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Annual Report
of the

Secretary of the Treasury
on the

State of the Finances
For ihe Fiscal Year Ended June 30, 1963

TREASURY DEPARTMENT
DOCUMENT NO. 3231
Secretary

UNITED STATES GOVERNMENT PRINTING OFFICE, WASHINGTON : 1964
For sale by the Superintendent of Documents, U.S. Government Printing Office
Washington D.C. 20402 - Price 32.50 paper cover)

. I 4'^^^

/o
/]3
CONTENTS
Page

statement by the Secretary of the Treasury

xvii

REVIEW OF FISCAL OPERATIONS
Summary of financial operations
Administrative budget receipts and expenditures
Receipts
Estimates of receipts
Expenditures
.
Estimates of expenditures
Trust receipts and expenditures
Receipts
Estimates of receipts
Expenditures
Estimates of expenditures
Receipts from and payments to the public
Investments of Government agencies in public debt and agency securities
(net).
Sales and redemptions of securities of Government agencies in the market
(net)
.
.
Corporations and certain other busihess-type activities of the U.S. Government
Account of the Treasurer of the United States
Public debt management
.
Public debt operations in fiscal 1963....--1
Ownership of Federal securities
Taxation developments
International financial affairs
Foreign assets control

3
4
4
6
10
11
11
11
12
12
13
13
14
14
14
16
17
24
36
40
53
73

ADMINISTRATIVE REPORTS
Management improvement program
Comptroller of the Currency, Bureau of the
Customs, Bureau of
Defense Lending, Office of
Domestic Gold and Silver Operations, Office of
Engraving and Printing, Bureau of
Fiscal Service
Foreign Assets Control, Office of
Internal Revenue Service
International Affairs, Office of
Mint, Bureau ofthe
Narcotics, Bureau of
United States Coast Guard
United States Savings Bonds Division
United States Secret Service

77
80
84
99
100
102
108
130
131
145
147
153
158
169
171

EXHIBITS
PUBLIC DEBT OPERATIONS, CALLS OF GUARANTEED OBLIGATIONS. REGULATIONS.
AND LEGISLATION

Treasury Certificates of Indebtedness, Treasury Notes, and Treasury Bonds
Offered and Allotted
1. Treasury certificates of indebtedness
179
2. Treasury notes..
186
3. Treasury bonds
195
4. Call, August 14, 1962, for redemption on December 15, 1962, of 2%
percent Treasury bonds of 1960-65, dated December 15, 1938
225
nr

CONTENTS
Treasury Bills Offered and Accepted
Page

5. Treasury bills

225
Guaranteed Obligations Called

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

238

Regulations
7. Third amendment, January 29, 1963, to Department Circular No. 905,
Second Revision, United States savings bonds. Series H
8. Notice of revocation of 1947 Treasury Department Circular No. 811..
9. Second amendment, September 17, 1962, to Department Circular No.
793, Revised, regulations governing Armed Forces leave bonds
10. Second revision, April 19, 1963, of Department Circular No. 300,
general regulations with respect to United States securities
11. Department Circular No. 22-62, regulations governing sale of Treasury
bonds through competitive bidding (December 17, 1962)
..
12. Department Circular No. 1-63, regulations governing United States
retirement plan bonds (January 10, 1963)

243
243
243
244
266
268

Legislation
13. An act to increase temporarily the public debt limit set forth in section
21 of the Second Liberty Bond Act (May 29, 1963)

274

FINANCIAL POLICY

14. Statement by Secretary of the Treasury Dillon, January 31, 1963,
before the Joint Economic Committee

274

PUBLIC DEBT MANAGEMENT

15. Statement by Secretary of the Treasury Dillon, February 27, 1963,
before the House Ways and Means Committee on the debt limit
16. Statement by Secretary of the Treasury Dillon, May 23, 1963, before
the Senate Finance Committee on the debt limit
17. Remarks by Under Secretary of the Treasury for Monetary Affairs
Roosa, October 2, 1962, at the annual convention of the Mortgage
Bankers Association on debt management and the capital markets..

280
284
286

TAXATION DEVELOPMENTS

18. Message from the President, January 24, 1963, relative to a revision
of our tax structure
19. Statement by Secretary of the Treasury Dillon, February 6, 1963,
before the House Ways and Means Committee on the tax recommendations of the President
20. Statement by Secretary of the Treasury Dillon, June 20, 1963, before
the Senate Committee on Finance on H.R. 6755, the Tax Rate
Extension Act of 1963
21. Statement by Secretary of the Treasury Dillon, August 20, 1963,
before the House Ways and Means Committee on the Interest
Equalization Tax
22. Other Treasury testimony published in hearings before congressional
committees, July 1, 1962-June 30, 1963

293
311
332
335
346

INTERNATIONAL FINANCIAL AND MONETARY DEVELOPMENTS

23. Statement by Secretary of the Treasury Dillon, October 23, 1962,
at the Ministerial Meeting of the Inter-American Economic and
Social Council, Mexico City, Mexico
24. Remarks by Secretary of the Treasury Dillon, March 7, 1963, at the
tenth annual monetary conference of the American Bankers Association on our unfinished task of improving the U.S. balance of
payments..

346

351

CONTENTS

V
Page

25. Statement by Secretary of the Treasury Dillon, as Governor for the
United States, October 1, 1963, at the discussion of the Annual
Report of the International Monetary Fund
26. Statement by Under Secretary of the Treasury for Monetary Affairs
Roosa, July 10, 1962, before the House Committee on Banking and
Currency on interest rates on official time deposits
27. Remarks by Under Secretary of the Treasury for Monetary Affairs
Roosa, September 25,1962, at the annual convention of the American Bankers Association on banking and the balance of payments..
28. Statement by Under Secretary of the Treasury for Monetary Affairs
Roosa, December 13, 1962, submitted to the Subcommittee on International Exchange and Payments of the Joint Economic Committee of Congress on the balance of payments
29. Article by Under Secretary of the Treasury for Monetary Affairs Roosa
on Assuring the Free World's Liquidity, Business Review Supplement, Federal Reserve Bank of Philadelphia, September 1962
30. Remarks by Assistant Secretary of the Treasury Bullitt, March 19,
1963, at the Annual Rhode Island World Trade Conference on
the Common Market and the U.S. balance of payments
31. Treasury and Federal Reserve foreign exchange operations, September
1962-February 1963
32. Press Release, October 24, 1962, announcing formal adherence of the
United States to the special borrowing arrangements of the International Monetary Fund
.
.
33. Press Release, January 21, 1963, announcing the signing of an extension of an exchange agreement between the United States and
the Philippines
34. Other Treasury testimony published in hearings before congressional
committees, July 1, 1962-June 30, 1963

356
361
363

369
375
382
386
394
394
394

FOREIGN ASSETS CONTROL

35. Form letter of transmittal to foreign subsidiaries of U.S. firms and
questionnaire for trade survey

395

DOMESTIC GOLD AND SILVER OPERATIONS

36. Executive Order 11037, July 20, 1962, amending Executive Order 6260,
August 28, 1933, as amended, relating to the acquisition or holding
abroad or the importation of gold coins into the United States
37. Amendmentto the gold regulations, July 23,1962 (31 CFR 54)
38. Statement by Secretary of the Treasury Dillon, April 29, 1963,
before the Senate Committee on Banking and Currency on silver
39. An act to repeal certain legislation relating to the purchase of silver,
and for other purposes (June 4, 1963)
40. Other Treasury testimony published in hearings before congressional
committees, July 1, 1962-June 30, 1963

398
398
400
405
406

ORGANIZATION AND PROCEDURE

41. Treasury Department orders relating to organization and procedure..

406

ADVISORY COMMITTEES

42. Advisory committees utilized by the Treasury Department under
Executive Order 11007

414

TABLES
Bases of tables
.
Description of accounts relating to cash operations

429
430

SUMMARY OF FISCAL OPERATIONS

1. Summary of fiscal operations, fiscal years 1932-63 and monthly 1963

432

CONTENTS
RECEIPTS AND EXPENDITURES
Page

2. Receipts and expenditures, fiscal years 1789-1963
3. Refunds of receipts and transfers to trust funds, fiscal years 1931-63.
4. Administrative budget receipts and expenditures," fiscal years 1961,
1962, and 1963
5. Trust receipts and expenditures, fiscal years 1961, 1962, and 1963
6. Investments in public debt and agency securities (net), fiscal years
1961, 1962, and 1963
7. Sales and redemptions of Government agency securities in market
(net), fiscal years 1961, 1962, and 1963
8. Interfund transactions excluded from both net budget receipts and
budget expenditures, fiscal years 1960-63
.
9. Interfund transactions excluded from both net trust account receipts
and net trust account expenditures, fiscal years 1960-63
10. Public enterprise (revolving) funds, receipts and expenditures for
fiscal year 1963 and net for 1962 and 1963
11. Trust enterprise (revolving) funds, receipts and expenditures for
fiscal year 1963 and net for 1962 and 1963
12. Administrative budget receipts and expenditures monthly and total
for fiscal year 1963
13. Trust receipts and expenditures monthly and total for fiscal year
1963
14. Trust receipts by sources and expenditures by major functions, fiscal
years 1955-63
15. Administrative budget receipts by sources and expenditures by major
functions, fiscal years 1955-63
16. Trust and other transactions by major classifications, fiscal years
1953-63
17. Cash income and outgo, fiscal years 1953-63
18. Administrative budget receipts and expenditures based on existing
and proposed legislation, actual for the fiscal year 1963 and estimated for 1964 and 1965
19. Trust and other transactions, actual for the fiscal year 1963 and
estimated for 1964 and 1965
20. Effect of financial operations on the public debt, actual for the fiscal
year 1963 and estimated for 1964 and 1965
21. Internal revenue collections by tax sources, fiscal years 1929-63
22. Internal revenue collections and refunds by States, fiscal year 1963..
23. Customs collections and payments by districts, fiscal year 1963
24. Summary of customs collections and expenditures, fiscal years 1962
and 1963
25. Postal receipts and expenditures, fiscal years 1916-63

434
442
444
456
461
462
463
464
465
467
468
470
471
472
476
478
480
483
485
486
492
493
494
495

PUBLIC DEBT, GUARANTEED OBLIGATIONS, ETC.

I.—Outstanding
26.
27.
28.
29.
30.
31.
32.
33.
34.

Principal of the public debt, 1790-1963
PubUc debt and guaranteed obligations outstanding June 30,1934-63 .
PubHc debt outstanding by security classes, June 30, 1953-63
Guaranteed obligations issued by (Government corporations and other
business-type activities and held outside the Treasury, June 30,
1953-63
Interest-bearing securities outstanding issued by Federal agencies but
not guaranteed by the United States Government, fiscal years
1953-63
Maturity distribution of marketable interest-bearing public debt,
June 30, 1946-63
Summary of public debt and guaranteed obligations by security
classes, June 30, 1963
Description of pubhc debt issues outstanding, June 30, 1963
Description of guaranteed obligations held outside the Treasury,
June 30, 1963

496
498
499
502
503
504
504
506
530

CONTENTS

VII
Page

35. Postal savings systems^ deposits and Federal Reserve notes outstanding, June 30, 1946-63
36. Deposits to the Treasury by the Federal Reserve Banks representing
interest on Federal Reserve notes, fiscal years 1947-63
37. Statutory limitation on the public debt and guaranteed obligations,
June 30, 1963
38. Debt limitation under the Second Liberty Bond Act, as amended,
1917-63
.-.

532
532
533
534

II.—Operations
39. Pubhc debt receipts and expenditures by classes, monthly for fiscal
year 1963 and totals for 1962 and 1963
40. Public debt increases and decreases, and balances in the account of
the Treasurer of the United States, fiscal years 1916-63
41. Public debt issues, redemptions, and transfers, fiscal 1963 and outstanding June 30, 1962 and 1963
42. Issues, maturities, and redemptions of interest-bearing pubUc debt
securities, excluding special issues, July 1962-June 1963
,43. Allotments by investor classes on subscriptions for public marketable
securities other than regular weekly Treasury bills, fiscal year
1963
44. Statutory debt retirements, fiscal years 1918-63
45. Cumulative sinkmg fund, fiscalyears 1921-63

536
547
548
571
606
608
609

III.—United States savings bonds
46. Sales and redemptions of Series E through K savings bonds by series,
fiscal years 1941-63 and monthly 1963
47. Sales and redemptions of Series E and H savings bonds by denominations, fiscal years 1941-63 and monthly 1963
48. Sales of Series E and H savings bonds by States, fiscal years 1962,
1963, and cumulative

610
614
615

IV.—^Interest
49. Amount of interest-bearing public debt outstanding, the computed
annual interest charge, and the computed rate of interest, June 30,
1939-63, and at the end of each month during 1963
50. Computed annual interest rate and computed annual interest charge
on the public debt by security classes, June 30, 1939-63
51. Interest on the public debt by security classes, fiscal years 1959-63
52. Interest on the public debt and guaranteed obligations by tax status,
fiscal years 1940-63

616
617
619
620

V.—Prices and yields of securities
53. Average yields of taxable long-term Treasury bonds by months,
October 1941-June 1963
.
54. Prices and yields of marketable public debt issues June 29, 1962
and June 28, 1963, and price range since first traded

621
622

VI.—Ownership of governmental securities
55. Summary of Treasury survey of ownership of interest-bearing public
debt arid guaranteed obhgations, June 30, 1962 and 1963
56. Estimated ownership of interest-bearing governmental securities
outstanding June 30, 1954-63, by type of issuer

624
626

ACCOUNT OF THE TREASURER OF THE UNITED STATES

57. Assets and liabilities in the account of the Treasurer of the United
States, June 30, 1962 and 1963
58. Analysis of changes in tax and loan account balances, fiscal years
1952-63

627
628

Vni

CONTENTS
STOCK AND CIRCULATION OF MONEY IN THE UNITED STATES
Page

59. Stock of money, money in the Treasury, in the Federal Reserve
Banks, and in circulation, by kinds, June 30, 1963
60. Stock of money, money in the Treasury, in the Federal Reserve
Banks, and in circulation, selected years June 30, 1930-63
61. Stock of money by kinds, selected years, June 30, 1930-63
62. Money in circulation by kinds, selected years, June 30, 1930-63
63. Location of gold, silver bullion at monetary value, and coin held by
the Treasury on June 30, 1963
64. Paper currency issued and redeemed during the fiscal year 1963 and
outstanding June 30, 1963, by classes and denominations

629
631
632
634
635
636

TRUST FUNDS AND CERTAIN OTHER ACCOUNTS OF THE FEDERAL GOVERNMENT

65. Holdings of public debt and agency securities by Government agencies
and accounts, June 30, 1959-63

637

I.—^Trust funds
66. Civil service retirement and disability fund, June 30, 1963
67. District of Columbia teachers' retirement and annuity fund, June 30,
1963
68. Employees health benefits fund. Civil Service Commission, June 30,
1963
69. Retired employees health benefits fund. Civil Service Commission,
June 30, 1963
70. Employees' life insurance fund, Civil Service Commission, June 30,
1963
71. Federal disability insurance trust fund, June 30, 1963
72. Federal old-age and survivors insurance trust fund, June 30, 1963—
73. Foreign service retirement and disability fund, June 30, 1963
74. Highway trust fund, June 30, 1963
75. Judicial survivors annuity fund, June 30, 19 63
76. Library of Congress trust funds, June 30, 1963
77. National service life insurance fund, June 30, 1963
78. Pershing HaU Memorial fund, June 30, 1963
79. Philippine Government pre-1934 bond account, June 30, 1963
80. Railroad retirement account, June 30, 1963
81. Unemployment trust fund, June 30, 1963
82. U.S. (Government life insurance fund, June 30, 1963

640
642
643
644
645
647
649
651
652
653
654
655
656
657
658
660
666

II.—Certain other accounts
83. Colorado River Dam fund, Boulder Canyon project, status by operating years ending May 31, 1933-63
84. Refugee Relief Act of 1953, status of loans as of June 30, 1963

667
668

FEDERAL AID TO STATES

85. Expenditures made by the Government as direct payments to States
under cooperative arrangements and expenditures within States
which provided relief and other aid, fiscal year 1963

669

CUSTOMS OPERATIONS

86. Merchandise entries, fiscal years 1962 and 1963
87. Principal commodities on which drawback was paid, fiscal years 1962
and 1963
88. Carriers and persons arriving in the United States, fiscal years 1962
and 1963
89. Aircraft and aircraft passengers entering the United States, fiscal
years 1962 and 1963
90. Seizures for violations of customs laws, fiscal years 1962 and 1963
91. Investigative activities, fiscal years 1'962 and 1963

689
689
690
691
692
693

CONTENTS

ENGRAVING AND PRINTING PRODUCTION
Page

92. New postage stamp issues delivered, fiscal year 1963
93. Deliveries of finished work by the Bureau of Engraving and Printing,
fiscal years 1962 and 1963
.

694
695

INTERNATIONAL CLAIMS

94. Awards of the Mixed Claims Commission, United States and Germany, Class III awards, and Private Law 509, approved July 19,
1940, status as of June 30, 1963
.
95. Status of claims of American nationals against certain foreign governments as of June 30, 1963
.

696
697

INTERNATIONAL FINANCIAL TRANSACTIONS

96. United States net monetary gold transactions with foreign countries
and international institutions, fiscal years 1945-63
97. Estimated gold reserves and dollar holdings of foreign countries and
international institutions as of June 30, 1962 and 1963
98. United States gold stock and holdings of convertible foreign currencies by U.S. monetary authorities, fiscal years 1952-63
.
99. International investment position of the United States, total December 31, 1950, by area, December 31, 1961 and 1962
100. U.S. balance of payments, calendar 1960-June 1963
101. Assets and liabilities of the Exchange StabUization Fund as of June
30, 1962 and 1963
102. Summary of receipts, withdrawals, and balances of foreign currencies
acquired by the United States without purchase with dollars, fiscal
year 1963
103. Balances of foreign currencies acquired by the United States without
purchase with dollars, June 30 1963

698
699
701
702
704
706
708
710

INDEBTEDNESS OF FOREIGN GOVERNMENTS

104. Indebtedness of foreign governments to the United States arising from
World War I, and payments thereon as of June 30, 1963
105. World War I indebtedness, payments, and balances due under agreements between the United States and Germany as pf June 30, 1963.
106. Outstanding indebtedness of foreign countries on United States Government credits (exclusive of indebtedness arising from World War
I) as of June 30, 1963, by area, country, and major program
107. Status of accounts under lend-lease and surplus property agreements
(World War II) as of June 30, 1963

712
713
714
716

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

108. Comparative statement of obligations of Government corporations
and certain other business-type activities held by the Treasury,
June 30, 1953-63
109. Capital stock, notes, bonds, and other obligations of Government
agencies held by the Treasury or other Government agencies, June
30, 1962 and 1963, and changes during 1963
110. 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, 1963
111. Description of obligations of Government corporations and certain
other business-type activities held by the Treasury, June 30,1963...
112. Summary statements of financial condition of Government corporations and certain other business-type activities, June 30, 1963
113. Statement of loans outstanding of Government corporations and
certain other business-type activities, June 30, 1963
114. Dividends, interest, and simUar earnings received by the Treasury
from Government corporations and certain other business-type
activities, fiscal years 1962 and 1963
.

719
720
722
723
727
729
732

CONTENTS
GOVERNMENT LOSSES IN SHIPMENT
Page

115. Government losses in shipment revolving fund, June 30, 1963

734

PERSONNEL

116. Number of employees in the departmental and field services of the
Treasury Department, quarterly from June 30, 1962 to June 30,
1963
INDEX
NOTE.—DetaUs of figures may not add to totals because of rounding.

736
737

SECRETARY, UNDER SECRETARIES, GENERAL COUNSEL, AND ASS I S T A N T SECRETARIES OF THE TREASURY DEPARTMENT FROM
JANUARY 21, 1961, TO DECEMBER 16, 1963 »
Term of service
Official
From

To
Secretary of the Treasury

Jan. 21, 1961

Douglas Dillon, New Jersey.
Under Secretary

Feb.

Henry H. Fowler, Virginia.

3, 1961

Under Secretary of the Treasury for
Monetary Affairs
Robert V. Roosa, New York.

Jan. 31, 1961

General Counsel
Apr. 5, 1961
Nov. 16, 1962

Oct.

6, 1962

Robert H. Knight, Virginia.
G. d'Andelot Belin, Massachusetts.
Assistant Secretaries

Dec.
Apr.
Apr.
Dec.
Dec.
Sept.

20, 1957
5, 1961
24, 1961
20, 1961
18, 1962
18, 1963

Dec. 19, 1961
Oct. 31, 1962

A. Gilmore Flues, Ohio.
John M. Leddy, Virginia.
Stanley S. Surrey, Massachusetts.
James A. Reed, Massachusetts.
John C. Bullitt, New Jersey.
Robert A. Wallace, Illinois.
Fiscal Assistant Secretary

June 19, 1955
June 15, 1962

Mar. 31, 1962

WUliam T. Heffelfinger, District of Columbia.
John K. Carlock, Arizona.
Administrative Assistant Secretary

Sept. 14, 1959

A. E. Weatherbee, Maine.

» For officials from September 11, 1789, through January 20, 1961, see the 1961 annual report exhibit 32,
pp. 389-392.

PRINCIPAL ADMINISTRATIVE AND STAFF OFFICERS OF
TREASURY DEPARTMENT AS OF DECEMBER 16, 1963
Secretary of the Treasury....
Special Assistant to the Secretary
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.
Director, Office of Debt Analysis
Assistant to the Secretary (Debt Management)..!
General Counsel
Deputy General Counsel
Assistant General Counsel
Assistant General Counsel
Assistant General Counsel
Assistant General Counsel
Chief Counsel, Foreign Assets Control....
Director of Practice
'.
Assistant Secretary
Deputy Assistant Secretary and Director,
Office of Tax Anslysis
.
.
Tax Legislative Counsel
Special Assistant for International Tax
Affairs
Assistant Secretary
Deputy Assistant Secretary
Aide to the Assistant Secretary
.
Director, Office of Law Enforcement Coordination
_!
:.- :
Assistant Secretary
Deputy Assistant Secretary
_.
Special Assistant to Assistant Secretary..
Director, Office of International Affairs
Assistant Secretary
Special Assistant to Assistant Secretary...
Director, Employment Pohcy Program
Fiscal Assistant Secretary
'• Deputy Fiscal Assistant Secretary
Assistant Fiscal Assistant Secretary
Assistant to Fiscal Assistant Secretary
Assistant to Fiscal Assistant Secretary
Director, Office of Defense Lending
Administrative Assistant Secretary
Director, Office of Personnel
Director, Office of Budget and Finance...
Director, Office of Management and
Organization
Director, Office of Administrative Services.
Director, Office of Security
Assistant to the Secretary (Congressional Relations)
Deputy Assistant to the Secretary (Congressional Relations)
^...^.^^..^..^
5CII

THE

Douglas Dillon
Robert Carswell
Henry H. Fowler
Douglass Hunt
Robert V. Roosa
Paul A. Volcker
Leland Howard
(Vacancy)
R. Duane Saunders
Daniel S. Ahearn
G. d'Andelot Belin
Fred B. Smith
Roy T. Englert
Edwin F. Rains
Hugo A. Ranta
George F. Reeves
Stanley L. Sommerfield
Thomas J. Reilly
Stanley S. Surrey
Jacob A. Stockfisch
Donald C. Lubick
David R. Tillinghast
James A. Reed
James P. Hendrick
Commander Robert D. Johnson,
USCG.
Arnold Sagalyn
John C. Bullitt
Merlyn N. Trued
Ralph Hirschtritt
George H. Willis
Robert A. Wallace
Thomas W. Wolfe
Mrs. Mary F. Nolan
John K. Carlock
George F. Stickney
Hampton A. Rabon, Jr.
Boyd A. Evans
Frank F. Dietrich
Robert M. Seabury
A. E. Weatherbee
Amos N. Latham, Jr.
Ernest C. Betts, Jr.
James H. Stover
Paul McDonald
Thomas M. Hughes
Joseph W. Barr
Joseph M. Bowman. Jr.

PRINCIPAL ADMINISTRATIVE AND STAFF OFFICERS

Assistant to the Secretary (Public Affairs)
Deputy Assistant to the Secretary (Public
Affairs)
Assistant to the Secretary (National Security
Affairs)
National Security Affairs Adviser
Director, Office of Foreign Assets Control.
Senior Consultant
Special Assistant to the Secretary and Director, Executive Secretariat

Dixon Donnelley
Stephen C. Manning, Jr.
Charles A. Sullivan
Bradley H. Patterson, Jr.
Mrs. Margaret W. Schwartz
Seymour E. Harris
Donald I. Lamont

BUEEAU OF ACCOUNTS

Commissioner of Accounts
Assistant Commissioner
Staff Assistant to the Commissioner
Assistant Commissioner for Administration
Chief Disbursing Officer
Chief Auditor
Deputy Commissioner for Systems
Deputy Commissioner for Central Accounts
Deputy Commissioner for Central Reports
Deputy Commissioner for Deposits and
Investments

Harold R. Gearhart
Sidney S. Sokol
George Friedman
John H. Henriksen
Julian F. Cannon
Harold A. BaU
Ray T. Bath
Howard A. Turner
Lyle D. Mosso (Acting)
Sidney Cox

BUREAU OF CUSTOMS

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

Philip Nichols, Jr.
David B. Strubinger
Alfred F. Beiter
Robert Chambers
Walter G. Roy
William E. Higman
Burke H. Flinn
Lester D. Johnson
N. G. Strub
R. V. Mclntyre
George Vlases, Jr.

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

Director, Bureau of Engraving and Printing. _ Henry J. Holtzclaw .
Assistant Director, Bureau of Engraving and
Printing
Frank G. Uhler
BUREAU OF T H E M I N T

Director of the Mint
Assistant Director of the Mint

Miss Eva Adams
Frederick W. Tate

BUREAU OF NARCOTICS

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

Henry L. Giordano
(Vacancy)
George H. Gaffney

BUREAU OF THE PUBLIC DEBT

Commissioner of the Public Debt
Donald M. Merritt
Assistant Commissioner
Ross A. Heffelfinger, Jr.
Deputy Commissioner
Michael E. McGeoghegan
Deputy Commissioner in Charge, Chicago
Office
Jack P. Thompson

XHI

XrV

PRINCIPAL ADMINISTRATIVE AND STAFF OFFICERS
I N T E R N A L R E V E N U E SERVICE

Commissioner of Internal Revenue
Deputy Commissioner
Assistant Commissioner (Administration)
Assistant Commissioner (Inspection)
Assistant Commissioner (Compliance)
Assistant Commissioner (Data Processing)
Assistant Commissioner (Planning and Research)
Assistant Commissioner (Technical)
Chief Counsel

Mortimer M. Caplin
Bertrand M. Harding
Edward F. Preston
Vernon D. Acree
Donald W. Bacon
Robert L. Jack
William H. Smith
Harold T. Swartz
Rudy P. Hertzog (Acting)

OFFICE OF THE COMPTROLLER OF THE CURRENCY

Comptroller ofthe Currency...
James J. Saxon
Administrative Assistant to the ComptroUer.« Albert J. Faulstich
Deputy Comptroller
William B. Camp
Deputy Comptroller
Justin T. Watson
Deputy Comptroller
. . Thomas G. DeShazo
Deputy Comptroller
!. Douglas T. Bushman (Acting)
Deputy Comptroller (Trusts)
Dean E. Miller
Chief National Bank Examiner
R. Coleman Egertson
Chief Counsel.
Robert Bloom
OFFICE OF T H E TREASURER OF T H E U N I T E D STATES

Treasurer ofthe United States
Deputy Treasurer
Assistant Deputy Treasurer

Kathryn O'Hay Granahan
William T. HoweU
Willard E. Scott

U N I T E D STATES COAST GUARD

Commandant, U.S. Coast Guard
Assistant Commandant
Chief of staff

Admiral Edwin J. Roland
Vice Admiral Donald McG.
Morrison
Rear Admiral James A. Alger, Jr.

U N I T E D STATES SAVINGS BONDS DIVISION

National Director
Assistant National Director

William H. Neal
BiU McDonald

U N I T E D STATES S E C R E T SERVICE

Chief, U.S. Secret Service
Deputy Chief
Assistant Chief

James J. Rowley
Paul J. Paterni
E. A. Wildy
C O M M I T T E E S AND BOARDS

Chairman, Treasury Management Committee.
Chairman, Treasury Awards Committee
Chairman, Treasury Wage Board
Employment Policy Officer
Principal Compliance Officer

A. E. Weatherbee
Amos N. Latham, Jr.
Amos N. Latham, Jr.
Robert A. Wallace
Robert A. Wallace

•ORGANIZATION OF THE DEPARTMENT OF THE TREASURY-

December 2,1963

SECRETARY
UNDER SECRETARY

I—.,

ff-

Office
\
ofthe
}
Secretary i
I

T
ASSISTANT
SECRETARY

Officeof

..A.^^
^ ^

ASSISTANT
TO THE
SECRETARY
(Debt MonogemenI

ASSISTANT
TO THE
SECRETARY
(Non Secur Affairs)

DEPUTY UNDER
J L . A ^ . SECRETARY FOR
'>*'V'n
(MONETARY
AFFAIRS

ADMINISTRATIVE
ASSISTANT
SECRETARY

Office of TOI
Legislolive
Counsel

Officeof
Foreign Assets
Control

Olfice of Personnel

Office of
MonogemenI on

Office ot OointttK
Cold ond Silver
Operotiont

Operating \
Bureaus /

JI
Bureau of
the Mint

U.S. Secret
Service

Office of ttie
Comptroller of
ttie Currency

U.S. Sovings
Bonds Division

U.S.
Coast Guard

Bureau of
Engraving and
Printing

CHART

Bureau of
Customs

Bureau of
Narcotics

Bureau of
Accounts

Bureau of ttie
Public Debt

Office of ttie
Treasurer
of the U.S.

ANNUAL REPORT ON THE FINANCES
TREASURY DEPARTMENT,

Washington, M a y 15, 1964I have the honor to report to you on the finances of the Federal
Government for the fiscal year 1963.
The sustained economic expansion which began in early 1961
continued through the calendar year 1963. Business investment
plans, as well as current signs of growth in other sectors of the economy,
point to further substantial gains in 1964. The general reduction in
taxes taking effect in 1964 and the President's strong efforts to reduce
Government expenditures ensure the enduring vitality of American
free enterprise.
In signing the Revenue Act of 1964 on February 26, the President
termed it the single most important step taken to strengthen our
economy since World War I I . The $11.5 billion tax reduction and
structural reform which this law provides have broken rigid tax
patterns and opened the way to beneficial changes in our economy.
Together with the major legislative and administrative measures of
1962, most importantly the investment tax credit and depreciation
reform., it serves as a giant step forward in promoting healthy longterm economic growth. B y stimulating domestic expansion, the
Revenue Act of 1964 is expected to increase both the demand for and
the profitability of capital investment at home, thus slowing the
outflow of U.S. investment capital and advancing our efforts to reduce
the deficit in the U.S. balance of payments.
SIRS:

Balance-of-Payments Policy
During 1963, the Government heightened its continued efforts to
reduce the deficit in the U.S. balance of payments. A deterioration
in our international accounts during the first half of the calendar
year stemmed primarily from a sharp expansion in the outflow of
long-term portfolio capital from the United States. During the latter
half of the year this deterioration was arrested, and results for the
calendax year demonstrated that progress toward balance was again
underway.
Recorded private capital investment abroad during the first half
of 1963 reached an annual rate more tban $2 billion higher than in
1962. A Cabinet Committee on Balance of Payments, chaired by
the Secretary of the Treasury, conducted a major review of our
XVII
707-484—64

XVIII

1963

REPORT OF T H E SECRETARY OF T H E

TREASURY

payments position. Its findings led to President Kennedy's second
major message on the balance of payments of July 18, 1963. That
message included announcement of a proposed interest equalization
tax designed to dampen the rapidly accelerating outflow of long-term
portfolio capital from the United States. The President estimated
that enactment of this tax, together with the rise in the Federal
Reserve discount rate from 3 to 3% percent, which had occurred just
before his message, might be expected to reduce the annual outflow
of capital from the United States by $1 billion. The President also
proposed administrative measures calculated to reduce by a further
$1 billion annually the balance-of-payments impact of U.S. Government overseas expenditures, notably those connected with military
defense and with foreign economic assistance.
As provided in the bill passed by the House of Representatives on
March 5, the proposed interest equalization tax will have the effect
of increasing by approximately one percent a year the cost of foreign
long-term borrowing in the U.S. market. The tax will not affect
normal export trade financing or apply to borrowing by the developing
countries. The tax is designed not to eliminate foreign investment,
but to bring it within the limits of our current capacities—while at
the same time preserving the traditional role of the inarket mechanism
as the impersonal arbiter in any particular financing. The bill
provides that the tax would apply until the end of calendar 1965.
Reductions in capital outflow during the second half of the calendar
year were largely responsible for a dramatic improvement in the balance-of-payments position. The deflcit on regular transactions,
which had reached the clearly unsustainable seasonally adjusted
annual rate of over $5 billion during the second quarter, dropped to a
rate of about $2 billion in the last.half of the year.
The Treasury and the Federal Reserve continued to conduct official
foreign exchange operations in most of the major currencies of the
world during the year. (These operations are explained more fully
elsewhere in this report.) The Treasury continued the sale to foreign
monetary authorities of two series of nonmarketable securities, one
denominated in dollars and the other denominated in the currency
of the buying country. These securities furnish an outlet for the
investment of foreign reserve funds and offer an alternative to gold
purchases. The proceeds from their sale supply the Treasury with
funds for foreign exchange operations. On December 31, 1963,
Treasury obligations of these series were outstanding in the amount
of more than $1.3 billion.
Gold sales for the calendar year were $461 million, compared with
$891 million in the preceding calendar year.

ANNUAL REPORT ON T H E FINANCES

XIX

International Monetary and Financial Cooperation
The special borrowing arrangements between the International
Monetary Fund and the Group of Ten countries which became effective in October 1962, provide that the members of the group wiU lend
up to a total equivalent of $6 billion in their own currencies to the
Fund if such additional resources should be needed to forestall or
cope with an impairment of the international monetary system.
Thus far it has not been necessary for any of the members of the
Group of Ten to supply additional currency to the Fund for this
purpose, and the Fund's transactions have been carried out with the
resources available to it from the ordinary subscriptions of member
countries. The avaUability of these resources, however, gives assurance that the major countries are prepared to cooperate in dealing
with the financial problems which might arise from sudden or speculative large-scale movements of capital such as may occur now that
aU the major currencies have returned to convertibility.
For the first time, in July 1963, the United States entered into a
standby arrangement with the International Monetary Fund in the
amount of $500 million. The primary purpose of this arrangement is
to facilitate repayments to the Fund by countries which wish to use
part of their dollar holdings for this purpose. Under its Articles of
Agreement the Fund may not hold currencies of a member in excess
of 75 percent of that member's quota, unless the member itself has
drawn on the Fund. By the end of our fiscal year 1963, the Fund's
holdings of dollars were rapidly approaching this 75-percent limit, not
as a result of U.S. borrowing, since, up to that time the United States
had never borrowed from the Fund, but as a result of repayments in
doUars by those countries which had. Under the new standby
arrangement, the United States was prepared to draw from the Fund
currencies acceptable under the Fund's Articles of Agreement and to
sell these currencies for dollars to countries which otherwise would
have had to convert their dollars in world exchange markets. In this
way the dollar's usefulness in settling international obligations, including obligations to the International Monetary Fund, is maintained
while the dollars received by the United States in exchange for the
currencies paid to the Fund are, in practice, withdrawn from the
foreign exchange market and the potential demand for conversion of
dollars into gold is thus reduced.
In February 1964, the dollar holdings of the Fund reached the 75
percent limit. The United States, therefore, made its first drawiag of
foreign currency from the Fund. The drawing, made under the
July 1963 standby agreement for $500 million, was equivalent to
$125 ;million. The drawing was made primarily in equal amounts of

1963 REPORT OF THE SECRETARY OF THE TREASURY

Deutsche Mark and French francs, with a small portion in Italian lire.
The drawing was designed to cover a number of transactions expected
to take place in ensuing weeks, rather than any single repayment by
another country.
The Finance Ministers of the Group of Ten agreed last October to
examine the international monetary system and its probable future
needs for liquidity, and to evaluate means for meeting these needs.
A Working Group of Deputy Finance Ministers from each country
under the chairmanship of Under Secretary Roosa has met periodically
siace then. Along with representatives of the central banks and
officials from the International Monetary Fund, the Bank for International Settlements, and the Organization for Economic Cooperation
and Development, they have started a systematic examination of the
present system and its problems with a view to developing possible
new approaches. Related studies have been undertaken by the
international organizations. The discussions of the Group of Ten
are in large part concerned with the problems which may arise when
the United States is no longer supplying additional dollars to the rest
of the world through its balance-of-payments deficit. These discussions, therefore, do not in any way reduce the necessity for eliminating
our balance-of-payments deficit.
International cooperative e^fforts to provide capital for the economic
progress of the less-developed countries took two significant steps
forward during the year. The Inter-American Development Bank
has proposed to its constituent members an authorization to increase
the Bank's callable capital by $1 billion. The U.S. portion will be
$411.8 million. This enlargement in caUable capital will enable the
Bank to borrow in world financial markets in a manner that wUl increase its resources for lending without requiring additional payments
by the member governments. The Bank also requested a 50-percent
iacrease in the member quotas in the Fund for Special Operations,
which is used to finance development credits on flexible terms to deal
with special problems of the member countries. The Fund for Special
Operations is flnanced, however, by direct contributions from the
member governments, since its loans do not provide the same basis
for borrowing as do loans from the ordinary capital. Of the total
iacrease in the Fund for Special Operations of $73.2 miUion, the U.S.
portion wiU be $50 mUlion. The Congress passed the necessary legislation to enable the United States to subscribe to the proposed increases in resources in January 1964.
The Congress in May 1964 also approved a proposal submitted
by the Administration to authorize an increased contribution by the
United States to the International Development Association. This
Association, an affihate of the International Bank for Reconstruction

ANNUAL REPORT ON T H E FINANCES

XXI

and Development, makes credits to the less-developed member countries which, because of heavy external debt burdens, cannot afford
the repayment terms of conventional international loans. These
credits, however, serve the same important purpose of economic
development as do conventional IBRD loans. The 17 economically
advanced member countries of IDA have agreed to provide additional
resources aggregating $750 miUion over a three-year period, beginning
in the fiscal year 1966. The U.S. portion of this contribution, to be
appropriated later, wUl be $104 miUion for each of the three years.
This agreement represents an important additional step in the
contiauing efforts of the United States to encourage other industrialized nations to share in financing the development of the less fortunate nations of the free world.
Tax Policy
The Revenue Act of 1964 was the third major step in the Administration program to revise basic tax policy. Retroactive to January 1,
the act embodies proposals set forth in the tax message of the President
to the Congress of January 24, 1963, which recommended general rate
reductions and various structural reforms. This legislation followed
the Revenue Act of 1962, the second step in the program, which
included an investment credit for business expenditures for productive
equipment. As the first step, the Treasury in mid-1962 had administratively issued revised guidelines and procedures for determining
depreciation of plant and equipment for tax purposes.
Taken together, these measures are designed to nourish vigorous
business expansion and sustained economic growth. The balanced
reduction of individual and business income taxes is intended to increase consumption and accelerate investment so that the resultant
rise in national income wiU be several times the amount of the initial
tax cut.
The investment credit established by the Revenue Act of 1962 and
the more rapid rate of depreciation under the revised guidelines reduced calendar 1962 corporate taxes by $2.25 bUlion. That reduction,
together with the $2.4 billion tax reduction when the Revenue Act of
1964 becomes fully effective, lowers corporation income taxes approximately 19 percent. Individual taxpayers as a group also receive a tax
reduction of approximately 19 percent when the 1964 act takes fiUl
effect.
The Revenue Act of 1964 includes abundant benefits for small
business. Small corporations gain from the 27-percent reduction in
the corporation tax on the first $25,000 of corporate iacome, compared
with the average overall reduction in corporation tax rates of 9 percent.
Owners of unincorporated businesses benefit from the larger individual

XXII

19 63 REPORT OF T H E SECRETARY OF T H E

TREASURY

rate reductions. They also continue to benefit from the investment
credit and the depreciation reform. These measures, combined, will
significantly strengthen the small busiaess enterprises of the economy.
The entire individual income tax rate structure is improved. Low
income taxpayers benefit from a decrease in the starting rate from
20 to 14 percent and a new minimum standard deduction which frees
from tax all single individuals with incomes up to $900 and all married
couples with incomes up to $1,600. The two provisions afford substantial tax relief at relatively small cost to individuals whose incomes
are at very low levels.
At the upper end of the rate schedule the top surtax rate on individual income falls from 91 percent to 70 percent. Individuals subject
to high individual surtax rates receive increases in aftertax income
which will do much to restore the incentives necessary for the effective
operation of our society. There is no reduction in the alternative tax
rate on net long-term capital gains or on the percentage of capital
gain excluded from tax. This retention of the alternative tax on
capital gains at 25 percent, together with the reduction of individual
surtax rates, narrows the existing disparity in the tax treatment of
high iacomes.
The individual rate reduction occurs in two stages, the first effective as of January 1, 1964, and the second a year later. The act
provided, however, that shortly after its enactment the withholding
rate on individuals' wages and salaries be reduced to its final level of
14 percent.
Of the several structural changes in the income tax other than
those in the rate schedules, some raise revenues and some lower
revenues. Although the legislation contains less reform than had
been recommended by the Administration, the changes made, coupled
with those in the 1962 act, provide the largest amount of revenueraisiag reforms in iacome tax history. The revenue-increasing
provisions in the 1962 act raised $855 million of revenue. The
revenue-increasing changes in the 1964 act will produce gross iacreases
in the long n m of $835 mUlion, compared with $770 million from the
revenue-decreasiag provisions.
A number of structural revisions in the 1964 act curtail special
preferences. They include lioiitations on tax advantages accruing
from group term iasurance, bank loan insurance, sick pay exclusion,
casualty loss deduction, the utilization of personal holding companies,
multiple corporation provisions, gifts of future interest, aggregation
of mineral properties for computing depletion, and the realization of
capital gaias on sales of real estate resulting from excessive depreciation ; and further reduction of the exclusion of foreign earned income
of bona fide foreign residents. Deductions of certain State and local

ANNUAL REPORT ON T H E FINANCES

XXIII

taxes that were difficult of uniform and equitable administration
were eliminated, as was the dividend credit which unduly advantaged
the large iavestor. All of these provisions iacrease revenues. The
act also completed the process of placing larger corporations on a
current tax payment basis.
Revenue-decreasing structural changes other than those in the
income tax rate schedules include indefinite extension of the five-year
capital loss carryover; income averaging for an individual; liberalization of the investment credit and certain computations of the retirement income credit; liberalization of deductions for chUd care expense,
for moving expenses of workers, and for medical expenses of older
persons; and a limited exclusion for gain on the sale of a residence
by older taxpayers. The act liberalizes tax treatment of receipt of
iron ore royalties, certain charitable contributions, installment sales,
and foreign expropriation losses. I t repeals the two-percent penalty
tax paid by corporations for the privUege of fUing a consolidated
return. Corporations under common control which elect not to take
multiple surtax exemptions are allowed an intercorporate dividends
credit of 100 percent.'
As a whole, at 1963 income levels the Revenue Act of 1964 can be
expected to reduce calendar 1964 tax liabilities by $7.7 bUlion and
calendar 1965 liabUities by $11.5 bUlion. (The latter amount includes
the $7.7 bUlion reduction.) The calendar 1965 effect is virtually the
same as the long-term effect before taking into account any impact
of the reductions upon the economy. Of the $11.5 bUlion reduction
in 1965, it is estimated that $9.1 bUlion, or nearly 80 percent of the
total, wUl go to individuals.
At the 1963 levels of income, the act wUl decrease revenues in
fiscal 1964 by $1.6 bUlion and in fiscal 1965 by $8.5 bUlion. (The
latter amount includes the $1.6 bUlion reduction.) Since collection
tends to lag behind the accruing of liabUity, the effects of tax reductions in terms of receipts appear in a later year than they do in terms
of liabUities. If the rising expansion of business activity expected
to accompany the tax reduction is taken into account, the reduction
in fiscal year tax collections is expected to be $1.4 bUlion in 1964 and
$4.4 bUlion in fiscal 1965.
Debt Management
In calendar 1963, a year in which business activity and private credit
demands expanded considerably, the major problem of Treasury debt
management again was to finance a budget deficit and refund debt
maturities without hampering sustained domestic business expansion,
whUe at the same time bolstering the U.S. international payments position.
The specific responsibUities of debt management in furthering

XXIV 1963 REPORT OF THE SECRETARY OF THE TREASURY
these objectives are reviewed in a later section of this report, dealing
with the fiscal year 1963 (see pp. 17 to 24).
The financing requirements which had to be met during calendar
1963 were determined largely by the $39.0 bUlion of marketable certificates of indebtedness, notes, and bonds maturing in that year plus
the new money which had to be raised to finance the calendar year's
budget deficit of $6.7 bUlion. Of the $39.0 bUlion of those maturities,
$2 bUlion was paid off, $18 billion was extended beyond 1964, and
only $19 bUlion was placed in 1964 maturities. In addition, one-third
of the net new money borrowed was raised through issues maturing
in longer than one year and $5 bUlion of the 1964 maturities was extended through prerefunding. These various operations considerably
reduced the volume of debt which would have to be refinanced in
calendar 1964.
Increases in regular weeldy and one-year bill issues, totaling $4.3
billion during calendar 1963, contributed on appropriate occasions to
keeping U.S. Treasury bill rates at levels competitive with short-term
interest rates available in foreign money centers. At the same time,
marketable certificates, notes, and bonds maturing within one year
were reduced, thus enabling the Treasury to keep the overall volume
of short-term Treasury obligations from exceeding the liquidity needs
of the economy. Through advance refundings, the volume of maturities in subsequent nearby years was also reduced, as demonstrated by a
decline of $3.2 billion during the calendar year in outstanding obligations maturing in 1-5 years. Debt maturiag beyond 5 years was
increased by $5.6 billion, with the largest increase ($3.8 billion)
occuring in the 10-20 year sector. The net result of these structural
changes was an extension of 2 months in the average length of the
marketable debt, from 4 years 11 months on December 31, 1962, to 5
years 1 month on December 31, 1963.
In addition to a balanced maturity structure, the Treasury seeks to
maintain a balanced ownership of the Federal debt, in both instances
for the purpose of limiting the possible encouragement to the development of inflationary forces. Accordingly, budget deficits have been
financed in recent years so far as possible through drawing on savings
institutions and other nonbank sources of funds rather than on expansion of bank credit.
Like that for the preceding year, the budget deficit for calendar 1963
was financed entirely outside the Nation's commercial banks. U.S.
Government securities held by commercial banks, in fact, declined by
$3.1 bUlion during the 1963 calendar year. This reduction was
partially offset by an increase of $2.8 billion in the holdings of the
Federal Reserve System, undertaken in order to meet the Nation's
credit and currency needs during a period of economic expansion.

ANNUAL^ REPORT ON T H E FINANCES

XXV

In contrast with this net liquidation of $0.3 billion on the part of
the banking system as a whole, savings and other private nonbank
investors increased their holdings of Federal obligations by $4.0 billion
during the calendar 3^ear. Further, $2.4 billion represented net
additions to Government investment accounts, which include the
large social security and Government employees' retirement trust
funds.
A notable feature of the flow of Treasury offerings during the year
was the success of the advance refunding technique in placing new
issues of longer term debt with the public. Of a total of approximately $15 billion of Treasury offerings with maturities of more than
5 years acquired by the public in calendar 1963, two-thirds resulted
from advance refunding operations. Official agencies—^Government
investment accounts and the Federal Reserve—continued, as in previous years, to purchase Government securities in the market.
Government investment accounts acquired $1.6 billion of over 5-year
issues in the market and the Federal Reserve acquired $0.6 billion.
A variation ia financing techniques in the short-term area was the
introduction in August 1963 of a monthly series of one-year Treasury
bills to replace eventually the four quarterly one-year bUl issues then
outstanding in the amount of $9.5 billion. The first issue ia the
monthly series, for $1.0 bUlion, was auctioned on August 27 and issued
on September 3. This was followed by issues of similar amounts in
October, November, and December. As a part of this program, the
Treasury retired $2.5 bUlion of quarterly one-year bill maturities in
mid-October 1963, replacing them in part by interim borrowing in
the form of tax anticipation bUls to mature in March 1964.
Interest rates on Treasury bills, which had changed relatively little
during the first 6 months of the calendar year, rose from 3 percent to
3% percent during the latter half of the year in response to an increase
in the Federal Reserve rediscount rate and other measures taken to
maintain short-term rates at levels which would provide no incentive
to an outflow of short-term capital. Other concurrent actions are discussed in the review of international finance on pp. 53 to 73, below.
As calendar 1964 began, the Treasury again faced the task of
financing a budget deficit and meeting debt maturities in a year of
business expansion. While the enactment of the new tax legislation
removed some uncertainties concerning revenues, the Government's
financing requirements could not be clearly calculated until the final
action by the Congress on the President's expenditure proposals.
Nevertheless, it seemed probable in the early months of the year that
the magnitude of Treasury borrowing operations in calendar 1964
would not greatly differ from that of 1963. At the same time, the
sharp reduction in the fiscal 1965 budget deficit, projected at $4.9

XXVI 19 63 REPORT OF THE SECRETARY OF THE TREASURY
billion compared with $10.0 bUlion in fiscal 1964, means that most of
the needed borrowing in the latter half of calendar 1964 wUl be seasonal and temporary and therefore can appropriately be met by issuance of short-term tax anticipation bills which would be retired out
of surplus revenues in the first half of calendar 1965. In any case,
debt management in the current calendar year wUl again be centered
on financing the debt increase ia a manner that will support business
expansion without buUding inflationary potential, while contributing
to the support of our balance-of-payments position through appropriate actions in the short-term maturity sector of the debt.
DOUGLAS DILLON,

Secretary oj the Treasury,
To
To

THE
THE

PRESIDENT P R O TEMPORE OF THE SENATE.
SPEAKER OF THE H O U S E OF REPRESENTATIVES.

REVIEW OF FISCAL O P E R A T I O N S

Summary of Financial Operations
For the flscal year 1963 the administrative budget deflcit was $6.3
biUion, which was $0.1 bUlion less than the deficit in 1962. N e t
administrative budget receipts increased $5.0 billion to $86.4 billion,
reflecting mainly increases in individual income and corporation tax
receipts and a substantial rise in misceUaneous receipts. Net
administrative budget expenditures were $4.8 biUion larger, amounting to $92.6 bUlion.
CHART 2

The Administrative Budget

Net receipts of trust funds in fiscal 1963 totaled $27.7 biUion and
net expenditures, $26.5 biUion, a $1.1 biUion excess of receipts.
On the basis of a consohdated cash statement (receipts from and
payments to the pubUc), total receipts from the pubhc during 1963
were $109.7 biUion whUe total payments were $113.8 billion, an excess
of payments of $4.0 bUlion.
The total public debt outstanding on June 30, 1963, was $305.9
biUion, an increase of $7.7 billion from June 30, 1962. The fiscal

1963 REPORT OF THE SECRETARY OF THE TREASURY

operations of the Government in 1962-63 and their effect on the
public debt are summarized as follows:
In billions of dollars

Administrative budget receipts and expenditures:
Net receipts (—)—
Net expenditures
Administrative budget deficit.
Trust receipts and expenditures:
Netreceipts (—)
Net expenditures
Excessof expenditures, or receipts (—)
.
Net investments tn public debt and agency securities
_._
Net sales (—), or redemptions of Government agency securities in m a r k e t . . .
Increase (—), or decrease (+) in checks outstanding, deposits tn transit (net),
etcIncrease (—), or decrease (+) in public debt interest accruedChange in cash balances, iacrease, or decrease (—):
Treasurer's account
Held outside Treasury
Increase in public debt

..-

' Revised.
•Less than $50 million.

Administrative Budget Receipts and Expenditures
Receipts

The $5.0 billion increase in net administrative budget receipts
in the fiscal year 1963, to $86.4 bUlion, followed a rise of $3.7 billion
in 1962 and brought budget receipts to another alltime record.
Economic activity expanded steadUy throughout the fiscal year 1963.
Although two 1962 tax changes, liberalized depreciation and the
investment tax credit, reduced the rise in taxes on business profits,
total tax revenues increased $3K billion. An addition of $1.3 bUlion
to miscellaneous receipts, primarily from nontax sources, brought
the overaU rise to $5.0 billion.
A comparison of net administrative budget receipts by major
sources for fiscal 1962 and 1963 is shown below. Additional data for
1963 on a gross basis are presented in table 18.
1962

1963

Source

Amount
In

Intemal revenue:
Individual income taxes
Corporation tncome taxes
Excise taxes—_
Estate and gift taxes

:.-

Total intemal revenue
Customs duties.
Miscellaneous receipts
Budget receipts

Increase

-._

Percent

mi llions of dollars

45,571
20,523
9,585
2,016

47,588
21,579
9,916
2,167

2,017
1,066
330
151

4.4
51
3.4
75

77,696
1,142
2,672

81,249
1,205
3,922

3,654
63
1,360

4.6
5.6
52.5

81,409

86,376

4,987

6.1

REVIEW OF FISCAL OPERATIONS

Individual income taxes.—^Receipts from individual income taxes
amounted to $47.6 billion, 55 percent of budget revenues. The gain
over 1962 in individual income taxes was $2 billion, 41 percent of the
total increase in net budget receipts. Receipts from taxes withheld
on wages and salaries increased as incomes rose generally in fiscal 1963.
However, taxes other than those withheld declined slightly as a result
of lower capital gains in 1962.
Corporation income taxes.—Receipts from corporation income taxes
are dependent primarily on the amount of corporate profits for the
calendar year which ends in the fiscal year.
Profits of corporations rose substantiaUy in the calendar year 1962
despite increased depreciation charges of $2)^ bUlion under the new
guidelines. The rise in tax coUections from this source, however,
was limited to $1.1 billion because the investment credit enacted in
1962 reduced corporate tax liability by an estimated $1 billion for the
year.
Excise taxes.—^Receipts from excise taxes are shown in the following
table.
Increase, or decrease
1962

(-)

1963

Source

Amount
In

Percent

millions of dollars

Alcohol taxes
_
-.-.
Tobacco taxes
. .
._
Taxes on documents, other instruments, and playing cards
Manufacturers excise taxesRetailers excise taxes
Miscellaneous excise taxes .
Undistributed depositary receipts and unapplied collections.—

3,341
2,026
159
'5,133
'421
'1,570
••IOl

3,442
2,079
149
5,610
444
1,620
66

100
54
-10
477
22
49
-35

Gross excise taxes
Less:
Refunds of receipts—
Transfers to highway tmst fniid

12,752

13,410

658

218
2,949

216
3,279

-2
330

—1 1
11 2

9,685

9,915

330

Net excise taxes

30
26
-6.4
93
53
3 1
-34.7

' Revised.

Net excise tax receipts, after deduction of refunds and transfers to
the highway trust fund, rose $330 miUion, or 3.4 percent. This
brought the total to $9.9 bUlion for the year. Increases were pervasive, reflecting the general rise ia economic activity in the fiscal
year 1963.
Estate and gift taxes.-—Estate and gift tax coUections were 7K percent
larger in fiscal 1963 than in 1962. Even so, since estate taxes
are not payable untU 15 months after death and the valuation of the
estate is the lesser of the value at time of death or one year later, the
rise did not reflect the strong rise in stock prices during the last three
quarters of fiscal 1963.

1963 REPORT OF THE SECRETARY OF THE TREASURY

Customs.-—Customs duty collections amounted to $1.2 biUion in
the flscal year 1963. The rise of 5.6 percent reflected an increase in
taxable imports which accompanied the general advance in business
activity.
Miscellaneous receipts.-—Miscellaneous receipts are a nontax revenue source. Such receipts had been depressed in fiscal 1962 by
repayments of foreign loans which had been advanced to 1961. The
rise of $1.3 bUlion in these receipts in 1963 again reflected substantial
foreign loan repayments. I t was bolstered also by larger rent receipts and repayments to the unemployment trust fund by States.
Estimates of receipts

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 flscal year and for the flscal 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 flscal 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.
The estimates of receipts and the legislative and economic assumptions upon which they are based are the same as those presented in the
Budget message of the President of January 21, 1964. The message
recommended enactment of the income tax reduction bill, H.R. 8363,
as approved by the House of Representatives except for the reduction
in rates on capital gains unless accompanied by taxation of gains on
property transferred at death. The message also recommended that
the individual income tax withholding rate be dropped from the existing 18 percent to 14 percent as soon as possible after enactment.
The House bill provided for a decrease to 15 percent starting January
1, 1964. The estimates of revenue for fiscal 1964 and 1965 assumed
that the recommended reduction in the withholding rate would take
effect in February.
The revenue bill of 1964 reduces tax rates and makes various structural changes in individual and corporate income taxes, and bolsters
economic incentives. Part of the tax reduction will be in effect during
the calendar year 1964 and the remainder during calendar 1965.
When fuUy effective, it will reduce income tax liabilities by over $11
billion a year.
The rates on taxable individual incomes then will be in a range from
14 percent to 70 percent, compared with the former range from 20
percent to 91 percent. The present first bracket of taxable income
up to $2,000 for single persons, and $4,000 for married couples, which

REVIEW OF FISCAL OPERATIONS

has been taxed at 20 percent, will be divided into four equal brackets,
ea;ch of which wiU be taxed at a different rate below 20 percent.
The combined normal and surtax rates on corporation incomes above
$25,000 is 50 percent for 1964 and will become 48 percent in 1965,
compared with the former 52 percent. Incorporated small businesses
receive an even larger tax rate reduction, since the normal tax rate on
corporation income below $25,000 has been reduced to 22 percent,
compared with the former 30 percent.
Corporations with income tax liabilities in excess of $100,000 per
year have their tax payments moved closer in time to the accrual of
tax liabilities. The speedup of payments starts in the calendar year
1964 and will be completed in 1970, when payments of estimated tax
liabilities greater than $100,000 will be made quarterly as the liability
develops. During the transition to the new payment schedule total
tax payments by these corporations wUl not exceed the taxes they
would pay under present rates on the same income.
Under present law, the excise rates on distiUed spirits, beer, wines,
cigarettes, passenger automobiles, and automobile parts and accessories will be reduced on July 1, 1964, and the tax on general telephone
service wiU expire on July 1, 1964. The revenue estimates are based
on proposed legislation extending the present rates of these taxes for
one additional year.
I t is further assumed that certain proposals with respect to transportation taxes will be enacted.
The most significant changes proposed affect commercial and other
users of transportation, and would become effective on July 1, 1964.
These include: Continuing as a user charge the 5-percent excise tax
on air passenger transportation which would otherwise expire on July
1, 1964; instituting a 5-percent tax on air freight; extending to jet
fuels, currently untaxed, the present 2 cents per gallon tax on fuels
used in commercial air transportation; increasing from 2 cents to 3
cents per gallon the tax on all fuels used in general aviation; and
initiating user charges for the inland waterways through a tax of 2
cents per gallon on fuels used in transportation on these waterways.
The receipts from all of these charges wiU be retained in the general
fund of the Treasury under the proposed legislation.
In addition, a land and water conservation fund has been proposed
to finance planning, land acquisition, and development of recreation
facUities, to be carried out chiefly through grants to States. The
revenues would come to this new fund from existing and new admission
and user fees in national forests, parks, and other recreation areas,
the proceeds from the sale of surplus Government real property, and
transfer of certain motor boat fuel taxes from the highway trust fund.
707-484—64

19 63 REPORT OF THE SECRETARY OF THE TREASURY

Enactment of the 1964 tax biU wiU accelerate the growth of the
economy toward fuU employment. Under these conditions the Nation's output of goods and services is expected to reach $623 bUlion
in the calendar year 1964, an increase of $38 bUlion over calendar 1963.
This projection should be taken as the midpoint of a $10 biUion range,
from $618 billion to $628 bUlion. Substantial gains in personal income
and corporate proflts before taxes wUl accompany the growth in output.
SpeciflcaUy, the calendar year revenue estimates are based on the foUowing
economic assumptions:

1962
actual

1963
preliminary

1964
estimate

In billions
Gross national product
Personal income
Corporate profits before taxes

$554.9
442.1
46.8

$585.0
463.0
61.7

$623
492
66

Estimates of tax revenues >cannot be derived directly and simply
from the assumed levels of aggregate economic performance. The
deflnitions of taxable income in the tax statutes, which determine tax
liabilities, differ from the economic or statistical deflnitions of income
which are used to measure economic performance. In addition, tax
payments are received by the Treasury after the period in which tax
liabUities are incurred. For example, corporation income tax collections now lag about 6 months behind the period when the taxable
income was earned; there is also some lag between the time when
individual income and social security taxes are deducted from earnings
and the time employers transfer these sums to the Treasury.
Under the new income tax rates, which are to be retroactive to
January 1, 1964, tax payments by individuals and corporations wiU be
reduced by approximately $2.6 billion in the fiscal year 1964 and $8
billion in fiscal 1965, calculated on the basis of calendar 1963 income
levels. These potential gross losses in tax receipts, however, wiU be
offset in part by increased revenues from the economic stimulus of the
tax cut and a new schedule for quarterly corporation tax payments.
As a result, the net revenue decline from the tax changes is estimated
to be $2.2 biUion in fiscal 1964 and $3.1 bUlion in fiscal 1965.
Despite these losses, revenues are expected to continue rising. I n
the fiscal year 1964 revenues are estimated to increase $2.0 biUion
over actual receipts in 1963 to a total of $88.4 bUlion. A further rise
of $4.6 biUion to a total of $93.0 bUlion is estimated for 1965. Receipts
will have risen for four consecutive years by fiscal 1965, reaching a
level $15.3 biUion above 1961. This revenue gain reflects the $120

REVIEW OF FISCAL OPERATIONS

billion increase in gross national product, estimated for the calendar
year 1964 over actual 1960.
Actual administrative budget receipts for flscal 1963 and estimated
receipts for 1964 and 1965 are compared by major sources in the
accompanying table. The amount shown for each revenue source is
the net amount after deduction of, refunds, transfers to trust funds,
and interfund transactions.

Source

1963
actual

1964
estimate

1966
estimate

Increase,
1966 over
1964

In millions of dollars
Tndividiial in come taxes .
Corporation income taxes.
Excise taxes
.
Estate and gift taxes
Customs
Miscellaneous receipts
Administrative budget receipts

47,688
21,679
9,915
2,167
1,205
3,922

47,500
23,700
10,221
2,335
1,276
3,369

48,600
26,800
10,987
2,740
1,460
3,613

1 000
2,100
766
405
186
144

86,376

88,400

93,000

4,600

Individual income taxes.—Actual individual income tax receipts were
$47,588 million in flscal 1963. They are estimated to remain virtually
unchanged at $47,500 mUlion in 1964 and then rise $1,000 million to
$48,500 miUion in 1965. These changes reflect the net effect of the
reduction in tax rates and the anticipated rise in personal income
subject to tax.
The effect of the income tax reduction in flscald964 will be reflected
in reductions in withheld taxes in the last part of the year. The decrease in the withholding rate from 18 percent to 14 percent will affect
withheld tax revenues for the whole of 1965 but because of collections
lags the fuU effect of the second step of the tax reduction will be
delayed untU 1966.
Corporation income taxes.—Corporation income tax receipts are expected to rise by approximately the same amount, $2,100 million in
both flscal 1964 and 1965. Rising corporate proflts are primarily
responsible since the corporation provisions of the income tax reduction do not have substantial effects on receipts. The flrst step of the
corporate rate reduction affects calendar year 1964 tax liabUities which
for the most part are collected in flscal 1965. The reduction in tax
liabUities is almost offset, however, by the increase in receipts because
of the proposed acceleration of tax pajnnents.
Excise taxes.—Net excise tax revenues, excluding transfers to the
highway trust fund, are estimated to rise from $9j915 mUlion in 1963,
to $10,221 mUlion in 1964, and to $10,987 miUion in 1965. Fiscal
year 1964 receipts wiU be reduced by the phasing out of the reduction.

1963 REPORT OF THE SECRETARY OF THE TREASURY

effective November 15, 1962, of the tax on transportation by air from
10 percent to 5 percent and the repeal of the tax on other transportation. Receipts in 1965 are increased by approximately $150 million
by proposals for transportation user charges and the recreation and
conservation fund.
Estate and gift taxes.—Receipts from this source arise mostly from
collections of estate taxes which are payable flfteen months after death.
The 1963 rise in stock market values will not be reflected in receipts
untU flscal 1965. Combined estate and gift tax receipts are estimated
to increase from $2,167 miUion in 1963, to $2,335 million in 1964, and
to $2,740 miUion in 1965.
Customs.—Customs receipts are estimated to increase from $1,205
million in 1963, to $1,275 million in 1964, and to $1,460 million in
1965 as a result of the anticipated expansion of economic activity.
Miscellaneous receipts.—MisceUaneous receipts, after deduction
of interfund transactions are expected to decline from $3,922 mUlion
in 1963 to $3,369 million in 1964 because of reduced receipts in rentals
from Outer Continental Shelf lands and repayment of foreign loans
which had been unusually large in 1963. A rise of $144 million to
$3,513 miUion is estimated for 1965.
Expenditures

During the fiscal year 1963 administrative budget expenditures
totaled $92.6 bUlion, or $4.9 bUlion over 1962. Expenditures by
major functions for fiscal years 1955-63 are shown in detaU in table 15.
A summary of expenditures by certain major functions, comparing
fiscal 1963 with 1962, follows:

Program

1962

Increase, or decrease (—)
1963
Amount

Percent

In millions of dollars
National defense
Intemational affairs and finance
space research and technology
Interest payments
__
Veterans' benefits and services.
Agriculture and agricultural resources.
Health, labor, and welfare
_.
Commerce and transportation
Other 1
Less interfimd transactions
Total.

87, 787

62, 755
2,688
2,552
9,980
5,186
6,954
4,789
2,843
5.507
513

1,652
-229
1,295
782
-217
1,073
251
69
68
-120

3.2
-8.1
103.0
8.5
-4.0
18.2
5.6
2.5
1.1
-14.0

92,642

4,855

5.5

1 Includes programs relating to natural resources, housing and community development, education, and
general government.

National defense expenditures in fiscal 1963 accounted for almost
60 percent of total expenditures; interest payments accounted for

REVIEW OF FISCAL OPERATIONS

10.8 percent; veterans' benefits and services, over 5 percent; and
agriculture and agricultural resources, 7.5 percent.
Estimates of expenditures

Administrative budget expenditures in the fiscal years 1964 and
1965 are estimated at $98.4 billion and $97.9 billion, respectively.
The following shows, by major functions, the estimated expenditures
for 1964 and 1965, as compared with the immediately preceding
fiscal year:
1963
actual

Program

Increase,
Increase,
1964
1965
or deor deestimate crease (—), estimate crease (—),
1964 from
1966 from
1963
1964
In millions of dollars

National defense
International affairs and finance
Space research and technology
Interest payments
Veterans' benefits and services
Agriculture and agricultural resources.
Health, labor, and welfare
Coinmerce and transportation.
_
Other 1
Less interfund transactions
Total.,

62,755
2,588
2,552
9,980
5,186
6,954
4,789
2,843
5,507
513

55,297
2,447
4,400
10, 701
6,362
6,070
6.533
3,151
6,129
686

2,542
-141
1,848
721
176
-884
744
308
622
172

63,979
2,248
4,990
11,101
6,081
4,907
5,832
3,069
7,293
600

-1,318
-199
690
400
-281
-1,163

92,642

98,406

5,763

97,900

-505

299

-82
l,l&i
-85

1 Includes programs relating to natural resources, housing and community development, education, and
general government.

Trust Receipts and Expenditures
Receipts

The increase of $3.4 billion in net trust receipts in fiscal 1963 to
$27.7 billion, was due principaUy to the rise in the combined social
security tax rate from 6% percent to 7% percent, effective January 1,
1963.
Net trust receipts for fiscal 1963, by certain of the major sources,
are shown below, compared with 1962.
Increase, or decrease
Source

1962

1963
Amount

In
Employment taxes
Deposits by States, uneTnplojrrnent insurance
Excise taxes
__1
l._I
Interest on tmst funds . ^ .
^. „ . .
Other trust receipts i
Less interfund transactions __ _
Net trust fund receipts. _ .

. . .

_ .

millions of

Percent

dollars

12,561
2,729
2,949
1,433
6,146
528

14,862
3,009
3,279
1,477
5,567
505

2,301
280
330
44
421
-23

18.3
10.3
11.2
3.1
8.2
—4.4

24,290

27, 689

3,399

14.0

1 Includes Federal employee and agency payments to retirement funds, veterans' life insurance premiums,
and other miscellaneous trust receipts.

1963 REPORT OF THE SECRETARY OF THE TREASURY

Estimates of receipts

Trust receipts in the fiscal years 1964 and 1965 are expected to
continue to rise, with the greater increase taking place in 1964, the
first fuU fiscal year under the increased social security tax rates.
Estimated trust receipts by major sources for the fiscal years 1964 and
1965 are compared with the immediately preceding fiscal year in the
foUowing table:

1963
actual

Program

Increase,
Increase,
or de1964
1965
or deestimate crease (—). estimate crease (—),
1965 from
1964 from
1964
1963
In millions of dollars

Employment taxes
Unemployment tax deposits by States
Excise taxes
. . . .
Interest on trnst fnnds
^.
Other trust receipts i
Less interfund transactions
Net trnst fnnd receipts .

14,862
3,009
3,279
1,477
6,567
605

16,777
2,900
3,478
1,589
6,907
488

1,916
-109
199
112
340
-17

16,996
2,826
3,504
1,669
6,356
477

219
-76
26
80
448
-11

27,689

30,163

2,474

30,872

709

1 Includes Federal employee and agency payments to retirement funds, veterans' life insurance premiums, and other miscellaneous trust receipts.

Expenditures

During fiscal 1963 trust expenditures amounted to $26.5 bUlion,
$1.1 billion less than net trust receipts and $1.4 billion greater than
trust expenditures in fiscal 1962.
Total trust expenditures in the fiscal year 1963, by major functions,
are shown below, compared with 1962:
Increase, or decrease (—)
Program

1962

1963
Amount

Percent

In millions of dollars
National defense
Intemational affairs and flnance
Veterans' benefits and services
Agriculture and agricultnral resources..
Health, labor, and welfare
Commerce and transportation
other 1
Less interfund transactions
Total trust expenditures..

366
16
733
398
20,382
2,662
1,113
628

679
44
836
507
21,866
2,877
253
606

313
29
102
109
1,473
216
-860
-23

85.5
193.3
13.9
27.4
7.2
8.1
-77.3
-4.4

26,141

26, 546

1,404

6.6

1 Includes programs relating to natural resources, housing and community development, education, and
general government, and net transactions in deposit fund accounts.

In fiscal 1963 health, labor, and welfare programs accounted for
82.3 percent of total trust expenditures; commerce and transportation

REVIEW OF FISCAL OPERATIONS

programs, principally the highway trust fund, made up almost 11
percent.
Estimates of expenditures

I t is estimated that trust fund expenditures in the fiscal years 1964
and 1965 wUl be $29.3 biUion and $29.4 biUion, respectively. The
following table shows, by major functions, the estimated trust expenditures for 1964 and 1965, compared with the immediately preceding
fiscal year:

Program

1963
actual

Increase,
Increase,
or de1964
or de1965
estimate crease (—), estimate crease (—),
1966 from
1964 from
1964
1963
In millions of dollars

National defense
Intemational affairs and flnance
Space research and technology
Agriculture and agricultural resources.
Commerce and transportation
Health, labor, and welfare
Veterans' benefits and services
Other 1
Less Interfund transactions
Total trast funds.

507
2,877
21,855
835
253
505

(*)475

3,394
22,669
642
1,670
488

(*)- 3 2

617
814
-193
1.417
-17

1,231
99
2
442
3,466
23,649
495
565
477

26,545

29,315

2,770

29,372

679
44

867
86

188
42

364
13
2
-33
72
880
—147
-1,105
-11
67

• Less than $600,000.
»Includes natural resources, housing and community development, education, and general government,
and net transactions in deposit fund accounts.

Receipts from and Payinents to the Public
The Government's receipts from and payments to the public,
or cash income and outgo, must be referred to when considering the
impact on the private economy of the Government's financial transactions. Total receipts from and payments to the public are
obtained by adding administrative budget receipts and expenditures to trust fund receipts and expenditures with an appropriate
deduction for intragovernmental transactions, and adjustments
to expenditures for debt issuances in lieu of checks, the change in
checks outstanding, and certain other transactions involving no
exchange of cash with the public. For a more detailed explanation
of this subject, see page 31 of the 1962 annual report.
During fiscal 1963 total receipts from the public amounted to
$109.7 billion, while total payments to the public were $113.8 billion,
an excess of payments amounting to $4.0 billion. The following

1963 REPORT OF THE SECRETARY OF THE TREASURY

summary shows receipts from and payments to the public for the
fiscal years 1962 and 1963, with estimates for fiscal 1964 and 1965:
Actual
Receipts from a n d p a y m e n t s to t h e p u b l i c

1962

Estimated
1963

1964

1 1965

I n millions of doUars
R e c e i p t s from t h e p u b l i c :
A d m i n i s t r a t i v e b u d g e t receipts (net)
T r u s t a n d other receipts (net)
I n t r a g o v e r n m e n t a l a n d other n o n c a s h t r a n s a c t i o n s (—).

81,409
24,290
-3,834

86,376
27,689
-4,326

88,400
30,163
-4,197

93,000
30,872
-4,130

T o t a l receipts from t h e p u b l i c

101,865

109, 739

114,366

119,742

Paj^ments to t h e p u b l i c :
A d m i n i s t r a t i v e b u d g e t e x p e n d i t u r e s (net) . .
T r u s t fund a n d other e x p e n d i t u r e s (net)
__.
___.._
Intragovernmental and other noncash transactions ( - ) - - .

87, 787
25,141
-6,266

92,642
26,545
-5,436

98,405
29,315
-6,016

97,900
29,372
-4,682

T o t a l p a y m e n t s to t h e p u b l i c

107,662

113,751

122, 704

122,690

-6,797

-4,012

-8,338

-2,948

Excess of cash receipts from, or p a y m e n t s to (—) t h e p u b l i c

Investments of Government Agencies in Public Debt and Agency
Securities (Net)
Investments in public debt and agency securities usually are made
pursuant to legislative requirements, and provide interest incom.e on
funds not needed to meet current expenditures. They are generally
reported at par. In fiscal 1963 purchases for public enterprise funds
and trust funds exceeded sales by $1,298 million; purchases for certain
deposit funds constituting Government-sponsored enterprises exceeded
sales by $771 mUlion.
Sales and Redemptions of Securities of Government Agencies in the
Market (Net)
Certain Federal agencies have authority to issue their securities as
a means of financing operations, as explained in the following paragraphs. Reported at par value, transactions in the securities of these
agencies during fiscal 1963 resulted in net redemptions of $435 mUlion;
transactions in securities of Government-sponsored enterprises
resulted in net issuances (sales) of $1,457 mUlion.
Corporations and Certain Other Business-Type Activities of the U.S.
Government
The various busiaess-type programs administered by Government
corporations and certain other agencies are financed by appropriations,
capital stock subscriptions, borrowings from the U.S. Treasury or
the public, or by utilizing revenues derived from their own operations.

REVIEW OF FISCAL OPERATIONS

Agencies haviag legislative authority to borrow from the public
must have the approval of the Secretary of the Treasury regarding
the terms of the securities to be offered prior to their issuance (31
U.S.C. 868). Agencies exempt from the approval requirement must
consult with the Secretary of the Treasury on their proposed offerings.
Loans or advances of funds made by the Secretary of the Treasury,
pursuant to the terms of the borrowing authority, are evidenced by
formal securities of the agencies or agreements executed between the
Secretary and the head of the borrowiag agency. These borrowings,
or advances, are reported in the financial statements of the agencies
as part of the Government's net investment in the enterprise.
Advances by the Treasury in fiscal 1963, exclusive of refinancing
transactions, totaled $8,456 million; repayments during the year
amounted to $7,919 million. The outstanding loans and advances as
of June 30, 1963, totaled $29,172 mUlion.
New congressional authority to borrow from the Treasury granted
in fiscal 1963 amounted to $977 mUlion and reductions of borrowing
authority totaled $691 mUlion, a net increase of $286 mUlion. Unused
authority as of June 30,1963, amounted to $20,928 mUlion, compared
with $21,180 mUlion on June 30, 1962. The status of the borrowing
authority of these corporations and agencies is shown in table 110.
Interest rates applicable to borrowiags from the Treasury, except
where fixed by law, are determiaed from month to month by the Treasury, taking iato consideration the cost to the Government in effecting
its borrowings in the current market as reflected by the prevaUing
market yields on Government securities having maturities approximately equivalent to the advances or loans made to the agencies.
Table 111 gives a description of the securities of the Government
corporations and agencies held as of June 30, 1963, together with the
applicable uiterest rates.
Payments in the form of iaterest, dividends, and distribution of
earnings are made either on the basis of the operating results of an
enterprise, or in compliance with legislative requirements. During
fiscal 1963, $562 mUlion was received in the Treasury as interest
payments on advances to agencies and $169 mUlion as other payments.
DetaUs regarding these payments are contained in table 114.
Financial statements submitted to the Treasury

Government corporations and agencies submit to the Treasury
quarterly statements of financial condition, income and expense, and
source and application of funds; statements of long-range commitments
and contingencies are submitted semiannually. These reports serve
as the bases for combined statements compUed by the Treasury.
Individual and combined financial statements, includiag statements

1963 REPORT OF THE SECRETARY OF THE TREASURY

of income and expense and source and application of funds, are
published periodically in the Treasury Bulletin.
Business-type activities included in the administrative budget
category are the public enterprise and intragovernmental revolving
funds, and revenue producing activities financed by general and special
funds. The total combined assets, including interagency items, of
these administrative budget funds amounted to $84,883 mUlion as of
June 30, 1963. The combined liabUities, which also include interagency items and consist primarUy of accounts payable and borrowings
from the public, amounted to $7,645 mUlion. Borrowings from the
Treasury are not included in liabUities; they are considered part of the
Government's investment. Comparable totals for business-type
activities included in the trust fund category as of June 30, 1963,
were $14,317 mUlion of assets and $9,107 mUlion of liabUities.
In fiiscal 1963 the total combined iacome of Government corporations and business-type activities included under administrative
budget funds amounted to $14,059 mUlion; total expenses amounted
to $17,395 mUlion, resiUting in an overall net loss of $3,336 miUion.
Public enterprise revolving funds, which account for the majority of
business-type transactions, experienced a combined net loss during the
year of $3,520 mUlion. Operations of the intragovernmental revolving
funds and general and special funds resiUted in a combined net income
of $184 million. Those pubUc enterprise funds whose net income
or loss during the year accounted for most of the net loss of $3,336
mUlion included:

Post Office Department, postal fund
Export-Import Bank, regular lending activities
Commodity Credit Corporation
Federal National Mortgage Association:
Special assistance functions
Management and liquidating functions
Veterans' Administration, direct loan program
Tennessee Valley Authority
Federal Housing Administration.

;

Net income,
or loss (-)
in milions
—$819
114
— 2, 597
10
5
16
38
75

Summary statements of financial condition of Government corporations and other business-type activities, as of June 30, 1963, are
shown in table 112.
Account of the Treasurer of the United States
The account of the Treasurer of the United States is printed in
summary balance sheet form in the Daily Statement oj the United
States Treasury, and in more detail in table 57. Briefiy, the account
consists of three major categories: Gold, sUver, and the general account.

REVIEW OF FISCAL OPERATIONS

As of June 30, 1963, the value of the gold on hand was $15,733 million,
held principaUy at the Fort Knox Depository with lesser amounts in
the mints and assay offices. Gold liabilities included $15,613 million
of gold certificates issued to Federal Reserve Banks and held as
reserves against Federal Reserve notes and for the redemption of
U.S. notes, etc. The free gold balance was $120 miUion. SUver
bullion and silver dollars included in the assets totaled $2,144 million,
against which liabilities of sUver certificates (currency issued against
free silver, etc.) totaled $2,126 million, leaving a balance of silver
totaling $18 miUion. Assets of the general account, $12,116 mUlion
as of June 30, 1963, included gold and sUver balances against which
there were no specific legal liabilities or reserves, cash in the form of-,
currency and coin, unclassified coUections, and Government funds on
deposit with Federal Reserve Banks and other depositories.
D/Uring the fiscal year there was an increase of $1,686 million in the
balance of the Treasurer's account. The net change during the year
is accounted for as foUows:
Transactions affecting the account ofthe Treasurer ofthe United States, fiscal year 1963
In millions of dollars]

Balance June 30, 1962
10, 430
Excess of deposits, or withdrawals (—), budget, trust, and
other accounts:
Deposits
114, 454
Withdrawals
.
118,477 - 4 , 023
Excess of deposits, or withdrawals (—), public debt accounts:
Increase in gross public debt
7, 659
Deduct:
Excess of Government agencies' investments
in public debt securities
1, 981
Accrual of discount on savings bonds and
bills (included in net increase in gross
public debt above)„__
2, 858
Less certain public debt redemptions (included above in withdrawals, budget,
trust, and other accounts)
— 1, 824
Total deductions
—3, 015 4, 644
Excess of sales of Government agency securities in the market
26
Net transactions in clearing accounts (documents not received or
classified by the Treasurer of the United States)
Balance June 30, 1963

1, 039
12,116

Public Debt Management
Economic condi tions—by affecting both revenues and expenditures—
influence significantly both the size of the Treasury's borrowing task
and the market in which Government securities are sold. Thus, an

1963 REPORT OF THE SECRETARY OF THE TREASURY

essential element of the environment in which decisions on public debt
mangement are made is the state of the economy. Moreover, the
manner in which the Treasury meets its primary responsibihty of
raising the funds needed to cover Government expenditures and refinance maturing securities has important imphcations for the financial
markets and the general economy. These implications must be
appraised in arriving at the choice of instruments, their terms, and
timing, which constitute the management of the debt.
In fiscal 1963 the administrative budget deficit requiring financing
amounted to $6.3 billion. The Federal debt (the public debt and
guaranteed obligations not owned by the Treasury) actually rose a
little more than this, increasing $7.8 billion to $306.5 billion on
June 30, 1963. As a result, there was a $1.7 billion increase in the
cash balance of the Treasurer of the United States.
CHART 3

The Federal Debt - Semiannually since 1946
$Bil.
306.5
300«-

June'61^

r 289 2

/idll
275»',/une-5e^

^ / ^

[•iiiii!:-:::-:-;-;':-:-:-!

ii i iiiiiiiiiiiiii iiiiiiiiii

^June'48

25^)5

ililil 1- :;:iiiiiilHii
2524

250»-

lllllil lllll
iiiiiiiiiiliiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiii;!:^
iiiiJi^iixiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiii^ :;iiiiiii iiiiiiiiii

225-

m i ^w
0

ttL

^ ^ ^ M

»Including public debt and guaranteed obligations.

iiliiiiiiiiiiiiiUiiUiiiiUiiii^^
iinnWiiiiMin^ili^^^^

JiMttgi

ai U
1

Treasury borrowing in the economic environment of fiscal 1963
required a careful balancing of several objectives of public debt
management. Business activity continued to expand and private
credit demands rose to new record levels, increasing the competition
for available funds. At the same time, persisting high levels of unemployment and unused plant capacity provided evidence that
expansionary forces still needed encouragement if the economy's
human and physical resources were to be more fully used. In these
circumstances, the very substantial flow of savings that remained
available for investment in longer term securities offered an oppor-

REVIEW OF FISCAL OPERATIONS

tunity to continue progress in restructuring the debt. At the same
time, the volume of longer term offerings and the technique used to
place this debt had to be carefuUy accommodated to the absorptive
capacity of the market. Meanwhile, the tendency for investment
funds to flow abroad and aggravate a deterioration in the U.S. balanceof-payments position dming the fiscal year required positive steps
to reduce and eliminate incentives to the transfer of these funds
abroad.
More specificaUy, the U.S. balance-of-payments position made it
appropriate to put more stress on using debt management, in cooperation with monetary pohcy, to bring U.S. short-term interest rates
into better ahgnment with rates available in major money centers
abroad so as to minimize the outfiow of short-term funds from this
country. Yields on three-month Treasury biUs rose from about
2% percent at the close of fiscal 1962 to about 3 percent at the close
of fiscal 1963. Shortly after the end of the fiscal year, short-term
yields moved up further and for balance-of-payments reasons the
Federal Reserve discount rate, was raised from 3 percent to 3K
percent.
However, the fact that the economy continued to be characterized
by excessive levels of unemployment and unused plant capacity
made it inappropriate similarly t o bring upward pressure on long-term
interest rates through debt management operations. A premature
increase in long-term rates occasioned by Government demands in
the short-term area could have slowed the rise in private business
activity and in long-term, credit demands, both of which clearly were
desirable in terms of domestic goals. Treasury debt management,
accordingly, was directed toward avoiding pressure on the long-term
markets while at the same time continuing an orderly program toward maintenance of a sound, well-balanced debt structure. Reflecting these efforts, and the continuation of a high rate of savings
in the economy, yields on long-term Treasury bonds and corporate
bonds at the close of fiscal 1963 were approximately the same as at
the end of June 1962 and were actually lower than in December 1961.
Municipal securities yields showed little net change during fiscal 1963
while mortgage yields moved lower throughout the year. Shortly
after the close of the fiscal year. President Kennedy proposed a special
interest equahzation tax on American purchases of foreign stocks
and bonds to slow the outflow of U.S. long-term capital without
artificially attempting to raise U.S. long-term interest rates to levels
inconsistent with the pattern of domestic savings and investment.
With business activity continuing to rise,Treasury debt management
policy had to bear in mind the possibUity that increased issues of
Treasury bUls in fiscal 1963, designed to bring upward pressures on

1963 REPORT OF THE SECRETARY OF THE TREASURY

key short-term interest rates, might unless otherwise offset make the
economy overly liquid and create potential inflationary pressures.
This potential threat to an orderly economic environment was avoided
by reducing the volume of short-term Treasury issues other than bUls
and by successful placement of substantial amounts of intermediate
and long-term bonds.
Debt management in the fiscal 1963 environment, as ia other recent
years, has had to face the task of bringing about an acceptable
balance among these various domestic and international objectives.
The major results which have been achieved duriag the past 2}^
years are summarized in the paragraphs which follow.
The short-term problem

In the 2/^ years from December 1960 through June 1963 the
Treasury increased the outstandiag volume of regular Treasury bills
(3-month, 6-month, and 1-year series) by $14.8 billion. To help
make room for these increases, the Treasury exercised strict control
over other short-term debt, both new coupon issues and outstanding
obligations falling into the 1-year sector as a result of the passage of
time. In consequence, coupon issues maturing within one year
increased by only $2.2 bUlion over the period.
CHART 4

Structure of the Under I-Year Marketable Debt

NOTE.—Coupon Issues include all certificates, notes, and bonds maturing within one year.

WhUe short-term marketable debt increased on a net basis between
December 1960 and June 30, 1963, chart 4 shows that the upward
trend was reversed in fiscal 1963. In that year the Treasury was able

REVIEW OF FISCAL OPERATIONS

to make a net reduction of $3.1 bUlion in total under 1-year debt,
while adding $7.0 biUion to the volume of regular weekly and 1-year
Treasury bUls. This was accomplished in part by the introduction of
prerefundings, a variation of the advance refunding technique in
which holders of securities maturiag within 1 year are offered new
and longer issues in exchange for their current holdings. In the
first prerefunding operation, undertaken ia September 1962, almost
$8 bUlion of securities maturing within the succeediag 8 months was
exchanged for 4-year 11-month or 9-year 11-month obligations, thus
clearing the way for new financing, particularly new bill financing,
in the critical under 1-year area.
Debt restructuring: the contribution of advance refunding

The part which advance refundiag has played in restructuriag the
marketable debt beyond the one-year area is shown in chart 5. The
chart covers the period beginning with 1959, when legislation facilitating advance refunding was enacted.
CHAET 5

Role of Advance Refunding in Restructuring the
Over 1-Year Marketable Debt
$Btl.
—

Ito 5 Year Maturities
79 Q
'^^

60^-

Issued in Advance
Refundings

58.3
15.3: ..26%

40^-

20»--

:;il959S760^-;.|[6l;;^:':i;62:-;;;;63/i
>Jun^f30;

In the 1- to 5-year area, as noted above, a major purpose has been
to keep the outstanding volume under control so as to avoid undue
spUlover into the short-term sector. As shown in the chart, there
was a heavy concentration of maturities in the 1-to 5-year area in
1960, when the advance refunding technique was stiU in its experimental stages. Between the end of 1960 and the close of fiscal 1963,
however—a period during which the total marketable debt increased
by $14.5 bUlion—outstanding 1- to 5-year maturities were reduced

19 63 REPORT OF THE SECRETARY OF THE TREASURY

by nearly $13 bUUon, from $70.8 billion on December 31, I960, to
$58.0 biUion at the end of fiscal 1963. Of the $58.0 bUUon, $15.3
biUion or 26 percent resulted from advance refunding operations.
In the maturity groups of more than 5 years, advance refunding
had the major advantage of maintaining ownership on the part of
longer term investors without the need for operations which might
prove disturbing in the market or might divert new savings funds
from private uses. On June 30, 1963, more than half of the outstanding obligations in the 20-year and over area had originally been
issued in advance refunding operations. In the 5- to 20-year range,
the proportion due to advance refunding was approximately onefourth. Since December 1960, restructuring of the debt has resulted
in an overall increase of $17.3 bUlion in maturities of 5 years or
longer—$2.8 biUion more than the increase in the total marketable
debt over that period. In consequence, despite the shortening effects
of the passage of time, the average length of the Federal debt has
increased appreciably, from 4 years 7 months at the end of calendar
1960 to 5 years 1 month on June 30, 1963.
I t may be noted that in the 20-year and over area, $550 mUlion
of the approximately $14}^ billion debt outstanding on June 30, 1963,
resulted from a recent innovation in Treasury finance, the sale of
long-term bonds through competitive bidding. This technique is
stUl in an experimental stage, and the Treasury will continue to
explore it and other new procedures for improving the debt structure
whenever circumstances are propitious.
Commercial bank ownership

In addition to maintaining a balanced debt structure in terms of
maturities, the Treasury must seek to maintain a debt ownership
pattern which will give the least possible encouragement to the
growth of inflationary forces. In particular, the Treasury has not
wished to rely on commercial bank holdings of highly liquid shortterm debt in excess of amounts that these banks feel necessary to
support such growth in their deposits and other assets that is in
accord with the basic needs of the economy.
Between December 1960 and June 1963, when under one-year debt,
excluding seasonal financing, increased $17.0 bUlion, commercial banl^
holdings of Government securities increased only $2.3 billion. AU of
the increase, however, took place before fiscal 1963. Between June
30, 1962, and June 30, 1963, commercial bank holdings declined $0.8
bUlion.
For the entire banking system, there was a net increase of $1.6
billion in holdings of U.S. Government securities during the fiscal
year, reflecting the decline of $0.8 billion in commercial bank owner-

REVIEW OF FISCAL OPERATIONS

ship and an increase of $2.4 billion in the holdings of the Federal
Reserve. Thus almost four-fifths of the $7.8 billion increase in the
public debt during fiscal 1963 was financed outside the banking system, in accordance with the Treasury's objective of financing the
budget deficit without generating an inflationary potential.
I t may be noted also that a marked extension in maturity length
occurred in the Government portfolios of commercial banks during
fiscal 1963. This was due in part to the continued search for higher
earnings to cover increased interest rates permitted on time deposits
in commercial banks beginning in January 1962. Between June 30,
1962, and June 30, 1963, commercial banks reporting to the Treasury
Survey of Ownership reduced their holdings of marketable U.S. Goverhment obligations maturing in 1 year or less by $7.3 billion. At
the same time these banks added $1.3 billion to their holdings of 1to 5-year maturities and $5.3 billion to maturities of 5- to 10-years.
Maturities of over 10 years declined by $0.9 billion.^
Further details on^ changes in ownership during fiscal 1963 on the
part of both bank and nonbank investors are found on pp. 36 to 40.
Market yields

Chart 6, which shows market yields of U.S. Government securities
at constant maturities in recent years, Ulustrates the extent to which
the Treasury and the monetary authorities have been successful in
helping to maintain short-term rates at levels which are competitive
internationaUy, while causing only slight upward pressures in the
longer term area.
As indicated in the chart, the market rate for 3-month Treasury
bills, which averaged approximately 2% percent in December 1960,
had risen to approximately 3 percent by June 1963. Shortly after
the end of the fiscal year further increases were required to maintain
equUibrium with competitive rates abroad.
In contrast with short-term movements, the 20-year Government
rate remained relatively stable, ranging on a monthly average basis
from about 3% percent to about 4% percent during the 2 ^ years
ending in June 1963. Long-term rates in the private sector of the
economy showed no tendency to rise in response to pressures being
exerted in the shorter maturity areas. On the contrary, during the
two-year period from June 1961 to June 1963, when bill rates were
rising fairly consistently, rates on high grade corporate bonds, on
municipal obligations, and on mortgages actually declined.
1 The figures relating to the maturity structure of commercial bank holdings include only the holdings
of commercial banks reporting to the Treasury Survey of Ownership. For further details see table 55.
707-484—64
4

1963 REPORT OF THE SECRETARY OF THE TREASURY
CHAET 6

Market Yields at Constant Maturities' 1960-63
%
^20 rears

"•\ \

V/Vv,

./\

-.*... y

.-^T *-

^•v
^.^ . / ^ 3 M o n t h
y^*—-N./ "^
Bills

1 Estimated yields of U.S. Government securities at 1, 5, and 20 years; bank discount rates on bills;
monthly averages of end of week figures.

PUBLIC DEBT OPERATIONS IN FISCAL 1963 ^

The primary area in which the Treasury works toward its debt
management objectives is the marketable debt. On June 30, 1963,
$203.5 bUlion, or approximately two-thirds of the Federal debt of
$306.5 biUion, was in marketable issues. Of the total $7.8 bUlion
increase in the debt during the year, $7.4 bUlion was accounted for
by increases in marketable obligations. A summary of changes in
the debt during the year is shown in the accompanying table.
June 30,
1962

June 30,
1963

Increase, or
decrease ( - )

Class of debt
In billions of dollars
Public debt:
Interest bearhig:
Public issues:
Marketable
Nonmarketable

-- --

Total public issues
Special issues to Government investment accounts
Total interest-bearing public debt
Matured debt on which interest has ceased
Debt bearing no interest
TotaJ public debt Guaranteed obligations not owned by Treasury..
Total gross public debt and guaranteed obligations

;

196.1
53.4

203.5
53.6

7.4
.2

249.5
44.9

257.2
44.8

7.6
-.1

294.4
.4
3.3

302.0
.3
3.6

7.5
-.1
.3

298.2
.4

305.9
.6

7.7
.2

298.6

306.6

7.8

Exclusive of the refinancing of regular weekly, 3-month, and
6-month bUls, the Treasury issued $77.4 bUlion of new marketable
obligations during the fiscal year. Of this total, $16.5 biUion was
issued for new cash, including $5.5 biUion of seasonal borrowing

REVIEW OF FISCAL OPERATIONS

which was retired before the end of the year. The remaining cash
borrowings reflected not only demands on the Government's funds as
a result of the budget deficit but also replacements of unexchanged
portions of maturing securities in refundings and some limited additions to cash in the last month of the fiscal year in anticipation of
fiscal 1964 needs.
In addition to new cash operations, $45.0 billion of securities was
issued to refund maturing obligations, either through exchange oft'ers
or through payment in cash and the simultaneous offering of new
issues. The remaining $15.9 billion of new securities issued in fiscal
1963 represented obligations issued in the course of refunding outstanding issues in advance of maturity.
Marketable debt is issued by the Treasury in the form of obligations
ranging in maturity length from 3 months for certain Treasury bills
to 40 years or more in the case of the longest Treasury bonds. I t is
essential for the Treasury to offer a wide range of maturities if it is
to reach all types of demand for Government securities. The distribution among the various maturity classes of the $77.4 billion of
new obligations issued during fiscal 1963 is summarized in the foUowing
table.
Maturity at issuance
1 year and under:

Amount issued,
•^^'="' ^^^^

BiUs: 1

[In billions of dollars]

Increases in regular 3-month and 6-month weekly series
Strip bill series ^
1-year series
Tax anticipation series
Total bills
Certificates
Total 1 year and under
Over 1 year:
1-5 years
5-10 years
10 years and over

44. 6
16. 1
13.4
3. 2

;

Total over 1 year
Total marketable

4. 5
1. 0
9. 5
5. 5
20.5
24. 1

32. 7
'-

77. 4

1 Excludes refinancing of regular weekly bills.
2 Additional amounts of a series of outstanding Treasury bills maturuig over a period of consecutive
weeks.

New money operations in the regular bill market (exclusive of
seasonal borrowing), which raised the volume of outstanding biUs by
$7.0 billion, took place during most months of the fiscal year.
As the year began, the Treasury was in the midst of a cycle of increases in regular weekly bills which added a total of $200 million
each week to the 3-mont.h and 6-month series. This program was
followed untU mid-August 1962, when the cycle of increases in the

1963 REPORT OF THE SECRETARY OF THE TREASURY

3-month series was completed. Weekly increases of either $100 million or $200 miUion in the 6-month series were continued through
early January 1963, and resumed again for an 8-week period beginning
March 28 and ending May 16. A strip of biUs in the amount of
$1.0 bUlion, offered in mid-November, added $100 million to each of
the 10 biU issues maturing between January 17 and March 21, 1963.
Including the strip-biU ofl'ering, regular 3-month and 6-month,
Treasury bills outstanding amounted to $37.7 biUion on June 30, 1963,
an increase of $5.5 biUion over June 30, 1962.
One-year bUls were increased by a total of $1.5 billion through
additions of $0.5 biUion each at the refundings of the maturities of
October 1962, January 1963, and AprU 1963. Seasonal borrowing in
the form of tax anticipation bills was also undertaken in October
1962 and in February and March 1963, as shown in the table on page
30.
These continued financing operations in the bUl market, in combination with Federal Reserve policy, supported the objective of bringing more upward pressure on Treasury bUl rates, as was shown in
chart 6. After a rise in July 1962, which carried the 3-month rate
to almost 3 percent, short-term rates fell off somewhat in September
and October. Partly in response to this situation, the Federal Reserve took action to avoid putting further downward pressure on
biU yields when it supplied bank reserves to meet seasonal needs.
Instead of buying Government securities, largely Treasury bUls,
the Federal Reserve released reserves in October through reducing
reserve requirements against time deposits in member banks.
By mid-November 1962 the offering rate on new 3-month Treasury
bUls had again moved up beyond 2.80 percent. The rate continued
to advance irregularly during the remainder of the fiscal year, with
the offering rate on the shortest bUls averaging close to 3 percent in
June 1963.
The $24.1 bUlion of one-year certificates issued in fiscal 1963
represented largely replacements of maturing obligations issued in
the cash refunding of August 1962 and in the exchange operations of
November 1962, February 1963, and May 1963. The detaUs of
these offerings are shown in the table on page 30.
The rates on new offerings of certificates in fiscal 1963 reflected
the other efforts to maintain short-term rates. Certificates, like all
coupon issues priced by the Treasury, are offered at prices to yield
an interest return as close to prevailing market rates as is consistent
with a successful operation, in order to keep the interest cost to the
Treasury at a reasonable minimum. Offering rates on these obhgations ranged between 3}^ percent and 3}^ percent during the fiscal
year; the last issue, that of May 1963, carried a rate of 3)^ percent.

REVIEW OF FISCAL OPERATIONS

The Treasury's major progress in debt restructuring in fiscal 1963
was accomplished as a result of advance refunding operations. Although the major purpose of the first operation of the year of this
type, the prerefunding of September 1962, was to clear the way for
new financing in the under one-year area, it also contributed substantially to lengthening the debt by adding $5.3 bUlion to 1- to 5year debt and $2.6 bUlion to the debt at the far end of the 5- to 10year area.
In the advance refunduig of March 1963 the Treasury took the
novel step of combining a prerefunding and a junior advance refunding to place new issues in each of three longer maturity areas :
the 1-to 5-year, the 5- to 10-year, and the 10-year and over. In all,
$29.0 bUlion of outstanding securities was included in the double
operation. Owners in the prerefunding group (holders of $18.7
biUion of issues maturing from August 1963 through February 1964)
were given the opportunity of exchanging their holdings for 3-year
11-month notes, 8-year 8-month bonds, or 16-year 11-month bonds.
Owners in the junior advance refunding group (holders of $10.3
bUlion of issues maturing in November 1965 and in February, August,
and November 1966) were offered in exchange either an 11-year
8-month bond or the longest bond (16-year 11-month) included in
the prerefunding offer. Two of the eligible issues included in the
prerefunding were being given their second opportunity for extension,
and one of the eligible issues in the junior operation had been issued
in the advance refunding of March 1961. This genealogy Ulustrates
the flexibUity with which the advance refunding technique can make
avaUable to investors new U.S. Government obligations in preferred
maturity areas at times and in amounts suitable to their needs.
In both the advance refunding operations of fiscal 1963, cash
adjustments were made to provide terms of exchange equally attracttive to the holders of all eligible issues. The terms in most previous
operations of this type also included such adjustments.
The March 1963 advance refunding, which resulted in a larger
dollar volume of exchanges than had occurred previously in an
operation of this type, made a substantial contribution to debt
restructuring. A total of $8.0 billion of eligible holdings was exchanged: $4.3 billion for the notes, $2.6 billion for the medium-term
bonds of 1971 and 1974, and $1.1 billion for the bonds of 1980.
Further details of this operation, including allotments to subscribers,
are shown in the tables on pages, 30, 31, and 32.
WhUe advance refunding has proved the major instrument for
debt restructuring in recent years, the Treasury has continued to
take advantage of other favorable occasions for lengthening the debt.
In three of the four regular refundings of fiscal 1963 (the cash refunding

1963 REPORT OF THE SECRETARY OF THE TREASURY

of August 1962 and the exchange offers of November 1962 and
February 1963) the options offered investors included 5- to 10-year
maturities in addition to the customary short-term obligations.
The cash refunding offer of August 1962 also included a 30-year bond.
Owing to market conditions prevailing at the time, the options in
the last refunding of the fiscal year, that of M a y 1963, were limited
to a 1-year certificate and a 2-year 9-month note.
Two cash offers of the fiscal year were notable in that they represented sales of Treasury bonds through competitive bidding by
syndicates of security dealers and banks, with the syndicate bidding
the highest price receiving the entire issue. This competitive bidding
procedure applied to bonds was a departure from the usual practice
of offering such issues on the basis of a predetermined price and rate.
Preparations for this pioneering event went on over a considerable
period. On September 14, 1962, the Treasury announced that it
would offer about $250 million of bonds at competitive bidding
within the next 6 months and urged all interested persons and institutions to submit their views on the procedural and other aspects of
the operation. Subsequently, meetings were held in which Treasury
representatives explained the purposes and conditions of the forthcoming auction and again asked for comments and suggestions.
Announcement of the auction of $250 million 30-year 1-month
bonds due in 1993 and callable in 1988 was made on December 20,
1962. The Treasury stated that the bonds would be offered to
underwriters for competitive bidding on January 8; the underwriters
in turn were required to make a bona fide reoffering of all of the bonds
to the investing public. A few days before the auction it was announced further that bidders would be given a choice of a 4-percent
or a 4)^-percent coupon.
The bid of the winning syndicate, for a 4-percent coupon, resulted
in an interest cost to the Treasury of 4.008210 percent, calculated to
maturity—several basis points less than would have been required
in a subscription offering. The bonds were offered by the syndicate
at par and were rapidly disposed of to the public, with the major
part going to savings-type investors.
Encouraged by this experience and by the good reception which had
been accorded the 17-year bonds offered in the March advance
refunding, the Treasury announced on March 20 that $300 million of
31-year 1-month obligations due in 1994 and callable in 1989 woiUd be
auctioned on April 9. Optional coupon rates of 4 percent and 4K
percent were again offered. The winning bid, in this instance for a
4}^-percent coupon, resulted in a cost to the Treasury of 4.093145
percent. Although the basis cost of money to the Treasury provided
by tbe winning bid was thus higher than that of the January auction,

REVIEW OF FISCAL OPERATIONS

the relationship of this bid to other prevaUing yields in the market
was approximately the same.
The new auction bond was priced by the syndicate at 100.75 per
$100 of face amount to yield 4.082 percent to maturity. Investors
showed only limited interest in the bonds at this rate, and reportedly
one-half of the issue remained unsold when the syndicate terminated
price restrictions on April 25. The Treasury has emphasized that
bond auctions remain experimental, with testing under varying
conditions essential to gauge the receptivity of the market to this type
of offering.
One further cash offering beyond the short-term area was made
before the end of the fiscal year. An upward revision in the debt
limit toward the end of May 1963 (as reviewed below), made it
possible for the Treasury to make a small start in June on the financing
requirements of the new fiscal year. Accordingly, on June 6, 1963,
the Treasury announced a cash offer at par of $1^ biUion 4 percent,
7-year 2-month bonds to mature in August 1970. Subscriptions in
amounts up to and including $100,000 were to be aUotted in full,
whUe amounts subscribed over $100,000 would be aUotted on a
percentage basis. The Treasury indicated at the time of the announcement that it was prepared to enlarge the issue by 10 to 15 percent if
investor interest proved sufficiently extensive.
The major purpose of the $100,000 full-aUotment provision was the
encouragement of subscriptions from smaU banks and others who
might hesitate to guess at what the Treasury's aUotment percentage
might turn out to be. A high minimum, it was believed, would
considerably broaden the area reached initially by Treasury cash
offers outside the bUl market.
The response to this offering far exceeded the Treasury's expectations. Subscriptions numbered almost 24,000 and amounted to
approximately $16}^ bUlion. Since there was a possibUity of undue
speculative activity, the Treasury in cooperation with the Federal
Reserve took unusual steps to weed out duplicate subscriptions.
Nevertheless, in order to cover the basic allotments of $100,000 and
give at least tradeable aUotments to regular market participants, the
issue was increased to $1.9 biUion and percentage aUotments on subscriptions of more than $100,000 were set at the very low figure of 5
percent.
The foUowing 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 bUls.
Table 43 shows allotments by investor classes. The exhibits on
public debt operations give details of public offerings and allotments
by issues in tables and representative circulars.

1963 REPORT OF THE SECRETARY OF THE TREASURY

Puhlic offerings of marketable Treasury securities excluding refinancing of regular
weekly bills, fiscal year 1963
[In millions of dollars]
Issued for cash
Date

Description of security

Issued in
exchange

For new] For re- For ma-| In admoney funding turing vance
issue refunding

Total

BONDS, NOTES, AND CERTIFICATES OF INDEBTEDNESS

1968
Apr. 1 1H% exchange note—Apr. 1,1967 i
—
Aug. 15 33^^% certificate—Aug. 15,1963Aug. 15 4% bond—Feb. 15, 1969
Aug. 15 m % bond—Aug. 15,1987-92 (issued at 101)
—.
Sept. 15 3%% note—Aug. 15, 1967
Sept. 15 4% bond—Aug. 15,1972.,..
Oct. 1 13^% exchange note—Oct. 1,1967 »
._
Nov. 15 33^% certificate—Nov. 15,1963..._
Nov. 15 3H% note—Nov. 15, 1965
_Nov. 15 4% bond—Feb. 15,1972
Dec. 15 Z7/i% bond—Nov. 15,1971 additional at 99.60
—
Dec. 15 4% bond—Feb 15,1980 additional at 99.50
Jan.
Feb.
Feb.
Mar.
Mar.
Mar.
Mar.
Apr.
Apr.
May
May
June

17
15
15
15
15
15
15
1
18
15
15
20

4% bond—Feb. 15, 1988-93 auction 8.,
3H% certificate—Feb. 15,1964
3M% bond—Aug. 15,1968 additional.,
S%% note—Feb. 15, 1967
3%% bond—Nov. 15,1971 additional.
dlWo bond—Nov. 15, 1974 additional.
4% bond—Feb. 15, 1980 additional....
1H% exchange note—Apr. 1,1968 L__
43^% bond—May 15, 1989-94 auction «
3H% certificate—May 15,1964
35i% note—Feb. 16,1966 additional...
4% bond—Aug. 15, 1970
Total bonds, notes, and certificates. _

3 919
3 550
3 108

2,150
1,286
252

2 222
3,782

457
4,856
3,286
2,344
*41
<34
250

6,741
2,490

300

5,282
2,679

4,287
1,515
1,074
1,131

5,693
3,273

'i,'906
4,033

33,276

15,868

222
6,851
1,844
366
5,282
2,579
457
4,856
3,286
2,344
41
34
250
6,741
2,490
4,287
1,515
1,074
1,131
44
300
5,693
3,273
1,906
56,865

BILLS ^ (MATURITY VALUE)

1962

1963

Increases in regular weekly bill offerings:
July through September
October through December
January through March
April through June
Total increases..

July
Oct.
Oct.
Nov.

15
3
15
15

1963
Jan. 15
Feb. 6
Mar. 22 9
Apr. 15

2,002
1,511
292

3,005
497
1,001

3.016% 1 year—Jan. 16,1964._
2.929% 138-day (tax anticipation) June 24, 1963..
2.856% 94-day (tax anticipation) June 24,1963...
3.062% 1 year—Apr. 15, 1964
Total bills
Total public offerings.

4,603

4,503

Other bill offerings:
3.267% 1 year—July 16,1963
2.616% 170-day (tax anticipation) Mar. 22, 1963..
2.969% 1 year—Oct. 16,1963
2.866% 94.5-day average for strip s

2,004
3,005
2,600
1,001

16
1,813

190

495
1,001
1,502
500

1,962

1,917

12,504
16,637

7,680
11,368

329
33,605

2,496
1,001
1,502
2,501

15,868

20,513
77,378

1 Issued only on demand in exchange for 2%% Treasury Bonds, Investment Series B-1975-80.
2 Issued subsequent to June 30,1962.
8 Prorated on the basis of amount of each security issued for cash.
4 Includes cash payments of $93,000 for the 3J^% bonds and $101,826.for the 4% bonds on exchange of Series
F and G savings bonds.
« The bonds were sold to a syndicate on the basis of competitive bidding for reoffering to the public. The
winning bid was $99.86111 per $100 of face amount for a 4% coupon, resulting in a net basis cost to the Treasury
of 4.008210% calculated to maturity.
6 The bonds were sold to a syndicate on the basis of competitive bidding for reoffering to the public. The
winning bid was $100.66119 per $100 of face amount for a i]ri% coupon, resulting in a net basis cost to the
Treasury of 4.093146%, calculated to maturity.
7 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.
8 Consists of additional amounts of ten series of outstanding regular weekly Treasury bills, $100 million
maturing each week from Jan. 17 through Mar. 21,1963.
• Additional to issue of Feb. 6,1963.

REVIEW OF FISCAL OPERATIONS

Disposition of marketable Treasury securities excluding regular weekly bills, fiscal year
1963
[In millions of dollars]

Date of
refunding or
retirement

Security

Description and maturity date

Issue date

ReExchanged for
deemed new security
for cash
or
Total
carried
At
In adto ma- matu- vance
tured
rity
redebt
funding

BONDS, NOTES, AND CERTIFICATES OF
INDEBTEDNESS

1962
Aug. 15
Aug. 16
Sept. 15
Sept. 15
Sept. 15
Sept. 15
Sept. 15
Sept. 15
Oct. 1
Nov. 15
Nov. 15
Nov. 15
Nov. 15

4%not&-Aug. 15, 1962....
334% note-Aug. 15, 1962.
3J^% certificate-Feb. 15, 1963..
2H% note-Feb. 16, 1963
3H% note-Feb. 15, 1963
334% certificate-May 15, 1963..
334% note-May 15, .1963
4% note-May 16, 1963
13^% note-Oct. 1, 1962
3M%note-Nov. 15, 1962
334% note-Nov. 15, 1962
2K% bond-Dec. 16, 1969-62....
2%% bond-Dec. 16, 1960-65 2._

Sept.
Feb.
Feb.
Apr.
Nov.
May
May
Apr.
Oct.
Nov.
Aug.
Nov.
Dec.

1,1959
1,1957
29,1957
1,1961
15,1945
15,1938

1968
Feb. 15
Feb. 15
Feb. 15
Mar. 15
Mar. 16
Mar. 15
Mar. 15
Mar. 15
Mar. 15
Mar. 15
Mar. 16
Apr. 1
May 15
May 16
May 15

33^% certificate-Feb. 15,1963..
2^^% note-Feb. 15, 1963
334% note-Feb. 15, 1963
3H% certificate-Aug. 15, 196323^% bond-Aug. 15,1963
33.^% certificate-Nov. 16, 1963.
3% bond-Feb. 15, 1964
_.
33^^% note-Nov. 15,1965
3^^% note-Feb. 16, 1966
3% bond-Aug. 15,1966
Z%% bond-Nov. 15, 1966
13^% note-Apr. 1, 1963
334% certificate-May 15, 1963..
4% note-May 15, 1963..
._
33^4% note-May 16, 1963

Feb.
Apr.
Nov.
Aug.
Dec.
Nov.
Feb.
Nov.
May
Feb.
Mar,
Apr.
May
Apr.
May

16,1962
16,1958
15.1961
15.1962
15,1954
15,1962
14,1958
15,1962
15,1962
28,1958
15.1961
1.1958
15.1962
1.1959
15,1961

26.1957
15.1961
15.1962
15.1958
15.1961
16.1962
16,1961

Total bonds, notes, and certificates.

154
1,534

4
1 3, 791
1,142
1,352
1,383
1,401
2,021
560

690
92
112
219
73

1,051
5,970
2,050
1,412
5,660
1,396
2,176
1,671
2,856
302
1,066
332
734
460
586

533
117
266
146

5,167
917
2,881

6,070

32,474

15,866

158
7,325
1,142
1,352
1,383
1,401
2,021
560
590
1,143
6,082
2,269
1,485
5,719
1,487
2,259
1,671
2,856
302
1,066
332
734
460
586
533
5,284
1,183
3,027
54,410

BILLS

July 16
Sept. 21
Oct. 15

2.908% July 15, 1962
2.896% (tax anticipation) Sept. 21, 1962..
2.975% Oct. 15, 1962

July 15,1961
Mar. 23,1962
Oct. 16,1961

1,988
i 1,802
1,813

116

2,004
1,802
2,003

1963
Jan. 16
Mar. 22
Apr. 16
June 24
June 24

3.366% Jan. 16,1963..
2.616% (tax anticipation) Mar. 22, 1963..
2.943% Apr. 16, 1963
2.929% (tax anticipation) June 24, 1963..
2.855% (tax anticipation) June 24, 1963..

Jan. 15,1962
1,962
Oct. 3.1962 3 3,005
Apr. 15.1962
1,917
Feb. 6.1963 31,001
Feb. 16.1963 31, 502

139

2,001
3,005
2,001
1,001
1,602

14, 990
21,060

329
32,803

Total bills
Total securities.

184

15,866

15,319
69, 729

1 Accepted in payment in lieu of cash.
2 Called on Aug. 14, 1962, for redemption on Dec. 15,1962.
3 Including tax anticipation issues redeemed for taxes.

As was evident on various occasions during tbe year, debt management operations in fiscal 1963 had to be conducted within a debt
limit which at times considerably restricted flexibility of action. In
an act approved July 1, 1962, Congress for the first time had attempted
tp fit changes in the debt limit to the seasonal pattern of Treasury
financing. Temporary ceilings above the $285 billion permanent
limit were authorized as follows: $308 billion from July 1, 1962,

1963 REPORT OF THE SECRETARY OF THE TREASURY

Allotments of marketable Treasury securities other than regular weekly hills, fiscal year
1963 1
[In millions of dollars]
Allotments by investor
classes
Date of
financing

U.S. Govemment
Amount investment Comissued
accounts mercial All
and
banks2 others
Federal
Reserve
Banks

Description of security

BONDS, NOTES, AND CERTIFICATES OF INDEBTEDNESS

1962
Aug. 15
Aug. 15
Aug. 15
Sept. 15
Sept. 15
Nov. 15
Nov. 16
Nov. 15
Dec. 15
Dec. 16

33r^% certificate-Aug. 16,1963-C 3
4% b o n d - F e b . 15, 19693
434% bond—Aug. 15, 1987-92 3
3%% note—Aug. 16,1967-A
4% bond-Aug. 15,1972
33^^% certificate—Nov. 16,1963-D
33.^% note—Nov. 15,1965-B
4% b o n d - F e b . 15, 1972
3^^% b o n d - N o v . 16,1971 additional
4% bond—Feb. 16,1980 additional

1963
Jan. 17
Feb. 15
Feb. 15
Mar. 15
Mar. 15
Mar. 15
Mar. 15
Apr. 18
May 15
May 15
June 20

4% b o n d - F e b . 15,1988-93 <
334% certificate-Feb. 15,1964-A
ZH% bond—Aug. 15,1968 additional
3^^% note—Feb. 15,1967-B
3Wo bond-Nov. 15, 1971 additional
3 ^ % bond—Nov. 16,1974 additional
4% b o n d - F e b . 15,1980 additional
m % bond—May 15, 1989-94 4
334% certificate—May 15,1964-B
3H% note—Feb. 15,1966-B additional
4% bond—Aug. 16, 1970

1962
July 15
Oct. 3
Oct. 15
Nov. 15

3.257% July 16, 1963
2.616% (tax anticipation) Mar. 22, 1963
2.969% Oct. 15, 1963
2.866% strip s

2,004
3,005
2,600
1,001

1963
Jan. 15
Feb. 6
Mar. 22
Apr. 15

3.015% Jan. 16, 1964
2.929% (tax anticipation) June 24,1963
2.855% (tax anticipation) June 24,1963 additional
3.062% Apr. 15, 1964

2,496
1,001
1,602
2,501

6,851
1,844
365
5,282
2,579
4,856
3,286
2,344
41
34

-..

..-

....
.-..
--.

260
6,741
2,490
4,287
1,515
1,074
1,131
300
5,693
3,273
1,906

3,804
100
60
21
320
3,796
1
6

(*)
(*)
3,923
15
20
30
152
124
3,327
85

1,967
453
200
1,676
1,113
629
1,047
834
39
2 1
33
1

1,080
1,291
115
3,585
1,146
431
2,238
1,504

50
1, 612
1,635
2,711
923
491
278
166
1,327
2,033
886

200
1,306
840
1,556
562
431
729
134
1,039
1,155
1,020

952
2,975
1,209
675

1,008
30
1,011
426

1,331
416
714
1,192

1,103
586
788
1,197

BILLS

44
280

62
112

* Less that $500,000.
1 Excludes 13^% Treasury EA and EO notes issued in exchange for nonmarketable 2%% Treasury Bonds,
Investment Series B-1975-80.
2 Includes trust companies and stock savings banks.
3 Offerings of these securities, subject to allotments, were made for the purpose of paying off maturing
securities in cash. Holders of the maturing securities were not offered preemptive rights to exchange their
holdings but were permitted to present them in payment or exchange, in whole or in part, for the new issues.
* Sold at competitive bidding with allotment distribution based on sales reported by syndicate members.
5 Consists of an additional $100 million each of ten series of outstanding weekly bills issued in a strip on
Nov. 16, 1962, maturing Jan. 17 to Mar. 21, 1963, inclusive.

through March 31, 1963; $305 biUion from AprU 1 through June 24,
1963; and $300 billion from June 25 through June 30, 1963. The
successive declines were intended to reflect the fact that, under
favorable circumstances, it is possible to reduce or liquidate the
seasonal borrowing of July-December during the heavy tax payment
months of April and June. The extent to which this can in fact be
accomphshed is dependent, of course, on the budgetary situation at
the time.

REVIEW OF FISCAL OPERATIONS

Before the end of calendar 1962 it became apparent that the
reductions scheduled for April 1 and June 25, 1963, were unrealistic
in view of the budgetary deficit anticipated for fiscal 1963 and the
financing which would be required during the final quarter of the
fiscal year. On January 17, 1963, President Kennedy included in his
budget message a request for legislation that would extend the current
$308 billion temporary debt limit through the remainder of fiscal
1963. Following this message. Secretary DiUon appeared before the
House Ways and Means Committee on February 27 in support of the
proposed legislation. See exhibit 15.
The House took no immediate action, and the lower ceiling of
$305 biUion went into effect on AprU 1, 1963. On M a y 15 the House
acted on the Treasury's request by passing legislation establishing
temporary limits of $307 biUion through June 30, 1963, and $309
billion for the first two months of fiscal 1964. Each of these limits
was $1 billion below the levels requested. I t was believed that by
the end of August 1963 a clearer view of probable tax changes, as
well as appropriations for fiscal 1964, would be possible.
On M a y 28, 1963, after Secretary Dillon had appeared before the
Senate Finance Committee urging passage of the House biU (see
exhibit 16), the Senate passed the requested legislation and it was
approved by the President on the foUowing day. The new legislation
made it possible for the Treasury once more to take advantage of
favorable circumstances for the programming of new money operations.
Public nonmarketable debt increased by $0.2 bUlion during the
year, reaching $53.6 billion on June 30, 1963. This relatively small
net change nevertheless comprised substantial increases and decreases
in the various types of public nonmarketable interest-bearing debt
outstanding. The largest change during the year was a $0.8 billion
decline in investment series bonds. As in the past, this change was
due principally to the exchange of nonmarketable Series B investment
boiids for marketable 5-year, 1% percent exchange notes.
During fiscal 1963 the Treasury expanded the foreign borrowing
operations begun a year earlier, when for the first time since 1918
the Treasury borrowed directly from foreign oflicial agencies. Innovations in foreign borrowing operations during fiscal 1963 included
a lengthening of the original maturity of the securities involved
through the issuance of notes and bonds as well as certificates.
Foreign nonmarketable securities increased by $0.3 biUion during
fiscal 1963, reaching $1.3 biUion on June 30. This total includes $0.5
bUlion of certificates of indebtedness, and $0.8 billion of the longer
term securities, denominated in both foreign currencies and U.S.
doUars, issued to foreign governments and central banks. In keeping
with the needs of foreign central banks, certain of the notes and bonds

1963 REPORT OF THE SECRETARY OF THE TREASURY

provide for the possibility of conversion into short-term U.S. obligations denominated in the same currency as the original security,
whether U.S. dollars or foreign currency.
In some cases these securities issued to central banks have been
specificaUy designed to deal with special operations. For example, a
$58.0 million Treasury note was issued with an original maturity of
five years, redeemable before maturity for the purpose of purchasing
promissory notes held by the Export-Import Bank of Washington.
These nonmarketable foreign series and foreign currency series
securities, issued at interest rates equal to those prevailing for comparable maturities in the U.S. market, provide foreign central banks
and governments with attractive investment possibUities as an
alternative to purchases of gold from the United States or of U.S.
securities in the money market.
In January 1963 the Treasury inaugurated a new nonmarketable
security, the U.S. retirement plan bond, in accordance with the
Self-Employed Individuals Tax Retirement Act of 1962 (26 U.S.C.
401-05). These bonds may be purchased only in connection with
bond purchase plans and pension and profit-sharing plans as described
in the 1962 act. There ^y^as less than $1 million of the retirement
plan bonds outstanding on June 30, 1963. Treasury Department
regulations governing the issuance of the new retirement bonds will
be found in exhibit 12.
Class of security

June 30,
1962

June 30,
1963

Increase, or
decrease (—)

In millions of dollars
U.S. savings bonds:
Series E
Series H
Subtotal E andH_
Series F and G
Series J and K
Subtotal savings bonds
Certificates of indebtedness:
Foreign series
Foreign cm'rency series
Treasury notes—Foreign series
_
Treasm-y bonds—Foreign currency series..
Treasury certificates
U.S. retirement plan bonds..
Treasury bonds:
REA series
Investment series
Depositary bonds
'..
Total interest-bearing public nonmarketable issues..
*Less than $600,000.

38,260
6,695

39,166
7,193

906

44,956
853
1,799

46, 359
246
1,709

1,404
-607
-90

47, 607

48,314

707

860
75

465
25
183
604
2

-395
-49
183
604
2

(*)
26
4,727
138

27
3,921
103

63,431

53, 646

(*)
2
-806
-35

REVIEW OF FISCAL OPERATIONS

U.S. savings bonds, which are demand securities payable at guaranteed redemption values, account for the largest portion of the nonmarketable public debt. Series E and Series H, the only savings
bonds currently being sold, increased by $1.4 biUion during the year,
reaching a total of $46.4 biUion on June 30, 1963. These two series,
purchased principaUy by individuals, represented over 15 percent of
the total interest-bearing debt at the end of the fiscal year 1963. Outstanding savings bonds of Series F, G, J, and K declined by $0.7 biUion
during the year. Of this total, $75 mUlion of Series F and G bonds
maturing in 1963 and 1964 was exchanged for marketable bonds
maturing in 1971 and 1980 during the special offering effective December 15, 1962. Issuance of F and G bonds was discontinued in 1952
and only about $100 miUion of the outstanding amount had maturities
beyond December 1963; consequently, the exchange offer was made to
holders of all remaining unmatured bonds in these series rather than
being limited as during simUar offerings in the past to bonds maturing
in the coming calendar year. The December 1962 offer was also the
first in which holders of F and G bonds were given the option of a
longer term as well as a medium-term security. At the close of fiscal
1963, $48.3 biUion of interest-bearing savings bonds was outstanding,
a net increase of $0.7 bUlion during the year.
In September 1962 the Treasury announced that taxpayers would
be offered the option of receiving tax refunds in the form of Series E
savings bonds, beginning with refunds due on calendar 1962 income
tax pa3niients. During the second haK of fiscal 1963 approximately
237,000 E bonds with a cash value of over $19 million were issued to
taxpayers requesting refunds in this form.
Although the provisions of the legislation approved October 5, 1961
(26 U.S.C. 6109) did not in terms apply to interest payments made on
obligations of the United Staites issued by the Treasury Department,
the Secretary of the Treasury decided that the Treasury should place
itself on the same plane as other obligors insofar as feasible. To
accomplish this objective, the Treasury initiated a program during
the fiscal year 1963 to obtain taxpayer identifying numbers (social
security account numbers or employer identification numbers) from
current recipients of interest payments on Series H and K savings
bonds and marketable Treasury bonds and notes in registered form.
In this same connection, to facUitate future reporting of such interest
payments to the Internal Revenue Service, the Treasury made provision
for obtaining the pertinent taxpayer identifying numbers in the registration of aU future issues of those securities.

1963 REPORT OF THE SECRETARY OF THE TREASURY
OWNERSHIP OF FEDERAL SECURITIES

Of the $306.5 bUlion Federal debt outstanding on June 30, 1963,
$151.7 bUlion, or almost one-half, was in the hands of private nonbank
investors. This group comprises 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, nonbank dealers, and nonprofit associations. Commercial banks and Federal Reserve Banks together held $96.4 billion,
representing nearly one-third of the debt. The remaining $58.4
bUlion was held in Government investment accounts, primarUy
social security and unemployment trust funds, veterans' insurance
funds, and Government employees' retirement funds. These figures
are graphically presented in chart 7.
CHART 7

Ownership of the Federal Debt June 30,1963
$Bil.
Total
300Nonbonk Investors

Gov't Invest.
Accounts
200306^2

K ^ ^ ^ ^ ' ^ ^ Individuals
^Savings
W / / / / 1 Institutions
Corps

^20

All Other ^ ^ ^ ^ y ^

Bonks

I00--

i^^XA'^^Coml
Federal
Reserve

B32rJ

Private nonbank investors acquired $4.4 biUion of the total $7.8
biUion increase in the Federal debt during fiscal 1963. In addition,
Government investment accounts absorbed $1.9 biUion of the total,
and the banking system (commercial and Federal Reserve Banks)
accounted for the remaining $1.6 bUlion. Investor class ownership
of Federal securities on selected dates is presented in the following
table.

REVIEW OF FISCAL OPERATIONS

Ownership of Federal securities ^ by investor classes on selected dates, 1941-63
[Dollar amounts in billions]

June 30,
1941

Estimated ownership by:
Private nonbank investors:
Individuals 3
_
TnsuraTioe nompanip-s
Mutual savings banks
Corporations *
State and local governments
Foreign and international«
Miscellaneous investors"
Total private nonbank investors.
Federal Government investment accounts
Commercial banks
Federal Reserve Banks
Total gross debt outstanding

Feb. 28,
1946 2

June 30,
1962

June 30,
1963

Change
during fiscal year
1963

$11.2
7.1
3.4
2.0
.6
.2
.5

$64.1
24.4
11.1
19.9
6.7
2.4
6.6

•• $64. 7
11.3
6.3
••19.6
19.7
14.1
11.6

$65.5
10.8
6.1
20.2
20.7
15.8
12.5

$0.8
—.5
—.1
.6
1.0
1.7
.9

26.0

135.1

»• 147.3

151.7

4.4

8.5
19.7
2.2

28.0
93.8
22.9

56.5
••66.2
29.7

58.4
64.4
32.0

1 9
—.8
2.4

55.3

279.8

298.6

306.5

7.8

Percent of total
Percent owned by:
Private nonbank: investors:
Individuals . ._
other

Total
Federal Government investment accounts
Commercial banks
Federal Reserve Banks
Total gross debt outstanding

20
25

23
25

22
28

21
28

15
36
4

10
34
8

19
22
10

19
21
10

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 accouuts. Nonprofit institutions and corporate pension trust
funds are included under "Miscellaneous investors."
* Exclusive of banks and insurance companies.
«Includes the investments of foreign balances and international accounts in the United States.
8 Includes savings and loan associations, nonprofit institutions, corporate pension trust funds, and dealers
and brokers.

Individuals increased their ownership of Federal securities during
the fiscal year by $0.8 billion. They remained the largest single
investor group in the Federal debt ownership structure. A $1.3
bUlion increase in holdings of Series E and H savings bonds was
partially off'set by continued redemptions of the discontinued Series
F, G, J, and K savings bonds and a small net liquidation of marketable
issues. Sales of E and H savings bonds in fiscal 1963 were at a fiveyear peak. Although this is basically a reflection of the sharp increase in all forms of individual savings during the period, much of
the increase, particularly in sales of small denomination Series E bonds,
can be credited to the effective savings bonds campaigns conducted
throughout the year.
Holdings of Federal securities by insurance companies on June 30,
1963, amounted to $10.8 billion, $0.5 billion less than a year earlier.
A little more than one-half this total ($5.6 billion) was held by life

1963 REPORT OF THE SECRETARY OF THE TREASURY

insurance companies which continued to reduce their holdings of
shorter term governments, by a net $0.6 billion liquidation during the
fiscal year. By participating in the two advance refundings during
the year and liquidating other shorter term holdings, life companies
increased the average maturity of their marketable holdings by onehalf year to an average of slightly more than 21 years.
The. remaining companies in the insurance group, fire, casualty,
and marine insurance companies, made small net additions to their
holdings of Federal securities during the year. In contrast to life
insurance companies, the fire, casualty, and marine group held predominantly short-term obligations. Almost ninety percent of their
marketable Federal holdings on June 30, 1963, had maturities of less
than 10 years, with an average maturity length for these holdings of
less than 6 years.
Mutual savings banks held $6.1 bUlion of Federal securities on
June 30, 1963, which was $0.1 billion less than a year earlier.
Corporations added a net $0.6 billion to their holdings of Federal
securities during fiscal 1963. Large manufacturing companies (primarily producers of automobUes and basic metals) accounted for the
entire increase. Net additions to corporate holdings represented
mainly a funding of larger amounts of Federal tax liabilities which
exceeded $14 bUlion on June 30, 1963, the highest June 30 level since
1953.
State and local governments showed an increase of about $1 billion
in their holdings of Federal securities during the fiscal year, partly
as the result of market conditions which made capital borrowing by
municipalities particularly attractive. Federal securities were used
as an investment outlet for proceeds of these borrowings which were
temporarily idle before being utUized. More than one-half of the
$14.4 bUlion Federal securities held by general purpose municipal funds
on June 30, 1963, mature in the twelve months of fiscal 1964. However, there remains a sizeable investment in longer term securities,
primarUy in endowment and sinking funds. State and local employee
retirement funds held $6.3 biUion of Federal securities on June 30,1963,
which was $0.3 biUion more than a year earlier. The investments of
these funds are concentrated in the longest term Treasury securities
and the average maturity of their marketable U.S. Government
issues at the end of fiscal 1963 exceeded 20 years.
Foreign balances invested in Federal securities increased by $1.6
bUlion during the year, to $10.4 biUion on June 30, 1963. Of this
total, $1.3 biUion was in the form of special, nonmarketable securities
(denominated either in dollars or in certain foreign currencies) which
were issued directly to foreign monetary authorities. International
and regional institutions increased their holdings by $0.1 biUion, to

REVIEW OF FISCAL OPERATIONS

$5.4 billion at the close of the fiscal year. Major changes were a
$0.3 biUion increase in the special noninterest-bearing notes issued to
the International Monetary Fund and a decrease of $0.2 billion in the
marketable securities held by the International Bank for Reconstruction and Development.
Other investors held approximately $12.5 billion of Federal securities
on June 30, 1963. Almost one-half of this total represented the
$6.2 billion holdings of savings and loan associations which showed
an $0.8 billion increase during fiscal 1963. Activity of the remaining
investor groups (nonprofit associations, nonbank dealers, corporate
pension funds, and certain smaUer institutions) resulted in very
little net change during the year.
Government investment accounts added $1.9 biUion to their
holdings of Federal securities during the year. Of the $58.4 billion
held on June 30, 1963, $44.8 billion, or over three-fourths of the total,
was in the form of special securities issued only to these accounts.
The largest increases in holdings were registered by the Government
employee retirement funds ($1.1 billion), the Federal home loan
banks ($0.6 billion), the unemployment trust fund ($0.5 billion), and
the Federal Savings and Loan Insurance Corporation ($0.3 billion).
The major offset to these increases was a $0.8 bUlion reduction in the
Federal old-age and survivors insurance trust fund. Details on the
ownership by Government investment accounts are shown in tables
65 to 82, inclusive.
The net increase of $1.6 billion in the Federal security holdings of
the banking system during fiscal 1963 reflected an increase of $2.4
billion in the Federal Reserve System account together with a decline
of $0.8 billion in commercial bank ownership. Steadily increasing
operating costs, particularly the December 1961 supplement to the
Federal Reserve's Regulation Q which authorized an increase in the
rates payable by member banks on their time and savings deposits,
impelled commercial banks to seek higher-yielding outlets for some
of the funds that previously had been invested in Federal securities.
Tax-exempt State and local bonds became attractive as relatively
low-risk alternative investments, and the banks moved heavily into
the municipal market. There was a tendency, too, for banks to
lengthen the maturity of their portfolios of Federal securities to take
advantage of the higher rates offered on longer issues. The average
length of the marketable U.S. Government securities held by commercial banks increased by eight months during fiscal 1963.
The decline in commercial bank holdings was centered in the reserve
city banks, as New York and Chicago institutions liquidated $1.0
billion and other reserve city banks dropped $1.2 billion. The smaller
707-484—64

1963 REPORT OF THE SECRETARY OF THE TREASURY

country member and nonmember banks showed a net increase of
$1.4 bUlion in holdings of Federal securities during the year.
A breakdown of the estimated changes during fiscal 1963 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 interest-bearing public debt and guaranteed obligations for fiscal 1963
is shown in table 55.
Estimated changes in ownership of Federal securities ^ by type ofissue, fiscal year 1963
[In billions of dollars]
Change accounted for b y Total
changes.

Private
nonbank
investors

Government investment
accounts

Commercial banks

0.2
.3
-.2

-0.6
.7
.8
-.2

Federal
Eeserve
Banks

Marketable securities:
Treasury bills:
Weekly—maturing within 3 months.
Weekly—maturing in 3-6 months—.
Annual
Tax anticipation
__.__-____

3.3
2.2
1.5
-1.8

3.4
1.2
.6
-1.5

Total bills
Treasury certificates of indebtedness
Treasury notes
Treasury bonds, etc

5.2
8.6
-13.3
7.1

3.6
.1
-3.7
3.8

.3
.1
-.1
1.7

.8
-.4
-2.1
1.0

.4
8.8
—7.5
.6

7.6

3.8

2.1

-.7

2.4

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

. .

-.1
-.8
.6

-.7
.5

(*)

0.2
'''

.3
— .1

-.1

-.1
-.1

(*)
(*)

-.2

-.1

7.8

4.4

1.9

-.8

•Less than $50 million.
I Gross public debt, and guaranteed obligations of the Federal Government held outside the Treasury.

Taxation Developments
Tax policy in 1963 was placed in the forefront in the effort to achieve
fiUl employment, more rapid economic growth, and stability in our
balance of payments. On January 24, 1963, the President presented
far-reaching recommendations for tax reduction and structural revision (see exhibit 18). After extensive public hearings and lengthy
executive sessions, the House Ways and Means Committee prepared
a bill based upon those recommendations which was approved by the
House of Representatives. The Senate Finance Committee then held
hearings on the bUl and had it under consideration in executive sessions
at the end of the calendar year 1963. In his July balance-of-payments message the President proposed an interest equalization tax to
strengthen the Nation's balance-of-payments position. In other developments, the rates of the corporate income tax and certain excise
taxes were extended for another year.

REVIEW OF FISCAL OPERATIONS

Presidential tax recommendations

Tax reduction and structural revision.—The President on January 24,
1963, outlined a major program of tax reduction and structural revision intended to supplement the important legislation enacted in 1962.
Paramount in his program was a reduction in individual and corporate
taxes which would have reduced tax liabilities by over $10 bUlion.
(For a discussion of the President's previous proposals and the 1962
act see the 1962 annual report, pp. 11-15 and 62-68.) This substantial
reduction in taxes, which was to be implemented in three stages
covering a 15-month period, was proposed to reduce the waste of
unemployment and unused physical resources and improve the climate
for more vigorous long-term economic growth.
The structural revisions proposed by the President included both
revenue-losing measures to relieve hardships and revenue-raising
measures to broaden the tax base. The structural revisions would, on
balance, have increased revenues substantially, thus permitting larger
rate reductions than would otherwise have been possible. The changes
were designed also to minimize the diversion of energy and resources
from more productive activity to tax avoidance and to make the
economy more responsive to market forces.
To improve equity, relieve hardships, and encourage growth, the
structural revisions included: A minimum standard deduction under
the individual income tax; a liberalized deduction for the care of
chUdren and disabled dependents; revision of the tax treatment of
older persons; a more comprehensive income-averaging provision for
individuals; a deduction for moving expenses to establish equal tax
treatment for all employees; simplification of the upper limit to the
deduction for charitable contributions; simplification of the floor under
medical expenses; and the current deduction of expenditures for machinery and equipment used directly in research or development
activities.
The base-broadening provisions included: Limiting itemized deductions by individuals to the amount in excess of 5 percent of adjusted
gross income; limiting the casualty loss deduction to the amount of
total losses in excess of 4 percent of adjusted gross income; repealing
the unlimited charitable deduction; repealing the sick pay exclusion;
repealing the dividend credit and exclusion; including in employees'
taxable income the current value of employer-financed group term life
insurance coverage in excess of $5,000; tightening the personal holding
company provisions; and, in the case of income from natural resources,
limiting defects which now arise in connection with the 50-percent net
income limitation on percentage depletion; the grouping of oil and
gas properties for tax purposes; the deduction from ordinary income
of amounts later recovered and taxed at the capital gains tax rate;

1963 REPORT OF THE SECRETARY OF THE TREASURY

and the deduction of foreign development costs or the foreign tax
credit.
In the proposed reduction in corporate tax rates, the President
recommended that the 2-percent tax on consolidated returns be
repealed and that action be taken to limit the use of multiple surtax
exemptions. He also proposed placing the estimated tax payments of
large corporations on the same fully current basis as those of
individuals.
The President also recommended important changes in the taxation
of capital gains. Central to these recommendations was a proposal for
taxing the untaxed gains accrued on capital assets at the time of their
transfer by reason of death or gift. In connection with this revenueraising proposal he recommended that the present 50-percent inclusion
ratio for capital gains be reduced to 30 percent, that the holding period
be increased from six months to one year, and that an indefinite loss
carryover be permitted. Changes in the definition of capital gains
were proposed to limit capital gains treatment to transactions which
clearly merit such treatment. Recommendations in this area were
made with regard to real estate sales and restricted stock options.
Additional items were included in the February 6, 1963, statement of
Secretary Dillon before the House Committee on Ways and Means
(see exhibit 19). Included in the list presented by the Secretary were:
The sale of timber, coal royalties, lump-sum pension and profit-sharing
distributions; the sale of livestock and other property used in farming;
the sale of patents; the disposition of assets for deferred payments;
and the sale of life estates.
The President's program called for tax rate reductions which would
have reduced individual and corporate liabilities by $13.6 billion.
Individual tax rates M^ould have been reduced from the present
range of 20 to 91 percent to a range of 14 to 65 percent. The normal
tax rate, which applies to all corporate net income, would have been
reduced from 30 to 22 percent while the surtax rate, which applies
to income in excess of $25,000, would have been adjusted so that the
combined normal and surtax rates would be equal to 47 percent.
Base broadening structural reforms would have recouped $3.1 billion
from individuals and $250 million from corporations, more than
offsetting the $800 million of revenue-reducing revisions.
In
addition, the capital gains provisions would have increased revenues
by an estimated $750 million, largely by inducing the more rapid
turnover of capital assets.
Following the presentation of the President's tax message, hearings
were held by the Ways and Means Committee of the House of Representatives. Secretary Dillon was the first witness, appearing before
the committee on February 6. The 27 days of public hearings lasted

REVIEW OF FISCAL OPERATIONS

until March 27 and filled over 4,000 pages of testimony. Following
the hearings, the committee met in a lengthy series of executive sessions
in which Treasury representatives participated. On September 10
the Ways and Means Committee agreed to a bill embodying many
of the President's recommendations. The bill was reported to the
full House and subsequently passed by that body on September 25.
The Senate Committee on Finance started hearings on the bill on
October 15 with Secretary Dillon as the first witness. Public hearings
were concluded on December 10. At the end of the year, the bill was
still under consideration by the committee.
Interest equalization tax.—On July 18, 1963, the President sent a
special message to the Congress addressed to the difficult problem
of eliminating the deficit in the U.S. balance of payments. One of
the recommendations contained in that message called for the enactment of an interest equalization tax to discourage the outflow of U.S.
capital. This tax, which is described in greater detail in the section
on international tax developments, would apply to portfolio investments made by Americans in foreign securities and would have the
effect of increasing by approximately 1 percentage point the interest
cost to foreigners of obtaining capital in this country.
Other items.—In his budget message for the fiscal year 1964, delivered on January 17, 1963, the President recommended legislation
to extend for an additional year certain excise tax rates and the normal
corporate income tax rate. He also renewed recommendations he
had made in 1962 for the enactment of a series of user charges for
commercial and general aviation and for transportation on inland
waterways. These recommendations would assure that passengers
and shippers who benefit from special Government programs bear a
more equitable share of the costs of these programs. (Details of the
1962 program may be found in the 1962 annual report, pp. 71-72.)
In connection with proposals to acquire more land for recreational
purposes, the President recommended financing through a land and
water conservation fund. One source of revenue for the fund would
be a tax of 4 cents a gallon on fuel used in motorboats. Such fuel is
already subject to a net tax of 2 cents a gallon.
Revenue Act of 1963

H.R. 8363, the Revenue Act of 1963, as approved by the House of
Representatives, calls for an overall tax reduction of $11.08 billion,
to be effected in two stages, beginning with reductions totaling
$7.08 billion on January 1, 1964. The full tax cut would be effective
on January 1, 1965.
The most distinctive feature of the bill is a top-to-bottom reduction
in individual income tax rates. The rates would be lowered from

1963 REPORT OF THE SECRETARY OF THE TREASURY

their present range of 20 to 91 percent to a range of 14 to 70 percent.
The present first taxable income bracket would be split into four
equal segments, to be taxed at the rates of 14, 15, 16, and 17 percent,
respectively. Over 50 percent of all taxpayers have taxable incomes
that fall entirely within the present first taxable income bracket.
On the average, the tax rates would be reduced by 20 percent. Individual rates would be reduced by two-thirds of the full reduction in
1964.
The combined corporate normal and surtax rate would be reduced
from 52 percent to 48 percent. The tax rate on the initial $25,000
of corporate net income, which is of particular importance to small
businesses, would be reduced from 30 percent to 22 percent on January 1,
1964. At the same time, the surtax rate would be raised from 22
percent to 28 percent. On January 1, 1965, the surtax rate would
be reduced to 26 percent. Another change in the corporate tax system
would require more current payment of estimated tax. The acceleration of corporate tax payments would affect only corporations with
tax liabilities in excess of $100,000. Current payments would be
required in April and June (in addition to those now required in September and December). The changeover would be carried out on a
stepped-up basis for the years 1964-70.
The rate reductions in the bill would reduce individual and corporate
liabilities by $11.66 billion when fully effective. This reduction
would be offset in part by the net effect of structural changes which
would increase liabUities by $600 million, by capital gains revisions
which would increase revenues as a result of the more rapid turnover
of capital assets, and the acceleration of corporate tax payments
over a seven-year transition period.
Some of the structural changes contained in the bill provide for
the relief of hardship and improved equity. Provisions in this
category include a minimum standard deduction of $300 for every
taxpayer plus an additional $100 deduction for each exemption after
the first. Married taxpayers filing separately would each be entitled
to a minimum standard deduction of $200. This provision will
provide $320 mUlion of tax relief to low income taxpayers, that is,
those whose 10 percent standard deduction is less than the value
of the minimum standard deduction.
The bill would liberalize the deduction for the care of children
and disabled dependents by increasing the maximum deduction from
$600 to $900 where there are two or more chUdren or disabled dependents to support in the case of widows, widowers, and persons with
disabled spouses. I t also raises from eleven to twelve the age limit
for nondisabled children of the taxpayer for whom the deduction
may be claimed. The provision would reduce liabilities by $5 million.

REVIEW OF FISCAL OPERATIONS

Provision is made for a practical and uniform system of averaging
which will be of assistance to individuals whose incomes rise substantially relative to the average of the preceding four-year period. In
general, individuals could average that portion of their current taxable income which exceeds 133 percent of their average income over
the prior four taxable years, provided the excess is over $3,000. The
tax on the income subject to ''averaging" woiUd be five times the
amount payable on one-fifth of the amount subject to averaging.
The provision would reduce liabUities by $40 mUlion a year.
The bUl provides more uniform treatment for employee moving
expenses. A moving expense deduction would be avaUable to new
employees whose reimbursements by employers for moving expenses
under present law must be included in income, and to nonreimbursed
employees who are not now allowed a deduction for moving expenses.
The deduction would place these employees in a position comparable
to transferred employees who are reimbursed by their employer for
moving expenses. Under present law, the latter do not have to include
the reimbursement in income. This provision would reduce liabUities
by $60 million a year.
The present 1-percent floor under the deduction for the expense of
medicines and drugs in the case of taxpayers aged 65 or over would
be eliminated, saving these taxpayers $10 miUion a year.
The bill would aUow charitable deductions by individuals of up
to 10 percent of adjusted gross income beyond the presently existing
limit of 20 percent of adjusted gross income in the case of donations
to nonprofit organizations which are publicly supported. At the
present time, only contributions to churches, educational institutions,
and medical research facUities qualify for the supplemental deduction
limit. The carryforward of unused deductions for charitable contributions by corporations would be extended from two to five years.
At the same time, the bill would deny a current charitable deduction
for the gUt of a future interest in tangible personal property if a life
estate is reserved for other than the life of the donor or his spouse.
The revenue effect of these changes would be nominal.
Other structural provisions in the bUl would raise $1,085 bUlion
in revenue to offset part of the revenue-reducing features of the bUl.
Itemized deductions by individuals for State and local taxes would
be limited to income taxes, property taxes, and general sales and use
taxes. The bUl would disallow the deduction of excise taxes on tobacco
products, alcoholic beverages, and gasoline, license fees and operators'
permits for motor vehicles, and other miscellaneous taxes. This
provision would increase liabUities by $520 mUlion a year.
The 4-percent dividend credit would be reduced to 2 percent in
1964 and repealed in 1965. At the same time, the bUl would increase

1963 REPORT OF THE SECRETARY OF THE TREASURY

the present dividend exclusion from $50 to $100 per person. Taken
together, these provisions would increase liabilities by $300 mUlion
a year.
Application of the sick pay exclusion would be limited to cases in
which the individual has been absent from work for more than 30
days, increasing liabUities by $110 million a year. Another provision,
with negligible revenue effect, would require individuals to include
in income any amount received from, accident or health insurance for
any injury or illness which exceeded the medical expenses so incurred
by the taxpayer.
Individuals would be requhed to include in their taxable income
the cost of group term life insurance coverage in excess of $30,000
provided by their employer. Another provision would disallow a
deduction for interest paid on indebtedness used to purchase or carry
a life insurance, endowment, or annuity contract pursuant to a plan
which contemplates the systematic borrowing of part or all of the
increases in the cash value of the contract. The fh^st of these insurance provisions would increase liabUities by $5 million a year; the
second, by $10 mUlion.
The deduction for casualty losses of personal property would be
limited to the amount of each loss in excess of $100, increasing
liabilities by $50 mUlion.
Other structural revisions concern personal holding companies and
stock options. The definition of a personal holding company would
be revised to make more difficult the use of this device to avoid the
imposition of the progressive personal income tax rates on passive
investment income and certain personal service income. The change
would increase liabilities by $15 mUlion. More stringent provisions
are set forth which would have to be met by stock option plans for
corporate executives if the difference between the market price at
the time of exercise and the option price is not to be treated as ordinary
income. This revision would have no noticeable revenue effect, since
any income from nonqualifying options which become taxable to
executives would become deductible as compensation paid by the
employer.
Another provision would require oil and gas industry operators,
except in the case of unitization agreements, to maintain separate
interests as separate properties for depletion purposes. However,
taxpayers would be able to treat separate deposits in a single lease
or acquisition as one property or separate properties. This rule
would end the practice by large producers of combining widely
separated properties merely for the purpose of obtaining the most
favorable application of the 50-percent net income limitation on per-

REVIEW OF FISCAL OPERATIONS

centage depletion. The increase in tax liabUities as a result of this
provision would be $40 mUlion.
In the case of afliliated corporations, the bUl would impose a 6percent penalty tax on the first $25,000 of net income of each corporation that did not file a consolidated return so as to retain the use of
multiple surtax exemptions. At the same time, the bill would repeal
the 2-percent surtax on corporations filing consolidated returns.
The stricter treatment of affiliated corporations would increase liabUities by $35 mUlion; repeal of the 2-percent tax on consolidated returns
would reduce liabUities by $50 miUion.
The capital gains provisions in H.R. 8363 would lower from 50
percent to 40 percent the inclusion factor in the case of gains arising
from the sale of bona fide capital assets held more than two years by
taxpayers other than corporations. The maximum tax rate on gains
from such assets would be set at 21 percent instead of the present
25 percent. Present law provisions would continue to apply for
assets held between six months and two years, and for certain
''statutory" capital gains, such as lump-sum distributions from
pension plans and income from timber. This provision by itself
would reduce revenues by $230 million a year. Initially, however,
it would induce the more rapid tm^nover of capital assets with accrued
appreciation. The result of the more rapid turnover would be a net
increase in revenues of $210 million in 1964 and $80 million in 1965.
The bill also provides for the unlimited carryover of capital losses by
individuals, which would reduce liabilities by $30 million a year.
Capital gains treatment of income arising from depreciable real
estate sold within 10 years of acquisition would be limited if such real
estate has been depreciated at accelerated rates. This provision is
expected to increase liabilities by $15 million. Another provision
limiting capital gains treatment, which would not have any appreciable revenue effect, would require that part of the proceeds from the
sale of capital assets on an installment basis with no stated interest
charge (other than patents, royalties, or exchanges for annuity payments) be treated as interest and taxed as ordinary income.
The bill would permit taxpayers who are 65 years old or over to
exclude from taxable income capital gains arising from the first
$20,000 of the sale price of their home. I t also would extend capital
gains treatment to iron ore royalties. The first of these provisions
would reduce liabihties by $10 mUlion a year, the second by $5
miUion.
The Revenue Act of 1963 also includes amendments to the investment credit enacted in 1962. H.R. 8363 would repeal a provision
which now requires that the basis of newly-purchased assets be
reduced by 7 percent to reflect the investment credit. This provision

1963 REPORT OF THE SECRETARY OF THE TREASURY

would effectively double the profitability effect of the investment
credit and remove complications resulting from the required basis
reduction. The amendment would reduce tax liabilities by $185
milhon in 1965. Elevators and escalators would be included in the
types of property qualifying for the investment credit. Liabilities
woiUd be reduced by $10 mUlion by this change. The bill also
contains a statement that it was the intent of the Congress in providing the investment credit in 1962 that Federal agencies regulating
public utilities should not, without the taxpayer's consent, require a
"pass through" of the 7-percent credit to customers, or, in the case
of the 3-percent credit for certain utilities, require a "pass through"
over any period shorter than the useful lives of the property involved.
Tax rate extension and user charges

The President's request for the extension of certain tax rates
which otherwise would have automatically expired on July 1, 1963, was
incorporated in Public Law 88-52, approved June 29, 1963. The law
extended for one year the existing corporate income tax rates and the
excise tax rates on alcoholic beverages, cigarettes, passenger automobUes, parts and accessories for automobUes, general (local) telephone
service, and transportation of persons by air. Extension of the excise
tax rates wUl prevent a revenue loss of $1.7 bUlion in fiscal 1964.
Although the President's tax message called for a reduction in the
corporate income tax, he also asked for the one-year extension of
the corporate normal tax rate so that the reduction in corporate rates
could be considered in relation to the entire tax program and made
effective at the same time as individual rate reductions.
No action was taken on the President's recommendation for a user
charge program for airways and waterways.
Treasury oflicials testified at hearings held by the House Ways and
Means Committee on July 10, 1963, on the President's proposal to
finance part of a new land and water conservation fund through receipts
from taxes of 4 cents per gallon on fuels used in motorboats. Subsequently, the Ways and Means Committee recommended to the
House Committee on Interior and Insular Affairs that the receipts
from motorboat fuels be allocated to the fund, but that the net tax
on such fuels be continued at 2 cents per gallon through retention of
the 2 cents per gallon refund for gasoline used in motorboats.
Miscellaneous legislation

Income taxes.—Public Law 8 8 ^ , approved AprU 2, 1963, makes
the deduction for expenses for the care of chUdren or disabled dependents available to women who have been deserted by their husbands. A deduction of up to $600 may currently be taken for such
expenses when incurred by a woman or widower, without regard to

REVIEW OF FISCAL OPERATIONS

income, if the chUd is under twelve or the dependent is physicaUy or
mentally handicapped. WhUe the deduction is avaUable to married
women, it must be reduced by one dollar for every dollar of total earnings by both husband and wife in excess of $4,500. Because of the
income limit, married women cannot claim the deduction unless they
file a joint return. The new law treats deserted wives as widows,
freeing them from the joint return requirement and the joint income
limitation. To qualify, a deserted wife must not know of the whereabouts of her husband (and has not known his whereabouts at any
time during the taxable year) and she must have applied to a court
for an order compelling him to furnish support.
Public Law 88-9, approved April 10, 1963, provides a deduction
for income tax purposes of annual or periodic payments for redeemable
ground rent. The law was enacted to restore a position formerly held
by the Treasury Department. Under Maryland law, ground rent
may be redeemed after five years by paying an amount computed by
capitalizing it at a 6-percent rate of interest. Before 1962 theTreasury
treated Maryland ground rents as mortgages and permitted home
buyers to deduct annual rents as interest payments. Sellers were
required to include the redemption value of the ground rent in their
sales price, the same as a mortgage. The Treasury position was
changed, effective January 1, 1962, following two court cases which
appeared to invalidate the position. This law reestablishes the
former practice.
Public Law 88-153, approved October 17, 1963, permits employees
who have consistently accrued vacation pay for income tax purposes
to continue to do so for taxable years ending before January 1, 1965.
Prior law limited this privilege to years ending before January 1, 1963.
Social security.—Section 2(a) of Public Law 88-31, approved May
29, 1963, reduced the rate of the Federal unemployment tax for wages
paid in the calendar year 1963 from 3.5 percent to 3.35 percent.
The rate had been raised in 1961 from the permanent level, of 3.1
percent to 3.5 percent for 1962 and 1963. As a result of Public Law
88-31, employer payments to the Federal Government, after credits
for State unemployment tax contributions, generally are to be 0.65
percent of taxable wages paid in 1963, instead of the 0.8 percent
provided for in the 1961 legislation.
The maximum monthly wage base for purposes of the taxes imposed
by the Railroad Retirement Tax Act was raised from $400 to $450
by Public Law 88-133, approved October 5, 1963. The new tax base
became effective for compensation paid for services rendered in
November 1963.
Public Law 88-173, approved November 7, 1963, revises the
formulas for repayment to the Treasury of advances made to the

1963 REPORT OF THE SECRETARY OF THE TREASURY

States for the payment of unemployment compensation pursuant to
the Temporary Unemployment Compensation Act of 1958 and
advances made prior to September 13, 1960, under title X I I of the
Social Security Act. Previously if such advances were not repaid
by a State within a specified time, the law provided for reduction of
the employer's credit against the Federal tax for the State unemployment tax. Each year that advances were not repaid by the State the
employer's credit was reduced further. Public Law 88-173 limits
the reduction in the credit. Where advances were made before
September 13, 1960, under title X I I of the Social Security Act, the
new law limits the additional tax payable by employers to the Federal
Government to 0.15 percent of wages for the years 1963-1967. Thereafter, the regular year-by-year reduction in the credit will apply.
In the case of unpaid advances under the Temporary Unemployment
Compensation Act of 1958, the additional tax is limited to 0.15
percent of wages for 1963 and 0.30 percent for any succeeding year.
Public Law 88-173 further provides that a State can prevent the
credit reduction in any year by paying to the Treasury on or before
November 10 of the year an amount approximately equal (as determined by a formula specified in the law) to that which employers
would have to pay through the credit reduction.
Silver hullion.—Title I I of Public Law 88-36, approved June 4,
1963, repealed the tax of 50 percent on profits from transfers of
interests in silver bullion. Repeal was effective for transfers made
after June 4, 1963. This tax originally was imposed as part of the
SUver Purchase Act of 1934. Repeal of this tax, along with substantial
other changes in the Government's policy with respect to silver, was
recommended by the President in November 1961. The recommendations were renewed in the 1963 Economic Report of the
President. (See exhibit 39.)
Administration, interpretation, and clarification of tax laws

During the fiscal year the Treasury Department published 53
Treasury decisions and 43 notices of proposed rulemaking relating to
tax matters.
Among the more important Treasury decisions published during
the fiscal year was one prescribing rules for the substantiation of
business travel and entertainment expenses and another containing
the substantive rules on the deduction of travel, entertainment, and
gifts as business expenses. Other Treasury decisions concerned the
use of taxpayer identification numbers; the limitation on net operating
loss carryovers; information with respect to certain foreign corporations; the reporting of dividends, interest, and patronage dividends;
the taxation of cooperatives and their patrons; the manufacturers

REVIEW OF FISCAL OPERATIONS

excise tax on motor vehicles, parts, and accessc^ries; and the credit
and refund of certain excise taxes on sales and services.
Notices of proposed rulemaking published during the fiscal year
which were stUl pending at its close included those relating to: Meals
and lodging furnished for the convenience of the employer; certain
revolving credit sales treated as installment sales; certain aspects of
the investment credit; the taxation of mutual fire and casualty
insurance companies; certain provisions with respect to controlled
foreign corporations; the treatment of earned income from sources
without the United States; and the qualification of pension and
profit-sharing plans and bond-purchase plans under the Self-Employed
Individuals Tax Retirement Act of 1962 and the deduction of contributions and the taxation of distributions under these plans.
Federal-State tax relations

A new program was developed for payroll deductions for certain
State income taxes from salaries of Federal employees. This program
supplements the program of withholding State and District ofColumbia
income taxes on salaries of Federal employees which has been in effect
since 1952.
Under the withholding program. Federal agencies follow the
general practice of private employers and withhold State income
taxes on salaries of Federal employees at the place of employment
only. However, many employees live in one jurisdiction and work
in another, and under reciprocity agreements some States do not
require withholding on nonresidents. Also, employees who reside
in an income tax State and work in a nonincome tax State have no
State income tax withheld.
The new program was made possible by a decision of the Comptroller
General on June 4, 1963, that the Civil Service Commission could
by regulation authorize Federal agencies to institute a voluntary
pa3n:-oll deduction plan. Under this plan a Federal employee who
lives in one State and works in another may make allotments for
payment of his State income tax to his State of residence. The
CivU Service Commission issued such regulations on September 19,
1963, and on the same date the Treasury Department issued regulations setting forth the procedures to be followed in handling the
deductions. Before the end of 1963 many Federal agencies had
instituted this payroll deduction plan. This new program wUl be.
of great assistance to the States in the administration of their tax
laws. In addition, it wUl help employees to meet their responsibUities
and simplify their tax compliance problems.

1963 REPORT OF THE SECRETARY OF THE TREASURY

International tax matters

The President's special message to the Congress on July 18, 1963,
on the balance of payments included a proposal for a temporary
"interest equalization tax." The tax was intended to help reduce the
outflow of long-term capital in the form of portfolio investments by
increasing by approximately one percentage point the interest cost
of capital acquired in this country by foreigners. Hearings on the
proposal were held by the House Committee on Ways and Means in
August and Secretary DUlon testified on August 20 in its support
(see exhibit 21). On December 16, 1963, the committee reported out
H.R. 8000, the Interest Equalization Tax Act of 1963. The bUl
incorporates the substance of the President's recommendations.
Under the terms of the bUl, the interest equalization tax would be
effective for the period July 19, 1963 (August 17, for listed securities)
through December 31, 1965. The tax would apply to the acquisition
by a U.S. person of a debt obligation of a foreign obligor, or stock of
a foreign issuer, which is acquired from a foreign person. The tax
on the transfer of stock would be 15 percent of the actual value of the
stock at the time of the transfer. The tax on the transfer of debt
obligations would vary from 15 percent on obligations with a maturity
of 28K years or more down to 2.75 percent for those with a maturity
of 3 to 3K years. For debt obligations with a shorter maturity, no
tax would be imposed. These tax rates are designed to approximate
the effect of an increase of one percentage point in the interest cost to
foreigners of obtaining capital in this country.
The principal exclusions in the bUl relate to: Securities acquired
from a prior American owner; securities received in a wide range of
export transactions; debt obligations received by commercial banks
in the course of their commercial banking business; dhect investments
in 10-percent-owned corporations; securities of "less-developedcountry corporations" and obligations of less-developed countries;
new security issues which the President exempts in the interest of
international monetary stabUity, presumably new Canadian securities;
reserves maintained by insurance companies doing business in
foreign countries; and investments of foreign membership dues by
labor unions and other exempt organizations.
I t is expected that the bill may improve our balance-of-payments
position by $1.3 billion to $1.5 billion a year relative to the situation
in the first half of the calendar year 1963. While not designed as a
revenue measure, the tax might bring in $20 million to $30 million
annuaUy.
The President recommended in his message of April 2, 1963, on
foreign assistance that a tax credit be granted, for a trial period, for

REVIEW OF FISCAL OPERATIONS

'53

investnients in developing countries. No action was taken on this
proposal.
Treasury discussions were conducted with a number of countries
during 1963 for the purpose of negotiating new tax treaties or amending existing treaties. A tax treaty with Luxembourg was signed as
well as an agreement to modify the treaty with the Netherlands as it
applies to the Netherlands AntUles. These are now pending in the
Foreign Relations Committee of the Senate. The Netherlands
agreement provides for the gradual increase in U.S. withholding rates
on income payments to nonresident-owned investment companies in
the Netherlands AntUles. This provision is designed to eliminate
abuse of the treaty created by the low rates of tax imposed in the
Netherlands Antilles on U.S. source income. Negotiations for the
modification of the Swedish income tax treaty were completed and the
treaty is awaiting signature. Discussions with Germany were continued during the year in an effort to revise the German income tax
treaty. Final agreement has not yet been reached on certain issues
relating to dividend withholding.
The Fiscal Committee of the Organization for Economic Cooperation and Development (OECD), on which the United States is represented by Treasury oflB.cials, completed its preparation of a model
income tax convention and^drafted^a report'on the convention to the
Council of the Organization. I t is hoped that this model convention
wUl serve as a basis for future treaty negotiations or revisions.
International Financial Affairs
The U.S. balance of payments and gold and dollar movements

The U.S. balance oj payments.—After substantial reductions in 1961
and 1962 from the 1958-60 levels, the overaU U.S. balance-of-payments
deficit rose sharply in the first half of the calendar year 1963. This
rise came despite sizeable sales of nonmarketable U.S. Government
medium-term securities issued to provide an investment outlet for some
of the accumulations of dollar reserves by foreign monetary authorities.
Including receipts from the sales of these securities, the deficit in the
first six months of 1963 was running at a seasonally adjusted annual
rate of $3.2 billion; excluding such receipts, the rate of deficit was
$4.2 billion, seasonally adjusted. These rates of dieficit compared with
an annual average of $3.7 billion in the calendar years 1958-60 and
deficits of $2.4 biUion in 1961 and $2.2 billion in 1962.
In recent years, these overall deficits have been reduced in important part as a result of various special Government receipts consisting
of prepayments of debt by foreign governments to the U.S. Government, advance cash payments by foreign governments against future

19 63 REPORT OF THE SECRETARY OF THE TREASURY

U.S. military exports, and proceeds from sales of nonmarketable U.S.
Government securities to foreign official institutions. Excluding
these special receipts, the deficits on "regular" transactions amounted
to $3.9 biUion in the calendar year 1960, $3.0 billion in 1961, and $3.6
bUlion in 1962. In the first half of 1963 this deficit on regular transactions was running at an annual rate of $4.5 billion, a worsening of
about $900 million from the rate for the fuU calendar year 1962.
This increase in our deficit in the first half of 1963 reflected the rise
in recorded private U.S. capital outflows to an annual rate more than
$2 billion higher than in 1962. New issues alone accounted for an
$850 million higher rate of outflow. The rate of direct investment
outflows rose by about $400 mUlion. Recorded short-term outflows
were more than double the 1962 rate, rising by an annual rate of
nearly $700 million. Other categories of private capital outflow also
rose, led by transactions in outstanding securities.
In view of these developments, a thorough and comprehensive
review of our whole payments position was undertaken within the
U.S. Government by the Cabinet Committee on the Balance of Payments under the chahmanship of the Secretary of the Treasury.
This review resulted in President Kennedy's second major message
on the balance of payments which was presented to Congress on
July 18, 1963. The message sets forth a series of measures to reinforce the long-term effort to strengthen the payments position as well
as a number of actions designed to produce a more immediate impact.
In addition to outlining the basic programs for intensification of
efforts in such key fields as merchandise exports and tourism, and in
promoting foreign investment in U.S. private companies, the President
indicated that $2 bUlion in annual savings were to be made by further
reducing the impact on our balance of payments of U.S. Government
defense and economic assistance expenditures, and by measures to
reduce excessive outflows of private capital from the United States.
He noted that measures would be put into effect before the end of
1964 to reduce military expenditures abroad by more than $300
mUlion from the 1962 level. Reductions in programs for the acquisition of strategic materials from abroad are expected to save, within
two years, $200 miUion from the 1962 level.
AID expenditures entering our balance of payments are to be reduced to not over $500 million in the fiscal year 1965, a cut of about
$500 mUlion from fiscal 1961. In fiscal 1963 fully 80 percent
of AID commitments were tied to U.S. exports of goods and services,
and this figure is expected to rise even further in fiscal 1964. Reviews
and revisions of the programs of other departments and agencies
are expected to save about $100 mUlion a year from the 1962 rate.
Since the deterioration during the early part of 1963 was in the

REVIEW OF FISCAL OPERATIONS

capital accounts, the President's program also directed particular
attention to this section on the balance of pajnuents. In order to
have a decisive and quick impact on capital flows, an interest equalization tax was proposed calling for a temporary excise tax on acquisitions from foreigners of both new and outstanding foreign securities—
both debt and equity—maturing in three or more years. (See also
Taxation Developments and exhibit 21.) Together with the
increase in the discount rate announced by the Federal Reserve
System, an improvement of about $1 billion was foreseen by the
President through the resultant effect on capital flows. The President
also announced that the United States had entered into a standby
arrangement with the International Monetary Fund, as discussed
in a subsequent section on the operations of the Fund.
(See also
exhibit 32.)
The balance-of-payments accounts showed marked improvement
in the third quarter of calendar 1963. This was in sharp contrast
with the poor showing in the previous quarter and, on the basis of
preliminary data, appears to have been the best quarterly performance
on regular transactions since the Suez crisis year of 1957, the only
year of surplus in the last fourteen. The overall payments deficit
fell on a seasonally adjusted basis from an annual rate of $3.2 billion
in the first half of 1963 (including receipts from the sales of nonmarketable, convertible, medium-term U.S. Government securities)
to an annual rate of about $300 mUlion in the third quarter. Excluding such receipts, the deficit improved from a rate of $4.2 billion
in the first half to a rate of about $1 billion in the third quarter of
1963. If all special Government receipts are omitted, the deficit
declined from an annual rate of $4.5 billion in the first half of 1963
to a rate of about $1.6 bUlion in the third quarter. Early reports
indicate that the improvement resulted primarily from the drop in
net capital outflows. New foreign security issues in the U.S. capital
market were sharply curtaUed by the announcement of the interest
equalization tax proposal. The rise in our short-term interest rates
in July is also believed to have had the effect of greatly reducing
outward movements of short-term funds.
U.S. gold losses during the first three quarters of the calendar year
were reduced to $422 mUlion, compared with $1.7 billion in 1960,
$857 million in 1961, and $890 million in 1962. On June 30, 1963,
U.S. gold holdings stood at $15.8 billion, and the Treasury and Federal Reserve System held the equivalent of $126 million in foreign
convertible currencies; on December 31, 1963, at $15.6 billion in gold
and $212 million in foreign currencies.
Gold and dollar movements.—The gold and dollar holdings of foreign
countries (excluding gold held by the USSR, other Eastern European
707-484—64

1963 REPORT OF THE SECRETARY OF THE TREASURY

countries, and China Mainland) amounted to an estimated $46.0
billion as of June 30, 1963, having increased $2.7 billion during fiscal
1963 (see table 97). Of the total, oflicial gold holdings were $23.6
billion, oflicial and private short-term dollar assets held m t h banks
in the United States were $21.0 billion, and estimated oflicial and
private holdings of U.S. Government bonds and notes amounted to
$1.4 biUion.
Western European countries during fiscal 1963 increased their
gold and dollar assets by $816 million, which was substantially less
than the gain of $3.2 billion by these countries during fiscal 1962.
French holdings rose by $868 million; United Kingdom holdings declined by $670 million; most other European countries increased their
reserves. In contrast to its loss of $209 million during fiscal 1962,
Canada increased its gold and doUar assets by $754 million. Latin
American holdings rose by $154 million. The total gain by Asiatic
countries was $595 million, of which $403 million was by Japan. In
Africa, the area increase of $166 million reflected a rise of $165 million
in the holdings of South Africa. All other countries gained $166
million. International and regional organizations increased their
gold and dollar holdings by $370 million.
The estimated official gold holdings of the world (excluding the
USSR, other Eastern European countries, and China Mainland)
were $41.7 biUion on June 30, 1963. Of this total, the United States
held $15.8 billion and international and regional institutions $2.3
billion.
Treasury joreign 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 liabilities to foreigners, claims on foreigners, and
securities transactions with foreigners, and constitute the basis for
statistics on the dollar holdings of foreign countries and international
institutions and for other statistics on capital movements apart from
direct investments, which enter into the U.S. balance of payments.
The broad program initiated several years ago to ensure the adequacy of the Treasury statistics for analysis and policy formulation
was continued during fiscal 1963. A new monthly report from nonbanking concerns on their liquid assets abroad was introduced in
August 1962.5The major step taken during the year was the completion of a comprehensive revision of the report forms filed by banks and
brokers. The first monthly reports under the revised requirements
covered data as of M a y 31, 1963. The changes introduced provide

REVIEW OF FISCAL OPERATIONS

separate data on types of short-term liabilities and claims which might
be expected to be relatively responsive to interest rates and monetary
conditions, details on long-term banking claims, data on transactions
in U.S. Government bonds and notes by foreign oflicial institutions,
and information on the structure of U.S. liabilities to and claims on
foreigners. D a t a based on the revised forms were published for the
first time in the July 1963 issue of the monthly Treasury Bulletin.
Treasury exchange and stabilization agreements

During the year ending June 30, 1963, Treasury exchange agreements were in effect with six countries, Argentina, Brazil, Chile, Costa
Rica, Mexico, and the Philippine Republic. The one-year exchange
agreement with Costa Rica in the amount of $6 million expired on
September 5, 1962. A six-month exchange agreement with the
Philippine Republic in the amount of $25 million, which was renewed
for three months on January 1, 1963 (see exhibit 33), expired at the
end of March.
Net drawings by Brazil during the year, under the two-year Treasury exchange agreement which exphed on May 15, 1963, amounted
to $7.7 mUlion.
The Treasury exchange agreement with Argentina for $50 million,
originally due to expire on June 6, 1963, was extended for four months,
until October 6, 1963. This action made available to Argentina $25
million not previously drawn as part of the loans and other financial
assistance provided by the Government of the United States to the
Government of Argentina in conjunction with a standby arrangement
for $100 million concluded with the International Monetary Fund.
At the end of fiscal 1963 Argentina had drawn $40 million against
the Treasury exchange agreement.
The two-year exchange agreement with Mexico for $75 million
was signed on January 1, 1962. No drawings had been made by the
Government of Mexico against this credit at the end of fiscal 1963.
The one-year $10 million exchange agreement entered into with
the Government of Chile by the Treasury Department on January 31,
1963, was one of three U.S. Government arrangements totaling $60
million which were concluded to support continued fiscal and monetary
stability in Chile. The U.S. Agency for International Development
arranged a loan of $35 million and the Export-Import Bank approved a
loan of $15 mUlion. The U.S. credits supplemented an International
Monetary Fund standby arrangement made in January 1963 in the
amount of $40 miUion.
Foreign exchange operations

Oflicial operations in foreign exchange by the Treasury and the
Federal Reserve System were conducted in nearly every major cur-

1963 REPORT OF THE SECRETARY OF THE TREASURY

rency during the fiscal year 1963. In some instances operations
stemmed from a need to protect the dollar from the adverse effects
of special situations, such as the Cuban crisis. Other operations
were designed to off'set temporary movements and to prevent shortrun influences from becoming magnified in market fiuctuations wider
than warranted by underlying financial and economic conditions.
The overriding influence on the exchange markets was the continuing
deficit in the U.S. balance of payments which caused dollar quotations
to remain below par in relation to most convertible currencies.
Cooperation with foreign monetary authorities was further developed and extended during the year. Establishment of a broader
base for diversified and flexible operations consistent with and in
support of President Kennedy's comprehensive program for correcting
the U.S. balance-of-payments deficit and for restraining the outflow
of gold contributed to the further strengthening of the international
payments system.
In October 1962 the Treasury began to issue a special series of nonmarketable, medium-term bonds to foreign monetary authorities
denominated in their own currencies. These new instruments serve
a variety of purposes in connection with foreign exchange operations
and provide an additional outlet for the investment of foreign reserve
funds as an alternative to gold purchases. As of July 1, 1963, a total
of $630 million equivalent of these securities was outstanding carrying maturities of 15 to 24 months. Interest rates ranged from 2.75
percent to 3.30 percent per annum and were at or below rates at the
the time of issuance on domestic securities of comparable maturity.
The bonds were denominated in five currencies: Austrian schillings
($25 million equivalent), Belgian francs ($30 million), German marks
($200 miUion), Itahan lire ($200 miUion), and Swiss francs ($175 million). All were issued to central banks except for $128 million equivalent of Swiss franc bonds issued to the Swiss Confederation. The
proceeds of the Swiss franc bonds and of $150 million of the lira bonds
were used by the Treasury to reduce outstanding short-term commitments in those currencies. The proceeds of the remaining lira bonds
and of those denominated in Austrian schillings, Belgian francs, and
German marks were used to acquire dollars from the respective
central banks, thereby reducing their potential gold purchases.
The Federal Reserve increased the number of the swap agreements
maintained with foreign central banks from five to eleven during the
year, and the total amount of foreign currencies which might be drawn
by the Federal Reserve at any one time was increased from $450
million to $1,550 million as of June 30, 1963. The largest agreement,
$500 million, was with the Bank of England. Other agreements were
in effect with the Bank of Canada, the Bank of Italy, the German

REVIEW OF FISCAL OPERATIONS

Federal Bank, the Bank of France, the Swiss National Bank, the
Bank for International Settlements, the Netherlands Bank, the
National Bank of Belgium, the Austrian National Bank, and the
Bank of Sweden. During the year, drawings were made and utilized
by one or both parties under all agreements except those with the
Bank of France and the Bank of Sweden. The most frequent use has
been made of the agreement with the National Bank of Belgium.
This agreement, of $50 million, has been fully drawn since its inception
in June 1962 and the frequent use by both parties of portions of the
balances drawn has helped absorb temporary surpluses of dollar
holdings of the National Bank and provide that Bank with additional
dollar resources when needed.
Toward the close of fiscal 1962 speculative capital movements and
exchange market nervousness resulting from the New York and
foreign stock market declines and the devaluation of the Canadian
dollar were effectively countered by cooperative action. Exchange
operations by the Treasury and Federal Reserve played a significant
part in hastening the restoration of confidence, by methods which
conserved the U.S. gold stock and diminished the effects of the speculative forces. The Canadian financial crisis had been effectively
broken by the announcement by the Canadian Government of the
imposition of a series of fiscal and monetary measures and the provision of massive international support for the Canadian dollar, including a newly-agreed $250 million swap arrangement with the Federal
Reserve, Export-Import Bank standby credits of $400 million, credits
of $100 million by the Bank of England, and drawings of $300 million
in European currencies from the International Monetary Fund. To
assist in further stabilizing the Canadian-U.S. dollar rate, the Treasury
purchased small amounts of Canadian dollars in the New York market.
Speculative capital flight to Switzerland, and to a lesser extent to
the Netherlands, swelled the reserve positions of the respective central banks and weakened the U.S. dollar in the exchange markets
both for spot and forward delivery. During mid-June and July the
Federal Reserve and the Treasury, using the proceeds of swap arrangements, absorbed about $65 million of the reserves of the Netherlands Bank and the Treasury resumed the sale of forward guilders,
providing exchange cover for dollars held by Netherlands commercial
banks, thereby reducing the amount of dollars offered in the market.
Similar but more extensive operations were undertaken in Swiss
francs. In July the Federal Reserve concluded a $100 million swap
arrangement with the Swiss National Bank and a similar arrangement
with the Bank for International Settlements; $110 million worth of
Swiss francs were drawn under these agreements and equivalent
amounts of dollars purchased from the Swiss National Bank. The

1963 REPORT OF THE SECRETARY OF THE TREASURY

Treasury increased its sale of forward Swiss francs by about $50
million to a total of $139 million outstanding by early August. Small
operations were also carried out in German marks.
The exchange market situation eased appreciably in August 1962,
following President Kennedy's emphatic statement during his Telstartelevision press conference on JiUy 23 that the dollar would not be
devalued. Tensions in Berlin on the first anniversary of the Wall
caused some weakness in the German mark, and the Treasury and
Federal Reserve purchased Deutsch Mark in the market, thereby
rebuilding balances in that currency. The Federal Reserve and
Treasury swaps with the Netherlands Bank were fully reversed and
the Treasury's forward guUder commitments were liquidated. Some
progress was also made in reducing Swiss franc commitments. In
October capital flight to Switzerland resumed because of the Cuban
crisis, but speculative pressure on the dollar was of short duration
and largely offset by relatively small sales of Swiss francs in the spot
market by the Federal Reserve and by additional forward Swiss
franc sales by the Treasury. The announcement during this period
of the acquisition of Swiss francs by the Treasury through the issuance
of the first 15-month bond and of shorter-term certificates denominated
in Swiss francs also helped to stabUize the market.
Large amounts of dollars continued to be gained by the central
banks of Italy, France, and Austria during 1962. During the summer
the Treasury absorbed the bulk of the gains of the Bank of Italy by
utilizing the proceeds of 3-month certificates of indebtedness issued
under a $150 million equivalent lira credit line and the Italian Govern.ment made an advance payment of $178 million against outstanding indebtedness to the United States. The Treasury's shortterm lira obligations were funded in October through the issuance
of 15-.cnonth bonds denominated in lire and an additional $50 million
equivalent lira bond was issued in November. The dollar accruals
of the Bank of France were reduced by debt prepayments by the
French Government to the United States totaling about $470 million
during the course of the calendar year 1962. The Austrian reserve
gain was temporarily reduced by $50 million through utilization by
the Federal Reserve of its swap agreement with the Austrian National
Bank, but as the Austrian balance of pa^^ments continued in surplus
the swap was reversed after the beginning of the year. In April
1963, however, a further growth in Austria's dollar holdings was
restrained through the sale of an 18-month Treasury bond denominated in schillings. Yearend positioning by commercial banks in
Germany, Italy, and Switzerland led to some repatriation of funds,
a consequent weakening of the dollar in terms of those currencies,
and further dollar gains by the respective central banks. Relatively

REVIEW OF FISCAL OPERATIONS

smaU operations by the Treasury and Federal Reserve offset the
effects of the capital flow, which shortly after the beginning of the
year was reversed.
The position of sterling in the exchange markets was sharply
affected in January 1963 by the rejection of the United Kingdom's
bid for membership in the Common Market. Major support for
sterling during this period, totaling $250 miUion, was provided by
five European central banks, to offset the pressure which appeared
to emanate from the Continent. The Federal Reserve and the Treasury purchased small amounts of sterling to stabilize the rate in New
York and the Bank of England utilized $25 million under the swap
agreement with the Federal Reserve. In M a y the Federal Reserve
swap agreement with the Bank of England was increased to $500
mUlion, although no additional drawing was made. Confidence in
sterling was restored, and the Bank of England subsequently repaid
aU of the special financing it had obtained.
During the remainder of the fiscal year, operations consisted
primarily of spot sales of German marks and Netherlands guilders.
The German balance-of-pajmients position improved, the money
market tightened, and funds were repatriated by commercial banks.
To moderate the effects of the short-term capital flow to Germany on
the dollar exchange rate and to reduce accruals to the reserves of the
Bundesbank, the Treasury and Federal Reserve commenced spot
sales of German marks in AprU 1963. Most sales were by the Federal
Reserve, which drew the full $150 million equivalent of marks under
its swap arrangement with the Bundesbank. In July and August
the Treasury issued an additional $75 million worth of mark-denominated bonds, some of the proceeds of v/hich were sold to the Federal
Reserve for use in reducing its swap drawing. Operations in Netherlands guUders during this period, while smaller in magnitude, were
caused by similar factors. The guilder strengthened against the
dollar to its upper intervention point, and to absorb dollar accruals
the Federal Reserve drew the full $50 million of guUders under its
swap agreement with that Bank. The flow of funds was shortly
reversed and the Federal Reserve restored its guUder position and
liquidated its swap drawing.
The International Monetary Fund

Drawings in various currencies from the Fund by 18 nonindustrial
member countries totaled the equivalent of $297 million in fiscal
1963. U.S. dollar drawings ($212 million) accounted for over 70
percent of the total. In contrast to the large drawings by the UnitedKingdom ($1.5 billion), Canada ($300 million), and India ($250
million) in fiscal 1962, drawings in the current fiscal year ranged from
$60 miUion by Brazil to $500,000 by Haiti. As in most recent.

1963 REPORT OF THE SECRETARY OF THE TREASURY

periods, a number of the drawings were made under standby arrangements which were negotiated in advance with the Fund and under
which drawings up to specified amounts and within an agreed period
may be made without reconsideration of the member's position at the
actual time of drawing. Of the 18 countries which received financial
assistance from the Fund in fiscal 1963, either through direct purchase
transactions or under standby arrangements, 11 were in Latin America
(Argentina, Bolivia, Brazil, Chile, Colombia, Costa Rica, Ecuador,
Haiti, Plonduras, Nicaragua, and Uruguay), 4 were in Asia (Afghanistan, India, Syria, and the United Arab Republic), 2 in Africa
(Ghana and Liberia), and 1 in Em*ope (Turkey).
Among the larger drawings, the $60 mUlion drawing by BrazU
in June was the first authorized under the Fund decision of March
1963, which is designed to provide additional balance-of-payments
support to member countries, particularly those exporting primary
products, which experience temporary declines in their export earnings
due to chcumstances largely beyond their control. Drawings of
$39 million by Colombia, $30 million by Argentina, and of $25 million
each by ChUe and India were associated with measures to improve
their foreign payments position while continuing to promote economic
growth.
Currency repayments by 22 member countries totaled the equivalent
of $814 million. Over 65 percent of this total was accounted for
by the repurchase of $531 million equivalent by the United Kingdom
in final repayment of its drawing of $1.5 billion in August and September 1961, the largest ever granted by the Fund. This repurchase
assisted significantly in maintaining the revolving character of the
Fund's resources. Thhteen countries in Latin America also repurchased the equivalent of approximately $200 mUlion of their
currencies held by the Fund, in addition to repurchases of $49 mUlion
by 4 countries in Asia, $31 million by 3 countries in Europe, and a
repurchase of $2.9 million by the Sudan.
In fiscal 1963 the Fund entered into standby arrangements with
15 member countries in the total equivalent of $1.4 bUlion, including
the $1 bUlion standby with the United Kingdom approved by the
Fund in August 1962. As of June 30, 1963, under these arrangements
$1.3 bUlion was avaUable to 16 countries.
The special borrowing arrangements between the Fund and ten
leading industrial countries, referred to in the 1962 annual report,
(pp. 85-86) became effective in October 1962, when the United States
announced its formal adherence with a commitment of up to $2
bUlion.^ U.S. participation in the arrangements was authorized
1 The U.S. announcement brought to eight the number of countries announcing adherence, and to $6.65
bilhon the total of commitments involved. France, Germany, Italy, Japan, the Netherlands, Sweden, and
the United Kingdom had previously made commitments.

REVIEW OF FISCAL OPERATIONS

in June 1962 by Public Law 87-490 (22 U.S.C. 286e-2) and appropriation of the funds was approved by the Congress in October 1962,
under Public Law 87-872. The arrangements were embodied in the
Fund decision of January 1962, which set forth the terms and conditions under which these countries would lend the equivalent of $6
bUlion of their currencies to the Fund when such additional resources
are needed to forestall or cope with an impairment of the international
monetary system.
In January 1963 Belgium deposited its instrument of adherence,
thereby increasing the number of participating countries to nine,
with aggregate commitments of $5.8 biUion. The remaining country,
Canada, has introduced the necessary legislation in Parliament but
as of June 30, 1963, had not yet notified the Fund of its adherence.
Canada's participation would increase total commitments to the
equivalent of $6 billion. ^
The Government of Switzerland (not a member of the Fund) has
submitted to its Federal Parliament for approval a framework agreement with the Fund under which it would be associated with currency
support operations of the Fund in an amount up to the equivalent of
$200 miUion.
In view of the new situation presented by the increasing number
of currencies usable in Fund transactions, the Fund Executive Directors in July 1962 approved a statement indicating the main considerations to be followed in the selection of cm-rencies for drawings
and repurchases. With respect to the selection of currencies for a
particular drawing or for drawings in general, account is taken of the
balance-of-payments and reserve positions of the countries whose
currencies are considered for drawings, as well as the Fund's holdings
of these currencies. In the case of repurchases, members are required
to consult the Managing Director of the Fund on the convertible
currencies to be used in repurchase transactions. The Fund will
accept any currency which is formally convertible under Article VIII
and of which the Fund's holdings are below 75 percent of the quota.
In July 1963 the United States entered into a standby arrangement
with the Fund in the amount of $500 million. Since the Fund's
holdings of U.S. dollars were close to 75 percent of quota, other
countries making repayments to the Fund would have been
required to use gold or convertible currencies other than the dollar.
To facilitate repayment by countries wishing to use part of the dollar
holdings to make repurchases, the United States will sell to them,
against payment in dollars, currencies drawn by us from the Fund.
The net result of the transaction will be to leave unchanged the Fund's
holdings of the currency drawn. The dollars paid will be effectually
1 On January 21,1964, Canada notified the Fund of its adherence to the special borrowing arrangements.

1963 REPORT OF THE SECRETARY OF THE TREASURY

withdrawn from the exchange market and will so reduce the potential
demand for conversion of dollars into gold.
The second annual consultation between the Fund and the United
States was held in May 1963, in accordance with arrangements under
which members of the Fund which have accepted the convertibility
obligations of Article V I I I of the Fund's Articles of Agreement
consult with the Fund on a voluntary basis.
Programs for financing economic development

The International Bank.—^During fiscal 1963 the International Bank
(IBRD) authorized 28 loans for the equivalent of $449 million for the
financing of development projects in 19 countries, down from the
previous year's peak of $882 million. In this fiscal year transportation loans accounted for nearly half the loans authorized ($190 million);
electric power loans accounted for $124 million; industrial loans,
primarily to industrial development banks, totaled $110 million; and
$24 million was made available for agricultural assistance in the forms
of four loans to finance irrigation projects.
Disbursement of loan funds in the fiscal year reached $620 million,
the highest figure yet recorded. The Bank continued its practice of
marketing maturities of Bank loans without its guaranty; sales during
the year totaled $273 million, and the cumulative figure of sales stood
at $1,605 million, all except $69 million without the Bank's guarantee.
During the fiscal year the Bank borrowed $124 million and repaid
$126 million, resulting in a net reduction of the outstanding funded
debt of $2 million. The major part of the debt transactions was
represented by the refunding outside the United States of a $100 million
U.S. dollar debt, sinking fund redemptions, and the maturity of a
small Swiss franc issue which more than offset a $10 million U.S.
dollar issue sold in Austria, and a $11 million Netherlands guilder issue
plus delivery of $3 million of U.S. dollar bonds sold in previous years.
Since it began operations, the International Bank has extended
loans totaling $7.0 billion, excluding canceUations, terminations, and
refundings; of this amount $5.4 billion had been disbursed by June 30,
1963. Total principal repayments amounted to $1,319 million, of
which $655 million consisted of direct repayment to the Bank, and
$664 million of sales of borrowers' obligations sold by the Bank. The
Bank's total reserves on June 30,1963, stood at $813 million, comprising
the Supplemental Reserve of $558 million and the Special Reserve of
$255 million. Ten new members joined the I B R D during fiscal 1963
raising total membership to 85 with capital subscriptions totaling
$20.7 biUion.
Through a variety of means during the year, the International

REVIEW OF FISCAL OPERATIONS

Bank continued its activities to promote international coordination
of financial assistance to developing nations. The Bank has acted
as a leader in the formation of consultative groups of governments
interested in assistance to a particular developing country. During
fiscal 1963 such groups for Colombia, Nigeria, and Tunisia met under
the chahmanship of the I B R D , to hear proposals under the development plans of the respective countries. The consortia for aid to
Pakistan and to India have continued to meet to examine and comment on the development plans of the two countries and to make
additional financial commitments for the current requirement of
each nation under their respective plan. Various studies, education
programs, technical assistance, and advisory services continue to
be made available by the I B R D to its members.
The International Development Association.—The International
Development Association (IDA) was established in September 1960,
as an affiliate of the International Bank, to provide financing for
economic growth in the less-developed areas of the world on credit
terms that take account of the heavy debt service burden of the
borrowing countries. By June 30, 1963, the IDA had made commitments of $495 mUlion for development credits, and had disbursed
$68 miUion. During the past fiscal year seventeen credits equivalent to $260 miUion were approved to finance projects in nine countries. The resources of IDA are being contributed by the member
governments in five annual installments. On June 30, 1963, IDA
had 76 members—16 Part I members (economicaUy advanced) and
60 Part I I members—with total subscriptions equivalent to $969
mUlion. Total subscriptions of usable hard currency are $775
mUlion, including a special supplementary contribution of $10 million
by Sweden. The initial U.S. subscription was $320.3 mUlion; two
instaUments of $61.7 miUion remain to be paid in November 1963
and November 1964. On June 30, 1963, only about $280 million
of hard cmTency remained avaUable for commitment. This amount
was further reduced by aid commitments for fiscal 1964 to the consortia on aid to India and Pakistan of $87 mUlion. Consequently,
only $193 mUlion of freely usable currencies were available for investment by IDA.
At the Annual Meeting of the Board of Governors of IDA held in
Washington in September 1962, the Executive Dhectors of IDA
were asked to consider the prospective financial requhements of the
Association and prepare a report on the matter. The Executive
Directors held preliminary discussions during the faU of 1962, and

19 63 R.EPORT OF THE SECRETARY OF THE TREASURY

bUateral conversations and negotiations on the broad outlines of a
feasible proposal continued dming the remainder of the fiscal year. ^
The International Finance Corporation.—The International Finance
Corporation (IFC) is an affiliate of the International Bank designed
to encourage the growth of private enterprise in less-developed
countries by investing in debt and equity issues of the private sector
without governmental guaranty of repayment. During fiscal 1963
the I F C made eleven commitments equal to $18.0 miUion in ten
countries, including two standby commitments amounting to $5.1
mUlion.
Seven of the commitments, the equivalent of $4.4 miUion, involved
participation in purchases of equity capital issued by industrial
concerns and industrial development finance companies. The I F C
has been permitted to make equity investments since September
1961 when an amendment to its charter to that effect was approved
by the Board of Governors. Total commitments reached $83 mUlion
by June 30, 1963; $61 mUlion had been disbursed and $16 miUion of
I F C investments had been sold.
On AprU 25, 1963, the Executive Dhectors recommended to the
Board of Governors that the authorized capital of the IFC be increased from $100 mUlion to $110 million, in accordance with a
provision in the Corporation's Articles permitting an increase, to
a maximum of $10 mUlion, in the authorized capital stock to allow
for subscriptions of new members. Secretary DUlon, as U.S. Governor, voted in favor of the proposal, which became effective September 5, 1963. Authority for U.S. assent to the increase is found in Section 5 of the International Finance Corporation Act (Public Law
350, 84th Congress) (22 U.S.C. 282c). The United States would
not subscribe for any part of the increase.
Inter-American Development Bank.-—The Inter-American Development Bank (IDB) of which the United States is a member was established to further economic development in Latin America. Loans
are made for a wide variety of purposes to governments, industry,
agriculture, and other areas of the private sector. With the exception
of Cuba all the Latin American nations are members of the I D B .
The Bank has total resources of $959 mUlion, consisting of $813 mUlion
ordinary capital and $146 mUlion in the Fund for Special Operations.
As a result of an agreement signed with the United States on June 19,
1 In a report submitted on Sept. 9,1963, the Executive Directors concluded that freely available currencies
in IDA'S initial resources would only support new commitments for a short period and that it was desirable
to provide IDA with new resources in order to permit its continued operation. The Executive Directors,
therefore, recommended to the Board that $760 milhon in freely usable currencies be subscribed by Part I
countries (Kuwait would not be a participant in the new arrangement), but Belgium and Luxembourg,
which had not previously become members of IDA, would joiu and take part in the increase. Payment
would be in three annual installments of $260 million each year begirming in November 1965. The U.S.
subscription would be $312 million, payable at the rate of $104 milUon per year. The National Advisory
Council in a Special Report submitted in September 1963, strongly recommended that the Congress authorize U.S. participation in this expansion of IDA's resources.

REVIEW OF FISCAL OPERATIONS

1961, the I D B was entrusted with the administration of the Social
Progress Trust Fund, comprising $394 million of the funds appropriated by the Congress on May 27, 1961, for the Inter-American
Social and Economic Cooperation Program (Public Law 87-41).
The Trust Fund Agreement enables the I D B to provide loans and
technical assistance for social development programs under terms
and conditions of repayment which are best suited to each country.
From the time it began operations in October 1960 untU June 30, 1963,
the I D B had authorized a total of $295 mUlion for loans from its
ordinary capital, aU repayable in the currency lent, $117 million from
the Fund for Special Operations, and $348 million from the Social
Progress Trust Fund. Total disbursements from all three sources
were $122 mUlion by June 30, 1963.
h
At the third Annual Meeting of the Board of Governors of the IDB
held in AprU 1962, the Governors requested that the Executive
Dhectors consider the question of enlarging the Bank's resources.
In AprU 1963 the Executive Directors of the I D B made the following
recommendations to the Board of Governors: (a) that the ordinary
capital resources of the Bank be increased by $1 billion to be subscribed in the same proportion in which original subscriptions were
made; (b) that each member's quota in the Fund for Special Operations be increased 50 percent; and (c) that a further increase of $300
million of capital stock be authorized to provide for admission of new
members. The U.S. subscription to the ordinary capital stock would
be 41 percent of the total, or $412 mUlion, and would be payable in
two installments by December 31, 1964, and December 31, 1965.
The U.S. payment to the Fund for Special Operations, representing
68 percent of the total quota, would be $50 mUlion. This payment
would be due within 90 days after approval of these recommendations
by Governors representing three-fourths of the voting power of I D B
members. ^
I'he Export-Import Bank.-—In the fiscal year ended June 30, 1963,
the Export-Import Bank authorized approximately $1.5 bUlion in
loans, guaranties, and export credit insurance. Development project
credits totaled $525 mUlion, and emergency foreign trade loans $35
million. The Bank also extended exporter credits and guaranties
amounting to $339 million, and committed $575 miUion through the
Foreign Credit Insurance Association (FCIA).
As indicated in the 1962 annual report (page 91), three significant
programs were initiated in fiscal 1962 in furtherance of the Bank's
function of assisting U.S. foreign trade as weU as to place U.S. exporters on a basis of full equality with their competitors in other
1 In May 1963 the National Advisory Council sent to the President and the Congress its own report on
the subject, strongly recommending legislation to permit the United States to join in the proposed incre?ise§
(see House Document No. 153, 88th Congress, 1st session).

1963 REPORT OF THE SECRETARY OF THE TREASURY

countries. These were the formation of the FCIA, an unincorporated
group of over 70 major American marine, casualty, and property
insurance companies set up to provide export credit insurance for
U.S. exporters; a system of guaranties on export transactions for
commercial banks; and sales of the Bank's portfolio paper to private
banks. The FCIA has been issuing short-term export credit insurance (for transactions on terms up to 180 days) jointly with the
Export-Import Bank since February 1962 to cover both comniercial
credit and political risks.
In July 1962 the Bank announced that U.S. exporters may obtain
insurance covering credit and political risks in overseas sales made on
terms of 181 days to 5 years, and in January and February 1963, the
Bank further modified its export insurance and guaranty programs to
include insurance policies on export transactions to cover political
risks only, to provide for lower charges on insurance and guaranties
and to offer guaranties of payment for services, and on equipment on
lease, consignment, or exhibit abroad.
The Export-Import Bank disbursed $499 million during the fiscal
3^ear; and export guaranties and insurance totaling $914 million were
financed privately. The Bank also sold $250 million of its portfolio
paper to private banks. Its earnings from interest and fees were
$182 miUion, and interest paid to the U.S. Treasury on borrowed
money was $51 million. A dividend of $50 million was declared on
the stock of the Bank held by the Secretary of the Treasur}^ The
Bank's uncommitted lending authority on June 30, 1963, was $1,364
mUlion.
The Agency jor International Development.—The Agency for
International Development (AID), in the Department of State,
succeeded the International Cooperation Administration and the
Development Loan Fund on November 4, 1961, in accordance with
the Foreign Assistance Act of 1961 (Public Law 87-195) (22 U.S.C.
2381). The responsibilities entrusted to the new Agency included
development lending, development grants and technical cooperation,
supporting assistance, contributions to international organizations
and programs, investment guaranties, and surveys of investment
opportunities. AID was also made responsible for administering
part of the funds provided under the Inter-American Program for
Social Progress (Pubhc Law 86-735) (22 U.S.C. 1943), and for
negotiating loans involving U.S.-owned local currencies, including
those acquired under sections 104(e) and 104(g) of Public Law 480,
as amended. These responsibilities were continued in fiscal 1963,
and the Foreign Assistance Act of 1962 (Pubhc Law 87-565) (22
U.S.C. 2211) added a new title for the Alliance for Progress, previously
covered in separate legislation. The Alliance for Progress title included

REVIEW OF FISCAL OPERATIONS

a separate provision for development loans and grants for Latin
America.
AID doUar commitments in fiscal 1963 totaled $2.4 billion, of
which $1.4 bUlion or 58 percent, was in the form of loans. Of total
dollar commitments, the Near East and South Asia accounted for
$992 mUlion, Latin America, $556 million, the Far East, $441 million,
and Africa, $266 million. The remainder comprised nonregional
programs, such as U.N. Technical Assistance and the U.N. Children's
Fund, and general program support and administrative expenses.
AID also continued to pursue its policy of maximizing expenditures
of foreign assistance funds within the United States. Current procedures result in the commitment of approximately four-fifths of all
assistance funds to U.S.-produced goods and services.
International conferences

International Monetary Fund and International Bank.—The Annual
Meeting of the Boards of Governors of the International Monetary
Fund and the International Bank for Reconstruction and Development and its affiliates opened in Washington in September 1963.
The U.S. delegation was headed by Secretary Dillon as U.S. Governor
and Under Secretary of State Ball as Alternate Governor. Under
Secretary Fowler, Under Secretary of the Treasury for Monetary
Affairs Roosa, Assistant Secretary BuUitt (U.S. Executive Director of
the I B R D ) , and Mr. Wilham B. Dale (U.S. Executive Director of the
IMF) acted as temporary Alternate Governors. The delegation
included members of the agencies constituting the National Advisory
Council on International Monetary and Financial Problems, members
of congressional committees, and other officials of the Government
concerned with the affairs of the international financial organizations.
President Kennedy addressed the Governors on September 30.
After paying tribute to the late Per Jacobsson, Managing Dhector
of the International Monetary Fund, he reviewed the steps being
taken by the U.S. Government to reduce the drain upon its balance of
payments, within the framework of increasing international economic
and financial interdependence. At the meeting of the Fund Governors, Secretary DUlon reviewed domestic developments in the United
States and commented upon measures initiated by the United States
to improve the international position of the dollar (see exhibit 25).
He also expressed the approval of the U.S. Government of the Fund's
declared intention to study the question of international liquidity and
stated that the Fund should be at the center of any strengthening of
the international monetary system which may prove to be desirable.
Meeting at the same time, representatives of the Group of Ten, ^
1 The following countries which have arranged to make additional resources available to the I M F : the
United States, the United Kingdom, Germany, France, Italy .Japan, Canada, the Netherlands, Belgium,
and Sweden.

1963 REPORT OF THE SECRETARY OF THE TREASURY

under the chahmanship of Secretary Dillon, announced plans to
examine the outlook for the functioning of the international monetary
system and its probable future needs for liquidity. In carrying out
these studies close working relationships wUl be maintained with the
International Monetary Fund.
In the meeting of the Governors of the Bank and its aflUiated
institutions, the Executive Directors of the International Development Association presented a report recommending that the resources
of IDA be increased by $750 million. The Board of Governors of
the Bank noted with approval the action of the Executive Directors
to discontinue the automatic annual allocation of net income to the
Supplemental Reserve. Instead the Executive Directors will decide
on the allocation of net income at the end of each fiscal year.
The Organization jor Economic Cooperation and Development.—Under
Secretary of the Treasury Fowler attended the second Ministerial
Council meeting in Paris on November 27-28, 1962, of the Organization for Economic Cooperation and Development (OECD). At this
meeting the Council of Ministers reaffirmed the need for concerted
action to increase the volume and effectiveness of aid to developing
countries. They also advocated policies which take full account of
the interdependence of trade and aid.
The Economic Policy Committee of the OECD held regular meetings throughout the year in order to discuss the overall economic
situation of the member countries. Under Secretary of the Treasury
for Monetary Affairs Roosa was a member of the U.S. delegation at
these meetings.
The Treasury has participated in the activities of two Worldng
Parties of the Economic Policy Committee. The Working Party on
Policies for the Promotion of Better Payments Equilibrium (Working
Party 3) meets regularly at intervals of approximately six weeks;
Under Secretary Roosa is the Chahman of the U.S. delegation to this
Working Party. This group reviews the payments situation of both
surplus and deficit countries and tries to achieve coordinated action
toward the goal of international monetary stability. The Working
Party on Policies for the Promotion of Economic Growth (Working
Part}^ 2), has been concerned since its inception with implementing
the 50 percent collective growth target for the sixties that was adopted
by the first OECD Ministerial CouncU held in November 1961.
Deputy Under Secretary Daane has been a member of the U.S.
delegation to Working Party 2.
The Development Assistance Committee (DAC) of the OECD

REVIEW OF FISCAL OPERATIONS

has investigated and considered means whereby development aid
could be made avaUable on a more effective basis and with a greater
degree of harmonization of the policies of the donor countries. In
April 1963 representatives of the Treasmy participated in a meeting
of the DAC which adopted resolutions pertaining to policy recommendations on terms of aid by DAC members to developing countries.
DAC membership includes Belgium, Canada, Denmark, France,
Germany, Italy, Japan, Norway, the Netherlands, Portugal, the
United Kingdom, the [Jnited States, and the Commission of the
European Economic Community. Denmark and Norway became
members during fiscal 1963.
The annual aid review of the DAC provides for careful study and
examination of each member's program and enables a comparison
of relative aid burdens and general aid policies. The U.S. review
was held on June 7, 1963. Assistant Secretary of the Treasury
Bullitt attended the Ministerial session in July 1963 that closed the
second annual aid review.
The Economic Development and Review Committee of the OECD
reviews annually the economies of the member countries and issues
a public report; the Treasury participated in the Committee's formal
examination of the U.S. economy and in the drafting of the public
report that followed. The Treasury also participates in the work
of the Fiscal and other committees of the OECD. A Treasury
observer regularly attended meetings of the Managing Board of
the European Monetary Agreement.
The General Agreement on Tarif s and Trade.—Extensive preparations were also undertaken during the fiscal year for the international
trade conference under the General Agreement on Tariffs and Trade
(GATT) scheduled to open in Geneva in 1964. The path to the
Conference was opened by the enactment in October 1962 of the
Trade Expansion Act (19 U.S.C. 1801), which gave the President
unprecedented powers to enter into new reciprocal trade agreements.
The next step was taken at the twentieth session of the Contracting
Parties to the GATT, October 23-November 16, 1962, when, in
addition to consideration of various problems affecting world trade
of the type with which these sessions are usuaUy confronted, it was
decided, on the basis of a joint United States-Canadian proposal,
to convene a ministerial level meeting early in 1963 to make the
necessary determinations for the scheduling of a trade conference.
Representatives of the Treasury were members of the U.S. delegation
to this meeting which was held in Geneva from May 21 to June 29,
707-484—64

19 63 REPORT OF THE SECRETARY OF THE TREASURY

1963. The Treasury continues to participate in the work of the
Trade Expansion Committee, meeting at different levels within the
Government, to prepare for the ^^Kennedy round" of tariff negotiations, utilizing new tariff schedules authorized by the Tariff Classification Act of 1962 (19 U.S.C. 101) which became effective August 31, 1963.
Among the matters, other than the proposed trade conference,
considered by the GATT at its twentieth session was Canada's action,
in June 1962, as part of a program to stop severe losses of foreign exchange, imposing surcharges on approximately half its total imports.
Inter-American Economic and Social Council.—The Secretary of the
Treasury headed the U.S. delegation to the annual meeting at the
Ministerial level of the Inter-American Economic and Social Council
held in Mexico City, October 22-27, 1962. In his principal statement
(see exhibit 23) Secretary Dillon reviewed the major accomplishments
of the AUiance for Progress during its first year, and pointed out areas
requiring attention in the year ahead and the role of the United
States and the Latin American countries in carrying out the objectives
of the Alliance. Early in December Secretary Dillon attended the
second meeting of the joint United States-Japan Committee on Trade
and Economic Affairs held in Washington. Later in December
Secretary Dillon attended the North Atlantic Treaty Organization
meeting in Paris. Secretary Dillon, the U.S. Governor of the InterAmerican Development Bank (IDB), led the U.S. delegation to the
Fourth Annual Meeting of the Board of Governors of the I D B held
in Caracas, Venezuela, in April 1963.
Lend-lease silver

Repayments continued during fiscal 1963 of those obligations which
still remained outstanding at the beginning of the year on account of
Treasury silver transferred to certain countries during World War I I
under the authority of the Lend-Lease Act of March 11, 1941. Liquidation of these obligations is nearly completed. During fiscal 1963
cash repayments of $6.6 miUion were received from Saudi Arabia and
taken into the account of the Treasurer of the United States. Converted on the basis of the market price for silver on the dates of
receipt of the payments, this is equivalent to 5.4 million fine troy
ounces of sUver. One million ounces of silver and cash repayments of.
$3.5 miUion from Pakistan were also taken into the Treasurer's
account. This cash repayment is equivalent to 3 million fine troy
ounces of silver on the basis of the market price on the dates of receipt.

REVIEW OF FISCAL OPERATIONS
Lend-lease silver transactions as of June SO, 1963
[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 Kingdom
Total

--—
--

Silver returned and
taken into
the account
of the Treasm-er of the
United States

Silver
being
returned

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

11.8
.3
6.4
.2
172.2
66.7
48.8
1.4
88.1

0.3

410.8

384.9

0:3

Dollar repayments
(millions)

Silver
to be returned

i$3.5
3 20.3

1.6
1

23.8

1.7

1 Equivalent to 3 million fine troy ounces of silver converted on the basis of the market price on dates of
receipts.
2 Includes 1,031,250 ounces lost at sea while in transit.
3 Equivalent to 19.8 million fine troy ounces of silver converted on basis of the market price on dates of
receipts.

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 dhectly 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, the United Kingdom, and Vietnam.
Notices of the availabUity 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. A number of
additional items became available for certification during the year.
The enforcement measures of the Control resulted in a number of
successful criminal prosecutions. A total of $146,342 was collected

1963 REPORT OF THE SECRETARY OF THE TREASURY

by the Government in forfeitures, fines, and other penalties as a result
of proceedings under the Foreign Assets Control Regulations.
The Cuban Import Regulations prohibit the importation into the
United States of all goods of Cuban origin and all goods imported
from or through Cuba, except pursuant to license. The regulations,
as amended, include imports of goods manufactured in third countries
containing Cuban components. For details, see 1962 annual report,
page 98 and exhibit 50.
The Transaction Control Regulations, supplementing the export
control laws of the Department of Commerce, prohibit persons in the
United States from purchasing, selling, or arranging the purchase or
sale of certain strategic commodities outside the United States for
ultimate shipment to the Soviet bloc. To determine to what extent
foreign subsidiaries of U.S. firms engage in trade with the Soviet
bloc in strategic commodities not presently affected by the Transaction
Control Regulations, a trade survey was conducted (see exhibit 35).
Out of approximately 1,100 replies received, only nine indicated that
the firms engaged in trade with the Soviet bloc in commodities not
presently covered by the Transaction Control Regulations.

ADMINISTRATIVE

REPORTS

Management Improvement Program
The objective of the Treasury management improvement program
is to ensure that a continuous broad-scale effort is made by all
Treasury components to evaluate systematically and improve the
effectiveness and economy of operations within all levels of their
organization. This program, since its inception in 1947, has through
the contributions of the participating bureaus made possible an estimated savings of $150 million. Within this total, $15.9 million in
recurring savings were reported during the year, representing a 20percent increase in program achievement over last year. Of the fiscal year 1963 savings $2.1 million resulted from the incentive awards
program.
Special studies and projects

In response to a Presidential memorandum of October 11, 1962, an
analysis, begun in fiscal 1962, was completed of each Treasury bureau's
manpower control and utilization program including the extent to
which a systematic approach is used to equate manpower with
workload. I t was founci: That each bureau has a manpower-control
method; that more than 35 methods and techniques are used by the
bureaus; and that some of them apply cost accounting and work
measurement systems to equate manpower and workload in all of
theh operations.
A study of the Bureau of Customs' mission, organization, management practices, and problems was undertaken by a study group
composed of members from the Treasury's OflEice of Management
and Organization, Office of Budget and Finance, Oflice of Personnel,
and the Bureau of Customs. A report will be made in the fiscal year
1964. A similarly-composed group completed a management study
of the Customs Agency Service for the Commissioner of Customs
during fiscal 1963. The implementation by the Commissioner of the
recommendations produced a major field reorganization in one segment of Customs to provide better manpower utUization.
Seventy-three Treasury bureau field offices in fourteen cities were
visited by staff members of the Oflice of the Secretary as a part of
a continuing effort to review the progress made in the management
improvement program. Primary emphasis was given to manpower
utilization and control, recurring and special appraisals, long-range
planning, and field coordination and cooperation.
A study of correspondence and mail handling practices in the
Treasury Department was completed to identify significant problem
areas within the Office of the Secretary and the bureaus.
The Treasury bureaus have designated 88 of theh key field personnel to serve on the 12 Federal executive boards located in the
major metropolitan areas of the United States. During fiscal 1963,
4 of the 12 boards were chaired^by Treasury personnel.

1963 REPORT OF THE SECRETARY OF THE TREASURY

Financial management

Improvements continued to be made in the three major categories
of Treasury Department financial management programs. The fhst
related to the Department's policy role as a central agency in
Government-wide accounting, reporting, and banking services.
Significant accomplishments included realization of the annual
savings of $150,000 resulting from modifications of central accounting
and financial reporting in the regional accounting oflices of the
Bureau of Accounts; development of a reporting regulation to provide
monthly information on gross obligations for use in developing
measurements of the impact of certain Government expenditures on
the private economy; and major revision of the Monthly Statement oj
Eeceipts and Expenditures oj the United States Government to conform
with the revised presentations contained in the 1964 Budget
document.
The second category included financial programs or operations of
the Department such as disbursing, internal and customs revenue
collections, and public debt operations. Significant accomplishments
included: The use of ADP equipment by the Bureau of Accounts in
disbursing operations enabling centralization of oflices resulting in
$680,000 annual savings; extension of Internal Revenue Service's
A D P operations in the Atlanta region to process individual income
tax returns and the opening of the Philadelphia Regional Service
Center to process business returns; and the reorganization by the
Bureau of Customs of customs comptroller districts and the taking
of other steps which reduced the cycle of audits for customs collections
from three years to eighteen months.
The t h h d category was financial management of the resources of
the Treasury Department, which is carried out through budgeting,
administrative accounting, and internal audit activities. During
fiscal 1963 reorganizations within the Oflice of the Administrative
Assistant Secretary consolidated budget and administrative accounting activities in the Office of Budget and Finance and established
a separate Internal Audit Division in the Oflice of Management and
Organization. Instructions were developed for a simplified method
of preparing and submitting budget estimates for the fiscal year 1965;
a review of the appropriation and activity structure was initiated;
and the Accounting Policy Circular on accrual accounting was revised
to provide alternative methods of accrual accounting enabling
practical application of the concept in the several Treasury
organizations.
Personnel management

The Oflice of Personnel increased the effectiveness and efficiency
of the following major areas: employee-management cooperation;
equal employment opportunity; placement of the handicapped;
employee training and development; and the development of better
standards and guides pertaining to employee qualifications, conduct,
appeals, position classification, and pay.
The Department granted formal recognition to four major employee
organizations and the top officers cf these organizations were consulted on several major personnel policies and programs.

ADMINISTRATIVE REPORTS

The Treasury Personnel Alanual chapter on Standards of Conduct
for Treasury employees was revised and issued as were new regulations
for preventing conflicts of interest on the part of advisers and
consultants.
An overaU personnel management program was developed and
issued which provides authorities, regulations, and procedures for the
operation of a personnel program during a national emergency.
A new qualification standard was developed in close cooperation
with all Treasury law enforcement activities, under which, for the
first time, all of the Department's criminal investigator positions,
approximately 4,000, are covered by a single qualification standard.
This will achieve more eft'ective recruitment, advancement, and
retention of personnel. Position classification action was taken to
bring criminal investigator positions in the six Treasury law enforcement activities into more equitable alignment.
Substantial assistance was provided to the Office of the Comptroller
of the Currency in the development of a new qualification standard for
national bank examiner positions including the new positions specializing in trust work. Concurrently, revised compensation schedules
were issued in recognition of responsibilities added to these positions.
These two projects have facilitated the recruitment and retention of
high quality personnel.
Bureaus were provided with more specific guidance and direction
for implementing the Federal policy on equal employment opportunity
and on the elimination of discrimination practices based on such
factors as age and sex.
Policies and regulations were issued to insure understanding and
effective use of step increases related to acceptable level of competence and high quality performance. The Treasury performance rating plan was revised to improve evaluations of employee
performance.
Employee training in the Department continued at approximately
the same level as in 1962 except in the Internal Revenue Service where
there was a sharp decrease in training in the audit function to meet
immediate production requirements. Elsewhere in the Department
training of technical and professional personnel was increased.
Nationwide training sessions were conducted for bureau hearing
officers in Atlanta, Boston, Chicago, New York, and San Francisco
in connection with Treasurv appeal procedm-es under Executive
Order 10987.
The Office of Personnel continued to stress executive development
and the effective use of available training resources both within and
outside the Department. Participation in interbureau and interagency activities responsive to their needs and the use of nongovernment resources proved to be especially helpful to small and niedium
sized bureaus. Evaluation of the training effort in relation to bureau
needs was also stressed, and a comprehensive report on employee
training in each bureau and throughout the Department was furnished to bureau heads and other pertinent Treasury officials to
facilitate program review. The Office of Personnel participated in a
number of studies of bureau programs in which employee training and
personnel management were subjects of particular attention.

1963 REPORT OF THE SECRETARY OF THE TREASURY

Incentive awards program

Estimated first year savings from the incentive awards program
increased 22 percent above fiscal 1962. Because the Department has
placed appropriate emphasis on raising the quality of employee suggestions, there was a decline in the number of suggestions received
and the number adopted in the fiscal year 1963. However, there was a
significant increase in the number of performance awards and in the
estimated tangible savings derived from them. Superior performance
and special act or service awards have provided valuable incentives
for increased production and high quality performance.
Safety program

For calendar 1962 the Treasury Department's disabling injmy
frequency rate (the number of lost time injuries per million manhours) was reported as 3.6, the second lowest rate ever recorded by
the Department. While the number of disabling injuries increased
in 1962, compared with 1961, the number of days lost due to disabling
injuries and the total doUar cost of injuries both declined.
Property management

The Department continued to dispose of excess real and personal
property promptly and to take advantage of excess property from
other agencies.
Thirteen properties, consisting of land and improvements with a
total acquisition cost of $440,400, were declared excess. Thi'ee other
properties previously declared excess were disposed of, two by transfer
and one by sale for $13,500. Of real property not involving acreage,
62 parcels, having a total acqmsition cost of $654,000, were disposed of
and 67 additional parcels, having a total acquisition cost of $728,000,
were approved for disposal. In addition, the disposal of these properties will reduce maintenance and protection costs.
Treasury field oflices were moved into new buildings at four locations. In three instances the moves permitted the housing under one
roof of widely scattered oflices. This resulted in: Saving time,
salaries of employees, and transportation costs; bringing together
various phases of related work; and greater convenience to the public.
During fiscal 1963 the Treasury Department received from other
Federal agencies without reimbursement excess personal property
with an original acquisition cost of about $5,884,800 and determined
$15,514,700 of personal property excess to its needs, based on
original acquisition cost. Within the Treasury Department $491,400
of personal property was reassigned for further utUization.
Bureau of the Comptroller of the Currency
On February 25, 1963, the National Banking System celebrated
its one-hundredth anniversary. This commemorated President
Abraham Lincoln's signing in 1863 of an act which provided for
establishing a system of national banks chartered and supervised by
the Comptroller of the CmTency. These national banks and those
chartered by each of the individual States constitute what has become
known as the dual banking system.

ADMINISTRATIVE REPORTS

Several recent activities of the Bureau of the Comptroller of
the Currency have reflected policies adopted since November 1961.
The amount of information available to the public, depositors, and
stockholders, relating to the operations of national banks has been
increased. Procedures have been instituted and legislation suggested
which would enable national banks to serve local business needs
and assist in meeting national goals proclaimed by the President.
Involved is the providing of national banks with additional flexibility
so that they may be able to give adequate service to the varying
individuals and businesses who are their customers and to compete
more effectively with other financial and nonfinancial institutions for
new business.
Disclosure

On June 1, 1963, the Bureau issued its completely revised
Comptroller's Manual jor National Banks, which combines the laws
relating to national banks, the regulations of the Comptroller of the
Currency, and his rulings interpreting and applying the laws, regulations, and general principles of prudent banking. The manual was
prepared for use by bank oflicials and theh counsel and by national
bank examiners and other members of the staff of the Comptroller.
In its preparation, the Bureau benefited by many useful suggestions
from national banks throughout the country, the technical assistance of representatives of the banking industry, and the Advisory
Committee on Banking to the Comptroller of the Currency.
This Committee submitted its valuable report Naiional Banks in
the Future in September 1962. The report covered the entire gamut
of problems of the banking field, including such important areas as
the powers of national banks, their capital, corporate procedures,
relationships with the Federal Reserve System, bank examination
and supervision, and taxes. There is widespread recognition that
the report presents for the first time in many decades a comprehensive
view of the problems faced by national banks.
In September 1962 Congress gave the ComptroUer of the Currency
power to grant national banks authority to exercise trust and associated
powers. On August 15, 1963, the Bureau issued its Comptrollers
Manual j o r Representatives in Trusts, a revision of that last published
in 1938. This manual complements the revision of trust regulations
affecting national banks, which began with the publication of Revised
Regulation 9, April 5, 1963. This manual, like the manual for national
banks, is intended to assist in the understanding of the applicable
regulations, instructions, and opinions. Where necessary, supplements, including opinions rendered by the Bureau, wUl be provided.
As part of the program to supply additional information, the new
Comptroller's Manual jor National Banks requires that banks with
deposits in excess of $25 mUlion submit to theh stockholders a
comparative balance sheet, earnings statement, and reconciliation
of 'capital account. To assist further in supplying information to
stockholders of national banks, the Bureau has distributed an '^Annual
Meeting Instruction Kit," which will supply many banks, especially
the small national banks, with information and procedures to facUitate
their holding more informative annual meetings.

1963 REPORT OF THE SECRETARY OF THE TREASURY

A regularly issued Bureau publication Summary oj Actions includes
decisions relating to all applications for new national bank charters,
branches, mergers, consolidations, pm'chase of assets, assumption of
liabilities, change of name or location of head offices or branches,
and conversion from State to national banks. This has received
wide distribution among banks and the press.
Department of Banking and Economic Research

With the additional work requirements of the Bureau, it was
found deshable to establish a Department of Banking and Economic
Research. This Department has the responsibility of supplying the
Comptroller with advice relating to the economic and financial
aspects of legislation and to current banking and economic developments. For the first time in recent history the Bureau has been
able to undertake a research program relating to its operations and
responsibUities. In progress, there are program studies relating to
chartering, branching, and the performance of national banks, both
on a national scale and for selected regions. I t is expected that the
fruits of these projects will aid in formulation of policy by keeping
the Bureau abreast of significant changes in the banking sphere.
This Department maintains relationships with the other Federal
supervisory agencies with the aim of increasing the amount of information relevant to all. In addition, this liaison enables the Bureau
to develop forms and procedures for national banks which may be
simUar to those used for nonnational banks, making possible useful
comparisons.
This research Department has responsibility for publishing the
National Banking Review, a new quarterly publication of the Comptroller of the Currency, which is avaUable on a subscription basis.
The aim of this journal is to afford a medium of expression to those
who are concerned with public policies in the field of money and
banking and with the problems and practices of banking institutions.
A major function of this review is to encourage an exchange of ideas
which will lead to better understanding, more effective teaching,
and further explorations of problems and issues. As a lasting tribute
to the commemoration of the centennial of the National Banking
System, the Bureau sponsored a volume entitled Banking and Monetary Studies, which contains 23 essays by leading scholars in these
areas. The 100th Annual Report oj the ComptroUer oj the Currency
was prepared in this Department. I t represents a significant departure from previous annual reports in that it includes more analysis
and, for the first time for any of the Federal bank supervisory agencies,
\9
the complete texts of all merger decisions during 196^
The status of national banks

As of June 1963 there were 4,544 commercial banks under the
supervision of the Comptroller of the Currency. Of these, 4,537
were national banks and 7 were nonnational banks in the District
of Columbia. This compares with a total of 4,507 banks (4,500
national banks and 7 nonnational banks in the District of Columbia)
under the supervision of the Comptroller of the Currency in June 1962.
As a whole, the banks under the supervision of the Comptroller are

ADMINISTRATIVE

REPORTS

in excellent financial condition. In the process of supervision, each
bank is examined approximately three times every two years. Hence,
the examining staff examines almost 7,000 banks a year. D a t a are
collected on the general condition of each. As of July 1962, there
were only 38 banks in poor condition and one bank in bad condition.
As a result of special supervisory activities and constant attention
these were reduced to 19 and zero, respectively, by early July 1963.
Assets and liabilities of naiional banks on J u n e 30, 1962; September 28, 1962lt
December 28, 1962; March 18, 1963; and J u n e 29, 1963
'
[In millions of dollars]
J u n e 30,
1962

Sept. 28,
1962

D e c . 28,
1962

M a r . 18,
1963

J u n e 29,
1963

4,500 b a n k s 4,494 b a n k s 4,505 b a n k s 4,506 b a n k s 4,537 b a n k s
ASSETS

L o a n s a n d discoimts (including overdrafts)
U . S . G o v e r n m e n t securities, direct obligations
--_
Obligations g u a r a n t e e d b y U . S . Government
__
__
Obligations of States a n d political s u b d i visions.- -- Otber b o n d s , notes, and d e b e n t u r e s
C o r p o r a t e stocks, including stock of Federal Reserve B a n k s
, „.
T o t a l loans a n d securities
Reserve w i t h Federal Reserve B a n k s
C u r r e n c y a n d coin
Balances w i t h other b a n k s , a n d cash items i
in process of collection
B a n k premises o w n e d , furniture a n d fixtures
-_
Real estate o w n e d other t h a n b a n k premises
_
I n v e s t m e n t s a n d other assets indirectly
r e p r e s e n t m g b a n k premises or other real
estate
C u s t o m e r s ' liability on acceptances outstanding
Other a s s e t s .
Totalassets

69, 771

71, 769

75, 548

75, 677

78,383

4; 383

34,456

35, 551

34,411

33,944

125

118

112

12, 809
1, 772

13,116
1,864

13, 607
2,039

14,135
1,929

15,174
2,164

381

397

396

403

413

119, 241

121, 720

127, 254

126, 627

130.146

26,860

26, 959

29, 684

27, 546

28, 641

1,931

1,973

2,028

2,073

2,137

187

189

191

193

216

454
821

458
850

542
891

520
824

518
1,023

149, 559

152, 216

160, 657

157,852

162, 748

60,705

61, 831

67,338

6o,775

63,256

46; 975

49, 859
3,922

51, 713

54, 065

5,640

48, 437
5,013

10,390
8,278
1,741

10,050
8,621
1,588

10, 629
9,282
1,795

10, 577
8,777
1,711

11,429
8,627
1,934

l;;3,728

135, 539

142, 825

139, 771

145, 613

82, 834
60, 893

83,352
52,188

88, 964
53, 861

83, 655
66,116

86, 893
58, 620

LIABILITIES

D e m a n d deposits of i n d i v i d u a l s , partnerships, 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 ,
p a r t n e r s h i p s , a n d corporations
P o s t a l savings deposits
}
Deposits of U . S . G o v e r n m e n t
Deposits of s t a t e s a n d political s u b d i v i sions
Deposits ofbanks
-_.
Certified a n d oflScers' checks, etc
_.
T o t a l deposits
D e m a n d deposits
T i m e a n d s a v m g s deposits
--Mortgages or other liens o n b a n k premises
a n d other real estate ..
R e d i s c o u n t s a n d other liabilities for borrowed m o n e y
Acceptances executed b y or for a c c o u n t of
reporting banks and outstanding
O t h e r l i a b i l i t i e s . . _—
- _
T o t a l liabilities

3, 217

379

821

1,636

1,391

600

463
2, 743

467
2,866

552
2,891

631
3,388

531
3,093

137,316

139, 697

147, 907

145,083

149, 740

1963 REPORT OF THE SECRETARY OF THE TREASURY

Assets and liabilities of naiional banks on J u n e SO, 1962; September 28, 1962;
December 28, 1962; March 18, 1963; and J u n e 29, 1963—Continued
[In millions of dollars]
J u n e 30,
1962

Sept. 28,
1962

D e c . 28,
1962

M a r . 18,
1963

J u n e 29,
1963

4,600 b a n k s 4,494 b a n k s 4,605 b a n k s 4,506 b a n k s 4,637 b a n k s
CAPITAL ACCOUNTS

Debentures

(*)

.. .
3,709

3,758

3,824

3.871

3,679
3

3,706
3

3,735
23

3,801
23

3,846
26

3
6,124
2,164

3
6,176
2,357

23
6,307
2,406

23
6,428
2,238

26
6, 626
2,331

C a p i t a l stock, total .

3,682

C o m m o n stock .
Preferred stock„

.._

R e t i r a b l e value of preferred capital stock L
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 a c c o u n t for p r e ferred stock

272

277

279

281

12,243

12, 519

12, 750

12, 768

13, 008

T o t a l liabilities a n d capital a c c o u n t s . . .

149,659

162,216

160,667

157,862

162, 748

21,103

20, 622

21,488

20,881

23,104

T o t a l capital accounts

MEMORANDUM

Assets pledged or assigned t o secure liabilities a n d for other purposes

*Less than $500,000.
1 Not included in total capital accounts figure.

Bureau of Customs
The major responsibility of the Bureau of Customs is to administer
the Tariff Act of 1930, as amended. Primary duties include the
assessment and collection of all duties, taxes, and fees on imported
merchandise, the enforcement of customs and related laws, and the
administration of certain navigation laws and treaties. As an enforcement organization, the Bureau engages in 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
1963 reached almost $1,722 miUion, or 6 percent more than the
$1,624 million collected in 1962. Included in the totals were customs
duty collections, excise taxes on imported merchandise collected for
the Internal Revenue Service, and certain misceUaneous collections.
Customs duty collections alone amounted to almost $1,241 million
compared with $1,171 million in 1962. Larger customs collections
than in fiscal 1962 were reported by 41 out of 45 customs districts.
CoUections and payments by customs districts are shown in table 23.
The major classes of all collections by the Customs Bureau are shown
in table 24.
Of all imports into the United States during fiscal 1963, more than
37 percent were duty free. Included were some commodities imported free for Government stockpile purposes, or authorized by

ADMINISTRATIVE REPORTS

special acts of Congress for free entry although dutiable under the
Tariff Act of 1930, or taxable under the Internal Revenue Code. The
63 percent which was dutiable constituted the basis of customs
duties on imports.
Political propaganda screening

As of January 7, 1963, Customs resumed screening foreign mail for
^'Communist political propaganda,'' pursuant to legislation approved
October 11, 1962 (39 U.S.C. 4008). Customs is requhed to determine
which mail matter, except sealed letters, is such propaganda, as
defined by the act, after which the Postmaster General detains or
releases such material as provided for in the act. Screening units
were established at 10 major postal ports from which all foreign mail
is distributed throughout the United States.
Customs operations in 1963

Carriers and persons entering.—More than 164 million persons were
subject to customs inspection in fiscal 1963. There was a 5.6 percent
increase in carriers and a 4.1 percent increase in persons entering the
United States as shown in tables 88 and 89.
Entries oj merchandise.—The volume of imports into the United
States continued to rise in fiscal 1963, exceeding last year's record.
The value totaled $16.4 billion, compared with $15.5 billion in fiscal
1962. The volume and type of entries handled by customs officers
during the past two years is shown in table 86.
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 1963 as reflected in table 87 by principal
commodities was $17,821,222, an increase of 20.8 percent over 1962.
Appraisement oj merchandise {including Customs Injormation Exchange).—Invoices filed during fiscal 1963 increased 5.3 percent,
2,49i,639, compared with 2,366,771 in 1962. The number of packages
examined by appraisers' personnel totaled 1,546,280, an increase of
2.7 percent over the 1,504,689 examined in fiscal 1962.
The backlog of unappraised invoices more than 30 days old rose to
444,000, an increase of 44.6 percent over the 307,000 on hand at the
close of fiscal 1962. This sharp increase was attributed, as in fiscal
1962, to the initiation in January 1962 of the U.S. import duties
annotated verification program (USIDA). During the year 2,932,000
individual line items were verified, each requiring four verifications.
Of these, 32.6 percent requhed correction of one or more of the
verified elements.
Under the Antidumping Act of 1921, as amended (19 U.S.C".
160-171), 41 complaints were received, compared with 16 in 1962.
The disposal of 31 cases left 28 under investigation at the end of
fiscal 1963, compared with 18'' the previous year. Eight cases
were referred to the U.S. Tariff Commission for a determination as
to possible injury to American industry. One new case on countervailing duty was received and two cases were closed.
^ Revised.

19 63 REPORT OF THE SECRETARY OF THE TREASURY

Two new cases involving convict labor were received during the
year and four cases were closed.
Appraisers' reports of classification and value by the Customs
Information Exchange in New York, N.Y., covering a cross section of
imported merchandise received at each port, totaled 73,000 in fiscal
1963, compared with 76,000 in 1962.
During fiscal 1963 onlj 224 detailed investigations were made
abroad to obtain information for appraisement. This reflected 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 the current regulation which permits a
foreign inquiry only as a last resort in securing value information.
Technical services.—The nine district laboratories and one branch
laboratory of the Division of Technical Services analyzed about
139,000 samples in fiscal 1963. The increase of about 7,000 samples
during the year was accounted for chiefly by: Samples of crude drugs
and medicinals; resins, elastomers, and plastics; raw sugar; textiles;
and ores and minerals. The majority of the samples were submitted
to the laboratories for appraisement or tariff' classification information.
Other classes analyzed were seizures (mainly narcotics and other
prohibited merchandise); samples tested for other Government agencies ; and preshipment samples (samples submitted by importers when
requesting the rate of duty on a prospective import).
The Division of Technical Services also analyzes cargo sample
weighing data, to assure accuracy and precision within statistical
control limits. In fiscal 1963 such analyses were made of 107 cargoes
of refined sugar, cigarette tobacco, and rayon.
The program for the improvement of U.S. border inspection stations
in cooperation with the Immigration and Naturalization Service
included preparation of plans and specifications and the awarding of
contracts for new facilities at Northgate and Hansboro, N. Dak.;
at Whitetail and Morgan, Mont.; and at Warroad, Minn. Construction was continued on the projects at Maida, Hannah, Sarles, Walhalla,
and Fortuna, N. Dak.; Lancaster, Minn.; and Opheim, Mont. Facilities at Roseau, Minn., and Antler, N. Dak., were completed.
The Division of TechnicpJ Services works closely with the General
Services Administration (GSA) in the development and review of
plans for customs facilities at the larger border installations, which
are supervised by the GSA and include space utilized by a number of
Government agencies. In fiscal 19631" contracts were awarded for
facilities at Jackman, Maine, and Sweetgrass, Mont., and preliminary
drawings were reviewed for facilities planned for Tok, Alaska; Nogales,
Ariz.; Porthill, Idaho; Van Buren, Vanceboro, and Lubec, Maine;
Pigeon River, Minn.; Pembina, N. Dak.; and Derby Line, Vt.
The Bureau and the GSA have agreed on a site on Terminal Island,
Calif., for a new customhouse which will be convenient to both the
Long Beach and Los Angeles port sections.
Export control.—The following table shows the volume of export
control activities.

ADMINISTRATIVE

REPORTS

1962

Activity

' 4, 729, 544
«• 396,496
M94
r $514, 708
201

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 s e i z u r e s . . .
Value of seizures
E x p o r t control e m p l o y e e s .

1963

4,856, 637
398,183
345
$683, 984
217

Percentage
increase
2.7
0.4
77.8
32.9
8.0

f Revised.

Protests and appeals.—Protests filed by importers against the rate
and amount of duty assessed and appeals for reappraisement filed by
importers who did not agree with appraisers as to the value of
merchandise are shown in the following table.

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 (formal)
Filed w i t h collectors b y i m p o r t e r s (informal)
A p p e a l s for r e a p p r a i s e m e n t filed w i t h collectors

1962

...

37.270
52; 374
17,164

1963

34, 271
50,416
13, 694

Percentage
decrease

-8.1
-3.7
-20.2

Marine activities.—Vessels in the American merchant marine documented for commercial use increased from 44,018 in fiscal 1962 to
44,656 in fiscal 1963, while those documented as yachts rose from
8,712 to 9,767. The following table compares the volume of marine
documentation during the fiscal years 1962 and 1963.

Activity

T o t a l vessels d o c u m e n t e d at e n d of year
D o c u m e n t s issued (registers, enrollments, a n d hcenses)
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 u m e n t s of title recorded
A b s t r a c t s of title a n d certificates of ownership issued—
Certificates a n d p e r m i t s _
N a m e changes
. .

1962

1963

Percentage
increase, or
decrease ( - )

52,730
17,286
49,238

54,423
17,344
50,433

3.2
.3
2.4

15,707
• 7, 597
1,493
1,110

15,666
7,360
1,476
1,095

-.3
-3.1
-1.1
-1.4

Cooperative arrangements with State administrators of the motorboat numbering laws were established which will help to insure that
no motorboat will be simultaneously documented by the Bureau and
numbered by the State.
Pursuant to rulings of the Maritime Administration, the customs
regulations were amended to provide that Maritime Administration
approval would not be necessary before the marine document^ of a
vessel covered by a preferred mortgage could be surrendered: Where
the document is issued in error or on an improper form, and when the
president or secretary whose name appeared on the document dies,
is removed, or resigns, and there has been no change in ownership.
707-484—64

1963 REPORT OF THE SECRETARY OF THE TREASURY

A working group of the Subcommittee on Tonnage Measurement,
Intergovernmental Maritime Consultative Organization including a
U.S. delegation, headed by Customs, met in London in October 1962
and January 1963. Proposals were formulated for tonnage-measurement rules permitting the permanent closing of certain shelter-deck
and other ''open" spaces on ships while retaining present tonnage
advantages when the ship's draft is less than the permissible maximum.
When the ship's draft is sufl^iciently shallow so that a prescribed mark
on the ship's sides is not submerged, the shelter-deck and other open
spaces would be exempted from inclusion in tonnage; when that line
is submerged, the tonnage will be determined without allowing exemption of those spaces. The working group made progress toward the
developing of a universal system of tonnage measurement.
The Subcommittee on Tonnage Measurement received the report
and recommendations of the working group at its session March 2 5 29, 1963. After adoption of certain amendments, the report and
recommendations were sent to the Maritime Safety Committee with
the suggestion that the recommendations be transmitted to the
IMCO Assembly for approval at its meeting in October 1963.
The Bureau of Customs was represented also at Haifa, Israel, at
the biennial meeting of delegates from the nations signatory to the
Convention for a Universal System of Tonnage Measurement of
Ships signed at Oslo, Norway, on June 10, 1947. Although the
United States is not a signatory to this Convention, it has many of
the same tonnage-measurement problems.
Developments in IMCO on tonnage measurement, the solution of
the shelter-deck problem, and the several national suggestions for a
universal system were discussed. The U.S. position on the treatment
of water-ballast spaces with particular reference to the recent change in
regulations requhing special review of claimed exemptions for waterballast in excess of 30 percent of the gTOss tonnage was outlined. It
was suggested that we might consider a change in practice to omit
bona fide ballast spaces from inclusion in net tonnage instead of exempting it from gross tonnage. Such a system would be applicable
without limitation to all vessels, whether existing or new. I t was
agreed not to insist on the 19-percent limitation for deduction of
water-ballast spaces, contained in the present Convention, in any
international overall agreement on a tonnage-measurement system.
During fiscal 1963 a customs representative participated in the
work of a group established by IMCO to study measures to facilitate
maritime travel and the transport of goods by sea.
The group is to consider the regulations of governments or public
authorities in regard to ships entering or leaving port and the documents, varying both in number and character, which are required to
be presented at various ports.
A representative of the Bureau of Customs participated in the
Inter-American Port and Harbor Conference in Argentina in the negotiation and conclusion of the convention proposed by the Organization of American States (OAS) as the Draft Convention on the
Facilitation of International Waterborne Transportation. The Conference adopted a resolution calling upon the Secretariat of the OAS
to convene a group of experts within six months to consider drafting

ADMINISTRATIVE REPORTS

an annex of standards and recommended practices to be attached to
the convention.
Amending legislation enacted on October 15, 1962 (13 U.S.C. 304)
authorized deletion of the requirement for filing shipper's export declarations from the navigation laws administered by Customs, this requirement being consolidated with the general authority to require
such declarations.
On October 15, 1962, legislation was enacted which repealed the
requirement under the navigation laws (46 U.S.C. 95) for clearance of,
and presentation of outward manifests for, U.S. vessels in trade solely
between the United States and Puerto Rico, Guam, and its other non-^
contiguous territory, and in trade between such places.
Amending legislation approved on October 24, 1962 (46 U.S.C. 883)
empowered the Secretary of Commerce for a period of one year to
suspend the provisions of section 27 of the Merchant Marine Act of
1920 to permit vessels not entitled to engage in the coastwise trade to
transport lumber to Puerto Rico from points in the United States
upon a finding that no domestic vessel is reasonably available for such
transportation. ''Reasonably available" is construed to mean able
to meet the foreign vessel's terms, including price.
The United States added Cambodia, Central African Republic,
Gabon Republic, Malagasy Republic, and the Republic of Senegal to
the list of countries whose admeasurement rules it recognizes.
During fiscal 1963 a total of 4,027 admeasurement transactions
were completed. On June 30, 1963, there were 255 applications
pending at the various ports for the admeasurement of vessels other
than yachts, and 136 admeasurement applications pending for yachts.
At the request of the Secretary of Defense or the Secretary of the
Navy, several waivers of coastwise shipping and other navigation laws
were granted for specific uses of foreign flag vessels in trade or for uses
usually reserved for U.S. flagships.
There was deleted from section 4.81(c) Customs Regulations the
requirement, that a master of a vessel registered for the foreign trade
deposit his vessel's document at the customhouse upon arrival at a
domestic port, where it would be retained until the vessel's departure.
Another change in Customs regulations exempts vessels clearing
dhectly from their only port of call in the United States from filing
an outward manifest listing aU cargo retained on board for foreign
ports, provided that the master states that such cargo shown on the
inward manifest as destined to foreign ports is retained on board.
A similar procedure was permitted for vessels proceeding between
domestic ports by way of a foreign port.
Pursuant to the President's Proclamation of October 23, 1962,
interdicting shipments of military materiel to Cuba, collectors of customs administered a procedure coordinated with the Departments of
State and Defense for the issuance, upon application, of passes known
as "Clearcerts" for foreign vessels leaving U.S. ports in order to avoid
unnecessary delays to vessels crossing the zone and to simplify patrolling and inspecting activities of the U.S. Navy in the zone. From
October 23-November 21, 1962, vessels of 36 countries applied for
and were issued 843 Clearcerts.
The Customs Regulations were amended on April 13, 1963, to conform to changes in law and in the regulations of the Bureau of the

19 63 REPORT OF THE SECRETARY OF THE TREASURY

Census. The main purpose of the changes was to make uniform for
all carriers the authority of the Secretary of Commerce to regulate,
with the concurrence of the Secretary of the Treasury, foreign trade
statistical reporting requirements.
The amendments to the Customs Regulations made by T.D. 55876
removed provisions for the clearance of domestic vessels and aircraft
in trade with and between noncontiguous territories of the United
States. Penalty provisions for failure to comply with procedural
requirements on outward voyages were changed materially.
The following table compares entrances and clearances of vessels
in the fiscal years 1962 and 1963.
1962

Vessel m o v e m e n t s

Entrances:
D i r e c t from foreign p o r t s
Via other domestic p o r t s

_ _.

Total
Clearances:
Direct to foreign p o r t s
Via other domestic ports
Total

1963

Percentage
decrease

47,463
39,631

46, 674
38, 699

—1.7
-2.4

87,094

86,373

-2.0

46, 772
39, 667

44, 676
38,253

-2.6
-3.6

85,439

82, 829

-3.1

Law enjorcement and investigative activities.—The Customs Agency
Service conducted 22,077 investigations during 1963 under customs,
navigation, and related laws administered by Customs and several
administered by other Governm ent agencies and enforced by Customs.
Table 91 shows the number and types of cases investigated during
1962 and 1963.
The most active enforcement districts were: Los Angeles, Calif.,
with 540 arrests and 271 convictions; Laredo, Tex., with 365 arrests
and 160 convictions; El Paso, Tex., with 233 arrests and 99 convictions;
and New York, N.Y., with 158 arrests and 55 convictions.
The following table shows the number of arrests by Customs
agents and dispositions thereof during the fiscal years 1962 and 1963.

Activity

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

1962

Percentage
increase, or
decrease (—)

1963

466

1,687
68;
28
6^:
34]
26
625

297

279

1,429
686
33
67
28J

11.1
-0.6"
-16.2
-19.4
20.5
560.0
37.1
-6.1

ADMINISTRATIVE REPORTS

During fiscal 1963 officers of the Customs Agency Service cooperated with Federal, State, and local law enforcement agencies and
with officials of foreign governments in 7,515 cases, 1,388 more than
in 1962.
Customs made 6,855 seizures during fiscal 1963, compared with 5,819
in 1962. Total value of seizures in 1963, amounted to $24,130,554.
Fines and penalties incurred totaled $13,213,717, compared with
$21,374,970 in 1962.
Although included in the statistics for the Service as a whole,
customs port investigators made 498 arrests during fiscal 1963 as
compared with 344 in 1962. They also made 5,582 seizures of merchandise in 1963, compared with 3,753 in 1962.
DmTng fiscal 1963 a new task force was created to survey the
enforcement operations of the Customs Agency Service including:
its assigned duties, responsibilities, recruitment, training, chain of
command, delegation of responsibility, and its voluntary relations
with other law enforcement agencies. The study, which was conducted
from October 1962 through January 1963, involved interviews with
almost two-thirds of all customs agents and many customs port
investigators. A full review was made of the conclusions obtained in
the M a y 1962 task force report (see 1962 annual report, p. 116), and
all of its findings were confirmed. The 1963 task force endorsed
strongly the recommendations previously made. Since submission of
their final report in February 1963, most of theh recommendations
have been implemented.
Customs seizures of narcotic drugs with the exception of heroin were
less than in 1962. The seizure at Houston, Tex., on November 7,
1962, of a lot of 10,320 grams of heroin, the largest in several years,
accounts for the increase in that drug. The largest seizure of raw
opium, 49K pounds, which was intercepted at New Orleans, La.,
had come from India. During fiscal 1963 there were 13 seizures of
marihuana larger than 40 pounds each, 12 from Mexico and 1 from
Panama. These seizures involved the breakup of gangs which had been
helping supply the markets in New York, Chicago, and Los Angeles.
Some of the violators had also been dealing in heroin and cocaine.
The largest individual seizures of marihuana were 230 pounds found at
San Ysidro, Calif., and 200 pounds detected at New York, N.Y.
As a result of investigations conducted by Customs representatives
in Em'ope during fiscal 1963, 68 seizures with an appraised value of
$130,312 were made possible in the United States, and penalties
amounting to $1,846,179 were assessed under the provisions of the
Tariff Act of 1930 (19 U.S.C. 1592).
Information developed by U.S. customs representatives in the Far
East led to seizures in Tokyo, Hong Kong, Singapore, and Australia,
of various quantities of narcotics some of which were destined for the
United States. In one case, in cooperation with the Federal Bureau
of Narcotics, six packages of opium were seized in Tokyo after having
been smuggled from Thailand for an American pilot by a stewardess
aboard a U.S. military chartered aircraft.

1963 REPORT OF THE SECRETARY OF THE TREASURY

The following table compares drug seizures during 1962 and 1963.
Drug seizures

Fiscal years
1962

Narcotic drugs (weight in grams):
Heroin
Number of seizures
Raw opium
Number of seizures
Smoking opium
Number of seizures
' Others
Number of seizures
_..
Marihuana;
Bulk (weight in kilograms)—
• Number of seizures
Cigarettes (number)
Number of seizures

2,367.80

111

7, 653. 69

Percentage
increase, or
decrease (—)

1963

15,721.00

142
1,388.48

7,651. 75

2,760.13

9, 347.15

4,383.52

283
9,176.824

187
876.703

429

470

1,766

1,230

139

119

566.7
27.9

-81.6
50.0
-63.9
-53.1
-33.9
-90.5
9.6
-30.4
-14.4

As a result of information developed by customs representatives in
Hong Kong, $26,900 in counterfeit U.S. currency was seized from
seamen who were subsequently convicted on smuggling charges and
given lengthy prison sentences.
Through the work of the customs representative in Singapore, a
quantity of equipment and dies used in the manufacture of counterfeit U.S. gold coins was seized and several arrests were effected. It
was aUeged that counterfeit U.S. gold coins were used to purchase
large quantities of narcotics. Direct connections were established
between the arrested counterfeiters and persons involved in a recent
Singapore seizure of 4,740 pounds of opium and 72 pounds of
morphine.
Seizures of merchandise throughout the country for violation of
laws enforced by the Customs Service reflected an increase of 12.7
percent in the number of seizures and 87.2 percent in the appraised
value from the year before, as shoAvn in table 90.
The Cuban crisis placed unusually heavy and continuing demands
upon Customs, to carry out the Neutrality Act provisions, especially
in Florida and other lower east coast areas.
Foreign trade zones.—The nuinber of entries received in Foreign
Trade Zone No. 1 at New York, N.Y., increased 4.2 percent over last
year. Large quantities of cast iron pipe from India, papain from the
Congo, cotton articles subject to import control, and barbasco root
powder were received in the zone. Large amounts of refined sugar,
radios, piece goods of wool and cotton, bulk and bottled liquors,
cameras, Brazil nuts, chemicals, alligator sldns, machinery, caviar,
talc, zinc and lead ingots, and tungsten ore were stored and more than
6,900 manipulations operations were performed in the zone.
During fiscal 1963 the number of entries received in Foreign Trade
Zone No. 2 at New Orleans, La., were 42.8 percent less than in fiscal
1962. Duties and internal revenue taxes collected increased 21.1
percent. An aluminum processing plant is being assembled in the
zone for the processing of domestic and foreign aluminum. A grant
for the establishment of Foreign Trade Subzone No. 2A at New
Orleans, La., was issued on February 14,1962, but the subzone was not
in operation at the close of the fiscal year.

ADMINISTRATIVE

REPORTS

There were 441 manipulations operations performed in Foreign
Trade Zone No. 3 at San Francisco, Calif., during fiscal 1963. The
number of entries received in the zone increased 3.7 percent over
fiscal 1962. Long tons received in the zone decreased 28 percent,
although their value increased 18.9 percent and those dehvered from
the zone decreased 5.2 percent, although their value increased 41.2
percent. Duties and taxes collected increased 69.3 percent.
There was an increase in all activities at Foreign Trade Zone No.
5 at Seattle, Wash. A large variety of merchandise for exhibition at
the World's Fair of 1962 and the Washington International Trade
Fair was handled through the zone. Largest tonnage commodities
were ball bearings, camp stoves, and camp lanterns from Japan, ski
bindings from France, waterproof wearing apparel from Norway,
cotton wearing apparel from Hong Kong, wooden stools and chairs
from Yugoslavia, and woolen fabrics from Scotland.
Foreign Trade Zone No. 7 at Mayaguez, P.R., completed its first
full year of operation in fiscal 1963. Activities consisted of repacking and remarking of dental instruments and the cutting of wallboard
to size.
The fhst purely industrial subzone located at Penuelas, P.K. (No.
7-A), contains a petrochemical-producing facUity operated by Union
Carbide Caribe, Inc. Operation of this plant helps the area by providmg employment to a substantial number of maintenance and auxiliary
personnel.
Fiscal 1963, the first full year of operation for Foreign Trade Zone
No. 8 at Toledo, Ohio, the first and only foreign trade zone on the
Great Lakes, was one of vigorous activity. Manipulations operations
in the zone consisted of unpacking, sorting, and repacking electrical
kitchen appliances, twist drhls, and advertismg literature.
The following table summarizes foreign trade zone operations during
fiscal 1963.

Trade zone

New York
New Orleans
"
San Francisco
Seattle
Mayaguez
Penuelas (subzone)
Toledo

Number
of entries

5,398
2,164
5,479
1,048
26
8
937

Received in zone
Long tons

41,683
26,528
1,099
425
6
201,075
39,738

Value

$33,450,469
10,366,024
2,206,381
872,626
10,057
3, 631,084
26,365,744

Dehvered from zone
Long tons

45,234
25,968
1,829
661
12
127,687
47,395

Value

$35,533,258
9, 633,195
-3,171,273
1,004,742
94,990
7,458,388
30,857,082

Duties and
internal
revenue
taxes
collected
$3,465,286
1,726,300
409,119
162,646
88
106,741
419,624

Customs ports oj entry, stations, airports, ports oj documentation,
districts oj the appraiser oj merchandise, and comptroller districts.—The
limits of the ports of Port Canaveral, Fla., and Duluth, Minn.-Superior,
Wis., were extended and redescribed to include areas not heretofore
covered.
Customs ports of entry were established at GreenvUle, Miss, (the
limits of which were extended to include the GreenvUle Municipal
Ahport), and Fort Worth, Tex. Mackinac Island and Rogers City,
Mich., were designated as customs stations. The designation of
Cordova, Alaska, as a customs port of entry was revoked.

19 63 REPORT OF THE SECRETARY OF THE TREASURY

Part of the San Francisco District (area of Clark County, Nev.)
was transferred to the Los Angeles District.
Customs ports of documentation were established at GreenvUle
and Pascagoula, Miss. The designation of St. Augustme, Fla., as a
customs port of documentation was revoked.
The office of the Appraiser of Merchandise as a principal customs
field office was established at Duluth, Minn.-Superior, Wis. (district 36).
Pmsuant to section 1109(b) of the Federal Aviation Act of 1958
(49 U.S.C. 1509(b)), international ahports (airports of entry) were
designated at the followhig places: Williston, N. Dak. (Sloulin Field);
Yuma, Ariz. (Yuma County Ahport); Del Rio, Tex. (Del Rio International Airport); and Tucson, Ariz. (Tucson Municipal Ahport).
In accordance with the same legislation and requests from local
ahport authorities, the names of the foUowing previously designated
international ahports were changed as mdicated: Baudette Municipal
Airport to Baudette International Airport; Yuma County Airport
to Yuma International Airport; Duluth Municipal Ahport to Duluth
International Ahport; and Tucson Municipal Ahport to Tucson
International Ahport.
The realignment of the comptrollers' districts in September 1962
resulted in changes of customs collection districts as follows: Rochester
(8) and Buffalo (9) from New York comptroller district to PhUadelphia
comptroller district; Indiana (40) and Kentucky (42) from PhUadelphia comptroller district to Chicago comptroller district; Tennessee
(43) from PhUadelphia comptroUer district to New Oiieans comptroller
district; Montana (33) and Idaho (33) from Chicago comptroller
district to San Francisco comptroller district; and Arizona (26) from
New Orleans comptroller district to the San Francisco comptroller
district.
Participation in meetings oj international organizations and conferences.—The Commissioner of Customs served as a member of the
U.S. delegation at the annual conference of the International Criminal
Police Organization (Interpol) held at Madrid, Spain, from September
19-26, 1962. As an observer, the Commissioner also attended a
session of the Permanent Technical Committee of the Customs
Cooperation Council, held at Brussels, Belgium, from September 2 7 October 1, 1962.
The Assistant Commissioner served as Chairman of the U.S.
Delegation to the meeting of the Working Party on Customs Administration of the Corfimittee on Trade of the Economic Commission for
Asia and the Far East. This conference, held at Bangkok, Thailand,
from October 2-November 2, 1962, continued work toward simplification and uniformity in customs requirements and procedures among
participating nations.
A Customs representative served as an observer at the meeting of
the Chemical Committee of the Customs Cooperation Council. The
purpose of this meeting, held from January 22-February 2, 1963, in
Brussels, Belgium., was to develop a uniform system of classification
nomenclature, chiefly for chemicals and raw materials.

ADMINISTRATIVE

REPORTS

Cost of administration

Customs operating expenses totaled $70,786,426, including export
control expenses and the cost of additional inspection reimbursed by
the Department of Agricultm-e.
The following table shows man-year employment data in the fiscal
years 1962 and 1963.
Operation

Regular customs operations:
Nonreimbursable
Reimbursable 1

Total regular customs employment.
Export control—
_Additional inspection for Department of Agriculture..
Total employment

Man-years
1962

Man-years
1963

Percentage
increase

7,573
315

7,768
324

7,888
201
213

8,092
217
221

2.6
8.0
3.8

8,302

8,530

2.7

2.9

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

Management improvement program

Special search jor economies.—A review, begun in November 1962,
which concentrated on improvements in customs field activities is
expected to achieve annual recurring savings of approximately
$75,000; it also made unnecessary requests for additional funds in
the amount of $79,000. Tbe savings from the management improvement program, amounted to $223,900, including space valued at
$3,800 released to other agencies, and $84,200 saved in requests for
additional funds.
A survey of the missions, organization, and activities of both field
and headquarters offices was begun. I t wUl explore possibilities for
reducing operating costs, improving services to the public, effecting
greater utilization and control of available resources, and improving
customs' coordination within the Treasmy Department and with
other inspectional agencies.
International travel.—Efforts were continued in fiscal 1963 to improve baggage declaration forms and baggage examination facilities,
as well as to speed customs clearance of persons arriving in the United
States.
A pilot form to replace the itemized baggage declaration was adopted
on a trial basis at the Miami, Honolulu, San Juan, and New York
IcUewild international airports. This form, calling only for information necessary to identify the passenger on his arrival, permits travelers
to make oral declarations of their effects and requires a listing of
articles only when the passenger is a returning resident and has
exceeded his exemption, or has articles to follow. The oral declaration procedure was adopted permanently for air passengers at the
preclearance points of Bermuda and Nassau.
Baggage procedm-es for precleared air passengers transiting the
United States who wish to check their baggage through to the port
of departure were extended to provide them the same service, at the
airlines' option, as that previously granted to air passengers processed
at the fh'st port of arrival in the United States.

1963 REPORT OF THE SECRETARY OF THE TREASURY

A standard discount of 40 percent from the full retail price was
authorized in applying customs exemptions and assessing duties on
articles, except automobiles and made-to-order clothing, purchased
abroad by returning residents. This enables returning residents to
estimate the customs value of purchases and the probable value on
which duties will be assessed when exemptions are exceeded.
The 24-hour absence requhement to permit U.S. residents returning from Mexico through California ports to claim the $100 exemption has been revoked. Uniform time requhements now exist
at all ports on the Mexican border.
Treasury officials, including customs personnel, participated in an
advisory group with other Government representatives, the carriers,
and the New York City Department of Marine and Aviation. The
objectives of the group are to improve the appearance and eflficiency
of New York pier facUities for passengers. To eliminate congestion
on the piers the issuance of visitor dock passes has been discontinued.
New baggage examination procedures designed to eliminate long
waits for customs inspection were adopted at one pier and tested at
another.
The Bureau of Customs, the Immigration and Naturalization
Service, the Public Health Service, and the Plant Quarantine Division
of the Department of Agriculture have adopted a joint procedure
whereby border officers of any of the four inspectional agencies may
perform primary screening of pedestrians and vehicles entering the
United States from Mexico for all four agencies. Under this procedure service to the public wUl be improved without additional
cost and there wUl be improved utUization of inspectional manpower.
Also, a system was adopted to provide for uniform reporting by the
four agencies of statistical information of vehicle and passenger
arrivals through ports on the Mexican border.
The four inspectional agencies and the MUitary Air Transport
Service adopted joint procedures to facUitate the clearance of large
groups of mUitary troops at locations other than established ports of
entry. These provide a uniform method of processing mUitary troops
for all of the inspectional agencies, including adequate inspection of
cargo and baggage without unnecessary delays to the movement of the
troops, where the arrival or departure point is not normally staffed
by inspectional personnel.
In certain overseas areas U.S. military and civilian personnel handle
customs inspections. To assist when inspectional workloads are
excessive, additional overseas personnel were authorized to make
such inspections.
Uniform procedures, implementing certain regulations governing
the importation of emergency purchases of raw materials by the
Department of Defense, were provided for ports where these shipments arrive. The new instructions expedite the release of these
commodities and facilitate the filing of entries by the Department of
Defense in cases where merchandise is released before the filing of an
entry.
When an aircraft conveying precleared passengers is diverted by
weather or operational necessity to an airport where no - customs
officer is on duty, all precleared baggage and passengers may be
released by the airline before a customs officer arrives, provided that

ADMINISTRATIVE REPORTS

the airline retains any listed on the General Declaration as exceptions.
This new authorization enables precleared passengers and baggage
to leave the ahport without the delays previously encountered.
United States and Canadian Customs have adopted a joint United
States-Canada intransit card for baggage moving in bond between
ports of one coimtry via the territory of another. This is one of
several improvements in which carriers have been authorized to use
a common seal, joint manifest, etc., for both United States and
Canadian customs purposes.
The booklet Customs Injormation jor Exporters to the United States,
for the assistance of American importers and foreign exporters to the
United States, was revised and distributed. A brochure Customs Injormation jor Exhibitors at the United States Trade Fairs for private
exhibitors, representatives of foreign governments, and concessionaires
who contemplate importing articles for display at a fair, exhibition,
or exposition was prepared to explain customs requirements in nontechnical language.
Entry oj merchandise.—The Bureau of Customs established the
followmg procedures to curtail widespread abuse of the free entry
provision for gifts valued at $10 or less: Assessment of uniform
penalties, including forfeiture on gift parcels which are falsely labeled,
undervalued, etc.; adoption of a declaration to be signed by the
recipient for the free entry of gifts which have been assessed with
duty, in order to obtain release of the parcel duty free when the gifts
are bona fide; and provision of a warning stamp to be affixed to
^^passed free'' gift parcels requesting the addressee to report the facts
to Customs if the contents are not bona fide gifts.
A nominal customs value was authorized for importations of certain
business machine pmich cards, records, tapes, maps, charts, and other
business records, as well as certain works of art, and media bearing
musical compositions or information to be imported for noncommercial
purposes. The adoption of this nominal value concept has relieved
appraising officers of the necessity for obtaining cost of production
information and importers of the requirement for furnishing this
information.
Export control.—Special procedures were authorized to permit
validation of documents and inspection of a h export shipments at the
port of origin rather than at the port of exportation. This new procedure applies only to domestic cargo laden at the port of origin on an
international flight and transferred at the port of exportation to
another aircraft of the same airline. I t has eliminated many delays
which occur when all export documentation requirements have not
been met. ShnUar procedures are being tested to permit authentication of export declarations at the port of origin for export cargo
laden on a domestic flight to a port of exportation.
Liguidation oj entries.—Intensive efforts to reduce the backlog of
formal entries ready for tentative liquidation resulted in a decrease
from 458,000 entries on June 30, 1962, to just over 346,000 entries at
the close of fiscal 1963, almost 25 percent.
Public relations developments.—In August 1962 an information
and publication office was established in the Bureau of Customs.
In each of the principal field offices an employee was designated as an
information aide to implement the public relations program. Through-

1963 REPORT OF THE SECRETARY OF THE TREASURY

out the fiscal year several new leaflets, revised pamphlets, posters,
statistical information, and reprints of articles explaining different
types of customs services, were prepared and distributed to the
public.
Enjorcement activities.—As a result of a major management study,
the Customs Agency Service was reorganized from 14 districts and
foreign offices into seven regions with headquarters in Rome, Italy;
Tokyo, Japan; New York; Miami; Houston; Chicago; and Los
Angeles. As of July 1, 1963, each regional headquarters was staffed
by a supervising customs agent and three assistants. This and other
improvements have increased coordination and appropriate action on
cases of national scope; relieved customs agents in charge of many
administrative details; consolidated budget and personnel functions;
and provided for better utUization of manpower.
A nationwide training agreement which authorized the selection and
training of customs port investigators at grade GS-5 with promotion
to GS-7 upon satisfactory completion of a minimum of six months
training was approved by the Civil Service Commission. The training
program will provide Customs with qualified enforcement personnel
after a relatively short period of intensive training.
During the fiscal year five training sessions for newly appointed
customs port investigators were conducted at New York, Los Angeles,
and Seattle.
Delegations oj authority.—The Customs Regulations were amended
to grant additional authority to collectors to settle certain types of
customs violations without prior review by Bureau officials. This
has aided in reducing the number of minor fines, penalties, and forfeiture cases incurred for violations of customs laws. Another change
authorized customs agency personnel to appraise merchandise seized
when the value was imder $100.
Other improvements.—During fiscal 1963 of the 747 employee
suggestions submitted, 237 were adopted. Suggestion awards totaling
$6,785 represented tangible savings of $23,000.
In cooperation with the Agency for International Development, 112
foreign customs officials from 39 different countries were given extensive training in the practical operations of the U.S. Customs Service.
Upon the recommendations of the Interagency Textile Administrative Committee and the succeeding President's Cabinet Textile
Advisory Committee under the Long-Term Cotton Textile Arrangement, Customs placed restrictions on the entry or withdrawal for
consumption of 64 categories of cotton textiles and cotton textUe
products. A total of 87 quotas were imposed and prohibitions were
issued against the entry or withdrawal of eight product categories.
Weekly reports on the status of all quotas and weekly records on 17
separate categories were furnished for the use of the Committee.
The National Customs Service Association and the United States
Appraisers and Examiners Association were formally recognized at the
national level and 47 employee organizations were granted local
recognition under the provisions of the employee-management regulations issued by the Bureau of Customs.

ADMINISTRATIVE REPORTS

A per diem rate, based on the cost of lodging in particular localities,
was established for each customs port of entry, customs station, and
other places where customs employees travel regularly. These new
guidelines are more specific and equitable than previous instructions.
Management teams from the Bureau headquarters inspected 62
collection, comptroller, appraisement, agency, and chemist districts.
These inspections provided: A reevaluation of present and future
manpower requirements; simplified procedures; and other improvements to promote safety, morale, and efficiency.
Ofiice of Defense Lendmg
The Office of Defense Lending, established July 1, 1957, by Treasury
Department Order No. 185, is responsible for 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, dateci
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 Emergency Planning of the Executive
Office of the President.
No new loans were authorized during the fiscal year 1963. Loans
outstanding were reduced from $121.3 mUlion to $53 mUlion during
the year. Commitments totaling $1.5 million at the close of fiscal
1962 were terminated. The net reduction in notes payable to the
Treasury amounted to $69.4 million. Interest payments of $3.4
mUlion were made.
Activities under the Federal Civil Defense Act

The lending functions under section 409 of the Federal Civil
Defense Act 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). Since
the close of fiscjal 1955 no administrative expense allowance has been
authorized for this program, and no applications for new loans have
been accepted. As of July 1, 1962, the loans outstanding amounted
to $691,687 and deferred participation commitments to $1,308,343.
These loans had been reduced to $582,739 and the commitments to
$476,992 as of June 30, 1963. Notes payable to the Treasury were
reduced by $135,000. Interest paid amounted to $13,243.
Liquidation of Reconstruction Finance Corporation assets

The Reconstruction Finance Corporation was abolished effective at
the close of June 30, 1957, pursuant to the provisions of Reorganization
Plan No. 1 of 1957. Its remaining assets, liabilities, and obligations
were transferred to the Secretary of the Treasury, the Administrator
of the Small Business Administration, the Housing and Home Finance

100

1963 REPORT OF THE SECRETARY OF THE TREASURY

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 as of June 30,
1957, of $250,000 or more, securities of and loans to railroads, securities of financial institutions, and the windup of corporate affairs.
Net income and proceeds of liquidation amounting to $3.6.mUlion
were paid into the Treasury as miscellaneous receipts in fiscal 1963,
thus making a total of $50.6 mUlion paid since July 1, 1957. The
portfolio of R F C loans, securities, and commitments amounted to
$7.2 miUion on June 30, 1963, a reduction of $1.1 mUlion from the
$8.3 mUlion outstanding a year earlier. Total reductions effected
have amounted to $48.3 mUlion, approximately 87 percent of the
portfolio of $55.5 million transferred to the Secretary of the Treasury
on July 1, 1957.
The Office of Domestic Gold and Silver Operations
The Office of Domestic Gold and Silver Operations, in the Office of
the Under Secretary for Monetary Affairs, assists the Under Secretary
in the formulation, execution, and coordination of policies and programs relating to gold and silver ih both their monetary and commercial aspects. The Office administers the Treasury Department
Gold Regulations relating to the purchase, sale, and control of industrial gold; issues licenses and other authorizations for industrial,
professional, and artistic use of gold, both in the United States and
abroad; receives and examines reports of operations; and investigates
and supervises the activities of users of gold. Investigations into
possible violations of the Gold Regulations are correlated with those
of the U.S. Secret Service and other enforcement agencies.
Industrial gold controls

Because of the gold supply and balance-of-payments problems,
control over the industrial use of gold has assumed increased importance. The examination of gold reports, the verification of records,
and field inspections have been intensified.
Increased purchases oj gold jor industrial use jrom the Treasury.—
The sales of gold for industrial use by the Treasury, which in 1961 were
2,154,468 ounces, amounted to 2,746,046 ounces in 1962. Auditors
from the Office of Domestic Gold and Silver Operations examined
the books and plants of all gold users whose purchases from the Mint
had increased materially in calendar 1962. The survey was made
to obtain explanations for the increases and to ensure that the gold
was being put to legitimate use. I t was found that the sales of
jewelry had increased and that more gold was being consumed in
electronics and related uses. In addition, certain foreign gold which
formerly came into the United States for refining and sale, was being
diverted to other countries, and thus was not available to domestic
consumers.
Renewal oj gold licenses.—All of the industrial gold licenses expired
on December 31, 1962, and since they had been in effect for four years,
except for those issued originally during the period, it was determined
that a complete reexamination be made of the approximately 1,200

ADMINISTRATIVE REPORTS

101

gold licensees. Examinations were made of the ffles and reports,
field audits were made where considered advisable, and aU licenses
were brought up to date.
Gold coin licensing.—On July 20, 1962, Executive Order 11037
(see exhibit 36) was issued by the President. This prohibited the
acquisition or holding abroad, or the importation of gold coins into
the United States except under a hcense issued by this Office. A
six-month period was given to those citizens who held rare gold coins
abroad at the time of the issuance of the order, in which to dispose
of them to a person not subject to the jurisdiction of the United States
or to import them into the United States. This grace period expired
December 31, 1962.
The regulations issued under this Executive order (see exhibit 37)
provide that licenses be issued only in exceptional cases. Since
rulings under the Gold Regulations have always been based upon
the character of the gold coin itself, that is, its numismatic value,
rulings as to licenses are made with reference to the exceptional
numismatic character of the coins proposed to be acquired and
imported. This determination is made in consultation with the
Curator of Numismatics at the Smithsonian Institution, who is the
governmental authority on the subject.
The order and regulations have resulted in a vastly increased
volume of work. A list of U.S. coins which are eligible for importation has been compiled, but comprehensive lists of eligible foreign
coins are not yet available.
Many persons, not laiowing of the order, have purchased gold
coins abroad which must be impounded by Customs upon their arrival
in the United States until a determination as to their eligibUity for
importation may be made. Many U.S. citizens resident abroad
were not aware of the order in time to meet the deadline for importation and, in addition, many persons have gold coins mounted in
jewelry, which come within the gold coin rulings. An effort is being
made, in collaboration with the Bureau of Customs, to evolve procedures which wUl reduce the amount of correspondence entailed in
these cases.
Statistics re: End use oj gold.—Requests for statistics regarding
the end use of gold have been received from congressional committees,
other Government agencies, and private industry. Accordingly,
end-use certificates which are requhed to be executed by any
purchaser of semiprocessed gold in an amount of $200 or more have
been tabulated according to end use. Before this, the examination of the end-use certificates had been purely for the purpose of
determining that the use was legitimate and not for classification in
categories. A preliminary survey was made by correspondence,
questionnaires, and personal visits to persons using gold, and an
estimate was made for the calendar year 1962 of the amount of gold
actually consumed in industry. The amounts used in general
categories, that is, jewelry, dental, and industrial, which included
electronics, space and defense use, by the over 6,000 firms purchasing
semiprocessed gold are estimated in the accompanying table. The
end-use certificate form was modified in certain respects so that
more detailed information regarding uses wUl be compiled on a
continuing basis.

102

1963 REPORT OF THE SECRETARY OF THE TREASURY
Estimated allocation of gold by use for the calendar year 1962
Use

Jewelry and arts
Dental...
Space and defense
Other industry

Fine ounces

. . .

_____

___ . . . .

Total-

Dollars,
based on
Percent
$35 per ounce

2, 297, 654
346, 111
435, 282
445, 603

$80,417,890
12,113,886
16, 234, 870
15, 592, 605

65.19
9.82
12.35
12.64

3, 624, 650

123,359, 250

100.00

Gold subsidy bills.—A number of bills which in effect would give a
subsidy to gold producers have been introduced in the Congress. In
general, they would have the eft'ect of setting up a gold purchase
authority, first suggested for the Department of Defense and then for
the Department of the Interior, which would pay to the gold miners
$105 per fine troy ounce, or 3 times the monetary value, and would sell
at the same price to the industrial users of gold. Any gold not purchased by industry would be sold to the Treasury Department at $35.
Since these proposals would have the effect of setting up two prices
for gold in the United States, and because of the adverse implications
of such a two price system for the central role of the dollar as an
international currency convertible into gold at the present fixed
price, the Treasury Department expressed its opposition in hearings
held on S. 1273 on July 15, 16, 17, 1963, by the Senate Committee
on Interior and Insular Affairs.
Silver legislation

Legislation for the repeal of the Silver Purchase Act of 1934, section
4 of the act of July 6, 1939, and the act of July 31, 1946, had been
introduced at the request of the administration in February 1962 and
again in 1963. Statements on the bill were made by the Secretary
of the Treasury on March 11 and 14, and AprU 29, 1963. The
legislation (77 Stat. 54) was enacted on June 4, 1963. (See exhibits
38 and 39.)
Its passage had little effect upon the work of this Office since few
purchases of silver had been made, except as integral parts of a gold
deposit, since 1958, and the sale of silver under the acts had been suspended by the President in November 1961. Although the new
legislation permits sales of sUver should the market price go above
the monetary price, this contingency did not occur during the fiscal
year 1963.^
Bureau of Engraving and Printing
The Bureau of Engraving and Printing designs, engraves, and prints
U.S. currency. Federal Reserve notes, securities, postage and revenue
stamps, and various commissions, certificates, and other forms of
engraved work for U.S. Government agencies, as well as bonds and
postage and revenue stamps for the governments of insular possessions
of the United States.
1 See also report of the Treasurer of the United States, p. 125.

ADMINISTRATIVE REPORTS

103

Deliveries of all classes of work to the customer agencies in the
fiscal year 1963 totaled 36,259,917,549 pieces, as compared with
27,715,972,318 pieces in 1962, an increase of 8,543,945,231, or approxmiately 30.8 percent, in the deliveries of Bureau products.
Management attainments

In accordance with the provisions of Executive Order 10988, on
employee-management cooperation, the Bureau extended recognition
to 18 employee organizations, 3 on an informal basis, 2 on a formal
basis, and 13 with exclusive recognition. The Employment Policy
Review Board continued its studies of Bureau administrative practices
to insure further compliance with the Treasury's long-standing
nondiscrimination policy by all levels of management.
Manpower requirements were reviewed throughout the year and
each vacancy was evaluated before a request was made for a replacement. The reduction of personnel from 2,943 employees at the
beginning of the fiscal year to 2,938 at its close was accomplished
although there was a substantial increase in product requirements.
The Bureau conducted industrial engineering studies, analyses of
production processes, and qualit}'^ control surveys to improve methods,
operations, and efficiency, and insure development and practice of
sound quality control systems. Improvements were made in equipment and in processes in the manufacture of currency and postage
stamps. To facilitate operations, further modifications were made on
sheet-fed rotary currency presses and web-fed rotary stamp presses.
Other Bureau research activities to improve the quality of its products
related to paper, tape, labels, film, adhesives, presses, and equipment.
Close liaison was maintained with the Department of Agriculture
concerning the expanded food stamp program and with the Post
Office Department to plan for the increasing demand for postage
stamps as well as the abnormally high requirement for postage stamp
books.
Reviews and audits made by the Bureau Internal Audit Staff
indicate that in the fiscal year 1963, 70 financial and management
type audits, containing 27 audit recommendations were released.
Fifty recommendations were cleared and only 28 audit recommendations were still under consideration at the close of the year.
Through the excess property program the Bureau received $6,690
from the sale of obsolete equipment and material declared excess and
obtained equipment valued at $32,563 at no charge through the
Federal utilization program.
Annual recurring savings of $18,106 are estimated to accrue from
employee suggestions adopted. There were 209 cubic feet of noncurrent records transferred from office space to the records storage
area and 616 cubic feet of obsolete records were destroyed. In
response to 1,131 requests, 88 new forms were prepared, 33 were
eliminated, 9 consolidated, and 314 were improved and revised.
The emphasis which Bureau management continued to place on
the Treasury Department safety program resulted in a steady improvement in its safety record. The calendar year 1962 proved to be the
safest in the history of the Bureau and won for it the Secretary of
the Treasury's Safety Award for bureaus in the 1,000 or more personnel
category.
707-484—64

104

19 63 REPORT OF THE SECRETARY OF THE TREASURY

Forty-seven Bureau training classes were attended by479 employees;
136 employees attended 49 programs conducted by other agencies;
and 10 employees attended 8 programs conducted by nongovernment
organizations. A qualifications and skills inventory of all employees
in positions below GS-11 was taken in order to advise employees of
vacancies utilizing additional skills.
Estimated savings resulting from management improvements
during fiscal 1963 totaled 51 man-years and approximately $278,338
on a recurring annual basis. All realized savings were applied against
production costs and have been reflected either in billing rates or in
inventory valuations.
New issues of postage stamps and deliveries of finished work

New issues of postage stamps delivered by the Bureau in fiscal 1963
are shown in table 92. A comparative statement of deliveries of
finished work for the fiscal years 1962 and 1963 appears in table 93.
Finances

Bureau operations are financed by reimbursements to the Bureau
of Engraving and Printing fund, as authorized by law. Comparative
financial statements follow.

ADMINISTRATIVE

105

REPORTS

Statement of financial condition J u n e SO, 1963 and 1962
Assets
C u r r e n t assets:
Cash:
Onhand
With the Treasury
A c c o u n t s receivable
Inventories: i
R a w materials___
W o r k in process
F i n i s h e d goods
Stores..
P r e p a i d expenses

J u n e 30,1963

__.

T o t a l c u r r e n t assets

. . . ___ _

_. _

.__ __

.__

F i x e d assets: 2
P l a n t m a c h i n e r y and e q u i p m e n t .
Motor vehicles.
Offi ce m ach in es
F u r n i t u r e a n d fixtures__ _
__
D i e s , rolls, a n d plates
Building appurtenances _
_ _ _ _ _
Fixed assets u n d e r c o n s t m c t i o n _ ...^
,

. . . ___

_
_ _ _
..

...

Less a c c u m u l a t e d depreciation
Excess fixed assets ( w r i t t e n do%vn to 10% of b o o k value)
T o t a l fixed assets
Deferred charges

Totalassets

J u n e 30, 1962

$746, 727
5, 686, 571
2, 031,021

$3, 314, 240
2,081, 938

1, 036, 858
3, 743, 900
1, 356, 069
1,064, 567
73,134

800,032
3, 954, 640
3,138, 817
1,064, 605
56, 248

15, 638, 837

14, 410, 320

18,457, 911
97, 785
242, 381
444, 492
3, 965, 961
2, 668, 323
68, 204

19, 684, 923
94, 300
193,714
442, 276
3, 955, 961
2,196, 607
305,030

25, 826, 057
12, 335, 541

26, 872, 810
12, 370, 307

13, 489, 516
4,132

14, 602, 503
819

13, 493, 648

14, 503, 322

132, 498

64, 632

29, 264,983

28, 978, 274

Liabilities and investment of the XJnited States
Liabilities: 3
Accounts payable
_
Accrued liabilities:
Pa3Toll
__
Accrued leave
Other
T r u s t a n d deposit liabilities
Otherliabilities. .

Total liabilities.
Investment ofthe U.S. Government:
A p p r o p r i a t i o n from U . S T r e a s u r y
D o n a t e d assets, n e t 2 _ _
A c c u m u l a t e d earnings, or deficit (—)*
T o t a l i n v e s t m e n t of t h e U . S . G o v e r n m e n t
T o t a l liabilities a n d i n v e s t m e n t o f t h e U . S . G o v e r n m e n t

$312,109

$452,127

1,174,878
1, 743, 658
166,197
651, 571
1,760

1,019, 555
1, 643, 968
97, 776
576, 777
1,082

4,060,173

3, 791, 285

3, 250,000
22, 000, 930

3, 250, 000
22,000, 930

25, 250, 930
-36,120

25, 250, 930
-63,941

25, 214, 810

25,186, 989

29, 264, 983

28, 978, 274

1 Finished goods and work in process inventories are valued at cost, iacluding administrative and service
overhead. Except for the distinctive paper which is valued at the acquisition cost, raw materials and stores
inventories are valued at the average cost of the materials and supplies on hand.
2 Plant machinery and equipment, furniture and fixtures, office machines, and motor vehicles acquired
on or before June 30, 1960, are stated at appraised values. Additions since June 30,1950, and all building
appurtenances are valued at acquisition cost. The act of Aug. 4, 1950 (31 U.S.C; 181a) which established
the Bureau of Engraving and Printing fimd specifically excluded land and buildings valued at about
$9,000,000 from the assets of the fund. Also excluded are appropriated funds of about $1,100,000 expended
or transferred to GSA for extraordinary expenses in connection with uncapitalized building repairs and
plans for air conditioning. Dies, rolls, and plates were capitalized as of July 1,1951, on the basis of average
unit costs of manufacture, 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 totaled $6,991,069 as of June 30,1963, as compared with $3,626,842 at June 30,
1962. The June 30,1963, figure includes $2,833,437 for the acquisition of a multicolor postage stamp web-fed
printing press. In addition, procurement action had been initiated by the close of fiscal year 1963 leading
toward the acquisition of other high-speed prmting equipment at an estimated cost of $1,600,000.
4 The act of Aug. 4,1960, provided that customer agencies make payment to the Bureau at prices deemed
adequate to recover all costs incidental to performing work or services requisitioned. Any surplus accruing
to the fund in any fiscal year is to be paid into the general fund of the Treasury as miscellaneous receipts
except that any surplus is applied first to restore any impairment of capital by reason of variations between
prices charged and actual costs.

106

19 63 REPORT OF THE SECRETARY OF THE TREASURY
Statement of income and expense, fiscal years 1963 and 1962
I n c o m e a n d expense

1963

O p e r a t i n g r e v e n u e : Sales of engraving a n d p r i n t i n g
Operating costs:
Cost of sales:
Direct labor
D i r e c t m a t e r i a l s used _

P r i m e cost
O v e r h e a d costs:
Salaries a n d indirect l a b o r . _ _ _ _
F a c t o r y supplies
._
R e p a i r p a r t s a n d supplies
._
E m p l o y e r ' s share personnel beneflts
R e n t s , c o m m u n i c a t i o n s , a n d utilities
O t h e r services
_.
_ _ __
D e p r e c i a t i o n a n d amortization
Losses on disposal or r e t i r e m e n t of fixed assets
S u n d r y expense (net)__ __ _.
T o t a l overhead

__.

_._

T o t a l costs 1
Less:
N o n p r o d u c t i o n costs:
Shop costs capitalized
Cost of miscellaneous services r e n d e r e d other agencies

N e t increase ( - ) , or decrease in finished goods a n d w o r k i n process
inventories
Cost of sales
0 perating profit
Nonoperating revenue:
O p e r a t i o n a n d m a i a t e n a n c e of incinerator a n d space utilized b y other
T r e a s u r y activities
_ .
_
_
O t h e r services
-- - _ - _ _ _ _

N o n o p e r a t i n g costs:
Cost of miscellaneous services r e n d e r e d other agencies.
N e t profit for t h e year 2 .

1962

$28,464,977

$24,681,846

10,004,372
4,043,654

9,366,156
3,946, 379

14,047,926

13,312, 535

7,718,968
1,216, 557
287,993
1,322,479
505, 607
296, 860
1,612,843
49,484
93,777

7,307,064
1,061,617
288,218
1,274,941
488,086
294,843
1, 678,862
56,539
36,694

13,104,468

12,386,864

27,152,394

26,699,399

200,556
508,080

164,126
460,630

708,636

614,755

26,443,768

26,084,644

1,993,398

- 4 2 7 , 311

28,437,156

24,667,333

27.821

24,512

398,468
109,612

385, 779
64 851

.508,080

460, 630

608,080

460,630

27,821

24,612

1 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 buDdings excluded
from the assets of the fund by the act of Aug. 4,1950, and (3) certain costs of services performed by other
agencies on behalf of the Bureau.
2 The act of Aug. 4,1950, provided that customer agencies make payment to the Bureau at prices deemed
adequate to recover all costs incidental to performing work or services requisitioned. Any surplus accruing
to the fund in any fiscal year is to be paid into the general fund of the Treasury as miscellaneous receipts
except that any surplus is applied first to restore any impairment of capital by reason of variations between
prices charged and actual costs.

107

ADMINISTRATIVE REPORTS
Statement of source and application of funds, fiscal years 1963 and 1962
Funds provided and applied
Funds provided:
Sales of printing
Operation and maintenance of incinerator and space utilized by other
Treasury activities
Other services

1963

1962

$28,464,977

$24, 681,845

398,468
109,612

385, 779
64,851

28, 973,057

25,132,475

27,282,908

23,472, 561

Sale of surplus equipment.

1,690,149
10,153

1,659,914
3,784

Total funds provided..

1,700,302

1,663,698

619,930

739,626

110,742
969,630

16,961
907,122

1,700,302

1,663.698

Less cost of sales and services (excluding depreciation and other charges
not requiring expenditure of funds: Fiscal year 1963, $1,662,327; fiscal
year 1962, $1,635,401)

Funds applied:
Acquisition of fixed assets
Acquisition of experimental equipment; and plant repairs and alterations to be charged to future operations_
Increase in workmg capital
_
_
Total funds applied.

108

19 63 REPORT OF THE SECRETARY OF THE TREASURY
Fiscal Service
BUREAU OF ACCOUNTS

The Bureau's major functions are Government-wide in scope.
They cover the Government's central accounts and financial reports;
disbursing for vhtually all civUian Federal agencies; supervising the
Government's depositary system; determining qualifications and
underwriting limitations of surety companies to write fidelity and
other surety bonds covering Government activities; investing Government trust funds and other funds; administering Treasury loans and
advances to Government corporations and agencies; accounting and
reporting for foreign currencies acquhed by the U.S. Government;
and stafl' participation in the joint financial management improvement
program.
Central Accounting and Repor tingResume of advances since 1948
In October 1948, there was established what is now referred to as
the joint financial management improvement program. Briefly, one
of its purposes was to develop sound accounting within each agency,
as a working arm of management, in terms of flnancial information
and control. Fifteen years ago when the program began, the system
of central accounts was geared to certain statutory (warrant)
requirements which, although having served an essential purpose
earlier, had become outmoded, resulting in overlapping and duplication
of effort by the Treasury, the General Accounting Office, and the
administrative and disbursing agencies concerned. That system
has evolved into an accounting for the cash operations of the Government, a system based on the considerations that served as the framework for sections 114 and 115 of the Budget and Accounting Procedures Act of 1950 (31 U.S.C. 66b-66c). The present system is tied
to the reporting of cash transactions by disbursing, collecting, and
administrative offices and the Treasurer of the Uniteci States, is based
on the accounts maintained by these offices, and is unifled centrally
to present results for the Government as a whole.
During this fifteen-year period, the central financial reporting of
the Government has undergone considerable change. As a result of
cooperative eft'orts by the Bureau of the Budget, the General Accounting
Office, the Treasury Department, and other agencies, in carrying out
the objectives of the Budget and. Accounting Procedures Act of 1950,
the scope has been expanded and the quality of central financial
reporting improved, replacing inadequate disclosure of information,
lack of consistency, and duplication.
The following chart illustrates developments over this period.
It necessarily represents only a general outline of a major modernization of central accounting and reporting. The system which has
evolved since 1948, apart from simplifications and better quality of
results in Treasury operations, has freed the operating agencies from
central rigid bookkeeping requhements, thereby permitting talent
and energy to be applied in the basic financial services to management
as was envisioned by the 1950 act.

ADMINISTEATIVE

109

REPORTS

FIFTEEN YEARS OF PROGRESS IN CENTRAL
ACCOUNTING FOR CASH OPERATIONS
OF THE GOVERNMENT

1948

1963

SIGNIFICANT ELIMINATIONS

I. OUTMODED STATUTORY REQUIREMENTS

I. BUDGET AND ACCOUNTING
PROCEDURES ACT
ACCOUNTABLE WARRANTS, COVERING
WARRANTS, ETC.

AUTHORIZED
| SIMPLIFIED
ESTABL I SHMENT<^ SYSTEM OF
OF A
I ACCOUNTS
REQUISTION AND ADVANCE OF FUNDS
TO DISRURSING OF FI CERS'ACCOUNTS
AHD RELATED CENTRAL ACCOUNTS
FOR SO-CALLED TREASURY CASH

2 . CREATED AN ACCOUNTING PAPER MILL

2 . UTILIZING THE ACCOUNT!NG DATA OF
APPROPRIATION AND FUfJD ACCOUNTS
IN THE GENERAL ACCOUNTING OFFICE
AND DISBURSING OFFICES

COLLECTING
DEPARTMENTS
AND
AGENCIES

AND
DISBURSING
OFFICERS

TREA.SURER

THE

UNITED STA7IS

(.'.ANY THOUSAND FUNDED CHECKING
ACCOUNTS FOR DISBURSING OFFICERS WITH TREASURER, U.S.

3. WHICH RESULTED IN THE

3. AS SOURCE DATA FOR AN INTEGRATED

MAINTENANCE OF

•UMCOOROINATED
.INCONSISTENT
.INCOMPLETE
ANO
•DUPLICATE
ACCOUNTING

SYSTEM OF CENTRAL ACCOUNTS
SEPARATECERTIFICATESOF DEPOSIT FOR SPECIFIC TYPES OF COLLECTIONS BASED UPON THE THEN
EXISTING CENTRAL FUNDING REQUIREMENTS
TREftSURY
1

•

CENTRAL
GENERAL LEDGER
ANO
USSIDIARY RECORDS
OF THE TREASURY

AGEIICY

G. A. 0 .

1
1

IDISB.OFFICER

CHECKS AND DEPOSITS FOR ROOKKEEPING TRANSACTIONS REPRESENTING INTRAGOVERNMENT EXPENDITURE
AND NONEXPENDITURETRANSACTIONS

AND CONSEQUENTLY INADEQUATE

4. PROVIDING INTERLOCKING

SUPPORT FOR THE

ACCOUNTING SUPPORT FOR THE
HANDLING AGENCY COLLECTIONS IN
TREASURY REGIONAL DISBURSING
OFFICES

ACCOUNT OF ADVANCES FOR THE Ml LITARY DEPARTMENT

110

19 63 REPORT OF THE SECRETARY OF THE TREASURY

Systems improvement

Bureau staff in the fiscal year 1963 continued to represent the
Treasury Department on the steering committee and survey teams
of the joint financial management improvement program in a continuing Government-wide effort to improve financial practices.
An agreement was completed with the State of Virginia for withholding State income taxes on the compensation of Federal employees,
bringing to 28 the number of States (including the District of Columbia)
with which agreements have been completed. Action was initiated
toward a voluntary system of withholding State income taxes from
Federal employees residing in those States where agreements have
been signed, but whose place of employment is outside the State of
residence.
Other systems work included participation in developing an
electronic data processing (FDP) system for certain central accounting
and reporting operations and a centralized Fiscal Service payroll and
development of the Bureau's administrative accounting system
integrated with a cost-based operating budget.
Central accounting

The Division of Central Accounts maintains the central accounts
for the Federal Government. These provide the accounting basis
for compiling receipt and expenditure data for financial statements
of the Government as a whole, interlocking all cash transaction
relationships between the Government's disbursing, collecting, and
fiscal officers and the Treasurer of the United States.
Early in fiscal 1963 a favorable report was submitted on the
feasibilit^T^ of using a computer system for certain central accounting
and reporting operations; an application study is proceeding with the
development of plans for the first phase of E D P systems operation
in fiscal 1964.
The central and regional offices of the Division of Central Accounts
processed 3,625,421 accounting items during fiscal 1963, compared
with 3,881,951 in 1962. For the most part, worldoad reductions
reflect the results of continuing simpliflcation in paperwork relating
to accounting operations.
Central reporting

During flscal 1963 several steps were taken to provide new, more
timely, and more meaningful reporting of the Government's flnancial
transactions. For example, regulations were issued to obtain monthly
data on gross obligations incurred, by object class. This new central
reporting, effective with July 1963, was undertaken at the request
of the Dhector of the Bureau of the Budget, in recognition of the
need for timely data on the economic impact of Government operations
on the private economy.
With the collaboration of the Office of the Treasurer of the United
States, the format of the daUy Treasury statement was revised,
effective January 1963, to present the data in more logical sequence,
enhancing its use as a report of cash flow in and out of the Treasurer's
accounts.

ADMINISTRATIVE REPORTS

111

The Monthly Statement oj Receipts and Expenditures oj the United
States Government was revised to conform to concei3ts and classifications presented in the 1964 Budget document. The major changes,
effective with the June 1963 issue, included an expansion of summary
tables to include trust fund receipts and expenditures, a new table
summarizing cash transactions with the public, and a table showing
intragovernmental and noncash transactions eliminated therefrom, to
come to a cash basis.
Control of foreign currencies

Pmsuant to Executive Order 11036, dated July 11, 1962, the Treasury Department and the Department of State established procedures
whereby American tourists may purchase Egyptian pounds through
the American Embassy in Caho. SimUar procedures may follow in
other coimtries where the United States holds currencies in excess of
normal requhements.
Legislation has been submitted to the Congress which would permit
using for regular operating purposes the foreign currencies which by
law are now held in a ^^reserve" status for funding certain programs.
Many of these currencies are held idle for long periods and, in the
meantime, the Government buys such currencies on the market to
meet regular needs.
For details of foreign currency holdings and transactions see tables
102 and 103.
Internal auditing

Substantial progress was made in developing formal audit programs
relating to flscal activities. Man agem ent-type audits were instituted
and staff assigned to broaden the scope of the audits beginning in
flscal 1964. Comprehensive audits were conducted in the Kansas
City and New York regional offices, and surveys of speciflc procedural
and operational problems were made in various other offices.
On January 2, 1963, incident to the appointment of a new Treasurer
of the United States, a verification was made of the balances of cash,
currency, and securities of the Office of the Treasurer of the United
States.
Disbursing Operations
During most of fiscal 1963 the Division of Disbursement operated
with fourteen regional disbursing offices, servicing over 1,600 offices of
agencies located throughout the United States, its possessions, and
the PhUippines.
Electronic data processing systems were installed in the Birmingham
and San Francisco offices in October 1962. These two E D P systems
and others previously instaUed in the Chicago, Kansas City, and Philadelphia offices were used to prepare social secm-ity benefits, veterans'
benefits, income tax refunds, national service life insurance dividends, railroad rethement benefits, interest payments on public debt
securities, and some Federal employees' salaries and U.S. savings
bonds. More than 259,240,000 checks (77 percent of the Division's
entire volume) were so issued. The high productivity and efficiency
of the electronic process led to installation of a similar computer system in the Washington office for operation at the beginning of fiscal
1964.

112

19 63 REPORT OF THE SECRETARY OF THE TREASURY

Incident to conversions to electronic systems, and after review of
the worldoad remaining in all non-EDP offices, it was decided to close
the Boston, Mass., Dallas, Tex., and Portland, Oreg., offices. The
Boston office was closed on May 31, 1963; the other two are scheduled
for closing early in fiscal 1964.
The average cost of processing checks and bonds in fiscal 1963 was
3.34 cents per item, compared with 3.73 cents in 1962. These processing costs include amortizations of owned (capitalized) E D P equipment and exclude one-time costs for E D P site preparation and closing
of offices as well as postage.
There follows a comparison of fiscal year 1962 and 1963 workloads:
Volume 1

Classification
1962
Payments:
Social security benefits
Veterans' benefits
Income tax refunds
Veterans' national service life insurance dividend program.
Other
Adjustments and transfers...
Savings bonds issued
.
Total

1963

•162,552,270
63,256,915
40,470, 741
6,013,284
r 42, 051,476
' 178,578
3,999,111

177,
63, 011,104
40, 704, 667
6, 076,295
44, 768, 616
127,112
629,171

' 318,522, 375

337,183,454

1 Excludes items financed by reimbursements.
•• Revised to exclude reimbursable items on a basis consistent with fiscal 1963 data.

Deposits, Investments, and Related Activities
Federal depositary system

The various types of depositary services and the number of commercial banking institutions authorized to provide each service, as of
June 30, 1963, are shown in the following table:

Type of service provided by depositaries

Receive proceeds from deposits by taxpayers and sale of pubhc debt securities for credit in
Treasury tax and loan accounts
Receive deposits from district directors of internal revenue, military fiinance ofl&cers, and
other Government officers
Maintain official checking accounts of postmasters, clerks of U.S. courts, and other Government officers.".
Furnish bank drafts to Government officers 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
.
Foreign
.
.

Number of
banking
institutions

11,644
889
4,384
2,242
58
"278
165

Loans and advances by the Treasury

The Bureau of Accounts administers loan agreements with those
Government corporations and agencies authorized by law to borrow
from the Treasury to finance certain programs. Tables 109 and 110
show the status of loans and advances as of June 30, 1963.

ADMINISTRATIVE

113

REPORTS

Surety bonds

The Secretary of the Treasury issues certificates of authority, renewable every June 1, to corporate sureties qualified to execute bonds
in favor of the United States (6 U.S.C. 8). A list of companies
holding certificates is published annually in the Federal Register
(Department Chcular No. 570, Revised). A total of 248 companies
were so authorized, as of June 30, 1963; during the year, 34,035 bonds
and consent agreements were approved by the Bureau as to corporate
surety.
Executive agencies are required by law (6 U.S.C. 14) to obtain
blanket, position schedule, or other types of surety bonds covering
emplbyees who must be bonded. The legislative and judicial branches
are permitted by the same law to follow this procedure. There follows
a summary of the agencies' bonding activities:
June 30,1962
Number of officers and employees covered:
Executive branch
Legislative and judicial branches
Total

.-.-

Aggregate penal sums of bonds procured:
Executive branch .
Legislative and judicial branches
Total
Premiums paid by Government (annual basis):
Executive branch
.
Legislative and judicial branches
Total
Administrative expenses:
Executive branch
_. .
Legislative and judicial branches
Total

June 30,1963

1,006,059
1,522

958,622
1,688

1,007,581

960, 310

$3,538, 697, 750
11,318,500

$3,424, 001. 530
12, 085,500

3,550, 016,250

3,436, 087, 030

280,775
2,091

282,596
1,980

282,866

284, 576

45,295
582

42,968
764

45,877

43, 732

World War I

Under funding and moratorium agreements covering World War I
indebtedness, the Government of Finland made payments during the
year totaling $396,484; these payments are used to finance certain
educational exchange programs with Finland (20 U.S.C. 222). For
further details regarding World War I indebtedness of all foreign
governments to the United States, see tables 104 and 105.
World War II

Under lend-lease and sm-plus property agreements, the Treasury
received dollar payments totaling $66.9 million (including the dollar
value of silver repaid); payments in local cmTencies had a dollar
equivalent of $14.5 million. Cumulative payments and credits against
the original indebtedness amount to $3,633.7 million, as indicated in
table 107.
Credit to the United Kingdom

Under the Anglo-American financial agreement, the United Kingdom made payments totaling $123.1 million, of which $68.0 milhon

114

1963 REPORT OF THE SECRETARY OF THE TREASURY

was interest. Cumulative payments through June 30, 1963, totaled
$544.7 million of principal, leaving an unpaid principal balance of
$3,205.3 million. Interest payments to date aggregate $717.9
million. There also remains to be paid deferred interest installments,
totaling $139.8 mUlion. For details regarding deferred payments,
see page 137 of the 1962 annual report.
Japan, postwar (World War II) economic assistance

Under an agreement dated January 9, 1962, the Government of
Japan is to pay the United States $490 miUion, plus interest, in
settlement of post-World War I I economic assistance. Initial
payments of $28,334,125 as principal and $6,125,000 as interest were
received during fiscal 1963.
Germany, postwar (World War II) economic assistance

Under the External Debt Settlement Agreement of February 27,
1953, as amended, the Federal Republic of Germany paid to the
Treasury, during fiscal 1963, the amount of $5,009,263.70 as interest
on a postwar (World War II) economic assistance loan. Through
June 30, 1963, cumulative payments on principal amounted to
$799,629,452.21, leaving a principal balance of $200,370,547.79.
Because of advance payments made, the next principal installment is
not due untU January 1, 1966.
Claims Against Foreign Governments and Nationals
Foreign Claims Settlement Commission

On October 4, 1962, the Foreign Claims Settlement Commission
had completed adjudications under the Czechoslovakian Claims
Program, with awards of $113,645,205 certified to the Treasury for
payment. Payments are necessarily limited to actual funds available,
derived from sale of certain blocked Czechoslovakian assets, and
follow a prescribed order of priority. Awards of $1,000 or less were
paid in full and, additionally, a pro rata distribution has been made
on all awards over $1,000. Additional funds for further payments
are not expected.
In addition to the initial payment of a maximum of $1,000 on all
awards under the Bulgarian, Hungarian, Rumanian, Italian, and
Soviet claims programs, the Treasury has made pro rata payments as
follows: Five from the Bulgarian claims fund, one from the Hungarian
claims fund, two from the Rumanian 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 1958 annual report (page
112) contains information regarding the origin and history of the
claims against these five governments. For the present status of the
claims funds, see table 95.
Under the agreement signed July 16, 1960, regarding claims of
American nationals against the Government of Poland, the Treasury
received the third annual installment of $2,000,000 on January 10,
1963. A balance of $34 mUlion is to be repaid over the next 17 years.
Through June 30, 1963, a total of 9,883 claims had been filed with

ADMllsriSTRATlVE REPORTS

115

the Commission. The time for filing claims with the Commission has
expired. In March 1963 the Commission began to certify awards to
the Treasury.
Mixed Claims Commission, United States and Germany
On April 1, 1963, the Treasury received $4,000,000 from the Federal
Republic of Germany, as its annual payment on claims arising out of
World War I, as provided by the agreement of February 27, 1953.
This payment was used to make an additional distribution to holders
of awards certified by the Mixed Claims Commission. For the status
of the claims funds, see table 94.
Divested property of enemy nationals
As of June 30, 1963, the balance on deposit in the Treasury as 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)), was $641,405. The funds are being held in the names of
individuals who are nationals of Bulgaria ($88,678), Hungary
($408,071), and Rumania ($144,657). To date, the Department of
Justice has authorized refunds to individuals aggregating $227,018.
Other Operations
Management improvement program
The continuing search for operating economies resulted in adoption
of improvements creating additional annual recurring savings of
$1,045,815, which includes $967,568 realized in disbursing operations.
Training
A two-week middle management development program was
inaugurated, with 16 management personnel participating initially.
The course was developed in conjunction with and conducted by staff
of the American University.
Donations and contributions
^'Conscience fund" contributions received in the Bureau during the
year and deposited into the Treasury amounted to $32,558.56. Other
unconditional donations totaled $141,463.48. Such receipts by other
Government agencies amounted to $8,894.10 and $21,363.11 respectively. Conditional gifts to further the defense effort amounted to
$3,790.80.
The Secretary of the Treasury is authorized (31 U.S.C. 901 (a)) to
accept gifts of money or property donated for the purpose of reducing
the public debt. Gifts of money and the proceeds of real or personal
property credited to this account in fiscal 1963 amounted to $10,210.10,
increasing the cumulative total to $12,213.11. Of this amount,
$12,000.00 has been used to purchase and retire public debt securities.
Government losses in shipment
Claims totaling $536,691 were paid from the revolving fund established by the Government Losses in Shipment Act, as amended.
Table 115 shows the status of the fund and detaUs of operations under
the act.

116

19 63 REPORT OF THE SECRETARY OF THE TREASURY

Payment of pre-1934 Philippine bonds

The Treasury maintains a trust account for deposits by the Philippine Government, representing amounts payable as principal and
interest on bonds of the PhUippine Government issued prior to
May 1, 1934. For the status of the account as of June 30, 1963,
see table 79.
Withheld foreign checks

On May 20, 1963, Department Circular No. 655 was amended to
prohibit the delivery of U.S. Government checks to payees residing
in Cuba.
Deposits of interest charged on Federal Reserve notes

In fiscal 1963 the Treasury received $828,485,777.73 from Federal
Reserve Banks as interest on outstanding Federal Reserve notes in
excess of gold certificates held as collateral against the notes (12
U.S.C. 414). For cumulative payments by the Banks over the
period 1947-63, see table 36.
Depositary receipts

The following table shows the volume of depositary receipts for
the fiscal years 1958-63. (See page 141 of the 1962 annual report
for further details.)
Fiscal year

1958
1959
I960
1961
1962
1963

Inconie and
social
security
8,481.465
8,961,762
9,469, 057
9,908, 068
10,477,119
11,161,897

Railroad
retii-ement
taxes

Federal
excise taxes

10,947
10,751
10, 625
10,724
10,262
9,937

681,210
604,933
598,881
618,971
610, 026
619,519

Total

9,173,622
9,577,446
10, 078,563
10,537, 763
11,097,407
11, 791,353

NOTE.—Comparable data for 1944-57 will be found on p. 141,1962 annual report.

BUREAU OF THE PUBLIC DEBT

The Bureau of the Public Debt, in support of the management of
the public debt, has responsibility for the preparation of 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 OAvners of registered securities and authorizing the issue
of checks in payment of interest thereon, and the handling of claims
on account of lost, stolen, destroyed, or mutilated securities.
The Bureau maintains offices in Chicago, 111., Parkersburg, W. Va.,
and Washington, D.C. The Savings Bond Audit Branch in Cincinnati, Ohio, which had been processing retired paper type savings bonds,
was closed as of December 31, 1962, and its operations transferred to
the Chicago and Parkersburg offices.

ADMINISTRATIVE REPORTS

117

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 19,000 in all) cooperate in the issuance of savings bonds.
Management improvement

Electronic data processing (EDP) activities of the Bureau were
expanded to include operations involving certain rethed savings
bonds in paper form. Effective August 1, 1962, incident to the closing
of the Cincinnati office, provision was made for the transmittal of all
redeemed Series A - E paper savings bonds to the Parkersburg office,
where they are audited and classified electronically in essentially
the same manner as rethed Series E card bonds. After audit and
classification, the serial number of each rethed Series E paper bond
is recorded on magnetic tape. Previously this rethement information had been recorded manually in registers maintained in the Chicago office. The manually posted registers are being microfilmed
and utimately will be destroyed. Inquhies requhing reference to
the serial number records wUl be searched on microfilm in the Chicago office; items not closed out on the old registers wUl then be
referred to the Parkersburg office for searching on tape.
Modifications and refinements in existing programs have increased the effectiveness of the electronic system and certain related
procedures, and made possible the release of a number of pieces of
conventional tabulating equipment used to perform various minor
operations. Steps also have been taken to inaugurate a pUot study
of the feasibUity of substituting microfilm and magnetic tape for
registration stubs as the media for obtaining Series E bonds issue
data from large volume agents which use electronic computers to
inscribe bonds.
A continuing analysis of the transistorized equipment, installed on
a rental basis during fiscal 1962, showed that the central processor
operated at a high efficiency level and that its purchase woiUd provide a cost advantage to the Bureau within a reasonable time. Accordingly, this equipment was purchased in November 1962.
Auditing and classifying of issue and rethement transactions
of Series F, G, H, J, and K savings bonds have been concentrated
in the Chicago office, which performs related operations for bonds of
these series. The classification of retirement transactions was
transferred as of July 1, 1962, in anticipation of the closing of the
Cincinnati office; the classification of issue transactions was transferred from the Federal Reserve Banks as of January 1, 1963. These
changes have permitted standardization of the basic procedures
governing the audit of and accounting for savings bonds.
Typical examples of other management improvements follow.
The authority of paying agents to redeem Armed Forces leave
bonds was withdrawn as of the close of business on September 29,
1962; this change has simplified the audit procedure and reduced
the incidence of pricing errors. A simplified method of computing
the part-term interest on Federal Housing Administration debentures was developed. Check issue and name and address information for interest payable on registered Treasury bonds and notes

118

1963 REPORT OF THE SECRETARY OF THE TREASURY

has been converted to punch cards in lieu of addressograph plates.
The transmittal of the stubs of spoUed Series E card bonds has been
discontinued and all spoiled bond processing standardized.
A number of changes in organizational structure were made to
promote more effective utUization of manpower and reduce personnel
costs. These changes included: The closing of the Cincinnati
office effective December 31, 1962; the reorganization in the Chicago office of three subunits in the Division of Loans and Currency
Branch; and the abolishment of the Numerical Register Section
of the Division of Rethed Savings Bonds and the transfer of its
remaining functions. In the Washington office, the Securities
Transactions and the Claims sections of the Division of Loans and
Currency were merged.
Department Circular No. 300, General Regulations With Respect
To United States Securities, reorganized and rewritten, was approved
on April 19, 1963. Provisions relating to advance refunding offerings,
redemption and redemption-exchange transactions, and taxpayer
identifying numbers were added. See exhibit 10.
In anticipation of the reporting to the Internal Revenue Service
of the interest paid on registered securities, regulations were issued
requiring the inclusion of taxpayer identifying numbers as a part of
the registration information on registered Treasury bonds and notes
and Series H and K savings bonds. Action also was taken to obtain
the taxpayer numbers of owners of outstanding securities of those
types for association with registered accounts and check issue records.
This program is being developed jointly with the Internal Revenue
Service and the Division of Disbursement.
Special attention has been devoted to the personnel management
programs of the Bureau. More positive recruitment procedures were
established. A planned series of publications will provide information
on such subjects as personnel procedures, classification, and the rights,
benefits, and obligations of Federal employees. Career development
plans have been adopted for two operating divisions in the Washington
office. Training opportunities were provided for employees at all
levels; there was participation in 32 programs presented outside the
Bureau and 14 programs within it.
Under the incentive awards program, 179 suggestions were received
and 45 were adopted with estimated recurring savings of $19,963.
Cash awards totaling $1,355 were made for the adopted suggestions.
Cash awards totaling $12,150 were given to 82 employees who received
outstanding performance ratings. An additional $13,042 was distributed to 280 employees for sustained superior work performance.
One Special Act or Service Award in the amount of $150 was made.
Two Bureau employees received the Treasury Department's Meritorious Service Award.
Bureau operations

One measure of the work of the Bureau is the change in the composition of the public debt. The debt 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

ADMINISTRATIVE REPORTS

119

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 Treasury directly to various Government
trust and certain other accounts and are payable only for these
accounts.
During the year, 19,011 individual accounts covering publicly held
registered securities other than U.S. savings bonds were opened and
22,363 were closed. This reduced the number of open accounts on
June 30, 1963, to 242,184 covering registered securities in the principal
amount of $12,811 million. There were 488,536 interest checks with
a value of $409,996,848 issued to owners of record during the year,
an increase of 17,515 checks from the number issued in 1962, and a
decrease in value of $16,212,249.
Redeemed and canceled securities other than savings bonds received
for audit included 5,138,232 bearer securities and 394,202 registered
securities, a total of 5,532,434 as compared with 5,191,569 in 1962;
and 18,511,169 coupons were received, which was 1,973,858 less than
in 1962.
A summary of public debt operations handled by the Bureau appears on pages 17 to 40 of this report, and in allied tables 26 to 56.
U.S. savings bonds.—The issuance and redemption of savings bonds
creates great administrative problems for the Bureau of the Public
Debt. The work involved includes: maintenance of alphabetical
and numerical ownership records for the 2.5 bUlion bonds issued
during the past 28 years; adjudication of claims; replacement of lost,
stolen, and destroyed bonds (which totaled 1.8 mUlion pieces on June
30, 1963); and the handling and recording of retired bonds.
Detailed information of sales, accrued discount, and redemption of
savings bonds will be found in tables 46 to 48, inclusive.
There were 95.6 million stubs representing issued bonds of Series
E received for registration making a grand total of 2,451.1 million,
including reissues, received through June 30, 1963. In recent years
original stubs of paper type bonds were arranged alphabetically in
semiannual blocks, by name of owner, and microfilmed. The stubs
were then arranged in numerical sequence by bond serial numbers
for a full calendar year file and microfilmed, after which they were
destroyed. These microfilms are permanent registration records.
The original issue of paper bonds was discontinued in fiscal 1958.
The issue stubs of the punch-card type bonds are microfilmed in
batches as they are received by the Bureau. Electronic data processing equipment is used to audit the stubs and develop a numerical
and alphabetical register on magnetic tape showing ownership of
bonds. In addition, the magnetic tape file of bonds issued serves as
a locator index to the bond stub image on microfilm.
The following table shows the status of processing operations for
registration stubs of card type Series E savings bonds. The table
also includes information on operations for all rethed bonds in card
form, and paper type Series E bonds reissued since January 1, 1962,
or redeemed since August 1, 1962.
707-484—64

120

1963

REPORT OF T H E

SECRETARY OF T H E

TREASURY

Balance

Fiscal year

Received

'
1958
1959
1960
1961
1962
1963

Converted
MicroKeyto
filmed p i m c h e d m a g netic
tape

Audited
and
classified

Destroyed

Unfitaied

Not
conNot
verted
keyto
punched magnetic
tape

Unaudited

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

.
Total

59.5
87.5
87.2
88.7
91.0
94.3

57.8
88.2
84.7
90.7
90.2
93.9

41.4
103.4
82.6
92.4
88.7
95.0

5.7
119.0
102. 5
92.2
89.1
95.0

34.7
106.9
83.6
92.9
88.9
93.0

58.3
154.4
154.1
69.6

508.2

505.5

503. 5

503.5

500.0

436.4

1.7
1.0
3.5
1.5
2.3
2.7

18.1
2.2
6.8
3.1
5.4
4.7

53.8
22.3
7.0
3.5
5.4
4.7

24.8
5.4
9.0
4.8
6.9
8.2

R e t i r e d card t y p e Series E savings b o n d s recorded in P a r k e r s b u r g oflice
(in millions of pieces)
1958
1959
1960
1961
1962
1963

. .

....

Total

17.5
45.2
55.2
59.7
62.4
64.9

16.7
45.5
54.3
60.6
61.3
64.3

10.5
51.4
52.5
61.5
61.1
64.1

0.1
53.2
60.0
62.4
61.1
64.3

7.3
52.8
52.4
62.8
60.3
63.5

20.6
93.0
95.0
48.3

304. 9

302.7

301.1

299.1

256.9

0.8
.5
1.4
.5
1.6
2.2

7.0
.8
3.5
1.7
3.0
3.8

17.4
9.4
4.6
1.9
3.2
3.8

10.2
2.6
5.4
2.3
4.4
5.8

R e t i r e d p a p e r t y p e Series E savings b o n d s processed in P a r k e r s b u r g oflice
(in millions of pieces)
J a n . 1-Jiine 30,
1962
1963
Total

0.8
21.8

0.8
21.2

0.7
20.8

0.7
19.9

5.1

22.6

22.0

21.5

20.6

5.1

0.1
1.1

0.1
2.0

All retired Series E savings bonds are now handled in the Parkersburg office. There, after microfilming, the bonds are audited and required permanent record data are prepared by an electronic data
processing system before being destroyed. Prior to August 1, 1962,
retired paper bonds of all series, except Series E bonds retired on
reissue transactions after January 1, 1962, were processed through the
Cincinnati office where they were audited, microfilmed, and
destroyed. A list of the serial numbers of bonds audited by the
Cincinnati office was 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 Chicago
and Cincinnati offices.

ADMINISTRATIVE

121

REPORTS

R e t i r e d p a p e r t y p e savings b o n d s of aU series recorded i n
Chicago oflace (in millions of pieces)
S t a t u s of posting
N u m b e r of
retired
bonds
reported

Period

Balance
Verified

Posted

Unposted
C u m u l a t i v e t h r o u g h J u n e 30, 1958
Fiscal year:
1959
1960
1961.
1962
1963
...
..
Total

Unverified i

1,608.5

1,605.2

1,499.1

3.3

28.0

50.3
45.3
37.1
28.6
8.9

50.4
45.7
37.2
29.2
11.0

86.2
55.5
39.3
32.6
12:2

3.2
2.8
2.7
2.1

3.3
4.9
2.8
1.2

1,778.8

1,778. 8

1,724.8

1 Excludes 53.9 million pieces received in 1954 and 1955 which were not verified.

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 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,
1958
F i s c a l y.ear:
1959
1960
. . . . .
1961
1962
1963 . .
Total

Unfilmed 2

1,145.0

1,141.4

1,128.0

3.6

5.9

1,076.8

48.7
43.2
32.6
28.4
2.3

49.1
44.4
32.9
28.4
4.0

47.7
46.2
34.0
28.2
5.0

3.2
2.0
1.7
1.7

6.9
3.9
2.5
2.7

72.4
47.5
32.2
28.3
33.6

1,300.2

1,289.1

31, 290. 8

1 Cincinnati audit oflQce was closed in fiscal 1963 and was the last of five such oflices to be closed. This
table includes data for all five oflSces.
2 Excludes 9.4 million pieces of unfilmed spoiled stock transferred to permanent storage and 1.7 miUion
pieces of unissued stock destroyed without microfilming.
3 Excludes 9.4 million pieces of spoiled stock transferred to permanent storage.

Of the 84.9 mUlion Series A-E savings bonds redeemed prior to
release of registration and received by the Bureau during the year,
82.7 mUlion, or 97.5 percent, was redeemed by approximately 15,700
financial institutions. These paying agents were reimbursed 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. During the year a total
of $10,703,064, an average of 12.94 cents per bond, was paid to the
agents.
The following table shows the number of savings bonds outstanding
as of June 30, 1963, by series and denomination.

122

19 63 REPORT OF THE SECRETARY OF THE TREASURY

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 i

Total
$10

$25

$50

$100

$200

$500

E.
. . . . 447,633
6,417
H
3
A . __ . . .
4
B .
12
C.
59
D...
129
F.
372
G
J
416
K
517

822

238,416

99,297

76, 793

7,456

11, 941
2,437

1
1
3
17
42
142
141

—(-*")"""

455, 662

822

77,140

7,456

Total-...

(*)

1
1
4
21
38

1
2
11

72
238, 553

99,311

$1,000

$5,000

$10,000 $100,000

12, 866
3,590 '"""305"

41
85

(*)

1
4
12
76
42
138

1
6
30
138
115
287

4
11
17
44

3
5
27
46

1
2

14, 651

17, 033

381

207

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

The following table shows the number of issuing and paying agents
for Series A-E savings bonds by classes.

Post
oflaces 1

J u n e 30

Banks

Building
and
savmgs
and
loan
associations

Credit
unions

Companies
operating
pa3T0ll
plans

All
others

Total

Issuing agents
1945
1950
1955
1959
I960
1961.
1962
1963

24,038
25,060
2,476
1,120
1,093
1,061
1,046
1,011

_
.

15,232
15,225
15,692
16,178
16,436
13, 505
13,559
13,644

3,477
1,567
1,566
1,778
1,851
1,617
1,670
1,679

2,081
622
428
336
320
286
281
269

2 9,605
3,052
2,942
2,401
2,352
2,045
1,978
1,857

660
588
688
643
590
573
560

54,433
46,966
23.681
22, 601
22,695
3 19,103
19,107
19,020

67
66
60
60
16
16
15

13,466
16,691
17,652
18,778
19,153
315,449
15, 663
15,736

(2)

P a y i n g agents
1945
1960
1955
1969
1960
1961
1962
1963

13,466
15, 623
16,269
16, 860
17,127
13,670
13,687
13,826

874
1,188
1,690
1,797
1.605
1,690
1,739

137
139
168
169
158
160
165

1 Estimated by the Post Oflace Departraent for 1955 and thereafter. Sale of Series E savings bonds was
discontinued at post oflaces at the close of business on Dec. 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 reclassification by Federal Reserve Banks eft'ective Dec. 31,1960, to include
only the actual number of entities currently qualified.

Interest checks issued on cmTent income type savings bonds (Series
G, H, and K) during the year totaled 5,165,049 with a value of
$296,043,088, an increase of 70,568 checks from those issued during
1962, and an increase in value of $19,950,657. New accounts established for Series H bonds, the only current income type savings bond
presently on sale, totaled 184,211, while accounts closed for Series H
bonds totaled 119,625, an increase of 64,586 accounts.

ADMINISTRATIVE REPORTS

123

Applications during the year for the issue of duplicates of lost,
stolen, or destroyed savings bonds amounted to 44,958. These,
together with 998 cases on hand at the beginning of the year, totaled
45,956. In 27,375 cases the bonds were recovered, and in 17,155
cases the issuance of duplicate securities was authorized. On June 30,
1963, there remained 1,426 cases not settled.
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. Created by an act of Congress approved September 2,
1789, as amended (31 U.S.C. 141, 147), 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. Included are: The
verification and destruction of U.S. paper currency; 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 which qualify as depositaries provide banking
facilities for the Government in the United States and in foreign
countries. D a t a on the transactions handled for 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.
The Treasurer maintains current summary 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
the value of mutilated currency; and acts as special agent for the
payment of principal and interest on certain obligations of corporations
of the U.S. Government and on certain obligations of Puerto Rico
issued on or before January 1, 1940. The Treasurer also acts as
special agent for the payment of principal and interest on certain
pre-1934 dollar bonds of the Philippines.
The Office maintains facilities at the Treasury to: Accept deposits
of public moneys by Government officers; cash U.S. savings bonds and
checks drawn on the Treasurer; receive excess and unfit currency and
coins; and to conduct 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 hregularities involving checks paid by the
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 Treasurer of the Board of
Trustees of the Postal Savings System. She is also custodian of bonds

124

19 63 REPORT OF THE SECRETARY OF THE TREASURY

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 three-year program for expansion and modernization of the
electronic data processmg (EDP) system, initiated m the fiscal year
1961, was completed by the close of fiscal 1963 with virtually all components replaced by more efficient equipment. The acquisition during
the year of faster and highly accurate card-to-tape converters brought
tbe capacities of this equipment into closer alignment with the increased capabilities of the computer mam frames and other peripheral
equipment previously acquired. A program for purchasing rather
than renting most of the E D P equipment was well underway at the
end of fiscal 1963 and is expected to result in considerable savmgs.
The new equipment wUl enable the office to handle the foreseeable
workload of both Government checks and Post Office money orders
for the next several years, with further reductions in item cost. In
fiscal 1957, during the earliest phase of the changeover to the electronic sj^stem, the cost was $.015 per check. In 1960 it was brought
down to $.006, and the latest improvements have reduced the cost to
$.004 per check. (All salary costs were adjusted to the 1963 levels
for purposes of comparison.) Other significant benefits realized from
the new E D P equipment are: Larger work units and simpler controls
resulting from reels of magnetic tape with capacity double that of
those formerly in use; earlier entry of checks into the system giving
the public, the disbursing officers, and the banking community better
service with respect to stoppage of payment, claims, and other matters
involving discrepancies; and earlier completion of the manual operations of balancing checks paid to checks charged by presenthig banks
and to perfecting data for permanent records.
The conversion to processmg postal money orders on the Treasurer's
electronic system, which started near the end of the last fiscal year,
also was completed during fiscal 1963. In April 1963 the remaining
money order accounts were brought under the new payment system
so that, m addition to the estimated annual volume of checks (490
million ia 1964 and 521 mUlion in 1965), the Treasurer will be processing, on a reimbursable basis, approximately 240 million money orders
for the Post Office Department. Improved control and servicing of
the orders and overall savings to the Government of at least $650,000
annually, are expected.
Arrangements were made with the General Services Admhiistration
whereb}'- all paid checks and many of the related records are stored
in the Federal Records Center at Mechanicsburg, Pa., includhig some
previously stored in Alexandria, Va. This consolidation facilitates
the withdrawal of checks and makes possible earlier action on claims
for lost or stolen checks and adjustments of accounting differences.
Employee participation in on-duty and off-dut}^ training programs
in automation and supervisory, managerial, and executive development has improved the bureau's ability to select qualified personnel
for important managerial jobs. A training procedures circular was
issued during fiscal 1963.

ADMINISTRATIVE REPORTS

125

Assets and liabilities in the Treasurer's account

A summary of the assets and liabUities in the Treasurer's account at
the close of the fiscal years 1962 and 1963 is shown in table 57.
The assets of the Treasurer consist of gold and silver bullion, coin
and paper currency, deposits in Federal Reserve Banks, and deposits
in commercial banks designated as Government depositaries.
Gold.—The gold assets declined during fiscal 1963 as they have
each year since 1957. Disbursements of $1,046.4 million and receipts
of $344.5 mUlion on the daily Treasury statement basis resulted in the
net reduction of $701.8 milhon shown in table 57. The final balance
on June 30, 1963, was $15,733.2 million with a free gold balance of
$120 million. The declines in earlier fiscal years were: (in millions)
1958, $1,266.6; 1959, $1,651.6; 1960, $382.5; 1961, $1,771.8; and 1962,
$1,115.0.
Silver.—To conserve sUver bullion for increasing coinage requirements, the Treasury Department continued to sell sUver only to
Government agencies. The Treasurer's Office gradually reduced the
sUver certificates outstanding, by permitting their replacement with
Federal Reserve notes. Silver buUion at the monetary value of
$1.29-|- per ounce, beld to secure outstandhlg certificates, thus was
made avaUable and released to the Bureau of the Mint for coinage.
However, sUver certificates are also secured by standard sUver dollars
in the Treasury, none of which have been coined since 1935. Although
outstanding certificates were reduced $150.3 mUlion during the year,
the reduction was oftset by a drop of $49.9 mUlion in the holdings of
sUver dollars which passed into circulation at an unprecedented rate.
By allowing the free sUver balance to decline $4.4 mUlion, the Treasurer's Office was able to release for coinage use 81 mUlion ounces of
sUver bullion with a monetary value of $104.7 miUion.
An act approved on June 4, 1963 (77 Stat. 54) (see exhibit 39)
repealed the Silver Purchase Act of 1934 (31 U.S.C. 311a, 316a, 316b,
405a, 448-448e, 734a, and 734b), the silver purchase provisions of
the act of July 6, 1939, section 4 (31 U.S.C. 316c), and the act of
July 31, 1946, relating to the use and purchase of silver (31 U.S.C.
316d).^ The new law provides that the Secretary of the Treasury
maintain ownership and possession or control within the United
. States of silver of a monetary value equivalent to the face amount of
all outstanding sUver certificates. Unless the market price exceeds
the monetary value, the Secretary may not dispose of silver held or
owned by the United States in excess of this reserve requirement
except that he may sell it to other Government departments and
agencies or use it in coining standard silver dollars and subsidiary
silver coins. This legislation repealed the requirement that the
Treasury purchase newly-mined domestic silver at the fixed price
of 90K cents per ounce, a requirement that had been suspended by
Presidential dhective on November 28, 1961. (See annual report
for 1962, page 151.) Silver certificates shall be exchangeable jby
the Treasmy on demand for silver dollars or, at the option of the
Secretary of the Treasury, for silver bullion of a monetary value
equal to the face amount of the certificates. Another provision
1 See also report of the OflBce of Domestic Gold ahd Silver Operations, p. 102.

126

19 63 REPORT OF THE SECRETARY OF THE TREASURY

of the new law authorizes issuance of Federal Reserve notes in $1
and $2 denominations for the first time. This will make it possible
to replace more readily outstanding silver certificates (mainly in
$1 denomination) by Federal Reserve notes.
Transactions in silver bullion during the year are summarized in
the followins; table.
Silver bullion
Fiscal year 1963

Held to
secure silver
certificates
Monetary
value

Held for coinage, etc.

Monetary
value

Cost value Recoinage
value

(In millions)
On hand July 1, 1962
Received (+), or disbursed (—), net.
Revalued
Released for coinage
Used in coinage
On hand June 30,1963.

$2,183.1

(*)

$8.4
-2.7

-104.7

+104.7
-106.1

2,078.4

4.3

$21. 6
+0.9

(*)

$0.1
+2.0
-2.1

22.5

*Less than $60,000.

Balances with depositaries.—The following table shows the number
of each class of depositaries and balances on June 30, 1963.

Class

Deposits to the
Number of
credit of tbe
accounts with Treasurer of the
depositaries ^ United States
June 30, 1963
! $1,148, 329, 413
37, 627,998

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

226, 605, 902

10, 324,211, 590
49,167,154
13, 671

11,785,842.057

1 Includes only depositaries having balances with the Treasurer of the United States on June 30, 1963.
Excludes depositaries duly designated for this purpose but having no balances on that date and those
designated to furnish official checking accomit facilities or other services to Government oflacers 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 $341,894,611 in process of collection.
3 Principally branches of U.S. banks and of the American Express Company, Inc.

Bureau operations

Receiving and disbursing public moneys.—Moneys collected by
Government officers are deposited with the Treasurer at Washington,
in Federal Reserve Banks, and in designated Government depositaries
for credit to the account of the Treasm'er of the United States. All
payments are withdrawn from this account. Moneys deposited and
withdrawn in the fiscal years 1962 and 1963, exclusive of certain
intragovernmental transactions, are shown in the following table on
the basis of the Daily Statement oj the United States Treasury,

ADMINISTRATIVE

127

REPORTS

Deposits, withdrawals, and balances in the Treasurer's account

1962

Balance at beginning of fiscal year
Cash deposits (net):
Internal revenue, customs, trust fund, and other collections
Public debt receipts 1
Less: Accrued discount on U.S. savings bonds and Treasury
bills .
-.
Purchases by Government agencies (net) 2
Sales ofsecurities of Government agencies in market (net)
Total net deposits
Cash withdrawals (net):
Budget and trust accounts, etc
Public debt redemptions 1
Less redemptions included in budget and trust accounts
Total net withdrawals.__
Change in clearing accounts (checks outstanding, deposits in transit,
unclassified transactions, etc.) (net deposits)
Balance at close of fiscal year

1963

$6, 694,119, 954

$10,430, 393, 549

^ 105, 910, 789,098
203,530, 446,854

114, 453, 793, 651
227,000, 711, 290

- 2 , 571,113, 247
-502,677,061
950, 771,810

-2,857,938,673
—1,981,089,754
25, 674, 499

r 307,318, 217,454

336,641,150, 913

r 112,188,289,891
194,300, 662,743
-1,647,689,011

118,476 596,149
219,341,901, 015
-1,824,674,500

•• 304,841,163, 623

335, 993, 922, 664

1,259,219, 764

1,038, 554, 365

10, 430,393, 549

12,116.176,163

«• Revised.
1 For details for 1963 see table 39.
2 Includes net purchases of public debt securities in the niarket.

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 facUities of the Federal Reserve Banks and their
branches.
The Federal Reserve Banks and branches, as agents of the TreasuTy,
redeem and destroy the major portion of the U.S. currency as it
becomes unfit for chculation. A small amount is handled directly
by the Treasurer's Office.
Federal Reserve Banks issue Federal Reserve notes; they 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 Currency 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 sources in Washington and
from Government officers abroad; and examines and identifies for
lawful redemption all burned and mutilated currency received from
any source. During fiscal 1963 such currency was examined for
44,719 claimants and payment made therefor to the extent of
$16,046,123.
A comparison of the amounts of paper currency of all classes, including Federal Reserve notes, issued, redeemed, and outstanding
during the fiscal years 1962 and 1963 follows.

128

1963 REPORT OF THE SECRETARY OF THE TREASURY

1962
Pieces
Outstanding July 1
Issues d u r i n g y e a r . . .
Redemptions during y e a r . . .
O u t s t a n d i n g J u n e 30 ^-^

1963
Amount

3, 632,683,740 $34,688,829,789
1,720,343,853
8,834,281,203
1,569,251,054
7. 674,837,133
3,783,776, 539 35,848,273,859

Pieces
3,783,776,539
1, 818, 874,687
1,682, 566, 500
3,920,084,726

Amount
$35,848,273,859
9,686,107, 640
^.aj)48, 606,339
37,484,776,160

Since enactment of the Old Series Currency Adjustment Act (31
U.S.C. 912-916) on June 30, 1961, only gold certificates of the Series of
1934 and silver certificates issued after June 30, 1929, have been
carried in the Treasurer's accounts as respective liabilities against gold
and silver. Older issues of these currencies are redeemable from the
general fund of the Treasury and the amounts outstanding are shown
as noninterest-bearing public debt (see table 41). This is true also for
old series Federal Reserve notes (issues prior to the Series of 1928)
inasmuch as the Federal Reserve Banks, following approval of the act,
deposited funds with the Treasurer for the redemption of these notes.
Funds for the redemption of Federal Reserve Bank notes and national
bank notes had been previously deposited with the Treasurer and
credited as public debt receipts.
U.S. notes are treated as a liability against gold to the extent of the
gold reserve established by law (31 U.S.C. 408). The remainder of the
amount outstanding appears as noninterest-bearing public debt.
Federal Reserve notes of 1928 and subsequent series are liabilities of
the respective banks of issue. However, a portion of the gold in the
Treasury that is earmarked for the Federal Reserve System is segregated as a redemption fund for these notes pursuant to the act of
June 12, 1945 (12 U.S.C. 414). Redemptions made by the Currency
Redemption Division are charged against this fund.
In accordance with the legislation of June 30, 1961 (31 U.S.C. 915c),
the Secretary of the Treasury, on August 27, 1962, determined that
various old series currencies totaling $58 million would never be
presented for redemption and the public debt was reduced accordingly.
A similar reduction of $1 million had been made in fiscal year 1962.
The redemptions of paper currency shown in the preceding table
include these reductions.
Table 64 shows by class and denomination the value of paper
currency issued and redeemed or written off during the fiscal year
1963 and the amounts outstanding at the end of the year. Tables
59 through 63 give further details on the stock and circulation of
money in the United States.
Checking accounts oj disbursing officers and agencies.—As of June 30,
1963, the Treasurer maintained 2,310 checking accounts as compared with 2,393 on June 30, 1962. The number of checks paid, by
categories of disbursing officers, during fiscal 1962 and 1963 follows.

ADMINISTRATIVE REPORTS

129

N u n i b e r of checks p a i d
D i s b u r s i n g officers
1962
Treasury.
Army
Navy
Air Force
Other.. .

...
.

Total..

... ...

1963

319, 658,152
28, 670, 953
33, 834,057
33,152,049
33, 770,098

337, 475, 327
29,123, 250
32,107,033
33, 688, 542
34, 417, 927

448, 985, 309

466, 8121,079

Settling check claims.—During the fiscal year the Treasurer processed 509,000 requests to stop payment on Government checks,
including approximately 123,000 checks destroyed in a Railway Express car fixe and 52,000 requests for information and for photostatic
copies of paid checks. Requests numbering 49,000 for removal of
stop payments were processed.
The Treasurer acted upon 218,000 paid check claims dm-ing the
year, including those referred to the U.S. Secret Service for investigation which involved the forger}^^, alteration, counterfeiting, or frau(iulent issuance and negotiation of Government checks. Reclamation
was requested from those having liability to the United States on
33,000 claims, and $3,298,000 was recovered. Settlements and adjustments were made on 31,000 forgery cases totaling $3,614,000.
Disbursements from the check forgery insurance fund, established to
enable the Treasurer to expedite settlement of check claims, totaled
$307,000. As recoveries are made, these moneys are restored to
the fund. Settlements totaling $3,307,000 have been made from
this $50,000 revolving fund establisheci by the act of November
21, 1941 (31 U.S.C. 561-564). The amount of the fund was increased to $100,000 by appropriation of an additional $50,000
effective July 1, 1963.
Claims b}^ payees and others involving 92,000 outstanding checks
were acted upon. Of these, 75,000 were certified for issuance of
substitute checks valued at $27,193,000 to replace checks that were
not received or were lost, stolen, or destroyed. In addition, claims
by Federal Reserve Bank branches at Nashville and New Orleans
involving 116,000 cashed checks totaling $23,000,000, which were en
route to the Treasurer's Office for credit when they were destroyed
in the Railway Express car fire, were processed under special
procedures.
The Treasurer treated as canceled and transferred to accounts of
agencies concerned for adjustment the proceeds of 16,319 unavailable
outstanding checks, totaling more than $5,262,000.
Collecting checks deposited.—Government officers during the year
deposited more than 6,980,000 commercial checks, drafts, money
orders, etc., with the Cash Division in Washington for collection.
Custody oj securities.—The face value of securities held in the
custody of the Treasm'er as of June 30, 1962, and June 30, 1963, is
shown in the following table:

130

1963 REPORT OF THE SECRETARY OF THE TREASURY

June 30

Purpose for which held

1963
As collateral:
To secure deposits of public moneys in depositary banks..
To secure postal savings funds
In lieu of sureties
In custody for Governnient officers and others:
Forthe Secretary ofthe Treasury i
For Board of Trustees, Postal Savings System
Forthe Comptroller ofthe Currency
For the Federal Deposit Insurance Corporation
For the Rural Electrification Adniinistration
For the District of Columbia
For the Commissioner of Indian Afi'atrs
Foreign obligations 2_
Others
For Government security transactions:
Unissued bearer securities
Total

$133,026,100
18,728,500
4,832,050

$117.903,100
16,963, 600
4,637,400

34,888,248,969
286,637,000
12,341,000
1,367,097,830
99,676,759
93,563,936
36,549,160
12,064,388,132
65,127,646

35,796,249,444
190,737,000
13,960,000
1,132,228,100
119,931,043
121,196,078
36,438,426
12,060,226,132
86,256,956

1,853,438.750

1,710,531,950

50,913,554,820

51,407,249,128

1 Includes those securities listed in table 109 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 theh securities. The
amounts of these payments during the fiscal 3^ear 1963, on the basis
of the Daily Statement oj the United States Treasury were as follows:
Principal
Banks for cooperatives
District of Colmnbia Armory Board
Federal home loan banks
Federal I-Iousing Administration
Federal intermediate credit banks
Federal land banks ._
Federal National Mortgage Association
Puerto Rico—
Others
.
Total

$941, 860,000

Interest paid Registered
with principal interest i
$14, 921,959

Coupon
interest

$842,163
19, 853, 664

1, 953,056,000
270,093, 700
2, 373, 825,000
439, 548,300
299, 982,000
550,000
23, 226

42, 473, 325
2, 706, 317 $20, 209, 399
57, 404, 346
138, 387 8, 616,838
5,063

96, 072, 323
89, 863,076
113,023
2,970

6, 278, 937, 225

117,649, 665 28. 731,300

206,737,117

6,323

1 On the basis of checks issued.

Office of Foreign Assets Control
The Office of Foreign Assets Control was established on October 15,
1962, by Treasury Department Order No. 128, Revision 1 (see exhibit 41). The Office administers regulations and orders issued under
section 5(b) of the Trading with the Enemy Act. The Foreign
Assets Control Regulations block all property in the United States in
which any Communist Chinese or North Korean interest exists and
prohibit all trade or other financial transactions with those areas or
their nationals. The Cuban Import Regulations govern imports into
the United States of goods of Cuban origin, goods containing Cuban
components, or goods from or through Cuba.

ADMINISTRATIVE REPORTS

131

The Control also administers regulations which prohibit persons in
the United States from purchasing, selling, or arranging the purchase
or sale of strategic commodities outside the United States for ultimate
shipment to the Soviet bloc. The latter regulations supplement the
export control laws administered by the Department of Commerce.
In addition, the Control carries on licensing activities in connection
with transactions otherwise prohibited by the regulations mentioned
above and takes action to enforce these regulations.
Internal Revenue Service^
The Internal Revenue Service is responsible for collecting internal
revenue and for administering the internal revenue laws. One of the
major objectives of the Service is to preserve and strengthen the selfassessment system of taxation through encom^aging greater voluntary
compliance with the tax laws. The Service is also responsible 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 of $105.9 billion dming
the fiscal year 1963 exceeded $100 billion for the fhst time in history.
This was an increase of $6.5 billion over 1962. During the year
there have been definite indications that voluntary compliance with
the laws by taxpayers is increasing. This trend reflects the salutary
effect of the Service's programs dealing with taxpayer information
and assistance (including publications for taxpayers), dhect enforcement, and conversion to automatic data processing (ADP). For
example, many taxpayers came into district and local offices voluntarily paying taxes that were past due and stated that they wanted
to get theh tax accounts current before A D P was fully implemented.
This improvement in voluntary compliance, together with favorable
economic conditions, was responsible for the sharp increase in
collections.
Individual income taxes rose $2.3 billion, 4.6 percent, and reflected
greater voluntary compliance and a continued rise in the national
level of personal income, particularly in salaries and wages. Corporation income taxes increased $1.0 billion over 1962, a new high for
collections from this source.
Employment taxes, which accounted for 14.2 percent of all internal
revenue, increased 18.1 percent in 1963 and accounted for $2.3 biUion
of the increase in total revenue. Gains in employment taxes reflected
not only the higher level of personal income, but also increases in tax
rates. The old-age, disability, and survivors insurance tax rate,
payable by both employers and employees, increased from 3)^ to 3%,
percent on the first $4,800 of taxable wages, effective January 1, 1963.
Unemployment insurance taxes rose $0.5 billion, or 107.3 percent.
This increase was due primarily to the rise in the tax rate to 3.5 per1 Additional information will be found in the separate Annual Report of the Commissioner oJ Internal
Revenue,

132

19 63 REPORT OF THE SECRETARY OF THE TREASURY

cent on taxable wages paid during the calendar year 1962 from the 3.1
percent rate in effect during 1961. Since the State credit is 2.7 percent, the net Federal tax increased from 0.4 to 0.8 percent.
Excise tax collections increased $657.6 million, or 5.2 percent, in
1963; this approximates the dollar increase of 1962. The Federal use
tax on highway motor vehicles amounted to just under $100 million,
24.7 percent more than last year. Receipts from the Federal tax on
passenger automobiles, chassis, bodies, etc., were up $259.1 mUlion,
or 19.9 percent. The excise tax on transportation of persons was
repealed effective November 16, 1962, except the tax on air travel
which was reduced to 5 percent. Collections from this source
dropped $28.8 million, or 11.0 percent, to $233.9 million.
A comparison of collections in the fiscal years 1962 and 1963 by
principal type of tax is shown below. Collections from 1929-63 by
detailed catcR'ories are 2:iven in table 21.
I n t h o u s a n d s of dollars
Source
1963
I n c o m e taxes:
Corporation
Individual:
W i t h h e l d b y employers
other

21,295,711

22,336.134

36, 246,109
14,403,485

38, 718, 702
14, 268, 878

T o t a l i n d i v i d u a l income taxes
T o t a l income taxes
E m p l o y m e n t taxes:
Old-age a n d disability i n s u r a n c e
U n e m p l o y m e n t insurance
R a i l r o a d retirenient

50, 649, 594
71,945,306

62, 987, 581
75,323, 714

11, 686, 231
457, 629
564,311

13,484,379
948,464
671, 644

T o t a l e m p l o y m e n t taxes
E s t a t e a n d gift taxes
Excise taxes:
Alcohol taxes
T o b a c c o taxes
Other excise taxes

12, 708,171
2,036,187

15,004,486
2,187,457

3,341,282
2,025,736
7.385,158

3,441.656
2,079, 237
7,888,844

T o t a l excise taxes
T o t a l collections

12,752,176
99,440,839

13,409, 737
105,925,395

Rejunds.—During fiscal 1963 refunds of internal revenue, comprising both principal and interest, totaled $6.6 bUlion, compared with
$6.3 bUlion in 1962. Gross collections, less refunds, were $99.3 bUlion
in fiscal 1963 and $93.1 bUlion in 1962. These amoimts wUl differ
from net budget receipts which include gross collections of internal
revenue, customs duties, and receipts from miscellaneous sources
reduced by transfers to trust fund accounts, refunds of receipts, and
interfund transfers.
Interpretation and communication of tax law to taxpayers

To assist taxpayers to understand theh rights and responsibUities,
the Service prepares and distributes basic regulations, rulings, tax
forms, and instructions. I t also publishes a series of tax guides
covering separate situations and disseminates information through
the various news media. District and local offices provide individual,
group, or telephone assistance to taxpayers to help them prepare
theh returns correctly, comply with ffling requhements, or meet
payment deadlines.

ADMINISTRATIVE REPORTS

133

Taxpayer publications.—Thisfis basically a self-help program for
taxpayers. In addition to providing histructions with the tax return
forms, the Service issues approximately 50 publications in plain
everyday language for the uiformation and guidance of taxpayers on
practically all aspects of Federal taxation. Continuing the Service's
^'New Dhection" for greater emphasis on voluntary compliance
through an informed taxpaying public, numerous improvements and
expansions of the program were accomplished during fiscal 1963.
Each publication contains detaUed and easy to understand explanations of the laws applicable to a particular problem area. Objectives
of this program are to expedite and increase the effectiveness of the
taxpayer assistance program, and to minimize the necessity for
individual assistance by Service personnel.
Public injormation program.—UtUizing the Centennial observance
as a point of interest, the Service conducted an accelerated public
information program throughout the fiscal year 1963 through the
press, radio, television, theater and group showings of fihns, and
speeches by Internal Revenue officials. Extended efforts were
dhected toward increased public understanding of the Federal tax
laws and the rights and obligations of taxpayers.
In addition to the needs refiected b}^ automatic data processmg and
taxpayer assistance in general, the liberalization of depreciation guidelines and the effect of the Revenue Act of 1962 increased the necessity
for mass dissemhiation of mformation.
The keen public interest which developed in the tax aspects of
travel and entertainment expenses, rethement plan contributions of
self-employed persons, investment credit, and foreign hivestment,
resulted in substantial mcreases in news media inquhies and requests.
With the cooperation of the press, radio, and television, the Service
strengthened its program of information thereby contributing toward
a better-informed public.
Taxpayer assistance program..—A basic component of the Service's
program of fostering voluntary compliance is the taxpayer assistance
program. Taxpayers are assisted by specially selected individuals
who have demonstrated theh technical proficiency and theh abUity
to deal effectively with the public.
During the filing period, 11.5 .million taxpayers received aid in
-preparing theh tax returns. Assistance furnished taxpayers by
telephone rose from 6.3 "" mUlion in 1962 to 6.8 mUlion in 1963. Taxpayers receiving individual assistance numbered 470,000 compared
with 509,000 last year, but those furnished self-help assistance in
1963 was substantially unchanged from 1962.
Although the number of taxpayers assisted increased 3.0 percent
over 1962, the number of man-days expended decreased 9.9 percent,
from 131,518 in 1962 to 118,546 in 1963. This saving in thne was
made possible by the greater emphasis placed on assistance by
telephone.
Tax return jorms program.—The Service's continuing efforts to
hnprove and simplify tax return forms were complicated by new
legislation, new regulations, and the impact of automatic data
processing. Members of the Tax Return Forms Committee visited
' Revised.

134

1963 REPORT OF THE SECRETARY OF THE TREASURY

service centers and conferred with ADP specialists in order to minimize
processing problems. There was also close coordination with the
Social Security Administration and other Government agencies as
well as with State tax officials in matters of mutual concern. Several
new forms were designed or old ones revised as a result of legislative
changes. Other forms were eliminated and, in some cases, several
forms were combined into one. A number of sample forms and tax
rate tables illustrating the effects of proposed legislation were drafted.
Suggestions from professional groups, the public, and Service employees
were evaluated and utilized.
Regulations program.—Fifty-three Treasury decisions, 9 Executive
orders, and 44 notices of proposed rulemaking, relating to matters
other than alcohol and tobacco taxes, were published in the Federal
Register. Twenty-one public hearings on the provisions of the
proposed regulations, which were published this year, were held in
accordance with the provisions of the Administrative Procedures Act.
Approximately 1,900 taxpayers or their representatives participated.
In the alcohol and tobacco tax area, certam regulations relating
to fruit-flavor concentrates were simplified and reissued. Other
regulations relating to tobacco products were rewritten for clarification and reissued.
Receipt and processing of returns

Number oj returns jiled.—The Service received 97.8 million tax
returns of all classes in the fiscal year 1963, an increase of 1.3 million,
or 1.4 percent, over those received in 1962. Individual income tax
returns increased 1.1 million. Declarations of estimated individual
income tax again, as in 1962, decreased by about 0.1 million. Employment tax returns increased 0.2 million. Nearly half of this increase
was in employers' returns for household employees. Information
returns decreased from 340 million in 1962 to 327 million. This four
percent decrease in total information returns reflects a decrease in
the number of forms 1099 received in the latter half of flscal 1963, due to
discontinuance of the requirement of flling such returns on a quarterly
basis. (Form 1099 is an information return reporting payments of
dividends, interest, and various other items.)
Service center junctions.—The Atlanta Regional Service Center
began handling individual income tax returns durhig flscal 1963.
That center and the three area service centers at Lawrence, Mass.,
Kansas City, Mo., and Ogden, Utah, processed 57.5 million individual
income tax returns in 1963. Of the returns processed, 49.2 million
were 1962 returns filed during the 1963 filing period and 8.3 million
were 1961 returns filed during the 1962 filing period, but processed
after June 30, 1962. The decrease of 3 mUlion returns, 5 percent,
from the precedhig fiscal year was due substantiaUy to the accelerated
returns processing program maintained in the latter half of fiscal 1962
by the area service centers.
In addition, 4.9 million declarations of estimated individual income
tax were processed. Accounts receivable were established for appropriate mdividual income and estimated tax returns. Area service
centers performed the mailing and delinquency check operations for
all employers' returns for the district offices which they service. The
Atlanta Regional Service Center performed all processing, accounting,

ADMINISTRATIVE REPORTS

135

mailing, and delinquency check operations for certain business returns
filed in that region over the full fiscal year.
The transfer of work from the area service centers to regicnal
service centers under the A D P program continued as the mailing and
delinquency check operations for employers' returns from the
Philadelphia region were shifted from the Northeast Service Center
to the new Philadelphia Regional Service Center. The processing
of individual income tax returns and declarations of estimated hicome
tax for the Atlanta region was transferred from the Midwest Service
Center to the Atlanta Regional Service Center during the second
half of fiscal 1963.
Automatic data processing.—Conversion to the automatic machines,
for processing tax returns, installed during fiscal 1962 on a carefully
phased basis with major attention being given to avoiding adverse
effects on employees to be redeployed, is proceeding on schedule.
After one year of experience in processing business returns under the
master file concept, the operations of the Atlanta center were expanded
in fiscal 1963 to process individual income tax returns. The PhiladelphiafRegional Service'_Center;^began processing business returns in
January 1963.
The system already has demonstrated its capabilities and worth by
protecting the revenue and insuring faher distribution of the tax
burden. This has been accomplished by detecting failures to file
required tax returns, detecting instances of multiple filing of overpayment returns by the same taxpayer, and mechanically applying
overpayments, otherwise refundable, against outstanding taxes due
from the claimants.
Enforcement activities

To strengthen the self-assessment system and to promote voluntary
compliance the Service expends a substantial amount of its resources
on enforcement activities. These activities consist of correcting errors
in tax liabUity on returns voluntarily filed, securing delinquent retm-ns,
collecting past due taxes, investigating cases in which there is evidence
or allegation of fraud, and enforcing the laws pertaining to alcohol and
tobacco products and firearms. The Service also administers a taxpayer appeals system, processes civil litigation cases and those involving criminal prosecution, and conducts the Federal-State cooperative
exchange program and the tax program abroad.
Examination oj returns.—During the 1963 fiscal year 3.8 mUlion
returns were examined, an increase of 11 percent over 1962. The
expanded use of correspondence audit techniques was a major factor
responsible for this increase.
In thousands of returns

Type of return

Income tax:
Corporation
Individual and
Total inconie tax
Estate and gift taxes
Excise and employment taxes
Grand total

fiduciary

«• 129
3,120
3,249
30
195
^ 3,475

' Revised to include all examined exempt organization returns on basis consistent with 1963 data.
707-484—64
11

148
3,495
3,644
30
175
3,849

136

19 63 REPORT OF THE SECRETARY OF THE TREASURY

The 3.8 mUlion examinations resulted in over $2.1 bUlion of recommended additional tax and penalties, an increase of $275.8 million over
last year. This is the first year that recommended tax deficiencies
have exceeded $2 billion.
Mathematical verijication.—Approximately 57.5 million individual
income tax returns were mathematically verified dming the fiscal year
1963, a decrease of 1.3 million, or 2.2 percent, from the preceding year.
The number of error cases disclosed by this process was 2.4 million,
about the same as in 1962. The number with tax increases rose 1.6
percent, whUe the number of retm'ns with tax decreases dropped 5.6
percent. The average tax increase was $95 and the average decrease
$79. The aggregate tax increase was $148.1 mUlion, compared with
$140.3 "^ million in 1962, while tax decreases totaled $69.4 mUlion,
compared with $69.0 mUUon in the fiscal 1962.
The rise in the amount of tax increases is attributed in part to the
more comprehensive mathematical verification of individual returns
processed for the first time by the A D P system in the Atlanta region
during the latter half of fiscal 1963.
Delinquency investigations and delinquent returns secured.—^During
the fiscal year 1963 the Service secured 981,000 delinquent returns
reflecting $186.6 mUlion.of previously unreported tax. This was an
increase of 46,000 delinquent returns and $22.1 million over last. year.
Over 1.7 miUion delinquency investigations were conducted, an increase of 17.1 percent over the record number of 1.5 million in 1962.
The Service made a special effort this year to achieve optimum
enforcement of the highway use tax through the examination of both
internal and external source records. A record number of 140,000
delinquent highway use tax returns representing $21.2 miUion were
secm-ed.
In addition, in examining tax returns, district audit divisions secured
61,000 delinquent returns compared with 73,000 in 1962. Tax and
penalties on these returns amounted to $48.7 mUlion, an increase of
24 percent.
Summary oj additional tax jrom direct enjorcement.—Additional tax,
penalties, and interest assessed in 1963 as a result of dhect enforcement
activities totaled $2.2 billion, a new record. The following table gives
detailed amounts of additional tax from direct enforcement during the
last two fiscal years.

Sources

In thousands of doUars
1962

Additional tax, interest, and penalties resulting from examination
_.
Increase in individual income tax resulting from mathematical verification..
Tax, interest, and penalties on delinquent returns.. _
. . .
Total additional tax, interest, and penalties
.
Claims disallowed.
_
__
.
.__
' Revised.
n.a. Not available on a comparable basis.

r Revised.

r 1,627.604
»140,294
203.679
' 1,971,577
n.a.

1963
1,869,975
148,113
235.267
2, 243,356
1,080,794

ADMINISTRATIVE REPORTS

137

Tax jraud investigations, indictments, and con notions.—The Service
placed special emphasis during fiscal 1963 on investigating tax law
violations involving pohtical corruption and organized crime. The
drive against organized crime was, as last yea:-, closely coordinated
m t h the Department of Justice.
Prehminary investigations totaled 10,873, compared with 10,229 in
1962; full-scale investigations totaled 3,648, compared with 3,469
last year. Prosecution was recommended in 2,2*)8 cases, 80 more than
in 1962. Indictments were returned against 1,856 defendants in
1963, an increase of 154 over the 1,702 indictments returned in 1962.
In cases reaching the courts, 1,117 pleaded gui.ty or nolo contendere,
176 were convicted, 73 acquitted, and 230 cases were dismissed.
These compare with 1,013 pleas of guilty or no(0 contendere, 178 convictions, 65 acquittals, and 181 dismissals in tho preceding year.
Special agents of the Service continued to conduct nationwide
coordinated raids, as well as independent raids, against violators of
the wagering tax laws, making raids at 696 loc itions throughout the.
country. As a result, 939 persons were arref.ted and $377,000 in
currency and 188 automobiles were seized. A nationwide raid was
also made against violators of the coin-operated j;aming device tax law.
The number of convictions in the past ten i iscal years (excluding
those for alcohol, tobacco, and firearms tax violators) is shown in the
following table.
Number of
individuals
convicted

Fiscal year

1954
1955
1956
1967
1958
1969
1960
1961
1962
1963

_
.

. .

1,291
1,339
1,572
1,256
1,096
909
1,086
1,231
1,191
1,293

Alcohol and tobacco tax administration.—Intensive concentration on
the perfection of criminal cases under the mr^jor violator program
against the principals responsible for large-scale illicit distilling activities resulted in effective prosecution and trial action in most areas.
During the year, 591, or approximately 37 percent, of the 1,573 listed
major violators were arrested or indicted. The mandatory preventive
raw materials program continues to be an important adjunct to the
law enforcement effort. Through this program the Service prevents
to a considerable extent iUicit distiUers from obtaining sugar, yeast,
and containers essential to the production and packaging of nontaxpaid spirits.
Fourteen southern States accounted for 92.6 percent of the stills
and 95.3 percent of the mash seized in 1963. Seizures in aU categories
declined, with the exception of nontaxpaid wines. The volume of
mash seized in the country as a whole, a significant index of the trend
of illicit production, decreased 9.7 percent, as shown in the following
table.

138

1963 REPORT OF THE SECRETARY OF THE TREASURY
Fiscal year

1940
1946
1950
1955...
1956
1957
1958
1969.-_
1960
1961
1962
1963.

Number of
stills seized

..
_.

._
.

10,663
8,344
10,030
12,509
, 14,499
11,820
9,272
9,225
8,290
6,826
6,886
6,213

Gallons of
Number of
mash seized arrests made i
6,480,200
2,945.000
4,892, 600
7,375.300
8, 643. 200
6, 756. 600
6.140, 800
4.656, 600
4, 274.400
3,669, 500
3.424, 600
3,092, 600

26,638
11,104
10.236
10. 545
11,380
11,513
11,631
10.912
10,376
9.503
9,126
8,507

1 Includes arrest for firearms violations and, begirming 1955, tobacco tax violations. Arrest involving
these two classes of violations during 1963 numbered 358 and 2, respectively.

PUot operations initiated late in fiscal 1962 and completed this
year demonstrated the feasibility of further improvements in the
methods used by the Government to supervise distilled sphits plants.
Using the new procedures as guidelines, a nationvnde survey was
made of inspector (on-premises) manpower requirements. Study of
the results indicates, in certain regions, tbe possibility of ehminating
a limited number of inspector (on-premises) positions as they become
vacant. During periods of peak activity, increased use would be
made of inspectors (general) for on-premises supervision. The policy
of not filling vacancies, except for emergency situations, resulted in
savings of approximately 59 ma.n-years in inspector positions.
This year quality inspections, utilizing additional audit techniques,
were emphasized. At the beginning of the year, regions were authorized to select premises to be inspected in accordance with indicated
needs, rather than by rigid schedule. As a result the scope and depth
of selected inspections increased materially. In tbe closing months
of tbe year, all regions concluded field tests of a proposed brewery
inspection handbook. Time devoted to these tests and increased
use of audit techniques in inspections contributed to a slight increase
in man-days per inspection and a corresponding decrease in number
of inspections completed, from 32,260 in 1962 to 28,966 this year.
Collection oj past-due accounts.—Nearly 2.9 million accounts became
past due in the fiscal year 1963, 9.7 percent less than in 1962. However, the amount of delinquent tax involved, $1,475 million, was $21.2
million more in 1962 principally relating to a few very large accounts.
Emphasis on reducing inventories was continued with particular
attention given to closing large accounts. At the end of June 968,000
past-due accounts were pending, a reduction of 8.4 percent from last
year. Delinquent taxes aggregated $1,041 million, only $4.8 mUlion
more than last year.
The decrease in new accounts is attributable in part to the effectiveness of the revised procedures initiated in fiscal 1962 for collecting
trust fund taxes. Under these procedures, employers and excise
taxpayers are communicated with quickly whenever they fail to pay
the tax due on returns filed or fail to purchase depositary receipts
evidencing timely payment of employment or excise taxes. Additional
taxpayers were brought under the revised procedures|this year and a
larger number of accounts were closed while in notice status (before
past-due accounts were established).

ADMINISTRATFVE REPORTS

139

Appeals and civil litigation.—District audit divisions upon request
from taxpayers referred 17,774 prestatutory notice income, estate,
and gift tax cases to regional appellate divisions. This was an increase
of 2,261 cases, or 14.6 percent, over the 15,513 referred to appellate
divisions last year. The appellate divisions disposed of 16,339 prestatutory notice and poststatutory notice cases in fiscal 1963, compared
with 14,921 in fiscal 1962. Inventory of both types of cases in appellate divisions on June 30, 1963, was 13,812, compared with 11,805 the
previous year. Petitions filed in the Tax Court of the United States
numbered 5,247, compared with 4,752 filed in 1962. The Supreme
Court decided 9 tax cases, wholly sustaining the Government's position in 8 of them and deciding the ninth case partly for and partly
against the Government. The circuit courts of appeals decided 349
tax cases (exclusive of bankruptcy, receivership, insolvency, compromise, and liquor cases). The Government's position was supported
in 229 of these cases.
Taxpayers who have paid a disputed tax may sue for refund in the
Court of Claims or in a U.S. district court. This year the district
courts decided 166 cases for the Government, 200 for the taxpayer,
and 56 partly for the Government and partly for the taxpayer. The
Court of Claims decided 34 cases for the Government, 12 for the
taxpayer, and 18 partly for each.
International activities

The overseas affairs of the Internal Revenue Service fall into three
broad areas: Technical assistance to developing countries in the
strengthening and modernization of theh tax systems; participation
in the negotiation of tax conventions with foreign governments and
the preparation of regulations under these pacts; and the administration of Federal tax laws affecting mainly U.S. citizens and business
organizations abroad.
Foreign Tax Assistance Staffi.—Following the pledge of the Secretary
of the Treasury at Punta del Este in 1961, the Internal Revenue
Service organized a program to extend technical assistance for tax administration modernization to developing foreign countries. Responsibility for the program is vested in the Foreign Tax Assistance Staff
in the Office of the Commissioner of Internal Revenue. The Staff's
activities are conducted in close collaboration with the Agency for
International Development of the U.S. Department of State. The
Service's immediate efforts are oriented mainly to Latin America
under the Alliance for Progress, although several countries in other
parts of the world have requested and are receiving assistance.
One major phase of the overall program deals with the selection of
teams of tax specialists, not only from within the Service but also
from selected State and local governments, for overseas assignment
at the invitation of foreign countries. The activities of these teams
range from broad sm^veys of existing tax administrations and recommendations for improvement to long-term programs for assisting tax
officials of foreign governments in devising and installing tax administration modernization. The second eft'ort involves arrangements for
foreign tax officials to observe and study in the United States the
organization and operation of the Service. During 1963 the Service
received over 200 foreign visitors from more than 35 countries.

140

19 63 REPORT OF THE SECRETARY OF THE TREASURY

Tax conventions.—Discussions took place abroad with four countries
working toward the conclusion of one new income tax convention and
three conventions supplementing those already in existence. The
texts of such agreements were in various stages of development at the
close of the flscal year.
A supplementary protocol to the Japanese income tax convention
was signed on August 14, 1962, and an income tax convention with
Luxembourg on December 18, 1962.
The proposed income tax conventions with India, Israel, the United
Arab Republic, and Luxembourg, as well as the proposed supplementary protocols modifying the convention with Japan, were pending
ratiflcation in the U.S. Senate on June 30, 1963.
International operations.—The Office of International Operations is
responsible for administering the internal revenue laws outside the
United States and U.S. tax treaties with foreign countries.
In addition to the operation of foreign posts at Paris, France,
London, England, Ottawa, Canada, Mexico City, Mexico, Sao Paulo,
BrazU, and Manila, Philippine Republic, the Service conducted a
taxpayer assistance and educational program to promote greater
voluntary compliance by aliens subject to tax in the United States
and by U.S. citizens abroad. Under this program, 13,134 persons
were assisted and 3,583 returns were actually prepared reporting a
total tax of $915,284. Revenue agents traveled in excess of 110,000
miles, visiting 98 cities in 51 foreign countiies. Agents also conducted
11 schools for military tax instructors who assisted armed forces
personnel stationed overseas.
Planning activities

Planning is an integral part of tax administration and is accomplished at every organizational level of the Service. The long-range
plan is the vehicle that translates all planning into a comprehensive
system thereby producing a synthesis of program requhements,
operational capabUities, and resources under different time frames
which provide top management with a framework of carefully developed priorities for decision making.
The purpose of a tax system is to guarantee the longrun flscal
soundness of the policies and programs of government. The purpose
of tax administration is to implement the tax system fully. For the
long run, this means collecting all of the legislated taxes at least cost.
In the short run, it means maximizing the revenue coUectible with the
resources the Government makes avaUable to the administrator.
Attainment of these objectives requhes the development of an overall
plan which includes both the strategy of long-range planning and
tactical current-year operational plans or programs that are consistent
with the long-range plan.
Long-range planning.—The long-range plan is a coordinated action
program designed by all components of the Service to eliminate operating deficiencies and anticipate and prepare for the future needs of an
adequate tax administration system. I t constitutes the Service's
basic planning document and provides the foundation for the development of the Service's work plans and budget requests.
The Service's long-range plan was initiated in 1959 and is updated
each year. The 1963 edition, developed by the national office in

ADMINISTRATIVE REPORTS

141

conjunction with regional and district officials, covers the 10-year
period from 1961-70. I t includes objectives for all of the operational
aspects of the Revenue Service, together with estimates of the manpower requirements and costs to reach desired objectives. It also
includes estimated tax yields resulting from increased enforcement
effort.
In order to develop the plan most effectively, more detailed information must be obtained in a number of problem areas where information is inadequate. These areas involve: The size and natm^e of the
total tax administration workload; the portion of the total tax administration job that is accounted for by current operations; the portion of the total tax administration job that is left undone, or the gross
tax administration gap; the degree of taxpayer compliance; changes
in the degree of taxpayer comphance, and whether compliance is
increasing or decreasing under existing programs; the effectiveness
with which current operations are being conducted; and the net
tax administration gap, or that portion of the gross tax administration
gap that is worth closing.
To obtain data relating to these areas, the Service has developed a
taxpayer compliance measurement program (TCMP), which will
provide new information in at least three areas: Delinquent accounts;
delinquent returns; and correctness of returns filed. The informational
aspects of T C M P include bringing together and coordinating all information requhed to measure the dimensions of Federal tax administration workloads, theh trends and projections; the related requirements,
such as manpower, training, equipment, and buildings; and the basic
economics involved, such as costs, dhect and indirect tax yields, and
improvements in existing cost-yield ratios. T C M P is the Service's
long-range research program designed to provide the information
needed to implement the Service's long-range plan and maximize
Federal tax administration.
Resources utilization.—On December 17, 1962, the Committee on
Resources UtUization submitted its report to the Commissioner. The
report contained recommendations relating to the organization and
procedures of both national and field offices. By the end of the fiscal
year action had been taken on those recommendations which concerned the organization of the field offices (see Realignment oj field
offices under Major management improvements).
The Service is currently making plans to establish a permanent
resources utilization program with coordination responsibUity centralized in the office of the Deputy Commissioner. Under this program,
selected divisions of the national office would undertake regular programs of research and analysis to assist the Commissioner in evaluating
the activities and costs of the Service, and in allocating resomces
among them. Also, manpower utUization would receive increased
emphasis in the national office review program, and the several
management development programs.
Systems review and coordination.—Continuing attention was given
to the modernization of tax administration through the planning and
design of total systems for implementing legislation and for improving
current or proposed programs. Systems development projects during
fiscal 1963 included: The introduction of advanced equipment; new
uses in tax administration for it; systems studies not involving such

142

1963 REPORT OF THE SECRETARY OF THE TREASURY

equipment; public compliance aspects of tax administration systems;
and advisory and educational activities.
Current research program.—Research activities were both accelerated
and broadened in order to meet expanding demands. The needs for
analysis of administrative facets of cmrent legislative proposals
continued to absorb a major portion of research resources. Increasing
consideration was given to internal management and operating problems, which stemmed from two sources: the planning necessary for
following up various aspects of the 1962 tax legislation, and the
problems encountered in the wake of expanded application of the automatic data processing system.
Numerous studies of the administrative impact of 1963 proposals for
new tax legislation included such matters as changes in the treatment
of deductions, optional tax tables, withholding methods, and averaging
of fluctuating incomes.
Expanded information reporting for interest, dividends, and
patronage dividends, requhed by the Revenue Act of 1962, focused
attention on the need for new, integrated techniques for achieving
more effective utilization of all information documents. An experimental program has been developed to provide streamlined techniques
to resolve apparent discrepancies resulting from mass computer
comparisons of information documents and tax return data and to
fmmish a comprehensive system of compliance followup. Additionally, plans are being developed for utilizing information returns
from domestic owners of five percent or more of stock of foreign
corporations.
Major management improvements

Benefits jrom management improvements.—Increased stimulation and
leadership in management improvement efforts resulted in an alltime
record of over $11.6 mUlion in annual recurring savings in 1963.
Many additional management improvement actions not readUy
adaptable to measurement in monetary savings released substantial
manpower and other resources for use in more critical areas. All
savings, both tangible and intangible, resulting from management
improvement projects are channeled into work areas where the
application of additional manpower serves to strengthen the enforcement effort, reduce bacldogs, and improve taxpayer service. These
savings reflect a cooperative effort spearheaded by top management
officials actively supporting the objectives of the management improvement program.
Realignment oj field offices.—The Secretary of the Treasury gave
final approval on May 17, 1963, to the following field office realignment
plan, effective January 1, 1964:
(1) Reduction m the number of regions from 9 to 8. This was
accomplished by combining the Chicago and Omaha regions and
redistributing certain districts to the Dallas, Cincinnati, and Philadelphia regions.
(2)|Reduction in the number of districts from 62 to 58. This
was accomplished by merging the Camden District into the Newark
District, the Syracuse District into the Buffalo District,Hhe Kansas
City District into the St. Louis District, and by dividing the Scranton
District between the Philadelphia and Pittsburgh districts.

ADMINISTRATIVE REPORTS

143

When completed, the realignment is expected to yield recurring
annual savings of approximately $3.5 million with no decrease in
taxpayer services or overall effectiveness.
A program was initiated to reduce supervisory and administrative
costs in the districts, particularly in the smaller ones, to minimum
operating requhements.
Other management improvement actions.—Other significant accomplishments, resulting in tangible savings, were initiated in 1963.
For example, training programs were streamlined to the extent that
$1.9 mUlion wUl be diverted to productive enforcement activities
each year. A continuing review of reporting requhements to insure
quality reports at the least possible cost resulted in redhecting
manpower worth $1.4 mUlion.
The Service seeks to keep its managers informed of new and improved methods by participation hi management courses, seminars,
and institutes. In 1963 approximately 125 officials attended such
outside training sessions. Li addition, the administrative intern
program, designed to recruit and train promising participants for
highly responsible positions, stresses the importance of management
improvement in formal courses and on-the-job training.
Personnel

The personnel administration program was emphasized by
improving manpower utilization and maintaining high employee
morale. Significant changes and innovations were made in the
incentives awards program, and continued progress was made in
ADP redeployment, the equal employment opportunity program, and
employee-management relations.
At the close of the fiscal year 1963 employees on the rolls numbered
59,486, compared with 56,510 a year earlier. There were 3,561
employees in the national office and 55,925 employees in field offices
including service centers, regional, district, and local offices, and in
the Office of International Operations.
Training

Legislation enacted on October 23, 1962 (26 U.S.C. 7516) provides
that representatives of local, State, and foreign governments may
participate in Internal Revenue Service training courses. With the
assistance of the National Association of Tax Administrators explorations were begun to determine to what extent and on what basis the
Service can assist State governments in meeting theh tax enforcement
training needs.
A program of tax administration orientation for foreign tax officials
was launched to make official visits of foreign tax officials more
meaningful and helpful. The program developed by the Foreign
Tax Assistance Staff and the Training Division includes presentations
by the Commissioner and other top officials. Approximately 50
foreign tax officials from 25 nations participated during the year.
During fiscal 1963 funds were set aside for the first regional experimental training center in San Francisco. This installation will be
established in 1964. Establishment of a national experimental
training center awaits only the avaUabUity and selection of an
appropriate site.

144

19 63 REPORT OF THE SECRETARY OF THE TREASURY

The Commissioner's Committee, set up in 1962 to survey training
needs in the collection enforcement area, submitted a report proposmg
a comprehensive career trammg plan. Action was immediately
begmi to implement the Committee's recommendations.
In June 1963 a committee of four distinguished training consultants,
appointed by the Secretary of the Treasury to review the total training
effort of the Service, submitted its report. It described the program
as a whole as ^Very commendable" and made a number of recommendations for further improvements.
Space

Most regional and district offices are now in, or have firm commitments for, good space. Many of those offices having firm commitments for new space wUl move during the fiscal year 1964; others
are awaiting the completion of new Federal office buildings ahd wUl
move during the next two or three years. Additional space was
obtamed for 209 offices to relieve crowded conditions and accommodate
staff expansion. The following offices were moved mto new or
modernized buUdings: Bhmingham, Toledo, Burlington, Hartford,
Parkersburg, Philadelphia, and JacksonvUle. Construction was begun
on a 21-story, 374,000 square foot leased building to house approximately 3,000 employees in the Manhattan District. Progress is
also being made toward correcting acute space problems of the offices
in Chicago, WUmington, Miami, Brooldyn, Cincinnati, Denver, San
Francisco, Seattle, Dallas, Hollywood, and Aberdeen. This is
particularly significant in that m mid-1961 comparatively few Service
offices were properly housed.
Inspection activities

Internal audit.—An annual independent review and appraisal of
Service operations as a protective and constructive service to the
Commissioner and all other levels of management is carried out
through the internal audit program. All field organizations and
activities are covered by internal audit to determine whether policies,
practices, procedures, and controls adequately protect the revenue
and are being efficiently and effectively carried out. Expansion of
the automatic data processing activity has increased the internal
audit responsibilities of the inspection function. Emphasis in the
Internal Audit Division is placed on examination of the Service
functions which are most closely connected with collection of the
revenues and enforcement of tax laws, and on coordination with the
Internal Secuiity Division to carry out the integrity program of the
Service.
This year 355 internal audit reports were issued compared with
303 in 1962. The increase was caused primarily by the separate
reporting on audits of the organized crime drive functions of the
intelligence activities.
Internal security.—Successful administration of the voluntary selfassessment system of taxation depends a great deal on integrity of
taxpayers and their representatives as weUas integrity and impartiality among officials and employees of the Service. The Service
continued the vigorous efforts started in 1962 to promote understanding among its employees, taxpayers, and practitioners regarding

ADMINISTRATIVE REPORTS

145

the importance of integrity and the need to expose corruption
wherever discovered.
Forty-six cases of actual or suspected bribery by taxpayers or their
representatives were reported by Service employees to Inspection.
Investigations resulted in indictments of 10 taxpayers or theh representatives, and additional prosecutions are contemplated in a number
of pending cases. This makes a total of 20 persons indicted for
attempting to bribe Internal Revenue employees during the past
two years. To date 15 have been convicted.
Investigations completed during the year totaled 10,011 which was
11.8 percent more than in the preceding fiscal year. This is the
highest number completed in the 11-year history of Inspection. In
addition, police checks were made on 3,413 employees given short-term
temporary appointments.
Enrollment of practitioners

The Office of the Director of Practice continued its program of
revitalization, which resulted in various changes in regulations
governing practice, a modification of the special enrollment program,
and increased vigUance with respect to the ethics of all types of
practitioners.
In order to conform the eligibility requirements for practice more
closely with the various State rules governing qualification for practice
of law aiid accounting, certahi sections of Treasury Department
Chcular 230 were amended.
The annual cost to the Treasury Department of enrolling persons
to practice before the Internal Revenue Service by means of a Special
Enrollment Examination has been more than double the receipts
obtained from exammation candidates in recent years. Since Congress
has decreed that such programs, insofar as possible, shall be selfsustaining and that fees charged shall be equitable in relation to the
costs involved, it was determined that candidates wUl be charged an
examination fee of $25.
A normal decrease occurred in the number of enrollment cards
renewed in 1963, compared with 1962, which was the second peak
year of the cycle established in 1952 for periodic renewal of enrolbient
cards at five-year intervals. Of those who enrolled or who renewed
their cards in 1958, about 3,200 did not renew in 1963. Initial
applications for enrollment approved this year totaled 6,782, approximately 1,000 more than the year before. On June 30, 1963,
approximately 73,500 persons were enrolled to practice before the
Service.
Office of International Aflfairs
Treasury Department Order No. 198, effective October 15, 1962,
established the Office of International Affahs in the Treasur}^ Department as a separate administrative unit mthin the Office of the
Secretary, succeeding the Office of International Finance. The
Office of International Affahs includes six major constituent units:
The Office of Balance of Payments, the Office of Intemational Financial Policy Coordination, the Office of International Economic Ac-

146

1963 REPORT OF THE SECRETARY OF THE TREASURY

tivities, the Office of Industrial Nations, the Office of Developing
Nations, and the Office of Latin America. (See exhibit 41.)
The Office of International Affairs advises and assists the Secretary of the Treasury and other senior departmental officials in the
formulation and execution of policies and programs relating to the
responsibUities of the Treasury Department in the international
economic, financial, and monetary fields.
By direction of the Secretary, the responsibUities of the Office of
International Aft'airs include the Treasury's activities in relation to
international financial and monetary problems, covering such matters
as the U.S. balance of payments, the convertibility of currencies,
exchange rates and restrictions, the operation of the U.S. Exchange
Stabilization Fund and the extension of stabilization credits; international aspects of 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 International Development
Association, and the In ter-American Development Bank; foreign lending and assistance; the Organization for Economic Cooperation and
Development and its committees, and the North Atlantic Treaty
Organization.
The responsibUities of the Office of International Affairs 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 by 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
International Development Association, and the Inter-American
Development Bank also provide for the coordination by the National
Advisory Council of the policies and operations 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 takes part in negotiations with
foreign governments with regard to matters included within its responsibilities. I t assists the Secretary on the financial aspects of international trade matters.
The Office of International Affairs 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

ADMINISTRATH^E REPORTS

147

studies the financial policies of foreign countries, their exchange rates,
balances of payments, capital flows, and other related problems. I t
assists the Secretary, in his capacity as Chairman of the Cabinet
Committee on the Balance of Payments, in review for the President
of the entire range of administration programs and policies for achieving a lasting equUibrium in the U.S. balance of payments and for
assuring a strong international payments system, and prepares reports
to the President on the balance-of-payments situation and on administration measures in this area.
The Office administers the Treasury foreign exchange reporting
system. The reporting system collects through the Federal Reserve
Banks statistical data on capital movements between the United
States and foreign countries.
Bureau of the Mint ^
The major functions of the Bureau of the Mint are the manufacture,
distribution, and redemption of domestic coins; the receipt, processing,
custody, disbursement, and movement of gold and silver buUion;
the manufacture of medals of a national character and special medals
for other U.S. Government agencies; the manufacture of foreign coins;
and other technical services.
The Director of the Mint, with offices in Washington, D . C , administers and supervises all activities of the Bureau. In fiscal 1963 six
field institutions were in operation: The Philadelphia and Denver
mints; the New York City and San Francisco assay offices; the silver
bulhon depository in West Point, N.Y., which is an adjunct of the
New York Assay Office; and the gold buUion depository in Fort
Knox, Ky. Legislation approved July 11, 1962 (31 U.S.C. 261)
authorized that the official designation of the San Francisco institution be changed to the United States assay office at San Francisco.
Electrolytic refineries for refining precious metals are located in the
Denver Mint and the New York Assay Office, and Denver performs
assays for the public. The engraving, the proof coin, and medal
production divisions are in Philadelphia. Uncirculated coin sets are
packaged in San Francisco.
Domestic coinage

The production of U.S. coins totaled 3.6 billion pieces with face
value of $161.7 million in the fiscal year 1963, exceeding last year's
alltime record. The Denver Mint operated three shifts per day and
the Philadelphia Mint, two shifts, with a partial third shift. At
times both plants operated six days a week. The finished coins were
shipped for chculation as soon as they were available and no inventory
was built up at either mint during the year.

» Additional information is contained in the separate Annual Report ofthe Director ofthe Mint.

148

19 63 REPORT OF THE SECRETARY OF THE TREASURY
Production of U.S. coins, fiscal 1963
Number

Denomination

Face
value

In millions
1-cent pieces
2.561.1
407.7
5-cent pieces
...
Dimes.
449.0
Quarter dollars
164.5
59.4
Half doUars
Total
.--- 1 3,641.6

Standard
gross
weight

Distribution
(based on
pieces)

Short tons

Percent

$25.6
20.4
44.9
41.1
29.7

8,780
2,247
1,238
1,133
818

70
11
12
6
2

161.7

14,216

100

Metallic composition

95% copper, 5% zinc and tin.2
76% copper, 25% nickel.
900 pai'ts silver, 100 parts copper.
Do.
Do.

1 Includes 3,009,583 sets of proof coins manufactm'ed at Philadelphia.
2 Tin was eliminated from the bronze alloy after September 5; 1962 (31 U.S.C. 317).

Foreign coinage

The Philadelphia Mint manufactured coins for three foreign
governments during fiscal 1963, as shown in the following table.
Foreign coinage by the Philadelphia Mint, fiscal 1963
Government

Denomination

Number of
coins produced (in
millions)

Metallic composition

El Salvador

5 centavos

75% copper, 25% nickel (cupronickel).

Ethiopia

10 cents
5 cents

20
6

95% copper, 5% zinc (bronze).
Do.

Total
Philippines

25
10 centavos
1 centavo

100
160

Total

260

Grand total

295

70% copper, 18% zinc, 12% nickel (German sUver).
95% copper, 5% zinc (bronze).

Issue and stock of coins

The mints issue coins for general circulation through the facilities
of the 12 Federal Reserve Banks and their 24 branches and the
Office of the Treasurer of the United States in Washington, D.C.
These 37 facilities deliver the coins to the commercial banks which
place them in actual circulation. Proof coins and uncirculated coins
are packaged in sets and sold directly to the public by the mint
offices. All of the subsidiary silver and minor coins produced in
fiscal 1963 were issued during the year, as were 46.8 million standard
silver dollars from earlier min tings.

ADMINISTRATIVE

149

REPORTS

Issue of U . S . coins i

Denomination

Number

Face value

I n millions
1-cent pieces
5-cent pieces
Dimes
Q u a r t e r dollars
Plalf d o l l a r s . .
Silver dollars

.
_
.. ...

Total

standard
gross weight

Distribution
(based on
pieces)

Short tons

Percent

2, 561.1
407.7
449.0
164.5
59.4
46.8

$25.6
20.4
44.9
41.1
29.7
46.8

8,780
2,247
1,237
1,133
818
1,379

69
11
12
5
2
1

3,688.4

208.5

15, 594

100

J Includes the sales of 3,009,782 sets of proof coins. A set consists of one coin of each denomination currently minted (10, 50, 100, 250, and 500). Includes also the sales of uncirculated coin sets. A set consists
of one coin of each denomination currently minted at each mint.

The total stock of domestic coins in the United States, estimated by
the Office of the Director of the Mint, is divided into three groups:
Minor coins (1 and 5 cent pieces); subsidiary silver (dimes, quarter
dollars, and half dollars); and standard silver dollars. A comparison
of the stock at the close of the fiscal years 1962 and 1963 and the net
change during the 12-month period is summarized as follows:

Face value (in millions)
s t o c k o f U . S . corns
J u n e 30,1962 J u n e 30, 1963

M i n o r coins
Subsidiary silver coins
Silver dollars . . .
Total

. ...
_.

Increase, or
decrease ( - )

$636.0
1,710.8
487.4

$681.8
1,824.9
486.0

$45.8
114.1
-1.3

2,834.1

2, 992.7

158.6

Gold transactions

The monetary stocks of gold bullion held for the Treasury in the
Philadelphia and Denver mints, the New York and San Francisco
assay offices, and the Fort Knox Depository showed a net decrease
of 22.9 million ounces, valued at $801.8 million, between June 30,1962,
and June 30, 1963. Opening and closing holdings and the receipts
and issues during the year are shown in the following table.

150

19 63 REPORT OF THE SECRETARY OF THE TREASURY

Quantity
Value at $35
per ounce
Gold holdings a n d transactions (excluduag i n t e r m i n t transfers 0

F i n e ounces
Short tons
I n millions

H o l d i n g s on J u n e 30,1962

. .

Receipts in fiscal year 1963:
N e w l y m i n e d domestic gold.
Scrap gold from domestic sources
Foreign a n d other miscellaneous deposits

...

Totalreceipts
Issues in fiscal y e a r 1963:
Sales for domestic industrial, professional, a n d artistic u s e .
E x c h a n g e s for scrap gold
_
Exchanges for other t h a n scrap gold
Other m o n e t a r y i s s u e s . . . . .
... ...
..
Total issues..
H o l d i n g s on J u n e 30,1963
N e t decrease in holdings

. . .
_.

15,869

462.5

$16,189.2

27
14
166

.8
.4
4.8

27.7
14.0
169.0

206

6.0

210.7

99
2
36
865

2.9
.1
1.0
24.9

100.9
2.2
36.4
873.0

992

28.9

1,012. 5

16, 073

439.6

16.387.4

786

22.9

801.8

1 Intermint transfers amounted to 23.1 million ounces (792 tons) valued at $808.8 million duringfiscal1963.

Silver transactions

The mints and assay offices received a total of 4,799.9 thousand
fine ounces of sUver bullion from various sources during the fiscal year
1963. Of this amount, 911.4 thousand ounces were returns of lendlease silver by the Government of Pakistan and 13.4 thousand ounces
by the Government of India. Uncurrent U.S. silver subsidiary coins
melted for recoinage provided 890.8 thousand fine ounces of silver and
uncurrent U.S. silver dollars, 592.6 thousand fine ounces. Newly
mined domestic silver received under the act of July 31, 1946 (31
U.S.C. 316d) amounted to 18.3 thousand ounces. Deposits in exchange for bars and other miscellaneous items totaled 2,373.4 thousand
ounces.
The PhUadelphia and Denver mints processed a total of 83,623.7
thousand fine ounces of sUver into U.S. half dollars, quarter dollars,
and dimes during the fiscal year. Of this amount, 82,049.7 thousand
ounces of bullion was made available by the retirement of five and ten
dollar silver certificates under the Presidential directive of November
28, 1961, and implementing legislation enacted on June 4, 1963 (77
Stat. 54). See exhibit 39. Recoinage sUver yielded by the melting
of uncurrent U.S. coins provided the remainder of coinage silver with
890.8 thousand ounces from subsidiary silver coins and 683.2 thousand
from sUver dollars. Sales for industrial use at $1.29+ per ounce
amounted to 2,098.2 thousand ounces and other miscellaneous issues
amounted to*j2,267.6 thousand ounces. Stocks of silver held in the
mints, assay offices, and the West Point Depository reflected a net
decrease of 83,189.5 thousand ounces from June 30, 1962, to June 30,
1963, accounted for as follows.

151

ADMINISTRATIVE REPORTS

Quantity 1
Silver bullion holduigs and transactions (excludmg intermint transfers)

Fine ounces
(in millions)

Short tons

Holdings on June 30,1962

1,660.0

56,915.7

Receipts in fiscal year 1963:
Lend-lease silver from foreign governments
Newly mined domestic, act of July 31, 1946 (31 U.S.C. 316d) 2
Recoinage bullion from uncurrent U.S. silver coins.
Deposits in exchange for fine bars
Other miscellaneous receipts

(*)

.9
1.5
2.1
.3

31.7
.6
50.9
72.3
9.1

4.8

164.6

83.6
2.1
2.3

2,867.1
71.9
77.8

...

Totalreceipts
Issues in fiscal year 1963:
Manufactured into U.S. subsidiary silver coins
Sales for domestic industrial use at $1.29-|Other miscellaneous issues

Total issues

...

Holdings on June 30,1963

88.0

3.016.8

1, 676. 8

54,063.5

*Less than 50,000 ounces.
1 Does not include 64.7 million flne ounces (2,220 tons) of Treasury silver held by other agencies of the U.S,
Government.
2 Legislation repealed by the act of June 4,1963 (77 Stat. 54).

Revenue and monetary assets and liabilities

Revenue deposited by the Bureau of the Mint into the general fund
of the Treasury totaled $47,707.5 thousand in the fiscal year 1963,
with seigniorage accounting for $44,896.0 thousand and various other
items the remaining $2,811.5 thousand. Seigniorage on 2,968,798.7
thousand minor coins manufactured amounted to $38,050.3 thousand
and on 672,823.1 thousand silver subsidiary coins manufactured,
$6,839.1 thousand. Seigniorage amounting to $6.7 thousand resulted
from the revaluation of 17,188 fine ounces of newly mined domestic
silver bullion from cost to monetary value as security for silver certificates.
Monetary assets and liabilities of the mint institutions on June 30,
1962, and June 30, 1963, are compared in the following statement.
In millions

Item

June 30, 1962 June 30,1963

Gold bullion .
Silver bullion
.
Silvercoin...
Minorcoin... . . . . . . . . . . . . . .
Minor coinage nietal, etc

Assets
_

Total assets
Liabilities

Bullion fund
Minor coinage metal fund
Other miscellaneousTotal liabilities.

707-484—64-

-12

_
..

$16,189. 2
2,129. 5
66.8
.2
LO

$15,387.4
2,021. 5
20.4
.2
.9

18, 386. 7

17,430. 3

18,385. 6
.6
.5

17, 429. 4
.4
.6

18,386.7

17,430.3

152

19 63 REPORT OF THE SECRETARY OF THE TREASURY

Managenient improvement

The management improvement program of the Bureau of the Mint
was greatly accelerated during fiscal 1963. As a result of the large
increase in coinage requirements during the past several years and
the consequent coin shortages despite recordbreaking production,
arrangements were made for an objective survey of mint facilities,
operations, and requhements, by a private management engineering
consulting firm. The survey, which extended to January 16, 1963,
was sponsored by the Bureau of the Budget, with funds provided by the
President's Management Improvement Fund. The final report was
made to the Bureau of the Budget on February 11, 1963. I t pointed
up, among other things, that present minting facilities are completely
inadequate to produce the quantity of coins that will be needed in
future years.
Coordinating the consulting firm's conclusions and recommendations
with the Mint's own longtime study and experience. Mint officials
took definite steps toward expansion of its facilities. Legislation
designated "An act to authorize the construction and equipping of
buildings required in connection with the operations of the Bureau of
the Mint," was approved by .the President August 20, 1963 (77 Stat.
129). I t is planned to erect a new coinage mint in Philadelphia to
replace the existing building there. One of the many factors governing this choice of location is the fact that about 70 percent of all coins
manufactured are delivered to the banks nearest to Philadelphia.
The new facilities contemplated will employ the most modern and
efficient types of equipment available, and further substantial reductions in unit manufacturing costs are expected.
During fiscal 1963 management officials of the Bureau in Washington
and the field continued intensive appraisal and review of day-to-day
activities. The Director and members of the staff made frequent
trips to the mints and assay offices to assist in expediting operations.
Two daily shifts of employees in the mints were increased to three,
and working days were extended from a five-day week to six and,
for some operations, to seven days. Accordingly, the two mints,
producing as many coins as possible with available manufacturing
facilities and funds, established new domestic coinage records for the
t h h d successive year. These results were accompanied by reduced
unit-manufacturing costs. The present cost of producing 1,000 coins
of each denomination is less than one-half what it was in fiscal 1946,
although annual wage increases have been granted to per diem
employees since 1946, and costs of supplies, utilities, personnel benefits,
etc. have increased proportionately. A special study of manpower
utilization confhmed the fact that the Mint has achieved highly
satisfactory results, but improvements are continuing. A great deal
of attention was given to long-range plans for coinage, gold and silver
deposits activity, and gold and silver refinery operations.
Improvements made at Philadelphia in 1963 resulting in annual
recurring savings included a new improved type mooter for the number
one roUing mill, resulting in reduceci maintenance costs and increased
production, savings $5,000; a new ingot brushing machine, savings
$500; an improved methoci of paying postage for the shipment of
proof coins, savings $2,000; and the elimination of advices of ship-

ADMINISTRATIVE REPORTS

153

ments of proof coins, with savings of $21,000. One-time savings of
$36,000 were made by obtaining 150,000 yards of cotton duck cloth
at one-half the usual price, and savings of approximately $60,000
from the purchase of other misceUaneous supplies and equipment.
Denver acquired surplus property with a value of $6,800, including a
fork lift, fixe extinguishers, desks, and miscellaneous items. At New
York, more efficient furnaces were installed in the melting and refining
division, and new ducts and flues were installed over the deposit
melting furnaces. Although monetary savings were negligible, a
serious safety hazard has been eliminated, and in the event of future
expansion in refinery operations monetary savings will result from
the installation of the new furnaces. Under the Bureau's records
management program, new plans for the orderly retirement of records
were developed and a reduction in the need for filing cabinets resulted
in one-time savings of $2,100. In summary, recurring annual savings
amounted to $28,500, of which $5,500 is applicable to appropriated
funds, with the other $23,000 applying to reimbursable operations.
In addition, one-time savings amounted to $38,100, applicable to
operations payable from appropriated funds. The savings relating
to appropriation items were applied to offset partially increased costs
of wages, supplies, and materials. The recurring savings in reimbursable operations increase profits derived from such operations, which
are deposited as miscellaneous receipts in the general fund of the
Treasury.
Gold and silver production and consumption in the United States

Statistics on U.S. gold and silver refinery production and industrial
consumption are compUed by the Office of the Dhector of the Mint
on a calendar year basis.
The refinery production of newly mined domestic gold totaled
1,556,000 fine ounces valued at $54,460,000 in 1962, compared with
1,566,800 fine ounces valued at $54,838,000 in 1961. Among the
16 States where gold was mined. South Dakota continued as the
major producing State, accounting for 36.6 percent of the total.
Utah ranked second, followed by Alaska, Arizona, and California,,
The refinery production of newly mined domestic sUver totaled
36,345,000 fine ounces in 23 States in 1962, compared with 34,900,000
fine ounces in 20 States in 1961. Idaho accounted for 46.8 percent
of the total output with Arizona, Utah, Montana, and Colorado
foUowing.
Gold and sUver issued for domestic industrial, professional, and
artistic use in 1962 amounted to 3,576,000 fine ounces and 110,400,000
fine ounces, respectively. Comparative issues in 1961 were 2,775,000
ounces of gold and 105,500,000 ounces of sUver.
Bureau of Narcotics ^
The Bureau of Narcotics administers the Federal laws governing
narcotic drugs and marihuana and carries out the responsibUities
of the Government under the international conventions and protocols
relating to these drugs.
1 Further inforniation is ava:ilable in the separate report of the Bureau of Narcotics entitled, Traffic in
Opium and Other Dangerous Drugs for the Year Ended December Sl, 1962.

154

1963 REPORT OF THE SECRETARY OF THE TREASURY

The Bureau supervises U.S. imports and exports of narcotic drugs
as well as the manufacture and domestic trade in these drugs to
prevent their diversion for abuse. I t apprehends interstate and international violators of narcotic laws. I t cooperates with State and
local law enforcement authorities in the United States. At the
request of law enforcement authorities in foreign countries Bureau
agents assist in international narcotic trafficking investigations of
mutual interest. These cooperative efforts have reduced the smuggling of Ulicit narcotics into this country.
Law enforcement

The major enforcement effort of the Bureau is directed against
the international and interstate traffic in narcotic drugs and marihuana and the members of organized crime who are engaged in this
traffic. Particularly significant was the August 1962 indictment
in New York of 19 high echelon violators whom Justice Department
officials credit with the introduction of heroin worth $100,000,000
into illicit channels in the United States during the years 1950-59.
At the same time the Bureau cooperated with State and local authorities in reducing: the retaU traffic at the addict level.
Number of violators of the narcotic and marihuana laws prosecuted during the fiscal
year 1963 with their dispositions and penalties ^
Marihuana laws

Narcotic laws
Registered persons
Federal
court
Convicted. __
Acquitted

state
court

Yrs. Mos.

$250

Fines imposed
Yrs. Mos.

Yrs. Mos.

$119,899

Yrs. Mos.
6

$21,671

Yrs. Mos. Yrs. Mos. Yrs. Mos.

$250

6
6

....--

$166
71

64
3

213

9 1,111

4,371

State
court

142
4

237
8

723
42

1,010

Sentences imposed _.

Nonregistered persons
Federal
court

state
court

3
Yrs. Mos.

Average fine per conviction:
196.3
1962

Federal
court
1

Total 1

Average sentence per conviction:
1963
1962

Nonregistered persons

i
3

$91
65

8
11

Yrs. Mos.
623

Yrs. Mos.
3

322

$717

$13,202

Yrs. Mos.

4
5

4
1

$5
42

6
3

$206
75

i Some cases tried m Federal courts and some cases tried in State courts are made by Federal and State
oflacers working in cooperation.

ADMINISTRATIVE REPORTS

155

The investigative jurisdiction of the Bureau, as expanded by
authorization of the Secretary of the Treasury in October 1962, resulted in the establishment of district offices in Bangkok, Thailand,
and Mexico City, Mexico. Under this expanded program Bureau
agents, working undercover, assisted police in Latin America, Europe,
the Middle East, and the Far East in the arrests of scores of traffickers
and the seizure of several tons of opium, as well as large quantities
of intermediate morphine base and heroin. Individual seizures of
opium in excess of one ton were made in Turkey and Thailand.
The realistic sentences meted out to narcotic violators as a result
of the Narcotic Control Act of 1956 (21 U.S.C. 174; 26 U.S.C. 7237)
remain one of the most effective weapons against the narcotic traffic.
During fiscal 1963 the Bureau seized a total of 44,298 grams of
narcotics, principally heroin, in the Ulicit traffic, as compared with
86,345 grams in 1962. Seizures of marihuana amounted to 580,898
grams bulk, as compared with 145,230 grams bulk in 1962.
The number of violators of the narcotic laws reported by Federal
narcotic enforcement officers is shown in the table above.
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 finished 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 United States and has authority to license the growing of
opium poppies to meet the medicinal needs of the country if and when
theh production might become necessar}^^ in the public interest.
Under the Narcotics Manufactming Act of 1960 (21 U.S.C. 501-517;
26 U.S.C. 4702, 4731) the Bmeau determines, in the interest of public
health and safety, what narcotic drugs shall be manufactm'ed and used
by establishing ''basic classes" for those which are authorized. I t
licenses the manufacture of such drugs and fixes annual manufactming
quotas for each producer, thus keeping total production within predetermined medical and scientific requhements. Under' that act the
Bureau, with the assistance of an advisory committee, also classifies
pharmaceutical preparations containing narcotic drugs accordirig to
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 theh derivatives are subjected to a system of quotas and
allocations designed to insure theh proper distribution for medical
needs. During the year 259,530 kilograms of raw opium were imported from Afghanistan, India, Tm^key, and Yugoslavia and 250,627
kilograms of coca leaves were imported from Bolivia and Peru to
meet medical requhements 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 quantity of narcotic drugs exported dming 1963 was more than
that exported the year before. The export total, however, never has
been significant in comparison with the quantity used within the

156

19 63 REPORT OF THE SECRETARY OF THE TREASURY

United States. The manufacture of narcotics continued to be extensive principally because of the large medical consumption of pethidine,
codeine, and papaverine.
There were 1,608 thefts of narcotics, amounting to 71,260 grams,
reported during 1963 from persons authorized to handle the drugs,
compared with 1,695 thefts amounting to 70,289 grams in 1962.
Practically all of the approximately 353,684 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 scientific users of narcotic substances are few, the quantities
used for these purposes are insignificant.
International control and cooperation

Opium, coca leaves, marihuana, and their more important derivatives have been internationally controlled 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, 12 secondary derivatives of opium and 58 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.
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, complete statistics of their manufacture, distribution,
imports, exports, and stocks. The Bureau applies a system of import, export, and intransit permits which conforms to the requhements
of these conventions as well as to our own Narcotic Drugs Import
and Export Act. It exchanges, dhectly with the narcotics control
authorities of other governments, information relating to movements
of drugs under the 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 former Commissioner of Narcotics is the U.S. 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.
On March 8, 1963, an important international development was
the coming into force of the 1953 Opium Protocol. The U.S. Senate
ratified this Protocol August 20, 1954, and urged other governments
to do so. The necessary ratifications to make this Protocol effective
(25 countries, including any 3 of certain named producing countries
and any 3 of certain named manufacturing countries) were accomplished with the ratification by the Greek Government in February
1963.
This Protocol limits production of opium throughout the world to
that quantity needed only to meet world requirements for medical
and scientific purposes; thus it should greatly reduce the quantity of
opium available for diversion into illicit traffic. As of June 30, 1963,
46 countries had ratified the Protocol.

ADMINISTRATIVE REPORTS

157

The expanded jurisdiction of the Bureau in Latin America and the
Far East has produced significant results. In ThaUand, for example,
several large seizures of opium have been made by national police
working in close cooperation with Bureau agents.
Similar investigations in Tmkey have resulted in comparable
seizures in that country. In Italy the Bm-eau has rendered assistance
to the enforcement authorities currently conducting an extensive
drive against the Mafia.
Cooperation with States, counties, and local authorities

Close cooperation among Federal, State, and local narcotic law
enforcement agencies in the exchange and coordination of law enforcement information continued during fiscal 1963 and resulted in
the investigation and prosecution of an increasing number of minor
violations and routine inspections by State and local authorities.
Training schools

The Bureau of Narcotics Training School, established in 1956 to
meet the need for State and local law enforcement officers trained in
narcotic enforcement techniques, provides two-week intensive comses
in narcotic law enforcement procedures through lectures, demonstrations, and technical instruction in methods of detection and prevention of illicit narcotic trafficking. Police officers frorii foreign
countries who visit the United States to receive training in general
law enforcement methods and procedures also attend this school.
Dming the fiscal year 1963 the school trained 204 officers, including
32 narcotic agents, 6 food and drug inspectors, 107 State and local
police officials, 49 military officers, and 10 foreign police officials
who came from Bermuda, Canada, Guam, Indonesia, Iraq, the
Philippines, Mexico, and Turkey.
In addition to the regular on-the-job training program designed for
Bureau agents, the Bureau is responsible for planning and organizing
training programs for foreign police officials. During fiscal 1963
on-the-job training programs were arranged for 21 foreign police
officials from China, El Salvador, Guam, Indonesia, Iran, Iraq,
Mexico, the Philippines, Syria, Turkey, and Egypt.
Short seminars or conferences at the Bureau of Narcotics Training
School and the Bureau of Narcotics were arranged for about 41
visiting officials.
Twenty-four narcotic agents attended the Treasury Law Enforcement Officers' Trairiing School and four narcotic agents attended the
Treasury technical equipment operators' school.
Drug addiction

On June 30, 1963, the Bmeau's central index recorded the names of
47,905 active addicts, many of whom were reported by State and
local agencies.
The first White House Conference on Narcotic and Drug Abuse
met in Washington on September 27-28, 1962, with some 400
scientists and law enforcement officials, as well as other recognized
authorities in attendance. The President, the Attorney General,
the Commissioner of Narcotics, and other officials addressed the
Conference.

158

1963 REPORT OF THE SECRETARY OF THE TREASURY

In January 1963 the President appointed an Advisory Commission on Narcotic and Drug Abuse to study the recommendations of
the Conference. This Commission presented a preliminary report
before June 30, 1963, and is scheduled to present its final report to
the President before the end of the calendar year 1963.
Management improvement

The internal audit program continued to improve overall operations without increased dollar expenditures.
Some recommendations contained in the survey report of district
offices' training programs and requirements were approved and
implemented.
By authorization of the Secretary of the Treasmy, Bureau enforcement responsibUities in foreign areas were extended, including the
establishment of district offices in Bangkok, ThaUand, and Mexico
City, with a branch office in Monterrey, Mexico.
The second District Supervisors' conference, in AprU 1963, included
discussions by Attorney General Robert F. Kennedy, Assistant Secretary of the Treasury James A. Reed, and the Treasury Department
Dhector of Personnel, Amos N. Latham, Jr. The first annual safe
driving award plaques were presented to three districts, two of which
had accident-free records.
United States Coast Guard
The U.S. Coast Guard is responsible for enforcing or assisting in
the enforcement of Federal laws on the high seas and 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 coordinates and provides
maritime search and rescue facilities for marine and air commerce
and the Armed Forces. Other functions include promoting the
safety of merchant vessels, furnishing ice breaking services, and
developing, installing, maintaining, and operating aids to niaritime
navigation. The Coast Guard has a further responsibility for maintaining a state of readiness to operate as a specialized Service of the
Navy in time of war or national emergency.
Search and rescue

The Coast Guard in fiscal 1963, working closely with the other
armed services, revised the basic search and rescue (SAR) procedures,
which will be placed in effect by an amendment to the National
Search and Rescue Manual.
The plotting area of the Atlantic Merchant Vessel Reporting
System (AMVER) was extended to cover the enthe North Atlantic
Ocean. During the fiscal year 1963 AMVER reporting procedures
were revised. A reference book, listing merchant vessels and their
search and rescue capabilities, was compUed by the AMVER computer and is being used in the Atlantic and Pacific areas by SAR
coordinators.

ADMINISTRATIVE REPORTS

159

Some typical examples of assistance cases participated in by the
Coast Guard during fiscal 1963 are described below.
Grounded fishing vessel aided.—Lost and aground off the California
coast, the fishing vessel Sentinel was located by a Coast Guard amphibious aircraft responding to a distress call on August 24, 1962. With the
assistance of an 82-foot patrol boat which arrived on the scene,
pumps were placed in operation aboard the stricken vessel to control
flooding. I t was then towed to port by the Coast Guard vessel for
repairs.
Airliner jorced down offi Alaskan coast.—On October 22, 1962, a
Northwest Airlines DC-7 with 102 occupants was forced to ditch in
the waters of Sitka Sound, Alaska. Three persons suffered minor
injuries, but all aboard were rescued. Shortly after the ditching, a
Coast Guard amphibian landed on the water and sighted five liferafts.
The survivors were picked up by a Federal Aviation Agency supply
boat and transferred later to the U.S.C.G.C. Sorrel, which took them
to Sitka, Alaska.
Survivors oj sinking motor vessel rescued.—The motor vessel Helga
Smith, 50 miles southeast of Cape Race, Newfoundland, reported to
the Coast Guard during the night of April 21, 1963, that the ship had
an uncontrollable leak and requhed assistance. The U.S.C.Gr.C.
Campbell, arriving on the scene to assist, illimiinated the area with its
floodlights as the crew of the Helga Smith left the flooded vessel in
lifeboats and boarded the Campbell. Two commercial tugs attempted
to tow the disabled ship to St. Johns, Newfoundland, but it sank
en route.
Two ships collide near San Francisco.—Under cover of a heavy fog
the U.S.N.S. Asterion and the SS Kokoku Maru collided on June 4,
1963, 40 miles west of San Francisco. The Coast Guard cutters
Magnolia, Comanche, and Avoyel as well as a patrol boat (CG-95311)
were dispatched to assist. Two commercial tugs called for by the
agent for the Japanese ship also converged on the scene. One
Kokoku Maru crewmember was killed and three were injured, but all
43 of the survivors were removed from the disabled vessel by the
Comanche and Magnolia.
The Asterion continued on to San Francisco under its own power,
but the Kokoku Maru had to be towed by the two commercial tugs.
When one of the tugs lost its bilge pumps and began to flood, Coast
Guard ahcraft dropped emergency pumping equipment to control the
water intake. The crewmembers of the Kokoku Maru were delivered
safely ashore, and theh vessel successfully towed into San Francisco
harbor.
Ill crewman evacuated jrom ship.—The SS Walter Rice, in the
Yucatan Channel in the Gulf of Mexico, requested Coast Guard assistance on May 26, 1963, when a crewmember became seriously ill.
Since the patient's life was in danger, a Coast Guard amphibian, dispatched from Miami for the rescue, made a landing in five-foot seas
alongside the Walter Rice. The patient was flown to Key West, Fla.
and transferred to the U.S. Naval Hospital.
A statistical summary of search and rescue assistance comparing
the fiscal years 1962 and 1963 follows:

160

19 63 REPORT OF THE SECRETARY OF THE TREASURY

Operations

By aviation
units
1962

Vessels assisted:
Reflofited (number)
Towed (numher) ___
_.
Otherwise aided (number)
Property involved (value including cargo in thousands) ,
Miles towed
Aircraft assisted:
Escorted (number)
Otherwise aided (number)
Property involved (value including cargo in thousands) _
Miles escorted
Personnel assisted
Miscellaneous assisted (floods,
forest fires, etc.)
-._
Attempts to assist (no physical
assistance rendered)
Persons involved (number):
Lives saved or rescued from
peril
Medical assistance furnished__0ther assistance
Miscellaneous property involved
(value in thousands)
_.

74
280
976

1963

61
318
991

By vessels

By other
small boats,
vehicles, and
equipment

1962

1963

1962

1963

227
2,385
1,210

219
2,662
950

1,908
10,928
2,891

2,128
12,878
2,013

Total

1962

1963

2,209
13,593
5,076

2,408
15,858
3,954

$776,226
138,085

$496,017
130,242

316
379
$710,668
62,469
3,166

241
259

303
160

231
85

4
45

4
31

9
174

6
143

724

764

456

489

1,986

1,799

114

201

176

1,066

857

1,371

1,131

2,259

1,741

1,948

5,826

6,220

9,738

10,427

2,597
2,622
85, 519

1,970
2,584
86,735

$46,440

$13,905

2,171

$488,186
36,527
3,052

Marine inspection and allied safety measures

During the fiscal year 1963, 4,365 marine casualties were reported,
four of which were considered major and requhed marine boards of
investigation. These inquiries revealed that 226 lives were lost from
veissel casualties, 161 from personal accidents, and 247 deaths were
from miscellaneous causes. (These figures do not include pleasure
craft covered by the National Boating Act of 1958 (46 U.S.C. 527)).
The disappearance in February 1963 of the Marine Sulphur Queen
with the presumed loss of 39 men was the most serious casualty of
the year. In the collision on October 20, 1962, between the MV
Boheme, a Norwegian tanker, and the tug Bonnie D, 20 lives were lost.
The capsizing of the MV Diversity in the GiUf of Mexico on January
24, 1963, with the loss of five lives, and the explosion of a tank barge
(NBC 883) at Carlyss, La., on September 22, 1962, with three fatalities, were also major casualties.
National motorboat numbering program.—Forty-three States and
the Virgin Islands now have Coast Guard-approved systems for numbering boats under the Federal Boating Act of 1958. The Coast
Guard continues to assist those States not having approved numbering
plans.
The sixth annual statistical report entitled Recreational Boating
in the United States published on May 1, 1963, showed that on December 31, 1962, there were 3,516,052 boats numbered in the United States,
3,317,633 through approved State systems. During the calendar
year 1962 there were reported to the Coast Guard 3,085 boating
accidents, involving 3,897 vessels, causing 1,055 fatalities, 977 injuries,
and damage estimated at $4,270,700.
A digest of certain marine inspection activities comparing the
fiscal years 1962 and 1963 follows.

ADMINISTRATIVE

Gross toimage

Number

Inspection activities

1962
Inspections for certification
Drydockings
Reinspections
Factory inspections 2
Miscellaneous inspections
,
Merchant vessel plans reviewed
Violations ofnavigation and inspection laws (administrative penalty action completed)

161

REPORTS

4,218
5,731
5,855
1,558,399
25,107
35,915
28, 059

1963

1962

1 4,741 8,532,734
6,725 13,413,450
5,529 13,320,800
1,396,649
24,131
31,013

1963
11,261,186
13.417,296
9,638,164

66,294

1 Includes 549 initial inspections to obtain first certificates.
2 Includes such items as liferafts, lifejackets, flares, etc.

Merchant marine technical activities.—The increasing need for the
water transport of liquefied flammable gases at atmospheric pressures
has led to much research in the field of cryogenics, since the low temperatures of such cargo (as much as —430° for liquefied hydrogen)
require safeguards to protect shipbuUding steel from brittle fractm:es.
A number of marine casualties involving the sinking of open hopper
barges transporting dangerous bulk cargo led to the development and
issuance of new regulations to prevent future sinkings from swamping
and diving.
On October 24, 1962, a certificate was issued for the 34-foot hyclrofoU passenger vessel Albatross, the first such vessel to get Coast
Guard approval.
Under consideration at the close of fiscal 1963 were the proposed
plans for a somewhat revolutionary 300-foot semiautomated, selfpropelled container type vessel of about 2,900 gross tons, scheduled
for operation in the Hawaiian area.
Merchant Marine Council meetings, conferences, and publications.—
The Merchant Marine Council held nine regular meetings and one
public hearing to consider proposed amendments to regulations.
Some 800,000 copies of the pamphlet Pleasure Crajt, highlighting
the Federal Boating Act of 1958, were distributed to the public duiing
the fiscal year. About 50,000 copies of The Recreational Boating
Guide, an educational publication for the novice boatman, were sold
by the Government Printing Office.
In the interests of maritime safety, the Coast Guard was represented
at numerous technical meetings in this country and abroad.
Merchant marine personnel.—During the fiscal year 69,244 documents were issued to merchant marine personnel, and Coast Guard
shipping commissioners supervised the execution of 7,299 sets of
shipping articles involving 455,445 individual transactions relating to
the shipment and discharge of seamen.
Merchant marine investigation sections in major U.S. ports and
merchant marine detaUs in foreign ports investigated 19,872 cases
involving negligence, incompetence, and misconduct. Charges were
preferred and hearings held before civilian examiners in 1,064 of these
cases. Security checks were made of 18,864 persons desiring employment on merchant ships.
The Coast Guard, with the cooperation of the National Academy of
Sciences, is developing statistical data concerning the work habits of
merchant seamen to facilitate an evaluation of merchant vessel
automation and its potential impact on the economy.

162

19 63 REPORT OF THE SECRETARY OF THE TREASURY

Law enforcement

The law enforcement workload continues to gTow as recreational
boating becomes more popular throughout the country. There is
also an increase in the number of foreign fishing vessels in the North
Pacific treaty areas, requhing the assignment of additional patrol
boats and ahcraft in that vicinity. Enforcement patrols in the Florida
Straits have been expanded for surveillance of vessels possibly violating
neutrality laws. Another problem is the increasing incidence of water
pollution cases, requiring increased concentration on detection, investigation, and reporting.
The following table compares the Coast Guard workload in the major
enforcement areas for the fiscal years 1962 and 1963.

Enforcement work

Nuinber
1962

Vessels boarded
Waterfront facilities inspected
Reported violations of:
Motorboat Act
Port security regulations
Oil Pollution Act
Other laws
Explosives:
Loading permits issued
Loadings supervised
Tons covered by issued permits.
Other hazardous cargoes inspected..
Anchorage violations

1963

171,150
29,294

196, 481
37,251

53,706
1,244
524
642

72,412
1,131
302
770

756
513
279,689
6,801
19

731
883
202,098
5,782
45

Operational readiness

To maintain a high state of operational readiness, 22 ships underwent refresher training at U.S. Naval training commands during the
year. Coast Guard ships also conducted about 700 gunnery indoctrination and antisubmarine firing exercises. Some 9,250 officers and
men participated in small arms courses for training and qualification.
Cooperation with other Federal agencies

The Coast Guard assisted other Federal agencies during the last
two fiscal years 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

36
225
237

1963
26
95
458

95,588
17,928

93,234
16,897

Aids to navigation

The long-range program to replace overage lightships with offshore
structures continued during fiscal 1963 as construction began on a
new fixed aid to navigation nine mUes from the shore entrance to the
Savannah River (Georgia). Plans are progressing for erection of
another such structure at Frying Pan Shoals, 34 miles off Southport,
N . C , with completion scheduled for August 1964. Two previously

163

ADMINISTRATIVE REPORTS

completed offshore structures, replacing lightships, are already in
operation.
A comparison of the volume of aids to navigation maintained by
the Coast Guard at the close of the last two fiscal years follows.

Navigational aids

Number

Loran transmitters.
Radiobeacons._-_
__
Fog signals (except sound buoys).
Lights (including lightships)
Daybeacons
,
Buoys:
Lighted (including sound)....
Unlighted sound
Unlighted
River type
Total

i2,073

Ocean stations

The Coast Guard continued the operation of four ocean stations
in the North Atlantic Ocean and two in the North Pacific. These
ships, cruising 483,527 miles on patrol, provided meteorological,
navigational, communications, and rescue services for a h and marine
commerce, and collected various scientific data. In the calendar
year 1962 ocean station ships communicated with 39,154 transatlantic flights, reflecting a steady increase since 1950 when 9,890
such contacts were made.
International ice patrol

The international ice patrol, comprised of an ahcraft detachment,
radio station, and oceanographic vessel, operated hi the North
Atlantic between March 7 and June 21, 1963. The ice menace
for this year, the 50th anniversary of the patrol, was comparatively
light.
Bering Sea patrol

The 1962 Bering Sea patrol was carried out by the cutters Storis
and Northwind from May 20 to September 30, 1962, assisted by the
cutters Winona, Wachusett, and Klamath. The latter three vessels
were needed for observation of the increased foreign fishing operations
in the area.
Oceanography

Amending legislation enacted on October 5, 1961 (14 U.S.C. 2)
requhed the Coast Guard to engage in oceanographic research on the
high seas and in waters subject to the jurisdiction of the United States.
Pursuant to this, oceanographic observations are now being made
by ocean station vessels, and one such cutter has been outfitted and
equipped as a prototype oceanographic laboratory. The design of
equipment to provide oceanographic capability for all ocean station
vessels has been completed, and installation will begin in fiscal 1964.

164

19 63 REPORT OF THE SECRETARY OF THE TREASURY

Icebreaking

The past whiter was notably severe and requhed a major icebreaking effort in several northern regions. All available icebreaking
units in those areas were employed to maximum endurance, and,
although there were some delays, shipping was maintained at or near
normal.
Coast Guard intelligence

During the fiscal year 2,435 internal security investigations and
9,810 national agency checks were made. In addition, 20,166
merchant mariners and 24,081 applicants for port security cards
were screened before issuance of their documents.
Operational facilities

Floating units.—There were 323 ships in active commission on
June 30, 1963, including 61 rescue cutters, 76 patrol craft, 5 icebreakers, 111 buoy tenders, 26 lightships, 37 harbor tugs, and several
special purpose vessels. Coast Guard floating units cruised some
3,195,780 miles in carrying out Service functions.
Shore units.—Early hi 1963, the Report on the Requirements for
Coast Guard Shore Units was approved by the Commandant. This
report established an overall plan for the progressive modification of
the shore establishment over the next ten years.
Aviation and aircrajt.—Aircraft operated by the Coast Guard
during the year, 97 conventional types and 41 helicopters, spent
110,369 hours in the a h whUe carrying out 33,114 sorties. Fifteen
of the new HH-52A turbine-powered helicopters were procured to
replace the older HH-19G models, and the final three HC-130B
ahcraft were received, making 12 such planes avaUable for long-range
search and rescue missions.
Communications.—In May 1963 the principal Coast Guard-leased
landlines communication chcuits were transferred to the Defense
Communications Agency and combined with other mUitary chcuits.
The savings realized from this action will contribute to the gradual
improvement of Coast Guard communications facilities.
Engineering developments

Aeronautical engineering.—The Coast Guard has adopted on a trial
basis a new system of ahcraft inspection, based on the calendar rather
than hourly intervals as before. This change is expected to iniprove
work schedulhig and maintenance, as well as increase operational
availability.
Civil engineering.—The loran construction program continued to
progress in fiscal 1963, with the start of a new chain of four loran
transmitting stations in the North Pacific area. Two lifeboat
stations demolished by the Atlantic Coast storm of 1962 are being
completely rebuilt. At the Ahcraft Repah and Supply Base a
modern warehouse is under construction to replace small buildings

ADMINISTRATIVE REPORTS

165

scattered around the Base. The long-range construction program
to improve facUities of the Coast Guard Academy conthiued duriag
the fiscal year.
Electronics engineering.—A simple and economical technique using
the existiag loran-C navigation system has been designee! by the
Coast Guard to disseminate civU defense warniag information. The
method has been demonstrated to those concerned m t h the civil
defense program and appears to have been favorably received. The
use of loran-C facilities for this purpose could save a substantial
sum which would otherwise be requhed if an additional warning
system were buUt.
A second RATAN system was beiag installed in the New York
area at the close of fiscal 1963. This histallation at Bayonne, N.J.,
together with the one previously set up at Sandy Hook, N.J., will
provide experimental Radar-TV-aids-to-navigation service for the
upper and lower New York harbor areas.
Naval engineering.—The 210-foot U.S.C.G.C. Reliance, the first of
a new class vessel, was christened and launched ia May 1963 at the
Todd Shipyards ia Houston, Tex. Two other ships of this class are
under construction as a part of the fieet modernization program.
A 157-foot coastal buoy tender which will replace a 42-year-old vessel
is being buUt at the Coast Guard Yard.
Five obsolete buoy tenders have been replaced by newly constructed
pusher-tender and barge combinations for service on rivers of the
Second District. The completion of six new 65-foot harbor tugs in
fiscal 1963 enabled the replacement of aging and obsolete vessels.
The construction of 82-foot patrol boats at the Coast Guard Yard
continued, with ten completed ia December 1962 and five more
scheduled for manufacture ia fiscal 1964. Seventeen of the Coast
Guard's new 44-foot motor lifeboats, enthusiastically received a t the
recent International Lifeboat Conference, were buUt duriag the year
to replace older models and hnprove rescue capabUities.
Coast Guard Reserve

In recognition of its continued importance in contributiag to the
readiaess stature of the Coast Guard, the Reserve Program has been
elevated to Office status at Headquarters. The Reserve InspectorInstructor Program was modified during the year to include mobUization duties. As a result these senior Reserve officers are now beiag
trained for mobUization assignments to assume command of two or
more operational Organized Reserve Traiaing Units (Port Security).
A new system has been adopted for matching mobUization biUets
with Reserve personnel using a mechanized process, and preassignment
mobUization orders have aheady been issued to most ready reservists.
Personnel

The personnel strength of the Coast Guard as of Jmie 30, 1962 and
1963 is shown in the following table.

166

1963 REPORT OF THE SECRETARY OF THE TREASURY
Number

Personnel
1962
Military personnel:
Commissioned officers . _ _ _ . _
Chief warrant officers.
Warrant officers
Cadets
Enlisted men
Total

.._

--.

. - . __-

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

.
-

Ready reservists:
Officers
Enlisted men .

- -

Total

1963

3,122
849
178
372
27,200

3,176
852
172
398
27,062

31, 721

31, 660

2,539
2,148
207

2,595
2,237
203

4,894

5,036

3,570
24, 638

3,569
22, 673

28,208

26,242

Illustrated in the table below are the changes in the numbers of
officers on active duty as of June 30, 1962 and 1963. The net gain of
41 was sufficient to meet increased commitments at the start of fiscal
1964.
Number

Officers
1962
Additions of commissioned officers:
Coast Guard Academy graduates
Reserve officers called to active duty.
Pormer merchant marine officers appointed
Officer Candidate School graduates

.
_.

.-- . .

Total
Losses of commissioned officers:
Regular i
_
__
Reserve on completion of obligated service
Total
Net gain

__ _

1963

115
18
5
208

94
14
5
167

346

270

135
150

107
122

285

229

1 Through retirements, resignations, revocations, and deaths.

Recruiting and training.—Fifty-seven main recruiting stations and
approximately 45 substations were manned by 215 recruiters. During
fiscal 1963 there were 14,035 apphcants for enlistment in the regular
Coast Guard and 4,364 were enlisted. The Reserve received 6,968
applications and enlisted 3,115. The receiving centers at Cape
May, N.J., and Alameda, Calif., trained 3,429 and 2,095 recruits,
respectively.
Training jor joreign visitors.—^Under the sponsorship of other Government agencies, about 86 visitors from 26 foreign countries were
extended the use of Coast Guard training facilities.
Coast Guard education program.—The education and training programs sponsored by and participated in by the Service are summarized for 1962 and 1963 as follows:

167

ADMINISTRATIVE REPORTS

Education and training program

Coast Guard Academy:
Applications
Applications approved
Appointments
Cadets
Graduates (bachelor of science degrees)
Officer training completed:
Officer Candidate School graduates
Postgraduate
Fhght training
Helicopter pilot training
C-130B aircraft training
Short term speciahzed courses
Off-duty courses at civilian schools
Enlisted training completed:
Coast Guard basic petty officer schools
Navy basic petty officer schools
.
Advanced schools (Coast Guard and Navy)
Specialized courses (Service and civilian schools)
Correspondence courses completed:
Coast Guard Institute courses completed
U.S. Armed Forces Institute courses completed.
Naval correspondence schools courses completed.

Number

10,044
311
6,000

1 Estimated.

Public Health Service support.—On June 30, 1963, there were 94
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.
Coast Guard Auxiliary

The Auxiliary, a voluntary nonmUitary organization functioning in
646 communities, conducted numerous public instruction courses in
safe boating in fiscal 1963. These courses had an enrollment of some
121,000 persons. Courtesy examinations of the safety equipment of
approxiniately 140,000 motorboats were made by specially qualified
auxiliarists. The Auxiliary also worked with the Coast Guard in
patrolling 1,780 regattas, and cooperated in answering more than
5,700 calls for assistance, theh efforts saving the lives of 281 persons.
On June 30, 1963, the organization had approximately 22,100 members
and 14,500 facilities, consisting of boats, ahcraft, and radio stations
in 783 flotiUas.
Fiscal and supply management

Greater use is being made of mechanized systems to facilitate accounting for appropriated funds and expenditures, with EAM equipment replacing conventional bookkeeping machines at Headquarters
and in two district offices. This system, which will provide more
timely financial status reports to program managers, is planned for
installation at other Coast Guard accounting offices during the fiscal
year 1964.
In carrying out the budgetary program for military personnel,
automatic data processing is being used to analyze variations between
actual and planned costs and to identify reasons for such variations.
This provides factual and timely management information to support
early adjustments of personnel plans and funding requhements.
707-484—64-

-13

168

19 63 REPORT OF THE SECRETARY OF THE TREASURY

Funds available, obligations, and balances

The following table shows the amount of funds available for the
Coast Guard during fiscal 1963 and the amounts of obligations and
unobligated balances.

Appropriated funds:
Operatingexpenses..
. .
.
Reserve training
Retired pay
Acquisition, construction, and improvements
Total appropriated funds
Reimbursements:
Operating expenses
Acquisition, construction, and improvements
Total reimbm'sements
Trust fund, U.S. Coast Guard gift fund.
Grand total

Funds
available i

Net total
obligations

$222, 530,784
16,497, 577
32,350,000
49,776,128

$222,454,310
16,431,074
31,773, 281
40,590,914

$76,474
66,503
576,719
9,185,214

321,164,489

311,249,579

9,904,910

31,453, 204
29,676, 580

31,453,204
24,737, 951

4,838, 629

61,029, 784

56,191,156

4,838, 629

18, 611

3,388

15, 223

382,202,884

367,444,122

14,758,762

Unobligated
balance 2

1 Funds available include unobligated balances brought forward from prior year appropriations as follows:
Acquisition, construction, and improvements:
Appropriated funds
$16,250,837
Reimbursements
9,252,833
U.S. Coast Guard gift fund
12,189
2 Unobligated balance of $14,023,843 under the acquisition, construction, and improvements appropriation remains available for obligation in fiscal 1964. These funds are programmed for obligation in fiscal
1964 for the following general purposes:
Coast Guard Department
projects
of Defense
projects
For projects deferred in fiscal 1963 to be subsequently accomplished
$3,053,900
For completion of projects started in fiscal 1963
6,131,314
$4,838,629
TotaL
9,185,214
4,838,629
NOTE.—Funds available under acquisition, construction, and improvements also include recoveries
of prior obligations, $195,291.

Management improvement

Through the collective efforts of Coast Guard military and civilian
personnel in applying the principles of management improvement, the
Service expects to realize savings of some 145 man-years and dollar
value benefits estimated at $2,746,000 for the fiscal year 1963. Of
these savings, some $371,000 stemmed from military and civUian suggestions and superior work performance. Although not measurable
in a monetary sense, many improvement projects returned significant
benefits by furthering safety, morale, and service to the public.
To promote greater supervisory knowledge and understanding of
the management improvement program and its goals, the Coast
Guard wiU distribute to all supervisors a booklet entitled The Supervisor's Role in Management Improvement. The publication of a
quarterly Management Bulletin is also planned.
The most significant improvement of the fiscal year centered on
cost reductions in traffic management. Through the study and
analysis of transportation systems, substantial rate reductions were
negotiated for a variety of materials transported for the Coast Guard
by commercial carriers.

ADMUNISTRATIVE REPORTS

^169

The conversion of numerous manned light stations to automatic
operation saved an estimated 45 man-years and $246,000, while the
collocation of loran-A and loran-C stations brought an additional
return of 20 man-years and $97,000.
The completion of a management survey of the Coast Guard^s
Reserve Training Program brought about numerous administrative
improvements, leading to predicted savings of 26 man-years and
$53,000.
United States Savings Bonds Division
The U.S. Savings Bonds Division is responsible for promoting the
sale and retention of U.S. savings bonds and the sale of savings stamps.
The savings bond prograni makes a vital contribution to Government
financing and debt management policy as one of the most significant
means through which the Treasury achieves the broadest possible
ownership of the public debt.
Activities of the Division during the fiscal year 1963 centered
around the ^Treedom Bond'' drive conducted from May 1
through July 4, 1963. Various promotional campaigns specifically
designed to reach different gToups of the American public were carried out within the drive. To launch the 'Treedom Bond'' drive
within industry, 28 leading industrialists met in Washington on January 16, 1963, to form the U.S. Industrial PayroU Savings Committee,
chahed by Harold S. Geneen, president of International Telephone
and TelegTaph Company. Campaigns in more than 10,250 American
firms were completed during the January-October 1963 period, resulting in nearly one million four hundred thousand new enrollments,
an increase of more than 40 percent from the number of new enrollments a year earlier.
As part of the 1963 ^Treedom Bond" drive within the Federal
Government, the Interdepartmental Savings Bond Committee under
the chahmanship of John W. Macy, Jr., Chahman of the Civil Service
Commission, initiated a successful drive for greater Federal employee
participation in the payroll savings plan. The Minute Man Award,
signifying 90 percent or greater employee participation, was presented
to the Treasury Department during the year. In previous years,
three other Federal agencies had qualified for this award. During
fiscal 1963 the number of Government employees enrolled in the
program increased by 8.5 percent.
In addition to these concerted drives for increased sales through
payroll savings plans, the Division coordinated many individual
campaigns designed to enlist the aid of national organizations and
community institutions in promoting the Series E and H bond program. ^^Seven day community bond campaigns" were held in 125
cities and towns during fiscal 1963 under the dhection of State and
regional field representatives of the Division, with the assistance of a
large volunteer corps. Executives of 65 major national organizations, representing 63 million members, met in Washington during
the fall of 1962 to organize and direct the National Organizations
Family Campaign under the chairmanship of Bernard B. Burford,
Secretary-Treasurer of Optimist International. The goal of this
drive was to encourage each family to buy a bond during the year.

17Q

19 63 REPORT OF THE SECRETARY OF THE TREASURY

Sales of savings stamps during the fiscal year 1963 increased 3.4
percent over 1962, primarily from the ''Junior Astronaut" promotional program initiated during the 1962-63 academic year. When
buying his first stamp of the school year, each student received a
certificate signed by the seven Mercury astronauts designating him
as a '^Junior Astronaut." Over 5 million of these certificates were
distributed.
Of great importance to all of the campaigns and promotions directed
by the Savings Bonds Division is the voluntary assistance provided by
the Advertising Council, which prepares and donates advertising and
promotion material, and the contributions and cooperation of
industrial and community volunteers. The donated advertising time
and space alone is conservatively valued at more than $50 million
annually. Because of this support, the costs to the Government of
promoting the sale of savings bonds are held to a minimum and average
}io of one percent of annual sales.
Sales of Series E and H savings bonds during the fiscal year 1963
totaled $4,518,034,609. Details of sales, redemptions, and amount
outstanding will be found in tables 46-48.
Organization and management improvement

The Savings Bonds Division is headed by a National Director and
Assistant National Dhector and consists of two principal branches:
Sales, and Advertising and Promotion. The branch chiefs, together
with the National Dhector and Assistant National Dhector, make up
the Division's Management Committee, whose main purpose is
continuing improvement of the Division's services.
The Division has six regional offices and offices in the fifty States
and the District of Columbia through which sales materials are disseminated. A relatively small sales and service staff recruits, trains,
and services a large volunteer savings bonds sales corps. Liaison is
maintained with all types of financial, business, labor, agricultural,
and educational institutions, as well as with other civic organizations.
Their volunteer services are enlisted to sell savings bonds at banks,
savings and loan associations, credit unions, certain post offices
(those in communities where there is no other sales outlet), and
business establishments operating the payroll savings plan.
In response to the Secretary's directive for better utilization of manpower a review was made of the Division's organization and operations
and several functions were realigned as follows: Program planning
and niarket research activities were assigned to the Sales Branch;
coordination of banking and volunteer relations were placed in the
National Director's Office; management, internal audit, and emergency planning were increased in scope, these three activities now
reporting directly to the office of the National Director; and upper
New York State coverage was realigned iato broader areas, the Buffalo
Branch Office closed, and two positions reassigned to locations of
greater potential.
An automatic data processing (ADP) system was installed for the
collection, recording, and reporting of payroll savings participation.
This information which is vital to both sales planning and appraisal
was formerly collected in 52 State offices from 35,000 firms, posted to
individual card records, and manually tabulated. Under the ADP

ADMINISTRATIVE REPORTS

171

system the information is collected and processed in Washington,
and the field offices supplied with the machine tabulations and summaries. The new system provides more versatile, timely, and
accurate data; standardizes field records; and eliminates a significant
amount of manual clerical work. Annual recurring savings of eight
man-years and $51,500 are anticipated.
Other nianagement improvement projects completed during the
year include the following. A survey of promotional films in the field
produced 600 films surplus to the needs of certain localities. These
were released to the central film library in Chicago to be available on
loan, or to help supply States requiring more prints without making
further acquisitions. As part of a continuing study of procedures for
the procurement and distribution of consumer and advertising
material, two forms were simplified, and a thhd eliminated. Under
the incentive awards prograni, 40 employees received outstanding or
superior work performance ratings.
United States Secret Service
Principal functions of the U.S. Secret Service are the protection of
the President of the United States, the members of his immediate
family, the President-elect, the Vice President or other officer next in
order of succession to the office of President, and the Vice-Presidentelect ; the protection of a former President, at his request, for a reasonable period after he leaves office; 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, and Federal land bank associations. The duties of the
Service are defined by section 3056, Title 18, United States Code.
Management improvement

Several undertakings during the year were dhected toward greater
efficiency and economy of operations.
Classification by data processing equipment of the handwriting of
suspects in check and bond forgery cases was further refined and
developed. Maintenance of original fingerprint cards in investigative
case files was discontinued as a result of a project which solicited
suggestions and opinions of field offices and other law enforcement
agencies. A revision of the system of reporting bond forgery cases
to the Bureau of the Public Debt brought about clarification of c(^rtain instructions and procedures in the Division of Loans and Currency of the Bureau which speeded the issuance of replacement bonds
to the public. I t also lessened the work of the Division and the
Secret Service.
In cooperation with field offices, a revision was made of the ' E a r n ing notice" system relating to the passing of counterfeit notes. A
simplified and improved system replaced the previous one which had
been administered jointly with the Federal Reserve Board at a postage
cost to the Secret Service of approximately $1,000 per annum. A
review of the ''check-up" system on former counterfeiters resulted in
improvements and some reduction in workload.

172

19 63 REPORT OF THE SECRETARY OF THE TREASURY

In all field offices the deletion of obsolete cards from the master
index was begun. This will reduce the amount of card-filing equipment necessary, lower the number of cards to be searched, and result
in other intangible economies. A comparison was made of the cost
of leasing automobUes used by the Service in San Juan, P.R., with
purchase cost.
Emphasis was placed on improving manpower utUization and productivity. On each field office inspection, the inspection staff analyzes
all procedures and manpower utUization seeking further improvements.
Protective and security activities

The most important responsibility of the Secret Service continued
to be the protection of the First Family and the Vice President.
Amending legislation enacted on October 15, 1962 (18 U.S.C. 3056)
authorized the protection of the Vice President without requiring his
request therefor and extended Secret Service protection to any officer
next in succession to the office of President, the Vice-President-elect,
and to a former President at his request, for a reasonable time. An
amendment to 18 U.S.C. 871, on October 15, 1962, substituted ''and
successors to the Presidency" for "President-elect and Vice President"
in the law dealing with threats against the President.
Investigations concerning protective activities decreased from 882
in 1962 to 753 in 1963, or 14.6 percent. Arrests resulting from investigations of these cases declined from 109 in 1962 to 81 in 1963, or
25.7 percent. There were 52 cases pending at the close of the fiscal
year, which was 13.0 percent more than at the close of the previous
year.
Enforcement activities

Vigorous and sustained efforts to suppress counterfeiting were
continued during fiscal 1963. In the more important cases heavy
losses to the public were prevented by seizing the plants and the
counterfeited product before the notes could be passed. Counterfeiting in general continued both by organized criminals and by small
groups who made use of printing and other equipment of legitimate
business enterprises without the knowledge of the owners. Several
cases during the fiscal year fell into the latter category.
By amending legislation enacted on October 10, 1962 (18 U.S.C.
3056), moneys expended from Secret Service appropriations for the
purchase of counterfeits and subsequently recovered shall be reimbursed to the appropriation current at the time of deposit. This
enables the Service to operate more effectively and to utUize funds
better.
During the fiscal year 1963, 47 plants for the manufacture of
counterfeit money were seized, compared with 44 for the previous
year, an increase of 6.8 percent. Six hundred and sixty-two persons
were arrested for counterfeiting offenses, compared with 737 the
previous fiscal year, a decrease of 10.2 percent. Counterfeit money
received amounted to $3,412,327, compared "with $4,134,916 the year
before, a decline of 17.5 percent. Only $564,321 reflected loss to the
public, because Secret Service Agents seized $2,848,005 before it could
be passed. Only one in seven counterfeits manufactured resulted in
a loss to the public.

ADMINISTRATIVE REPORTS

173

The following are examples of major counterfeiting cases:
During June 1963, at Durham, N . C , special agents seized $1,038,860 in a new issue of counterfeit $20 notes on the Federal Reserve
Bank of Richmond, in an intensive investigation which required less
than a week. Five persons are awaiting judicial action. The owner
of a printing concern and one of his employees were the note manufacturers. About $10,000 of the money manufactured has not been
accounted for but, so far as is known, none reached the hands of the
public.
On June 28, 1962, at Long Beach, Calif., two men were arrested and
a complete plant for the manufacture of counterfeit money was seized
from the residence of one of the men, which was also the office of a
fixm owned by him. About $300,000 in counterfeit notes on the
Federal Reserve Bank of San Francisco were seized; none was passed
on the public.
On July 4, 1962, at Miami, Fla., a supervisor in a commercial
printing fixm was arrested for manufacturing and passing counterfeit
$50 notes on the Federal Reserve Bank of PhUadelphia. All the
plates and other paraphernalia, together with $99,000 in notes, were
seized. Only five notes are known to have been passed. The
principal in this case printed the notes after working hours on the
firm's equipment without his employer's knowledge.
On July 29, 1962, at Los Angeles, Calif., two men were arrested
for manufacturing $100 counterfeit notes on the Federal Reserve
Bank of San Francisco. The plates for the notes were found in the
car of one of the offenders, a former policeman, who owned a private
detective agency in Los Angeles. About $434,000 in the notes were
seized and none had been passed on the public.
In July 1962 two brothers were arrested in Sparta, Wis. In the
car in which they were riding 56 plates for counterfeit $5, $10, $20,
and $100 notes were found, together with 14 counterfeit $20 notes
on the Federal Reserve Bank of Richmond; 12 counterfeit $20 notes
on the Federal Reserve Bank of Chicago; and seven counterfeit $50
notes on the Federal Reserve Bank of Minneapolis. The complete
plant was located in the basement of the farm home of one of the men.
During October 1959 an American was arrested in Mexico for
possessing and passing counterfeit U.S. currency. He was sentenced
to five years and was released in October 1961, pendhig review of bis
sentence by Mexican authorities. During June and July 1962 he
manufactured $40,000 in new counterfeit $10 and $20 notes in California and then again moved his operations to Mexico where he
manufactured new counterfeit $20, $50, and $100 U.S. notes. In
September 1962 a Mexican national was arrested in Mexico while
passing a new counterfeit $50 note, and a second man was developed
as a suspect. Within a few days, about $124,000 in the counterfeits
was found in the wrecked car of the second man, and subsequent
investigation resulted in the arrest of the maker, and all passers.
During November 1962, at Chamblee, Ga., two men, partners in
a small printing shop in the outskirts of Atlanta, were arrested and
more than $70,000 in counterfeit $20 notes on the Federal Reserve
Bank of Atlanta, together with plates for $5 and $10 notes, were
seized.

174

19 63 REPORT OF THE SECRETARY OF THE TREASURY

During February 1963 two men were arrested in California for
manufacturing and passing counterfeit $5, $10, and $20 notes on the
Federal Reserve Bank of San Francisco. The entire plant was
seized, together with more than $128,000 in the counterfeit notes.
During May 1963, in Chicago, a plant for the production of counterfeit $10 and $20 notes on the Federal Reserve Bank of Chicago was
smashed and five men were arrested. The defendant who made the
plates was employed as a printer for the American Hospital Association in Chicago.
The following table is a sumniary of seizures of counterfeit money
during the fiscal years 1962 and 1963:
Counterfeit money seized, fiscal years 1962 and 1963
Counterfeit currency

Loss to t h e p u b l i c
Before circulation._
Total

1962

1963

$567, 896.36
3, 567, 020.43

$564,321.91
2, 848, 005. 31

—0.6
—20.2

4,134, 916. 78

3, 412, 327.22

—17.5

Percentage
decrease

The forgery of Government checks continued to represent a major
enforcement problem for the Secret Service. During fiscal 1963
the Service investigated 47,505 cases involving a face amount of
$4,711,861, compared with 40,351 cases involving a face value of
$4,244,133 in the fiscal year 1962, an increase of 17.7 percent in cases
handled and 11.1 percent in amount involved. Check forgery offenses
accounted for the arrest of 3,343 persons in 1963, a slight decline from
the 3,414 arrests the previous year.
The Service also investigated 7,169 cases involving the forgery
of U.S. savings bonds, compared with 7,804 in fiscal 1962. However,
the face amount involved in 1963 was $931,845, compared with
$758,715 the previous year, an increase of 22.8 percent. Eighty-one
persons were arrested for bond forgery offenses in 1963, compared with
82 in the fiscal year 1962.
Many repeat offenders in check forgery cases are narcotic addicts.
During August 1962 a man and a woman were arrested in Pittsburgh,
Pa., for stealing and forging 19 Government checks worth $1,807.36.
The woman had been arrested on a previous occasion for the same offense. WhUe on baU for the current offense, she was admitted to a
hospital after she had taken an overdose of barbiturates. The male
defendant committed suicide whUe awaiting judicial action.
In August 1962 a man who had been sought as a suspected manufacturer of counterfeit notes and postage stamps was identified as the
passer of counterfeit U.S. Treasury checks in Phoenix, Ariz. He was
arrested by Phoenix police while attempting to pass one of the counterfeit checks in a bank. He resisted arrest and drew a pistol with which

ADMINISTRATIVE REPORTS

175

he began to beat one of the policemen and threatened to shoot him.
The policeman shot the defendant, wounding hhn seriously. The entire plant for the counterfeits was seized from his home.
During March 1962 two men were arrested in New York while
depositing twenty-five U.S. Government checks to an alleged business
account in a New York bank. About $26,000 had been previously
deposited and $22,000 withdrawn. The location furnished for the
business was found to be a vacant storeroom rented by one of the men.
Nearly 300 forged Government checks worth more than $38,000 were
traced to the account.
The forgery and alteration (to larger amounts) of U.S. Treasury
checks has been a problem in the PhUippines for several years. During
March 1963 the National Bureau of Investigation of the Republic
of the Philippines advised that a special team of investigators had
been created to work on these cases. It is hoped that this will be
eft'ective in suppressing these offenses there.
An example of the itinerant check forger, who poses a most difficult
enforcement problem, is that of a man and his wife who stole more than
100 Government checks worth more than $11,000 and cashed them in
23 states from New York and Massachusetts to California and Oregon.
They kept moving, not remaining in any location more than a few days.
Bond forgery cases continue to refiect the interest and activity of
organized criminals who buy and sell large amounts of stolen bonds.
An Ulustrative case is the arrest of five individuals in New York
State in February 1963 after they had successfully forged and negotiated 451 bonds with a maturity value of $68,250. The bonds
were registered to nine different owners and were stolen from residences
and business establishments in New York, New Jersey, and Illinois.
On September 19, 1962, legislation was enacted which amended
section 491, Title 18, U. S. Code, prohibiting certain acts involving
the use of tokens, slugs, disks, devices, papers, or other things simUar
in size and shape to lawful coins or other currency of the United
States. Under this new law during the remainder of fiscal 1963,
59 arrests were made. The increase in such offenses is due to the
rapid growth of vending machines of all kinds. The Service has been
able to absorb the increased work thus far.
During March 1963, $2,160 in travelers checks on Thomas Cook
and Son (Bankers) Ltd., were stolen from a travel agency in Massachusetts. The entire amount was deposited in a New York bank.
Arrangements were made for the Service to be notified when the
depositor returned, as previously agreed with the bank, to withdraw
some of the funds. Bank officials notified the Secret Service and
New York police at the same time, but when the agents arrived, they
found that police had arrived one minute earlier and had kUled the
depositor in a gun battle.
The following tables show the number of criminal and noncriminal
investigations and the number of arrests completed by the Secret
Service in the fiscal years 1962 and 1963:

176

1963 REPORT OF THE SECRETARY OF THE TREASURY
Criminal and noncriminal cases investigated, fiscal years 1962 and 1963
Cases investigated

1962

Counterfeiting
Forged Government checks.
Forged Government bonds.
Miscellaneous criminal
Miscellaneous noncriminal..
Total

1963

Percentage
increase, or
decrease (—)

10,052
40,361
7,804
1,187
4,397

10,378
47, 505
7,169
1,080
5.837

+3.2
+17.7
-8.1
-9.0
+32.7

63, 791

71,969

+12.8

Number of arrests, fiscal years 1962 and 1963
Offenses

Counterfeiting
Forged Government checks
Forged or stolen bonds
Miscellaneous
Total

1962

1963

Percentage
decrease

737
3,414
82
169

662
3,343
81
121

—10 2
—2 1
—1.2
—28 4

4,402

4,207

—4 4

During fiscal 1963 a total of 121 persons were arrested for crimes
other than counterfeiting and forgery, bringing the total number of
arrests to 4,207 for the fiscal year. Cases of all types investigated
by the Secret Service totaled 71,969, an increase of 12.8 percent.
Offenses investigated by the Secret Service resulted in the conviction of 3,717 persons. Of all Secret Service cases brought to trial this
fiscal year, 97.6 percent resulted in convictions.
The trends in crimes over which this Service has jurisdiction remain
generally consistent with nationwide trends in other crimes.
The growth and development of cooperation between all law
enforcement agencies over the past several years has been responsible
for much of the success of the Secret Service in keeping the crimes
under its jurisdiction under control.

EXHIBITS

PubUc 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
Two Treasury circulars representative of the four certificate offerings during
the fiscal year 1963 are reproduced in this exhibit: a cash offering and an exchange
offering. Circulars pertaining to the other certificate 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 certificates issued for cash and in exchange for maturing
or outstanding securities are shown in the second table.
DEPARTMENT CIRCULAR NO. 12-62.

PUBLIC DEBT

TREASURY DEPARTMENT,

Washington, July SO, 1962.
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 ^ percent Treasury certificates of
indebtedness of Series C-1963. The amount of the offering under this circular
is $6,500,000,000, or thereabouts. The following notes maturing August 15,
1962, will be accepted at par in payment or exchange, in whole or in part, for
the certificates subscribed for, to the extent such subscriptions are allotted
by the Treasury:
4 percent Treasury notes of Series B-1962; or
3J4 percent Treasury notes of Series G-1962.
The books will be open only on July 30, 1962, for the receipt of subscriptions for
this issue.
II. DESCRIPTION OF CERTIFICATES

1. The certificates will be dated August 15, 1962, and will bear interest from
that date at the rate of 3}^ percent per annum, payable semiannually on February
15 and August 15, 1963. They will mature August 15, 1963, 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.
4. Bearer certificates with interest coupons attached will be issued in denominations of $1,000, $5,000, $10,000, $100,000, $1,000,000, $100,000,000, and $500,000,000. The certificates will not be issued in registered form.
5. The certificates will be subject to the general regulations of the Treasury
Department, now or hereafter prescribed, governing United States certificates.
III. SUBSCRIPTION AND ALLOTMENT

180

1963 REPORT OE THE SECRETARY OF THE TREASURY

for their own account. Subscriptions from commercial banks for their own
account will be restricted in each case to an amount not exceeding 50 percent of
the combined capital, surplus, and undivided profits of the subscribing bank.
Subscriptions will be received without deposit from commercial and other banks
for their own account, Federally-insured savings and loan associations. States,
political subdivisions or iristrumentalities 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. Subscriptions from all others must be accompanied by payment (in cash
or in notes of the two issues enumerated in section I hereof, which will be accepted
at par) of 2 percent of the amount of certificates applied for, not subject to withdrawal until after allotment. Registered notes submitted as deposits should be
assigned as provided in section V hereof. Following allotment, any portion of the
2 percent payment in excess of 2 percent of the amount of certificates allotted may
be released upon the request of the subscribers.
2. 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
certificates of this issue, until after midnight July 30, 1962.
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 certificates 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 pubhc 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 certificates allotted hereunder must be made or completed on or before August 15, 1962, or on later
allotment. In every case where payment is not so completed, the payment with
application up to 2 percent of the amount of certificates allotted shall, upon
declaration made by the Secretary of the Treasury in his discretion, be forfeited
to the United States. Payment may be made for any certificates allotted hereunder in cash or by exchange of notes of the two series enumerated in section I
hereof, which will be accepted at par. Where payment is made with bearer
notes, coupons dated August 15, 1962, should be detached and cashed when
due by holders. In the case of registered notes, the final interest due on August
15, 1962, will be paid by check drawn in accordance with the assignments on the
notes surrendered, or by credit in any account maintained by a banking institution
with the Federal Reserve Bank of its district.
V. ASSIGNMENT OF REGISTERED NOTES

1. Treasury notes of Series G-1962 in registered form tendered as deposits and
in payment for certificates allotted hereunder should be assigned by the registered
payees or assignees thereof to ''The Secretary of the Treasury for 3}^ percent
Treasury certificates of indebtedness of Series C-1963 to be delivered to
", in accordance with the general regulations of the Treasury Department.
Notes tendered in payment should be surrendered to a Federal Reserve Bank or
branch or to the Office of the Treasurer of the United States, Washington 25,
D.C. The notes must be delivered at the expense and risk of the holder.
VI. GENERAL PROVISIONS

EXHIBITS

181

for certificates allotted, to make delivery of certificates on full-paid subscriptions
allotted, and they may issue interim receipts pending delivery of the definitive
certificates.
2. The Secretary of the Treasury may at any time, or from time to time,
prescribe supplemental or amendatory rules and regulations governing the offering, which will be communicated promptly to the Federal Reserve Banks.
DOUGLAS DILLON,

Secretary of ihe Treasury.
DEPARTMENT CIRCULAR NO. 17-62.

PUBLIC DEBT

TREASURY

DEPARTMENT,

Washington, October 29, 1962.
I. OFFERING OF CERTIFICATES

1. The Secretary of the Treasury, pursuant to the authority of the Second
Liberty Bond Act, as amended, invites subscriptions, at par, from the people
of the United States for certificates of indebtedness of the United States, designated ZYi percent Treasury certificates of indebtedness of Series D-1963, in
exchange for any of the following securities, singly or in combinations aggregating
$1,000 or multiples thereof:
3% percent Treasury notes of Series C-1962, maturing November 15, 1962;
3K percent Treasury notes of Series H-1962, maturing November 15, 1962;
2}i percent Treasury bonds of 1959-62, maturing December 15, 1962; or
2^i percent Treasury bonds of 1960-65, called for redemption on December 15,
1962.
Interest will be adjusted in the case of the 2>^ percent Treasury bonds of 1959-62
and the 2^4 percent Treasury bonds of 1960-65 as set forth in section IV hereof.
Delivery of the certificates will be made on November 15, 1962. The amount of
the offering under this circular will be limited to the amount of eligible securities
tendered in exchange and accepted. The books will be open only on October 29
through October 31, 1962, for the receipt of subscriptions for this issue.
2. In addition to the offering under this circular, holders of the eligible securities
are offered the privilege of exchanging all or any part of such securities for 3H
percent Treasury notes of Series B-1965, or 4 percent Treasury bonds of 1972,
which offerings are set forth in Department Circulars, Public Debt Series—Nos.
18-62 and 19-62, respectively, issued simultaneously with this circular.
II. DESCRIPTION OF CERTIFICATES

1. The certificates will be dated November 15, 1962, and will bear interest
from that date at the rate of 3H percent per annum, payable semiannuallj^ on
May 15 and November 15, 1963. They will mature November 15, 1963, 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.
4. Bearer certificates with interest coupons attached will be issued in denominations of $1,000, $5,000, $10,000, $100,000, $1,000,000, $100,000,000, and
$500,000,000. The certificates will not be issued in registered form.
5. The certificates will be subject to the general regulations of the Treasury
Department, now or hereafter prescribed, governing United States certificates.
III. SUBSCRIPTION A N D 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 25, 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 amoimt of certificates applied for; and
any action he may take in these respects shall be final. Subject to these reserva-

182

1963 REPORT OF THE SECRETARY OF THE TREASURY

tions, all subscriptions will be allotted in full.
out promptly upon allotment.

Allotment notices will be sent

IV. PAYMENT

1. Payment for the face amount of certificates allotted hereunder must be made
on the date shown in paragraphs 2, 3, and 4 below, and may be made only in
securities of the four issues enumerated in section I hereof, which will be accepted
at par, and should accompany the subscription.
2. sy^ percent notes of Series C-1962 and 3}i percent notes of Series H-1962.
Payment with maturing notes of Series C-1962 or Series H-1962 must be completed on or before November 15, 1962, or on later allotment. Coupons dated
November 15, 1962, should be detached from notes in bearer form and cashed when
due. In the case of registered notes of Series H-1962, the final interest due on
November 15, 1962, will be paid, following discharge of registration, by check
drawn in accordance with the assignments on the notes surrendered, or by credit
in any account maintained by a banking institution with the Federal Reserve
Bank of its district.
3. 2}i percent bonds of 1959-62. Payment with bonds of 1959-62 must be
completed on or before November 15 ,1962, or on later allotment. Coupons dated
December 15,1962, must be attached to the bonds in bearer form when surrendered.
Accrued interest from June 15, 1962, to November 15, 1962 ($9.40574 per $1,000),
will be paid to subscribers and the payments will be made in the case of bearer
bonds following their acceptance and in the caseof 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.
4. 2y4, percent bonds of 1960-65, called for redemption on December 15, 1962.
Payment with the called bonds of 1960-65 must be completed on or before November 15, 1962, or on later allotment, together with accrued interest from November 15, 1962, to December 15, 1962 ($2.58978 per $1,000), on the certificates
to be issued. Coupons dated December 15, 1962, should be detached from bonds
in bearer form and cashed when due. Coupons dated June 15, 1963, and all
subsequent coupons, must be attached to the called bonds in bearer.form when
surrendered. Final interest due December 15, 1962, on registered bonds will be
paid on December 15, 1962, following discharge of registration, 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. Delivery of the certificates will be made upon completion of payment
therefor on November 15, 1962.
V. ASSIGNMENT OF REGISTERED SECURITIES

1. Treasury notes of Series H-1962 and Treasury bonds of 1959-62 and 196065 in registered form tendered in payment for certificates offered hereunder should
be assigned by the registered payees or assignees thereof to "The Secretary of the
Treasury for exchange for ?>% percent Treasury certificates of indebtedness of
Series D-1963 to be delivered to
' \ in accordance with
the general regulations of the Treasury Department governing assignments for
transfer or exchange, 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 25, D.C. The securities must be delivered at the expense and
risk of the holder.
VI. GENERAL PROVISIONS

1. As fiscal agents of the United States, Federal Reserve Banks are authorized
and requested to receive subscriptions, to make allotments on the basis and up to
the amounts indicated by the Secretary of the Treasury to the Federal Reserve
Banks of the respective districts, to issue allotment notices, to receive payment for
certificates allotted, to make delivery of certificates on full-paid subscriptions
allotted, and they may issue interim receipts pending delivery of the definitive
certificates.
2. The Secretary of the Treasury may at any time, or from time to time, prescribe supplemental or amendatory rules and regulations governing the offering,
which will be communicated promptly to the Federal Reserve Banks.

DOUGLAS DILLON,

Secretary of the Treasury.

Summary of information pertaining io Treasury certificates of indebtedness issued during ihe fiscal year 1963
Department
circular
Date of
preliminary
announcement
Date
Number

July 26
Oct. 25

12-62
17-62

1962
July 30
Oct. 29

1968
Jan. 30

2-63

1963
Feb. 4

Apr. 24

8-63

Apr. 25

Concurrent
offering
circular
number

13-62,14-62
18-62,19-62

9-63

Certificates of indebtedness offered for exchange or for cash

33^ percent Series C-1963 issued at par—
3>l percent Series D-1963 issued at par in exchange for—
3 ^ percent Series C-1962 notes maturing Nov. 15,1962,
33^ percent Series H-1962 notes maturing Nov. 15, 1962,
234 percent Treasury bpnds of 1959-62 maturing Dec. 15, 1962,
2M percent Treasury bonds of 1960-65 called for redemption on Dec. 15, 1962.
334 percent Series A-;1964 issued at par in exchange for—
33^ percent Series A-1963 certificates maturing Feb. 15, 1963,
2Ys percent Series A-1963 notes maturing Feb. 15, 1963,
334 percent Series E-1963 notes maturing Feb. 15, 1963.
334 percent Series B-:•1964 issued at par in exchange for—
334 percent Series B-1963 certificates maturing May 15, 1963,
4 percent Series B 1963 notes maturing May 15, 1963,
334 percent Series D-1963 notes maturing May 15, 1963.

1 See Department Circular No. 12-62, sees. I l l and IV, in this exhibit, for provisions
for subscription and payment. Holders of 4 percent Treasury notes of Series B-1962 or
3H percent Treasury notes of Series G-1962 which matm'ed Aug. 15, 1962, 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
of the Series B-1962 or Series G-1962 notes.

Allotment
payment
date on
or before (or
on later
allotment)

Date of
issue

Date
Date of subscription
maturity
books
closed

1962
Aug. 15
Nov. 15

1963
Aug. 15
Nov. 15

1962
July 30 lAug. 15
Oct. 31 2 Nov. 15

1963
Feb. 15

1964
Feb. 15

1963
1963
Feb. 6 3Feb. 15

X
May 15

May 15

May

4May 15

M
Q
IP

2 See Department Circular No. 17-62, sees. I l l and IV, in this exhibit, for provisions
for subscription and payment.
3 Coupons dated Feb. 15,1963, were detached from the certificates and notes in bearer
form and cashed when due.
4 Coupons dated May 15,1963, were detached from the certificates and notes in bearer
form and cashed when due.

00
CO

Allotments of Treasury ceriificates of indebtedness issued during the fiscal year 1963, by Federal Reserve districts

[In thousands]
33^ percent Series D-1963 certificates issued i n exchange for

Boston— _
NewYork
Philadelphia..
Cleveland..
Richmond
Atlanta..
Chicago
St. L o u i s
Minneapolis..
KansasCity
DaUas
San Francisco.
Treasury

- -.
_ _ _ _ _ _ _ _
______
__
_____
__
.
. _ . .__ . . .
_.
_ _ __
__ _ _ _
.1
._ _ . .
. ._.
_ _
_
_._
__
_
. _ ...
__
__
_ _
.
_
_ _ _ _ _
. . . .
__
_ _ _ _
_
__
._
_ _ _ _ _ . . _
.
_
__
_

T o t a l certificate a l l o t m e n t s .
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
T o t a l exchanged
__ _ _
N o t s u b m i t t e d for exchange___

3 ^ percent
Series C-1962
T r e a s u r y notes
maturing
N o v . 15, 1962 3

334 percent
Series H-1962
T r e a s u r y notes
maturing
N o v . 15, 1962 3

234 percent
Treasury bonds
of 1959-62
maturing
D e c . 15, 1962 3

2 ^ percent
Treasury bonds
of 1960-65
caUed for
r e d e m p t i o n on
D e c , 15, 1962 3

$117,476
5,137,661
60,328
158,093
111,410
111,295
337,383
164, 210
40,859
142, 515
67. 234
398, 653
4,317

$5, 686
60, 986
1,852
13,091
4,527
5,250
13,064
4,486
2,702
4,604
1,237
3,378
40

$27,859
3, 687,708
18, 772
23,114
26,300
28,837
99,000
46, 792
21,046
17,620
17, 788
21, 688
7,684

$7,043
445,442
3,304
6,383
11, 587
17,695
34,093
7,517
2,022
8,157
13,084
12,892
155

$1,549
41,184
2,520
648
2,964
1,150
58, 536
8,324
516
600
333
2,853
2

$42,137
4,235,320
26,448
43, 236
45,378
62,932
204,693
67,119
26,286
30,981
32,442
40,811
7,881

6,851,434

120, 903

4,044, 208

569,374

121,179

4, 855,664

930, 220
1,051,123

1,926,013
5,970, 221

1,481,316
2,050,690

1. 291,470
1,412,649

5.629,019
10,484,683

33^ percent
Series C-1963
certificates i

F e d e r a l R e s e r v e district

_.._

_ .

. _
.

T o t a l securities eligible for exchange . . _ _ _ . . .

...

T o t a l issued
Hd
O

__ __

91,833

111,574

218, 785

72,734

494,926

_ . _

1,142. 956

6,081, 795

2. 269.475

1.485,383

10,979,609

%
o
H^

W
O

Footnotes at end of table.

>
d
OQ

td
Kj

Allotments of Treasury certificates of indebtedness issued during the fiscal year 1963, by Federal Reserve districts- -Continued
[In thousands]
334 p e r c e n t Series A-1964 certificates issued
i n exchange for—2

S}4 p e r c e n t
4 percent
334 p e r c e n t
3}4 p e r c e n t
2 H percent
334 p e r c e n t
Series A-1963 Series A-1963 Series E-1963
Series B-1963 Series B-1963 Series D-1963
Treasury
T o t a l issued
Treasury
Treasury
certificates
Treasury
T o t a l issued
certificates
notes
notes
maturing
maturing
notes
notes
maturing
maturing
M a y 15. 1963 & m a t u r i n g
F e b . 15, 1963«
maturing
M a y 15, 1963« M a y 15, 1963 s
F e b . 15, 1963 * F e b . 15, 1963 4

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 _

. . . . .
. _ _ _ _ . _
_ .
_ .__ _
__. _
...
.__ _ __ _ _
.
_ .
. _ _
. . .

T o t a l certificate a l l o t m e n t s . _ _
Securities eligible for exchange:
E x c h a n g e d t 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 e x c h a n g e .

__
_.

_ _
.

_ __
.. _

$139,032
4,333,988
63,409
140,512
58,256
124,230
329,369
119,594
43, 681
125,113
61,324
144,277
10.375

$127,434
5,065,382
63, 569
156,454
54,954
112,352
388,641
146,083
50,281
112,146
88, 458
350,926
24, 534

$51,691
3,071,107
30,173
62,801
22,919
72,028
192,145
64,896
15.273
81,903
21,295
76,640
5,173

$19,743
128,446
6,035
21,041
10, 664
11,026
36,419
11,292
•10,665
11,360
11,076
8,871
2,511

$67,598
1,134,436
27,201
56, 670
24, 673
41,177
100,805
43,406
17, 743
31,850
28.953
58, 766
2,691

•1,396,704

6,741,214

• 3,768,044

289,148

1,635,968

5, 693,160

778, 694

2, 489,819

1,399,568

628,299

1,244,771

3,272, 638

1,395, 738
91,133

2,175,398
83, 709

9,231,033
233, 789

5,167, 612
116,865

917,447
265,916

2,880,739
146,110

8,966,798
528,891

1,486,871

2,259,107

9,464,822

5, 284,477

1,183,363

3,026,849

9,494,689

$62,008
3,976, 356
20.183
83,784
18, 800
46,860
159,295
53,411
20,489
40,987
27,315
169, 678
13,009

$18,399
393,379
6,882
16,836
6,000
19,239
72,378
21,220
6,513
37,255
18.812
35,107
315

$47,027
695, 647
36,504
55,834
30,154
46,253
156,968
71,452
23.279
33,904
42,331
146,141
11,210

4, 692,175

652,335

967,722

743, 403

5, 659,897
58,947
5, 718,844

1 Subscriptions from States, political subdivisions or instrumentalities thereof, public
pension and retirement and other public funds, intemational 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.
Subscriptions from all others in amounts up to $50,000, were allotted in full; amounts
over $50,000 were allotted 123^ percent, but not less than $50,000 to any one subscriber.

33i p e r c e n t Series B-1964 certificates issued
h i exchange for—2

2 Subscriptions were allotted in full.
3 33^ percent Treasury notes of Series B-1965 and 4 percent Treasury bonds of 1972
were also offered in exchange for these securities.
4 SH percent Treasury bonds of 1968 were also offered in exchange for these securities.
8 3 ^ percent Treasury notes of Series B-1966 were also offered in exchange for these
securities.

186

19 6 3 REPORT O F . T H E

SECRETARY OF T H E

TREASURY

E X H I B I T 2.—Treasury notes
Two Treasury circulars, one containing an exchange offering a n d t h e other
an advance refunding exchange offering, are reproduced in this exhibit. T h e
circulars pertaining to t h e other note offerings during 1963 are similar in form a n d
therefore are not reproduced in this report. However, t h e essential details for
each issue are summarized in t h e first table following t h e circulars and t h e final
allotments of t h e new notes issued for cash or in exchange are shown in t h e second
table.
D E P A R T M E N T C I R C U L A R N O . 15-62.

PUBLIC

TREASURY

DEBT

DEPARTMENT,

Washington, September 10, 1962.
1. O F F E R I N G OF NOTES

1. T h e Secretary of t h e Treasury, p u r s u a n t to t h e a u t h o r i t y of t h e Second
Liberty Bond Act, as amended, invites subscriptions 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 A-1967:
(1) a t 99.50 percent of their face value in exchange for 3H percent Treasury
certificates of indebtedness of Series A-1963, d a t e d F e b r u a r y 15, 1962,
due F e b r u a r y 15, 1963;
(2) a t 99.90 percent of their face value in exchange for 2^^ percent Treasury
notes of Series A-1963, dated April 15, 1958, due F e b r u a r y 15, 1963;
(3) a t 99.60 percent of their face value in exchange for 3)4 percent Treasury
notes of Series E - 1 9 6 3 , dated November 15, 1961, due F e b r u a r y 15, 1963;
(4) a t 99.60 percent of their face value in exchange for 3}i percent Treasury
certificates of indebtedness of Series B-1963, dated M a y 15, 1962, due
M a y 15, 1963;
(5) a t 99.60 percent of their face value in exchange for 3)^ percent T r e a s u r y
notes of Series D - 1 9 6 3 , dated M a y 15, 1961, due M a y 15, 1963; or
(6) a t 99.00 percent of their face value in exchange for 4 percent Treasury
notes of Series B-1963, dated April 1, 1959, due M a y 15, 1963.
Interest adjustments as of September 15, 1962, a n d t h e cash p a y m e n t s due to t h e
subscriber on account of t h e issue prices of t h e new notes will be m a d e as set forth
in section IV hereof. Subscriptions are invited up to an a m o u n t not to exceed
$6,000,000,000, or thereabouts. If subscriptions exceed this a m o u n t t h e y will
be received subject t o allotment. I n addition t o t h e a m o u n t offered for public
subscription, exchange subscriptions from Government investment accounts will
be allotted in full. Delivery of t h e new notes will be m a d e on September 20, 1962.
T h e books will be open only on September 10 through September 12, 1962, for t h e
receipt of subscriptions for this issue.
2. I n addition to t h e offering under this circular, holders of t h e eligible securities
are offered t h e privilege of exchanging all or a n y p a r t of such securities for 4 percent Treasury bonds of 1972, which offering is set forth in D e p a r t m e n t Circular,
Public D e b t Series—No. 16-62, issued simultaneously with this circular.
3. Nonrecognition of gain or loss for Federal income tax purposes.—Pursuant
to t h e provisions of section 1037(a) of t h e I n t e r n a l Revenue Code of 1954 as added
by Public Law 86-346 (approved September 22, 1959), t h e Secretary of t h e
T r e a s u r y hereby declares t h a t no gain or loss shall be recognized for Federal income
tax purposes upon t h e exchange with t h e United States of t h e eligible securities
enumerated in p a r a g r a p h one of this section solely for t h e 3^i percent Treasury
notes of Series A-1967. Section 1031(b) of t h e Code, however, requires recognition of a n y gain realized on t h e exchange to t h e extent t h a t money is received
by t h e security holder in connection with t h e exchange. To t h e extent not
recognized a t t h e t i m e of t h e exchange, gain or loss, if any, u p o n t h e obligations
surrendered in exchange will be t a k e n into account upon t h e disposition or redemption of t h e new obligations.
II.

DESCRIPTION OP NOTES

1. T h e notes will be dated September 15, 1962, a n d will bear interest from t h a t
date a t t h e r a t e of 3 ^ percent per a n n u m , payable on a semiannual basis on
F e b r u a r y 15 a n d August 15, 1963, a n d thereafter on F e b r u a r y 15 a n d August 15
in each year until t h e principal a m o u n t becomes payable. T h e y will m a t u r e
August 15, 1967, a n d will not be subject to call for redemption prior t o m a t u r i t y .

EXHIBPTSi

187

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 25, D.C.
Banking institutions generally may submit subscriptions for account of customers,
provided the names of the customers are set forth in such subscriptions, but only
the Federal Reserve Banks and the Treasury Department are authorized to act
as official agencies. Subscriptions will be received without deposit 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. Subscriptions from all
others must be accompanied by the deposit of any of the eligible securities enumerated in paragraph one of section I hereof, in the face amount of not less than
10 percent of the amount of notes applied for, not subject to withdrawal, until
after allotment. Registered securities 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 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. The basis of the allotment will
be publicly announced and allotment notices will be sent out promptly upon
allotment.
IV. PAYMENT

1. Payment for the face amount of notes allotted hereunder must be made on
or before September 20, 1962, or on later allotment, and may be made only in a
like face amount of securities of the six issues enumerated in paragraph one of
section I hereof. In ev^ery case where payment is not so completed, the payment
with application up to 10 percent of the notes allotted shall, upon declaration
made by the Secretary of the Treasury in his discretion, be forfeited to the United
States.
2. S}i percent ceriificaies of indebtedness of Series A-1963,—Coupons dated
February 15, 1963, must be attached to the certificates when surrendered. Accrued interest from August 15 to September 15, 1962 ($2.94837 per $1,000) plus
the payment ($5.00 per $1,000) due to the subscriber on account of the issue
price of the notes will be paid to subscribers following acceptance of the certificates.
3. 2ys percent notes of Series A-1963.—Coupons dated February 15, 1963,
must be attached to the notes when surrendered. Accrued interest from August
15 to September 15, 1962 ($2.21128 per $1,000) plus the payment ($1.00 per
$1,000) due to the subscriber on account of the issue price of the new notes will
be paid to subscribers following acceptance of the notes.
4. 3% percent notes of Series E-1963.—Coupons dated February 15, 1963,
must be attached to the notes in bearer form when surrendered. Accrued interest from August 15 to September 15, 1962 ($2.73777 per $1,000) plus the
payment ($4.00 per $1,000) due to the subscriber on account of the issue price
of the new notes will be paid to subscribers. Payments will be made in the case
of bearer notes following their acceptance and in the case of registered notes
following discharge of registration. In the case of registered notes, the payment

188

1963 REPORT OF THE SECRETARY OF THE TREASURY

will be made by check drawn in accordance with the assignments on the notes
surrendered, or by credit in , any account maintained by a banking institution
with the Federal Reserve Bank of its district.
5. 5)4 percent ceriificates of indebtedness of Series B-1963.—Coupons dated
November 15, 1962, and May 15, 1963, must be attached to the certificates when
surrendered. Accrued interest from May 15 to September 15, 1962 ($10.86277
per $1,000) plus the payment ($4.00 per $1,000) due to the subscriber on account
of the issue price of the notes will be paid to subscribers following acceptance of the
certificates.
6. 5J4 percent notes of Series D-1963.—Coupons dated November 15, 1962,
and May 15, 1963, must be attached to the notes in bearer form when surrendered.
Accrued interest from May 15 to September 15, 1962 .($10.86277 per $1,000) plus
the payment ($4.00 per $1,000) due to the subscriber on account of the issue price
of the new notes will be paid to subscribers. Payments will be made in the case of
bearer notes following their acceptance and in the case of registered notes following
discharge of registration. In the case of registered notes, the payment will be
made by check drawn in accordance with the assignments on the notes surrendered,
or by credit in any account maintained by a banking institution with the Federal
Reserve Bank of its district.
7. 4 percent notes of Series B-1963.—Coupons dated November 15, 1962, and
May 15, 1963, must be attached to the notes when surrendered. Accrued interest
from May 15 to September 15, 1962 ($13.36957 per $1,000) plus the payment
($10.00 per $1,000) due to the subscriber on account of the issue price of the new
notes will be paid to subscribers following acceptance of the notes.
V. ASSIGNMENT OF REGISTERED SECURITIES

1. After allotment Treasury notes of Series D-1963 and Series E-1963 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 to a
Federal Reserve Bank or branch or to the Office of the Treasurer of the United
States, Washington 25, D.C. The securities must be delivered at the expense and
risk of the holder. If the new notes are desired registered in the same name as the
securities surrendered in exchange, the assignment should be to ''The Secretary
of the Treasury for exchange for 3% percent Treasury notes of Series A-1967'';
if the new notes are desired registered in another name, the assignment should be
to ' T h e Secretary of the Treasury for exchange for 3% percent Treasury notes of
Series A-1967 in the name of
"; if new 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 A-1967 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
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,

Secreiary of the Treasury.
DEPARTMENT CIRCULAR NO. 18-62.

PUBLIC DEBT

TREASURY

DEPARTMENT,

Washington, October 29, 1962.
I. OFFERING OF NOTES

1. The Secretary of the Treasury, pursuant to the authority of the Second
Liberty Bond Act, as amended, invites subscriptions, at par, from the people of

EXHIBITS

189

the United States for notes of the United States, designated 3}^ percent Treasury
notes of Series B-1965, in exchange for any of the following securities, singly or in
combinations aggregating $1,000 or multiples thereof:
3% percent Treasury notes of Series C-1962, maturing November 15, 1962;
3}i percent Treasury notes of Series H-1962, maturing November 15, 1962;
2>i percent Treasury bonds of 1959-62, maturing December 15, 1962; or
2% percent Treasury bonds of 1960-65, called for redemption on December 15,
1962.
Interest will be adjusted in the case of the 2}i percent Treasury bonds of 1959-62
and the 2% percent Treasury bonds of 1960-65 as set forth in section IV hereof.
Dehvery of the new notes will be made on November 15, 1962. The amount of
the offering under this circular will be limited to the amount of eligible securities
tendered in exchange and accepted. The books will be open only on October 29
through October 31, 1962, for the receipt of subscriptions for this issue.
2. In addition to the offering under this circular, holders of the eligible securities
are offered the privilege of exchanging all or any part of such securities for SYs percent Treasury certificates of indebtedness of Series D-1963, or 4 percent Treasury
bonds of 1972, which offerings are set forth in Department Circulars, Public
Debt Series—Nos. 17-62 and 19-62, respectively, issued simultaneously with this
circular.
II. DESCRIPTION OF NOTES

1. The notes will be dated November 15, 1962, and will bear interest from that
date at the rate of 3>4 percent per annum, payable semiannually on May 15 and
November 15 in each year until the principal amount becomes payable. They
will mature November 15, 1965, 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 25, 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 for the face amount of notes allotted hereunder must be made on
the date shown in paragraphs 2, 3, and 4 below, and may be made only in securities
of the four issues enumerated in section I hereof, which will be accepted at par,
and should accompany the subscription.
2. sy^ percent notes of Series C-1962 and sy^ percent notes of Series H-1962.
Payment with maturing notes of Series C-1962 or Series H-1962 must be completed

190

19 63 REPORT OF THE SECRETARY OF THE TREASURY

on or before November 15, 1962, or on later allotment. Coupons dated November 15, 1962, should be detached from notes in bearer form and cashed when due.
In the case of registered notes of Series H-1962, the final interest due on November 15, 1962, will be paid, following discharge of registration, by check drawn in
accordance with the assignments on the notes surrendered, or by credit in any
account maintained by a banking institution with the Federal Reserve Bank of
its district.
3. 2]4: percent bonds of 1959-62. Payment with bonds of 1959-62 must be
completed on or before November 15, 1962, or on later allotment. Coupons
dated December 15, 1962, must be attached to the bonds in bearer form when
surrendered. Accured interest from June 15, 1962, to November 15, 1962
($9.40574 per $1,000) will be paid to subscribers and the payments will be made 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.
4. 2 ^ percent bonds of 1960-65, called for redemption on December 15, 1962.
Payment with the called bonds of 1960-65 must be completed on or before
November 15, 1962, or on later allotment, together with accrued interest from
November 15, 1962, to December 15, 1962 ($2.90055 per $1,000), on the new notes
to be issued. Coupons dated December 15, 1962, should be detached from bonds in
bearer form and cashed when due. Coupons dated June 15,1963, and all subsequent
coupons, must be attached to the called bonds in bearer form when surrendered.
Final interest due December 15, 1962, on registered bonds will be paid on December 15,1962, following discharge of registration, 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.
Delivery of the new notes will be made upon completion of payment therefor on
November 15, 1962.
V. ASSIGNMENT OF REGISTERED SECURITIES

1. Treasury notes of Series H-1962 and Treasury bonds of 1959-62 and 1960-65
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 25, D.C. The securities
must be delivered at the expense and risk of the holder. If the new notes are
desired registered in the same name as the securities surrendered, the assignment
should be to "The Secretary of the Treasury for exchange for Z}i percent Treasury notes of Series B-1965"; if the new notes are desired registered in another
name, the assignment should be to "The Secretary of the Treasury for exchange
for 3H percent Treasury notes of Series B-1965 in the name of
";
if new notes in coupon form are desired, the assignment should be to "The Secretary
of the Treasury for exchange for 33^ percent Treasury notes of Series B-1965 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
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 ma}'- 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 ihe fiscal year 1963

Date of
issue

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

1962
Sept. 15

1967
Aug. 15

1962
1962
Sept. 12 1 Sept. 20

Nov. 15

1965
Nov. 15

Oct. 31 2 Nov. 15

1968
15

1967
Feb. 15

1963
1963
Feb. 28 3 •4 Mar. 15

Department circular
Date of
prehminary announce
ment
Number

1962
Sept. 5

Date

Concurrent
exchange
offering
circular
number

15-62

1962
Sept. 10

16-62

Oct. 25

18-62

Oct. 29

17-62,19-62

1963
Feb. 20

4-63

1963
Feb. 21

5-63, 6-63

Apr. 24

9-63

Apr. 25

8-63

Treasury notes offered for exchange

3M percent Series A-1967 issued at prices indicated below in exchange for—
33^ percent Series A-1963 certificates maturmg Feb. 15, 1963 (99.50);
25/g percent Series A-1963 notes maturing Feb. 15, 1963 (99.90);
33^ percent Series E-1963 notes maturing Feb. 15, 1963 (99.60);
33| percent Series B-1963 certificates maturing May 15, 1963 (99.60);
334 percent Series D-1963 notes maturing May 15, 1963 (99.60);
4 percent Series B-1963 notes maturing May 15, 1963 (99.00).
33^ percent Series B-1965 issued at par in exchange for—
3 ^ percent Series C-1962 notes maturing Nov. 15, 1962;
33| percent Series H-1962 notes maturing Nov. 15, 1962;
234 percent Treasury bonds of 1959-62 maturmg Dec. 15, 1962;
2M percent Treasury bonds of 1960-65, called for redemption on Dec. 15, 1962.
3 ^ percent Series B-1967 issued at prices indicated below in exchange for— . . .
33^ percent Series C-1963 certificates maturing Aug. 15, 1963 (99.50);
23^ percent Treasury bonds of 1963 maturing Aug. 15, 1963 (99.90);
33/g percent Series D-1963 certificates maturing Nov. 15, 1963 (99.70);
3 percent Treasury bonds of 1964 maturmg Feb. 15, 1964 (99.90).
3/^ percent Series B-1966 (additional issue) issued at par in exchange for—
334 percent Series B-1963 certificates maturmg May 15, 1963;
4 percent Series B-1963 notes maturhig May 15, 1963;
33€ percent Series D-1963 notes maturmg May 15, 1963.

1 See Department Circular No. 15-62, sees. I l l and IV, in this exhibit, for provisions
for subscription and payment.
2 See Department Circular No. 18-62, sees. I l l and IV, in this exhibit, for provisions
for subscription and payment.
3 In addition, subscriptions were accepted from individuals through Mar. 8, 1963.
For this purpose individuals were defined as natural persons in their OMTI right.
* Coupons dated Aug. 15,1963, were required to be attached to the 3]^ percent certificates when surrendered. Accrued interest from Feb. 15 to Mar. 15, 1963, ($2.70718
per $1,000), plus the payment of $5.00 per $1,000 due to the subscriber on account of the
issue price of the notes was paid to subscribers. Coupons dated Aug. 15, 1963, were
required to be attached to the 2]^ percent bonds in bearer form when surrendered.
Accrued interest from Feb. 15 to Mar. 15, 1963, ($1.93370 per $1,000), plus the payment
of $1.00 per $1,000 due to the subscriber on account of the issue price of the notes was

1962
1966
May 15 s Feb. 15

May

1 8 May 15

paid to subscribers. Coupons dated May 16 and Nov. 15, 1963, were required to be
attached to the S]ri percent certificates when surrendered. Accrued interest from
Nov. 15,1962, to Mar. 15,1963 ($10.35912 per $1,000), plus the payment of $3.00 per $1,000
due to the subscriber on accoimt of the issue price of the notes was paid to subscribers.
Coupons dated Aug. 15, 1963, and Feb. 15, 1964, were required to be attached to the
3 percent bonds in bearer form when surrendered. Accrued interest from Feb. 15 to Mar.
15,1963 ($2.32044 per $1,000), plus the payment of $1.00 per $1,000 due to the subscriber
on account of the issue price of the notes was paid to subscribers.
5 Interest payable frora May 15, 1963.
6 Coupons dated ^ 3 , Y 15, 1963, were required to be detached from the maturing certificates and notes in bearer form and cashed when due. Accrued interest from"^Feb.
15 to May 15,1963, ($8.91229 per $1,000) on the new notes allotted was paid by subscribers.

Allotments of Treasury notes issued during thefiscal year 1963, by Federal Reserve districts

[In thousands]
3 ^ percent Series A-1967 Treasury notes issued ui exchange for—i
Federal Reserve district

33^ percent
Series A-1963
certificates
maturing
Feb. 16, 1963 2

2% percent
Series A-1963
Treasury notes
maturing
Feb. 15, 1963 2

33€ percent
Series E-1963
Treasury notes
maturing
Feb. 16, 1963 2

334 percent
Series B-1963
certificates
maturing
May 15, 1963 2

334 percent
Series D-1963
Treasury notes
maturing
May 16, 1963 2

Boston
New York
Philadelphia
Cleveland
Richmond
Atlanta
Chicago
St. Louis
Minneapolis
Kansas City
DaUas
San Francisco
Treasury

$17,541
463,833
12,638
63,973
8,519
18,739
90,421
25,284
11,630
20,949
9,447
28,733
777

$42,667
487,609
22,964
47,293
34,726
29,285
157,147
36,902
14,235
31,929
18,796
29, 756
258

$16,426
329,872
27,984
49, 772
47,326
53,062
148,916
32,332
32,367
46,214
31,168
277,672
1,462

$4,216
65,943
4,224
36,632
3,404
7,122
25,466
6,024
11,448
11, 781
8,291
7,192
243

$46,701
538,911
63,066
169,411
34,299
38,975
191,087
34, 736
24,342
40,665
22,641
100,628
5,502

Total note allotments
Securities eligible for exchange:
Exchanged in concurrent offerings

772,384

952,667

1,093,461

180,885

1,300,863

Total exchanged
Not submitted for exchange
Total securities eligible for exchange
Footnotes at end of table.

4 percent
Series B-1963
Treasury notes
maturing
May 15, 1963 2

$33,368
429,234
33,804
79,516
15,502
20, 744
191,663
37,279
17,684
24,983
38,907
66,688
2,006

Total issued

o
$169,918
2,305,402
154,679
446,497
143,776
167,927
804,688
170,557
111,706
176,621
129,260
600,469
10,238
5,281,628

448,678

259,021

719, 740

401, 989

2,578,547

1,142,711
6, 718,844

1,401,245
1,438,108

1,3.52,482
2,289,982

659, 677
, 126,045

2,020,603
3,026,849

1,383,357
359, 683

7,860,076
18, 959,611

6,861,655

2,839,363

3,642,464

i, 685, 722

6,047,452

1, 743,040

26,819,586

370,327

378,792

>
K!

>
d

Allotments of Treasury notes issued during ihe fiscal year 1963, by Federal Reserve districis- - C o n t i n u e d
[In thousands]
Z\^ percent Series B-1965 T r e a s u r y n o t e s issued in exchange for—«

F e d e r a l R e s e r v e district

Boston
NewYork
Philadelphia
Cleveland
Richmond
-Atlanta
Chicago
S t . Louis
Minneapolis
Kansas City
Dallas
SanFrancisco
Treasury

...
_ .
. ...

. . .
.

Total note allotmentsSecurities 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 i ) m i t t e d for exchange

... _

. _

T o t a l securities eligible for exchange

3 ^ percent
Series C-1962
Treiisury n o t e s
maturing
N o v . 15, 1962 4

334 percent
Series H-1962
T r e a s u r y notes
maturmg
N o v . 16, 1962 4

234 p e r c e n t
Treasury bonds
of 1959-62
maturing
D e c . 15, 1962 4

2% percent
Treasury bonds
of 1960-65
called for
r e d e m p t i o n on
D e c . 15, 1962 4

$33, 675
208, 660
15, 242
48, 589
24.306
16; 866
63, 440
12, 744
19, 865
10, 949
9,715
20, Oil
100

$57, 519
447,232
40, 204
177, 651
19,031
38, 966
187,892
46, 613
15,264
36, 586
28, 533
182,862
2,897

$18,118
451,125
14,239
20, 611
9,213
28, 718
165, 662
13,360
13, 741
16, 682
19, 471
35, 823
1,041

$44, 875
317,901
34.315
71,338
42, 618
22. 459
77, 761
40, 487
12, 056
13, 073
14, 869
13,418
7,622

$154. 087
1, 424,818
104, 000
318, 089
95,168
107, 009
494, 655
113,104
60, 926
77,290
72,588
252,114
11, 660

483, 962

1, 281,150

807, 604

712, 792

3.285, 608

T o t a l Issued

567,161

4, 689,071

1,243,086

699, 857

7,199,175

1, 051,123
91, 833

5, 970,221
111, 674

2, 050, 690
218, 786

1, 412, 649
72, 734

10,484, 683
494, 926

^ 1,142,956

6, 081, 795

2, 269,475

1, 485,383

10, 979, 609

Footnotes at end of table.

CO
CO

Allotments of Treasury notes issued during ihe fiscal year 1963, by Federal Reserve districts- -Continued
CD

[In thousands]
3^^ p e r c e n t Series B-1967 T r e a s u r y n o t e s issued i n exchange for—3

3 H p e r c e n t Series B-1966 T r e a s u r y notes issued i n
exchange for—3

SH p e r c e n t
2H p e r c e n t
33^^ p e r c e n t
3 percent
Series C-1963
Treasury
Series D-1963
Treasury
certificates
b o n d s of 1963 certificates
b o n d s of 1964
maturing
maturing
maturing
maturing
A u g . 15, 19635 A u g . 15, 19635 N o v . 15,1963 5 F e b . 15, 1964 5

F e d e r a l R e s e r v e district

Boston
New York
PhiladelphiaCleveland.. . .
Richmond
Atlanta .
Chicago
St L o u i s
Minneapohs
Kansas City
Dallas
.
San Francisco
Treasury

. .
.

.
. . . . . . .

...

Total note 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
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 e x c h a n g e . ._

Total
issued

Total
issued
O
S3

$48,155
572, 084
16, 001
47, 343
20, 318
27, 205
92, 464
6,970
5,592
14,907
34, 986
69, 949
4,006

$36,499
1, 284,310
64, 622
55, 550
44, 592
50, 650
248, 540
74, 261
35, 024
51, 595
34, 773
291, 764
3,205

$7,435
109, 581
2,794
6,150
10,113
6.923
43, 988
2,230
2,470
3,885
2,901
3, 407
4,008

$16, 546
369, 969
16,183
35, 479
37, 966
54, 709
129, 767
34,465
30,204
28, 982
33, 612
55, 785
1,618

$108, 635
2,335, 944
99, 600
144, 522
112, 989
139, 487
514, 759
117, 926
73, 290
99, 369
106, 272
420, 905
12, 837

$15,814
715, 635
18, 938
38,312
13, 413
53, 227
220, 088
49, 603
9,293
18,157
22, 076
221,132
3,880

$39, 025
271, 995
14, 474
47, 462
14, 071
21, 266
111, 280
25, 574
22, 557
21,105
16, 556
21, 081
1,853

$20,194
640, 697
33,882
65, 943
23, 594
68, 970
165, 644
43, 717
27,146
34, 056
46, 637
79, 660
4,631

$76,033
1, 628,327
67, 294
151,717
51, 078
133,463
497, 012
118 894
58, 996
73, 318
85 269
321, 873
10 364

959, 980

2,275,385

205, 885

845, 285

4, 286, 535

1, 399, 568

628, 299

1, 244, 771

3, 272, 638

710,819

580, 972

95, 720

220, 338

1, 607, 849

3, 768, 044

289,148

1, 635, 968

5, 693,160

1, 670, 799
5,180, 635

2, 856, 357
1, 460,709

301, 605
4, 554, 059

1, 065, 623
1, 634, 301

5, 894, 384
12, 829, 704

5,167, 612
116,865

917, 447
265, 916

2, 880, 739
146,110

8, 965, 798
528 891

6, 851, 434

4,317,066

4, 855, 664

2, 699, 924

18, 724, 088

5, 284,477

1,183,363

3, 026, 849

9,494, 689

1 These exchanges were advance refundings. All subscriptions were allotted in full.
2 4 percent Treasury bonds of 1972 were also offered in exchange for this security.
3 Subscriptions were allotted in fall.
4 33^^ percent Series D-1963 certiflcates of indebtedness and 4 percent Treasury bonds
of 1972 were also offered in exchange for this security.

334 p e r c e n t
4 percent
SH p e r c e n t
Series B-1963 Series B-1963 Series D-1963
certificates
Treasury
Treasury
maturing
notes
notes
maturing
M a y 15,1963 6 m a t u r i n g
M a y 15, 1963 e M a y 15,1963 6

5 S% percent Treasury bonds of 1971 (additional issue) and 4 percent Treasury bonds
of 1980 (additional issue) were also offered in exchange for this security.
6 SH percent Series B-1964 certificates of indebtedness were also issued in exchange
for this security.'

a
>
o

>
Ul

d
Hi

EXHIBITS

195

E X H I B I T 3.—Treasury bonds
Six Treasury circulars representative of t h e thirteen bond offerings during t h e
fiscal year 1963 are r e p r o d u c e d in this exhibit: a cash offering; an exchange offering for m a t u r i n g issues; two exchange offerings (additional issues) for U.S. savings
bonds of Series F a n d G m a t u r i n g during t h e calendar years 1963 and 1964; an
advance refunding exchange offering; a n d a cash offering of bonds sold t h r o u g h
competitive bidding. Circulars pertaining t o t h e other bond offerings are similar
in form a n d therefore are not reproduced in this report. However, t h e essential
details for each issue are summarized in t h e first table following t h e circulars a n d
t h e final allotments of t h e new bonds are shown in t h e second table. Also reproduced in this exhibit are a public notice of invitation to bid and a supplemental
press release for an offering of bonds sold to a syndicate through competitive
bidding.
D E P A R T M E N T C I R C U L A R N O . 14-62.

PUBLIC DEBT

TKEASURY DEPARTMENT,

Washington, J u l y 30, 1962.
1. O F F E R I N G O F BONDS

1. T h e Secretary of t h e Treasury, p u r s u a n t to t h e a u t h o r i t y of t h e Second
Liberty Bond Act, as amended, invites subscriptions, subject to allotment, a t
101 percent of their face value a n d accrued interest, from t h e people of t h e United
States for bonds of t h e United States, designated 4>^ percent Treasury bonds of
1987-92. T h e a m o u n t of t h e offering under this circular is u p to $750,000,000, or
thereabouts. I n addition t o t h e a m o u n t offered for public subscription, t h e
Secretary of t h e Treasury reserves t h e right t o allot u p to $50,000,000 of these
bonds t o Government investment accounts. T h e following notes m a t u r i n g
August 15, 1962, will be accepted a t par in p a y m e n t or exchange, in whole or in
p a r t , for t h e bonds subscribed for, to t h e extent such subscriptions are allotted by
t h e Treasury:
4 percent Treasury notes of Series B-1962; or 3}4 percent Treasury notes of
Series G-1962.
T h e books will be open only on July 30, 1962, for the receipt of subscriptions for
this issue.
2. Deferred p a y m e n t for bonds allotted hereunder m a y be made as provided in
section I V hereof b y any of t h e following subscribers, who for this purpose are
defined as savings-type investors:
Pension a n d retirement funds—public and private
E n d o w m e n t funds
Common t r u s t funds under Regulation F of t h e Board of Governors of t h e
Federal Reserve System
Insurance companies
M u t u a l savings b a n k s
F r a t e r n a l benefit associations a n d labor unions' insurance funds
Savings a n d loan associations
Credit unions
Other savings organizations (not including commercial banks)
States, political subdivisions, or instrumentalities thereof, and public funds.
II.

DESCRIPTION OF BONDS

1. T h e bonds wih be dated August 15, 1962, and will bear interest from, t h a t
date a t t h e r a t e of 4}1 percent per a n n u m , payable semiannually on F e b r u a r y 15
and August 15 in each year until t h e principal a m o u n t becomes payable. T h e y
will m a t u r e August 15, 1992, b u t m a y be redeemed a t t h e option of t h e United
States on and after August 15, 1987, in whole or in part, a t par a n d accrued
interest, on a n y interest day or days, on 4 m o n t h s ' notice of redemption given
in such m a n n e r as t h e Secretary of t h e Treasury shall prescribe. I n case of partial
redemption t h e bonds to be redeemed will be determined by such m e t h o d as m a y
be prescribed b y t h e Secretary of t h e Treasury. F r o m t h e d a t e of redemption
designated in any such notice, interest on t h e bonds called for redemption shall
cease.
2. T h e income derived from t h e bonds is subject to all taxes imposed under
t h e Internal Revenue Code of 1954. T h e bonds are subject to estate, inheritance,
gift, or other excise taxes, whether Federal or State, b u t are exempt from all

196

1963 REPORT OF THE SECRETARY OF THE TREASURY

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 representatives of the deceased owner's estate, at par and accrued interest to date of
payment, 1 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'Jwithin 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 25, D.C.
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 provided the names of the customers are set forth in such subscriptions.
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 10 percent of
the combined amount of time and savings deposits, including time certificates
of deposit, or 25 percent of the combined capital, surplus and undivided profits
of the subscribing bank, whichever is greater. Subscriptions will be received
without deposit from commercial and other banks for their own account, Federally1 An exact half-year's interest is computed for each full half-yeai* 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 Jan. 16 through Feb. 16, and from July 16 through Aug. 15 (both dates
inclusive) in each year.
3 Copies of Form PD 1782 may be obtamed from any Federal Reserve Bank or from the Treasury Department, Washington 25, D.C.

EXHIBITS

197

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. Subscriptions
from all others must be accompanied by payment (in cash or in notes of the two
issues enumerated in section I hereof, which will be accepted at par) of 10 percent
of the amount of bonds applied for, not subject to withdrawal until after allotment. Registered notes submitted as deposits should be assigned as provided
in section V hereof. Following allotment, any portion of the 10 percent payment
in excess of 10 percent of the amount of bonds allotted may be released upon
the request of the subscribers.
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 bonds
of this issue, until after.midnight July 30, 1962.
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 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 101 percent of their face value and accrued interest for bonds
allotted hereunder must be made or completed on or before August 15, 1962, or
on later allotment, in cash or by exchange of notes of the two issues enumerated
in section I hereof, which will be accepted at par; provided, however, that where
a subscriber eligible to defer payment under section I hereof elects to defer payment for part of the bonds allotted, not less than 30 percent of the bonds allotted
must have been paid for by August 15, 1962, not less than 60 percent must have
been paid for by September 15, 1962, and full payment must be completed by
October 15, 1962. All payments made subsequent to August 15, 1962, must be
accompanied by accrued interest from that date, at the rate of $0.12 per $1,000
per day. In the event allotments are less than a rate of 10 percent of the amount
subscribed for, the amount of the deposit in excess of the par amount of the bonds
allotted hereunder will be returned to the subscriber. Where partial payment
for bonds allotted is to^be deferred beyond August 15, 1962, delivery of 5 percent
of the total par amount of bonds allotted, adjusted to the next higher $500, will
be withheld from all subscribers (except States, political subdivisions, or instrumentalities thereof, and public pension and retirement and other public funds)
until payment for the total amount allotted has been completed. In every case
where payment is not so completed the 5 percent so withheld shall, upon declaration made by the Secretary of the Treasury in his discretion, be forfeited to the
United States. In all other cases where payment is not completed on or before
August 15, 1962, or on later allotment, the payment with application up to 10
percent of the amount of bonds allotted shall, upon declaration made by the Secretary of the Treasury in his discretion, be forfeited to the United States. Any
qualified depositary will be permitted to make payment in its Treasury tax and
loan account for bonds allotted to it for itself and its customers which are paid
for in cash 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. Where
payment is made with bearer notes, coupons dated August 15, 1962, should be
detached and cashed when due by holders. In the case of registered notes, the
final interest due on August 15, 1962, will be paid by check drawn in accordance
with the assignments on the notes surrendered, or by credit in any account maintained by a banking institution with the Federal Reserve Bank of its district.
V. ASSIGNMENT OF REGISTERED NOTES

1. Treasury notes of Series G-1962 in registered form tendered as deposits and
in payment for bonds allotted hereunder should be assigned by the registered
payees or assignees thereof, in accordance with the general regulations of the

198

19 63 REPORT OF THE SECRETARY OF THE TREASURY

Treasury Department, in one of the forms hereafter set forth. Notes tendered
in payment should be surrendered to a Federal Reserve Bank or branch or to the
Office of the Treasurer of the United States, Washington 25, D.C. The notes
must be delivered at the expense and risk of the holder. If the bonds are desired
registered in the same name as the notes surrendered, the assignment should be
to "The Secretary of the Treasury for 4% percent Treasury bonds of 1987-92";
if the bonds are desired registered in another name, the assignment should be to
"The Secretary of the Treasury for 4>i percent Treasury bonds of 1987-92 in the
name of
"; if bonds in coupon form are desired, the assignment should be to "The Secretary of the Treasury for 4}^ percent Treasury bonds
of 1987-92 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.
DOUGLAS DILLON,

Secreiary of the Treasury.

DEPARTMENT CIRCULAR NO. 19-62.

PUBLIC DEBT

TREASURY

DEPARTMENT,

Washington, October 29, 1962.
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 4 percent Treasury
bonds of 1972, in exchange for any of the following securities, singly or in combinations aggregating $500 or multiples thereof:
3% percent Treasury notes of Series C-1962, maturing November 15, 1962;
SYi percent Treasury notes of Series H-1962, maturing November 15, 1962;
2>{ percent Treasury bonds of 1959-62, maturing December 15, 1962; or
2 ^ percent Treasury bonds of 1960-65, called for redemption on December
15, 1962.
Interest will be adjusted in the case of the 2}^ percent Treasury bonds of 1959-62
and the 2% percent Treasury bonds of 1960-65 as set forth in section IV hereof.
Delivery of the new bonds will be made on November 15, 1962. The amount
of the offering under this circular will be limited to the amount of eligible securities
tendered in exchange and accepted. The books will be open only on October
29 through October 3r, 1962, for the receipt of subscriptions for this issue.
2. In addition to the offering under this circular, holders of the eligible securities
are offered the privilege of exchanging all or any part of such securities for 3>^
percent Treasury certificates of indebtedness of Series D-1963, or 3}^ percent
Treasury notes of Series B-1965, which offerings are set forth in Department
Circulars, Public Debt Series—Nos. 17-62 and 18-62, respectively, issued simultaneously with this circular.
II. DESCRIPTION OF BONDS

1. The bonds will be dated November 15, 1962, and will bear interest from
that date at the rate of 4 percent per annum, payable on a semiannual basis
on February 15 and August 15, 1963, and thereafter on February 15 and August
15 in each year until the principal amount becomes payable. They will mature
February 15, 1972, 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

EXHIBITS

199

all taxation now or hereafter imposed on t h e principal or interest thereof by any
State, or any of t h e possessions of t h e United States, or by any local taxing
authority.
3. T h e bonds will be acceptable to secure deposits of public moneys. T h e y
will not be acceptable in p a y m e n t of taxes.
4. Bearer bonds with interest coupons attached, a n d bonds registered as t o
principal a n d interest, will be issued in denominations of $500, $1,000, $5,000,
$10,000, $100,000, a n d $1,000,000. Provision will be m a d e for t h e interchange
of bonds of different denominations a n d of coupon and registered bonds, a n d
for t h e transfer of registered bonds, under rules a n d regulations prescribed by
t h e Secretary of t h e Treasury.
5. T h e bonds will be subject to t h e general regulations of t h e Treasury D e p a r t ment, now or hereafter prescribed, governing United States bonds.
III. SUBSCRIPTION AND ALLOTMENT

1. Subscriptions will be received at t h e Federal Reserve Banks a n d branches
a n d a t t h e Office of t h e Treasurer of t h e United States, Washington 25, JD.C.
Banking institutions generally m a y submit subscriptions for account of customers,
b u t only t h e Federal Reserve Banks a n d t h e Treasury D e p a r t m e n t are authorized
to act as official agencies.
2. T h e Secretary of t h e Treasury reserves t h e right to reject or reduce any
subscription, a n d t o allot less t h a n t h e a m o u n t of bonds applied for; and any
action he m a y t a k e in these respects shall be final. Subject to these reservations,
all subscriptions will be allotted in full. 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 for the face a m o u n t of bonds allotted hereunder must be made on
the d a t e shown in paragraphs 2, 3, a n d 4 below, and may be made only in securities
of t h e four issues enumerated in section I hereof, which will be accepted a t par,
a n d should accompany t h e subscription.
2. 3% percent notes of Series C-1962 and 3% percent notes of Series H - 1 9 6 2 .
P a y m e n t w i t h m a t u r i n g notes of Series C-1962 or Series H-1962 must be completed on or before November 15, 1962, or on later allotment. Coupons dated
November 15, 1962, should be detached from notes in bearer form and cashed
when due. In the case of registered notes of Series H-1962, t h e final interest
due on November 15, 1962, will be paid, following discharge of registration, by
check drawn in accordance with the assignments on the notes surrendered, or by
credit in any account maintained by a banking institution with the Federal Reserve
Bank of its district.
3. 2Y4. percent bonds of 1959-62. P a y m e n t with bonds of 1959-62 m u s t be
completed on or before November 15, 1962, or on later allotment. Coupons
dated December 15, 1962, must be attached t o the bonds in bearer form when
surrendered.
Accrued interest from J u n e 15, 1962, t o November 15, 1962
($9.40574 per $1,000) will be paid to subscribers and the p a y m e n t s will be made
in the case of bearer bonds following their acceptance and in t h e case of registered
bonds following discharge of registration. I n the case of registered bonds, the
p a y m e n t will be made by check drawn in accordance with t h e assignments on
t h e bonds surrendered, or by credit in any account maintained by a banking
institution with the Federal Reserve Bank of its district.
4. ^% percent bonds of 1960-65, called for redemption on December 15, 1962.
P a y m e n t with t h e called bonds of 1960-65 must be completed on or before November 15, 1962, or on later allotment, together with accrued interest from November
15, 1962, to December 15, 1962 ($3.26087 per $1,000) on t h e new bonds to be
issued. Coupons dated December 15, 1962, should be detached from bonds in
bearer form and cashed when due. Coupons dated J u n e 15, 1963, and all subsequent coupons, must be a t t a c h e d to the called bonds in bearer form when
surrendered. Final interest due December 15, 1962, on registered bonds will be
paid on December 15, 1962, following discharge of registration, by check drawn
in accordance with t h e assignments on t h e bonds surrendered, or by credit in
a n y account maintained by a banking institution with t h e Federal Reserve Bank
of its district. Delivery of t h e new bonds will be made upon completion of
p a y m e n t therefor on November 15, 1962.
707-484—64

200

1963 REPORT OF THE SECRETARY OF THE TREASURY
V. ASSIGNMENT OF REGISTERED SECURITIES

1. Treasury notes of Series H-1962 and Treasury bonds of 1959-62 and 1960-65
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 25, D.C. The securities
must be delivered at the expense and risk of the holder. If the new bonds are
desired registered in the same name as the securities surrendered, the assignment
should be to "The Secretary of the Treasury for exchange for 4 percent Treasury
bonds of 1972"; if the new bonds are desired registered in another name, the
assignment should be to "The Secretary of the Treasury for exchange for 4 percent
Treasury bonds of 1972 in the name of
"; if new bonds in
coupon form are desired, the assignment should be to "The Secretary of the
Treasury for exchange for 4 percent Treasury bonds of 1972 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 off'ering,
which will be communicated promptly to the Federal Reserve Banks.
DOUGLAS

DILLON,

Secretary of the Treasury.

DEPARTMENT CIRCULAR NO. 20-62. PUBLIC DEBT
TREASURY

DEPARTMENT,

Washington, November 15, 1962.
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 99.50 percent of their
face value and accrued interest, for bonds of the United States, designated 3%
percent Treasury bonds of 1971, in exchange for a like face amount of United
States savings bonds of Series F and G maturing in the calendar years 1963 and
1964, which will be accepted at exchange values as provided 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, 1962,
and an adjustment in favor of subscribers representing the discount from the
face value of the bonds will be made as provided 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 for the receipt of subscriptions for this issue from all classes of
subscribers from November 19 through November 26, 1962, and in addition,
subscriptions may be submitted by individuals through November 30, 1962. For
this purpose individuals are defined as natural persons in their own right. Delivery
of the new bonds will be made on December 17, 1962.
2. In addition to the offering under this circular, holders of the eligible Series
F and G bonds are offered the privilege of exchanging all or any part of such bonds
for 4 percent Treasury bonds of 1980 (additional issue) which offering is set forth
in Department Circular, Public Debt Series—No. 21-62, issued simultaneously
with this circular.

EXHiBrrs

201

II. DESCRIPTION OF BONDS

1. The bonds now offered will be an addition to and will form a part of the
series of 3% percent Treasury bonds of 1971 issued pursuant to Department Circular, PubHc Debt Series—No. 11-62, dated April 30, 1962, 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, 1962. Subject to the provision for the accrual of interest from December
15, 1962, on the bonds now offered, the bonds are described in the following
quotation from Department Circular, Public Debt Series—No. 11-62:
" 1 . The bonds will be dated May 15, 1962, and will bear interest from that
date at the rate of 3% percent per annum, payable semiannually on November
15, 1962, and thereafter on May 15 and November 15 in each year until the
principal amount becomes payable. They will mature November 15, 1971, 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 fromi 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 ta:dng
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 25, D.C.
Banking institutions generally, and paying agents eligible to process bonds under
Treasury Department Circular No. 888, Revised, may submit exchange 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 for the face amount of bonds allotted hereunder must be made on or
before December 17, 1962, or on later allotment, and may be made only in a like
face amount of United States savings bonds of Series F and Series G maturing
from January 1, 1963, to April 1, 1964, inclusive, and any cash difference necessary
to make up an even $500 multiple, which bonds and cash should accompany
the subscription, together with the net amount, if any, to be collected from the
subscriber as set forth in tables I and II at the end of this circular. The Series
F and G bonds will be accepted in the exchange at amounts set forth thereunder
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 one percent per annum more than would otherwise accrue
from December 15, 1962, to the maturity dates of their bonds, and will receive an
investment yield of approximately 3.94 percent on the 3% percent marketable
bonds received in exchange for the period from the maturity dates of their Series F
and G bonds to November 15, 1971. All.subscribers will be charged the interest
from November 15, 1962, to December 15, 1962 ($0.32 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, which also show the net amounts to be collected from or paid to subscribers for each $100 (face amount) of bonds accepted
in exchange.

202

19 63 REPORT OF THE SECRETARY OF THE TREASURY

(a) Series F honds.—'The exchange values of Series F bonds, the differences
between such values and the offering price of the 3% percent bonds, the interest
which will accrue on the new bonds and the total amounts to be collected from
or paid to holders of Series F bonds per $100 (face amount) are as set forth in
table I.
TABLE I.—For Series F bonds

F bonds
m a t u r i n g on t h e
first d a y of—

Exchange
values of F
bonds per
$100 (face
amt.)

COL. 1
1963
January
February._
March
April
May
June
July
August
September
October
November
December

.^
__

C h a r g e or credit for
differences between
$99.50 (offering price
per $100 of n e w
bonds) aiid exchange
values of F b o n d s

T o t a l a m o u n t s per $100
(face a m t . ) of F
b o n d s accepted i

Charge

Credit

Interest
N o v . 16 to
D e c . 15,
1962, to b e
charged on
new bonds
per $100
(face a m t . )
of F b o n d s

COL. 2

COL. 3

COL. 4

$99.88
99.64
99.40
99.16
98.92
98.68
98.44
98.20
97.96
97.72
97.48
97.24

$0.10
0.34
0.58
0.82
1.06
1.30
1.54
1.78
2.02
2.26

$0.32
0.32
0.32
0.32
0.32
0.32
0.32
0.32
0.32
0.32
0.32
0.32

97.00
96.76
96.52
96.28

2.50
2.74
2.98
3.22

0.32
0.32
0.32
0.32

1964
January
February
Marcb
•:
April

$0.38
0.14

TOBE
TOBE
COLPAID TO LECTED
SUBFROM
SCRIBSUBERS
SCRIB(COLS. 3
ERS
m i n u s 4) 2 ( C O L S . 2
plus 4
m i n u s 3)
COL. 5

COL. 6

3 Interest
accruing
per $100 o n
new bonds
from
N o v . 15,
1962, to
maturity
dates of F
b o n d s in
196 3 or 1964

COL. 7

$0.18
0.42
0.66
0.90
L14
L38
L62
L86
2.10
2.34
2.58

$0.50
0.83
1.13
1.47
L79
2.12
2.43
2.76
3.09
3.40
3.73
4.05

2.82
3.06
3.30
3.54

4.38
4.71
5.01
5.34

$0.06

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 $99.82 ($99.50 issue price plus $0.32 accrued interest).
2 The net amount to be paid to subscribers will be paid following acceptance of the bonds by the agency
through which the exchange is made.
3 Including $0.32 per $100 paid by subscriber as accrued interest from Nov. 15, 1962, to Dec. 15, 1962
(O OL. 4). This data is included for information only.

(b) Series G Bonds.—The exchange values of Series G bonds, the differences
between such values and the offering price of the 3% 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 or paid to holders of
Series G bonds per $100 (face amount) are as set forth in table II.
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 quahfied ih 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 Revisiori, as amended, or the special endorsement 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:

203

EXHIBITS

(a) I am the owner of this bond and hereby request exchange for 3%% Treasury
bonds of 1971 in bearer form to be delivered to (insert name and address of person
to whom delivery is to be made).
(b) I am the owner of this bond and hereby request exchange for 3Ji% Treasury
bonds of 1971 registered in the name of (insert exact registration desired—see
section V hereof).
TABLE II.—For Series G bonds
Charge or credit
for differences
b e t w e e n $99.50
(offering price
per $100 of n e w
Exchange
bonds) a n d
values of exchange values
G bonds
G bonds
of G b o n d s
m a t u r i n g on t h e per $100
(face
first d a y of—
amt.)
Charge

COL. 1
1963
January
February
March
April
May
.Tune
July
August
September
October
November
December
1964
January
February
March
April

__-

Interest
to be
credited
on G
bonds
per $100
(tace
amt.)

$0.48
0.44
0.40
0.37
0.33
0.30
0.27
0.23
0.19
0.15
0.12
0.09

"$o."oi"
0.05

Interest
N o v . 16 to
D e c . 16,
1962, to be
charged on
new bonds
per $100
(face a m t . )
of G b o n d s

Credit

COL. 2 COL. 3 COL. 4

$99.98
99.94
99.90
99.87
99.83
99.80
99.77
99.73
99.69
99.65
99.62
99.59
99. 56
99.52
99.49
99.45

T o t a l a m o u n t s per $100
(face a m t . ) of G
b o n d s accepted i

0.06
0.02

$1.15
0.94
0.73
0.52
0.31
0.10
0.94
0.73
0.52
0.31
0.10

(^)

0.94
0.73
0.52

TO BE
PAID TO
SUBSCRIBERS
(COLS. 3
plus 4
minus 2
a n d 5) 2

TOBE
COLLECTED
FROM
SUBSCRIBERS
(COLS. 2
plus 5
minus 3
a n d 4)

COL. 6

COL. 7

COL. 5

$0.32
0.32
0.32
0.32
0.32
0.32
0.32
0.32
0.32
0.32
0.32
0.32
0.32
0.32
0.32
0.32

$1.31
1.06
0.81
0.67
0.32
0.08
$0.15
0.86
0.60
0.35
0.11
0.13
0.36
0.64
0.40
0.15

3 Interest
accruing
per $100 on
new bonds
from
Nov,. 15,
1962, to
maturity
dates of G
b o n d s in
1963 or
1964

COL. 8

$0.50
0.83
1.13
1.47
1.79
2.12
2.43
2.76
3.09
3.40
3.73
4.05
4.38
4.71
5.01
5.34

1 In addition, for each $100, or multiple thereof, between the face amount of Series Q bonds submitted
and the face amount of bonds subscribed (to next higher multiple of $600) the subscriber must pay $99.82
($99.60 issue price plus $0.32 accrued interest).
2 The net amount to be paid to subscribers will be paid following acceptance of the bonds by the agency
through which the exchange is made.
3 Including $0.32 per $100, paid by subscriber as accrued interest from Nov. 15,1962, to Dec. 15,1962 (COL.
5). This data is included for information only.
4 Interest will be paid to Jan. 1,1963, on bonds maturing July 1,1963, and Jan. 1,1964, in regular course on
Jan. 1, 1963, by checks mailed by the Treasury Department. As these checks will include unearned
interest for the period from Dec. 15, 1962, to Jan. 1, 1963, each subscriber who tenders these bonds will be
required to make an interest refund of $0.10 per $100 (face amount). The above amounts of $0.15 and $0.36
in COL. 7 include such refunds.
V. REGISTRATION OF BONDS

1. Treasury bonds may be registered only as authorized in Treasury Department
Circular No. 300, Revised, as supplemented. Registration in the name of one
person payable on death to another is not authorized. Registered Treasury bonds
may be transferred to a purchaser only upon proper assignment. Treasury bonds
registered in the form "A or B " may be transferred only upon assignment by or
on behalf of both, except that if one of them is deceased, an assignment by or on
behalf of the survivor will be accepted. Since Treasury bonds are not redeemable before maturity at the option of the owners, the effects of registering them in
the names of two or more persons are important. Information concerning the
effects of various forms of registration may be obtained from any Federal Reserve
Bank or branch, the Office of the Treasurer of the United States, Washington 25,
D . C , or from" banking institutions generally.

204

1963 REPORT OF THE SECRETARY OF THE TREASURY
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 aliotted,
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.
DOUGLAS DILLON,

Secretary of the Treasury.
DEPARTMENT CIRCULAR NO. 21-62.

PUBLIC DEBT

TREASURY DEPARTMENT,

Washington, November 15, 1962.
1. O F F E R I N G OF BONDS

1. The Secretary of the Treasury, pursuant to the authority of the Second
Liberty Bond Act, as amended, invites subscriptions, at 99.50 percent of their
face value and accrued interest, for bonds of the United States, designated 4
percent Treasury bonds of 1980, in exchange for a like face amount of United
States savings bonds of Series F and G maturing in the calendar years 1963 and
1964, which will be accepted at exchange values as provided 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, 1962,
and an adjustment in favor of subscribers representing the discount from the
face value of the bonds will be made as provided 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 for the receipt of subscriptions for this issue from all classes of subscribers from November 19 through November 26,1962, and in addition, subscriptions may be submitted by individuals through November 30, 1962. For this
purpose individuals are defined as natural persons in their own right. Delivery
of the new bonds will be made on December 17, 1962.
2. In addition to the offering under this circular, holders of the eligible Series
F and G bonds are offered the privilege of exchanging all or any part of such bonds
for 3% percent Treasury bonds of 1971 (additional issue) which offering is set
forth in Department Circular, Public Debt Series—No. 20-62, issued simultaneously with this circular.
II. DESCRIPTION OF BONDS

1. The bonds now offered will be an addition to and will form a part of the
series of 4 percent Treasury bonds of 1980 issued pursuant to Department Circulars No. 1020 and Pubhc Debt Series—No. 5-62, dated January 12, 1959, and
February 19, 1962, respectively, will be freely interchangeable therewith, and are
identical in all respects therewith except that interest on the bonds to be issued
undervthis circular will accrue from December 15, 1962. Subject to the provision
for the accrual of interest from December 15, 1962, on the bonds now offered,
the bonds are described in the following quotation from Department Circular
No. 1020:
" 1 . The bonds will be dated January 23, 1959, and will bear interest from that
date at the rate of 4 percent per annum, payable on a semiannual basis on August 15, 1959, and thereafter on February 15 and August 15 in each year until the
principal amount becomes payable. They will mature February 15, 1980, 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.

EXHiBrrs

205

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. Provisions 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 representatives of the deceased owner's estate, at par and accrued interest to date of
payment,^ provided:
(a) that the bonds were actually owned by the decedent at the time of his
death; and
(6) 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 25, D.C.
Banking institutions generally, and paying agents eligible to process bonds under
Treasury Department Circular No. 888, Revised, may submit exchange 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.
1 An exact half-year's interest is computed for each full half-3^ear period irrespective of the actual number
of days in the half year. For a fractional part of any half j^ear, computation is on the basis of the actual
number of days in such half year.
2 The transfer books are closed from Jan. 16 to Feb. 15, and from July 16 to Aug. 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 25, D.C.

206

1963 REPORT OF THE SECRETARY OF THE TREASURY
IV. PAYMENT

1. Payment for the face amount of bonds allotted hereunder must be made on or
before December 17, 1962, or on later allotment, and may be made only in a like
face amount of United States savings bonds of Series F and Series G maturing
from January 1, 1963, to April 1, 1964, inclusive, and any cash difference necessary to make up an even $500 multiple, which bonds and cash should accompany the
subscription, together with the net amount, if any, to be collected from the subscriber as set forth in tables I and II at the end of this circular. The Series F and
G bonds will be accepted in the exchange at amounts set forth thereunder 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 one percent per annum more than would otherwise accrue
from December 15, 1962, to the maturity dates of their bonds, and will receive an
investment yield of approximately 4.04 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 February 15, 1980. All subscribers will be charged the interest from
August 15, 1962, to December 15, 1962 ($1.33 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, which also show the net amounts to be collected from or
paid to 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 set forth in table I.
TABLE I.—For Series F bonds

Exchange
F bonds maturing values of F
bonds per
on the first day
$100 (face
of—
amt.)

COL.l
1963
January.
February
March
April-May
June
Julv
August
September
October
November
December

1964
January
February
March
April

Charge or credit for differences between $99.50
(offering price per $100
of new bonds) and exchange values of F bonds

Charge

Credit

COL. 2

COL. 3

$99.88
99.64
99.40
99.16
98.92
98.68
98.44
98.20
97.96
97.72
97.48
97.24

$0.10
0.34
0.58
0.82
1.06
1.30
1.54
1.78
2.02
2.26

97.00
96.76
96.52
96.28

2. 50
2.74
2.98
3.22

$0.38
0.14

1 Total
amounts per
$100 (face
2 Interest
Interest
amt.) of r
accruing per
bonds
Aug. 15 to
$100 on new
Dec. 16, 1962, accepted
bonds from
to be charged
TO BE
Aug. 15,1962,
on new
bonds per COLLECT- to maturity
ED FROM
dates of F
$100 (face
SUBbonds in 1963
amt.) of F
or 1964
SCRIBERS
bonds
(COLS. 2
plus 4 minus
3)
COL. 4

COL. 5

COL. 6

$1.33
1.33
1.33
1.33
1.33
1.33
1.33
1.33
1.33
1.33
1.33
1.33

$0.95
1.19
1.43
1.67
1.91
2.16
2.39
2.63
2.87
3.11
3.35
3.59

$1.51
1.85
2.15
2.50
2.83
3.17
3.50
3.85
4.18
4.51
4.85
5.17

1.33
L33
1.33
1.33

3.83
4.07
4.31
4.55

5.61
5.85
6.16
6.51

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
$100.83 ($99.50 issue price plus $1.33 accrued interest).
2 Including $1.33 per $100 paid by subscriber as accrued interest from Aug. 15,1962, to Dec. 15,1962 (COL.
4). These data are included for information only.

207

EXHiBrrs

(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 or paid to holders of
Series G bonds per $100 (face amount) are as set forth in table II.
TABLE II.—For Series G Bonds
C h a r g e or credit
for differences
b e t w e e n $99.50
(offering price
per $100 of n e w
bonds) a n d
Exchange
Interest
values of exchange values
tobe
G bonds matur- G bonds
of G b o n d s
credited
per $100
i n g on t h e first
on G
(face
b o n d s per
d a y of—
amt.)
$100 (face
amt.)
Charge C r e d i t

COL.l

COL. 2 COL. 3 COL. 4

T o t a l a m o u n t s per $100
(face a m t . ) of G
b o n d s accepted i
Interest
A u g . 16 to
D e c . 15,
1962,to be
charged on
new bonds
per $100
(face a m t . )
of G b o n d s

COL. 5

TOBE
PAID TO
SUBSCRIBERS
(COLS. 3
plus 4
minus 2
a n d 5) 2

TOBE
COLLECTED
FROM
SUBSCRIBERS
(COLS. 2
plus 6
minus 3
a u d 4)

COL. 6

COL. 7

3 Interest
accruing
per $100 on
new bonds
from Aug.
16, 1962, to
maturity
dates of G
b o n d s in
1963 or 1964

COL. 8

1968
$99.98
99.94
99.90
99.87
99.83
99.80
99.77
99.73
99.69
99.65
99.62
99.69

January
February
March
April
May
June _ _
July
August
September
October
November
December

$0.48
0.44
0.40
0.37
0.33
0.30
0.27
0.23
0.19
0.15
0.12
0.09

$1.15
0.94
0.73
0.52
0.31
0.10
0.73
0.52
0.31
0.10

$1.33
1.33
L33
1.33
L33
1.33
L33
L33
1.33
1.33
1.33
1.33

$0.30
0.05

0.44
0.69
0.93
L16
0.16
0.41
0.66
0.90
L14

$1.51
1.85
2.15
2.50
2.83
3.17
3.50
3.85
4.18
4.51
4.85
5.17

1.37
0.37
0.61
0.86

5.51
5.85
6.16
6.51

$0.25

1964
January
February
March
April

•...

99.56
99.52
99.49 "$0?0"l'
99.46
0.05

0.06
0.02

(^)
0.94
0.73
0.52

L33
L33
1.33
L33

1 In addition, for each $100, or multiple thereof, between the face amount of Series G bonds submitted and
the face amount of bonds subscribed (to next higher multiple of $500) the subscriber must pay $100.83 ($99.50
issue price plus $1.33 accrued interest).
2 The net amount to be paid to subscribers will be paid following acceptance of the bonds by the agency
through which the exchange is made.
3 Including $1.33 per $100 paid by subscriber as accrued interestfrom Aug. 15,1962, to Dec. 15,1962 (C OL. 5).
These data are included for information only.
4 Interest vnW be paid to Jan. 1,1963, on bonds maturing July 1, 1963, and Jan. 1, 1964, in regular course on
Jan. 1,1963, by checks mailed by the Treasury Department. As these checks will include unearned interest
for the period from Dec. 15, 1962, to Jan. 1,1963, each subscriber who tenders these bonds will be required to
make an interest refund of $0.10 per $100 (face amount). The above amounts of $1.16 and $1.37 include such
refunds.

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 endorsement 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:

208

1963 REPORT OF THE SECRETARY OF THE TREASURY

(a) I am the owner of this bond and hereby request exchange for 4% Treasury
bonds of 1980 in bearer form to be dehvered to (insert name and address of person
to whom delivery is to be made).
(b) I am the owner of this bond and hereby request exchange for 4 % Treasury
bonds of 1980 registered in the name of (insert exact registration desired—see
section V hereof).
V. REGISTRATION OF BONDS

1. Treasury bonds may be registered only as authorized in Treasury Department Circular No; 300, Revised, as supplemented. Registration in the name of
one person payable on death to another is not authorized. Registered Treasury
bonds may be transferred to a purchaser only upon proper assignment. Treasury
bonds registered in the form "A or B " may be transferred only upon assignment
by or on behalf of both, except that if one of them is deceased, an assignment by or
on behalf of the survivor will be accepted. Since Treasury bonds are not redeemable before maturity at the option of the owners, the effects of registering them in
the names of two or more persons are important. Information concerning the
effects of various forms of registration may be obtained from any Federal Reserve
Bank or branch, the Office of the Treasurer of the United States, Washington 25,
D . C , or from banking institutions generally.
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 dehvery 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.
DOUGLAS DILLON,

Secretary of the Treasury.

PRESS RELEASE OF DECEMBER 20, 1962
Treasury Secretary Douglas Dillon today issued a public notice of invitation
for bids on $250,000,000 of Treasury bonds of 1988-93. This will be the first sale
of Treasury bonds to an underwriter on the basis of competitive bidding for reoffering to the public. The Treasury announced last September its intention
to test this new technique.
Bids for the bonds will be received at the Federal Reserve Bank of New York
not later than 11:00 a.m., eastern standard time, on Tuesday, January 8, 1963.
The successful bidder will be required to make a bona fide reoffering of all of the
bonds to the investing public.
The bonds will mature on February 15, 1993, but may be called for payment
on February 15, 1988, or any interest payment date thereafter. The bonds will
be dated January 17, 1963. Interest will be payable on February 15 and August
15 of each year until the bonds mature or are called. The first interest coupon,
payable August 15, 1963, will cover interest accrued between January 17, 1963,
and August 15, 1963.
A supplemental notice, to be published on January 2, 1963, will set forth
provisions relating to the coupon rate or rates of interest upon which bids will be
received. Bidders must file a Notice of Intent to Bid at the Federal Reserve Bank
of New York not later than 12:00 noon, eastern standard time, on January 4,
1963.
Payment for the bonds must be made in immediately available funds not later
than 11:00 a.m., eastern standard time, on January 17, 1963.
The public notice of invitation to bid is attached.

EXHIBITS

209

Public notice of invitation to bid on Treasury bonds of 1988-93
TREASURY DEPARTMENT,

Washington, December 20, 1962.
The Secretary of the Treasury, by this notice and under the terms and conditions prescribed in Treasury Department Circular, Public Debt Series No. 2262, invites bids for an issue of bonds of the United States, designated as Treasury
Bonds of 1988-93. The principal amount of the issue hereunder will be $250,000,000, These bonds will be offered only as a single block on a competitive bid
basis.
1. Description of bonds
The bonds will be dated January 17, 1963, and will bear interest from that
date payable on a semiannual basis on August 15, 1963, and thereafter on February 15 and August 15 in each year until the principal amount becomes payable. They will mature February 15, 1993, but may be redeemed at the option
of the United States on and after February 15, 1988, at par and accrued interest,
on any interest day, on four months' notice of redemption given in such manner
as the Secretary of the Treasury shall prescribe. From the date of redemption
designated in any such notice, interest on the bonds called for redemption shall
cease.
If the bonds are owned by a decedent at the time of his death and thereupon
constitute a part of his estate, they will be redeemed at par and accrued inte-rest
at the option of the representative of the estate, provided the Secretary of the
Treasury is authorized by the decedent's estate to apply the entire proceeds of
redemption to payment of the Federal estate taxes on such decedent's estate.
II. Notice of intent
Any individual, organization, syndicate, or other group intending to submit
a bid must file written" notice of such intent with the Federal Reserve Bank of
New York on Form PD 3555 by 12:00 noon, eastern standard time, on January 4,
1963. Notices which are received postmarked to show they were mailed prior
to that time will be treated as having been timely filed. Forms and envelopes
therefor may be obtained from any Federal Reserve Bank or branch or from the
Bureau of the Pubhc Debt, Treasury Department, Washington 25, D.C. The
filing of such notice will not constitute a commitment to bid.
III. Submission of bids
Only bids submitted in accordance with the provisions of this invitation, or
any supplement or amendment hereto, and of Treasury Department Circular,
Public Debt Series No. 22-62, by bidders who have filed notice of their intent
to bid as required by sec. II hereof will be considered. Each bid must be submitted in duplicate on Form PD 3556, enclosed and sealed in an envelope which
will be furnished with the form, and must be received in the Northwest Conference
Room of the Federal Reserve Bank of New York not later than 11:00 a.m., eastern
standard time, on January 8, 1963. Forms and envelopes may be obtained from
any Federal Reserve Bank or branch, or.from the Bureau of the Public Debt,
Treasury Department, Washington 25, D.C.
A bid submitted by a syndicate must be supplemented by a list of its members
which must specify the amount of each member's underwriting participation.
This supplement must be filed by the representative on Form PD 3557 not later
than 12:00 noon on January 8, 1963, at the place designated for receipt of bids.
Each bidder may submit only one bid which must be for the purchase of all
of the bonds described in this invitation. The price to be paid to the United
States by the bidder must be expressed as a percentage of the principal amount
of the bonds in not to exceed five decimals, e.g., 100.01038 percent. Provisions
relating to the coupon rate of interest will be set forth in a supplemental notice
hereto on January 2, 1963.
Each bid must be accompanied by a payment to the Federal Reserve Bank of
New York, as fiscal agent of the United States, of an amount equal to 3 percent of
the principal amount of the bonds in immediately available funds.
IV. Bids—opening—acceptance
Bids will be opened in the Northwest Conference Room of the Federal Reserve
Bank of New York at 11:00 a.m., eastern standard time, on January 8, 1963, and

210

1963 REPORT OF THE SECRETARY OF THE TREASURY

the accepted bid will be announced publicly not later than 2:00 p.m., eastern
standard time, on that date. The bids and the names of the bidders will be considered as matters of public record, including, in the case of a syndicate, the names
of the members and the amount of each member's underwriting participation.
The bid to be accepted will be the one resulting in the lowest basis cost of
money computed from the date of the bonds to the date of maturity determined
in accordance with the terms of this invitation, or any supplement or amendment
hereto, and the provisions of Treasury Department Circular, Public Debt Series
No. 22-62. It shall be a condition of each bid that, if accepted by the Secretary
of the Treasury, the bidder shall make a bona fide reoffering of all of the bonds
to the investing public.
When the successful bidder has been announced, his deposit will be retained
as security for the performance of his obligation and will be applied toward payment of the bonds. Thereafter, the deposits of all other bidders will be returned
immediately. No interest will be allowed on any of the deposits. In the event
that the supplemental notice does not specify a single coupon rate of interest and
bids based on different coupon rates of interest result in identical basis costs of
money computed to maturity, the Secretary of the Treasury will accept the bid
resulting in the lowest interest cost to the first call date. Otherwise, if identical
bids are submitted, the Secretary of the Treasury, in his discretion, shall determine
the bid to be accepted by lot in a manner prescribed by him, unless he proposes
and those who submitted the identical bids agree on a division of the bonds. In
the event of a division of the bonds, the bids of the successful bidders will be
amended accordingly, their deposits will be apportioned and the remainder
refunded immediately.
The Secretary of the Treasury, or his representative, will accept the successful
bid by signing the duplicate copy of the bid form and delivering it to the bidder,
or his representative.
The Secretary of the Treasury, in his discretion, reserves the right to reject any
or all bids.
V. Payment for and delivery of bonds
Payment for the bonds must be made in immediately available funds and must
be completed by the successful bidder not later than 11:00 a.m., eastern standard
time, on January 17, 1963, at the Federal Reserve Bank of New York.
If the bidder desires any registered bonds to be shipped on the paymient date,
he must notify the Federal Reserve Bank of New York and furnish the necessary
registration information within two days after the award. All other bonds will
be delivered in bearer form and will be available on the payment date at Federal
Reserve Banks and branches. Shipment of the bonds will be made on the payment date, at the risk and expense of the United States, to any place or places in
the United States designated by the bidder. If necessary, the Treasury will issue
interim receipts for the bonds on the payment date.
DOUGLAS DILLON,

Secreiary of ihe Treasury.
PRESS RELEASE OF JANUARY 2, 1963
Acting Treasury Secretary Henry H. Fowler today announced that bidders
will be offered the option of bidding upon either a 4 percent or 4K percent coupon
rate for the $250,000,000 Treasury bonds of 1988-93, the first to be sold to underwriters under competitive bidding. Each bidder may submit only one bid which
must specify one of these two coupon rates. The successful bidder will be required to make a bona fide reoffering of all the bonds to the investing public.
As previously announced, bidders must file a Notice of Intent to Bid at the
Federal Reserve Bank of New York not later than 12:00 noon, eastern standard
time, on January 4, 1963. Final bids must be received at the same place not
later than 11:00 a.m., eastern standard time, on Tuesday, January 8, 1963.
The bonds wih mature on February 15, 1993, but may be called for payment on
February 15, 1988, or any interest payment date thereafter. The bonds will be
dated January 17, 1963. Interest will be payable on February 15 and August 15
of each year until the bonds mature or are called. The first interest coupon, payable August 15, 1963, will cover interest accrued between January 17, 1963, and
August 15, 1963.
Payment for the bonds must be made in immediately available funds not later
than 11:00 a.m., eastern standard time, on January 17 .1963.

EXHiBrrs

211

D E P A R T M E N T C I R C U L A R N O . 6-63.

PUBLIC

TREASURY

DEBT

DEPARTMENT,

Washington, February 21, 1963.
I. O F F E R I N G OF BONDS

1. T h e Secretary of t h e Treasury, pursuant to t h e authority of t h e Second
Liberty Bond Act, as amended, invites subscriptions from t h e people of t h e
United States for bonds of t h e United States, designated 4 percent Treasury bonds
of 1980:
(1) at 99.10 percent of their face value in exchange for 3}^ percent Treasury
certificates of indebtedness of Series C-1963, dated August 15, 1962, due
August 15, 1963;
(2) at 99.50 percent of their face value in exchange for 2H percent Treasurv
bonds of 1963, dated December 15, 1954, due August 15, 1963;
(3) at 99.30 percent of their face value in exchange for 3>i percent Treasury
certificates of indebtedness of Series D-1963, dated November 15, 1962,
due November 15, 1963;
(4) at 99.50 percent of their face value in exchange for 3 percent Treasury
bonds of 1964, dated F e b r u a r y 14, 1958, due F e b r u a r y 15, 1964;
(5) at 99.00 percent of their face value in exchange for ?>% percent Treasury
notes of Series B-1965, dated November 15, 1962, due November 15,
1965;
(6) at 98.80 percent of their face value in exchange for 3% percent Treasury
notes of Series B-1966, dated M a y 15, 1962, due F e b r u a r y 15, 1966;
(7) at 100.50 percent of their face value in exchange for 3 percent Treasury
bonds of 1966, dated February 28, 1958, due August 15, 1966; or
(8) at 99.60 percent of their face value in exchange for 3^^ percent Treasury
bonds of 1966, dated March 15, 1961, due November 15, 1966.
Interest adjustments as of March 15, 1963, and t h e cash payments due t o or from
t h e subscriber on account of t h e issue prices of t h e new bonds will be made as set
forth in section IV hereof. T h e amount of t h e offering under this circular will be
limited t o t h e amount of ehgible securities tendered in exchange and accepted.
T h e books will be open for t h e receipt of subscriptions for this issue from all
classes of subscribers from F e b r u a r y 25 t h r o u g h F e b r u a r y 28, 1963, and, in addition, subscriptions m a y be s u b m i t t e d b y individuals t h r o u g h M a r c h 8, 1963.
For this purpose individuals are defined as natural persons in their own right.
2. I n addition t o t h e offering under this circular,
(a) holders of t h e first four issues of securities enumerated in p a r a g r a p h 1 are
offered t h e privilege of exchanging all or any p a r t of such securities for 3^i
percent Treasury notes of Series B-1967, or 3Ji percent Treasury bonds
of 1971 (additional issue), which offerings are set forth in D e p a r t m e n t
Circulars, Public Debt Series—Nos. 4-63 and 5-63, respectively, and
(b) holders of t h e last four issues of securities enumerated in p a r a g r a p h 1 are
offered t h e privilege of. exchanging all or any part of such securities for 3%
percent Treasury bonds of 1974 (additional issue), which offering is set
forth in D e p a r t m e n t Circular, Public Debt Series—No. 7-63.
These three circulars are being issued simultaneously with this circular.
3. Nonrecognition of gain or loss for Federal income tax purposes.—-Pursuant to
t h e provisions of section 1037(a) of t h e Internal Revenue Code of 1954 as added
by P u b h c Law 86-346 (approved September 22, 1959), t h e Secretary of t h e Treasury hereby declares t h a t no gain or loss shall be recognized for Federal income t a x
purposes upon t h e exchange with t h e United States of t h e eligible securities
enumerated in p a r a g r a p h one of this section solely for t h e 4 percent Treasury
bonds of 1980. Section 1031(b) of t h e Code, however, requires recognition of
any gain realized on t h e exchange t o t h e extent t h a t money is received b y t h e
security holder in connection with t h e exchange. To t h e extent not recognized
a t t h e t i m e of t h e exchange, gain or loss, if any, upon t h e obligations surrendered
in exchange will be t a k e n into account upon t h e disposition or redemption of t h e
new obhgations.
II.

DESCRIPTION OF BONDS

1. T h e bonds now offered will be an addition t o and will form a p a r t of t h e
series of 4 percent Treasury bonds of 1980 issued p u r s u a n t t o D e p a r t m e n t Circulars No. 1020, and P u b h c D e b t Series—Nos. 5-62 and 21-62, dated J a n u a r y
12, 1959, F e b r u a r y 19, 1962, and November 15, 1962, respectively, will be freely
interchangeable therewith, and are identical in all respects therewith except t h a t

212

1963 REPORT OF THE SECRETARY OF THE TREASURY

interest on the bonds to be issued under this circular will accrue from March 15,
1963. Subject to the provision for the accrual of interest from March 15, 1963,
on the bonds now offered, the bonds are described in the following quotation
frohi Department Circular No. 1020:
" 1 . The bonds will be dated January 23, 1959, and will bear interest from that
date at the rate of 4 percent per annum, payable on a semiannual basis on August
15, 1959, and thereafter on February 15 and August 15 in each year until the
principal amount becomes payable. They will mature February 15, 1980, 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 representatives of the deceased owner's estate, at par and accrued interest to date of
payment, 1 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."

1 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 Jan. 16 to Feb. 15, and from July 16 to Aug. 15 (both dates ha elusive)
in each year.
3 Copies of Form P D 1782 may be obtained from any Federal Reserve Bank or from the Treasury Department, Washington 25, D.C.

EXHiBrrs
III.

213

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 25, 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. All subscribers requesting registered bonds will be required to furnish appropriate identifying numbers as required on tax returns and other documents
submitted to the Internal Revenue Service, i.e., an individual's social security
number or an employer identification number.
3. The Secretary of the Treasury reserves the right to reject or reduce any
subscription, and to allot less than the amount of bonds applied for; and 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 for the face amount of bonds allotted hereunder must be made
on or before March 15, 1963, or on later allotment, and may be made only in
a like face amount of securities of the eight issues enumerated in paragraph 1
of section I hereof, which should accompany the subscription. Payment will
not be deemed to have been completed where registered bonds are requested if
the iappropriate identifying number, as required by paragraph 2 of section. I l l
hereof, has not been furnished; provided, however, if a subscriber has applied
for but is unable to furnish the identifying number by the payment date only
because it has not been issued, he may elect to receive, pending the furnishing
of the identifying number, interim receipts and in this case payment will be
deemed to have been completed.
2. 3Y2 percent ceriificates of indebtedness of Series C—1963.—Coupons dated
August 15, 1963, must be attached to the certificates when surrendered. Accrued
interest from February 15 to March 15, 1963 ($2.70718 per $1,000) on the certificates plus the payment ($9.00 per $1,000) due to the subscriber on account
of the issue price of the bonds will be credited, accrued interest from February
15 to March 15, 1963 ($3.09392 per $1,000) on the bonds to be issued will be
charged, and the difference ($8.61326 per $1,000) will be paid to subscribers
following acceptance of the certificates.
3. 2Y2 percent bonds of 1963.—Coupons dated August 15, 1963, must be attached
to the bonds in bearer form when surrendered. Accrued interest from February
15 to March 15, 1963 ($1.93370 per $1,000) on the 2Y2 percent bonds plus the payment ($5.00 per $1,000) due to the subscriber on account of the issue price of the
new bonds will be credited, accrued interest from February 15 to March. 15,
1963 ($3.09392 per $1,000) on the bonds to be issued wiU be charged, and the
difference ($3.83978 per $1,000) will be paid to subscribers. Payments will be
made in the case of bearer bonds following their acceptance and in the cas5e 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.
4. Sn percent ceriificaies of indebtedness of Series D—1963.—Coupons dated
May 15 and November 15, 1963, must be attached to the certificates when surrendered. Accrued interest from November 15,1962, to March 15,1963 ($10.35912
per $1,000) on the certificates plus the payment ($7.00 per $1,000) due to the
subscriber on account of the issue price of the bonds will be credited, accrued interest from February 15 to March 15, 1963 ($3.09392 per $1,000) on the.bonds
to be issued will be charged, and the difference ($14.26520 per $1,000) will be
paid to subscribers following acceptance of the certificates.
5. S percent bonds of 1964-—Coupons dated August 15, 1963, and February 15,
1964, must be attached to the bonds in bearer form when surrendered. Accrued
interest from February 15 to March 15-1963 ($2.32044 per $1,000) on the 3 percent
bonds plus the payment ($5.00 per $1,000) due to the subscriber on account of
the issue price of the new bonds will be credited, accrued interest from February
15 to March 15, 1963 ($3.09392 per $1,000) on the bonds to be issued will be
charged, and the difference ($4.22652 per $1,000) will be paid to subscribers.
Payments will be made 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

214

1963 REPORT OF THE SECRETARY OF THE TREASURY

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.
6. 3Y2 percent notes of Series B—1965.—Coupons dated May 15, 1963, and all
subsequent coupons, must be attached to the notes in bearer form when surrendered.
Accrued interest from November 15, 1962, to March 15, 1963 ($11.60221 per
$1,000) on the notes plus the payment ($10.00 per $1,000) due to the subscriber
on account of the issue price of the bonds will be credited, accrued interest from
February 15 to March 15, 1963 ($3.09392 per $1,000) on the bonds to be issued
will be charged, and the difference ($18.50829 per $1,000) will be paid to subscribers. Payments will be made in the case of bearer notes following their
acceptance and in the case of registered notes, the payment will be made by check
drawn in accordance with the assignments on the notes surrendered, or by credit
in any account maintained by a banking institution with the Federal Reserve
Bank of its district.
7. SYs percent of Series B—1966.—Coupons dated August 15, 1963, and all
subsequent coupons must be attached to the notes in bearer form when surrendered. Accrued interest from February 15 to March 15, 1963 ($2.80387 per
$1,000) on the notes plus the payment ($12.00 per $1,000) due to the subscriber
on account of the issue price of the bonds will be credited, accrued interest from
February 15 to March 15, 1963 ($3.09392 per $1,000) on the bonds to be issued
will be charged, and the difference ($11.70995 per $1,000) wiU be paid to subscribers. Payments will be made in the case of bearer notes following their
acceptance and in the case of registered notes following discharge of registration.
In the case of registered notes, the payment will be made by check drawn in
accordance with the assignments on the notes surrendered, or by credit in any
account maintained by a banking institution with the Federal Reserve Bank
of its district.
8. 3 percent bonds of 1966.—Coupons dated August 15, 1963, and all subsequent
coupons, must be attached to the bonds in bearer form when surrendered. Accrued interest from February 15 to March 15, 1963 ($2.32044 per $1,000) on the 3
percent bonds will be credited, accrued interest from February 15 to March 15,
1963 ($3.09392 per $1,000) on the bonds to be issued plus the payment ($5.00 per
$1,000) due the United States on account of the issue price of the new bonds will
be charged, and the difference ($5.77348 per $1,000) must be paid by subscribers
and should accompany the subscription.
9. SYs percent bonds of 1966.—Coupons dated May 15, 1963, and all subsequent
coupons, must be attached to the bonds in bearer form when surrendered. Accrued interest from November 15, 1962, to March 15, 1963 ($11.18785 per $1,000)
on the ^Ys percent bonds plus the payment ($4.00 per $1,000) due to the subscriber
on account of the issue price of the new bonds will be credited, accrued interest
from February 15 to March 15, 1963 ($3.09392 per $1,000) on the bonds to be
issued will be charged, and the difference ($12.09393 per $1,000) will be paid to
subscribers. Payments will be made 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 O F R E G I S T E R E D SECURITIES

1. Treasury notes and bonds 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 25, D.C. The securities
must be delivered at the expense and risk of the holder. If the new bonds are
desired registered in the same name as the securities surrendered in exchange,
the assignment should be to "The Secretary of the Treasury for exchange for 4
percent Treasury Bonds of 1980"; if the new bonds are desired registered in another
name, the assignment should be to "The Secretary of the Treasury for exchange for
4 percent Treasury bonds of 1980 in the name of
"; if new bonds in
coupon form are desired, the assignment should be to "The Secretary of the
Treasury for exchange for 4 percent Treasury bonds of 1980 in coupon form to be
dehvered to
"
VL GENERAL PROVISIONS

1. As fiscal agents of the United States, Federal Reserve Banks are authorized

EXHIBITS

215

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 dehvery 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.
DOUGLAS DILLON,

Secretary of the Treasury.
DEPARTMENT CIRCULAR NO. 11-63.

PUBLIC DEBT

TREASURY

DEPARTMENT,

Washington, May 16, 1965.
I. NOTICE OF S A L E

1. Bonds designated 45^ percent Treasury bonds of 1989-94, and described
herein, were sold on April 9, 1963, in the amount of $300,000,000, at competitive
bidding pursuant to an invitation by the Secretary of the Treasury under authority
of the Second Liberty Bond Act, as amended, and as set forth in Treasury Department Circular, Pubhc Debt Series—No. 22-62, dated December 17, 1962, Pubhc
Notice of Invitation to Bid, dated March 20, 1963, and the supplement thereto
dated April 3, 1963. The bonds were sold to a syndicate headed by Salomon
Brothers and Hutzler, C. J. Devine and Company, Chase Manhattan Bank, First
National City Bank of New York, Chemical Bank New York Trust Company,
Bankers Trust Company, and the First National Bank of Chicago, and including
67 others, at a price of $100.55119 per $100 of face amount, resulting in a net
basis cost of money to the Treasury of 4.093145 percent, calculated to maturity.
One of the conditions of the sale was that the successful bidder would make a
bona fide reoffering of all of the bonds to the investing public.
II. DESCRIPTION OF BONDS

1. The bonds, dated April 18, 1963, bear interest from that date at the rate of
4}^ percent per annum, payable on a semiannual basis on November 15, 1963,
and thereafter on May 15 and November 15 in each year until the principal amount
becomes payable. They will mature May 15, 1994, but may be redeemed at the
option of the United States on and after May 15, 1989, at par and accrued interest,
on any interest day, on 4 months' notice of redemption given in such manner as the
Secretary of the Treasury shall prescribe. From the date of redemption designated in any such notice, interest on the bonds called for redemption shall cease.
2. The income derived from the bonds 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 are acceptable to secure deposits of public moneys.
4. Bearer bonds with interest coupons attached, and bonds registered as to
principal and interest, are available in denominations of $500, $1,000, $5,000,
$10,000, $100,000, and $1,000,000. Provision has been made for the interchange
of bonds of different denominations and of bearer and registered bonds, and for
the transfer of registered bonds.
5. If the bonds are owned by a decedent at the time of his death and thereupon
constitute a part of his estate, they will be redeemed at par and accrued interest
at the option of the representative of the estate, provided the Secretary of the
Treasury is authorized by the decedent's estate to apply the entire proceeds of
redemption to payment of the Federal estate taxes on such decedent's estate.
6. The bonds are subject to the general rules and regulations of the Treasury
Department, now or hereafter prescribed, governing United States securities.
JOHN K . CARLOCK,

Fiscal Assistant Secretary.
707-484—64

fcO
I—l

Summary of information pertaining to Treasury honds issued during the fiscal year 1963
Department
circular
Date of
preliminary announceNumber
Date
ment

Concurrent
offermg
circular
number

1962
July 26

13-62

July 30

12-62,14-62

4 p e r c e n t of 1969 a t p a r i

July 26

14-62

July 30

12-62,13-62

4M p e r c e n t of 1987-92 issued at 1011-2

D a t e of
issue

T r e a s u r y b o n d s issued for exchange or for cash

1962

_
,

Sept. 5

16-62

Sept. 10

15-62

Oct. 25

19-62

Oct. 29

17-62,18-62

Nov. 15

20-62

Nov. 15

21-62

S% p e r c e n t of 1971 ( a d d i t i o n a l issue) issued at 99.60 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 y e a r s 1963 a n d 1964

Nov. 15

21-62

Nov. 15

20^2

4 p e r c e n t of 1980 (additional issue) issued a t 99.50 i n exchange for—
U . S . s a v i n g s b o n d s of Series F a n d G m a t u r i n g i n t h e calendar years 1963 and 1964

Dec. 20

10-63

1963
May 16

1963
Jan. 30

3-63

Feb. 4

4 p e r c e n t of 1972 issued at prices i n d i c a t e d below in exchange for—
3 H p e r c e n t Series A-1963 certificates m a t u r m g F e b . 15,1963 (99.30);
2 H p e r c e n t Series A-1963 notes m a t u r m g F e b . 16,1963 (99.70);
S H p e r c e n t Series E-1963 notes m a t u r m g F e b . 16,1963 (99.40);
3M p e r c e n t Series B-1963 certificates m a t u r i n g M a y 15,1963 (99.40);
SK p e r c e n t Series D-1963 notes m a t u r h i g M a y 15,1963 (99.40);
4 p e r c e n t Series B-1963 n o t e s m a t u r i n g M a y 15,1963 (98.80).
4 p e r c e n t of 1972 issued a t p a r in exchange for—
3 ^ p e r c e n t Series C-1962 notes m a t u r i n g N o v . 15,1962;
33^ p e r c e n t Series H-1962 n o t e s m a t u r i n g N o v . 16,1962;
23< p e r c e n t 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;
2 ^ p e r c e n t T r e a s u r y b o n d s of 1960-66 caUed for r e d e m p t i o n on D e c . 15, 1962.

4 p e r c e n t of 1988-93 issued a t 99.85111 for cash «
2-63

S% p e r c e n t of 1968 ( a d d i t i o n a l issue) issued a t p a r in exchange for—
3 K p e r c e n t Series A-1963 certificates m a t u r i n g F e b . 16,1963;
2 ^ p e r c e n t Series A-1963 notes m a t u r i n g F e b . 15,1963;
S}4 p e r c e n t Series E-1963 notes m a t u r m g F e b . 15,1963.

Allot- .
ment
D a t e sub- p a y m e n t
D a t e of scription d a t e on
books
maturity
or before
closed
(or on
later allotment)

1962
A u g . 15

F e b . 15

1962
J u l y 30

1962
A u g . 15

A u g . 15

J u l y 30

A u g . 15

S e p t . 15

1972
A u g . 15

Sept. 12

Sept. 20

N o v . 15

F e b . 15

Oct. 31 4 N o v . 15

M a y 15 5

1971
N o v . 16

(«)

7 D e c . 17

1980
1959
J a n . 23 5 F e b . 16

(«)

8 D e c . 17

1963
J a n . 17

1993
F e b . 15

1963
Jan.
8

1963
J a n . 17

1962
Apr. 1810

1968
A u g . 16

Feb.

" F e b . 16

Feb. 20

5-63

Feb. 21

4-63, 6-63

S}i percent of 1971 (additional issue) issued at prices indicated below in exchange for33^ percent Series C-1963 certificates maturmg Aug. 15,1963 (98.90);
2H percent Treasury bonds of 1963 maturing Aug. 15,1963 (99.30);
S}4 percent Series D-1963 certificates matiuuig Nov. 15,1963 (99.10);
3 percent Treasury bonds of 1964 maturing Feb. 16,1964 (99.30).

Feb. 20

6-63

Feb. 21

4-63, 5-63
7-63

4 percent of 1980 (additional issue) issued at prices indicated below in exchange for—..
3M percent Series C-1963 certificates maturing Aug. 15,1963 (99.10);
2}4 percent Treasury bonds of 1963 maturing Aug. 15,1963 (99.60);
SVs percent Series D-1963 certificates maturmg Nov. 16,1963 (99.30);
3 percent Treasury bonds of 1964 matm'ing Feb. 15,1964 (99.60);
syi percent Series B-1966 notes maturing Nov. 16,1966 (99.00);
S ^ percent Series B-1966 notes maturing Feb. 15,1966 (98.80);
3 percent Treasury bonds of 1966 maturing Aug. 16,1966 (100.50);
Sfi percent Treasury bonds of 1966 maturing Nov. 16,1966 (99.60).

Feb. 21

6-63

3K percent of 1974 (additional issue) issued at prices indicated below in exchange for3H percent Series B-1966 notes maturing Nov. 15,1965 (98.50);
3 ^ percent Series B-1966 notes matm'ing Feb. 16,1966 (98.30);
3 percent Treasury bonds of 1966 maturing Aug. 15,1966 (par);
S ^ percent Treasury bonds of 1966 maturing Nov. 15,1966 (99.10).

Feb. 20

Mar. 20

11-63

May 16

4H percent of 1989-94 issued at 100.5511 for cash iL

June 6

12-63

June 7

4 percent of 1970 issued at par for cash

1971
N o v . 16

(13)

i^Mar. 15

1959
1980
J a n . 23 12 F e b . 15

(13)

isMar. 15

1957
D e c . 212

1974
N o v . 16

(13)

iflMar. 16

1963
A p r . 18

1994
M a y 15

M a y 1512

J u n e 20

1970
A u g . 15

X
Apr.

Apr. 18

J u n e 11 isjune 20

Footnotes on following page.

fco

1 Holders of 4 percent Treasury notes of Series B-1962 and SH percent Treasury notes
of Series C-1962, both of which matured Aug. 15, 1962, were not offered preemptive
rights to exchange their holdings for the new bonds. 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 B-1962 or C-1962. Coupons dated Aug. 15, 1962, were detached from the notes
in bearer form and cashed when due. Payment was permitted by credit in Treasury
tax and loan accounts.
2 Department Circular No. 14-62 is reproduced in this exhibit.
3 Coupons were required to be attached to bearer securities submitted in exchange
and payments were made to ah subscribers as follows (per $1,000):
Paid on
account
Accrued interest paid
of issue
'
price on
Security surrendered
Coupons attached
For period
Amount
new
bonds
SH% Ctf. A-63
Feb. 15, 1963
Aug. 15-Sept. 15 $2.94837
$7.00
2 ^ % Note A-63.... Feb. 15, 1963
Aug. 15-Sept. 15 2.21128
3.00
33^%NoteE-63._. Feb. 15, 1963
Aug. 15-Sept. 15 2.73777
6.00
• 3M% Ctf. B-63
Nov. 15, 1962, and May 16-Sept. 15 10.86277
6.00
May 15, 1963.
33^%NoteD-63.__ Nov. 15, 1962, and May 15-Sept. 16 10.86277
6.00
May 15, 1963.
4% Note B-63
Nov. 15, 1962, and May 15-Sept. 16 13. 36957
12.00
May 15, 1963.
4 See Department Circular No. 19-62, sees. I l l and IV, in this exhibit, for provisions
regarding subscription and payment.
5 Interest payable from Dec. 15, 1962.
6 For individuals (natural persons in their own right) books closed Nov. 30, 1962; for •
all other classes of subscribers, Nov. 26, 1962.
7 See Department Circular No. 20-62, sees. I l l and IV, in this exhibit, for provisions
for subscription and payment.
8 See Department Circular No. 21-62, sees. I l l and IV, in this exhibit, for provisions
for subscription and payment.
9 Issue sold through competitive bidding to a S3m.dicate. Public Notice of Invitation
to Bid dated Dec. 20, 1962, and press release dated Jan. 2, 1963, are reproduced in this
exhibit.
10 Interest payable from Feb. 15, 1963.
11 Coupons dated Feb. 15, 1963, were detached from the certificates and notes in
bearer form and cashed when due.
12 Interest payable from Mar. 15, 1963.
13 For individuals (natural persons in their own right) books closed Mar. 8, 1963; for
all other classes of subscribers, Feb. 28, 1963.
" Coupons were required to be attached to bearer securities submitted tn exhange
and accrued interest was paid to all subscribers for the period shown as fohows:

Security
Coupons attached
Accrued interest paid for
S}4% Ctf. C-63-. Aug. 15, 1963
Feb. 15-Mar. 15,1963
21^% Bond 1963.. Aug. 16, 1963
Feb. 15-Mar. 15, 1963
3H% Ctf. D-63.- May 16 and Nov. 15, 1963
Nov. 15, 1962-Mar. 16, 1963
3% Bond 1964.... Aug. 15,1963and Feb. 15,1964. Feb. 15-Mar. 15, 1963
Accrued interest on old security (Col. 2) and amount due on account of issue price of
new bond (Col. 3) were credited to subscriber, accrued interest on new bond (Col. 4)
was charged, and difference paid to subscriber (Col. 6) or collected from subscriber
(Col. 6) as follows (per $1,000):
Security
Col. 2 Col. 3
Col. 4
Col. 5
Col. 6
3M% Ctf. C-63
$2.70718 $11.00 $12.84530 $0.86188
$3.91160
2M% Bond 1963
1.93370
7.00 12.84530
3H% Ctf. D-63
10.35912
9.00 12.84530 6.61382
3.52486
3% Bond 1964
2.32044
7.00 12.84530
15 See Department Circular No. 6-63, sees. I l l and IV, in this exhibit, for provisions
for subscription and payment.

fcO
1—I

(X)

o
o

18 Coupons were required to be attached to bearer securities submitted in exchange
and accrued interest was paid to all subscribers for the period shown as follows:
Security
Syp/o Note B-653 ^ % Note B-66.
3%Bondl966-._
3H% Bond 1966..

Coupons attached
May 15,1963, and subsequent.
Aug. 15,1963, and subsequent.
Aug. 15,1963, and subsequent.
May 15,1963, and subsequent.

Accrued interest paid for
Nov: 15, 1962-Mar. 15, 1963
Feb. 15-Mar. 15, 1963
Feb. 15-Mar. 15, 1963
Nov. 16, 1962-Mar. 15, 1963

Accrued interest on old security'- (Col. 2) and amount due on account of issue price
of new bond (Col. 3) were credited to subscriber, accrued interest on new bond (Col. 4)
was charged, and difference paid to subscriber (Col. 5) or collected from subscriber
(Col. 6) as follows (per $1,000):
Security
3M% Note B-65
SVsJo Note B-66
3% Bond 1966
3 ^ % Bond 1966

Col. 2
Col. 3
Col. 4
Col. 5
Col. 6
$11.60221 $15.00 $12.84530 $13.75691
6.95857
2.80387 17.00 12.84530
12.84530
$10.52486
2.32044
9.00
12.84530
7.34255
11.18785

17 Issue sold through competitive biddmg to a syndicate. Department Cu-cular
No. 11-63 is reproduced in this exhibit. (Invitation to bid and supplemental press
release were similar to those dated Dec. 20, 1962, and Jan. 2, 1963, respectively, reproduced in this exhibit.)
18 Payment was permitted by credit in Treasury tax and loan accounts.

Allotments of Treasury bonds issued during the fiscal year 1963, by Federal Reserve districts
[In thousands]
4 percent T r e a s u r y b o n d s of 1972 issued in exchange for—3
4 percent
Treasury
b o n d s of
19691

F e d e r a l Reserve district

Boston
NewYork
._
Philadelphia .
Cleveland
_
Kichmond
.
Atlanta
.
Chicago
._ .
S t . Louis
Minneapolis
_ _
Xansas City
._.
DaUas
. . ._ .
S a n Francisco
Treasury .
OovP.rnmp.nt i n v e s t m e n t aeeonnts

_. .

...

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 t ) m i t t e d for exchange
T o t a l securities eligible for exchange .

i H percent
Treasury
b o n d s of
1987-92 2

4 percent
314 percent
2 H percent
314 percent
SH p e r c e n t
SH percent
Series A-1963 Series A-1963 Series E-1963 Series B-1963 Series D-1963 Series B-1963
T o t a l issued
Treasury
Treasury
Treasury
Treasury
certificates
certificates
notes
notes
maturing
notes
notes
maturing
maturing
M a y 15, 1963 4 m a t u r i n g
F e b . 16, 1963 ^ m a t u r i n g
maturmg
M a y 15, 1963 * M a y 16,1963 ^
F e b . 16, 1963 4 F e b . 15, 1963 4

$102,669
423, 906
61,307
125,128
74, 608
87, 616
325,442
74, 710
62,864
81,800
66,827
256,808
131
100,000

$20,473
160,843
4,338
4,689
17,045
14, 726
42, 617
6,598
7,274
7,192
7,287
22,581
560
50, 000

$31,549
224,109
249
6,302
1,505
2,101
59,094
6,234
6,444
5,966
1,311
23,190
2,283

$37,544
254,536
1,676
8,700
1,991
3,733
73,298
6,089.
3,422
13,537
4,318
39,832
3

$6,487
158, 578
2,838
4,281
6,391
6,097
24,218
10, 610
10, 758
3,402
5,967
21,271
133

$31,142
114,908
27,862
12,343
14,498
13,652
46,848
13,877
13,795
14,924
21,368
31,896
21,689

$29,126
238,843
14,795
12,104
7,601
8,154
40,879
11,800
30,495
16,605
17,622
55,811
235,906

$17,626
292,614
1,818
2,547
2,103
7,628
36,361
6,077
4,290
3,968
3,926
18,698^
4,334

$153,474
1,283, 688
49, 237
46,277
33,089
40,365
280,698
64,687
69,204
68,392
54,491
190,698
264,347

1,843, 616

365,122

370,327

448, 678

269, 021

378, 792

719, 740

401, 989

2, 678, 547

J72

772, 384

952, 667

1, 093,461

180,885

1, 300, 863

981,368

5, 281, 628

1,142, 711
6, 718,844

1,401,246
1,438,108

1,352, 482
2, 289,982

569, 677
6,126, 046

2,020, 603
3.026,849

1, 383,357
359, 683

7,860, 075
18,959, 511

6,861, 555

2,839,353

3,642,464

6,685,722

5, 047.452

1, 743,040

26,819,586

Footnotes at end of table.

to
CO

fcO
fcO

Allotments of Treasury bonds issued during the fiscal year 1963, by Federal Reserve districts- -Continued
[In thousands]

o
4 p e r c e n t T r e a s u r y b o n d s of 1972 issued in exchange f o r - 2
CO

05
F e d e r a l Reserve district

Boston
___._.
NewYork
.
Philadelphia
Cleveland
.__
Richmond
. ._
Atlanta
Chicago
_
St. Louis
Minneapolis
Kansas City
Dallas
San Francisco
Treasury

.. .
. .
_
_.
.
.
...

Total bond allotments.
Securities eligible for exchange:
E x c h a n g e d t n c o n c u r r e n t offerings
Total exchanged. .
N o t s u b m i t t e d for exchange
T o t a l securities eligible for exchange

Footnotes at end of table.

.
.

..
...

3 % percent
Series C-1962
T r e a s u r y notes
maturing
N o v . 15,1962 5

3 H percent
Series H-1962
Treasury notes
maturing
N o v . 15, 1962 5

214 p e r c e n t
Treasmry b o n d s
of 1959-62
maturing
D e c . 15,1962 s

2M p e r c e n t
Treasury bonds
of 1960-^5
called for
r e d e m p t i o n on
D e c . 15, 1962 5

$21,342
217,475
12,932
47,218
6,069
7,679
63,226
12,684
11,273
9,663
9,177
22,339
5,191

$24,874
284,922
10,650
24.175
6,258
24,720
93,987
16,622
13,907
17,789
6,375
120.386
298

$22,311
361,928
8,424
29,429
11.205
10,731
161,714
10,957
12,133
8.208
9,603
27,015
64

$16,048
219,863
21,804
3,339
15,624
1,034
169,106
37,045
7,861
19.865
1,460
63,517
2,112

T o t a l issued

O
$84,575
1,084,188
53,810
104,161
39,146
44,164
488,033
77,208
46,174
65,525
26,615
233,267
7,665

446,258

644,863

673,712

578, 678

2,343,511

604,866

6,325,358

1,376,978

833,971

8,141,172

1,051,123
91,833

5,970.221
111, 574

2,050,690
218,786

1,412,649
72,734

10,484,683
494,926

1,142,966

6,081,796

2, 269,475

1,486,383

10,979.609

>
Ul

td
Kl

Allotments of Treasury bonds issued during the fiscal year 1963, hy Federal Reserve districis- -Continued
[In thousands]
S l i p e r c e n t T r e a s u r y b o n d s of 1971 (additional issue)
issued i n exchange for Series F a n d Series G savings
b o n d s m a t u r i n g i n t h e calendar years 1963 a n d 1964 2

4 percent T r e a s u r y b o n d s of 1980 (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 years 1963 a n d 1964 2

F e d e r a l Reserve districts
Series F
Series G
savings b o n d s savings b o n d s
exchanged 8 exchanged 8
Boston
N e w York
PhUadelphia
Cleveland
Richmond
Atlanta
Chicago
S t . Louis
Minneapolis.
Kansas City
Dallas
San Francisco.
Treasury _

...
. ._
...
_
.
. .

_
._
._
.
„ .
...
...

T o t a l b o n d allotments_._
.
Securities eligible for exchange:
E x c h a n g e d in concurrent offerings
T o t a l exchanged

. . . ._
. . . .
_

. _.

C a s h differences 7

C a s h differSeries G
Series F
ences 7
T o t a l issued savings b o n d s savings b o n d s
exchanged s exchanged 8

T o t a l issued

$1
1,389
98
L051
170
345
1,349
231
106
250
6
309
41

$1,810
6,196
2,614
3,089
1,667
L694
8,680
1,790
1,281
3,612
1,812
2,695
328

$2
12
12
16
3
4
20
8
3
5
2
4
1

$1,814
6,597
2,624
4,154
1,740
2,043
10,049
2,029
1,391
3,767
1,820
3,008
371

$3
692
38
469
110
400
264
191
4
34
60
31
63

$1,863
6,211
2,265
1,869
1,232
2,562
5,348
1,782
1,110
2,409
1,161
3,351
333

$3
13
14
7
4
3
24
9
3
9
4
7
2

$1,869
6.916
2,317
2.334
1,347
2,966
5.636
1.982
1,117
2,462
1,215
3,389
398

5,346

36,968

41,407

2,349

31,486

102

33,937

2,349

31,486

102

33,937

5,346

35, 968

41,407

7,695

67, 454

195

76,344

7,695

67,454

195

75, 344

w
Ul

N o t s u b m i t t e d for exchange
T o t a l securities eUgible for exchange

""
Footnotes at end of table.

fcO

Allotments of Treasury honds issued during the fiscal year 196S, hy Federal Reserve districts—Continued

fcO

to
to

[In thousands]

F e d e r a l Reserve district

Boston
New York .
_.
Philadelphia
Cleveland .
_.
Richmond
Atlanta _
...
Chicago
St. L o u i s . .
._
Minneapolis
Kansas City . - _
Dallas.
San Francisco. _
Treasury

. . .

. .

...

. . .

...
.

Total bond allotments
Securities eligible for exchange:
E x c h a n g e d i n concurrent 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 e x c h a n g e . . .

Footnotes at end of table.

S H p e r c e n t T r e a s u r y b o n d s of 1968 (additional issue)
issued i n exchange for— 2

S H p e r c e n t T r e a s u r y b o n d s of 1971 ( a d d i t i o n a l issue) issued m
exchange for—3

314 p e r c e n t
31^ p e r c e n t
2 H percent
Series A-1963 Series A-1963 Series E-1963
T o t a l issued
Treasury
Treasury
certificates
notes
notes
maturing
maturing
F e b . 15,1963 s m a t u r i n g
F e b . 16,1963 « F e b . 15,1963 e

3 H percent
3 ^ percent
2H percent
3 percent
Series D-1963
Series C-1963
Treasury
Treasury
b o n d s of 1963 certificates
b o n d s of 1964 T o t a l issued
certificates
maturing
maturing
maturing
maturing
F e b . 15,
A u g . 15,
N o v . 15,
A u g . 15,
1964 10
1963 10
1963 10
1963 10

$25,416
531,129
38,250
71, 281
11,413
31,844
87,221
36, 586
19,360
13,861
11,013
87,358
2,990

$8,187
411, 279
17,573
17,994
3,553
20, 454
111,137
17,606
11, 604
14,708
19,886
89,388
36

$38,080
383,179
21,199
49,121
7,685
23,265
141,150
32,262
13, 595
29,165
16,581
23,252
260

$71,683
1,325, 687
77,022
138,396
22, 651
76,663
339,608
86.453
44, 559
57,734
47,480
199,998
3, 286

$24,108
654,826
1,417
7,875
911
4,916
83,006
3,637
2,382
4,799
2,928
2,670
100

$6,917
281,251
37, 626
19,322
6,129
11,681
77,015
13,467
17,970
12,225
10,809
36,996
416

$2,230
67,923
2,982
6,807
4,354
228
7,967
366
706
248
646
251

$2,458
88,249
7,215
4,645
7,511
11,480
24,854
5.650
14,957
15,536
4,450
8,619
355

$35,713
992,248
49,240
37, 649
18,905
28,304
192,842
23,120
36,015
32,808
18,732
48,436
871

967,722

743,403

778, 694

2,489.819

693,473

631,824

93,607

195,979

1,514,883

4.692,175

652,336

1,396.704

6,741,214

977,326

2,324,533

207,998

869,644

4,379, 501

5, 659,897
58.947

1,395,738
91,133

2,175,398
83,709

9,231,033
233,789

1, 670,799
5.180,635

2,856,357
1,460,709

301,606
4,554,069

1,065,623
1, 634,301

6,894,384
12,829,704

5.718,844

1,486,871

2,259,107

9,464,822

6,851,434

4,317,066

4,855,664

2,699,924

18,724,088

td
hi
O

^
O

o
td
td
K^

td
Ul

td
K|

Allotments of Treasury bonds issued during ihe fiscal year 1963, by Federal Reserve districts- -Continued
[In thousands]
4 percent T r e a s u r y b o n d s of 1980 (additional issue) issued in exchange for—3
31^ p e r c e n t
3 % percent
3 percent
SH p e r c e n t
S H percent
3 percent
2H percent
3 ^ percent
Series C-1963
Treasury
Series B-1966 Series B-1966
Treasury
Treasury
Treasury
Series D-1963
certificates
b o n d s of 1964
Treasury
Treasury
b o n d s of 1966 b o n d s of 1966
b o n d s of 1963 certificates
maturing
notes m a t u r - notes m a t u r maturing
matm'ing
maturing
maturing
maturing
F e b . 15,
ing N o v . 15, ing F e b . 16,
A u g . 15,
A u g . 15,
A u g . 16,
N o v . 15,
N o v . 16,
1964 11
1965 12
1966 12
1966 13
1963 11
1963 11
1963 11
1966 12

F e d e r a l Reserve district

Boston
NewYork
PhUadelphia
Cleveland.
Richmond
Atlanta.._
Chicago
S t . Louis
Minneapolis
KansasCity..
DaUas.
San F r a n c i s c o .
Treasury

.
. .
:
_

...

.
. ...

...

Total bond allotments
Securities eligible for exchange:
E x c h a n g e d in concurrent 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 e x c h a n g e . . .

$709
10,927
300
208
30
350
1,883
294
141
663
608
1,216
27

$3,399
18,243
3,071
2,212
1,169
848
8.903
3,051
650
3,838
1.349
2,319
197

17,346

49,149

1,663,453
1,670, 799
6,180,635
6,861,434

T o t a l issued

25
14
3

$245
9,469
290
395
160
685
1,289
1,389
297
3,763
81
6,201
104

$1, 661
171,394
82
174
65
104
12,878
3,006
157
2,077
2,278
1,682
18

$3, 769
363,043
64
383
125
94
7,821
316
1,703
5,575
914
36,198
35

$2,694
82,865
900
2,914
3,821
4,709
7,109
2,686
898
4,386
1,619
9,169
85,822

$7, 323
142,807
9,301
4,288
6.437
4,966
11, 749
4.125
1.851
5.146
4.109
10,430
463

$19,815
799,402
14,012
10,643
11,807
11, 768
52, 725
14, 956
6,600
26,438
10.983
67,229
86.669

2,113

24,368

195,465

420,040

209, 581

212,994

1.131,046

2,807,208

299,492

1,041,265

136,239

313, 758

250,316

373,227

6,874,967

2,856.357
1, 460, 709

301,605
4, 664,059

1,065,623
1,634,301

331,704
2, 953,804

733, 798
2,380,101

459,896
1,024,402

586,221
1,851,408

8,006,003
21,039. 419

4, 317,066

4,855,664

2,699, 924

3,285, 608

3,113,899

1,484, 298

2,437,629

29,045,422

$125
674
4
69
13
1,093
90
3

fel

Footnotes at end of table.

fcO

Allotments of Treasury honds issued during the fiscal year 1963, by Federal Reserve districts- -Continued

fcO

[In t h o u s a n d s ]
3 ^ percent T r e a s u r y b o n d s of 1974 ( a d d i t i o n a l issue) issued in exchange for—3
F e d e r a l Reserve district

Boston
New York
PhUadelphia
Cleveland
Richmond
Atlanta
Chicago
St. L o u i s
Minneapolis
Kansas City
DaUas
S a n Francisco
Treasury

T o t a l b o n d aUotments
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
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.

3 H percent
Series B-1966
Treasury notes
maturing
F e b . 16, 1966 i3

3 percent T r e a s u r y b o n d s of
1966 m a t u r i n g
A u g , 15, 1966 13

S% percent
Treasury bonds
of 1966 m a t u r i n g
N o v . 15, 1966 13

$1,136
85,257
8,002
2,753
716
3.378
17,656
2,053
630
2,290

9,218
81

$6,634
226,498
8,298
3,616
5,002
3,720
45,302
6,383
2,634
1,286
1,063
4,306
17

$8,160
87,791
10,901
15,916
4,668
6,039
32,204
8,089
16,675
6,848
10,530
40,907
2,597

$5,527
185,272
15,144
10,546
6,040
9,074
50,923
10,619
15,608
9,520
16,209
37,495
1,260

$20,467
684,818
42,345
32,830
16,416
21,211
146,085
27,144
35,547
19,944
30,871
91,926
3,945

$98,392
472,737
68,440
124,490
83,709
154,851
301,143
107,820
77,701
127,017
88,938
198,682
1,891

136,239

313,758

250,315

373,227

1,073, 639

1,905,811

195,465

420,040

209, 581

212,994

1,038,080

331,704
2,953,804

733,798
2,380,101

459,896
1,024,402

586,221
1,861,408

2,111,619
8,209, 715

3,285,508

3,113, 899

1,484,298

2,437, 629

10,321,334

3,069

1 S u b s c r i p t i o n s from G o v e r i u n e n t i n v e s t m e n t a c c o u n t s w e r e aUotted t n full. All
others i n a m o u n t s u p t o $100,000 were a l l o t t e d i n fuU a n d those over $100,000 w e r e
a l l o t t e d 22 p e r c e n t , b u t n o t less t h a n $100,000.
2 S u b s c r i p t i o n s w e r e allotted in full.
3 A d v a n c e refunding; aU subscriptions allotted i n fuU.
4 3 % p e r c e n t T r e a s u r y n o t e s of Series A-1967 w e r e also offered i n exchange for t h i s
security.
5 S H p e r c e n t T r e a s u r y certificates of i n d e b t e d n e s s of Series D-1963 a n d S H p e r c e n t
T r e a s u r y n o t e s of Series B-1965 w e r e also offered t n exchange for t h i s security.
6 4 p e r c e n t T r e a s u r y b o n d s of 1980 ( a d d i t i o n a l issue) w e r e also offered in exchange for
t h i s security.
7 Necessary t o m a k e u p t h e n e x t higher $500 m u l t i p l e .
8 S H p e r c e n t T r e a s u r y b o n d s of 1971 ( a d d i t i o n a l issue) w e r e also offered in exchange
for t h i s security.

4 percent Treasu r y b o n d s of
1970 14

SH percent
Series B-1965
T r e a s u r y notes
maturing
N o v . 15, 1965 13

T o t a l issued

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9 314 p e r c e n t T r e a s u r y certiflcates of i n d e b t e d n e s s of Series A-1964 w e r e also offered
i n exchange for t h i s s e c u r i t y .
10 S H p e r c e n t T r e a s u r y notes of Series B-1967 a n d 4 p e r c e n t T r e a s u r y b o n d s of 1980
( a d d i t i o n a l issue) w e r e also offered in exchange for t h i s s e c u r i t y .
11 S H p e r c e n t T r e a s u r y notes of Series B-1967 a n d S H p e r c e n t T r e a s u r y b o n d s of
1971 ( a d d i t i o n a l issue) w e r e also offered i n exchange for t h i s security.
12 S H p e r c e n t T r e a s u r y b o n d s of 1974 ( a d d i t i o n a l issue) w e r e also offered i n exchange
for t h i s s e c u r i t y .
13 4 p e r c e n t T r e a s u r y b o n d s of 1980 ( a d d i t i o n a l issue) w e r e also offered t n exchange
for t h i s s e c u r i t y .
14 S u b s c r i p t i o n s u p t o $100,000 w e r e allotted i n full; o t h e r s u b s c r i p t i o n s w e r e a l l o t t e d
5 p e r c e n t w i t h a m i n i m u m a U o t m e n t of $100,000 per s u b s c r i p t i o n .
N O T E . — I n a d d i t i o n t o b o n d s listed a b o v e , a $250,000,000 issue of 4 p e r c e n t b o n d s of
1988-93, a n d a $300,000,000 issue of i H p e r c e n t b o n d s of 1989-94, were each sold t h r o u g h
competitive bidding to a syndicate.

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EXHIBITS

225

EXHIBIT 4.—Call, August 14, 1962, for redemption on December 15, 1962,
of 23^ percent Treasury bonds of 1960-65, dated December 15, 1938 (press
release of August 14, 1962)
TREASURY CALLS LAST PARTIALLY TAX-EXEMPT BOND
The Treasury Department today announced the ofiicial notice of call for redemption on December 15, 1962, of the partially tax-exempt 2% percent Treasury
bonds of 1960-65, dated December 15, 1938, due December 15, 1965. There
are now outstanding $1,485,383,100 of these bonds.
The 2Y2 percent bonds of 1962-67, which are also callable on December 15,
1962, will not be called for redemption on that date.
The text of the formal notice of call is as follows:
Two and Three-quarters Percent Treasury Bonds of 1960-65
{Dated December 15, 1938)
NOTICE OF CALL FOR R E D E M P T I O N
To Holders of 2% Percent Treasury Bonds of 1960-65, and Others Concerned:

1. Public notice is hereby given that all outstanding 2% percent Treasury
bonds of 1960-65, dated December 15, 1938, due December 15, 1965, are hereby
called for redemption on December 15, 1962, on which date interest on such
bonds will cease.
2. Holders of these bonds may, in advance of the redemption date, be offered
the privilege of exchanging all or any part of their called bonds for other interestbearing obhgations of the United States, in which event public notice will hereafter be given and an official circular governing the exchange offering will be
issued.
3. Full information regarding the presentation and surrender of the bonds for
cash redemption under this call will be found in Department Circular No. 300,
Revised, dated April 30, 1955.
DOUGLAS DILLON,

Secretary of ihe Treasury.

Treasury Bills Offered and Accepted
EXHIBIT 5.—Treasury bills
During the fiscal year 1963 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 one-year
issues, and one issue of a strip of weekly bills representing additional amounts
of 10 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 5 and June 10, 1963, 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. The details of
the issue of strip bills are explained in the releases of November 1 and November 7,
1962. The tax anticipation series is represented by the releases of January 22 and
January 30, 1963, and the one-year bill issues are represented by the releases of
July 2 and July 10, 1962. The essential details regarding each issue of Treasury
bills during fiscal 1963 are summarized in the table following the releases.
There is also printed herein a press release, dated August 28, 1962, announcing
that the Secretary of the Treasury had invoked the right he reserves to place a
restriction on the amount of Treasury bills to be awarded to a single bidder.
PRESS RELEASE OF JUNE 5, 1963
The Treasury Department, by this public notice, invites tenders-for two series
of Treasury bills to the aggregate amount of $2,100,000,000, or thereabouts, for
cash and in exchange for Treasury bills maturing June 13, 1963, in the amount
of $2,101,373,000, as follows:
91-day bills (to maturity date) to be issued June 13, 1963, in the amount of
$1,300,000,000, or thereabouts, representing an additional amount of bills dated

226

19 63 REPORT OF THE SECRETARY OF THE TREASURY

March 14, 1963, and to mature September 12, 1963, originally issued in the amount
of $800,265,000, the additional and original bills to be freely interchangeable.
182-day bills, for $800,000,000, or thereabouts, to be dated June 13, 1963, and
to mature December 12, 1963.
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, $50,000, $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 p.m., eastern daylight saving time, Monday, June 10,
1963. 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. •
Banking institutions generally may submit tenders for account of customers
provided the names of the customers are set forth in such tenders. Others than
banking institutions will not be permitted to submit tenders except for their own
account. Tenders will be received without deposit from incorporated banks and
trust companies and from responsible and recognized dealers in investment
securities. Tenders from others must be accompanied by payment of 2 percent
of the face amount of Treasury bills applied for, unless the tenders are accompanied
by an express guaranty of payment by an incorporated bank or trust company.
Immediately after the closing hour, tenders will be opened at the Federal
Reserve Banks and branches, following which public announcement will be made
by the Treasury Department of the amount and price range of accepted bids.
Those submitting tenders will be advised of the acceptance or rejection thereof.
The Secretary of the Treasury expressly reserves the right to accept or reject
any or all tenders, in whole or in part, and his action in any such respect shah
be final. Subject to these reservations, noncompetitive tenders for $200,000 or
less for the additional bills dated March 14, 1963, (91 days remaining until maturity date on September 12, 1963) 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 Banks on June 13, 1963,
in cash or other immediately available funds or in a like face amount of Treasury
bills maturing June 13, 1963. 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 (current revision) 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.

227

EXHIBITS
PRESS RELEASE OF JUNE 10, 1963

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 14, 1963, and the other series to be dated June 13, 1963, which were offered
on June 5, were opened at the Federal Reserve Banks on June 10. Tenders were
invited for $1,300,000,000, or thereabouts, of 91-day bills and for $800,000,000,
or thereabouts, of 182-day bills. The details of the two series are as follows:
91-day Treasury bUls maturing 182-day Treasury bUls maturing
Sept. 12, 1963 .
Dec. 12, 1963
Range of accepted competitive bids
Price
High...
Low
Average

99.254
99.245
99.248

Approxunate
equivalent
annual rate
2.951%
2.987%
1 2.975%

Price

Approximate
equivalent
annual rate
3.050%
3.070%,
1 3.063%

98.458
98.448
98.452

(63 percent of the amount of 91-day bills bid for at the low price was accepted and 59 percent of the amount
of 182-day bUls bid for at the low price was accepted)
1 On a coupon issue of the same length and for the same amount invested, the return on these bUls would
provide yields of 3.04 percent for the 91-day bills, and 3.15 percent for the 182-day biUs. Interest rates on
bills are quoted tn terms of bank discount with the return related to the face amount of the bUls 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 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.

Total tenders applied for and accepted by Federal Reserve districts
District
Boston
NewYork
Philadelphia..
Cleveland
Richmond
Atlanta..^
Chicago
St. Louis
Minneapolis..
Kansas City..
DaUas
San Francisco
Total...

Applied for
$27, 577, 000
1, 653,198, 000
31 957, 000
29, 143,000
10, 905, 000
45, 562, 000
216, 053, 000
30. 442, 000
19',842, 000
27, 717, 000
34, 163, 000
102, 780, 000
2,128,339,000

Accepted

Applied for

$17, 577, 000
853, 398. 000
16, 967, 000
29, 143, 000
10, 905, 000
42, 152, 000
146, 293, 000
24, 972, 000
18, 137, 000
23, 717,000
30, 223, 000
86, 640, 000

$21,296, 000
1,163, 616, 000
11,849, 000
25, 055, 000
4,426, 000
13, 789, 000
108, 853, 000
6,990,000
6,679, 000
9,160, 000
9,127, 000
94,782,000

$4,296,000
606,455, 000
6,849,000
22,464,000
3,406, 000
13,379,000
45,393, 000
5,285, 000
6,474, 000
5,119, 000
6,717,000
76, 092,000

11,300,114,000

1,475, 621, 000

2 800,929,000

1 Includes $243,896,000 noncompetitive tenders accepted at the average price of 99.248.
2 Includes $57,468,000 noncompetitive tenders accepted at the average price of 98.452.

Accepted

228

1963 REPORT OF THE SECRETARY OF THE TREASURY
PRESS RELEASE OF NOVEMBER 1, 1962

The Treasury Department, by this public notice, invites tenders for additional
amounts of ten series of Treasury bills to an aggregate amount of $1,000,000,000,
or thereabouts, for cash. The additional bills will be issued November 15, 1962,
will be in the amounts, and will be in addition to the bills orginially issued and
maturing as follows:
Amount 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

Origmal issue dates 1962

July 19
July 26
Aug. 2
Aug. 9
Aug. 16.
Aug. 23
Aug. 30
Sept. 6
Sept. 13
Sept. 20

Maturity dates 1963

Jan. 17
Jan. 24
Jan. 31
Feb. 7..
Feb. 14... ._
Feb. 21 .
Feb. 28
Mar. 7.
Mar. 14
Mar. 21

Days from
Nov. 15, 1962,
to maturity
63
70
77
84
91
98
105
112
119
126

Amount outstanding Hn
mUlions)
$2,000
2,003
2,001
700
704
700
700
700
701
700

1,000, 000. 000

The additional and original bills will be freely interchangeable.
Each tender submitted must be in the amount of $10,000, 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 $50,000 will be apphed $5,000 to the issue with original date of July 19,
1962, and $5,000 to each of the additional weekly issues through the issue with
original date of September 20, 1962.)
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, $50,000, $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 p.m., eastern standard time, Wednesday, November 7,
1962. 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 $10,000, 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.
Banking institutions generally may submit tenders for account of customers
provided the names.of the customers are set forth in such tenders. 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 gua;ranty of payment by an incorporated bank or trust
company.
Immediately after the closing hour, tenders will be opened at the Federal
Reserve Banks and branches, following which public announcement will be made
by the Treasury Department of the amount and price range of accepted bids.
Those submitting tenders will be advised of the acceptance or rejection thereof.
The Secretary of the Treasury expressly reserves the right to accept or reject
any or all tenders, in whole or in part, and his action in any such respect shall be
final. Noncompetitive tenders for $100,000 or less (in even multiples of $10,000)
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 $200,000,000, the Secretary of the

229

EXHIBITS

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 $10,000. Settlement for accepted tenders in accordance with the bids must
be made or completed at the Federal Reserve Bank or branch in cash or other
immediately available funds on November 15, 1962.
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 cliscount 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 Ptevenue 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. Purchasers of a strip
of the bills offered hereunder should, for tax purposes, take such bills on to their
books on the basis of their purchase price prorated to each of the ten outstanding
issues using as a basis for proration the closing market prices for each of the
issues on November 15, 1962. (Federal Reserve Banks v^iil have available a list
of these market prices, based on the mean between the bid and asked quotations
furnished by the Federal Reserve Bank of New York.)
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 NOVEMBER 7, 1962
The Treasury Department announced last evening that tenders for additional
amounts of ten series of Treasury bills to an aggregate amount of $1,000,000,000,
or thereabouts, to be issued November 15, 1962, which were offered on November
1, were opened at the Federal Reserve Banks on November 7. The amount of
accepted tenders will be equally divided among the ten regular weekly issues of
outstanding Treasury bills maturing January 17, 1963, to March 21, 1963,
inclusive. The details of the offering are as follows:
Total applied for
$2, 409, 960, 000
Total accepted (includes $13,160,000 entered on a noncompetitive basis and accepted in full at the average price shown
below)
__.
1, 001, 210, 000

Range of accepted competitive bids
High...
Low
Average

Approximate equivalent annual rate of
discount based on 94.5 days (average
number of days to maturity)
2.827%
2. 876%
1 2.866%

(18 percent of the amount bid for at the low price was accepted.)
1 On a coupon issue of the same length as the average for the bills and for the same amount invested, the
return on these bills would provide a yield of 2.93 percent. Interest rates on biUs 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 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
semiaimual compounding if more than one coupon period is involved.

230

19 63 REPORT OF THE SECRETARY OF THE TREASURY
Total tenders applied for and accepted by Federal Reserve districts

Boston
New York
Philadelphia
Cleveland
Richmond
Atlanta
Chicago
St. Louis.
Minneapolis
Kansas City
Dallas
San Francisco

District

Applied for

$31,450,000'
2, 010,220,000
10,310,000
32,470, 000
21, 050, 000
16,860,000
144,440, 000
8.240,000
12,960,000
12, 660, 000
21,100,000
88,200,000

....
.
. .

. .

. . .

. .
.

. ._
.

2,409,960.000

Total

Accepted
$25, 750,000
863, 020,000
310, 000
27,470,000
13,410,000
6,950, 000
27,680, 000
1,740, 000
6,140,000
1,660,000
1,280, 000
35,800, 000
1,001,210,000

P R E S S R E L E A S E O F J A N U A R Y 22, 1963
T h e Treasury D e p a r t m e n t , by this public notice, invites tenders for
$1,000,000,000, or thereabouts, of 138-day Treasury bills, to be issued on a
discount basis under competitive a n d noncompetitive bidding as hereinafter
provided. T h e bills of this series will be designated t a x anticipation series,
t h e y will be dated F e b r u a r y 6, 1963, a n d t h e y will m a t u r e J u n e 24, 1963. T h e y
will be accepted a t face value in p a y m e n t of income and profits taxes due on
J u n e 15, 1963, a n d t o t h e extent t h e y are not presented for this purpose t h e
face a m o u n t of these bills will be payable without interest a t m a t u r i t y . T a x payers desiring to apply these bills in p a y m e n t of J u n e 15, 1963, income a n d
profits taxes have t h e privilege of surrendering t h e m t o any Federal Reserve
B a n k or branch or t o t h e Office of t h e Treasurer of t h e United States, Washington,
not more t h a n fifteen days before J u n e 15, 1963, a n d receiving receipts therefor
showing t h e face a m o u n t of t h e bills so surrendered. These receipts m a y be
submitted in lieu of t h e bills on or before J u n e 15, 1963, to t h e District Director
of I n t e r n a l Revenue for t h e district in which such taxes are payable. T h e bills
will be issued in bearer form only, and in denominations of $1,000, $5,000, $10,000,
$50,000, $100,000, $500,000, a n d $1,000,000 (maturity value).
Tenders will be received a t Federal Reserve Banks and branches u p to t h e
closing hour, one-thirty p.m., eastern s t a n d a r d time, Wednesday, J a n u a r y 30,
1963. Tenders will not be received a t t h e Treasury D e p a r t m e n t , Washington.
E a c h tender m u s t be for an even multiple of $1,000, a n d in t h e case of competitive
tenders t h e price offered m u s t be expressed on t h e basis of 100, with not more
t h a n three decimals, e.g., 99.925. Fractions m a y not be used. I t is urged
t h a t tenders be made on t h e printed forms a n d forwarded in t h e special envelopes
which will be supplied by Federal Reserve Banks or branches on application
therefor.
Banking institutions generally m a y submit tenders for account of customers
provided t h e names of t h e customers are set forth in such tenders. Others
t h a n banking - institutions will not be p e r m i t t e d t o submit tenders except for
their own account. Tenders will be received without deposit from incorporated
banks a n d t r u s t companies a n d from responsible a n d recognized dealers in investment securities. Tenders from others m u s t be accompanied by p a y m e n t of
2 percent of t h e face a m o u n t of Treasury bills applied for, unless t h e tenders are
accompanied by an express g u a r a n t y of p a y m e n t by an incorporated b a n k or
t r u s t company.
All bidders are required to agree not to purchase or to sell, or to make any
agreements with respect to t h e purchase or sale or other disposition of any bills
of this issue, until after one-thirty p.m., eastern s t a n d a r d time, Wednesday,.
J a n u a r y 30, 1963.
I m m e d i a t e l y after t h e closing hour, tenders will be opened a t t h e Federal
Reserve Banks and branches, following which public announcement will be m a d e
by t h e Treasury D e p a r t m e n t of t h e a m o u n t a n d price range of accepted bids.
Those submitting tenders will be advised of t h e acceptance or rejection thereof.
T h e Secretary of t h e Treasury expressly reserves t h e right t o accept or reject
any or all tenders, in whole or in p a r t a n d his action in any such respect shall
be final. Subject t o these reservations, noncompetitive tenders for $200,000

231

EXHiBrrSi

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 February 6, 1963.
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 (current revision) 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 JANUARY 30, 1963
The Treasury Department announced last evening that the tenders for
$1,000,000,000, or thereabouts, of tax anticipation series 138-day Treasury bills
to be dated February 6, 1963, and to mature June 24, 1963, which were offered
on January 22, were opened at the Federal Reserve Banks on January 30.
The details of this issue are as follows:
Total applied for
$2, 061, 518, 000
Total accepted (includes $42,068,000 entered on a noncompetitive basis and accepted in full at the average price
shown below)
1, 000, 434, 000
Range of accepted competitive bids:
High, equivalent rate of discount approximately 2.893% per annum. 98. 891
Low, equivalent rate of discount approximately 2.940% per annum. 98. 873
Average, equivalent rate of discount approximately 2.929% per
annum i
98. 877
(58 percent of the amount bid for at the low price was accepted.)
1 On a coupon issue of the same length and for the same amount invested, the return on these bUls would
provide a yield of 3.00 percent. Interest rates on bUls 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 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.
Total
applied for

Federal Reserve district

Boston
New York
PhUadelphia
ClevelandRichmond
Atlanta
Chicago
St. Louis.
Minneapohs.,
Kansas City
Dallas
San Francisco

.
......

....
. . , ,

- _
, .

Total
707-484—64-

. . . __

-17

,,. ,

Total accepted

$27,370,000
1, 662,669,000
23,405,000
20,101,000
2,202,000
15,927,000
159,127,000
12,485,000
19,832,000
15,420,000
24,300,000
88,690,000

$18,530,000
823,825,000
1,405,000
4,101,000
2,202,000
12,927,000
68,977,000
6,485,000
7, 57:2,000
4,920,000
9,040,000
40,450,000

2,061,518,000

1,000,434,000

232

1963 REPORT OF THE SECRETARY OF THE TREASURY
PRESS RELEASE OF JULY 2, 1962

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 July 15, 1962, in the amount of $2,003,516,000, to be
issued on a discount basis under competitive and noncompetitive bidding as hereinafter provided. The bills of this series will be dated July 15, 1962, and will
mature July 15, 1963, 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, $50,000, $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 p.m., eastern daylight saving time, Tuesday, July 10, 1962.
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.
Banking institutions generally may submit tenders for account of customers
provided the names of the customers are set forth in such tenders. Others
than banking institutions will not be permitted to submit tenders except for
their own account. Tenders will be received without deposit from incorporated
banks and trust companies and from responsible and recognized dealers in investment securities. Tenders from others must be accompanied by payment of
2 percent of the face amount of Treasury bills applied for, unless the tenders are
accompanied by an express guaranty of payment by an incorporated bank or
trust company.
Immediately after the closing hour, tenders will be opened at the Federal
Reserve Banks and branches, following which public annoucement 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 July 16, 1962, in cash or other immediately available funds or
in a like face amount of Treasury bills maturing July 15, 1962. 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.

233

EXHIBITSi

Treasury Department Circular No. 418 (current revision) and this notice,
prescribe the terms of the Treasury bills and govern the conditions of their issue.
Copies of the circular may be obtained from any Federal Reserve Bank or branch.
PRESS RELEASE OF JULY 10, 1962
The Treasury Department announced last evening that the tenders for $2,000,000,000, or thereabouts, of 365-day Treasury bills to be dated July 15, 1962, and
to mature July 15, 1963, which were offered on July 2, were opened at the Federal
Reserve Banks on July 10.
The details of this issue are as follows:
Total applied for
$3, 719, 072, 000
Total accepted (includes $221,574,000 entered on a noncompetitive basis and accepted in full at the average
price shown below)
2, 000, 393, 000
Range of accepted competitive bids: (Excepting five tenders totaling
$2, 675, 000).
High, equivalent rate of discount approximately 3.225% per
annum
96. 730
Low, equivalent rate of discount approximately 3.273% per
annum
96. 682
Average, equivalent rate of discount approximately 3.257% per
annumi
96. ^98
(85 percent of the amount bid for at the low price was accepted.)
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 3.39 percent. Interest rates on biUs 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 bond.s are
computed in terms of interest on the amount invested, and relate the number of days remaining in an interest pajmient period to the actual number of days tn the period, with semiannual compounding if miore
than one coupon period is involved.

Federal Reserve district

Boston.
NewYork
Philadelphia
Cleveland
Richmnnd ..
Atlanta
_
Chicago
St. Louis...
Minneapolis.Kansas City.
DaUas
San Francisco

. . .

Total applied
for

•
.

_..
_

_
.
—

Total

Total accepted

$100,927,000
2,456,472,000
43,605,000
221,738,000
22,610,000
42,710,000
524,386,000
22,838,000
31,885,000
49,782,000
38,668,000
163,451,000

$65,427,000
1 198,397,000
14,305,000
163,238 000
16,010,000
35,310,000
355,636,000
16,834,000
5,885,000
34, 782,000
26,518, 000
68,051,000

3,719,072,000

2,000,393,000

PRESS RELEASE OF AUGUST 28, 1962
Yesterday's regular weekly Treasury bill auction was marked by the unusual
occurrence of a single bidder tendering for an exceptionally high proportion of
the total amount of 3-month bills offered. In view of the disproportionate
allotment that would have occurred and the resulting market disturbance, the
Secretary of the Treasury decided to invoke the right that he expressly reserves
in every public offering of Treasury securities to reject any or all tenders, in whole
or in part. Under these circumstances, he has announced that no single bidder
will be awarded more than one quarter of the total supply of bills offered in either
the 3-month or 6-month maturities.

oo
Summary of information pertaining to Treasury bills issued during the fiscal year 1963
[Dollar a m o u n t s i n t h o u s a n d s ]
Prices a n d r a t e s

M a t u r i t y value
Tenders accepted
D a t e of
issue

D a t e of
maturity

Days
to
maturity 1

Total
applied
for

Total
accepted

On
competitive
basis

On noncompetitive
basis

T o t a l b i d s accepted

For
cash

In
exchange

Average
price
per
hundred

Competitive bids

accepted

High
EquivaLow
lent
average
rate
P r i c e per E q u i v a - P r i c e per E q u i v a (percent) h u n d r e d lent rate h u n d r e d lent rate
(percent)
(percent)

Amount
maturing
on issue
d a t e of
new
offermg

Regular Weekly

July

12
12
19
19
26
26
Aug. 2
2
9
9
16
16
23
23
30
30
Sept. 6
6
13
13
20
20
27
FRASER 27

Oct.
Jan.
Oct.
Jan.
Oct.
Jan.
Oct.
Jan.
Nov.
Jan.
Nov.
Feb.
Nov.
Feb.
Nov.
Feb.
Nov.
Feb.
Dec.
Mar.
Dec.
Mar.
Dec.
Mar.
Dec.
Mar.

4.1962
3,1963
11,1962
10,1963
18,1962
17,1963
25,1962
24,1963
1.1962
31,1963
8,1962
7,1963
15,1962
14,1963
23.1962
21,1963
29.1962
28,1963
6,1962
7,1963
13,1962
14.1963
20,1962
21,1963
27,1962
28,1963

Digitized for

91 $2,211, 823 $1,300,530 $1,107,122
659, 681
700,181
182 1,202, 417
91 2,365,008 1,301,363 1,037.620
700,094
648,379
182 1,126,394
91 2,454,084 1,302,466 1, 002,080
633,940
700,058
182 1,067. 673
91 2,127,134 1,298,098 1,060,002
645,893
702,835
182 1,361, 667
2,161,090 1,300,687 1,076, 884
9
645,892
700,229
182 1, 576, 560
91 1,971,875 1,300,901 1,083,791
7(0.362
660,292
182 1,202.587
91 2,078,302 1,300,652 1,055,169
642, 266
703,844
182 1,765,901
92 2,003,064 1,300.806 1.072,464
639,534
699, 743
182 1,651,071
9:. 2,247,662 1, 300,839 1,092,381
649.770
700,150
182 1,259,495
91 2,054,192 1,301,392 1,095,926
662.200
700,303
182 1,332,153
91 2.377,161 1, 300,907 1,028,964
1.290,537
700, 587
630,295
182 2,264,
810 1, 301,202 1,016,779
91
1,376,198
621,951
700,445
182 2,160,382
1,300,422 1,060,073
9.
639,479
700,115
182 1,777.239

$193,408 $1,127,764
40,600
645,098
263,843 1, 287,935
51,716
698,139
300,385 1,216,690
66.118
674,98
238; G96 1,209,11.
66,942
670,24<i
224,803 1,184,93^:
64,337
638,845
217,110 1,172, 790
637,58:.
50.060
245,483 1,258,490
61, 578
681, 527
228,352 1, 202,940
60.209
646,137
208,458 1,218,463
50,380
667,892
205, 467 1,223,286
48,103
667,232
271,943 1,285, 714
70,292
696,964
284,423 1,097,17C
78,494
646,936
240,349 1,234.674
60,636
656, 782

$172,766
65,083
13,428
1,955
85,775
25.077
88.987
32,586
115, 753
61.384
128. i i : .
62,77:.
42,162
22,317
97,866
53,606
82,376
42,268
78,106
43,071
15,193
3,623
204,032
53,509
65,748
43,333

99.259
98.479
99.248
98.435
99.246
98.416
99.269
98.43
99.27^:
98.441)
99. 292
98.489
99.275
98. 453
99.275
98.491
99.291
98. 626
99.284
98. 495
99.295
98. 628
99.293
98. 603
99.305
98. 515

2.930
3.008
2.974
3.096
2.983
3.134
2.892
3. lOcl
2.87' =
3.075
2.80:^
2. 990
2.867
3.060
2.837
2.984
2.806
2.916
2.834
2.977
2.789
2.91:L

2.796
2.962
2.749
2.938

2 99.269
98.494
99. 268
98.454
99.260
2 98.43
99.273
2 98. 440
99.2711
98.458
99.30':
2 98.491)
2 99.282!
2 98.47:.
2 99.278
98.498
99. 296
98. 534
99.29:.
2 98. 606
99.298
98. 538
99. 300
2 98. 609
99.310
98. 618

2.892
2.979
2.935
3.058
2.927
3.104
2.871)
3.081)
2.852
3.050
2.753
2.975
2.831)
3.02^^
2.825
2.971
2.785
2.900
2.805
2.957
2.777
2.892
2.769
2.949
2.730
2.931

99.257
98.464
99.245
98.425
99.244
98.407
99.265
98.421)
99.27.
98.444
99.282
98.474
99.27:.
98.462
99.27:.
98.488
99.288
98. 523
99.279
98.491
99.292
98. 521
99.292
98.498
99.302
98. 514

2.939 $1,200,638
600,464
3.038
2.987 1,200,273
599,939
3.115
2.991 1,200,982
600,454
3.151
2.9t:J 1,200,752
600,021
3.1L
1,201,600
2.88'
3.07i
600,310
1,204,210
2.841
3.01J
600.080
2.884 1,200,403
600,423
3.062
2.853 1,300.412
600,937
2.991
2.817 1,301,155
600,231
2.922
2.852 1,301,003
600,851
2.985
2.801 1,300,405
600,291
2.925
2 . 8 0 . 1,300,743
600.081
2.97.
2 . 7 6 . 1,300,482
600,230
2.939

1963

Oct. 4
4
11
11
18
18
25
26
Nov. 1
1
8
8

3 15

15
15
23
23
29
29
Dec. 6
6
13
13
20
20
27
27
1963
Jan. 3

3
10
10
17
17
24
24
31
31

91
182
91
182
91
182
91
182
91
182
91

Jan. 3
Apr. 4
Jan. 10
Apr. 11
Jan. 17
Apr. 18
Jan. 24
Apr. 25
Jan. 31
May 2
Feb. 7
May 9
Jan. 17
Jan. 24
Jan. 31
Feb. 7
Feb. 14
Feb. 21
Feb. 28
Mar. 7
Mar. 14
Mar. 21
Feb. 14
May 16
Feb. 21
May 23
Feb. 28
May 31
Mar. 7
June 6
Mar. 14
June 13
Mar. 21
June 20
Mar. 28
June 27

182
90
181
91
183
91
182
91
182
91
182
91
182

Apr. 4
July 5
Apr. 11
July 11
Apr. 18
July 18
Apr. 25
July 25
May 2
Aug. 1

91
183
91
182
91
182
91
182
91
182

182
63
70
77
84

210,852
57, 701
279,305
69,419
292,855
76,685
255,807
66,989
236,463
57,283
234,591
67,652

1,143, 521
647,626
1,207,119
686,303
1, 281,442
695,422
1,178, 668
696,819
1,206,115
657,819
1,162, 726
659,695

1,001,310

988,050

13,260

1,001,310

98
105
112
119
126
91

2,324, 723
1,436.686
2, 409,216
1,273, 774
2, 042,386
1,528,444
2,108,013
1,663,124
1,973,007
1,320, 556
2,091, 613
1,248,269
2,659,736
1,321,683

1,302,307
701,326
1,300. 096
799, 994
1,300,386
800, 744
1,300,313
800,865
1,300,707
800,996
1,301,005
799,979
1,309. 071
801, 567

1,062,201
638,817
1,030,837
736, 043
1,075,779
750,911
1.070,236
749,336
1,038,163
736,692
1,021,097
737,519
1,086,878
749, 027

240,106
62, 509
269,269
63,961
224, 607
49,833
230,077
61,529
262,644
64,304
279,908
62,460
222,193
62,640

1,228,507
678,574
1,182,951
746, 644
1. 202,877
768, 634
1, 224,052
778,102
1,245,862
786,680
1,163,071
742,231
1,244,886
777, 566

2, 220, 022
1,339, 507
2,196,256
1, 541,616
2,363,131
1,260,038
2.253, 525
1,352,808
2,035,425
1,197,214

1,301,055
800,502
1,300,877
800,450
1,301,077
800,045
1,302,094
800,263
1,300,475
799.994

1,092,118
759,266
1,006.920
736,632
969,145
729,311
1,038,234
739,498
1.067,078
751,192

208,937
41,236
293, 957
63,818
331,932
70,734
263,860
60, 765
233,397
48,802

1,167,704
747.185
1,187.181
777,669
1,218,139
785,833
1,166,894
749,769
1,218,273
778,504

1,300,455
701,063
1,301,360
700.610
1,300,331
700,038
1,300, 534
700, 279
1,301,118
700, 787
1,300,942
702,298

99.304
98. 533
99. 302
98. 562
99.306
98.563
99.307
98. 570
99.321
98. 597
99.282
98.520

2.752
2.902
2.760
2.864
2.749
2.843
2.742
2.828
2.686
2.776
2.841
2.927

99. 310
98. 537
99.308
98. 560
99.310
98. 670
99.312
2 98. 676
99.325
98.601
2 99.287
2 98.626

2.730
2.894
2.738
2.848
2.730
2.829
2.722
2.817
2.670
2.767
2.821
2.916

99.300
98. 530
99. 300
98. 550
99.303
98.562
99.305
98. 568
99.318
98. 596
99. 279
98. 519

99.248

2.866

99.258

2.827

99.245

2.876

73,800
22, 762
117,145
53,450
97, 609
32,110
76, 261
22,763
54,845
14,416
137,934
67, 748
64,185
24,001

99.292
98. 561
99. 292
98. 546
99.279
98. 508
99.277
98. 611
99. 290
98. 664
99.277
98. 634
99.269
98.522

2.801
2.846
2.833
2.892
2.863
2.936
2.861
2.946
2.807
2.861
2.860
2.900
2.893
2.924

99.295
98. 670
99.297
2 98. 552
99. 292
' 98.618
99.281
98. 620
99.299
98. 562
2 99.281
2 98. 544
99. 276
2 98.630

2.789
2.829
2.812
2.880
2.801
2.916
2.844
2.927
2.773
2.844
2.844
2.880
2.868
2.908

99.290
98.559
99.290
98. 539
99.276
98.502
99.274
98. 509
99.286
98. 548
99.274
98. 530
99. 268
98. 517

2.809
2.850
2.840
2.906
2.864
2.947
2.872
2.949
2.826
2.872
2.872
2.908
2.896
2.933

1, 300,652
1600,140
1,300,806
600,316
1,300,839
601,324
1,301,392
701,967
1,300,907
700,118
1,301,202
700,552
1,300,422
700,197

133,361
53, 317
113,696
22, 781
82,938
14,212
135,200
50,494
82,202
21,490

99. 260
98.492
99.262
98. 501
99.271
98. 518
99.261
98.496
99.263
98.498

2.926
2.966
2.920
2.966
2.884
2.932
2.923
2.976
2.917
2.972

99.270
98. 506
2 99.267
98.608
99. 275
98.528
99.271
98. 618
99.267
98. 507

2.888
2.939
2.900
2.961
2.868
2.912
2.884
2.931
2.900
2.963

99. 269
98.488
99. 259
98. 496
99. 270
98. 613
99.260
98.493
99. 260
98.489

2.931
2.974
2.931
2.975
2.888
2.932
2.927
2.981
2.927
2.989

1,300,455
700,181
1,301,360
700,094
1,300,331
• 700,058
1,300,634
4 702,835
1,301,118
4 700,229

156,934
63,437
94,241
14,307
18,889
4,616
121,866
3.460
95,003
42.968
138.216
42,703

2.769
2.908
2.769
2.868
2.757
2.844
2.749
2.833
2.698
2.777
2.852
2.929

1,300,530
600,667
1,301,363
600,202
1,302,465
600,3G9
1,289,098
600,408
1,300.687
600,048
1,300,901
601,639

91 12,410,060

Footnotes at end of table.

1, 089,603
643,362
1, 022,055
631,191
1,007,476
623,353
1,044,727
633, 290
1.064,665
643,504
L066,351
644,646

2, 010,655
1, 505,266
2.135,736
1,630, 584
2,224,608
1.436,426
2,133,036
1,394,070
2, 206,922
1, 672. 583
2,249,249
1,760,714

CO
CJI

Summary of information pertaining to Treasury bills issued during the fiscal year 1963—Continued
[Dollar a m o u n t s in t h o u s a n d s ]
Prices a n d r a t e s

M a t u r i t y value
T o t a l b i d s accepted

Tenders accepted
D a t e of
issue

D a t e of
matmrity

Days
to
maturity 1

Total
applied
for

Total
accepted

On
competitive
basis

On noncompetitive
basis

For
cash

In
exchange

Average
price
per
hundred

Competitive bids accepted

EquivaHigh
Low
lent
average
rate
Price per E q u i v a - Price per E q u i v a ( p e r c e n t ) h u n d r e d l e n t r a t e h u n d r e d lent r a t e
(percent)
(percent)

Amount
maturing
on issue
d a t e of
new
offering

Regular W e e k l y — C o n t i n u e d
1963
Feb. 7
7
14
14
21
21
28
28
Mar. 7
7
14
14
21
21
28
28
Apr. 4
4
11
11
18
18
25
25
May 2

May
Aug.
May
Aug.
May
Aug.
May
Aug.
June
Sept.
June
Sept.
June
Sept.
June
Sept.
July
Oct.
July
Oct.
July
Oct.
July
Oct.
Aug.
Oct.
Aug.
Nov.

9
8
16
15
23
22
31
29
6
5
13
12
20
19
27
26
6
3
11
10
18
17
25
24
1
31
8
7

91
182
91
182
91
182
92
182
91
182
91
182
91
182
91
182
92
182
91
182
91
182
91
182
91
182
91
182

911,723 $1,300,787 $1,066,970
338,156
799,156
747,658
426,733 1,303,318 1, 033,388
270,278
741,262
800,036
343.878 1,300,254 1,051,103
496.420
746, 584
800,397
956,072 1,300,116 1,087,480
207,523
753,953
800,163
980, 969 1,301,346 1,069,946
406,838
751,120
800, 647
042.052 1,300, 377 1,034,053
428, 657
743.146
800, 265
336.879 1,301,314 1,018, 999
305. 439
736,479
800, 595
132, 535 1,300, 849 1,053,888
458,712
749, 646
800,046
080, 876 1,300,470 1,077,966
454,124
746. 346
800.033
292,009 1,302,008 1,03i; 714
653,177
741,193
801,369
351, 566 1, 300.736
991,323
484,964
732,603
800,442
258, 566 1.300, 237 1.057,123
670,369
739,177
801,100
054, 396 1.301, 685 1,083,337
667. 689
800, 950
743.485
119, 270 1,300,975 1,078,897
714, 600
801,786
747,081

$233,817 $1,198,531
755,939
51,498
269,930 1,260,38S
58, 773
777,086
249,151 1,173,683
63,813
767,974
212,636 1,178, 530
766,049
46,200
231,400 1,179.010
741,036
49, 427
266, 324 1,196, 852
67,119
781, 645
282, 315 1,125, 683
64,116
746, 246
246, 961 1,153, 563
50,400
746,091
222, 504 1,174, 762
53, 687
756,386
270, 294 1,166, 627
60.176
748, 066
309,413 1, 284, 209
67.839
796,505
243,114 1,206,898
61, 923
767,734
218, 348 1,208,990
67, 466
769, 481
222,078 1,150,106
54, 705
743. 576

$102,256
43,217
52,929
22,949
126, 571
42,423
121, 586
46,104
122, 336
69, 611
103, 525
18,620
175, 631
54, 349
147, 286
53, 956
125, 708
43, 647
136, 381
53, 303
16, 527
3,937
93,339
33,366
92,695
31. 469
150, 869
58,210

99.255
98.486
99.256
98.486
99. 266
98.499
99.267
98. 523
99. 268
98. 615
99. 276
98. 518
99. 266
98. 506
99. 262
98. 495
99. 253
98. 492
99. 264
98.496
99. 263
98. 478
99. 271
98. 492
99. 268
98.48S
99.266
98.487

2.947
2.995
2.944
2.995
2.905
2.969
2.870
2.922
2.897
2.938
2.870
2.931
2.902
2. 965
2.919
2.977
2. 922
2.982
2. 913
2.978
2.917
3.010
2.884
2.982
2.897
2.989
2.905
2.993

99.266
98. 500
99. 262
98.492
99. 270
2 98. 506
99. 276
98. 530
2 99. 274
98. 522
99.280
98. 626
2 99. 276
2 98. 513
99. 270
2 98. 502
99. 265
98. 498
99. 267
98. 600
99. 266
2 98. 484
99. 275
2 98. 496
99. 274
2 98.494
99. 270
98. 496

2.904
2.967
2.92C
2.983
2.888
2.956
2.833
2.908
2.872
2.924
2.848
2.916
2.868
2.941
2.888
2.963
2.876
2.971
2.900
2.967
2.904
2.999
2.868
2.975
2.872
2.979
2.888
2.975

99. 251
98.481
99.265
98.482
99.264
98.494
99.262
98. 514
99. 264
98. 610
99. 270
98. 613
99. 265
98. 502
99. 26C
98. 492
99. 251
98. 48S
99. 263
98. 493
99. 261
98. 476
99. 27C
98. 491
99. 266
98. 488
99. 264
98. 485

2.963 $1,300,942
3.006
4 700,352
2.947 1,302,307
4 703,844
3.003
2.912 1,300,096
4 699. 743
2.979
2.888 1,300,386
4 700,150
2.939
2.912 1, 300,313
2.947
4 700,303
2.888 1, 300, 707
4 700, 587
2. 941
2.908 1, 301.005
4
700, 445
2.963
2.927 1,309,071
2.983
700,115
2.931 1, 301,055
701,063
2.989
2.916 1.300. 877
700, 610
2.981
2.924 1. 301,077
700,038
3.015
2.888 1, 302,094
700, 279
2.985
2.904 1, 300,475
700, 787
2.991
2.912 1,300. 787
2.997 1 702, 298

June

Aug.
Nov.
Aug.
Nov.
Aug.
Nov.
Sept.
Dec.
Sept.
Dec.
Sept.
Dec.
Sept.
Dec.

15
14
22
21
29
29
5
5
12
12
19
19
26
26

91
182
91
182
90
182
91
182
91
182
91
182
91
182

397, 233 1, 301, 508
583,305
800, 667
179. 620 1.301. 692
472, 623
800,428
034,199 1,302.377
411,162
801, 296
188,017 1.302. 566
651. 800
800. 219
128,489 1.300, 264
476, 621
800, 929
304,350 1.301, 702
364, 904
800, 700
912, 450 1,301, 836
440, 997
798,837

1,054, 599
732,058
1,079, 869
742,071
1,109, 293
752,145
1,089, 682
749, 290
1,056, 218
743,461
1,058,151
739. 604
1,056, 872
741,095

246. 909
68. 609
221,823
58, 357
193,084
49,151
212, 884
50, 929
244,046
67,468
243, 551
61,096
244, 963
67, 742

1, 288,147
796, 260
1,169. 986
736, 362
1,144, 934
798, 506
1,165, 286
747, 318
1, 285, 987
797, 543
1,100.040
735, 252
1,172, 520
764,346

99. 266
98. 488
99. 261
98.481
99. 257
98. 455
99. 235
98. 434
99. 248
98. 452
99.242
98. 442
99. 247
98. 448

2.903 . 99.270
2.990
98.494
2.922
99. 270
3.005
98.490
2.973
2 99. 260
3.055
98. 462
2 99. 238
3.027
3.098
2 98. 438
2.975
99. 254
3.063
98.458
2.997
2 99. 245
98.452
3.081
2.979
99. 252
3.070
98.452

2.888
2.979
2.888
2.987
2.960
3.042
3.015
3.090
2.951
3.050
2.987
3.062
2.959
3.062

99. 265
98. 487
99.260
98.478
99. 266
98.456
99. 233
98. 431
99. 245
98.448
99.241
98. 440
99.244
98. 446

2.908
2.993
2.927
3.011
2.980
3.055
3.034
3.104
2.987
3.070
3.003
3.086
2.991
3.074

$564, 776 $3,005, 221

98.766

2.616

2 98.820

2.499

98. 757

2. 632

42, 318 1,000. 684
47, 299 1, 502, 258

98. 877
99. 254

2.929
2.855

98. 891
99. 261

2.893
2.830

98.873
99. 251

2.940
2.869

13,361
4,407
141,706
64. 066
167,443
2,790
137, 280
62,901
14, 277
3,386
201, 662
65,448
129,315
44, 491

1,303,318
701,326
1,300, 254
799,994
1,300,116
800, 744
1,301,346
800, 865
1,300.377
800; 996
1.301,314
799, 979
1,300,849
801.667

Tax Anticipation
1962
1963
Oct. 3 Mar. 22
1963
Feb. 6 June 24
Mar. 22 June 24

170 $5,945, 771 $3,005, 221 $2, 440,445
138
94

2,061, 768
2, 442.188

1,000. 684
968, 366
1. 502, 268 1, 454, 959

One-Year
1962

1963

July 15
Oct. 15

July 16
Oct. 15

1963
Jan. 15
Apr. 15

Jan. 15
Apr. 15

365 $3, 722, 270 $2, 003, 591 $1, 778, 019
365 4, 534, 991 2, 500,103 2,315, 051

$224, 672 $1, 987,341
186,052 2,310,069

$16, 250
190,034

96. 698
96.989

3.257
2.969

2 96. 730
2 97.019

3.226
2.940

96. 682
96. 980

3. 273 $2,003, 516
2.979 2,003, 463

5, 244, 361 2.496,151 2, 252,941
4,047, 588 2, 500. 763 2,310,022

243, 210 2, 457, 503
190, 741 2, 416, 618

38, 648
84,145

96. 943
96. 887

• 3.015
3.062

2 96. 968
2 96.899

3.000
3.050

96. 938
96. 881

3. 020 2, 001, 255
3.068 2,000, 754

1964
365
366

1 The 13-week bills represent additional issues of bills with an orighial maturity of
26 weeks.
2 Relatively small amounts of bids were accepted at a price somewhat above the
high shown. However, the higher price is not shown in order to prevent an appreciable
discontinuity in the range (covered by the high to low prices shown) which would
make it misrepresentatlve.
8 An additional $100 million each of 10 series of weekly bills issued tn a strip for cash
(see press releases dated Nov. 1 and Nov. 7, 1962, in this exhibit).
4 In addition, $100,131,000 of the strip of bihs issued on Nov. 16,1962, matured.
NOTE.—The usual timing with respect to issues of Treasury bilJs is: Press release
inviting tenders, 8 days before date of issue; closing date on which tenders are accepted,
3 days before date of issue; and press release aimouncing acceptance of tenders, 2 days

before date of issue. Figures are final and may differ from those shown in the press
release announcing prehminary results of an offering.
Noncompetitive tenders (without stated price) from any one bidder were accepted
in full at the average price for accepted competitive bids for each issue up to the followmg amounts: 13-week issues, $200,000; 26-week issues, $100,000; strip of bills, $100,000
(m even multiples of $10,000); tax anticipation series of Oct. 3,1962, $400,000, tax anticipation series issued on Feb. 6 and Mar. 22,1963, $200,000; and one-year issues, $400,000.
All equivalent rates of discount shown are on a bank-discount basis.
Qualified depositaries were permitted to make payment by credit in Treasury tax
and loan accounts for Treasury bills of the tax anticipation series dated Oct. 3, 1962,
allotted to them for themselves and their customers up to any amount for which they
were qualified in excess of existing deposits when so notified by the Federal Reserve
Bank of their district;
CO

238 . 1963 REPORT OF THE SECRETARY OF THE TREASURY
Guaranteed Obligations Called
EXHIBIT 6.—Calls for partial redemption, before maturity, of insurance fund
debentures
During the fiscal year 1963, there were 16 calls for partial redemption, before
maturity, of insurance fund debentures, 8 dated September 21, 1962, and the
others dated March 21, 1963. The notices of call were pubhshed in the Federal
Registers of September 28, 1962, and March 29, 1963. The notice covering the
thirteenth call of the 2H, 2^8, 2%, 2^8, 3, 3/8, 3>i 3%, 3M, 3%, 3%, and 4/3 percent
Series A A 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 28, 1962

To Holders of 2Y2; 2Ys; 2%', 2YB; S; SY%', SYA', SYS; SYI^SYA] SYS; and 4Ys Percent Mutual
Mortgage Insurance Fund Debentures, Series A A:
NOTICE OF CALL FOR PARTIAL R E D E M P T I O N , BEFORE MATURITY, OF 2M, 2H, 2%,
2H, 3, 31^, SM, SYi, 3M, S%, SH, AND 41^ P E R C E N T MUTUAL MORTGAGE INSURANCE
F U N D D E B E N 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 mutual mortgage insurance fund debentures, Series AA, of the interest
rates, denominations and serial numbers designated below, are hereby called for
redemption, at par and accrued interest, on January 1,1963, on which date interest
on such debentures shall cease:
2Y2y 2y%, 2%, 2Y%, S, SYs, SYi, SYs, 5H, SY4, SYs, and 4Y8 Percent Mutual Mortgage Insurance Fund Debentures, Series A A
Serial numbers
Denomination
{all numbers inclusive)
$50
12,875 to 13,306
100
r49,511 to 56,397
156,399 to 56,509
f 13,330 to 13,331
500
h3,333 to 15,091
[15,115 to 15,137
l,000-__40,087 to 46,293
5,000
ril,702to 13,362
I 13,368
I 3 - - to 13,369
8,0661to 9,030
10,000
r 8,066
9,037
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, 1962. This does not affect the right of the holder of a debenture to sell and assign the debenture on or after October 1, 1962, and provision
will be made for the payment of final interest due on January 1, 1963, with
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, 1962,
to December 31, 1962, 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, 1963, or for purchase prior to that date will be given by the
Secretary of the Treasury.
APPROVED: Septemher 24, 1962
GEORGE F . STICKNEY,

Deputy Fiscal Assistant Secretary of the Treasury.

NEAL J. HARDY,

Commissioner.

Summary of information contained in the notices of call for partial redemption of insurance fund debentures during the fiscal year 1963
2H, 2H, 2H, 2H, 3,-314, SH,
S%, SH, SH, SH, and i H percent mutual mortgage insurance fund debentures.
Series A A, thirteenth call
Notice of call
Sept. 21, 1962
Redemption date
_
__. Jan. 1,1963.._
Serial numbers called by denominations:
$60
12876-13306
100
- , 49511-66397, 66399-56509.
600

SH and AH percent housing
insurance fund debentures,
Series BB, ninth call

SH, SH, SH, and AH percent
section 220, housing insurance
fund debentures, Series CC,
thu-d call

Mar. 21, 1963..
July 1, 1963....

Sept. 21. 1962„
Jan. 1,1963....

Sept. 21, 1962.
Jan, 1, 1963.

13307-13919.-._
—.
56398, 66610-63516, 63850-63863,
64044.
- . 13330-13331,13333-15091, 15115- 15092-16114, 15138-16878, 16981.

1,000
5,000
10,000
_._
Final date for transfers or denominational
exchanges (but not for sale or assignment).
Redemption on call date, amount of interest
per $1,000 paid tn full with principal.

Presentation for purchase prior to call date:
Period
Amount of accrued interest per $1,000 per
day paid with principal.

2H, 2H, 2%, 2H, 3, SH, SH,
SH, SH, SH, SH, and 4H percent mutual mortgage insurance fund debentures,
Series A A, fourteenth call

16137.
40087-46293....
11702-13362, 13368-13369
8066-9030,9037
Sept. 30,1962..

9-10.
36-63.
12-20.

46294-52259, 53325
13363-13367, 13370-15041, 15288.
9031-9036,9038-9962
3000-3103
Mar. 31,1963
Sept. 30, 1962
$12.60 for 2H%, $13,125 for $12.60 for 2 H % , $13,125 for $15,626 for 3H%, $20,625 for
2H%, $13.75 for 2H%, $14,376
2 H % , $13.76 for 2 H % , $14,375
iH7c.
for 2 H % , $15.00 for 3 % ,
for 2%%, $15.00 for 3%,
$15,625 for S H % , $16.25 for
$16,625 for SH%, $16.25 for
3 H % , $16,875 for 3 % % , $17.60
SH%, $16,876 for S%%, $17.50
for S H % , $18.76 for S H 7 o ,
for SH%, $18.75 for SH%,
$19,375 for S H 7 o , $20,626 for
$19,375 for SH%, $20,626 for
iH%.
iH%. .

36-66.
3-16.

Oct. 1-Dec. 31,-1962
Oct. 1-Dec. 31, 1962
Apr. 1-June 30,1963
$0.067935 for 2H7o, $0.071332 for $0.069061 for 2H7o, $0.072514 for $0.084918 for 3H%, $0.112092 for
iH7o, from July 1, 1962, to
2H%, $0.076967 for 2H%,
2H%, $0.074728 for 2H%,
date of purchase.
$0.079420-for 2H%, $0.082873
$0.078125 for 2H%, $0.081522
for 3%, $0.086326 for SH7o,
for 3%, $0.084918 for SH%,
$0.089779 fox SH%, $0.093232
' $0.088316 for SH%, $0.091712
for SH%, $0.096685 for SH%,
for SH7o, $0.095109 for SH%,
$0.103591 for SH7o, $0.107044
$0.101902 for SH%, $0.105299
for SH7o, $0.113960 for 4H%,
for SH%, $0.112092 for 414%,
from Jan. 1, 1963, to date of
from July 1,1962, to date of
purchase.
purchase.

Oct. 1-Dec. 31, 1962.
$0.088315 for 3H%, $0.095109 for
SH7o, $0.101902 for SH7o,
$0.112092 for iH%, from July
1, 1962, to date of purchase.

Sept. 30, 1962.
$16.25 for SH7o, $17.50 for
SH7o, $18.76 for SH7o, $20,625
for 4H%.

CO
CO

Summary of information contained in the notices of call for partial redemption of insurance fund debentures during the fiscal year 1963—
Continued

Notice of call
Redemption date
Serial numbers called by denominations:
$50
100 . .
500
1,000
6,000.
_
10,000
Final date for transfers or denominational exchanges (but not for sale or assignment).
Redemption on call date, amount of interest
per $1,000 paid in full with principal.

Presentation for purchase prior to call date:
Period .
Amount of accrued interest per $1,000 per
day paid with priacipal.

ZH, m , 4, and i H percent section 220, housing insurance
fund debentures, Series CC,
fourth call

2H, 2H, 3, ZH, ZH, ZH, ZH,
SH, SH, and i H percent
servicemen's mortgage insurance fund debentures,
Series E E , tenth call

2H, 2H, 3, ZH, ZH, ZH, ZH,
ZH, ZH, and i H percent
servicemen's mortgage insurance fund debentures,
Series EE, eleventh call

2H, 2H, ZH, ZH, and ZH percent armed services housing
mortgage insurance fund debentures, Series F F , sixth
caU

Mar. 21,1963
J u l y l , 1963

Sept. 21, 1962 _
Jan. 1,1963-.

Mar. 21, 1963
July 1,1963

Mar. 21, 1963
July 1,1963.

11-14
64-82
21-27
67-81
17-20
220-484
Mar. 31,1963

379-437
2446-2876
640-767
2316-2700
649-639
600-661
Sept. 30,1962

438-577
2877-4080
758-1068
2701-3836, 3871
640-861
662-689
Mar. 31,1963

5-39.
33-793.
8-169.
39-662.

1369-2149.
Mar. 31, 1963.

$17.50 for 3H7o, $18.75 for 3%%, $13,125 for 2H7o, $14,375 for $13,126 for 2H7o, $14,376 for $12.50 for 2H7o, $13.75 for 2%%,
2H7o, $16.00 for 3%, $16,625
$20.00 for 4%, $20,625 for
2H7o, $16.00 for 3%, $15,626
$16,875 for ZH7o, $17.50 for
for 3H%, $16.25 for 3H%,
4H%.
for ZH7o, $16.25 for ZH7o,
ZH7o, $18.75 for ZH7o$16,875 for SH7o, $17.60 for
$16,875 for 3%%, $17.60 for
SH7o, $18.76 for SH7o, $19,376
SH7oi $18.76 for SH7o, $19,375
for 3 ^ % , $20,626 for 4H%.
for 3Ji%, $20,625 for 4H%.
Apr. 1-June 30,1963
$0.096686 for 3H%» $0.103691
for 3H7o, $0.110497 for 4%,
$0.113950 for 4 ^ % , from Jan.
1, 1963, to date of purchase.

Oct. 1-Dec. 31, 1962
$0.071332 for 2H7o, $0.078125
for 2H7o, $0.081622 for 3%,
$0.084918 for SH7o, $0.088315
for 3H%, $0.091712 for SH7o,
$0.096109 for SH7o, $0.101902
for SH7o, $0.106299 for SH7o.
$0.112092 for iH7o, from July
1, 1962, to date of purchase.

Apr. 1-Jime 30,1963.__
$0.072514 for 2H7o, $0.079420
for 2H7o, $0.082873 for 3%,
$0.086326 for SH7o, $0.089779
for 334%, $0.093232 for SH7o,
$0.096685 for SH7o, $0.103591
for 3%%, $0.107044 for SH7o
$0.113950 for iH7o, from Jan.
1, 1963, to date of purchase.

Apr. 1-June 30, 1963.
$0.069061 for 2H7o, $0.075967 for
2%%, $0.93232 for ZH7o,
$0.096685 for 33^%, $0.103591
for ZH7o, from Jan. 1, 1963,
to date of purchase.

fej
Ul

Notice of call
Redemption date
Serial numbers called by denominations:
$50
—
100
600
1,000
,
6,000
10,000
Final date for transfers or denominational
exchanges (but not for sale or assignment).
Redemption on call date, amount of interest
per $1,000 paid in full with principal.
Presentation for purchase prior to call date:
Period
Amount of accrued interest per $1,000 per
day paid with pruicipal.

23^ percent war housing insurance fund debentures.
Series H, twenty-seventh
call

2)4 percent war housing insurance fund debentures,
Series H, twenty-eighth call

23^ percent Title I housing insurance fund debentures,
Series L, sixteenth call

23^ percent Title I housing insurance fund debentures,
Series L, seventeenth call

Sept. 21,1962
Jan. 1,1963
4749-4823

Mar. 21, 1963..
July 1, 1963....

Sept. 21. 1962..
Jan. 1,1963....

Mar. 21, 1963.
July 1,1963.

4824-4858

17393-18213
4946-6296

18214-18496
6297-6363

21155-22079
4926-5116
47211^9969
Sept. 30, 1962

22080-22297
6116-5168
49970-60988,51000..
Mar. 31, 1963

180-187..
418-443..
16^180..
622-643..

188-200.
444-482.
181-185.
644-662.
83.

Sept. 30, 1962..

Mar. 31,1963.

$12.60

$12.50.,

$12.60

$12.50.

Oct. 1-Dec. 31,1962
$0.067936 from July 1, 1962, to
date of purchase.

Apr. 1-June 30,1963
$0.069061 from Jan. 1, 1963, to
date of purchase.

Oct. 1-Dec. 31,1962
$0.067935 from July 1, 1962, to
date of purchase.

Apr. 1-June 30,1963.
$0.069061 from Jan. 1, 1963, to
date of purchase.

fcO

Summary of information contained in the notices of call for partial redemption of insurance fund debentures during the fiscal year 1963—
Continued
2 ^ percent T i t l e I h o u s i n g
i n s u r a n c e fund d e b e n t u r e s .
Series R, fourteenth call

2H: percent T i t l e I housing
i n s u r a n c e fund d e b e n t u r e s ,
Series R , fifteenth call

3 percent T i t l e I h o u s i n g insurance fund d e b e n t u r e s ,
Series T , t h i r t e e n t h caU

3 percent T i t l e I housing ins u r a n c e fund
debentures.
Series T , fourteenth call

Sept. 21, 1962-.
J a n . 1, 1963....

M a r . 21, 1963-.
J u l y l , 1963...

Sept. 21, 1962
J a n . 1, 1963

M a r . 21, 1963.
J u l y 1, 1963.

611-533....
1135-1273..
274-305....
478-637....

534-546....
1274-1328..
306-328....
638-687....

508-640.
1689-1956.
572-620.
1086-1392.

rs:)
CO

Oi
CO

N o t i c e of call
Redemption date
Serial n u m b e r s caUed b y d e n o m i n a t i o n s :
$50100..
500-1,0006 000F i n a l d a t e for t r a n s f e r s - o r 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 on call d a t e , a m o u n t of interest
p e r $1,000 p a i d i n fuh w i t h p r i n c i p a l .
P r e s e n t a t i o n for p u r c h a s e prior to caU d a t e :
Period
A m o u n t of accrued interest per $1,000
per d a y p a i d w i t h p r i n c i p a l .

Sept. 30, 1962..

M a r . 31, 1963-.

495-507
1631-1688
562-571..
1028-1085..
394-395
Sept. 30, 1962

$13.75--

$13.75

$15.00

$15.00.

Oct. 1-Dec. 31, 1962
$0.074728 from J u l y 1, 1962, t o
d a t e of p u r c h a s e .

A p r . 1-June 30, 1963
$0.075967 from J a n . 1, 1963, to
d a t e of p u r c h a s e .

Oct. 1-Dec. 31,1962
$0.081522 from J u l y 1, 1962, t o
d a t e of p u r c h a s e .

A p r . 1-June 30,1963.
$0.082873 from J a n . 1, 1963, to
d a t e of p u r c h a s e .

%
O

M a r . 31, 1963.

»^
W
Ul
O

>
K!

t?=l

EXHIBITS

243

Regulations
EXHIBIT 7.—Third amendment, January 29, 1963, to Departmerit Circular
No. 905, Second Revision, United States savings bonds. Series H
TREASURY DEPARTMENT,

Washington, January 29, 1963.
Section 332.10 of Department Circular No. 905, Second Revision, dated
September 23, 1959 (31 CFR, 1962 Supp., 332), is hereby supplemented by the
addition of subsection (c) as follows:
(c) Identifying numbers.—The applicant will furnish the appropriate identifying number of the owner or first-named coowner, as the case may be, required
to be used on tax returns and other documents submitted to the Internal Revenue
Service (an individual's social security account number or employer identification
number), and the issuing agent will, in addition to the other data prescribed by
sec. 332.5, include such identifying number on the bond following the name of
the owner or first-named coowner.
DOUGLAS DILLON,

Secreiary of the Treasury.
EXHIBIT 8.—Notice of Revocation of 1947 Treasury Department
No. 811

Circular

TREASURY DEPARTMENT,

Washington, September 17, 1962.
Effective as of the close of business September 29, 1962, banks and other
financial institutions will no longer be authorized to redeem Armed Forces leave
bonds. Treasury Department Circular No. 811 (31 CFR 325), relating to payments by banks and other financial institutions in connection with redemption
of Armed Forces leave bonds, is revoked effective at the close of business
September 29, 1962.
DOUGLAS DILLON,

Secretary of ihe Treasury.
EXHIBIT 9.—Second amendment, September 17, 1962, to Department Circular No. 793, Revised, regulations governing Armed Forces leave bonds
TREASURY DEPARTMENT,

Washington, September 17, 1962.
Department Circular No. 793, Revised, dated August 1, 1947 (31 CFR 1947
Supp., Part 324), is hereby amended and revised, effective as of the close of
business September 29, 1962.
AUTHORITY: Armed Forces Leave Act of 1946, as amended (60 Stat. 963; 61
Stat. 510; 62 Stat. 506; 37 U.S.C. 32, 35); and Second Libertv Bond Act, as
amended (31 U.S.C. 757c).
Section 324.8 is rescinded.
Section 324.9 is amended to read as follows:
SEC. 324.9. Payment of honds.
(a) Execution of reguest and presentation for payment.—A registered owner
must identify himself to an authorized certifying officer and must sign
the request for payment of his bond in the presence of such officer. The
bond should be presented and surrendered direct or through a bank or
trust company to a Federal Reserve Bank or branch or to the Treasurer
of the United States, Washington 25, D.C, except that any bond marked
"DUPLICATE" should be forwarded to the Bureau of the Public Debt,
Division of Loans and Currency, Washington 25, D.C.
(b) Certification of reguest.—After the registered owner has identified himself and signed the request for payment, the certifying officer should
complete the certification appearing at the end of the form for request
for payment and imprint his official seal or stamp. An embossing seal
should not be used for this purpose. If the officer has no other seal, he
should prepare a separate certification which describes the bond, complete
and sign it and impress the seal thereon.

244

1963 REPORT OF THE SECRETARY OF THE TREASURY
(c) Certifying officers.—The following officers are authorized to certify
requests for payment of Armed Forces leave bonds:
(1) Banks, trust companies and branches.—Any officer of any bank or
trust company incorporated in the United States or its organized
territories, or domestic or foreign branch of such bank or trust
company, including those doing business in the organized territories
or insular possession of the United States under Federal charter or
organized under Federal law; Federal Reserve Banks, Federal land
banks, and Federal home loan banks; and any employee of any such
bank or trust company expressly authorized by the corporation for
that purpose, who should sign over the title "Designated Employee";
(2) Veterans' home or hospital or other facility.—The officer in charge of
any home, hospital, or other facility of the Veterans Administration
(only for patients and members of such facilities);
(3) Foreign countries.—Ajay United States diplomatic or consular
representative; a notary or other officer authorized to administer
oaths, whose certification must be accompanied by a certificate as to
his official character and jurisdiction certified by a United States
diplomatic or consular officer under seal of his office (see (b) above);
(4) Armed forces:-—Commissioned officers of the Army, Navy, Air Force,
Marine Corps, and Coast Guard of the United States for members
of their establishments or civilian employees (and the families of such members or employees) under their jurisdiction, persons in countries in which
there are no United States diplomatic or consular representatives
and persons who are in areas remote from such representatives;
(5) Special provisions.—The Commissioner of the Public Debt, the Chief
of the Division of Loans and Currency, or a Federal Reserve Bank
is authorized to make special provision for certification in any
particular case in which none of the officers authorized to certify
requests for payment of Armed Forces leave bonds is readily
accessible.
DOUGLAS DILLON,

Secretary of the Treasury.
EXHIBIT 10.—Second Revision, April 19, 1963, of Department Circular No.
300, general regulations with respect to United States securities
TREASURY DEPARTMENT,

Washington, April 19, 1963.
Department Circular No. 300, Revised, dated April 1, 1955, as amended (31
CFR 306), is hereby further amended and issued as the Second Revision, effective
April 19, 1963.
AUTHORITY: Sees. 306.0 to 306.118 issued under R.S. 3706, 40 Stat. 288, 290,
and 1309, 48 Stat. 343 and 50 Stat. 481; 31 U.S.C. 738a, 739, 752, 752a, 753, 754,
754a, and 754b.
SUBPART A - G E N E R A L INFORMATION

Sec. 306.0. Applicability of regulations.—These regulations apply to all United
States transferable and nontransferable securities, ^ other than United States
savings bonds, to the extent specified in these regulations, the offering circulars
or special regulations governing such securities.
Sec. 306.1 Official agencies.
(a) Subscripiions—tenders-bids.—Securities subject to these regulations are
issued from time to time pursuant to public offerings by the Secretary of the
Treasury, through the Federal Reserve Banks, fiscal agents of the United States,
and the Treasurer of the United States. Only the Federal Reserve Banks and
branches and the Treasury Department are authorized to act as official agencies,
and subscriptions for securities, tenders for Treasury bills, and bids, to the extent
provided in the regulations governing the sale of Treasury bonds through competitive bidding, may be made direct to them; however, banking institutions may
assist customers with their subscriptions, tenders or bids.
1 Bonds and other securities issued by certain agencies of the United States and the former Government
of Puerto Rico are subject to these regulations, so far as apphcable, under special arrangements with tho
issuing authorities. Information as to their application to any particular transaction tn any designated
security will be furnished by the Bureau ofthe Public Debt, Division of Loans and Currency, Washmgton
26, D . C , upon request.

EXHIBITS

245

(b) Transactions after issue.—Transactions in securities after original issue
are largely conducted by the Bureau of the Public Debt, Division of Loans and
Currency, Washington 25, D . C , and inquiries concerning such transactions
should be directed to it. The Federal Reserve Banks and branches are also
official agencies for the receipt of securities for transactions after issue. The
Federal Reserve Banks and branches are located in the cities indicated by their
names, as follows:
Federal Reserve Bank of Boston.
Federal Reserve Bank of St. Louis,
Federal Reserve Bank of New York,
Little Rock Branch,
Buffalo Branch.
Louisville Branch,
Federal Reserve Bank of Philadelphia.
Memphis Branch.
Federal Reserve Bank of Cleveland,
Federal Reserve Bank of Minneapolis,
Cincinnati Branch,
Helena (Montana) Branch.
Pittsburgh Branch.
Federal Reserve Bank of Kansas City,
Federal Reserve Bank of Richmond,
Denver Branch,
Oklahoma City Branch,
Baltimore Branch,
Omaha
Branch.
Charlotte Branch.
Federal Reserve Bank of Atlanta,
Federal Reserve Bank of Dallas,
Birmingham Branch,
El Paso Branch,
Houston Branch,
Jacksonville Branch,
San Antonio Branch.
Nashville Branch,
New Orleans Branch.
Federal Reserve Bank of San FranFederal Reserve Bank of Chicago,
cisco,
Detroit Branch.
Los Angeles Branch,
Portland (Oregon) Branch,
Salt Lake City Branch,
Seattle Branch.
Sec. 306.2. Definitions.—Certain words and terms, as used in these regulations,
are defined as follows:
(a) "Department" refers to the Treasury Department.
(b) ''Bureau" refers to the Bureau of the Public Debt, Division of Loans and
Currency, Washington 25, D.C.
(c) ''Treasury securities," "Treasury bonds," "Treasury notes," "Treasury
certificates of indebtedness," and "Treasury bills," or simply "securities,"
"bonds," "notes," "certificates," and "bills," unless otherwise indicated by the
context, refer only to transferable securities.
(d) "Transferable securities" are securities title to which may be transferred
by delivery, or by assignment and delivery, and which may be sold on the market.
(e) "Registered securities" are either transferable or nontransferable, payable
on their face at maturity or call for redemption before maturity in accordance
with their terms to certain persons whose names and addresses are recorded.
Nontransferable securities, issued only in registered form, are payable accorcLing
to their terms to the registered owners or recognized successors in title to the
extent and in the manner provided in the offering circulars or applicable
regulations.
(f) "Bearer securities" are those which are payable on their face at maturity
or call for redemption before maturity in accordance with their terms to "bearer,"
the ownership of which is not recorded. Title to such securities may pass by
delivery without endorsement and without notice. "Coupon securities" are
bearer securities which are issued with interest coupons attached.
(g) "Securities assigned in blank" or "securities so assigned as to become, in
effect, payable to bearer" refers to registered securities which are assigned by
the owner or his authorized representative without designating the assignee.
Registered securities assigned simply to "The Secretary of the Treasury" or in
the case of Treasury Bonds, Investment Series B-1975-80, to "The Secretary
of the Treasury for exchange for the current Series EA or EO Treasury
notes" are considered to be so assigned as to become, in effect, payable to bearer.
(h) "Face maturity date" is the payment date specified in the text of a security.
(i) "Call date" is the date on which the obligor may make payment before
maturity pursuant to a call for redemption in accordance with the terms of the
security.
(j) "Payment" and "redemption," unless otherwise indicated by the context,
are used interchangeably for payment at maturity or payment before maturity
pursuant to a call for redemption in accordance with the terms of the securities.

246

1963 REPORT OF THE SECRETARY OF THE TREASfURY

(k) "Redemption-exchange" is any authorized redemption of securities for
the purpose of applying the proceeds in payment for other securities offered in
exchange.
(1) "Advance refunding offer" is an offer to a holder of a security, in advance
of its call or maturity, to exchange it for another security.
(m) "Coownership" and "coowner" are used for convenience only to describe
any permitted form of joint ownership.
(n) "Incompetent" refers to a person under any legal disability except
minority..
(o) "Court" means one which has jurisdiction over the parties and the subject
matter.
(p) "Identifying number" means the appropriate identifying number as
required on tax returns and other documents submitted to the Internal Revenue
Service, i.e., an individual's social security account number or an employer
identification number, (NOTE: The social security account number is composed
of nine digits separated by two hyphens, for example, 000-00-0000; the employer
identification number is composed of nine digits separated by one hyphen, for
example, 00-0000000. The hyphens are an essential part of the numbers and
must be included.)
Sec. 306.3. Transportation charges and risks in the shipment of securities.—
The following rules will govern transportation to, from, and between the Treasury
Department and the Federal Reserve Banks and branches of securities issued
on or presented for authorized transactions:
(a) The securities may be presented or received by the owners or their agents
in person.
(b) Securities issued on original issue, unless delivered in person, will be delivered by registered mail or by other means at the risk and expense of the United
States.
(c) The United States will assume the risk and expense of any transportation
of securities which may be necessary between the Federal Reserve Banks and
branches and the Treasury.
(d) Securities submitted for any transaction after original issue, if not presented
in person, must be forwarded at the owner's risk and expense.
(e) Bearer securities issued on transactions other than original issue will be
delivered by registered mail, covered by insurance, at the owner's risk and
expense, unless called for in person by the owner or his agent. Registered securities issued on such transactions will be delivered by registered mail at the
risk of, but without expense to, the registered owner. Should delivery by other
means be desired, advance arrangements should be made with the official agency
to which the original securities were presented.
SUBPART B - R E Q I S T R A T I O N

Sec. 306.10. Registration.
(a) General.—'The registration used must express the actual ownership of the
security, and may not include any restriction on the authority of the owner to
dispose of it in any manner, except as otherwise specifically provided in these
regulations. The Treasury Department reserves the right to treat the registration
as conclusive of ownership. Requests for registration should be clear, accurate
and complete, and conform substantially with one of the forms set forth in this
subpart. The registration of all securities owned by the same person, organization,
or fiduciary estate should be uniform. The address must include the street and
number, postal zone, rural route, or any other local feature. Individual owners
should be designated by the names by which they are ordinarily known or under
which they do business, preferably including at least one full given name. . The
name of an individual may be preceded by any applicable title, such as "Dr." or
"Rev.," or followed by "M.D.," "D.D." or other similar designation. "Sr." or
"Jr." or any other similar suffix should be used when necessary to distinguish the
owner from any other person. The name of a woman must be preceded by "Miss"
or "Mrs.," unless some other applicable title or designation is used. A married
woman's own given name, not that of her husband, must be used for example,
"Mrs. Mary A. Jones," NOT "Mrs. Frank B. Jones."
(b) Identifying number.— Requests for registration and assignments for transfer
must include identifying numbers. (See sec. 306,2(p).) Identifying numbers
are not required for foreign governments, nonresident aliens not engaged in
trade or business within the United States, or international organizations and
foreign corporations not engaged in trade or business within the United States

EXHIBITS

247

and not having an office or place of business or a financial or paying agent in the
United States.
Sec. 306.11. Forms of registration for transferable securities.—The forms of
registration described below are authorized for transferable securities:
(a) Natural persons in their own right.—In the names of natural persons who
are not under any legal disability, in their own right, substantially as follows:
(1) One person.—In the name of one individual, for example:
John A. Doe (000-00-0000)
Mrs. Mary C. Doe (000-00-0000)
Miss Mary Ann Doe (000-00-0000)
An individual who is sole proprietor of a business conducted under a trade name
may include a reference to the trade name, for example:
John A Doe, doing business as Doe's Home Apphance Store (00-0000000)
or
John A. Doe (000-00-0000), d/b/a Doe's Home Appliance Store
(2) Two or more persons—general.—Securities will not be registered in the
name of one person payable on death to another, or in any form which purports
to authorize transfer by less than all the persons named in the registration as
owners (or all the survivors).^ Securities registered in the names of husband and
wife should show the husband's identifying number. Securities registered in the
names of a minor (whether under legal or natural guardianship) and an adult
should show the latter's identifying number.
(i) With right of survivorship.—^In the names of two or more individuals
with right of survivorship, for example:
John A. Doe (000-00-0000) or Mrs. Mary C. Doe or the survivor
Mrs. Mary C. Doe and John A. Doe (000-00-0000) or the survivor
John A. Doe (000-00-0000) or Mrs. Mary C. Doe or Miss Mary Ann Doe or
the survivors or survivor
John A. Doe (000-00-0000) or Mrs. Mary C. Doe
John A. Doe (000-00-0000) and Mrs. Mary C. Doe
(ii) Without right of survivorship.—In the names of two or more individuals in
such manner as to preclude the right of survivorship, for example:
John A. Doe (000-00-0000) and William B. Doe as tenants in common
John A. Jones as natural guardian of Henry B. Jones, a minor, or Robert
C. Jones (000-00-0000), without right of survivorship.
(b) Natural guardians of minors.—A security may be registered in the name of
a natural guardian of a minor for those whose estate no legal guardian or sirailar
representative has legally qualified, for example:
John Jones as natural guardian of Henry Jones, a minor (000-00-0000)
Either parent with whom the minor resides, or, if he does not reside with either
parent, the person who furnishes his chief support, will be recognized as his natural guardian and will be considered a fiduciary. Registration in the name of a
minor in his own right as owner or coowner is not authorized. Securities so registered, upon qualification of the natural guardian, will be treated as though registered in the name and title of the natural guardian.
(c) Incompetents not under guardianship.—Registration in the name of an incompetent is not authorized, except to the extent provided in sec. 306.57(c) (2).
(d) Private organizations {corporations, unincorporated associations, and partner*
ships).—A security may be registered in the name of any private corporation,
unincorporated association, or partnership. The full legal name of the organization, as set forth in its charter, articles of incorporation, constitution, partnership
agreement, or other authority from which its powers are derived, must be included
in the registration, and may be followed, if desired, by a parenthetical reference to
a particular account or fund other than a trust fund, in accordance with the rules
and examples given below:
(1) A corporation.—The name of a business, fraternal, religious, or other
private corporation must be followed by descriptive words indicating the corporate
status unless the term "corporation" or the abbreviation "Inc." is part of the name
1 WARNING: D I F F E R E N C E B E T W E E N TRANSFERABLE TREASURY SECURITIES
R E G I S T E R E D IN T H E NAMES OF TWO OR MORE PERSONS AND U N I T E D STATES
SAVINGS BONDS IN COOWNERSHIP F O R M . The efifect of registering transferable Treasury
securities in the names of two or more persons differs decidedly from registration of savings bonds in coownership form. Savings bonds are virtually redeemable on demand at the option of either coowner on his sigaature
alone. Tsansferable Treasury securities are redeemable only at maturity or upon prior call by the Secretary
of the Treasury. Accordingly, if cash is needed before such time, it can be reahzed only by sale on the
market. This involves a transfer of ownership which can be accomplished only upon proper assigriment
by or in behalf of all owners.
707-484—64

248

19 63 REPORT OF THE SECRETARY OF THE TREASURY

or t h e n a m e is t h a t of a corporation or association organized under Federal law,
such as a national b a n k or a Federal savings and loan association, for example:
Smith Manufacturing Company, a corp. (00-0000000)
T h e S t a n d a r d Manufacturing Corp. (00-0000000)
Jones & Brown, Inc. (00-0000000) (Depreciation Acct.)
First National Bank of
(OO-rOOOOOOO)

(2) An unincorporated association.—The name of a lodge, club, labor union,
veterans' organization, religious society, or similar self-governing organization
which is not incorporated (whether or not it is chartered by or affiliated with a
parent organization which is incorporated) must be followed by the words "an
unincorporated association," for example:
American Legion Post No.
, Department of the D . C , an unincorporated assn. (00-0000000)
Local Union No. 100, Brotherhood of Locomotive Engineers, an unincorporated association (00-0000000)
Securities should not be registered in the name of an unincorporated association
if the legal title to its property in general, or the legal title to the funds with which
the securities are to be purchased, is held by trustees. In such a case the securities
should be registered in the title of the trustees in accordance with (h) of this
section. The term "unincorporated association" should not be used to describe
a trust fund, a partnership, or a business conducted under a trade name.
(3) A partnership.—The name of a partnership must be followed by the
words "a partnership," for example:
Smith & Brown, a partnership (00-0000000)
Acme Novelty Co., a limited partnership (00-0000000)
(e) Staies, public bodies and corporations and public officers.—A security m a y be
registered in t h e n a m e of a State or county, city, town, village, school district or
other political entity, public body or corporation established by law (including a
board, commission, administration, a u t h o r i t y or agency) which is t h e owner or
official custodian of public funds, other than trust funds, or in t h e full legal title of
t h e public officer having custody, for example:
S t a t e of Maine (00-0000000)
Town of Rye, N . Y . (00-0000000)
Maryland State Highway Commission (00-0000000)
Treasurer, City of Springfield, 111. (00-0000000)
Treasurer of Rhode Island as Custodian of t h e State Forestry F u n d (OOOOOOOOO)
(f) States, public officers, corporations or bodies of trustees.—A security m a y be

registered in the title of a public officer or in the name of a State o.i* county, a
public corporation or public body acting as trustee under express authority of
law, followed by appropriate reference zo the statute creating the trust, for example :
State Sinking Fund Commission, trustee of State Highway Certificates of
Indebtedness Sinking Fund under Sec.
, Code of S.C. (00-0000000)
Insurance Commissioner of Pennsylvania, trustee for the benefit of the policyholders of the Blank Insurance Co. (00-0000000), under Sec.
, Penna.
Stats.
(g) Executors, administrators, guardians, and similar representatives or fiduci-

aries.— A security may be registered in the names of legally qualified executors,
administrators, guardians, conservators, or similar representatives or fiduciaries
of a single estate. The names of all the representatives or fiduciaries, in the form
shown in their letters of appointment, must be included in the registration and
must be followed by an adequate identifying reference to the estate, for example:
John Smith, executor of the will (or administrator of the estate) of Henry J.
Jones, deceased (00-0000000)
Wilham C. Jones, guardian (or conservator, etc.) of the estate of James D.
Brown, a minor (or an incompetent) (000-00-0000)
William C. Jones, as custodian for John Smith, a minor (000-00-0000),
under the California Gifts of Securities to Minors Act
(h) Private trust estates.—A security may be registered in the name and title of
the trustee or trustees of a single duly constituted private trust, followed by an
adequate identifying reference to the authority governing the trust, for example:
John Jones and Blank Trust Company, Albany, N.Y., trustees under the
will of Sarah Jones, deceased (00-0000000)
John Doe and Richard Roe, trustees under agreement with Henry Jones
dated 2/9/50 (00-0000000)

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249

The names of all trustees, in the form used in the trust instrument, must be included in the registration, except as follows:
(1) If there are several trustees designated as a board or authorized to act as
a unit, their names should be omitted and the words "Board of Trustees" should
be substituted for the word "trustees," for example:
Board of Trustees of Blank Company Retirement Fund under collective
bargaining agreement dated 6/30/50 (00-0000000)
(2) If the trustees do not constitute a board or otherwise act as a unit, and
are either too numerous to be designated in the inscription by names and title,
or serve for limited terms, some or all of the names may be omitted, for example:
John Smith, Henry Jones, et al., trustees under the will of Henry J. Smith,
deceased (00-0000000)
Trustees under the will of Henry J. Smith, deceased (00-0000000)
Trustees of Retirement Fund of Industrial Manufacturing Co., under
directors' resolution of 6/30/50 (00-0000000)
Sec. 306.12. Nontransferable securities.—Upon authorized reissue. Treasury
Bonds, Investment Series B-1975-80, may be registered in the forms set forth
in sec. 306.11.
Sec. 306.13. Errors in registration.—If an erroneously inscribed security is
received it should not be altered in any respect but the Bureau or a Federal
Reserve Bank or branch should be promptly furnished full particulars concerning
the error and requested to furnish instructions.
SUBPART C - T R A N S F E R S , EXCHANGES, AND REISSUES

Sec. 306.15. Transfers and exchanges of securities—closed periods.
(a) General.—The transfer of registered securities should be made by assignment in accordance with Subpart F. Transferable registered securities are eligible
for denominational exchange and exchange for bearer securities. Bearer securities
are eligible for denominational exchange, and when so provided in the offering
circular, are eligible for exchange for registered securities. Specific instructions
for the issuance and delivery of the new securities, signed by the owner or his
authorized representative, must accompany the securities presented. (Form PD
1642, 1643, 1644, or 1827, as appropriate, may be used.) Securities presented for
transfer or for exchange for bearer securities of the same issue must be received
by an official agency not less than one full month before the date on which the
securities mature or become redeemable pursuant to a call for redemption before
maturity, and any security so presented which is received too late to comply with
this provision will be accepted for payment only.
(b) Closing of transfer books.—'The transfer books are closed for one full month
preceding interest payment dates. If the date set for the closing of the transfer
books falls on Saturday, Sunday, or a legal holiday, the books will be closed as of
the close of business on the last business day preceding that date. If registered
securities forwarded for transfer, for reissue, or for exchange for coupon securities,
or coupon securities forwarded for exchange for registered securities are received
by the Bureau during the time the books are closed, the transaction will not be
completed until the first business day following the date on which interest falls
due, when the books are reopened for all purposes. However, denominational exchanges, exchanges of Treasury Bonds, Investment Series B-1975-80, for the
current series of EA or EO IY2 percent 5-year Treasury notes, and optional redemption of bonds at par as provided in sec. 306.28, may be made at any time.
Sec. 306.16. Denominational exchanges of registered securities.—No assignment
will be required for the authorized exchange of registered securities for like
securities in the same names in other authorized denominations.
Sec. 306.17. Exchanges of registered securities for coupon securities.—Registered
securities submitted for exchange for coupon securities should be assigned to
"The Secretary of the Treasury for exchange for coupon securities to be delivered
to (inserting the name and address of the person to whom delivery of the coupon
securities is to be made)." Assignments to "The Secretary of the Treasury for
exchange for coupon securities," or assignments in blank will also be accepted.
The coupon securities issued upon exchange will have all unmatured coupons
attached.
Sec. 306.18. Exchanges of coupon securities for registered securities.—Coupon
securities presented for exchange for registered securities should have all matured
interest coupons detached. All unmatured coupons should be attached, except
that if presented when the transfer books are closed (in which case the exchange
will be effected on or after the date on which the books are reopened), the next

250

1963 REPORT OF THE SECRETARY OF THE TREASURY

maturing coupons should be detached and held for collection in ordinary course
when due. If any coupons which should be attached are missing, the securities
must be accompanied by a remittance in an amount equal to the face amount of
the missing coupons. The new registered securities will bear interest from the
interest payment date next preceding the date on which the exchange is made.
Sec. 306.19. Denominational exchanges of coupon securities.—All matured interest coupons and all unmatured coupons likely to mature before an exchange
can be completed should be detached from securities presented for denominational
exchange. All unmatured coupons should be attached. If any are missing, the
securities must be accompanied by a remittance in an amount equal to the face
amount of the missing coupons. The new coupon securities will have all unmatured coupons attached.
Sec. 306,20. Reissue of registered transferable securities.—Assignments are
not required for reissue of registered transferable securities in the name(s) of
(1) the surviving coowner or coowners of securities registered in the names of
or assigned to. two or more persons, unless the registration or assignment includes
words which preclude the right of survivorship, or the words "or either of them,"
(2) a succeeding fiduciary or other lawful successor, (3) an individual, corporation,
or unincorporated "association whose name has been legally changed, (4) a corporation or unincorporated association which is the lawful successor to another
corporation or unincorporated association, and (5) a successor in title to a public
officer or body. Evidence of survivorship, succession, or change of name, as
appropriate, must be furnished. No evidence will be required to support assignments for redemption for the account of the registered owner(s) or assignee (s),
or for redemption-exchange or pursuant to an advance refunding offer if the
securities offered in exchange are to be registered in substantially the same form.
The appropriate identifying number must be furnished if the registration of the
security submitted does not include such number for the person or orgahization
to be named on the reissued or new bonds.
Sec. 306.21. Reissue of nontransferable securities.
(a)' Treasury Bonds, Investment Series A-1965.—Bonds of this series may be
reissued only when (1) the name of an owner has been changed, (2) the trustees
in whose names the bonds are registered have been succeeded by other trustees,
and (3) the corporation, unincorporated association, or fund in whose name the
bonds are registered has been succeeded by another corporation or unincorporated
association or fund, by operation of law or otherwise, whereby the business or
activities of the original organization or fund are continued without substantial
change in the successor. Bonds presented for reissue must be accompanied by
pertinent evidence and an appropriate request for reissue. (Form PD 2168
should be used.)
(b) Treasury Bonds, Investment Series B-1975-80.—Bonds of this series may
be reissued only in the names of (1) lawful successors in title, (2) the legal representatives or distributees of a deceased owner's estate, or the distributees of a
trust estate, and (3) State supervisory authorities in pursuance of any pledge
required of the owner under State law, or upon termination of the pledge in the
names of the pledgors or their successors. Bonds presented for reissue must be
accompanied by evidence of entitlement.
Sec. 306.22. Exchange of Treasury Bonds, Investment Series B-1975-80.—Bonds
of this series presented for exchange for 1J4 percent 5-year Treasury notes must
bear duly executed assignments to "The Secretary of the Treasury for exchange
for the current series of EA or EO Treasury notes to be delivered to (inserting the
name and address of the person to whom the notes are to be delivered)." The
notes will bear the April 1 or October 1 date next preceding the date the bonds,
duly assigned with supporting evidence, if necessary, are received by the Bureau
or a Federal Reserve Bank or branch. Interest accrued at the rate of 2^i percent
on the bonds surrendered from the next preceding interest payment date to the
date of exchange will be credited, and interest at the rate of IJ^^ percent on the
notes for the same period will be charged and the difference will be paid to the
owner.
SUBPART D—REDEMPTION OR P A Y M E N T

Sec. 306.25. Presentation and surrender.
(a) General.—Securities, whether in registered or bearer form, are payable in
due course at maturity unless called for redemption before maturity, in which

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251

case they will be payable on the redemption date fixed in the call. The Secretary of the Treasury may provide for the exchange of maturing or called securities, or pursuant to an advance refunding offer, may afford owners the opportunity of exchanging a security, in advance of call or maturity, for another
security. Registered securities should be presented and surrendered for redemption to a Federal Reserve Bank or branch or to the Bureau, and bearer
securities to a Federal Reserve Bank or branch or to the Treasurer of the United
States, Washington 25, D.C. ^
(b) ^'Overdue" securities.—If a bearer security or a registered security assigned
in blank, or to bearer or so assigned as to become, in effect, payable to bearer,
is presented and surrendered for redemption after it has become overdue, the
Secretary of the Treasury may require satisfactory proof of ownership. A
security shall be considered overdue after the lapse of the following periods of
time from its face maturity date:
(1) One year for Treasury bonds.
(2) Six months for Treasury notes and certificates of indebtedness.
(3) Three months for Treasury bills.
(4) Other securities:
(i) One year for securities issued for a term of five years or longer.
(ii) Six months for securities issued for a term of one year or more but
less than five years.
(iii; Three months for securities issued for a term of less than one j^ear.
Sec. 306.26. Redemption of registered securities at maturity, upon prior call, or
for advance refunding.—Registered securities presented and surrendered for
redemption at maturity or pursuant to a call for redemption before maturity
should be assigned to "The Secretary of the Treasury for redemption," unless
the assignor desires that payment be made to some other person, in which case
the assignments should be made to "The Secretary of the Treasury for redemption for the account of (inserting the name, identifying number, and address of
the person to whom payment is to be made)." Assignments in blank or other
assignments having a similar effect will be accepted but specific instructions for
the issuance and delivery of the redemption check, signed by the owner or his
authorized representative, must accompany the securities, unless included in the
assignment. (Form PD 1705 may be used.) Payment will be made by check
drawn on the Treasurer of the United States to the order of the person entitled
and mailed in accordance with the instructions received. Interest payable on
the maturity date, or call redemption date, unless otherwise provided in the
notice of call, will be paid with the principal. Securities presented for advance
refunding should be assigned as provided in the advance refunding offer. Adjustment of interest will be made as provided in the offer.
Sec. 306.27. Redemption of bearer securities at maturity, upon prior call, or for
advance refunding.—All interest coupons due and payable on or before the date
of maturity or date fixed in the call for redemption before maturity should be
detached from coupon securities presented for redemption and should be collected
separately in regular course. All coupons bearing dates subsequent to a date
fixed in a call for redemption, or an offer of advance refunding, should be left
attached to the securities. If any such coupons are missing the full face amount
thereof will be deducted from the payment to be made upon redemption or the
advance refunding adjustment unless satisfactory evidence of their destruction
is submitted. Any amounts so deducted will be held in the Department to provide for adjustments or refunds in the event that the missing coupons should be
subsequently presented or their destruction is later satisfactorily estabhshed. In
the absence of other instructions, payment of bearer securities will be made by
check drawn to the order of the person presenting and surrendering the securities
and mailed to him at his address, as given in the advice which should accompany
the securities, (Form PD 1704 may be used.) A Federal Reserve Bank, upon
appropriate request, may make payment to a member bank from which bearer
securities are received by crediting the amount in the member bank's account.
Sec. 306.28. Optional redemption of Treasury bonds ai par {before maturity or
call redemption date) and application of the proceeds in payment of Federal estate
taxes.
1 See sec. 306.28 for presentatioii and surrender of securities eUgible for use in payment of Federal estate

252

1963 REPORT OF THE SECRETARY OF THE TREASURY

(a) General.—All Treasury bonds to be redeemed at par for the purpose of
applying the proceeds to payment of Federal estate taxes on a decedent's estate ^
must be presented and surrendered to a Federal Reserve Bank or branch or the
Bureau. They should be accompanied by Form PD 1782, fully completed and
duly'executed in accordance with the instructions on the form, and evidence as
described therein. Redemption will be made at par plus accrued interest from
the last preceding interest payment date to the date of redemption, except that
if registered bonds are received by a Federal Reserve Bank or branch or the
Bureau within one month preceding an interest payment date for redemption
before that date a deduction will be made for interest from the date of redemption
to the interest payment date, and a check for the full six months' interest will be
paid in due course. The proceeds of redemption will be deposited to the credit
of the District Director, Internal Revenue Service, designated in Form PD 1782,
the representative of the estate will be notified of the deposit, and the District
Director will forward a formal receipt.
(b) Conditions.—The bonds presented for redemption under this section must
have (1) been owned by the decedent at the time of his death and (2) thereupon
constituted part of his estate, as determined by the following rules in the case of
coownership, partnership and trust holdings:
(i) Coownership holdings.—Bonds held by the decedent at the time of his
death in coownership with another person or persons will be deemed to have met
the above conditions either (1) to the extent to which the bonds actually became
the property of the decedent's estate, or (2) in an amount not to exceed the amount
of the Federal estate taxes which the surviving coowner or coowners are required
to pay on account of such bonds and other jointly-held property.2
(ii) Partnership holdings.—Bonds held at the time of the decedent's death by
a partnership in which he had an interest will be deemed to have met the above
conditions to the extent of his fractional share of the bonds so held proportionate
to his interest in the assets of the partnership.
(hi) Trust holdings.—Bonds held in trust at the time of the decedent's death
will be deemed to have met the above conditions in an amount not to exceed:
the amount of the Federal estate taxes which the trustee as such is required to
pay under the terms of the trust instrument or otherwise; or, if the trust actually
terminated in favor of the decedent's estate, the amount of such estate taxes.
(c) Transactions permitted after owner's death.—If the bond or bonds are in
excess of the amount of the taxes and are not in the lowest authorized denominations, they may be exchanged for bonds of lower denominations. Other transactions, involving no change of ownership, which may be conducted after the death
of the owner without affecting the eligibility of the bonds for redemption at par,
include (1) exchange of registered bonds for coupon bonds, (2) transfer to the
names of the representative of his estate, and (3) exchange of coupon bonds for
bonds registered in the name of the representative of the estate; but such transactions must be explained on Form PD 1782 or in a supplemental statement.
SUBPART E - I N T E R E S T

Sec. 306.35. Computation of interest.—The interest on Treasury securities
accrues and is payable on a semiannual basis unless otherwise provided in the
circular offering them for sale or exchange. If the period of accrual is an exact
six months, the interest accrual is an exact one-half year's interest, without regard
to the number of days in the period. If the period of accrual is less than an exact
six months, the accrued interest is computed by determining the daily rate of
accrual on the basis of the exact number of days in the full interest period and
multiplying the daily rate by the exact number of days in the fractional period for
which interest has actually accrued. A full interest period does not include the
day as of which the securities were issued or the day on which the last preceding
interest became due, but does include the day on which the next succeeding interest
payment is due. A fractional part of an interest period does not include the day
as of which the securities were issued or the day on which the last preceding interest
1 Certain issues of Treasury bonds are redeemable at par and accrued interest upon the death of the owner,
at the option of the representative of, or if none, the persons entitled to, his estate, for the purpose of having
the entire proceeds applied in payment of the Federal estate taxes on the decedent's estate, in accordance
with the terms of the offering circulars cited on the face of the bonds. A current list of eligible issues .may
be obtained from any Federal Reserve Bank or branch or the Bureau of the Public Debt.
2 Substantiallylthe^samefrule applies to community property except that upon the death of either spouse
bonds which constitute part ofthe community estate are deemed to meet the required conditions to the
extent oi one-half of each h(md.

EXHIBITS

253

payment became due, but does include the day as of which the transaction terminating the accrual of interest is effected. The 29th' of February in a leap year is
included whenever it falls within either a full interest period or a fractional part
thereof.^
.
• •
. .
Sec. 306.36. Termination of interest.—Securities will cease to bear interest on
the date of their maturity unless they have been called for redeniption prior
to maturity in accordance with their terms, in which case they will cease to bear
interest on the date fixed for redemption in the call.
Sec. 306.37. Interest on registered securities.
(a) Method of payment.—The interest on registered securities is payable by
checks drawn on the Treasurer of the United States to the order of the registered
owners, except as otherwise provided herein. Interest checks are prepared by
the Department in advance of the interest payment date and are ordinarily
mailed in time to reach the addressees on that date. Upon receipt of notice of
the death or incompetency of an individual named as registered owner, a change
in the name or in the status of a partnership, corporation or unincorporated
association, the removal, resignation, succession or death of a fiduciary or trustee,
dehvery of interest checks will be withheld pending receipt and approval of
evidence showing who is entitled to receive the interest checks. If the inscriptions
on securities do not clearly identify the owners, delivery of interest checks will
be withheld pending reissue of the securities in the correct registration. The
final installment of interest will be paid with the principal at maturity, or upon
call, unless otherwise provided in the notice of call.^
(b) Change of address.—To assure timely delivery of interest checks, owners
should promptly notify the Bureau of any change of address. (Foi-m PD 345
may be used.) The notification must be signed by the registered owner or a
coowner or an authorized representative, and should show the old and newaddresses, the serial number and denomination of each security, the title" of the
securities (for example, 3}{ percent Treasury bonds of 1978-83, dated May 1,
1953), and the registration of each security. Notifications by attorneys in fact
or by legal representatives of the estates of deceased, incompetent or nainor
owners should be supported by proof of their appointment unless, in the case of
legal representatives, they are named in the registration.
(c) Collection of interest checks.
(1) General.—Interest checks may be collected in accordance with the
regulations governing the endorsement and payment of Government warrants
and checks, which are contained in Department Circular No. 21, Revised, as
amended.
(2) By voluntary guardians of incompetents.—Interest checks drawn to the
order of an incompetent for whose estate no legal guardian or similar representative has been appointed should be returned to the Bureau with a full explanation of the circumstances. For collection of interest, the Department will
recognize the relative responsible for the incompetent's care and support or
some other person as voluntary guardian for the incompetent. (Apphcation
may be made on Form PD 1461.)
(d) Nonreceipt, loss, theft or destruction of interest checks.—If an interest check
is not received within a reasonable period after an interest-payment date, or if
a check is lost, stolen or destroyed after receipt, the Bureau should be notified.
The notification should include the name and address of the owner, the serial
number, denomination, and titles of the securities upon which the interest was
payable. If the check is subsequently received or recovered, the Treasurer of
the United States, Washington 25, D.C., should be advised.
Sec. 306.38. Interest on bearer securities.—Unless the terms of the securities
provide that final interest is payable with the principal at matiuity, interest on
coupon securities is payable upon presentation and surrender of the interest
coupons as they mature. Interest coupons are payable at the Office of the
Treasurer of the United States and at any Federal Reserve Bank or.branch.^
The interest on some issues is payable with the principal at maturity, and no
coupons are attached. The interest on Treasury bills, which are sold on a discount basis and are payable at par at maturity, is represented by the difference
between the purchase price and the par value, and no coupons are attached.
^ The Appendix to these regulations contains a complete explanation as to the method of computtag
interest on Treasury bonds, notes, and certificates of indebtedness in any given situation. The Appendix
also outlines the method of computtng the discount rate on Treasury bihs.
2 See sec. 306.15(b) for presentation of securities during periods transfer books are closed.
8 Banking institutions will u.suaUy cash the coupons without charge as an accommodation to thieir
customers.

254

1963 REPORT OF THE SECRETARY OF THE TREASURY
SUBPART F—ASSIGNMENTS OF R E G I S T E R E D SECURITIES—GENERAL

Sec. 306.40. Execution of assignments.—The assignment of a registered
security should be executed by the owner or his authorized representative in the
presence of an officer authorized to witness the assignment. All assignments
must be made on the backs of the securities, unless otherwise authorized by the
Department or a Federal Reserve Bank or branch. An assignment by mark (x)
must be witnessed not only by a witnessing officer but also by-at least one other
person, who should add an endorsement substantially as follows: "Witness to
signature by mark," followed by his signature and address.
Sec. 306.41. Form of assignment.—Registered securities may be assigned in
blank, to bearer, to a specified transferee, to the Secretary of the Treasury for
exchange for coupon securities, or to the Secretary of the Treasury for redemption
or for exchange for other securities offered at maturity, upon call or pursuant to
an advance refunding offer. Assignments to "The Secretary of the Treasury,"
"The Secretary of the Treasury for transfer," or "The Secretary of the Treasury
for exchange" will not be accepted, unless supplemented by specific instructions.
Sec. 306.42. Alterations and erasures.—If an alteration or erasure has been
made in an assignment, an explanation satisfactory to the Treasury Department,
usually in the form of an affidavit by the person responsible, will be required.
Sec. 306.43. Voidance of assignments.—An assignment of a security to or for
the account of another person, not completed by delivery, may be voided by a
disclaimer of interest from that person. The disclaimer should be executed in
the presence of an officer authorized to witness assignments of securities. Unless
otherwise authorized by the Treasury Department or a Federal Reserve Bank
or branch the disclaimer must be written, typed, or stamped on the back of the
security, in substantially the foUowing form:
The undersigned as assignee of this security hereby disclaims any interest
herein.
(Signature)

I certify that the above-named person as described, whose identity is well
known or proved to me, personally appeared before me the
day of
at
and signed the above disclaimer of
(Month and year)

interest.

(SEAL)

(Place)
(Signature and official designation
of witnessing officer)

In the absence of a disclaimer, an affidavit or affidavits should be submitted for
consideration explaining why a disclaimer cannot be obtained, reciting all other
material facts and circumstances relating to the transaction, including whether
or not the security was delivered to the person named as assignee and whether or
not the affiants know of any basis for the assignee claiming any right, title or
interest in the security.
Sec. 306.44. Discrepancies in names.—The Department wUl ordinarily require
an explanation of discrepancies in the names which appear in inscriptions, assignments, supporting evidence or in the signatures to any assignments. (Form
PD 385 may be used for this purpose.) However, where the variations in the
name of the registered owner, as inscribed on securities of the same or different
issues, are such that both may properly represent the same person, for example,
"J. T. Smith" and "John T. Smith," no proof of identity will be required if^ ihe
assignments are signed exactly as the securities are inscribed and are duly certified
hy the same witnessing officer.
Sec. 306.45. Offix^ers authorized to witness assignments.
(a) Officers authorized generally.—Officers authorized to witness assignments
include:
(1) Officers and employees of banks and trust companies chartered by or
incorporated under the laws of the United States or those of any State, Commonwealth or Territory of the United States, and Federal savings and loan associations
or other organizations which are members of the Federal Home Loan Bank
System, who have been authorized generally to bind their respective institutions
by their acts.
(2) Officers of Federal Reserve Banks and branches.
(3) Officers of Federal land banks, Federal intermediate credit banks, and
banks for cooperatives, the central bank for cooperatives, and Federal home
loan banks.

EXHIBITSi

255

(4) United States attorneys, collectors of customs, and regional commissioners
and district directors. Internal Revenue Service.
(5) Judges and clerks of United States courts.
(b) Authorized officers in foreign countries.—The following officers are authorized
to witness assignments in foreign countries:
(1) United States diplomatic or consular representatives.
(2) Managers, assistant managers and other officers of foreign branches of
banks or trust companies chartered by or incorporated under the laws of the
United States or any State, Commonwealth or Territory of the United States.
(3) Notaries public and other officers authorized to administer oaths. The
official position and authority of any such officer must be certified by a United
States diplomatic or consular representative under seal of his office.
(c) Officers having limited authority.—The following officers are authorized to
witness assignments to the extent set forth in connection with each class of
officers:
(1) Postmasters, acting postmasters, assistant postmasters, inspectors-incharge, chief and assistant chief accountants, and superintendents of stations of
any post office, notaries public and justices of the peace in the United States,
its territories and possessions, the Commonwealth of Puerto Rico and the Canal
Zone, but only for assignment of securities for redemption for the account of the
assignor, or for redemption-exchange, or pursuant to an advance refunding offer
for other securities to be registered in his name, or in his name with a coowner.
The signature of any post office official, other than a postmaster, must be in the
following form: "John A. Doe, Postmaster, by Richard B. Roe, Superintendent
of Station."
(2) Commissioned officers and warrant officers of the Armed Forces of the
United States for assignments of securities of any class for any authorized transaction, but only with respect to assignments executed by (i) Armed Forces personnel
and civilian field employees, and (ii) members of the families of such personnel
or civilian employees.
(d) Special provisions for witnessing assignments.—The Commissioner of the
Public Debt, the Chief of the Division of Loans and Currency, or any Federal
Reserve Bank or branch is authorized to make special provisions for any case
or class of cases.
Sec. 306.46. Duties and responsibilities of witnessing officers.—The witnessing
officer must require execution of the assignment in his presence after he has
established the identity of the assignor. He must then complete the certification
and impress or imprint the official seal or stamp, if any. The witnessing olficer
and, if he is an officer or employee of an organization, the organization will be
held responsible for any loss which the United States may suffer as the result of
his fault or negligence.
SEC. 306.47. Evidence of witnessing officer's authority.—The authority of a
witnessing officer may be established by his affixing the seal of his organization
to his certification of an assignment. If such officer does not have access to the
seal, his signature and authority must be certified to the Department, under
seal, by an officer having access to the records and wUl be recognized until notice
is received that his authority has been terminated. (Form PD 835-B may be
used.) Any post office official must use the official stamp of his office. A commissioned or warrant officer of any of the armed forces of the United States
should indicate his rank and state that the person executing the assignment is
one of the class whose signature he is authorized to witness. A judge or clerk
of court must use the seal of the court. Any other witnessing officer must use
his official seal or stamp, if any, but, if he has neither, his official position and a
specimen of his signature must be certified by some other authorized officer under
official seal or stamp or otherwise proved to the satisfaction of the Department.
Sec. 306.48. Interested person not to act as witness or witnessing officer.—Neither
the assignor, the assignee, nor any person having an interest in a security may
act as witnessing officer or as witness to an assignment by mark. However, a
bank officer may witness an assignment to the bank, or an assignment executed by
another officer in its behalf.
Sec. 306.49. Nontransferable securities.—The provisions of this subpart, so
far as applicable, govern transactions in Treasury Bonds, Investment Series
B-1975-80.

256

1963 REPORT OF THE SECRETARY OF THE TREASURY
SUBPART G—ASSIGNMENTS BY OR IN B E H A L F OF INDIVIDUALS

SEC. 306.55. Signatures, minor errors, and change of name.—The owner's
signature to an assignment should be in the form in which the security is inscribed
or assigned, unless such inscription or assignment is incorrect or the name has
since been changed. In case of a change of name, the signature to the assignment should show both names and the manner in which the change was made,
for example, "John Young, formerly John Jung (changed by court order)."
Evidence of the change will be required. However; no evidence is required to
support an assignment if the change resulted from marriage and the signature,
which must be duly witnessed by an authorized officer, is written to show that
fact, for example, "Mrs. Mary J. Brown, before marriage Miss Mary Jones."
SEC. 306.56. Assignment of securities registered in the names of or assigned to
two or more persons.
{SL) For transfer or exchange.—The transfer or exchange for coupon securities
of securities registered in the names of or assigned to two or more persons may be
made during the lives of all the coowners only upon assignments by all or in their
behalf by authorized representatives. Upon proof of the death of one, the Department will accept an assignment by or in behalf of the survivor or survivors,
unless the registration or assignment includes words which preclude the right of
survivorship, or the words "or either of them." In such cases, in addition to
assignment by or in behalf of the survivor or survivors, an assignment in behalf
of the decedent's estate will be required.
(b) For advance refunding exchanges.—Securities registered in the names of or
assigned to two or more persons, whether jointly or in the alternative, may be
assigned by one where the securities offered in exchange are to be inscribed in their
names in substantially the same form. If bearer securities or securities in a
different form are to be issued, all persons named must assign, except that in case
of death paragraph (a) of this section shall apply.
(c) For redemption or redemption-exchange.
(1) Alternative registration or assignment.—Securities registered in the names
of or assigned to'two or more persons in the alternative, for example, "John Smith
or Mrs. Mary Smith" or "John Smith or Mrs. Mary Smith or the survivor,"
may be assigned by one coowner at maturity or upon call, for redemption or
redemption-exchange (as defined in sec. 306.2(k)), for his own account or otherwise, whether or not the other coowner or coowners are deceased. This provision
also applies to securities registered in or assigned to the form "John Smith and
Mrs. Mary Smith or either of theni."
(2) Joint registration or assignment.—Securities registered in the names of
or assigned to two or more persons jointly, for exaniple, "John Smith and Mrs.
Mary Smith," "John Smith and Mrs. Mary Smith or the survivor," or "John
Smith and Mrs. Mary Smith as tenants in common," may be assigned by one
coowner during the lives of all only (i) for redemption at maturity or upon call,
and then only for redemption for the account of all, or (ii) for exchange for other
securities to be registered in their names in substantially the same form as appears
in the registration or assignment of the securities surrendered. Upon proof of
the death of one coowner, the survivor or survivors may assign securities so registered or assigned for redemption or redemption-exchange for any account, except
that, if the words "as tenants in common" or other words having the same effect
appear in the registration or assignment, assignment in behalf of the decedent's
estate also will be required.
SEC. 306.57. Minors and incompetents.
(a) Assignments of securities registered in name of minor.
(1) By minor.—Securities registered in the name of a minor for whose estate
no guardian or similar representative is legally qualified, may be assigned by the
minor at maturity or call for redemption if the total face amount of the matured
or called securities so registered does not exceed $500, and if the minor, in the
opinion of the witnessing officer, is of sufficient competency to execute the assignments and understand the nature of the transaction.
(2) By natural guardian.—Securities registered in the name of a minor for
whose estate no legal guardian or similar representative has qualified may be
assigned by the natural guardian upon quahfication. Form PD 2481 may be
used for this purpose.
(b) Assignments of securities registered in name of natural guardian of minor.—
Securities registered in the name of a natural guardian of a minor may be assigned
by the natural guardian for any authorized transaction except one for the apparent
benefit of the natural guardian. If the natural guardian in whose name the

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257

securities are registered is deceased or is no longer qualified to act as natural
guardian, the securities may be assigned by the person then acting as natural
guardian. The assignment by the new natural guardian should be supported
by proof of the death or disqualification of the former natural guardian and by
evidence of his own status as natural guardian. (Form PD 2481 may be used for
this purpose.) No assignment by a natural guardian will be accepted after receipt
of notice of the minor's attainment of majority, removal of his disability of minority, disquahfication of the natural guardian to act as such, quahfication of a legal
guardian or similar representative, or the death of the minor.
(c) Assignments hy voluntary guardians of incompetents.—Registered securities
belonging to an incompetent for whose estate no legal guardian or similar representative is legally qualified may be assigned by the relative responsible for his
care and support or some other person as voluntary guardian:
(1) For redemption or exchange for bearer securities, if the proceeds of the
securities are necessary and will be used for the care and support of the incompetent or that of his legal dependents and the total face amount of such securities
for which redemption or exchange is requested in any 90-day period does not
exceed $1,000.
(2) For redemption-exchange, if the securities are matured or have been
called, or pursuant to an advance refunding offer, for reinvestment in other
securities to be registered in the form "A, an incompetent (000-00-0000), under
voluntary guardianship."
An application on Form PD 1461 by the person seeking authority to act as
voluntary guardian will be required.
(d) Assignments by legal guardians of minors or incompetents.—Securities
registered in the name and title of the legal guardian or similar representative
of the estate of a minor or incompetent may be assigned by the representative
for any authorized transaction without proof of his qualification. Assignments
by a representative of any other securities belonging to a minor or incompetent
must be supported by properly certified evidence of qualification. The evidence
must be dated not more than one year before the date of the assignments and
must contain a statement showing the appointment is in full force unless it shows
the appointment was made not more than one year before the date of the assignment or the representative or a corepresentative is a corporation. An assignment
by the representative will not be accepted after receipt of notice of termination
of the guardianship, except for transfer to the former ward.
Sec. 306.58. Nontransferable securities.—The provisions of this subpart, so
far as applicable, govern transactions in Treasury Bonds, Investment Series
B-1975-80.
SUBPART H - A S S I G N M E N T S IN B E H A L F OF ESTATES OF DECEASED OWNERS

Sec. 306.65. In course of administration.—A security belonging to the estate
of a decedent which is being administered by a duly qualified executor or general
administrator will be accepted for any authorized transaction upon assignment
by such representative. If the security is not registered in the name and title
of the representative, the assignment must be supported by a certificate or a
copy of the letters of appointment, under court seal. The certificate or certification, if required, must be dated not more than six months before the date of the
assignment and must contain a statement that the appointment is in full force,
unless (a) it shows the appointment was made not more than one year before the
date of the assignment, or (b) the representative or a corepresentative is a corporation, or (c) redemption is being made for application of the proceeds in payment of Federal estate taxes as provided by sec. 306.28.
Sec. 306.66. Temporary or special administrators.—Temporary or special
administrators may assign securities for any authorized transaction within the
scope of their authority. The assignments must be supported by:
(a) Temporary administrators.—A certificate, under court seal, showing the
appointment in full force within thirty days preceding the date of receipt of the
securities.
(b) Special administrators.—A certificate, under court seal, showing the
appointment in full force within six months preceding the date of receipt of the
securities.
Authority for assignments for transactions not within the scope of appointment
must be estabhshed by a duly certified copy of a special order of court.
Sec. 306.67. After settlement through court proceedings.—Securities belonging
to the estate of a decedent which has been settled will be accepted for any author-

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1963 REPORT OF THE SECRETARY OF THE TREASURY

ized transaction upon assignments by the person or persons entitled, as determined
by the court. The assignments should be supported by a copy, certified under
court seal, of the decree of distribution, the representative's final account as
approved by the court, or similar court records.
Sec. 306.68. Without administration.—When it appears that no legal representative of an estate to which securities belong has been or is to be appointed,
the securities may be duly disposed of pursuant to an agreement and assignment
by all persons entitled to share in the securities under the laws of the State of
the decedent's domicile. (Form PD 1646 may be used.) However, all debts
of the decedent and his estate must be paid or provided for and the interests of
any minors or incompetents in the estate must be protected.
Sec. 306.69. Special provisions applicable to small amounts of securities, interest
checks, or redemption checks.—Entitlement to, or the authority to dispose of, a
small amount of pubhc debt securities and checks issued in payment thereof
or in payment of interest thereon, belonging to the estate of a decedent, may be
established through the use of certain short forms, according to the aggregate
amount of securities and checks involved (excluding checks representing interest
on the securities), as indicated by the following table:
Amount
$100
500
500

Circumstances
No administration.-Estate being administered
Estate settled

Form
P D 2216
P D 2488
P D 2458A

To be executed b y - Person who paid burial expenses.
Executor or administrator.
Former executor or administrator,
attorney or other qualified person.

Sec. 306.70. Nontransferable securities.—The provisions of this subpart, so
far as applicable, govern transactions in Treasury Bonds, Investment Series
B-1975-80.
SUBPART I—ASSIGNMENTS BY OR IN B E H A L F OF TRUSTEES AND SIMILAR
FIDUCIARIES

Sec. 306.75. Individual fiduciaries.—Securities registered in, or assigned to, the
names and titles of individual fiduciaries will be accepted for any authorized
transaction upon assignment by the designated fiduciaries without proof of their
qualification. If the fiduciaries in whose names the securities are registered, or
to whom they have been assigned, have been succeeded by other fiduciaries,
evidence of successorship must be furnished. If the appointment of a successor
is not required under the terms of the trust instrument or otherwise and is not
contemplated, assignments by the surviving or remaining fiduciary or fiduciaries
must be supported by appropriate proof. This requires (a) proof of the death,
resignation, removal, or disqualification of the former fiduciary and (b) evidence
that the surviving or remaining fiduciary or fiduciaries are fully qualified to administer the fiduciary estate, which may be in the form of a certificate by them
showing the appointment of a successor has not been applied for, is not contemplated and is not necessary under the terms of the trust instrument or otherwise. Assignments of securities registered in the titles, without the names of
the fiduciaries, for example, "Trustees of the George E. White Memorial Scholarship Fund under deed of trust dated 11/10/40, executed by John W. White,"
must be supported by proof that the assignors are the qualified and acting trustees
of the designated trust estate, unless they are empowered to act as a unit in
which case the provisions of sec. 306.76 shall apply. (Form PD 2446 may be used
to furnish proof of incumbency of fiduciaries.) Assignments by fiduciaries of
securities not registered or assigned in such manner as to show that they belong
to the estate for which the assignors are acting must also be supported by evidence that the estate is entitled to the securities.
Sec. 306.76. Fiduciaries acting as a unit.—If the fiduciaries of any trust estate,
public or private, constitute a board, committee or other body empowered to
act as a unit, securities registered in its name, or assigned to it, may be assigned
for any authorized transaction by anyone authorized to act in its behalf. Except
as otherwise provided in this section, the assignments must be supported by a
copy of a resolution adopted by the body, properly certified under its seal, or, if
none, sworn to by a member of the body having access to its records. (Form
PD 2495 may be used.) If the person assigning is designated in the resolution
by title only, his incumbency must be duly certified by another member of the

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259

body. (Form PD 2446 may be used.) If the fiduciaries of any trust estate are
empowered to act as a unit, although not designated as a board, committee, or
other body, securities registered in their names or assigned to them as such, or
in their titles without their names, may be assigned by anyone authorized by
the group to act in its behalf. Such assignments may be supported by a sworn
copy of a resolution adopted by the group in accordance with the terms of the
trust instrument, and proof of their authority to act as a unit may be required.
As an alternative, assignments by all the fiduciaries, supported by proof of their
incumbency if not named on the securities, will be accepted.
Sec. 306.77. Corepresentatives and fiduciaries.—If there are two or more executors, administrators, guardians, or similar representatives, or trustees of an estate,
all must unite in the assignment of any securities belonging to the estate. However, when a statute, a decree of court, or the instrument under which the representatives or fiduciaries are acting provides otherwise, assignments in accordance
with their authority will be accepted. If the securities have matured or been
called and are submitted for redemption for the account of all, or for redemptionexchange or pursuant to an advance refunding offer and the securities offered in
exchange are to be registered in the names of all, only one representative or
fiduciary need execute the assignment.
Sec. 306.78. Nontransferable securities.—The provisions of this subpart, so far
as applicable, govern assignments of Treasury Bonds, Investment Series B 1975-80.
SUBPART J—ASSIGNMENTS IN BEHALF OF PRIVATE OR PUBLIC ORGANIZATIONS

Sec. 306.85. Private corporations and unincorporated associations.—Securities
registered in the name of, or assigned to, an unincorporated association, or a
private corporation in its own right or in a representative or fiduciary capacity,
may be assigned in its behalf for any authorized transaction by any duly authorized officer or officers. Evidence, in the form of a resolution of the governing
body, authorizing the assigning officer to assign, or to sell, or to otherwise dispose
of the securities will ordinarily be required to support assignments. Resolutions
may relate to any or all registered securities owned by the organization or held
by it in a representative or fiduciary capacity. (Form PD 1009 or 1010, or any
substantially similar form, may be used for securities owned by an organization
in its own right; Form PD 1011 or 1012, or any substantially similar form, may
be used for securities held in a representative or fiduciary capacity.) If the
officer or officers derive their authority from the charter, constitution, or bylaws,
a copy or a pertinent extract therefrom, properly certified, will be required in
lieu of a resolution. If the resolution or other supporting document shows only
the title of the authorized officer, without his name, it must be supplemented by
a certificate of incumbency. (Form PD 1014 may be used.)
Sec. 306.86. Change of name and succession of private organizations.—If a
private corporation or unincorporated association changes its name or is lawfully
succeeded by another corporation or unincorporated association, its securities
may be assigned in behalf of the organization in its new name or that of its successor by an authorized officer in accordance with sec. 306.85. The assignment
must be supported by evidence of the change of name or successorship.
Sec. 306.87. Partnerships.—An assignment of a security registered in the name
of or assigned to a partnership must be executed by a general partner. Upon
dissolution of a partnership, assignment by all living partners and by the persons
entitled to assign in behalf of any deceased partner's estate will be required unless
the laws of the jurisdiction authorize a general partner to bind the partnership
by any act appropriate for winding up partnership affairs. In those cases where
assignments by or in behalf of all partners are required this fact must be shown
in the assignment; otherwise, an affidavit by a former general partner must be
furnished identifying all the persons who had been partners immediately prior
to dissolution. Upon voluntary dissolution, for any jurisdiction where a general
partner may not act in winding up partnership affairs, an assignment by a liquidating partner, as such, must be supported by a duly executed agreement among
the partners appointing the liquidating partner.
Sec. 306.88. Political entities and public corporations.—Securities registered in
the name of, or assigned to, a State, county, city, town, village, school district,
or other political entity, public body or corporation, may be assigned by a duly
authorized officer, supported by evidence of his authority.
Sec. 306.89. Public officers.—Securities registered in the name of, or assigned
to, a pubhc officer, designated by title, may be assigned by such officer, supported

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1963 REPORT OF THE SECRETARY OF THE TREASURY

by evidence of incumbency. Assignments for the officer's own apparent individual benefit will not be recognized.
Sec. 306.90. Nontransferable securities.—The provisions of this subpart apply
to Treasury Bonds, Investment Series B-1975-80.
SUBPART K—ATTORNEYS IN FACT

Sec. 306.91. Attorneys in fact.
(a) General.—Assignments by an attorney in fact will be recognized if supported
by an adequate power of attorney. Every power must be executed in the presence of an authorized witnessing officer. The original power, or a photocopy
certified by an authorized witnessing officer, must be filed with the Treasury
Department. An assignment by a substituted attorney in fact must be supported
by an authorizing power of attorney and power of substitution. An assignment
by an attorney in fact or a substituted attorney in fact for the, apparent benefit
of either will not be accepted unless expressly authorized. (Form FD 1001, 1002,
1003, or 1004, as appropriate, may be used to appoint an attorney in fact. An
attorney in fact may use Form PD 1006 or 1008 to appoint a substitute. However,
any form sufficient in substance may be used.) If there are two or more joint
attorneys in fact or substitutes, less than all may assign for redemption for the
account of the owner, or for redemption-exchange, or pursuant to an advance
refunding offer provided the new securities are to be registered in the owner's
name. Otherwise, all must unite in the assignment unless the power authorizes
less than all to act. A power of attorney or of substitution not coupled with an
interest will be recognized until the Bureau receives proof of revocation or proof
of the grantor's death or incompetency.
(b) For legal representatives or fiduciaries.—Assignments by an attorney in fact
or substitute attorney in fact for a legal representative or fiduciary, in addition
to the power of attorney and of substitution, must be supported by evidence, if
any, as required by sees. 306.57(d), 306.65, 306.75, and 306.76. Powers must
specificaUy designate the securities to be assigned,
(c) For corporation or unincorporated association.—Assignments by an attorney
in fact or a substitute attorney in fact in behalf of a corporation or unincorporated
association, in addition to the power of attorney and power of substitution, must
be supported by one of the following documents certified under seal of the organization, or, if it has no seal, sworn to by an officer who has access to the records:
(1) A copy of the resolution of the governing body authorizing an officer
to appoint an attorney in fact, with power of substitution if pertinent, to assign,
or to sell, or to otherwise dispose of, the securities, or
(2) A copy of the charter, constitution, or bylaws, or a pertinent extract
therefrom, showing the authority of an officer to appoint an attorney in fact, or
(3) A copy of the resolution of the governing body directly appointing
an attorney in fact.
If the resolution or other supporting document shows only the title of the authorized officer, without his name, a certificate of incumbency must also be furnished.
(Form PD 1014 may be used.) The power may not be broader than the resolution
or other authority.
(d) For public corporations.—A general power of attorney in behalf of a public
corporation will be recognized only if it is authorized by statute.
Sec. 306.92. Nontransferable securities.—The provisions of this subpart shall
apply to nontransferable securities, subject only to the hmitations imposed by
the terms of the particular issues.
SUBPART L - T R A N S F E R THROUGH JUDICIAL P R O C E E D I N G S

Sec. 306.95. Transferable securities.—The Department will recognize valid
judicial proceedings affecting the ownership of or interest in transferable securities,
upon presentation of the securities together with evidence of the proceedings. In the
case of securities registered in the names of two or more persons, the extent of
their respective interests in the securities must be determined by the court in
proceedings to which they are parties or must otherwise be validly estabhshed.^
Sec. 306.96. Evidence reguired.—Copies of a final judgment, decree, or order
of court and of any necessary supplementary proceedings must be submitted.
Assignments by a trustee in bankruptcy or a receiver of an insolvent's estate
1 A finder claiming the ownership of a bearer security or a registered security assigned in blank or so assigned as to become, in effect, payable to bearer, must perfect his title in accordance with the provisions of
State law. If there are no such provisions, the Department will not recognize his title to the security.

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261

must be supported by evidence of his qualification. Assignments by a receiver in
equity or a similar court officer must be supported by a copy of an order authorizing him to assign, or to sell, or to otherwise dispose of, the securities. Vi^here
the documents are dated more than six months prior to presentation of the securities, there must also be submitted a certificate dated within six months of presentation of the securities, showing the judgment, decree or order, or evidence of
qualification, is in full force. Any such evidence must be certified under court
seal.
Sec. 306.97. Nontransferable securities.
(a) Treasury Bonds, Investment Series A-1965.—The provisions of this subpart shall apply to bonds of this series, except that reference to assignments
shall be deemed only to refer to requests for payment. With the exception of
a trustee in bankruptcy or a receiver of an insolvent's estate, payment will be
limited to the redemption value current thirty days after termination of the
judicial proceedings or current at the time the bonds are surrendered for redemption, whichever is less. No judicial proceedings will be recognized if they would
give effect to an attempted voluntary transfer inter vivos of the bonds.
(b) Treasury Bonds, Investment Series B-1975-80.—The provisions of this
subpart shall apply to bonds of this series, except that prior to maturity any
reference to assignments shall be deemed to refer to assignments of the bonds
for exchange for the current series of IY2 percent 5-year EA or EO Treasury notes.
SUBPART M ~ R E Q U E S T S FOR SUSPENSION OF TRANSACTIONS

Sec. 306.100. Requests for suspension of transactions in securities,
(a) Registered securities.
(1) Reports of loss, theft, or destruction of registered securities.—Reports of
lost, stolen, or destroyed registered securities not so assigned as to become, in
effect, payable to bearer, will be accepted from the owner or his authorized agent
at any time and records will be maintained of the reports. If such a registered
security is presented to the Department, the owner will be duty advised and given
all available information.
(2) Reports of assignments affected by fraud.—The Department reserves the
right to suspend any transaction in a registered security bearing an apparently
valid assignment, if prior to the time it is received in the Department a report
is received from and a claim is filed by an assignor that his assignment was
affected by fraud. The interested parties will be notified of the suspension and
given a reasonable period of time within which to effect settlement by agreement
or institute judicial proceedings. If subsequent to the time the Department has
transferred, exchanged, or redeemed a registered security in reliance on an apparently valid assignment, a report or claim is received that the assignment was
affected by fraud, the Department will undertake only to furnish all available
information.
(3) Reports of forged assignments.—If it is claimed that the assignment of a
registered security is a forgery, the Department will investigate the matter and
if it is estabhshed that the assignment was forged and the owner did not authorize
or ratify the assignment, or receive any benefits therefrom, the Department will
recognize his ownership and grant appropriate relief.
(b) Bearer securities or registered securities so assigned as to become, in effect,
payable to hearer.
(1) Securities not overdue.—Neither the Department nor any of its agents
will accept notice of any claim or of pending judicial proceedings by any person
for the purpose of suspending transactions in bearer securities, or registered
securities so assigned as to become, in effect, payable to bearer which are not
overdue as defined in sec. 306.25.^ However, if the securities are received and
1 It has been the longstanding policy of the Department to assume no responsibility for the protection
of bearer securities not in the possession of persons claiming rights therein and to give no effect to any notice
of such claiins. This pohcy was formalized on Apr. 27, 1867, when the Secretary of the Treasmy issned
the foUowing statement:
"In consequence of the increasing trouble, wholly without practical benefit, arising from notices which
are constantly received-at the Department respecting the loss of coupon bonds, which are payable to beaier,
and of Treasury notes issued and remaining in blank at the time of loss, it becomes necessary to give this
public notice, that the Government can not protect and will not undertake to protect the owners of snch
bonds and notes against the consequences of thetr own fault or misfortune.
"Hereafter all bonds, notes, and coupons, payable to bearer, and Treasury notes issued and reraaining
in blank, will be paid to the party presenting them in pursuance of the regulations of the Department,
in the course of regular business; and no attention will be paid to caveats which may be filed for the purpose
of preventing such payment."

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1963 REPORT OF THE SECRETARY OF THE TREASURY

retired, the Department will undertake to notify persons who appear to be
entitled to any available information concerning the source from which the
securities were received.
(2) Overdue securities.—Reports that bearer securities, or registered securities so assigned as to become, in effect, payable to bearer, were lost, stolen, or
possibly destroyed after they became overdue as defined in sec. 306.25 will be
accepted by the Bureau for the purpose of suspending redemption of the securities if the person claiming ownership thereof establishes his interest. If the
securities are presented, their redemption will be suspended and the presenter
and the claimant will each be given an opportunity to establish ownership.
SUBPART N - C L A I M S ON ACCOUNT OF LOSS, T H E F T , DESTRUCTION, MUTILATION,
OR D E F A C E M E N T OF SECURITIES

Sec. 306.105. Statutory authority and requirements.—Section 8 of the Act of
July 8, 1937 (50 Stat. 481), as amended (31 U.S.C. 738a), provides for rehef,
under certain conditions, on account of the loss, theft, destruction, mutilation,
or defacement of United States interest-bearing securities. To obtain relief the
security must be fully identified and the pertinent facts proved to the satisfaction of the Secretary of the Treasury, and generally, a bond of indemnity in such
form and with such surety, sureties or security as may be required to protect
the interests of the United States, must be filed.
Sec. 306.106. Reports of loss, theft, destruction, mutilation, or defacement of
securities.
(a) Loss or theft.—Report of the loss or theft of a security should be made
promptly to the Bureau. The report should include:
(1) The name and present address of the owner, and his address at the time
the security was issued, and, if the report is made by any other person, the
capacity in which he represents the owner;
(2) The identification of the security by title of loan, issue date, interest
rate, serial number and denomination, and in the case of a registered security,
the exact form of inscription and a full description of any assignment, endorsement, or other writing thereon; and
(3) A statement of the circumstances.
(b) Destruction, mutilation, or< defacement.—If a security is destroyed, or becomes so mutilated or defaced as to impair its value to the owner, a report of the
circumstances, as outlined in paragraph (a), must be made to the Bureau. All
available portions of the mutilated or defaced security must also be submitted.
In any appropriate case, a form for use in applying for relief will be furnished.
Sec. 306.107. Relief authorized for lost, stolen, destroyed, mutilated, or defaced
securities.
(a) Registered securities.—Relief will be granted for a registered security not
assigned in blank or not so assigned as to become, in effect, payable to bearer,
when it has been established that the security has been lost, stolen, destroyed,
mutilated or defaced. Relief will be granted in the same manner for bearer
securities restrictively endorsed in accordance with the provisions of the current
revision of Department Circular No. 853.
(b) Bearer securities or registered securities so assigned as to become, in effect,
payable to bearer.—Relief will be granted for bearer securities and registered
securities so assigned as to become, in effect, payable to bearer, proved to have
been destroyed, mutilated, or defaced. Relief will also be granted for such securities if they were lost or stolen under such circumstances and have been missing
for such period of time after they have matured or become redeemable pursuant
to a call for redemption as in the judgment of the Secretary of the Treasury establishes that they (1) have been destroyed or have become irretrievably lost,
(2) are not held by any person as his own property, and (3) will never become the
basis of a valid claim against the United States.
(c) Interest coupons.—Relief will be granted for interest coupons only when it
is established they were attached to a security at the time they were destroyed,
mutilated, or defaced.
Sec. 306.108. Type of relief granted.—When relief is authorized for a lost,
stolen, destroyed, mutilated, or defaced security, it will be granted by either (a)

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the issue of a substitute marked "Duplicate," bearing the same issue date and
showing the serial number of the original security, if the security for which relief
is being granted has not matured or become redeemable pursuant to a call, or (b)
payment, if the security has matured or become redeemable pursuant to a call.
When a substitute is issued to replace a destroyed, mutilated, or defaced coupon
security it will have attached all coupons corresponding to those proved to have
been attached thereto at the time of the mishap, except that any matured coupons
will not be attached but will be paid by check. Relief will not be granted in any
case before the expiration of six months from date of loss or theft.
Sec. 306.109. Nontransferable securities.-—The provisions of this subpart shall
apply to all nontransferable securities, other than United States savings bonds,
subject only to the limitations imposed by the terms of the particular issues.
SUBPART 0—MISCELLANEOUS PROVISIONS

Sec. 306.115. Additional requirements.—In any case or any class of cases
arising under these regulations the Secretary of the Treasury may require such
additional evidence and a bond of indemnity with or without surety, as may in
his judgment be necessary for the protection of the interests of the United States.
Sec. 306.116. Waiver of regulations.—The Secretary of the Treasury reserves
the right, in his discretion, to waive or modify any provision or provisions of these
regulations in any particular case or class of cases for the convenience of the United
States or in order to relieve any person or persons of unnecessary hardship, if
such action is not inconsistent with law, does not impair any existing rights, and
he is satisfied that such action would not subject the United States to any substantial expense or liabihty.
Sec. 306.117. Preservation of existing rights.—Nothing contained in this circular shall limit or restrict any existing rights which holders of securities heretofore
issued may have acquired under the circulars offering such securities for sale or
under the regulations in force at the time of acquisition.
Sec. 306.118. Supplements, amendments, or revisions.—The Secretary of the
Treasury may at any time, or from time to time, prescribe additional, supplemental, amendatory, or revised regulations with respect to United States securities.
(Signed) DOUGLAS DILLON,

Secretary of ihe Treasury.
Appendix.^Computation of Interest on Treasury Bonds, Treasury Notes, and
Treasury Certificates of Indebtedness, and Computation of Discount on
Treasury Bills
Treasury Bonds, Treasury Notes, and Treasury Certificates of Indebtedness
COMPUTATION OF I N T E R E S T ON A SEMIANNUAL BASIS
ONE DAY'S I N T E R E S T IS Hsi, Hs2, ^ 8 3 , OR ^84 OF H YEAR'S I N T E R E S T

Computation of interest will be made on a semiannual basis in all cases where
interest is payable for one or more full half-year (6 months) periods, or for one or
more full half-year periods and a fractional part of a half-year period. A semiannual interest period is an exact half-year or 6 months, for computation purposes,
and may comprise 181, 182, 183, or 184 actual days.
An exact half-year's interest at the specified rate is computed for each full
period of exactly 6 months, irrespective of the actual number of days in the halfyear.
If the initial interest covers a fractional part of a half-year, computation is
made on the basis of the actual number of days in the half-year (exactly 6 months)
ending on the day such initial interest becomes due. If the initial interest covers
a period in excess of 6 months, coniputation is made on the basis of one full halfyear period, ending with the interest due date, and a fractional part of the preceding full half-year period.
Interest for any fractional part of a full half-year period is computed on the
basis of the exact number of days in the full period, including February 29 whenever it falls within" such a period.

707-484—64

264

1963 REPORT OF THE SECRETARY OF THE TREASURY

The number of days in any half-year period is shown in the following table:
For the half year
Begmning from the 1st or 15th day of—
January..
February..
March
April
May
,
June
July.
August
September-.
October
NovemberDecember-.
One year (any 2 consecutive half-years).

Endmg on the Ist or 15th day of—
July
August
SeptemberOctober
November.
DecemberJanuary
February..
March
Aprh
May
June

Number of days
Regular
year

Leap year

181
181
184
183
184
183
184
184
181
182
181
182

182
182
184
183
184
183
184
184
182
183
182
183

366

Use of Interest Table
In the attached table decimals are set forth for use in computing interest for
fractional parts of interest periods. The decimals cover interest on $1,000 for
one day in each possible semiannual interest period, at all rates of interest, in
steps of Ys percent, from Ysto 6 percent. The amount of interest accruing on any
date (for a fractional partof an interest period) on $1,000 face amount of any issue
of Treasury bonds. Treasury notes, or Treasury certificates of indebtedness may
be ascertained in the following way:
(1) The date of issue, the dates for the payment of interest, and the rate of interest (percent per annum) may be determined from the text of the security, or
from the official circular governing the issue.
(2) Determine the interest period of which the fraction is a part, and calculate
the number of days in the full period to determine the proper column to be used in
selecting the decimal for one day's interest.
(3) Calculate the actual number of days iu the fractional period/rom but not including
the date of issue or the day on which the last preceding interest payment was
made, to and including the day on which the next succeeding interest payment is
due or the day as of which the transaction which terminates the accrual of
additional interest is effected.
'
(4) Multiply the appropriate decimal (one day's interest on $1,000) by the number of days in the fractional part of the interest period. The appropriate decimal
will be found in the attached table opposite the rate borne by the security, and in
the column showing the full interest period of which the fractional period is a part.
(For interest on any other amount, multiply the amount of interest on $1,000 by
the other amount expressed as a decimal of $1,000.)
TREASURY BILLS
The methods of computing discount rates on Treasury biUs are given below:
Computation will be made on an annual basis in all cases. The annual period
for bank discount is a year of 360 days, and all computations of such discount for
a fractional part of a year wiU be made on that basis. The annual period for true
discount is one full year from but not including the date.of issue to and including
the anniversary of such date. Computation of true discount for a fractional part
of a year, will be made on the basis of 365 days in the year, or 366 days if February 29 faUs within the year.
BANK DISCOUNT

The bank discount rate on a Treasury bill may be ascertained by (1) subtracting
the sale price of the bill from its face value to obtain the amount of discount; (2)
dividing the amount of discount by the number of days the bill is to run to obtain
the amount of discount per day; (3) multiplying the amount of discount per day
by 360 (the number of days in a commercial year of 12 months of 30 days each) to
obtain the amount pf discount per year; and (4) dividing the amount of discount
per year by the face value of the bill to obtain the bank discount rate.
For example:
91-day bill—dated April 1,1954—due July 1,1954:
Principal amount—maturity value
Price at issue—amount received
Ainount of discount..
$0.50-^91X3604-$100=1.978 percent.

_.. $100.00
99.50
.50

265

EXHEBira
T R U E DISCOUNT

The true discount rate on a Treasury bill may be ascertained by (1 and 2) obtaining the amount of discount per day by following the first two steps described
under "Bank Discount"; (3) multiplying the amount of discount per day by the
actual number of days in the year from date of issue (365 ordinarily, but 366 if
February 29th of a leap year falls within the year from date of issue) to obtain
the amount of discount per year; and (4) dividing the amount of discount per year
.by the sale price of the bill to obtain the true discount rate.
For example:
91-day biU-dated April 1,1954—due July 1,1954:
Principal amount—maturity value
-__.
Price at issue—amount received

. Amount of discount

$100.00
99.50
. 50

$0.50^91X365^$99.50=2.016 percent.

Decimal for one day's interest on $1,000 at various rates of interest, payable semiannually or on a semiannual basis, in regular years of 365 days and in leap
years of 366 days
Interest period ending on the 1st or 15th of—
Half-year of 184 days Half-year of 183 days Half-year of 182 days Half-year of 181 days
Rate per a n n u m
Regular year: Jan- Regular year: Octo- Regular year: April, Regular year: March,
uary, February, Sepber, December
June
M a y , July, August
tember, November Leap year: April, Leap year: March,
June
M a y , July, August
Percent
H

—.

H
H
H
H
1
IH.
134
IH
IH1^^ '
IH...
IH
2
2H
234_
2H
2H
2H
2H
2H
3
SHSH
SH
SHSH
SHSH
4
4H

4H
iH
iH
iH
4%

- -

5
5H
5H-

5H5H
6%
5H
6

....

$0.003 396 739
. 006 793 478
. 010 190 217
. 013 686 967
.016 983 696
.020 380 436
. 023 777 174
. 027 173 913
. 030 670 652
. 033 967 391
. 037 364 130
.040 760 870
.044 167 609
.047 554 348
.050 961 087
.054 347 826
.057 744 665
. 061 141 304
. 064 538 043
.067 934 783
.071 331 622
.074 728 261
. 078 126 000
. 081 621 739
. 084 918 478
. 088 316 217
.091711967
. 095 108 696
.098 605 436
. 101 902 174
. 105 298 913
. 108 695 652
. 112 092 391
. 115 489 130
.118 885 870
. 122 282 609
. 125 679 348
. 129 076 087
.132 472 826
.135 869 566
. 139 266 304
.142 663 043
. 146 059 783
. 149 456 522
. 162 863 261
. 156 260 000
. 169 646 739
. 163 043 478

$0.003 415 301
. 006 830 601
. 010 245 902
. 013 661 202
. 017 076 503
. 020 491 803
. 023 907 104
. 027 322 404
. 030 737 705
.034 163 005
. 037 568 306
. 040 983 607
.044 398 907
.047 814 208
.051 229 608
. 054 644 809
. 058 060 109
. 061 475 410
. 064 890 710
.068 306 Oil
.071 721 311
. 075 136 612
. 078 561 913
. 081 967 213
. 085 382 514
. 088 797 814
. 092 213 115
. 096 628 415
. 099 043 716
. 102 459 016
. . 105 874 317
. 109 289 617
. 112 704 918
. 116 120 219
. 119 635 619
. 122 950 820
.126 366 120
. 129 781 421
. 133 196 721
. 136 612 022
. 140 027 322
. 143 442 623
.146 857 923
. 150 273 224
. 163 688 625
.157 103 826
.160 519 126
.163 934 426

$0.003 434 066
.006 868 132
. 010 302 198
. 013 736 264
. 017 170 330
. 020 604 396
. 024 038 462
.027 472 527
.030 906 593
. 034 340 659
. 037 774 725
. 041 208 791
. 044 642 857
. 048 076 923
.061 610 989
. 054 945 056
. 068 379 121
.061 813 187
. 065 247 253
. 068 681 319
. 072 116 385
. 076 549 451
.078 983 616
.082 417 682
. 085 851 648
.089 286 714
.092 719 780
. 096 163 846
. 099 587 912
. 103 021 978
. 106 456 044
. 109 890 110
. 113 324 176
. 116 758 242
. 120 192 308
. 123 626 374
. 127 060 440
. 130 494 605
. 133 928 671
.137 362 637
. 140 796 703
.144 230 769
.147 664 836
.151 098 901
.154 532 967
.167 967 033
. 161 401 099
. 164 835 165

$0.003 453 039
.006 906 077
.010 369 116
. 013 812 156
. 017 265 193
.020 718 232
.024 171 271
.027 624 309
.031 077 348
. 034 530 387
.037 983 426
.041 436 464
.044 889 503
.048 342 541
.. 051 795 580
. 055 248 619
.058 701 667
. 062 164 696
.066 607 736
. 069 060 773
. 072 513 812
. 075 966 851
.079 419 890
.082 872 928
.086 326 967
.089 779 006
.093 232 044
. 096 686 083
. 100 138 122
.103 591 160
. 107 044 199
. 110 497 238
. 113 950 276
.117 403 315
. 120 856 364
.124 a09 392
. 127 762 431
.131 215 470
. 134 668 608
. 138 121 647
.141 574 686
.145 027 624
. 148 480 663
.151 933 702
. 165 386 740
.168 839 779
. 162 292 818
. 165 746 856

266

1963 REPORT OF THE SECRETARY OF THE TREASURY

EXHIBIT 11.—Department Circular No. 22-62, regulations governing
sale of Treasury bonds through competitive bidding
TREASURY

the

DEPARTMENT,

Washington, December 17, 1962.
Department Circular, Pubhc Debt Series No. 22-62, dated December 17, 1962
(31 CFR 340) is hereby issued, effective immediately.
Sees. 340.0 through 340.12 issued under authority of: R.S. 3706; 40 Stat. 288,
290, 1309; 48 Stat. 343; 50 Stat. 481; 31 U.S.C. 738a, 739, 752, 752a, 753, 754,
754a, and 754b.
SEC. 340.0. Authority for sale of Treasury bonds through competitive bidding.
The Secretary of the Treasury may, from time to time, by public notice, offer
Treasury bonds for sale and invite bids therefor. The bonds so offered and the
bids made will be subject to the terms and conditions and the rules and regulations
herein set forth, except as they may be modified in the public notice or notices
issued by the Secretary in connection with particular offerings.^ The bonds will
be subject also to the general rules and regulations of the Treasury Department,
now or hereafter prescribed, governing United States securities. They will be
issued pursuant to the authority of the Second Liberty Bond Act, as amended.
The terms "public notice," "notices," or "announcement" as used in this part
mean the "Public Notice of Invitation to Bid" on Treasury bonds and any supplementary or amendatory notices or announcements with respect thereto,
including, but not limited to, any statement released to the press by the Secretary
of the Treasury and notices sent to those who have filed notices of intent to bid
bor who have filed bids.
SEC. 340.1, PubUc notice—description of bonds—terins of offer.
When bonds are offered for sale through competitive bidding, bids therefor will
be invited through the form of a public notice or notices issued by the Secretary of
the Treasury. The notice or notices will either fix the coupon rate of interest to
be borne by the bonds or prescribe the conditions under which bidders may
specify the rate and will set forth the terms and conditions of the bonds, including maturities, call features, if any, and the terms and conditions of the offer,
including the amount of the issue for which bids are invited, the date and closing
hour for receipt of bids, and the date on which the bonds will be delivered and payment for any accepted bid must be completed. When so specified in the public
notice, it shall be a condition of each bid that, if accepted by the Secretary of the
Treasury, the bidder will make a bona fide reoffering to the investing public.
SEC. 340.2. Denominations and exchanges.
Bearer bonds with interest coupons attached, and bonds registered as to principal arid interest, will be available in denominations of $500, $1,000, $5,000,
$10,000, $100,000, and $1,000,000. Provisions will be made for the interchange
. of bonds of different denominations and of bearer and registered bonds, and for
the transfer of registered bonds.
SEC. 340.3. Taxation.
The income derived from the bonds will be subject to all taxes imposed under
the Internal Revenue Code of 1954. The bonds will be subject to estate, inheritance, gift, or other excise taxes, whether Federal or State, but will be exempt
from all taxation now or hereafter imposed on the principal or interest thereof by
any State, or any of the possessions of the United States, or by any local taxing
authority.
SEC. 340.4. Acceptance as security for public deposits.
The bonds will be acceptable to secure deposits of public moneys.
'
SEC. 340.5. 'Notice of intent to bid.
Any individual or orgahization, syndicate, or other group. which intends to
submit a bid, must, when required by the public notice, give written notice of such
intent on Form PD 3555 at the place and within the time specified in the public
notice. The filing of such notice will not constitute a commitment to bid.
SEC. 340.6. Submission of bids.
(a) General. Bids will be received only at the place specified and not later than
the time designated in the pubhc notice. Each bid must be submitted on^ the
official form referred to in the pubhc notice and should be enclosed and sealed in
the special envelope provided by the Treasury Department. Forms and envelopes
may be obtained from any Federal Reserve Bank or branch or the Bureau of
1 These regulations do not apply to Treasury bills, which are governed by Department Circular No. 418,
Revised, and do not constitute a specific offermg of bonds.

EXHIBITS

267

t h e Public Debt, Treasury D e p a r t m e n t , Washington 25, D.C. Bids shall be
irrevocable.
(b) Bidding. Bids, except noncompetitive bids when authorized, m u s t be
expressed as a percentage of t h e principal a m o u n t in not to exceed five decimals,
e.g., 100.01038 percent. Provisions relating to t h e coupon r a t e of interest on t h e
bonds, if not set forth in t h e public notice, will be m a d e in a supplemental announcement. T h e public notice will indicate t h e timing of any such announcement. If
t h e bidders are required t o specify t h e coupon rate, each bidder shall specify a
single coupon r a t e of interest, which shall be a multiple of Y^ of 1 percent b u t not
in excess of 4}i percent. T h e Secretary of t h e Treasury m a y limit t h e p r e m i u m
above or t h e discount below par.
(c) Group bids. A syndicate or other group submitting a bid m u s t act t h r o u g h
a representative who m u s t be a member of t h e group. T h e representative m u s t
w a r r a n t to t h e Secretary of t h e Treasury t h a t he has all necessary power and
authority to act for each member and to bind t h e members jointly and severally.
In addition t o whatever other d a t a m a y be required by t h e Secretary of t h e
Treasury, in t h e case of a syndicate, t h e representative m u s t file, within one hour
after t h e t i m e for opening bids, a t t h e place specified in t h e public notice for
receipt of bids a final s t a t e m e n t of t h e composition of t h e syndicate membership
and t h e a m o u n t of each member's underwriting participation.
SEC. 340.7. Deposits—retention—return.
Each bid m u s t be accompanied by a deposit in t h e a m o u n t specified in t h e
public notice. T h e deposit of aiiy successful bidder will be retained as security
for t h e performance of his obligation and will be applied t o w a r d p a y m e n t of t h e
bonds. All other deposits will be returned immediately. No interest will be
allowed on account of any deposits.
SEC. 340.8. Acceptance of bids.
(a) Opening of bids. Bids will be opened a t t h e time and place specified in t h e
public notice.
(b) Method of determining accepied bids. T h e lowest basis cost of money ^ comp u t e d from t h e d a t e of t h e bonds to t h e date of m a t u r i t y will be used in determining successful bids.
(c) Acceptance of successful bid. T h e Secretary of t h e Treasury, or his representative, will notify any successful bidder of acceptance in t h e manner and form
specified in t h e public notice.
SEC. 340.9. Bids—revocations—rejections—postponements—reoffers.
T h e Secretary of t h e Treasury, in his discretion, m a y (a) revoke t h e public notice
of invitation to bid a t any t i m e before opening bids, (b) r e t u r n all bids unopened
either a t or prior to t h e time specified for their opening, (c) reject any or all bids,
(d) postpone t h e t i m e for presentation and opening of bids, and (e). waive any
immaterial or obvious defect in any bid. Any action t h e Secretary of t h e
Treasury m a y t a k e in these respects shall be final. In t h e event of a postponem e n t , known bidders will be advised thereof and their bids returned unopened.
S E C . 340.10. Payment for and delivery of bonds.
P a y m e n t for t h e bonds, including accrued interest, if any, must be made in
immediately available funds on t h e date a n d a t t h e place specified in t h e invitation.
Delivery of bonds under this section will be made a t t h e fisk a n d expense of t h e
United States a t such place or places in t h e United States as m a y be provided in
t h e invitation. Interim receipts, if necessary, will be issued pending delivery of
t h e definitive bonds.
SEC. 340.11. Failure io complete iransaction.
If a n y successful bidder shall fail to p a y in full for t h e bonds on t h e date and a t
t h e place specified in t h e invitation, t h e money deposited by or in behalf of such
bidder shall be forfeited to the Treasury D e p a r t m e n t .
S E C . 340.12. Reservations as to terms of circular.
T h e Secretary of t h e Treasury reserves t h e right, a t a n y time, or from time t o
time, to amend, repeal, supplement, revise, or withdraw all or a n y of t h e provisions
of this circular.
DOUGLAS DILLON,

Secretary of the Treasury.
1 In cases where bidders are requked to specify the coupon rate, the lowest basis cost of money wih be
determined by reference to a specially prepared table of bond yields, a copy of which wih be made available
to all prospective bidders upon written request to the Federal Reserve Bank of New York, or the Bureau of
the Public Debt, Treasury Department, Washington 26, D.C. Straight-line interpolation will be applied
if necessary.

268

1963 REPORT OF THE SECRETARY OF THE TREASURY

EXHIBIT 12.—Department Circular No. 1-63, regulations governing United
States retirement plan bonds
TREASURY DEPARTMENT,

Washington, January 10, 1963.
SEC, 341.0. Offering of bonds.—The Secretary of the Treasury, under the
authority of the Second Liberty Bond Act, as amended, and pursuant to the SelfEmployed Individuals Tax Retirement Act of 1962, offers for sale, effective as of
January 1, 1963, bonds of the United States, designated as United States retirement plan bonds. The bonds will be available for investment only to (1) bond
purchase plans and (2) pension and profit-sharing plans, as described in sections
405 and 401, respectively, of the Internal Revenue Code of 1954. This offering of
bonds will continue until terminated by the Secretary of the Treasury.
SEC. 341.1. Description of bonds—(a) Investment yield {interest).—United States
retirement plan bonds, hereinafter sometimes referred to as retirement plan bonds
will be issued at par. The investment yield (interest) on the bonds will be 3%
percent per annum, compounded semiannually, as set forth in the table of redemption values appended to this circular. Such interest will be paid only upon redemption of the bonds. The accrual of interest will continue until the bonds have
been redeemed or have reached maturity, whichever is earlier, in accordance with
these regulations.
(b) Term.—The maturity date of any bond issued under this circular shall be
indeterminate, but unless sooner redeemed in accordance with these regulations,
its investment yield will cease on the interest accrual date coinciding with, or,
where no such coincidence occurs, the interest accrual date next preceding, the
first day of the sixtieth (60th) month following the date of death of the person in
whose name it is registered.
(c) Denominations—issue date.—Retirement plan bonds will be available only in
registered form and in denominations of $50, $100, $500, and $1,000. At the time
of issue, the issuing agent will enter in the upper right-hand portion of the bond the
issue date (which shall be the first day of the month and year in which payment of
the purchase price is received by an authorized issuing agent), and will imprint the
agent's validating stamp in the lower right-hand portion. The issue date, as
distinguished from the date in the agent's validating stamp, will determine the
date from which interest will begin to accrue on the bond. A retirement plan
bond shall be valid only if an authorized issuing agent receives payment therefor,
duly inscribes, dates, stamps, and delivers it.
SEC. 341.2. Registration.—(a) General.—The registration of retirement plan
bonds is limited to the names of natural persons in their own right, whether adults
or minors, in either single ownership or beneficiary form. A bond registered inbeneficiary form will be inscribed substantially as follows (for example): "John
A. Doe payable on death to {or P.O.D.) Richard B, Roe," No more than one
beneficiary may be designated on a bond.
(b) Inscription.—The inscription on the face of each bond will show the name,
address, date of birth, and the social security account number of the registered
owner, as well as information as to whether he is a self-employed individual or an
employee, and the amount he contributed (if any) out of his own funds toward the
purchase price of the bond. In the case of any self-employed individual (who is
treated as an employee for the purpose of sections 405 and 401 of the Internal
Revenue Code of 1954), this amount would be that portion of the purchase price he
contributed (if any) as an employee and which he will not take into account in
determining the amount deductible for Federal income tax purposes. The name
of the beneficiary, if one is to be designated, will also be shown in the inscription.
SEC. 341.3. Purchase of honds.—(a) Agencies.—Retirement plan bonds may be
purchased over-the-counter or by mail from Federal Reserve Banks and branches
and the Office of the Treasurer of the United States, Washington 25, D.C. Customers of commercial banks and trust companies may be able to arrange for the
purchase of the bonds through such institutions, but only the Federal Reserve
Banks and branches and the Treasurer's Office are authorized to act as official
agencies, and the date of receipt of the application and payment by an official
agency will govern the dating of the bonds issued.
(b) Applications.—Applications for the purchase of retirement plan bonds
should be made on Form PD 3550, accompanied by a remittance to cover the
purchase price. Personal checks will be accepted, subject to collection. Checks
or other forms of exchange, should be drawn to the Federal Reserve Bank or

EXHIBITS

269

Treasurer of the United States, as the case may be. Checks payable by endorsement are not acceptable.
(c) Delivery.—Delivery of bonds will be made in person, or by mail at the risk
and expense of the United States at the address given by the purchaser, but only
within the United States, its territories and possessions, the Commonwealth of
Puerto Rico, and the Canal Zone. No mail deliveries elsewhere will be made.
If the registered owner temporarily resides abroad, the bonds will be delivered to
such address in the United States as the purchaser directs.
SEC. 341.4. Proof of purchase.—At the time a retirement plan bond is issued,
the issuing agent will furnish therewith to the purchaser, and ih cases where the
purchaser is different from the person in whose name the bond is inscribed, to
the registered owner as well, proof of the purchase on Form PD 3550. The form
will show the names and addresses of the purchaser and of the registered owner,
the latter's date of birth, social security account number and his classification
(i.e., self-employed individual or employee), the number of bonds issued, a description thereof by issue date, serial numbers, denominations, and registration,
together with information as to the amount of his contributions (if any) toward
the purchase price of the bonds.
SEC. 341.5. Limitation on holdings.—The limit on the amount of any retirement
plan bonds issued during any one calendar year that may be purchased in the
name of any one person as registered owner is $5,000 (face value).
SEC. 341.6. Nontransferability.—United States retirement plan bonds are not
transferable, and may not be sold, discounted or pledged as collateral for a loan
or as security for the performance of an obligation, or for any other purpose.
SEC. 341.7. Judicial proceedings.—No judicial determination will be recognized
which would give effect to an attempted voluntary transfer inter vivos of a retirement plan bond. Otherwise, a claim against a registered owner will be recognized
when established, by valid judicial proceedings, but in no case will payment be
made to the purchaser at a sale under a levy or to the officer authorized to levy
upon the property of the owner under appropriate process to satisfy a money
judgment unless or until the bond has become eligible for redemption pursuant
to these regulations. Neither the Treasury Department nor any of its agencies
will accept notices of adverse claims or of pending judicial proceedings or undertake to protect the interests of litigants who do not have possession of the bond.
SEC. 341.8. Payment or redemption during lifetime of owner.—(a) At age 59Y2
or thereafter.—A retirement plan bond will be redeemable at its current redemption value upon the request of the registered owner (or a person recognized as
entitled to act on his behalf), provided he is 59H years of age or older. The
owner's age will be determined from the date of birth shown on the face of the
bond, provided, however, that the Secretary of the Treasury reserves the right
in any case or class of cases to require proof, in the form of a duly certified copy
of his birth certificate, that the owner has attained the age of 59J^ years. If
such evidence is unavailable, one of the following documents may be furnished in
heu thereof:
(1) Church records of birth or baptism
(2) Hospital birth record or certificate
(3) Physician's or midwife's birth record
(4) Certification of Bible or other family record
(5) Military, naturalization, or immigration records
(6) Other evidence of probative value
Similar documentary evidence will also be required to support any claim made
by an owner that the date of birth shown on his bond is incorrect.
(b) Prior to age 59Y2 years.—A retirement plan bond will be paid at its then
current redemption value upon a registered owner's request (or by a person
recognized as entitled to act on his behalf) prior to his attainment of age 59}i years
upon submission of a physician's statement or any similar evidence showing that
the owner has become disabled to such an extent that he is unable to engage in
any substantial, gainful activity by reason of any medically determinable physical
or mental impairment which can be expected to result in death or to be of longcontinued and indefinite duration. The following are examples of impairments
which would ordinarily be considered as preventing substantial, gainful activity:
(1) Loss of use of two limbs.
(2) Certain progressive diseases which have resulted in the physical loss or
atrophy of a limb, such as diabetes, multiple sclerosis, or Buerger's disease.
(3) Diseases of the heart, lungs, or blood vessels which have resulted in major
loss of heart or lung reserve as evidenced by X-ray, electrocardiogram, or other

270

1963 REPORT OF THE SECRETARY OF THE TREASURY

objective findings, so that despite medical treatment breathlessness, pain, or
fatigue is produced on slight exertion, such as walking several blocks, using
public transportation, or doing small chores.
(4) Cancer which is inoperable and progressive.
(5) Damage to the brain or brain abnormality which has resulted in severe
loss of judgment, intellect, orientation, or memory.
(6) Mental diseases (e.g., psychosis or severe psychoneurosis) requiring continued institutionalization or constant supervision of the individual.
(7) Loss or diminution of vision to the extent that the affected individual has
a central visual acuity of no better than 20/200 in the better eye after best correction, or has a limitation in the fields of vision such that the widest diameter of
the visual fields subtends an angle no greater than 20 degrees.
(8) Permanent and total loss of speech.
(9) Total deafness uncorrectible by a hearing aid.
In any case coming under the provisions of this paragraph, the evidence referred
to above must be submitted to the Bureau of the Public Debt, Division of Loans
and Currency, Washington 25, D . C , for approval before any bonds may be paid.
If, after review of the evidence, the Secretary of the Treasury is satisfied that
the owner's disability has been established, a letter wiU be furnished authorizing
payment of his retirement plan bonds. This letter must be presented each time
any of the owner's bonds are submitted for payment to a Federal Reserve Bank
or branch or to the Office of the Treasurer of the United States.
(c) Requests for payment.—(1) By owner.—When redemption of any retirement
plan bond is desired by the registered owner under (a) above, it should be presented, with the request for payment on the back of the bond signed and duly
certified, to a Federal Reserve Bank or branch or to the Office of the Treasurer
of the United States, Washington 25, D.C. If payment is requested under (b)
above, the letter described therein should accompany the bond.
(2) By person other than owner.—When redemption of any retirement plan
bond is desired by the legal guardian, committee, conservator, or similar representative of the owner's estate under (a) above, it should be presented, with the
request signed as described below, to a Federal Reserve Bank or branch or to
the Office of the Treasurer of the United States. If payment is requested under
(b) above, the letter described therein should accompany the bond.^ The request
for payment, in either case, should be signed by the representative in his fiduciary
capacity before an authorized certifying officer, and must be supported by a
certificate or a certified copy of the letters of the appointment from the court
making the appointment, under seal, or other proof of qualification if the appointment was not made by a court. Except in the case of corporate fiduciaries, such
evidence should state that the appointment is in full force and should be dated
not more than one year prior to the presentation of the bond for payment.
(d) Partial redemption.—A retirement plan bond in a denomination greater
than $50 (face value) which is otherwise eligible for redemption may be redeemed
in part, at current redemption value, upon the request of the registered owner
(or a person recognized as entitled to act on his behalf), but only in amounts
corresponding to authorized denominations. In any case in which partial redemption is desired, before the request for payment is signed, the phrase "to the
extent of $
(face value) and reissue of the remainder" should be appended
to the request. Upon partial redemption of the bond, the remainder will be
reissued as of the original issue date. No partial redemption of a bond will be
made after the death of the owner in whose name it is registered.
SEC, 341.9, Payment or redemption after death of owner.—(a) Order of precedence
where owner is not survived by beneficiary.—If the registered owner of a retirement
plan bond dies before it has been presented and surrendered for payment, and
there is no beneficiary shown thereon, or if the designated beneficiary predeceased
the owner, the bond shall be paid in the following order of precedence:
(1) To the duly appointed executor or administrator of the estate of the owner,
who should sign the request for payment on the back of the bond in his representative capacity before an authorized certifying officer, such request to be supported
by a court certificate or a certified copy of his letters of appointment, under seal
1 In any case in which a legal representative has not been appointed for the estate of a registered owne
who has attained the age of 59H years, or who has become disabled, a person seeking payment of a bond
on the owner's behalf should furnish a complete statement of the cu-cumstances to the Bureau ofthe Public
Debt, Division of Loans and Currency, Washington 25, D.C. Appropriate instructions will then be
urnished.

EXHiBrrs

271

of the court, which should show that the appointment is in fuU force and effect,
and be dated within six months of its presentation;
(2) If no legal representative of the deceased registered owner's estate has
been or will be appointed, to the widow or widower of the owner;
(3) If none of the above, to the child or children of the owner and the descendants of deceased children by representation;
(4) If none of the above, to the parents of the owner, or the survivor of them;
(5) If none of the above, to other next-of-kin of the owner, as determined by
the laws of the domicile of such owner at the time of his death.
In any case coming under the provisions of this paragraph, a duly certified copy
of the registered owner's death certificate will ordinarily be required. Proof of
death of the beneficiary, if any, will be required where he predeceased the owner.
Payment of bonds under (1) will be made by a Federal Reserve Bank or branch
or by the Office of the Treasurer of the United States, Washington 25, D.C.
Payment of bonds under (2) to (5) wih be made upon receipt of applications on
Form PD 3565, together with the bonds and supporting evidence, by the Bureau
of the Public Debt, Division of Loans and Currency, Washington 25, D.C.
(b) Order of precedence where beneficiary survived owner.—If the registered
owner of a retirement plan bond dies before it has been presented and surrendered
for payment, and the beneficiary shown thereon survived the owner, the bond
shall be paid in the following order of precedence:
(1) To the designated beneficiary upon his presentation and surrender of the
bond with the request for payment signed and duly certified, such payment
to be made to the exclusion of any other person who may have been named beneficiary by the registered owner in a bond purchase plan, or under a pension or
profit-sharing plan;
(2) If the designated beneficiary survived the registered owner but failed to
present the bond for payment during his own lifetime, payment will be made in
the order of precedence specified in (1) to (5) of paragraph (a) above to the legal
representative, surviving spouse, children, parents, or next-of-kin of such beneficiary, and in the manner provided therein.
In any case coming under the provisions of this paragraph, a duly certified copy
of the registered owner's death certificate will ordinarily be required. Proof of
death of the beneficiary will also be required where he survived the owner but
failed to present the bond for payment during his own lifetime. Payment of a
bond to a designated beneficiary will be made by a Federal Reserve Bank or
branch or by the Treasurer of the United States, Washington 25, D.C.
(c) Ownership of redemption proceeds.—The orders of precedence set forth in
(a) and (b) above, except in cases where redemption is made for the account of.
a registered owner, are for the Department's convenience in discharging its
obligation on a retirement plan bond. The discharge of the obligation in accordance therewith shall be final so far as the Department is concerned, but those
provisions do not otherwise purport to determine ownership of the redemption
proceeds of a bond.
SEC. 341.10. Reissue.—(a) Addition or change of beneficiary.—A retirement plan
bond will be reissued to add a beneficiary in the case of a single ownership bond,
or to eliminate or substitute a beneficiary in the case of a bond registered in
beneficiary form upon the owner's request on Form PD 3564. No consent will
be required to support any reissue transaction from a beneficiary whose name is
to be removed from the registration of a retirement plan bond. If the registered
owner dies after the bond has been presented and surrendered for reissue, upon
receipt of notice thereof by the agency to which the request for reissue was submitted, such request shall be treated as ineffective, provided the notice of death
is received by the Federal Reserve Bank or branch or the Office of the Treasurer
of the United States, Washington 25, D.C, to which the request was sent, in
sufficient time to withhold dehvery, by mail or otherwise, of the reissued bond.
(b) Error in issue—change of name.—Reissue of a retirement plan bond will
be made where an error in issue has occurred, as well as in cases where the owner's
name has been changed by marriage, divorce, annulment, order of court, or in
any other legal manner, upon appropriate request, supported by satisfactory
evidence. Information as to the procedure to be followed in securing such reissue
may be obtained from a Federal Reserve Bank or the Office of the Treasurer of
the United States, Washington 25, D.C.
SEC. 341.11. Use of power of attorney.—No designation of an attorney, agent,
or other representative to request payment or reissue on behalf of the owner.

272

1963 REPORT OF THE SECRETARY OF THE TREASURY

beneficiary, or other person entitled under section 341.9, other than as providedin these regulations, will be recognized.
SEC. 341.12. Lost, stolen, or destroyed honds.—If a retirement plan bond is lost,
stolen, or destroyed, a substitute may be issued upon identification of the bond
and proof of its loss, theft, or destruction. A description of the bond by denomination, serial number, issue date and registration should be furnished at
the time the report of loss, theft, or destruction is made. Such reports should
be sent to the Bureau of the Public Debt, Division of Loans and Currency,
Washington 25, D . C Full instructions for obtaining substitute bonds will then
be given.
SEC. 341.13. Taxation.—The tax treatment provided under section 405 of the
Internal Revenue Code of 1954 shall apply to all retirement plan bonds. The
bonds are subject to estate, inheritance, 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, municipality, or any local taxing authority.
Inquiries concerning the application of any Federal tax to these bonds should
be directed to the District Director of Internal Revenue of the taxpayer's district
or to the Internal Revenue Service, Washington 25, D . C
SEC. 341.14. Certifying officers.—Officers authorized to certify requests for payment or for any other transaction involving retirement plan bonds include:
(a) Post offices.—Any postmaster, acting postmaster, or inspector-in-charge, or
other post office official or clerk designated for that purpose. A post office
official or clerk, other than a postmaster, acting postmaster, or inspector-in-charge,
should certify in the name of the postmaster or acting postmaster, followed by
his own signature and official title. Signatures of these officers should be authenticated by a legible imprint of the post office dating stamp.
(b) Banks and trust companies.—Any officer of a Federal Reserve Bank or
branch, or of a bank or trust company charted under the laws of the United
States or those of any State, Commonwealth, or Territory of the United States,
as well as any employees of such bank or trust company expressly authorized to
act for that purpose, who should sign over the title "Designated Employee."
Certifications by any of these officers or designated employees should be authenticated by either a legible imprint of the corporate seal, or, where the institution
is an authorized issuing agent for United States savings bonds. Series E, by a
legible imprint of its dating stamp.
(c) Issuing agents of Series E savings bonds.—Any officer of a corporation or any
other organization which is an authorized issuing agent for United States savings
bonds. Series E. All certifications by such officers must be authenticated by a
legible imprint of the issuing agent's dating stamp.
(d) Foreign countries.—In a foreign country requests may be signed in the
presence of and be certified by any United States diplomatic or consular representative, or the manager or other officer of a foreign branch of a bank or trust
company incorporated in the United States whose signature is attested by an imprint of the corporate seal or is certified to the Treasury Department. If such an
officer is not available, requests may be signed in the presence of and be certified
by a notary or other officer authorized to administer oaths, but his official character and jurisdiction should be certified by a United States diplomatic or consular
officer under seal of his office.
(e) Special provisions.—The Commissioner of the Public Debt, the Chief of the
Division of Loans and Currency, or any Federal Reserve Bank or Branch is authorized to make special provision for certification in any particular case or class
of cases where none of the officers authorized above is readily accessible.
SEC. 341.15. General provisions.—(a) Regulations.—All retirement plan, bonds
shall be subject to the general regulations prescribed by the Secretary with respect
to United States securities, which are set forth in Treasury Department Circular
No. 300, current revision, to the extent applicable. Copies of the general regulations may be obtained upon request from any Federal Reserve Bank or branch or
the Office of the Treasurer of the United States.
(b) Reservation as to issue of honds.—The Secretary of the Treasury reserves
the right to reject any application for the purchase of retirement plan bonds, in
whole or in part, and to refuse to issue or permit to be issued any such bonds in
any case or any class or classes of cases if he deems such action to be in the public
interest, and his action in any such respect shall be final.
(c) Additional requirements.—In any case.or any class of cases.arising,under
this circular the Secretary of the Treasury may require such additiorial evidence
as may in his judgment be necessary, and may require a bond of indemnity, with

273

EXHIBITS

or w i t h o u t s u r e t y , w h e r e he m a y consider such b o n d necessary for t h e p r o t e c t i o n
of t h e U n i t e d S t a t e s .
(d) Waiver of requirements.—The S e c r e t a r y of t h e T r e a s u r y reserves t h e r i g h t ,
in his discretion, t o waive or modify a n y provision or provisions of t h i s circular in
a n y p a r t i c u l a r case or class of cases for t h e convenience of t h e U n i t e d S t a t e s , or in
order t o relieve a n y p e r s o n or persons of unnecessary h a r d s h i p , if such action is
n o t inconsistent w i t h law, does n o t impair a n y existing rights, a n d h e is satisfied
t h a t such a c t i o n would n o t subject t h e U n i t e d S t a t e s t o a n y s u b s t a n t i a l expense or
liability.
(e) Fiscal agents.—Federal R e s e r v e B a n k s a n d b r a n c h e s , as fiscal a g e n t s of t h e
' U n i t e d S t a t e s , are a u t h o r i z e d t o perform such services as m a y be r e q u e s t e d of
t h e m b y t h e Secretary of t h e T r e a s u r y in connection w i t h t h e issue, delivery, r e d e m p t i o n , reissue, a n d p a y m e n t of r e t i r e m e n t p l a n b o n d s .
(f) Reservation as io terms of c i r c u l a r . — T h e Secretary of t h e T r e a s u r y m a y a t
a n y t i m e , or from t i m e t o t i m e , s u p p l e m e n t or a m e n d t h e t e r m s of t h i s circular,
or a n y a m e n d m e n t s or s u p p l e m e n t s t h e r e t o .
DOUGLAS DILLON,
Secreiary of the Treasury.
Table of redemption values providing a n investment yield of 3% percent per a n n u m
for bonds bearing issue dates beginning J a n u a r y 1, 1963
Table shows how the retirement plan bonds bearing issue dates beginning January 1, 1903, by
denomination, increase in redemption value during successive half-year periods following issue. The
redemption values have been determined to provide an investment yield of 3.75 percent i per annum,
compounded seraiannually, on the purchase price from issue date to the begiiming of each half-year period.
The period to maturity is indeterminate in accordance with the provisions of sec. 341.1(b) of this circular.2
Issue price
Period after issue d a t e

Fhst^^Tcar
H to I'year
1 t o IJ/^ years
I H to 2 years—•-_- -__
.
._.
2 to 23^ years
2 H to 3 years
3 to 3V^ y e a r s . .
3M t o 4 years
4 to 4V^ years
._
4 H to 5 years
_-_ _ _
5 to 5 H years
:.___•__
_•
5M to 6 years
_ .
6 to 6V^ years
6 H t o 7 years
7 to 73^ years
'
7^4 to 8 y e a r s . .
8 to 8V^ years
__._"
8Kto9.years
.
..
9to93^'years
:. ..9 H to 10 years
.
.
10 to lOV^ years
'
lOH to 11 years
11 t o I I H years _
I I M to 12 years
.._•
..__
•
12 to 121/^ y e a r s . : - - - . . .
121^ to 13 years
13 to W A y e a r s . . :
.
:
131/^ to 14 3^ears
14 to 14H years
'.._
14H to 15 years
15 to 151-^ years
15^4 to 16 y e a r s . . .
••
16 to 16H years
. . •.
1 6 ^ to 17 y e a r s .
17 to 1 7 ^ y e a r s . . . . 173^ to 18 y e a r s . . ^ _-"
18to 18^years-.._-._
1 8 ^ to 19 y e a r s . . - !
19 to 19H y e a r s . . .
19H to 20 years
1.....
..
20 t o 20>i years 2_ _

$50.00

$100.00

$500.00

$1,000.00 •

R e d e m p t ion values d u r i n g each half-year period
(values increase on first d a y of period shown)
$50.00
60.94
61.89
52.87
53.86
54.87
65.90
56.94
68.01
59.10
60.21
6L34
62.49
63.66
64.86
66.07
67.31
68.57
69.85
7L16
72.60
73.86
75.24
76.66
78.09
79.55
8L05
82.56
84.11
85.69
87.30
88.93
90.60
92.30
94.03
96.79
97.59
99.42
101.28
103.18
105.12

$100.00
101.88
103.79
105.73
107.71
109.73
111. 79
113.89
116.02
118.20
120.41
122.67
124.97
127.31
129.70
132.13
134.61
137.14
139.71
142.33
144.99
147.71
150.48
153.30
156.18
' 159.11
162.09
165.13
.168.23
171.38
174;59
177.87
181.20
184.60
188.06
191.59
195.18
.198.84
202.57
206.37
210.23

$500.00
509.38
518.93
628.66
538.57
648.67
558.95
569.43
580.11
590.99
602.07
613.36
624.86
636.67
648. 51
660.67
673.06
686.68
698.53
711.63
724.97
738. 57
752.42
766.62
780.90
795.54
•810.45
825.65
841.13
856.90
872.97
889.34
906.01
923.00
940.31
957.94
975.90
994.20
1,012.84
1, 031.83
1,051.17

$1,000.00
1,018.75
1,037.86
1,057.31
1, 077.14
1, 097.33
1,117.91
1,138.87
1,160.22
1,181.98
1,204.14
1,226.72
1,249.72
1,273.15
1,297.02
1,321.34
1,346.11
1,371.36
1,397.07
1, 423.26
1,449.96
1,477.13
1, 504.83
1, 533.05
1, 661.79
1, 591.07
1, 620.91
1, 661.30
1, 682.26
1, 713.80
1, 745.94
1,778. 67
1,812.02
1,846.00
1, 880.61
1,915.87
1, 951.80
1,988.39
2,025. 67
2,063.66
2,102.35

•, 1 Based on redemption values of $1,000 bond.
^ ? At a future date prior to Jan. 1,1983 (20 years after issue date of the first bonds) this table will be extended
to show redemption values for periO(is Of holdmg of 20^^ years ahd beyond.

274

19 63 REPORT OF THE SECRETARY OF THE TREASURY

Legislation
EXHIBIT 13.—An act to increase temporarily the public debt limit set forth
in section 21 of the Second Liberty Bond Act
[Public Law 88-30, 88th Congress, H.R. 6009, May 29,1963]

Be it enacted by ihe Senate and House of Representatives of the
United States of America in Congress assembled, That the public
debt limit set forth in the first sentence of section 21 of the
Second Liberty Bond Act, as amended (31 U.S.C 757b), shall
be temporarily increased-- ^ ^
. . . . . . . .
.
. Public debt limit.
(1) durmg the period beginmng on the date of the enactment Temporary inof this Act and ending on June 30, 1963, to $307,000,000,000, and creases.
72 Stat.
1768.
(2) during the period beginning on July 1, 1963, and ending on
August 31, 1963, to $309,000,000,000.
During the period ending on June 30, 1963, the limit provided
by paragraph (1) shall be in lieu of the limits provided by the
Act of July 1, 1962 (Public Law 87-512; 76 Stat. 124).
Approved May 29, 1963.

Financial Policy
EXHIBIT 14.—Statement by Secretary of the Treasury Dillon, January 31,
1963, before the Joint Economic Committee
The recent performance of the American economy has already been reviewed
in the Economic Message of the President and in the Report and testimony of
the Council of Economic Advisers. The compelling and overriding theme of
their remarks can be simply stated.
The need for faster growth
1962 was, against the background of recent experience, a good year. Employment, output, and incomes all reached new records. Almost two years after
the last recession, the economy appears free of those excesses and imbalances
that in the past have signaled a new downturn. Virtual price stability has been
maintained throughout the expansion period. And, despite the substantially
higher level of imports generated by rising business activity, the pattern of
increasingly large deficits in our balance of payments that characterized the
years 1958-1960 has been reversed.
Nevertheless, our recovery since early 1961, reassuring as it has been, has not
achieved the kind of decisive transition to dynamic, self-reinforcing growth that
is well within our means. The past five years have left us with a residue of
unemployment that a recovery of only normal proportions cannot eliminate.
Excess productive capacity and pressures on profits continue to chill the incentives to invest and expand upon which our economic vitality depends. Not
only has our progress at home been limited, but also our ability to provide expanded markets for other nations struggling to find the means for a better hfe
within a framework of individual freedom. At the same time, the deficit in our
international payments has remained uncomfortably large.
We want to increase our rate of economic growth and improve our living
standards because it is basic to our way of life. We are concerned that too
many of our citizens are unemployed, that others do not have a fair share of the
national prosperity, that there are depressed economic areas, that our economy
is not growing as fast as others. We are not willing to accept these as inevitable
and we believe a combination of appropriate Government policies and private
initiative, consistent with our political and economic traditions, can help to ease
these problems.
Our difficulties are not those of crisis—a sharp domestic recession—an
unmanageable drain of international reserves—an early relapse into inflation.
Rather, the problem lies in a gradual accumulation of deficiencies over a period
of years, each interacting with the other to retard our progress. Slow growth
and less-than-capacity operations inevitably dull incentives to invest, encourage
inefficient ''make work" practices, and lead to pressures on unit costs and profit
margins. In this setting, investment opportunities abroad, within the borders
of our rapidly growing foreign competitors, become magnets to American capital,

EXHIBITS

275

burdening our balance of payments today and diverting potential new jobs and
efficient productive facilities from our shores. And, in terms of the Federal
budget, our underemployed economy is not able to generate the revenues needed
to cover the costs of Government, even though increases in spending for fiscal
1964 are being held to the essentials of national security, space, and interest
payments.
The link between our domestic and balance-of-payments goals
One lesson of the past five years is that our goals of domestic growth and
external balance cannot safely be separated. We live in an open economy, an
economy whose performance powerfully influences our trading partners, rich
and poor alike, and which is itself subject to strong competitive pressures from
abroad. Our growth, or failure to grow, the efficiency with which we produce,
the climate for domestic investment, and our success in achieving price stability
all affect the flows of goods and capital between nations. And the strength and
stability of our currency concern every nation with a stake in freely-flowing
trade and a durable international payments system, for side by side with gold
itself, the dollar serves the free world as its chief reserve and trading currency.
The continuing need to reconcile our domestic and international objectives
sometimes limits the kind and scope of specific actions^that we can take in pursuit
of one goal or the other. But fundamentally these goals need not be incompatible;
indeed, they can reinforce each other. Faster growth at home and an efficient
industry, able to pour out the new products eagerly sought in world markets,
both depend upon a higher level of domestic investment, incorporating the latest
technology and exploiting the fruits of new research. A dynamic domestic
economy, alive with new and profitable investment opportunities, is ultimately
the only way—consistent with our free market system—by which we can discourage excessive outflows of capital and attract funds from abroad. Price
stability is essential both to broaden our export markets and to achieve balanced
growth at home.
The continuing challenge before us is to seek out and apply that blend of
practical policies that, taken together, promise to support both our domestic
and international objectives. This requires, first of all, a clear appraisal of
existing trends, not just for recent months or the past year, but for a long enough
period to appreciate the underlying forces at work in the economy. It is in this
longer perspective that the performance of the past year, while gratifying in
many respects, has demonstrated the need for new approaches.
The key role of investment
One fact that stands out in our recent experience has been the sluggishness of
business investment—the kind of spending that both generates current income
and enlarges our productive potential. This is true in relation to both our
earlier postwar record and that of our aggressive foreign competitors. To be
sure, business spending for plant and equipment rose by 9 percent in 1962. But
the gains slowed appreciably after the early months of recovery and, in dollar
volume, outlays barely surpassed levels reached as long ago as 1957. In real
terms, spending is actually below earlier peaks. We have been adding to our
capital stock at a rate of little more than 1J4 percent per year since 1957, well
below the amounts that are needed to support a vigorously growing economy.
Moreover, businessmen, once the threat of a steel strike was eliminated early
last year, have followed increasingly cautious inventory policies, adding to stocks
only where clearly needed to support their current level of sales.
The explanation for these conservative business pohcies is not hard to find.
With many industries faced for some time with more capacity than they could
effectively use, and with profit margins under pressure over a period of years,
businessmen understandably have confined their investment spending largely to
those replacement and modernization projects offering clear and prompt cost
advantages. With fast deliveries assured, and with constantly improving methods
of inventory control aUowing smaller inventories to serve a given level of demand,
ncentives for adding to their volume have been weak.
These investment and inventory practices, rooted in the experience of the
past five years, are one reason why the danger of serious recession in the months
ahead appears remote. But, in an economy with a growing labor force and steady
increases in worker productivity, we cannot be satisfied with stabihty or creeping
advance. And the fact of the matter is that we need, and could effectively

276

1963 REPORT OF THE SEGRETARY OF THE TREASURY

utilize at a high level of employment, much more investment than has been
forthcoming.
Much of the difficulty lies in an absence of sufficiently strong and assured
markets—markets more in line with our potential capacity to produce. After
five years of inadequate progress we cannot confidently sit back in the hopes
that such markets will appear spontaneously, without the encouragement of
fresh incentives and the release of new purchasing power.
Residential housing, for instance, had a good year in 1962, helped by the prevaihng ease of mortgage credit. But, it would be unreahstic to expect, within
the limits set by family. formation and current income levels, that that sector
can supply the further expansionary drive that is needed. Government expenditures, at all levels, are also rising, but not appreciably faster than current tax
rates are draining income from other sectors of the economy. To permit expenditures to rise further,, in areas of less than compelling need, merely as a
means of expanding demand would clearly violate important considerations of
public policy. Finahy, consumers—accounting for two-thirds of our whole gross
national product—have regularly been spending a normal share of their aftertax
incomes. Further increases in their outlays can be expected, but only as we.
generate a rise in income and employment from other sources.
The tax program and debt management
We have at our command an instrument that will permit us to cut thi'ough
this impasse. A broad consensus has developed among leaders from all sectors
of our economy that fresh incentives for investment, for risk-taking, and for
personal effort—supported by the release of additional purchasing power through
tax reduction—offers a practicable means for breaking through the sluggish
performance of recent years to achieve the difficult transition to sustained and
self-reinforcing prosperity. This consensus is embodied in the program of tax
reduction and reform that the President presented to the Congress last week,
and that lies at the core of our economic and financial policy. I shall be testifying on that program in detail before the House Ways and Means Committee
next week, and am not in a position to treat the specifics at length here today.
Rather, I would hke to consider the program in the perspective of the overall
financial policy of this administration, for tax reduction, however vital, can be
only a part of a well-conceived financial program for the mid-1960's.
Ultimately, one result of our proposed tax program will be a higher level of
Federal revenues than can reasonably be expected if we continue to hold back
our productive power with a tax structure that saps initiative and drains off
such a large fraction of income that reasonably full employment becomes an
ever receding mirage. The reason is very simple—revenues reflect not only the
level of tax rates, but also the level of incomes to which they are applied. Our
own experience—most recently following the 1954 tax reduction—shows that
this kind of stimulus to an idling economy can be the surest path to vigorous
expansion and budgetary balance. And the record of the past five years also
demonstrates the futility of deferring action in the hope that some other stimulus,
always just beyond the visible horizon, can do the job.
None of us can be happy with the temporary increase in the deficit that our
tax program hnplies for fiscal 1964, although I should point out that the estimated net
revenue loss of $2.7 billion is small when compared to the $9.2 billion deficit that
we face in any event as a consequence of the failure of our economy to achieve
reasonably full capacity operation. The phasing of the full program over three
years, but with enactment in a single package, is designed to minimize the transitional deficit,. before balance can be restored, without delaying the impact on
business incentives. And I am confident that we will be able to manage a deficit.
of the magnitude we foresee without endangering either our record of price stability or our balance-of-payments position, just as we have successfully financed
our deficits of the past two years.
We have been aided in that task by a rising fiow of savings that individuals
and businesses have been willing to commit to investment for a substantial period
of time. Almost all the deficit in 1962 was financed outside the banking system.
Moreover, the increase in outstanding Government securities maturing in more
than five years was substantiaUy greater than the total rise in the public debt.
Under the circumstances, it was possible to achieve this progress toward restructuring and funding the marketable debt—symbolized by a 7H percent increase
in its average maturity—without diverting funds from productive use elsewhere

EXHIBITS

277

in the economy. In fact, most long-term interest rates drifted down below their
recession lows over the course of the year.
As we move ahead in financing the deficit, we will remain alert to the need to
maintain a debt structure that will not contribute to inflationary pressures as
full employment is restored. This will require distribution of the debt among
the various maturity areas and investor groups in a manner that avoids excessive
liquidity, either in the form of new money creation or short-term Treasury
securities.
Of course, at a time of unemployment and excess capacity like the present, the
use of short-term securities or commercial bank financing is fully justified in
appropriate amounts. A growing economy needs more money and other liquid
assets, and short-term Government issues may help to fill these needs. The
compelling policy requirement—and the guide that we have consistently observed—is to insure that the growth of liquidity instruments of all kinds does
not run ahead of the ability of the economy to absorb them without inflation.
While hard and fast mechanical rules cannot be set down in advance, this
guide implies a continuing need to tap longer-term savings—either directly, or
through' the complex of savings institutions—for a portion of the funds required
to finance our forthcoming deficit. We are fortunate, in approaching this task,
that techniques have been developed that permit us to raise funds in the intermediate- and longer-term sectors of the market with a minimum of disturbance
to other borrowers. I am thinking partly of our advance refundings, which have
now been tested and found useful in six instances over the course of two Administrations. I am also thinking of our recent experience in auctioning longterm bonds through competing syndicates of security dealers—an experiment
that owes much to the continuing interest and support of Senator Douglas, I
am happy to report that our initial venture in selling $250 million of long-term
bonds by that means was highly successful in achieving a wide distribution of the
new securities, in this instance at an interest cost virtually equivalent to the
prevailing yield for comparable outstanding securities. While it is still too soon
to permit a judgment concerning the ultimate role of this new technique within
our total debt management program, the initial success provides every reason for
further testing from time to time as market conditions and our own objectives
make that desirable.
Financing the transitional deficit
It is sometimes argued that, to the extent we tap savings in financing the
deficit, the desired stimulus from our tax program will be offset—that we will, in
effect, take back with one hand the money that we provide with the other. This
oversimplified account of the financing process overlooks several important considerations. First of all, however the deficit is -financed, it will leave untouched
the spur to the economy from the greater incentives for productive effort and
new investment brought on by tax rate reduction. Equally important, there is
every reason to believe that, until we return closer to full employment, the flow
of longer-term investment funds generated by rising levels of business activity
will exceed the combined borrowing requirements of individuals, businesses, and
State and local governments, just as has been the case over the last two years.
An increased volume of savings will not require decisions to reduce spending
by business or consumers, but rather will flow from higher incomes. The act of
saving may itself be the end product of a long sequence of prior spending decisions, each of which will tend to add to the level of business activity and the
incomes of workers. The taxpayer himself, when he devotes part of his tax
saving to purchases of goods or services, will be only the first link in this chain
of spending, income generation, and saving that lies at the heart of the expansionary process. Under these circumstances, it is quite possible and practicable
for the Government to absorb some of the new savings for its own use, without
bringing undesirable upward pressures on interest rates or diverting funds from
use in other investment channels.
As the economy reaches full employment, and potential savings can be fully
and productively employed in financing our expanding private economy, the
situation becomes quite different. Then it is quite true that wedging Government bonds into an already taut capital market will raise interest rates and curtail
private spending. And, in a potentially inflationary situation, that might be
appropriate. , Even more to the point, that would clearly be a situation in which
Government policies should be directed toward budgetary balance and surplus.

278

19 63 REPORT OF THE SECRETARY OF THE TREASURY

thereby restraining demand and (through debt retirement) releasing funds for
productive use by other sectors of the economy. I am confldent that, as the
economy does reach its full potential, the tax rates we are proposing will in fact
generate revenues adequate to cover the essential expenditures of Government.
The course of interest rates in the months ahead will be affected less by Treasury
debt management decisions than by the course of the economy itself, and by the
policies of the Federal Reserve in response to emerging developments both
domestically and in our balance of payments.
Whatever the future may bring in this respect, it is clear that easy money and
ample availability of credit has been a major factor supporting the economy
throughout this period of expansion, and remains so today. Seldom in our
history—certainly not since World War II—have most long-term interest rates
actually declined during a recovery period. I was interested to see recently a
report that the larger New York banks charged an average of Ys-Yi percent less
per annum for new term loans in 1962 than was the case a year earlier—a striking
reflection of the downward pressures on the rate structure and aggressiveness of
banks in seeking out new borrowers, even while the so-called prime rate remained
unchanged. The record volume of mortgage financing in 1962—coming at a
time in the expansion period when tight money has often sharply curtailed homebuilding—is another sign of the really unique character of this period.
Tax policy and the balance of payments
The continuing need for striking an appropriate balance between domestic and
external considerations in the execution of debt management and monetary
policies will not be fundamentally changed by our tax proposals. However, we
have developed the tax program so as to reduce the possibility of serious conflicts
arising. For one thing, it will take on a good part of the burden for encouraging
expansion that is being borne by monetary policy, thereby easing the problems
of the monetary authorities should they one day find themselves compelled to
deal more vigorously with the balance of payments.
Equally important, the stimulus to domestic investment, the new incentives
for cost-cutting and modernization, the encouragement for industrial research,
and the higher profits implicit in the tax program will support and reinforce
our more specific efforts to deal with the balance-of-payments problem. Some
capital that is now inclined to seek employment abroad will find new opportunities
opening up in this country. The productivity of our industry should be reinforced, bettering our competitive posture in markets at home and abroad. Our
leadership in research and its application to industrial products—products that
account for a large portion of our total exports—will also be further bolstered.
To realize these potential benefits for our balance of payments, it remains critically important that we maintain price stability. The wage and price guideposts
reiterated in the Report of the Council of Economic Advisers clearly set forth the
general standards by which price and wage decisions may appropriately be
evaluated from the standpoint of the public interest. The increases in takehome pay and profits implicit in our tax program should make it easier for both
sides to accept wage settlements and to make pricing decisions that lie well within
these guideposts, effectively supporting our goal of price stability.
Balance-of-payments results
One of the disappointments of the past year has been the relatively slow improvement in our balance of payments. The preliminary figures presently available, indicating that our overall deficit remained somewhat over $2 billion, demonstrate conclusively that we must seek out and apply even more vigorously measures
specifically aimed at restoring lasting equilibrium in our international accounts.
With merchandise imports rising by $1.6 billion last year, the moderate progress
recorded in reducing our deficit from the $2}^ billion in 1961 was possible only
because the concerted efforts to stem the dollar drains directly associated with
Government activities have begun to bear fruit. Most importantly, net military
spending overseas declined by almost $600 million (on the basis of incomplete
data), reflecting offsetting purchases of military goods and services by our allies.
The vigorous efforts to economize on our own military spending overseas merely
served to hold the overall total level while absorbing the costs of larger forces and
higher foreign price^levels. Prepayments of loans by France, Italy, and Sweden
amounted to|over $650 million, approximately comparable to our 1961 receipts
from this source. A larger proportion of our aid to the less-developed countries

EXHIBITS

279

was directly reflected in purchases in this country, and fully three-quarters of
this fiscal year's new AID commitments will result in American exports in coming
years.
Further savings in Government spending overseas are clearly necessary. I am
confident that they will emerge as the new Government-wide control system for
international transactions, established within the Bureau of the Budget, becomes
fully effective as an administrative device for budgeting our foreign exchange
outlays.
Improvement developed in other directions as well. Commercial exports rose
moderately, despite slower growth in Europe—our most rapidly expanding export
market. The steady increase in earnings on our overseas investment provided
a factor of long-term strength. Short-term capital outflows, which had reached
exceptionally high levels in 1960 and 1961, declined, although they still remain
a major factor in our payments difficulties. These outflows, including items not
specifically recorded in our balance-of-payments statistics, accounted for approximately 70 percent of our total deficit as compared to about 80 percent in 1961.
Last year's deficit resulted in a gold loss of $890 million as compared to $857
million in 1961. Toward the end of last year, and continuing into early 1963,
ten weeks passed in which there was no net decline in our gold stock. This
situation could not be expected to continue in the face of our payments deficit,
and the gold outflow resumed in January. Further moderate outflows can be
expected in the coming weeks and months.
The improvement in our balance of payments thus far is simply not good enough
if we are to maintain a strong dollar and fulfill our basic commitments for aid
and defense. The hard job of searching out and penetrating new foreign markets
has only begun and the President has therefore proposed a sharp step-up in our
export expansion program. Our long-term capital exports continue to reflect the
absence of effective alternatives abroad to our own well-developed capital markets,
as well as the inadequate investment opportunities at home. And the burdens
of aid and defense must be more equitably shared.
Strengthening the international payments system
We cannot take comfort in the thought that an easy solution can be found in
some new monetary arrangement that will shield us from the necessity for taking
corrective action. Any effective monetary arrangement necessarily presupposes,
not balance every year, but an ability and willingness to avoid large and continuing
deficits, as well as the full confidence of a group of willing lenders.
We need a stable monetary system, resistant to the strains and shocks that can
quickly develop as a result of sudden and massive flows of funds between countries,
and capable of meeting the needs of a growing world economy for international
liquidity and access to credit. During the past year, we have made great
strides toward strengthening the existing system. The prompt ratiflcation and
implementation of the special IMF borrowing arrangement—making available
in time of demonstrated need a pool of up to $6 billion of convertible currencies—
was a source of special gratification. Moreover, we have now tested in a wide
variety of situations the usefulness of operations for our own account in both the
spot and forward foreign exchange markets, of reciprocal currency agreements by
the Federal Reserve with the monetary authorities of other industrialized countries, and of Treasury direct borrowing at short- and medium-term from other
countries in a strong payments position. The effectiveness of these arrangements,
supplementing the resources of the IMF itself, in meeting incipient strains of
various kinds—whether directed fagainst the doUar or otber currencies—was
demonstrated at the time of the stock market disturbances last spring, and again
during the Canadian exchange crisis, and the Cuban situation. Similarly, the
new cooperative arrangements in the London gold market have been helpful in
dispelling a potentially speculative atmosphere, and the price of gold in that
market declined toward the end of last year. For much of January, the price
has been below $35.06, touching the lowest level since 1959.
No doubt there is room for further innovation and improvement in these areas.
We are continuing to study these questions in cooperation with other interested
countries. But no monetary mechanism can effectively substitute for the hard
and continuing task of steadily improving our own balance of payments. The
easy, obvious savings have already been made—the hard core of the deficit that
remains will require the conscious effort and understanding of all groups in the
economy, as well as the cooperation of our friends abroad who now find themselves
in a strong position.
707-484—64

^20

280

19 63 REPORT OF THE SECRETARY OF THE TREASURY

In this connection, I was much interested in reading the report of your own
subcommittee, chaired by Congressman Reuss, that recently made available a
mass of valuable and provocative material on the balance of payments and related
monetary arrangements. The emphasis in your own conclusions on the fundamental necessity for working with our alhes to achieve a more equitable sharing of
the burdens of defense and aid, with fuU recognition of the increased capacity and
economic strength of other industriahzed nations in recent years, seenis to me entirely appropriate. And I also share your view that we can find no solution to
our problems" by simply multiplying guarantees for dollars in the hands of
foreigners.
The need for price stability
But there is one sort of guarantee that is vitally necessary if we are to maintain
the confidence of our friends abroad and successfully achieve our twin goals of
domestic expansion and balance in our international accounts—that is a pledge
that we will conduct our affairs in a manner that will maintain our recent record
of price stability. That is why it is essential that we finance our deficit in a prudent way, with, an eye toward the future as well as the present. . That is why we
need to maintain a flexible monetary policy, alert to developments as they emerge.
And, above all, that is why it is so important that labor and business alike, as the
stimulus from our tax program takes hold, continue to seek out more efficient
methods of production and display restraint in their wage bargaining and pricing
decisions.
This process should be greatly facilitated by the new incentives and the increases
in aftertax incomes of individuals and business enterprises alike which will be provided by our tax program. It is in this context of responsible citizen action within
a framework of effective pubhc pohcy that tax reduction will be a boon to us all.

Public Debt Management"
EXHIBIT 15.—Statement by Secretary of the Treasury Dillon, February 27, 1963,
before the House Ways and Means Committee on the debt limit
The President in his Budget Message last January requested legislation which
would extend the present $308 billion temporary debt limit through the remainder
of the current fiscal year. I am here today to urge approval of this legislation.
It is absolutely essential for the sound management of Government finances during
the final quarter of the fiscal year.
The existing law provides that the temporary debt limit will drop from the
present level of $308 bilhon to $305 bilhon beginning April 1, 1963, and from $305
billion to $300 biUion beginning June 25, 1963. The debt limit will revert to the
permanent level of $285 biUion on July 1, 1963.
The graduated reductions scheduled for the debt limit in fiscal 1963 were designed to conform closely to thie seasonal borrowing requirements of the Government under the assumption of a balanced budget.^
The single, most significant fact in this hearing is to emphasize that when the
graduated reductions from the $308 billion level were originally estabhshed, it
was universally agreed that they would not be feasible if we were to run a deficit
of any substantial size in fiscal 1963.
The balanced budget assumption upon which these debt limit ''step-downs"
were based has, I regret to say, not been realized. As you all know, we are expecting a sizable deficit in fiscal 1963, an administrative budget deficit which was
estimated in the President's Budget Message last month at $8.8 billion. This
deficit-was largely produced by the failure of the economy to attain the levels of
economic activity which had been assumed when the President's Budget Message
was presented in January 1962. Instead of the assumed gross national product
of $570 billion in 1962, the actual figure came to only $554 billion. As a consequence of this slower-than-expected rate of economic expansion, we now expect
fiscal 1963 revenues to be $4.8 billion lower than we had projected in January 1962.
Various, partially offsetting refinements in our estimates, resulting froni new and
more up-to-date data, have reduced the revenue estimate by another $600 million.
1 See 1962 annual report, pp. 290-296, "Statement by Secretary of the Treasury Dihon, June 26, 1962,
before the Senate Finance Committee on the debt limit."

EXHIBITS

281;

Finally, administrative changes in the depreciation provisions of the Revenue
Code and the effects of the Revenue Act of 1962 have led to a further reduction of
$2.1 billion in our revenue estimate. In sum, revenues are now estimated to be
$7.5 billion lower than the January 1962 budget projection upon which the
present temporary debt limit provisions were tailored.
Estimates for fiscal 1963 expenditures have also increased over last year's
estimate. The increase is $1.8 billion over the figure in the January 1962 Budget
Message. At the time of last year's debt ceiling hearings, additional proposals
had been made involving an amount approximately offsetting the small surplus
estimated in the January 1962 Budget document. The largest of these—for the
accelerated public works program—was subsequently enacted and is estimated to
require expenditures of $300 million in fiscal year 1963. The other expenditure
increases, however, were not foreseen at the time of last year's hearings. The
largest unexpected increases are: a rise of $895 million in expenditures on agriculture (over $400 million of which is attributable to the fact that the President's
agricultural proposals were not enacted), and a $541 million increase in the cost
of the postal service (stemming primarily from the fact that postal rate increases
were effective January 7, 1963, rather than July 1, 1962, as proposed). These
items, together with smaller increases and decreases in other programs, produced
the estimated rise of $1.8 billion in total expenditures over the January 1962
estimates.
In short, the combined effect of a substantial reduction in revenues and a
moderate increase in expenditures has led to the current estimate of an $8.8
biUion deficit rather than the even balance upon which the present temporary
debt limit legislation was based.
Last June, at the time of the debt limit hearings, with much evidence at hand
that the rate of economic expansion was slowing down, it was apparent that the
gross national product projection upon which we had based our revenue estimates
was much less likely to be realized than we had thought in January. However, we
did not have, at that time, an adequate basis for revising either the revenue or the
expenditure estimates presented in the Budget Message. In the light of all of
the uncertainties, both with respect to the future course of the economy and with
respect to the future actions of the Congress, it was judged best to proceed with
the request for a fiscal 1963 debt limit based on the assumption of a balanced
budget, a judgment with which this committee specifically concurred.
Since it is now abundantly clear that a substantial deficit will be incurred in
fiscal 1963, the scheduled reductions in the temporary debt hmit cannot be permitted to occur. The bills are coming in; they must be paid.
An attached table clearly demonstrates that a $308 billion debt limit is the
absolute, rock-bottom minimum needed to finance the operations of the Federal
Government from now through June 30, 1963. This table was constructed on
the basis of the same two assumptions used in last year's debt limit hearings:
an operating cash balance of $4 billion and an allowance for flexibility and contingencies of $3 billion. The table shows that a $308 billion debt limit will not,
in fact, provide us with anywhere near this margin for flexibility and contingencies during the remainder of fiscal 1963. In mid-June,' the margin under a
$308 billion debt limit will shrink to an extremely narrow $800 million. However,
since we are nearing the end of the fiscal year, both revenues and expenditures
are unlikely to vary substantially from current estimates, so we can afford to
run the risk of what would otherwise be an unacceptably narrow margin. It is
for this very simple and very compelling reason that I earnestly recommend
the prompt approval by this committee of legislation extending the present $308
billion temporary debt limit through the remainder of this fiscal year.

282

19 63 REPORT OF THE SECRETARY OF THE TREASURY

Actual operating cash balance and public debt subject to limitation June SO, 1962February 15, 1963, estimate based on constant operating cash balance of $4-0
billion {excluding free gold) February 28, 1963-June SO, 1963
[In bihions, based on 1964 Budget document]
Operating cash
balance (excluding free gold)

Date

June 30 _
July 15
July 31
Aug. 15
Aug. 31
Sept. 16 - Sept.30
Oct. 16
Oct. 31Nov. 15
Nov. 30
Dec. 15
Dec. 31

Actual 1962
.

1963

Jan. 15
Jan. 31
Feb.16
Feb. 28
Mar. 15
Mar.31
Apr. 15
Apr. 30
May 15
May 31
June 15
June 30

Estimated
.-

_ _

Public debt
subject to
limitation

$9.4
6.4
6.5
6.2
7.7
5.3
8.3
7.8
6.7
5.0
6.3
3.5
6.7

$298.2
298.3
297.9
299.7
30L9
30L8
299.6
302.9
302.2
304.7
305.5
303.9
303.6

4.4
4.5
4.4

304.2
303.6
304.1

4.0
4.0
4.0
4.0
4.0
4.0
4.0
4.0
4.0

302.6
305.1
300.5
304.2
303.4
303.7
304.4
307.2
302.6

Allowance to
provide flexiTotal public
bility in financ- debt limitation
requu-ed
ing and for
contingencies

$3.0
3.0
3.0
3.0
3.0
3.0
3.0
3.0
3.0

$305. 5
308.1
303.6
307.2
306.4
306.7
307.4
310.2
305.5

Actual and estimated monthly budget receipts and expendiiures and resulting end-of-month debi levels, fiscal year 1963
[In billions, based on 1964 Budget document]
Budget receipts and expenditures
Date

Net receipts J

Balance June 30,1962
Actual
1962 July
August .
September
October
November
December _

_ - ._ .

1963 January
Estimated
February
March
April
May June
Fiscal year 1963

. . .

.
_.. . ,

Expenditures '

Surplus,
or deficit

(-)

Total to
be financed

Decrease
in operating cash
balances 2

Increase
in debt
subject to
limit

-$0.3
4.0
-2.3
2.6
3.3
-L9

$3.6
7.1
10.0
3.0
7.0
8.4

$7.3
8.5
7.3
8.5
8.1
7.6

-$3.7
-1.4
2.7
-5.6
-Ll
.8

$0.1
-.4
0.2
0.3
-1.6
1.5

$3.6
1.8
-2.9
6.2
2.7
-2.3

$3.9
-2.2
-.6
2.6
-.6
-.4

6.5

8.0

-2.5

2.2

7.5
9.3
5.0
7.4
11.7

6.9
7.7
7.5
7.8
9.1

.6
1.6
-2.5
-.4
2.6

.4
-.4
-.6

-.6
-2.0
2.9
1.0
-L9

85.6

94.3

-8.8

-.9

9.7

(^)

1 Totals based on 1964 Budget document. Monthly spread for February through
June estimated by Treasury.
2 Excluding free gold.

Financing means

Net receipts of
trust and
clearing
accounts
and other
transactions

-1.1
-2.0
2.9
LO
-L9

5.4

4.3

(4)

(*)
(*)

Operating
cash balances 2

Debt subject to
limitation

$9.4

$298.2

5.5
7.7
S.3
5.7
6.3
6.7

297.9
301.9
299.6
302.2
305.6
303.6

4.5

303.6

4.0
4.0
4.0
4.0
4.0

302.5
300.5
303.4
304.4
302.6

Ahowance
for flexibihty and
contingencies

$3.0
3.0
3.0
3.0
3.0

Total
debt limitation
requhed 3

$305. 5
303.6
306.4
307.4
305.5

3 At the mid-month points in March and June the requu-ements are $308.1 billion and
$310.2 billion, respectively.
4 Assuming $4.0 billion constant cash operating balance.

(X)
CO

284

1963 REPORT OF THE SECRETARY OF THE TREASURY

EXHIBIT IG.—Statement by Secretary of the Treasury Dillon, May 23, 1963,
before the Senate Finance Committee on the debt limit
Under existing law, the teniporary debt limit dropped from $308 billion to
$305 biUion on April 1, 1963, and is scheduled to decline to $300 billion on June 25,
1963. Should the existing temporary legislation be allowed to expire without
further action, the debt ceiling would revert to the permanent level of $285
biUion on July 1, 1963.
The graduated reductions established in the debt limit legislation for fiscal 1963
were specifically designed to take care of the seasonal borrowing requirements of
the Government under the assumption of a balanced budget.
While the prospect of a balanced budget in the fiscal year 1963 was admittedly
dubious at the time of last year's legislation, it did not appear practical to legislate on any other basis.^
Unfortunately, a balanced budget has not eventuated. As you are aware, the
administrative budget deficit for fiscal 1963 was estimated in the January Budget
Message at $8.8 billion. While the budget outlook for fiscal 1963 has improved
somewhat since the January estimate, we still face a deficit in the neighborhood
of $8 biUion.
As a consequence of the substantial fiscal 1963 deficit, the graduated reductions
in the debt limit cannot be permitted to run their course.' Our present projections show that the debt will rise from the present level of $304.0 biUion to $305.6
billion on' May 31, a figure $600 million in excess of the present debt limit. From
the May 31 level of $305.6 biUion, the debt is projected to rise to $306.8 biUion
in the second week of June, a level $1.8 billion in excess of the present debt Jimit.
On June 25, when the present temporary debt ceiling is scheduled to fall to $300
biUion, our projections indicate that the debt will be $304.2 billion, $4.2 billion
in excess of the limit. This would place the Treasury and the country in an
impossible situation. On July 1, when the debt ceiling reverts to the permanent
level of $285 biUiou, the debt is estimated at $305.3 bUhon, $20.3 biUion in excess
of the limit.
'
The present debt limit legislation was based on a premise which has not been
realized. It is not: consistent with the financial facts of life which the Treasury
must face. It is,\therefore, imperative that the debt limit be raised if the financial
obhgations of the United States, at home and abroad, are to be met.
Because of the short period of time involved in the debt hmit extension provided
by H.R. 6009, the Ways and Means Committee requested the Treasury to supply
figures showing the estimated debt and cash balance for each day up through
August 31st. These daily projections are the best estimates we can produce, but
they cannot be considered highly reliable. Long experience has shown that
actual daily receipts and expenditures can, and often do, vary from estimates
by as much as several hundred million dollars in either direction. This is true
of estimates looking ahead 30 days or less and, of course, would be far more likely
in the case of daily estimates looking over three months into the future. For
periods longer than 30 days, the type of semimonthly estimates we have furnished
the Congress in the past would seem to be the most appropriate basis for assessing
debt limit requirements. The daily estimates furnished to the House Committee
at its request do, of course, indicate the general trend of the debt and the cash
balance. Since the House action was based upon daily cash and debt figures
through the end of August, I am including our latest daily estimates for this
period as an attachment to this statement.
The temporary debt limits provided by H.R. 6009 are at the absolute minimum
levels needed by the Treasury for the proper management of the debt and the
Treasury's cash balance between now and the end of August. These proposed
limits are tight, so tight that they provide little or no room for meeting unforeseen
contingencies. The $307 billion debt limit provides only a $200 million leeway
over our mid-June projected debt level of $306.8 billion. Our projections show
the debt will' actually exceed the $309 billion level during the last two days of
August.
The limits in the House bill are lower than those we requested. Our request
to the Ways and Means Committee was for $308 billion through June 30th and
$310 bilhon thereafter. The committee reduced these figures by $1 billion each.
1 See 1962 annual report, pp. 290-296, "Statement by Secretary of the Treasury Dillon, June 26, 1962
before the Senate Finance Committee on the debt limit".

EXHIBITS

285-

We told'the committee that, while we could not recommend the adoption of such
tight figures, we would do our best to live, with them.
I am here today to urge the approval of H.R. 6009, which would provide a
$307 billion temporary debt limit through the end of the current fiscal year and
a $309 billion debt limit for the period July 1 through August 31, the first two
months of the fiscal year 1964.
For the past few years the Congress has, prior to the end of each fiscal year,
authorized temporary debt ceilings for the entire ensuing fiscal year. H.R. 6009
departs from this custom by providing a limit that will expire on August 31st,
after which the debt limit would, in the absence of further congressional action,
return to its permanent level of $285 biUion. The reason for this action is that
estimates for the fiscal year 1964 must take account of the tax program presently
before the Congress. The House of Representatives felt that the prospects for the
tax program would be clearer by August. And, by then, the overall outline of
fiscal 1964 appropriations will also be clearer. For these reasons it was felt that
a decision on the level of next year's debt limit should be postponed until August.
In undertaking to operate within the very tight limits set forth in H.R. 6009, the
Treasury is making three assumptions: (1) that we can have.a reasonable degree
of confidence in our expenditure estimates, since they cover a period only three and
one-half months into the future; (2) that the likelihood is relatively small that
our revenues will fall below the estimated levels; and (3) that, since Congress wUl
be in session throughout the period covered by the legislation, it would be possible
to obtain new debt limit legislation promptly, if it should be required, without
the necessity of calling a special session of the Congress. For longer periods
of time a more adequate allowance for contingencies would be required, and debt
limits as tight as those provided in H.R. 6009 would not be acceptable.
The preservation of the financial integrity of the United States is the primary
mission and responsibility of the Treasury. It is for this very reason that we
cannot willingly accept a debt limit which is so restrictive as to make it impossible
to handle the finances of the U.S. Government in a prudent and responsible
manner.
No one is more conscious than I of the necessity of keeping the expenditures
of the Federal Government under firm control. This objective cannot be attained, however, by exerting controls at the tag end of the expenditure process,
when the bills which, must be paid are coming due. The debt limit is not, and
cannot be made, a substitute for control of expenditures at the decisive stage of
the expenditure process—in the decisions on appropriations. A debt limit of
$307 biUion through June 30, 1963, and $309 biUion from that date through
August 31, 1963, will provide the absolute minimum degree of flexibility needed
by the Treasury in handling the financial affairs of the Government. More
restrictive debt limits than these would force the Treasury to resort to an array
of unsound financial procedures of the sort which had to be used in 1957-58,
procedures which, in the end, only add to the burdens of the taxjDayers of this
country. But apart from cost considerations, it is not in keeping with the status
of the United States as banker tp the free world to be placed in such a ]Dosition.
The financial community, iSoth here and abroad, would be utterly dismayed
should they find that the U.S. Treasury is no longer permitted to cope in a responsible manner with the routine requirements of fiscal affairs. The consequences of such a situation are fraught with danger for the safety and stability
of the dollar.
It is for these reasons, which I believe are compeUing, that I urge your prompt
approval of H.R. 6009,

286

1963 REPORT OF THE SECRETARY OF THE TREASURY

Estimated cash balance and debt subject to limit day-hy-day May 1-August 31, 1963
[ I n b i h i o n s of doUars]
M a y 1963
Cash
balance
(excluding gold)

Debt
subject
to limit

April 30

J 6.3

1 303.4

1
2
3.
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31

15.9

Day

1 303.4
1 303.6
1 303.4
Saturday
Sunday
3.4
16.7
1 303.4
16.2
1 303.4
16.2
1 303. 5
16.4
1 303.5
16.4
Saturday
Sunday
1 303.6
16.5
1 303. 4
16.6
1 303.0
16.8
1 303.1
16.2
1 303.1
16.7
Saturday
Sunday
17.1
1.1
7.4
1.1
7.5
303.0
7.6
304.0
7.4
304.0
Saturday
Sunday
7.0
304.0
6.6
304.0
6.4
305.2
6.4
305.2
6.2
306.6

J u n e 1963
Cash
balance
(excludm g gold)

Debt
subject
to limit

Saturday
Sunday
305.6
5.7
305.6
6.2
4.8
305.6
4.3
305.6
4.0
305.6
Saturday
Sunday
305.6
3.6
305.6
3.4
306.8
4.6
306.8
4.5
306.8
4.6
Saturday
Sunday
4.7
5.1
16.7
5.8
306.3
6.9
305.7
8.0
305.4
Saturday
Sunday
7.7
304.3
7.8
304.2
8.1
304.1
8.3
304.0
8.2
305.3
Saturday
Sunday

J u l y 1963
Cash
balance
(excluding gold)

Debt
subject
to l i m i t

305.3
8.1
305.3
7.8
305.3
7.5
Holiday
7.0 I
305.2
Saturday
Sunday
305.2
6.3
305.2
5.8
305.2
6.5
6.3
306.2
6.2
305.2
Saturday
Sunday
5.4
305.7
5.2
305.5
6.1
305.4
6.0
305.4
6.7
307.2
Saturday
Sunday
307.2
6.5
307.2
6.2
307.3
6.0
307.3
6.8
307.3
6.7
Saturday
Sunday
307.3
6.5
307.5
6.4
306.4
5.4

A u g u s t 1963
Cash
balance
(excluding gold)

Debt
subject
to l i m i t

4.9
5.0
Saturday
Sunday
5.0
4.5
4.2
4.2
4.2
Saturday
Sunday
4.2
4.2
4.6
4.7
6.1
Saturday
Sunday
5.3
5.7
6.0
6.2
6.3
Saturday
Sunday
6.2
6.0
5.8
5.7
7.1
Saturday

306.4
306.4
306.4
306.3
306.3
306.3
306.3
306.3
306.3
306.3
306.8
306.8
306.8
306.8
306.7
306.7
307.7
307.7
308.6
309.4
310.0

1 Actaal.

EXHIBIT 17.—Remarks by Under Secretary of the Treasury for Monetary
Affairs Roosa, October 2, 1962, at the annual convention of the Mortgage
Bankers Association on debt management and the capital markets
A meeting of the Mortgage Bankers Association is a particularly appropriate
forum for a discussion of debt management—the problems, the policies, and the
results. For mortgage bankers and the managers of the Federal debt have a
vital interest in common: a continuing concern with the state of the capital
markets, with the forces of supply and demand at work in them, and with the
behavior of interest rates that results from these forces.
The mortgage market is by far the largest single component of our long-term
capital markets in this country. The net increase of mortgages outstanding in a
single year consistently exceeds the entire outstanding total of all Federal debt in
the 20-year-and-over maturity range. For example, after allowing for all repayments and refundings, your industry placed last year a volume of long-term debt
that was larger than the total of long-term Federal debt now in existence as the
combined and cumulative result of everything that all of the managers of the
Federal debt have been able to accomplish in that area of the market since World
War II. So I approach you very humbly, seeking both the sympathy and the
suggestions of the successful.
I would like to review with you the range of varied objectives that we have to
try to fulfill, and to reconcile, in managing a Federal debt that is distributed
through all maturity sectors of the money and capital markets. And, in the light
of that review, I will then trace through some of the results we have had in working
toward those objectives during the past twenty months.

EXHIBITS

287

The process of decision-making in debt management is complicated by the sheer
number and diversity of objectives which we must pursue simultaneously. Some
are the cost and efficiency considerations appropriate to any borrowing operation;
some are peculiar to the inescapable fact that our operations must almost always
be large; and some relate to the special responsibilities and opportunities inherent
in any exercise of public policy. This means that anyone engaged in Federal debt
management must, among other things, keep in mind the impact of any given
Treasury debt operation on the liquidity needs of the domestic economy, on the
long-term capital markets, on our balance-of-payments position, and on the interest cost of carrying the debt as a whole. Moreover, against the inexorable
pressure of the passage of time, the debt manager must continually strive to turn
over to his successor a suitably balanced debt structure.
Very broadly, these objectives of debt management may be divided between
those that are more largely of a ''housekeeping" character and those that are more
closely related to the Government's economic policy.
One of the first on either list is the aim of minimizing interest costs and the
burden of the debt on the taxpayer, to the fullest extent consistent with other
compelling objectives. Another housekeeping aim is that of promoting and maintaining an active and broadly-based market for Government securities, not only
in the interest of the Treasury and of investors in Government securities, but also
in the interest of the Federal Reserve, which must operate through this market in
adjusting, on a day-to-day basis, the reserve position of the banking system.
Our further housekeeping objectives must be to establish and maintain a maturity structure for the debt which will assure a reasonable range of flexibility for
the Treasury debt managers in the future, a structure which will also facilitate
rather than inhibit the execution of appropriate monetary policies, and one which
will provide appropriate quantities of securities in the various maturity areas to
meet the needs of the investing public.
Very often we are asked why the Treasury does not finance solely through
short-term securities. Such borrowing seems always to be more easily carried
out. And, since short-term rates are usually lower than long-term rates, would
not such a policy also save the taxpayers money? Not many of those who ask
this sort of question would carry it to its ultimate extreme and argue that the
Treasury ought to finance its operations solely through greenbacks—demand
obligations which carry a zero interest cost. The hazards of greenback financing
are well known. Unfortunately, the hazards of an excessive concentration of
short-term financing are less well known.
Perhaps our housekeeping objectives can best be understood by pointing up
some of these hazards. First and most important, if we were to concentrate our
financing entirely in short-term securities, we would be courting the danger of
excess liquidity and the infiationary potential which excess liquidity creates.
Short-term Government securities are a close substitute for money; they can be
turned into money very quickly and with little risk of loss. To be sure, an advanced economy, such as ours, has need for a large stock of liquid instruments
that are free of credit risk; such a stock is needed for the ready reserves of our financial institutions and other organizations. And, as our economy grows, the
size of the appropriate stock of liquid instruments will also grow. But this does
not mean that all of the debt can be in short form. For the stock of liquid instruments can exceed the needs of the economy at going prices and practicable
rates of output. And, to the extent that such an excess occurs, a threatening
inflationary potential will have been created in the economy—even an economy
that is not, throughout its many sectors, fully employed.
Furthermore, it does not follow that, if the Treasury were to concentrate its
financing solely in the short-term area, the interest cost on the Federal debt
would be reduced. The level of interest rates for any given maturity area reflects not only the state of expectations, but also the quantity of securities supplied to the market in that maturity area. If the Treasury were to add to the
supply of short-term securities well beyond the needs of the economy for this
kind of instrument, short-term rates on Treasury securities would inevitably
rise relative to long-term rates.
This sort of situation is illustrated by the actual experience of 1959 and early
1960, when the Treasury was forced to concentrate an excessive amount of its
financing in the one-to-five year maturity area. As a result, a humped yield
curve was produced, with yields in the one-to-five year area being substantially

288

1963 REPORT OF THE SECRETARY OF THE TREASURY

higher than yields on the longest-term Government securities. And partly as a
result, total budgetary interest costs for the fiscal year ending June 1960, were
larger than those for either of the two following fiscal years, even though the total
outstandihg debt was actually increasing over those later years and, at the same
time, a considerable lengthening of the average maturity of the debt was being
accomplished.
Another major hazard of an excessive concentration of short-term Government
securities is that it may severely inhibit the execution of monetary policy. It
can do so in several ways. To the extent that more of the Federal debt is concentrated in short maturities, other than Treasury bills, there will inevitably be
a need for more frequent, large refunding operations by the Treasury.
The reason that the turnover of our short debt is now accomplished with
relatively little disturbance to the money market, and without serious impact
on the flexibility of the Federal Reserve, is that the volume of short-term
securities is still well within the absorptive capacity of the economy. However,
if the Treasury, because of an excessive concentration of short debt, was forced
to engage in very frequent and very large refunding operations of the sort which
might be disruptive to the money markets, the Federal Reserve would find
itself with only very short intervals of time within which it could freely and
independently work out gradations of change, or shifts, in monetary policy without risking an undue disruption not only of the markets but also of the Treasury
finaricing operations themselves.
Since February 1961, the Federal Reserve has extended open market operations throughout the entire maturity range of Government securities, instead of
concentrating its efforts solely in the short-term sector. This is a change in
'procedure which the Treasury has welcomed. However, if the Federal Reserve
is to be able to release or absorb reserves through transactions in any part of the
maturity range that is appropriate for its policy objectives, the quantity of
outstanding securities in the various maturity areas must be adequate to provide
an active and broadly-based market in which such transactions can actually
be conducted.
It is particularly important, so far as the implementation of monetary policy
is concerned, that the maturity composition of the Federal debt include a significant volume of long-term debt. For at times when monetary controls shpuld be
reaching through to the longer maturity areas—influencing the supply of funds
that may or may not be released to flow into mortgages, for example—significant
changes may be brought about in market expectations by relatively small changes
in the daily flows of funds into or out of Government securities, and the related
small changes in interest rates. If there were not an adequate supply of tradeable
Government securities, the effects of any needed monetary policy would have to
be expected to work their way out toward the longer area by means of tentative
and possibly erratic efforts at private arbitrage. The alternative for monetary
policy, if there were no tradeable volume of longer-term Governnaent securities,
would be a great lengthening of the time needed for monetary controls to take
hold and a great intensification of the severity of the other actions that would
actually have to be taken by the Federal Reserve to accomplish a given result.
It can indeed be argued that a tradeable quantity of outstanding Government
debt in all maturity sectors is a precondition for any broadly effective monetary
policy in the United States today. And that case is strong whether or not the
Federal Reserve itself chooses to operate directly in all maturity sectors.
For very short periods, the objective of maintaining a balanced maturity
structure for the debt may be subordinated to shorter-run economic policy
considerations. But this is very much lilie deferred maintenance on a railroad
or an industrial plant. If the practice is continued long enough, the basic
structure may deteriorate to such an extent that it may be very difficult to
restore a sound basic structure again. It is often said that there is never a
time when the Treasury can freely place securities in the longer-term area of
the capital rnarket—^when business is slack, no diversion from private investment
can be risked, and when business is booming, interest costs are too high. The
debt manager must, nonetheless, place long-term debt into the market without
being hung from either of the horns of this dilemma, and, if possible, while furthering all of the' other housekeeping objectives we have just reviewed, and while
also fulfilling the economic policy aims which I will now briefly describe.

EXHIBITS

289

IL
Debt management cannot escape involvement in economic policy. The
present size of the debt alone virtually compels a continuous interrelationship
between what is done to refund the steady stream of maturities and what the
Federal Reserve is doing to influence the supply of money and credit. We now
have a debt of more than $300 billion, almost $90 billion of which will mature
and have'to be refunded during the y^ar ahead. Apart from that, in recent
years, the ordinary seasonal swings in the Treasury's cash borrowing requiremenfts
have been running around $10 billion.
Thus, with about $100 billion of indicated borrowing requirements, whether
or not there are further budget deficits, the very magnitude and frequency of
Treasury borrowing operations is necessarily such that Treasury operations can
scarcely avoid having some impact on all of the other markets for fixed income
securities, the corporate bond market and the market for State and local Government securities, as well as the mortgage market. The challenge to debt management planning is, therefore, so to channel the influence of Treasury debt operations upon these various other markets and activities that it will, wherever possible, help to further the objectives of Government economic pohcy—domestically
and with respect to the balance of payments.
Much has been said in other countries about a presumed necessity for combining monetary control and debt management into a single policy instrument.
And, in some countries, both are administered by a single agency. But in accordance with the principle of checks and balances, and the diffusion of power, which
characterizes our political institutions generally, these functions have most appropriately been divided in the United States between the Federal Reserve and
the Treasury. Two separate centers of responsibility appraise the needs of two
interrelated spheres of action. And the results for each, given a full flow of intercommunications and a genuine desire for harmonious cooperation, are greater
than any conceivable result of an enforced consolidation. Certainly there is no
country in the world today in which the independence of these two functions is
more clearly respected; yet I doubt if there is any in which the integration between monetary pohcy and debt management is more effective.
There are three areas of economic pohcy in which monetary policy and debt
management come together. First, there is that of maintaining an appropriate
level of liquidity—not only for the routine needs of the domestic economy, but
also to sustain a strong rate of economic growth—without creating a potential
inflationary hazard. The Treasury's decisions on the volume of short-term.
Government securities to be issued play a part in determining the volume of
"near-money" hquidity in the economy. The influence exerted is necessarily similar to, although, of course, much less potent than that of the Federal Reserve
in regulating the volume of bank reserves and thereby the quantity of money itself,
A second general pohcy area that is common to debt management and monetary
management is that of helping to create conditions in the credit and capital
markets which will be conducive to the most appropriate flow of funds into long-term
private investment. I need not tell this group that not only the amount, but
also the manner and the timing, of Treasury borrowing efforts in the longer-term
market can have important effects on the flow of private investment funds.
And as to the influence of Federal Reserve action—even the significance of expectations as to what that action might be—surely no elaboration is necessary.
A third important area of economic policy concerns the impact of debt management and monetary policy on our balance-of-payments position. Over the past
two years, and more, this has meant that both debt operations and monetary
actions have had to be directed, in part, toward keeping our short-term rate
structure in reasonable competitive equihbrium with rates abroad. The purpose
has not been to put a floor under rates at any particular level. Our concern is
not with absolute rate levels, but with relative levels. The aim is to keep our
short-term rates, if possible, in line with foreign short-term rates, after adjusting
for the cost of covering the forward exchange risk. The result thus far, as many
of you know, is that very httle money has flowed out of this country for interest
arbitrage over most of the past two years.
In addition, we have begun to use debt management itself as an active instrument of balance-of-payments control. In recent months, we have borrowed
from official agencies at short term in two foreign currencies—^the Swiss franc and
Itahan lira. We have converted the proceeds into doUars at an overall cost that
compared favorably with the costs of borrowing here. The incidental result has

290

19 63 REPORT OF THE SECRETARY OF THE TREASURY

also been a net absorption of excess dollars abroad that might otherwise have
ultimately been used to purchase gold here. Though what we have done is still
tentative and exploratory, we are increasingly impressed with this new dimension
of debt management—an approach originally foreseen by Russell Leffingwell,
then Assistant Secretary of the Treasury, when he asked Congress for the necessary legislative authority before the close of World War I. To be sure, however,
this is not ah approach that would be relevant to a very sizable part of our total
debt management program.
Every time a judgment is taken in debt management, however, some aspects
of all three of these areas of economic policy, as well as our various housekeeping
goals., must be weighed in the hght of all known conditions, at that particular
moment in time. Quite obviously, no single answer can produce the optimum
result every time for each of these diverse objectives. The objectives themselves
may even occasionally be in conffict. The best we can hope for, probably, is
reasonably well-balanced progress toward meeting all of these objectives, over a
period of time.
III.
Having thus briefly paraded the problems of debt management, I trust it is
now safe for me to review what we have been trying to do in debt management
during the past twenty months. Perhaps the best starting point is to examine
the economic environment within which policies were initially formulated.
In January 1961, we faced a conjuncture of a number of serious problems: a
recession which had been under way for the past half year; an inadequate rate
of growth which had been slackening for a number of years; and, as if these two
problems were not enough, we were faced with a critical balance-of-payments
problem, with world confidence in the dollar deteriorating.
In developing a policy framework which would embrace all of these problems,
we placed the central focus of our policies on encouraging and raising the level of
private investment. Increased private investment would help pull us out of the
recession. At the same time, more investment could be the key to quickening our
growth rate and reducing the continuing high rate of unemployment. And, in a
longer-range sense, through increasing the productivity of American industry,
more investment would also make the most fundamental and long-lasting contribution toward strengthening our national competitive position in the world and
thereby righting our balance of payments.
All of our policies, then—fiscal policy, tax policy, and debt management, as
well as monetary policy in its coordinate role—were oriented toward this common
goal. The joint evolution of monetary policy and debt management, which had
been under way since the summer of 1960, had two major aspects: to help create
conditions in the capital markets which would promote a large fiow of long-term
capital into productive investment while, at the same time, averting any changes
in the short-term interest rate structure which would set off significant outflows of
short-term capital seeking interest rate advantages abroad. To achieve both of
these objectives simultaneously required new operating techniques and new
kinds of emphasis in the decision-making processes of both the Federal Reserve
and the Treasury.
In monetary policy, this new policy orientation was reflected in the decision by
the Federal Open Market Committee to conduct open market operations wherever
necessary over the full maturity range of Government securities. In debt management, the new emphasis was initially reflected in the development of the
following key elements of policy:
That the Treasury would conduct the great bulk of its cash borrowing operations in short-term securities, thereby exerting a maximum of pressure to
sustain an appropriate international relationship for interest rates on Treasury
bills and the consteUation of surrounding money market instruments;
that, in ordinary refunding operations, the Treasury would largely concentrate
on short-term and intermediate-term securities in a maturity range out to
around ten years;
and that, to offset the deterioration in the maturity structure of the debt
which would otherwise have occurred, the Treasury would seek, through the
technique of advance refunding, to extend further out into the long-term area
substantial quantities of long-term debt already in the hands of the public,
but which the passage of time was moving steadily closer to the intermediate
and short maturity range.

EXHIBITS

291

In concentrating its cash financing largely in the short-term area, the Treasury
had, of course, several objectives. By placing upward pressure on short-term
yields from the supply side of the market, debt management helped enable the
Federal Reserve to expand the monetary base without sacrificing our balance-ofpayments objectives. Moreover, from the standpoint of the liquidity position
of the domestic economy, there was a positive need for an expansion in the
quantity of liquid assets to support a further increase in economic activity. In
statistical terms, the economy had apparently grown up to the excess liquidity
created during World War II, and the relationship between the money supply
and the gross national product had returned to the level which had generally
prevailed during the first thirty years of this century. In practical terms, a
number of financial and business firms were actively seeking more short-term
investments.
And at the same time, by concentrating its own cash borrowings in the shortterm area, the Treasury in effect was reserving the flow of new long-term savings
for the use of private investment in housing, industrial, and commercial plant and
equipment, and for State and local public facilities.
Of course, no matter what we think we are trying to do, for housekeeping
purposes or in the interest of broad economic policy, we also have the bedrock
problem of designing issues that will sell, will hold their place in the market, and
will make participation in the distribution of Government securities a reasonably
rewarding as well as a patriotic undertaking. The fine art of tailoring our issues
to the prevailing market has no formulas. Each actual offering is always a
combined product of the advice we receive in many ways from the market itself
(notably our splendid advisory committees), the technical expertise of our career
staffs, the lessons of recent experience, and a pinch or two of hunch and intuition.
IV.
In appraising the results of our efforts during the past twenty months, I should
start with a word on savings bonds. They account now for almost one-sixth of the
entire outstanding debt. They provide, without exposure to market risk, a
convenient opportunity for every individual to have some part in the debt financing of Government. And they pay rates of interest that are, year in and year out,
better than any alternative savings instrument that has other investment attributes of even rough comparability. Since the continued success of this program
is a vital part of the whole debt management effort, and since it depends so
heavily on the support of a volunteer program, it is gratifying that savings bonds
have kept their place in our debt structure during these recent months when the
competitive pressure from higher rates on bank deposits and savings and loan
shares, in particular, has been of unusual intensity.
In turning to the marketable debt, perhaps I can best sketch the outlines of
most of the significant developments if I focus on three visible indicators: the
behavior of interest rates, the change in the maturity structure of the Federal
debt, and the change in the ownership of the debt.
For a period that has consisted mainly of sustained economic expansion,
the interest rate behavior of the past twenty months has been most unusual.
Since January 1961, short-term interest rates have been moving within an upward-rising range, while long-term rates have remained stable or moved lower.
The yield on 3-month Treasury bills, for example, has gone up from 2Y percent
to the recent range of 2% percent to 3 percent. Yet corporate bond yields are
now at about the same level as in January 1961, when we were close to the
bottom of the recession, and rates on municipal bonds and mortgages are actually
lower than they were then. Just how mucli of this unusual behavior of interest
rates should be attributed to the influence of monetary and debt management
policies and how much would have occurred in any event, I would not venture
to say. However, one thing is clear: tbis is precisely the sort of interest rate
behavior that should have been expected to occur if the economic policy aspects
of the monetary and debt management programs of the past twenty months
were to be fulfilled.
The favorable climate in the capital markets during the past twenty months
has been reflected, as you know, in a record combined flow of long-term capital
into corporate securities, State and local government bonds, and mortgages.
The corporate sector alone has not set new records, so far as market borrowing
is concerned, but both of the others have expanded remarkably. New record
highs have been reached in the first half of 1962, with $5 billion flowing into

292

1963 REPORT OF THE SECRETARY OF THE TREASfURY

State and local government bonds and more than $10 biUion flowing into
mortgages.
Meanwhile, the total outstanding public debt has grown by $10 biUion over
the full course of the twenty months from the end of January 1961, through
September 1962. Of this, $9 billion has been in marketable issues and $1 bUlion
in nonmarketables, such as savings bonds. What has happened in the maturity
composition of these marketable issues? The total outstanding in the underone-year category has risen by almost $9 biUion, the debt in the one-to-fiveyear maturity area has dechned by almost $13 billion, and the debt maturing
beyond five years has risen by almost $13 billion. But note that, while the rise
in very short debt has been about equal to the rise in total debt, the increase
in the over-five-year debt has been 40 percent greater than the $9 billion total
increase in the inarketable debt during this period.
The decline of roughly $13 billion in the one-to-five-year debt is very significant
from the standpoint of the maturity structure of the debt. The under-one-year
debt can increase in two ways: it can be increased by deliberate action, as we
have done in order to maintain upward pressures on the bill rate, or it can increase automatically as, with the passage of time, more debt falls within the
one-year area. The substantial reduction in the quantity of debt maturing in
one to five years means that the short-term debt is under better control, since
the potential for automatic increases in the very short debt has been substantially
reduced.
We are convinced that the shifting of $13 billion of debt from the one-to-fiveyear area out beyond five years has produced a significant improvement in the
overall maturity structure of the debt. Statistically, this has been reflected
in an increase of six months in the average maturity of the debt, from four years
and six months in January 1961, to five years at the present time, the highest
level in four years.
The developments in ownership of the Government debt have been equally
interesting. While the total debt has gone up by $10 billion, and the marketable
part by $9 billion, commercial bank holdings have risen by only $1}^ billion.
The Federal Reserve has, to be sure, added about $3}^ billion to its holdings of
Government securities. This means that $5 billion, or one-half of the total
increase in the debt, has been financed outside the banking system.
The subject of financing deficits through the banking system has been much
discussed in recent weeks. That is as it should be. But some of the public
discussion has seemed to me to proceed in oversimplified terms. The issue is
not simply whether the Treasury sells securities to the banking system or not,
but whether the amount of securities that remains in the banking system becomes
so excessively large that the credit base is expanded well beyond the needs of
the economy and an inflationary potential is, thereby, created. This, I can
assure you, is a situation which iDoth the Treasury and the Federal Reserve are
able and determined to prevent. The relatively sparing use which we have made
of the commercial banking system in financing the deficit of the past twenty
months testifies, I would suggest, both to our intent and our ability to finance
any future deficits in a manner which does not generate an inflationary potential.
It is important to remember, too, that the distinction between financing a
deficit through, the banking system and financing it through savings is not a
sufficiently clear-cut basis for evaluation. For, in addition to their demand
deposit function, the commercial banks are one of the most important financial
intermediaries engaged in attracting and investing the savings of the public.
Since January 1961, time and savings deposits at commercial banks have grown
by about $21 billion. The $1.5 billion increase in commercial bank holdings of
Government securities represents only about 7 percent of this increase in time
and savings deposits.
And so far as Federal Reserve acquisitions of Government securities are concerned, these have all been an incidental byproduct of providing an adequate,
but noninflationary, reserve base for the commercial banking system. I would
indeed suggest that there is no evidence—in terms of the expanding money
supply, the overall growth of bank credit, or in the broader context of price
behavior in the economy—that Federal Reserve credit has grown too much.
V.
- To sum up the record of the past twenty months, though there is obviously
much more we would like to have done, we believe that we have had some success

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293

in working toward both our economic policy and housekeeping objectives.
Throughout the period, we have managed to avoid the sort of persistent, sizable
gaps between short-term intefrest rates in the United States and rates abroad
which would have encouraged substantial outflows of short-term capital. At
the same time, the avaUability of funds and long-term interest rates have remained at levels consistent with the promotion of a large domestic flow of investment capital.
While the rate of increase in corporate investment has not been up'to our
hopes and expectations this year, it does not appear that the flow of corporate
investment is being constrained by thejevel of money rates or the availability
of long-term funds. So far as Government is concerned, it is probably in the
area of tax policy that we must look for further means to stimulate corporate
investment.
In pursuing the various economic policy objectives, the Treasury has not
sacrified its longer-term interest in a balanced maturity structure. The maturity
structure of the debt is, in fact, despite a rise of $10 billion in the outstanding
debt, in better balance than it was twenty months ago—a result largely attributable to carrying forward the creative innovations in debt management introduced by the preceding Treasury administration.
Looking to the future, the only generalization that can be made with absolute
certainty is that debt management policy, like monetary policy, must adapt to
changing circumstances. It must continually evolve in response to changes in
the liquidity needs and the investment requirements of our domestic economy,
changes in our balance-of-payments position, and modifications in the overall
policy mix through which the governmental part of the solutions to our economic
problems may be sought.
From time to time, new debt management procedures may be needed to meet
both our economic policy objectives and our housekeeping objectives. In recent
months, we have tentatively introduced borrowing arrangements with governmental bodies abroad. We have already announced our intention to test another
new procedure in the capital market here—the sale of long-term bonds on the
basis of competitive bidding. And as our experience grows, as conditions alter,
and experts such as those gathered here supply us with further suggestions,
there wUl be further changes in the techniques and the policies that guide debt
management and its relationship to the money and capital markets in the United
States.

Taxation Developments
EXHIBIT 18.^—Message from the President, January 24,1963, relative to a revision
of our tax structure
To the Congress of the United States:
The most urgent task facing our Nation at home today is to end the tragic
waste of unemployment and unused resources—to step up the growth and vigor .
of our national economy—to increase job and investment opportunities—to
improve our productivity—and thereby to strengthen our Nation's ability to
meet its worldwide commitments for the defense and growth of freedom. The
revision of our Federal tax system on an equitable basis is crucial to the achievement of these goals.
Originally designed to hold back war and postwar inflation, our present income
tax rate structure now holds back consumer demand, initiative, and investment.
After the war and during the Korean conflict, the outburst of civilian demand
and inflation justified the retention of this level and structure of rates. But it
has become increasingly clear—particularly in the last 5 years—that the largest
single barrier to full employment of our manpower and resources and to a higher
rate of economic growth is the unrealistically heavy drag of Federal income
taxes on private purchasing power, initiative, and incentive. Our economy is
checkreined today by a war-born tax system at a time when it is far more in need
of the spur than the bit.
My recommendation for early revision of our tax structure is not motivated
by any threat of imminent recession—^nor should it be rejected by any fear of
inflation or of weakening the dollar as a world currency. The chief problem
confronting our economy in 1963 is its unrealized potential^—^slow growth, underinvestment, unused capacity, and persistent unemployment. The result is

294

1963 REPORT OF THE SECRETARY OF THE TREASURY

lagging wage, salary, and profit income, smaller take-home pay, insufficient
productivity gains, inadequate Federal revenues, and persistent budget deficits.
One recession has followed another, with each period of recovery and expansion
fading out earlier than the last. Our gains fall far short of what we could do and
need to do, measured both in terms of our past record and the accomplishments
of our overseas competitors.
Despite the improvements resulting from last year's depreciation reform and
investment credit—which I pledged 2 years ago would be only a first step—^our
tax system still siphons out of the private economy too large a share of personal
and business purchasing power and reduces the incentive for risk, investment,
and effort—-thereby aborting our recoveries and stifling our national growth
rate.
In addition, the present tax code contains special preferences and provisions,
all of which narrow the tax base (thus requiring higher rates), artificially distort
the use of resources, inhibit the mobility and formation of capital, add complexities and inequities which undermine the morale of the taxpayer, and make
tax avoidance rather than market factors a prime consideration in too many
economic decisions.
I am therefore proposing the following:
(1) Reduction in individual income tax rates from their present levels of
20 to 91 percent, to a range of 14 to 65 percent—^the 14-percent rate to apply
to the first $2,000 of taxable income for married taxpayers filing joint returns, and to the first $1,000 of the taxable income of single taxpayers;
(2) Reduction in the rate of the corporate income tax from 52 to 47
percent;
(3) Reversal of the corporate normal and surtax rates, so that the tax
rate applicable to the first $25,000 of corporate income would drop from
30 to 22 percent, so as to give particular encouragement to small business;
(4) Acceleration of taxpayments by corporations with anticipated annual
liabilities of more than $100,000, to bring the corporate payment schedule
to a current basis over a 5-year transition period;
(5) Revision of the tax treatment of capital gains, designed to provide
a freer and fuller flow of capital funds and to achieve a greater equity;
(6) Removal of certain inequities and hardships in our present tax structure; and
(7) Broadening of the base of the individual and corporate income taxes,
to remove unwarranted special privileges, correct defects in the tax law,
and provide more equal treatment of taxpayers—^thereby permitting a
larger reduction in tax rates than would otherwise be possible and making
possible my proposals to alleviate hardships and inequities.
The tax program I am recommending for enactment in 1963 would become
fully effective by January 1, 1965. The rate reductions provide a cut in tax
liabilities of $13.6 billion—-$11 billion for individuals and $2.6 billion for corporations. Other adjustments, some of which lose and some of which gain
revenue, would, on balance, produce a revenue gain of $3.4 billion, leaving a
net reduction of $10.2 billion. Accelerating tax payments of large corporations
to a current basis over a 5-year transition period would reduce the effect on tax
receipts to $8.7 bUlion. These figures do not include offsetting revenue gains
which would result from the stimulating effects of the program on the economy
as a whole and on.the level of taxable income, profits, and sales—gains which
may be expected to increase as the economy recaptures its vigor, and to lead to
higher total tax receipts than would otherwise be realized.
I. BENEFITS TO THE ECONOMY

Enactment of this program will help strengthen every segment of the American
economy and bring us closer to every basic objective of American economic policy.
Total output and economic growth will be stepped up by an amount several
times as great as the tax cut itself. Total incomes will rise—billions of dollars
more will be earned each year in profits and wages. Investment and productivity
improvement will be spurred by more intensive use of our present productive
potential; and the added incentives to risk taking will speed the modernization
of American industry. Additional dollars spent by consumers or invested by
producers will lead to more jobs, more plant capacity, more markets, and thus
still more dollars for consumption and investment. Idle manpower and plant

EXHIBITS

295

capacity make this possible without inflation; and strong and healthy economic
activity is the best insurance against future recessions.
Unemployment will be reduced, as firms throughout the countr}^ hire new
workers to meet the new demands released by tax reduction. The economic
prospects of our depressed areas will improve as investors obtain new incentives
to create additional productive facilities in areas of labor surplus. Pressure for
the 35-hour week, for new import barriers, or for other shortsighted and restrictive
measures will be lessened. Cornpanies and workers will find it easier to adjust to
import competition. Low-income farmers will be drawn to new jobs which offer
a better livelihood. The retraining of workers with obsolete skills will proceed
more quickly and efficiently in a full employment climate. Those presently
employed will have greater job security and increased assurance of a full workweek.
Price stability can be maintained. Inflationary forces need not be revived by
strengthening the economy at a time of a substantial unemployment and unused
capacity with a properly constructed program of tax reduction. With the gains
in disposable income of wage earners there should be less pressure for wage increases in excess of gains in productivity—and with increased profits after tax
there should be less pressure to raise prices. Inflationary expectations have
ended; monetary tools are working well; and the increasing productivity and
modernization resulting from new levels of investment will facilitate a reduction
of costs and the maintenance of price stability. This Nation is growing—its needs
are growing—and tax revision now will steadily increase our capacity to meet
those needs at a time when there are no major bottlenecks in manpower, plant,
or resources, no emergencies straining our reserves of productive power, and no
lack of vigorous competition from other nations. Nor need anyone fear that
the deficit will be financed in an inflationary manner. The balanced approach
that the Treasury has followed in its management of the public debt can be
relied upon to prevent any inflationary push.
Our balance of payments should be improved by the fiscal policies reflected in
this program. Its enactment—which will make investment in America more
profitable, and which will increase the efficiency of American plants, thus cutting
costs and improving our competitive position in world trade—will provide the
strongest possible economic backing for the dollar. Lagging growth contributes
to a lack of confidence in the dollar, and the movement of capital abroad. Accelerated growth will attract capital to these shores and bolster our free world leadership in terms of both our strength and our example. Moreover, a nation operating
closer to capacity will be freer to use monetary tools to protect its international
accounts, should events so require.
Consumers will convert a major percentage of their personal income tax savings
into a higher standard of living, benefiting their own families while generating
stronger markets for producers. Even modest increases in take-home pay enable
consumers to undertake larger periodic payments on major purchases, as well as
to increase purchases of smaller items—and either type of purchase leads to further
income and employment.
Investment Avill be expanded, as the rate of return on capital formation is
increased, and as growing consumer markets create a need for new capacity. It
is no contradiction to say that the best means of increasing investment today is
to increase consumption and market demand—and reductions in individual tax
rates will do this. In addition, reducing the corporate tax from 52 percent to
47 percent will mean not only greater incentives to invest but more internal funds
available for investment. Reducing the maximum individual income tax rate
from 91 percent to 65 percent makes more meaningful the concept of additional
reward and incentive for additional initiative, effort, and risk taking. A rising
level of consumer demand will enable the more than $2 billion worth of investment
incentives provided by last year's tax actions (the depreciation reform and investment credit) to achieve their full effect. In addition, tax reform will reduce
those distortions of effort which interfere with a more efficient allocation of
investment funds. The cumulative effect of this additional investment is once
again more income, therefore more consumer demand, and therefore still more
investment.
State and local governments, hard pressed by a considerably faster rise in
expenditures and indebtedness than that experienced at the Federal level, will
also gain additional revenues without increasing their own tax rates as national
income and production expand.
707-4S4—64

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19 6 3 REPORT OF T H E
II.

SECRETARY OF THE

TREASURY

BENEFITSITOITHE TAXPAYER

T h e increased purchasing power a n d strengthened incentives which will move
us toward our national goals will reach to all corners of our population and to all
segments of our business community.
Wage earners a n d low-income families will gain an immediate increase in
take-home pay as soon as t h e tax program is enacted and new withholding rates
go into effect. While tax rates are to be reduced for every bracket, t h e largest
proportionate tax reduction properly goes to those a t t h e b o t t o m of t h e economic
ladder. Accordingly, in addition to lowering rates in t h e lower brackets, I urge
t h a t t h e first bracket be split into two groups, so t h a t married couples with
''adjusted gross incomes" of $2,000 or less (or single persons with $1,000 or less)
receive a 30-percent reduction in their tax rate. Some one-third of aU taxpayers
are in this group—including many of t h e very old and very young whose earning
powers are below average. Many of t h e structural revisions proposed below are
also designed t o meet hardships which r a t e reduction alone will not alleviate—
hardships to low-income famihes and individuals, to older workers, a n d to working
mothers. This program is far preferable to an increase in exemptions, because,
with a far smaller loss of revenue, it focuses t h e gains far more sharply on those
who need it most a n d will spend it quickly, with benefits to t h e entire economy.
Middle a n d higher income families are both consumers a n d investors—and t h e
present rates ranging up to 91 percent not only check consumption but discourage
investment, a n d encourage t h e diversion of funds a n d effort into activities aimed
more a t t h e avoidance of taxes t h a n t h e efficient production of goods. T h e
oppressive impact of those high rates gave rise to many of t h e undue preferences
in t h e present law—and both t h e high rates a n d t h e preferences should be ended
in t h e new law. Under present conditions, t h e highest r a t e should not exceed 65
percent, a reduction of 29 percent from t h e present rate—accompanied by appropriate reductions in t h e middle income ranges. This will restore an idea t h a t has
helped m a k e our country great—that a person who devotes his efforts to increasing
his income, thereby adding to t h e Nation's income and wealth, should be able to
retain a reasonable share of t h e results.
Businessmen a n d farmers—everyone whose income depends directly upon
selling his products or services to t h e public—will benefit from t h e increased
income and purchasing power of consumers and t h e substantial reduction in
taxes on profits. T h e a t t a i n m e n t of full employment and full capacity is even
more i m p o r t a n t to profits t h a n t h e reduction in corporate taxes; for, even in t h e
absence of such reduction, profits after taxes would be a t least 15 percent higher
today if we were operating a t full employment. E n a c t m e n t of a program aimed
a t helping reach full employment and capacity use which also reduces t h e Government's interest in corporate profits to 47 percent instead of 52 percent, t h u s
lowering corporate t a x liabilities by a further $2.6 billion a year—while increasing
consumer demand by some $8 billion a year—will surely give American industry
new incentive to expand production and capacity.
Small businessmen with net income of less t h a n $25,000, who constitute over
450,000 of t h e N a t i o n ' s 585,000 corporations, will, under this program, receive
greater reductions in their corporation taxes t h a n their larger competitors. Under
m y program, beginning this year, t h e first $25,000 of corporate taxable income
will be subject to a t a x r a t e of 22 percent rather t h a n 30 percent, a reduction of
almost 27 percent. This change is i m p o r t a n t to those small corporations which
have less ready access to t h e capital markets, m u s t depend more heavily for
capital on internally generated funds, and are generally at a financial and competitive disadvantage. Unincorporated businesses, of course, will benefit from
t h e reduction in individual income taxes.
III. T H E T A X PROGRAM AND THE FEDERAL BUDGET
A balanced Federal budget in a growing full-employment economy will be
most rapidly and certainly achieved by a substantial expansion in national
income carrying with it t h e needed Federal revenues—the kind of expansion t h e
proposed t a x revision is designed to bring about. Within a few years of t h e
enactment of this program, Federal revenues will be larger t h a n if present t a x
rates continue to prevail. Full employment, moreover, will m a k e possible t h e
reduction of certain Government expenditures caused by unemployment. As

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297

the economy climbs toward full employment, a substantial part of the increased
tax revenue thereby generated will be applied toward a reduction in the Federal
deficit.
As I have repeatedly emphasized, our choice today is not between a tax cut and
a balanced budget. Our choice is between chronic deficits resulting from chronic
slack, on the one hand, and transitional deficits temporarily enlarged by tax
revision designed to promote full employment and thus make possible an ultimately balanced budget. Because this chronic slack produces inadequate
revenues, the projected administrative deficit for fiscal 1964—without any tax
reduction, leaving the present system intact—would be $9.2 biUion. The inclusion of the tax program—after the ''feed back" in revenues from its economic
stimulus and the acceleration of corporate tax payments—will add only an additional $2.7 billion loss in receipts, bringing the projected deficit in the administrative budget to $11.9 billion. The issue now is whether the strengthening of
our economy which will result from the tax program is worth an addition of
$2.7 billion to the 1964 deficit.
If the tax brake on our economy is not released, the slack will remain, Federal
revenues will lag, and budget deficits will persist. In fact, another recession
would produce a record peacetime deficit that would far exceed $11.9 billion, and
without the positive effects of tax reduction. But once this tax brake is released,
the base of taxable income, wages, and profits will grow—and a temporary increase
in the deficit will turn into a permanent increase in Federal revenues. The
purpose of cutting taxes, I repeat, is not to create a deficit but to increase investment, employment, and the prospects for a balanced budget.
It would be a grave mistake to require that any tax reduction today be offset
by a corresponding cut in expenditures. In my judgment, I have proposed the
minimum level of Federal expenditures needed for the security of the Nation,
for meeting the challenge facing us in space, and for the well-being of our people.
Moreover, the gains in demand from tax reduction would then be offset—or more
than offset—by the loss of demand due to the reduction in Government spending.
The incentive effects of tax reduction would remain, but total jobs and output
would shrink as Government contracts were cut back, workers were laid off, and
projects were ended.
On the other hand, I do not favor raising demand by a massive increase in
Government expenditures. In today's circumstances, it is desirable to seek
expansion through our free market processes—to place increased spending power
in the hands of private consumers and investors and offer more encouragement to
private initiative. The most effective policy, therefore, is to expand demand and
unleash incentives through a program of tax reduction and reform, coupled with
the most prudent possible policy of public expenditures.
To carry out such a policy, the fiscal 1964 budget reduces total outlays other
than defense, space, and interest charges below their present levels—despite
the fact that such expenditures have risen at an average rate of 7.5 percent
during the last 9 years. Federal civilian employment under this budget proyides
for the same number of people to serve every 100 persons in our population as
was true when this administration took office, a smaller ratio than prevailed
10 years ago. The public debt as a proportion of our gross national product
will fall to 53 percent, compared to 57 percent when this administration took
office. Last year the total increase in the Federal debt was only 2 percent—
compared to an 8-percent increase in the gross debt of State and local governments. Taking a longer view, the Federal debt today is only 13 percent higher
than it was in 1946—while State and local debt increased over 360 percent and
private debt by 300 percent. In fact, if it were not for Federal financial assistance
to State and local governments, the Federal cash budget would actually show a
surplus. Federal civilian employment, for example, is actually lower today
than it was in 1952, while State and local government employment over the same
period has increased 67 percent. This administration is pledged to enforce
economy and efficiency in a strict control of expenditures.
In short, this tax program will increase our wealth far more than it increases
our public debt. The actual burden of that debt—as measured in relation to
out total output—will decline. To continue to increase our debt as the result
of inadequate earnings is a sign of weakness. But to borrow prudently in order
to invest in a tax revision that will greatly increase our earning power can be a
source of strength.

298
IV.

19 63 REPORT OF THE SECRETARY OF THE TREASURY
R E Q U I R E M E N T S FOR E F F E C T I V E ACTION AND F I S C A L

RESPONSIBILITY

Fully recognizing t h a t it is b o t h desirable a n d necessary for t h e Congress to
exercise its own discretion in t h e actual drafting of a t a x bill, I recommend t h e
application of t h e foUowing basic principles in this vital t a s k :
A. The entire tax revision program should be promptly enacted as a single comprehensive bill.—The sooner t h e program is enacted, t h e sooner it will make its
impact upon t h e economy, providing additional benefits and further insurance
against recession. While t h e full r a t e reduction program m u s t t a k e effect gradually for t h e reasons stated below, I a m proposing t h a t t h e individual tax rates for
1963 income be reduced to a range from 18.5 percent to 84.5 percent, with a cut
in t h e withholding r a t e from t h e present 18 percent to 15.5 percent becoming
effective upon enactment of t h e law. This will increase t h e disposable income
of consumers at an annual r a t e of nearly $6 billion a year in t h e second half of 1963.
Also t h e r a t e of corporate tax on t h e first $25,000 of net income would be reduced
from 30 percent to 22 percent for t h e year 1963. Equally i m p o r t a n t is action in
1963 on t h e additional individual and corporate r a t e reductions proposed for 1964
a n d 1965. T h e p r o m p t e n a c t m e n t of a bill assuring this combination of realized
a n d prospective t a x reductions will improve t h e business climate and public
psj^chology, induce forward business planning, and increase individual incentives.
I t will enable investors and producers to act this year on t h e basis of solid expectations of increased m a r k e t demand and a higher r a t e of r e t u r n . To delay decisive
action beyond 1963 risks t h e loss of opportunity and initiative which this year
uniquely offers.
B. The net amount of tax reduction enacied should keep within ihe limits of economic sufficiency and fiscal responsibihty.—Too small a t a x cut would be a waste,
gaining us little b u t further deficits. I t could not cope with t h e t a s k of closing
a $30 to $40 billion gap in our economic performance. B u t the net t a x cut of over
$10 billion envisioned by this program can lead t h e way to strong economic expansion and a larger revenue yield.
On t h e other hand, responsible fiscal policy requires t h a t we avoid an overly
sharp drop in budgetary receipts for fiscal 1964-65, and t h a t we hold t h e temporary
increase in t h e deficit below t h e level which in t h e past has proved both manageable and compatible with price stability. Therefore, t o make these reductions
possible, I propose a p r o g r a m : (a) to phase t h e t a x reductions over a 3-year period,
with t h e final step effective J a n u a r y 1, 1965; (b) to couple these reductions,
amounting to $13.6 billion, with selected structural changes and reforms gaining
$3.4 billion net in revenues; and (c) to offset t h e revenue loss still further during,
t h e next 5 years by gradually moving t h e t a x p a y m e n t s of larger corporations to a
more current time schedule without any change in their t a x liabilities.
C. Tax reduction and structural reform should be considered and enacted as a
single integrated program.—My recommendations for r a t e reductions of $13.6
billion are made in t h e expectation t h a t selected structural changes and reforms
will be adopted, adding on balance $3.4 billion in revenue and resulting in a net
reduction in t a x liabilities of no more t h a n $10.2 billion. Larger cuts would create
a larger budget deficit and t h e possibility of renewed inflationary pressures.
Therefore, should t h e Congress make any significant reductions in t h e revenues
t o be raised b y structural changes, these reductions would have to be offset by
substantially equivalent increases in revenue, and this could only be achieved by
sacrificing either some of t h e i m p o r t a n t r a t e reductions I have proposed or some
of t h e measures I am recommending to relieve hardship and promote growth.
On t h e other hand, an a t t e m p t t o solve all t a x problems at once by t h e inclusion
of even more sweeping reforms might impair t h e effect of r a t e reduction. This
program is designed to achieve broad acceptance and p r o m p t enactment.
Some reforms will improve t h e t a x structure by reducing certain liabilities.
Others will broaden t h e t a x base by raising liabiUties and wiU meet with resistance
from those Avho benefit from existing preferences. B u t if this program of t a x
reduction is aimed at making t h e most of our economic potential, it should be
remembered t h a t these preferences a n d special provisions also restrict our r a t e
of growth and distort t h e flow of investment. They discourage t a x p a y e r cooperation and compliance b y adding inequities and complexities t h a t affect similarly
situated t a x p a y e r s in wholly different ways. They divert energies from productive
activities t o t a x avoidance—and from more valuable or efficient undertakings t o
less valuable undertakings with lower t a x consequences.
Some departures from uniform tax t r e a t m e n t are required to promote overriding
national objectives. B u t taxpayers with equal incomes who are burdened with

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299

unequal t a x liabUities are certain to seek still further preferences and exceptions—
a n d t o use their resources where t h e y yield t h e greatest returns after t a x even
though producing less before taxes, t h u s lowering our national o u t p u t a n d
efficiency.
Tax reduction is urgently needed to spur the growth of our economy—but both
the fruits of growth and the burdens of the resulting new tax structure should be
fairly shared by all. For t h e present patchwork of special provisions lightens t h e
load on some by placing a heavier burden on others. Because t h e y reduce t h e
t a x base, t h e y compel a higher tax r a t e — a n d the reduction in the t o p rate from 91
percent t o 65 percent, which in itself is a major reform, cannot be justified if these
other forms of perferential tax t r e a t m e n t remain.
The resistance t o t a x reform should be less when it is coupled with more-thanoff'setting t a x reductions benefiting all brackets—and t h e support for t a x reform
should be greater when it is a necessary condition for greater tax reduction.
Reform, as mentioned earlier, includes top-to-bottom rate reduction as well as
structural change—and t h e two are inseparable prerequisites to the achievement
of our economic and equity objectives. The new rates should be both lower and
more widely applicable—for the excessively high rates and various tax concessions
have in the past been associated with each other, and they should be eliminated
together.
In short, these changes in our t a x structure are as essential to maximizing our
growth and use of resources as rate reduction, a n d make a greater rate reduction
possible. The broader t h e Congress can extend the tax base, t h e lower it can
reduce the t a x rates. B u t to the extent t h a t the erosion of our tax base by special
preferences is not reversed to gain some $3.4 billion net, Congress will have t o
forgo—for reasons of both equity and fiscal responsibility—either corporate or
personal rate reductions now contained in the program.
V.

P R O P O S A L S FOR R A T E R E D U C T I O N

The central t h r u s t of this proposed t a x program is contained in the most
thorough overhaul in tax rates in more t h a n 20 years, substantially reducing rates
at all levels, for both individuals and corporations, by a total of $13.6 billion.
While t h e principal components of m y proposals for rate reduction have been
alluded to in the foregoing discussion, it might be well to specify t h e m in detaU
here.
1. Reduction in individual income t a x rates. Personal t a x liabilities will be
decreased by $11 billion through a reduction in rates from their present levels of
20, 91 percent to a range of 14, 65 percent, with appropriate reductions generally
averaging more t h a n 20 percent a n d covering every bracket. The lowest 14percent rate would apply to the first $2,000 of taxable income for married taxpayers
filing joint returns, and to the first $1,000 of t h e taxable income of single taxpayers—a reduction of 30 percent in the taxes levied on this new bracket, in which
falls t h e entire taxable income of one-third of all taxpayers. The new m a x i m u m
rate of 65 percent would enable those individuals who now keep only 9 cents out
of each additional dollar earned to retain 35 cents in t h e future. I a m attaching
tables sho\^dng the proposed rate schedules for married and