
Development A.ssociation in cooperation with the International Bank for Reconstruction and Development. It is contemplated that such an agency would provide long-term dollar and hard currency loans at a low rate of interest and repayable in local currencies to supplement World Bank loans, and would also use foreign currencies resulting from the sale of United States agricultural surpluses and
other programs in its lending activities.
This proposal relates to questions of real importance to both this country and
the less-developed countries of the free world. We must recognize that the desires
of the less-developed countries for economic development financing frequently
exceed their capacity to service loans from the Export-Import Bank and the
International Bank. Since the International Bank is financed largely by borrowing in the American market, its loans must be repayable for the most part in
dollars. Many of the less-developed countries have a limited capacity to service
dollar loans. Loans payable in the currencies of the borrowing country are very
much easier to service than loans payable in dollars. This, of course, is one of the
reasons why our own Development Loan Fund is making loans on these flexible
terms. Senator Monroney's proposal represents a valuable additional suggestion
as to how to deal with this problem.
It has been suggested by the chairman that the International Development
Association be set up with an original capital of $1 billion, in dollars or other
hard currency. Of this amount, the United States would probably put up 30
percent, or $300 million. The Association would also have the use of local cur-^
rencies, including a large portion of those which the United States has accumulated
from its large-scale disposal of agricultural surpluses. The chairman also suggests
that the loans of the International Development Association should be subordinated to the loans of the International Bank, and that it might extend its own
loans for 40 years at low interest rates, with payments of interest and principal
being made in the currency of the borrowing country.
The resolution and the suggestions that have been made in implementing its
objectives are being given and should be given most careful and thorough examination. It appears that in any undertaking of a multilateral program of loans
repayable in local currency, the best way to do so would be through the use of
an affiliate of the International Bank which could draw upon the experience and
personnel of that organization. However, the implications of the proposal are farreaching, and we shall need to devote much time and effort to give it the thorough
consideration which it warrants. We must explore various economic, financial,
and legal questions. The creation of an international institution involving large
sums of money is a major effort of international financial negotiation, and we
would need to be sure of our grounds before undertaking such an important endeavor. In this light we may wish to suggest for your consideration some modifications in the wording of the proposed resolution. For example, in order to be
slightly more specific as to the relationship of the proposed International Development Association to the Bank, we would offer the suggestion that the last clause
of the opening paragraph of the resolution read "as an affiliate of the International
Bank for Reconstruction and Development."
One of the advantages sought by the resolution is that countries other than
the United States would provide additional financing of economic development
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195 8 REPORT OF THE SECRETARY OF THE TREASURY
which they m a y not be likely to furnish in t h e absence of such an institution.
As outlined in t h e proposal, such additional financing is anticipated from subscriptions of $700 million in hard or usable currencies from foreign countries.
While it would be very helpful if capital for development abroad could be made
available on a larger scale from some of the other countries, it is not now known
whether foreign countries would be filling to subscribe substantial amounts of
'Convertible currencies to such an institution. Many of t h e 65 member countries
of t h e International Bank regard themselves as less-developed areas and might
w a n t to consider whether they should provide capital from their limited reserves
of convertible currencies to finance development in other areas. The industrialized
countries of Europe, Canada, Japan, and a few other areas provide t h e best
'•possibilities for seeking subscriptions in hard currencies. To some exterit they are
now exporting capital through public loans and credits, through direct private
investments, and other forms of foreign investment. Foreign central banks and
international investors have also purchased substantial amounts of dollar obligations of the International Bank.
The experience of the International Bank is illuminating, and suggests b o t h t h e
possibilities and m a n y of t h e practical problems encountered in multilateral
financing.
The Articles of Agreement of the International Bank provide t h a t
each member shall contribute, in addition to two percent in gold or dollars, 18
percent of its capital subscription in its own currency. T h e Bank has had available
for lending out of its two percent capital, $63.5 million from the United States and
about $120 million from other countries. The 18 percent contributions are n o t
automatically convertible since they may be used only with the permission of t h e
subscribing go.vernment. Countries have been urged to make funds available for
the Bank's lending operations from the 18 percent capital. The total subscriptions
forming this portion of the capital amount to t h e .equivalent of $1,680 million.
A little more t h a n half of this has been loaned, amounting to about $890 million.
T h e United States subscription amounted to $571.5 million. The balance of t h e
a m o u n t loaned consists of t h e Canadian subscription and p a r t of the capital subscriptions of Germany, Italy, the United Kingdom, Belgium, France, the Netherlands, Sweden, and small amounts from other countries. Besides the $319.5
million obtained from these countries, the Bank has obtained releases under which
i t expects to be able to use about $250 million in t h e near future. M a n y of t h e
countries have from time to time imposed special conditions upon the use of funds'
released by t h e m .
While the experience of the International Bank is valuable in judging the
prospects for obtaining capital subscriptions from other countries in convertible or
usable currencies, there is one i m p o r t a n t difference between the Bank and the
proposed International Development Association. The International Bank makes
bankable loans, most of which are repayable in dollars, and the. rest are to be
serviced in major trading currencies. The International Development Association
would be making loans most of which would be repayable in the curfeney of t h e
borrowing country. J u s t how this difference in t h e hardness of the assets held by
t h e two institutions would affect the a t t i t u d e of foreign countries- toward capital
subscriptions to t h e new institution is not entirely clear, and would have to be
determined by cons.ultation.
T h e second way in which it is proposed t h a t t h e International Development
Association augment the resources available for economic development is through
t h e use of local curfeney which has accrued from various United States programs.I t is suggested t h a t currencies accumulated by t h e United States could be used
for economic development programs through the proposed institution. I would
like to examine this aspect of the proposal in a little more detail.
Broadly speaking, the degree of success which might result from the proposal
would involve, among other things, t h e answers to these questions: (1) Is local
currency available in countries t h a t might have capital goods available for export
to other areas? (2) If there are such holdings, would t h e countries permit their
use for financing exports? (3) Would they be willing to have the.currencies turned
over to an international agency for this purpose? (4) Would financing through
this agency within the country be favored by countries now receiving . loans
repayable in local currency from United States programs?
While t h e whole subject of local currency accumulations is extremely complex,
it should be clearly understood t h a t t h e United States does not have unilateral;
power of decision in these questions. Although the* United States holds title to
large sums in local currencies, t h e s e have been acquired only under specific agreements with foreign countries t h a t their use would be limited in various specific
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297
•waj^s, and generally these limitations do not permit their use for financing exports.
The reason is clear. Most of these currencies were acquired from the sale of
surplus agricultural commodities of which the United States wished to dispose.
In order to avoid a drain on their, foreign exchange resources, foreign countries are
willing to buy our agricultural surpluses only if strict limitations are placed upon
the use of the currencies which are paid into our accounts. We would have to
determine the extent to which these countries would consent to diverting any
•substantial portion of these currencies from the financing of development in their
own countr}^ to financing exports to other areas.
In addition to this broad general limitation, we do not in fact hold very large
amounts of local currency in industrial countries which are in a position to export
the goods needed by the less-developed areas. A large part of the European
currency is being used for United States governmental expenditures, and loan
programs have been agreed for most of the remainder. By far the predominant
part of the local currencies held are the currencies of less-developed countries
themselves. These currencies could be utilized within the country for loans, and
transferred to an international agency, if the countries agreed to do so. However,
funds spent within their own borders will not at once add to the country's real
resources, as do imports of capital and other goods from abroad.
Even in less-developed areas, a large or preponderant part of the financing of
•economic development over a period of time has been and wfll be provided from
internal savings within the country. And over time, these savings, effectively
invested, will add to the productive effort of the country. But they do not have
the immediate effect of imports, and frequently advanced capital equipment can
be procured only in a more industrialized country. The mobilization of large
amounts of local currency under the Public Law 480 program does provide a fund of
currenC5^ usable within the country which the foreign government might not
otherwise easily obtain. Effectively used, and with due regard to the inflationary
•consequences of too large an outlay in addition to the already existing level of
public expenditure and private investment, this mobilized fund of currency can
be a useful adjunct to internal development programs. But the immediate increase in real resources which comes from the Public Law 480 program is the
dehvery in the country of the agricultural commodities themselves, which add
to the food and raw material resources of the recipient country.
The present program of the United States contemplates the use.of most of these
currencies for economic development within the country which originally acquired
our agricultural surpluses. Loans are being made through United States agencies
that are repayable in local currency on very favorable terms. For example, the
loans to the Brazflian Economic Development Bank for the financing of economic
development in that country amount to about $150 million, and are repayable in
Brazflian currency over 40 years. Frequently these loans, which are both made
and repayable in local currency, can be used to facilitate the operations of the
Export Import Bank and the International Bank by providing for local currency
expenditures which are related to the projects being financed b}^ these institutions.
Broadly speaking, the foreigri currency holdings derived from the sale of
agricultural surplus commodities under Public Law 480 may be used for:
(1) Country uses—where the currency is granted or loaned back to the
coun-try from which it was originahy received.
(2) United States uses—which includes meeting the general expenditures of
our foreign missions and personnel and special programs such as educational and
informational activities and the development of new agricultural markets.
About 70 percent of the present holdings derived from Public Law 480 are
destined for country use and the remaining 30 percent for United States use.
Under the Cooley Amendment there will in the future be increasing amounts for
private American investment which will reduce the percentages available for
the other uses.
' Let us consider first those currencies which are to be loaned or granted to the
country from which they are received. These uses are specified in the agreements
which generated the currency and the foreign countries involved have in effect
already secured our agreement'that they willnot be used for expenditures which
do not have the specific approval of the foreign government. We would be
required by consultation to ascertain whether they would approve expenditures
which would represent a claim on their resources for the benefit of another country.
• In fact, one of the specific uses provided for in Public Law 480 is the financing
of goods purchased in one country for the use of another country. Only very
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1958 REPORT OF THE SECRETARY OF THE TREASURY
small amounts of currencies generated under the program have to date been
agreed upon for this purpose.
In the case of the currencies which are, by agreement, for United States use,
the situation may be somewhat different. Where the currencies are available for
use to meet the general obligations of the United States in its operations, the
foreign exchange which these countries would otherwise earn is reduced, since we
save dollar expenditures by using these currencies. In this case the foreign countries might more readily agree to the transfer of currencies to an international
body since they already expect to lose dollars through thetr use. In this situation,
however, assuming the United States had ready use for the currencies, they represent an asset as valuable to the United States as are dollars. Consequently,
transferring such usable currencies to the international body would cost us
dollars, but would not necessarily give the international organization a convertible
asset.
There are in a few countries currencies for United States use which are in excess
of our immediate requirements and will require many years to use. These
countries might agree to use of the currencies by an international institution but
the usefulness of these currencies is limited because they are for the most part
the currencies of less-developed areas.
A relatively new type of use is for loans through the Export-Import Bank to
private American business to encourage investment abroad. This program was
recently enacted by the Congress in the Cooley Amendment. If these funds
should be provided to the International Development Association, such funds
could not be used to carry out this congressional intent, and ways would have to
be examined to meet this objective.
For the future one of the principal sources of foreign currencies will be the
repayments on loans made from currencies received under Public Law 480 and
the mutual security program. These will reach considerable magnitude during
the middle and later 1960's and continue over the next 40 years. The loan
agreements with the countries permit the repayments to be used for any expenditures or payments by the United States in the debtor country. Transfers into
other currencies or areas are, however, subject to mutual agreement from time
to time and we have agreed that whatever use the United States makes of the
currency we will take into consideration the economic position of the country
concerned. Since these repayments are spread over many years in the future
it is impossible to predict what the economic position,of the countries will be at
the time of repayment or what other uses for the currencies the United States
may find.
The creation of any new institution will not by itself produce any new resources
of capital for the less-developed areas of the free world. Making resources available means that the production of some nation must be tapped to provide real
goods, for the use of another nation. On the other hand, we must remember
that mechanisms for the best utilization of capital resources approach being as
important as the capital itself.
As we explore what might be accomplished under the proposed International
Development Association, we know from our earlier conversations that the
chairman would want us to face afl of the problems realistically and to develop
our thinking in terms of the important objectives.
At the same time, I think that we all agree that our national interest requires
the capacity for bilateral financing. The Congress has expressed its faith in
bilateral loans payable in dollars through the Export-Import Bank. We must,
in our judgment, continue to implement the Development Loan Fund as a part
of our national policy. And for this we need the appropriations which have
been included in the President's budget. Meanwhile, we shall be exploring and
developing the contributions that can be made through the proposed International
Development Association. This should proceed with all reasonable diligence.
To make progress in the underdeveloped countries of the free world is going to
require the best resources that can effectively be brought to bear from the United
States and from other countries—and through the best utihzation of our bankable
resources, as well as the use of resources in other ways.
In this statement I have listed many points for further consideration. I have
done so because these points seem to involve questions that will require a good
deal of study. There are a number of other areas suggested by the resolution
which deserve exploration. We shall proceed with our further consideration of
the proposal with diligence.
EXHIBITS
299
EXHIBIT 33.—Letter from Secretary of the Treasury Anderson, August 18, 1958,
to the President on the adequacy of the resources of the International Monetary Fund and the International Bank for Reconstruction and Development
DEAR MR. PRESIDENT: We have frequently discussed together the importance of
a sound and sustainable growth in the economy of the free world to both the foreign
and domestic policy objectives of the United States. Over the longer term, I
believe that the well-being of the friendly nations depends not only on the economic
and financial health of the industrialized nations of Europe, North America, and
elsewhere, but also upon the economic growth and progress of nations in the lessdeveloped areas of the free world.
Through a number of measures the United States has been pursuing these objectives, and this year we have taken major steps forward in our own programs.
It would seem highly desirable that the nations of the free world as a whole should
move forward cooperatively to deal more effectively with the problem. One of
the best ways of achieving such cooperation would be by strengthening the
financial institutions already established; . In the International Bank for Reconstruction and Development and the International Monetary Fund we have
seasoned international instruments now engaged in this work.
Both of these organizations have staffs of internationally recruited experts who,
with over a decade of experience behind them, have demonstrated their ability
to act effectively and impartially. Both have established operating standards
and policies which command the respect of their member governments, The
Fund has provided short-term financial assistance to 35 member countries, aggregating the equivalent of over $3 billion. Through such assistance and the influence it has been able to bring to bear for the adoption of sound currency and exchange policies, the Fund has contributed substantially towards monetary stability
and a freer flow of international trade and payments. The Bank has invested
some $3.8 billiori in productive development projects in 47 different countries and
territories, most of them underdeveloped. Loans bj^ the Bank are running at the
rate of about $750 million a year. The Bank's financing and technical assistance
activities have served to accelerate the pace of economic growth all over the free
world; and it has carried on these activities on a basis that has earned for the
Bank the confidence of all major private capital markets. The establishment of
the International Finance Corporation, which supplies capital to encourage the
growth of productive private enterprise, has recently increased the scope and
flexibility of the Bank's field of operation.
The International Monetary Fund utilizes for its operations gold and member
country currencies which have been provided to it by the member countries
through their subscriptions to its capital.' Advances, by the Fund in the past
two years have amounted to approximately $1.8 billion and nearly $900 million
additional are in effect earmarked against standby commitments which the Fund
has undertaken.
Under the charter of the International Bank, a small part of its authorized
capital is available for loans, but the Bank must depend primarily on borrowings
in the financial markets of the world. The major part of the authorized capital
in effect constitutes a guarantee for these borrowings. The Bank has raised the
equivalent of more than $2 billion through issuing its bonds denominated in six
different Currencies. At present the equivalent of about $1.7 billion is outstanding in such bonds. The Bank's bonds are recognized throughout the world as
securities of the highest quality and, as a result, the Bank has been able to borrow
large sums of money at frequent intervals at rates of interest comparable to those
of highly regarded government securities. This in turn has enabled the Bank
to fix interest rates on its own loans at levels not imposing undue burdens on the
borrowing countries concerned. While the Bank stfll has unused borrowing
capacity, its volume of lending has expanded greatly and, if it is to continue to
be able to meet legitimate loan requests likely to be submitted to it during the
years ahead, it must go to the market for larger amounts of money than ever
before. This would require a broadening of the market for the Bank's bonds
and the tapping of sources of capital not yet reached.
During the annual meetings of the Bank and Fund at New Delhi early in
October, we should give consideration to ways and means of increasing the
effectiveness of these two institutions. As United States Governor of the Bank
and Fund, I would welcome your guidance with respect to these vital problems
of policy. If you believe that certain avenues of action should be explored
preparatory to the New Delhi meeting, I would ask the National Advisory
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1958 REPORT OF THE SECRETARY OF THE TREASURY
Council to proceed promptly with detailed study and arrangements. We would,,
of course, wish to consult with members of the Congress who are- particularly
concerned with this subject. .
.
A related matter has recently been under consideration by the Senate, which
has adopted a resolution calling upon the National Advisory Council to undertake a study of the feasibility of an International Development Association as
an affiliate of the International Bank. The resources of such an organization wouldbe subscribed by the members of the Bank. The Association would finance development projects on the basis of long term loans at reasonably low interest
rates repayable in whole or in part in local currencies. In the course of its study,
the Council will also explore the possibility that such an affiliate of the Bank
might prove to be a means, supplemental to our own national programs, for assuring productive investment of some part of the various local currencies becoming available to the United States through the sale of agricultural surpluses or
other programs. It is intended to undertake informal discussions with other
members of the Bank with a view to ascertaining their attitude toward an expansion of the Bank's activities along these lines.
' I request your guidance as to whether, if the study indicates that the proposal
is promising, you would wish to have the subject pursued formally with the governments of the other member countries of the International Bank.
Faithfully yours,
ROBERT B . ANDERSON,
Secretary of the Treasury.
EXHIBIT 34.—Letter from the President, August 26, 1958, to Secretary of the
Treasury Anderson outlining a three-point program for consideration at the
annual meetings in New Delhi of the International Monetary Fund and the
International Bank for Reconstruction and Development
DEAR M R . SECRETARY: I have read with great interest your letter concerning
the adequacy of the present resources of the International Monetary Fund and
the International Bank for Reconstruction and Development.
I thoroughly agree with you that the well-being of the free world is vitally affected by the progress of the nations in the less-developed areas as well as the economic
situation in the more industrialized countries. A sound and sustainable rate of
economic growth in the free world is a central objective of our policy.
It is universally true, in my opinion, that governmental strength and social
stabflity call for an economic environment which is both dynamic and financiallysound. Among the principal elements in maintaining such an economic basis
for" the free world are: (1) a continuing growth in productive investment, interriational as well as domestic; (2) financiarpolicies that wfll command the confidence of the public, and assure the strength of currencies; and (3) mutually
beneficial international trade and a constant effort to avoid hampering restrictions on the freedom of exchange transactions.
, During the past year, as you know, major advances have been made in our own
programs for dealing with" these problems. These include an increase in the
lending'authority of the Export-Import Bank; establishment of the Development
Loan Fund on a firrrier basis through incorporation and enlargement of its resources; extension and broadening of the Reciprocal Trade' Agreements Act;
and continuation of the programs carried forward under the Agricultural Trade
Development and Assistance Act.
Our own programs, however, can do only a part of the job. Accordingly, as
we carry them forward, we should also seek a major expansion in the international
programs designed to promote economic growth with the indispensable aid of
strong and healthy currencies.
i^'#^!#
As you have pointed out, the International Bank for Reconstruction and Development and the International Monetary Fund are international instruments of
proved effectiveness already engaged in this work. While both institutions still
have uncommitted resources, I am convinced that the time has now come for us to
consider, together with the other members of these two agencies, how we can
better equip them for the tasks of the decade ahead.
Accordingly, I request, assuming concurrence by the interested members of the
Congress with whom you will consult, that you take the necessary steps in conjunction with the National Advisory Council on International [Monetary and
Financial Problems, to support a course of actiori along the following lines:
EXHIBITS
301
' First.—In your capacity as United States Governor of the International Monetary Fund, I should like to have you propose, at the annual meeting of the Fund
at New Delhi in October, that prompt consideration be given to the advisability
of a general increase in the quotas assigned to the member governments.
The past ten years testify to the important role played by the Internationale
Monetary Fund in assisting countries which, from time to time, have encountered
temporary difficulties in their balance of payments; We are riow entering a period
when the implementation of effective and sound ecoriomic policies may be increasingly dependent, in many couritries upon the facilities and technical advicewhich the Fund can make available, as they meet temporary external financial
difficulties. • This is particularly true of the less developed countries with the great
variability in foreign exchange receipts to which they are subject from time totime. It also applies to industrialized countries which are dependent on foreigntrade. Through its growing experience and increasingly close relations with its
members, the Fund can also help see to it that countries are encouraged to pursuepolicies that create stable financial and monetary conditions while contributing
to expanding world trade and income. The International Monetary Fund is
uniquely qualified to harmonize these objectives but its present resources do not
appear adequate to the task.
Second.—In your capacity as United States Governor of the International Bank
for Reconstruction and Development, I should like to have you propose, at theannual meeting of the Bank, that prompt consideration be given to the'advisability of an increase in the authorized capital of the Bank and to the offering of
such additional capital for subscription by the Bank's member governments..
Such additional capital subscriptions, if authorized, would not necessarily require
additional payments to be made to the Bank; they would, however, ensure the
adequacy of the Bank's lending resources for an extended period by strengthening
the guarantees which stand behind the Bank's obligations.
The demands upori the Bank for development loans have been increasing rapidly,,
and it is in a position to make a growing contribution to the econorriic progress of
the free world in the period which lies ahead. Moreover, it can do this by channeling the savings of private investors throughout the world into sound loans, repayable in dollars or other major currencies. But to meet the rising need for such
sound development loans, it must be able to raise the funds in the capital markets
of the free world. An increase in the Bank's subscribed capital, by increasing theextent of the responsibility of member governments for assuring that the -Bank
will always be in a position to meet its obligations, would enable the Bank-to place
a.larger volume of its securities in a broader market, while stfll maintaining the
prime quality of its securities and hence the favorable terms on which it can
borrow and relend funds.
Third.—With respect to the proposal for an International Development Association, I believe that such an affiliate of the International Bank, if adequately
supported by a number of countries able to contribute, could provide a usefuB
supplement to the existing lending activities of the Bank and thereby acceleratethe pace of economic development in the less developed member countries of the
Bank. In connection with the study of this matter that you are undertaking in the
National Advisory "Council pursuant to the Senate Resolution, I note that you'
contemplate informal discussions with other member governments of the Bank
with a view to ascertaining their attitude toward an expansion of the Bank's
responsibilities along these lines. .If the results indicate that the creation of theInternational Development Association would be feasible, I request that, as a third
step, you initiate promptly negotiations looking toward the establishment of such
an affiliate of the Bank.
The three-point program I have suggested for consideration would require intensified international cooperation directed to a broad attack upon some of themajor economic problems of our time. A concerted and successful international
effort along these lines wouldj I feel certain, create a great new source of hope for
all those who share our coriviction that with material betterment and free institutions flourishing side by side we can look forward with confidence to a peaceful
world.
Sincerely,
DwiGHT D .
EISENHOWER.
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1958 REPORT OF THE SECRETARY OF THE TREASURY
EXHIBIT 35.—Statement by Secretary of the Treasury Anderson as Governor
for the United States, October 6, 1958, at the opening joint session of the
International Bank for Reconstruction and Development and the International
Monetary Fund, New Delhi, India
On behalf of the United States delegation, I should like first to thank the Prime
Minister of India for the warm welcome which he has extended to the Boards of
Governors. We have come to this meeting with a keen awareness of the profoundly important role which the Asian members of these two institutions are
playing and will continue to play in the free world. In a vivid sense their needs
and their aspirations epitomize the task of the Bank and the Fund. It is the
concern of all the governments represented in this room to find ways of contributing more effectively to the well-being of all peoples. As members of these
institutions we have expressed our conviction that free countries gain much by
friendly and effective association in a common attack on the financial and economic problems which confront them. We are pleased to have the Governors
for Malaya, Tunisia, Morocco, Spain, and Libya join with us here today, in our
consideration of these vital questions.
We also wish to express our appreciation of the able address by the Chairman
of the Boards of Governors, who has focused our attention on some of the basic
problems confronting our countries as they seek to develop their" economies and
expand their trade. We agree with him that sound internal finance is an essential condition to sound international economic policy. We should like to emphasize that economic development can and should go forward with noninflationary monetary policies so that the greatest benefits can be realized.
We in the United States Government find great encouragement in the increasingly effective way in which the Fund and the Bank have been performing their
tasks. By improving the capacity of both institutions to operate throughout the
free world, the member countries can greatly intensify their efforts to deal with
the problems of economic development and financial and economic stability. It
was to this end that the President of the United States and I recently exchanged
letters in August expressing the results of our thinking about international action
which might fruitfully be taken. Pursuant to instructions which President
Eisenhower gave to me, I have introduced resolutions at the Procedures Committee calling for a study of an increase in the resources of the Bank and the
Fund. President Eisenhower has also asked me to read to you the following
message:
"One of the great opportunities which free nations have to be .of service to one
another—and to the larger cause of freedom itself—is that of fostering economic
growth and well-being. A key element certainly is the timely provision of needed
capital resources.
"It is universally true, in my opinion, that governmental strength and social
stability call for an economic environment which is both dynamic and-financially
sound. Among the principal elements in maintaining such an economic basis
for the free world are: (1) A continuing growth in productive investment, international as well as domestic; (2) financial policies that will command the confidence of the public, and assure the strength of currencies; and (3) mutually
beneficial international trade and a constant effort to avoid hampering restrictions
ori the freedom of exchange transactions.
"During the period of their operations the International Bank for Reconstruction and Development and the International Monetary Fund have performed an indispensable function in providing both short- and long-term financial
assistance to various nations in need of it. There is widespread agreement as to
the effectiveness of these two great institutions. A constructive increase in their
resources would greatly enhance their usefulness to the free world community.
"These facts have prompted me to ask that consideration be given to certain
measures designed to increase the capacity of both the Bank and the Fund so
that they may better serve the rising needs of our free world economy. It is my
conviction that through these institutions we can give real encouragement and
hope to all our member countries in the decade ahead. A progressively broadening attack upon some of the paramount economic problems of our time can be
made possible by this program. I am confident that it can provide a new source
of bright hope for the peoples of our world."
I should also like to say something about the International Development
Association to which President Eisenhower referred in his August letter. We
are now studying this proposal in my own Government. I have no blueprint
EXHIBITS
303
to offer at this time for such an association. Essentially, however, it would be
an affiliate of the International Bank which would make long-term loans for
economic development repayable in whole or in part in the currency of the borrowing country. As I have said, the United States Government is making its
own studies of the feasibility and desirability of establishing an IDA. We hope
that other countries will at the same time be giving thought to the matter, and
we shall look forward to having informal discussions with you. If these informal
studiesr and discussions lead to encouraging conclusions, it would be appropriate
to undertake more formal study and negotiation, looking to the establishment
of such an association.
• We are meeting at a time in which the economic development of the free world
is both encouraging and challenging. We must expect of our free economies
that they will be at the same time dynamic and strongly resistant to both inflation
and recession. We must expect also that they will provide an environment which
invites and encourages investment and that they will generate the savings which
make investment possible. To my mind, a most satisfying aspect of the experience of our countries, taken as a whole, in the years since the war has been
the upward trend of world savings, production, and world trade.
The -Bank and the Fund have again demonstrated, in the past year of their
operations, that they are well designed to contribute both to growth and to
economic and financial stability. The Fund has completed two years of operation on a very large scale indeed. The International Bank has also been going
through the most intense period of activity in its history, and in the fiscal year
made a larger volume of loan commitments than in any" preceding year.
As indicated in the President's letter to me on August 22, it is our earnest
hope that the executive boards of the Fund and Bank will consider promptly
the question of the most practical means of increasing the quotas of the Fund
and the capital of the Bank. Various aspects will, of course, have to be dealt
with in these studies, including the amount of the increases, the manner in which
subscriptions and quota increases would be subscribed or paid, the extent of
participation by the members as a whole, and many others. No doubt some
weeks would be needed for the executive boards to complete the studies.. However, I hope that the importance of the matter will be so evident as to create a
sense of urgency, and that by the end of December the boards of governors may
expect to receive the reports from the two executive boards.
EXHIBIT 36.—Statement by Secretary of the Treasury Anderson as Governor
for the United States, October 7, 1958, at the discussion of the Annual Report
of the International Monetary Fund, New Delhi, India
Our distinguished managing director has read a thoughtful statement of the
problems of the Fund in its relation to the economies of its members. His great
experience and gift for expression have enabled him to draw our attention vividly
and with clear economic insight to the central questions to which we should all
give our very best efforts.
.
The Annual Report of the Fund, which we are considering today, is worthy
of its predecessors, in its comprehensive and balanced analysis of changes in the
world economy. Each year these reports have added to our understanding of
the financial relations and the trade and payments problems of the members of
the free world. The Report records the work which the Fund has done in advising its members on exchange policies and related monetary issues, and describes
progress toward the agreed objective of freer trade and payments arrangements
under conditions of exchange stability.
We of the United States delegation are exceedingly glad to have, as members
of our delegation, two distinguished United States Senators, Senator J. W. Fulbright and Senator A. Willis Robertson, who have the major-responsibility for
legislation in international financial matters..
Prior to our last annual meeting there was a feeling of uncertainty about the
course of foreign exchange rates. New and large balance of payments problems
had emerged in several countries. Effective use of the Fund's resources by the
members during this period gave the world reassurance that there were means of
assisting member countries in temporary balance of payments difficulties even
when their deficits had become rather large. There had also been a disturbing
amount of speculation in currencies and a shifting of international balances.
Vigorous statements of the last annual meeting by the Governors for the United.
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195 8 REPORT OF THE SECRETARY OF THE TREASURY
Kingdom a n d t h e Federal Republic of Germany, and by t h e managing director,
against t h e background of earlier governmental action, set a t rest much of t h e
speculation in t h e exchange markets.
We meet here a t New Delhi in a different atmosphere from t h e one which
dominated our preceding meeting. T h e F u n d report has called a t t e n t i o n to t h e
generally strong international financial position of t h e industrial members of our
two institutions. At t h e same time it recognizes t h a t t h e year 1957-58 has
brought with it a number of problems for m a n y of t h e countries t h a t depend'
upon t h e production of food and raw materials for their international earnings.
This is of course related to three major factors, first, t h e overall trend of world
trade, second, t h e r a t e of expansion in production of particular commodities,,
a n d finally, t h e pressure of demand for.imports in t h e less developed countries.
insofar as developments in the United States affect the level of world trade,
t h e p r e s e n t ' o u t l o o k appears to us to be encouraging. In fact, during the p a s t
year our imports continued a t a high level and our exports fell off quite decidedly.
T h u s , in fact, during this period t h e United States absorbed some of the impact
of the leveling off in world trade in its own export accounts, and acted as a sustaining factor on world trade as a whole through the maintenance of a high level
of imports. T h e encouraging factors in our domestic economic situation, and
t h e growing competition of other countries in world markets, lead us to anticipate
a strengthening of t h e world trade and p a y m e n t s situation. I t may be noted
t h a t in recent years, the upward trend of increased official holdings of gold and
dollar balances has continued. I n addition, there were sizable private balances
which are used in t h e settlement of international accounts.
I n the p a s t two years we have had temporary balance of p a y m e n t s difficulties,
in the industrial countries, and more recently similar problems among the lessindustrialized nations. I t is in the light of these problems t h a t certain suggestions
have been p u t before this body by my Government. I refer to t h e proposal
which we have made, t h a t the executive directors of the F u n d p r o m p t l y consider
the question of enlarging its resources through an increase in quotas.
In t h e last two fiscal years, drawings on the F u n d have amounted to $1.8
billicn, and in addition a t the end of this period there were outstanding standby
commitments of $884 million. As we look ahead to the next decade, t h e resources available to t h e Fimd to help countries to meet temporary swings in
their balances of p a y m e n t s m a y well be inadequate. I n the light of our experience in recent years, we feel t h a t practical means to provide an additional
cushion of this character deserve the most p r o m p t attention. This would affbrdan additional measure of confidence and t h u s help sustain world production and'
t r a d e . A strengthened Monetary F u n d would also give encouragement to the
efforts which member countries are making to maintain or achieve convertibflity.
If t h e governors find themselves receptive to t h e suggestion t h a t we have made,
the executive board would, of course, consider a number of points. I n addition
to the more obvious questions, such as t h e a m o u n t of t h e increase in the quotas
and the form of p a y m e n t , it would be well for the board to consider ways in which,
more effective utilization can be made of t h e currencies of industrialized countries
other t h a n the United States.
We have been h a p p y to note t h a t drawings have recently been made in some
currencies other t h a n United States dollars. To t h e extent t h a t the F u n d makes
effective use of other currencies, its ability to play its sustaining role in world
t r a d e should be enhanced.
We h a v e reason to be proud of t h e work of t h e Fund, especially during the
last two years. I n addition to its financial assistance, t h e F u n d has courageously
and devotedly undertaken to help its members deal with t h e difficult financial
problems of internal inflation and exchange management. We look forward to
a continuation of its p a t i e n t and reliable guidance in this extremely i m p o r t a n t
and rewarding field.
Exhibit 37.— S t a t e m e n t by Assistant Secretary of the Treasury Coughran as
Temporary Alternate Governor of the International Finance Corporation, October 8, 1958, N e w Delhi, India.
The President of the Corporation in his address has drawn attention to a year
of further experience in the specialized activities with which the Corporation deals.
We have listened with riiuch interest to his remarks today, and we appreciate
his leadership of the Corporation throughout t h e year.
EXHIBITS
305
The I F C gives further emphasis to a concept which has been a guiding one
in the development of industrialized countries of the free world. I t is the idea",
t h a t productive private enterprise, under the stimulus of the economic incentives
of a free economic system, can play a role of p a r a m o u n t importance in achieving'
a quickened tempo of economic development. The Corporation is designed as
a catalyst in this process. We have all underwritten its objectives with our
capital subscriptions. We have t h u s expressed agreement t h a t I F C offers an
advantageous means of assisting soundly conceived private projects. With
modest contributions acting as a lever, a potentially larger fund of private capital,
should be directed into rewarding uses. T h e s t a r t has been made ably, and, it is.
to be hoped, with prospects of increasing activity.
An examination of t h e investments of t h e Corporation to date shows evidence
t h a t t h e intended catalytic action by the Corporation is in fact beginriing to^
t a k e place. The capital investments so far maide have been accompanied b y '
private investment, either in the form of loans dr equity capital,',which is triple,
t h a t of the Corporation's. The Corporation has t h u s elicited flows^of additional'
capital funds from within the country in which the proj ect-is located and from
sources in the more industrialized centers o f t h e world. I am happy to say t h a t
foi ward-looking private enterprise in my own country has participated to a
substantial extent in t h e additional private investment associated with t h e
Corporation's investments.
Indeed, the overall record of American enterprise in providing needed resources
abroad is a highly favorable one. Recently available figures show t h a t United
States private long-term investments in foreign countries in the last full calendar
year alone increased by about $3.5 billion, t h u s raising the total of such investm e n t s by more t h a n 10 percent.
The growth of the organization during the year, both in membership and in
operating experience, is an encouraging sign. I t now numbers 57 countries, and
I wish on behalf of the United States to welcome the Governors for Ghana,
Malaya, Ireland, and Libya. M y Government is also pleased to note t h a t the
increase in the. Corporation's commitments has been accompanied by a wider
geographic distribution of its investment activities.
T h e Corporation's relatively brief existence enables us to avoid dwelling on
history; our concentration is on the years ahead. We look forward to another
year of increasing activity and usefulness on t h e p a r t of the Corporation.
E X H I B I T 38.—Joint a n n o u n c e m e n t by the Treasury Department, the D e p a r t m e n t
of State, and the Export-Import Bank, January 30, 1958, relating to financial
discussions between the United States and France
Financial discussions between the United States and France
Discussions on t h e French financial situation h a v e been held in Washington
during t h e past 2 weeks between officials and agencies of t h e Government of t h e
United States and a French financial mission headed by M. Jean Monnet.
T h e United States has been represented in these talks by t h e Secretary of t h e
Treasury, Mr. Robert B. Anderson; t h e D e p u t y Under Secretary of State for
Economic Affairs, Mr. C. Douglas Dillon; and t h e president of t h e E x p o r t - I m p o r t
Bank, Mr. Samuel C. Waugh.
T h e representatives of t h e French Government have simultaneously conducted
similar discussions with t h e International M o n e t a r y F u n d , in Washington, a n d
t h e European P a y m e n t s Union, in Paris.
All of these discussions were completed today.
During t h e discussions t h e French representatives have described t h e financial
program which has been adopted by t h e French Government a n d Parliament
for t h e purpose of eliminating inflation, achieving equilibrium in t h e French
balance-of-payments, and restoring financial stability. This program is described
in t h e s t a t e m e n t which has been issued t o d a y by t h e French Government.
I n view of t h e financial program adopted by France, t h e European P a y m e n t s
Union will extend t o France credits equivalent to $250 million; t h e I n t e r n a t i o n a l
Monetary F u n d has agreed to m a k e available to France t h e equivalent of
$131,250,000; a n d t h e United States has agreed t o extend t o France certain
financial facilities a m o u n t i n g t o $274 million.
T h e a m o u n t s to be provided by these three sources total $655,250,000, which
306
1958 REPORT OF THE SECRETARY OF THE TREASURY
will assist the French Government in carrying through the financial program it
has adopted.
The financial facilities being extended to France by the Government of the
United States consist of the following arrangements:
Agreement relating to the refunding, at maturity date, of
of the next 4 semiannual installments of principal on prior ExportImport Bank loans
,
$96, 000, 000
Agreement relating to the postponement of 3 annual installments, as to principal and interest, on prior lend-lease and surplus property credits
90, 000, 000
Agreements for the shipment to France of cotton under
Pubhc Law 480 and Section 402 of the Mutual Security Act (to be
completed)
43,000,000
Agreement for the sale, for francs, of United States military
supplies and equipment for French NATO forces in Europe, up t o . - 45, 000, 000
Total
274, 000, 000
The details of the arrangements provided through the European Payments
Union and the International Monetary Fund are being announced by the two
international institutions.
EXHIBIT 39.—Statement by Under Secretary ofthe Treasury Baird, February 18,
1958, before the House Ways and Means Committee in support of the trade
agreements program
I am very pleased to appear before this committee today in support of H. R.
10368 and H. R. 10369, which would amend and extend present trade agreements
legislation. We in the Treasury are especiahy concerned with the trade agreements program's importance to the maintenance of a healthy and expanding
domestic economy. We have, of course, a special interest in our domestic
economy for the very practical reason that this is the source of the tax revenues
with which the Treasury pays the Government's bills.
Our foreign trade is an essential source of our economic strength. It has
contributed significantly to production and employment in many of our industries. .
It has frequently exerted a stabilizing effect on domestic production and employment when demands at home have been declining.
We are one of the world's great trading nations. Twenty years ago, when the
trade agreements program was getting under way, our exports comprised about
14 percent of the world's total. Today, our exports have grown to more than
20 percent of the world total. In 1957 our exports amounted to about $19H
bilhon, which is an increase of almost 60 percent in value and is about
half again as large in physical volume, as compared with the corresponding
figures for 1953.
The sustaining role of our foreign trade in the growth of our domestic economy
is revealed in the way it has matched the spectacular growth J n our domestic
production and employment. There have been notable achievements in the
growth of our gross national product over the past decade, and our foreign trade
has consistently expanded at a comparable rate. Approximately 3 million of
our workers are now employed, directly or indirectly, in producing goods for
export and transporting them to foreign markets. More than 9 percent of the
movable goods we produced in 1956 was sold abroad. For agriculture, our
foreign sales represented in the fiscal year 1957 between 12 and 13 percent of
our total agricultural output.
For many of our industries, foreign trade is even more important in our own
self-interest than the foregoing broad percentage relationships indicate. To
cite a few examples: The proportion of our total production which was exported
in 1956 ran about 40 percent for copper sulphate, certain insecticides, tracklaying tractors, and ammonium sulphate; over 30 percent for certain types of
construction and mining equipment, complete. civilian aircraft, molybdenum
ores and concentrates, and resin; over 20 percent for sulphur and penicillin,
carbon black, lubricating oil, petroleum coke, and phosphate rock; 19 percent
for motor trucks and coaches; 18 percent for anthracite coal; 16 percent for
diesel engines for certain types of tractors and for turpentine; 14 percent for
agricultural combines, synthetic rubber and bituminous coal; and 11 percent for
EXHIBITS
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307
machine tools. As any businessman can testify, the course of demand in so
sizable a proportion of his market as these percentages represent is likely to have
a very important influence on his profits and.on the level of employment he is
able to maintain.
As the pace of expansion in domestic demand eased off during the past year,
the export sales of some commodities continued at a high level. For instance,
higher exports of machine tools and metal-working machinery provided a major
support to production during the first half of 1957 as shipments to domestic
customers declined sharply; during the first 9 months of 1957, cotton, cattle
hides, bituminous and anthracite coal, and iron and steel scrap were exported
in larger quantities than during a comparable period in the previous year, while
domestic demands were declining.
It is plain, therefore, that foreign trade is exerting an important sustaining
and stabihzing effect on production and employment in this country.
Should the markets for our exports decline, this shrinkage would be felt not
only by those primarily involved but also by secondary industries, retail trade
and service activities in the community.
As taxpayers, our citizens have another interest in our foreign trade. The
growth and expansion of a mutually beneficial foreign trade has not only permitted
our exports to expand but has also enabled many of our free world pa^rtners to
build up their economies without dependence upon continuing economic assistance
from this country.
The last war brought in its wak
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