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Annual Report
ofthe

Secretary of the Treasury
on the

State of the Finances
For the Fiscal Year Ended June 30, 1965




TREASURY DEPARTMENT
DOCUMENT NO. 3236
Secretary

UNITED STATES

GOVERNMENT

P R I N T I N G OFFICE, WASHINGTON

: 1966

For sale by the Superintendent of Documents, U.S. Government Printing Office
Washington, D.C, 20402 - Price ^2.50 (paper cover)




JHEETO

HI
10

fi
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 pubhc
.
Corporations and other business-type activities of the Federal Government.
Account of the Treasurer of the United States
PubHc debt management and ownership
Financing operations
Ownership of Federal securities
.
Taxation developments
International financial affairs..
^
ADMINISTRATIVE REPORTS
Management improvement program
Comptroller of the Currency, Office of the
Customs, Bureau of
Director of Practice, Office of the
Domestic Gold and Silver Operations, Office of
Engraving and Printing, Bureau of
Fiscal Service
.
Accounts, Bureau of_
.
Pubhc Debt, Bureau of the
Treasurer of the United States, Office of the
Foreign Assets Control, Office of
.
Internal Revenue Service
International Affairs, Office of the Assistant Secretary for
Mint, Bureau of the
Narcotics, Bureau of
.
^
United States Coast Guard
United States Savings Bonds Division
United States Secret Service

3
4
4
6
10
11
11
11
12
12
13
13
14
15
17
20
29
34
49
69
73
78
91
92
93
98
98
104
108
114
115
129
130
137
142
154
157

'.

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

Treasury Notes and Treasury Bonds Offered and Allotted
1. Treasury notes
2. Treasury bonds

165
172

Treasury Bills Offered and Tenders Accepted
;^>^

3. Treasury bills

_...

189

Guaranteed Debentures Called
4. Calls for partial redemption, before maturity, of insurance fund and
home improvement account debentures .




III

200

IV

CONTENTS
Regulations
Page

5. Revision, December 4, 1964, of Department Circular No. 853, regulations governing restrictive endorsements of United States bearer
securities
6. Third revision, December 23, 1964, of Department Circular No. 300,
general regulations with respect to United States securities
7. Ninth revision, December 23, 1964, of Department Circular No. 530,
regulations governing United States savings bonds
.
8. Sixth revision, December 23, 1964, of Department Circular No. 653,
offering of United States savings bonds. Series E
9. Fifth amendment, December 23, 1964, of Department Circular No.
750, regulations governing payments by banks and other financial
institutions in connection with the redemption of United States
savings bonds
:
10. Third revision, December 23, 1964, of Department Circular No. 905,
offering of United States savings bonds. Series H

206
208
236
261

269
269

Legislation
11. An act to provide for a temporary increase in the public debt limit
set forth in section 21 of the Second Liberty Bond Act

274

FINANCIAL POLICY

12. Statement by Secretary of the Treasury Dillon, February 22, 1965,
before the Joint Economic Committee
13. Remarks by Secretary of the Treasury Dillon, October 27, 1964,
before the 90th annual convention of the American Bankers Association, on fiscal and economic policies
14. Remarks by Secretary of the Treasury Dillon, March 19, 1965, before
the 13th annual monetary conference of the American Bankers
Association, Princeton, N.J., on capital markets, interest rates,
and balance of payments
15. Remarks by Secretary of the Treasury Dillon, March 26, 1965, before
the American Bankers Association Symposium on Federal Taxation, on fiscal and tax policy
:
...
16. Remarks by Secretary of the Treasury Fowler, April 17, 1965, before
the annual convention of the American Society of Newspaper
Editors, on economic policy
17. Other Treasury testimony published in hearings before congressional committees, July 1, 1964-June 30, 1965

274
280

285
289
293
297

MONETARY DEVELOPMENTS

18. Statement by Secretary of the Treasury Dillon, February 1, 1965,
before the House Committee on Banking and Currency, on H.R.
3818, an act to eliminate the provision of existing law that Federal
Reserve banks hold gold certificates equivalent to at least 25 percent of their own deposit liabilities
•__
19. An act to eliminate the requirement that Federal Reserve banks
maintain certain reserves in gold certificates against deposit liabilities
.
20. Message from the President, June 3, 1.965, relative to the coinage
program
21. Statement by Secretary of the Treasury Fowler, June 4, 1965, before
the House Banking and Currency Committee, on the .President's
coinage and silver proposals
,22. Statement by Leland Howard, Director, Office of Domestic Gold and
Silver Operations, June 8, 1965, before the House Committee on
Interior and Insular Affairs, on silver policy
23. An act to provide for the coinage of the United States
24. Other Treasury testimony published in hearings before congressional
committees, July 1, 1964-June 30, 1965
.

297
302
302
307
312
316
321

PUBLIC DEBT MANAGEMENT

25. Statement by Secretary of the Treasury Fowler, June 15, 1965, before
the Senate Finance Committee, on the debt limit



321

CONTENTS

^

. V
Page

26. Remarks by Under Secretary of the Treasury for Monetary Affairs
Roosa, November 19, 1964, before the Bankers Club of Chicago,
on debt management, liquidity, and monetary stability
27. Remarks by Under Secretary of the Treasury for Monetary Affairs
Deming, June 8, 1965, at the National Mortgage Banking Conference of the INlortgage Bankers Association of America, Minneapolis, Minn., on debt management and the long-term capital
market
28. Remarks by Deputy Under Secretary of the Treasury for Monetary
Affairs Volcker, IVIarch 9, 1965, before the North Texas Industrial
Payroll Savings Bond Campaign, Dallas, Tex., on debt management and the savings bond program
29. Other Treasury testimony pulDhshed in hearings before congressional
committees, July 1, 1964-June 30, 1965

324

329

333
336

TAXATION DEVELOPMENTS

30. Message from the President to the Congress, May 17, 1965, transmitting proposed recommendations relative to excise and fuel
taxes
336
31. Statement by Secretary of the Treasury Fowler, June 8, 1965, before
the Senate Finance Committee, on H.R. 8371, the Excise Tax
Reduction Act of 1965
344
32. Statement by Assistant Secretary of the Treasury Surrey, June 8,
1965, before the Senate Finance Committee, on H.R. 8371, the
Excise Tax Reduction Act of 1965
-,
347
33. Statement by the President, June 21, 1965, at the signing .of the excise
tax reduction bill
351
34. Statement by Secretary of the Treasury Fowler, June 30, 1965, before
the Committee on Ways and Means of the House of Representatives, on H.R. 5916, a bill to reduce tax barriers to foreign
investment
.
• 352
35. Press release, February 19, 1965, on liberalization of depreciation
rules
.
357
36. Statement by Secretary of the Treasury Dillon, July 21, 1964, before
Subcommittee No. 1 of the Select Committee on Small Business of
the House of Representatives, on tax-exempt foundations
361
37. Introduction and summary of U.S. Treasury Department report on
private foundations, February 2, 1965
364
38. Other Treasury testimony pubhshed in hearings before congressional
committees, July 1, 1964-June 30, 1965
369
INTERNATIONAL FINANCIAL AND MONETARY DEVELOPMENTS

39. Excerpts from remarks by Secretary of the Treasury Dillon, February
17, 1965, before the Government-Industrial Conference of the
National Industrial Conference Board
40. Statement by Secretary of the Treasury Dillon, March 9, 1965, before
the Subcommittee on International Finance of the Senate Banking
and Currency Committee
41. Remarks by Under Secretary of the Treasury for Monetary Affairs
Roosa, September 28, 1964, before the sixth annual meeting of the
National Association of Business Economists, on the meaning of
international financial cooperation
42. Remarks by Under Secretary of the Treasury for Monetary Affairs
Roosa, October 14, 1964, at the conference on 'Tnternational
Financing—1964" of the National Industrial Conference Board,
Inc., on the future of the international monetary system
43. Remarks by Under Secretary of the Treasury for IVtonetary Affairs
Deming, April 29, 1965, at the Ohio State University, in connection
with "Distinguished Lectures in Monetary Policy"
44. Excerpts from remarks by Under Secretary of the Treasury for Monetary Affairs Deming, May 18, 1965, at the 43d annual meeting of
the Bankers Association for Foreign Trade, on the U.S. balance of
payments—problem and program
45. Excerpts from remarks by Under Secretary of the Treasury for Monetary Affairs Deming, June 22, 1965, at the annual convention of the
Washington State Bankers Association, on international banking
in^relation to the balance of payments and international liquidity



370
373

379

385
393

399

403

VI

CONTENTS
Page

46. Remarks by Assistant Secretary of the Treasury for I n t e r n a t i o n a l
Affairs Trued, M a y 18, 1965, before t h e Financial Analysts Federation 18th annual convention, on the interest equalization tax
47. Remarks by D e p u t y Under Secretary of the Treasury for M o n e t a r y
Affairs Volcker, J u n e 8, 1965, before t h e Forecasting Conference of
the Chicago Chapter of the American Statistical Association, on
critical factors in the balance-of-payments problems
48; Treasury and Federal Reserve foreign exchange operations, M a r c h August 1964
49. Treasury and Federal Reserve foreign exchange operations, September
1964-February 1965
'.
.-..
50. Press Release, July 23, 1964, announcing renewal of s t a n d b y arrangem e n t with t h e International Monetary F u n d
51. Press Release, July 30, 1964, announcing Treasury rescheduling of
Brazilian obligations
52. Press Release, August 10, 1964, on U.S. program of assistance for t h e
Dominican Republic
53. Press Release, September 1, 1964, announcing the third U.S. drawing
from t h e International Monetary F u n d
54. Press Release, September 30, 1964, announcing t h e fourth U.S. drawing from the International Monetary F u n d
55. Press Release, November 25, 1964, on assistance to the United
Kingdom
56. Press Release, December 7, 1964, announcing a U.S. drawing in Germ a n marks from the I n t e r n a t i o n a l M o n e t a r y F u n d
57. Press Release, December 16, 1964, containing t h e text of a communique on t h e Ministerial Meeting of the Group of Ten
58. Press Release, February 4, 1965, announcing the signing of an exchange agreement by t h e United States and Chile
59. Press Release, February 4, 1965, on President de Gaulle's s t a t e m e n t
on t h e gold s t a n d a r d
60. Press Release, February 10, 1965, on Treasury actions following t h e
President's Balance-of-Payments Message
61. Press Release, February 23, 1965, announcing t h e signing of a new
exchange agreement between t h e United States a n d Brazil
62. Press Release, M a r c h 22", 1965, announcing the first U.S. drawing in
1965 from t h e I n t e r n a t i o n a l M o n e t a r y F u n d _ .
63. Press Release, April 6, 1965, announcing t h a t t h e B a h a m a s , Bermuda,
Ireland, Kuwait, and Portugal are to be made subject to interest
equahzation t a x
.
64. Press Release, Maj^ 20, 1965, announcing t h a t U.S. citizens m a y b u y
Indian rupees Owned by t h e U.S. Government
65. Press Release, J u n e 16, 1965, announcing t h e intention of France to
m a k e a further p r e p a y m e n t on its d e b t to t h e United States
66. S t a t e m e n t on discussions held J u n e 29, 1965, by Chancellor of t h e
Exchequer James Callaghan of Great Britain and Secretary of t h e
Treasury H e n r y H , Fowler a t t h e U.S. Treasury
67. Press Release, July 1, 1965, announcing t h e consent of the United
States to an increase in its quota in t h e International M o n e t a r y
Fund
.
68. Other Treasury testimony pubhshed in hearings before congressional
committees, July 1, 1964-June 30, 1965
.
.

408

412
417
429
439
439
439
440
440
441
441
441
442
442
442
444
444
444
445
445
446
447
447

ORGANIZATION AND PROCEDURE

69. Secretaries, Under Secretaries, General Counsels, Assistant Secretaries, and D e p u t y Under Secretaries for M o n e t a r y Affairs serving
in t h e Treasury D e p a r t m e n t from September 11, 1789, to J a n u a r y
20, 1965, and the Presidents under whom they served
70. Treasury D e p a r t m e n t orders relating to organization and p r o c e d u r e .

449
458

ADVISORY COMMITTEES

71. Advisory committees utilized b y t h e Treasury D e p a r t m e n t under
Executive Order 11007

465

TABLES
Bases of tables
Description of accounts relating to cash operations



485
486

CONTENTS

VII

SUMMARY OF FISCAL OPERATIONS
Page

1. Summary of fiscal operations, fiscal years 1940-65 and monthly 1965.

488

RECEIPTS AND EXPENDITURES

2. Receipts and expenditures, fiscal years 1789-1965
.
3. Refunds of receipts and transfers to trust funds, fiscal years 1931-65.
4. Administrative budget receipts and expenditures, fiscal years 1963,
1964, and 1965
5. Trust receipts and expenditures, fiscal years 1963, 1964, and 1965
6. Investments in public debt and agency securities (net), fiscal years
1963, 1964, and 1965
7. Sales and redemptions of Government agency securities in market
(net), fiscalyears 1963, 1964, and 1965
8. Interfund transactions excluded from both net budget receipts and
budget expenditures, fiscal years 1962-65
__.
9. Interfund transactions excluded from both net trust account receipts
and net trust account expenditures, fiscal years 1962-65
10. Pubhc enterprise (revolving) funds, receipts and expenditures for
fiscalyear 1965 and net for 1964 and 1965
11. Trust enterprise (revolving) funds, receipts and expenditures for
fiscal year 1965 and net for 1964 and 1965
12. Administrative budget receipts and expenditures monthly and total
for fiscal year 1965
13. Trust receipts and expenditures monthly and total for fiscal year 1965.
14. Trust receipts by sources and expenditures by major functions, fiscal
years 1957-65
15. Administrative budget receipts by sources and expenditures by major
functions, fiscal years 1957-65
.
16. Trust and other transactions by major classifications, fiscal years
1955-65
17. Receipts from and payments to the public, fiscal years 1955-65
18. Administrative budget receipts and expenditures based on existing
and proposed legislation, actual for the fiscal year 1965 and estimated for 1966 and 1967
19. Trust and other transactions, actual for the fiscal year 1965 and estimated for 1966 and 1967
.
20. Effect of financial operations on the public debt, actual for the fiscal
year 1965 and estimated for 1966 and 1967
21. Internal revenue collections by tax sources, fiscal years 1936-65
22. Internal revenue collections and refunds by States, fiscal year 1965..
23... Deposits by the Federal Reserve banks representing interest charges
on Federal Reserve notes, fiscal years 1947-65
24. Customs collections and payments by districts, fiscal year 1965
25. Summary of customs collections and expenditures, fiscal years 1964
and 1965
26. Postal receipts and expenditures, fiscal years 1926-65
^
27. Increment resulting from reduction in weight of the gold dollar, as
of June 30, 1965
:
28. Seigniorage on coin and silver bulhon, January 1, 1935-June 30, 1965. _

490
498
500
512
517
518
519
520
521
523
524
526
527
528
532
534
536
539
541
542
548
549
550
551.
552
553
553

PUBLIC DEBT, GUARANTEED DEBT, ETC.

I.—Outstanding
29.
30.
31.
32.
33.
34.
35.
36.

Principal of the public debt, fiscal years 1790-1965
Public debt and guaranteed debt outstanding June 30, 1934r-65
Public debt outstanding by classification, June 30, 1955-65
Guaranteed securities issued by Government corporations and other
business-type activities and held outside the Treasury, June 30,
1955-65
Interest-bearing securities outstanding issued by Federal agencies but
not guaranteed by the U.S, Government, fiscal years 1955-65
Maturity distribution and average length of marketable interestbearing public debt, June 30, 1946-65
Summary of public debt and guaranteed debt by classification, June
30, 1965
Description of public debt issues outstanding June 30, 1965




554
556
557
560
561
562
562
564

VIII

CONTENTS
Page

37. Description of guaranteed, debt held outside the Treasury, J u n e 30,
1965
38. Postal savings systems' deposits and Federal Reserve notes outstanding, J u n e 30, 1946-65
.
39. S t a t u t o r y limitation on the public debt and guaranteed debt, J u n e
30, 1965
.
40. D e b t limitation under the Second Liberty Bond Act, as amended,
1917-65
---

592
594
595
596

II.—Operations
41. Public debt receipts and expenditures by classes, monthly for fiscal
year 1965 and totals for 1964 and 1965
42. Public d e b t increases and decreases, and balances in t h e account of
the Treasurer of the United States, fiscal years 1916-65.
43. Changes in public debt issues, fiscalyear 1965
44. Issues, maturities, and redemptions of interest-bearing public d e b t
securities, excluding special issues, July 1964-June 1965.45. Allotments by investor classes on subscriptions for public marketable
securities other t h a n regular weekly Treasury bills, fiscal year 1 9 6 5 .
46. S t a t u t o r y d e b t r e t i r e m e n t s , fiscalyears 1918-65
_.
47. Cumulative sinliing fund, fiscal years 1921-65

598
609
610
634
666
668
669

III.—United States savings bonds
48. Sales and redemptions of Series E through K savings bonds by series,
fiscalyears
1941-65 and monthly 1965
49. Sales and redemptions of Series E and H savings bonds by denominations, fiscal years 1941-65 and monthly 1965
50. Sales of Series E and H savings bonds by States, fiscal years 1964,
1965, and cumulative
.

670
674
676

IV.—Interest
51. Amount of interest-bearing public debt outstanding, t h e computed
a n n u a l interest charge, and t h e computed rate of interest, J u n e 30,
1939-65, and a t t h e end of each m o n t h during 1965
52. Computed annual interest rate and computed annual interest charge
on t h e public d e b t by classes, J u n e 30, 1939-65
53. Interest on t h e public debt by classes, fiscal years 1961-65

677
678
680

V.—Prices and yields of securities
54. Average yields of taxable long-term Treasury bonds by m o n t h s ,
October 1941-June 1965
55. Prices and yields of taxable public debt marketable issues J u n e 30,
1964, and J u n e 30, 1965, and price range since first traded

681
682

Vl.—Ownership of governmental securities
56. E s t i m a t e d ownership of interest-bearing g o v e r n m e n t a l securities outstanding June 30, 1954-65, by t y p e of i s s u e r . . .
57. S u m m a r y of Treasury survey of ownership of interest-bearing public
debt a n d guaranteed securities, J u n e 30, 1964 and 1965

685
686

ACCOUNT OF THE TREASURER OF THE UNITED STATES

58. Assets and liabilities in t h e account of t h e Treasurer of t h e United
States, J u n e 30, 1964 and 1965
59. Analysis of changes in tax and loan account balances, fiscal years
1955-65__
.
-.
'

688
689

STOCK AND CIRCULATION OF MONEY IN THE UNITED STATES

60. Stock of money, money in t h e Treasury, in t h e Federal Reserve
banks, and in circulation, by kinds, J u n e 30, 1965
61. Stock of money, money, in the Treasury, in the Federal Reserve
banks, and in circulation, selected years, J u n e 30, 1930-65
62. Stock of money by kinds, selected years, J u n e 30, 1930-65
63. Money in circulation by kinds, selected years, J u n e 30, 1930-65



690
692
693
695

CONTENTS

IX
Page

64. Location of gold, silver bulhon at monetary value, and coin held by
-the Treasury on June 30, 1965...
65. Paper currency issued and redeemed during the fiscal year 1965 and
outstanding June 30, 1965, by classes and denominations

696
697

TRUST AND OTHER FUNDS

66. Holdings of public debt and agency securities by Government agencies
and accounts, June 30, 1961-65
67. Civil service retirement and disability fund, June 30, 1965
68. District of Columbia teachers' retirement and annuity fund, June 30,
1965
69. Employees health benefits fund, Civil Service Commission, June 30,
1965
70. Retired employees health benefits fund. Civil Service Commission,
June 30, 1965
..-.
71. Employees' life insurance fund. Civil Service Commission, June 30,
1965
72. Federal disability insurance trust fund, June 30, 1965
73. Federal old-age and survivors insurance trust fund, June 30, 1965
74. Foreign service retirement and disability fund, June 30, 1965
75. Highway trust fund, June 30, 1965
76. Judicial survivors annuity fund, June 30, 1965
77. Library of Congress trustfunds, June 30, 1965
78. National service life insurance fund, June 30, 1965
79. Pershing Hall Memorial fund, June 30, 1965
80. Philippine Government pre-1934 bond account, June 30, 1965
81. Railroad retirement account, June 30, 1965
82. Unemployment trust fund, June 30, 1965
83. U.S. Government life insurance fund, June 30, 1965

698
701
703
704
705
706
708
710
712
713
714
715
716
717
718
719
721
728

FEDERAL AID TO STATES

84' Federal grants in aid to State and local governments and to individuals
and private institutions within the States, fiscal year 1965

729

CUSTOMS OPERATIONS

85. Merchandise entries, fiscal years 1964 and 1965
86. Principal commodities on which drawback was paid, fiscal years 1964
and 1965
.
.
87. Carriers and persons arriving in the United States, fiscal years 1964
and 1965
88. Aircraft and aircraft passengers entering the United States, fiscal years
1964 and 1965
89. Seizures for violations of customs laws, fiscal years 1964 and 1965
90. Investigative activities, fiscal years 1964 and 1965

752
752
753
754
755
756

ENGRAVING AND PRINTING PRODUCTION

91. New postage stamp issues delivered, fiscal year 1965
92. Dehveries of finished work by the Bureau of Engraving and
Printing, fiscal years 1964 and 1965

756
757

INTERNATIONAL CLAIMS

93. Status of Class III awards of the Mixed Claims Commission, United
States and Germany, and Private Law 509 as of June 30, 1965
94. Status of claims of American nationals against certain foreign governments as of June 30, 1965
.
.

758
759

INTERNATIONAL FINANCIAL TRANSACTIONS

95. U.S. net monetary gold transactions with foreign countries and international institutions, fiscalyears 1945-65
96. Estimated gold reserves and dollar holdings of foreign countries and
international institutions as of June 30, 1964, December 31, 1964,
and June 30, 1965
97. U.S. gold stock, and holdings of convertible foreign currencies by U.S.
monetary authorities, fiscal years 1952-65
.
..



760
762
765

X

CONTENTS
Page

98. International investment position of the United States, total December
31, 1950; by area, December 31, 1963 and 1964
^
99. U.S. t)alance of payments, calendar year 1964 and January-June 19651
100. Assets and liabilities of the Exchange Stabilization Fund as of June 30,
1964 and 1965
101. Summary of receipts, withdrawals, and balances of foreign currencies
acquired by the United States without purchase with dollars, fiscal
year 1965
102. Balances of foreign currencies acquired by the United States without
purchase with dollars, June 30, 1965

766
768
770
773
774

INDEBTEDNESS OF FOREIGN GOVERNMENTS

103. Status of indebtedness of foreign governments to the United States
arising from World War I as of June 30, 1965
104. Status of German World War I indebtedness as of June 30, 1965
105. Outstanding indebtedness of foreign countries on U.S. Government
, credits (exclusive of indebtedness arising from World War I) as of
June 30, 1965, by area, cbuntry, and major program
106. Status of accounts under lend-lease and surplus property agreements
(World War II) as of June 30, 1965

776
777
778
780

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

107. Comparative statement of securities of Government corporations
and other business-type activities held by the Treasury, June 30,
1955-65
.
108. Capital stock, notes, bonds, and other securities of Government
agencies held by the Treasury or other Government agencies, June
30, 1964 and 1965, and changes during 1965
109. Borrowing authority and outstanding issues of Government corporations and other business-type activities whose securities are issued
to the Secretary of the Treasury, June 30, 1965
110. Description of securities of Government corporations and other
business-type activities held by the Treasury, June 30, 1965
111. Summary statements of financial condition of Government corporations and other business-type activities, June 30, 1965
112. Statement of loans outstanding of Government corporations and
other business-type activities, June 30, 1965
113. Dividends, interest, and similar earnings received by the Treasury
from Government corporations and other business-type activities,
fiscalyears 1964 and 1965

782
783
786
787
791
793
796

GOVERNMENT LOSSES IN SHIPMENT

114. Government losses in shipment revolving fund, June 30, 1965

797

PERSONNEL

115. Number of employees in the departmental and field services of the
Treasury Department quarterly from June 30, 1964, to June 30,
1965
.
....

799

INDEX

801




SECRETARIES, UNDER SECRETARIES, GENERAL COUNSEL, ASSISTANT
SECRETARIES, SPECIAL ASSISTANT TO THE SECRETARY (FOR
ENFORCEMENT), AND DEPUTY UNDER SECRETARIES FOR MONETARY AFFAIRS, SERVING IN THE TREASURY DEPARTMENT FROM
JANUARY 20, 1965, THROUGH DECEMBER 31, 1965 i
Term of service

Official
To

From

Secretaries of ihe Treasury
Jan. 21, 1961
Apr. 1, 1965

Apr.

1, 1965

Douglas Dillon, New Jersey.
Henry H. Fowler, Virginia.
Under Secretary
Joseph W. Barr, Indiana.

Apr. 29, 1965

Under Secretary of the Treasury for
Monetary Affairs
Feb.

Frederick L. Deming, Minnesota.

1, 1965

General Counsel
Nov. 16, 1962

Jan. 31, 1965

G. d'Andelot Belin, Massachusetts.
Assistant Secretaries

Apr.
Dec.
Sept.
Apr.
Sept.

24,
20,
18,
29,
14,

1961
1961
1963
1965
1965

Sept. 1, 1965

Stanley S. Surrey, Massachusetts.
James A. Reed, Massachusetts.
Robert A, Wallace, Illinois.
Merlyn N. Trued, New Jersey.
W. True Davis, Jr., Missouri.
Special Assistant to the Secretary
(for Enforcement)
David C. Acheson, District of Columbia.

Sept. 16, 1965

Deputy Under Secretaries of the Treasury
for Monetary Affairs
Dec. 3, 1963
Nov. 24, 1965

Nov. 23, 1965

Paul A. Volcker, New Jersey.
Peter D. Sternlight, New York.
Fiscal Assistant Secretary

June 15, 1962

John K. Carlock, Arizona.
Assistant Secretary for Administration

Sept. 14, 1959

A. E. Weatherbee, Maine.

I For officials from Sept. 11,1789, to Jan. 20,1965, see exhibit (




XI

PRINCIPAL ADMINISTRATIVE AND STAFF OFFICERS OF THE
TREASURY DEPARTMENT AS OF DECEMBER 31, 1965
Secretary of the Treasury
i__
Special Assistant to the Secretary
Under Secretary of the Treasury
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, Fpreign Assets Control
Director of Practice
Assistant Secretary.
.
Director, Office of Tax Analysis
Tax Legislative Counsel
Special Assistant for International Tax Affairs
Assistant Secretary..
Special Assistant to Assistant Secretary
Director, Employment Policy Program
Assistant Secretary..
Deputy Assistant Secretary
Deputy to Assistant Secretary for International
Monetary Affairs
Deputy to Assistant Secretary for International
Financial and Economic Affairs
Assistant Secretary
Deputy Assistant Secretary
Aide to the Assistant Secretary

Henry H. Fowler
Douglass Hunt
Joseph W. Barr
Frederick L. Deming
Peter D. Sternlight
Leland Howard
John H. Auten (Acting)
R. Duane Saunders
Franklin R. Saul
Fred B. Smith (Acting)
Fred B. Smith
Roy T. Englert
Charlotte Tuttle Lloyd
Hugo A. Ranta
Vacancy
Stanley L. Sommerfield
Thomas J. Reilly
Stanley S. Surrey
Gerard M. Brannon
(Acting)
Lawrence M. Stone
Richard O. Loengard, Jr.
Robert A. Wallace
Thomas W. Wolfe
Mrs. Mary F. Nolan
Merlyn N. Trued
Winthrop Knowlton
George H. WiUis

Ralph Hirschtritt
W. True Davis, Jr.
James P. Hendrick
Commander G. H. Patrick
Bursley, USCG
Assistant to the Assistant Secretary
Matthew J. Marks
Special Assistant to the Secretary (for Enforcement) _ David C. Acheson
Staff Assistant. . .
Robert E. Jordan, III
Staff Assistant..^
Anthony A. Lapham
Director, Office of Law Enforcement Coordination. Arnold Sagalyn
Fiscal Assistant Secretary.
John K. Carlock
Deputy Fiscal Assistant Secretary..
George F. Stickney
Assistant Fiscal Assistant Secretary
Hampton A. Rabon, Jr.
Assistant to Fiscal Assistant Secretary
Boyd A. Evans
Assistant to Fiscal Assistant Secretary
Sidney Cox
Assistant Secretary for Administration
A. E. Weatherbee
Deputy Assistant Secretary for Administration
and Director, Office of Budget and Finance
Ernest C. Betts, Jr.
Director, Office of Personnel
Amos N. Latham, Jr.
Director, Office of Management and Organization. James H. Stover
Director, Office of Administrative Services
Paul McDonald
Director, Office of Security
Thomas M. Hughes
Director, Office of Planning and Program Evaluation
Vacancy
Assistant to the Secretary (Congressional Relations). . Joseph M. Bowman, Jr.
Deputy Assistant to the Secretary (Congressional
Relations)'.
Joseph L. Spilman
XII




PRINCIPAL ADMINISTRATIVE AND STAFF OFFICERS

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

XIII

Dixon Donnelley
Mark T. Sheehan
Charles A. Sullivan
Robert W. Bean
Raymond J. Albright
Mrs. Margaret W.
Schwartz
Seymour E. Harris
Robert J. Moody

BUREAU OF ACCOUNTS

Commissioner of Accounts
Assistant Commissioner
Comptroller
Chief Disbursing Officer
...
Deputy Commissioner for Central Accounts and
Reports
Deputy Comissioner for Deposits and Investments.. _

Sidney S. Sokol
L. D. Mosso
Ray T. Bath
Lester W. Plumley
Howard A. Turner
Sebastian Fama

BUREAU OF CUSTOMS

Commissioner of Customs
Assistant Commissioner of Customs
Deputy Commissioner, Office of Administration
Deputy Commissioner, Office of Investigations
Deputy Commissioner, Office of Operations
Deputy Commissioner, Appraisement
Deputy Commissioner, Technical
Deputy Commissioner, Collectors Operations
Deputy Commissioner, Office of Regulations and
Rulings
^
Deputy Commissioner, Classification and Drawbacks
Deputy Commissioner, Entry, Value, and Penalties
Acting Deputy Commissioner, Marine Administration
Chief Counsel
^

Lester D. Johnson
Edwin F. Rains
N. G. Strub
Lawrence Fleishman
David C. Ellis
Walter G. Roy
George Vlases, Jr.
Thomas J. Gorman, Jr.
Robert V. Mclntyre .
Wilham E. Higman
Vacancy
John P. Tebeau
Donald L. Ritger

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
i
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
George H. Gaffney
John R. Enright

BUREAU OF THE PUBLIC DEBT

Commissioner of the Pubhc Debt
Assistant Commissioner
Deputy Commissioner
Deputy Commissioner in Charge, Chicago Office.....




Donald M. Merritt
Ross A. Heffelfinger, Jr.
Michael E. McGeoghegan
Jack P. Thompson

XIV

PRINCIPAL ADMINISTRATIVE AND STAFF OFFICERS
I N T E R N A L REVENUE 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

Sheldon S. Cohen
Bertrand M. Harding
Edward F. Preston
Vernon D. Acree
Donald W. Bacon
Robert L. Jack
William H. Smith
Harold T. Swartz
Mitchell Rogovin

OFFICE OF THE COMPTROLLER OF THE CURRENCY

Comptroller of the Currency
First Deputy Comptroller
Administrative Assistant to the Comptroller
Deputy Comptroller (Bank Supervision and Examination)
Deputy Comptroller (Mergers and Branches)
--Deputy Comptroller (New Charters)
Deputy Comptroller (Domestic Bank Operations)
Deputy Comptroller (Trusts)
Deputy Comptroller (International Banking and
Finance)
.
Director, Department of Banking and Economic
Research
Chief Counsel
.
..
..
Chief National Bank Examiner

James J. Saxon
William D. Camp
Anthony G. Chase
Justin T. Watson
R. J. Blanchard
Thomas G. DeShazo
R. C. Egertson
Dean E. Miller
E. R. Park
Victor Abramson
Robert Bloom
Vacant

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

Treasurer of the United States
Deputy Treasurer. _.
Assistant-Deputy Treasurer

Mrs. Kathryn O'Hay
Granahan
William T. Howell
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 W. D.
Shields
Rear Admiral Paul E.
Trimble

U N I T E D STATES SAVINGS BONDS DIVISION

National Director
Assistant National Director

William H. Neal
Bill McDonald

U N I T E D STATES SECRET SERVICE

Director
Assistant Director (Investigations)
Assistant Director (Protective Forces)
Assistant Director (Protective Intelligence)

James J. Rowley
Thomas J. Kelley
Rufus Youngblood
Walter Young

COMMITTEES AND BOARD

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 9,1965

1flSSTTO THE SEMETftRr I

H

y

} Office \
I ofthe
}
\ Secretory,'

ASST TO THE SECRETftRY t
(Public A) foir.)
I

^

OlfKC Of

Bureau of
Accounts

Office of the
Treosurer
of fhe U.S.

Bufeou of the
Public Debt

Office I

Internol
Revenue
Service

Office of the
Comptroller of
the Currency

Bureauof
Narcotics

USSovinos
Bonds Diviaon

<
SflSci o( lha SecrtUiy of the Ireasuy




CHART

US. Secret
Service

1

Bureou of
Engraving and
Printing




ANNUAL REPORT ON THE FINANCES
TREASURY DEPARTMENT,

Washington, May 9, 1966.
: I have the honor to report to you on the finances of the Federal
Government for the fiscal year 1965. Details on Treasury operations
and administrative reports for the fiscal year 1965 will be found in the
full text of this report. This introduction will be concerned with
major fiscal and financial developments during the calendar year 1965
and the early part of 1966.
SIRS

OveraU Review
The period under review was one of chaUenge and accomplishment,
both domestically and internationally. At home a continuing expansion in production and incomes, unparalleled in our peacetime history,
carried us closer to the goals of a Great Society. Although margins
of unutilized industrial capacity and unemployed labor remained by
the end of 1965, they had been narrowed significantly by the pace of
steady expansion, supported by an act of Congress in June eliminating
most excise taxes and reducing others. But, as 1965 drew to a close,
it was becoming apparent that our steadfast commitment to the cause
of freedom in Viet Nam would entail a much larger claim upon the
nation's resources, both material and human. The new economic
challenge was to insure the balanced growth of a nearly fully employed
economy, free from inflationary excesses, while providing all that our
commitments in Southeast Asia and elsewhere might require.
There was every reason for confidence that the vast productive
power of our economy, strengthened during recent years by tax reduction and high rates of investment, would be equal to the foreseeable
demands that might be placed upon it. But, it was essential, if
serious inflationary strains were to be avoided, that the Federal fiscal
influence should shift from one of steady stimulus to aggregate demand
to one of moderate restraint. Therefore, the President's January
1966 budgetary recommendations combined strict economy in nondefense expenditure programs witlj proposals for further tax action to
augment the increases in social security and medicare taxes already
going into effect at the beginning of 1966. Prompt congressional
enactment of that further tax action, in almost the exact form requested, was an impressive demonstration of the flexibility of fiscal
policy, and of the willingness of the Congress to act promptly to
prevent overstraining the economy. Whether further fiscal action
.
xvn
783-556—66—^1-^2



XVIII

19 65 REPORT OF T H E SECRETARY OF TIIE> TREASiURY

would be required was uncertain, but the President had made it amply
clear in his Budget Message, that:
'^if . . . events in Southeast Asia so develop that additional funds
are required, I will not hesitate to request the necessary sums.
And should that contingency arise, or should unforeseen inflationary pressures develop, I will propose such fiscal actions as are
appropriate to maintain economic stability.''
In our international financial relations, the challenge at the beginning of 1965 was twofold. First, it was essential to reverse the
worsening in our balance-of-payments position that had developed
in late 1964 and to move promptly toward a secure equilibrium in
our international accounts. Second, beyond that immediate necessity, there was the very great desirability of making timely progress
toward agreement with other nations on the form that improved
international monetary arrangements should take.
The President's comprehensive voluntary balance-of-payments
program announced February 10, 1965, and further tightened in
December 1965, was chiefly responsible for an approximate halving
of our 1964 balance-of-payments deficit as measured on the liquidity
basis. The goal of the Administration was to cover the remaining
distance to payments equilibrium by the end of 1966, although it was
recognized that the direct and indirect impact of Viet Nam might
temporarily delay achievement of that goal.
Following a series of bilateral talks with the financial officials of a
number of other countries, new negotiating machinery was established
in September 1965, to achieve improvements in the international
monetary situation. The major objective is to arrange for dependable
new sources of liquidity as required in the future to finance growing
international trade in the absence of dollar deficits. Negotiations
have been pursued actively and progress is being made toward
reaching a consensus on the essential features of an international
system for creating reserves.
Treasury debt management faced new challenges in the past year
even though the Treasury's net cash borrowings were relatively
modest. The rise in longer term interest rates after mid-1965 was
the first significant upturn during the present extended period of
prosperity and created a new environment for debt management.
As described below and discussed more fully in the text of this report,
financing operations were successfully adjusted to the changing
market situation, and continued to serve the overall objectives of
economic policy.
In addition to these major domestic and international financial
developments, the past year was an active and important one for
the Treasury in many other respects, a few of which are noted
below.
At a conference in Manila in early Deceniber 1965, the United
States and 21 other countries signed the charter of an Asian Develop-




ANNUAL REPORT ON THE FINANCES

XIX

ment Bank with an authorized capital of $1 billion, of which the
U.S. subscription is $200 million. Nine other countries became
charter members by signing and making a pledge by January 31,
1966. In his Message to the Congress recommending approval of
U.S. participation, President Johnson pointed out that the new
Bank ''is the product of Asian initiative, and it offers the nucleus
around which Asians can make a cooperative response to the most
critical economic problems-—national and regional." The Congress
approved the enabling legislation and it was signed by President
Johnson on March 16, 1966.
As an outgrowth of action initiated at the September 1964 meeting
of the International Monetary I und, the Congress authorized an
increase of $1,035 billion in the U.S. quota in the International
Monetary Fund in June 1965. The U.S. action was part of a general
increase by all of the participating countries in their respective Fund
quotas, to become effective upon ratification by members holding
two-thirds of present quotas. This point was reached on February
23, 1966. The quota expansion had been strongly supported by
President Johnson and by his National Advisory Council on International Monetary and Financial Problems.
The realities of the silver supply situation made it impossible to
continue indefinitely the production of high-content silver coins.
Therefore, a necessary change in our coinage system was made with
the passage of the Coinage Act of 1965 which removed silver from
the dime and quarter and reduced the silver content of the half dollar
to 40 percent. New coinage alloys, reflecting the latest developments
in modern technology, insured the consistent operation of the new
dimes, quarters, and half dollars in all of our millions of coin-operated
machines. Late in 1965, the new quarters began to go into circulation, followed by the dimes and half dollars in early 1966. Details
of the new coinage system and a description of the successful efforts
of the Bureau of the Mint in overcoming recent coin shortages will
be found in the accompanying report (pages 131-4).
A comprehensive study, initiated in 1963, on the mission, organization, and management of the Bureau of Customs was released in
March 1965. At the same time, President Johnson announced a
major program, under the terms of Reorganization Plan No. 1 of
1965 which became effective May 25, to make maximum use of the
skill and talent of the career employees of the Customs Service and to
achieve annual savings estimated at $9 million. Major management
improvements in other Treasury agencies and bureaus are described
in the accompanying report.
Tax Policy
The economic expansion that began in early 1961 continued strongly
through calendar year 1965 and into 1966. National output rose 5K



XX

19 65 REPORT OF T H E 'SECRETARY OF T H E

TREAS'URY

percent in real terms during 1965 and our record of cost-price stability
remained superior to that of any other major industrial nation,
despite growing pressures by the end of the year. Unemployment
was reduced to just over 4 percent by the end of 1965 and declined
further in early 1966.
Tax reduction and reform was again a central element in overall
economic policy. Forward impetus was provided to the economy by
the second-stage tax reductions of the Revenue Act of 1964, which has
convincingly demonstrated its success, and by the first stage of the
Excise Tax Reduction Act of 1965, signed into law by President
Johnson on June 21, 1965.
Very general agreement had developed that many of our excise
taxes had no place in a permanent tax system. Extensive hearings
had been held on excise tax reduction before the House Ways and
Means Committee in the summer of 1964 preparing the way for prompt
action in 1965. The President stated in his Budget Message of
January 25, 1965, that attention should now be given to the repeal
of some excise taxes and the reduction of others. Such action would
provide further aid to economic growth and minimize the burden on
consumers and business resulting from taxes which were often costly
and difficult to administer and which frequently distorted consumer
choices as among different goods. On May 17 the President sent a
message to the Congress with the details of an excise tax reduction
program, modified in the light of the current and prospective economic
situation, and totaling $3.9 billion at estimated fiscal 1966 levels of
income. To insure the maximum contribution to continued price
stability and balanced prosperity, the President requested that business promptly pass forward to consumers the full amount of excise
tax reductions. This request was emphasized again when he signed
the bill on June 21, and, by and large, was carried into effect in ensuing months.
The tax repeals or reductions under the final legislation amounted
to $4.7 billion at fiscal 1966 levels of income, rather than the $3.9
billion recommended by the President. ' This resulted chiefly from
eventual reduction of the tax on passenger automobiles to one percent,
rather than five percent as recommended, and to a lesser extent from
minor changes which are detailed later in this report (pages 37-40).
Of the total $4.7 billion, about $1.75 billion became effective on
June 22, 1965, and an approximately equal amount became effective
on January 1, 1966, with additional reductions to be effective in three
stages, on January 1, 1967, 1968, and 1969.
Another taxation development during 1965 that deserves mention
here was the modification of the depreciation guideline procedures
initiated in 1962. Those 1962 procedures were instituted as part of a
thoroughgoing depreciation reform designed to encourage the use of
more rapid equipment modernization in industry. At that time.



ANNUAL REIPORT ON T H E FINANCES

XXI

taxpayers were allowed a three-year transitional period. Study of
the depreciation practices of several hundred large firms conducted
at the request of the Treasury in 1964 by the National Industrial
Conference Board and independent studies by the Internal Revenue
Service suggested that some liberalization of guideline procedures was
necessary if businesses were to obtain full benefit from the 1962
depreciation reform. At the same time, the Treasury recognized the
need to apply limitations in the use of certain accounting techniques
found to be incompatible with the guideline procedure. The combination of the new liberalized rules and the new limitations was estimated, to result in increasing depreciation tax benefits during 1965
by some $600 million-$800 million over what they would have been
if the 1962 reform had not been modified.
The overall fiscal position in late 1965 and early 1966 was substantially influenced by the amendment of the Social Security Act in
July 1965, in line with recommendations by the President. Old age
benefits were liberalized retroactively to January 1, 1965, with, disbursement of the retroactive portion made in September 1965. However, the increase of some $2 billion annually in transfer payments was
to be more than offset by the increase in social security and medicare
payroll taxes of $6 biUion, annual rate, going into effect January 1,
1966. With medicare payments not beginning until the second half
of 1966, the net effect would be some increase in fiscal restraint in the
first haff of 1966 because of the higher payroll taxes.
Late in 1965 it became apparent that the increased commitment
in Viet Nam might be sufficiently large to require offsetting fiscal
action, beyond that which would result from the higher payroll taxes
and rigorous control of nondefense expenditures. In his Budget
Message of January 24, 1966, President Johnson announced that
apart from the special military and economic assistance costs in Viet
Nam, expenditures for the regular programs of the Federal Government in fiscal 1967 were estimated at $102.3 billion, a rise of $0.6
billion from fiscal 1966, only six-tenths of one percent. But, because
increased special costs associated with Viet Nam would add an
estimated $4.7 billion in fiscal year 1966 expenditures and $10.5
billion in fiscal year 1967 expenditures over the amounts estimated in
January 1965, it would be necessary to raise additional revenues.
As the President had expressed the matter on January 19, .1966:
''Under these circumstances, I was faced with three choices:
—A deficit in excess of $6.5 billion, which would require the
Government to borrow the additional money.
—^An increase in corporate and personal income tax rates, or
other new taxes.
—Temporary restoration of certain excise taxes, and adoption
of graduated withholding of individual income taxes and current payment of corporate income taxes—to put the American



XXII

19 65 REPORT OF T H E SECRETARY OF T H E

TREASURY

people on a pay-as-you-go basis without increasing the total
tax bill due.
"Over the past several weeks I discussed these alternatives and
countless variations of them with my advisers. I made two decisions.
"First, w^e could raise revenue or borrow it. I chose to raise the
money.
"Second, I chose to raise that money without any increases in
personal and corporate income tax liabilities, but through changes
that affect only the timing of tax payments and the temporary restoration of certain excise taxes on telephones and automobiles."
Therefore, the President recommended tax legislation involving
(a) temporary restoration of the rates of excise taxes on automobiles
and telephones that were in effect at the end of 1965 and (b) the
adoption of collection procedures which would put income and selfemployment tax payments closer to a pay-as-you-go system, thereby
increasing current revenues without changing income tax rates and
without changing anyone's final tax liabilities. I t took only about
60 days from the time the tax program was outlined in mid-January
for it to be enacted, essentially in its original form as regards the impact
on fiscal years 1966 and 1967, as the Tax Adjustment Act of 1966.
That legislation was expected to generate approximately $6 billion
extra revenue in the 15 months following its enactment—through
fiscal year 1967. In terms pf cash payments, the changes in the new
law were estimated to take about $2.7 billion out of the individual
and corporate spending stream in calendar 1966.
Whether the degree of fiscal restraint embodied in the Tax Adjustment Act of 1966 would prove sufficient, or whether further fiscal or
other action would be required, could only be determined with the
passage of time. Full effects of the Federal Reserve's monetary
tightening signaled by the December 1965 increase in the discount
rate were yet to be registered, and further evidence was needed on the
strength of private spending plans. I t was clear, however, that the
• flexible adaptation of fiscal policy to changing needs had already been
convincingly demonstrated.
In the recent past, tax reduction actions had included the investment credit in the Revenue Act of 1962, the individual and corporate
income tax reductions in the Revenue Act of 1964, the Excise Tax
Reduction Act of 1965, and the administrative depreciation reforms
of 1962 and 1965. Despite tax reductions that cut the burden of
taxes by some $20 billion at current levels of income, revenues were
estimated at $21 billion higher in fiscal year 1966 than in fiscal year
1961. This contrasts with a growth in receipts of only $10 billion in
the 5 years preceding 1961, a period in which there was no significant
tax reduction.
I n commenting upon this remarkable growth in revenues in his
January 24, 1966, Budget Message, President Johnson noted that we



ANNUAL REPORT ON T H E FINANCED

XXIII

have had a clear illustration of the direct relationship between tax
policies, economic growth, and Federal revenues. He went on to
observe that: " T a x policy, however, must be used flexibly. We
must be equally prepared to employ it in restraint of an overly rapid
economic expansion as we were to use it as a stimulus to a lagging
economy. The current situation calls for a modest measure of fiscal
restraint."
Balance of Payments
The U.S. balance-of-payments deficit increased sharply during the
last half of calendar 1964, reaching an annual rate of $5.5 billion in
the fourth quarter (liquidity basis), primarily because of a substantial
increase in net outflows of U.S. private capital. By leading to temporarily excessive increases in foreign dollar holdings the larger
deficit was aggravating the gold outflow problem. Therefore, President Johnson announced a comprehensive balance-of-payments program on February 10, 1965. The program was the result of a careful
review of the situation by the Cabinet Committee on the Balance
of Payments, chaired by the Secretary of the Treasury. The essentiaUy new element in the program was its reliance upon the voluntary cooperation of the commercial and financial community.
U.S. banks were asked to hold total claims outstanding on foreign
residents to 105 percent of the level at the end of 1964. Guidelines
developed by the Board of Governors of the Federal Reserve System
for implementing this program were designed to assure that credits
to finance U.S. exports, and loans to less-developed countries, could
be adequately met. I n addition, consideration for the special positions of Canada, Japan, and the United Kingdom was requested.
Within these broad guidelines each bank was to decide the direction
of its particular overseas activities. A similar approach was permitted
nonbank financial institutions in their foreign lending and investing
activities.
U.S. industrial corporations also were asked to improve their
individual balance-of-payments accounts, combining all transactions
such as exports, dividend income, royalties, fees, and capital outflows
from the United States. The objective was to leave the corporations
free to adjust these components of their individual payments accounts
while achieving a significant net payments improvement.
To reduce the tourist deficit, Americans as well as foreigners were
encouraged to travel more in this country. Legislation was recommended and subsequently enacted on June 30, 1965 (Public Law
89-62), reducing the duty exemption on purchases made abroad by
returning U.S. residents.
The February 10 program also called for extension of the interest
equalization tax for two years beyond December 31, 1965, broadening
its coverage to include nonbank credit of one-to-three year maturity.



XXIV

19 65 REPORT OF T H E SECRETARY OF THE TREASURY

and activation of the Presidential authority under the Gore Amendment to the act to apply the interest equalization tax to bank loans
of one year or more. (The Interest Equalization Act was broadened
in coverage and extended to July 31, 1967, by Public Law 89-243,
October 9, 1965.) To stop any excessive flow of funds to Canada
under its special exemption from the interest equalization tax, the
President sought and received firm assurance that the policies of the
Canadian Government would be directed towiard limiting borrowing
in the United States to the maintenance of a stable level of Canada's
foreign exchange reserves. The program also caUed for an intensification of U.S. Government efforts to minimize the foreign exchange
costs of our defense and aid programs; an increase in our efforts to
promote U.S. exiports; and, finally, encouragement of more investments from abroad, by increasing, through new tax legislation, the
incentive of foreigners to invest in U.S. securities.
The prograin of voluntary cooperation that President Johnson
called for in his Balance-of-Payments Message of February 10, 1965,
proved to be highly effective. For the year 1965, there was a $1.5
bUlion net reduction in the payments deficit on a liquidity basis
despite heavy outflows on private capital account during the early
months and despite setbacks for the year as a whole in trade and other
accounts. The $1.3 bUlion deficit in 1965 w^as the smaUest since 1957
and less than half the size of our deficits of $2.8 billion in 1964 and
$2.7 billion in 1963. On the other principal accounting basis, official
reserve transactions, our deficit in 1965 was also $1.3 billion, about
the same as the 1964 deficit on that basis.
Gold outflows rose sharply to $1,665 billion for the year as a whole.
However, there was a pattern of steady improvement during the
course of the year. From a high of $832 million in the first quarter,
the outflow declined to $590 million in the second quarter (including
a $259 million payment of the gold portion of the increased U.S.
subscription to the I M F ) , and fell further to $124 miUion in the third
quarter, and $119 million in the fourth quarter.
Late in 1965, at the.request of the President, the Cabinet Com- <
mittee on the Balance of Payments, under the chairmanship of the
Secretary of the Treasury, conducted an intensive review of the
U.S. balance-of-payments situation. The recommended measures for
1966 involve, essentially, a sharpening and reinforcing of the 1965
program with continued emphasis upon its voluntary, comprehensive,
and balanced character.
Corporations are requested, through a strengthened Commerce
Department Program, to meet overall balance-of-payment targets
simUar to those of 1965; and also to meet specific targets for direct
investment which are expected to result in balance-of-payments
savings of up to $1 bUlion in 1966. CeUings on lending under the
Federal Reserve voluntary program are to rise by the end of 1966 to



ANNUAL REPORT ON T H E FINANCE'S

XXV

109 percent of the December 1964 base for banks and nonbank financial institutions and small banks wUl be permitted to increase their
loans somewhat more than this. These changes recognize the outstanding contribution of banking institutions to the 1965 program,
and wUl help to insure more fully the adequacy of credit for financing
of U.S. exports and the achievement of other desired objectives.
Other important features of the program include an intensified effort
to hold down the balance-of-payments cost of Government programs,
encouragement of both foreign and domestic tourism in the United
States, stepped-up effort to expand U.S. export trade^ and the recommendation that legislation to encourage foreign investment in the
United States now before the Congress be enacted as soon as possible.
The main balance-of-payments imponderables in early 1966 were
the exact extent to which there would be rising balance-of-payments
costs in Southeast Asia in both the mUitary and aid programs and the
direct and indirect impact of Viet Nam on the domestic economy and
the balance of trade.
International Financial Arrangements
A summary of a wide range of developments in international
financial affairs will be found in the text of this report (pages 49-65).
The discussion here will be limited to a brief review of the major steps
taken during the calendar year 1965 to achieve further progress
toward improved international monetary arrangements.
The need for improved arrangements arises from the fact that
growth in international monetary reserves—primarUy gold and
dollars—has been largely dependent over the past decade upon increases in official foreign dollar holdings. New gold supplies moving
into monetary use have been accounting for a relatively small proportion of total reserve growth. Therefore, as the U.S. payments deficit
is removed, the major source of recent growth in international liquidity wUl also be removed. To assure ample world liquidity for the
years ahead—when U.S. payments wUl not be in chronic deficit—
the United States, in cooperation with other leading financial countries,
is seeking workable ways of strengthening and improving international
financial arrangements.
I n a Ministerial Statement of August 1964, the Group of Ten
countries—Belgium, Canada, France, Germany, Italy, Japan, the
Netherlands, Sweden, the United Kingdom, and the United States—
stated that while supplies of gold and reserve currencies are fuUy
adequate for the present and are likely to be for the immediate future,
the continuing growth of world trade and payments is lUiely to require
larger international liquidity. I t was recognized that world liquidity
needs might be met by larger credit facilities or might call for some
new form of reserve asset. Therefore, a Study Group was set up " t o
examine various proposals regarding the creation of reserve assets



XXVI

19 65 REPORT OF THE SECRETARY OF THE TREASURY

either through the I M F or otherwise." Their valuable study—the
so-called Ossola Report—was submitted to the Group of Ten on June
1, 1965, and was published later.
By mid-1965 with this and other technical studies completed and
with the U.S. balance-of-payments program demonstrating its effectiveness, it was appropriate to press forward toward a stage of more
conclusive negotiations. Therefore, on July 10, 1965, the Secretary
of the Treasury announced his intention of conducting a series of
informal discussions with ranking financial officials of other Group of
Ten countries to ascertain firsthand their views on the most practical
and promising ways of furthering progress toward improved international monetary arrangements. I n that statement, it was made
clear that the United States was prepared to participate in an international monetary conference at some appropriate future time. I t
was also pointed out that before such a conference took place, there
should be reasonable certainty of measurable progress through prior
agreement on basic points.
I t was announced at the same time that President Johnson had
approved the recommendation of the Secretary of the Treasury and
had created an Advisory Committee on International Monetary
Arrangements, chaired by the former Secretary of the Treasury,
Douglas DUlon. The Advisory Committee membership includes:
Robert V. Roosa, former Under Secretary of the Treasury for Monetary Affairs; Kermit Gordon, former Director of the Bureau of the
Budget; Edward Bernstein, economic consultant specializing in international monetary policy; Andre Meyer, of the investment banking
firm of Lazard Freres; David Rockefeller, President of the Chase
Manhattan Bank; Charles Kindleberger, Professor of Economics at
Massachusetts Institute of Technology; Walter Heller, former Chairman of the Council of Economic Advisers; and Frazar Wilde, Chairman
of the Board of Trustees, Committee for Economic Development.
In September, following a series of bilateral talks between the
Secretary of the Treasury and foreign financial officials, new negotiating machinery was established at the time of the annual meeting of
the International Monetary Fund. The Finance Ministers of the
Group of Ten countries instructed their Deputies to seek a basis of
agreement on the improvements needed in the international monetary
system, including arrangements for the future creation of reserve
assets. I t was further provided that once a basis for agreement on
essential points was reached, it would be necessary to proceed from
this first phase to a second phase, involving a much larger group of
countries.
At the same time, the Managing Director of the I M F , who participates in the ministerial meetings of the Group of Ten, indicated that
the Fund would pursue its own investigation of the ways and ineans
of creating international reserves. Since last fall, negotiations have



ANNUAL REPORT ON T H E FINANCES

XXVII

been pursued actively. The Deputies are proceeding to draft their
report to the Ministers, which it is hoped wiU show considerable progress toward a consensus on the essential features of an
international system for creating reserves.
Debt Management
During the course of calendar 1965, record flows of funds moved
through our domestic financial markets but at higher rates of interest.
For short-term rates, this marked a continuation of the more or less
steady advance dating from the beginning of the current expansion
in early 1961, which has made our o^vn short-term rates more competitive with key rates abroad. For longer term rates, the rise after
mid-1965 was the first significant upturn since the present expansion
began.
Yields moved upward in all maturity ranges of Treasury securities
from mid-1965 until early December, and then rose sharply following
the December 6 increase in the Federal Reserve discount rate (jdelds
from 1960 to mid-1965 are shown in chart 3, page 18 of the accompanying report). The yield on 3-month bills advanced from about
3.80 percent at mid-1965 to 4H percent in early December, rose sharply
to about 4)2 percent by the end of the year, and worked its way
irregularly higher in early 1966. Treasury coupon issues in the 5-year
range, which were a bit above 4^8 percent at midyear, rose to about
4K percent by early December, and 4% by yearend. Longer term
yields in the 20-year range moved from a little below 4% percent at
mid-1965, to around 4K percent by the end of 1965. This background
of rising rates, which continued into early 1966, formed the environment for Treasury debt management operations after mid-1965. (A
detailed review of public debt management and ownership developments during fiscal 1965 is provided on pages 17-34 of the accompanying report.)
Following an August 1965 refunding operation, the Treasury conducted the bulk of its financing for the rest of the year in the form of
tax anticipation bills. A $4 billion tax anticipation bill package in
September was followed by a November auction of another $2.5
billion in tax bills. On October 27 the Treasury announced the terms
for refinancing $9.7 billion of notes maturing November 15. The
refinancing took the form of a cash offering of a new 18-month, 4K
percent note, priced to yield about 4.37 percent. At the end of 1965
the average length of the marketable interest-bearing public debt
was 5 years, the same as a year earlier b u t 4 months shorter than the
average maturity at the end of fiscal 1965 which had reflected the
lengthening impact of an advance refunding in January 1965.
In early 1966, after a $1.5 billion cash offering and $1 billion in
additional tax anticipation bills in January, the Treasury took advantage of favorable market conditions in February to achieve some



XXVIII

19 65 REPORT OF T H E (SECRETARY C F T H E TREASURY

moderate b u t useful debt lengthening, and also to lighten the task
of refunding issues that would be maturing later in the year. The
successful February operation was a combined refunding of February
15 and April 1 debt maturities into 18-month or 4% year notes,
along with a prerefunding of issues maturing in May and August into
the 4% year option. With its completion. Treasury flnancing operations for the fiscal year were virtually completed, except for routine
rollovers.
The savings bond program received an important stimulus early
in 1966 when President Johnson announced an increase in the rate
to 4.15 percent from the previous 3.75 percent effective from December
1, 1965. The Presidential action also raised the earnings after December 1, 1965, of outstanding Series E and H savings bonds. The
new, higher rate was clearly justified not only in view of the higher
rates available on various private savings accounts, but also in the
light of current needs to sustain vigorous noninflationary growth and
manage the public debt soundly. Corporate and Federal campaigns
to increase participation in the payroll savings plan were being pressed
intensively and substantial results were expected.
H E N R Y H . FOWLER,

Secretary of the Treasury.
T o THE PRESIDENT OF THE SENATE.
To THE SPEAKER OF THE H O U S E OF REPRESENTATIVES.




R E V I E W OF F I S C A L




OPERATIONS




S u m m a r y of Financial Operations
The administrative budget deficit for the. fiscal year 1965 was $3.4
billion, $4.8 billion less than the 1964 deficit and $2.8 billion less than
estimated in the 1966 budget document. Net administrative budget
receipts during the year totaled $93.1 billion and net expenditures
amounted to $96.5 billion—receipts being $3.6 billion higher and expenditures $1.2 billion lower than the preceding year.
Net reoeipts of trust funds during fiscal 1965 exceeded net trust
expenditures by. $1.4 billion, with net reoeipts rising to $31.0 billion
and net expenditures to $29.6 billion.
On the basis of a consolidated cash statement, total receipts from
the public during the year amounted to $119.7 billion, and total payments to the public amounted to $122.4 billion, resulting in an excess
of payments to the public of $2.7 billion.
The public debt outstanding June 30, 1965, totaled $317.3 billion,
a net increase of $5.6 billion during the year. A summary of the
Government's fiscal operations during the 1964-65 fiscal years and
their effect on the public debt follows:

In billions of dollars

Administrative budget receipts and expenditures:
Netreceipts (—)
Net expenditures
Administrative budget deficit...
Trust receipts and expenditures:
Netreceipts (—)
Net expenditures

---.

Excess of receipts (—), or expenditures
Net investments in public debt and agency securities
Net sales (—) of Govemment agency securities in the market
Increase (—), or decrease in checks outstanding, deposits in transit (net), etc.
Increase (—), or decrease in public debt interest accrued
Change in cash balances, increase, or decrease (—):
Treasurer's account
Held outside Treasury
.
Net increase in cash balances
Increase in public debt..,
*Less than $50 million.




1965 REPORT OF THE SECRETARY OF THE TREASURY
Administrative Budget Receipts and E x p e n d i t u r e s
CHART

2

The Administrative Budget

Receipts

The increase of $3.6 billion in net administrative budget receipts
during fiscal 1965 brought the total to $93.1 billion, thus marking the
fourth successive year in which new peaks have been established. This
overall rise occurred despite the impact of reduced individual and
corporate income tax rates under the Revenue Act of 1964. The bulk
of the tax reduction went into effect early in the calendar year 1964
and the remainder on January 1, 1965.
Economic activity continued to expand throughout the fiscal year
1965 and tax receipts accompanied this general rise.
A comparison of net administrative budget receipts by major sources
for fiscal years 1964 and 1965 is shown below. Additional data for
1965 on the gross basis are presented in table 18.
1965

1964
Source

I n millions of doUars

Internal revenue:
I n d i v i d u a l inconie taxes
C o r p o r a t i o n income taxes
Excise taxes
E s t a t e a n d gift t a x e s . Total internal revenue
C u s t o m s duties
Miscellaneous receipts
. ..

,
- -

48,697
23,493
10, 211
2,394

48,792
25, 461
10,911
2,716

95
1,968
700
323

--

84,794
1,252
3 412

87,880
1,442
3 749

3,086
190
337

-.

89,459

93 072

3,613

-

-

--

--

N e t a d m i n i s t r a t i v e b u d e e t receiots




_ .

-

Increase

REVIEW OF FISCAL OPERATIONS

5

Individual income taxes.—Receipts from individual income taxes
amounted to $48.8 billion in fiscal 1965, accounting for over one-half
of total budget revenues but, because of the rate reduction, for only
3 percent of the year's increase. The net gain of $95 million over
fiscal 1964 occurred despite the effect of the tax reduction under the
Revenue Act of 1.964.
Corporation incoone taxes.—Corporation income tax receipts rose
to $25.5 billion in the fiscal year 1965, $2.0 billion above the previous
year's receipts, despite the reduced tax rates.
Receipts from corporation income taxes depend primarily on the
amount of corporation profits earned during the calendar year w-hich
ends within the fiscal year. Corporation profits rose substantially
from calendar year 1963 to 1964, up $6.2 billion on a national accounts basis. Tax receipts in fiscal 1965 were further bolstered by
the speedup in estimated payments required under the Revenue Act
of 1964. This speedup in payments adds to Government receipts
in the fiscal years involved but does not affect the tax liabilities
computed under the new lower rates.
Excise taxes.—Receipts from excise taxes are shown in the following
table.
1964

1965

Increase, or
decrease ( - )

Source
I n millions of dollars

Gross excise taxes
-.
Less:
R e f u n d s of receipts
Transfers to h i g h w a y t r u s t fund
N e t excise taxes

..

-

--

-

--

--.

-.

3,577
2,053
172
6,021
475
1,547
106

3,773
2,149
186
6,418
513
1,786
-32

195
96
15
398
38
239
-139

13,950

Alcohol taxes
T o b a c c o taxes
T a x e s on d o c u m e n t s , other i n s t r u m e n t s , a n d p l a y i n g cards
M a n u f a c t u r e r s excise taxes
Retailers excise taxes
.
Al iscellaneous excise taxes
U n d i s t r i b u t e d d e p o s i t a r y receipts a n d u n a p p l i e d collections

14, 793

843

220
3,519

223
3.659

3
139

10,211

10,911

700

Net excise tax receipts, after deduction of refunds and transfers
to the highway trust fund, rose $700 million to $10.9 billion for the
fiscal year 1965. Increases were pervasive among the many forms of
excises reflecting the sustained expansion in economic activity. Miscellaneous excise taxes showed the largest relative increase, the bulk
of it due to increased collections from telephone and other communications services.
Estate and gift taxes.—Estate and gift tax collections reached $2.7
billion in fiscal 1965, $323 million larger than in the previous fiscal
year. Since estate taxes are not payable until 15 months after death




6

19 65 REPORT OF THE SECRETARY OF T H E TREASURY

and the valuation of the estate is the lesser of the value at time of
death or one year later, the rise refiected the strong upsurge in stock
prices which began late in the calendar year 1962.
Customs.—Customs duties increased 15 percent during the year
reaching a net total of $1,442 million. This rise reflected a substantial
increase in taxable imports accompanying the general rise in economic
activity.
Miscellaneous receipts.—^Miscellaneous receipts are the total of receipts by the Government of varied forms of income other than taxes.
The total of $3.7 billion received in the flscal year 1965 was $337
million or 10 percent larger than in 1964. The net overall rise is a
composite of divergent movements in the various forms of nontax
receipts. Sales of Govemment property and products, dividends and
other earnings, and seigniorage showed advances, offset in part by
smaller realizations on loans and investments.
Estimate of receipts

The Secretary of the Treasury is required each year to prepare and
submit in his annual report to Congress estimates of public revenue
for the current fiscal year and for the fiscal year next ensuing (act
of February 26,1907 (5 U.S.C. 265)).
The estimates of receipts from taxes and customs for the current
and ensuing fiscal years are prepared by the Treasury Department.
In general, the estimates of miscellaneous receipts are prepared by
the agencies depositing these receipts in the Treasury.
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 24, 1966. Briefly,
the recommendations involve (a) rescheduling the 1966-69 reductions in the automobile and telephone excise taxes to the period 196871 and (b) the adoption of certain collection procedures which will
put income tax payments closer to a pay-as-you-go system, thereby
increasing current revenues without changing income tax rates and
without changing final tax liabilities.
. Excise tax rates on automobiles and general and long distance
telephone and teletype services would be restored to the rates in effect
before January 1, 1966, and the successive reductions scheduled until
January 1, 1969, would be deferred. The estimate assumes that the
telephone and teletype taxes would return to 10 percent on April 1,
1966, and the tax on automobiles would return to 7 percent from
6 percent on March 15,1966.
The proposed graduated withholding schedule on wage and salary
income tax liabilities affects the timing of tax payments during the
year, but it does not change the tax liabilities. Under present legisla-




REVIEW OF FISCAL OPERATIONS

7

tion, a flat 14 percent is withheld on taxable salaries and wages; this
corresponds to the tax on the lowest income bracket, and it is applied
regardless of the amount of income. As a result, the taxes withheld
on higher bracket wage earners are generally too small. The proposed
new schedule would increase the amounts withheld as taxable salaries
and wages increase, and thereby would reduce underwithholding to
a small proportion of total income tax liability. The new withholding schedules are assumed to become effective on May 1,1966.
Under present law quarterly corporation payments on estimated
tax liabilities greater than $100,000 per year are being adjusted to a
schedule that would run concurrently with the accrual of tax liabilities during each tax year. The size of payments on estimated tax is
being adjusted gradually to reach lan even quarterly pattern by calendar year 1970. The legislation proposed in this budget would require
a naore rapid adjustment and would complete the transition in the 1967
tax: year. The 'accelerated schedule would first apply to payments due
April 15, 1966.
Legislation authorizing additional user charges and extending others
is recommended, in keeping with the policy that a greater share of the
costs of certain programs which provide special benefits or privileges
should be borne by identifiable primary beneficiaries. The user
charges program also is being extended by administrative action
throughout the executive branch where legislative authority exists,
and present charges are reexamined regularly to assure that they adequately reflect the costs incurred.
The tax on air passenger traffic would be raised from 5 .percent to 6
percent until January 1, 1969. A tax of 2 percent on air freight
waybills would be instituted and an additional 2 percent added on>
January 1, 1969, raising this tax to 4 percent. The growth of air
transportation should generate sufficient receipts from these taxes to
meet commercial aviation's share of the cost of the Federal airways.
Accordingly, the present 2 cents per gallon tax on gasoline used in
commercial aviation would be repealed, leaving fuels used in commercial aviation untaxed. Gasoline and jet fuels used in general aviation would be taxed at 4 cents per gallon, and all of the receipts
retained in the general fund.
A user charge of 2 cents per gallon is proposed on fuel used by vessels navigating the inland waterways.
User charges are also being recommended in several other programs.
Some of these charges would become miscellaneous receipts of the
general fund. In other instances, the charges would be used to offset
the costs of operation, as in: (1) meat and poultry inspections; (2)
commodity inspection and classification and warehouse inspecting and




8

1965 REPORT OF THE SECRETARY OF T H E TREASURY

licensing; (3) administration of workmen's compensation and safety
programs for longshoremen and harbor w^orkers; and (4) overtime
border inspections of private vessels and aircraft.
Legislation has been requested to create revolving funds for the
Rural Electrification Administration ( R E A ) and three power administrations—Bonneville, Southeastern, and Southwestern. With
authority to operate as revolving funds, the agencies would be able to
use collections on outstanding loans and revenues from power sales
to help finance their current operations and necessary capital outlays,
while remaining subject to control through the regular appropriations
process. Enactment of this legislation will reduce, equally, miscellaneous receipts of tHe Treasury and expenditures by the agencies
without effect upon the budgetary surplus or deficit.
The nation's output of goods and services for calendar year 1966 is
expected to be within a $10 billion range centered on $722 billion, an
increase of $46i/^ billion over 1965 at the midpoint of the range. Substantial gains in personal income and corporate profits will accompany
the groAvth in output. Specifically, the fiscal year revenue estimates
are based on the following economic assumptions:
Calendar years
1965
preliminary

1964
actual

1966
estimate

X

I n billions of dollars
Gross n a t i o n a l p r o d u c t
Personal i n c o m e . .
C o r p o r a t e profits before t a x e s . . . .

..

__. . . .

. . . _.

628.7
495.0
64.8

675.6
530.7
74.6

722
567
80

Estimates of tax revenues cannot be derived directly and simply
from the assumed levels of aggregate economic performance. The
definitions of taxable income in the tax statutes, which determine
tax liabilities, differ from the economic or statistical definitions of income which are used to measure economic performance. . I n addition,
tax payments are received by the Treasury after the period i n which
tax liabilities are incurred. For example, corporation income tax
collections lag six 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.
The 1964 income tax legislation decreased tax liabilities by successively greater amounts in calendar years 1964 and 1965. Despite the
losses from income tax reduction and, in fiscal 1966, from the excise tax




9

REVIEW OF FISCAL OPERATIONS

cuts of 1965, total revenues rose in fiscal 1964 and 1965 and are exjDccted to continue rising in the fiscal years 1966 and 1967. Receipts
for fiscal 1966 are estimated to increase $7 billion over actual receipts
in 1965 to $100 billion. A further increase of $11 billion to a total
of $111 billion is estimated for 1967. Receipts will have risen for
six consecutive years by the fiscal year 1967, reaching a level $33 billion
above 1961. This revenue gain reflects an increase of $218 billion in
gross national product from the calendar year 1960 to the calendar
year 1966.
Actual administrative budget receipts for the fiscal year 1965 and
estimated receipts for 1966 and 1967 are compared by major sources
in the accompanying table. Amounts shown for each revenue source
are the net amounts after deduction of refunds, transfers to trust
funds, and interfund transactions.
Fiscal years
1965
actual

1966
estimate

1967
estimate

Increase, or
decrease (—),
1966 to 1967

In millions of dollars
Individuallncome taxes
Corporation income taxes.
Excise taxes
Estate and gift taxes
Customs
Miscellaneous receipts

_. ._
__ __

Net administrative budget receipts

..
_ _
-___

48,792
25,461
10,911
2,716
1,442
3,749

51,400
29,700
9,169
2,932
1, 655
5,144

56,240
34,400
8,879
3,301
1,845
6,335

4,840
4,700
-290
369
190
1,191

_.

93,072

100,000

111, 000

11,000

Individual income taxes.—Collections of individual income taxes
amounted to $48.8 billion in fiscal year 1965. They are estimated to
rise to $51.4 billion in fiscal 1966 and to $56.2 billion in fiscal 1967, an
increase of $4.8 billion. The rise of $2.6 billion in fiscal 1966 reflects
a substantial increase in the individual income tax base offset in part
by the second stage reduction of tax rates which Avent into effect on
January 1, 1965. The larger rise in 1967 is almost wholly due to
higher incomes, bolstered by the proposed introduction of a graduated
withholding system.
Corporation income taxes.—Corporate receipts which amounted to
$25.5 billion in the fiscal year 1965, are expected to reach $29.7 billion
in 1966, and $34.4 billion in 1967. Receipts in 1966 are depressed by
the second stage of tax rate reduction but are increased by $1.0 billion
because of the further speedup in the payment schedule. The 1967
revenue increase of $4.7 billion reflects both increased profits and a
$3.2 billion effect of the proposed speedup.




10

19 65 REPORT OF THE SECRETARY OF THE TREASURY

Excise taxes,—Net excise tax revenues, excluding taxes collected and
transferred to the highway trust fund, are estimated to fall to $9.2
billion in fiscal year 1966 from $10.9 billion in 1965. A further decrease to $8.9 billion is estimated for 1967. Losses in 1967 from the
several excises repealed as of January 1, 1966, will be substantially
offset if the proposals relating to the auto and telephone excises are
accepted by the Congress.
Also, there would be some offset if the various user charge proposals
are adopted. Collections are also increasing from the excises not
affected by the excise reduction act, reflecting increased sales of the
products and services involved.
Estate and gift taxes,—Estate and gift tax receipts are estimated to
increase from $2.7 billion in 1965 to $2.9 billion in 1966. A rise to $3.3
billion is expected in 1967. Receipts from this source arise mostly
from collections of estate taxes which are payable 15 months after
death. The estimated increases in the fiscal years 1966 and 1967
therefore reflect rises in asset valuations occurring some time earlier.
CustoTns,—Customs receipts are estimated to increase from $1,442
million in fiscal year 1965, to $1,655 million in 1966, and to $1,845
million in 1967. Enlarged receipts from customs duties reflect increasing imports associated with a continued expansion of economic activity.
Miscellaneous receipts.—Miscellaneous receipts, which are all those
received by the general fund of the Treasury except for taxes and
customs duties, are shown in the above table net of interfund transactions. Such receipts are estimated to increase from $3.7 billion in
fiscal 1965, to $5.1 billion in 1966, and to $6.3 billion in 1967. Over
half of the increases of $1.4 billion in 1966 and $1.2 billion in 1967 are
attributable to seigniorage profits arising from full-scale production
of coins with the new composition authorized by the Coinage Act of
1965.^ Also adding to the increases are accelerated sales of excess
strategic and critical materials, increased receipts from the Outer
Continental Shelf lands as new areas are opened for exploration, and
higher payments of earnings by the Federal Reserve System.
Expenditures

Net administrative budget expenditures decreased ihore than $1
billion in fiscal 1965 from the preceding fiscal year, the first such yearto-year reduction in expenditures in five years. A two-year comparative summary by major functions is set forth below; more detailed
information on administrative budget expenditures is contained in
table 15.
1 See exhibit 23.




11

REVIEW OF FISCAL OPEKATIONS
1965
Program

Increase, or
decrease (—)

In millions of dollars
National defense
Interest payments
Health, labor, and welfare
Veterans' benefits and services
Space research and technology
International affairs and finance
Agriculture and agricultural resources.
Commerce and transportation
Other 1:
.
Less interfund transactions

54,181
10, 765
5,475
5,492
4,171
3,687
r 5, 475
3,002
^ 6,102
664

-4, 018
670
423
3
922
617
-577
497
490
206

97,684

Total

50,163
11,435
5,898
5,495
5,093
4,304
4,898
3,499
6,592
870
96, 507

-1,177

r Revised.
I Includes programs relating to natural resources, housing and community development, education, and
general government.

Expenditures for national defense, though significantly below the
preceding year, accounted for 52 percent of total administrative budget
expenditures. Interest payments increased during the year to account
for 12 percent of administrative budget expenditures; health, labor,
and welfare programs accounted for over 6 percent; and veterans'
benefits and services something less than 6 percent.
Estimates of expenditures

Administrative budget expenditures in the fiscal years 1966.and
1967 are expected to be $106.4 billion and $112.8 billion, respectively.
The following summary shows the estimated expenditures for these
two years by major programs. Table 18 shows estimated administrative budget expenditures for these years by agencies.

1965
actual-

1966
estimate

Program

Increase, or
decrease
( - ) , 1966
from 1965

1967
estimate

Increase, or
decrease
( - ) , 1967
from 1966

I n millions of dollars

Total

50,163
11,435
6,898
5,495
5,093
4,304
4,898
3,499
6,592
870

56,560
12,104
8,377
5,122
5,600
3,932
4,313
3,202
7,866
647

96,507

N a t i o n a l defense
Interest payments
H e a l t h , labor, a n d welfare
.
. . .
V e t e r a n s ' benefits a n d services.
Space research and technology
I n t e r n a t i o n a l aflairs a n d finance. _
Agriculture a n d agricultural resources
Commerce and transportation.
Other 1
.
_
Less i n t e r f u n d transactions

106,428

6,397 . .. 60,541
12,854
669
9,962
2,479
5,721
-373
5,300
507
4,177
-372
3,372
-585
2,672
-297
8,960
1,274
712
-223
9,921

112,847

...

3,981
750
1,585
599
-300
245
-941
-530
• 1,094
65
6,419

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

T r u s t Receipts and Expenditures
Receipts

I n fiscal 1965, net trust receipts rose to $31.0 billion, an increase of
$.7 billion over 1964. Detailed information on net trust receipts is




12

19 65 REPORT OF THE SECRETARY OF THE TREASURY

given in table 5; the following summary shows the two year comparison of net trust receipts, by source for fiscal years 1964 and 1965.
Increase

1964
Source

In millions of dollars

Employment taxes
__.
Unemployment tax deposits by States.
Excise taxes.
Interest on trust funds
Other trust receipts i
Less interfund transactions

16,832
3,042
3,519
1,613
5,845
521
30,331

Net trust receipts

16,905
3,052
3,659
1,770
6,299
638

73
10
140
157
454
117

31,047

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

Estimates of receipts

In the fiscal years 1966 and 1967 trust receipts are expected to rise
to $33.5 billion and $41.6 billion, respectively. The rise will be due
principally to employment tax receipts. In fiscal 1966, employment
taxes are estimated to increase $1.9 billion over 1965, and in 1967 by
$5.5 billion over 1966. These increases will develop primarily from
the higher social security tax rates and larger wage base, effective
January 1, 1966. On that date the combined employer-employee rate
is raised from 7.25 percent to 8.4 percent and the covered annual wage
base from $4,800 to $6,600. On January 1,1967, existing law provides
for the combined tax rate to be further increased to 8.8 percent.
Detailed estimates of trust fund receipts are contained in table 19;
a suriimary by principal source follows:

Source

1965
actual

1966
estimate

Increase, or
decrease
( - ) , 1966
from 1965

1967
estimate

Increase, or
decrease
( - ) , 1967
from 1966

In millions of dollars
Employment taxes
Unemployment tax deposits by States . .
Excise taxes.
Interest on trust funds
_ _. __ _ ._
Other 1
Less interfund transactions __ . _
Net trust receipts

16,905
3,052
3,659
1,770
6,299
638

18,819
2,900
3,859
1,822
6,933
795

1,914
-152
200
52
634
157

24,339
2,900
4,378
1,970
8,787
767

5,520

31,047

33,539

2,492

41.608

8,069

519
148
1,854
-28

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

Expenditures

Net trust expenditures in fiscal 1965 amounted to $29.6 billion, an
increase over the preceding year of $.7 billion. Programs of a health,
labor, and welfare nature accounted for 78 percent of total trust ex-




REVIEW OF FISCAL

13

OPERATIONS

penditures, while commerce and transportation programs (mainly
highway trust fund expenditures) made up 13 percent of the total.
Details regarding trust expenditures are contained in table 5; a summary by major function follows comparing fiscal 1965 trust expenditures with those of 1964.
1964

1965

Program

Increase, or
decrease (—)

In millions of dollars
Health, labor, and welfare
,
Commerce and transportation
I-Iousing and community development
Veterans' benefits and services
Agriculture and agricultural resources..
National defense
Other 1
_.
Less interfund- transactions

22,733
3,482
1,889
666
496
487
-348
521

751
-213
638

453
382
-753
-42
431
264
135
117

28, 885

Net trust expenditures

23,186
3,864
1,136
624

29, 637

752

927

1 Includes programs relating to natural resources, international affairs and finance, education, and general
government; also includes net transactions in deposit fund accounts.

Estimates of expenditures

I n the fiscal years 1966 and 1967 trust expenditures are expected to
reach $33.8 billion and $37.9 billion, respectively. The following
summary shows by major functions the estimated trust expenditures
for 1966 and 1967, compared with the preceding year. Trust expenditures for these years are shown in more detail in table 19.

1965
actual

Program

Increase, or
decrease
( - ) , 1966
from 1965

1966
estimate

1967
estimate

Increase, or
decrease
( - ) , 1967
from 1966

In millions of dollars
Health, labor, and welfare. _
Commerce and transportation
Housing and community development
Veterans' benefits and services
Agriculture and agricultural resources
National defense
Other 1
Less interfund transactions..'
Net trust expenditures

..
.
.
_.

23,186
3,864
1,136
624
927
751
-213
638

26, 589
3,780
1,988
554
600
875
194
795

3,403
-84
852
-70
-327124
407
157

31,110
3,895
1,194
682
623
898
248
767

4,521
115
-794
128
23
23
54
-28

29, 637

33, 786

4,149

37,882

4,096

1 Includes programs relating to natural resources, international affairs and finance, education, and general
government; also includes net transactions in deposit funds.

Receipts F r o m and P a y m e n t s to the Public
A summary of Federal Government cash transactions with the public during fiscal year 1965 shows total receipts from the public to have
amounted to $119.7 billion, while total payments to the public reached
$122.4 billion, resulting in an excess of payments totaling $2.7 billion.




14

19.65 REPOIIT OF T H E SECRETARY OF T H E

TREASURY

The consolidated cash statement is considered helpful in assessing
the results of the Federal Government's financial operations, since it
presents the flow of cash transactions between the Federal Government
and the public. The totals of the administrative budget receipts and
expenditures are added to the trust fund receipts and expenditures,
with appropriate deductions for intragovernmental transactions, an
adjustment to expenditures for debt issuances in lieu of checks, and
certain other adjustments for transactions not involving cash exchanges with the public. The 1962 annual report, page 31, contains
a detailed explanation of the procedure for compiling the consolidated
cash statement.
Table 17 provides an ll-year comparative table showing details of
cash transactions with the public. Tlie following summary shows such
transactions for fiscal years 1964-65 and estimates for 1966-67.
Actual
Receipts from and pasonents to the public

1964

Estimated
1965

1966

1967

In millions of dollars
Receipts from the public:
Administrative budget (net)
.
Trust and other fnet).
Intragovernmental and other noncash items

89,459
30,331

93, 072
31,047

100,000
33, 539

111. 000
41,608

-4,259

- 4 , 420

-5,385

-7,069

Totalreceipts from the public

115, 530

119, 699

128,154

145, 539

Payments to the public:
Administrative budget (net)
Trust a.nd other (net)
Intragovemmental and other noncash items

97,684
28, 885

96, 507
29, 637

106,428
33, 786

112,847
37, 882

Total payments to the public
Excess of cash receipts from, or payments to ( - ) , the
public

-6,237

- 3 , 749

-5,166

-5,681

120,332

122,395

135,048

145, 048

-4,802

- 2 , 696

- 6 , 894

491

Corporations and Other Business-Type Activities of the Federal
Government
The business-type programs which Govemment corporations and
agencies administer are financed by various means: appropriations,
sales of capital stock, borrowings from either the U.S. Treasury or
the public, or by revenues derived from their own operations.
Corporations or agencies having legislative authority to borrow
from the Treasury issue their formal securities to the Secretary of
the Treasury. Amounts borrowed are reported in the periodic financial statements of the Government corporations and agencies as part
of the Government's net investment in the enterprise. I n fiscal 1965,
borrowings from the Treasury, exclusive of refinancing transactions,
totaled $7,450 million, repayments were $8,352 million, and outstanding loans on June 30, 1965, totaled $28,354 million.



REVIEW OF FISCAL OPERATIONS

15

Those agencies having legislative authority to borrow from the public must either consult with the Secretary of the Treasury regarding
the proposed offering, or have the terms of the securities to be offered
approved by the Secretary.
During fiscal 1965 Congress granted new authority to borrow from
the Treasury in the total amount of $1,050 million, and reduced existing authority by $924 million, resulting in a net increase of $126
million. The status of borrowing authority and the amount of corporation and agency securities outstanding as of June 30, 1965, are
shown in table 109.
Unless otherwise specifically fixed by law, the Treasury each month
determines interest rates on its loans to agencies by considering the
Government's cost for its borrowings in the current market, as reflected
by prevailing market yields on Government securities with comparable
maturities. A description of the Federal agencies' securities held
by the Treasury on June 30, 1965, is shown in table 110.
During fiscal 1965, $1.1 billion was received by the Treasury as interest on borrowings by agencies, dividends, and similar payments.
Quarterly statements of financial condition, income and expense,
and source and application of funds are submitted to the Treasury
by Government corporations and agencies. Semiannual statements
of financial contingencies are also submitted. These statements serve
as the basis for the combined financial statements compiled by the
Treasury which, together with the individual statements, are published periodically in the Treasury Bulletin, Summary statements
of the finiancial condition of Government corporations and other business-type activities, as of June 30, 1965, are shown in table 111.
Account of the T r e a s u r e r of the United S t a t e s
Gold, silver, and the general account are the three major categories
of the account of the Treasurer of the United States. On June 30,
1965, gold held was valued at $13,934 million, the principal amount
being at the Fort Knox Depository with lesser amounts at mints and
assay offices. Gold liabilities totaled $13,826 million and included
gold certificates (series 1934), the reservation for the gold certificate
fund of the Federal Reserve Board of Governors, and reserves against
Federal Reserve notes and U.S. notes.
Assets of the silver account, consisting of silver bullion and silver
dollars had a value of $1,270 million as of June 30, 1965. Liabilities
against the silver account (currency issued against free silver, etc.)
amounted to $889 million, leaving a silver balance totaling $382
million.



16

1965 REPORT OF THE SECRETARY OF THE TREASURY

Transactions affecting the account of the Treasurer of ihe United States, fiscal year
1965
[In millions of dollars]

Balance June 30, 1964
Excess of deposits, or withdrawals (—), budget,
trust, and other accounts:
Deposits
Withdrawals ( - )
Excess of deposits, or withdrawals (—), public
debt accounts:
Increase in gross public debt
Deduct:
Excess of Govemment agencies' investments in public
debt issues
2,422
Accruals on savings and retirement plan bonds and
Treasury bills (iucluded in
increase in gross public
debt above)
3, 7l7
Certain public debt redemptions (iQcluded above in
withdrawals, budget, trust,
and other accounts)
—3, 467
Net deductions

11,036

125,464 .
126,395
-931

5, 561

2,672

Excess of sales of Government agencies' securities in the
market
•__
Net transactions in clearing accounts (documents not received or classified by the Office of the Treasurer)
Balance June 30, 1965




-__

2,889

201
—584
12,610

REVIEW OF FISCAL OPERATIONS

17

The assets of the general account of the Treasurer at fiscal yearend
included the gold and silver balances against which there were no
reserves or specific liabilities, cash in the form of currency and coin,
unclassified collections, and funds on deposit with Federal Reserve
banks and other depositaries. During the year the balance in the general account increased by $1,575 million. The net change is accounted
for in the preceding table.
Table 58 is a balance sheet presentation of the account of the Treasurer of the United States.
Public Debt Management and Ownership
I n the fiscal year 1965 Treasury debt management operations were
primarily designed to secure the funds needed for Government expenditures in excess of revenues and for the refinancing of maturing
Treasury securities. I n addition to meeting these basic housekeeping
requirements, decisions were also shaped by major economic policy
objectives—including the achievement of progress toward equilibrium
in the U.S. balance of payments, and the achievement of growth and
price stability of the domestic economy. I n brief, these goals called
for maintaining a level of short-term interest rates that would be
sufficiently competitive with rates available in other financial centers,
while avoiding an excessive buildup in short dated debt (with its
implicit inflationary potential) or upward pressure on long-term interest rates, which would impede domestic investment. A t the same
time a continuing effort was made to retain and improve upon a debt
maturity structure that would assure flexibility in future fmancing
decisions. With the domestic economy expanding and total credit
flows proceeding at record levels, these objectives presented no serious
conflict with one another. Flows of funds proceeded through the
market at record levels, helping to lift economic activity to new highs
while longer term interest rates were essentially steady—despite sizable sales of long-term Treasury issues through the advance refunding
of shorter debt. The price level in the economy rose slightly during
the year. The balance.of payments was in deficit for the period as
a whole, but showed a marked improvement wdthin the year and actually registered a surplus in the April-June 1965 quarter. This
improvement largely reflected the initial impact of President Johnson's voluntary restraint program of February 10,1965, but the higher
level of short-term interest rates in this country was also helpful.
78;2-5.56—66

2




18

19 65 REPORT OF THE SECRETARY OF THE TREASURY

The form and scope of Treasury borrowing operations in fiscal 1965
depended to a great extent upon the investment environment at each
particular financing juncture. Early in the fiscal year the investment
climate was generally marked by invesstor confidence in the existing
yield levels which, in turn, reflected the noticea;ble improvement in
the U.S. balance-of-payments situation in the second half of the previous fiscal year and the continued steady growth of the domestic
economy.
This favorable atmosphere was clouded during the fall months,
however, as the extent of the British balance-of-payments problems
became publicized and the increase in the Bank of England bank
rate was closely followed in late November by a rise in the Federal
Reserve discount rate. The credit market impact of the British payments crisis was almost entirely confined to the money market area
where, for example, average issuing rates on three-month Treasury
bills rose from 3|% percent early in the fiscal year to 3 % percent by
calendar yearend. (See chart 3.) Prices of long-term securities faltered, but recovered quickly as a steady volume of investment demand
continued to be the predominate factor in capital markets. The extent of this demand was highlighted by the very active investor participation in the Treasury's advance refunding offering in January
and the aggressive bidding for corporate and municipal securities offered at that time.
CHAET 3

Market Yields At Constant Maturities' I960"'65

3>h

LW

tr

1 Estimated yields of U.S. (Government securities a t 1, 5, and 20 y e a r s ; bank
r a t e s on bills ; monthly averages of end of week figures.




discount

REVIEW OF FISCAL OPERATIONS

19

Short-term rates, after declining somewhat from December highs,
turned up again in January and reached record levels in late February 1965 for the current business expansion. Growing concern over
the deteriorating U.S..balance-of-payments position and the accompanying gold losses created uncertainties in the money market, which
were in part abated by the President's February 10 message to Congress introducing the voluntary foreign credit restraint program. As
the efficacy of this program became apparent, investor confidence reemerged and short-term as well as long-term interest rates were generally steady to lower throughout the remainder of the fiscal year.
By the end of the fiscal year the market rate on 3-month bills, after
reaching 4.0 percent, declined to about 3.8 percent while the average
yield on long-term Treasury bonds fell slightly to about 4% percent.
The Treasury was also aided in debt management efforts by a continuation of the trend of recent years toward smaller year-to-year
increases in the Federal debt (the public debt and guaranteed debt
not owned by the Treasury). The total debt rose by $5.3 billion in
fiscal 1965 compared with increases of $6.1 billion in fiscal 1964, $7.8
billion in fiscal 1963, and $9.4 billion in fiscal 1962. Marketable securities, which comprised almost two-thirds of the debt on June 30,1965,
totaled just $2.2 billion higher than a year earlier, marking the smallest fiscal year increase in this category of debt since fiscal year 1957.
Moreover, the supply of marketable Treasury securities held by the
public actually declined by $2.4 billion as Govemment investment
accounts and the Federal Reserve System absorbed $4i/^ billion of
marketable issues duruig the year. Official accounts also added $2
billion to their holdings of nonmarketable securities, for a total net
acquisition that was $1.2 billion greater than the $5.3 billion increase
in the Federal debt.
As illustrated by chart 4, commercial banks (particularly large
reserve city banks) continued to liquidate holdings of Govermnent
securities durmg the past fiscal year. These holdings declined by $2
billion, following a $4 billion decline in fiscal 1964. Large nonfinancial
corporations were also net sellers of governments in fiscal 1965 as the
yields on alternative money market instruments attracted an increasingly larger share of the corporate short-term investment funds which
remained after heavier capital spending outlays. As was true in fiscal
1964 net new investment in Federal securities in fiscal 1965, other than
that represented by Govemment investment account and Federal Reserve purchases, was largely concentrated in the portfolios of State and
local government general and pension funds, individuals, and corporate pension funds.




20

10 65 REPORT OF THE SECRETARY OF THE TREASURY
CHART 4

Changes in Public Debt Holdings by Investor Classes
$Bil.

•4^h-

Fiscal Year
1964 <

•2^
+23
0^

M

.*.4,3

Fiscal Year
^1965

f*2.8f

1

-2
-3.5

-£•

FINANCING OPERATIONS

As the new fiscal year began the financing outlook had improved
from earlier projections due to the stronger than anticipated budget
position during the last few inonths of fisoal 1964. The Treasurer's
account balance reached a relatively high level of $11 billion on June
30,1964, and earlier expectations of moderately heavy cash borrowing
in the upcoming July-September period were revised downward. The
budget deficit for fiscal 1965 w^as viewed as certain to be significantly
less than the $81/4 billion fiscal 1964 total with expenditures held below^
the level of the previous year and revenues rising somewhat. Reflecting the seasonally light flow of receipts \h^ budget deficit in the first
six inonths of the new fiscal year was expected to approach $9 billion,
follow^ed by a substantial surplus in the subsequent six-month period.
However, by drawing down the seasonally high cash balance at the
start of the fiscal year and entering the inarket for about $2 billion
of new money in July or August, it appeared that the Treasury could
postpone the bulk of new cash borrowing until the October-December
quarter.
This favorable cash outlook, together with outward signs of strength
in the Governinent securities market, presented the Treasury with an
opportunity to make a major debt restructuring effort. Consideration
centered on the possibility of including an early refunding in advance
of maturity of issues due m August and November 1964 into longer
term securities in addition to the advance refundinp' of selected issues




REVIEW OF FISCAL OPERATIONS

.

21

in the short to intermediate maturity range. With close to $30 billion
of coupon issues maturing on the 4 quarterly refunding dates of fiscal
year 1965 and $16% billion of the total held by the public (that is, in
the hands of individual, business, and institutional investors other than
the Federal Reserve banks and Government investment accounts) it
was hoped to refund a significant portion of these nearby maturities,,
along with some other short-term issues, in the existing receptive
market. A reduction in the volume of short dated debt also would
provide greater flexibility in the later fall cash operations by making
it possible to borrow through regular bills and tax anticipation bills
without adding so much to the economy's liquidity as to be an inflationary influence.
Accordingly, on July 8, the Treasury announced that the improvement of its cash position made unnecessary any immediate substantial
cash borrowing. At the same time, an advance refundmg offering was
made to holders of $42 billion of 9 selected note and bond issues maturing from August 1964-February 1967. This first financing of the new
fiscal year provided an opportunity for holders of these issues ($261^
billion in public hands) to exchange for reopened 4 percent bonds of
October 1969, new 4% percent bonds of 1973, and reopened 4^4 percent
bonds of August 1987-92. The terms of the offering were W'ell received
by investors .and public subscriptions reached a record high for advance refundings of $9.3 billion, 35 percent of eligible public holdings.
As a result of the large conversion public holdings of Issues maturing
in fiscal year 1965 were reduced by some $41^ billion, $114 billion was
added to the volmne of long-term debt outstanding, and the average
maturity of the marketable debt rose by almost 5 months tO' the highest level in 8 years. The successful offering was particularly helpful
in tightening the August and Noveihber maturities, reducing public
holdings of issues maturing in each of those months to a very manageable $214 billion.
The Treasury also announced at the time of the advance refunding
in July that the immediate cash needs of the Treasury would be met
through increases in the regular weekly bill offerings beginning with
a $100 million addition to the weekly auction of bills dated July 16.
The following two weekly auctions were increased by a like amount.
The demand for bills expanded sharply during the refunding period,
however, as some sellers of advance refunding "rights" entered the
bill market and reinvestment demand also developed from holders
of the $2 billion one year bills maturuig July 15. Bill rates moved
appreciably lower. Responding to the market demand, and mindful
of near-term needs for additional cash, the Treasury announced, on
July 20, a cash offering of a $1 billion strip of bills consisting of an
additional $100 million each of 10 weekly series dated October 15—•




22

19 65 REPORT OF THE.SECRETARY OF THE TREASURY

December 17, 1964. Bill rates immediately steadied and then turned
upward as supplies were enlarged and as market observers interpreted
the move as a sign of official concern over the trend and level of shortterm rates compared with those abroad.
The $4 billion remainder of the 5 percent notes and 3 % percent
notes maturing on August 15 were refinanced through a cash offering
of new 3 % percent 18-month notes, at par. The cash refinancing offer
was favorably received and subscriptions totaled $14.9 billion for the
$4 billion, or thereabouts, to be issued. Subscriptions received from
States and funds of other political subdivisions, Govemment investment accounts, Federal Reserve banks, international organizations
and foreign official accounts totaled $2.0 billion and were allotted in
full upon receipt of the required certification of ownership of the maturing securities. Subscriptions for less than $100,000 were allotted
in full while larger subscriptions were subject to a 15-percent allotment but were assured of a minimum award of $100,000.
The second major step taken to meet the anticipated cash requirements of the fall period was announced on August 21, 1964. Subscriptions were invited for $1 billion of 201-day tax anticipation bills
to be dated September 2, 1964, and to mature March 22, 1965. On
August 31, the Treasury announced a $100 million increase in the following regular weekly bill auction, and similar additions were made
for the next three weeks bringing the net hew cash borrowed through
the first three months of fiscal 1965 to $2% billion.
Treasury financing decisions through the remainder of the calendar
year 1964 were influenced by a combination of international and domestic developments. I n the international area imcertainties arose
over the British and U.S. balance-of-payments positions and were
strengthened, by the sterling crisis and resultant increases in the
British bank rate and Federal Reserve discount rate in late November.
Added to these concerns there were increased discussions in the market
of the possibility that domestic price stability might be threatened
by rising private credit demand associated with expanding business
activity. The outcome of the labor negotiations in the automobile
industry also generated a degree of market caution.
I n mid-October Treasury again entered the Govemment securities
market to borrow $ 1 % billion through the auction of additional March
22, 1965, tax anticipation bills. This step had been anticipated by
market observers in view of expected Treasury cash requirements
and commercial banks bid aggressively in the auction to obtain the
Treasury tax and loan account credit which was permitted up to 50
percent of bank allotments.
On October 28, the Treasury announced plans to refinance the $83^4
billion of 4 % percent notes and 3 % percent notes maturing Novem-




REVIEW OF FISCAL OPERATIONS

23

ber 15,1964. The Treasury offered $914 billion, or thereabouts, of new
4 percent 18-month notes for cash in order to pay off the maturing
securities and raise a moderate amount of new money. Subscriptions
totaling $21.9 billion were received for the issue and those received
from States, political subdivisions, Govemment investment accounts,
Federal Reserve banks, international organizations and foreign official
accounts were allotted in full if accompanied by the required certification of ownership of the maturing notes. All other subscriptions
were allotted in full up to $100,000 and larger subscriptions were
subject to a 16.5 percent allotment ratio with a minimum award of
$100,000.
Additional new cash was raised in November with an offering of $1.5
billion of tax anticipation bills to- mature in June 1965. As in
October, the Treasury allowed commercial banks to pay for 50 percent
of their purchases through direct crediting of tax and loan accounts,
and this resulted again in vigorous bank bidding for the bills.
This offering marked the completion of the borrowing program
(aside from regular bill rollovers) for the July-December half of
the fiscal year with a total of $6i/^ billion of new oash raised, primarily
through bills, and $22 billion of notes and bonds issued in exchange
and cash refunding operations.
Throughout the closing months of the calendar year the Treasury
considered possibilities for borrowing operations in the January-June
1965 period. While financial developments in late November, as
mentioned earlier, provided an additional complication, plans continued to focus on advance refunding possibilities should conditions
favor such an undertaking in the months ahead. Remaining cash
borrowing needs for the fiscal year were expected to be relatively light
with most of the total to be raised through additional June tax anticipation bills. The market for longer term governments improved in
early December and prices climbed back to the levels existing before
the discount rate increase in November. While bond prices declined
moderately by yearend, there appeared to be sufficient demand for
intermediate and longer term governments to warrant another advance refunding offering in early January. A good availability of
funds for long-term investment was in evidence with some signs of
easing in the demand for mortgage loans and no particular pressures
noticeable in either the corporate or municipal sectors.
The flow of liquid savings continued at record high levels and it was
felt that by moving ahead at the turn of the calendar year, the Treasury would remove some uncertainties surrounding new investment
programs for the coming year, and provide investors with an opportunity to extend their holdings at then current yield levels. It would




24

19 65 REPORT OF THE SECRETARY OF THE TREASURY

also be useful for the Treasury to gain the benefit of private investors'
desires to achieve debt extention and thus increase the flexibility of
future Treasury operations.
The announceinent on December 30 of an advance refunding offering
was well received by the market. Holders of $33 billion of 8 outstanding issues, including the nearby inaturing February 1965 bonds, in
addition to those maturing from Noveinber 1965—November 1967,
w^ere given an opportunity to extend their holdings into new 4 percent bonds of February 1970, new 41/8 percent bonds of February
1974, and reopened 4^4 percent bonds of August 1987-92. A total of
$9.1 billion or 41 percent of the $22.1 billion of eligible public holdings, were exchanged for the new issues. The Treasury was well
satisfied with the results of the offering, which exceeded earlier expectations, and welcomed the expression of iiiA^estor confidence in
current interest rate levels. Secondary distribution proceeded
smoothly assisted by a favorable market reaction to the President's
Budget Message and news of improvement in the British balance-ofpayments situation.
At the same time that the January advance refunding was announced, the Treasury indicated the intent to borrow shortly from
$ 1 % billion to $2 billion by adding to the outstanding June tax anticipation bill. The formal offering of $ 1 % billion of this issue was made
on January 6, for cash subscription on January 12. Commercial banks
were again allowed a 50 percent credit to their Treasury tax and loan
accounts in payment for their allotments and as a result the auction
attracted good commercial bank participation.
A technical shortage of short-term regular bills developed in the
inarket during the advance refunding period as strong reinvestment
demand originated from sellers of "rights." T o help counteract this
shortage and maintain international short-term interest rate relationships, as well as help cover some of the remaining fiscal year 1965 cash
borrowing needs, the Treasury announced on January 13 that $100
million would be added to the regular weekly auctions in coming
weeks. Each of the seven auctions for the bills issued from J'anuary 21—^March 4, w^as increased by this amount as well as the auctions
for the March 25, April 1, and April 15 issues. One auction, the issue
of April 8, was increased by $200 inillion to even out the existing pattern, leaving a cycle of $2.2 billion regular weekly bills maturing and
offered each w^eek: $1.2 billion of the 13-week bill and $1.0 billion of
the 26-week issue. This cycle was maintained through the balance of
fiscal 1965, along with the regular cycle of one-year bills maturing on
month-end dates, each in the amount of $1 billion.
The remainder of the 2% percent bonds maturing February 15,1965,
were paid off in cash from the proceeds of a routine offering of an




REVIEW OF FISCAL OPERATIONS

25

equivalent amount of 4 percent, 21-month notes priced at 99.85, to
yield 4.09 percent. The $2.2 billion of these 2%s to reach final maturity represented less than one-third of the amount originally issued
in June 1958. The issue had been made eligible in three advance refunding offerings and in the last of these, in January, $1.8 billion was
exchanged for the longer term securities then being offered.
Subscriptions for the new 4 percent notes totaled $10.6 billion and
those received from official institutions and public funds were allotted
in full. Subscriptions of $100,000 or less were also allotted in full
while larger subscriptions were subject to a 15 percent allotment ratio
but assured of a $100,000 miniinum aAA-ard. The 21-inonth maturity of
the notes offered in this refinancing represented a slight departure
from the length of short-term securities in recent cash and exchange
offerings and, in fact, was the only such maturity issued in more than
20 years.
The final financing operation of fiscal year 1965 consisted of the refinancing of $81/^ billion securities maturing May 15, 1965. The two.
inaturing issues were a 4% percent note and a 3 % percent note with
some $4.1 billion of the maturing total in public hands. This total
represented the largest public holding of the four quarterly refundings during the year and the largest since the $4.2 billion public holding
of May 1964, just a year earlier. The market environment was also similar to that of the previous spring, with long-term yields down slightly
and intermediate rates generally unchanged from a year earlier. The
only significant change in the yield structure had occurred in the shortterm area where the three-month bill rate had climbed nearly one-half
of one percent and one-year yields had increased a little over oneeighth of one percent. The budget picture was also one of improvement from the latest January estimates, with projected revenue flows
adequate to meet expenditures through the remainder of the fiscal
year.
The securities offered in the May refunding, in exchange for the
maturing notes were also similar to those offered a year earlier. Investors were given the opportunity to exchange for 4 percent 15-month
notes (priced to yield 4.12 percent) and 41/4 percent, 9-year bonds
(priced to yield 4.22 percent). The latter option was the same issue
that had been offered in 1964, reopened at a slight premium. Interest
centered primarily on the 414 percent bonds and public subscriptions
to this issue totaled $2.0 billion, compared to $1.7 billion for the shorter
term notes.
The two accompanying tables smnmarize the Treasury's major
financing operations during the fiscal year and table 45 provides data




26

19 65 REPORT OF T H E SECRETARY OF T H E TREASURY

on allotments by investor classes. The exhibits on public debt operations provide further information on public offerings and allotments
by issues in tables and representative circulars.
Public offerings of marketable Treasury securities excluding refinancing of regular
bills (three-month, six-month, and one-year) fiscal year 1965
[In millions of dollars]
Issued for cash

Issued i n
exchange
Total

Description

Date

For
new
money

For
For
refund- m a t u r ing
ing
issue

I n advance
refunding

BONDS AND N O T E S

1961^
Apr, 1
J u l y 22
J u l y 22
J u l y 22
A u g . 15
Oct. 1
N o v . 16

13'^% exchange n o t e - A p r . 1,1969 i
4 % b o n d - O c t 1,1969, a d d i t i o n a l
4 H % b o n d - N o v , 15, 1973
4 H % b o n d - A u g 15, 1987-92, additional
3 % % n o t e - F e b . 15, 1966 3
-_
iy^% exchange n d t e - O c t . 1,1969 i
4% n o t e - M a y 15, 1966 3

1965
J a n . 15
J a n . 15
J a n . 15
F e b . 15
Apr. 1
M a y 15
M a y 15

4 % b o n d - F e b . 15, 1970
4V^% b o n d - F e b . 15,1974
434% b o n d - A u g . 15, 1987-92, a d d i t i o n a l
4 % n o t e - N o v 15, 1966 '
1 H % exchange n o t e - A p r . 1,1970 i
4% n o t e - A u g . 15, 1966, a d d i t i o n a l a t 99.85
i H % b o n d - M a y 15, 1974, a d d i t i o n a l a t 100 25

2 48
'"3,'726"
4,357
1,198
4,040
159
811

1964
1965

86

N o v . 24
1965
J a n . 18

897

19, 046

43, 063

2,168

14, 916

8,204

VALUE)

Increase i n t h r e e - m o n t h a n d six-month bills:
July through September
October t h r o u g h D e c e m b e r
January through March
April through June
.. _

608
100
802
399

3.711% 155-day (tax anticipation) J u n e 22, 1965,
additional
_ -. .

608
100
802
399

1,909

O t h e r bill offerings:
3.505% 109.6-day average for s t r i p *
3.580% 201-day (tax anticipation) M a r . 22, 1 9 6 5 . . 3.518% 147-day (tax anticipation) M a r . 22, 1965,
additional.3.639% 210-day (tax anticipation) J u n e 22, 1965

T o t a l bills
T o t a l p u b l i c offerings _ __

4,381
3,130
2,254
2,254
31
5,904
2,062

31
5,904
2,062

T o t a l increase
1964
J u l y 29
Sept. 2
Oct. 26

........
4,381
3,130
2,254

_..

T o t a l b o n d s a n d notes
BILLS * (MATURITY

8,708

48
3,726
4,357
1,198
. 4,040
159
9,519

1,909

1,001
1,001

1, 001
1,001

1,503
1,505

1,503
1,505

1,758

1,758

8,677
9,574

14, 916

8,204

19, 046

8,677
51, 740

1 Issued only on demand in exchange for 2^4% Treasury Bonds, Investment Series B-1975-80.
2 Issued subsequent to June 30,1964.
3 A cash offering (all subscriptions subject to allotment) was made for the purpose of paying off the maturing securities in cash. Holders of the maturing securities were permitted to present them in payment in
lieu of cash to the extent subscriptions were allotted. For further detail see exhibit 1.
4 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.
5 Consists of additional amounts of 10 series of outstanding regular weekly Treasury bills, $100 million
maturmg each week from Oct. 15 through Dec. 17, 1964.




REVIEW OF FISCAL

27

OPERATIONS

Disposition of marketable Treasury securities excluding regular bills (three-month,
six-month, arid one-year) fiscal year 1965
[In millions of dollars]
Securities
D a t e of
refundm g or
retirement

1964
J u l y 22
J u l y 22
J u l y 22
J u l y 22
J u l y 22
J u l y 22
J u l y 22
J u l y 22
J u l y 22
A u g . 15
A u g . 15
Oct.
1
N o v . 15
N o v . 15
1965
J a n . 15
J a n . 15
J a n . 15
J a n . 15
J a n , 15
J a n 15
J a n . 15
J a n 15
F e b . 15
Apr. 1
M a y 15
M a y 15

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

Issue d a t e

E x c h a n g e d for
n e w issue
Total
At
maturity

In
advance
refunding

B O N D S AND N O T E S

5% n o t e - A u g . 15, 1964
3^4% n o t e - A u g . 15, 1964
4 ^ % n o t e - N o v . 15, 1964
3 % % n o t e - N o v . 15, 1964
Z H % n o t e - M a y 15, 1965
3 ^ % n o t e - F e b . 15, 1966
Z H % b o n d - M a y 15, 1966
4 % n o t e - A u g . 15, 1966
3 ^ % n o t e - F e b . 15, 1967
5% n o t e - A u g . 15, 1964
Z H % n o t e - A u g . 15, 1964
1 H % exchange n o t e - O c t . 1, 1964
i H % n o t e - N o v , 15, 1964
3 % % n o t e - N o v . 15, 1964

Oct.
Aug.
Feb.
Aug.
Nov.
May
Nov.
Feb.
Mar,
Oct.
Aug.
Oct.
Feb.
Aug.

15,1959
1,1961
15,1960
15,1963
15,1963
15,1962 .
15,1960
15,1962
15,1963
15,1959
1,1961
1,1959
15,1960
15,1963

2 ^ % b o n d - F e b , 15, 1965
33^% n o t e - N o v , 15, 1965 _
4 % n o t e - N o v , 15, 1965
3 ^ % n o t e - F e b . 15, 1966
3 ^ i % n o t e - F e b . 15, 1966.—
3 M % b o n d - M a y 15, 1966
3-K% n o t e - A u g . 15, 1967
3 ^ % b o n d - N o v 15, 1967
2 ^ % b o n d - F e b . 15, 1965
13^% exchange n o t e - A p r . 1, 1965
4 ^ % n o t e - M a y 15, 1965
ZH7o n o t e - M a y 15,1965

June
Nov.
May
May
Aug.
Nov,
Sept,
Mar,
June
Apr,
May
Nov.

15,1958
15,1962
15,1964
15,1962
15,1964
15,1960
15,1962
15,1961
15,1958
1,1960
15,1960
15,1963

845
1,175
600
519
1,357
2,392
612
664
1,117

845
1,175
600
519
1,357
2,392
612
664
1,117
1,198
2,910
490
3,267
5,441

1,808
1,337
461
1,065
1,443
563
1,504
1,584

1,061
1,094
490
901
1,182

1,808
1,337
461
1,065
1,443
563
1,504
1,584
2,168
466
1,816
6,620

19, 046

43, 423

1137
11,817
1 2,366
1 4, 260

1,649
466
281
189

1,535
6,431

7,313

Total bonds and notes
1965
M a r 22
M a r . 22
J u n e 22
J u n e 22

Redeemed
for cash
or carried to
matured
debt

17, 064

1518

BILLS

3.580%
3.518%
3 639%
3.711%

(tax
(tax
(tax
(tax

anticipation)
anticipation)
anticipation)
anticipation)

Sept.
. . Oct.
Nov.
Jan.

T o t a l bills.'
T o t a l securities

22,1964
26,1964
24,1964
18,1965

1,001
1,503
1,505
1,758

2 1, 001
21, 503
21, 505
21, 758
5,767
13, 080

17, 064

19,046

5,767
49,190

1 Accepted in payment in lieu of cash.
2 Including tax anticipation issues returned for taxes.

Public debt changes

The Treasury issued $51.7 billion of new marketable securities during fiscal 1965, exclusive of the refinancing of regular three-month,
six-month, and one-year bills, or slightly more than the $51.6 billion
volume of fiscal 1964. Over $9.6 billion of the 1965 total represented
securities for new cash, of which $5.8 billion w^as seasonal borrowing
through tax anticipation bills issued and redeemed within the fiscal
year. Of the remaining $3.8 billion new cash raised, $2.2 billion represented an increase in the marketable debt. The remaining $1.6 billion was used to pay off maturing exchange notes in October 1964 and
April 1965, to retire unexchanged maturing securities in the May refunding, and to redeem Treasury bonds during the year for the payment of estate taxes. I n addition to new cash operations, $19 billion



28

19 65 REPORT OF THE SECRETARY OF THE TREASURY

of longer term securities were placed with investors in the advance
refundings of July 1964 and January 1965, and over $23 billion of
notes and bonds were issued to replace securities maturing during the
year. Over one-fourth of the $155% billion marketable notes and
bonds outstanding on June 30, 1964, were extended during the subsequent 12 months, while the $50% biUion outstanding bills were rolled
over an averaa'e of almost two and one-half times.
June 30,
1965

June 30,
1964

Increase, or

(-)

Class of debt
In billions of dollars
Pubhc debt:
Marketable public issues, maturing:
Within one year
. One to five years
Five to twenty years
Over twenty years
. Total marketable issues
Nonmarketable public issues:
Saving^ bonds:
Series E and H
Other series
Investment series bonds
Foreign series securities
Foreign currency series securities..
Other nonmarketable debt
Total nonmarketable issues
Special issues to Government investment accounts..
Noninterest-bearing debt
Total pubhc debt
Guaranteed debt not owned by Treasury.
Total gross pubhc debt and guaranteed debt..

81.4
65.5
43.3
16.3
206.5

6.2
-9.3
4.3

87.6
56.2
47.6
17.2
208.7

47.7
1.6
3.5
.4

1.2
3.3
1.1
1.1
.2

1.1
-.3
-.3
.7
.3

(*)

54.2
46.6
4.4

55.8
48.6
4.2

1.5
2.0

311.7

317.3
.6

5.6
-,2

317.9

5.3

*Less then $50 million.

Although the shortest term marketable debt—that maturing within
the foUowing year—increased by $614 billion in fiscal 1965 as the
volume of regular Treasury bills rose and the terms of outstanding
issues shortened, the debt inaturing w^ithin the potentially troublesome
one-to-five year area declined by $9% billion. The total of debt maturing beyond 5 years was increased by $514 billion, or by almost 9
percent. Further use of the advance refmiding technique played a
major role in achieving this rise in longer term debt. I n the advance
refundings of July 1964 and January 1965 holders of $19 billion of
issues maturing within 3 years elected to exchange for bonds inaturing
in from 5 to 28 years. Of the exchanges, $3l^ billion were for 27-28
year maturities, $7% biUion for the approximately 9-year issues, and
the remaining $8 billion for tlie 5-year issues made available. Tlie net
eft'ect of all Treasury financing operations during fiscal year 1965 was
to uicrease the average niaturity of the marketable debt by 4 months to
5 years 4 months, the highest June 30 level since 1956.
Public nonmarketable debt increased by $1.5 billion during the year,
reaching $55.8 billion on June 30, 1965. The change during the year



REVIEW OF FISCAL OPERATIONS

29

was largely the result of $1.1 billion increase in Series E and H savings bonds and $1.1 billion increase in securities issued directly to foreign official agencies, offset by declines in discontinued Series J and K
savings bonds and investment Series A and B bonds. The increase in
Series E and H savings bonds, which are purchased principally by
individuals, brought the total for these two series to $48.8 billion, or
16 percent of the total interest-bearing debt on June 30, 1965. The
$0.7 billion increase in foreign series securities and the $0.3 billion
increase in securities denominated in foreign currencies are discussed
on page 32.
Special securities issued directly to Governnient trust funds and
accounts rose by $2.0 billion during fiscal 1965, mainly reflecting the
surplus of receipts over expenditures in the civil service retirenient,
unemployment, and Federal old age and survivors insurance trust
funds. The fiscal year 1965 income, expenditure and investment activities of the major trust funds and accounts are detailed in tables
66—83 and discussed on page 33.
Guaranteed debt not owned by Treasury consists of $20 million
District of Columbia stadium bonds, due in 1979, and $569 million
Federal Housing Admmistration debentures issued under the Housing
Act of 1934. The $0.2 billion decline in this category during fiscal
1965 was entirely the.result of F H A debentures called for redemption
during the year.
OWNERSHIP OF FEDERAL SECURITIES

Of the $317.9 billion Federal securities outstanding at the end of
thefiiScalyear 1965, Governmeiit investnient accounts and Federal Reserve banks held $102.5 billion, or close to one-third of the total. Commercial banks held $58.3 billion, or just under one-fifth, and private
nonbank investors held almost one-half, or $157.1 billion. The June
30, 1965, ownership distribution of the debt is graphically illustrated
in chart 5 and a further classification of investor ownership on selected
dates is presented in the following table.
Individuals, the investor group wdth the largest holdings of the
public debt, increased their ownership of Federal securities by $2.0
billion during fiscal 1965. Although more than half of this increase
was due to the continued rise in the value of their Series E and H
savings bond holdings, individuals also added to their accumulation
of marketable Government securities. The increase in holdings of
marketable securities in fiscal 1965 was in all probability concentrated
•within the personal trust and partnership areas, however, certain
long-term deep discount securities continue to be attractive to wealthy
individuals as evidenced by the $0.3 billion unmatured Treasury bonds
redeemed during fiscal 1965 in payment of estate taxes.




30

19 65 REPORT OF THE SECRETARY OF THE TREASURY
CHART 5

Ownership of the Federal Debt June 30,1965
$Bil.
Totol

Gov't Invest.
' Accounts

300 •

Federal
' Reserve
200 •

Private
Nonbank Investors

ComI B a n k s i
318

IX/ 71/^ * ^ Individuals
lOO---

Savings ^ ^ K Z ^ M
Milutiof^s
y^m^^^.^corps
All Other ^ V y i ^ ' k '

Ownership of Federal securities^ by investor classes on selected dates, 1941-65
[Dollar amounts in billons]
Change
during
fiscal
year
1965

June 30,
1941

Total individuals
Insurance companies
Mutual savings banks
Savings and loan associations
State and local governments
Foreign and international *..
Corporations * _
Miscellaneous investors *

,.

Total private nonbank investors
nnTnmero.ial bfl.nks
Federal Reserve banks
Federal Government investment accounts.
Total gross debt outstanding

June 30,
1964

June 30,
1965

$0.2
11.0

Estimated ownership by:
Private nonbank investors:
Individuals: s
Series E and H saving bonds
Other securities

Feb. 28,
1946 2

$30.8
33.3

$47.3
21.9

$48.3
22.8

$1.0
.9

11.2
7.1
3.4
.1
.6
.2
2.0
.4

64.1
24.4
11.1
2.5
6.7
2.4
19.9
4.0

••69.2
10.9
6.0
6.7
22.5
15.6
'•18.5
7.0

71.1
10.6
5.8
7.2
24.1
15.7
15.1
7.6

2.0
-.3
-.2
.6
1.6
.1
—3.6
.6

25.0
19.7
2.2
8.5

135.1
93.8
22.9
28.0

156.4
60.2
34.8
61.1

157.1
58:3
39.1
63.4

.7
-2.0
4.3
2.3

55.3

279.8

312.5

317.9

5.3

Percent
Percent owned by:
Individuals nonbank investors
,_
Other private . - . . .
Commercial banks
Federal Reserve banks
Federal Government investment accounts
Total gross debt outstanding

20
25
36
4
15

23
25
34
8
10

22
28
19
11
20

23
• 27
18
12
20

100

100

100

100

r Revised.
' Gross public debt, and guaranteed debt ofthe Federal Government held outside the Treasury.
2 Immediate postwar peak of debt.
3 Includes partnerships and personal trust accounts. Nonprofit institutions and corporate pension,trust
funds are included under "Miscellaneous investors."
4 Includes the investments of foreign balances and international accounts in the United States.
5 Exclusive of banks.and insurance companies.
6 Includes nonprofit institutions, corporate pension trust funds, and nonbank Government security
dealers.




REVIEW OF FISCAL OPERATIONS

31

The Government security holdings of insurance companies declined
during fiscal 1965 as life companies liquidated $0.3 billion and fire,
casualty and marine companies showed a small increase for the year.
On June 30, 1965, life insurance companies held $5.2 billion governments while property and casualty insurance companies held $5.4
billion. Although the average maturity of marketable governments
held by life insurance companies feU nine months during fiscal 1965,
the end-of-year level was still high at 19 years 11 months, as these
institutions continue to hold a large proportion of their portfolios in
long-term securities. In contrast the fire, casualty and marine companies, with a less predictable claim experience, tend to hold short and
intermediate-term securities as primary and secondary reserves. However, the average maturity of their marketable governments rose
sharply during the fiscal 1965, from 5 years 9 months at the beginning
of the year to 6 years 11 months on June 30, 1965, ^as these companies
exchanged for higher-yielding issues in the July 1964 and January
1965 advance refundings.
Mutual savings banks reduced their holdings of governments by
$0.2 billion in fiscal 1965 to a level of $5.8 billion at yearend. These
institutions typically use short-term Treasury securities as a form
of liquid reserve and as tempoi'ary investments for funds earmarked
for future mortgage acquisitions, while maintaining an investment
position in longer term issues. During the fiscal year 1965 their
holdings of Treasury bills rose by $0.2 billion, other securities declined
by $0.4 billion, and the average maturity of all marketables increased
by three months to 10 years 10 months. The increase in the average
maturity of marketable holdings was also primarily due to participation in the two advance refundings during thefiscalyear.
Savings and loan associations have increased their holdings of
Govemment securities during each of the past 11 fiscal years, rising
from less than $2 billion on June 30,1954, to $7.2 billion at the end of
fiscal 1965. Held primarily as liquidity reserves, the Federal securities purchased by savings and loan associations are generally short
to intermediate-term maturities. Close to 75 percent of their Govemment portfolio matures within 10 years with the heaviest concentration
of holdings in bonds with from 5-10 years to maturity.
State and municipal governments held $24.1 billion of Federal securities on June 30, 1965, $1.6 billion more than at the end of the fiscal
year 1964. Pension funds of State and municipal employees continued to add to holdings of governments, acquiring a net $0.5 billion
during fiscal 1965. As would be expected by the nature of these
funds the bulk of investment is in long-term Treasury issues, as evidenced by the 20 year 10 month average maturity of their June 30,1965,




32

19 65 REPORT OF THE SECRETARY OF THE TREASURY

holdings. The general purpose funds of States and municipalities, on
the other hand, are invested in goveniinents for a relatively short
period of time, generally as seasonally surplus tax revenues. During
the high revenue spring months these investments are increased, only
to be drawn down during the fall months when expenditures exceed
current revenues. As a result the shortest term Treasury securities
are purchased (to avoid the risk of price fluctuations) and Treasury
bills are in particularly heavy demand for this purpose. I n addition
to excess tax revenues the proceeds of capital niarket borrowings are
also invested in Treasury securities until needed, as are the receipts
to speciah purpose funds, such as sinking, endowment, and workmen's
conipensation funds. During the fiscal year 1965 all of the nonretirement type funds showed an increase of $1.1 billion in holdings of
Government securities.
Foreign and international investments in U.S. Govermnent securities rose by $0.1 billion in fiscal 1965 as a $0.4 billion increase (from
$9.9 billion to $10.3 billion) in foreign holdings was partially offset
by a $0.3 billion reductioii (froin $5.7 billion to $5.4 billion) in securities held by international and regional institutions. Within the foreign group, liquidation of official French and Gernian holdings, totaling $1.0 billion, was more than balanced by Italian and United Kingdom acquisitions totalmg $1.1 billion, also primarily for official
accounts. Sjpecial nonmarketable securities, issued directly to foreign
inonetary authorities, Avere increased by $1.1 billion durmg the fiscal
year while holdings of marketable Treasury securities fell by $0.7
billion.
The decline in international and regional institutions' holdings consisted of a $0.2 billion drop in marketable securities held by the International Bank for Reconstruction and Development and a $0.1 billion
reduction of special iioiiiiiterest-bearing notes issued to the International Monetary Fund. On June 30, 1965, the securities held for
international and regional accounts consisted of $3.5 billion noninterest-bearing special notes and $1.9 billion marketable Treasury bills,
notes, and bonds.
Nonfinancial corporations were heavy liquidators of Federal securities during the fiscal year as holdings fell to the lowest levels since
the recession induced loAvs.of 1958. Almost all of the $3.5 billion fiscal
year 1965 decline in corporate holdings of governments appear to be
related to switching on the part of large industrial firms mto higher
yielding alternative short-term investments. Federal securities have
historically been used by corporations as convenient investments of
funds earmarked for income tax, dividend, and other anticipated nearterm payments, i During the past few years, however, conimercial




REVIEW OF FISCAL OPERATIONS

33

bank certificates of deposit and open market paper have assumed a
major role in this area. The trend toward greater investment in
non-Federal money market instruments began in the early 1960s and
became pronounced in the fiscal years 1964 and 1965 following the
July 1963 and November 1964 revisions in the maximum rates payable
by Federal Reserve meinber banks on time and savings deposits.
Prior to fiscal 1965 much of the flow into these instruments appeared
to be net new investment and conversioii of demand deposits to time,
with holdings of governments remaining relatively stable from year
to year. During the fiscal year 1965, how^ever, corporate investment
in governments declined by almost 20 percent as holdings of negotiable certificates of deposit and commercial paper combined increased
by approximately 30 percent, or $4i/^ billion.
Activity of the remaining private nonbank investor groups (nonprofit institutions, nonbank dealers, corporate pension funds, and
miscellaneous smaller institutions) resulted in a $0.5 billion increase
during the fiscal year.
Commercial banks were net sellers of Federal securities in fiscal
year 1965 for the third consecutive year. Although banks were active
purchasers of governments during most of the first six months of the
fiscal year, heavy liquidation in the last half of the year brought total
holdings down by $2.0 billion for the full 12-month period. The
larger reserve city commercial banks acquired $1.4 billion governments frpm June 30 to Deceinber 31, 1964, then sold a net $3.3 billion
during the following six months in order to meet sharply rising loan
demands. Smaller commercial banks (country and nonmember institutions) were also actively purchasing governnients through December
1964, adding a total of $2.4 billion, and then liquidating a like aniount
in the following 6-month period.
The Federal Reserve Systeni acquired a net $4.3 billion Govemment
securities in fiscal year 1965, $1.5 billion more than in fiscal 1964. The
increase in net purchases during fiscal 1965 was necessary in order to
offset reserve drains caused by increased sales of gold and other technical factors as well as to provide for growth in member bank reserves.
Acquisitions of Treasury bills accounted for $2.8 billion of the increase
and the remaining $1.5 billion was in coupon securities. The average
maturity of the $39.1 billion Federal securities held in the System
Open Market Account on.June 30,1965, was 15% months, two months
lower than a year earlier.
The holdings of Government investment accounts rose by $2.3 billion in the fiscal year 1965, or by $0.5 billion less than in fiscal 1964.
The largest increases during 1965 were registered by the Government
employee retirement funds ($1.2 billion) and the unemployment trust
fund ($1.0 biUion). Of the $63.4 biUion Federal securities held by




34

1965 REPORT OF THE SECRETARY OF THE TREASURY

these accounts on June 30,1965, $48.6 billion, or over three-fourths of
the total, was in the form of special issues held only by these accounts.
The remaining one-fourth of the total consisted of $2.2 billion of nonmarketable securities (primarily investment series bonds) and $12.4
billion of intermediate and longer term marketable issues.
A summary of the Treasury survey of ownership of the interestbearing public debt and guaranteed debt for fiscal 1965 is shown in
table 57.
Taxation Developments
Taxation developments in 1965 were highlighted by the passage of
the Excise Tax Reduction Act of 1965. The measure was designed
to simplify the tax system, lessen the burden of regressive taxes, and
provide more purchasing power with the consequent creation of employment opportunities for the expanding labor force.
The legislation eliminated, as of June 22, 1965, the 10-percent retailers excise tax on such items as toilet articles, wallets and handbags,
jewelry, and furs. I n addition, manufacturers excise taxes on many
other items were eliminated or reduced on the same date with later
reductions scheduled for January 1,1966, January 1,1967, January 1,
1968, and January 1,1969.
The total annual excise tax reduction, when the program is in full
effect, will be about $4.7 billion. About $1.75 billion of the reduction
became effective on June 22,1965, and an approximately equal amount
wUl become effective on January 1, 1966. The tax reduction for 1966
will thus total about $3.4 billion. The additional reductions will be
effective in three stages, on January 1,1967,1968, and 1969.
Modifications of the application of the depreciation guideline procedure initiated in 1962 liberalized the manner in which depreciation deductions may be taken and increased depreciation benefits in 1965 by
some $600 million to $800 million as compared to the results that
w^ould have occurred if the procedure had remained unchanged.
The Interest Equalization Tax Extension Act of 1965, designed to
strengthen our international economic position, was pending before
the Ways and Means Committee at the end of fiscal 1965 and was subsequently approved.
I n response to requests by the Senate Committee on Finance and
the House Committee on Ways and Means, the Treasury Department
examined the activities of private foundations for possible tax abuses.
The Department's report on this subject, which was printed, by the
Committee on Finance on February 2, 1965,^ indicated that serious
abuse of the tax exemption privilege occurred among only a minority
1 See exhibit 37.




REVIEW OF FISCAL OPERATIONS

35

of foundations. Recommendations were made for additional legislative measures to meet problems disclosed by the study.
Excise Tax Reduction Act of 1965

The Excise Tax Reduction Act of 1965, Public Law 89-44, was
approved by President Johnson on June 21,1965.
Since the revenue acts of 1962 and 1964 had been devoted to income
tax adjustments and reductions, the President stated in his budget
message of January 25, 1965, that attention should now be given to
excise reductions as a means of providing further aid to economic
growth and of minimizing the burden on consumers and business
resulting from the taxes on sales of selected goods and services. Accordingly, the President stated that he planned to transmit to the
Congress an excise reduction program, $1,750 miUion of whicii was to
be effective before July 1,1965. Other excise proposals in the budget
message related to user charges for highways, airways, and waterways.
The highway user charge proposals of the President involved increasing the tax on diesel fuel from 4 cents to 7 cents a gallon, increasing the use tax on heavy trucks from $3 to $5 per 1,000 pounds,
and increasing the tax on tread rubber from 5 cents to 10 cents a pound.
Increased revenue from the proposals was estimated to be $206 million
per year. The highway user charge proposals had two objectives:
To provide increased revenues to meet the new cost estimates of completing the Interstate System and to obtain from heavier trucks the
highway construction costs attributable to them. To finance the increased construction costs, the President recommended an extension of
the taxes used to finance the highway trust fund beyond the present
expiration date of September 30, 1972. The President subsequently
recommended an extension to February 28,1973.
The President recommended, as an airways user charge system, continuation of the 5-percent tax on amounts paid for transportation of
persons by air, a tax of 2 percent on air freight waybills, a tax of 2
cents a gallon on jet fuel (which is not now taxed although aviation
gasoline is taxed at 2 cents a gallon), and an additional tax of 2 cents
a gallon on fuel used in general (noncommercial) aviation. He recommended that revenues from the tax on aviation gasoline be retained
in the general fund of the Treasury rather than transferred to the
highway trust fund. Revenue from the recommendations for these
tax increases was estimated at $86 million.
As a waterways user charge, the President recommended a tax of
2 cents a g-allon on all fuel used in boats with a draft of 15 feet or less
using the domestic waterways and not engaged in foreign trade. Gasoline, but not diesel fuel or bunker fuel, used in boats is now taxable




36

19 65 REPORT OF THE SECRETARY OF THE TREASURY

at a net rate of 2 cents a gallon. The present tax thus is largely limited to fuel used in pleasure boats. The new tax was estimated to
raise $8 million.
On May 17 the President sent a message ^ to the Congress with the
details of an excise reduction program totaling $3.9 billion at estimated
fiscal 1966 levels of income. Highlights of the program had been
made public by the President on May 15. Of the total, a reduction
of $1,750 million was recommended for July 1, 1965, about the same
amount for January 1, 1966, and further reductions totaling $464
million for January 1, 1967, 1968, and 1969. The increase from the
aniount recommended in January was made possible by the improved
economic situation over that foreseen in January. The reductions
suggested for January 1966 were deemed desirable to avoid the possibility that the tax system would be taking too much buying power
out of the private economy.
To insure that the reductions made the maximum contribution to
continued price stability and balanced prosperity, the President requested that business promptly pass forward to consumers the full
amount of the reductions. The President reemphasized this when
he signed the Excise Tax Reduction Act of 1965 on June 21.^ The
hearings published by the Senate Finance Committee, as a result of
a request by a member of the committee, contain copies of telegrams
to the Chairman of the Committee from the four largest doniestic
passenger car manufacturers expressing their intention to reflect any
excise reduction in their suggested retail prices on passenger cars.
The President's recommendations in May contemplated eventual
repeal of all excises except those on: (1) alcoholic beverages, (2)
tobacco products, (3) passenger automobiles (to be reduced by onehalf), (4) truck parts and accessories, (5) pistols and revolvers, and
(6) a nuniber of levies designed as control measures (e.g., the taxes on
narcotics, white phosphorous matches, wagers, and machine guns).
The taxes used to finance specific expenditure programs, or which were
in the nature of user charges were also to be retained. These were the
taxes on motor fuels, trucks, tires and tubes, tread rubber, truck use,
fishing equipment, sporting firearms and ammunition, and transportation of persons by air. I t was also recommended that the tax reductions scheduled for July 1,1965, on alcoholic beverages, cigarettes,
and truck parts, and the repeal of the tax on air transportation be removed from the law.
Refunds of tax already paid on items subject to manufacturers excises and held by wholesalers and retailers for sale on the date of tax
reduction or repeal were recommended in all cases except: fountain
1 See exhibit 3'0.
2 See exhibit 33.




REVIEW OF FISCAL OPERATIONS

37

and ball-point pens and mechanical pencils, cigarette lighters, playing
cards, passenger automobile parts and accessories, and sporting goods.
An innovation in Federal tax policy was the recommendation for
a refund to consumers (through the medium of the manufacturers and
their dealers) of the tax on purchases of passenger automobiles and
air conditioners between May 15 and the effective date of the law.
May 15 was recommended because the President's statement on that
date specifically mentioned his intended recommendations with respect to reduction and repeal of these taxes. Such refunds were proposed in order to prevent disruption of sales as a result of consumer
anticipation of price reductions. Air conditioners have a unique seasonal pattern with a high proportion of retail sales normally occurring
in June. I h the case of automobiles, the large dollar amount per unit
of the proposed tax reduction was deemed a possible sales deterrent.
The consumer refund recommendation was limited to these two items
because other businesses affected by the tax reduction recommendations
felt that the complexity and cost of the paperwork involved would
outweigh the benefits.
Since the House Ways and Means Committee had held extensive
hearings on excise tax reduction in the summer of 1964, the committee
held no further hearings on the President's recommendations. Hearings before the Senate Finance Committee were limited to statements
by Secretary Fowler and Assistant Secretary Surrey on June 8.^
The House and Senate agreed to the conference report on the President's recommendations on June 17, 1965. On June 21, the President
signed the bill to become effective on June 22. The Congress had
provided that the effective date should be the day after enactment of
the law in order to minimize the postponement of purchases by consumers and distributors.
Tax repeals or reductions under the act ultimately will total $4.7
billion at fiscal 1966 levels of income. (See exhibit 33). Practically
all of the difference from the $3.9 billion program recommended by
the President ^ is accounted for by the fact that the act provides for
eventual reduction of the tax on passenger automobiles to one percent
of manufacturers sales prices, rather than to five percent recommended
by the President. The additional four points reduction will result in
a revenue loss of $760 million. Reductions taking effect in fiscal 1966,
however, will be practically the same as the $3.5 billion recommended
by the President.
The House Ways and Means Committee decided not to consider
user charges as part of the excise tax legislation, except to make permanent the 5-percent tax on ainounts paid for transportation of per1 See exhibits 31 and 32.
2 See exhibit 30.




38

19 65 REPORT OF T H E SECRETARY OF T H E

TRE.ASURY

sons by air. Consequently, the other recommendations of the President respecting user charges were not considered in the course of the
legislation.
Another variation from the President's recommendations was the
repeal of the 10 cents per pound tax on smoking and chewing tobacco
and snuff effective January 1, 1966. The estiinated revenue loss is
$18 inillion. Conversely, the act retains the 6 cents per gallon tax on
lubricating oil if used in a highway motor vehicle. Taxation was
continued because the Congress felt that repeal would seriously affect
operations of rerefiners of used oil and add to the water pollution
problem if waste oil were disposed of in streams because it was not collected by rerefineries. I n the case of the taxes on truck parts and accessories and lubricating oil, provision was made for the transfer of
the revenues therefrom from the general fund to the highway trust
fund beginning January 1, 1966. Revenues to be so transferred are
estimated to be $50 million per year from lubricating oil and $20 million from truck parts.
The eft'ective date for repeal of the tax on conveyances of realty was
advanced from January 1, 1966, as originally recommended by the
President, to January 1,1968, in order to give the States time to enact
a similar tax if they wished.
A number of new exemptions from taxes not otherwise repealed
were added by the act. So called camper coaches and bodies for
miobile homes were exempted from the taxes on manufacturers sales of
trucks (10 percent) or truck parts (8 percent). Exempted from the
tax on trucks were three wheel trucks if the gross weight of the chassis
does not exceed 1,000 pounds and the motor is not over 18 brake horsepower. The tax on trucks also was removed from school buses sold
to any person for use in transporting students and employees of public
and private nonprofit schools. Also exempted from the truck tax and
truck parts t a x ' w e r e bodies and parts and accessories primarily
designed for use in processing, hauling, spreading, loading or unloading, feed, seed, or fertilizer for use on farms. Exemption from
the tax on transportation of persons by air was provided within the
concept of "uninterrupted international air transportation" for payments by servicemen traveling in uniform at their owii expense if they
purchase their tickets for the second portion of their trip within 6
hours after the end of the first portion and utilize the first accommodations available for such subsequent portion. An exemption from the
wagering tax retroactive to Marcli 10, 1964, was enacted for sweep. stakes or lotteries conducted by a State. As of the end of fiscal 1965
New Hampshire was the only State operating sweepstakes.




REVIEW OF FISCAL OPERATIONS

39

I n addition to the floor stocks refunds recommended by the President, provision was made for refunds on passenger automobile parts
and accessories, sporting goods, playing cards, and cutting oil.
Under prior law, refunds (in whole or in part) of the excise tax
on gasoline were made to the ultimate purchaser for gasoline used on a
farm for farming purpoises, for nonhighway purposes, and for certain
local transit operations. Under the Excise Tax Reduction Act, such
"refunds" will be made in the form of credits against income tax. In
the case of a typical calendar year taxpayer, the credit will be taken
first on the income tax return filed for the calendar year 1966 and will
cover gasoline used from July 1, 1965, through December 31, 1966.
However, the United States, a State, or political subdivision, and
organizations exempt from income tax under section 501 of the Intemal Revenue Code (other than those subject to inconie tax on certain
inconie) will continue to apply directly for refunds. I n the case of
gasoline used for off-highway and local transit purposes, a direct
claini for refund is permitted for any of the first three quarters of the
user's taxable year for any quarter in which the claim is $1,000 or more.
Prior law contained this quarterly refund provision, but for all four
quarters of the year.
A similar system for credit against income tax, direct quarterly
refunds, or direct refunds to the United States, etc., was enacted for
the 6 cents a gallon tax on lubricating oil for oil used other than in a
highway motor vehicle after December 31, 1965. Credits or refunds
will not be available for oil previously used, since the sale of used or
rerefined oil is not subject to tax. Cutting oil, which is to be exempted •
from tax as of January 1, 1966, will qualify for exemption under the
normal procedure rather than through a credit or refund to the ultimate purchaser.
The act also contains a number of technical revisions of taxes
continued in effect.
The definitions of a cigarette and cigar were revised in recognition
of the development and use of homogenized tobacco for use as wrappers of tobacco products. Prior law defined a cigarette as a roll of
tobacco wrapped in paper or any substance other than tobacco. A
cigar was defined as a roll of tobacco wrapped in tobacco. The new law
expands the definitions to make the classification of a product also
dependent on its appearance, type of tobacco used in the filler, and its
packing and labeling.
Gasoline was redefined as "all products comnionly or coromercially
known or sold as gasoline whicii are suitable for use as a motor fuel."
Prior law did not include the "suitability" test, and the law specifically
included casinghead and natural gasoline. Thus, some products, such
as casinghead and natural gasoline and certain petrochemicals, were




40

19 65 REPORT OF THE SECRETARY OF THE TREASURY

taxed as gasoline although they could not be used in a modern automobile. The retail tax on special motor fuels was amended, however, to tax casinghead and natural gasoline if sold for use or used as a
fuel for a motor vehicle, motorboat, or airplane.
The definitions of local telephone service (previously general telephone service), toll telephone service, and teletypewriter exchange
service were revised to clarify the services taxable.
Other teclinical changes covered: Determination of tax on installment sales made before tax repeals or reductions; electric light bulbs
incorporated in other articles between June 22 and Deceniber 31,1965 ;
the definition of truck parts or accessories; the definition of the taxable
price of truck parts made with used components furnished by the customer; the use of new parts in rebuilding and reconditioning automobile and truck parts; bonding requirenients for producers and importers of gasoline; registration by purchasers of tax-free supplies for
vessels or aircraft; the method of payment of the tax on foreign insurance policies; credit or refund of tax for distilled spirits returned
to bonded premises; exemption from rectification tax for certain
mingling of distilled spirits; refund or credit of tax for distilled spirits
returned to bonded preniises and voluntarily destroyed; redistillation
of articles containing denatured distilled spirits; relanding of exported
distilled spirits; the amount of carbon dioxide permitted in still wines;
wine inventory reserve requirements and certain restrictions relating
to the use of sugar in wines; the tax-free shipment of distilled spirits
to possessions of the United States; credit to the manufacturer or importer for tax on tobacco products or cigarette papers or tubes withdrawn from the niarket or destroyed by casualty; the definition of
"manufacturer of tobacco products"; and the fonn in whicii a retum
has to be filled out to start the running of the statute of limitations.
Other excise tax legislation

Legislation approved August 31,1964 (26 U.S.C. 5062(c)), provided
for credit or refund of internal revenue taxes on imported alcoholic
beverages which, after having been found to be unmerchantable or
not to conform to sample or specifications, are returned to customs
custody, and then exported or destroyed. Doniestic alcoholic beverages already were accorded substantially sunilar treatment.
The Land and Water Conservation Fund Act of 1965, Public Law
88-578, approved September 3, 1964, provided that the estimated
revenues from the taxes on gasoline and special motor fuels used in
motorboats shall be transferred to the land and water conservation
fund. Transfers are effective with respect to revenues received after
January 1, 1965, and before July 1, 1989. Previously, such revenues
accrued to the highw^ay trust fund. F o r the fiscal year 1966, it is
estimated that $28 million will be so transferred.



41

REVIEW OF FISCAL OPERATIONS
Rate reductions and revenue loss under ihe Excise Tax Reduction Act of 1965
[Dollar amounts in millions]

Tax
Changes effective June 22, 1965:
Retail taxes:
Jewelry
Furs
Toilet preparations
Luggage
Subtotal
Manufacturers taxes:
Automobiles 2
Trucks and truck parts:
"Camper coaches" 3
School buses
Farm feed, seed, and fertilizer
equipment.
Small three-wheeled trucks
Business machines
Sporting goods (except fishing
eqmpment).
Phonograph records
Musical instruments
Television sets
Radios and-phonographs
Photographic equipment

Rate prior to Excise Tax
Reduction Act

Rate under Excise
Tax Reduction Act

10%.
10%-.
10%-.
10%..

Full year
revenue
loss 1

$220
30
210
90
550

10%

7%..

10% and 8%-.
10%
10% and 8%-.

0....
0—.
0....

10%..
10%-.
10%-.

570

(*)
(*)

10%
10%
10%..
10%
Cameras and film, 10%; projectors, 5%.
5%.
Refrigerators and freezers
10%
Room air conditioners *
Electric, gas, and oil appliances... 5%
10%
Pens and mechanical pencils
10%, not to exceed 100 per unit.
Lighters
Plain, 10%, not to exceed 20
Matches
per 1,000; fancy wooden,
5H^ per 1,000.
130 per pack
Playing cards..

Subtotal
Other taxes: *
Coin-operated amusement devices.
Bowling alleys, billiard, and pool
tables.
Leases of safe deposit boxes
Wagering:
State-conducted sweepstakes s..

75
25
30
27
135
90
40
41
34
85
8
3
4
11

1,188
$10 per device per year

6

$20 per aUey or table per year..

7

10% of amount paid

7

(*)

10% of amount wagered; $50
per year for each person receiving wagers.

SubtotalTotal effective June 22,1965...
Changes effective January 1,1966:
Tobacco taxes:
Chewing and smoking tobacco
and snuff.
Manufacturers taxes:
Automobiles
Automobile parts ahd accessories,
except truck parts.
Lubricating oil:
Cutting oil
Other, used other than in a
highway vehicle.
Electric light bulbs
Subtotal
Admissions and club dues:
General admissions ^
Cabarets ^
_
Club dues and initiation fees «.
SubtotalFootnotes at end of table.




1,758
100 per pound..
10%

6%-.
0—.

190
230

30 per gallon..
60 per gallon.

28

10%

45
511

10 for each 100 in excess of $1;
race tracks, 10 for each 60 of
full price.
10% of bill
20% of amount paid if annual
dues are in excess of $10.

55
47
85

42

19 65 REPORT OF THE SECRETARY OF THE TREASURY

Rate reductions and revenue loss under ihe Excise Tax Reduction Act of 1965Continued
[Dollar amounts in millions]

Tax
Changes effective January 1,1966—
Continued
Communications raxes:
Local and long distance telephone
service and teletypewriter exchange service.
Private telephonic conmiunications service.
Telegraph service
.
Wire and e quipment service
.
Subtotal
Documentary stamp taxes:
Issuance of stocks and bonds:
Stocks, except mutual funds.
Mutual fund shares
Bonds
-^
Transfer of stocks and bonds:
Stocks
Bonds

Rate prior to Excise Tax
Reduction Act

10% of amount paid.

Rate under Excise
Tax Reduction Act

3% of amount paid.

Full year
revenue
loss 1

$639

10% of amount paid..
10% of amount paid..
8% of amount paid...

17
15
801

100 per $100 of actual value.
40 per $100 of actual value..
110 per $100 of face value....
153

40 per $100 of actual value, but
not more than 80 per share
or less than 40 per sale.
50 per $100 of face value

Total effective January 1,1966.

1,652

Total 1965 and 1966 changes.

3,410

Changes effective January 1,1967:
Automobiles
Local and long distance telephone
service and teletypewriter exchange service.

10% of manufacturers price..
10% of amount paid

4% of manufacturers
price.
2% of amount paid...

91

2% of manufacturers
price.
1% of amount paid...

91

Total effective January 1,1967...
Changes effective January 1,1968:
Automobiles
Local and long distance telephone
service and teletypewriter exchange service.
Deeds of conveyance
.

10% of manufacturers price..
10% of amount paid
550 per $500 of the consideration if in excess of $100.

42

Total effective January 1,1968..
Changes effective January 1,1969:
Automobiles
Local and long distance telephone
service and teletypewriter exchange service.
Total effective January 1,1969...
Grand total.^

513
10% of manufacturers price..
10% of amount paid

1% of manufacturers
price.
0

190
92

282
4,676

*Less than $1 million.
J At fiscal 1966 levels of income.
2 Effective May 15,1965.
8 Includes bodies for self-propelled mobile homes.
* Effective July 1,1965.
fi Effective Mar. 10,1964.
6 Exemption achieved by refund to ultimate purchaser.
7 Effective at noon, Dec. 31,1965.
8 Effective July 1,1965, for initiation fees to a new club which first makes its facilities available to members
on or after that date.

Public Law 88-653, approved October 13, 1964, made three amendments to the excise tax provisions. Rebuilt automobile parts were
exempted from the 8-percent manufacturers tax on automobile parts
and accessories. The value of a television picture tube taken in trade



REVIEV7 OF FISCAL OPERATIONS

43

on a rebuilt tube was excluded from the taxable price for purposes of
the 10 percent manufacturers tax on radio and television parts. Exclusion of the value of a "trade in" had previously been in effect for
purposes of computing the tax on rebuilt automobile parts. The act
also contained a provision making it possible to produce wine by
removing the volatile fruit-flavor concentrate from the juice before
fermentation and then to add it back to the wine after fermentation.
The act made clear that such an operation would not result in the wine
having to be classified as "imitation" wine.
Depreciation developments

On February 19, 1965, the Treasury Department announced ^ several measures modifying the application of the new depreciation
guideline procedure initiated in 1962 (Revenue Procedure 62-21).
In general, the new measures liberalized the manner in which income
tax deductions for depreciation of plant and equipment can be taken
to insure that business may reap the full benefit of the 1962 depreciation reform. At the same time, the Treasury limited the ways in which
guideline depreciation can be calculated to exclude certain accounting
techniques that are incompatible with the guideline procedure.
The combination of the new liberalized rules and the new limitations
was estimated to result in increasing depreciation tax benefits during
1965 by some $600 million to $800 million over what they would have
been if the 1962 reform had not been modified.
The new liberalizing measures and limitations were subsequently set
forth in Eevenue Procedure 65-13 of May 7, 1965, supplementing
Revenue Procedure 62-21, Depreciation Guidelines and Rules,
The new liberalizing measures are: (1) a method (called the "guideline form of the reserve ratio test") which allows each taxpayer to
compute a reserve ratio upper limit more correctly tailored to his individual circumstances, as an alternative to determining such limit from
the Reserve Ratio Table under the "tabular form" of the test; (2) a
"transitional allowance rule" which eases and extends the transition
from previous depreciation practices and gives taxpayers additional
time to conform their replacement policy to the new guideline lives;
it will do so by raising the effective reserve ratio upper limit, determined under either the tabular form or the guideline form of the test,
over a new lengthened transition period equal to one guideline life beginning with the termination of the original three-year moratorium
on the application of the reserve ratio test; and (3) a "minimal adjustment rule" which reduces the lengthening adjustments of depreciable
life in cases where the reserve ratio test is not met from generally 25
percent under the original procedure to 5 percent or 10 percent, de1 See exhibit 35.




44

19 65 REPORT OF THE SECRETARY OF THE TREASURY

pending on the extent by which the taxpayer fails to meet the reserve
ratio test.
Also added are limitations on the use of depreciation calculation
techniques, involving the use of multiple-asset open end accounts in
conjunction with the straight line or sum-of-the-years-digits method,
designed to prevent exaggerated depreciation deductions under the
guideline procedure, particularly during the liberalized transition
period. Accounts depreciated under the declining balance method are
not affected.
Without the new liberalization, an estimated 60 percent of larger
firms would not have qualified under the reserve ratio test in 1965.
This would have reduced total tax benefits in 1965 resulting from the
1962 guideline revision, estimated at $1.8 billion, by some $700 million
to $900 million. The three liberalizing measures will allow the great
bulk of firms which would have failed the test in 1965 to meet it, continuing some $600 million to $800 million of the benefits which otherwise they would not have been eligible to receive.
Other legislation enacted

Legislation approved July 17, 1964 (26 U.S.C. 512(b) (14)), provides an exemption from the tax on unrelated business income in the
case of labor unions and agricultural or horticultural organizations
where three conditions are met. First, the inconie must be used to
establish, maintain, or operate a retirement home, hospital, or similar
facility operated for the exclusive use of aged and infirm members of
such organizations. Second, the income must be derived from agricultural pursuits on ground contiguous to the home, hospital, etc.
Third, this income may not represent more than 75 prcent of the cost
of maintaining and operating the facilities.
Public Law 88-484, approved August 22, 1964, amends the "collapsible corporation" provisions of the tax laws so that they will not
apply to the sale of stock in a corporation whicii consents to a special
tax treatment on any later disposition by it of its noncapital assets as
of the date of sale of the stock.
Public Law 88-554, approved August 31,1964, extends for two more
years certain temporary rules with respect to the deductibility of
accrued vacation pay.
Public Law 88-570, approved September 2, 1964, provides that gain
from installment obligations which were transmitted to a taxpayer at
the time of death of a decedent in taxable years before 1954, but on
whicii payments are still being made, may be reported by the recipient
on a pro rata basis as he receives installment payments without the
necessity, lieretof ore required, of maintaining a bond with the Internal
Revenue Service to assure this reporting of income. This law also
provided that where real property is sold and the seller receives a



REVIEW OF FISCAL OPERATIONS

45

mortgage on such property, and subsequently is forced to repossess
the property, any gain resulting from such repossession is to be limited
to money (and value of other property) received by the seller before
the repossession to the extent such ainounts have not already been
reported ias income.
Public Law 88-571, approved September 2, 1964, makes five modifications in the tax treatment of life insurance coinpanies and two other
amendments. The life insurance modifications are as follows: First,
it extends the 8-year loss carryover to new life insurance companies
regardless of whether they are affiliated with other companies. Second, it corrects an imperfection in prior law which permitted a double
inclusion in the "shareholders surplus account" with respect to the
excess of net long-term capital gains over net short-term capital losses.
This double inclusion, which was removed by the act, permitted the
distribution to shareholders of an amount equal to twice this capital
gain without the paynient of tax at the time of distribution (with certain other adjustnients) under what is called "phase 3." Third, the
act corrects an imperfection in the additions whicii are required to be
made to the "policyholders surplus account." The new law provides .
that if any amount added to the policyholders surplus account for
any year increases or creates a loss from operations, and part or all of
that loss cannot be used in any other year to reduce the company's
taxable incoine, then the policyholders surplus account for the last
year to which this loss may be carried is to be reduced by the amount
of the unused loss or, if less, the amount in the policyholders account
(before making any subtractions for that year). Fourth, the act
adds a new exception to the phase 3 tax which makes that tax inapplicable in the case of spin-offs of the stock of an 80-perceiit controlled
fire or casualty subsidiary to the shareholders of a life insurance
coinpany, subject to certain restrictions. Fifth, the new law permits
the investment incoine of life insurance companies to reniain free of
tax to the extent attributable to reserves for retirement annuities of
public school systems. I n addition, the act provides that all ores of
beryllium are to receive the same percentage depletion treatment when
domestically produced as domestically produced beryl, and that foreign expropriation capital losses may be carried over 10 years rather
than for the usual period of 5 years.
Public Law 88-650, approved October 13, 1964, contains provisions
affecting the old-age, survivors, and disability insurance program in
three ways: first, it permits a disabled worker to establish the beginning of his disability, for purposes of social security protection, as of
the date he actually became disabled regardless of when he files his
application; second, it extends through April 15,1965, the time within
which certain ministers can elect to be covered under social security;



46

19 65 REPORT OF THE SECRETARY OF THE TREASURY

and, third, it validates certain earnings reported under social security
of engineering aides working for soil and water conservation districts
in Oklahoma.
Legislation pending as of June 30,1965

H.R. 6675, passed by the House on April 8, 1965, and reported with
amendments by the 'Senate Finance Committee on June 30, 1965, includes provisions which establish a health insurance system, increase
social security benefits, raise the wage base and the rates of contribution for employees, employers, and the self-employed, and make some
changes in the uicome tax treatment of medical expenses. As passed
by the House, the bill would terminate the special treatment of.the
medical expenses of taxpayers who are 65 or over. Thus, the provision of present law limiting medical expense deductions for a taxpayer,
his spouse, or his dependents under age 65 to the amount of such expenses in excess of three percent of adjusted gross income, including
expenses for medicine and drugs to the extent they exceed one percent
of adjusted gross income, is extended to all taxpayers, spouses, and
dependents regardless of age. In addition, the bill provides that all
taxpayers itemizing their deductions are to be granted a deduction,
without regard to the three-percent floor, for one-half the cost of
medical care insurance but not to exceed $250. The other half of any
preniiums paid, plus any excess over the $250 limit for medical care
insurance, will continue to be subject to the three-percent floor and
only when they plus any other allowable medical expenses exceed
three percent of adjusted gross income will they be deductible. The
House bill would also cover tips under social security and the withholding of income tax.
Administration, interpretation, and clarification of tax laws

During the fiscal year the Treasury Department stepped up its program of issuing regulations under the Internal Revenue Code.
Seventy-seven final regulations, 13 Executive orders, and 58 notices
of proposed rulemaking, relating to matters other than alcohol and
tobacco taxes, were published in the Federal Register,
A special effort was made to publish those regulations interpreting
the important provisions of the revenue acts of 1962 and 1964. Fifteen of the published Treasury decisions related to regulations under
the Revenue Act of 1964, and nine notices of proposed rulemaking were
published in connection with other regulations under that act. Fourteen of the published Treasury decisions related to regulations under
the Revenue Act of 1962, and six notices of proposed rulemaking were
published in connection with other regulations under that act.
At the end of fiscal 1965, final or proposed regulations had been
published for every significant provision of the 1962 act and for all



REVIEW OF FISCAL OPERATIONS

47

but eight of the significant provisions under the 1964 act. In addition, the Treasury decisions published in 1965 included significant
regulations under other revenue acts and some significant amendments
in earlier regulations.
Among the issues covered in the Treasury decisions published were
the sick pay exclusion, the deduction of moving expenses, the limitation on the medicine and drug deduction, the acceleration of corporate
estimated tax, lobbying expenses, the minimum standard deduction,
the retirement income credit, the denial of a deduction for certain
State and local taxes, the income of export trade corporations and
foreign investment companies, professional service corporations, distributions by foreign corporations, foreign controlled corporations,
and foreign investment companies.
Notices of proposed rulemaking published during the fiscal year
and still pending at the end of the year included those relating to:
group term insurance; foreign expropriation losses and other net
operating loss deductions; employee stock options and purchase plans;
interest on deferred payments; and investment credit recapture.
International tax matters

H.R. 4750, the Interest Equalization Tax Extension Act of 1965,^
was pending before the House Ways and Means Committee on June
30, 1965. (It was enacted and approved by President Johnson on
October 9, 1965 (Public Law 89-243).) It extends the termination
date of the interest equalization tax on the acquisition by a U.S. person
of stock of a foreign issuer, or a debt obligation of a foreign obligor
with a period remaining to maturity of three years or more, from
December 31, 1965, to July 31, 1967, and enlarges its scope to make
taxable the acquisition after February 10, 1965 (the date of President Johnson's Special Message to Congress on the Balance of Payments) by a U.S. person of a debt obligation of a foreign obligor with
a period remaining to maturity between one year and three years.
Other technical amendments included in the act have the effect of
granting exclusions for specific acquisitions whose deterrence is not
required to further the balance-of-payments policies implemented by
the tax.
H.R. 5916, a bill to encourage investment by foreign persons in the
United States which was prompted by the 1964 Report of the Fowler
Task Force, was also pending before the House Ways and Means
Committee on June 30, 1965. A new bill embodying committee
amendments (H.R. 11297) was introduced in September 1965 and
circulated for public comment.
The new income tax convention with Luxembourg was ratified by
the Senate in July 1964. Instruments of ratification were exchanged
1 See exhibit 46.




48

19 65 REPORT OF THE SECRETARY OF THE TREASURY

in December 1964, and the treaty is effective for taxable years beginning on or after January 1,1964.
Two supplementary protocols to the tax convention with Japan
came into force during fiscal year 1965. The first, signed in May
1960, came into force in September 1964. The second, signed in
August 1962, came into force in May 1965.
Discussions on a protocol to the income tax treaty with Belgium
were concluded during the year, and a protocol was signed in May
1965, which revises the treaty largely to take account of the 1962
Belgian income tax law. Discussions were concluded during the year
with Germany on a protocol to update the present German income tax
treaty. Both protocols were signed and were the subject of hearings
before the Subcommittee on Tax Treaties of the Senate Committee
oil Foreign Relations.
Negotiations were begun with France to revise the present French
treaty signed in 1945. Although negotiations were still in progress
at the close of fiscal 1965, it is expected that the new treaty will be
patterned after the model inconie tax convention prepared by the
Organization for Economic Cooperation and Development ( O E C D ) .
Negotiations were also initiated with Portugal on an income tax
convention.
Three income tax treaties were negotiated with less-developed countries during fiscal 1965: A treaty was signed with the Philippines on
October 10, 1964; on March 1, 1965, a treaty was signed with Thailand ; and on June 29, 1965, one was signed with Israel. The Israeli
and Thai treaties contain provisions which have not appeared previously in U.S. tax treaties and which are designed specifically for income tax treaties with less-developed countries. The most important
of these is a credit to be granted American investors against their
U.S. tax liability on income from any source equal to seven percent
of the capital invested in a qualified enterprise in the less-developed
country and a similar credit for the reinvestment of amounts in excess
of one-half the profits of such enterprise. Hearings were held by the
Senate Subcommittee on the treaty with Thailand but action on it
was deferred until 1966.
Income tax treaty negotiations were also held with India during
the year, but were not concluded. Tentative agreement was reached to
include the investnient credit provision in the new Indian treaty.
Treasury representatives participated in the preparation of a report
on "Fiscal Incentives for Private Investment in Developing Countries" which was adopted by the O E C D Fiscal Committee and published during the year. The Fiscal Committee also made progress
toward completion of a model estate tax convention.




REVIEW OF FISCAL OPERATIONS

49

I n t e r n a t i o n a l Financial Affairs
The U.S. balance of payments and gold and dollar movements

The U..S, balance of payments,—The payments situation deteriorated during the last half of the calendar year 1964, reaching an
annual rate of $6.2 billion during the fourth quarter. The deficit resulted from a substantial increase in net outflows of private U.S.
capital. On February 10, 1965, President Johnson transmitted a
special Balance-of-Pa3nnents Message to the Congress calling for a
wide range of new, primarily voluntary, nieasures to extend the
balance-of-payments program to the bulk of our international
transactions.
The American commercial and financial communities responded
with their immediate support of the new payments program. Particularly significant was the reversal of the flow of short-term U.S.
liquid funds, which swung from a heavy net outflow to a net inflow.
I n March the United States had a substantial payments surplus. The
improvement continued throughout the second.quarter of 1965 when
the first quarterly surplus in several years was registered.
The net deficit registered during the first half of calendar 1965
resulted from the combination of large deficits in January and February, and surpluses in March through June. While the turnaround
was in good part ascribable to the President's payments program, the
improvement also reflected certain special, transient factors.
During the first half of 1965 the paynients deficit on regular transactions ran at an annual rate of $1.3 billion, seasonally adjusted; this
compared favorably with the more than $6 billion annual rate deficit
registered in the fourth quarter of 1964, and the $3.1 billion deficit
recorded for the calendar year 1964.
U.S. gold sales (excluding the increased gold subscription to the
International Monetary Fund) amounted to $1.2 billion. These were
the counterpart of a reduction in holdings of foreign official dollar
balances of nearly $1.0 billion. The cashing-in of these holdings for
gold reflected in part the unusually large foreign ojficial acquisitions
during the fourth quarter of 1964.
The U.S. payments deficit on regular transactions, which excludes
special inter-Government transactions, amounted to $3.1 billion in
1964, a slight improvement over the 1963 deficit. The overall 1964
deficit—which includes as receipts, in addition to the regular transactions, any net inflows arising out of special intergovernmental
transactions (sales of special nonmarketable, nonconvertible Treasury
bonds to official foreign institutions, prepayments to the U.S. Government of official foreign debts, and prepayments for U.S. Govemment
military exports)—came to $2.8 billion, compared with $2.7 billion
in 1963.
782-556'--6i6^

4




50

19 65 REPORT OF THE SECRETARY OF THE TREASURY

However, the full measure of the deterioration in the U.S. payments
position is masked by these year-to-year comparisons. I n the fourth
quarter of 1963 the overall deficit at an annual rate was $612 million,
compared with $5.5 billion in the fourth quarter of 1964. This $4.9
billion deterioration mainly reflected the $4.3 billion increase in outflows of private U.S. capital. Over the same period the U.S. commercial current account surplus rose by $1.6 billion to an annual rate
of $5.5 billion.
The President^, program.—The President's message of February 10,
1965, recommended a new balance-of-payments program which was
the result of a careful review of the situation by the Cabinet Committee on the Balance of Payments, chaired by the Secretary of the
Treasury. I t was designed to respect the criteria and decisions of the
marketplace, as opposed to the use of compulsory controls. Therefore, a prime element in the prograni was its reliance on the voluntary
cooperation of the U.S. commercial and financial community.
U.S. banks were asked to hold total claims outstanding on foreign
residents to 105 percent of the level at the end of 1964. Guidelines
developed by the Board of Governors of the Federal Reserve System
for implementing this program were designed to assure that credits
to finance U.S. exp'orts, and loans to less-developed countries, could
be adequately met. I n addition, consideration for the special positions of Canada, ^ Japan, and the United Kingdom was requested.
Within these broad guidelines each bank decides the direction of its
particular overseas activities. A similar approach was permitted nonbank financial institutions in their foreign lending and investing
activities.
U.S. industrial corporations also were asked to improve their individual balance-of-payments accounts, combining all transactions such
as exports, dividend income, royalties, fees, and capital outflows from
the United States. The objective was to leave the corporations free
to adjust these components of their individual payments accounts
while achieving a significant net payments improvement.
To reduce the tourist deficit, Americans as well as foreigners were
encouraged to travel more in this country. Legislation was recommended and subsequently enacted on June 30, 1965 (Public Law
89-62), reducing the duty exemption on purchases made abroad by
returning U.S. residents.
The February 10 program also: Extended the interest equalization
tax through July 1967; broadened the interest equalization tax to
include lending of one to three years' maturity; and activated the
President's authority to apply the interest equalization tax to bank
loans of one year or more maturity. To stop any excessive flow of
funds to Canada under its special exemption from the interest equali-




REVIEW OF FISCAL OPERATIONS

51

zation tax, the President sought and received firm assurance that the
policies of the Canadian Governinent would be directed toward limiting such outflows to the maintenance of a stable level of Canada's
foreign exchange reserves. The program also called for an intensification of U.S. Governnient efforts to minimize the foreign exchange
costs of our defense.and aid programs; an increase in our efforts to
promote U.S. exports; and finally, encouraging more investments
from abroad, by increasing, through new tax legislation, the incentive
of foreigners to invest in U.S. securities.
The effect of the payments program.—On the basis of seasonally
adjusted data, an improvement of $950 million in the overall payments balance was achieved from the first to the second quarters of
the calendar year 1965. The details of quarterly balance-of-payments
statistics from January 1964—June 1965 are contained in table 99.
The reduction in the net outflow of private U.S. capital, from $1.5
billion in the first quarter of 1965 to $264 million in the second quarter
accounted for a good part of the improvement. The largest quarterto-quarter change occurred in U.S. net bank claiins on foreigners: an
outflow of $435 rnillion in the first quarter was converted to an inflow
of $369 million in the second quarter. This improvement reflected
a reduction in net U.S. bank loans to developed countries, indicating
bank compliance with the priorities suggested by the Federal Reserve
guidelines. The total bank inflows from March through June were
sufficient to place banks under the ceilings suggested in the Federal
Reserve guidelines and to leave adequate room for expansion of bank
credits to finance U.S. exports.
U.S. corporations repatriated large amounts of short-term liquid
investments abroad in the March-June period. I n the first two quarters of 1965 nonbank, short-term U.S. capital showed an inflow of
$575 million seasonally adjusted, compared to an outflow of $588
million in the full year 1964.
U.S. direct investment outlays in the second quarter amounted to
about $880 million. While this represented a decline from the first
quarter rate, it was at an annual rate considerably 'above the total for
1964. This continued high level of direct investment outlays may
have reflected in part the difficulty in tapering, off already-developed
capital expenditure plans.
Treasury foreign exchange reporting system.—A number of steps
were taken in fiscal 1965 to improve the reporting of capital movements statistics which enter into the U.S. balance of payments, particularly by nonbanking concerns. Procedures for the monthly reports of liquid assets held abroad by large companies were changed to
expand the. reporting group and to ensure more accurate reporting
of monthly changes in holdings. At the same time the exemption level




52

19 65 REPORT OF THE SECRETARY OF THE TREASURY

for the quarterly reports was raised to exempt smaller firms from the
reporting requirement, without significantly affecting the statistics.
Special instructions were issued to reporting firms to ensure proper
reporting of funds placed abroad. Following the initiation in February 1965 of the President's voluntary balance-of-payments program,
various types of nonbanking financial firms were informed of the
Treasury reporting requirements.
Early in the year, a survey was made to ascertain the types of shortterm dollar liabilities to foreigners, aside from deposits and Government obligations, held for the account of foreigners. I n connection
with the publication of the capital movements statistics in the Treasury
Bulletin.^ a number of changes were introduced, including the publication of liabilities to foreign official institutions by area (beginning
with the September 1964 issue), and a breakdown by type of shortterm liabilities and claims of nonbanking concerns (first published in
May 1965).
Gold and dollar Koldings.—The gold and dollar holdings of foreign
countries (excluding gold holdings of the U.S.S.R., other Eastern
European countries, and China Mainland) amounted to an estimated
$51.4 billion as of June 30, 1965. Of this total, official gold holdings
were $26.9 billion. Official and private short-term dollar assets held
with banks in the United'States were $22.9 billion, and estimated official
and private holdings of inarketable U.S. Government bonds and notes
amounted to $1.6 billion. (See table 96.)
During fiscal 1965 gold and dollar holdings of foreign countries
increased by $3.4 billion. Official gold holdings derived from all
sources increased by $1.9 billion. The increase of $1.5 billion in the
dollar holdings of foreign countries accrued entirely to private accounts, with officia;l holdings declining by $13 million.
Western European countries increased their gold and dollar assets
by $2.5 billion during fiscal 1965, substantiaUy more than the gain of
$1.1 billion during fiscal 1964. Italy gained $785 million; the United
Kingdom $662 million; and France $643 million. The gold and
dollar assets of most other Western European countries increased,
except for the decreases of $698 million for the Federal Republic of
Germany and $17 million for Austria.
Canadian gold and dollar holdings declined by $141 million and
African holdings by $164 million. Latin American holdings rose by
$251 million. The total gain of Asiatic countries was $807 million,
of which $377 million was made by Japan. The rest of the world
gained $115 million.
The gold and dollar holdings of international and regional organizations decreased by $874 million during fiscal 1965: Those of the International Monetary Fund declined by $649 million, while the holdings



REVIEW OF FISCAL OPERATIONS

53

of other international and regional organizations declined by $225
million. The F u n d gold holdings exclude payments made to it in
anticipation of increases in quotas, including the $259 million in gold
paid by the United States in June 1965 as part of its increase. These
payments will not be taken into the Fund's regular accounts until the
requisite nuniber of countries (having two-thirds of the quotas in
effect on February 26,1965) consent to their quota increases.
The official gold holdings of the world (excluding the U.S.S.R., other
Eastern European countries, and China Mainland) increased by an
estimated $75 million during fiscal 1965, amounting on June 30,1965,
to $43.0 billion. Of the world total, the United States held $14.0
billion and international and regional institutions $1.8 billion. See
tables 96 and 97.
Treasury exchange and stabilization agreements

During the fiscal year 1965 Treasury exchange agreements were in
effect with Brazil, Chile, the Dominican Republic, and Mexico. A one
year Treasury exchange agreement in tlie amount of $6,250,000 was
concluded with the Dominican Republic ^ on August 10, 1964. A
$16,120,000 Treasury exchange agreement wath Chile ^ was signed on
February 4, 1965, effective for one year. On February 23,1965, a one
year Treasury exchange agreement in the aniount of $53,660,000 was
signed with Brazil.^
Foreign exchange operations

The dollar, after generally weakening against most major currencies
from July-December 1964, showed renewed strength in the exchange
markets after the President's February 1965 message. Despite the
large U.S. payments deficit incurred in the last quarter of 1964 and
the severe pressure, at times, on sterling, the dollar was not under
speculative attack. This was largely because speculation has been
discouraged by the network of defenses which have been steadily
erected over the past five years and because the President in his Balance-of-Payments Message of February 10 reaffirmed the determination of the United States to eliminate its deficit.
The dominant force on exchange markets during the year was selling
pressure on sterling. Through November, short-term assistance to
the Bank of England in financing market operations was provided by
a nuniber of foreign central banks as well as through utiliza;tion of the
Federal Reserve swap arrangement. This assistance was repaid in
early December when the United Kingdom drew $1 billion from the
I M F . At the end of November, in further support of the United
1 See exhibit 52 and table 100.
2 See exhibit 58 and table 100.
3 See exhibit U m ^ table 100.




54

19 65 REPORT OF THE SECRETARY OF THE TREASURY

Kingdom's determination to defend sterling, the United States joined
10 other countries and the Bank for Intemational Settlements in arrangements to provide the United Kingdom with the equivalent of
$3 billion of additional assurance. Through the next six months the
United Kingdom utilized portions of this to help finance exchange
operations. On May 28, 1965, it drew $1.4 biUion from the I M F , a
large part of whicii was used to repay drawings from the $3' billion
"package."
Cumulative deficits in the U.S. balance of payments over recent
years, accentuated by a heavy capital outflow in the last three months
of 1964 and in January 1965, led to an accumulation of dollar reserves
by certain foreign central banks in excess of desired levels and to large
purchases of gold in the latter part of the fiscal year. One important
objective of Treasury and Federal Reserve foreign exchange operations was to ease demands for gold by absorbing dollars held by the
central banks and facilitating shifts from official to private holdings.
To some extent, official dollar gains resulted from flows which appeared likely to be reversed in the future. These could appropriately
be offset by short-term operations such as the utilization of Federal
Reserve swap facilities, forward market operations, and swaps with
the Bank for International Settlements involving foreign currencies.
I n addition, the Treasury issued further amounts of special mediumterm, nonmarketable securities to Austria, Germany, and Switzerland.
The operations undertaken by the Treasury and Federal Reserve
are described in detail in articles published semiannually by the
Federal Reserve Bank of New York which, as agent or manager,
carries out the operations of both the Treasury and the Federal
Reserve. See exhibits 48 and 49.
The International Morietary Fiind

During fiscal 1965, 27 member countries drew the equivalent of
$3,180.7 million in convertible currencies from the Fund, an increase
bf 41.5 percent in the total assistance made available by the Fund
since it began operations in 1947. Total drawings as of June 30,1965,
were $10,841.2 million equivalent.
The exceptional activity of the Fund reflected the support operation for the pound sterling. Assistance to the United Kingdom
totaled $2,400 million equivalent, or more than three-fourths of total
Fund lending during the fiscal year. For the first time, the General
Arrangements to Borrow (GAB) was activated. The GAB is an
agreement among 10 major industrial countries (the Group of Ten)
to provide mutual financial assistance. The Fund borrowed $405
million equivalent from 8 countries for relending to the United Kingdom in December 1964, and $525 million in May 1965. I n associated




REVIEW OF FISCAL OPERATIONS

55

transactions Switzerland made available to the United Kingdom the
equivalent of $80 million, and $40 million, respectively. Switzerland
is not a member of the Ten, but is associated with them by special
agreement. In neither instance did the Fund borrow from the United
States.
The United States was the second largest user of the Fund during
fiscal 1965, with drawings amounting to $350 million.^ All U.S.
drawings of currencies were intended for sale for U.S. dollars at par
by the United States to countries holding reserves in dollars and wishing to make repurchases of their own currencies from the Fund. Under Article V, Section 7(b), the Fund is precluded from accepting for
repurchase any currency of which the Fund's holdings are 75 percent
of the country's quota. During all of fiscal 1965 the Fund's holdings
of. dollars exceeded 75 percent of the U.S. quota and no repayments
were accepted in dollars. The U.S. drawings, however, enabled countries holding dollars to make repayments to the Fund without
inconvenience.
The Deutsche Mark was the currency most used in Fund transactions. The equivalent of $862.2 million in Deutsche, Marks (27.1
percent of total drawings) was drawn from the Fund, compared with
drawings of $485.5 million in dollars. Repurchases amounted to
$492.1 million equivalent, of which $276.4 million (56.2 percent) were
made in Deutsche Marks. The United States has made no repurchases from the Fund, but its net indebtedness had been reduced to
$123.4 million as of June 30, 1965, as the result of drawings by other
countries.
During fiscal 1965, 22 countries arranged standby credit facilities,
amounting to $2,127.8 million with the Fund. Of this amount, $1,643.1
million was actually drawn during the year.
Fund membership remained at 102 throughout the year. Preparations have been made to increase member quotas by 25 percent to
about $21 billion,, sub ject to ratification of members holding two-thirds
of the total quota. In addition, several countries have consented to an
increase in their quota by more than 25 percent. Legislation authorizing a 25 percent increase in the U.S. quota was approved in June 1965
(Public Law 89-21). One quarter of the $1,035 million increase or
$258.75 million, was paid in gold on June 30, 1965; the remainder is
represented by a letter of credit. The U.S. gold payment is exactly
offset by an increase in the amount of credit automatically available to
the United States from the Fund. The total potential credit available
to the United States under normal Fund policy relating to the credit
tranches will be increased by an amount equal to the quota increment.
1 See exhibits 53, 54, 56, and 62.




56

19 65 REPORT OF THE SECRETARY OF THE TREASURY

Both in the I M F and in other forums there was continuing study
of proposals to strengthen the international monetary systeni, including proposals for increasing international liquidity in the future
through the creation of a new type of reserve asset. The "Study
Group on the Creation of Reserve Assets" of the Group of Ten published a report (Ossola Report) on August 1,1965, examining several
of these proposals.
Programs for financing economic development

The Intemational Bank.—During fiscal 1965 the International Bank
for Reconstruction and Development ( I B R D ) authorized 38 loans
in 27 eountries amounting to $1,023 million. Loans to Asia and the
Middle East amounted to $395.5 million; to Europe, $292.5 million;
to the Western Hemisphere, $212.3 million; and to African countries,
$123 million. India received the largest loan, $134 million. Distribution of I B R D loans by purpose was as follows: transportation,
$411.7 million; electric power, $321.4 million; industry, $179 million;
agriculture, $78.2 million; water supply, $27 million; and education,
$6 million. Disbursements amounted to $606 million, compared with
$559 miUion in fiscal 1964.
The Bank's funded debt increased by about $232 miUion to $2,724
million as a result of its active borrowing. New bonds amounted to
$299.6 million, including an issue of $200 million in the United States
(the first U.S. issue in three years). I n addition, $298 million of
maturing bonds and notes were refunded through placements outside
the United States, including a maturing $100 million issue of U.S.
dollar bonds. Two issues, both held outside the United States, totaling $18.4 million, were paid off. Borrowers repaid $300 million on
outstanding Bank loans during fiscal 1965: $137 million to the Bank
and $163 million to investors holding participations in Bank loans.
Sales for the year of portions of Bank loans totaled $106 million,
compared to $173 million the year before. Sales from portfolio accounted for $76 million and the remaining $30 million represented
participations by investors who agreed to take up parts of Bank loans
at the time loan agreements were signed. The reduction in sales was
due in part to the policy of the Bank not to sell the obligations of
countries subject to the U.'S. interest equalization tax in the United
States.
Through June 30, 1965, the Bank had extended a total of 424 loans
in 77 countries and territories, with gross commitments amounting
to $8,954.6 million, of whicii $6,590.1 million had been disbursed. A
total of $1,884.8 million in outside participations had been sold by
the Bank. This, along with exchange adjustments, cancellations, and
repayments, reduced net I B R D commitments to $5,966.8 million. To-




REVIEW OF FISCAL OPERATIONS

57

tal reserves were $956.5 million. Subscribed capital amounted to
$21,669.4 million. Eight members increased their subscriptions to the
Bank's capital stock as a concomitant to increases in their Fund
quotas.
The Bank has adopted a policy of differentiating between the interest rates on loans to developing countries and those on loans to industrialized countries. Therefore, a loan to Japan carried aii interest
rate of 6i/^ percent and one to Italy at shorter maturity a rate of 6l^
percent, compared to 5^/^ percent for all other loans.
During the year the Executive Directors completed a draft of a
Convention on the Settlement of Investment Disputes between States
and Nationals of Other States. The convention provides for the establishment of an Intemational Center for Settlement of Investment
Disputes under the auspices of the Bank. It will provide facilities
for conciliation and arbitration, on a voluntary basis, of disputes
arising between any contracting nation and investors who are nationals of other countries. The convention will become effective after
it has been signed and ratified by at least 20 governments. At the
end of fiscal 1965 it was before the member governments for appropriate action.
The Bank continued its technical, advisory, and planning assistance,
as well as its activities in helping to coordinate the aid projects of
major capital-exporting countries to certain countries. The Bank
is a member of consortia on India, Pakistan, Greece, and Turkey and
participates in Consultative Groups for Colombia, Nigeria, the Sudan,
Tunisia, and Ecuador. Most of these consortia and Consultative
Groups have been formed at the initiative of the IBRD.
The Intemational Developm^ent Association.—The International
Development Association (IDA) an affiliate of the IBRD, during
fiscal 1965 approved 20 credits totaling $309 million in 11 member
countries—an increase of $26 million over authorizations in the preceding fiscal year. Aggregate credits approved by the IDA through
June 30, 1965, were thereby increased to a cumulative net total of
$1,085.5 million, covering 77 credits in 29 countries and territories.
Disbursements during the 1965 fiscal year increased from $192.5
mUUon on June 30, 1964, to $414.7 million as of June 30, 1965, or
about 38 percent of net credits authorized.
With the addition of Belgium in July 1964, the membership of
the IDA on June 30, 1965, increased to 94, consisting of 18 Part I
(economically advanced) members, and 76 Part I I members.
As indicated in the 1964 annual report, page 58, the proposed
increase of $750 million in the freely usable resources of the IDA
became effective on June 29, 1964, when 12 members (including the




58

19 65 REPORT OF THE SECRETARY OF THE TREASURY

United States) formally notified the Association that they would
contribute new resources to the I D A in excess of the required $600
million. As of July 1965, all of the remaining P a r t I countries had
agreed to contribute the amounts allotted to them.
The Intemational Finance Corporation.—The International Finance Corporation ( I F C ) is an affiliate of the I B R D designed to
encourage the growth of private enterprise in less-developed countries by investing in debt and equity issues of private firms without
governmental guaranty of repayment. The Corporation acts for the
I B R D and the I D A and on its own behalf in the technical and financial appraisal, preparation, and supervision of industrial, mining,
and development finance company projects.
During fiscal 1965 the I F C invested $26 million in 11 countries in
15 enterprises, mostly basic industries, including cement, steel, textiles, paper, and food products. Eight of these investments, totaling
$9.9 million, represented second or third commitments to firms in
which I F C had outstanding investments. New commitments included
approximately $15 million in loans and $11 million in equity.
As of June 30, 1965, the I F C had made total commitments of $137
million involving 103 transactions in 32 countries. About 56 percent
($77 million) of this represents investments in the Western Hemisphere. The I F C has been able to revolve more than one-third of its
•entire commitments through sales from its portfolio and principal
repayments. Membership remained unchanged during the year at 78.
Amendments to the Articles of Agreement of the I F C and of the
I B R D were proposed to the members by the Board of Governors
in September 1964, to permit the Bank to lend to the I F C and to
permit the I F C to borrow from the Bank in an 'amount up to four
times the unimpaired subscribed capital and surplus of the I F C .
Member governments, including the United States, approved the
amendments,^ which became effective after the close of the fiscal year.
Approximately $400 million will be added to the potential resources
of the I F C for relending to private enterprise.
The Inter-American Development Banh.—The Inter-American Development Bank ( I D B ) was established on December 30, 1959, began
operations in the fall of 1960, and made its first loan on February 3,
1961. All of the countries of the Organization of American States are
members of the I D B . Cuba is not a member and is no longer eligible
to join.
The Bank has up to now carried on its financing operations through
three "windows."
1 The necessary legislation was passed by the U.S. Senate June 30, 1965. The bill became
law on Aug. 14, 1965 (79 Stat. 519).




REVIEW OF FISCAL OPERATIONS

59

The Ordinary Capital resources provide development funds on conventional ternis in much the same manner as the World Bank. It
commenced operations with governmental subscriptions but now obtains its funds largely from private financial markets in the same
way as the World Bank.
The Fund for Special Operations offers financing on easy repayment terms entirely from resources provided by the United States
and the Latin American members of the Bank.
The Social Progress Trust Fund has been administered by the Bank
since mid-1961 on behalf of the United States, whicii provided all of
its funds. Loans from the Fund are repayable on easy terms and
are made in four areas of social development: water supply and sanitation, advanced education, housing, and land settlement and improved
land use.
The authorized Ordinary Capital of the Bank is the equivalent of
$2,150 million (of which the total U.S. share is $762 miUion), composed of $475 mUlion in paid-in capital (U.S. portion, $150 ihillion)
and $1,675 million in callable capital (U.S. portion, $612 million).
To obtain resources for its lending operations, the Bank, through
June 30, 1965, had borrowed $285 million equivalent secured by its
callable capital. In October 1964 the Bank borrowed $100 million
in the United States, its third bond issue here, bringing to $225
million the total raised in U.S. markets. There were three Bank
borrowings abroad in fiscal year 1965: A $15 million equivalent
Deutsche Mark bond issue in Germany in July 1964; an $8.4 million
equivalent sterling bond issue in the United Kingdom in September
1964; and a $12.5 million direct borrowing of U.S. dollars from the
Government of Spain on March 30, 1965. Added to the $24.2 million
Italian lira bond issue in April 1962, these Bank borrowings brought
the total raised in foreign markets to the equivalent of $60 million.
On March 31, 1965, pursuant to recommendations of the fifth annual meeting of the Board of Governors of the IDB (see 1964 annual
report, page 61), an expansion of the Fund for Special Operations
by $900 million equivalent became effective. The U.S. share of the
increase is $750 m.illion, while the Latin American members are contributing $150 million in their national currencies. This is to provide
sufficient funds for operations during the three years 1965-67. The
contributions are to be paid in three equal instaUments, of whicii the
first was paid by the United States before June 30, 1965, the second
will be due before December 31, 1965, and the last will be due by the
end of 1966.
The Social Progress Trust Fund was financed solely by the United
States by appropriations of May 27, 1961, for $394 million and of
January 6,1964, for $131 million. This Trust Fund has never formed




60

1965 REPORT OF THE SECRETARY OF THE TREASURY

part of the Bank's resources, but has been administered by the Bank
as trustee. The funds are now nearing exhaustion and the United
States announced, in comiection with the recent expansion of the
Fund for Special Operations, that the United States will make no
further contributions to the Social Progress Trust Fund. Its loan
functions have been delegated by the Governors of the Bank to the
expanded Fund for Special Operations.
Through June 30,1965, the Bank had authorized 115 loans amounting to $583.7 million equivalent from its Ordinary Capital, 56 loans
amounting to $192.4 million from the Fund for Special Operations,
and 112 loans from the Social Progress Trust Fund amounting to
$482.4 million—a total of 283 loans amounting to. $1,258.5 million.
Total disbursements from all three funds amounted to $602.1 million
through the fiscal year 1965. Disbursements in the fiscal year 1965
roughly equaled those made during the entire prior period from the
Bank's inception through June 30,1964.
During the fiscal year, the Bank entered into two agreements with
the Government of Canada which provided 25 million Canadian dollars for loans to Latin American member countries for purchases in
Canada. An agreement of December 1964, provided that 10 million
Canadian dollars would be made available through the Bank by the
Govemment of Canada at low or no interest and with maturities of
up to 50 years. In the second agreement, the Canadian Government
reserved an additional 15 million Canadian dollars through the Export Credits Insurance Corporation for credits of up to 20 years at
commercial interest rates.
The Export-Import Banh.—During the fiscal year 1965 the ExportImport Bank authorized over $1.8 billion in loans, guaranties and
export credit insurance to assist in financing the sale of American
goods and services overseas. Authorizations for long-term capital
loans totaled $435.2 million; and exporter credits and guaranties
amounted to $282.9 million. Export credit insurance extended through
the Foreign Credit Insurance Association (FCIA) amounted to $721.5
million in the fiscal year. Other authorizations included $340 million
in emergency foreign trade credits, $76.3 million in commodity credits,
and $3.1 million for insurance covering U.S. goods on consignment.
The bank disbursed $403.2 million in fiscal 1965. During the year,
private participation in the Bank's loans totaled $614.7 million, of
which $450 million represented sales of portfolio participation certificates to private financial institutions. The Bank earned $177.8
million in interest and fees, and paid $15.1 million in interest on funds
borrowed from the Treasury. In addition, the Bank paid $44 million
in interest on participation certificates and $.5 million in interest to
commercial banks. A dividend of $50 million was declared on the



REVIEW OF FISCAL OPERATIONS

61

stock of the Bank held by the Secretary of the Treasury. A t the close
of the fiscal year, the Bank's retained income reserve for contingencies
amounted to $944 million, and its uncommitted lending authority was
$3,299 million. Receipts of principal and interest on the Bank's outstanding credits during fiscal 1965 contributed over $553 million to
the U.S. balance of international payments.
The Agency for International Development.—^The Agency for International Development ( A I D ) is responsible for the economic assistance activities of the United States. These include development
lending, development grants and technical cooperation, supporting
assistance, investment guaranties, surveys of investment opportunities
and negotiation of loans involving U.'S.-owned local currencies including those acquired under section 104(e) and 104(g) of Public Law
480, as amended. A I D is also responsible for administering funds
appropriated for development loans and grants for Latin America.
Total U.S. dollar commitments by A I D during fiscal 1965 amounted
to $2.2 billion, of whicii $1.2 billion, or 55 percent, was on a loan basis.
The Near East and South Asia received $694 million, of which $605
million, or 87 percent, was in the form of loans; Latin America received $588 million, of which $454 million was on a loan basis; the
F a r East received $450 million; including $69 million in loans; and
Africa received $164 million, of which $76 million was on a loan basis.
The balance ($282 million) was utilized for nonregional programs
such as U.N. Technical Assistance, the U.N. Children's Fund, plus
general program support and administrative expenses. A I D continued the policy of direct procurement in the United States to minimize the impact of its expenditures on the U.S. balance of payments.
A t the close of fiscal 1965, over 85 percent of all A I D dollars were
committed directly for the purchase of U.S. goods and services.
Annual meetings of international financial institutions

International Monetary F u n d and International Bank.—The annual meetings of the Boards of Governors of the International Monetary F u n d and of the International Bank for Reconstruction and
Development and its affiliates were held in Tokyo in September 1964.
The Governors adopted a resolution requesting the Executive Directors to report on the desirability of increasing Fund quotas. Subsequently, the Directors submitted a report proposing increases in Fund
quotas generally by 25 percent, with special increases for certain
countries whose economic positions had changed considerably since
the last revision of the quotas. At the meeting of the Bank and its
affiliates approval was given to certain changes in their lending policies, as well as a request to the Executive Directors of the Bank to




62

19 65 REPORT OF THE SECRETARY OF THE TREASURY

draft a convention for the arbitration and conciliation of investment
disputes.^
Inter-American Developnient Bank.—Mr. David E. Bell, Administrator of the Agency for International Development (AID), as Alternate U.S. Governor of the Bank, led the U.S. delegation to the Sixth
Annual Meeting of the Bank held in Asuncion, Paraguay, in April
1965. The delegation also included Mr. Tom Killefer, U.S. Executive
Director of the Bank, representatives of the agencies constituting
the National Advisory Council on International Monetary and Financial Problems and Members of Congress.
The Governors concerned themselves principally with the problem
of obtaining financial and technical resources from nonmember countries and emphasized the broadest possible support for the Bank's
efforts to promote the process of Latin American integration.
Organization foT Economic Cooperation and Development.—The
fourth Ministerial Council Meeting of the Organization for Economic
Cooperation and Development (OECD) met in Paris on Deceinber
2-3, 1964. Acting Assistant Secretary of the Treasury Merlyn N.
Trued served as a member of the U.S. delegation. The Council of
Ministers reaffirmed the target established in 1961 for expanding by
50 percent the combined output of the Organization's 21 member nations over the decade ending in 1970. Noting the satisfactory progress
achieved thus far in meeting this objective, the Council approved a
proposal for a comprehensive mid-term review in 1965. The Council
called for a continuation of efforts within the OECD to improve the
capital markets of member countries, both as a means of facilitating
economic growth and of contributing to balance-of-payments equilibrium. Work on capital market development has continued in the
Committee for Invisible Transactions (a Treasury official is the U.S.
expert on this Coirimittee), the body within the OECD primarily responsible for the progressive removal of restrictions on international
movements of capital and services.
The Organization's Econoniic Policy Committee continued to meet
regularly throughout the year to discuss the overall economic situation of the member countries. Under Secretary of the Treasury for
Monetary Affairs Robert V. Roosa was a member of the U.S. delegation at the meetings early in the fiscal year, and his successor,
Frederick L. Deming, served in that capacity at the later meetings.
A Treasury official also served on the U.S. delegation to the Economic
Policy Committee Working Party on Policies for the Promotion of
Economic Growth (Working Party 2), which is concerned with implementing the collective growth target mentioned above.
^ These meetings were discussed in the 1964 a n n u a l report pages 62-4,
32 and 33 in the 1964 a n n u a l report.




See also exhibits

REVIEW OF FISCAL OPERATIONS

63

The Economic Policy Committee's Working Party on Policies for
the Promotion of Better Payments Equilibrium (Working Party 3)
met at intervals of four to six weeks over the past year, with the Under
Secretary of the Treasury for Monetary Affairs as Chairman of the
U.S. delegation. In addition to its reviews of the external payments
situation of both surplus and deficit countries in which special attention has been devoted to the United Kingdom and its efforts to achieve
coordinated action toward the goal of international monetary stability, the Working Party, at the request of the Group of Ten, began
a study of the adjustment process and undertook a continuing multilateral surveillance of the ways and means of financing balahce-ofpayments disequilibrium.
As a part of the Trade Committee's continuing efforts to expand
trade among nations, discussions were held on the changes in the U.S.
antidumping regulations as well as on the antidumping laws and
regulations in other member countries. The Assistant Secretary of
the Treasury for International Affairs is the principal U.S. representative on the Trade Committee's Group on Export Credit Guarantees which met several times during the year to examine questions of
mutual interest in this area of activity.
The Treasury Department provides the U.S. representation on the
Fiscal Committee, which has been developing model income tax conventions, examining the estate tax field, and encouraging international
cooperation in other tax policy areas. The Treasury representative is
Vice Chairman of the Fiscal Committee and has headed a working
committee which published a report on "Fiscal Incentives for Private
Investment in Developing Countries" during the fiscal year.
The Development Assistance Committee (DAC) of the OECD
continues to coordinate development aid policies of member countries
to achieve a greater degree of harmonization of the programs of donor
countries and more effective use of such aid. Assistant Secretary of
the Treasury John C. BuUitt served as a senior member of the U.S.
delegation to the DAC Ministerial meeting in July 1964. Austria
and Sweden became members of DAC in 19'65, bringing its membership to 15.
The Annual Aid Review of the DAC provides for careful study
and examination of each member's program and permits a comparison
of relative aid burdens and general aid policies. The review of the
United States was held in May of 1965.
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 in November 1964. A Treasury




64

19 65 REPORT OF THE SECRETARY OF THE TREASURY

observer regularly attended meetings of the Managing Board of the
European Monetary Agreement.
The General Agreement on Tariffs and Trade,—The General
Agreement (GATT) is the principal instrument used by the United
States to reduce and eliminate obstacles to the expansion of international trade. I n the framework of developing the policy of the
U.S. Government in the trade field, the Treasury continued to participate in the work of the Trade Expansion Act Advisory Committee,
the Trade Executive Conimittee, the Trade Staff Committee, and the
Trade Information Committee.
The negotiating phase of the Kennedy round began on November
16, 1964, when the industralized countries in the G A T T submitted
their lists of items to be excepted from the 50 percent linear tariff
cut. I n the absence of an agreed set of rules to govern negotiations
on agricultural products, the exceptions lists tabled on November 16
covered only industrial products. Insofar as agricultural products
are concerned, the subsequent discussions in the Kennedy round forum
have sought to clarify and identify the possible scope and content of
future negotiations. Septeinber 16, 1965, was set as the date for the
tabling of agricultural offers. The United States has made it clear
that the ultimate Kennedy round agreement must include the liberalization of trade in agricultural products as well as industrial
products.
Discussions were also initiated in the Kennedy round negotiations
on nontariff barriers to trade. These covered both complaints by the
United States on the practices of other countries and complaints by
others on U.S. practices. The latter group included such issues as
the use of the American selling price in determining the value of
certain imports and the U.S. antidumping law and regulations; in
the former group, the United States raised such issues as the assessment of road taxes that appeared to place a greater burden on U.S.
automobiles than on other types of cars and quantitative restrictions
on imports of U.S. goods.
During the.year a Treasury representative was a member of the
U.S. delegation to the annual meeting of the G A T T Contracting
Parties, to the G A T T Comniittee on Balance-of-Payments Restrictions, and to the special G A T T Working Party whicii consulted with
the United Kingdom on its application of a 15 percent temporary
surcharge on imports in order to safeguard its external financial position and to correct its balance of payments.
The United Nations Conference on Trade and Development.—The
First Session of the Trade and Development Board of the Conference
met in New York April 5-30,1965. The Board held its Second Session
in Geneva August 24 to September 15, 1965. During these Sessions,



REVIEW OF FISCAL

65

OPERATIONS

the Board gave shape and direction to the new U.N. economic machinery, approved by the General Assembly on Deceinber 30, 1964, to
deal with a variety of problems involving the developing countries.
I t established terms of reference for four principal subsidiary committees (Commodities, Manufactures, Invisibles, and Financing Related to Trade and Shipping), elected the members of the Committees,
established a work program for the Board, and adopted a set of rules
of procedure. The Treasury continued to participate in this general
framework of activity.
Lend-lease silver

The liquidation of all obligations on account of Treasury silver
transferred to certain countries during World W a r I I under the authority of the Lend-Lease Act of March 11, 1941, was completed by
repayments during fiscal 1965. The Lend-Lease Silver Liability Account of the Government of India was settled and closed on the books
of the Treasury Department upon receipt from that Government of
324,809.08 fine troy ounces of silver. A final cash payment of $137,328.73, equivalent to 106,215.19 fine troy ounces of silver converted on
the basis of the monetary value, was received from Pakistan and its
account has also been settled and closed.
Lend-lease silver transactions as of J u n e 30, 1965
[In millions of fine ounces except where otherwise specifically indicated]
Silver transferred from
the Treasury
to lend-lease
for account
of foreign
governments

^

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

11.8
.3
6.4
.2
172.6
66.7
63.5
2 22.3
88.1

Total

11.8
.3
6.4
.2
172.5
56.7
48.8
1.4
88.1

410.8

Australia
Belgium
Ethiopia
^inopd
India.Netherlands
Pakistan
Saudi Arabia _ _ _
United "RTingdom

385.2

Silver
being
returned

Dollar repayments
(millions)

Silver
tobe
returned

i$6.6
8 20.4 .
26.0

1 Equivalent to 4.7 million fine troy ounces of silver converted on the basis of the market price on dates
of receipts, or the monetary value.
2 Includes 1,031,250 ounces lost at sea while tn transit.
3 Equivalent to 19.9 miUion fine troy ounces of silver converted on basis of the market price on dates of
receipts.

782-556—66

^
5







ADMINISTRATIVE




REPORTS




Management Improvement Program
The Treasury Department's management improvement program
seeks to insure maximum effectiveness in reducing costs, increasing
productivity, and improving efficiency at all operating and staff levels.
During fiscal 1965, as a result of continued cost consciousness of
employees throughout the Department, Treasury's management
improveraent program achieved another record. Savings resulting
from the program were estimated at $24.2 million on an annual
recurring basis, while one-time savings reached $14.8 million making
a fiscal year total of $39.0 million. Of these amounts, $3,369,000 was
the result of the incentive awards program and $788,000 was achieved
in Coast Guard's military awards program.
The more significant management improvements of Treasury
bureaus are highlighted in the administrative reports of the individual
offices and bureaus which follow.
Special studies and projects

The final report of the survey of the mission, organization, and
management of the Bureau of Customs begun in 1963 was issued in
March 1965. Simultaneously the President submitted Reorganization Plan No. 1 of 1965 to the Congress. This plan, designed to
streamline and improve the operation and management of the Customs service,^ became law on May 25, 1965.
In conjunction with Secret Service personnel, staff of the Assistant
Secretary for Administration participated in several studies which
included a survey of the budgetary, manpower, and equipment
resources required for Presidential protection and an examination
of the overall management and organization of the Secret Service.
The staff also assisted the Bureau of the Mint in acquiring sufficient
heavy manufacturing equipment to avert a critical coin shortage
while the new mint in Philadelphia is under construction. From surplus or reserve equipment held by the General Services Administration
and the Department of Defense, the Mint was able to obtain over
$1 million worth of industrial presses, tools, and other equipment.
Financial management

The Office of Budget and Finance continued to provide staff support
and direction for the Secretary in the financial management of the
Department's operating funds.
Preparatory to presenting the 1967 operating expense budget, on
the program or mission basis long sought by the Bureau of the Budget
and the Department, Coast Guard revised its accounting and operational reporting systems to provide proper support. The 1966
budget was presented in both the conventional and revised formats
and was well received. Provision was made for more precise distriSee Bureau of Customs administrative report




69

70

19 65 REPORT OF THE SECRETARY OF THE TREASURY

bution of Coast Guard aircraft operating costs to the specific programs
served by the aircraft.
Plans were made for the establishment of a computerized servicewide pa3a'oll service for reservists' drill pay and retirement point records at Coast Guard Headquarters. This centralization will result in
personnel savings of approximately 16 man-years and $77,600.
The management reporting system for the expanded capital outlay
program of the Coast Guard was redesigned to provide a more timely
and coordinated flow of management planning and progress information.
Automated payroll operations

The continuing program for automation of payrolls resulted in
converting two additional Treasury organizations to the I R S computer system. Plans were completed and the actual work of conversion was well underway at fiscal yearend for a third large bureau.
By the close of fiscal 1965 five organizations had been converted and
tests had been initiated for conversion of a sixth. Through this
system the usual payroll operations are performed with magnetic tape
records producing checks, savings bonds, personnel statistics, related
accounting statements, and other information for each pay period.
Benefits to the bureaus include reduction in manpower expended in
payroll and related accounting.functions.
The accounts maintained by IRS for employee payxoll withholdings
and employer contributions of Treasury bureau payrolls were consolidated into a single set of accounts. The reporting of the funds disbursed for these withholdings and contributions was also consolidated.
This eliminated the maintenance of as many as 16 accounts for each
bureau serviced by the Internal Revenue Service. Disbursement
procedures from these funds require only one payment document for
similar type transactions in place of one for each bureau.
Accounting systems

Improvement was made in the accrual accounting system of several
bureaus as the result of the development of accounting manuals.
Bureaus which developed and submitted manuals to the General
Accounting Office for review were: the Bureau of Public Debt; the
Bureau of Narcotics; and the Oflice of the Treasurer of the United
States.
The Bureau of Accounts system of internal cost-based budgeting
was initially adopted in the fiscal year 1964. Improvements in the
system during fiscal 1965 provided a better basis for operational
planning and control as weU as a means to measure the attainment of
self-imposed goals. The Bureau is modifying administrative accounting in regional offices so that actual and budgeted cost data may be
computerized. The Bureau also prepares monthly cost reports showing actual progress compared to budget plans. These reports are
tailored to management needs and provide a sounder basis for formulating operating cost budgeting forecasts.
A number of bureaus revised their systems for controlling and
accounting for nonexpendable property. Generally these systems
reduced the number of items on inventory through the establishment




ADMINISTRATIVE REPORTS

71

of a $50 minimum as the basis for capitalization and control. These
simplified systems have reduced paperwork and facilitated the physical
inventory process without eliminating essential controls.
Internal auditing

Internal auditing is handled through a departmental audit staff
in the Office of the Secretary and the staffs in 12 bureaus and offices.
In addition to performing audits relating to funds appropriated to
the Office of the Secretary, the departmental audit staff periodically
reviews the internal audit systems of other Treasury bureaus and
offices. Such reviews emphasize the necessity for adequate audit
coverage, audit work programs, and effective reporting as a constructive service to management.
During fiscal 1965, the departmental audit staff completed reviews
and appraisals of the systems of internal auditing in two Treasury
bureaus, and audited payrolls and other related administrative
activities in the Office of the Secretary.
Although corrective actions taken by bureaus and offices as a
result of internal audit recommendations can sometimes be stated
in monetary terms, most 1965 actions resulted in intangible improvements. In most Treasury bureaus these benefits were confined
primarily to the strengthening of internal controls, improvements
in procedures, and better utilization of personnel and space. In the
Internal Revenue Service, work of the internal audit staff also resulted
in corrective actions which effected additional tax revenue, or other
matters having an impact on the revenue, of about $30 million.
Personnel management

In fiscal 1965 major emphasis was placed on evaluating programs,
implementing new Government-wide programs, and strengthening
existing personnel programs.
A comprehensive personnel management review of the Bureau of
Narcotics was initiated with visits to headquarters and 18 field
offices; the report of the review is to be submitted to the Commissioner
of Narcotics during the fiscal year 1966. Evaluations of the personnel
programs in the Bureau of Accounts, the U.S. Coast Guard, the
Internal Revenue Service, the Bureau of the Mint, and the Bureau
of the Public Debt were in process at the end of fiscal 1965. The
majority of these are cooperative efforts involving the Office of
Personnel and the Civil Service Cominission.
The Treasury Department was commended for its increased
employment of the handicapped by the Chairman of the Civil Service
Commission, the District of Columbia Commissioners' Committee
on Employment of the Handicapped, and the President's Committee
on the Emplojmient of the Handicapped. A program for placing
returning Peace Corps volunteers was successfully initiated, as was
the nationwide youth opportunity corps in which Treasury exceeded
its quota of 884 by over 52 percent. A new centralized summer
employment program in the Washington area during the summer of
1965 resulted in less expenditure of manpower in handling summer
employment and in hiring better quality personnel.




72

1965 REPORT OF THE SECRETARY OF THE TREASURY

Comprehensive regulations were issued on premium pay and wage
boards appeals. A supplementary guide for classification of criminal
investigator positions was cleared with the Civil Service Commission
and readied for issuance. The basis for pay of 1,700 noncraft
employees in the Bureau of Engraving and Printing was revised to
a modified version of the Army-Air Force Wage Board System,
effective April 25, 1965, thus aligning pay scales with prevailing
industrial rates in this area. A study was completed of the Bureau
of the Mint wage-fixing system, which involved some 1,000 wage
board employees.
Significant developments occurred in employee-management relations. An arbitrator ruled in favor of local units rather than
the National Association of Internal Revenue Employees (NAIRE)
proposed nationwide unit in Internal Revenue. Other activities
included an impasse in negotiations and a charge of unfair labor
practices. All of these cases reflected issues and changes in relationships brought about by Executive Order 10988 and the striving to
establish a framework for improved relationships.
The Office of Personnel continued to stress the use of external as
well as internal resources in meeting employee training needs effectively and economically. During fiscal 1965 it published and distributed a reporti on classroom training for the fiscal years 1962-64,
which helped Treasury bureaus evaluate their training efforts. The
report reflected a heavy emphasis on technical training in the
Department, a steady growth in employee training in bureaus other
than I R S , and a significant increase in training at other Government
agencies and non-Government facilities by most Treasury bureaus.
Incentive awards program

In support of the President's program to reduce costs and improve
productivity, all Treasury bureaus were encouraged to increase their
emphasis on employee suggestions and all phases of the incentive
awards program. Suggestions received in fiscal 1965 increased by 68
percent; adopted suggestions increased by 64 percent; and estimated
first-year benefits from the suggestion program increased by 96
percent to a total of $1,182,835. The number of perf ormance awards
and quality pay increases also rose. Total estimated benefits from
all phases of the incentive awards program amounted to over $3.3
million.
On September 2, 1964, the First Annual Treasury Awards Ceremony
was held at which 236 employees were recognized for their outstanding service and significant contributions to Treasury operations
during fiscal 1964. Treasury's two top awards, for Exceptional
Service or Meritorious Service, went to 44 employees. Thirty-four
employees received recognition for outstanding suggestions or service,
and 144 in the Washington area were cited for more than 40 years of
Federal service.
Property and facilities management

The number of excess real properties disposed of during the past
year was the largest since the inception of the program. Title and
descriptive data were transmitted to GSA regional offices on 41
excess real properties involving 442 acres of land with improvements




ADMINISTRATIVE REPORTS

73

and a total acquisition cost of $1,250,000. These properties will
either be sold by GSA with the proceeds going into the Treasury,
transferred to other Govemment departments for further use, or
conveyed to the States for use by historical, educational, or health
institutions.
Consolidation of space was achieved in a number of Treasury
activities. In nine cities, single locations were established to eliminate
a number of previously separated activities.
In 26 dift'erent locations offices were relocated from leased to
Government-owned buildings, which will result in annual savings of
$22,000. In addition, 26 offices were closed.
The Bureau of Narcotics and the Washington Secret Service Field
Office were relocated into new quarters. Additional space was also
obtained for the I R S National Training School and the Bureau of
Customs headquarters.
Personal property determined excess during the fiscal year exceeded
$9.4 million. During the same period, $559,000 of excess property
was reassigned for further utilization withiii the Department. Property transferred to other Federal agencies totaled $3.2 million and, in
turn. Treasury received $6.6 million of excess property from other
Federal agencies, without reimbursement.
Safety program

Figures for the calendar year 1964 indicated that Treasury's disabling injury frequency rate (the number of lost-time injuries per
million man-hours worked) was somewhat higher than the rates of
recent years. However, it still remains considerably below, the
all-Federal rate, indicating the continuing effectiveness of this
program.
To maintain interest in the program, a safety emblem contest was
sponsored by the Treasury Safety Council with 532 Treasury employees submitting 1,150 different designs. An emblem was selected
and has been adopted by the Treasury Safety Council for use in
promoting safety awareness throughout the Department.
On February 24, 1965, the Secretary of the Treasury issued Administrative Circular No. 125, transmitting President Johnson's
memorandum of February 16, 1965, announcing the initiation of
Mission SAFETY-70. This is a new program to reduce Federal
work injm-ies and costs, year by year, until a total 30 percent reduction is achieved by 1970. On May 7, 1965, Secretary Fowler met
with the heads of Treasury bureaus to discuss their plans to implement
Mission SAFETY-70. At the meeting bureau heads reported to
the Secretary on their plans for the balance of calendar year 1965.
The Secretary stated that he had assured the President that Treasury
would achieve a 2.6 injmy frequency rate by 1970 and that he expected the support of each bm-eau in this achievement.
'
Office of the Comptroller of the Currency
The ComptroUer of the Currency, as the Administrator of the
National Banking System, is charged with the responsibility of
maintaining the public's confidence in the System by sustainiug the
banks' solvency and liquidity. An equaUy important public objec-




74

1965 REPORT OF THE SECRETARY OF THE TREASURY

tive is to fashion the controls over banking so that banks may have
the discretionary power to adapt their operations sensitively and
efficiently to the needs of a growing economy.
The banking structure that is most ideal in terms of the public
need will vary with the changing requirements for banking services
and facilities. In our prosperous society these changes are constant,
far-reaching, and of compeUing importance. Increases in personal
income and population affect the volume of savings seeking productive
uses. The growth of capital and advances in technology bring new
products and new industries. These, in turn, often give rise to new
communities and shifts of population. Population movements are
further accelerated as income levels rise and permit the purchase of
new homes. AU of these factors have worked to produce demands
for additional types of banking services and for banking facilities at
new locations.
During the period from 1961 to mid-1965, the Nation enjoyed its
longest peacetime economic expansion in history. Real gross national
product was 17 percent higher in 1964 than in 1960. Population
continued to grow at a much higher rate than during the economically
depressed 1930's.
The number of commercial banking offices increased by 18.5 percent
during the years 1961-64, compared with a 12.9 percent increase in
1957-60, and an 8.7 percent increase in 1953-56. The 1961-64
expansion occurred in response to the banking needs generated by the
economic growth of the years.
The 102d Annual Report of the Comptroller oj the Currency contains
a statement of policy on the evolution of the banking structure, the
texts of merger decisions, and summaries of litigation. Information
relating to administrative matters, including a comparative statement
of assessment and other operating iucome, and of financial operations,
from 1958-64 is also given. The 1964 report continues the innovations of the 1963 report by presenting the Comptroller's principal
addresses, his testimony before congressional committees, selected
correspondence, and new rulings and interpretations.
Management improvement

Where economy or effectiveness warrants, the policy of decentralization of duties has been continued. The 14 regional comptrollers
were given additional discretionary functions formerly reserved to
the Washington office. Attorneys were assigned to several regional
headquarters, resulting in more immediate and frequent transmission
of Office opinion to bankers and other interested parties. The
regional offices have assumed the responsibUity for examining travel
vouchers and reviewing certain aspects of bank examination reports.
The performance of these functions was improved by their allocation
to points closer to the traveling force and the bankers, and effected a
substantial saving in time and nioney. New travel regulations,
providing more equitable reimbursement to the force, also yielded
considerable savings.
The Office conducted a one-week program in wliich regional personnel were instructed in the performance of their new duties. An
Uluminating side effect of this school was the discussion of problems




ADMINISTRATIVE REPORTS

75

common to both Washington and regional personnel. In addition,
increased Washington-region communication at the highest levels has
succeeded in establishing a common concern for efficiency. Regional
visits by high-echelon members of the Washington staff, including
Deputy Comptrollers, economists, and attorneys, as well as regional
comptrollers' conferences, have been successful in bringing about this
objective.
The Bureau of Accounts Audit Staff conducted an independent
audit of the financial statements and supporting records of the Office
of the Comptroller of the Currency for the calendar year 1963, and
one for 1964 was in progress at the end of the fiscal year.
Status of national banks

The result of the effort to broaden the opportunities for national
banks and enable them to meet the demands of commerce and industry
is shown in the accompanjdng record of bank performance. In
December 1964, there were 4,780 commercial banks under the supervision of the Comptroller of the Currency, including 7 nonnational
banks in the District of Columbia, an increase of 3.4 percent since
1963. During the year there were 232 national bank charters issued,
of which 205 were primary organizations and 27 were conversions
from State banks; 782 branches were opened of which 60.6 percent,
or 474, were located in communities with a population of less than
25,000, and 30.6 percent, or 239, belonged to banks with total resources of less than $25 miUion.
The assets of national banks grew 11.7 percent. Loans and
discounts registered a 14.6 percent increase over 1963 and grew from
49.0 percent to 50.3 percent of the total assets. Securities displayed
an increment of 4.2 percent but as a percentage of total assets, securities dropped from 30.6 in 1963 to 28.6 in 1964. U.S. Government
securities increased 0.4 percent; however, their percentage of total
assets decreased from 19.6 to 17.6. On the other hand. State and
local obligations rose from 9.6 percent to 9.8 percent of total assets.
This increase in loans and discounts, as contrasted with the relative
decrease in securities holdings, reflected the brisk demand for loans
from the private sector of the economy.




76

19 65 REPORT OF THE SECRETARY OF THE TREASURY
Number of naiional banks and banking ofiices, by Staies, June SO, 1965
National banks

state

Total

Unit

3,521

United States 2
Alabama
Alaska
Arizona
Arkansas
California
Colorado
Connecticut
Delaware
District of Columbia
Florida
Georgia
Hawaii
Idaho
^
Illinois..
Indiana
i.
Iowa
Kansas
Kentucky
Louisiana
Maine
Maryland.
M assachusetts
Michigan
.
Minnesota
Mississippi
Missouri
Montana.
Nebraska
Nevada
New Hampshire
New Jersey
New Mexico
New York
North Carolina
North Dakota
Ohio
Oklahoma
Oregon
Pennsyl vania
Rhode Island
South Carolina
South Dakota
Tennessee
^^
Texas
Utah
.......
Vermont.
Virginia
Washington
West Virginia
Wisconsin
Wyoming-..*
Virgin Islands
D.C—alH

84
5
4
65
94
117
27
5
8
192
54
2
9
415
125
102
170
81
47
21
50
94
97
193
34
96
48
125
3
50
147
34
198
30
42
223
222
12
377
4
24
33
75
544
13
27
121
31
79
110
39
1

59
0
1
40
60
117
11
3
0
192
30
0
3
415
64
80
146
40
17
8
24
33
42
191
9
82
48
108
1
32
52
16
105
9
37
97
' 197
7
230
0
5
28
28
544
9
18
53
14
79
98
39
0

With
branches

Number
of branches
of national
banks

Number
of national
banking
offices 1

1,282

8,254

13,057

25
5
3
25
34
0
16
2
8
0
24
2
6
0
61
22
24
41
30
13
26
61
55
2
25
14
0
17
2
18
95
18
93
21
5
126
25
5
147
4
19
5
47
0
4
9
68
17
0
12
0
1

110
38
168
53
1,681
0
158
4
46
0
103
39
91
0
247
24
24
117
127
65
177
312
377
6
48
14
0
17
32
22
406
49
792
256
5
489
25
203
752
53
168
35
185
0
54
27
299
330
0
24
0
2

194
43
172
118
1, 775
117
185
9
54
192
157
41
100
415
372
126
194
198
174
86
227
406
474
199
82
110
48
142
35
72
553
83
990
286
47
712
247
215
1.129
57
192
68
260
544
67
54
420
361
79
134
39
3

81

96

1 Number of banking offices is the sum of total national banks and niunber of branches of national banks.
2 Includes Virgin Islands.
3 Includes Deposit Insurance National Bank of Dell City, Tex., and Deposit Insurance National Bank of
Newport News, Va.—organized under Section 11 of the Federal Deposit Insurance Act—to operate no
longer than a two-3'ear period.
* Includes national and nonnational banks in the District of Colurabia, all of which are supervised by
the Comptroller of the Currency.




ADMINISTRATIVE

77

REPORTS

A s s e t s , l i a b i l i t i e s , a n d c a p i t a l a c c o u n t s of n a i i o n a l b a n k s o n J u n e 3 0 , 1 9 6 4 , D e c e m b e r
31, 1964, a n d J u n e 30, 1965
[In millions of dollars]
June 30, 1964 Dec. 31; 1964 June 30, 1965
(4,702 banks) (4,773 banks) (4,803 banks)
ASSETS

Loans and discounts
_.
U.S. Government securities, direct and guaranteed
Securities of States and political subdivisions
Other bonds, notes, and debentures

88, 519
31, 551
17, 591
2,191

95, 577
33, 537
18, 592
2,237

102, 059
30, 323
20, 460
2,439

139,852

149,943

155,281

761
47

821
81

1,059
188

29, 513
2,683
1,642

34, 066
2,789
652
1,760

31, 595
2,893
723
1,860

175,107

190,113

193; 599

66,030

74,200

61,000
5,999
12,228
8,648
2,075

64, 763
3,787
13, 647
10,733
2, 486

69, 931
6,912
13,941
9,408
2.349

._

155, 980

169, 617

171, 528

Demand deposits
.
."
Time and savings deposits
Rediscounts and other liabilities for borrowed money
Federal funds purchased
Acceptances executed by or for account of banks and outstanding—
:
other liabihties

89,681
66,299
79
787

98, 660
• 70, 957
299
827

620
3,344

666
3,656

Total loans and securities
Federal funds sold
..
Direct lease financing
_
Balances with other banks, and cash items in^ process of collection
Fixed assets
Customers' liabiUty on acceptances outstanding
Other assets
._
Totalassets
LIABILITIES

Demand deposits of mdividuals, partnerships, and corporations...
Time and savings deposits of individuals, partnerships, and
corporations
Deposits of U.S. Government
Deposits of States and pohtical subdivisions
_.
Deposits of banks
...
Certified and officers' checks
Total deposits

Totaliiabilities

160,810

94,826
76, 702
603
. 959
732 •
3,-924
• 177, 746

CAPITAL ACCOUNTS

Debentures

.

Capital stock, total
Common stock
Preferred stock
Surplus..
Undivided profits
Reserves

4,190

..

Total capital accounts
Total liabilities and capital accounts.




4,314

4,..607

4,162
28

4,286
28

4,578
29

6,950
2,491
362

7,207
2,657
393

7,311
2,741
380

14,297

15, 853

175,107

193, 599

78

19 65 REPORT OF THE SECRETARY OF THE TREASURY
Bureau of Customs

The major responsibility of the Bureau of Customs is to administer
the Tariff Act of 1930, as amended. 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, it engages in combating smuggling and
frauds on the revenue and enforces the regulations of numerous other
Federal agencies.
Management improvement program

Special search jor economies.—During fiscal 1965, intensive efforts
were made to initiate improvements to cope with increasing workloads.
These improvements, when fuUy effective, are expected to result in
savings and cost avoidance estimated at more than $1,204,700.
Over 40 percent of the total savings realized resulted from progressive
policies and measures for reducing backlogs. One substantial reduction, amounting to a cost avoidance of approximately $350,000
was effected by special administrative instructions concerning unappraised invoices on hand over 30 days and fUed prior to August
31, 1963.
Management surveys.—An Evaluation oj Mission, Organization and
Management oj the Bureau oj Customs, a major management survey,
was released on March 21, 1965. In the implementation of recommendations in this report, the President on March 25, 1965, submitted
Reorganization Plan Number One of 1965 to the Congress. Under
this plan which became effective May 25, 1965, all positions previously
fUled by Presidential appointment in the Bureau of Customs are to
be abolished.
The President's plan permits a major reorganization of the customs
field structure during the coming year in which administrative and
some supervisory functions wUl be consolidated in nine regional
headquarters. This wUl result in a reduction in the number of
district offices and release their personnel to provide improved service
to the importing and traveling public. The reorganization, begun
in fiscal 1965, is essential because of the Bureau's expanding workload
from increased trade and travel.
Much of the management activity throughout the year was concentrated on implementing Treasury Order No. 165-15, effective
October 1, 1964^ Better functional supervision of the major field
programs was achieved by Bureau headquarters reorganization which
established four major offices in lieu of seven divisions; and by certain
transfers of functions and delineations of responsibUities to improve
operationahdirection and technical advice to field offices. A savings
of $75,000 was realized by the adoption of random sampling to verify
liquidated formal entries and by improving the review of these entries
under an internal check system in the coUectors offices.
Essential features of an improved and expanding Training and
Career Development Program adopted recently include: A Training
and Career Development CouncU in Bureau headquarters to assist
1 See exhibit 70.




ADMINISTRATIVE REPORTS

79

in planning and carrying out a Bureauwide Career Development and
Executive Development Program; an Executive Evaluation Board to
review the qualifications of applicants for middle management and
executive positions; a Servicewide Management Intern Training
Program to provide trained people for future assignments; and an
intensified Reports Analysis Program in the Bureau headquarters
which wiU be a continuing program covering all customs field activity
reports which are prepared to identify, correct, or eliminate weaknesses and problems in field activities. Significant management
improvements made at local offices and having possible application
at other ports are given servicewide circulation through the periodical
^^Management Progress Digest.'' This digest summarizes local
improvements and makes provision for furnishing more detailed
information to interested offices.
Liquidation oj entries.—During fiscal 1965, for the fourth consecutive year, the backlog of formal entries ready for tentative
liquidation was reduced very substantially. The number of entries
decreased 50.7 percent from 1964 to 144,000 on June 30, 1965.^ This
reduction was achieved by introducing new simplified liquidating
procedures and by reassigning entries to districts where the backlog
had been eliminated.
Facilitation oj international trade.—The number of ports designated
for entering antique furniture, claimed free of duty for consumption,
has been increased from 10 ports to aU ports in 24 collection districts.
The designation of these additional ports by the Secretary of the
Treasury improves customs service to the importing public and better
equalizes the examination workload of customs officers.
The sections of the Customs Regulations pertaining to the administration of the Antidumping Act of 1921 have been amended. The
amended regulations make Government policy on antidumping claims
more explicit and provide exporters, importers, and domestic industry
representatives with additional information regarding evidence produced by interested persons to show either the existence or nonexistence of sales at less than fair value.
An intransit manifest developed jointly by Customs officials of the
United States and Canada, may now be used to document merchandise
moving in bond from the port of origin to the port of destination
through either country. The new procedures permit bonded shipments to transit either country two or more times without additional
documentation if the movement is continuous from the original port
of entry to the ultimate destination.
Delegations oj authority.—The authority of the Commissioner of
Customs to sign any decision with respect to claims, fines, or penalties
(including forfeitures) arising from violations of Customs laws was
increased from $20,000 to $100,000, by a recent Treasury Decision.
This permits more expeditious settlement of many major penalty cases
and reduces the number of cases referred to the Secretary's office for
decision.
To improve and facUitate administration of vessels documented in
the United States, coUectors of customs have been authorized to delegate authority to deputy collectors in charge of ports of entry to waive
requirement for production of recordable instruments of conveyance
and approve designation of home ports.




80

1965 REPORT OF THE SECRETARY OF THE TREASURY

Collectors of customs also were granted authority to satisfy claims
of. error in admeasurement procedure when the claimant and the
collector are in agreement with respect to: The error; the assigned
tonnage; and the action to be taken. When there is an unresolved
question, the Commissioner of Customs will make the decision. This
change will expedite processing claims of error and adjustment of
tonnage without jeopardizing the claimant's right to appeal when
there is a disagreement.
Legislation.—On June 30, 1965, the Congress enacted major changes'
in the tourist exemption law for returning residents to be effective on
October 1, 1965. The amendments include: The elimination of the
privilege of allowing ^'articles to follow," declared at the time the
traveler returns to the United States, to be later admitted free of
duty within his exemption; retention of the returning resident's exemption in the amount of $100 based on the aggregate fair retail value of
the articles rather than on wholesale A^alue; a provision for a $200
exemption in the case of residents arriving from American Samoa,
Guam, and the Virgin Islands of the United States of which no more
than $100 may be acquired elsewhere than in the islands; a reduction
from one gallon of alcoholic beverages per person to one quart jyer
adult resident m t h the exception of residents returning from specified
insular possessions who retain the one gallon exemption provided that
no more than one quart is acquired elsewhere than in the islands; and
a provision that the dollar value of the exemptions allowable under
the $10 gift section of the tariff act be computed on the basis of the
aggregate fair retail value in the country of shipment of the articles.
The elimination of the ''articles to follow" pri^dlege will result in
some savings to Customs.
Fees and charges.—^As part of the program to insure that special
services are as self-sustaining as possible, the fees charged for such
services were reviewed. As a result, it was determined that three
fees were no longer adequate to recover the cost of the services and
were increased.
A $6.00 fee was set to recover the administrative and overhead
costs involved in processing and issuing a yacht commission. Formerly, any vessel belonging to a regularly organized and incorporated
3^ach.t club, licensed as a yacht, and meeting certain other requirements could, upon application^ receive a free commission which
identified the yacht and its owner during one foreign voyage.
. Training and orientation.—During fiscal 1965 technical training
was provided to inspectors, examiners, agents, and port investigators
in field procedures as well as to management officials in the Bureau
headquarters. Within the orientation program, 22 new headquarters
employees participated.
As part of the development and refinement of a servicewide training
course for all new customs inspectors, a permanent staff of instructors
was recruited and trained. The course was shortened from 6 weeks
to 4 weeks primarUy by providing orientation material to participants
before the course began.
1 Public law 89-62.




ADMINISTRATIVE REPORTS

81

Forms management.—During fiscal 1965, 31 customs forms were
revised, 4 new ones established, 4 consolidated, and 4 abolished. A
program is underway to revamp the local forms program in each
field office, to reduce their number and to eliminate unnecessary
duplication. Based on the special review completed during fiscal
1965 of 156 reporting requirements imposed on the public, 102 forms
are being simplified or eliminated. All saleable customs forms are
being reviewed to determine whether current prices are adequate to
cover costs to the Bureau.
Incentive awards.—To improve the effectiveness of employee
participation in the Bureau of Customs Incentive Awards Program
several innovations were made. The Customs Regulations were
revised to increase the authority of field officers to consider and
evaluate local employee suggestions; the average time required to
take action on suggestions in the Bureau was reduced from 90 to
60 days; and a followup system was established to insure implementation of adopted suggestions. Tangible savings for fiscal 1965 resulting
from adopted suggestions were approximately $72,000, an increase of
about 250 percent over fiscal 1964.
Customs cooperation with the Agency jor International Development.—:
The Bureau of Customs, and the AID on May 11, 1965, signed a
Participating Agency Service Agreement (PASA) for a customs
technical assistance corps. Under the terms of the agreement, AID
wiU reimburse Customs for the costs of recruiting and training 12
customs employees for overseas technical assistance assignments and
for the costs of program direction and support for the AID assistance
projects. The training period wiU be for approximately one year
and those who successfully complete the course wUl be expected to
serve in overseas assignments for a minimum of four years. Prior to
the establishment of this program, each request from AID for customs
personnel was advertised throughout the Customs Service and the
chosen candidate was indoctrinated by AID before reporting overseas.
Under this program. Customs wUl be able to provide well-qualified
and trained Customs employees upon request by AID, without the
delays formerly encountered.
During the fiscal year, in cooperation with AID, 71 customs officials
from 19 foreign countries participated in a Bureau of Customs program
of training which included meetings with key officials in Bureau
headquarters to discuss management and technical subjects and visits
to field offices to observe customs operations.
Work related to cotton textiles.—Upon receipt of directives issued by
the President's Cabinet Textile Advisory Committee under the LongTerm Cotton TextUe Arrangement, Customs implemented and admhiistered 153 import quotas on cotton textiles and cotton textile
products manufactured or produced in various countries; ia addition,
special visaed invoice requirements were enforced on cotton textiles in
specific categories from 3 countries, all 64 categories in the case of 1
country and 1 category each in the case of 2 other countries. Weekly
status,reports on all the quotas and weekly cumulative import statistics on merchandise in nine categories under observation were furnished
the Interagency TextUe Administrative Committee for its use.
782-556—66

6




82

19 65 REPORT OF THE SECRETARY OF THE TREASURY

Collections

Revenue coUected by the Customs Service during fiscal 1965,
reached an alltime high of $2,062 miUion, including customs duty
coUections, excise taxes on imported merchandise collected for the
Internal Revenue Service, and certain miscellaneous coUections.
Larger customs collections than in 1964 were reported by 39 out of the
45 customs districts. Collections and payments by customs districts
are shown in table 24. The major classes of all collections by the
Customs Bureau are shown in table 25.
More than 36 percent of all imports into the United States during
fiscal 1965 were duty free and included commodities imported free for
Government stockpile purposes or authorized by special acts of
Congress for free entry. The remaining 64 percent constituted the
basis of customs duties on imports.
Bureau operations

Carriers and persons entering.—More than 181 million persons were
subject to customs inspection in fiscal 1965, a 5.7 percent increase in
carriers, and a 4 percent increase in persons entering the United States,
as shown in tables 87 and 88.
Entries oj merchandise.—The volume and value of imports into the
United States continued their rise in fiscal 1965, with total value
reaching $19.7 bUlion. The volume and type of entries handled
during the past two years are shown in table 85.
Drawback ^transactions.-^Drawback allowance on the exportation of
merchandise manufactured from imported materials and for certain
other export transactions usually amounts to 99 percent of the
customs duties paid at the time the goods are entered. The total
drawback paid in fiscal 1965 as reflected in table 86 by principal commodities was $17,585,376.
Appraisement oj merchandise (including Customs Injormation
Exchange).—Invoices ffled during fiscal 1965 amounted to 2,841,601,
while the number of packages examined by appraisers' personnel
totaled 1,875,027.
The backlog of unappraised invoices more than 30 days old declined
to 413,829, a decrease of 24.8 percent from fiscal 1964. During the
year, 3,203,000 individual line items were verified, each requiring a
verification of four factors. Of these, changes were made in roughly
59 percent of the verified elements, a substantial portion of which were
of an editorial nature. Substantive changes were necessary in approximately 20 percent of the reports.
Under the Antidumping Act of 1921, as amended (19 U.S.C. 160171), 22 complaints were received, compared with 27"* in fiscal 1964.
The disposal of 30 cases left 21 under investigation at the end of fiscal
1965. Five cases were referred to the U.S. Tariff Commission for a
determination as to possible injury to American industry. Two
findings of dumping were made. Two new cases of countervailing
duty were received, and three were closed.
• Revised.




ADMINISTRATIVE

83

REPORTS

One new case involving convict labor was received during this year
and none were closed.
The activities of the Customs Information Exchange in New York,
N.Y., continued at approximately the same high level as that of
1964. Appraisers' reports of classification and value, covering a cross
section of imported merchandise received at each port, totaled 83,146
compared with 79,000 in 1964.
There were 6,889 reports of value differences during fiscal 1965 as
compared with 6,091 in 1964. Differences in classification totaled
7,000 during 1965 compared with 6,947, in 1964, indicating an increase
in new commodities received.
DetaUed investigations abroad to obtain information for appraisement increased to 231 in fiscal 1965.
Technical services.—The 9 district laboratories and 1 branch
laboratory of the Division of Technical Services analyzed over 129,000
samples in fiscal 1965. Despite changes brought about by Tariff
Schedules of the United States and an extensive shipping strike, the
laboratories analyzed almost 3,000 more samples than during the
previous year. Most of these were submitted to the laboratories to
assist in appraisement and tariff classification. Other classes analyzed
were seizm*es (mainly narcotics and other prohibited merchandise),
samples tested for other Government agencies, and preshipment
samples (submitted by importers when requesting the rate of duty
on a prospective import). Extensive research was carried out on
tests for rubber and fluorspar.
The Division of Technical Services also analyzed cargo sample
weighing data to assure accuracy and precision within statistical
control limits.
Final approval was made of one bulk weighing and sampling equipment installation and tentative approval given for another. Installation of one truck scale was completed and another is in progress at
Boston, Mass. Another was being installed in New York, N.Y.,
at the end of the fiscal year.
The improvement of U.S. border , stations in cooperation with
the Immigration and Naturalization Service was continued. Three
new stations were completed, two occupied, three under construction,
and contracts awarded for seven others during the fiscal year. Construction plans prepared by the General Services Administration for
19 major projects, providing space for Customs, were reviewed and
appropriate changes recommended. Such facilities were completed
at three locations.
Export control.—The following table compares export control
activities in the fiscal years 1964 and 1965.
Activity
Export declarations authenticated
Shipments examined
Number of seizures
Value of seizures
Export control employees




1964

5,065, 217
359,097
403
$421,778
218

1965

6,308,272
465, 226
360
$336,105
245

Percentage
increase, or
decrease (—)
4.8
29.6

-10.7
-20.3
12.4

84

1965 REPGRT OF THE SECRETARY OF THE TREASURY

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

Protests:
Filed with coUectors by .importers (formal)
Filed with collectors by importers (informal)
Appeals for reappraisement filed with collectors

1964

-

37, 050
57, 586
25,700

1965

47 445
61 010
24 071

Percentage
increase, or
decrease (—)

28.1
5.9
-6.3

•

Marine activities.—Dviring fiscal 1965 one meeting of the Subcommittee on Tonnage Measurement of the Maritime Safety Committee of the Intergovernmental Maritime Consultative Organization
(IMCO) and one meeting of its working group were held in London
to consider matters affecting the international tonnage measurement
of ships. The U.S. delegation to each meeting was led by a Customs
representative. The working group initiated and the Subcommittee
approved a computer study for assessing parameters proposed by
various nations for bases for a universal system of tonnage measurement of ships.
A customs representative, an observer for the United States, attended
the first fuU conference of the Convention for a Uniform System of
Tonnage Measurement of Ships since that convention was signed at
Oslo on June 10, 1947. The conference, held at Oslo in May, was
attended by member delegations from Denmark, the Federal Republic
of Germany, Finland, France, Iceland, Israel, the Netherlands,
Norway, Poland, and Sweden. Observers represented Italy, Japan,
and the United Kingdom, as well as the United States; IMCO, the
Panama Canal, and five classification societies were also represented
by observers.
The primary purpose of the conference was to amend the tonnage
measurement regulations to implement the recommendations on the
treatment of shelter-deck and other ''open" spaces adopted by the
Third Assembly of IMCO. Identical bUls, S. 906 and H.R. 3351,
sponsored by the Treasury Department were introduced in the 89th
Congress to implement the recommendations in the United States.
The United States was particularly interested in the consideration
given to the possible relaxing of the 19-percent limit in the Oslo Rules
for deductible water-ballast space.
A customs representative again participated in the work of the
Group of Experts established by IMCO to study measures to facilitate
maritime travel and the transport of goods by sea at its fflth and
fhial session, January 18-22, 1965. The group considered the comments and proposals made by governments concerning a draft
Convention on FacUitation of Maritune Traffic, a draft annex to that
Convention, and certain draft resolutions.
The draft Convention is. intended as the legal foundation for the
annex, which contains a number of detaUed technical provisions to




ADMINISTRATIVE REPORTS

85

facUitate maritime traffic and prevent unnecessary delays to ships,
passengers, crews, cargoes, and baggage by reducing to a minimum the
formalities, documentary requirements, and procedures required in
connection with arrivals and departures of ships engaged in iaternational travel.
The group prepared reports on the drafts for the International
Conference on Facilitation of Maritime Travel and Transport.
The International Conference on Facilitation of Maritime Travel
and Transport, under the auspices of IMCO, convened in London on
March 24, 1965. I t established and opened for acceptance and
signature the Convention and annex referred to in the paragraph
above. The annex consists of standards and recommended practices
to be followed by governmental authorities with a view to facilitating
maritune traffic and simplification of the formalities, documentary
requirements, and procedures in connection with arrivals and
departures of ships on international voyages. The Conference was
attended by delegates from 57 countries, observers from 11, as well
as representatives from various intergovernmental and nongovernmental organizations. The 18-member U.S. delegation was led by a
Customs representative and included other Treasury and congressional
representatives.
The Conference adopted various recommendations designed to
furthur the purposes of the Convention and its annex and to provide
for future work in facUitating maritime traffic.
A Customs representative also led the U.S. delegation to a meeting
of the Group of Experts on FacUitation of International Waterborne
Transportation under the auspices of the Organization of American
States (OAS) at Lima, Peru, from AprU 20-24, 1965. After consideration of the comments submitted by various Governments on
a preliminary draft of an annex to the Convention of Mar del Plata
signed June 7, 1963, by a number of countries including the United
States, the Group prepared the final draft. This draft followed
the pattern of the annex adopted by the IMCO council mentioned
above.
The Permanent Technical Committee on Ports met following the
meeting of the Group of Experts and adopted the draft annex. This
Committee proposed that a special Inter-American Port and Harbor
Conference be convened to consider and act upon their recommendations on the proposed annex, as soon as the Secretary-General of the
OAS determines that enough member governments are williug to
participate.
Admeasurement.—A total of 4,410 admeasurements of vessels of all
sizes and types for all ports were completed during fiscal 1965. In
addition there were 360 readmeasurements and adjustments of
tonnages of vessels. The total admeasurements for the 2 years were
4,770 and 4,544, respectively.
At the end of fiscal 1965, there were 343 pendiag applications for
measurements of commercial vessels and 310 pending applications
for yachts.
Documentation.—Vessels in the American merchant marine documented for commercial use increased t o 46,604 in fiscal 1965 while




86

19 65 REPORT OF THE SECRETARY OF THE TREASURY

those documented as yachts rose to 12,344. The following table
compares the volume of marine documentation during fiscal years
1964 and 1965.
Activity
Total vessels documented at end of year
Documents issued (registers, enrollments, and licenses)
Licenses renewed and changes of master endorsed.
Mortgages, satisfactions, notices of lien, bills of sale, abstracts
of title, and other instruments of title recorded
Abstracts of title and certificates of ownership issued
Certificates and permits
Name changes
.
.

1964

56,549
18,984
62,324
16,503
7,311
1,550
1,515

1965

'

Percentage
increase

58,948
19,205
53,841

4.2
1.2
2.9

17,542
7, 744
1,632
1,536 !

6.3
6.9
6.3
1.4

Legislation.—Treasury Department sponsored bUls were iatroduced
in the 89th Congress to simplify the admeasurement of small vessels
and to amend the laws relating to admeasurement to permit implementation by the United States of the recommendations adopted by
the Assembly of the IMCO on the treatment of shelter-deck and
other "open" spaces.
Legislation was again proposed to repeal and amend certain statutes
to permit the fixing of charges for various services rendered the public
under the navigation laws on the basis of cost to the Government.
No action had been taken on these bills at the close of the fiscal year.
The Marine Section in fiscal 1965 began a revision of the codification
of the navigation laws in title 46, United States Code, which the
Bureau of Customs administers.
Tonnage taxes.—Cyprus and Monaco were added to the list of
nations which are exempt from the payment of special tonnage tax
and light money.
Waivers.—In a few instances waivers of the coastwise shipping
laws and other navigation laws in the interest of national defense
were issued upon the request of the Assistant Secretary of Defense
or the heads of other agencies of the Government. Novel among
these was a waiver of certain of the navigation laws upon request of
the Assistant Secretary of Defense to permit the experimental use of
two foreign-buUt hovercraft by the City of Oakland, Calif., between
points in the San Francisco Bay area for a period of 20 months.
Entry, clearance, and use oj vessels.—Appropriate instructions were
issued: To insure observance of the time limitations for the filing of
applications for relief from duties assessed on the costs of repairs to
and equipment for vessels of the United States obtained in foreign
countries; to restate the requirements applicable to the landing of fish
by foreign-fiag vessels in U.S. ports in certain circumstances; to update
and combine in one chcular the list of countries having ratified and
acceded to the International Load Line Convention of 1930; and to
restate the requirement that an unmanned barge under American
registry must be accompanied on a foreign voyage by the master whose
name is endorsed on its register.
The foUowing table compares entrances and clearances of vessels
in fiscal year 1965 with 1964.




ADMINISTRATIVE

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

1964

Percentage
increase, or
decrease ( - )

_. .
..

._

49,426
38,071

1.6
-5.2

88,823

87,497

— 1.5

47,386
40,091

47,954
37,936

1.2
—5.4

87,477

Total

_

1965

48,651
40,172

__

Clearances:
D i r e c t to foreign p o r t s
Via other domestic p o r t s .
T o t a l __

87

REPOETS

85,890

—1 8

Law enforcement and investigative activities

On M a y 20, 1964, legislation was enacted (16 U.S.C. 1081-1085)
"To prohibit fishiag in territorial waters of the United States and in
certain other areas by vessels other than vessels of the United States
and by persons in charge of such vessels." Interim procedures for
the enforcement of this law were issued by the Bureau of Customs
during fiscal 1965.
Investigations completed.—The Customs Agency Service completed
21,019 investigations during fiscal 1965. The number and types of
cases investigated during fiscal years 1964 and 1965 under customs,
navigation, and related laws administered and enforced by Customs
are shown in table 90.
The most active enforcement regions were: Western (headquarters
at Los Angeles, Calif.), with 1,163 arrests and 591 convictions; Southwestern (headquarters at Houston, Tex.), with 616 arrests and 258
convictions; and Northeastern (headquarters at New York, N.Y.),
with 284 arrests and 34 convictions.
The foUowiag table shows the number of arrests and dispositions
thereof during fiscal years 1964 and 1965.
Activity
Under or awaiting indictment at beginning of year.
Arrests
Turned over to other agencies
Prosecutions declined
.,
Not indicted
Convictions
Dismissals and acquittals
Nolle prossed
Under or awaiting indictment at end of year.

1964

'620
1,801
386
338
14
780
115
'20
'768

1965

768
2,205
412
354
2
944
123
29
1,109

Percentage
mcrease, or
decrease (—)
23.9
22.4
6.7
4.7
-85.7
21.0
7.0
45.0
44.4

' Revised.

Cooperation vnth other officers,—Officers of the Customs Agency
Service cooperated with Federal, State, and local law enforcement
agencies and with officials of foreign governments in 7,769 cases
compared with 5,470'' last year.
'Revised,




88

19 65 REPORT OF THE SECRETARY OF THE TREASURY

Seizures,, general.—^A total of 7,836 seizures (aside from those of
narcotics and other drugs) was made by the Customs Agency Service
in fiscal 1965, having an appraised value of $16,827,588, while fines
and penalties associated with the seizures amounted to $19,441,763.
Seizures, narcotic and other drugs.—The substantial increase in
marihuana seizures was concentrated on the California border and
involved gangs of Cuban refugees who were engaged in supplyiag the
eastern market tributary to New York City, N.Y., and Miami, Fla.
A record 22 pounds (9,979.20 grams) of cocaine from ChUe was
seized at New York which led to the ultimate arrest of seven violators
in this country and four in Chile. Two seizures of cocaine made at
Miami were traced back to a violator who had jumped baU in that
city after being convicted in 1961.
The largest seizure (34,629.53 grams) of French heroin ever recorded
on the Mexican border by customs officers at Laredo, Tex., was
reported in the 1964 annual report, page 89. That offense implicated
the head of a gang with powerful political connections who made
every effort to obstruct justice and eventually escaped from jaU.
However, he was recaptured and with three associates extradited to
the United States where trial of the four was pending at the end of
fiscal 1965.
The foUowing table compares seizures of narcotic drugs and marihuana in 1965 with 1964.
Drug seizures

Fiscal years

Percentage
increase, or
decrease (—)

1964
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....

1965

' 41,774.73
'210
13,021. 71
8
32,734.33
17
12,919. 87
'325

11, 029. 24
238
15,511.12
11
15,588. 26
16
16,706.37
232

-73.6
13.3
19.1
37.5
-^52.4
-5.9
29.3
-28.6

4,339.897
678
841
179

35.6
16.1
-10.9
26.1

' 3,200. 726
'584
944
'142

' Revised.

Work oj joreign offices.—^European offices of the Bureau supplied
291 inf ormation leads which resulted in 98 seizures having an appraised
value of $136,000, and fines and penalties amounting to $294,000.
Customs offices in the Far East are credited with 31 seizures having
an appraised value of $825,000 and fines and penalties totaling
$563,000.
A principal activity of aU the foreign offices was the investigation
of valuation frauds. Especially common in the Far East was the
overstating of nondutiable components of inclusive prices, or inventing
fictitious nondutiable components. Other violations included faUure
to declare purchases of expensive jewelry and clothing and the widespread practice by which foreign sellers declare goods sold to tourists
as unsolicited gifts.




ADMINISTRATIVE REPORTS

89

A significant occurrence during fiscal 1965 was the trial at Los
Angeles, Calif., of a firm which had grossly undervalued over 30,000
transistor radios imported from Japan and Okinawa. Government
agents and other witnesses were brought from Japan, New York,
and Chicago. Both the firm and its vice president were found
guUty and fined on 12 counts.
Other irregularities included misdeclarations of national origin,
involving such commodities as stockings from Yugoslavia, mink
skins from Russia, and jade articles from Communist China. Customs bureau disclosure of abuses with jade articles caused Hong Kong
authorities to suspend the issuance of certificates of origin covering
this item.
Our Tokyo office reported that whUe only two new dumping inquiries were initiated duriag the year, extreme interest in the subject
was shown by the Japanese press, industry, and officials, in connection
with new customs regulations. A finding of dumping promulgated
as the result of an earlier investigation is believed to be the first ever
made on a Japanese product.
Customs seizures of merchandise throughout the country during
fiscal 1965 for violation of laws enforced by the Customs Service
showed an increase of 2.6 percent in the number of seizures and a
decrease of 44.1 percent in the appraised value, as compared with
fiscal 1964. Details of these seizures by number and value are shown
in table 89.
Foreign trade zones

During fiscal 1965 the number of entries received in Foreign Trade
Zone No. 1, New York, N.Y., were 6.1 percent less than in fiscal 1964.
Other activities in the zone also decreased. Large quantities of
dates, machinery, zinc and lead ingots, wool and cotton piece goods,
bottled and bulk liquors, chemicals, radios, cameras, Brazil nuts,
alligator sldns, caviar, talc, and tungsten ore were stored and approximately 7,000 manipulations operations were performed. Thirteen
ships used the zone facUities for discharging cargo from foreign
countries.
The number of entries received in Foreign Trade Zone No. 2 at
New Orleans, La., increased 1.2 percent over last year. The foUowing
manipulations operations were performed in the zone: Fumigation of
17 different commodities, commingling, grinding and rebagging of
casein, manufacture of lead and lead oxide into battery plates and
storage batteries, markiag of country of origin on musical instruments,
sampling and affixing city and State stamps on whiskey and wine,
repackaging of twist drUls and packaging of personal and household
effects for export, manufacture of wire rope into bridles, cutting of
galvanized chain into various lengths, repackaging of bird seed, and
destroying of chemical compounds.
Entries received in Foreign Trade Zone No. 3 at San Francisco,
Calif., increased 2.8 percent over fiscal 1964, whUe long tons received
in the zone increased 65.4 percent and their value 6.2 percent. There
were 933 manipulations operations performed in the zone, an increase
of 58.1 percent over last year.
Fiscal 1965 was the first full year of operation for Foreign Trade
Subzone No. 3-A, at San Francisco, Calif. This subzone contaias a
manufacturiag plant for the production of semifinished and finished



90

19 65 REPORT OF THE SECRETARY OF THE TREASURY

wearing apparel from imported woven wool fabric. Semifinished
apparel is cut to pattern and entered into U.S. Customs territory and
transferred to a nearby plant operated by this firm where fiaished
apparel is produced for domestic and foreign markets.
Although the number of entries received in Foreign Trade Zone No.
5 at Seattle, Wash., during fiscal 1965, decreased 7.3 percent from the
year before, there were substantial increases in the foUowing activities:
Long tons received, 127.9 percent; value of goods entering the zone,
108.5 percent; long tons delivered from the zone, 138.1 percent;
value of goods delivered from the zone, 135.5 percent; and duties
and internal revenue taxes collected, 8.1 percent. Manipulations
operations in the zone consisted of converting trucks into campers,
cutting steel piling and woolen fabrics into lengths, replacing gaskets
and tuning diesel engines, testing and repacking tape recorders,
repacking salmon roe, compasses, and microscope parts.
There were substantial increases in the following activities at
Foreign Trade Zone No. 7, at Mayaguez, P.R.: Entries received,
318.2 percent; long tons received, 60 percent; value of long tons
received, 68.2 percent; long tons delivered from the zone, 153.8
percent; and value of goods delivered from the zone, 231 percent.
The number of entries received at subzone No. 7-A, Penuelas,
P.R., duringfiscal 1965 increased 200 percent over fiscal 1964. Thirteen
ships used the zone facUities for discharging cargo from foreign
countries and 10 ships berthed in the zone to lade domestic ship cargo.
There were decreases in all activities at Foreign Trade Zone No.
8, at Toledo, Ohio, with the exception of duties and internal revenue
taxes collected which showed an increase of 21.7 percent. Operations
in the zone consisted of public warehousing, converting panel trucks
to campers, sorting and repacking twist driUs, and combining cartons
of alcoholic beverages for shipment and recoopering.
The foUowing table summarizes foreign trade zone operations during
fiscal 1965.
Trade zone

Number
of entries

Received ui zone
Long tons

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

1

4,965
3.038
6,689
356
1, 039
92
36
452

Value

25,156 $34,804,505
24,742 10,700,611
2,305 3,176,629
170 1,169,970
1,055
2,466,791
24
64,766
232, 253 3,917,061
14,561 7,923,923

Delivered from zone
Long tons

Value

32,354 $32,952,408
25,368 10,781,677
2,276
2,568,667
229
770,655
1,055
2,444,229
33
143,426
133,771 8,365,404
17,363 12,100,535

Duties and
intemal
revenue
taxes
collected
$6,555,718
•1,247,926
676,372
230,942
178,197
2,981
125,941
1,283,636

Customs ports of entry, stations, and airports

The limits of the ports of Aberdeen, Wash.; Muskegon, Mich.;
Pascagoula, Miss.; Wrangell, Alaska; and Port Allen, Kauai, Hawaii,
were extended and redescribed to include areas not heretofore covered.
Changes in customs stations during the year included the designation
of Wild Horse, Mont., and Willow Creek, Mont., and the revocation
of Havre, Mont. The official port name of Los Angeles, Calif., was
changed to Los Angeles-Long Beach, Calif.; and Port Allen, Kauai,
Hawaii, was changed to NawUiwUi-Port Allen, Kauai, Hawaii. The




ADMINISTRATIVE

91

REPORTS

designation of the Malone-Dufort Airport, Malone, N.Y., as an international ahport was revoked.
Cost of administration

Customs operating expenses amounted to $82,289,912, including
export control expenses and the cost of additional inspection reimbursed by the Department of Agriculture.
The following table shows man-year employment data in the fiscal
years 1964 and 1965.
Man-years
1964

operation
Regular customs operations:
Nonreimbursable
Re.imbnr.«?abie i. ..

7,792
351

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

Man-years
1965

. . . _.

8,143
218
228
8,589

Percentage
uicrease

7,939
369
.

1.9
5.1

8,308
245
236

2.0
12.4
3.5

8,789

2.3

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

Office of t h e Director of Practice
The Office of the Director of Practice is a part of the Office of the
Secretary of the Treasury, under the immediate supervision of the
General Counsel.
The Director of Practice receives and acts upon applications for
enrollment to practice as attorneys or agents before the Internal Revenue Service; institutes and provides for the conduct of disciplinary
proceedings relating to enrolled attorneys and agents; makes inquiries
with respect to matters under his jurisdiction; and performs such
other duties as are necessary or appropriate, or as are prescribed by the
Secretary of the Treasury.
Internal reorganization of the Office of the Director of Practice was
effected within the fiscal year, with the simultaneous transfer of the
functions of the former Enrollment Section into the functionally
enlarged and concurrently established Applications Section, which is
under the general supervision of an attorney advisor.
During the year the Office put into operation an electronic data
processing (magnetic tape) system, for the purpose of maintaining its
enrollment and related rosters. This Director of Practice E D P system is being coordinated and further implemented through facilities
of the Office of the Treasurer of the United States.
Applications for enrollment approved this year totaled 7,650 (4,098
attorneys and 3,552 agents, consisting of certified public accountants,
successful Special Enrollment Examination candidates, and former
Internal Revenue Service employees). Approximately 89,000 attorneys and agents were enrolled to practice before the Service at the
end of fiscal 1965. Renewed cards issued during the year totaled
6,124, consisting of 2,826 to attorneys and 3,298 to agents.
The Special Enrollment Examination, held in Internal Revenue
Service ciistrict offices in September 1964, was taken by 797 persons,
of whom 480 achieved passing grades. During the year 424 successful
examination candidates were enrolled to practice. Examinees have a




92

19 65 REPORT OF THE SECRETARY OF THE TREASURY

period of three years in which to file for enrollment after notification
of their successful completion of the examination.
The Office processed and closed 362 derogatory information cases
during the fiscal year, and had 259 cases under review on June 30,1965,
89 relating to attorneys, and 170 relating to agents. There were also
173 cases under investigation at the close of the fiscal year, 60 relating
to attorneys and 113 relating to agents.
During the year there were 107 cases in which a discipline was
imposed oy this Office, or from which a related action resulted, such
as the withdrawal or abandonment of an application for enrollment
while under evaluation, or the acceptance of a resignation from enrollment. I n addition, and as a result of disciplinary proceedings instituted by this Office, a hearing examiner imposed two disbarments and
one suspension for four months. A t the end of the fiscal year one
additional case was awaiting trial before a hearing examiner.
Each district director of the Internal Revenue Service has authority
to determine that a particular unenrolled person who signs a tax
return as preparer is ineligible to exercise the privilege of limited
practice without enrollment if the preparer is not of good character
or reputation, or if the preparer conducts his practice in an unethical
manner. The scope of requirements concerning limited practice without enrollment, applicable to those who prepare and sign Federal
income tax returns, is set forth in Revenue Procedure 64-47, which
became effective November 1, 1964. A district director's decision of
ineligibility under this procedure may be appealed by the unenrolled
preparer to the Director of Practice. During the fiscal year 11 such
appeals were filed with the Director of Practice by unenrolled preparers of tax returns. I n eight of these cases, the district director's
decision was affirmed; in one case the decision was modified and
affirmed; in one case the decision was reversed; and one appeal is
awaiting final action.
Office of Domestic Gold a n d 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 in both their monetary and commercial aspects. The Office administers the Treasury Department
Gold Regulations relating to the purchase, sale, and control of industrial gold, gold coin, and gold certificates; issues licenses and other
authorizations for the use, import and export of gold, and for the
importation and exportation of gold coin; 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 coordinated with the U.S. Secret Service, the Bureau of
Customs, and other enforcement agencies.
Gold controls
The comprehensive examination of gold reports, verification of records, and field inspections have been continued.
Purchases of gold for industrial use from the Treasury.—The gross
sales of gold for industrial use by the Treasury increased in the calen-




ADMINISTRATIVE

93

REPORTS

dar year 1964 to 3,665,245 fine troy ounces, as compared with 3,068,345
• ounces in calendar year 1963, and 2,746,046 ounces in calendar 1962.
;
j Examinations of the books and reports of the gold users, however,
•^ continue to show no indication of hoarding or excessive inventories.
'
Golcl coin licensing,—The volume of requests for the importation of
gold coin and the cases involving coins acquired abroad without a license by uninformed tourists, continued at a high rate. Their settlement has been expedited to a large extent by the use of form letters and
circulars which set forth the condition's governmg the importation of
gold coins.
E n d uses of gold,—End-Use Certificates with detailed information
concerning the end use of gold were in effect throughout the calendar
year 1964. The estimated allocation by use for 1964 is shown in the
table below.
E s t i m a t e d allocation of gold by use for the year 1964
E n d use

Jewelry and a r t s . .
Dental
Space a n d defense, electrical a n d electronics.
Space a n d defense, other
I n d u s t r i a l , electrical, a n d electronics
Industrial, other.
i
Total

F i n e ounces

Dollars, based
o n $35 per ounce

Percent

$93,249, 590
19, 255, 985
9,870,700
838,495
15,151,780
8,737, 995

63.39
13.09
6.71
.57
10.30
5.94

. 4,202,987

....:

..

2, 664, 274
550,171
282, 020
23,957
432, 908
249,657

147,104,545

100. 00

Silver legislation

On June 3, 1965, the Treasury Staff Study of Silver and Coinage
was released reviewing the increasing imbalance between silver supplies and uses and possible alternatiA^es to our present silver coinage.
The President transmitted to the Congress a bill providing for a new
metallic composition of the 10 cent, 25 cent, and 50 cent pieces; for
{he purchase of newly-mined domestic silver should the price drop below the monetary price; and for certain standby authorities for the prevention of melting and hoarding of silver coins. Hearings were held
on this bill in June 1965 ^ and legislation was enacted on July 23,1965.^
The elimination of silver from the 10 cent and 25 cent pieces and the
sharply reduced silver content of the 50 cent piece authorized by this
legislation will assure maintenance of an ample supply of coinage in
the 3^ears ahead.
B u r e a u of Engraving and P r i n t i n g
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 various territories
administered by the United States.
1 See exhibits 21 and 22.
2 See exhibit 23.




94

1965 REPORT OF THE SECRETARY OF THE TREASURY

Management attainments

Throughout the year, the Bureau concentrated on expanding the^
conversion from wet to dry intaglio printing of currency. ^ A second v
area for the production of currency, similar to the existiag rotary X ;
currency area, has been set up. Four new four-plate, sheet-fed rotary
intaglio presses of ultramodern design, embodying the latest engineering principles, have been purchased and put into production. Bureau
personnel are currently making studies, adjustments, and modifications, as needed, to improve the operating characteristics of the presses
and to correct mechanical deficiencies. Associated overprinting
presses, processing machines, and equipment have been relocated in
this area and are now in operation. Production and processing operations are continually reviewed in an effort to keep production costs
to a minimum. A comparison of the base manufacturing cost rate for
producing currency 18 subjects to a sheet with a projected rate for
producing currency 32 subjects to the sheet on the new presses indicates that annual recurring savings estimated at approximately
$3,200,000 will be realized.
I n fiscal 1965, there were 632,691 people escorted on guided tours of
Bureau operations. To accommodate visitors, the Bureau, over a
period of years, has used a trained guide force of as many as 30 employees, most of whom were detailed from the production divisions during
the busy tourist season from April to September. Concurrent with
the installaition of the four new sheet-fed rotary intaglio currency
presses and the planning for related processing functions adjacent to
these presses, a new and improved tour facility was constructed in
which production operations will be described by audio-visual methods.
Under the new arrangement, visitors will reach and leave the gallery
by means of escalators eliminating the need for personal guide service.
It is expected that the installation of this facility will preclude the
necessity for detailing employees to the guide force during the tourist
season, with a reduction in associated personnel costs of approximately
$70,000 annually for the operation of this facility.
I n the interest of maintaining efficient and economical operations,
the Bureau has carried on intensive research, engineering, and development activities and a continuing program of production and quality
control studies.
Financial and management type audits made by the Bureau's internal auditors indicate that Bureau policies have been effectively carried out. There were 25 recommendations outstanding on July 1,1964.
During fiscal 1965, 72 reports of audit, containing 46 additional
recommendations, were released. Thirty-six recommendations were
outstanding at the close of the year.
Through the excess property program, the Bureau received $2,634
from the sale of obsolete equipment and material declared excess to
Bureau needs; and obtained equipment and furniture valued at $25,403
at no charge, through the Federal excess property utilization program.
The Bureau was awarded a certificate of achievement by the National Safety Council for the largest percentage reduction in the 1964
injury frequency rate among 26 printing and publishing establishments. I n fiscal 1965, the Bureau initiated a program bf offering




95

ADMINISTRATIVE REPORTS

prescription safety eyeglasses to maintenance employees who require
prescription-ground glasses.
Employees were continuously urged to make suggestions for improvements in work processes as an eff'ort toward accomplishment of
the President's program to reduce costs and improve productivity.
Estimated annual recurring savings of $17,396 and a one-time savings
of $1,415 wUl accrue to the Bureau as a result of suggestions adopted
through the incentives award program in fiscal 1965.
During the year, 293 Bureau employees participated in 27 Bureau
traming sessions; 100 employees completed 46 courses conducted by
other Government agencies; and 46 employees attended seminars and
training classes sponsored by non-Government organizations.
Estimated savings resulting from nianagement improvements during fiscal 1965 totaled 6 man-years and approximately $88,000 on a
recurring annual basis. All savmgs realized were applied against
production costs and were reflected in the Bureau's billing rates to
customer agencies.
New issues of postage stamps and deliveries of finished work

New issues of postage stamps delivered by the Bureau in fiscal 1965
are shown in table 91. . A comparative statement of deliveries of finished work for the fiscal year 1964 and 1965 aj^pears in table 92.
Finances

Bureau operations are financed by reimbursements to the Bureau of
Engraving and Printing fund, as authorized by law. Comparative
. financial statements follow.
Statement of financial condition June 30, 1965 and 1964
• Assets
C u r r e n t assets:
Cash:
On hand
With t h e T r e a s u r y
A c c o u n t s receivable ^
Inventories: 2
F i n i s h e d goods
Work i n process
R a w materials
Stores
P r e p a i d expenses

J u n e 30,1965

J u n e 30, 1964

$824
4, 427, 824
4, 215, 264

$12
5, 333,878
2,664,730

1,238,819
3,412, 963
684, 501
1, 021, 704
83,493

1,940,984
3,649,869
969,258
1,044,655
57,176

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

15,085,392

15, 560, 562

Fixed assets: 3
Plant machinery and equipment
Motor vehicles
Office m a c h i n e s
F u r m t u r e a n d fixtures
Dies, rolls, a n d plates
Building appurtenances
Fixed assets u n d e r construction

21,767,112
160, 616
259,173
489,607
3, 955,961
3,143, 755
410,342

20,116,698
146, 665
251,174
468, 778
3,955, 961
2, 676,807
295,267

30,186,566
14, 980, 051

27,911,350
13, 730,821

15,206, 515

14,180, 629

._

_

„.

Less a c c u m u l a t e d depreciation
Excess fixed assets ( w r i t t e n d o w n to 20% a n d 10% of book v a l u e , 1965 a n d
1964, respectively)

Deferred charges
Totalassets

455

15,210,981

T o t a l fixed assets

4,466

14,180,984

156,050
_

F o o t n o t e s a t end of t a b l e .




_

_

_

147,119

30,452,423

29,888,665

96

19 65 REPORT OF THE SECRETARY OF THE TREASURY
Statement of financial condition June SO, 1965 and 1964—Continueci
Liabilities and investment of the United States

Liabilities:
Accounts payable
—_
Accrued liabihties:
Payroll 4
____
Accrued leave
^
Other
Trust and deposit liabilities
Other habilities ^

June 30, 1965 June 30,1964

$736,851

$1,116, 028

1,919,346
1,821, 656
214,307
800,453
11, 510

1,142, 663
1,686, 726
136, 905
624,930
307

.....^

5, 604,122

4,706,449

Investment ofthe U.S. Government:
Appropriation from U.S. Treasury
, Donated assets, net ^

3,250,000
22, 000,930

3,250,000
22, 000,930

25,250,930
-302,629

25,250,930
• -68,714

Total investment of the U.S. Governinent

24,948,301

25,182,216

Total liabilities and investment of the U.S. Government

30,452,423

29,888,665

Total habihties s...:

_

—_

Accumulated earnings, or deficit (—) ^

1 Accounts receivable at June 30,1965, include $134,242 representiag the value of finished goods and work
in process inventories destroyed as a result of a fire as weU as misceUaneous expenses iacurred in connection
thereto. A claim of negligence assessed against the contractor engaged in a construction project at the time
of the fire waS'pendiag at the close of the fiscal year.
2 Finished good's and work in process inventories are valued at cost, includiag administrative and service
overhead. Except for the distiactive paper which is valued at the acquisition cost, raw materials and stores
inventories-are valued at the ayerage cost of the materials and supphes on hand.
3 Plant machinery and equipment, furniture and fixtures, office machines, and motor vehicles acquired
Oh or before June 30, 1950, are stated at appraised values. Additions siace 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 Engtaving and Printing fund specificaUy excluded land and buildings valued at about
$9,000,000 from the assets of the fund. Also excluded are appropriated funds of about $6,766,000 expended
or transferred to (>SA for extraordinary expenses in connection with uncapitalized building repairs and air
conditioning. Dies, rolls, ahd plates were capitalized at 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.
4 Accrued payroU and other habihties at June 30,1965, include $207,211 and $9,113, respectively, for clauned
retroactive overtime pay due building guards or the estates of deceased buUding guards for services performed during the period October 1954-0ctober 1964 in accordance with. Comptroller General's Decision
B-156197, dated Oct. 8, 1964, and Mar. 17, 1965. A contingent habihty of an undetermined amount exists
for former guards who may file claims.
6 In addition, outstanding commitments with suppliers for unperformed contracts and undelivered
purchase orders totaled $7,264,767 as of June 30, 1965, as compared with $7,906,174 at June 30, 1964; unperformed contracts at both dates include $2,177,087, representmg the balance due for a prototype multicolor
postage stamp web-fed intagho printing press to be dehvered in fiscal year 1966. The balance for the most
part represents annual term; contracts for materials and supphes for delivery ia the ensuing fiscal year
6 See foUowing page, footnote 3.




ADMINISTRATIVE

97

REPORTS

Statement of income and expense, fiscal years 1965 and 1964
Income and expense

1964

1965

Operating revenue: Sales of engraving and printing

•_._

__

__

____

Rp.nts, c o m m n n i c a t i o n s , a n d n t i h t i e s
O t h e r services
Depreciation a n d amortization
G a i n s (—), or 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)

$26,424, 992

10,099,336
4, 242, 064

16,857,230

Prime cost
Overhead costs:
Salaries and indirect labor'
__
Factory supplies
Repair parts and supplies
Employer's share personnel benefits

$31,028,383

12, 004, 970
4,852, 260

Operating costs:
Cost of sales:
Direct labor.
Direct materials used

14, 341,400

8, 968,383
1,188, 731
316, 596
1, 458, 417
528,106
319, 651
1, 706,814
29, 675
. 56,037

8,165, 638
1,191, 023
310, 949
1,386, 242
503, 736
253, 081
1, 601, 022
- 2 , 634
46, 531

Total overhead

14, 572, 409

13, 455, 588

T o t a l costs 2

31,429, 639

27, 796, 988

424, 564
647, 606
2,242

369, 331
479,177

Less:
N o n p r o d u c t i o n costs:
S h o p costs capitalized
Cost of miscellaneous services r e n d e r e d o t h e r agencies
Cost of special services rendered—fire

974, 412
Cost of p r o d u c t i o n
._
_.
N e t increase (—), or decrease i n finished goods a n d w o r k in process
i n v e n t o r i e s from operations
.

848, 508

30,455,227

26, 948, 480

'.

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
Cost of special services rendered—fire
W o r k i n process a n d finished goods i n v e n t o r y loss d u e to fire

-490,894
26, 457, 686

- 2 3 3 , 915

- 3 2 , 594

469, 767
77,839
134, 242

421,323
57, 854

681, 848

O p e r a t i n g profit, or loss (—)

Nonoperating revenue:
Operation a n d m a i n t e n a n c e of incinerator a n d space u t i h z e d b y o t h e r
agencies
..
O t h e r direct charges for misceUaneous services
_
C l a i m receivable for fire loss
_ _ _ _

807,071
31, 262,298

Cost of sales

479,177

547, 606
2,242
132,000

479,177

681,848
N e t profit, or loss (—) for t h e y e a r 3

_

_

_

- 2 3 3 , 915

..

.

479,177
-32,594

1 Includes $216,324 in 1965 to cover the cost of retroactive overtime pay for buUding guards, most ofwhich
was applicable to prior years.
2 No amounts are included in the accounts of the fund for (1) interest on the investment of the Govemment
in the Bureau of Engraving and Printing fund, (2) depreciation on the Bureau's buildings excluded from the
assets of the fund by the Act of Aug. 4,1950, and (3) certain costs of services performed by other agencies on
behalf of the Bureau.
3 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.

782-556—66



98

19 65 REPORT OF THE SECRETARY OF THE TREASURY
Statement of source and application of funds, fiscal years 1965 and 1964
Funds provided and applied

Funds provided:
Sales of engraving and printing
Operation and maintenance of incinerator and space utilized by other
agencies
J
Other direct charges for miscellaneous services
Claim receivable for fire loss

1966

1964

$31,028,383

$26,424, 992

469,767
77,839
134, 242

421, 323
67, 854

31, 710, 231

26, 904,169

30,207, 657

26, 338,375

Sale of surplus equipment.. _
Decrease in working capital.

1, 602, 674
6,430
1, 272, 843

1, 565,794
17, 810
734, 551

Total funds provided

2, 781,847

2,318,155

2, 706,967

2, 245, 012

Less cost of sales and service (excludiag depreciation and other charges
not requiring expenditure of funds: Fiscal year 1965, $1,736,489; fiscal
year 1964, $1,598,388)—

Funds applied:
Acquisition of fixed assets
1
Acquisition of experimental equipment; and plant repairs and alterations
to be charged to future operations

73,143

2,781,847

Total funds applied.

74, 880

2,318,156

Fiscal Service
BUREAU OF ACCOUNTS

Functions of the Bureau of Accounts have Government-wide scope.
They include central accounting and financial reporting; disbursing
for virtually all civilian agencies; supervising the Government's depositary system; determining qualifications of insurance companies to
do surety business with Government agencies; a variety of fiscal activities such as investment of trust funds, agency borrowings from the
Treasury, and international claims and indebtedness; and Treasury
staff representation in the Joint Financial Management Improvement
Program.
Management improvement

Annual recurring savings of $1,056,000 were realized from the continuing management improvement program during fiscal 1965, attributable to further improvements in technology and systems, major
realignments of organization and staffing, and the fruits of the continuing programs for the development of people in management skills
at all levels.
Systems improvement

Bureau staff continued to represent Treasury on the steering committee and survey teams of the Joint Financial Management Improvement Program. Primary attention was given to assisting Government agencies to improve advance financing practices through letters
of credit, pursuant to Department Circular No. 1075. (For details
on the purpose of this circular, see 1964 annual report, page 101.)




ADMINISTRATIVE REPORTS

99

More than 1,500 letters of credit were issued in fiscal year 1965 by
the Departments of Agriculture; Labor; and Health, Education, and
Welfare; Office of Economic Opportunity; National Aeronautics and
Space Administration; National Science Foundation; Agency for International Development; and Atomic Energy Commission. Letters
of credit were also utilized by the Treasury Department in making
U.S. subscriptions to the International Monetary Fund and contributions to programs of the Inter-American Development Bank. Total
disbursements drawing down letters of credit in fiscal 1965 exceeded
$1.3 billion. The Office of Civil Defense, the State Department, and
the Department of the Interior plan to use the procedure in fiscal 1966.
Department Circular No. 918, which regulates the withholding of
State income taxes by Federal agencies, was supplemented to modify
timing of payments and filing of tax returns. Agreements for withholding taxes were concluded with Arkansas, Kansas, and Rhode Island. These cooperative arrangements are now in effect for 30 States,
including the District of Columbia.
Other systems work during the year included various studies to improve central accounting operations, administrative accounting procedures, and internal financial reporting. At the end of fiscal 1965,
work was in process on a consolidated manual of all Treasury regulations on central accounting, reporting, and other fiscal matters, for
the guidance of all Federal agencies. This manual covers certain prescribed forms and procedures which have been, or will be, dropped
from titles 6 and 7 of the General Accounting Office Policy and Procedures Manual for Guidance of Federal Agencies,
Central accounting and reporting

Consolidation of the central accounting and central reporting
organizations in April 1964 was instrumental in achieving considerable progress during fiscal 1965 toward maximum integration of the
central accounting and reporting operations by use of the Bureau's
E D P equipment originally acauired for disbursing work. The central accounts are now entirely in the computer system. A number of
financial report operations have been so converted, including several
tables in the monthly statement of receipts and expenditures. Computer programs for other tables appearing in this monthly report and
other reports are expected to be developed and installed in fiscal year
1966. This looks to the capability for computer printouts of "camera"
copies, for use in reproducing certain major Govemment-wide financial reports.
Department Circular No. 966, which covers business-type financial
statements, was revised to update Treasury requirements for descriptive narrative submissions on the source of data included in statements ; an explanation of accounting bases, principles, and standards;
and the nature of underlying assets and liabilities. A completely new
set of regulations was in process at the end of fiscal 1965 and is targeted
for completion in fiscal 1966, to amalgamate all prior modifications,
define terms more precisely, and achieve greater conformity between
the agencies, the Bureau of the Budget, and the Treasury in the treatment of a wide variety of accounting transactions.




100

19 65 REPORT OF THE SECRETARY OF THE TREASURY

The reservation of foreign currencies on an unfunded basis continued to yield benefits to the Govemment through its favorable impact
on cash financing costs and the balance of payments. Amendment No.
1 to Department Circular 930, Revised, establishing regulations for
further unfunding of foreign currencies, was issued during the year.
A total of 3,528,041 accounting items was processed by the central
and regional oiiices through the central accounting system during fiscal
1965, a slight increase over the preceding year.
Internal auditing

Twenty audits of Bureau and nonbureau activities were begun during
the fiscal year; two were in progress at yearend. Thirteen of these
audits were of fiscal functions, five of management operations, and two
included both areas.
General coordination and staff assistance were furnished for the annual audit of the Exchange Stabilization Fund. Also, an auditor was
loaned to the Intemal Audit Division, Office of the Secretary, for their
audit of the administrative accounts of the Office of the Secretary.
Disbursing operations

. The average unit cost for all- disbursing operations reached a low of
2.98 cents in fiscal 1965; the unit cost in fiscal 1964 was 3.05 cents.^
These figures cover the cost of all goods and services consumed in the
central disbursing function, including depreciation of owned equipment in relation to the quantities of checks and savings bonds produced.
(It does not include the cost of postage, which has no bearing on
operational efficiency in the disbursing functions.) Productivity per
employee increased by 10 percent in 1965 over 1964.
During the year 11 regional disbursing: offices were in operation,
servicing over 1,500 offices of agencies. Certain foreign service posts
in Central and South America and the F a r East also received disbursing services from the Washington and Manila regional offices, respectively.
More than 93 pigrcent of all of the Bureau's checks and bonds were
produced on computers, as conversions of payments to electronic data
processing continued during the year.
A centralized electronic microfilm system was installed in the Chicago regional office, resulting in considerable savings. This system
produces microfilm, records directly from data on magTietic tapes generated by the six largest regional disbursing offices.
Special machines for preparing checks for miscellaneous payments,
using a heat transfer process, which imprint payee information on
checks directly from vouchers submitted by the agencies, were installed
in the 8 regional disbursing offices within the 48 contiguous States.
Substantial savings result from the elimination of check typing and
proofreading work in this area of the Division of Disbursement's
operations.
1 The unit cost of 3.11 cents shown in the 1964 annual report, page 102, did not include
disbursing activities financed by reimbursements from certain agencies.




ADMINISTRATIVE

101

REPORTS

There follows a comparision of the fiscal year 1964 with the 1965
workload.
Volume

Classification
1964
Operations financed by appropriated funds:
Checks:
Social security benefits
Veterans'benefits ..,

1966

Total workload financed by appropriated funds. . ,. _
Operations financed by reimbursements:
Railroad Retirement Board
__
Department of Agriculture (ACP)„
Bureau ofthe PubUc Debt (certam savings bonds)
Total workload-reimbursable iterns^.

^

Total workload

.

357,455,545
12,153, 862

13,427, 282

13,004,316

363,476, 686

.

198 593,859
68,976,138
39 841,453
• 4,279,794
40,209,189
6,500,741
54,371

12, 267, 997
360,615
798,670

Veterans'national service life insurance dividends.
Other .
Savings bonds issued
Adjustments and transfers,
.
,,

189,431,084
62,721.888
42,358,609
4,406,015
45,932,888
5,087,062
111,758
350,049,304

Tnnnmft tax refunds

370,459, 860

850, 463

Deposits, investments, and related activities

Federal depositary system,—The types of depositary services and
number of commercial banking institutions authorized to provide each
service, as of June 30,1965, are shown in the following table.
Type of service provided by depositaries

Receive proceeds of deposits by taxpayers and from sale of public debt securities, for credit
in Treasury tax and loan accounts
_.
Receive deposits from district directors of internal revenue, military finance oflicers, and
other Government oificers
Maintain official checking accounts of postmasters, clerks of U.S. courts, and other Government officers
_
:
Furnish bank drafts to Government officers in exchange for coUections
Service State unemployment compensation benefit payments and clearing accounts
Operate limited banking facihties at miUtary instaUations:
In the United States and its outlying areas
Foreign
___!
.__
.

Number of
banking
institutions

12,186
1,036
6,780
2,250
56
274
153

Investmients,—Government trust funds are invested in marketable
U.S. securities and special securities issued for purchase by the major
trust funds as authorized by law. During the year legislation was
enacted to authorize the Secretary of the Treasury to invest two
additional funds.
Legislation approved October 13, 1964 (38 U.S.C. 725(b)), established the veterans' reopened insurance fund, which permits certain
veterans to reinstate national service life insurance, and authorizes the
Secretary of the Treasury to sell to the fund special interest-bearing
securities of the United States. These special securities bear interest
at a rate equal to the average market yield on marketable U.S, securities not due or callable until after the expiration of four years.
The District of Columbia judicial retirement and survivors annuity
fund was established under legislation approved October 13, 1964 (78
Stat. 1061). The Secretary of the Treasury is authorized to invest




102

19 65 REPORT OF THE SECRETARY OF THE TREASURY

this fund in interest-bearing securities of the United States or Federal
farm loan bonds.
Table 66 shows the holdings of public debt and agency securities by
Government agencies and accounts.
Loans i y the Treasury,—The Bureau administers loan agreements
with those Government corporations and agencies that have authority
to borrow from the Treasury to finance certain programs. Legislation
was enacted during the year authorizing borrowing to finance parking
facilities for the iJohn F . Kennedy Center for the Performing Arts,
established January 23, 1964 (78 Stat. 5). The Board of Eegents of
the Smithsonian Institution is authorized to sell to the Secretary of the
Treasury revenue bonds which are to be retired by the Board from
parking facility revenues. Tables 108, 109, and 110 show the status
of Treasury loans to Government corporations and agencies as of June
30, 1965.
Surety 66)^(^5.—Executive agencies are required by law to obtain
blanket, position schedule, or other types of surety bonds covering
those employees required to be bonded. Legislative and judicial
branches are permitted by law to follow the same procedure. The
Secretary of the Treasury issues certificates of authority, renewable
each June 1, to corporate sureties that are qualified to execute bonds in
favor of the United States. A total of 259 companies held such certificates as of June 30, 1965 (published annually in the Federal Register in relation to Department Circular 570, Eevised). A summary
of bonding activities of Government agencies follows:
Number of officers and employees covered on June
30, 1965
976, 961
Aggregate penal sums of bonds procured
$3,511,234,300
Total premiums paid by Govemment in fiscal year
1965
$229, 997
Administrative expenses in fiscal year 1965
$45,932
Foreign indebtedness

World War I.—^Following an agreement with the Government of
Greece on May 28, 1964, legislation was introduced to authorize the
acceptance of a settlement of the World W a r I indebtedness of Greece
and the use of the payments to finance a mutual cultural and educational exchange program. The legislative proposal was pending in
the Congress at yearend.
The Government of Finland made total payments of $374,645 during
fiscal 1965, which were used to finance educational exchange programs
with that Government (22 U.S.C. 2455(e)). For the status of all
World W a r I indebtedness see tables 103 and 104.
World War II,—U.S. dollar payments of $49 million (including
the U.S. dollar value of returned lend-lease silver) and the equivalent
of $13 million in local currencies were received from debtor governments, under lend-lease and surplus property sales agreements. See
table 106 for the status of the lend-lease and surplus property accounts
administered by the Treasury.
Credit to the United Kingdom.—Although there was a deferral of
the principal and interest installment due December 31, 1964 (under




ADMINISTRATIVE REPORTS

103

the financial aid agreement of December 6,1945, as amended March 6,
1957) the United Kingdom paid previously deferred principal and
interest installments, and interest thereon, totaling $3.8 million.
Cumulative payments total $1,389.6 million, of which $788.7 million is
interest. The unmatured principal balance is $3,149.1 million; deferred interest installments outstanding amount to $201.8 million.
Payment of claims against foreign governments

Mixed Claims Commission,, U.S, and Germany,—The Federal Eepublic of Germany paid $4 million during the year under the agreement of February 27,1953, enabling a further distribution to be made
to holders of awards certified by the Mixed Claims Commission on
claims arising from World W a r I. Table 93 shows the status of the
claims fund.
Foreign Claims Settlement Commission.—The fifth installment of
$2 million was received from the Polish Government under the July
16, 1960, agreement. These payments will be used to settle claims of
American nationals against Poland which have been adjudicated by
the Foreign Claims Settlement Commission. The Commission expects
to complete adjudication of these claims by March 31, 1966. Payments up to $1,000 were made during the year on each award certified
to the Treasury by the Commission.
During the year the Commission began certifying to the Treasury
those claims filed under the W a r Claims Act of 1948, as amended.
The Treasury received $75 million for payment of these awards; additional amounts will become available through the U.S. sale of seized
assets of German and Japanese nationals, including substantial sums
realized from the sale of General Aniline and Film Corp. stock. The
deadline for filing claims with the Commission was January 15,1965.
Payments of awards made due to death and personal injury were authorized and begun in fiscal 1965. See table 94.
Defense lending

Effective with the close of fiscal year 1964, the Office of Defense
Lending was abolished and its functions transferred to the Commissioner of Accounts, pursuant to Treasury Department Order No. 185-2,
dated June 24,1964.^
Defense Production Act.—No new loans to private businesses were
made during the year under section 302 of the Defense Production Act
of 1950, as amended. Loans outstanding were reduced from $17.9
million to $16.7 million during fiscal 1965. Further transfers of $1.7
million were made to the account of General Services Administration,
Eevolving Fund, Defense Production Act, from the net earnings ac• cumulated since inception of the program, bringing the total of these
transfers to $16.5 million.
Federal Oivil Defense Act.—The remaining deferred participation
commitments under section 40'9 of the Federal Civil Defense Act were
liquidated during fiscal 1965 and outstanding loans reduced to $509,994. Notes payable to the Treasuiy were reduced $71,091 to a total of
,909, and interest payments of $3,246 were made during the year.
^ See 1964 annual report, exhibit 54, p. 374.




104

19 65 REPORT OF THE SECRETARY OF THE TREASURY

Liquidation of Reconstruction Finance Corporation assets.—The
Secretary of the Treasury's responsibility in the liquidation of E F C
assets relates to completing the liquidation of business loans and securities with individual balances of $250,000 or more as of June 30,
1957, securities of and loans to railroads, securities of financial institutions, and the windup of corporate affairs. Net income and proceeds
of liquidation amounting to $606,134 were paid into the Treasury as
miscellaneous receipts in fiscal 1965, making a cumulative total of $53.7
million since July 1, 1957. Total unliquidated assets as of June 30,
1965, had a gross book value of $5.5 million.
Depositary receipts

The following table shows the volume of depositary receipts for the
fiscal years 1960-65. A description of the depositary receipt procedure
is contained on page 141 of the 1962 annual report.
Income and
social security

Fiscalyear

1960
1961
1962..
1963
1964
1965

. . _

_
.-- ^

_.

9,469,057
9,908,068
10,477,119
11,161,897
11,729, 243
12, 012,386

Railroad
retirement
taxes

Federal excise
taxes

10,626
10,724
10, 262
9,937
9,911
9,869

598,881
618,971
610,026
619, 519
633,437
644,763

Total

10, 078, 563
10,537,763
11,097,407
11,791,353
12,372,691
12, 666,997

NOTE.—Comparable data, for 1944-59 will be found in the 1962 annual report, page 141.

Government losses in shipment
Claims totaling $44,210.04 were paid from the revolving fund established by the Government Losses in Shipment Act, as amended. De-*
tails of operations under this act are shown in table 114.
Other operations

Withheld foreign checks.—On November 9, 1964, Department Circular 655 was completely revised to incorporate into one document the
original circular dated March 19, 1941, and the 14 later supplements.
Donations and contributions.—Bureau receipts deposited into the
Treasury during the year as "conscience fmid" contributions amounted
to $18,441.15. Other unconditional donations totaled $651,863.05;
such receipts by other Government agencies amounted to. $9,479.77.
Conditional gifts tp further the defense effort amounted to $150,822.19.
Gifts of money and the proceeds of real or personal property donated
in fiscal 1965 for the purpose of reducing the public debt amounted to
$709,777.35, of which $706,707.35 was used to purchase and retire,
public debt securities.
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 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




ADMINISTRATIVE REPORTS

105

those outstanding. The Bureau is responsible for the final audit and
custody of retired securities, the maintenance of the control accounts
covering all public debt issues, the keeping of individual accounts with
owners of registered securities and authorizing the issue of checks iii
payment of interest thereon, and the handling of claims on account of
lost, stolen, destroyed, or mutilated securities.
The Bureau's principal office and headquarters is in Washington,
D.C. Offices also are maintained in Chibago, 111., and Parkersburg,
W. Va., where most Bureau operations related to U.S. savings bonds
are handled. Under Bureau supervision many transactions in public
debt securities are conducted by the Federal Eeserve banks and their
branches as fiscal agents of the United States. Selected post offices,
private financial institutions, industrial organizations, and others
(approximately 19,200 in all) cooperate in the issuance of savings
bonds.
Management improvement

The E D P system in the Parkersburg office was expanded and up^
dated by the acquisition of two new system components, which have increased efficiency and permitted the conversion to electronics of operations previously performed either manually qr on other types of
equipment.
The fees due paying agents who redeem savings bonds are now being
computed electronically, and check issue information is supplied to
the Eegional Disbursing Office on magnetic tape. Statistical reports
bf employee participation in company-operated payroll savings plans
are also being developed electronically. Both of these operations were
previously performed on conventional tabulating equipment in the
Washington office.
Accounting and statistical documents now prepared on the computer
mclude the permanent receipts for shipments of stubs and bonds, advices of adjustment covering individual differences disclosed in the
audit of stub and bond transmittals, certain machine utilization and
personnel production reports, and cash accounting reports.
An E D P programming refinement has substantially reduced tape
requirements for the maintenance of the consolidated file reflecting
alphabetic data and bond identification data, both of which are compacted under a new tape format. This permits more frequent inquiry
searches with no increase in machine time.
Additional operating economies were effected in the Parkersburg
office through the installation of a revised procedure for correcting mispunched registration stubs, the replacement of manual film readers
with automatic reader-printers, and a revision in the stub adjustment
procedure which eliminated the typing of substitute registration stubs.
Joint projects were instituted with three large Government issuing
agents using computers to inscribe Series E savings bonds, with a view
to having these agents furnish issue data on magnetic tape and microfilm, rather than through the submission of registration stubs. Following a successful trial period, the Navy Department, Bureau of Supplies
:and Accounts will convert to this system early in fiscal 1966. The projects with the other agents are being continued.




106

1965 REPORT OF THE SEGRETARY OF THE TREASURY

Authority was delegated to the Federal Eeserve banks and branches
to redeem bearer Treasury bonds of eligible issues presented in payment of Federal estate taxes and to remit the proceeds to the appropriate district director of Internal Eevenue. This decentralization
will result in operating economies as well as improved service to the
public.
The accounting records of the Division of Eetired Securities were
revised to eliminate certain control accounts and reduce maintenance
detail by more extensively using basic data in the public debt accounts.
Changes were also made in the method of preparation and the arrangement of destruction schedules, thereby facilitating the preparation of
the schedules and ^he selection of items to be destroyed.
Bureau operations

The extent of the change in the composition of the public debt is one
measure of the Bureau's work. The debt falls into two broad cater
gories: public issues and special issues. Public issues consist of marketable Treasury bills, certificates of indebtedness, notes, and bonds;
and nonmarketable securities, 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, 24,297 individual accounts coveriag publicly held
registered securities other than U.S. savings bonds and retirement plaii
bonds were opened and 32,510 were closed. This reduced the number
of open accounts to 215,020 covering registered securities in the principal amount of $12,559 million. There were 410,913 interest checks with
a value of $409,373,018 issued during the year.
Eedeemed and canceled securities other than savings bonds and retirement plan bonds received for audit included 5,517,912 bearer
securities and 711,609 registered securities. Coupons totalmg
17,471,487 were received.
A summary of public debt operations handled by the Bureau appears
on pages 17 to 29 of this report and in tables 29-57.
U,S, savings honds,—The issuance and redemption of savings bonds
results in a heavy administrative burden for the Bureau of the Public
Debt, involving: Maintenance of alphabetical and numerical ownership records for the 2.7 billion bonds issued since 1935; adjudication of
claims for lost, stolen, and destroyed bonds (which totaled 2.0 million
pieces on June 30, 1965); and the handling and recording of retired
bonds.
Detailed information on sales, accrued discount, and redemption of
savings bonds will be found in tables 48 to 50, inclusive.
There were 98.4 million stubs representing the issuance of Series E
bonds received for registration, making a grand total of 2,649.6 million^
including reissues, received through June 30,1965.
All registration stubs of Series E savings bonds and all retired Series
E savings bonds are microfilmed, audited, aind destroyed, after re^
quired permanent record data are prepared by an EDP system in the
Parkersburg office; Prior to the establishment of that office these
savings bond operations were performed in several Bureau offices




ADMIISnSTRATrVE

107

REPORTS

manually and on tabulating equipment. The following table shows
the status of processing operations in the Parkersburg office.
Balance
Fiscal y e a r

Received

Microfihned

ConKeyverted
p u n c h e d to m a g netic
tape

Audited
and
classified

Destroyed

Unfilmed

N o t conN o t key- verted to
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 miUions of pieces]
1968-60
1961
1962
1963
1964.
1966_
Total

230.7
90.7
90.2
93.9
98.2
100.7

227.4
92.4
88.7
96.0
97.6
101.1

227.2
92.2
89.1
95.0
97.6
101.1

226.2
92.9
88.9
93.0
98.4
101.7

58.3
164.4
154.1
69.6
96.2
123.7

706.7

_._.
_

234.2
88.7
91.0
94.3
100.1
98.4

704.4

702. 2

702.2

700.1

656.3

3.6
1.6
2.3
2.7
4.6
2.3

6.8
3.1
6.4
4.7
7.2
4.5

7.0
3.6
5.4
4.7
7.2
4.6

9.0
4.8
6.9
8.2
9.9
6.6

4.6
1.9
3.2
3.8
5.0
3.6

5.4
2.3
4.4
6.8
6.8
6.2

0.1
1.1
1.4
.9

0,1
2.0
2.1
1.3

R e t i r e d card t y p e Series E savings b o n d s [in mUUons of pieces]
1958-60.
1961
1962..
1963.
1964.
1966.

117.9
69.7
62.4
64.9
70.1
75.3

114.4
61.6
61.1
64.1
68.9
77.1

113.3
62.4
61.1
64.3
68.9
76.8

112.6
62.8
60.3
63.5
69.1
76.9

20.6
93.0
96.0
48.3
83.4
69.8

460.3

Total

116.6
60.6
61.3
64.3
70.0
75.9
448.6

447.1

446.8

445.1

1.4
.5
1.6
2.2
2.3
1.7

400.1

3.6
1.7
3.0
3.8
5.0
3.2

R e t i r e d p a p e r t y p e Series E savings b o n d s [in milUons of pieces]
1962
1963
1964
1965

0.8
21.8
22.4
20.4

0.7
20.8
22.1
21.0

0.7
20.8
22.1
20.9

0.7
19.9
22.3
21.2

5.1
23.4
11.0

65.4

Total

0.8
21.2
22.4
20.6
64.9

64.6

64.6

64.1

39.6

0.1
1.1
1.4
.8

0.6
.6
.6

Of the 91.3 million Series A - E savings bonds redeemed and received by the Bureau during the year, 89.0 million (97.4 percent) were
redeemed by approximately 16,200 authorized paying agents. These
agents were reimbursed quarterly 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, for
a total of $11,522,472 and an average of 12.95 cents per bond.
The following table shows the number of savings bonds outstanding
as of June 30,1965, by series and denomination.
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

E
H
A.._
B
C.
D
F G
J.
K
Total

-

---

$60

$25

$75

$100

$200

$500

$1,000 $5,000 $10,000 $100,000

467,158
6,884
2
3
9
46
49
120
332
366

716 247,381 106,480 1,030 78,730 8,061 12,013 12,709
2,634 3,832 " 3 2 4 '

474,969

372

i

1
3
17
21
60

(*)

1
2
9

i

1
3
13
15
59
115

(*)
(*)

1
3
4
23
34
95

(*)
(*)

1
4
8
36
89
204
716 247,484 106,492 1,030' 78,937 8,051 14,807 16,883

* Less than 600 pieces.
J Currently only bonds of Series E and H are on sale.




2

46
95

1
2
13
32

(*)
34
195

(*)

1
3

108

19 65 REPORT OF THE SECRETARY OF THE TREASURY

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

June 30

Credit
unions

Companies
operating
payroll
plans

Al]

Total

others

Issuing agents
24, 038
25, 060
2,476
1,093
1.061
.1, 046
1,011
977
943

1946-.
1950-.
1955I960-.
1961-.
1962-.
1963-.
1964-.
1966-

15, 232
16, 225
• 16, 692
16, 436
13, 506
13, 559
13, 644
13, 908
14, 095

3,477
1.557
1, 555
1, 851
1,617
1,670
1, ()79
1,702
1,702

2,081
522
428
320
285
281
269
252
246

2 9, 606
3,052
2,942
2,352
2,045
1,978
1,857
1.783
1,695

(2)

660
588
643
590
573
560
,528
510

54, 433
45,966
23,681
22, 695
319,103
19,107
19, 020
19,160
19,191

•

Paying agents
1945-.
1950-.
1956-.
I960..
1961..
1962-.
19631964-.
1965-.

13,466
16, 623
16. 269
17,127
13, 670
13. 687
13, 826
14. 039
14,190

874
1,188
1,797
1, 605
1,690
1,739
1,779
1,816

137
139
169
158
160
155
158
157

13, 466
16, 691
17, 652
19,153
315, 449
16, 553
16,735
15,991
16,178

1 Estimated by the Post Office Department for 1955 and thereafter. Sale of Series E savings bonds was
discontinued at post offices at the close ofbusiness on Dec. 31,1953, except in those localities where no other
public facilities for their sale were avaUable. .
2 "All others" included with companies operating payroll plans.
3 Substantial reduction due to reclassification by Federal Reserve banks effective Dec. 31,1960, to include
only the actual number of entities currently quahfied.

Interest checks issued on current income type savings bonds (Series
H and K) during the year totaled 5,217,914 with a value of $323,033,173. New accounts established for Series H bonds, the only current
income type savings bond presently on sale, totaled 142,214, while accounts closed for Series H bonds totaled 131,553, an increase of 10,661
accounts.
Applications received during the year for the issue of duplicates of
savings bonds lost, stolen, or destroyed after receipt,by the registered
owner or his agent totaled 34,439. I n 22,720 of these cases the issuance of duplicate bonds was authorized. I n addition,. 12,735 applications for relief were received in cases where the originah bonds
were reported as not being received after having been mailed to the
registered owner or his agent.
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. Federal Eeserve banks as fiscal agents of the United
States perform many functions for the Treasurer. These include:
The verification and destruction of U.S..paper currency; the redemption of public debt securities; the keeping of cash accounts in the name




ADMINISTRATIVE REPORTS

109

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 qualifying as depositaries provide banking facilities for the Government in the United States and in foreign countries.
Data on the transactions handled for the Treasurer by Federal Eeserve. 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 Eeserve currency; examines and determines
the value of mutilated currency; and acts as special agent for the payment of principal and interest on certain securities of U.S. Government corporations and on certain securities issued by Puerto Eico on
or before January 1,1940.
The Office of the Treasurer maintains facilities at the Treasury t o :
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 conduct transactions in both marketable.
and nonmarketable public debt securities. The Office also prepares
the Daily Statement of the United States Treasury and the monthly
Circulation Statement of United States Money,
Under the authority delegated by the Comptroller General of the
United States, the Treasurer processes claims arising from forged endorsements and other irregularities involving checks paid by the
Treasurer and passes upon claims for substitute checks to replace lost
or destroyed unpaid checks.
The Treasurer of the United States is Treasurer of the Board of
Trustees of the Postal Savings System. She is also custodian of bonds
held to secure public deposits in commercial banks, bonds held to secure
postal savings on deposit in banks, and miscellaneous securities held for
other agencies.
Management improvement

This year's management improvements were concentrated in the
areas of better utilization of personnel and other resources, motivating
employees to increase their proficiency and usefulness to the bureau,
and more effective organizational structure. Nine incentive awards
were given to keypunch operators in recognition of their noteworthy
proficiency.
I n other data processing operations, certain reports, records, and
procedural steps were eliminated, thus freeing personnel and machines
for additional services to other Treasury offices.
Eeorganiz ations included a change in the check claims activity de^
signed to eliminate bottlenecks in the review process by expanding top
level review capabilities, facilitating and unifying claims examiner
training, and providing greater staffing flexibility.




110

19 65 REPORT OF THE SECRETARY OF THE TREASURY

Assets and liabilities in the Treasurer's account

A summary of the assets and liabilities in the Treasurer's account at
the close of the fiscal years 1964 and 1965 is shown in table 58.
The assets of the Treasurer consist of gold and silver bullion, coin
and paper currency, deposits in Federal Eeserve banks, and deposits in
commercial banks designated as Government depositaries.
Gold,—The Treasurer's gold assets declined during fiscal 1965 for
the eighth consecutive year. The net reduction of $1,527.2 million,
daily Treasury statement basis, shown in table 58, includes a payment
of $258.8 million on June 30,1965, for 25 percent of the increase in the
quota of the United States in the International Monetary F u n d and
other disbursements of $1,755.1 million, offset by receipts of $486.6
million.
Silver,—The Treasurer's Office continued the policy of reducing the
amount of silver certificates outstanding so that silver bullion securing
such certificates could be released to the Bureau of the Mint for coinage. Commercial demands for silver were met by exchanging bullion
for silver certificates at the New York and San Francisco assay offices
under instructions issued by the Secretary on July 22, 1963 (28 F . E .
7530).
\
The results achieved for the fiscal year are shown below on the basis
of the daily Treasury statement.
Silver buUion

Value at $1.29-f per oz.
(In miUions)

Available for release at beginning of fiscal year 1966 1
Increase from reduction in sUver certificates outstanding 1

$27.2
933.8

.

Total available for aU purposes during the year
Disposition:
Exchanged for sil ver. certificates
Released for coinage, etc., at request of Bureau of the Mint

961.0
$213.5
366.9

.

-679.4

Balance available at end of fiscal year 1966 ^

381.6

1 See table 68.

The following table also on the basis of the Daily Statement of the
United States Treasury summarizes transactions in silver bullion of
all types during fiscal 1965.
SUver bulUon
Held to
secure sUver
certificates

Fiscal year 1965

Monetary
value

'
On hand July 1,1964
Received(-f), or disbursed(—), net
Exchanged for silver certificates _.
Released for comage
Used in coinage
On hand June 30,1965 •
»Revised.




Held for comage, etc.
Monetary
value

Cost
value

Recoinage
value

(In mUlions)
$1,846.8
-213.6
-366.9
1,267.4

$1.4
-3.1

$10.2
-1.4

+365.9
-364.3
9.9

'$0.1
-)-.6
—.6

8.8

ADMINISTRATIVE

111

REPORTS

Balances with depositaries,—The following table shows the number
of each class of depositaries and balances on June 30,1965.
Number of
accounts with
depositaries i

Class

Deposits to the
credit of the
Treasurer of the
United States
June 30,1965
2 $906,499,624
38,604,737

36
47
1,946
12,186
62

Total

224,960,022
10,688,996,287
66,118,925

14,277

Federal Reserve banks and branches
Other domestic depositaries reporting directly to the Treasurer
Depositaries reporting through Federal Reserve banks:
General depositaries, etc.-.
.
Special depositaries, Treasury tax and loan accounts
Foreign depositaries 3

11,914,179,596

ilncludes only depositaries having balances with the Treasurer of the United States on June 30, 1965.
Excludes depositaries duly designated for this purpose but having no balances on that date and those
designated to furnish oflacial checking account facilities or other services to Govemment oflacers, but which
are not authorized to maintain accounts with the Treasurer. Banking institutions designated as general
depositaries are also frequently designated as special depositaries, hence the total number of accounts exceeds
the number of institutions involved.
2 Includes checks for $233,455,909 in process of coUection.
8 PrmcipaUy branches of U.S. banks and of the American Express Co., Inc.

Bureau operations

Receiving and disbursing public moneys,—Govemment officers deposit moneys collected to the credit of the Treasurer of the United
States, either with the Treasurer at Washington, with Federal Eeserve
banks, or at designated Govemment depositaries, domestic or foreign.
All payments are withdrawn from the Treasurer's account. Moneys
deposited and withdrawn in the fiscal years 1964 and 1965, exclusive
of certain intragovernmental transactions, are shown in the following
table on the daily Treasury statement basis.
Deposits, withdrawals, and balances in the Treasurer's account

1964
$12,116,176,163

Balance a t beginning of fiscal yp.ar

Cash deposits:
Internal revenue, customs, trust fund, and other coUections
121,581,066,544
Public debt receipts i
_.
.____. 230,012,138,001
Less:
Accrued discount on savings bonds and Treasury bUls
-3,372,296,050
Purchases by Government agencies
-51,118,494,823
Sales ofsecurities of Govemment agencies ia market
8,917,936,633
Total deposits

$11,036,731,209
125,464,340,732
239,286,169,978
-3,717,131,345
—49,395,891,396
10,676,163,749

306,020,350,306

-3,467,431,831
-46,973,403,368
10,475,644,025

305, 610,134, 655

Total withdrawals

126,395,262,802
233,726,170,252

-2,273,223,086
-48,373,356,385
8,031,959,150

Change in clearing accounts (checks outstanding, deposits in transit,
unclassified transactions, etc.), net deposits, or withdrawals (—)

322,313, 651,718

124,066,882,136
224,158,871,740

Cash withdrawals:
Budget and trnst accounts, etc
Public debt redemptions ^
Less:
Redemptions included in budget and trust accounts
Redemptions by Government agencies -. _
Redemptions of securities of Government agencies in market

Balance at close of fiscal year

1965

320,165,141,880

-1,490, 660,704
.

-583,976,412

. 11,036,731,209

12,610,264,635

1 For details see table 41.

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,




112

19 65 REPORT OF THE SECRETARY OF THE TREASURY

chiefly through the facilities of the Federal Eeserve banks and their
branches.
The Federal Eeserve banks and branches, as agents of the Treasury,
redeem and destroy the major portion of the U.S. currency as it becomes unfit for circulation. A small amount is handled directly by
the Treasurer's Office.
Federal Eeserve banks issue Federal Eeserve notes; they also redeem
these notes, cut them in half, and forward the halves separately to
Washington where the Currency Eedemption 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 Eedemption Division also redeems unfit paper currency 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 1965 the Division examined such currency for
46,692 claimants and made payments totaling $12,899,447.
A (Comparison of the paper currency of all classes, including Federal
Eeserve notes, issued, redeemed, and outstanding during the fiscal
years 1964 and 1965 follows.
Fiscal year 1964
Pieces
Outstanding July 1
Issues during year..
Redemptions during year
Outstanding June 30

__. .

3,920,084, 726
1,866,174,623
1,669,350,864
4,116,908,485

Amount
$37,484,776,160
10,239,966,528
8,165, 614,017
39, 559,128,671

Fiscal year 1965
1

Pieces

Amount

4,116,908,485
1,985,469,083
1,560,382,209
4,541,995,359

$39, 559,128,671
9,826,962, 793
10,721,313,796
38,664, 777,668

Table 65 shows by class and denomination the value of. paper
currency issued and redeemed during the fiscal year 1965 and the
amounts outstanding at the end of the year. TalDles 60 through 64
give further details on the stock and circulation of money in the
United States.
•
•
^
Paying grants through letters of credit,—Treasury Department Circular No. 1075 dated May 28,1964, established a procedure "to preclude
withdrawals from the Treasury any sooner than necessary" in cases
where Federal programs are financed by grants or other payments to
State or local governments or to educational or other institutions.
Under this procedure Government departments and agencies issue
letters of credit which permit grantees to make withdrawals from the
account of the Treasurer of the United States as they need funds to
accomplish the object for which a grant has been awarded.
By the close of fiscal 1965, more than 1,500 letters of credit had been
issued by the nine Government departments and agencies which had
put this procedure into effect for one or more of their programs. A
total of 5,065 withdrawal transactions, under letters of credit, involving $1,549.2 million, had been processed by June 30,1965.
Checking accounts of disbursing officers and agencies.—As of June
30,1965, the Treasurer maintained 2,145 checking accounts, compared
with 2,174 the year before. The number of checks paid by categories
of disbursing officers during fiscal 1964 and 1965 follows.



ADMINISTRATIVE

113

REPORTS

Number of checks paid

Disbursing oflicers

1965

1964
Treasury.
Army
Navy.Air Force
Other
Total

355,813,618
, 27,813,399
33,034,809
33,340,716
24,244,516

...

. ...
-

362,071, 237
28,418,544
33,303,977
34,557,707
24,269,758

474, 247,058

__ .

482,611, 223

. Settling check claims.—The Treasurer processed 393,000 requests
to stop payment on Government checks, and 21,000 requests for information and for photostatic copies of paid checks during the fiscal
year. Sixty-six thousand requests for removal of stop payments were
processed.
The Treasurer acted upon 229,000 paid check claims including those
involving the forgery, alteration, counterfeiting, or fraudulent issuance and negotiation of Government checks which were referred to the
U.S. Secret Service for investigation. Eeclamation was requested from
those having liability to the United States on 33,459 claims, and
$3,672,329 was recovered. Settlements and adjustments were made on
26,480 forgery cases totaling $3,736,798. Payments from the check
forgery insurance fund, established to enable the Treasurer to expedite
settlement of check claims, totaled $675,628. As recoveries are made,
these moneys are restored to the fund. Settlements totaling $4,535,198
have been made from the check forgery insurance fund since its
establishment in 1941.
Claims by payees and others involving 114,000 outstanding checks
were acted upon. Of these, 98,000 were certified for issuance of substitute checks valued at $30,370,000 to replace checks not re(ieived, i.e.,
lost, stolen, or destroyed.
Collecting checks deposited.—Government officers during the year
deposited more than 7,202,000 commercial checks, drafts, money
orders, etc., with the Cash Division in Washington for collection.
Custody of securities.—The face value of securities held in the custody
of the Treasurer as of June 30,1964, and June 30,1965, is shown below.
June 30

Purpose for which held1964
As coUateral:
To secure deposits of public moneys in depositary banks
To secure postal savings funds
In lieu of sureties
In custody for Government oflacers and others:
Fpr the Secretary of the Treasury 1
__
...
For Board of Trustees, Postal Savings System
For the Comptroller of the Currency
For the Federal Deposit Insurance Corporation
Forthe Rnral Electrification Administration
For the District of Columbia
For the Commissioner of Indian Affairs
Foreign securities 2
... .
Others
For Govemment security transactions:
Unissued bearer securities
Total

1965

$118,313,100
16,927,000
6,591,000
__

$75,223,100
18,917,000
4,067,500

. . 35,609,163,447
432,079,000
14, 790,000
.._ 1,142,077,900
125,639, 626
130,646, 529
35,800,800
12,056,059,132
79, 604,970

34,908,409,499
355,679,000
16,388,600
1,169,148,000
124,368,030
140,849,297
35,016,076
12,051,630,530
69,896,Oil

...

1,630,409,960

1,758,882,800

61,398,102,454

50, 728,364,342

1 Includes those securities listed in table 108 as in custody of the Treasury..
2 Issued by foreign governments to the United States for indebtedness arising from World War I.
^Includes U.S. savings bonds in safekeeping for individuals.

782-556—6



114

19 65 REPORT OF THE SECRETARY OF THE TREASURY

Servicing securities for Federal agencies and for certain other governments,—In accordance with agreements between the Secretary of
the Treasury and various Government corporations and agencies and
Puerto Eico, the Treasurer of the United States acts as special agent
for the payment of principal of and interest on their securities. The
amounts of these payments during the fiscal year 1965, on the daily
Treasury statement basis, follow.
Payment made for

Prkicipal

$1,250,860,000
Banks for cooperatives
. .
District of Columbia Armory Board
Federal home loan banks .
3,801,345 000
Federal Housing Administration
782,312,950
2,977,095,000
Federal intermediate credit banks
666,624,600
Federal land banks
... 346,898,000
Federal National Mortgage A-ssociation.
Puerto Rico__
210,500
Others
1
23,476
Total

.--

9,726,369,625

Interest paid
with principal

Registered
interest i

$24,661 751
111,956 982
11,423 748
88,864 417
15 705

$34,832 762

$829,227
40,677,904

9,325 868

119,926,642
67,253,315
67,548
2,924

44,158,630

228,746,460

8
236,912,612

Coupon
interest

,
1 On the basis of checks issued.

Office of Foreign Assets Control
The Office of Foreign Assets Control is responsible for administering the Treasury Department's freezing controls under section 5(b)
of the Trading with the Enemy Act. The controls under the Foreign
Assets Control Eegulations with respect to trade and financial transactions with, and assets in the United States of Communist China,
North Korea, North Vietnam and their nationals were continued during the 1965 fiscal year. The prohibitions under the regulations relating to the purchase and importation of Communist Chinese, North
Korean, and North Vietnamese merchandise and the procedures for
specified commodities of types principally imported from mainland
China prior to the regulations also remained relatively unchanged.
The enforcement! measures taken by the Control during fiscal 1965
included, in addition to $151,907 in fines and forfeitures collected, one
successful criminal prosecution and one indictment.
The Cuban Assets Control Eegulations were also continued. These
regulations were issued under section 5(b) of the Trading with the
Enemy Act and also under section 620(a) of the Foreign Assistance
Act of 1961. They apply to Cuba and nationals thereof and are of
the same nature as the controls applied to China, North Korea, and
North Vietnam under the Foreign Assets Control Eegulations. That
is, they block all Cuban assets in the United States and prohibit all
unlicensed financial and commercial transactions by Americans with
Cuba or nationals thereof.
The Office of Foreign Assets Control also administers the Transaction Control Eegulations which supplement the export controls
exercised by the Department of Commerce.over direct exports from
the United States to the Soviet bloc. The Transaction Control Eegulations prohibit, unless licensed, any person within the United States
from purchasing or selling or arranging the purchase or sale of internationally controlled strategic commodities located outside the United




ADMINISTRATIVE REPORTS

115

States for ultimate delivery to the Soviet bloc. As in the case of both
the Foreign Assets and Cuban Assets Control Eegulations, the prohibitions apply not only to domestic American companies but also to
foreign firms owned or controlled by persons within the United States.
I n t e r n a l Revenue Service ^
The Internal Eevenue Service administers the internal revenue laws
embodied iu the Intemal Eevenue Code (Title 26 U.S.C.) and 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). I t
is the mission of the Service to encourage and achieve the highest
possible degree of voluntary compliance with the tax laws and regulations and to maintain the highest degree of public confidence in the
integrity and efficiency of the Service.
Major management improvements

The Service compiled its most impressive record in improving operations and reducing costs during the fiscal year 1965. Eecurring,
onetime, and incentive awards savings from cost reduction and management improvements totaled $17.1 million, an increase of .47
percent over the previous high of $11.6 million in fiscal 1963. Twentyfive individual management improvement and cost reduction actions,
each of which produced, or will produce annual savings in excess oi
$100,000, made a substantial contribution to the total savings. Only
11 comparable actions were completed in 1964.
Major systems and procedural changes.—The following are examples of the changes made during fiscal 1965 to effect optimum
utilization of resources: (1) A new system which transfers data
directly from magnetic tape to microfilm has been adopted for production of final printed computer outputs such as indexes and settlement registers for use in district offices and service centers. The small
volume of microfilm contrasts sharply with the great volume of paper
outputs previously necessary. Savings in manpower (four manyears), space, paper, and computer printout time are estimated at
$298,700 annually begimiing in 1966. (2) A computerized tape library
system was devised which enabled the Service to defer additional tape
purchases estimated at $303,000. (3) Simplified key punching procedures resulted in first year savings of 136 man-years and $542,800
during fiscal 1965. (4) Purchasing rather than leasing computers and
certain other A D P equipment was found to be to the Government's
advantage. Nonrecurring savings to be realized through this change
are estimated at $1 million over the next three years. (5) Issuance
by service centers of followup notices on individual income tax accounts completes the mechanization of all major collection notices to
the taxpayer. This changeover will result in savings of 128 man-years
and $587,000 in fiscal 1966 and ensuing years. (6) Section 6405 of the
Internal Eevenue Code of 1954 requires reports to the Joint Committee
on Internal Eevenue taxation of all refunds and credits of income,
1 Additional information will be found in the separate Annual Report of the Commissioner of Internal Revenue.




116

19 65 REPORT OF THE SECRETARY OF THE TREASURY

war profits, excess profits, and estate and gift tax in excess of $100,000.
Simplification of the processing of these cases will produce substantial
benefits including savings on interest payments estimated at $2.0
inillion annually. (7) Authority has been obtained from the Joint
Committee on Pi^inting to decentralize reprints of tax forms for all
regions. This authority provides a means for obtaining emergency
supplies of tax forms from commercial or G P O plants; other refinements in estimation of requirements were made, resulting in estimated
annual savings of $350,000.
Management of manpower resources.—A few examples of the many
actions taken by the Service during the year to improve manpower
utilization are described below:
A survey to evaluate the utilization of manpower assigned to alcohol
and tobacco tax enforcement was completed. I t involved a comprehensive appraisal and assessment of the enforcement organization and
operations in each region to determine what steps could be taken at
regional, branch, and post-of-duty levels to achieve more effective and
efficient utilization of investigative manpower. Implementation of
survey recommendations resulted in a net reduction of 35 man-years
in enforcement manpower valued at $260,000.
Extensive revision, including the development of improved training materials, of the classroom portion of revenue officer training was
completed. The new shortened course will enable trainees to work
independently sooner than was previously possible. Total annual
estimated savings of 28 man-years and $223,000 are anticipated.
Staffing of 206 selected local offices with 271 full-time personnel to
assist taxpayers was undertaken to provide year-round assistance,
thereby releasing higher paid revenue agents and officers for enforcement work. Estimated annual savings of $250,000 are based on the
improved utilization of manpower.
Several major organizational changes were made to improve operations and increase efficiency. Among other benefits, most improvements resulted in supervisory and other overhead positions being
diverted to direct enforcement work, thereby reducing requirements
for additional manpower to meet increasing workloads. Following
are some of the most significant changes.
Consolidation of New Tork and Northeast regions.—Effective January 4,1965, by authority of Treasury Department Order No. 150-65,^
the New York and Northeast regions were consolidated into a single
region, the North-Atlantic Eegion, with headquarters in New York
City. The purpose of this consolidation was to bring about a better
balance between the various Intemal Eevenue Service regions and
to reduce overhead supervisory expenses.
Consolidation oj Office Collection Force {OOF) organizations.—
Consolidating O C F organizations in large metropolitan areas permitted centralization of nontechnical functions and released supervisory revenue officers for direct enforcement work. Savings of 19.6
man-years and $136,000 were realized during the year.
Technical Division reorganized.—The structure of the technical
organization in the National Office was realigned by type of tax rather
1 See exhibit 70.




ADMINISTRATIVE REPORTS

117

than by function. The new organization, fully implemented in July
1965, is designed to more effectively utilize manpower and improve
service to taxpayers.
Chief CoujnseVs office.—The office of the Chief Counsel was reorganized by the addition of the position of Deputy Chief Counsel and
the establishment of a new division, to provide for a more efficient
performance of administrative and nontax legal functions.
Personnel

A major step in the personnel program of the Service in fiscal 1965
was participation in the development of an improved position management and control system, to coordinate manpower cost reduction
efforts of line managers at every level with those of support staff
organizations. Other' highlights of the 1965 program included the
first substantive collective bargaining agreement negotiated between
the Service and an employee organization; attitude surveys decentralized to the regions and conducted in nine different districts; outstanding gains in the suggestions and awards program, sigTialing
increased recognition of employee contributions to good management;
and further progress in the recruitment and redeployment problems
associated with the continuing conversion from manual processing
and revenue accounting methods to A D P .
Executive selection and developrnjcnt.—The executive selection and
development program, established in 1955, has progressed to where
it now represents the route to the Service's top level executive positions and is the means through which the Service seeks to assure itself
a staff of first-rate career executives. Among the program's 120 graduates, for example, are 34 assistant district directors, 33 district directors, 7 assistant service center directors, 3 service center directors, 20
assistant regional commissioners, and 11 National Office executives.
Incentive atoards program.—Outstanding progress was made in
fulfilling President Johnson's expressed desire for a stronger incentive awards program throughout the Federal Government. Fiscal
year 1965 set an all-time Service high for suggestion program results
with an increase of more than 50 percent in suggestions received,
adopted, and in estimated savings. A t the same time, there were
noteworthy increases in the number of honor and performance awards
presented for services of an exceptional nature.
The highlight of the year's program was the Civil Service Commission's Tenth Anniversary Awards Ceremony on December 4, 1964,
at which President Johnson honored 30 top cost-cutters in the Federal
Service, of whom 5 were Service employees who comprised a task
force which initiated savings of over $900,000 annually.
Equal employment program.—The Service continued to place
special emphasis upon the nondiscrimination program—the employment of minority group members, women, the physically handicapped,
and the mentally retarded.
Minority group members were employed in fiscal 1965 in areas and
job categories which heretofore had not been open to them. The appointment of two minority group members to the 1965 Executive
Selection and Development Program was an indication of the progress
of this program within the Service.




118

19 65 REPORT OF THE SECRETARY OF THE TREASURY

The Service continued to employ many handicapped persons ranging
from those of limited mental ability through highly skilled professional employees with physical handicaps.
Training

I t has been demonstrated that training programs to develop better
management result in improved service to the public and the maintenance of the highest standards of personal integTity, therefore the
supervisory and management development program was strengthened.
The number of supervisors and managers selected for training was
increased, and laboratory-type sessions, I E S case study material, and
other improved techniques were added to the general supervisory and
managerial training courses. Management training was broadened
by: early identification and training of potential first-line supervisors
and managers; strengthening training of supervisors of processing
operations; and separate programs focusing on problems of supervision in individual functions.
Changes in tax laws, techniques for their administration, and the
continuing effort of the Service to assure that its employees develop
the highest possible skills in administering and interpreting the laws
and in dealing with taxpayers requires that operational training
programs be reexamined, modified, and broadened. Accordingly,
several significant actions were taken in operational areas during the
year, including, for example, the orientation courses in A D P for
alcohol and tobacco tax, audit, and intelligence personnel.
Interpretation and communication of tax law to taxpayers

To promote voluntary compliance, the foundation of our unique
self-assessment system, the Service strives to keep the public wellinformed and to accommodate administrative practices and procedures
for the convenience of taxpayers. Programs directed toward the
accoinplishment of these objectives include: Publication of numerous
tax guides covering a wide variety of separate tax situations; dissemination of information through news media by a broad public
information program; providing direct personal taxpayer assistance
in local offices; and the preparation and distribution of educational
materials, tax forms and instructions, regulations, and rulings.
Public information program.—Major changes in the tax law and in
administrative procedures led to an increase in the volume and variety
of information supplied to mass communications media during 1965.
The provisions of the 1964 tax reduction law were emphasized in all
materials distributed to the mass media during the income tax filing
season. These included news releases, magazine features, television
and movie films, radio scripts and spot announcements. I n addition,
exhibits, displays, and related items were prepared to augment filing
season communication.
The extension of the automatic data processing system required the
dissemination of special information to familiarize taxpayers with
the system. As an illustration, an optional filing procedure for individual income, taxpayers filing refund returns was initiated in the
Southeast Eegion. Taxpayers were informed through newspaper, television, and radio publicity that they could speed up their refunds and




ADMINISTRATIVE REPORTS

119

facilitate returns processing by sending their returns direct to the
service center at Chamblee, Ga., instead of to their district office. The
response was very substantial.
Taxpayer assistance program,—The taxpayer assistance program
initiated in fiscal 1964 on a year-round basis, provides the type and
degree of information assistance taxpayers need to fulfill their tax
obligations at a minimum of inconvenience to them through a method
most efficient and economical to the Government.
Nationwide, more than 25 million taxpayers received assistance
during the year, about 2 million more than in fiscal 1964. Approximately 16.2 million taxpayers were assisted through telephone contacts, which is stressed as an effective as well as inexpensive method
of providing assistance for both the taxpayer and the Government.
For the nine million taxpayers visiting Service offices, continued emphasis was placed on the self-help method.
Tax-return forms,—The enactment of the Eevenue Act of 1964 required the revision of the tax rate tables of all income tax returns,
both individual and corporation. The Excise Tax Eeduction Act
of 1965 will necessitate the elimination of one and revision of several
other excise tax forms. Altogether, over 250 forms, instructions, and
related documents were revised or reviewed during fiscal 1965.
Tax rulings,—The National Office, issues rulings to answer inquiries
of individuals and organizations as to their status for tax purposes
and the tax effect of their acts or transactions. Eulings are written
statements issued to taxpayers which interpret or apply the tax laws
to a specific set of facts. During the year, 34,345 requests (31,255 froih
taxpayers and 3,090 from field offices) for technical advice were proc^
essed. At the close of the year, 5,922 requests for rulings and technical
advice were on hand, excluding a relatively small number relating
to. alcohol and tobacco taxes.
In addition, 6,892 formal and informal technical conferences were
held with taxpayers and their representatives.
Regulations program,—During the fiscal year 1965, 85 final regUr
lations, 61 notices of proposed rulemaking, and 13 Executive orders
were published in the Federal Register, Three notices and eight
final regulations were in connection with alcohol and tobacco tax
administration.
Fifteen of the final regulations and nine notices of proposed rulemaking related to the Eevenue Act of 1964. Fourteen final regulations
and six notices related to the Eevenue Act of 1962. Several final regulations resulted from other revenue acts while others were written
pursuant to administrative decisions.
Internal revenue collections and refunds

Gross collections,—Internal revenue collections totaled $114.4 billion
in fiscal 1965, an increase of $2.2 billion over 1964 collections. The
decrease of nearly $1 billion from 1964 in individual income tax collections was due to the lower tax rates in effect during fiscal 1965 under
the Eevenue Act of 1964. This decrease was more than offset by collections of corporation income taxes which increased $1.8 billion.
Some of this increase is accounted for by the higher proportion of




120

19 65 REPORT OF THE SECRETARY OF THE TREASURY

corporation income tax prepaid through estimated payments pursuant
to the Eevenue Act of 1964.
Employment tax collections exceeded the 1964 total by $42.8 million,
reflecting the higher employment level throughout 1965. Excise tax
collections increased 6.1 percent over 1964. The Excise Tax Eeduction Act of 1965 ^ enacted in June 1965 did not affect excise tax
collections durmg fiscal year 1965.
A comparison of gross collections in the fiscal years 1964 and 1965 by
principal types of tax is shown below. Collections from 1936-65 by
detailed categories are given in table 21.
Source

In thousands of dollars
1964

Income taxes:
Corporation
._
Individual:
Withheld by employers
Other
^L

24,300,863

26,131,334

39,258,881
15,331,473

36, 840,394
16,820, 288

Total individual iricome taxes.

64,590,354

53, 660,683

Total income taxes

78,891,218

79, 792, 016

16, 557, 783
850,858
593,864

15,846,073
622,499
635, 734

17, 002, 504

17,104,306

Employment taxes:
Old-age and disability insurance..
Unemployment insurance
Railroad retirement
Total employment taxes
Estate and gift taxes

2,416, 303

2, 746, 532

Excise taxes:
Alcohol
Tobacco
Other excise
Total excise taxes...

3, 577,499
2, 052, 545
8,320,188

3,772,638
2,148, 594
8,871, 547

13, 960, 232

14, 792, 779

Total collections

__

112, 260,257

114, 434,634

Refunds.—-Reinnds of internal revenue, comprising both principal
and interest, totaled $6.1 billion in fiscal 1965, compared with the $7.2
billion refunded in 1964. This was due primarily to the fact that
the Eevenue Act of 1964 provided for a greater rate of reduction in
taxes withheld than the tax rate for the calendar year 1964. Consequently, for many individual taxpayers withholding was insufficient to
meet their tax liability. The second-stage decrease in tax rates,-effective for taxable years beginning after December 31, 1964, brings, the
tax and withholding more in line.
Receipt and processing of returns

Numiber of returns fled.—A total of 102.5 million tax returns were
filed in fiscal 1965, an increase of 2.4 million over 1964. Individual
income tax returns rose 1.7 million to 65.9 million in 1965. Corporation income tax returns increased 53,000 to 1,420,000. Approximately
340 million information documents, including employers' copies of
Forms W - 2 and copies attached to employees' returns, were filed.
1 See exhibits 30, 31, and 32.




ADMINISTRATIVE REPORTS

121

Automatic data processing.—At the beginning of fiscal 1965, four
service centers serving the Mid-Atlantic, Central, Southeast, and
Southwest regions were processing business returns under the A D P
master file concept. On January 1, 1965, as scheduled, the service
centers, at Lawrence, Mass., serving the North-Atlantic Eegion, at
Kansas City, Mo., serving the Midwest Eegion, and at Ogden, Utah,
serving the Western Eegion began processing business returns completing installation of the system for business returns. At the end
of fiscal 1965 the Business Master File, with the addition of accounts
for these three regions, contained over 5.0 million taxpayer accounts.
I n the first half of fiscal 1965, when only four regions were on the
Business Master File, nearly 4.2 million returns and declarations of
estimated tax were posted to the file. Over 8.4 million returns were
posted during the second half of the year making a total of 12.6
million.
During fiscal 1965, the Southeast Service Center, Chamblee, Ga.,
was in its fourth year of processing business returns and in its third
year of processing individual returns. The Mid-Atlantic Service
Center was in its third year of processing business returns, and began
processing individual returns on January 1,1965. With the addition
of the Mid-Atlantic Eegion, the Individual Master File now contains
approximately 18 million accounts. I n fiscal 1965, about 19 million
returns and estimated tax declarations were posted to these accounts.
These totals for the Southeast and Mid-Atlantic Eegions represent
approximately 26.4 percent of individual income tax returns and declarations filed nationwide. The other five regional service centers
will begin processing individual returns in 1966 and 1967. Thereafter,
data from the Federal tax returns of all of the nation's taxpayers,
business and individual alike, will be recorded on the master file.
Actually, all taxpayers will be under A D P beginning on January 1,
1966, since all taxpayer trarisactions after December 31, 1965, will
be shown on returns filed in 1967 and subsequent processing years.
From the beginning of A D P , it was apparent that the most ef&cient
and economical regional operation would be dependent upon returns
being filed directly with the service centers. After three years' experience in processing business returns, and two in processing individual
returns, the Southeast Service Center began to test the direct filing
plan on January 1, 1965. Taxpayers in that region were given the
option of filing their individual income tax returns directly with the
center if they were to receive a refund. About 4.3 million taxpayers
in the seven State area exercised this option. This test proved that
preliminary processing operations can be performed more economically at the service centers. The option will be continued in the Southeast Eegion and extended to taxpayers in the Mid-Atlantic Eegion
during the 1966 filing period.
The I E S Data Center, operating independently of the basic A D P
system, will be located in Detroit, Mich. Beginning January 1, 1966,
the Data Center will assume all data processing activities of the service
centers not directly related to the A D P master file.




122

19 65 REPORT OF THE SECRETARY OF THE TREASURY

Enforcement activities

To preserve and strengthen the voluntary compliance system, the
Service, through a comprehensive enforcement program, seeks to assure that all taxpayers pay only their just share and, where warranted,
prosecutes taxpayers who ignore or seek to evade their tax responsibilities.
Examination of returns,—During fiscal 1965, 3.5 million returns
were examined. This decrease of 4 percent from 1964 reflects a continuation of the cutback planned in fiscal 1963 to provide a more
balanced program by shifting emphasis from the examination of low
income nonbusiness returns to that of higher income nonbusiness
returns and small business returns. The number of returns examined
during the last two fiscal years is shown in the following table.
Type of return

In thousands of returns
1964

Income tax:
Corporation
..
Individual and fiduciary.
Exempt organizations.. - -

1965

163
3,236
10

164
3,092
12

__

3,409

3,268

Estate and gift taxes
_-.
Excise and ehiployment taxes
Grand total

31
180
3,620

35
1169

Total Income tax

1 3,472

'Includes 623 interest equalization tax returns examined.

A total of $2,729 million in additional tax and penalties was recommended on returns examined in fiscal 1965. This was an increase of
$179 million over the previous high of $2,550 million in fiscal 1964.
Gains of $149 million and $47 million over 1964 occurred in the individual and corporation tax areas, respectively. The estate, ^ f t ,
excise, and employment tax areas showed a net decline of $15.9 million.
The interest equalization tax, Public Law 88-563, approved September 2, 1964, imposed an excise tax on the acquisition by American
citizens of certain foreign securities from a foreign person. I n the
1965 fiscal year $2.1 million in additional tax and penalties were
recommended as a consequence of examining interest equalization
tax returns.
The Service in recent years expanded its exempt organization audit
program, developed specialized training programs, and instituted
studies into tax abuses in this area. Data processing techniques > are
also being applied to improve compliance. One example is the establishment of a master file of exempt organizations.
I n addition to the increases in taxes and penalties recommended,
district audit personnel determined that some taxpayers had overstated their tax liabilities by $144.6 million exclusive of claims for
refund.
Mathematical verification.—During fiscal year 1965, 62.9 million
individual income,tax returns were mathematically verified. There
were 3.9 million taxpayer errors discovered, an increase of 49 percent




ADMINISTRATIVE

123

REPORTS

over fiscal 1964. This was due primarily to taxpayers' misinterpretation of the use of the minimum standard deduction incorporated into
law beginning with the calendar year 1964.
The. $99.9 million in net yield—the potential additional revenue
accruing from the difl'erence between the taxpayer errors increasing
revenue and the taxpayer errors decreasing revenue—exceeded the
fiscal 1964 net yield by 7.5 percent.
Delinquent returns.—The Service secured 1.2 million delinquent
returns representing $281.3 million in unreported tax, interest, and
penalties during fiscal 1965. About 100,000 of these returns, representing $61.1 million in unreported liabilities were secured by district
audit divisions incidental to the examination of returns. The bulk,
approximately 1.1 million returns representing $220.2 million, was
secured through the established delinquent returns program..
Summiary of additional tax from direct enforcement,—A detailed
comparison of additional tax assessments from direct enforcement
during the last two fiscal years follows.
Sources

In thousands of dollars
1964

Additional tax, interest, and penalties resulting from examination _
Increases in individual income tax resulting from mathematical verification.
National Identity File i .
_
Tax, interest, and penalties on delinquent returns
Total additional tax, interest, and penalties
Claims disallowed

1965

2,062,008
166,501
r 2, 654
275, 480

2,161,187
194,086
3,374
2281,278

' 2, 505, 642

2 2, 629,925

445, 556

278,795

' Revised.
1 An interim computer procedure estabhshed in regions processing individual income tax returns to
identify taxpayers fihng more than one return. When the Individual Master File is operative nationwide
this procedure will no longer be necessary.
2 Includes 111 returns with additional tax and penalties of $2,030,658 (interest equahzation tax).

Tax fraud investigations, indictments and convictions,—^As part of
the Government's drive on organized crime, the Service continued to
give top priority to the investigation of the tax affairs of major
racketeers. During fiscal 1965 many racketeers were brought before
the courts for tax evasion. The fact that this type of investigation
requires more manpower per case than other fraud investigations,
contributed to the decline in the number of full-scale investigations
completed and prosecution recommendations. Full-scale investigations totaled 3,643, while prosecution was recommended in 2,382 cases.
Preliminary investigations rose from 9,846 in fiscal 1964 to 10,520 in
fiscal 1965.
Indictments were returned against 1,919 defendants, an increase of
342 over fiscal 1964. I n cases reaching the courts, 1,251 defendants
entered pleas of guilty or nolo contendere, 200 were convicted, 86
acquitted, and 195 cases were nol-prossed or dismissed. Convictions
for fraud during the fiscal year 1965 totaled 1,451, well above the past
ten years' average of 1,251.
Alcohol and tobacco tax administration,—The illicit liquor traffic
concentrated in the Southern States continues to be the major enforcement problem of alcohol and tobacco tax investigators. To cope with




124

19 65 REPORT OF THE SECRETARY OF THE TREASURY

this problem with greater success, particular emphasis is being given to
the perfection of cases against violators posing the greatest threat to
the revenue and the development of evidence to withstand the test of
trial action.
The soundness of this approach was reflected in the increasingly
receptive attitude of United States attorneys toward such cases, and
the more severe sentences imposed by the courts. Eesults of this
firmer attitude were apparent in the length of prison sentences which
averaged 449 days in fiscal 1965, compared to 403 days in fiscal 1964.
Even more encouraging was the result of trial actions in conspiracy
and other major cases in which sentences increased from an average of
584 days in fiscal 1964 to 1,165 days (more than three years) in fiscal
1965.
i
Data on seizures and arrests resulting from investigative work
during the last 10 fiscal years follows.
Number of
stills seized

Fiscal year

1956.—^
1957
1958
1959
1960
1961
1962
1963.
1964
1965

.
-

.
.

.
..
L

14,499
11,820
9, 272
9, 225
8,290
6,826
6,886
6,213
6,837
7,432

Gallons of
mash seized

•

8,643,200
6,756,600
5,140,800
4,655, 600
4,274,400
3,669, 600
3,424, 500
3,092,600
3,123,800
3, 637,900

Number of
arrests made i
11,380
11,513
11,631
10,912
10, 376
9,503
9,126
8,607
8,198
7,426

1 Includes arrests for firearms violations and tobacco tax violations, which numbered 254 and 1, respectively,, durmg 1965.

A total of 30,552 on-site inspections of plants and permittees was
completed in fiscal year 1965. The decrease of about 1,000 from
1964 reflected a planned reduction to offset the additional time required
for more comprehensive evaluations of proprietors' operations under
the audit-type approach.
Firearms law enforcement,—In the fiscal year 1965 investigations of
violations of the National and Federal firearms acts resulted in the
perfection of 394 criminal cases, 264 arrests, and the seizure of 94
vehicles and 4,050 firearms. Comparative figures for 1964 were the
perfection of 373 criminal cases, 300 arrests, and the seizure of 94
vehicles and 3,567 firearms.
Collection of past-due accounts,—There were 2.4 million accounts
that became past due in fiscal 1965. Although this was a decrease of
21 percent from the number of accounts established in 1964, the $1,551
million of delinquent tax involved was $88 million more, as a result
of a few unusually large accounts. The decline in new accounts was
largely attributable to the initiation of a new "followup notice" procedure that eliminated the need for further enforcement action on some
accounts and deferred action on the remainder until early in the next
fiscal year. Other factors that were responsible for the decrease of new
past-due accounts compared with last year were: (1) increased activity
at the service centers in Jmie 1964 which resulted in the establishment
of many accounts; which would normally have been established in
fiscal 1965, and (2) the salutary effects of intensified enforcement.




ADMINISTRATIVE REPORTS

125

Progress continued to be made in the program emphasized in fiscal
1964 to reduce the inventory of past-due accounts. Over 2.8 million
accounts were closed during fiscal 1965 resulting in an all-time low
inventory of 530,000 accounts, almost 45 percent below the balance at
the close of fiscal 1964. Because a few of the new past-due accounts
involved unusually large amounts, total taxes due in the accounts pending at the.end of the year aggregated $1,182 million, $84 million more
than last year.
The Service continued to make immediate contacts with employers
and excise taxpayers who failed to pay withholding and similar trust
fund taxes when due. For the first time since the program began
there was a decline in this activity in fiscal 1965, indicating improved
taxpayer compliance. The total of 148,000 notices on trust fund and
dishonored check accounts was 57,000 fewer than in 1964. Of these
104,000, or 70 percent, were closed while in notice status. The amount
collected was $217 million, compared to $247 million in 1964.
Appeals dnd civil litigation.—Case referrals from district audit
divisions to regional appellate divisions were 22 percent higher in
fiscal year 1965 than in 1964. Partially offsetting the impact of this
increase in appeals was a nine percent rise in the cases disposed of by
appellate divisions, resulting principally from more effective use of
manpower. While the inventory on June 30, 1965, was 22 percent
above a year ago, anticipated improvement in manpower utilization in
areas with the heaviest workloads are expected to permit the continued
timely handling of the larger caseload. Petitions filed with the Tax
Court of the United States numbered 6,852.
The status of civil cases in the trial courts won or partially won
by the Government during fiscal 1965 was as follows: I h the Tax
Court, 83 percent; in the Court of Claims, 81 percent; and in the U.S.
district courts, 64 percent. Comparable percentages for the preceding
year were 81 percent for the Tax Court, 58 percent for the Court of
Claims, and 60 percent in the district courts.
The Government won 16 and lost 6 of the 22 civil tax cases decided
by the Supreme Court in fiscal 1965. Last year the Court sustained
the Government in five such cases and decided against it in two. The
Government also won, in whole or in part, 302 (79 percent) of the
381 civil tax cases decided by courts of appeal (exclusive of collection
litigation and alcohol and tobacco tax legal matters).
International activities

The overseas affairs of the Service include the administration of
the tax laws as they apply to U.S. citizens and businesses abroad, participation in the negotiation of tax conventions and preparation of
regulations under these pacts, and the furnishing of technical assistance to developing countries.
Intemational operations.—In the 1965 fiscal year 454,717 returns
were filed, with the Office of International Operations, 7,279 more
than in the preceding year. Added to the full range of audit and
collection activity with respect to these returns are many special problems not usually encountered in domestic returns. Such problems
are attributable to the complexity of the laws pertaining to international taxation and to the special treatment of income under the respec-




126

19 65 REPORT OF THE SECRETARY OF THE TREASURY

tive tax treaties. As a consequence, the error rate on returns examined
is greater than the rate applicable to domestic returns. A total of
22,104 returns were examined, and deficiencies and penalties recommended amounted to $57.9 million. Collections against 18,753 pastdue accounts of taxpayers totaled $6.4 million.
I n conducting the annual overseas taxpayer assistance and education
program, assistance was given to 45,131 U.S. taxpayers through personal and telephone contact and through correspondence. Also, 14
schools were conducted for military tax instructors assigned to assist
armed forces personnel abroad in the preparation of their tax returns.
Tax conventions.—Discussions took place in Washington with three
countries and abroad with seven countries with a view to the conclusion of four new income tax conventions, five protocols supplementing
those already in existence, and one tax convention replacing an existing
one.^
Foreign tax assistance.—The Service's foreign tax assistance program meets requests for technical assistance in tax administration
from developing countries of the free world. The program is administered by the Foreign Tax Assistance Staff, an integral part of the
Commissioner's office.
Long-range tax modernization teams were established in eight more
countries in fiscal 1965: Bolivia, Brazil, Costa Eica, Dominican Eepublic, India, Panama, Paraguay, and Uruguay. Seventeen such
teams now are active overseas. Previously established teams are
located in Chile, Colombia, Ecuador, E l Salvador, Guatemala, South
Korea, Nicaragua, Peru, and the Eepublic of the Philippines.
The Service was host to 319 foreign officials and students from 54
countries including the chief tax officers from Brazil, France, Nicaragua, and Uruguay. A majority of the visitors received special
orientation or training in National Office and field operations.
I t has become increasingly clear that one of the most urgent needs
of the developing countries is trained personnel. Two pilot programs
were introduced this year—a course for audit supervisors from Spanish speaking Latin American countries, held at the Albuquerque District Office and mobile training teams. The Albuquerque course was
taught entirely in Spanish by Spanish-speaking Service personnel.
This innovation in AID-sponsored training permitted the selection of
participants solely on the basis of their abilities in tax administration.
The mobile training teams traveled in various Latin American countries and were prepared to teach courses ranging from basic accounting
to advanced audit techniques depending on the capacity of host country trainees.
Planning activities

The planning activities of the Service embrace short and long-range
estimates and forecasts, a current program of research, organizational
planning, statistical reporting, and systems development.
Long-range planning.—The long-range plan of the Service provides
an essential management and planning tool for establishing goals,
forecasting future needs, and assuring that current programs are
1 See pages 47-48.




ADMINISTRATIVE REPORTS

127

designed to meet established goals. The prime objective is to maintain
a low-cost Federal tax admmistration system by maintaining and extending high levels of voluntary compliance with tax law requirements.
The achievement of this objective requires the continuous evaluation of
every phase of Service operations in order to forecast basic growth
needs and to identify opportunities for improvements in taxpayer
compliance and in the utilization of resources. The needs and opportunities thus identified are carefully reviewed in terms of available
alternatives, overriding priorities, and practical resource limitations.
Upon passing these tests, they provide the basis for the operational
goals and the program guidelines in the long-range plan.
The most important workload indicator used by long-range planners
is the forecast of tax returns filing. The volume of returns filed in
recent years has been steadily increasing and the outlook for continued
growth in the nation's population, labor force, and economy indicates
further substantial gains in the number of returns. Eecently prepared
projections indicate that the number of returns filed will reach 111
million by 1970.
Short-range operational planning,—Planning for the current year
is based on the portions of the long-range plan which can realistically
be attained in a relatively short period of time. Budget requests for
the coming year are based directly upon the plan. After enactment of
congressional appropriations, appropriate adjustments are made and
resources are allocated to the various activities of the Service through
an approved financial plan.
Current goals, workloads, and performance measurements in the
principal activities are provided by detailed work planning and
control systems and by integrated reporting requirements.
Current research program,—Eesearch activities were conducted
throughout fiscal 1965 relating to changes in the excise tax laws, the
1964 changes in the Internal Eevenue Code, the increased scope of data
processing, the Service's emphasis on improving operations and taxpayer compliance, and inquiries by congressional committees, academic
institutions, other Government agencies, and State and local
governments.
A substantial part of research resources was expended on studies to
determine the administrative effect of proposed legislative changes.
An estimate of the costs related to the administration of the various
excise taxes was one of the most important studies during fiscal 1965.
Another significant study involved the drawing of nationwide samples
on the degree of taxpayer compliance in reporting interest from Series
E and H savings bonds and the comparability of other interest inconie
and dividends as shown on tax returns with the amounts given on
inf ormation returns.
The Taxpayer Compliance Measurement Program (TCMP) is
already producing tangible results. F o r example, data obtained
through TCMP's Phase I on delinquent accounts indicate that a
significant portion of these accounts are closed by correspondence when
referred to local offices for collection. Accordingly, a new procedure
provides for the expanded use of A D P in the mailing pf followup
notices and in the related processing operations on these accounts.
Thus local offices are relieved of a substantial clerical operation and




128

19 65 REPORT OF THE SECRETARY OF THE TREASURY

the new procedure is expected to reduce delinquent account issuances
by about 500,000 annually.
Expected short-run operational benefits from T C M P can be summarized as: (1) establishing the extent of potential savings from
revised collection programs based on greater use of data processuig
procedures and lesser use of enforcement manpower; (2) determination of the level of; adequacy of the Business Master File as a delinquent
returns check; (3) disclosures of pockets of delinquent returns noncompliance for systematic follow-through by enforcement personnel,
and the use of educational programs and other indicated tax administration methods; and (4) development of an effective A D P procedure
for selecting the individual returns most urgently in need of
examination.
Over a longer period, T C M P will indicate whether current tax
admmistration procedures are reducing, increasing, or maintaining
the willingness and ability of taxpayers to comply with the Federal tax
laws.
Systems development,—Action taken in this area was directed
toward achieving four broad objectives:
(1) Eeducing costs and increasing efficiency of computer configurations already in place or scheduled for installation in service centers
and the National Computer Center. (Eesults are reported under
Management Improvement, above.)
(2) Eeducing costs and increasing efficiency in input preparation
in service centers. The principal achievement in this area was the
development of simplified key-punching procedures (see Management
Improvement, above).
(3) Improving and developing information systems for program
managers responsible for the coordination and control of the Service's
resources. For example, a system which assists attorneys in coordinating pending cases to insure that consistent positions are being taken
on similar issues is currently operating in Chief Counsel offices.
(4) Developing a future A D P systems concept that will take advantage of technological advances. Major improvements in data bank
storage along with developments in high-speed communications suggest that research studies are needed to determine the potential utilization of these developments in the Service's data processing and other
functional areas. Development of the specific definition and scope
of this project was started in fiscal 1965.
Inspection activities !

Within the Service an inspection function is performed by an independent fact-finding body reporting directly to the Commissioner.
This activity, headed by an Assistant Commissioner, encompasses the
internal audit and internal security areas. Major investigations, such
as those involving; fraud on the revenue, are subject to close interfunctional coordination.
Internal audit,—The Service's internal audit program, an integral
part of its management control system, provides for an annual independent review and appraisal of Service operations for the Commissioner and all other levels of management. This program covers all




ADMINISTRATIVE REPORTS

129

Service field organizations and activities and includes a determination
of whether the policies, practices, procedures, and controls adequately
protect the revenue and are carried out effectively.
Internal audit examinations disclosed certaui conditions requiring
correction by management. Some of the actions taken are measurable
in terms of additional revenues collected or savings effected. A conservative estimate of the results of these actions during fiscal 1965
totals more than $30 million. Included are such items as management's action on specific tax cases, interest and penalties not properly
assessed, and accelerated collection actions.
Intemal security,—The aid management in maintaining public confidence in the integrity and impartiality of the officers and employees
of the Service, internal security investigators provide management
with information on any matter that represents a potential threat
to the integrity standards of the Service. During fiscal 1965 the
services performed by internal security inspectors included: Background investigations of new employees; investigations of employee
breaches of integrity; investigations of taxpayers' attempts to bribe
employees; and assistance to other Government agencies (also performed by the Service's internal audit inspectors).
Internal security investigations of all types completed during the
year totaled 8,825. In addition, police checks were made on 6,510
employees considered for short-term appointments, compared with
5,075 checks made during fiscal year 1964.
Office of the Assistant Secretary for International Aflfairs
Treasury Department Order No. 202, effective October 14, 1964
(see exhibit 70), transferred to the Office of the Assistant Secretary
for International Affairs the constituent units which had been established as the Office of International Affairs by Treasury Department
Order No. 198, dated October 15,1962.
By direction of the Secretary, the responsibilities of the Office of the
Assistant Secretary for International Affairs 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 Eeconstruction and
Development, the International Finance Corporation, the International Development Association, and the Inter-American Development Bank; foreign lending and assistance; the Organization for
Economic Cooperation and Development and its committees, and the
North Atlantic Treaty Organization.
The responsibilities of the Office of the Assistant Secretary for 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 Agree782-556—<66

9




130

1965 REPORT OF THE SECRETARY OF THE TREASURY

ments 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 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 InterAmerican 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 the Assistant Secretary for 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. I n 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. I n conjunction with its other activities the Office 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 equilibrium 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 Eeserve
banks statistical data on capital movements between the United States
and foreign countries.
Bureau of the Mint ^
The Bureau of the Mint, with headquarters in Washington, D . C ,
operates four mints and assay ofiices which are located hi Denver,
Philadelphia, San Francisco, and New York City. Two bullion
depositories, in Fort Knox, Ky., and West Point, N.Y., are maintained
for the storage of values.
1 Reorganization Plan No. 4 of 1965, dated May 27, 1965, and effective July 26, 1965,
abolished the National Advisory Council as a statutory body and transferred its functions
to the President. By an interim Executive Order dated July 28, 1965, and effective July
27, a new National Advisory Council on International Monetary and Financial Problems
was established, with f'the same membership, functions, and status" as its predecessor.
It is contemplated that a further Executive Order relating to the Council will be issued
before the present order terminates on Jan. 1, 1966.
2 Additional information is contained in the separate Annual Report ofthe Director ofthe Mint.




ADMINISTRATIVE REPORTS

131

The Mint manufactures and distributes all coins of the United
States; redeems uncurrent and mutilated coins that are withdrawn
from circulation; and, as production schedules permit, manufactures
foreign coins and coinage dies on a reimbursable basis for other
governments.
In addition to the coinage function, the Mint receives deposits of
gold and silver bullion in unrefined and refined forms for which
payments, either in fine bars of gold or silver, or by check, are made
on the basis of mint assays. • Sources of deposits, both domestic and
foreign, include those of individuals, private companies, central banks,
other Government agencies, and international monetary institutions.
The Mint melts and refines gold and silver, and also the platinum
group metals; manufactures gold and silver bars for ^'good delivery,'^
issue, or storage; and disburses gold and silver bullion for authorized
monetary and industrial purposes.
Eelated activities involve the continuous safeguarding of the
monetary metals and other values in custody, including coins in
various processing stages until finished and released for circulation.
Medallic work comprises the production of national medals authorized by special acts of Congress, and medals and other distinguishing
decorations for U.S. Government agencies.
The Mint conducts metallurgical investigations, performs chemical
and metallurgical analyses, and other technical services.
Domestic coinage

Coinage legislation oj 1965.—President Johnson proposed legislation
to provide for the coinage of the United States in a special message to
Congress on June 3, 1965. (See exhibit 20.) Following this, public
hearings were held before the Banking and Currency committees of
the House of Eepresentatives ^ and the Senate. The Coinage Act
of 1965, Public Law 89-81, was signed by President Johnson on
July 23, 1965. (See exhibit 23.).
The act authorizes the minting and issuance of a new type of
three-layer composite coin for the half doUar, quarter dollar, and dime
which reflect the latest developments in modern technology. No
changes were made in the silver dollar, the cupronickel 5-cent piece,
or the bronze 1-cent piece.
The new half dollar will contain an overall silver content of 40
percent and be nearly indistinguishable in appearance from the present
homogeneous alloy of 90 percent silver and 10 percent copper. The
cladding alloy of the outside layers will be 80 percent silver and 20
percent copper, with an inner core of approximately 21 percent silver
and 79 percent copper.
Silver will be eliminated from the quarter dollar and dime. The
cladding alloy of the outside layers will be 75 percent copper and 25
percent nickel; an inner core of pure copper will give the coins a
distinctive feature—a copper edge. Except for the edge, the outward
appearance of the quarter and dime will resemble the cupronickel
5-cent piece.
See exhibit 21, statement by Secxetary Fowler before the House committee




132

19 65 REPORT OF THE SECRETARY OF THE TREASURY

. The new series of subsidiary coins will have the same diameters,
designs, and inscriptions as the present series.
For several years before the selection of composite coins, the Mint
conducted extensive metallurgical and technical experiments and
investigations of materials which could be considered as possible
substitutes for the existing coins of high silver fineness. Many
practical requirements entered into the studies since coins serve the
public in a dual capacity, as a medium of exchange and as technical
merchandising instruments for use in coin-operated machines.
Metals included a range of silver alloys of varying finenesses; also
all other traditional coinage metals in either pure or alloyed forms;
and the ''newer^' metals. Eecent scientific developments and improved methods of metal processing in the industrial field were tested
and evaluated for coinability and full-scale minting operations.
During the fiscal year 1965, the Mint's program was supplemented
by the independent study of a private metallurgical research institute.
Eesults of the complete survey were incorporated into the ^overall
Treasury Staffi Study oj Silver and Coinage.
Accelerated production program.—^An accelerated coinage program
designed to overcome the general coin shortage was announced by
the Treasury before the close of the fiscal year 1964. Accordingly,
the Mint's ^'crash program'' was initiated in July 1964, and it progressed steadily inonth by month throughout fiscal 1965. The year's
total production of over 7.2 billion coins was more than two-thirds
greater than the 1964 output. Monthly production, ranging from
458 million pieces to over 700 million, reached a peak of 738.7 million
pieces in April 1965. This unprecedented record was due in part to
the following measures adopted under the crash program:
1. Purchased from private industry minor coinage metals in the
form of bronze and cupronickel strip for the one and five cent
denominations.
2. Purchased new coin and blanking presses, and other operative
equipment; arranged for the return of Mint presses on loan to museums
and converted them for current use.
3. Acquired from the Department of Defense and the General
Services Administration surplus machines which could be converted
to mint blanking and stamping operations.
4. Suspended proof coin production at Philadelphia after December
1964; converted suitable proof coin presses for high speed production
of regular coinage; and transferred proof coin personnel to regular
coinage operations^
5. Utilized the Frankford Arsenal of the Department of Defense in
Philadelphia for annealing and cleaning bronze blanks for the Philadelphia Mint.
6. Eeacquhed space in the San Francisco facility which had been
occupied by other Government agencies after coinage operations
were discontinued in 1955; reactivated the space, instaUing machinery
for the blanking, anneahng, cleaning, and upsetting of bronze and
cupronickel planchets for final stamping at the Denver Mint. By
the spring of 1965, San Francisco was supplying Denver with all of
their one and five cent blanks.




133

ADMINISTRATIVE REPORTS

Activities of the San Francisco Assay Office will continue to expand
under the Coinage Act of 1965 which authorizes the temporary use
of the institution for full-scale minting operations. The act also
provides for the refining of precious metals.
7. Hired additional personnel and operated on a 24-hour day, 7
days a week schedule.
8. Eenovated space in Denver and Philadelphia for expanded
coinage operations. In Denver, a vacant building adjacent to the
Mint was remodeled by the General Services Administration for
additional coinage presses. A total of 99 presses were in operation
at the two mints on June 30, 1965, compared with 60 on June 30, 1964.
9. Eetained the ^^1964" date on coins manufactured after January
1, 1965. Public Law 88-580, enacted on September 3, 1964, provided
the Mint with the authority to inscribe the figure ^'1964" on all coins
minted until adequate supplies are available. This measure was
designed to eliminate the incentive for keeping 1964 coins out of
circulation for speculative purposes.
10. The Mint accepted no foreign coinage orders during fiscal 1965,
utilizing all facilities for production of domestic coins.
As rapidly as the coins were finished they were shipped to the
Federal Eeserve banks and branches, and the Treasury in Washington,
D . C , for immediate circulation in the denominations indicated below.
Production and issue of U.S. coins, fiscal year 1965 ^

Denomination

Number of Face value Distribution
(based on
pieces 2
pieces)
In miUions

Metallic composition

Percent

1-cent pieces
6-cent pieces .
Dimes. _ __
Quarter dollars .
Half dollars

3,717.2
1,578.0
1,036.2
716.8
194.6

$37.2
78.9
103.6
179.0
97.3

61.3
21.8
14.3
9.9
2.7

Total

7,241.8

496.0

95% copper, 6% zinc.
76% copper, 25% nickel.
900 parts silver, 100 parts copper.

100.0

Do.

1 All coins struck during fiscal 1965 were dated 1964. The unrounded data for production and issue will
vary slightly.
2 The standard gross weight totaled approximately 31,900 short tons, as foUows: 1-cent-pieces, 12,700 tons;
5-cent pieces, 8,700 tons; dimes, 2,900 tons; quarter doUars, 4,900 tons; and half doUars, 2,700 tons.

A nationwide inquiry relative to the shortage of coins in circulation
was made by the Legal and Monetary Affairs Subcommittee of the
Committee on Government Operations, House of Eepresentatives.
Public hearings were held in two sessions: the first on June 30, July 1,
and 2, 1964; and the second on February 16 and 17, 1965. In response
to the committee's request, information was furnished by members
of Congress, Government officials, commercial bankers, representatives of business concerns dealing with large quantities of coins,
trade associations, and other interested citizens. Treasury officials
presented comprehensive information on coinage production and
distribution.
Siock.—The total face value of U.S. coins held in the Treasury,
Federal Eeserve banks, commercial banks, and in the hands of the




134

t9 65 REPORT OF THE SECRETARY OF THE TREASURY

public is compared below for the close of the fiscal years 1964 and
1965.
F a c e v a l u e (in miUions)
s t o c k of U . S . coins
J u n e 30,1964 J u n e 30,1966
Minor coins
S u b s i d i a r y silver coins
Silver doUars

Increase

$737.7
1,999. 5
484.7

Total

_ -

$853.4
2, 375.3
484.7

$115.7
375.9

3, 221.9

'.

3,713. 4

491.6

Gold activities

The gold bullion activity at the mints, assay offices, and the Fort
Knox Depository included receipts of $208.2 million, issues of $1,688.2
million, and transfers between Mint institutions valued at $1,524.6
million during 1965. The sources of receipts, the disposition, and
the total held in custody on June 3(D, 1964, and June 30, 1965, are

shown in the following table.
Quantity
V a l u e a t $35
per ounce
Fine
ounces

Gold holdings a n d t r a n s a c t i o n s
(excluding i n t e r m i n t transfers 0
Short t o n s

Tn miUions
H o l d i n g s o n J u n e 30,1964

__

R e c e i p t s i n fiscal year 1965:
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

. .

L

Issues i n fiscal y e a r 1965:
Sales for d o m e s t i c i n d u s t r i a l , professional, a n d artistic use
E x c h a n g e s for scrap gold
^
E x c h a n g e s for other t h a n scrap gold
:__
O t h e r m o n e t a r y issues
Totalissues
H o l d i n g s o n J u n e 30,1965.__

14,824

432.4

$15,132.9

24
19
161

0.7
.6
4.7

24.9
19.0
164.3

204

5.9

208.2

139
3
28
1,484

4.1
.1
.8
43.3

141.9
3.2
28.6
1, 614. 6

1,654

48.2

1, 688. 2

13,374

390.1

13, 652.9

1 Intermint transfers amounted to 43.6 miUion fine ounces (1,494 tons) valued at $1,524.6 million in fiscal
1965.

Silver activities

During fiscal 1965, deposits of 4.4 million fine ounces of unrefined
silver were added to the stock of 1,378.5 million ounces held by the
Mint on June 30, 1964. The principal use of silver in 1965 was the
manufacture of 274.5 million ounces into U.S. coins in the half dollar,
quarter dollar, aiid dime denominations. This was the largest
amount of silver ever minted in a single year.
In millions

Number of silver coins manufactured
Face value
Silver content, fine ounces

1, 946. 6
$379. 9
^ 274. 5

1 Includes 0.5 miUion ounces of recoinage bullion from the normal melting of uncurrent (worn) coins
withdrawn from circulation.




135

ADMINISTRATIVE EEPORTS

SUver bullion issued to other U.S. Government agencies and the
public amounted to 173.3 mihion ounces. Further details are given
in the table below.
Silver buUion holdings and transactions
(excluding intermint transfers)

Holdings on June 30,1964
Receipts in fiscal year 1965:
Newly mined domestic silver
Recoinage buUion from uncurrent silver coins..
Deposits in exchange for fine bars
Other miscellaneous receipts
Total receiptsIssues in fiscal year 1966:
Manufactured into U.S. subsidiary silver coins.
Bars issued in exchange for deposits
Bars issued in exchange for silver certificates 2__
Other misceUaneous issues
Total issues
Holdings on June 30,1965..

Quantity i
Fine ounces
(in miUions)
1,378.5

Short tons

47,263.3

0.4
3.3
.7

0.4
12.1
113.8
23.0

4.4

149.3

274.6
3.3
165.1
4.9

9,410.0
113.8
5,660.6
168.2

(*)

447.8

15,362.6

935.1

32,060.0

*Less than 50,000 ounces.
1 Excludes 64.7 miUion fine ounces (2,220 tons) of Treasury silver held by other agencies of the U.S.
Government.
2 Issued pursuant to Instructions of Secretary of the Treasury, July 22,1963, as provided under section 2
of the act of June 4,1963 (31 U.S.C, 405a-l).

Revenue deposited into the general fund of the Treasury

The Bureau of the Mint deposited $114.3 million into the general
fund of the Treasury in 1965. Seigniorage resulting from the manufacture of the domestic coins reflected a gain of 64 percent over that
of 1964. Other revenue, included profit on the sale of silver bullion,
handling charges on gold bullion, other bullion charges, sale of
equipment, scrap, and salvage materials, and miscellaneous fees, etc.
A comparison of the fiscal years 1964 and 1965 follows.
Revenue deposited into the general fund of the Treasury

In miUions
1964

Seigniorage on subsidiary silver coinage
Seigniorage on minor coinage
All other
Total




1965

$21.0
47.8

$21.9
91.1

68.7
2.1

113.0
1.3

70.8

114.3

136

19 65 REPORT OF THE SECRETARY OF THE TREASURY

Monetary assets and liabilities

The total monetary assets and liabilities of the mints, assay offices,
and bullion depositories for June 30, 1964, and June 30, 1965, are set
forth in the following statement.
In mUlions

Item

June 30,1964 June 30,1965
ASSETS

14,866.6
14,855.5
2.6
8.4

16,911.4

__

$13,662.9
1,202.5
.1
' ' ' 11.0

16,910.5

_

$15,132.9
1,774.8
2.7
.2
.7
16,911.4

Gold bullion
__^ _
Silver bullion .
Silver coin
___
Minorcoin..
Minor coinage metal, etc

14,866.5

Total assets
LIABILITIES

BuUion fund
-_.
Minor coinage metal fund. ,
Allother
__
Total liabUities

.

.

—

^
•Less than $50,000.

Gold and silver production and consumption in the United States

Statistics on the domestic refinery production and industrial consumption of gold and silver are compiled on a calendar year basis by
the Office of the Dhector of the Mint.
Production data are based on the deposits of newly mined material
received by U.S. mints and assay offices and privately owned refineries.
The deposits are traced back through the various refining processes
to determine the States where the ores were mined. In 1965, South
Dakota, ranking first in gold production, accounted for 42 percent
of the output among 15 producing States. Next in order were Utah,
Arizona, Washington, and Nevada, whose combined output was 43
percent of the total.
Among the 16 silver producing States, Idaho ranked first with 45
percent of the total output. Arizona in second place with 16 percent,
was followed by Montana, 15 percent; Utah, 12 percent; and Colorado,
7 percent. Total production for 1963 and 1964 was as follows:
U.S. gold production
Calendar year

Fine ounces

Value at $35
per ounce

U.S. silver production
Fine ounces

Value

In miUions
1963
1964

:.

L5
L5

$51.4
5L4

35.0
37.0

i$44.8
2 47.9

1 Valued at $1.2804, the equivalent of the annual average in New York of $1.27912 for refined bar silver
999/1000 fine.
2 Valued at $1.29429, the equivalent of $1,293 for refined bar silver 999/1000 fine. This quotation has been
unchanged from Sept. 9,1963.




ADMINISTRATIVE

137

REPORTS

Consumption data represent the net amount of gold and silver
issued for inci us trial, professional, and artistic use by Mint institutions,
private refiners, and dealers. Net issues are obtained by deducting
from gross issues, the amount of gold and silver contained in secondary material (scrap) received by the same concerns during the year.
D a t a for 1963 and 1964, as described above, are summarized in the
following table.
U.S. gold consumption
Item

1963

1964

U.S. silver
consumption i
1963

1964

Fine ounces (in miUions)

:

Net issues 3

4.3
1.3

6.9
1.1

204.6
94.5

. 196.6
76.1

2.9

Total issues of bullion in various forms.
Returns of secondary materials (scrap) 2

4.8

110.0

120.6

1 Does not include silver used in coinage.
2 Does not include coin or coinage scrap.
* The equivalent of domestic industrial consumption.

B u r e a u of Narcotics ^
The Bureau of Narcotics admiaisters Federal laws controlling
narcotic drugs and marihuana and carries out the responsibilities of
the Government under the international conventions and protocols
relating to these drugs.
Bureau responsibility for regulating the legitimate supplies of
narcotic drugs for medical and scientific purposes involves supervision
of U.S. imports and exports of these drugs, and control of the manufacture an.d domestic trade in them to prevent diversion into illicit
channels. Enforcement duties include apprehension of interstate and
international violators of narcotic laws and cooperation with State and
local law enforcement agencies. At the request of foreign police
authorities. Bureau agents assist in mutually beneficial investigations
of intemational narcotic traffickers. The recently expanded program
in cooperation with f oreigTi countries has greatly curtailed smuggling
of narcotic drugs into the United States.
Management improvement

Several significant management actions were taken. Automatic
data processing equipment was used more effectively. Statistics relating to convicted violators of the Federal narcotic and marihuana laws
were converted to A D P , thus effecting an estimated saving of one-half
a man-year and making current data available more promptly. A
study was in process at the end of fiscal 1965 to determine the feasibility of automating registrant returns to expedite their audit and to
promote overall improvement in the control of the legitimate trade in
narcotic drugs.
1 For further information see the separate Bureau of Narcotics report, Traffic in Opium
and Other Dangerous Drugs for the Year Ended December 31, 1964.




138

19 65 REPORT OF THE SECRETARY OF THE TREASURY

Pursuant to a recommendation of the President's Advisory Com-.
mission on Narcotic and Drug Abuse, a brochure dealing with the
preparation of addiction reports was distributed to Federal, State, and
local law enforcement agencies, as well as proprietary groups who
report information on addiction to the Bureau. This has been
beneficial in improving the accuracy and quality of reports on
addiction received by the Bureau. The President's Commission also
recommended that the Bureau substantially increase the number of
agents assisting foreign law enforcement officers under the expanded
foreign program.
Training schools

The Bureau of Narcotics Training School held nine two-week sessions during fiscal 1965 and graduated 375 students: 46 Bureau agents;
256 State and local police officers; 54 military investigative personnel;
and 19 foreign la:iv enforcement officials. One of the sessions was conducted at Pasadena, Calif., for 127 law enforcement students from
seven Western States in that area.
On-the-job training was provided for 20 foreign police officers from
9 countries. Short seminars or conferences were arranged for 46
other visiting foreign officials. A pilot study of an on-the-job training
project for Bureau agents was made during fiscal 1965; this training
IS scheduled to continue as a permanent part of the Bureau program.
The Bureau school, together with district offices, initiated a program
of three-day seminars on narcotics, which in fiscal 1965 were held in
New York City, Pittsburgh, and Oklahoma City, to assist State and
local enforcement officers in conducting narcotic investigations.
School staff members participated in the programs of the Office of
Special Investigations, U.S. Air Force School, the F B I National
Academy, and the International Police Academy.
The Director of Training participated in the United Nations
Seminar on Narcotics Control for Enforcement Officers held at
Manila, Philippines, January 20-February 3, 1965, as well as in the
following seminars: Frances Glessner Lee Seminar in Homicide Investigation, Harvard Medical School; Washington Institute of
Scientific Studies for the Prevention of Alcoholism; and the Fifteenth
Annual Law Enforcement Institute, of the University of Maryland.
The Director of Training in April 1965, in response to the request of
the Puerto Rican Government, conducted a three-day seminar on narcotics for 30 narcotic enforcement officers in San Juan, Puerto Rico.
During the fiscal year 35 narcotic agents attended the five-week
basic course of the Treasury Law Enforcement School. Four narcotic
agents attended the three-week course of the Technical Investigative
Aids School.
The Bureau of Narcotics participated in interagency training
facilities, especially those offered by the Civil Service Commission in
supervision and group performance, interrelationships in administration and international relations, and executive leadership. The benefits derived from the Civil Service Commission program were reflected
in the more effective and meaningful annual Conference of District
Supervisors, held in May 1965. Most of the conference program dealt




ADMINISTRATIVE REPORTS

139

with leadership and group performance with Civil Service Commission, Department, and Bureau officials addressing the group.
The Bureau provides training materials for district supervisors to
use in their weekly staff refresher courses.
Enforcement activities

The noticeable increase in the number of joint investigations and the
quantities of narcotic drugs seized by foreign police officers assisted by
Bureau agents reflected the success of the accelerated foreign enforcement program. Selected examples of such cooperation follow.
An investigation begun in Chicago led to the seizure in Guadalajara,
Mexico, of a heroin-conversion laboratory and the arrests of five
defendants. Several years of investigation coordinated with the New
York City Police Department, Honduran, and Mexican, authorities
culminated in the seizure of more than two kilograms of heroin and the
arrests of three members of a large illicit heroin and cocaine trafficking organization. Other investigations with Mexican authorities
included one in Montemorelos, Mexico, where Mexican police officers
engaged in a gun battle in which one trafficker was killed, five others
arrested, and a half ton of marihuana seized; in another, at San Luis
Potosi, Mexico, 700 kilograms of marihuana and 6 pistols were seized.
The largest French heroin-conversion laboratory ever uncovered,
including 105 kilograms of heroin and 68 kilograms of morphine
base, was seized near Aubagne, France; its operator and several other
defendants were arrested, six of whom have been convicted and
sentenced.
Investigation of an international conspiracy involving employees of
a French international airline who had been delivering heroin in lots
of 20 kilograms to 40 kilograms to Anchorage, Alaska, and Montreal,
Canada, resulted in several arrests by the Royal Canadian Mounted
Police at Montreal, Canada, and by the French Surete Nationale at
Paris and the seizure of 62 pounds of heroin.
A t La Paz, Bolivia, a physician and two associates, who were major
suppliers of cocaine to New York City traffickers, were arrested and
one kilogram of cocaine seized.
I n the Middle East, Turkish police officers at Dursunbey, following
a gun battle, seized 45 kilograms of morphine base and arrested the
leader and two associates of a large Turkish intemational trafficking
organization.
Police officers at Damascus, Syria, and Beirut, Lebanon, simultaneously arrested five traffickers and seized 20 kilograms of morphine base.
This group had obtained the narcotic in Syria and transported it
through Beirut, Lebanon, to France for conversion to heroin destined
primarily for distribution in the United States.
Singapore authorities seized more than 1 kilogram of "999" brand
morphine base and arrested three defendants.
I n Bangkok, Thailand, a joint investigation of Bureau agents with
the U.S. Air Force Office of Special Investigations and Thai authorities netted over 12 kilograms of "999" brand morphine base, one-half
kilogram of heroin, anci more than 6 kilograms of morphine base powder. A Royal Thai Air Force captain, a master sergeant, anci three
civilians were arrested.




140

1965

REPORT

OF T H E

SECiJRETARY OF T H E

TREASURY

Bureau agents working with Hong Kong Narcotics Bureau officers
learned of the seizure there of 1,363 kilograms of raw opium and more
than 81 kilograms of "999" brand morphine base. The joint investigation continued and led to the arrest of 3 suspects and the seizure of
818 kilograms of raw opium and more than 90 kilograms of morphine
base concealed in bamboo poles which had arrived in Hong Kong
aboard a British freighter from Bangkok. The source of the drugs in
Bangkok had not been determined by the end of fiscal 1965.
For several years a large-scale narcotic trafficking syndicate had
been importing heroin in lots of 50 kilograms to 100 kilograms into New
York City from France. Following the seizure of 44 kilograms of
heroin from several suspects in 1962, Bureau agents and New York
City police officers continued their undercover investigation and surveillance of this group. I n February 1965..they began a series of 18
arrests of Cosa Nostra members.
Bureau agents also in New York City, arrested a member of the notorious Mulberry Street Mob, as he delivered about one-half pound of
heroin to a well-known narcotic violator.
During fiscal 1965 the Bureau seized a total of 58,321 grams of narcotics, principally heroin, in the illicit traffic, while seizures of marihuana amounted to 1,284,386 grams bulk.
The number of violators of the narcotic laws reported by Federal
narcotic enforcement officers is shown in the accompanying table.
Number of violators of the narcotic and m a r i h u a n a laws prosecuted during the fiscal
year 1965 wiih their dispositions and penalties
Narcotic laws
Registered persons
Federal
court
Convicted
Acquitted
Totali

Federal
court

4,097

3 1,077

$225, 610
Yrs. Mos

4

2

Yrs. Mos. Yrs. Mos
4

5
5

._._._

_ —
_
Average fine per conviction:
1965
1964

$125

324
9

$277

Yrs. Mos. Yrs. Mos.
444

3

. 6

$11, 010

Yrs. Mos.

$26
59

74
4

195

$,R. 515

3
4

State court

110
7

Yrs. Mos. Yrs. •Mos. Yrs. Mos

Fines imposed

Average sentence per
conviction:
1965
1964

Federal
court

i,181 •

4

_ _

Nonregistered persons

State court

814
34

1
4

Yrs. Mos
Sentences imposed

Nonregistered persons

State court

3

Marihuana laws

301
.

10

$1,060

Yrs. Mos. Yrs. Mos.
4
4

3

1

.___..

$100
109

4
3

1
6

$14
61

1

1 Some cases tried in Federal courts and some cases tried in State courts are made by Federal and State
officers working in cooperation.




ADMINISTRATIVE REPORTS

141

Control of manufacture and medical distribution

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 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 grov/ing of opium poppies to meet the medicinal needs of the
comitry if and when their production might become necessary in the
public interest.
The operational authority of the Bureau derives from the following
statutes: 5 U.S.C. 258a, 282-282c; 18 U.S.C. 1401-1407; 21 U.S.C. 171184a, 188-188n, 197-199, 501-517; 26 U.S.C. 4701-4762, 4771-4774,
7237, and 7607; 49 U.S.C. 781-788; and 78 Stat. 367.
During fiscal 1965, 200,920 kilograms of raw opium were imported
from India and Turkey and 294,190 kilograms of coca leaves were imported from Bolivia and Peru to meet medical requirements for opium
derivatives and cocame 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 during 1965 increased to
1,084 kilograms 856 grams from 836 kilograms 94 grams exported during the previous year.
There were 2,194 thefts of narcotics, amounting to 115,899 grams,
reported during 1965 from persons authorized to handle the drugs,
compared with 1,580 thefts amounting to 74,348 grams in 1964.
Approximately 367,840 persons were registered to engage in lawful
narcotic and marihuana activities during fiscal 1965.
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. Under Article I I of the 1931
Convention and the international Protocol of November 19, 1948, 12
secondary derivatives of opium and 59 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 further details concerning international
control and cooperation, see the 1963 annual report, page 156.
The Single Convention on Narcotic Drugs, 1961, came into force
December 13,1964. By June 30,1965, it had been ratified by 47 countries. The U.S. Government will not ratify the Single Convention
unless and until it is amended to rectify certain provisions which it
believes would weaken international control of opium production.
Cooperation with States, counties, and local authorities

Excellent cooperation among Federal, State, and local narcotic law
enforcement agencies continued in free exchange of information, in
coordinating the investigation and prosecution of minor violations and
routine inspections by State and local authorities. There has also been
a notable improvement in the quality of addiction reports, as indicated
above under Management Improvement.




142

19 65 REPORT OF THE SECRETARY OF THE TREASURY

Drug addiction

The Bureau recorded 55,695 active addicts, as of June 30, 1965,
compiled from reports received from Federal, State, local, and private
United States Coast Guard
The 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, conducting oceanographic research, 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 function as a
specialized service of the Navy in time of war or national emergency.
Management improvement

During fiscal 1965 management improvement and cost reduction
actions in the Coast Guard brought savings in excess of $16 million,
more than double that of any previous year. I n the area of manpower utilization, significant gains resulted from the automation of
previously manned light stations; the replacement of two lightships
by fixed light structures; the disestablishment of one loran station
and the transfer of three others for operation by the Japanese Government; and the collocation of three loran-A with three loran-C stations
in the Western Pacific.
To obtain billets urgently needed to extend the Automated Merchant Vessel Reporting System (AMVER) to the Pacific Ocean—
scheduled to begin operation on July 1, 1965—the Coast Guard
carried out studies of manpower utilization and workload distribution
which resulted in the reassignment of 44 enlisted and warrant radiomen
to the new program. Additional savings in manpower and equipment
costs were realized by expanding the capacity of the East Coast
AMVER Computer Center in New York to handle the data processing
workload of the west coast system, thus eliminating the need for the
acquisition of a second computer and an estimated 19 additional men
to operate it.
Some $6.00,000 in manufacturing costs and $78,000 in annual operating expenses were saved by building thi^ee 75-foot buoy tenders in
place of three larger tenders approved previously in the construction
program. The substitution of the smaller tenders was made possible
by reassignment of existing vessels. The Coast Guard also eliminated
an estimated expenditure of about $856,000 by deleting pulling bc)ats
from vessel allowance lists. Most of these boats would have required
major repairs or replacement.
The Coast Guard conducted three management seminars during fiscal
1965, designed to improve the management capabilities of officers
presently—or likely to be—assigned to executive positions. Several
meetings and lecture-discussions were also held to improve coordi-




ADMINISTRATIVE REPORTS

143

nation and teamwork between military and civilian personnel. These
sessions, attended by those in the middle and higher management
brackets, were intended to clarify the interrelationship and interdependency of military and civilian positions, thereby furthering
management effectiveness.
Coast Guard patrol boats assist Navy in Vietnam

Seventeen Coast Guard 82-foot patrol boats have been deployed to
South Vietnam to assist in halting communist infiltration by sea of
men, weapons, and other materials into the hands of the Viet Cong
guerillas. The Coast Guard squadron, specially trained and equipped
will board and inspect junks and other craft for contraband cargo.
Under the operational control of the Navy's 7th Fleet, these are the
first Coast Guard vessels to be used in a combat situation since World
War I I .
Search and rescue

During the last five years. Coast Guard response to calls for assistance has increased by 29 percent, an additional workload which has
been met, in part, by increased operating efficiency. As part of a
long-range plan to develop more effective search and rescue techniques,
a new electronic D a t u m Marker Buoy is under operational evaluation.
Dropped at the best position of a distress case, it drifts at the same rate
as a man in the water and emits a radio signal for 48 hours that can be
picked up by SAR units as far away as 70 miles. The first operational
uses have been highly successful.
The use of helicopters operating from the new Reliance-clsiss cutters
has opened a new horizon in search operations. Helicopters refueling
from these small vessels are able to search an area with far greater
effectiveness than fixed-wing ahcraft alone. Two of these new cutterhelicopter teams participated in the GT-3 shot of the Gemini Space
Shot series, and a helicopter from Diligence was the first aircraft to
reach the downed capsule.
The Automated Merchant Vessel Reporting System (AMVER)
continued to coordinate the services of merchant ships in search and
rescue cases, plotting the movements of some 1,000 vessels daily in the
Atlantic. The system is being extended to the Pacific in fiscal 1966.
Some typical examples of Coast Guard assistance rendered during
fiscal 1965 are summarized below.
Ship disaster.—On December 20, 1964, the United States M/V
Smith Voyager, while approximately 800 miles east-southeast of
Bermuda in heavy weather, broadcast a distress message after shifting
cargo caused a 30-degree list and a loss of power. Three merchant
vessels, three Coast Guard cutters, and Coast Guard and Air Force
aircraft diverted to assist the 42 persons on board. Thirty-eight
persons were rescued and four bodies recovered despite adverse
weather and sea conditions. This was but one of nine major ship
disasters at sea during the winter of 1964-65.
Airline crash.—On February 9, 1965, a commercial D C - 7 exploded
in midair off Jones Beach, Long Island, with 84 persons on board.
An extensive search utilizing 7 Coast Guard cutters, 6 Coast Guard
aircraft, and a Navy tug recovered 9 bodies and various pieces of
debris. There were no survivors.




144

19 65 REPORT OF THE SECRETARY OF THE TREASURY

Midwest jloods:—During April 1965, rain and melting snow in
southern Minnesota and northern Iowa caused record floods along the
Mississippi and Red Rivers. Coast Guard flood relief teams preceded
the crests downriver, strengthening dikes, and evacuating persons in
danger. Where the dikes did not hold, whole towns and tens of
thousands of square miles were completely inundated. Coastguardsmen in small boats and helicopters evacuated over 3,000
stranded persons.
Medical evacuation.—Medical assistance was rendered to the Indian
M/V Kaksami Jayanti when her chief officer was severely injured. A
Coast Guard helicopter and fixed-wing ahcraft, escorted by a 95-foot
W P B and a 40-foot utility boat, rendezvoused with the ship 240 miles
northwest of Queen Charlotte, Alaska. The patient was ahlifted to
an ambulance for transfer to a hospital.
A tabulation of search and rescue assistance for fiscal year 1965
follows.
Response b y operations

Aviation
units

Ships

Shore
units

Total

ASSISTANCE CALLS RESPONDED T O F O R

Total.. .

__
__

__

-

2,620
1,433
599
100
59
25
87
4
437
292

18,950
2,792
1,757
258
183
39
59
10
2,112
1,214

23,772
4,846
2,649
413
505
134
560
23
3,773
1,911

6,656

__

2,202
621
293
55
263
70
414'
9
1,224
406

6,656

27,374

38,586

1,179
30
306
264
17
685
147
937
1,308
916

255
151
2,488

898
2,220
14,471

134
273
77
575
923
947

175
1,187
297
1,998
3,664
3,970

2,332
2,401
17,265
264
326
2,146
521
3,510
5,895
5,832

5,788

Private vessels.
_
_
Commercial fishing vessels
Other commercial vessels „ _
Government vessels . _ _____
Private aircraft
Commercial aircraft
____
Military aircraft
Other aircraft _
_
Personnel only._
Miscellaneous _
_

5,823

28,880

40,491

616
825
13,233

346
365
17, 518

1,022
1,365
68,317

1,984
2,555
99,068

16,074

20,329

72,004

103,607

MAJOR T Y P E OF ASSISTANCE RENDERED

Located
Refloated
Towed
Aircraft escorted ._
Fueled or repaired
Medical..
Personnel rescued
Searches
__
Attempts to assist
Other assistance

^__

__

___

-_- _

_
.__

Total
PERSONS INVOLVED IN ASSISTANCE CASES

Lives saved.. ___
Medical assistance rendered .
Otherwise assisted
_ _^
Total assisted..
VALUE O P PROPERTY INVOLVED INCLUDING CARGO

Vessels
Aircraft
Miscellaneous .

$1,197,151, 700
640,229,900
36,292,000

Total

1,873,673,600

.




ADMINISTRATIVE REPORTS

145

Marine inspection and allied safety measures

There were 4,432 marine casualties reported during fiscal 1965, four
of which were major and requhed marine boards of investigation.
Inquiries revealed that 125 lives were lost from vessel casualties, 178
from personal accidents, and 225 deaths were due to miscellaneous
causes. (These figures exclude pleasure craft covered by the Federal
Boating Act of 1958.)
Of the four casualities investigated by mariae boards, foremost was
the foundering of the wheat laden SS Smith Voyager in the Atlantic
Ocean on December 20, 1964. Four crewmembers lost their lives
while abandoning the vessel which later sank while under tow.
Another accident involved the American tanker Santa Maria which
collided with the Norwegian tanker Sirrah off Anchorage, Alaska, on
October 19, 1964, causing one fatality and extensive damage to both
vessels. Another inquiry concerned the collision of the American
freighter Cedarville and the Norwegian freighter Topdalsjjord near
the Straits of Mackinac on M a y 7, 1965. The Cedarville sank with
10 crewmen aboard. The fourth casualty investigated was the flooding of the Panamanian tanker Daniel Pierce which resulted in its cargo,
sulfuric acid, contaminating the Port of Guanica, Puerto Rico, on
July 13, 1964. The harbor was closed to all traffic and the town
partially evacuated. There were no fatalities.
The International Convention for Safety of Life at Sea, 1960
(SOLAS), became effective on May 26, 1965. Safety certificates in
accord with the new standards will now be issued to passenger, cargo,
and tank vessels as they come up for initial inspections or reinspections.
Recreational boating.—The phenomenal growth in recreational
boating is continuing, with more than 7,750,000 pleasure craft estimated to have been in use in the United States during calender 1964.
To cope with this activity several innovations were made by the Coast
Guard. For example, safety patrols are to be used to deter, detect,
and report unsafe boating practices. Under this program, law enforcement in general should be improved through better coverage of
boating areas although fewer boats than in the past will be routinely
stopped and examined. A Boarding Officers' Instructor Indoctrination Course was conducted by the Coast Guard to promote uniform
enforcement by States. Greater emphasis is being placed on dissemination of safety information to the boating public and to boat manufacturers and dealers.
As of December 31, 1964, there were 3,763,469 pleasure craft
numbered, 183,043 by the Coast Guard and the remainder by the 45
States and the. Vhgin Islands which have numbering systems approved
by the Coast Guard. During calendar 1964, 5,036 vessels were
involved in 3,912 boating accidents which resulted in 1,192 fatalities,
1,193 injuries, and property damage estimated at $5,171,600. Capsizing continued to be a major cause of fatalities while collisions
accounted for 42 percent of all boating accidents. Fires and explosions were the cause of 44 percent of the reported property damage.
Merchant marine technical activities.—In the commercial shipbuilding field, considerable interest is being shown in submarine
tankers, ground effect machines, hydrofoils, exotic research vessels,
chemical carriers, etc. In many cases the development of completely
782-5!56^6&—10




146

19 65 REPORT OF THE SECRETARY OF THE TREASURY

new concepts or criteria for evaluating safety of design and operation
is required of the Coast Guard. In conjunction with these new designs some of the special areas requiring detailed consideration include the use of high strength steel, aluminum, newly developed
insulation, and the arrangement of spaces and equipment.
The nuclear-powered N.S. Savannah is now in operation, and the
U.S. Army MH-1A floating nuclear power plant is to be certificated
by the Coast Guard during 1966. These vessels have given the Coast
Guard practical experience in the construction and operation of
pressurized water reactors in the marine environment.
Approximately 24 passenger hydrofoils, representing three different
designs, have been certificated to date by the Coast Guard, and two
passenger-carryhig Ground Effect Machines (GEMs) for use in the
San Francisco Bay area are being evaluated.
The Coast Guard published a book entitled Chemical Data Guide jor
Bulk Shipments hy Water, believed to be the fhst publication dealing
with the hazards of transporting chemicals by water. I t should
assist in dealing with emergencies and prove useful as a reference
manual for marine iuspectors.
Although not required by law, several Federal agencies are availing
themselves of Coast Guard knowledge and experience to assist in the
construction of safe and seaworthy vessels, ranging from oceanographic research vessels to satellite tracking ships.
Tabulated below are certain of the marine inspection functions of
the Coast Guard, comparing the workload for the fiscal years 1964
and 1965.
Inspection activities

1964
Vessels inspected for certification i
Vessels reinspected
Drydock inspections
_
Equipment Inspected at factory
Miscellaneous vessel uispections
Violations of navigation and inspection laws (administrative action completed)
Inspection of foreign vessels
Merchant vessel plans reviewed
Structures tuspected (Outer Contmental Shelf Lands
Act)

Gross tonnage

Number

5,644
6,134
6,882
1,251,350
27,886
64,759
36,606

1965

1964

5,343 9,604,360
5, 003 12,684,433
5,798 13,757,828
1,128,917
26,329
38,128
1,428
40,641

1966
11,765,913
9,606,985
13,868,000

13,982,117

52

I Includes initial inspections.

Meetings, conjerences, and publications.—The Merchant Marine
Council held four regular and two special committee meetings, one
public hearing and an executive session to consider proposed amendments to regulations.
The Coast Guard participated in numerous meetings and conferences held in the United States to promote maritime safety, and
was actively or indirectly concerned with 27 international meetings
held in London by the Intergovernmental Maritime Consultative
Organization (IMCO).




ADMINISTRATIVE REPORTS

147

The Coast Guard continued to distribute the publications. Pleasure
Crajt, Recreational Boating Guide, and the Proceedings oj the Merchant
Marine Council to promote greater safety in recreational boating and
in the maritime industry.
Merchant marine personnel.—Merchant mariae personnel were issued
67,818 documents during the fiscal year. Coast Guard shipping
commissioners processed 7,703 sets of shipping articles involving
486,576 individual transactions relating to the shipment and discharge
of seamen. Merchant marine investigating sections in major U.S.
ports and merchant marine details in certain foreign ports investigated
17,310 cases involving negligence, incompetence, and misconduct.
Charges were preferred and hearings held on 1,067 cases before
civilian examiners. Security checks were made of 19,987 persons
deshing employment on merchant vessels.
Law enforcement

Patrols of the Florida Straits and Bahama Islands were continued
as high priority projects, since Cuban refugee action, enforcement of
neutrality, and fishing vessel movements require constant surveillance.
Enforcement of international fisheries conventions also assumed a role
of major importance as foreign fishing fleets have set up large scale
operations off U.S. shores. The Alaska Patrol required the temporary
redeployment of six cutters to enforce international fishery conservation treaties during fiscal 1965. The Coast Guard's role in the
enforcement of water pollution laws continued to grow because of
national concern with the increased pollution by oil and other
materials.
Port Security.—Fifty-three captains of the port enforce Port
Security and Dangerous Cargo Regulations throughout the United
States. Duriug the past 10 years production and water transportation of industrial chemicals has tripled, resulting in increased Coast
. Guard responsibilities under the Dangerous Cargo Act. In addition
to the safety aspects of the Port Security Program, the Coast Guard
is. charged with protecting U.S. ports and harbors against sabotage.
This requhed special attention for certain vessels making a total of
265 port entries (1,259 days in port) during the fiscal year. The
following table illustrates the workload in the major enforcement
areas for fiscal year 1965.

Enforcement work

Number
1965

Motorboats boarded. _
Waterfront facilities inspected
Reported violations of:
Motorboat Act
Port security regulations
Oil Pollution Act
Other laws
Explosives:
Loading permits issued
Loadings supervised
Other hazardous cargoes inspected _




121,892
30,777
39,857
4,137
617
487
519
. 640
9,623

148

19 65 REPORT OP THE SECRETARY OF THE TREASURY

Military readiness

As part of the Coast Guard military readiness program, 30 ships
participated in Navy refresher training and three ships in shakedown
training during the fiscal year. The Navy-Coast Guard class improvement plan for instaUing new military readiness equipment on high
endurance cutters: is approximately 20 percent complete. Coast
Guard units participated in a number of joint military training
exercises. As reported above, 17 Coast Guard patrol craft were
sent to South Vietnam for surveiUance of the coastal sea routes.
Aids to navigation

During fiscal 1965 the Frying Pan Shoals, N . C , lightship and the
Savannah, Ga., lightship were replaced by newly constructed fixed
light structures. Nine manned light stations were converted to
automatic operation to reduce costs without reduction of service.
The revision of the radiobeacon system was completed in the Great
Lakes as part of a coordinated program with the Canadian Department of Transport. On July 1, 1964, three loran stations in Japan
were transferred to the Japanese Maritime Safety Agency, and the
station in Pusan, Korea, was discontinued. Japan established
another station at Tsushima in order to maintain service in the area.
The volume of aids to navigation maintained by the Coast Guard
as of March 31, 1965, follows.
Navigational aids

Number
1965

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

64
189
683
11,084
7,193
3,642
336
10,959
7,728
41,778

Ocean stations

The Coast Guard continued its operation of four ocean stations in
the North Atlantic and two in the North Pacific. These ships, spending 78,420 operating hours on patrol, provided meteorological, navigational, communications, and rescue services for air and marine
commerce and collected various scientific data.
Oceanography

Progress continued toward full participation in the National Oceanographic Program. Twenty-nine ships have now been outfitted for
oceanographic surveys, and programs of routine time-series observations on ocean stations Bravo, Charlie, and Victor were initiated. A
shipboard computer on board the oceanographic ship USCGC Evergreen has improved the quality of its surveys. The USCGC Woodrush
conducted extensive seismic experiments in Lake Superior in support




149

ADMINISTRATIVE REPORTS

of a joint United States/Canadian Study of the North American
Crustal Structure.
Coast Guard intelligence

During the fiscal year, 2,439 internal security and criminal investigations were made, as well as 12,052 national agency checks. In
addition, 23,486 merchant mariners and 7,658 applicants for port
security cards were screened to determine whether documents should
be issued.
Operational facilities

The foUowing table shows the distribution of operating hours for
the major functions of Coast Guard vessels, aviation units, and shore
units (including small boats) for the fiscal year 1965.
Workload distribution, fiscal 1965
Activity

Law enforcement
Search and rescue
_,___.
Aids to navigation
Reserve training
Ice breaking.
Oceanography
Military readiness
Cooperation with other agencies
Port security
Training of cadets and officer candidates.
Ocean stations
Nonmission movement
Proficiency training ^
Ferry 1
Tests'
Administrative'
Total-

(operating
hours)

Aviation
units (flight
hours)

51,133
106,223
209,081
12,693
14,004
7,011
29,217
18,270
16,222
4,916
78,420
43,991

5,805
26,190
8,084
24
192
672
243
2,378
472

691,181

81,233

27, 551
1,704
1,605
6,413

Shore units
(operating
hours)
68,206
86,913
87, 067
2,078
531
106
3,198
4,816
39,671
91
19,328

312,005

'Applies to aircraft only.

Floating units,—As part of the continuing program to replace overage and obsolete ships, the second and third 210-foot WPC-class
medium endurance cutters were completed in fiscal 1965, and construction of the first of the newly-designed 378-foot WPG-class high
endurance cutters neared the midpoint. Three 157-foot coastal
buoy tenders and several smaller vessels were also completed, and a
221-foot reserve training vessel acquired from the Navy was commissioned. On June 30, 1965, the Service had 323 ships in active
commission.
Shore units,—Fourteen facilities, including light attendant stations,
loran transmitting stations, and inspector offices, were disestablished,
whUe 17 new facilities were established and 11 were reorganized.
Aviation and aircrajt.—^The Coast Guard operated 153 aircraft,
including 57 helicopters, during fiscal 1965. Seven turbine-powered
amphibian helicopters replaced overage models and a new helicopter
station was coramission ed at Astoria, Oreg. Additional helicopters
were assigned to the Annette Air Station, Alaska, to augment service
at that activity.




150

19 65 REPORT OF THE SECRETARY OF THE TREASURY

Communications.:—Major Coast Guard commands have been included in the Defense Communication Agency^s Automatic Voice
Network (AUTOVON) anci Automatic Digital Network (AUTODIN)
expansion program. Additional communication circuits for search
and rescue were added, and the SARLANT teletypewriter circuit
which serves major search and rescue commands on the east coast
was converted to an automatic 83B3 selective calling system. In
November 1964, the President approved the inclusion of Coast Guard
landline circuits with those of the National Communications System.
Engineering developments

Civil engineering.—A new search and rescue station was completed
at Brookings, Oreg., and the construction of a new air station at
Selfridge Air Base near Detroit, Mich., begun. The construction of
a new replacement runway at the Elizabeth City, N . C , Air Base was
near completion a t the close of the fiscal year; and work had been
started on a new field house at the Coast Guard Academy.
Rechargeable lead acid batteries and electric-motor flashers on
minor lighted aids to navigation are being replaced with more economical and reliable single cycle air depolarized batteries and solid
state electronic flashers. Standardized day marks have been designed
to facilitate mass production of low cost uniform signal marks for
identification of aids to navigation structures.
Electronics engineering.—The Coast Guard completed a series of
flight tests of the engineering model of a loran-C coordinate converter,
which demonstrated the feasibility of loran-C as a highly accurate
enroute and terminal air navigation system. A lightweight U H F /
V H F homing device was developed for the HH-52A helicopter,
enabling faster location of any distressed vessel, aircraft, or emergency
beacon capable of transmitting in the U H F / V H F frequency range.
Two new schools to improve the training of Coast Guard aviation
electronics technicians have been opened at the Aircraft Repair and
Supply Center, Elizabeth City, N.C.
The MK-56 Gun Fire Control System to be used aboard large
cutters is to be modified to enable its use for tracking high altitude
weather balloons, thus eliminating the need for separate special
purpose equipment.
The new primary radio station at Miami was put into operation
this year. This is another step in a modernization program, which
wUl improve communications reliability through use of the most
up-to-date equipment.
Naval engineering.—Several large vessels and a number of smaller
ones were completed during the fiscal year (See Floating units above
for further details). ; Contracts were let and initial construction begun
on 13 smaller vessels. Contracts were awarded for the construction
of the second 378-foot high endurance cutter and five 210-foot medium
endurance cutters. Multiyear contracts are now being employed,
where practicable, to reduce construction costs. Standard boatbuilding construction continued during the year with the production
of thirteen 44-foot motor life boats, eleven 40-foot utility boats, and




ADMLNTISTRATIVE REPORTS

151

twenty-seven 25-foot motor selfbaUing surfboats. Thirteen 19-foot
boats, capable of being towed on and launched from traUers, were
placed in use for servicing navigational aids on intercoastal waterways.
Aeronautical engineering.—Flotation equipment was developed and
installed on inservice and production HH-52 helicopters to improve
the waterborne stability of the aircraft with the rotors stopped. This
wiU increase personnel safety and reduce the cost of crash damage
repairs. The program to improve the engine reliabUity of H U - 1 6 E
aircraft was also completed.
Testing and development.—Advances were made in the development
of equipment and techniques to accelerate the automation of manned
light stations. A simple radio remote control system, designed for
point-to-point control of a single small light station, has been in use
for 16 months. A more sophisticated system has successfully exercised
experimental control over a major light/fog signal/radiobeacon station.
This complex system, capable of controlling a network of six major
light stations, will be tested in the western Long Island Sound area
early in fiscal 1966.
Baltimore Light, the world's first nuclear-powered lighthouse, completed one year of successful operation in May 1965. The SNAP-7B
generator, developed under AEC sponsorship, has proved to be a
reliable power source, but isotopic power is not now economicaUy
competitive with more conventional energy sources for aids to navigation.
A Coast Guard 30-foot utility boat has been equipped with hydrofoUs to study the advantages and liabilities of hydrofoU craft as search
and rescue vehicles.
Coast Guard reserve

Reserve training cruises were conducted on the east coast by the
USCGC Tanager for 1,484 reservists. Active duty training courses
for reservists on the West Coast were instituted at the Coast Guard
Base, Alameda, Calif., during the summer months.
The first group of women recruits (SPARs) since World War I I
entered on active duty for one year of training, after which they will
be assigned to organized reserve training units. A limited pilot
enlistment program, consisting of four months instead of six months
initial active duty for training, was commenced for port security
personnel in certain areas. If successful, the program will be expanded,
thus saving two months of active duty training time for personnel
entering the port security rating.
Personnel

The Continuation Boards required by the interim provisions of
legislation approved in September 1963 (14 U.S.C. 211 et seg.) to
reduce the officer personnel hump in the grades of commander and
captain were completed. A total of 12 captains and 73 commanders
are being retired as they reach minimum eligibility. The personnel
strength of the Coast Guard as of June 30, 1964 and 1965 is shown in
the foUowing table.




152

1965 REPORT OF THE SECRETARY OF THE TREASURY
Number

Personnel
1964
Military personnel:
Commissioned officers
Commissioned warrant officers
Warrant officers _. __
Cadets
Enlisted men _ _ -__
Total

31,776

2,757
2,292
180

2,856
2,308
168

j_

5,229

6,322

3,620
24,286

3,796
26,446

27,906

._
- - -

3,388
844
244
440
26,860

_

- -

3,293
867
207
385
'27,509
r32,261

-

30,242

-

-

Civilian personnel:
Salaried (General Service)
Wageboard
Lamplighters

_ _ _ _ _

Total (exclusive of vacancies)
Ready reservists:
Officers
Enlisted

1966

'
___ __

Total

-

f Revised.

The table below reflects the changes in the number of officers on
active duty as of June 30, 1964 and 1965.
Number

Officers
1964

•

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

__

Total
_

_

114
66
2
244

354

416

143
103

178
145

246

Total

__

109
24
0
221

_

Losses of commissioned officers:
Regular ^ _ _ _ _ _
Reserve on completion of obligated service
Net gain

1965

323

108

92

i Through retirements, resignations, revocations, and deaths.

Recruiting and training.—Fifty-nine main recruiting stations and
50 substations were manned by 257 recruiters during the fiscal year.
There were 11,749 applicants for enlistment in the regular Coast
Guard and 4,914 were enlisted. The Reserve received 6,711 applications and enlisted 3,565.
A Coast Guard aviation cadet program was begun during the year
with 10 enlisted applicants, selected. Under another new program,
direct commissions as Lt.(jg.) in the U.S. Coast Guard Reserve
will be offered to law school graduates, who would spend three years
on active duty. The first of this group wiU be commissioned during
the fiscal year 1966.




153

ADMUSriSTRATIVE REPORTS

• Coast Guard education program.—The education and training programs sponsored by and participated in by the Service are summarized
for the fiscal years 1964 and 1965 as follows.
Education and traming programs

Coast Guard Academy:
Applications
Applications approved
Appointments accepted
Cadets
Graduates (Bachelor of Science degree)
Officer training completed:
Officer Candidate School graduates
• Postgraduate
Flight training
Hehcopter trainmg
C-130 B aircraft training
Short-term specialized courses
Off-duty courses at civilian schools
Enlisted traiaing completed:
Recruit training:
Regular
Reserve
Coast Guard basic petty officer schools
Navy basic petty officer schools
Advanced schools (Navy and Coast Guard)
Specialized courses (Service and civilian).. _
Off-duty education (civilian schools)
Correspondence courses completed:
Coast Guard Institute
U.S. Armed Forces Institute
U.S. Naval Correspondence Course Center.

Number

301
13,210

1 Estimated.

Coast Guard Auxiliary

The AuxUiary, a voluntary nonmilitary organization functioning
in 686 communities, conducted public instruction courses in safe
boating which were attended by 137,395 persons in fiscal 1965.
Courtesy examinations of the safety equipment of some 183,000
motorboats were made by speciaUy qualified Auxiliarists. The
AuxUiary also cooperated with the regular Coast Guard in making
2,875 regatta patrols, and participated in 5,985 assistance missions
which were instrumental in saving 161 lives. As of June 30, 1965,
this organization had 23,004 members, including 5,860 instructors and
8,197 inspector-examiners. The membership operated 14,966 facilities, consisting of boats, aircraft, and radio stations.
Fiscal and supply management

Contracts for the construction of high endurance and medium
endurance cutters awarded during fiscal 1965 contained options for the
procurement of additional vessels which were programmed in the
Coast Guard budget estimates for the fiscal year 1966. These multiyear procurements are expected to save $1,350,000 in total contract
prices. This procurement policy wiU be utilized in the future whenever
feasible.
The Coast Guard cost accounting and operational data reporting
systems were revised to produce the financial information and operational performance statistics required for the distribution of operating
costs to Coast Guard programs. The Coast Guard budget presenta-




154

19 65 REPORT OF THE SECRETARY OF THE TREASURY

tion for fiscal 1967 will be program-oriented, using actual accounting
and performance data collected during fiscal year 1965.
Coast Guard operating units have been provided an improved level
of direct retail supply support by stores issuing activities of the
Department of Defense and the General Services Administration.
This has enabled a corresponding reduction in Coast Guard inventories.
Funds available, obligations, and balances

The following table shows the amount of funds available for the
Coast Guard during fiscal 1965 and the amounts of obligations and
unobligated balances.
Funds
available i

Total appropriated fnnds
Reimbursements:
Operatingexpenses
__..
_. .
Acquisition, construction, and improvements
Total reimbursements .
Trust fund, U.S. Coast Guard gift fund
Grand total

.

_ _

_

$67,468
80,111
2,566
13,819,864

410,478,840

13,959,999

14,220,342
14,327,986

14,220,342
6,876,030

7,477,789

21,096,372

7,477,789

43,468

_

$273,691,046
20,858,889
36,968,434
78,970,471

28,548,328

.

$273,748,604
20,939,000
36,961,000
92,616,446
424,264,950

Appropriated funds:
Operatingexpenses
;
Reserve traiuing
__
Retired pay.
_:
Acquisition, construction, and improvement

Net total
obhgations

4,737

38,721

452,856,736

431,579,949

21,476,510

Unobhgated
balance 2

1 Funds available include unobligated balances brought forward from prior year appropriation as follows:
Acquisition, construction, and miprovements:
Appropriated funds
_..__.
$7,186,446
Reimbursements
14,068,557
U.S. Coast Guard gift fund.
15,415
2 Unobhgated balance of $21,297,653 imder the acquisition, construction, and improvements appropriation
remains available for obligation in fiscal year 1966. These funds are programmed for obhgation in fiscal
1966 for the following general purposes:
Department
Coast Guard of Defense
projects
projects
. $4,575,000
For projects deferred in fiscal 1965 to be subsequently accomplished-,
9,244,864
For completion of projects started in fiscal 1965
$7,'477,'789
13,819,864

7,477,789

United S t a t e s Savings Bonds Division
The primary responsibility of the U.S. Savings Bonds Division is to
promote the sale and retention of savings bonds and the sale of savings
stamps. The savings bonds program 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.
Management improvement

The Savings Bonds Division is headed by a National Director and
Assistant National Director and consists of two principal branches:
Sales, and Advertising and Promotion. The branch chiefs, together
with the National Director and Assistant National Director, make up
the Division's Management Committee, whose main purpose is continuing improvement of the Division's services.




ADMIOTSTRATIVE REPORTS

155

The Division has 6 regional offices and offices in the 50 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.
I n October 1964 a quarterly management improvement report was
initiated under which State offices reported management activities to
the headquarters staff. The new system is still in an experimental
stage, but has served to make the field staff more management conscious, and has increased headquarters staff information on the way
in which State offices are administered.
I n February 1965 a Field Communications Guide ^^'^ issued as a
manual for communications between the field and headquarters offices.
The guide has been well received as a reference work and as a training
guide.
During fiscal 1965, six States transferred their addressograph
operations to the Distribution Center. Of these States, five were able
to declare their addressograph equipment surplus. Indirect savings
were made by the release of clerical time for more gainful activity.
Newsette,) a Division publication, initiated in May 1965, is designed
to keep all Division employees iniormed about the Federal Government, the Treasury Department, and the entire Savings Bonds Division. The Division plans to consolidate its administrative information in this publication, thereby substantially reducing the employees'
required reading material.
Programming has been completed for the conversion of payroll savings reporting to an E D P system using the facilities of the Parkersburg office of the Bureau of the Public Debt. First reports under the
new system were mailed to 37,000 business firms during the week of
July 5, 1965.
The new equipment has been programmed to produce a number of
highly useful operating reports at minor cost which had not been
possible under the previous system.
I n addition, steps are under way to handle the allocation of sales
credits by large interstate companies based on the actual payroll savings participants in each State.
Stepped-up servicing of publicity media such as providing live radio
spots to local radio stations and negatives for offset service to newspapers and periodicals are further examples of the continuing effort of
the Division in the area of management improvement.
Promotional activities

A "Red, White, and Blue" plan for all Americans set the pace for
savings bond promotions in the fiscal year 1965, the program's "StarSpangled Savings Bonds Year."
May, the anniversary month of the popular Series E Bond, was
selected for "Star-Spangled Security Month."




156

19 65 REPORT O.F THE SECRETARY OF THE TREAStJRY

To lamich the campaign within industry and outline its goals, the
1965 U.S. Industrial Payroll Savings Committee, a volunteer committee appointed by the Treasury Department, met in Washington on January 12. Twenty-seven business and industrial leaders, each representing a major metropolitan market area, comprised the Committee,
headed by Elmer W. Engstrom, president. Radio Corporation of
America. Secretary of the Treasury Fowler serves as the Committee's
Honorary General Chairman. Members-at-large are Frank R. Milliken, president of Kennecott Copper Corporation, and Harold S.
Geneen, chairman and president of International Telephone and Telegraph Corporation, chairmen of the 1964 and 1963 committees,
respectively.
Locally, metropolitan chairmen organize, lead, and encourage business and industrial leaders to conduct intensive payroll savings campaigns in their own companies.
During J a n u a r y - J u l y 1965, more than 8,000 business firms promoted
payroll savings. By July 31, 74 percent of the Committee's goal of
1,100,000 new "sign-ups" had been attained. The 809,756 new enrollments represented a gain of 14 percent over the corresponding months
of 1964. I n addition to the new "sign-ups," thousands of employees
already participating in the plan increased their regular bond savings.
Sales of the small-denomination Series E bonds (bought chiefiy by
payroll savers) registered peacetime records in fiscal 1965.
Organized labor gave its full cooperation to payroll savings
campaigns in industry. Through the National Labor Advisory
Committee for Savings Bonds, the sales program was successfully
publicized by national unions among their members.
The 1965 "Star-Span^ied Savings Plan for All Americans" was
also marked by highly effective campaigns within the Federal Government. Led by the Interdepartmental Savings Bond.Committee, under
the Chairman of the Civil Service Coinmission, John W. Macy, Jr.,
this campaign raised the number of civilian and military employees
enrolled in the payroll savuigs plan to 2,398,825 at the end of the year,
an increase of 39,460 participants.
Besides these concerted campaigns, the Division coordinated numerous individual drives to promote the sale of E and H bonds with the
aid of national organizations and community institutions. To organize and direct the campaigns, under the chairmanship of Bernard B.
Burford, secretaiy-treasurer of Optimist International, executives of
the major national organizations, with more than 60 million members,
met in Chicago in January 1965 and in Washington in February.
"Community Bond Campaigns," designed to encourage American
families to buy at least a bond a year, were held, in many of the
Nation's cities and towns during the fiscal year.
During fiscal 1965 the motion picture industry produced a new
20-minute color short, "The Land We Love," to assist the Division in
promoting the sale of savings bonds. Ten motion picture companies
contributed footage; Warner Brothers Studio donated its full facilities. The Department of Defense and the Treasury Department's
Coast Guard cooperated by "shooting" some of the scenes. This film
is a splendid example of the volunteer contributions of the American
public in support of the U.S. savings bonds program.




ADMINISTRATIVE REPORTS

157

The women's organizations of the Nation act as volunteer leaders
in the promotion of U.S. savings stamps sales. Stamps are sold primarily in the Nation's schools. The "Junior Astronaut" program'
initiated during academic year 1962-63 continued in fiscal year 1965,
with more than 6,000,000 student stamp buyers receiving a certificate
signed by the Nation's 7 original astronauts designating each one as a
"Junior Astronaut." The sale of 115 million savings stamps in 1965
was the largest number sold in any peacetime year.
The voluntary assistance provided by the Advertising Council and
its task force agencies who prepare and donate advertising and promotional material are of major importance to all campaigns and
promotional activities undertaken by the U.S. Savings Bonds Division. Also of immeasurable value to the sales program are the
contributions and cooperation of banks and other financial institutions,
as well as of industry and community volunteers, whose efforts continued at high levels throughout fiscal 1965.
Donated advertising time and space alone is conservatively estimated
at a value of more than $50 million annually. Because of this support,
the costs to the Government of promoting the sale of Series E and H
bonds are held to a minimum and average approximately one-tenth
of one percent of annual sales.
Sales of E and H savings bonds during fiscal 1965 totaled $4.5
billion. Details of sales, redemptions, and amount outstanding will
be found in tables 48-50.
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

During the fiscal year 1965 the management improvement program
of the Service gave increased attention to cost reduction, economy of
operations, and increased productivity. The Inspection Staff continued to analyze procedures and methods at the time of each field
office and Headquarters section inspection, and to make suggestions
for improvements.
An advisory committee was formed to study the application of data
processing to the huge volume of letters and reports handled in connection with the protection responsibilities of the Service.
Studies of new techniques and methods to expedite criminal investigations continued. During fiscal 1965 a procedural change was made
in the submission of settlement reports in cases of forged Govemment




158

19 65 REPORT OF THE SECRETARY OF THE TREASURY

checks, where the forger had already been identified before receipt of
the check for investigation. The reports are now submitted by the
Headquarters Forgery Section to the Treasurer of the United States
when the case is received instead of by Secret Service field offices. This
benefits the payee who receives a duplicate check earlier while reducing
work in the Office of the Treasurer and in the Secret Service.
The Counterfeit Note Index, a necessary operating document in each
field office, was revised and computer programmed to produce a more
effective index. '
ParticijDation in the incentive awards program was improved during
fiscal 1965, with the number of suggestions increasing more than 55
percent. The number of quality pay increases rose 700 percent.
Training

Training activities of the Service were expanded during the year.
Seven Secret Service Training Schools, one Treasury Guard Force
School, and various types of other Service schools were conducted. I n
addition, an Administration and Management Institute was organized
for first line supervisors. Outside training included attendance at the
F B I Foreign Language School, the F B I Academy, Brookings Institution, American University, GSA Secretarial Courses, GSA Institute
Course on Small Purchases, Department of Defense Crypto Schools,
and firearms instructions courses by the Colt Co. and Smith and
Wesson Co.
Protective and security activities

The protection of the First Family and the Vice President, and the
widow and minor children of the late President Kennedy continued to
be the most important responsibility of the Secret Service.
Investigations concerning protective activities increased from 2,020
in 1964 to 2,428 in 1965, or 20.2 percent. There were 288 cases pending
at the close of the fiscal year, representing a 14.3 percent increase from
the end of fiscal 1964.
Enforcement activities

Counterfeiting continued to be a major concern. However, the
large seizures in the previous year of illicit plants for the manufacture
of counterfeit money was reflected in some reduction in the number of
plants and the amount in counterfeit money seized this fiscal year.
During fiscal 1965, 36 plants for the manufacture of counterfeit
money were seized, a decrease of 18.2 percent from 1964. There were
484 new issues of counterfeit notes seized and 723 persons arrested for
counterfeiting offenses during the year. Counterfeit money received
decreased 56.6 percent to $3,363,809. The loss to the public amounted
to $846,213 because Secret Service agents seized $2,517,596 before it
could be passed. The majority of the notes passed on the public came
from large organized groups of offenders in the New York-Newark
and Cleveland-Chicago areas.
During April 1965 four men were arrested in San Francisco for
passing counterfeit $20 notes on the Federal Reserve Bank of San
Francisco. Following the arrest, $100,000 in the notes was seized from
a room occupied by two of the men and another $156,000 was found in
safe deposit boxes rented by the defendants in two Los Angeles banks.




ADMINISTRATIVE REPORTS

159

The defendants admitted manufacturing the notes in a printing shop
operated by one of them in Portland, Oreg.
I n December 1964, the owner of a printing shop in Allston, Mass.,
and an associate printed $150,000 in counterfeit $20 Federal Reserve
notes. Although they solicited underworld contacts to arrange for the
sale of the notes, the buyer they found was actually an undercover
Secret Service agent. The group was arrested and their equipment
and counterfeits, including a quantity of counterfeit American Express
checks, seized before any could be passed.
During August 1964 special agents in Cleveland began investigating
the purchase of certain materials which could be used for counterfeiting. By December the investigation had progressed sufficiently to
secure a Federal search warrant for the home of a principal suspect
who was apprehended there. Special agents found a press and other
paraphernalia as well as $50,000 in new. counterfeit $20 and $100 Federal Reserve notes. The suspect escaped his guard, leaped through a
glass door and fired four shots at the pursuing agents as he ran, using
a gun handed to him by a woman who had concealed it in a blanket
covering her baby. The agents returned the fire and wounded the suspect. The subject, a notorious hoodlum on the "Ten Most Wanted
List" of the F B I , was persuaded to surrender and was hospitalized.
H e escaped from the hospital, was recaptured the same day, and is now
serving a life sentence.
During February 1965 South African police arrested two men in
Johannesburg, for possession bf a suitcase containing $495,000 in
counterfeit $5 notes, drawn on the Federal Reserve Bank of San Francisco. One of the men had manufactured the notes in a printing shop
in Johannesburg, where he was employed.
Close and effective work by special agents assigned to the Paris office
and the Italian Police resulted in the arrest of 11 persons in Italy during June 1965. The authorities seized $7,100 in counterfeit $50 and
$100 U.S. Federal Reserve notes, issued on various Federal Reserve
banks. These arrests halted a large criminal operation responsible for
the distribution of stolen diamonds and automobiles, illegally possessed
gold and arms, and many varieties of smuggled goods.
During August 1964 a man was arrested in San Francisco and approximately $20,000 in counterfeit notes and negatives for four different types of notes drawn on the Federal Reserve banks of New York,
Boston, and Chicago seized. As a result of that arrest, two trunks
containing $716,000 in counterfeits were seized from a warehouse near
Hartford, Conn. Another man was arrested and both defendants were
convicted. Less than $400 in the notes was passed on the public.
The alterations of U.S. coins to enhance their numismatic value increased during the fiscal year. This problem has grown rapidly in the
past two years. One case involved the purchase for $25,000 by a Virginia coin dealer of a roll of silver dollars dated 1893. The mint mark
on each coin had been altered so expertly that a reputable and experienced numismatic firm had judged them to be genuine.
Counterfeit U.S. currency continued to be a problem in foreign
countries. During fiscal 1965, $951,595 was received as compared with
$157,740 in the previous fiscal year. Since a great deal of such activity
does not come to the attention of the Secret Service, despite mutual




160

19 65 REPORT OF THE SECRETARY OF THE TREASURY

agreements, these figures undoubtedly represent a relatively small part
of the amount manufactured and/or circulated. Close liaison with
Interpol as well as with police officials throughout the world has been
very fruitful in improving this phase of the Service's operations. Police officials from many countries receive instructions on detection of
counterfeits from the Service, both when they visit Washington and
when Service employees are traveling in their countries on other assignments. Particularly effective cooperation exists with authorities
in Canada and Mexico. Notices of U.S. counterfeits in circulation
are regularly furnished to finance officers and employees of our Defense establishments overseas with whom the Secret Service maintains
excellent liaison. Close contact is also maintained with State Department representatives throughout the world on counterfeiting and protective matters. Liaison with nations in the F a r East is handled
through the office in Hawaii and with nations in Europe, the Middle
East, and Africa from the Paris office.
Secret Service responsibility extends to the counterfeiting in the
United States of money of other countries. During fiscal 1965, the
Service seized 1,897 pieces of counterfeit foreign currency in this
country.
The following table summarizes receipts of counterfeit money during
the fiscal years 1964 and 1965.
Counterfeit money received, fiscal years 1964 and 1965
Receipts of counterfeit currency and coins

Counterfeit money received in the United States:
Loss to the public
__.
Seized before circulation.- _
Total

_

1964

1966

Percentage
increase, or
decrease (—)

$530, 434. 45 $846, 213.30
7, 222, 015. 78 2, 517, 596. 27

69.5
—65.2

7, 752, 450.23 3, 363, 809. 57

—66.6

Counterfeit U.S. currency received in foreign coun tries

157, 740

951, 695

503.3

Pieces of counterfeit currency of other nations received in the
UnitedStates

246, 010

1,897

-99.0

Although there has been a slight decline in the number of forged
Government checks received, this continues to be a major problem.
During the past fiscal year, 39,399 cases involving a face amount of
$3,967^777.04 were investigated. A total of 2,720 persons were arrested
for check forgery in 1965.
I n fiscal 1965, 5,586 cases involving the forgery of U.S. savings
bonds with a face amount of $605,980.93 were investigated; arrests for
bond forgery offenses totaled 69.
The decline in the number of check and bond forgery cases may be
attributable to improved investigative techniques as well as a continued
healthy economic climate. I t is significant that the decrease in these
cases occurred despite a continuing increase in the number of checks
issued and a general rise in criminal activity.
The following are representative of the cases involving large scale
multiple forgers of checks and bonds.




161

ADMINISTRATIVE REPORTS

I n August 1964 a man was arrested for forging about 130 U.S. Treasury checks at various places in Pennsylvania, Ohio, Virginia, New
York, Connecticut, and Delaware. I n 1959 he had been released from
a penitentiary where he had been incarcerated for previous counterfeiting offenses. H e estimated that he had forged and negotiated from
$75,000 to $100,000 worth of various types of negotiable instruments
since 1959. H e was sentenced for 15 years.
Four persons who stole and forged approximately 70 U.S. Treasury
checks in Florida during 1964 have been convicted.
A husband and wife team stole and forged more than 60 checks during 1964 throughout the New England States. Both have been sentenced. The successful investigation and prosecution in this case was
at least partially due to use of the ninhydrin identification process,
now widely used in the Service.
During 1965 a man was arrested in California while attempting to
redeem 156 U.S. savings bonds. A t the time he was free on bond
awaiting sentence for the forgery of a stolen U.S. Treasury check.
During this fiscal year, two men were arrested in Florida for forging 361 savings bonds, which had been received from a "fence" in
New York and Miami, Fla. When arrested one of them was
administering narcotics to himself.
Gold Reserve Act violations required a great deal of investigative
thne, with 137 cases handled during the year. Such cases are usually
complex and time consuming. Conferences were held with the Customs Agency Service and the Office of Domestic Gold and Silver
Operations to effect closer coordination in the handling of gold cases.
The following tables show the number of criminal and noncriminal
investigations completed and arrests made by the Secret Service in
fiscal years 1964 and 1965.
Criminal and noncriminal cases investigated, fiscal years 1964 and 1965
Cases investigated

1964

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

1965

Percentage
increase, or
decrease (—)

12,166
41,236
6,795
2,217
10,601

33.3
-4.6
-3.6
30.9
27.7

72,015

Total

16, 213
39,399
5,586
2,903
13,542
77,643

• 7.8

Number of arrests, fiscal years 1964 and 1965
1964

Offenses

Counterfeiting
Forged Government checks
Forged or stolen bonds
Miscellaneous
Total782-556—ee-




-

1966

Percentage
increase, or
decrease (—)

737
3,192
74
171

723
2,720
69
249

-1.9
—14.8
-6.8
46.6

4,174

3,761

-9.9

162

19 65 REPORT OF THE SECRETARY OP THE TREASURY

Cases of all types investigated by the Service during fiscal 1965
totaled 77,643, while 3,761 persons were arrested.
Offenses investigated by the Secret Service resulted in the conviction
of 3,182 persons, 97.5 percent of the cases brought to trial during the
year.
The trends in crimes over which this Service.has jurisdiction remain
generally consistent with nationwide trends in other crimes.
Cooperation with State, county, local authorities, and industry

The Secret Service has a fine record built up over many decades of
cooperation and coordination with all local and Federal authorities.
During the current fiscal year, special emphasis was given to maintaining and improving this record, with particular attention to protective activities. The Service continued the program developed over
many years of fostering close cooperation with all segments of
industry which are concerned with the la^vs enforced by the Service.







EXHIBITS




Public Debt Operations, Calls of Guaranteed Securities,
Regulations, and Legislation
Treasury Notes and Treasury Bonds Offered and Allotted
Exhibit 1.—Treasury notes
Two Treasury circulars, one containing an exchange offering and the other
containing a cash offering, are reproduced in this exhibit. Circulars pertaining
to the other note offerings during the fiscal year 1965 are similar in form and
therefore are not reproduced in this report. However, the essential details for
each offering are summarized in the first table following the circulars and the
final allotments of the new notes are shown in the second table.
DEPARTMENT CIRCULAR NO. 1-65.

PUBLIC DEBT

TREASURY DEPARTMENT,

Washington, January 28,1965.
I . OFFERING OF NOTES

1. The Secretary of the Treasury, pursuant to the authority of the Second
Liberty Bond Act, as amended, offers $2,170,000,000, or thereabouts, of notes of
the United States, designated 4 percent Treasury notes of Series E-1966, at
99.85 percent of their face value and accrued interest. The 2% percent Treasury bonds of 1965, maturing February 15, 1965, will be accepted at par in
payment or exchange, in whole or in part, to the extent subscriptions are allotted by the Treasury. The books will be open only on February 1, 1965, for
the receipt of subscriptions.
I I . DESCRIPTION OF NOTES

1. The notes will be dated February 15, 1965, and will bear interest from that
date at the rate of 4 percent per annum, payable on a semiannual ba,sis on
May 15 and Novemher 15, 1965, and on May 15 and November 15, 1966. They
will mature November 15, 1966, 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 wiU 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.
I I I . SUBSCRIPTION AND

ALLOTMENT

1. Subscriptions accepting the offer made by this circular will be received at
the Federal Reserve banks and branches and at the Oflace of the Treasurer
of the United States, Washington, D.C, 20220. Only the Federal Reserve
165




166

19 65 REPORT OF THE SECRETARY OF THE TREASURY

banks and the Treasury Department are authorized to act as oflQcial 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 50 percent of the combined
capital (not including capital notes or debentures), surplus and undivided profits
of the subscribing bank. 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, intemational 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. Federal Reserve banks and
Government investment accounts. Subscriptions from all others must be accompanied by payment (in cash or in Treasury bonds of 1965, maturing February 15, 1965, which will be accepted at par) of 2 percent of the amount of notes
applied for, not subject to withdrawal until after allotment. Registered bonds
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 notes allotted may be released upon the request of the
subscribers.
2. All subscribers requesting registered notes 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. 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 note,s of this issue at a specific rate or price, until after midnight February
1, 1965.
4. 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.
5. Under the Second Liberty Bond Act, as amended, the Secretary of the
Treasury has the authority 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 when he deems it to be in the public
interest; and any action he may take in these respects shall be final. Subject
to the exercise of that authority, subscriptions will be allotted (1) in full for
any State, political subdivision or instrumentality thereof, puhlic pension and
retirement and other public fund, intemational organization in which the
United States holds membership, foreign central bank and foreign State,
Federal Reserve bank^ or Government investment account that certifies in writing that at 4 p.m., eastern standard time, January 27, 1965, it owned or had
contracted to purchase for value 2% percent Treasury bonds of 1965 in an
amount equal to or greater than the amount of its subscription (if the certification is not made, none of such subscriber's subscription shall be subject to a
preferred full allotment) and (2) for all others as publicly announced. Allotment notices will be sent out promptly upon allotment.
IV. PAYMENT"

1. Payment at 99.85 percent of their face value and accrued interest, if any,
for notes allotted hereunder must be made or completed on or before February 15,
1965, or on later allotment. Payment will not be deemed to have been completed
where registered notes are requested if the appropriate identifying number, as
required by paragraph 2 of section III 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. In every case
where full payment is not completed, the payment with application up to 2 per-




EXHIBITS

167

cent of the amount of notes allotted shall, upon declaration made by the Secretary of the Treasury in his discretion, be forfeited to the United States. Payment may be made for any notes allotted hereunder in cash or by exchange of
2% percent Treasury bonds of 1965, which will be accepted at par. A cash
adjustment will be made for the difference ($1.50 per $1,000) between the par
value of maturing bonds accepted in exchange and the issue price of the notes.
The payment 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. Where payment is made with bonds in bearer form, coupons
dated February 15, 1965, should be detached and cashed when due. In the case
of registered bonds, the final interest due on February 15, 1965, will be paid by
issue of interest checks in regular course to holders of record on January 15,
1965, the date the transfer books closed.
v . A S S I G N M E N T OF REGISTERED BONDS

1. Treasury bonds of 1965 in registered form tendered as deposits and in payment for notes allotted hereunder should be assigned by the registered payees
or assignees thereof, in accordance with the general regulations of the Treasury
Department, in one of the forms hereafter set forth. Bonds tendered in payment should be surrendered to a Federal Reserve bank or branch or to the
Oflace of the Treasurer of the United States, Washington, D.C, 20220. The
bonds must be delivered at the expense and risk of the holder. If the notes are
desired registered in the same name as the bonds surrendered, the assignment
should be to "The Secretary of the Treasury for 4 percent Treasury Notes of
Series E-1966"; if the notes are desired registered in another name, the assignment should be to "The Secretary of the Treasury for 4 percent Treasury Notes
of Series E-1966 in the name of
"; if notes in coupon
form are desired, the assignment should be to "The Secretary of the Treasury
for 4 percent Treasury Notes of Series E-19e6 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 such allotments as may be prescribed by the Secretary of the Treasury, to issue such notices as may be
necessary, to receive payment for and 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 DHXON,

Secretary of the Treasury.

DEPARTMENT CIRCULAR NO. 2-65. PUBLIC DEBT
TREASURY DEPARTMENT,

Washington, April 29, 1965.
I . OFFERING OF NOTES

1. The Secretary of the Treasury, pursuant to the authority of the Second
Liberty Bond Act, as amended, offers notes of the United States, designated
4 percent Treasury notes of Series A-1966, at 99.85 percent of their face value
and accrued interest, in exchange for the following notes maturing May 15,1965:
4% percent Treasury notes of Series A-1965; or
3% percent Treasury notes of Series C-1965.




168

1965 REPORT OF THE SECRETARY OF THE TREASURY

A cash payment will be due from subscribers as set forth in section IV hereof.
The amount of this offering will be limited to the amount of eligible notes tendered in exchange. The books will be open only on May 3 through May 5, 1965,
for the receipt of subscriptions.
2. In addition, holders of the notes enumerated in paragraph 1 of this section
are offered the privilege of exchanging all or any part of such notes for 4 ^
percent Treasury bonds of 1974, which offering is set forth in Department
Circular, Public Debt Series—No. 3-65, issued simultaneously with this circular.
n.

DESCRIPTION OF NOTES

1. The notes now offered will be identical in all respects with the 4 percent
Treasury notes of Series A-1966 issued pursuant to Department Circulars,
Public Debt Series—Nos. 3-62 and 4-64, dated February 5, 1962, and January 31,
1964, respectively, except that interest will accrue from May 15, 1965. With
this exception the notes are described in the following quotation from Department Circular No. 3-62:
"1. The notes will be dated February 15, 1962, and will bear interest from
that date at the rate of 4 percent per annum, payable semiannually on August
15, 1962, and thereafter on February 15 and August 15 in each year until the
principal amount becomes payable. They will mature August 15, 1966, 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 wiU 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."
I I I . SUBSCRIPTION AND ALLOTMENT

1. Subscriptions accepting the offer made by this circular will be received at
the Federal Reserve banks and branches and at the Office of the Treasurer of
the United States, Washington, D.C, 20220. 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 notes 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. Under the Second Liberty Bond Act, as amended, the Secretary of the
Treasury has the authority to reject or reduce any subscription, and to allot
less than the amount of notes applied for when he deems it to be in the public
interest; and any action he may take in these respects shall be final. Subject
to the exercise of that authority, all subscriptions will be aUotted in full.
IV. P A Y M E N T

1. Payment for the face amount of notes allotted hereunder together with a
cash payment of $8.33425 per $1,000 (the difference between $9.83425 per $1,000
payable by the subscriber for accrued interest from February 15 to May 15,
1965, and $1.50 per $1,000 payable to the subscriber on account of the issue price,
of the notes allotted) must be made on or before May 17, 1965, or on later allotment. Payment for the face amount of the notes allotted may be made only in a
Uke face amount of notes of the two issues enumerated in paragraph 1 of section




EXHIBITS

169

I hereof, which together with the cash payment referred to in the preceding sentence should accompany the subscription. Payment will not be deemed to have
been completed where registered notes are requested if the appropriate identifying number, as required by paragraph 2 of section III 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 tnis case payment will be deemed to have been completed.
When payment is made with notes in bearer form, coupons dated May 15, 1965,
should be detached and cashed when due. When payment is made with registered
notes, the final interest due on May 15, 1965, wiU be paid by issue of interest
checks in regular course to holders of record on April 15, 1965, the date the
transfer books closed.
V. A S S I G N M E N T OF REGISTERED NOTES

1. Treasury notes of Series A-1965 and Series C-1965 in registered form
tendered in payment for notes offered hereunder should be assigned by the
registered payees or assignees thereof, in accordance with the general regulations of the Treasury Department governing assignments for transfer or exchange,
in one of the forms hereafter set forth, and thereafter should be surrendered
with the subscription to a Federal Reserve bank or branch or to the Office of the
Treasurer of the United States, Washington, D.C, 20220. The maturing notes
must be delivered at the expense and risk of the holder. If the new notes are
desired registered in the same name as the notes surrendered, the assignment
should be to "The Secretary of the Treasury for exchange for 4 percent Treasury
Notes of Series A-1966" ; if the new notes are desired registered in another name,
the assignment should be to "The Secretary of the Treasury for exchange tor 4
percent Treasury notes of Series A-1966 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 4 percent Treasury notes of Series A-1966 in
coupon form to be delivered to
."
VI. GENERAL PROVISIONS

1. As fiscal agents of the United States, Federal Reserve banks are authorized
and requested to receive subscriptions, to make such allotments as may be prescribed by the Secretary of the Treasury, to issue such notices as may be necessary, to receive payment for and 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.




HENRY H . FOWLER,

Secretary of the Treasury.

O

Summary of information pertaining to Treasury notes issued during ihe fiscal, year 1965
Department
circular
Date of
preliminary announcement
Number

Concurrent
offering
circular
number
Date

11-64
12-64

Jan. 27

3K percent Series C-1966 issued at par for cash 1
4 percent Series D-1966 issued at par for cash 2 _.

July 30
Oct. 29

__ _

.__ _

1-65

1966

1964

Aug. 15
Nov. 15

Feb. 15
May 15

Aug. 3
Nov. 2

Aug. 17
Nov. 16

1965

4 percent Series E-1966 issued at 99.85 for cash 3

Jan. 28

___

o
o

1964

1966

1965

1966

1965

Date
Date of subscription
maturity
books
closed

1964

1964

1964
July 29
Oct. 28

Date of
issue

Treasury notes issued for excliange or for cash

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

___ Feb. 15

Nov. 15

Feb.

1

o

Feb. 15

1962
Apr. 28

2-65

Apr. 29

3-65

1 Holders of 5 percent Treasury notes of Series B-1964 and 3 ^ percent Treasury
notes of Series E-1964, which matured Aug. 15,1964, were not offered preemptive rights
to exchange their holdings for the new notes. Pajnnent for cash subscriptions allotted
could be made in whole or in part by exchange at par of the notes of Series B-1964 and
E-1964; coupons dated Aug. 15,1964, were detached from such notes in bearer form and
cashed when due.
2 Holders of iJ4 percent Treasury notes of Series C-1964 and 3 ^ percent Treasury
notes of Series F-1964 which matured Nov. 6,1964, were not offered preemptive rights
to exchange their holdings for the new notes. Payment for cash subscriptions allotted
could be made in whole or in part by exchange at par of the notes of Series C-1964 and
F-1964; coupons dated Nov. 16 1964 were detached from such notes in bearer form and
cashed when due.




May 5 6 May 17

o

3 Holders of 2 ^ percent Treasury bonds of 1965, which matured Feb, 15,1965, were
not offered preemptive rights to exchange their holdings for the new notes. See Department Circular No. 1-65 in this exhibit for provisions for subscription and pa3mient.
4 Interest payable from May 15,1965.
* See Department Circular No. 2-65 in this exhibit for provisions for subscription
and payment.

fel

4 percent Series A-1966 issued at 99.85 in excliange for—4H percent Series A-1965 notes * Feb. 15 Aug. 15
maturing May 15,1965; d]4 percent Series C-1965 notes maturing May 15, 1965.

>

Ul

Allotments of Treasury notes issued during the fiscal year 1965, by Federal Reserve districts
[In thousands]
4 percent Series A-1966 notes issued in
exchange for—3
Federal Reserve district

3J6 percent
Series C-1966
notes 1

Boston
New York
Philadelphia...
Cleveland
Richmond
Atlanta
Chicago
St. Louis
Minneapolis..Kansas City...
Dallas
San FranciscoTreasury

$81,488
! 850,455
,
44,272
124,018
55, 530
98, 560
273,940
60,570
35,977
83,884
46,479
278,440
6,305

Total note allotments
Securities eligible for exchange:
Exchanged in concurrent offerings..

4,039,918

Total exchanged
Not submitted for exchange..
Total securities eligible for exchange..
1 Subscriptions from States, political subdivisions or instrumentalities thereof, pubhc
pension and retirement and other public funds, international organizations in which
the United States holds membership, foreign central banks and foreign States, Government investmentfaccounts, and the Federal Reserve banks were allotted in full if the
subscriber certified that it owned a like or greater amount of securities that could be
usedjln payment for the notes. Subscriptions from all others in amounts up to $100,000
were allottedjia full; amounts over $100,000 were allotted 15 percent, but not less than
$100,000 to any one subscriber.
2^Subscriptions from States, political subdivisions or instrumentalities thereof, public




4 percent Series 4 percent Series
D-1966 notes 2 E-1966 notes 1

$132,622
7,576, 837
78,274
183, 453
99,938
157,659
491,421
125,160
62, 552
121,836
90, 630
392,615
5,945

VA percent
i% percent
Series A-1965
Series C-1965
Treasury notes Treasury notes
' maturing
maturing
May 15,1965 < May 15, 1965 *

Total issued

$77,262
,169, 234
54,768
103,888
56,195
90,978
327,143
61,846
42,107
55,169
35,726
179,066
439

$22,337
462,915
14, 783
36, 939
13,078
23,899
100,057
21,882
19,720
26,706
12,006
35,857
12,476

$46,195
4,435,169
23,771
68,473
37,669
56,557
180,864
65,918
39,067
32,403
34,612
66,093
14,796

$68, 532
4,898,084
38, 554
105,412
50, 747
80,456
280,921
87,800
58,787
59,109
46, 618
101,950
27,272

2, 253, 821

802,655

5,101,587

5,904,242

732,389

1,329,296

2,061,685

1,535,044
280, 666

6,430,883
189,234

7,965,927
469,900

1,815,710

6,620,117

8,435,827

pension and retirement and other public funds, international organizations in which
the United States holds membership, foreign central banks and foreign States, Government investment accounts, and the Federal Reserve banks were allotted in full if the
subscriber certified that it owned a like or greater amount of securities that could be
used in payment for the notes. Subscriptions from all others in amounts up to $100,000
were allotted in full; araounts over $100,000 were allotted 16.6 percent, but not less than
$100,000 to any one subscriber.
3 Subscriptions were allotted in full.
* 4H percent Treasury bonds of 1974 were also offered in exchange for this security.

W
Ul

172

19 65 REPORT OF THE SECRETARY OF THE TREASURY
Exhibit 2.—Treasury bonds

Two Treasury circulars, one containing an exchange offering for maturing
issues and the other containing an advance refunding exchange offering, are
reproduced in this exhibit. Circulars pertaining to the other bond offerings
during the fiscal year 1965 are similar in form and therefore are not reproduced
in this report. However, the essential details for each offering are summarized
in the first table following the circulars and the final allotments of the new
bonds are shown in the second table.
DEPARTMENT CIRCULAR NO. 10-64. PUBLIC DEBT
TREASURY DEPARTMENT,

Washington, July 9, 1964.
1. OFFERING OF BONDS

1. The Secretary of the Treasury, pursuant to the authority of the Second
Liberty Bond Act, as amended, invites subscriptions from the people of the
United States fdr bonds of the United States, designated 4^4 percent Treasury
bonds of 198T-92:
(1) at 100.10 percent of their face value in exchange for 3% percent Treasury
notes of Series E-1964, dated August 1, 1961, due August 15, 1964;
(2) at 99.95 percent of their face value in exchange for 5 percent Treasury
notes of Series B-1964, dated October 15, 1959, due August 15, 1964;
(3) at 99.95 percent of their face value in exchange for 3% percent Treasury
notes of Series F-1964, dated August 15, 1963, due November 15, 1964;
(4) at 99.60 percent of their face value in exchange for 4% percent Treasury
notes of Series C-1964, dated February 15, 1960, due November 15, 1964;
(5) at 99.90 percent of their face value in exchange for 3% percent Treasury
notes of Series C-1965, dated November 15, 1963, due May 15, 1965;
(6) at 100.30 percent of their face value in exchange for 3% percent Treasury
notes of Series B-1966, dated May 15, 1962, due February 15, 1966;
(7) at 100.15 percent of their face value in exchange for 3% percent Treasury
bonds of 1966, dated November 15, 1960, due May 15, 1966;
(8) at 99.75 percent of their face value in exchange for 4 percent Treasury
notes of Series A-1966, dated Februa.ry 15, 1962, due August 15, 1966; or
(9) at 100.70 percent of their face value in exchange for 3% percent Treasury
notes of Series B-1967, dated March 15, 1963, due February 15, 1967.
Interest adjustments as of July 22, 1964, and the cash payments on account of
the issue prices of the new bonds will be made as set forth in section IV hereof.
The amount of the offering under this circular will be limited to the amount of
eligible securities tendered in exchange and accepted. Delivery of the new bonds
will be made on July 24, 1964. The books will be open only on July 13 through
July 16, 1964, for the receipt of subscriptions for this issue.
2. In addition to the offering under this circular, holders of securities of the
issues enumerated in paragraph 1 of this section are offered the privilege of
exchanging all or any part of such securities for 4 percent Treasury bonds of
1969 (Oct.), or 4% percent Treasury bonds of 1973, which offerings are set
forth in Department Circulars, Public Debt Series Nos. 8-64 and 9-64, respectively, issued simultaneously with this circular.
3. Nonrecognition of gain or loss for Federal incoine tax purposes.^—Pursuant to the provisions of section 1037(a) of the Internal Revenue Code of
1954 as added by Public Law 86-346 (approved September 22, 1959), the Secretary of the Treasury hereby declares that no gain or loss shall be recognized for
Federal income tax purposes upon the exchange with the United States of the
378 percent Treasury notes of Series C-1965,
3% percent Treasury notes of Series B-1966,
3% percent Treasury bonds of 1966,
4 percent Treasury;notes of Series A-1966, or
3% percent Treasury notes of Series B-1967,
solely for the 4% percent Treasury bonds of 1987-92. Section 1031(b) of the
Code, however, requires recognition of any gain realized on the exchange to the
1 Gain or loss, if any, upon t h e exchange of t h e securities of t h e first four issues listed
in p a r a g r a p h 1 of this section, must be fully recognized under the Code.




EXHIBITS

173

extent that money is received by the security holder in connection with the
exchange. To the extent not recognized at the time of the exchange, gain or
loss, if any, upon the obligations surrendered in exchange will be taken into
account upon the disposition or redemption of the new obligations. .
I I . DESCRIPTION OF BONDS

1. The bonds now offered will be identical in all respects with the 4% percent
Treasury bonds of 1987-92 issued pursuant to Department Circular, Public Debt
Series No. 14-62, dated July 30, 1962, except that interest will accrue from July
22,1964. With this exception the bonds are described in the following quotation
from Department Circular No. 14-62 :
"1. The bonds will be dated August 15, 1962, and will bear interest from that
date at the rate of 4% percent per annum payable semiannually on February 15
and August 15 in each year until the principal amount becomes payable. They
will mature August 15, 1992, but may be redeemed at the option of the United
States on and after August 15, 1987, in whole or in part, at par :and accrued
interest, on any interest day or days, on 4 months' notice of redemption given
in such manner as the Secretary of the Treasury shall prescribe. In case of
partial redemption the bonds to be redeemed will be determined by such method
as may be prescribed by the Secretary of the Treasury. From the date of redemption designated in any such notice, interest on the bonds called for redemption shall cease.
"2. The income derived from the bonds 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, wiU 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, wiU be redeemed at the option of the duly constituted representatives of the deceased owner's estate, at par and accrued interest to date
of payment,^ provided:
(a) that the bonds were actually owned by the decedent at the time of his
death; and
(b) that the Secretary of the Treasury be authorized to apply the entire proceeds of redemption to the payment of Federal estate taxes.
Registered bonds submitted for redemption hereunder must be duly assigned
to 'The Secretary of the Treasury for redemption, the proceeds to be paid to the
District Director of Internal Revenue at
for credit on Federal
estate taxes due from estate of
' Owing to the periodic closing
of the transfer books and the impossibility of stopping payment of interest to
the registered owner during the closed period, registered bonds received after
the closing of the books for payment during such closed period will be paid only
at par with a deduction of interest from the date of payment to the next interest
payment date; ^ bonds received during the closed period for payment at a date
after the books reopen will be paid at par plus accrued interest from the reopening
of the books to the date of payment. In either case checks for the full six
months' interest due on the last day of the closed period will be forwarded to the
owner in due course. All bonds submitted must be accompanied by Form PD
1782,^ properly completed, signed and certified, and by proof of the representa1 An exact half-year's interest is computed for each full half-year period irrespective of
the actual number of days in the half year. For a fractional p a r t of any half year,
computation is on t h e basis of the actual number of days in such half year.
2 The transfer books are closed from J a n u a r y 16 through F e b r u a r y 15, and from
July 16 through August 15 (both dates inclusive) in each year.
3 Copies of Form P D 1782 may be obtained from any Federal Reserve bank or from the
T r e a s u r y Department, Washington, D . C , 20226.




174

19 65 REPORT OF THE SECRETARY OF THE TREASURY

tives' 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 appoiatment is in full force and be dated within six months prior to the submission of
the bonds, unless the certificate or letters show that the appointment was made
within one year immediately prior to such submission. Upon payment of the
bonds appropriate memorandum receipt will be forwarded to the representatives,
which will be followed in due course by formal receipt from the district director
of Internal Revenue.
"6. The bonds will be subject to the general regulations of the Treasury Department, now or hereafter prescribed, governing United States bonds."
III. SUBSCRIPTION AND ALLOTMENT

1. Subscriptions will be received at the Federal Reserve banks and branches
and at the Office of the Treasurer of the United States, Washington, D.C, 20220.
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.
rv. PAYMENT

1. Payment for the face amount of bonds allotted hereunder must be made on
or before July 24,1964, or on later allotment, and may be made only in a like face
amount of securities of the nine 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 appropriate
identifying number, as required by paragraph 2 of section III 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. Cash payments due from subscribers (paragraphs 2, 4,, 5, 6, 7, 8, and
10 below) should accompany the subscription. Cash payments due to subcribers
(paragraphs 3 and 9 below) will be made in the case of bearer securities following
their acceptance and in the case of registered securities following discharge of
registration. In the case of registered securities, the payment will be made
by check drawn in accordance with the assignments on the securities surrendered
or by credit ih any account maintained, by a banking institution with the Federal
Reserve bank of its district.
2. 8% percent notes of Series E-1964.—Coupons dated August 15, 1964, must
be attached to the notes in bearer form when surrendered. Accrued interest
from February 15 to July 22, 1964 ($16.27747 per $1,000) wiU be credited,
accrued interest from February 15 to July 22, 1964 ($18.44780 per $1,000) on the
bonds to be issued plus the payment ($1.00 per $1,000) due the United States on
account of the issue price of the bonds will be charged, and the difference
($3.17033 per $1,000) must be paid by subscribers.
3. 5 percent notes of Series B-1964-—Coupons dated August 15, 1964, must be
attached to the notes in bearer form when surrendered. Accrued interest from
February 15 to July 22, 1964 ($21.70330 per $1,000) plus the payment ($0.50
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 July 22, 1964 ($18.44780 per
$1,000) on the bonds to be issued will be charged, and the difference ($3.75550
per $1,000) will be paid to subscribers.
3% percent notes of Series F-1964.—Coupons dated November 15, 1964,
must be attached to the notes in bearer form when surrendered. Accrued




EXHIBITS

175

interest from May 15 to July 22, 1964 ($6.92935 per $1,000) plus the payment
($0.50 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 July 22, 1964
($18.44780 per $1,000) on the bonds to be issued will be charged, and the difference ($11.01845 per $1,000) must be paid by subscribers.
5. 4% percent notes of Series 0-1964-—^Coupons dated November 15, 1964,
must be attached to the notes in bearer form when surrendered. Accrued
interest from May 15 to July 22, 1964 ($9.00815 per $1,000) plus the payment
($4.00 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 July 22, 1964 ($18.44780
per $1,000) on the bonds to be issued will be charged, and the difference
($5.43965 per $1,000) must be paid by subscribers,
6. 3% percent notes of Series G-1965.—Coupons dated November 15, 1964, and
May 15, 1965, must be attached to the notes in bearer form when surrendered.
Accrued interest from May 15 to July 22, 1964 ($7.16033 per $1,000) plus the
payment ($1.00 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 July 22,
1964 ($18.44780 per $1,000) on the bonds to be issued wiU be charged, and the
.difference ($10.28747 per $1,000) must be paid by subscribers.
7. 5% percent notes of Series B-1966.—Coupons dated August 15, 1964, and all
subsequent coupons, must be attached to the notes in bearer form when surrendered. Accrued interest from February 15 to July 22, 1964 ($15.73489 per
$1,000) will be credited, accrued interest from February 15 to July 22, 1964
($18.44780 per $1,000) on the bonds to be issued plus the payment ($3.00 per
$1,000) due the United States on account of the issue price of the bonds will
be charged, and the difference ($5.71291 per $1,000) must be paid by subscribers.
8. 8% percent bonds of 1966.—Coupons dated November 15, 1964, and all subsequent coupons must be attached to the bonds in bearer form when surrendered.
Accrued interest from May 15 to July 22, 1964 ($6.92935 per $1,000) will be
credited, accrued interest from February 15 to July 22, 1964 ($18.44780 per
$1,000) on the bonds to he issued plus the payment ($1.50 per $1,000) due the
United States on account of the issue price of the new bonds will be charged,
and the difference ($13.01845 per $1,000) must be paid by subscribers.
9. 4 percent notes of Series A-1966.—Coupons dated August 15, 1964, and all
subsequent coupons, must be attached to the notes in bearer form when surrendered. Accrued interest from February 15 to July 22, 1964 ($17.36264 per
$1,0(X)) plus the payment ($2.50 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 July 22, 1964 ($18.44780 per $1,000) on the bonds to be issued wiU be
charged, and the difference ($1.41484 per $1,000) will be paid to subscribers.
10. 8% percent notes of Series B-1961.—Coupons dated August 15, 1964, and
all subsequent coupons, must be attached to the notes in bearer form when
surrendered. Accrued interest from February 15 to July 22, 1964 ($15.73489
per $1,000) will be credited, accrued interest from February 15 to July 22, 1964
($18.44780 per $1,000) on the bonds to be issued plus the payment ($7.00 per
$1,000) due the United States on account of the issue price of the bonds will be
charged, and the difference ($9.71291 per $1,000) must be paid by subscribers.
V. ASSIGNMENT OF REGISTERED SECURITIES

1. Eligible Treasury securities in registered form tendered in payment for
bonds offered hereunder should be assigned by the registered payees or assignees
thereof, in accordance with the general regulations of the Treasury Department
governing assignments for transfer or exchange, in one of the forms hereafter
set forth, and thereafter should be surrendered with the subscription to. a
Federal Reserve bank or branch or to the Office of the Treasurer of the United
States, Washington, D.C, 20220. 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 4i/4 percent Treasury bonds of 198792"; 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 1987-92 in the name of
" ; if new bonds
in coupon form are desired, the assignment should be to "The Secretary of the




176

19 65

REIPORT

OF THE SECRETARY OF THE TREASURY

Treasury for exchange for 4^/4 percent Treasury Bonds of 1987-92 in coupon
form to be delivered to
"
V I . 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,

Secretary of the Treasury.
DEPARTMENT CIRCULAR NO. 3-65. PUBLIC DEBT
TREASURY DEPARTMENT,

Washington, April 29, 1965.
I . OFFERING OF BONDS

1. The Secretary of the Treasury, pursuant to the authority of the Second
Liberty Bond Act, as amended, offers bonds of the United States, designated 4%
percent Treasury bonds of 1974, at 100.25 percent of their face value, in exchange
for the following notes maturing May 15, 1965:
4% percent Treasury notes of Series A-1965; or
3% percent Treasury notes of Series C-1965.
The amount of this Offering will be limited to the amount of eligible ndtes
tendered in exchange. The books will be open only on May 3 through May 5,
1965, for the receipt of'subscriptions.
2. In addition, holders of the notes enumerated in paragraph 1 of this section
are offered the privilege of exchanging all or any part of such notes for 4
percent Treasury notes of Series A-1966, which offering is set forth in Department Circular, Public Debt Series-No. 2-65, issued simultaneously with this
circular.
I I . DESCRIPTION OF BONDS

1. The bonds now offered will be identical in all respects with the 41^4 percent
Treasury bonds of 1974 issued pursuant to Department Circular, Public Debt
Series No. 7-64, dated April 30, 1964, except that interest will accrue from
May 15, 1965. With this exception the bonds are described in the following
quotation from Department Circular No. 7-64:
"1. The bonds will be dated May 15, 1964, and will bear interest from that
date at the rate of 4^4 percent per annum, payable semiannually on November
15, 1964, and thereafter on May 15 and November 15 in each year until the
principal amount becomes payable. They will mature May 15, 1974, 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 Federai 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.




EXHIBITS

177

"5. Any bonds issued hereunder which are owned by a decedent at the time
of his death and there^upon constitute a part of his estate wiil be redeemed at
par and accrued interest prior to maturity, provided the Secretary of the Treasury is authorized by the representative of the estate to apply the entire proceeds
of redemption to payment of the decedents Federal estate taxes.
"6. The bonds will be subject to the general regulations of the Treasury Department, now or hereafter prescribed, governing United States bonds."
I I I . S U B S C R I P T I O N AND

ALLOTMENT

1. Subscriptions accepting the offer made by this circular will be received
at the Federal Reserve banks and branches and at the Office of the Treasurer of
the United States, Washington, D.C, 20220. Banking institutions generally
may submit subscriptions for account of customers, hut 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. Under the Second Liherty Bond Act, as amended, the Secretary of the
Treasury has the authority to reject oi* reduce any subscription, and to allot
less than the ^amount of bonds applied for when he deems it to be in the public
interest; and any action he may take in these respects shall be final. SuJbject
to the exercise of that authority, all subscriptions will he allotted in full.
IV. P A Y M E N T

1. Payment for the face amount of bonds allotted hereunder must be. made on
or before May 17, 1965, or on later allotment, and may be made only in a like
face amount of notes of the two issues enumerated in paragraph 1 of section
I hereof, which should accompany the subscription. A cash payment of $2.50 per
$1,000 on account of the issue price of the new bonds must be paid by suJbscribers
and should accompany the sutoscription. Payment will not be deemed to have
been completed where registered bonds are requested if the appropriate identifying number, as required by paragraph 2 of section III 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. When payment is made with notes in bearer foi-m, coupons dated
May 15, 1965, should be detached and cashed when due. When payment is
made with registered notes, the final interest due on May 15, 1965, wili be paid
by issue of interest checks in regular course to holders of record on April 15,
1965, the date the transfer books closed.
V. A S S I G N M E N T OF REGISTERED

NOTES

1. Treasury Notes of Series A-1965 and Series C-1965 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 TJnited States, Washington, D.C, 20220. The notes
must be delivered at the expense and risk of the holder. If the bonds are de^
sired registered in the same name as the notes surrendered, the assignment
should be to "The Secretary of the Treasury for exchange for 4 ^ percent
Treasury Bonds of 1974"; if the bonds are desired registered in another name,
the assignment should be to "The Secretary of the Treasury for exchange for
41^ percent Treasury Bonds of 1974 in the name of
.
";
if bonds in coupon form are desired, the assignment should be to "The Secretary
of the Treasury for exchange for 4^/4 percent Treasury Bonds of 1974 in coupon
form to he delivered to
"
782-'556—66

12




178

1965 RE'PORT 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 such allotments as may be prescribed by the Secretary of the Treasury, to issue such notices as may be necessary, to receive payment for and make delivery of bonds on full-paid subscriptions allotted, and they may issue interim receipts pending delivery of the
definitive bonds.
2. The Secretary of the Treasury may at any time, or from time to time, prescribe supplemental or amendatory rules and regulations governing the offering,
which will be communicated promptly to the Federal Reserve banks.




HENRY H . FOWLER,

Secretary of the Treasury.

Summary of information pertaining to Treasury bonds issued during the fiscal year 1965
Department
circular
Date of
preliminary announcement
Number
Date

Concurrent
Offering
circular
number

1964
July 8

8-64

1964
July 9

9-64,10-64

July

8

9-64

July

9

8-64,10-64

July

8

10-64

July

9

8-64, 9-64

Treasury bonds issued for exchange

4 percent of 1969 issued at prices indicated below in exchange for—
3M percent Series E-1964 notes maturing Aug. 15,1964 (99.70);«
6 percent Series B-1964 notes maturing Aug. 15,1964 (99.55);*
3M percent Series F-1964 notes maturing Nov. 15,1964 (99.55);*
4>g percent S,eries C-1964 notes maturing Nov. 15, 1964 (99.20);*
Z% percent Series C-1965 notes maturing May 15, 1965 (99.50);
3 ^ percent Series B-1966 notes maturing Feb. 15,1966 (99.90);
3M percent Treasury bonds of 1966 maturuig May 15,1966 (99.75);
4 percent Series A-1966 notes maturing Aug. 15,1966 (99.35);
Z% percent Series B-1967 notes maturmg Feb. 15, 1967 (100.30).
4H percent of 1973 issued at prices indicated below in exchange for—
3M percent Series E-1964 notes maturing Aug. 15, 1964 (99.25);*
5 percent Series B-1964 notes maturing Aug. 15, 1964 (99.10);*
3 ^ percent Series F-1964 notes maturmg Nov. 15, 1964 (99.10);*
iVg percent Series C-1964 notes maturing Nov. 15,1964 (98.75);*
3J^ percent Series C-1965 notes maturing May 15,1965 (99.05);
Z & percent Series B-1966 notes maturing Feb. 15, 1966 (99.45);
V
Z% percent Treasury bonds of 1966 maturing May 15, 1966 (99.30);
4 percent Series A-1966 notes maturing Aug. 15, 1966 (98.90);
3 ^ percent Series B-1967 notes maturing Feb. 15,1967 (99.85).
i}4: percent of 1987-92 issued at prices indicated below in exchange for—
3M percent Series E-1964 notes maturmg Aug. 15, 1964 (100.10);*
6 percent Series B-1964 notes maturmg Aug. 15 1964 (99.95);*
. 3M percent Series F-1964 notes maturmg Nov. 15, 1964 (99.95);*
i^/i percent Series C-1964 notes maturing Nov. 15, 1964 (99.60);*
Z}i percent Series C-1965 notes maturing May 15,1965 (99.90);
ZYs percent Series B-1966 notes maturing Feb. 15,1966 (100.30);
3M percent Treasury bonds of 1966 maturmg May 15,1966 (100.15)
4 percent Series A-1966 notes maturmg Aug. 15, 1966 (99.75);
Z% percent Series B-1967 notes maturing Feb. 16,1967 (100.70).

Date of
issue

Allotment
pajnnent
Date
Date of subscrip- date on
or before
tion
maturity
books
(or on
closed
later
aUotment)

1957
1969
1 Oct. 1 Oct. 1

1964
1964
July 16 2 3 July 24

1973
Nov. 15

July.r;6 2 8 July 24

1964
July 22

1962
1992
1 Aug. 15 Aug. 15

July 16

6 July 24

Footnotes at end of table.




CO

00

Summary of information pertaining to Treasury bonds issued during the fiscal year 1965—Continued
Department
circular
Date of
preliminary announceNumber
ment
Date

Dec. 30

Dec. 30

Dec. 30

1965
Apr. 28

13-64

14-64

15-64

3-65

Dec. 31

Dec. 31

Dec. 31

1965
Apr. 29




Concurrent
offeruig
circular
number

14-64,15-64

13-64,15-64

13-64,14-64

2-65

Date of
issue

Treasury bonds issued for exchange

4 percent of 1970 issued at prices indicated below in exchange for—
_._ __
2^-g percent Treasury bonds of 1965 maturing Feb. 15, 1965 (99.40);*
3H percent Series B-1965 notes maturing Nov. 15, 1965 (99.55);
4 percent Series E-1965 notes maturing Nov. 15, 1965 (99.10);
SVs percent Series B-1966 notes maturing Feb. 15, 1966 (99.60);
SVs percent Series C-1966 notes maturing Feb. 15, 1966 (99.30);
3M percent Treasury bonds of 1966 maturing May 15, 1966 (99.50); .
ZH percent Series A-1967 notes maturing Aug. 15, 1967 (99.95);
Z ^ percent Treasury bonds of 1967 maturing Nov. 15, 1967 (100.30).
4H percent of 1974 issued at prices indicated below in exchange for—
2 ^ percent Treasury bonds of 1965 maturing Feb. 15, 1965 (99.35);*
3H percent Series B-1965 notes maturing Nov. 15, 1965 (99.50);
• 4 percent Series E-1965 notes maturing Nov. 15, 1965 (99.05);
zys percent Series B-1966 notes maturing Feb. 15, 1966 (99.55);
ZVs percent Series C-1966 notes maturmg Feb. 15, 1966 (99.25);
3M percent Treasury bonds of 1966 maturing May 15, 1966 (99.45);
3M percent Series A-1967 notes maturing Aug. 15, 1967 (99.90);
3 ^ percent Treasury bonds of 1967 maturing Nov. 15, 1967 (100.25).

Allotment
payment
Date
Date of subscrip- date on
tion
or before
maturity
books
(or on
closed
later
allot.:
ment)
1970
Feb. 15

1965
1966
Jan. 8 7 8 Jan. 19

CO

05

O
O

Ul

_ Jan. 15

1974
Feb. 15

Jan.

8 79 Jan. 19

o
>
o

i}4 percent of 1987-92 issued at prices indicated below tn exchange for—
25^ percent Treasury bonds of 1965 maturing Feb. 15, 1965 (100.25);*
3H percent Series B-1965 notes maturing Nov. 15, 1965 (100.40);
4 percent Series E-1965 notes maturing Nov. 15, 1965 (99.95);
zfi percent Series B-1966 notes maturing Feb. 15, 1966 (100.45);
ZVs percent Series C-1966 notes maturing Feb. 15,1966 (100.15);
33^ percent Treasury bonds of 1966 maturing May 15, 1966 (100.35);
• 3M percent Series A-1967 notes maturing Aug. 15, 1967 (100.80);
3 ^ percent Treasury bonds of 1967 maturing Nov. 15, 1967 (101.15).
i}4: percent of 1974 issued at prices indicated below in exchange for—
. iVs percent Series A-1965 notes maturing May 15, 1965 (100.25);
zys percent Series C-1965 notes maturing May 15, 1965 (100.25).

1965
Jan. 15

o

.

1962
1992
1 Aug. 15 Aug. 15
0

Jan.

8 711 Jan. 19

>
Ul

1974
1964
1 May 15 May 15
2

0
3
May 5 1 May 17

1 I n t e r e s t p a y a b l e from J u l y 22,1964.
2 All coupons d a t e d s u b s e q u e n t to t h e p a y m e n t d a t e were r e q u i r e d to b e a t t a c h e d to
bearer securities s u b m i t t e d in exchange a n d interest w a s a d j u s t e d o n aU securities as of
J u l y 22,1965.
8 A c c r u e d interest o n old security (Col. 2) a n d a m o u n t d u e subscriber o n a c c o u n t of
issue price of n e w b o n d (Col. 3) were credited to subscriber, accrued interest o n n e w
b o n d (Col. 4) a n d a m o u n t d u e from subscriber o n a c c o u n t of issue price of n e w b o n d
(Col. 5) were charged to subscriber, a n d difference paid to subscriber (Col. 6) or collected
from subscriber (Col. 7) as follows (per $1,000):
Security
Col. 2
Col. 4
Col. 5
Col. 6
Col. 7
Col. 3
3 M % N o t e E-1964
$16.27747 $3.00 $12.24044
$7.037034.50
4% N o t e B-1964
2L 70330
12.24044
13.92286
$0.81109
6 M % N o t e F-1964
6.92935 4.50
12. 24044
i y 8 % N o t e C-1964
9.00815 8.00
12.24044
4.76771
Zy8% N o t e C-1965
7.16033 5.00
12. 24044
0.08011
LOO
12. 24044
4.49445
35^% N o t e B-1966
15.73489
12. 24044
2.81109
3 M % B o n d 1966
6.92935 2.50
6.50
12. 24044
I L 62220
4 % N o t e A-1966
17. 36264
0.49445 .
3 ^ % N o t e B-1967
15.73489
12.24044 $3.00
* H o l d e r s of these securities were n o t offered t h e n o n t a x a b l e exchange privilege
6 Cash p a y m e n t s were m a d e to subscribers as follows (per $1,000):
P a i d on
account
Total
ofissue
price of
. ISecurity
bond
ZK% N o t e E-1964
$16.27747
$7. 50 $23. 77747
5% N o t e B-1964
2L 70330
9.00 30. 70330
15.92935
Z H % N o t e F-1964
.
6.92935
9.00
4>g% N o t e C-1964.
9.00815
12.50 21. 50815
3 % % N o t e C-1965
7.16033
9.50
16. 66033
21.23489
3 ^ % N o t e B-1966
15.73489
5.50
13.92935
3 M % B o n d 1966.
6.92935
7.00
28.30264
4% N o t e A-1966
17.36264
ILOO
17. 23489
3 ^ % N o t e B-1967
15.73489
LSO
6 See D e p a r t m e n t Circular N o . 10-64 in t h i s exhibit for provisions for s u b s c r i p t i o n
and payment.
7 All coupons d a t e d s u b s e q u e n t to t h e p a y m e n t d a t e were r e q u i r e d to be a t t a c h e d to
bearer securities s u b m i t t e d in exchange a n d interest was adjusted o n all securities as of
J a n . 15,1965.




Accrued
interest on
old security

8 Accrued interest on old s e c u r i t y was credited to subscriber (Col. 2) a n d a m o n n t d u e
to subscriber (Col. 3) or d u e from subscriber (Col. 4) on a c c o u n t of issue price of n e w
b o n d s w a s credited or charged a n d t b e n e t a m o u n t w a s p a i d to subscriber (Col. 5) as
follows (per $1,000):
Security
Col. 2
Col. 3 Col. 4
Col. 6
2ys% B o n d 1965
$10.91372 $6.00
$16.91372
3 M % N o t e B-1965
5.89779 4.50
10.39779
4 % N o t e E-1965
6.74033 9.00
15. 74033
Zy8% N o t e B-1966
15.07133 4.00
19.07133
3>g% N o t e C-1966
1
16.11073 7.00
23.11073
3 M % B o n d 1966
6.31906 5.00
IL 31906
3 M % N o t e A-1967
15.59103 0.50
16. 09103
3 ^ % B o n d 1967
6.10843
^
$3.00
3.10843
9 Accrued interest o n old s e c u r i t y w a s credited to subscriber (Col. 2) a n d a m o u n t
d u e to subscriber (Col. 3) or d u e from subscriber (Col. 4) on a c c o u n t of issue price of
n e w b o n d s w a s credited or charged a n d t h e n e t a m o u n t w a s p a i d to subscriber (Col.
5) as foUows (per $1,000):
Security
Col. 2
Col. 3 Col. 4
Col. 6
2 ^ % B o n d 1965
$10.91372 $6.50
$17.41372
3 H % N o t e B-1965
6.89779
5.00
10.89779
4% N o t e E-1965
6. 74033 9.50
16.24033
3 ^ % N o t e B-1966
16.07133 4.50
19.67133
Zys7o N o t e C-1966
16.11073 7.60
23.61073
3 M % B o n d 1966
6.31906 6.60
I L 81906
Z H % N o t e A-196715. 59103
LOO
16.69103
Zy8% B o n d 1967_
6.10843
$2.60
3.60843
10 I n t e r e s t p a y a b l e from J a n . 16, 1966.
11 Accrued uiterest on old s e c u r i t y (Col. 2) a n d a m o u n t d u e subscriber on a c c o u n t of
issue price of n e w b o n d (Col. 3) were credited to subscriber, a c c m e d interest o n n e w
b o n d (Col. 4) a n d a m o u n t d u e from subscriber on account of issue price of n e w b o n d
(Col. 5) were charged to subscriber a n d t h e difference (Col. 6) w a s coUected from s u b scriber as foUows (per $1,000):

w
H-l

Ul

Security
Col. 2
Col. 3
Col. 4
Col. 5 Col. 6
2y8% B o n d 1965
$10.91372
$17.66984 $2.60 $9. 26612
33^% N o t e B-1965
5.89779 $0. 60 17. 66984
16. 77205
4 % N o t e E-1965
6.74033
17.66984 4.00 10. 42961
ZysJo N o t e B-1966.
16.07133
17.66984 4.60 7. 09861
Zy8% N o t e C-1966
16.11073
17.66984 L50 3.06911
Z%% B o n d 1966
6.31906
17.66984 3.60 14. 86078
17.66984 8.00 10.07881
3M% N o t e A-1967
15. 59103
3 ^ % B o n d 1967
6.10843
17.66984 1L60 23.06141
12 I n t e r e s t p a y a b l e from M a y 16,1966,
13 See D e p a r t m e n t Circular N o . 3-65 i n t h i s exhibit for provisions for s u b s c r i p t i o n
and payment.

QO

(X)
to

Allotments of Treasury bonds issued during the fiscal year 1965, by Federal Reserve districts
[In thousands]

CO
Oi

4 percent Treasury bonds of 1969 issued in exchange for4 percent
3 ^ percent
ZYi percent
ZH percent
5 percent
ZH percent
4% percent Zli percent Z% percent
Series E-1964 Series B-1964 Series F-1964 Series C-1964 Series C-1965 Series B-1966 Treasury Series A-1966 Series B-1967
Treasury
Treasury
Treasury
Treasury
Treasury
Treasury
bonds of 1966 Treasury
Treasury
Total issued
notes
notes
ndtes
maturing
notes
notes
notes
notes
notes
maturing
maturing
maturing
maturing May 15,1966 2 maturing
maturing
maturing
maturing
Aug. 15,1966 Feb. 15,1967
Aug. 15,1964 2 Aug. 15,1964 2 Nov. 15,1964 2 Nov. 15,1964 May 15,1965 2 Feb. 15,1966 2

Federal Reserve district

Boston
New York
PhUadelphia
Cleveland
Richmond
Atlanta
Chicago
St. Louis
Minneapolis
Kansas City
DaUas
San Francisco
Treasury

_

Total bond allotments
Securities eUgible for
exchange:
Exchanged in concurrent
offerings
Total exchanged
Not submitted for
exchange:
Total securities eUgible for exchange
Footnotes at end of table.




$19,219
265,551
21,328
50,126
15,636
22,474
125,276
27,708
18, 070
37, 669
17,150
14,131
693

$6,027
186,062
8,397
7,839
6,672
7,395
25,987
8,877
6,832

634,731

14,322
3,993
4,555
1,583

$4,726
49,830
5,182
13,539
1,478
6,295
28,044
7,687
8,622
11,028
8,290
16,323
297

$4,225
182,368
3,363
6,821
1,019
2,494
18,285
6,872
8,113
8,264
3,451
4,146
1,237

$18,338
212,151
4,307
34, 263
7,383
13,142
67, 700
19,334
6,181
9,728
4,614
11, 735
622

16,541

161,341

249,658

$4,815
77,447
3,234
8,777
1,196
14,925
37,314
6,555
2,812
9,430
3,853
.7,936
435

$13,462
266,168
11,068
40,667
37,405
25,263
76,707
45,373
8,588
15,377
12,642
24,131
2,287

$112,657
1, 716,753
86, 634
268, 777
93,793
138,028
636,152
168,373
90,692
169,139
121,257
125,876
8,560

294,283

399,388

392,173
19,613
90,978
19,339
39,453
188,757
30,810
21, 247
33,173
45,424
31,962

$13, 566
85,003
10,142
16,887
4,765
6,587
77,082
16,157
11,227
20,248
21,940
10,957
723

178,729

678,928

3,726,691

o
o
hrj-

Ul
O
S3

>
O
• ^

639,801

659,210

357,632

350,212

957,311

1,450,444

317,654

486,014

638,269

5, 655,547

1,174,632

845,751

618,973

599,870

1,366,699

2,392,436

611,937

663,743

1,117,197

2,911,622

1,199,502

6,442,250

3,267,326

6,620,117

3,260,303

2,250,086

5,156,228

2,367,648

32,465,082

4,086,164

2,045,253

6,961,223

3,867,196

7,976,816

6,652,739

2,862,023

6,819,971

3,474,846

41,746,220

W

9,281,138
S3
fel

;>
Ul

d
Hi

Allotments of Treasury bonds issued during the fiscal year 1965, by Federal Reserve districts- -Continued
[In t h o u s a n d s ]
i } i p e r c e n t T r e a s u r y b o n d s of 1973 issued i n exchange for6 percent
ZH p e r c e n t
m percent
3 ^ percent
ZH p e r c e n t
3 % percent
3H percent
ZH p e r c e n t
4 percent
Treasury
Series A-1966 Series B-1967
Series E-1964 Series B-1964 Series F-1964 Series C-1964 Series C-1965 Series B-1966
Treasury
Treasury
Treasury
Treasury
Treasury
b o n d s of 1966
Treasury
Treasury
T o t a l issued
Treasury
notes
maturing
notes
notes
notes
notes
notes
notes
notes
maturing
maturing
maturing
M a y 15,1966 3 m a t u r i n g
maturing
maturing
maturing
maturing
A u g . 15,1966 F e b . 15,1967
A u g . 15,1964 8 A u g . 16,1964 3 N o v . 15,1964 3 N o v . 15,1964 3 M a y 15,1965 s F e b . 15,19663

Federal Reserve district

Boston
_
N e w York
Philadelphia
Cleveland
Richmond
Atlanta...
_
Chicago
St. Louis
Minneapolis
Kansas City
DaUas
S a n Francisco
Treasury

_

_.

Total bond aUotments....
Securities eUgible for exchange:
Exchanged 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 . .

$8,813
151,132
4,670
4,939
3,911
11,296
68, 777
6,904
9,456
14,089
19,344
39,690
804

$52, 405
134, 691
65,376
17, 662
6,269
5,390
33,102
. 7,874
7,409
12,226
5,336
12, 409
2,155

$3, 560
96,277
16, 730
13,628
1,045
2,838
47, 772
4,521
7,467
3,761
3,405
12, 323
304

$29, 841
105, 424
3,667
6,735
2,240
7,526
24, 512
4,420
6,730
6,513
5,136
31,029

$61, 670
447, 475
4,368
21,146
4,524
5,235
61, 395
21, 428
6,984
10,000
6,891
118,165
1,023

$31, 947
664, 788
18, 269
18,273
8,460
6,968
162, 816
13,014
46,082
27, 913
47,218
265,138
1,892

$14, 392
106, 565
15, 984
39,112
6,597
6,193
62, 891
7,191
10,043
12,062
11,275
14, 758
788

$25,103
147, 991
6,004
7,817
636
9,006
84, 360
12,830
6,103
9,626
6,330
13, 420
4,829

$18, 610
233, 749
20,464
11, 967
12, 337
8,746
87, Oil
10, 877
11, 218
23, 038
10, 693
49, 846
4,785

$246, 341
2,088,092
154, 532
140,279
44, 999
63,188
622, 636
89, 059
110,482
119,228
114, 627
646, 778
16, 970

343,825

362,294

212, 621

232,162

769, 304

1, 302, 758

296,851

334,055

503, 341

4, 357,211

4,923,927

830, 707

483,457

306, 352

367, 708

687,395

1,089, 678

315,086

329, 688

613,856

1,174, 532

845, 751

518, 973

699,870

1, 356, 699

2, 392, 436

611,937

663, 743

1,117,197

9,281,138

2, 911, 622

1,199, 502

5,442,260

3,267,326

6, 620,117

3,260, 303

2,260,086

5,156,228

2, 357, 648

32,465,082

16,164

2,045,263

6, 961,223

3,867,196

7, 976,816

5, 652, 739

2,862,023

5, 819, 971

3, 474,845

C
O

41,746,220

F o o t n o t e s a t e n d of t a b l e .




00
OO

OO

Allotments of Treasury bonds issued during the fiscal yeaf 1965, by Federal Reserve districts—Continued
[In thousands]

CO

4H p e r c e n t T r e a s u r y b o n d s of 1987-92 issued in exchange for— i
SJ
5 percent
ZH p e r c e n t
Series E-1964 Series B-1964
Treasury
Treasury
notes
notes
maturing
maturing
A u g . 15,1964 * A u g . 15,1964 *

Federal Reserve district

3 % percent
4 percent
i'A p e r c e n t
ZH p e r c e n t
ZH p e r c e n t
3 H percent
Z'A p e r c e n t
Series A-1966 Series B-1967
Series F-1964 Series C-1964 Series C-1965 Series B-1966
Treasury
T o t a l issued
Treasury
Treasury
" Treasury
Treasury
b o n d s of 1966
Treasury
Treasury
notes
notes
maturing
. notes
notes
notes
notes
maturing
M a y 15,1966 ^ m a t u r i n g
maturing
maturing
maturing
maturing
A u g . 15,1966 * F e b . 15,1967*
N o v . 15,1964* N o v . 16,1964* M a y 15,1966 * F e b . 15,1966 *

O
SD
1-3

O

>^
Boston
N e w York
Philadelphia
Cleveland..
H8cbTnond.._
Atlanta
Chicago
St. Louis
Minneapolis,.
Kansas City
DaUas.. . .
SanFrancisco
Treasury

$650
167,616
1,008
168
166
110
4,147
451

__.
_ ,.
._

289
1,600
19,982

_..

Total bond aUotments
Securities eligible for
exchange:
Exchanged in concurrent
offerings
•
T o t a l exchanged
N o t s u b m i t t e d for
exchange
.

$4,336
137,895
16
362
1
200
115
416

196,916

$7,307
80,510
164
1,076
134
18,581
5,186
475
2,905
68
266
1,216
163

$16,651
114,132
113
1,675
125
111
10,183
1,835
490
266
20
43,606

$1,319
88,590
30
1,024
1,079
100
8.406
1,339
26
61
110
46,607
106

$1,646
16,898
67
148

$10,917
95,979
15
193

$1,302
25,762
100
50

35
811
128
204
266

112
38,767
983
2,550
322
268
415
448

20
2,827
106
110
2
10
4,139
500

$57,279
873,496
2,788
17, 607
1,944
19, 711
75,795
6,938
6,684
2,049
3,706
128,985
1,356

146, Oil

118, 050

188, 007

147,686

20,803

160,959

34,928

1,198,336

8,082,802

18
780
874

711

.

Footnotes at end of table.

978;556

648,835

373,962

. 481,820

1,168,692

2,244,760

591,134

512,784

1, 082,269

1,174,532

T o t a l securities eligible for e x c h a n g e




195,976

$14,353
146,113
1,275
13, 021
440
442
6,363
1,206
400
777
763
12, 635
138

845,751

518,973

599,870

1,356, 699

2,392,436

611,937

663,743

1,117,197

1,199, 502

6, 442, 250

3, 267, 326

6, 620,117

3, 260.303

2, 250, 086

6,156, 228

2,357. 648

32,465,082

4,086,154

2,046,253

6,961,223

3,867,196

7,976,816

6, 662,739

2,862, 023

6,819,971

3,474,845

41,746,220

Ul

o
SD

>
S3

o

9, 281,138

2,911, 622

w

S3

>

Ul

d
SD

Allotments of Treasury bonds issued during ihe fiscal year 1965, by Federal Reserve districts—Continued
[In thousands]
4 percent Treasury bonds of 1970 issued in exchange for-

Federal Reserve district

Boston
New York
PhUadelphia
Cleveland
Richmond
Atlanta
Chicago
St. Louis
Minneapolis
Kansas City
Dallas
San Francisco
Treasury
Total bond allotments
Securities eligible for exchange:
Exchanged in concurrent offerings
Total exchanged.
Not submitted for exchange.
Total securities eligible for exchange.

2H percent
Treasury
bonds of 1965
maturing
Feb. 15,1966«

ZH percent
31^^ percent
4 percent
ZH percent
ZH percent
ZH percent
Z'A percent
Treasury
Series A-1967
Treasury
Series B-1965 Series E-1965 Series B-1966 Series C-1966
Treasury
bonds of 1967 Total issued
Treasury
Treasury
Treasury
Treasury
bonds of 1966
notes maturmaturing
maturing
notes matm-- notes matur- notes matur- notes maturing Nov. 15, ing Nov. 15, ing Feb. 16, ing Feb. 15, May 15,1966 6 ing Aug. 15, Nov. 15,1967 5
1967 5
1966 6
1966«
1965 4
1965 5

$8,594
266, 311
9,522
39,992
11,807
29,779
129,360
30, 612
21,831
42, 275
16, 760
66, 666
1,122

$13, 684
189,837
36, 717
62,186
20, 693
32,658
140,170
25,956
24,349
23, 850
22,914
43,002
3,686

$21,416
51, 581
3,922
15,142
3,376
6,267
30,133
11, 640
9,376
9,012
8,733
3,035
2,141

$12,134
323, 310
27, 291
40, 222
13, 323
20, 542
80, 671
16, 683
' 8,662
17, 280
9,506
13, 696
4,534

$13, 850
221, 556
8,057
65, 029
6,390
3,098
37, 742
7,346
2,947
3,632
6,079
3,941
144

$5,233
148, 591
7,900
14,063
5,697
6,747
52,882
11,303
14,366
13, 658
8,959
9,767
383

$18,199
434, 633
16,048
69,953
25, 460
29,824
168,948
26, 274
15, 269
23,824
39, 939
30, 948
3,518

$26,126
208, 643
17, 711
36,196
24, 853
23,112
134, 751
27, 795
17, 575
29, 743
25, 738
124, 910
27, 733

$118,136
1,844, 461
127,168
342, 782
110, 688
151, 927
774, 567
157, 409
114, 264
163, 274
137, 628
296, 966
43, 261

673,631

639, 501

175, 672

687, 644

378,810

299, 549

902,827

723,886

697, 699

285, 041

477, 692

1, 064, 513

262, 990

601, 027

861,118

1, 337, 200
1, 616, 604

460, 713
1 099, 286
,

1, 065, 236
2,195, 067

1, 443, 323
2, 596, 595

562, 639
1, 687, 648

1. 503, 854
2, 929,360

1, 585, 004
2, 018, 540

9, 766,190
23,310, 447

3,975, 768

2,953,804

8, 559, 999

3, 260,303

4, 039, 918

2, 250, 087

3, 603, 644

Ul

5,384, 770

1,808, 321
2,167, 447

X

4, 381, 420

1,134, 690

fel

33, 076,637

Footnotes at end of table.




CX)

00

Allotments of Treasury bonds issued during ihe fiscal year 1965, by Federal Reserve districts—Continued
[In thousands]

,

SD

i H percent T r e a s u r y b o n d s of 1974 issued in exchange for— i
Z)ri p e r c e n t
ZH p e r c e n t
ZH percent
4 percent
3H^.percent
2H percent
ZH p e r c e n t
3H percent
Treasury
Series A-1967
Treasm-y
Treasury
Series B-1965 Series E-1965 Series B-1966 Series C-1966
b o n d s of 1967
Treasury
Treasury
b o n d s of 1966
Treasm-y
b o n d s of 1966
Treasury
Treasury
maturing
maturing
notes
T o t a l issued
notes
maturing
notes
notes
notes
maturing
maturing
N o v . 15,
maturing
maturing
M a y 15,
F e b . 15,
maturing
1967 6
1966 6
A u g . 15,
F e b . 15,
N o v . 15,
1965 6
N o v . 15,
F e b . 16,
1966 6
1967 6
1966 6
1966 6
1965 6

F e d e r a l Reserve district

Boston
NewYork
PhUadelpMa
Cleveland
Richmond
Atlanta
Chicago.
_
St. Louis
Minneapolis
Kansas City
Dallas
San F r a n c i s c o . . _
Treasury

__

_ _

Total b o n d aUotments
Securities eligible for exchange:
E x c h a n g e d in c o n c u r r e n t offerings
T o t a l exchanged .
N o t s u b m i t t e d for exchange
T o t a l securities eUgible for exchange

Footnotes at end of table.




$2, 070
271, 972
7,620
15,628
3,343
6,344
97,364
5,647
4,678
9,974
5,828
62, 752
242

$10, 225
165, 551
7,300
6,071
6,658
12, 470
128,411
2,960
16, 845
2,586
4,165
62, 300
200

$4,496
81, 211
4,161
3,989
1,988
1,562
20, 563
3,951
3,631
8,927
2,417
3,260
270

. $18, 483
236, 579
3,280
5,656
11,848
1,531
25, 727
3,447
4,391
6,749
5,607
11,444
18

$4,008
318,328
4,528
24, 066
1,727
2,207
11,161
2,268
5,085
6,045
1,643
12,843
6,050

$1,608
79,915
3,983
3,844
1,628
2,284
33,128
3,363
4,499
4,411
4,074
4,149
31

$18,374
152,894
16, 680
15,862
6,668
8,915
64, 228
7,845
10,952
9,904
22,105
126, 286
676

$22, 021
233, 252
24, 054
40, 757
21,874
24,911
114, 797
21, 317
28, 620
17, 999
21, 892
46, 397
121, 028

$81, 285
1, 539, 702
71, 606
115,873
55, 734
60, 224
495, 379
50, 798
78, 601
65, 596
67, 731
319, 431
128, 415

493, 462

415, 742

140,326

333, 760

399,959

146,917

461, 289

738, 919

921, 458

320,387

731,476

1, 043,364

415,622

• 1,042,565

846, 085

1,337, 200
1, 616, 604

460, 713
8, 099, 286

1, 065, 236
2,195, 067

. 1,443,323
2, 696, 595

562,539
1, 687,548

1, 503,854
2,929,360

1, 585, 004
2, 018, 540

9, 766,190
23,310,447

3, 976, 768

2,953, 804

8, 669,999

3, 260,303

4, 039,918

2, 250, 087

4,433, 214

3, 603, 644

33, 076, 637

O

Ul

\^

a

SD

teJ

>

S3
O

6, 635,816

1, 808, 321
2,167, 447

S3

3,130,374

1, 314, 859

o

»-3
S3
tei

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Ul
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SD
Kl

Allotments of Treasury bonds issued during the fiscal year 1965, by Federal Reserve districts—Continued
[In thousands]
4 K p e r c e n t T r e a s u r y b o n d s of 1987-92 issued in exchange for—i
3^^ p e r c e n t
4 percent
Zyi p e r c e n t
ZH p e r c e n t
ZH p e r c e n t
ZH p e r c e n t
ZH p e r c e n t
2 H percent
Series B-1965 Series E-196o Series B-1966 Series C-1966
Treasury
•Series A-1967
Treasury
Treasury
Treasury
Treasm-y
Treasury
b o n d s of 1965
Treasury
b o n d s of 1967
b o n d s of 1966
Treasm-y
notes r n a t u r notes m a t u r - n o t e s m a t u r - notes m a t u r - notes m a t u r maturing
maturing
maturing
ing A u g . 15,
ing F e b . 15,
ing N o v . 15,- ing N o v . 15, ing F e b . 15,
N o v . 15,
F e b . 15,
M a y 15,
1967 7
1966 7
1965 7
1965 7
1967 7
1966 7
1965 7
1966 7

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

Boston
N e w York .
Philadelphia...
C l e v e l a n d . . . --_
Richmond
Atlanta
.__
Chicago
_.

St. Louis

Minneapoli.s
Kansas City
DaUas
S a n Francisco
Treasury _ .

_- -

__. .
_ ..

..
__ ._ .^

-

...

_

_-.
.

.- _
_ _^_

-___

._ .
_

.

$4. 859
494, 999
6
2,568
10, 241
134
45, 846
1,779
340
589
170
79, 697

._

$2,316
245, 706
70
376
545
4,755
148
2,390
208
306
25,117
20

$2, 305
130, 412
204
158
5,300
340
2,231
38
890
60
1,630
1,139
18

$954
112,148
27
143
2,020
50
13, 295
268
50
121
3,445
9,511
1,900

$12, 783
568,726
102
185

$1,458
72, 663
46
29, 731

$16,106
53, 700
84
50, 799

287
39, 058
3,137
100
2,185
318
37,167
506

1,723
38
668
160
9,327
258
1

84
9,090
330
131
55
429
8,822
108

T o t a l issued

$11,459
62, 499
3,011
2,609
108
535
18, 819
2,119
1,113
1.233
9,497
8,657
540

$52, 240
1, 740, 853
3,550
86, 569
17, 669
1,975
134, 817
7,857
5,682
4,601
25,122
170, 368
3,093

641, 228

281, 957

144, 715

143, 932

664, 654

116, 073

139, 738

122,199

1, 055, 243

315, 998

921, 304

778,769

446, 466

1,364,116

1,462, 805

7, 511, 794

..

1, 808, 321
2,167, 447

1,337, 200
1, 616, 604

' 460,713
8, 099, 286

1, 065, 236
2,195, 067

1,443,323
2, 696, 595

562, 539
1, 687, 548

1, 503', 854
2, 929,360

1, 585, 004
2, 018, 540

9, 766,190
23,310,447

T o t a l securities eUgible for e x c h a n g e . . .

3, 975, 768

2, 953, 804

8, 559, 999

3, 260, 303

4, 039, 918

2, 250,087

4,433, 214

3, 603, 544

Ul

2, 254,396

1,167, 093

teJ

33, 076, 637

Total bond allotments
Securities eUgible for exchange:
E x c h a n g e d i n concm-rent offerings
T o t a l exchanged
N o t s u b m i t t e d for exchange

.

Footnotes a t end of table.




00

C»'
00-

Allotments of Treasury bonds'issued during thefiscal year 1965, by Federal Reserve districts—Continued
[In thousands]
414 percent Treasury bonds of 1974 issued
in exchange for—s
i H percent
ZH percent
Series A-1965 Series C-1965
Treasury
Treasury
notes matur- notes maturing May 15, ing May 15,
1965 9
1965 9

Federal Reserve district

Boston
NewYork
Philadelphia
Cleveland
Richmond...!
Atlanta
Chicago
St. Louis.
Mirmeapolis
Kansas City
DaUas...
San Francisco.
Treasury

.

.

.

.

.

.

.
....

.

Total bond allotments
Securities eligible for exchange:
Exchanged in concurrent offerings
Total exchanged ._
Not submitted for exchange

.

.
...

_ _
. . .

...
._

_
._ . . . . ._
..
. . . .

..

o

.

.

S3'

.

. . .

.
..

_

...

:

...

... ..
....

... ...

. . .
.

1 Advance refunding; all subscriptions were allotted in full.
2 41^ percent Treasury bonds of 1973 and 434 percent Treasury bonds of 1987-92 were
also offered in exchange for this security.
3 4 percent Treasury bonds of 1969 and 4K percent Treasury bonds of 1987-92 were
also offered in exchange for this security.
* 4 percent Treasury bonds of 1969 and i H percent Treasury bonds of 1973 were also
offered in exchange for this security.
5 i H percent Treasury bonds of 1974 and 4K percent Treasury bonds of 1987-92 were
also offered in exchange or this security.

. ... ..
. . .
.._
...

.

. . .
-. -.

$31,378
827, 761
15,493
62,127
7,177
21,833
154,315
24,770
20,352
12,313
14,978
113,112
23,687

$84,176
1, 203,072
23, 259
89,107
16, 814
41, 740
242, 776
39,476
33,837
34,733
26,700
201,601
25,494

O

1,329, 296

2,061,685

O

5,101, 587

5,904,242

1, 535,044
280,666

._

$52, 798
375,311
7,766
26,980
8,637
19,907
88,461
14,706
13,485
22,420
11,722
88,389
1,807
802,655

._

Total securities eligible for exchange...




Total
issued

732,389

.
._

- ..
.. ...

SD:

n

6,430,883
189, 234

7,965,927
469,900

1, 815, 710

6,620,117

8,435,827

6 4 percent Treasury bonds of 1970 and 4H percent Treasury bonds of 1987-92 were
also offered tn exchange for this security.
7 4 percent Treasury bonds of 1970 and i H percent Treasury bonds of 1974 were also
offered in exchange for this security.
8 All subscriptions were allotted in full.
9 4 percent Treasury notes of Series .AL-1966 were also offered in exchange for this
security.

te!
Ul

tei

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S3
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189

EXHIBITS
Treasury Bills Offered and Tenders Accepted
Exhibit 3.—Treasury bills

During the fiscal year 1965 there were 52 weelily issues each of 13-week and
26-week Treasury bills (the 13-week bills represent additional issues of biUs
with an original maturity of 26 weeks), 13 one-year issues, 4 issues of tax anticipation series and one issue of a strip of weekly bills consisting of additional
amounts of 10 series of outstanding bills. Four press releases inviting tenders,
which are representative of the four types of bill issues, are reproduced in
this exhibit as follows: strip of issues, July 20, 1964; tax anticipation series,
November 10, 1964; weekly issues, April 14, 1965;, and one-year issues, April 19,
1965. Also reproduced is the press release of April 19, 1965, which is representative of the releases announcing the acceptance of tenders for all types of
issues. Following the press releases is a summary table of data for each issue.
PRESS RELEASE OF JULY 20, 1964
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 July 29, 1964, will
be in the amounts, and will be in addition to the bills originally 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

Original issue dates 1964

AprU 16
AprU 23
April 30
May 7
May 14
May 21
May 28
June 4
June 11
June 18

._

.

Maturity dates 1964

October 16 _
—
October 22
October 29
November 5
November 12 . .
November 19
November 27 . .
December 3
December 10
December 17

Days from
July 29,1964,
to maturity

78
86
92
99
106
113
121
127
134
. 141

Amount
currently
outstanding
(in mUlions)
$2,102
901
900
900
900
900
900
905
901
901

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 applied $5,000 to the issue with
original date of April 16, 1964, and $5,000 to each of the additional weekly
issues through the issue with original date of June 18, 1964.)
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 daylight saving time, Friday, July 24, 1964.
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, vrith 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




190

19 65 REPORT OF THE SECRETARY OF THE TREASURY

banks and trust companies and from responsible and recognized dealers in
investment securities. Tenders from others must be accompanied by payment of
2 percent of the face amount of Treasury bills applied for, unless the tenders
are accompanied by an express guaranty of payment by an incorporated bank
or trust company.
Immediately after the closing hour, tenders will be opened at the Federal
Reserve banks and branches, following which public announcement will be made
by the Treasury Department of the amount and price range of accepted bids.
Those submitting tenders will be advised of the acceptance or rejection thereof.
The Secretary of the Treasury expressly reserves the right to accept or reject
any or all tenders, in whole or in part, and his action in any such respect shall
be final. 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 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 July 29, 1964.
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 Ibills 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. 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 July 29, 1964. (Federal Reserve banks will 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 10, 1964
The Treasury Department, by this public notice, invites tenders for $1,500,000,000, or thereabouts, of 210-day Treasury bills, to be issued on a discount
basis under competitive and noncompetitive bidding as hereinafter provided.
The bills of this series will be designated tax anticipation series, they will be
dated November 24, 1964, and they will mature June 22, 1965. They will be
accepted at face value in payment of income taxes due on June 15, 1965, and
to the extent they are not presented for this purpose the face amount of these
bills will be payable without interest at maturity. Taxpayers desiring to apply
these bills in payment of June 15, 1965, income taxes have the privilege of surrendering them to any Federal Reserve bank or branch or to the Oflace of the
Treasurer of the United States, Washington, not. more than 15 days before
June 15, 1965, and receiving receipts therefor showing the face amount of the




EXHIBITS

191

bills so surrendered. These receipts may be submitted in lieu of the bills on
or before June 15, 1965, to the District Director of Internal Revenue for the
District in which such taxes are payable. The bills will be issued in bearer
form only, and in denominations of $1,000, $5,000, $10,000, $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, Tuesday, November 17,
1964. 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 wiU 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.
All bidders are required to agree not to purchase or to sell, or to make any
agreements with respect to the purchase or sale or other disposition of any bills
of this issue at a specific rate or price, until after one-thirty p.m., eastern standard
time, Tuesday, November 17, 1964.
Immediately after the closing hour, tenders will be opened at the Federal
Reserve banks and branches, following which public announcement will be made
by the Treasury Department of the amount and price range of accepted bids.
Those submitting tenders will be advised of the acceptance or rejection thereof.
The Secretary of the Treasury expressly reserves the right to accept or reject any
or all tenders, in whole or in part, and his action in any such respect shall be
final. Subject to these reservations, noncompetitive tenders for $200,000 or less
without stated price from any one bidder will be accepted in full at the average
price (in three decimals) of accepted competitive bids. 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 November 24, 1964, provided, however, any qualified depositary will be permitted to make payment by
credit in its Treasury tax and loan account for not more than 50 percent of the
amount of Treasury bills allotted to it for itself and its customers up to any
amount for which it shall be qualified in excess of existing deposits when so
notified by the Federal Reserve bank of its district.
The income derived from Treasury bills, whether interest or gain from the
sale or other disposition of the bills, does not have any exemption, as such, and
loss from the sale or other disposition of Treasury bills does not have any special
treatment, as such, under the Internal Revenue Code of 1954. The bills are subject to estate, inheritance, gift, or other excise taxes, whether Federal or State,
but are exempt from all taxation now or hereafter imposed on the principal or
interest thereof by any State, or any of the possessions of the United States, or by
any local taxing authority. For purposes of taxation the amount of discount at
which Treasury bills are originally sold by the United States is considered to be
interest. Under sections 454(b) and 1221(5) of the Internal Revenue Code of
1954 the amount of discount at which bills issued hereunder are sold is not
considered to accrue until such bills are sold, redeemed, or otherwise disposed
of, and such bills are excluded from consideration as capital assets. Accordingly, the owner of Treasury bills (other than life insurance companies) issued
hereunder need include in his income tax return only the difference between the
price paid for such bills, whether on original issue or on subsequent purchase, and
the amount actually received either upon sale or redemption at maturity during
the taxable year for which the return is made, as ordinary gain or loss.
Treasury Department Circular No. 418 (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.




192

19 65 REPORT OF THE SECRETARY OF THE TREASURY
PRESS RELEASE OF APRIL 14, 1965

The Treasury Department, by this public notice, invites tenders for two series
of Treasury bills to the aggregate amount of $2,200,000,000, or thereabouts, for
cash and in exchange for Treasury bills maturing April 22,1965, in the amount of
$2,201,051,000, as follows:
91-day bills (to maturity date) to be issued April 22, 1965, in the amount of
$1,200,000,000, or thereabouts, representing an additional amount of bills dated
January 21, 1965, and to mature July 22,1965, originally issued in the amount of
$1,001,051,000, the additional and original bills to be freely interchangeable.
182-day bills, for $1,000,000,000, or thereabouts, to be dated April 22, 1965,
and to mature October 21, 1965.
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 standard time, IMonday, April 19, 1965.
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 ih part, and his action in any such respect shall
be final. Subject to these reservations noncompetitive tenders for each issue for
$200,000 or less without stated price from any one bidder will be accepted in full
at the average price (in three decimals) of accepted competitive bids for the
respective issues. Settlement for accepted tenders in accordance with the bids
must be made or completed at the Federal Reserve banks on April 22, 1965, in
cash or other immediately available funds or in a like face amount of Treasury
bills maturing April 22, 1965. 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 Intemal
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 otherVTise 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




EXHIBITS

193

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 APRIL 19, 1965
The Treasury Department, by this public notice, invites tenders for $1,000,000,000, or thereabouts, of 365-day Treasury bills, for cash and in exchange for
Treasury bill's maturing April 30, 1965, in the amount of $1,001,439,000, to be
issued on a discount basis under competitive and noncompetitive bidding as
hereinafter provided. The bills of this series will be dated April 30, 1965, and
will mature April 30, 1966, 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 standard time, Friday, April 23, 1965.
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. Fraction's may not be used. (Notwithstanding
the fact that these iDills will run for 365 days, the discount rate will be computed
on a bank discount basis of 360 days, as is currentiy 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
banl?:ing institutions will not be permitted to submit tenders except for their
own account.' Tenders will be received without deposit from incorporated banks
and trust companies and from responsible and recognized dealers in investment
securities. Tenders from others must be accompanied by payment of 2 percent
of the face amount of Treasury bills applied for, unless the tenders are accompanied by an express guaranty of payment by an incorporated bank or trust
company.
Immediately after the closing hour, tenders will be opened at the Federal
Reserve banks and branches, following which public announcement will be made
by the Treasury Department of the amount and price range of accepted bids.
Those submitting tenders will be advised of the acceptance or rejection thereof.
The Secretary of the Treasury expressly reserves the right to accept or reject
any or all tenders, in whole or in part, and his action in any such respect shall
be final. Subject to these reservations, noncompetitive tenders for $200,000 or
less without stated price from any one bidder will be accepted in full at the
average price (in three decimals) of accepted competitive bids. Settlement
for accepted tenders in accordance with the bids must be made or completed
at the Federal Reserve bank on April 30', 1965, in cash or other immediately
available funds or in a like face amount of Treasury bills maturing April 30,
1965. 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
782-556-^66
13




194

19 65 REPORT OF THE SECRETARY OF THE TREASURY

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 APRIL 19, 1965
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
January 21, 1965, and the other series to be dated April 22, 1965, which were
offered on April 14, were opened at the Federal Reserve banks on April 19.
Tenders were invited for $1,200,000,000, or thereabouts, of 91-day bills and for
$1,000,000,000, or thereabouts, of 182-day bills. The details of the two series are
as follows:
91-day Treasury bills maturing 182-day Treasury bills maturing
Oct. 21, 1966
July 22, 1965.
Range of accepted competitive bids
Price
High....
Low
Average.

99. 006
99.001
99. 003

Approximate
equivalent
annual rate
3.93:
3.952% I
2 3.946%

Price
1 97.978
97.971
97.974

Approximate
equivalent
annual rate
4. 000%
4. 013%
2 4. 008%

1 Excepting 3 tenders totaling $1,534,000.
^
2 On a coupon issue of the same length and for the same amount invested, the return on these biUs would
provide yields of 4.04%, for the 91-day bills, and 4.15%, for the 182-day bills. 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 semiannual compounding if more than one coupon period is involved.
NOTE.—62 percent of the amount of 91'^day biUs bid for at the low price was accepted. 5 percent of the
amount of 182-day bills bid for at the low price was accepted.

Total tenders applied for and accepted by Federal Reserve districts
District
Boston
New York
Philadelphia..
Cleveland
Richmond
Atlanta
Chicago
St. Louis
MinneapolisKansas City..
DaUas
_..
San Francisco.
Total

AppUed for

Accepted

Applied for

$15,923,000
1,490,917,000
28, 232, 000
26,137,000
14,867, 000
41, 704, 000
291, 551, 000
63, 705,000
26, 667, 000
27, 707, 000
28,348,000
203,307,000

$16, 923, 000
739, 697, 000
15, 232, 000
26, 137, 000
14, 567, 000
32, 614, 000
136, 431, 000
44, 679, 000
19, 527, 000
26, 567,000
20, 968, 000
110, 071, 000

$25, 935, 000
1, 337,392, 000
16,436, 000
37,899, 000
4,056, 000
29,116, 000
267,813, 000
13, 446, 000
11, 474, 000
19,374, 000
23, 394, 000
135,009, 000

2, 248, 065, 000 1 1,201,413,000

1,921,344, 000

1 Includes $260,097,000 noncompetitive tenders accepted at the average price of 99.003.
2 Includes $108,127,000 noncompetitive tenders accepted at the average price of 97.974.




Accepted
$25, 935, 000
681, 792, 000
6,916, 000
23,149, 000
4, 066, 000
24,166, 000
112, 513, 000
11, 946, 000
9, 024, 000
16, 574,000
7,969, 000
77, 272, 000
21, 001,312,000

Summary of information perioAning to Treasury bills issued during the fiscal year 1965
[DoUar amounts tn thousands]
Maturity value

Prices and rates
Total bids accepted

Tenders accepted
Date of
issue

Date of
maturity

Days to
maturity 1

Total
applied
for

Total

On competitive
basis

On noncompetitive basis

For cash

Average
price per
In
exchange hundred

Competitive bids accepted

High
EquivaLow
lent
average
Price per Equiva- Price per Equivarate
(percent) hundred lent rate hundred lent rate
(percent)
(percent)

Amount
maturing
on issue
date of
new
offering

Regular Weekly
1964
July 2
2
9
9
16
16
23
23

3 29

Aug.

30
30
6
6
13
13
20
20
27
27

Oct.
Dec.
Oct.
Jan.
Oct.
Jan.
Oct.
Jan.
Oct.
Oct.
Oct.
Nov.
Nov.
Nov.
Nov.
Dec.
Dec.
Dec.
Oct.
Jan.
Nov.
Feb.
Nov.
Feb.
Nov.
Feb.
Nov.
Feb.

1,1964
91
31, 1964
182
8, 1964
91
7, 1965
182
15,1964
91
14,1965
182
22, 1964
91
182
21. 1965
15,1964
78
22,1964
85
29,1964
92
5,1964
99
12, 1964
106
113
19,1964
121
27,1964
3,1964
127
10, 1964
134
17, 1964
141
29,1964
91
28,1965
182
5,1964
91
4,1965
182
12.1964
91
11,1965
182
19,1964 ' 91
18,1965
182
27,1964
92
25,1965
182

Footnotes at end of table.




$1, 913, 700 $1, 200,167 $993, 055
1, 580, 620
900, 402
849, 295
2,178, 912 1, 201, 238
965, 167
1, 414, 326
900, 046
839, 956
2,122, 719 1, 201, 549. 878, 501
1, 409, 225
902, 495
810, 219
2, 069, 809 1, 200, 735
963, 315
1, 332, 877
899, 827
839, 486

)2,147, 330

1,000, 860

996, 830

4,030

1, 000, 860

2, 203, 740
1, 889, 232
2, 081, 381
1, 750,962
2, 092. 365
1,597,308
2, 070, 777
2, 040, 991
2, 049,191
1,962,121

1, 200, 736
901, 969
1, 200, 441
900, 616
1,196, 793
901.846
1, 200,177
901, 346
1, 201, 538
902, 006

987, 032
844, 449
966, 679
842, 322
937, 860
838,173
954, 040
838, 613
.980, 095
845, 876

213, 704
57, 520
233, 762
58, 294
267. 933
63,673
246,137
62,733
221, 443
56,130

993, 487
790, 410
1, 010, 563
788, 675
1,128, 930
848,664
931, 492
779, 063
967,300
789,900

207, 249
111, 569
189, 878
111, 941
66, 863
53,182
268, 685
122, 293
234, 238
112,106

99.121
98. 217
99.117
98. 208
99.128
98. 206
99.115
98.170

3.479
3.528
3.492
3.544
3.448
3.549
3.502
3.619

99.124
2 98. 220
3 99.121
2 98. 217
99.134
98. 216
99.128
2 98.182

3. 465
3.621
3.477
3.527
3.426
3.529
3.450
3.696

99.118
98. 214
99.115
98. 200
99.126
98.198
99.112
98.159

98.933

$207,112 $1, 036,198 $163, 969
807, 994
92, 408
51,107
236, 071 1, 029, 092 172,146
51, 455
60, 090
848, 591
323, 048 1,185, 099
16, 460
898, 097
92, 276
4,398
237, 420
928, 745
271, 990
787, 923
111, 904
60, 341

3.605

98.941

3.478

98.929

3.618

99.122
98.184
99.118
98.186
99.113
98.174
99.112
98.163
99.102
98.160

3.476
3.691
3.489
3.688
3.510
3.111
3.512
3.634
3.513
3.639

99.124
98.188
2 99.122
98.192
2 99.118
2 98.186
99.115
98.171
2 99.106
98.166

3. 466
3.584
3.473
3.676
3.489
3.588
3.601
3.618
3.498
3.628

99.119
98.182
99.116
98.184
99.111
98.170
99. Ill
98.161
99.100
98.168

3.485
3.696
3.497
3.692
3.617
3.620
3.617
3.638
3. 622
3.644

3.489 $1, 300, 660
800, 466
. 3. 533
3.501 1, 300, 692
800, 403
3.560
3.458 1, 200, 606
800, 444
3.564
3.613 1, 200, 078
800, 616
3.642

1, 201, 283
800, 267
1, 200, 271
900, 431
1, 200, 553
900, 881
1, 202, 081
900, 955
1,199, 984
901, 802

Summary of information pertaining to Treasury bills issued during the fiscal year 1965—Continued
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
maturity

D a y s to
maturity 1

Total
applied
for

.

Total
accepted

On competitive
basis

CD

On noncompetit i v e basis

F o r cash

In
exchange

Average
price p e r
hundred

Equivalent
average
rate
(percent)

C o m p e t i t i v e b i d s accepted
Low

High

-:

Amount
maturing
on issue
d a t e of
new
offering

Price per E q u i v a - P r i c e per E q u i v a h u n d r e d lent r a t e h u n d r e d l e n t r a t e
(percent)
(percent)

CO

o>
Oi
&3
O
SI
O

>^

Regular Weekly-- C o n t i n u e d
1964
Sept. 3
3
10
10
17
17
24
24
Oct.
1
1

Dec.
Mar.
Dec.
Mar.
Dec.
Mar.
Dec.
Mar.
Dec.
Apr.

3,1964
4,1965
10,1964
11, 1965
17.1964
18,1965
24,1964
25, 1965
31,1964
1,1965

91 $2,129, 431 $1, 200, 678
182 1,522,489
900, 287
91 2, 169. 481 1, 301, 783
182 1, 463, 946
900, 822
91 2; 082, 514 1, 301, 621
182 1, 474, 395
900, 020
91 2, 200, 319 1, 301, 980
182 1, 623. 973
900. 644
91 2, 085. 860 1, 300, 880
182 1. 450, 772
900, 333

$963, 450
836, 825
1, 064, 472
839, 589
1, 021, 542
825, 345
1, 055, 764
834, 934
1, 065, 802
828, 957

91
182
91
182
91
182
91
182
91
182
91
182
91
182
90
181
91
182

959, 909
822 994
937, 455
914, 536
949,134
917, 284
966, 494
931, 307
955. 661
928, 425
944, 803
912. 712
938', 565
923, 983
930, 350
• 931,676
962, 662
932, 635

228
462
311
233
079
675
216
710
078
376

$978, 370
784, 862
1, 220, 814
868, 644
1,162, 969
836, 192
1,139, 536
816, 010
1,140, 477
827,168

$222, 308
115, 425
80, 969
32,178
138, 652
63, 828
162, 444
84, 634
160, 403
73,165

99.112
98.165
99.112
98.155
99.105
98.133
99.105
98.133
99.101
98.124

3.512
3.629
3.514
3.649
3.541
3.693
3.542
3.692
3.555
3.711

99.115
98 171
99 117
2 98 162
99 114
98 140
99 108
98 136
99 106
98.134

3.501
3.618
3.493
3.636
3.505
3.679
3.529
3.687
3. 537
3.691

99.110
98.161
99.109
98. 149
99.103
98.129
99.103
98.131
99.100
98.120

3.521 $1, 201, 964
902, 448
3.638
1, 201,130
3.525
900, 265
3.661
1, 200, 661
3.549
898, 804
3.701
1, 201, 309
3.549
900, 302
3.697
1, 200,167
3.560
901, 457
3.719

240, 383
78, 182
274,110
89, 947
253, 783
83, 485
233, 681
71, 447
244, 916
71. 535
255. 138
87, 605
262, 476
76, 840
219, 846
68, 426
237, 562
67, 416

1, 041, 049
828, 046
1,197, 760
998, 864
1, 009, 532
886. 597
985, 055
900, 052
995, 324
886: 613
1, 050, 278
926, 016
970, 821
867, 498
982, 364
877. 363
1, 007; 569
867, 826

159, 243
73,130
13, 805
5, 619
193. 385
114,172
215,120
102, 702
205, 253
113, 347
149, 653
74, 301
230, 220
133, 325
217, 832
122, 739
192, 655
132, 225

99. 094
98.107
99. 095
98.116
99. 092
98.110
99. 098
98.117
99.100
98.120
99. 097
98.108
99. 090
98. 093
99. 061
98. 018
99. 022
97.962

3.583
3.744
3.580
3.726
3.592
3. 738
3.568
3.724
3.561
3.718
3.574
3.742
3.600
3.772
3.757
3.942
3.868
4.030

2 99. 098
2 98. 110
2 99. 098
2 98.118
99. 094
98.118
99.101
98.121
2 99.105
98. 124
2 99. 100
2 98.115
2 99. 093
2 98. 098
2 99. 068
2 98. 040
2 99. 030
2 97. 973

3.568
3.738
3.568
3.723
3.584
3. 723
3.556
3.717
3.541
3.711
3.560
3.729
3.588
3.762
3.728
3.898
3.837
4.009

99. 091
98.105
99. 093
98.115
99. 091
98.106
99. 097
98.116
99. 098
98.116
99. 095
98. 106
99. 089
98.090
99. 054
98. 000
99. 016
97. 957

3. 596
3.748
3.588
3. 729
3.596
3.746
3.572
3.727
3.568
3.727
3.580
3.746
3. 604
3.778
3.784
3.978
3.893
4.041

$237,
63,
237,
61,
280,
74,
246,
65,
235,
71,

W
Ul

o

>
Pi

8
8
15
15
22
22
29
29
Nov. 5
5
12
12
19
19
27
27
Dec. 3
FRASER 3

1965
Jan.
7
Apr. 8
J a n . 14
A p r . 15
J a n . 21
A p r . 22
J a n . 28
A p r . 29
Feb. 4
May 6
F e b . 11
M a y 13
F e b . 18
M a y 20
F e b . 25
M a y 27
Mar. 4
June 3

Digitized for


1, 912, 812
1, 634, 687
2, 163, 822
2, 095, 533
2,170, 090
1, 725. 361
2, 204, 764
1, 902, 159
2,106, 301
1, 650,175
2, 029,151
1, 742, 422
2, 158. 178
1, 812; 350
2, 638. 731
1. 937, 757
2, 042. 564
1, 835, 321

1, 200, 292
901,176
1,211,565
1, 004, 483
1, 202, 917
1, 000, 769
1, 200,175
1, 002, 754
1, 200, 577
999, 960
1, 199, 941
1, 000, 317
1, 201, 041
1, 000, 823
1, 200, 196
1, 000, 102
1, 200, 224
1, 000, 051

1, 201, 238
900, 029
1, 201, 549
4 900, 050
1, 200, 735
4 900, 793
1, 20.0, 736
4 900, 482
1, 200, 441
4 900, 393
1, 195, 793
4 900, 452
1, 200, 177
4 900, 490
1, 201, 538
4 900, 091
1, 200, 678
4 904, 729

o
W
s)
>
ZP

d

10
10
17
17
24
24
31
31

11
10
18
17
25
24
1
1

91
182
91
182
91
182
91
182

1, 829, 067
1, 672, 878
2, 324, 666
2, 097, 454
2, 109, 531
2,189, Oil
2, 264, 222
2, 038, 711

Apr. 8
July 8
Apr. 15
July 15
Apr. 22
July 22
Apr. 29
July 29
May 6
Aug.. 5
M a y 13
Aug. 12
M a y 20
Aug. 19
M a y 27
Aug. 26
June 3
Sept. 2
June 10
Sept. 9
June 17
Sept. 16
June 24
Sept. 23
July 1
Sept. 30
July 8
Oct. 7
July 15
Oct. 14
July 22
Oct. 21
July 29
Oct. 28

91
182
91
182
91
182
91
182
91
182
.91
182
91
182
91
182
91
182
91
182

1, 986, 695
2, 020, 324
2, 171, 205
'1,811,184
2, 099, 469
2, 475, 013
2,184, 985
2, 465, 324
2, 226,134
2, 469, 650
2, 241, 693
2, 448, 440
2, 073, 818
2, 161, 767
2, 327, 347
2, 503, 559
2,358,807
2, 303, 530
2,151,455
1,880,194
2, 248,707
2,331,424
2, 367,953
2, 023,932
2, 061,246
1,937, 578
2, 280, 698
2,188, 024
2,335,947
1,832,482
2,248,216
1, 921,554
2, 267,394
2,210,644

Mar.
June
Mar.
June
Mar.
June
Apr.
July

1965
Jan.

7

7
14
14
21
21
28
• 28
Feb. 4

4
11
11
18
18
25
25
Mar.

4

4
11
11
18
18
25
25

'

91

182
91
182
Apr. 1
91
182
1
91
8
182
8
91
15
182
15
91
22
182
22
91
29
182
29
Footnotes at end of table.




1, 301, 017 1, 042, 542
909, 089
1, 000, 578
1, 300, 840 1, 024, 449
886, 983
1, 000, 604
993, 064
1, 208, 096
904, 322
1, 004, 907
1,199, 854
967,158
904, 385
1, 001, 977

258, 475
91, 489
276, 391
113, 621
215, 032
100, 585
232, 696
97, 592

1, 285, 897
995, 581
1, 282, 866
993, 151
1, 015, 884
870,107
998,184
878, 464

15,120
4,997
17, 974
7,453
192, 212
134, 800
201, 670
123, 513

99. 036
98. 006
99. 023
97. 996
99.022
97.998
99. 023
97. 999

3.815
3.944
3.864
3.965
3.868
3.960
3.866
3.957

99. 052
98. 020
2 99. 029
98. 004
2 99. 025
98. 002
99. 026
98. 004

3.750
3.916
3.841
3.948
3.857
3.952
3.853
3.948

99. 021
97.992
99.019
97.991
99. 020
97. 996
99. 021
97. 998

3.873
3.972
3.881
3.974
3.877
3.964
3.873
3.960

1, 301, 783
4 900, 518
1, 301, 621
4 901, 049
1, 301, 980
900, 065
1, 300, 880
900, 402

1,101, 840
1, 003, 362
1, 099, 634
1. 001, 067
i; 200, 282
1, 001, 051
1, 202, 865
1, 003, 233
1, 202, 517
1, 003, 580
1, 200, 357
1, 001, 236
1, 200, 071
1, 000, 358
1, 200, 917
1, 003, 386
1, 200,197
1, 000, 299
1, 200, 754
1, 000,355
1, 200, 993
1, 002, 526
1,202,754
1, 000,457
1, 200,166
1, 002, 063
1, 201,819
1, 001, 261
1,200, 668
1, 000, 699
1, 201, 564
1, 001, 522
1, 201, 098
1, 003,275

239, 993
86, 651
312, 380
126, 213
260, 272
98, 055
225, 368
98, 228
230, 452
89, 663
252, 352
92, 424
253, 685
93. 158
206; 803
76,140
238,204
94,770
255,859
99, 541
276, 661
102, 656
238,690
91, 607
230,712
102,810
242,938
96,857
298, 320
124,443
260, 248
108, 337
234, 626
92, 606

888, 465
917,910
917, 948
905, 987
1, 000, 459
877,931
989, 713
871,198
960, 445
869, 929
1, 020, 728
868, 314
1,187, 733
998, 511
966, 571
860. 395
971,663
864,834
1, 016,370
924,479
1,012,872
948,352
1, 036, 334
859, 616
1, 001,390
857, 619
1,010,487
908,731
1, 029, 246
914,277
982,331
846, 264
995, 602
850, 075

213. 375
85, 452
181, 686
95. 080
199; 823
123,120
213,152
132, 035
242, 072
133, 651
179, 629
132,922
12, 338
1,847
234. 346
142, 991
228,534
135,465
184,384
75,876
188,121
54,174
166,420
140,841
198,776
144,444
191, 332
92, 530
171,422
86,422
219,233
155, 258
205, 496
163,200

99. 032
98. 015
99. 036
98. 007
99. 034
97. 998
99. 027
98.005
99.017
97. 994
99.013
97.984
99.005
97. 970
98. 992
97. 956
98.993
97.959
99. 002
97.977
99. 010
97.983
99. 009
97.986
99.009
97.981
99.004
97.981
99. 005
97.983
99.003
97.974
99. 010
97.989

3.829
3.927
3.814
3.942
3.821
3.960
3.848
3.946
3.888
3.968
3.903
3.987
3.936
4.015
3.989
4.043
3.982
4.037
3.948
4.001
3.917
3.990
3.922
3.984
3.921
3.993
3.942
3.993
3.937
3.991
3.946
4.008
3.916
3.978

99. 036
98. 020
99. 042
98. 015
99. 038
98. 000
99. 031
98. 010
2 99. 023
97. 998
2 99. 016
97. 990
99. 010
97. 981
98. 995
2 97.961
2 98.995
97.961
99. 006
97.984
99. 014
97. 985
99. 010
2 97.989
99. 014
97.988
99. 007
97.984
99.007
97.989
99. 006
2 97.978
99.014
97.993

3.814
3.916
3.790
3.926
3.806
3.956
3.833
3.936
3.866
3.960
3. 893
3.976
3.916
3.994
3.976
4.033
3.976
4.033
3.932
3.988
3.901
3.986
3.916
3.978
3.901
3.980
3.928
3.988
3.928
3.978
3.932
4.000
3.901
3.970

99. 031
98. 014
99.034
98. 002
99. 031
97. 997
99. 025
98. 004
99. 016
97.992
99. Oil
97.983
99. 001
97. 968
98.990
97. 955
98.992
97.958
99. 000
97.973
99.007
97.982
99. 007
97. 983
99. 006
97.978
99.002
97. 980
99. 003
97.979
99. 001
• 97.971
99. 009
97.988

3.833
3.928
3. 822
3.952
3.833
3.962
3. 857
3.948
3.893
3.972
3.913
3.990
3.952
4.019
3.996
4.045
3.988
4.039
3.956
4.009
3.928
3.992
3.928
3.990
3.932
4.000
3.948
3.996
3.944
3.998
3.952
4.013
3.920
3.980

1, 200, 292
900, 046
1, 211, 565
902, 495
1; 202, 917
899, 827
1, 200,175
901, 969
1, 200, 577
900, 616
1, 199, 941
901, 846
1, 201, 041
901, 346
1, 200,196
902, 006
1, 200, 224
900, 287
1,301, 017
900,822
1,300,840
900, 020
1, 208, 096
900, 644
1,199,854
900,333
1,101,840
901,176
1, 099, 634
1,004,483
1,200,282
1, 000,769
1,202,865
1, 002,. 754

861, 847
916, 711
787,254
874, 854
940, 010
902, 996
977, 497
905, 005
972, 065
913, 917
948, 005
908, 812
946, 386
907, 200
994,114
927, 246
961,993
905, 529
944,895
900,814
924,332
899,870
964, 064
908,850
969,454
899, 253
958,881
904,404
902,348
876, 256
941,316
893,185
966,472
910, 669

CD

Summary of information pertaining to Treasury bills issued during the fiscal year 1965—Continued

CD
00

Prices a n d r a t e s

M a t u r i t y value
T e n d e r s acceptedD a t e of
issue

D a t e of
maturity

D a y s to
maturity 1

Total
appUed
for

Total
accepted

Total bids accepted

C o m p e t i t i v e b i d s accepted
High

Low

O n noncompetit i v e basis

EquivaAverage
lent
price pe?- average
hundred
rate
(percent)

Price per E q u i v a hundred lent rate
(percent)

Price per E q u i v a hundred lent rate
(percent)

O n competitive
basis

For cash

In
exchange

Amount
maturing
o n issue
d a t e of
new
offering

1965
6
6
13
13
20
20
27
27
June 3
3
10
10
17
17
24
24

o

W

1965
Aug. 6
Nov. 4
Aug. 12
Nov. 12
Aug. 19
Nov. 18
Aug. 26
Nov. 26
Sept. 2
Dec. 2
Sept. 9
Dec. 9
Sept. 16
Dec. 16
Sept. 23
Dec. 23

P?

o

Regular Weekly—Continued

May

CO

91
182
91
183
91
182
91
183
91
182
91
182
91
182
91
182

073,412 $1,200, 536
958,383 1, 000,414
246,167 1,200,969
871,725 1, 000,857
952,704 1,200,891
041,003 1, 001,778
090,782 1,199, 660
001,200 1, 000,785
206,827 1,202,352
992,142 1, 001,177
932,400 1,200,254
846,257 1, 000,294
039,887 1,200,670
302,842 1,001,469
221,341 1,205,281
340,802 1, 001, 519

$973, 517
909, 037
962,949
902,358
963,164
898,860
984,208
916, 036
991,672
917, 560
954,506
896,138
954,906
899,027
970,213
891,448

$227, 019
91,377
238, 0^0
98,499
237,727
102,918
215,452
84,749
210, 680
83,617
245,748
104,156
245,764
102,442
235, 068
110,071

$971,271
838,522
977,871
866,647
1,013,276
896,771
983,121
857, 411
975, 008
884,850
1, 024, 630
896,155
1, 015, 367
886, 590
1, 001,183
914,899

$229,265
161,892
223,098
134, 210
187,616
105, 007
216, 539
143, 374
227,344
116,327
175, 624
104,139
185,303
114,879
204,098
86,620

99. 014
98.003
99. 016
97.992
99. 015
98.000
99. 017
97.995
99. 022
98. 016
99.044
98.047
99.040
98.042
99.042
98.063

3.901
3.950
3.893
3.950
3.897
3.955
3.889
3.944
3.870
3.924
3.781
3.863
3.799
3.873
3.789
3.831

99. 016
98.004
99. 020
2 97.998
99. 018
98.003
99. 020
2 97.998.
99. 026
98.023
99; 049
98. 054
99.043
98.045
99.047
98.068

3.893
3.948
3.877
3.938
3.885
3.950
3.877
3.938
3.853
3.911
3.762
3.849
3.786
3.867
3.770
3.822

99. 012
98.001
99. 015
97. 990
99. 012
97.998
99. 015
97.994
99. 020
98. 013
99.038
98.044
99.038
98.041
99. 042
98.062

3.909 $1, 202,517
999,960
3.954
3.897 1, 200,357
3.954 1, 000, 317
3.909 1, 200, 071
3.960 1, 000,823
3.897 1, 200, 917
3.946 1, 000,102
3.877 1, 200,197
3.930 1, 000, 051
3.806 1, 200,764
3.869 1, 000, 678
3.806 1, 200,993
3.875 1, 000, 604
3.790 1,202,764
3.833 1,004,907

Ul

o
;>
Kl

o
>^
W

• Tax Anticipation
1964
Sept. 2
O c t . 26
N o v . 24

>

1965
M a r . 22
M a r . 22
J u n e 22

Ul
201 $2,234,994 $1, 000,965
147 3,188,232 1, 503,195
210 3,703,119
1, 504,489

$971,771
1,299,263.
1,298,870

$29,194 $1,000, 965
203,932 1, 503,195
205, 619 1,504,489

98.001
98. 564
97.877

3.580
3. 518
3.639

2 98.012
98.575
2 97.895

3.561
3.490
3.609

97.998
98.559
97.874

3.586
3.529
3.645

155

1, 617,200

241,147

98.402

3.711

2 98.411

3.691

98.399

3.718

1965
J a n . 18
 J u n e 22


4,044,947

1,758,347

1,758,347

One-Year
1964
July 7
Aug. 4
Aug. 31
Sept. 30
Oct. 31
Nov. 30
Dec. 31

1965
Jan.
Feb.
Mar.
Apr.
May
June

31
28
31
30
31
30

1965
June 30
July 31
Aug. 31
Sept. 30
Oct. 31
Nov. 30
Dec. 31

358 $2,393,266 $1, 001, 222
361 2, 080, 052 1, 000,462
365 1,940, 279 1, 000,439
365 1,849, 028 1, 000, 539
365 2,349,793
999,950
365 2,496,632 1, 000, 542
365 2,310,836 1, 002,951

$979,820
979,275
960, 205
947, 691
954,691
948,419
957,341

$21,402 $1, 001,222
21,187 1, 000,462
973,989
40, 234
982,146
52,848
896,159
45, 259
937,414
52,123
976, 694
45, 610

$26,450
18,393
103,791
63,128
26, 257

96. 329
96.346
96. 260
96.174
96.158
95.876
95.972

3.691
3.644
3. 688
3.773
3.790
4.068
3.972

96. 336
96. 362
96. 270
96.189
96.168
2 95.944
2 95.987

3.684
3.628
3.679
3.759
3.780
4.000
3.958

96. 327
96.339
96. 252
96.169
96.154
95.855
95.965

3.694
3.651
3.697 $1, 001,143
3.779 1, 001,960
3.793 1, 000,273
4.088 1, 004,801
3.980 1, 000,309

102,754
36, 599
49,318
120,884
100,282
62,101

96. 000
95.882
95. 957
95.949
95.991
96.140

3.945
4.062
3.987
3.996
3.954
3.807

2 96.007
2 95.904
2 95.973
95.951
2 95.994
2 96.157 .

3.938
4.040
3.972
3.994
3.951
3.790

95.998
95.873
95. 950
95.945
95.991
96.126

3.947
4.070
3.995
3.999
3.954
3.821

1966
Jan.
Feb.
Mar.
Apr.
May
June

31
28
31
30
31
30

365
365
365
365
365
365

2,907,878
2, 023,196
2, 241,262
2, 573,194
2,761,993
2,190,847

1, 000,387
1, 000,705
1, 000,304
1, 001,162
1, 000,886
1, 000, 647

947,866
965, 677
946, 618
964,100
969,510
953, 065

52, 521
35, 028
53, 686
37,062
31,376
47,582

897,633
964,106
950,986
880,278
900, 604
938,546

1 The 13-week bills represent additional issues of bills with an original maturity of
26 weeks, except that the issue of October 1 was an additional issue of biUs with an original maturity of one year.
2 Relatively smaU 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 the low prices shown) which would
make it misrepresentatlve.
3 An additional $100 miUion each of 10 series of weekly bills issued in a strip for cash
(see press release dated July 20, 1964, in this exhibit).
4 In addition, $100,086,000 of the strip of biUs issued July 29,1964, matured.
NOTE.—The usual timing with respect to weekly issues of Treasury bills 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 announcing acceptance of tenders,
2 days before date of issue.




1, 000,393
1, 000, 520
1,001,464
1, 001,439
1, 000,141
1, 001,222

Figures are fiunal and may differ from those shown in the press release announcing
prehminary results.
Noncompetitive tenders (without stated price) from any one bidder were accepted
in full at the average price of accepted competitive bids for each issue up to the foUowing
amounts: $100,000 for the 26-week issues of July 2 through Dec. 10,1964, and the strip
of bills; $200,000 for the 13-week issues, 1-year issues, 26-week issues of Dec. 17, 1964,
through June 24,1965, and tax anticipation series of Sept. 2, Oct. 26, and Nov. 24,1964;
and $300,000 for the tax anticipation series of Jan. 18,1965.
AU equivalerit rates of discount are on a bank-discount basis.
QuaUfled depositaries were permitted to make payment by credit in Treasury tax
and loan accounts for not more than 50 percent of the amount of the tax anticipation
series of Oct. 26, Nov. 24,1964, and Jan. 18,1965, 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.

I—l

w
Ul

ID
. CD

200

19 65 REPORT OF THE SECRETARY OF THE TREASURY
G u a r a n t e e d D e b e n t u r e s Called

Exhibit 4.—Calls for p a r t i a l redemption, before m a t u r i t y , of i n s u r a n c e fund
and home improvement account d e b e n t u r e s
During the fiscal year 1965, there were 32 calls for p a r t i a l redemption, before
m a t u r i t y , of insurance fund debentures, and one call of home improvement account debentures, 22 dated September 23, 1964, and 11 dated March 25, 1965.
The notices of call were published in t h e F e d e r a l Register of September 29, 1964,
and March 31, 1965. The notice covering t h e call of t h e 3 % percent servicemen's mortgage insurance fund debentures Series EE, is shown in this exhibit.
Since t h e other notices of call a r e similar to this notice, they have been omitted,
but the essential details are summarized in the table following the notice of call.
NOTICE O F CALL.

F E D E R A L R E G I S T E R O F MARCH 31, 1965

To Holders of 3 % Percent Servicemen's Mortgage I n s u r a n c e F u n d Debentures,
Series E E :
NOTICE OF CALL FOR P A R T I A L REDEMPTION. B E F O R E MATURITY, OF 3 %
PERCENT
SERVICEMEN'S
MORTGAGE
INSURANCE
FUND
DEBEiNTURES,
SERIES EE

P u r s u a n t to t h e 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 t h a t Servicemen's Mortgage Insurance F u n d Debentures, Series E E , bearing interest a t 3 % percent as designated below a r e hereby called for redemption,
a t p a r and accrued interest, on J u l y 1, 1965, on which date interest on such
debentures shall c e a s e :
3 % Percent Servicemen's Mortgage I n s u r a n c e F u n d Debentures, Series E E

Denomination
$50
100

-

500
1,000
5,000
10,000

-.

Range of inclusive serial
n u m b e r s w i t h i n which called
debentures fall
3, 397 to 3, 912
/ 25,344 to 25,347 and
I 25, 937 t o 30, 201
6, 247 to 7, 228
/ 19, 918 t o 22, 822 a n d
1 22 918
3' 442 to 3, 911
_
— 3, 839 to 4, 288

Although t h e above inclusive serial numbers include Series E E debentures
bearing other rates, only those bearing interest a t the r a t e of 3 % percent, listed
above, a r e included in t h i s call, together with certain other debentures bearing
t h e same r a t e and registered in t h e n a m e of t h e F e d e r a l National Mortgage
Association.
No t r a n s f e r s or denominational exchanges in debentures covered by t h e foregoing call will be made on the books maintained by t h e T r e a s u r y D e p a r t m e n t on
or after April 1,1965: This does not affect the r i g h t of the holder of a debenture
to sell and assign t h e debenture on or after April 1, 1965, and provision will be
made for t h e payment of final interest due on July 1, 1965, with t h e principal
thereof to t h e a c t u a l owner, as shown by t h e assignments thereon.
T h e Commissioner of t h e F e d e r a l Housing Administration hereby offers to
purchase any debentures included in this call a t any time from April 1, 1965, to
J u n e 30, 1965, inclusive, a t p a r and accrued in'terest, to date of purchase.
Instructions for t h e presentation and surrender of debentures for redemption
on or after J u l y 1, 1965, or for purchase prior t o t h a t date will be given by t h e
Secretary of t h e Treasury.
P. N. BROWNSTEIN,

i
A P P R O V E D : Ma/txh 26, 1965.
J O H N K . CARLOCK,

Fiscal Assistant Secretary of the Treasury.




F e d e r a l Housing Commissioner.

Summary of information contained in the notices of call for partial redemption of insurance fund debentures during the fiscal year 1965
ZH percent mutual mortgage insurance fund debentures, Series AA
Notice of call..
Redemption date
Serial numbers called by denominations:
$50
'..

ZH percent mutual mortgage insurance fmid debentures, Series AA

4 percent mutual mortgage insurance fund debentures, Series AA

i H percent mutual mortgage insurance fund debentures, Series AA

i'A percent mutual mortgage insurance fund debentures, Series AA

Mar. 25, 1965.
July 1, 1965..

M a r . 25, 1965..
July 1, 1 9 6 5 —

Mar.25, 1965
July 1,1965

Sept. 23, 1964..
Jan. 1, 1965..-.

M a r . 25, 1965.
July 1, 1965.

13941-21185.-.

15324,16389-70643, 7065270653.
65349-500571, 500760- .
500768, 500791-500794,501606, 502033-502034,
502040-502044.

24779, 26055-70641 —

55461-70640, 70852, 70934,
70988.
379512-500581, 501034501038, 501904-501906,
502032, 503040-503041.

17238", 17382-124962,125020,
125023, 125145-125146,
125328
54075-380819, 380970380973, 380978-380981,
381008, 381396-381399.

26256, 27764, 30786, 32494,
33372-124967.

25399-55457, 55534, 5571855721.
148308-148571, 148603379511, 379752, 379966379976, 380392, 380418,
380805-380807, 380843780846, 380881-380883.
38876-95096, 95242, 95329,
95337, 95430.

100

63646-115199..

500—.

16912-30601..

1,000..

52497-99946..

5,000...
10,000.
Final date for transfers or denominational exchanges (but
not for sale or assignment).
Redemption on call date,
amount of interest per $1,000
paid in full with principal.
Presentation for purchase prior
to call date:
Period
Amount of accrued interest
per $1,000 per day paid
with principal.




104019-500566, 501605

90524, 101112, 110300380817, 381011.

95098-1249070,125081,125219.
293380-380815, 381009381010, 381617-381621381766, 381768, 382389,
382570-382571.

15064-22960, 23325, 23328,
23337
9977, 10023-14822

15534-74225, 74257, 74259,
74421.
10032-62739

25196, 25545, 26325-74224,
74362.
13363, 13962, 15183-62721..

127550-293376, 293547,
293835-293841, 293909,
294468-294469, 294484,
294791-294792, 294840294842.
27589-58387, 58483, 5850658507, 58569.
18486-46958

A p r . l , 1965

Apr. 1, 1965

Apr. 1, 1965.

Oct. 1, 1964

46962-62741, 62873, 62927,
63043, 63232. .
Apr. 1, 1965.

$19.375

$20.00

$20.625

$20,625.

Apr. 1-July 1, 1965
$0.107044199 from Jan. 1,
1965, to date of pur-'
chase.

Apr. 1-July 1, 1965
$0.110497238 from Jan. 1,
1965, to date of purchase.

Oct. 1-Dec. 31, 1964
$0.112092 from July 1,1964,
to.date of purchase.'

Apr. l-.Julv 1, 1965.
$0.113950276 from Jan. 1,
1965, to date of purchase.

$18.75

..

Apr. 1-July 1, 1965
$0.103591160 from Jan. 1,
1965, to date of purchase.

---..

Ul

58398-74222, 74268.

O

Summary of information contained in ihe notices of call for partial redemption of insurance fund debentures during thefiscal year 1965—Con.
3J^, 4, and i}i percent housing
insurance fund debentures.
Series BB
Notice of call
Redemption date
Serial numbers called by denominations:
$50.
100

...

Z]/i percent housing insurance
fund debentures, Series BB

Sept. 23, 1964
Jan. 1, 1966
480-1580
1968-12853
639-3393
2317-11837
647-1586
5498-22170
Oct. 1, 1964..

Mar. 25, 1965..
July 1, 1965
1591-1659, 1667...
12932-13719-...........
3475-3644, 3646
11881-12559
1589-1729

.

4 percent housing insurance
fund debentures, Series BB

i}/8 percent housing insurance
fund debentures, Series BB
CO
Oi

Mar. 26, 1965.
July 1, 1965.

Mar. 25, 1965
July 1, 1965
1581-1657

5,000
10,000

Final date for transfers or denominational exchanges (but not for sale or assignment).
Redemption on call date, amount of interest
per $1,000 paid in full with principal.
Presentation for purchase prior to caU date:
Period
_
•
Amount of accrued interest per $1,000 per
day paid with principal.

..--:.-..-.

1582-1663.
12865-13718.
3396-3645, 3659.
11839-12558.
1604-1744.

22394-28190

12868-13681.
3395-3638,:
11840-12535
1603-1743
22171-28630

Apr. 1, 1965.

Apr. 1, 1965-

$19,375 for 3 ^ % , $20.00 for 4%,
.$20,625 for 4)^%.

$19.375

$20.00

Oct. 1, 1964-Jan. 1, 1965
$0.105299 for 3 ^ % , $0.108696 for
4%, $0.112092 for 43^%, from
July 1, 1964, to date of purchase.

Apr. 1-July 1, 1965...
$0.107044199 from Jan. 1, 1965,
to date of purchase.

Apr. 1-July 1, 1965...
$0.110497238 from Jan. 1, 1965,
to date of purchase.

Z% p e r c e n t section 220 housing
i n s u r a n c e fund d e b e n t u r e s .
Series C C

500...............--.:--....:..:.
1,000
:

bO

o
to

3J^ percent section 220 h o u s i n g
insurance fund d e b e n t u r e s ,
Series C C

i}/i p e r c e n t section 220 housing
i n s u r a n c e fmid d e b e n t u r e s ,
Series C C

43/g p e r c e n t sectioii 220 housing
insurance fund d e b e n t u r e s ,
Series C C

Mar. 25, 1965
J u l y 1, 1965

Mar. 25, 1965
J u l y 1, 1965.

Sept. 23, 1964..
J a n . 1, 1965

Mar. 25, 1965.
J u l y 1, 1965.

217-228.
67
186-192

51.
233-237.
71.
196-197.
6751.
A p r . 1, 1965.

-

pi
•T)

O
Pi

22377-28619.
Apr. 1, 1965.
-..

O

$20,625.

W

Apr. 1-July 1, 1965.
$0.113950276 from Jan. 1, 1965,
to date of purchase.

Ul
Q

Pi

>

Notice 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 :
$50
100
500
1,000
10,000
—
.....
F i n a l d a t e for transfers or d e n o m i n a t i o n a l exchanges ( b u t n o t for sale or a s s i g n m e n t ) .
R e d e m p t i o n on call d a t e , a m o u n t of interest
per $1,000 p a i d in fuU w i t h principal.
P r e s e n t a t i o n for p u r c h a s e prior to call d a t e :
Period
A m o u n t of accrued interest p e r $1,000 per
d a y p a i d w i t h principal.




.

41, 43
184-193
56.
157, 158
5680-6062
A p r . 1, 1 9 6 5 . - . .

.

•

232
70..
193-195

:

A p r . 1, 1965 - .

Oct. 1, 1964

$18.76.

$19.375

$29,625

$20,625.

A p r . 1-July 1, 1965
$0.103591160 from J a n . 1, 1965,
to d a t e of p u r c h a s e .

A p r . 1-July 1, 1965
$0.107044199 from J a n . 1, 1965,
to d a t e of p u r c h a s e .

O c t . 1-Dec. 31, 1964
$0.112092 from J u l y 1, 1964, to
d a t e of p u r c h a s e .

A p r . 1-Julv 1, 1966.
$0.113950276 from J a n . 1,1965, to
d a t e of p u r c h a s e .

Pi
O

W
pi

>
Ul

d

pi

Z% p e r c e n t section 221 housing insurance fund d e b e n t u r e s , Series D D
N o t i c e of caU.._ . .
.. .
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 :
$50
.
100
500
1,000
6,000
10,000...
F i n a l d a t e for transfers or d e n o m i n a t i o n a l exchanges
( b u t not 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 per $1,000
p a i d i n full w i t h p r i n c i p a l .
P r e s e n t a t i o n for p u r c h a s e prior to caU d a t e :
Period
_.
...
.
A m o u n t of accrued i n t e r e s t per $1,000 per d a y p a i d
with principal.

Z}i p e r c e n t section 221 housing insurance fund d e b e n t u r e s , Series D D

4 a n d i ^ i p e r c e n t section 221 housing
i n s u r a n c e fund d e b e n t u r e s , Series D D

M a r . 25, 1965.
J u l y 1, 1965

M a r . 26, 1965
J u l y 1, 1965

Sept. 23, 1964.
J a n . 1, 1965.

1005-2847
1856-1980i . . .
1646-5146
2154-18145
1412-5397
2037-6715
A p r . 1, 19'65

465-2885
2280-21186
-_
768-5463
2584-19126
1048-5970,5975
1403-7482
A p r . 1, 1965

-.

..

..

-

1336-2752.
5966-20232.
2657-5248.
6026-18499.
2018-5820.
1893-7404.
Oct. 1, 1964.
$20. 00 for 4 % , $20. 625 for 4 ^ % .




$19,375

A p r . 1-July 1, 1965
$0.103591160 from J a n . 1, 1965, t o d a t e
of p u r c h a s e .

A p r . 1-July 1, 1965
$0.107044199 from J a n . 1, 1965, to d a t e
of p u r c h a s e .

Oct. 1, 1964-Jan. 1, 1965.
$0.108696 for 4%, $0.112092 for 4 3 ^ % ,
from J u l y 1,1964, to d a t e of p u r c h a s e .

4 p e r c e n t section 221 housing insurance fund d e b e n t u r e s , Series D D

N o t i c e of call
Redeinption 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 :
$50
100
500
.
1,000...
6,000
10,000
.
F i n a l d a t e for transfers or d e n o m i n a t i o n a l exchanges
( b u t n o t for sale or a s s i g n m e n t ) .
R e d e m p t i o n o n caU d a t e , a m o u n t of interest per $1,000
p a i d i n fuU 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 t o call d a t e :
Period
A m o u n t of accrued interest p e r $1,000 per d a y
paid with pruicipal.

$18.75

i}4 percent section 221 housing insurance fund d e b e n t u r e s , Series D D

3M, ZJ4,4, a n d 43^ percent servicemen's
m o r t g a g e m s u r a n c e fund d e b e n t u r e s ,
Series E E

.

.

Ul

Sept. 23, 1964.
J a n . 1, 1965.

M a r . 25, 1965
J u l y 1, 1965

M a r . 25, 1965
J u l y 1, 1965 -

2754-2888, 2894
20234-21189,21215
5249-5465
18502-19127 _
5822-6962
7407-7479
A p r . 1, 1965

2776-2887.. .
20331-21181
5265-5460
18512-19118
5826-5965, 5976
7466-7476.
A p r . 1, 1965

$20.00

$20,625

$18.75 for ZK%, $19,375 for 3>|%, $20.00
for 4%, $20,625 for 4 3 ^ % .

A p r . 1-July 1, 1966
:..
$0.113950276 from J a n . 1, 1965, to d a t e
of p u r c h a s e .

Oct. 1, 1964-Jan. 1, 1965.
$0.101902 for Z H % . $0.106299 for 3 ^ % ,
$0.108696 for 4%, $0.112092 for 4 ^ % ,
from J u l y 1,1964, to d a t e of p u r c h a s e .

...

A p r . 1-July 1, 1965
$0.110497238 from J a n . 1, 1965, t o d a t e
of p u r c h a s e .

. .

584-3394.
4098-25913.
1078-6243.
3855-19906.
880-3439.
698-3833.
Oct. 1, 1964.

bO

o

00

Summary of information contained in the notices of call for partial redemption of insurance fund debentures during thefiscal year 1965—Con.
ZH percent servicemen's m o r t g a g e insurance fund d e b e n t u r e s , Series E E

N o t i c e of caU
.
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 :
$50
- .
100
500
:
1,000
5,000
10,000
...
F i n a l d a t e for transfers or d e n o m i n a t i o n a l exchanges ( b u t n o t
for sale or a s s i g n m e n t ) .
R e d e m p t i o n on call d a t e , a m o u n t of interest per $1,000 p a i d in
• full w i t h principal.
P r e s e n t a t i o n for p u r c h a s e prior to 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
principal.

Z ^ p e r c e n t servicemen's m o r t g a g e insurance fund d e b e n t u r e s , Series E E

4 p e r c e n t servicemen's m o r t ' gage uisurance fund debent u r e s . Series E E

Mar. 25, 1965.
J u l y 1, 1965

Mar. 25, 1965
J u l y 1, 1965

o

Mar. 25, 1965.
J u l y 1, 1965.

.

.

.-

-.

3397-3912
25344-25347,25937-30201
6247-7228
19918-22822,22918
3442-3911
3839-4288
A p r . 1, 1965

3396-3905
25914-30175
6255-7222,7269
19907-22802, 22889
3440-3907
3835-4281
A p r . 1, 1965

$18.75

$19,375-

A p r . 1-July 1, 1965
$0.103591160 from J a n . 1, 1965, to d a t e
of p u r c h a s e .

A p r . 1-July 1, 1965
$0.107044199 from J a n . 1, 1965, to d a t e
of purchase.

A p r . 1-July 1, 1965.
$0.110497238 from J a n . 1, 1965,
to d a t e of purchase.

i y s p e r c e n t servicemen's m o r t g a g e insurance fund d e b e n t u r e s . Series E E

3M, Z}i, 4, a n d i ^ percent a r m e d
services housing m o r t g a g e u i s u r a n c e
fund d e b e n t u r e s . Series F F

3M p e r c e n t a r m e d services
housing m o r t g a g e insurance
fund d e b e n t u r e s . Series F F

Mar. 25, 1965
J u l y 1, 1965

Sept. 23, 1964
J a n . 1, 1965

Mar. 25, 1965,
J u l y 1, 1965,

3400-3914.
25925-30217.
6245-7231.
19942-22829, 22887.
3451-3912.
3836-4282.
A p r . 1, 1965.
-..

o
t ^

o

$20.00.

Ul

o
pi

N o t i c e of caU
. _.-- _
. . . .
...
Redemption date
Serial n u m b e r s called b y d e n o m i n a t i o n s :
$50
100
500
1,000
5,000
.
10,000
F i n a l d a t e for transfers or d e n o m i n a t i o n a l exchanges ( b u t n o t
for sale or a s s i g n m e n t ) .
R e d e m p t i o n on call date, a m o u n t of interest per $1,000 paid in
full w i t h principal.
P r e s e n t a t i o n for p u r c h a s e prior to call d a t e :
Period .
... A m o u n t of accrued interest per $1,000 per d a y p a i d w i t h
principal.




.__

_-

3395-3911
25919-30213, 30308-30313
6244-7230,7254
19912-22826
3444-3910
3837-4298
A p r ; 1, 1965

-

115-214
1430-2471
319-538
1787-2567
358-524
9408-9859
Oct. 1, 1964

.

-

.

.-

--.
•

2483-2590,
564.
2637-2661.
550.
9861.
A p r . 1, 1965.

$20.625

$18.75 for 33^%, $19,375 for 3J^%,
$20.00 for 4%, $20,625 for 43/g%.

$18.75.

A p r . 1-July 1, 1965
$0.113950276 from J a n . 1, 1965, to d a t e
of p u r c h a s e .

Oct. 1,1964-Jan. 1,1965
. -- A p r . 1-July 1, 1965.
$0.101902 for ZH%, $0.105299 for 33^%, $0.103591160 from J a n . 1, 1965,
to d a t e of purchase.
$0.108696 for 4%, $0.112092 for 43^^%,
from J u l y 1,1964, to d a t e of p u r c h a s e .

>
pi

o
• ^

>
d
Pi

ZH percent armed services
housing mortgage insurance
fund debentures. Series F F

$50
100
500
1,000
5,000
10,000

Final date for transfers or denominational exchanges (but not for sale or assignment).
Redemption on call date, amount of interest
per $1,000 paid in full with principal.
Presentation for purchase prior to caU date:
Period
Amomit of accrued interest per $1,000 per
day paid with principal.

N o t i c e of call
R e d e m p t i o n d a t e . . - _.
. ..
Serial n u m b e r s called b y d e n o m i n a t i o n s :
$50
100
. . .
...
500
1,000
-.
.5,000
. . .
F i n a l d a t e for transfers or d e n o m i n a t i o n a l exchanges ( b u t n o t for sale or a s s i g n m e n t ) .
R e d e m p t i o n on caU d a t e , a m o m i t of i n t e r e s t
p e r $1,000 p a i d in fuU 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 i n t e r e s t per $1,000 per
d a y paid with principal.




i A percent armed services
housing mortgage insurance
fund debentures. Series F F

23'^ percent war housing insurance fund debentures,
Series H

Mar. 25, 1965..
July 1,1965..-

Mar. 25, 1965..
July 1,1965..-

Sept, 23, 1964.
Jan, 1, 1965.

225,227....
2515-2607-.
553-554--..
2573-2673-.

226
2527-2605-.
548-566---.
2615-2671

9864-9920---Apr, 1, 1965-

9866-9923- —
Apr. 1, 1965.

Mar. 25, 1965
J u l y l , 1965
215-216
2479-2586
549-559
2575-2656
545
9862-9863
Apr, 1, 1965

4996-5017.
19224-19225, 19231-19389.
5531-5565.
22856, 22861-22993.
5237, 5243-5262.
53129-53623.
Oct. 1, 1964.

$19,375

$20.00-.

$20,625

$12. 50.

Apr. 1-July 1, 1965
$0.107044199 from Jan. 1,
to date of purchase.

Apr. 1-July 1, 1965
$0.110497238 from Jan. 1, 1965,
to date of purchase.

Apr, 1-July 1, 1965
$0.113950276 from Jan. 1, 1965,
to date of purchase.

Oct. 1-Dec. 31, 1964.
$0.067935 from July 1, 1964, to
date of purchase.

4 p e r c e n t section 203 h o m e
i m p r o v e m e n t a c c o u n t deb e n t u r e s . Series H H

Notice of call
Redemption date
Serial numbers called by denominations:

4 percent armed services
housing mortgage insurance
fund debentures, Series F F

23'i p e r c e n t T i t l e I housing
insurance fund d e b e n t u r e s .
Series L

2H p e r c e n t T i t l e I h o u s i n g
i n s u r a n c e fund d e b e n t u r e s
Series R

3 p e r c e n t T i t l e I h o u s i n g insurance fund
debentures,
Series T

Sept. 23, 1964
J a n , 1, 1965.. . . -

Sept, 23, 1964
J a n , 1, 1965-.

Sept, 23, 1964
J a n , 1, 1965

Sept, 23, 1964.
J a n 1, 1965.
694-643
2533-2686
773-819
1904-2031,

---

.

212-215, 261
564-596
204-209
693-710.Oct, I, 1964

Oct, 1, 1964

559-565
1564-1634- _
384-396
858-925
260-261
Oct. 1, 1964

$20,00

$12,50

$13,75

$15 00

Oct, 1-Dec, 31, 1964
$0.074728 from J u l y 1, 1964,
to d a t e of p u r c h a s e .

Oct. 1-Dec, 31, 1964.
$0.081522 from J u l y 1, 1964,
to d a t e of p u r c h a s e .

Ul

Oct, 1-Dec, 31, 1964
Oct, 1-Dec. 31, 1964
$0.108696 from J u l y 1, 1964, . $0.067935 from J u l y 1, 1964,
to d a t e of p u r c h a s e .
to d a t e of p u r c h a s e .

Oct. 1, 1964.

ts3
O
C7«

206

19 65 REPORT OF THE SECRETARY OF THE TREASURY
Regulations

Exhibit 5.—Revision, December 4, 1964, of Department Circular No. 853,
regulations governing restrictive endorsements of United States bearer
securities
TREASURY DEPARTMENT,

Washington, Deceniber 4, 1964Department Circular No. 853, dated October 5, 1949, is hereby amended and
issued as Department Circular No. 853, Revised.
AUTHORITY: Sees. 328.1 to 328.9 issued under R.S. 161, as amended (5 U.S.C.
22) ; Second Liberty Bond Act, as amended (31 U.S.C. 752, 753, 754, 754b).
'Sec. 328.1. Scope of regulations.—These regulations are applicable only to
United States bearer securities ^ presented (a) by or through banks for payment
at or after their maturity or call date, or in exchange for any securities under
any exchange offering, (b) by or through banks at any time prior to their
maturity or call date for redemption at par and application of the proceeds in
payment of Federal estate taxes, provided said securities by the terms of their
issue are eligible for such redemption, and (c) by district directors, Internal
Revenue Service, for redemption, with the proceeds to be applied to payment of
taxes (other'than securities presented under (b) above). These regulaitioms do
not apply to bearer securities presented for any other transaction, or to registered
securities assigned in blank, or to bearer, or so assigned as to become, in effect,
payable to bearer.
Sec. 328.2. Definitions.—Certain words and terms, as used in these regulations,
are defined a® follows:
(a) ''Banks" refer to, and include, incorporated banks (i.e., banks doing a
general commercial banking business), incorporated trust companies (i.e., trust
companies doing either a general banking business or general trust husinelss),
and savings banks (whether or not mutual).
(b) "Bearer securities" or ''securities" are those Which are payable on their
face to "bearer," the ownership of which is not recorded. They include "Treasury
bonds," "Treasury note's," "Treasury certificates of indebtedness," and "Treasury
bills."
Sec. 328.3. Authorizationfor restrictive endorsements.— (a) By banhs. Banks
are authorized, under the conditions and in the form hereinafter provided, to
place restrictive endorsements upon the face of bearer securities owned by themselves or their customers for the purpose of presentation to Federal Reserve
banks or branches, or to the Treasurer of the United States, as follows:
(1) For payment or redemption—at any time within one calendar month prior
to their maturity date, or the date on which they become payable pursuant to
a call for redemption, or at any time after their maturity or call date;
\ 2 ) For ex Chang e-^duTing any period for their presentation pursuant to an
exchange offering; and
(3) For redemption at par in payment of Federal estate taxes {only eUgible
securities)—at any time prior to their maturity or call redemption date.
(b) By district directors, Internal Revenue Service. District directors. Internal Revenue Service, are authorized, under the conditions and in the foonm
hereinafter provided, to place restrictive endorsements upon the face of bearer
securities for the purpose of presentation to Federal Reserve banks or branches,
or to the Treasurer of the United States, for redemption and application Of
the proceeds in payment of taxes (other than securities presented for redemption
at par and application of the proceeds in payment of Federal estate taxes).
(c) Instructions from Federal Reserve banks. Federal Reserve banks will
inform eligible banks and district directors of the Internal Revenue Service in
their respective districts as to the procedure to be followed under the authority
granted by these regulations. No bank or district director should imprint
restrictive endorsements on securities until such information is received from
the Federal Reserve bank.
Sec. 328.4. Effect of restrictive endorsements.—Bearer securities bearing restrictive endorsements as herein provided will thereafter be nonnegotiable and
1 These regulations may also apply to securities issued by certain agencies of the United
States and the former Government of Puerto Rico for which the Treasury Department of
the United States acts as transfer agency, provided the issuing authorities for such
securities have adopted by appropriate regulations the provisions of this circular.




EXHIBITS

207

payment, redemption, or exchange will ibe made only as provided in such
endorsements.
Sec. 328.5. Forms of endorsement.— (a) When presented by banks—
(1) For payment or exchange. The endorsement placed on a bearer security
presented for payment or exchange by a bank should be in the following form :
For presentation to the Federal Reserve Bank of
, Fiscal Agent of
the United States, for redemption or in exchange for securities of a new
issue, in accordance with written instructions submitted by
(Insert name of presenting bank)

ABA No.
(2) For redemption at par. The endorsement placed on a bearer security
presented for redemption at par in payment of Federal estate taxe's should be
in the following form:
For presentation to the Federal Reserve Bank of
, Fiscal Agent
of the United States, for redemption at par in payment of Federal estate
taxes, in accordance with written instructions submitted by
(Insert name of presenting bank)

ABA No.
-_(b) When presented by district directors, Internal Revenue Service. The
endorsement placed on a bearer security by a district director, Intemal Revenue
Service, should be in the following form:
For presentation to the Federal Reserve Bank of
, Fiscal Agent
of the United States, for redemption, the proceeds to,, be credited to the
account of the district director. Internal Revenue Service at
,
for credit on the Federal
taxes due from
Income, gift, or other

(Name and address)

Sec. 328.6. Requirements for endorsements.— (a) On bearer securities. The
endorsement must be imprinted in the left-hand portion of the face of each security with the first line thereof parallel to tlie left edge of the security and in such
manner as to be clearly legible and in such position that it will not obscure the
serial number, series designation or other identifying data, and cover the smallest
poS'sible portion of the text on the face of the security. The dimensions of the
endorsement should be approximately four inches in width and one and one-half
inches in height, and must be imprinted by stamp or plate of such character,
with a carbon pigment ink, and by such means, as will render the endorsement
substantially ineradicable. In cases where the endorsement is being made by
a bank, immediately below and as part of the endorsement the ABA code number
of the pre^senting bank must be perforated in figures approximately one-fourth
to one-half inch in height. The perforations should be placed as nearly as
possible beneath the endorsement without obliterating any of the identifying
data. The name of the Federal Reserve bank of the district must appear on the
plate or stamp used for the imprinting of the endorsement, and presentation to
the appropriate branch of the Federal Reserve bank named will be considered as
presentation to the bank. When securities are to be presented to the Treasurer
pf the United States, the words "Treasurer of the United States" should be used
in lieu of the words "Federal Reserve Bank of
.—, Fiscal Agent of the
United States." No 'subsequent endorsement will be permitted and no other
form of endorsement may be made.
(b) On coupons. Unmatured coupons attached to restrictively endorsed securities should be cancelled by imprinting the prescribed endorsement in such
manner that a substantial portion of the endorsement will appear on each such
coupon. Where such endorsements are made by a bank, its ABA code number
should not be perforated on the coupons. If any such coupons are missing,
deduction of their face amount will be made in cases of redemption, and in cases
of exchange, remittance equal to the face amount of the missing coupons must
accompany the securities. All matured coupons, including coupons which will
mature on or before the date of redemption or exchange (except as otherwise
specifically provided in an announcement of an exchange offering), should be
detached from securities upon which restrictive endorsements are to be imprinted.
Sec. 328.7. Shipment of securities.—Securities bearing restrictive endorsements may be shipped, at the risk and expense of the shipper, by registered mail,
messenger, armored car service, or express to the Federal Reserve bank of the
district in which the presenting bank or district director. Internal Revenue
Service, is located, or to the appropriate branch of such Federal Reserve bank.




208

1965 REPORT OF THE SECRETARY OF THE TREASURY

Shipments to the T r e a s u r e r of the United States, Washington, D . C , should be
made by messenger or armored car.
Sec. 328.8. Loss, theft, or destruction of securities bearing restrictive endorsements.— (a) General. Relief will be provided on account of securities bearing
restrictive endorsements proved to have been lost, stolen or destroyed, upon the
owner's application, in the same m a n n e r as registered securities which have not
been assigned. (See Subpart N of the current revision of Department Circular
No. 300,^ the general regulations with respect to United States securities.)
Except for bearer securities submitted for redemption a t p a r in payment of
F e d e r a l estate taxes, a bank will be considered the owner of securities handled
on behalf of customers unless it otherwise requests. The application for relief
( F o r m P D 2211) and instructions will be furnished by the F e d e r a l Reserve
banks.
(b) Bond of indemnity. W h e r e securities bearing restrictive endorsements
shipped by a bank have been lost, stolen, or destroyed, a bond of indemnity with
surety satisfactory to t h e Secretary of the T r e a s u r y will be required from the
owner. If such bond is executed by a bank or other corporation, the execution
must be authorized by general or special resolution of the board of directors,
or other body exercising similar functions under its bylaws. Ordinarily, no
surety will be required on a bond executed by a presenting bank. The Secretary
of the T r e a s u r y reserves the right, however, to require a surety in any case
in which he considers s u c h ' a c t i o n necessary for t h e protection of the United
States.
Sec. 328.9. Miscellaneous.—The provisions of this circular a r e subject to the
current revision of D e p a r t m e n t Circular No. 300. The Secretary of the T r e a s u r y
reserves the right a t any time to amend, supplement, or w i t h d r a w any or all of
the provisions of these regulations.
J O H N K . CARLOCK,

Fiscal Assistant Secretary.
Exhibit 6.—Third revision, December 23, 1964, of D e p a r t m e n t Circular No. 300,
general regulations with respect to United S t a t e s securities
TREASURY . DEPARTMENT,

• Washington, December 23, 1964D e p a r t m e n t Circular No. 300, Second Revision, dated April 19, 1963 (31 CFR
306), is hereby amended and issued as the Third Revision.
AUTHORITY: Sees. 306.0 to 306.118 issued under R.S. 3706, 40 Stat. 288, 290,
1309, 48 Stat. 343, and 50 Stat. 4 8 1 ; 31 U.S.C. 73Sa, 739, 752, 752a, 753, 754, 754a,
and 754b.
' S U B P A R T A—GENERAL INFORMATION

Sec. 306.0. Applicability of regulations.—These regulations apply to all United
States transferable and nontransferable securities,^ other t h a n 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) Subscriptions-tenders-bids.—Securities subject to these regulations a r e
issued from time to time p u r s u a n t to public offerings by the Secretary of the
Treasury, through the F e d e r a l Reserve banks, fiscal agents of the United States,
and the T r e a s u r e r of the United States. Only the F e d e r a l Reserve b a n k s and
branches and t h e T r e a s u r y D e p a r t m e n t are authorized to act as official agencies,
and subscriptions for securities, tenders for T r e a s u r y bills, and bids, to the
extent provided in the regulations governing the sale of T r e a s u r y bonds through
competitive bidding, may be made direct to t h e m ; however, banking institutions
may assist customers with their subscriptions, tenders or bids.
1 See exhibit 6,
2 Bonds and other securities issued by certain agencies of the United States and the
former government of P u e r t o Rico are subject to these regulations, so far as applicable,
under special a r r a n g e m e n t s with t h e issuing authorities.
Information as to their application to any particular transaction in any designated security will be furnished by the
Bureau of the Public Debt, Division of Loans and Currency, Washington, D . C , 20226,
upon request.




EXHIBITS

209

(b) Transactions after issue.—The B u r e a u of the Public Debt, T r e a s u r y
Department, is charged with m a t t e r s relating to transactions in securities after
original issue. Correspondence concerning such transactions and requests for
appropriate forms may be addressed to (1) t h e Federal Reserve bank or branch
of t h e district in which t h e correspondent is located, or (2) the B u r e a u of t h e
Public Debt; Division of Loans and Currency, Washington, D . C , 20226, or (3)
t h e Office of t h e T r e a s u r e r of t h e United States, Securities DiAdsion, Washington,
D . C , 20220, except where specific instructions a r e otherwise given in these
regulations. T h e addresses of t h e F e d e r a l Reserve banks a n d branches a r e :
F e d e r a l Reserve Bank of Boston, Boston, Mass. 02106.
F e d e r a l Reserve B a n k of New York,
New York, N.Y. 10045.
Buffalo Branch, Buffalo, N.Y.
14240.
F e d e r a l Reserve B a n k of Philadelphia, Philadelphia, Pa. 19101.
F e d e r a l Reserve Bank of Cleveland,
Cleveland, Ohio 44101.
Cincinnati Branch, Cincinnati,
Ohio 45201.
P i t t s b u r g h Branch, Pittsburgh,
P a . 15230.
F e d e r a l Reserve Bank of Richmond,
Richmond, Va. 23213.
Baltimore Branch, Baltimore, Md.
21203.
Charlotte Branch, Charlotte, N . C
28201.
F e d e r a l Reserve B a n k of Atlanta, Atlanta, Ga. 30303.
Birmingham Branch, Birmingham, Ala. 35202.
Jacksonville Branch,
Jacksonville, Fla. 32201.
Nashville B r a n c h , . Nashville,
Tenn. 37203.
New Orleans Branch, New Orleans, La. 70160.
F e d e r a l Reserve B a n k of Chicago,
P.O. Box 834, Chicago, 111. 60690.
Detroit Branch, P.O. Box 1059,
Detroit, Mich. 48231.

F e d e r a l Reserve Bank of St. Louis,
P.O. Box 442, St. Louis, Mo. 63166.
Little Rock Branch, P.O. Box
1261, Little Rock, Ark. 72203.
Louisville Branch, P.O. Box 899,
Louisville, Ky. 40201.
Memphis Branch, P.O. Box 407,
Memphis, Tenn. 38101.
F e d e r a l Reserve Bank of Minneapolis,
Minneapolis, Minn. 55440.
Helena Branch, Helena, Mont.
59601.
F e d e r a l Reserve B a n k of K a n s a s City,
K a n s a s City, Mo. 64106.
Denver Branch, Denver, Colo.
80217.
Oklahoma City Branch, Oklahoma City, Okla. 73101.
Omaha Branch, Omaha, Nebr.
68102.
Federal Reserve B a n k of Dallas, Station K, Dallas, Tex. 75222.
El Paso Branch, P.O. Box 100, El
Paso, Tex. 79999.
Houston Branch, P.O. Box 2578,
Houston, Tex. 77001.
San Antonio Branch, P.O. Box
1471, San Antonio, Tex. 78206.
F e d e r a l Reserve B a n k of San F r a n cisco, San Francisco, Calif. 94120.
Los Angeles Branch, P.O. Box
2077, Los Angeles, Calif. 90054.
Portland Branch, P.O. Box 3456,
Portland, Oreg. 97208.
Salt Lake City Branch, P.O. Box
780, Salt Lake City, Utah 84110.
Seattle Branch, P.O. Box 3567,
Seattle, Wash. 98124.

Sec. 306.2. Deflnitions of %oords and terms as used in these regulations.
(a) "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.
(b) "Bearer securities" a r e those which a r e payable on their face at m a t u r i t y
or call for redemption before m a t u r i t y in accordance with their terms to "bearer,"
t h e ownership of which is not recorded. Title to such securities may pass by
delivery without endorsement a n d without notice. "Coupon securities" a r e bearer
securities which are issued with interest coupons attached.
(c) " B u r e a u " refers to t h e B u r e a u of the Public Debt, Division of Loans and
Currency, Washington, D . C , 20226.
(d) "Call d a t e " or "date of call" is t h e date fixed in the official notice of call
published in the F e d e r a l Register as the date on which t h e obligor will make
payment of the security before m a t u r i t y in accordance with its terms.
(e) "Court" means one which h a s jurisdiction over the parties and the subject m a t t e r .
782-556^6-6
14




210

19 65 REPORT OF THE SECRETARY OF THE TREASURY

(f) "Department" refers to the Treasury Department.
(g) "Face maturity date" is the payment date specified in the text of a security,
(h) "Incompetent" refers to a person under any legal disability except
minority.
(i) "Joint owner" and "joint ownership" refer to any permitted form of ownership by two or more persons.
(j) "Nontransferable securities" are those issued only in registered form which
according to their terms are payable only to the registered owners or recognized
successors in title to the extent and in the manner provided in the offering circulars or special applicable regulations.
(k) "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.
(1) "Redemption-exchange" is any authorized redemption of securities for the
purpose of applying the proceeds in payment for other securities offered in exchange.
(m) "Registered securities" refers to securities payable on their face at
maturity or call for redemption before maturity in accordance with their terms
to the persons whose names are inscribed thereon.
(n) "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.
(o) "Taxpayer 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. A social security account number is composed of nine digits
separated by two hyphens, for example, 123-45-6789; an employer identification
number is composed of nine digits separated by one hyphen, for example, 123456789. The hyphens are an essential part of the numbers and must be
included.
(p) "Transferable securities,'* which may be in either registered or bearer
form, refers to securities which may be sold on the market and transfer of title
accomplished by assignment and delivery if in registered form, or by delivery only
if in bearer form.
(q) "Treasurer's Office" refers to the Office of the Treasurer of the United
States, Securities Division, Washington, D.C, 20220.
(r) "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.
Sec. 306.3. Transportation charges and risks in the shipment of secu^rities.—
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 m i l 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 niade with the official
agency to which the original securities were presented.




EXHIBITS
SUBPAUT

211

B—REGISTRATION

Sec. 306.10. General.—The registration used must express the actual ownership of a 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, conform with one of the forms set forth in this
subpart, and include appropriate taxpayer identifjdng numbers.^ The registration of all bonds owned by the same person, organization, or fiduciary should be
uniform with respect to the name of the owner and, in the case of a fiduciary,
the description of the fiduciary capacity. 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 titie, 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 included when ordinarily used or when necessary
to distinguish the owner from a member of his family. 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." The address should include, where appropriate, the number and street,
route, or any other local feature and the ZIP Code.
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. Examples:
John A. Doe (123^5-6789)
Mrs. Mary C Doe (123-45^6789)
Miss Elizabeth Jane Doe (123-45-6789)
An individual who is sole proprietor of a business conducted under a trade name
may include a reference to the trade name. Examples:
John A. Doe, doing business as Doe's Home Appliance Store (12-3456789)
John A. Doe (123-^5-6789), 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 (or
all the survivors).^ Securities will not be registered in the forms "John A. Doe
and Mrs. Mary C Doe, or either of them" or "William C Doe or Henry J. Doe,
or either of them" and securities so assigned will be treated as though the
words "or either of them" do not appear in the assignments. The taxpayer
identifying number of any of the joint owners may be shown on securities
registered in joint ownership form. However, if such owners are husband and
wife, the husband's number should be shown. If the joint owners are a minor
and an adult, the adult's number should be shown.
(i) With right of survivorship.—In the names of two or more individuals
with right of survivorship. Examples:
John A. Doe (123-45-6789) or Mrs. Mary C Doe or the survivor
Mrs. Mary C Doe and John A. Doe (123-45-6789) or the survivor
1 Taxpayer identifying numbers are not required for foreign governments, nonresident
aliens not engaged in t r a d e or business within the United States, international organizations and foreign corporations not engaged in t r a d e or business and not having an office
or place of business or a financial or paying agent within the United States, and other
persons or organizations a s may be.exempted from furnishing such numbers under regulations of the I n t e r n a l Revenue Service.
2 WARNING : D I F F E R E N C E B E T W E E N T R A N S F E R A B L E TREASURY S E C U R I T I E S
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 FORM. The effect of registering Treasury securities to which these regulations apply 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 a t the option df either coowner on his signature alone.
Transferable Treasury securities a r e redeemable only at m a t u r i t y or upon prior call by the
Secretary of the Treasury. Accordingly, if cash is needed before such time, i t can be
realized only by sale on the market. This involves a transfer of ownership which can be
accomplished only upon proper assignment by or in behalf of all owners.




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1965 REPORT OF THE SECRETARY OF THE TREASURY

John A. Doe (123-45-6789) or Mrs. Mary C Doe or Miss Mary Ann Doe or
the survivors or survivor
John A. Doe (123-45-6789) or Mrs. Mary C Doe
John A. Doe (123-45-6789) 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. Examples:
John A. Doe (123-45-6789) and William A Doe as tenants in common
John A. Jones as natural guardian of Henry B. Jones, a minor, or Robert
C Jones (123-45-6789), without right of survivorship
(b) Minors and incompetents.— (1) Natural guardians of minors.—A security may be registered in the name of a natural guardian of a minor for whose
estate no legal guardian or similar representative has legally qualified.
Example:
John R. Jones as natural guardian of Henry M. Jones, a minor (123-45-6789)
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 as joint owner is not authorized.
Securities so registered, upon qualification of the natural guardian, will be
treated as though registered in the name of the natural guardian in that
capacity.
(2) Custodian under statute authorizing gifts to minors.—A security may be
purchased as a gift to a minor under a gifts to minor statute in effect in a
State in which either the donor or the minor resides, in which case the security
should be registered as provided in the statute, with the addition of a parenthetical reference identifying the statute if the registration does not clearly
identify it. Examples:
William C Jones, as custodian for John A. Smith, a minor (123-45-6789),
under the California Uniform Gifts to Minors Act
Robert C Smith, as custodian for Henry L. Brown, a minor (123-45-6789),
under the laws of Georgia (Ch. 48-3, Code of Ga. Anno.)
(3) Incompetents not under guardianship.—Registration in the form "John
A. Brown, an incompetent (123^5-6789), under voluntary guardianship," is
permitted only on reissue after a voluntary guardian has qualified for the purpose of collecting interest. (See sees. 306.37(c) (2) and 306.57(c) (2).) Otherwise, registration in the name of an incompetent not under legal guardianship
is not authorized.
(c) Executors, administrators,; guardians, and similar representatives or
fiduciaries.—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 and capacities of all the representatives or fiduciaries, as shown in their letters of appointment, must be included
in the registration and must be followed by an adequate identifying reference
to the estate. Examples:
John Smith, executor of the will (or administrator of the estate) of Henry
J. Jones, deceased (123-45-6789)
William C Jones, guardian (or conservator, etc.) of the estate of James D.
Brown, a minor (or an incompetent) (123-45-6789)
(d) 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.
Examples:.
John Jones and Blank Trust Company, Albany, N.Y., trustees under the will
of Sarah Jones, deceased (12-3456789)
John Doe and Richard Roe, trustees under agreement with Henry Jones
dared 2/9/50 (12-3456789)




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213

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." Example:
Board of Trustees of Blank Company Retirement Fund under collective
bargaining agreement dated 6/30/50 (12-3456789)
(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. Examples :
John Smith, Henry Jones, et al., trustees under the will of Henry J. Smith,
deceased (12-3456789)
Trustees under the will of Henry J. Smith, deceased (12-3456789)
Trustees of Retirement Fund of Industrial Manufacturing Co., under directors' resolution of 6/30/50 (12-3456789)
(e) Private organizations {corporations, unincorporated associations, and
partnerships).—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 or the name is that of a corporation or association organized under
Federal law, such as a national bank or Federal savings and loan association.
Examples:
Smith Manufacturing Company, a corp. (12^3456789)
The Standard Manufacturing Corp. (12^3456789)
Jones & Brown, Inc. (12-3456789) (Depreciation Acct.)
First National Bank of
(12-3456789)
(2) An unincorporated association.—The name of a lodge, club, labO;r 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." Examples:
American Legion Post No. __, Department of the D.C, an unincorporated
assn. (12-3456789)
Local Union No. 100, Brotherhood of Locomotive Engineers, an unincorporated association (12-3456789)
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
(d) 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." Examples:
Smith & Brown, a partnership (12-3456789)
Acme Novelty Co., a limited partnership (12-3456789)
(f) States, public bodies and corporations, and public officers.—A security may
be registered in the name 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, authority, or agency) which is the




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19 65 REPORT OF THE SECRETARY OF THE TREASURY

owner or official custodian of public funds, other than trust funds, or in the full
legal title of the public officer having custody. Examples:
State of Maine
Town of Rye, N.Y.
Maryland State Highway Commission
Treasurer, City of Springfield, 111.
Treasurer of Rhode Island (State Forestry Fund)
(g) States, public officers, corporations, or bodies as trustees.—A security
may be registered in the title of a public officer or in the name of a State or
county, a public corporation or public body acting as trustee under express authority of law, followed by appropriate reference to the statute creating the
trust. Examples:
Insurance Comraissioner of Pennsylvania, trustee for the benefit of the
policyholders of the Blank Insurance Co. (12-3456789), under Sec.
,
Penna. Stats.
Rhode Island Sinking Fund Commission, trustee of the General Sinking
Fund under Ch. 35, Gen. Laws of R.I.
Sec. 306.12. Errors in registration.—If an erroneously inscribed security is
received it should not be altered in any respect, but the Bureau, a Federal Reserve
bank or branch, or the Treasurer's Office should be furnished full particulars
concerning the error and asked to furnish instructions.
Sec. 306.13. Nontransferable securities.—Vvon authorized reissue. Treasury
Bonds, Investment Series B-1975-80, may be registered in the forms set forth in
sec. 306.11.
SUBPART C — T R A N S F E R S , E X C H A N O E S , 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 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.) Denominational exchanges, exchanges of Treasury Bonds, Investment Series B-1975-80,
for the current series of EA or EO 1% percent 5-year Treasury notes, and
optional redemption of bonds at par as provided in sec. 306.28 may be made
at any time. Securities presented for transfer or for exchange for bearer
securities of the same issue must be received by the Bureau 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 tob 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 and call or maturity dates. If the date
set for 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 which have not matured or
been called are received by the Bureau for transfer, reissue, or exchange for
coupon securities, or coupon securities which have not matured or been called
are received for exchange for registered securities during the time the books for
that loan are closed, the transaction will not be completed until the first business
day following the date on which interest falls due, when such books are reopened.
If registered securities are received for transfer or exchange for bearer securities,
or coupon securities are received for exchange for registered securities, during
the time the books are closed for payment of final interest at maturity or call,
unless otherwise provided in the offering circular or notice of call, the following
action will be taken:
(1) Payment of final interest will be made to the registered o^mer of record
on the date the books were closed.
(2) Payment of principal will be made to (i) the assignee under a proper
assignment of the securities, or (ii) if the securities have been assigned for




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215

exchange for bearer securities, to the registered owner of record on the date
the books were closed.
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. Exchange 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 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. 30(3.19. 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 (a)
the surviving joint owner(s) 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, (b) a succeeding fiduciary or other
lawful successor, (c) an individual, corporation or unincorporated association
whose name has been legally changed, (d) a corporation or unincorporated
association, which is the lawful successor to another corporation or unincorporated association, and (e) a successor in title to a public officer or body.
Evidence of survivorship, succession, or change of name, as appropriate, must
be furnished. The appropriate taxpayer identifying number also must be furnished if the registration of the securities submitted does not include such
number for the person(s) or organization to be named on the reissued securities'.
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 li/^ percent 5-year Treasury notes
must bear duly executed assignments to "The Secretary of the Treasury for




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19 65 REPORT OF THE SECRETARY OF THE TREASURY

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% 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 1% percent on the notes for the same period will be charged and
the difference will be paid to the owner.
SUBPART D

REDEMPTION OR PAYMENT

Sec. 306.25. Presentation and surrender.
(a) General.—Securities, whether in registered or bearer form, are payable
in regular course of business at maturity unless called for redemption before
maturity in accordance with their terms, in which case they will be payable
in regular course of business on the date of call. The Secretary of the Treasury
may provide for the exchange of maturing or called securities, or in advance
of call or maturity, may aff'ord owners the opportunity of exchanging a security
for another security pursuant to an advance refunding offer. Registered securities should be presented and surrendered for redemption to the Bureau, a Federal Reserve bank or branch, or the Treasurer's Office, and bearer securities to
a Federal Reserve bank or branch or the Treasurer's Office.^ If securities are
registered in the name of, or assigned to (1) a State or other political entity, (2)
a corporation, or (3) a board, committee or other body authorized to act as a
unit and which is the fiduciary of a public or private trust estate, no evidence
will be required in support of an assignment by an officer of the registered
owner or assignee for redemption for its account. Under the same circumstances, no evidence will be required for an assignment for redemption-exchange,
or exchange pursuant to an advance refunding offer, if the new securities are
to be registered exactly the same as the registration or assignment of the securities surrendered. To the extent appropriate, these rules also apply to securities
registered in the title of a public officer who is the official custodian of public
funds.
(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.
(Form PD 1071 may be used.) A security shall be considered to be overdue after
the lapse of the following periods of time from its face maturity:
(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 year.
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 name and address of 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, sign(jd by the owner or his authorized representative,
must accompany the securities, unless included in the assignment. (Form
PD 1705 may be used.) Payment of the principal will be made either (a) by
check drawn on the Treasurer of the United States to the order of the person
1 See sec, 306.28 for presentation and surrender of securities eligible for use in payment
of Federal e s t a t e taxes.




EXHIBITS

217

entitled and mailed in accordance with the instructions received, or (b) upon
appropriate request, by crediting the amount in a member bank's account with
the Federal Reserve bank of its district. Securities presented for advance refunding should be assigned as provided in the advance refunding offer.
Sec, 306.27. Redemption of bearer securities at maturity, upon prior call, or
for advance refimding.—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 established. 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 at par {before maturity
or call redemption date) and application of the proceeds in payment of Federal
estate taxes.
(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 honds 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 joint ownership, partnership, and trust holdings:
(i) Joint ownerships.—Bonds held by the decedent at the time of his death
in joint ownership with another person or persons will be deemed to have met
the above conditions either (a.) to the extent to which the bonds actually became
the property of the decedent's estate, or (b) in an amount not to exceed the
amount of the Federal estate taxes which the surviving joint owner or owners
are required to pay on account of such bonds and other jointly-held property.^
• (ii) Partnerships.—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.
^ Certain issues of T r e a s u r y bonds are redeemable a t p a r and accrued interest upon the
death of the owner, a t t h e option of the representative of, or if none, the persons entitled
to, h i s estate, for t h e purpose of having t h e entire proceeds applied in payment of the
Federal estate taxes on the decedent's estate, in accordance with the terms of t h e offering
circulars cited on the face of the bonds, A c u r r e n t list of eligible issues may be obtained
from any Federal Reserve bank or branch, the Bureau of the Public Debt, or t h e Treasurer's
Office.
2 Substantially the same rule ap.plies to community property except t h a t upon the death
of either spouse bonds which constitute p a r t of t h e community estate are deemed to meet
the required conditions to the extent of one-half of each loan and issue of tonds.




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19 65 RE'PORT OF THE SECRETARY OF THE TREASURY

(iii) Trusts.—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 if (a) the trust actually terminated in favor of
the decedent's estate, or (b) the trustee as such is required to pay the decedent's
Federal estate taxes uiader the terms of the trust instrument or otherwise, or (c)
the debts of the decedent's estate, including costs of administration. State
inheritance and Federal estate taxes, exceed the assets of his estate without
regard to the trust estate.
(c) Transactions after owner's death.—No transactions involving changes bf
ownership may be conducted after an owner's death without affecting the eligibility of the bonds for redemption at par for application of the proceeds to payment of Federal estate taxes. Transactions, involving no changes of ownership,
which may be conducted without affecting eligibility are (1) exchange of bonds
for those of lower denominations where the bonds exceed the amount of the taxes
and are not in the lowest authorized denominations, (2) exchange of registered
bonds for coupon bonds, (3) exchange of coupon, bonds for bonds registered in
the names of the representatives of the estate, and (4) transfer to the names
of the representatives of the owner's estate. However, any such transactions
must be explained on Form PD 1782 or in a supplemental statement.
SUBPART E^—INTEREST

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 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. Terniination of interest.—Securities will cease to bear interest on
the date of their maturity unless they have been called for redemption before
maturity in accordance with their terms, in which case they will cease to bear
interest on the date of 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. Interest on a registered security
which has not matured or been called and which is presented for any transaction
during the period the books for that loan are closed will be paid by check
drawn to the order of the registered owner of record. 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, delivery 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, unless otherwise provided in the offering
1 The Appendix to these regulations contains a complete explanation of the method of
computing interest on a semiannual basis on Treasury bonds, notes, and certificates of
indebtedness, and an outline of t h e method of computing the discount r a t e s on Treasury
bills. Also included are tables of computation of interest on quarterly and a n n u a l bases.




EXHIBITS

219

circular or notice of call, will be paid by check drawn to the order of the
registered owner of record and mailed in advance of the interest payment date in
time to reach the addressee on or about that date."^ Interest on securities presented for aavance refunding will be adjusted as provided in the advance refunding off'er.
(b) Change of address.—To assure timely delivery of interest checks, owners
should promptly notify the Bureau of any change of address. (Form PD 345
may be used.) The notification must be signed by the registered owner or a
joint owner or an authorized representative, and should show the old and new
addresses, the serial number and denomination of each security, the titles of
the securities (for example 3^/4 percent Treasury Bonds of 1978-83, dated May 1,
1953), and the registration of each security. Notifications by attorneys in fact,
trustees, or by the legal representatives of the estates of deceased, incompetent,
or minor owners should be supported by proof of their authority, unless in the
case of trustees or legal representatives, they are named in the registration.
(c) Collection of interest checks.
(1) Genera/^.—Interest checks may be collected in accordance with the regulations governing the endorsement and paj^ment of Government warrants and
checks, which are contained in Department Circular No. 21, Revised, as amended
(31 CFR 360).
(2) By voluntary guardians of incompetents.—Interest checks drawn to the
order of a person who has become incompetent and 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. (Application 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
the Bureau should be notified. Should a check be lost, stolen, or destroyed after
receipt, the Office of the Treasurer of the United States, Check Claims Division,
Washington, D.C, 20226, should be notified. Notification should include the name
and address of the owner, the serial number, denomination, and title of the
security upon which the interest was payable. If the check is subsequently
received or recovered the latter office should also be advised.
Sec. 306.38. Interest on bearer securities.—Unless the offering circular and
notice of call provide otherwise, interest on coupon securities is payable in regular
course of business upon presentation and surrender of the interest coupons as they
mature. Such coupons are payable at any Federal Reserve bank or branch, or
the Treasurer's Office." Interest on Treasury bills, and any other bearer securities which may be sold and issued on a discount basis and which are payable at
par at maturity, is represented by the difference between the purchase price and
the par value, and no coupons are attached.
SUBPART F

ASSIGNMENTS OF REGISTERED SECURITIES

GENERAL

Sec. 306.40. Execution of assignments or special endorsements.
(a) Execution of assignrhents.—The assignment of a registered security should
be executed by the owner or his authorized representative in the presence of an
officer authorized to certify assignments. All assignments must be made on the
backs of the securities, unless otherwise authorized by the Bureau, a Federal
Reserve bank or branch, or the Treasurer of the United States. An assignment
by mark (X) must be witnessed not only toy a certifying 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.
(b) Special endorsements in lieu of assignmvents.—A -security may be presented without assignment for any authorized transaction by a financial institution which is (1) a member of the Federal Reserve System, (2) a member of
the Federal Home Loan Bank System, or (3) insured by the Federal Deposit
1 The final installment of interest on securities which m a t u r e d or were called before t h e
effective date of these regulations will be paid with t h e principal upon presentation of the
securities unless otherwise provided in the offering circular or notice of call. See sec.
306.15(b) for presentation of securities during periods transfer books are closed.
2 Banking institutions will usually cash t h e coupons w i t h o u t charge as an accommodation to their customers.




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19 65 REPORT OF THE SECRETARY OF THE TREASURY

Insurance Corporation, provided full instructions are furnished as to the transaction desired and the security bears the endorsement, tmder the official seal of .
the institution, as follows:
Presented in accordance with instructions of the owner (s).
Absence of assignment guaranteed.
(Name of financial institution)
By
(Signature and title of officer)

This form of endorsement will be an unconditional guarantee to the Treasury
Department that the institution is acting as attorney in fact for the owner(s)
of the security under proper authorization and that the officer is duly authorized
to act.
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 ladvance 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 by or in behalf of the owner.
Sec. 306.42. Alterations and erasures.—^If an alteration or erasure has been
made in an assignment, the assignor should appear before an authorized certifying officer and execute a new assignment to the same assignee. If the new
assignment is to other than the 'assignee whose name has been altered or erased,
a disclaimer from the first-named assignee should be obtained. Otherwise, an
' affidavit of explanation by the person responsible for the alteration or erasure
should be submitted for consideration.
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 certify assignments of securities. Unless
otherwise authorized by the Bureau, a Federal Reserve biank or branch, or the
Treasurer of the United States, the disclaimer must be written, typed, or
stamped on the back of the security in substantially the following 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
(Month and year)

disclaimer of interest.

(Place)

(SEAL)

(Signature and official designation
of certifying 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. After >an assignment has been voided, in
order to dispose of the security, an assignment by or on behalf of the owner will
be required.
Sec. 306.44. Discrepancies in names.—^The Department will ordinarily require
an explanation of discrepancies in the names which lappear in inscriptions,
assignments, supporting evidence, or in the signatures to any assignments.
(Form PD 385 may be used for this purpose.) Plowever, where the variations
in the name of the registered owner, as inscribed on secnrities 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 the assignments are signed exactly as the securities are inscribed and
are duly certified by the same certifying officer.




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Sec. 306.45. Officers authorized to certify assignments.
(a) Officers authorized generally.—Officers authorized to certify 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 to (i) generally bind their respective institutions by their acts, (ii) unqualifiedly guarantee signatures to
assignments of securities, or (iii) expressly certify assignments of securities.
(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.
(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 certify assignments in foreign countries :
(1) United States diplomatic or consular representatives.
(2) Managers, assistant managers, and other officers of foreign branches
of blanks 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 certify 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 v^ith a
joint owner. 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) Oommissioned 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
per sonnet and civilian field employees, and (ii) members of the families of such
personnel or civilian employees.
(d) Special provisions for certifying assignments.—The Commissioner of the
Public Debt, the Chief of the Division of Loans and Currency, any Federal Reserve bank or branch, or the Treasurer of the United States, is authorized to
make special provisions for any case or class of cases.
Sec. 306.46. Duties and responsibilities of certifying officer.—A certifying
officer must require execution of an assignment, or a form with respect to securities, in his presence after he has; established the identity of the 'assignor
and before he certifies the signature. He must then complete the certification.
An employee who is not an officer should insert "Authorized signature" in the
space provided for the title. However, an assignment of a security need not be
executed in the presence of 'the certifying officer if he unqualifiedly guarantees
the signature thereto, in which case he must place his endorsement on the
security, following the signature, in the form "Signature guaranteed, First
National Bank of JonesviHe, N.H., by A. B. Doe, President." The certifying
officer and, if he is an officer or employee of an organization, the organization
will be held responsible for any loss the United States may suff'er as the result.
of his fault or negligence.
Sec. 306.47. Evidence of certifying officer's authority.—The authority of an
individual to act as a certifying officer is established by -affixing to a certification
of an assignment, or a form with respect to securities, or an unqualified guarantee of a signature to an assignment, either (a) the official seal of the organi-




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19 65 REPORT OF THE SECRETARY OF THE TREASURY

zation, or (b) a legible imprint of the issuing agent's dating stamp, if the organization is an authorized issuing agent for United States savings bonds of Series
E.- Use of such stamp shall result in the same responsibility on the part of the
organization as if its official seal were used. If the certifying officer does not
have access to the seal or issuing agent's dating stamp, his authority to act as a
certifying officer must be certified, under official seal or stamp, to the Bureau by
an officer having access to the organization's records and will be recognized until
evidence is received that his authority has been terminated. (Form P p 835
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 certify. A judge
or clerk of court must use the seal of the court. Any other certifying 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 persons not to act as certifying officer or witness.—•
Neither the assignor, the assignee, nor any person having an interest in a security
may act as a certifying officer, or as a witness to an assignment by mark. However, a bank officer may certify 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.
SUBPART G

A S S I G N M E N T S BY OR I N B E H A L F OF I N D I V I D U A L S

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, changed by order of court from Hans Jung."
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 certified by an authorized officer, is written to show that
fact, for example, "Mrs. Mary .J. Brown, changed by marriage from Miss Mary
Jones."
Sec. 306.56. Assignment of securities registered in the names of or assigned
to two or more persons.
(a) For transfer or exchange.—Securities registered in the names of or assigned to two or more persons may be transferred or exchanged during the lives
of all the joint owners only upon assignments by all' or on 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. In the latter case, 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 to be received in exchange are to be registered in the same names and 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 oMernative, for example, "John B.
Smith or Mrs. Mary J. Smith" or "John B. Smith or Mrs. Mary J. Smith or the
survivor," may be assigned by one of them at maturity or upon call, for redemption or redemption-exchange, for his own account or otherwise, whether or not
the other joint owner or owners are deceased.
(2) Joint registration or assignment.—Securities registered in the names of or
assigned to two or more persons jointly, for example, "John B. Smith and Mrs.
Mary J. Smith," "John B. Smith and Mrs. Mary J. Smith or the survivor," or
"John B. Smith and Mrs. Mary J. Smith as tenants in common," may be as-




EXHIBITS

223

signed by one of them during the lives of all only for (i) redemption at maturity
or upon call, and then only for redemption for the account of all, or (ii) redemption-exchange for securities to be registered in their names in the same form as
appears in the registration or assignment of the securities surrendered. Upon
proof of the death of one of the joint owners, 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
which preclude the right of survivorship 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 certifying 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 qualification. (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 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, disqualification of the natural guardian to act as
such, qualification of a legal guardian or similar representative, or the death
of the minor.
(c) Assignments by voluntary guardians of incoinpetents.—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 needed to pay expenses already incurred, or to be incurred during
any 90-day period, for the care and support of the incompetent or his legal
dependents and the total face amount of such securities for which redemption
or exchange is requested 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 (123^5-6789) 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, Investments Series
B-1975-80.




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19 65 REPORT OF THE SECRETARY OF THE TREASURY
SUBPART H — A S S I G N M E N T S

I N B E H A L F OF E S T A T E S OF DECEASED

OWNERS

Sec. 306.65. Special provisions applicable to small amounts of securities,
interest checks, or redemption checks.—Entitlement to, or the a u t h o r i t y to dispose of, a small amount of 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 t h e aggregate
a m o u n t of securities and checks involved (excluding checks representing interest on the securities), as indicated by the following t a b l e :
Amount

C ircumstances

$100
500
500

No administration
Estate being administered
Estate settled -

Form
PD 2216
PD 2488
PD 2458-1

To'the executed b y Person who paid burial expenses.
Executor or adniinistrator.
Former executor or administrator,
attorney, or other qualified person.

Sec. 306.66. Estates—administration.
( a ) Temporary or special administrators.—Temporary or special administrators may assign securities for any authorized transaction within t h e scope of
their authority. The assignments m u s t be supported b y :
(1) Temporary administrators.—A certificate, u n d e r court seal, showing t h e
appointment in full force within thirty days preceding t h e d a t e of receipt of
t h e securities.
(2) Special administrators.—A certificate, u n d e r court 'Seal, showing the
appointment in full force within 6 months preceding the date of receipt of the
securities. Authority for assignments for t r a n s a c t i o n s not within the scope of
appointment m u s t be established by a duly certified copy of a special order of
court.
(b) I n course of administration.—A security belonging to t h e estate of a
decedent which is being administered by a duly qualified executor or general
a d m i n i s t r a t o r ' will be accepted for any authorized transaction upon assignment by isuch representative.
(See sec. 306.77.)
Unless the security is
registered in t h e name of and shows the capacity of t h e representative, the
assignment m u s t be supported by a certificate or a copy of t h e letters of appointment, certified under court seal. T h e certificate or certification, if required, must
be dated not more t h a n six months before t h e d a t e of t h e assignment and must
contain a statement t h a t the appointment is in full force, unless (1) it shows
the appointment w a s m a d e not more t h a n . one year before the d a t e of the
assignment, or (2) t h e representative or a corepresentative is a corporation, or
(3) redemption is being m a d e for application of t h e proceeds in payment of
F e d e r a l estate taxes as provided by sec. 306.28.
(c) After settlement through court proceedings.—Securities belonging to the
estate of a decedent which h a s been settled in court will be accepted for any
authorized transaction upon assignments by t h e person or persons entitled, as
determined by t h e court. The assignments should be supported by a copy,
certified u n d e r court seal, of t h e decree of distribution, t h e representative's final
account a s approved by t h e court, or other pertinent court records.
Sec. 306.67. E s t a t e s not administered.
(a) Special provisions under S t a t e laws.—If, under State law, a person h a s
been recognized or appointed to receive or distribute t h e assets of a decedent's
estate without regular administration, h i s assignment 'of securities belonging
to t h e estate will be accepted provided h e submits a p p r o p r i a t e evidence of his
authority.
(b) Agreement of persons entitled.—When it appears t h a t no legal representative of a decedent's estate h a s been or is to be appointed, securities belonging to
t h e estate may be duly disposed of p u r s u a n t to an agreement and assignment by
all persons entitled to s h a r e in t h e decedent's personal estate. ( F o r m P D 1646
may be used.) Plowever, all debts of t h e decedent and his estate m u s t be paid
or provided for and t h e interests of any minors or incompetents must be protected.
Sec. 306.68. Nontransferable securities.—The provisions of this subpart, so far
a s applicable, govern transactions in T r e a s u r y Bonds, Investment Series
B-1975-80.




EXHIBITS
SUBPART I

225

A S S I G N M E N T S BY OR I N B E H A L F OF T R U S T E E S AND S I M I L A R F I D U C I A R I E S

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 pr 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.—Securities registered in the name
of or assigned to a board, committee, or other body authorized to act as a unit
for any public or private trust estate may be assigned for any authorized transaction by anyone authorized to act in behalf of such body. 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 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 redemption-exchange 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

A S S I G N M E N T S I N B E H A L F OF PRIVATE OR P U B L I C 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
782-556—^66>

15




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19 65 REPORT OF THE SECRETARY OF THE TREASURY

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 1010,
or any substantially similar form, may be used when the authority relates to
specific securities; Form PD 1011, or any substantially similar form, may be
used for securities generally.) 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 the title of an 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 tb 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 eiitity, 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 public officer designated by title may be assigned by such officer, supported
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 vn 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 certifying officer under the conditions set out in sec.
306.45 for certification of as'signments. . Powers need not be submitted in support
of assignments for redemption-exchange or exchanges pursuant to advance refunding off"ers where the securities to be issued are to be registered in the same
names and forms as appear in the inscriptions or assignments of the securities
surrendered, and such securities are registered in the names of or assigned to
(1) corporations, unincorporated associations, lodges, 'societies, or similar organizations, or their legal successors, or (2) individuals, and the assignments are
executed on their behalf by corporate attorneys in fact. In all other cases, the
original power, or a photocopy showing the grantor's autograph signature, properly certified, must be submitted, together with the security assigned on the
owner's behalf by the attorney in fact.
An assignment by a substitute 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 substitute attorney in fact for the apparent benefit of either
will not be accepted unless expressly authorized. (Form PD 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.)




EXHIBITS

227

If there are two or more joint attorneys in fact or substitutes, all must unite
in an assignment. However, less than all may assign if the power authorizes
less than all to act, or the assignment is for redemption for the account of the
owner, or for redemption-exchange or pursuant to an advance refunding offer
and the new securities are to be registered in the owner''s name. 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 and 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), 306.66(b), 306.75, and 306.76.
Powers must specifically designate the securities to be assigned.
(c) For corporations or unincorporated associations.—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 isupporting 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 limitations imposed by
the terms of the particular issues.
SUBPART L

TRANSFER T H R O U G H J U D I C I A L

PROCEEDINGS

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 established.^
Sec. 306.96. Evidence required.—Oopies of a final judgment, decree, or order
of court and of any necessary supplementary proceedings must be sulbmitted.
Assignments by a trustee in bankruptcy or a receiver of an insolvent's estate
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.
Where the documents are dated more than six months prior to presentation of
the securities, there must also be submitted a certiflcate 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
^ 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, m u s t perfect his title
in accordance with the provisions of State law. If there are no such provisions, the
D e p a r t m e n t will not recognize his title to the security.




228

19 65 REPORT OF THE SECRETARY OF THE TREASURY

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, which ever 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 l^^ percent 5-year EA or EO Treasury
notes.
SUBPART M—REQUESTS 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 duly
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 susi^ension
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 established 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 bearer.
(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 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 claimant 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.
1 I t h a s been the lon.gstanding policy of the D e p a r t m e n t to assume no responsibility for
the protection of bearer securities not in the possession of persons claiming rights therein
and to give no eflect to any notice of such claims. This policy was formalized on Apr. 27,
1867, when t h e Secretary of the Treasury issued the following s t a t e m e n t :
" I n consequence of the increasing trouble, wholly w i t h o u t practical benefit, arising from
notices which a r e constantly received a t the D e p a r t m e n t respecting the loss of coupon
bonds, which are payable to bearer, and of Treasury notes issued and remaining in blank
a t t h e time of loss, it becomes necessary to give this public notice, t h a t the Government
cannot protect and will not undertake to protect the owners of such bonds and notes against
the consequences of their own fault or misfortune,
"Hereafter all bonds, notes, and coupons, payable to bearer, and Treasury notes issued
and remaining in blank, will be pnid to the p a r t y presenting them in pursuance of the
regulations of the Department, in the course of regular business ; and no a t t e n t i o n will be
paid to caveats which may be filed for the purpose of preventing such payment."




EXHIBITS
SUBPART N — C L A I M S

ON ACCOUNT OF LOSS, T H E F T , DESTRUCTION,
DEFACEMENT OF S E C U R I T I E S

229
MUTILATION,

OR

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 relief,
under certain conditions, on account of the loss, theft, destruction, multilation,
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 interest of the United States, must be filed.
Sec. 306.106. Reports of loss, theft, destruction, multilation, 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 multilated 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, multilated, or defaced
securities.
(a) Registered securities.—Relief is authorized 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,
multilated, or defaced. Relief is available in the same manner for bearer securities restrictively endorsed in accordance with the provisions of Department
Circular No. 853, current revision (31 CFR 328).
(b) Bearer securities or registered securities so assigned as to become, in effect,
payable to bearer.—Relief is authorized for bearer securities and registered
securities so assigned as to become, in effect, payable to bearer, proved to have
been destroyed, multilated, 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 is authorized for interest coupons if 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 granted for a lost, stolen,
destroyed, mutilated, or defaced security, it will be in the form of either (a) a
substitute security 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 for
redemption before maturity in accordance with its terms, or (b) payment, if the
security hais 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.




230

19 65 REPORT OF THE SECRETARY OF THE TREASURY
SUBPART O—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 regulatioiis 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
hards'hip, 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 liability.
•Sec. 306.117. Preservation of existing rights.—Nothing contained in these
regulations shall limit or restrict 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.
JOHN K.. CARLOCK,

Fiscal Assistant Secretary of the 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 INTEREST ON AN ANNUAL BASIS ONE DAY'S INTEREST I S 1/365
1/366 OF 1 YEAR'S INTEREST

OR

Computation of interest will be made on an annual basis in all cases where
interest is payable in one amount for the full term of the security, unless such
term is an iexact quarter-year (3 months) or an exact half-year (6 months),
when it is provided that interest shall be computed on a quarterly or semiannual
basis, respectively.
If the term of the securities is exactly one year, the Interest is computed for
the full period at the specified rate, regardless of the number of days in such
period.
If the termi of the isecurities is less than one full year, the annual interest period
for purposes of computation is considered to be the full year from but not including the date of issue to and including the anniversary of such date.
If the term of the securities is more than one full year, computation is made on
the basis of one full annual interest period', ending with the maturity date, and a
fractional part of the preceding full aimual interest period.
The computation of interest for any fractional part of an annual interest
period is made on the basis of 365 actual daj^s in any such period, or 366 days if
February 29 falls within such annual period.
COMPUTATION OF INTEREST ON A SEMIANNUAL BASIS ONE D A Y ' S INTEREST IS l / l 8 1 ,
1/182, 1 / 1 8 3 , OR 1/184 OF l / 2 YEAR'S INTEREST

Computation of interest will be made on a semiannual basis in all eases 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
half-year.
•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, computation is made on the basis




231

EXHIBITS

of one full half-year 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.
The number of days in any half-year period is shown in the following table:
For the half-3^ear
Beguming from the 1st or 15th
day of—
January
February. _.
March
April
May
June
July.
August
September..
October
November_.
December-.

Ending on the 1st or 15th day o—
f
July
August
September.
October
November.
December.^
January
February. _
March
April
May
June

One year (any 2 consecutive half-years)..

Number of days
Regular
year

Leap
year

181
181
184
183
184
183
184
184
181
182
181
182

365

366

COMPUTATION OF INTEREST ON A QUARTERLY BASIS ONE D A Y ' S INTEREST IS
1/89, 1/90, 1 / 9 1 , OR 1/92 OF l / 4 YEAR'S INTEREST

Computation of interest will be made on a quarterly basis in all cases where
interest is payable for one or more full quarter-year periods, or for one or more
full quarter-year periods and a fractional part of a quarter-year period.
A quarter-year interest period is an exact quarter-year of three months, and
may comprise 89, 90, 91, or 92 days. An exact quarter-year's interest is computed
for each full quarter-year period irrespective of the actual number of days in
the quarter-year. Por a fractional part of any quarter-year computation is on
the basis of the actual number.of days in such quarter-year (February 29 being
included if it falls within any such quarter-year). If the initial interest covers
a fractional part of a quarter-year (preceding a full quarter-year period),
computation is on the basis of the actual number of days in the quarter-year
(exactly 3 months) ending on the day such initial interest becomes due; if the
final interest covers a fractional part of a quarter-year (following a full quarteryear period), computation is on the basis of the actual number of days in the
quarter-year beginning on the day such final interest begins to accrue and
ending exactly three months thereafter. The number of days in any quarteryear period is shown in the following table:
For the quarter-year
Beginning from the 1st or 15th
day of—
January
February. _.
March
April
May
June
July
August
September_.
October
November_.
December..
One year (any 4 consecutive quarters).




Ending on the 1st or 15th da3^ of-

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

Number of days
Regular
year

Leap
year
91
90
92
91
92
92
92
92
91
92
92

91
366

232

19 65 REPORT OF THE SECRETARY OF THE TREASURY
Use of Interest Tables

In the appended tables 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 quarterly (table I ) , semiannual (table I I ) , and
annual (table III) interest period, at all rates of interest, in steps of % percent,
from Ys to 6 percent. The amount of interest accruing on any date (for a
fractional part of 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, the basis (quarterly, semiannual, or annual) upon which interest is computed, and the rate of
interest (percent per annum) may be determined from the text of the security,
or from the oflicial 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 in the fractional period from 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 appended table for interest payable quarterly,
semiannually, or annually, as the case may be, 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 oh $1,000 by the other amount expressed as a decimal of
$1,000.)
TREASURY BILLS

The methods of computing discount rates on U.S. Treasury bills 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 the year will 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 falls 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 of 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 J u l y 1, 1954 :
Principal a m o u n t — m a t u r i t y value
Price a t issue—amount received
Amount of discount
$0.50-^91 X 3 6 0 - ^ ' $ 1 0 a = 1.978 p e r c e n t

.
-

$100. 00
99, 50
. 50

TRUE DISCOUNT

The true discount rate on a Treasury bill of not more than one-half year in
length 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 the date of issue (365 ordinarily, but 366 if February 29 falls within




233

EXHIBITS

t h e y e a r from d a t e of issue) t o obtain t h e a m o u n t of discount p e r y e a r ; a n d (4)
d i v i d i n g t h e a m o u n t of discount p e r y e a r by t h e sale price of t h e bill to obtain t h e
t r u e discount rate.
For example:
91-day bill—<Iated April 1. 1954—due J u l y 1, 1954 :
P r i n c i p a l a m o u n t — m a t u r i t y value^
Price a t i s s u e — a m o u n t received

$100, 00
99. 50

A m o u n t of discount
$ 0 . 5 0 - h 9 1 X 3 6 5 - ^ $ 9 9 . 5 0 = 2 . 0 1 6 percent.

. 50

T A B L E I.—Decimal for one day's interest on $1,000 at various rates of interest,
payable quarterly, or on a quarterly basis, i n regular years of 365 days and i n
leap years of 366 days
Interest period ending on the 1st or 15th of
Quarter-year of
92 days
Regular year:
January, February,
June, August,
September, October, November

Rate per annum

Quarter-year of
91 days
Regular year:
July, December
Leap year:
March, April

Quarter-year of
90 days
Regular year:
March, April
Leap year: M a y

Quarter-year of
89 days
Regular year:
May

Percent
•L/

•i/

}A

RZ

3/

]4
V/a
Ijy

IM
1]4
15^
IS/

IJ1:
2
2H
2}4
2M
2H
2ys.
2H
2J4
3.!

--

—

. _ .:_.

zys

zU. -

33^.._

zyz
3M
Z}i
4
i}4
4^4H
i%.
4M

-

-

_
_
- - -

iPs.: : : : _ : : : : " : : : : : : : : - :
5„:
5^8
5}4
5}4

._
.

.

ga/

sys
6

_ _

$0, 003 396 739
. 006 793 478
. 010 190 217
. 013 586 957
. 016 983 696
. 020 380 435
. 023 777 174
. 027 173 913
. 030 570 652
. 033 967 391
. 037 364 130
. 040 760 870
. 044 157 609
. 047 554 348
. 050 951 087
. 054 347 826
. 057 744 565
. 061 141 304
. 064 538 043
. 067 934 783
. 071 331 522
. 074 728 261
. 078 125 000
. 081 521 739
. 084 918 478
. 088 315 217
. 091 711 957
.095 108 696
. 098 505 435
. 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
. 135 869 565
. 139 266 304
. 142 663 043
. 146 059 783
. 149 456 522
. 152 853 261
.156 250 000
. 159 646 739
. 163 043 478




$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
. 051 510 989
.054 945 055
. 058 379 121
.061 813 187
. 065 247 253
. 068 681 319
. 072 115 -385
. 075 549 451
. 078 983 516
. 082 417 582
.085 851 648
. 089 285 714
. 092 719 780
. 096 153 846
. 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
. 130 494 505
. 133 928 571
. 137 362 637
. 140 796 703
. 144 230 769
. 147 664 835
. 151 098 901
. 154 532 967
. 157 967 033
. 161 401 099
. 164 835 165

$0. 003 472 222
. 006 944 444
. 010 416 667
. 013 888 889
.017 361 111
. 020 833 333
. 024 305 556
. 027 777 778
. 031 250 000
. 034 722 222
. 038 194 444
. 041 666 667
. 045 138 889
. 048 611 111
. 052 083 333
. 055 555 556
. 059 027 778
. 062 500 000
. 065 972 222
. 069 444 444
. 072 916 667
. 076 388 889
. 079 861 111
. 083 333 333
. 086 805 556
. 090 277 778
. 093 750 000
. 097 222 222
. 100 694 444
.104 166 667
. 107 638 889
.111 111 111
.114 583 333
. 118 055 556
. 121 527 778
. 125 000 000
. 128 472 222
. 131 944 444
. 135 416 667
. 138 888 889
. 142 361 111
. 145 833 333
.149 305 556
. 152 777 778
. 156 250 000
. 159 722 222
. 163 194 444
. 166 666 667

$0.003 511 236
.007 022 472
. 010 533 708
.014 044 944
. 017 556 180
.021 067 416
.024 578 652
.028 089 888
.031 601 124
.035 112 360
.038 623 596
. 042 134 831
.045 646 067
.049 157 303
.052 668 539
. 056 179 775
. 059 691 Oil
. 063 202 247
. 066 713 483
. 070 224 719
.073 735 955
.077 247 191
.080 758 427
. 084 269 663
. 087 780 899
. 091 292 135
.094 803 871
.098 314 607
. 101 825 843
. 105 337 079
.108 848 315
. 112 359 551
. 115 870 787
. 119 382 022
. 122 893 258
.126 404 494
. 129 915 730
. 133 426 966
. 136 938 202
. 140 449 438
. 143 930 674
. 147 471 910
. 150 983 146
. 154 494 382
.158 005 618
.161 516 854
.165 028 090
. 168 539 326

234

19 65 REPORT OF THE SECRETARY OF THE TREASURY

T A B L E II.—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 t h e 1st or 15th ofHalf-year of 183 d a y s Half-year of 182 d a y s |
Half-year of 184 d a y s |
R a t e per a n n u m
Regular year:
January, February, September,
November

Regular year:
October, D e cember
L e a p year:
April, J u n e

Regular year:
April, J m i e
L e a p year:
March, May,
July, August

Half-year of 181 d a y s
Regular year:
March, May,
July, August

Percent

ys

y^
M
3^

%—r-

—

M

ys
1
iKs
l>^
1^8

\y2

.m
IM
lys
2
2ys
2>i
2^8
2^
2ys
2M
2ys
3

._
-__-_

33/8—

— -

3M
3/8
3K2
3^8
3M
3j^
4._

•_

4K8

4K

m

43^
45/8
WA

iys
6

—

._-_—

5H
5^

_

m
53^

•-

55/8

5:^
5^8




I. 003 396 739
. 006 793 478
. 010 190 217
. 013 586 957
. 016 983 696
. 020 380 435
. 023 777 174
. 027 173 913
. 030 570 652
. 033 967 391
. 037 364 130
. 040 760 870
.044 167 609
. 047 564 348
.050 951 087
. 064 347 826
. 057 744 565
. 061 141 304
. 064 538 043
. 067 934 783
. 071 331 522
. 074 728 261
. 078 125 000
.081 521 739
. 084 918 478
. 088 315 217
. 091 711 957
. 095 108 696
. 098 505 435
. 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
. 135 869 565
. 139 266 304
. 142 663 043
. 146 069 783
. 149 456 522
•. 152 853 261
. 166 250 000
. 159 646 739
. 163 043 478

). 003 415 301
. 006 830 601
. 010 245 902
. 013 661 202
.017 076 603
. 020 491 803
. 023 907 104
, 027 322 404
. 030 737 705
. 034 153 005
.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
.078 551 913
. 081 967 213
. 085 382 514
.088 797 814
. 092 213 116
.096 628 415
. 099 043 716
. 102 459 016
. 105 874 317
. 109 289 617
. 112 704 918
. 116 120 219
.119 535 619
•. 122 960 820
. 126 366 120
. 129 781 421
. 133 196 721
. 136 612 022
. 140 027 322
. 143 442 623
. 146 867 923
. 160 273 224
•. 153 688 525
.157 103 826
. 160 519 126
. 163 934 426

10, 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
. 034 340 669
. 037 774 725
. 041 208 791
. 044 642 867
. 048 076 923
.061 610 989
. 064 945 065
. 058 379 121
. 061 813 187
. 065 247 263
. 068 681 319
. 072 116 386
. 075 649 451
. 078 983 516
. 082 417 582
. 085 851 648
. 089 285 714
. 092 719 780
. 096 153 846
. 099 687 912
. 103 021 978
. 106 456 044
. 109 890 110
.113 324 176
. 116 758 242
. 120 192 308
. 123 626 374
. 127 060 440
. 130 494 505
. 133 928 671
.. 137 362 637
. 140 796 703
. 144 230 769
. 147 664 836
. 151 098 901
. 164 543 967
.157 967 033
. 161 401 099
. 164 835 165

;0, 003
.006
. 010
. 013
. 017
. 020
. 024
.027
. 031
. 034
.037
. 041
. 044
. 048
. 051
. 066
. 058
, 062
. 066
. 069
. 072
. 075
. 079
. 082
.086
. 089
. 093
. 096
. 100
. 103
. 107
. 110
. 113
. 117
. 120
. 124
. 127
.131
. 134
. 138
. 141
. 145
. 148
. 161
.155
. 158
. 162
.166

463 039
906 077
359 116
812 155
266 193
718 232
171 271
624 309
077 348
630 387
983 425
436 464
889 503
342 541
795 580
248 619
701 667
154 696
607 735
060 773
513 812
966 851
419 890
872 928
325 967
779 006
232 044
685 083
138 122
591 160
044 199
497 238
960 276
403 315
856 354
309 392
762 431
215 470
668 608
121 547
674 686
027 624
480 663
933 702
386 740
839 .779 •
292 818
745 856

235

EXHIBITS

T A B L E III.—Decimal for one day^s interest on $1,000 at various rates of interest,
payable annually or on an annual basis, in regular years of 365 days and in leap
years of 366 days.
Rate per annum

Regular year, 365 Leap year, 366 days
days

Percent
H.

-

-

^--^——

-

-

-.

ys

H
—

YB

J^
ys
1

IH- —
IK
1H-IH

m
iM
m
2

—-

-

—
-

-

—

2H2K

—

2^-23^
2ys

ZH
3K

-.

—-.

2M--

2y8
3

—
—

- —

...-,

—-

m
3>^_

-

-

zys
33^

3^
4
iH4M
4H
43^
4H
4M
iys
5

bH
bK

bys
53^
bYs

-

-

-—

-

—_—

5M
bys




— -

$0.003 424 658
,006 849 315
, 010. 273 973
,013 698 630
,017 123 288
.020 647 946
,023 972 603
.027 397 200
, 030 821 918
, 034 246 575
.037 671 233
,041 095 890
.044 520 548
,047 946 205
.061 369 863
. 054 794 521
.058 219 178
,061 643 836
.065 068 493
,068 493 151
.071 917 808
.075 342 466
.078 767 123
.082 191 781
, 085 616 438
, 089 041 096
.092 465 753
, 095 890 411
.099 315 068
.102 739 762
.106 164 384
, 109 589 041
. 113 013 699
, 116 438 356
. 119 863 014
. 123 287 671
,126 712 329
. 130 136 986
, 133 561 644
,136 986 301
. 140 410 959
,143 835 616
,147 260 274
,150 684 932
, 154 109 589
.167 534 247
.160 958 904
,164 383 562

$0,003 415 301
.006 830 601
,010 254 902
, 013 661 202
, 017 076 503
.020 491 803
.023 907 104
,027 322 404
.030 737 705
.034 153 005
,037 568 306
,040 983 607
.044, 398 907
.047 814 208
,051 229 508
, 064 644 809
, 058 060 109
, 061 475 410
, 064 890 710
.068 306 Oil
.071 721 311
.075 136 612
.078 551 913
.081 967 213
.085 382 514
. 088 797 814
, 092 213 115
. 095 628 415
.099 043 716.
. 102 459 016
. 105 874 317
.109 289 617
. 112 704 918
, 116 120 219
. 119 635 519
. 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
.153 688 525
.167 103 825
.160 519 126
.163 934 426

236

19 65 REPORT OF THE SECRETARY OF THE TREASURY

Exhibit 7.—Ninth revision, December 23, 1964, of D e p a r t m e n t Circular No. 530,
regulations governing United S t a t e s savings bonds
TREASURY DEPARTMENT,

Washington, December 23, 1964.
D e p a r t m e n t Circular No. 530, Eighth Revision, dated December 26, 1957, as
amended (31 C F R 315), is hereby further amended a n d issued as the Ninth Revision.
AUTHORITY : Sees. 315.0 to 315.93 issued under authority of sections 22 a n d 25
of t h e Second Liberty Bond Act, a s amended, 49 Stat. 21, a s amended, 73 Stat;
621 (31 U.S.C. 757c, 757C-1).
SUBPART A — G E N E R A L INFORMATION

Sec. 315. Applicability of regulations.—These regulations apply to all United
States savings bonds of whatever series designation (hereinafter referred to as
"savings bonds" or " b o n d s " ) bearing any issue dates whatever, t o the extent
specified herein and in t h e offering circulars governing such bonds. The provisions of these regulations with respect to bonds registered in t h e names of certain classes of individuals, fiduciaries, a n d organizations a r e equally applicable
to bonds to which such individuals, fiduciaries, and organizations a r e otherwise
shown to be entitled under these regulations. The provisions of D e p a r t m e n t Circular No. 300, current revision (31 C F R 306), have no application to savings
bonds.
Sec. 315.1 Official agencies.—The B u r e a u of t h e Public Debt of the T r e a s u r y
D e p a r t m e n t is charged w i t h m a t t e r s relating to savings bonds. Correspondence
concerning transactions after original issue and requests for appropriate forms
should be addressed to (1) t h e Federal Reserve bank or branch of t h e district
in which t h e correspondent is located, or (2) t h e B u r e a u of t h e Public Debt,
Division of Loans a h d Currency Branch, 536 South Clark Street, Chicago, 111.
60605, or (3) the Ofiice of the T r e a s u r e r of t h e United States, Securities Division, Washington, D;C. 20220, except where specific instructions are otherwise
given in these regulations. Notices or documents not filed in accordance with
instructions in these regulations will not be recognized. T h e addresses of t h e
F e d e r a l Reserve banks and branches a r e :
F e d e r a l Reserve B a n k of Boston, Boston, Mass. 02106.
F e d e r a l Reserve B a n k of New York,
New York, N.Y. 10045.
Buffalo Branch, Buffalo, N.Y.
14240.
F e d e r a l Reserve B a n k of Philadelphia,
Philadelphia, P a . 19101.
Federal Reserve B a n k of Cleveland,
Cleveland, Ohio 44101.
Cincinnati Branch, Cincinnati,
Ohio 45201.
P i t t s b u r g h Branch, Pittsburgh,
P a . 15230.
Federal Reserve B a n k of Richmond,
Richmond, Va. 23213.
Baltimore Branch, Baltimore, Md.
21203.
Charlotte Branch, Charlotte, N.C.
28201.
Federal Reserve B a n k of Atlanta, Atlanta, Ga. 30303.
Birmingham Branch, Birmingham, Ala. 35202.
Jacksonville Branch, Jacksonville,
Fla. 32201.
Nashville B r a n c h , Nashville,
Tenn. 37203.




Federal Reserve B a n k of Atlanta, Atlanta, Ga. 30303—Continued
New Orleans Branch, New Orleans, La. 70160.
F e d e r a l Reserve B a n k of Chicago, P.O.
Box 834, Chicago, 111. 60690.
Detroit Branch, P.O. Box 1059,
Detroit, Mich. 48231.
F e d e r a l Reserve Bank of St. Louis,
P.O. Box 442, St. Louis, Mo. 63166.
Little Rock Branch, P.O. Box
1261, Little Rock, Ark. 72203.
Louisville Branch, P.O. Box 899,
Louisville, Ky. 40201.
Memphis Branch, P.O. Box 407,
Memphis, Tenn. 38101.
F e d e r a l Reserve Bank of Minneapolis,
Minneapolis, Minn. 55440.
Helena Branch, Helena, Mont.
59601.
F e d e r a l Reserve Bank of K a n s a s City,
K a n s a s City, Mo. 64106.
Denver Branch, Denver, Colo.
80217.
Oklahoma City Branch, Oklahoma
City, Okla. 73101.
Omaha Branch, Omaha, Nebr.
68102.

EXHIBITS
Federal Reserve Bank of Dallas, Station K, Dallas, Tex. 75222.
El Paso Branch, P.O. Box 100, El
Paso, Tex. 79999.
Houston Branch, P.O. Box 2578,
Houston, Tex. 77001.
San Antonio Branch, P.O. Box
1471, San Antonio, Tex. 78206.

237

Federal Reserve Bank of San Francisco, San Francisco, Calif. 94120.
Los Angeles Branch, P.O. Box
2077, Los Angeles, Calif. 90054.
Portland Branch, P.O. Box 3456,
Portland, Oreg. 97208.,
Salt Lake City Branch, P.O. Box
780, Salt Lake City, Utah
84110.
Seattle Branch, P.O. Box 3567,
Seattle, Wash. 98124.

Sec. 315.2. Definition of words and terms as used in these regulations.
(a) "Authorized issuing agent" means an incorporated bank, trust company,
savings bank, savings and loan association, other organization, or instrumentality
of the United States, qualified as an issuing agent under the provisions of Department Circular No. 657, current revision (31 CFR 317).
(b) "Authorized paying agent" means an incorporated bank, trust company,
savings bank, savings and loan association, or other organization qualified as
a paying agent under the provisions of Department Circular No. 750, current
revision (31 CFR 321).
(c) "Court" means one which has jurisdiction over the parties and subject
matter.
. (d) "Extended maturity date" is the date on which a bond will mature and
cease to bear interest under applicable optional extension provisions.
(e) "Extended maturity value" is the value of a bond at maturity under
applicable optional extension provisions.
(f) "Face value" of a bond refers to the value of the bond as shown on the
face thereof.
(g) "Incompetent" refers to a person under any legal disability except
minority.
(h) "Maturity date" means the date on which the bond will mature by the
terms of the circular offering it ior sale without regard to any optional extension
period.
(i) "Optional extension period" ^ means any period after maturity date which
the owner may retain the bonds and continue to earn interest on the maturity
value in accordance with the terms of the circular offering such bonds for sale.
(j) "Payment" and "redemption" are used interchangeably, unless otherwise
indicated. They refer to payment of a bond in accordance with these regulations.
(k) "Personal trust estate" means a trust estate established by natural persons
in their own right for the benefit of themselves or other natural persons in whole
or in part, and common trust funds comprised in whole or in part of such trust
estates.
(1) "Presented and surrendered" and "presentation and surrender" mean
the actual receipt of a bond, with an appropriate request for the particular
transaction, by the Bureau of the Public Debt, Chicago or Washington office,
the Office of the Treasurer of the United States, Securities Division, or a Federal
Reserve bank or branch, or, if the transaction is one which an authorized
paying agent may handle, receipt by such authorized paying agent.
(m) "Representative of the estate of a minor, incompetent, aged person,
absentee, etc.," means a guardian, conservator, or similar representative appointed by a court or otherwise legally qualified, regardless of the title by which
designated. These terms do not refer to a voluntary guardian recognized under
sec. 315.53, to a natural guardian, such as a parent, including a parent to whom
custody of a child has been awarded through divorce proceedings or a parent
by adoption, or to the executor or administrator of the estate of a decedent.
(n) "Reissue" means the cancellation and retirement of a bond and issue
of a new bond or bonds of the same series, amount (face value) (or the remainder thereof in case of partial redemption), and issue date.
(o) "Taxpayer identifying number" means the appropriate identifying number as required on tax returns and other documents submitted to the Internal
1 All Series E bonds have a 10-year optional extension period. Those bearing issue dates
of May 1, 1941, through May 1, 1949, have a second 10-year optional extension period.
Series H bonds bearing issue dates of J u n e 1, 1952, through J a n . 1, 1957, have a 10-year
optional extension period. Other bonds do n o t have t h i s feature.




238

19 65 REPORT OF THE SECRETARY OF THE TREASURY

Revenue Service, i.e., an individual's social security account number or an
employer identification number. The social security account number is comiposed of nine digits separated by two hyphens, for example, 123-45-6789; the
employer identification number is composed of nine digits separated by one
hyphen, for example, 12-3456789. The hyphens are an essential part of the
numbers and must be included.
1

SUBPART

B—REGISTRATION

Sec. 315.5 General.—Savings bonds are issued only in registered form. The
registration used on issue or reissue must express the actual ownership of and
interest in the bond and, except as otherwise specifically provided in Subpart E
and section 315.48 of Subpart J of these regulations, will be considered as
conclusive of such , ownership and interest. No designation of. an attorney,
agent, or other representative to request or receive payment on behalf of the
owner or a coowner, nor any restriction on the right of the owner or a coowner
to receive payment of the bond or interest, except as provided in the regulations,
may be made in the registration or otherwise. Registrations requested in
applications for purchase or requests for reissue should be clear, accurate, and
complete, conform with one of the forms set forth in this subpart, and include
the appropriate taxpayer identifying number.^ The registration of all bonds
owned by the same person, organization, or fiduciary should be uniform with
respect to the name of the owner and, in the case of a fiduciary, the description
of the fiduciary capacity. The owner, coowner, or beneficiary should be designated by the name by which he is ordinarily known or the one under which he
does business, including preferably at least one full given name. The name
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 a similar suffix
should be included, when ordinarily used or when necessary to distinguish
the owner from a member of his family. 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." The post
office address should include where appropriate, the number and street, route,
or any other local feature, and the ZIP Code.
Sec. 315.6 Restrictions on registration.
(a) Residence.—Registration of bonds is restricted on original issue, but not
on authorized reissue, to persons (whether natural persons or others) who are:
(1) residents of the United States, its territories and possessions, the Commonwealth of Puerto Rico, and the Canal Zone;
(2) citizens of the United States temporarily residing abroad; and
(3) civilian employees of the United States or members of its Armed Forces,
regardless of their residence or citizenship.
However, other natural persons may be designated as coowners or beneficiaries
with natural persons of the above classes, whether on original issue or reissue,
except that registration is not permitted in any form which includes the name of
any alien who is resident of any area with respect to which the Treasury Department restricts or regulates the delivery of checks drawn against funds of the
United States or any agency or instrumentality thereof.^
(b) Minority.—Bonds purchased by another person with funds belonging to
a minor should be registered in the name of the minor without a coowner or
1 I t is not m a n d a t o r y t o include taxpayer identifying numbers in registrations of Series E
bonds. Issuing agents for Series E bonds issued under payroll savings plans who desire
to place such numbers on the bonds should obtain i n s t r u c t i o n s from the Bureau of the
Public Debt, Washington, D,C. 20220. As the numbers must be included in Series H
bond registrations, except with respect t o such persons and organizations a s may be exempt
from furnishing such numbers under t h e regulations of the I n t e r n a l Revenue Service, they
are shown in the examples in sec, 315.7 for guidance. Series H bonds inscribed in the
name of an individual, with or w i t h o u t a beneficiary, must show the individual's social
security account number. The social security account number of either coowner may be
shown on bonds registered in coownership form, except t h a t if t h e coowners are husband
and wife, the husband's number should be shown. If the coowners are a minor and an
adult, t h e a d u l t ' s number should be shown. Questions concerning t a x p a y e r identifying
numbers and correct forms of registration should be submitted to t h e Federal Reserve bank
or branch of the a p p r o p r i a t e district, or to t h e Bureau of t h e P.ublic Debt, Division of
Loans and Currency Branch, 536 South Clark Street, Chicago, 111. 60605, or to t h e Office
of t h e Treasurer of the United States, Securities Division, Washington, D.C. 20220.
2 See D e p a r t m e n t Circular No. 655, current revision (31 CPR 2 1 1 ) .




EXHIBITS

239

beneficiary. A minor may name a coowner or beneficiary on bonds he purchases
with his wages, earnings, or other funds belonging to him and under his control.
A minor, whether or not under legal guardianship, may be named as owner, coowner, or beneficiary on bonds purchased by another individual with funds other
than those belonging to the minor.
If there is a representative of a minor's estate, bonds should be registered
in the name of the minor, or in the name of the representative, followed in
either case by an appropriate reference to the guardianship. Bonds purchased
by a representative of two or more minors, even though appointed in a single
proceeding, .should be registered separately in a form to show each guardianship
estate. A bond, may be purchased as a gift to a minor under a gifts to minors
statute in effect in a State in which either the donor or the minor resides, in
which case the bond should be registered as provided in the statute, with the
addition of a parenthetical reference identifying the statute if the registration
does not clearly identify it. Registration in the name of a natural guardian is
not authorized. See examples of forms of registration under sec. 315.7(&).
(c) Incompetency.—Bonds should not be registered in the name of an incompetent unless there is a legal representative of his estate, except under the
provisions of sec. 315.53. If there is a legal representative, the provisions of
paragraph {b) of this section apply as tO' registration in the name of the legal
representative or in the name of the incompetent followed by reference to the
guardianship.
Sec. 315.7. Authorized forms of registration.—Subject to any limitations or
restrictions contained in these regulations on the right of any person to be named
as owner, coowner, or beneficiary, bonds may be registered in the following
forms: ^
(a) Natural persons.—In the names of natural persons in their own right.
(1) Single owner. Example: John A. Jones 123-45-6789.
(2) Coownership form—two persons {only). In the alternative as coowners.
Examples:
John A. Jones 123-45-6789 or Mrs. Ella S. Jones.
Mrs. Ella S. Jones or John A. Jones 123-45-9876.
No other form of registration establishing coownership is authorized.
(3) Beneficiary form—two persons {only). Examples:
John A. Jones 123-45-6789 payable on death to Mrs. Ella S. Jones.
John A. Jones 123-45-6789 P.O.D. Mrs. Ella S. Jones.
"Payable on death" may be abbreviated to "P.O.D." as indicated in the last
example. The first person named is hereinafter referred to as the owner and
the second named person as the beneficiary.
(b) Fiduciaries and private or public organizations.—Only the single owner
form of registration is available for bonds owned by other than natural persons,
and the registration must conform to the forms authorized in this subsection.
(1) Fiduciaries.—In the names of auy persons or organizations, public or
private, as fiduciaries, but not where the fiduciary would hold the bonds merely
or principally as security for the performance of a duty, obligation, or service,
(i) Guardians, custodians, conservators, etc.—In the name and title or capacity
of the legally appointed, designated, or authorized representative or representatives of the estate of a minor, incompetent, aged person, absentee, etc., or in the
name of such individual, followed by an appropriate reference to the estate and
showing tlie nature of the legal disability or referring to the applicable statute.
Examples:
William C. Jones, guardian (or conservator, trustee, etc.) of the estate of
James F. Brown 123-45-6789, a minor (or an incompetent, aged person,
infirm person, or absentee).
John Smith 123-45-6789, a minor (or an incompetent, aged person, infirm
person, or absentee) under legal guardianship (or conservatorship or
trusteeship, etc.) of Henry C. Smith.
John Smith 123-45-6789, an adult under conservatorship of Henry Smith
pursuant to sec. 572,1963 Iowa Probate Code.
John Smith 123-45-6789, a minor (or incompetent) under custodianship by
designation of the Veterans Administration.
1 See Department Circular No. 655, current revision (31 CPR 211).




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19 65 REPORT OF THE SECRETARY OF THE TREASURY

John Smith 123-45-6789, an incompetent for whom Henry C. Smith has been
designated trustee by the Department of the Army pursuant to 37 U.S.C.
351-354.
William C. Jones, as custodian for John Smith 123-45-6789, under the
California Uniform Gifts of Securities to Minors Act.
William C. Jones, as custodian for John Smith 123-45-6789, a minor, under
the laws of Georgia (Chapter 48-3, Code of Ga. Ann.).
Richard Roe 123-45-6789, a minor (or an incapacitated adult) beneficiary
for whom Reva Roe has been designated representative payee by the
Secretary of Health, Education, and Welfare, pursuant to 42 U.S.C.
405(j).
(ii) Executors, administrators, etc.
(a) In the name of the representative or representatives of the estate of a
decedent appointed by a court or otherwise legally qualified. The registration
should include the name of the decedent and the name or names of all representatives. The name and title of the representative must be followed by.
adequate identifying reference to the estate. Example:
John Smith, executor of the will, (or administrator of the estate) of Henry
J. Smith, deceased 12-3456789.
(b) In the name of an executor authorized to administer a trust under the
terms of a will although he is not named as trustee. Example:
John Smith, executor of the will of Henry J. Smith, deceased, in trust for
Mrs. Jane Smith, with remainder over 12-3456789.
(iii) Trustees.—In the name and title or capacity (or title or capacity alone
where hereinafter provided) of the trustee or trustees of a single duly constituted
trust estate (which will be considered as an entity), substantially in accordance
with the examples set forth in this paragrai3h. Unless otherwise indicated, an
adequate identifying reference should be made to the trust instrument or other
authority creating the trust. A common trust fund established and maintained
according to law by a financial institution duly authorized to act as a fiduciary
will be considered as a single duly constituted trust estate within the meaning
of these regulations.
(a) Will, deed of trust, agreement, or similar instrument.—;'ExB.m^\eSi:
John Smith and the First National Bank, trustees under the will of Henry
J. Smith deceased 12-3456789.
The Second Natiohal Bank, trustee under an agreement with George E.
White, dated February 1, 1935, 12-3456789.
If the authority creating the trust designates by title only an officer of a board
or an organization as trustee, only the title of the officer should be used in the
registration. Example:
Chairman, Board of Trustees, First Church of Christ, Scientist, of Chicago,
111., in trust under the will of Henry J. Smith, deceased 12-3456789.
If the trustees are too numerous to be designated in the inscription by names
and capacity, the names or some of the names may be omitted. Examples:
John Smith, Henry Jones, et al., trustees under the will of Henry J. Smith,
deceased 12-3456789.
Trustees under the will of Henry J. Smith, deceased 12-3456789.
(b) Pension, retirement, or similar fund, or employees' savings plans.—In the
name and title (or title alone) of the trustee or trustees of a pension, retirement,
or similar fund, or an employees' savings plan. If the instrument creating the
trust provides that the trustees shall serve for a limited term, the names of the
trustees may be omitted. Examples:
First National Bank and Trust Company, trustee of the Employees' Savings
Plan of Jones Company, Inc., U/A dated Jan. 17, 1959, 12-3456789.
Trustees of the Employees' Savings Plan of Johnson Company, Inc., U/A
dated Jan. 20, 1964, 12-3456789.
First National Bank, trustee of pension fund of Industrial Manufacturing
Company, under agreement with said company dated Mar. 31, 1949, 123456789.
Trustees of Retirement Fund of Industrial Manufacturing Company, under
resolution adopted by its board of directors on Mar. 31, 1949, 12-3456789.
(c) Funds of a lodge, church, society, or similar organization.—If the funds
of a lodge, church, society, or similar organization, whether incorporated or not,




EXHIBITS

241

are held in trust by a trustee or trustees or a board of trustees, only the capacity
should be used in the registration. Examples:
Trustees of the First Baptist Church, Akron, Ohio, acting as a Board under
section 15 of its by-laws, 12-3456789.
Trustees of Jamestown Lodge No. 1,000, Benevolent and Protective Order
pf Elks, undej- section 10 of its by-laws, 12-3456789.
Board of Trustees of the Lotus Club, Washington, Ind., under Article X
of its constitution, 12-3456789.
(d) Public officers, corporations, or bodies.—If a public officer, public corporation, or public body acts as trustee under express authority of law, only the title
should be used in the registration. Examples:
Rhode Island Sinking Fund Commission, trustee of the General Sinking
Fund, under Ch. 35, Gen. Laws of R.I.
Superintendent of the Confederate Home for Men, in trust for the Benefit
Fund, under ,sec. 3183c, Vernon's Civil Stats, of Texas Ann.
(e) School, class, or activity fund.—If the principal or other officer of a public,
private, or parochial school acts as trustee for the benefit of the student body or
a class, group, or activity thereof, only the title should be used in the registration, and if the amount purchased for any one fund does not exceed $500 (face
value), no reference need be made to a trust instrument. Examples:
Principal, Western High School, in trust for Class of 1955 Library Fund
12-3456789.
Director of Athletics, Western High School, in trust for Student Activities
Association under resolution adopted May 12, 1955, 12-3456789.
(iv) Life tenants.—In the name of a life tenant, followed by adequate identifying reference to the instrument creating the life tenancy. Example:
Mrs. Jane Smith, life tenant under the will of Henry J. Smith, deceased
12-3456789.
(v) Investment agents.—In the name of a bank, trust company, or other financial institution, or individual, holding funds of a religious, educational,
charitable, or nonprofit organization, whether or not incorporated, as agent
under an agreement with the organization for the sole purpose of investing and
reinvesting the funds and paying the income to the organization. The name and
designation of the agent should be followed by an adequate identifying reference to the agreement. Examples :
Black County National Bank, fiscal agent 12-3456789, under agreement with
the Evangelical Lutheran Church of The Holy Trinity, dated Dec. 28,1949.
First National Bank and Trust Company, investment agent. 12-3456789,
under agreement dated Sept. 16, 1964, with Central City Post No. 1000,
Department of Illinois, American Legion.
(2) Private organizations {corporations, associations, and partnerships,
etc.).-^In the name of any private organization, but not in the names of commercial banks, which are defined for this purpose as those accepting demand
deposits. The full legal name of the organization, without mention of any
officer or member by name or title, should be used as follows:
(1) A corporation.—A business, fraternal, religious, or other private corporation, followed preferably by the words "a corporation" (unless the fact of incorporation is shown in the name). Examples :
Smith Manufacturing Company, a corporation, 12-3456789.
Jones and Brown ,Inc. 12-3456789.
(ii) An unincorporated association.—An unincorporated lodge, society, or similar self-governing association, followed preferably by the words "an unincorporated association." The term "an unincorporated association" should not
be used to describe a trust fund, a board of trustees, a partnership, or a business
conducted under a trade name or as a sole proprietorship. If the association
is chartered by or affiliated with a parent organization, the name or designation
of the subordinate or local organization should be given first, followed by the
name of the parent organization. The name of the parent or national organization may be placed in parentheses and, if it is well known, may be abbreviated. Examples:
The Lotus Club, an unincorporated association, 12-3456789.
Local 447, Brotherhood of Railroad Trainmen, an unincorporated association, 12-3456789.
782-55'6—66^

16




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19 65 REPORT OF THE SECRETARY OF THE TREASURY

Eureka Lodge No. 317 (A.F. & A.M.), an unincorporated association,
12-3456789.
(iii) A partnership.—A partnership (which will be considered as an entity),
followed by the words "a partnership." Examples:
Smith and Brown, a partnership 12-3456789.
Acme Novelty Company, a partnership 12-3456789.
(iv) Institutions {churches, hospitals, homes, schools, etc.).—In the name of
a church, hospital, home, school, or similar institution conducted by a private
organization or by private trustees, regardless of the manner in which it is
organized or governed or title to its property is iheld. Examples:
Shriners' Hospital for Crippled Children, St. Louis, Mo. 12-3456789.
St. Mary's Roman Catholic Church, Albany, N.Y. 12-3456789.
Rodeph Shalom Sunday School, Philadelphia, Pa. 12-3456789.
(3) Government units, agencies, and ofiicers.—In the full legal name pr title
of the owner or official custodian of public funds, other than trust funds, as
follows:
(i) Any governmental unit, as a State, county, city, town, village, or school
district. Examples:
State of Maine.
Town of Rye, New York (Street Improvement Fund).
(ii) Any board, commission, government owned corporation, or other public
body duly constituted by law. Example:
Maryland State Highway Commission,
(iii) Any public officer designated by title only. Example:
Treasurer, City of Chicago,
(c) Treasurer of the United States as coowner or beneficiary.—-Those who
desire to do so may make gifts to the United States by designating the Treasurer of the United States as coowner or beneficiary. Bonds so registered may
not be reissued to change the designation. Examples:
John A. Jones 123-45-6789 or the Treasurer of the United States of America.
John A. Jones 123-45-6789 P.O.D. the Treasurer of the United States of
America.
Sec. 315.8. Unauthorized registration.—A savings bond inscribed in a form
not substantially in agreement with one of those authorized by this subpart will
not be considered as validly issued, except that once it is established that the
bond can be reissued in a form of registration which is valid under these
regulations it will be considered as having been validly issued from the date of
original issue.
SUBPART C

L I M I T A T I O N S ON

HOLDINGS

Sec. 315.10. Amount which ma/y be held.—The amounts of savings bonds of
each series, issued in any one calendar year, which may be held by any one
person at any one time, computed in accordance with the provisions of sec.
315.11, are limited as follows: ^
(a) Series E.—$5,000 (face value) for each calendar year up to and including
the calendar year 1947; $10,000 (face value) for the calendar years 1948 to
1951, inclusive; $20,000 (face value) for the calendar years 1952 to 1956, inclusive; $10,000 (face value) for the calendar year 1957^ and each calendar
year thereafter; except that trustees of an employees' saving plan (as defined in
Department Circular No. 653, current revision) may purchase $2,000 (face
value) multiplied by the highest number of employees participating in the plan
at any time during the calendar year in which the bonds are issued.
(b) Series H.—$20,000 (face value) for each calendar year up to and including the calendar year 1956; $10,000 (face value) for the calendar years 1957'
1 Bonds of Series F, G, J, and K, no longer available for purchase, are subject to the
limitations on holdinjrs and rules for computation of holdings set forth in sees. 315,8 and
315.9 of Department Circular No. 530, Seventh Revision.
2 Effective May 1, 1957, Accordingly, investors who purchased $20,000 (face value)
of bonds of Series E bearing issue dates of J a n u a r y 1 through April 1 were not entitled
to purchase additional bonds of t h a t series during 1957, The same liraitation applies to
bonds of Series H bearing those issue dates. Investors who purchased less t h a n $10,000
(face value) of bonds of either series prior to May 1 were entitled only to purchase enough
of either series to bring their total for t h a t series for 1957 to $10,000 (face v a l u e ) .




EXHIBITS

243

to 1961, inclusive; $20,000 (face value) for the calendar year 1962 and each
calendar year thereafter.
Sec. 315.11. Computation of amount.
(a) Definition of ''person."—The term "pei'son" for purposes of this section
shall mean any legal entity and shall include but not be limited to natural
persons, corporations (public or private), partnerships, unincorporated associations, and trust estates.^ The holdings of each person individually and his holdings in any fiduciary capacity authorized by these regulations, such as, for
example, his holdings as a guardian of the estate of a minor, ^s a life tenant,
or as trustee under a will or deed of trust, shall be computed separately. A
pension or retirement fund or an investment, insurance, annuity, or similar fund
or trust will be regarded as an entity regardless of the number of beneficiaries
or the manner in which their respective interests are established or determined.
Segregation of individual shares as a matter of bookkeeping or as a result of
individual agreements with beneficiaries or the express designation of individual shares as separate trusts will not operate to constitute separate trusts
under these regulations.
(b) Bonds that must be included in computation.—Except as provided in
paragraph (c) of tliis section, there must be taken into account in computing
the holdings of each person:
(1) All bonds registered in the name of that person alone;
(2) All bonds registered in the name of the representative of the estate of
that person;
(3) All bonds originally registered in the name of that person as coowner or
reissued at the request of the original owner to add the name of that person
as coowner or to designate him as coowner instead of as beneficiary. However,
the amount of bonds of Series E and H held in coownership form may be applied
to the holdings of either of the coowners but will not be applied to both, or the
amount may be apportioned between them.
(c) Bonds that may be excluded from computation.—There need not be taken
into account:
(1) Bonds on which that person is named beneficiary;
(2) Bonds in which his interest is only that of a beneficiary under a trust;
(3) Bonds to which he has become entitled under sec. 315.66 as surviving
beneficiary upon the death of the registered owner as an heir or legatee of the
deceased owner, or by virtue of the termination of a trust or the happening of
any other event;
(4) Bonds of Series E purchased with the proceeds of matured bonds of
Series A, 0^1938, and D, where such matured bonds were presented for that
purpose;
(.5) Bonds of Series E bearing issue dates from May 1, 1941, to Dec. 1, 1945,
inclusive, held by individuals in their own, right which are not more than $5,000
(face value) in excess of the prescribed limit; .
(6) Bonds of Series E or H reissued under sec. 315.61(a) (1) ;
(7) Bonds of Series E or H reissued in the name of a trustee of a per,sonal
trust estate which did not represent excess holdings prior to such reissue;
(8) Bonds of Series E or H purchased with the proceeds of bonds of Series
F, G, J, or K,, at or after maturity, where such matured bonds are presented for
that purpose in accordance with the provisions of Department Circulars Nos.
653, current revision (31 CFR 316), off'ering bonds of Series E, and 905, current
revision (31 CFR 332), offering bonds of Series H ;
(9) Bonds of Series PI issued in exchange for bonds of Series E, F, or J
under the provisions of Department Circular No. 1036, as amended.
Sec. 315.12. Disposition of excess.—If any person at any time acquires savings
bonds issued during any one calendar year in excess of the prescribed amount,
the excess must be immediately surrendered for refund of the purchase price,
less (in the case of current income bonds) any interest which may have been
paid thereon, or for such other adjustment as may be possible. For good cause
found the Secretary of the Treasury may permit excess holdings to stand in any
particular case or class of cases.
SUBPART D ' — L I M I T A T I O N

ON T R A N S F E R OR PLEDGE

Sec. 315.15. Limitation on transfer or pledge.—Savings bonds are not transferable and are payable only to the owners named thereon, except as specifically




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19 65 REPORT OF THE SECRETARY OF THE TREASURY

provided in these regulations, and then only in the manner and to the extent so
provided. A savings bond may not be hypothecated, pledged as collateral, or
used as security for the performance of an obligation,, except as provided in
sec. 315.16.
Sec. 315.16 Pledge under Department Circulars Nos. 154 ^'^d 657.—A bond
may be pledged by the registered owner in lieu of surety under the provisions of
Department Circular No. 154, current revision (31 CFR 225), if the bond approving officer is the Secretary of the Treasury, in which case an irrevocable
power of attorney shall be executed authorizing the Secretary of the Treasury
to request payment. A bond may also be deposited as security with a Federal
Reserve bank under the provisions of Department Circular No. 657, current
revision (31 CFR 317), by an institution certified under that circular as an
issuing agent for Series E bonds.
SUBPART

E—LIMITATION

ON

JUDICIAL PROCEEDINGS—NO
PERMITTED

STOPPAGE

OR

CAVEATS

Sec. 315.20. General.—No judicial determination will be recognized which
would give effect to an attempted voluntary transfer inter vivos of a bond or
would defeat or impair the rights of survivorship conferred by these regulations
upon a surviving coowner or beneficiary, and all other provisions of this subpart
are subject to this restriction. Otherwise, a claim against an owner or coowner
of a savings bond and confiicting claims as to ownership of, or interest in, such
bond as between coowners or between the registered owner and beneficiary will
be recognized, when established by valid judicial proceedings, upon presentation
and surrender of the bond, but only as specifically provided in this subpart.
Neither the Treasury Department nor any agency for the issue, reissue, or
redemption of savings bonds will accept notices of adverse claims of or pending
judicial proceedings or undertake to protect the interests of litigants who do
not have possession of a bond.
Sec. 315.21. Payment to judgment creditors.
(a) Creditors.—Payment (but not reissue) of a savings bond registered in
single ownership, coownership, or beneficiary form will be made to the purchaser
at a sale under a levy or to the officer authorized to levy upon the property of
the registered owner or coowner under appropriate process to satisfy a money
judgment. Payment will be made to such purchaser or. officer only to the extent
necessary to satisfy the judgment and will be limited to the redemption value
current sixty days after the termination of judicial proceedings. Payment of
a bond registered in coownership form pursuant to a judgment or levy against
only one of the coowners will be limited to the extent of that coowner's interest in
the bond ; this interest may be established by an agreement between the coowners
or by a judgment, decree, or order of court entered in a proceeding to which both
coowners are parties.
(b) Trustees in bankruptcy and receivers.—Psijm.ent of a savings bond will be
made to a trustee in bankruptcy, a receiver of an insolvent's estate, a receiver
in equity or a similar officer of the court, under the applicable provisions of subsection {a) of this section, except that payment will be made at the redemption
value current on the date of payment.
Sec. 315.22. Payment or reissue pursuant to judgment.
(a) Divorce.—A decree of divorce ratifying or confirming a property settlement agreement or otherwise settling the respective interests of the parties in
a bond will not be regarded as a proceeding giving effect to an attempted voluntary
transfer under the provisions of sec. 315.20. Consequently, reissue of a savings
bond may be made to eliminate the name of one spouse as owner, coowner, or
beneficiary, or to substitute the name of one spouse for that of the other as
owner, coowner, or beneficiary pursuant to such a decree. The evidence required
under sec. 315.23 must be submitted in any case. Where the decree does not
set out the terms of the property settlement agreement a certified copy of the
agreement must also be submitted. If bonds are registered with a person other
than one of the spouses as owner or coowner there must be submitted either
a request for reissue by such person or a certified copy of a judgment, decree, or
order of court entered in a proceeding to which he was a party, determining the
extent of the interest in the bond held by the spouse whose name is to be eliminated, and reissue will be permitted only to the extent of the spouse's interest
in the bonds. Payment rather than reissue will be made if requested.




EXHIBITS

245

(b) Gifts causa mortis.—A bond belonging solely to one person will be paid
or reissued on the request of the person found by a court to be entitled thereto
by reason of a gift causa mortis by the sole owner.
(c) Date for determining rights.—For the purpose of determining whether or
not reissue shall be made under this section pursuant to judicial proceedings,
the rights of all parties involved shall be those existing under these regulations
at the time of the entry of the final judgment, decree, or order.
Sec. 315.23. Evidence necessary.— To establish the validity of judicial proceedings, there must be submitted certified copies of a final judgment, decree,
or order of court and of any necessary supplementary proceedings. If the
judgment, decree, or order of court was rendered more than six months prior to
the presentation of the bond, there must also be submitted a certificate from the
clerk of the court, under its seal, dated within six months of the presentation of
the bond showing that the judgment, decree, or order of court is in full force.
A request for payment by a trustee in bankruptcy must be supported by duly
certified evidence of his appointment and qualification. A request for payment
by a receiver of an insolvent's estate must be supported by a copy of the order
appointing him, certified by the clerk of the court, under its seal, as being in full
force on a date not more than six months prior to the date of the presentation of
the bond. A request for payment by a receiver in equity or a similar officer
of the court, other than a receiver of an insolvent's estate, must be supported by a
copy of an order authorizing him to present the bond for redemption, certified
by the clerk of the court, under its seal, as being in full force on a date not more
than six months prior to the presentation of the bond. ^
SUBPART

F.

RELIEF

FOR

LOSS, T H E F T , DESTRUCTION,
OR N O N R E C E I P T OF BONDS

MUTILATION,

DEFACEMENT,

Sec. 315.25. After receipt by owner or his representative.—Relief, either by
the issue of a substitute bond marked "DUPLICATE" or by payment, may be
given under section 8 of the Act of July 8, 1937, as amended (50 Stat. 481, as
,amended; 31 U.S.C. 738a) for the loss, theft, destruction, mutilation, or defacement of a bond after receipt by the owner or his representative. In granting
relief under the act, the Secretary of the Treasury may require a bond of in'demnity in such form and with such surety as may be deemed necessary for the
protection of the United States of America. In all cases the bond must be
identified and the applicant must submit satisfactory evidence of loss, theft, or
destruction, or a satisfactory explanation of the mutilation or defacement. Relief on account of loss or theft ordinarily will not be granted until six months
after the date of receipt by the Bureau of the Public Debt of the notice of such
loss or theft.
Sec. 315.26. Procedure to be foUowed.—Immediate notice of the facts concerning the loss, theft, destruction, mutilation, or defacement of a bond, together with
its complete description (series, year and month of issue, serial number, name
and address of the registered owner or coowners), should be given to the Bureau
of the Public Debt, Division of Loans and Currency Branch. Defaced bonds and
all available fragments of mutilated bonds in any form whatsoever should be
submitted. That office will furnish the proper application form and instructions.
The application must be made by the person or persons (including both coowners, if living), authorized under these regulations to request payment of
the bond, except as follows:
(1) If the bond is in beneficiary form and the owner and beneficiary are both
living, both ordinarily will be required to join in the application.
(2) If a minor named on a bond as owner, coowner, or beneficiary is not of
sufficient competency and understanding to request payment, both parents ordinarily will be required to join in the application.
Sec. 315.27. Nonreceipt of bond.—If a bond, on original issue or on reissue,
is not received from the issuing agent by the registered owner or other person
to whom delivery of the bond was directed, the issuing agent should be notified
as promptly as possible and given all information available about the transaction.
The agent will then obtain appropriate instructions and forms. After approval
of the application for relief, relief will be granted by the issuance of a bond,
bearing the same issue date as the bond which was not received.
Sec. S15.28. Recovery or receipt of bonds reported lost, stolen, destroyed or not
received.—If a bond reported lost, stolen, destroyed, or not received, is recovered




246

19 65 REPORT OF THE SECRETARY OF THE TREASURY

or received before relief is granted, the Bureau of the Public Debt, Division of
Loans and Currency Branch, should be notified promptly. If recovered or received after relief is granted, the bond should be surrendered promptly to the
same office for cancellation.
SUBPART G.

INTEREST

Sec. 315.30. General.—Savings bonds are issued in two forms: (1) appreciation bonds, issued on a discount basis and redeemable before final maturity at
increasing fixed redemption values; and (2) current income bonds, issued at
par, bearing interest payable semiannually ^ and redeemable before final maturity at par or at fixed redemption values less than par.
Sec. 315.31. Appreciation bonds.—Bonds issued on a discount basis increase
in redemption value at the end of the first half-year from issue date and at the
end of each successive half-year period thereafter until their maturity date,
when the full face amount becomes payable.^ Bonds of Series E bearing issue
dates of May 1, 1941, through May 1,1949, vnll continue to increase in redemption
value after the maturity date for twenty years and those bearing issue dates
beginning with June 1, 1949, for ten years after the maturity date, in accordance
with the provisions of Department Circular No. 653, current revision.^ The
increment in value (interest) on appreciation bonds is payable only on redemption of the bonds.
'Sec. 315.32. Current income bonds.
(a) Interest rates.—The interest payable on a current income bond is fixed
by the provisions of the bepartment circular offering the particular series of
bonds to the public.^
(b) Method of interest payments.—Interest due on a current income bond is
payable semiannually beginning six months from its issue date and will be paid
on each interest payment date by check drawn to the order of the person or
persons in whose names the bond is inscribed, in the same form as their names
appear in the inscription on the bond, and mailed to the address of record (that
given for the delivery of interest checks in the application for purchase or the
request for reissue or, if no, instruction is given as to the delivery of interest
checks, the address given for the owner or the first-named coowner), except
that:
(1) In the case of a bond registered in the form "A payable on death to B"
the check will be drawn to the order of "A" alone until the Bureau of the Public
Debt, Division of Loans and Currency Branch, receives notice of A's death, from
which time the payment of interest will be suspended, until the bond is presented
for payment or reissue. Interest so withheld will be paid to the person found
to be entitled to the bond.
(2) Upon receipt of notice of the death of the coowner to whom interest is
being mailed, payment of interest will be suspended until a request for chan.ge
of address is received from the other coowner, if living, or, if not, until satisfactory evidence is submitted as to who is authorized to endorse and collect such
checks on behalf of the estate of the last deceased coowner, in accordance with
the provisions of Subpart O.
(3) Upon receipt of notice of the death of the owner of a bond, payment of
interest on the bond will be suspended until satisfactory evidence is submitted
as to who is authorized to endorse and collect such checks on behalf of the
estate of the decedent, in accordance with the provisions of Subpart O.
1 The final interest on bonds of Series H bearing issue dates of J u n e 1, 1952, through
.Tan, 1, 1957. covers a period of two months, from 9 % years to 9 years, 8 months. Bonds
so dated will continue to earn interest for a lO-year optional extension period, during
which time interest will accrue and be ipaid beginning six m o n t h s from t h e original m a t u r i t y
date, in accordance with the provisions of D e p a r t m e n t Circular No. 905, current revision.
Since May 1. 1957, the only current income bonds on sale are those of Series H. See
D e p a r t m e n t Circulars Nos. 654, Third Revision, as amended, for Series G, and 906, aa
amended, for Series K.
2 Series E bonds issued on or before Apr. 30, 1952, and Series P bonds, the sale of which
was terminated Apr. 30, 1952, increased in redemption value a t t h e end of the first year
from issue date ; Series B bonds issued on and after May 1, 1952, and Series J bonds, t h e
sale of which began on May 1, 1952, increased in redemption value a t the end of t h e first
half-year frora issue date. T h e last increase in redemption value of Series E bonds issued
on or after May 1,-1952, prior to the s t a r t of t h e 10-year optional extension period covers
these p e r i o d s : two months, from 9^/^ years t h r o u g h ' 9 years, 8 months, for bonds issued
before Feb. 1, 1 9 5 7 ; five raonths, frora Sy.. years through 8 years. 11 raonths. for bonds
issued oh or after Feb. 1, 1957. but before J u n e 1, 1959 ; and three months, from 7 % years
-through 7-years 9 months, for bonds issued on or after J u n e 1, 1959,
3 See Tables of Redemption Values of t h a t circular for extended m a t u r i t y values.




EXHIBITS

247

(4) Whenever practicable the accounts for all current income bonds of the
same series, with the same inscription, on which interest is payable on the same
dates, will be consolidated and a single check will be issued on each interest
payment date for interest on all such bonds. The check inscription may vary
from the inscriptions on the bonds in cases of very long inscriptions or where
there is lack of uniformity in the inscriptions on the bonds.
(5) The interest due at maturity in the case of bonds for which an optional
extension privilege has not been granted and at the extended maturity date for
all bonds for which an optional extension privilege has been granted will be
paid with the principal and in the same manner. However, if the registered
owner of a bona in beneficiary form dies on or after the due date without having
presented and surrendered the bond for payment or authorized reissue, and is
survived by the beneficiary, the interest may be paid to the legal representative
of or the person entitled to the registered owner's estate. To obtain such payment, the bond with a request therefor by the beneficiary should be submitted
together with evidence as required in Subpart 0.
(c) Notices affecting delivery of interest checks.—Notices aff'ecting the delivery of interest checks, including changes in addresses, should be sent to the
Bureau of the Public Debt, Division of Loans and Currency Branch, 536 South
Clark Street, Chicago, 111. 60605. Each bond should be described in the notice
by issue date, serial number, series (including year of issue), and inscription
appearing on the face of the bond. The bonds should not be submitted. The
notice must be signed by the owner or a coowner, or in the case of a minor or
incompetent as provided in (d) or (e) of this section. A notice which would
affect delivery of an interest check will be acted upon as rapidly as possible, but
if the notice is not received at least one month before an interest payment date,
no assurance can be given that action can be taken in time to make the change,
or suspend the mailing of the interest due on that date.
(d) Representative appointed for the estate of a minor, incompetent, absentee,
etc.—Interest on current income bonds will be paid to the representative appointed
for the estate of the owner of such bonds who is a minor, incompetent, absentee,
etc., in accordance with the provisions of sec. 315.50 relating to payment of the
bonds. However, if the registration of the bonds does not include reference to
the owner's status, the bonds should be submitted to the Bureau of the Public
Debt, Division of Loans and Ourrency Branch, at the address shown in (c)
of this section, or to a Federal Reserve bank for appropriate reissue so that
interest checks may be, properly drawn and delivered. TTiey must be accompanied by the proof of appointment required by sec. 315.50.
(e) Adult incompetent's estate having no representative.—If an adult owner
of a current income bond is incompetent to endorse and collect the interest checks
and no legal guardian or similar representative is legally qualified to do so, the
relative responsible for his care and support, or some other appropriate person,
may apply to the Bureau of the Public Debt, Division of Loans and Currency
Branch, for recognition as voluntary guardian for the purpose of receiving, endorsing, and collecting the checks. Form PD 2513 should be used in making
application for this purpose.
(f) Reissue during interest period.—Physical reissue of a bond will be made
as soon as practicable without regard to interest payment dates. If a current
income bond is reissued between interest x>ayment dates, interest for the entire
period will ordinarily be paid on the next interest payment date, by check
drawn to the order of the person in whose name the bond is reissued. However,
if reissue is made during the month preceding an interest payment date, the
interest due on the first day of the next month may in some cases be paid to
the former owner or the representative of his estate.
(g) Termination of interest.—Interest on current income bonds will cease at
maturity, or extended maturity in the case of bonds for which an optional extension period has been granted, or in case of redemption prior to maturity, on the
last day of the interest period immediately preceding the date of redemption,
except that, if the date of redemption falls on an interest payment date, interest
will cease on that date. For example, if a bond on which interest is payable
on January 1 and July 1 is redeemed on September 1, interest will cease on
the preceding July 1, and no adjustment of interest will be made for the period
from July 1 to September 1. The same rules apply in case of partial redemption
with respect to the amount redeemed.




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19 65 REPORT OF THE SECRETARY OF THE TREASURY

(h) Endorsement of checks.—Interest checks may be collected upon the endorsement of the payee or his authorized representative in accordance with the
regulations governing the endorsement and payment of Government warrants
and checks, which are contained in Department Circular No. 21, current
revision (31 CFR 360). A form for the appointment of an attorney in fact
for this purpose may be obtained from the Office of the Treasurer of the United
States or from any Federal Reserve bank. If the owner is incompetent or deceased and no legal representative of his estate has been or will be appointed,
the Bureau of the Public Debt, Division of Loans and Currency Branch (address
given in (c) of this section), or a Federal Reserve bank will furnish instructions
upon request.
(i) Nonreceipt or loss of check.—If an interest check is not received or is lost
after receipt, the Bureau of the Public Debt, Division of Loans and Currency
Branch, should be notified of the facts and given information concerning the
amount, number, and inscription of the bonds, as well as a description of the
check, if possible.
SUBPART H

GENERAL PROVISIONS FOR P A Y M E N T AND REDEMPTION

Sec. 315.35. Provisions applicable both before and after maturity.^—Payment
of a savings bond will be made to the person or persons entitled thereto under
the provisions of these regulations upon presentation and surrender of the bond
with an appropriate request for payment, except that checks in payment will not
be delivered to addressees in areas with respect to which the Treasury Department restricts or regulates the delivery of checks drawn against funds of the
United States or any agency or instrumentality thereof.^ Payment will be made
without regard to any notice of adverse claims to a bond and no stoppage or
caveat against payment in accordance with the registration will be entered.
Sec. 315.36. Before maturity.
(a) At option of owner.—Pursuant to its terms, a savings bond may not be
called for redemption by the Secretary of the Treasury prior to maturity date, or
extended maturity date in case of bonds for which an optional extension period
has been granted, but may be redeemed in whole or in part at the option of
the owner prior to maturity, or extended maturity, under the terms and conditions set forth in the offering circular for each series and in accordance with the
provisions of these regulations, following presentation and surrender as provided
in this subpart.
(b) Series E.—A bond of Series E will be redeemed at any time after two
months from issue date without advance notice, at the appropriate redemption
value as shown in the revision of Department Circular No. 653 current at the
time of redemption.
(c) Series H, J, and K.—A bond of Series J or K will be redeemed on one
calendar month's notice and a bond of Series H will be redeemed after six
months from issue date on one calendar month's notice to a Federal Reserve
bank or branch, or the Bureau of the Public Debt, Division of Loans and Currency Branch, or the Office of the Treasurer of the United States, Securities
Division. Such notice may be given separately in writing or by presenting
and surrendering the bond with a duly executed request for payment.. Payment will be made as of the first day of the first month following by at, least
one full calendar month the date of receipt of notice. For example, if notice
is received on June 1, payment will be made as of July 1, but if notice is received
between June 2 and July 1, inclusive, payment ordinarily will be made as of
August 1. If notice is given separately, the bond must be presented and surrendered with a duly executed request for payment to the same agency to which
notice is given, not less than 20 days before the date on which payment is to be
made. For example, if notice is received on June 15, the bond should be received
not later than July 12. (See sec. 315.32(g) for provisions as to interest on current income bonds redeemed prior to maturity.) A bond of Series H will be
redeemed at PAR. A bond of Series J or K will be redeemed at the appropriate
redemption value as shown in the table printed on the bond, except as provided
1 Bonds of Series A through D and Series P and G have all now matured. They earn
no interest after maturity. Any such bonds which have not been redeemed should be
presented for payment.
2 See Department Circular No. 655, current revision (31 CPR 211).




EXHIBITS

249

in (d), below. (See sec. 315.37 for provisions as to notice to redeem current
income bonds for which an optional extension period has been granted.)
(d) Series K: Redemption at par.
(1) A bond of Series K issued in exchange for matured bonds of Series E under
the provisions of Department Circular No. 906 is payable at par.
(2) A bond of Series K registered in the name of a natural person or persons
in their own right will be paid at par upon the request of the person entitled to
the bond upon the death of the owner or either coowner.
(3) A bond of Series K held by a trustee, life tenant, or other fiduciary (exclusive of trustees of a pension, retirement, investment, insurance, annuity or
similar fund, or employees' savings plan)* will be paid at par upon appropriate
request upon the termination, in whole or in part, of a trust, life tenancy, or other
fiduciary estate by reason of the death of a natural person, but in the case of
partial termination, redemption at par will be made to the extent of not more
than the pro rata portion of the trust or fiduciary estate so terminated. Bonds
of Series K held by a financial institution in its name as trustee of its common
trust fund will be paid at par upon the request of the fiduciary upon the termination, in whole or in part, of a participating trust by reason of the death of a
natural person, to the extent of not more than the pro rata portion of the
common trust fund so terminated.
The option to receive payment at par under subparagraph (d) (2) and (3)
of this section may be exercised by a signed request for payment or by express
written notice, in either case specifying that redemption at par is desired.
Payment may be postponed to the second interest payment date following the
date of death, if so requested; otherwise, payment will be made in regular
course. A death certificate or other acceptable evidence of death must be submitted. In no case of redemption at par before maturity under subparagraph
{d) {2) and {3) will interest be payable beyond the second interest payment date
following the date of death.
(e) Withdrawal of request for redemption.—An owner who has presented and
surrendered a savings ^bond to the Treasury Department or a Federal Reserve
bank or branch, or an authorized paying agent, fpr payment, with an appropriate
request for payment, may withdraw such request if notice of intent to withdraw
is given to and received by the same agency to which the bond was presented
prior to the issuance of a check in payment by the Treasury Department or a
Federal Reserve bank, or payment by the authorized paying agent. Such request
may be withdrawn under the same conditions by the executor or administrator
of the estate of a deceased owner, or by the person or persons entitled to the bond
under Subpart O, or by the representative of the estate of a person under legal
disability, unless presentation and surrender of the bond have cut off rights of
survivorship under the provisions of Subpart M or Subpart N.
Sec. 315.37. At or after maturity.—Pursuant to its terms, a savings bond of
any series will be paid at or after maturity at the maturity value fixed by the
terms of the Department Circular offering the particular series of bonds to the
public, current at the time of redemption, and in no greater amount. No advance
notice will be required foir the redemption of matured savings bonds except that
any current income bond for which an optional extension period has been
provided will, beginning with the first day of the third calendar month following
the calendar month in which the bond originally matured, be regarded as unmatured until it reaches its extended maturity date, and the same notice prior,
to redemption will be required for it as required for bonds of the same series
which have not reached original maturity.
Sec. 315.38. Requests for payment.
(a) Form and execution of requests.—A request for payment of a bond must
be executed on the form appearing on the back of the bond unless (1) the bond
is accepted by an authorized paying agent for payment or for presentation to
a Federal Reserve bank for payment without the owner's signature to the request
for payment under the provisions of Department Circular No. 888, current revision
(31 CFR 330), or (2) authority is given for the execution of a separate or
detached request.
(b) Date of request.—Ordinarily, requests executed more than six months
before the date of receipt of a bond for payment will not be accepted; nor will
a bond ordinarily be accepted for redemption more than three calendar months
prior to the date redemption is requested under these regulations.




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19 65 REPORT OF THE SECRETARY OF THE TREASURY

(c) Identification and signature of owner.—^Unless the bond is presented
under the provisions of paragraph (a) of this section or sec. 315.39(b), an
owner in whose name the bond is inscribed or other person entitled to payment
under the provisions of these regulations must appear before and establish
his identity to an officer authorized to certify requests for payment (see Subpart
I ) , and in the presence of such officer sign the request for payment in ink, adding
in the space provided the address to which the check issued in payment is to
be miailed. A signature made by mark (X) must be witnessed by at least one
disinterested person in addition to the certifying officer and must be attested
by endorsement in the blank space, substantially as follows: "Witness to the
above signature by mark," followed by the signature and address of the witness.
If the name of the owner or other person entitled to payment as it appears in
the registration or in evidence on file in the Bureau of the Public Debt, Division
of Loans and Currency Branch, has been changed by marriage or in any other
legal manner, the signature to the request for payment should show both names
and the manner in which the change was made, for example, "Mrs. Mary T.
Jones Smith (Mrs. Mary T. J. Smith or Mrs. Mary T. Smith), changed by
marriage from Miss Mary T. Jones," or "John R. Young, changed by order of
court from Hans R. Jung." (See sec. 315.49.) No request signed in behalf of
the owner or person entitled to payment by an agent or a person acting under
a power of attorney will be recognized by the Treasury Department, except
when the bond has been pledged in lieu of surety under Department Circular
No. 154, current revision (31 CFR 225), as provided in sec. 315.16.
(d) Certification of request.—After the request for payment has been signed
by the owner, the certifying officer should complete and sign the certificate
following the request for payment and the bond should then be presented and
surrendered as provided in Sec. 315.39(a).
Sec. 315.39. Presentation and surrender.
(a) All series.—Except for cases coming within the provisions of paragraph
(b) of this section, after the request for payment has been duly signed by the
owner and. certified as provided in Subpart I, the bond should be presented and
surrendered to (1) a Federal Reserve bank or branch, (2) the Bureau of the
Public Debt, Division of Loans and Currency Branch, or (3) the Office of the
Treasurer of the United States, Securities Division. Usually payment will be
expedited by surrender to a Federal Reserve bank or branch. In all cases
presentation will be ;at the expense and risk of the owner. Payment will be
made by check drawn to the order of the registered owner or other person
entitled and mailed to the address given in the request for payment or, if no
address is given, to the address shown in instructions accompanying the bond.
(b) Optional procedure Umited to bonds of Series A to E, inclusive, in the
names of individual owners or coowners only.—^A natural person whose name is
inscribed on the face of a bond of Series A, B, C, D, or E, either as owner or
coowner in his own right, may present such bond for redemption to an authorized paying agent. If such a person is not known to the paying agent, he must
estaJblish his identity to the agent. (See sec. 315.43.) Such owner or coowner
must sign the request for payment, and add his home or business address. Even
though the request for payment may have been signed, or signed and certified,
before presentation of the bond, the representative of the paying agent must
be satisfied that the person presenting the bond for payment is the owner or
coowner and may require him to sign the request for payment again. If the
bond is in order for payment, the paying agent will make immediate payment
at the appropriate redemption value without charge to the owner or coowner.
This procedure is not applicable to partial redemption cases, or deceased owner
cases, or other cases in which documentary evidence is required.
Sec. 315.40. Partial: redemption.—A bond of any 'series may be redeemed in
part at current redemption value, but only in amounts corresponding to authorized denominations, upon presentation and surrender of the hond in accordance
with sec. 315.39(a). In any case in which partial redemption is authorized
before the request fbr payment is signed the phrase "to the extent of $_
(face value) and reissue of the remainder" should be added to the first sentence of the request. Upon partial redemption of the bond, the remainder will
be reissued as of the original issue date, as provided in Subpart J. For payment of interest on current income bonds in case of partial redemption, see
Subpart G.




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251

Sec. 315.41. Nonreceipt or loss of checks issued in payment.—In case a che'ck
in payment of a bond surrendered for Tedemption is not received within a reasonable time or in case such check is lost after receipt, notice should be given to the
same agency to which the bond was surrendered for payment, accompanied by
a description of the bond by series, denomination, serial number, and registration. The notice should state whether or not the check was received and should
give the date upon which the bond was surrendered for payment.
SUBPART I-T-CERTIFYING

OFFICERS

Sec. 315.42. Persons who may certify.—The following persons are authorized
to act as certifying officers for the purpose of certifying requests for payment
and forms with respect to bonds :
(a) At United States post offices.—Any postmaster, acting postmaster, or
inspector in charge or other post office official or clerk designated for that pur^
pose. One or more of these officials will be found at every United States post
office, classified branch, or station. A post office official or clerk other than a
postmaster, acting postmaster, or inspector in charge should certify in the name
of the postmaster or acting postmaster, followed by his own signature and
official title, for example, "John Doe, postmaster, by Richard Roe, postal cashier."
Signatures of these officers should be authenticated h j a legible imprint of the
post office dating stamp.
(b) At banks, trust companies, and branches.—^Any officer of any bank or
trust company incorporated in the United States (including for this purpose its
territories and possessions and the Commonwealth of Puerto Rico) or domestic
or foreign branch of such bank or trust company; any officer of a Federal Reserve bank. Federal land bank, and Federal home loan bank; 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"; and
Federal Reserve agents and assistant Federal Reserve agents located at the
several Federal Reserve banks. Certifications by any of these officers or designated employees should be authenticated by either a legible impression of the
corporate seal of the bank or trust company or, in the case of banks or trust
companies and their branches which are authorized issuing agents for bonds
of Series E, by a legible imprint of the issuing agent's dating stamp.
(c) Issuing agents not banks or trust companies.—Any officer of a corporation not a bank or trust company and of any other organization which is an
authorized issuing agent for bonds of Series E. All certifications by such officers
must be authenticated by a legible imprint of the issuing agent's dating stamp.
(d) Commissioned and warrant officers of Arnied Forces.—^Commissioned
and warrant officers of any of the Armed Forces of the United Sitates, but
only for members and the families of members of their respective services and
civilian employees at posts or bases or stations. Such certifying officer should
indicate his rank and state that the person signing the request is one of the
class whose request he is authorized to certify.
(e) United States officials.—Judges, clerks, and deputy clerks of United
States courts, including United States courts for the territories, possessions,
the Commonwealth of Puerto Rico, and the Canal Zone; United States commissioners ; United States attorneys; United States collectors of customs and
their deputies; Regional commissioners and district directors of Internal Revenue and Internal Revenue agents; the officer in charge of any home, hospital, or
other facility of the Veterans Administration, but only for patients and employees of such facilities; certain officers of Federal penal institutions designated
for tha-t purpose by the Secretary of the Treasury; certain officers of the
United States Public Health Service Hospitals at Lexington, Ky., and Fort
Worth, Tex., and of United States Marine Hospitals at Fort Stanton, N. Mex.,
and Carville, La., designated for that purpose by the Secretary of the Treasury
(in each case, however, only fqr inmates or employees of the institution
involved).
(f) Officers authorized in particular localities.—Certain designated officers
in the Treasury Department; the Governor and Treasurer of Puerto Rico; the
Governor and Commissioner of Finance of the Virgin Islands; the Governor
and Director of Finance of Guam; the Governor and Director of Administrative Services of American Samoa; the Governor, paymaster, or acting paymaster and collector or acting collector of the Panama Canal; and postmasters
and acting postmasters of the Bureau of Posts of the Canal Zone.




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19 65 REPORT OF THE SECRETARY OF THE TREASURY

(g) In foreign countries.—In a foreign country requests for payment may be
signed in the presence of and be certified by any United States diplomatic or
consular representative, or the maiiager or other officer of a foreign branch of
a bank or trust company incorporated in the United States whose signature is
attested by an impression of the corporate seal or is certified to the Treasury
Department. If such an officer is not available, requests for payment 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 dii^lomatic or consular officer under seal of his office.
(h) Special provisions.—In the event none of the officers authorized to
certify requests for payment of bonds is readily accessible, the Commissioner
of the Public Debt, the Deputy Commissioner of the Public Debt in Charge of
the Chicago Office, the Treasurer of the United States, or any Federal Reserve
bank or branch is authorized to make special provision for any particular case.
Sec. 315.43. General instructions to certifying officers.—A certifying officer
should require that a person presenting bonds, or forms with respect thereto,
establish his identity by positive and reliable evidence before the bonds or forms
are signed, unless the presenter is personally well known to the officer. Such
officer and, if he is an officer or employee of an organization, the organization will
be held fully responsible for the adequacy of the identification. The certifying
officer should place an adequate notation on the back of the bond or form, or on a
separate record, showing exactly how identification was established. The certifying officer must affix to the certification his official signature, title, seal or dating stamp, address (if hot shown in the seal or stamp), and the date of execution.
Officers of Veterans Administration facilities. Public Health Service hospitals.
Marine hospitals, and Federal penal institutions should use the seal of the particular institution or service, where such seal is available. A certifying officer
other than a post office official, officer of a bank or trust company, or officer of an
issuing agent who does not possess an official seal should add a statement to that
effect to his certification.
'Sec. 315.44. Interested person not to certify.—A certifying officer may not certify a request for payment of a bond, or a form with respect to a bond, in which he
has or is acquiring an interest, either in his own right or in a representative
capacity.
SUBPART J — ^ R E I S S U E AND D E N O M I N A T I O N A L

EXCHANGE

Sec. 315.45. General.—Reissue of a bond may be made only under the conditions specified in' these regulations. Reissue is not authorized solely for the purpose of effecting an exchange as between authorized denominations, but in case
of authorized reissue the new bond or bonds may be issued in any authorized denomination or denominations.
Reissue will not be made if the request therefor is received less than one full
calendar month before the maturity date, except for bonds of Series E and H for
which optional extension periods have been provided in Department Circulars
Nos. 653 and 905, current revisions (31 CFR 316 and 332). In the case of such
bonds, reissue will not be made if the request is received less than one full month
before the extended maturity date. However, a request for reissue of a bond
received prior to its maturity, or its extended maturity date, will be effective to
establish ownership as though the requested reissue had been made.
A request for reissue of a bond received on or after its maturity, or its extended
maturity date, will not be effective to name a coowner or beneficiary or to promote a beneficiary to a coowner, but requests for reissue in the names of persons
who have become entitled by operation of law will be recognized as establishing
the right of those persons to receive payment.
Reissues under the provisions of this subpart may be made only at (1) a
Federal Reserve bank or branch, (2) the Bureau of the Public Debt, Division of
Loans and Currency Branch, or (3) the Office of the Treasurer of the United
States, Securities Division.
Sec. 315.46. Requests for reissue.—A request for reissue should be made on the
prescribed form by the person authorized under these regulations to make such request. Appropriate forms may be obtained from any Federal Reserve bank,
the Office of the Treasurer of the United States, or the Bureau of the Public
Debt, Division of Loans and Currency Branch.




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253

Sec. 315.47. Effective date.—In any case of authorized reissue, the Treasury
Department will treat the receipt by (1) a Federal Reserve bank or branch, or (2)
the Bureau of the Public Debt, Division of Loans and Currency Branch, or (3)
the Office of the Treasurer of the United States, Securities Division, of a bond and
an appropriate request for reissue thereof as determining the date upon which
the reissue is effective. If the owner or either coowner of a bond dies after he
has presented and surrendered the bond for authorized reissue, the bond will be
regarded as though reissued in the decedent's lifetime.
Sec. 315.48. Correction of errors.—Reissue of a bond may be made to correct
an error in the original issue, upon appropriate request supported by satisfactory
proof of the error.
Sec. 315.49. Change of name.—An owner, coowner, or beneficiary whose name
is changed by marriage, divorce, annulment, order of court, or in any other legal
manner after the issue of a bond should submit the bond with a request on Form
PD 1474 for reissue to substitute the new name for the name inscribed on the
bond. The signature to the request for reissue should show the new name, the
manner in which the change was made and the former name. If the change of
name was made other than by marriage, the request must be supported by satisfactory proof of the change.
SUBPART K

M I N O R S , I N C O M P E T E N T S , AGED P E R S O N S , A B S E N T E E S , ETC.

Sec. 315.50. Paynient to representative of estate.—If the form of registration
of a savings bond indicates that the owner is a minor, an incompetent, aged
person, absentee, etc., and that there is a representative of his estate, payment
will be made to such representative. During the lifetime of such owner, the
representative of his estate will be recognized as entitled to obtain payment of a
bond registered in the name of the ward as owner or coowner, or of a bond to
which the ward has become entitled. After the death of such owner, his representative, so long as he is authorized to act for the estate, will be entitled to
obtain payment of a bond to which the ward was solely entitled. If the form
of registration does not indicate there is a representative of the estate of a
minor owner or coowner, a notice that there is such a representative will not be
accepted for the purpose of preventing payment to the minor or to a parent or
other person on behalf of the minor, as provided in sees. 315.51 and 315.52.
The request for payment appearing on the back of a bond should be signed by
the representative as such, for example, "John A. Jones, guardian (committee)
of the estate of Henry W. Smith, a minor (an incompetent)." Unless the form
of registration gives the name of the representative requesting payment, a certificate, or a certified copy of the letters of appointment, from the court making
the appointment, under court seal, or other proof of qualification if not appointed
by a court, should be submitted with the bond.
Sec. 315.51. Payment to minors.—If the owner of a savings bond is a minor
and the form of registration does not indicate that there is a representative of
his estate, payment will be made to him upon his request, provided he is of
sufficient competency to sign his name to the request for payment and to understand the nature of the transaction. In general, the fact that the request for
payment has been signed by a minor and duly certified will be accepted as
sufficient proof of competency and understanding.
Sec. 315.52. Payment to a parent or other person on "behalf of a minor.—If the
owner of a savings bond is a minor and the form of registration does not indicate
that there is a representative of his estate, and if such minor owner is not of
sufficient competency to sign his name to the request for payment and to under;
stand the nature of the transaction, payment will be made to either parent of
the minor with whom he resides or, if the minor does not reside with either
parent, then to the person who furnishes his chief support. His parent or the
person furnishing his chief support should execute the request for payment and
furnish a certificate, which may be typed or written on the back of the bond, as
to his right to act for the minor. If a parent isigns the request, the certificate
and signature thereto should be in substantially the following form:
"I certify that I am the mother (or father) of John C. Jones and the
person with whom he resides. He is
years of age and is not of
sufficient competency and understanding to make this request.
"Mrs. Mary Jones on behalf of John C. Jones."




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19 65 REPORT OF THE SECRETARY OF THE TREASURY

If a person other than a parent signs the request, the certificate and signature
thereto, including a reference to the person's relationship, if any, to the minor,
should be in substantially the following form :
"I certify that John C. Jones does not reside with either parent and that
I furnish his chief support. Pie is
years of age and is not of
sufficiemt competency and understanding to make this request.
"Mrs Alice Brown, grandmother, on behalf of John C. Jones."
'Sec. 315.53. Payment or reinvestment upon request of voluntary guardian of
incompetent.—If the adult owner of bonds is incompetent to request and receive
payment thereof and no other person is legally qualified to do so, the relative
responsible for his care and support or some other person may submit an application as voluntary guardian for redemption of the bonds in the following cases:
(a) Where the proceeds of the bonds are needed to pay expenses already
incurred, or to be incurred during any 90-day period, for the support of the
incompetent or his legal dependents, bonds belonging to the incompetent, not
exceeding $1,000 (face value), may be submitted for redemption;
(b) Where the bond has matured and it is desired to redeem it and reinvest
the proceeds in savings bonds. The proceeds of any matured appreciation type
bonds 'Ordinarily will be required to be reinvested in Serie's E bonds. The proceeds of matured current income bonds may be invested in Series H or Serie's E
bonds. The new 'bonds must be registered in the name of the incompetent
followed by the words "an incompetent." A living coowner or beneficiary
named on the matured bond must be designated on the new bonds unless he is
a competent adult and, furnishes a certified statement consenting to omission of
his name. If an amount insufficient to purchase an additional bond of any
authorized denomination of any series remains after the reinve'stment, the voluntary guardian may, if | he so desires, furnish additional funds sufficient to purchase another bond of either series in the lowest available denomination. If
additional funds are not furnished, the remaining amount will be paid to the
voluntary guardian for the use and benefit of the incompetent.
Sec. 315.54. Reissue.-—A bond of which a minor or other person under legal
disability is the owner or in which he has an interest may be reissued upon an
authorized reissue transaction under the following conditions:
(a) A minor of sufficienit c'ompetency to sign his name to the request and to
understand the nature of the transaction may request reissue to add a coowner
or beneficiary to a bond registered in his name alone or to which he is entitled
in Ihis own right.
(b) A bond on which a minor is named as beneficiary or coowner may be reissued in the name of a custodian for the minor under a statute authorizing
gifts to minors upon the request of the adult whose name appears on the bond
as owner or coowner.
(c) Except to the extent provided in (a) and (b) of this section, reissue will
be restricted to a forni of registration which does not adversely affect the existing ownership or interest of the minor or such other person. Requests for
reissue should be executed by the person authorized to request payment under
sees. 315.50 and 315.52, or who may request recognition as a voluntary guardian
under sec. 315.53 and in the same manner.
SUBPART L — N A T U R A L PERSON AS SOLE OWNER

Sec. 315.55. Payment.—A savings bond registered in the name of a natural
person in his own right, without a coowner or beneficiary, will be paid to him
during his lifetime under Subpart H. Upon the death of the owner such bond
will be considered as belonging to his estate and will be paid under Subpart O,
except as otherwise provided in 'these regulations.
Sec. 315.56. Reissue for certain purposes.—A savings bond registered in the
name of a natural person in his own right may be reissued upon appropriate
request by him (subject to the provisions of sec. 315.54), upon presentation and
surrender during his lifetime, for the following purposes :
(a) Addition of a coowner or beneficiary.—^To name another natural person
as coowner or as beneficiary. Form PD 1787 should be used.
(b) Divorce or annulment.—To name as registered owner the other party to
a divorce or annulment occurring after issue of the bond. Form PD 3360 should
be used.




EXHIBITS

255

(c) Certain degrees of relationship.—To name as registered owner a person
related to the owner as provided in sec. 315.61(a) (1) (i), with a beneficiary or
coowner, if so desired. Form PD 3360 should be used..
(d) Trustees.—To name the trustee of (1) a. personal trust estate created by
the owner, or (2) a personal trust estate created by other than the owner if a
beneficiary of the trust and the owner are related as provided in sec. 315.61(a)
(1) (i). Form PD 1851 should be used.
SUBPART M — T W O

NATURAL PERSONS AS

COOWNERS

Sec. 315.60. Payment during the lives of both coowners.—A savings bond registered in coownership form, for example, "John A. Jones or Mrs. Mary O. Jones,"
will be paid to either upon his separate request, and upon payment to him the
other shall cease to have any interest in the bond. If both request payment
jointly, payment will be made by check drawn to their order jointly, for example,
"John A. Jones AND Mrs. Mary C. Jones."
Sec. 315.61. Reissue during the lives of both coowners.
(a) General.—A bond registered in coownership form may be reissued upon
its presentation and surrender during the lifetime and competency of both
coowners, upon the request of both, as follows:
(1) In the name of either coowner, alone or with a new coowner or
beneficiary—
(i) If the coowner whose name is to remain on the bond is related to the
coowner whose name is to be eliminated a s : husband, wife; parent, child (including stepchild) ; brother, sister (including the half blood, stepbrother, stepsister, or brother or sister through adoption) ; grandparent, grandchild; great
grandparent, great grandchild; uncle, aunt, nephew, niece (including a child of
a brother or sister of the present spouse) ; granduncle, grandaunt, grandnephew,
grandniece; father-in-law, mother-in-law, son-in-law, daughter-in-law, brotherin-law, sister-in-law.
(ii) If one of them marries after issue of the bond.
(iii) If they are divorced or legally separated from each other, or their
marriage is annulled, after issue of the bond.
(2) In the name of a third person related to either coowner, as provided in
(a) (1) (i) of this section, witli a coowner or beneficiary, if so desired.
(Form PD 1938 should be u,sed for any of the above classes.)
(3) In the name of a trustee of (i) a personal trust estate created by either
coowner, or (ii) a personal trust estate created by other than a coowner if a
beneficiary of the trust is related to either coowner as provided in (a) (1) (i)
of this section.
Form PD 1851 should be used.
(b) Minor coowners.—A request for reissue signed by a minor coowner of
sufficient competency to sign his name to the request and understand the nature
of the transaction, and for whose estate no representative has been appointed,
will be recognized if the bond is to be reissued in his name alone, or in his name
with a new coowner or beneficiary. A request for reissue to eliminate the
other coowner, signed in behalf of a minor coowner by the representative of
his estate will be recognized; however, a request to eliminate the name of the
minor will be recognized only if supported by evidence that a court has ordered
the representative to request such reissue (see sec. 315.23). A minor coowner
for whose estate no representative has been appointed may be promoted to ,sole
owner upon the request of the competent coowner. A competent coowner may,
upon his own request, have the bond reissued to remove his name and name a
custodian for the minor under a statute authorizing gifts to minors.
(c) Incompetent coowners.—Reissue will not be made if one coowner is
incompetent and a representative of the incompetent's estate has not been appointed, except to add "an incompetent" after his name or to eliminate the
other coowner from the registration. If there is a representative, the provisions of paragraph (b) of this section apply as to his execution of a request
for reissue.
Sec. 315.62. After the death of one or both coowners.—If either coowner dies
without the bond having been presented and surrendered for payment or authorized reissue, the survivor will be recognized as the sole and absolute owner.
Thereafter, payment or reissue will be made as though the bond Were registered
in the name of the survivor alone (see Subpart L), except that a request for




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19 65 REPORT OF THE SECRETARY OF THE TREASURY

reissue by him must be supported by proof of death of the other coowner, and
except further that after the death of the survivor proof of death of both coowners
and of the order in which they died will be required. The presentation and
surrender of a bond by one coowner for payment establishes his right to receive
the proceeds of the bond, and if he should die before the transaction is completed, payment will be made to the legal representative of, or persons entitled to, his estate in accordance with the provisions of Subpart O. If either
coowner dies after the bond has been presented and surrendered for authorized
reissue (see sec 315.47), the bond will be regarded as though reissued during
his lifetime.
Sec. 315.63. Upon death of both coowners in a common disaster, etc.—If both
coowners die under such conditions that it cannot 'be established either by presumption of law or otherwise which died first, the bond will be considered
as belonging to the estates of both equally, and payment or reissue will be
made accordingly. (See Subpart O.)
SUBPART N—TWO NATURAL PERSONS AS OWNER AND BENEFICIARY

Sec. 315.65. During the lifetime of the registered owner.—A savings bond registered in beneficiary form, for example, "John A. Jones payable on death to
Mrs. Mary C. Jones," will be paid or reissued upon presentation and surrender
during the lifetime of the registered owner, as follows:
(a) Payment.—The bond will be paid to the registered owner during his
lifetime upon his properly executed request as though no beneficiary had been
named in the registration. The presentation and surrender of the bond by the
registered owner for payment establishes his exclusive right to the proceeds of
the bond, and if he should die before the transaction is completed, payment will
be made to the legal representative of, or the persons entitled to, his estate upon
receipt of proof of the appointment and qualification of the representative or the
identity of the persons entitled, in accordance with the provisions of Subpart O.
(b) Reissue.
(1) The bond will be reissued on a duly certified request of the owner:
(i) To name the beneficiary designated on the bond as coowner. Form PD
1787 should be used.
(ii) To eliminate his name as owner and to name as owner a custodian for
the beneficiary, if a minor, under a statute authorizing gifts to minors. Form
PD 3360 should be used.
(iii) To eliminate the beneficiary, to substitute another person as beneficiary,
or to name another person as coowner, if the request of the owner is supported
by the beneficiary's duly certified consent to elimination of his name or by proof
of his death.^ Form PD 1787 should be used.
(iv) In the name of a trustee of (1) a personal trust estate created by the
owner, or (2) a personal trust estate created by other than the owner if the
owner and a beneficiary of the trust are related as provided in sec. 315.61(a)
(1) (i), and the request of the owner is supported by the duly certified consent
of the beneficiary, or by proof of his death.^ Form PD 1851 should be used by
the owner and the beneficiary.
Sec. 315.66. After the death of the registered owner.—If the registered owner
dies without the bond having been presented and surrendered for payment or
authorized reissue and is survived by the beneficiary, upon proof of death of
the owner the beneficiary will be recognized as the sole and absolute owner, and
payment or reissue will be made as though the bond were registered in his name
alone (see Subpart L).
SUBPART 0

DECEASED OWNERS

Sec. 315.70. General.—Upon the death of the owner of a savings bond who is
not survived by a coowner or designated beneficiary and who had not during his
lifetime presented and surrendered the bond for payment or an authorized reissue, the bond will be considered as belonging to his estate and will be paid or
reissued accordingly as hereinafter provided, except that reissue under this
subpart will not be permitted if otherwise in confiict with these regulations. If
1 The provisions of t h i s section do not apply t o bonds on which the T r e a s u r e r of the
United S t a t e s of America is named as beneficiary.




257

EXHIBITS

the person entitled is an alien who is a resident of an area with respect to which
the Treasury Department restricts or regulates the delivery of checks drawn
against fimds of the United States of America, or any agency or instrumentality
thereof, payment of, and interest on, a bond will not be made so long as the
restriction applies.^ A creditor is entitled only to payment of a bond to the
extent of not mere than his claim.
Sec. 315.71. Special provisions applicable to small am^ounts of savirigs bonds,
interest checks or redemption checks.—Entitlement to, or the authority to dispo'se of, a small amount of bonds 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 face
amount of bonds and checks involved, (excluding checks representing interest
on the bonds), as indicated by the following table:
Amount
$100
600
500 _.

Circumstances
No admiaistration
Estate being administered
Estate settled-, _. _.

Form
PD 2216
__ PD 2488-1
PD 2458

To be executed b y Person who paid burial expenses.
Executor or administrator.
Former executor or administrator, attorney, or other quahfied person.

Sec. 315.72. Estates administered.
(a) In course of administration.—If the estate of a decedent is being administered in court, the bond will be paid to the duly qualified representative of the
estate or will be reissued in the names of the persons entitled to share in the
estate, upon the request of the representative and compliance with the following
requirements:
(1) Where there are two or more legal representatives, all must join in the
request for payment or reissue, except as provided in sees. 315.77 and 315.78.
(2) The request for payment or reissue should be signed in the form, for
example, "John A. Jones, administrator of the estate (or executor of the will)
of Henry W. Jones, deceased," and must be supported by proof of the representative's authority in the form of a court certificate or a certified copy of the
representative's letters of appointment. The certificate or the certification to the
letters must be under 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 should be dated within six months of the date of presentation of the bond,
unless the certificate or letters show that the appointment was made within one
year immediately prior to such presentation.
(3) In case of reissue the legal representative of the estate should certify that
each person in whose name reissue is requested is entitled to the extent specified
for each and has consented to such reissue. A request for reissue by the legal
representative should be made on Form PD 1455. If a person in whose name
reissue is requested desires to name a coowner or beneficiary, such person should
execute an additional request for that purpose, using Form PD 1787.
(b) After settlement through court proceedings.—If the estate of the decedent
has been settled in court, the bond will be paid to, or reissued in the name of, the
person entitled thereto as determined by the court. The request for payment
or reissue should be made by the person shown to be entitled, supported by a
duly certified copy of the representative's final account as approved by the
court, decree of distribution, or other pertinent court records, supplemented, if
there are two or more persons having an apparent interest in the bond, by an
agreement executed by them concerning the disposition of the bond. Form PD
1787 should be used 'by the person entitled if he wishes to name a coowner or
beneficiary.
Sec. 315.73. Estates not administered.
(a) Special provisions under State laws.—If, under State law, a person has
been recognized or appointed to receive or distribute the assets of a decedent's
estate without regular administration, his request for payment or reissue of
a bond to the person or persons entitled will be accepted provided he submits
appropriate evidence of his authority.
1 See D e p a r t m e n t Circular No. 655, c u r r e n t revision (31 CFR 2 1 1 ) .
782-556—66^
17




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19 65 REPORT OF THE SECRETARY OF THE TREASURY

(b) Agreement of persons entitled.—When it appears that no legal representative of a decedent's estate has been or will be appointed, the bond will be
paid to, or reissued in the name of, the person or persons entitled, including
those entitled as donees of a gift causa mortis, pursuant to an agreement and
request by all persons entitled to share in the decedent's personal estate. A
form of agreement for settlement without administration. Form PD 1946-1,
should be used for cases in which the total face amount of bonds and redemption
and interest checks belonging to the decedent's estate is in excess of $500.
Where the total face amount does not exceed $500, Form PD 1946 may be used.
If the persons entitled to share in the personal estate include minors or incompetents, payment or reissue of the bond will not be permitted without administration except to them or in their names unless their interests are otherwise
protected to the satisfaction of the Treasury Department.
SUBPART

P—FIDUCIARIES

Sec. 315.75. Payment.—A savings bond registered, in the name of a fiduciary
or otherwise belonging to a fiduciary estate will be paid to the fiduciary or
fiduciaries in accordance with the provisions of sees. 315.77 and 315.78.
Sec. 315.76. Reissue.
(a) In the name of person entitled.
(1) Distribution of trust estate in kind.—A bond to which a beneficiary of a
trust estate has become lawfully entitled in his own right or in a fiduciary
capacity, in whole or in part, under the terms of a trust instrument, will be reissued in his name to the extent of his interest, upon the request of the trustee
or trustees and their certification that such person is entitled and has agreed
to reissue in his name.
(2) After termination of trust estate.—If the person who would be lawfully
entitled to a bond upon the termination of a trust does not desire to have
distribution made to him in kind, as provided in paragraph (1) above, the
trustee or trustees should present the bond for payment before the estate is
terminated. If, however, the estate is terminated without such payment or
reissue having been made, the bond will thereafter be paid to or reissued in the
name of the person lawfully entitled upon his request and satisfactory proof
of ownership, supplemented, if there are two or more persons having any apparent
interest in the bond, by an agreement executed by all such persons concerning
the disposition of the bond.
(3) Upon termination of guardianship estate.—If the estate of a minor or incompetent or of an absentee is terminated, during the ward's lifetime, a bond
registered to show that there is a representative of the estate will be reissued
in the name of the former ward upon the representative's request and certification that the former ward is entitled and has agreed to reissue in his name
(Form PD 1455 should be used), or will be paid to or reissued in the name of the
former ward upon his own request, supported in either case by satisfactory
evidence that his disability has been removed or that an absentee has returned to
claim his property. Certification by the representative that a former minor
has attained his majority, that a former incompetent has been legally restored
to competency, that a legal disability of a female ward has been removed by
marriage, if the State law so provides, or that an absentee has appeared to claim
his property, will ordinarily be accepted as sufficient (see sec. 315.77 if the
representative's name is not shown in the registration). Upon the termination
of the estate as the result of the death of the ward, a bond registered to show
that there is a representative of his estate will be reissued in accordance with the
provisions of Subpart O.
(4) U%ion termination of life estate.—Upon the death of a life tenant, a bond
registered in his name as life tenant may be reissued in the name of the person
or persons entitled pursuant to an agreement and request of all of the persons
having an interest in the remainder.
(b) In the name of a succeeding fiduciary.—If a fiduciary in whose name a
bond is registered has been succeeded by another, the bond will re reissued in the
name of the succeeding fiduciary upon appropriate request and satisfactory evidence of successorship. Form PD 1455 should be used.
(c) In the name of financial institution as trustee of common trust fim,d.—A
bond held by a bank, trust company, or other financial institution as a trustee,
guardian or similar representative, executor or administrator may be reissued




EXHIBITS

259

in its name as trustee of its common trust fund to the extent that participation
therein by the institution in such capacity is authorized by law or applicable
regulations. A request for reissue to the institution as trustee of its common
trust fund should be executed on its behalf in the capacity in which the bond
is held and by the cofiduciary, if any. Form PD 1455 should be used.
Sec. 315.77. Requests for reissue or payment prior to maturity or extended
maturity.—The following rules apply to both requests for reissue and payment
by fiduciaries: A request for reissue or payment prior to maturity, or extended
maturity for bonds for which an optional extension period has been provided,
must be signed by all acting fiduciaries unless by express statute, decree of court,
or the terms of the instrument under which the fiduciaries are acting, some one
or more of them may properly execute the request. If the fiduciaries named in
the registration are still acting, no further evidence of authority will be required.
Otherwise, a request must be supported by evidence as specified below:
(a) Fiduciaries by title only.—If the bond is registered in the titles, without
the names, of fiduciaries not acting as a board, satisfactory evidence of their
incumbency must be furnished, except in the case of bonds registered in the title
of public officers as trustees.
(b) Succeeding fiduciaries.—If the fiduciaries in whose names the bond is
registered have been succeeded by other fiduciaries, satisfactory evidence of
successorship must be furnished.
(c) Boards, committees, etc.—A savings bond registered in the name of a
board, committee, commission, or other body, empowered to act as a unit and to
hold title to the property of a religious, educational, charitable, or nonprofit
organization or public corporation will be paid upon a request for payment
signed in the name of the board or other body by an authorized officer thereof.
A request so signed and duly certified will ordinarily be accepted without further
evidence of the officer's authority. The check in payment of the bond will be
drawn in the name of the board or other body as fiduciary for the organization
named in the registration or shown by satisfactory evidence to be entitled as
successor thereto.
(d) Corporate fiduciaries.—If a public or private corporation or a political
body, such as a State or county, is acting as a fiduciary, a request must be signed
in the name of the corporation or other body in the fiduciary capacity in which
it is acting, by an authorized officer thereof. A request so signed and duly
certified will ordinarily be accepted without further evidence of the officer's
authority.
(e) Registration not disclosing trust or other fiduciary estate.—If the registration of the bond does not show that it belongs to a trust or other fiduciary estate
or does not identify the estate to which it belongs, satisfactory evidence of
ownership must be furnished in addition to any other evidence required by this
section.
Sec. 315.78. Requests for payment at or after maturity.—A request for payment at or after the maturity date, or extended maturity date for bonds for
which an optional extension period has been provided, signed by any one or. more
acting fiduciaries, will be accepted. Payment ordinarily will be made by check
drawn as the bond is inscribed.
SUBPART Q — P R I V A T E ORGANIZATIONS (CORPORATIONS, A S S O C I A T I O N S , P A R T N E R S H I P S ,
ETC.) AND GOVERNMENTAL A G E N C I E S , U N I T S , AND OFFICERS

Sec. 315.80. Payment to corporations or unincorporated associations.—A savings bond registered in the name of a private corporation or an unincorporated
association will be paid to the corporation or unincorporated association upon
request for payment on its behalf by a duly authorized officer thereof. The signature to the request should be in the form, for example, "The Jones Coal Company,
a corporation, by John'Jones, President," or "The Lotus Club, an unincorporated
association, by William A. Smith, Treasurer." A request for payment so signed
and duly certified will ordinarily be accepted without further evidence of the
officer's authority.
Sec. 315.81. Payment to partnerships.-—A savings bond registered in the name
of an existing partnership will be paid upon a request for payment signed by
a general partner. The signature to the request should be in the form, for
example, "Smith and Jones, a partnership, by John Jones, a general partner."
A request for payment so signed and duly certified will ordinarily be accepted




260

1965 REPORT OF THE SECRETARY OF THE TREASURY

as sufficient evidence that the partnership is sti.ll in existence and that the person
signing the request is duly authorized.
Sec. 315.82. Reissue or payment to successors of corporations, unincorporated
associations, or partnerships.—A savings bond registered in the name of a private
corporation, an unincorporated association, or a partnership which has been
succeeded by another corporation, unincorporated association, or partnership
by operation of law or otherwise, as the result of merger, consolidation, incorporation, reincorporation, conversion, or reorganization, or which has been lawfully
succeeded in any manner whereby the business or activities of the original organization are continued without substantial change, will be paid to or reissued in
the name of the succeeding organization upon appropriate request on its behalf,
supported by satisfactory evidence of successorship. Form PD 1540 should be
used.
Sec. 315.83. Reissue or payment on dissolution of corporation or partnership.
(a) Corporations.—K savings bond registered in the name of a private corporation which is in the process of dissolution will be paid to the authorized
representative of the corporation upon a duly executed request for payment, supported by satisfactory eyidence of the representative's authority. Upon the
termination of dissolution proceedings, the bond may be reissued in the names
of those persons, other than creditors, entitled to the assets of the corporation,
to the extent of their respective interests. Reissue under this subsection will
be made .upon the duly executed request of the authorized representative of
the corporation and upon proof that all statutory provisions governing the
dissolution of the corporation have been complied with and that the persons
in whose names reissue is requested are entitled and have agreed to the reissue.
If the dissolution proceedings are under the direction of a court, a certified copy
of an order of the court, showing the authority of the representative to make
the distribution requested, must be furnished.
(b) Partnerships.—A. savings bond registered in the name of a partnership
which has been dissolved by death or withdrawal of a partner, or in any other
manner, will be paid upon a request for payment by any partner or partners
authorized by law to act on behalf of the dissolved partnership, or will be paid
to or reissued in the names of the persons, other than creditors, entitled thereto
as the result of such dissolution to the extent of their respective interests, upon
their request supported by satisfactory evidence of their title, including proof
that the debts of the partnership have been paid or properly provided for. Form
PD 2514 should be used.
Sec. 315.84. Payment to institutions {churches, hospitals, homes, schools,
etc.).—A savings bond registered in the name of a church, hospital, home, school,
or similar institution without reference in the registration to the manner in
which it is organized or governed or to the manner in which title to its property
is held will be paid upon a request for payment signed on behalf of such institution by an authorized representative. For the purpose of this section, a request
for payment signed by a pastor of a church, superintendent of a hospital, president of a college, or by any official generally recognized as having authority to
conduct the financial affairs of the particular institution will ordinarily be
accepted without further proof of his authority. The signature to the request
should be in the form, for example, "Shriners' Hospital for Crippled Children,
St. Louis, Mo., by William A. Smith, superintendent," or "St. Mary's Roman
Catholic Church, Albany, N.Y., by John Jones, pastor."
Sec. 315.85. Reissue in name of trustee or agent for investment purposes.—
A savings bond registered in the name of a religious, educational, charitable, or
nonprofit organization^ whether or not incorporated, may be reissued in the name
of a bank, trust company, or other financial institution, or an individual, as
trustee or agent under an agreement with the organization under which the
trustee or agent holds funds of the organization, in whole or in part, for the
purpose of investing and reinvesting the principal and paying the income to
the organization. Form PD 2177 should be used and should be signed on behalf
of the organization by an authorized officer.
Sec. 315.86. Reissue upon termination of investment agency.—A savings bond
registered in the name of a bank, trust company, or other financial institution,
or individual, as agent for investment purposes only, under an agreement with
a religious, educational, charitable, or nonprofit organization, may be reissued
in the name of the organization upon termination of the agency. The former
agent should request such reissue and should certify that the organization is




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261

entitled by reason of the termination of the agency, using Form PD 1455. If
such request and certification are not obtainable, the bond will be reissued in.
the name of the organization upon its own request, supported by satisfactory
evidence of the termination of the agency.
Sec. 315.87. Payment to governmental agencies and units.—A savings bond
registered in the name of a State, county, city, town, or village, or in the name
of a Federal, State, or local governmental agency such as a board, commission,
or corporation, will be paid upon a request signed in the name of the governmental agency or unit by a duly authorized officer thereof. A request for payment so signed and duly certified will ordinarily be accepted without further
proof of the officer's authority.
Sec. 315.88. Payment to Government officers.—^A savings bond registered in the
official 'title of an officer of a Government agency or unit will be paid upon a
request for payment signed by the designated officer. The fact that the request
for payment is so signed and duly certified will ordinarily be accepted as proof
that the person signing is the incumbent of the designated office.
SUBPART R — M I S C E L L A N E O U S

PROVISIONS

Sec. 315.90. 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 of America or in order to relieve any person or persons of
unnecessary hardship, if such action would not be inconsistent with law and
would not impair any existing rights, and if he is satisfied that such action
would hot subject the United States of America to any substantial expense or
liability.
Sec. 315.91. Additional requirements; bond of indemnity; taxpayer identifying
numbers.—The Secretary of the Treasury may require (a) such additional evidence as he may consider necessary or advisable, (b) a bond of indemnity,
with or without surety, in any case where he may consider such a bond necessary
for the protection of the interests of the United States of America, and (c) without prior notice, that appropriate taxpayer identifying numbers be furnished
for issue, reissue, or payment of any savings bond.
Sec. 315.92 Preservation of rights.—Nothing contained in these regulations
shall be construed to limit or restrict existing rights which holders of savings
bonds heretofore issued may have acquired under the circulars offering the
bonds for sale or under the regulations in force at the time of purchase.
Sec. 315.93. Supplements, amendments, or revisions.—The Secretary of the
Treasury may at any time, or from time to time, prescribe additional, supplemental, amendatory, or revised rules and regulations governing United States
savings bonds.
JOHN K . CARLOCK,

Fiscal Assistant Sew^etary of the Treasury.

Exhibit 8.—Sixth revision, December 23, 1964, of Department Circular No. 653,
offering of United States savings bonds, Series E
TREASURY DEPARTMENT,

Washington, December 23,1964.
Department Circular No. 653, Fifth Revision, dated September 23, 1959, as
amended (31 CFR 316), is hereby further amended and issued as the Sixth
Revision.^
AUTHORITY: Sees. 316.1 to 316.14 issued under authority of sections 22 and
25 of the Second Liberty Bond Act, as amended, 49 Stat. 21, as amended, and
73 Stat. 621 (31 U.S.C. 757c, 757c-l).
Sec. 316.1 Offering of bonds.—The Secretary of the Treasury offers for sale
to the people of the United States, United States savings bonds of Series E, hereinafter generally referred to as Series E bonds. These bonds are substantially
1 The basic terms of the bonds offered under the Fifth Revision have not been changed.
The material in the Fifth Revision and its three amendments has been reorganized and
edited in connection with the publication of the 1965 edition of Title 31 of the Code of
Federal Regulations.




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19 65 REPORT OF THE SECRETARY OF THE TREASURY

a continuation of the Series E bonds heretofore available. This offering of
bonds will continue until terminated by t h e Secretary of the Treasury.
Sec. ,316.2. Description of bonds currently offered.— ( a ) General.—Series E
bonds bear a facsimile of the signature of t h e Secretary of the T r e a s u r y a n d of
t h e Seal of the T r e a s u r y Department. The bonds a r e issued only in registered
form and a r e nontransferable.
(b) Denominations and prices.—Series E bonds a r e issued on a discount
basis a t 75 percent of their face values. The denominations and issue prices
are:
Issue
{purchase)
Denomination {face value)
price
$25
$18.75
50
—
37.50
75
56.25
100
75.00
200
150.00
- 500.
375. 00
1,000
750.00
10,000
7, 500. 00
100,000 '
75, 000. 00
(c) Inscription a n d issue.—At the time-of issue t h e issuing agent will (1)
inscribe on the face of each Series E bond the n a m e and address of t h e owner, a n d
the n a m e of t h e beneficiary, if any, or t h e name a n d address of one coowner, a n d
the name of the other coowner, (2) enter in t h e upper right-hand portion of the
bond the issue date, and (3) imprint the agent's dating stamp in the lower righth a n d portion to show t h e date t h e bond is actually inscribed. A Series E bond
shall be valid only if an authorized issuing agent receives payment therefor and
duly inscribes, dates, stamps, a n d makes delivery of the bond in accordance with
t h e purchaser's instructions. The T r e a s u r y D e p a r t m e n t may require, without
prior notice, t h a t the appropriate identifying number as required on t a x r e t u r n s
and other documents submitted to the I n t e r n a l Revenue Service be furnished
for inclusion in the inscription.
(d) Term.—A Series E bond shall be dated as of the first day of the month in
which payment of the issue price is received by a n agent authorized to issue
such bonds. This date is t h e issue date and t h e bond will m a t u r e a n d be payable
a t face value 7 years a n d 9 months from such issue date. The bond may not be
called for redemption by t h e Secretary of the T r e a s u r y prior to m a t u r i t y or the
end of the extended m a t u r i t y period (see sec. 316.8(a) ( 1 ) ) . The bond may be
redeemed a t t h e owner's option a t any time after two months from issue date
a t fixed redemption v a l u e s ; however, the T r e a s u r y D e p a r t m e n t may require
reasonable notice of presentation of a bond for redemption prior to maturity.
The owner h a s the option of continuing to hold the bond for an extended m a t u r i t y
period a t a r a t e of interest to be determined prior to the original m a t u r i t y of
such bond.
(e) Investment yield {interest).—The investment yield (interest) o n a Series
E bond will be approximately 3.75 percent per a n n u m compounded semiannually
if t h e bond is held to m a t u r i t y ; ^ but the yield will be less if t h e bond is redeemed
prior to m a t u r i t y . The interest will be paid as a p a r t of the redemption value.
During the first six months from issue date the bonds will be redeemable only
a t issue price. The redemption value will increase a t the end of the first halfyear period from issue d a t e and successive periods thereafter (see Table I ) .
Sec. 316.3. Governing regulations.—Series E bonds are subject to the regulations of the T r e a s u r y Department, now o r hereafter prescribed, governing United
States savings bonds, contained in D e p a r t m e n t Circular No. 530, current revision
(31 C F R 315).'
1 The $100,000 denomination is available only for purchase by trustees of employees'
savings plans as described in section 316,5(c).
s u n d e r a u t h o r i t y of section 25, 73 S t a t 621 (31 U,S.C, 7 5 7 c - l ) . the President of the
United S t a t e s on Sept. 22, 1959, concluded t h a t with respect to Series E bonds it was
necessary in the national interest to exceed the raaximum interest r a t e and investment yield
prescribed by section 22 of t h e Second Liberty Bond Act, as amended (31 U.S.C. 757c).
3 Copies may be obtained from any Federal Reserve bank or branch, or the Bureau of the
Public Debt, Washington, D.C. 20220, or its Chicago Office, 536 South Clark Street,
Chicago, 111. 60605. (See exhibit 7.)




EXHIBITS

263

Sec. 316.4 Registration.— {a) Oeneral.—Generally, only residents of the
United States, its territories and possessions, the Commonwealth of Puerto Rico,
the Canal Zone and citizens of the United States temporarily residing abroad are
eligible to be named as owners of Series E bonds. The bonds may be registered
in the names of natural persons in their own right as provided in (b) of this
section, and in the names and titles or capacities of fiduciaries and organizations
as provided in (c) of this section. Full information regarding authorized forms
of registration and restrictions with respect thereto will be found in the governing regulations.
(b) Natural persons in their own right.—The bonds may be registered in the
names of natural persons (whether adults or minors) in their own right, in
single ownership, coownership, and beneficiary forms.
(c) Others.—The bonds may be registered in single ownership form in the
names of fiduciaries and private and public organizations, as follows:
(1) Fiduciaries.—In the names of and showing the titles or capacities of any
persons or organizations, public or private, as fiduciaries (including trustees,
legal guardians or similar representatives, and certain custodians), but not
where the fiduciary would hold the bonds merely or principally as security for
the performance of a duty, obligation, or service.
(2) Private and public organizations.—In the names of private or public
organizations (including private corporations, partnerships, and unincorporated associations, and States, counties, public corporations, and other public
bodies) in their own right, but not in the names of commercial banks.^
Sec. 316.5. Limitations on holdings.—The amount of Series E bonds originally
issued during any one calendar year that may be held by any one person, at any
one time, computed in accordance with the governing regulations, is limited, as
follows:
(a) General limitation.—$10,000 (face value) for the calendar year 1959
and each calendar year thereafter.
(b) Special limitation for owners of savings bonds of Series F, G, J, and K.—
Owners, except commercial banks ^ in their own right (as distinguished from
a representative or fiduciary capacity), of outstanding bonds of Series F and G,
all of which are now matured, and bonds of Series J and K, at or after maturity,
may purchase Series E bonds with the proceeds of redemption without regard
to the general limitation on holdings, under the following restrictions and
conditions:
(1) The bonds must be presented to a Federal Reserve bank or branch, the
Office of the Treasurer of the United States, Securities Division, or the Bureau
of the Public Debt, Division of Loans and Currency Branch, for the specific
purpose of taking advantage of this privilege. The Series E bonds will be
dated as of the first day of the month in which the bonds presented are received
by the agency.
(2) Series E bonds may be purchased with the proceeds of the bonds presented
only up to the denominational amounts that the proceeds thereof will fully
cover. Any difference between such proceeds and the purchase price of the Series
E bonds will be paid to the owner.
(3) The Series E bonds will be registered in the name of the owner in any
authorized form of registration, subject to the restrictions prescribed by the
governing regulations.
(4) This privilege will continue until terminated by the Secretary of the
Treasury.
(c) Special limitation for employees' savings plans.—$2,000 (face value)
multiplied by the highest number of participants in an employees' savings plan,
as defined in (1) of this paragraph, at any time during the year in which the
bonds are issued.^
(1) Definition of plan and conditions of eligibility.—
(i) The employees' savings plan must have been established by the employer
for the exclusive and irrevocable benefit of his employees or their beneficiaries,
1 Commercial banks, as defined in section 315.7(d)(2) of Department Circular No. 530,
current revision, the governing regulations, for this purpose are those accepting demand
deposits.
^ Savings and vacation plans may be eligible for this special limitation. Questions
concerning eligibility of such plans should be addressed to the Bureau of the Public Debt,
Division of Loans and Currency Branch, 536 South Clark Street, Chicago, 111. 60605.




264

19 65 REPORT OF THE SECRETARY OF THE TREASURY

afford employees the means of making regular savings from their wages through
payroll deductions, and provide for employer contributions to be added to such
savings.
(ii) The entire assets thereof must be credited to the individual accounts of
participating employees and assets credited to the account of an employee
may be distributed only to him or his beneficiary, except as otherwise provided
herein.
(iii) Series E bonds may be purchased only with assets credited to the accounts
of participating employees and only if the amount taken from any account at any
time for that purpose is equal to the purchase price of a bond or bonds in an
authorized denomination or denominations, and shares therein are credited to
the accounts of the individuals from which the purchase price thereof was
derived, in amounts corresponding with their shares. For example, if $37.50
credited to the account of John Jones is commingled with funds credited to the
accounts of other employees to make a total of $7,500, with which a Series E
bond in denomination of $10,000 (face value) is purchased in January 1965 and
registered in the name and title of the trustee or trustees', the plan must provide,
in effect, that John Jones' account shall be credited to show that he is the
owner of a Series E bond in the denomination of $50 (face value) bearing the
issue date of January 1,1965.
(iv) Each participating employee shall have an irrevocable right at any time
to demand and receive from the trustee or trustees all assets credited tO' his
account or the value thereof, if he so prefers, without regard to any condition
other than the loss or suspension of the privilege of participating further in the
plan, except that a plan will not be deemed to be inconsistent herewith if it limits
or modifies the exercise of any such right by providing that the employer's contribution does not vest absolutely until the employee shall have made contributions under the plan in each of not more than 60 calendar months succeeding the
month for which the employer's contribution is made.
(v) Upon the death of an employee, his beneficiary shall have the absolute
and unconditional right to demand and receive from the trustee or trustees all
the assets credited to the account of the employee, or the value thereof, if he
so prefers.
(vi) When settlement is made with an employee or his beneficiary with respect to any Series E bond registered in the name and title of the trustiee or
trustees in which the employee has a share (see (ii) hereof), the bond must be
submitted for redemption or reissue to the extent of such share; if an employee
or his beneficiary is to receive distribution in kind, bonds bearing the same
issue dates as those credited to the employee's account will be reissued in the
name of the distributee to the extent to which he is entitled, in authorized
denominations, in. any authorized form of registration, upon the request and
certification of the trustee or trustees in accordance with the regulations
governing United States savings bonds.
(2) Definitions of terms used in this section and related provisions.—
(1) The term "savings plan" includes any regulations issued under the plan
with regard to 'Series E bonds; a copy of the plan and any such regulations,
together with a copy of the trust agreement certified by a trustee to be true
copies, must be submitted to the Federal Reserve bank of the district in order to
establish the eligibility of the trustee or trustees to purchase bonds in excess of
the general limitation in any calendar year.
(ii) The term "assets" means all funds, including the .employees' contributions
and employer's contributions and assets purchased therewith as well as accretions thereto, such as dividends on stock, the increment in value on bonds and
all other income; but, notwithstanding any other provision of this section, the
right to demand and receive "all assets" credited to the account of an employee
shall not be construed to require the distribution of assets in kind when it would
not be possible or practicable to make such distribution; for example, Series E
bonds may not be reissued in unauthorized denominations, and fractional shares
of stock are not readily distributable in kind..
(iii) The term "beneficiary".means the person or persons, if any, designated
by the employee in accordance with the terms of the plan to receive the benefits
of the trust upon his death or the estate of the employee, and the term "distributee" means the employee or his beneficiary.




EXHIBITS

265

Sec. 316.6 Purchase of bonds.—Series E bonds may be purchased, as follows:
(a) Over-the-counter for cash.
(1) Bonds registered in names of natural persons in their own right only.—
At such incorporated banks, trust companies, and other agencies as have been
duly qualified as issuing agents and at selected United States post offices.
(2) Bonds registered in all authorized forms.—At Federal Reserve banks and
branches and at the Office of the Treasurer of the United States, Securities
Division, Washington, D.C. 20220.
(b) On mail order.—By mail upon application to 'any Federal Reserve bank
or branch or to the Office of the Treasurer of the United States, Securities
Division, W^ashington, D.C. 20220, accompanied by a remittance to cover the
issue price. Ajoy form of exchange, including personal checks, will be accepted
suhject to collection. Checks or other forms of exchange should be drawn to
the order of the Federal Reserve bank or the Treasurer of the United States,
as the case may be. Checks payable by endorsement are not acceptable. Any
depositary qualified pursuant to the provisions of Treasury Department Circular No. 92, current revision (31 CFR 203), will be permitted to make payment
by credit for bonds applied for on behalf of 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.
(c) Savings stamps.—Savings stamps, in authorized denominations may be
purchased at most post offices and at such other agencies as may be designated
from time to time. The stamps may be used to accumulate credits for the
purchase of Series E bonds. Albums for affixing the stamps will be available
without charge, and such albums vnll be receivable h j any authorized issuing
agent in the amount of the affixed stamps on -the purchase price of the bonds.
'Sec. 316.7. Delivery of bonds by mail.—Issuing agents are authorized to
deliver Series E bonds 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 purchased by citizens of
the United States temporarily residing abroad, the bonds will be delivered at
such address in the United 'States as the purchaser directs.
Sec. 316.8. Extended terms and improved yields for outstanding bonds.—
(a) Optional extension privileges.
(1) General.—The term "optional extension privilege," when used herein,
means the privilege of retaining Series E bonds after maturity for a period,
known as the "extended maturity period," or as the "second extended maturity
period," and of earning interest upon the maturity values or extended maturity
values thereof, as the case may be.^ The tables at the end of this circular, whicli
are incorporated herein, show current redemption values and investment yields.
No special action is required of owners desiring to take advantage of any optional
extension privilege. Merely by continuing to hold their bonds after maturity,
they will continue to earn further interest. Interest will accrue at the end of
the first half-year period following maturity or extended maturity and at the
end of each successive half-year period thereafter until final maturity.
(2) For bonds loith issue dates of May 1, 1941, through May 1, 1949.—
Owners of Series E bonds with issue dates of May 1, 1941, through May 1, 1949,
have the option of retaining their bonds for a second extended maturity period
of ten years.
(3) For bonds with issue dates of June 1, 1949, through April 1, 1957.—
Owmers of Series E bonds with issue dates of June 1, 1949, through April 1,
1957, have the option of continuing to hold their bonds for an extended maturity
period of ten years.
(4) For bonds ivith issue date of May 1, 1957, or thereafter.—^Owners of
Series E bonds with issue date of May 1, 1957, or thereafter have the option of
continuing to hold such bonds for an extended maturity period of ten years at
rates of interest to be determined prior to the original maturity of such bonds.
(b) Improved yields.
(1) For bonds with issue dates of MOAJ 1, 1941, through May 1, 1949.—The
investment yields on outstanding Series E bonds with issue dates of May 1,
1 The rederaption value of any bond at original m a t u r i t y is t h e base upon which interest
will accrue during t h e extended m a t u r i t y period. The redemption value of auy bond a t
t h e end of the extended m a t u r i t y period is the base upon which interest accrues during
t h e second extended m a t u r i t y period.




266

19 65 REPORT OF THE SECRETARY OF THE TREASURY

1941, through May 1, 1949, were increased for the remaining period of their
extended maturity: (i) by not less than six-tenths of one percent per annum on
bonds with issue dates of May 1, 1941, through April 1, 1942; and (ii) fivetenths of one percent per annum on bonds with issue dates of May 1, 1942,
through May 1, 1949, if held to the end of the extended m'aturity period, and
by lesser amounts if redeemed earlier.^ The improvement in investment yields
started on June 1, 1959, for bonds with the issue months of June or December
and on the date of the first increase in redemption value after June 1, 1959,
for a bond with any other issue month. The resulting yields are in terms of
rate percent per annum, compounded semiannually. See tables 2 through 19"
for current redemption values and investment yields.
(2) For bonds with issue dates of June 1, 1949, through April 1, 1957.^—
The investment yields on outstanding Series E bonds with issue dates of June
1, 1949, through April 1, 1957, were increased for the extended maturity period
by approximately three-fourths of one percent per annum, compounded semiannually for bonds held at the end of that period and by lesser amounts if redeemed earlier. See tables 20 through 37 ^ for current redemption values and
investment yields.
(3) For bonds with issue dates of May 1, 1957, through May 1, 1959^—The
investment yields on outstanding Series E bonds with issue dates of May 1,
1957, through May 1, 1959, were increased beginning June 1, 1959, by five-tenths
of ohe percent per annum if held to original maturity and by lesser amounts if
redeemed earlier. The improvement in investment yields started on June 1,
1959, for bonds with the issue months of June or December and on the date of
the first increase in redemption value after June 1, 1959, for a bond with any
other issue month. The resulting yields are in terms of rate percent per annum,
compounded semiannually. See tables 38 through 42^ for current redemption
values and investment yields.
Sec. 316.9. Taxation.— (a) General.—^For the purpose of determining taxes
and tax exemptions, the increment in value represented by the difference between the price paid for Series E bonds (which are issued on a discount basis)
and the redemption value received therefor shall be considered as interest. Such
interest 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.
(b) Federal income tax on Series E bonds.—An owner of Series E bonds
who is a cash basis taxpayer and accordingly not required to report the increase
in redemption value bf his bonds each year as it accrues is required to include
such amount in gross income for Federal income tax purposes for the taxable
year of final maturity, actual redemption, or other disposition, whichever is
earlier. An owner not reporting the increase in redemption value of such bonds
currently for income tax purposes may elect in any year prior to final maturity,
subject to the provisions of section 454 of the Internal Revenue Code of 1954
and the regulations prescribed thereunder, for such year and subsequent years
to report such income annually. An owner who is required, or chooses, to report
the increase in redemption value of his bonds each year as it accrues must
continue to do so so long as he retains the bonds, unless in accordance with the
income tax regulations he obtains permission from the Internal Revenue Service
to change to a different method of reporting income from such obligations. In1 The investment yields for the full extended m a t u r i t y period of the bonds referred to in
section 316.8(a) (2) a n d ( b ) ( 1 ) were, according to issue dates, a s follows :
May 1, 1941, t h r o u g h Apr. 1, 1942
2. 90
May 1, 1942, through May 1, 1949
3. 00
percent per annum, compounded semiannually.
2 See " N o t e " a t end of this exhibit.
3 The investment yields for the full original maturity/ period of bonds referred to in
section 3 1 6 . 8 ( b ) ( 2 ) and ( 3 ) , were, according to issue dates, as follows:
Dec. 1, 1949, t h r o u g h Apr. 1, 1952
2. 90
May 1, 1952, through J a n . 1, 1957
3. 00
Feb. 1, 1957, through May 1, 1959
3. 25
These yields were increased, effective one-half year from the next date after J u n e 1, 1959,
on which t h e redemption value increased, by not less t h a n six-tenths of one percent for
bonds w i t h issue dates of Dec. 1, 1949, through Apr. 1, 1952, and by five-tenths of one
percent for bonds w i t h issue dates of May 1, 1952, through May 1, 1959. All of these
yields a r e in t e r m s of r a t e percent per annum, compounded semiannually.




EXHIBITS

267

quiry concerning further information on Federal taxes should be addressed to
the district director, Internal Revenue Service, of the taxpayer's district, or the
Internal Revenue Service, Washington, D.C, 20224.
Sec. 316.10. Payment or redemption.— (a) General.—A Series E bond may
be redeemed in accordance with its terms at the appropriate redemption value
as shown in the applicable tables hereof for bonds bearing various issue dates
back to May 1, 1941. The redemption values of bonds in the denomination of
$100,000^ (which was authorized as of January 1, 1954) are not shown in the
tables. However, the redemption values of bonds in that denomination will
be equal to the total redemption values of ten $10,000 bonds bearing the same
issue dates. A Series E bond in a denomination higher than $25 (face value)
may be redeemed in part but only in the amount of an authorized denomination
or multiple thereof.
(to) Federal Reserve banks and branches and Treasurer of the United
States.—Owners of Series E bonds may obtain payment upon presentation and
surrender of the bonds to a Federal Reserve bank or branch or to the Office of the
Treasurer of the United 'States, Securities Division, Washington, D.C, 20220,
with the requests for payment on the bonds duly executed and certified in accordance with the governing regulations.
(c) Incorporated banks, trust companies, and other financial institutions.—
An individual (natural person) whose name is inscribed on a Series E bond
either as OAvner or coowner in his own right may also present such bond to any
incorporated bank or trust company or other financial institution which is
qualified as a paying agent under Department Circular No. 750, current revision
(31 CFR 321). If such bond is in order for payment by the paying agent, the
owner or coowner, upon estaiblishing his identity to the satisfaction of the agent
and upon signing the request for payment and adding his home or business
address, may receive immediate payment of the current redemption value.
Sec. 316.11. Reservation as to issue of bonds.—The Secretary of the Treasury
reserves the right to reject any application for Series E bonds, in whole or in
part, and to refuse to issue or permit to be issued hereunder 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 he final.
Sec. 316.12. Preservation of rights.—Nothing contained herein shall limit or
restrict rights which owners of Series E bonds heretofore issued have acquired
under offers previously in force.
Sec. 316.13. Fiscal agents.—Federal Reserve banks and branches, as fiscal
agents of the United States, are authorized to perform such services as may be
requested of them by the Secretary of the Treasury in connection with the issue,
delivery, redemption, and payment of Series E bonds.
Sec. 316.14. Reservations as to terms of offer.—^The Secretary of the Treasury
may at any time or from time to time supplement or amend the terms of this
offering of bonds (31 OFR 316), or of any amendments or supplements thereto.
JOHN K . CARLOCK,

Fiscal Assistant Secretary of the Treasury.
1 The $100,000 denomination is only available for purchase by trustees of employees*
savings plans as described in section 316.5(c).




TABLES OF REDEMPTION VALUES AND INVESTMENT YIELDS FOR U N I T E D STATES SAVINGS BONDS OF SERIES E
Each table shows: (1) How bonds of Series E bearing the issue dates covered by the table, by denominations, iacrease tn redemption value for each successive half-year period
(a) following the date of issue for bonds bearing issue dates begimiing Dec, 1,1954; (b) following original maturity for bonds bearing issue dates of Dec. 1, 1944, through Nov. 1, 1954
(c) following first extended matmity for bonds bearing issue dates of May 1, 1941, through Nov. 1, 1944 (for the latest revised redemption values and investment yields duriag
original maturity and first extended maturity periods not shown in these tables seeDepartment Circular 653, Fifth Revision, dated Sept. 23, 1959); (2) the approximate investraent
yield on the purchase price from issue date to the beginning of each half-year period shown on the table; and (3) the approximate investment yield on the current redemption value
from the beginniag of each half-year period sho\vn on the table to maturity. Yields are expressed tn terms of rate percent per annum, compounded semiannually.

to
00

TABLE I.—Bonds bearing issue dates beginning June 1, 1959
Issueprice
Maturity value.

Period after issue date

First ^2 year
.,
3^ to 1 year
1 to IH years
:
13^ to 2 years
2 to 2H years
2H to 3 years
3 to Z}4 years
3H to 4 years
4 to 41^ years
4K to 5 years
6 to 5H years
5H to 6 years
6 to 6H years
6H to 7 years
7 to 7H years
^H years to 7 years and 9 months
MATURITY VALUE (7 years and 9
months from issue date)
•

$18. 75
25.00

$37,50
50.00

$56, 25
75,00

$75. 00
100,00

$150.00
200,00

$375.00
500.00

$750,00
1,000,00

$7, 600
10,000

Approxunate investment
yield 1

(2) On pur(3) On current
chase price
redemption
from issue date value from be(1) Redemption values duriag each half-year period 2 (values increase on first day of period shown) to beginning of ginning of each
each half-year half-year perperiod 1
iod 2 to maturity

$18. 75
18,91
19,19
19,51
19.90
20, 28
20.66
21.07
21,50
21. 95
22.40
22.86
23.32
23.79
24,27
24,75

$37, 50
37.82
38.38
39.02
39.80
40,56
41.32
42.14
43.00
43.90
44.80
45.72
46.64
47.58
48,54
49,50

25,00

50,00

$56. 25
56,73
57,57
58,53
59,70
60.84
61.98
63,21
64,50
65,85
67. 20
68.58
69.96
71.37
72.81
74.25

$75. 00
75.64
76,76
78,04
79.60
81.12
82,64
84,28
86.00
87.80
89.60
91.44
93.28
95.16
97.08
99.00

$150,00
151.28
153, 52
156. 08
159. 20
162, 24
165, 28
168. 56
172.00
175. 60
179. 20
182.88
186, 56
190,32
194,16
198, 00

$375,00
378, 20
383, 80
390.20
398,00
405, 60
413,20
421.40
430,00
439.00
448, 00
457, 20
466, 40
475,80
485.40
495. 00

100. 00

200.00

500.00

$750.00
756, 40
767, 60
780, 40
796.00
811. 20
826, 40
842,80
860, 00
878, 00
896.00
914, 40
932,80
951, 60
970,80
990,00

$7, 500
7,564
7.676
7,804
7,960
8,112
8,264
8,428
8,600
8,780
8,960
9,144
9,328
9,516
9,708
9,900

Percent
0.00
1.71
2.33
2.67
3.00
3.16
3.26
3,36
3,45
3,53
3,59
3,64
3,67
3,70
3.72
3.74

10,000

3.75

Percent
53.75
3,89
3,96
4,01
4.01
•4.03
4.05
4.06
4,06
4,04
4.03
4,02
'4, 01
4,01
3.99
4,06

o

w
Ul

o
pi

>

Pi

o
W
H9

1,000.00

1 Calculated on basis of $1,000 bond (face value),
2 3-month period in the case of the 7^^ year to 7 year and 9 nionth period.
3 Approximate investment yield for entire period from issuance to maturity.

NOTE.—The other tables are not reproduced in this exhibit as the redemption values and approximate investment yields shown in
those tables are the same as those published in previous annual reports as follows: tables 2-19 cover bonds bearing issue dates from
May 1, 1941, through May 1, 1949, and appear as tables I-XVIII, respectively, on pages 275-292 of the 1961 annual report; and tables
 cover bonds bearing issue dates from June 1, 1949, through May 1,1959, which appear on pages 232-254 of the 1960 annual report.
20-42


O
Pi

>
Ul

Pi

EXHIBITS

269

Exhibit 9.—Fifth amendment, December 23, 1964, of Department Circular No.
750, regulations governing payments by banks and other financial institutions
in connection with the redemption of United States savings bonds
TREASURY DEPARTMENT,

Washington, December 23,1964.
Subsection (a) of section 321.4 Department Circular No. 750, Revised, dated
June 30, 1945, as amended and supplemented (31 CFR, Part 321), is hereby
further amended as follows:
Sec. 321.4. Meariing of terms in this circular * * *
(a) 'Taying agent(s)" or "agent(s)" shall mean (1) any eligible financial
institution duly qualified pursuant to the provisions of this circular (31 CFR
321) to make payments in connection with the redemption and redemptionexchange of the United States savings bonds hereinafter specified, including
branches of such institutions located within the United States, its territories
and possessions, the Commonwealth of Puerto Rico and the Canal Zone, and
(2) banking facilities of such institutions established at Armed Forces installations and other places with the specific approval of the Treasury Department.
JOHN K . CARLOCK,

Fiscal Assistant Secretary of the Treasury.

Exhibit 10.—-Third revision, December 23, 1964, of Department Circular No. 905,
offering of United States savings bonds, Series H
TREASURY DEPARTMENT,

Washington, December 23,1964Department Circular No. 905, Second Revision, dated September 23, 1959,
as amended (31 CFR 332), is hereby further amended and issued as the Third
Revision.^
AUTHORITY: Sees. 332.1 to 332.14 issued under authority of sections 22 and
25 of the Second Liberty Bond Act, as amended, 49 Stat. 21, as amended, and
73 Stat. 621 (31 U.S.C. 757c, 757c-l).
Sec. 332.1. Offering of bonds.—The Secretary of the Treasury offers for sale
to the people of the United States, United States savings bond of Series H,
hereinafter generally referred to as Series H bonds. These bonds are substantially a continuation of the Series H bonds heretofore available. This
offering of bonds will continue until terminated by the Secretary of the
Treasury.
Sec. 332.2. Description of bonds currently offered.— (a) General.—Series H
bonds bear a facsimile of the signature of the Secretary of the Treasury and
of the Seal of the Treasury Department. The bonds are issued only in registered form and are nontransferable.
(b) Denominations and prices.—Series H bonds are issued at par and are
available in denominations of $500, $1,000, $5,000, and $10,000.
(c) Inscription and issue.—At the time of issue the issuing agent will (1)
inscribe on the face of each Series H bond the name, taxpayer identifying
number,^ and address of the owner, and the name of the beneficiary, if any, or
the names of the coowners, the taxpayer identifying number of one coowner,^
and the address of one coowner, (2) enter in the upper right-hand portion of
the bond the issue date, and (3) imprint the agent's dating stamp in the lower
right-hand portion to show the date the bond is actually inscribed. A Series H
bond shall be valid only if an authorized issuing agent receives payment therefor
and duly inscribes, dates, stamps, and makes delivery of the bond in accordance
with the purchaser's instructions.
1 The basic terms of the bonds offered under the Second Revision have not been changed.
The raaterial in the Second Revision and its four amendments has been reorganized and
edited in connection with the publication of the 1965 edition of Title 31 of the Code of
Federal Regulations.
2 The number 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). If the coowners are husband and wife, the husband's number should
be furnished. If the coowners are a minor and an adult, the adult's number should be
furnished.




270

19 65 REiPORT OF THE SECRETARY OF THE TREASURY

(d) Terms.—A Series H bond will be dated as of the first day of the month
in which payment therefor is received by an agent authorized to issue such
bonds. This date is the issue date and the bond will mature and be payable ten
years from such issue date. The bond may not be called for redemption by
the Secretary of the Treasury prior to maturity, but may be redeemed, AT
PAR after six months from issue date, at the owner's option, but only upon
one calendar month's notice as provided in sec. 332.10.
(e) Interest {investment yield).—The interest on a Series H bond will be
paid semiannually by check drawn to the order of the registered owner or coowners, beginning six months from issue date. Interest payments will be on
a. graduated scale, fixed to afford an investment yield of approximately 3.75
percent per annum, compounded semiannually if the bond is held to maturity;'
but the yield will be less if the. bond is redeemed prior to maturity. (See
table I of the tables at the end of this circular, which are incorporated herein.)
Interest will cease at maturity, or in the case of redemption before maturity, at
the end of the interest period next preceding the date of redemption, except
that if the date of redemption falls on an interest payment date, interest will
cease on that date.
Sec. 332.3. Governing regulations.—Series H bonds are subject to the regulations of the Treasury Department, now or hereafter prescribed, governing
United States savings bonds, contained in Department Circular No. 530, current
revision (31 CFR 315).'
Sec. 332.4. Registration.— (a) General.—Generally, only residents of the
United States, its territories and possessions, the Commonwealth of Puerto
Rico, the Canal Zone and citizens of the United States temporarily residing
abroad are eligible to be named as owners of Series I-I bonds. The bonds may
be registered in the names of natural persons in their own right as provided in
(b) of this section, and in the names and titles or capacities of fiduciaries and
organizations as provided in (c) of this section. Full information regarding
authorized forms of registration and restrictions with respect thereto will be
found in the governing regulations.
(b) Natural persons in their own right.—The bonds may be registered in
the names of natural persons (whether adults or minors) in their own right, in
single ownership, coownership, and beneficiary forms.
(c) Others.—The bonds may be registered in single ownership form in the
names of fiduciaries and private and public organizations, as follows:
(1) Fiduciaries.—In the names of and showing the titles or capacities of any
persons or organizations, public or private, as fiduciaries (including trustees, legal
guardians or similar representatives, and certain custodians) but not where the
fiduciary would hold the bonds merely or principally. as security for the performance of a duty, obligation, or service.
(2) Private and public organizations.—In the names of private or public
organizations (including priva.te corporations, partnerships, and unincorporated
associations, and States, counties, public corporations, and other public bodies),
in their own right, but not in the names of commercial banks.^
Sec. 3'32.5. Limitations on holdings.—The amount of Series H bonds originally
issued during any one calendar year that may be held by any one person at any
one time, computed in accordance with the governing regulations, is limited, as
follows:
(a) General Umitation.—$20,000 (face value) for the calendar year 1962 and
each calendar year thereafter.
(b) Special limitation for owners of savings bonds of Series F, G, J, and K.—
Owners, except commercial banks'^ in their own right (as distinguished from
a representative or fiduciary capacity), of outstanding bonds of Series F and G,'
1 Under a u t h o r i t y of section 25, 73 S t a t . 621 (31 U.S.C. 7 5 7 c - l ) , the President of the
United States on Sept. 22, 1959, concluded t h a t with respect to Series H bonds it was
necessary in the n a t i o n a l interest to exceed the maxiraura interest r a t e and investraent
yield prescribed by section 22 of the Second Liberty Bond Act, as amended (31 U.S.C.
757c).
:
2 Copies may be obtained on application to any Federal Reserve bank or branch or the
Bureau of t h e Public Debt, Washington, D . C , 20220. or its Chicago Office, 536 South Clark
Street, Chicago, 111., 60605. (See exhibit 7.)
3 Comraercial banks as defined in section 3 1 5 . 7 ( d ) ( 2 ) of Departraent Circular No. 530,
c u r r e n t revision, the governing regulations, for t h i s purpose are those accepting demand
deposits.




EXHIBITS

271

all of which are now matured, and bonds of Series J and K, at or after maturity
may apply the proceeds of such bonds to the purchase of Series H bonds without
regard to the general limitation on holdings, under the following restrictions and
conditions:
(1) The bonds must be presented to a Federal Reserve bank or branch, the
Office of the Treasurer of the United States, Securities Division, or the Bureau
of the Public Debt, Division of Loans and Currency Branch, for the specific purpose of taking advantage of this privilege. The Series H bonds will be dated
as of the first day of the month in which the bonds presented are received by the
issuing agent.
(2) Series H bonds may be purchased with the proceeds of the bonds presented
only up to the denominational amounts that the proceeds thereof will fully cover.
Any difference between such proceeds and the purchase price of the Series H
bonds will be paid to the owner.
(3) The Series H bonds will be registered in the name of the owner in any
authorized form of registration subject to the restrictions prescribed by the
governing regulations.
(4) This privilege will continue until terminated by the Secretary of the
Treasury.
(c) Exchanges pursuant to Department Circular No. 1036, as amended.—Series
H bonds issued in exchange for bonds of Series E, Series F, or Series J under
the provisions of Department Circular No. 1036, as amended (31 CFR 339), are
exempt from the annual limitation.
Sec. 332.6 Purchase of bonds.—(a) Agents.—Only the Federal Reserve banks
and branches and the Treasury Department are authorized to act as official
issuing agents for the sale of Series H bonds. However, commercial banks and
trust companies may forward applications for purchase of the bonds. The date
of receipt of the application and payment to an issuing agent will govern the
issue date of the bonds purchased.
(b) Application for purchase and remittance.—The applicant for purchase of
Series H bonds should furnish (1) instructions for registration of the bonds to
be issued, which must be in an authorized form, (2) the appropriate taxpayer
identifying number or numbers,^ (3) the post office address of the owner or a
coowner (preferably the first-named), (4) the address for delivery of the bonds,
and (5) the address for mailing checks in payment of interest. The application
should be forwarded to a Federal Reserve bank or branch or the Office of the
Treasurer of the United States, Securities Division, Washington, D.C, 20220,
accompanied by a remittance to cover the purchase price. Any form of exchange
including personal checks will be accepted subject to collection. Checks or other
forms of exchange should be drawn to the order of the Federal Reserve bank or
Treasurer of the United States, as the case may be. Checks payable by endorsement are not acceptable. Any depositary qualified pursuant to Treasury Department Circular No. 92, current revision (31 CFR 203), will be permitted to make
payment by credit for bonds applied for on behalf of 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.
Sec. 332.7. Delivery of SoncZs.—Authorized issuing agents will deliver the
Series H bonds either 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 purchased by citizens of
the United States temporarily residing abroad, the bonds will be delivered at
such address in the United States as the purchaser directs.
Sec. 332.8. Improved yield and extension of term for outstanding bonds.— (a)
Improved yield to maturity for outstanding bonds with issue dates of June 1,
1952, through May 1, 1959.—The investment yields on all outstanding Series H
bonds with issue dates prior to June 1, 1959, were increased, beginning on and
after June 1, 1959, as described below, for the remaining period to maturity,
iThe number 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). If the coowners are husband and wife, the husband's number
should be furnished. If the coowners are a minor and an adult, the adult's number should
be furnished.




272

19 65 REiPORT OF THE SECRETARY OF THE TREASURY

by not less than one-half of one percent, and by les'ser amounts if redeemed
earlier.^ The resulting yields are in terms of rate percent per annum, compounded semiannually. See Tables 2 through 16 ^ for current schedules of interest payments and investment yields. This increase became effective beginning
with interest payments due December 1, 1959, for bonds with the issue month
of June or December of any year prior to 1950, and for all other bonds on the
next interest payment date after December 1, 1959.
(b) Extended maturity period for bonds with issue dates of June 1, 1952,
through January 1, 1957.—Owners of Series H bonds with these issue dates have
the option of continuing to hold such bonds for an extended maturity period of
ten years with an investment yield of approximately 3.75 percent payable semiannually. Bonds held after maturity will earn further interest which will
accrue and be paid semiannually by check drawn to the order of the owner or
coowners beginning; six months from the original maturity dates. Interest
payments will be made in the amounts shown in Tables 2 through 11.^
Sec. 332.9 Taxation.—The income derived from Series H 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
intere'st thereof by any State, by any of the possessions of the United; States or
by any local taxing authority.
Sec. 332.10. Payment or redemption.— (a) Prior to maturity.—^Pl^ior to maturity a Series H bond will be redeemed AT PAR, in whole or in part, in the
amount of an authorized denomination or multiple thereof, at the option of the
owner, after six months from the issue date upon one calendar month's notice
to (1) a Federal Reserve bank or branch, (2) the Office of the Treasurer of the
United States, Securities Division, Washington, D.C, 20220, or (3) the Bureau
of the Public Debt, Division of Loans and Currency Branch, 5'36 South Clark
Street, Chicago, 111., 60605. Such notice may be given separately, in writing, or by
presenting and surrendering the bond with a duly executed request for payment.
If notice is given separately, the bond must be presented with a duly executed
request for payment to the same agent not less than twenty days before the
redemption date fixed by the notice. Payment will be made as of the first day
of the first month following by at least one full calendar month the date of the
receipt of notice.
(b) At maturity.—IJpon maturity a Series H bond will be redeemed at par
upon presentation of the bond with a duly executed request for payment to one
of the agents designated in (a) of this section. Any Series H bond having an
extended maturity period will be redeemed at par upon original maturity and
for two calendar months following the month in which the bond originally matures without advance notice.^
(c) During extended m-aturity period.—A Series H bond having an extended
maturity period will, beginning with the first day of the third calendar month
followiag the calendar month in which the bond originally matures, be regarded
as unmatured until it reaches its final maturity date and may be redeemed in
the same manner and subject to the isame notice for redemption as provided in
(a) of this section.
'Sec. 332.11. Reservation as to issue of bonds.—The Secretary of the Treasury
reserves the right to reject any application for Series H bonds, in whole or in
part, and to refuse to issue or permit to be issued hereunder any such bonds in
any case or any clas's or classes of cases if he deems isuch action to be in the
public interest, and his action in any such respect shall be final.
Sec. 332.12. Preservation of rights.—Nothing contained herein shall limit or
restrict rights Which owners of Series H bonds heretofore issued have acquired
under offers previously in force.
1 The investment yield to m a t u r i t y heretofore prescribed for the bonds referred to in
section 332.8(a) were (according to issue d a t e s ) , as follows:
J u n e 1, 1952, t h r o u g h J a n . 1, 1957
3, 00
Feb. 1, 1957, through May 1, 1959
3. 25
percent per a n n u m corapounded seraiannually.
2 See "Note" at end of this exhibit.
3 For example, if a bond is dated J u n e 1, 1955, t h e date of original m a t u r i t y is Feb. 1,
1965. The date on which t h e r i g h t to payment w i t h o u t advance notice will be suspended
is May 1, 1965.




273

EXHIBITS

Sec. 332.13. F i s c a l a g e n t s . — F e d e r a l Reserve b a n k s a n d branches, a s fiscal
agents of t h e United States, a r e a u t h o r i z e d t o perform such services a s m a y be
requested 'of them by t h e S e c r e t a r y of t h e T r e a s u r y in connection w i t h t h e issue,
delivery, redemption a n d p a y m e n t of Series H bonds.
Sec. 332.14. R e s e r v a t i o n a s to t e r m s of offer.—The Secretary of t h e T r e a s u r y
m a y a t a n y time or from t i m e to time supplement or a m e n d t h e t e r m s of this
offering of bonds (31 C F R 332), or of any a m e n d m e n t s or supplements t h e r e t o .
JOHN K .

CARLOCK,

F i s c a l A s s i s t a n t S e c r e t a r y of the T r e a s u r y .
TABLES OF CHECKS ISSUED AND INVESTMENT YIELDS F O R UNITED STATES
SAVINGS BONDS OF SERIES H
Each table shows: (1) Amounts of interest checks paid on United States savings bonds of Series H bearing
issue dates covered by the table, by denominations, on each interest payment date (a) following the date of
issue for bonds bearing issue dates beginning Dec. 1, 1954; (b) following original maturity date for bonds
bearing issue dates of June 1,1952, through Nov, 1,1954 (for the latest revised amounts of interest checks and
investment yields duriug the original raaturity period not shown in these tables, see Department Circular
905, Second Revision, dated Sept. 23,1959); (2) the approximate investment yield on the face value from issue
date to each interest payment date; and (3) the approximate investment yield on the face value from each
interest payment date to maturity. Yields are expressed in terms of rate percent per annum, compounded
semiannually.
T A B L E I.—Bonds bearing issue dates, beginning J u n e 1, 1959

Issue price
Redemption i and raaturity value

{

Period of time bond is held after issue
date

34 year
1 year
IH years
2 years..2H years.
Syears
3H years
—
4 years..—
4H years
5 years
-__
5H years.—
6 years
6H years
7 years
-—
7H years
—
Syears...
8H years
9 years
9H years
10 years (maturity)

$500

$1,000

$5,000

500

1,000

5,000

Approximate invest$10,000 ment yield on face value 2
10,000

(1) Amounts of interest checks for each
denomiaation

$4,00
7,25
8,00
10,00
10.00
10,00
10,00
10,00
10.00
10,00
10.00
10.00
10,00
10.00
10,00
10.00
10.00
10.00
10,00
10.00

$8.00
14.50
16.00
20,00
20.00
20,00
20.00
20.00
20,00
20.00
20,00
20.00
20,00
20.00
20.00
20,00
20,00
20,00
20.00
20.00

$40, 00
72.50
80,00
100. 00
100, 00
100, 00
100, 00
100. 00
100. 00
100, 00
100. 00
100, 00
100, 00
100. 00
100, 00
100, 00
100, 00
100, 00
100. 00
100. 00

145.
160,
200.
200,
200.
200,
200.
200.
200.
200,
200,
200.
200,
200.
200.
200.
200.
200.
200.

(2) From
issue date
to each
interest
payment
date
Percent
L60
2,25
2.56
2,91
3,12
3,26
3,36
3.44
3.49
3.54
3.58
3.61
3,64
3,66
3.68
3.70
3.71
3,72
3.74
3.75

(3) From
each interest payment date
to maturity 3
Percent
3.88
3.95
4,00
4,00
4,00
4,00
4,00
4.00
4.00
4,00
4,00
4,00
• 4,00
4,00
4.00
4.00
4.00
4,00
4.00

1 At aU times, except that bond is not redeemable during first 6 months.
2 Calculated on the basis of $1,000 bond.
3 Approximate investment yield for entire period from issuance to maturity is 3,75 percent per annum.
NOTE.—^The o t h e r tables a r e not reproduced in t h i s exhibit a s t h e a m o u n t s of
i n t e r e s t checks a n d a p p r o x i m a t e investment yields shown in those tables a r e t h e
s a m e a s those published in previous a n n u a l r e p o r t s a s f o l l o w s : tables 2-11
cover bonds b e a r i n g issue d a t e s from J u n e 1, 1952, t h r o u g h J a n u a r y 1, 1957,
a n d a p p e a r a s tables I - X , respectively, on pages 260-269 of t h e 1962 a n n u a l
r e p o r t ; a n d tables 12-16 cover bonds b e a r i n g issue d a t e s from F e b r u a r y 1, 1957,
t h r o u g h May 1, 1959, w h i c h a p p e a r on pages 270-274 of t h e 1960 a n n u a l r e p o r t .

782^556—^6'6t-

-18




274

19 65 REPORT OF THE SECRETARY OF THE TREASURY
Legislation

Exhibit 11.—An act to provide for a temporary increase in the public debt
limit set forth in section 21 of the Second Liberty Bond Act
[Public Law 89-49, 89th Congress, H.R. 8464, June 24, 1965]

Be it enacted by the Senate and House of Representatives of
the United States of America in Congress assembled, That, during the period beginning on July 1,1965, and ending on June 30,
1966, 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 to $328,000,000,000.
Approved June 24,1965.

Public debt
Temborary increase.
78 Stat. 225.

Financial Policy
Exhibit 12.—Statement by Secretary of the Treasury Dillon, February 22, 1965,
before the Joint Economic Committee
We meet after a year of substantial progress and accomplishment. But we
have no cause for complacency.
At home too many pf our workers—particularly younger people just entering
their productive years and those who suffer from inexperience, lack of education,
and racial prejudice-^are without jobs. As we enter the fifth consecutive year
of economic advance, we must be alert both to the dangers of price pressures
and of any flagging in the forces of expansion.
At the same time, our balance of payments has not shown the improvement
we must have. Further action, as outlined by President Johnson in his Message
on the Balance of Payments, is essential to the continued strength of the dollar.
And, on that solid foundation, we must press forward, in cooperation with our
friends and trading partners, with our effort to assure the capacity of the international monetary system over the years ahead to provide the reserves and credit
facilities needed to support the vigorous and balanced growth of the free world
economy.
Fiscal policy and a progressive economy
Maintenance of a healthy rate of domestic economic expansion, free from inflation, will continue to require the coordinated use of the tools of fiscal, monetary,
and debt management policy. But, within that framework, fiscal policy, and
particularly tax policy, has unquestionably come to assume a more crucial role
than ever before in sustaining our forward momentum and carrying out the
mandate of the Employment Act of 1946.
The first important steps to spur more rapid growth through tax policy were
taken in 1962. The Revenue Act of 1962, you will recall, provided for a tax
credit of 7 percent on new investment in machinery and equipment, and in the
same year the Treasury reformed and liberalized the tax treatment of depreciation, bringing up to date badly outmoded procedures that served as a drag on
new investment. Coupled with the two-stage reduction in the corporate tax rate
contained in the Revenue Act of 1964, these measures provided a powerful stimulus to business investment in plant and equipment, increasing the profitability
of a typical investment in new equipment by more than 30 percent.
Just last week we improved and liberalized the reserve ratio test procedures
that accompanied the 1962 liberalization of depreciation. This action was taken
after extensive studies. It will make certain that businesses which truly wish
to adapt their replacement practices to the new shorter lives announced in 1962
can obtain the full tax benefits of the 1962 guidelines. For 1965 it will mean
that additional taxes will amount to a maximum of $100 million rather than the
$800 million that would have been the case under the original 1962 reserve ratio
test procedures.
The response of private investment to tax incentives and to expanding sales
and profits has been remarkable indeed. Producers' outlays on durable equipment, after correction for price change, amounted to $26 billion in 1961, as compared to $26.6 billion in 1952. But in the three years since 1961, those same
outlays, again corrected for price change, have risen to $35.1 billion, an increase




EXHIBITS

275

of over one-third in the space of only three years. Yet, the expansion of investment has been closely geared to requirements for new productive capacity and
no unsustainable capital goods boom on the 1956-57 model has been allowed
to develop.
Along with the invigoration of private investment that is so basic for long-run
growth, the individual tax reduction of 1964, as it becomes fully effective, is
' releasing $11 billion of consumer purchasing power at 1965 levels of income.
The size, composition, and timing of last year's tax cut were carefully planned,
and the results were almost exactly as predicted in the 1964 Economic Report
of the President.
A year ago that report projected a gross national product of $623 billion as
the midpoint within a $10 billion range. The actual result is now estimated at
$622.6 billion. A year ago the report estimated that with tax reduction the unemployment rate could be expected to fall to approximately 5 percent at the end of
the year, as it actually did, before falling even further to 4.8 percent in January.
The behavior of personal income, corporate profits, and other measures was also
in line with our expectations.
The tax reduction enacted last year continues to spur consumer and business
spending, although the large initial thrust is now behind us. Later this year
we will further improve the tax system, iencourage price declines, and give the
economy another measured and timely stimulus through the reduction and elimination of some of our excise taxes. The President's budget provides for excise
tax reductions effective on July 1 that will total $1.75 billion a year when fully
effective. The President will spell out the details of this program in ample time
to permit consideration by the Congress before midyear.
Over the past four years, as this record suggests, we have come to a far
greater appreciation of how fiscal and tax policy can help achieve our economic
goals. But much remains to be done before we can be satisfied that this policy
tool can be used with the fiexibility that is essential should recessionary tendencies gather force.
To meet that need, the President has urged that the Congress review its own
procedures to assure prompt action on temporary tax cuts, if and when required.
The lengthy and painstaking deliberations by the Congress, which are entirely
necessary and appropriate before undertaking a lasting structural change in the
tax structure, are not relevant to purely temporary, across-the-board, antirecessionary cuts.
We simply must be able to count on procedures that insure an early decision
in response to a Presidential proposal, or else we must give up the strongest
antirecessionary weapon in our arsenal.
At the same time, we must, of course, develop programs that will attack structural problems of unemployment and depressed areas at their roots and solve
them within a framework of overall price stability. These deep-seated problems
will only yield to a concerted attack aimed directly at their causes. We are
mounting just such an attack.
In a modern industrial society, those without skills, or with skills no longer in
demand, suff'er a heavy disadvantage. Training programs such as those now
being conducted under both the Manpower Development and Training Act and
the Economic Opportunity Act can make a key contribution to individual and
national welfare. The Appalachia program, now under congressional consideration, is an ambitious effort to deal in a coordinated way with a particular depressed area problem. Ah improved Area Redevelopment Act would be helpful
in spurring growth. Carefully designed programs such as these will play a
steadily increasing role in reducing unemployment and widening job
opportunities.
Monetary and debt management policies
The timely use of fiscal policy enables us to make far more effective use of the
tools of monetary and debt management policies in meeting our internal and
external economic goals. For instance, the stimulus from tax reduction, by lifting
some of the burden for promoting economic expansion from monetary policy, has
made extremely easy money policies at home unnecessary, policies that would
have been totally out of keeping with our balance-of-payments problem.
The fact is that, in a world of increasingly free trade and payments, we cannot
expect to insulate our domestic money and capital markets entirely from those
of other countries, nor would that be consistent with our longer-range goals of a




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1965 REOPORT OF THE SECRETARY OF THE TREASURY

liberal world economic order. As the President emphasized in his Economic
Report, monetary policy must and will remain free to respond if the stability
of the dollar is threatened, either from domestic inflation as a result of excessive
demand, or from outflows of money and capital that undermine our balance of
payments. But, if monetary policy is to play that role effectively, and without
potential damage to the internal economy, we must also recognize the corollary
need for dynamic, flexible fiscal policies in promoting domestic prosperity.
So long as we are willing in the future, as during the past few years, to use
all the varied tools of financial policy flexibly, and in complementary ways,
intolerable conflicts need not arise between our commitment to defend the dollar
and our commitment to. sustained domestic growth and prosperity. Effective
economic policy does not require that every tool be pushed hard in the same
direction and at the same time. What is required is that, ih seeking our varied
goals, we achieve a blend and a balance among our policy tools^—taking advantage
of the strong points of each—that will permit progress in several directions
simultaneously.
The debt management record
The use of our policy instruments in the pursuit of multiple objectives is well
illustrated in an area for which I have had direct responsibility and which affects
the economy almost daily: the management of the public debt.
Debt management has in recent years helped keep our market interest rates
in the short-term area reasonably competitive with rates in major foreign money
centers, thus minimizing interest rate incentives to the transfer of short-term
funds abroad. Thus, we increased the volume of Treasury bills $5.0 billion
further during 1964, helping to raise the three-month bill rate from about 3i/^
percent at the close Of 1963 to just under 4 percent today.
At the same time, however, it has been important to insure that this action,
undertaken for balance-of-payments reasons, did not clash with other objectives.
With persistent unemployment and unused industrial capacity, we have wanted
to avoid upward pressures on the structure of long-term interest rates, and to
assure the availability of investment funds adequate to support the steady rise
in domestic investment and economic activity.
In addition, the Treasury also has continuously before it the need to maintain
a well-balanced maturity structure in the national debt, a prerequisite for flexibility in its financing decisions. This requires sizeable placements of new
intermediate and longer-term securities in the market in order to offset the
shortening effect of the passage of time on the term to maturity of outstanding
issues. Otherwise, debt would soon pile up in the short-term area, not only
risking an infiationary potential but also straining that sector of the market
and using up some or all of the short-term borrowing capacity which it is
prudent to hold in reserve for emergencies.
To achieve this balanced debt structure and avoid any excessive buildup of
liquidity, the Treasury last year reduced outstanding short-term debt other
than Treasury bills by an even larger amount than the rise in the volume of
bills. As a result, the total marketable debt due within one year actually
declined by $1.0 billion. And, as in the preceding year, the Treasury's borrowing
was done, on balance, without recourse to the commercial banking system, making
it the third successive year in which bank holdings of Treasury securities showed
no increase. Actually, commercial bank holdings of Government debt as shown
in the attached table were slightly lower at the end of January than they were
four years earlier. Thus, all of the large increase in bank credit over the past
four years has been used to finance private borrowers and State and local
governments.
The great bulk of the Treasury's debt extension has continued to be achieved
through advance refundings, a technique initiated during the preceding Administration and further developed and extensively utilized during the past four
years. One important advantage of this technique is that it minimizes the
impact on the market and on interest rates of our debt extension operations.
Investors responded to 3 advance refunding offers, in January and July 1964
and January 1965, by exchanging existing shOrt-term holdings for $4.2 billion
of bonds maturing in 20 years or more, for $7.5 billion of bonds maturing in
about 9 years, and for $10.3 billion of bonds maturing in 5 to 7 years. An additional $1.5 billion of 10-year bonds was issued in the regular refunding in May
1964.




EXHIBITS

277

Reflecting these operations, the marketable debt due in 5 years or more rose
$7.1 billion in the 12 months that ended on January 31, exceeding the $5.8 billion
increase in the entire marketable debt over this period. As the attached table
indicates, an amount larger than the entire $25.1 billion increase in the marketable debt since January 1961 has been financed over that period in longer-term
issues; marketable debt due in 5 years or more is 'Up $26.9 billion. Accordingly,
the average maturity of the marketable debt as of January 31,1965, was 5 years
5 months, 4 months longer than its year-ago level and 11 months longer than in
January 1961.
Moreover, if we add the $2.6 billion increase in the outstanding volume of
savings bonds since January 1961 to the $26.9 billion increase in the portion of
the marketable debt due in 5 years or more, we get a total of $29.5 billion, well
beyond the $28.4 billion rise in the entire public debt over these 4 years. This
is a clear record of noninfiationary finance not often recognized by those who
like to talk of loose fiscal policies in Washington.
It is noteworthy that these efforts to finance the Govemment at long-term
have been achieved without any noticeable upward pressure on long-term, yields.
Most long-term interest rates important to private economic activity are now
well below the levels touched in 1961: Average conventional mortgage rates
are currently 5.8 percent, down nearly % percent; offering yields on new highgrade corporate bonds have recently been under 4% percent, % percent or more
below levels of the spring of 1961; and a widely-used municipal bond' yield
average which was as high as 3.55 percent in 1961 is currently 3.10 percent.
This is an impressive record when one considers the increase of about 1%
percent in short-term yields that has taken place since the lows of early 1961,
as well as the record demand for funds. The volume of funds raised during
the past 4 years totals about $240 billion, nearly 50 percent higher than the
total of the preceding 4 years. A major part of the explanation lies, of course,
in the high and rising flow of savings for longer-term investment generated out
of the steadily rising incomes that have accompanied our prosperity. The
smooth flow of these savings into investment has been greatly assisted and
encouraged by confidence in continuing price stability and by the increases in
interest rates paid by savings institutions and commercial banks.
Clearly, the Treasury's program of noninfiationary debt management has
been entirely consistent m t h full availability of credit to private borrowers
at stable or declining long-term interest rates.
Importance of cost-price stability
Fiscal incentives and isound financing of the national debt have helped account
for the remarkable degree of price stability that has accompanied our vigorous
expansion. In contrast, earlier postwar expansions have typically been marred,
after the initial recovery period, by rapid increases in costs and narrowing
profit margins. The bidding up of prices and costs dissipated the forces for
expansion; maladjustments and distortions isoon developed, and recessionary
forces gathered strength.
We have avoided that pattern during the present expansion. The rise in
productivity associated with more rapid growth and an expanded scale of
investment, along with moderation in wage demands, has caused manufacturing
labor costs per unit of output to decline more or less steadily throughout the
current expansion. As a result, there has been no squeeze on profit margins
and little upward pressure on prices. With costs and prices stable, and productivity rising steadily, we have maintained a good balance throughout the
economy and no drastic tightening of money has been necessary to curb overexuberance.
We must not allow the dismal cycle of inflation and recession of the earlier
postwar period to reappear. The challenge is clear, for experience shows that
the task of maintaining cost-price stability becomes more diflicult as expansion
whittles away margins of unused plant capacity and selective labor shortages
begin to appear. Moreover, some signs of price pressures—fortunately confined
to limited sectors of the economy and in some cases reflecting temporary interruptions in the flow of raw materials from abroad—were apparent in the closing
months of 1964.
These pressures by no means signify that our long period of price stability
is ending. They do, however, reemphasize the need for vigilance.




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19 65 REPORT OF THE SECRETARY OF THE TREASURY

Our flnancial policies afford assurance that total demand will remain well
within our growing capacity to produce, and we do not face excess demand
inflation. But, in addition, we must recognize that, even at a time when overall
demand is not excessive, costs and prices may be pushed up by pressures. of
wage bargaining and the pricing policies of large firms.
The record of labor and industry in recent years in this respect has been good,
although we are all aware, I think, that it has not been in every instance as
good as it could have been. The price-wage guideposts, endorsed by both
President Kennedy and President Johnson, point unambiguously to the responsibilities of both labor and management if key wage settlements and pricing
decisions are to serve the public interest. The acceptance by all sectors of
our economy of their continuing responsibility for noninflationary policies is the
key to steady expansion at home and a stronger competitive position abroad.
Balance of payments
Cost-price stability has contributed to a marked improvement in our already
favorable balance of trade. Commercial exports, excluding those flnanced by
the Government, rose to $22.4 billion in 1964, an increase of 16 percent over
1963, and fully 28 percent over 1960 levels. As a result, our commercial trade
surplus widened from 1963's $2.3 billion to an estimated $3.7 billion in 1964,
despite the larger demand for imports generated by our rising levels of economic
activity.
The 1964 results were, of course, aided by the special grain sales to both
Eastern and Western Europe early in the year, and we cannot count on equally
favorable overall trends in 1965. But, there can be little doubt that the relative
stability of our own costs and prices since 1958, while most foreign costs and
prices have been rising more or less steadily, is at last beginning to count in our
favor.
Our improved trade balance has been paralleled by further savings in net
Government spending overseas, and by an unprecedented increase in income
from our rising volume of foreign investments. These factors combined to
reduce our deficit on regular transactions to an annual rate of about $2 billion
over the first three quarters of 1964, about in line with earlier expectations
despite rising levels of capital outfiows.
However, as you know, progress in reducing our deficit for the year as a whole
was disappointing. A sharp deterioration during the fourth quarter pushed
our deficit on regular transactions up to $3.0 billion for the year as a whole.
While some of the fourth quarter results can be traced to temporary factors,
analysis of the results for the year made it perfectly clear that new measures
needed to be taken to achieve a more rapid reduction in the underlying deficit and
to maintain the international strength and stability of the dollar unquestioned.
As a consequence, President Johnson has announced a 10-point program to
intensify our effort to reach an early balance. Export promotion will be pressed
even harder and the oyerseas dollar cost of Government programs will be reduced
even further. In addition, legislation will be sought to narrow the gap on
tourist expenditures by reducing the duty-free exemption on our returning tourists
and our "See the U.S.A." program will be greatly intensified. But, the major
thrust of the President's program is in the area of capital movements.
The reason is simple. The bulk of our diflSculty can be traced to accelerating
outflows of American investment and loan funds to a rapidly growing outside
world that desires capital and that apparently is still incapable of mobilizing
its own savings with full effectiveness. Since 1960, gains in our trade balance,
net savings in our aid and military programs overseas, and rising investment
income have benefited our balance of payments by about $3.9 billion. But over
that same period, private capital fiows abroad increased by about $2i/^ billion
to a record $6.3 billion, washing away most of the gains in other sectors of our
accounts.
This hu.ge capital outfiow is in one sense a reflection of our basic strength as
a nation, the huge savings we are capable of generating, the steady increase in
our holdings of productive and profitable assets abroad, and the worldwide usefulness of the dollar. But, at this point in time, it is also evident that our balanceof-payments position cannot afford accelerating outfiows of capital at the expense
of our international liquidity. Nor can we afford a heavy outflow of the gold
that stands behind our pledge to maintain the value of the dollar at $35 an oimce.




EXHIBITS

279

And just such an outflow is inevitable unless we take the steps that will hold
the outflows of capital within our capacity as a nation to flnance them.
The success of this program rests on the cooperation of the business and
financial communities in a voluntary program to limit the flow, of dollars abroad
arising from their own operations. Such a voluntary program, designed in the
public interest, can be an enormously effective instrument in assisting the early
balance in our payments that is so urgently needed. Only last Thursday, the
President, together with Secretary Connor, Chairman Martin, and I, outlined
to a group of distinguished business and financial leaders the nature of this
voluntary program. I am sure they will respond to the challenge quickly and
effectively.
International financial cooperation
Early and decisive reductions in our balance-of-payments deficit are essential
not only to protect the dollar, but also to permit calm and orderly study and
appraisal of the most effective approaches toward assuring the adequacy of the
international financial system to meet the needs of a growing world. The
capacity of the present system to meet short-run strains has been impressively
demonstrated, most recently when sterling came under heavy pressure. The
massive credits extended to the British amounted to a collective endorsement—
backed by $3 billion of hard cash—of existing exchange parities by the major
industrial countries. The speed and effectiveness with which these credits could
be assembled was a product of the close international financial cooperation built
up over recent years.
Meanwhile, we are exploring with other leading nations how best to meet
the longer-range needs of the world for international liquidity and for more
effective processes of international balance-of-payments adjustment. These
studies are complex and difficult, and it is not surprising that some differences
of approach among the major countries are evident at this stage. Certainly,
we cannot afford to look back nostalgically and seek a solution in the rigid
mechanism of a pure gold standard, a mechanism that even in an earlier and
simpler day was prone to breakdown and deflation. Instead, the challenge is
to build upon the system that has served the world so well over the postwar
years, with full awareness of its problems and shortcomings, to be sure, but also
with healthy respect for its resiliency and flexibility in responding to varied
and never fully predictable needs.
While this longrun effort is being pressed to a satisfactory conclusion, the
planned expansion of IMF resources provides tangible assurance that the financial support needed to facilitate expansion in world trade and payments will be
available.
The Executive Directors of the International Monetary Fund have agreed in
principle to submit to member governments, proposals for a general increase of
all quotas by 25 percent, ^plus special increases for a relatively small number
of countries whose quotas are out of line with their economic importance. Together, these increases, if accepted by the member countries, would total $4.8
billion, and when completed would bring the total quotas of the Fund up to
$20.9 billion, ah overall rise of approximately 30 percent. The U.S. quota, which
would be subject only to the 25-percent general increase, would rise from the present $4,125 million to $5,160 million. It is expected that legislation providing for
this increase will be introduced next month; full provision for it has already
been made in the President's budget.
The Fund proposals will provide that 25 percent of each country's quota
increase must be paid in gold. The United States has been prepared at all times
to pay this 25 percent from its own gold holdings, but we had been concerned
that such payments by others would lead to large purchases of U.S. gold. I am
glad to say that this possibility will be forestalled by measures agreed upon in the
Fund. I believe that the understandings that have been reached will fully
protect the interests of the United States, the payments system as a whole, the
Fund, and its other members.
Conclusion
I have touched upon several key challenges for economic policy in 1965: Maintaining price stability while reducing unemployment; achieving a decisive reduction in our balance-of-payments deficit; and progress toward a stronger inter-




280

1965 REPORT OF THE SECRETARY OF THE TREASURY

national payments system. Each of these problems we approach from a position
of great strength.
Business is moving ahead with good momentum, but without infiationary pressures on supplies or speculative excesses. Our international competitive position
is slowly but surely improving, and standing behind the dollar is the world's
largest gold stock and a huge volume of foreign assets. The international
financial system has withstood a series of shocks and strains, while demonstrating its ability to finance a further large increase in world trade.
Given a continued willingness to use all our tools of economic policy in fiexible
and imaginative ways—and with the vital support of industry, labor, and finance—I am confident that the challenges of today will become the successes of
tomorrow.
The structure and ownership of ihe public debi January 1961 and January 1965
(In bilhons of dollars)
January 1961 January 1965
Debt structure:
Marketable public debt:
Due within 5 years.. . .
Due after 5 years
Nonmarketable public debt:
Savings bonds
_ ._
Special issues and other

__ _. __
..

Total public debt

Total publicly-held debt...
Government investment accounts. .
FederalReserve banks.—. .
..
I

___
--. __- _

$144.7
69.7

^$1.8
-f26.9

47.2
53.6

49.8
54,4

4-2.6
-1-0.8

318,6

-f28.4

62,7
146.4

__ __

.

$146.4
42.9

290.2

__. .

Ownership:
Commercial banks .
Other publicly-held debt 1

Total public debt

Change

P62.3
p 160.5

-0.4
-1-14.1

209.1
54.6
26.6

222.8
59.1
36.7

-M3.7
-1-4.5
-flO.2

290.2

318.6

-1-28.4

V Preliminary.
1 Includes State and local governments, individuals, private investment institutions, corporations, all
other private holders.

Exhibit 13.—Remarks by Secretary of the Treasury Dillon, October 27, 1964,
before the 90th annual convention of the American Bankers Association, on
fiscal and economic policies
This is the third time in the past four years that I have had the privilege of
appearing before you to discuss national economic policies. During those years
the United States ha!s faced serious economic challenges both, at home and
abroad.
At home the central challenge, after years of recurring recession and slow
growth, was to bring our economic performance closer to our unmatched potential.
There is no better measure of our success than the 44 months of unbroken
business advance that the nation has thus far achieved, a record of recovery
unexcelled in our peacetime history.
That advance has added more than $100 billion in real terms, or roughly 20
percent, to our annual output. In the space of less than four years, the increase
in our annual production alone has exceeded the total gross national product
of any other nation of the free world. In more personal terms, disposable income of the average American household, when measured in constant dollars,
has risen by well over $700 duj:ing the last four years, an increase greater than
that during the preceding eight years.
At the same time, company after company is reporting record profits and
enlarged capital spending programs. It is clear that sharply higher returns
on invested capital are furnishing new and stronger incentives for investment
in modern plant and equipment—investment which will provide new jobs, increase productivity, and spur future growth.




EXHIBITS

281

Abroad, we have made progress in closing the deficit in our balance of payments, assuring a stable dollar and, on that solid base, building a stronger payments system. Our payments deficit during the last fiscal year was cut to $1.7
billion, well under half of the 1958-60 average. Confidence in the dollar has
reduced the pressure on our gold stock. As a result, in each of the past two
months our total gold stock has actually shown a slight increase over the level
of the preceding year, the first time that we have seen a year to year increase
in our gold stock since the Suez crisis in 1957.
These gains, together with the economic gains we have achieved at home, make
an impressive record. But continued prosperity at home and further progress
abroad are not, and never can be, automatic. So today our concern must focus
on the challenges that still lie ahead.
We cannot, of course, now anticipate every possible threat to stable and
orderly economic growth that may arise over the coming years. The complexity of our own economy, and the impact of events in other parts of this
swiftly changing world, will continue to place the highest premium on flexibility
in the use of all our economic policy tools.
We long ago learned that timely shifts in monetary policy are essential both
to sustain growth and to combat inflationary excesses as they emerge. But experience has also shown that monetary policy, no matter how flexibly and intelligently implemented, cannot, by itself, achieve our multiple goals. We cannot insist that large changes in interest rates and credit availability must carry
the full burden of stabilizing the domestic economy, and at the same time rely
on monetary policy as the primary means of bringing balance to our international accounts. Nor can we expect monetary policy to do either of those
jobs effectively if, by neglect or misdirection, we allow other policy tools to
operate at cross purposes.
Our needs require, and have received, a coordinated blend of financial and
economic policies that can be adapted to both our internal and external circumstances. This blend, as you know, has meant a new and indispensable role for
fiscal policy, complementing and reinforcing more traditional monetary policies.
Building on this recent experience is the best way to cope promptly and effectively
with new challenges no matter from what direction they come.
Let me, however, make one point crystal clear. An active, fiexible fiscal
policy should not, and does not, require any sacrifice of the basic principles of
fiscal responsibility. I believe that the record of these recent years amply demonstrates that point.
President Johnson has given, and continues to give, his personal attention to
making certain that tax reduction is coupled with the strictest vigilance in
assuring a full dollar of value for every dollar spent.
It is true that our budget has increased appreciably during the past four
years; expenditures for 1965 are expected to be between $15 billion and $16
billion higher than in 1961. But $5 billion of the rise from the fiscal 1961 to
the fiscal 1965 budget is accounted for by the urgent national need to maintain
defenses second to none. Our space program has also seen an increase of more
than $4 billion, as it had to if we were not to abandon that new frontier to the
Soviets. And more than $2 billion is accounted for by larger interest payments
on the Federal debt.
The true test of our record in expenditure control lies not in these items but in
what has happened to all other governmental expenditures, including welfare
programs, domestic housekeeping, ordinary civilian services, agricultural payments, and all the rest. Annual expenditures on all of these programs combined
have grown, over the four years, fiscal 1961-65, by something less than $4^/^
billion. That figure is more than 25 percent less than the increase in these same
programs during the 1957-61 period when the previous Administration was
doing its level best to hold down unnecessary expenditures. This 25-percent improvement is the fair measure of the effectiveness of the current Administration's cost control effort over the past four years.
During the current fiscal year we will achieve a year-to-year decline in total
expenditures for only the second time since the end of the Korean War permitted
a substantial, but nonrecurring, cut in defense spending. And this year's reduction is being accomplished despite the half billion dollar cost of the long
overdue adjustment in Federal salaries, the new antipoverty program, higher
interest costs, and other built-in increases.




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19 65 REPORT OF THE SECRETARY OF THE TREASURY

This accomplishment is possible only because of a sustained drive for budgetary
economies that, for sheer intensity and effectiveness, exceeds anything within
my experience in Government. One result is that Federal employment has been
cut below the level at the end of fiscal 1962, two and a quarter years ago. In fact.
Federal civilian employment, as a proportion of the total national work force, has
dropped to its lowest point since 1941.
Fiscal responsibility does not imply that urgent national need^ must go unsatisfied. But it does require, in the face of almost limitless pressures for new
and expanded programs, a zealous and never-ending search for economies in less
urgent areas. The Government sector of the economy must be held to a size where
the burden of taxes and debt can be carried by a growing economy, without
infiationary pressures.
By this test, too, the record is clear. During the current fiscal year, despite
the requirements of defense and space, budget expenditures will be lower relative
to our gross national product than at any time in the past 13 years. The share
of total personal income preempted by the Federal individual income tax will
decline to 9 percent, smaller than in any fiscal year since 1951. And the Federal
debt as a proportion of GNP, a realistic measure of its burden, will, by the
end of this fiscal year, have dropped back to the levels prevailing at the very
beginning of World War II.
These figures also underscore the fact that the basic economic strategy of this
Administration has been to look to the private sector of the economy as the main
engine for expansion. Government has had an essential role to play in thi^ process, but this role was not simply to seek increases in its own spending. Rather, it
was to provide, through its economic and financial policies, a favorable climate
for business investment and private spending. It was to promote continued
increases in efficiency and productivity, so essential both to sustained domestic
growth and to our export effort. And all of this had to be done within a framework of price stability.
Monetary and debt management policies could do part of the job. We ruled
out the extremes of easy money, even had they been otherwise desirable, because
it was vital to our payments effort that we keep our money market rates roughly
in equilibrium with those abroad'. But consistent with that constraint, we
developed techniques to as.sure an ample fiow of credit to long-term borrowers.
That was, of course, a process in which the banking community played an essential role by aggressively seeking out and mobilizing funds that could, in turn,
be made available to businesses, homebuyers, and State and local governments.
We .could not, however, meet our objectives with monetary policy alone. There
was also a compelling need to cut through the inhibitions, lethargy, and maze
of detail that for much too long had blocked sorely needed tax reduction and
reform.
Because of tax reduction, we have had temporarily to accept somewhat larger
budgetary deficits than we would otherwise have had. We have not sought those
deficits. They are the price we had to pay for timely, effective tax and fiscal
policy. The price is acceptable only because, under existing conditions and with
prudent management of the debt, those deficits do not pose an inflationary problem. They are, instead, a transitional step toward our basic goal of a balanced
budget in a healthy, full employment economy.
The choice we faced was not one between balanced budgets and tax reduction. An economy prone to recession and slow growth is also prone to
deficits, for we cannot meet our essential spending needs from a shrunken tax
base. We learned that lesson the hard way during the latter part of the 1950's,
a lesson highlighted by the record $12 billion deficit that followed the 1958
recession. The ironic, but plain, fact was that our excessively high tax rates were
themselves contributing to the sluggishness of the economy.
Carefully designed tax reduction offered the most promising way out of that
impasse. By expanding incomes and profits, it promised to greatly widen the
tax base, with the result that our revenues would rise despite the reduced rates.
That is not simply theory. It is now being confirmed every day by actual experience. With continued expenditure control, and an expanded tax base, we can
look forward to the steady reduction and eventual elimination of our budgetary
deficit in a vigorously expanding economy.
This bold and successful use of fiscal policy has important implications for
the future. There is now a growing national consensus that the more active use of
fiscal policy, together with responsible debt management and monetary policies,




EXHIBITS

283

has a key role to play in achieving our economic objectives. There is also a
growing understanding that a more fiexible fiscal policy need not be associated
with loose spending practices, and that the added revenues yielded by economic
growth can offer further opportunities for tax reduction.
During the coming session of Congress, we should undertake the next priority
item on our agenda: an overhauling of the crazy quilt of excise taxes that we
have inherited in good part from past emergencies. The extensive studies that
are needed to lay a responsible groundwork for such action have been underway
for some time.
We must guard, however, against allowing the first glow of success to distort
the developing consensus on the responsible use of fiscal policy into something
quite different. In this uncertain world, we simply cannot responsibly schedule
fixed tax reduction for years ahead in blithe ignorance of, or unconcern for, expenditure needs and the state of the economy. Changes in our tax system must
be recognized for what they are: strong medicine, to be prescribed only
after the most painstaking and careful diagnosis.
A budget deficit acceptable under conditions of excessive unemployment would
be dangerously infiationary when production is straining at capacity. A willingness to use fiscal stimulus under one set of conditions must be matched by a willingness to accept restraint when needed. I need not emphasize to this audience,
which is so well schooled in the principle and practice of flexible monetary
policies, the dangers of a rigid commitment to particular policies for years
ahead, no matter how enticing the prospect may appear today.
One factor that must always receive great weight in our policy decisions is the
imperative need to maintain price stability. With industrial prices today averaging almost precisely the same as in 1958, we can look back on the longest period
of sustained stability in many decades. Manufacturing labor costs per unit of
output have actually declined during the current expansion, a refl^ection of our
rapid gains in productivity and responsible wage bargaining. In both respects,
our performance has been unmatched by any other.major industrialized nation.
There has been no persuasive evidence of a prolonged buildup of excessive
liquidity in our domestic economy. Increases in the money supply since 1960
have been relatively modest, at a rate well below the increase in production.
Corporate cash flow has been expanding rapidly, but we have large investment
and working capital needs. As a result, aggregate corporate balance sheets do
not reflect an accumulation of liquid assets that might fuel an uncontrollable
burst of spending. And slowly, but noticeably, bank liquidity has been reduced.
One important factor in maintaining this balance, and thereby easing the task
of the monetary authorities, has been the steady progress in restructuring the
national debt. Since early 1961 outstanding marketable Treasury securities
maturing in more than 5 years have increased by more than $26 billion, an
amount exceeding the entire growth in the public debt. In effect, our entire
cumulative budget deflcit has been financed at long-term, drawing upon the
savings generated by a growing economy in ways that will not contribute to
inflationary pressures. This has meant an increase in the average life of the
national debt from 4 years 6 months in January 1961, to 5 years 3 months as
of the end of last month. And, instead of the creation of bank credit to finance
the Government, commercial bank holdings of Federal debt have declined.
Taking a broad look at the past four years, I am persuaded that monetary
policy has made as great a contribution to the solution of our balance-of-payments problem as it appropriately could have done. A severe tightening of
credit might, it is true, have reduced the outfiow of short-term funds, and attracted some money from abroad. That approach would have had merit if our
deficit had resulted from the classic problem of internal inflation with shortages
of labor and industrial capacity. But that was clearly not the case. The basic
solution to our balance-of-payments problem lay elsewhere: in spurring gains
in efficiency of operation and in improving the investment climate so that our
industry could better its position in world markets. In these circumstances tight
money, while perhaps permitting us briefly to balance our external accounts,
would have provided only a fleeting illusion of progress. By working at cross
purposes to our fundamental needs to stimulate investment and productivity, it
would surely have been self-defeating.
The^e judgments do not in any way imply that monetary policy should not be
sensitive both to inflationary pressures at home and to any new difficulties in the




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19 65 REiPORT OF THE SECRETARY OF THE TREASURY

balance of payments that may require a prompt and effective response. To the
contrary, the importance of the tax reduction program lies in part in the fact
that it has placed the monetary authorities in a stronger position to deal appropriately with such contingencies should they arise.
As our economy moves ahead over the coming weeks and months, the monetary
authorities will certainly be watching closely for evidence, either in financial
flows or elsewhere, of forces that could develop into a threat to either price
stability or orderly expansion. But we must not assume that the maintenance
of price stability is the responsibility of the monetary authorities alone. For
the most difficult problem—and one with which the monetary authorities are
ill-equipped to deal—would be spreading wage and cost pressures that industry
could not absorb from rising productivity. Here the heaviest responsibility rests
on both industry and labor to maintain a relationship between wages, productivity, and prices that can permit us to prolong our excellent record of cost and price
stability.
For price stability today is imperative, not only to our domestic economy, but
to our balance-of-paynients position. In the past year, we have begun to see clear
evidence that price stability is gradually improving our international competitive
position. During fiscal year 1964 our commercial exports rose by 16 percent, far
exceeding the 9-percent rise in imports that has been a natural consequence of our
rising levels of business activity. As a result, our commercial trade balance
increased by $1.4 billion, helping to cut our balance-of-payments deficit over the
same period more than in half. And during the recent summer months our
exports reached a nevf peak, despite expected declines in grain shipments from the
exceptionally high levels of last winter.
Important savings have developed in other sectors of our international accounts. By midyear, the annual balance-of-payments costs of our aid and defense
programs had been trimmed back by roughly $500 million from their 1962 levels.
Further reductions already scheduled will next year bring those savings to approximately $1 billion. The dangerous threat to the dollar arising from last
year's accelerating outflow of portfolio capital has been successfully braked
through the interest equalization tax. As anticipated, that necessary, but
temporary, measure is providing the breathing time we need until European
capital markets are more fully developed and our other measures have had
time to become fully effective.
The favorable influence of these factors on our balance of payments is frequemtly obscured by erratic fluctuations from month to month and quarter to
quarter. For example, our payments deficit dropped abruptly during the first
quarter of this year in response to an unusual combination of temporary factors,
only to give way to a considerably larger deficit in the second quarter. The
latest figures for the third quarter, while still fragmentary, indicate that the
deficit will fall between those extremes, and confirm the prospects of substantial
improvement for 1964 as a whole. Looked at in the longer view we are justified
in taking real satisfaction from the substantial improvement in our international
payments that has characterized the past 15 months.
I am not suggesting that our balance-of-payments problem is over. It clearly
is not. In some ways, the hardest part of the job remains ahead. Moreover, in
a world of convertible currencies, with trade and capital free to flow across
national boundaries, it will never again be possible to take the relaxed attitude
toward our international payments that characterized much of the period since
World War II.
What I am saying is that I am confident that ithis challenge cajn be met, and
that it can be met while reaching new peaks of prosperity at home. That confidence does not arise out of any false hope that we can simply ride on the
momentum of the past into a new era of ''painless prosperity." Rather, it arises
from the fact that we have learned much in recent years about how to use and
blend our varied tools of Government policy in new ways, always within a framework of free markets and fiscal responsibility. It arises because once again our
system of free private enterprise has demonstrated its enormous capacity for
growth and innovation in a climate of price stability and renewed incentives.
These are the solid building blocks of which we can and will fashion a better
future for all America.




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285

Exhibit 14-—Remarks by Secretary of the Treasury Dillon, March 19, 1965,
before the 13th annual monetary conference of the American Bankers Association, Princeton, New Jersey, on capital markets, interest rates, and balance
of payments
This is the fourth year in which I have had the special privilege of addressing
this Conference of distinguished leaders in the world of finance. These have
been years of remarkable innovation vn financial practices and policies, public
and private, both within the United States and abroad. Internationally, we
have fashioned a framework for mutual consultation and cooperation that—
measured against our common objectives of steady growth and flourishing world
trade, coupled with substantial price stability—has proved both durable and
viable.
But, despite much excellent progress, our international financial system still
suffers from a disturbing disequilibrium, one I have discussed with you on
previous occasions. This is the seemingly chronic tendency for capital to fiow
between countries in directions and in amounts that impede the entire process
of restoring balance in the payments of deficit and surplus countries alike.
The Group of Ten, in their recent study ^ of the international monetary system,
concluded unanimously that ways must be found to improve the process of
balance-of-payments adjustment. The United States' wholeheartedly joined in
that conclusion and welcomes the systematic studies of this matter now underway in Working Party I I I of the OECD. However, if these studies are to have
truly useful results they must face up to the stubborn and extremely difficult
problem posed by the deep structural imbaiajnces in the world's capital markets
that have enormously complicated the smooth functioning of the adjustment
mechanism.
The nature of the problem is clearly illustrated by developments in our
balance of payments last year. By 1964, the measure we had undertaken to
improve our trade position and to reduce 'the balance-of-payments impact of our
aid and defense programs had achieved visible and gratifying results. Yet, as
you know, our deficit last year was once again disappointingly large, primarily
because capital had poured out of the United States in unprecedented amounts—
in significant part to the strong surplus countries of Western Europe. The
recent Annual Report of the Monetary Commission of the European Economic
Community highlighted this point, noting that an improvement of about $3
billion in U.S. transactions for goods and services and Government accounts
had been largely offset by a $2 billion increase in private capital outfiows.
Within the basic limitations set by the needs of an underemployed domestic
economy, the United States throughout the last four years had been alert to
the fact that excessively easy money at home could only aggravate the problem
of capital outflows. By shifting much of the burden for promoting domestic
expansion to fiscal policy and tax reduction, we have enabled our monetary
authorities to move gradually, but steadily, to an essentially neutral monetary
policy.
Our short-term market interest rates have climbed significantly since the
1960-61 recession, responding largely to two half point increases in the discount rate. With the discount rate now at 4 percent. Treasury bill yields are
within one-half percent or so of their postwar high, a high reached only briefly
during the period of very tight money in 1959. Loan/deposit ratios of banks
have gradually climbed to a postwar peak, and other traditional measures of
bank liquidity have confirmed a gradual tightening in their position. The Federal Reserve has rather steadily reduced the free reserves of the banking system,
and, for the past month, the banks have actually operated with a small net
borrowed reserve position. While corporate cash fiow has remained high,
liquidity ratios have reached the lowest levels in a quarter of a century.
Clearly, credit has remained readily available in the United States throughout
this period, and our bank lending and long-term interest rates are still low
relative to most other countries. But it is also a palpable fact that rising
investment opportunities and credit demands at home, combined with increases
in the Federal Reserve discount rate and greater restraint in the provision of
bank reserves, have noticeably reduced the ease of our market. Yet, instead of
declining in response to these developments, the capital outflow has accelerated.
^ See 1964 annual report, exhibit 49.




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19 65 REPORT OF THE SECRETARY OF THE TREASURY

This fact alone casts into doubt the thesis of" those who view the problem
almost entirely in terms of "excessive" domestic liquidity, with tighter monetary policy the simple, effective, and unique remedy. Naturally, if one defines
an excess of liquidity as synonymous with an excessive capital outfiow, I sup^
pose that position would be miassailable. But that kind of analysis bears no
realistic relationship to the difficulty we face today. All it does is to define away
the substance of a very real and tough problem.
In my judgment, it is much more enlightening, although still not the entire
answer, to analyze the problem in terms of diff'erences in investment profitability,
rather than in ternis of liquidity. .Consider, for example, the outfiow of funds
for direct investment abroad, which has continued to rise, reaching $2.3 billion
in 1964. At the present time, many American firms clearly believe that a portion
of their available resources can be most profitably invested in subsidiaries
abroad. That calculation rests on a variety of familiar considerations: The
more rapid growth of certain foreign markets ; a desire to operate inside a wall of
extemal tariffs; proximity to readily available raw materials; and lower
production costs, to name some of the most obvious factors.
But perhaps most important of all is the fact that U.S. industrial development so far exceeds that of any other country. This has brought with it a
degree of competition that is unknown anywhere else in the world. Add to this
our enormous flow of savings, and it is not surprising to flnd a general acceptance
of lower rates of return on capital in this country than prevail elsewhere, rates
that only partially reflect differences in risks between investments here and
abroad. At the same time, our businessmen and investors tend to place higher
capital values on prospective earnings than is the case elsewhere, and our corporations at tiines find it attractive to pay higher prices in the acquisition of going
concerns abroad than would seem reasonable to local investors.
Whatever the specific reason that particular direct investments abroad appear
to a given company to be a more profitable use for its funds, the fact is that we
cannot eff'ectively influence this judgment by simply reducing liquidity and tightening credit at homj So long as the basic difference in profitability remains,
any gain in terms of reduced foreign investment will entail a substantially larger
cost in terms of dampening domestic investment as well. There seems, therefore, little warrant either in theory or in practice for basing economic policy on a
presumption that corporate managers will permit considerations of the rate and
availability of bank credit to affect their decisions on foreign investment, while
leaving the domestic economy untouched.
In the broadest sense, international differences in the rate of return on investment—as these differences are reflected in interest rates and the intensity
of demands for credit—also lie behind the accelerating outflow of bank loans
and other .credits abroad. This structural imbalance forced us to propose the
interest equalization tax during the summer of 1963. It effectively increased
the cost of long-term portfolio credit to foreigners in developed countries. As
a result the outflow of long-term portfolio capital in 1964 dropped back to the
1000 level.
Tlie plain fact is that foreign borrowers are willing and able to pay higher
rntes than domestic borrowers of similar credit standing with free access to
the vast resources of the American credit market, and foreign loans are thus
in many instances more profitable to the lending banks. The same is true for
the placement of liquid funds by our corporations. But the massive outflow
of tbese types of credit is also related to other deepseated structural characteristics of American and foreign capital markets.
As you know, with rare exceptions, foreign financial markets, even in countries with the most highly developed economies, lack a large and fiuid shortterm money market. Long-term bond markets are usually even more constricted.
xAs a result, in most other countries there is simply no effective mechanism by
wbich private borrowers and lenders, and to a very considerable extent governments, can readily raise or dispose of large sums in short periods of time in the
open market. Instead, the available funds within each country are channeled
almost entirely through a relatively few big institutions dealing with individual
customers on a personalized basis. These institutional markets are fairly well
insulated from the short-term money market, and frequently respond only
sluggishly if at all to the actions of the monetary authorities.
The fiuidity and size of the niarket available to most private borrowers
abroad is further impaired by the fact that many foreign governments preempt




EXHIBITS

287

a very large fraction of the savings available for investment, or direct it into
officially sanctioned uses, frequently with a sizeable subsidy for preferred borrowers added along the way. This is partly a natural result of basic social
decisions to provide, through Government social insurance programs, the protection for citizens that we in the United States furnish to a much larger extent
through private insurance and private industry. But, it is also a refiection,
in many instances, of a conscious desire to provide special preferences to one
major group of borrowers or another, and to maintain a high degree of Government control of national economic development. In either case, the natural
result is to leave those businesses and other borrowers that must look to the
remainder of the market more or less perpetually starved for funds, and with
an impelling desire to seek needed capital from abroad.
All of these factors have contributed to a structure of long-term interest
rates in Europe that, with only one or two exceptions, has remained throughout
the postwar period at levels that, in the light of past history, are usually
high. Official discount rates, and the money market rates more immediately
influenced by the official rates, often bear little relationship to the loan charges
payable by local borrowers. And, faced with constricted internal markets, and
thus denied a full range of flscal and monetary tools, the authorities themselves
often flnd it essential to pursue essentially domestic credit objectives—and
in some instances even to flnance internal budgetary needs—through adjustments in external flows of funds. Sometimes this is done by borrowing directly
from abroad and sometimes by seeking to influence the external borrowing or
placement of funds by their commercial banks.
The sheer size of the U.S. economy and the tremendous volume of funds
raised in our credit markets, estimated last year at over $70 billion, help account
for the much greater fluidity of our markets and their ability to adjust to, and
absorb, large domestic or foreign demands with relative ease. But it is not a
question of size alone. The relative freedom of the market mechanism, and
the intensity of competitive pressures among institutions with a wide variety
of investment options, permit funds to flow promptly from one sector of our
economy to another in response to changing demands. And, a long history of
confidence in our currency, further fortified by the stability of our prices in
recent years, has encouraged individuals and investment institutions to commit
funds freely at long term.
As a result of the pressure of the huge volume of private savings seeking
investment in our market, our long-term interest rate structure has remained
essentially stable during the past four years, even though money market rates
have risen by 1% percent or more to a range of 4 to 4i/^ percent. As a result,
the differential between short- and long-term rates has almost disappeared.
Nevertheless, the bond market has^ continued to absorb a record volume of longterm financing at stable rate levels.
Another indication of the strength of our longer-term markets is that, over
the past four years, they have not merely provided the vast amount of funds
necessary to support high levels of homebuilding, a remarkable expansion in
business investment, and the rapidly growing needs of our States and localities.
They have also provided funds to the Government, equal to the entire $28.8
billion Federal deficit during the first four years of this Administration. During
that period more than that amount was placed in savings bonds and marketable
debt maturing in over five years. This achievement is refiected in the increase
of almost one year or 20 percent in the average length of the marketable debt
to a level last seen in mid-1956.
In this setting we could not expect moderately tighter monetary policies to
bring the needed reduction in the outfiow of long-term funds abroad. The disparities in the structure of the capital markets of our different countries are
simply too great to permit us to rely heavily on that approach toward adjustment. Much more is needed to bring interest rates here and in other industrialized countries into the rough alignment that is surely necessary if we are
to put a permanent end to the destabilizing capital fiows that have characterized the past two years.
It might, of course, be argued that extremely tight money would be able to
do the job if continued over a long enough period. Such a policy rests on the
highly doubtful assumption that in spite of our huge volume of savings it would
be technically feasible—perhaps by drastically reducing the money supply—




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19 65 REPORT OF THE SECRETARY OF THE TREASURY

to raise the general level of our bank and long-term interest rates by the li/^
to 2 percent that would be needed to achieve interest rate parity with Europe.
But even granting that assumption, such a policy would surely be selfdefeating. Before it could achieve the interest rate objective, the extreme
restriction of credit would surely move us tO'ward domestic recession, and at a
time when our economy is already failing to use its resources to the full. A
recession would, in turn, delay our fundamental aim of creating a more favorable
climate for investment in the United States. At the same time, it would rapidly
create forces for easy money that would be likely to prove irresistible. Thus the
end result would not be an improvement but rather an aggravation of our
balance-of-payments problem.
To cite these limitations and difficulties in the use of monetary policy is not,
of course, to say that monetary policy does not have a useful and indeed essential role to play in helping the adjustment process in the United States, as in
other countries. It has played such a role, is playing such a role now, and will
continue to do so in the future. In fact, as I suggested earlier, one of our
chief reasons for relying primarily upon fiscal policy to stimulate the domestic
economy was to give monetary policy additional freedom in coping with our
balance-of-payments problem. And I can assure you that monetary policy remains fully available for further use should the need arise. But I see no
realistic prospect that the full burden for achieving a permanent international
adjustment in capital fiows can reasonably be thrust on American monetary
policy alone either now or in the foreseeable future.
Instead, as I have suggested before to this group, the only really satisfactory
long-range solution to our present problem of excessive capital outfiows lies in
achieving a more attractive environment for investment within the United
States through tax reduction and sustained growth, together with the development of far larger, far more efficient, and far more fiexible capital' markets
abroad. W'hile there has been some encouraging progress in both of these
directions, much morei remains to be done.
These are, of course, longrun measures, and their infiuence on capital fiows
must be expected to emerge only slowly. For the time being, the existing disequilibrium, and the urgency of reducing our deficit, has required that we
seek the cooperation of our banks and other financial institutions, as well as
of our industrial firms, in voluntarily reducing the fiow of capital abroad. The
response of those asked to participate in this voluntary program has been most
gratifying. The effects are already clearly visible both in the foreign exchange
markets and in our preliminary payments statistics which point to a sharp
and favorable change since mid-February. But two swallows don't make a
summer. We need a considerable period of balance to offset the deficits of the
past. We know we can count on your cooperation in achieving this vitally
needed result.
But the success of our present program does not, of course, meet the basic
problem. The nations of the free world, working together, must develop better
means for infiuencing capital fiows within a basic framework of free markets
and national objectives, and without placing intolerable burdens either upon
monetary policy or upon the resources of the international monetary system.
We must be under no illusion that a different or improved intemational
monetary system could in any way eliminate the need for adjusting these flows.
But these two questions 'are nonetheless related, for one of the basic functions
of the international monetary system is to provide sufficient means for financing
deficits and surpluses to permit the working out of an orderly process of
adjustment.
This linkage between the process of adjustment and the international monetary
system seems to me to be at the source of much of the confusion and difficulty
evident in recent international efforts to develop a common approach toward the
further evolution of the international payments system. Ail the major countries
are fully agreed, I believe, on the need for developing an assured method of
generating international liquidity in adequate, but not excessive, amounts as
world trade and production increases over the years ahead. This much clearly
emerged from the studies of the Group of Ten and the International Monetary
Fund last year.
But in recent months, there has been little progress toward more concrete
agreement on methods and approaches. The pronounced divergences in view
that have been evident can, I believe, be traced in good part to quite different




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289

assumptions about the relationship of international monetary reform to the
current U.S. payments deficit.
The overriding need, in one European view, is to develop a mechanism which
would force a prompt end to our payments deficits. We fully agree with these
European friends on the necessity for achieving early balance in our international accounts. And we intend to achieve this igoal by our own actions, which
now for the first time cover all aspects of our payments problem.
But, in assessing the problems of the international monetary system, our concern and that of a number of other countries has been to look toward the future,
when there will no longer be an American payments deficit pumping dollars into
the reserves of other countries. So the thrust of our thinking has been to
find the best way of developing supplementary imeans of providing the liquidity
that is likely to be needed. We feel that this can only be done gradually and \yy
building on what we now have. And we emphatically disagree with the thesis
recently propounded in some quarters which 'Would 'turn back the clock and
embrace an outmoded and highly restrictive system, a system that would surely
cripple the growth of international trade and commerce as our deficit was ended.
Under the circumstances, with these broad differences of approach, any final
resolution of the variety of issues that have been raised seems to me highly Unlikely until the United States has brought its international payments into balance.
As that is done it will become less and less easy to ignore the potential need for
supplementary sources of reserve assets and international credit facilities.
Meanwhile, difficult and time consuming technical studies are well underway
under the 'auspices of the Group of Ten, helpinig to clarify the issues and to
evaluate alternative techniques. These studies will, I believe, provide the basis
for timely agreements on ways and means for improving the present monetary
system well in advance of any urgent need.
I n looking back on the past four years, and on the postwar period as a whole,
there can be no question that the present system—anchored on gold and the
dollar, and effectively supplemented by the International Monetary Fund—has
served the world welL The extremes of inflation and deflation characteristic of
other postwar periods have been avoided. Barriers to trade have been lowered or
removed. And, in this environment, the vast productive capabilities of the free
world have been released to the benefit of us all.
The challenge for the future is to build further on this system, recognizing its
potential weaknesses and shortcomings, but preserving the elements of strength
and flexibility that have contributed so much to our progress.
In this area, as in the area of adjustin;g capital flows, I have no fixed blueprint
to offer to those who will share the responsibility for developing solutions. I
remain confident, however, that solutions can and will 'be found, provided only
that the United States discharges its own immediate responsibility to maintain
the full strength of the dollar as the world's primary reserve currency by achieving an early balance in its international accounts. And with the help of you
gentlemen that is exactly what we are going to do.

Exhibit 15.—Remarks by Secretary of the Treasury Dillon, March 26, 1965,
before the American Bankers Association Symposium on Federal Taxation,
on fiscal and tax policy
I 'am particularly pleased to make this, my. last public speech as Secretary
of the Treasury, before a group which has contributed so much to the better
understanding of economic issues over the past four years.
In the light of our experience during those years, I would like to consider a, few
of the problems and prospects that may lie ahead.
Budgetary policy
I have no doubt that, despite our better understanding of economic realities,
a great deal of discussion over the next few years will continue to center around
the question of budget deficits and balanced budgets. There are still many who
hold that the budget should be balanced every year or at least over some very
short period of years, no matter what the circumstances. This view usually
assumes that a balanced budget is entirely neutral in its economic impact, neither
782--556—66

19




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19 65 REPORT OF THE SECRETARY OF THE TREASURY

inflationary nor deflationary, and thus has no effect at all upon the private
economy.
But when we examine the facts a little more carefully, we discover that some
taxes are more deflationary than others and that some expenditures are less inflationary than others—that our economic performance is affected by the struc- •
ture of taxes and expenditures as well as by their level.
When we scrutinize the administrative .budget, which is the budget that most
people want to balance, we find a whole host of disparate items. In that budget,
a loan is treated as an expenditure in exactly the same manner as wages paid,
and the repayment of a debt to the Federal Government is treated as a revenue
receipt just as if it were a tax collection. It would certainly be surprising if the
achievement of balance between the so-called expenditures and the so-called
revenues of such a budget turned out to have a neutral effect upon the private
economy.
A far more realistic approach to budget making is to consider first the essential
needs that must be met by Federal expenditures. We can then estimate the
impact of these expenditures on the economy in the light of foreseeable revenues.
Finally, after considering the economic outlook, we can make whatever adjustments appear necessary and so put together a budget that both meets essential
national needs and produces an economic impact appropriate to existing
conditions.
In 1963, for example, when we first proposed the tax cut, and again in early
1964, when it was about to go into eff'ect, our budgets refiected the imperative
need for restraint in public expenditures at a time when we were giving expenditures in the private sector of our economy so large a stimulus through tax
reduction.
And in his Budget Message of this year. President Johnson recognized that,
if we are to continue our steady progress toward the twin goals of full employment and balanced budgets, we must move carefully. Thus, while the projected deficit of $5.3 billion for fiscal 1966 was $1 billion less than that projected
for fiscal 1965, the President found room to include a prudent amount of excise
tax reduction designed not only to remove inequities but also to insure the continued expansion of our economy.
This approach means, as President Johnson has amply demonstrated, that,
while on the one hand, we must provide for essential national needs, whether
they be economic, social, or defense, we must also rigorously, even ruthlessly,
seek out and eliminate waste and inefficiency wherever we find them.
We see the success of this approach in the fact that, over the past four years
we have achieved a substantial improvement in our employment situation at
the same time that we have compiled an outstanding record of price stabiUty:
a record which stands in striking contrast to the pattern of steadily rising prices
in other leading industrial nations.
A proper concern for the level of employment and for the requirements of the
economy need not lead to continuing deficits. If we can keep our economy
moving steadily ahead, it is perfectly feasible, even after allowing for increases
in budget expenditures of about $3 billion a year to foresee a balanced budget
in fiscal 1968, just three years from now.
In evaluating budget policy, past, present, and future we must always bear
in mind that our stubborn balance-of-payments problems force us to rely less
on monetary policy and more on fiscal policy in fostering economic growth.
As you know, we are now well launched upon a program to 'bring our balanceof-payments deficits to a swift and sure end. But there is little likelihood that
the success of that program will permit us to shift more of the burden of sustaining domestic economic: advance to monetary policy. High interest rates abroad
and other structural imbalances in the world's capital markets will force us to
continue, for the foreseeable future, to place our chief reliance on fiscal policy
to keep our economy healthy and strong.
Flexibility of tax rates
But fiscal policy will not fulfill, as it must, its potential as a force for strong
and stable economic growth, until we can employ it as a weapon to forestall—
and not merely react to—recession. Thus, the President recommended in his
Economic Message that the Congress take steps to ensure "that its procedures will
permit rapid action on temporary income tax cuts if recession threatens." . This
is a reasonable alternative to the recommendation made by the Commission on




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Money and Credit that the President be given discretionary authority to reduce
tax rates when recession threatens. For, it allows us to deal with the problem
of rapid and temporary fiscal adjustments while maintaining unchanged our
traditional congressional control over taxes. It requires only the assurance of
a prompt congressional vote whenever a temporary tax cut proposal is made
by the President. The Congress can adopt whatever procedures it believes necessary to assure prompt action. But prompt action is absolutely essential since
delay in the face of oncoming recession could easily cost the Nation billions
of dollars in production and hundreds of thousands, or even millions, of jobs.
Expenditure policy
No matter, however, how versatile and potent a weapon we make of fiscal
policy, we will continue to face critical choices in actually bringing it to bear
upon our economic needs and problems. No simple arbitrary formula can tell
us how to make those choices. A growing economy inevitably brings rising
government expenditures, and confronts us with difficult decisions on how those
expenditures should be made. A normal year's economic growth, such as an
increase of $40 billion in gross national product, means that total expenditures
in our society will have grown by $40 billion. For that is just what GNP is—
the sum of all the final expenditures in our economy. Much of this growth
can and should be in the things we buy, privately and individually, for ourselves.
But as our economy and our wealth expand, so does our need for public services, and so does the capacity of State, local, and Federal Governnient to meet
these needs. We must decide, each year, how many of our urgent public needs
we should meet out of our growing productive capacity, which xerograms deserve
prioritj^ and which can be cut back.
These choices inevitably involve tough decisions like those we have recently
made on Navy yards, veterans' hospitals, and Customs coUectors. They also
involve programs of enormous promise, such as the Peace Corps, improved education, or the war on poverty.. Too often in the past such decisions have simply
been the accidental byproducts of a confrontation between an alliance of the
advocates of various expenditure programs on the one side and the opponents
of all expenditure programs on the other. I am not at all sure that this approach has been very effective in weeding out expenditure programs, and I
particularly doubt that it has succeeded in weeding out the least worthy ones.
But here again there is an alternative approach, which is simply the careful analysis of costs and benefits in particular programs. This is the kind of
analysis that has gone into the development of our defense programs, into the
veterans' hospital program and that is now being used in evaluating the supersonic transi^ort program. It is in this direction, rather than in arbitrary budget
ceilings, that we must seek for solutions in trying to allocate expenditures between the public and the private sectors of our economy.
Apart from the economic aspect of our fiscal policy, we must also consider
its human aspects. That is why we have emphasized both the incentive and
the equity aspects of our tax proposals. What we have said about incentives
has fallen on fertile soil, but what we have said about equity has often fallen
on harder soil.
While we all agree that we should have a tax system that is progressive in
its impact, we do not all agree on just how progressive it ought to be. This
is not surprising, but it has its unfortunate aspects. For a great deal of our
concern about this problem of progression, or "vertical equity" has unintentionally drawn attention away from the equally serious problem of "horizontal
equity," the unfair tax treatment of diff'erent individuals at basically similar
income levels.
Capital gains at death and the estate tax
Perhaps the most important problem in this area of horizontal equity lies
in the treatment of capital gains at death. Under our present law, a man who
accumulates wealth during his lifetime from earned income and dividends will
pay substantial income taxes during his lifetime on this income and estate t