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o

Annual Report
ofthe

Secretary of the Treasury
on the

State of the Finances
For tke Fiscal Year Ended June 30, 1961




TREASURY DEPARTMENT
DOCUMENT NO. 3222
Secretary

UNITED STATES GOVERNMENT PRINTING OFFICE, WASHINGTON : 1962
For sale by the Superintendent of Documents, U.S. Government Printing Office
Washington 25, D.C. - Price 32.50 (paper cover)




H ^R^

LETTER OF TRANSMITTAL
TREASURY DEPARTMENT,

Washington, March SO, 1962.
SIRS: Pursuant to the requirements of Section 262 of Title 5 of the
United States Code, I have the honor to submit to you herewith my
Annual Report on the State of the Finances.
DOUGLAS DILLON,

Secretary of the Treasury.

To

THE P R E S I D E N T OF T H E S E N A T E .

T O THE SPEAKER




OF THE H O U S E OF

REPRESENTATIVES.




CONTENTS
Page

ANNUAL R E P O R t OF THE SECRETARY OF THE TREASURY ON
THE STATE OF THE FINANCES
REVIEW OF OPERATIONS AND STATISTICS FOR THE FISCAL
YEAR 1961

NOTE.—Details of figures may not add to the totals because of rounding.




V

1
5)




ANNUAL R E P O R T
OF THE
SECRETARY OF THE TREASURY
O N THE
STATE OF THE FINANCES







SUMMARY
When the present administration assumed office in January 1961,
the Nation faced two serious economic problems: A recession at home,
which had continued for eight months; and a persistent deficit in this
country's international balance of pa3anents, which had shaken confidence in the stability of the dollar. Forthright action was taken to
combat both problems. While their ultimate solution lies in the
future, gratifying progress has been made.
The two problems are intimately related. In the world of the
1960's, everything the Government does to foster recovery and economic growth at home must be considered in the light of its impact
upon the Nation's economic position in the world. And every move
to maintain confidence in our currency abroad must be weighed
against its effect upon the domestic economy.
Any accounting of Treasury actions and accomplishments during
1961 must, therefore, focus on efforts to reconcile conflicts—both
seeming and real—between our domestic and our foreign economic
programs.
In fact, there is no conflict between our national and international
objectives. If this Nation fails to maintain a vigorous economic
system, capable of utilizing its resources fully and expanding its
productive potential adequately, America's political and military
leadership of the free world will inevitably deteriorate. Similarly,
if we fail to help maintain stable currencies and vigorous economies
throughout the free world, there can be no prosperity for our ovni
people.
While our international and domestic goals thus automatically
interlock and reinforce each other, formulating policies that will serve
both objectives can involve difficult choices. We must disavow any
philosophy and reject all programs that support one exclusively at the
cost of the other.
This we have done in 1961 and will continue to do.
Budgetary policies have been adopted which meet urgent national
needs and, at the same time, have clearly demonstrated to the world
our intention to manage our fiscal affairs wisely and prudently.
Monetary and debt management policies have been followed that
have contributed simultaneously to vigorous economic growth at home
and to stability in world financial markets.




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ANNUAL

REPORT

OF THE SECRETARY OF THE TREASURY

Tax policies have been developed that will directly promote expansion of business and emplo3niient at home and, at the same time,
strengthen the Nation's competitive position abroad.
The interrelationship of fiscal and monetary policies has been
recognized and designed to encourage greater investment in productive facilities—another objective that serves both our national and
international needs.
And finally, the administration has moved boldly into a new world
of close and confidential financial cooperation with our friends and
allies, thus strengthening the economic security and stability of all
free nations.
Our problems are far from solved and the future may bring new
ones which will require that old programs be modified or scrapped and
new ones developed to supplement or supplant them. Our policies,
however, will always be pointed toward both objectives: A vigorous,
expanding domestic economy and equilibrium in our international
financial position.




FISCAL POLICY
Fiscal policy, which concerns the level and composition of Government expenditures, the level and sources of Government receipts, and
the balance between expenditures and receipts, plays a key role in the
attainment of our national objectives.
Federal expenditures for goods and services, or in the form of
transfer payments to State and local governments or to individuals,
affect the trend of private economic activity and the composition of
national output.
Moreover, even Government programs which do not require
significant cash outlays may strongly influence private economic
decisions. For example, Government insurance and guarantee
programs, such as those covering home mortgages, may require little
direct expenditure but can have widespread economic consequences.
Similarly, not only the volume of tax receipts but also different
levels and types of taxation produce far-reaching economic results.
The financial plans of the Federal Government must fulfill certain
basic requirements:
National security, including military, other defense, and foreign
policy requirements, must be met in full.
The need of the domestic economy for stimulation or restraint, or
for an essentially neutral influence, as appropriate to economic conditions, must be met.
International financial consequences of domestic economic trends
and policies must be taken fully into account.
Vital nondefense programs must be provided for.
An adequate revenue base must be established and maintained.
National security needs come first. While the Government must
fulfill national security requirements as efficiently as possible—ever
on guard against waste and duplication—it is inappropriate to confine national security programs within arbitrary expenditure ceilings.
Other considerations of fiscal policy must be tailored to fit national
security requirements, if necessary through tax increases, increased
borrowing, postponement or curtailment of less-essential domestic
programs, or some combination of these.
The influence of Government spending trends and of the Government's surplus or deficit position on the health and vitality of the
national economy is a continuous consideration. Few dispute the
appropriateness of Federal budget deficits in a time of declining




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ANNUAL

REPORT

OF THE SECRETARY OF THE TREASURY

or depressed economic activity, or of Federal budget surpluses in a
time of rapid expansion and inflationary threat. But between such
periods of obvious need for stimulation or restraint, there frequently
exist economic conditions which call for fine tuning of fiscal policies to
more complex economic needs. With the emergence of international
balance-of-payments considerations as a factor in domestic economic
policy judgments, additional delicate adjustments of fiscal policy
nowadays are frequently required.
Decisions concerning the components of Government outlays also
require the weighing of complex considerations. Since Government
resources are limited, spending priorities must be established and
essential programs distinguished from the merely worthwhile or
desirable. How many in the latter category may be undertaken, and
to what extent, will depend on the level of spending required by
national security and essential domestic programs and the extent to
which overall economic needs dictate a tighter or less restrictive
fiscal policy.
Major budget concepts
No single budgetary system is wholly adequate for complete analysis of the effect of Federal fiscal operations on the level and composition of economic activity. For this reason, other accounting
concepts, in addition to the conventional administrative budget,
have been developed. The most familiar is the cash budget which
covers all cash receipts from and payments to the public, except
borrowing from the public. More recently, the record of the activities
of the Federal Government in the national income and product
accounts has been increasingly used.
The administrative budget, the accounting S3^stem commonly referred to as ^^the Budget," is primarily a presentation of administration policies. I t sets forth governmental programs, together with
their estimated costs and proposed means of financing them. The
administrative budget is, however, of limited use in appraising the
effects of Federal financial transactions on the economy. In part this
is because the operations of the Government trust funds and of
Government-sponsored enterprises are largely omitted from the
administrative budget figures.
The cash budget includes the activities of the Government's various
trust funds, the largest of which are the social security and highway
trust funds, but also the transactions of Government-sponsored
enterprises, which include the Federal Deposit Insurance Corporation,
Federal intermediate credit banks. Federal land banks. Federal home
loan banks, and banks for cooperatives.




FISCAL POLICY

7

Unlike either the administrative or cash budgets, the timing of
Federal receipts and expenditures in the national income and product
accounts is designed to coincide with their impact upon the economy.
Hence, most taxes are recorded at the time the tax liability is incurred, and purchases refiect the time of acquisition rather than of
payment. This statement also includes trust funds but excludes
certain financial transactions, such as loans or the purchase or sale
of existing assets, which represent neither the production of current
output nor incomes earned in production.
I t is also clearly important in analyzing the economic significance of
the Federal budget to recognize that it includes substantial outlays for
public works and other durable assets and capital items that will
continue to yield benefits for many years after the fiscal year in which
the expenditures are recorded. Many loan and grant programs, as
well as direct expenditures programs, fall in this category. In addition
many categories of Government expenditures are ^'developmental"
in nature, such as outlays for education and training and for research
and development. The importance of the distinction between outlays
for current and capital purposes, in fact, has caused many businesses
and State and local governments, as well as foreign governments, to
show separate budgets for current and capital expenditures.
Fiscal year 1961
V^Tien this administration assumed office, the Nation was in its
eighth month of economic decline. The gross national product,
which had reached a peak of $506.4 billion, seasonally adjusted annual
rate, in the fom^th quarter of fiscal 1960, had fallen to $504.5 billion in
the second quarter of fiscal 1961 and fell further to $500.8 billion in the
January-March quarter of 1961. The industrial production index,
seasonally adjusted, had fallen, by December 1960, to 103 percent of
its 1957 base from a high of 111 in January 1960 and continued to fall,
reaching a low of 102 in February. The unemployment rate,
seasonally adjusted, which had remained at 5 percent or more in every
month but one since the 1957-58 recession, had reached 6.7 percent in
December 1960 and continued near this level throughout the first ten
months of 1961. In addition, our balance-of-payments position, which
had progressively worsened during 1960, remained a serious
consideration.
In those circumstances, a fiscal policy directed toward arresting
the downturn and giving upward momentum to the economy was
clearly in order.
Extended temporary unemployment benefits, a speedup in income
tax refunds, early payment of Veterans' Administration life insurance




8

ANNUAL REPORT OF THE SECRETARY OF THE TREASURY

dividends, and a special VA insurance dividend, added directly to
disposable personal income and helped sustain purchasing power.
Accelerated military procurement and construction and highway aid
payments directly stimulated production and employment. Other,
longer term programs were inaugurated, including a higher minimum
wage with expanded coverage, assistance to areas of chronic unemployment, and increased Federal aids for housing.
These changes in Federal fiscal programs, with other measures
employed by the new administration, helped spur an increase in
economic activity. By the end of fiscal 1961 much more ground
had been regained than had been lost during the recession months,
without emergence of inflationary pressures.
The administrative budget.—Budget (net) receipts in fiscal 1961
totaled $77.7 billion and expenditures were $81.5 billion, resulting in
a $3.9 billion deficit for the fiscal year. In the previous fiscal year,
expenditures had totaled $76.5 billion and receipts $77.8 billion, resulting in a surplus of $1.2 billion.
The previous administration had estimated expenditures in fiscal
1961 of $78.9 billion, receipts of $79.0 biUion, and a surplus of $79
million. Thus, slightly more than one-third of the difference between
the projected budget surplus and the actual deficit recorded resulted
from failure of receipts to maintain the level anticipated by the outgoing administration.
By far the largest portion of the increase in expenditures over fiscal
1960 was the $2.8 billion for national defense, international affairs and
finance, and space research and technology. An additional $600 million in added expenditures was incurred for necessary antirecession
programs. Expenditures for all other purposes were $1.6 billion
greater than in fiscal year 1960, but only about $200 million more
than estimated by the outgoing administration. About one-fifth of
this increase was for interest on the public debt.
Net budget receipts for fiscal 1961 included: $41.3 billion in individual income taxes, which accounted for more than half of total
budget receipts; $21.0 billion in corporate income taxes; $9.1 billion
in excise tax collections; $1.9 billion in estate and gift taxes; $1.0
biUion in customs collections; and $3.4 billion in miscellaneous
receipts.
Although individual income tax collections showed a gain, corporate
and excise tax and customs collections were down from those of fiscal
1960 (after deduction of interfund transactions).
Cash budget.—In fiscal 1961, cash payments to the public exceeded
cash receipts by $2.3 billion. The cash deficit was less than the
budget deficit, since trust funds receipts exceeded expenditures by
$568 million. Government-sponsored enterprises net receipts were $236




FISCAL POLICY

9

million, and net interest accruals and other noncash adjustments
amounted to $821 million.
Naiional income and product accounts.—In the national income and
product accounts, Federal expenditures exceeded receipts by $2.2
billion in fiscal 1961. A moderate surplus in the first quarter of the
fiscal year changed to a substantial deficit in the last half of the fiscal
year, reflecting additional expenditures largely for defense and the
effects of the recession on tax accruals.
Fiscal year 1962
In a year of presidential change, the budget for the succeeding
fiscal year is presented according to law by the outgoing administration. Thus, during its first several months in office the new administration was simultaneously planning to meet immediate needs in
the remaining months of fiscal 1961, reviewing the fiscal 1962 proposals of the outgoing administration, and formulating its own programs. Paramount considerations were the need to stimulate
economic recovery and to alleviate the worsening international
situation which culminated in the Berlin crisis in July 1961.
Although by the last quarter of fiscal 1961 it was clear that the
economy was again expanding, it was also clear that a satisfactory
decrease in unemployment was still many months in the future. I t
was decided, therefore, that necessary increases in military and domestic spending should be put into effect without any compensating
increase in taxes, thus continuing the economic stimulus of a Government deficit.
The administrative budget.—In the January 1962 budget message
expenditures in fiscal 1962 were estimated at $89.1 billion, or $7.6
billion more than in fiscal 1961. Receipts were estimated at $82.1
billion, compared with $77.7 billion in fiscal 1961, resulting in an
estimated deficit of $7.0 billion, compared with a deficit of $3.9
billion in fiscal 1961.
Since budget receipts in a fiscal year are primarily associated with
income and profits levels in the calendar year which ends in the
fiscal year, the increase in estimated receipts for fiscal 1962 over
fiscal 1961 reflects the rise in economic activity in 1961. However,
since the low point of the 1960-61 recession was reached in the first
quarter of calendar 1961, fiscal 1962 receipts still reflect the impact
of that recession.
The estimated increase in budget expenditures from fiscal 1961 to
1962 is $7.6 billion, of which $4.7 bilHon, or more than 60.percent, is
for national defense, international affairs and finance, and space
research and technology. Of the remaining $2.9 billion increase,




10

ANNUAL REPORT OF THE SECRETARY OF THE TREASURY

$1.2 billion is for agricultural programs, particularly farm income
stabilization and food for peace programs.
In the January budget document the estimates for fiscal 1962
show an increase in expenditures of $8.2 billion, compared with the
estimates submitted by the previous administration. Of this amount,
more than half, $4.7 billion, represents the increase in planned outlays
for defense, space technology, and international programs, and the
larger anticipated cost of interest on the public debt. Another
$1.2 billion is accounted for by the rise in the cost of agricultural
programs.
According to the January budget document budget receipts for
1962 were expected to run about $200 million lower than estimated
by the previous administration.
Individual income tax collections were estimated at $45.0 billion and
corporate tax coUections at $21.3 biUion—the former a significant
increase from fiscal 1961, the latter a modest one. All other major
categories of receipts were expected to show some rise, with the exception of miscellaneous receipts, because of a large advance loan repayment by the Federal RepubHc of Germany in 1961. Excise tax
collections were estimated at $9.6 billion; estate and gift taxes at $2.1
bUlion; customs collections at $1.2 billion; and miscellaneous receipts
at $2.9 biUion.
Cash budget.—Cash payments to the public were estimated to exceed
cash receipts from the public by $8.5 billion in fiscal 1962, a deficit
larger than the budget deficit, mainly because trust fund expenditures
were expected to exceed receipts by $1.0 biUion. Expected net
expenditures of $514 million from the operations of Governmentsponsored enterprises account for nearly all the remaining difference
between the administrative and cash budget deficits.
National income and product accounts.—It was estimated that the
national income and product accounts would show a deficit of $0.5
biUion in fiscal 1962, compared with a deficit of $2.2 bUlion in fiscal
1961. The Federal Government was expected to shift from a deficit
position to a surplus position in the latter part of the fiscal year, thus
providing a moderate restraining influence on the economy, as output
increases, in place of the net stimulative effect exerted throughout
calendar 1961.
Fiscal year 1963
The economic considerations which underlay budget policy for
the fiscal year 1963 were somewhat more complex than those which
had characterized the two previous years.
The fiscal 1963 budget was in preparation during the final months
of calendar 1961, when the economic recovery was well established




FISCAL POLICY

11

and nearly every measure of economic activity had reached new
records. Although unemplo3mient and underutilization of productive
capacity remained high, continuous expansion and fuller utilization
of resources were expected. Moreover, balance-of-payments problems, which the recession, with its accompanying lower demand for
imports, had helped to ease, were again causing concern.
Although strong stimulation of the economy by fiscal means
seemed no longer necessary, it was important to avoid a degree of
restraint which might choke off the expansion needed to bring down
unemplo3niient and set the economy firmly on the road to sustained
growth.
While the existing high unemplojmient and underutilization of
capacity might, in other circumstances, have made continuation of
budgetary deficits desirable as a stimulus to growth, balance-ofpayments considerations indicated a need for different measures.
Continued strong economic expansion without upward pressures
on prices was necessary. The clearly evident means of achieving
this was a higher level of private investment in productive facilities,
investment which would not only directly stimulate expansion, but
would also substantially increase the competitiveness of American
products in markets at home and abroad, thus easing the balance-ofpayments situation.
The need for an expanding level of private investment emphasized
the desirability of a situation in which the Federal Government would
not have to draw savings from the private economy to finance a
Government deficit. I t also required that credit be relatively easily
attainable and at favorable rates.
Thus, it was decided to present a balanced budget for tho new
fiscal year which will begin in July 1962. Only a moderate surplus
of $463 million was provided, however, in the conventional or administrative budget. I t was considered necessary to avoid a repetition of
the pattern of the previous recovery period, when the Federal budget
moved from a deficit, on an administrative budget basis, of $12.4
biUion in fiscal 1959 to a surplus of $1.2 biUion in fiscal 1960. This
movement, totaling more than $13M billion, contributed to the premature termination of the expansion phase of the business cycle in
calendar 1960. In contrast, the budgetary swing planned between
fiscal 1962 and fiscal 1963 would total only about $7K bUlion.
The administrative budget.—For fiscal 1963 budget expenditures
were estimated at $92.5 billion and receipts at $93.0 billion. Budget
expenditures were expected to be $3.4 billion greater than in fiscal
1962, with more than three-fourths of the increase accounted for by
additional expenditures for national defense, international affairs and
6143,59—62

2




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ANNUAL REPORT OF THE SECRETARY OF THE TREASURY

finance, and space programs. In addition, the interest cost on the
public debt was expected to be $400 million greater than in fiscal 1962.
The rise in all other domestic programs was estimated at less than
$400 million. Budget receipts were expected to rise by $10.9 billion
from fiscal 1962 to fiscal 1963, mainly as a result of the anticipated
higher levels of personal income and corporate profits in calendar 1962.
Individual income taxes were expected to account for $49.3 biUion
of the total revenues, an increase of $4.3 billion over fiscal 1962 levels.
Corporate tax collections were expected to reach $26.6 billion, a gain
of $5.3 billion from fiscal 1962. Excise taxes were estimated at nearly
$10.0 billion; estate and gift taxes at $2.3 billion; customs collections
at $1.3 billion; and miscellaneous receipts at $4.2 billion. AU were
expected to show increases over 1962.
Cash budget.—In comparison with the excess of cash payments over
receipts of %S.b billion in fiscal 1962, cash receipts will exceed cash
payments by $1.8 billion in fiscal 1963.
National 'ncome and product accounts.—It was estimated that the
Federal Government will show a surplus of $4.4 billion in the national
income and product accounts in fiscal 1963, in comparison with a
deficit of $0.5 billion in fiscal 1962. Purchases of goods and services
in the national income and product accounts were expected to rise by
$4.0 billion, transfer payments by $1.6 billion and grants-in-aid by
$0.7 billion. Net interest and other expenditures were expected to
decline by $0.5 billion. Total expenditures were estimated to rise
by $5.8 billion, but receipts on an accrual basis were estimated to increase by $10.7 billion, accounting for the change in the Government's
net position.




DEBT MANAGEMENT
The management of the public debt, which now totals nearly $300
billion, is one of the major responsibilities of the Treasury Department.
Each year more than one-fourth of the securities making up the total
debt come due and must be replaced with new issues or paid off in
cash. During periods when Federal Government expenditures are
larger, than receipts, the Treasury must go into the financial markets
to borrow new money as well. As a result of the highly seasonal pattern of revenue collections, such periods may occur even when the
Federal budget is in balance.
Debt management policies
Federal debt management has become increasingly complex,
requiring a high degree of coordination with the closely related
operations of the Federal Reserve System. Its objectives, as well
as the techniques by which those objectives are carried out, have
changed with the American economy and the world's financial markets.
The objectives have evolved from a simple raising of money to pay the
Government's bills to recognition of the importance of debt management in fostering economic stability and a healthy and sustained
economic growth. Most recently, a whole new dimension has been
added to debt management objectives by the emergence of international balance-of-payments considerations.
Techniques, too, have changed, requiring that the Treasury seek
new means to achieve debt management objectives: New types of
securities, new methods of marketing, and adaptations of other
techniques.
Despite continuous shifts in the economic environment both at
home and around the globe, debt management decisions must be
made in the light of certain fundamental, and sometimes conflicting,
objectives. Among these are:
First, to raise the money required to meet the Government's
obligations.
Second, to borrow as cheaply as possible, consistent with meeting
other debt management objectives.
Third, to make sure that the Government carries out its borrowing
in a way that fosters, rather than inhibits, economic stability and
sustained growth of the economy.




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ANNUAL REPORT OF THE SECRETARY OF THE TREASURY

Fourth, to conduct debt operations in such a way as to try to avoid
significant international interest rate differentials, which can lead to
large and disruptive flows of short-term funds.
Fifth, to work toward a balanced debt maturity structure, in order
to facilitate the orderly managing of the debt in future 3^0ars. This
requires maintenance of both a reasonable volume of long-term
securities and a sufficient supply of short-term securities to meet the
needs of the economy.
The problems of reconciling and achieving these various goals of
debt management policy were manifest throughout the calendar
year 1961.
The total borrowing need was large. Government expenditures
exceeded Government receipts during the year with $6 billion in net
new borrowing required. Treasury offerings to the public to raise new
money ancl to refinance existing obligations at maturity, or, in some
cases in advance of maturity, totaled more than $65 billion, excluding
the weekly rollover of maturing Treasury biUs which amounted to $85
bUlion.
The total outstanding debt at the end of the calendar year was
$296)^ billion, of which about two-thirds, or $196 billion, was in
marketable issues and the remainder largely in special issues to Government investment accounts and in U.S. savings bonds held by
individuals and others.
As the Nation moved out of recession and into recovery, economic
conditions at home required a strong fiow of funds into private investment at reasonable long-term interest rates, thus limiting the
desirability of long-term Treasury borrowing.
International balance-of-payments considerations made it mandatory to deter the outflow of funds from the United States which
might have occurred if short-term interest rates had been allowed to
fall to the low levels reached in other recent recession and early recovery periods. This required an increase in the supply of the
shortest term securities, 91-day and 182-day Treasury bUls in particular.
The combined needs of the domestic economy and the balance-ofpayments situation—and the ever-present fact that simple passage
of time alone wUl shorten the maturity of the over one-year debt by
one full year each year—made mere maintenance of the average
maturity of the debt a most difficult task.
The conflicts, seeming and real, among the five major objectives of
debt management policy were, however, resolved and the funds needed
to finance new debt and refinance old were raised.
With the cooperation of the Federal Reserve System, which actively entered the market for intermediate- and long-term Govern-




DEBT MANAGEMENT

15

ment securities for the first time in a decade, short-term interest rates
were kept at sufficiently high levels to deter large outflows of money
from this country, and an adequate volume of long-term investment
funds was encouraged, at reasonably low long-term rates.
While the outstanding volume of Government securities maturing
in one year or less increased by $10% bUlion, the average maturity of
the debt at the end of calendar 1961 remained unchanged from the
55-month average at the end of 1960.
The total cost of interest on the debt was $8.9 billion in calendar
1961 compared with $9.3 bUlion in the previous year.
Debt management operations in 1961
A broad array of debt management techniques was required to
meet these difficult debt management objectives during the course
of the calendar year.
Two techniques which had been reintroduced in 1960, so-called
advance refunding and cash refunding, were continued with marked
success. In addition, one wholly new device, the offering of ^'strips"
of Treasury bills, was inaugurated. Use of six-month and one-year
Treasury bills, which had first been offered in 1958 and 1959, respectively, and which have now become a fundamental part of the debt
structure, was also continued.
Several steps were also taken to encourage continuing and expanding OAvnership of Series E and H savings bonds with the result that at
the year's end the outstanding volume of these bonds, including accrued interest, had risen by more than $1}^ billion to a total of $44^
billion, or 15 percent of the total public debt. New sales of E and
H bonds increased by 4 percent over 1960 levels and redemptions declined 10 percent.
In its management of the marketable debt, which includes most of
the Federal debt except savings bonds and special securities issued
to Government investment accounts, the Treasury concentrated newcash financings in short-term issues. These were mainly Treasury
bills, which were increased from $39K billion outstanding at the end
of 1960 to $43K billion outstanding on December 31, 1961. t h e
weekly bill maturities were increased by $4 billion and one-year bills
maturing quarterly were increased by $1 billion. (In January 1962
another $500 mUlion was added to the one-year bills maturing in that
month, bringing each of the four quarterly one-year bill maturities up
to $2 billion.) In contrast with increases in the weekly and quarterly
bill maturities, the Treasury during 1961 cut back its tax anticipation series b}^ $1 billion in order to bring total outstanding issues of
tax anticipation bills more closely in line with the level of corporation
tax payments.
•




16

ANNTUAL REPORT OF THE SECRETARY OF THE TREASURY

Except for small additional amounts raised in the course of refunding
operations, the Treasury's only new-cash financing outside of the bill
market was the reoffering in October of a 3)4 percent note maturing
in May 1963, first issued in May 1961. A total of more than $2%
biUion was raised by this means.
Debt refinancing operations also were largely confined to shortterm securities during the first half of the calendar year, when the need
to encourage the nascent upturn in the economy was paramount.
With the recovery barely underway. Treasury debt operations were
designed to avoid draining off long-term funds, which otherwise
would be available for private investment, from the financial markets.
This complemented the open market operations of the Federal Reserve
System involving the purchase of long-term securities from the public,
offset in part by sales of short-term securities.
The Treasury, therefore, in February and again in May 1961
undertook two refinancings of maturing debt into relatively shortterm securities through the cash refunding technique, under which
maturing securities are paid off directly to their holders and new
securities sold for cash.
In a cash refunding, unlike the more traditional''exchange offering"
method of refinancing maturing securities, the Treasury can control
the exact amount to be sold, and is not circumscribed by the desires
of the holders of the maturing issues either to exchange or, conversely,
to demand payment in cash. In these two cases, the Treasury
obtained a moderate amount of additional cash—a need at the time
in view of the Government deficit—through issuing somewhat more
in new securities than it paid off in old ones.
Certificates maturing in February in the amount of $7 bUlion were
paid off and a new issue of iK-year notes was sold, totaling shghtly
more than $7}i billion. A similar operation was conducted in May
when $7% billion of maturing securities were paid off and new cash
was raised through the issuance of $8)4 billion of short-term securities,
$5K billion of one-year certificates and $2% billion of two-year notes.
Significant efforts to lengthen the debt became possible in the
second half of the year, with the business recovery firmly established.
In July an exchange offer consisting of 1-year 3-month notes,
three-year notes, and a reopening of a bond maturing in 1968 was made
to holders of $12J^ billion of obUgations maturing between August
and October. More than $11% bUlion of new securities were issued,
including $5 billion of the three-year notes and three-quarter billion
of the reopened bonds.
The November maturity of $7 biUion provided another opportunity
to work toward a balanced debt structure. In addition to one
short-term issue, holders of the maturing securities were offered two




DEBT MANAGEMENT

17

bonds, both reopenings of earlier issues, one maturing, in 1966 and one
maturing in 1974. In all, holders of $6}^ billion of the maturing issue
exchanged their obligations for new securities including approximately
$2^ billion of the shorter bonds and one-half billion of the bonds
maturing in 1974.
Some further debt extension was accomplished during the year by
means of an exchange offering in November to holders of approximately $970 million nonmarketable Series F and G savings bonds
maturing in 1962. Owners of these obligations were offered in exchange marketable Treasury bonds maturing in 1968, a reopening
of bonds first offered in June 1960. The exchange offer was accepted
by holders of approximately $320 mUlion of the 1962 F and G
maturities.
While these offerings made in the course of regular refinancing
operations resulted in some redistribution of the debt, the major
efforts in 1961 toward a balanced debt structure took the form of
riefunding of obligations in advance of maturity, that is, by an
''advance refunding." In March a ''junior" advance refunding of
relatively short-term issues into intermediate-term securities resulted
in the exchange of $6 billion of securities maturing in 1962 and 1963
for obligations maturing in 1966 and 1967. As a result, the crowding
of issues in the one-to-two-year maturity range was relieved, making
room for other new or refunding issues to be placed in that area later
as new needs arose. In September 1961, a ''senior" advance refunding
saw holders of $3% billion of intermediate-term bonds maturing in
1970 and 1971 take advantage of an offer to exchange their holdings
for longer term issues maturing between 1980 and 1998.
As a result of this advance refunding, there was a net increase
over the year of almost $2)^ billion in total debt obligations having
more than 20 years until maturity. The reduction of the volume of
issues in the nine-to-ten-year area gave added flexibility for the placement of other debt in that maturity sector, if market conditions and
other objectives favor such a possibility later on.
An entirely new debt management technique was used on two
occasions during the year as a means of raising additional new cash.
This was the offering of "strips" of Treasury bills, maturing over a
series of consecutive weeks. The strip of bills offers an alternative
to the device of weekly increases in the volume of regular Treasury
bills, a technique which was also used frequently during the year.
A strip bill offering of $1.8 billion of Treasury bills to mature over
a period of 18 weeks was made in June, followed by an offering in
November of $800 million of bills to mature over an 8-week period.
Although the Treasury's major financing operations each year
necessarUy involve marketable issues, nonmarketable obligations, and




18

ANNUAL REPORT OF THE SECRETARY OF THE TREASURY

particularly U.S. savings bonds, are an important element in the
Government debt. Savings bonds owners on the average hold their
securities for 7% years, a considerably longer span of time than the
average length of the outstanding marketable debt. Thus the purchase of savings bonds simplifies the Treasury's complicated problem
of restructuring the debt.
The first step taken during the calendar year to encourage continuing ownership of savings bonds was the announcement in March
of a second extension of Series E bonds issued from Ma}^ 1941 through
May 1949. A rate of 3% percent per year compounded semiannually
is payable on these bonds for a 10-year period beginning with the
date on which the bonds reach the end of their first extended maturity, 20 years from date of purchase.
In August the Treasury announced that it was granting an extended
maturity on current income savings bonds for the first time. Series
H bonds issued from June 1952 through January 1957 were given
a 10-year extension, with interest payable during the extension
period at the rate of 3% percent a year.
An additional action to encourage investment in savings bonds
was the increase from $10,000 to $20,000 in the amount of Series H
savings bonds which can be purchased in any one year by a single
buyer.
Debt management operations early in 1962
At the outset of calendar 1962 the Treasury was faced with the
necessity of refinancing or paying off $56 billion in maturing marketable securities, not counting the $30 billion involved in the refunding
of regular weekly Treasury bills, which will be rolled over several
times during 1962. I t also faced the necessity of borrowing new
cash from time to time, perhaps as much as $6K billion in the first
half of the year and $12 billion in the second half.
The first major cash borrowing of the year provided $1 billion to
meet the Treasury's January needs through an offering of 4 percent
bonds maturing in October 1969. There had been a significant reduction in the supply of bonds in the 1970 maturity area as a result of
the advance refunding of the previous September. This helped create
a market for the January offering. I t illustrates the principle that
debt management is a continuous process, with each operation necessarily related to the sequence of future operations.
In its February 1962 refunding the Treasury faced the task of
exchanging $11% billion in maturing securities for new obligations.
Of the total amount, more than $6% billion was publicly held; that is,
in the hands of individual, business, and institutional investors other




DEBT MANAGEMENT

19

than the Federal Reserve Banks and Government investment accounts.
Among the policy objectives which required careful attention were:
First, the continuing deficit in the United States international
balance of payments indicated that any impact on short-term rates
as a result of the refinancing ought to be upward, rather than
downward. In line with this, a one-year security with an attractive
yield of 3K percent was offered.
Second, with a crowded refinancing schedule ahead—in particular
the unusually large May and June maturities totaling more than
$15K billion, of which $13% billion is publicly held—it was necessary
to maintain flexibility for future refundings. This consideration, too,
influenced the choice of a one-year security, rather than a somewhat
longer one maturing in May or August, as the short-term offering in
the February exchange.
Third, with a restrictive statutory debt ceiling still in effect, and
balance-of-payments considerations indicating that it might be desirable in the near future to exert still further upward pressure on the
shortest term interest rates by adding again to the supply of 91-day
bills, it was not possible to consider raising new cash in this refinancing.
Thus an exchange offering rather than a cash refunding was decided on.
Fom^th, in order to achieve some overall balance in the maturity
structure, and in view of all the other debt in the shorter term area,
it was desirable to offer a security in the intermediate range, and a
4K-year 4 percent note was offered.
Fifth, the possibility of offering a long-term bond was considered.
The decision not to make such an offering at that time was based in
part on a belief that lengthening of the debt structure might be
accomplished under more favorable terms and with much less impact
on the financial markets and on interest rates at a later time through
an advance refunding. I t appeared that selling a long-term security
would have required a very favorable interest rate, one which might
have exerted upward pressure on other long-term rates. With the
domestic economy still operating at less than capacity and unemployment stUl in excess of 5)^ percent, it seemed unwise to offer the option
of a long-term investment.
Throughout 1962 the Treasury intends to make its needs and
intentions known to the financial markets and the public. Treasury
actions are necessaril}'' significant elements in the market process.
This fact was recognized at the outset of 1961 when both domestic and
international demands indicated a need to maintain short-term rates at
relatively high, and even rising levels, and to maintain long-term rates
at a reasonably low level. This dual objective was not kept secret.




20

ANNUAL REPORT OF THE SECRETARY OF THE TREASURY

Similarly, late in 1961, the intention of the Treasury was made known
when it became evident that it would be desirable if the short-term
bill rate, which had been moving in a range of 2% to 2}^ percent, should
edge upwards to the 2% percent level to prevent the emergence of
significant interest rate differentials here and abroad.
To the maximum extent feasible, indications will continue to be
given as to the direction in which the influence of Treasury debt
management actions will be working.




TAX POLICY
The direct and important influence of the Federal tax system upon
the national economy is demonstrated by the impact of tax considerations on individual and business decisions as well as the very magnitude
of tax receipts. In the calendar year 1961, some 100 million individual
taxpayers, with a total of 70 miUion dependents, fUed personal income
tax returns. They paid $42.4 billion in income taxes. Corporations
paid $20.3 billion. These two major sources produced more than
four-fifths of the total of the more than $75 billion in budget receipts
from taxes. The remainder came from excise taxes, estate and gift
taxes, and customs collections. An additional $15 billion in excise
and emplo3mient taxes went to trust funds to finance Federal highway, social security, and other programs.
In all, Federal tax receipts exceeded $90 billion, the equivalent of
17.3 percent of our gross national product.
Objectives of tax policy
Tax policies are of concern to all—as they should be. Taxes importantly influence myriad economic decisions, and play a significant
role in determining the level of economic activity, the distribution of
income, and competitive business relationships. Tax policies also
affect the value of our money, our balance of international payments,
and the rate at which our economy grows. Among the many important elements to consider in determining tax policy are:
Adequacy—to meet the Government's needs for revenues.
Vitality—to assure that the tax system enhances, rather than
inhibits, economic efficiency, growth, and stability.
Equity—to achieve fairness as between different taxpayers.
Neutrality—to insure that taxes do not artificiaUy influence
economic decisions.
Simplicity—to make possible taxpayer understanding of tax laws,
and effective and economical tax administration.
A basic objective is to maintain a tax system that permits us to
meet our public needs. Adequate revenues are required to maintain
our defenses, support our international commitments, provide the
public services required of the Federal Government, and to finance
these activities in a manner that maintains full confidence, at home
and abroad, in the management of our fiscal affairs.




21

22

ANNUAL REPORT OF THE SECRETARY OF THE TREASURY

Adequacy does not mean that revenues must always equal expenditures. I t refers, rather, to the capacity of the tax system to supply
revenues in the amounts necessary to finance expenditures without
adverse economic consequences. In some circumstances revenues
should exceed expenditures to produce a budgetary surplus; in others,
a deficit is appropriate.
The overall revenue yield of the tax system at different levels of
business activity is a major test of its economic effectiveness—the
second major objective of tax policy. If the tax system is to make a
significant contribution to economic stability, it must be responsive
to changes in business conditions. The total tax yield should decline
more than total income in time of recession, so that the impact of the
recession on disposable income is moderated. The reverse should
occur in a time of rapid economic expansion and inflationary threat.
In addition to contributing to economic stability, tax policy also
influences the rate of economic growth. Our tax laws can, for example,
contribute to growth by increasing the attractiveness of investment
in new productive equipment. They can also inhibit growth by
making certain types of less-productive activity more attractive than
other, more economically valuable, undertakings.
A third major goal of tax policy is equit}^ Each person should
contribute his appropriate share to the cost of Government, and he
should feel confident that others are doing so as well.
Opinions vary as to what is fair or equitable in the application
of particular taxes, but there are some generally accepted principles
of tax fairness.
One is "horizontal" equity: persons with equal incomes and similar
circumstances should pay equal taxes.
A second is "vertical" equity: as income increases, the proportion
that goes into taxes should rise. The eft'ectiveness and efficiency
of our income tax laws, which are to a considerable extent subject
to voluntary compliance, depend upon a general belief that each'
individual's share of the tax burden is just, and that others are not
escaping.
In applying standards of equity, our tax laws recognize variations
in taxpa^^ers' circumstances. In some instances, departures from
uniform rules may be the means of achieving important public purposes. But tax equity requires that special tax provisions be carefully considered. They are justified only when real and significant
differences exist between taxpayers' situations, or when there is no
better wa^^ of attaining a compelling national objective than by
exceptional tax rules.
Related to the concept of tax equity is that of tax neutrality
Tax rates should apply uniformly and without discrimination be-




TAX POLICY

23

tween individuals, between businesses, and between the ways in
which similarly situated individuals choose to conduct their economic
affairs.
Simplicity is also a basic objective of tax policy. In a complex
modern society there may be conflicts between simplicity and other
objectives. But in evaluating our tax policies, simplicity is an important consideration. Otherwise, the tax system becomes virtually
incomprehensible, compliance becomes increasingly burdensome,
and expensive enforcement processes are required.
Conformity of the present system with tax policy objectives
In the light of these objectives, there are many features of our tax
structure that need revision to meet changing social, economic, and
international conditions, and to improve tax equity. For example,
as health, welfare, and other programs grow, some features of the
tax system—initiated in support of welfare goals—should be reexamined. Similarly, important features of our tax structure, imposed in wartime to meet special needs, are no longer consistent with
our objectives.
Special preferences for some taxpayers invite claims by others
for similar relief. When some taxpayers are permitted to pay less,
others must inevitably pay more if revenues are to be maintained.
Special provisions create inequity, add to the complexity of tax law
and tax forms, and hamper taxpayer understanding and compliance.
Differences in the treatment of income from different sources affect
business and investment decisions and distort the allocation of economic resources. Not the least of these distortions is the pursuit of
special treatment, which diverts attention from ordinary business
decisions to opportunities for the legal avoidance of tax liabUities.
How the tax system should be changed
1961 tax proposals.—Our present tax system is not contributing
enough to an improved rate of economic growth. To meet the requirements of a growing population and labor force, to increase per
capita income, and to raise employment levels, we need a larger
volume of capital formation. Modernization of plant and equipment
must be accelerated if we are to increase productivity and enable
our industries to compete more effectively in international markets,
thus lessening the pressure on our balance of payinents.
To this end, the President recommended a tax credit for investment
in machinery and equipment. The presently planned tax credit of
8 percent will afford substantial encouragement for increased investment. This form of incentive achieves a greater stimulus to investment per dollar of revenue loss than would the avaUable alternatives.




24

ANNUAL REPORT OF THE SECRETARY OF THE TREASURY

The administration has also recognized that guidelines for depreciation deductions require revision if they are to reflect economic and
technological changes which affect obsolescence. Priority in these
revisions has been given to textile machinery, in keeping with a
Presidential directive, but new and simplified depreciation schedules
for all other industries will be announced in the spring of 1962. With
more realistic tax allowances for depreciable property, American
industry will be in a better position to maintain the most modern
industrial plant in the world.
The investment credit was one part of the set of urgently needed
legislative reforms recommended by the President in his April 20,1961,
tax message to the Congress. The President also recommended
statutory changes in taxation that will yield the revenues needed to
offset the loss resulting from the investment credit. These changes
will also remove certain obvious defects and inequities in the tax
structure.
One necessary area of revision is the tax treatment of income from
foreign sources. The recommended amendments would serve the
overall objective of tax neutrality between domestic and foreign
operations by eliminating the existing privilege of deferring tax payments on earnings from many types of overseas operations until such
time as those earnings are returned to this country. The administration's proposals would also remove the adverse effect on our balance
of payments which now results from the artificial tax inducement to
overseas investment. Specifically, the recommendations would permit tax deferral privileges for profits earned in developing countries
only and tighten the tax treatment of other foreign income. These
involve tax haven operations; taxation of U.S. shareholders in foreign
investment companies; taxation of American citizens residing abroad;
estate tax on real property located abroad; computation of allowances
for foreign tax credits on dividends; taxation of foreign trusts; and
additional information with respect to certain foreign corporations
controlled by Americans.
Statutory changes are also necessary to cope with abuses of business
deductions for entertainment, gifts, and other expense account items.
Business deductions for entertainment, vacations, club dues, and
luxurious travel too frequently provide purely personal benefits.
Use of such deductions severely discriminates against the average
taxpayer, who must meet his personal expenses out of income after
tax, thereby undermining general confidence in the fairness of our tax
system. Successive administrative efforts under present law have
not succeeded in ending abuses. More definite and enforceable
statutory provisions were recommended as the effective remedy.




TAX POLICY

25

Corrective legislation is also needed with respect to the tax treatment of profits on sales of depreciable property to the extent of prior
depreciation. Proper taxation of this income has become more
urgent than ever, in view of the administration's plans to revise depreciable lives and its legislative proposal to liberalize treatment of
salvage value in determining depreciation. Profits from sales of
depreciable property should be treated as ordinary income, and the
administration has recommended accordingly that they be taxed as
ordinary income to the extent of depreciation allowed after December
31, 1961.
Under present law several types of business institutions enjoy unwarranted tax preferences. Recommendations were made: To insure
that either cooperatives or their patrons pay taxes currently on earnings which reflect business activities; to repeal special provisions now
applicable to the operating income of mutual fire and casualty insurance companies; and to amend the deductible reserve provisions
applicable to mutual savings banks and savings and loan associations
to assure nondiscriminatory taxation among competing financial
institutions.
The privUeged treatment of dividend income enacted in 1954 has
not proved to be effective in fostering additional capital investment
and it unduly favors the upper bracket taxpayer. Repeal was recommended for both the exclusion from an individual's income of the
fiLrst $50 of dividends and the credit against tax of 4 percent of additional dividends.
A system of tax withholding on dividends and interest was recommended to overcome the serious loss of revenue and the unfairness
that result from the failure of some individuals to report these types
of income on their tax returns. I t has become clear that this gap in
tax payments cannot be closed by taxpayer educational programs nor
by attempts to apply other collection techniques to the mUlions of
separate dividend and interest transactions. An automatic system
simUar to tax withholding for employee compensation is essential.
The President has recommended that Congress grant him the
authority to adjust personal income tax rates downward by as much
as 5 percentage points, subject to congressional disapproval. This
discretionary tax flexibility is needed as a means of facilitating the
achievement of the objectives of the Employment Act of 1946.
Without it the tax structure is incapable of contributing as much
as it should to the attainment of economic stability.
Steps were taken in 1961 to improve tax administration. Legislation was enacted to authorize the use of taxpayer account numbers
to improve enforcement and collection of taxes. The account number
system wUl facilitate a greatly expanded use of automatic data process-




26

ANNUAL REPORT OF THE SECRETARY OF THE TREASURY

ing equipment by the Internal Revenue Service. This wUl make
possible the assembling of a single fiiie of all tax data for any one
taxpayer as an essential part of a modern administrative system.
As a result of the President's recommendations, the Congress also
increased appropriations for the Internal Revenue Service to add
personnel and expand tax enforcement programs. The President
directed the Internal Revenue Service to give particular attention
to methods of inventory reporting and to the broadening of tax
audit coverage.
Strengthening of administration increases revenues, and maintains
general confidence that tax laws are being uniformly and vigorously
enforced.
Elements of more comprehensive tax reform
In accordance with a Presidential directive, the Treasury is preparing a more comprehensive tax reform program. Studies are underway
on the manner in which existing tax provisions operate, and their
probable effects on the economy and on the distribution of tax liabUities. These studies are providing a factual and analytical basis for
tax reform proposals consistent with our general policy objectives.
Legislative proposals wUl be presented to the Congress prior to
adjournment of its 1962 session.
Attention will be directed first to the income taxes, corporate and
personal, but it is recognized that the estate and gift taxes and the
excise taxes also demand attention. As we proceed with the reform
program, proposals in these areas will be offered.
The studies now in progress involve an intensive investigation of
the operation and effects of current exclusions from income, deductions, and credits. The general purpose is to determine where and in
what manner the income tax base might properly be broadened and
unwarranted special preferences eliminated. Broadening of the tax
base will permit significant reductions of tax rates without sacrifice of
tax revenues. Possible changes are being carefully evaluated in terms
of tax equity, neutrality, simplification, and the contribution they
can make to our national goals, including improved growth and
efficiency of our free enterprise economic system.
Continuing study is also being given to the most feasible means of
strengthening the countercyclical effects of the tax system on the
economy. We need to make the tax system more responsive to
changes in levels of income, unemployment, profits, and sales. Only
if we succeed in mitigating the excessive swings of our economy will
we be able to attain the steady, healthy, and prolonged economic
growth we need to achieve our true potential.




INTERNATIONAL FINANCE
I. BALANCE OF PAYMENTS •

Shortly after taking office, the President outlined in a special
message to the Congress a broad and energetic attack on the balanceof-payments problem facing this country. In response to the clear
and urgent need a wide variety of measures have been introduced and
pursued with vigor by all agencies concerned. At the President's
direction, the Secretary of the Treasury assumed special responsibility
for continuous review of all these activities., and for reporting to him
at frequent intervals on the status of our international accounts.
This is an appraisal of progress over the past year, and of the hard
tasks that still lie ahead.
During 1961, the immediate pressures apparent a t the time the
administration took office were relieved. Confidence in the dollar
was strengthened; the gold outflow slowed; and the deterioration in
our world competitive position arrested. Nevertheless, the task of
eliminating our balance-of-payments deficit has only begun. Until
it is finished, we cannot rest easy.
The main responsibility for righting our deficit lies in the sustained
efforts of Government, business, and labor. But the cooperation of
other free countries is also essential if we are to build a stronger international financial system. That system must be capable not only of
supporting and nourishing expanded trade among the free nations but
also of withstanding the strains and pressures that are an inevitable
part of progress.
The results of our efforts thus far have been good enough to justify
confidence that we have made the right start; they are not so good as
to justify complacency. Part of our iniprovement in 1961 came from
palliatives, and palliatives must be continued in 1962. But the cure
has also begun to work, and it can be a lasting cure, as long as we
recognize that it can be neither simple nor painless.
Full success will require time. The necessary time is ours—if we
use it effectively. Today the dollar is still strong, bulwarked by
over 40 percent of the monetary gold stock of the free world. Time
will not be our ally if we waste it, for then confidence will be shaken,
the basis for essential cooperation among the leading financial powers
lost, and the future will be in doubt.
27
614359-^62

3




28

ANNUAL REPORT OF THE SECRETARY OF THE TREASURY

The nature of the problem
In 1961, our basic accounts, which sum up all our recorded transactions with foreigners except flows of short-term capital, were in
deficit to the extent of $600 million, a substantial reduction from the
basic deficits of $1.9 billion in 1960 and $4.3 biUion in 1959. This
reduction reflected both a larger export surplus and reduced net
payments abroad on Government account—progress in the directions
we must move. But it is clear that our progress did not stem entirely
from factors of a lasting sort.
The large surplus of over $3 billion in our trade accounts, excluding
those exports financed by Government grants and capital, resulted in
part from the low import levels that accompanied the recent recession.
In addition, special debt prepayments to the United States—by the
Federal Republic of Germany, the Netherlands, the Philippines, and
Italy—contributed almost $700 million to our receipts, a much larger
amount than can be expected 3^ear after year. Because these special
factors were concentrated in the early part of the year, our basic
deficit increased appreciably during the final six months.
Moreover, on top of the basic deficit, short-term capital continued to
flow abroad in amounts only slightly less than during 1960. These
flows were much less disturbing than in 1960, when speculation against
the dollar developed. They did not reflect or arouse the same doubts
over the future of the dollar. Instead, more of the outflow in 1961
consisted of commercial credits to other countries, which helped to
support a continued expansion of trade. But this was only part of
the cause, and in 1961 the size of the short-term capital outflow
clearly aggravated our problem.
Altogether, our deficit in 1961 amounted to nearly $2.5 billion.
While sharply below the average of $3.7 billion for the three previous
years, this is still far from our target of equilibrium in our international accounts. A deficit of the proportions of 1961 could be, and
was, financed without placing new strains on the monetary system
only because confidence in the dollar was strong and our determination
to meet our problem was apparent.
A little over a third of our deficit in 1961, or $857 mUlion, was reflected in gold sales from our monetary stocks. Of this, $324 mUlion
was purchased by foreigners in the single month of January, before
the President had made clear the determination of this administration
to maintain the value of the dollar and to take the vigorous measures
necessary to restore a balance to our international accounts without
resort to direct controls or restrictions.
Our abiUty to fiinance our deficit in 1961 cannot be permitted to
obscure the nature of the continuing problem before us. This
country is agreed on its vital responsibUities for leadership in the




INTERNATIONAL FINANCE

29

defense of the free world and for assisting the developing nations to
find a better life in free societies. But it is not always understood
that these burdens cannot be carried if we do not, over a series of years,
earn a larger surplus in our commercial accounts.
Equally important is the fact that a sound dollar is essential to the
strength and stability of the whole international monetary system,
and thus a vital concern to all our allies and trading partners. American dollars, side by side with gold, are a part of the basic reserves of
nearly every coimtry in the free world. They use dollars to finance
much of their worldwide trade, to pay for shipping and transportation,
and to support their foreign investment or borrowing. I t is this
universal acceptabUity of the dollar as a reserve and trading currency
that has made possible a vast expansion in world trade.
The dollar can continue to perform these functions only so long as it
is reliable. I t must be immediately reliable as a currency that can be
converted into gold at a fixed price. I t must be ultimately reliable
as a solid claim on the enormous and richly varied resources of our
abundant economy, a claim undiluted by inflation, creeping or rapid.
The broad challenge before us is to maintain the value of the dollar
unquestioned, and to do so without impairing om* vital domestic
objectives, the strength of our mutual defense, or our ability to assist
the less fortimate nations along the path to prosperity and freedom.
These tasks are mutually reinforcing. We cannot afford to neglect
one for another, for only when our economy is expanding at home, our
defenses strong, and the poorer countries are making visible progress
can we command the sort of confidence in our own future that is
necessary.
The overall objectives
Our programs and policies to maintain the strength of the dollar
within a framework of free and expanding markets at home and
abroad are focused on two broad and related objectives:
First, we must eliminate the deficits in our international accounts,
taking the good years and the bad together, so that prolonged and
excessive drains on our own reserves cease. This will require, above
all, that we achieve a still larger commercial surplus by competing
more vigorously with producers of other countries both in foreign
markets and at home. I t also requires that we reduce our net payments to other countries on Government account to the minimum
required by national security and economic development objectives.
And, we must eliminate from our tax system artificial incentives,
grounded in neither equity nor economic efficiency, to moving capital
abroad.




30

ANNUAL REPORT OF THE SECRETARY OF THE TREASURY

Second, on this fixm base, we must buUd a stronger framework of
mutual cooperation among governments and monetary authorities.
Acting with our partners, we must be able to defend the international
monetary structure from speculative excesses and other strains. In
particular, while allowing short-term funds to move freely from country to country in accordance with private initiative, we must make it
impossible for sudden and capricious movements to undermine the
stabUity of the payments system.
To achieve these objectives, the energies and resources of all agencies
of the U.S. Government have been mobUized to specific tasks in the
areas of their responsibilities. To assure that the proper priorities
are maintained and the appropriate sense of urgency prevaUs throughout Government, the Secretary of the Treasury has, under the President's authority, established procedures for continuous review of all
these activities. Full reports on the actions of the Government departments and agencies involved are prepared for the President's review
at least once every three months. Special measures being taken or
needed throughout the Government to overcome our balance-ofpayments problem are brought to his attention promptly, and he has
issued a series of directives, and sent to Congress a number of proposals
to intensify and coordinate these efforts.
Eliminating the deficit
The balance of payments is made up of countless individual transactions, each responding to a wide variety of factors. Among these
factors, some are under the direct control of Government; others reflect
the performance of our whole domestic economy; and still others the
policies and performance of other nations. Amid these complexities,
there can be no satisfactory single solution to the deficit. What is
needed is a concerted effort on all fronts—by the Government,
business, labor, and finance in this country and by other leading
countries as well, particularly those whose balance-of-payments
surpluses represent the opposite side of our deficit.
Immediate measures.—The first line of attack on the balance-ofpa3niients deficit consists of measures to curtail the outflow of dollars
stemming from the activities of Government itself. Many of these
measures are now well advanced, and contributed to the improvement
in 1961. Others are just now becoming effective, and should provide
needed help during 1962. But still more can be and is being done to
assure that all Government programs are fully adjusted to current
needs.
The Secretary of Defense is conducting negotiations with certain
of our allies to offset, through the purchase by them of additional
U.S. military equipment and services, the heavy payments which




INTERNATIONAL FINANCE

31

we must make to maintain and support American forces in countries
participating in the common defense. Expenditures for defense
purposes overseas were close to $3 billion in 1961. I t is expected
that our total sales of military equipment and services will result in
payments to the United States of more than $1 billion in the calendar
year 1962, compared with less than half as much in 1961. This will
help greatly in reducing our 1962 deficit.
The Defense Department has also directed the return of procurement to U.S. sources of a portion of the major equipment, supplies,
and services formerly purchased in foreign countries for the use of our
armed forces overseas. I t is streamlining overseas deplo3niients and
pruning installations with a view to conserving dollars within the
framework of our defense requirements. Military and civilian
personnel and their dependents are being urged to reduce their
personal expenditures overseas and to channel their family savings
into U.S. saving bonds and other American securities or savings
institutions.
In our economic assistance programs we are reducing the portion
transferred to foreign countries in the form of dollars rather than
U.S. goods and services. Conversely, the share of our aid transferred
in the form of U.S. goods and services is being increased. Because a
substantial part of CTirrent expenditures stems from commitments
made under earlier policies, the full resiUts of the new emphasis have
not yet been reflected in the balance-of-payments data. Approximately two-thirds of the funds expended for all our foreign economic
assistance programs in 1961 (including foreign currency sales of
agricultural surpluses) were initially utUized for expenditure in the
United States. The portion spent in this country wUl increase as procurement orders under present directives become more fully reflected
in our balance of payments. Ways are being developed to reduce
still further the impact of economic assistance on our balance of payments without damage to the objectives of the program of the Agency
for International Development.
Our program for bartering agricultural surpluses under Public
Law 480 is being reexamined to make sure it wUl not adversely affect
the balance of payments of the United States. The danger is that,
in some instances, potential export sales for dollars may be diverted
into barter arrangements that return to this country imports for
which there is no current need. This problem should be recognized
in any modification of legislation or additional appropriations for the
barter programs contemplated by the Congress.
Longer range programs.—The task of reaching a balance in our
international accounts is not one that the Government can achieve
alone. The private sector of the economy has an even more vital




32

ANNUAL REPORT OF THE SECRETARY OF THE TREASURY

role to play. Longrun equilibrium will be reached and maintained
only if private industry improves its efficiency more rapidly, produces
goods and services fully competitive in world markets, and actively
seeks out and fully exploits its export opportunities.
Here, the Government can act as a prod and catalyst and help
assure the proper environment. We have recognized that, if business
moves ahead satisfactorily, a balanced budget in fiscal 1963 is a desirable part of this environment. Under conditions of strong private
demand, a balanced budget would assure that the overall fiscal program of the Government is in keepmg with the need to avoid excesses
in our domestic economy and to release savings and resources for
productive investment. Moreover, our monetary policies are being
conducted in a manner to assure that ample credit is available to
finance domestic growth without providing new fuel for inflation.
But, in the last analysis, the critical decisions and the crucial actions
are those of private citizens.
Above all else is the need for business and labor to exert conscious
restraint in shaping wage and price policies. Our industry cannot
remain competitive if we repeat the pattern of the 1950's, when prices
of industrial goods in this country advanced more rapidly than those
of our leading competitors. Prices of American manufactured goods
exports, for instance, rose 14 percent relative to those of other industrialized nations from 1953 to 1960. Over the same period, our
share of world exports of manufactures declined from 25.9 percent
to 21.6 percent.
All the agencies of the Government directly concerned—the Council
of Economic Advisers, the Departments of Labor and Commerce,
and the Treasury—are cooperating to demonstrate to all Americans
the key fact that the United States can, in this intensel}^- competitive
world, win th,e battle for markets only by doing a better job in restraining our own prices and costs. The President's Labor and
Management Advisory Committee, too, is fully aware of the importance of price stability to our international payments situation, as
well as to our domestic economic welfare.
The Council of Economic Advisers has set forth guideposts for wage
and price decisions consistent with our long-range needs. These
guideposts would permit increases in average wages over time in
line with increases in national productivity. They would allow for
the correction of inequities in the wage structure, and would permit
market forces to be appropriately reflected in relative wages aud prices.
They do not provide precise answers to every question that arises
amid the tug and pull of collective bargaining and pricing decisions.
But they can indicate, amid the strong pressures on both labor and




INTERNATIONAL FINANCE

33

management to seek whatever bargaining advantage the moment
offers, where the public interest lies.
Fortunately, we have so far come out of the recent recession without price increases. Wholesale prices of industrial commodities are
actually a bit lower than in the spring of 1961 despite a gain in production of over 12 percent—altogether the best performance of the
postwar years. At the same time, prices in most foreign countries
have tended to rise. But, as the domestic economy moves ahead,
and the benefits of extraordinary gains in productivity typical of the
early stages of recovery are absorbed, we cannot relax our vigilance.
Upon taking office, the President suggested that it was the responsibility of every citizen to ask what he could do for his country.
In this area of price and wage decision, that challenge is clear and
specific.
More rapid modernization of our industrial plants, so that the
United States can retain its leadership in efficient production, is
another essential part of our longer run effort to achieve and maintain
a stronger position in export markets. Improved efficiency is the
only way that we can hope to achieve faster growth at home and a
better life for all of our citizens, whUe still meeting our commitments
abroad and remaining competitive in world markets.
This improved efficiency is in good part dependent on incorporating
modern science and technology in our production methods. Congress
now has before it a bill that would provide a tax credit to be applied
against purchases of new industrial equipment. Within the framework of existing laws, the Treasury also has underway a program of
depreciation reform, updating the outmoded guidelines set years ago
and permitting faster writeoffs in line with current experience and
technology. Together, these key reforms wUl provide incentives for
new investment in the United States comparable to those available
for investment in productive facUities in other industrialized countries
of the free world.
At the same time, our payments situation underscores the importance of removing from our tax laws those provisions that give an
unwarranted stimulus to investment by American firms in the developed countries abroad. American foreign business does not require
the use of special tax privUeges, and particularly access to tax havens
that avoid practically all taxes, to operate effectively in developed
countries with business tax systems comparable to ours.
Price stabUity and improved efficiency provide the essential underpinning for any effort to expand our commercial trade surplus by
penetrating export markets aggressively while at the same time meeting import competition without resort to restrictions. In addition,




34

ANNUAL REPORT OF THE SECRETARY OF THE TREASURY

Government officials and businessmen must become much more export-minded than ever before. To assure maximum exploitation of
aU opportunities, efforts within the Government to facilitate and encourage the flow of American goods and services to foreign markets
have been greatly increased.
The foreign trade functions of the Foreign Service and the
Department of Commerce have been reshaped and infused with
fresh energy so that American business can be made aware of export
opportunities as they arise. Foreign market surveys by our Foreign
Service numbered over 34,000 in 1961, an increase of 73 percent over
1960. The Commerce Department has established a National Export
Expansion Council, linked to 14 regional councils throughout the
United States, on which 1,000 business executives are being asked to
serve.
Efforts to familiarize foreign businessmen with American products
and firms also are being intensified. The U.S. Trade Center Program,
initiated successfuUy in London in 1961, is being expanded. Centers
in Bangkok, Frankfurt, and Tokyo will open in 1962. In 1961 we
participated in 11 international trade fairs and sent special trade
missions to 12 countries.
The Department of Agriculture, utilizing foreign currencies
received from sales of surpluses abroad, has expanded its program
to develop foreign markets for American wheat, feed grains, rice, and
other agricultural products. Forty private trade groups are associated
with the Department in this effort. In 1961 alone, agricultural trade
promotion exhibits were provided at 20 international fairs in Europe,
Africa, the Far East, and Latin America.
The Export-Import Bank, in cooperation with 60 insurance companies, has developed a broad program of export credit insurance to
be carried out through the newly created Foreign Credit Insurance
Association. The FCIA, which began operations early in February
1962, is offering to exporters throughout the United States a single
insurance poUcy, backed by extensive Government guarantees, covering both commercial and political risks connected with U.S. export
sales to buyers in friendly foreign countries. When fully effective, this
new insurance program, together with existing Government and private facilities, should permit the American exporter to offer export
credit on a footing at least as favorable as available to his foreign
competitors.
To promote foreign travel to the United States, and thereby
reduce our deficit to about $1 billion a year on foreign travel account,
the Department of Commerce has established a new agency, the U.S.
Travel Service, assisted by a 36-man Travel Advisory Committee
drawn from our private travel and tourist industry. United States




INTERNATIONAL FINANCE

35

travel promotion personnel are now established in seven foreign cities
and are working with travel agents, carriers, and the general public
in 30 foreign countries.
Procedures for entry into the United States for foreign business
and vacation travelers have been simplified. Most visas for such
visitors are now issued in less than 30 minutes. The Department of
State last year recommended legislation designed to simplify visa
requirements for travelers still further and eliminate them entirely
on the basis of reciprocity. Congress failed to act on this proposal
in 1961, but it^will be^resubmitted at the 1962 session.
To assure that the maximum potential from this wide variety of
efforts is reached the Secretaries of the Treasury and of Commerce
recommended that the President appoint an export [coordinator in
the Department of Commerce to concentrate wholly on the overriding
need to expand our export sales.
The export coordinator would be responsible for developing, in
consultation with private business, meaningful export targets by
industry, and by country and region of destination. He would assure
that the vast facilities of Government are used to best advantage in
helping our exporters to reach these targets. He would keep a close
watch on performance, pursuing through his o^vn small staff and
existing channels the reasons for any shortfalls and assisting in the
removal of obstacles as they develop. Finally, he should identify
new problems that might arise, and^make/ecommendations to the
proper officials for dealing with them.
The role of other countries.—The deficit in our own balance of payments has its counterpart in the surpluses of other countries. These
surpluses, in recent years, have been largely concentrated in several
of the industrialized countries in continental Western Europe. These
countries have as great a responsibility for cutting down their surpluses
as we have for reducing our deficit, if the international monetary
system is to be both strong and stable.
Substantial advances have occurred over the past year in this
sharing of responsibUity. There were the mUitary arrangements and
sizable debt prepayments by certain of our allies already mentioned.
Further agreements along these lines are anticipated during 1962.
But there must be more. We are hard at work now developing the
means.
Only a beginning has been made in mutual support for the expanding needs of the developing countries for economic assistance, on
terms and conditions suited to their circumstances. Conventional
loans, repayable within relatively short periods at high rates of
interest, do not adequately meet these needs. Other industrialized
countries, in the years ahead, must contribute much more assistance




36

ANNUAL REPORT OF THE SECRETARY OF THE TREASURY

to the developing countries, and on better terms. This must be
a continuing objective of our foreign policy.
In most industrialized countries, businesses and individuals are
still not free to invest where and when they wish outside their own
currency areas. Frequently, they are not free to invest in the United
States when they want to, and in ways they prefer. Such restrictions
can no longer be generally justified on balance-of-payments grounds.
Continued use of them is especially anomalous in the case of the
countries with large and growing monetary reserves.
Surplus countries should move boldly now in freeing those capital
movements. Moreover, our longtime objective—removal of controls
over trade itself—is only partially fulfilled. To be sure, quotas and
other quantitative restrictions, so common earlier in the postwar
period, are now largely gone for manufactured goods in the industrialized countries. That has been a great gain. But barriers
remain for agricultural goods. And the progress of the Common
Market, desirable as it is, will bring into being a common external
tariff, a barrier which must be lowered if the United States is to
expand its sales to this great and growing market.
A breakthrough is imperative in this area. Broad-scale trade
negotiations under the authority of the Trade Expansion Act that the
President has already proposed to the Congress offer the only
realistic opportunity.
Strengthening the world monetary system
The first requisite for a strong and healthy international monetary
system is progress toward resolving our own basic balance-of-payments
problem. Only in that way can there be a firm basis for continuing
confidence in the dollar. But even then the system will remain
exposed to potential shocks and strains arising from large-scale shifts
of liquid funds from one country to another.
Normally, these short-term capital flows serve a constructive purpose in moving funds to the point of greatest need. But, these flows
can also magnify temporary fluctuations in a nation's balance of payments and become a vehicle for speculation against one currency or
another. No nation, however strong in reserves, could withstand
alone the potential pressures that could conceivably arise. The industrialized nations therefore have a common interest in protecting
the system upon which we all rely to facilitate the flow of trade
among us.
Basic to progress in meeting this problem are frank consultations
and close understanding among the leading financial nations. The
working groups within the Organization for Economic Cooperation




INTERNATIONAL FINANCE

37

and Development and the regular meetings of European Central
Bankers at Basle, to which the Federal Reserve now regularly sends
an observer, have provided appropriate forums for such discussions,
and the cooperative spirit displayed has been gratifjdng. As a result,
we can now shape our policies with better understanding of the needs
and responses of others. The uncertainties and lack of information
that can be a breeding ground for speculation and instabUity have
been largely dissipated.
I t was this understanding and cooperative approach toward our
mutual problems which made possible the agreement announced in
December by ten leading industrialized countries to supplement the
resources of the International Monetary Fund by means of a new
system of lending arrangements totaling $6 billion. These arrangements will greatly enhance the ability of the Fund to cushion any
significant shocks to the monetary system, from whatever source,
and to diffuse the impact among the surplus countries best able to
bear it. In particular, the new arrangements would greatly increase
the potential resources of the Fund in currencies of the surplus countries of Western Europe, upon which the United States would have
to draw in the event of need. We are awaiting final approval of the
enabling legislation by the Congress.
The Treasury also began, during the past year, to operate directly
in the foreign exchange markets. Using in part currencies borrowed
in foreign markets, this intervention was helpful in damping down
the Idnds of temporary fluctuations in the exchanges that can set off
excessive short-term capital movements. The Federal Reserve, acting
under its existing statutory authority, began in March 1962 to engage
in foreign exchange operations in full consultation and cooperation
with the Treasury. This participation by the Federal Reserve wUl
. strengthen this country's resources and facUities for countering any
threatening pressures against the dollar in world exchange markets.
I t will, in the end, contribute to the further use of the dollar as a
reserve and trading currency.
There is one area in which the United States can take action to
: eliminate an incentive for short-term capital flows that serve no real
economic purpose. Certain recently imposed taxes abroad, in combination with the current provisions of our tax laws permitting a
credit for foreign taxes paid, have created, for some companies, an
entirely artificial incentive to transfer liquid balances abroad. A
specific recommendation for dealing with this quirk in the application
of our tax laws has been prepared by the Treasury so that appropriate
remedy m a y b e included in the tax bill this year.




38

ANNUAL REPORT OF THE SECRETARY OF THE TREASURY

Prospects for 1962
Changes in any nation's balance of payments from year to year,
reflecting a mass of crosscurrents in both the domestic and foreign
economies, are never fully predictable. Nevertheless, it is clear
that the measures already taken and proposed will not have had time
to work their full effect in 1962. We must therefore be prepared for
another deficit in the balance this year.
The principal factor working against a balance in 1962 is the
prospect of a sharp increase in imports over the unusually low level
during the early part of 1961. This can be expected in response to
the growth of our domestic economy. The same sort of increase
cannot safely be assumed for exports, tied closely to market conditions abroad, although we will be doing all we can to expand our
foreign markets. Our commitments for defense and economic assistance should, however, impose a smaller burden, because of foreign
debt payments, offsetting payments for military purchases, and the
tying of aid to the fullest extent possible to purchases from the United
States.
We must be prepared also for a possible further outflow of shortterm capital. Borrowings in the American market by residents of
other countries and foreign governments, unusually large over the
past two years, are likely to slacken, but not to cease. In the conduct of our monetary and debt management policies, we must remain continually alert to assure that our own short-term market
does not become so liquid that credit spills over unnecessarily into
foreign lending.
The means for financing our prospective deficit in 1962 are available.
In the process, some portion will need to be settled in gold as some
countries exchange part of their dollar holdings for gold to restore or
maintain their varied rule-of-thumb ratios of gold to their total international reserves, although ratios of that sort have less relevance as
international cooperation becomes closer and the payments system is
strengthened.
These gold losses in 1962 should not be of a size or character to cause
dismay. But they wUl be a forceful reminder that, until our accounts
are fully in order, we are using our reserves to buy time.
We still have the time for the most important element in any real
cure consistent with the maintenance of our commitments to free
world security and economic progress in the developing countries—an
expanded commercial surplus. To achieve that expanded commercial surplus we shall have to apply ourselves to the job at hand
with the same urgency it would need if little or no time were left.
And we shall also have to insist that other free countries able to do so
assume and discharge their full share of the common burden, and




INTERNATIONAL FINANCE

39

provide us with the sort of trading opportunities that will permit us
to carry our own full share.
Essential parts of this overall program stUl require legislative action
for their full implementation:
Authority to participate in the supplementary International
Monetary Fund arrangements.
Authority to bargain effectively for lower tariffs with the European Common Market and other countries under the terms of the
Trade Expansion Act.
Incentives for more rapid modernization of industrial equipment
by means of an investment tax credit.
The removal of special inducements to invest abroad by eliminating the possibilities for tax avoidance on foreign operations through
the use of tax havens and unwarranted deferments of taxes on operations of foreign subsidiaries.
New appropriations adequate to staff and operate effectively the
office of the recommended export coordinator and the enlarged
functions of the Departments of State and Commerce in stimulating
exports.
Simplified visa requirements for foreign visitors.
Continuation of Public Law 480 in a form that will not adversely
affect our balance of payments.
Recognition of the problems before us, the wisdom to devise and
forcefully apply appropriate remedies, the understanding cooperation
of our allies abroad—all of these are critical elements in a successful
resolution of our current difficulties. But in the end we will succeed,
as in all our endeavors, only as all Americans grasp the challenge,
and demonstrate that combination of restraint in setting wages and
prices and bold initiative in seizing export opportunities that the
circumstances require. The stability of the dollar is a key to economic progress at home and abroad. Beyond that, it will stand as a
symbol of our own determination to discharge the responsibility that
is ours for leadership of the free world.
IL FOREIGN ASSISTANCE

Economic development of the less-developed areas of the free world
is a primary objective of U.S. policy. In this area the Treasury is
concerned particularly with the relationship of development assistance
to our balance-of-payments situation, as described above; with encouraging the flow of funds from other industrialized countries; with
the terms and conditions of lending by U.S. agencies and their effect
upon the economies of the recipients; and with the impact of the
monetary, fiscal, and exchange policies of the recipient economies
upon the effective use of public assistance and private capital.




40

ANNUAL REPORT OF THE SECRETARY OF THE TREASURY

The Secretary of the Treasury, as chairman of the statutory coordinating group, the National Advisory CouncU on International
Monetary and Financial Problems, is charged with the task of coordinating foreign lending and stabUization policies and operations with
overaU governmental policies.
Since the rise of strong economies in other industrialized countries
of the free world, we have endeavored to obtain from them a larger
and more effective flow of financial assistance on both public and
private account to the developing countries.
Through the International Bank and its affiliated institutions,
through the newly formed Development Assistance Committee of the
O.E.C.D., through consortia dealing with particular countries, and
through less formal channels, this objective has been pursued.
In carrying out the coordinating activities of the National Advisory
CouncU, the Treasury has sought fbiancial terms and conditions of
lending which are suited to the changing objectives of U.S. policy,
and which take into account the appropriate interrelationship of the
activities of the international agencies, the Export-Import Bank, the
Agency for International Development, other Government agencies,
and private institutions.
Through a variety of contacts, consultations, and negotiations with
less-developed countries the Treasury has encouraged financial
policies which will strengthen their economies, develop and enlarge
domestic sources of capital, avoid inflationary dissipation of resources,
and, in general, promote effective use of the assistance they receive.
In this area, the advice and assistance of the International Monetary
Fund has been particularly helpful, and in certain Latin American
countries the Treasmy has entered into stabUization agreements to
promote these objectives.
With passage of the Foreign Assistance Act in 1961, the Congress
established a new institutional framework and new policies for U.S.
foreign assistance. Military assistance continued its decline relative
to economic assistance. Our aid program places new emphasis on
economic and social development, on evidence of the determination of
less-developed countries to achieve development and to take measures
to help themselves do so, on the preparation of coherent long-term
plans, and on the assurance that development assistance wUl be
available on a continuing basis.
A major aspect of U.S. foreign policy during 1961 was the establishment of the Alliance for Progress, under which the United States
committed itself to concentrate continuing efforts on a broad scale to
assist in the development of Latin America. In the Charter of
Punta del Este—which created the Alliance—the participatmg Latin
American countries agreed to prepare long-term programs for economic




INTERNATIONAL FINANCE

41

and social reform and development, with special emphasis upon the
need for self-help measures such as land and tax reform. On its
part, the United States pledged itself to help achieve these goals, and
agreed to provide a major part of the estimated minimum of $20
billion required by Latin America over the next ten years from all
external sources in order to supplement its own efforts.
Part of the financial assistance to be provided by the United States
within the Alliance is administered by the Inter-American Development Bank, which unites the Latin American members and the
United States in a cooperative drive for more rapid growth within the
Hemisphere. During 1961, the first year of operations, the InterAmerican Development Bank authorized loans totaling about $294
million. Of this sum, $116 million was committed froiri the Social
Progress Fund, which administers Alliance for Progress funds
appropriated by the United States.
The United States has also continued to provide resources and
leadership for development programs elsewhere in the free world.
The United States is participating actively in consortia of industrial
nations meeting regularly, under the auspices of the International
Bank for Reconstruction and Development, to coordinate assistance
to India and Pakistan.




ADMINISTRATION
A number of steps to improve administrative operations in the
Treasury were undertaken in calendar year 1961. Basic organizational changes were put into effect, staff assistance for policymaking
officials was strengthened, and improvements were made in work
methods and procedures.
Organizational improvements
Responsibility for all areas of tax policy, and supervision of all
personnel engaged in tax policy formulation were centralized under
an Assistant Secretary, and his staff was greatly strengthened.
An Office of Congressional Relations was established to improve
Treasury Department liaison with the Congress.
An additional position of Assistant to the Secretary was created
to provide for closer liaison with other departments and agencies
concerning activities affecting the Treasury.
A post of Deputy Under Secretary for Monetary Affairs was
established to assist in the formulation and execution of domestic
and international financial policy.
The Office of Defense Lending was assigned to the Fiscal Assistant
Secretary.
The Office of Security was assigned to the Administrative Assistant
Secretary.
A new position of Deputy Administrative Assistant Secretary was
established to handle the growing administrative workload.
An Office of Financial Analysis was created to advise the Secretary
on a broad range of financial and economic problems, and thereby to
assist him in his role as chief financial adviser to the President.
A group of 50 of the Nation's most noted economists were named
to serve as consultants to the Treasury in their particular fields of
competence.
An Office of Domestic Gold and Silver Operations was established
within the Office of the Under Secretary for Monetary Affairs, and
was made responsible for the formulation of policy in this area.
An Executive Secretariat was established to assume the responsibility
for coordinating information and action documents between the
Offices of the Secretary and Under Secretary and the Department's
various divisions and bureaus. The Secretariat also follows action
42




ADMINISTRATION

43

assignments made by the Secretary and Under Secretary and informs
the various offices in the Department of policy decisions of concern
to them.
The Office of Management and Organization, in the Office of the
Administrative Assistant Secretary, was reorganized into three
divisions in order to fix responsibUity for specialized areas of activity.
The Management Analysis Division was assigned the responsibility
for management improvement programs, long-range planning efforts,
and appraisal of the internal audit systems of the various bureaus
and divisions. The Mobilization Planning Staff was made responsible
for coordinating the Department's emergency preparedness activities.
The Systems Development Division was assigned supervision of all
systems design and analysis, including manual systems and automatic
data processing activity, and review of the accounting systems in
use in the Department. The functions of appraisal of accounting
and audit, formerly in the Bureau of Accounts, were combined into
the Office of Management and Organization.
In the Internal Revenue Service, administrative activities were
regrouped and placed under the newly created Office of the Assistant
Commissioner for Administration, which also has jurisdiction over
the Public Information, Facilities Management, Personnel, Fiscal
Management, and Training divisions.
Mechanization of operations
Of the many steps undertaken during the year to improve the
Department's efficiency, among the most significant was the expanded
use of automatic data processing equipment. For instance, the
Internal Revenue Service National Computer Center, at Martinsburg, W. Va., which ultimately will process tax return data irom the
entire Nation, went into operation late in the year. &j
In addition, further progress was made toward ultimate mechanization of the Treasury's entire disbursing process, from initial checkwriting to final reconciliation of check payments. The processing of
savings bonds has also been converted^to a more efficient and
economical electronic system.
The Coast Guard continued its conversion from man-operated to
automatic lighthouses.
Manpower utilization
Progress has been made in improving the Department's utilization
of personnel, by simplification of work procedures, by added emphasis
on training programs, and by increased utilization of qualified minority
group members.
614359—62

4




44

ANNUAL REPORT OF THE SECRETARY OF THE TREASURY

The Bureau of Customs, with improved procedures, was able for
the first time in more than five years to reduce its bacldog of cases
involving final duty assessments on commercial imports.
Cooperation between various Treasury bureaus and State and local
governments was continued and expanded in various areas of activity.
Many types of violations and inspections formerly handled by the
Bureau of Narcotics are now being referred to local or State authorities
for investigation and prosecution, or are investigated jointly.
Internal Revenue Service changes in its system of inspection of
distilled spirits plants by Alcohol and Tax Unit personnel resulted in
signfficant savings in manpower and money.
The Internal Revenue Service has negotiated formal agreements
for the exchange of tax information with the States of Utah and
California. Earlier agreements with the four States originally participating in the program have been revised to provide for a broadened
policy on the cooperative exchange of tax information. An agreement was made with the State of Ohio for the exchange of excise,
gift, and estate tax information.
Future trends
Several specific programs of management improvements are underway.
The financial and tax analysis staffs will be further strengthened.
Increased use of automatic data processing equipment by the
Treasury is anticipated in the year ahead. An A D P system for
classifying and coding handwriting is under development which wUl
enable the Secret Service to speed identification of forgers.
In the Bureau of Customs, studies and projects aimed at facilitating international trade and travel have been undertaken. The
recommendations of a Citizens' Task Force, appointed to study the
handling of travelers' baggage by Customs, are being considered.
A study of< the^ role and missions of the Coast Guard is also being
made.
In addition, a study of the Department's long-range planning
activities wUl begin shortly. This study will include determination
of the extent and scope of such activities, evaluation of their effectiveness, and identification of areas for improvement.




O R G A N I Z A T I O N C H A R T AND
TREASURY




OFFICIALS

CHART 1
Oi

•ORGANIZATION OF THE DEPARTMENT OF THE TREASURY-

December 1,1961

SECRETARY
UNDER SECRETARY

1^

Off/ce \
ofthe
>
Secretory/

ASSISTANT
TOTHE
SECRETARY

ASSISTANT
TOTHE
SECRETARY

Office ot Low
Enforcement
Coordination

MONETARY AFFAIRS

ADMINISTRATIVE
ASSISTANT
SECRETARY

FISCAL
ASSISTANT
SECRETARY

Oltice of Domestic
Gold and Silver

Office ot
Internationol
Tax Attoirs

\ Operafmg\
I Bureaus j

Bureau of
the Mint

LI.S. Secret
Service




U.S.
Coast Guard

Bureau of
Engraving and
Printing

Bureau of
Narcotics

Bureaa of
Customs

Office of ttie
Comptroller of
ttie Currency

U.S. Savings
Bonds Division

Bureau of
Accounts

Bureau of
ttie Public Debt

Office of tfie
Treasurer
of ttie U.S.

Ilnternal Revenue]
Service

SECRETARY, UNDER SECRETARIES, GENERAL COUNSEL, AND ASSISTANT SECRETARIES OF THE TREASURY DEPARTMENT FROM
JANUARY 21, 1961, TO JANUARY 8, 19621
T e r m of service
Official
From

To
Secretary of the Treasury

J a n . 21, 1961

Douglas Dillon, N e w Jersey.
Under Secreiary

Feb.

3, 1961

H e n r y H . Fowler, Virginia.
Under Secretary of the Treasury for .
Monetary Affairs

J a n . 31, 1961

R o b e r t V. Roosa, N e w York.
General Counsel

Apr.

5, 1961

Robert H . Knight, Virginia.
Assistant Secretaries

Dec. 20, 1957 Dec. 19, 1961 A. Gilmore Flues, Ohio.
John M. Leddy, Virginia.
Apr. 5, 1961
Stanley S. Surrey, Massachusetts.
Apr. 24, 1961
J a m e s A. Reed, Massachusetts.
Dec. 20, 1961
Fiscal Assistant Secreiary
J u n e 19, 1955

William T . Heffeliinger, District of Columbia.
Admini str ative Assistant Secretary

Sept. 14, 1959

A. E . Weatherbee, Maine.

' For officials from September 11,1789, through January 20,1961, see exhibit 32 in this report.




47

PRINCIPAL ADMINISTRATIVE AND STAFF OFFICERS OF THE TREASURY
DEPARTMENT AS OF JANUARY 8, 1962
SECRETARY
DOUGLAS DILLON

Henry H. Fowler
Douglass Hunt
Robert V. Roosa
J. Dewey Daane
Leiand Howard
Paul A. Volcker
Frank E. Morris
R. Duane Saunders
RolDert H. Knight
John K. Carlock
Edwin F. Rains
Fred B. Smith
Hugo A. Ranta
George F. Reeves
Harold R. Pollak
John M. Leddy
John C. Bullitt
George H. Willis
Charles R. Harley
Margaret W. Schwartz
Stanley S. Surrey
Donald C. Lubick
Michael Waris, Jr
Harvey E. Brazer
Douglas H. Eldridge
Nathan N. Gordon..
James A. Reed
James P. Hendrick
Commander Robert D. Johnson, U.S.C.G
Arnold Sagalyn
William T. Heffelfinger
Martin L. Moore.
George F. Stickney.
Boyd A. Evans
Frank F. Dietrich
Hampton A. Rabon, Jr
Robert M. Seabury
A. E. Weatherbee
Carl W. Clewlow
Willard L. Johnson
Amos N. Latham, Jr
Paul McDonald
Albert J. Faulstich
48




^

Under Secretary of the Treasury.
Special Assistant to the Under Secretary.
Under Secretary for Monetary Affairs.
Deputy Under Secretary for Monetary
Affairs.
Director, Office of Domestic Gold and Silver
Operations.
Director, Office of Financial Analysis.
Assistant to the Secretary (Debt Management) .
Director, Office of Debt Analysis.
General Counsel.
Assistant General Counsel.
Assistant General Counsel.
Assistant General Counsel.
Assistant to the General Counsel.
Chief Counsel to the Fiscal Assistant Sec• retary.
Chief Counsel, Foreign Assets Control.
Assistant Secretary.
Deputy Assistant Secretary.
Director, Office of International Finance.
Assistant Director, Office of International
Finance.
Associate Director, Foreign Assets Control.
Assistant Secretary.
Director, Office of Tax Legislation.
Associate Director, Office of Tax Legislation.
Director, Office of Tax Analysis.
Associate Director, Office of Tax Analysis.
Director, Office of International Tax Affairs.
Assistant Secretary.
Deputy to the Assistant Secretary.
Aide to the .Assistant Secretary.
Director, Office of Law Enforcement Coordination.
Fiscal Assistant Secretary.
Assistant to the Fiscal Assistant Secretary.
Technical Assistant (Systems and Methods
Staff).
Technical Assistant.
Technical Assistant.
Technical Assistant.
Director, Office of Defense Lending.
Administrative Assistant Secretary.
Deputy Administrative Assistant Secretary
and Director, Office of Management and
Organization.
Director, Office of Budget.
Director, Office of Personnel.
Director, Office of Administrative Services.
Director, Office of Security.

PRINCIPAL ADMINISTRATIVE AND STAFF OFFICERS
Joseph W. Barr
Richard E. McCormack
Dixon Donnelley
Stephen C. Manning, Jr
Eileen Shanahan
Robert A. Wallace
Charles A. Sulhvan
Theodore L. Eliot, Jr
Frank A. Southard, Jr
Robert Cutler
Seymour E. Harris
William N. Turpin

49

Assistant to the Secretary (Congressional
Relations).
Deputy Assistant to the Secretary (Congressional Relations), o
Assistant to the Secretary (Public Affairs).
Deputy Assistant to the Secretary (Pubhc
Affairs).
Special Assistant to Assistant to the Secretary (Pubhc Affairs).
Assistant to the Secretary.
Special Assistant to the Secretary.
Special Assistant to the Secretary.
Special Assistant to the Secretary.
Special Assistant to the Secretary.
Senior Consultant to the Secretary.
Director, Executive Secretariat.
BUREAU OF ACCOUNTS

Harold R. Gearhart
Sidney S. Sokol
George Friedman
Juhan F. Cannon
Harold A. Ball
Ray T. Bath

^

Sidney Cox
John H. Henriksen
Howard A. Turner
Samuel J. Elson

Commissioner of Accounts.
Assistant Commissioner.
Staff Assistant to the Commissioner.
Chief Disbursing Officer.
Chief Auditor.
Deputy Commissioner—Accounting Systems.
Deputy Commissioner^Deposits and Investments.
Assistant Commissioner for Administration.
Deputy Commissioner—Central Accounts.
Deputy Commissioner—Central Reports.
BUREAU OF CUSTOMS

Phihp Nichols, Jr
David B. Strubinger
Alfred F. Beiter
N. G. Strub___-,
C. A. Emerick
Walter G. Roy.
William E. Higman__
Robert Chambers
James W. Gulick.
Burke H. Flinn
George Vlases, Jr

..-

Commissioner of Customs.
Assistant Commissioner of Customs.
Deputy Commissioner for Policy Planning.
Deputy Commissioner of Management and
Controls.
Deputy Commissioner,. Diyision of Investigations and Enforcement.
Deputy Commissioner, Division of Appraisement Administration.
Deputy Commissioner, Division of Classification and Drawbacks.
Chief Counsel.
Deputy Commissioner, Division of Marine
Administration.
Deputy Commissioner, Division of Entry,
Value, and Penalties.
Deputy Commissioner, Division of Technical Services.

BUREAU OF ENGRAVING AND P R I N T I N G

Henry J. Holtzclaw
Frank G. Uhler

Director, Bureau of Engraving and Printing.
Assistant Director.
BUREAU OF T H E M I N T

Eva Adams
Leiand Howard

Director of the Mint.
Assistant Director.
BUREAU OF NARCOTICS

Harry J. Anslinger
Henry L. Giordano
Charles Siragusa




Commissioner of Narcotics.
Deputy Commissioner.
Assistant Deputy Commissioner.

50

PRINCIPAL ADMINISTRATIVE AND STAFF OFFICERS
BUREAU OF T H E PUBLIC D E B T

Donald
Ross A.
Michael
Charles

M. Merritt
Heffelfinger, ,lra
E. McGeoghegan
D . Peyton

^

Commissioner of the P u b h c D e b t .
Assistant Commissioner.
. D e p u t y Comraissioner.
D e p u t y Commissioner in Charge, Chicago
Office.

I N T E R N A L REVENUE SERVICE

Mortimer M. C a p l i n . .
Bertrand M. Harding
Vernon D. Acree
Wiiliara H. Loeb
Harold T. Swartz
Wilham H. Smith

Commis.sioner of Internal Revenue.
D e p u t y Comraissioner.
Assistant Coraraissioner (Inspection).
Assistant Commissioner (Compliance).
Assistant Comraissioner (Technical).
Assistant Commissioner (Planning and R e search).
Assistant Coraraissioner ( D a t a Processing).
Assistant Coraraissioner (Administration).
Chief Counsel.
Director of Practice.

Robert L. Jack
E d w a r d F. Preston
Crane C. Hauser
T h o m a s J. Reilly

OFFICE OF T H E COMPTROLLER OF TPIE CURRENCY

J a m e s J. Saxon
H . S. Haggard
W. M. Taylor
G. W. Garwood
C. C. Fleraing
J u s t i n T. Watson

Coraptroller of the Currency.
First Deputy Comptroller of the Currency.
D e p u t y Coraptroller of the Currency.
D e p u t y Comptroller of the Currency.
D e p u l y Coraptroller of the Currency.
Chief National Bank Examiner.

OFFICE OF T H E TREASURER OF T H E U N I T E D STATES

Elizabeth Rudel Sraith
William T. Howell
Willard E. Scott

Treasurer of the United States.
D e p u t y Treasurer.
._ Assistant D e p u t y Treasurer.
U N I T E D STATES COAST GUARD

Admiral Alfred C. Richmond
Vice Adrairal Jaraes A. Hirshfield..
Rear Adrairal James A. Alger
Rear Admiral Irvin J. Stephens

Coraraandant, U.S. Coast Guard.
Assistant Coraraandant a n d Chief of Staff.
Engineer in Chief.
Chief, Office of M e r c h a n t Marine Safety.

U N I T E D STATES SAVINGS BONDS DIVISION

William H. Neal
Bill McDonald

.

National Director.
Assistant National Director.

U N I T E D STATES SECRET SERVICE

J a m e s J. Rowley
Paul J. Paterni
E . A. Wildy

Chief, U.S. Secret Service.
D e p u t y Chief.
Assistant Chief.
C O M M I T T E E S AND BOARDS

Elizabeth Rudel Smith
A. E. Weatherbee
Araos N . Lathara, J r
Amos N. L a t h a m , J r
Robert A. Wallace
R o b e r t A. Wallace




Chairman, I n t e r d e p a r t m e n t a l Savings Bond
Conmiittee.
Chairman, Treasury M a n a g e m e n t Comraittee.
Chairman, Treasury Awards Committee.
Chairman, Treasury Wage Board.
Eraployment Policy Officer.
Principai Comphance Officer.

R E V I E W OF
AND

OPERATIONS

STATISTICS

F O R T H E F I S C A L YEAR 1 9 6 1







CONTENTS
REVIEW OF FISCAL OPERATIONS
Page

Budget results
Budget receipts and expenditures
Budget receipts in 1961
Estimates of receipts in 1962 and 1963
Budget expenditures in 1961
Estimates of expenditures in 1962 and 1963
Trust account and other transactions
Corporations and certain other business-type activities of the Government
Account of the Treasurer of the United States
Public debt operations and ownership of Federal securities
Public debt operations
Ownership of Federal securities
Taxation developments
International financial and monetary developments

63
64
64
67
70
72
73
75
79
80
89
97
102
114

ADMINISTRATIVE REPORTS
Management improvement program
Comptroller of the Currency, Bureau of the
Customs, Bureau of
Defense Lending, Office of
Engraving and Printing, Bureau of
Fiscal Service
Internal Revenue Service
International Finance, Office of
Mint, Bureau of the
.
Narcotics, Bureau of
United States Coast Guard
United States Savings Bonds Division
United States Secret Service

139
141
144
158
159
163
193
204
205
209
213
223
225

EXHIBITS
PUBLIC DEBT OPERATIONS, CALLS OF GUARANTEED OBUGATIONS,
REGULATIONS, AND LEGISLATION

Treasury Certificates of Indebtedness, Treasury Notes, and Treasury Bonds Offered and Allotted
1. Treasury certificates of indebtedness
2. Treasury notes
3. Treasury bonds

233
237
243

Treasury Bills Offered and Accepted
4. Treasury bills

258
Guaranteed Obligations Called

5. Calls for partial redemption, before maturity, of insurance fund
debentures
53




270

54

CONTENTS
U.S. Savings Bonds Regulations
Page

6. First amendment, March 21, 1961, to Department Circular No. 653,
Fifth Revision, regulations governing Series E savings bonds
7. Fourth amendment. May 16, 1961, to Department Circular No. 750,
Revised, regulations governing payments by banks and other financial institutions in connection with the redemption of U.S. savings
bonds

274

293

U.S. Savings Stamps Regulations
8. First revision, August 5, 1960, of Department Circular No. 1008,
regulations governing Treasury savings stamp agents in the sale of
U.S. savings stamps at schools

293

Legislation
9; An act to increase for a one-year period the public debt limit set forth
in section 21 of the Second Liberty Bond Act
10. An act to authorize adjustments of outstanding old series currency,
and for other purposes

297
297

PUBLIC DEBT MANAGEMENT

11. Statement by Secretary of the Treasury Dillon, June 27, 1961, before
the Senate Finance Committee on a new temporary public debt
limit

299

TAXATION DEVELOPMENTS

12. Mesvsage from the President, April 20, 1961, relative to the Federal tax
system
13. Statement by Secretary of the Treasury DiHon, May 3, 1961, before
the House Committee on Ways and Means on the President's tax
program
14. Statement by Secretary of the Treasury Dillon, March 14, 1961, before
the House Committee on Ways and Means on financing the Federal
highway program
15. Statement by Assistant Secretary of the Treasury Surrey, July 25,
1961, before the Senate Finance Committee on H.R. 10, to encourage
the establishment of voluntary pension plans by self-employed
individuals

303
313
341

344

INTERNATIONAL FINANCIAL AND MONETARY DEVELOPMENTS

16. Statement by the President, October 27, 1961, on the new programs to
stimulate American exports, strengthen the U.S. balance of
payments, and enlist the maximum cooperation of private credit
facilities
17. Statement by Secretary of the Treasury Dillon, February 14, 1961,
before the Senate Foreign Relations Committee on ratification of
the Organization for Economic Cooperation and Development
Convention
18. Statement by Secretary of the Treasury Dillon, March 7, 1961, before
the Joint Economic Committee
19. Remarks by Secretary of the Treasury Dillon, April 11, 1961, at the
second meeting of the Board of Governors of the Inter-American
Development Bank, Rio de Janeiro, Brazil
.
20. Statement by Secretary of the Treasury Dillon, April 28, 1961, before
the Senate Appropriations Committee on the Act of Bogota and
the proposed Fund for Social Progress
21. Remarks by Secretary of the Treasury Dillon, May 2, 1961, before
the U.S. Council of the International Chamber of Commerce, New
York, N.Y
22. Stateraent by Secretary of the Treasury DiDon, May 10, 1961, before
a Subcommittee of the House Committee on Banking and Currency
on a proposed amendment to the Articles of Agreement of the
International Finance Corporation




348

349
351
357
360
364

367

CONTENTS

55
Page

23. Joint announcement, May 17, 1961, by Secretary of the Treasury
Dillon and the Minister of Finance of Brazil on the conclusion of
financial negotiations between the United States and Brazil
24. Statement by Secretary of the Treasury Dillon, June 5, 1961, before
the Senate Foreign Relations Committee on the proposed Act for
International Development and the International Peace and
Security Act
25. Statement by Secretary of the Treasury Dillon, June 19, 1961, before
the Subcommittee on International Exchange and Payments of the
Joint Economic Committee
26. Statement by Secretary of the Treasury Dillon as Governor for the
United States, September 20, 1961, at the discussion of the Annual
Report of the International Monetary Fund
27. Statement by Assistant Secretary of the Treasury Leddy as Temporary
Alternate Governor for the United States, September 21, 1961, at
the discussion of the Annual Report of the International Finance
Corporation
28. Statement by Assistant Secretary of the Treasury Upton, August 15,
1960, before the Senate Foreign Relations Committee on the President's proposal for Latin America
29. Press release, August 9, 1960, announcing the signing of the Articles
of Agreement of the International Development Association
30. Press release, January 6, 1961, on extending the exchange agreement
between the United States and Argentina
31. Press release, February 10, 1961, on the signing of an exchange agreement between the United States and Chile

368

369
374
380

384
385
387
388
388

ORGANIZATION AND PROCEDURE

32. Secretaries, Under Secretaries, and Assistant Secretaries of the Treasury Department from September 11, 1789, to January 20, 1961, and
the Presidents under whom they, served
33. Treasury Department orders relating to organization and procedure. _

389
393

TABLES
Bases of tables
Description of accounts relating to cash operations

403
406

i

SUMMARY OF FISCAL OPERATIONS

1. Summary of fiscal operations, fiscal years 1932-61 and monthly 1961..

408

RECEIPTS AND EXPENDITURES

2. Receipts and expenditures, fiscal years 1789-1961
.
;
3. Transfers to trust funds and refunds of receipts, fiscal years 1931-61 __
4. Budget receipts and expenditures, monthly for fiscal year 1961 and
totals for 1960 and 1961
5. Interfund transactions excluded from both net budget receipts and
budget expenditures, fiscal years 1932-61
6. Public enterprise revolving funds, receipts and expenditures for
fiscal year 1961, and net 1960 and 1961
.
7. Trust account and other receipts and expenditures, monthly for fiscal
year 1961 and totals for 1960 and 1961
8. Investments of Government agencies in pubhc debt securities (net),
monthly for fiscal year 1961 and totals for 1960 and 1961
9. Sales and redemptions of obligations of Government agencies in
market (net), monthly for fiscal year 1961 and totals for 1960
and 1961
10. Intertrust. fund transactions excluded from both net trust account
receipts and net trust account expenditures, fiscal years 1948-61 _.
11. Trust enterprise revolving funds, receipts and expenditures for fiscal
year 1961 and net for fiscal year 1960
.
12. Budget receipts by sources and expenditures by major functions,
fiscal years 1953-61
13. Trust account and other transactions by major classifications, fiscal
years 1952-61
.




410
416
418
450
458
460
472
474
476
477
478
482

56

,

CONTENTS
Page

14. Budget receipts a n d expenditures, based on existing a n d proposed
legislation, actual for the fiscal year 1961 a n d estimated for 1962
and 1963
15. T r u s t account and other transactions, actual for t h e fiscal year 1961
and estimated for 1962 and 1963
16. Effect of financial operations on the pubhc debt, actual for t h e fiscal
year 1961 and estimated for 1962 and 1963
17. I n t e r n a l revenue collections by tax sources, fiscal years 1929-61
18. I n t e r n a l revenue coUections and refunds by States, fiscal year 1 9 6 1 . .
19. Customs collections and refunds, fiscal years 1960 a n d 1961
20. Deposits by t h e Federal Reserve Banks representing interest charges
on Federal Reserve notes, fiscal years 1947-61
21. Postal receipts and expenditures, fiscal years 1916-61
22. Cash income a n d outgo, fiscal years 1952-61

484
487
489
490
496
497
498
499
500

PUBLIC DEBT, GUARANTEED OBLIGATIONS, ETC.

23.
24.
25.
26.
27.
28.
29.
30.
31.
32.
33.
34.

I.—Outstanding
Principal of t h e public debt, 1790-1961
Public debt and guaranteed obligations outstanding J u n e 30, 1 9 3 4 - 6 1 .
Public debt outstanding by security classes, J u n e 30, 1952-61
Guaranteed obligations issued by Government corporations and other
business-type activities and held outside t h e Treasury, J u n e 30,
1952-61
Interest-bearing securities outstanding issued by Federal agencies
b u t not guaranteed by t h e United States Government, fiscal years
1953-61
M a t u r i t y distribution of marketable interest-bearing public debt and
guaranteed obligations, J u n e 30, 1946-61
S u m m a r y of p u b h c debt and guaranteed obhgations by security
classes, J u n e 30, 1961
Description of pubhc debt issues outstanding J u n e 30, 1961
Description of guaranteed obhgations held outside t h e Treasury,
J u n e 30, 1961
Postal savings systems' deposits and Federal Reserve notes outstanding, J u n e 30, 1946-61
S t a t u t o r y limitation on t h e public debt and guaranteed obligations,
J u n e 30, 1961
D e b t limitation under t h e Second Liberty Bond Act, as amended,
1917-61

II.—Operations
35. Public debt receipts and expenditures by security classes, monthly
forfiscal year 1961 and totals for 1960 and 1961
36. Changes in p u b h c debt issues, fiscal year 1961
37. Issues, maturities, and redemptions of interest-bearing public debt
securities, excluding special issues, July 1960-June 1961
38. Allotments by investor classes on subscriptions for public marketable
securities other t h a n regular weekly Treasury bihs, fiscal year 1961 _
39. Public debt increases and decreases, and balances in t h e account of
t h e Treasurer of t h e U.S., fiscal years 1916-61
40. S t a t u t o r y debt retirements, fiscal j^ears 1918-61
41. Cumulative sinking fund, fiscal years 1921-61
42. Transactions on account of t h e cumulative sinking fund, fiscal year
1961

507
509
510
513
514
515
516
518
537
539
541
542

544
554
574
604
605
606
607
608

III.—United States savings bonds
43. S u m m a r y of sales and redemptions of savings bonds b y series, fiscal
years 1935-61 and monthly 1961
44. Sales and redemptions of Series E through K savings bonds by series,
fiscal years 1941-61 and monthly 1961
45. Sales and redemptions of Series E and H savings bonds by denominations, fiscal years 1941-61 a n d ' m o n t h l y 1961
46. Sales of Series E and H savings bonds by States, fiscal years 1960,
1961, and cumulative




609
610
614
615

CONTENTS

57

IV.—Interest
Page

47. Amount of interest-bearing public debt outstanding, the computed
annual interest charge, and the computed rate of interest, June 30,
1916-61, and at the end of each month during 1961
48. Computed annual interest rate and computed annual interest charge
on the public debt by security classes, June 30, 1939-61
49. Interest on the public debt by security classes, fiscal years 1957-61..
50. Interest on the public debt and guaranteed obligations by tax status,
fiscal years 1940-61

616
618
620
621

V.—Prices and yields of securities
51. Average yields of taxable long-term Treasury bonds by months,
October 1941-June 1961
.
52. Prices and yields of marketable public debt issues, June 30, 1960 and
1961, and price range since first traded

622
623

VI.—Ownership of governmental securities
.53. Estimated ownership of interest-bearing governmental securities outstanding June 30, 1952-61, by type of issuer
54. Estimated distribution of interest-bearing governmental securities
outstanding June 30, 1952-61, by tax status and type of issuer
55. Summary of Treasury survey of ownership of interest-bearing public
debt and guaranteed obligations, June 30, 1960 and 1961

625
626
628

ACCOUNT OF THE TREASURER OF THE UNITED STATES

56. Assets and liabilities in the account of the Treasurer of the United
States, June 30, 1960 and 1961
57. Analysis of changes in tax and loan account balances, fiscal years
1952-61

630
631

STOCK AND CIRCULATION OF MONEY IN THE UNITED STATES

58. Stock of money, money in the Treasury, in the Federal Reserve Banks,
and in circulation, by kinds, June 30, 1961
•59. Stock of money, money in the Treasury, in the Federal Reserve Banks,
and in circulation, June 30, 1913-61
60. Stock of money by kinds, June 30, 1913-61
61. Money in circulation by kinds, June 30, 1913-61
62. Location of gold, silver bullion at monetary value, and coin held by
the Treasury on June 30, 1961
63. Paper currency issued and redeemed during the fiscal year 1961 and
outstanding June 30, 1961, by classes and denominations.

632
634
635
636
637
637

TRUST FUNDS AND CERTAIN OTHER ACCOUNTS OF THE FEDERAL
GOVERNMENT

64. Holdings of Federal securities by Government agencies and accounts,
June 30, 1952-61
.

638

I.—Trust funds
65. Ainsworth Library fund, Walter Reed General Hospital, June 30,
1961
...
66. Civil service retirement and disability fund, June 30, 1961
67. District of Columbia teachers' retirement and annuity fund, June 30,
1961
68. District of Columbia other funds—Investments as of June 30, 1960
and 1961
69. Employees health benefits fund, June 30, 1961
70. Employees' life insurance fund, Civil Service Commission, June 30,
1961
71. Federal disabihty insurance trust fund, June 30, 1961
72. Federal old-age and survivors insurance trust fund, June 30, 1961
73. Foreign service retirement and disability fund, June 30, 1961
74. Highway trust fund, June 30, 1961
75. Judicial survivors annuity fund, June 30, 1961
.




642
642
645
646
647
648
650
652
654
655
656

5S

CONTENTS
Page

76. Library of Congress trust funds, June 30, 1961
77. Longshoremen's and Harbor Workers' Compensation Act, relief and
rehabilitation, June 30, 1961
78. National Archives gift fund, June 30, 1961
79. National park trust fund, June 30, 1961
80. National service life insurance fund, June 30, 1961
81. Pershing Hall Memorial fund, June 30, 1961
82. Phihppine Government pre-1934 bond account, June 30, 1961
83. Public Health Service gift funds, June 30, 1961.
84. Railroad retirement account, June 30, 1961
>
85. Unemployment trust fund, June 30, 1961
86. U.S. Government life insurance fund, June 30, 1961
87. U.S. Naval Academy general gift fund, June 30, 1961
88. Workmen's Compensation Act within the District of Columbia, relief and rehabilitation, June 30, 1961

657
658
658
659
659
660
661
662
662
664
670
671
672

II.—Certain other accounts
89. Colorado River Dam fund, Boulder Canyon project, status by operating years ending May 31, 1933 through 1961
90. Refugee Relief Act of 1953, loan program through June 30, 1961

673
674

FEDERAL AID TO STATES

91. Expenditures for Federal aid to States, individuals, etc., fiscal years
1930, 1940, 1950, and 1961
92. Expenditures made by the Gov( rnment as direct payments to States
under cooperative arrangements and expenditures within States
which provided relief and other aid, fiscal year 1961

675
683

CUSTOMS STATISTICS

93.
94.
95.
96.
97.
98.
99.
100.
101.
102.
103.
104.

Summary of customs collections and expenditures, fiscal year 1961 __
Customs collections and payments by districts, fiscal year 1961
Merchandise entries, fiscal years 1960 and 1961
Principal commodities on which drawback was paid, fiscal years 1960
and 1961
Computed customs duties, value of dutiable imports, and ratio of
computed duties to value of dutiable imports, by tariff schedules,
calendar years 1949-59
Computed customs duties, value of imports entered for consumption,
and ratio of duties to value of dutiable imports and to value of all
imports, calendar years 1949-59
Value of dutiable and taxable imports for consumption and computed duties and taxes collected by tariff schedules, fiscal years
1959 and 1960
Value of dutiable imports for consumption and computed duties collected by countries, fiscal years 1959 and 1960
Vehicles and persons entering the United States, fiscal years 1960
and 1961
Aircraft and aircraft passengers entering the United States, fiscal
years 1960 and 1961
Seizures for violations of customs laws, fiscal years 1960 and 1961
Investigative activities, fiscal years 1960 and 1961

699
700
701
701
702
704
705
706
708
708
709
710

ENGRAVING AND PRINTING PRODUCTION

105. New postage stamp issues delivered, fiscal year 1961
106 Deliveries of finished work by the Bureau of Engraving and Printing,
fiscal years 1960 and 1961

710
711

INTERNATIONAL CLAIMS

107. Awards of the Mixed Claims Commission, United States and Germany, certified to the Secretary of the Treasury by the Secretary
of State, through June 30, 1961
108. Mexican claims fund as of June 30, 1961
109. Yugoslav claims fund as of June 30, 1961




712
714
714

CONTENTS

59
Page

110. Status of claims of American nationals against certain foreign governments as of June 30, 1961

715

GOLD AND CURRENCY TRANSACTIONS AND HOLDINGS

111. United States net monetary gold transactions with foreign countries
and international institutions, fiscal years 1945-61
112. Estimated gold reserves and dollar holdings of foreign countries as of
. June 30, 1960, December 31, 1960, and June 30, 1961
113. United States gold stock and holdings of convertible foreign currencies by U.S. monetary authorities, fiscal years 1952-61
114. Assets and liabihties of the exchange stabilization fund as of June 30,
1960 and 1961
115. Summary of receipts, withdrawals, and balances of foreign currencies acquired by the United States without purchase with dollars,
fiscal year 1961
116. Balances of foreign currencies acquired by the United States without purchase with dollars, June 30, 1961

716
718
720
721
724
726

INDEBTEDNESS OF FOREIGN GOVERNMENTS

117. Indebtedness of foreign governments to the United States arising from
World War I, and payments thereon as of June 30, 1961
118. World War I indebtedness, payments and balances due under agreements between the United States and Germany as of June 30, 1961__
119. Outstanding indebtedness of foreign countries on United States Government credits (exclusive of indebtedness arising from World War
I) as of June 30, 1961, by area, country, and major program
120. Status of accounts under lend-lease and surplus property agreements
(World War II) as of June 30,1961

728
729
730
732

CORPORATIONS AND CERTAIN OTHER BUSINESS-TYPE ACTIVITIES OF
THE UNITED STATES GOVERNMENT

121. Capital stock, notes, and bonds of Government agencies held by the
Treasury or other Government agencies, June 30, 1960 and 1961,
and changes during 1961
122. 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, 1961
123. Comparative statement of obligations of Government corporations
and certain other business-type activities held by the Treasury,
June 30, 1952-61
124. Description of obligations of Government corporations and certain
other business-type activities held by the Treasury, June 30, 1961
125. Comparative statement of the assets, liabilities, and net investment
of Government corporations and certain other business-type activities, June 30, 1952-61
126. Statement of loans outstanding of Government corporations and
certain other business-type activities, June 30, 1961
127. Dividends, interest, and similar earnings received by the Treasury
from Government corporations and certain other business-type
activities, fiscalyears 1960 and 1961
128. Restoration of amounts of capital impairment of the Commodity
Credit Corporation, pursuant to the act of March 8, 1938, as amended

736
738
739
740
744
746
749
750

GOVERNMENT LOSSES IN SHIPMENT

129. Government losses in shipment revolving fund, June 30, 1961

751

PERSONNEL

130. Number of employees in the departmental and field services of the
Treasury Department, quarterly from June 30, 1960, to June 30,
1961
INDEX
614X59—62

5




752
753




R E V I E W OF FISCAL




OPERATIONS




Budget Results
The Government's operations resulted in a budget deficit of $3.9
billion in the fiscal year 1961. Receipts amounted to $77.7 billion,
slightly less than those in 1960 as the 1960-1961 recession reduced
revenues below the level which would have been realized from an
expanding economy. Expenditures in 1961 were $81.5 billion as
compared with $76.5 billion in 1960. The increase of $5.0 billion
resulted from greater expenditures for national security and space
exploration and larger outlays generally for Government programs,
some of which were for the purpose of mitigating the economic
recession.
CHART 2

.THE BUDGET
$Bil.

Surplus

1953

'54

'55

^

'56

'57
Fiscal Years

'58

'59

'60

'61
'

The public debt rose $2.6Jbillion in 1961. The increase in debt was
less than the budget deficit principally because of a reduction of $1.3
billion in the cash balance of the Treasurer of the United States.
As of June 30, 1961, the total public debt outstanding amounted to
$289.0 billion.




63

64

1961 REPORT OF THE SECRETARY OF THE TREASURY

The Government's fiscal operations in 1960-61 and their effect on
the public debt are summarized as follows:
1960

1961

In billions of dollars
Budget results:
Net receipts
Net expenditures

77.8
76.5

Budget deficit, or surplus (—)
Plus:
Trust account and other transactions, excess of expenditures,
or receipts (—) *
Change in Treasurer's balance:
Increase, or decrease (—)
Total

77.7
81.5
-1.2

3.9

.2

.1

2.7

-1.3

Equals: Public debt increase

2.8

-L2

L6

2.6

1 Includes net trnst 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 the amount of cash held outside
the Treasury.

Budget Receipts and Expenditures
BUDGET RECEIPTS IN 1961

Net budget receipts in the fiscal year 1961 amounted to $77.7
billion, practically unchanged from the alltime high record of $77.8
billion in fiscal 1960.
Receipts in fiscal 1961 would have attained a new record but for the
new treatment of taxes collected and deposited under the Federal
Unemployment Tax Act. Under the Employment Security Act
of 1960, approved September 13, 1960 (42 U.S.C. 1101), beginning
with fiscal 1961 equivalent amounts of those receipts are appropriated and transferred to the unemployment trust fund. Previously
these taxes were classified as budget receipts.
Declines in receipts from the corporation income tax and customs
were more than ofiset by increases in receipts of individual income
taxes and estate and gift taxes.
A comparison of net receipts after refunds and transfers by major
sources for the fiscal years 1960 and 1961 is shown below. Additional
data for 1961 on a gross basis are presented in table 14.




65

REVIEW OF FISCAL OPERATIONS

1960

Increase, or
decrease ( - )

1961

Source

Amomit

I ercent

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

40,715
21,494
9,137
339
1,606
-1

Total internal revenue
Customs
Miscellaneous receipts
- -

_

Subtotal receipts _ _ _
Deduct:
Interest and other income received by Treasury
from Government agencies included above and
also included in budget expenditures. _ _
Net budget receipts .

41.338
20,954
9,063

1.5
-2.5
-.8

1,896

623
-540
-75
-339
290
1

73,290
1,105
4,062

73, 251
982
4,080

-40
-122
18

—.1
-11.1
.4

78, 457

78,313

-144

-.2

(*)

(1)

18.0
(1)

694

654

-40

-5.8

77, 763

77,659

-104

—.1

•Negative receipts of $461,000.
1 Percentage comparisons inappropriate.

Individual income taxes.—As a result of the higher level of wages
and salaries, individual income taxes increased $623 million, or 1.5
percent, from fiscal 1960 to 1961. Withheld taxes on salaries and
wages, which consist approximately of two-thirds of individual income
tax collections, more than accounted for the increase. A small decline
in other individual income taxes was the result of decreased payments
on declarations and final returns associated with the 1960-61 recession.
Corporation income taxes.—The decrease of 2.5 percent in 1961
corporation income taxes primarily reflected the moderate decline in
profits which occurred in the calendar year 1960, the liability year
primarily determining tax receipts in the fiscal year 1961.
Excise taxes.—Receipts from this source are shown in the following
table.
1960

Increase, or
decrease (—)

1961

Source

Amount

Percent

In millions of dollars
Alcohol taxes
Tobacco taxes
. . . . _.
.
Taxes on documents, other instruments, and playing
cards
Manufacturers' excise taxes
. _.
_
Retailers'excise taxes
_
Miscellaneous excise taxes
. .
Undistributed depositaiT receipts and unapplied collections
. . . . .
.. ..
Gross excise taxes . .
Deduct:
Refunds of receipts
._
Transfers to highway trust fund
Net excise taxes
1 Percentage comparison inappropriate.




. _
. .

3,194
1,932

3,213
1,991

19
60

.6
3.1

139
4,735
379
1,387

149
4,897
398
1,498

10
162
19
111

7.3
3.4
5.0
8.0

100

-81

-181

11,865

12,064

200

1.7

85
2,642

78
2,923

-7
281

-7.8
10.6

9,137

9,063

-75

—.8

(1)

66

1961 REPORT OF THE SECRETARY OF THE TREASURY

Excise tax receipts generally did not change much in fiscal 1961
from receipts in 1960. Gross excise tax receipts rose $200 million in
1961, but since the approximately 25 percent of excise tax revenues
transferred to the highway trust fund rose by 281 million, receipts
remaining in the general fund declined $81 million.
Taxes on liquor, tobacco, passenger automobiles, and communications expenditures provided almost 80 percent of general fund revenues. Excise revenues included in budget receipts are, therefore,
dependent to a substantial extent on the production of goods and
services of a few industries. Consumer expenditures for nondurable goods and services were higher in fiscal 1961 than in 1960, and
were reflected in increases in revenues from taxes on alcohol,, cigarettes, and communications. However, since expenditures for
durable goods, especially passenger automobiles, declined, a substantial decrease in revenues from these sources was reflected in a
decline in excise revenues as a whole.
The increase of $281 million in highway fund taxes in 1961 reflected
the full year effect of the increase in the tax rate on motor fuels from
3 cents to 4 cents a gallon, effective October 1, 1959.
Employment taxes.—Receipts from the various employment taxes
were as follows:

1960

Increase, or
decrease ( - )

1961

Source

Amount

Percent

In millions of doUars
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 disability insurance trust fund
Railroad retirement account
.__
Unemployment trust fund ^
Net employment taxes
* Negative receipts of $461,000.
1 Percentage comparison inappropriate.




10,211
607
341

11, 586
571
345

1,376
-36
4

11,159

12, 502

1,344

12.0

3

1

-2

-78.2

9,272
939
607

10, 623
963
571
345

1,352
24
-36
345

14.6
2.6
6.0

(*)

-339

339

13.5
-6.0
1.2

0)

REVIEW OF FISCAL OPERATIONS

67

Net employment taxes decreased $339 million in fiscal 1961, the
result of transferring for the first time the receipts from the Federal
Unemployment Tax Act to the unemployment trust fund. The
increase of $1,376 million, or 13.5 percent, in receipts from the Federal
Insurance Contributions Act and Self-Employment Contributions
Act reflected the rise in taxable wages and the full year effect of the
rate increase effective January 1, 1960. Receipts from the Railroad
Retirement Tax Act were slightly lower than in 1960.
Estate and gift taxes.—Receipts from estate and gift taxes amounted
to $1,896 million in fiscal 1961, an increase of $290 million, or 18
percent, above receipts of $1,606 million in 1960. The increase
reflected substantial gains in values of securities.
Customs.—Customs receipts decreased $122 million in 1961 as the
result of a decline in dutiable imports stemming from the business
recession.
Miscellaneous receipts.—Miscellaneous receipts amounted to $4,080
million in 1961, relatively unchanged from 1960. Declines in Federal
Reserve payments to the Treasury (which had been unusually large
in 1960) and rental receipts were more than offset by realizations
on loans, principally a large loan prepayment by the Federal Republic
of Germany.
ESTIMATES OF RECEIPTS IN FISCAL 1962 AND 1963

The Secretary of the Treasury is required each year to prepare and
submit in his annual report to Congress estimates of the public revenue
for the current fiscal year and for the fiscal year next ensuing (act of
February 26, 1907 (5 U.S.C. 265)).
The estimates of receipts from taxes and customs for the current and
ensuing fiscal years are prepared by the Treasury Department. In
general, the estimates of miscellaneous receipts are prepared by the
agencies depositing these receipts in the Treasury.
Estimates for 1963 assume that the present rates on corporate
income taxes, and excises on alcohol, tobacco, passenger automobiles
and parts, and general telephone service will be extended until June
30, 1963, as recommended by the President. The estimates further
assume that the following recommendations of the President with
respect to transportation taxes will be enacted to: Repeal the tax on
transportation of persons, except for aMines, on July 1, 1962 (under
present law the rate would drop from 10 percent to 5 percent); extend
the present 10 percent rate on airlines until December 31, 1962; and
enact a user charge of 5 percent on transportation of persons and




68

1961 REPORT OF THE SECRETARY OF THE TREASURY

freight by air effective January 1, 1963; tax jet fuel at two cents per
gallon for airlines and three cents for general aviation; raise the
present two cents per gallon tax on aviation gasoline to three cents
for general aviation and credit all receipts to the general fund instead
of transferring them to the highway trust fund; and tax fuel used on
inland waterways at two cents per gallon.
The estimates of receipts by sources do not show the revenue effect
of the President's recommended tax reform proposals which would
allow an 8 percent credit for expenditures for equipment and eliminate
certain inequities in the present tax structure since it is estimated
that the reform program will have no net effect on revenues.
Estimates of revenues for the fiscal years 1962 and 1963 are based on
the expectation that the broad econoiric recovery which began early
in the calendar year 1961 will continue throughout the period underlying receipts in the two fiscal years. Although the rapid rate of
recovery which was experienced in the last nine months of 1961 is not
expected to continue, the recovery movement will remain strong, and
it is estimated that the gross national product in the calendar year
1962 will amount to $570 billion, an increase of almost $50 billion over
the calendar year 1961. Consistent with this increase in the value of
goods and services will be an advance in incomes. Personal incom.e is expected to rise from $417 billion in the calendar year 1961 to
$448 bilhon in 1962.
Corporate profits in the first quarter of the calendar year 1961, the
low point of the 1960-61 recession, had dropped to a level almost $9
billion, seasonally adjusted annual rate, below the same quarter of
the preceding year. Profits have risen sharply since the fixst quarter,
but because of the depressed recession level at the beginning of the
year the corporate profits total for the whole of the calendar year 1961
will not be much higher than the total for 1960. A continued rise in
1962 is expected to bring corporate profits for that year to $56.5
billion, a rise of approximately $10.5 billion above the 1961 level.
As a result of the anticipated widespread economic recovery, all
major tax sources show increases in estimated revenues for both of the
fiscal years 1962 and 1963. Gains in both years are substantial
except for the corporation income tax where a moderate rise is estimated for 1962 followed by a very large one in 1963. Revenues from
miscellaneous receipts, primarily a nontax source, are expected to
drop substantially in 1962 but to rise in 1963 to a level somewhat
higher than in 1961.
Actual receipts for 1961 and estimated receipts for 1962 and 1963
are compared by major sources in the accompanying table. The
amount shown for each revenue source is the net amount after deduction of refunds and transfers to trust funds.




69

REVIEW OP FISCAL OPERATIONS

Source

1961 actual

1962 estimate

1963 estimate

Increase
196i over
1962

In raillions of dollars
45.000
21.300
9,627

49,300
26.600
9,956

4,300
5,300
329

1,896
982
4,080

2,090
1,215
3, 524

2,325
1,320
4,192

235
105
668

78;313

82,756

93,693

10,937

Individual income taxes...
Corporation income taxes.
Exci.se ta.xes
Employment taxes
Estate and gift taxes
Customs
Miscellaneous receipts

41.338
20,954
9,063

Subtotal receipts
Deduct:
Interest and other income received by Treasury
from QoNcriirnent agencies included above and
also included in budget expenditures
Net budget receipts..

(')

654

656

693

77,659

82,100

93,000

37

10, S

1 Negative amount of $461,000.

Individual income taxes remain by far the most important source
of revenue, providing more than 50 percent of net budget receipts.
The corporation income tax will continue as the second most important source. Together, the income taxes will account for more than
80 percent of budget revenues.
Individual income taxes.—Receipts from individual income taxes^
withheld and not withheld, are estimated to total $45,000 million in
the fiscal year 1962, an increase of $3,662 million over 1961. This
rise in individual income tax receipts is responsible for over 80 percent
of the increase in budget revenues for 1962. A rise of $4,300 million
is estimated for 1963, but because of the larger increase expected
from the corporation income tax, the estimated gain in 1963 from the
individual income tax accounts for only about 40 percent of the total
gain from all budget revenue sources.
Withheld tax receipts account for more than two-thirds of total
individual income tax receipts. Since gains in salaries and wages
are expected to be greater than those in other forms of taxable personal
incomes, the withheld taxes are estimated to provide over 85 percent
of the rises in total individual income tax receipts in 1962 and 1963.
Corporation income taxes.—Receipts from the corporation income
tax are expected to show a moderate rise from $20,954 milhon in 1961
to $21,300 million in 1962. A substantial gain to $26,600 miUion
is estimated for 1963. The 1963 gain of $5,300 million accounts for
almost 50 percent of the rise in total revenues.
Corporation income tax receipts in each fiscal year are determined
primarily by profits of the calendar year ending in the fiscal year.
The expected behavior of tax receipts for 1962 and 1963 reflects the
anticipated small rise in profits in the calendar year 1961 followed by
a large gain of approximately $10.5 billion in the calendar year 1962.




70

1961 REPORT OF THE SECRETARY OF THE TREASURY

Excise taxes.—Net excise taxes included in budget receipts are estimated to increase from $9,063 million in 1961 to $9,627 million in 1962
and further to $9,956 million in 1963. Receipts from the tax on
passenger automobiles, which are estimated to increase by $116 million
in 1962 and $155 million in 1963, provide the largest single increase,
but substantial gains in both 1962 and 1963 are expected from all
important revenue sources except the tax on transportation of persons
which will be lower as a result of proposed legislation.
In 1963 all of the revenues from the 10 percent manufacturers^
excise tax on trucks, buses, and trailers will be transferred to the
highway trust fund. Previously one-half had been transferred. The
additional transfer will reduce net excise taxes included in net budget
receipts by $135 million.
Estate and gift taxes.—Receipts from estate and gift taxes are estimated to increase from $1,896 million in 1961 to $2,090 million in 1962
and $2,325 million in 1963 as security and other asset values are expected to rise.
Customs.—Receipts from customs which had declined substantially
in the fiscal year 1961 are estimated to rise to $1,215 million in 1962,
a level higher than realized in 1960. A further rise to $1,320 million
is anticipated for 1963. The gains for 1962 and 1963 reflect the estimated expansion of the economy.
Miscellaneous receipts.—Revenues from miscellaneous receipts (net
of interfund transactions), which were unusually large in the fiscal
year 1961 by reason of the large loan prepayment by the Federal
Republic of Germany, are expected to dechne by ,$559 million in 1962.
For the fiscal year 1963 revenues are expected to increase by $631
million, principally because of repayment to the general fund of
advances to certain States for temporary unemployment compensation
during the 1960-61 recession.
BUDGET EXPENDITURES IN 1961

. The $5.0 billion increase in budget expenditures in fiscal 1961 over
those in 1960 brought the total to $81.5 billion. This compared to
$80.3 billion expended in fiscal 1959, the only other year outside of
World War I I in which budget expenditures exceeded $80 billion, and
like 1959 a year in which expenditures were affected by the aftermath
of a recession. Major functional expenditures for the fiscal years




71

REVIEW OF FISCAL OPERATIONS

1953 through 1961 are shown in table 12. Their distribution from
1957 (when national defense expenditures began to be consistently
above $43 billion a year) through 1961 is shown in the summary
below.

Fiscal year

National
defense

International
affairs and
finance

Interest

Other 1

Interfund
transactions
deducted

Total 2

In billions of dollars
1957.
1958.
1959.
1960.
1961.

43.4
44.2
46.5
45.7
47.5

2.0
2.2
3.8
1.8
2.5

7.3
7.7
7.7
9.3
9.0

16.8
17.8
22.8
20.4
3 23.1

0.5
0.6
0.4
0.7
0.7

69.0
71.4
80.3
76. 5
81.5

1 Includes veterans' benefits and services and space research and technology.
2 Excludes interfund transactions.
3 Includes food for peace program.

National defense in 1961 accounted for $1.8 billion of the increase
over 1960, and was 58.3 percent of total expenditures. This compared with 59.7 percent in 1960, 57.9 percent in 1959, and 62.9 percent
in 1957. The 1961 dollar increase included principally a rise of
approximately $1.4 billion for military research and development.
The overall increase more than offset reductions of $0.2 billion each
for military procurement and military assistance to strengthen the
forces of more than 40 foreign nations. The latter decrease reflected
the almost complete taking over by the industrialized Western
European countries of the cost of their own armaments.
•Economic and financial assistance abroad was mainly responsible
for the $0.7 billion rise in spending for international affairs and finance.
The total of $2.5 billion, which represented 3.1 percent of all expenditures, was in line with the average in recent years.
A decline of approximately $0.2 billion in interest expenditures on
the public debt during 1961 accounted for the comparable decrease
in overall interest payments.
Almost all of the remainder of $23.1 billion was spent for domestic
programs. This spending increased $2.7 billion in 1961 over the year
before. I t was 28.4 percent of total expenditures in 1961, and compared with 28.3 percent in 1959, and with 24.3 percent in 1957. The
tabulation following shows the principal purposes within this group.




72

1961 REPORT OP THE SECRETARY OF THE TREASURY

Fiscal year

Veterans'
benefits
and
services

\ griculture
and
agricultural
resources

Healtli,
labor,
and
welfare

Commerce
and
transportation

Other 1

Total 2

In billion? of dollars
1957 . .
1958
1959
1960
1961

. -

4.9
5.2
5.3
5.3
5.4

4.5
4.4
6.6
4.9
3 5.2

2.6
3.1
3.9
3.7
4.2

1.3
1.6
2.0
2.0
2.6

3.4
3.5
5.0
4.6
5.7

16.8
17.8
22.8
20.4
23.1

1 Includes space research and technology.
2 Includes interfund transactions.
3 Includes food for peace program.

Veterans' benefits and services continued their gradual rise with an
increase of approximately $0.1 billion in expenditures above those in
1960. This expenditure sometimes has been categorized historically
with national defense, international affairs and finance, and interest
on the public debt as war related expenditures. Expenditures for
agriculture, which rose nearly $0.3 billion over 1960, included an
increase of $0.2 billion for farm income stabilization and the food for
peace program.
A rise of approximately $0.6 billion during 1961 over 1960 in
expenditures for health, labor, and welfare services emphasized the
Government's growing concern in these fields. The main increase
was $0.3 billion for labor and manpower services, and was followed by
$0.1 billion for health services and research, and a like increase for
public assistance.
The largest increase in expenditures for commerce and transportation during fiscal 1961 over 1960 was that of approximately $0.4
billion for postal services, which was followed by one of approximately
$0.1 billion for the promotion of aviation. These constituted the
major items responsible for the overall increase of $0.6 billion in this
category. Space research and technology expenditures amounted to
$0.7 billion, an increase of more than $0.3 billion.
ESTIMATES OF EXPENDITURES IN 1982 AND 1963

Actual expenditures for the fiscal year 1961 and estimates for the
fiscal years 1962 and 1963 are summarized in the following table.
Further details will be found in table 14. The estimates are based on
those submitted to the Congress in the Budget of the United States
Government for the Fiscal Year Ending June SO, 196S.




REVIEW OF FISCAL

73

OPERATIONS

Actual budget expenditures for the fiscal year 1961 and estimated expenditures for
1962 and 1963
[In millions of dollars.

On basis of 1963 B u d g e t d o c u m e n t ]
1961
actual

Legislative b r a n c h
T h e judiciary
Agriculture D e p a r t m e n t (including C o m m o d i t y C r e d i t
ration)
Atomic Energy Commission
Civil Aeronautics Board
Civil Service C o m m i s s i o n
Commerce Department
Defense D e p a r t m e n t :
M i l i t a r y functions
Civil functions
E x p o r t - I m p o r t B a n k of W a s h i n g t o n
Federal Aviation A ? e n c y
F u n d s a p p r o p r i a t e d to t h e P r e s i d e n t :
Foreign assistance—economic
Other
General Services A d m i n i s t r a t i o n
H e a l t h , E d u c a t i o n , and Welfare D e p a r t m e n t
H o u s i n g a n d H o m e i^inance Agency
Interior Department
Justice D e p a i t m e n t
Labor Department
N a t i o n a l Aeronautics a n d Space A d m i n i s t r a t i o n
P o s t Oifice D e p a r t m e n t
._.
Small Business A d m i n i s t r a t i o n
State DepartmentTreasury Cepartment:
I n t e r e s t on t h e p u b l i c d e b t
Other
Veterans' Administration
Allowance for contingencies a n d p a y a d j u s t m e n t s
All other
Total
D e d u c t interf'md
expenditures)

transactions

N e t b u d g e t expenditures.,

(included

in both

1962
estimate

1963
estimate

133
52

161
59

148
63

5,929
2,713
86
74

7,177
2,830
92
40
650

6,709
2, 880
94
43
815

44,676
972
37
638

48, 250
1,015
alOl
708

49, 700
1,071
a225
781

1,805
77
387
3, 685
502
801
284
831
744
914
103
258

1,935
236
501
4,469
940
873
298
563
1,300
853
250
453

2,235
186
578
5,183
1, 383
1,031
.^04
386
2,400
261
222
342

8,957
996
5,401

8,900
1,073
5,560
75
572

9, 300
1,131
5,285
350
574

82,169

1,732

93, 230

654

656

Corpo-

receipts

and
81, 515

693
92, 537

a Excess of credits ( d e d u c t ) .

Trust Account and Other Transactions
Several classes of financial transactions of the Government (other
than budgetary or public debt) affect the cash balance of the Treasurer of the United States, or the cash held outside the account of the
Treasurer, but do not affect the Federal budget surplus or deficit.
These transactions are classified in Treasury reports as follows: Trust
and deposit fund accounts, etc.; investments of Government agencies
in public debt securities (net); and sales or redemptions of obligations
of Government agencies in the market (net). Table 13 shows the
amounts of transactions in these classifications for the fiscal years
1952 through 1961, and table 15 contains information in slightly
more detail for the fiscal year 1961 and estimates for 1962 and 1963.




74

1961 REPORT OF THE SECRETARY OF THE TREASURY

Trust and deposit fund accounts

Trust funds are maintained by the Government to account for
moneys provided for specific purposes or programs in accordance with
trust agreements or statutes. Transactions in trust accounts usually
are reported on a gross basis, except for certain trust revolving funds
established for business-type operations which are reported net.
Reporting on a net basis also applies to deposit fund accounts, where
the Government is holding funds in suspense, subject to refund or
transfer to other Government accounts, or where the Government is
acting as banker or agent for others. In the fiscal year 1961, net transactions in trust and deposit fund accounts resulted in an excess of
receipts aggregating $565 million, compared with a $359 million
excess of expenditures in 1960.
Investments of Government agencies in public debt securities (net)

Purchases and sales of public debt securities, together with nominal
amounts of securities of Government agencies, are included in this
classification, primarily at par on a net basis. These investments,
which usually are made pursuant to legislative requirements, provide
interest income on funds not needed for current expenditures. The
investment transactions are not reported in the budget or trust
account operations of the agencies since they do not represent program activities. During fiscal 1961, the excess of purchases for
public enterprise funds and trust accounts amounted to $435 million
as compared with $714 million in 1960. In addition, investment
transactions of certain deposit funds constituting Governmentsponsored enterprises resulted in an excess of purchases in the aggregate
of $434 million during 1961 as compared with $239 million in 1960.
Sales and redemptions of obligations of Government agencies in the market (net)

Certain agencies of the Government have authority to issue obligations to finance their operations, as explained under Corporations
and Certain Other Business-type Activities of the Government.
Transactions in these securities during the fiscal year, reported at
their par value, resulted in an excess of redemptions in the aggregate
of $733 million as compared with an excess of issues, or sales, of $1,023
million in 1960. In addition, transactions in the obligations of
Government-sponsored enterprises showed an excess of issues amounting to $195 million in 1961 and $723 million in 1960.
Interest rates on special issues

Trust funds administered by the Treasury, such as the Federal
old-age and survivors insurance trust fund, the Federal disability
insurance trust fund, the civil service retirement and disability fund,
the railroad retirement account, and the veterans^ life insurance




REVIEW OF FISCAL OPERATIONS

75

funds, are invested in marketable Government securities and in special
public debt obligations issued specifically to each fund. The interest
rates borne by special public debt obligations usually are established
by the statutes in the form of a fixed rate or a varying rate based on
designated classes of Government securities outstanding.
In view of the higher yield on marketable Government securities
compared with statutory rates on special issues, the Treasury has
endeavored, through recommendations to the Congress and by
administrative action, to obtain greater uniformity in interest rates
by relating the rates on special issues to yields on marketable Government securities. As stated in the 1960 Annual Report (pp. 22-24),
this has been accomplished with respect to the Federal old-age and
survivors insurance trust fund, the Federal disability insurance trust
fund, and the veterans^ life insurance funds.
In August 1960 the Treasury recommended a change in the statutory formula for determining the interest rate on special public debt
obligations issued to the civil service retirement and disability fund.
Public Law 87-350, approved October 4, 1961 (75 Stat. 770), authorized a formula which provides that these special issues shall bear
interest at a rate equal to the average market yield (rounded to the
nearest multiple of l/8th of one percent) borne by all marketable
interest-bearing obligations of the United States that are not due
or callable until after the expiration of 4 years. (See also page 171
of this report.)
At the close of 1961 the formula recommended by the Treasury for
interest rates on special obligations issued to the railroad retirement
account had not been enacted into law.
Corporations and Certain Other Business-type Activities of the
Government
In accordance with statutory authority, various business-type programs are administered by Government corporations and certain
other agencies. These programs are financed by appropriations,
capital stock subscriptions, borrowings from the public or the United
States Treasury, or from the revenues of the corporation or agency.
The Secretary of the Treasury is authorized to purchase the securities
of the agencies which borrow from the Treasury, and also, under
certain circumstances, to prescribe the terms and conditions of iheir
obligations. The terms of the securities of some of.^^the agencies
which borrow from the public must be approved by the Secretary of
the Treasury in accordance with provisions of the Government
Corporation Control Act (31 U.S.C. 868). The agencies that are
exempt from this requirement must consult with the Secretary of the
G143159—62

6




76

1961 REPORT OF THE SECRETARY OF THE TREASURY

Treasury before issuing obligations to the public. The checking
accounts of the majority of the Government corporations and all
other business-type activities are required to be maintained with the
Treasurer of the United States. Subject to approval of the Secretary
of the Treasury, some accounts may be kept with the Federal Reserve
Banks or with private banks that have been designated as depositaries
or fiscal agents of the United States.
Financial statements submitted to the Treasury

Treasury Department Circular No. 966 and Supplement No. 1,
issued under authority of the Budget and Accounting Procedures Act
of 1950, require Government corporations and agencies to submit
financial data periodically. Statements of assets and liabilities,
income and expense, and source and application of funds are required
quarterly, while a statement of long-range commitments and contingencies is required semiannually. Government agencies that are
not engaged in a business-type operation are required to submit only
a statement of assets and liabilities annually. These agency reports
serve as bases for combined statements compiled by the Treasury and
designed to provide full disclosure regarding operations, financial
condition, and the investment of the United States in these enterprises,
The total combined assets of the Government corporations and
agencies involved, consisting primarily of inventories, receivables,
and fixed property (land, structures, and equipment), amounted to
$116,055 million as of June 30, 1961, compared with $111,129 million
as of June 30, 1960. The combined liabilities, consisting primarily
of accounts payable and borrowings from the pubhc, amounted to
$7,865 million as of June 30, 1961, compared with $6,924 million as of
June 30, 1960. The combined total of the Government's investment
amounted to $108,191 million as of June 30, 1961, compared with
$104,205 million as of June 30, 1960. Borrowings from the Treasury
are reported as part of the Government's investment. This investment is exclusive of the Government's interest in mixed-ownership or
Government-sponsored corporations, which amounted to $2,792
million on June 30, 1961, and $2,650 million on June 30, 1960. Individual and combined financial statements of the reporting agencies
are published periodically in the Treasury Bulletin. The comparative
combined balance sheet data as of June 30, 1952-1961, are shown in
table 125.
Borrowing authority and advances by the Treasury

New congressional authorizations to borrow, made available during
the fiscal year 1961, amounted to $3,889 million, while reductions in
authority amounted to $388 million; resulting in a net increase in




REVIEW OF FISCAL OPERATIONS

77

borrowing authority of $3,501 million.^ The unused authority as of
June 30, 1961, was $22,480 million, compared with $19,354'' million
on June 30, 1960. The status of borrowing authority of these corporations and agencies is shown in table 122.
Loans or advances of funds are made by the Secretary of the Treasury to certain Government corporations and agencies, pursuant to the
terms of the borrowing authorizations. The advances by the Treasury
are secured by formal obligations or agreements executed between the
Secretary of the Treasury and the head of the agency involved. On
the financial statements of the agencies, these borrowings or advances
are reported as part of the net investment of the United States in
the enterprise. Excluding refinancing transactions, such advances
by the Treasury during the fiscal year 1961 amounted to $7,537
million, compared with $6,734 million in 1960; repayments amounted
to $7,163 million as compared with $6,441 million in 1960. The
outstanding loans and advances amounted to $26,011 million as of
June 30, 1961, compared with $25,636 million on June 30, 1960.
Table 124 describes the obligations of the Government corporations
and agencies held by the Treasury.
Interest and other payments made to the Treasury

Except where fixed by law, interest rates on borrowings from the
Treasury are determined by the Treasury from month to month,
taking into account the cost of Government borrowings in the current
market, as reflected by the prevailing market yields on Government
obligations with maturities corresponding to the approximate duration
of the advances to the Government agencies. The amounts of
borrowings from the Treasury outstanding as of June 30, 1961, a
description of the securities held, and their rates of interest are given
in table 124.
On the basis of operating results of an enterprise, or as may be
required by law, payments to the Treasury are made by Government
corporations and agencies in the form of interest, dividends, and distribution of earnings. During fiscal 1961, interest paid to the Treasury amounted to $706 million and other payments amounted to
$112 million, as compared with $755 million and $76 million, respectively, during 1960. Details regarding these payments are given
in table 127.
Capital stock and other securities owned by the United States

The Government's investment in this area is evidenced by various
types of securities. These include certificates of capital stock, bonds,
and notes of Government corporations and agencies.
1 The borrowing authority for 1960 was revised to include $150 million of borrowing authority from the
Treasury Department for the Tennessee Valley Authority.
•• Revised.




78

1961 REPORT OF THE SECRETARY OF THE TREASURY

The Government purchased $21.5 million of capital stock in fiscal
1961, as additional subscriptions to the capital stock of Federal
intermediate credit banks in the amount of $6 million and preferred
stock of the Federal National Mortgage Association (secondary market
operations) in the amount of $16 million. Repa3niients of Government-held capital stock in the amount of $8 million were made by the
banks for cooperatives. The amount of Government-held capital
stock as of June 30, 1961, and the changes in holdings during the
year are shown in table 121.
Guaranteed obligations of Government agencies

Certain Government corporations and agencies, with authority to
borrow from the public, may issue obligations which are guaranteed
as to principal and interest by the United States. The issuance of
such obligations during the fiscal year 1961 was confined to notes of
the District of Columbia Armory Board, and to the Federal Housing
Administration debentures issued in exchange for foreclosed mortgages on behalf of its various mortgage insurance funds. During
fiscal 1961, issues of guaranteed obligations amounted to $192 million
and redemptions amounted to $92 million, compared with $87 million
and $59 million, respectively, during 1960. As of June 30, 1961, the
total outstanding (held outside the Treasury) was $240 million,
compared with $140 million on June 30, 1960. Included in the
amount outstanding was $0.5 million of matured obligations of liquidated corporations, for which funds for payment of the matured
principal and the interest are on deposit with the Treasurer of the
United States. A description of the guaranteed obligations outstanding is contained in table 31.
Nonguaranteed obligations of Government agencies

Certain Government-owned and Government-sponsored corporations and agencies issue to the public nonguaranteed obligations
under their statutory borrowing authority. They include the Tennessee Valley Authority, the Federal National Mortgage Association,
the Federal home loan banks. Federal land banks, Federal intermediate
credit banks, and the banks for cooperatives. During the fiscal
year 1961, the issues of nonguaranteed obligations amounted to
$6,616 million and redemptions and other reductions amounted to
$7,258 million, as compared with $7,800' million and $6,100' million,
respectively, during 1960. The total nonguaranteed obligations outstanding totaled $7,765 million as of June 30, 1961, and $8,407
million as of June 30, 1960. In addition, the agencies of the Farm
Credit Administration obtain funds for short periods, usually between
••Revised.




REVIEW OF FISCAL OPERATIONS

79

bond and debenture sales dates, by issuing notes to other banks
within the farm credit system or to commercial banks. These outstanding notes amounted to $73 million as of June 30, 1961, and
$79 million as of June 30, 1960. Certain other agencies also issue
notes at infrequent intervals to obtain funds. The nonguaranteed
obligations outstanding, for each issuing agency as of June 30, 19531961, are shown in table 27.
Account of the Treasurer of the United States
Statements of the account of the Treasurer of the United States are
published in the Daily Statement of the United States Treasury in summary form, and in more detail in table 56. The account consists of
three major categories: Gold, silver, and the general account. As of
June 30, 1961, the total value of gold assets was $17,550 million, held
principally in the Fort Knox Depository, and to a lesser extent in mints
and assay offices. Liabilities against gold include $17,442 million of
gold certificates issued to Federal Reserve Banks as reserves against
Federal Reserve notes and amounts held for redemption of United
States notes, etc. The balance of $109 million represents available
gold. The amount of silver bullion and silver dollars included in the
assets totaled $2,403 million, against which liabilities of silver certificates (currency issued against free silver, etc.) amounted to $2,375 million, leaving a balance of silver on June 30, 1961, of $27 million. The
assets of the general account on June 30, 1961, amounted to $6,769
million, and included gold and silver against which there are no specific
legal liabilities or reserves, cash in the form of coin and currency, unclassified collections, and funds on deposit with Federal Reserve Banks
and other depositaries. Liabilities of the general account totaled $75
million, and included principally funds to the credit of the Board of
Trustees of the Postal Savings System and imcollected items, exchanges, etc.
The balance of $6,694 million in the Treasurer's account on June 30,
1961, which represents the difference between the assets and liabilities,
consists of current operating funds on deposit in Federal Reserve
Banks; funds available for transfer to Federal Reserve Banks from
Treasury tax and loan accounts in commercial banks qualified as
special depositaries; and other funds in general and other depositaries
not immediately available for operating purposes.
On June 30, 1961, the balance in the account of the Treasurer of the
United States was $1,311 million less than on June 30, 1960. Daily
balances-during the year ranged from a high of $8,868 million on
July 13, 1960, to a low of $2,501 miUion on April 18, 1961.




80

1961 REPORT OF THE SECRETARY OF THE TREASURY

The net change in the balance is accounted for as foUows:
Transactions affecting the account of the Treasurer of the United States, fiscal year
1961
[In millions of dollars]

Balance June 30, 1960
Transactions classified on p. 1 of the daily Treasury statement:
Cash deposits
Cash withdrawals

8, 005
96, 897
98, 284

Deduct excess withdrawals

1, 387

Subtotal
Transactions classified on p. 2 of the daily Treasury statement:
Add—net increase in gross public debt
Subtotal
Deduct:
Excess of Government agencies' investments over redemptions in public debt securities
Excess of redemptions over sales of obligations of Government agencies in the market
Accrual of discount on savings bonds and bills
(included in net increase in gross public debt,
above)
2, 310
Less certain public debt redemptions (included
in cash withdrawals, above)
1, 774

6,618
2, 640
9,258
921
1, 107

536
Total deductions
Balance June 30, 1961___^

2, 564
6, 694

Public Debt Operations and Ownership of Federal Securities
At the close of the 1961 fiscal year the pubhc debt and guaranteed
obligations amounted to $289.2 billion, a net increase of $2.7 billion
from the $286.5 billion outstanding on June 30j 1960.
There was a net budget deficit of $3.9 billion in the fiscal year 1961
as compared with a surplus of $1.2 biUion in the previous fiscal year.
The 1961 deficit.was financed by the issuance of new public debt
obligations (that is, by the net increase in total outstanding debt) and
by a drawing down of the cash balance from $8.0 billion on June 30,
1960, to $6.7 billion on June 30, 1961.
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.




81

REVIEW OF FISCAL OPERATIONS
June 30,
1960

Class of debt

June 30,
1961

Increase, or
decrease

(-)

In billions of dollars
Public debt:
Interest-bearinfr:
Public issues:
Marketable
Nonmarketable.

183.8
54.5

187.1
53.5

33
— 1.0

238.3
44.9

240.6
45.0

23
.1

Total interest-bearing public debt
Matured debt on which interest has ceased
Debt bearing no interest

283.2
.4
2.6

285.7
.3
2.9

24
—, 1
.3

Total public debt
Guaranteed obligations not owned by the Treasury

286.3
.1

289.0
.2

26
.1

Total public debt and guaranteed obUgations

286.5

289.2

27

Total public issues .
Special issues to Government investment accounts .

Of the $2.7 billion total increase in debt during the fiscal year,
interest-bearing issues accounted for $2.4 billion and noninterestbearing debt for $0.2 billion. There was also an $0.1 billion increase
in guaranteed obligations, primarily Federal Housing Administration
debentm^es. The rise in public issues of $2.3 billion reflected an
increase of $3.3 billion in marketable securities which was partially
offset by a decline of $1.0 billion in public nonmarketable issues.
CHART 3

THE PUBLIC DEBTL

1 Including public debt and guaranteed obligations.
2 Excluding Victory Loan proceeds used to repay debt in 1946.




82

1961 REPORT OF THE SECRETARY OF THE TREASURY

Marketable issues have in fact been an increasing proportion of the
interest-bearing public issues since 1952. On June 30, 1961, marketable issues constituted 78 percent of the interest-bearing public issues
and nonmarketable 22 percent, as compared with 64 percent and 36
percent, respectively, on June 30, 1952.
Increases in the marketable debt during the fiscal year 1961 took
place entirely in the relatively short-term area, as shown in the accompanying table. Regular weekly Treasury bills and tax anticipation
bills increased by $2.8 billion and $1.5 billion, respectively, more than
compensating for the cutback from $7.5 billion to $6.5 billion in 1-year
bills. Certificates of indebtedness outstanding dropped sharply, partly
because of the Treasury's greater reliance on 15- to 18-month Treasury
notes. Treasury bonds outstanding also declined somewhat during
the fiscal year.
Class of security

June 30,
1960

June 30,
1961

Increase, or
decrease

(-)
In billions of dollars
Treasury bills (regular series):
3-month and 6-month
1-year
._
Treasury bills (tax anticipation series).
Certificates of indebtedness...
Treasurynotes
Treasury bonds
_.
Other bonds
Total interest-bearing public marketable issues.

25.9
7.5
17.7
51.5
81.2

28.7
6.5
1.5
13.3
56.3

(*)
183.)

2.8
-1.0
1.5
-4.3
4.8
-.4

(*)
187.1

3.3

•Less than $50 million Panama Canal bonds.

Although the debt of $289.2 biUion as of June 30, 1961, was considerably higher than at the close of World War I I financing, the
debt burden has actually been declining since 1946 on a per capita
basis and as a percentage of gross national product. As shoivn in
chart 4, per capita debt declined from $1,832 on December 31,
1946, to $1,575 on June 30, 1961. The total debt dropped from
an amount which was considerably more than the gross national
product in 1946 to an amount equal to 56 percent of the gross national
product on June 30, 1961.
A large part of the reduction in the debt burden in terms of the
gross national product represents real growth in the economy. Part
of it, however, reflects inflationary price advances.
Chart 4 shows that the Federal debt has grown by a little over
10 percent during the postwar period. At the end of the fiscal year
1961 it represented 28 percent of the total debt of the country. While
other forms of debt have grown at a much faster rate since 1946, the
$289 billion of debt owed by the Federal Government still exercises
a predominant influence in flnancial markets.




83

REVIEV^ OF FISCAL OPERATIONS
CHART 4

THE PUBLIC DEBT IN A GROWING ECONOMY
$Bii.

Relative to Total Debt
(Public dnd Private)
1.018

1200-

' Fec/eraf
800
^Sfof eond
Local

%

1946

i96l

As % of Gross National
Product

* ^ Corporate
400
58%.

IOO
•

P^S

^/ndMduo/

^^m
r\

1946
Dec.

1961
June

1946
Dec.

Progress toward debt management objectives

Exclusive of Treasury bills the Treasury issued $45.8 billion in
new securities during fiscal 1961. All these securities were issued
in the course of operations to refinance existing obligations either at
maturity or in advance of maturity. In addition new issues of tax
anticipation bills and one-year bills totaled $15.0 billion, and regular
weekly offerings were increased $2.8 billion during the year, including
$1.8 billion issued on June 14, 1961, to mature on 18 weekly bill
maturity dates between August 3 and November 30, 1961. The June
offering of a ''strip'' of bUls was designed to meet the Treasury's
need for funds without the necessity of a succession of increases in
weekly bill offerings.
The Treasury in its debt management programs during the fiscal
year concentrated new cash financings in short-term issues, as previously mentioned. Longer term holdings were increased and the
debt structure improved through advance refunding and through the
terms of the Treasury's regular refunding operations.
The under 1-year debt increased by $11 billion to $81K billion during the fiscal year, while the 1- to 5-year maturities declined from $73
billion to %5^y2 billion. The over 5-year debt increased from $40}^
billion as of June 30, 1960, to $47K billion as of June 30, 1961. As
shown in chart 5, $36K billion of the over 5-year debt at the end of




84

1961 REPORT OF THE SECRETARY OF THE TREASURY

the fiscal year was in the maturity range of 5- to 20-years while $11
billion was in the 20-year and over area. These structural changes
resulted in a 2-month increase in the average length of the marketable
debt, from 4 years 4 months on June 30, 1960, to 4 years 6 months on
June 30, 1961.
CHART 5

STRUCTURE OF THE PUBLIC DEBT JUNE 30.1961

1 PartiaUy tax-exempt bonds are classified to earliest call date.

The Treasury's progress in extending debt maturities during fiscal
1961 was due almost entirely to a series of operations in which outstanding obligations were refunded in advance of maturity. Advance
refunding operations have been of two types: Senior advance refunding, in which holders of securities of intermediate maturities are offered
the opportunity to exchange into longer term issues, and junior advance refunding, in which holders of relatively short-term issues are
offered the opportunity to exchange into securities in the intermediate
range.
Under circumstances where the market environment is favorable,
the refunding of securities in advance of maturity offers a number of
advantages both to the economy and to the Treasury. The economy
benefits because debt extension is accomplished with a minimum
change of ownership. The adverse market impact of a comparable
cash offering is avoided, and the flow of new savings into the private
sector of the economy is not significantly disturbed. Junior advance




86

REVIEW OP PISCAL OPERATIONS
CHART 6

XOMPARISOM OF EXTENSIONS OF MATURITY
ADVANCE REFUNDINGS
Total Amount
Extended

$BiHions-Years
of Extension

($ Billions)

% of Publicly
Held Extended

Average Length
of Extension
(Years-Months)

Junior Refundings

ii6.0ii
ii30%
26 i
June'60

Mar'61

June'60

Mor.'61

June'60

Mar.'6l

|

June'60

Mar.'61

Senior Refundings

98 =n

247 i

40

Oct.'60

31%

Sept.'61

Oct.'60

Sept.'61

Oct'60

Sept'61

Oct '60

Sept 61

refundings have the further advantage of reducing inflationary pressures through curtailing the amount of highly liquid short-term debt.
From the point of view of the Treasury, advance refunding offers a
mechanism not only for extending the average length of the debt but
also for transferring blocks of securities out of a maturity area where
undue concentration may have occurred. The Treasury also beneflts
along with the economy from the fact that long-term investors are
encouraged to continue their ownership of Federal Government securities without interruption.
Two junior advance refundings and two senior advance refundings
took place in the period beginning with June 1960 and extending
through December 1961. The first of these was at the end of fiscal
1960, the second and third during fiscal 1961, and the last one in
September 1961. Although only two of these operations occurred in
fiscal 1961, for purposes of comparison all four are considered in the
following discussion and are shown in the accompanying charts 6
and 7}
The bars in the first column of chart 6 show the amounts of debt,
shifted to longer maturities in the four advance refunding operations,
1 Information on the June 1960 junior advance refunding will be found in the annual report for 1960, on p
29 and in exhibit 3. Later advance refunding operations are discussed in the account of Debt Management
beginning on p. 15 of this report. Further details of operations during the fiscal year 1961 are given in
exhbit 3.




86

1961 REPORT OF THE SECRETARY OF THE TREASURY

$10.2 billion in the junior refundings, and $7.8 billion in the senior
refundings.
The impact of any advance refunding operation on the structure of
the marketable debt as measured by the average term to maturity
is dependent on the product of the two factors involved, namely, the
amount of debt extended and the length of the extension. In effect,
this means that $10 billion of debt extended for 1 year provides the
same degree of debt lengthening as $2 billion extended for 5 years.
The product in either case is 10 billion dollar-years. As shown in
chart 6, the June 1960 operation amounted to 12 billion dollar-years
and the March 1960 refunding to 26 billion. In the same context
the amounts for the two senior advance refundings were 98 billion
in the October 1960 operation and 72 billion in September 1961.
The larger figures in the two senior refundings are due to the longer
extensions of the eligible issues involved.
The degree of debt lengthening in each operation is indicated in the
third column of chart 6 headed '^average length of extension." The
figures in this column were obtained by dividing each of the billiondollar-year figures by the amount of debt extended. As shown on
chart 6, in the June 1960 refunding $4.2 biUion of debt was extended
by an average of 2 years 10 months and in March 1961 $6.0 biUion
of debt was extended by 4 years 4 months. The average lengths of
extension in the two senior refundings were much greater: 24 years
7 months in October 1960 and 19 years 2 months in September 1961.
In terms of the impact of advance refunding on the length of the
more than $180 billion of marketable debt, the two junior advance
refundings increased total average length by 0.8 month and 1.6
months, respectively. The two senior advance refundings, with their
greater debt extensions, increased the marketable debt length by 6.3
months and 4.5 months, respectively.
A significant measure of the success of an advance refunding operation is the percentage of old issues turned in for new, particularly by
public holders (that is, holders other than the Federal Reserve and
Government investment accounts). In junior advance refundings
investors must weigh the advantages of the exchange against some
loss of liquidity and in senior advance refundings the greater risk of
capital loss due to the much longer extensions of maturity. In view of
these conditions, the proportion of the public's holdings which has
been extended in the four advance refundings shows that these operations have been highly successful. As apparent in chart 6, public
holders of securities eligible for junior advance refunding turned in 37
percent of their holdings in June 1960 and 30 percent in March 1961.
The comparable figures for the senior advance refunding operations of




REVIEW OF FISCAL OPERATIONS

87

CHAET 7

.PUBLIC HOLDINGS EXTENDED IN ADVANCE REFUNDINGS^
$Bil.

Junior Refundings

June I 9 6 0 :
Total Amount-$4.1 billion

Mar. 1961: $5.4billion

^ % ofHoldings
^ Extended
»%v«>

-.43%

it6li_34%
36%
Oct. I 9 6 0 : $3.4billion

Senior Refundings

Sept. 1961: $2.8 billion

: l.9i:

I7:::>..62%
.2._._.29%

Com'!
Banks

Insur Go's,
Mut. Sav. Bks

All
Other

Com'l
Banks

Insur. Go's,
Mut. Sav. Bks.

All
Other

October 1960 and September 1961 were 31 percent and 51 percent,
respectively.
Chart 7 gives further information on the response of various classes
of investors to the four advance refunding operations.
Commercial banks, which were large holders of the short-term
securities involved in the junior refundings, turned in 43 percent of
their holdings in June 1960 and 28 percent in March 1961. Insurance
companies and mutual savings banks exchanged 40 percent of their
relatively smaU holdings in June and 36 percent in March.
Since savings type institutions were much more heavily invested in
the obligations involved in the senior refundings, they likewise were
much more interested in extending the maturities of their mediumterm holdings than they had been in exchanging their short-term
securities for medium-term. In October 1960, insurance companies
and mutual savings banks exchanged 49 percent of their medium-term
securities for the new long-term offerings, and in September 1961 they
exchanged 62 percent. Commercial banks held only small amounts
of the issues involved in these two exchange offers.
In addition to advance refunding in the long-term area and the
issuance of "strip" bills in place of a succession of increases in weekly
biU offerings, the Treasury made another change in debt management




88

1961 REPORT OF THB SECRETARY OF THE TREASURY
GHAKT 8

MARKET YIELD TRENDS
OF SHORT AND LONG-TERM SECURITIES
%

Month y Averac es

Long-Term
Treasury Bonds \

4

3

/V

j ^ i

Vx^

i

V

l l l l l l

1953

M

:

1V W

l.^..

.'••.•

9HOay
^Treasury B i l l s

V

• l l - ' l

'55

I

1

l^

\j

i. J

1

/

1

K
•

1 /

/I

2

0«

J^

^

> ^

56

Mh.l

'57

I..I.,

58

..I..I

59

l l l i l l i l l l l

'60

K I M I

'61

practice during fiscal 1961. This was the refunding of maturing
obligations by means of a cash offering of new securities used in whole
or in part to pay off the maturities, a technique which had not been
used since the World War I I financing period. On three occasions
during the fiscal year, in August 1960, in February 1961, and in May
1961, this method was used in place of an exchange offering which
would have given holders at the time of the offering preemptive rights
to subscribe to new issues.
One of the important considerations in setting the terms of a new
offering is the pattern of market yields existing at the time. For a
financing operation to be successful, the interest rate on a new
Treasury issue must be in line with the return which investors are
able to get on existing issues of comparable maturity. Chart 8, which
shows the trend in the market yields of long-term Treasury bonds and
the shortest term Treasury bills over a period of time, illustrates the
background against which financing operations in the long- and shortterm areas have taken place during fiscal 1961 and in other recent
years.
As indicated in the chart, average monthly market yields on
Treasury bonds which were neither due nor callable before 10 years
were relatively stable during the fiscal year ending June 30, 1961,
ranging between a high of 3.93 percent (November 1960) and a low of



REVIEW OF FISCAL OPERATIONS

89

3.73 percent (May 1961). During the previous fiscal year yields on
Treasury bonds averaged above 4 percent in every month except
June 1960, when the average was 3.98 percent. The highest, 4.37
percent, was reached in January 1960.
Market yields on the longest outstanding 91-day Treasury bills also
fluctuated within narrow limits during fiscal 1961. A high of 2.48
percent was reached in September 1960 as compared with a low of 2.24
percent in January 1961. During the year before, in contrast, yields
on outstanding 91-day bills fluctuated widely, rising from 3.21 percent
in July 1959 to 4.51 percent in December 1959 and thereafter declining
sharply to 2.46 percent in June 1960.
The average rates on new offerings of regular weeldy bills throughout
the year are shown in exhibit 4, and the monthly average yields of
long-term Treasury bonds will be found in table 51. The computed
annual interest rate and the computed annual interest charge on the
public debt by security classes will be found in table 48.
PUBLIC DEBT OPERATIONS

The first financing of fiscal 1961 was the offering of a tax anticipation security undertaken to cover the major share of the Treasury's
seasonal needs for cash in the first quarter of the fiscal year. Tax anticipation securities are planned to provide the Treasury with funds
during periods when tax collections are seasonally low, and to provide
an investment medium for funds accumulated by corporations during
such periods to pay income and profits taxes. The securities are
retired at maturity, to the extent they are not presented in payment
of taxes, with the proceeds of tax receipts flowing in on tax payment
dates.
Early in July 1960, on an auction basis, the Treasury issued for cash
$3K billion of tax anticipation bills to mature shortly after the midMarch 1961 tax collection date and $1K billion of one-year Treasury
bills to mature July 15, 1961. The latter offering represented a
partial rollover of the $2 billion of one-year bills maturing on July 15
in accordance with the pattern previously established by the Treasury
of one-year maturities on quarterly dates in January, April, July,
and October.
On July 25, 1960, the Treasury announced that it would pay off in
cash the $9.6 billion of 4% percent Treasury notes maturing August 15
and the $0.8 billion of Federal National Mortgage Association 3^^
percent notes maturing August 23. This marked the first occasion
in recent jeeiYS on which the Treasury.used the cash refunding method,
in preference to giving holders of maturing obligations the exclusive
right to exchange th.eir old securities for new ones. . In order that
holders of the Federal National Mortgage Association maturities




90

1961 REPORT OF THE SECRETARY OF THE TREASURY

might have an opportunity to reinvest the proceeds, the Secretary
of the Treasury in behalf of the Association offered to purchase such
notes on August 15 at par. Funds for the retirement of the Treasury
and Federal National Mortgage Association notes were derived from
new issues totaling $8.9 billion, plus withdrawals from the cash balance.
Of the $9.6 billion of Treasury notes retired, $1.0 billion was charged
against the sinking fund. (Tables 41 and 42 give further information
on sinking fund operations.)
The new issues in August consisted of $7.8 bilhon of 1 1 ^ month
3K percent certificates to mature August 1, 1961, and $1.1 billion
of additional 3% percent Treasury bonds of 1968. Although no
exchange privileges were granted to holders of maturing secmities,
these owners were permitted to use their securities for downpayments
where required; they could also turn in their holdings in payment for
new securities allotted them.
Following the use of the advance refunding technique in the
junior operation of June 1960, the Treasury on September 9, 1960,
announced its first senior advance refunding. This was an offering
of three issues of 3K percent long-term bonds (two issues of new
securities to mature in 1980 and 1998, respectively, and additional
amounts of the 3Ks of 1990, first issued in February 1958) to holders
of four issues of wartime 2K percent Treasury bonds maturing between June 15, 1967, and December 15, 1969, outstanding in the
amount of $12K billion. An outside limit of $4.5 billion was placed
on the combined amounts of the 1990 and 1998 maturities issued to
the public. No limit was placed on the issue matm-ing in 1980.
The issue eligible for exchange into the 1980 maturity was the smallest
of the group of wartime 2Ks involved in the refunding operation.
In addition, it was largely held by commercial banks which are traditionally interested mainly in short-term holdings and thus were not
expected to subscribe heavily to the new and longer term exchange
offering.
Participants in this exchange were primarUy long-term investors
who were interested in extending the maturity of their holdings.
Subscriptions totaled $4 billion and were allotted in full. As a result
of this single operation the amount of outstanding Treasury bonds
with maturities beyond 15 years incr^aased by nearly one-half, from
$8.5 billion to $12.5 billion, and the g verage length of the marketable
public debt was extended from approximately 4 years 2 months to
4 years 9 months.
The financing operations of OctobBr were minor as compared with
those of August and September, and were confined entirely to the
short-term area. The first item on the program was a cash retirement
in the amount of $278 mUlion of the IK percent exchange notes due




REVIEW OF FISCAL OPERATIONS

91;

October 1, 1960. Following that, the Treasury on October 11 auc-i
tioned a 1-year bill in the amount of $1}^ billion, to replace the $2|
bUlion of bills coming due on October 17, thus continuing the Julyi
practice of cutting back somewhat the existing one-year bill maturities.;
At the same time, announcement was made of a $3K billion June,
1961 tax bill, subsequently auctioned on October 18.
;
Securities coming due on November 15 amounted to $10.8 bUlion,,
$7.0 billion 4% percent certificates and $3.8 billion 2% percent bonds.;
Holders of these issues were offered a 5}^-year 3% percent bond, to
mature M a y 15, 1966, and a 15-month 3% percent Treasury note
to mature February 15, 1962. About $10.3 billion of the November
15 maturities was exchanged for the new issues, $9.1 billion for the
note and $1.2 billion for the bond. The remaiaing $0.5 billion of
maturing securities was paid off in cash.
Shortly after this operation the Treasury announced an exchange
offering to holders of approximately $750 million Series F and G savr
ings bonds maturing in 1961. Owners of these maturing obligations
were offered in exchange marketable 4 percent Treasury bonds of
1969 (a reopening of bonds first offered in October 1957) at a price
of lOOK with certain interest and other adjustments as of December
15, 1960. The exchange offer was accepted by holders of $148 million
of the 1961 F and G maturities outstanding.
;
The first financing operation of the calendar year 1961 was th^
rollover of $1.5 billion of 1-year bUls which took place on January 1^.
The budget situation made it necessary for the Treasury to obtain
new cash, however, and this was done through increases of $0.5 billion in the regular weeldy bUl offerings during the period January 19
through February 2.
;
The Treasury's decision to raise new money at that time through
offerings of relatively short-term securities was further reflected in
the issuance of a 3K percent 18-month note on February 15, 1961.
Funds in the amount of $7.3 billion derived from this operation werle
used to redeem the $6.9 bUlion of 4% percent certificates coming due
on the same date and also to supply the Treasury with an extra $0.4
billion of cash for operating purposes, bringing to $0.9 billion the
amount of new money borrowed since January 1, 1961.
In mid-March the Treasury undertook its second junior advance
refunding. (The first had taken place in June 1960.) Holders of foiir
issues of outstanding Treasury bonds and notes maturing from June
15, 1962, through August 15, 1963, were offered in exchange two issues
of intermediate-term securities dated March 15, 1961, a 3^^ percent
Treasury bond to mature on November 15, 1966, and a S% percent
Treasury bond to mature on November 15, 1967. The Treasury
placed a limit of $5 bUlion on the aggregate amount of 3% percent
S14359—62

7




\

92

1961 REPORT OF THE SECRETARY OF THE TREASURY

bonds it would issue, and a limit of $3 billion on the 3% percent issue.
In all, subscriptions of $6.0 billion were received and were allotted in
full, $2.4 billion for the 5-year 8-month 3% percent bond and $3.6
billion for the 6-year 8-month S% percent bond. As a result of this
operation, congestion in the 1962 and 1963 maturity schedules was
significantly reduced at the same time that holders of short-term U.S.
Government securities were encouraged to lengthen their investments.
Shortly after the advance refunding operation was completed, the
Treasury turned to the bill market for meeting its current requirements for new cash. These were covered through a $1K billion issue
of Treasury tax anticipation bUls dated April 3, 1961, to be acceptable
in payment of income taxes due in September 1961, and by increases
totaling $0.3 billion in regular weekly bill offerings during March and
April. In addition, on April 15, the $2.0 billion one-year bill maturity
was rolled over in its entirety.
Plans for meeting the May 15 certificate and note maturities,
amounting to $7.8 billion, were announced late in April. To obtain
the funds for paying off these holders and to raise some additional
cash, the Treasury issued a total of $8.3 billion of new securities, $5.5
billion of 3 percent Treasury certificates to mature May 15, 1962, and
$2.8 billion of Sji percent Treasury notes to mature M a y 1963. As
before, in the cash refundings of August 1960 and February 1961,
owners of maturing securities were permitted to use their holdings to
make downpayments when required or to make pa3niients on securities allotted to them.
The $0.5 billion of new cash raised in this operation, together with
an $0.2 billion addition to regular weekly bills between M a y 4 and
M a y 11, was largely absorbed by increases in the cash balance. To
obtain new funds for current expenditures the Treasury again turned
to the bUl market, but by means of a novel operation designed to provide the necessary funds in a single financing and to give investors a
range of maturities. In this operation, regular weekly bills were increased by $1.8 billion, approximately $0.1 billion of which matured
each week over the 18-week period August 3-November 30, inclusive.
Subscriptions were required to be in units of $18,000, with a single
price submitted for each ^'strip'' of 18 maturities or multiple thereof.
The offering of strip bUls was the final financing operation of the fiscal
year.
The following tables summarize the financing operations during the
fiscal year and show the results of the public offerings of marketable
Treasury securities, excluding the refinancing of regular weekly bills.




93

REVIEW OF FISCAL OPERATIONS

For additional information see table 38 for allotments by investor
classes and the exhibits on public debt operations beguming on
page 233.
Public offerings of marketable Treasury securities excluding refinancing of regular
weekly bills, fiscal year 1961
[In millions of dollars]
Issued for cash
Date

Description of security

Issued in
exchange

For
For re- For ma- In adnew funding turing vance
money
issue refunding

Total

BONDS, NOTES, AND CERTIFICATES OF
INDEBTEDNESS

1960
Apr. 1
Aug. 15
Aug. 15
Oct. 1
Oct. 3
Oct. 3
Oct. 3
Nov. 15
Nov. 15
Dec. 15

13^% exchange note—Apr. 1,1965 i
___
31^% certificate—Aug. 1, 19613
3%% bond—May 15, 1968 additional 3
1}^% exchange note—Oct. 1,1965 1
31^% bond—Nov. 15, 1980
SH% bond—Feb. 15, 1990 additional
33^% bond—Nov. 15, 1998
3H% note—Feb. 15, 1962
3%% bond—May 15, 1966
.__
4% bond—Oct. 1,1969 additional at 1003^.

1961
Feb. 15
Mar. 15
Mar. 15
Apr. 1
IVEay 15
May 15

334% note—Aug. 15,1962 3
3H% bond—Nov. 15, 1966
3H% bond—Nov. 15, 1967
l ^ % exchange note—Apr. 1, li
3% certificate—May 15, 1962 3_.
3H% note—May 15,1963 3

2,078
1,042

2 408
5,751
28
315

9,098
1,213
4 148
387

3,268

643
993
2,343

3,670

2,438
«337
6 172

Total bonds, notes, and certificates

3,391
1,731

1,781
850

11,510

23,331

1,380
1,486

121
16

10,021

408
7,829
1,070
315
643
993
2,343
9,098
1,213
148
7,325
2,438
3,604
69
5,509
2,753
45, 758

BILLS e (MATURITY VALUE)

1960
Julv 13
July 15
Oct. 17
Oct. 21
1961
Jan. 15
Apr. 3
Apr. 15
June 14

2.823% 252-day (tax anticipation) Mar. 22,1961_.
3.265% 1 yr.—July 15, 1961.
___.
3.131% 1 yr.—Oct. 16, 1961-_..
2.788% 8 mo. (tax anticipation) June 22,1961
2.679% 1 yr.—Jan. 16, 1962
2.473% 172-day (tax anticipation) Sept. 22,1961
2.827% 1 yr.—Apr. 15, 1962
2.308% 109.6 day average for "strip"7
Increases in regular weekly bill offerings:
Jan. 19, 1961 through Feb. 2, 1961-.
500
Mar. 30, 1961 through Apr. 13, 1961
298
May 4,1961 through May 11,1961
201
Total biUs
Total public offerings..

3,512
3, 504

1,410
1,503
1,802

1,814

186

415
11, 320 6,090
12, 216 17, 600 23, 746 10,021

3, 512
1,501
1,502
3,504
1,502
1,503
2,000
1,802

17,825
63, 583

1 Issued only on demand in exchange for 2%% Treasury Bonds, Investment Series B-1975-80.
2 Issued subsequent to June 30,1960.
3 A cash offering (all subscriptions subject to allotment) was made for the purpose of paying off the maturing securities in cash. Holders of the maturing securities were permitted to present them in payment in
lieu of cash to the extent subscriptions were allotted. For further detail see exhibits 1-3.
4 Includes about $362,000 cash payment on exchange of Series F and G savings bonds.
6 Prorated on the basis of total amount of each secmity issued for cash.
8 Treasury bills are sold on a discount basis with competitive bids for each issue. The average price for
auctioned issues gives an approximate yield on a bank discount basis as indicated for each series.
^ Consists of additional amounts of eighteen series of outstanding regular weekly Treasury bills, approximately $100 million maturing each week from August 3 to November 30, 1961, inclusive.




94

1961 REPORT OF THE SECRETARY OF THE TREASURY

Disposition of marketable Treasury securities excluding regular weekly bills, fiscal year
1961
[In millions of dollars]
Security
D a t e of
refunding or
retirement

Description a n d m a t u r i t y date

Issue d a t e

E x c h a n g e d for
n e w security
Redeemed
for cash or
carried to
In admatured
A t ma- vance
debt
turity refund
ing

Total

B O N D S , N O T E S , AND CERTIFICATES OF
INDEBTEDNESS

1960
A u g . 15
Oct.
Oct. 3
Oct. 3
Oct. 3
Oct. 3
N o v . 15
N o v . 15
1961
F e b . 15
M a r . 15
M a r . 15
M a r . 15
M a r . 15
Apr. 1
M a y 15
M a y 15
June 1

m %
1^%
21^%
21.^%
21^%
2},i%
434%
2H%

note—Aug. 15, 1960
exchange note—Oct. 1, 1960
b o n d — J u n e 15, 19«2-67
b o n d — D e c . 15, 1963-68
b o n d — J u n e 15, 1964-69
b o n d — D e c . 15, 1964-69
certificate—Nov. 15, 1960
b o n d — N o v . 15. 1960

_...

4 ^ % certificate—Feb. 15, 1961__-_
2 H % b o n d — J u n e 15, 1959-62
2 H % b o n d — D e c . 15, 1959-62
2^^% n o t e — F e b . 15, 1963._.
,
2J^% b o n d — A u g . 15, 1963
1J4% exchange note—Apr. 1, 1961
4 % % certificate—May 15,1961
3 ^ % n o t e — M a y 15, 1961
3 % b o n d — J u n e 1, 1961 ( P a n a m a C a n a l
loan)

Aug.
Oct.
IVfay
Dec.
Apr.
Sept.
Nov.
Aug.

1,1959
1,1955
5,1942
1,1942
15,1943
15,1943
15,1959
15,1954

3,781
278

271
262

6,766
3,544

Feb.
June
Nov.
Apr.
Dec.
Apr.
May
Dec.

15,1960
1,1945
15,1945
15,1958
15,1954
1,1956
15,1960
1,1958

3,268

1 3, 670

June

1,1911

T o t a l b o n d s , notes, a n d certificates.

1 5,780
643
993
1,095
1, 248

1,293
1,180
1,131
2,438
144
3,599
1,523

175
1 2, 555

50

9,561
278
643
993
1,095
1,248
7,037
3,806
6,938
1,293
1,180
1,131
2,438
144
3,674
4,078
50

13,176

22, 390

10,021

1121
116

2,001
2,007

192

1,504
3,512
2,001
3,504

45, 587

BILLS

1960
J u l y 15
Oct. 17

4.728%—July 15, I960-.
4.860%—Oct. 17, I 9 6 0 -

Julv
Dec

15,1959
2,1959

1,880
1,991

1961
J a n . 15
M a r . 22
A p r . 15
J u n e 22

5.067%—Jan. 15, 1961
2.823% (tax anticipation) M a r . 2 2 , 1 9 6 1 . . .
4.608%—Apr. 15, 1961
2.788% (tax anticipation) J u n e 22, 1 9 6 1 . . .

Jan.
July
Apr.
Oct.

15,1960
13,1960
15,1960
21,1960

1,412
2 3, 512
1,815
2 3, 504

T o t a l bills
T o t a l securities.
Accepted in p a y m e n t in lieu of cash.
I n c l u d i n g t a x a n t i c i p a t i o n issues r e d e e m e d for taxes,.




14,114
27, 290

1186
415
22,805

10,021

14,529
60,016

95

REVIEW OF FISCAL OPERATIONS

Allotments of marketable Treasury securities other than regular weekly bills, fiscal
year 1961 i
[In millions of dollars]
Allotments by investor classes

Date of
financing

Amount
issued

Issue—description of security and
maturity date

U.S. Government
investment
Commer- All others
accounts
cial banks 2
and
Federal
Reserve
Banks

BONDS, NOTES, AND CERTIFICATES OF
INDEBTEDNESS

1960
Aug. 15
Aug 15
Oct. 3
Oct. 3
Oct. 3
Nov. 15
Nov. 15
Dec. 15

3H% certificate—Aug. 1,1961-C
3^^% bond—May 15, 1968 additional
31^% bond—Nov. 15, 1980...
31^% bond—Feb. 15, 1990 additional
31^% bond—Nov. 15, 1998...
31/4% note—Feh. 15, 1962-F
3%% bond—May 15, 1966....
4% bond—Oct. 1,1969 additional

1961
Feb. 15
Mar. 15
Mar. 15
May 15
May 15

314% note—Aug. 15,1962-G....
ZH% bond—Nov. 15, 1966.
3H% bond—Nov. 15, 1967..
3% certificate—May 15, 1962-A
3H% note—May 15,1963-D__

1960
Julv 13
July 15
Oct. 17
Oct. 21
1961
Jan. 15
Apr. 3
Apr. 15
June 14

-...

7,829
1,070
643
993
2,343
9,098
1,213
148

5,641
25
131
216
236
5,102
6

(*)

797
644
96
54
117
1,698
821
2

1,491
501
416
723
1,990
2,298
386
146

7,325
2,438
3,604
5.509
2, 753

3,605
39
560
1,818
837

1,518
1,714
1,664
2,004
907

2,202
685
1,380
1,687
1,009

2.823% (tax anticipation)—Mar. 22,1961...
3.265%—July 15, 1961
3.131%—Oct. 16, 1961
2.788% (tax anticipation)—June 22,1961-._

3,612
1,601
1,502
3,504

236
S2

3,476
612
723
3,463

36
653
697
41

2.679%—Jan. 15, 1962..
2.473% (tax anticipation)—Sept. 22, 1961...
2.827%—Apr. 15, 1962
2.308%—"strip" 3

1,602
1,503
2,000
1,802

651
• 1,492
896
1,792

648
11
778
10

BILLS

203
"326"

* Less than $500,000.
1 Excludes 13^% Treasury EA and EO notes issued in exchange for nonmarketable 2M% Treasury Bonds
Investment Series B-1976-80.
2 Includes trust companies and stock savings banks.
3 Consists of additional amounts of eighteen series of outstanding regular weekly Treasury bills, approximately $100 million maturing each week from August 3 to November 30, 1961, inclusive.




96

1961 REPORT OF THE SECRETARY OF THE TREASURY

Seasonal and other cash borrowing during the first half of the fiscal
year brought the public debt up to levels not far from the temporary
ceiling of $293 biUion. The peak of $291.0 biUion for the first half year
was reached on October 24, 1960. In the second half of the fiscal
year the debt subject to limitation rose to a new peak of $291.7 billion
on June 14, 1961. On June 30, 1961, a temporary increase of
$13 billion was authorized for the fiscal year 1962, bringing the total
authorization for the new fiscal year up to $298 billion. For further
detail on the statutory limit on the public debt and guaranteed obligations as of June 30, 1961, see table 33, and for a summary of amendments to the law limiting the debt see table 34.
The decline of $1.0 billion in interest-bearing public nonmarketable
securities during the year was due principally to the reduction in
Series B investment bonds as a result of exchanges of these securities
for marketable 5-year 1% percent exchange notes. In addition, the
Postal Savings System redeemed $0.1 billion Series B investment bonds
at par to provide funds to meet withdrawals of postal savings deposits.
Beginning on July 1, 1960, the Treasury made avaUable exclusively
to borrowers from the Rural Electrification Administration an issue
of bonds to yield 2 percent per annum. This arrangement provides
REA borrowers with a means for investing their general cash funds
not needed for immediate operating purposes at a rate of interest
equal to that charged by the Government on REA loans. The bonds,
which may be purchased to the extent the individual borrower wishes,
have a 12-year maturity but may be redeemed by the holder in whole
or in part on 30 days' notice. On June 30, 1961, REA series bonds
were outstanding in the amount of $19 million.
The largest portion of the public nonmarketable debt is in U.S.
savings bonds, which are demand securities redeemable at guaranteed
redemption values. Although savings bonds of various series have
been continuously on sale since March 1935, Series E and Series H
are the only savings bonds currently being sold. These series were
outstanding on June 30, 1961, in the amount of $43.8 billion, representing 15 percent of the total interest-bearing debt. This was an increase
of $1.1 billion for the year, the largest annual increase in Series E
and H bonds outstanding since 1956. Series F, G, J, and K bonds,
which are no longer being sold, decreased by $1.1 billion during the
year. This decline includes the exchange of $0.1 billion of Series F
and G bonds maturing in the calendar year 1961 for the 4 percent
marketable bond of 1969. The total interest-bearing savings bonds
outstanding of all series at the close of fiscal 1961 was $47.5 bUlion,
approximately the amount of a year earlier.




97

REVIEW OF FISCAL OPERATIONS
Class of security

June 30,1960

June 30,1961

Increase,
or decrease (—)

In billions of dollars
United States savings bonds:
Series E
Series H

37.5
5.3

37.8
6.0

.4
.7

Subtotal E and H
Series F and G
Series J and K

42.7
2.8
2.0

43.8
1.8
1.9

1.1
— 1.0
-. 1

47.5

47.5

6.8
.2

.1

- —.1
1.0

54.5

53.5

-1.0

Subtotal savings bonds
Treasury bonds:
REA series _ .
_
Investment series
Depositary bonds..

_ _
._ _ .
..

Total interest-bearing public nonmarketable issues

(*)
(*)

*Less than $50 million.

In March 1961, the Secretary of the Treasury announced a second
ten-year extension for Series E bonds issued between May 1941 and
M a y 1949. Beginning May 1, 1961, as these bonds enter their
second extended maturity they earn a straight S% percent interest per
annum, compounded semiannually. Details of this new regulation
may be found on pages 274-292.
Sales of the smaller denomination E bonds ($200 and under) in
fiscal 1961 were approximately 1 percent above those of fiscal 1960,
while sales of the larger denomination E and H bonds were up 8 percent from last year. Detailed information on savings bonds from
their inception on March 1, 1935, through June 30, 1961, is given in
tables 43 through 46.
OWNERSHIP OF FEDERAL SECURITIES

Private nonbank investors held an estimated $143.3 billion of
Federal securities at the end of fiscal 1961, almost one-half of the
$289.2 bUlion total Federal debt outstanding. Private nonbank
investors comprise individuals (including partnerships and personal
trust accounts), insurance companies, mutual savings banks, savings
and loan associations, nonfinancial corporations, pension funds, foreign and international accounts. State and local governments, and
nonprofit associations. Commercial banks and Federal Reserve
Banks together held $89.8 billion, representing nearly one-third of
the debt. The remaining $56.1 billion of debt was held by Government investment accounts, primarily in social security and unemployment trust funds, veterans' insurance funds, and Government retirement funds. These figures are graphically presented in chart 9.
During fiscal 1961 the total public debt outstanding increased $2.7
billion. The banking system increased its holdings by $8.0 billion
while private nonbank investors decreased their holdings by $6.0
billion. Government investment accounts rose by $0.8 billion.
Ownership of Federal securities by investor classes on selected dates
is presented in the following table.



98

1961 REPORT OF THE SECRETARY OF THE TREASURY

Ownership of Federal securities i by investor classes on selected dates, 1941-61
[Dollars in billions]

Estimated ownership by:
P r i v a t e n o n b a n k investors:
Individuals 3
I n s u r a n c e companies
M u t u a l savings b a n k s
Corporations*.S t a t e a n d local g o v e r n m e n t s
Miscellaneous investors ^
T o t a l p r i v a t e n o n b a n k investors .
F e d e r a l G o v e r n m e n t i n v e s t m e n t accounts
Commercial banks
F e d e r a l 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

.

Change
J u n e 30, d u r i n g fis1961
cal year
1961

J u n e 30,
1941

F e b . 28,
1946 2

J u n e 30,
1960

$11.2
7.1
3.4
2.0
.6
.7

$64.1
24.4
11.1
19.9
6.7
8.9

' $68.4
^2.0
6.6
'20.7
'18.8
'22.7

$64.3
11.4
6.3
19.4
18.7
23.2

$-4.1
—.6
-.3
—1.3
-.1
.6

25.0
8.5
19.7
2.2

135.1
28.0
93.8
22.9

' 149. 3
56.3
'55.3
26.6

143.3
56.1
62.5
27.3

—6.0
.8
7.2
.7

56.3

279.8

286.5

289.2

2.7

P e r c e n t of t o t a l
P e r c e n t owned b y :
P r i v a t e n o n b a n k investors:
Individuals _
Other
Total
Federal Govprnrnpnt invp.stmp.nt anooiints
Commercial banks
Federal Reserve Banks
T o t a l gross d e b t o u t s t a n d i n g

20
25

23
25

24
28

22
28

45
15
36
4

48
10
34
8

62
'20
'19
9

50
19
22
9

100

100

100

100

' Revised.
1 Gross public debt, and guaranteed obligations of the Federal Government held outside the Treasury.
2 Immediate postwar peak of debt.
8 Includes partnerships and personal trust accounts. Nonprofit institutions and corporate pension trust
funds are included under "Miscellaneous investors."
4 Exclusive of banks and insurance companies.
«Includes savings and loan associatious, nonprofit institutions, corporate pension trust funds, dealers
and brokers, and investments of foreign balances and international accounts in this country.

Within the nonbank sector, individuals decreased their holdings
of Federal securities by $4.1 billion, from $68.4 billion in June 1960
to $64.3 billion in June 1961; however, they still remained the largest
single investor group in the Federal debt ownership structure.
Individuals increased their holdings of Series E and H savings
bonds (the only series currently being sold) by $1.0 billion during
fiscal 1961, to an alltime high level of $43.6 billion which represented
two-thirds of the total ownership of Federal securities by individuals.
Their holdings of the discontinued Series F, G, J, and K savings
bonds declined by $0.6 billion during the fiscal year 1961, and holdings
of other Government securities, mainly marketable issues, were
reduced by $4.6 billion. Many individual investors were less attracted to marketable Government securities during the fiscal year
as new issue coupon rates receded from the high levels of fiscal year
1960 and as investment interest focused upon other outlets for funds.
Federal securities held by insurance companies on June 30, 1961,
totaled $11.4 billion, a decrease of $0.6 billion diu*ing the year.




99

REVIEW OF FISCAL OPERATIONS
CHART 9

OWNERSHIP OF THE PUBUC DEBT, JUNE 30J96I
TOTAL

Gov't. Invest.
Accounts

Nonbank Investors

Bonks

$Bii.
.56x

^^Individuals
200

'2'^

^ Savings
Instifufions

IOO

Comi
Federal
Reserve

'.Life insurance companies owned $6.3 billion, or 55 percent, of the
total insm-ance holdings of Federal securities at the end of the fiscal
year. The life insurance group accounted for a $0.3 billion decrease
in insurance companies' holdings, and almost all of this decrease was
in the nonmarketable Series B investment bonds (exchanged for
marketable IK percent exchange notes which, in turn, were sold in
the market). The average length^ of life insurance holdings of marketable securities increased from 12 years 3 months to 16 years 7 months.
This was an increase of 4 years 4 months over the 12-month period
in contrast to a decline of 2 months during the previous fiscal year.
This sharp reversal was primarily due to the exchange of $0.9 billion
of 2){ percent bonds, issued during World War I I , and now approaching maturity, for long-term 3K percent bonds in the advance refunding of October 1960.
Fire, casualty, and marine insurance companies decreased their
holdings of marketable securities during the year by $0.3 bUlion and
their nonmarketables by $0.1 billion. The drop in nonmarketables
was attributed to the liquidation of savings bonds holdings as well
as Series B investment bonds. The average length of the marketable
securities held by this group at the. end of fiscal 1961 was 5 years 9
months, a drop of 2 months during the year.
1 In deriving average length figures all marketable securities are classified to final maturity, except partially tax-exempt bonds which are classified to earliest call date.




100

1961 REPORT OF THE SECRETARY OF THE TREASURY

At the end of fiscal 1961 mutual savings banks held $6.3 billion of
Federal securities, $0.3 bUlion less than on June 30, 1960. The greatest portion of this reduction, or $0.2 billion, was in the marketable
area. However, the average length of marketable securities held
by mutual savings banks increased 20 months during the fiscal year
from 8 years 10 months to 10 years 6 months. Savings banks also
participated strongly in the advance refunding of October 1960,
taking $0.8 billion of the new long-term issues.
Federal securities held by nonfinancial corporations were $1.3
billion lower at the end of fiscal 1961 than the $20.7 biUion held on
June 30, 1960, Corporations continued to hold relatively large
amounts of Governments during the year and did not liquidate
sharply as in the 1958 recession.
Holdings of Federal securities by State and local governments are
estimated to be $18.7 billion at the close of the fiscal year, a level
$0.1 billion lower than that of June 1960. Over one-third of the
Federal security holdings of these State and local governmental units
are in employee retirement funds. In July 1960 the Treasury Department added a number of the larger State and local governments
to the regular monthly Survey of Ownership of U.S. Government
Securities. Tabulations of these holdings were published with the
other survey groups in the February 1962 Treasury Bulletin.
The holdings of all other private nonbank investors amounted to
$23.2 billion on June 30, 1961, an increase of $0.5 billion. Foreign
balances invested in Federal securities decreased $0.3 billion to a
level of $8.1 billion on June 30, 1961. International institutions
increased then* holdings by $0.7 billion as the International Monetary
Fund acquired $0.3 billion of marketable Treasury securities and
$0.3 bUlion of special notes, and the International Development
Association acquired $0.1 bUlion of secmities.
Savings and loan associations increased their holdings of Federal
securities during the fiscal year by $0.4 billion. On June 30, 1961,
marketable securities of approximately 500 large savings and loan
associations had an average length of 8 years 11 months, an increase
of 3 months over the June 30, 1960, amount.
Holdings of the remaining classes in this group of private nonbank
investors (nonprofit associations, dealers and brokers, corporate
pension funds, and certain smaller institutional groups) are estimated
to have decreased $0.2 billion during the fiscal year.
Government investment accounts increased their holdings of Federal
securities by $0.8 biUion. The largest increases in holdings were
registered by Government employee retirement funds ($1.1 billion),
the Federal disabUity insurance trust fund ($0.3 biUion), and the
highway trust fund ($0.2 billion). Offsetting reductions in holdings




101

REVIEW OF PISCAL OPERATIONS

were made by the unemployment trust fund ($0.9 billion), and the
Federal old-age and survivors insurance trust fund ($0.2 biUion). Of
the $56.1 billion Federal securities held by Government investnient accounts on June 30, 1961, $45.0 billion, or more than 80 percent, was in
the form, of special issues held only by these accounts. Details on the
ownership by Government ia vestment accounts are shown in tables
64-88.
The change in holdings of the banjking system during the fiscal year
consisted of an increase of $7.2 billion in commercial bank holdings
and a $0.7 billion increase on the part of the Federal Reserve System.
The commercial bank change consisted of a $7.4 billion increase in
holdings of marketable securities and a $0.2 biUion decline in nonmarketables. Of the commercial bank increased holdings. New York
City central reserve city banks accounted for $2.2 billion, Chicago
central reserve city banks $0.4 biUion, reserve city banks $3.0 billion,
and country and nonmember banks $1.6 billion. The average length
of marketable securities held by commercial banks on June 30, 1961,
was 2 years 9 months, a decrease of 11 months from that as of^June 30,
1960.
An analysis of the estimated changes during fiscal 1961 in bank
versus nonbank ownership is given by type of issue in the following
table. A summary of the Treasury survey of ownership of the
iaterest-bearing public debt and guaranteed obligations for fiscal 1961
is shown in table 55.
Estimated changes in ownership of Federal securities ^ by type ofissue, fiscal year 1961
[In billions of dollars]
Change accounted for b y Total
changes

Marketable securities:
Treasury bills;
13-week
26-week
_1
Tax anticipation
Other Treasury biUs

_!__

Total bills
Treasury certificates of indebtedness
Treasurynotes
1
.
Treasury bonds, etc
Total marketable

_.
._.
.

._.

_._

_

Nonmarketable securities, etc.:
U.S. savings bonds
Special issues to Government investment accounts
___
___
Treasury bonds, investment series
Other
__
_
Total nonmarketable, etc
Total change. ._

_

Private Govern- Commer- Federal
nonbank ment incial
Reserve
investors vestment banks
Banks
accounts

1.7
1.1
1.5
-1.0

-1.0
.1
1.2
-2.1

3.3
-4.3
4.8
-.4

-1.8
-3.3
.7
-1.0

3.4

-6.5

(*)

.1

.1
-1.0
.2

-.8
.2

-.7

-.5

2.7

-6.0

-.1
.1

2.4
.9
.3
.7

(*)
(*)—.1

.4
-.2
-.6
1.1

4.4
1.2
3.0
-1.2

-2.0

.7

7.4

".4

(*)

.4

.3
1.6
.8
.7

-•1

.1
-.1
-.1

(*)

-.2
.8

7.2

.7

* Less than $50 million.
1 Gross public debt, and guaranteed obligations of the Federf ll Governnlent held o utside the Treasury.




102

1961 REPORT OF THE SECRETARY OF THE TREASURY
Taxation Developments

Major taxation developments during the year included: Consideration by the Committee on Ways and Means of the House of Representatives of the proposals in the President's tax message of April 20,
1961, for an investment credit to improve the competitive status of
American industry and for the elimination of certain defects in the
tax system; revision of the social security system to meet problems
caused by the high level of unemployment and the inadequacy of
benefit levels; securing of additional tax revenues to finance completion of the interstate highway system; and work on administrative
revision of depreciation schedules.
Presidential tax recommendations

The President's tax message (exhibit 12) proposed a credit against
income tax for investment in new plant and equipment. Specifically,
the credit would be 15 percent of all new plant and equipment expenditures in excess of current depreciation allowances; 6 percent of
such expenditures in excess of 50 percent, but not over 100 percent,
of depreciation allowances; with 10 percent of the first $5,000 of new
investment as a minimum credit. The investmentfl credit was
proposed to encourage investment in capital equipment needed to
accelerate economic growth and to make American industry more
effective in competing in^international markets. Measures to correct
certain defects and inequities in the tax structure also were recommended. These changes would provide revenue gains to offset the tax
reduction involved in the investment credit.
These suggestions were advanced only as a first step toward tax
reform. The President also directed the Secretary of the Treasury
to undertake the research and preparation of a comprehensive tax
program to be placed before the next session of the Congress. The
aim of this program is to provide a broader and more uniform tax
base, a more equitable tax structure, and a simpler tax law.
The President's immediate suggestions for correction of defects included : Revisions in the tax provisions with respect to foreign income
which favor U.S. private investment abroad compared with investment in our economy; withholding of income tax on dividend and in-




REVIEW OF FISCAL OPERATIONS

103

terest income; repeal of the dividend credit and exclusion; limitations
on business expense deductions for travel, entertainment, and gifts;
withdrawal of capital gains tax treatment on the sale of depreciable
property to the extent of depreciation taken; legislation to assure the
current taxation of the income of cooperatives at either the cooperative or patron level; and taxation of mutual fire and casualty insurance companies on a basis similar to stock companies. With the aim
of assuring nondiscriminatory treatment, a review was recommended
also of the provision allowing mutual savings banks and savings and
loan associations an income tax deduction for bad debt reserves.
Tax administration features of the tax message included a request
for legislation to authorize the use of taxpayer account numbers to
facilitate the growing task of tax collection and enforcement falling
upon the Internal Revenue Service. The President also reiterated a
previous request for additional tax personnel while pointing out that,
among other things, he had directed the Internal Revenue Service to
increase emphasis on reviewing taxpayers' inventory accounts because manipulation of inventories had become a frequent method of
avoiding taxes.
In addition the President pointed out that Government revenue
needs required extension of corporation income and excise tax rates
otherwise scheduled for reduction or termination on July 1, 1961.
Finall}^, he recommended that all aviation fuel be taxed to recover
from civil aviation a share of the costs of the Federal airways system.
This tax proposal involved extension of the current 2-cents per gallon
rate on aviation gasoline to jet fuels for fiscal 1962, and thereafter an
annual increment of tax of one-half cent a gallon.
Legislation to carry out the President's recommendation for the
extension of the corporate income and certain excise tax rates beyond
their scheduled expiration dates was embodied in Public Law 87-72,
approved June 30, 1961. The law continues for one year, until July 1,
1962, the 52 percent corporate income tax rate and the present rates
of excise tax on distUled spirits, beer, wine, cigarettes, passenger cars,
automobile parts and accessories, on general telephone service, and the
transportation of persons. The effect of this legislation on the
Government's revenues is shown in detail in the following table.




104

1961 REPORT OF THE SECRETARY OF THE TREASURY

Estimated net increase in revenue ^ resulting from extension of present corporation
income and excise tax rates for one year beyond June 30, 1961
[In millions of dollars]
Increase in receipts
Tax

Scheduled r a t e
reduction

1962
C o r p o r a t i o n income tax
Excise taxes:
Alcohol:
DistiUed spirits

62% to 47%
$10.60 to $9.00 per
gallon.
$9.00 to $8.00 per
barrel.
Various ^

Beer
Wmes
T o t a l alcohol taxes
Tobacco:
Cigarettes (small)
M a n u f a c t u r e r s ' excise taxes:
Passenger a u t o m o b i l e s
P a r t s a n d accessories
automobiles.

for

T o t a l m a n u f a c t u r e r s ' excise taxes.
Miscellaneous excise taxes:
General telephone service

T o t a l increase in receipts

ex-

1963

$1, 000

2 $1,000

$2,000

170

3

173

130

76

1

77

8

9

9

6

255

4

269

143

$4.00 to $3.60 per
thousand.

230

4

234

23

10% to 7% of m a n u facturers' price.
8% to 5% of m a n u facturers' price.

334

73

407

60

66

13

79

400

86

486

366

119

485

116

25

141

482

144

626

1,367

238

1,605

226

2,367

1,238

3,606

226

10%, repeal J u l y 1,
1961.
T r a n s p o r t a t i o n of persons - _. 10% to 5%
T o t a l miscellaneous
cise taxes.
T o t a l excise taxes

Decrease
in refunds
F u l l year (1962 o n l y )

Fiscal year

1 At levels of income estimated for the calendar year 1961 and fiscal year
2 Includes small receipts in succeeding years.
3 Sparkling wines (champagne)
Artificially carbonated wines
Still wines:
Not more than 14% alcohol
More than 14%, not over 21% alcohol
More than 21%, not over 24% alcohol
Wine liqueurs or cordials produced domestically containing over 23^^%
wine, which wine contains over 14% alcohol (in lieu of rectification
tax)

60

1962.
$3.40 to $3.00 per gallon.
$2.40 to $2.00 per gallon.
17 cents to 15 cents per gallon.
67 cents to 60 cents per gallon.
$2.26 to $2.00 per gallon.
$1.92 to $1.60 per gallon.

No action was taken by the Congress on the President's proposal
for a tax on aviation fuel, but the Committee on Ways and Means
directed the interested executive departments to make a study of the
consequences of the aviation fuel tax proposal for the airliaes industr}^
and also of the impact of the transportation of persons tax on the
transportation industries aff'ected by it. This study was later consolidated into a broader review of the transportation situation which
the President asked the Secretary of Commerce to undertake.
The President's investment credit proposal and recommendations
to eliminate defects and inequities, except with respect to mutual
savings banks and savings and loan associations, were amplified and
supported by Secretary of the Treasury Dillon before the Committee
on Ways and Means of the House on May 3, 4, and 5, 1961. On




REVIEW OF FISCAL OPERATIONS

105

July 14, 1961, Secretary Dillon sent to the committee a report on the
taxation of mutual savings banks and savings and loan associations.
The committee conducted 24 days of public hearings in May and
June on the recommendations of the President. Oral testimony was
received from 217 witnesses. In August, two further days of public
hearings were devoted to the taxation of mutual savings banks and
savings and loan associations.
Executive sessions of the committee on the President's recommendations for an investment credit, withholding of interest and dividends,
etc., lasted 25 days. Although the committee took no final action on
the proposals, except with respect to taxpayer account numbers,
certain tentative decisions were made for the purpose of having
statutory language drafted and were embodied in a ^^discussion"
draft and made available for public review. On August 23 Chairman
MUls announced that the committee had found it impossible to conclude its deliberation of the President's tax recommendations during
the current session, but that consideration of the program would be
the first order of business in the next session of this Congress.
The President's proposal for taxpayer account numbers was handled
as a separate item by the Congress and enacted as Public Law 87-397,
approved October 5, 1961. The adoption of a nmnber system will
make possible a greatly expanded use of automatic data processing
equipment by the Internal Revenue Service and will enable the
Service to bring together all tax data for any one taxpayer. For this
purpose social security numbers will be used not only by persons who
already have them, but also by the remainder to whom numbers will
be assigned.
Unemployment compensation, social security, and pensions

On February 2, 1961, the President sent a message to the Congress
proposing a program to restore momentum to the American economy.
Among the measures suggested to aid in economic recovery were:
A temporary program for extending the duration of benefits under
the unemployment insurance system; expansion of the program of aid
to dependent children to include the children of needy unemployed
parents; and a five-point program to increase the adequacy of benefits,
and to relax the eligibility rules for benefits under the old-age and
survivors, and disability insurance programs.
The Temporary Extended Unemployment Compensation Act of
1961, Public Law 87-6, was approved March 24, 1961. Public Law
87-31, approved May 8, 1961, made Federal grants available for the
period M a y 1, 1961-June 30, 1962, to States to extend aid to dependent
children of unemployed parents on the same basis as Federal grants
for State aid programs for chUdren deprived of parental support by




106

1961 REPORT OF THE SECRETARY OF THE TREASURY

death, absence, or incapacity of a parent. The Social Security
Amendments of 1961, Public Law 87-64, were approved June 30, 1961.
The Temporary Extended Unemployment Compensation Act of
1961 provided extended benefits up to 13 weeks of total unemployment to workers who had exhausted their rights under State programs
and under Federal unemployment compensation programs for exservicemen and Federal employees. Payments may be made to
unemployed persons who have exhausted their benefit rights under
State programs after June 30, 1960, and before April 1, 1962, for
weeks of unemployment ending before July 1, 1962. The law also
provided that to the extent a State pays unemployment compensation
for more than 26 weeks of total unemployment in the benefit year,
the State will be reimbursed for the number of weeks it pays in excess
of 26, up to a maximum of 13.
The cost of the program is to be financed by advances from the
Treasury to be repaid by temporarily increasing the net Federal
unemplo3niient tax from 3.1 percent to 3.5 percent on the existing wage
base of $3,000 for calendar years 1962 and 1963. The credit against
Federal tax for contributions to State unemployment funds is to be
limited by assuming a 3 percent Federal tax rate.
The Social Security Amendments of 1961 included the following
provisions: An increase from $33 to $40 in the minimum monthly
retirement benefit to persons retiring at or after age 65 and in the
monthly disability benefit, with proportionate increases for dependents
and survivors; provision for payment of retirement benefits to men
at age 62, at their option, with reduced benefits; liberalization of the
insured status requirements to provide that a worker is fully covered
if he has one quarter of coverage for every year elapsing after 1950,
or after the year in which he attained age 21 if later, and up to the
year of disability, death, or attainment of age 65 for men and age 62
for women; an increase in aged widows', widowers', and parents'
benefits from 75 to 82.5 percent of the worker's retirement benefit; and
liberalization of the earned income limitation to increase from $300
to $500 the area in which onl}^^ half of earnings above $1,200 are treated
as excess earnings.
The cost of increased benefits is to be financed by: An increase
in the contribution rates oi ji oi 1 percent each for employees and
employers, with corresponding increases for self-employed persons,
and by advancing one year, to 1968, the time at which the ultimate
scheduled contribution rate becomes effective. For the calendar
year 1962, the employee and employer tax rate will be 3^8 percent of
the first $4,800 of covered wages, and the self-employment tax wiU
be 4.7 percent of the first $4,800 of self-emplo3mient income for any
taxable year beginning in 1962.




REVIEW OF FISCAL OPERATIONS

107

Other provisions included an increase in the Federal matching
maximum for old-age assistance and aid to the blind and permanently
and totally disabled; provision for expenditure of Federal funds for
temporary assistance to certain U.S. nationals who have returned
from foreign countries as a result of war or similar crisis and are
without immediately available resources; extension of the time in
which State and local government employees who did not elect
coverage under a divided retirement system may change their decisions; the addition of New Mexico to the list of States which are permitted to divide their retirement systems; and the permitting of
survivors of ministers or Christian Science practitioners who died after
September 12, 1960, and before April 16, 1962, to elect coverage of the
minister or practitioner in certain circumstances if the election is
made on or before April 15, 1962.
Public Law 87-285, approved September 22, 1961, changed the
eligibility requirements for benefits under the Railroad Retirement
Act to bring them in line with the changes in eligibility requirements
for benefits under the Social Security Amendments of 1961.
Extension of the social security system to include a health insurance
program for all persons aged 65 or over who are eligible for social
security or railroad retirement benefits was recommended by President
Kennedy in a message to the Congress on February 9, 1961. The
program would be financed by an increase in social security contributions oi Yi oi 1 percent by both employers and employees and by an
increase in the maximum taxable earnings base from $4,800 a year
to $5,000. Services to be provided would include inpatient hospital
services up to 90 days for a single illness, nursing home services up
to 180 days immediately after discharge from a hospital, and certain
hospital outpatient and home nursing services. The Committee on
Ways and Means held hearings for nine days in JiUy and August
1961 on H.R. 4222, which incorporated the President's recommendations. Although the bill was not reported by the committee, the
Congress incorporated in Public Law 87-31 (aid to dependent children)
a provision increasing from $12 to $15 the maximum average medical
care expenditures per recipient per month in behalf of old-age
assistance recipients with respect to which there will be Federal
participation.
Public Law 87-321, approved September 26, 1961, was designed to
prevent the imposition of a double tax in the case of the Federal and
State unemplo}niient taxes, arising from a variation in the definition
of ^^employer" between the Federal and State laws. Under prior law,
when a trade or business changed hands within the first 20 weeks of
the year, the predecessor employer was not treated as an '^employer"
for purposes of the Federal unemployment tax, but generally was so
ei4359—62

8




108

1961 REPORT OF THE SECRETARY OF THE TREASURY

considered for most State unemployment compensation taxes. As
a result, the first employer usually had to pay the State tax in such
cases, and the second had to pay the full Federal tax without the
credit usually available for the State tax paid by the first. This law
makes the usual credit available in such cases.
Proposals to permit self-employed persons and employees not
covered by pension plans to postpone tax on a part of their earned
income set aside in specified ways for retirement purposes have been
actively considered by the Congress for a nimiber of years. This
year a plan to allow self-employed people to be covered by voluntary
pension plans was passed by the House of Representatives as H.R. 10.
The Senate Finance Committee reported an amended version of
the bill which contained a number of technical changes suggested by
the Treasury. During the course of the hearings on this bill before
the Senate Finance Committee, the Treasury recommended (exhibit
15) that legislation dealing with the tax treatment of the retirement
savings of self-employed people be deferred until it can be considered
in the perspective of the entire tax reform program which the President directed the Treasury to prepare. The Treasury also stated
that legislation related to the self-employed was not desirable without
also considering the present treatment of owner-managers and
executives.
Highway financing

Revised cost estimates for the interstate highway system having
revealed the inadequacy of anticipated revenues of the highway trust
fund to permit the scheduled completion of the system in 1972,
President Kennedy sent the Congress a message on February 28, 1961,
requesting higher taxes for highway users. The President's proposals
were designed to contain the construction schedule on a pay-as-you-go
basis, as originally planned. He opposed any further diversion of
general fund revenues to highwa,y use, including the congressional
action in 1959 which provided for transfer of part of the revenues
from the taxes on manufacturers' sales of passenger automobiles and
automobile parts and accessories to the highway trust fund for the
fiscal years 1962-64. In support of the President's proposal Secretary
Dillon appeared at public hearings of the Committee on Ways and
Means on March 14, 1961. (See exhibit 14.) Under Secretary
Fowler represented the Treasury before the Senate Finance Committee
on June 6, 1961.
The Federal-Aid Highway Act of 1961, PubHc Law 87-61, approved
June 29, 1961, provides additional revenues that will make possible
completion of the interstate highway system in 1972, the date originally contemplated. Revenue changes in the law will bring into the




REVIEW OF FISCAL OPERATIONS

109

highway trust fund an additional $9.7 billion over the life of the program in addition to transferring back to the general fund $2.5 billion
in revenues attributable to the taxes on passenger cars and automobUe
parts which, under prior legislation, would have been transferred to
the trust fund in the fiscal years 1962-64.
The legislation: Continued until October 1, 1972, the 4-cents per
gallon rate on gasoline, diesel fuel, and special motor fuels which had
been scheduled to be reduced to 3 cents per gallon on June 30, 1961;
increased the tax on tires for highway-type vehicles from 8 to 10 cents
a pound, on inner tubes from 9 to 10 cents a pound, and on tread
rubber from 3 to 5 cents a pound; raised the annual tax on highway
vehicles with a gross weight of more than 26,000 pounds from $1.50 to
$3 for each 1,000 pounds and provided for payment of the tax on a
quarterly basis; dedicated to the highway trust fund the entire revenues
received after June 30, 1962, from the manufacturers' tax on trucks,
buses, and trailers; continued the highway trust fund for an additional three months to October 1, 1972, with all taxes dedicated to the
fund continued at present rate levels for the additional three months;
exempted from tax gasoline which is sold for nonfuel purposes in the
manufacture of another article; and imposed floor stocks taxes of 2cents per pound on tires and tread rubber and 1-cent per pound on
inner tubes, except tubes for bicycle tires which were held for sale on
July 1, 1961.
In considering this legislation, the Committee on Ways and Means
directed the Treasury Department to make a study analyzing various
aspects of the truck weight tax. The House and Senate Conference
Committee requested the Treasury to conduct a study of the loss of
gasoline by retail dealers through shrinkage, evaporation, or other
causes.
Depreciation developments

Progress was made in two important areas of depreciation reform
to encourage modernization and expansion of the productive machinery
and equipment of the Nation's industry: A recommendation for legislation for an investment credit to supplement depreciation allowances,
and urgent studies looldng toward administrative updating and
revision of depreciation schedules in the light of current conditions.
The investment tax incentive credit proposal outlined by the
President in his tax message of April 20 was later tentatively approved
by the Committee on Ways and Means for inclusion in its public
discussion draft in the form of an 8 percent credit against tax on
investments in most types of machinery and equipment. In making
this recommendation, the President also indicated that a review of
depreciation rules and methods was underway in the Department,




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1961 REPORT OF THE SECRETARY OF THE TREASURY

as a part of its overall tax reform study, to determine what changes
were appropriate.
„ _
„
_
A preliminary report: by the Department on'~January 5, 1961,
summarized findings of a questionnaire survey of a cross section of
American industry, previously initiated in cooperation with the
Small Business Administration, to obtain information on the operation
of existing depreciation provisions of the tax law, asset lives, the
adequacy of existing allowances, and the feasibility of alternative
approaches to reform. (See the 1960 Annual Report, page 52.)
This preliminary report dealt primarily with the portions of the survey
questionnaire relating to depreciation practices, the extent of adoption
of the new liberalized depreciation methods previously authorized by
the 1954 Internal Revenue Code, and respondents' views on alternative changes in depreciation rules. Subsequently, the Department
carried forward an intensive study of tabulations from the statistical
schedules included in the survey as a basis for realistic revision of the
lives of capital assets to reflect existing practices and technological
obsolescence.
Information from the Treasury depreciation survey bearing on depreciation revision was supplemented with tabulations of depreciable
lives of property from tax returns for 1959, special engineeriag studies
conducted by the Internal Revenue Service, and a general review of
obsolescence trends and rate of loss of economic usefulness of depreciable property.
On May 2, 1961, the President dh'ected the Treasur}^ Department
to review the depreciation schedules for textile machinery as part of
a program developed by a Cabinet committee to deal with problems
of the textile industry. This jDriority study of depreciation allowances
provided the basis for a revision of suggested average useful lives for
major types of machinery and equipment used in the textile industry,
published by the Internal Revenue Service in Bulletin ^^FJ^ The
revision was announced by the President on October 11, 1961. Estimated average useful lives suggested in Bulletin ^^i^" for most textile
machinery and equipment were reduced from 25 years or longer to
15 years, and in some cases, 12 years. Similar studies were continued
for all sectors of industry. On December 6, 1961, Secretary Dillon
announced the initiation of special engineeriag studies of six major
industries as part of this review. The industries included were aircraft and parts manufacturers, automobile manufacturers, electrical
machinery and equipment manufacturers, metalworking machinery
and machine tools, raihoads, and steel mills.
As part of its depreciation studies, the Department also examined
ways in which the application of the depreciation allowances might
be simplified so as to minimize controversy between the taxpayers




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111

and the Internal Revenue agents. Tentative decisions by the Committee on Ways and Means in the development of a draft bill incorporating the President's tax recommendations included a provision
relaxing the existing rule on salvage by permitting estimated salvage
up to 10 percent of an asset's cost to be disregarded in computing
depreciation on machinery and equipment. This proposed change in
the treatment of salvage value was facilitated by a Presidential recommendation, the substance of which was included in the draft bill with
respect to personal property, for the taxation of gain on dispositions
of depreciable propert}^ as ordinary income to the extent of depreciation
previously taken on the property.
Miscellaneous legislation

Public Law 87-15, approved March 31, 1961 (which amended and
extended the Sugar Act of 1948), postponed the termination of the
tax on manufactured sugar from September 30, 1961, to December 31,
1962, and provided that floor stocks refund shall apply to manufactured sugar held by importers for sale on December 31, 1962, rather
than September 30, 1961, if claim for such refund is filed on or before
March 31, 1963.
Enacted at the request of the President as a step toward the improvement of this country's ability to defend its gold reserves. Public
Law 87-29, approved May 4, 1961, provided an exemption from tax
for income derived by a foreign central bank of issue from U.S. Government obligations, but only if the obligations are not held for or
used in connection with commercial banking functions or other commercial banking activities. The exemption is effective with respect
to income received in taxable years beginning after 1960. A Senate
amendment revised the provision relating to the time within which
shareholders of a small business corporation can consent to having it
treated as a partnership. Where a husband and wife hold shares as
community property, the period for filing consent by one spouse shall
not expire prior to May^l5, 1961, if the other filed a timely consent
for a taxable year of the corporation beginning before January 1, 1961.
PubUc Law 87-59, approved June 27, 1961, included a provision
extending for two years (1960 and 1961) the period within which
certain stock life insurance companies may make deductible distributions to shareholders in acquisition of stock pursuant to a plan of
mutualization adopted prior to January 1, 1958.
Public Law 87-109, approved July 26, 1961, was designed to
offset the decision of the Supreme Court in Automobile Club of
Michigan v. Commissioner (1957) and provided that membership
organizations may elect to report prepaid dues income over the
period during which there is a liabUity on the part of the organizations
to provide the service, rather than in the year in which the dues are




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1961 REPORT OF THE SECRETARY OF THE TREASURY

received. The liabUity must extend beyond the current year but
not for more than 36 months. The provision applies only to membership organizations having no capital stock and making no distributions
of net earnings. A transitional rule is provided designed to spread
over a period of years the Government's loss of revenue as the result
of the change in reporting. Taxpayers may elect the reporting method
for taxable years beginning with the calendar year 1961.
The Mutual Educational and Cultural Exchange Act of 1961,
Public Law 87-256, approved September 21, 1961, provided that
students wbo are not candidates for degrees may exclude from gross
income scholarship and fellowship grants by a foreign government,
international organization, and certain binational or multinational
organizations to the same extent as was previously provided for
grants made by domestic organizations and governmental units in
the United States; made nonimmigrant alien students and certain
trainees, teachers, etc., temporarUy present in the United States
subject to tax on U.S. income (generally the taxable portion of
scholarships and feUowships) at income tax rates applicable to citizens
(with conforming changes in withholding) rather than the minimum
30 percent rate generall}^ applicable to nonresident aliens not engaged
in trade or business; and excluded from gross income compensation
paid by a foreign employer to a nonresident alien while he is temporarily in the United States as a nonimmigrant student, trainee,
etc. Services perforrned by such individuals as part of their educational, teaching, or training programs are not to be considered
employnient for purposes of social security and unemployment
compensation taxes.
Public Law 87-293, approved September 22, 1961, provided specific
measures for the taxation of civUian oflicers and employees of the
Governnient under the Peace Corps Act. Certain aUowances are
excluded from taxable income; the tax on income from back pay
reported in the current year is limited to the tax that would have
been due on the pay if received and taxed in the year to which it is
attributable; and payments for services (other than termination
payments) are excluded from the deflnition of ^Vages" for income
tax withholding purposes, The head of the Federal agency having
control of the Peace Corps services wUl make the determinations as
to whether services of volunteers constitute '^employm«ent" for,
purposes of the taxes imposed by the Federal Insurance Contributions
Act; wUl determine the amount of their remuneration which constitutes ^Vages" for such purposes; and will make returns and payrnents of such taxes.
Manufacturers of brick and tUe clay and any other shale, where
the finished produpt is the first comraercially marketable product,




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113

are permitted under Public Law 87-312, approved September 26j
1961, to base their percentage depletion for all open taxable years
beginning before January 1, 1961, upon the value of the finished or
end product. For the purpose of computing the depletion, the
^'gross income from the property" shall be 50 percent of the gross
income from the finished product but not more than $12.50 for each
ton of clay or shale used in the finished product. Public Law 87-321
(see section on social securit}^) incorporated a provision that, for
open past years, ordinary treatment processes in the case of quartzite
and clay mined and used by the mine owner or operator in production
of refractory products may include crushing, grinding, and separating
the mineral from waste, but shall not include any subsequent process.
In addition the section provided a method of determining the value
of each ton of such quartzite and clay used in the production of
refractory products. To have these new provisions apply, the taxpayer must make an election which would be effective on and after
January 1,1951, for all open taxable years beginning before January 1,
1961. These two laws modify the effect of the Supreme Court
decision in Cannelton Sewer Pipe Co. v. United States (see the 1960
Annual Report, page 51).
A system of a,nnuities for surviving widows and dependent chUdren
of judges of the Tax Court of the United States was provided by
Public Law 87-370, approved October 4, 1961. Included in the law
is a provision which extended, for taxable years beginning after
December 31, 1957, to annuities purchased by employers for employees
of public school systems the same tax treatment granted annuities
purchased for employees by organizations exempt under section
501(c)(3) of the Internal Revenue Code as charitable, religious,
and educational organizations.
Administration, interpretation, and clarification of tax laws

During the fiscal year, the Treasury Department published 81
Treasury decisions, 6 Executive orders, and 59 notices of proposed
rulemaking relating to tax matters. All previously pubUshed regulations under the 1954 Code relating to income taxes, employment
taxes, and procedure and administration were republished with the
incorporation of technical revisions.
Enactment of the Dealers Reserve Adjustment Act of 1960 (26
U.S.C. 481 note) required the prompt issuance of temporary regulations relating to the methods of computing and paying the tax permitted b}^ the act. One new major regulation under the 1954 Code was
completed on miscellaneous stamp taxes. Other Treasury decisions
published concerned the definition of partnerships, corporations,
associations and trusts, the manner of computing the income tax
for life insurance companies, the definition of '^scientific" for purposes




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1961 REPORT OF THE SECRETARY OF THE TREASURY

of determining whether certain organizations are exempt from income
tax, and the requirement of bonds for certain importers of motor
vehicles.
Notices of proposed rulemaking were published during the year
relating to: The documentary stamp tax; carrj^overs in certain
corporate acquisitions; real estate investment trusts; prepaid subscription income; and distributions by bank holding companies.
The Secretary of the Treasury appeared before the Committee on
Ways and Means on May 3, 1961, to detail the administration's
tax program. He submitted as part one of a four-part document
on expense accounts a preliminary report of a study undertaken
pursuant to the request in the Public Debt and Rate Extension Act
of 1960 (26 U.S.C. 162 note) concerning the results of the Internal
Revenue Service's accelerated enforcement program relating to
deductions as business expenses of expenditures for entertainment,
gifts, dues, or initiation fees in social, athletic, or sporting clubs or
organizations. The report was based on special examinations of
some 38,000 business tax returns claiming such deductions.
International Financial and Monetary Developments
Measures to strengthen the U.S. balance-of-payments position, efforts to increase the amount and the effectiveness of iaternational
capital provided for the advancement of the less-developed areas of
the world, and consideration of the need to improve international
monetary arrangements dominated U.S. Government activities in
international finance during the fiscal year. The Treasury Department worked actively hi these and related fields. The National
Advisory Council on International Monetary and Financial Problems,
of which the Secretary of the Treasury is the chairman, continued,
in accordance with its statutory authority, to coordinate the policies
and operations of the representatives of the United States on the
international financial institutions of which the United States is a
member and of all agencies of the Government which make or participate ia making foreign loans, or which engage in foreign financial,
exchange, or monetary transactions.
The U.S. balance of payments has been in deficit for a number of
years, and the large deficits ia the calendar years 1958, 1959, and
1960 were settled in part by sizable outflows of gold. An hnprovement in the trade balance ia 1960 was offset by an outflow of shortterm funds aggravated by speculative forces. U.S. determination to
seek solutions to its balance-of-payments problem along lines consistent with its international obligations and policies, and in fuU
recognition of the position of the doUar as an essential cornerstone




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115

in the international flnancial system of the free world, was made clear
by President Eisenhower in the closing weeks of 1960. President
Kennedy, in a message to the Congress on February 6, 1961, on
balance of payments and gold, reaflSrmed these objectives and outlined a comprehensive program for restoring balance in the international payments position of the United States, with respect to the
problems both of correcting the persisting basic deflcit and of meeting
short-term demands on reserves. The Secretary of the Treasury has
undertaken general coordinating responsibility for the measures to be
carried out by the various departments and agencies, as directed in
the President's message.
Two new international flnancial institutions, in the establishment
of which the United States had taken an active part, commenced
lending operations during the flscal year. The International Development Association, as an affiliate of the International Bank for Reconstruction and Development, provides development credits on flexible
terms to less-developed areas within its membership, using funds
subscribed on the basis of systematic budgetary contributions by all
members. The Inter-American Development Bank, which employs
a variety of instruments designed to stimulate the process of economic
development among its members in the Western Hemisphere, was
designated as the primary mechanism for administering funds for
social development to be provided by the United States within the
framework of the new Alliance for Progress. The Alliance was announced by the President in March 1961, as an invitation to the
Latin American nations to cooperate through their own self-help
measures in renewed efforts to promote economic development and
social justice. The Alliance for Progress among the American Republics is to be implemented under the terms of the Charter of Punta
del Este, signed at a special meeting of the Inter-American Economic
and Social CouncU held at Punta del Este, Uruguay, in August 1961.
Major efforts were made during the year to bring about a greater
and more united drive among the free industrialized nations to assist
the less-developed nations on a long-term basis to achieve selfsustained growth. The President, in March 1961, recommended
to the Congress a revision in the organization of U.S. foreign aid
and in its basic concepts of operation. These concepts included a
new stress on long-term planning and flnancing based on development
programs for individual countries and special attention to nations
willing to undertake necessary internal reforms and self-help measures.
He also called upon the other industrialized nations to join the
United States in a common effort to assist the developing countries.
As one element in this common effort, the United States became a




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1961 REPORT OF THE SECRETARY OF THE TREASURY

member of the Organization for Economic Cooperation and Development which came into being on September 30, 1961. Membership in
the OECD also provides the United States with a framework for
carrying out intensive and frequent international consultations with
the other industrialized countries on economic and financial policies.
As the result of these and other consultations, progress was made
during the fiscal year toward a better coordinated and a more stable
pattern of international interest rate relationships, and cooperative
arrangements were worked out for stabilizing exchange markets.
Consideration of specific improvements in international monetary
arrangements led to the proposal by the Managing Director of the
International Monetary Fund, Per Jacobsson, that each of the
principal industrial countries commit itself to lend its currency to
the Fund to insure that sufficient amounts would be available should
balance-of-payments pressures involving these countries ever impair
or threaten to impair the smooth functioning of the world payments
system.
The annual meetings of the Boards of Governors of the International Bank for Reconstruction and Development and its affiliates,
the International Finance Corporation and the International Development Association, and of the International Monetary Fund were
held in Vienna, Austria, September 18-22, 1961. Secretary of the
Treasury Dillon, in his capacity as U.S. Governor of these institutions, headed the U.S. delegation. The delegation included Under
Secretary of State George Ball, the Alternate U.S. Governor, and Under
Secretary of the Treasury for Monetary Affairs Robert V. Roosa,
Assistant Secretary of the Treasury John M. Leddy (U.S. Executive
Director of the I B R D ) , and Special Assistant to the Secretary Frank
A. Southard, Jr. (U.S. Executive Director of the Fund), as Temporary
Alternate Governors. The delegation also included members of the
House Banking and Currency Committee, other members of the
National Advisory Council on International Monetary and Financial
Problems, members of the Council of Economic Advisers, other
officials of the executive branch, the President and Vice President
of the Federal Reserve Bank of New York, and the Charge d'Affaires
of the American Embassy in Vienna.
On September 20, 1961, Secretary Dillon addressed the meeting
of the Governors of the International Monetary Fund in connection
with the discussion of the Fund's Annual Report (see exhibit 26).
As is customary in the U.S. Governor's address to the Fund, Secretary
Dillon reviewed the domestic economic situation in the United States
and recent developments relating to the U.S. balance of payments.
In his statement the Secretary supported the suggestion by the
Fund's Managing Director regarding borrowing arrangements between




REVIEW OF FISCAL OPERATIONS

117

the Fund aiid the principal industrial countries to provide needed
supplementary resources to the Fund. There was support in principle
on the part of the other Governors for this suggestion, and it was
the consensus that the specific arrangements necessary for carrying
the borrowing plan into effect could be formulated in the course of
the ensuing months.
The U.S. balance of payments and gold and dollar movements

The U.S. balance oJ payments.—In the fiscal year 1961, the overall
balance-of-payments deficit of the United States, as measured by
changes in gold and convertible currency holdings Of U.S. monetary
authorities and in liquid liabilities of banks and monetary authorities
in the United States to foreigners, amounted to $2.7 billion. This
compared with an overall deficit of $3.3 billion in fiscal 1960. (Excluding prepayments on foreign countries' indebtedness to the U.S.
Government amounting to $724 million in fiscal 1961 and $285 million
in fiscal 1960, the overall deficit in fiscal 1961 was $3.4 billion compared with $3.5 billion in fiscal 1960.)
Although our overall payments position thus showed some improvement in fiscal 1961 as compared with 1960, most of the $600 million
decrease in the overall deficit represented the excess of special debt
service prepayments to the U.S. Government in 1961 over those in
fiscal 1960. The maintenance of the deficit near the high level of
the previous year resulted from a very large outflow of private shortterm capital from the United States. This outflow, which is taken
to be roughly equivalent to the net movements of U.S. private shortterm capital, foreign commercial credits to the United States, and
transactions not otherwise accounted for (errors and omissions),
totaled $2.6 billion in. flscal 1961 in contrast to less than $400 million
in 1960. This rise in short-term capital outpayments tended to
cloak the very impressive improvement made in our other accounts,
particularly in our merchandise trade.
Our underlying payments position, aside from the short-term capital
movements, is measured by the '^basic balance," i.e., the balance On
all recorded transactions exclusive of U.S. private short-term capital
outflow and foreign commercial credits to the United States. The
basic deflcit of the United States was only $37 million in flscal 1961
($761 million exclusive of debt service prepayments) as compared with
a basic deflcit of $2.9 bUlion in flscal 1960 ($3.2 bUlion exclusive of
prepajnnents). As noted above, the overall deflcit in flscal 1961 was
much larger than the basic deflcit.
The substantial improvement in our basic position ia fiscal 1961
refiected the very large increase in our merchandise trade surplus.
Our nonmUitary merchandise exports rose by $1.7 bUlion to $19.7




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1961 REPORT OF THE SECRETARY OF THE TREASURY

billion and our imports declined by $1.6 bUlion to $13.9 billion.
Thus our merchandise export surplus, at $5.8 billion, was substantially
more than double the $2.5 billion export surplus of 1960. In both
years, approximately $2 billion of our merchandise export surplus
reflected U.S. exports flnanced under various foreign economic
assistance programs of the U.S. Government.
Our military expenditures abroad in each of the flscal years 1960
and 1961 were slightly over $3 billion. U.S. receipts on other current
account items such as investment income, military goods sales, travel
and transportation, and royalties and license fees, rose by about
$465 million in flscal 1961 over 1960, while U.S. payments for such
items and for remittances and pensions rose b}^ only about $65 million,
accounting for a further improvement of about $400 million in our
basic accounts.
U.S. private direct and portfolio investment abroad, however,
increased by about $430 million, amounting to $2.6 billion in fiscal
1961. Some $370 million of the increase was ascribable to a single,
large direct investment transaction involving cash payments. At
the same time, U.S. receipts from foreign long-term capital inflow
declined by about $360 million, amounting to $275 mUlion, Thus,
our long-term private investment accounts resulted in net outpayments to foreigners of almost $800 mUlion more in flscal 1961 than in
1960.
Gross U.S. Government foreign economic assistance rose by $500
mUlion, to a total of $3.6 bUlion in flscal 1961, reflecting a higher level
of aid to the less-developed countries. A substantial part of the
increase arose from an expansion of assistance in the form of U.S.
surplus agricultural products which contributed to the higher U.S.
merchandise trade surplus.
Thus, our net receipts from our larger merchandise export surplus
and on our invisible accounts totaled $3.8 billion more in flscal 1961
than those in fiscal 1960, while the increase in our net outpayments to
foreigners on public and private long-term capital accounts (exclusive
of special foreign debt service prepayments to the U.S. Government)
totaled about $1.4 billion. The net improvement in our basic
accounts, excluding the improvement due to larger prepayments on
foreim indebtedness fto ithe U.S. % Government iin fiscal 1961 over
fiscal 1960, amounted to $2.4 billion (the difference between our basic
deficits of $761 million in fiscal 1961 and $3.2 bUlion in fiscal 1960).
In accordance with the U.S. policy of buying and selling gold at
$35 per fine ounce (exclusive of handling charges) in transactions with
foreign governments, central banks, and under certain conditions
international institutions, for the settlement of international balances
and other legitimate monetary purposes, net monetary sales of gold




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119

during the fiscal year amounted to $1,730 million (see table 111),
$187 million of which is attributable to the period January-June 1961.
In a statement before the Subcommittee on International Exchange
and Payments of the Joint Economic Committee of Congress, June 19,
1961 (see exhibit 25), the Secretary described recent developments of
the U.S. balance of payments, pressures which have arisen in the
principal exchange markets, and some of the specific steps that have
been taken to deal with exchange market pressures. (Other statements by the Secretary on the balance-of-payments situation are
presented in exhibits 18 and 21.)
Gold and dollar movements.—The gold and liquid dollar assets of
foreign countries (excluding gold holdings of the U.S.S.R., other
Eastern European countries, and China Mainland) amounted to an
estimated $39.8 billion as of June 30, 1961. Of this amount, official
gold reserves were $20.8 billion, official and private short-term dollar
assets held with banks in the United States were $17.5 billion, and
estimated official and private holdings of U.S. Government bonds and
notes were $1.4 billion. The total represented an increase of $2.4
billion over the estimated $37.4|billion^heldasjof^une;30,11960 |(see
table 112).
Western European countries increased their gold and liquid dollar
assets during fiscal 1961 by $2.3 billion; the largest gain ($1.3 billion)
was made by Germany. Asiatic holdings rose by $344 million, and
reflected a gain of $508 million by Japan. Canadian holdings increased by $160 million. Latin America, on the other hand, experienced a decline of $284 million. The holdings of the rest of the world
decreased by $90 million.
The gold and liquid doUar assets held by international institutions
rose by $872 million, from a total of $6.6 billion at the end of flscal
1960 to $7.5 billion at the end of flscal 1961.
The estimated official gold holdings of the world (excluding the
U.S.S.R., other Eastern European countries, and China Mainland)
were $40.9 billion as of June 30, 1961. Of this amount, the United
States held $17.6 bUlion and international institutions $2.5 billion.
Treasury foreign exchange reporting system.—Data relating to
capital movements between the United States and foreign countries
have been collected by the Treasury Department since 1935. The
data are obtained from monthly reports by banks and brokers and
quarterly reports by nonfinancial concerns to the Treasury Department through the Federal Reserve Banks. The reports provide
information on liabUities to foreigners, claims on foreigners, and
securities transactions with foreigners, and constitute the basis for
statistics on the doUar holdings of foreign countries and international




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1961 REPORT OF THE SECRETARY OF THE TREASURY

institutions and other statistics on capital movements which enter
into the U.S. balance of payments.
Because of the increasing importance of these statistics in the
formulation of U.S. Government policies, a program was instituted
during the fiscal year to enlarge the coverage and to improve the
reliability of the reports. This program has included: Conferences
with Federal Reserve Banks and reporting institutions to review
reporting problems and the operation of the reporting system; special
surveys of particular reporting problems; the introduction of systems
of obtaining rapid reports of summary data; and steps to acquaint
increasing numbers of prospective reporters with the reporting requirements. These actions were part of a continuing program to insure
the reliabUity of these capital movements statistics.
Gold holdings oj U.S. citizens abroad.—On January 14, 1961, the
President issued an Executive order prohibiting the holdings by U.S.
citizens and enterprises, and by other persons subject to the jurisdiction of the United States, of gold situated abroad and of securities
representing gold on deposit abroad. The order further amended
Executive Order No. 6260 of August 28, 1933, under which citizens
are forbidden to hold gold in the United States. The order, as
amended, was implemented by an amendment to the Treasury Department's Gold Regulations, which afforded existing American
holders of gold abroad, and of securities representing gold on deposit
abroad, a reasonable period of time until June 1, 1961, to dispose of
their holdings. The prohibition of such holdings abroad, where
purchases generally represent an outflow in the U.S. balance of
payments, underlines the fact that gold today represents principally
a means of settling international payments between individual foreign
countries. The amendment of the Executive order was undertaken
within the administration's comprehensive program to work toward
equilibrium in the U.S. balance of payments.
y^Foreign exchange stabilization operations

Operations in exchange markets.—Under the conditions of convertibility of the major world currencies, international money markets
have again become closely interconnected, and liquid funds are free
to flow in large volume between these markets in response to differentials in interest rates and speculative considerations. When
interest rates in the United States and Europe diverged substantially
in mid-1960, a broad stream of short-term capital moved from New
York to London and other European money centers in search of
higher short-term rates. The magnitude of this capital movement
resulted in an appreciable increase in the outflow of gold from the
United States. This in turn brought on a speculative outbreak in




REVIEW OF FISCAL OPERATIONS

121

the private gold market in London in October 1960. When European
authorities lowered their discount rates, the flow of short-term capital
slowed and confldence was gradually restored.
In accordance with the President's balance-of-payments program,
the United States took the initiative in developing a framework for
close consultation with European authorities to discuss financial questions of mutual interest, including the disequilibrating movements of
liquid funds. In April 1961a working party on international payments
problems was established as a subcommittee of the Economic Policy
Committee of the Organization for European Economic Cooperation.
This worldng party continues within the new Organization for Economic Cooperation and Development. Under Secretary for Monetar}^
Affairs Robert V. Roosa headed the U.S. delegation to meetings of
this group in April and May.
Following the revaluations of the German mark and the Dutch
guilder in early March 1961, the United States decided to undertake
limited operations in forward exchange markets to contain speculative
movements of capital and prevent them from forcing either an undesirable and unnecessary change in exchange rates or a reversion to
exchange controls.
In addition to these new operations in the forward market, the
Treasury, through the facilities of the Federal Reserve System, and
in cooperation with authorities abroad, also began to acquire modest
holdings of foreign exchange which could be sold in the spot market
should the dollar again come under pressure. The United States thus
acquired some deutsche mark in connection with the prepayment by
Germany_of'$587 million of its official "debt to'the United States. The
Tr'easury also acquired certain other convertible currencies. In order
to indicate clearly the increased strength and flexibility of the U.S.
reserve position, the Treasury now includes holdings of convertible
foreign exchange as well as gold in the reports of U.S. monetaiy assets
(see table 113).
Treasury exchange and stabilization agreements.—During the flscal
year the Treasury exchange agreement with Argentina was renewed
and exchange agreements with Chile and Brazil were signed. As of
June 30, 1961, agreements were in force with four countries, Ai^gentina,
Brazil, Chile, and Mexico, in the total amount of $210 million.
The $50 million exchange agreement with Argentina was renewed
for an additional year on January 6, 1961. (See exhibit 30.) Under
this agreement Argentina may request the U.S. Exchange Stabilization
Fund to purchase Argentine pesos which must subsequently be repurchased by Argentina with dollars. In 1959 the Exchange Stabilization Fund purchased the equivalent of $25 million in Argentine
pesos for U.S. doUars. During the fiscal year the Central Bank of




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1961 REPORT OF THE SECRETARY OF THE TREASURY

Argentina repurchased $11 miUion in Argentine pesos, leaving an
outstanding balance of $14 million as of June 30, 1961.
On February 10, 1961, a $15 miUion, one-year exchange agreement
was signed with Chile. (See exhibit 31.) Concurrent announcements
were made of agreements for additional support from other public
and private sources, including a $16 million drawing from and a $75
miUion standby arrangement with the International Monetary Fund,
a $15 million Export-Import Bank credit, and $30 milUon in shortterm credits from a group of private U.S. banks.
A two-year, $70 million exchange agreement with BrazU was announced on May 17, 1961, as a part of financial facilities provided
Brazil by the United States, the International Monetary Fund, and
various European countries. (See exhibit 23.) New U.S. credits
were announced, totaling $338 million including: $168 million from
the Export-Import Bank, $100 million from the new aid agency, subject
to congressional authorization, and the $70 million Treasury exchange
agreement. Brazilian payments to the Export-Import Bank of
approximately $305 mUlion were also rescheduled. Simultaneous
announcement was made of an agreement with the International
Monetary Fund for a standby arrangement of $160 mUlion and for
rescheduling of $140 mUlion of Brazilian obligations to the Fund.^
Subsequent negotiations with European countries resulted in arrange-y
ments for rescheduling of existing indebtedness, increases of shortterm bank credit lines, and arrangements for new standby credits.
The International Monetary Fund.—Financial assistance extended
by the International Monetary Fund during the fiscal year totaled
$567 million, taking the form of drawings by 21 members, against
their quotas in the Fund, of the currencies of other members needed
to assist in meeting an unbalanced payments position. Nearly all
drawings were, as in other recent years, under standby arrangements
negotiated in advance with the Fund whereby the Fund assures the
member that drawings up to specified amounts during a specified
period may be made, usually without further consultation. As during
the previous fiscal year, when member drawings amounted to $247
million, the call upon the Fund's resources reflected the persistent
payments problems of nonindustrial countries, and most drawings
were made in connection with stabilization programs newly adopted
or continued as the result of Fund consultations. As of June 30,
1961, there were in effect 16 standby arrangements providing potentially about $709 million, of which $552 million remained available
to the countries participating. Repurchases by member countries
against earlier drawings, and other members' drawings which had
the effect of repurchases, resulted in total repayments of about $589
mUlion during the fiscal year. WhUe over half represented the com-




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123

pletion of repayments by the United Kingdom and France, a substantial amount was repaid by nonindustrial countries.
For the first time in any comparable period the amount of U.S.
dollars drawn ($192 million) was smaller than the amount of other
currencies drawn ($375 million). In December 1958 the major
nondollar currencies had been made externally convertible and thereby became more useful to other countries in financing international
transactions; as a consequence some of these currencies began to be
drawn more widely from the Fund.
During the current fiscal year, in February and March 1961, eleven
member countries agreed formally to give up the transitional arrangements provided in the Fund Articles of Agreement and to accept all
of the obligations of Article VIII, including approval of the Fund
prior to imposing restrictions on payments. Thus at the present
time nearly all currencies used to finance international trade and payments are under Article VIII and may be used to make repayments
to the Fund.
During the fiscal year the Fund began to hold periodic voluntaiy
discussions with member countries which have accepted the obligations of Article VIII. The United States has agreed to participate
in these consultations, which provide an opportunity for the Fund,
as well as for the member, to exchange views on the course of domestic
and international financial developments, looking toward a greater
degree of monetary cooperation among countries whose currencies
are used in international transactions. Also during this period the
Fund clarified the meaning of the Articles of Agreement with respect
to the use of Fund resources for helping to meet those deficits in the
balance of payments of members that go beyond the current account
and are attributable, in whole or in part, to capital transfers. It was
agreed that, in accordance with Article VI and the other provisions
of the Articles, the Fund's resources can be used for mitigating the
unfavorable effects of capital transfers.
Programs for financing economic development

The Act jor International Development.—On September 4, 1961, the
Congress approved legislation providing a new framework and new
goals for U.S. foreign aid. The Act for International Development of
1961 (Part I of Public Law 87-195, 22 U.S.C. 2151) was enacted on the
basis of recommendations by the President in his special foreign aid
message to the Congress on March 22, 1961, and his subsequent
submission of detailed legislative proposals. Among the primary
reasons for seeking the new legislation was the desire to center in a
single agency the responsibility of administering assistance in a variety
of forms in support of long-range development programs, based upon
the self-help efforts of the developing countries themselves. The
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1961 REPORT OF THE SECRETARY OF THE TREASURY

development lending provisions of the act require that dollar loans be
repaid exclusively in dollars, although other terms may be flexible.
The Secretary appeared before the Senate Foreign Relations Committee on June 5, 1961, and before the House Foreign Affairs Committee on June 21, 1961, in support of this legislation. (See exhibit
24.)
The administrative provisions of the new legislation provide for the
abolition of the Development Loan Fund as a corporate entity and of
the International Cooperation Administration. The Secretar}^ of
State, under the direction of the President, is to be responsible for the
continuous supervision and general direction of the assistance programs authorized by the act; the primary responsibUity for administering development loans, grants, technical cooperation, investment
guarantees, and other development and supporting assistance under
the new legislation is to be placed within the newly formed Agency for
International Development. Loans of foreign currencies formerly
made by the Export-Import Bank pursuant to section 104(e) of the
Agricultural Trade Development and Assistance Act of 1954, as
amended (7 U.S.C. 1704(e)), will also be administered by the new
Agency.
The Alliance jor Progress.—At a White House reception for Ambassadors of the Latin American countries on March 13, 1961, President Kennedy called upon the people of the hemisphere to join in an
''Alliance for Progress," a cooperative effort to satisfy basic needs for
homes, work, land, health, and schools. He proposed that the Latin
American governments formulate long-term development plans, suggested further cooperation in the areas of commodity problems and
economic integration, called for continued cooperation in hemispheric
defense and arms control, and proposed an expansion of the food for
peace program and of scientific, technical, and cultural exchanges.
He indicated that he expected shortly to ask for convocation of a
special meeting of the Inter-American Economic and Social CouncU
at the ministerial level. The President referred to his request for
appropriations under the legislation approved on September 8, 1960
(22 U.S.C. 1942), which authorized $500 million for an Inter-American
Program for Social Progress (and which also authorized $100 mUlion
for reconstruction in Chile of facilities damaged by earthquake).
(See exhibit 28.) This legislation had enabled the U.S. delegation to
assume the initiative in discussions about social and economic development at the third meeting of the Special Committee of the Organization
of American States held in Bogota, Colombia, in September 1960.
On March 14, 1961, the President transmitted a message to the
Congress requesting the appropriation of the $500 million authorized
for the Inter-American social progress program. He proposed that




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125

$394 million be administered by the Inter-American Development
Bank, that $100 million be allocated to the International Cooperation
Administration or its successor, and that $6 million be made available
for use by the Organization of American States. Secretary DUlon
appeared before the Foreign Operations Subcommittee of the House
Appropriations Committee on March 20, 1961, and before the Senate
Appropriations Committee on April 28, 1961, in support of the request.
(See exhibit 20.) The appropriation bill (Public Law 87-41) was
signed on May 27, 1961. The administration of the $394 million was
entrusted to the Inter-American Development Bank under the Social
Progress Trust Fund Agreement, which was signed by President
Kennedy and Mr. Felipe Herrera, President of the Bank, on June
19, 1961.
The Special Meeting of the Inter-American Economic and Social
Council at the Ministerial Level met at Punta del Este, Uruguay, in
August. The U.S. delegation was headed by Secretary Dillon.
Major items on the agreed agenda of the conference were: Planning
for economic and social development, Latin American economic integration, export commodity market problems, annual review (progress
reports on economic and social development), and information and
public relations. The Charter of Punta del Este, formulated at the
conference, defined the aims of the Alliance for Progress and set forth
the major goals for a ten-year program of social and economic progress
in Latin America, involving internal reforms and public and private
help from outside sources.
The Inter-American Development Bank.—The Inter-American Development Bank, in which the United States and all the Latin American Republics except Cuba have become members, commenced its
business operations on October 1,1960. Under its ordinary operations,
the Bank is empowered to assist in financing productive economic development projects through loans repayable in the currency lent.
The resources of the Fund for Special Operations are available for
loans on terms and conditions appropriate for dealing with special
circumstances arising in particular countries or with respect to specific
projects. In addition to direct loans and guarantees, an important
function of the Bank is to provide technical assistance for the preparation, financing, and implementation of development plans and
projects.
The Bank will have resources equivalent to $959.5 million, including
$381.6 million in paid-in capital, $431.6 million in callable capital,
and $146.3 million in contributions to the Fund for Special Operations.
Half of the subscriptions to ordinary capital and of the contributions
to the Fund for Special Operations are payable in gold and/or U.S.
dollars, and half in the currency of the member country. The sub-




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1961 REPORT OF THE SECRETARY OF THE TREASURY

scriptions to paid-in capital are payable in three installments of 20
percent, 40 percent, and 40 percent respectively. The contributions
to the Fund for Special Operations are payable in two equal installments. The first installments, both on subscriptions to capital and
on contributions to the Fund, were payable by September 30, 1960.
(The United States paid its installments, totaling $80 million, in
June 1960.) The second installment on subscriptions to capital, and
the second half of contributions to the Fund were due October 31,
1961, and the final installment of 40 percent of capital subscriptions
will be due October 31, 1962. An appropriation of $110 million to
meet the required U.S. payments due October 31, 1961, was contained
in the foreign aid appropriation bill approved by the Congress on
September 30, 1961 (Public Law 87-329). (The United States paid
its installments in October 1961.)
Secretary Dillon, as U.S. Governor, headed the U.S. delegation to
the Second Meeting of the Board of Governors of the I D B , held in
Rio de Janeiro, BrazU, AprU 10-14, 1961. (See exhibit 19.) The
delegation included Assistant Secretary of the Treasury John M.
Leddy and Assistant Secretary'- of State for Economic Affairs Edwin
M. Martin as Temporary Alternate Governors, and Special Assistant
to the Secretary of the Treasury Robert Cutler (the U.S. Executive
Director of the I D B ) . The delegation also included the chairman
and a member of the Committee on Foreign Relations of the Senate,
members of the House Banking and Currency Committee, the
President of the Export-Import Bank, other officials of the executive
branch, and the U.S. Ambassador to BrazU.
The I D B announced its fh^st loan on February 3, 1961, and approved
12 loans from its ordinary capital resources and 7 loans from its Fund
for Special Operations during the period ending June 30, 1961. Its
total lending operations, equivalent to $70 million, assisted in financing
projects in 12 member countries. U.S. commercial banks participated
in the aggregate amount of $1.9 million in a number of the loans made
from the ordinary capital resources.
The Export-Import Bank.—In fiscal 1961 the Export-Import Bank
authorized new credits and guaranties totaling $1.4 bUlion to 85
countries—an amount over twice that authorized in the preceding
fiscal year period, and the largest amount committed in any such
period since 1946. Approximately 54 percent of total authorizations
were to Latin American countries. In addition to those loans and
guaranties, the Bank also approved $147 mUlion in aUocations under
credits previously approved. The Bank's loans are intended to assist
in financing the export sale of U.S. industrial or agricultural equipment, consumer durable goods, materials and services, with repayment in U.S. dollars on terms appropriate to the item purchased.




REVIEW OF FISCAL OPERATIONS

127

In fiscal 1961, the Bank had a gross income of $138.5 mUlion. Interest
paid to the Treasury on borrowed money was $42.8 million, and
operating expenses were $2.5 mUlion. Thus, the net income for the
period was $93.1 mUlion. In June the Bank declared a dividend of
$30 mUlion on the stock of the Bank held by the Secretary of the
Treasury. From its inception in February 1934 through June 30,
1961, loan and guaranty authorizations of the Bank totaled $12.1
bUlion. Disbursements were $7.8 bUlion, of which $4.4 bUlion had
been repaid. The Bank's uncommitted lending authority on June
30, 1961, was $1,312 mUlion.
Pursuant to section 104(e) of the Agricultural Trade Development
and Assistance Act of 1954, as amended, the Bank during fiscal 1961
authorized 45 loans in the currencies of 11 countries for a total amount
equivalent to $25.1 mUlion. Since the amendment of Public Law 480
in August 1957 (7 U.S.C. 1704(e)), the Bank has authorized a total of
163 such loans in the currencies of 17 countries in the equivalent of
approximately $92 mUlion.
In February 1961 the President, in his message to the Congress on
balance of payments and gold, directed the Bank to prepare and
submit to the Secretary of the Treasury, as Chairman of the National
Advisory Council on International Monetary and Financial Problems,
a new program under the Bank to place U.S. exporters on a basis of
full equality with their competitors in other countries. With the
approval of the National Advisory Council, the Bank, on March 24,
1961, annoimced the avaUabUity of new forms of guaranties and
financing for U.S. exports. The Bank also announced that it would
devise a system to guarantee short- and medium-term export credit
transactions. Negotiations were carried out for an agreement with a
group of leading private insurance companies under which the companies would issue export credit insurance to be underwritten jointly
by them and the Export-Import Bank. In addition, a program was
prepared whereby the Export-Import Bank would issue a new system
of guaranties directly to the commercial banks and those financial
institutions undertaking nonrecourse financing of exports. The two
programs were announced by the President on October 27, 1961.
(See exhibit 16.)
The Development Loan Fund.—During the period under review, the
Development Loan Fund continued to be the principal instrument of
the mutual security program for stimulating economic growth in the
less-developed countries of the world. Through its authority to
provide financing on flexible terms, the D L F has been able to adapt
its repayment requirements to the capacity of the less-developed
countries. These requirements have often included provision for
repayment in the currency of the borrower. In fiscal 1961, the D L F




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1961 REPORT OF THE SECRETARY OF THE TREASURY

approved 61 loans and other commitments totaling $653 million in 83
countries. Since its creation in 1957 the D L F has approved through
June 30, 1961, a total of 212 loans, guaranties, and allocations in 50
countries, totaling over $2 billion. Cumulative disbursements under
approved loans amounted to $538 million.
The International Bank.—During fiscal 1961 the International Bank
made 27 loans totaling $610 million in 20 member countries and territories, bringing the total number of loans to 292 in 57 countries and
territories. Disbursements under loans were $398 million, substantially lower than the $544 million and $583 million in the two preceding years. Many of the recent projects have been large ones with
longer completion dates, thus accounting for an increase in the average
disbursement period from two or three years to about five years.
Participations by private investors, and sales from the Bank's
portfolio, all without the Bank's guaranty, amounted to $202 million.
Repayments by borrowers from the Bank totaled $191 million, including $101 million to the Bank and $90 million to other holders of
Bank loans. The Bank's need for outside funds during the year was
relatively small, and the Bank's funded debt rose by only $155 million to a total of $2,228 million as of June 30, 1961. All of the borrowings during the year took place outside the United States, and it
is estimated that some 53 percent of the debt outstanding on June 30,
1961, was held outside the United States.
The cumulative total of Bank loans, net of cancellations and refundings, was $5,669 million as of June 30, 1961, of which $4,320 million had been disbursed. Principal repayments to the Bank amounted
to $438 million, and loans sold or agreed to be sold totaled $1,013
million. More than two-thirds of the Bank's lending is for electric
power and transportation. Although iii past years electric power
was the more important, transportation is becoming more significant
and ih fiscal 1961 accounted for slightly more than half of the total
Bank loans.
The Indus Waters Treaty, 1960, was signed on September 19, 1960,
and simultaneously an international financial agreement was executed
to create an Indus Basin Development Fund to finance irrigation and
other works in Pakistan. The Fund will be administered by the
International Bank. (See the Annual Report for 1960, pp. 65 and 66.)
Work has begun on projects included in the ten-3''ear settlement plan
including preliminar}^ construction and invitations for tenders on
major segments of the plan.
The International Bank continued to sponsor meetings of a consortium of countries to discuss assistance for the development plans
of India and Pakistan. The fourth meeting of the consortium concerning India was held in April and June 1961, and was attended




REVIEW OF FISCAL OPERATIONS

129

by representatives of the United States, Canada, Germany, Japan,
and the United Kingdom. France joined the consortium as a member during the meeting, and Austria, Denmark, Norway, and Sweden
sent observers. The U.S. delegation was headed by Assistant Secretary John M. Leddy. At this session the members of the consortium
undertook commitments of aid to India totaling over $2 billion. The
consortium interested in Pakistan met in early June 1961, with
representatives and observers from the same governments which participated in the fourth meeting of the Indian consortium. France also
joined this consortium as a member during the meeting. Commitments made at the meeting totaled $550 million, including $230
million in aid previously committed by'members for Pakistan.
The International Development ^ssocm^^o7^.^Secretary of the Treasury Robert B. Anderson, on behalf of the President, signed the
Articles of Agreement of the International Development Association
on August 9, 1960 (see exhibit 29), and the Agreement entered into
force on September 24, 1960. The Association, an affiliate of the International Bank, officially began operations on November 8. Its
first development credit agreement, $9 million for highway development in Honduras, was signed on May 12, 1961. By June 30, three
additional credits had been extended: $13 million for the Roseires
Dam project in Sudan, a joint IDA-International Bank operation
under which the I B R D agreed to lend $19.5 million and in which the
Federal Republic of Germany participated by providing a loan
equivalent to $18.4 million; $19 million for a highway project in Chile,
jointl}^ with an International Bank loan of $6 million; and $60 mUlion
for a highway project in India.
As of June 30, 1961, membership in the IDA included 51 countries
having total initial subscription commitments, payable over a five-year
period, of about $906 million. All members of the International Bank,
numbering 68 as of June 30, are eligible to join the IDA. ' T a r t I "
members, the United States and the 14 other more economically
advanced countries included within its membership, pay all subscriptions in convertible currencies usable for any development credits
extended by IDA; the remaining 36 members, the "Part I I " countries,
subscribe 10 percent in convertible funds and the remainder in their
own currencies usable for credits only with their consent. Pursuant
to the schedule for the payment of subscription installments, the
United States paid in $73.7 million at the time the obligations of
membership were assumed. These funds had been appropriated for
the purpose by the Congress, and later in the fiscal year request was
made for an additional $61.7 million to pay the second installment on
the U.S. subscription coming due in November 1961. Provision for
such payment was included in the foreign aid appropriation bill




130

1961 REPORT OF THE SECRETARY OF THE TREASURY

approved by the Congress on Septeinber 30, 1961 (Public Law 87329). The balance of the initial U.S. subscription is payable in three
additional annual installments of $61.7 million.
The International Finance Corporation.—Nine new investments
totaling $6.2 million in seven member countries were made by the
Corporation during the fiscal year. As of June 30, 1961, the I F C
had net commitments outstanding of $44.4 million, resulting from 40
investments in 18 countries. Sales of investments and participations
in investments had reached a total of $8.9 million, such sales having
amounted to $3.5 million during the year. At the end of the period,
subscriptions by the 59 member countries totaled $96.6 million.
In February 1961 a proposal to amend the Articles of Agreement of
the Corporation to enable investment in capital stock was formally
submitted to the Board of Governors. A favorable U.S. vote on this
proposal, which had been under discussion for some months, required
amendment of the International Finance Corporation Act (22 U.S.C.
282), and the administration requested the necessary legislation.
Secretary of the Treasury Dillon, as U.S. Governor of the Corporation,
appeared before a Subcommittee of the House Banking and Currenc}^
Committee on behalf of the legislation on May 10, 1961. (See exhibit
22.) The legislation was approved on August 30, 1961 (22 U.S.C.
282(c)), and on September 5, 1961, the President of the IFC announced
that the required votes for adoption of the resolution amending the
Articles of Agreement had been received. At the annual meeting of
the Governors of the IFC, held in conjunction with the meetings of
the International Monetary Fund, the International Bank, and the
International Development Association in Vienna, Austria, in September 1961, Assistant Secretary John M. Leddy, as U.S. Director and
Temporary Alternate Governor of the IFC, noted that the amendment
to the Articles permitting investment in equities would enable the
Corporation to operate with a greater degree of flexibUity and so more
readily assist the investment of private capital and the development
of private enterprise of the less-developed countries (see exhibit 27).
He also paid tribute to the retiring President of the I F C , Robert L.
Garner, who had held that office since the I F C had come into existence
in July 1956.
U.S. private investments.—The amount of U.S. private investments
abroad increased by more than $5 billion during the calendar year
1960, and totaled over $50 billion by the end of the year. U.S.
direct investments ,abroad accounted for about 60 percent of these
amounts, increasing by nearly $3 billion during the year and amounting to $32.7 biUion on December 31. Long-term portfolio investments
increased by $1.2 billion, about the same as in 1959, and were valued
at $12.6 billion at yearend. Short-term portfolio investments rose by




REVIEW OF FISCAL OPERATIONS

131

slightly more than $1.3 biUion during the year to a total of $4.9
bUlion.
The flow of direct investments to Europe (including reinvested
subsidiary earnings), which had increased by $325 "^ million in 1959
to an annual rate of $750 '' mUlion, rose by another half-billion
doUars in 1960 to an annual flgure of $1.3 billion. Two-thirds of the
$435 million investment in Common Market countries in 1960 was
attributable to manufacturing. An extraordinarily large capital
flow to the United Kingdom of $700 million included cash expenditures
for the acquisition of minority interests in subsidiaries. Direct investment flows to Canada increased at a slower rate than in 1959,
but nevertheless amounted to $860 million. Flows to Latin America
dropped from $420 ^ million to $310 mUlion, a result in large part of
the cessation of investment in Cuba.
Other international organizations and conferences

The Organization jor Economic Cooperation and Development.—During February and March 1961, the Secretary appeared before the
Senate Foreign Relations Committee to support ratiflcation by the
United States of the Convention, signed in Paris on December 15,
1960, establishing the Organization for Economic Cooperation and
Development (OECD), the successor to the Organization for European
Economic Cooperation, in which the United States and Canada would
become full members. (See exhibit 17.) The Senate approved U.S.
adherence to the Convention on March 16, 1961 (Executive E), and
the OECD oflGlcially came into existence on September 30, 1961.
The creation of the OECD was suggested by the United States in
1959 in recognition of the strength of Western Europe, the signiflcance
of convertibility of the European currencies, and Europe's growing
responsibilities for supporting economic improvement throughout the
free world. In its association with the OEEC, the United States participated in the work of a number of committees and had been represented at meetings at various levels. The Economic Policy Committee was particularly active during the period under review, and
a working party was established under this committee to analyze the
effect on international payments of monetary, flscal, and other policy
measures and to consult on national and international policy measures
as they relate to international payments equUibrium. The Development Assistance Group, which was formed early in 1960 to discuss
various aspects of cooperation in facUitating the flow of bilateral longterm capital to less-developed areas, met in Washington in March
and October 1960, in Bonn in July 1960, and in London in March 1961.
These and other activities which had been begun within the framework
r Revised.




132

1961 REPORT OF THE SECRETARY OF THE TREASURY

of the OEEC are to be continued within the OECD. The European
Monetary Agreement will continue to function under the OECD,
although the United States and Canada do not participate in it.
The European Economic Community.—The member nations of the
European Economic Community (the Common Market) made further
progress during the year toward the goal of establishing the customs
union envisaged by the Treat}^^ of Rome. The flrst four-year stage of
this treaty ended December 1961. Originally, tariff reductions of
30 percent were to have been effected among the six members in
this period; but because of an accelerated schedule, tariff reductions
of 30 percent were in force by January 1, 1961, and another tariff
cut of 10 percent took place on December 31, 1961. The first move
towards establishing a common external tariff was made on December
31, 1960. Germany and the Benelux countries increased their duties
on imports, while tariffs in Italy and France were lowered. Within
the Common Market quantitative restrictions on industrial products
were eliminated by December 31, 1961. The removal of quotas on
other goods will take place gradually until 1970. Toward the close
of calendar 1961, the United Kingdom and other members of the
European Free Trade Association began to explore the possibilities
of becoming members of the Common Market.
The General Agreement on Tarifs and Trade.—The seventeenth and
eighteenth sessions of the Contracting Parties to the General Agreement on Tariffs and Trade (GATT) were held during the fiscal year.
The sessions, both of the Council and of various committees of GATT,
dealt with, a broad range of problems affecting worldwide trade.
Representatives of the United States used these sessions, as well as
numerous bilateral contacts, to exert stead}^^ pressure for elimination
of unjustifiable quantitative restrictions, especially those which
involve discrimination against U.S. exports. Considerable progress
was made in the further dismantling of import restrictions generally,
although their use persists in varying degrees in many parts of the
world, particularly in the less-developed countries. Discrimination
in import restrictions against industrial goods from the United States
has been reduced to relatively small proportions. Discriminatory
restrictions on important agricultural products, hoM^ever, have been
maintained by a number of Western European countries. These
have been a matter of continued concern to the United States.
In addition to the general sessions which dealt with a broad range
of problems, a Tariff Negotiations Conference was convened on
September 1, 1960, by the Contracting Parties of GATT, at the initiative of the United States. This multilateral tariff conference, the
fifth of its kind, continued on into the new fiscal year beginning July
1, 1961. I t has been the largest and most complex of the series.




REVIEW OF FISCAL OPERATIONS

133

The negotiations with the European Common Market countries
involved special difficulties, mainly in relation to agricultural products.
Particular interest has attached to the efforts of the United States,
and of other Contracting Parties, to insure that the Community will
establish commercial policies that will expand, rather than restrict,
world trade. Negotiations have, therefore, aimed to secure for
imports into the Common Market area tariff treatment which will
afford competitive access by exports from the United States and
from other outside countries.
Much effort was devoted during the year to working out international arrangements for textiles which would enable the lessdeveloped countries and Japan to find progressively expanding market
opportunities without disrupting conditions in import markets,
particularly the United States. This culminated in a special meeting,
held in Geneva in July 1961, attended by ofl&cial representatives from
16 countries, and by observers from a number of other countries and
various interested organizations. The meeting reached agreement
upon a general program of corrective action. A one-year interim
agreement was submitted for approval by the governments represented in the conference, and provision was made both for negotiations
aiming at a longrun agreement and for supplementary bilateral
agreements.
Other conjerences.—Treasury officers participated in numerous
conferences with representatives of many countries. Secretary of the
Treasury Anderson, accompanied by Douglas Dillon as Under Secretary of State, held informal talks with German officials in Bonn
during November 21-23, 1960. The talks covered a broad range of
financial and economic questions, including balance-of-payments
problems, assistance to the developing countries, international trade,
and related problems of mutual interest. These discussions were
followed by periodic meetings at both the ministerial and technical
levels throughout the fiscal year. In April 1961 the Federal Republic
agreed to make an advance payment of $587 million against the German
debt for United States postwar economic assistance. A number
of informal meetings were held also with British officials, and in April
1961 Secretary of the Treasury Dillon participated in the discussions
between the President and the Prime Minister. The Treasury was
represented also in United States-Canadian meetings. Secretary
Anderson attended the third meeting of the United States-Canada
Ministerial Committee on Joint Defense in Quebec on July 12 and 13,
1960; Secretaiy of the Treasury Dillon and Under Secretary of the
Treasury Henry H. Fowler participated in the sixth meeting of the
Joint United States-Canadian Committee on Trade and Economic
Affairs held in Washington on March 13 and 14, 1961. On May 18




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1961 REPORT OF THE SECRETARY OF THE TREASURY

and 19, 1961, the Secretaiy met with the Minister of Finance and
Economic Affairs of France; subjects discussed were the general
economic situation and the balance-of-payments trends in France and
the United States, the relationship of the International Monetary
Fund to the problem of short-term capital movements under conditions of convertibility, and the need for coordination currently being
developed in the framework of the future Organization for Economic
Cooperation and Development. Also during the fiscal year the
Treasury was represented on U.S. delegations to meetings of various
United Nations bodies, the North Atlantic Treaty Organization, the
Southeast Asia Treaty Organization, the Colombo Plan Organization,
and the In ter-American Economic and Social Council.
Lend-lease silver

During World War I I the United States transferred a total of 410.8
milhon 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 within five
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 part of the repayment
for two additional years. Prior to June 30, 1960, the entire amount
of silver due from the Governments of Australia, Belgium, Ethiopia,
the Netherlands, and the United Kingdom (also acting for the
Government of the Fiji Islands) had been returned and taken into
the account of the Treasurer of the United States. In addition, a
large portion of the silver furnished duriag the war under lend-lease
for use in undivided India had been returned and taken into the
Treasurer's account pursuant to arrangements concluded in 1957,
whereby the U.S. Government agreed to a division of liability for this
silver between India and Pakistan. (See the annual reports for 1957,
pp. 49 and 50; 1958, pp. 56 and 57; and 1959, p. 65.)
In the course of fiscal 1961 a total of 3.3 million fine troy ounces of
silver consisting of 1.1 million ounces from India; 0.8 miUion ounces
from Pakistan; and 1.4 million ounces from Saudi Arabia, was
returned and taken into the account of the Treasurer of the United
States.




135

REVIEW OF FISCAL OPERATIONS
Lend-lease silver transactions as of June SO, 1961
[In millions of fine ounces except where otherwise specifically indicated]
Silver transferred from
the Treasury
to lend-lease
for account
of foreign
governments
Australia
Belgium
Ethiopia
Fiji
India
Netherlands
Pakistan.
Saudi Arabia
United Eangdom

_

_

.

_ _
_

.

Total

_ _
-_.. _ _

Silver returned
and taken into
the account of
Silver
the Treasurer
being
of the United returned
States

11.8
.3
5.4
.2
172.5
56.7
53.5
2 22.3
88.1

168.6
56.7
35.8
1.4
88.1

4.0

410.8

368.3

12.4

Dollar
repayments
being
made

Silver
tobe
returned

11.8
.3
5.4
9

8.4

8 $8.7

19.2
*10.5

3 8.7

19.7

1 Under an agreement concluded with Pakistan in 1957, the balance is being returned in annual installments.
2 Includes 1,031,250 ounces lost at sea while in transit.
3 Equivalent to 9.4 million fine troy ounces of silver converted on basis of present market price. This
payment was taken into the accounts of the Treasurer after June 30, 1961.
* Preliminary.

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. The Control does not issue
licenses authorizing importation of Chinese-type merchandise unless
satisfactory evidence of its 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
Governments now have such certification procedures: Australia,
Belgium, Canada, Formosa, France, the Federal Republic of Germany,
Hong Kong, India, Italy, Japan, the Netherlands, the Republic of
Korea, Spain, Switzerland, and Vietnam. 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 a number of additional items
became available for certification.
The enforcement measures of the Control resulted in a number of
successful criminal prosecutions. A total of $89,262 was collected by
the Government in forfeitures, fines, and other penalties as a result
of proceedings under the Foreign Assets Control Regulations.







ADMINISTRATIVE




REPORTS




Management Improvement Program^
Annual recurring savings resulting from recorded management
improvements during the fiscal year 1961 totaled $8 mUlion and
one-time savings amounted to $2.3 million, the highest figures in
recent years. Of these amounts over $3 million resulted from the
mUitary and civUian incentive awards programs. However, since
the value of many of the most significant changes cannot be measured
in doUars and cents, these figures are only a small indication of the
magnitude of the Treasury's efforts to streamline its organization
and operations. A few of the more noteworthy management improvements of the Treasury bureaus are discussed in the administrative
reports of the individual bureaus found later in this document.
Developments of a more general nature are described below.
Mechanization of operations

By far the most substantial monetary savings have come from the
continued mechanization of Treasury operations. Important benefits continue to come from the utilization of automatic data equipment.
The Treasury's entire disbursing process, from initial checkwriting to
final reconciliation, is being adapted to automatic data processing
methods. Savings bonds now also are processed electronical^. The
Internal Revenue Service has initiated the use of automatic data
processing equipment in processing tax returns and is establishing a
central facility where information on all taxpayers and tax sources
will be available by electronic means. Several of the larger bureaus
use electronic equipment for adminis tra tive-type operations, while
even the smaller bureaus are exploring means of using this equipment
to improve their work programs and administrative activities. These
installations have freed many Treasury employees for other work and
resulted in substantial savings.
Personnel management

The Department's Ofl&ce of Personnel has been reorganized and
expanded to strengthen its effectiveness in providing leadership, coordination, and guidance to the bureaus on their personnel programs.
Four specialized areas; employment, classification and wage administration, employee relations, and training, have been set up under the
Director of Personnel. In addition, the staff handling personnel
operations for the Office of the Secretary have been transferred from
the Ofl&ce of Administrative Services to the Ofl&ce of Personnel.
Goals have been established which the Ofl&ce of Personnel expects
to achieve through the cooperative efforts of the Treasury bureaus.
A list of 22 projects has been developed for study by work committees
composed of departmental and bureau representatives. In order to
help the smaller bureaus without the staff resources available to the
1 See bureau reports for significant bureau improvements.
614359—62

10




139

140

1961 REPORT OF THE SECRETARY OF THE TREASURY

larger Treasury organizations, the Personnel Office plans to institute
personnel administration workshops on the development of programs
and procedures and the improvement of operations.
In keeping with principles of maximum utilization of personnel,
emphasis in several bureaus has continued to shift from meeting
immediate training needs to identifying and satisfying career requirements. Moreover, throughout the Department, there has been a
sizable overall increase in training activity to meet problems created
by changes in workload, organization, and methods. This increase
reflects a greater awareness and acceptance of training responsibility
on the part of supervisors and operating oflBcials.
Because of the many law enforcement activities of the Treasury
Department and the critical importance of its 4,000 enforcement
agents, greater emphasis was given to basic and advance training for
these employees. During fiscal 1961 the Treasury Law Enforcement
Ofl&cers Training School continued to improve its curriculum and
facilities for basic training of all Treasuiy agents and significant
improvements were made by the Internal Revenue Service in developing comprehensive advance training programs for their agents.
Executive development programs in several bureaus were further
strengthened by better replacement planning and development,
better structuring of jobs for career purposes, and participation in
professional executive developm.ent courses and other activities which
broaden knowledge and increase skill.
Financial management

Progress in improving financial practices and controls continued, a
complete account of which may be found in the Annual Report on
Financial Management .hnprovement Activities jor the jiscal year ended
June SO, 1961, obtainable from the Bureau of Accounts.
Standards were prepared for the content and arrangement of
accounting systems manuals to be prepared by the Treasury bureaus,
and progress was made in their compilation. Developmental work is
continuing in the interest of furnishing management with better and
more timely financial information and otherwise providing more effective internal use of cost-based budgets. Also, as part of a continuing
program, the Department appraised the internal audit systems of the
Bureau of the Public Debt and the Office of the Treasurer with a view
to their improvement.
In connection with the Treasury's Government-wide responsibility
for central accounting and financial reporting, accounts kept in
regional accounting offices were streamlined with estimated annual
savings of $70,000 resulting. An inventory of Government-wide
reports was compiled, and a number of improvements suggested by
users were put into effe^ct. These studies and improvements were
made in collaboration with the Bureau of the Budget and the General
Accounting Office.
Property management

The Department continued its vigorous efforts to dispose of excess
real and personal propert}^ promptly and to take full advantage of
surplus property available from other agencies.




ADMINISTRATIVE REPORTS

141

Fourteen excess properties, consisting of land and improvements
with an acquisition cost of $285,000, were declared excess to the
General Services Administration. Seven other properties previously
declared excess to the GSA were sold for $102,000. Sixty-eight parcels
of real property not involving acreage, with a total acquisition cost of
over $1 million, were disposed of, while 75 additional properties
involving an acquisition cost of $1.8 million were reported to the GSA
for disposal. In addition to immediate monetary returns, the disposal
of such properties reduced maintenance and protection costs to the
Treasury.
Several Treasury bureaus were moved into improved space in new,
modern buildings at field locations, including Internal Revenue
Service offices which were moved into new buildings at 11 locations.
During the fiscal 3^ear the Treasury received from other Federal
agencies without reimbursement excess personal properties with an
original acquisition cost of $9.8 million. In the same period, personal
properties with an acquisition cost of $13.6 million were determined to
be excess and available for disposal.
Safety program

Accident prevention eff'orts in the Treasury were successful in
decreasing the calendar year 1960 accident frequency rate (the number
of lost time injuries per million man-hours) to an all time low of 3.9.
In addition to a more favorable frequency rate the Treasury record
was improved in several other ways. The number of injuries dropped
from 730 in calendar 1959 to 633 in calendar 1960; the number of days
lost from the job decreased, from 40,143 to 37,002; and the total direct
cost was cut by $138,000. The severity rate (number of days lost per
million man-hours) improved from 252 to 229, and the total direct cost
per employee decreased from $7.46 to $5.56.
Incentive awards program

At the departmental level, responsibility for the incentive awards
program was transferred from the Office of Management and Organization to the Office of Personnel. Excellent progress continued to be
made, with the number of employee suggestions adopted increasing
to 2,464 in fiscal 1961, an increase of 6 percent. Superior performance
awards jumped 25 percent to a new high of 2,714. Estimated annual
savings rose to over $1 million, 13 percent above the previous year. In
addition, $2 million was saved under the military incentive awards
program of the U.S. Coast Guard. In that Bureau one award alone
saved an estimated $1.8 million.
The Bureau of Engraving and Printing won the second annual
award of the Secretary of the Treasury for the bureau showing the
best average results under the program.
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 forma1 Additional information concerning the Bureau of the Comptroller of the Currency is contained in the
separate annual report of the Comptroller of the Currency.




142

1961 REPORT OF THE SECRETARY OF THE TREASURY

tion 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.
Abstract of reports of condition of active national banks on the date of each report
from J u n e 16, 1960, to J u n e 30, 1961
[In t h o u s a n d s of dollars]
J u n e 15,
1960
(4,542
banks)

Oct. 3,
1960
(4,535
banks)

D e c . 31,
1960
(4,530
banks)

A p r . 12,
1961
(4,523
banks)

J u n e 30,
1961
(4,524
banks)

ASSETS

L o a n s a n d discounts, i n c l u d i n g overdrafts..
U . S . G o v e r n m e n t securities, direct obligations __
Obligations g u a r a n t e e d b y U . S . Government
Obligations of States a n d p o h t i c a l s u b divisions
Other b o n d s , notes, a n d d e b e n t u r e s
Corporate stocks, including stocks of
Federal Reserve B a n k s

62,397, 733

63,137,178

63,693, 668

63,595,879

63,439,852

29,227, 240

30, 507,592

32,615,321

32,228,779

33,397,413

70,438

91, 209

96, 402

122,019

124,680

8, 984,454
1,318, 874

9,123,621
1,245,349

9,408,711
1,407, 576

9, 927,654
1,325,874

10,123,742
1, 419,736

310, 631

316,748

324,184

333,660

337,241

T o t a l loans a n d securities
102,309,370 104,421,697 107, 545, 862 107,533,865 108,842, 664
Cash, balances w i t h other b a n k s , a n d cash
i t e m s in process of collection..
26,379, 669 25,846,362 28, 674, 506 25,440,116 25,274,240
B a n k premises owned, furniture a n d fix1,567,086
1,640,168
1, 685, 524
1,749,325
1,774,055
tures
51,164
54,303.
53, 978
Real estate o w n e d other t h a n b a n k premises.
56, 654
53, 467
I n v e s t m e n t s a n d other assets indirectly
representing b a n k premises or other real
173, 611
187,073
158,748
169, 502
185,369
estate
463, 691
441,638
361, 763
419, 342
446,326
C u s t o m e r s ' liability on acceptances
666, 509
725,347
599,884
689, 799
691, 541
Other a s s e t s .
T o t a l assets

131,433,174 133,240,337 139,260,867 136,100,845 137,298,995

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 59, 649,364
ships, a n d corporations
T i m e a n d savings deposits of i n d i v i d u a l s ,
34, 650,471
partnerships^ 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
3, 778,109
savings
Deposits of States a n d pohtical s u b d i v i s i o n s . 8,137, 561
8, 409,880
Deposits of b a n k s
Other deposits (certified a n d ofiicers' checks,
1, 552,826
etc.)
—
T o t a l depositsD e m a n d deposits
T i m e a n d savings d e p o s i t s .
R e d i s c o u n t s 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 other real estate—
Acceptances o u t s t a n d i n g
Other liabilities
T o t a l liabilities

59,025, 547

63,131,263

61,274, 612

59, 212,875

35, 972, 754

36, 761,292

38, 922,341

40,338,073

4,096,097
8, 473, 965
8,885, 686

3, 456, 544
9,297,327
10,439,491

1, 576, 344
9,187, 440
8, 611,099

3, 756, 972
9, 762, 861
7, 848,020

1, 509,134

1,824, 934

1, 492,826

1,566,137

116,178,211 117, 963,183 124, 910, 851 121,064,662 122, 484,938
78,801,033
37,377,178

78, 998, 753
38,964,430

84,754,054
40,156, 797

78, 970,875
42,093, 787

78,891, 899
43,593,039

1,490,892

1,013,323

110, 590

686,157

355,466

3,086
371,482
2, 703,341

2,967
426,827
2,824, 584

3,189
474, 565
2,663,334

3,158
454,133
2, 546,550

3,338
448,976
2, 567,224

120, 747,012 122,230,884 128,162, 529 124,754,660

125,859,942

3, 459,094
5, 572,040
2,047.520

3,478,403
5,620,169
2,071,321

11,346,185

11,439,053

CAPITAL ACCOUNTS

C a p i t a l stock
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 preferred stock
T o t a l capital accounts

3, 265,182
5,164, 562
2,019, 267

3,308,077
5, 250,859
2,201,129

237,151

249,388

10,686,162

3, 342, 850
5,446,143
2,030,052

269,160

T o t a l liabilities a n d capital a c c o u n t s . . 131,433,174 133,240,337 139,260,867 136,100,845




143

ADMINISTRATIVE REPORTS
Changes in the condition of active national banks

The total assets of the 4,524 active national banks in the United
States and possessions on June 30, 1961, amounted to $137,299
mUlion, as compared with the total assets of 4,542 banks amounting
to $131,433 million on June 15, 1960, an increase of $5,866 million
during the year. The deposits of the banks in 1961 totaled $122,485
million, which was $6,307 million more than in 1960. The loans in
1961 were $63,440 mUlion, exceeding the 1960 figure by $1,042 mUlion.
Securities held totaled $45,403 million, an increase of $5,491 million during the year. Capital funds of $11,439 million were $753
million more than in the preceding year.
Summary of changes in number and capital stock of national banks

The authorized capital stock of the 4,525 national banks in existence on June 30, 1961, consisted of common stock aggregating $3,478
million, and preferred stock aggregating $1.3 million. The common
stock of the 4,539 national banks in existence a year earlier amoimted
to $3,276 million, and preferred stock to $1.5 million. During the
year charters were issued to 39 national banks having an aggregate
of $21.1 mUlion of common stock. There was a net decrease of 14
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 1961 is shown in the following table.
Organizations, capital stock changes, and liquidations ofnational banks, fiscal year 1961
Number
of banks

Capital stock
Common

Charters in force June 30,1960, and authorized capital stock..

4,539

Increases:
Charters issued
Capital stock:
195 cases by statutory sale
475 cases by statutory stock dividends
1 case by conversion of preferred stock
32 cases by statutory consolidation
24 cases by statutory merger

$1, 529,370

21,092,750
25,592,636
149,489,460
111,600
10,271,015
7, 565, 325

Total increases..

214,122,786

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 merger
3 cases by retirement

550,000
505,000
11,010,000
50,000
33,783
269, 675
206,070

Total decreases.
Net change

$3,275,910,031

Preferred

—

Charters in force June 30, 1961, and authorized capital stock '

4,525

12,418,458

206,070

201,704,328

-206,070

3,477,614,359

1,323,300

« These figures differ from those in the preceding table. Tho figures as of June 30, 1961, include 1 new
bank not yet open for business, and 1 bank in process of merging or consolidating with and into a State
bank under the provisions of the act of Aug. 17, 1950 (12 U.S.C. 214), and exclude 1 bank consolidated with
another national bank under the provisions of the act of Nov. 7, 1918, as amended (12 U.S.C. 215).




144

1961 REPORT OF THE SECRETARY OF THE TREASURY
Bureau of Customs

The major responsibility of the Bureau of Customs is to administer
the Tariff Act of 1930, as amended. Its primary duties include the
assessment and collection of all duties, taxes, and fees due on imported
merchandise, the enforcement of customs and related laws, and the
administration of certain navigation laws and treaties. As an enforcement organization, customs is concerned primarily with combating
smuggling and frauds on the revenue. I t also enforces the regulations
of numerous other Federal agencies.
Collections

Revenue collected by the Customs Service during the fiscal year
1961 totaled more than $1,423 million, or 6.4 percent less than the
$1,520 million collected in 1960. In acidition to custom.s collections,
the total included certain taxes collected for the Internal Revenue
Service and some collections for other Government agencies. Larger
customs collections than in fiscal 1960 were reported by 15 customs
districts. Collections by customs districts are shown in table 94.
Customs collections alone amounted to almost $1,017 miUion, 10.1
percent less than the $1,131 million collected in 1960. Almost $1,008
million was derived from duties (including import taxes) levied on
imported merchandise. They also included tonnage taxes, fees, and
fines and penalties for the violation of customs and navigation laws.
Collections by Customs of internal revenue taxes on imported liquors,
wines, perfumes, etc., amounted to over $406 mUlion, 4.5 percent
more than the $389 million coUected in 1960. Miscellaneous coUections amounted to almost $9 million, an increase of 17.8 percent over
those in 1960. The major classes of all collections are shown in
table 19.
During the fiscal year 1960 almost 41 percent of all imports into
the United States was duty free. Included were some commodities,
such as copper and iron anci steel scrap, 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. The 59 percent which was dutiable
constituted the basis of customs duties on imports.
Values and collections on dutiable imports by tariff' schedule and
country for fiscal 1960, which were omitted from the 1960 annual
report because of technical difficulties will be found in tables 97
through 100. The comparable statistics subsequent to the fiscal year
1960 will not be published by the Treasury Department, but will be
provided by the Bureau of the Census and incorporated in Department of Commerce publications.
By commodities.—During fiscal 1960, for the ninth consecutive year,
imports of metals and manufactures were the largest single source of
customs revenue, with an increase of 25.6 percent more in duty
collections than in fiscal 1959. The sundries schedule remained in
second place with an increase of 42.7 percent, followed by the wool
schedule with an increase of 8 percent. The value of dutiable and
taxable imports for consumption and duties and taxes collected by
tariff schedules for fiscal 1959 and 1960, will be found in table 99.




ADMINISTRATIVE REPORTS

145

The value of and duties collected on imports for consumption by
the calendar years 1949 through 1959 are shown in tables 97 and 98.
By countries oj origin.—Imports from Japan again were the largest
source of customs revenue and duties collected thereon were 28.3
percent more than in 1959. The United Kingdom ranked second
with an increase of 9.1 percent. The Federal Republic of Germany,
with an increase of 27.2 percent, ranked third. Canada remains in
fourth place with an increase in duties of 14.2 percent.
Customs operations in 1961

Vehicles and persons entering.—More than 45.1 million carriers
entered United States harbors, international airports, or crossed
United States borders during fiscal 1961, bringing over 131 miUion
persons. In addition, over 27 miUion persons walked across the
borders. Altogether more than 158 million persons were subject to
customs inspection. There was a 3.6 percent increase in carriers and
a 5.8 percent increase in persons entering the United States in fiscal
1961 as compared with fiscal 1960. Statistics for the two years are
contained in tables 101 and 102.
Entries oj merchandise.—Imports into the United States in fiscal
1961 decreased for the first tmie in many years. The value of imports
totaled $13.8 biUion, down $1.5 billion from the entries in fiscal 1960.
Formal entries of merchandise, comprising consumption, warehouse,
and rewarehouse, exceeded one miUion for the sixth consecutive year.
There were 1,398,123 formal entries filed during fiscal 1961, 5.3
percent less than those in 1960. Informal entries and baggage
declarations covering maU importations and other shipments valued
at less than $250, totaled 5,481,650, an increase of 18.7 percent.
The volume of entries handled by customs officers during the past
two 3^ears is shown in table 95.
Drawback transactions.—Drawback allowance on the importation
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. The total drawback
paid in fiscal 1961 was $11,595,663, which included an increase of
35.1 percent over fiscal 1960. The principal imported materials used
in manufacturing exports in 1961 were almninum; chemicals; cotton
cloth; iron and steel semimanufactures; lead ore, matte, pigs, and bars;
nonmetallic minerals and manufactures; paper and manufactures;
petroleum and products; sugar; tobacco, unmanufactured; and watch
movements. Table 96 shows the drawback transactions for 1960
and 1961.
Appraisement oj merchandise {including Customs Injormation Exchange).—For the first time in six 3^ears there was a slight decrease in
the number of invoices examined b}^ appraisers' personnel. During
fiscal 1961, 2,181,008 invoices were filed, compared with 2,322,480 invoices in 1960, a decrease of 6.1 percent. The total nmnber of packages examined b}^ appraisers' personnel decreased 0.6 percent from
1,386,158 during 1960 to 1,377,351 in fiscal 1961. This decrease was
not in proportion to the decrease in all invoices and may be attributed
to new products which require more examinations per invoice.




146

1961 REPORT OF THE SECRETARY OF THE TREASURY

The backlog of unappraised invoices over 30 days old decreased
duriugfiscal 1961 from 247,000'' to 194,000, a reduction of 21.6 percent.
The decrease resulted from the smaller number of invoices received
and the concentration of field personnel on reducing backlogs.
Under the Antidmnping Act, 32 complaints of dumping were received as compared with 33 in 1960. Thirty-five cases were disposed
of, leaving 29 under investigation at the end of fiscal 1961, compared
with 32 a year earlier. For a determination as to possible injury to
American industiy, ten cases were referred to the United States Tariff
Commission.
No new cases of countervailing duty were received during fiscal
1961. Of the five cases carried over from the year before, two were
closed, leaving three on hand.
The activities of the Customs Information Exchange in New York,
N.Y., continued at the high level of 1960. Appraisers' reports of
classification and value, covering a cross section of importation of
merchandise received at each port, totaled 78,000 compared with
79,000 in 1960. These reports indicate the relative number of commodity items received at any given port for the first time, as well as
regularly received items at new prices or subject to different terms of
sale from previous shipments.
Diff'erences in classification and value indicate the number of instances where information as to the value or classification of merchandise varied among ports or when the conclusions of appraising officers
differed. In the latter, additional stud}^ and analysis were required
before a uniform price or rate could be established. There were
7,243 reports of value differences during fiscal 1961, as compared with
8,882 in 1960. Diff'erences in classification totaled 4,803 during 1961
compared with 4,502 in 1960, indicating a continuing increase in new
commodities received.
Foreign inquiries recjuiring detailed investigations abroad to secure
information for appraisement purposes decreased from 244 in fiscal
1960 to 215 in 1961. This 11.9 percent decrease may be ascribed to
the continuing effect of the elimination of foreign value as a basis of
appraisement under the terms of the Customs Simplification Act of
1956 (19 U.S.C. 1402), and to present procedure which permits the use
of a foreign inquiry only as a last resort in securing value information.
Technical services.—This division of the Customs Service furnishes
chemical, engineering, statistical weighing and sampling, and other
scientific and technical services; provides proper weighing and gauging
equipment and standards; designs and oversees the construction of
border inspection stations; and directs the field operations of Customs
laboratories. Developing and supplying investigative aids for enforcement officers is a continuing fmiction of the laboratories.
The laboratories analyzed approximately 124 thousand samples in
fiscal 1961. A slight decrease from 1960 was occasioned by a significant decrease in the number of raw sugar samples due to a change to
bulk handling and to improved sampling practices. Samples of imported merchandise submitted to obtain information necessary to
assist in appraisement and tariff classification made up a large majorit}'- of those analyzed. Other types anal^^zed were those taken from
seizures, mostl}^ narcotics and prohibited merchandise; preshipment
»• Revised.




ADMINISTRATIVE

147

REPORTS

samples of merchandise intended for shipment to the United States
analyzed to assist in establishing proper classification; and samples
tested for other Government agencies.
Chief chemists provided statistical quality control of sample
weighing operations by making analyses of cargo sample weighing
data to assure that accurac}^ and precision were within control limits.
Ninet3^-nine cargoes of raw sugar, 50 cargoes of refined sugar, 75
cargoes of cigarette tobacco, and 1 cargo of ra3^on were weighed
b}^ statistically controlled methods. Statistical review of the verification of liquidations by comptrollers (final determination of duty
and taxes) was continued. A special exchange sampling technique
was tried out under this program. A factor based on statistical
evaluation was developed to assist in gauging Greek black olives.
The division recommended approval of bulk weighing equipment
meeting customs specifications at a number of locations.
In cooperation with the Immigration and Naturalization Service,
plans were prepared for a number of border stations with residences.
Contracts were awarded for residences at Pittsburg, N.H., and
LukevUle, Ariz., and for inspection stations and two residences at
Roseau, Minn., Maida, N.D., and Del Bonita, Mont.
Construction plans of various projects involving space for customs
prepared by the General Services Administration or engineering
firms were reviewed and appropriate changes recommended. Major
projects include Jackman, Maine, Lewiston Bridge, N.Y., Sault
Ste. Marie, Mich., Massena, N.Y., and Sweetgrass, Mont. Inspection
facUities at Eagle Pass, Tex., and Dunseith, N.D., previously reviewed, were completed. Preliminary plans for future stations at
a number of locations were reviewed with appropriate recommendations.
Export control.—During fiscal 1961 export declarations authenticated increased 6.2 percent over 1960, whUe shipments examined
increased 23.6 percent. The number of seizures increased 12.1 percent and their value increased 163.4 percent. The following table
shows the volume of export control activities.
Activity

E x p o r t declarations a u t h e n t i c a t e d
S h i p m e n t s examined
N u m b e r of seizures
Value of seizures
E x p o r t control employees

1960

1961

4, 474, 425
482, 737

4, 758, 249
596, 457
222
$656, 903
173

$249, 385
160

Percentage
increase
6.2
23.6
12.1
163. 4

8.1

At the request of the Department of Commerce, this Bureau added
the name of Cuba to and made certain revisions in the list of countries
to which vessels cannot be cleared without first filing complete outward foreign manifests and all required export declarations
The
list includes countries in the Sino-Soviet bloc, Hong Kong, and
Macao, and names among others, the Communist-controlled areas
of Vietnam, East Germany (Soviet Zone of Germany and the Soviet
Sector of Berlin), North Korea, and Outer Mongolia. SimUar restrictions have been imposed upon aircraft departures.




148

1961 REPORT OF THE SECRETARY OF THE TREASURY

Protests and appeals.—Protests filed by importers against the rate
and amount of duty assessed and other decisions made by collectors
of customs increased 9.7 percent. Appeals for reappraisement filed
by importers who did not agree with appraisers as to the value of
merchandise increased 25.3 percent. The following table shows the
number of protests and appeals filed and acted upon during fiscal
1960 and 1961.
P r o t e s t s a n d appeals

Protests:
Filed w i t h collectors b y i m p o r t e r s
..
._ ._
Allowed b y collectors.
D e n i e d b y collectors a n d forvvarded to customs court
Appeals for r e a p p r a i s e m e n t filed w i t h collectors

1960

32,469
4,509
33, 881
21, 773

1961

35, 627
3,532
27, 907
27, 281

Percentage
increase, or
decrease (—)

9.
—21.7
-17.6
25.3

Marine activities.—The American merchant marine continued its
steady growth during fiscal 1961. At the end of the year the documented fleet totaled 51,115 vessels as compared with 48,884 at the
end of 1960, an increase of 4.6 percent. During the year, 1,714 vessels
were removed from documentation and about 3,945 vessels (roughly
the total nmnber of all sizes built) never before documented were
added. Approximately 7,500 were documented as yachts, while
almost 43,600 were authorized through documentation to be used in
commercial activities in the foreign, coasting, or fishing trades.
There was an increase of 36.4 percent in the nmnber of vessels documented as yachts during this fiscal year. The continued increase in
the documentation of 3^achts can be attributed, at least in part, to
the effect of the Federal Boating Act of 1958 (46 U.S.C. 527) which
permits the States to number vessels under certain conditions.
Yachtsmen have been documenting their vessels rather than obtaining nmnbers under the various States' laws. The following table
shows the volmne of marine documentation during fiscal years 1960
and 1961.

Activity

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 title, a n d other i n s t r a 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 imposed
_ .
T o n n a g e tax p a y m e n t s .

1960

1961

Percentage
increase, or
decrease (—)

48, 884
15, 840
40, 623

61,115
17, 396
47, 440

4.6
9.8
1.8

14, 414
6,885
3,063
23, 016

14, 954
7,754
2. 919
23, 731

3.7
12.6
—4.7
3.1

A number of vessels admeasured during the fiscal year were large
cargo vessels admitted to American registry for the first time or
returned in order, apparently, to be entitled to participate in the




ADMINISTRATIVE REPORTS

149

transportation of American foreign-aid cargo. Not less than 50 percent of such cargoes are required by law to be carried in American
vessels. The transfer to American registry became desirable because
of the decline in foreign cargo available through other sources.
The arrangements made with the Panama Canal Company to
receive direct notification of any changes in tonnages shown on
Panama Canal certificates issued by the Bureau have resulted in the
receipt of information from the Canal which has been found to aff'ect
the tonnages of such vessels under American registry as well as Canal
tonnages. As a consequence the Bureau has issued new rulings
concerning the treatment of propelling machinery spaces, unoccupied
sleeping rooms for spare crew members, and related matters.
Instructions were issued during the year on the admeasurement
procedures to be followed in connection with new classes or types of
vessels, principally nuclear-powered vessels, hydrofoils, and a type of
collapsible container of flexible sausage-shaped barge, known as a
Dracone and, intended for use in a partially submerged condition in
the transportation of fuel oil or other liquid cargoes. When filled
the Dracone is intended to be towed afloat and when empty is to be
rolled up on a reel for transportation as deck cargo. This type of
contrivance is, of course, one that was not within the contemplation of
those who drafted the original admeasurement laws and the application of the statutory provisions to such craft presents many problems.
A bill to repeal a nimiber of statutes which established certain
marine fees and prohibited the collection of others was reintroduced
in the first session of the 87th Congress. This bill, if enacted, would
permit the Bureau to charge for certain services such as the documentation of vessels, renewals of licenses, and entr}^ and clearance under
regulations to be prescribed by the Secretary of the Treasury under
the authorit}^ of section 140 of Title 5, United States Code.
A nmnber of other legislative proposals affecting functions administered under the navigation laws of the United States were
reviewed during the year. Included among those proposals were:
Draft legislation to permit certain transportation on Canadian vessels
between ports in Alaska and in some cases between such ports and
other points in the United States outside of Alaska; the collection of
statistics on movements in the foreign trade of the United States and
in trade with certain noncontiguous areas; the admeasurement of
small vessels under a smiplified procedure; the importation of fish into
the Virgin Islands by foreign vessels; the operation of fishing vessels
transporting the catches of other vessels while under enrollment and
license; the admission of a class of vessels of 12,500 gross tons or
more to American registry for the coastwise trade, even though
formerly under foreign registry; the elimination of the form of oath
required on shippers' export declarations; the documentation of vessels sold or transferred while abroad; and a nmnber of bills providing
for the admission of specifically named foreign vessels to American
registry.




150

1961 REPORT OF THE SECRETARY OF THE TREASURY

The following table shows entrances and clearances of vessels in
fiscal 1960 and 1961.
1960

Vessel m o v e m e n t s

Entrances:
Direct from foreign ports
Via other domestic p o r t s . . . - .
Total
Clearances:
Direct to foreign ports
Via o t h e r domestic p o r t s . . .
Total

_. _

__

1961

Percentage
increase, or
decrease (—)

53,326
37, 451

48,364
38,459

-9.3
2.7

90, 777

86, 823

—4.4

51, 086
37, 913

46, 421
38,193

-9.1
.7

88, 999

84, 614

-4.9

Waivers of the navigation laws of the United States were granted
upon request under the special authority contained in the act of
December 27, 1950 (46 U.S.C. 1 note), to permit certain vessels used
in transporting material dredged from the Great Lakes connecting
channels to proceed into Canadian waters without clearing upon
departure or entering upon return to the United States. The program under which the vessels concerned are operating is designed to
increase the usability of the waters forming a part of the systems
served by the Saint Lawrence Seaway project.
A further waiver in 1961 permitted a Canadian tug to tow an
American barge to a worksite on the Saint Lawrence River near
Rooseveltown; this also was an operation related to the Seaway
project.
General instructions were issued to customs marine officers in the
field covering: The marking of names and hailing ports on vessels;
defining and standardizing the requirements for small vessels; the
position of the Bureau in construing bareboat charters for yachts
and distinguishing such charters from time charters and the penalties
to be imposed for violations; the accession of the Republic of Haiti
to the International Load Line Con vention; a procedure for determining whether any particular body of water is to be regarded as forming
a part of the navigable waters of the United States for applicability of
Federal statutes and Bureau regulations; the recording and indexing
of a t3^pe of vessel title instrument designed to serve as a combined
bill of sale, mortgage, and assignment of mortgage; and the procedure
followed by disposal agencies in the sale of vessels from the reserve
or laid-up fleets of the United States.
The first study stage of the program to develop a simplified system
of ship registry was completed. A proposed documentation procedure package which may be used as a basis for recommending
revision of the present ship registry laws is being drafted for comment
by both Government and industry.
A Water Transportation Facilitation Committee composed of all
Goverment agencies interested in shipping problems was organized
at the beginning of the year under the sponsorship of the Department
of Commerce. One of the first activities in which this committee
expressed an interest was the customs program for the simplification
of entry and clearance controls. Revised customs control forms are




ADMINISTRATIVE REPORTS

151

being drafted. I t is anticipated that this beginning will lead to
other improvements through the cooperation of Government and
industry.
The biennial conference of the Convention for Uniform Tonnage
Measurement Rules, signed at Oslo on June 10, 1947, was held in
Reykjavik, Iceland, June 14 to 29, 1961. The meeting was attended
by delegates from Denmark, Federal Republic of Germany, Finland,
France, Iceland, Israel, Netherlands, Norway, and Sweden. Observers represented Japan, Poland, the United Kingdom, and the United
States. Observers were also present from the Suez Canal Authority,
the Intergovernmental Maritime Consultative Organization, and the
Classification Societies of Bureau Veritas, Germanischerlloyd, and
Lloyd's Register of Shipping.
Although the Unitecl States is not a member of this convention,
it is faced with many of the tonnage measurement problems discussed
at the meeting. In the light of the discussions which took place, the
U.S. observers representing the Treasury Department and the shipping
industry were convinced more than ever of the soundness of the position of the United States in seeking a simplified method of tonnage
measurement.
The same observers represented the United States as official members of the working group of the Subcommittee on Tonnage Measurement, Intergovernmental Maritime Consultative Organization, which
met at London July 3 to 6, 1961. As a result of the attendance at
the Reykjavik meeting the United States proposals were considered
with interest and were to be placed before the meeting of the full
subcommittee to be held in December 1961.
Law enjorcement and investigative activities.—The Customs Agency
Service conducted 18,828 investigations during 1961 compared with
17,717 ^ in 1960, an increase of 6.3 percent. These investigations
were made under the customs, navigation, and related laws administered by the Bureau of Customs and several laws administered by
other Government agencies and enforced by Customs. Table 104
showing the number of cases investigated during 1960 and 1961,
reflects the continued emphasis on criminal cases. Investigation of
noncriminal matters remained fairly constant. The increase in number of export control violations and an increase in the smuggling of
arms and ammunition out of the country resulted from the embargo
on the shipment to Cuba, effective October 20, 1960, of all types of
merchandise except foods and medicines.
Other major enforcement problems remained much the same as in
previous years. The smuggling of narcotic drugs and marihuana was
the most important, with the smuggling of watches, jewelry, and other
types of expensive merchandise almost as great. Although there was
a decline in the number of investigations involving undervaluations
and false invoicing, they stUl constituted a major problem. A.s indicated above, the illegal exportation of arms and ammunition and
general merchandise to Cuba assumed increased importance.
Customs agents made 147 seizures of heroin totaling 11,177.13
grams during 1961, compared with 132 seizures totaling 8,479.21 grams
in fiscal 1960. In 1961 there were 28 seizures of opium amounting to
44.75 kilograms, compared with 25 seizures of 6.79 kilograms during
f Revised.




152

1961 REPORT OF THE SECRETARY OF THE TREASURY

fiscal 1960. The two largest of these lots originated in Calcutta, and
one Avas the largest apprehended in the United States since 1952.
Marihuana seizures during fiscal 1961 numbered 397 aggregating
3,645.573 kilograms, as against 386 seizures of 1,255.850 kUograms
during fiscal 1960. However, not all of the increase in marihuana
seizures represented attemptecl smuggling, since the largest seizure of
all, made on April 19, 1961, involved 26 kilograms of viable marihuana
seed and 2,028 kilograms of hemp stalks, which a large American firm
was innocently attempting to import for use in experiments to determine if the fibers were suitable for making paper. Even excluding
this item, however, the year to year increase was still more than 28
percent. Mexico continued to be the source of 95 percent of the
marihuana consumed in the United States.
While Europe is still the main supplier of the heroin used in the
United States, customs seizures consisted in large part of heroin from
the Far East, manufactured mainly in Macao from morphine extracted
from opium in Bangkok. United States customs officers stationed in
the Orient report that the quantities of narcotics available in that area
are almost unbelievably large. In November and December 1960,
for instance, the authorities in Hong Kong made seizures on two
vessels arriving from Bangkok which involved a total of 1,984 pounds
of opium and 330 pounds of block morphine. At about the same
time a seizure of 2.2 tons of raw opium was made in Thailand.
Customs agents made 1,483 arrests and convicted 743 violators,
compared with 1,317 arrests and 784 convictions in 1960. The
following table shows the number of arrests and dispositions during
fiscal 1960 and 1961.
Activity

Arrests
Convictions
Acquittals
Nolle pressed
Dismissed
Not indicted.,
Under, or awaiting indictment.. !
Turned over to State and other Federal authorities for prosecution

Percentage
increase, or
decrease (—)

1961

1960

12.6
-5.2
-38.2

1,317

1,483

784
55
:LOI
288
11
422

743
34
.01
399
14
366

38.5
27.3
-13.3

93

208

123.7

During fiscal 1961 customs agents and enforcement officers made
4,017 seizures as compared with 1,570 in 1960. Fines and penalties
incurred in fiscal 1961 totaled $28,469,300 compared with $13,730,125
in 1960.
Reflected in the 1961 statistics is the effectiveness of the customs
enforcement officers in the first full year they were a part of the
Customs Agency Service. Under the new management and a revitalized program of training personnel, and higher grades of radio and
automobile equipment, customs enforcement officers arrested 265
persons and made 2,579 seizures of miscellaneous merchandise valued
at $8,409,141. Of this, $7,975,000 is the value placed on nine oceangoing vessels seized under the mandatory provisions of an act approved
June 17, 1930 (19 U.S.C. 1453), which requires special licenses before
lading or unlading merchandise from any vessel. These officers




ADMINISTRATIVE

153

REPORTS

also made 250 seizures of marihuana weighing 38.42 kilograms and 59
seizures of opium and heroin weighing 43.14 kilograms.
Seizures of merchandise throughout the country b}^- all types of
customs officers during fiscal 1961 for violation of laws enforced b}^the Customs Service numbered 14,658 with an appraised value of
$15,850,918, compared with 13,950 seizures in 1960, appraised at
$8,677,279. This was an increase of 5.1 percent in the number of
seizures and an increase of 82.7 percent in the appraised value. Title
to only a small fraction of these seizures actually passed to the Government, as the majority are destroyed or returned to the owners upon
payment of fines or penalties. Details of seizures are shown in table
103.
Foreign trade zones.—During fiscal 1961 large quantities of Brazil
nuts, pharmaceuticals, transistor radios, lead, zinc, sugar, talc, and
heavy machinery continued to flow in and out of Foreign Trade
Zone No. 1 at New York, N.Y. Five ships berthed to lade domestic
ship's stores and 44 ships used the zone facilities for discharging
cargo from foreign countries. Raw cotton is brought into Foreign
Trade Zone No. 2 at New Orleans, La., from foreign countries, manufactured into cotton card laps, and then shipped to mills for further
cotton manufacturing. Activities at the San Francisco Foreign
Trade Zone (No. 3) remained at approximately the same level as
during 1960, although duties and taxes coUected increased by 21
percent. There were decreases in all activities at Foreign Trade
Zone No. 4 at Seattle, Wash. Foreign Trade Zone No. 7 at Mayaguez, Puerto Rico, and Foreign Trade Zone No. 8 at Toledo, Ohio,
were approved but were not activated until fiscal 1962.
The following table contains a brief summary of foreign trade
zone operations during fiscal 1961.

Trade zone

New York
New Orleans
San Francisco
Seattle

Number
of
entries

5,747
3,410
6,344
658

Received in zone
Long tons

45, 007
36,217
1,953
297

Value

$35,228, 900
17, 956,204
2,272,874
551, 565

Delivered from zone
Long tons

44,374
40,634
2,077
484

Value

$39,963, 091
22,178, 988
2,314, 648
724, 998

Duties and
internal
revenue
taxes
collected
$4,390,372
1,147,020
267, 511
86,390

Customs ports oj entry, stations, and airports.—The limits of the
port of Los Angeles, Calif., were extended and redescribed to include
all the territory within the corporate limits of Los Angeles (which
include San Pedro and Wilmington, Calif.), the territory within the
corporate limits of El Segundo, Long Beach, and Signal Hill, Calif.,
and in addition, certain other territory lying east of the corporate
limits of Los Angeles. Kodiak, and Anchorage, Alaska, and Port
Canaveral, Fla., were designated ports of entry. St. Juste, Quebec,
Canada; Houma, La., and Culebra, Puerto Rico, were designated as
customs stations. The designations of Lac Frontiere, Quebec,
Canada, and Fort Yukon, Alaska, as customs stations were revoked.
The name of the customs station at Connecticut Lakes, N.H., was
changed to Pittsburg, N . H . Customs preflight inspection officQs




154

1961 REPORT OF THE SECRETARY OF THE TREASURY

were established at Kindley Field, Bermuda, and at Vancouver
International Airport, Vancouver, B.C., Canada.
Cost of administration

Regular nonreimbursable customs employment increased 1.6
percent in 1961. Total employment increased 1.8 percent. Export
control emplo3^ment, financed by funds from the Department of
Commerce, increased 8.1 percent, while employment financed by
funds transferred from the Department of Agriculture increased 6.8
percent.
Customs operating expenses totaled $62,109,562, including export
control expenses and the cost of additional inspection reimbursed by
the Department of Agriculture.
The following table shows man-year employment data in fiscal
1960 and 1961.
Operation

Man-years
1960

Man-years
1961

Percentage
increase

Regular customs operations:
Nonreimbursable
Reimbursable i

7,213
299

7,328
302

1.6
1.0

T o t a l regular 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 Agriculture

7,512
160
176

7,630
173
188

1 6
8 1
6.8

7,848

7,991

1.8

Total employment

--

1 Salaries reimbursed to the Government by the private firms who received the exclusive services of these
employees.

Management improvement program

Management improvement in fiscal 1961 was concentrated primarily
on projects to facilitate trade and travel in contrast to Bureau operations which received special attention in 1960. Total savings of
$188,200 were realized. The savings were used to fuiance several
essential but unbudgeted projects, including preflight clearance at
Bermuda and Vancouver, and a special customs training program for
enforcement officers as well as to reduce backlogs of work and to meet
unexpectedly large costs for miscellaneous services.
International trade.—A significant reduction was made in the entries
awaiting liquidation (the final determination of duties and taxes due),
which had reached an alltime peak of 642,000 on December 31, 1960.
During the last six months of fiscal 1961 a reduction of 85,000 entries
was made, chiefly by a high rate of individual production through
improved procedures and the additional manpower obtained with
funds authorized in 1960 and 1961. During the same period the
invoices awaiting action by the appraisers were reduced by 60,000, a
substantial reduction in another area where the backlog was large.
New procedures were developed to facUitate the customs entry and
release of lift vans, cargo vans, and other large cargo containers, and
also to simplify substantiaUy the inspection, examination, and release
of the merchandise imported in these containers. The new procedures




ADMINISTRATIVE REPORTS

155

recognize the increasing use of cargo containers b}^ the transportation
industry.
The continuous customs supervision of the discharge of bulk petroleum cargoes, which was successfuUy discontinued at PhUadelphia in
1960, has been ended at all ports. Continuous supervision over the
withdrawal of oil from bonded tanks for use as bunker fuel was eliminated also under certam conditions. The new procedures a d e q u a t e ^
safeguard the revenue while permitting better utilization of inspection
manpower and substantial savings to the oU companies in reimbursable
overtime charges.
Customs regulations were amended to permit warehouse withdrawals for smelted or refined metal to be ffied for a greater quantit}^
than that on hand in a smelted or refined state. This procedure
benefits importers by permitting them to take advantage of any quota
that may be opened while the smelting or refining process is underway.
The customs treatment of shipments arriving at one port for
immediate transportation in bond to another port was facilitated by a
new procedure which permits collectors of customs at destination ports
under certain conditions to accept entry for the packages in the shipment even though the marks and numbers on the packages do not
agree with the manifest. This procedure will eliminate technical and
storage problems.
A new procedure permits horses which are temporarily imported for
exhibition and competition to be entered under the informal entry
procedure. Also, the bond given by the importer to guaranty subsequent exportation does not require surety or cash in lieu of surety.
The new procedure saves importers the expense and inconvenience of
filing formal entry supported by surety bonds.
A power of attorney from an importer in favor ol an unincorporated
customhouse broker is no longer required to contain the name of each
broker's employee who has been designated by the broker to act for
him in customs matters. This simplification makes it unnecessary for
a broker to secure new powers of attorney for all his clients every time
he wishes to designate a new employee to act for him.
The airline companies operating international flights were benefited
by the establishment of a new consolidated bond which incorporates
and replaces four separate bonds previously required. The new bond
may run indefinitely thereby eliminating the need for yearly renewals.
The approval of each bond is published in the weekly Treasury
Decisions which makes it unnecessary for the airline to provide a copy
of the bond for each port where it wUl conduct business.
The admmistrative settlement of protests in which there is no dispute between the collector of customs and the importer was facilitated
by a new policy which permits collectors to validate the protest and
make appropriate adjustments even though it was not possible to do
so within the 90 days prescribed by the Tariff Act of 1930. Previously many offices forwarded all protests over 90 days old to the
Customs Court, even though they agreed with the contentions of the
importer.

614359—62

11




156

1961 REPORT OF THE SECRETARY OF THE TREASURY

Standards were issued for the uniform application of penalties for
violation of the customs laws relating to the arrival of conveyances,
persons, and merchandise from contiguous countries.
International travel.—A study of customs inspection of passengers'
baggage at air, sea, and border ports of entry, was designed to determine whether current requirements and procedures unnecessarily discourage foreign tourists from visiting the United States; and if so, to
recommend corrective action. A task force of citizens organized to
make the study includes persons interested in travel and transportation, experts in business management and governmental procedures,
a sociologist, and an authority on public relations. Most large ports
of entry were to be visited b}'^ the members during the summer of 1961.
Customs preflight inspection offices were established at Kindley
Field, Bermuda, and at Vancouver International Airport, Vancouver,
B.C., Canada. Under this procedure, persons departmg on direct
flight by commercial aircraft to the United States clear through the
U.S. Customs before boarding the aircraft. Preclearance enables
them to proceed without further delay upon arrival in the United
States. Similar procedures were alread}^ in effect at Toronto, Montreal, and Winnipeg, Canada, and at Nassau, Bahama Islands.
Customs requirements were amended to permit the vehicles carrj^ing the equipment of nonresident athletic teams and theatrical troupes
to be admitted without formal customs entry regardless of the number
of cities in which they will appear while on tour. Previously, formal
entries had to be filed for these vehicles whenever the teams or
troupes appeared in more than one cit}^
Bureau operations

The efficiency and effectiveness of the enforcement operations of the
Customs Agency Service were mcreased substantial^ by the installation of a uniform radio system. The S37^stem consists of repeater
stations, two-way automobile radios, and portable units, all of which
operate on the same frequency, thereb}^ providing flexibility and increased range of communication. Another innovation in customs
enforcement work was introduced at New York's Idlewild Airport
when closed circuit television cameras were installed to monitor a
wide area where planes discharge passengers, baggage, and freight.
An extensive training program in law enforcement techniques was
developed and presented to customs enforcement officers who were
transferred from the offices of the collectors of customs to the Customs
Agency Service in 1960. The training course was designed to acquaint the enforcement officers with the latest developments in enforcement methods and to prepare them for the more important
enforcement duties to which they will be assigned.
An office of regional customs representative with jurisdiction over
all Customs Agency Service activities in the Far East has been established in Tokyo, Japan, primarily to provide better control and coordmation of enforcement activities in that area.
A new program was developed and installed to provide for systematic interviews of newly hired employees 90 days after they enter on




ADMINISTRATIVE REPORTS

157

duty. These interviews will assist in improving selection and placement procedures and will determine whether the emplo3^ee is satisfactorily adjusted to the job and fully understands his rights, privileges, and obligations.
The new safety policy of the Secretary of the Treasury was put
into effect and all local safety programs were reviewed. Steps were
taken to supply hearing protection devices to customs officers who
are required to work in close proximity to jet aircraft.
A new system for the preparation, issuance, and filing of circularized directives was installed during the year. The more important
features include: A reduction from ten to two in the types of
directives; a new format designed to increase clarity; and a classification system which insures that all on the same subject are filed
together. At the same time the number of outstanding directives
was reduced from 5,000 to 1,400.
The program for the monthly reporting of statistical data by the
field offices to the Washington headquarters was reviewed and revised.
A new report form was designed to replace three separate forms
previously used.
A manual of auditing standards and techniques was prepared and
distributed to all comptrollers of customs. The manual wUl be used
as a guide by custonis auditors in performing onsite audits of customs
field offices and will be useful in the training of new auditors.
Criteria were established for use in determining under what conditions a customs form will be priced or distributed free. The less
expensive offset method was adopted for printing certain forms.
Savings realized to the Government are expected to range from
$20,000 to $40,000 yearly.
A forms improvement workshop in the office of the U.S. Appraiser
of Merchandise at New York, N.Y., eliminated 55,000 filing operations
annually and 10,000 copies of forms or form letters, the preparation
of 17,000 pieces of correspondence, and 142,000 postings. A review
of locally reproduced forms, using the General Services Administration
pamphlet Forms Analysis as a guide, resulted in the elimination of
almost 250 forms. In addition the Washington headquarters office
in its review of printed customs forms abolished 8, established 11 new
forms, and revised 55.
Management teams and officials from the Washington headquarters
office inspected 16 customs districts during the year. Manpower
requirements were reevaluated in terms of existing and anticipated
workloads, simplified procedures were installed, and other improvements made which resulted in the facilitation of trade and travel and
annual recurring savings of $30,000.
A total of 762 employee suggestions was received ofwhich 213 were
adopted, with awards of $5,398. Identifiable savings resulting from
adopted suggestions amounted to $53,399.
Legislation

An important piece of legislation affecting customs business was
Public Law 87-132, approved August 10, 1961. This law amended




158

1961 REPORT OF THE SECRETARY OF THE TREASURY

paragraph 1798(c)(2) of the Tariff Act of 1930 by reducing the duty
exemption for U.S. residents returning to the United States on and
after September 9, 1961, and before July 1, 1963. The $200 exemption under subdivision (A) was reduced to $100 and the $300 exemption under subdivision (B) was eliminated.
Formerly a returning resident who had been out of the country
over 12 days could bring in a maximum of $500 worth of personal and
household goods duty free. Under the new law he is entitled to only
$100. Although it was not the purpose of this law to produce revenue,
there will be some small additional collections. Its purpose was to
reduce U.S. tourists' purchases abroad and thus reduce the outflow
of U.S. gold and improve our balance-of-payments position.
Early indications are that its purpose is being accomplished.
Office of Defense Lending
The Office of Defense Lending was established on July 1, 1957,
by Treasury Order No. 185. Assigned to this Office were the following functions which had been transferred to the Secretary of the
Treasury.
Activities under the Defense Production Act

The making and administering of loans to private business enterprises under the authority of section 302 of the Defense Production
Act of 1950, as amended (50 app. U.S.C. 2153), were assigned to the
Secretary of the Treasury by Executive Order No. 10489, dated
September 26, 1953. Under section 302, this Office can consider only
applications for loans which are certified as essential for national
defense purposes by the Office of Civil and Defense Mobilization.
No new loans were authorized during the fiscal year 1961.
On July 1, 1960, there were loans outstanding amounting to $162.9
million and deferred participation commitments of $14.7 million. By
the close of fiscal 1961 tbese loans had been reduced to $121.6 million
and commitments to $13.6 million.
Civil defense loans

The lending functions under section 409 of the Federal Civil Defense
xlct were transferred to the Secretary of the Treasury on September
28, 1953, pursuant to section 104 of the Reconstruction Finance Corporation Liquidation Act (50 app. U.S.C. 2261). Beginning with
fiscal 1956 no administrative expense allowance has been authorized
for this program, and no applications for new loans have been accepted.
On July 1, 1960, there were loans outstanding amounting to $904,085
and deferred participation commitments of $2,129,110. By June 30.
1961, these loans had been reduced to $798,344 and the commitments
to $1,776,138.
Liquidation of Reconstruction Finance Corporation assets

Pursuant to the provisions of Reorganization Plan No. 1 of 1957,
the Reconstruction Finance Corporation was abolished effective at




ADMINISTRATIVE REPORTS

159

the close of June 30, 1957. Its remaining assets, liabilities, and
obligations were transferred to the Secretary of the Treasury, the
Administrator of the SmaU Business Administration, the Housing
and Home Finance Administrator, and the Administrator of General
Services.
The Secretary of the Treasury 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 fiscal 1961 there was paid into the Treasury as miscellaneous
receipts $4.5 million, representing net income and proceeds of liquidation on the various loans, securities, and commitments. This
brought to $44.5 million the total paid into the Treasury since July 1,
1957.
On June 30, 1961, the portfolio of R F C loans, securities, and commitments amounted to $16.1 million, a reduction of $3.9 million from
the $20 million outstanding on July 1, 1960. Total reductions
eff'ected have amounted to $39.4 million, approximately 71 percent
of the portfolio of $55.5 million transferred to the Secretary of the
Treasury on July 1, 1957.
Bureau of Engraving and Printing
The Bureau of Engraving and Printing designs, engraves, and prints
United States currency. Federal Reserve notes, securities, postage
and revenue stamps, and 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 to the customer agencies in the
fiscal year 1961 totaled 26,746,227,150 pieces, as compared with
27,643,428,932 pieces in 1960, a decrease of 897,201,782, or approximately 3.2 percent in the deliveries of Bureau products.
Organizational matters

Several changes were made in the organizational structure during
the 3^ear in order to improve operating efficiency. The Bureau
Organization Manual was published and distributed. It consists
of organizational charts and functional statements for all components
and a list of the organization staff and principal assistants. The
Manual is kept current through issuance of revised pages as needed.
Management attainments

The Director of the Bureau has held frequent meetings with the
Bureau Management Advisory Committee and other management
and supervisory personnel for the purpose of exchanging ideas, solving
problems, and bringing about unproved operations. He has established and appointed members to special committees to investigate
and make appropriate reports on special situations. He has also




160

1961 REPORT OF THE SECRETARY OF THE TREASURY

held frequent meetings with committees representing various organized groups to discuss and resolve labor-management problems.
An eff'ective management tool which the Bureau used throughout
the fiscal .year was the continuing review of manpower requirements
by which every vacancy is reviewed, and the position's absolute need
determined before a request is made for filling the vacancy. In
addition, a special committee was appointed by the Director to study
the overall situation with the purpose of providing for improved
manpower utilization. Since the Post Office Department did not
order as many postage stamps as had been estimated, and the Bureau
converted at an accelerated pace to processing all coils on automatic
equipment, fewer emplo3^ees were required. The rate of spoilage on
U.S. currency, 32-subject, decreased and the average production per
employee increased, thereby making it possible to produce the currency with fewer emplo^^ees. These combined efforts, together with
other management improvements, were reflected in the reduction of
personnel from 3,191 emplo37^ees at the beginning of the fiscal year to
3,038 at its close, a decrease of 153.
Management placed continuing emphasis on the directive to keep
overtmie to an absolute minimum, with a resulting reduction in paid
overtime from $277,158 for fiscal 1960 to $110,537 for 1961.
In the Bureau's technological improvement program, extensive
research and development activities have been conducted throughout
the year. Management eff'orts were directed especially toward
making additional refinements and improvements in the new equipment and processes employed in the manufacture of currency and
postage stamps. In an attempt to reduce spoilage, a special committee was appointed to investigate all facets of the formulation and
manufacture of the printing inks used in the production of currency.
This investigation covered the procurement of the raw materials
through the printing operations in an eff'ort to identify the underlying
causes for the deficiencies found prevalent in such inks. To bring
about additional unproved operations further modifications and refinements continued to be made on the high-speed rotary stamp
presses and on the coil stamp processing equipment. The Bureau
has vigorously continued other research activities relating to paper,
tape, labels, wrappings, plate wear, presses, and equipment, in order
to bring about unprovements in the quality of its products.
The Bureau has also conducted an active and continuing program
of industrial engineering studies, analyses of production processes,
and quality control surveys, to improve work methods and operations,
increase industrial efficiency, and insure development and practice of
sound qualit}^ control systems.
Close liaison was maintained with, representatives of the Department of Agriculture relative to the new food stamp program. Careful
utilization of einployees and equipment permitted successful completion of food stamp coupon requirements in addition to the thnely
completion of normal postage stamp book requisitions.
Reviews and audits made by the Internal Audit Staff indicate that
Bureau policies have been carried out eff'ectively. Through financial
and management t^^^pe audits, areas were identified in which substantial hnprovements in operations and savings were made. In fiscal
1961, 74 reports of audits, containing 90 recommendations, were




ADMINISTRATIVE REPORTS

161

released and 52 audit recommendations were under consideration by
the responsible offices at the close of the year.
Through the excess property program, the Bureau received $41,908
from the sale of obsolete equipment and material declared excess to
Bureau needs. I t obtained equipinent valued at $15,467 at no charge
through the Federal utilization program.
Initiated last year the awards program promotional campaign of
presenting a pencil to each employee submitting a suggestion and one
to his supervisor was ended during 1961, after a total of 510 pencils
had been issued. I t is estimated that annual recurring savings of
$29,283 will accrue to the Bureau from employee suggestions adopted
during the fiscal year. Through the records management program, 561
cubic feet of noncurrent records have been transferred from office
space to the records storage area, and 250 cubic feet of obsolete records were destroyed. In the forms management program, 1,084
requests for form service were processed resulting in the preparation
of 71 new forms, the ehmination of 129, and the improvement and
revision of 295.
The Director met with all supervisors and members of safety committees to reemphasize his personal interest in the Bureau safety
program, and to encourage supervisors to give this program their wholehearted support. Supervisors held similar meetings to stress the need
for an all-out effort to reduce injuries. Several new ideas were adopted
to intensify Bureau-wide interest.
The Bureau conducts a continuing employee development program,
through which management at all levels helps personnel acquire the
knowledges, skills, and attitudes needed to work effectively and to
prepare for greater responsibilities. The program encompasses both
outside and internal training and orientation. Sixty-five employees
concluded six supervisory training classes and were presented certificates in appropriate ceremonies.
Estimated savings resulting from management improvement efforts
in the Bureau of Engraving and Printing for fiscal 1961 totaled nine
man-years and approximately $75,000 on a recurring annual basis.
In addition, it is estimated that an additional $1,200,000 is being
saved annually by the Government as a result of the development by
the paper manufacturer of a dry paper for use in printing one dollar
sUver certificates on high-speed intaglio presses. Use of this dry paper
has increased the service life of such notes in circulation by an estimated 30 percent over that of notes printed by the wet process. All
realized savings were applied against the cost of products, and have
been reflected either in the Bureau's billing rates or in decreases in
appropriation requests by the Office of the Treasurer of the United
States for funds for the purchase of currency.
New issues of postage stamps and deliveries of finished work

New issues of postage stamps delivered by the Bureau in fiscal
1961 are shown in table 105. A comparative statement of deliveries
of finished work for fiscal 1960 and 1961 appears in table 106.
Finances

The Bureau operations are financed by reimbursements to a working capital fund authorized by law. Balance sheets and a statement
of income and expense as of June 30, 1960 and 1961, follow.




162

1961 REPORT OF THE SECRETARY OF THE TREASURY
Balance sheets as of June 30, 1960 and 1961
June 30,1960

Assets
Current assets:
Cash with Treasury
Accounts receivable
Inventories: i
Raw materials
Work in process
Finished goods
Stores
Prepaid expenses

_ _ _
_. .
_

.

.

Total current assets
Fixed assets: 2
Plant machinery and equipment
Motor vehicles
Office machines
_
Furniture and fixtures
Dies, rolls, and plates
Building appurtenances
Fixed assets under construction

_..
_ _
__ .

Less portion charged off as depreciation
Excess fixed assets (estimated realizable value).
Total fixed assets
D eferr ed charges
Total assets

_.

Liabilities and investment of the United States

$3,862,823
1,061,865

$3,294,070
1, 274, 673

660,351
3,419,054
1,802,659
1,142,188
66,627

762, 520
3, 669, 498
2,996, 548
1,097,054
61, 396

12,015, 567

13,155,759

19, 998, 338
86, 247
188, 823
445,467
3, 955, 961
2,133,428
34, 544

19, 505,859
88, 317
193,843
435,031
3,955, 961
2,138, 720
36, 789

26, 842, 808
10,101, 572

26,354, 520
11,008, 940

16, 741, 236
804

15, 345,580
360

16, 742,040

15,345, 940

174, 742

104, 623

28, 932, 349

28, 606.322

June 30,1960

Liabilities: ^
Accouuts payable
. . ._
Accrued liabilities:
Payroll
_ . . _ - . _
Accrued leave
Other
Trust and deposit liabilities
Other liabilities
. .

June 30,1961

June 30,1961

$595, 544

$400,910

926,175
1, 365,674
177, 299
675.087
5,889

883, 639
1,475,161
115,196
564,063
4,876

3,745,668

3,443, 845

3,250,000
22,000, 930

3, 250,000
22,000,930

25,250, 930
-64, 249

25, 250, 930
-88,453

Total investment of the U.S. Government

25,186, 681

25,162,477

Total liabilities and investment of the U.S. Government

28, 932, 349

28,606, 322

Total liabilities
Investment ofthe United States Government:
Principal of the fund:
Appropriation from the U.S. Treasury
Donated assets, net

_

__

Total principal
Earned surplus, or deficit (—) ^

...

1 Finished goods and goods-in-process inventories are valued at cost. Except for the distinctive paper
which is valued at the acauisition cost, raw materials and stores inventories are valued at the average cost
of the materials and supplies on hand.
2 The act of August 4,1950, establishing the Bureau of Engraving and Printing Fund, specifically excluded
from the assets of the fund the land and buildings occupied by the Bureau (31 U.S.C. 181a). These assets
are valued at about $9,000,000. However, under the Supplemental Appropriation Act of 1961 (74 Stat. 514)
$1,250,000 was appropriated for emergency repairs to the Bureau of Engraving and Printing Annex Building.
Plant machinery and equipment, furniture and fixtures, office machines, and motor vehicles acquired on or
before June 30,1950, are stated at appraised values. Additions since June 30, 1950, and all building appurtenances are valued at acquisition cost. Dies, rolls, and plates were capitalized as of July 1,1951, on the basis
of average unit costs developed for fiscal 1950 reduced to recognize their estimated useful life. Since July 1,
1951, all costs of dies, rolls, and plates have been charged to operations in the year acquired.
3 Outstanding commitments, consisting of undelivered purchase orders and unperformed contracts,
totaled $3,617,362 on June 30, 1961, compared with $4,480,585 on June 30, 1960; of these amounts, $2,497,766
on June 30, 1961, and $2,582,783 on June 30, 1960, related to contracts entered into prior to June 30, but not
to be performed until the ensuing fiscal years.
^ The act of August 4,1950, provided that any surplus accruing to the fund in any fiscal year be paid into
the Treasury as miscellaneous receipts except that any surplus would be applied first to restore any impairment of capital by reason of variations between prices charged and actual costs (31 U.S.C. 181a).




ADMINISTRATIVE

163

REPORTS

Statement of income and expense for the fiscal years 1960 and 1961
Income and expense

I960

Operating revenue: Sales of engraving and printing.
Operating costs:
Cost of sales:
Direct labor
__Direct materials used.
Prime cost

_
._

Overhead costs:
Salaries and indirect labor
Factory supplies
.
_ ,
Repair parts and supplies
Employer's contribution for retirement and life insurance
Rents, communication, and utilities
Other services._ _
Depreciation and amortization
Losses on disposal or retirement of fixed assets
Sundry expenses (net)

__

.

Total overhead
Total costs!

--

Less:
Nonproduction costs:
Shop costs capitalized
Cost of miscellaneous services rendered other agencies
Net increase, or decrease (—) in finished goods and work tn
' process inventories
__

Cost of sales
Operating loss
Nonoperating revenue:
Sales of card checks
Operation and maintenance of incinerator and space utilized by
other Treasury activities _.
_.
Other services
.
.

Nonoperating costs:
Purchase of card checks
Freight out-card checks
Other costs of miscellaneous services rendered other agencies

1961

$26,014, 685

$24,235, 583

9, 781,451
4,180, 726

9 438 947
4,033, 564

13,962,177

13,472, 511

•• 7,012, 692
1,066,341
258,339
r 1,125, 312
453, 352
538,907
1,972,205
25, 530
21,995

7,184, 555
1 110 591
246,372
1,294,445
457,983
293 681
1,945,966
236, 308
9,217

12, 474, 673

12, 779,118

26,436,850

26,251, 629

201,246
424,030

115,275
431.151

—203,477

1 444,333

421, 799

1,990, 759

26,015,051

24,260,870

366

25, 287

1,186,101

213 392

361,217
49,025

379,457
49,072

1, 596, 343

641,921

976,950
195,178
424,030

173,520
36,167
431,151

1, 596,158

640,838

Nonooeratins: nrofit

185

1,083

Net loss for the vear^

181

24, 204

»• Revised.
» No amounts are included in the accounts of the fund for (1) interest on the investment of the Government
in the Bureau of Engraving and Printing fund, (2) depreciation on the Bureau's buildings excluded from
the assets of the fund by the act of August 4,1950, and (3) other costs incurred by other agencies on behalf
of the Bureau.
2 The act of August 4,1950, provided that any surplus accruing to the fund in any fiscal year be paid into
the Treasury as miscellaneous receipts except that any surplus would be applied first to restore any impairment of capital by reason of variations between prices charged and actual costs (31 U.S.C. 181a).

Fiscal Service
The Fiscal Service, headed by the Fiscal Assistant Secretary,
consists of the Ofl&ce 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.
In addition to general supervision of the Fiscal Service bureaus,
the Fiscal Assistant Secretary is responsible for administration of the
cash position of the Treasury, including the distribution of funds




164

1961 REPORT OF THE SECRETARY OF THE TREASURY

between Federal Reserve Banks and other Government depositaries;
participation in planning Treasury financing operations; general direction of fiscal agency operations of the Federal Reserve Banks; and
the Treasury's central agency participation in the joint financial
management improvement program along with the Bureau of the
Budget and General Accounting Office.
Treasury Order No. 148 (Revision 10), dated March 2, 1961,
assigned to the Fiscal Assistant Secretary responsibility for general
supervision of the Office of Defense Lending.
The reports of the Bureau of Accounts, Bureau of the Public Debt,
and Office of the Treasurer of the United States, which follow, explain
the operations under the responsibilities of the Fiscal Assistant
Secretary.
BUREAU OF ACCOUNTS

The Bureau of Accounts was established by the President's Reorganization Plan I I I , dated April 2, 1940, and reorganized by Treasury Department Order No. 164, dated December 12, 1952.
The Bureau's functions, which are mainly of Government-wide
scope, include: Maintenance of the Government's system of central
accounts; issuance of the Government's central financial reports;
accounting and reporting for foreign currencies in" the custody of
the Secretary of the Treasury; disbursing for virtually all civilian
agencies of the Government; participation with the Office of the
Fiscal Assistant Secretary in the joint financial management improvement program; general direction and designation of Government
depositaries; determination of qualifications and underwriting limitations of surety companies to write fidelity and other surety bonds
to cover Government activities; investment of social security and
other trust funds; administration of loans and advances by the
Treasury to Government corporations and other agencies; technical
guidance to Treasury bureaus and other executive agencies on accounting systems and related matters; and general direction of fiscal
internal auditing within the Department.
The Bureau 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; and performs such other fiscal work as may be required.
Accounting and Reporting
Accounting systems

Procedural changes resulting from operations of the Accounting
Systems Division during the fiscal year 1961 were as foUows:
Department Circular No. 945 was revised on January 17, 1961,
modifying Treasury accounting relationships with all agencies for
which the Treasury disburses. Effective July 1, 1961, Treasury
regional offices will keep a single account with each agency accounting station concerned in lieu of an account for each appropriation,
fund, or receipt classification. The agency accounting stations will
report to the Treasury monthly the transactions based on their own
accounts, classified by appropriations, fund, and receipt accounts.




ADMINISTRATIVE REPORTS

165

Further information on this subject is presented under ^'Central
Accounting."
Under the joint financial management improvement program,
staff of the Accounting Systems Division participated in a study to
explore improvements in all financial aspects of reimbursable programs of Government agencies and in continuing studies concerning
accrual accounting and cost-based budgeting.
The staff also dealt with depositary receipt procedures; prepared
regulations for substitute checks drawn on depositaries; developed
procedures and agreements with the Department of Labor required
by the Employment Security Act of 1960 (42 U.S.C. 1101-1104);
participated in fiscal arrangements incident to food stamp operations;
and assisted the Civil Service Commission on fiscal procedures for
the Federal employees' health benefits program.
Other staff work included: Preparation of an accounting manual
for cash operations of the Treasurer of the United States; serving
on the Interbureau Committee on Automatic Data Processing;
assistance relating to new legislation on extended unemploymentbenefits and extension of benefits under the Social Security Act
Amendments of 1961 (75 Stat. 131); recommendations on accounting
for seized property; and development of the Department's annual
report for the joint financial management|improvement program.
In the departmental area, staflf assistance was furnished also in
such matters as: Bureau manuals and procedural instructions; guidelines for departmental accounting policy; participation \vith the
General Accounting Office and the Bureau of Customs in a study
of Customs accounting; participation in the electronic data processing program of the Internal Revenue Service; proposals on Mint
financing and accounting; and assistance to the Bureau of Narcotics,
the U.S. Secret Service, and the Office of Administrative Services
in accounting.
Central accounting

The Division of Central Accounts maintains the central accounts
for the receipts, expenditures, appropriations, and related cash operations of the Government in accordance with section 114 of the Budget
and Accounting Procedures Act of 1950 (31 U.S.C. 66b), and Treasury
Department Circular No. 945, as amended. The central accounting
system integrates the transactions of all collec'ting and disbursing
officers and the Treasurer of the United States, the appropriation,
fund, and receipt accounts of the Government, and budget results,
with a disclosure of the related cash assets and liabilities. The
Division also prescribes official appropriation, fund, and receipt account symbols and titles and issues appropriation warrants pursuant
to law.
By means of deposit in transit accounts, the system of central
accounts provides Government-wide control with respect to deposits
reported b}^ collecting and disbursing officers for credit to the account of the Treasurer of the United States. I t also provides overall
control concerning data on checks issued reported by disbursing
officers, tied in with the detailed check reconciliation of disbursing
officers' accounts by the Office of the Treasurer of the United States




166

1961 REPORT OF THE SECRETARY OF THE TREASURY

and anchored to the expenditure data aflfecting appropriations and
funds.
The central accounts system furnishes the accounting base for
classified receipts, expenditures, and other data required for the official
central reports, including for example, the Monthly Statement oj
Receipts and Expenditures oj the United States Government and the
annual Combined Statement oj Beceipts, Expenditures and Balances oj
the United States Goveriiment.
Revised procedures were developed, eflfective July 1, 1961, whereby
Treasury regional accounting offices will keep control accounts for the
aggregate of transactions at the level of each agency accounting station
for which the Treasury disburses. Agency accounting stations will
furnish the Treasury with monthly statements of their transactions
classified according to the individual appropriation, fund, and receipt
accounts involved, based directly on their own records. The classified
transactions so reported must be in agreement with the control
accounts maintained in the Treasury regional accounting offices.
The monthly statements submitted by agency stations wUl be taken
up in the central accounts, serving to disclose the Government's cash
operations and budget results. As a result, the accurac}^ of classified
data in the central accounts and validity of the related financial
reports, in large measure, will rest on the accounts of the administrative agencies.
Certificates of deposit and related documents will be forwarded by
the Federal Reserve Banks directly to the central office of the Division
of Central Accounts instead of to the Treasury regional accounting
offices. Agency stations will furnish the Treasury with the totals of
their deposits, classified as to the month in which the deposits are
confirmed by depositaries as credited to the general account of the
Treasurer of the United States. This will be the basis for maintaining
the central ^^eposit in transit" accounts at the level of each agency
accounting station within the Treasury disbursing area, thereby
providing a direct accounting control between each collecting agency
making deposits and the Treasurer of the United States.
The volume of accounting items processed through the central and
regional accounting offices of the Division of Central Accounts during
the fiscal years 1960 and 1961, is shown in the following tabulation.
Classification

Work volume
1960

1961
Number

Receipts
Expenditures
Other items

___

..

Total

- -

-

-- -

-

- -

1,532,873
2, 785,345
13, 727

1,449,428
2, 692, 963
13,396

4,331, 945

4,155, 787

Central reporting

With the collaboration of Government agencies, staff of the joint
financial management improvement program, and users of reports,
various central reporting improvements were made during fiscal
1961.




ADMINISTRATIVE REPORTS

167

A survey of Governm.ent-wide financial reports was made jointly
with the Bureau of the Budget and General Accounting Office. Its
-purpose was to identif}^ and review existing reports; to determine
whether they meet the informational needs of persons who have a
continuing interest in the Government's financial operations; and to
make recommendations for a" coordinated system of reporting that
adequately meets the needs of the public. An inventory of reports
was issued and many users were interviewed. As a result of the survey, a report was submitted containing recommendations for improving the scope of Government-wide reports.
A survey of accoimts and procedm-es of the Department of State,
with respect to Foreign Service and U.S. disbursing officers, was made
under the joint financial management improvement program.
The principal reports compiled in the Division of Central Reports
are: The Monthly Statement oj Receipts and Expenditures oj the United
States Government,^ the monthly statement of Budgetary Appropriations,
and Other Authorizations, Expenditures and Unexpended Balances, the
monthly Treasury Bulletin, the annual Combined Statement oj Receipts,
Expenditures and Balances oj the United States Government, the Annual
Report oj the Secretary oj the Treasury, quarterly Report on Foreign
Currencies in Custody oj the Treasury Department, and monthly and
quartei^ly reports on foreign currency transactions under Public Law
480, as amended. Some improvements made in these reports during
the year were as follows:
Monthly Statement oj Receipts and Expenditures oj the United States
Government.—Additional data were provided by including a special
table on interfund transactions; by further classification of expenditures according to major functions; and by reporting transactions in
trust revolving funds on a gross basis.
Combined Statement oj Receipts, Expenditures and Balances oj the
United States Government.—Additional information was provided by a
breakdown of unpaid obligations as to accounts payable and undelivered
orders.
Ti'easury Bulletin.—Several new tables were added, including a
statement of interfund transactions of budget receipts and expenditures; nonguaranteed obligations of Federal agencies issued and outstanding; public debt securities held by certain savings and loans
associations and other corporations; and a calendar ^^^ear summary
table on internal revenue collections by States and major tax classes.
The section on financial statements of Government corporations and
public enterprise funds was expanded to include additional data on
loans outstanding.
Control of foreign currencies

By legislative enactments and Executive Order No. 10900, dated
January 5, 1961, operations during the fiscal year 1961 continued to
expand in the custody, acquisition, purchase, deposit, transfer, axid
sale of foreign currencies.
As a result of legislation, sales of surplus agriciUtural commodities
for foreign currencies were increased, new programs financed with
foreign currencies were established, and additional dollar appropriations were provided for the purchase of currencies available for U.S.
uses. The transfer of certain functions from the Bureau of the Budget
also added to the worldoad of the Bureau in foreign currency operations.




168

1961 REPORT OF THE SECRETARY OF THE TREASURY

Foreign currency transactions in Treasury custody accounts during
the year are summarized as follows: Collections of currencies generated
under various Government programs amounted to the equivalent of$1,327.5 mUlion; transfers for authorized uses without reimbursement
amounted to the equivalent of $737.8 million; and withdrawals for
sale to Government agencies for dollars, to the equivalent of $240.1
million. The balances in Treasury custody accounts amounted to
the equivalent of $1,323.4 million on June 30, 1961, compared with
$1,035.2 million on June 30, 1960. Unexpended balances in agency
accounts amounted to the equivalent of $1,268.1 million on June 30,
1961, compared with $1,415.1 million on June 30, 1960. Transactions
and balances for the fiscal year are shown in tables 115 and 116.
Internal auditing

Efforts were continued during fiscal 1961 toward attaining maximum
results from the internal audit function in the individual Treasury
bureaus, principall^y by advice and assistance; exchanging internal
audit information and techniques; evaluating internal audit results,
particularly in relation to external audit findings of the General
Accounting Office; and otherwise coordinating internal auditing
throughout the Department.
The audit of unissued stocks of Federal Reserve notes held in joint
custody by the Comptroller of the Currency and the Treasurer of the
United States was conducted as of February 24, 1961, and disclosed
that all stocks were accounted for.
Commodity Credit Corporation appraisal

The act of March 8, 1938, as amended (15 U.S.C. 713a-l), required
the Secretary of the Treasury, as of each June 30, to appraise the
assets and liabilities of the Commodity Credit Corporation to determine its net worth. The amended act defined asset values, for the
purpose of determining the net worth, as the cost of such assets to
the Corporation; therefore, the appraisal figure is stated in terms of
realized losses or gains.
The appraisal for fiscal 1960 disclosed an unpairment of the capital
of the Corporation in the amount of $1,612,108,771.41. An act
approved June 29, 1960 (74 Stat. 242), restored $594,499,006.68 of
this hmpairment, and the balance was restored by an act approved
July 26, 1961 (75 Stat. 238).
An act, approved August 17, 1961 (75 Stat.391), further amended
the act by authorizing annual appropriations for capital impairment
based upon the Corporation's records, rather than upon the Secretary's
appraisal. Accordingly, beginning with the fiscal year ended June 30,
1961, the Secretary of the Treasury no longer is required to make the
appraisal.
Verification of cash, currency, and securities held in the Office of the Treasurer
of the United States, as of January 30, 1961

Incident to the change in Administration, a special committee
appointed by the Secretary of the Treasury made an audit of the
assets transferred to the incoming Treasurer. The assets transferred
were verified as of January 30, 1961. This involved an audit of the
balances of cash, currency, and securities held in the Office of the
Treasurer, Washington, D . C , as shown on the Treasurer's books,
together with the reserve stocks of currency held in the vaults of the




ADMINISTRATIVE REPORTS

169

Bureau of Engraving and Printing and those held for the Treasurer
by Federal Reserve Banks and certain commercial banks. The
inventory was found to be in agreement with the Treasurer's account
balances, after taking into account certain minor items in process of
being recorded.
Disbursing Operations
Durmg fiscal 1961 the Division of Disbursement, through fifteen
regional disbursing offices, performed disbursing services for about
1,500 offices of agencies located throughout the United States, its
possessions, and the Philippines. The Division services all executive
agencies except the military departments, the Post Office Department,
and a few relatively small agencies. The Division also exercises
technical supervision of disbursing operations delegated by the Chief
Disbursing Officer to U.S. disbursing officers of the Department of
State at embassies and consulates in foreign countries, and to assistant
disbursing officers and cashiers attached to agencies located throughout the United States and foreign countries. Under arrangements
with the Department of State payments are made also in behalf of
domestic civilian agencies requiring disbursing service in foreign
countries.
The Minneapolis regional disbursing office was closed as a result of
the transfer of veterans' check issuance operations from that office
to the Chicago regional disbursing office. This completed the planned
closing of six disbursing offices incident to the centralization of disbursing activity for veterans' benefits, coordinated with the related
accounting centralization program in the Veterans' Administration.
A computer system was installed in the Chicago office in December
1960. By June 30, 1961, the computer was being used to process
about 1.5 million veterans' benefit payments monthly. Over eleven
million tax refund checks and approximately two million national
service life insurance dividend checks were likewise prepared during
the first six months of the computer system.
Preliminary to establishing additional electronic data processmg
systems, regional disbursing offices began receiving tabulating cards
from payment centers of the Social Security Administration for use
in preparing new, adjusted, and reinstated cases, thereby reducing
file maintenance work.
New high-speed microfilm-checksigning
machines were installed in all regional offices; new copying machines
were acquired in eight of the larger offices to handle undeliverable
checks returned by post offices.
Significant improvements were made in other areas, including
further conversion of payment files to punched cards, improved
machine operating techniques; streamlining operations in regional
disbursing offices; simplification of balancing operations; and improved
work methods under a job analysis program utilizing firstline supervisors in analyzing procedures and devising improvements.
Recurring annual savings realized during the year under the management improvement program amounted to $285,403.
For fiscal 1961 the average unit cost for processing checks was
4.35 cents, compared with 4.16 cents in 1960. Cost increases resulted
from an act which became law on July 1, 1960 (5 U.S.C. 1113), and




170

1961 REPORT OF THE SECRETARY OF THE TREASURY

which increased salary rates effective July 10, 1960, and also from
nonrecurring expenditures for installing E D P equipment in the
Chicago regional disbursing office.
The volume of work completed in fiscal 1961 as compared with
that of 1960 was as follows:
1960

Classification

Number
Payments:
Social security
Veterans' benefits
Income tax refunds
-.Veterans' national service life insurance dividend program.
Other
Adjustments and transfers
Savings bonds issued
__.
Total

_.

134, 639, 684
61, 673, 858
36, 731,288
4, 341,351
43, 671,271
249, 639
3, 479, 646

146,249,107
62, 736, 556
40,317, 753
7, 096,822
43,386,926
250, 683
3, 739, 793

284, 786,737

303, 777, 640

Deposits, Investment, and Related Operations
Federal depositary system

To supplement services provided by the Treasurer of the United
States, the Secretary of the Treasury has designated the Federal
Reserve Banks and commercial banking institutions in the United
States, insular possessions, and foreign countries, as Government
depositaries authorized to furnish Government agencies with a variety
of banking and financial services. This includes more than 11,500
commercial banking institutions, some of which provide more than
one type of service. Deposits of Government collections with these
depositaries flow to the operating accounts maintained with the Federal Reserve Banks.
A summary of the various types of depositary services and the
number of commercial banking institutions which, as of June 30,
1961, were authorized to provide these services, is shown in the
following table.
Type of services provided by depositaries

Receive proceeds from deposits of taxpayers and sale of public debt securities for credit in
Treasury tax and loan accounts
Receive deposits from directors of internal revenue, military finance oflScers, and other Government oflQcers
Maintain oflScial checking accounts of postmasters, clerks of United States courts, and other
Government oflScers
Furnish bank drafts to Government oflScers in exchange for collections
Service State unemployment compensation benefit payment and clearing accounts
Operate limited banking facilities at military installations:
In the United States and its outlying areas
Overseas
-.

Number of
banking
institutions

11,340
856
4,021
2,212
57
273
164

An act approved September 13, 1960 (42 U.S.C. 1101(c)(2)),
provides in part that beginning July 1, 1960, the Secretary of the
Treasury shall pay from the employment security administration
account, within the unemployment trust fund, into the Treasury as



ADMINISTRATIVE REPORTS

171

miscellaneous receipts, expenses of banks for servicing unemployment
benefit payment and clearing accounts which are offset by the maintenance of balances of Treasury funds with such banks.
Investments

Under provisions of law the Secretary of the Treasury is responsible
for investing various Government trust funds. The Department
also furnishes investment services for other funds of Government
agencies (see table 64).
Trust funds are invested in marketable Government securities and,
where authorized by law, in special public debt obligations issued
specifically to the fund. The statutes authorizing issuance of special
public debt obligations apply to the major trust funds and usually
specify interest rates; in some cases the Secretary has discretionary
authority to establish the rate. Where specified by law, it is either
a fixed rate or is based on a formula using the average coupon rates
on designated classes of outstanding Government securities.
In view of the higher yields on marketable Treasury obligations
compared with statutory rates on special obhgations, the Treasury
has continued its efforts to achieve greater uniformity in interest rates
by relating the rates on special obligations to market yields. For
progress in fiscal 1960, see the 1960 annual report, pp. 22-24. During
fiscal 1961 this objective was accomplished with respect to the Federal
old-age and disabilit}^ insurance trust funds. The Social Security
Amendments of 1960 (42 U.S.C. 401(d)), provide that, beginning
October 1, 1960, the interest rate on special obligations issued to these
trust fimds shall be equal to the average market yield, computed as of
the end of the month immediately preceding the date of issue, on all
marketable interest-bearing public debt obligations not due or callable
until 4 years from the end of such month.
Public Law 87-350, approved October 4,1961 (75 Stat. 770), contains
similar interest rate provisions for special obligations issued to the
civil service retirement and disabUity fund.
Loans and advances by the Treasury

Pursuant to specific provisions of law, various Government corporations and agencies are authorized to borrow from the Treasury to
fuiance certain programs. The Bureau of Accounts administers the
loan agreements and keeps the accounts for the loans and for advances
and subscriptions to capital stock of U.S. Government and international corporations. Table 121 shows the status of loans and advances
as of June 30, 1961.
Surety bonds

Certificates of authority for the execution of bonds in favor of the
United States are issued by the Secretary of the Treasury to qualified
corporate sureties, under the act of July 30, 1947 (6 U.S.C. 8). These
certificates are renewable annually as of May 1, and a list of companies
holding such certificates is published annually in the Federal Register
(Department Circular No. 570, Revised). The Bureau examines
the applications of companies requesting authority to write Federal
bonds and currently reviews the qualifications of the companies so
authorized. As of June 30, 1961, a total of 198 companies held
614359—e2^

12




172

1961 REPORT OF THE SECRETARY OF THE TREASURY

certificates of authority. A total of 40,376 bonds and consent agreements were cleared during the year for approval as to corporate surety.
The act of August 9, 1955 (6 U.S.C. 14), provided that the head of
each executive agency shall obtain blanket position schedule or other
types of surety bonds covering employees required by law or administrative ruling to be bonded, with premiums to be paid by the Government rather than by the employees. The law permits the legislative
and judicial branches to follow the same procedhre.
A summary follows of the information reported by agencies for
transmittal to Congress by the Secretary of the Treasury, showing
the number of officers and employees covered, the aggregate penal sums
of the bonds procured, and the premiums paid by the Government as
of June 30, 1960 and 1961.
J u n e 30, 1960
N u m b e r of ofiicers a n d emploj^ees covered:
Executive branch
Legislative a n d judicial branches
Total

-

Aggregate penal s u m s of b o n d s procured:
Executive branch
_
Legislative a n d judicial b r a n c h e s
Total

_ _

—

Total premiums paid b y Government: i
Executive branch
Legislative a n d judicial branches
Total
A d m i n i s t r a t i v e expenses:
Executive branch
Legislative a n d judicial b r a n c h e s
Total

J u n e 30,19G1

920, 575
1,313

1, 003, 613
1,342

921, 888

1, 004, 955

$3, 239, 950, 525
10, 337, 000

$3, 522, 501, 050
10, 317, 000

3, 250, 287, 525

3, 532, 818, 050

278,108
2,190

285, 589
2,268

280, 298

287, 857

35, 078
565

38, 515
595

35, 643

39 110

1 Premiums on bonds are shown on the basis of the proportionate costfor one year, together with the premiums on one-year bonds in order to arrive at an annual rate.

Foreign Indebtedness
World V^ar I

The Treasury received during fiscal 1961 semiannual payments
totaling $396,421.86 due from the Government of Finland under
funding and moratorium agreements covering World War I indebtedness. In accordance with, the act of August 24, 1949 (20 U.S.C. 222)
these funds were used to finance certain educational exchange programs with Finland. Tables 117 and 118 show the status of World
War I indebtedness of foreign governments to the United States.
World War II

Under lend-lease and surplus property agreements, debtor governments made dollar payments aggregating $126.6 million (including
the dollar value of silver repayments) and payments in foreign currencies equivalent to $21.6 million. Since inception of these programs,
total credits to debtor governments have amounted to $3,406.3 mUlion
as indicated in table 120 which shows the status as of June 30, 1961.




ADMINISTRATIVE REPORTS

173

By agreement of January 30, 1958, France was granted an option
to defer until 1981, 1982, and 1983 its annual installments originall}^
payable under lend-lease and surplus property agreements on July 1,
1958,1959, and 1960, respectively. Accordingly, installment payments
of $29,112,102.65 and $29,571,476.62, which became due July 1, 1958,
and July 1, 1959, respectively, were deferred to July 1, 1981, and 1982.
The installments due on July 1, 1960, and July 1, 1961, including
interest on the deferred installments, were received on the dates due,
as indicated in table 120.
Credit to the United Kingdom

Under the terms of the financial aid agreement of December 6, 1945,
the United Kingdom borrowed from the United States $3,750,000,000,
repayable in 50 annual installments beginning December 31, 1951.
The agreement was amended on March 6, 1957, to allow the United
Kingdom to defer any seven principal and interest installments due
after 1956, with interest at the rate of 2 percent per annum on deferred
installments. The United Kingdom exercised this option by deferring
the interest installments due in 1956 and 1957, amounting to $70,385,447.48 and $69,406,431.45, respectively. The principal installment
of $49,929,818.55 due in 1957 was also deferred. The installment due
December 31, 1960, consisting of $52,985,922.90 in principal and
$70,144,761.05 in interest was received. As of June 30, 1961, cumulative payments on principal amount to $435,539,749.13, leaving a
principal balance of $3,314,460,250.87 plus deferred interest installments of $139,791,878.93, or a total balance of $3,454,252,129.80.
Germany, postwar (World War II) economic assistance

Under the External Debt Settlement Agreement with the Federal
Republic of Germany, dated February 27, 1953, Germany agreed to
repay to the United States $1 billion in semiannual installments over
a period of twenty-five years for postwar (World War II) economic
assistance. Under a supplemental agreement, dated April 25, 1961,
providing for an advance payment of $587,000,000, the United States
received on AprU 28, 1961, $487,000,000 and also deutsche marks
equivalent to $100,000,000, which by September 1, 1961, had been
converted into dollars.
Claims Against Foreign Governments and Nationals
Foreign Claims Settlement Commission

Under the International Claims Settlement Act of 1949, as amended
(22 U.S.C. 1642-1642p), the Foreign Clauns Settlement Commission
has docketed over 4,000 claims of American nationals for losses
resulting from the taking of property by the Government of Czechoslovakia. In March 1960 the Commission began certifying awards
to the Secretary of the Treasury, for payment under the order of
priority prescribed in the act. Payments will be made within the
limits of funds realized from the sale of certain blocked Czechoslovakian assets. Subject to the adequacy of the fund, initially, all
awards of $1,000 or less are to be paid in full, and those larger than
$1,000 are to be paid to the extent of $1,000, with additional pro rata




174

1961 REPORT OF THE SECRETARY OF THE TREASURY

pa3mients to be made untU the fund is exhausted or until aU awards
have been paid in full. The status of the Czechoslovakian claims
fund as of June 30, 1961, follows.
Awards certified to the Treasury (through June 30,1961): i
Number of awards
_.
Amount of aw-ards-

_
.-.

Deposits in claims fund
Statutory deduction for administrative expenses
Amount available for payment on awards
Payments on awards
Balance in claims fund
-.
--

_

_-.

_. 8,990,282.54
449,514.13

_
_
-.

_

-

1,629
$7,971,961.37

_

8, 540,768.41
999,234.17
7,541,534.24

» The Foreign Claims Settlement Commission has until August 1962 to complete its adjudication of
Czechoslovakian claims.

Pursuant to the International Claims Settlement Act of 1949, as
amended (22 U.S.C. 1641-1641q), the Foreign Clauns Settlement
Commission has completed its affairs concerning the Bulgarian, Hungarian, Italian, Rumanian, and Soviet claims programs. In addition
to an initial payment of up to $1,000 on all awards under these programs, pro rata payments have been authorized, consisting of two from
tbe Rumanian claims fund, three from the Bulgarian claims fund,
and one from the Soviet claims fund. The Italian awards, including
accrued interest, have been paid in full. Additional funds for further
payments on the Soviet awards are not expected.
The origin and history of the claims of American nationals against
these five governments are summarized in the 1958 annual report,
page 112. For status of the claims funds as of June 30, 1961, see
table 110.
On Jidy 16, 1960, the Governments of Poland and the United
States signed an agreement for the settlement of claims of American
nationals, whereby Poland wUl pay $40,000,000 to the United States
in annual instaUments of $2,000,000. On January 10, 1961, the first
installment was received. The Foreign Claims Settlement Commission is now accepting claims from American nationals against the
Government of Poland.
Mixed Claims Commission, United States and Germany

On AprU 3, 1961, the Treasury received the annual pa3mient of
$3,700,000 due from the Federal Republic of Germany, in partial settlement of World War I debts, under the agreement of February 27, 1953.
These funds were used for an additional distribution to award-holders
amounting to 8.2 percent of the interest accrued on Class I I I awards
(those over $100,000), which includes the award under Private Law
509, approved July 19, 1940. The status of the claims fund as of
June 30, 1961, is shown in table 107.
Divested property of enemy nationals

As of June 30, 1961, there was on deposit in the Treasury, a balance
of $800,748, representing the net proceeds of property divested by
the Attorney General of the United States pursuant to the act of
August 9, 1955 (22 U.S.C. 1631a(a)). The funds are being held in
the names of individuals who are nationals of Bulgaria ($89,376),
Hungary ($407,787), and Rumania ($303,585). Through June 30,




ADMINISTRATIVE REPORTS

175

1961, refunds totaling $54,859 had been made to individuals, as
authorized by the Department of Justice.
Other Operations
Management improvement program

The continuing search for operating economies during fiscal 1961
resulted in the adoption of improvements creating annual recurring
savings of $297,750, which includes the amount of $285,403 realized
in disbursing operations mentioned in an earlier paragraph.
Incentive awards program.—Supervisors at all levels are contmually
urged to promote additional interest in the program and encourage
employees to submit worthwhile suggestions to improve operations
and reduce costs. During the year, 376 suggestions were received;
207 were adopted. This compares favorably with fiscal 1960, when
296 suggestions were received and 147 adopted.
Sajety program.—Designated employees, on a rotational basis,
make monthly inspections of all space occupied by the Bureau.
This is accomplishing the objective of elimiaating safet}^ hazards
and creating widespread awareness of the importance and benefits of
the accident prevention program. Arrangements have been made
for the attendance of certain supervisors at supervisory safety training courses sponsored by the Department of Labor.
Personnel administration.—A program of biannual surveys of personnel administration in regional offices has been initiated. Surveys
in the Kansas City and Philadelphia offices were completed during
the year.
Training.—The Bureau's training piogram continues to emphasize
the four basic areas—executive development, supervisory development, self-improvement, and skills training. A new supervisory
training course was introduced, dealing with such common supervisory problems as planning and organizing work, training new employees, and human relations.
The Bureau expanded its skills training program to provide qualified
programmers for its new electronic data processing installations,
in conjunction with the Civil Service Commission, a test was developed for selection of employees with programming aptitudes.
The test results, coupled with evaluations of applicants by supervisors,
provided an effective basis for selection. This procedure, incorporated in a training agreement for digital computer programmers, was
approved by the Civil Service Commission and will be used in staffing future installations.
Donations and contributions

During the year the Bureau of Accounts deposited ''conscience
fund" contributions totaling $39,296 and other unconditional donations totaling $205,612, including a single bequest of $20,558. Other
Government agencies deposited ^'conscience fund'' contributions and
unconditional donations amounting to $22,406 and $5,610, respectively. Conditional gifts amounting to $5,936 were received to further the defense effort.
In accordance with the act of June 27, 1961 (75 Stat. 119), authorizing Government acceptance of gifts of money or property to
reduce the public debt, a special account was established on the books




176

1961 REPORT OF THE SECRETARY OF THE TREASURY

of the Treasury. Amounts of such gifts credited to the special account, including the proceeds of real or personal property, will be
used to purchase and retire public debt securities.
Government losses in shipment

The Government Losses in Shipment Act of July 8, 1937, as
amended (5 U.S.C. 134-134h;31 U.S.C. 528, 738a, 757c(i)), established
a self-insurance plan supplanting contracts with private insurance
companies. Under the act the Government assumes the risk on its
shipments of money, bullion, securities, and other valuables. Payments are made from a revolving fund for valuables lost, destroyed,
or damaged while in shipment, for losses incurred in the erroneous
payment of U.S. savings bonds by paying agents, and for certain
losses by the Postal Service. Claims totaling $86,266 were paid in
fiscal 1961; recoveries amounted to $172. For details concerning
operations under the act, see table 129.
Deposits of interest charged on Federal Reserve notes

The Board of Governors of the Federal Reserve System is authorized
by section 16 of the Federal Reserve Act, as amended (12 U.S.C. 414),
to charge Federal Reserve Banks interest on the amount of unredeemed Federal Reserve notes issued to the Banks in excess of gold
certificates held as collateral against the notes. By exercising this
authority, annual interest payments equal to approximately 90 percent of the net earnings of the Federal Reserve Banks have been made
to the Treasury from 1947 through 1958, and beginning with calendar
year 1959, 100 percent of the net earnings, afterpayment of statutory
dividends to member banks.
The deposit in fiscal 1961 was $788,129,485.02; total deposits since
1947 aggregate $5,607,128,810.77 (see table 20).
Payment of pre-1934 Philippine bonds

In accordance with the act of August 7, 1939, as amended (22 U.S.C.
1393(g)(4)(5)), the Treasury maintains a trust account for deposits
by the Philippine Government, representing principal and interest
on pre-1934 bonds of the Philippines. For the status of the account
as of June 30, 1961, see table 82.
Withheld foreign checks

Delivery of U.S. Government checks to payees, residing in certain
foreign areas continued to be prohibited during fiscal 1961 in accordance with Department Circular No. 655, dated March 19, 1941, as
amended. These foreign areas are listed in the 1960 annual report,
page 117.
Withholding of income taxes for States, etc.

Additional agreements under the act of July 17, 1952, as amended
(5 U.S.C. 84b, 84c), for withholding State income taxes from the
compensation of Federal employees were entered into with West
Virginia, Missouri, and New Mexico. A new agreement with Oklahoma was made necessary by passage of a new withholding tax law
by that State.
Depositary receipts

Under provisions of the Internal Revenue Code, employers are
required to withhold from salaries of employees amounts of Federal




177

ADMINISTRATIVE REPORTS

income and Federal Insurance Contribution Act (FICA) taxes.
Regulations provide that where the total taxes withheld plus the FICA
tax on the employer exceed $100 each month, the taxes must be paid
in monthly to the Treasury, with a depositary receipt, through a local
Government depositary designated for that purpose or directly to a
Federal Reserve Bank. Depositary receipts are validated by Federal
Reserve Banks and returned to employers, to be used as evidence of
payment accompanying their quarterly tax returns to District Directors of Internal Revenue.
In 1944 when the depositary receipt procedure was initiated only
the deposit of withheld income taxes was covered (26 U.S.C. 3402).
Withholding requirements were extended to cover FICA taxes, beginning in 1950 (26 U.S.C. 3101 and 3111); railroad retirement taxes,
beginning in 1951 (26 U.S.C. 3201 and 3221); and certain excise taxes,
beginning in 1953 (Section 477.2(b) of Treasury Decision No. 6025,
approved July 31, 1953). As indicated in the following table, there
have been substantial increases in the annual volume of depositary
receipts since inception of the accelerated collection system. These
increases are attributable to the extensions to additional classes of
taxes in the earlier years, as well as increased tax rates, growth in the
number of employers and employees, and the results of enforcement
activities of the Internal Revenue Service in connection with the
monthly payment requirements.
Income and Railroad
social
retirement
security
taxes
taxes

Period

1944-_
1945
1946
1947
1948
1949
1950
1951
1952
1953
1954
1955
1956
1957
1958
1959
1960
1961

__.

_

_

_

.

--

3, 516,012
3, 527, 611
3, 699,158
3,887, 630
3, 989,195
3, 922, 399
4, 481, 451
4, 664, 374
4,895, 784
5, 600, 904
5, 425, 723
6, 316, 929
7, 632, 789
• 8,142,296
8, 481, 465
8,961,762
9, 469, 057
9, 908, 068

10,802
11,395
11,025
11,128
11,707
12, 776
10, 947
10, 751
10, 625
10, 724

Federal
excise
taxes

701,243
652,971
694,125
682, 014
681, 210
604, 933
598,881
618,971

Total

3, 516, 012
3, 527, 611
3, 699,158
3,887, 630
3, 989,195
3, 922, 399
4,481,451
4, 664, 374
4, 906, 586
5, 612, 299
6,137, 991
6,981,028
8, 338, 621
8,837, 086
9,173, 622
9, 577, 446
10, 078, 563
10, 537, 763

BUREAU OF THE PUBLIC DEBT

The Bureau of the Pubhc Debt, in support of the management of the
public debt, has responsibility for the preparation of Treasury Department circulars offering public debt securities, the direction of the
handling of subscriptions and making of allotments, the formulation
of instructions and regulations pertaining to each security issue, the
issuance of the securities, and the conduct or direction of transactions
in those outstanding. The Bureau is responsible for 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




178

1961 REPORT OF THE SECRETARY OF THE TREASURY

issue of checks in payment of interest thereon, and the handling of
claims on account of lost, stolen, destroyed, or mutilated securities.
Of the four offices maintained, the principal one, including the
headquarters of the Bureau, is in Washington, D.C. This office is
charged with the receipt and custody of all new securities and their
issuance directly to owners or to the Federal Reserve Banks and
branches or other authorized issuing agents. Except for savings
bonds the office conducts transactions in all outstanding securities (including securities of the Government-owned corporations for which
the Treasury acts as agent), and audits and maintains custody of the
securities when retired and interest coupons when paid. 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 in Cincinnati, Ohio, audits retired paper type savings bonds and transmits
retirement information to the Chicago office for recording. All issue
and retirement records of the punch-card type savings bonds are prepared and maintained in a field office in Parkersburg, W. Va., where
the major auditing, accounting, and record keeping operations are
performed by a large scale electronic data processing system.
Under Bureau supervision many transactions in public debt securities are conducted by the Federal Reserve Banks and their branches
as fiscal agents of the United States. Selected post offices, private
financial institutions, industrial organizations, and others (approximately 19,100 in all) cooperate in the issuance of savings bonds; and
about 15,500 private financial institutions redeem savings bonds.
Management improvement

Since 1958 the Parkersburg office of the Bm-eau has employed
electronic data processing equipment to audit and account for all
issues and retirements of punch-card Series E savings bonds, to
establish and maintain alphabetical and numerical registration
records of these bonds on magnetic tape, and service the accounts of
the registered owners. Because of the substantial progress in the
development of new computers offering greater capacity and speed at
reduced costs, a committee of Bureau personnel made a study to
determine the feasibility of converting to a new system. On the
basis of the committee's findings and recommendations, the updating
of the present system with more modern transistor equipment has
been approved. The changeover is scheduled for the latter part of
fiscal 1962.
Until a decision was reached that updating the system was feasible,
the operations of the present equipment were under continuing
review. Significant savings in central processor and peripheral equipment time, and in the cost of related operations, resulted from modifications in basic controlling programs and routines. Examples of
these developments included a new compact type of listing for use
in the manual audit of out-of-balance batches; new routines which
facilitated updating, stockpiling, sorting, and file merging operations;
and a series of new programs for use in the zero balance and classification operations. The documentation of all current programs also
has been completed. This documentation includes a description of




ADMINISTRATIVE REPORTS

179

each program with accompanying flow charts, program cards, exhibits,
and complete operational instructions.
In addition to electronic equipment, the Bureau uses a variety of
electric accounting, microfilming, and other type machines. Substantial savings wiU be realized from a wide range of projects completed during the year as a result of the regular analysis of the utilization of this equipment. In some cases these savings will result from
the installation of faster or more versatile equipment to replace older
models or perform new functions; in other cases the savings will result
from the expanded utilization of the present equipment through the
further mechanization of operations or more efficient workload
scheduling.
Among the procedural studies completed during the year were two
which were designed to improve service to the public by expediting
the issue and deliver}^ of securities to their owners. One study concerned the original issue of registered marketable securities in certain
t3''pes of redemption-exchange transactions. In these transactions
a faster issuance of new securities will be attained by a change in the
procedures followed by the fiscal agents in submitting to the Department the securities to be redeemed and the controUing redemption
and issue documents. The second stud}^ related to the issue of replacement bonds to owners of punch-card Series E savings bonds who allege
the nonreceipt of their bonds. Procedures were revised to provide for
the direct submission to the Parkersburg office of requests for the
entry of caveat as a preliminary to the issuance of the replacement
bonds. A new special form, adopted concurrently, combines a punch
card for use in searching the magnetic tape record and recording the
caveat, with paper components which serve as action copies for the
Chicago office and fiscal agents. The procedural change and use of
the new form have expedited the entr}^ of caveats, eliminated processing steps and paperwork, and accelerated the issue of the replacement
bonds.
The Bureau has initiated a project to codify and issue all instructions relating to administrative and operating procedures in a revisable
manual for the guidance of the Federal Reserve Banks and others in
their conduct of securities transactions as fiscal agents.
Continued emphasis has been placed on the training program, and
especially upon participation in management and technical courses
offered by outside sources. The Director of the Parkersburg office
participated in a Conference for Federal Executives sponsored by the
Brookings Institution; an assistant division chief attended a fourweek course off'ered b}^ the American Management Association; and
other employees engaged in outside training in various aspects of
electronic and other t3^pes of data processing, forms management,
personnel functions, office equipment operation, and financial management. Intensive training in programming the new electronic data
processing system was also begun in the Parkersburg office.
Under the incentive awards program in fiscal 1961, 224 suggestions
were submitted and 103 adopted, with savings estimated at $23,010.
Cash awards totaling $1,745 were made for 91 of the adopted suggestions. Cash awards totaling $15,000 were given to 100 employees
who received outstanding performance ratings. An additional




180

1961 REPORT OF THE SECRETARY OF THE TREASURY

$20,071 was distributed to 525 emplo3^ees for superior work performance, including 7 group awards for 82 people.
Bureau operations

The public debt of the United States falls into two broad categories:
public issues and special issues. The public issues consist of marketable Treasury bills, certificates of indebtedness, notes, and bonds; and
nonmarketable obligations, chiefly U.S. savings bonds and Treasury
bonds of the investment series. Special issues of certificates, notes,
and bonds are made by the Treasuiy directly to various Government
trust and certain other accounts and are payable only for these
accounts.
During fiscal 1961 the gross public debt increased by $2,640 million
and the guaranteed obligations not owned by the Treasury increased
by $100 million. The most significant changes in the composition of
the outstanding debt during the year were the net increase of $3,303
million in interest-bearing marketable public issues, principally Treasury bills and notes, and the net decrease of $1,016 million in interestbearing nonmarketable public issues, principally Treasur}^ bonds of the
investment series. Total public debt issues, including issues exchanged for other securities, amounted to $176,248 miUion during
1961, and retirements amounted to $173,608 mUlion.
A summary of public debt operations handled by the Bureau appears on pages 80 to 97 of this report, and a series of statistical tables
dealing with the public debt will be found in tables 23 to 55. The
following statement gives a comparison of the changes during the
fiscal years 1960 and 1961 in the various classes of public debt issues.
Increase, or decrease (—)
Classification

1960

1961

In million 3 of dollars
Interest-bearing debt:
Marketable obligations
Treasury bonds, investment series
U.S. savings bonds
Special issues
other
Total interest-bearing debt
Matured debt and debt bearing no interest.
Total

-

5,818
-1,582
- 2 , 959
144
-13

3,303
-953
-30
144
-34

1,408
217

2,430
210

1,625

2,640

U.S. savings bonds.—The large volume of work involved in connection with the issuance and redemption of savings bonds creates the
greatest number of administrative problems for the Bureau of the
Public Debt. Because these bonds are issued in registered form and
are owned by tens of millions of persons, both alphabetical and numerical ownership records must be established and maintained for 2.3
billion bonds issued during the past twenty-six 3^ears. The adjudicating of claims and replacing lost, stolen, and destroyed bonds (which
now total 1.6 million pieces), handling and recording retired bonds,
and conducting the related accounting operations also present massive
administrative burdens.




ADMINISTRATIVE

181

REPORTS

During the year receipts from sales were $4,464 million and accrued
discount charged to the interest account and credited to the savings
bonds principal account amounted to $1,286 million, a total of $5,749
million. The sales include $9 million of Series H bonds issued in exchange for Series F and J bonds, but exclude $188 million of Series
E bonds exchanged for Series H bonds. Expenditures for redeeming
savings bonds charged to the Treasurer's account during the year,
including about $2,673 million of matured bonds, amounted to $5,819
million. The redemptions include $147 million of Series F and G
bonds exchanged for marketable Treasury bonds and $9 miUion of
Series F and J bonds exchanged for Series H bonds, but exclude $188
million of Series E bonds exchanged for Series H bonds. The amount
of unmatured and matured savings bonds of all series outstanding on
June 30, 1961, including accrued discount, was $47,754 million, a
decrease of $69 million from the amount outstanding on June 30,
1960. Detailed information regarding savings bonds will be found in
tables 43 to 46, inclusive, of this report.
There were 90.6 million stubs representing issued bonds of Series E
received for registration during fiscal year 1961, making a grand total
of 2,262.8 million, including reissues, received through June 30, 1961.
Original stubs of paper type bonds were arranged alphabeticall3^ in
semiannual blocks, by name of owner, and microfilmed. They were
then arranged by numerical sequence of their bond serial numbers in a
full calendar year file and microfilmed, after which they were destroyed. These microfilms are permanent registration records. The
original issue of paper bonds has been discontinued.
The issue stubs of the punch-card type bonds are microfilmed in
batches as they are received by the Bureau. The stubs are audited
and. recorded by electronic processing equipment and then destroyed.
Magnetic tape files of the bonds issued, in both alphabetical and numerical sequence, are established and maintained with each bond file
item indicating the location of the microfilm which contains the complete image of the original bond stub.
The following tables show the status of processing operations for
registration stubs of the paper type and the card type Series E savings
bonds. The table on card type bonds also shows steps taken in retiring 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 i n Chicago oflace
(In millions of pieces)
Period

A l p h a b e t i c a l l y sorted
Stubs
received

C u m u l a t i v e t h r o u g h J u n e 30,
1956
Fiscal year:
1957
1958
1959
1960
1961
Total




Alphabetically
filmed

Numerically
filmed

Destroyed
after
filming

Restricted
basis
sort

F i n e sort
prior to
filming

1,805.8

1, 782. 6

1, 734.6

1,696.0

1,463.6

1,457.8

91.1
37.1
2.1
1.9
1.9

88.9
62.1
2.5

90.4
85.7
24.4
2.3
1.5

108.1
89.9
41.1
1.9
1.9

192.3
178.3
100.9

191.3
184.1
101.9

1.9

1.9

1, 939. 9

1, 936.1

1, 938. 9

1,938. 9

1, 937.0

1, 937.0

182

1961 REPORT OF THE SECRETARY OF THE TREASURY
Balance
ConAuverted
dited
MicroKeyDefilmed p u n c h e d to mag- a n d
stroyed
netic
classitape
fied

Received

Fiscal year

Unfilmed

Not
Not
conkeyverted U n a u p u n c h e d to mag- dited
netic
tape

S t u b s of issued card t y p e Series E savings b o n d s i n P a r k e r s b u r g oflice
(In millions of pieces)

-

59.5
87.5
87.2
88.7

57.8
88.2
84.7
90.7

41.4
103.4
82.6
92.4

5.7
119.0
102.5
92.2

34.7
106.9
83.6 " ' 5 8 . " 3 "
92.9
154.4

Total- . --

322.9

321.4

319.8

319.4

318.1

1958
1959
1960
1961

1.7
1.0
3.5
1.5

18.1
2.2
6.8
3.1

53.8
22.3
7.0
3.5

24.8
5. 4
9.0
4.8

212.7

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 oflftce
(In millions of pieces)
1958
1959
1960
1961

-

Total

17.5
45.2
55.2
59.7

16.7
45.5
54.3
60.6

10.5
51.4
52.6
61.5

0.1
53.2
60.0
62.4

7.3
52.8
52.4
62.8

"lo.'e"

177.6

177.1

175.9

175.7

175.3

113.6

93.0

17.4
9.4
4.6
1.9

7.0
.8
3.5
1.7

.5

10.2
2.6
5.4
2.3

Retired savings bonds of all series received during fiscal 3^ear 1961
numbered 92.3 million. Retired bonds in card form issued onh^ in
Series E, are handled in the Parkersburg ofiice where, after microfilming, the bonds are audited and permanently recorded b3^ an
electronic data processing system before being destro37^ed. The immediately preceding table shows the status of these operations. Retired paper bonds of all series are processed through the Cincinnati
office where they are audited, microfilmed, and destro3^ed. A list of
the serial numbers of retired paper bonds is transmitted to the Chicago
office for posting of retirement reference data to numerical ledgers for
permanent record.
The following tables show the status of these operations for the
paper t3^pe bonds.
Retired p a p e r t y p e savings b o n d s of all series i n t h e b r a n c h a u d i t offices i
(In millions of pieces)
Period
Balance
Bonds
received

Audited

Microfilmed

Destroyed
Unaudited

C u m u l a t i v e t h r o u g h J u n e 30,
1956
Fiscal year:
1957
1958
1959. 1960
1961
Total

Unfilmed 2

963.0

958.1

945.6

4.9

6.3

897.5

100.2
81.8
48.7
43.2
32.6

102.1
81.2
49.1
44.4
32.9

99.8
82.6
47.7
46.2
34.0

3.0
3.6
3.2
2.0
1.7

6.7
5.9
6.9
3.9
2.5

100.0
79.3
72.4
47.5
32.2

1, 269. 5

1, 267. 8

1, 255. 9

1, 228. 9

1 There is only one audit office now in existence but prior to June 1958 there were five such ofiices and this
table includes reports for all of them.
2 Excludes 9.4 million pieces of unfilmed spoiled stock transferred to permanent storage and 1.7 raillion
pieces of unissued stock to be destroyed without microfilming.




ADMINISTRATIVE

183

REPORTS

R e t i r e d p a p e r t y p e savings b o n d s of all series recorded i n
Chicago oflace (in millions of pieces)
Period

N u m b e r of
retired
bonds
reported

C u m u l a t i v e t h r o u g h J u n e 30,1956
Fiscal year:
1957
1958
1959
-._:-.
1960
1961
-

----

Total

S t a t u s of posting
Posted

Verified

Unposted

Unverified I

1,423.8

1,419.0

1,332.8

4.8

8.1

100.1
84.6
50.3
45.3
37.1

99.0
87.2
50.4
45.7
37.2

102.3
64.0
86.2
55.5
39.3

5.9
3.3
3.2
2.8
2.7

4.8
28.0
3.3
4.9
2.8

1, 741. 2

1, 738. 5

1, 680.0

1 Represents balance unverified on current work. Excludes 55.7 million pieces received in 1954 and 1955
which were not verified.

Of the 86.6 million Series A - E savings bonds redeemed prior to
release of registration and received in the audit offices during the
year, 84.6 miUion, or 97.7 percent, were redeemed b3^ over 15,000
paying agents. These agents were reimbursed for this service in each
quarter year at the rate of 15 cents each for the first 1,000 bonds paid
and 10 cents each for all over the first 1,000. The total amount paid
to agents on this account during the year was $10,819,696, which was
at the average rate of 12.79 cents per bond.
The following table shows the number of savings bonds outstanding
as of June 30, 1961, by series and denominations.
D e n o m i n a t i o n (in t h o u s a n d s of pieces)
Series

E 1
H 1
A
B

c

D
F
G.__
J
K

Total
$10

$25

$50

$100

$200

$500

440,115
5,319
3
5
14
79
411
1,240
473
590

963

236,621

94,177

76,290

7,021

11, 956
1,998

1
2
5
28
102

1
1
3
15

1
2
4
23
126
375
160

T o t a l . . 448, 249

963

80
236, 839

94,196

76, 981

*Less than 500 pieces.
1 Currently only bonds of Series E and H are on sale.




(*)
(*)

1
5
39
233
48
159
7,021

14, 439

$1,000

$5,000

13,051
2,995 " ' " 2 5 8 '

(*)
(*)

$10,000 $100,000
35
67

1

1
8
107
513
133
328

15
52
20
50

22
67
31
52

1
2

17,137

395

274

4

184

1961 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 1

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

Issuing agents
1945
1950--1955
1956
1957 1958
1959
1960
1961

--

24,038
25,060
2,476
1,768
1,401
1,178
1,120
1,093
1,061

15,232
15, 225
15,692
15, 845
15, 978
16,047
16,178
16,436
13, 505

3,477
1,557
1,555
1,606
1,665
1,702
1,778
1,851
1,617

2,081
522
428
411
379
357
336
320
285

2 9,605
3,052
2,942
2,898
2,788
2,640
2,401
2,352
2,045

650
688
626
611
687
688
643
590

54,433
45,966
23,681
23,154
22, 822
22, 511
22, 501
22,695
319,103

57
56
54
59
69
60
60
16

13, 466
16, 691
17,662
17,933
18,282
18, 554
18, 778
19,153
315,449

(2)

P a y i n g agents
1945
1950
1955 1956
1957- 1958
1959
1960
1961

13,466
15, 623
16, 269
16, 441
16, 613
16, 744
16, 860
17,127
13,670

874
1,188
1,300
1,438
1,580
1,690
1,797
1,605

137
139
138
172
171
168
169
158

1 Estimated by the Post Ofl5.ce Department for 1965 and thereafter. 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.
2 "All others" included with companies operating payroll plans.
3 Substantial reduction due to reanalysis of reporting procedures by Federal Reserve Banks effective
Dec. 31, 1960, to reflect only the actual number of entities currently qualified.

Interest checks issued on current income type savings bonds during
the year totaled 5,034,983 with a value of $258,447,427, a decrease
of 98,710 checks from those issued during 1960, and a decrease in
value of $6,063,493. New accounts established totaled 212,235, compared with 190,972 in 1960. As of June 30, 1961, there were 1,844,028
active accounts with owners of this type savings bonds, a decrease of
98,198 accounts during the year. There were reductions of 182,445
in accounts of Series G bonds which have been maturing since May 1,
1953, and 11,767 in accounts of Series K which were first sold on May
1, 1952, and discontinued effective at the close of business April 30,
1957. An increase of 96,014 occurred in accounts of Series H bonds,
which were first sold on June 1, 1952.
Applications during the year for the issue of duplicates of lost,
stolen, or destroyed savings bonds amounted to 41,202. These together with 1,550 cases on hand at the beginning of the year, totaled
42,752. In 25,323 cases the bonds were recovered, and in 16,238 cases
the issuance of duplicate securities was authorized. On June 30,
1961, 1,191 cases remained unsettled.
Other U.S. securities.—During the year 34,581 individual accounts
covering publicly held registered securities were opened and 30,530
were closed. This increased the total of open accounts on June 30,
1961, to 248,678 covering registered securities in the principal amount
of $14,672 million. There were 471,304 interest checks with a value
of $427,413,353 issued to owners of record during the year, an in-




ADMINISTRATIVE REPORTS

185

crease of 53,596 checks from the number issued in 1960, and a decrease in value of $28,268,163.
Redeemed and canceled securities received for audit included
4,138,616 bearer securities and 186,368 registered securities, a total
of 4,324,984 as compared with 3,996,505 in 1960; and 20,094,140
coupons were received, which was 1,710,778 more than in 1960.
OFFICE OF THE TREASURER OF THE UNITED STATES

The Treasurer of the United States is responsible for the receipt,
custody, and disbursement, upon proper order, of the public moneys
and for maintaining records of the source, location, and disposition of
these funds. The office was created by an act of Congress approved
September 2, 1789, as amended (31 U.S.C. 141, 147).
In lieu of branch or field offices, the Office of the Treasurer uses the
facilities of the Federal Reserve Banks as fiscal agents of the United
States to perform many of its functions throughout the country.
These include the verification and destruction of U.S. paper currenc3^;
the redemption of public debt securities; the keeping of cash accounts
in the name of the Treasurer; the acceptance of deposits made by
Government officers for credit; and the custody of bonds held to secure
public deposits in commercial banks.
Commercial banks in the United States and in foreign countries
which qualify as depositaries provide banking facilities for activities
of the Government at places where they are located. Data on the
transactions handled in the name of the Treasurer by the Federal
Reserve Banks and commercial banks are reported daily to the Treasurer and are entered in the Treasurer's general accounts.
Specifically, the Treasurer maintains current accounts of all receipts
and expenditures; pays the principal and interest on the public debt;
provides checking account facilities for Government disbursing officers,
corporations, and agencies; pays checks drawn on the Treasurer of the
United States and reconciles the checking accounts of the disbursing
officers; procures, stores, issues, and redeems U.S. currency; audits
redeemed Federal Reserve currency; examines and determines fche
value of mutilated currency; acts as special agent for the pa3mient of
principal and interest on certain obligations of corporations of the
United States Government and certain obligations of Puerto Rico
issued on or before January 1, 1940. The Treasurer also acts as
special agent for the pa3mient of principal and interest on certain
pre-1934 dollar bonds of the PhUippine Islands.
The Office of the Treasurer maintains facilities in the main Treasury
building for: Accepting deposits of public moneys by Government
officers, the cashing of U.S. savings bonds and checks drawn on the
Treasurer, the receipt of excess and unfit currency and coins, and the
conduct of transactions in both marketable and nonmarketable public
debt securities. The Office also prepares the Daily Statement oj the
United States Treasury and the monthly Circulation Statement oj
United States Money.
Acting under authority delegated by the Comptroller General of the
United States, the Treasurer processes claims arising from forgery of
endorsements and other irregularities involving checks paid by the




186

1961 REPORT OF THE SECRETARY OF THE TREASURY

Treasurer and passes upon claims for substitute checks to replace
unpaid checks which have been lost or destroyed.
The Treasurer of the United States is also Treasurer of the Board
of Trustees of the Postal Savings System and custodian of bonds held
to secure public deposits in commercial banks, bonds held to secure
postal savings on deposit in such banks, and miscellaneous securities
and trust funds.
Management improvement program

The Office of the Treasurer made many changes throughout the
Bureau during the year which increased efficiency and produced
economies. Some of the improvements are having wide effect within
the Government and others have resulted in better service to the general public. The more significant accomplishments are described in
the foUowing paragraphs.
New electronic equipment of an advanced design and with faster
processing speeds and greater capacity has been installed in the check
payment and reconciliation activity. New computer programs
developed for this equipment have resulted in significant procedural
improvements and faster settlement of claims involving Treasury
checks. Annual savings resulting from the new equipment and
related procedural improvements are expected to exceed $100,000.
Option agreements for the purchase of certain components of the
electronic equipment used to pay and reconcile Government checks,
were entered into with the manufacturer after a thorough analysis of
the projected costs of purchasing as compared with renting. After
the capital investment has been recovered, purchasing instead of
renting these components will produce substantial economies by the
elimination of rental charges. The analysis also showed that purchases of the other components is not practical because of the amount
of servicing and maintenance they normally require.
The office awarded a contract for suppl3ring the approximately 458
million card checks which Government disbursing officers will purchase
during fiscal 1962. The new contract contains lower unit prices than
the previous contract and will save disbursing offices about $70,000
a year.
Under a plan approved by the Treasury and Post Office Departments during fiscal 1961, the electronic installation in the Treasurer's
Office will be expanded as a service to the Post Office to include
reconciliation of postal money orders. I t is contemplated that
several phases of the plan will be put into effect beginning late in
fiscal 1962. Full operation is expected to save the Government over
$650,000 a year ancl to effect substantial improvements in the control
and servicing of money orders.
The Bureau's incentive awards program has been given added
impetus by the reorganization of its incentive awards committee to
consist of division chiefs who will review all recommendations for
suggestion and performance awards.




ADMINISTRATIVE

187

REPORTS

Eight percent of the office force, selected from aU organizational
levels, participated in training programs during the year. The
courses were aimed at improving skills and techniques and providing
training in such areas as personnel management, automatic data processing, and executive development. Special attention was given to
the need for having trained employees available in areas where there
are apt to be many retirements within the next few years.
A significant step was taken in the records maintenance program
when over one million records of active stop payments against Government checks, received prior to the installation of the electronic system
for paying checks, were converted to microfilm. The records, which
must be retained permanently, were becoming illegible, torn, and
difficult to handle.
Assets and liabilities in the Treasurer's account

The assets of the Treasurer consist of gold and sUver baUion, coin
and paper currency, deposits in Federal Reserve Banks, and deposits
in commercial banks designated as Government depositaries.
A summary of the assets and liabUities in the Treasurer's account
at the close of the fiscal years 1960 and 1961 is shown in table 56.
Gold.—The gold assets, which amounted to $19,321.9 million on
June 30, 1960, on the daily Treasury statement basis, declined rapidly
for several months thereafter. The outflow leveled off in February
1961 and, from a low of $17,372.2 million in mid-March, the assets
had increased to $17,550.1 million as the fiscal year ended. Receipts
were $539.9 million and disbursements $2,311.7 million for the year.
The final balance of $17,550.1 mUlion on June 30, 1961, covered
liabilities of $17,285.5 million in gold certificates or credits payable
in gold certificates and $156.0 million for the gold reserve against
currency, leaving a free gold balance of $108.5 million.
Silver.—Transactions in silver bullion during the year are summarized, in millions of dollars, in the following table.
Silver bulhon held at
Fiscal year 1961

On hand July 1,1960
Received (+) or disbursed (—), net
Revalued-Used in coinage
On hand June 30, 1961

Monetary
value
$2,252.1

Cost value Recoinage
value

+.3

$114.9
-28.5
-.2
-29.1

2,252. 3

57.1

$0.3
+1.5
-1.8

The closing balance of $2,252.3 million in silver bullion at the
monetary value of $1.29+ per ounce, was held, together with $150.2
million in sUver dollars, to secure outstanding silver certificates of
$2,373.9 million and outstanding Treasury notes of 1890 of $1.1 million on June 30,1961. This left a free balance of $27.5 mUlion in monetized silver.

614359—62

-13




188

1961 REPORT OF THE SECRETARY OF THE TREASURY

Balances with depositaries.—The following table shows the namber
of each class of depositaries and balances on June 30, 1961.

Class

Number of
accounts with
depositaries i

Deposits to the
credit of the
Treasurer of
the United
States
June 30, 1961

36
42

2 $629,999,352
41,766,399

1,732
11,340
73

270,856,779
5,452,671,002
22,340,204

13,223

6,417,622,736

Federal Reserve Banks and branches
_.
Other domestic depositaries reporting directly to the Treasurer
Domestic depositaries reporting through Federal Reserve Banks:
General depositaries
_
Special depositaries, Treasury tax and loan accounts
Foreign depositaries 3..
_
Total

-

1 Includes only depositaries having balances with the Treasurer of the United States on June 30, 1961.
Excludes depositaries duly designated for this purpose but having no balances on that date and those
designated to furnish ofl&cial checking account facilities or other services to Government oflftcers but which
are not authorized to maintain accounts with the Treasurer. Banking institutions designated as general
depositaries are frequently also designated as special depositaries, hence the total number of accounts
exceeds the number of institutions involved.
2 Includes checks for $222,173,189 in process of collection.
8 Principally branches of U.S. banks and of the American Express Company, Inc.

Bureau operations

Receiving and disbursing public moneys.—Moneys coUected by
Govermnent officers are deposited with the 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 in the fiscal years 1960 and 1961, exclusive of certain
intragovernmental transactions, are shown in the following table on
the basis of the Daily Statement oj the United States Treasury.
Deposits, withdrawals, and balances in the Treasurer's account

1960

Cash deposits (net) (including internal revenue, customs, trust
funds, etc.)
Public debt receipts i
Less accrued discount on U.S. savings bonds and Treasury bills...

$94,861, 698, 466
187,561,096,432
-2,844,933,117

$96,897,026, 794
176,247,926,563
-2,309, 768, 703

279,567,861,781
5,350,391, 763

270,835,184, 654
8,004, 740,998

284,918,253, 544

278,839,925, 662

93, 508,321, 696

18,283,877,037

Total net deposits

_

Balance at begirming of fiscal year
Total
Cash withdrawals (includes budget and trust accounts, etc.).
Net transactions in:
Investments of Government agencies in public debt securities,
excess of investments, or redemptions (—)
__.
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
Totalnet withdrawals
Balance at close of fiscal year
__

1961

992,195,940

921,036, 604

-1,265,658,769
186,926,242, 662
-2,247, 588,893

1,107,286, 500
173, 607, 748,801
-1,774,143,244

276, 913, 612, 546
8,004,740,998

272,145,805,698
6, 694,119,954

1 For details for 1961 see table 35.

Old series currency .— ThQ Old Series Currency Adjustment Act,
approved June 30, 1961 (see exhibit 10, p. 297), authorizes and directs
the Secretary of the Treasury to make certain adjustments and to




189

ADMINISTRATIVE REPORTS

take certain other actions with respect to all large size currency
outstanding which was issued prior to July 1, 1929, and with respect
to small size gold certificates outstanding which were issued between
July 1, 1929, and January 30, 1934, the date of enactment of the
Gold Reserve Act of 1934 (31 U.S.C. 440-446). Any such old series
currency presented to the Treasury wUl be redeemed from the general
fund of the Treasury and the amount of the public debt outstanding
wUl be correspondingly reduced.
In accordance with the provisions of the new act, gold and sUver
reserves in the aggregate amount of $61,059,919 were released as of
July 1, 1961. These reserves had been held as security for gold
certificates issued prior to January 30, 1934, and as security for or
for the redemption of Treasury notes of 1890 and of sUver certificates
issued prior to July 1, 1929. The freeing of these reserves resulted
in an equivalent increase in the free gold balance and the free sUver
balance in the general fund avaUable for the issuance of gold certificates to Federal Reserve Banks and for the issuance of additional
amounts of sUver certificates.
The amount of each of these old series currency issues outstanding
on July 1, 1961, was credited as a public debt receipt and established
as a public debt liabUity bearing no interest as follows:
Gold certificates
Silver certificates
Treasury notes of 1890

$29,959,809
29, 958, 443
1, 141, 667

Also, as provided by section 4 of the new act, each Federal Reserve
Bank paid into the Treasury an amount equal to its Federal Reserve
notes of any series prior to the series of 1928 outstanding as of July 1,
1961. These payments were made on July 28, 1961, in the aggregate
amount of $36,419,050. This amount was credited to public debt
receipts and established as a public debt liability bearing no interest
(section 6(b) of the act). The amount received from each Federal
Reserve Bank was as follows:
Federal Reserve Bank
Boston
New York
Philadelphia
Cleveland
Richmond
Atlanta
Ohicago

Federal Reserve Bank

Amount

1

.

___-

_
-

$2,397,025
9,259,995
2,704,686
3,756,435 1
1,547,845 1
2,054,150
5,637,450

St. Louis
Minneapolis _
Kansas City
Dallas
San Francisco
Total

_.

Amount

_
-

.

$1,385,646
1,307,395
1,661,510
972,515
3,834,400
36,419,060

In accordance with section 6(c) of the act, the Secretary of the
Treasury, from time to time, will determine the amount of each
denomination of each kind of old series currency outstanding which
in his judgment has been destroyed or irretrievably lost and so will
never be presented for redemption. The pubhc debt liability for
these currencies wUl be reduced by the amount of the determinations
with corresponding credit to miscellaneoas receipts of the Treasury.
The act also authorizes the establishment of a historical collection
of the paper currency issues of the United States.




190

1961 REPORT OF THE SECRETARY OF THE TREASURY

Issuing and redeeming paper currency.—By law the Treasurer is the
agent for the issue and redemption of U.S. paper currency. The
Treasurer's Office procures all U.S. paper currency from the Bureau of
Engraving and Printing and places it in circulation 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
redeem and destroy the major portion of the U.S. currency as it becomes unfit for circulation. A small amoant is handled directly by
the Treasurer's Office.
Federal Reserve notes are issued by Federal Reserve Banks. The
Federal Reserve Banks also redeem these notes, cut them in half and
forward the halves separately to Washington where the Currency
Redemption Division of the Treasurer's Office verifies the lower halves
and the Office of the Comptroller of the Carrency verifies the upper
halves. Both halves <are then destroyed under the direction of a
special committee.
The Currency Redemption Division also redeems unfit paper currency of all types received from local soarces in Washington and from
Government officers abroad; and examines and identifies for lawful
redemption all burned and mutilated currency received from any
source. The last operation requires special techniques and unlimited
patience on the part of skilled examiners as the currency received
may be charred, discolored, moldy, in fragments, or in claylike
chunks. During fiscal 1961 such currency was examined for 45,588
claimants and paymient made therefor to the extent of $6,918,446.
A comparison of the amoants of paper currency of all classes, including Federal Reserve notes, issued, redeemed, and outstanding
daring the fiscal years 1960 and^'^1961 follows.
1961

1960
Pieces
Outstanding July 1
Issues during year.
Redemptions during year
Outstanding June 30

Amount

3,553,469,038 $34,076,030, 538
1,651,081,648
7, 714, 526,885
1, 636,425,384
7, 627, 754, 630
3,668,126,302 34,162,802, 793

Pieces

Amount

3,668,125,302 $34,162,802, 793
8, 224,217, 983
1, 687, 618, 740
1,623,060,302
7, 698,190,987
3,632,683, 740 34,688,829,789

Table 63 shows by class and denomination the value of paper currency issued and redeemed during the fiscal year 1961 and the amounts
outstanding at the end of the year. Tables 58 through 61 give further
details on the stock and circulation of money in the United States.
These tables, however, do not reflect the adjustments made pursuant
to the Old Series Currency Adjustment Act described above. The
act was approved on June 30, 1961, the last day of the fiscal year and
adjastments were therefore not made until fiscal 1962.
Checking accounts oj disbursing officers and agencies.—As of June 30,
1961, the Treasarer maintained 2,290 checking accounts as compared




191

ADMESnSTRATIVE REPORTS

with 2,272 on Jane 30, 1960. The namber of checks paid, by categories of disbursing officers, during fiscal 1960 and 1961 follows.
Number of checks paid

Disbursing officers

1960
Treasury
Army
Navy
Air Force
Other-

-

-

..

Total

-

•

—

-

—-

-

,---

1961

283,496,174
26,939,886
33,588,322
31, 694,858
31,292,002

301,031,795
27, 943,028
35,388,109
32,163,458
33, 655,044

406, 911, 242

430,181,434

Settling check claims.—During the fiscal year the Treasurer processed
330,000 requests to stop payment on Government checks, including
approximately 66,000 requests for information and for photostatic
copies of paid checks. In addition, 61,000 requests for removal of
stop payments were processed.
The Treasurer acted upon 194,000 paid check claims during the
year, including those referred to the U.S. Secret Service for investigation which involved the forgery, alteration, counterfeiting, or fraudulent issuance and negotiation of Government checks. Reclamation
was requested from those having liability to the United States on
29,000 claims, and $2,771,000 was recovered. Settlements and
adjustments were made on 27,000 forgery cases totaling $3,044,000.
Disbursements from the check forgery insurance fund, established
to enable the Treasurer to expedite settlement of check claims,
totaled $228,000. As recoveries are made, these moneys are restored
to the fund. Settlements totaling $2,737,000 have been made from
this $50,000 revolving fund established by the act of November 21,
1941 (31 U.S.C. 561-564).
Claims involving 81,000 outstanding checks were acted upon. Of
this number, 70,000 were certified for issuance of substitute checks
valued at $22,341,000 to replace checks that were not received or
were lost, stolen, or destroyed.
Collecting checks deposited.—Government officers deposited more
than 6,700,000 commercial checks, drafts, money orders, etc., during
the year with the Cash Division in Washington for collection.
Sale oj uncirculated coin sets.—The Cash Division packaged and
sold to collectors 50,000 sets of uncirculated coins minted in 1959 and
223,000 sets minted in 1960. This service is rendered at no expense
to the Government as, in addition to the face value of the coins, a
fee of 58 cents a set is charged for the cost of assembling, handling,
and mailing the coins.




192

1961 REPORT OF THE SECRETARY OF THE TREASURY

Custody oj securities.—The face value of securities held in the
custody of the Treasurer as of June 30, 1960 and 1961, is shown in
the following table.
June 30

Purpose for which held

1961

1960
As collateral:
To secure deposits of public moneys in depositary banks
To secure postal savings funds
-.
In lieu of sureties
_
In custody:
For the Secretary of the Treasury i.
For Board of Trustees, Postal Savings System
For the Comptroller of the Currency
For the Federal .Deposit Insurance Corporation
For the Rural Electrification Administration
For the District of Columbia
F o r thft CnmTnis,<?inner nf Tnriifln Affair.c;

Foreign obligations 2
Others
For servicing outstanding Government issues:
Unissued bearer securities
Total
.._-

_..

$186,388,600
21,057,50D
4,240,000

$134,161, 600
17,848, 500
4,038,900

30,227,614,068
469,137,000
11, 723,000
1, 389,300,000
95, 758, 411
41, 918,842
40, 540, 895
12,072,096,132
87, 463, 776

31,260, 683,684
344,137,000
12,157.000
1, 386, 297, 830
97, 984,184
61,501,866
38,368,725
12,068, 244,132
67,710, 676

1, 226, 703,200

1,968, 817,900

46,872, 830,424

47,450, 841, 897

1 Includes those securities listed in table 121 as in custody of the Treasury.
2 Issued by foreign governments to the United States for indebtedness arising from World War I.
3 Includes U.S. savings bonds in safekeeping for individuals.

Servicing securities jor Federal agencies and jor 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. The
amounts of these payments during the fiscal year 1961, on the basis
of the daily Treasury statement, were as follows:

Payments made for

Federal home loan banks
Federal land banks
Federal Farm Mortgage Corporation - _
Fedfiral TTonsing A dm ini.''tration
Federal National Mortgage Association
District of Columbia Armory Board
Home Owners' T/oan Corporation
Pbilippine Islands
Puerto Rico
_
___
Total
1 On the basis of checks issued.




Principal

$1,414,675,000
604,617,300
19,300
91, 678,650
1,693,224,000

Interest
paid with
principal

Registered
mterest i

$40,195,506
12, 203,721 $7,431,721
24
857, 807 6,604,647
9, 320,218

Coupon
interest

$7,893,161
75,282, 319
1,077

8,600
28,000
1,162,000

5,720

25,625

101,468, 857
814,695
7,026
8,685
87,660

3, 706,402, 860

62, 582,995

14,061, 993

186, 563,480

ADMINISTRATIVE REPORTS

193

Internal Revenue Service ^
The Internal Revenue Service is responsible for collecting internal
revenue and for administerkig the internal revenue laws. . One of the
primary objectives of the Service is to preserve and strengthen the
self-assessment system of taxation. The Service is responsible also
for administering certain other statutes including the Federal Alcohol
Administration Act (27 U.S.C. 201-212), the Liquor Enforcement Act
of 1936 (18 U.S.C. 1261, 1262, 3615), and the Federal Firearms Act
(15 U.S.C. 901-909).
Internal revenue collections and refunds

Collections.—Internal revenue collections in fiscal 1961 reached a
record $94.4 billion. This was an increase of $2.6 billion, or 3 percent
more than that collected in fiscal 1960. It is significant that approximately 97 percent of the total is paid voluntarily by taxpayers under
our self-assessment system. An increase of $1.2 billion in individual
income taxes from those in fiscal 1960 represented almost one-half the
increase ia total internal revenue and reflected the rise in the national
level of personal income in calendar 1960. The $0.4 billion decrease
m corporation income taxes resulted from the decline in corporate
profits in that year.
Old-age and disability insurance taxes provided more than half of
the additional revenue collected ia fiscal 1961. The increase of $1.4
billion reflected not only the higher level of personal income but also
the rise in the tax rate (from 2.5 percent to 3.0 percent each on employers and employees) which was in effect for all of flscal 1961 but
only part of fiscal 1960.
Excise taxes iacreased about $0.2 billion ui fiscal 1961. Changes in
the tax structure which affected excise tax collections included: The
increase from 3 to 4 cents per gallon on gasoline and diesel fuel effective
all of fiscal 1961 but only part of 1960; the decrease from 20 percent to
10 percent in the tax rate for cabarets and roof gardens which became
effective toward the close of fiscal 1960; and the broadening of the tax
base for air conditioners by an administrative ruluig eff'ective
December 1, 1959.
Rejunds.—Refunds of internal revenue, comprising both principal
and interest, aggregated $6.0 billion in flscal 1961 compared with
$5.3 billion in 1960. Gross collections, less refunds, were $88.4 billion
in flscal 1961 and $86.5 billion in 1960. These amounts will differ
from net budget receipts which exclude refunds and amounts transferred to trust funds, and include collections from customs and
miscellaneous sources.
A comparison of collections ui the flscal years 1960 and 1961 by
principal types of tax is shown below. Collections from 1929 through
1961 in more detailed categories are given ia table 17.
1 Additional information will be found in the separate Annual Report of the Commissioner of Internal
Revenue.




194

1961 REPORT OF THE SECRETARY OF THE TREASURY

Source

1960

1961

In thousands of dollars
Income taxes:
Corporation
Individual:
Withheld by employers
OtherTotal individual income taxes
Total income taxes
Employment taxes:
Old-age and disabiUty insurance
Unemployment insurance
Railroad retirement
Total emplo3nnent taxes
Estate and gift taxes
Excise taxes:
Alcohol taxes
Tobacco taxes
Other excise taxes
Total excise taxes
Total coUections

22,179,414

21, 764,940

31,674,588
13,271,124

32,977,654
13,175,346

44,945, 711
67,125,126

46,163,001
67,917,941

10,210,650
341,108
606,931

11, 586,283
345,356
570,812

11,168,589
1,626,348

12, 502,451
1,916,392

3,193,714
1,931,604
6.739, 622
11,864,741
91,774, 803

3,212,801
1,991,117
6,860,384
12,064,302
94,401,086

Interpretation and communication of tax law to taxpayers

To assist taxpayers in obtaining an understanding of their rights
and responsibilities, the Service prepares and distributes basic regulations, rulings, tax forms, and instructions. I t also publishes a
series of tax guides (including a school kit) and disseminates information through the various news media. District and local offices
work closely with taxpayers by giving individual, group, or telephone
assistance to those in need of information to prepare their tax returns
correctly, comply with flling requirements, or meet payment
deadlines.
Taxpayer publications.—Under the Service's taxpayer publications
program taxpayers are informed of the requirements of the Federal
tax laws and their rights thereunder, and are provided with clear,
understandable, and detailed answers to speciflc problems in order
to enable them to compute their taxes properly with a minimum of
time and effort. Several of the most widely used taxpayer publications are the detailed tax guides prepared for different classes of
taxpayers, such as small businesses, farmers, and aliens. Others are
published covering the tax effect of special problems common to broad
segments of the population.
Public injormation program.—The Service conducts an active
public information program, by the use of fllms and spot announcements on radio and television, to provide current data on revenue
operations and to improve taxpayer understanding of Federal tax
laws. In addition, in 1961, more than 150 technical and general
news releases were issued, ranging from reports on the Service's
nationwide gambling raids to developments on the conversion to
automatic data processing.
Taxpayer assistance.—The aim of the 1961 program was to provide
professional service to all taxpayers who needed assistance. During
the 1961 flling period, 10.4 million taxpayers were assisted compared
with 10.2 million for the same period in 1960. Three types of assistance are furnished taxpayers: Individual or group assistance;
self-help (an employee helping two to eight taxpayers at a time by
going from one to another resolving problems as each fills out his




ADMINISTRATIVE REPORTS

195

own return); and replies to inquiries by telephone. In recent years
increasing emphasis has been placed on the use of the telephone
assistance. In 1961 about 56 percent of all requests were telephoned
compared with 53 percent in 1960.
Tax return jorms program.—In keeping with its continuous effort
to simplify and improve tax return forms, the Service made a study
of suggestions for revising tax forms received from Service employees,
practitioners, and taxpayers. Several changes m the tax forms were
made, some of which were attributable to these suggestions and also
to the anticipated requirements for conversion to automatic data
processing. In addition, several new tax forms were issued to improve
Service procedures.
Regulations program.—Regulations completed during the year
included a major one relating to miscellaneous stamp taxes and
temporary regulations relating to the Dealers Reserve Adjustment
Act of 1960 (26 U.S.C. 481 note). AU regulations issued under the
Federal Alcohol Administration Act (27 DFR, Parts 1-8) were republished in the Federal Register on December 29, 1960. These
regulations incorporate all amendments published by Treasury
Decisions prior to September 1, 1960, and reflect certain changes
made in chapter 51 of the Internal Revenue Code of 1954 by section
201 of the Excise Technical Changes Act of 1958 (26 U.S.C. 50015692).
Receipt and processing of returns

Number oj returns fled.—In the 1961 flscal year, 95.8 mUlion tax
returns of all classes were received by the Internal Revenue Service,
which was 1.4 mUlion (1.5 percent) more than in 1960. Over half
of the increase occurred among individual income tax returns with
the combined total of Forms 1040, 1040W, and 1040 A increasing
0.8 million (1.3 percent) over those in the year before. Information
returns received in 1961 totaled over 330 million.
Processing oj returns.—The three service centers processed almost
60.0 million individual income tax returns, about 12.7 million, or 27
percent more than in 1960. In addition, 4.7 million individual
estimated tax declarations were processed. Accounts receivable
were established for appropriate individual income and estimated
tax returns. This was the flrst year for which service centers performed mailing and delinquency check operations on employers'
returns. Form 941, for all quarters and all districts.
In accordance with administration policy, the Service expedited
its refunding program to such an extent that the number scheduled
through March 1961 was 21 percent above the same period in 1960.
In the six-month period ended June 30, 1961, nearly 36.0 million
refunds were scheduled on individual income tax returns flled for
the 1960 tax year. This was an increase of 1.4 mUlion (4 percent)
over the same period last year. The average refund scheduled for
the tax year 1960 was $124 compared with $114 for the tax year 1959.
During the period January-June 1961 the northeast service center
processed individual income tax returns for the tax year 1960 on new
high-speed magnetic tape computers. This advanced electronic system made possible the submission of the refund data to the Chicago
regional disbursing office on magnetic tape. Beginning January 1,




196

1961 REPORT OF THE SECRETARY OF THE TREASURY

1962, the Service plans to utUize this equipment in the midwest and
western service centers.
Automatic data processing.—Substantial progress was made in the
Service's program to develop automatic data processing during flscal
1961. This program, which will be installed over a period of several
years, is designed to bring major advances to the processing and enforcement activities of the Internal Revenue Service through a network of high-speed electronic computers. Some signiflcant highlights
of the past year were: Creation of the new ADP Division; selection
and training of systems analysts and programmers; systems design for
processing business returns; planning for personnel redeployment;
establishment of the pilot service center in Atlanta, Ga.; and initiating the construction of the national computer center at Martinsburg,
W.Va.
The new system will be tested in the pilot service center established
in Atlanta. The center will service district offices in the States of
Alabama, Georgia, Florida, Mississippi, North Carolina, South Carolina, and Tennessee. I t was staffed with key administrative personnel and began the buildup of its work force to process returns. Starting
January 1962 business-type returns will be processed, and in January
1963 this service center will begin processing individual income tax
returns.
Enforcement activities

The enforcement activities of the Service play an important role in
sustaining public confldence in our self-assessment tax system and in
encouraging voluntary compliance. These activities include correcting errors on returns voluntarily flled; identifying and collecting taxes,
interest, and penalties from taxpayers; and, where warranted, prosecuting those who deliberately falsify or seek to evade their just tax
responsibilities.
Examination of returns.—District audit divisions examined 3.5
million returns during flscal 1961 compared with 3.0 million in 1960.
This sharp increase in examinations is attributed primarily to the use
of improved office audit techniques. A comparison of the number of
returns examined during the last two years follows.
Fiscal year
1961

Type of return

Income tax:
Corporation
Individual and
fiduciary
Total income tax
Estate and gift taxes
Excise and employment taxes i
Grand total

_-_
._

_

_._

_
_

_
_

_

__
_.

165
2,571
2,736
27
236
3,000

163
3,079
3,242
32
212
3,486

1 Excludes examinations resulting in no tax change where such examination was made from the taxpayer's
copies of returns in the course of an audit covering both income and excise and/or employment taxes.

Additional tax, penalties, and interest assessed on examined returns
amounted to nearly $1.8 billion in 1961, an increase of $972,000 over
that in 1960. A decrease of $85.3 million in additional assessments of
corporation income taxes was more than offset by increases of $81.5




ADMINISTRATIVE REPORTS

197

million on individual and flduciary income taxes, $2.5 million on estate
and gift taxes, and $2.4 million on employment taxes. The amount saved
through the examination and disallowance of improper refund claims
increased from $635 million in 1960 to $649 million in 1961. Not aU
examinations resulted in an increase in tax, however. For instance,
recommendations of $116.0 million in overassessments were made in
1961, an amount only slightly less than the $116.5 million recommended
in 1960.
Mathematical verijication.—Tax computations on more than 59.5
million individual income tax returns were mathematically verifled
during the year, an increase of 9.3 million, or 19 percent over those in
1960. The number of error cases increased from 2.0 million in 1960 to
2.5 million in 1961. The veriflcation process yielded tax increases
aggregating $132 million, compared Mnth $112 million in 1960, whUe
tax decreases totaled $66 million, compared with $49 million last year.
Delinquent returns secured.—The number of investigations conducted as a result of preliminary evidences of failure to flle returns
rose from 1.0 million in fiscal 1960 to 1.3 million in 1961. This
investigative increase was responsible for a rise in delinquent returns
secured by district collection divisions from 897,000 during flscal
1960 to 969,000 in 1961. The amount of tax, penalties, and interest
on these returns was $159.2 million, a gain of 38 percent over 1960.
In addition, district audit divisions secured 95,000 delinquent returns
in connection with tax examinations. Although this was 5,000 fewer
than last year, additional tax, penalties, and interest on these returns
rose from $37.9 mUlion in 1960 to $50.7 million, an increase of 34
percent.
Summary oj additional tax jrom enjorcement.—Additional tax, penalties, and interest assessed in 1961 as a result of enforcement activities
amounted to $2,130 mUlion as compared with $2,052 mUlion assessed
in 1960. This was a 4 percent increase and is the highest annual
total in the history of the Service. A comparison of additional tax
from enforcement during the last two years is shown in the following
table.

Sources

1960

1961

In thousands of dollars
Additional tax, interest, and penalties resulting from examination
Increase in individual income tax resulting from mathematical verification
Tax, tnterest, and penalties on delinquent returns
Total additional tax, interest, and penalties
_
..
Claims disaUowed
_
_

1,786,916
112,066
163,511
2,052, 493
634, 768

1, 787,887
131,981
209,873
2,129, 741
649,471

Fraud investigations, indictments, and convictions.—The number of
preliminary investigations totaled 12,866 in 1961 compared with
11,480 in 1960, and full-scale investigations totaled 3,677 in
1961 and 3,561 in 1960. Prosecution was recommended in 2,096
cases, an increase of 279 over last year. Indictments were returned
against 1,709 defendants in 1961 compared with 1,260 in 1960. In
the cases reaching the courtroom, 1,129 pleaded guilty or nolo contendere, 102 were convicted, 49 acquitted, and 194 were dismissed.




198

1961 REPORT OF THE SECRETARY OF THE TREASURY

These compare with 950 pleas of guUty or nolo contendere, 136 convictions, 69 acquittals, and 204 dismissals in 1960.
Nationwide coordinated raids against wagering tax violators took
place in 160 cities and resulted in 421 arrests and the seizure of 36
automobiles, $270,000 in currency, and miscellaneous gambling
equipment. Prosecution was recommended in 781 wagering cases
compared with 524 in 1960.
Investigation of the tax affairs of major racketeers was emphasized
in line with the Service's participation in the Department of Justice
drive on organized crime. To assure maximum effort in this program
as well as in the usual enforcement activities, the authorized special
agent strength was increased by 161.
The number of convictions in the past nine flscal years are shown in
the following table.
N u m b e r of
individuals
convicted

Fiscal year

1953
1954
1965—
1956
1957
1968
1959
I960
1961 -

_-

929
1,291
1,339
1,672
1,256
1,096
909
1,086
1,231

__

-

—

--

-

_-

-

—

_-

-

-

Alcohol and tobacco tax administration.—During 1961 the three
enforcement programs adopted in 1957 against Ulicit distilleries have
continued to be highly successful. The program which concentrates
on criminal cases against major violators in critical enforcement areas
was responsible for the arrest, conviction, and imprisonment of many
syndicate members as well as unaffiliated major violators. Under
the known defendant seizure program, the number and percentage of
distilleries seized involving the arrest of one or more violators increased over 1960. The program to prevent the acquisition of raw
materials used in illicit alcohol products continued to curtail supplies.
Seizures for violations of alcohol tax laws are shown in the following
table.
Number
of StiUs
seized

Fiscal y e a r

1940
1945
I960
1955
1966
1957
1958
1959
I960
1961

_

_
-

-

-

___

-

-

-

—

___

-

___

-

—
-

—
-

—

-

10,663
8,344
10,030
12, 509
14, 499
11, 820
9,272
9,225
8,290
6,826

Gallons of
mash
seized
6,480,200
2,945,000
4, 892, 600
7, 375,300
8, 643,200
6, 756, 600
5,140,800
4, 655, 600
4,274,400
3, 669, 500

Number
of arrests
made i
25,638
11,104
10,236
10,545
11,380
11,513
11, 631
10,912
10,376
9,503

1 Includes arrests for firearms violations and, beginning with 1955, tobacco tax violations. Arrests involving these two classes of violations during 1961 numbered 614 and 6, respectively.




ADMINISTRATIVE REPORTS

199

With the implementation of the Excise Technical Changes Act of
1958 by regulations effective July 1, 1960, an opportunity was provided to accelerate a change in the concept of on-premises supervision
which has been in progress for the past several years. This change
involves two principal elements: Transferring to proprietors the responsibUity for the performance of various manual and clerical tasks;
and the use of selective sampling methods in lieu of full-time personal
supervision.
After the new regulations had been in effect for several months,
a nationwide survey of inspector (on-premises) manpower requirements was conducted. By using the uniform guides for the assignment of Government officers to particular plant duties, it was
determined that a saving could be made. Accordingly, the inspector
(on-premises) staff has been reduced through attrition, transfers to
other assignments within the Alcohol and Tobacco Tax Division, and
transfers to other Service activities.
Inspections for the flscal year aggregated 36,044, of which 26,256
related to plants and permittees other than dealers. The reduction
in the. number of inspections (from 38,561 and 28,066, respectively),
resulted primarily from the substitution of an ''inspection by selection'^ program for the previous '.'scheduled inspection'' program.
Collections oj past-due accounts.—On June 30, 1961, past-due accounts on hand totaled 960,053 representing $1.0 billion in unpaid
taxes. This was 2 percent higher than a year ago in number of
accounts and 3 percent more in dollars. The increase was due primarily to the large number of accounts which became past due during
the year and which totaled 2.9 mUlion and involved taxes of $1.5
billion. This volume was the second highest on record, exceeded
only in flscal 1958.
Some increase in the number of past-due accounts had been expected
in view of anticipated normal growth factors and expanded coverage
in both the audit and delinquent returns activities. The extent of
the increase, however, exceeded estimates, primarily because of the
unforeseen degree of the economic recession. Unemployment among
wage earners made both collections and case disposals difficult. This
factor, in addition to the earlier programmed increase in canvassing
activity, precluded the possibUity of bringing about a reduction in
inventories.
Accounts closed in 1961 totaled 2.9 mUlion in the amount of $1.5
billion, of which $1.1 billion was collected. Closing of accounts by
the office collection force was responsible for 65 percent of all accounts
closed compared with 62 percent in 1960. The importance of office
collection cannot be overemphasized, for the extent of its success
frees revenue officer time to handle the more difficult and older cases
and to secure delinquent returns. Accounts with balances two years
old and over were reduced to 91,924 as of June 30, 1961, compared
with 134,049 on hand a year earlier.
Appeals and civil litigation.—The 14,871 protested income, proflts,
estate, and gift tax cases referred by district audit divisions to regional
appellate divisions at the request of taxpa3'ers was 7 percent less than
the 16,001 received in 1960. This was the lowest volume of cases
referred since 1956. The principal reason for the decline was the




200

1961 REPORT OF THE SECRETARY OF THE TREASURY

increased emphasis on informal conference in the district audit
divisions.
Disposals, though below 1960, exceeded receipts for the second
consecutive year, resulting in the lowest combined pre-90-day and
90-day case inventory in four years. On June 30, 1961, such cases on
hand totaled 10,922 compared with 11,832 on hand at the beginning
of the year.
The number of petitions flled with the Tax Court of the United
States was less than in 1960. This, coupled with more docketed case
disposals than in any previous year, caused the inventory of docketed
cases to decline to its lowest point since 1958.
The Supreme Court decided 10 tax cases, sustaining the Government's position in 8 cases. The circuit courts of appeals decided 261
tax cases (exclusive of banlo-uptcy, receivership, insolvency, compromise, and liquor cases). Of these, the Government's position was
supported in 193 cases.
Taxpayers who have paid a disputed tax may sue for refund in the
Court of Claims or in a U.S. district court. The district courts decided 166 cases for the Government, 192 for the taxpa3^er, and 39
cases partly for the Government and partly for the taxpayer. The
Court of Claims decided 17 cases for the Government, 24 cases for the
taxpayer, and 5 partly for each.
Major administrative improvements and changes

Savings jrom improvements.—The management improvement program once again made a major contribution to the efficiency and
effectiveness of the Service. Through the efforts of employees at all
levels in studying the Service's operations and policies tangible recurring savings of $3.7 mUlion were realized. The incentive awards
program added $755,245 which brought the grand total to $4.5 mUlion.
In addition to these recurring savings there were improvements
resulting in one-time savings of $2.1 mUlion and many other improvements of direct beneflt to the Service in its operations and to the taxpayer by way of better service which, though not susceptible to measurement, were nonetheless signiflcant.
District offices.—Anchorage, Alaska, became the flrst new internal
revenue district office in 40 years on January 6, 1961. I t is the l l t h
district office in the San Francisco region and raises the total in the
Service to 62.
Organizational changes in the national office.—The following changes
in organization were made to improve operations and provide better
management control.
Administration activities were regrouped in September 1960 and
placed under a newly created office of Assistant Commissioner for
Administration. The new Assistant Commissioner (Administration)
assumed jurisdiction over the formerly independent Reports and Public Information Divisions, as well as the FacUities Management,
Personnel, and Training Divisions.
On January 1, 1961, the former Collection Division was converted
into two new divisions, the Collection Division and the A D P Division.
The A D P Division was given responsibUity for putting in operation
the A D P system and the closely related returns processing, revenue
accounting, and service center operations. The new Collection Division retained responsibUity for collection enforcement activities.



ADMINISTRATIVE

201

REPORTS

The International Operations Division was reorganized as the Office
of International Operations in August 1960. The primary objectives
were to organize district-type operations along district organization
lines and to establish a planning unit (Operational Research Staff).
The two divisions under the Assistant Commissioner (Inspection)
were reorganized in flscal 1961 to provide better management and
supervision and to meet growing responsibUities arising from the
Service's long-range expansion programs.
Effective AprU 3, 1961, the Operating Facilities Division was
reorganized and became the Facilities Management Division. The
major purpose was to place all facUities management activities relating to field operating programs in one branch and to place in a separate
branch all administrative services performed for the national office.
Personnel

The Service concentrated its personnel administration resources
during the past year on four major areas: A greatl}^ expanded college
recruitment program; development of plans and procedures for redeplo3dng employees affected by the conversion to automatic data
processing; strengthening employee-management relations, including
an employee opinion survey; and issuance of guides and standards for
extending the ''Blue Ribbon" career service program.
Employees on the rolls at the close of 1961 numbered 53,680, compared with 50,199 a year earlier. There were 3,031 employees in the
national office and 50,649 in regional and district offices, and the
Office of International Operations. The field service with 3,152 was
the principal beneficiary of the increase of 3,481 over June 30, 1960.
An analysis of the personnel structure b}^ type of position for fiscal
1960 and 1961 is shown in the following table.

Location and type

National oflSce
Regional and district oflQces i

B Y LOCATION

Number on rolls
at close of fiscal year

2,702
47, 497

3,031
50, 649

641

553

5,476
2,343
4,123
10, 583
1,418
392
901
719

5,769
2,657
4,502
11, 289
1,568
425
915
611

26,966

27, 726

B Y TYPE

Permanent personnel:
Supervisory personnel
Enforcement personnel:
Revenue officers
Office auditors
Tax 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 2,
Total permanent personnel
Temporary personnel
Grand total

,

633

599

4,668
16, 743

5,101
17,492

48,440
1,759
60,199

61,471
2,209
53, 680

1 Includes Office of International Operations personnel (headquarters and field offices) numbering 307
for 1960 and 391 for 1961.
2 Includes 4 overseas employees hired locaUy.




202

1961 REPORT OF THE SECRETARY OF THE TREASURY

Training

With pilot automatic data processing scheduled in the Atlanta
region in fiscal 1962, and necessary preparation for soon-to-follow A D P
operations in other regions, the appropriate training received a high
degree of emphasis. As an initial step to orient the Service's top
management in the role and capabilities of ADP, an executive seminar
was held in October 1960 with twenty-three top Service officials
attending. Another seminar was later held in Atlanta for high
officials of that region in anticipation of its A D P operation.
In view of the growth of the trainmg program in recent years and
the important role it plays in the Service's activities, a task force
was appoiated in April to study the entire training function and to
recommend improvements.
Space and equipment

The Service reexamined its traditional office layouts to find ways of
housing more employees in the space available. As a result new concepts were applied to office-furniture arrangements, and new equipment standards emerged, based on the functions performed by Service
employees and the Idnds of equipment actually needed for these
functions. New furniture and equipment in keeping with the new
standards have been satisfactorily tested and the groundwork has
been laid for a revised long-range equipment program.
Cost of administration

The cost of operating the Service in 1961 was $413.3 million,
including $357,000 from reimbursements, or 99.8 percent of the funds
available, compared with total obligations of $363.7 million in 1960.
Of the 53,345 man-years planned, 53,206 man-years, or 99.7 percent
were actually realized. This is an increase of 2,159 over the 51,047
man-years realized in 1960.
The increase of $49.6 million over fiscal 1960 costs was used to finance
a salary increase effective July 10, costing nearly $26 million; the
Service's contribution of approximately $3 million for employees
health benefit plans which also became effective July 10; an increase
in automobile reimbursement allowance from 8 cents to 10 cents a
mile costing about $1 million; approximately $13 million for the first
step of a long-range program to strengthen enforcement and modernize
returns processing through conversion to automatic data processing,
including the pilot center m Atlanta; personnel promotions; and
increased requirements for and costs of supplies, equipment, communications, and space.
Long-range planning

The Service's long-range plan was updated during 1961 to take
account of revised workload projections, current work performance
rates, and new research results. The plan provides for a Federal tax
administration equipped to deal with internal revenue requirements
of a growing population and a growing economy.
Long-range obj ectives include the modernization of returns processiag
through use of high-speed electronic equipment; expansion of the
capacity to examine tax returns commensurate with requirements to




ADMINISTRATIVE REPORTS

203

mauitaia an adequate level of voluntary compliance; increased
investigative efforts aimed at tax evaders, especially racketeers; and
improvement of the system to detect and secure delinquent returns.
The plan also provides for prompt collection of past-due accounts
arising from higher levels of tax enforcement; strengthening of
enforcement-related activities such as the Appellate Division and
the Office of the Chief Counsel; and the upgrading and improvement
of space and equipment throughout the Service. These broad
programs are scheduled over a number of years.
Advisory group

The advisory group was established in 1959 to effect better cooperation and understanding between taxpayers, tax practitioners, and the
Revenue Service. Four meetings were held with officials of the
Service in 1961, and discussions touched on all facets of operations.
From suggestions by members numerous improvements have been
made in both administration and procedures.
In keeping with the Service's commitment to the members, the
terms of the first group expired in June 1961. During that month a
new panel of twelve high-ranking lawyers, accountants, educators,
and businessmen was appointed. Like their predecessors, they were
chosen from all sections of the country and serve without compensation.
The new advisory group, at their first meeting in June 1961, suggested
comprehensive agenda for discussions throughout the coming year.
Internal controls

Internal audit.—In the interest of efficient administration, the
Service performs an independent review and appraisal of its accoimting,
financial, and other operating activities. Coverage of all major field
activities is required at least once each year. This includes the various segments of the 9 regional offices, 62 district directors' offices, 3
service centers, and the Office of International Operations, aggregating 252 separate units subject to audit. For the second consecutive
year an internal audit was made of each of the field activities except
those in Anchorage and the Atlanta service center which were created
late in the year.
Internal security.—To strengthen and sustain public confidence in
the voluntary self-assessment system, special emphasis is being paid to
the conduct of personnel in their official relations with taxpayers and
tax practitioners. Thorough, expeditious, and impartial investigations are made where there is evidence or allegation of wrongdoing on
the part of employees. Apphcants for employment are subjected to
thorough character investigations. Involved in this area also are the
investigations of enrollees and applicants ibr enrollment.
Over 6,000 investigations of employees and applicants for employment were completed in 1961, compared with nearly 5,000 in 1960.
An expanded recruitment program was responsible for much of the
increase.
Enrollment of practitioners

Lack of integrity on the part of persons enrolled to practice before
the Internal Revenue Service could have a disastrous effect on revenue

6M359—62




204

1961 REPORT OF THE SECRETARY OF THE TREASURY

collections by undermining public confidence in the tax system. The
Service is determined to investigate fully every incident of corrupt
practice and to take swift action to discourage and eliminate further
occurrences. The Director of Practice has intensified the surveillance
of improper activities by enrolled practitioners. Tax practitioners
have been put on notice of the Service's great concern with proper
conduct in all tax matters and they and the public have been asked
to assist the Service in this effort.
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 U.S. balance of pa3axLents, 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, the International Finance Corporation, the Inter-American Development Bank,
and the International Development Association; foreign lending and
assistance; the North Atlantic Treaty Organization; the AngloAmerican Financial Agreement; the United States Exchange Stabilization Fund; and the Foreign Assets Control.
The responsibilities of the Office of International Finance also
include activities of the Treasury in relation to the National Advisory
Council on International Monetary and Financial Problems. The
Secretary of the Treasury is Chairman of the Council, which was
established in 1945 b}^ the Bretton Woods Agreements Act (22 U.S.C.
286b) in order to coordinate the policies and operations of the U.S.
representatives on the International Monetary Fund, and the International Bank, and of all the agencies of the Government which make
or participate in making foreign loans or which engage in foreign
financial, exchange, or monetary transactions. The acts authorizing
U.S. membership in the International Finance Corporation, the
Inter-American Development Bank, and the International Development Association also provide for the coordination by the National
Advisory Council of the U.S. representatives to these institutions.
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 international financial
aspects of problems arising in connection with his responsibilities
under the Tariff Act.




ADMINISTRATIVE REPORTS

205

The Office of International Finance advises Treasury officials and
other departments and agencies of the Government concerning
exchange rates and other financial problems encountered in operations
involving foreign currencies. In particular, it advises the Department of State and the Department of Defense on financial matters
related to their normal operations in foreign countries and on the
special financial problems arising from defense preparation and
military operations. In conjunction with its other activities the Office
studies the financial policies of foreign countries, exchange rates,
balances of payments, the flow of capital, and other related problems.
The Division of Foreign Assets Control administers certain regulations and orders issued under section 5(b) of the Trading with the
Enemy Act. The Foreign Assets Control Regulations block all
property in the United States in which any Communist Chinese or
North Korean interest exists and prohibit all trade or other flnancial
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, seUing, or arranging the purchase
or sale of strategic commodities outside the United States for ultimate
shipment to the Soviet bloc. The latter regulations supplement the
export control laws administered by the Department of Commerce.
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
domestic coin between the mints, the Federal Reserve Banks and
branches, and the Treasurer of the United States in Washington,
D . C ; the custody, processing, and movement of gold and silver
biUlion; the administration of the regidations issued under the Gold
Reserve Act of 1934, as amended (31 U.S.C. 440-446), and section 5b
of the act of October 6, 1917, as amended (12 U.S.C. 95a), including
the issuance and denial of licenses, the purchase of gold, and the sale
of gold buUion 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.
In addition to the Office of the Director of the Mint in Washington,
D . C , six fleld institutions were in operation during the flscal year
1961, consisting of the PhUadelphia and Denver mints where coins
are manufactured; the San Francisco Mint, operating as an assay
office and bullion depository; the Fort Knox Gold Bullion Depository; the New York Assay Office; and the West Point SUver Bullion
Depository which operates as an adjunct of the New York Assay
Office.
1 Additional information concerning the Bureau of the Mint Is contained in the separate annual report
of the Director of the Mint.




206

1961 REPORT OF THE SECRETARY OF THE TREASURY

Coinage

The mints manufactured 3.1 biUion domestic coins during the flscal
year 1961, an increase of 19 percent over the previous year's output
of 2.6 billion coins. The following table shows production of the
flve denominations coined during the year.
Production 2

Denomination i

Number
of coins

Metallic composition

Standard
gross
weight

Face
value

In millions

1-cent pieces
5-cent pieces
Dimes. _
Quarter dollars
Half dollars

Bronze (95% copper, 6% zinc and tin)
Cupronickel (75% copper, 25% nickel)
900 parts silver, 100 parts copper
._- do
_ _do
_

Total

Short
tons

2,461.9
210.4
305.7
74.6
18.5

$24.6
10.5
30.6
18.6
9.2

8,440
1,169
842
514
266

3,071.1

93.6

3 11,210

1 No silver dollars were coined during the year; the last dollar coinage was in September 1935.
2 Includes 2,461,800 sets of proof coins.
8 Consists of 1,460 tons of silver, 9,048 tons of copper, 290 tons of nickel, and 422 tons of zinc and tin.

In addition to domestic coinage, the Philadelphia Mint manufactured 110.4 million coins for four foreign governments, as follows:
Denomination

Government

Dominican Republic

50 centavos
25 centavos

Number of
coins produced (in
millions)

MetalUc composition

...

900 parts silver, 100 parts copper
do..
....
....

. . -

.

Total
El Salvador
Liberia...

.7
_. 5 centavos
50 cents
26 cents
10 cents
6 cents
1 cent

75% copper, 25% nickel

. ...

6.0

900 parts silver, 100 parts copper
do
do
. .
.
76% copper, 25% nickel
95% copper, 5% zinc

.7
.4
.2
.2
2.0

Total
Philippines

0.1
.6

3.5
1 peso
I'i peso
10 centavos
5 centavos
1 centavo

900 parts silver, 100 parts copper
__
. . . do.
.......
70%copper, 18% zinc, 12% nickel
80% copper, 20% zinc
. ... .
95% copper, 6% zinc
_. .

.1
.1
40.0
40.0
20.0

Total -

100.2

Grand total

110.4

During the flscal year 1961 the mints issued 3.1 billion domestic
coins for circulation, compared with 2.7 billion coins in 1960. The
six denominations issued are shown in the follomng table.




ADMINISTRATIVE

207

EEPORTS

N u m b e r of
coins issued i

Face value

Gross weight

Denomination
I n millions
1-cent pieces - 5-cent pieces
Dimes
Quarter dollars. Half dollars
Silverdollars

. .
. .

Total

-

Short tons

2,454.8
225.5
303.7
80.2
20.2
23.7

$24.5
11.3
30.4
20.0
10.1
23.7

8,416
1,243
837
562
278
697

3,108.1

120.0

12,023

1 Includes 2,451,619 sets of proof coins sold by the Philadelphia Mint. A set consists of five coins (10, 60,
100, 250, and 500 denominations).

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
close of the past two flscal years as follows:
F a c e value (in millions)
s t o c k of U . S . coins
J u n e 30, 1960 J u n e 30, 1961

M i n o r coins
S u b s i d i a r y silver coins
Silverdollars

.

Total

_.

Increase, or
decrease ( - )

$569.1
1,562.1
487.8

$694.1
1,608.7
487.6

$34.9
66.6
I -.2

2, 599.0

2,690.3

91.3

1 Decrease represents the amount of uncurrent (worn) silver dollars withdrawn from circulation and
returned to the mints during fiscal 1961.

Gold

The three mints and the New York Assay Office received 6.0
million flne ounces of gold valued at $211.3 million during fiscal 1961.
Issues of gold totaled 63.2 million ounces valued at $2,211.9 million,
including sales of 2.0 million ounces valued at $69.0 million for domestic
industrial, professional, and artistic use. Gold in the Fort Knox
Depository amounted to 356.7 million ounces valued at $12,483.4
million throughout the year. Total holdings and transactions are
shown in the following table.
Gold holdings and transactions (excluding intermint transfers 0

Holdings on June 30, 1960,
Receipts
Holdings on June 30, 1961
Net decrease.-..

2,000. 7

1 Intermint transfers amounted to 67.2 million ounces valued at $2,353.5 million during fiscal 1961.




208

1961 REPORT OF THE SECRETARY OF THE TREASURY

Silver

Silver bullion transactions made at the mints, the New York Assay
Office, and the West Point Depository, and beginning and end-of-year
holdings of the five institutions are summarized in the following
statement.
Silver bullion holdings and transactions -(excluding intermint transfers 0

Holdings on June 30, 1960

Fine ounces
(in millions)
21,834.1

Receipts:
Newly mined domestic silver, act of July 31,1946 (31 U.S.C. 316d)
Lend-lease silver from foreign governments:
India
Pakistan
Saudi Arabia
_
Total lend-lease silver
Eecoinage bullion from uncurrent U.S. silver coins
other miscellaneous receipts

.3

1.1
.8
1.4

_

3.3
1.1
.3

Total receipts...

5.0

Issues:
Manufactured into U.S. subsidiary silver coins
Sold under act of July 31, 1946 (31 U.S.C. 316d)
Other miscellaneous issues
Total issues

_

Holdings on June 30,1961
Net decrease in silver bullion

42.3
40.5

(*)
82.8
3 1, 756.2
77.9

•Less than 600,000.
1 Intermint transfers, including physical and book transfers, amounted to 176.4 million ounces during
fiscal 1961.
2 Includes 1,677.1 million ounces held as seciu-ity for silver certificates.
3 Includes 1,677.3 million ounces held as security for silver certificates.

Revenue and monetary assets

Revenue deposited by the Bureau of the Mint into the general
fund of the Treasury totaled $62.4 million during the fiscal year.
Seigniorage on the 398.8 million subsidiary silver coins manufactured
amounted to $26.9 million and on the 2,672.3 million minor coins
manufactured, $28.4 million. Seigniorage on the 0.2 mUlion ounces
of silver bullion revalued from cost to monetary value as security for
silver certificates amounted to $0.1 million. In addition to the
$55.4 million in seigniorage, other miscellaneous deposits amounted
to $7.0 miUion.
Monetary assets of gold and silver bullion, silver and minor coins,
and other values in the six mint institutions totaled $21.7 billion at
the beginning of the fiscal year and $19.6 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.
Domestic gold production totaled 1,679,800 fine ounces during the
calendar year 1960, compared with 1,635,000 ounces in 1959. Silver
production in 1960 totaled 36,800,000 fine ounces, compared with
23,000,000 oimces in 1959.




ADMINISTRATIVE REPORTS

209

Gold and silver issued in 1960 for domestic industrial, professional,
and artistic use amounted to 3,000,000 ounces and 102,000,000 ounces,
respectively, compared with 2,521,800 ounces and 101,000,000 ounces
in 1959.
Management improvement

In the fiscal year 1961 the Mint's management improvement
program achieved total annual recurring savings of $56,200. At the
Philadelphia Mint the installation of automatic data processing
equipment for the processing of proof coin orders resulted in savings
of $40,000 which related to reimbursable operations. Savings of
$16,200 relating to appropriation items were effected by improved
coinage operations at Philadelphia and Denver, and improved refinery
operations at the New York Assay Office. Appropriation savings
were applied to offset partially wage increases granted to per diem
employees, and increased costs of supplies and materials.
Continuing attention was given throughout the year to the incentive
awards program, records management, safety, control of communication costs, and forms and reports control. Cash awards amounting
to $580 were granted to employees for suggestions resulting in savings
of $9,382 per year and intangible benefits.
Bureau of Narcotics ^
The Bureau of Narcotics is responsible for the prevention,
investigation, and detection of violations of the Federal narcotic
and marihuana laws.
The principal objectives of the Bureau are: To suppress the Ulicit
traffic in such drugs and thus avoid the spread of addiction; to control
the legitimate manufacture and distribution of narcotic medicines
and prevent their diversion for addiction purposes; to cooperate,
through the State Department, with other governments in control
of the international drug traffic and the discharge of bhe obhgations
of the United States under the several narcotics conventions and
protocols; and to cooperate with the several States in narcotic drug
legislation and local law enforcement.
Law enforcement

To suppress the illicit traffic the Bureau concentrates its efforts as
far as possible on: Eliminating foreign sources of supply of clandestine
drugs and preventing their smuggling into the United States; detecting and preventing illicit interstate traffic; detecting and eliminating
wholesale traffic within the States; and cooperating with State and
local officials to eliminate retaU peddling and promote the treatment
and cure of addicts.
In foreign countries investigation, surveUlance, and negotiation are
undertaken to detect and locate nar^cotic drugs intended for illicit
traffic and prevent their entrance into this country. During the fiscal
year 1961 through cooperation with the Canadian, French, Greek,
Italian, Lebanese, Mexican, Swiss, Syrian, and Turkish Governments
large quantities of crude, semiprocessed, and finished products destined
for the United States were seized, leading in some instances to the
closing of large clandestine laboratories. The lines of supply of heroin
1 Further information is available in the separate report of the Bureau of Narcotics entitled. Traffic in
Opium and Other Dangerous Drugs for the Year Ended December Sl, I960.




210

1961 REPORT OF THE SECRETARY OF THE TREASURY

originating in Communist China were further disrupted, and the Bureau continued its guard against the huge supplies of opium and heroin
which are avaUable in that area.
The Narcotic Control Act of 1956 (21 U.S.C. 174) continues to be
an important and effective aid in discouraging the illicit traffic in the
United States, as reflected in the longer sentences imposed. For unregistered narcotic violators the average sentence per conviction was
6 years 6 months in 1961 as compared with 3 years 7 months in flscal
1956, the last year preceding enactment of this law; and for marihuana
violators the average was 5 years 2 months as compared with 3 years
4 months in 1956. In jurisdictions where the policy of heavier sentences applies, continued stiffening of penalties is acting as a steadily
increasing deterrent to illicit traffic.
In its enforcement activities during the year the Bureau seized a
total of 157,358 grams of narcotics as compared with 74,444 grams in
1960. Seizures of marihuana amounted to 620,437 grams bulk and
776 cigarettes as compared with 1,529,722 grams bulk and 731 cigarettes in 1960.
Number of violations of the narcotic and marihuana laws reported during the fiscal
year 1961 with their dispositions and penalties
Narcotic laws
Registered persons
Federal
Court
Pending July 1, I960.
Reported during 1961 i
Total to be disposed
ofl
Convicted
Acquitted
Dropped

- -. -

State
Court

Marihuana laws

Nonregistered persons
Federal
Court

Nonregistered persons
Federal
Court

State
Court

State
Court

11
5

935
1,481

100
163

16

2,416

263

5

1

5

1

880
29
205

330
10
57

83
2
23

55
1
15

Total disposed of i . .

12

1,511

179

Pending June 30, 19611...

4

905

84

Sentences imposed
Fines imposed

Yrs. Mos.
20
$8,000

Yrs. Mos. Yrs. Mos. Yrs. Mos. Yrs. Mos.
5,731
1 1,254
5
6 429
$3,020

Average sentence per con- Yrs. Mos. Yrs. Mos.
viction:
1961
_.
5
4
4
2 ""io"
1960
Average fine per conviction:
1961
-—
1960

$1,600
1,000

$3,020

$112,181

$7,105

Yrs. Mos.
6
6

$127
166

6
8

$503

Yrs. Mos.
3
3

$21
30

10
11

$3,550

Yrs. Mos.
2
4

5
5

$6
85

Yrs. Mos.
217
8

Yrs. Mos.
3
4

11
8

$64
36

1 All violations reported and disposed of during 1961 were Federal cases, that is. those made by Federal
oflacers working independently. There were no joint cases (those made by Federal and State officers working in cooperation).




ADMINISTRATIVE REPORTS

211

The number of violations of the narcotic laws reported by Federal
narcotic enforcement officers is shown in the preceding table. Violations by persons registered to engage in legitimate narcotic and marihuana activities are shown separately from those by persons who were
not qualifled by registration to possess or handle the drugs.
Control of manufacture and medical distribution

In its control of the legitimate trade the Bureau issues permits for
imports of the crude materials, for exports of flnished drugs, and for
the intransit movement 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 medicines
within the country and has authority to license the growing of opium
poppies to meet the medicinal needs of the country if and when their
production should become in the public interest.
Under the Narcotics Manufacturing Act of 1960 (21 U.S.C. 501-517,
26 U.S.C. 4702, 4731) the Bureau determines, in the interest of public
health and safety, what narcotic drugs shall be manufactured and used
by establishing ^'basic classes" for those which are authorized. I t
licenses the manufacture of such drugs and flxes annual manufacturing quotas for each producer, thus keeping total production within
predetermined medical and scientiflc requirements. Under that act
the Bureau, with the assistance of an Advisory Committee, also classifles narcotic drugs and their pharmaceutical preparations into various
control categories, applying to each category that degree of control
which is found to be warranted by its risk of addiction or abuse.
The importation, manufacture, and distribution of opium and coca
leaves and their derivatives are subjected to a system of quotas and
allocations designed to insure their proper distribution for medical
needs. During the year, 100,354 kilograms of raw opium were imported from Burma, Turkey, and India, and 132,340 kilograms of coca
leaves were imported from Peru to meet medical requirements for
opium derivatives and cocaine and to supply nonnarcotic coca flavoring
extracts. The latter were obtained as a byproduct from the same
leaves from which the cocaine was simultaneously extracted.
The q^uantity of narcotic drugs exported during 1961 was more than
twice that exported during 1960. The export total, however, has
never been signiflcant in comparison with the quantity used within
the United States. Principally because of the large medical consumption of pethidine, codeine, and papaverine, the manufacture of
narcotics continued extensive.
There were 1,671 thefts of narcotics, amounting to 65,406 grams,
reported during 1961 from persons authorized to handle the drugs as
compared with 1,446 thefts amounting to 52,500 grams in 1960.
Almost all of the approximately 337,910 persons registered to engage
in lawful narcotic and marihuana activities were employed in the
manufacture, wholesale or retail distribution, or dispensing or prescribing of narcotic drugs for legitimate medical uses. As industrial
and scientiflc users of narcotic substances are few in number, the
quantities used for these purposes are insigniflcant.




212

1961 REPORT OF THE SECRETARY OF THE TREASURY

International cooperation

For each calendar year the Bureau submits to appropriate agencies
of the United Nations advance estimates of requirements for each basic
drug covered by the several international conventions, and after the
year has ended, full and complete statistics of their manufacture, distribution, imports, exports, and stocks. I t applies a system of import, export, and intransit permits which conforms to the requirements
of these conventions as well as to our own Narcotic Drugs Import and
Export Act. I t exchanges, direct with the narcotics control authorities of other governments, information relating to movements of drugs
under such permits, as well as information relating to illicit traffickers
and illicit movements of narcotics between countries. Through the
State Department the Bureau cooperates in matters of narcotic policy
with other governments and with the United Nations. The Commissioner of Narcotics is the United States Representative on the United
Nations Commission on Narcotic Drugs, which meets annually to
review the work of the various international agencies concerned with
narcotics and to make recommendations on narcotic matters to the
Economic and Social Council.
An agreement to limit the production of opium to world medical
and scientiflc needs was signed at the United Nations on June 23, 1953,
and approved by'the United States Senate August 20,1954. The approval
was followed by Senate Resolution 290 of June 14, 1956, urging other
governments also to ratify. This Protocol requires the ratiflcation s
of 25 states including any three of seven named producing countries
and any three of nine named manufacturing countries. As of June 30,
1961, 39 ratiflcations had been deposited including six from manufacturing countries and two from producing countries. When one additional producing state has deposited its ratiflcation the Protocol will
become effective and should then accomphsh a much further reduction in the amount of opium available to the illicit traffic.
Cooperation with States and municipalities

Excellent cooperation continues among Federal, State, and municipal narcotic law enforcement agencies in the exchange of law enforcement information and in local law enforcement activities. Many
types of minor violations and routine inspections formerly handled by
the Bureau are now referred to local or State authorities for investigation and prosecution, or are investigated jointly with them.
The names of 46,936 active addicts, many of which were reported
by State and municipal agencies, were recorded in the Bureau's central
index as of June 30, 1961.
Scope of activities

The scope of the Bureau's operations continues to enlarge as additional drugs are made subject to the narcotic laws. Opium and coca
leaves and their derivatives have been under national control since
1915. Marihuana has been under control since 1937. Isonipecaine,
a S3mthetic known more generally as meperidine and internationally as
pethidine, was brought under control in 1944; and imder the act of
March 8, 1946 (26 U.S.C. 4731(g)), 42 other synthetic narcotics have
been brought under control through administrative procedures provided by the act.




ADMINISTRATIVE REPORTS

213

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 I I of the 1931 Convention and the international Protocol of
November 19, 1948, nine secondary derivatives of opium and 45 synthetic drugs have been found by the World Health Organization to
have addicting qualities similar to morphine or cocaine and have
been brought under the controls provided by the treaties.
Training schools

The Bureau's narcotics training school, staffed by 20 experts in narcotic law enforcement, has now graduated 707 State and municipal law
enforcement officers representing 322 separate agencies from 45 States,
the District of Columbia, and Puerto Rico. Seventy-two foreign law
enforcement officers, representing 32 separate agencies, from Afghanistan, Belgium, Bolivia, Canada, Ceylon, Ecuador, Ethiopia, Indonesia,
Iran, Iraq, Japan, Jordan, Korea, Lebanon, Mexico, Peru, Philippines,
Thailand, Turkey, and Venezuela also have attended. Twenty-one
narcotic agents attended the Treasury Law Enforcement School during
the year and three attended its Technical Equipment Operators'
School. Thirty-eight employees were paid cash awards totaling
$11,450 under the incentive awards program for adopted suggestions
or special acts and services.
Management improvement

During the flscal year the Bureau completed the changeover from the
complicated avoirdupois system of pounds, ounces, and grains to the
simpler metric system of Idlograms, grams, and milligrams for manufacturers' reporting and accounting for narcotic drugs. The reporting
of wholesalers' monthly returns and annual inventories was also
simplifled in a manner that saves these registrants thousands of manhours annually in their preparation. Improvements have been made
in methods of accumulating data for export statistics and their more
prompt reporting to international authorities. Automatic accounting
equipment has been installed to increase the efficiency of payroll
operations.
United States Coast Guard
The United States Coast Guard is responsible for enforcing Federal
laws on navigable waters subject to the jurisdiction of the United
States. These laws govern navigation, shipping, and other maritime
operations, and the related protection of life and property. The
Service also promotes the safety of merchant vessels, and designs,
installs, maintains, and operates aids to maritime navigation for commerce and the Armed Forces. By training and maintaining an adequate Reserve force, the Coast Guard fulfills a further responsibUity
which consists of maintaining a state of readiness to operate as a
specialized service of the Navy in time of war or national emergency.
The primary duties of the Service are defined in Title 14 of the United
States Code.




214

1961 REPORT OF THE SECRETARY OF THE TREASURY

Search and rescue operations

The responsibility for coordinating search and rescue operations
in the Western Atlantic and most of the Pacific Ocean is vested in the
Coast Guard. Some typical examples of assistance rendered during
the fiscal year follow.
Aircrajt ditching.—On July 14, 1960, a Northwest Airlines DC-7C
aircraft carrying 58 persons reported that it would be forced to ditch
in Philippine waters because of fuselage damage and an engine fire
resulting from the loss of a propeller. An air search, coordinated by
the Coast Guard, was made in the vicinity of the Polillo Islands.
After sighting four life rafts, a Coast Guard U F aircraft landed and
rescued 23 survivors. Thirty-four others were rescued by a Navy
P5M plane, which also recovered from the water the body of the only
fatality.
Ship collision.—Early in the morning of October 22, 1960, the
S.S. Alcoa Corsair was beached after being severely damaged in a
collision with the S.S. Lorenzo Marcello near the mouth of the Mississippi River. Although the Lorenzo Marcello had no casualties and
could proceed to New Orleans, the Alcoa Corsair had eight fatalities,
nine injured, and one missing. Four of the critically injured were removed by a Coast Guard helicopter. The remaining injured crewmen
were ferried ashore to waiting ambulances by Coast Guard boats and
other craft.
Midair collision.—In the New York City area on December 16,
1960, a United Airlines D C - 8 with 83 passengers aboard collided
with a TWA Super Constellation carrying 42. Coast Guard helicopters working with Army, Navy, and New York Police Force aircraft transported injured passengers from the Constellation, which
crashed on Staten Island, to a nearby hospital. Coast Guard vessels
also searched the New York harbor area and recovered debris for the
Civil Aeronautics Board to assist in determining the cause of the
mishap.
Tanker broken in two.—On December 21, 1960, the Coast Guard
received a report that the tanker Pine Ridge with 37 crewmen aboard
was breaking in two about 120 miles off Cape Hatteras. Coast Guard
aircraft and vessels were dispatched to the scene together with nearby
merchant vessels. Naval vessels, including -the aircraft carrier
Valley Forge, were made available when needed. A Coast Guard
U F - 2 G plane on the scene observed that the bow section of the Pine
Ridge had capsized throwing crewmen overboard, while the stern section remained afloat and upright. The tanker Artemis, on-scene,
attempted to rescue the seamen who were thrown in the water, but
was rebuffed by mountainous seas. Liferafts and emergency equipment were air-dropped, and helicopters from the Valley Forge removed
28 survivors from the stern section. A widespread air and surface
search was made for nine missing crewmen and the bow section,
but only debris and lifejackets were found.
A statistical summary of search and rescue assistance for the flscal
year 1961 follows.




215

ADMINISTRATIVE REPORTS

Rescue operations

Vessels assisted:
Refloated ( n u m b e r )
Towed (number)
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 including 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 involved (value including cargo)
Miles escorted
.
. _
Persons assisted.._
..
.
MisceUaneous assisted (floods, forest fires, etc.)
A t t e m p t s t o assist (no physical assistance r e n d e r e d ) .
P e r s o n s involved ( n u m b e r ) :
Rescued
,
. ..
M e d i c a l assistance furnished
O t h e r assistance
Miscellaneous p r o p e r t y involved ( v a l u e ) .
_

B y aviation u n i t s

B y vessels

B y other
equipment

83
379
1.004

202
2,219
1,063

1,625
8,666
3,454

1,910
11,264
5,521
$627,394,900
119,696

383
168

2
44

5
179

668
87
1,874

403
159
1,635

1,705
1,015
6,413

390
391
$1,090, 937,500
61,883
2,776
1,261
8,822

Total

2,806
2,392
79,199
$16,991,000

Marine inspection and allied safety measures

Through December 30, 1960, 2,218,487 boats had been numbered by
40 States administering motorboat numbering S3^stems approved by
the Coast Guard. An additional 231,997 were numbered by the
Coast Guard itself for those States not having approved systems.
During the calendar j^ear 1960, reportable accidents involving
3,785 pleasure craft resulted in 819 fatalities, 929 injuries, and property
damage estimated at $3,192,100. DetaUs on the Coast Guard program to promote marine safety for pleasure boating were published in
a statistical report entitled Recreational Boating in ihe United States,
released on M a y 1, 1961.
Since June 1, 1958, some 4,350 small passenger vessels have been
covered by the inspection and certiflcation provisions of the act of
May 10, 1956 (46 U.S.C. 390 a-g).
There were 3,700 marine casualties reported and investigated, 7
of which were considered major and were investigated by marine
boards of investigation. The inquiries of these boards disclosed that
there were 156 fatalities from vessel casualties, 167 from personal
accidents, and 229 from miscellaneous causes. The two most serious
vessel mishaps are described in an earlier part of the report as search
and rescue operations.
A digest of certain marine inspection activities for the fiscal 3'^ear
follows.

Inspection activities

Inspections for certification, U.S. and foreign
Drydockings.
Reinspections
Miscellaneous inspections
Factory inspections
Merchant vessel plans reviewed
Violations of navigation and vessel inspection laws
1 Includes 691 initial inspections to obtain first certificates.
2As of April 30, 1961.




Number of
vessels or
actions
1 5,433
5,810
6,204
22,801
607,245
32, 300
2 11,412

Gross tonnage

11,301,814
13,654,872
8,201,661

216

1961 REPORT OF THE SECRETARY OF THE TREASURY

The Merchant Marine Council held seven regular meetings and
one public hearing during the year. As a result of their deliberations,
numerous amendments to merchant marine safety regulations were
promulgated.
In the interest of promoting marine safety the Coast Guard participated in numerous meetings and conferences throughout the year,
one of which was the National Safety Council's Exposition in Chicago,
111. The Coast Guard also established a coordinating panel to assist
and advise the Commandant concerning rules of the road. A conference of marine inspection officers assigned to Coast Guard district
offices was held to promote greater uniformity in the administration
of merchant marine safety functions. One million copies of the
pamphlet Pleasure Craft, containing useful information for motorboat
owners, were distributed to the public during the year. The Recreational Boating Guide, a publication written to assist the novice boatman, has also had wide distribution. For the fourth consecutive
year the Coast Guard received the National Safety Council's Award
of Merit for the monthly magazine Proceedings of the Merchant
Marine Council, a publication intended to increase interest in marine
safety.
The Coast Guard recently established a special staff to devote full
time to activities involving international maritime safety. A principal function of this staff will be to work closely with the Intergovernmental Maritime Consultative Organization.
Merchant marine personnel.—During the fiscal year, 63,522 documents were issued to merchant marine personnel, and Coast Guard
shipping commissioners supervised the execution of 7,997 sets of
shipping articles involving 522,429 individual transactions relating to
the shipment and discharge of seamen.
Merchant marine investigating sections in major U.S. ports and
merchant marine details in foreign ports investigated 13,183 cases
involving negligence, incompetence, and misconduct. Charges were
preferred and hearings conducted before civilian examiners in 1,053
of these cases. Security checks were made of 16,540 persons desiring
employment on merchant vessels.
Law enforcement

To provide law enforcement and educational facilities for remote
areas, 20 mobUe boarding units were established in fiscal 1961. The
units travel from one water area to another in order to examine boats
for compliance with Federal boating laws and to conduct courses for
the public.
The following statistics reflect the volume of enforcement work by
the Coast Guard during the flscal year.
Vessels boarded
Waterfront facilities inspected
Reported violations of:
Motorboat Act
Port security regulations
Oil Pollution Act
Other laws




152, 441
24, 254
25, 125
714
462
498

ADMINISTRATIVE REPORTS
Explosives:
Loading permits issued
Loadings supervised
Tons covered by issued permits
Other hazardous cargoes inspected.
Anchorage violations

217
801
701
116, 601
7, 465
23

Cooperation with other Federal agencies

The Coast Guard performed services for other Federal agencies as
follows:
Alcohol Tax Unit, Treasury (aircraft days)
Coast and Geodetic Survey (aerial surveys days)
Fish and Wildlife (censuses taken)
Weather Bureau:
Reports furnished
Warnings disseminated

27
138
220
84, 490
19, 299

Aids to navigation

On June 30, 1961, there were 40,833 aids to navigation maintained
in the navigable waters of the United States, its Territories and possessions, the Trust Territory of the Paciflc Islands, and at overseas
bases. A summary of those maintained at the close of each of the
last two flscal years follows.
Navigation aids

Lor an transmitters
__.
Radiobeacons
_.
Fog signals (except sound buoys)
Lights (including lightships)
Daybeacons
Buoys:
Lighted (including sound).„.
Unlighted sound..
Unlighted metal
River type
Spar
Total

40,833

1 Includes three experimental loran-B stations and three experimental loran-C stations,
2 Includes three experimental loran-C stations.

Ocean stations

The Coast Guard continued to maintain four ocean stations in the
North Atlantic and two in the North Paciflc during the flscal year.
These ships, during their cruises of approximately 494,431 miles,
provided meteorological, navigational, and communication services
for air and marine commerce, and collected various scientiflc data.
International ice patrol

The international ice patrol, operating between February 20 and
June 27, 1961, employed reconnaissance aircraft, radio station
facilities, and an oceanographic vessel. The iceberg distribution was
found to be relatively light.




218

1961 REPORT OF THE SECRETARY OF THE TREASURY

Bering Sea patrol

Between May 22 and September 30, 1960, the U.S.C.G.C. Storis
and U.S.C.G.C. Northwind traveled 17,464 miles in conducting the
Bering Sea patrol. This patrol is concerned principally with law
enforcement, search and rescue, aids to navigation, logistics, and the
furnishing of medical and dental treatment to Alaskan natives.
Coast Guard intelligence

During the year, 2,765 full or limited investigations were made,
involving security, criminal law enforcement, and complaints. In
addition the following investigations were made for secmity and
screening purposes: 11,553 mUitary national agency checks, 19,668
merchant marine documents and licenses, and 14,738 port security
cards.
Facilities, equipment, construction, and development

Floating units.—At the close of flscal 1961, the Coast Guard had in
active commission 179 cutters, 75 patrol boats, 28 lightships, 38
harbor tugs, and 12 buoy boats. The patrol boat fleet included 17
newly constructed 82-foot steel vessels. Two pusher-barge (combination type) buoy tenders were also built as replacements for overage
and obsolete ships. Fixed structures are being built to replace two
lightships that have had over 50 years of active service. Coast Guard
floating units cruised a total of 2,925,443 miles during flscal 1961.
Shore establishments.—A modernization of the standard 30-foot
utUity boat has resulted in a 30 percent increase in speed, and construction of a prototype 44-foot motor lifeboat was begun. On a trial
basis a houseboat is being used as a seasonal search and rescue facility
on the Great Lakes. Six light stations were converted from manned to
automatic, unmanned operation and four small ligbt attendant stations were consolidated. Seven port security units were disestablished
during the year as the result of a change in emphasis.
Aviation and aircrajt.—The Coast Guard operated a total of 133
aircraft, including 37 helicopters, during the flscal year. In exchange
for an equal number of type SA-16A aircraft 11 P5M seaplanes were
transferred to the Department of Defense, and two SC-130B planes
were acquired as replacements for R5D aircraft. Additionally,
arrangements were made with the Navy to borrow six H 0 4 S helicopters to relieve a Coast Guard shortage pending new procurement.
Coast Guard aircraft flew 27,376 sorties during the flscal year, accumulating a total of 104,607 operating hours.
Communications.—To provide for more effective coordination of
distress cases, particularly those involving aircraft, private line telephone systems have been leased in two additional districts to connect
major Coast Guard, Air Force, and Navy commands having important
search and rescue capabilities.
Engineering developments

Aeronautical engineering.—Procurement of type H U S - l G helicopters has been terminated because of various deflciencies. Two of
these models were lost in crashes caused by unexplained power failures.




ADMINISTRATIVE REPORTS

219

Further helicopter procurement will await careful evaluation of models
now available. Eleven SA-16 twin engine amphibious aircraft
obtained from the Air Force will be converted to type UF-2G, the
standard Coast Guard search and rescue plane, which can be operated
much more economically than the P5M aircraft which it will replace.
Civil engineering.—Major projects started in the flscal year included
the construction of two offshore light stations to replace lightships at
Buzzards Bay, Mass., and Brenton Eeef, R.L, and bhe erection of a
modern lighthouse as a replacement for the one located at Charleston,
S.C.
Two new chains of overseas loran stations, consisting of six transmitters and two monitors, were completed and additions were made
to existing chains.
Electronics engineering.—A new device which converts radar picture
coordinates to television picture coordinates has undergone a successful
engineering feasibility test. An operational evaluation of this device
as an aid to navigation is scheduled for flscal year 1962.
Naval engineering.—Sixteen obsolescent, wooden hulled 83-foot
patrol boats were replaced with diesel-powered, steel-hulled 82-foot
boats. A 210-foot cutter has been designed to replace aging 125-foot
and 165-foob vessels. The cutters of the new class, the construction
of which will start in the next flscal year, will be powered by dieselgas turbine plants and wUl have helicopter carrying capability.
Laminated flberglass is being used in the construction of thirty new
30-foot and seven 40-foot utility boats. The construction of six
additional pusher-barge combinations has been authorized for aids to
navigation work, and six 65-foot steel harbor tugs are to be built to
replace obsolescent, wooden hulled tugs now in use.
Testing and development.—An evaluation is being made of a method
for purifying sea water. Propane-fueled, thermoelectric power sources
for buoys are under study, and two iso topic-fueled thermoelectric
power sources are being manufactured for the Coast Guard by the
Atomic Energy Commission. During the flscal year progress was
also made in the study of corrosion protection systems for the hulls
of vessels.
International Lighthouse Conference.—The Coast Guard was host to
the Sixth International Technical Conference on Lighthouses and
Other Aids to Navigation, held in Washington, D . C , in September
1960. Two hundred representatives from 36 countries attended.
Coast Guard Reserve

An extensive training program of two-weeks active duty was carried
out during the flscal year for some 11,680 reservists, and an estimated
60 officers and 2,540 enlisted men entered active duty for six-months'
training.
Eight new organized Reserve units were commissioned, which
brought the total units to 228. Some 14,200 officers and enlisted
men are attached to these units and participate in the annual 48drill schedule.
614359—^62

^15




220

1961 REPORT OF THE SECRETARY OF THE TREASURY

Personnel

The following table enumerates the Coast Guard personnel as of
June 30, 1960 and 1961.
Personnel

1961

1960
Number

Military personnel:
Commissioned officers
Chief warrant oflEicers
Warrant officers
Cadets
Enlisted men

3,011
676
333
405
26,191

3,061
812
205
385
27,100

__

30,616

31,563

__

2,379
2,187
224

2,477
2,219
220

4,790

4,916

3,577
27,907

3,650
27,399

31,484

31,049

__

Total
Civilian personnel:
Salaried (General Service).
Wageboard
Lamplighters

_

Total (exclusive of vacancies)
Ready reservists:
Officers
Enlistedmen

_ _

_
_

„

Total

The following table shows the changes in the numbers of officers
on active duty as of June 30, 1960 and 1961. The net gain of 47
was sufficient to meet the increased commitments at the beginning
of fiscal 1962.
Officers

1960

1961
Number

Additions of commissioned officers:
Coast
Academy
graduates
Officer Guard
Candidate
School
graduates
Reserve officers called to active duty
Former merchant marine officers appomted

137
172
12
10

119
204
17
5

331

345

121
112

88
210

Total

233

298

Net gain. ,

98

47

Total

_

_

__

Losses of commissioned officers:
Regular i
•
_
Reserve (on completion of obligated service)

_

_

1 Through retirements, resignations, revocations, and deaths.

Recruiting and training.—Fifty-five main recruiting stations and
approximately 47 substations were manned by 249 recruiters. Of
the 19,885 applicants for enlistment in the regular Coast Guard,
6,102 were enlisted. The Reserve received 6,204 applications and
enlisted 3,351. The Receiving Center, Cape May, N.J., trained
4,554 recruits and the Receiving Center, Alameda, Calif., an additional
1,685.
Training for foreign visitors.—Approximately 179 visitors from 33
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




221

ADMIlSnSTRATIVE REPORTS

marine safety, vessel inspection, port security, law enforcement, and
aircraft, etc.
Coast Guard education program.—The education and training
programs participated in and sponsored b}^ the Service are summarized
for 1960 and 1961 as follows:
Education and training programs

1960

1961
Number

Coast Guard Academy:
Applications...
Applications approved
Appointments
Cadets
Graduates (bachelor of science degrees)
Officer Candidate School graduates
Enhsted men graduated from basic petty officer schools:
Coast Guard
Navy and other
.-.

4,393
4,345

5,128
5,101

223
400
137
172

224
385
119
262

1,549

1,487

294

394

Total graduates of basic petty officer schools

1,843

1,881

Advanced schools (Navy and other)
Specialized courses (Service and civilian schools).
_..
Coast Guard Institute courses completed
United States Armed Forces Institute courses completed
Naval correspondence schools courses completed..
Other training:
Postgraduate (officers)
_.
Entered flight (officers)
Helicopter pilot, 8-week (aviators)
Training (C-130B aircraft)
Short term specialized courses
Off duty courses at civilian schools (officers)

626
234
6,178
294
4,302

1,023
382
6,107
253
2.641

77
34
25
22
209
178

52
47
25
20
289
230

Public Health Service support.—On June 30, 1961, there were 92
Public Health Service personnel on duty with the Coast Guard serving
at 22 shore stations and aboard ships assigned to ocean stations, the
Bering Sea patrol, and arctic and antarctic operations.
Personnel sajety program.—The injury-producing accident rate increased during 1960 for both military and civilian Coast Guard personnel. In spite of this increase the accident ratio over the past
several years has had a downward trend.
Fiscal and supply management

Uniform supply procedures and organization have been adopted
throughout the Service during the fiscal year. This uniformity has
not only resulted in savings, but also has simplified the task of training
supply personnel. Through arrangements with the General Services
Administration and the Department of Defense, the Coast Guard now
has direct access to the excess and long supply stocks of the military
services. This is expected to result in more effective use of surplus
material, since the Coast Guard will be able to obtain excess stocks
several months earlier than in previous years. The Coast Guard has
also arranged to dispose of its excess materials through Department
of Defense consolidated sales activities, thus enabling faster and more
economical disposal through established military sales outlets.
Coast Guard Auxiliary

The primary purpose of this voluntary, nonmUitary organization
is the promotion of boating safety. Functioning in some 573 communities, the AuxUiary conducts public instruction courses in basic




222

1961 REPORT OF THE SECRETARY OF THE TREASURY

seamanship and safe boat handling, which had an enrollment of
108,041 during the fiscal year. The Auxiliary also made 113,962
courtesy examinations of motorboats, assisted the Coast Guard in
patrolling 842 regattas, and cooperated in answering 3,150 calls for
assistance. On June 30, 1961, the organization had 20,747 members
and 13,391 facilities consisting of boats, aircraft, and raclio stations in
713 flotiUas.
Funds available, obligations, and balances

The following table shows the amount of funds available for the
Coast Guard during the flscal year 1961, and the amounts of obligations and unobligated balances.

Appropriated funds:
Operating expenses
Reserve training __
_ .
Retired pay
Acquisition, construction, and improvements
Total appropriated funds
Reimbursements:
operating expenses
Acquisition, construction, and improvements
Total reimbursements
Trust fund, U.S. Coast Guard gift fund
Grand total

_

Funds
available ^

Net total
obligations

$205,000,000
16,000,000
30,000,000
34, 661, 002

$204, 454, 768
15, 919, 547
29, 980, 505
23, 886, 565

$545,232
80 453
19, 495
10, 774, 437

285, 661, 002

274, 241, 385

11 419 617

30, 973, 244
33, 753, 434

30, 973, 244
18, 666, 335

15, 087, 099

64, 726, 678

49, 639, 579

15, 087, 099

Unobligated
balances 2

17, 840

6,602

11, 238

350, 405, 520

323, 887, 566

26, 517, 954

1 Funds available include unobligated balances brought forward from prior year appropriations as follows:
Acquisition, construction, and improvements:
Appropriated funds
$4,661,002
Reimbursements
12,290,349
U.S. Coast Guard gift fund
7,683
2 Unobligated balance of $25,861,536 under the acquisition, construction, and improvement appropriation
remains available for obligation in the fiscal year 1962. These funds are programmed for obligation in fiscal
1962 for the following general purposes:
Coast Guard Department of Defense
projects
projects
For projects deferred in fiscal 1961 to be subsequently accomplished
$4, 661,100
$9, 805, 500
For completion of projects started in fiscal 1961
__
6,113,337
5, 281, 599
Total-

10, 774,437

15,087,099

Management improvement

Management improvement in flscal 1961 again proved its worth as
a means of reducing costs and furthering efficiency in the Coast
Guard. From this program total savings for the year were estimated
at $3,234,000, an increase of 60 percent over the previous 12-month
period. Of this total, some $2,200,000 is credited to the military and
civUian incentive awards programs, which are closely linked to the
management improvement effort.
Numerous nianagement reviews were undertaken during flscal 1961,
including studies of various functions in the Office of Personnel. A
major management survey is scheduled to get underway shortl}?" after
the start of flscal 1962. This wUl involve an extensive study of the
Coast Guard ^s systems of information on flnancial management.
The beneflts realized from management improvement have enabled
the Service to make more effective use of its manpower, facilities, and
equipment.




ADMINISTRATIVE REPORTS

223

United States Savings Bonds Division
Fiscal 1961 marked the twenty-sixth year of continuous sale of U.S.
savings bonds, a nonmarketable security sold in denominations as low
as $25. Series E and Series H are the only savings bonds currently
being sold. Series E bonds, which marked their twentieth anniversar}^ during the flscal year, have been on sale since May 1941,
while the sale of Series H bonds began in June 1952.
The primary responsibility of the U.S. Savings Bonds Division is to
promote the sale and retention of U.S. savings bonds and the sale of
savings stamps. Comparatively small in stafi', the Division concentrates its activities on planning and directing the sales promotional
efforts of a large corps of volunteers. These volunteers comprise
thousands of public-spirited men and women who serve as a sales promotional force and as issuing agents. Over the years they have been
primarily responsible for the success of the savings bond program.
Thousands of banks and other flnancial institutions sell savings
bonds without compensation. As a public service, private industry
flnances advertising time and space costs of the program, which amount
to an annual cost of more than $50 million. The promotional costs
of payroll savings campaigns in vaiious businesses and industries, as
well as the operational costs of the plans, are likewise borne by the
businessmen of the Nation. Thanks to this nationwide volunteer
support the promotional cost of the savings bond program to the
Government is only slightly over one dollar for every one thousand
dollars of E and H bonds sold.
For the average investor who deshes a riskless investment, savings
bonds have an advantage over marketable securities, since they are
free from m.arket fluctuations in price. After short initial holding
periods, an investor may redeem his bonds at prescribed redemption
values. This contract permitting him to obtain in cash the amount
of his original investment and any interest that might have accrued,
not only at maturity date but also throughout the life of the security,
is an important and valuable feature for many individual savers.
In this respect the savings bond is similar to a private savings
account. The purchaser of a savings bond, however, has the assurance that the investment return is guaranteed for the full term of
the bond, whereas the savings account interest or dividend rate may
be revised at the option of the savings institution. The graduated
interest return on savings bonds, depending upon length of retention,
was designed to encourage longer-term holdings. All E and H
bonds dated June 1, 1959, and thereafter pay 3% percent per annum
compounded semiannually if held to maturity. The initial maturity
term for the E bond is 7 years, 9 months, for the H bond, 10 years.
Series E bonds also are attractive to many investors in that payment
of income tax on interest accruals ma}^- be postponed until the bonds
are redeemed or reach flnal maturity, whichever is earlier. With the
10-year maturity extension which has been granted to all E bonds, and
a second 10-year extension given to bonds bought between May 1941
and May 1949, many holders can postpone redemptions until a time
of life when they may be in a lower tax bracket, or not subject to any
tax.




224

1961 REPORT OF THE SECRETARY OF THE TREASURY

In addition, since January 1, 1960, holders of all outstanding Series
E and J bonds and certain Series F bonds have been permitted to
exchange them for current income Series H bonds. Payment of taxes
on the interest increments on the old bonds may be deferred until the
H bonds issued in exchange are flnally redeemed, or until the taxable
year of flnal maturity, whichever is earlier.
Another protective feature of savings bonds is that they are issued
in registered form only and are replaced by the Treasury in the event
of destruction or loss.
Since its inception the savings bond program has proved to be a vital
ins trument in promoting nationwide thrift and regular saving on the
p a r t of millions of Americans. The payroll savings plan has been
particularly effective in developing the thrift habit among the Nation's
wage earners and in channeling systematic savings into Series E bonds,
the most popular Government security. More than eight million
Americans at work in industry and Government participate in payroll savings programs. They account for more than 40 percent of
current E and H bond purchases.
The best assurance of sound Government flnance is widespread
ownership of the public debt by genuine savers, outside the commercial
banking system. The sale of E and H bonds to persons who buy them
with money saved from earnings is the most successful wa}^ the Treasury has found during the postwar period to increase the amount of the
debt in the hands of long-term savers. Such sales contribute to the
maintenance of price stability and a sound dollar.
At the close of flscal 1961, Seiies E and H bonds outstanding reached
more than $43.8 billion, a $13.5 billion increase in this program over
the amount of E bonds outstanding at the end of calendar 1946.
They now represent 15 percent of the total public debt outstanding
as compared with 12 percent in December 1946. Of the $43.8 billion
outstanding on June 30, 1961, $17.8 billion, or more than 40 percent,
are E bonds which have gone beyond tlieir flrst maturity of ten
years from issue date.
The E and H bond sales and redemption picture showed signiflcant
improvement in flscal 1961. The cash value of E and H bonds
outstanding, including the automatic accrual of interest on Series E
bonds, gained $1.1 billion during the year, the largest growth in any
one-year period since 1956. Total cash sales amounted to $4.5 billion
and were 4 percent above those in flscal 1960. Cash sales were 2
percent higher in the flrst half of flscal 1961 (July-December 1960)
and 5 percent more in the second half than sales in the corresponding
periods a year earlier. Moreover, from January-June 1961 the volume
of E and H bonds outstanding increased $668 million, which was
more than four times the increase during the same period in flscal
1960. Gross redemptions of the two series of $4.6 billion during
flscal 1961 represented the lowest amount in six years and were 16
percent below redemptions in flscal 1960.
The sale of savings stamps also continues to be an important part
of the Treasury's efforts to promote thrift and channel individuals'
savings into Government bonds. Through their purchase students
and other savers are able to buy savings bonds on the installment
plan. The sale of savings stamps in flscal 1961 amounted to $18.4




ADMINISTRATIVE REPORTS

225

million, 5 percent below the preceding year.
represented purchases of 107 million stamps.

The sales volume

Management improvement

Headed by a National Director and an Assistant National Director,
the U.S. Savings Bonds Division is composed of three principal
branches: Sales, Planning, and Advertising and Promotion. The
chiefs of these three branches, together with the National Director and
Assistant National Director, comprise the Division's management
committee whose main purpose is the improvement of services by
the Division.
Constant attention is given to improvement in operations, organization, and the use and distribution of manpower. During the year
5 positions were abolished with savings of $33,200 annually.
Stricter controls over the distribution of electrotype plates, which
commenced during 1960, have been expanded through a survey of
industrial publications to determine whether some could use proofs
instead of electrotype plates to reproduce savings bonds advertisements in their publications. This resulted in a further saving of
about $3,500 a year.
The Division was able to expand its promotional exhibits without
cost through the cooperation of private industry and of three other
Government agencies. Of particular note was the acquisition of two
exhibits illustrating the Government's satellite program, presented
by a private corporation for use in savings bonds promotion.
Consolidation and relocation of fleld offices in the State of New
York and the District of Columbia, instigated by the Division,
resulted in a reduction of 2,259 square feet of rented space, with
consequent savings to the Government.
The Sales Branch developed and adopted a uniform training program for newly appointed field personnel and an intensive refresher
course in the promotion of the payroll savings plan for selected personnel already on the rolls. In addition the new semiannual reports
required of all field representatives have resulted in a marked improvement in the number and quality of sales calls made by the field force.
United States Secret Service
The major functions of the United States Secret Service are the
protection of the President of the United States and members of his
immediate famUy, the President-elect, and 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, jointstock land banks, and national farm loan associations. These and
other duties of the Secret Service are defined in section 3056 of Title
18, United States Code.
Management improvement

A system of classification and coding of handwriting was developed
and placed in use in the Forgery Section of the Secret Service headquarters as an aid in associating forgeries of common authorship and




226

1961 REPORT OF THE SECRETARY OF THE TREASURY

identifying multiple and interstate forgers. With the cooperation of
the Treasury Department's Office of Management and Organization
a study is underway to determine the feasibility of adapting the system to automatic data processing, and trial runs have been made on
equipment made available by other Treasury activities. These tests
give promise of successful adaptation of the system to electronic
equipment. The result expected from this program is faster identification of professional interstate forgers and saving in time in field
investigations.
Conferences were held by representatives of the Secret Service and
of the Post Office Department with the objective of identifying measures which could be taken to reduce the number of Treasury checks
stolen from the maU and then forged and cashed. As a result of these
conferences, the Post Office Department has inaugurated procedures
designed to reduce the incidence of check thefts from the maUs.
Several steps were taken with a view to eliminating nonessential
paperwork. Multiple copy statistical control forms relating to certain
types of investigations were reduced to an original copy only and a
procedure was adopted which saves time in the compilation of statistics. In addition, a statistical report for each field district, previously
prepared and distributed monthly, is now prepared quarterly. The
time saved allows the Statistical Section to absorb, without additional
personnel, the increased worldoad caused by the rise in the number
of investigations being handled by the Secret Service.
A revision was completed of the manual, ^^Production oj^ Currency
and Other Obligations oj the United States.^' This manual is used to
familiarize investigative personnel with the various processes involved
in the manufacture of currency and coins. Such information is vital
for the effective performance of duties relating to suppression of
counterfeiting. The revised manual gives a thorough and up-to-date
account of methods used.
Presidential protection

During the year the Secret Service was heavily engaged in activities
relating to Presidential protection. A special detail of special agents
was assigned to guard President-elect Kennedy immediately following
his election to the Presidency. Following the inauguration, the, responsibUity for protecting President Kennedy and his famUy then was
shifted to the regular White House DetaU of the Secret Service and
a detaU of agents was assigned to Vice President Johnson when
requested.
In addition to protection provided the President while in residence
and during trips within the United States, special agents made advance
security arrangements and protected the President and Vice President
on trips abroad. These included trips of the President to Canada,
Paris, Vienna, and London, and trips of the Vice President to Africa,
Europe, and the Far East.
Investigations concerning the protection of the President increased
from 573 in 1960 to 870 in 1961, a rise of 51.8 percent. There were
65 such cases pending at the close of the year, which was 36 more
than at the end of fiscal 1960. Arrests resulting from investigation of
these cases increased from 65 to 86, or by 32.3 percent.




ADMUSriSTRATIVE REPORTS

227

One of these investigations was the so-called ^'human bomb" case.
On December 15, 1960, llichard Paul Pavlick was arrested in West
Palm Beach, Fla., for threatening the hfe of President-elect Kennedy.
Pavlick planned to make himself a '^himian bomb,'-^ get as close to
the President-elect as he could, detonate the explosive, and destro}^
himself along with any others who might be in the vicinity. When
arrested, seven sticks of d}mamite, detonators, wires, and related
items were found in his car. In a search of his living quarters, three
additional sticks of dynamite were found. The intended scene of
this carefully planned assassination attempt was the church in West
Palm Beach attended by the President-elect. Pavlick was held in
$100,000 bond. On January 27, 1961, he was ordered committed
to the Medical Center for Federal Prisoners.
Enforcement activities

Counterfeiting investigations increased 58.9 percent and Secret
Service special agents seized a total of $2,179,146 in counterfeit
notes, an increase of 400.8 percent compared with seizures in 1960.
Of the amount seized in 1961, $1,632,070 was captured before it could
be placed in circulation and $547,076 was passed on merchants and
cashiers. Representative value of counterfeit coins seized was
$22,297, an increase of 112.6 percent over 1960. Of this amount,
$16,502 was passed.
In 1961 there was a 39.3 percent rise in new issues of counterfeit
notes, continuing the trend in 1960, in which year there was an increase of 25.6 percent over 1959. Arrests for violating the counterfeiting laws totaled 595, an increase of 44.4 percent over 1960.
The following are representative of some of the counterfeiting
investigations this 3^ear:
On July 19, 1960, the manufacturer of counterfeit $20 notes was
arrested in Youngstown, Ohio. His arrest followed extensive undercover work and he was taken into custody while in the act of making
plates for additional counterfeit notes. The first of the counterfeit
notes appeared June 11, 1960, in West Virginia and circulation of
the notes spread quickly to other areas. There were 32 additional
arrests made for dealing in these counterfeits. On September 15,
1960, the manufacturer was sentenced to 10 years.
On May 16, 1961, nine men were "sentenced in Springfield, Mo.,
for the manufacture and distribution of counterfeit $20 and $100
notes. The leader of the ring, Loren Baxter Hamby, was sentenced
to 20 years imprisonment and the others received sentences ranging
from five to fifteen years. The convictions climaxed months of
investigation and undercover work by Secret Service agents and
stamped out a counterfeiting operation with the capacity to print
one million dollars in currency a week. The members of this gang
had expressed fear of infiltration by an undercover agent and after
their arrests were stunned by the disclosure that one young man,
accepted as a trusted accomplice, turned out to be a Secret Service
agent. In addressing the jury at the end of the trial, the Federal
District Judge commented that the agent was ''a brave man, exceedingly brave, a dedicated public servant. He has demonstrated
more courage than I ever had."




228

1961 REPORT OF THE SECRETARY OF THE TREASURY

In New York City on April 13, 1961, two men were arrested for
negotiation of $194,000 in counterfeit U.S. Treasury note coupons at
a Long Island bank. A third man, an employee of the bank, was
arrested on April 19, in Tampa, Fla. He had conspired with the
other two to negotiate the counterfeit coupons and arranged to
facilitate the transaction. The defendants in this case were convicted on June 30, 1961. The principal has been sentenced to 10
years and his two codefendants to 3 years and 15 months, respectively.
One of them was also identified with the extensive passing of counterfeit notes in the East.
On December 3, 1960, three men were arrested in Union City, N . J.,
for making and distributing counterfeit $20 notes. They are awaiting
trial. These notes first appeared in circulation in New York City on
October 1, 1960. By tracing purchases of the type of paper on which
the notes were printed, the site of the plant was located, and after
a period of surveillance, a raid was made and the three men arrested.
Paraphernalia used in printing these notes were seized. In addition
to the three principals, about 100 others have been arrested for distributing and passing these $20 notes, which have circulated heavily
along the East Coast from Massachusetts to Florida.
The following table summarizes seizures of counterfeit money
during the fiscal years 1960 and 1961.
Counterfeit money seized, fiscal years 1960 and 1961
N o t e s a n d coins

Counterfeit a n d altered n o t e s :
After circulation
Before circulation __
Total .
Counterfeit coins seized:
After circulation
Before circulation

—-

Total
G r a n d total

-__

._

--

1960

1961

$245,048.10
190,106. 00

$547,076.50
1,632,070.00

123.3
758.5

435,154.10

2,179,146. 50

400.8

9,588. 73
896. 96

16,501.94
5,795. 20

72.1
546.1

Percentage
increase

10,485.69

22,297.14

112.6

445,639.79

2,201,443. 64

394.0

During the fiscal year 1961, the Secret Service received 36,221
cases involving the forgery of Government checks, a decline of 8
percent compared with 1960. In the final quarter of the year, forgeries
of Government checks began to rise sharply, with 10,115 received
compared with 8,565 received in the quarter preceding. Agents
completed investigation of 34,846 check forgery cases. There had
been 22,815 forged check cases on hand at the beginning of the year,
and at its close there was a backlog of 24,190, an increase of 6 percent.
Forged checks investigated had a representative value of $3,333,307.
There were 2,967 arrests for forging Government checks, a decrease
of 8.7 percent compared with 1960.
An interstate multiple check forger was arrested in Chicago on
August 5, 1960. He was identified as the forger of 70 Treasury checks
and, when arrested, had more than $16,000 in cash in his possession.
He had been released from prison approximately a year before, after
serving five years on forgery charges. He was sentenced on October 3,
1960, to twelve years.




ADMINISTRATIVE REPORTS

229

On October 5, 1960, a serviceman stationed at Fort Bragg, N . C ,
stole 105 blank Treasur}'^ checks from the Finance Office. He fraudulently issued and cashed 22 of the checks and was arrested while
attempting to cash another check. Seventy-six of the blank checks
were recovered. He was sentenced on May 26, 1961, to five years.
Between August 1960 and January 1961, eleven persons were
arrested for conspiracy to steal, forge, and cash U.S. Treasurer's
checks. They were responsible for over 125 forged checks negotiated
in Ohio, Kentucky, California, Mississippi, Tennessee, and Florida.
All were convicted and received sentences ranging up to six years
imprisonment.
Investigations concerning the forgery of U.S. savings bonds increased nearl,y 100 percent, cases received in fiscal 1961 totaling
10,402 compared with 5,218 for the previous year. At the close of
1961, there were 7,908 such cases pending, an increase of 55 percent
over the number pending a year earlier. There were 75 offenders
arrested for bond forgeries compared with 58 arrests the year before.
Investigations by the Secret Service reveal that thousands of dollars
in U.S. savings bonds are being stolen in burglaries and disposed of
through fences to the negotiators of the bonds. In most cases the
forgers have used counterfeit or fraudulently obtained automobile
drivers' licenses as identification, and, as a further subterfuge to
establish a rating at the bank, have opened small savings accounts.
Through the cooperation of the American Bankers Association and
State bank associations, banks throughout the country have been
alerted and cautioned to observe requirements for identification
before negotiating bonds.
In Newark, N.J., on November 18, 1960, thirteen persons responsible
for the forgery of about $250,000 in savings bonds were sentenced
to terms in prison ranging up to 15 3^ears.
On November 10, 1960, also in Newark, N.J., an individual was
arrested and charged with conspiracy to forge and negotiate U.S.
savings bonds. When arrested at the airport, he had 46 bonds in his
possession, with face value of $15,000, together with counterfeited
drivers' licenses made out in the names of the owners of the registered
bonds.
In Buffalo, N.Y., on January 9, 1961, three men and a woman were
arrested after the woman had attempted to negotiate nineteen $100
savings bonds at two different banks. All banks in the area were
alerted and when the woman made another attempt to negotiate the
bonds, she was arrested by Secret Service agents. Later her three
accomplices were identified and arrested.
On January 25, 1961, a notorious bond forger was arrested at
Laredo, Tex., when an agent who had been searching for him,
recognized him in a hotel coffee shop. He had cashed $67,000 in
stolen bonds and had seven $1,000 bonds in his possession. He has
been sentenced to 10 years in prison.
On June 28, 1961, two men were arrested at Niagara FaUs, N.Y.,
after they had negotiated $4,000 in stolen and forged savings bonds.
One was arrested while attempting to negotiate $2,400 in additional
bonds. The other attempted to escape and was arrested as a result
of a road block. These men used the typical procedure for negotiating
bonds. They opened a small savings account and rented a safety




230

1961 REPORT OF THE SECRETARY OF THE TREASURY

deposit box and for identification presented a counterfeit automobile
operator's license in the name of the registered owner of the stolen
bonds. They allegedly obtained the bonds through underworld
sources acting as brokers for bonds stolen in various parts of the
country.
Cases of all t3^pes received for investigation aggregated 61,538,
an increase of 13.5 percent over the previous 3^ear. At the beginning
of fiscal 1961 there were 28,921 cases pending and although 56,902
cases were closed, there were 33,557 cases pending at the end of the
year.
Secret Service agents arrested a total of 3,806 offenders in 1961
compared with 3,869 for the previous year. There were 3,444 convictions, representing 99 percent of all cases prosecuted, some of which
had been pending from 1960.
The following tables show comparative case and arrest statistics
for the fiscal years 1960 and 1961.
Criminal and noncriminal cases received, closed, and pending, fiscal years 1960
and 1961
Percentage
increase, or
decrease (—)

Cases
Keceived:
Pr otecti ve r esear ch _
_.
Counterfeiting
Forged Government checks.
Forged U.S. savings bonds.,
Miscellaneous criminal
Miscellaneous noncriminal..

573
7,118
39,358
5,218
383
1,575

870
11,308
36,221
10,402
367
2,370

51.8
58.9
-8.0
99.3
-4.2
60.5

_-.

54,225

61, 538

13.5

Closed:
Protective research
Counterfeiting
Forged Government checks.
Forged U.S. savings bonds.,
Miscellaneous criminal
Miscellaneous noncriminal.

580
7,130
41, 202
3,750
390
1,767

834
11,004
34,846
7,603
392
2,223

43.8
54.3
-15.4
102.7
.5
25.8

54,819

56,902

3.8

651
22,815
5,109
126
191

65
955
24,190
7,908
101
338

124.1
46.7
6.0
54.8
-19.8
77.0

28,921

33,557

16.0

Total

_-.-

Total
Pending end of fiscal year:
Protective research
Counterfeiting
Forged Government checks.
Forged U.S. saving bonds..
Miscellaneous criminal
Miscellaneous noncriminal.
TotaL._

Number of arrests fiscal years 1960 and 1961
Offenses

1960

1961

Percentage
increase, or
decrease (—)

•

Counterfeiting
Forged Government checks
Stolen or forged U.S. savings bonds
Protective research
Miscellaneous
Total..




-._..

.-

412
3,250
68
65
84

595
2,967
75
86
83

44 4
—8 7
29 3
32.3
—1.2

3,869

3,806

—1.6




EXHIBITS




Public Debt Operations, Calls of Guaranteed Obligations, Regulations,
and Legislation
Treasury Certificates of Indebtedness, Treasury Notes, and Treasury Bonds
Offered and Allotted
EXHIBIT 1.—Treasury certificates of indebtedness
A Treasury circular containing a representative certificate offering during the
fiscal year 1961 is reproduced in this exhibit. The circular pertaining to the other
cash offering is similar in form and therefore is not reproduced in this report.
However, the essential details for the two issues are summarized in the first table
following the circular and the final allotments of new certificates issued for cash
are shown in the second table.
DEPARTMENT CIRCULAR NO. 1048. PUBLIC DEBT
TREASURY

DEPARTMENT,

Washington, August 1, 1960.
I. OFFERING OF CERTIFICATES

1. The Secretary of the Treasury, pursuant to the authority of the Second
Liberty Bond Act, as amended, invites subscriptions, subject to allotment, at par
and accrued interest, from the people of the United States for certificates of
indebtedness of the United States, designated 3)i percent Treasury certificates of
indebtedness of Series C-1961. The amount of the offering under this circular
is $7,750,000,000, or thereabouts. Treasury notes of Series C-1960, maturing
August 15, 1960, will be accepted at par in payment or exchange, in whole or in
part, for the new certificates subscribed for, to the extent such subscriptions are
allotted by the Treasury. The books will be open only on August 1 and August 2,
1960, for the receipt of subscription for this issue.
2. The Secretary of the Treasury, on behalf of the Federal National Mortgage
Association, offers to purchase on August 15, 1960, at par and accrued interest.
Federal National Mortgage Association 3^^ percent notes of Series ML-1960-A,
dated January 20, 1958, due August 23, 1960, to the extent to which subscriptions
from the holders thereof to Treasury certificates of indebtedness of Series C-1961
hereunder are alloted by the Treasury, and the proceeds from the par amount
of such notes are applied to the payment, in whole or in part, of the certificates
in accordance with paragraph 2 of section IV of this circular. Tenders of the
Federal National Mortgage Association 3^^ percent notes of Series ML-1960-A
for that purpose are invited.
II. DESCRIPTION OF CERTIFICATES

1. The certificates will be dated August 15, 1960, and will bear interest from
that date at the rate of 3K percent per annum, payable on a semiannual basis on
February 1 and August 1, 1961. They will mature August 1, 1961, and 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.




233

234

1961 REPORT OF THE SECRETARY OF THE TREASURY

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. T h e certificates will be subject to the general regulations of t h e Treasury
D e p a r t m e n t , now or hereafter prescribed, governing United States certificates.
III. SUBSCRIPTION AND ALLOTMENT

1. Subscriptions will be received at the Federal Reserve Banks and branches
and a t the Office of t h e Treasurer of the United States, Washington. Only the
Federal Reserve Banks and the Treasury D e p a r t m e n t are authorized to act as
official agencies. Commercial banks, which for this purpose are defined as b a n k s
accepting demand deposits, m a y submit subscriptions for account of customers.
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 restricted in each case to an a m o u n t not exceeding 50 percent of t h e
combined capital, surplus, and undivided profits of the subscribing bank. Subscriptions from commercial and other banks for their own account, federally insured savings and loan associations, States, political subdivisions or instrumentalities thereof, public pension and retirement and other public funds, international
organizations in whicb the United States holds membership, foreign central
banks and foreign states, dealers who make primary markets in Government
securities and report daily to the Federal Reserve Bank of New York their positions with respect to Government securities and borrowings thereon, Governm e n t investment accounts, and the Federal Reserve Banks will be received without deposit. Subscriptions from all others must be accompanied by p a y m e n t
(in cash or in Treasury notes of Series C-1960, maturing August 15, 1960, at par,
or Federal National Mortgage Association notes of Series M L - 1 9 6 0 - A tendered
for purchase under p a r a g r a p h 2 of section I, hereof, at par) of 2 percent of t h e
a m o u n t of certificates applied for, not subject to withdrawal until after allotment.
Following allotment, any portion of t h e 2 percent p a y m e n t in excess of 2 p e r c e n t
of the a m o u n t of certificates allotted m a y be released upon the request of the
subscribers.
2. All subscribers are required to agree not to purchase or to sell, or to m a k e
any agreements with respect to the purchase or sale or other disposition of any
certificates of this issue, until after midnight August 2, 1960.
3. Commercial banks in submitting subscriptions will be required to certify
t h a t they have no beneficial interest in any of the subscriptions t h e y enter for t h e
account of their customers, and t h a t their customers have no beneficial interest
in the b a n k s ' subscriptions for their own account.
4. The Secretary of the Treasury reserves the right to reject or reduce a n y
subscription, to allot less t h a n the a m o u n t of certificates applied for, and to make
different percentage allotments to various classes of subscribers; a n d any action
he m a y t a k e in these respects shall be final. Subject to these reservations, all
subscriptions from States, political subdivisions or instrumentalities thereof,
public pension and retirement and other public funds, international organizations
in which the United States holds membership, foreign central banks a n d foreign
states. Government investment accounts, and the Federal Reserve Banks, will
be allotted in full. The basis of t h e allotment will be publicly announced, a n d
allotment notices will be sent out p r o m p t l y upon allotment.
IV. PAYMENT

1. P a y m e n t a t p a r and accrued interest, if any, for certificates allotted hereu n d e r m u s t be made or completed on or before August 15, 1960, or on later allotm e n t . I n every case where p a y m e n t is not so completed, the p a y m e n t with
application up to 2 percent of the a m o u n t of certificates allotted shall, upon
declaration made b y t h e Secretary of the Treasury in his discretion, be forfeited
to the United States. P a y m e n t m a y be made for any certificates allotted hereunder in cash or by exchange of Treasury notes of Series C-1960, maturing August 15,
1960, which will be accepted a t par. Where p a y m e n t is made with Treasury
notes of Series C-1960, coupons d a t e d August 15, 1960, should be detached from
such notes by holders and cashed when due.
2. I n addition, p a y m e n t m a y be made for any certificates allotted hereunder
with the proceeds of the p a r a m o u n t of Federal National Mortgage Association
notes of Series M L - 1 9 6 0 - A tendered for purchase in accordance with paragraph
2 of section I of this circular. Federal National Mortgage Association notes




EXHIBITS

235

of Series M L - 1 9 6 0 - A tendered for purchase must have coupons dated August
23, 1960, attached, and p a y m e n t will be made at par and accrued interest to
August 15, 1960. Accrued interest from February 23, 1960, to August 15, 1960,
on the Series M L - 1 9 6 0 - A notes ($17.31944 per $1,000) will be paid following
acceptance of the notes.
V. GENERAL

PROVISIONS

1. As fiscal agents of the United States, Federal Reserve Banks are authorized
and requested to receive subscriptions, to make allotments on the basis and up to
the a m o u n t s indicated by the Secretary of the Treasury to the Federal Reserve
Banks of the respective districts, to issue allotment notices, to receive p a y m e n t
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 a t any time, or from time to time, precribe 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

614359—62

16




to
CO

CO
Ol

Summary of information pertaining to Treasury certificates of indebtedness issued during the fiscal year 1961
Department
ch-cular
Date of
prehminary announcement
Number
Date

1960
July 28

1048

1961
Apr. 27

1060

1960
Aug. 1
1961
Mayl

Concurrent
offering,
circular
number

Certificates of indebtedness offered for cash

Allotment
Date sub- payment
Date of scription date on
books or before
matuiity
closed
(oron
later
allotment)

^M percent Series C-19611

1960
Aug. 15

1961
Aug. 1

1960
Aug. 2

1960
Aug. 15

1061 3 percent Series A-1962 2__

1961
May 15

1962
May 15

1961
May 1

1961
May 15

1049

1 See Department Circular No. 1048, secs. I l l and IV, in this exhibit for provisions
for subscription and payment. Holders of i^A percent Treasury notes of Series C-1960,
which matured August 15, 1960, were not offered preemptive rights to exchange their
holdings for the new certificates. Paymient for cash subscriptions allotted could be
made In whole or in part in cash or by exchange at par of the notes of Series C-1960; or
with the proceeds of the par amoimt of SH percent Federal National Mortgage Association notes of Series ML-1960-A which matured August 23,1960. Payment by credit
on Treasury tax and loan accounts was not permitted.




Date of
issue

O
S3

2 Holders of 4% percent Treasury certificates of indebtedness of Series B-1961, and
35^ percent Treasury notes of Series B-1961, both of which matured May 15,1961, were
not offered preemptive rights to exchange their holdings for the new certificates. Payment for cash subscriptions allotted could be ma,de in whole or in part in cash or by
exchange at par of the certificates of Series B-1961 or the notes of Series B-1961. Coupons dated May 15, 1961, were detached from the maturing securities by holders for
payment when due. Payment by credit in Treasury tax and loan accounts was not
permitted.

O

w
o

>
O

fel

>

d

237

EXHIBITS

Allotments of Treasury certificates of indebtedness issued during the fiscal year 1961,
by Federal Reserve districts
[In thousands of doUars]
3^^ percent
Series C-1961
certificates 12

Federal Reserve district
Boston
New York
Philadelphia
Cleveland
Richmond
Atlanta
Chicago.St. Louis.Minneapolis
Kansas Cityl
Dallas
San Francisco
Treasury . _-

_

_
.

—' _

__

_

_
-- -- - _- - -

-_

Total certific ite allotments-

_

.._

-

3 percent
Series A-1962
certificates 13

$55,596
6,539,954
44,307
205,999
77,749
80,483
296,176
71,876.
34,673
80,937
44,713
286,815
9,498
4 7,828,775

$130,589
3,416,205
105,189
194,922
120,480
127,309
505,935
83,556
56,051
114,520
119.028
501,479
33,955
5 5,509,218

1 Subscriptions from States, political subdivisions or instrumentalities thereof, public pension and retirement and other pubUc funds, international organizations in which the United States holds membership,
foreign central banks and foreign states, Govemment investment accounts, and the Federal Reserve Banks
were allotted in full.
2 Subscriptions from subscribers other than those shown in footnote 1 were allotted 13 percent.
3 Subscriptions from subscribers other than those shown in footnote 1 were allotted 27 percent with subscriptions for $25,000 or less allotted in full and those for more than $25,000 allotted not less than $25,000.
* Includes $2,078 million for cash (mcluding proceeds from the par amount of Federal National Mortgage
Association 3H percent notes of Series ML-1960-A) and $5,751 million for Treasury notes of Series C-1960.
6 Includes $3,728 million for cash, $54 miUion for Treasury certificates of indebtedness of Series B-1961,
and $1,727 mUUon for Treasury notes of Series B-1961.

EXHIBIT 2.—Treasury notes
Two Treasury circulars, one containing an exchange and the other a cash note
offering during the fiscal year 1961, are reproduced in this exhibit. The circular
pertaining to the other note offering during 1961 is similar in form and therefore
is 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. 1053. PUBLIC DEBT
TREASURY DEPARTMENT,

Washington, October 31, 1960.
I. O F F E R I N G OF NOTES

1. The Secretary of the Treasury, pursuant to the authority of the Second
Liberty Bond Act, as amended, invites subscriptions, at par, from the people
of the United States for notes of the United States, designated 3)4 percent Treasury
notes of Series F-l 962 in exchange for which any of the following securities,
singly or in combinations aggregating $1,000 or multiples thereof, may be tendered:
4% percent Treasury certificates of indebtedness of Series C-1960, maturing
November 15, 1960
2y8 percent Treasury bonds of 1960, maturing November 15, 1960
The amount of the offering under this circular will be limited to the amount of
maturing certificates and bonds tendered in exchange and accepted. The books
will be open only on October 31 through November 2, 1960, 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 Sji percent Treasury bonds of 1966, which offering is set forth in Department
Circular No. 1054, issued simultaneously with this circular.




238

1961 REPORT OF THE SECRETARY OF THE TREASURY
II. DESCRIPTION OF NOTES

1. The notes will be dated November 15, 1960, and will bear interest from that
date at the rate of 3}i percent per annum, payable on a semiannual basis on February 15 and August 15, 1961, and on February 15, 1962. They will mature February 15, 1962, and will not be subject to call for redemption prior to maturity.
2. The income derived from the notes is subject to all taxes imposed under the
Internal Revenue Code of 1954. The notes are subject to estate, inheritance,
gift, or other excise taxes, whether Federal or State, but are exempt from all
taxation now or hereafter imposed on the principal or interest thereof by any
State, or any of the possessions of the United States, or by any local taxing
authority.
3. The notes will be acceptable to secure deposits of public moneys. They will
not be acceptable in payment of taxes.
4. Bearer notes with interest coupons attached, and notes registered as to principal and interest, will be issued in denominations of $1,000, $5,000, $10,000,
$100,000, $1,000,000, $100,000,000, and $500,000,000. Provision will be made
for the interchange of notes of different denominations and of coupon and registered notes, and for the transfer of registered notes, under rules and regulations
prescribed by 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, D.C. 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 November 15, 1960, or on later allotment, and may be made only in the securities of
the two issues enumerated in section I hereof, which will be accepted at par, and
should accompany the subscription. Coupons dated November 15, 1960, should
be detached from the maturing securities in coupon form by holders and cashed
when due. In the case of registered bonds, final interest due on November 15,
1960, will be paid by check drawn in accordance with the assignments on the
bonds surrendered, or by credit in any account maintained by a banking institution with the Federal Reserve Bank of its district,
V. ASSIGNMENT OF REGISTERED BONDS

1, Treasury bonds of 1960 in registered form tendered in payment for notes
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 surrendered with the subscription to a Federal Reserve
Bank or branch or to the Office of the Treasurer of the United States, Washington,
D.C. The bonds must be delivered at the expense and risk of the holder. If the
notes are desired registered in the same name as the bonds surrendered, the assignment should be to "The Secretary of the Treasury for exchange for 3J4 percent
Treasury notes of Series F - l 962"; if the notes are desired registered in another
name, the assignment should be to ''The Secretary of the Treasury for exchange
for Syi percent Treasury notes of Series F-l962 in the name of
J ' ; if
notes in coupon form are desired, the assignment should be to "The Secretary of
the Treasury for exchange for 3}^ percent Treasury notes of Series F - l 962 in
coupon form to be delivered to
".




EXHIBITS

239

VI. GENERAL PROVISIONS

1. As fiscal agents of t h e United States, Federal Reserve Banks are authorized
and requested t o receive subscriptions, t o make allotments on t h e basis a n d u p to
t h e a m o u n t s indicated b y t h e Secretary of t h e Treasury t o t h e Federal Reserve
Banks of t h e respective districts, to issue allotment notices, to receive p a y m e n t
for notes allotted, to m a k e delivery of notes on full-paid subscriptions allotted,
a n d t h e y m a y issue interim receipts pending delivery of t h e definitive notes.
2. T h e Secretary of t h e Treasury m a y a t a n y time, or from time t o time, prescribe supplemental or a m e n d a t o r y rules and regulations governing t h e offering,
which will be communicated p r o m p t l y t o t h e Federal Reserve Banks.
ROBERT B . ANDERSON,

Secreiary of the Treasury.
D E P A R T M E N T C I R C U L A R N O . 1057. P U B L I C

DEBT

TREASURY DEPARTMENT,

Washington, February 6, 1961.
I. O F F E R I N G O F NOTES

1. T h e Secretary of t h e 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, subject to allotment, a t p a r
and accrued interest, from t h e people of t h e United States for notes of t h e United
States, designated 3)^^ percent Treasury notes of Series G-1962. T h e a m o u n t of
t h e off'ering under this circular is $6,900,000,000, or thereabouts. Treasury certificates of indebtedness of Series A-1961, m a t u r i n g F e b r u a r y 15, 1961, will be
accepted a t par in p a y m e n t or exchange, in whole or in part, for t h e notes subscribed for, to t h e extent such subscriptions are allotted b y t h e Treasury. T h e
books will be open only on F e b r u a r y 6, 1961, for t h e receipt of subscriptions for
this issue.
II. DESCRIPTION OF NOTES

1. T h e notes will be dated F e b r u a r y 15, 1961, a n d will bear interest from t h a t
d a t e a t t h e r a t e of 3}1 percent per a n n u m , payable semiannually on August 15,
1961, a n d F e b r u a r y 15 a n d August 15, 1962. They will m a t u r e August 15, 1962,
a n d will not be subject to call for redemption prior to m a t u r i t y .
2. T h e income derived from t h e notes is subject t o all taxes imposed under t h e
I n t e r n a l Revenue Code of ] 954. T h e notes are subject to estate, inheritance,
gift, or other excise taxes, whether Federal or State, b u t are exempt from all t a x ation now or hereafter imposed on t h e principal or interest thereof by a n y State,
or a n y of t h e possessions of t h e United States, or by a n y local taxing a u t h o r i t y .
3. T h e notes will be acceptable to secure deposits of public moneys. T h e y
will n o t be acceptable in p a y m e n t of taxes.
4. Bearer notes with interest coupons attached, a n d notes registered as t o
principal a n d interest, will be issued in denominations of $1,000, $5,000, $10,000,
$100,000, $1,000,000, $100,000,000, a n d $500,000,000. Provision will be m a d e for
t h e interchange of notes of different denominations a n d of coupon a n d registered
notes, a n d for t h e transfer of registered notes, under rules a n d regulations prescribed b y t h e Secretary of t h e Treasury.
5. T h e notes 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 notes.
III. SUBSCRIPTION AND ALLOTMENT

1. Subscriptions will be received a t t h e Federal Reserve B a n k s a n d branches
and a t t h e Office of t h e Treasurer of t h e United States, Washington. 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. Commercial banks, which for this purpose are defined as b a n k s
accepting d e m a n d deposits, m a y submit subscriptions for account of customers
provided t h e names of t h e customers are set forth in such subscriptions. Others
t h a n commercial b a n k s will not be p e r m i t t e d t o enter subscriptions except for
their own account. Subscriptions from commercial banks for their own account
will be restricted in each case t o an a m o u n t not exceeding 50 percent of t h e
combined capital, surplus, a n d undivided profits of t h e subscribing b a n k . Subscriptions will be received without deposit from commercial a n d other b a n k s for




240

1961 REPORT OF THE .SECRETARY OF THE TREASURY

their own account, federally insured savings and loan associations. States, political
subdivisions or instrumentalities thereof, public pension and retirement and other
public funds, international organizations in which the United States holds membership, foreign central banks and foreign states, dealers who make primary
markets in Government securities and report daily to the Federal Reserve Banks
of New York their positions with respect to Government securities and borrowings
thereon. Government investment accounts, and the Federal Reserve Banks.
Subscriptions from all others must be accompanied by payment (in cash or in
Treasury certificates of indebtedness of Series A-1961, maturing February 15,
1961, at par) 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
payment in excess of 2 percent of the amount of notes allotted may be released
uppn the request of the subscribers.
2. All subscribers are required to agree not to purchase or to sell, or to make
any agreements with respect to the purchase or sale or other disposition of any
notes of this issue, until after midnight February 6, 1961.
3. 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.
4. The Secretary of the Treasury reserves the right to reject or reduce any
subscription, to allot less than the amount of notes 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. Subject to these reservations, all
subscriptions from States, political subdivisions or instrumentalities thereof,
public pension and retirement and other public funds, international organizations
in which the United States holds membership, foreign central banks and foreign
states. Government investment accounts, and the Federal Reserve Banks will
be allotted in full. 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, if any, for notes allotted hereunder
must be made or completed on or before February 15, 1961, 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.
Payment may be made for any notes allotted hereunder in cash or by exchange
of Treasury certificates of indebtedness of Series A-1961, maturing February 15,
1961, which will be accepted at par. Where payment is made with Treasury
certificates of indebtedness of Series A-1961, coupons dated February 15, 1961,
should be detached from such certificates 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.




DOUGLAS DILLON,

Secretary of the Treasury.

Summary of information pertaining to Treasury notes issued during thefiscal year 1961
Department
circular
Date of
preliminary announceNumber
ment
Date

1960
Oct. 27

1053

1960
Oct. 31

1961
Feb. 2

1057

1961
Feb. 6

Apr. 27

- 1061

May 1

Concurrent
offering,
circular
number

1054

Treasury notes offered for exchange or for cash

3M percent Series F-1962 issued in exchange for—
4 ^ percent Series C-1960 certificates maturing Nov. 15,1960, 2\i percent Treasury bonds
of 1960 maturing Nov. 15,1960.»
3M percent Series Q-1962«-

1060

33^ percent Series D-1963 3

1 See Department Circular No. 1053, secs. I l l and IV, in this exhibit, for provisions
for subscription and payment.
2 See Department Circular No. 1057, secs. I l l and IV, in this exhibit, for provisions
for subscription and payment. Holders of 4 J^ percent Treasury certificates of indebtedness of Series A-1961, which matured February 15, 1961, were not offered preemptive
rights to exchange their holdings for the new notes. Payment for cash subscriptions
allotted could be made in whole or in part in cash or by exchange at par of the certificates of Series A-1961. Payment by credit in Treasury tax and loan accounts was not
permitted.




Date of
issue

Allotment
Date sub- payment
Date of scription date on
books or before
maturity
(oron
closed
later
aUotment)

1960
Nov. 15

1962
Feb. 15

1960
Nov. 2

1960
Nov. 15

1961
Feb. 15

Aug. 15

1961
Feb. 6

1961
Feb. 15

May 15

1963
May 15

May 1

May 15

fel

!^
Ui

3 Holders of 4^i percent Treasury certificates of indebtedness of Series B-1961 and 3^^
percent Treasury notes of Series B-1961, both of which matured May 15, 1961, were
not offered preemptive rights to exchange their holdings for the new notes. Payment
for cash subscriptions allotted could be made in whole or in part in cash or by exchange
at par of the certificates of Series B-1961 or the notes of Series B-1961. Coupons dated
May 15,1961, were detached from the maturing securities by holders for payment when
due. Payment by credit in Treasury tax and loan accounts was not permitted.

to

bO

to

Allotments of Treasury notes issued during thefiscal year 1961, by Federal Reserve districts
[In thousands of dollars]

CO

334 percent Series F-1962 Treasury notes
issued in exchange for—
Federal Reserve district

4 ^ percent
2],i percent
Treasury
Series C-1960
certificates
bonds of 1960
maturing
maturing
Nov. 15,1960 1 Nov. 15, 1960 1

Oi

Z}4 percent
Series G-1962
Treasury
notes 2 3

3K percent
Series D-1963
Treasury
notes 2 *

Total issued

O
O

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

_
-

-

-

-

_-

--

-

_

—
-

Total note allotments
Maturing or redeemable securities:
E xchanged in concurrent offerings

$68, 474
1,686,170
23, 533
59,657
30,411
45, 062
157,161
70,892
31,947
41,814
22,060
185, 998
8,243

$42, 842
1, 657, 082
42, 041
93, 595
67, 462
79,996
263, 297
116, 864
63, 358
74, 764
40,101
120, 023
5,196

$111,316
7, 343, 252
65, 574
153, 252
97,873
125, 058
420, 458
187, 756
95,305
116, 578
62,161
306,021
13,439

$127, 426
5, 290, 367
88, 019
233,314
124, 425
126, 402
475, 089
98,188
72, 770
169, 910
120, 661
390,172
8,119

9, 098, 043

8 7,324,862

6,431,422

2, 666, 621

-

335,250

877, 860

1,213,110

Total exchanged
--Redeemed for cash or carried to matured debt
Total maturing securities

6, 766, 672
270, 534

3, 544, 481
262,002

10,311,153
532, 536

7,037,206

3,806,483

10,843, 689

-

> 3H percent Treasury bonds of 1966 also offered iu exchange for this security; see
exhibit 3.
2 Subscriptions from States, political subdivisions or instrumentaUties thereof,
public pension and retirement and other public funds, international organizations in
which the United States holds membership, foreign central banks and foreign states,
Government investment accounts, and the Federal Reserve Banks were allotted in full.
3 Subscriptions from subscribers other than those shown in footnote 2 were allotted
20 percent with subscriptions for $10,000 or less being allotted in full and those for more
than $10,000 being allotted not less than $10,000.




$77,230
, 426, 529
44,192
139, 435
92, 938
70, 728
302, 478
47, 373
38,829
124, 763
65, 647
183, 635
139,031
6 2, 752, {

4 Subscriptions from subscribers other than those shown in footnote 2 were allotted
12 percent with subscriptions for $25,000 or less being aUotted in full and those for more
than $25,000 being allotted not less than $25,000.
fi Includes $3,655 million for cash and $3,670 miUion for Treasury certificates of indebtedness of Series A-1961.
6 Includes $1,903 miUion for cash, $21 miUion for Treasury certificates of indebtedness
of Series B-1961, and $829 miUion for Treasury notes of Series B-1961.

o

o
W

EXHIBITS

243

EXHIBIT 3.—Treasury bonds
Five Treasury circulars for five of the nine bond offerings during the fiscal year
1961 are reproduced in this exhibit: a Rural Electrification Administration Series,
a cash offering (additional issue); an advance refunding exchange offering (additional issue); an exchange offering for maturing issues; and an exchange offering
(additional issue) for U.S. savings bonds of Series F and G maturing during the
calendar year 1961. Circulars pertaining to the other bond 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 the new bonds issued for cash and in exchange for maturing
or outstanding securities are shown in the second table.
DEPARTMENT CIRCULAR NO. 1046.

PUBLIC DEBT

TREASURY

DEPARTMENT,

Washington, June 27, 1960.
I. OFFERING OF BONDS

1. The Secretary of the Treasury, pursuant to the authority of the Second
Liberty Bond Act, as amended, gives notice of an issue of bonds of the United
States, designated 2 percent Treasury bonds—R.E.A. Series. These bonds may
be subscribed for, at par, effective July 1, 1960, by borrowers from the Rural
Electrification Administration, U.S. Department of Agriculture. The bonds will
be sold to such borrowers with the specific approval of the Rural Electrification
Administration for each transaction. Subscriptions for the bonds shall be submitted to the Secretary of the Treasury through the Rural Electrification
Administration.
II. DESCRIPTION OF BONDS

1. The bonds will bear interest at the rate of 2 percent per annum, payable on
a semiannual basis on January 1 and July 1 in each year until the principal
amount becomes payable, and will be issued in amounts in multiples of $1,000.
Each bond will be issued as of, and will bear interest from, the date payment
therefor is received, and will mature twelve years from such date, but may be
redeemed at the option of the United States or the Rural Electrification Administration borrowers, in whole or in part, at par and accrued interest, at any time,
upon not less than 30 nor more than 60 days' notice in writing given by either
party to the other. From the date of redemption designated in any such notice,
interest on the bond or bonds or any part thereof to be redeemed shall cease,
and the unredeemed portion, if any, shall be reissued bearing the same issue date
as the bond surrendered. Any such notice of redemption given by a Rural Electrification Administration borrower shall be addressed to the Secretary of the
Treasury.
2. The income derived from the bonds is subject to all taxes imposed under
the Internal Revenue Code of 1954. The bonds are subject to estate, inheritance,
gift, or other excise taxes, whether Federal or State, but are exempt from all
taxation now or hereafter imposed on the principal or interest thereof by any
State or any of the possessions of the United States, or by any local taxing authority.
3. The bonds will not be acceptable to secure deposits of public monies. They
will not be entitled to any privilege of conversion. They will not be transferable.
Accordingly, they may not be sold, discounted, hypothecated as collateral for a
loan, or pledged as security for the performance of an obligation or for any other
purpose. The bonds will be issued in registered form only in the name of the
Treasurer of the United States in trust for the Rural Electrification Administration borrowers to which they are allotted. They will be subject to the general
regulations of the Treasury Department, now or hereafter prescribed, governing
United States bonds, so far as applicable.
III. GENERAL PROVISIONS

1. The Secretary of the Treasury may at any time, or from time to time,
prescribe supplemental or amendatory rules and regulations with respect to this
issue of bonds, and he may terminate the issue at any time without notice.




ROBERT B . ANDERSON,

Secretary of the Treasury.

244

1961 REPORT OF THE SECRETARY OF THE TREASURY
DEPARTMENT CIRCULAR NO. 1049. PUBLIC DEBT
TREASURY DEPARTMENT,

Washington, August 1, 1960.
1. OFFERING OF BONDS

1. The Secretary of the Treasury, pursuant to the authority of the Second
Liberty Bond Act, as amended, invites subscriptions, subject to allotment, at par
and accrued interest, from the people of the United States for bonds of the United
States, designated 3% percent Treasury bonds of 1968. The amount of the offering under this circular is $1,000,000,000, or thereabouts. Treasury notes of
Series C-1960, maturing August 15, 1960, will be accepted at par in payment or
exchange, in whole or in part, for the new bonds subscribed for, to the extent such
subscriptions are allotted by the Treasury. The books will be open only on
August 1 and August 2, 1960, for the receipt of subscriptions for this issue.
2. The Secretary of the Treasury, on behalf of the Federal National Mortgage
Association, offers to purchase on August 15, 1960, at par and accrued interest,
Federal National Mortgage Association 3^^ percent notes of Series ML-1960-A,
dated January 20, 1958, due August 23, 1960, to the extent to which subscriptions
from the holders thereof to Treasury bonds of 1968 hereunder are allotted by the
Treasury, and the proceeds from the par amount of such notes are applied to the
payment, in whole or in part, of the bonds in accordance with paragraph 2 of
section IV of this circular. Tenders of the Federal National Mortgage Association 3% percent notes of Series ML-1960-A for that purpose are invited.
II. DESCRIPTION OF BONDS

1. The bonds now offered will be an addition to and will form a part of the series
of SYs percent Treasury bonds of 1968 issued pursuant to Department Circular
No. 1044, dated June 8,1960, will be freely interchangeable therewith, and are identical in all respects therewith except that interest on the bonds to be issued under
this circular will accrue from August 15, 1960. Subject to the provision for the
accrual of interest from August 15, 1960, on the bonds now offered, the bonds are
described in the following quotation from Department Circular No. 1044:
" 1 . The bonds will be dated June 23, 1960, and will bear interest from that date
at the rate of 3% percent per annum, payable on a semiannual basis on November
15, 1960, and thereafter on May 15 and November 15 in each year until the
principal amount becomes payable. They will mature May 15, 1968, and will
not be subject to call for redemption prior to maturity.
"2. The income derived from the bonds is subject to all taxes imposed under the
Internal Revenue Code of 1954. The bonds are subject to estate, inheritance,
gift, or other excise taxes, whether Federal or State, but are exempt from all
taxation now or hereafter imposed on the principal or interest thereof by any
State, or any of the possessions of the United States, or by any local taxing
authority.
*'3. The bonds will be acceptable to secure deposits of public moneys. They
will not be acceptable in payment of taxes.
"4. Bearer bonds with interest coupons attached, and bonds registered as to
principal and interest, will be issued in denominations of $500, $1,000, $5,000,
$10,000, $100,000, and $1,000,000. Provision will be made for the interchange of
bonds of different denominations and of coupon and registered bonds, and for
the transfer of registered bonds, under rules and regulations prescribed by the
Secretary of the Treasury.
"5. The bonds will be subject to the general regulations of the Treasury Department, now or hereafter prescribed, governing United States bonds."
III. SUBSCRIPTION AND ALLOTMENT

1. Subscriptions will be received at the Federal Reserve Banks and branches and
at the Office of the Treasurer of the United States, Washington. Only the Federal
Reserve Banks and the Treasury Department are authorized to act as official agencies. Commercial banks, which for this purpose are defined as banks accepting
demand deposits, may submit subscriptions for account of customers. 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 restricted in each case to an amount not exceeding 25 percent of the com-




EXHIBITS

246

bined capital, surplus, and undivided profits of the subscribing bank. Subscriptions from commercial and other banks for their own account, federally insured
savings and loan associations. States, political subdivisions or instrumentalities
thereof, public pension and retirement and other public funds, international organizations in which the United States holds membership, foreign central banks
and foreign states, dealers who make primary markets in Government securities
and report daily to the Federal Reserve Bank of New York their positions with
respect to Government securities and borrowings thereon. Government investment
accounts, and the Federal Reserve Banks will be received without deposit. Subscriptions from all others must be accompanied by payment (in cash or in Treasury
notes of Series C-1960, maturing August 15, 1960, at par, or Federal National
Mortgage Association notes of Series ML-1960-A tendered for purchase under
paragraph 2 of section I, hereof, at par) of 20 percent of the amount of bonds
applied for, not subject to withdrawal until after allotment. Following allotment,
any portion of the 20 percent payment in excess of 20 percent of the amount of
bonds 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, to allot less than the amount of bonds apphed 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 from June 23,. 1960, to August 15, 1960
($5.58084 per $1,000), for bonds allotted hereunder must be made or completed on
or before August 15, 1960, or on later allotment. In every case where payment is
not so completed, the payment with application up to 20 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. Payment may be made for any
bonds allotted hereunder in cash or by exchange of Treasury notes of Series
C-1960, maturing August 15, 1960, which will be accepted at par. Where payment is made with Treasury notes of Series C-1960, coupons dated August 15,
1960, should be detached from such notes by holders and cashed when due.
2. In addition, payment may be made for any bonds allotted hereunder with
the proceeds of the par amount of Federal National Mortgage Association notes of
Series ML-1960-A tendered for purchase in accordance with paragraph 2 of section I of this circular. Federal National Mortgage Association notes of Series
ML-1960-A tendered for purchase must have coupons dated August 23, 1960,
attached, and payment will be made at par ahd accrued interest to August 15,
1960. Accrued interest from February 23, 1960, to August 15, 1960, on the Series
ML-1960-A notes ($17.31944 per $1,000) will be credited, and accrued interest
from June 23, 1960, to August 15, 1960 ($5.58084 per $1,000), will be charged andthe difference $11.7386 per $1,000 will be paid subscribers following acceptance of
the notes.
V. GENERAL PROVISIONS

1. As fiscal agents of the United States, Federal Reserve Banks are authorized
and requested to receive subscriptions, 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.




^

ROBERT B . ANDERSON,

Secretary of the Treasury.

246

1961 REPORT OF THE SECRETARY OF THE TREASURY
DEPARTMENT CIRCULAR NO. 1051. PUBLIC DEBT
TREASURY DEPARTMENT,

Washington, September 12, 1960.
1. OFFERING OF BONDS

1. The Secretary of the Treasury, pursuant to the authority of the Second
Liberty Bond Act, as amended, invites subscriptions, at par and accrued interest,
from the people of the United States for bonds of the United States, designated
3}^ percent Treasury bonds of 1990, in exchange for 2% percent Treasury bonds
of 1963-68, dated December 1, 1942, due December 15, 1968. Exchanges will
be made at par with adjustment of interest as provided in section IV hereof.
Subscriptions to the offering under this circular and the offering of 3}^ percent
Treasury bonds of 1998 under Department Circular No. 1052, issued simultaneously with this circular are invited up to a combined amount not to exceed
$4,500,000,000, or thereabouts. If subscriptions exceed this amount they will
be subject to allotment on the same basis for each of the two issues. In addition
to the amount offered for public subscription, the Secretary of the Treasury
reserves the right to issue in exchange to Government investment accounts an
aggregate amount not to exceed $550,000,000 of the bonds offered hereunder
and the bonds offered simultaneously under Department Circular No. 1052.
The books will be open only on September 12 through September 20, 1960, for
the receipt of subscriptions for this issue.
2. Nonrecognition of gain or loss for Federal income tax purposes.—Pursuant to
the provisions of section 1037(a) of the Internal Revenue Code of 1954 as added
by Public Law 86-346 (approved September 22, 1959), the Secretary of the
Treasury hereby declares that no gain or loss shall be recognized for Federal
income tax purposes upon the exchange with the United States of the 2}^ percent
Treasury bonds of 1963-68, due December 15, 1968, solely for the 3}^ percent
Treasury bonds of 1990. Gain or loss, if any, upon the obligations surrendered
in exchange will be taken into account upon the disposition or redemption of the
new obligations.
II. DESCRIPTION OF BONDS

1. The bonds now offered will be an addition to and will form a part of the series
of 3J^ percent Treasury bonds of 1990 issued pursuant to Department Circular
No. 1005, dated February 3, 1958, will be freely interchangeable therewith, and
are identical in all respects therewith except that interest on the bonds to be
issued under this circular will accrue from October 3, 1960. Subject to the
provision for the accrual of interest from October 3, 1960, on the bonds now
offered, the bonds are described in the foliowing quotation from Department
Circular No. 1005:
" 1 . The bonds will be dated February 14, 1958, and will bear interest from that
date at the rate of 3>^ percent per annum, payable on a semiannual basis on
August 15, 1958, and thereafter on February 15 and August 15 in each year
until the principal amount becomes payable. They will mature February 15,
1990, and will not be subject to call for redemption prior to maturity.
"2. The income derived from the bonds is subject to all taxes imposed under
the Internal Revenue Code of 1954. The bonds are subject to estate, inheritance,
gift, or other excise taxes, whether Federal or State, but are exempt from all
taxation now or hereafter imposed on the principal or interest thereof by any
State, or any of the possessions of the United States, or by any local taxing
authority.
"3. The bonds will be acceptable to secure deposits of public moneys.
"4. Bearer bonds with interest coupons attached, and bonds registered as to
principal and interest, will be issued in denominations of $500, $1,000, $5,000,
$10,000, $100,000, and $1,000,000. Provision will be made for the interchange
of bonds of different denominations and of coupon and registered bonds, and for
the transfer of registered bonds, under rules and regulations prescribed by the
Secretary of the Treasury.
''5. Any bonds issued hereunder which upon the death of the owner constitute
part of his estate, will be redeemed at the option of the duly constituted repre-




EXHIBITS

247

sentatives of the deceased owner's estate, at par and accrued interest to date of
payment,! provided:
(a) that the bonds were actually owned by the decedent at the time of his
death; and
(b) that the Secretary of the Treasury be authorized to apply the entire
proceeds of redemption to the payment of Federal estate taxes.
Registered bonds submitted for redemption hereunder must be duly assigned
to "The Secretary of the Treasury for redemption, the proceeds to be paid to the
District Director of Internal Revenue at
for credit on Federal estate
taxes due from estate of
" Owing to the periodic closing of the
transfer books and the impossibility of stopping payment of interest to the
registered owner during the closed period, registered bonds received after the
closing of the books for payment during such closed period will be paid only at
par with a deduction of interest from the date of payment to the next interest
payment date; 2 bonds received during the closed period for payment at a date
after the books reopen will be paid at par plus accrued interest from the reopening
of the books to the date of payment. In either case checks for the full six months'
interest due on the last day of the closed period will be forwarded to the owner
in due course. All bonds submitted must be accompanied by Form PD 1782,^
properly completed, signed, and certified, and by proof of the representatives'
authority in the form of a court certificate or a certified copy of the representatives' letters of appointment issued by the court. The certificate, or the
certification to the letters, must be under the seal of the court, and except in
the case of a corporate representative, must contain a statement that the appointment is in full force and be dated within six months prior to the submission of
the bonds, unless the certificate or letters show that the appointment was made
within one year immediately prior to such submission. Upon payment of the
bonds appropriate memorandum receipt will be forwarded to the representatives,
which will be followed in due course by formal receipt from the District Director
of Internal Revenue.
''6. The bonds will be subject to the general regulations of the Treasury Department, now or hereafter prescribed, governing United States bonds."
III. SUBSCRIPTION

AND

ALLOTMENT

1. Subscriptions will be received at the Federal Reserve Banks and branches and
at the Office of the Treasurer of the United States, Washington, D.C. Only the
Federal Reserve Banks and the Treasury Department are authorized to act as
official agencies. Banking institutions generally may submit subscriptions for
account of customers. Subscriptions from banking institutions for their own
account, federally insured savings and loan associations. States, political subdivisions or instrumentalities thereof, public pension and retirement and other
public funds, international organizations in which the United States holds membership, foreign central banks and foreign states. Federal Reserve Banks, and
Government investment accounts will be received without deposit. Subscriptions
from all others must be accompanied by the deposit of 2J^ percent Treasury bonds
of 1963-68, due December 15, 1968, in the face amount of not less than 10 percent
of the amount of bonds applied for, not subject to withdrawal until after allotment.
Registered bonds submitted as deposits should not be assigned. After allotment
detached assignment forms may be used as provided in section V hereof.
2. The Secretary of the Treasury reserves the right to reject or reduce any subscription, 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 for bonds allotted hereunder must be made on or before
October 3, 1960, or on later allotment, and may be made only in 2}^ percent Treas1 An exact half-year's interest is computed for each fuU half-year period irrespective of the actual number
of days in the half year. For a fractional part of any half year, computation is on the basis of the actual
number of days in such half year.
2 The transfer books are closed from January 16 to February 15, and from July 16 to August 15 (both dates
inclusive) in each year.
3 Copies of Form PD 1782 may be obtained from any Federal Reserve Bank or from the Treasury Department, Washington, D.C.




248

1961 REPORT OF THE SECRETARY OF THE TREASURY

ury bonds of 1963-68, due December 15, 1968, which will be accepted at par.
Coupons dated December 15, 1960, and all subsequent coupons, must be attached
to the bonds in coupon form when surrendered. Accrued interest from June 15,
1960, to October 3, 1960 ($7.51366 per $1,000), on the bonds surrendered will be
credited, and accrued interest from August 15, 1960, to October 3, 1960 ($4.66033
per $1,000), on the bonds to be issued will be charged, and the difference ($2.85333
per $1,000) will be paid subscribers, in the case of bearer bonds following their acceptance, and in the case of registered bonds following discharge of registration.
In the case of registered bonds, the payment will be made by check drawn in accordance with the assignments on the bonds surrendered, or by credit in any account
maintained by a banking institution with the Federal Reserve Bank of its district.
V. ASSIGNMENT OF REGISTERED BONDS

1. After allotment the 2}^ percent Treasury bonds of 1963-68 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 surrendered to a
Federal Reserve Bank or branch or to the Office of the Treasurer of the United
States, Washington, D.C. If the new bonds are desired registered in the same
name as the bonds surrendered in exchange, the assignment should be to ''The
Secretary of the Treasury for exchange for 3 ^ percent Treasury bonds of 1990";
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 1990 in the name of
"; if new bonds in coupon form are desired,
the assignment should be to "The Secretary ofthe Treasury for exchange for 3}^
percent Treasury bonds of 1990 in coupon form to be'delivered to
".
Detached assignment forms may be used for the convenience of subscribers.
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.

DEPARTMENT CIRCULAR NO. 1054. PUBLIC DEBT
TREASURY

DEPARTMENT,

Washington, October 31, 1960.
I. OFFERING OF BONDS

1. The Secretary of the Treasury, pursuant to the authority of the Second
Liberty Bond Act, as amended, invites subscriptions, at par, from the people of
the United States for bonds of the United States designated 3)^ percent Treasury
bonds of 1966, in exchange for which any of the following securities may be
tendered:
4^1 percent Treasury certificates of indebtedness of Series C-1960, maturing
November 15, 1960
2}i percent Treasury bonds of 1960, maturing November 15, 1960
The amount of the offering under this circular will be limited to the amount of
maturing certificates and bonds tendered in exchange and accepted. The books
will be open only on October 31 through November 2, 1960, for the receipt of
subscriptions for this issue.




EXHIBITS

249

2. In addition to the offering under this circular, holders of the maturing
securities are also offered the privilege of exchanging all or any part of such
securities for 3 ^ percent Treasury notes of Series F-1962, which offering is set
forth in Department Circular No. 1053, issued simultaneously with this circular.
II. D E S C R I P T I O N O F BONDS

1. The bonds will be dated November 15, 1960, and will bear interest from that
date at the rate of 3% percent per annum, payable semiannually on May 15 and
November 15 in each year until the principal amount becomes payable. They
will mature May 15, 1966, and will not be subject to call for redemption prior to
maturity.
2. The income derived from the bonds is subject to all taxes imposed under the
Internal Revenue Code of 1954. The bonds are subject to estate, inheritance,
gift, or other excise taxes, whether Federal or State, but are exempt from all
taxation now or hereafter imposed on the principal or interest thereof by any
State, or any of the possessions of the United States, or by any local taxing
authority.
3. The bonds will be acceptable to secure deposits of public moneys. They
will not be acceptable in payment of taxes.
4. Bearer bonds with interest coupons attached, and bonds registered as to
principal and interest, will be issued in denominations of $500, $1,000, $5,000,
$10,000, $100,000, and $1,000,000. Provision will be made for the interchange
of bonds of different denominations and of coupon and registered bonds, and for
the transfer of registered bonds, under rules and regulations prescribed by the
Secretary of the Treasury.
5. The bonds will be subject to the general regulations of the Treasury Department, now or hereafter prescribed, governing United States bonds.
III. S U B S C R I P T I O N AND ALLOTMENT

1. Subscriptions will be received at the Federal Reserve Banks and branches
and at the Oflice of the Treasurer of the United States, Washington, D.C. 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 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
November 15, 1960, or on later allotment, and may be made only in the securities
of the two issues enumerated in section I hereof, which will be accepted at par,
and should accompany the subscription. Coupons dated November 15, 1960,
should be detached from the maturing securities in coupon form by holders and
cashed when due. In the case of registered bonds, final interest due on November
15, 1960, will be paid by check drawn in accordance with the assignments on the
bonds surrendered, or by credit in any account maintained by a banking institution with the Federal Reserve Bank of its district.
V. ASSIGNMENT OF REGISTERED BONDS

1. Treasury bonds of 1960 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 surrendered with the subscription to a Federal Reserve
Bank or branch or to the Office of the Treasurer of the United States, Washington,
D.C. 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 1966"; 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 1966 in the name of
";




250

1961 REPORT OF THE SECRETARY OF THE TREASURY

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 1966 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.
ROBERT B . ANDERSON,

Secretary of the Treasury.
DEPARTMENT CIRCULAR NO. 1056. PUBLIC DEBT
TREASURY

DEPARTMENT,

Washington, November 18, 1960.
1. OFFERING OF BONDS

1. The Secretary of the Treasury, pursuant to the authority of the Second
Liberty Bond Act, as amended, invites subscriptions, at 100}^ percent of their
face value and accrued interest, for bonds of the United States, designated 4
percent Treasury bonds of 1969, in exchange for a like face amount of United
States savings bonds of Series F and G maturing in the calendar year 1961,
which will be accepted at exchange values set forth in section IV hereof. Holders of Series F and G bonds aggregating less than an even multiple of $500 maturity value (the lowest denomination of new bonds available) may exchange
such bonds with payment of the difference in cash to make up the next higher
$500 multiple. Interest on the bonds will be adjusted as of December 15, 1960,
as set forth in section IV hereof. The amount of the offering under this circular
will be limited to the amount of securities, together with cash adjustments,
tendered in exchange and accepted. The books will be open only on November
21 through November 29 for the receipt of subscriptions for this issue.
II. DESCRIPTION OF BONDS

1. The bonds now offered will be an addition to and will form a part of the 4
percent Treasury bonds of 1969 issued pursuant to Department Circular No. 996,
dated September 16, 1957, will be freely interchangeable therewith, and are
identical in all respects therewith except that interest on the bonds to be issued
under this circular will accrue from December 15, 1960. Subject to the provision for the accrual of interest from December 15, 1960, on the bonds now
offered, the bonds are described in the following quotation from Department
Circular No. 996:
" 1 . The bonds will be dated October 1, 1957, and will bear interest from that
date at the rate of 4 percent per annum, payable semiannually on April 1 and
October 1 in each year until the principal amount becomes payable. They will
mature October 1, 1969, and will not be subject to call for redemption prior to
maturity.
"2. The income derived from the bonds is subject to all taxes imposed under
the Internal Revenue Code of 1954. The bonds are subject to estate, inheritance,
gift, or other excise taxes, whether Federal or State, but are exempt from all
taxation now or hereafter imposed on the principal or interest thereof by any
State, or any of the possessions of the United States, or by any local taxing
authority.
" 3 . The bonds will be acceptable to secure deposits of public moneys.
"4. Bearer bonds with interest coupons attached, and bonds registered as to
principal and interest, will be issued in denominations of $500, $1,000, $5,000,
$10,000, $100,000, and $1,000,000. Provision will be made for the interchange




EXHIBITS

251

of bonds of different denominations and of coupon and registered bonds, a n d for
the transfer of registered bonds, under rules and regulations prescribed by t h e
Secretary of the Treasury.
" 5 . Any bonds issued hereunder which upon t h e d e a t h of t h e owner constitute
p a r t of his estate, will be redeemed at the option of the duly constituted representatives of t h e deceased owner's estate, a t p a r a n d accrued interest t o d a t e of
payment,^ provided:
(a) t h a t t h e bonds were actually owned by t h e decedent a t t h e time of his
death; and
(b) t h a t t h e Secretary of t h e Treasury be authorized t o apply the entire
proceeds of redemption t o t h e p a y m e n t of Federal estate taxes.
Registered bonds s u b m i t t e d for redemption hereunder m u s t be duly assigned
to " T h e Secretary of t h e Treasury for redemption, t h e proceeds to be paid to the
District Director of I n t e r n a l Revenue at
for credit on Federal estate
taxes due from estate of
" Owing to t h e periodic closing of t h e
transfer books and t h e impossibihty of stopping p a y m e n t of interest t o t h e registered owner during the closed period, registered bonds received after the closing
of t h e books for p a y m e n t during such closed period will be paid only a t par with
a deduction of interest from the date of p a y m e n t to the next interest p a y m e n t
d a t e ; ^ bonds received during t h e closed period for p a y m e n t at a date after t h e
books reopen will be paid at par plus accrued interest from the reopening of the
books t o t h e date of p a y m e n t . I n either case checks for the full six m o n t h s '
interest due on t h e last day of t h e closed period will be forwarded to t h e owner
in due course. All bonds s u b m i t t e d m u s t be accompanied by Form P D 1782,^
properly completed, signed, and sworn to, a n d by proof of t h e representatives'
a u t h o r i t y in t h e form of a court certificate or a certified copy of the representatives'
letters of a p p o i n t m e n t issued by the court. T h e certificate, or the certification
t o the letters, must be under the seal of the court, and except in the case of a
corporate representative, m u s t contain a s t a t e m e n t t h a t the a p p o i n t m e n t is in
full force and be dated within six m o n t h s prior to the submission of t h e bonds,
unless the certificate or letters show t h a t the a p p o i n t m e n t was made within one
year immediately prior to such submission. Upon p a y m e n t of t h e bonds appropriate m e m o r a n d u m receipt will be forwarded to the representatives, which will
be followed in due course by formal receipt from t h e District Director of I n t e r n a l
Revenue.
" 6 . The bonds will be subject t o t h e general regulations of t h e Treasury D e p a r t m e n t , now or hereafter prescribed, governing United States b o n d s . "
III. SUBSCRIPTION AND ALLOTMENT

1. Subscriptions will be received a t the Federal Reserve Banks and branches
and a t the Oflice of the Treasurer of the United States, Washington, D.C. Banking institutions generally, and paying agents eligible to process bonds under
Treasury D e p a r t m e n t Circular No. 888, Revised, m a y submit exchange subscriptions for account of customers, b u t only the Federal Reserve Banks and the
Treasury D e p a r t m e n t are authorized to act as official agencies.
2. T h e Secretary of the Treasury reserves the right to reject or reduce any
subscription, a n d to allot less t h a n the a m o u n t of bonds applied for; and any
action he m a y take in these respects shall be final. Subject to these reservations,
all subscriptions will be allotted in fuU. Allotment notices will be sent o u t
p r o m p t l y upon allotment.
IV.

PAYMENT

1. P a y m e n t for t h e face a m o u n t of bonds allotted hereunder m u s t be made on
or before December 15, 1960, or on later allotment, and m a y be made only in a
like face a m o u n t of United States savings bonds of Series F and Series G m a t u r i n g
from J a n u a r y 1 to December 1, 1961, inclusive, a n d any cash difference necessary
to make up an even $500 multiple, which bonds and cash should accompany the
subscription, together with t h e n e t a m o u n t to be collected from t h e subscriber
1 An exact half-year's interest is computed for each full half-year period irrespective of the actual number
of days in the half year. For a fractional part of any half year, computation is on the basis of the actual
number of days in such half year.
2 The transfer books are closed from March 2 to AprU 1, and from September 2 to October 1 (both dates
Luclusive) in each year.
3 Copies of Form PD 1782 may be obtained from any Federal Reserve Bank or from the Treasury
Department, Washington, D.C.
614359—62
17




252

1961 REPORT OF THE SECRETARY OF THE TREASURY

as set forth in tables I and II hereof. The Series F and G bonds will be accepted
in the exchange at amounts set forth hereunder for their respective months of
maturity. These exchange values are higher than present redemption values.
They have been set so that holders of Series F and G bonds who elect to accept
this exchange offer will receive, in effect, an investment yield approximately 1
percent per annum more than would otherwise accrue from December 15, 1960,
to the maturity dates of their bonds, and will receive an investment yield of
approximately 3.93 percent on the 4 percent marketable bonds received in exchange for the period from the maturity dates of their Series F and G bonds to
October 1, 1969. All subscribers will be charged the interest from October 1,
1960, to December 15, 1960 ($0.82 per $100), on the bonds allotted. Other
adjustments with respect to bonds accepted in exchange will be made as set
forth in tables I and II hereof, which also show the net amounts to be collected
from subscribers for each $100 (face amount) of bonds accepted in exchange.
(a) Series F bonds.—The exchange values of Series F bonds, the differences
between such values and the offering price of the 4 percent bonds, the interest
which will accrue on the new bonds and the total amounts to be collected from
holders of Series F bonds per $100 (face amount) are as follows:
TABLE I.—For Series F bonds

F bonds matm-ing in 1961
on the first day of—

Total amounts
TO BE COLCharge for difInterest Oct. 1
LECTED
ferences between to Dec. 15, 19c)0,
Exchange values $100.50 (offering to be charged on FROM SUBSCRIBERS
of F bonds per price per $100 of new bonds per
per $100 (face
$100 (face amt.) new bonds) and $100 (face amt.)
amt.) of F bonds
exchange values
of F bonds
accepted
of F bonds
(Cols. 2 plus 3) 1
Col. 1

January—
FebruaryMarch
AprU
May
June
July
„
August
September
October--_
November
December.

99.64
99.40
99.16
98.92
98.68
98.44
98.20
97.96
97.72
97.48
97.24

Col. 2
$0.62
0.86
1.10
1.34
1.58
1.82
2.06
2.30
2.54
2.78
3.02
3.26

Col. 3
$0.82
0.82
0.82
0.82
0.82
0.82
0.82
0.82
0.82
0.82
0.82
0.82

Col. 4
$1.44
1.68
1.92
2.16
2.40
2.64
2.88
3.12
3.36
3.60
3.84
4.08

1 In addition, for each $100, or multiple or fraction thereof, between the face amount of Series F bonds
submitted and the face amount of bonds subscribed (to next higher multiple of $500) the subscriber must
pay $101.32 ($100.50 issue price plus $0.82 accrued interest).

(b) Series G bonds.—The exchange values of Series G bonds, the differences
between such values and the offering price of the 4 percent bonds, the accrued
interest to be credited on the Series G bonds, the interest which will accrue on
the new bonds and the total amounts to be collected from holders of Series G
bonds per $100 (face amount); see table IL
2. Any qualified depositary will be permitted to make payment by credit in
its Treasury tax and loan account for any cash payments authorized or required
to be made under this circular 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.
3. Series F and G bonds tendered in exchange must bear appropriate requests
for payment in accordance with the provisions of Treasury Department Circular
No. 530, Eighth Revision, as amended, or the special endorsements provided for
in Treasury Department Circular No. 888, Revised. In any case in which bonds
in bearer form, or registered bonds in another name, are desired, requests for
payment must be supplemented by specific instructions signed by the owner who
signed the request for payment. 'An owner's instructions for bearer or registered
bonds may be recorded on the surrendered bonds by typing or otherwise recording
on the back thereof, or by changing the existing request for payment form to
conform to one of the two following forms:




253

EXHIBITS

(a) I am the owner of this bond and hereby request exchange for 4 % Treasury
bonds of 1969 ia bearer form to be delivered to (insert name and address of person
to whom delivsMy is to be m a d e ) .
(b) I am the owner of this bond and hereby request exchange for 4 % Treasury
bonds of 1969 registered in the n a m e of (insert exact registration desired—see
section V hereof).
T A B L E II.—For Series G bonds

C h a r g e for
I n t e r e s t Oct. 1
differences beto Dec. 15,1960,
Exchange
tween $100.50
I n t e r e s t to be
to be charged
values of G
(offering price credited on G on n e w b o n d s
b o n d s per $100 per $100 of n e w b o n d s per $100 per $100 (face
bonds) a n d exa m t . ) of G
(face a m t . )
(face a m t . )
change values
bonds
of G b o n d s

G bonds maturing
in 1961 on t h e
first d a y of—

Col. 2

Col. 1
Januar yFebruary.
March
April
May
June
July
August
September
October
November
December-_-

-

$99. 98
99.94
99. 91
99.87
99.83
99.80
99.77
99. 73
99. 70
99.66
99.63
99.59

Col. 3

.$0. 52
0. 56
0.59
0.63
0.67
0.70
0.73
0.77
0.80
0.84
0.87
0.91

CoL 4

Total amounts
TO BE COLLECTED
F R O M SUBSCRIBERS
per $100 (face
a m t . ) of G
b o n d s acceptedi
(Cols. 2 a n d 4
m i n u s 3)
Col. 5

$0.82
0.82
0.82
0.82
0.82
0.82
0.82
0.82
0.82
0.82
0.82
0.82

$1.15
0.94
0.73
0.52
0.31
0.10
(2)

0.94
0.73
0.52
0.31
0.10

$0.19
0.44
0.68
0.93
1.18
1.42
1.65
0.65
0.89
1.14
1.38
1.63

1 In addition, for each $100, or multiple thereof, between the face amount of Series G bonds submitted and
the face amount ofbonds subscribed (to next higher multiple of $500) the subscriber must pay $101.32 ($100.50
issue price plus $0.82 accrued interest).
2 Interest wiU be paid to January 1,1961, on bonds maturing July 1,1961, in regular course on January 1,
1961, by checks mailed by the Treasury Department. As these checks will include unearned interest for the
period from December 15, 1960, to January 1,1961, each subscriber who tenders these bonds wiU be required
to make an interest refund of $0.10 per $100 (face amount). The above amount of $1.65 in col. 5 includes
such refund.
V. REGISTRATION OF BONDS

1. Treasury bonds m a y be registered only as authorized in Treasury D e p a r t m e n t Circular N o . 300, Revised, as supplemented. Registration in the name of
one person payable on d e a t h to another is not authorized. Registered Treasury
bonds m a y be transferred to a purchaser only upon proper assignment. Treasury
bonds registered in t h e form " A or B " m a y be transferred only upon assignment
by or on behalf of both, except t h a t if one of t h e m is deceased, an assignment by
or on behalf of t h e survivor will be accepted. Since Treasury bonds are not
redeemable before m a t u r i t y a t t h e option of the owners, the effects of registering
t h e m in the names of two or more persons are i m p o r t a n t . Information concerning
t h e effects of various forms of registration m a y be obtained from a n y Federal
Reserve B a n k or branch, t h e Office of the Treasurer of the United States, Washington, D . C , or from banking institutions generally.
VI. GENERAL

PROVISIONS

1. As fiscal agents of t h e United States, Federal Reserve Banks are authorized
a n d requested to receive subscriptions, to make allotments on the basis a n d up
to t h e a m o u n t s indicated by t h e Secretary of t h e Treasury to the Federal Reserve
Banks of the respective districts, to issue allotment notices, to receive p a y m e n t
for bonds allotted, to m a k e delivery of bonds on full-paid subscriptions allotted,
a n d they m a y issue interim receipts pending delivery of the definitive bonds.
2. T h e Secretary of the Treasury m a y a t a n y time, or from time to time,
prescribe supplemental or a m e n d a t o r y rules and regulations governing the offering, which will be communicated promptly to the Federal Reserve Banks.




JULIAN

B.

BAIRD,

Acting Secretary of the Treasury.

to

05

Summary of information pertaining to Treasury bonds issued during the fiscal year 1961
D e p a r t m e n t circular
D a t e of
prelimin a r y announce- N u m b e r
ment

Date

Concurrent
offering,
circular
number

1960
J u l y 28

1049

1960
Aug. 1

1048

Sept.

1050

Sept. 12

1051,1052

9

Sept.

9

1051

Sept. 12

1050,1052

Sept.

9

1052

Sept. 12

1050,1051

Oct. 27
N o v . 18
1961
M a r . 15
M a r . 15

1054
1056

Oct. 31

1053

N o v . 18

1058

1961
M a r . 20

1059

1059

M a r . 20

1058




T r e a s u r y b o n d s issued for cash or i n exchange for o u t s t a n d i n g securities ^

3 % percent of 1968 (additional issue)^

-_

__

3M percent of 1980 issued i n exchange for—
2 H percent T r e a s u r y b o n d s of 1962-67 m a t u r i n g J u n e 15, 1967.
3M percent of 1990 (additional issue) issued in exchange for—
2y2 percent T r e a s u r y b o n d s of 1963-68 m a t u r i n g D e c . 15, 1968.
3 H percent of 1998 issued in exchange for—
2\4 percent T r e a s u r y b o n d s on 1964-69 m a t u r i n g J u n e 15, 1969,
2\4 percent T r e a s u r y b o n d s of 1964-69 m a t u r i n g D e c . 15, 1989.
3M percent of 1966 issued in exchange for—
4M percent Series C-1960 certificates m a t u r i n g N o v . 15, 1960,
2 H percent T r e a s u r y b o n d s of 1960 m a t u r i n g N o v . 15, 1960.
4 p e r c e n t of 1969 (additional issue) issued in exchange for —
U . S . savings b o n d s of Series F a n d Q m a t u r i n g i n t h e calendar year 1961.
3 H percent of 1966 issued i n exchange for—
2M percent T r e a s u r y b o n d s of 1963 m a t u r i n g A u g . 15, 1963.
3 ^ percent of 1967 issued i n exchange for—
2 ^ percent Series A-1963 notes m a t u r i n g F e b . 15, 1963,
2M percent T r e a s u r y b o n d s of 1959-62 m a t u r i n g J u n e 15, 1962,
2}4 percent T r e a s u r y b o n d s of 1959-62 m a t u r i n g D e c . 15, 1962.

D a t e of
issue

O
H
O

AUotment
Date sub- p a y m e n t
D a t e of scription d a t e o n
maturity
books
or before
(oron
closed
later
allotment)

W

1960
1968
-._ 3 J u n e 23 M a y 15

1960
Aug. 2

1960
Aug. 15

1980
N o v . 15

Sept. 20

4 Oct.

3

1958
1990
« F e b . 14 F e b . 15

Sept. 20

6 Oct.

3

1960
Oct. 3

3

Oct.

3

1998
N o v . 15

Sept. 20

7 Oct.

1966
N o v . 15 M a y 15
1957
- 1969
» Oct. 1
Oct.
1

Nov.

2

8 N o v . 15

N o v . 29

10 D e c . 15

1961
M a r . 15

1966
N o v . 15

1961
M a r . 22

1961
11 Mar. 30

M a r . 15

1967
N o v . 15

M a r . 22

12 M a r . 30

o

o

>

1 See also Department Circular No. 1046 in this exhibit.
2 See Department Circular No. 1049, secs. I l l and IV, in this exhibit, for provisions
for subscription and payment. Holders of 4% percent Treasury notes of Series C-1960,
which matured August 15, 1960, were not offered preemptive rights to exchange their
holdings for the new certificates. Payment for cash subscriptions allotted could be
made in whole or in part in cash or by exchange at par of the notes of Series C-1960; or
with the proceeds of the par amount of 3 ^ percent Federal National Mortgage Association notes of Series MLr-1960-A which matured August 23,1960. Payment by credit
In Treasury tax and loan accounts was not permitted.
3 Interest payable from Aug. 15, 1960.
* Exchanges were made at par with adjustment of interest as of Oct. 3, 1960, in
amounts of $500 or multiples thereof. Coupons dated Dec. 15,1960, and all subsequent
coupons were required to be attached to bonds in coupon form when surrendered.
Accrued interest from June 15 to Oct. 3,1960 ($7.51366 per $1,000), was paid to subscribers
in the case of bearer bonds following there acceptance and in the case of registered bonds
foUowing discharge of registration.
6 Interest payable from Oct. 3, 1960.
6 See Department Circular No. 1051, secs. I l l and IV, in this exhibit, for provisions
for subscription and payment of interest.
7 FoUowing acceptance of surrendered securities interest adjustment from June 15
to Oct. 3, 196 0 ($7.51366 per $1,000), was paid to subscribers in the case of bearer bonds
foUowing their acceptance and in the case of registered bonds following discharge of
registration. Coupons dated Dec. 15, 1960, and all subsequent coupons were required
to be surrendered with the bearer bonds.

8 See Department Circular No. 1054, secs. I l l and IV, in this exhibit, for provisions
for subscription and payment.
0 Interest payable from Dec. 15, 1960.
10 See Department Circular No. 1056, secs. I l l and IV, in this exhibit, for provisions
for subscription and interest adjustments.
11 Coupons dated Aug. 15, 1961, and all subsequent coupons were required to be
attached to the bonds in coupon form when surrendered. Accrued interest from Feb.
15 to Mar. 15, 1961 ($1.93370 per $1,000), on bonds surrendered was paid to subscribers
in the case of bearer bonds following their acceptance and in the case of registered bonds
foUomng discharge of registration.
12 Coupons dated Aug. 15, 1961, and aU subsequent coupons were required to be attached to the Treasury notes of Series A-1963 when surrendered and accrued interest
from Feb. 15 to Mar. 15, 1961 ($2.03039 per $1,000), was paid to subscribers. Coupons
dated June 15, 1961, and all subsequent coupons were required to be attached to the
2H% Treasury bouds of 1959-62 in coupon form when surrendered. Accrued interest
from Dec. 15, 1960, to Mar. 15, 1961 ($5.56319 per $1,000), on the bonds due June 15,
1962, was paid to subscribers. Accrued interest from Dec. 15, 1960, to Mar. 15, 1961
($5.56319 per $1,000), on the bonds due Dec. 15, 1962, was credited, payment ($3.00 per
$1,000) due the United States (exchange made at 100.30% of their face value)
was charged and the difference ($2.56319 per $1,000) was paid to subscribers in the case
of bearer securities following their acceptance and in the case of registered bonds foUowng discharge of registration.

Allotments of Treasury bonds issued during the fiscal year 1961, by Federal Reserve districts
[In thousands of dollars]
3 K p e r c e n t T r e a s u r y b o n d s of 1998 issued i n
3)4 p e r c e n t
exchange for—
Treasury bonds
3K percent
3 % percent
of 1990
Treasury bonds
T r e a s u r y b o n d s of 1980 issued
(additional
issue) issued
i n exchange
of 1968
for 23^ percent in exchange for
2>^ p e r c e n t
(additional
2K percent
issue) issued T r e a s u r y b o n d s
Treasury bonds Treasury bonds
2M p e r c e n t
T o t a l issued
of 1964-69
of 1964-69
for cash i
of 1962-67
Treasury bonds
maturing
maturing
maturing
of 1963-68
J u n e 15,1969 2 D e c . 15,1969 2
maturing
J u n e 15,1967 2
D e c . 15,1968 2

F e d e r a l R e s e r v e district

Boston
N e w York
Philadelphia
Cleveland
-_
Richmond
Atlanta
Chicago
St. Louis
M i n n e a p o l i s _. .
_
Kansas City




_ ---- -

-

_-- _
-- _
- _

--_
-.

.

. .

$74,995
467,615
23,994
45, 623
37, 778
42,028
139, 609
26, 524
17,092
27,064

$53,237
298,799
12,364
20,993
12,008
2,456
64, 620
6,278
4,933
10,694

$70,060
467, 366
24,202
55,271
29,802
5,270
78, 641
6,429
4,817
16,005

$84,430
637, 941
29, 923
71, 707
18,153
4,977
62, 538
7,543
16,800
26,356

$98,125
746,046
23, 798
58,799
23,634
6,902
74, 799
11,757
8,170
21, 700

$182,555
1,383,987
53,721
130,506
41. 787
11,879
137.337
19,100
24,970
48,056

CO

fcO
Cn
CJl

Allotments of Treasury bonds issued during the fiscal year 1961, by Federal Reserve districts—Continued
[In thousands of doUai's]

3 % percent
Treasury bonds
of 1968
(additional
issue) issued
for cash i

F e d e r a l Reserve district

Dallas
San F r a n c i s c o .
Treasury

- - _ - - .

-

.

-

.-

.

__

_

$36,064
106, 276
26,411

$37,841
13,761
105,422

$33,328
27, 922
173, 603

$38,150
48,406
48,089

$32, 289
39, 619
102,084

$70,439
88,025
150.173

_ -

3 1, 070,074

643, 406

992, 716

1, 094,813

1, 247, 722

2, 342, 535

.__

Total bond allotments.
--Securities eligible for exchange: E x c h a n g e d in c o n c u r r e n t offerings
T o t a l exchanged
-..
N o t s u b m i t t e d for exchange

3 H percent
Treasury bonds
of 1980 issued
in exchange
for 2 H percent
Treasury bonds
of 1962-67
maturing
J u n e 15, 1967 2

..

_._

.

to
3 H p e r c e n t T r e a s u r y b o n d s of 1998 issued in
3 H percent
exchange for—
Treasury bonds
of 1990
(additional
issue) issued
2 H percent
in exchange for
2)4 p e r c e n t
Treasury bonds Treasury bonds
2 H percent
of 1964-69
of 1964-69
T o t a l issued
Treasury bonds
maturing
maturing
of 1963-68
J u n e 15, 1969 2 D e c . 15, 1969 2
maturing
Dec. 15, 1968 2

...

1, 465, 613

1, 822,153

2, 642,209

2, 563,137

5, 205, 346

Ul

2,814,869

3, 737.022

3.810.859

7, 547,881

o

4 percent T r e a s u r y b o n d s of 1969 (additional issue) issued in exchange for Series F a n d Series G savings b o n d s m a t u r i n g in t h e
calendar year 1961

>
Hi

F e d e r a l R e s e r v e district
2\i percent
4% p e r c e n t
Series C-1960 T r e a s u r y b o n d s
of 1960
certificates
maturing
maturing
N
o
v
. 15, 1960 4
N o v . 15, 1960 "

... .

...

.
. .
. . .

o

2,109, 019
3 % p e r c e n t T r e a s u r y b o n d s of 1966 issued in
exchange for—


T o t a l b o n d aUotraents


o

W

T o t a l securities eligible for exchange

Boston
New York
Philadelphia
Cleveland
Richmond
Atlanta.
Chicago _
St. Louis
Minneapolis
Kansas City
Dallas
.
SanFrancisco.
Treasury

a:)

..

. . .

Total
issued

Series F
savings b o n d s
exchanged

Series G
savings b o n d s
exchanged

Cash
differences

Total
issued »

O

W

$20,802
163, £06
7,944
7,803
4,899
9, 053
56, 047
11, 802
10, 569
15,430
6, r,86
20, 352
457

$21,119
340, 067
28, 038
47, 574
20,127
29,053
177,412
50, 260
27, 019
56, 785
31, 330
46,094
2,982

$41,921
503, 573
35, 982
55, 377
25,026
38,106
233,459
62,062
37, 588
72, 215
37, 916
66, 446
3,439

$666
2,565
387
1,166
609
687
3, 243
96
446
668
463
842
46

$13,874
25, 822
8,355
9,740
6,192
6,472
26,241
8,731
4,414
9,652
4,161
9, 687
2,107

$21
69
36
31
15
12
87
24
16
22
9
19
4

$14, 561
28, 456
8.778
10,937
6,816
7,171
29,571
8,851
4,876
10, 342
4,633
10, 548
2, 157

335, 250

877,860

1, 213,110

11,884

135, 448

335

147, 697

>
Ul

d

Securities eUgible for exchange:
E x c h a n g e d i n c o n c u r r e n t offerings.

.

T o t a l exchanged
N o t s u b m i t t e d for exchange
T o t a l securities eligible for exchange

6,431,422

2, 666, 621

9,098, 043

6, 766,672
270, 534

3, 544, 481
262,002

10, 311,153
632, 536

7,037, 206

3, 806,483

10,843.689

- .
-_.

-

...

__
_

.
L
_ -_
-

_
- . - -._
.
-- -

_ .

Total bond allotments
Securities eligible for exchange:
E x c h a n g e d i n c o n c u r r e n t offerings-.

.

:

365

147, 697

. . _

$69,184
813, 096
126, 475
193, 757
54, 611
79, 436
487. 337
108, 244
76, 422
120. 865
130, 593
165, 906
11, 705

$42, 465
452, 664
37, 245
39, 838
26,068
44, 920
157, 771
44, 264
24,383
44, 893
42, 076
78,144
96, 614

$50,101
610, 791
45,108
77, 700
39, 817
43, 782
218,801
66, 238
27, 874
47, 913
65, 858
57, 641
53, 919

$36,316
655, 655
41, 613
54,329
22, 747
24,139
170, 300
25, 565
24,003
30, 462
32,126
46, 723
12,689

$128,882
1, 619,110
123,966
171, 867
88, 632
112.841
546,872
126,067
76, 260
123, 258
140,060
182, 508
163, 222

2, 437, 630

1,131, 345

1, 295, 543

1,176, 657

3, 603, 545

4,318, 066

2,839,353

3, 966,169

2, 272, 678

9,078,190

6, 755, 696

3, 970, 698

5, 261, 702

3, 449, 335

12, 681, 735

fei

Ul

._

T o t a l exchanged
N o t s u b m i t t e d for e n c h a n g e
T o t a l securities eligible for exchange
1 Subscriptions from savings-type investors and Government investment accounts
were allotted 25%, subscriptions from commercial banks for their own account were
aUotted 20% and subscriptions from all others were aUotted 16%.
2 These exchanges were advance refundings. All subscriptions were allotted in fuU.
3 Includes $1,042 miUion for cash (including proceeds from the par amount of Federal
National Mortgage Association 3H percent notes of Series ML-1960-A) and $28 million
for Treasury notes of Series C-1960.




135,448

3 H percent
3 H p e r c e n t T r e a s u r y b o n d s of 1967 issued i n exchange for—
Treasury bonds
of 1966 issued
i n exchange for
2H percent
2H percent
2 H percent
Series A-1963 T r e a s u r y b o n d s T r e a s u r y b o n d s
2 H percent
of 1959-62
of 1959-62
T o t a l issued
T r e a s u r y b o n d s T r e a s u r y notes
maturing
maturing
maturing
of 1963
F e b . 15, 1963 2 J u n e 15, 1962 2 D e c . 15, 1962 2
maturing
A u g . 15, 1963 2

F e d e r a l Reserve district

Boston
NewYork
Philadelphia
Cleveland
Richmond
Atlanta
Chicago
St. L o u i s Minneapolis
Kansas City
Dallas .
SanFrancisco
Treasury

11,884

* Series F-1962 3H% Treasury notes also offered in exchange for this security; see
exhibit 2.
5 Exchanges together with cash differences necessary to make up the next higher
$500 multiple.
Cn

258

1961 REPORT OF THE SECRETARY OF THE TREASURY
Treasury Bills Offered and Accepted

EXHIBIT 4.—Treasury bills
During the fiscal year 1961 there were 52 weekly issues each of 13-week and
26-week Treasury bills (the 13-week bills represent additional issues of bills
with an original maturity of 26 weeks), 3 issues of tax anticipation series, 4 other
issues (one 364-day and three 365-day bills), and one issue of a strip of weekly
bills issued June 14, 1961, representing additional amounts of 18 series of outstanding Treasury bills. Four press releases inviting tenders and four releases
announcing the acceptance of tenders are reproduced in this exhibit. The press
releases of June 7 and June 13, 1961, are in a form representative of a weekly
double issue of regular bills (91- and 182-day) in which there is an additional
issue of a currently outstanding issue of 182-day bills having 91 days remaining
before maturity and a new issue of 182-day bills. The details of the issue of
strip bills are explained in the releases of June 2 and June 9, 1961. The tax
anticipation series is represented by the releases of March 23 and March 29,
1961, and the other bill issues are represented by the releases of April 6 and
April 13, 1961. The essential details regarding; each issue of Treasury bills
during the fiscal year 1961 are summarized in the table following the releases.
PRESS RELEASE OF JUNE 7, 1961
The Treasury Department, by this public notice, invites tenders for two series
of Treasury bills to the aggregate amount of $1,600,000,000, or thereabouts,
for cash and in exchan-ee for Treasury bills maturing June 15, 1961, in the amount
of $1,601,254,000, as follows:
91-day bills (to maturity date) to be issued June 15, 1961, in the amount
of $1,100,000,000, or thereabouts, representing an additional amount of bills
dated March 16, 1961, and to mature September 14, 1961, originally issued
in the amount of $600,004,000 (including $100,000,000 to be issued June 14,
1961), the additional and original bills to be freely interchangeable.
182-day bills, for $500,000,000, or thereabouts, to be dated June 15, 1961,
and to mature December 14, 1961.
The bills of both series will be issued on a discount basis under competitive
and noncompetitive bidding as hereinafter provided, and at maturity their
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 dayHght saving time, Monday,
June 12, 1961. 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 appHed 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




259

EXHIBITS

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 for the additional bills dated March 16, 1961 (91-days remaining until
maturity date on September 14, 1961), and noncompetitive tenders for $100,000
or less for the 182-day bills without stated price from any one bidder will be
accepted in full at the average price (in three decimals) of accepted competitive
bids for the respective issues. Settlement for accepted tenders in accordance
with the bids must be made or completed at the Federal Reserve Bank on June
15, 1961, in cash or other immediately available funds or in a like face amount
of Treasury bills maturing June 15, 1961. 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 JUNE 13, 1961
The Treasury Department announced last evening that the tenders for two
series of Treasury bills, one series to be an additional issue of the bills dated
March 16, 1961, and the other series to be dated June 15, 1961, which were
offered on June 7, were opened at the Federal Reserve Banks on June 12. Tenders
were invited for $1,100,000,000, or thereabouts, of 91-day bills and for $500,000,000, or thereabouts, of 182-day bills. The details of the two series are as
follows:
Range of accepted competitive bids

91-day Treasury bUls maturing September 14,1961

Price
High....
Low
Average.

99.428
99. 415
99. 420

Approximate
equivalent
annual rate
2. 263%
2. 314%
1 2. 295%

182-day Treasury bills maturing December 14,1961
Approximate
equivalent
annual rate

Price
!.756
1.736
!.740

2.461%
2. 500%
1 2.492%

(36 percent of the amount of 91-day bills bid for at the low price was accepted and 71 percent of the amount
of 182-day bills bid for at the low price was accepted.)




260

1961 REPORT OF THE SECRETARY OF THE TREASURY
Total tenders applied for and accepted by Federal Reserve districts
A p p l i e d for

Accepted

$30,462,000
1,468,146,000
25, 693,000
33, 945,000
9,798,000
23, 392,000
210,848,000
23,817,000
20,023,000
35,962,000
11,191,000
75, 274,000

$10,397,000
689, 363,000
10,168,000
33,401,000
9, 748,000
18, 467,000
176, 278,000
20, 267,000
19, 523,000
32, 962,000
11,191,000
69,674,000

$3,175,000
934,341,000
8, 997,000
22,181,000
1, 561,000
3,864,000
91, 566,000
6.668,000
6, 667,000
12, 540,000
3,427,000
49,235,000

$2,325,000
360,123,000
3,952,000
19,156,000
1, 211, 000
3,310,000
62,451,000
5,450,000
4, 937,000
7,337,000
3, 267,000
37,086,000

1, 958,451,000

21,100,439,000

1,144, 212,000

3 500,604,000

District
Boston
New York
PhUadelphia
Cleveland
Richmond
Atlanta
Chicago
St. L o u i s
Minneapolis
Kansas City
Dallas
S a n Francisco

- _

-_
_-

Total

A p p l i e d for

Accepted

1 On a coupon issue of the same length and for the same amoimt invested, the return on these biUs would
provide yields of 2.34%, for the 91-day bills, and 2.56%, for the 182-day biUs. Interest rates on biUs are quoted
in terms of bank discount with the return related to the face amount of the bUls payable at matm-ity rather
than the amount invested and their length in actual number of days related to a 360-day year. In contrast,
yields on certificates, notes, and bonds are computed in terms of interest on the amount invested, and relate
the number of days remaining tn an interest payment period to the actual number of days in the period, with
semiannual compounding if more than one coupon period is involved.
2 Includes $205,903,000 noncompetitive tenders accepted at the average price of 99.420.
8 Includes $50,752,000 noncompetitive tenders accepted at the average price of 98.740.

PRESS RELEASE OF JUNE 2, 1961
The Treasury Department, by this public notice, invites tenders for additional amounts of eighteen series of Treasury bills to an aggregate amount of
$1,800,000,000, or thereabouts, for cash. The additional bills will be issued
June 14, 1961, will be in the amounts, and will be in addition to the bills originally
issued and.maturing, as follows:
A m o u n t of
additional
issue

$100,000,000
100,000,000
100,000,000
100,000,000
100.000,000
100,000,000
100,000,000
100,000,000
100,000,000
100,000,000
100.000,000
100,000,000
100,000,000
100,000,000
100,000,000
100,000,000
100,000,000
100,000,000

Original issue d a t e s 1961

Feb. 2
Feb. 9
F e b . 16
Feb. 23—
Mar. 2
Mar. 9.
M a r . 16
Mar. 23..M a r . 30
Apr. 6
A p r . 13
A p r . 20
A p r . 27
May 4
-._
M a y 11
M a y 18
M a y 25
June 1

M a t u r i t y d a t e s 1961

Aug. 3
A u g . 10
A u g . 17
A u g . 24.
A u g . 31
Sept. 7
Sept. 14
Sept. 21
Sept. 28
Oct. 6Oct. 13- Oct. 19
Oct 26
Nov. 2
Nov. 9
N o v . 16
Nov. 24.-.
N o v . 30

D a y s from
J u n e 14,1961,
to m a t u r i t y

60
57
64
71
78
85
92
99
106
113
121
127
134
141
148
165
163
169

Amount
outstanding
(in millions)
J u n e 2, 1961
$1,601
1,601
1,600
1,600
1,501
500
500
500
500
500
500
400
400
500
500
501
600
500

1,800,000,000

The additional and original bills will be freely interchangeable.
Each tender submitted must be in the amount of $18,000 or an even multiple
thereof, and the amount tendered will be applied to each of the above series of
bills on the basis of the ratio of each series to the total of all series. (For example,
an accepted tender for $90,000 will be applied $5,000 to the issue with original
date of February 2, 1961, and $5,000 to each of the additional weekly issues
through the issue with original date of June 1, 1961.)
The bills offered hereunder will be issued on a discount basis under competitive
and noncompetitive bidding as hereinafter provided, and at maturity their 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).




EXHIBITS

261

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, June 8, 1961.
Tenders will not be received at the Treasury Department, Washington. 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. A single price must be submitted for each unit of $18,000, or even multiple
thereof. A unit represents $1,000 face amount of each issue of bills offered
hereunder, as previously described. 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 and 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 hours, 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. Noncompetitive tenders for $180,000 or less (in even multiples of $18,000)
without stated price from any one bidder will be accepted in full at the average
price (in three decimals) of accepted competitive bids, provided, however, that
if the total of noncompetitive tenders exceeds $900,000,000, the Secretary of the
Treasury reserves the right to allot less than the amount applied for on a straight
percentage basis with adjustments where necessary to the next higher multiple
of $18,000. Settlement for accepted tenders in accordance with the bids must
be made or completed at the Federal Reserve Bank in cash or other immediately
available funds on June 14, 1961, 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 section 454(b) and 1221(5) ofthe 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 JUNE 9, 1961
The Treasury Department announced last evening that tenders for additional
amounts of eighteen series of Treasury bills to an aggregate amount of $1,800,000,000, or thereabouts, to be issued June 14, 1961, which were offered on June 2,
were opened at the Federal Reserve Banks on June 8. The amount of accepted
tenders will be equally divided among the eighteen regular weekly issues of out-




262

1961 REPORT OF THE SECRETARY OF THE TREASURY

standing Treasury bills maturing August 3, 1961, to November 30, 1961, inclusive.
The details of the offering are as follows:
Total applied for
$4, 671, 774, 000
Total accepted (includes $187,842,000 entered on a noncompetitive basis and accepted in full at the average price shown below) _ 1, 800, 972, 000
Approximate equivalent annual rate of discount based on 109.6 days (average number of days to maturity)

Range of accepted competive bids

HighLow
Average

2.283%
2.326%
»2.308%

(44 percent of the amount bid for at the low price was accepted)

Total tenders applied for and accepted by Federal Reserve districts
District
Boston
New York
Philadelphia
Cleveland
Richmond
.
Atlanta
Chicago
S t . Louis
Minneapolis
Kansas City
Dallas
San Francisco

A p p l i e d for

-

-_
.

-

-

1

_
-

-

Total

-

-

-

$176,148,000
2, 293. 254, 000
163, 926,000
355,050.000
117,144.000
128, 322.000
482, 526.000
87,930.000
121,194,000
80,046,000
267,516,000
398, 718,000
4,671, 774,000

Accepted
$83, 628 000
652,176.000
65,844 000
153. 810. 000
33 840 000
55, 206,000
362.142,000
31, 374.000
72, 144,000
40, 212,000
157,176.000
93, 330,000
1,800,972,000

» On a coupon issue of the same length as the average for the bills and for the same amount invested, the
return on these bUls would provide a yield of 2.36%. Interest rates on biUs are quoted in terms of bank
discount with the return related to the face amount of the bills payable at maturity rather than the amount
invested and their length in actual number of days related to a 3G0-day year. In contrast, yields on certificates, notes, and bonds are computed in terms of interest on the amount invested, and relate the number
of days remaining in an interest payment period to the actual number of days in the period, with semiannual
compounding if more than one coupon period is involved.

PRESS RELEASE OF MARCH 23, 1961
The Treasury Department, by this public notice, invites tenders for $1,500,
000,000, or thereabouts, of 172-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
April 3, 1961, and they will mature September 22, 1961. They will be accepted
at face value in payment of income and profits taxes due on September 15, 1961,
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 September 15, 1961, income and profits taxes have the
privilege of surrendering them to any Federal Reserve Bank or branch or to the
Ofiice of the Treasurer of the United States, Washington, not more than fifteen
days before September 15, 1961, 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 September 15, 1961, 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 standard time, Tuesday, March 28,
1961. 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 incorpo


EXHIBITS
263
rated 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.
All bidders are required to agree not to purchase or to sell, or to make any
agreements with respect to the purchase or sale or other disposition of any bills
of this issue, until after one-thirty o'clock p.m., eastern standard time, Tuesday,
March 28, 1961.
Immediately after the closing hour, tenders will be opened at the Federal Reserve Banks and branches, following which public announcement will be made
by the Treasury Department of the amount and price range of accepted bids.
Those submitting tenders will be advised of the acceptance or rejection thereof.
The Secretary of the Treasury expressly reserves the right to accept or reject any
or all tenders, in whole or in part, and his action in any such respect shall be final.
Subject to these reservations, noncompetitive tenders for $300,000 or less without
stated price from any one bidder will be accepted in full at the average price (in
three decimals) of accepted competitive bids. 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 April 3, 1961, provided, however,
any qualified depositary will be permitted to make payment by credit in its
Treasury tax and loan account for not more than 50 percent of the amount of
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 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 R E L E A S E ^ O I ^ A R C H 29, 1961
The Treasury Department announced last evening that the tenders for
$1,500,000,000, or thereabouts, of tax anticipation series 172-day Treasury bills
to be dated April 3 and to mature September 22, 1961, which were offered on
March 23, were opened at the Federal Reserve Banks on March 28.
The details of this issue are as follows:
Total applied for
$3, 894, 635,000
Total accepted (includes $218,935,000 entered on a noncompetitive basis and accepted in full at the average
price shown below)
1, 501, 150, 000
Range of accepted competitive bids (excepting three tenders
totaling $1,900,000):
High, equivalent rate of discount approximately
2.380% per annum
98. 863
Low, equivalent rate of discount approximately 2.491%
per annum
98. 810
Average, equivalent rate of discount approximately
2.473% per annumi__
98. 818
(47 percent of the amount bid for at the low price was
accepted)
Footnote on foUowing page.




264

1961 REPORT OF THE SECRETARY OF THE TREASURY
Total applied
for

Federal Reserve district
Boston
NewYork
Philadelphia
Cleveland
Richmond
Atlanta
Chicago.St. Louis
Minneapolis
Kansas City
Dallas
San Francisco
Total -

-_

-

-.

-

-

---

_._ --

_-_

-

-

-

-

-

-

Total accepted

$213,880,000
1,689, 980,000
186,190,000
379, 695,000
69,930,000
121, 975,000
431, 415,000
114, 265,000
97,480,000
88, 900,000
245,500,000
265,426,000

$106,080,000
416, 785,000
75,878,000
177, 675,000
37, 498,000
70,103,000
216,984,000
41, 702,000
58,065, 000
39, 730,000
169,860,000
91,810,000

3,894, 636,000

1, 501,160,000

1 On a coupon issue of the sarae length and for the same amount invested, the return on these bills would
provide a yield of 2.64%. Interest rates on bills are quoted in terms of bank discount with the return related to the face amount of the bills payable at maturity rather than the amount invested and their length
in actual number of days related to a 360-day year. In contrast, yields on certificates, notes, and bonds
are computed in terms of interest on the amount invested, and relate the number of days remaining tn
an interest payment period to the actual number of days in the period, with semiannual compounding
if more than one coupon period is involved.

PRESS RELEASE OF APRIL 6, 1961
The Treasury Department, by this public notice, invites tenders for
$2,000,000,000, or thereabouts, of 365-day Treasury bills, for cash and in exchange for Treasury bills maturing April 15, 1961, in the amount of $2,000,780,000,
to be issued on a discount basis under competitive and noncompetitive bidding
as hereinafter provided. The bills of this series will be dated April 15, 1961, and
will mature April 15, 1962, 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 standard time, Wednesday, April 12,
1961. 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. (Notwithstanding
the fact that these bills will run for 365 days, the discount rate will be computed
on a bank discount basis of 360 days, as is currently the practice on all issues of
Treasury bills.) 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.
Immediatley 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 $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. Settlement for accepted tenders in
accordance with the bids must be made or completed at the Federal Reserve
Bank on April 17, 1961, in cash or other immediately available funds or in a like
face amount of Treasury bills maturing April 15, 1961. 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



265

EXHIBITS

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 APRIL 13, 1961
The Treasury Department announced last evening that the tenders for $2,000,000,000, or thereabouts, of 365-day Treasury bills to be dated April 15, 1961,
and to mature April 15, 1962, which were offered on April 6, were opened at the
Federal Reserve Banks on April 12.
The details of this issue are as follows:
Total applied for
$4, 116,451,000
Total accepted (includes $178, 894,000 entered on a noncompetitive basis and accepted in full at the average
price shown below)
.__ 2,000,367,000
Range of accepted competitive bids (excepting one tender
of $1,500,000):
High, equivalent rate of discount approximately
2.790% per annum
97. 171
Low, equivalent rate of discount approximately 2.844%
per annum
97. 117
Average, equivalent rate of discount approximately
2.827% per annumi
97.134
(81 percent of the amount bid for at the low price was accepted)
Federal Reserve district
Boston
New York
PhUadelphia-.
Cleveland
Richmond
Atlanta
Chicago
St. Louis
MinneapolisKansas City—
Dallas
San Francisco
Total—

Total applied
for
$86,818,000
2,682, 215,000
57,591,000
225,561,000
37, 904,000
74, 745,000
522,032,000
24, 797,000
27, 570,000
62,284,000
39,021,000
286, 923,000
4,116, 451,000

Total accepted

$31,818,000
., 344,345,000
20,191,000
72, 491,000
17,804,000
35,495,000
230, 793,000
13, 247,000
7,370,000
27,169,000
22. 921,000
176, 723,000
2,000,367,000

1 On a coupon issue of the same length and for the same amount invested, the return on these bills would
provide a yield of 2.93%. Interest rates on bUls are quoted in terms of bank discount with the return
related to the face amount of the biUs payable at maturity rather than the amount invested and their length
in actual number of days related to a 360-day year. In contrast, yields on certificates, notes, and bonds are
computed tn terms of interest on the amount invested, and relate the number of days remaining in an
interest payment period to the actual number of days tn the period, "with semiannual compounding if more
than one coupon period is involved.




Summary of information pertaining to Treasury bills issued during the fiscal year 1961
to

[Dollar amounts in thousands]

Gi
Maturity value

Prices and rates

Date
ofissue

Date of
maturity

Total
applied
for

Competitive bids accepted

Total bids accepted

Tenders accepted
Days
to
maturity

High
Total
accepted

On
competitive
basis

On noncompetitive
basis

For
cash

In exchange

Average Equivalent averprice
per hun- age rate
(percent)
dred

Low

EquivaPrice
EquivaPrice
lent rate
lent rate
per
per
hundred (percent) hundred (percent)

Amount
maturing
on issue
date
of new
offering

CO

05

o
O

Regular Weekly
1960
July
7
7
14
14
21
21
28
28
Aug. 4
4
11
11
18
18
25
25
Sept. 1
1
8
8
15
15
22
22
29
29
Oct.
6
6
13
FRASER13
20

M
Oct.
Jan.
Oct.
Jan.
Oct.
Jan.
Oct.
Jan.
Nov.
Feb.
Nov.
Feb.
Nov.
Feb.
Nov.
Feb.
Dec.
Mar.
Dec.
Mar.
Dec.
Mar.
Dec.
Mar.
Dec.

6,1960
5,1961
13,1960
12,1961
20,1960
19,1961
27,1960
26,1961
3,1960
2,1961
10,1960
9,1961
17,1960
16,1961
25,1960
23,1961
1,1960
2,1961
8,1960
9,1961
15,1960
16,1961
22,1960
23,1961
29,1960

1961
M a r . 30
Jan.
5
Apr. 6
J a n . 12
A p r . 13
J a n . 19

Digitized for


91 $1, 687,161 $1, 000, 429
878, 310
500, 050
182
91 1, 699, 656 1,001, 296
977, 215
500,189
182
91 1, 733,976 1,000,175
869, 442
400, 053
182
91 1, 791, 018 1, 000,171
788,395
400, 200
182
91 1, 808, 924 1,000,135
890, 064
400, 019
182
91 1, 826, 613 1,100, 283
756, 986
500,026
182
91 1, 851, 090 1,100, 086
919, 735
500, 335
182
92 1, 826,183 1,100,019
500, 864
182 1, 321, 909
91 1, 805, 946 1,000, 438
505, 724
182 1, 066,059
91 2, 002, 864 1,108, 713
500, 692
182 1, 403, 521
91 1, 911, 068 1,099, 762
500,129
182 1, 080, 666
91 2, 040, 226 1,101, 623
500, 264
182 1, 018, 205
91 1, 968,120 1, 001, 463
182
91
182
91
182
91

848,670
1, 768, 895
992,197
1, 774, 694
1,095, 387
1, 811, 350

499,960
1, 000,145
600,137
1,000, 304
500, 480
1, 001,199

$835, 583
466, 451
784, 667
450, 300
770,118
347, 664
809, 359
360, 907
813, 024
359, 789
911, 744
462, 749
869, 366
452, 909
905, 369
459, 516
803,630
462,848
928, 856
460, 831
852,123
446, 987
837, 243
438, 042
809, 223

$164, 846
33, 599
216, 629
49, 889
230, 057
52, 489
190, 812
39, 293
187, 111
40, 230
188, 539
37, 277
230, 719
47, 426
194, 650
41, 348
196, 808
42, 876
179, 858
39, 761
247, 629
53,142
264, 280
62, 222
192, 240

$882, 063
447, 682
986, 093
448, 086
948, 711
368, 203
878, 361
364, 457
877,371
358,799
964, 731
448,414
990, Oil
447, 672
1, 048, 675
495,108
916, 642
454,015
1,099, 368
499,190
1,085,198
497, 593
1,085, 793
496, 520
894, 763

$118,366
52, 368
15, 203
52,103
51, 464
31,850
121, 810
35, 743
122, 764
41, 220
135, 552
51, 612
110,074
52, 763
51, 344
5,756
83, 796
61, 709
9,345
1,402
14, 554
2,536
15, 730
3,744
106, 700

99. 417
98. 582
99. 351
98.395
99. 417
98. 673
99. 392
98. 635
99. 461
98. 782
99. 440
98. 757
99.424
98. 675
99. 356
98. 582
99. 356
98. 672
99. 363
98. 584
99. 329
98. 526
99. 385
98. 613
99. 422

2.307
2.805
2.567
3.175
2.307
2.625
2.404
2.701
2.132
2.409
2.216
2.468
2.278
2.621
2.618
2.806
2.549
2.825
2.520
2.801
2.654
2.916
2.433
2.743
2.286

99.424
98.604
99. 373
98. 418
99.423
98. 684
1 99.399
1 98. 644
99. 472
98. 792
1 99. 451
98. 774
99. 445
1 98. 700
1 99.370
1 98. 590
99. 368
98. 588
99. 371
98. 590
1 99. 338
98. 550
99.394
98. 624
99. 433

2.279
2.761
2.480
3.129
2.283
2.603
2.378
2.682
2.089
2.389
2.172
2.425
2.196
2,571
2.465
2.789
2.600
2.793
2.488
2.789
2.619
2.868
2.397
2.722
2.243

99.407
98. 565
99.337
98.386
99. 410
98. 670
99.388
98. 630
99. 456
98. 778
99. 434
98. 742
99. 417
98. 663
99. 361
98. 680
99. 352
98. 569
99. 358
98. 581
99.323
98.620
99. 380
98. 604
99. 419

2.346 $1, 500, 345
2.838
2.623 1, 500,166
3.193
2.334 1,400, 468
2.631
2.421 1,401,176
2.710
2.156 1, 400, 536
2.417
2.239 1, 591,048
2.488
2.306 1, 600, 257
2.645
2,540 1, 600,116
2.809
2.564 1, 500, 658
2.831
2.540 1, 600, 265
2.807
2.678 1, 600, 246
2. 927
2.453 1, 600, 774
2.761
2.298 1, 500, 292

457, 608
815, 636
461,157
765, 276
443,296
752,365

42,352
184, 509
38, 980
235,028
57,184
248,834

448,306
864, 270
446, 932
904, 674
498,300
988, 778

51, 654
135, 875
53, 205
95, 630
2,180
12, 421

98. 620
99. 375
98. 521
99. 318
98. 443
99.392

2.729
2.473
2.925
2.698
3.079
2.406

98. 640
99.388
1 98. 538
1 99. 337
1 98. 460
99. 401

2.690
2.421
2.892
2.623
3.046
2.370

98.
99.
98.
99.
98.
99.

2.749
2.504
2.947
2.738
3.088
2.433

1
1
1
1

610
367
510
308
439
385

1, 500, 509
1, 501, 320
1,400,323

o

o
W

t>

Ul

d

w

Kj

20
27
27
Nov. 3
3
10
10
17
17
25
25
Dec. 1
1
8
8
15
15
22
22
29
29
1961
Jan.
5

5
12
12
19
19
26
26
Feb.

2

2
9
9
16
16
23
23
Mar. 2
2
9
9
16
16
23
23
30
30
Apr.

6

Apr. 20
Jan. 26
Apr. 27
Feb. 2
May 4
Feb. 9
May 11
Feb. 16
May 18
Feb. 23
May 25
Mar. 2
June 1
Mar. 9
June 8
Mar. .16
June. 16
Mar. 23
June 23
Mar. 30
June 29

182
974, 990
91 1, 814, 583
182
961,320
91 1, 728, 266
182
938,065
91 1,815, 577
182,
866, 741
91 2, 111, 006
182
898,185
90 1, 780, 561
181 1, 304, 671
91 1, 810,022
97.3, 611
182
91 1, 803,830
182 1, 038, 298
91 2,124,068
182 1, 405, 543
91 1, 999, 650
183 1,083, 984
91 2,012,429
182 1, 030, 977

401, 065
1,000, 640
400, 087
1,000, 691
400,140
1,100, 377
400, 206
1,101, 304
499, 975
1,102,176
601, 794
1, 000, 680
500, 211
1,100,132
500, 235
1, 098, 388
501,318
1,101, 397
500.151
1, 000, 899
500, 633

338,070
795, 612
348, 849
799, 349
352, 872
892, 015
355, 095
862, 560
454,123
881, 933
450, 248
801, 590
458,322
893, 678
452, 808
868,166
449, 721
867,176
446, 916
834,481
467, 457

62, 995
205, 028
51, 238
201,242
47, 268
208, 362
45,111
238,744
45,852
220, 243
51, 646
199, 090
41, 889
206, 454
47, 427
230, 222
51, 697
234, 221
63, 235
166, 418
33,176

2.349
398, 716
136, 422
864, 218
43,148
356, 939
143, 932
856, 659
64, 696
345, 444
152, 547
947, 830
53,117
347,089
171, 358
929, 946
63,177
436, 798
82,718
1, 019, 458
7, 375
494, 419
13, 573
987,107
. 1,662
498, 549
99, 738
1,000, 394
447, 755
52, 480
78,149
1, 020, 239
17, 255
484,063
939, 970 : 161,427
63, 082
447, 069
1.34,882
866, 017
53, 575
447, 058

98. 682
99. 462
98. 701
99. 462
98. 760
99. 396
98. 700
99. 337
98. 572
99. 401
98. 618
99. 412
98. 665
99. 412
98. 654
99. 410
98 675
99. 438
98. 784
99.457
98.820

2.806
2.129
2.569
2.128
2.453
2.390
2.572
2.624
2.825
2.396
2.749
2.326
2.640
2.328
2.663
2.334
2.621
2.222
2.392
2.148
2.333

98. 596
99. 470
98. 718
99. 475
98. 772
1 99. 413
1 98. 722
1 99. 360
1 98. 586
99. 412
98. 626
1 99. 422
98. 684
99. 427
98. 665
99. 421
98. 696
99.449
98.800
99. 464
98.838

2.777
2.097
2.536
2.077
2.429
2.322
2. 528
2.632
2. 797
2.352
2. 733
2.287
2.603
2.267
2.641
2.291
2.579
2.180
2.361
2.120
2.298

98. 680
99. 467
98. 698
99.444
98. 751
99. 379
98. 691
99. 333
98. 560
99.389
98. 612
99.396
98. 653
99. 401
98. 648
99. 403
98. 671
99. 433
98. 780
99. 449
98. 814

2.809
2.148
2.676
2.200
2.471
2.457
2.589
2.639
2.848
2.444
2.761
2.389
2.664
2.370
2. 674
2.362
2.629
2.243
2.400
2.180
2.346

91 n , 756,976
182
926, 797
91 1,909, 573
182
988, 686
91 1,888, 783
182
994, 525
91 1,986,886
182 1,081,602
91 2,056, 806
182 1,082,345
91 1, 945,170
182 1,061,296
91 2,036,167
182 1,286,687
91 2,005,126
182 1,180,907
91 2,083,220
182 1, 053,349
91 1,994, 401
182 1,201, 664
91 1,930, 640
182
812, 738
92 1, 952, 735
182 1,033,831
91 1,923,924
182 1,046,395
91 1. 915,842
182 i; 048,146
91 2,000,116
183 1,118,342
91 1,934,089
182 1,142,138
91 2,080, 779
182 1,027, 863

$1,000, 876
500, 236
1,000,441
600,112
1,100, 643
400,172
1,100, 478
500,051
1,100, 873
500,388
1,100,173
500,174
1.101,239
500,436
1,100,802
500,145
1,000. 979
500,141
1,092, 420
500. 282
1,099.936
500,004
1,094,929
500,077
1,099, 921
500,085
1,100,096
500,135
1,100,815
500, 376
1,100,341
400,290
1,100, 767
400,115

$823, 754
469,204
741, 533
447,929
830, 910
343,701
893,258
456, 746
892,733
468, 550
899, 663
461,038
891,194
458,438
860,744
448,485
799,035
456,417
871,966
450, 542
859,882
448, 997
839, 615
440.580
923,113
464,126
923,265
462,984
868,274
450, 885
856,133
348. 465
908,964
365,284

$177,122
31,032
258,908
52,183
269,633
56, 471
207, 220
43,305
208,140
41, 838
200, 510
39,136
210.045
41, 998
240,058
61, 660
201, 944
43, 724
220,454
49, 740
240,054
51,007
255,314
59, 497
176,808
35,959
176,831
37,151
232, 541
49.490
244,208
61,825
191.803
44,831

$836, 700 $164,176
62, 586
447,650
101,888
898. 553
52,188
447, 924
84,099
1,016, 444
33, 914
366, 258
179,885
920, 593
61,921
448,130
126,282
974, 591
52,948
447, 440
180,137
920, 036
52,489
447,685
160, 781
940, 458
51, 967
448, 469
61, 427
1,039,375
42, 667
457, 578
70,417
930, 562
41. 977
458,164
85,866
1,006. 554
41, 987
458,295
95, 475
1,004, 461
17,470
482, 534
141,093
953,836
62,934
447,143
118, 849
981, 072
41. 626
458,459
108,861
991,235
43,265
456, 870
1.017,812
83,003
42, 936
457, 439
68,316
1,032. 025
21,960
378,330
109,206
991, 561
32,233
367, 882

99.435
98. 772
99.397
98. 684
99.404
98. 721
99.436
98. 776
99.419
98. 738
99. 400
98. 703
99.378
98. 659
99.369
98. 641
99.344
98. 595
99.372
98.648
99.405
98. 759
99. 418
98. 761
99. 395
98. 698
99.376
98. 656
99. 403
98. 701
99. 421
98. 758
99. 448
98.837

2.235
2.429
2.385
2.602
2.358
2.530
2.230
2.422
2.299
2. 497
2.374
2.566
2.462
2.652
2.496
2. 688
2.594
2.779
2.485
2.674
2.352
2.465
2.278
2.471
2.392
2.576
2.470
2.668
2.361
2.556
2.292
2.457
2.185
2.300

1 99.449
1 98. 786
1 99. 408
1 98. 710
1 99. 413
1 98. 730
99. 445
98. 790
99. 428
1 98. 748
1 99. 413
1 98. 721
1 99.384
98. 666
1 99.383
98. 657
1 99.352
1 98. 612
99. 376
98. 652
99.411
1 98..768
99.426
98. 768
99.405
98.716
99.384
1 98. 666
99. 410
98. 708
99. 427
98. 762
» 99. 451
98.842

2.180
2.401
2.342
2.552
2.322
2.612
2.196
2.393
2.263
2.476
2.322
2.530
2.437
2.639
2.441
2.656
2.564
2.745
2.469
2.666
2.330
2.437
2.246
2.437
2.354
2.540
2.437
2.639
2.334
2.642
2.267
2.449
2.172
2.291

99. 430
98. 760
99.393
98. 676
99. 400
98. 717
99.431
98. 770
99. 414
98. 730
99.394
98. 698
99. 374
98. 656
99.364
98. 637
99.342
98. 590
99.367
98. 646
99.398
98. 738
99. 412
98. 748
99.390
98. 694
99.371
98. 650
99.399
98. 698
99. 417
98. 756
99. 444
98. 832

2.255
2. 453
2.401
2.619
2.374
2.538
2.251
2.433
2.318
2.612
2.397
2.575
2. 476
2.658
2.516
2.696
2.603
2.789
2.504
2.678
2.382
2.496
2.301
2.476
2.413
2.583
2.488
2.670
2.378
2.661
2.306
2.461
2.200
2.310

1,400,396
1, 400,149
1, 605, 272
1, 600,125
1, 600,142
1, 500, 737
1, 608, 780
1, 599, 788
1,601,680
1, 601,766

1961

Apr. 6
July 6
Apr. 13
July 13
Apr. 20
July 20
Apr. 27
July 27
May 4
Aug. 3
May 11
Aug. 10
May 18
Aug. 17
May 26
Aug. 24
Jime 1
Aug. 31
June 8
Sept. 7
June 15
Sept. 14
June 23
Sept. 21
June 29
Sept. 28
July 6
Oct. 5
July 13
Oct. 13
July 20
Oct. 19
July 27
Oct. 26

6
13
13
20
20
27
27

Footnotes at end of table.



$1,600,195
"i,'500,'493
1, 401,252
'i,"400,'840
1,400,610

H

^
HH
O

W

^
03

1,600, 403
"i,"60i,'639
'i,'603,"040
"i,"506,'404
'i,"600,'724
"i,'598,"5i7
"i,"60i,'66i
"i,"500,"859

'i,"56i,'oi3
'i,"505,'92i
'i,"56r608
1,600, 565

bO

ot)

^

Summary of information pertaining to Treasury bills issued during the fiscal year 1961—Continued

to

[DoUar amounts in thousands]

O)
(X)

Maturity value

Prices and rates

Tenders accepted
Date
ofissue

Date of
maturity

Days
to
maturity

Total
applied
for

Total bids accepted

Competitive bids accepted
High

Total
accepted

On
competitive
basis

On noncompetitive
basis

For
cash

In exchange

Average Equivaprice
lent averper hun- age rate
dred
(percent)

Low

EquivaPrice
EquivaPrice
lent rate
per
lent rate
per
hundred (percent) hundred (percent)

Amount
maturing
on issue
date
of new
offering

O
td
O

Regular Weekly
1961
May 4
11
11
18
18
26
25
June 1
1
8
8

14 2

15

W
Aug.
Nov.
Aug.
Nov.
Aug.
Nov.
Aug.
Nov.
Aug.
Nov.
Sept.
Dec.
Aug.
Aug.
Aug.
Aug.
Aug.
Sept.
Sept.
Sept.

3
2
10
9
17
16
24
24
31
30
7
7
3
10
17
24
31
7
14
21

Sept.
Oct.
Oct.
Oct.
Oct.
Nov.
Nov.
Nov.
Nov.
Nov.
Sept.

28
5
13
19
26
2
9
16
24
30
14




91 2,086, 986
182
949,636
91 1,876, 879
182 1,116,254
91 2,012,064
182 1,201, 416
91 2,047,664
183
966.031
91 2,288,064
182
949, 918
91 2,137,631
182
998,304
50
67
64
71
78
85
92
99
106 >4.672,620
113
121
127
134
141
1^
155
163
169
91 1,958. 666

1,100,652
500,252
1,100, 589
500,372
1,100,018
500, 728
1,100,352
500,151
1,000,929
500, 268
1.100,635
600,354

920.615
463,266
903,233
463,143
871,973
448, 702
890,329
450, 293
838,127
461,313
900,422
456,338

180,037
36,986
197,356
37,229
228,045
52,026
210,023
49,858
162,802
38,955
200,213
44,016

946, 820
444. 792
919,831
448, 466
929, 636
448, 702
1,034, 247
467, 641
922,238
458, 592
982, 259
448,290

1,801,872

1,613, 178

188,694

1,801,872

153,832
55,460
380,758
61,906
170,482
52,026
66,105
32, 510
78, 691
41, 676
118,376
52,064

99. 419
98. 778
99.436
98. 775
99.428
98. 769
99.405
98. 744
99.384
98. 689
99.364
98. 621

2.299
2. 417
2.232
2.423
2.264
2.435
2.354
2.470
2.437
2.593
2. 616
2.727

99.428
98.800
99.444
» 98. 786
99.440
1 98. 775
1 99. 411
1 98. 766
1 99.386
1 98. 703
1 99.369
1 98.636

2.263
2.374
2.200
2.401
2,215
2.423
2.330
2.447
2.429
2. 665
2.496
2.698

99. 416
98. 770
99.432
98. 773
99.425
98. 766
99.401
98. 735
99. 383
98. 685
99.361
98. 616

2.310
2.433
2.247
2.427
2.275
2.441
2.370
2.489
2.441
2.601
2.528
2.738

99. 297

2.308

99.305

2.283

99. 292

.32

1,501,013
1, 600,379

Ul

1,601,214

o
td

1,602, 696
1, 501,190
1, 592, 655
O

td

>
td
K|

1,100, 604

894, 536

206,068

1,050,019

50, 585

99.420

2.295

99. 428

2.263

99. 415

2.314

1,601,254

Dec.
Sept.
Dec.
Sept.
Dec.

14
21
21
28
28

182
90
181
91
182

1,143, 767
2,055,682
1,027,132
1,807,273
972, 660

500,368
1,101,056
500, 767
1,100,048
500,230

449, 711
867,952
439,086
922,420
459,812

50,657 1 497, 962
1,001,619
233,104
448,272
61,68
1,024, 665
177,628
468,009
40,418

2,406
99,437
62, 495
75,383
32, 221

(.740
1.419
;.733
1.439
L787

2.492
2.325
2.519
2.219
2.399

;. 756
'.425
;.744
1.447
;.796

2.461
2.300
2.498
2.188
2.382

98. 736
99.416
99.427
98. 774

2.500
2.340
2. .526
2.267
2.425

1.024
1.110

2.823
2. 788

1 98.138
1 98. 205

2.660
2.648

97. 972
98. 082

2.897
2.830

1 98. 863

2.380

1.810

1, 595,080
1, 600,554

Tax Anticipation
1960
J u l y 13
Oct. 21

1961
M a r . 22
J u n e 22

1901
Apr. 3

Sept. 22

252
244

4, 403, 843
5, 442, 706

3,511,749
3, 503, 766

3, 060,110
2, 889, 040

1, 502, 900

1, 282, 215

451, 639
614, 726

3, 511, 749
3, 503, 766
1, 502,900

Other
1960
July 15
Oct. 17
1961

Jan. 15
Apr. 15

1961
July 15
Oct. 16

365
364

3, 035, 638 1, 500, 509 1, 321, 019
3, 301, 897 1, 502,165 1,311,675

179, 490
190,490

1,379.977
1,486,443

120, 532
15, 722

96. 690
96. 834

3.265
3.131

1 96. 740
96. 891

3.215
3.075

96. 665
96. 815

3.289
3.150

2,000, 876
2. 006, 582

1962
Jan. 15
Apr. 15

365
365

3, 078, 008 1, 601, 672 1, 353, 414
4,116, 646 2,000, 462 1, 821, 573

148,258
178,889

1,409,557
1,814,471

92,115
185, 991

97. 284
97.134

2.679
2.827

1 97. 318
> 97.171

2.645
2. 790

97. 262
97.117

2.700
2.844

1, 503, 740
2,000, 780

1 R e l a t i v e l y smaU a m o u n t s of b i d s were accepted a t a price s o m e w h a t a b o v e t h e high
s h o w n . H o w e v e r , t h e higher price is n o t s h o w n i n order to p r e v e n t a n a p p r e c i a b l e
d i s c o n t i n u i t y i n t h e r a n g e (covered b y t h e h i g h t o l o w prices s h o w n ) w h i c h w o u l d m a k e
it misrepresentative.
2 A n a d d i t i o n a l $100 miUion each of 18 series of w e e k l y biUs issued i n a " s t r i p " for
cash (see press releases d a t e d J u n e 2 a n d J u n e 9, 1961, i n t h i s e x h i b i t ) .
N O T E . — T h e u s u a l t i m i n g w i t h respect t o issues of T r e a s u r y bUls is: Press release
i n v i t i n g t e n d e r s , 8 d a y s before d a t e of issue; closing d a t e on w h i c h t e n d e r s are a c c e p t e d ,
3 d a y s before d a t e of issue; a n d press release a n n o u n c i n g acceptence of t e n d e r s , 2 d a y s
before d a t e of issue. F i g u r e s are final a n d m a y differ fi'om those s h o w n i n press release
a n n o u n c i n g p r e l i m i n a r y results of a n offering.
T h e 13-week bills r e p r e s e n t a d d i t i o n a l issues of biUs w i t h a n original m a t u r i t y of 26
weeks.
N o n c o m p e t i t i v e t e n d e r s ( w i t h o u t s t a t e d price) from a n y one b i d d e r for $200,000 or
less i n t h e case of t h e 13-week biUs, a n d for $100,000 or less t n t h e case of t h e 26-week bills,




were a c c e p t e d i n fuU a t t h e average price for accepted c o m p e t i t i v e b i d s . F o r t h e t a x
a n t i c i p a t i o n series d a t e d J u l y 13 a n d Oct. 21, 1960, t h e a m o u n t w a s $500,000 a n d for t h e
issue d a t e d A p r . 3, 1961, t h e a m o u n t w a s $300,000. F o r t h e o t h e r bills t h e l i m i t a t i o n
w a s $400,000. I n t h e case of t h e s t r i p of biUs, n o n c o m p e t i t i v e t e n d e r s for $180,000 or less
(in e v e n m u l t i p l e s of $18,000) were accepted i n fuU a t t h e average price of a c c e p t e d
competitive bids.
All e q u i v a l e n t r a t e s of d i s c o u n t s h o w n are on a b a n k - d i s c o u n t basis.
Qualified depositaries were p e r m i t t e d to m a k e p a y m e n t b y credit i n T r e a s u r y t a x
a n d loan a c c o u n t s for t h e s t r i p of bills issued J u n e 14,1961, a n d for T r e a s u r y bills of t h e
t a x a n t i c i p a t i o n series d a t e d J u l y 13 a n d Oct. 21, 1960, aUotted to t h e m for t h e m s e l v e s
a n d their c u s t o m e r s u p to a n y a m o u n t for w h i c h t h e y w e r e qualified i n excess of existing deposits w h e n so notified b y t h e F e d e r a l R e s e r v e B a n k of t h e i r d i s t r i c t s . I n t h e
case of t h e t a x biUs d a t e d A p r . 3,1961, c r e d i t for n o t m o r e t h a n 50 p e r c e n t of t h e a m b u n t
of bills aUotted w a s aUowed.

Ul

to
Oi
CO

270

1961 REPORT OF THE SECRETARY OF THE TREASURY

Guaranteed Obligations Called
EXHIBIT 5.—Calls for partial redemption, before maturity, of insurance fund
debentures
During the fiscal year 1961, there were fifteen calls for partial redemption,
before maturity, of insurance fund debentures, seven dated September 23, 1960,
and the others dated March 16, 1961. The notices of call were published in the
Federal Register of September 30, 1960, and March 30, 1961. The notice covering the ninth call of the 2}^, 2%, 2%, 2%, 3, 3%, 3}i, 3%, 3)^, 3^i and 4/8 percent
Series AA mutual mortgage insurance fund debentures is shown in this exhibit.
Since the other notices of call are similar to this exhibit, they have been omitted
but the essential details are summarized in the table following the notice of call.
NOTICE OF CALL. FEDERAL REGISTER OF SEPTEMBER 30, 1960
To Holders of 2^1] 2%; 2%; 2M; 3; 3}^; 3}i; 5^8/ 3}^; 3%; and ^/s Percent Mutual
Mortgage Insurance Fund Debentures, Series A A:
NOTICE OF CALL FOR PARTIAL REDEMPTION, BEFORE MATURITY, OF 2}^; 2H; 2%; 2%; 3;
3H; 3H; 3H; 3 ^ ; 3%; AND

4H P E R C E N T M U T U A L M O R T G A G E I N S U R A N C E F U N D

DEBEN-

T U R E S , SERIES AA

Pursuant to the authority conferred by the National Housing Act (48 Stat.
1246; U.S.C. Title 12, Sec. 1701 et seq.) as amended, public notice is hereby
given that 2]4, 2%, 2%, 2}^, 3, 3/8; 3>i 3/8, 3><, 3%, and 4/8 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 1, 1961, on which date interest on such debentures shall cease:
2y2, 2ys, 2%, 2y%, 3, 3y8, 3y^, 3y8, 5^, 3%, and 4ys percent mutual mortgage insurance
fund debentures. Series A A
Denomination

Serial numbers (all
numbers inclusive)

$50
3,884 to 6,110
100
11,369 to 18,042
500
3,034 to 4,341
1,000
7,845 to 11,989
5,000
3,063 to 4,114
10,000
.
2,274 to 2,856
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, 1960. This does not affect the right of the holder of a debenture to sell and assign the debenture on or after October 1, 1960, and provision
will be made for the payment of final interest due on January 1, 1961, 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 1, 1960,
to December 31, 1960, inclusive, at par and accrued interest, to date of purchase.
Instructions for the presentation and surrender of debentures for redemption
on or after January 1, 1961, or for purchase prior to that date will be given by
the Secretary of the Treasury.
APPROVED: September 26, 1960
A. GILMORE FLUES,

JULIAN H . ZIMMERMAN,

Acting Secretary of the T-reasury.
Commissioner.
Debentures redeemed on or after January 1, 1961, will have interest paid with
principal for each $1,000 for each percent as follows: $12.50 for the 2 / % ; $13,125
for the 2/8%; $13.75 for the 2 ^ % ; $14,375 for the 2%%; $15.00 for the 3 % ;
$15,625 for the 3/8%; $16.25 for the 3>^%; $16,875 for the 3%%; $17.50 for the
3 / % ; $18.75 for the 3 ^ % ; and $20,625 for the 4/8%.
Debentures purchased between October 1 and December 31, 1960, will have
interest paid with principal from July 1, 1960, to date of purchase, at the following
rates per day for each $1,000 for each percent: $0.067935 for the 2 / % ; $0.071332
for the 2/8%; $0.074728 for the 2%%; $0.078125 for the 2%%; $0.081522 forthe
3%; $0.084918 for the 3/8%; $0.088315 for the 3 ^ % ; $0.091712 for the 3%%;
$0.095109 for the 3>^%; $0.101902 for the 3%%: and JfiO. 112092 for the 4/8%.




Summary of information contained in the notices of call for partial redemption of insurance fund debentures during the fiscal year 1961

N o t i c e of call
Rftdprnntion d a t e
Serial n u m b e r s called b y d e n o m inations:
$50
$100
$500
$1 000
$5000
$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 in
fuU w i t h p r i n c i p a l .

21^, 2 ^ , 2%, 2 ^ , 3, 31^
3 K , 3^^, 3 ^ , 334, a n d 41^^
percent m u t u a l mortgage
i n s u r a n c e fund debent u r e s , Series A A, n i n t h
call

2 ^ , 2 ^ , 2 % , 2 l i , 3, 33'^
33.4,3^,33^,3%, and 4H
percent m u t u a l mortgage
i n s u r a n c e fund debent u r e s , Series A A , t e n t h
call

23^, 2 ^ , 2 % , 3, a n d 3 H perc e n t housing insurance
f u n d debentm-es, Series
B B , fifth caU

2 ^ , 2 % , 2 % , 3, 334, 3 %
a n d 33-^ p e r c e n t h o u s i n g
insurance fund debent u r e s , Series B B , s t s t h
call

3M p e r c e n t section
h o u s i n g insurance f u n d
d e b e n t u r e s , Series C O ,
first call

Sept. 23,1960
J a n . 1, 1961

M a r . 16, 1961
J u l y 1,1961 - -

Sept. 23,1960
J a n . 1, 1961 _

M a r . 16,1961J u l y 1,1961

M a r . 16, 1961.
J u l y 1,1961.

3884-6110
11369-18042
3034-4341
7845-11989
3063-4114
2274-2866
Sept 30 1960

6111-8697
18043-24860
4342-6325
11990-17493
4115-5404
2857-3889
M a r . 31,1961

117-139
—
599-875
209-346
551-847
263-308
1884-2248
M a r . 31, 1961-

1-4.

$18.75.

.

-

— 105-116453-598
166-208
—
432-650
1S9-252.
1586-1883
Sept. 30, I960—

1-3.
1-9.
1-2.
M a r . 31,1961.

$12.50 for 2 3 ^ % , $13,125 for
25/i%, $13.75 for 23/4%,
$14,375 for 2^4%, $15.00
for 3 % , $15,625 for 3 \ i % ,
$16.25 for 3 H % , $16,875
for 3M%, $17.50 for 3 ^ %
$18.75 for 3 % % , $20,625
for 4 H % .

$12.50 for 23^%, $13,125 for
2 H % , $13.75 for 23/4%
$14,375 for 2 ^ % , $15.00
for 3 % , $15,625 for 3 ^ ^ %
$16.25 for 334%, $16,875
for 3 % % , $17.50 for 33/2%
$18.75 for 3 % % , $20,625
for 43^%.

$12.50 for 23^%, $13,125 for
2WYo, $13.75 for 23/4%,
$16.00 for 3 % , $16,875 for
33/^%.

$12.60 for 2 ^ % , $13.75 for
2 % % , $14,375 for 2 % % ,
$15.00 for 3 % , $16.25 for
33^4%, $16,876 for 3 ^ % ,
$17.50 for 3 3 ^ % .

P r e s e n t a t i o n for p u r c h a s e prior
t o caU d a t e :
Period
_ Oct. 1-Dec. 31,1960
A m o u n t of accrued interest $0.067935 for 23^%, $0.071332
for 2W/o, $0.074728 for
per $1,000 per d a y p a i d
2M%, $0.078125 for 2"^%
w i t h principal.
$0.081522 foi 3 % , $0.084918
for 3 \ i % , $0.088315 for
3 H % , $0.091712 for 33/^%
$0.095109
for
3)^%,
$0.101902
for
33/4%
$0.112092 for 4>^%, from
J u l y 1, 1960, to d a t e of
purchase.

A p r . 1-June 30,1961.
$0.069061 for 23^%, $0.072514
for 2W7o, $0.075967 for
2 % % , $0.079420 for 27/i%
$0.082873 for 3 % , $0.036326
for
33^%,
$0.089779
for 33^4%, $0.093232 for
3%%,
$0.096685
for
33^%, $0.103591 for 3^4%,
$0.113950 for 4 3 ^ % , from
J a n . 1, 1961, to d a t e of
purchase.

Oct. 1-Dec. 31, 1960
$0.067935 for 2 3,^%, $0.071332
for 2^^%, $0.074728 for
23/4%, $0.081522 for 3 % ,
$0.091712 for 3 % % , from
J u l y 1, 1960, to d a t e of
purchase.

A p r . 1-June 30,1961
A p r . 1-June 30,1961.
$0.069061 for 23^^%, $0.075967 $0.103591 from J a n . 1, 1961,
for 2 % % , $0.079420 for
to d a t e of p u r c h a s e .
2 ^ % , $0.082873 for 3 %
$0.089779
for
334%
$0.093232
for
3H%,
$0.096685 for 33^%, from
J a n . 1, 1961, to d a t e of
purchase.




Summary of information contained in the notices of call for partial redemption of insurance fund debentures during the fisoal year 1961—Con.
to

Notice of call
Redemption date.
Serial n u m b e r s called h y denominations:
$60
$100
$500
$1,000
$5,000...
. _
$10,000
F i n a l d a t e for transfers or denomin 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 i n t e r e s t per $1,000 p a i d in fuU
with principal.

2 l i , 3, 33^^, 33^4, 3 % , 3 ^ ,
3 % , a n d 43''^ percent
servicemen's m o r t g a g e
i n s u r a n c e fund debent u r e s . Series E E , sixth
call

2-A, 2%, 3, 33^, 334, 3 H ,
3 3 ^ , 3 % , a n d 43.^ percent
servicemen's m o r t g a g e
i n s u r a n c e fund debentures. Series E E , seventh
call

Sept. 23, 1960 J a n . 1, 1961

M a r . 16, 1961.
J u l y 1, 1961-

28-91...
215-474
24-110
102-384
16-76
37-109 .
Sept. 30, I 9 6 0 -

- -

_.

$14,375 for 2 ^ % , $15.00 for
3 % , $15,625 for 33^%,
$16.25 for 3V4%, $16,875
for 3 H % , $17.50 for 33^%,
$18.75 for 3 % % , $20,625

for m%.
P r e s e n t a t i o n for p u r c h a s e prior
tocaUdate:
Period
A m o u n t of accrued interest
per $1,00.0 per d a y p a i d
w i t h principal.




Oct. 1-Dec. 31, 1960
$0.078125
for
2^%,
$0.081522
for
3%,
$0.084918
for
3i/t%,
$0.088315
for
33.4%,
$0.091712
for
3^^%,
$0.095109
for
33^%,
$0.101902
for
3%%,
$0.112092
for
43^%,
from J u l y 1,1960, to d a t e
of p u r c h a s e .

23^ percent w a r h o u s i n g 23^ p e r c e n t w a r h o u s i n g
insurance fund debeninsm-ance fund debent u r e s . Series H , t w e n t y t u r e s . Series H , t w e n t y t h i r d call
fourth call

Sept. 23, 1960
- - - J a n . 1, 1961

M a r . 16, 1961
J u l y 1, 1961-

4498-4661
15470-16318
3913-4000,4526-470418811-19689
4323-4459
41024-42961
Sept. 30, 1960

4662-4700
16319-16791
4705-4801
19690-20565
4460-4593 . .
42962-44222
M a r . 31, 1961

$13,125 for 2 H % , $14,375
for 27A%, $15.00 for 3 % ,
$15,625 for 33^^%, $16.25
for 33^4%, $16,875 for
3 H % , $17.50 for 33/2%,
$18.75 for 3M%, $20,.625
for 41/^%.

$12.50

$12.50--

A p r . 1-June 30, 1961
$0.072514
for
2^%,
$0.079420
for
2^^%,
$0.082873
for
3%,
$0.086326
for
33^%,
$0.089779
for334%,
$0.093232
for
3H%,
$0.096685
for
33^^%,
$0.103591
for
3H%,
$0.113950
for
41/^%,
from J a n . 1,1961, to d a t e
of p u r c h a s e .

Oct. 1-Dec. 31, 1960
$0.067936 from J u l y 1,1960,
to d a t e of p u r c h a s e .

92-200
475-788
111-193
385-664
77-125
110-177
M a r . 31, 1961

1
S

23^ percent T i t l e I h o u s i n g
insurance fund debent u r e s . Series L . twelfth
call

Sept. 23, 1960.
J a n . 1, 1961.

296-321.
127-136.
505-621.
68-70.

...

O
O

Sept. 30, 1960.
$12.50.

-

Ul

.
o
A p r . 1 - J u n e 30, 1961
$0.069061 from J a n . 1,1961,
to d a t e of p u r c h a s e .

Oct. 1-Dec. 31, 1960.
$0.067935 from J u l y 1, 1960,
to d a t e of p u r c h a s e .

o

>

Ul

d

N o t i c e of caU
Redemption date.
Serial n u m b e r s called b y d e n o m i nations:
$50—
$100
$500
$1,000
-.
$6,000
_.
F i n a l d a t e for transfers or den 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 i n t e r e s t per $1,000 p a i d in fuU
w i t h principal.
P r e s e n t a t i o n for p u r c h a s e prior
to call d a t e :
Period
A m o u n t of accrued interest
p e r $1,000 per d a y p a i d
w i t h principal.




23^ p e r c e n t T i t l e I h o u s i n g
i n s u r a n c e fund debent u r e s , Series L , t h i r t e e n t h caU

2% p e r c e n t T i t l e I housing
i n s u r a n c e fund debent u r e s , Series R , t e n t h
call

2% p e r c e n t T i t l e I h o u s i n g
insurance fund debent u r e s , Series R , e l e v e n t h
call

3 percent Title I housing
i n s u r a n c e fund debent u r e s , Series T , n i n t h
call

3 percent Title I housing
i n s u r a n c e fund debent u r e s , Series T , t e n t h call

M a r . 16,1961
J u l y 1, 1961

Sept. 23, 1960.
J a n . 1, 1961

M a r . 16,1961J u l y 1, 1961

Sept. 23, 1960
J a n . 1, 1961

M a r . 16, 1961.
J u l y 1, 1961.

287-314..
1071-1164
402-432.
525-673
.„
295-321-.Sept. 30, I960..-

315-432.
1165-1271.
433-461.
674-636.
322-349.
M a r . 31, 1961.

$16.00

$15.00.

Oct. 1-Dec. 31, 1960.
$0.081622 from J u l y 1,1960,
to d a t e of p u r c h a s e .

A p r . 1-June 30, 1961.
$0.082873 from J a n . 1, 1961,
to d a t e of p u r c h a s e .

167-172.
322-338
137-142
622-541
71-76
M a r . 31,1961
$12.50

.

_

.

.

.

A p r . 1-June 30,1961
$0.069061 from J a n . 1,1961,
to d a t e of p u r c h a s e .

294-416
666-881,886-887
172-209.
161-280
193-221, 223
Sept. 30, 1960

_ 417-425
882-884, 888-946
210-220
281-289
— 224-239..
M a r . 31, 1961.

$13.75'

$13.75

_—.

Oct. 1-Dec. 31, 1960
$0.074728 from J u l y 1,1960,
to d a t e of p u r c h a s e .

A p r . 1-June 30, 1961
$0.075967 from J a n . 1,1961,
to d a t e of p u r c h a s e .

to
CO

274

1961 REPORT OF THE SECRETARY OF THE TREASURY
U.S. Savings Bonds Regulations

E X H I B I T 6.—First a m e n d m e n t , M a r c h 2 1 , 1961, to Department Circular No. 653,
Fifth Revision, regulations governing Series E savings b o n d s
TREASURY

DEPARTMENT,

Washington, March 2 1 , 1961.
Section 316.13(d) of D e p a r t m e n t Circular N o . 653, Fifth Revision, d a t e d
September 23, 1959 (31 C F R , 1960 Supp., 316), is hereby revised to read as
follows:
SEC. 316.13. Further investment yield (interest) on Series E bonds A F T E R
M A T U R I T Y — o p t i o n a l extension privileges.—* * *
(d) Additional optional extension privilege on bonds with issue dates of M a y 1,
1941, through M a y 1, 1949.—Owners of bonds with issue dates of M a y 1, 1941,
t h r o u g h M a y 1, 1949 (i.e., those which reach t h e end of their first extension
period beginning M a y 1, 1961, through M a y 1, 1969), are hereby granted the
option of retaining their bonds for a second 10-year optional extension period a t
t h e investment yield of approximately 3.75 percent per a n n u m compounded
semiannually for t h e second extension period. T h e redemption value of a n y
bond a t t h e end of t h e extended m a t u r i t y period will be t h e base upon which
interest will accrue during t h e second extension period. See tables I t h r o u g h
X V I I I a t t h e end of this a m e n d m e n t for t h e schedules of redemption values a n d
investment yields of t h e bonds.




DOUGLAS

DILLON,

Secretary of the Treasury.

275

EXHIBITS
TABLE I.—UNITED STATES SAVINGS BONDS—SERIES E
TABLE

OF R E D E M P T I O N VALUES AND INVESTMENT YIELDS DURINO E X T E N D E D
BONDS BEARING ISSUE DATE OF MAY 1, 1941

MATURITY

PERIODS ^ FOR

Table shoioing: (/) How bonds of Series E bearing issue date of May 1, 1941, by denominations, increase in
redemption value during successive half-year periods following date of original maturity: (£) the approximate
investment yield on the purchase price from issue date to the beginning of each half-year period: and (3) the
approximate investm.ent yield on the current redem.ption value from the beginning of each half-year period (a) to
first extended maturity or (b) to second extended maturity. Yields are expressed in terms of rate percent per
annum, compounded semiannually.
Original maturity value.
Issue price

$26.00
18.75

$50. 00
37.60

$100.00
75.00

$500. 00 I $1.000. 00
375. 00 1
750. 00

Appro.ximate investment yield 2

(3) On
(2) On
current repurchase
demption
price from value from
issue date beginning
of each
to
beginning half-year
of each
period (a)
half-year
First extended maturity period
to first
period
extended
maturity
Percent
Percent
$50. 00 $100.00 $500. 00 $1,000.00
$25.00
2.90
3 2.90
50.62
101. 25
506. 25
1,012.50
25.31
2.88
3 2.92
51.25
102. 50
512. 50
1,025. 00
26. 62
2.86
3 2.94
51.87
103.75
518.75
1, 037. 50
26.94
2.84
3 2.97
52.50
105.00
625. 00
1, 050. 00
26.25
2.82
33.01
53.12
106.25
531. 25
1, 062. 60
26.56
2.81
33.05
63.76
107. 60
537. 50
1, 075. 00
26.87
2.79
33.10
54.37
108.75
543. 75
1, 087. 60
27.19
2.77
3 3.16
65.00
110.00
550. 00
1,100. 00
27. 50
2.75
33.23
65. 62
111.25
556. 26
1,112. 50
27.81
2.74
33.32
66.26
112. 50
662. 60
1,125. 00
28.12
2.72
33.43
66.87
113.75
668.75
1,137. 50
28.44
2.71
3 3.56
57.50
115.00
575. 00
1,150.00
28.76
2.69
33.73
68.12
116.25
581. 25
1,162. 50
29.06
2.67
3 3.96
68.76
117.50
687.50
1,175. 00
29.37
2.66
3 4.26
60.00
120. 00
600. 00
1, 200. 00
30.00
2.70
3 4.26
61.33
122. 67
613. 33
1, 226. 67
30.67
2.75
34.21
62.67
125.33
1,
253.
33
31.33
2.79
44.77
626. 67
investment yields to first extended maturity on basis of June 1, 1959, revision
(1) Eedemption values during each half-year period
(Values increase on first day of period shown)

Period after original maturity (beginning 10
years after issue date)

First H y e a r . .
H to 1 year
1 to IV^ years..
IV^ to 2 years..
2 to 2V^ years..
214 to 3 years..
3 to 3 ^ years..
3}4 to 4 years..
4 to 4H years..
4*/^ to 6 years..
5 to 5H years..
5H to 6 years..
6 to 6H years..
6J^ to 7 years..
7 to 7li years..
7}4 to 8 years..
8 to 8H years..
8H to 9 yearsRedemption values and
9 to 9 H years
9M to 10 years
F i r s t extended m a t u r i t y
v a l u e (10 years from
originalmaturitydate)5.

$32.03
32.80

$64.06
66.60

$128.12
131.20

$640.60
656.00

$1, 281. 20
1, 312.00

2.84
2.89

33.63

67.26

134.62

672.60

1,345.20

2.94

Period after first e x t e n d e d
m a t u r i t y (beginninc 20
years after issue date)
F i r s t H year
1/^ to 1 year
1 to IV^ years
..
IJ^ to 2 years
..2 to 2V^ years
.
- 2 H to 3 years
._ _ 3 to 3 K years
-_.
33^ to 4 years
.
4 to 4 H y e a r s
43^ to 5 years
. 6 to 5 H years
5V^ to 6 years
6 to 6 H years
6 H to 7 years
7 to 7 H years
7 ^ to 8 years
8 to 8 H years
. .
8 K to 9 years
9 to 9V^ years -93^ to 10 years
Second extended matu-.
r i t y value (20 years from
original m a t u r i t y date) 0.

4.93
5.06

(b) to
second
extended
maturity

Second e x t e n d e d m a t u r i t y period

$33.63
34.26
34.90
35.56
36.22
36.90
37.60
38.30
39.02
39.75
40.50
41.25
42.03
42.82
43.62
44.44
46.27
46.12
46.98
47.86

$67.26
68.52
69.80
71.12
72.44
73.80
76.20
76.60
78.04
79.50
81.00
82.50
84.06
85.64
87.24
88.88
90.54
92.24
93.96
95.72

$134.52
137.04
139. 60
142. 24
144.88
147.60
150.40
153.20
156. 08
159.00
162.00
165. 00
168.12
171.28
174.48
177.76
181.08
184.48
187.92
191.44

$672.60
685.20
698.00
711.20
724.40
738.00
752.00
766.00
780.40
795.00
810.00
825.00
840.60
856.40
872.40
888.80
905.40
922.40
939.60
957.20

$1, 345. 20
1, 370.40
1,396.00
1, 422.40
1,448.80
1,476. 00
1, 504.00
1, 532.00
1, 560.80
1, 690.00
1,620.00
1,650.00
L681. 20
1, 712.80
1,744.80
1,777. 60
1,810.80
1,844.80
1,879. 20
1,914.40

2.94
2.96
2.98
3.00
3.02
3.03
3.05
3.06
3.08
3.09
3.10
3.12
3.13
3.14
3.15
3.16
3.17
3.18
3.19
3.20

48.76

97.52

195.04

975. 20

1,960.40

3.21

3.75
3.75
3.76
3.75
3.75
3.76
3.75
3.76
3.75
3 75
3.75
3.75
3.75
3.76
3.75
3.75
3 75
3.75
3 75
3.76

1 For redemption values and investment yields during original maturity period see Department Circular
No. 653, Fifth Revision, dated September 23,1959.
2 Calculated on basis of $1,000 bond (face value).
8 Approximate investment yield from beginning of each half-year period to first extended maturity,
at first extended maturity value prior to June 1,1959, revision.
4 Approximate investment yield from effective date of June 1,1959, revision to flrst extended maturity.
fi 20 years from issue date.
e 30 years from issue date.




276

1961 REPORT OF THE SECRETARY OF THE TREASURY
TABLE IL—UNITED STATES SAVINGS BONDS—SERIES E

TABLE O F R E D E M P T I O N VALUES AND I N V E S T M E N T YIELDS DURING E X T E N D E D MATURITY PERIODS 1 FOR BONDS
B E A R I N G ISSUE DATES FROM J U N E 1 T H R O U G H N O V E M B E R 1, 1941

Table showing: (1) How bonds of Series E bearing issue dates from June 1 through November 1,1941, by denominations, increase in redemption value during successive half-year periods following date of original maturity; (2) the
approximate investment yield on the purchase price from issue date to the beginning ofeach half-year period; and
(3) the approximate investment yield on the current redemption value from the beginning ofeach half-year period
(a) to first extended maturity or (b) to second extended maturity. Yields are expressed in terms of rate percent
per annum, compounded semiannually.
Original m a t u r i t y v a l u e . .
Issue price
.
.- -

$25. 00
IS. 75

$50. 00

$100. 00

.^7 F,()

7F> n o

$500. 00
.'^7.'^ nn

$1,000. 00
7.'sn. nn

(1) R e d e m p t i o n values d u r i n g each half-year period
(Values increase on first d a y of period shown)
P e r i o d after original m a t u r i t y ( b e g i n n i n g 10
y e a r s after issue date)
F i r s t extended m a t u r i t y period

First M year
3^ t o 1 year
.
1 t o V/2 years _ . . _
I M to 2 years
2 to 2 H years
2 H t o 3 years
_. _ _._
3 to 33^ years . _ _
3 H to 4 y e a r s .
_._ . - .
4 t o 43^ years
43^ to 5 years
...
5 to 53^ years _ _
53^ t o 6 years
_..
6 to Q}4 years .
63^ t o 7 years
7 t o 73^ years
73^ to 8 y e a r s . .
8 t o 83^ years

$25.00
25. 31
25. 62
25. 94
26. 25
26.56
26.87
27.19
27. 50
27. 81
28.12
28. 44
28.75
29.06
29.37
30.00
30.67

$50.00
50.62
51. 25
51. 87
52.50
53.12
53. 75
54. 37
55. 00
55. 62
56. 25
56. 87
57. 50
58.12
58. 75
60.00
61. 33

$100.00
101. 25
102. 50
103. 75
105.00
106. 25
107. 50
108. 75
110.00
111. 25
112. 50
113. 75
115.00
116.25
117. 50
120. 00
122. 67

$500.00
506. 25
612. 50
518.75
525. 00
531. 25
537. 50
543.75
550. 00
556. 25
562. 50
568.75
575.00
581.25
587. 50
600.00
613. 33

$1,000.00
1, 012. 50
1, 026.00
1,037. 50
1,050.00
1,062. 60
1, 075. 00
1, 087. 50
1,100.00
1,112.50
1,126. 00
1,137. 50
1,150. 00
1,162. 50
1,175. 00
1, 200. 00
1. 226. 67

A p p r o x i m a t e investm e n t yield 2
(2) O n
purchase
price from
issue d a t e
to
beginning
of each
half-year
period
Percent
2.90
2.88
2.86
2.84
2.82
2.81
2.79
2.77
2.75
2.74
2.72
2.71
2.69
2.67
2.66
2.70
2.75

(3) O n
c u r r e n t redemption
v a l u e from
beginning
of each
half-year
p e r i o d (a)
to first
extended
maturity
Percent
3 2.90
3 2.92
3 2 94
3 2.97
33 01
33.05
33 10
33.16
33 23
33.32
33 43
3 3. 66
33 73
3 3. 96
34 26
3 4.26
M.82

Redemption values and investnient yields to first extended maturity on basis of June 1, 1969, revision
$62. 72
$1, 254. 40
83/^ t o 9 y e a r s . . .
2.80
$125. 44
$627. 20
4.92
$31.36
642. 00
1,284.00
2.85
5.02
32.10
64. 20
128.40
9 t o 93^ years
657.80
32.89
1,315.60
2.90
131.56
93^ to 10 years
65. 78
5.11
First extended m a t u r i t y
v a l u e (10 years from
67. 46
134. 92
674. 60
1, 349. 20
original m a t u r i t y date)5.
2.96
33.73
P e r i o d after first e x t e n d e d
m a t u r i t y (beginning 20
years after issue date)
F i r s t ^2 year
3^ t o 1 y e a r . . .
_
1 t o 13^ years
13^ t o 2 years
2 to 23^ years
23^ to 3 years
._ _ _ .
3 to 33^ years
33^ t o 4 y e a r s . 4 to 43^ years
43^ t o 5 y e a r s . 5 t o 53^ years
53^ to 6 years— .
6 to 63^ years
63^ t o 7 years
7 t o 73^ y e a r s . .
73^ t o 8 years
8 to 83^ years
83^ t o 9 years
9 to 9}/2 years
93^ t o 10 years
Second extended m a t u r i t y value (20 years
from original m a t u r i t y
date) 6

Second e x t e n d e d m a t u r i t y period

$33. 73
34.36
36.01
35.66
36.33
37.01
37. 71
38.41
39.13
39.87
40.62
41.38
42.15
42. 94
43.75
44. 57
45. 40
46.26
47.12
48. 01

$67. 46
68.72
70.02
71. 32
72.66
74.02
75. 42
76.82
78.26
79.74
81.24
82.76
84.30
85. 88
87.50
89.14
90.80
92. 52
94.24
96.02

$134. 92
137. 44
140. 04
142. 64
145. 32
148. 04
150. 84
153. 64
156. 62
169. 48
162.48
165. 52
168.60
171. 76
175. 00
178.28
181. 60
185. 04
188. 48
192.04

$674. 60
687. 20
700. 20
713. 20
726.60
740. 20
754. 20
768. 20
782. 60
797. 40
812. 40
827. 60
843. 00
858. 80
876. 00
891. 40
908.00
926.20
942. 40
960. 20

$1, 349. 20
1, 374. 40
1, 400. 40
1, 426. 40
1, 453. 20
1, 480. 40
1, 508. 40
1, 536. 40
1, 565. 20
1, 594. 80
1, 624. 80
1, 655. 20
1, 686. 00
1,717.60
1, 750. 00
1, 782. 80
1, 816. 00
1, 850. 40
1, 884. 80
1, 920. 40

2.96
2.98
3.00
3.01
3.03
3.05
3.06
3.07
3.09
3.10
3.12
3.13
3.14
3.15
3.16
3.17
3.18
3.19
3.20
3.21

48.91

97.82

195. 64

978. 20

1, 956. 40

3.22

(b) to
second
extended
maturity
3 75
3.75
3.75
3.75
3. 75
3.75
3. 75
3.75
3 75
3.75
3.75
3. 75
3.75
3.75
3.75
3.75
3.76
3.75
3.76
3.76

1 For redemption values and investment yields during original maturity period see Department Circular
No. 653, Fifth Revision, dated September 23,1959.
2 Calculated on basis of $1,000 bond (face value).
3 Approximate investment yield from begiiming of each half-year period to first extended maturity,
at first extended maturity value prior to June 1,1969, revision.
4 Approximate investment yield from effective date of June 1,1959, revision to first extended maturity.
5 20 years from issue date.
6 30 years from issue date.




277

EXHIBITS
TABLE IIL—UNITED STATES SAVINGS BONDS—SERIES E

TABLE O F R E D E M P T I O N VALUES AND I N V E S T M E N T YIELDS DURING E X T E N D E D MATURITY P E R I O D S 1 FOR
B O N D S BEARING ISSUE DATES FROM D E C E M B E R 1, 1 9 4 1 , THROUGH APRIL 1, 1942

Table showing: (1) Howbondsof Series E bearing issue dates from December 1,19 41,through Aprill, 1942, by denominations, increase in redemption value during successive half-year periods following date of original maturity;
(2) the approximate investment yield on the purchase price from issue date to the beginning of each half-year
period; and (3) the approximate investment yield on the current redemption valve from the beginning of each
half-year period (a) to first extended maturity or (b) to second extended maturity. Yields are expressed in terms
of rate percent per annum, compounded semiannually.
Original m a t u r i t y v a l u e Issue price

$25. 00
18.75

$50. 00
37.60

$100. 00
75.00

$500. 00
375.00

$1,000.00
750. 00

(1) R e d e m p t i o n v a l u e s d u r i n g each half-year period
(Values increase on first d a y of period shown)
P e r i o d after original m a t u r i t y ( b e g i n n i n g 10
y e a r s after issue date)
F i r s t e x t e n d e d m a t u r i t y period

F i r s t ]/2 year
14. to 1 year
1 to 13^ years
13^ to 2 years
2 to 23^ years
23^ to 3 years
3 to 33^ years
33^ to 4 years
4 to 43^ years
43/^ t o 6 vears
5 to 53^ years
5 ^ to 6 years
6 to 6V^ years
(i3^ to 7 years
7 to 7]4 y e a r s —
7 K to 8 years

__

$25.00
25.31
25.62
25.94
26.25
26.66
26.87
27.19
27.50
27.81
28.12
28.44
28.75
29.06
29.37
30.00

$50.00
50.62
5L26
6L87
52.50
63.12
53.75
64.37
55.00
55.62
56.25
56.87
57.60
58.12
68.75
60.00

$100.00
101.25
102. 50
103.75
105.00
106.25
107. 50
108.75
110.00
111.25
112. 60
113. 75
115. 00
116. 25
117. 50
120.00

$500.00
506. 25
512. 60
618.75
525.00
631.25
537. 50
543.75
650.00
656.25
562. 50
568. 75
575.00
681.25
587. 60
600.00

$1, 000. 00
1, 012. 50
1,025.00
1,037. 60
1,050. 00
1,062.50
1,075.00
1,087. 60
1,100.00
1,112. 50
1,125.00
1,137. 60
1,150.00
1,162. 50
1,175. 00
1.200.00

A p p r o x i m a t e investm e n t yield 2
(2) O n
purchase
price from
issue d a t e
to
beginning
of each
half-year
period
Percent
2.90
2.88
2.86
2.84
2.82
2.81
2.79
2.77
2.75
2.74
2.72
2.71
2.69
2.67
2.66
2.70

(3) On
c u r r e n t redemption
v a l u e from
bengming
of each
half-year
period (a)
to first
exteuded
maturity
Percent
3 2.90
3 2.92
3 2 94
3 2.97
33 01
33.05
33.10
33.16
33.23
33.32
33.43
8 3.56
»3.73
3 3.96
3 4.26
4 4.86

Redemption values and investment yields to first extended maturity on basis of June 1, 1959, revision
$61. 38 $122.76
$613. 80 $1, 227. 60
4.93
; 30.69
2.76
8 to 83^ years
628. 20
6.01
62.82
125. 64
1, 256.40
2.81
31.41
83^ to 9 years
643.40
5.10
128. 68
2.86
64.34
1, 286.80
9 to 9H years
32.17
659.60
5.15
131. 92
2.92
93^ to 10 years
65.96
1,319.20
32.98
First extended maturity
value (10 years from
original matuj-ity date)^33.83
136.32 I 676.
2.97
1, 353. 20
(b) to
Period after first extended
second
maturity (beginning 20
Second extended maturity period
extended
years after issue date)
maturity
3.75
First 3^ year
$67. 66 $135.32 $676. 60 $1,353.20
$33.83
2.97
3.75
3^ to 1 year
68.92
137.84
689.20
1,378.40
34.46
2.99
3.75
70.22
140.44
702.20
1,404.40
35.11
3.01
1 to 13^ years
3.75
71.64
143.08
715. 40
1,430.80
36.77
3.03
13^ to 2 years
3.75
72.88
146. 76
728.80
1,457.60
36.44
3.04
2 to 23^ years
3.75
74.24
148.48
742.40
1,484.80
37.12
3.06
23^ to 3 years
3.75
75.64
151.28
756.40
1, 512.80
37.82
3.07
3 to 33^ years.
3.75
77.06
164.12
770.60
1, 541. 20
38.53
3.09
3]/i to 4 years
3.75
78.50
157.00
785.00
1, 570.00
39.25
3.10
4 to 4H years
3.75
79.98
159.96
799.80
1, 599. 60
39.99
3.12
4V^ to 5 years
3.75
81.48
162. 96
814. 80
1. 629. 60
40.74
3.13
5 to 53^ years
3.75
83.00
166. 00
830. 00
1,660.00
41. 60
3.14
53^ to 6 years
3.75
84.56
169.12
845. 60
1,69L20
42.28
3.15
6 to 61^ years
3.76
86.14
172. 28
861.40
1, 722.80
43.07
3.16
6V^ to 7 years
3.75
87.76
175. 52
877. 60
1, 755. 20
43.88
3.17
7 to iy2 years
3.76
89.40
178.80
894. 00
1, 788.00
44.70
3.18
71/^ to 8 years
3.75
91.08
182.16
910.80
1,821. 60
45.54
3.19
8 to 83^ years
3.75
92.78
185. 56
927.80
1,855. 60
46.39
3.20
8V^ to 9 years
3.75
94.52
189.04
945.20
1,890.40
.47.26
3.21
9 to 9]/^ years
48.15
96.30
192. 60
963.00
1,926.00
3.74
3.22
91/^ to 10 years
Second extended maturity value (20 years
from original maturity
98.10
3.23
date)Q
196.20
981. 00
1, 962. 00
49. 05
J For redemption values and investment yields during original maturity period see Department Circular
No. 653, Fifth Revision, dated September 23,1959.
2 Calculated on basis of $1,000 bond (face value).
3 Approximate investment yield from beginning of each half-year period to first extended maturity,
at first extended maturity value prior to June 1,1959, revision,
4 Approximate investment yield from effective date of June 1,1959, revision to first extended maturity.
6 20 years from issue date.
6 30 years from issue date.




278

1961 REPORT OF THE SECRETARY OF THE TREASURY
TABLE IV.—UNITED STATES SAVINGS BONDS—SERIES E

TABLE OF R E D E M P T I O N VALUES AND INVESTMENT YIELDS DURING E X T E N D E D MATURITY PERIODS ^ FOR
BONDS BEARING ISSUE DATE OF MAY 1, 1942

Table showing: (!) How bonds of Series E bearing issue date of May 1, 1942, by denominations, increase in
redemption value during successive half-year periods following date of original maturity: (2) the approximate
investment yield on the purchase price from issae date to the beginning of each half-year period: and (3) the
approximate investment yield on the current redemption value from the beginning ofeach half-year period (a) to
first extended niaturity or (b) to second extended maturity. Yields are expressed in terms of rate percent per
annum, compounded semiannually.
$25. 00
18.75

Original maturity value..
Issue price

$50. 00
37.50

$100. 00
75. 00

$500. 00
375. 00

$1,000. 00
750. 00

(1) Redemption values during each half-year period
(Values increase on first day of period shown)
Period after original maturity (beginning 10
years after issue date)
First extended maturity period

First H year.
14 to 1 year...
1 to l}4 years.
13^ to 2 years.
2 to 23^ years.
2}4 to 3 years.
3 to 33^ years.
3M to 4 years.
4 to 43^ years.
43^ to 5 years
5 to 5H years.
6H to 6 years.
6 to 6H years.
63^ to 7 years.
7 to 73^ years.
73^ to 8 ye^rs.

$25. 00
25. 37
25.75
26.12
26.50
26.90
27.30
27.70
28.10
28. 50
28.95
29.40
29.85
30.30
30.75
31.20

$50. 00
60.75
51.50
62.25
53.00
53.80
54.60
55.40
66.20
57.00
57.90
58.80
59.70
60.60
61.50
62.40

$100. 00
101. 50
103. 00
104. 50
106. 00
107. 60
109. 20
110. 80
112. 40
114. 00
115. 80
117. 60
119.40
121. 20
123. 00
124. 80

$500. 00
507. 50
516. 00
522. 50
530. 00
538. 00
646. 00
554. 00
562. 00
570. 00
579. 00
588. 00
597. 00
606. 00
616. 00
624. 00

$1,000. 00
1,015.00
1,030. 00
1,045. 00
1,060. 00
1,076. 00
1,092. 00
1,108. 00
1,124. 00
1,140. 00
1,158. 00
1,176. 00
1,194. 00
1,212. 00
1,230. 00
1, 248. 00

Approximate investment yield 2
(2) On
purchase
price from
issue date
to
beginning
of each
half-year
period
Percent
2.90
2.90
2.90
2.91
2.90
2.91
2.91
2.91
2.91
2.91
2.92
2.92
2.93
2.93
2.93
2.93

(3) On
current redemption
value from
beginning
of each
half-year
period (a)
to first
extended
maturity
Percent
33.00
33.00
33.00
33.01
33.02
33.02
33.02
33.03
33.04
3 3.0.C
33.O4
33.0;
8 3.0^
3 3.0c

4 3.5^
Redemption values and investment yields to first extended maturity on basis of June 1, 1969, revision
^/^ Qi/^
itoi a67i
a-co OA
(MOft ao
c-aoo A(\
(t'l n a a on
n
r\o
o3 72
$63.
34
8 to
83^ ..T^r^^o
years
$31.
$126.
68
$633.
40 $1,266.
2.93
80
64.42
83^ to 9 years
32.21
128. 84
644. 20
3.82
2.95
1,288. 40
65.60
3 89
9 to 9)^ years
32.80
131.20
666. 00
2.97
1,312.00
66.84
33.42
133.68
668.40
2.99
9M to 10 years
1,336.80
4.01
First extended maturity
value (10 years from
68.18
ori«^inal maturity datel*.
34.09
136. 36
681. 80
1,363.60
3.01
(b) to
Period after first extended
Second extended maturity period
second
maturity (beginning 20
extended
years after issue date)
maturity
$1,363. 60
$136. 36
$34. 09
$681. 80
$68.18
3.01
3 75
First 3^ year
138. 92
1,389.20
34.73
69.46
694. 60
3.76
3.03
3^ to 1 year
141. 52
70.76
1,415.20
35.38
707. 60
3.05
3.76
1 to 13^ years
144.16
72.08
1,441.60
3.06
36.04
3.75
720. 80
13^ to 2 years
146. 88
73.44
3.08
1,468. 80
36.72
734. 40
3.75
2 to 23^ years
149. 64
74.82
3.09
1,496. 40
37.41
3.75
748. 20
23^ to 3 years
152. 44
76.22
3.11
1,624. 40
38.11
3.75
762. 20
3 to 33^ years
. .
165. 28
77.64
3.12
3.76
1, 552. 80
38.82
776. 40
33^ to 4 years
158. 20
79.10
3.13
3.75
1, 582. 00
39.55
791. 00
4 to 43^ years
. 161.16
80.58
3.15
1,611.60
40.29
3.75
806. 80
43^ to 5 years
164.20
82.10
3.16
1,642. 00
41.06
3.75
821. 00
5 to 53^ years
167. 28
83.64
3.17
3.75
1,672. 80
4L82
836. 40
53^ to 6 years
-.170. 40
85.20
3.18
3.75
1,704. 00
6 to 63^ years
__ . _ _
42.60
852. 00
173. 60
86.80
3.19
1,736. 00
43.40
3.75
868. 00
6H to 7 years
176.88
88.44
3.20
3.76
1, 768. 80
7 to 73^ years
44.22
884.40
180.16
90.08
3.21
1,801. 60
73^ to 8 years
45.04
3.76
900. 80
183. 56
91.78
3.22
1,835. 60
8 to 83^ years
. .
45.89
3.75
917. 80
187.00
93.50
3.23
3.75
1,870. 00
83^ to 9 years
46.75
935. 00
190. 52
95.26
3.24
3.74
1,906. 20
9 to 93^ years
._ _ . .
47.63
952. 60
194. 08
97.04
3.25
1,940. 80
93^ to 10 years
48.52
3.75
970.40
Second extended maturity value (20 years
from original maturity
197. 72
1,977. 20
98.86
date)8
3.26
988. 60
49.43
1 For redemption values and investment yields during original maturity period see Department Circular
No. 653, Fifth Revision, dated September 23,1959.
2 Calculated on basis of $1,0C0 bond (face value).
3 Appro.ximate investment yield from beginning of each half-year period to first extended maturity,
at first extended maturity value prior to June 1, 1959, revision.
4 Approximate investraent yield from effective date of June 1,1959, revision to first extended maturity.
8 20 years from issue date.
^ 30 years from issue date.




279

EXHIBITS
TABLE V.—UNITED STATES SAVINGS BONDS—SERIES E

TABLE OF REDEMPTION VALUES AND INVESTMENT YIELDS DURING E X T E N D E D MATURITY PERIODS 1 FOR BONDS
BEARING ISSUE DATES FROM J U N E 1 THROUGH N O V E M B E R 1, 1942

Table showing: (1) How bonds of Series E bearing issue dates from June 1 through November 1,1942, by denominations, increase in redemption value during successive half-year periods following date of original maturity;
{2) the approximate investment yield on the purchase price from issue date to the beginning of each half-year
period; and (3) the approximate investment yield on the current redemption value from the beginning ofeach halfyear period (a) to first extended maturity or (b) to second extended maturity. Yields are expressed in terms of
rate percent per annum, compounded semiannually.
Original m a t u r i t y
Issue price

value..

$25.00
18.75

$50. 00
37.50

$100. 00
75. 00

$500. 00
375. 00

$1,000.00
750. 00

(1) R e d e m p t i o n values d u r i n g each half-year period
(Values increase on first d a y of period shown)
Period after original m a t u r i t y ( b e g i n n i n g 10
y e a r s after issue date)
F i r s t extended m a t u r i t y period

F i r s t H year
J^ to 1 year
1 to 13^ years
13^ to 2 years
2 to 23^ years
23^ to 3 years
3 to 33^ years
33^ to 4 years
4 to 43^ years
43^ to 5 years
5 to 63^ years
63^ to 6 years
6 to 63^ years
63^ to 7 years
7 to 73^ years

.

$25.00
26.37
26.75
26.12
26.50
26.90
27.30
27.70
28.10
28.60
28.95
29.40
29.85
30.30
30.75

$50. 00
50.75
51.50
52.25
53.00
53.80
54.60
65.40
56.20
57.00
67.90
58.80
59.70
60.60
61.50

$100.00
101. 50
103. 00
104. 50
106. 00
107. 60
109. 20
110. 80
112.40
114.00
115.80
117. 60
119.40
121. 20
123. 00

$500.00
607. 50
515. 00
522. 60
530. 00
538. 00
546. 00
554. 00
562. 00
670.00
579. 00
588. 00
597. 00
606. 00
615. 00

$1, 000.00
1,016.00
1, 030. 00
1, 045. 00
1, 060. 00
1, 076. 00
1, 092. 00
1,108.00
1,124. 00
1,140. 00
1,168. 00
1,176.00
1,194. 00
1,212.00
1, 230. 00

A p p r o x i m a t e investm e n t yield 2
(2) O n
purchase
price from
issue d a t e
to
beginning
of each
half-year
period
Percent
2.90
2.90
2.90
2.91
2.90
2.91
2.91
2.91
2.91
2.91
2.92
2.92
2.93
2.93
2.93

(3) On
current redemption
value from
beginning
of each
half-year
period (a)
to first
extended
maturity
Percent
33.00
33 00
33.00
3 3 01
33.02
33 02
33.02
3 3 03
33.04
33.05
33.04
3 3 04
33.03
33 04
<3. 55

Redemption values and investment yields to first extended maturity on basis of June 1, 1959, revision
$31. 21
$62. 42
$124. 84
$624. 20 $1, 248. 40
2.93
73^ to 8 years
3.66
31.70
126. 80
634. 00
63.40
1, 268. 00
2.94
8 to 8H years
3.79
32.27
129. 08
645. 40
1, 290. 80
2.96
64.54
83^ to 9 years
3.85
32.87
131.48
667. 40
1, 314. 80
2.98
9 to 93^ years
65.74
3.92
33.50
134. 00
670.00
1, 340.00
3.00
4.00
93^ to 10 years
67.00
First extended maturity
value (10 years from
34.17
34
136.68
683.40
L 366.
original maturity date)'
!.02
Period after first extended
(b) to .
Second extended maturity period
maturity (heirinning 20
second
years after issue date)
extended
maturity
$34.17
$68. 34 $136. 68 $683. 40 $1, 366. 80
First 3^ year
3.02
3.75
34.81
69.62
139,24
696. 20
1. 392. 40
}4 to 1 year
3.04
3.75
35.46
70.92
141. 84
709. 20
1,418.40
3.06
3.75
1 to IH years
36.13
72.26
144. 62
722. 60
1, 445. 20
3.07
3.75
1^-4 to 2 years
36.81
73.62
147. 24
736. 20
1, 472. 40
3.09
3.75
2 to 2H years
37.60
75.00
150. 00
760. 00
1, 600. 00
3.10
3.75
23^ to 3 years
38.20
76.40
152. 80
764. 00
1, 528.00
3.12
3.75
3 to 33^ years
38.92
77.84
155. 68
778. 40
1, 556. 80
3.13
3.75
314 to 4 years
39.64
79.28
158. 66
792. 80
1, 585. 60
3.14
3.75
4 to 4}4 years
40.39
80.78
161. 66
807. 80
1, 615. 60
3.16
3.75
43^ to 5 years
41.15
82.30
164. 60
823. 00
1, 646. 00
3.17
3.75
5 to 63/^ years
41.92
83.84
167. 68
838. 40
1, 676. 80
3.18
3.75
5]ri to 6 years
42.70
85.40
170. 80
854. 00
1, 708. 00
3.19
3.75
6 to 63^
43.50
87.00
174.00
870.00
1,740.00
3.20
3.75
63^ to 7 years
44.32
88.64
177. 28
886. 40
1, 772. 80
3.21
3.75
7 to 7H years
45.15
90.30
180. 00
903. 00
1, 806. 00
3.22
3.75
73^ to 8 years
46.00
92.00
184.
00
920.00
1,840.00
3.23
3.74
8 to 83^ years
46.86
93.72
187. 44
937. 20
1, 874. 40
3.24
3.74
83^ to 9 years
47.74
95. 48
190. 96
954. 80
1,909. 60
3.25
3.74
9 to 93^ years
48.63
97.26
194. 52
972. 60
1, 945. 20
3.26
3.74
93^ to 10 years
Second extended maturity value (20 years
from original maturity
99.08
198.16
990.80
1, 981. 60
date) 6
49.54
3.26
1 For redemption values and investment yields during original maturity period see Department Circular
No. 653, Fifth Revision, dated September 23, 1959.
2 Calculated on basis of $1,000 bond (face value).
3 Approximate investment yield from beginning of each half-year period to first extended maturity,
at first extended maturity value prior to June 1,1959, revision.
4 Approximate investment yield from effective date of June 1,1959, revision to first extended maturity.
8 20 years from issue date. 6 30 years from issue date.




280

1961 REPORT OF THE SECRETARY OF THE TREASURY
TABLE VI.—UNITED STATES SAVINGS BONDS—SERIES E

TABLE O F R E D E M P T I O N VALUES AND INVESTMENT YIELDS DURING EXTENDED MATURITY PERIODS 1 FOR
BONDS BEARING ISSUE DATES FROM DECEMBER 1, 1942, THROUGH MAY 1, 1943
Table showing: (1) How bonds of Series E bearing issue dates from December 1,1942, through May 1,194S, by denominations, increase in redemption value during successive half-year periods following date of original matuiity; (2) the approximate investment yield on the purchase price from issue date to the beginning of each
half-year period; and (3) the approximate investment yield on the current redemption value from the beginning of each half-year period(a)to first extended maturity or (b) to second extended maturity. Yields are expressed in terms of rate percent per annum, compounded semiannually.
Original m a t m - i t y v a l u e . .
Issue price -

$25.00
18.75

$50. 00
37.50

$100.00
75.00

$500. 00
376. 00

$1,000. 00
750.00

(1) R e d e m p t i o n values d u r i n g each half-year period
(Values increa.se on first d a y of period shown)
P e r i o d after original m a t u r i t y ( b e g i n n i n g 10
y e a r s after issue date)
F i r s t extended m a t u r i t y period

F i r s t 3>^year
3^ t o 1 year— - 1 t o 13^ years
13^ to 2 years
2 to 23^ years
23^ to 3 years
3 to 33^ y e a r s
33^ to 4 y e a r s
4 to 43^ y e a r s
43^ to 5 years
5 to 53^ years
63^ to 6 y e a r s
6 t o 63^ years
63^ t o 7 years

.--

. ._-

$25. 00
25. 37
26.75
26.12
26.50
26.90
27.30
27.70
28.10
28.50
28.95
29.40
29.86
30.30

$50. 00
50.75
51. 50
52. 25
53.00
53.80
54.60
55. 40
56.20
57.00
57.90
58.80
59.70
60.60

$100. 00
101. 50
103. 00
104. 60
106. 00
107. 60
109. 20
110. 80
112. 40
114. 00
116.80
117. 60
119. 40
121. 20

$500. 00
507. 50
516. 00
522. 50
530. 00
538. 00
546. 00
554. 00
562. 00
570. 00
579. 00
588. 00
597. 00
606. 00

$1,000. 00
1,016. 00
1,030. 00
1, 045. 00
1,060. 00
1,076. 00
1,092. 00
1,108.00
1,124. 00
1,140. 00
1,158. 00
1,176. 00
1,194. 00
1, 212. 00

Appro.ximate investm e n t yield 2

(2) On
purchase
price from
issue d a t e
to
beginning
of each
half-year
period
Percent
2.90
2.90
2.90
2.91
2.90
2.91
2.91
2.91
2.91
2.91
2.92
2.92
2.93
2.93

(3) On
c u r r e n t redemption
v a l u e from
beginning
of each
half-year
period (a)
to first
extended
maturity
Percent
3 3.00
3 3 00
33.00
33.01
3 3 02
33 02
3 3 02
33.03
33 04
33. 06
3 3 04
33.04
33 03
43.54

Redemption values and investment yields to first extended maturity on ba.sis of June 1, 1959, revision
2.93
3.62
7 to 73^ y e a r s .
$61. 52
$123. 04
$615. 20
$30. 76
$1, 230. 40
2.94
73^ t o 8 y e a r s
62.48
124. 96
624. 80
31.24
1, 249. 60
3.73
2.95
8 t o 83^ y e a r s
63.50
127. 00
035. 00
3.84
31.75
1,270. 00
2.97
83^ t o 9 y e a r s
64.66
129. 32
646. 60
32.33
1, 293. 20
3.90
2.99
65.88
131. 76
658.80
32.94
L 317. 60
3 97
9 to 93^ years
3.01
67.16
134. 32
671. 60
33.58
1,343. 20
93^ t o 10 y e a r s . . .
4. 05
F i r s t extended m a t u r i t y
v a l u e (10 y e a r s from
3.04
original m a t u r i t y date)«.
68.52
34. 26
137. 04
685. 20
1,370.40
P e r i o d after first e x t e n d e d
m a t u r i t y (beginning 20
y e a r s after issue date)

Second e x t e n d e d

raaturity

period

(b) to
second
extended
raaturity

$137. 04
$686. 20
$34.26
3.04
$68. 52
$1,370.40
3.75
F i r s t 3^ y e a r
139. 60
698. 00
34.90
69.80
3.05
1, 396. 00
3.75
3^ t o 1 y e a r
71.12
142. 24
711. 20
1, 422. 40
35.56
3.07
3.75
1 to I M years
72.44
1,448. 80
144. 88
724. 40
36.22
3.09
3.75
13^ t o 2 years .73.80
1,476. 00
147. 60
738. 00
36.90
3.10
3.75
2 t o 23^ years
75.18
1, 503. 60
23^ t o 3 years
150. 36
751. 80
37.59
3.12
3.75
76.60
1, 532. 00
153. 20
766. 00
38.30
3.13
3. 75
3 to 33^ years
78.04
1, 560. 80
33^ to 4 years
156. 08
780. 40
39.02
3.14
3.76
79.50
1, 590. 00
159. 00
795. 00
39.75
3.16
3.76
4 to 4 H years
. .
80.98
1, 619. 60
4J^ to 5 years
161. 96
809. 80
40. 49
3.17
3.75
82.50
1,650. 00
166. 00
825. 00
41. 25
3.18
3.75
5 to 53^ years
84.06
1, 681. 20
3.75
6 H to 6 years
168.12
840. 60
42.03
3.19
85.64
1,712. 80
3.75
6 t o 63^ y e a r s . 171. 28
856. 40
42.82
3.20
87.24
1, 744. 80
3.75
6 H t o 7 years
174. 48
872. 40
43.62
3.21
88.88
1,777. 60
177. 76
888.80
44.44
3.22
3.76
7 t o 73^ y e a r s .
90.54
1,810. 80
73^ to 8 y e a r s
..181. 08
905. 40
45.27
3.23
3.75
92.24
1, 844.80
184. 48
922. 40
46.12
3.24
3.75
8 to 8)^ y e a r s
_.
..93. 96
1,879. 20
187. 92
939. 60
46.98
3.25
83^ to 9 y e a r s
3.76
95.72
1, 914. 40
191. 44
957. 20
47.86
3.26
9 to 93^ years
._ . . .
3.77
97.52
1, 950. 40
195. 04
975. 20
48.76
3.27
3.77
93^ to 10 years
Second extended m a t u r i t y value
(20 y e a r s
from original m a t u r i t y
1,987. 20
3.27
993. 60
99.36
198. 72
49.68
date)6
1 For redemption values and investment yields during original maturity period see Department Circular
No. 653, Fifth Revision, dated September 23,1969.
2 Calculated on basis of $1,000 bond (face value).
3 Approximate investment yield from beginning of each half-year period to first extended maturity,
at first extended maturity value prior to June 1,1969, revision.
4 Approximate investment yield from effective date of June 1,1959, revision to first extended maturity.
«20 years from issue date.
s 30 years from issue date.




281

EXHIBITS
TABLE VII.—UNITED STATES SAVINGS BONDS—SERIES E

TABLE O F R E D E M P T I O N VALUES AND I N V E S T M E N T YIELDS DURING E X T E N D E D MATURITY PERIODS 1 FOR BONDS
BEARING ISSUE DATES FROM J U N E 1 THROUGH N O V E M B E R 1, 1943

Table showing: (1) How bonds of Series E bearing issue dates from June 1 through November 1,194S, by denominations, increase in redemption value during successive half-year periods following date of original maturity; (2) the
approximate investment yield on the purchase price from issue date to the beginning ofeach half-year period; and
(3) the approximate investment yield on the current redemption value from the beginning ofeach half-year period
(a) to first extended maturity or (b) to second extended maturity. Yields are expressed in terms of rate percent
per annum, compounded semiannually.
Original m a t m i t y v a l u e . ,
ssue price

$26.00
18.75

$50. 00
37.50

$100.00
76.00

$500. 00
375. 00

$1,000.00
750. 00

(1) R e d e m p t i o n v a l u e s d u r i n g each half-year period
(Values increase o n first d a y of period shown)
Period after original m a t u r i t y ( b e g i n n i n g 10
y e a r s after issue date)
F i r s t e x t e n d e d m a t u r i t y period

F i r s t }4 year
3^ to 1 year
1 to 13^ y e a r s . . .
13^ to 2 years
2 t o 23^ years
23^ to 3 years
3 t o 33^ years . _ .
33^ to 4 years
4 t o 43^ years
_
43^ to 5 years
5 to 5)^ years .
53^ to 6 years
6 to 63^ years

_ _

$25.00
26.37
25.75
26.12
26.50
26.90
27.30
27.70
28.10
28.50
28.95
29.40
29.85

$50.00
60.75
51.60
52.25
53.00
53.80
64.60
55.40
66.20
57.00
57.90
58.80
69.70

$100.00
101. 50
103.00
104. 50
106.00
107. 60
109.20
110.80
112.40
114. 00
116.80
117. 60
119. 40

$500.00
607. 50
615.00
522. 50
530.00
638.00
546.00
554.00
662.00
570.00
579. 00
688.00
597.00

$1,000.00
1, 015. 00
1,030.00
1,045.00
1,060.00
1,076.00
1,092.00
1,108.00
1,124.00
1,140.00
1,158.00
1,176.00
1,194.00

A p p r o x i m a t e investm e n t yield 2
(2) O n
purchase
price from
issue d a t e
to
beginning
of each
half-year
period
Percent
2.90
2.90
2.90
2.91
2.90
2.91
2.91
2.91
2.91
2.91
2.92
2.92
2.93

(3) O n
c u r r e n t redemption
v a l u e from
beginning
of each
half-year
period (a;
to first
extended
maturity
Percent
3 3 00
33.00
3 3 00
33.01
33.02
33.02
33.02
33.03
33.04
33.05
33.04
33.04
43.53

Redemption values and investment yields to first extended maturity on basis of June 1,1959, revision
63^ to 7 years
7 t o 73^ y e a r s .
73^ t o 8 years
8 t o 83^ years
83^ t o 9 years
_ -._
9 t o 934 years
9}/2 t o 10 y e a r s —
First extended m a t u r i t y
v a l u e (10 years from
original m a t u r i t y date) s-

$30.31
30.79
31.29
31.81
32.40
33; 02
33.66

$60.62
61.68
62.68
63.62
64.80
66.04
67.32

$121.24
123.16
125.16
127.24
129.60
132.08
134.64

$606.20
615.80
625.80
636.20
648.00
660.40
673.20

$1,212.40
1, 231.60
1, 251. 60
1,272.40
1, 296.00
1, 320.80
1,346.40

2.93
2.94
2.95
2.96
2.98
3.00
3.02

34.34

68.68

137.36

686.80

1,373.60

3.05

P e r i o d after first e x t e n d e d
m a t u r i t y (beginning 20
y e a r s after issue date)

Second e x t e n d e d m a t u r i t y period

3.60
3.67
3.76
3.86
3.91
3.96
4.04

(b) to
second
extended
maturity

$1,373.60
3.75
$34.34
$137.36
$686.80
3.05
$68.68
F i r s t }/2 year
1, 399.20
34.98
3.76
139.92
699. 60
3.07
M to 1 years..
69.96
1,426. 60
35.64
3.75
142. 56
712.80
3.08
1 t o 13^ years
-._
71.28
1,452.40
36.31
3.75
145.24
726.20
3.10
13^ t o 2 years
72.62
1,479, 60
36.99
3.76
147.96
739.80
3.11
2 t o 2 H years
73.98
1,507.20
37.68
3.75
150.72
763.60
3.13
2}4 to 3 years75.36
1, 535.60
38.39
3.75
163. 56
767.80
3.14
3 t o 33^ years
76.78
1, 664.40
39.11
3.75
156.44
782.20
3.15
33^^ t o 4 years
78.22
1, 693.60
3.75
39.84
169. 36
796.80
3.17
4 t o 43^ years
___ _
79.68
1,623.60
3.76
40.69
162.36
811.80
3.18
43^ t o 5 years
81.18
1, 654. 00
3.75
41.35
165.40
827.00
3.19
82.70
5 t o 53^ years
1, 685.20
42.13
3.75
168. 52
842.60
3.20
84.26
53^ t o 6 years
1, 716.80
3.75
42.92
171. 68
858.40
3.21
85.84
6 t o 63^ years
1, 748.80
43.72
3.76
174. 88
874.40
3.22
87.44
63^ to 7 years
1,781. 60
3.76
44.54
178.16
890.80
3.23
89.08
7 t o 73^ years1,814.80
46.37
3.75
181.48
907.40
3.24
90.74
73^ t o 8 years
1, 849.20
46.23
3.74
184.92
924.60
3.25
92.46
8 t o 83^ years
1,883.60
47.09
3.75
188.36
941.80
3.26
94.18
S}4 t o 9 years
1,919.20
47.98
191. 92
959.60
3.27
3.74
95.96
9 to 9}4 years
1,954.80
48.87
195.48
977.40
3.27
97.74
3.77
93^ t o 10 years
Second extended m a t u r i t y v a l u e (20 years
from original m a t u r i t y
1,991. 60
49.79
99.58
995. 80
199.16
3.28
date) 6
1 For redemption values and investment yields during original maturity period see Department Circular
No. 653, Fifth Revision, dated September 23,1959.
2 Calculated on basis of $1,000 bond (face value).
3 Approximate investment yield from beginning of each half-year period to first extended maturity,
at first extended maturity value prior to June 1,1969, revision.
4 Approximate investment yield from effective date of June 1,1969, revision to first extended maturity.
* 20 years from issue date.
8 30 years from issue date.




282

1961 REPORT OF THE SECRETARY OF THE TREASURY
TABLE VIII.—UNITED STATES SAVINGS BONDS—SERIES E

TABLE OF REDEMPTION VALUES AND INVESTMENT YIELDS DURING EXTENDED MATURITY PERIODS i FOR
B O N D S B E A R I N G I S S Q E DATES F R O M DECE.MBER 1, 1943, THROUGH MAY 1, 1944

Table showing: (1) How bonds of Series E bearing issue dates from December 1,1943, through May 1, 1944, by
denominations, increase in redemption value daring successive half-year periods following date of original
maturity; (2) the approximate investment yield on the purchase price from issue date to the beginning ofeach
half-year period; and (3) the approximate investment yield on the current redemption value from the beginning
of each half-year period (a) to first extended maturity or (b) to second extended maturity. Yields are expressed
in terms of tate percent per annum, compounded semiannually.
Original m a t u r i t y v a l u e . .
I s s u e price

$26.00
18.75

$50.00 1 $100.00
37. 50 1
75. 00

$500. 00 1 $1,000. 00
375.00 1
750.00

(1) R e d e m p t i o n values d u r i n g each half-year period
(Values increase on first d a y of period shown)
P e r i o d after original m a t u r i t y ( b e g i n n i n g 10
y e a r s after issue date)
F i r s t e x t e n d e d m a t u r i t y period

F i r s t 3^ year
3^ t o 1 y e a r . .
1 to 13^ years
1>^ t o 2 years
2 t o 23^ years
23/^ to 3 years
3 t o 33^ years
33^ to 4 years
4 to 43^ 3'^ears
43^ t o 5 years
5 t o 63^ years
53^ to 6 years

.- ...
.
_.- .
.

$25.00
25.37
25.75
26.12
26.50
26.90
27.30
27.70
28.10
28. 50
28.95
29.40
^y. tu

$60.00
50.75
61.50
52.25
53.00
63.80
54.60
55.40
56.20
57.00
57.90
58.80

uo. ou

$100.00
101.50
103.00
104.50
106. 00
107.60
109. 20
110.80
112.40
114.00
116. 80
117.60
JLX/. uu

$500.00
607.50
615.00
522.50
630. 00
638.00
546.00
654.00
562.00
570.00
679. 00
688. 00

UOO. uu

$1,000. 00
1,015.00
1,030. 00
1,045.00
1,060.00
1,076.00
1,092.00
1,108. 00
1,124. 00
1,140. 00
1,168.00
1,176.00
J., i / u . uu

A p p r o x i m a t e investm e n t yield 2
(2) O n
purchase
price from
issue d a t e
to
beginning
of each
half-year
period
Percent
2.90
2.90
2.90
2.91
2.90
2.91
2.91
2.91
2.91
2.91
2.92
2.92

Redemption values and investment yields to first extended maturity on basis of June
<t9Q
Rfi
«.SiQ 7 9
« 1 1 Q AA
kRQ7~0f\
* T 1 Q 4 AC\
$69.72
$119.44
$697.20
$1,194.40
$29.86
6 to 63^ years
60.66
121.32
606. 60
1,213.20
30.33
63^ to 7 years
61.66
123.32
616.60
1, 233.20
30.83
7 to 7H years
62.68
125.36
626.
80
1,253.
60
31.34
73^ to 8 yeai'S
63.74
127. 48
637.40
1, 274. 80
31.87
8 to 83^ yeai'S
64.94
129.
88
649.40
1,
298.
80
32.47
83^ to 9 years
66.18
132. 36
661.80
1, 323. 60
33.09
9 to 93^ 3'eai's
67.48
134.
96
674.80
1,349.60
33.74
93^ to 10 years
First extended maturity
value (10 years from
original
maturity
68.86
137. 72
date)5
688. 60
1,377.20
Period after first extended
maturity (beginning 20
years after issue date)

Second extended maturity period

^. yjj

(3) On
c u r r e n t redemption
value from
beeinning
of each
half-year
period (a)
to first
extended
maturity
Percent
3 3 00
33.00
33.00
33.01
33.02
33.02
33.02
33.03
33 04
33.05
33 04
43.54
•» o.

1, 1959, revision
9 Q!^
5~
2.93
3.59
2.94
3.66
2.95
3.72
2.96
3.80
2.97
3.90
2.99
3.95
3.01
4.01
3.04
4.09

3.06

(b) to
second
extended
maturity
3.76
3.75
3.76
3.75
3.75
3.75
3.75
3.75
3.75
3.75
3.75
3.75
3.75
3.75
3.75
3.75
3.74
3.74
3.75
3.76

$34. 43
$68. 86
$137. 72
$688. 60 $1, 377. 20
First }/2 year
3.06
35.08
70.16
140. 32
701. 60
1,403. 20
3^ to 1 year
—
3.08
35.73
71.46
142.92
714. 60
1,429. 20
1 to 13^ years
3.09
36.40
72.80
145. 60
728. 00
1,456.00
13^ to 2 years
3.11
37.09
74.18
148. 36
741.80
1, 483. 60
2 to 23^ years
3.12
37.78
75.56
151.12
755. 60
1,511.20
3.14
2}4 to 3 years
38.49
76.98
153. 96
769. 80
1, 539. 60
3 to 3}/i years
3.15
39.21
78.42
156. 84
784.20
1, 568. 40
33^ to 4 years
3.16
39.95
79.90
159. 80
799.00
1, 598.00
3.18
4 to 4:}4 years
40.70
81.40
162.80
814.00
1,628.00
3.19
43^ to 5 years
41.46
82.92
165. 84
829. 20
1,658. 40
3.20
5 to 63/^ years
42.24
168. 96
844. 80
1, 689. 60
. 84.48
3.21
53^ to 6 years
43.03
172.12
860. 60
1, 721. 20
86.06
13.22
6 to 63^ years
43.83
175. 32
876.60
1, 753. 20
87.66
13.23
&}4 to 7 years
44.66
178. 64
893. 20
1, 786. 40
89.32
3.24
7 to 73^ years..
—
45.49
181.96
909. 80
1, 819. 60
90.98
3.25
73^ to 8 years
46.35
185. 40
927.00
1, 854.00
3.26
: 92.70
8 to 83^ years
47.22
188. 88
944. 40
1, 888. 80
3.27
94.44
83^ to 9 years
48.10
192. 40
962. 00
1, 924. 00
3.28
96.20
9 to 93^ years
49.00
196.00
980.00
1, 960.00
3.28
98.00
93^ to 10 years
Second extended maturity value (20 years from
original
maturity
date)8.99.84
199. 68
49.92
998. 40
1, 996. 80
3.29
1 For rederaption values and investraent yields during original raaturity period see Departraxnt Circular
No. 653, Fifth Revision, dated Septeraber 23, 1959.
2 Calculated on basis of $1,000 bond (face value).
3 Approxiraate investraent yield from beginning of each half-year period to first extended maturity
at first extended maturity value prior to June 1,1959, revision.
4 Approximate investment yield from effective date of June 1,1959, revision to first extended maturity.
8 20 years from issue date. ^ 30 years from issue date.




283

EXHIBITS
TABLE IX.—UNITED STATES SAVINGS BONDS—SERIES

E

TABLE O F R E D E M P T I O N VALUES AND INVESTMENT YIELDS DURING EXTENDED MATURITY PERIODS 1 FOR
BONDS BEARING ISSUE DATES FROM JUNE 1 THROUGH NOVEMBER 1, 1944

Table shoiuing: (1) How bond<i of Series E bearing issue dates June 1 through November 1,1944, by denominations,
increase in redemption value during successive half-year periods following date of original maturity; (2) the
approximate investment yield on the purchase price from issue di.te to the beginning ofeach half-year period; and
(3) the approximate investment yield on the current redemption value from ihe beginning ofeach half-year period
(a^ to first extended maturity or (b) to second extended maturity. Yields are expressed in terms of rate percent
per annum, compounded semiannually.
Original m a t u r i t y v a l u e . $10.00
7.60
Issue price

$25. 00
18.75

$50. 00 $100. 00
75.00
37.50

$500. 00 $1, 000. 00
375. 00
750. 00

(1) R e d e m p t i o n values d u r i n g each half-year period
(Values increase on first d a y of period s h o w n )
Period after original m a t u r i t y (beginning 10
years after issue date)
F i r s t e x t e n d e d m a t u r i t y period

F i r s t 3^ y e a r
3-^ to 1 year _
1 to 13^ years
13^ to 2 vears
2 to 23^ years
23^ to 3 years
3 to 3}4 years
33^ to 4 years
4 to 43^ years _
43^ to 5 years
6 to 63^ years

_

$10.00
10.15
10.30
10.45
10.60
_ - . 10.76
10.92
11.08
11.24
11.40
11.58

Redemption values and
53^ to 6 years.
6 to 63^ years.
63^ to 7 years..7 to 7H years
.
7H to 8 years
8 to 8}4 years
83^ to 9 years.
9 to 93^ years
9yi to 10 years
First extended maturity
value (10 years from
original
maturity
date)5.-Period after first extended maturity (begirming 20 years after
issue date)
First 3^ year
14 to 1 year1 to 13^ years
—
13^ to 2 years
2 to 23^ years
23^ to 3 years
3 to 33^ years
33^ to 4 years
4 to 43^ years
43^ to 5 years
5 to 53^ years
53^ to 6 years
6 to 63^ years
63^ to 7 years
7 to 73^ years
-.
73^ to 8 years
8 to 83^ years83^ to 9 years
9 to 93^ years
93^ to 10 years
Second extended maturity value (20 years
from original maturity

$25.00
25.37
26.75
26.12
26.50
26.90
27.30
27.70
28.10
28. 50
28. 95

$50.00 $100.00
50.75 101.50
51. 50 103.00
52.25 104. 50
53.00 106.00
107. 60
63.80
64. 60 109.20
55. 40 110.80
112.40
56.20
114.00
67.00
57.90 115.80

$500.00 $1,000.00
507. 60 1,015.00
515.00 1,030.00
522. 60 1,045.00
530.00 1.060.00
638. 00 1,076.00
646.00 1,092.00
554.00
1,108. 00
562.00 1,124.00
670.00 1,140. 00
679.00 1.158.00

Approximate
i n v e s t m e n t yield 2
(2) O n
purchase
price from
issue d a t e
to beginn i n g of
each
half-year
period
Percent
2.90
2.90
2.90
2.91
2.90
2.91
2.91
2.91
2.91
2.91
2.92

investment yields to first extended maturity on basis of June
$29. 41 $58. 82 $117. 64
$588. 20 $1,176.40
597. 60 1,195.20
29.88
69.76
119. 52
607. 40 1, 214. 80
30.37
60.74
121.48
617. 40 1, 234. 80
30.87
61.74
123. 48
627. 80 1,256.60
31.39
62.78 126. 56
638. 60 1, 277. 20
31.93
63.86 127. 72
650. 80 1,301.60
32.54
65.08 130.16
663.40 1, 326.80
33.17
66.34 132. 68
676. 40 1,352.80
33.82
67.04 135.28

$11. 76
11.95
12.15
12.35
12. 66
12.77
13.02
13.27
13.63

13.80

34.51

69.02

138.04

690. 20

1,380.40

17. 58
17.90
18.24
18.58
18. 93
19.28
19.65

$34.51
35.16
36.82
36.49
37.17
37.87
38.68
39.30
40.04
40.79
41.65
42.33
43.13
43.94
44.76
45.60
46.45
47.33
48.21
49.12

$69. 02 $138.04
70.32
140. 64
71.64 143. 28
72.98 145.96
74.34 148. 68
75.74
151.48
77.16
154.32
78. 60 157. 20
80.08 160.16
81.58 163.16
83.10 166. 20
84.66 169.32
86.26 172. 62
87.88 175. 76
89.52 179. 04
182. 40
91.20
92.90 185. 80
94.66 189. 32
96.42 192. 84
98.24 196.48

$690.20 $1,380.40
703.20 1,406.40
716. 40 1, 432. 80
729. 80 1, 459. 60
743. 40 1. 486. 80
767. 40 1,614.80
771.60 1, 543. 20
786.00 1,672.00
800.80 1,601.60
815. 80 1, 631.60
831.00 1, 662. 00
846. 60 1, 693. 20
862. 60 1, 725. 20
878.80 1, 757. 60
895. 20 1,790.40
912.00 1,824.00
929.00 1,858.00
946. 60 1, 893. 20
964. 20 1, 928. 40
982.40 1, 964.80

Percent
3 3 00
3 3 00
33 00
33.01
3 3 02
33 02
3 3 02
33 03
33 04
33.05
43.54

1, 1969, revision
2.93
3.59
2.93
3.63
2.94
3.68
2.95
3.76
2.97
3.83
2.98
3.92
3.00
3.96
3.03
4.00
3.05
4.08

3.07

Second extended maturity period
$13.80
14.06
14.33
14.60
14.87
15.15
16.43
15.72
10.02
16.32
16.62
16.93
17.25

(3) On
current
redemption
value from
beginning
of each
half-year
period (a)
to first
extended
maturity

3.07
3.09
3.11
3.12
3.13
3.16
3.16
3.17
3.19
3.20
3.21
3.22
3.23
3.24
3.25
3.26
3.27
3.28
3.28
3.29

(b) to
second
extended
maturity
3.75
3.75
3.75
3.75
3.75
3.75
3.75
3.75,
3.75
3.75
3.75
3.75
3.75
3.75
3.75
3.75
3.76
3.75
3.76
3.76

60.04
20.02
100.08 200.16 1,000.80 2,001.60
3.30
date)6--•
1 For redemption values and investment yields during original maturity period see Department Circular
No. 653, Fifth Revision, dated September 23,1959.
2 Calculated on basis of $1,000 bond (face value).
3 Approximate investment yield from beginning of each half-year period to first extended maturity,
at first extended maturity value prior to June 1, 1959, revision.
4 Approximate investraent yield from effective date of June 1,1959, revision to first extended maturity.
«20 years from issue date.
«30 years from issue date.

614359—62-

-19




284

1961 REPORT OF THE SECRETARY OF THE TREASURY

TABLE X.—UNITED STATES SAVINGS BONDS—SERIES E
TABLE OF REDEMPTION VALUES AND INVESTMENT YIELDS DURING EXTENDED MATURITY PERIODS » FOR BONDS
BEARING ISSUE DATES FROM DECEMBER 1, 1944, THROUGH MAY 1, 1945

Table showing: (1) How bonds of Series E bearing issue dates December 1,1944, through May 1,1945, by denominations, increase in redemption value during successive half-year periods jfollowing date of original maturity;
(2) the approximate investment yield on the purchase price from issue date to the beginning of each half-year
period; and (3) the approximate investment yield on the current redemption value from the beginning of each
half-year period (a) to first extended maturity or (6) to second extended maturity. Yields are expressed in terms
of rate percent per annum, compounded semiannually.
Approximate
investment yield 2
(3) On
(2) On
current
(1) Redemption values during each half-year period
purchase redemption
(Values increase on first day of period shown)
price from value from
Period after original maissue date beginning
turity (beginning 10
to beginof each
years after issue date)
ning of
half-year
each
period (a)
First extended maturity period
half-year
to fiirst
extended
period
maturity
Percent
Percent
First }i year...
$10.00
$25.00
$500.00 $1,000.00
2.90
33.00
$50.00 $100.00
3^ to 1 y e a r —
507. 50 1,016.00
2.90
3 3.00
10.15
25.37
50.75
101. 50
33.00
515.00 1,030.00
2.90
10.30
26.75
51.60
103.00
1 to IM years..
33.01
622. 60 1,046.00
2.91
10.45
26.12
62.25
104. 50
13^ to 2 years..
33.02
530.00 1,060.00
2.90
10.60
2 to 23^ years..
26.50
63.00
106.00
33.02
538.00 1,076.00
2.91
2}4 to 3 years..
10.76
26.90
53.80
107. 60
33.02
646.00 1,092.00
2.91
3 to 3M years..
10.92
27.30
54.60 109. 20
33.03
554.00 1,108.00
2.91
33^ to 4 years..
11.08
27.70
55.40
110.80
33.04
562.00 1,124.00
2.91
11.24
28.10
56.20
112.40
4 to 43^ years..
4 3.65
670.00 1,140.00
2.91
11.40
67.00
114.00
28.50
A}4 to 6 years..
. Redemption values and investment yields to first extended maturity on basis of June 1,1969, revision
2.92
$579.20 $1,168.40
$11.58 $28. 96 $67.i92 $115. 84
3.58
5 to 53^ years
2.93
58.86
3.62
688. 60 1,177.20
117.72
11.77
29.43
53^^ to 6 years
.
2.94
69.82
3.67
119. 64
29.91
598.20 1,196.40
11.96
6 to 63^ years
2.95
60.82
3.71
121. 64
30.41
608.20 1,216.40
12.16
63^ to 7 years
2.96
61.84
3.77
123. 68
30.92
618.40 1,236.80
12.37
7 to 73^ years
2.98
1,268.40
62.92
3.83
125.84
31.46
629. 20
73^ to 8 years
12.58
2.99
64.00
3.93
128.00
32.00
640. 00 1,280.00
12.80
8 to 83^ years
3.02
1,304.80
65.24
3.95
130.48
32.62
652.40
83^ to 9 years
13.05
3.04
66.50
3.99
133.00
33.26
665.00 1,330.00
9 to 93^ years
13.30
3.06
1,356.00
67.80
4.07
135.
60
33.90
678.00
13.66
9}4 to 10 years
First extended maturity
value (10 years from
original m a t u r i t y
date) s
13.84
691.80 1,383.
69.18 138.36
34.59
3.09
(b) to
Period after first exsecond
Second extended maturity period
tended maturity (beextended
ginning 20 years after
issue date)
maturity
3.09
3.75
First }4 year.--. $13.84 $34. 59 $69.18 $138. 36 $691.80 $1, 383.60
3.10
35.24
70.48 140.96
704.80 1, 409.60
14.10
3.75
J^ to 1 year
3.12
36.90
71.80 143. 60
718.00 1,436.00
14.36
3.75
1 to 1}4 years
3.13
73.14 146.28
731.40 1,462.80
3.76
13^ to 2 years-—
-_. 14.63 36.57
3.15
37.26
74.62 149.04
745.20 1,490.40
14.90
3.76
2 to 2M years
3.16
37.96
75.92 151.84
759.20 1, 518.40
15.18
3.76
2}4 to 3 years
3.17
38.67
77.34 154.68
773.40 1, 546.80
16.47
3.75
3 to 33^ years
3.18
78.78 167. 56
787.80 1, 675. 60
15.76 39.39
3.75
3M to 4 years
3.20
80.26 160. 52
802.60 1,605.20
16.05 40.13
3.76
4 to 4.3^ years
3.21
81.76 163. 52
817. 60 1, 635.20
16.35 40.88
3.76
43^ to 6 years
3.22
41.65
83.30 166. 60
833.00 1,666.00
16.66
3.75
6 to 5}4 years
3.23
42.43 84.86 169. 72
848.60 1,697.20
16.97
3.75
53^ to 6 years
3.24
864.60 1,729.20
17.29 43.23 86.46 172.92
3.75
6 to 63^ years
3.25
88.08 176.16
880.80 1,761.60
17.62 44.04
3.75
63^ to 7 years
3.26
44.86
89.72 179.44
897.20 1,794.40
3.75
7 to 73^ years-—
_. 17.94
3.27
45.71
91.42 182.84
914.20 1,828.40
18.28
3.74
73^ to 8 years
3.27
93.12 186.24
931.20 1,862.40
18.62 46.56
3.75
8 to 83^ years
3.28
47.44
94.88 189. 76
948.80 1,897.60
18.98
3.74
83^ to 9 years
3.29
96.64 193.28
966.40 1,932.80
19.33 48.32
3.75
9 to 93^ years3.30
49.23 98.46 196.92
984. 60 1,969.20
19.69
3.74
93^ to 10 years
Second extended maturity value (20 years
from original matm-ity
60.15 100.30 200.60 1,003.00 2,006.00
20.06
•date) 0
—'
3.31
1 For redemption values and investment yields during original maturity period see Department Circular
No. 653, Fifth Revision, dated September 23,1959.
,2 Calculated on basis of $1,000 bond (face value).
3 Approximate investment yield from begiiming of each half-year period to first extended maturity, at
first extended maturity value prior to June 1,1959, revision.
* Approximate investment jaeld from effective date of June 1,1959, revision, to first extended maturity.
^ 20 years from issue date.
^ 30 years from issue date.
Original maturity value- $10.00 $25.00 $50.00 $100.00
Issueprice--------------7. 50 18. 75 37. 60 | 75. 00




$500.00 $1,000.00
375. 00
760.00

EXHIBITS

285

TABLE XI.—UNITED STATES SAVINGS BONDS—SERIES E
TABLE OF R E D E M P T I O N VALUES AND I N V E S T M E N T YIELDS D U R I N G E X T E N D E D MATURITY PERIODS 1 FOR
BONDS B E A R I N G ISSUE DATES FROM J U N E 1 THROUGH N O V E M B E R 1, 1945

Table showing: (1) How bonds of Series E bearing issue dates June 1 through November 1,1945, by denominations,
increase in redemption value during successive half-year periods following date of original maturity; (2) the
approximate investment yield on the purchase price from issue date to the beginning ofeach half-year period; and
(3) the approximate investment yield on the current redemption value from the beginning ofeach half-year period
(a) to first extended maturity or (b) to second extended maturity. Yields are expressed in terms of rate percent
per annum, compounded semiannually.
Original m a t u r i t y
value
Issue price

A p p r o x i m a t e invest$10.00 $25. 00 $50. 00 $100.00 $200.00
$500. 00 $1,000. 00
m e n t yield 2
7.60
18.75
37.50
76.00 150. 00
376. 00
750. 00
(2) O n
(3) O n
(1) R e d e m p t i o n v a l u e s d u r i n g each half-year period
purchase
current
(Values increase o n first d a y of period shown)
price
redemption
from
P e r i o d after origv a l u e from
inal m a t u r i t y
issue
beginning
(beginning 10
d a t e to
of each
y e a r s after issue
beginhalf-year
date)
F i r s t e x t e n d e d m a t u r i t y period
n i n g of
period (a)
each
to first
half-year
extended
period
maturity
Percent
Percent
F i r s t }4 year
$10.00 $25.00 $60.00 $100.00 $200.00
$600.00 $1,000.00
2.90
33.00
3^ to 1 year
10.15
25.37
60.75 101. 50 203.00
507. 60 1,016.00
2.90
33.00
1 t o 13^ years
10.30
25.75
51.50 103.00 206.00
515.00 1,030.00
2.90
33.00
13^ to 2 years
10.45
26.12
62.26 104.50 209.00
622. 60 1,046.00
2.91
83.01
2 t o 23^ years
10.60
26.60
63.00 106.00 212.00
530.00 1,060.00
2.90
33.02
23^ t o 3 years
10.76
26.90
53.80 107. 60 216.20
538.00 1,076.00
2.91
33.02
3 to 33^ years
10.92
27.30
54.60 109.20 218.40
646.00 1,092.00
2.91
33.02
33^ t o 4 years
11.08
27.70
56.40 110.80 221.60
554.00 1,108.00
2.91
33.03
4 to 4)^ years
11.24
28.10
66.20 112.40 224.80
562.00 1,124.00
2.91
43.54
Redemption values and investraent yields to first extended raaturity on basis of June 1, 1959, revision
$11.40 $28.51 $57.02 $114.04 $228.08
$670.20 $1,140.40
43^ to 5 years
2.91
3.59
11.59
579.40 1,168.80
5 to 5K years
28.97
57.94 116.88 231. 76
2.92
3.63
11.78
589. 20 1,178. 40
29.46
58.92 117.84 235. 68
53^ to 6 years
2.94
3.66
11.98
599.00 1,198.00
29.96
59.90 119.80 239.60
6 to 63^ years
2.95
3.70
60.92 121.84 243. 68
12.18
609.20 1,218.40
30.46
6>^ to 7 years
2.96
3.74
12.39
619. 60 1,239.20
30.98
61.96 123.92 247.84
2.98
7 to 7}4 years
3.80
12.61
630.40 1,260.80
31.62
63.04 126.08 252.16
2.99
73^ to 8 years
3.86
12.83
641.40 1,282.80
32.07
64.14 128.28 256.56
3.00
8 to 83^ years
3.95
13.08
653.80 1, 307.60
65.38 130.76 261.62
3.03
32.69
83^ to 9 years
3.98
13.33
666.60 1,333.20
3.05
33.33
66.66 133.32 266.64
9 to 9>^ years
4.01
13.60
679.80 1,359.60
3.07
93^ to 10 years
33.99
67.98 135.96 271.92
4.06
First extended
maturity value
(10 years from
original maturi69.36 138. 72 277.44
693.60 1,387.20
13.87
34.68
ty date) ^
3.10
Period after first
(b) to
extended maturisecond
Second extended maturity period
ty (beginning 20
extended
years after issue
maturity
date)
$693.60 $1,387.20
$13.87 $34.68 $69.36 $138. 72 $277.44
3.10
First 3^ year
3.75
706.60 1,413.20
35.33
70.66 141.32 282. 64
14.13
3.11
M to 1 year.3.75
719.80 1,439.60
35.99
71.98 143. 96 287.92
14.40
3.13
1 to IM years
3.76
733.40 1,466.80
36.67
73.34 146.68 293.36
14.67
3.14
13^ to 2 years
3.75
747.20 1,494.40
37.36
74.72 149. 44 298.88
14.94
3.16
2 to 23^ years
3.75
761.20 1,522.40
38.06
76.12 162.24 304.48
15.22
3.17
H t o 3 years
3.75
775.40 1,550.80
38.77
77.54 155.08 310.16
3.18
3 to33^yearS----_ 15.51
3.76
790.00 1,580.00
39.50
79.00 158.00 316.00
15.80
3.20
33^ to 4 years
3.75
804.80 1,609.60
40.24
80.48 160.96 321.92
3.21
4 to 43^ years
. 16.10
3.75
819.80 1,639.60
40.99
81.98 163. 96 327.92
16.40
3.22
3.75
43^ to 5 years
835.20 1,670.40
41.76
83.52 167.04 334.08
16.70
3.23
3.75
5 to 53^ years
850.80 1,701.60
42.64
86.08 170.16 340.32
17.02
3.24
3.75
5M to 6 years
866.80 1, 733.60
43.34
86.68 173.36 346. 72
17.34
3.25
3.75
6 to 63^ years
883.00 1, 766.00
44.15
88.30 176.60 353.20
17.66
3.26
3.75
63^ to 7 years
899.60 1, 799.20
44.98
89.96 179.92 369.84
17.99
3.27
3.75
7 to 73^ years
366.
56
916.40
183.28
1,832.80
45.82
91.64
18.33
3.28
3.75
73^ to 8 years
933.60 1,867.20
46.68
93.36 186. 72 373.44
18.67
3.28
3.75
8 to 8H years
951.20 1,902.40
47.56
95.12 190.24 380.48
3.29
3.74
83^ to 9 years
. 19.02
969.00 1,938.00
48.45
96.90 193.80 387. 60
19.38
3.30
3.74
9 to 93^ years
394.88
987.20
197.44
49.36
98.72
1,
974.40
19.74
3.31
3.73
93^ to 10 years
Second extended
maturity value
(20 years from
original maturi60.28 100.56 201.12 402.24 1,005.60 2,011.20
20.11
3.32
ty date) e
1 For redemption values and investment yields during original maturity period see Department Circular
No. 663, Fifth Revision, dated September 23,1959.
2 Calculated on basis of $1,000 bond (face value).
3 Approximate investment yield from beginning of each half-year period to first extended maturity,
at first extended maturity value prior to June 1,1959, revision.
4 Approximate investment yield from effective date of June 1,1959, revision to first extended maturity,
fi 20 years from issue date.
8 30 years from issue date.




286

1961 REPORT OF THE SECRETARY OF THE TREASURY

TABLE XII.—UNITED STATES SAVINGS BONDS—SERIES E
TABLE OF REDEMPTION V A I U E S AND INVESTMENT YIELDS DURINO EXTENDED MATURITY PERIODS 1 FOR BONDS
BEARING ISSUE DATES FROM DECEMBER 1, 1945, THROUGH MAY 1, 1948

Table showing: (1) How bonds of Series E bearing issue dates December 1,1945, through May 1,1946, by denominations, increase in redemption value during successive half-year periods following date of original maturity;
(2) the approximate investment yield on the purchase price from issue dote to the beginning of each half-year
period; and (3) the approximate investment yield on the current redemption value from the beginning of each
half-year period (a) to first extended maturity or (b) to second extended maturity. Yields are expressed in terms
of rate percent per annum, compounded semiannually.
Original maturity
invest$10.00 $26.00 $50.00 $100.00
$200.00 $500. 00 $1,000.00 Approximate
value
ment yield 2
18.75
7.50
37.50
75.00
150. 00 375.00
750.00
Issue price
(2) On (3) On curpurchase
(1) Redemption values during each half-year period
rent redemption
(Values increase on first day of period shown)
p. ice
from issue value from
Period after origdate to beginning
inal maturity
begin- ofeach half(begin.ning 10
ning of year period
years after issue
each half- (a) to first
First extended maturity period
date)
extended
year
maturity
period
Percent
Percent
2.90
33.00
$10.00 $25.00 $50. 00 $100.00 $200. 00 $500.00 $1,000.00
First }4 year
2.90
10.15
25.37
50.75 101.50 203. 00
33.00
J^ to 1 year
507. 50 1,015.00
2.90
1 to 13^ years
33.00
25.75
615.00 1,030. 00
10.30
51.50 103. 00 206. 00
26.12
2.91
52.25 104. 50 209. 00
33.01
114 to 2 years
10.45
522. 50 1.045.00
2.90
2 to 23/^ years
33.02
530.00 1,060.00
10.60
26.50
53.00 106.00 212.00
23/^ to 3 years
2.91
10.76
33.02
26.90
53.80 107. 60 215.20
538. 00 1,076.00
2.91
3 to 3}i years
10.92
33.02
546.00 1,092.00
27.30
54.60 109. 20 218. 40
2.91
33^ to 4 years
43.53
564.00 1,108.00
11.08
27. 70
55. 40 110.80 221. 60
Redemption values and investment yields to first extended maturity on basis of June 1, 1969, revision
4 to 4>^ years
$11.24 $28.11 $56.22 $112.44 $224. 88 $562.20 $1,124. 40
2.91
3.58
11.41
57.04 114. 08 228.16
570. 40 1.140. 80
2.91
43^ to 6 years
28.52
3.64
11.60
58.00 116.00 232.00
580.00 1,160. 00
2.93
5 to 53^ years
29.00
3.66
11.80
58.98 117. 96 235. 92
589. 80 1,179. 60
2.94
3.69
29.49
53^ to 6 years
3.73
12.00
59.98 119. 96 239. 92
599. 80 1,199. 60
2.96
29.99
6 to 6M years
3.77
12.20
61.02 122.04 244. 08
610. 20 1,220. 40
2.97
30.51
63/^ to 7 years
3.82
12.42
62.08 124.16 248. 32
620. 80 1,241.60
2.99
31.04
7 to 73/^ years
3.89
12.63
63.16 126.32 252. 64
631. 60 1,263.20
3.00
31.58
7M to 8 years
3.97
12. 86
64.28 128.56 257.12
642.80 1,285. 60
3.02
32.14
8 to 83^ years
3.99
13.11
65. 54 131.08 262.16
655. 40 1,310. 80
3.04
32.77
83^ to 9 years
4.03
13.36
66.82 133. 64 267. 28
668. 20 1, 336. 40
3.06
33.41
9 to 93^ years
4.11
13.63
68.14 136.28 272. 56
681. 40 1,362. 80
3.09
34.07
9Vr. to 10 years
First
extended
maturity value
(10 years from
original maturity date) s
13.91
34. 77
69. 54 139. 08 278.16
695. 40 1,390. 80
Period after first
(b) to
extended masecond exSecond extended maturity period
turity (begintended
ning 20 years
maturity
after issue date)
$13. 91 $34. 77 $69. 54 $139.08 $278.16
$695. 40 $1, 390. 80
First }4 year
3.75
3.11
70.84 141. 68 283.36
35.42
14.17
708. 40 1,416. 80
3/^ to 1 year3.76
3.13
14. 44
36.09
72.18 144.36 288. 72
721.80 1, 443. 60
1 to 13^ years
3.75
3.14
73.52 147. 04 294. 08
735. 20 1, 470. 40
36.76
VAto2 years
14.70
3.75
3.16
749.00 1, 498. 00
14.98
37.45
2 to 23^ years
3.75
74.90 149.80 299.60
3.17
763.00 1,526.00
15.26
38.15
23^ to 3 years
3.75
76.30 152.60 305.20
3.18
77.74 155. 48 310. 96
777. 40 1, 554. 80
38.87
3 to 33^ years
15.65
3.76
3.19
15.84
792. 00 1, 584.00
33^ to 4 years
3.75
79.20 158. 40 316. 80
3.21
39.60
16.14
40.34
806.80 1, 613. 60
80.68 161. 36 322. 72
4 to 43^ years
3.75
3.22
822.00 1,644. 00
16.44
43^ to 6 years
3.75
82.20 164. 40 328. 80
3.23
41.10
83.74 167. 48 334. 96
837. 40 1,674. 80
41.87
5 to 53^ years
16.75
3.75
3.24
853.00 1, 706.00
17.06
42.65
3.75
3.25
514 to 6 years
85.30 170. 60 341.20
869. 00 1, 738.00
43.45
3.75
86.90 173.80 347.60
3.26
6 to 63^ years
17.38
885.40 1, 770. 80
88.64 177.08 354.16
44 27
3.75
3.27
6>^ to 7 years
17.71
902.00 1,804. 00
18.04
3.74
3.28
7 to 73^ years
90.20 180.40 360. 80
45.10
918. 80 1,837. 60
46.94
3.76
3.29
7Mto 8 years
18.38
91 88 183.76 367. 52
936.00 1,872. 00
18.72
3.75
3.29
8 tc 83/^ years
46.80
93.60 187.20 374. 40
953.60 1,907. 20
3.75
3.30
83^ to 9 years
19.07
47.68
95.36 190. 72 381. 44
971. 60 1, 943. 20
3.31
3.73
48.58
97.16 194. 32 388. 64
9 to 9K years
19.43
1,979. 60
3.32
3.72
49.49
9H to 10 years
98.98 197. 96 395. 92
19.80
Second extended
maturity value
(20 years from
original matu60.41 100. 82 201. 64 403. 28 1,008.20 2,016.40
20.16
rity date) ^
3.32
1 For reciemption values and investment yields during original maturity period see Department Circular
No. 653, Fifth Revision, dated September 23, 1959.
2 Calculated on basis of $1,000 bond (face value).
3 Approximate investment yield from beginning of each half-year period to first extended maturity, at
first extended maturity value prior to June 1, 1959, revision.
* Approxiraate investment yield from effective date of June 1, 1969, revision to first extended maturity.
• 20 years from issue date
s 30 years from issue date.




287

EXHIBITS
TABLE XIII.—UNITED STATES SAVINGS BONDS—SERIES E

TABLE OF R E D E M P T I O N VALUES AND INVESTMENT YIELDS DURING E X T E N D E D MATURITY PERIODS I FOR B O N D S
BEARING ISSUE DATES FROM J U N E 1 THROUGH N O V E M B E R 1, 1946

Table showing: (1) How bonds of Series E bearing issue dates June 1 through November 1,1946, by denominations,
increase in redemption value during successive half-year periods following date of original maturity; (2) the
approximate investment yield on the purchase price from issue date to the beginning ofeach half-year period; and
(3) the approximate investment yield on the current redemption value from the beginning of each half-year period
(a) to first extended maturity or (b) to second extended maturity. Yields are expressed in terms of raie percent
per annum, compounded semiannually.
Original m a t u r i t y
value
Issue price

$10.00
7.50

$25. 00
18.76

$50. 00 $100. 00 $200. 00
37.50
150. 00
76.00

$500. 00 $1,000.00
375. 00 1 750.00

(1) R e d e m p t i o n values d u r i n g each half-year period
(Values increase on first d a y of period shown)
Period after original m a t u r i t y
(beginning 10
y e a r s after issue
date)

F i r s t H year
3^ to 1 y e a r - 1 to 13^ years
13^ to 2 years
2 to 23^ years
23^ t o 3 years
3 to 33^ years

F i r s t e x t e n d e d m a t u r i t y period

$10.00
10.15
10.30
10.45
10.60
10.76
10.92

$25.00
25.37
25.76
26.12
26.50
26.90
27.30

$50.00 $100.00 $200.00
50.76 101.60 203.00
51. 50 103.00 206.00
52.25 104. 50 209.00
53.00
106.00 212.00
63.80
107. 60 215.20
54.60
109. 20 218. 40

$500.00 $1,000.00
507. 50 1,015.00
515.00
1,030.00
522. 50 1,045.00
530.00
1,060.00
638.00
1,076.00
546.00 1,092.00

A p p r o x i m a t e investm e n t yield 2
(2) O n
purchase
price
from
issue
d a t e to
beginn i n g of
each
half-year
period

(3) O n
current
redemption
v a l u e from
beginning
of each
half-year
period (a)
to first
extended
maturity

Percent
2.90
2.90
2.90
2.91
2.90
2.91
2.91

Percent
33.00
33.00
33.00
33.01
33.02
33.02
43.52

R e d e m p t i o n value s a n d in v e s t m e n t yields t 0 first e ((tended m a t u r i t y on basis of J u n e 1, 1959, revision
'^}4 to 4 years
4 to 43^ years
43^ to 5 years
5 t o 53^ years
5 H t o 6 years
6 to 63^ years
63^ to 7 years
7 t o 73^ years
73^ t o 8 years
8 to 83^ years
83^ t o 9 years
9 t o 93^ years
9 M t o 10 years
First extended
m a t u r i t y value
(10 years from
original m a t u r i t y date) 5
P e r i o d after first
extended m a t u r i t y (beginning 20
y e a r s after issue
date)

$11.08
11.25
11.42
11.61
11.81
12.02
12.23
12.44
12.66
12.89
13.14
13.40
13.66

$27.71
28.12
28.65
29.03
29.53
30.04
30.57
31.10
31.65
32.22
32.84
33.49
34.15

13.94

34.85

$55. 42 $110.84 $221.68
66.24
112. 48 224. 96
114. 20 228.40
57.10
58.06
116.12 232. 24
59.06 118.12 236.24
60.08 120.16 240. 32
61.14
122. 28 244. 56
62.20
124. 40 248. 80
63.30
126. 60 253.20
64.44 128. 88 257. 76
65.68 131.36 262.72
66.98 133. 96 267. 92
68.30 136. 60 273.20

69.70

139.40

278. 80

$564.20 $1,108. 40
662. 40 1,124. 80
671.00 1,142. 00
680.60
1,161.20
590. 60 1,181.20
600. 80 1,201.60
611.40
1, 222. 80
622.00
1,244.00
633.00
1,266.00
644. 40 1, 288.80
656.80
1,313.60
669. 80 1, 339. 60
683.00 1,366.00

697.00

Second ext e n d e d m a t u r i t y iperiod

1,394.00

2.91
2.92
2.92
2.94
2.95
2.97
2.98
3.00
3.01
3.03
3.05
3.08
3.10

3.56
3.61
3.66
3.69
3.72
3.75
3.78
3.83
3.89
3.96
4.00
4.02
4.10

3.12
(b)to
second
extended
maturity

3.12
3.75
F i r s t 3^ year
$13. 94 $34.85 $69. 70 $139. 40 $278.80
$697.00 $1, 394.00
3^ t o 1 year
14.20
35.50
71.00
142. 00 284.00
710.00
1, 420.00
3.14
3.75
I t o 13^ years
14.47
36.17
72.34 144. 68 289.36
723. 40 1, 446. 80
3.16
3.75
14.74
36.86
147. 40 294. 80
737.00
1,474.00
3.17
3.75
'i}4 to 2 years
73.70
2 to 23^ years
15.02
37.64
75.08 150.16 300.32
750. 80 1,501.60
3.18
3.75
23^ to 3 years
15.30
38.24
76.48 152. 96 305.92
764.80
1, 529. 60
3.19
3.75
3 t o 33^ years
16.58
38.96
77.92 155.84 311.68
779.20
1,558.40
3.21
3.75
33^ t o 4 years
15.88
39.69
79.38 158. 76 317.62
793. 80 1, 687. 60
3.22
3.75
4 to 43^ years
16.17
40.43
80.86 161.72 323. 44
808.60
1, 617.20
3.23
3.75
43^ t o 5 years
16.48
41.19
82.38 164. 76 329. 52
823.80 1, 647. 60
3.24
3.75
16.78
41.96
83.92 167. 84 335. 68
839. 20 1, 678. 40
3.25
3.75
5 t o 5}4 years
53^ to 6 years
17.10
42.75
85.50 171.00 342.00
855.00 1,710.00
3.26
3.75
6 t o 63^ years
17.42
43.65
87.10 174. 20 348. 40
871.00 1,742.00
3.27
3.75
63^ t o 7 years
17.75
44.37
88.74 177. 48 354. 96
887.40 1, 774.80
3.28
3.75
7 t o 7}4 years
18.08
45.20
90.40 180.80 361.60
904.00
1,808. 00
3.29
3.75
73^ to 8 years
18.42
46.05
92.10 184.20 368. 40
921.00 1,842.00
3.29
3.75
8 t o 83^ years
18.76
46.91
93.82 187. 64 375. 28
938.20
1, 876. 40
3.30
3.75
83^ to 9 years
19.12
47.79
95. 68 191.16 382. 32
955. 80 1,911.60
3.31
3.75
9 to 93^ years
19.48
48.69
97. 38 194.76 389. 52
973. 80 1, 947.60
3.32
3.74
93^ to 10 years
19.84
49.60
99.20
992.00
1,984.00
3.32
3.75
198.40 396.80
Second e x t e n d e d
m a t u r i t v value
(20 years from
original m a t u 20.21
r i t y date)"
50.53 101.06 1 202.12 1 404.24 1 1,010.60 2,021.20
3.33
1 For redemption values and investment yields during original maturity period see Department Circular
No. 663, Fifth Revision, dated September 23, 1969.
2 Calculated on basis of $1,000 bond (face value).
3 Approximate investment yield from beginning of each half-year period to first extended maturity, at
first extended maturity value prior to June 1, 1959, revision.
4 Approximate investment yield from effective date of June 1, 1959, revision to first extended maturity.
«20 years from issue date.
^ 30 years from issue date.




288

1961 REPORT OF THE SECRETARY OF THE TREASURY
TABLE XIV.—UNITED STATES SAVINGS BONDS—SERIES E

TABLE OF R E D E M P T I O N VALUES AND I N V E S T M E N T YIELDS D U R I N G E X T E N D E D MATURITY PERIOD 1 FOR BONDS
B E A R I N G ISSUE DATES FROM D E C E M B E R 1, 1946, T H R O U G H MAY 1, 1947

Table showing: (1) Hoiu bonds of Series E bearing issue dates December 1,1946, through May 1,1947, by denominations, increase in redemption value during successive half-year periods jfollowing date of original maturity;
(2) the approximate investment yield on the purchase price from issue date to the beginning of each half-year
period; and (3) the approximate investment yield on the current redemption value from the beginning of each
half-year period (a) to first extended maturity or (b) to second extended maturity. Yields are expressed in terms
of rate percent per annum, compounded semiannually.
Original maturity
value
Issue price

Period after original maturity
(beginning 10
years after issue
date)

First }i year..
} 4 t o l year-_1 to 13^ years13^ to 2 years.
2 to 2M years.
23^ to 3 years.

Approximate investment yield 2
$500. 00 $1,000. 00
375. 00
750. 00
(2)
On
(3). On
(1) Redemption values during each half-year period
purchase
current
(Values increase on first day of period shown)
price
redemption
from
value from
issue
beginning
date to
of each
beginhalf-year
First extended maturity period
ning of
period (a)
each
to first
half-year extended
maturity
period
Percent
Percent
2.90
33.00
$10.00 $25.00 $50. 00 $100.00 $200.00
$500. 00 $1,000.0<M
2.90
33.00
507. 50 1,016.00'
10.15
25.37
50.76 101. 50 203.00
2.90
33.00
10.30
25.75
51.60 103.00 206.00
515. 00 1,030.00
2.91
33.01
522. 50 1,045.00
10.45
26.12
52.25
104. 60 209.00
2.90
33.02
26.50
106.00 212. 00
530.00 1, 060. 00
10.60
53.00
2.91
43.52
10.76
53.80 107. 60 215. 20
538.00 1, 076.00
26.90
$10. 00
7.50

$25. 00
18. 75

$50. 00 $100. 00 $200. 00
37.50
75. 00 150. 00

R e d e r a p t i o n values a n d i i v e s t m e n t yields
\ to 33^ years
$10.92 $27. 31 $54. 62
^}4 to 4 years
11.09
27.72
55.44
^ to 43^ years
11.26
28.14
56.28
*3^ to 5 years
11.43
28.58
57.16
^ to 53^ years
11.63
29.07
58.14
53^ to 6 years
11.83
29.58
59.16
6 to 63^ years
12.04
30.09
60.18
63^ to 7 years
12.25
30.62
61.24
7 to 73^ years
12.47
31.17
62.34
7 3 ^ t o 8 3^ears
12.69
31. 72
63.44
8 to 83^ years
12.92
32.29
64.58
83^ to 9 years
13.17
32.92
65.84
9 to 93^ years
13. 43
33.57
67.14
93^ to 10 years
13.69
34.23
68. 46
First extended
raaturity
value
(10 years from
original m a t u r i t y date) s
13.98
34.94
69.88
Period after first
extended maturit y (beginning 20
years after issue
date)
F i r s t 3^ year
3^ to 1 year
1 to 13^ years
13^^ to 2 years
2 to 23^ years
23^ to 3 years
3 to 33^ years
33^ to 4 years
4 to 43^ years
43^ to 5 years
6 to 53^ years
53^ to 6 years
6 to 63^3^ears
63^ to 7 5^ears
7 to 73^ years
73^ to 8 years
8 to 83/^ years.83^ to 9 years
9 to 93^ years
93^ to 10 y e a r s
Second e x t e n d e d
m a t u r i t y value
(20 years from
original m a t u r i t y date) e

to first e x t e n d e d m a t u r i t y on basis of J u n e
$109. 24 $218. 48
$546. 20 $1, 092, 40
110. 88 221.76
554. 40 1,108.80
112.56 225.12
562. 80 1,125. 60
114. 32 228. 64
571.60 1,143. 20
116. 28 232. 56
581. 40 1,162. 80
118. 32 336. 64
591. 60 1,183. 20
120. 36 240. 72
601. 80 1, 203. 60
122. 48 244. 96
612. 40 1, 224. 80
124. 68 249. 36
623. 40 1, 246. 80
126. 88 253.76
634. 40 1, 268. 80
129.16 258. 32
645. 80 1,291.60
131. 68 263. 36
658. 40 1,316.80
134. 28 268. 56
671. 40 1, 342. 80
136. 92 273. 84
684. 60 1, 369. 20

139. 76

279. 52

698. 80

1, 397. 60

1, 1959, revision
2.91
3.56
2.92
3.69
2.92
3.64
2.93
3.69
2.94
3.71
2.96
3.74
2.98
3.77
2.99
3.81
3.01
3.84
3.03
3.91
3.04
3.98
3.07
4.01
3.09
4.04
3.11
4.15

3.14
(b) to
second
extended
maturity

S 3Cond exi.ended n a t u r i t y ]aeriod

$13. 98
14.24
14.50
14.78
15. 06
15.34
15.62
15.92
16.22
16.52
16.83
17.14
17.47
17.79
18.13
18.47
18.81
19.17
19.52
19.89

$34. 94
35.60
36.26
36.94
37.64
38.34
39.06
39.79
40.54
41.30
42.07
42.86
43.67
44.48
45.32
46.17
47.03
47. 92
48. 81
49.73

20.26

50.66

$69.88 $139. 76 $279. 52
71.20 142.40 284.80
72.52 145.04 290.08
73.88 147. 76 295. 52
75.28 160. 56 301.12
76.68 153. 36 306. 72
78.12 156. 24 312. 48
79.58 159.16 318. 32
81.08 162.16 324. 32
82.60 165. 20 330. 40
84.14 168. 28 336. 56
85.72 171.44 342. 88
87.34 174. 68 349. 36
88.96 177. 92 355. 84
90.64 181. 28 362. 56
92.34 184. 68 369.36
94.06 188.12 376. 24
95.84 191. 68 383. 36
97.62 195. 24 390. 48
99.46 198. 92 397. 84

101.32

202. 64

405. 28

$698. 80 $1, 397. 60
712.00
1, 424. 00
725. 20 1, 450. 40
738.80 1. 477. 60
752.80 1, 505. 60
766. 80 1, 533. 60
781. 20 1, 562. 40
795. 80 1,591.60
810. 80 1. 621. 60
826. 00 1, 652.00
841. 40 1, 682. 80
867. 20 1, 714. 40
873. 40 1, 746. 80
889. 60 1, 779. 20
906. 40 1, 812. 80
923. 40 1, 846. 80
940.60
1,881. 20
958. 40 1, 916.80
976. 20 1, 952. 40
994. 60 1, 989. 20

1, 013. 20

2,026; 40

3.14
3.15
3.17
3.18
3.19
3.20
3.22
3.23
3.24
3.25
3.26
3.27
3.28
3.29
3.30.
3.30
3.31
3.32
3.33
3.33

3.75
3.75
3.75
3.75
3.75
3.75
3.75
3.75
3.76
3.75
3.75
3.76
3.75
3.75
3.75
3.75
3.75
3.74
3.75
3.74

3.34

' For redemption values and investment yields during original maturity period see Department Circular
No. 653, Fifth Revision, dated Septeraber 23,1959.
2 Calculated on basis of $1,000 bond (face value).
3 Approximate investment yield frora beginning of each half-year period to first extended maturity,
at first extended maturity value prior to June 1,1959, revision.
4 Approximate investment yield from effective date of June 1,1959, revision to first extended maturity.
5 20 years from issue date.
8 30 years from issue date.




289

EXHIBITS
T A B L E X V . — U N I T E D STATES SAVINGS B O N D S — S E R I E S

E

TABLE OF R E D E M P T I O N VALUES AND I N V E S T M E N T YIELDS D U R I N G E X T E N D E D MATURITY PERIODS 1 FOR BONDS
B E A R I N G ISSUE DATES FROM J U N E 1 THROUGH N O V E M B E R 1, 1947

Table showing: (1) How bonds of Series E bearing issue dates J u n e 1 through November 1,1947, by denominations,
increase i n redemption value during successive half-year periods folloiving date of original maturity; (2^ the
approximate investment yield on the purchase price from issue date to the beginning ofeach half-year period; and
(3) the approximate investment yield on the current redemption value from the beginning ofeach half-year period
(a) to first extended maturity or (b) to second extended maturity. Yields are expressed in terms of rate percent
per a n n u m , compounded semiannually.
Original m a t u r i t y
A p p r o x i m a t e investvalue
$10. 00 $25. 00 $50. 00 $100. 00 $200. 00
$500. 00 $1,000. 00
m e n t yield 2
18.75
375. 00
Issue price
7.50
37.50
75.00 150. 00
760. 00
(2) On
(3) On
purchase
current
(1) R e d e m p t i o n v a l u e s d u r i n g each half-year period
price
redemption
from
P e r i o d after orig(Values increase on first d a y of period shown)
value from
issue
inal m a t u r i t y
beginning
d a t e to
(beginning 10
of each
beginyears after issue
half-year
n i n g of
date)
period (a)
each
F i r s t e x t e n d e d m a t u r i t y period
to first
half-year
extended
period
maturity
Percent
Percent
33.00
2.90
F i r s t 3^ y e a r $10.00 $25.00 $50. 00 $100.00 $200. 00 $500.00 $1,000. 00
33.00
3^ t o 1 y e a r . 2.90
10.16
60.75 101. 50 203.00
25.37
507. 50 1,015.00
33.00
1 to 13^ y e a r s 2.90
10.30
25.75
51.60 103.00 206. 00
515.00 1, 030.00
13^ to 2 y e a r s 26.12
2.91
3 3. 01
10.45
52.25 104. 50 209.00
522. 50 1,045.00
4 3. 52
2 to 23^ y e a r s 2.90
10.60
26.50
53.00 106. 00 212. 00
630.00 1,060. 00
R e d e r a p t i o n values a n d i n v e s t m e n t yields to first e x t e n d e d m a t u r i t y on basis of J u n e 1, 1959, revision
2.91
3. 54
23^ to 3 y e a r s .
$638. 20 $1,076.40
$10. 76 $26. 91 $53.82 $107. 64 $216. 28
2.92
3.58
27.32
54.64 109. 28 218. 56
546.40 1,092. 80
10.93
3 to 33^ y e a r s
2.92
3.62
554. 80 1,109. 60
11.10
33^ to 4 y e a r s
27.74
55. 48 110.96 221. 92
2.93
3.66
663.40 1,126.80
11.27
4 to 43^ y e a r s
28.17
56.34 112.68 225.36
2.94
3.71
57.22 114.44 228.88
672. 20 1,144.40
11.44
28.61
4>2 to 5 years
2.95
3.73
582. 20 1,164.40
11.64
58.22 116. 44 232.88
29.11
5 to 53^ years
2.97
3.75
592. 60 1,185. 20
11.85
29.63
59.26 118. 52 237.04
53^ to 6 y e a r s
2.99
3.78
603.00 1,206.00
12.06
30.16
6 to 63^ y e a r s
60.30 120.60 241. 20
3.01
3.82
613.60 1,227. 20
12.27
61.36 122. 72 245.44
63^ to 7 y e a r s
30.68
3.02
3.85
624. 60 1,249. 20
31.23
62.46 124. 92 249. 84
7 to 73^ y e a r s . - - - - 12.49
3.04
3. 91
635.80 1,271.60
12. 72
31.79
73^ to 8 y e a r s
63.68 127.16 254. 32
3.05
3.99
647. 20 1,294.40
12.94
64.72 129.44 268. 88
8 to 83^ y e a r s
32.36
3.08
4.00
660. 00 1,320. 00
13.20
33. 00
83^ to 9 y e a r s
66.00 132.00 264.00
3.10
4.03
673.00 1,346.00
13.46
9 to 93^ y e a r s
33.65
67.30 134. 60 269.20
3.12
4.08
686. 40 1,372.80
13.73
34.32
68.64 137.28 274. 66
93^ to 10 years
First extended
m a t u r i t y value
(10 y e a r s frora
original m a t u r i t y date)^
35.02
70.04 140.08 280.16
3.16
14.01
700. 40 1, 400. 80
(b) to
P e r i o d after first
second
extended m a t u r i t y
Second e x t e n d e d m a t u r i t y period
extended
(beginning 20 years
maturity
after issue date)
3.75
$14.01 $35.02 $70. 04 $140. 08 $280.16
3.15
F i r s t ]4 y e a r
$700.40 $1,400.80
3.75
14.27
35.68
71.36 142. 72 285. 44
}/2 to 1 y e a r
3.16
713. 60 1,427. 20
3.75.
14.64
72.70 145. 40 290.80
727.00 1,454. 00
36.35
3.18
i to 13^^ y e a r s
3.76
14.81
74.06 148.12 296. 24
740.60 1,481. 20
37.03
13^ to 2 years
3.19
3.75
15.09
75.44 150.88 301.76
764.40 1, 508. 80
37.72
2 to 23^ years
3.20
3. 75
16.37
76.86 153. 72 307.44
768.60 1, 537. 20
38.43
23^ t o 3 y e a r s
3.22
3.75
15.66
78.30 156. 60 313. 20
783.00 1, 566.00
3 to 33^ years
39.15
3.23
3.75
16.95
79.76 159. 52 319. 04
797. 60 1, 595. 20
33^ to 4 years
39.88
3.24
3.75
16.25
81.26 162. 62 326.04
812. 60 1, 625. 20
4 to 43^ years
40. 63
3.25
3.75
16.66
82.78 165. 56 331.12
827.80 1, 655. 60
41.39
43^ to 5 years
3.26
3.75
16.87
84.34 168. 68 337. 36
843. 40 1, 686.80
5 to 53^ years
42.17
3.27
3.75
17.18
86.92 171. 84 343.68
859. 20 1, 718. 40
53^ to 6 years
42.96
3.28
3.75
17.51
87.64 175. 08 350.16
876.40 1, 750.80
43.77
6 to 63^ years
3.29
3.75
17.84
89.18 178.36 356. 72
891. 80 1, 783. 60
63^ to 7 years
44.69
3.30
3.75
18.17
90.84 181. 68 363. 36
908.40 1,816.80
7 to 73^ years
45.42
3.30
3.76
18.51
1,850.
80
370.16
92.54
925. 40
185. 08
73^ to 8 years
46.27
3.31
3.75
18.86
94.28 188. 56 377.12
942.80 1,885. 60
8 to 83^ years
47.14
3.32
3.76
19.21
96.04 192. 08 384.16
960. 40 1, 920.80
83^ to 9 y e a r s
48.02
3.33
3.75
19.67
97.86 196. 72 391. 44
978. 60 1, 957. 20
9 to 93^ years
48.93
3.34
3.77
19.49
99.68 199.36 398. 72
996. 80 1,993. 60
93^ to 10 years
49.94
3.34
Second e x t e n d e d
m a t u r i t y value
(20 y e a r s from
original m a t u r i t y date)^
20.31
50.78 101.56 203.12 406.24 1,015.60 2,031. 20
3.35
1 F o r r e d e m p t i o n v a l u e s a n d i n v e s t m e n t yields d u r i n g original m a t u r i t y period see D e p a r t m e n t C i r c u l a r
N o . 663, Fifth Revision, d a t e d S e p t e m b e r 23,1959.
2 C a l c u l a t e d on basis of $1,000 b o n d (face v a l u e ) .
3 A p p r o x i r a a t e i n v e s t r a e n t yield from b e g i n n i n g of each half-year period to first e x t e n d e d m a t u r i t y ,
at first e x t e n d e d m a t u r i t y v a l u e prior to J u n e 1,1959, revision.
. 4 A p p r o x i m a t e i n v e s t m e n t yield from effective d a t e of J u n e 1,1959, revision to first e x t e n d e d m a t u r i t y .
8 20 y e a r s from issue d a t e .
6 30 years from issue d a t e .




290

1961 REPORT OF THE SECRETARY OF THE TREASURY
T A B L E X V I . — U N I T E D STATES SAVINGS B O N D S — S E R I E S

E

TABLE OF R E D E M P T I O N VALUES AND I N V E S T M E N T YIELDS DURING E X T E N D E D MATURITY PERIODS 1 FOR
B O N D S BEARING ISSUE DATES FROM D E C E M B E R 1, 1947, T H R O U G H MAY 1, 1948

Table showing: (1) How bonds of Series E bearing issue dates December 1,1947, through M a y 1,1948, by denominations, increase in redemption value during successive half-year periods following date of original maturity;
(2) the approximate investment yield on the purchase price from issue date to the beginning of each half-year
period; and (3) the approximate investment yield on the current redemption value from the beginning^ of each
half-year period (a) to first extended maturity or (6) to second extended maturity. Yields are expressed in terms
of rate percent per a n n u m , compounded semiannually.
Original m a t u r i t y
value
Issue price

$10.00
7.50

$25. 00
18.75

$50. 00 $100. 00 $200. 00
37.50
75.00
150. 00

$500.00 $1, 000. 00
375. 00
750. 00

A p p r o x i m a t e investm e n t yield 2

(2) On
(3) O n
purchase
current
price
redemption
from
value from
issue
Period after origbeginning
d a t e to
inal m a t u r i t y
of each
begin(beginning 10
half-year
n i n g of
y e a r s after issue
period (a)
each
date)
F i r s t e x t e n d e d m a t u r i t y period
to first
half-year
extended
period
maturity
Percent
Percent
F i r s t 3^ year_2.90
$500. 00 $1, 000. 00
$10.00 $25. 00 $50. 00 $100. 00
33.00
y2 to 1 y e a r . . .
25.37
607. 60 1,015.00
2.90
60.75 101. 50
10.15
33.00
25. 75
615.00 1, 030. 00
1 to 13^ y e a r s .
51.50 103. 00
2.90
10.30
33.00
26.12
522. 50 1, 045. 00
52.25 104. 50
13^ to 2 y e a r s .
2.91
10.45
4 3. 61
R e d e m p t i o n values a n d i n v e s t r a e n t yields to first extended raaturity on basis of J u n e 1, 1959, revision
3.64
2 to 23^ years
2.91
$10. 60 $26. 51 $53. 02 $106 04 $212. 08
$630. 20 $1, 060. 40
3.57
2.91
10. 77
538. 40 1, 076. 80
23/5 to 3 years
26.92
53.84 107. 68 215. 36
3.61
2.92
10.94
27.34
546. 80 1, 093. 60
3 to 334 years
54.68 109. 36 218. 72
3.64
2.93
11.11
555. 40 1,110.80
33^ to 4 years
27.77
55. 54 111.08 222.16
3.69
2.94
11.28
564. 00 1,128.00
28.20
66.40 112. 80 225. 60
4 to 43/2 years
3.73
2.95
11.46
573. 00 1,146. 00
28.65
57.30 114. 60 229. 20
43^ to 5 years
3.75
2.97
11.66
583. 20 1,166.40
58.32 116.64 233.28
5 to 53/? years
29.16
3.77
2.99
11.87
593. 60 1,187. 20
59.36 118. 72 237. 44
29.68
53^2 to 6 years
3.79
3.00
12.08
604. 20 1, 208. 40
30.21
60.42 120. 84 241.68
6 to 634 years
3.82
3.02
12. 30
615. 00 1, 230. 00
30.75
61.50 123. 00 246. 00
63^ to 7 years
3.87
3.04
12.52
626. 00 1, 252. 00
62.60 125. 20 250. 40
31.30
7 to 73/2 years
3.92
3.05
12.74
637. 20 1, 274. 40
63.72 127. 44 254. 88
734 to 8 years
31.86
3.99
3.07
12.98
648. 80 1, 297. 60
32.44
8 to 834 years
64.88 129. 76 259. 52
4.01
3.09
13.23
661. 60 1, 323. 20
834 to 9 years
33.08
66.16 132. 32 264. 64
4.05
3.11
13.49
674.60 1, 349. 20
33. 73
67.46 134. 92 269. 84
9 to 9\4 years
4.13
3.14
13.76
688. 00 1,376. 00
34.40
68.80 137. 60 275. 20
934 to 10 years
First
extended
. m a t u r i t y value
(10 5^ears from
original
raatur i t y date) 5
70.22 140. 44 280. 88
702.20 1,404.40
14.04
35.11
3.16
(b) to
Period after first
second
extended m a t u extended
Second extended m a t u r i t y period
r i t y (beginnijig
20 years afte^maturity
issue date)
3.16
3.75
$702. 20 .$1,404.40
$14.04 $35.11 $70. 22 $140. 44 $280.88
F i r s t 14 year
3.18
3.75
715. 4.0 1,430.80
14.31
35.77
71.54 143. 08 286.16
34 to 1 year
3.19
3.76
728. 80 1, 457. 60
14.58
36.44
72.88 145. 76 291. 52
1 to 134 years
3.20
3.75
742. 40 1,484.80
14.85
37.12
74.24 148. 48 296. 96
l y , to 2 years
3.21
3.75
756. 40 1,512.80
16.13
75.64 151.28 302. 56
37.82
2 to 234 years
3.23
3.75
770. 60 1,541.20
1.5. 41
38.53
77.06 164.12 308. 24
234 to 3 years
3.24
3.75
785. 00 1,570.00
15.70
39. 25
78.50 157. 00 314. 00
3 to 3 H years
3.26
3.75
799. 80 1, 599. 60
16.00
39.99
79.98 159. 96 319. 92
334 to 4 years
3.26
3.76
814. 80 1, 629. 60
16.30
40.74
81.48 162. 96 325. 92
4 to 434 years
3.27
3.76
830. 00 1, 660. 00
16.60
41. 60
83. 00 166. 00 332. 00
434 to 6 years
3.28
3.75
845. 60 1, 691. 20
16.91
84. 56 169.12 338. 24
42.28
5 to 63'^ years
3.75
3.29
861. 40 1, 722. 80
17.23
43.07
86.14 172. 28 344. 66
b\4 to 6 years
3.75
3.30
877. 60 1, 755. 20
17.55
87. 76 175. 52 351. 04
43.88
Oto 634 years
3.75
3.31
894. 00 1, 788. 00
17.88
44.70
89. 40 178. 80 357. 60
634 to 7 years
3.75
3.31
1,821.60
910.
80
18.22
91. 08 182.16 364. 32
45. 64
7 to 734 years
3.75
.3.32
927. 80 1, 855. 60
18.56
46. 39
92.78 185. 56 371.12
734 to 8 years
3.75
3.33
945. 20 1, 890. 40
18.90
94.52 189. 04 378. 08
47.26
8 to 834 years
3.75
3.34
963. 00 1, 926. 00
19.26
48.15
96.30 192. 60 385. 20
834 to 9 years
3.76
981. 00 1, 962. 00
3.34
19.62
98.10 196. 20 392. 40
49.05
9 to 934 years
3.35
3.76
19.99
999. 40 1, 998.80
99.94 199. 88 399. 76
49.97
934 to 10 years
Second e x t e n d e d
m a t u r i t y value
(20 years from
original m a t u r i t y date) 9
3.36
20.36
50.91 101.82 203. 64 407.28
(1) R e d e m p t i o n values d u r i n g each half-year period
(Values increase on first d a y of period shown)

8888

1 F o r r e d e m p t i o n values a n d i n v e s t m e n t yields d u r i n g original m a t u r i t y period see D e p a r t m e n t Circular
N o . 653, Fifth Revision, d a t e d S e p t e m b e r 23,1959.
2 C a l c u l a t e d on basis of $1,000 b o n d (face v a l u e ) .
3 A p p r o x i m a t e i n v e s t m e n t yield from beginning of each half-year period to first e x t e n d e d m a t u r i t y , a t first
e x t e n d e d m a t u r i t y value prior to J u n e 1,1969, revision.
4 A p p r o x i m a t e i n v e s t m e n t yield from effective d a t e of J u n e 1,1959, revision to first e x t e n d e d m a t u r i t y .
5 20 years from issue d a t e .
«30 years from issue d a t e .




291

EXHIBITS

T A B L E X V I I . — U N I T E D S T A T E S SAVINGS B O N D S — S E R I E S E
TABLE OF REDEMPTION VALUES AND INVESTMENT YIELDS DURING EXTENDED MATURITY
PERIODS 1 FOR BONDS BEARING ISSUE DATES FROM JUNE 1 THROUGH NOVEMBER 1_, 1948

Table showing: (/) How bonds of Series E bearing issue dates Jane 1,1948, through November 1,1948, by denominations, increase in redemption value during successive half-year periods following date of original maturity;
{2) the approximate investment yield on the purchase price from issue date to the beginning of each half-year
period; and (S) the approximate investment yield on the cun ent redemption value from the beginning of each
half-year period (a) to first extended maturity or (b) to second extended maturity. Yields are expressed in terms
of rate percent % er annum, compounded semiannually.
Original m a t u r i t y
value
Issue price

$500. 00 $1,000. 00
$10.00 $25.00 $50. 00 $100. 00 $200.00
375. 00
18.75
37.50
75.00
7.50
150. 00
760. 00
(1) R e d e m p t i o n v a l u e s d u r i n g eacb half-year period
(Values increase on first d a y of period shown)

P e r i o d after original m a t u r i t y
(beginning 10
y e a r s after issue
date)

F i r s t 34 y e a r
34 to 1 year
1 to 13^ years

F i r s t e x t e n d e d m a t u r i t y period

$10.00
10.16
10.30

$25.00
26.37
25.75

$60.00 $100.00 $200. 00
50.75 101. 50 203.00
51.50 103.00 206. 00

$500.00 $1,000.00
607.50 1,015.00
515.00 1,030.00

A p p r o x i m a t e investraent yield 2
(2) O n
purchase
price
from
issue
d a t e to
beginn i n g of
each
half-year
period

(3) O n
current
redemption
value from
bep i n n i n g
of each
half-year
period (a)
to first
extended
maturity

Percent
2.90
2.90
2.90

Percent
33.00
33.00
43.50

Redemption values and inve.stment yields to first extended maturity on basis of June 1, 1959, revision
$522.80 $1,045. 60
13^ to 2 years.
$10.46 $26.14 $52.28 $104.56 $209.12
3.53
2.91
530. 40 1,060.80
63.04 106.08 212.16
10.61
26.62
2 to 234 years.
2.91
3.57
638. 60 1,077. 20
53.86 107. 72 215. 44
10.77
26.93
234 to 3 years
2.92
3.60
547.20 1,094. 40
54.72 109. 44 218. 88
10.94
27.36
3 to 33^ years
2.93
3.63
666.00 1,112.00
55.60 111.20 222. 40
11.12
27.80
3M to 4 years
2.94
3.66
664. 80 1,129. 60
56.48 112.96 225. 92
11.30
28.24
2.95
4 to 434 years
3.70
673. 80 1,147. 60
57.38 114.76 229. 52
11.48
28.69
2.96
434 to 5 years
3.75
584.20 1,168.40
68.42 116.84 233. 68
11.68
29.21
5 to 534 years
2.98
3.76
694.60 1,189.20
59.46 118.92 237.84
11.89
29.73
534 to 6 years
3.00
3.79
605. 20 1,210.40
60.62 121.04 242.08
12.10
30.26
3.01
3.81
6 to 634 years
616. 20 1, 232. 40
61.62 123.24 246. 48
12.32
30.81
3.03
3.84
634 to 7 years
627. 40 1, 254. 80
62.74 125. 48 250.96
12.55
31.37
3.05
3.87
7 to 734 years
638.60 1,277.20
63.86 127. 72 255. 44
12.77
31.93
734 to 8 years
3.07
3.93
650. 20 1,300.40
65.02 130.04 260.08
13.00
32.61
Sto 83^ years
3.08
4.01
663.00 1, 326.00
66.30 132.60 265.20
13.26
33.16
834 to 9 years
3.10
4.03
676.20 1, 352. 40
67.62 135. 24 270. 48
13.52
33.81
9 to 934 years
3.13
4.06
689. 60 1,379.20
68.96 137.92 275.84
13.79
34.48
3.15
934 to 10 years
4.15
First extended
maturity value
(10 years from
original matu35.20
70.39 140.78 281.56
703.90 1.407.
rity datc)5
3.17
14.08
Period after first
(b) to
extended matusecond
Second extended maturity period
extended
rity (beginning
20 years after
maturity
issue date)
$14.08 $35. 20 $70.39 $140.78 $281.56
$703. 90 $1,407, 80
First 34 year
3.17
3.75
717.00 1,434,00
34 to 1 year
14.34
35.85
71.70
143.40 286. 80
3.19
3.75
730.60
14.61
36.53
73.06
146.12
292.
24
1,461.20
3.20
1 to 134 years
3.75
744.20 1,488. 40
14.88
37.21
74.42
148.84 297. 68
3.21
13^ to 2 years
3.75
758. 20 1, 516.40
75.82 161. 64 303. 28
15.16
37.91
2 to 234 years
3.23
3.75
772. 40 1, 544, 80
38.62
77.24 154.48 308.96
15.45
234 to 3 years
3.24
3.75
786.80 1, 573. 60
39.34
15.74
78.68 157. 36 314. 72
3.25
3.75
3 to 334 years
801. 60 1,603. 20
16.03
80.16 160.32 320. 64
40.08
3.26
3.76
334 to 4 years
816. 60 1, 633.20
16.33
40.83
81.66 163. 32 326.64
3.75
3.27
4 to4>^ years
832.00 1, 664.00
16.64
83.20 166.40 332. 80
41.60
3.75
434 to 5 years
3.28
847. 60 1,695.20
16.96
84.76
169. 62 339.04
42.38
6 to 634 3'ears
3.29
3.75
863. 40 1, 726. 80
43.17
86.34 172. 68 345. 36
17.27
b}/2 to 6 years
3.75
3.30
879.60 1, 759. 20
87.96 175.92 351.84
43.98
17.59
3.31
3.76
6 to 634 years
896. 20 1, 792. 40
17.92
89.62
179. 24 358. 48
44.81
3.31
3.75
634 to 7 years
913.00 1,826.00
18.26
45.65
91.30 182. 60 365.20
3.32
3.75
7 to 734 years
930.00 1,860. 00
18.60
46.50
93.00 186.00 372.00
3.33
3.76
734 to 8 years
947. 60 1. 895.20
18.95
47.38
94.76 189. 52 379.04
3. 34
3.75
8 to 834 years
965. 20 1, 930.40
19.30
48.26
96.52
193.04 386.08
3.34
3.76
834 to 9 years
983.40 1, 966. 80
19.67
49.17
98.34
196. 68 393. 36
3. 35
3.75
9 to 934 years
20.04
60.09 100.18 200. 36 400.72 1,001. 80 2,003.60
934 to 10 years
3.36
3.75
Second extended
maturity value
(20 vears from
original matu20.41
51.03 102.06 204.12 408. 24 1,020. 60 2,041. 20
rity date) 6
3,37
1 For redemption values and investment yields during original maturity period see Departraent Circular
No. 653, Fifth Revision, dated September 23,1959.
2 Calculated on basis of $1,000 bond (face value).
3 Approximate investment yield from beginning of each half-year period to first extended maturity,
at first extended maturity value prior to June 1,1959, revision.
4 Approximate investment 3^eld from effective date of June 1,1959, revision to first extended maturity
«20 years from issue date.
«30 years from issue date.




292

1961 REPORT OF THE SECRETARY OF THE TREASURY

TABLE XVIII.—UNITED STATES SAVINGS BONDS—SERIES E
TABLE OF R E D E M P T I O N VALUES AND INVESTMENT YIELDS DURING EXTENDED MATURITY PERIODS 1 FOR BONDS
BEARING ISSUE DATES FROM DECEMBER 1, 1948, THROUGH MAY I, 1949

Table showing: (1) How bonds of Series E bearing issue dates December 1,1948, through May 1, i949, by denominations, increase in redemption value during successive half-year periods following date of original maturity;
(2) the approximate investment yield on the purchase price from issue date to the beginning of each half-year
period; and (3) the approximate investment yield on the current redemption value from the beginning of each
half-year period (a) to first extended maturity or (b) to second extended maturity. Yields are expressed in terms
of rate percent per annum, compounded semiannually.
Original maturity
value
Issue price

Approximate investment yield 2
$10.00 $26.00 $50.00 $100. 00 $200. 00 $500.00 $1,000. 00
18.75
37.60
75.00 150. 00
375. 00
7.60
760. 00
(2)
On
(3) On
(1) Redemption values during each half-year period
purchase
current
(Values increase on first day of period shown)
price
redemption
from
value from
issue
Period after origbeginning
dale to
inal maturity
of each
beginFirst extended maturity period
(beginning 10
half-year
ning of period (a)
years after issue
each
date)
to first
half-year extended
period
maturity
Percent
Percent
$10.00 $25.00 $60.00 $100.00 $200.00
$500.00 $1,000.00
First 14 year
2.90
33.00
10.15
50.75
507.
50
26.37
101.50
203.00
1,015.00
2.90
43.50
V^tol year
Redemption values and investment yields to first extended maturity on basis of June 1, 1969, revision
1 to 134 years
$10.30 $25.76 $61.52 $103.04 $206.08
$515.20 $1,030.40
3.53
2.91
3.56
2.91
11^ to 2 years
10.46
26.14
62.28 104. 56 209.12
522.80 1,045.60
3.69
2.91
2 to 2V^ years
10.61
26.53
53.06 106.12 212.24
530.60 1,061.20
3.62
2.93
234 to 3 years
10.78
26.96
53.92 107.84 215.68
539.20 1,078.40
3.65
2.94
3 to 3V^ years
10.96
27.39
54.78 109. 56 219.12
547.80 1,095.60
3.68
2.96
334 to 4 years
11.13
27.83
65.66 111.32 222.64
666.60 1,113.20
3.72
2.96
4 to 41/^ years
11.31
28.28
56.56 113.12 226.24
565. 60 1,131.20
3.76
2.97
434 to 5 years
11.60
28.74
67.48 114.96 229.92
574.80 1,149. 60
3.78
2.99
5 to 534 years
11.70
29.26
58.52 117.04 234.08
585.20 1,170.40
3.79
3.01
534 to 6 years
11.92
29.79
59.68 119.16 238.32
695.80 1,191.60
3.82
3.03
6 to 6V^ years
12.13
30.33
60.66 121.32 242.64
606.60 1,213.20
3.85
3.04
634 to 7 years
12.35
30.87
61.74 123.48 246.96
617.40 1,234.80
3.89
3.06
7 to 734 years
12.57
31.43
62.86 125.72 251.44
628.60 1,257.20
3.94
3.08
71/^ to 8 years
12.80
32.00
64.00 128.00 256.00
640.00 1,280.00
4.01
3.09
8 to 834 years
13.04
32.59
65.18 130.36 260.72
651.80 1,303.60
4.03
3.12
834 to 9 years
13.29
33.23
66.46 132.92 265.84
664. 60 1,329.20
4.06
3.14
9 to 934 years
13.66
33.89
67.78 135.56 271.12
677.80 1,356. 60
934 to 10 years
4.17
3.16
13.82
34.56
69.12 138.24 276.48
691.20 1,382.40
First extended
maturity value
(10 years from
original matu3.19
rity date)*
14.11
35.28
70.66 141.12 282.24
705.60 1,411.20
(b)to
Period after first
second
extended matuextended
rity (beginning
S 3cond ex ended m aturity iDeriod
maturity
10 years after
issue date)
3.19
3.75
First 34 year$14,11 $35.28 $70.66 $141.12 $282.24
$705.60 $1,411.20
3.75
34 to l y e a r
3.20
14.38
35.94
71.88 143. 76 287. 52
718.80 1,437. 60
3.75
1 to I H years
3.21
14.65
36.62
73.24 146.48 292.96
732.40 1,464.80
3.75
IV^ to 2 years
3.22
14.92
37.30
74.60 149.20 298.40
746.00 1, 492.00
3.75
2 to 234 years
3.24
15.20
38.00
76.00 162.00 304.00
760.00 1,620.00
3.75
234 to 3 years
3.26
15.48
38.71
77.42 164.84 309.68
774.20 1, 548.40
3.75
3 to 334 years
3.26
15.78
39.44
78.88 157.76 315.52
788.80 1,577.60
3.76
334 to 4 years
3.27
16.07
40.18
80.36 160.72 321.44
803. 60 1,607.20
3.76
4 to 434 years
3.28
16.37
40.93
81.86 163.72 327. 44
818.60 1,637.20
3.75
434 to 6 years
3.29
16.68
41.70
83.40 166.80 333. 60
834.00 1,668.00
3.75
5 to 534 years
3.30
16.99
42.48
84.96 169.92 339.84
849. 60 1, 699.20
3.76
534 to 6 years
3.31
17.31
43.28
86.66 173.12 346.24
865.60 1, 731.20
3.75
6 to 634 years
3.32
17.64
44.09
88.18 176.36 352.72
881.80 1, 763.60
3.75
634 to 7 years
3.32
17.97
44.92
89.84 179.68 359.36
898.40 1, 796.80
3.75
7 to 734 years
3.33
18.30
45.76
91.52 183.04 366.08
915.20 1,830.40
3.74
734 to 8 years
3.34
18.65
46.62
93.24 186.48 372.96
932.40 1,864.80
3.75
8 to 834 years
3.35
19.00
47.49
94.98 189.96 379.92
949.80 1,899.60
3.75
834 to 9 years
19.35
48.38
96.76 193. 52 387.04
967.60 1, 935.20
3.35
3.74
9 to 934 years
19.72
49.29
98.58 197.16 394.32
985.80 1, 971.60
3.36
3.74
934 to 10 years
20.08
60.21 100.42 200.84 401. 68 1,004.20 2,008.40
3.37
Second extended
maturity value
(20 years from
original maturity date) 6
20.46
61.15 102.30 204.60 409.20 1,023.00 2,046.00
3.37
1 For redemption values and investment yields during original maturity period see Department Circular
No. 653, Fifth Revision, dated September 23,1959.
2 Calculated on basis of $1,000 bond (face value). .
3 Approximate investment yield from beginning of each half-year period to first extended maturity,
at first extended maturity value prior to June 1,1959, revision.
4 Approximate investment yield from effective date of June 1,1959, revision to first extended maturity.
6 20 years from issue date.
«30 years from issue date.




EXHIBITS

293

ExmBiT 7.—Fourth amendment, May 16, 1981, to Department Circular No. 750,
Revised, regulations governing payments by banks and other financial institutions in connection with the redemption of U.S. savings bonds
TREASURY

DEPARTMENT,

Washington, May 16, 1961.
Section 321.9 of Treasury Department Circular No. 750, Revised, dated June
30, 1945, as amended and supplemented (31 C.F.R. 321), is hereby amended
to read as follows:
SEC. 321.9. Specific limitations of payment authority.—An agent is not authorized to pay a bond: (a) If the bond is presented for payment prior to the expiration of two months from the issue date (the issue date should not be confused
with the date appearing in the issuing agent's dating stamp). Any payment or
advance to a bond owner before a bond is eligible for redemption is not authorized
in any circumstance.
(6) If the agent does not know or cannot establish to its complete satisfaction
the identity of the person requesting payment as the owner of the bond (including
the establishment of the identity of parents requesting payment on behalf of
minor children, as set forth in sec. 321.8(b)).
(c) If the owner requesting payment (form for which appears on the back of
each bond) does not sign his name in ink as it is inscribed on the face of the bond
and show his home or business address. (See also secs. 321.8 (a) and (b), and
321.10(d).)
(d) If the bond appears to bear a material irregularity, for example, an altered,
illegible, incomplete, or unauthorized inscription, issue date, or issuing agent's
validating stamp impression; or if a bond appears to be altered, or is mutilated
or defaced in such a manner as to create doubt or arouse suspicion with respect
to the bond or any essential part thereof.
(e) If Treasury Department regulations require the submission of documentary
evidence to support the redemption of the bond, as in the case of deceased owners,
incompetents or minors under legal guardianship, or the change of an owner's
name as inscribed on a bond if for any reason other than marriage.
(/) If the owner named on the bond and requesting payment is a minor who,
in the opinion of the agent, is not of sufficient competency and understanding
to execute the request for payment and comprehend the nature of such act.
(Note the authority granted to agents to make payments of bonds to either
parent on behalf of a minor child under the provisions of sec. 321.8(b).)
(gr) If it is known to the agent that the owner has been declared, in accordance
with law, incompetent to manage his estate.
(h) If partial redemption is requested.
Attention is directed to sec. 321.17 hereof for handling bonds of the foregoing
classes of cases which may not be paid by agents.
ROBERT V. ROOSA,

Under Secretary of the Treasury for Monetary Affairs.

U.S. Savings Stamps Regulations
EXHIBIT 8.—First revision, August 5, 1960, of Department Circular No. 1008,
regulations governing Treasury savings stamp agents in the sale of U.S. savings
stamps at schools ^
TREASURY

DEPARTMENT,

Washington, August 5, 1960.
Department Circular No. 1008, dated April 25, 1958 (31 CFR 338), is hereby
revised to read as follows:
SEC. 338.1 Authority for circular.—The Secretary of the Treasury, pursuant
to the authority of the Second Liberty Bond Act, as amended (49 Stat. 21, as
amended, 31 U.S.C. 757c), hereby prescribes the regulations in this part for the
qualification and control of Treasury savings stamp agents.
SEC. 338.2 Eligibility for applying for agency.—Any individual is eligible, to
apply for qualification as a Treasury savings stamp agent to sell United States
»This is to facilitate the carrying out of the Treasury's school savings program as administered by the
Savings Bonds Division of the Treasury Department.




294

1961 REPORT OF THE SECRETARY OF THE TREASURY

savings stamps (hereinafter referred to as stamps) at a specific school or schools
in the 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 the consent of the appropriate school official or board to the sale of stamps
at the subject 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 to qualify
as a Treasury savings stamp agent shall file a duly completed Application-Agreement, Treasury Form PD 2949 (original and two copies), with the local State
Director of the Treasury's U.S. Savings Bonds Division. The term ''State
Director" shall include any director appointed by the U.S. Savings Bonds Division
for the District of Columbia, or for any Territory or possession of the United
States, or the Canal Zone. If such Application-Agreement is accepted, the
State Director will certify it and distribute a copy bearing his certification to
(i) the postmaster of the post office, branch or station designated in the application, and (ii) the Treasury savings stamp agent, hereinafter referred to as the
agent. Upon receipt of such copies, the postmaster and the agent are authorized
to perform the functions necessary to effect the sale of stamps as provided herein.
An applicant is not authorized to act as or to represent himself to be a Treasury
savings stamp agent unless and until he receives a completed copy of his Application-Agreement bearing the certification of the State Director.
SEC. 338.4 Responsibility of agents.—Each agent will be responsible for the
faithful performance of his duties and functions and for fully accounting for all
stamps received without prepayment. All stamps obtained pursuant to the
provisions of this circular, including proceeds of sales thereof, are the property
of the United States and shall be held in trust for it by the agent until duly
accounted for pursuant to the provisions of this circular.
SEC. 338.5 Scope of authority of Treasury savings stamp agent.—An agent is
authorized to sell stamps only at the school or schools designated in the agent's
Application-Agreement, and in accordance with the provisions of this circular.
Agents rnay sell stamps only for cash and at their face value. Qualification as a
Treasury savings stamp agent does not authorize an individual to act in any
other agency capacity for or on behalf of the Treasury Department.
SEC. 338.6 Stamps may be obtained without prepayment.—Each agent may,
subject to the provisions of this circular, obtain without prepayment an amount
of stamps sufficient to meet his maximum sales requirements for any one stamp
day. (The term ''stamp day" means the day of the week designated by the
appropriate school official as the day when U.S. savings stamps may be purchased
by students served by the agent.) Such stamps shall be obtained by the agent
from the post office, branch or station designated in the agent's ApplicationAgreement (hereinafter referred to as the post office) under one of the bases set
forth in sec. 338.7.
SEC. 338.7 Bases for agents obtaining stamps.—(a) General.—If an agent's
stamp requirements for a stamp day have been established by previous sales
experience, the agent may elect to obtain and account for his stamp supplies on
one of two bases designated: (1) a consignment basis, and (2) a fixed credit basis;
provided, however, that the Treasury may place a limit on the amount of the
fixed credit of any agent(s) and it may at any time, or from time to time, require
any fixed credit agent (s) to render a full accounting or to change from a fixed
credit to a consignment basis. If an agent's stamp requirements for a stamp
day have not been satisfactorily established by previous sales experience, the
agent shall be required to obtain and account for his stamp supplies on a consignment basis until such sales experience is duly established at which time he may,
as provided above, elect to change to a fixed credit basis.
(6) Obtaining stamps on the consignment basis.—Under the consignment basis
an agent shall (1) obtain a supply of stamps on each stamp day, or on the business
day preceding such day, and (2) duly account in full (as provided in sec. 338.8)
for all such stamps not later than the second business day following the day the
stamps were to be sold.
(c) Fixed credit basis.—An agent operating on the fixed credit basis shall
(1) obtain a supply of stamps for any one stamp day and use the proceeds of sales
thereof to replenish such supply for subsequent stamp day sales, and (2) duly
account in full for the amount of the stamps covered by the fixed credit, not later
than the second business day following the last stamp day in each school semester;




EXHIBITS

295

provided, however, t h a t t h e Treasury m a y a t any time, or from t i m e to time,
limit or adjust t h e fixed credit of any agent, m a y require a full or partial accounting by a "fixed credit a g e n t " and m a y require any "fixed credit a g e n t " to change
to a consignment basis for obtaining and accounting for stamps. A "fixed credit
a g e n t " m a y request a reduction or an increase (supported by evidence of need)
of t h e stamps he m a y obtain on t h e fixed credit basis and he m a y elect to change
to a consignment basis for obtaining s t a m p s .
S E C . 338.8 Accounting for stamps obtained without prepayment.—(a) Receipts
given by agents for stamps obtairued.—A receipt form, supplied by t h e post office,
shall be signed by t h e agent to cover all stamps he actually obtains a t any one
t i m e w i t h o u t p r e p a y m e n t . T h e agent shall be satisfied t h a t t h e a m o u n t stated
on t h e receipt is correct before signing it. These forms shall be retained b y t h e
post office until a full accounting for t h e stamps is m a d e b y t h e agent.
(6) Full accounting for stamps.—Stamps obtained without p r e p a y m e n t m u s t
be accounted for in full a t such t i m e or times as are prescribed in sec. 338.7.
Such accounting shall be in t h e form of unsold stamps or cash, or both, in t h e
aggregate a m o u n t of t h e full value of s t a m p s recorded on t h e related post office
receipt form signed b y t h e agent. When such accounting is m a d e t h e postal
employee receiving same will mark t h e related receipt form "canceled" and d a t e
and sign such notation. T h e form shall then be immediately given to t h e agent.
Should such receipt form be unavailable a t t h e time of such accounting t h e postal
employee shall appropriately note t h e facts of t h e accounting a n d unavailability
of t h e receipt a n d date and sign such notation on Treasury F o r m P D 2950 (see
sec. 338.9(b)). T h e form should be retained by t h e agent.
(c) Partial accounting for stamps.—This p a r a g r a p h covers each situation where
an agent renders any accounting for s t a m p s a n d such accounting is for less t h a n
t h e full a m o u n t of s t a m p s obtained w i t h o u t p r e p a y m e n t . However, it does not
include transactions whereby s t a m p s are purchased by "fixed credit a g e n t s "
with proceeds of s t a m p sales for t h e purpose of replenishing supplies of stamps
for sale on other s t a m p days. An accounting shall be in t h e form of unsold
stamps or cash, or b o t h . If an agent renders an accounting t h a t is less t h a n t h e
t o t a l a m o u n t of t h e stamps obtained by him without prepayment, t h e postal
employee to w h o m t h e accounting is m a d e shall appropriately note and date t h e
facts on t h e related receipt previously given by t h e agent and require t h e agent
to endorse t h e notation. T h e receipt will be retained by t h e post office until a
full accounting is m a d e . A similar notation, duly dated, shall be m a d e and
signed by t h e postal employee on Treasury F o r m P D 2950, which form shall be
retained by t h e agent as prescribed in sec. 338.9. (When t h e stamps are fully
accounted for t h e postal employee will date, cancel, sign, a n d r e t u r n t h e receipt
to t h e agent as prescribed in t h e preceding p a r a g r a p h 338.8(b).) If t h e original
related receipt form given by t h e agent is unavailable a t t h e time of a partial
accounting, t h e postal employee shall appropriately date, note, and sign t h e
facts of t h e accounting a n d unavailability of t h e receipt on Treasury F o r m P D
2950, which form shall be retained by t h e agent (see sec. 338.9(b)).
S E C . 338.9 Records and reports, preparation, maintenance, and destruction by
agents.—(a) Receipts by agents for stamps obtained without prepayment.—Section
338.8 covers t h e preparation and distribution of receipts for stamps obtained by
agents without p r e p a y m e n t . A receipt duly canceled and returned to an agent
shall be retained by him one calendar m o n t h after the m o n t h in which it is returned
after which the agent m a y retain or destroy the 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 stamps
and/or t h e proceeds of s t a m p sales (including proceeds of sales used by "fixed
credit a g e n t s " for t h e purchase of additional stamps) shipped or otherwise delivered during t h e m o n t h to t h e post office. A Treasury F o r m P D 2950 is provided for this purpose. Entries shall be made b y t h e agent on F o r m P D 2950
at t h e time each shipment or delivery is made. The agent shall take t h e duplicate copy of F o r m P D 2950 with him each time he makes a full or partial accounting to the post office for s t a m p s t h a t he obtained without p r e p a y m e n t (this does
not include purchase of additional stamps with, t h e proceeds of s t a m p sales by
"fixed credit agents"). The 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 the 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 duly account for stamps (when
and as required under t h e provisions of sec. 338.8 (b) or (c)), t h e F o r m P D 2950




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1961 REPORT OF THE SECRETARY OF THE TREASURY

(bothTcopies) shall be retained by the agent until one calendar month after the
deficiency is removed, unless the form is delivered to the Treasury, and provided
further that if a post office is unable to return to the agent his post office receipt
form covering stamps obtained without prepayment at the time a full accounting
therefor is made, the Form PD 2950 duly noted and signed by the postal employee
shall be retained for three months after such accounting.
(c) Other.—Other records prepared and maintained by and for the agent's own
use may be disposed of at the discretion of the agent: Provided, however, that
any records, affidavits, etc., that are prepared in connection with a loss which
may be the subject of a claim to the Treasury for relief shall be retained as provided in section 338.10(d) hereof.
SEC. 338.10 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 the shipments are made in accordance with prescribed regulations. The term
"shipment" as used herein is defined (in the same manner as provided in the
Government Losses in Shipment Act, as amended) to mean "the transportation
or the effecting of transportation of valuables without limitation as to the 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 stamp agent acting in his official
capacity are shipments of valuables at the risk of the United States. Accordingly, an agent may be relieved of his accountability for stamps if they are lost,
stolen, or destroyed in shipment (see sec. 338.10(d)).
(6) Preparation for transportation.—The amount of stamps and/or proceeds
thereof being transported from or to the post office must be established, prior
to transportation, by actual count by the agent. The agent's receipt given at
the post office for stamps obtained without prepayment will ordinarily constitute
an adequate record of the amount of stamps being transported by the agent to the
school.
(c) Procedure for transportation and delivery.—An agent must transport and
deliver the 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.
(rf) Report of losses and presentation of claims for relief.—Losses occurring during
the transportation by an agent of stamps or the proceeds thereof shall be promptly
reported by the agent to (i) the State Director who certified the agent's Application-Agreement, and (ii) the post office. Local police authorities should also be
notified if the loss is occasioned by theft. If prompt recovery of the loss does not
seem possible, the agent should supplement the report of loss by presenting his
claim for relief to the State Director who, in turn, will present it for consideration
by the Treasury Department. The agent's claim should be supported by the
appropriate duplicate copy of Form PD 2950; the report of any investigation
made; action taken or expected to be taken and of any results obtained or expected; statements by the agent as to the circumstances and cause of the loss;
and, if available, statements or affidavits of any witnesses to the incident causing
the loss. The foregoing data need not be furnished if it has previously been
furnished to or obtained by the Treasury's Secret Service. Stamp agents should
bear the foregoing requirements in mind so that in the event of a loss, they may
be in a position to obtain data for justifying a claim for relief from the loss.
Unless the records referred to herein have been turned over to the Treasury they
should be retained, notwithstanding the provisions of section 338.9 hereof, until
one calendar month after the claim is settled. An agent will be relieved of liability for a loss occurring during his transportation of stamps or the proceeds
thereof, unless it arose as a result of his failure to comply with the provisions of this
circular and instructions issued hereunder.
SEC. 338.11 Action by postmasters in connection with an agent's failure to
account.—Postmasters should promptly report any failure of an agent to account
when due, in whole or in part, for stamps supplied to the agent without prepayment. Such reports should be made to the State Director of the U.S. Savings
Bonds Division who certified the respective agent's Application-Agreement.
SEC. 338.12 Termination of an agent's qualification.—The Secretary of the
Treasury, the Fiscal Assistant Secretary of the Treasury, the National Director,
or a State Director of the U.S. Savings Bonds Division may terminate the qualification of a Treasury savings stamp agent at any time by written notice to the
agent, in which event a copy of such notice will be sent to the post office con-




EXHIBITS

297

cerned. A qualified agent m a y withdraw from and discontinue his agency by
giving an appropriate written notice to the office of the State Director of t h e U.S.
Savings Bonds Division who certified the agent's Application-Agreement: P r o vided, however, t h a t the agent will be obligated to m a k e a full accounting for all
stamps received by him without p r e p a y m e n t .
S E C . 338.13 Continuation of existing qualifications of stamp agents.—Any
person who is a qualified agent a t the effective date of t h e revision of this circular
m a y continue to act under such qualification subject to the terms and conditions
of this revision.
S E C . 338.14 Miscellaneous.—The Secretary of the Treasury reserves t h e right,
in his discretion, to waive or modify any provision or provisions of these regulations
a n d 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 concerned.
JULIAN B . BAIRD,

Acting Secretary of the Treasury.
Legislation
E X H I B I T 9.—An act to increase for a one-year period the public debt limit set
forth in section 21 of the Second Liberty Bond Act
[Public Law 87-69, 87th Congress, H.R. 7677, June 30,19611

Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled. T h a t , during the
period beginning on July 1, 1961, a n d ending on J u n e 30, 1962, t h e
public debt limit set forth in the first sentence of section 21 of
t h e Second Liberty Bond Act, as amended (31 U.S.C. 757b),
shall be temporarily increased by $13,000,000,000.

tmporary
increase,

Approved J u n e 30, 1961.

E X H I B I T 10.—An act to authorize a d j u s t m e n t s of outstanding old series currency,
a n d for other purposes
[Public Law 87-66, 87th Congress, S. 1619, June 30, 19611

Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled. T h a t this Act m a y
be cited as the "Old Series Currency Adjustment Act".
S E C . 2. For the purposes of this Act—
(a) T h e t e r m " S e c r e t a r y " means the Secretary of t h e Treasury.
(b) T h e t e r m " U n i t e d States n o t e s " means currency notes issued
u r s u a n t to t h e first section of t h e Act of F e b r u a r y 25, 1862 (12
t a t . 345), t h e Act of July 11, 1862 (12 Stat. 532), t h e resolution
of J a n u a r y 17, 1863 (12 Stat. 822), section 2 of the Act of March
3, 1863 (12 Stat. 709), or section 3571 of the Revised Statutes of
t h e United States (31 U . S . C , sec. 401).
(c) T h e t e r m " T r e a s u r y notes of 1890" means currency notes
issued p u r s u a n t to t h e Act of July 14, 1890 (26 Stat. 289).
SEC. 3. T h e Secretary of t h e Treasury is hereby authorized a n d
directed to transfer to t h e general fund of t h e Treasury, to be
credited as a public debt receipt, t h e following:
(1) Gold held as security for gold certificates issued prior
to J a n u a r y 30, 1934.
(2) S t a n d a r d silver dollars held as security for, or for t h e
redemption of, silver certificates issued prior to July 1, 1929.
(3) S t a n d a r d silver dollars held as security for, or for t h e
redemption of, Treasury notes of 1890.
S E C . 4. T h e Board of Governors of t h e Federal Reserve System,
with t h e approval of t h e Secretary, m a y require any Federal Reserve b a n k to p a y to t h e Secretary, to be credited as a public debt
receipt, an a m o u n t equal to the a m o u n t of Federal Reserve notes
of a n y series prior to t h e series of 1928 issued to such b a n k a n d
o u t s t a n d i n g a t the time of such p a y m e n t .

old Series Currency Adjust^'^^^ ^^^•
Definitions.

E




12 u s e 145.
Transfer of gold
andsUver, au°^^ ^'

Federal Reserve
notes.

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1961 REPORT OF THE SECRETARY OF THE TREASURY

Redemption of
currency.

SEC. 5. Any currency the funds for t h e redemption or security
of which have been transferred p u r s u a n t to the provisions of section 3 of this Act, and any Federal Reserve notes as to which
p a y m e n t has been made under section 4 of this Act, shall thereafter, upon presentation a t the Treasury for redemption, be
redeemed by the Secretary from the general fund of t h e Treasury
and thereupon retired.
Continuing
SEC. 6. (a) Except as provided in subsection (c) of this section,
accountability.
upon completion of the transfers and credits authorized and
directed by section 3 of this Act there shall be carried on the books
of the Treasury as public debt bearing no interest t h e following:
(1) Gold certificates isssed prior to J a n u a r y 30, 1934.
(2) Treasury notes of 1890.
(3) United States notes issued prior to July 1, 1929.
(4) Silver certificates issued prior to July 1, 1929.
(b) Except as provided in subsection (c) of this section, there
shall be carried on the books of the Treasury as public debt bearing
no interest Federal Reserve notes as to which p a y m e n t has been
made to the Secretary under section 4 of this Act and the a m o u n t
of the p a y m e n t credited as a public debt receipt in accordance
with such section.
(c) T h e Secretary is authorized to determine, from time to
time, the a m o u n t of—
(1) outstanding currency of any t y p e designated in subsections (a) and (b) of this section,
(2) circulating notes of Federal Reserve banks, issued prior
to July 1, 1929, for which the United States has assumed
liability, and
(3) circulating notes of national banking associations, issued
prior to July 1, 1929, for which the United States has assumed
liability,
which, in his judgment, have been destroyed or irretrievably lost
and so will never be presented for redemption, and to reduce
accordingly t h e a m o u n t or a m o u n t s thereof outstanding on t h e
books of the Treasury and to credit such a m o u n t s to the appropriate receipt account.
S E C . 7. T h e first paragraph of the Act of M a y 31, 1878, entitled
Legal-tender
notes.
"An Act to forbid the further retirement of United States legalReduction.
tender n o t e s " (31 U . S . C , sec. 404), is amended by inserting im20 Stat. 87.
mediately before t h e period a t t h e end thereof t h e following:
": And provided further, T h a t in the event of any determination
by the Secretary of the Treasury under section 6 of the Old Series
Currency Adjustment Act t h a t an a m o u n t of said notes has been
destroyed or irretrievably lost and so will never be presented for
redemption, the a m o u n t of said notes required to be k e p t in circulation shall be reduced by t h e a m o u n t so determined".
Federal Reserve
SEC. 8. (a) T h e fifth p a r a g r a p h of section 16 of the Federal
Act, amendment. Reserve Act (12 U . S . C , sec. 415) is amended by adding a t the
38 Stat. 251;
end thereof the following new sentence: " T h e liability of a Federal
48 Stat. 339.
Reserve bank with respect to its outstanding Federal Reserve
notes shall be reduced by any a m o u n t paid by such bank to the
Secretary of t h e Treasury under section 4 of t h e Old Series Currency Adjustment Act."
(b) T h e seventh p a r a g r a p h of section 16 of the Federal Reserve
40 Stat. 236.
Act (12 U . S . C , sec. 416) is amended by striking out t h e third
sentence and inserting in lieu thereof the following: " A n y Federal
Reserve bank shall further be entitled to receive back the collateral
deposited with the Federal Reserve agent for t h e security of any
notes with respect to which such bank has made p a y m e n t to the
Secretary of the Treasury under section 4 of the Old Series Currency Adjustment Act. Federal Reserve banks shall not be
required to maintain the reserve or the redemption fund heretofore
provided for against Federal Reserve notes which have been
retired, or as to which p a y m e n t has been made to t h e Secretary
of the Treasury under section 4 of the Old Series Currency Adj u s t m e n t Act."




EXHIBITS

299

SEC. 9. Nothing contained in this Act shall impair the redeem- Redeemability.
ability of any currency of the United States as now provided by
law.
SEC. 10. In order to provide a historical collection of the paper RTistoricai
currency issues of the United States, the Secretary of the Treasury collection,
is authorized, after redemption, to withhold from cancellation
and destruction and to transfer to a special account one piece of
each design, issue, or series of each denomination of each kind of
paper currency of the United States, including bank notes, heretofore or hereafter issued, and to make appropriate entries in the
redemption accounts and other books of the Treasurv to cover
any such transfers.
Approved June 30, 1961.

Public Debt Management
EXHIBIT 11.—Statement by Secretary of the Treasury Dillon, June 27, 1961,
before the Senate Finance Committee on a new temporary public debt limit
I am here today in support of a new temporary limit of $298 billion on the public
debt for the fiscal year 1962.
Under the existing legislation the current temporary ceiling of $293 billion
reverts at the end of this month to $285 billion. On that date, June 30, 1961,
which is now just a few days away, we estimate that the public debt subject to
limitation will be about $289 billion. This is expected to include a cash balance
of approximately $5}^ billion, which is about the usual balance for the end of the
fiscal year.
During the next twelve months, the fiscal year 1962, we expect revenues to fall
short of expenditures. On the assumption that we are able to closeout fiscal year 1962
with a minimum working cash balance as low as $3.5 billion, we estimate a total
public debt subject to limitation of about $290 billion on June 30, 1962. Because
of normal seasonal factors, however, the end-of-June debt position is generally
well below the high point reached during the fiscal year. Our current projections
(as shown in table 1) indicate a net increase of about $6 billion in the public debt
for the rest of the calendar year to a high of about $295 billion in December.
In addition it is prudent to set the debt limit at a level that makes a reasonable
provision for errors in the estimates as well as other unforeseen contingencies, and
permits sufficient flexibility in debt management so that the efficiency of day-today operations is not impaired. To provide this margin, I believe that an
allowance of $3 billion, the same allowance that has been made in previous years,
should be added to the projected high point of $295 billion in the public debt
during fiscal year 1962. This clearly indicates the need for a temporary debt
ceiling of $298 billion in the forthcoming fiscal year.
As you know, setting the temporary debt limit at $298 billion is by no means a
"license" to spend freely out of borrowings up to that amount. Federal expenditures are determined on the basis of congressional authorizations and appropriations, and I am wholeheartedly in support of observing strict discipline in weighing
the merits of the many competing demands for additional expenditures. If the
Congress wished to set limits on its own actions in authorizing expenditures, it
could do so directly by placing a ceiling on new spending authorizations in any
year. There is no way by which the debt ceiling can be effective in limiting
congressional authorizations to spend, because there is no direct and immediate
connection between congressional authorizations and their effects on the public
debt which will be felt months or even years later, when the spending takes place.
In arriving at the projected need for a temporary debt ceiling of $298 billion,
the latest budget estimates have been taken into account, including full allowance
for all of the new or expanded programs recommended by the President in his
message of May 25 on "Urgent National Needs." Budget outlays for fiscal 1962
are now estimated at $85.1 billion. The increase of $800 million from the $84.3
billion figure reported in late March largely represents additional funds for space
exploration, defense and military assistance, expanded lending to small business,
and programs to alleviate structural unemployment. Budget revenues are still
estimated at $81.4 billion, the same as reported in March, indicating a deficit of
614359—62

20




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1961 REPORT OF THE SECRETARY OF THE TREASURY

$3.7 billion. These spending and revenue projections have been based on the
assumption that the Congress would act favorably on the President's recommendations to put the highway building program on a fully self-sustaining basis, to
eliminate the postal deficit by raising postal rates, and to maintain various tax
rates otherwise scheduled for reduction or termination. Since the preparation
of these estimates the Congress has acted favorably on the President's request
for continuation of existing tax rates. In addition the Congress has completed
action on the highway financing bill which avoids any diversion of general revenues
during fiscal 1962. However, there has as yet been no action on postal rate
increases which were recommended in the amount of $741 million. If the Congress fails to act on this legislation the expected fiscal 1962 deficit would be
increased to $4.4 billion, and the Treasury's margin of flexibility would be reduced
to $2}i billion.
I might add that the currently projected budget deficit of $3.7 billion for the
fiscal year 1962 compares with deficits of $4.2 billion and $12.4 billion in the
fiscal years following the two previous business recessions (the fiscal years 1955
and 1959). It may seem incongruous that with a vigorous recovery already under
way, we nonetheless expect a deficit next year. The reason for this deficit is
simple. Corporate income tax revenues, as you know, are highly important in
our overall revenue structure. But the corporate tax revenues which will be
available to us in fiscal 1962 will be based on corporate profits during the present
calendar year which includes the lowest point of the recession. In effect, while
the economy is recovering, our corporate income tax revenues will still be at
recession levels. The same applies, to a somewhat lesser extent, to individual
income tax collections above the standard withholding deductions, because these
collections are largely dependent on incomes realized during calendar year 1961.
Therefore, the coming fiscal year will be one of continued recession revenues as
far as the Federal Government is concerned.
On the spending side the latest estimates indicate that the January budget
underestimated expenditures for going programs by about $400 million. In
addition President Kennedy has proposed certain programs which he considers
vital in terms of fulfilling needs for national defense, promoting a healthy and
vigorously growing economy at home, and meeting the challenge of space exploration. Total budgetary expenditures for these new proposals in fiscal year 1962
are expected to amount to $3.8 billion. The main increases in spending that we
expect for 1962, compared with those in the January budget message, are for
defense, extended unemployment compensation, aid to education, agricultural
programs, and space exploration. The spending for unemployment compensation
is under a program very similar to what was done in 1958. A substantial portion
of the additional spending on agricultural programs represents the use of
more realistic assumptions in preparing our spending estimates. In the areas of
defense spending and space exploration, the force of external events has called
for additional programs that would and should have been undertaken, in some
form, whatever administration was in office. In short, in my view the budget
changes since January simply do not add up to the picture of unrestrained spending that some have sought to draw.
Moreover, the deficit now anticipated for fiscal year 1962 will not have an
inflationary impact on our economy. For while we do expect the economy
throughout this period to be recovering sturdily, the period as a whole will not
be one of full prosperity. For today there is substantial unused capacity in
every part of our industrial structure, and most seriously in our labor force.
Rather than creating the inflationary pressures that are inevitably associated
with deficits in times of full employment, the deficit we anticipate in the coming
fiscal year will be helpful in putting our unused plant capacity and labor force
to work.




EXHIBITS

301

Looking further ahead we can and do foresee a sharp increase in revenues in
fiscal year 1963. This follows the same pattern as in previous recovery periods.
Revenues increased very substantially in the fiscal years 1956 and 1960. In
fact, during fiscal year 1960 the increase over the preceding year amounted to
$9.8 billion. While naturally we cannot make any firm prediction at this point,
I believe it is a reasonable expectation that we will be able to present a budget
for fiscal year 1963 in which receipts exceed expenditures. For as the President
stated in his message on budget and fiscal policy of March 24, 1961:
"Federal revenues and expenditures * * * should, apart from any threat to
national security, be in balance over the years of the business cycle—running a
deficit in years of recession when revenues decline and the economy needs the
stimulus of additional expenditures, and running a surplus in years of prosperity,
thus curbing inflation, reducing the public debt, and freeing funds for private
investment."
This statement by President Kennedy clearly outlines our budgetary policy, a
policy from which we have never wavered.
Our projections of the public debt at semimonthly intervals during the fiscal
year 1962 are shown in the first table attached to my statement. One important
assumption in preparing these projections is that the Treasury's operating balance
at the Federal Reserve Banks and private commercial banks would hold steady
throughout the period at $3.5 billion. That is actually a rather low working
balance for an operation as large and as subject to sharp fluctuations in receipts
and expenditures as is the management of the Treasury's cash position. A
balance of $3.5 billion would cover only a little over half of an average month's
budget expenditures, which is a much lower ratio of cash holdings to expenditures
than is maintained by the average business corporation.
In fact, as shown in the second attached table, the operating balance has
been more often above than below $3.5 billion during the fiscal year now ending.
It has averaged closer to $5 billion than to $3.5 billion, and this has provided a
highly desirable and important degree of flexibility in the efficient conduct of
day-to-day Treasury operations. It is because of this need for flexibility in the
management of cash balances, and because of the inescapable uncertainties of
revenue and expenditure estimates, that the $3 billion margin has been added to
our calculation of the appropriate debt ceiling.
As you can see from the first table, our debt projections, plus the $3 billion
allowance for flexibility, will reach a high point of $298 billion during the winter
months. A temporary limit of that amount should give us sufficient elbowroom
for maximum efficiency of operations and yet not impair any useful function which
may be served by the public debt limitation.
The intended function of the debt limit is but poorly served, I think, when a
specific limit fits so closely that the Treasury is forced to obtain additional funds—
at higher cost—through the market borrowings of Federal agencies not subject to
the statutory debt limit. Indeed the Government was forced to take such steps a
few years ago when the debt ceiling imposed too tight a limit on Government
fiscal operations. Iri addition the Treasury in its own borrowings has at times had
to defer borrowings when it would have been advantageous, or to engage in
piecemeal borrowings because of the limitations of too little margin under the
debt ceiling.
In conclusion, I believe that a temporary increase in the debt limit to $298
billion is essential to the orderly and economical management of the Government's finances, and I earnestly recommend its prompt approval by this committee.




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1961 REPORT OF THE SECRETARY OF THE TREASURY

TABLE I.—Forecast of public debt outstanding, fiscal year 1962, based on constant
operating cash balance of %S.6 billion {excluding free gold)
[In billions of dollars. Based on assumed budget deficit of $3.7 billionl i
Operating balance, Federal
Reserve Banks
and depositaries (excluding
free gold)

June 30
July 15
July 31
August 15
August 31
September 15
September 30
October 15
October 31
November 15
November 30
December 15
December 31
January 15
January 31
February 16.
February 28
March 15
March 31
April 16
April 30
Mav 16
May31
June 15
June 30

1981

Public debt
subject to
limitation

Allowance to
provide flcvibil- Total public
ity in financ- debt limitation
required 2
ing and for
contingencies

$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

$286. 4
288.6
289.6
289.9
290.1
291.9
288.2
290.7
292.2
293. 0
292.8
294.9
292.4

$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

$289. 4
291.6
292.6
292.9
290.1
294.9
291.2
293.7
295.2
296. 0
295.8
297.9
295.4

3.5
3.5
3.5
3.5
3.5
3.5
3.5
3.5
3.5
3.5
3.6
3.6

294.9
294.0
294.1
293.2
294.7
291.2
293.4
292.7
291.9
292.3
293.6
290.1

3.0
3.0
3.0
3.0
3.0
3.0
3.0
3.0
3.0
3.0
3.0
3.0

297.9
297.0
297.1
296.2
297.7
294.2
296.4
295.7
294.9
295.3
296.6
293.1

1962

1 Incorporates estimated budget revenues of $81.4 billion and estimated expenditures of $85,1 billion.
2 From July 1, 1960, to June 30, 1961, the statutory debt limit is $293 billion. Thereafter it will revert to
$285 billion.
8 Because the actual operating balance on June 30,1961, is expected to be considerably larger than $3.5 billion
the public debt subject to limitation will be about $289 billion on that date.

TABLE II.—Actual cash balance and public debt outstanding July 1960—May 1961
[In billions of dollars!
Operating balance, Federal
Reserve Banks
and depositaries (excluding
free gold)

July 15 July 31
August 16
August 31
September 15
September 30
__
October 15
October 31
_
November 16
November 30
December 15
December 31
_January 15
January 31
February 15
February 28
March 15
March 31
April 15
April 30
May 15
May 31

1960

--_
__
-1961
-

--

_
-

-

---

—-

---

Public debt
subject to
limitation

$7.4
6.2
4.8
6.1
3.0
7.5
3.6
5.9
4.1
5.0
2.7
6.7

$288. 6
288.1
287.5
288.4
288.3
288.2
287.2
290.2
289.9
290.2
290.0
290.0

3.4
3.8
3.7
6.3
2.8
4.0
1.7
2.9
4.0
4.4

289.9
289.8
290.5
290.3
290.0
287.3
288.4
287.8
288.8
290.0

NOTE.—From July 1, 1960, to June 30, 1961, the statutory debt limit is $293 billion, Thereafter it will
revert to $285 billion.




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303

Taxation Developments
EXHIBIT 12.—Message from the President, April 20, 1961, relative to the Federal
tax system
[House Document No. 140, 87th Congress, 1st sess.

To the Congress of the United States:
A strong and sound Federal tax system is essential to America's future. Without
such a system, we cannot maintain our defenses and give leadership to the free
world. Without such a system, we cannot render the public services necessary for
enriching the lives of our people and furthering the growth of our economy.
The tax system must be adequate to meet our public needs. It must meet
them fairly, calling on each of us to contribute his proper share to the cost of
government. It must encourage efficient use of our resources. It must promote
economic stability and stimulate economic growth. Economic expansion in
turn creates a growing tax base, thus increasing revenue and thereby enabling
us to meet more readily our public needs, as well as our needs as private individuals.
This message recognizes the basic soundness of our tax structure. But it also
recognizes the changing needs and standards of our economic and international
position, and the constructive reform needs to keep our tax system up to date
and to maintain its equity. Previous messages have emphasized the need for
prompt congressional and executive action to alleviate the deficit in our international balance of payments—to increase the modernization, productivity, and
competitive status of American industry—to stimulate the expansion and growth
of our economy—to eliminate to the extent possible economic injustice within
our own society and to maintain the level of revenues requested in my predecessor's budget. In each of these endeavors, tax policy has an important role to play
and necessary tax changes are herein proposed.
The elimination of certain defects and inequities as proposed below will provide
revenue gains to offset the tax reductions offered to stimulate the economy.
Thus no net loss of revenue is involved in this set of proposals. I wish to emphasize
here that they are a "set"—and that considerations of both revenue and equity,
as well as the interrelationship of many of the proposals, urge their consideration
as a unit.
I am instructing the Secretary of the Treasury to furnish the Committee on
Ways and Means of the House a detailed explanation of these proposals in connection with their legislative consideration.
I. Long-range tax reform
While it is essential that the Congress receive at this time this administration's
proposals for urgent and obvious tax adjustments needed to fulfill the aims listed
above, time has not permitted the comprehensive review necessary for a tax
structure which is so complicated and so critically important to so many people.
This message is but a first though urgent step along the road to constructive
reform.
I am directing the Secretary of the Treasury, building on recent tax studies of
the Congress, to undertake the research and preparation of a comprehensive
tax reform program to be placed before the next session of the Congress.
Progressing from these studies, particularly those of the Committee on Ways
and Means and the Joint Economic Committee, the program should be aimed at
providing a broader and more uniform tax base, together with an appropriate
rate structure. We can thereby work toward the goal of a higher rate of economic
growth, a more equitable tax structure, and a simpler tax law. I know these
objectives are shared by—and, at this particular time of year, acutely desired
by—the vast majority of the American people.
In meeting the demands of war finance, the individual income tax moved from
a selective tax imposed on the wealthy to the means by which the great majority
of our citizens participates in paying for well over one-half of our total budget
receipts. It is supplemented by the corporation income tax, which provides for
another quarter of the total.
This emphasis on income taxation has been a sound development. But so many
taxpayers have become so preoccupied with so many tax-saving devices that




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1961 REPORT OF THE SECRETARY OF THE TREASURY

business decisions are interfered with, and the efficient functioning of the price
system is distorted.
Moreover, special provisions have developed into an increasing source of
preferential treatment to various groups. Whenever one taxpayer is permitted
to pay less, someone else must be asked to pay more. The uniform distribution
of the tax burden is thereby disturbed and higher rates are made necessary by the
narrowing of the tax base. Of course, some departures from uniformity are needed
to promote desirable social or economic objectives of overriding importance
which can be achieved most effectively through the tax mechanism. But many
of the preferences which have developed do not meet such a test and need to be
reevaluated in our tax reform program.
It will be a major aim of our tax reform program to reverse this process by
broadening the tax base and reconsidering the rate structure. The result should
be a tax system that is more equitable, more efficient, and more conducive to
economic growth.
II. Tax incentive for modernization and expansion
The history of our economy has been one of rising productivity, based on improvement in skills, advances in technology, and a growing supply of more efficient
tools and equipment. This rise has been reflected in rising wages and standards
of living for our workers, as well as a healthy rate of growth for the economy as a
whole. It has also been the foundation of our leadership in world markets, even
as we enjoyed the highest wage rates in the world.
Today, as we face serious pressure on our balance-of-payments position, we must
give special attention to the modernization of our plant and equipment. Forced
to reconstruct after wartime devastation, our friends abroad now possess a modern
industrial system helping to make them formidable competitors in world markets.
If our own goods are to compete with foreign goods in price and quality, both at
home and abroad, we shall need the most efficient plant and equipment.
At the same time, to meet the needs of a growing population and labor force,
and to achieve a rising per capita income and employment level, we need a high
and rising level of both private and public capital formation. In my preceding
messages, I have proposed programs to meet some of our needs for such capital
formation in the public area, including investment in intangible capital such as
education and research, as well as investment in physical capital such as buildings
and highways. I am now proposing additional incentives for the modernization
and expansion of private plant and equipment.
Inevitably, capital expansion and modernization—now frequently under the
name of automation—alter established modes of production. Great benefits
result and are distributed widely—but some hardships result as well. This places
heavy responsibilities on public policy, not to retard modernization and capital
expansion but to promote growth and ameliorate hardships when they do occur—
to maintain a high level of demand and employment, so that those who are displaced will be reabsorbed quickly into new positions—and to assist in retraining
and finding new jobs for such displaced workers. We are developing, through such
measures as the area redevelopment bill and a strengthened employment service,
as well as assistance to the unemployed, the programs designed to achieve these
objectives.
High capital formation can be sustained only by a high and rising level of
demand for goods and service. Indeed, the investment incentive itself can contribute materially to achieving the prosperous economy under which this incentive
will make its maximum contribution to economic growth. Rather than delaying
its adoption until all excess capacity has disappeared and unemployment is low,
we should take this step now to strengthen our antirecession program, stimulate
employment, and increase our export markets.
Additional expenditures on plant and equipment will immediately create more
jobs in the construction, lumber, steel, cement, machinery, and other related
capital goods industries. The staffing of these new plants—and filling the orders
for new export markets—will require additional employees. The additional
wages of these workers will help create still more jobs in consumer goods and service industries. The increase in jobs resulting from a full year's operation of such
an incentive is esti mated at about half a million.




EXHIBITS

305

Specifically, therefore, I recommend enactment of an investment tax incentive
in the form of a tax credit of—
Fifteen percent of all new plant and equipment investment expenditures
in excess of current depreciation allowances;
Six percent of such expenditures below this level but in excess of 50
percent of depreciation allowances; with
Ten percent on the first $5,000 of new investment as a minimum credit.
This credit would be taken as an offset against the firm's tax liability, up to an
overall limitation of 30 percent in the reduction of that liability in any one year.
It would be separate from and in addition to depreciation of the eligible new
investment at cost. It would be available to individually owned businesses as
well as corporate enterprises, and apply to eligible investment expenditures made
after January 1 of this year. To remain a real incentive and make a maximum
contribution to those areas of capital expansion and modernization where it is
most needed, and to permit efficient administration, eligible investment expenditures would be limited to expenditures on new plant and equipment, on assets
located in the United States, and on assets with a life of 6 years or more. Investments by public utilities other than transportation would be excluded, as would be
investment in residential construction including apartments and hotels.
Of the eligible firms, it is expected that many small firms would be able to take
advantage of the minimum credit of 10 percent on the first $5,000 of new investment which is designed to provide a helpful stimulus to the many small businesses
in need of modernization. Other small firms, subject to a 30 percent tax rate,
would strive to be eligible for the full 15 percent credit—the equivalent for such
firms of a deduction from their gross income for tax purposes of 50 percent of the
cost of new investment. Among the remaining firms it is expected that a majority
would be induced to make new investments in modern plant and equipment in
excess of their depreciation in order to earn the 15 percent credit. New and growing firms would be particularly benefited. The 6 percent credit for those whose
new investment expenditures fall between 50 and 100 percent of their depreciation
allowances is designed to afford some substantial incentive to the depressed or
hesitant firm which knows it cannot yet achieve the 15 percent credit.
In arriving at this form of tax encouragement to investment, careful consideration was given to other alternatives. If the credit were given across the board
to all new investment, a much larger revenue loss would result from those expenditures which would have been undertaken anyway or represent no new level of
effort. Our objective is to provide the largest possible inducement to new investment which would not otherwise be undertaken. Thus the plan recommended
above would involve the same revenue loss—approximately $1.7 billion—as only '
a 7 percent credit across the board to all new investment.
The use of current depreciation allowances as the threshold above which the
higher rate of credit would apply recommends itself for a number of reasons. Depreciation reflects the average level of investment over the past, but is a less
restrictive and more stable test than the use of an average of investment expenditures for a period such as the preceding 5 years. In addition, the depreciation
allowances themselves in effect supply tax-free funds for investment up to this
level. We now propose a tax credit^which would help to secure funds needed
for the additional investment beyond that level.
The proposed credit, in terms of the revenue loss involved, will also be much
more effective as an inducement to investment than an outright reduction in the
rate of corporation income tax. Its benefits would be distributed more broadly,
since the proposed credit will apply to individuals and partnerships as well as
corporations. It will also be more effective as a direct incentive to corporate
investment, and increase available funds more specifically in those corporations
most likely to use them for additional investment. In short, whereas the credit
will have the advantage of focusing on the profitability of new investment, much
of the revenue loss under a general corporate rate reduction would be diverted
into raising the profitability of old investment.
It is true that this advantage of focusing entirely on new investment is shared
by the alternative strongly urged by some—a tax change permitting more rapid
depreciation of new assets (be it accelerated depreciation or an additional depreciation allowance for the first year). But the proposed investment credit would
be superior, in my view, for a number of reasons. In the first place, the determination of the length of an asset's life and proper methods of depreciation have
a normal and important function in determining taxable income, wholly apart
from any considerations of incentive; and they should not be altered or manipulated




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1961 REPORT OF THE SECRETARY OF THE TREASURY

for other purposes that would interfere with this function. It may be that on
examination some of the existing depreciation rules will be found to be outmoded
and inequitable; but that is a question that should be separated from investment
incentives. A review of these rules and methods is underway in the Treasury
Department as a part of its overall tax reform study to determine whether changes
are appropriate and, if so, what form they should take. Adoption of the proposed
incentive credit would in no way foreclose later action on these aspects of
depreciation.
In second place, an increase in tax depreciation tends to be recorded in the
firm's accounts, thereby raising current costs and acting as a deterrent to price
reduction. The proposed investment credit would not share this defect.
Finally, it is clear that the tax credit would be more effective in inducing new
investment for the same revenue loss. The entire credit would be reflected immediately in the increased funds available for investment without increasing the
company's future tax liability. A speedup in depreciation only postpones the
timing of the tax liability on profits from the investment to a later date—an
increase in profitability not comparable to that of an outright tax credit. Yet
accelerated depreciation is much more costly in immediate revenues.
For example, on an average investment, a tax credit of 15 percent would bring
the same return to the firm as an additional first year depreciation of over 50 percent of the cost of the investment. Yet the immediate revenue loss to the Treasury from such additional depreciation would be twice as much, and would remain
considerably higher for many years. The incentive to new investment our economy needs, and which this recommendation would provide at a revenue loss of
$1.7 billion, could be supplied by an initial writeoff only at an immediate cost of
$3.4 billion.
I believe this investment tax credit will become a useful and continuous part of
our tax structure. But it will be a new venture and remain in need of review.
Moreover, it may prove desirable for the Congress to modify the credit from time
to time so as to adapt it to the needs of a changing economy. I strongly urge
its adoption in this session.
III. Tax treatment of foreign income
Changing economic conditions at home and abroad, the desire to achieve greater
equity in taxation, and the strains which have developed in our balance-ofpayments position in the last few years, compel us to examine critically certain
features of our tax system which, in conjunction with the tax system of other
countries, consistently favor U.S. private investment abroad compared with investment in our own economy.
1. Elimination of tax deferral privileges in developed countries and "tax haven''
deferral privileges in all countries.—Profits earned abroad by American firms
operating through foreign subsidiaries are, under present tax laws, subject to U.S.
tax only when they are returned to the parent company in the form of dividends.
In some cases, this tax deferral has made possible indefinite postponement of the
U.S. tax; and, in those countries where income taxes are lower than in the United
States, the ability to defer the payment of U.S. tax by retaining income in the subsidiary companies provides a tax advantage for companies operating through oversea subsidiaries that is not available to companies operating solely in the United
States. Many American investors properly made use of this deferral in the conduct of their foreign investment. Though changing conditions now make continuance of the privilege undesirable, such change of policy implies no criticism
of the investors who so utilize this privilege.
The undesirability of continuing deferral is underscored where deferral has
served as a shelter for tax escape through the unjustifiable use of tax havens such
as Switzerland. Recently more and more enterprises organized abroad by
American firms have arranged their corporate structures—aided by artificial
arrangements between parent and subsidiary regarding intercompany, pricing, the
transfer of patent ficensing rights, the shifting of management fees, and similar
practices which maximize the accumulation of profits in the tax haven—so as to
exploit the multiplicity of foreign tax systems and international agreements in
order to reduce sharply or eliminate completely their tax liabilities both at home
and abroad.
To the extent that these tax havens and other tax deferral privileges result in
U.S. firms investing or locating abroad largely for tax reasons, the efficient allocation of international resources is upset, the initial drain on our already adverse




EXHIBITS

307

balance of payments is never fully compensated, and profits are retained and reinvested abroad which would otherwise be invested in the United States. Certainly since the postwar reconstruction of Europe and Japan has been completed,
there are no longer foreign policy reasons for providing tax incentives for foreign
investment in the economically advanced countries.
If we are seeking to curb tax havens, if we recognize that the stimulus of tax
deferral is no longer needed for investment in the developed countries, and if we
are to emphasize investment in this country in order to stimulate our economy
and our plant modernization, as well as ease our balance-of-payments deficit,
we can no longer afford existing tax treatment of foreign income.
I therefore recommend that legislation be adopted which would, after a twostep transitional period, tax each year American corporations on their current
share of the undistributed profits realized in that year by subsidiary corporations
organized in economically advanced countries. This current taxation would also
apply to individual shareholders of closely held corporations in those countries.
Since income taxes paid abroad are properly a credit against the U.S. income
tax, this would subject the income from such business activities to essentially
the same tax rates as business activities conducted in the United States. To
permit firms to adjust their operations to this change, I also recommend that
this result be achieved in equal steps over a 2-year period, under w.hich only onehalf of the profits would be affected during 1962. Where the foreign taxes paid
have been close to the U.S. rates, the impact of this change would be small.
This proposal will maintain U.S. investment in the developed countries at the
level justified by market forces. American enterprise abroad will continue to
compete with foreign firms. With their access to capital markets at home and
abroad, their advanced technical know-how, their energy, resourcefulness, and
many other advantages, American firms will continue to occupy their rightful
place in the markets of the world. While the rate of expansion of some American
business operations abroad may be reduced through the withdrawal of tax deferral
such reduction would be consistent with the efficient distribution of capital resources in the world, our balance-of-payments needs, and fairness to competing
firms located in our own country.
At the same time, I recommend that tax deferral be continued for income from
investment in the developing economies. The free world has a strong obligation
to assist in the development of these economies, and private investment has an
important contribution to make. Continued income tax deferral for these areas
will be helpful in this respect. In addition, the proposed elimination of income
tax deferral on U.S. earnings in industrialized countries should enhance the relative attraction of investment in the less-developed countries.
On the other hand, I recommend elimination of the tax haven device anywhere
in the world, even in the underdeveloped countries, througjh the elimination of
tax deferral privileges for those forms of activities, such as trading, licensing,
insurance, and others, that typically seek out tax haven methods of operation.
There is no vaUd reason to permit their remaining untaxed regardless of the
country in which they are located.
2. Taxation of foreign investment companies.—For some years now we have witnessed substantial outflows of capital from the United States into investment
companies created abroad whose principal justification lies in the tax benefits
which their method of operation produces. I recommend that these tax benefits
be removed and that income derived through such foreign investment companies
be treated in substantially the same way as income from domestic investment
companies.
3. Taxation of American citizens abroad.—It is no more justifiable to provide
tax exemptions for individuals living in the developed countries than it is to provide tax inducements for capital investment there. Nor s.hould we permit totally
unjustified tax benefits to be obtained by those Americans whose choice of residence is dictated primarily by their desire to minimize taxes.
I, therefore, recommend—
That the total tax exemption now accorded the earned income of American citizens residing abroad be completely terminated for those residing
in economically advanced countries;
That this exemption for earned income be limited to $20,000 for those
residing in the less-developed countiies; and
That the] exemption of $20,000 of earned income now accorded those
citizens who stay (but do not reside) abroad for 17 out of 18 months also




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1961 REPORT OF THE SECRETARY OF THE TREASURY

be completely terminated for those living or traveling in the economically
advanced countries.
4. Estate tax on property located abroad.—I recommend that the exclusion from
the estate tax accorded real property situated abroad be terminated. With the
adoption several years ago of the credit for foreign taxes under the estate tax,
there is no justification for the continued exemption of such property.
5. Allowance for foreign tax on dividends.—Finally, the method by which the
credit for foreign income taxes is computed in the case of dividends involves a
double allowance for foreign income taxes and should be corrected.
These proposals, along with more detailed and technical changes needed to
improve the taxation of foreign income, are expected to reduce substantially our
balance-of-payments deficit and to increase revenues by at least $250 million
per year.
IV. Correction of other structural defects
I next recommend a number of measures to remove other serious defects in the
income tax structure. These changes, while making a beginning toward the comprehensive tax reform program mentioned above, will provide sufficient revenue
gains to offset the cost of the investment tax credit and keep the revenue-producing
potential of our tax structure intact.
1. Withholding on interest and dividends.—Our system of combined withholding
and voluntary reporting on wages and salaries under the individual income tax
has served us well. Introduced during the war when the income tax was extended
to millions of new taxpayers, the wage-withholding system has been one of the
most important and successful advances in our tax system in recent times. Initial
difficulties were quickly overcome, and the new system helped the taxpayer no
less than the tax collector.
It is the more unfortunate, therefore, that the application of the withholding
principle has remained incomplete. Withholding does not apply to dividends
and interest, with the result that substantial amounts of such income, particularly
interest, improperly escape taxation. It is estimated that about $3 billion of
taxable interest and dividends are unreported each year. This is patently unfair
to those who must as a result bear a larger share of the tax burden. Recipients
of dividends and interest should pay their tax no less than those who receive
wage and salary income, and the tax should be paid just as promptly. Large
continued avoidance of tax on the part of some has a steadily demoralizing effect
on the compliance of others.
This gap in reporting has not been appreciably lessened by educational programs. Nor can it be effectively closed by intensified enforcement measures,
except by the expenditure of inordinate amounts of time and money. Withholding on corporate dividends and on investment-type interest, such as interest
paid on taxable Government and corporate securities and savings accounts, is
both necessary and practicable.
1, therefore, recommend the enactment of legislation to provide for a 20 percent
withholding rate on corporate dividends and taxable investment-type interest,
effective January 1, 1962, under a system which would not require the preparation
of withholding statements to be sent to recipients. It would thus place a relatively light burden of compliance on the payers of interest and dividends—
certainly less than that placed on payers of wages and salaries—while at the
same time largely solving the comphance problem for most of the taxpayers
receiving dividends and interest. Steps will also be taken to avoid hardships
for recipients who are not subject to tax.
The remaining need for comphance, largely in the high income group subject
to a higher tax rate, would be met througli the concentration of enforcement
devices on taxpayers in these brackets. Introduction of equipment for the automatic processing of information returns would be especially helpful for this purpose and would thus supplement the extension of withholding.
• Enactment of this proposal is estimated to increase revenue by $600 milhon
per year.
2. Repeal of the dividend credit and exclusion.—The present law provides for
an exclusion from income of the first $50 of dividends received from domestic
corporations, and for a 4 percent credit against tax of such dividend income in
excess of $50. These provisions were enacted in 1954. Proponents argued that
they would encourage capital formation through equity investment, and that
they would provide a partial offset to the so-called double taxation of dividend




EXHIBITS

309

income. It is now clear that they serve neither purpose well; and I, therefore,
recommend the repeal of both the dividend credit and exclusion.
The dividend credit and exclusion are not an efficient stimulus to capital
expansion in the form of plant and equipment. The revenue losses resulting from
these provisions are spread over a large volume of outstanding shares rather
than being concentrated on new shares; and the stimulating effect of the provisions
are thus greatly diluted, resulting in relatively little increases in the supply of
equity funds and a relatively slight reduction in the cost of equity financing.
In fact, such reduction as does occur is more likely to benefit large corporations
with easy access to the capital market, while being of little use to small firms
which are not so favorably situated. Insofar as raising the profitability of new
investment in plant and equipment is concerned, the tax investment credit proposed above would be far more effective since it is offered to the corporation,
where the actual investment decision is made.
The dividend credit and exclusion are equally inadequate as a solution to
the so-called problem of double taxation. Whatever may be the merits of the
arguments respecting the existence of double taxation, the provisions of the 1954
act clearly do not offer an appropriate remedy. They greatly overcompensate
the dividend recipient in the high income bracket, while giving either insufficient
or no relief to shareholders with smaller income.
This point deserves emphasis. For viewed simply as a means of tax reduction,
the dividend credit is wholly inequitable. The distribution of its benefits is
highly favorable to the taxpayers in the upper income groups who receive the
major part of dividend income. Only about 10 percent of dividend income
accrues to those with incomes below $5,000; about 80 percent of it accrues to that
6.5 percent of taxpayers whose incomes exceed $10,000 a year. Similarly,
dividend income is a sharply rising fraction of total income as we move up the
income scale. Thus, dividend income is about 1 percent of all income from all
sources for those taxpayers with incomes of $3,000 to $5,000; but it constitutes
more than 25 percent of the income for those with $100,000 to $150,000 of income,
and about 50 percent for those with incomes over $1 million.
The role of the dividend credit should not be confused with the broader question
of tax rates applicable to high incomes. These high rates deserve reexamination;
and this is one of the problems which will be examined in the context of next
year's tax reform. But if top bracket rates were to be reduced, the dividend credit
is not the way to do it. Rate reductions, if appropriate, should apply no less
to those with high incomes from other sources, such as professional and salaried
people whose tax position is particularly difficult today.
If the credit is eliminated, the $50 exclusion should also be discarded for similar
reasons. The tax saving from the exclusion is substantially greater for a dividend
recipient with a high income than for a recipient with low income. Moreover,
on equity grounds, there is no reason for giving tax reduction to that small fraction of low-income taxpayers who receive dividends in contrast to those who must
live on wages, interest, rents, or other forms of income.
The 1954 formula therefore is a dead end and should be rescinded, effective
December 31 of this year. The estimated revenue gain is $450 million per year.
3. Expense accounts.—In recent years widespread abuses have developed
through the use of the expense account. Too many firms and individuals have
devised means of deducting too many personal living expenses as business expenses,
thereby charging a large part of their cost to the Federal Government. Indeed,
expense account hving has become a byword in the American scene.
This is a matter of national concern, affecting not only our public revenues,
our sense of fairness, and our respect for the tax system, but our moral and business practices as well. This widespread distortion of our business and social
structure is largely a creature of the tax system, and the time has come when our
tax laws should cease their encouragement of luxury spending as a charge on
the Federal Treasury. The slogan—"It's deductible"—should pass from our
scene.
Tighter enforcement of present legislation will not suffice. Even though in
some instances entertainment and related expenses have an association with the
needs of business, they nevertheless confer substantial tax-free personal benefits
to the recipients. In other cases, deductions are obtained by disguising personal
expenses as business outlays. But under present law, it is extremely difficult to
separate out and disallow such pseudo-business expenditures. New legislation is
needed to deal with the problem.




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1961 REPORT OF THE SECRETARY OF THE TREASURY

I, therefore, recommend that the cost of such business entertainment and the
maintenance of entertainment facilities (such as yachts and hunting lodges)
be disallowed in full as a tax deduction and that restrictions be imposed on the
deductibility of business gifts, expenses of business trips combined with vacations,
and excessive personal living expenses incurred on business travel away from home.
I feel confident that these measures will be welcomed by the American people.
I am also confident that business firms, now forced to emulate the expense account
favors of their competitors, however unsound or uneconomical such practices may
be, will welcome the removal of this pressure. These measures will strengthen
both our tax structure and the moral fiber of our society. These provisions
should be effective as of January 1, 1962, and are estimated to increase Treasury
receipts by at least $250 million per year.
4. Capital gains on sale of depreciable business property.—Another flaw which
should be corrected at this time relates to the taxation of gains on the sale of
depreciable business property. Such gains are now taxed at the preferentialjrate
applicable to capital gains, even though they represent ordinary income.
This situation arises because the statutory rate of depreciation may not coincide
with the actual decline in the value of the asset. While the taxpayer holds the
property, depreciation is taken as a deduction from ordinary income. Upon its
resale, where the amount of depreciation allowable exceeds the decline in the
actual value of the asset so that a gain occurs, this gain under present law is taxed
at the preferential capital gains rate. The advantages resulting from this practice
have been increased by the liberalization of depreciation rates.
Our capital gains concept should not encompass this kind of income. This
inequity should be eliminated, and especially so in view of the proposed investment
credit. We should not encourage through tax incentives the further acquisition
of such property as.long as this loophole remains.
I, therefore, recommend that capital gains treatment be withdrawn from gains
on the disposition of depreciable property, both personal and real property, to
the extent that depreciation has been deducted for such property by the seller in
previous years, permitting only the excess of the sales price over the original cost
to be treated as a capital gain. The remainder should be treated as ordinary
income. This reform should immediately become effective as to all sales taking
place after the date of enactment. It is estimated to raise revenue by $200 million
annually.
5. Cooperatives and financial institutions.—Another area of the tax laws which
calls for attention is the treatment of cooperatives, private lending institutions,
and fire and casualty insurance companies.
Contrary to the intention of Congress, substantial income from certain cooperative enterprises, reflecting business operations, is not being taxed either to the
cooperative organization itself or its members. This situation must be corrected
in a manner that is fair and just to both the cooperatives and competing businesses.
The present inequity has resulted from court decisions which held patronage
refunds in certain forms to be nontaxable. I recommend that the law be clarified
so that all earnings are taxable to either the cooperatives or to their patrons,
assessing the patron on the earnings that are allocated to him as patronage
dividends or refunds in scrip or cash. The withholding principle recommended
above should also be applied to patronage dividends or refunds so that the average
patron receiving scrip will, in effect, be given the cash to pay his tax on his patronage dividend or refund. The cooperatives should not be penalized by the assessment of a patronage tax upon dividends or refunds taxable to the patron but left
in the business as a substitute for the sale of securities to obtain additional equity
capital. The exemption for rural electric cooperatives and credit unions should
be continued.
The tax provisions applicable to fire and casualty insurance companies, originally adopted in 1942, need to be reviewed in the light of current conditions. Many
of these companies, organized on the mutual or reciprocal basis are now taxed
under a special formula which does not take account of their underwritings gains
and thus results in an inequitable distribution of the tax burden amoung various
types of companies. Consideration should be given to taxing mutual or reciprocal
companies on a basis similar to stock companies, following the pattern of similar
treatment of stock and mutual enterprise in the life insurance field.
Some of the most important types of private savings and lending institutions
in the country are accorded tax deductible reserve provisions which substantially
reduce or eliminate their Federal income tax liability. These provisions should
be reviewed with the aim of assuring nondiscriminatory treatment.




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311

Remedial legislation in these fields would enlarge the revenues and contribute
to a fair and sound tax structure.
V. Tax administration
One of the major characteristics of our tax system, and one in which we can
take a great deal of pride, is that it operates primarily through individual selfassessment. The integrity of such a system depends upon the continued willingness of the people honestly and accurately to discharge this annual price of
citizenship. To the extent that some people are dishonest or careless in their
dealings with the Government, the majority is forced to carry a heavier tax
burden.
For voluntary self-assessment to be both meaningful and productive of revenues,
the citizens must not only have confidence in the fairness of the tax laws, but also
in their uniform and vigorous enforcement of these laws. If noncompliance by
the few continues unchecked, the confidence of the many in our self-assessment
system will be shaken and one of the cornerstones of our Government weakened.
I have in this message already recommended the application of withholding to
dividends and interest and revisions to halt the abuses of expense accounts. These
measures will improve taxpayer compliance and raise the regard of taxpayers for
the fairness of our system. In addition, I propose three further measures to
improve the tax enforcement machinery.
1. Taxpayer account numbers.—The Internal Revenue Service has begun the
installation of automatic data processing equipment to improve administration of
the growing job of tax collection and enforcement. A system of identifying
taxpayer account numbers, which would make possible the bringing together of
all tax data for any one particular taxpayer, is an essential part of such an improved
collection and enforcement program.
For this purpose, social security numbers would be used by taxpayers already
having them. The small minority currently without such numbers would be
assigned numbers which these persons could later use as well for social security
purposes if needed. The numbers would be entered on tax returns, information
returns, and related documents.
I recommend that legislation be enacted to authorize the use of taxpayer account
numbers beginning January 1, 1962, to identify taxpayer accounts throughout the
processing and recordkeeping operations of the Internal Revenue Service.
2. Increased audit coverage.—The examination of tax returns is the essence of
the enforcement process. The number of examining personnel of the Internal
Revenue Service, however, has been consistently inadequate to cope with the audit
workload. Consequently, it has been unable to audit carefully many of the returns
which should be so examined. Anticipated growth in our population will, of
course, increase this enforcement problem.
Related to broadened tax audit is the criminal enforcement program of the
Revenue Service. Here, the guiding principle is the creation of a deterrent to
tax evasion and to maintain or, if possible, increase voluntary comphance with all
taxing statutes. This means placing an appropriate degree of investigative
emphasis on all types of tax violations, in all geographical areas, and identifying
violations of substance in all income brackets regardless of occupation, business,
or profession.
Within this framework of a balanced enforcement effort, the Service is placing
special investigative emphasis on returns filed by persons receiving income from
illegal sources. I have directed all Federal law enforcement agencies to cooperate
fully with the Attorney General in a drive against organized crime, and to utilize
their resources to the maximum extent in conducting investigations of individuals
engaged in criminal activity on a major scale. With the foregoing in mind, I
have directed the Secretary of the Treasury to provide through the Internal
Revenue Service a maximum effort in this field.
To fulfill these requirements for improved audits, enforcement, and anticrime
investigation, it is essential that the Service be provided additional resources
which will pay their own cost many times over. In furthering the Service's longrange plans, the prior administration asked additional appropriation of $27.4
million to hire about 3,500 additional personnel during fiscal 1962, including
provisions for the necessary increases in space and modern equipment vital to the
efficient operation of the Service. To meet the commitments described above,
this administration reviewed these proposals and recommended that tbey be
increased by another $7 mihion and 765 additional personnel to expedite the
expansion and criminal enforcement programs. The pending alternative of only




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1961 REPORT OF THE SECRETARY OF THE TREASURY

1,995 additional personnel, or less than one-half of the number requested, this
administration would consider little more than the additional employees
needed each year during the 1960's just to keep up with the estimated growth in
number and complexity of returns filed. Thus I must again strongly urge the
Congress to give its full support to my original request. These increases will
safeguard the long-term adequacy of the Nation's traditional voluntary compliance
system and, at the same time, return the added appropriations several times over
in added revenue.
3. Inventory reporting.—It is increasingly apparent that the manipulation of
inventories has become a frequent method of avoiding taxes. Current laws and
regulations generally permit the use of inventory methods which are acceptable in
recognized accounting practice. Deviations from these methods, which are not
always easy to detect during examination of tax returns, can often lead to complete nonpayment of taxes until the inventories are liquidated; and, for some taxpayers, this represents permanent tax reduction. The understating of the valuation of inventories is the device most frequently used.
I have directed the Internal Revenue Service to give increasing attention to this
area of tax avoidance, through a stepped-up emphasis on both the verification of
the amounts reported as inventories and an examination of methods used in
arriving at their reported valuation.
VI. Tax rate extension
As recommended by my predecessor, it is again necessary that Congress enact
an extension of present corporation income and excise tax rates otherwise scheduled
for reduction or termination on July 1, 1961. Such extension has been adopted
by the Congress on a number of previous occasions, and our present revenue
requirements make such extension absolutely necessary again this year.
In the absence of such legislation, the corporate tax rate would be decreased 5
percentage points, from 52 percent to 47 percent, excise tax rates on distilled
spirits, beer, wines, cigarettes, passenger automobiles, automobile parts and accessories, and the transportation of persons would also decline; and the excise tax on
general telephone service would expire. We cannot afford the loss of these revenues
at this time.
VII. Aviation fuel
The last item on the agenda relates to aviation fuel. The two previous administrations have urged that civil aviation, a mature and growing industry, be required to pay a fair share of the costs of operating and improving the Federal
airways system. The rapidly mounting costs of these essential services to air
transportation makes the imposition of user charges more imperative now than
ever before. The most efficient method for recovering a portion of these costs
equitably from the airway users is through a tax on aviation fuel. Present law
provides for a net tax of 2 cents a gallon on aviation gasoline but no tax on jet
fuel. The freedom from tax on jet fuel is inequitable and is resulting in substantial
revenue losses due to the transition to jet power and the resulting decline
in gasoline consumption.
My predecessor recommended a flat 4H-cent tax for both aviation gasoline and
jet fuels. Such a request, however, appears to be unrealistic in view of the current
financial condition of the airline industry.
Therefore, I recommend—
Extending the present net 2-cent rate on aviation gasoline to jet fuels;
Holding this uniform rate covering both types of fuel at the 2-cent level
for fiscal 1962; and
Providing for annual increments in this rate of one-half cent after fiscal
year 1962 until the portion of the cost of the airways properly allocable to
civil aviation is substantially recovered by this tax.
The immediate increase in revenue from this proposal is modest in comparison
with anticipated airways costs; and the annual gradation of further increases is
intended to moderate the impact of the tax on the air carrier industry. Should
future economic or other developments warrant, a more rapid increase in the fuel
tax will be recommended. The decline from the revenues estimated by my predecessor is not large, and will be met by the reforms previously proposed. I repeat
my earlier recommendation that, consistent with the user charge principle, reve-




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313

nues from the aviation fuels tax be retained in the general fund rather than
diverted to the highway trust fund.
Conclusion
The legislation recommended in this message offers a first step toward the
broader objective of tax reform. The immediate need is for encouraging economic growth through modernization and capital expansion, and to remove tax
preferences for foreign investment which are no longer needed and which impair
our balance-of-payments position. A beginning is made also toward removing
some of the more glaring defects in the tax structure. The revenue gain in these
proposals will offset the revenue cost of the investment credit. Finally, certain
rate extensions are needed to maintain the revenue potential of our fiscal system.
These items need to be done now; but they are a first step only. They will be
followed next year by a second set of proposals, aimed at thorough income tax reform. Their purpose will be to broaden and unify the income tax base, and to
review the entire rate structure in the light of these revisions. Let us join in solving
these immediate problems in the coming months, and then join in further action
to strengthen the foundations of our revenue system.
JOHN F . KENNEDY.
T H E WHITE HOUSE, April 20, 1961.

EXHIBIT 13.—Statement by Secretary ofthe Treasury Dillon, May 3, 1961, before
the House Committee on Ways and Means on the President's tax program

The central objectives of the President's current tax program are:
First, to encourage modernization and expansion of American
industry;
Second, to remove tax advantages no longer justified that are now
enjoyed by some American firms with investments overseas;
Third, to correct certain evident flaws in our income tax structure;
Fourth, to extend present corporation income and excise tax rates
SO as to maintain needed revenues during the coming years; and
Fifth, to improve important aspects of tax administration.
This program will bring substantial gains to the American economy.
Its prompt enactment is urgently needed to stimulate the gathering
forces of economic recovery, to create new jobs, to strengthen the
competitive position of American enterprise, and to reduce our balanceof-payments deficit.
The program will also take us an important first step toward our
longer run objectives of tax reform, which are to adapt our tax system
to the requirements of a dynamically expanding economy, to provide
for a broader and more uniform tax base, and, as a consequence, to
permit reconsideration of the entire rate and bracket structure.
I.

T A X INCENTIVES FOR MODERNIZATION AND EXPANSION

The President's message urges that ''modernization and expansion
of the Nation's productive plant and equipment are essential to raise
productivity, to accelerate economic growth, and to strengthen our
competitive position in world markets." For this purpose, he proposes
that an investment credit be provided under the income tax. This
credit offers the most powerful and eflicient type of tax incentive.
WHY WE NEED A TAX INCENTIVE

As we look back over the past century we see that our record of
economic growth has been unmatched anywhere in the world. But




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1961 REPORT OF THE SECRETARY OF THE TREASURY

of late we have fallen behind. From a historic growth rate of 3
percent per annum in gross national product (1909-56, in constant
prices), we have fallen to 2 percent in the latter part of the fifties.
In the last 5 years Western Europe has grown at double or triple our
recent rate and Japan has grown even faster. While there is some
debate as to the precise annual growth rate of the Soviet economy,
CIA estimates that their G N P grew at a rate of 7 percent in the fifties.
Clearly, we must improve our performance; otherwise, we cannot
maintain our national security, we cannot maintain our position of
leadership in the eyes of the world and we cannot achieve our national
aspirations. The pressing task before us, then, is to restore the vigor
of our economy and to return to our traditionally high rate of economic
expansion and growth. I am confident this can be accomplished.
But it will require a major effort by all of us.
I have been impressed during recent travels abroad by the great
progress our friends overseas have made in reconstructing their economies since World War I I and by the highly modern and efficient
plants they now have at their disposal. We can take justifiable pride
in our contribution to their recovery, for all of us stand to gain from
economic progress anywhere in the free world. But we must recognize that our friends are once again our vigorous competitors. And
we cannot overlook the challenge which their competition represents
to our economy.
Obviously, we cannot hope to meet this challenge with aging and
obsolescent plant and equipment. The average age of our plant
today is 24 years. While this is an improvement over the immediate
postwar years, our plant is much older than during the twenties.
Much more serious is the fact that the average age of our business
machinery and equipment has been rising over the past decade. I t
now averages more than 9 years, and from 1954 to 1959, the stock of
equipment over 10 years old rose by 50 percent. While no comparable figures are available for Western Europe, all the information
we do have indicates that the plant and equipment of our friends and
competitors are considerably younger than ours.
Although this difference reflects the rebuilding of the shattered
European economies, I think it important to emphasize that it was
due in good part to the vigorous policies of the European governments.
Tax incentives for investment played a significant role, including accelerated depreciation, initial allowances, and investment credits.
Accelerated depreciation now provides for twice the straight-line rate
under the double declining balance method in West Germany for
equipment only and in Canada for plant and equipment—as we also
do in the United States for both plant and equipment. I t provides
for 2K times the straight-line rate in France. The United Kingdom
permits special depreciation deductions from income of 5 percent of
the cost of plant in the first year, and 10 percent in the case of machinery, witb the balance depreciated under normal procedures concurrently. Holland permits 33 K percent of the cost of machinery to
be deducted over the first 4 years (for buildings, 5)^ years), while
Italy permits 40 percent over the same period, and in both cases the
balance depreciated concurrently. The most liberal provisions are
found in Sweden, where the entire cost of equipment may be written
oflF in 5 years. Three Western European countries provide for de-




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315

ductions from income of special investment allowances above cost,
which are similar to the technique we are now recommending. These
include a 10 percent allowance over 2 years in Holland, an allowance
of 10 percent on plant and 20 percent on equipment ia the United
Kingdom, and in Belgium, a 30 percent allowance spread over 3 years
on expenditures in excess of depreciation and proceeds from sale of
depreciable assets.
All of our citizens will benefit from modernization of our industry.
A basic fact of economic life is that modernization and expansion are
essential to higher productivity. .Rising productivity will provide us
with a rising level of per capita income, with resultant and widely
shared benefits in the form of rising real wages and rising investment
incomes. Rising productivity will also permit us to hold prices down.
But rapid economic change is not without cost. Progress alters
established modes of production and creates hardships of transition.
As noted in the President's message, this imposes serious responsibilities on Government to facilitate readjustment and spread these hardships equitably.
A most important contribution can be made by maintaining a high
level of employment and capacity utilization. The fruits of modernization and capital expansion are increasingly realized as fuller use is
made of all our productive resources. Moreover, the higher level of
capital formation which will be induced by our proposed investment
credit, will generate added demand, which is much needed at this
time to raise our overall economic activity. The resultant increase
in jobs is estimated in the President's message at about 500,000.
The investment credit is needed this year to stimulate modernization
of our plant so that we can secure a higher rate of growth, create jobs
and stabilize the dollar both at home and abroad. There is not a
moment to lose.
PROPOSED

METHOD

OF INVESTMENT

STIMULUS

The tax credit provides the most powerful stimulant at the lowest
cost in revenues for a given incentive effect. The investment credit,
while new to tax practice in the United States, is not a novel invention
of this administration. As I noted earlier, similar approaches are
found in the United Kingdom, the Netherlands, and Belgium. The
proposed investment credit follows their general approach but is
adapted to the needs of our own economy.
We propose, therefore, that the investor be given a credit against
tax equal to 15 percent of eligible investment expenditures in excess
of depreciation allowance; and in addition that he be given a credit of
6 percent of investment between 50 and 100 percent of depreciation.
As a floor, in lieu of these credits, a credit would be provided of 10
percent on the first $5,000 of investment, regardless of whether it
was more or less than depreciation. As an upper limit, the credit
would not be allowed to exceed 30 percent of tax liability, but a 5-year
carryover of unused tax credit would be provided. The credit would
apply to investment expenditures made after January 1 of this year
and would be available to individually owned firms as well as to corporations. I t would be separate from and in addition to subsequent
depreciation of the asset under existing depreciation rules.
614359—f02

21




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1961 REPORT OF THE SECRETARY OF THE TREASURY

Let me illustrate the method of computing the credit. Suppose a
firm has depreciation deductions of $100,000. If it spends $150,000
on new plant and equipment or $50,000 in excess of its depreciation,
its credit would amount to 15 percent on the $50,000 excess or $7,500
plus 6 percent or $3,000 on the $50,000 expenditures between 50 and
100 percent of depreciation. This would give it a total credit of
$10,500. If the firm spent $100,000, it would not qualify for the 15
percent credit, but would receive the 6 percent credit or $3,000 on
the $50,000 expenditures between 50 and 100 percent of depreciation.
If the firm spent less than $50,000, it would qualify for neither the
6 percent nor the 15 percent credit, but would have a minimum credit
of 10 percent on the first $5,000 of its investments.
The 15 percent credit is very substantial. I t is the equivalent of
a deduction of 29 percent of the cost of an asset for a corporation
subject to the 52 percent tax rate; a deduction of 50 percent of cost
for small corporations subject to the 30 percent tax rate; and a deduction of 75 percent for an individually owned firm subject to the first
bracket rate under the personal income tax. As noted later, it is
largely because of this advantage to the small firm that we favor the
credit over the deduction method.
The details of the proposed investment credit are set forth in the
detailed explanation which has just been submitted to you. As
shown there, appropriate provisions for averaging would be made to
avoid undesirable bunching of investment and inequities between
firms. The method would consist of carrying over as an addition to
depreciation in future years the excess of current-year depreciation
over current-year investment. This carryover would be for a 5-year
period. Thus, firms would have to offset current depreciation plus
cumulated deficiencies in investment over a 5-year period starting
with 1961.
In order to obtain the maximum contribution to modernization and
capital expansion, eligible investment expenditures would be limited
to expenditures on new plant and equipment, and to assets with a
hfe of 6 years or more. Investment in plant and equipment located
outside the United States would be excluded as would be investrDen4—
by public utilities, other than transportation, and investment in
residential construction, including hotels and apartment buildings.
As stated in the President's message, the credit should become a useful
and continuous part of our tax structure. While it would be subject
to periodic review, it is not intended as a temporary measure. The
estimated revenue cost of the credit would be $1.7 billion per annum.
ADVANTAGES OF INVESTMENT CREDIT

As stated in the President's message:
The proposed credit is designed to give the greatest inducement to investment
for the revenue loss involved.

The intent is to stimulate investment, not to give general relief to
one particular group of taxpayers. For this purpose, the credit is
superior to certain alternative measures involving equal revenue loss,
such as a corresponding cut in the rate of corporation tax, or a corresponding allowance for more rapid depreciation on new assets.




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317

The proposed credit is altogether superior to a general cut in the
rate of corporation tax. The benefits from a cut in the corporate rate
would be received by all companies, whether they invested or not.
Our purpose is to stimulate new investment, not to give general tax
reduction. Therefore, we reject this approach.
A speedup in depreciation on new assets, like the investment
credit, is directly aimed at new investment. However, the investment credit is a more potent stimulus. It goes markedly further in
increasing the rate of return on new investment for the same revenue
loss. Where the investment credit results in outright tax reduction
over and above present depreciation allowances, a speedup in depreciation only postpones, for any particular asset, the due date for the
investor's tax liability on the earnings from this asset. This tax
postponement raises the rate of return, to be sure, but the gain is very
much less than under the credit. Consider a 20-year asset which
yields 10 percent after tax using straight-line depreciation or about
11 percent using double-declining-balance depreciation. The 15 percent credit would raise its rate of return to nearly 14 percent—or by
27 percent, assuming use of the double-declining-balance method of
depreciation. The percentage gain in yield would be even greater for
a lower yielding asset or a shorter lived asset. To get approximately
the same effect for the above 20-year asset, over 50 percent of additional depreciation in the first year (applied to investment in excess of
depreciation) would be necessary, and the initial revenue cost would
be more than twice as great. The revenue loss under the depreciation
approach would remain higher, even if the total revenue loss over a
period of, say, 10 years is considered. Therefore, for any given cost
in revenue to the Treasury over a substantial period, the increase in
rate of return, and hence the stimulus to investment, would be much
greater under the credit approach.
This conclusion may seem surprising. While the credit clearly
involves a permanent revenue loss, it is frequently said that the
speedup of depreciation involves no permanent revenue loss to the
Treasury but merely a tax postponement. This is true for revenues
from earnings on any particular asset, but it is wrong with regard to
effects on the Treasury's total revenue over time. Assuming a constant stream of investment, the revenue loss from accelerated depreciation is also permanent. While the annual net revenue loss from a
speedup in depreciation declines as postponed taxpajnnents come due
in later years, the earlier losses are never recouped.
Since the net revenue loss from accelerated depreciation declines
over the years while that from the credit remains constant (I still
refer to the assumed case of constant investment), it follows that the
advantage of the credit over accelerated depreciation, given equal
revenue cost, is greater if a fairly short period is considered. However, as I have just stated, the credit would still remain superior—
more effective in raising profitability for a given revenue loss—for a
period of at least 10 years. And if investment should constantly
grow, as is more likely to be the case, long-run comparisons become
even more favorable to the investment credit as the revenue cost of
accelerated depreciation falls off more slowly with growing investment
than with constant investment.




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1961 REPORT OF THE SECRETARY OF THE TREASURY

Not only is the investment credit superior in raising profitability,
it has other advantages as well. In the first place, it is a tax offset,
not a deduction from income. The credit will not be booked in
corporate records as a cost of operation as would increased writeoffs
under accelerated depreciation. Thus, the credit avoids distortion
of the costs on which a firm bases its pricing and other business
decisions. Since one of our major goals is to hold the price line so as
to strengthen the dollar, this advantage of the credit is of very great
significance.
In the second place, the investment credit does not confuse the
problem of stimulating investment with that of properly defining
taxable income. Depreciation constitutes a major cost in arriving
at taxable income. The amount deducted depends on the method
of depreciation and the depreciable lives of the assets, and both of
these are subject to differences of opinion and debate. Some believe
that present procedures inevitably produce inadequate amounts of
depreciation by failing realistically to measure the amount of asset
cost used up in any current period. This question is now under
intensive study in the Treasury in connection with next year's tax
recommendations, and it is as yet too early to anticipate what our
findings will be. In any event, the investment credit here proposed
will in no way prejudice the case for such depreciation reform as may
prove to be desirable to improve income measurement.
INCENTIVE FOR ADDITIONAL INVESTMENT

I repeat that the purpose of the investment credit is not to provide
general tax reduction for recipients of profit income. Rather, it is
to stimulate investment in the most efficient manner. The credit,
therefore, should be focused on investment which would not have
been undertaken without this inducement, and which will be most
responsive to the stimulus which it provides. A higher credit on
such strategic investment will stimulate modernization and expansion
more than will a credit granted to all new investment at a lower rate.
Holding the revenue cost constant, the proposed credit of 6 and 15
percent may be compared with a credit to all new investment of 7
percent. The proposed credit is superior because it gives a greater
stimulus to the undertaking of investment that was not previously
planned, and is less likely to give a credit for investment that would
have been undertaken in any event.
The strategic area for investment stimulus cannot be determined
precisely investor by investor, and must necessarily be delimited by
some general standard. In our view it may best be defined as investment in excess of depreciation allowances. This threshold marks the
dividing line between a firm's traditional level of investment—
depreciation being, after all, but an indicator of the firm's average
level of investment in the past—and a more ambitious policy of
modernization and expansion. Also, it marks the dividing line between the level of investment which can be financed from deprecia-




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319

tion, funds accumulated free of income tax, and that which requires
other sources for finance, either external or internal.
This type of credit would focus the incentive on the most responsive
area of investment. At the same time, it would bring benefits to a
broad range of American business. The Treasury's recent depreciation survey indicates that nearly 80 percent of small businesses and
about 85 percent of large corporations made investment expenditures
which averaged in excess of depreciation over the 6-year period
1954-59. In any particular year, the fraction of qualifying firms
would be different. In the current year 1961 it is estimated^ that the
expenditures of 94 percent of all business firms will be substantially
covered by the minimum credit. Of the remaining 6 percent of firms
which account for the greater part of our national production over
60 percent are expected to be eligible for the 15 percent credit and an
additional 25 percent for the 6 percent credit. Thus over S5 percent
of these larger firms will benefit this year from our proposal.
While it is desirable to have the incentive within reach of a large
number of firms, breadth of coverage is not the only criterion. The
purpose, as noted before, is not to provide general tax reduction for
the recipients of profit income. The purpose is to encourage modernization and expansion. I t is only right, therefore, that firms which
respond less should benefit less. The greatest benefit should go to
the most favorable investment response.
The proposed stimulus will be of particular advantage to new and
growing firms engaged in a high rate of capital expansion. I t will
also be of particular advantage to small firms whose investment is
largely covered by the 10 percent credit. Moreover, small firms will
benefit from the proposal to express the investment allowance as a
credit against tax, rather than as a deduction from taxable income.
Under the credit approach the tax saving per dollar of eligible investment is the same for small and large firms. Under a deduction approach the tax reduction would be greater for large firms which are
subject to a higher rate of tax.
RELATION TO NEXT Y E A R ' S TAX

REVISION

Before leaving this topic, let me relate the proposed investment
credit to our longer run objectives of tax reform. In important part
these will center on provision for a broader and more uniform base
but, as I have noted above, attention must also be given to the requirements of a growing economy. As the President states in his
message:
Some departures from uniformity are needed to promote desirable social or
economic objectives of overriding importance which can be achieved most effectively through the tax mechanism.
1 On the basis of the Department of Commerce and SEC survey of anticipated expenditures on plant
and equipment, by projecting the depreciation deductions shown in tax returns in most recent years.




320

1961 REPORT OF THE SECRETARY OF THE TREASURY

As indicated by the President, such is clearly the case with the proposed investment credit.
The importance of stimulating modernization and capital expansion
and of doing so right now is beyond doubt. Also, it is clear that tax
policy can make a vitally needed contribution to this end. The
proposed credit offers the best approach and achieves this incentive
in a powerful and efficient way. Just how powerful this incentive is
can be measured by the equivalence in effect on profitability of the
15 percent credit to a 50 percent initial writeoff. The tax credit,
at the same time, is least likely to waste itself in benefits which do
not serve the purpose of inducing modernization and expansion and
is directed most squarely to those who are prepared to respond to an
incentive.
II.

EQUAL TAXATION OF FOREIGN INVESTMENT INCOME

The President in his tax message has cited the strains in our balanceof-payments position as one of the factors which have led us to reexamine our tax treatment of foreign income. Earlier, in his balanceof-payments message, the President made it clear that our concern
relates to the preferential treatment of foreign investment income,
tax treatment that has favored U.S. private investment abroad compared with investment in our own country. There is no thought of
penalizing private investment abroad which rests upon genuine
production or market advantages.
ROLE O F T A X DEFERRAL

The most important feature of our tax system giving preferential
treatment to U.S. investment abroad is the privilege of deferring
U.S. income tax on the earnings derived through foreign subsidiaries
until those earnings are distributed as dividends. The lower the
rate of foreign income tax, the more significant is this privilege of tax
deferral.
I have here a table showing in the first line of figures the statutory
income tax rates imposed by various industriaUzed countries in
Europe. It shows a range of rates from 28,^ percent in Belgium to
31 percent in Italy, 51 percent in Germany and 53.5 percent in the
United Kingdom. If one were to take into account variations in the
methods of computing taxable income, the range of effective rates
would be somewhat lower, but similar adjustments would have to be
made for U.S. tax rates, and for present purposes the statutory rates
would seem to be the appropriate ones to use. As you can see, in
most of these countries, and particularly those countries which are
our more important competitors, the tax rates are substantially at
the same level as the U.S. corporation income tax. Tax deferral with
respect to profits earned in these countries does not, of course, have
any material effect on U.vS.-owned firms.




321

EXHIBITS

Comparison of tax rates applicable to income derived in selected foreign countries
under alternative assumptions concerning form of organization
Assumptions

Belgium

Denmark

France

Germany

Italy

Netherlands S w e d e n

United
Kingdom

1. Corporation organized b y U . S .
p a r e n t in c o u n t r y w h e r e all operations are conducted, a n d all
profits are r e t a i n e d b y subsidi- Percen Percent Percent Percen Percent Percen Percent Percent
ary
__-_-.
_ .
8 53.5
M4.0
50.0
128.5
3 51.0 4 31.0
40
47
2. Corporation organized in c o u n t r y
where m a n u f a c t u r i n g is cond u c t e d as a s u b s i d i a r y of a U . S . o w n e d Swiss p a r e n t ; p a r e n t
m a k e s sales a n d derives half t h e
total profits, a n d receives divi29.1
31.5
32.9
d e n d s from t b e s u b s i d i a r y e
28.5
22.0
32.0
30
28

1 Taxes paid in the previous year are deductible in every case, thus lowering the effective tax burden.
Assuming 100 percent distributions each year, this latter adjustment reduces the 40 percent nominal Belgian tax rate to 28.5 percent.
2 Because of a special deduction measured by a percentage of capital stock outstanding and allowed to
all Danish corporations, the rate may be reduced as low as 22 percent. The average rate for most corporations is 36 percent.
3 The German corporate rate of 51 percent is reduced to approximately 22 percent if all profits are distributed. This tax plus the creditable portion of the capital tax would amount to a total combined rate
of approximately 37 percent.
* Includes some allowance for excess profits tax imposed at the rate of 15 percent on profits in excess of 6
percent of capital plus certain allowable reserves.
6 Taldng into account the increase announced in the 1961-62 budget message.
fl The Swiss Federal tax rate is 8 percent. In addition, income taxes are also imposed in varying degrees
by the cantons. However, substantial tax concessions may be granted by the cantons. In the canton of
Geneva, for instance, the granting of such concessions would result in an aggregate tax rate of 15 percent,
or 13 percent taking into account the fact that taxes paid in the preceding year are allowed as a deduction.
Foreign source dividends are not taxable in Switzerland.

However, to the extent that business operations are conducted
in countries with lower tax rates, there is considerable leeway for
deferring U.S. tax. With a foreign tax rate of 28}^ percent, for example,
a company can defer U.S. tax payments equal to 23)^ percent of total
pretax profits. I t thus can through deferral retain nearly an extra
dollar out of every four that it earns.
These statutory rates, however, do not give adequate weight to
the variety of arrangements that have been made by American firms
in their foreign operations which may bring down rather substantially
the rates of tax imposed on income from their foreign operations.
Thus, an American company operating in West Germany through a
German subsidiary will be subject to tax there at the West German
income tax rate of 51 percent, and hence it cannot benefit significantly
from U.S. tax deferral. However, to the extent that the profits of the
German subsidiary can be diverted from the sweep of the German tax
system, a lower tax on profits can be attained. And this is precisely
what is achieved through a proliferation of corporate entities in tax
haven countries, like Switzerland.
The tax haven companies are given the right to license patents
developed by their parent organizations or sister corporations.
They supply the services of technicians of their corporate affiliates
to firms in various other countries. They acquire the distribution
rights of products manufactured by their affiliates. The transfer
of these various activities to tax haven entities means a transfer of




322

1961 REPORT OF THE SECRETARY OF THE TREASURY

income to them. Since the income taxes in these tax haven countries
are very low or nonexistent with respect to income derived outside
their own borders, the result of these arrangements is to bring
about a substantial reduction in tax on the total income derived
from the foreign operations. Switzerland, for example, has a federal
income tax ranging from 3 to 8 percent. While local income taxes
vary widely, there are opportunities for the negotiation of tax liability
to the cantons. With U.S. tax deferral operating simultaneously,
tax payments overall can be and often are very substantially reduced.
If $100 of income of a German subsidiary can be segmented so
that $50 is attributed to the entity in Germany and $50 attributed
to a selling entity in Switzerland, half the profit would be subject to
the 51 percent German tax rate but the other half would be subject
to a Swiss national tax of only 8 percent. The overall rate of tax
would thus be reduced to less than 30 percent. The table I last
referred to shows on the second line the aggregate income tax in cases
where manufacturing subsidiaries are organized in various European
countries but which effect their sales through a Swiss sales corporation
so that taxable profits are divided equally between the country of
manufacture and Switzerland. As a consequence of such arrangements, and taking into account withholding taxes on dividends
transferred from the manufacturing company to the Swiss sales
company, the resulting tax rates range from about 22 to 33 percent.
The reductions in tax that can be achieved through the use of tax
haven operations assume that the incomes attributed to the tax haven
companies are fair and reasonable. But the problem is compounded
by the fact that incomes are often allocated to tax haven companies
which are not economically justifiable. U.S. companies frequently
attribute a disproportionate share of profits to the trading, licensing,
and servicing companies established in tax haven countries—a
practice that is extremely difficult if not impossible for the Internal
Eevenue Service to police effectively.
This is not simply a question of allocating the profits of foreign
operations to tax haven countries. I t is a problem that significantly
affects U.S. taxation of domestic profits. The technique that is used
for diverting profits from one company to another among European
affiliates is also used to divert income from U.S. companies to foreign
affihates. Income that would normally be taxable by the United
States is thrown into tax haven companies with the object of obtaining
tax deferral. This is done, for example, by placing in a Swiss or
Panamanian corporation the activities of the export division of a
U.S. manufacturing enterprise. A very substantial volume of exports is required merely to offset the loss in foreign exchange which
the retention abroad of export profits entails.
The recent growth of U.S. subsidiaries in tax haven countries—
and Switzerland and Panama are but two examples—suggests that
their importance as a means of tax reduction and avoidance will
rapidly increase if the deferral privilege is continued. An examination of the public records in Switzerland alone indicates that there are




EXHIBITS

323

more than 500 firms there which can be identified as being owned by
U.S. interests. About 170 of these were created in the year ending
March 31, 1961. U.S. officials on the spot are of the opinion that
in addition to these firms there are a substantial number of other
U.S.-owned firms in Switzerland which cannot be readily identified as
such on the basis of the presently available data. Increasingly, U.S.
manufacturing subsidiaries operating elsewhere in Eui'ope are being
hnked to subsidiaries in the tax haven countries. Parenthetically, I
might note that the information returns filed by U.S. shareholders or
officers of foreign corporations indicate that there are only 92 U.S.owned corporations in Switzerland all told. There is httle doubt that
these information returns are inadequate and incomplete. The
tightened requirements for filing information returns on new foreign
corporations which were adopted by the Congress last year will
doubtless give us more accurate information in the future.
PROPOSAL REGARDING ADVANCED COUNTRIES AND TAX HAVEN
OPERATIONS

To avoid artificial encouragement to investment in other advanced
countries as compared with investment in the United States, we propose that American corporations be fully taxed each year on their
current share in the undistributed profits realized by subsidiary corporations organized in economically advanced countries. This change
in the method of taxation should be achieved over 2 years, with only
half of the profits aff'ected in 1962. Deferral of tax would also be
eliminated for individual shareholders controlling closely held foreign
corporations in the industrialized countries. The proposed change
will not alter the principle that companies may credit income taxes
paid abroad against U.S. income tax liabihty.
In view of the national objective of aiding the development of lessadvanced countries, we do not propose the same change in the tax
treatment of income from investments in less-developed countries.
Tax deferral will continue to apply with respect to operations in those
areas, except that we propose to eliminate deferral in the case of tax
haven companies even in the less industriahzed countries. For this
purpose, a tax. haven company would be defined generally as one
receiving more than 20 percent of its gross profit from sources outside
the country in which it is created.
This test would reach such typical tax haven activities as export
and import companies, licensing companies, and insurance companies.
However, the general test would be qualified so as not to affect manufacturing companies operating in less-developed regions which must
look to more than one country for their markets. Other possible
areas of exception may be considered in the light of forthcoming
testimony before this committee.
While it is difficult to estimate quantitatively by how much tax
deferral has contributed to the balance-of-payment deficit, it has
surely been a significant factor. Particularly when it is enhanced by




324

1961 REPORT OF THE SECRETARY OF THE TREASURY

the resort to tax havens, tax deferral has given artificial encouragement
to foreign investment and has acted as a deterrent to the repatriation
of dividend income. Deferral thus adversely affects our balance-ofpayments position by increasing payments and reducing receipts. For
the 4 years 1957 through 1960, the U.S. capital outflow to Western
European subsidiaries amounted to $1.7 billion, raising the total investment in these subsidiaries to $6.2 billion at the end of 1960.
Earnings from these subsidiaries in the same period were $2.4 billion,
of which $1.1 billion were reinvested abroad and $1.3 billion were
remitted to the United States in dividends. On balance, the outflow
for the 4-year period exceeded dividend remittances by $400 million.
Much the same picture apphes to Canada. The capital outflow in the
same 4 years amounted to $1.3 billion, bringing our investment there
to $9.3 billion. Earnings were $2.4 billion, but $1.3 billion were
reinvested and only $1.1 bilhon were remitted in dividends. Thus,
capital outflow exceeded dividend remittances by $200 million.
I t is true that deferral causes U.S. assets abroad to rise more rapidly
than they would otherwise, so that dividend remittances would also
tend to rise over a long span of years. But the time span is apt to
be very long. The attached chart shows how the tax deferral privilege can result in a slower remittance of earnings from investment in
a foreign subsidiary, as compared with a situation in which the deferral privilege did not exist. Suppose an investment of $1,000 in a
foreign subsidiary that yields 20 percent a year before taxes, and that
the foreign tax rate is 20 percent. Suppose also that the subsidiary
reinvests all of its after-tax earnings for 5 years; and then for the next
15 years reinvests half its profits and remits half its profits to the
United States as dividends.
Without the deferral privilege^ as the solid line shows, the company
would immediately begin to remit funds for U.S. tax payments on its
earnings.
With the deferral privilege, as the dotted hne shows, the company
reinvests the funds it would otherwise have remitted for U.S. taxpayments and it remits nothing for the first 5 years. The greater
amount of reinvestment results in a more rapid growth of its net
worth, and increases its earnings and remittances, once they begin.
Nevertheless, it will be 17 years before cumulative remittances to the
United States egual those that would have occurred if the deferral
privilege had not existed. On the chart this point is reached where
the curves cross.
Actually, this is an optimistic example since it assumes that with
the deferral privilege the subsidiary will begin remitting half of its
after-foreign-tax earnings from the sixth year on. In practice, the
existence of the deferral privilege may lead it to remit a considerably
lower portion of its profits and thus prolong further the time when
the two curves' cross.




EXHIBITS

325

""tnifiai investment $1,000; annuaI rats of earnings before taxes 20%; foreign tax
rate 20%; U.S. tax rate 50%. Reinvestment ofallafteMax earnings for first5years,
and reinvestment of half after-fax earnings for next 15years.

Today our situation is such that we must look first to the more
immediate balance-of-payments results. Last fall, as you know, our
balance-of-payments position led to a crisis which threatened the
stability of the dollar and therefore jeopardized the economic health
of the entire free world. Although returning confidence has given a
temporary reprieve, it is iinportant that we act to prevent a recurrence of last fairs situation. We must improve our balance-of-payments position. Eliminating the deferral privilege wiU help us to
do so.
It may be estimated, although very roughly, that the elimination of
the deferral privilege for subsidiaries in advanced countries and for tax
haven operations in all countries would improve our balance-of-payments position by as much as $390 million per annum. This estimate
includes the increase in remittances for U.S. taxpayments on foreign
earnings, as well as increased dividend remittances and a lower level
of capital outflow than would occur if the present privilege were continued.
I have heard it said that elimination of tax deferral such as we propose will not help our balance of payments. Some people even go so
far as to claim that it will injure our pa3mients position. In my
opinion this view is utterly erroneous. I would cite in support of my
opinion that of the responsible financial leaders of Europe. In midJanuary, during the height of our balance-of-payments difficulties, the
finance ministers of the six Common Market countries met and dis-




326

1961 REPORT OF THE SECRETARY OF THE TREASURY

cussed the U.S. balance-of-payments position. They were good
enough to give us the general tenor of their thinking. In particular,
the ministers informed us of their unanimous belief that the United
States would be justified in discontinuing the fiscal incentives which
encouraged the nonremittance of profits made in Europe. This viewpoint from countries which have an interest in attracting and keeping
U.S. investment is strong confirmation of our own judgment regarding the adverse impact of the deferral privilege on our balance of
payments.
While relief for the balance of payments is an important reason for
discontinuing tax deferral, it is not the only one. There exists, in
addition, an important issue of equity which has a significant bearing
on domestic employment and production, as well as an indirect bearing on our balance-of-payments position. With the present deferral
privilege, an American firm contemplating a new investment and finding cost and market conditions comparable at home and abroad is
impelled toward the investment opportunity overseas. This is so because it would thereafter be able to finance expansion on the basis of
an interest-free loan from the U.S. Treasury, repayable at the option
of the borrower. Tax deferral, after all, is just such a loan.
This issue of equity is sometimes presented in reverse; namely, that
the withdrawal of the deferral privilege would be unfair because it
would change the rules on which companies have already based major
investment decisions. This argument seems to me to be very questionable. During the postwar period the promotion of private foreign investment in both advanced and less-developed countries was in
the public interest. Times have changed, and the need to stimulate
investment in advanced countries no longer exists. Hence, there can
be no proper claim that preferential treatment should be continued
merely to perpetuate a private gain. This change, moreover, cannot
severely injure companies aheady abroad, for a change in the timing of
income tax liability will not normally turn a profit into a loss. At
most, it may slow the growth of companies abroad or make the financing of growth somewhat more expensive. To alleviate possible problems, our proposal would remove the tax deferral privilege in two
steps.
I t is sometimes contended that if U.S. firms are to compete successfully abroad they must enjoy as favorable a tax treatment as
their foreign competitors. I believe that this argument has been
overly stressed. A difference in tax rates, I said before, should not
handicap companies producing abroad, although it may slow the
rate of expansion. But even if this argument were fully valid, it
could not be a decisive objection to our proposal. As long as the tax
systems of various countries differ—and I venture to predict that
this will be the case for years to come—we must make a firm choice.
Either we tax the foreign income of U.S. companies at U.S. tax rates
and credit income taxes paid abroad, thereby eliminating the tax
factor in the U.S. investor's choice between domestic and foreign
investment; or we permit foreign income to be taxed at the rates
apphcable abroad, thereby removing the impact, if any, which tax
rate differences may have on the competitive position of the American
investor abroad. Both types of neutrality cannot be achieved at
once. I believe that reasons of tax equity as well as reasons of eco-




EXHIBITS

327

nomic policy clearly dictate that in the case of investment in other
industrialized countries we should give priority to tax neutrality in
the choice between investment here and investment abroad.
This does not mean that elimination of the deferral privilege
would end U.S. investment in foreign subsidiaries. In many cases,
foreign investment opportunities will remain more attractive although the same rates of tax apply to subsidiary earnings as to
income from a domestic business. Many U.S. subsidiaries in high
tax countries such as the United Kingdom and Germany have not
exploited tax haven opportunities and are therefore paying taxes
closely comparable to those in the United States. Yet these companies compete effectively. Curtailment of foreign investment which
can survive only under the shelter of preferential tax treatment can
only be in the U.S. interest and in the interest of the world economy.
I t will help domestic growth, strengthen our balance-of-payments
position, and (a matter in which I am not entirely disinterested) substantially increase tax receipts.
CREDITING OF FOREIGN TAX

The credit for foreign income taxes allowed a taxpayer under
existing law operates so as to grant an excessive allowance when
business activities are conducted abroad through a foreign subsidiary. When a foreign subsidiary pays income tax abroad, the
portion of its profits utilized for this purpose is, of course, not available
for distribution as a dividend to the parent. The foreign income tax
is, in effect, deducted from taxable profits. When the U.S. parent
company receives dividends from its subsidiary it is allowed a credit
for a proportionate part of the income tax paid by the subsidiary.
Thus both a deduction and a credit are allowed for the same income
tax. The result is to bring about a combined foreign and domestic
effective tax rate, m the optimum case, of about 45 percent instead
of the statutor}^ rate of 52 percent.
This may be clearer from the example shown on the attached table.
With a foreign income tax rate of 30 percent on the foreign subsidiary,
the combined effective tax rate is 45.4 percent instead of 52 percent.
The present method of computing the credit for foreign income tax
thus offers a substantial inducement to investment abroad through a
foreign subsidiary and produces serious tax discrimination against investment in the United States. The differential may be enlarged
even further if operations abroad are arranged through two foreign
subsidiaries.
To eliminate this unjustified tax advantage, it is proposed that a
taxpayer be required, as a condition for obtaining the credit, to include in taxable income his share of profits before foreign tax. The
resulting gain in our tax receipts on foreign earnings may be estimated
at $110 million a year.
SHARES IN FOREIGN INVESTMENT COMPANIES

Shareholders in domestic regulated investment companies are subject to tax currently on the earnings of the investment companies
because the earnings must be distributed currently if the companies




328

1961 REPORT OF THE SECRETARY OF THE TREASURY

are to be relieved of the corporate income tax. Foreign investment
companies whose shares are held by U.S. shareholders are not subject
to U.S. tax, except on income from U.S. sources. Hence, they may
accumulate earnings indefinitely. Moreover, when a shareholder receives his pro rata portion of such accumulated earnings by submitting
his shares to the company for redemption, he obtains capital gains
treatment on the income.
EXAMPLE
Computation of foreign tax credit for dividends from foreign subsidiary
Present law
Profits of subsidiary
Foreign tax
Dividend to U.S. parent
Plus "grossup" of foreign taxes
Tentative U.S. tax at 52 percent
Credit for foreign taxes paid by subsidiaryNet U.S. tax
Combined foreign and U.S. tax

Proposal

$100.00
30.00
70.00

36.40
21.00
15.40
45.40

$100
30
70
30
52
30
22
62

These foreign investment companies formed to attract U.S. shareholders are organized in localities where the companies themselves
are subject to little or no tax as in Canada or Bermuda.
We propose to eliminate this preferential treatment of investments
in foreign investment companies by requiring U.S. shareholders in
such companies to pay tax currently on their share of the income
derived by the foreign investment company. Since the SEC requires
such companies to report their earnings currently, there is no serious
administrative difficulty involved in making this change.
LIMITATION

OF EARNED

INCOME

EXCLUSION

UNDER

SECTION

911

Under existing law, an individual citizen of the United States who
qualifies as a foreign resident is granted tax exemption on his entire
earned income from outside the United States. In addition an
individual who goes abroad without establishing a foreign residence
and remains abroad for a period of 17 out of 18 consecutive months
is exempt with respect to his earned income up to $20,000 a year.
Available evidence indicates that there were approximately 50,000
American citizens who were living abroad in 1959 and who claimed
an aggregate exemption of more than $500 million for that year
under these two provisions. One individual excluded earned income
of almost a million dollars for 1 year. A number of others reported
excluded income of between $100,000 and $500,000, as the attached
table shows.




329

EXHIBITS

Individuals claiming tax exemption of earned income of $100,000 or more under sec.
911 on tax returns filed in calendar year 1960
Taxpayer identification no.

C-l
C-2
C-3C-4
.
.
C-5
C-6
C-7
C-8
. .
C-9
C-10
C-11
—
C-12
C-13
C-14.._.
C-15
- .
C-16
C-17
C-18
C-19
C-20
C-21.__
C-22
C-23
C-24.
C-25
C-26
C-27
C-28
C-29
C-30
C-31
C-32
C-33

Adjusted
gross hicome
reported

Country of residence
— Canada
Philippines
(1)

.

. .

- —

-

_

_.

England-_Australia
_
England
.
_
.
Mexico
Canada
__ _
Japan.__
Switzerland
. .
Venezuela
do
. .do
Switzerland
_
Venezuela. _
France
_
_
Switzerland
_
— Philippines..
do - Argentina
.
Venezuela
Lebanon.. . . . .
Ecuador
_
-.- Venezuela
. . .
Brazil
Philippiues..
Venezuela
Germany
Brazil.
Dominican Republic
Switzerland
England
Venezuela.
. . . .

$32,791
14,739
26,797
17, 651
64, 985
20,931
22,813
5,976
5,111
8,021
6,729
8,984
756
1,345
48,876
74, 586
122, 951
146,821
132
2,321
0
0
0
431
331
3,182
282
240
4,493
0
5,677
2,893
3,161

Amount of
income
excluded
$186,751
108,638
996,200
130,766
105, 707
217,500
583,087
136,700
122,260
160,000
107,000
107,367
184,171
155,360
119,551
115,523
156,000
265,640
111,870
217,121
161,083
151,167
122,307
153,078
449,803
131,950
129, 570
160, 450
144,833
150,059
117,556
162, 500
105,145

1 Not listed to avoid disclosure.
Source: U.S. Treasury Department, Internal Revenue Service.

I believe that it is an unsound policy for the U.S. Government
generally to subsidize through tax exemption those of its citizens who
wish to live abroad. This is especially so for individuals who establish
their residence abroad for tax purposes even though the nature of
their business does not require it. I t is manifestly unfair to other
taxpayers to continue these exemptions which also contribute to our
adverse balance-of-payments position. For these reasons, the President has recommended that the tax exemptions now accorded the
earned income of American citizens who are abroad be eliminated
entirely for those living in economically developed countries.
Here, again, the less-developed countries pose a different problem.
I t is in the public interest that Americans skilled in industry, education, medicine, and other professions be encouraged to go to these
countries and contribute to their economic development. I t is recommended therefore that the exemption for foreign residents be continued for those resident in these areas but only to the extent of $20,000
per year. The present exemption of $20,000 for those who remain
abroad for 17 out of 18 months would also be continued for those
individuals working in the less-developed countries.




330

1961 REPORT OF THE SECRETARY OF THE TREASURY
ESTATE TAX EXEMPTION FOR FOREIGN REAL ESTATE

The President recommended that the existing exemption of foreig-n
real estate from the Federal estate tax be eliminated. In recent years
this also has been a subject of abuse. Primarily because of this tax
feature, persons have been induced to make investments in foreign real
estate in countries which, due to their very low tax rates, could be
appropriately termed ''estate tax havens." Under legislation adopted
in 1951, credit is allowed for estate and inheritance taxes paid abroad,
and there is no justification for continuing the special exemption for
foreign real estate.
In addition to the changes that I have just discussed, there are
several other proposals of a relatively minor nature which are covered
in the technical statement.
SUMMARY

The foregoing set of proposals is designed to place the tax treatment
of foreign income on a more equal footing with that of domestic
income. These proposals are estimated to increase revenues by $275
million annually. Taken together these proposals may be expected
to improve our balance-of-payments position by as much as $525
million a year, of which about one-half would represent increased tax
receipts on foreign earnings. Therefore, enactment of these proposals
will mark a significant forward step in the battle to safeguard the
dollar. I t is essential that we win this battle and win it quickly.
Thus, these proposals have a special significance far higher than the
increase in tax receipts.
III.

CORRECTION OF OTHER STRUCTURAL D E F E C T S

We are currently examining the income tax structure, using recent
studies by congressional committees as well as materials developed by
the Treasury. Our objective is to develop a basic program of tax
reform. Studies of some parts of this program have been compl eted,
and in these areas the President has recommended action at this time.
Adoption of these recommendations mil improve the equity of the
tax structure and constitute an important first step toward tax reform. The President has directed the Treasury to continue with its
research and studies aimed at providing a broader and more uniform
tax base together with an appropriate rate structure. Additional
proposals to this end will be submitted next year. I turn now to the
President's recommendations for this year.
1. TAX W I T H H E L D O N DIVIDEND AND INTEREST INCOME

We must face the serious and continuing problem of numerous
individuals failing to report dividend and interest income for tax purposes. This results in substantial revenue losses to the Government
and is unfair to those who pay all of their taxes.
General tax compliance with respect to income from salaries and
wages has been largely and satisfactorily achieved by a system of
tax withholding. This system has been of help not only to the Government but also to the wage earner in paying his taxes in a gradual
and systematic manner. A similar system should be extended to




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331

dividend and interest income to assure and facilitate tax compliance.
This matter has been considered at various times by the Congress
and withholding provisions were passed by the House of Representatives in 1942, 1950, and 1951. I believe that we have now developed
a plan which overcomes the objections which have been raised previously.
Legislative action is clearly needed. The failure to report dividends
and interest income cannot be dealt with adequately through education programs.
In 1959 the Treasury Department launched an extensive educational
program to remind taxpayers to report their full interest and dividend
income on their 1959 income tax returns which were to be filed in
early 1960. Payers of interest and dividends cooperated fully with
the Treasury, and tens of millions of reminder notices were distributed
by them. Publicity campaigns were organized using newspapers,
magazines, radio, and television. The cooperative eff'ort of corporations, banks, the stock exchanges, communications media, and others
in the educational campaign has been greatly appreciated by the
Department.
Unfortunately, the evidence indicates that despite these substantial efforts, there has been at best only a slight improvement.
While compared to 1958 returns, a larger number of taxpayers reported this type of income in the 1959 returns and while the overall
percentages of reported interest and dividends improved slightly,
the absolute amounts of unreported interest and dividends actually
increased because of the larger overall payments of interest and
dividend income in 1959. The most recent Treasury study indicates
that for 1959 income, taxable individuals failed to report an estimated
$834 million of dividends and $1,995 million of interest payments,
or a total of $2,829 million. By including the unreported interest
and dividend incomes of those filing nontaxable returns, the total
nonreporting gap for 1959 is increased to $3,777 million.
It is further estimated that 11 percent of nonreported dividends
were received by taxpayers with incomes below $5,000, 18 percent by
those with incomes between $5,000 and $10,000, and 71 percent by
those with incomes in excess of $10,000. The corresponding percentages for nonreported interest income were 29, 42, and 29 percent.
The failure to report 1959 interest and dividends is estimated to
have cost the Government $864 million.
The problem cannot be solved by increased audit and enforcement
procedures. Nonreporting of interest and dividends is a mass compliance problem. Some of the nonreporting is deliberate tax evasion,
but much of it is due to inadvertence, forgetfulness, and failure to
keep records, particularly by taxpayers who receive a small portion
of their incomes from such sources. Obviously, it is impracticable
and inefficient to rely only on information documents combined with
audit procedures to verify and to follow up on millions of interest and
dividend transactions. The Government, at best, can be expected
to recover at a high cost only a small proportion of the unreported
tax by this method. An inordinate amount of time and money would
have to be spent in the attempt to close the gap, and little would be
gained by it.
014359-^62

22




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1961 REPORT OF THE SECRETARY OF THE TREASURY

To meet this need for compliance, we recommend instead that a
20 percent withholding rate be apphed to interest and dividends.
Withholding would be applicable to dividends paid by domestic
corporations, interest paid on deposits in savings institutions, such as
banks, savings and loan associations, and building and loan associations, interest paid on U.S. Government and corporate securities other
than short-term discount obligations, and to patronage dividends
allocated by cooperatives.
The withholding system we recommend would not impose any
substantial burden on the payers of dividends and interest. In fact,
there would be little additional work as compared to their present
operations. The withholding agent would be asked to withhold on a
simple flat rate basis without exemptions and he would not be required
to prepare withholding statements to be sent to recipients. Remittance to the Internal Revenue Service of amounts withheld would be
by lump sum, without requiring the listing of individual payees as is
required under wage withholding.
Exemption from withholding of certain payees such as exempt
organizations and nontaxable individuals would increase payer
burdens. Across-the-board withholding with no exemptions is therefore recommended to make the task of payers as simple and as inexpensive as possible. Provision would be made in turn to prevent
hardship due to overwithholding in the case of tax-exempt organizations and individuals not subject to tax. Tax-exempt organizations,
such as pension trusts, charitable foundations, and educational institutions, would be allowed to offset currently the amounts withheld
from their interest and dividends against the amounts they withhold
from their employees for income and social security tax purposes.
Where these credits would be insufficient to provide a full offset,
quarterly refunds would be provided. In order to simplify the refunding of small amounts withheld from nontaxable minors, provision
would be made for a parent of a dependent minor to claim credit on
the parent's annual tax return for amounts withheld from the minor,
if the parent so wishes. Individuals not subject to tax (other than
minors) would be allowed to claim the refunds on a quarterly basis.
These refunds can be paid promptly. Although withholding statements would not be used, it is not expected that their absence would
result in baseless claims for refunds. An excessive claim for refund
is a fraudulent act; this fortunately is not commonplace among our
taxpayers. Moreover, the Service would institute a special audit
enforcement program to verify the incomes reported by individuals
claiming refunds. Spot checks of refunds would be made b}^ having
payers confirm the reported incomes on those claims.
The adoption of this practicable system of withholding on dividends
and most forms of interest would, on the basis of 1959 results, increase
revenues by an estimated $613 million, the bulk of the estimated revenue loss. For most dividend and interest recipients, withholding
would cover the bulk of their tax liabilities on such income. We would
then be in a position to concentrate enforcement efforts on inadequate
tax compliance among higher bracket taxpayers to insure collection of
the total amounts of tax properly due. The out-of-pocket cost to the
Government to recoup the $613 million by withholding is estimated
to be $18 million, or 3 percent of the revenue gain. Ten million




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333

dollars of this total would be the cost of additional return and refund
processing; $6 million would be the cost to the Treasury for check
issuance and fiscal service activities as payer; and $2 million would
be the cost of policing the refund system.
2. REPEAL OF THE DIVIDEND CREDIT AND EXCLUSION

Under the law enacted in 1954 the first $50 of dividends may be excluded from income and a credit against tax of 4 percent taken on
dividends in excess of this amount. By providing the exclusion and
the credit against tax, it was intended to stimulate investment in the
economy through tax relief for dividend income, and to partially remove the so-called double taxation of dividend income. In my view,
the investment credit is a much more direct and effective method of
encouraging investment. As an attempt to coordinate the personal
and the corporate tax on dividend income, the 1954 technique has
proved to be discriminatory and inequitable.
Whether there is, in fact, double taxation of dividends has been the
subject of much controversy. However, even assuming the existence
of such double taxation the fact remains that the dividend credit and
exclusion give a considerably larger relative reduction in the burden
of double taxation to the dividend recipient with high income than to
the dividend recipient with low income.
This point may be made clear by considering the average stockholder in a particular income class. The corporate tax imposes an
extra tax burden, over and above the personal tax on dividends, of
52 cents per dollar of corporate profit before tax for shareholders not
liable to income tax, 42 cents per doUar of corporate profits before
tax for stockholders in the 20 percent tax bracket (for example,
married couples with less than $5,000 income), and of but 5 cents per
dollar of corporate profits on those with incomes of over $1 million.
On the average, the credit and exclusion combined reduce this extra
burden by 3 cents per dollar of corporate profit before tax for married
couples with income of $5,000, and by 2 cents for those with income
over $1 million. The percentage reduction of the so-called double
tax is thus only 8 percent for low income stocldiolders, while it is 41
percent for high income stockholders. This deficiency of the credit
and exclusion has been noted widely. Surely a technique as discriminatory as this has little to recommend it.
The dividend credit represents a dead end approach toward the
equitable taxation of dividends. In 1954 the provisions were represented as only a first step toward full relief, which was eventually
to be achieved by raising the credit to 15 percent of dividends.
However, it is not possible to increase the credit to such a level without
giving those in the high tax brackets reductions exceeding the extra
burdens they are presumed to bear as a result of the corporate income
tax. For example, the tax relief granted by a 15 percent credit
would amount to 7.2 cents per dollar of corporate earnings before
tax—or about 25 percent more than the extra burden presumed to
fall on those with incomes of $250,000 because of the corporate tax.
With a 20 percent credit, which has been recommended by some, the
tax relief at high income brackets could be twice as large as the
presumed extra burden of the corporate tax.




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1961 REPORT OF THE SECRETARY OF THE TREASURY

Looked at as straight tax reduction, the benefits provided by these
provisions are highly concentrated in the upper income groups.
In recent years less than 9 percent of the total combined tax reductions
from the dividend credit and exclusion have gone to returns with
less than $5,000 of income. In contrast, more than 75 percent of
the total tax reductions accrue to returns with incomes of $10,000
and over and more than 54 percent to taxpayers with incomes over
$20,000. In view of the fact that the dividend exclusion is frequently
represented as being helpful to low-income groups, it is noteworthy
that only about 15 percent of the total tax reduction due to such
exclusions go to returns with incomes under $5,000. About 55
percent of its tax benefits go to individuals with over $10,000 of
income.
Benefits from the 1954 dividend provisions accrue more broadly
at the higher income levels because shareholding is more usual at
those levels. Only 6 percent of taxable returns with income under
$5,000 have any dividends at all, while over 90 percent of returns with
incomes of over $50,000 have dividends. Dividend income for
returns under $5,000 constitutes but 1 percent of total income of this
group as against 29 percent for the higher group. Putting it differently, returns with incomes under $5,000, or 40 percent of the
total number of taxable returns, report only about 8 percent of the
dividends included in tax returns. On the other hand, returns with
incomes over $50,000, or two-tenths of 1 percent of all returns,
account for 33 percent of all dividends. Anyway one looks at it,
the overall benefit of the dividend credit is much larger for the upper
income groups.
If the dividend credit and exclusion are thought of as methods of
reducing taxes, they are extremely restricted in form. Singling out
a particular type of income for such reduction discriminates against
all other kinds of income recipients who also face high marginal tax
rates.
I am vitally interested in shaping the tax structure to stimulate
investment and growth. When the dividend credit and exclusion
were adopted it was hoped that they would induce new equity issues
from corporations which would use the proceeds to undertake new
investment in plant and equipment. However, these provisions have
not proved eff'ective in encouraging additional capital investment.
They cannot begin to compare in this regard to the proposed investment credit which applies only to new investment, operates directly
at the point where the decision to buy plant and equipment is made,
is available to firms whether they are investing retained earnings or
outside funds, and draws no distinction between incorporated or unincorporated enterprises.
Let us look at the record and see what the dividend credit and
exclusion have done to increase investment. Although the number
of stockholders has increased since the dividend provisions were
adopted, there has been no increase at all in the annual dollar purchases
of equity securities (less sales) by individuals. In both 1951 and
1952 when dividends received no relief the net purchases of stock by
individuals were higher than in any other year in the past decade. In
recent years, net stock purchases by individuals have also been outpaced by a number of other forms of personal savings such as time and




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335

savings deposits in banks and shares in savings and loan associations.
The relative importance of stock issues to corporate external longterm financing from all sources has not risen. Department of Commerce figm-es show that the relative importance of stock issues was
higher in the 1949-51 period than in later years of the past decade,
except for 1959. And, finally, but not least, any incentive effect
could only assist those large firms well enough known to be able to
tap the stock market for new funds.
According to estimates by the New York Stock Exchange, the
number of shareholders rose from 6.5 million in 1952 to 12.5 million
in 1959 and to 15 million in 1961. This is a healthy course for
economic democracy to take, and we welcome it. However, this
development does not require special tax preferences, and it is very
doubtful whether the dividend credit and exclusion have played a
major role in this respect. A number of other factors such as the
levels of personal incomes and savings, corporate profits, dividends,
and stock prices, appear to have been far more important than the
dividend provisions in stimulating stock ownership.
The repeal of the dividend credit and exclusion should be enacted
promptly so that the introduction of withholding on dividend and
interest income may benefit from the resulting simplification. The
revenue gain from the repeal of these provisions is estimated at $450
million a year.
3. EXPENSE ACCOUNTS

Turning now to expense accounts, much has been said and written
about the abuses in this area. Abuses through expense accounts take
a variety of forms. Tax deductible entertainment allowances frequently are a means by which business provides tax-free compensation
to favored employees or business associates. The seller invites the
buyer to his yacht or hunting lodge, the buyer may reciprocate with
lavish parties and nightclub entertainment, and both then charge it
off as a business expense. Some of this is done because of the businessman's own desire to obtain such luxuries tax free; much of it is done
in response to a competitive pressure which has in large measure been
created by our tax law and not by the dictates of business. As a
result, therefore, there are few of the luxuries of life, such as vacations
at fancy resorts, club memberships, and cruises which a large number
of taxpayers cannot in some way deduct on tax returns as business
expenses. As the President stated, the time has come when our tax
laws should cease to encourage luxury spending as a charge on the
Federal Treasury.
I have here a four-part document illustrating the abuses in the
entertainment area. This document demonstrates that tighter
enforcement of present law will not suffice; corrective legislation is
necessary.
Part One of this document summarizes the result of a recent audit
by the Internal Revenue Service. This audit was undertaken last
September by the Treasury Department as a step in meeting the
directive of the Congress, set forth in the Public Debt and Tax Rate
Extension Act of 1960, that the Secretary of the Treasury make a
report as soon as practicable during the 87th Congress on the progress
of an enforcement program, initiated by the Internal Revenue Service




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1961 REPORT OF THE SECRETARY OF THE TREASURY

in 1960, relating to expenses for entertainment, travel, yachts, hunting
lodges, club dues, and similar items. Although this audit covered
only 38,000 returns, it shows that these returns claimed deductions
totaling $5.7 million for club dues, $2 million for theater tickets and
similar amusements, over $1 mihion for hunting lodges and fishing
camps, $2.6 million for yachts, and $11.5 million for business gifts.
Most significantly, the audit shows that only a small portion of these
expenses can be disallowed under existing law.
The difficulty in administering present law is shown by the fact
that, even though most of the claimed expenditure for entertainment
was allowed under the existing generous standards, almost 50 percent
of the returns had to be adjusted by Internal Revenue agents. These
adjustments resulted in the disallowance of $28.3 million of claimed
travel and entertainment expense. In addition, it was determined
that $29.5 million of the claimed deductions constituted unreported
income in the nature of dividends or additional compensation to
stockholders, officers, or employees.
Part TAVO of the document consists of a report by the Conimissioner
of Internal Revenue on the very serious problems encountered in
administering present law relating to travel and entertainment
expenses.
Part Three contains a summary of some court decisions and administrative cases illustrative of the type of entertainment expenditure
which is deductible under existing law. As the introduction to this
part states, when judicial decisions permit the cost of a safari to
Africa undertaken by a hunting enthusiast and his wife to be deducted
as an expense for advertising dairy milk, one cannot expect revenue
agents to question successfully the business necessity for duck hunting
or nightclubbing with business associates.
Part Four of the document contains a compilation of recent comments on expense accounts and business gifts appearing in newspapers
and other periodicals. These comments illustrate the widespread
public concern, shared by many in the business community, with
expense account abuses.
The supplemental statement contains detailed proposals for carrying out the President's recommendation to disallow certain entertainment expenses. The characteristic feature of all of these expenses
is that they confer substantial personal benefits which are in large
measure a substitute for personal living expenses. Under these
detailed proposals, expenses for entertaining guests at such functions
as parties, nightclubs, theaters, country clubs and fishing trips would
be disallowed in full. So also would be expenses for luxury entertainment facilities such as yachts, hunting lodges, and swimming pools,
as well as for such items as country club dues. The cost of so-called
business gifts would be disallowed to the extent it exceeds an annual
limitation of $10 for each recipient.
Expenditures for food and beverages generally would be disallowed,
although several exceptions are made. One exception relates to food
or beverages provided primarily to employees on business premises.
Another exception covers the cost of food and beverages consumed
in the course of conducting business, but not in excess of a fixed
amount per day for each individual involved. This figure could be
somewhere in the range of $4 to $7. A deduction for the cost of




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337

food and lodging while on business trips would be limited to twice
the maximum per diem rate authorized to be paid to Federal employees. At the present time this rate for travel in the United States
is $12 per day, but the Bureau of the Budget has recommended to the
Congress that this figure be raised to $15. Therefore, the per diem
limitation applicable to business travel would be $30 if the Congress
accepts the recommendation of the Bureau of the Budget. Finally,
where a business trip is combined with a vacation, a portion of the
cost of travel to the business destination would be disallowed.
I believe that these are realistic recommendations which recognize
the legitimate needs of business while at the same time eliminating
the lavish expenditure for personal benefit which has, in the past,
been charged off to the American taxpayer. They would increase
revenues by at least $250 million per year.
4. CAPITAL GAINS ON SALE OF DEPRECIABLE BUSINESS PROPERTY

The President has recommended that capital gain treatment be
withdrawn from gains on the disposition of depreciable property to
the extent of prior depreciation allowances. Such gain reflects
depreciation allowances in excess of the actual decline in value of the
asset and under the President's proposal would be treated as ordinary
income. Any gain in excess of the cost of the asset would still be
treated as capital gain. This reform will eliminate an unfair tax
advantage which the law today gives to those who depreciate property at a rate in excess of the actual decline in market value and then
proceed to sell the property, thus, in effect, converting ordinary
income into a capital gain. This reform is particularly essential at
this time in view of the recommendations to provide a tax credit for
new investment in depreciable property.
Moreover, the proposed withdrawal of capital-gain treatment from
gains on disposition of depreciable property that reflect prior depreciation would eliminate much of the present tax advantage attaching to
investment in so-called depreciation shelters, which exist primarfly in
the real estate area. For example, during the first few years after
acquisition of a building by a real estate syndicate, the total depreciation allowances and mortgage interest will often exceed the rental
income, so that distributions of income during this period are tax
exempt in the hands of the investor. When the distributions substantially cease to be tax exempt, the building is sold, a capital gains
tax paid on the gain attributable to the depreciation allowances,
and another buflding is acquired to provide another depreciation
shelter. Withdrawal of capital-gain treatment from the gain on sale
of the building, to the extent of prior depreciation allowances, will
substantially eliminate this kind of tax trafficking. The gain in
revenue is estimated to be $200 million per year.
5. SPECIAL TYPES OF INSTITUTIONS

In an economy characterized by a great variety of institutions, the
tax law must attempt as far as possible to provide uniform and nondiscriminatory treatment among them. Various improvements of
this sort are recommended in the President's message.




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1961 REPORT OF THE SECRETARY OF THE TREASURY

Cooperatives.—The President has recommended legislation to insure
that earnings of cooperatives reflecting business activities are taxed
either to the cooperatives or to the patrons. Under the recommendation, cooperatives would be allowed to deduct amounts allocated in cash or scrip as patronage dividends and the patrons would be
taxable on the patronage dividends allocated to them. As under
present law, a patronage dividend received by a patron with respect
to purchases by him of items for his personal use would not be included
in his income.
In 1951, Congress enacted legislation which was intended to accomplish just this result. However, various court decisions have
rendered ineffective the congressional intent by holding certain allocations of patronage dividends to be nontaxable to the patron, although such allocations are deductible by the cooperative. As a
result, substantial income from certain cooperative enterprises is not
being taxed to either the cooperative or to its patrons. The President's recommendation would, in essence, fulffll the prior intention of
Congress and remove a present inequity in the tax law.
The President also recommended that the withholding tax on
dividends and interest at a rate of 20 percent be applied to patronage
dividends. This would, in effect, assure the average patron of cash
with which to pay the tax attributable to patronage dividends which
he receives, since the 20 percent tax paid to the Government by the
cooperative will come from its funds. The President's recommendation will result in a method of taxation of cooperative income that is
fair and just to both the cooperatives and competing businesses. I t
is estimated to raise revenue by $25 to $30 miUion.
Fire and casualty insurance companies.—As indicated in the President's message, the tax provisions applicable to mutual fire and
casualty insurance companies, originally adopted in 1942, are outmoded and result in an inadequate and inequitable distribution of
tax. Under the provisions of the present law, stock fire and casualty
insurance companies are taxed essentially like other corporations, on
the basis of the application of the regular corporate rates to their
combined investment and underwriting income. Mutual companies
in the fire and casualty insurance field, however, are generally subject
to an alternative tax formula under which they pay the regular corporate rates on net investment income only or 1 percent on their
gross income, consisting of the sum of the gross investment income and
net premiums, whichever results in the higher tax. Reciprocals and
interinsurers are excused from the 1 percent gross income tax.
We recommend, that legislation be adopted which would eliminate
the special provisions now applicable to mutual and reciprocal
insurance companies and tax these companies on the general corporate basis in essentially the same manner as stock companies. The
bills introduced in this Congress by Mr. Boggs and Mr. Baker,
members of this committee, to equalize the taxation of the various
types of fire and casualty insurance companies provide a sound basis
on which to effect current remedial legislation in this field.
I t is estimated that the enactment of legislation along the line of
the Boggs-Baker bill, effective beginning in 1962 would increase
revenues by about $50 million annually in the next few years.




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Mutual savings hanks and savings and loan associations.—As the
President has pointed out:
Some of the most important types of private savings and lending institutions
are accorded tax deductible reserve provisions which substantially reduce or
eliminate their Federal income tax liability.

The President has further stated:
These provisions should be reviewed with the aim of assuring nondiscriminatory
treatment.

The Treasury Department in cooperation with other interested Government agencies is now intensively reviewing these provisions in
order to develop specific recommendations in accordance with the
President's message. As soon as this review is completed, which we
expect to be done sometime in June, we will present our recommendations to the Congress.
IV.

FURTHER RECOMMENDATIONS

I now turn to a final set of recommendations, including tax rate
extension, taxation of aviation fuel, and taxpayer account numbers.
Tax rate extension.—The President, in his tax message, recommended an extension of present corporation income and excise tax
rates otherwise scheduled for reduction or termination on July 1, 1961.
In the absence of this legislation, the corporate tax rate would be
decreased 5 percentage points from 52 percent to 47 percent, excise
tax rates on distilled spirits, beer, wines, cigarettes, passenger automobiles, automobile parts and accessories, and the transportation of
persons would also decline; and the excise tax on general telephone
service would expire.
These scheduled reductions in corporate taxes and excise taxes would
cause a revenue loss of about $2.6 billion in fiscal year 1962 and a full
year revenue loss of $3.6 billion. Since we are already facing a deficit
in fiscal 1962 this is entirely unacceptable. I t is essential that these
rates be extended promptly to maintain intact the revenue producing
power of our tax system, to prevent an increase in the budget deficit,
and to avoid prejudging next year's overall tax reform.
Aviation fuel.—The President has recommended (1) extending the
present net 2-cent rate on aviation gasoline to jet fuels; (2) holding
this uniform rate covering both types of fuel at the 2-cent level for
fiscal 1962; and (3) providing for annual increments in this rate of
one-half cent after the fiscal year 1962, until the portion of the cost
of the airways properly allocable to civil aviation is substantially recovered by this tax.
The immediate increase in revenue from this proposal will be modest
in comparison with anticipated airway cost; and the annual gradation
of further increases is intended to moderate the impact of the tax on
the air carrier industry.
The inclusion of jet fuel in the tax base, along with aviation gasoline, is clearly in order and is estimated to almost triple the revenue
from aviation fuel. As air travel increases through the introduction
of modern jet airc