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L1BRARY
l\,or)M 5025
I.
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lREAS~JRY
1 ~)
,\Q~ :-
rc:r ~ 11MENT
LI8RARY
ROOM 50:10
JUN 1 ~ 1972
TREASURY DEPARTM ENT
TREASURY DEPARTMENT
FOR D1MEDIATE REIEASE
TREASURY DECISION ON BRAKE DRUMS
UNDER THE ANTIDUMPING ACT
The Treasury Department has determined that brake drums from
Canada, manufactured by Atom-Otive Products Co., Rexdale, OntariO,
Canada, are not being, nor likely to be, sold at less than fair
value within the meaning of the Antidumping Act.
A "Notice of Intent
to Discontinue Investigation and to Make Determination That No Sales
Exist Below Fair Value," was published in the Federal Register on
August 3, 1965, stating that termination of sales with respect to
brake drums imported from Canada, manufactured by Atom-Otive Products
Co., Rexdale, Ontario, Canada, was considered to be evidence that
there are not, and are not likely to be, sales below fair value.
No persuasive evidence or argument to the contrary was presented
within 30 days of the publication of the above-mentioned notice in
the Federal Register.
Appraising officers are being instructed to proceed with the appraisement of this merchandise from Canada without regard to any question of dumping.
Imports of the involved merchandise received during the period
August 1, 1964, through March 31, 1965, were worth approximately
$110,000.
4
TREASURY DEPARTMENT
October 1, 1965
FOR IMMEDIATE RELEASE
TREASURY DECISION ON PERCHWRETHYIENE SOLVENT
UNDER THE ANTIDUMPING ACT
The Treasury Department has completed its investigation with
respect to the possible dumping of perchlorethylene solvent from
France, manufactured by Solvay & Cie, Paris, France.
A notice of
intent to close this case with a determination that this merchandise is not being, nor likely to be, sold at less than fair value
will be published in an early issue of the Federal Register.
Appraisement of the above-described merchandise from France,
manufactured by Solvay
&
Cie, PariS, France, has been withheld.
Imports of the involved merchandise received during the period
July 1, 1964, through August 31, 1965, were worth approximately
$450,000.
TREASURY DEPARTMENT
?O,:1 rtELEASE A.M. NEWSPAPERS,
WASHINGTON. D.C.
Tuescl.::ly, October 5, 1965.
October 4, 1965
RESULTS OF TREASURY'S WEEKLY BILL OFF.c:TIi~G
The Treasury Department announced last evenincr that the tcnc.ers for two ser:.es 01
Tr0asury bills, one series to be an addi tiona1 iss~e of the bills dated July 8, 19651
ul:Q tre other series to be dated October 7, 1965, whiCh were offered on Septem~er 291
llere 0ptmed at. 'tho Fcde:r-al. RCl!Jervo Ba.nko on Oct.ober 4. telld<:';;~:;J WC1:e i.!1v:lted t:o~·
~>1,200,OOO,000, or thereabouts, of 91-day bills and for ~~l,OOO:.JOOO.)lOOO, or thereaboutr
of 182-day bills.
RA.NGE OF ACCEPTED
COI1PETITIVE BIDS:
High
Average
The details of the two series are as follo,oJ's:
91-day Treasury bills
:
182-d2.y Treasury bills
maturing Januaq 6, 1966 _ :
l.LaturiT:g April 7, 1966 ...
Approx o Equiv. :
Approx .. :3":quiv
Annual Rate
:
PriCe
Annual &.:.te
Price
:
97.384
4.185%
98 0 981 a/
0 031%
4 0 067%
:
97.870 4.213%
98 0 972 4
050%
1/
:
97.876
4.201%
98.976
0
-
b7
4
Y
a/ ZAcepting one tender of $600,000; b/ Excepting one tender of $20,000
09 ,ercent of the amount of 9l-day bills bid for at the low price was accepted
10 percent of the amount of
~O'I'AL
182-~
bills bid for at the
l~d
price was accepted
TENDERS APPLIED FOR AND ACCEPTED BY FEDERAL RESERVE DISTRICTS:
:='i:..:trict
i; 0 s''':' on
~.C\J York
. ~. '::-.iladelphia
Clc·,cland
.tli C :-:IT!Ond
:.tlanta
Chicaeo
sto Louis
hinneapolis
Kansas City
Dallas
San Francisco
TorALS
!BoJ-:ied For
32,251,000
$
1,520,164,000
26,816,000
30,845,000
17,165,000
38,967,000
257,535,000
42,239,000
16,597,000
32,609,000
32,,940,000
106.1495 ,2000
$2,154,623,000
·
·
·
AcceEted
• AEElied For _
$ 22,251,000
22,949,000
$
1,291,780,000
755,414,000 •
14,816,000 ••
14,941,000
•
30,845,000 •
29,590,000
17,165,000 •
9,888,000
27,564,000 ••
28,174,000
134,815,000
285,653,000
38,619,000
20,221,000
15,287,000 •
12,223,000
32,609,000 •
17,414,000
22,940,000 ••
17,787,000
88 Z085,2000 :
241,435,000
$1,,200,410,000 ~/ $1,992,055,000
·
··
·
·
Acc6'Dted
$ 17,949,000
578,880 ,000
6,891,00
29,590,00
1
8,888,00
17, 774,~
146,093,()Jij
14,811,000
10,723,000
15, 361~1(X»
12,967,000
140,140 lOOl,
$1,000,070,000
c/ Includes $242,905,000 noncompetitive tenders accepted at the average price of 98,911
d/ Includes $114,016,000 noncompetitive tenders accepted at the average price of 97 .81~
On a coupon issue of the same length and for the same all''.ount invested, the return ol
th8se bills would provide yields of 4015%, for the 9l-day bills, and 4.35% for the
132-~y bills. Interest ra.tes on bills are quoted in ter-ms of bank discount 'With
the return related to the face amount of the bills payable at maturity rathGr trum
the amount invested and their length in actual number of days related to a 360-da1
year g In contrast, yields on certificates, notes, and bonds are computed in te~
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 i f more than one coupon period is inVolved.
Y
Draft of Speech by Joseph Barr before the Tax
Executives Institute, October 1965
As the world economy grows more complex and interdependent, the
United States, along with other industrial countries, must pay increasing
attention to the needs of the less developed countries of the world.
The
giving of economic assistance to these countries is clearly far more than
an act of charity.
viable an!l. free
-
T~e-a:-states-hftB' --&
",conomie~
gr...eat._ stake -in the growth of
ill the leSE developed """"'d.
econom.y re;r;lresents a growing wSiir.d market for
Unit~d
{.~~. A)
StateE.,l>;t;QQ}1G:l;is and
......~"""'~t. ..~~1b~!~v~\C.Q·__'\."*,>&.I';I-"'~;;qqrM>:~~~~'$1.t~~rr~~~
........
support industrial expansion in the United States; it also represents a
f:TI!IJJlIlf"JW*i'G'P-'
oftCi±
f ilIa
%
..
en8IT'T'eIease in political upheaval.
The United States Government, through four administrations since
World War II, has committed itself to the importance of a strong and
imaginative foreign assistance program.
Following the reconstruction of
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- 2 Europe after World War II, the focus of our programs shifted from Europe
to the less developed world.
Many billions of dollars have been spent
by our government in a variety of programs to foster economic growth in
the countries of ASia, Africa and Latin America.
Billions more have been
spent individually by other industrial countries and jointly by
associations of countries.
proportion.
~
Viewed e.lone ~ these amounts are staggering in
Viewed in the context of the tremendous and growing job to
be done, however, they cannot be considered as more than a beginning, and
although we must start at the beginning, we cannot permit our efforts to
end there.
The potential for expanding official economic develQ~ment assistagce
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- 3 development of viable industrial bases in the economies of the less
developed countries.
~AS
the richest and roost technically advanced country in the world,
f/-U
,.;)C-
,J,.)-./
~~arly ha~ the
ability
~~l.ilS~ii~=::!=:C!l::tQ:r;;;;1ii
to perform this role.
However,
before we can do so adequately many economic and institutional barriers
to such investment must be lowered.
These barriers take the form of a
lack of knowledge of the opportunities which exist in these countries for
profitable investment; a lack of understanding and, therefore, a fear of
involvement in the commercial, financial and legal institutions in these
countries; the very real economic and political risks which accompany
investment in less developed countries; the lack of an adequate supply of
human resources in these countries; and a host of other impediments which
/~f'
l~''-·.
refiect themselves in wha~rppears to be inertia on the part of American
business.
There is much that can be done both through public and private
initiative to lower or eliminate these barriers.
- 4 Much 's now being done and more can be done by our Federal Governm~nt,
by the gave nments of the less developed countries, by world organizations
like the UN and tbe~OECD, by private trade associations and by interested
business firms and indivIduals.
A high level advisory committee, under the chairmanship of
"
Arthur K. Watson, was formed in 1964tb,make a thorough study of the
present government policies for channelling private investment into less
developed countries
A
In the report of that committee, published in
July 1965, a great many recommendations were made,
"'"
"
conSid~'tion by the government agencies concerned.
/'
/"
-r
/'
teal with many aspects of the problem.
The Effect of a Less Developed Country Investment Promotion Policy on
the Balance of Payments
Before entering into a discussion of specific policies and programs,
a few remarks may be in order regarding the possible effect on the
United States balance of payments of a policy to promote an expansion
\
~)"
;
- 5 ,
'''. "
of the outflows of American capital to less developed countries.
A
The
Aaministration has made abundantly clear its view that the recent improvement in our balance of payments must not be interpreted as a sign
that the time has now come to relax our policies aimed at strengthening
o~
balance of payments position.
In light of this, one might be led to
question whether this policy of selective foreign investment promotion is
consistent with our balance of payments policies, particularly the voluntary
foreign investment restraints and the interest equalization tax.
The
answer to this question clearly is yes, the two are consistent, as a brief
a~lysis
of the facts will indicate.
You will note that this affirmative
answer underlies our entire balance of payments program.
Less developed
country investment is exempt from the interest equalization tax; the
voluntary investment restraints do not apply to less developed countries;
While the Federal Reserve Guidelines do not exempt loans to less developed
countries from the overall ceilings which they impose, such loans are to
be given priority.
- 6 -
In the most short run sense, all foreign investment is reflected
in a balance of payments drain in the amount of the investment, whatever
the nature of the recipient country.
This is clearly not a realistic way of viewing the problem, for it
considers only one part of a much longer process.
This initial invest-
ment, whether it be in an industrial or a less developed country, will
generally lead to some export of capital equipment, raw materials and
semifinished goods produced in the United States, of American patents and
know-how and of the services of American technicians, all necessary to
support the investment.
In addition, if the venture is successful,
profits will be earned and, at least in part, repatriated to the investor.
The relevant focus , therefore
investment.
,
is the net balance of payments cost of an
That is, the initial capital outflow minus the export receipts
and dividend receipts generated by the investment.
Over a sufficiently
long period of time this net figure is likely to become positive for any
- 7 investment as the receipts, particularly the income receipts, increase
in relation to the fixed initial investment.
It is at this point in the analysis that a clear distinction can
be made between investment in developed countries and investment in less
developed countries.
The volume of United States exports generated by a
dollar of American capital invested in a less developed country tends to
be much greater than that generated by a dollar invested in an industrial
country.
In his testimony before the Senate Finance Committee in support of
the 1962 Revenue Act, Secretary Dillon presented the results of a study
which showed that for the years 1959 and 1960, a dollar invested in Europe
returned about four cents in direct net United States exports annually,
while a dollar invested in the less developed world generated direct
American exports in an amount exceeding forty cents per year.
This very
striking difference is accounted for by the fact that domestic sources of
- 8 -
supply in the less developed countries of capital goods, raw materials,
intermediate products and technical knowledge and skills are very limited.
American subsidiaries in these countries, therefore, find it necessary to
fall back on American markets for a substantial part of their
re~uirements.
This is much less true for investment in industrial countries.
[w~,must
~"
also look at the return flow of dividends generated by less
'".,
developed cOhQtry investment as compared with that of industrial country
investment.
Our data indicate that the ratio of dividends to net profit
for less developed country subsidiaries tends to be somewhat lower than
the average ratio for industrial countries.
However, rates of return on
capital are much higher for less developed country investment than for
investment in developed countries.
There are subsidiaries in less
developed countries earning returns consistently in excess of 50 percent.
These high returns, in many cases, more than offset the lower distribution
- 9 ratios, with the result that United States dividend receipts from less
developed country subsidiaries will gen'rally be higher per dollar of
investment than receipts from developer
T,1.-,'
co~~ SUbsidiari~
!
cetftBinlng these Cffl.) factor. of high direct net export receipts
J,-~~-..
c.J.
~~ivi8:efi8: l'ce~ipts,"i-t"bceo1ile'S
clear that the net balance of payments
,
.
effect of a dollar invested in a less developed country
~U~'::':;~"::~M6~~~
in an industrial country mad'
re'lllj
J-<J
h...-:>/~
w111 13eeolIie
-",
dollar invested
re many years to becowe
e. uet )la,] enee _
(\
The Use of Tax Policy to Promote Private United States Direct Investment
in Less Developed Countries ..
The Treasury Department is joining in the effort to find ways to
increase United States investment in less developed countries by developing
its own programs and by lending support to the programs of other agencies.
The primary tool which the Treasury has used in fostering private invest-
ment in less developed countries has been tax policy,
')
(
- 10 -
--
.J
"'II,l
<
.
,I.
In the Revenue Act of 1962, a distinction was first established in
the Internal Revenue Code between developed countries and less developed
countries.
The requirement in Section 902 that dividends received from
industrial country subsidiaries be grossed-up by the amount of the foreign
co~rate
tax, while permitting less developed country subsidiary dividends
to continue to be taxed on a non-grossed-up basis, may give a several
percentage point tax advantage to the less developed country subsidiary
dividend, depending on the rate of foreign tax.
The maximum advantage of
almost 6 percentage points occurs when the foreign tax rate is 24 percent.
In many less developed countries, the corporate tax rate is in the neighborhood of 24 percent, and in such cases the non-gross-up provision confers a
substantial benefit.
Exceptions were written into the "tax haven" provisions in the 1962
Revenue Act to the benefit of less developed countries.
Foreign base
- 11 co~ny
income was defined not to include dividends , interest and gains
from qualified investments in less developed countries, if reinvested in
less developed countries.
The Interest Equalization Tax, enacted in 1964, and extended in 1965,
is designed to stem the outflows of certain forms of United States capital.
~Administration
took a clear stand, in proposing this legislation, that
it was not to apply to investment in less developed countries.
I. DiHSQQnIlored
~
by AID
was·-fi:itroducea-
iri
tEe
:::e~'S,-iO' grant
a....cl'~di:Lagains.t. .United. States- tax ii.atttlttY'1;O-.Ari1e"rican investors, equal
)
,---,
... ~ .to 30 p~reeII t 6l"
~\.,
countries.
I~
No action was taken on this legislation in the last Congress.
is DreaemtlY"'.obe1trg-reconsidered and has not yet been'
'~~t9,~
~
amounts. . ·iii-iT8'St'ea" lnquarrri~~m!S'"ll1"l'"g~"'crevelo1!ed
(l,.A./Jfd!
~
reint~od~ed··1
r
Ta?C .Treaty Pol:{cy
Just over a year ago, Assistant Treasury Secretary Surrey addressed
this organization at a meeting in Montreal, at which time he made what
.)
- 12 -
:
I
remains today the best overall statement available of United States
~easury
goals in negotiating income tax conventions with less developed
country treaty partners.
I will not attempt to improve upon Mr. Surrey's
remarks on this subject, but will concentrate on the investment promotion
~licy
aspects of our less developed country treaties rather than the more
technical tax policy aspects.
In the last year our less developed country
treaty program has developed to a point where treaties with Thailand . . .
~ ti.;J. (}~t..~".~;,·t!;I,;
Israel embodying
theV~hilosophy
'J
~fitNIJ -It) >M4·/",0;~~f~"'f·(Ad/I(.tIt.{(",1-1
which Mr. Surrey outlined to you last year
,;'-:.~!/'/\
1\
have been signed and are awaiting Senate ratification and
a~
treaty,
with India, is now in its final stages of negotiation.
Viewed in their entirety, these treaties may be considered as
~
~,;<-'C/
investment promotion devices, for ~ objective of the sum of the
/
separate treaty provisions is to ~mpart a measure of certainty to what
is often, in the absence of a treaty
/
!P- '
(I.-Itr
t.
1(.(.
.
(4.
rt.
,J
/'
~ t.-,.~.~~
,..
,
V
a highly uncertain tax situation.
rh ~~~(
~,_ )~",.. (' ((",·r
~"
~,j
I '
,J.,
,
~\:t!! the lisk of"-cn"Flri: :U ... tax adRliisll!i!i'Qi;:iaOH in the less develope
d
try:
coun .. y/
,'a
1
... 13 ~sd 5
~
_, :I.D
r ..-dt
.,.t
r
ClUeS,
2
These treaties a180 serve to limit the foreiijn
to a level which permits full creditability in the
"
...vt-. f\'lbetf'recent lesa
.~*s'i£ ..-itA/the
1I,... ."t promoting in
developed country treaties,
a more explicit sense.
ft
. . .It
noteworthy investment pi i
t:Iz= feature of these treaties
1. tba 7 pereea.t investment credit which will be 8wilable to eligible
. , .. . iJmMrtore 1nveat1ng in qualified foreign enterprises.
Thie
enQ.t viU be available both for new outflows of American capital and
.Ij~) Ip ;). 1
fir
~
earn.1llb>'8, to the extent that
~ exceed
one-half of the
1\
...... and prot1ta of the forei;jtl subsidiary.
Ibi. credit will have the effect of
ext.ndl~~
to investment in
It1tcte4 lee. developed countries the domestic investment credit which
. . . 1Mr •• ,art of the 1962 Revenue Act.
Since, under the domestic
Cl'ttit, el.181ble capital f',oods must be used in this country in order to give
- 14 rise to a credit, investment abroad is placed at a disadvantage
ns-a-vis domestic investment, in this respect.
While this may be a
desirable result with respect to investment in industrial countries, it
runs counter to our policies with respect to less developed countries.
The granting of a 7 percent credit under these treaties, may, therefore,
4
•
be considered a.§. _AAc,!.tfftlt'!
--
(,,~.
~'Lfl4'
~~ari ty between domestic and
I
/1,.(
v
f
~ re-establish(r~
~
~/) J..;.." ,( ( '; i (.{ ,.:{ U 't ~I~-<J
foreign investment which was broken in 1962.
v'-'
"
The treaty credit and the domestic credit appear on the surface to
<.~', f ~
be quite different.
\'/
/
I.
'/
i:'
r~ {~,tT
../
The treaty credit is broader in scope, since the
/\
full amount of the investment in a qualified enterprise may be used as a
basis for the credit, regardless of the type of property purchased.
The
domestic credit, on the other hand, though narrower in scope,{is repetitive;
--'
~c.t
~ each time an eligible piece of equipment is replaced a new credit may
be taken.
~)tdP.~~
~~d'
Thu~ the ~ of the one-time treaty credit is"balanced by
~stQ?tflCJ
.....-.~..
" eredot
t he repetitiveness of the more narrow domest~c
~ "
- 15 -
~;~·s
of thE: two
can be shown by arithmetic example assuming, say,.
What might, in fact, be the impact of the credit on investment in
the selected less developed countries?
One
c~nnot
make a quantitative
credit analogy, the
..
record of our
.
~.<'
'".'.".-.-~
7 pepeenf,""credi t provides a clue to the expected investor
,"'.--
~
"";::....-r.....
'r~sponse to the treaty provisi0n.
There~s a graauaf upwii'rd-,trend in
"../
expenditures on new plant ~nd equipment in this country until 1962.
,.
A
small d~cline in lat~· '1962 was followed by a sharp upturn at a rate
rtl( ~
.
#
Javeraging between 10 and 15yercent per year.
There is no way to tell
%
extent t\'/Which this increase reflects the investment credit, since
"
-I'
the new"'iepreci,?-twn ~idel:ines were put into effect at about the same
Z
/'" -,-
/
,
I~;_~Syrobably
t least in part,
.....--
the case, however, that the investment credit is,
responsib~
In selecting those countries to which the investment credit will be
offered by treaty, effort is made to insure that the institutional frame-
roo
:~
------'------
i"--_ _ __
,
- 16 work in the partner country is one that will provide a receptive atmosphere
for American capital.
of receptiveness.
In part, the treaty itself strengthens this atmosphere
Thus some of the barriers that typically discourage the
American investor considering the prospect of investment in a less developed
country may not be present in these cases.
This gives us all the more hope
that a 7 percent credit will provide sufficient stimulus to draw investment
which might not otherwise be forthcoming into these countries.
Another provision of these treaties designed specifically to promote
OJ..
J;> ~'~ +.. ~ (~,,\.
~
VV\
g
private investment in the partner countries is the deferral of tax on the
exchange of technical assistance and know-how for the stock of the corporation receiving the assistance.
American business has developed many
advanced techniques of production which would be of great value in the
industrial growth of less developed countries.
The United States Government strongly supports efforts to transfer
this knowledge to less developed countries.
Many firms are willing to
enter into agreements to make their services and know-how available to
, 0
- 17 companies in less developed countries.
It is often the case, however,
that these foreign companies do not have the cash or the access to
foreign exchange to purchase the property or services outright.
The
acquisition in return for stock is an alternative which may be satisfactory
to both parties.
However, in many cases, the United States resident or
company transferring the property will be willing to do so in return for
stock only if the tax on the transaction can be deferred until the stock
is disposed of.
Otherwise, the problem arises of paying current tax on a
nOnliquid acquisition.
The deferral provision solves this liquidity
problem and, it is hoped, will lead to an expanded use of American skills
and knowledge in the less developed world.
It is our hope that the pending treaties with Thailand and Israel
will receive strong Senate endorsement so that the precedents established
\
~
~
these treaties may form the basis of an extensive network of treaties
~~
_
,...~--~.,..~ ....
'-,
~
...
~~
~
'.
, ~
9Lii±'--!6iiorr~i"~~~~~-' ~
~
.,
I.~'
,
,
The Treasury Department, through the facilities of the Internal
Revenue Service, is engaged in still another program designed, not
specifically to promote United States private investment in less developed
countries, but rather to improve the investment climate in these countries
~ ( ({ t· 1'4.' /~ (,. (.
'r
so that the prospects for investment will appear more favorable.
I refer
A.
to the Foreign Tax Assistance Program.
Organized in 1962, and growing out
of our Latin American aid programs, the Foreign Tax Assistance Staff offers
,help to less developed countries, particularly those in Latin America, in
improving the administration of their tax systems.
By the end of fiscal year 1965, technical assistance teams had been
Q
-tt~J -r.~).(,f,VlJ.i,.,,",
.
't,.;;::.I1,'
sent ~ long-term missfons
which are in Latin America.
~f
I
~
two years or more to 17 countries, 14 of
Short-term missions of 30 to 90 days have
- 20 -
countries with the resources necessary to undertake investment in public
projects such as transportation, power and communication facilities which
must precede almost any successful industrial venture.
In official statements, the Organization of American States
,
the Inter-
American Development Bank and the Chamber of Commerce have all pointed to
the tax assistance program as being one of the most successful of our
-......
Latin American development projects.
...IiQ;tber
J /.I V r
~~
r ilY\J--
Government Policies. _
--
...
//
1/1
Apart from these initiatives in the tax field, the Government has
been moving forward with a number of other projects designed to stimulate
private investment in less developed countries.
On August 27 of this year
the United States signed the Convention on the Settlement of Investment
Disputes between States and Nationals of Other States.
This Convention,
which as of September 30 had been signed by twenty-one countries in
addition to the United States, would establish a Center associated with
the World Bank which would provide facilities for the settlement by con-
)tt'~{~.'o.tt \... ~.~.-~
~
~-
\,
-
~-
-
-
-
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~
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tJ-....A../"l (~\.>~1·~_1 J?..Pt.~0'.if-..
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- 21 -
ciliation or arbitration of investment disputes between private citizens
or corporations of one country and the government of another country.
Recourse to conciliation or arbitration under the auspices of the Center
would be entirely voluntary and would be based on the written consent of
a private investor and a host State.
~
There
is now no effective inter-
In order to enter into force, the Convention must be ratified'by
twenty countries.
The Convention will soon be submitted to our Senate for
advice and consent to ratification.
We expect that the United States will
- 22 World Bank to make loan~ to the International Finance Corporation in
I,
an amount up to four times the $100 million subscribed capital of the
Corporation, that is, approximately $400million.
The Internationa;1.
Finance Corporation is designed to encourage the growth
of~roductive
private enterprise in less developed member countries, and it engages in
financing activities in associat:b;m with private investors.
The
\.
\,
additional capital which will now
b~
\
available to the Corporation will
\
\'
/
enable it to greatly expand its opera\ions and to work even more
\
\
effectively in joint ventures with
pri~te
\
\\.
I would also like to tell you about
capital.
~he
'I
progress we are making in
\.
drafting a charter for an Asian
Developmen~Bank
\.
\,
in consultation with
other member countries of the United Nations ~conomic Commission for
'\
Asia and the Far East.
On April 20 of this
announced that the United States would be
\
yea~
President Johnson
Willin~under
I\
appropriate
conditions to join with the countries of Asia in e~tablishing a regional
..
- 23 bank for the purpose of speeding the process of economic development
there.
While the initial funds of the Bank will have to be provided by
,.,-
/
government subscriptions to its capital stock, it ~~ed that
eventually it will be able to meet a
SUbs~rt of its needs for
caPi~Y
~tal
borrowings in the private
markets of member countries
/
"
which are ~orters of capital. ~ter this month a meeting will be held
in Bangkok
Wi~\interested Asln
countries and interested non-Asian
/
'\\
\,
I
/
trirt in order to work out the final text of a
'\
capital-exporting co
/1
!
charter for the Bank. iWe hope to be able to submit the completed charter
,I
/
~~xt
to Congress early
year fo
the necessary legislation authorizing
i
/
United States participation in the
ank.
The Asian Development Bank will
be engaged p~marily in making loans to the governments of countries in
/
/
Asia and t£e Far East.
As such it will not
directly promoting the
!
the imiestment of private capital in
,
I
O~fOreign aid program, it will help to establish the sor ~enVironment
in these countries in which private investment may be successf 1.
,.
\
J,
-,..
L
- 24 cent developments supplement a variety of existin
to promote private
areas of the
world.
I hope that this brief statement of Administration goals and review
of programs to promote private American direct investment in less developed
countries will be indicative of our Government's resolve to help provide
>,
n
'
~
--t7.J:/:'
'. I
the
l~;
iI\
'.K.~
\.
Il
.'
,"
.
\".:
8:0!I'f9J"Qped countries with the resources necessary to achieve a
position of economic independence.
It should be clear that direct Govern-
ment assistance cannot do the job alone.
I want it also to be clear that
the Government stands ready and able to offer assistance to the private
sector in fulfilling its part in this mission.
0
I'%j
I'%j
H
(j
t<l
FOR RELEASE ON DELIVE
0
I'%j
H
~
~
Z
I'%j
REMARKS
0
~
UND
~
H
0
Z
20TH ANNUAL CONF
t<l
CHASE-PARK ;
TUESDAY, C ~
o
~
I-'
As the world ecoUVLLL,Y o ...
--"""E"'---- ---- -..
the United States, along with other industrial countries, must
pay increasing attention to the needs of the less developed
countries of the world. The giving of economic assistance to
these countries is clearly far more than an act of charity.
The United States has a great stake in the growth of viable and
free economies in the less developed world. A growing world
economy does provide the proper setting in which the developing
nations can advance their own plans for the achievement of human
and economic progress. But, a growing world economy also
represents a growing world market for United States products and
services.
",wo;,
... "
... -
The United States Government, through four administrations
since World War II, has committed itself to the importance of a
strong and imaginative foreign assistance program. Following
the reconstruction of Europe after World War II, the focus of
our programs shifted from Europe to the less developed world.
Many billions of dollars have been spent by our government in
a variety of programs to foster economic growth in the countries
of Asia, Africa and Latin America. Billions more have been
spent individually by other industrial countries and jointly by
associations of countries. Viewed alone, these amounts are
staggering in proportion. Viewed in the context of the tremendous
and growing job to be done, however, they cannot be considered as
more than a beginning, and although we must start at the
beginning, we cannot permit our efforts to end there.
F-2l7
"W'1' RElfAPK~ YY THE HOTJOHABLE JOSF?H
'if,'.
UNDEP SF.CRETAEY OF THE THEASURY
BARR
BEFORE THE
On;.NNUAL CONFERENCE OF THE TAX EXECUTIVE) INSTITUTE
AT THE
CHASE-PARK PLAZA HOTEK, ST. LOUIS, MISSOURI
TUESDAY, XEFfEMHEB OCTOBER 5, 1965
12 :00 NOON, C~
the Tax
-
I'
I,.t'
)
erdependent, the
, must pay increasing
es of the world.
The
clearly far more than
an act of charity.
Tfte-Untte<t""1'itates-Ms -& gJ;e.at_.stake..-in the growth of
-
viable and free eoonomies in tll. less
econo~y
develope4~d ,~~~. A)
.
_. ••
represents a growing world market for United ,States
_»l
"""-=
t
.
.
~
~r~~~t§
and
-St.......,.~~~~~V'~Q...~~ ......uJII~~~$t.;.~~",e-~...~j1,.4
support industrial expansion in the United States; it also represents a
often :i?ind
tU~ff "rere~~ ;i;"'POli tical upheaval.
The United States Government, through four administrations since
World War II, has committed itself to the importance of a strong and
imaginative foreign assistance program.
Following the reconstruction of
TREASURY DEPARTMENT
Washington
FOR RELEASE ON DELIVERY
REMARKS BY THE HONORABLE JOSEPH W. BARR
UNDER SECRETARY OF THE TREASURY
BEFORE THE
20TH ANNUAL CONFERENCE OF THE TAX EXECUTIVES'INSTITUTE
AT THE
CHASE-PARK PLAZA HOTEL, ST. LOUIS, MISSOURI
TUESDAY, OCTOBER 5, 1965, 12:00 NOON, COT.
As the world economy grows more complex and interdependent,
the United States, along with other industrial countries, must
pay increasing attention to the needs of the less developed
countries of the world. The giving of economic assistance to
these countries is clearly far more than an act of charity.
The United States has a great stake in the growth of viable and
free economies in the less developed world. A growing world
economy does provide the proper setting in which the developing
nations can advance their own plans for the achievement of human
and economic progress. But, a growing world economy also
represents a growing world market for United States products and
services.
The United States Government, through four administrations
since World War II, has committed itself to the importance of a .
strong and imaginative foreign assistance program. Following
the reconstruction of Europe after World War II, the focus of
our programs shifted from Europe to the less developed world.
Many billions of dollars have been spent by our government in
a variety of programs to foster economic growth in the countries
of Asia, Africa and Latin America. Billions more have been
spent individually by other industrial countries and jointly by
associations of countries. Viewed alone, these amounts are
staggering in proportion. Viewed in the context of the tremendous
and growing job to be done, however, they cannot be considered as
more than a beginning, and although we must start at the
beginning, we cannot permit our efforts to end there.
F-2l7
- 2 The potential for expanding official economic development
assistance clearly falls far short of the level which should be
achieved. I will mention briefly three important factors
affecting this potential -(1)
allocation of national resources;
(2)
balance of payments; and
(3)
access to capital markets.
Allocation of Resources
The history of the United States since the end of
World War II is a magnificent record of generous and farseeing allocation of our own resources between our internal
needs and the needs of the world -- first in the re-building of
Europe and Japan and more recently in the developing nations.
But there is strong evidence appearing that we have increasing
internal needs emerging in the areas of education, pollution,
conservation, health; the attack on poverty; and the regeneration
of our cities. It is probably unrealistic to assume that in the
near future we can step-up the pace of our external official
assistance while confronted with these pressing domestic
problems.
Balance of Payments
So long as the United States is struggling to bring its
balance of payments into equilibrium, it is difficult for this
nation to increase the rate of our bi-lateral assistance other
than in the form of aid tied to United States procurement. It
is equally difficult for us to increase our contributions
to international development institutions except in areas of
the very highest priority such as the Asian Development Bank.
Secretary Fowler's call for an intensified effort to agree on new
methods of supplying the world~ needs for liquidity and reserves
~es to the root of this dilemma.
As the United States comes
into payments balance and shuts off the supply of reserves credited
by our deficits, then some method of supplying adequate reserves
must be discovered and agreed upon to prevent a shortage of
international liquidity from interfering with aid and trade with
the developing nations.
- 3 -
Access to Capital Markets
In this time of rather general prosperity among the
developed nations, the demand for capital is increasing steadily.
The capital markets of the world, organized in the most
effective and efficient manner are obviously necessary if
supplies adequate to Free World needs are to be available.
This increases the priority which other developed nations
should attach to freeing their capital markets from restrictions
and barriers to their constructive use by developing nations.
It is for these reasons that I believe that the potential
for expanding official development assistance is under
constraint at this particular time. The needs for expanded
assistance are obvious so it is surely appropriate for us to
examine how the private sectors of our economy can assume
an increasing share of the responsibility.
The key role which our private sector can play in this
endeavor is that of providing concurrently supplies of capital,
know-how and management skills for the development of viable
industrial bases in the economies of the less developed countries.
As the richest and most technically advanced country in
the world, our private sector clearly has the ability to perform
this role. However, before we can do so adequately many
economic and institutional barriers to such investment must be
lowered. These barriers take the form of a lack of knowledge of
the opportunities which exist in these countries for profitable
investment; a lack of understanding and, therefore, a fear of
involvement in the commercial, financial and legal institutions
in these countries; the very real economic and political risks
which accompany investment in less developed countries; the lack
of an adequate supply of human resources in these countries; and
a host of other impediments which reflect themselves in what
sometimes appears to be inertia on the part of American business.
There is much that can be done both through public and
private initiative to lmver or eliminate these barriers.
The Effect of a Less Developed Country Investment Promotion Policy
on the Balance of Payments
Before entering into a
programs, a few remarks may
effect on the United States
promote an expansion of the
discussion of specific policies and
be in order regarding the possible
balance of payments of a policy to
outflows of private American capital
- 4: to less developed countries. The Administration has made
abundantly clear its view that the recent improvement in our
balance of payments must not be interpreted as a sign that the
time has now come to relax our policies aimed at strengthening
our balance of payments position. In light of this, one might be
led to question whether this policy of selective foreign investment
promotion is consistent with our balance of payments policies,
particularly the voluntary foreign investment restraints and the
interest equalization tax. The answer to this question clearly
is yes, the two are consistent, as a brief analysis of the
facts will indicate. You will note that this affirmative answer
underlies our entire balance of payments program. Less developed
country investment is exempt from the interest equalization tax;
the voluntary investment restraints do not apply to less
developed countries; while the Federal Reserve Guidelines do not
exempt loans to less developed countries from the overall ceilings
which they impose, such loans are to be given priority.
In the most short run sense, all foreign investment is
reflected in a balance of payments drain in the amount of the
investment, whatever the nature of the recipient country.
This is clearly not a realistic way of viewing the problem,
for it considers only one part of a much longer process. This
initial investment, whether it be in an industrial or a less
developed country, will generally lead to some export of capital
equipment, raw materials and semifinished goods produced in the
United States, of American patents and know-how and of the services
American technicians, all necessary to support the investment. In
addition, if the venture is successful, profits will be earned and,
at least in part, repatriated to the investor. The relevant
focus, therefore, is the net balance of payments cost of an
investment. That is, the initial capital outflow minus the export
receipts and dividend receipts generated by the investment. Over
a sufficiently long period of time this net figure is likely to
become positive for any investment as the receipts, particularly
the income receipts, increase in relation to the fixed initial
investment.
It is at this point in the analysis that a clear distinction
can be made between investment in developed countries and
investment in less developed countries. The volume of United
States exports generated by a dollar of American capital invested
in a less developed country tends to be much greater than that
generated by a dollar invested in an industrial country.
- 5In his testimony before the Senate Finance Committee in
support of the 1962 Revenue Act, Secretary Dillon presented the
results of a study which showed that for the years 1959 and 1960,
a dollar invested in Europe returned about four cents in direct
net United States exports annually, while a dollar invested in
the less developed world generated direct American exports in an
amount exceeding forty cents per year. This very striking
difference is accounted for by the fact that domestic sources of
supply in the less developed countries of capital goods, raw
materials, intermediate products and technical knowledge and
skills are very limited. American subsidiaries in these
countries, therefore, find it necessary to fall back on
American markets for a substantial part of their requirements.
This is much less true for investment in industrial countries.
This factor of high direct net export receipts by itself,
makes it clear that the net balance of payments effect of a
dollar invested in a less developed country is highly favorable
when compared to a dollar invested in an industrial country.
The Use of Tax Policy to Promote Private United States Direct
Investment in Less Developed Countries
The Treasury Department is joining in the effort to find ways
to increase United States investment in less developed countries
by developing its own programs and by lending support to the
programs of other agencies. The primary tool which the Treasury
has used in fostering private investment in less developed
countries has been tax policy.
Current Programs -- Tax Legislation
In the Revenue Act of 1962, a distinction was first
established in the Internal Revenue Code between developed
countries and less developed countries. The requirement in
Section 902 that dividends received from industrial country
subsidiaries be grossed-up by the amount of the foreign corporate
tax, while permitting less developed country subsidiary dividends
to continue to be taxed on a non-grossed-up basis, may give a
several percentage point tax advantage to the less developed
country subsidiary dividend, depending on the rate of foreign
tax. The maximum advantage of almost 6 percentage points occurs
when the foreign tax rate is 24 percent. In many less developed
countries, the corporate tax rate is in the neighborhood of 24
percent, and in such cases the non-gross-up provision confers a
substantial benefit.
- 6 Exceptions were written into the "tax haven" provisiOt!) in the
1962 Revenue Act to the benefit of less developed countries.
Foreign base company income was defined not to include dividends,
interest and gains from qualified investments in less developed
countries, if reinvested in less developed countries.
The Interest Equalization Tax, enacted in 1964, and
extended in 1965, is designed to stem the outflows of certain
forms of United States capital. The Administration took a clear
stand, in proposing this legislation, that it was not to apply
to investment in less developed countries.
Tax Administration
The Treasury Department, through the facilities of the
Internal Revenue Service, is engaged in still another program
designed, not specifically to promote United States private
investment in less developed countries, but rather to improve
the investment climate in these countries so that the prospects
for investment generally will appear more favorable. I refer
to the Foreign Tax Assis tance Program. Organized in 1962, and
growing out of our Latin American aid programs, the Foreign
Tax Assistance Staff offers help to less developed countries,
particularly those in Latin America, in improving the
administration of their tax systems.
By the end of fiscal year 1965, technical assistance teams had
been sent by the Treasury Department on long-term missions of two
years or more to 17 countries, 14 of which are in Latin America.
Short-term missions of 30 to 90 days have gone to 15 countries since
July of 1963. In 1965 alone, representatives of 55 less developed
countries participated in Foreign Tax Assistance training and orientation programs for tax administrators and officials.
The results of these programs have been most encouraging. In 01
country in which the activities of the Foreign Tax Assistance Staff
have been carried on, the number of income tax returns filed during
the three month filing period in 1965 exceeded the 1964 returns
tiled by 43 percent and tax collections increased by 121 percent.
Developments such as these are important in furthering the goal
of an investment promotion policy in several respects. A poorly
administered tax system with widespread evasion results in uncertain
in tax planning and also in inequities in tax burden, for the honest
taxpayers must assume more than their share of the total burden.
In addition, the larger revenues resulting from a well administered
system provide the governments of these countries with the resources
- 7 necessary to undertake investment in public projects such as
transportation, power and communication facilities which must preced
almost any successful industrial venture.
In official statements, the Organization of American States,
the Inter-American Development Bank and the Chamber of Commerce have
all pointed to the tax assistance program as being one of the most
successful of our Latin American development projects.
Proposed Programs
Just over a year ago, Assistant Treasury Secretary Surrey
addressed this organization at a meeting in Montreal, at which
time he made what remains today the best overall statement
available of United States Treasury goals in negotiating income
tax conventions with less developed country treaty partners.
I will not attempt to improve upon Mr. Surrey's remarks
on this subject, but will concentrate on the investment
promotion policy aspects of our less developed country treaties
rather than the more technical tax policy aspects. In the last
year our less developed country treaty program has developed
to a point where treaties with Thailand, Israel and the Philippines
this last treaty without the investment credit clause -- embodying
the philosophy which Mr. Surrey outlined to you last year have
been signed and are awaiting Senate ratification and a fourth
treaty, with India, is now in its final stages of negotiation.
Viewed in their entirety, these treaties may be considered
as investment promotion devices, for a basic objective of the
sum of the separate treaty provisions is to impart a measure
of certainty to what is often, in the absence of a treaty, a
highly uncertain tax situation. With the treaty, businesses
can proceed in the light of more clearly defined tax rules
in the less developed country involved.
These treaties also serve to limit the foreign taxes, in most
cases, to a level which permits full creditability in the United
States. This also reduces a tax barrier to investment in these
countries. These aspects are of course present in our treaties
with developed countries. The recent less developed country
treaties, however, are also investment promoting in a more
explicit sense.
A noteworthy investment feature of these treaties is the 7
percent investment credit which will be available to eligible
American investors investing in qualified foreign enterprises.
This credit will be available both for new outflows of American
capital and for reinvested earnings, to the extent that the latter
exceed one-half of the earnings and profits of the £orei~n subsidia
- 8 This credit will have the effect of extending to investment in
selected less developed countries the domestic investment credit
which became law as part of the 1962 Revenue Act. Since, under the
domestic credit, eligible capital goods must be used in this
country in order to give rise to a credit, investment abroad is
placed at a disadvantage vis-a-vis domestic investment, in this
respect. While this may be a desirable result with respect to
investment in industrial countries, it runs counter to our policies
with respect to less developed countries. The granting of a 7 percer
credit under these treaties, may, therefore, be considered as reestablishing at least the parity between domestic and foreign
investment in less developed countries which was broken in 1962.
The treaty credit and the domestic credit appear on the surface
to be quite different. The treaty credit is in some respects broade%
in scope, since the full amount of the investment in a qualified
enterprise may be used as a basis for the credit, regardless of the
type of property purchased. The domestic credit, on the other hand,
is repetitive, since each time an eligible piece of equipment is
replaced a new credit may be taken. Thus the somewhat greater
coverage of the one-time treaty credit is in effect balanced by the
repetitiveness of the more narrow domestic credit.
What might, in fact, be the impact of the credit on investment
in the selected less developed countries? One cannot make a quantitative estimate. However, our experience has made clear that unless
some provision of the treaty contains a specific encouragement to
investment, the less developed countries believe that the treaty
will reduce their revenues without compensatory benefits to them.
Therefore without the credit provision there will be no treaty
and hence any investment gain from the treaty must be ascribed to it.
In selecting those countries to which the investment credit
will be offered by treaty, effort is made to insure that the
institutional framework in the partner country is one that will
provide a receptive atmosphere for American capital. In part, the
treaty itself strengthens this atmosphere of receptiveness. Thus
some of the barriers that typically discourage the American investor
considering the prospect of investment in a less developed country
may not be present in these cases. This gives us all the more hope
that a 7 percent credit will provide sufficient stimulus to draw
investment which might not otherwise be forthcoming into these
countries.
Another provision 0 f these treaties designed specifically to
promote a particular form of private investment in the partner
countries is the deferral of tax on the exchange of technical
assistance and know-how for the stock of the corporation receiving
- 9 the assistance. American business has developed many advanced
techniques of production which would be of great value in the
industrial growth of less developed countries.
The United States Government strongly supports efforts to
transfer this knowledge to less developed countries. Many firms are
willing to enter into agreements to make their services and know-how
available to companies in less developed countries. It is often
the case, however, that these foreign companies do not have the cash
or the access to foreign exchange to purchase the property or
services outright. The acquisition in return for stock is an alternative which may be satisfactory to both parties. However, in
many cases, the United States resident or company transferring the
property will be willing to do so in return for stock only if the
tax on the transaction can be deferred until the stock is disposed of.
Otherwise, the problem arises of paying current tax on a nonliquid
acquisition. The deferral provision solves this liquidity problem
and, it is hoped, will lead to an expanded use of American skills
and knowledge in the less developed world.
It is our hope that the pending treaties with Thailand and
Israel will receive strong Senate endorsement so that the precedents
established in these treaties may form the basis of an extensive
network of treaties with less developed countries. The other
industrialized countries of the world are also striving to establish
such a network to improve the climate for the investment and trading
activities of their residents. If our businessmen are to receive
the same treatment, our treaty program with less developed countries
must keep pace.
Investment Disputes
Apart from these initiatives in the tax field, the Government
has been moving forward with a number of other projects designed to
stimulate private investment in less developed countries. On August
of this year the United States signed the Convention on the
Settlement of Investment Disputes between States and Nationals of
Other States. This Convention, which as of September 30 had been
signed by twenty-one countries in addition to the United States,
would establish a Center associated with the World Bank which would
provide facilities for the settlement by conciliation or arbitration
of investment disputes between private citizens or corporations of
one country and the government of another country. Recourse to
conciliation or arbitration under the auspices of the Center would be
entirely voluntary and would be based on the written consent of a
private investor and a host State.
- 10 -
There is now no effective international forum to which private
investors and capital-importing countries can take investment dispute
that may arise between them. I need not remind you that these
disputes are often acrimonious and charged with emotional over-tones.
Quite often it is difficult in the midst of such confusion to
determine where the equity really lies. But it is certain that these
investment disputes have been a serious impediment to accelerating
capital investment in the developing nations. The Convention will
hopefully strike down this barrier.
In order to enter into force, the Convention must be ratified
by twenty countries. The Convention will soon be submitted to our
Senate for advice and consent to ratification. We expect that the
United States will be able to ratify sometime in 1966.
I hope that this brief statement of Administration goals and
review of programs to promote private American direct investment
in less developed countries will be indicative of our Government's
resolve to help provide the developing countries with the resources
necessary to achieve a position of economic independence. It should
be clear that direct Government assistance cannot do the job alone.
I want it also to be clear that the Government stands ready and
able to offer assistance to the private sector in fulfilling its
part in this mission.
000
- 36 defense needs are certainly not welcome, but they become a specter
to our economy only when their likely size is greatly exaggerated.
If I thought defense was going to add $10 to $15 billion to our
fiscal 1967 budget, I'd be back in my office right now considering
proposals for tax increases to pay for it.
with you instead.
As you see, Ifm here
I expect us to incorporate our defense spending
into a sound fiscal 1967 budget which still is carefully and
finely tuned to the needs of the economy.
In short, the outlook on both the domestic and international
.
fronts is for continued progress -- progress, to be sure, that must
continue to be earned by forging ahead with the flexible, balanced
policies in both the public and private sectors that have brought
us our present unprecedented prosperity.
000
- 35 -
factor for a time.
It will be accompanied by our second stage
of excise tax reduction, and we will be experiencing the effect
of a rise in defense expenditures within this fiscal year.
In the past two years the pluses and minuses have added up
into a generally smooth and well-paced expansion of $10 billion
a quarter in our GNP.
The pluses and minuses that are in prospect
do not suggest a marked deviation from that pattern
either up-
ward or downward.
In making our budget decisions for fi.8cal 1961, we will treat
our needs for defense expenditures as the number one priority.
The exact size of those needs will shape up in the next few
months.
On present prospects, they dim the hopes for new tax
reduction in fiscal 1967, and they may squeeze the scheduling and
size of some of the President's valuable civilian programs.
Our
- 34 -
same time, the bumpier aspects of the outicok today have a hright
side in assuring us that there is no
seri~s
threat of over-
exuberance in the economy.
One bumpy spot for the rest of this year and opening month$
of 1966 is the run-off of steel inventories.
It will not throw
us for a loss, but it will shave our gains in industrial productian and our manufacturing employment.
area for a year and a half.
Housing has been a bumpy
The latest movement of housing star.:s
:as been downward, and while we see no likelihood of a persistent:
decline, we cannot count on the homebui1dit&g industry to
to our advance in the months ahead.
contrLbuc~
The forthcoming Januaty r1se
in payroll taxes which was once inaccurately but widely viewed
as a roadblock to our expansion is now
se~u
in better
not as a serious chreat to our forward movement, but a
perspe~tive
stabi:L;..~ing
- 33 my own feeling that there is a tendency today in the money markets
to jump to conclusions instead of acting on the basis of hard
facts.
For us in the Treasury it seems that the money markets are
basing many of their forecasts and their fears of inflation on
exaggerated ideas about an economic boom which would add a bubble
on the steady trend line of expansion.
The economic outlook is
bright but there is no evidence as yet that
"A,-,---\.. H·)~v-"''"l.. L
jUstifi~
.-" "-
assumption that itAis going through the roof.
In recent years, the economy has shown remarkable ability
to move forward smoothly and to take the bumps in the road in
stride.
There have been bumps in particular areas, and there
will be some in the period ahead.
We must be alert to them and
ready to counter them in order to maintain our progress.
At the
- 32 We also discussed the favorable prospects for maintaining
this forward momentum because of the fact that the current expansion up to date has remained remarkably well balanced and
free from inflationary distortions.
The President then put a question to me and I believe it
went this way:
"Why w.on't people stop, look, and listen, and
count three before taking steps that would change the favorable
mix of economic policy that has characterized this balanceS
expans ion? II
Without answering the President's question, let me say that
"TL '.
this Administration continues to believe that ~tability of
long-term interest rates is an important factor in the economic
environment which has given us the greatest and best balanced
- 31 we have known;
-- A total of 3.6 million non-farm jobs have been created,- .
/'
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with official unemployment rates being reduced from 5.8 percent
to 4.5 percent;
-- Personal income, in which we
all share, has increased
from $474.7 billion to $531.6 billion or 12 percent;
-- Business profits after taxes, despite an increase of
$9.4 billion or 38.5 percent from the first quarter of 1961 to
the fourth quarter of 1963 have continued to rise by an additional
$10.6 billion, or 31.4 percent;
--Bank profits have moved to their greatest peaks in
history, increasing 6 percent between 1963 and 1964, and may
register another rise when 1965 figures are available.
.'
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- 30 -
All America, therefore, has not only a stake in the successful outcome of the forthcoming monetary negotiations, but a very
real share in insuring this outcome.
I have no doubt that we will more than rise to the challenge.
I have no doubt also that one of our greatest assets in
meeting that challenge will be the continued strength, stability
<..1.1 \N,"",~X,-,-
and soundness of our", economy •
Only the night before last, I talked with our President on
this subject which is one of those nearest and dearest to his
heart.
We reviewed what had happened to our economy during his
nearly two years in office, a time during which -__ A business expansion already thought mature
at-~months
of age in November, 1963, has continued to its current record
length of -56-months-, --the-- longes t peacetime economic expansion
- 29 -
equilibrium.
To falter or flag in that effort during the cominp
months of negotiation would not only seriously sap our negotiating
strength, but would seriously damage the prospects for any early
and fruitful end to those negotiations.
We cannot afford to let that happen -- and we will not.
President Johnson made that very clear in his address to the
Bank and Fund meeting last week.
tI • • •
~/::..lld
.;.Ie
I quote:
the U.S. has taken firm action to arrest the dollar drain
further action be necessary in the future, such action will
taken.
I want to be very clear about this.
We must, in our own
interest and in the interest of those who rely on the dollar as a
. reserve currency J maintain our payments in equilibrium.
will do."
This we
- 28 -
review again our over-all balance of payments position.
In
appraising the result, we will, of course, consider what, if
any, new measures of a voluntary character should be taken, ineluding the possibility of, \guidelines program, to achieve
further improvement in the year ahead.
And let there be no mistake:
sustained and lasting equilibrium.
we must have nothing less than
We must have nothing less, not
only for the sake of our own international reserve position and
the continued strength and soundness of the dollar as an international reserve and key currency, but to insure the successful
outcome of the forthcoming negotiations on world monetary reform.
For there are those who are still skeptical of our desire
and determination to bring our international accounts into lasting
- 27 -
this part of the program for voluntary restraint of foreign investment, are certainly to be congratulated.
They should, and
I know they will, keep up this good work.
I am sure also that we are going to see goo~ results from
C.i~_·'" /;'' ' -
the part of the program aimed at
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But this reflects, in part at least, the fact that the companies
doing business abroad already had commitments when our program
went into effect that they could not ignore or substantially
change.
They have given evidence of their support of the program
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by bringing home some $·~.million of funds that they had on
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deposit abroad!\ We are taking a new look at this picture as we
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- 26 ...
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- 25 - - , t.aat..a that by eUwt.as .....t .urplua
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- 24 -
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- 23 -
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- 22 -
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the al.tbls _chat. for creatiDs additional
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I I I
... r ::!
,II
i i ! I 1 r r
1 f
I i f
~ r · I I
.!
1
i
!. I ~ i ~
I
I
· · I
I
I r i
~
i
.,
I
; f':'! r' r 1 I I I
~
'j
_"I
- 19 •
. . . . . . . .t.att.c.a do aot la_ forth £rca .., ua....oua
..... CUt tben
u . , ura-C. ,rea_iDa
u.wtty -
.... that. tIlen will 'be auch • 8honap 18 the
1M
-
~-t..ta
.....~ ac_
. . . daftclta fa die U.S.
_t.eb
ahort8p
of
1fOI'14
f r . the fact that the
-.t.ce
.f iatenatioul ,.,..at.,
fw ....1' a-cy y .... haft .erved .. the ataMes
-.ehanism for providing a major r~tOD of the Free World'.
I1quid~ ty t alst come to an
pnd.
The thalted Stat.. -- the
.. 18 for the eel
PI em
,ooci.
I .entioa the•• facts
8~ly
to demonstrate tbsa,
_
tile finaocial front, the Free Worlel haa not been sitting
_
ita hancla over reeeat years -- that instead it bas been
-n.a -aurely and ateadilytoward
_
. . . .t
~
to _ter.
the negotiations we are
It is, in fact, this record of
ad thou&htful accomplist.ent -- of a wi•• wl111n&-
_ . to prepare for future cootinpMi•• before they
• • • -- that . . . t serve a. one of our fir.e8t srouncls
fft COIlficleDce ill the succe•• ful outeOM of the forth-
-iDa
_aotlation••
-
J.I -
.:., i!
joiMcl 1D
new
q
•.
1\,
I'~
arrana__ t. to )Suppord the pound.
>,,,.,
It
t\
__ ld 1M ..,usiaecl that this action
Cc:EeS
on the heels
of encouraaina indication. that Great Britain is moving
~
• halaace in it. international payments and is
•••rtakiDa a .ore effective lona-term national prop-am to
.taltil1M costa and prices that will put it in • • tronaer
. . . .tltlw pcNIitiOD in world mark.eta.
lIence, the _in
...... of the new araanaeMDt. 1. to exploit this
.tnaatheDlDa .ituation and reinforce the.e clevelopaents •
..
~t
action of the ten cooperatina countries
tile autill& iDternatioaal monetary 8yt. . and the willing.... of the _jor illdustrial countries to work together
-;,
-l' .,.-.
'f• •,...,le, 1 • • a u - l , ,l...eel that during
. . ,....... of . , nc_t ri.eit to Westem Europe for--b11ateral
..... Ml, affect. UIlOreta _
-t:u7 autborlti. .
CO ....1
.... of .ooperatioa "tween
constructivel, with a more iDaediate
.......1aa ,...1_ affect1q ttua ataltility of the existing
I refer to . . MC1. . . . . . . . . . Sept-'»er
of
la&l.aIs4, 1D. etch
l~
bytthe Bank
ten nations t including the United States.
- 15 -
raur .ore
years -- with the .UU.stion that the Arran~t8
M nvi..ct for possible adaptation ill October of 1968 or
later ta the 11&b.t of further experience with
A rr~{'''/
II',' i
/.
II~
th_.
t, I,,'
!tier. baa alao beea • 25 percent patera1 inc........ in'
A
DIP
tpIOtaa --
alona vida special iocr_.e. for . . .
i·e l l i" I~ ti 1 .'- I "'
~
• iatMD couatri.. -- that
~ ~
.A
..
...
total agrapt. quotas
billlOD to arOUDd $21 billioo.
At the ....
__ tt.a
E.~ rai.~
~
t~
that tRternational credit facilities
IiHIea expandacl. there have been underway the
__. t i f t t.aaical studie. . . . .tial to open1D& up the
poe.U.illt1ea of en1ara1n& intenaatioaal liquidity throup
. . . . DeW fo~
of reserve •••• t.
lIor....r. iDfor.l iDtenaatloaal IIIOIl8tary cooperation
- 14 no_t yean II,. -.larataa the credit resources of the
Iatezutloul MoDeta1:7 Puad.
In 1961, .. you bow, the
11"... of Tea _jor iDdustr1al Dati. . Delotiated with the
Ia~tioaal
MoDeta1:7 ftIDcI a so-called Ceoera1 Arraal_t.
til t.ad the DtF up to
$' .,111101\ .houlcl tilt. IN nec....ry
"to for. . tall or cope with
......... aDd ap1D lut
At the . . . t1a&
All
Ma)'
wt
blpair.eDt of the international
to furniab part of a $2.4 billion
week tile MiDiaten 8Ild Governor.
of tile Group of TeD &areed to reDeV the Arratls--ta for
-
.l") -
.11 of JCN -- that the hiP level MaotUt60na that ~<t{ll
_.el,
"'aiD
do not repn...t -7 sudden ~ of event. ~
.., .expected cbaaae in tJ:ae iaternatioaal weather:.
They
an INt tba lopeal outcome -- DOt ODly of recent eveota --
Rt of tbe pat1eDt, paiDstak1.a& pr.,aratiOD that haa bea
.taa -
for • .".ra1 years.
!1M _jor countrt.. 108& • . ,
.areecl
tbat there were
tw beale el_ _ ta in iDteJ:Mticmal liquidity:
I'eMnH
the
of aold an4 rea. . . curreDC1.. and the ready
/)~
• •ila1tl11ty of er_it facilitiea for couotrl_ in .... of temporary
_lataace.
ADd we
_we aup_ted
iDt.national liquidity over
8:
- 12 ,
At tId.. . .r1,. .tap 1a our 1IOV ••• Dt toward world monetary
..tea it 18 Bettila' ad'ri.aQ1e
• , .... to caire • poaltloo _
DOr
appropriate for . .
or to diaouaa publicly any of
........ r.t:1. . ,npoul. or po•• ible propo••1a for IIOMtary
..e-.
!be ...... of
~
.t: thia
tm.
18 to . . fina in
fdMiple aacl ill , . , . . . , Dut flexible 1n approach.
0. dlla ••••1oa. therefor•• I would like • .,17 to
,lace tIae fort:heomq _aotiatioaa tate proper per.pective
.., nrw1awb& briefl,. . _ of the lNaekp'OUDd of th...
_tlatiOM . . veil . . . . . of ella ,rob1- aad pro.pects,
'ree....
Hay I beaill .!ap1y 'tt7 atr••• laa the fact -- f_lliar to
n
C
- 11 -
dtat I wiab uither to exauerate nor to diminish.
-.at
..11
1 .tah to s,,"est, therefore, i8 that while we are
OIl the _,. toward
real world lIOI1etary reform -- we
Itill haft • lor1& . , to 10, we still have ahead of us
_tba of bard ancl toup nelotiations.
~y IIlOre
Va .... t be prepared,
.. tbo8e aelOtiatiOlUl proceeel, to weather -..nta of
• fiaal resolution of difficulti.. aDd disaare ••~ta . .,
. . . . to
arow
1tlealcer, iDstead of bri&bter --
.'
IIOI'IteO.t8
that
.... ific eletails of a a r - t and. DAtiOl'Ull intere. t8 beeOM
.... aD4
aore 1JrfOlved.
- 10 -
meeting of the Governors of the International Monetary Fund
or some other suitable forum, provided, of course, that a
sufficient degree of substantive accord can be reached in advance.
No one who followed the developments at the meeting
last week -- or took part in them as I did -- can help but
be heartened about the prospects for eventual world monetary
reform of a meaningful and workable kind.
There are, to
be sure, differences not only about the nature of future
reform but about the need for reform.
are real, and some of them are deep.
These differences
But they are not
insurmoun tab Ie.
There are those, after all, who as little as three
months ago held out little hope for the degree of accord
<''ClvwT-c'vA . <
~ . ---c<.j--<t"\.
~~r~{1... -Lf l'-'~~'-l-,L:)
--,
,'.'--;:"~L'--,'<-\ _. ,~,L.-I\ /"'-'-: . d
f<
L'
- 9 ...
~.
res-taCi. . . . . . conditioDs which lovern ite working.
ID
t1auQ...... 7fk •• ·;f;~J aoving
efforts toward
.-1. _ _ ear, "fom fr_ tile level of technical diacuasion
oato
~
,1... of
~
policy aelotiationsand in offerina
_ ••_ . for tile inolalO1l of repre.entatives of the _ller
_d.eaa ia tIaeH nepti.tlou, tIli. fOftllll accorel
a.ona
tne
. . . . of T_ _t1_ aDd die stailer uadertaki.p '-' the MaDalina
Ilnetor of the Iatenaatioaal MoDetal.7 Fad repr••nta the full
___'-••• Int of all that
~
ODit" State. hoped would be
_ ... IUlled at la.t ...k' • •atiD, of the tatenational
....taC7 hD.cl aDd World JaDk •
. . . . proeaclural an.n....nt. prov1cle aD adequate and
......,..1at. ,.ttem of eareful preparatlO1l for a .ieniileant
laternatiooal ..... tary conference in the form of a spec ia1
- 8 c0II81der.ti01l of the questiona that affeet the world econOllY
••• whol....
'fbey recopiaed, in short, that after the ten
l . .d1D& IUltiOlUl had estahlished 80l8Il coaaon around. for
age •••at -- .DCl before .ny final significant interaovern_tal .rr.......nta are entered into -- neaotiationa 1IIU8t be
apaacIed to include a aecond pha.e, desiped to encompa.s the
n-
an4 inter.sta and probl... of the other ninety-three
aualtler countrie. of the IDtenuatioaal Monetary Fund, .s reflected
"r:
entat11ta atacma
,1":'""'-
.., their repr••
of that organization.
7Ht:1
~
the twenty Executive Directors
'!he United Stat•• had insi.ted upon
~j:~<!)'lb
1IIel.uaiOllI\Of tblPe countrie. at an appropria3 atage of
-lOtLttlO118 bee.uae of our conviction that all connttt•• have
• ntal inter.at 11l • Iyst. of exchalll. of national currenei ••
- 7 eM . . . for Iaterut10Dal .ettl_nts, and i.~""1~1 of the
Iria. Battoaal _k •
.. (we
I " ...
ti'
this iaportaDt ta.k of fomal
".,.",u:1011 • • s.t 1. BlOtioD . . .volvial arr&lll_nta in
....... world ac..-, without a aontiD. . lacr.... i"lly
.....~ ..,......e
,...t. --
d ..
anel
Oft
OIl
_jor
u. s ...ficit.
in it. balance
the "". . .1. . . pa1ie1,. 8ullasted
... Jatenattenal IIoDeta'rJ Fuad this Sept....r. U
.... JI1aiaters . . . "pIlti. . of the Croup also agr.ed
...t . . . . . the.. _lOtiationa haft •• ta'-lishect a base for
- 6 -
•
lee......... of .aie UDderlyiDI.ar_Dt -- and 1 quote
.........a
for the
nature
oreAitiOil of rea.". ....t ••
. . . . . _ _ ........ 80 . . to
peJ:'lDlt . . . . . t. provision lor
1M ....~,. . . . . of . . -.riel
_~."
Dle Deputie. were
. . . . . iMtructeci to report 18 tbe .pr1q of next year
. . tIae ......... of their del11ter.tiou aact tIM Mope of
....tw
.ldle Group -- but tI01&ld .lao i_lucie repr...atative.
of tIae orpn1aatlO1l of 1c000ca1c Cooperation and Developaaent,
8 CI
- 5 .... duat till......1•• LIL. . t will lead to a .peedy resolution
d
tile las.s iIa • _, that will both protect the
lqit. . te
I-,il
tacereaea
of tile lown.aat
au ..et
the le,ltiaate
Ot~
fi.j-~ of
the baab •
.... t . . . . ,
_t_
OR •
far laraer etap. there • • another
of .bMIa that -- _11. preli.aiu.ry aM far fro.
tMa1 -- _,
"'1, to ••sun . . . . era of free world
_ . . . . . . . . the _ _ _,I" aec.,li.....t. of th. past two
••••••••
... . . . . of ,... l . .diDl ituluatrial utiou fonaally
- 4 .1 thII Mel_l pnn.Mt and the banking ind.ustry -. . _ttAlr of haDk _rprs.
AI Attorney General l'atzenbac~
_ _ .leu' Sa • recent letter to Chairman Patman of the
..... Jaaktna
aDd CUrreocy Committee, there 1s now a
.... ~t1al _etiq of Idn.s betve. the Attorney (Jeneral)
. . . . . . replatory
......, _
.,encl••.
and the Secretary of the
tile two ceDtral aspects of anti-trust policy
........... Iteal of
,""iDa co.ern
to the industry and those
....... i~l. for ita re. .lation in the public intereat.
adao.t loina into the c:1etails of this consensus -- which
&I'e cl. .rly oatli'" ill the Attorney General'. letter and
...........11 ...,..ted ill the pr... _.....y I Imply express my
0:
v'
- 2 circulation.
!he combined effect of theae programs was
to a.rt .... t otherwise ml&ht have been a coin
crt-ais last
Fall.
!his year your Aasociation bas liven strona support
to our
proar-
for chan&lna our subaidiary coinage materials.
Duriaa the current fiscal year,
.s
you know, ve will be
pl'oduci. these new coins by the billions and will continue
to . . so UDtil coin shoruse. have becOlll8 no WlO1:'e than.
elistaut •• _ory.
Mor caa 1 let this oceuion pass without citiDi the
iDYaluable .ervice that the bankers of AMrica perform for
tbe Treasury aocl for the country throup their efforts on
fot'
t'( F- £: ~-i..
/;
('7 ! ! ,irv,V
-,
,
...... '
.-
N etAlJidjJ'~(.r ~l.Ie~YI Q-/.J) ", ~
RDIAUS BY 'ID BO'IORABLE RElRY H. FOWLER.
SICUTAllY OF 1.'111 TREASURY
IIIOU DIE AImtlCAR lARDS ASSOCIATIOII (AlBUAL COIlYElJTlOB)
AT 'DI& coaAD KILm. IJ)TEL. CIIlCAGO. ILLDIOIS
TUlSDll'. OCTOBER S, 196.5
1600 A .lI., eDT
It 18 • particular plea.ure to appear before thi.
or....1aatiOll, for it 81"., _
the opportunity to pay public
trllnate to the baDkiq 1Dcluatry for all it has done durin, the
put year to help the
1'r~.ury
and the nation 1n
80
many BY••
You have been an invaluable source of strenath and
support cturins the past year of coin ,horta,•• and the need
far nthori.. tloD of new subsidiary cotusa _terials.
CoDnltationa wIth JOUr Industry led to the developMDt of
our
proar-
to double the produetioa of coins.
Last 'all
Jour Aaaoclatioo 8poaeored a .eri•• of radio and television
TREASURY DEPARTMENT
Washington
FOR RELEASE P.M. NEWSPAPERS
TUESDAY, OCTOBER 5, 1965
REMARKS BY THE HONORABLE HENRY H. FOWLER
SECRETARY OF THE TREASURY
BEFORE
THE AMERICAN BANKERS ASSOCIATION (ANNUAL CONVENTION)
AT THE CONRAD HILTON HOTEL, CHICAGO, ILLINOIS
TUESDAY, OCTOBER 5,1965,10:00 A.M., CDT
It is a particular pleasure to appear before this
organization, for it gives me the opportunity to pay public
tribute to the banking industry for all it has done during the
past year to help the Treasury and the nation in so many ways.
You have. been an invaluable source of strength and
support during the past year of coin shortages and the need
for authorization of new subsidiary coinage materials.
Consultations with your industry led to the development of
our program to double the production of coins. Last Fall your
Association sponsored a series of radio and television
announcements urging the public to put idle coins in
circulation. The combined effect of these programs was to
avert what otherwise might have been a coin crisis last Fall.
This year your Association has given strong support to
our program for changing our subsidiary coinage materials.
During the current fiscal year~ as you know, we will be
producing these new coins by the billions and will continue
to do so until coin shortages have become no more than a
distant memory.
Nor can I let this occasion pass without citing the
invaluable service that the bankers of America perform for
the Treasury and for the country through their efforts on
behalf of United States Savings Bonds. I cannot emphasize
too strongly how vital those efforts are to sound
Government financing and management of our public debt.
F-218
- 2 -
More important even than these notable contributions
to our nation's welfare has been the splendid performance
of our banks and other financial institutions in response to
the President's call for voluntary curbs on capital outflows
abroad to which I shall refer later.
Having thus cited but a few of the important services
you have rendered to the Treasury and the country, I am
indeed happy to note some good progress on a matter of concern
both to the legislative and executive branches of the
national government and the banking industry -- the matter
of bank mergers. As Attorney General Katzenbach made.
clear in a recent letter to Chairman Patman of the House
Banking and Currency Committee, there is now a substantial
meeting of minds between the Attorney General, the bank
regulatory agencies, and the Secretary of the Treasury on the
two central aspects of anti-trust policy which have been of
growing concern to the industry and those responsible for
its regulation in the public interest. Without going into the
details of this consensus -- which are clearly outlined in the
Attorney General's letter and have been well reported in the
press -- may I simply express my hope that this development
will lead to a speedy resolution of the issues in a way that
will both protect the legitimate interests of the government
and meet the legitimate needs of the banks.
Last week, on a far larger stage, there was another
meeting of minds that -- while preliminary and far from
total -- may help to assure a new era of free world economic
progress and prosperity which could equal or surpass even the
unexampled accomplishments of the past two decades.
For last week the Ministers and Central Bank Governors
of the Group of Ten leading industrial nations formally
instructed their Deputies to enter intensive negotiations
to locate areas of basic underlying agreement -- and I quote
from the Communique issued by the Group -- "on improvements
needed in the international monetary system, including
arrangements for the future creation of reserve assets, as
and when needed, so as to permit adequate provision for the
reserve needs of the world economy." The Deputies were
further instructed to report in the spring of next year "on
the progress of their deliberations and the scope of agreement
that they have found."
Q~
v
- 3 -
Nor would these discussions be limited solely to the
Deputies of the Group -- but would also include representatives
of the Managing Director of the International Monetary Fund,
of the Organization of Economic Cooperation and Development,
the Bank for International Settlements, and of the
Swiss National Bank.
So this important task of formal preparation was set in
motion for evolving arrangements in the Free World monetary
system to meet the needs of a fast growing world economy
without a continued increasingly dangerous dependence on
major U. S. deficits in its balance of payments -- and on
the schedule we publicly suggested last summer, namely, "at
the time of the annual meeting of the International Monetary
Fund this September."
The Ministers and Deputies of the Group also agreed
that, once these negotiations have established a base for
agreement on essential points,they must move to a "broader
consideration of the questions that affect the world economy
as a whole." They recognized, in short, that after the ten
leading nations had established some common ground for
agreement -- and before any final significant intergovernmental
arrangements are entered into -- negotiations must be
expanded to include a second phase, designed to encompass the
views and interests and problems of the other ninety-three
member countries of the International Monetary Fund, as
reflected by their representatives among the twenty Executive
Directors of that organization. The United States had
insisted upon this second stage of negotiations because of our
conviction that all countries have a vital interest in a
system of exchange of national currencies and the regulations
ann conditions which govern its working.
In thus moving efforts toward world monetary reform
from the level of technical discussion onto the plane of
high policy negotiations and in offering an avenue for the
inclusion of representatives of the smaller nations in these
negotiations, this formal accord among the Group of Ten
nations and the similar undertakings by the Managing Director
of the International Monetary Fund represent the full
achievement of all that the United States hoped would be
accomplished at last week's meeting of the International
Monetary Fund and World Bank.
- 4 These procedural arrangements provide an adequate and
appropriate pattern of careful preparation for a significant
international monetary conference in the form of a special
meeting of the Governors of the International Monetary Fund
or some other suitable forum, provided, of course, that a
sufficient degree of substantive accord can be reached in
advance.
No one who followed the developments at the meeting
last week -- or took part in them as I did -- can help but
be heartened about the prospects for eventual world monetary
reform of a meaningful and workable kind. There are, to be
sure, differences not only about the nature of future
reform but about the need for reform. These differences are
real, and some of them are deep. But they are not
insurmountable.
There are those, after all, who as little as three
months ago held out little hope for the degree of accord
that we achieved at last week's meeting -- a degree of accord
that I wish neither to exaggerate nor to diminish.
What I wish to suggest, therefore, is that while we are
well on the way toward real world monetary reform -- we
still have a long way to go, we still have ahead of us many
more months of hard and tough negotiations. We must be
prepared, as those negotiations proceed, to weather moments
of uncertainty and doubt -- moments, even, when prospects for
a final resolution of difficulties and disagreements may
seem to grow bleaker, instead of brighter -- moments that must
inevitably occur as we move deeper and deeper into the
specific details of agreement and national interests become
more and more involved.
At this early stage in our movement toward world monetary
reform it is neither advisable nor appropriate for me either
to take a position on or to discuss publicly any of the
substantive proposals or possible proposals for monetary
reform. The course of wisdom at this time is to be firm in
principle and in purpose, but flexible in approach.
- 5 -
On this occasion, therefore, I would like simply to
place the forthcoming negotiations into proper perspective
by reviewing briefly some of the background of these
negotiations as well as some of the problems and prospects,
objectives and strategies, that may unfold as negotiations
proceed.
May I begin simply by stressing the fact -- familiar to
all of you -- that the high level negotiations that will
shortly begin do not represent any sudden turn of events,
any unexpected change in the international weather. They
are but the logical outcome -- not only of recent events -but of the patient, painstaking preparation that has been
going on for several years.
The major countries long ago agreed that there were ~o
basic elements in international liquidity: the reserves of
gold and reserve currencies and the ready availability of
credit facilities for countries in need of temporary assistance,
And we have augmented international liquidity over
recent years by enlarging the credit resources of the
International Monetary Fund. In 1961, as you know, the
Group of Ten major industrial nations negotiated with the
International Monetary Fund a so-called General Arrangements
to Borrow. Under the Arrangements, the ten nations agreed
to lend the IMF up to $6 billion should this be necessary
"to forestall or cope with an impairment of the international
monetary system." The Arrangements were activated last
December and aga in las t May to furnish part of a $2.4 billion
drawing from the IMF by the United Kingdom.
At the meeting last week the Ministers and Governors
of the Group of Ten agreed to renew the Arrangements for
four more years -- with the suggestion that the Arrangements
be reviewed for possible adaptation in October of 1968 or
later in the light of further experience with them.
There has also been agreement on a 25 percent general
increase in IMF quotas -- along with special increases for
some sixteen countries -- that will raise total aggregate
quotas from $15 billion to around $21 billion.
- 6 -
Q...
Vv
At the same time that international credit facilities
have thus been expanded, there have been underway the
exhaustive technical studies essential to opening up the
possibilities of enlarging international liquidity through
some new form of reserve asset.
Moreover, informal international monetary cooperation
has served to give an added degree of stability to the
system. For example, I was extremely pleased that during
the course of my recent visit to Western Europe for
bilateral discussions of procedures for negotiating long range
international monetary reforms, we were able to participate ~
and help effect a concrete measure of cooperation between
monetary authorities to deal constructively with a more
immediate and pressing problem affecting the stability of the
existing international monetary system -- confidence in the
British pound, one of the two reserve currencies.
I refer to the action announced September 10 by the
Bank of England, in which ten nations, including the
United States, joined in new arrangements to strengthen the
pound. It should be emphasized that this action comes on the
heels of encouraging indications that Great Britain is moving
toward a balance in its international payments and is
undertaking a more effective long-term national program to
stabilize costs and prices that will put it in a stronger
competitive position in world markets. Hence, the main
purpose of the new arrangements is to exploit this strengthening
situation and reinforce these developments. The prompt actioo
of the ten cooperating countries demonstrated once again the
strength and flexibility of the existing international
monetary system and the willingness of the major industrial
countries to work together for the common good.
I mention these facts simply to demonstrate that on the
financial front, the Free World has not been sitting on its
hands over recent years -- that instead it has been moving
surely and steadily toward the negotiations we are now about
to enter. It is, in fact, this record of thorough and
thoughtful accomplishment -- of a wise willingness to
prepare for future contingencies before they occur -- that
must serve as one of our firmest grounds for confidence in the
successful outcome of the forthcoming negotiations.
- 7 These negotiations do not issue forth from any unaminous
view that there is any urgent, pressing shortage of world
liquidity -- or even that there will be such a shortage in
the near future. They stem, instead, from common agreement,
that when and if additional liquidity is needed, there must
already be in readiness some new orderly mechanism for creating
that liquidity.
Why, some will ask?
existing mechanism?
What was the matter with the
The answers to these questions go to the very heart of the
matter.
The problem stems from the fact that the large
deficits in the U. S. balance of international payments,
which for nearly twenty years have served as the existing
mechanism for providing a major portion of the Free World's
liquidity, must come to an end. The United States -- the
President, the Congress, and informed financial authorities
around the world all are agreed -- must move its balance of
payments into equilibrium and keep it there. It must do so
to preserve the integrity of the dollar at home and abroad,
so that dollars -- over $27 billion of them held in the
official reserves of the world's central banks and in private
commercial banks as a transaction currency -- can continue to
function as an essential part of the world's monetary system.
It must do so to arrest further drains in United States
reserves. That erosion cannot go on indefinitely. It must
be, and is being, stopped now.
That the world must know, and that the world expects
because it, too, requires that the dollar be as good as gold.
The long period of large U. S. deficits has come to an end.
If growth is to continue and trade is to expand, we must provide
an effective and adequate substitute for the creation of
additional reserves, when needed. Newly mined gold that finds
its way into the monetary system will not be enough in the
future any more than it has been in the past.
- 8 -
~()
..L' .
The U. S. balance of payments deficits have supplied about
three-quarters of the new official reserves accumulated by t~
central banks or other nations since the end of 1958.
Reserves deriving from the U. S. deficits grew in two forms _.
dollar balances held as such, and dollars acquired and
converted into gold. The latter development, of course,
resulted in a substantial decline in United States reserves.
We estimate that as of the end of 1964 more than a quarter of
the official reserves of the remainder of the Free World were
held in the form of dollars.
Clearly, as the existing mechanism for creating additional
liquidity -- U. S. deficits -- is closed down in order to
protect and maintain the liquidity that exists in the world's
holdings of dollars, some substitute must be devised.
All nations in the Free World are committed to a policy of
dynamic growth in a dynamic world economy . This means growing
international trade and economic development. If this
expansion is to occur it is reasonable to expect that the
Free World, including the United States, will, in the course
of time, face growing needs for monetary reserves.
I
These are the considerations that led your go~ernment to
take the initiative in suggesting that it is now t~me to
'
negotiate new international monetary arrangements to enabl:
the Free World to deal in season with future demands upon lts
monetary system.
In entering these negotiations, as I said last week, the
United States is wedded to no specific plan. We have no need
to preen our national pride -- very possibly at the price ~
imperilling the prospects of successful negotiations -- by
seeking to press or impose upon others a plan labe led "Made
in USA. II We will, as I have many times emphasized, carefully
consider and fairly weigh the proposals of all other nations.
Our own strategy, our own acceptance and presentation of
proposals, will be determined by the time and by the
circumstances -- guided always by our paramount goal of
seeking ample improvement in world monetary arrangements of
a kind that is thoroughly compatible with our national
interests.
l n,
\'
- 9 In the meantime, there is no more important task before
the United States than to achieve and to maintain equilibrium
in its balance of payments.
Since the announcement of President Johnson's balance of
payments program on February 10, our position has improved
markedly -- in no small measure because of the magnificent
response by our financial institutions to the President's
call for voluntary curbs on our capital outflow.
In the second quarter of this year, we experienced -- on
the basis of regular transactions -- a surplus of $119 million,
seasonally adjusted, compared with deficits of $780 million
in the first quarter, and $1,551 million in the fourth quarter
of 1964.
No one, I am sure, imagines that by showing a modest
surplus for three months we have in any sense solved our
balance of payments problem. For one thing, figures for so short
a period inevitably present a distorted reflection -- whether
favorable or unfavorable -- of particular transactions. And,
on balance, we believe the second quarter figures present a
more flattering picture of our progress than events really
warrant.
It is far more prudent -- and realistic -- to look at the
combined results of the first and second quarters of this
calendar year. During the first half of 1965, we had a deficit
of $661 million -- about $1.3 billion at annual rates
which represents a marked improvement over the $2,144 million
deficit -- $4,288 million at annual rates -- recorded for the
second half of 1964.
These results tell us that we are headed in the right
direction -- but we have far yet to go before we arrive at
our goal of sustained and lasting equilibrium.
I was very pleased to learn this week that our voluntary
program aimed at dampening the outflow of dollars from U. s.
banks to foreign holders is continuing to show very good
results. In the five months April through August the banks
have reduced their dollar placements abroad by $500 million.
- 10 -
10')
I.
Without this reduction, our balance of payments positi~
would be worse by that same amount. With this reduction, Our
balance of payments position is that much better than it would
otherwise be. So this program is helping the country in ve~
real and measurable terms to achieve the great national
objective of bringing our international accounts into balance.
The nation's banks, and the Federal Reserve System which is
managing this part of the program for voluntary restrainf
of foreign investment, are certainly to be congratulated.
They should, and I know they will, keep up this good
work.
I am sure also that we are going to see good results from
the part of the program aimed at achieving savings in the
international transactions of non-financial businesses
through their own voluntary efforts. The reports so far sh~
a continued high level of foreign investment by these
companies. But this reflects, in part at least, the fact
that the companies doing business abroad already had
commitments when our program went into effect that they could
not ignore or substantially change.
They have given evidence of their support of the
program by bringing home some $575 million of funds that
they had on deposit abroad and substantially increasing
foreign borrowings. We are taking a new look at this picture
as we review again our over-all balance of payments position.
In appraising the result, we will, of course, consider
what, if any, new measures of a voluntary character should
be taken, including the possibility of a guidelines program,
to achieve further improvement in the year ahead.
And 1e t there be no mis take: we mus t have nothing less th
sustained and lasting equilibrium. We must have nothing less,
only for the sake of our own international reserve position and
the continued strength and soundness of the dollar as an international reserve and key currency, but to insure the successful
outcome of the forthcoming negotiations on world monetary refot
For there are those who are still skeptical of our desire
and determination t,f> bring our international accounts into las~
equilibirium. To~alter or flag in that effort during the C~l
months of negotiation would not only seriously sap our nego t1st
strength, but would seriously damage the prospects for any earl
and fruitful end to those negotiations.
We cannot afford to let that happen
and we will not.
President Johnson made that very clesr in his sddress to
Bank and Fund meeting last week. I QOote:
-11" ... the U. S. has taken firm ac t ion to arres t the dollar drat
St\ould further action be necessary in the future, such action will
be taken.
"I want to be very clear about this. We must, in our own
interest and in the interest of those who rely on the dollar as a
reserve currency, maintain our payments in equilibrium. This we
will do."
All America, therefore, has not only a stake in the
successful outcome of the forthcoming monetary negotiations,
but a very real share in insuring this outcome.
I have no doubt that we will more than rise to the
challenge.
I have no doubt also that one of our greatest assets in
meeting that challenge will be the continued strength, stabili~
and soundness of our domestic economy.
Only the night before last, I talked with our President on
this subject which is one of those nearest and dearest to his
heart.
We reviewed what had happened to our economy during his
nearly two years in office, a time during which --- A business expansion already thought mature at 33 months
of age in November, 1963, has continued to its current record
length of 56 months, the longest peacetime economic expansion
we have known:
A total of 3.6 million non-farm jobs have been created
from November 1963 through August 1965, with official unemployment rates being reduced from 5.8 percent to 4.5 percent;
-- Personal income, in which we all share, has increased
in the same period from $474.7 billion to $531.6 billion or
12 percent;
-- Business profits after taxes, despite an increase of
$9.4 billion or 38.5 percent from the first quarter of 1961 to
the fourth quarter of 1963 have continued to rise by an additional
$10.6 billion, or 31.4 percent;
-- Bank profits have moved to their greatest peaks in
history, increasing 6 percent between 1963 and 1964, and may
register another rise when 1965 figures are available.
We also discussed the favorable prospects for maintaining
this forward momentum because of the fact that thp current
expansion up to date has remained remar~ab1y well balance anti
free from inflationary distortions.
- 12 -
104
The President then put a question to me and I believe it
went this way: "Why won't people stop, look, and listen, and
count three before taking steps that would change the favorable
mix of economic policy that has characterized this balanced
.
?"
expans~on.
Without answering the President's question, let me say t~
this Administration continues to believe that the stability of
long-term interest rates is an important factor in the economic
environment which has given us the greatest and best balanced
period of domestic prosperity in our history. Of course, I
recognize that new facts may at any time call for a reexamination of a policy mix, but may I venture my own feeling
that there is a tendency today in the money markets to jump to
conclusions instead of acting on the basis of hard facts.
For us in the Treasury it seems that the money markets a~
basing many of their forecasts and their fears of inflation on
exaggerated ideas about an economic boom which would add a bubb
on the steady trend line of expansion. The economic outlook is
bright but there is no evidence as yet that justifies any
assumption that the expansion is going through the roof.
In recent years, the economy has shown remarkable ability
to move forward smoothly and to take the bumps in the road in
stride. There have been bumps in particular areas, and there
will be some in the period ahead. We must be alert to them and
ready to counter them in order to maintain our progress. At
the same time, the bumpier aspects of the outlook today have a
bright side in assuring us that there is no serious threat of
over-exuberance in the economy.
One bumpy spot for the rest of this year and opening montb
of 1966 is the run-off of steel inventories. It will not throv
us for a loss, but it will shave our gains in industrial produc
tion and our manufacturing employment. Housing has been a bUDIF
area for a year and a half. The latest movement of housing sU
has been downward, and while we see no likelihood of a persiste
decline, we cannot count on the homebuilding industry to contri
bute to our advance in the months ahead. The forthcoming JanUl
rise in payroll taxes which was once inaccurately but wide~
viewed as a roadblock to our expansion is now seen in better
perspective not as a serious threat to our forward movement, b~
a stabilizing factor for a time. It will be accompanied byo~
- 13 -
10~
second stage of excise tax reduction, and we will be experiencing the effect of a rise in defense expenditures within
this fiscal year.
In the past two years the pluses and minuses have added
up into a generally smooth and well-paced expansion of $10
billion a quarter in our GNP. The pluses and minuses that are
in prospect do not suggest a marked deviation from that
pattern -- either upward or downward.
In making our budget decisions for fiscal 1967, we will
treat our needs for defense expenditures as the number one
priority. The exact size of those needs will shape up in the
next few months. On present prospects, they dim the hopes for
new tax reduction in fiscal 1967, and they may squeeze the
scheduling and size of some of the President's valuable civilial
programs. Our defense needs are certainly not welcome, but the
become a specter to our economy only when their likely size is
greatly exaggerated. If I thought defense was going to add
$10 to $15 billion to our fiscal 1967 budget, I'd be back b~
office right now considering proposals for tax increases to pay
for it. As you see, I'm here with you instead. I expect us to
incorporate our defense spending into a sound fiscal 1967 budge
which still is carefully and finely tuned to the needs of the
economy.
In short, the outlook on both the domestic and internatioru
fronts is for continued progress -- progress, to be sure, that
must continue to be earned by forging ahead with the flexible,
balanced policies in both the public and private sectors that
have brought us our present unprecedented prosperity.
000
TREASURY DEPARTMENT
(
FOR RELEA.SE A. M. NEWSPAPEitS,
Wednesday, October 6, 1965.
October 5, 1965
RESULTS OF T~SL8Y'S OFFERING OF $4 BILLION TAX ~TICIPATION BILLS
The Treasury Department announced last evening that the tenders for the two 1er1
of Treasury Tax Anticipation bills, each series to be dated October 11, 1965, vM~
were offered on September 22, 1965, were opened at the Federal Reserve Banks on
October 5, 1965. Tenders were invited for &3,000,000,000, or thereabouts, of 162~
bills and for $1,000,000,000, or thereabouts, of 254-day bills. The detaUs of till
two series are as follows:
RANGE OF ACCEPTED
COi'iPETITlVE BIDS:
162-day TriX Anticipation
bills maturing l'1arch 22, 1966
Approx. Equiv •
Price
Annual Rate
254-day Tax AntiCipation
bills maturing June 22, l~
Approx. Equ1l
Price
Annual Rate
~
High
98.31B!I
3.738%
:
97.260 b/
3.883%
Low
98.273
3.838%
:
97.206 3.960%
Average
)8.298
3. 783~ ~/
:
97.221
3.938% II
Excepting 4. t.enders totaling $4,150,000; E/ Excepting 5 tenders totaling .j,~
28 percent of the amount of 162-day bills bid for at the low price was accepwd
13 percent of the amount of 254-day bills bid for at the low price was accepted
!I
TOTAL TENDEliS APPLIED FOR AND ACCEPTED BY FEDERAL RESERVE DISTRICTS:
District
A.e;elied For
Acce;eted
Acc8:eted
tE;elied For
Boston
$ 127,625,000 $ 112,625,000
128,676,000 I
New York
1,833,145,000
254,3hO,~
1,054,590,000
1,045,905,000
Philadelphia
121,960,000
22,134,000
111,240,000
6,134,'
Cleveland
285,715,000
72,9SS,G
157,955,000
242,835,000
Hoichmond
19,20S,G
72,340,000
60,340,000 :
33,355,000
Atlanta
4$,)60,0
153,015,000
72,1l0,OOO
133,615,000
Chicago
193,195,1
540,045,000
244,700,000
486,045,000
St. Louis
)O,OSS,D
112,155,000
60,090,000
108,935,000 •
Ninneapolis
121,125,000
s
38,01,,0
119,125,000
51,865,000
~ansas City
2$,384,1
'76,597 ,000
39,841,000
74,272,000 ••
Dallas
:
6,2~,a
100,035,000
20,065,000
71,435,000
San Francisco
•
222,860.8
~22IZ80aOOO
433.780,000
321,730,000
·
80,8s"m
·
·
·
TOTALS
c/
y
1/
-
$4,040,537,000
·
$3,000,152,000!if
,2,207,111,000
$l,ooo,2li8,G
Includes$435,662,000 noncompetitive tenders accepted at the average price of 98.29
Includes $l97,Oll,OOOnoncompetitive tenders accepted at the average price of 97••
On a coupon issue of the same length and for the same amount invested, the ret1l1'D
these bills would provide yields of 3.90%, for the 162-day bills, and 4.08%, !~,
254-day bills. Interest rates on bills are quoted in tenus of bank discount lith
return related to the face amount of the bills payable at maturity rather tban till
amount invested and their length in actual number of days related to a ,360-da7
In contrast, yields on certificates, notes, and bonds are computed in te~ _~..-.
est on the amount invested, and relate the number of days remaining in an ~
~aym~nt period to the actual number of days in the period, with semiannual ~
1.ng 1.f more than one coupon period is involved.
F-219
=
TREASURY DEPARTMENT
Washington
FOR RELEASE ON DELIVERY
REMARKS BY THE HONORABLE STANLEY S. SURREY
ASSISTANT SECRETARY OF THE TREASURY
AT THE FINANCIAL ANALYSTS FEDERATION CONFERENCE
WASHINGTON HILTON HOTEL, WASHINGTON, D. C~
TUESDAY, OCTOBER 5, 1965, 12:30 P.M. EDT
THE ROLE OF TAX POLICY IN THE GREAT SOCIETY
Under President Johnson's leadership, this nation has
begun the challenging task of building a Great Society.
Substantial progress has been achieved and a sound
foundation for the structure is being laid.
The Great Society will rest upon two major supports .•
national consensus and economic prosperity.
As the Congress finishes a session which is out standing in our history for its achievements and as our
econ~y
continues strong in a record-breaking expansion, these two
supports appear sound indeed o
Prospects for future achievements are
The goals are many, but some stand
bright~
out~
Clearly, we
must do all in our power to:
give the 35 million people who now suffer the
despair of poverty the opportunity to earn a
decent life for themselves and a better life
for their children;
F-220
lQ~
- 2 -
give all our children full opportunity to educate
and equip themselves to take a constructive part
in carrying this society forward;
give all Americans the opportunity to fulfill
their own best hope of achievement, that we may
fulfill the promise offered when this land was
born;
make our countryside and our cities more beautiful, healthier, safer and better places in which
to live and work;
meet our commitments, written and unwritten,
throughout the world to those people who look
to us in their need for release from ignorance
misery, and hunger.
I would like to consider what role tax policy has to
play in achieving the goals of this Great Society.
Growth of the Economy
Certainly the Great Society will involve federal expend·
itures and our tax system must raise the funds to meet those
expenditures.
my talk.
In an earlier day this could mark the end of
But today's knowledge has brought us deeper insighq
10~
- 3 -
The accomplishment of the Great Society will require
an ever-growing economic base -- a base adequate to meet
the demands which that Society will place on Federal
expenditures, State and local government expenditures, and
private expenditures.
In our war on poverty, in our efforts to foster education, equal opportunity, health and natural beauty, and in
our campaign to improve urban life, economic prosperity is
not only essential -- it is the most powerful weapon we
have
0
Government policies must therefore be directed both
to achieving an economic growth that matches our potential
and to enabling us to keep that potential constantly
expanding.
We must achieve full employment and then go on
to provide an adequate rate of economic growth at full
employment.
The use of fiscal policy in meeting these demands is
today, as a result of the accomplishments of these last
five years, far more broad and flexible than most had
supposed.
The success of the tax reduction involved in the
Revenue Act of 1964 has marked the turning point.
This
- 4 -
I
'll
.1..\.1
tax reduction, though it came in a period of deficits,
brought the larger GNP and larger revenue base that the
Administration and many economists foresaw.
Recognition
of this success of the 1964 Act tax reduction was a large
factor in the speed with which the Excise Tax Reduction
Act
involving a further $4 billion staged reduction --
was enacted this year by the Congress.
If we did not have the investment credit of 1962, the
depreciation reform of 1962
which was liberalized early
this year -- the 1964 and 1965 individual and corporate
income tax reductions, and the excise tax reduction of
1965, next year the Federal tax burden would be more than
$20 billion heavier than it will now be.
That is the reduction in tax liabilities measured at
a constant income level.
But there was no corresponding
reduction in actual revenue receipts.
As President Johnson
said recently:
"I am happy to report that even with such
massive tax reduction, we anticipate that Federal
revenues for the 5-year period, fiscal 1961 to 1966,
will have increased by over $18 billion -- almost
twice the increase over the previous 5 years when
there were no tax cuts at all."
- 5 -
All this has permitted us, I believe
Government
economists and business analysts alike -- an increasing
objectivity in assessing the role of Federal budget policy
in our financial system.
We are no longer hampered by
such rigidities that a budget deficit is always bad
we
cannot automatically identify the villain by seeing if he
writes in red ink.
For we are now aware that adding a group of expenditures that differ widely in their form -- loans, grants,
current expenses, capital items -- and then achieving a
zero balance when these are subtracted from revenues in
itself can guarantee nothing as to the direction the
economy will move.
And we are also aware of such things
as fiscal drag and the power of our revenue system yearly
to increase its take from the private sector of the
economy -- at present by about $7 billion annually
of the need each year to offset that fiscal drag.
and
That
doesn't mean that tax reduction is always desirable and
must occur every year or that it is always preferable to
increased expenditures and is never to yield to debt
retirement.
112
- 6 -
Each year
wil~
require its own decisions.
They will
depend on our expenditure requirements
in terms of
domestic needs and foreign obligations
and on the
economic outlook -- in terms of the need to maximize
employment and avoid inflation.
We have balanced these things well in moving toward
an interim goal of four percent unemployment.
This course is not an easy one to pilot.
Like hidden
shoals, we will encounter unexpected developments.
At
times these developments will require rapid temporary
adjustments in our fiscal policy -- such as quick tax cuts.
It would be beneficial, now that the effects of tax
reduction on the economy are better understood, to reach
a consensus on the form that a temporary tax change should
take so that we thereby would be able, with that consensus
in hand, to achieve a speedy enactment if a temporary
reduction were ever needed.
An appropriate Congressional
hearing held now for this purpose, before the need ever
arises, would be useful in reaching such consensus.
I have talked so far in aggregate terms, and in these
terms tax reduction has mainly meant a broad attack on
inadequate private expenditures and investment incentives.
- 7 -
In the Revenue Act of 1964, and in the recent Excise Tax
Reduction Act, we provided a substantial stimulus to consumer demand which serves, of course, to provide the market
to induce and support our remarkable increase in business
investment.
We have also reduced corporate tax rates, and
provided the special measures of an investment credit and
the depreciation guidelines.
Together these business tax
measures have meant an increa3ed cash flow and considerably
higher after-tax rates of return.
In the Treasury we have begun an intensive study of
the investment experience in the past few years to isolate
if we can the impact of depreciation reform and the investment credit.
We are trying to learn more about our depreci-
ation system, the guidelines and the reserve ratio test
through a complex computer study of the effects of varying
depreciation rates and lives against the manifold patterns
of asset holdings, replacements and retirements that our
businesses present.
At the same time, through trips abroad by our experts,
we are bringing up-to-date our knowledge of the handling of
depreciation under the tax systems of other countries, so that
we can consider the comparative position of the U. S. approach.
114
- 8 -
Finally, in the area of business taxation we are aware
of the need for more research regarding the appropriate
relationship between the corporate tax and the individual
income tax.
But a look at the recent foreign changes
illustrates the complexities involved in this relationship,
and the need to define the goals before coming to any conclusion about whether a change is either necessary or
appropriate.
The United States approach is basically that of a
corporate tax separated from the individual tax, with no
adjustment (apart from the $100 dividend exclusion) for the
possibility that corporate profits may be taxed at two
levels, once as profits to the corporation and once as
dividends to individuals
0
I call this a possibility in
view of the considerable uncertainty about whether the
corporate tax is shifted.
However, many economists have favored the so-called
British approach, under which the two taxes are integrated
through the shareholder getting a credit at his level for
the corporate tax, and with his dividend grossed up to
reflect corporate profits before the corporate tax.
Some
1'~
- 9 -
-~
would even go further and apply this credit and grossed-up
inclusion in shareholder income automatically, without the
need for an actual distribution by the corporation.
But
the British this year abandoned their approach in favor of
the United States approach, though with a lower corporate
rate, probably 40 percent.
Meanwhile the French, who previously had the United
States approach, shifted this year halfway to the former
British approach, by giving the shareholder on the gross-up
approach a credit for one-half of the corporate tax.
Both the British and the French did not follow the
German technique, which grants the corporation a much lower
corporate rate (15 percent as against 51 percent) on the
corporate profits that are distributed to the shareholders.
The Canadians, who now use a very rough version of the
former British approach -- they give the shareholder a credit
of 20 percent of the dividend without any grossing up of the
dividend -- are, through their Royal Commission, studying
whether they should consider a change.
The key to all these different approaches -- bewilderwg
as they are in their variety and susceptibility to change -is probably that the changes are designed to achieve
goals.
differ~t
- 10 -
The British desire to encourage more corporate investment and hope their change will achieve that by favoring
the retention of corporate profits over their distributioo.
The French appear to desire a greater shareholder participation by their investors, and hence have focused on
inducements to the distribution of dividends -- a factor
which underlies the German approach though with a different
technique.
Here in the United States we have stressed. corporate
investment -- witness the investment credit -- and hence
adequate corporate cash flow and after-tax rate of return.
We have recognized that we already possess through our
developed capital markets and other institutional factors
strong forces in the direction of shareholder participatioo.
Hence our present needs exert a strong pressure for retention of the status quo in the structure of corporate taxation
still leaving room for rate reduction at an appropriate time.
The British have also recognized the relationship betweetl
these corporate patterns and the capital gains tax.
Thus,
along with their move to strengthen corporate retention of
profits they have adopted a capital gains tax on the American
model, but with inclusion of one-half of the gain, a
maxi~
- 12 Looking at our system as it now stands, the poor pay
primarily, as Federal taxes, the excises on alcohol and
tobacco and the income tax where poverty levels may be
above the present dividing line between taxable and nontaxable income.
They also pay the gasoline tax, which is
a user charge associated with the Highway Trust Fund, and
the Social Security and Medicare payroll taxes, which
involve a saving for pensions and medical care.
In looking
at the tax structure, it is clear that the income tax impact
deserves our first attention, and the President has said
that any future income tax reduction should cover those who
live in the shadow of poverty.
This suggests at least a
change which raises to a higher level of income the dividing line between taxable and non-taxable income
0
This nation cannot afford to continue indefinitely to
tax people who cannot afford to pay.
As incomes increased in past years for the population
as a whole, the nature of our tax structure over those
years -- relatively fixed rates and exemption levels -increased the tax burden on lower income taxpayers, as they
moved from a non-taxable status to a taxable status,
the lowest bracket rate to a higher rate.
fr~
- 13 Even our massive income tax reduction in the last two
years has only set this process back about five years.
And even with such reduction, over the past 15 years
an examination of effective tax rates (the percentage of
overall income actually paid in tax) shows:
a family earning half the national average income
($2,200 in 1950, $4,000 today) went from an
effective tax rate of zero to almost 4 percent;
a family earning the national average income went
from an effective tax rate of 6-1/2 percent to
9 percent;
-- a family earning double the national average income
stayed roughly the same;
higher income families either held their own or
realized reductions, often substantial, in their
effective tax rates as increased incomes were
offset by increased deductions or a greater proportion of capital gains.
Indeed, the spread of effective tax rates is greatest
for higher income taxpayers, varying from zero to around
66 percent.
Correspondingly, the average effective rate
for very high income taxpayers is much lower than is
- 14 generally realized.
For instance, all taxpayers who in
1962 reported adj usted gross incomes of more than a million
dollars would -- at present tax table rates -- pay an
average effective rate of only 26 percent of their overall
•
income (including capital gain income in full).
Further-
more, only nine percent of those taxpayers would have
effective rates of over 50 percent on overall income
ood~
present tax table rates.
All this reinforces President Johnson's view that the
next tax reduction should focus on the lower income groups.
We are constantly gaining more knowledge of the weapons
with which to carry out our war on poverty.
Some of the
approaches are associated with the sheer alleviation of
destitution, through providing funds directly.
Others
involve programs of income maintenance to counteract the
forces which can undercut a person's income.
Others look
to programs of education, relocation, training and the like
to help people raise themselves and their children out of
poverty, and to provide employment for those who are
employable.
As we gain this knowledge we will be in a bette
position to judge the contribution which a tax system can
make in this effort.
- 15 Tax Equity and Tax Simplification
A nation that seeks improvement in its society is
likely to insist on the improvement of that aspect of
Government which exerts a widespread and significant
effect on that society -- the Federal tax system itself.
The tax activity of the past few years has increased
public interest in obtaining the fairest and simplest tax
system possible.
Tax equity is a complex matter.
the same amount of income
Two persons may have
wages, net business income,
net investment income, capital gains
but the income tax
on one may be far higher than on the other.
The variance
comes about because the income tax has differing treatments
for various types of income and for various types of family
expenditures, primarily those involving personal expenses.
Thus, for example, on the income side, capital gains are
taxed at lower rates; on the expenditure side, deductions
are allowed for charitable contributions, personal interest,
State and local taxes, medical expenses, and so on.
The difficulty in all this lies in deciding which differences in income source and expenditures should be signif·
icant for income tax purposes.
While economists may, asS
- 18 waiving these differences in income and expenditure treatment , focuses attention on this matter, and hence merits
careful study.
Further, these value judgments mean that a large
variety of factors enter into the final determination of
a person's tax.
In turn this means that the income tax
structure is necessarily complex -- which brings us to tax
simplification.
One way to achieve tax simplification is
to reduce the differences that are regarded today as
icant.
si~~
Since tax simplification also commands a value,
necessarily we are involved in deciding between conflicting
goals in considering these differences.
Some would resolve the conflict by narrowing the differ,
ences through eliminating many of the preferences and
deductions, and lowering the rates in the tax tables.
Othe~
would resolve it by keeping the differences but lessening
their significance through granting comparable treatment to
taxpayers who do not have the actual expenditures -- such
as increasing the standard deduction.
Senator Long has
advocated this approach in some brackets.
This lowers the
effective rates on these taxpayers, but maintains the higbel
nominal rates.
l~S
- 19 -
The future course of the income tax -- and tax equity
and tax simplification
of these various factors.
will involve the proper
balanci~
Since value judgments are
involved, we should not expect the exclusive choice of a
single approach.
Rather, the unfolding solutions are likely
to involve a part of each approach.
Apart from these broad considerations, certain aspects
of tax equity and tax simplification also merit study.
One is the relationship of the income tax to the estate
and gift taxes.
The estate tax, with an available exemption
of $120,000 of assets for a married decedent, relates only
to slightly
unde~
:hree percent of decedents.
While
obviously these taxes affect only middle and upper income
groups, we do not as yet have sufficient information to
relate the incidence of these taxes to the incidence of the
income tax.
Moreover, the impact of all three taxes is
affected by the present treatment of capital gains,
especially the elimination from the income tax of any
unrealized appreciation in value occurring prior to the
decedent's death.
The serious imbalances which this latter
treatment involves, and the adverse effect on mobility of
- 20 -
capital through its tendency to lock families into their
present asset holdings, are regarded by many economists as
our most serious structural tax problem.
There are, in addit ion, a number of narrower areas in
which tax reforms could be made.
Similarly, while tax simplification on a broad scale
requires the consideration of the major questions we have
mentioned, there are many changes which can be made which
do not involve such policy considerations or value judgments,
We should therefore examine what can be done through these
narrower changes to simplify and improve our tax structure,
Cost-Effectiveness Studies
In order to assure the wisest use of resources in
achieving the goals of the Great Society, we must make
every effort to use the best and most modern methods of
program analysis.
This applies to new proposals as well as
existing programs -- and there is no reason to exclude the
tax area from such analysis.
The Budget Bureau, at the direction of President
Jo~~~
is now in the process of applying to non-defense expenditures
- 21 -
and programs the cost-effectiveness techniques which were
used so successfully in the Defense Department.
These
techniques consist of evaluating proposals, programs and
projects not merely by their cost, but also by what they
will accomplish in meeting specified goals.
In addition,
they require a clearer evaluation of the goals of the
programs and projects within a department -- a process
which in turn allows a comparison of priorities throughout
the entire government.
Taxes foregone because of a desire to benefit a
particular activity or to induce certain activities are,
in a real sense, monies spent.
In nearly every such situa-
tion an alternative to the tax appr oach is a direct expenditure of funds not involving the tax system.
Cost effective-
ness studies would enable us to appraise the efficacy of the
tax approach as compared with the direct expenditure
approach.
The overall goal, here as in the case of direct
expenditure programs, is a wise allocation of our resources
and the avoidance of distorting that allocation through
inappropriate tax provisions.
The use of cost-effectiveness studies may not always~
the proper or necessary method of evaluating a tax provision
- 22 -
or a new tax proposal designed to meet a particular econoa
or social obj ective.
But in one way or another the evalua.
tion has to be made.
Nearly every problem in our society
seems at least to invite a tax solution -- and indeed the
tax solution is often the first solution to be put forward,
Such proposals in the tax field thus generally act as
early warning devices pointing to social or economic proble
that require our attention.
Necessarily this involves us
in seeing if there is a non-tax solution that is more appro
priate o
For example, the Treasury, joined by the Department of
Health, Education and Welfare, believes that the proposal
to provide assistance to families with students in college
through tax credits is not a desirable use of funds.
It
will not achieve the obj ective of permitting more children
to enter college.
Moreover, the aid it does give is grante
in an inequitable manner -- the higher a family's incooe
and the more it can spend toward college, the greater is
the amount of money received through the tax credit.
This
is indeed an "upside down scholarship", and one which no
alumni body would support if a college were so ill-advised
- 23 -
as to attempt this approach in its own scholarship program.
The Treasury therefore sought an appropriate non-tax
program -- since the objective of aiding students and
families in meeting college costs is a desirable one -- and
early advocated a guaranteed student loan program such as
the one President Johnson proposed, which has now become a
part of this year's Higher Education bill.
And so in
~ny
other fields -- pollution, manpower training, research and
development -- we must consider the non-tax approach so as
to evaluate the tax approach.
Our experience is that the
tax system generally does not offer the best route to
particular social objectives.
The benefits may be mis-
directed by going to taxpayers who do not need them and by
being withheld from those whose low incomes or losses keep
them from being taxpayers at all.
Even when the tax approach may be the wiser course,
we
must be alert to see that the dollars foregone are not beiDl
wasted and that the tax privileges are not abused.
Thus
the Treasury Report on Private Foundations, while recogniz~
the values of private philanthropy and the contribution of
the tax system to such philanthropy, also points out the
- 24 -
abuses that are involved and how they can be corrected.
The House Ways and Means Committee now has this Report
under consideration and has invited comments on it for
staff study.
Another area where the tax system can be appropriately
used is that of taxes imposed as user charges to defray the
costs of Government programs conferring special benefits on
a part icular group.
The user charge programs in the trans-
portation area are an example.
Finally, the tax system itself as a functioning meehan'
ism can be the object of cost-effectiveness studies.
We
need to know more about the administration of that system,
such as the degree of compliance in various income areas
and the most effective ways of increasing compliance. We
need to know what information should be sought on tax
returns, what statistical data should be obtained and
tabulated and published by the Service in the light of its
own needs and the overall reporting requirements placed on
the private sector by the Government, how that data can be
used to guide us both in the administration of the tax
system and in evaluating existing provisions and new
- 25 -
legislative proposals, and how the data and information
gained can be used constructively to increase knowledge in
other areas.
We have learned much about the use of tax policy in
the last few years, and many prejudices surrounding this
area have been swept aside.
Our experience has not led us
to discard caution or careful examination in considering
future tax changes.
But at the same time we have learned
that tax policy -- properly used -- can be highly effective.
We can look forward to such creative use of tax policy
on an increas ing scale in the years ahead, and I am confident
it will prove an effective means of helping us to move
forward toward the goals of the Great Societyo
- 1. -
!be Mleptioaa
&p'• •d.
• new treaty should be -sot!~.
ahd .. qu1ckl, . . po••1bl. II and that theyI\uaeet again
~...
the ead of this ,..r to continue diaeuaaions.
~!(&-1-~)~~
Ua1te4 ~t.t..
·
Trinidad and TobaiO Tax Treaty
T. . . -aotiate4
hl....tioc. f r . the Uatted Stat •• and froua Trinidad
... To1taao.
~
e,
5
5
i')V\.
~..i, ~
ked CU.aeua.lona~ot\e.rntl'l6 tbe
,.,,1.108 ttl 0 . lac. . . tax treaty ".tween the two countri.s.
ra.
PUPO" of .\ldl . . income tax tr..
t,. is
to avoid tho
.... lbl11t1 of double taution.
~
a.t.,.
Ualted
~t.t.a
delesatiou uas he.ded by
,...1staat Seer.tar, of the Tru,ury.
... ToMp deleptloa va.- headed 1,)1 the
~t&nle1 ~.
The Trinidad
Jj.~ut1;,eeretary,
• •1Kry of l"laaaea, Hr•• PatTi.ci. r.Obioson.t'Tb.e treaty
!it.,
......tiatloa is ~~
Jx~o take accouat of ilt'oapect'lve
",,1.i_ III tb.. tax .,.tea of Trinidad and Toba&o.
...
p~t
L~nder
.yet_ 18 tbat country 1rujivldual sbareholdexl
.... allowed. ux erecUt for the eorporateproff.t8 tax
ahee4J paid by the corporation.
which will
tM tax
jO
Under the revised system,
tato effect in Trift1dad and TCNgo
~r. .t _ t
Dftt
year t
will be similar t.o that of the United
Statu and eo thU receat11 adopted by tbe United Kiagdom - ..
p.-("1~~>
eocpo... tloDa w111 be cued on tbeir ~_.. -and shareholders
~M;r~
...11 M toed _
f\.
eMir 41vidcada.
TREASURY DEPARTMENT
FOR RELEASE A.M. NEWSPAPERS
WEDNESDAY, OCTOBER 6, 1965
UNITED STATES - TRINIDAD AND TOBAGO
TAX TREATY TO BE RENEGOTIATED
Delegations from the United States and from Trinidad
and Tobago held discussions on October 4 concerning the
revision of the income tax treaty between the two countries.
The purpose of such an income tax treaty is to avoid the
possibility of double taxation.
The United States delegation was headed by Stanley S.
Surrey, Ass is tant Secre tary of the Treasury. The Trinidad
and Tobago delegation was headed by the Deputy Secretary,
Ministry of Finance, Mrs. Patricia Robinson.
The treaty renegotiation is necessary to take account of
prospective revision in the tax system of Trinidad and Tobago.
Under the present system in that country individual shareholder
are allowed a tax credit for the corporate profits tax
already paid by the corporation. Under the revised system,
which will go into effect in Trinidad and Tobago next year,
the tax treatment will be similar to that of the United
States and to that recently adopted by the United Kingdom -corporations will be taxed on their profits and shareholders
will be separately taxed on their dividends.
The delegations agreed a new treaty should be
negotiated as quickly as possible, and that they would meet aga
before the end of this year in Port-of-Spain, Trinidad,
to continue discussions.
000
F-22l
.. :3 -
)r other disposition of Treasury bills does not have any special treatment, as
under the Internal Revenue Code of 1954.
The bills are subject to estate,
ltance, gift or other excise taxes, whether Federal or State, but are exempt from
LXBtion now or hereafter imposed on the pri.ncipal or interest thereot by any State,
, ot the possessions ot the United States, or by any local taxing authority.
For
lea ot taxation the amount of discount at Which Treasury bills are originally sold
I
United States is considered to be interest.
Under Sections 454 (b) and 1221 (5)
I
Internal Revenue Code ot 1954 the amount of discount at which.bills issued here-
are sold is not considered to accrue until such bills are sold, redeemed or otherisposed ot, and such bills are excluded from consideration as capital assets •
.1ngly, the owner ot Treasury bills (other than life insurance companies) issued
der need include in his income tax return only the difference between the price
or such bills, whether on original issue or on subsequent purchase, and the amount
1Y
received either upon sale or redemption at maturity during the taxable year
lch the return is made, as ordinary gain or 10s8.
reasury Department Circular No. 418 (current revision) and this notice, prescribe
rms of the Treasury bills and govern the conditions of their issue.
rcular may be obtained from any Federal Reserve Bank or Branch.
Copies of
- 2 _0"
/",
/
nted for.ms and forwarded in the special envelopes which will be supplied by Federal
erve Banks or Branches on application therefor.
Banking institutions generally may submit tenders for account of customers pro!d the names of the customers are set forth in such tenders.
others than banking
~itutions will not be per.mitted to submit tenders except for their own account.
iers will be received without deposit from incorporated banks and trust companies
tram responsible and recognized dealers in investment securities.
Tenders fram
!rs must be accompanied by payment of 2 percent of the face amount of Treasury bills
Lied for, unless the tenders are accompanied by an express guaranty of payment by
~ncorporated
bank or trust company.
Emmediately after the closing hour, tenders will be opened at the Federal Reserve
:s and Branches, following which public anouncement will be made by the Treasury
~rtment
of the amount and price range of accepted bids.
. be advised of the acceptance or rejection thereof.
~ssly
Those submitting tenders
The Secretary of the Treasury
reserves the right to accept or reject any or all tenders, in whole or in
, and his action in any such respect shall be final.
Subject to these reserve-
s, noncompetitive tenders for each issue for $200,000 or less without stated
e fram anyone bidder will be accepted in full at the average price (in three
I8ls) of accepted competitive bids for the respective issues.
Settlement for
pted tenders in accordance with the bids/must be made or completed at the Federal
rYe Bank on
1
Octobe~
1965
a like face amount of Treasury bills maturing
~xchange
...
, in cash or other immediately available funds
tenders will receive equal treatment.
October 14, 1965
• Cash
Cash adjustments will be made for
!rences between the par value of maturing bills accepted in exchange and the issue
, of the new bills.
The income derived from Treasury bills, whether interest or gain from the sale or
• disposition of the bills, does not have any exemption, as such, and loss from the
DGXXlCeOC
~
TREASURY DEPARTMENT
Washington
IMMEDIATE RELEASE.
October 6, 1965
rlxxxxxXXXX3tIW~Y-Y..J9GSEK."BO'"_"G8BBdt
TREASURY'S WEEKLY BILL OFFERING
: The Treasury Department, by this public notice, invites tenders for two series
~asury
bills to the aggregate amount of $2.20~.000
and in exchange for Treasury bills maturing
..
.~ ,202,.000
October 14 1965, in the amount
Jiiii ·
, as follows:
91 -day bills (to maturity date) to be issued
in the amount of $l.~00;6ii'OOO
...
Januarx~.
1966
OctQber 14, 1965
iii
,
, or thereabouts, represent-
ing an additional amount of bills dated
and to mature
, or thereabouts, for
July
1~965
,
, originally issued in the
amount of $l,OOa'OOO , the additional and original bills
...
to be freely interchangeable.
182 -day bills, for $1.000.,000 , or thereabouts, to be dated
October 14. 1965 , and to mature April 1~6
~
The bills of both series will be issued on a discount basis under competitive
loncompetitive bidding as hereinafter provided, and at maturity their face amount
be payable without interest.
They will· be issued in bearer form only, and in
~1Dations of $1,000, $5,000, $10,000,' $50,000, $100,000, $500,000 and $1,000,000
rity value).
Tenders will be received at Federal Reserve Banks and Branches up to the closing
Daylight Saving
one-thirty p.m., Eastem/:naOtlaBii time, Monday, October ll, 1965
• Tenders
~ot
~
J4WJI
be received at the Treasury Department, Washington.
Each tender must be
even multiple of $1,000, and in the case of competitive tenders the price
td must be expressed on the basis of 100, with not more than three decimals,
,99.925.
Fractions may not be used.
It is urged that tenders be made on the
TREASURY DEPARTMENT
FOR IMMEDIATE RELEASE
TREASURY'S WEEKLY BILL OFFERING
The Treasury Department, by this public notice, invites tende"
for two series of Treasury bills to the aggregate amount of
$ 2 200,000,000,or thereabouts, for cash and in exchange for
Tre~sury bills maturing October 14, 1965, in the amount of
$2,202,515,000, as follows:
91-day bills (to maturity date) to be issued
in the amount of $1,200,000,000, or thereabouts,
additional amount of bills dated July 15, 1965 ,
mature January 13, 1966,originally issued in the
$ 1,000,711,000,the additional and original bills
interchangeable.
Oc tober 14, 1965,
representing an
and to
amount of
to be freely
182-day bills, for $ 1,000,000,000, or thereabouts, to be dated
October 14, 1965, and to mature April 14, 1966.
The bills of both series will be issued on a discount ba$1s unde
competitive and noncompetitive bidding as hereinafter provided, and r
maturity their face amount will be payable without interest. They
will be issued in bearer form only, and in denominations of $1,000,
$5,000, $10,000, $50,000, $100,000, $500,000 and $1,000,000
(maturity value).
Tenders will be received at Federal Reserve Banks and Branches
up to the closing hour, one-thirty p.m., Eastern Daylight Saving
time, Monday, October 11, 1965.
Tenders will not be
received at the Treasury De{>artment, 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 fo~ ~
forwarded in the special envelopes which will be supplied by Fede~
Reserve Banks or Branches on application therefor.
Banking institutions generally may submit tenders for account (
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 rece1,
without deposit from incorporated banks and trust companies and f~
responsible and recognized dealers in investment securities. Tend.1
from others must be accompanied by payment of 2 percent of the fac,
amount of Treasury bills applied for, unless the tenders are
accompanied by an express guaranty of payment by an incorporat~N
or trust company.
F-222
- 2 -
Immediately after the closing hour, tenders will be opened at the
ral Reserve Banks and Branches, following which public announcewill be made by the Treasury Department of the amount and price
e of accepted bids. Those submitting tenders will be advised
he acceptance or rejection thereof. The Secretary of the Treasury
essly reserves the right to accept or reject any or all tenders,
hole or in part, and his action in any such respect shall be
1. Subject to these reservations, noncompetitive tenders for
issue for $200,000 or less without stated price from anyone
er will be accepted in full at the average price (in three
nals) of accepted competitive bids for the respective issues.
lement for accepted tenders in accordance with the bids must be
or completed at the Federal Reserve Bank on October 14, 1965, in
or other immediately available funds or in a like face amount
:easury bills maturing October 14, 1965. Cash and exchange tenders
receive equal treatment. Cash adjustments will be made for
~rences between the par value of maturing bills accepted in
lnge and the issue price of the new bills.
The income derived from Treasury bills, whether interest or
from the sale or other disposition of the bills, does not have
!xemption, as such, and loss from the sale or other disposition
'easury bills does not have any special treatment, as such,
, the Internal Revenue Code of 1954. The bills are subject to
e, inheritance, gift or other excise taxes, whether Federal or
, but are exempt from all taxation now or hereafter imposed on
rincipal or interest thereof by any State, ·or any of the
ssions of the United States, or by any local taxing authority.
urposes of taxation the amount of discount at which Treasury
are originally sold by the United States is considered to be
est. Under Sections 454 (b) and 1221 (5) of the Internal
~e Code of 1954 the amount of discount at which bills issued
nder are sold is not considered to accrue until such bills are
redeemed or otherwise disposed of, and such bills are excluded
~onsideration as capital assets.
Accordingly, the owner of
lry bills (other than life insurance companies) issued hereunder
lnclude in his income tax return only the difference between
:ice paid for such bills, whether on original issue or on
luent purchase, and the amount actually received either upon
)r redemption at maturity during the taxable year for which the
1 is made, as ordinary gain or loss.
~reasury
Department Circular No. 418 (current revision) and this
! prescribe
the terms of the Treasury bills and govern the
ions of their issue. Copies of the circular may be obtained from
deral Reserve Bank or Branch.
./
and irresponsible persons can acquire destructive
II,
Uu
I.
""1 .....1
military-type weapons and handguns, fta:s demonstrated
,)
~
n;. ,.,
t
.
~i/t
!
'l.,
',- ':,
"l~~
1\
I
'v If'
i:~
t ~' "..t t.
.'
t~ ,~; v;
the urgent need for new, effective firearms controls.
/t
: i' (t'
"As law enforcement officials respons; for
protecting the lives and safety of local citizens,
the police chiefs know .... first hand the tragic role
such dangerous weapons play when in the wrong hands
and the extent to which they are used to commit
crime.
Their action yesterday, together with the
similar action taken by the
.......-'
{[IC
on Augus t 10, shows
Ameri~an
i",f..,\1
(q tJ\.,t(! C,
.uld~.ceman--t
It
Ellt--\.t;' 'it
~
strengthen~
/'
C~),"
G-1~.y.~.t:.ae,,··i~Eance·
l1L(
, nation's law
Association~
Bar
It."
.> 1,,(/1 p"/'
our
ft
leaders p-laee·--on'J,
the t'Fesent Federal Firearms Ac t, ,hy'
I
(
li'l
"
::
FOR IMMEDIATE RELEASE
TREASURY ENFORCEMENT HEAD PRAISES POLICE CHIEF'~
SUPPORT OF FIREARMS BILL
Endorsement yesterday by the International Association
1
C
o f 'i\ "..L (
'
\
(,
;, ,
I, ,
'/
!,
f
I' '
I
' ,
V
;' { ,
of Chiefs of Police/legislation supported by the Treasury~
aimed at tighter Federal control of firearms, was praised
today by David C. Acheson, Special Assistant to the
Secretary (For Enforcement).
Referring to the resolution passed by the IACP in
its
t~¢tr
annual meeting in JMi,amiif
this week, Mr. Acheson said:
"The International Association of Chiefs of
I
i
,
',t''T
Jf'
L r<' 4 ~ A, l k l/kt { l
Police is to be- CQW~A4e6 for its action yesterday
l;f
v
' ) '\l'- \~",,<
,( v
Ii.
.,,', J
~
1\
endorsing the enactment of S. 1592 or similar
Federal legislation which will assist the states
in controlling the interstate traffic in dangerous
firearms.
-t.Re.,-€,a-&e-wi-th-"whicn (rimina1s, juveniles
;,: '/
:>
TREASURY DEPARTMENT
October 8, 1965
FOR IMMEDIATE RELEASE
TREASURY ENFORCEMENT HEAD PRAISES POLICE
CHIEFS SUPPORT OF FIREARMS BILL
Endorsement yesterday by the International Association
of Chiefs of Police of legislation supported by the Treasury
and the Department of Justice, aimed at tighter Federal control
of firearms, was praised today by David C. Acheson, Special
Assistant to the Secretary (For Enforcement).
Referring to the resolution passed by the IACP in its
annual meeting in Miami this week, Mr. Acheson said:
"The International Association of Chiefs of
Police should be congratulated for its action
yesterday endorsing the enactment of S. 1592 or
similar Federal legislation which will assist the
states in controlling the interstate traffic in
dangerous firearms. Criminals, juveniles and
irresponsible persons can too easily acquire
destructive military-type weapons and handguns.
The resulting deaths and injuries have demonstrated
the urgent need for new, effective firearms controls.
The chiefs of police have met this head-on
in the action yesterday.
"As law enforcement officials responsible for
protecting the lives and safety of local citizens,
the police chiefs know first hand the tragic role
such dangerous weapons play when in the wrong hands
and the extent to which they are used to commit
crime. Their action yesterday, together with the
similar action taken by the American Bar Association
on August 10, shows the unequivocal support given by
the nation's leaders to the Administrations effort
to strengthen the Federal Firearms Ac t."
000
F-223
TREASURY DEPARTMENT
4
FOR RELEASE SUNDAY NEWSPAPERS
OCTOBER 10, 1965
COAST GUARD ICEBREAKER NORTHWIND COMPLETES
MAJOR MARINE STUDY IN SIBERIAN ARCTIC
Assistant Secretary True Davis today announced the
completion by the U. S. Coast Guard icebreaker NORTHWIND of
the most intensive oceanographic study ever carried out by the
United States in the far north Kara Sea.,
The ship will depart Oslo, Norway, October 10, arriving
in New York October 21. The NORTHWIND will proceed the following
day to her homeport, Seattle, Washington.
During her two-month stay in the Arctic above Soviet
Russia the NORTHWIND became the first American vessel to
traverse the Kara Sea on an oceanographic mission. The NORT~Im'
study was part of the United States program for oceanography,
being conducted in cooperation with the Inter-governmental
Oceanographic Commission (IOC) of the United Nations. The
information gathered by the NORTHWIND will be made available
to the World Data Center A for Oceanography in Washington, D.C.
World Data Center B is in Moscow, U. S. S. R. The two centers
exchange oceanographic information.
Soviet destroyers stayed near the NORTHWIND during much of
her voyage, but did not interfere. During the passage through the
Kara Sea the Soviet vessels and the NORTHWIND exchanged info~l
messages by blinker light .
.. The NORTHWIND gathered information at 132 points on water
temperature, salinity, dissolved oxygen and nutrients. She also
obtained bottom core samples at approximately half of the
observation points. Core samples will be examined, among other
things, for evidence of radioactivity.
(over)
F-224
- 2 -
Data obtained also enabled 15 marine scientists on board
he NORTHWIND to chart ocean currents in the far north region.
:eologic characteristics of the sea bottom in this area were
etermined by measurement of shock waves set up by small
nderwater explosions.
The scientific party consisted of teams from the U. S.
aval Oceanographic Office, and the Geophysical and Polar
esearch Center of the University of Wisconsin.
To the American scientific community the NORTHWIND's
tudy is especially significant since it was carried out in an
rea never visited before by a modern United States scientific
xpedition. The NORTHWIND's visit, therefore, will make a
ajor contribution to the world's knowledge of far northern
aters.
000
TREASURY DEPARTMENT
October 11,1965
FOR IMMEDIATE RELEASE
TREASURY MARKET TRANSACTIONS IN SEPTEMBER
During September 1965, market transactions in
direct and guaranteed securities of the government
for Treasury Investment and other accounts resulted
in net purchases by the Treasury Department of
$198,622,300.00.
000
F-225
TREASURY DEPARTMENT
October 11,1965
FOR IMMEDIATE RELEASE
TREASURY MARKET TRANSACTIONS IN SEPTEMBER
During September 1965, market transactions in
direct and guaranteed securities of the government
for Treasury Investment and other accounts resulted
in net plITchases by the Treasury Department of
$198,622,300.00.
000
F-225
.TREASURY DEPARTMENT
J4"
: •••
~
WASHINGTON. D.C.
.'. • •
October 11, 1965
RESULTS OF TREASURY'S WEEKLY BILL OFFERING
:he ~easur,y Department announced last evening that the tenders for two series of
"ry bills, one series to be an additional issue of the bills dated July 15, 1965,
:e other series to be dated October 14, 1965, which were offered on October 6,
pened at the Federal Reserve Banks on October 11. Tenders were invited for
~:'OOO,OOO" or thereabouts, ot 91-day bills and tor $1,000"000,,000,, or thereabouts,
-dq bills. The details ot the two series are as tollows:
:lEASE A..M. NEWSIl\PERS,
.y, october 12, 1965.
OF ACCEPrED
lTIVE BIDS:
gh
II
erage
9l-day Treasury bills
January 13 2 1966
Approx. Equivo
Price
Annual Rate
3.988%
98.992
98.983
4.023%
98.981
4.006% Y
maturi~
:
l82~
·:
maturin~
I
Price
97.892
91.884
91.881
:
:
:
Treasury bills
AEril 142 1966
Approx. Equiv •
Annual Rate
!I
4.170%
4.185%
40 180% Y
~pt~ 2 tenders totaling $5,000 000
,t'cent of the amount of 91-day bills bid for at the low price was accepted
,'rcent of the amount of 182-day bills bid for at the low price was accepted
:rENDERS APPLIED FOR AND ACCEPTED BY FEDF..R.AL RESERVE DISTRI CTS I
AcceEted
Accepted
rict
: A;eElied For
AEElied For
6,948,000'
:m
15,594,000 : $ 21,948,000 $
$ 25,594,000 I
481,899,000
650,919,000 : 1,192,186,000
lork
1,211,919,000
6,413,000
18,813,000 :
l.delphia
14,583,000
30,813,000
31,215,000
36,111,000 :
~land
45,204,000
36,801,000
11,531,000
18,818,000 :
~ond
11,531,000
24,318,000
18,243,000
I
lta
32,406,000
50,155,000
51,005,000
156,881,000
:
119,248,000
330,540,000
289,148,000
19O
28,585,000
48,113,000
30,585,000
~ouis
53,423,000
8,799,000
19,422,000 :
12,429,000
iapolis
19,422,000
16,204,000
22,329,,000
39,654,000 •
~B City
39,,654,000
1,540,000
12,631,000
23,116,000 I
LS
30,216,000
212
860
OOO
221.z114,t000
91
516
000
I
'rancisco
105 2°16 2000
2
2
z 2
$2,005,832,000 $1,001,,438,000
TOTAlS
$1,984,049,000 $1,200,119,000
·
·
0
BI
sI
i
:ludes $313,943,000 noncompetitive tenders accepted at the average price of 98.987
~ludes $142,800,000 noncompetitive tenders accepted at the average price of 91.887
la coupon issue of the same length and for the same amount invested" the return on
Ise bills 'WouJ.d provide yields of 4.10%, for the 9l~ bills, am 4.33%, for the
l-day bills. Interest rates on bills are quoted in terms ot bank discount with
: return related to tba face amount of the bills payable at maturiv rather than
~ amount invested and their length in actual number of days related to a 360-day
11". In contrast, yields on certificates, notes, and bonds are computed in terms
!interest on the amount invested, and relate the number ot days remaining in an
erest pqment period to tba actual number of days in the period, with semiannual
pounding i t more than one coupon period is involved.
1
--
4.·
.
\.j
TREASURY DEPARTMENT
FOil RElEASE i.K. lIEWS!l.PEBS,
WASHINGTON. D.C.
~
•
Tuesday, october 12, 1965.
October 11, 1965
RESULTS OF TREASURY'S WEEKLY BILL OFFERING
The Treasury Department announced last evening that the tenders for two ItI'1a
Treasury bills, one series to be an additional issue of the bills dated July 15.1
aoo the other series to be dated October 14, 1965, which were offered on October 6
were opened at the Federal Reserve Banks on October 11. Tenders were invited t.
$1,200,000,000, or thereabouts, of 91-day bills and tor $1,000,000,000, or th~
ot 162-dq bills. The details ot the two series are as tollows:
dANG! OF ACCEPl'ED
CCMPETITIVE BIDS:
High
Law
A.verage
9l-day Treasury bills
maturi!!i January 13.1 1966
Approx. EquiT.
Annual Rate
Price
3.988%
98.992
4.023%
96.963
4.006% !/
98.967
:
·
:
:
:
:
:
162-dq Treasurl bWa
maturing AErll 14. 196&
ApPl'Ol·1i
Price
97.892
97.884
97.887
!I
'"PI
4.1801J
al Exeept~ 2 tenders totaling $5,ooQ 1 OOO
10 percent of the amount of 91-day billS bid for at t he low price was accepted
74 percent of the amount of l62-clay bills bid tor at the low price was acceptecl
Tar.u. TENDERS APPLIED FOR AND ACCEPTED BY FEDFRAL RESERVE DISTRICTS:
District
A~lied For
AceeEted
: ~E1ied For
Ac~t...
Boston
:
6,.
$
21,948,000 •
8 25,594,000 $ 15,594,000
New York
1,271,919,000
650,919,000 I
1,192,786,000
487,891
Philadelphia
18,873,000 ••
30,673,000
6,W
14,583,000
Cleveland
36,801,000
36,771,000 :
45,204,000
31,21S.
Richmond
18,876,000 :
24,376,000
n,SI
17,531,000
Atlanta
57,005,000
50,755,000
32,406,000
Chicago
269,746,000
179,248,000 •
330,540,000
st. Louis
48,773,000 •
53,423,000
30,585,000
MinneapoliS
19,422,000
19,422,000 •
8,7
12,429,000
Kansas Ci.ty
•
16,2
39,654,000
39,654,000
22,329,000
Dallas
30,216,000
23,716,000 :
7,~,
12,631,000
San Franciaco
105 l 016,2000
221117'4
97,2516 2000 I
272 1860,2000
TOTAIS
$1,984,049,000
$1,200,119,000 ~ $2,005,832,000 1i,6Ol,;l
·
··
·
·
1~1
'EI
Includes $313,943,000 noncompetitive tenders accepted at the average price ~
__
c1/ Includes $l42,8OO,000 noncompetitive tenders aceepted at the aTerage price of
1 On a coupon is sue ot the same length and f cr the same amount invested tbe
these bills would provide yields of 4.10%, far the 91-da.Y bills, am '.3)~,.~
182-day bills. Interest rates on bills are quoted in terms ot bank dia~~
the return related to tIE tace amount ot the bill. payable at maturiV ratblr
tlll amount invested and their length in actual number of days related to I ]8
yea:. In contrast, yields on certificate., note. J and bonds are computeclii'
ot 4nterest on the amount invested, and relate the number ot days rema~'
interest pqment period to the actual. number of days in the period, with ...
compounding i t more tl».n one coupon period is inTo1ved.
F-226
nt
- 15 -
lId for its currency internationally. has made the doUar -- along with gold __
e basic international reserve assets.
We cannot afford to take side excur-
ms from our present policy which could cause a loss of confidence in us
.d in turn the dollar.
In summary, I point out that the root cause of our monetary problem
our balance -of -payments deficit and this is the problem to which we must
~ect
our attention and which we must solve.
This is the course of action
ich we are following and must follow, for we cannot continue to sustain
'icits of the magnitude of recent years.
Consequently, it is essential
t we continue to pursue vigorously the measures outlined by the President
3tem the outflow of dollars abroad and thus reduce substantially. if not
nplete ly eliminate. the deficits which have led to our gold losses in the
few years.
~t
be broad.
Our effort in this direction. by the very nature of the problem,
Not only does it involve many interrelated programs which re-
'e support and participation by many departments and
a~ncies
of the Govern-
It but it also requires the understanding and cooperation of business. labor
'lance.
- 14 -
This plan would be in serious conflict with the various obligations
IMF members, who have agreed to maintain a parity within a margin
one percent on either side of the declared par value.
This proposal
,e If. of course, is based on the assumption that the United States I offer
buy gold is the controlling factor in the gold market.
sumption can be challenged.
But certainly this
And. in any event. the risks inherent in a
lve that could trigger generalized uncertainty and doubt far outweigh
.atever dubious advantages such a move might offer.
At this pOint I wish to repeat what I said before; namely, the role
the dollar internationally has been possible for a number of reasons
the overriding one is the knowledge that dollars are freely convertible
gold at the fixed price of $35 per ounce.
~red
At the same time we have
to buy gold freely. thus making it a two-way street.
The fact that
have not varied from this policy and this fixed price for over thirty years,
3
the fact that we are the only country which stands ready to exchange
- 13 -
ted. for example. that world trade virtually doubled in the last decade
::me. while domestic economies were moving briskly forward.
The theoretical arguments for floating exchange rates can be presented
th great effectiveness and appeal but we believe ,that such a system. in
actice. could prove extreme ly disruptive to world trade and financial
msactions.
There is another schoo 1 that would have the United States continue
fixed selling price of gold at $35 but they would have us suspend purchases
make purchases on a limited scale.
This plan contemplates a lower price
gold by removing the United States from the buying side at the fixed
price.
The advocates of this plan contend that the guaranteed price
gold is conducive to speculation. especially by individuals. and. there-
e. if the guaranteed price is removed. private speculation in gold would
east be less attractive.
It is further contended that the desire of some
ntries to hold a large proportion of their reserves in gold would be
lpened.
- 12 -
fluctuation, whereas others would let the dollar float freely.
This
hool holds that fixed exchange rates create the need for large reserves.
ley feel that fixed exchange rates tend to restrain individual countries
)m following indicated and desirable domestic pOlicies.
They contend
it if exchange rates were free to move up and down in the market, a
lance-of-payments deficit would be reflected in a cheapening of the
llntry's currency which would bring about desired adjustments in the
Lde pattern; that is. lower imports and higher exports.
During the postwar period we have striven through the International
netary Fund and through international monetary cooperation to deve lop
ayments system based on stable eXChange rates firmly linked to gOld.
~e
exchange rates wou Id introduce uncertainties and disruptions in ex-
nge transactions and would not be conducive to trade between countries.
eh has grown so greatly since World War II under a system of basically
d exchange rates among the major industrial countries.
It should be
- 11 -
ley combine the proposal that the world once again accept automatic
gulation of its money supply according to the vagaries of world gold
oduction with the proposal that the implied and stated commitments
the gold exchange standard be repudiated to the advantage of a few
d the disadvantage of many.
It is easy to see how it might be appeal-
g to the major gold-producing countries. including the Union of South
rica and the U. S. S. R .• and even perhaps to a few countries holding a
gh proportion of their reserves in gold.
It would. of course. be dis-
iminatory against countries which have kept a substantial fraction of
~ir
reserves in the form of reserve currencies.
We believe our com-
.tment to maintain the fixed parity of $35 an ounce between gold and
liars is basic to the stability of the world monetary system.
It has also been proposed that we abandon our rigid policy of
ying and se lLing go Id at $ 35 per ounce thus letting the exchange rate
J
the doUar fluctuate or float.
Some advocates would limit the amount
- 10 Another suggested solution to our balance-of-payments problem
to return to a gold standard system.
Some may have other motives
It many advocates of this solution be lieve that the international monetary
'stem at the present time is experiencing a surplus of liquidity mainly
cause of too many dollars.
They believe the automatic adjustment which
ey attribute to the gold standard would correct the situation and bring
out a balance.
A return to the gold standard and its so-called automatic adjustment
lplies a sharp curtailment of world reserves and world liquidity.
this solution is the threat of worldwide deflation.
Inherent
Some who suggest the
;urn to the gold standard recognize the threat of dangerous deflationary
~ssures
and. therefore. recommend that there be a general increase in
price of gold so as to offset this deflationary pressure.
Such suggestions are thoroughly unacceptable to the United States.
- 9 -
:ficial price to mean that we had made a judgment that the official price
as too low; that in some way, directly or indirectly, we were on the way
changing our official price.
This could lead to speculation against our
lrrency.
We often hear it said that subsidies are paid by other countries.
erefore, why not by the United States.
The answer is that the monetary units of other countries do not
ve the status of the dollar, and other countries do not have the responsi.ity for maintaining a .fixed relationship between their currencies and
d. Gold in the United States is a monetary metal and cannot be treated
a commodity. as are products of other industries, or as gold is
ated in some countries.
The usual reasons, therefore, for urging
d subsidies in other couniries or for urging subsidies to other industries
his country are not applicable to gold in the United States.
- 8 ) replace the gold losses of the last seven and one -half years.
In this connection. let's take a look at recent gold production figures
~re
in the United States and in the Free World.
In the United States production reached its peak in 1940. when it
nounted to $1 70 million.
11y $51. 4 million.
In 1964. United States production amounted to
Free World production. on the other hand, has in-
'eased from $738 million after World War II to $1. 4 billion in 1964.
;timates are that for at least the next few years Free World production
.11 continue to increase.
As it now stands, based on 1964 figures. United
ates production is only 3. 7 percent of Free World production.
A subsidy. in short. cannot solve the problem.
And it would present
'Very real danger to our dollar.
We cannot afford to run the risk of having a second price for gold
the United States alongside the official price.
Our creditors - - those
It hold dollar balances -- would interpret any price other than the
- 7 -
auld bring forth enough gold within a few years to offset our decrease in
)ld stocks.
This decrease has amounted to $8.8 billion in the past seven
Id one half years -- the period when our gold losses were greatest.
Is it conceivable. therefore. that subsidization could reverse the
end and cause such an increase in production that our gold stocks woo ld
!ach the 1950 or 1958 level? What does experience tell us? In 1934.
len the price of gold was increased 69 percent -- when labor and supplies
~re
cheap. so that it was feasible to rework old ore dumps and tailing piles
:d to dredge the gold-bearing streams in the West -- our gold production
ightly more than doubled.
Consider the different economic conditions pre-
iling today -- the present cost of labor and machinery -- and speculate 'as
the kind of subsidy that would be required to insure the large-scale proction necessary to restore the lost gOld.
The Department of the Interior
'ew years ago. in commenting on one of the proposed subsidy bills, in-
:ated that a 100 percent subsidy would about double today's production.
that rate. it would take the increase due to the subsidy about 170 years
- 6 -
On the basis of figures for the first half of this year we are running
deficit of about $1. 3 billion on an annual basis. Our gold losses, however,
we been large and we lost $1. 2 billion during the first half of this year,
)t including $258.8 million paid into the International Monetary Fund on
me 30. Our gold stock after this payment stood at $14 billion.
The picture today with respect to foreign exchange holdings shows
at foreign monetary authorities hold about $14 billion in their reserves.
'ivate holdings amount to about $11 billion.
Nonmonetary international
;titutions also hold about $1. 5 billion.
The United States balance-of-payments deficits which provided the
lible for the accumulations of dollar balances by others, plus our loss
gold, have provided in many quarters the opportunity to come forth with
arietyof solutions to our problem, some of'Vlrhich relate to gold.
Let's
e a look at some of these proposals.
It has been said that a subsidy to gold producers in the United States
- 5 -
J49 and totaled about $7 billion.
During this period our gold stock rose
$4.5 billion and amounted to $24.6 billion at the end of 1949.
In 1950 our balance -of -payments picture changed from surplus to
~ficit
and during the seven-year period through 1956 we had a total deficit
$10.7 billion.
During this period our gold stock declined only $2. 5 billion.
the end of 1956 our gold stock amounted to $22.1 billion.
In 1957. due to the Suez crisis. we again showed a surplus in our
lance of payments which amounted to $500 million; however. our gold
)ck increased $800 million.
Our gold stock at the end of 1957 amounted
$22.9 billion which was nearly $3 billion more than we had at the close
World War II and only $1. 7 billion less than we had at the end of 1949.
In 1958 we started a period of very large and persistent balance-
'payments deficits which have been with us every year since. During
period 1958 through 1964 our deficits amounted to $24.3 billion and
gold losses were $7.4 billion.
- 4 -
)llars.
Because of the importance of this link, successive Presidents of
)th pOlitical parties have given assurance that the $35 price would be de-
!nded with all the resources of the country.
Doubt as to our intention of
mtinuing this pledge could cause a severe drain on our gold supplies
ld could disrupt not only our economy but also the economies of the
>untries of the Free World.
We do not, I might note here, sell gold to foreign individuals.
Dwever, we se 11 gold for legitimate industrial, professional and artistic
Ie in the United States.
Inasmuch as the dollar claims held by others, which we stand
!ady to convert into gold, were accumulated through our balance -of-
.yments transactions, I think it would be appropriate to trace briefly
e history of the U .
3.r II.
.s.
payments picture during the period since World
This will give us a picture of where we stand today.
Our payments balance was in surplus during the period 1946 through
- 3 -
mounts as a supplement to the gold supply in furnishing liquidity to the
'ade between the countries of the world.
A great many countries made
decision that the dollar best met their needs as a reserve asset and be-
luse of its general acceptability and other factors the use of the dollar
~
private trading transactions became worldwide.
~quired
confidence in the dollar.
To reach this position
This has been possible for a number of
!asons, but a fundamental aspect has been our policy of buying and seLLing
Ild at a fixed price to foreign governments, central banks and under certain
nditions to international institutions, for the settlement of international
lances and for other legitimate monetary purposes.
Our pledge to main-
n that price has been and still is the foundation upon which the stability
the gold exchange standard is based.
The dollar is the' only currency that maintains this link between
neyand gold, and the monetary system of the entire Free World is
ged to this interconvertibility which we maintain between gold and
- 2 -
.ature of its use remain stable.
We in the Treasury think of gold as a
:lonetary metal -- not as a commodity.
The gold doLLar is the standard
f unit and is defined as 15-5/21 grains of gold nine-tenths fine.
This
mounts to one thirty-fifth of an ounce of gold and therefore makes the
fficial price of gold $35 per fine ounce.
Also. we must keep in mind
lat the dollar not only is involved in our domestic economy. but also
I
used as a reserve currency by others as a supplement to the world's
)ld supply.
Our Government's policy on gold. therefore. is essentially the
Lme today as it was in 1934. when Congress enacted the GoLd Reserve
::t. Our basic policy has been -- and remains -- one of centralizing the
,Id stock of the country in the hands of the Government under the jurisdic-
m of the Treasury and maintaining a fixed price of $35 an ounce for gold.
Prior to World War II the dollar evolved as a key currency of the
'rId and since World War II the world has accepted the dollar in increasing
R RELEASE UPON DELIVERY
TREASURY DEPARTMENT
Washington
REMARKS BY LELAND HOWARD
DIRECTOR, OFFICE OF DOMESTIC GOLD AND SILVER OPERATIONS
AT THE 1965 MINING CONVENTION OF THE
AMERICAN MINING CONGRESS
LAS VEGAS I NEVADA
THURSDAY, OCTOBER 14, 1005
2 : 00 P. M., PDT.
TREASURY'S GOLD POLICY
I welcome this opportunity to meet with this distinguished gathering
representatives of one of our nation's most essential industries and to
lve the opportunity to restate the Treasury's position on gOld.
At the very outset and before I proceed further, I believe it would
~lp
in explaining Treasury's position if I pointed out the difference between
inking of gold as a commodity and as a monetary metal.
You as producers
e interested in bringing out of the ground a ton of material for which you
n obtain a price
I
on the basis of the metal or metals therein, that will
fset your cost of mining the ton of material. As the cost of mining in-
eases you feel that the price of gold should increase.
~tal
nes.
content of an ore body is not inexhaustible
J
The fact that the
is even forgotten some-
As a monetary metal, however the price of gold must by the
I
TREASURY DEPARTMENT
FOR RELEASE UPON DELIVERY
Washington
REMARKS BY LELAND HOWARD
DIRECTOR. OFFICE OF DOMESTIC GOLD AND SILVER OPERA'l10.
AT THE 1965 MINING CONVENTION OF THE
AMERICAN MINING CONGRESS
LAS VEGAS , NEVADA
THURSDA Y, OCTOBER 14, 1965
2:00 P. M., PDT.
TREASURY'S GOLD POLICY
I we lcome this opportunity to meet with this distinguished gatheriaa
of representatives of one of our nation's most essential industries and to
have the opportunity to restate the Treasury's position on gOld.
At the very outset and before I proceed further, I believe it would
help in explaining Treasury's position if I pointed out the difference bet....
thinking of gold as a commOdity and as a monetary metal.
You as
produce~
are interested in bringing out of the ground a ton of material for which JOU
can obtain a price, on the basis of the metal or metals therein, that will
offset your cost of mining the ton of material.
As the cost of mining in-
creases you feel that the price of gold should increase.
The fact that tbI
metal content of an ore body is not inexhaustible, is even forgotten
times. As a monetary metal, however, the price of gold must
80l1li'
br tbe
- 2 -
lature of its use remain stable. We in the Treasury think of gold as a
nonetary metal -- not as a commodity. The gold dollar is the standard
f unit and is defined as 15-5/21 grains of gold nine-tenths fine.
This
mounts to one thirty-fifth of an ounce of gold and therefore makes the
fficial price of gold $35 per fine ounce. Also, we must keep in mind
tat the dollar not only is involved in our domestic economy, but also
used as a reserve currency by others as a supplement to the world's
)ld supply.
Our Government's policy on gold, therefore, is essentially the
Lme today as it was in 1934, when Congress enacted the Gold Reserve
:t. Our basic policy has been -- and remains -- one of centralizing the
Id stock of the country in the hands of the Government under the jurisdicIn of the Treasury and maintaining a fixed price of $35 an ounce for gold.
Prior to World War
n
the dollar evolved as a key currency of the
rid and since World War II the world has accepted the dollar in increasing
16~
- 3 -
amounts as a supplement to the gold supply in furnishing liquidity to the
trade between the countries of the world.
A great many countries made
a decision that the dollar best met their needs as a reserve asset and be-
cause of its general acceptability and other factors the use of the dollar
in private trading transactions became worldwide.
required confidence in the dollar.
To reach this pOSition
This has been possible for a number of
reasons, but a fundamental aspect has been our policy of buying and selling
gold at a fixed price to foreign governments, central banks and under certain
conditions to international institutions, for the sett lement of international
balances and for other legitimate monetary purposes. Our pledge to maintain that price has been and still is the foundation upon which the stability
of the gold exchange standard is based.
The dollar is the only currency that maintains this link between
money and gold, and the monetary system of the entire Free World is
hinged to this interconvertibility which we maintain between gold and
- 4 -
lollars. Because of the importance of this link. successive Presidents of
loth political parties have given assurance that the $35 price would be deended with all the resources of the country. Doubt as to our intention of
ontinuing this pledge could cause a severe drain on our gold supplies
1'1l1d could disrupt not only our economy but also the economies of the
ountries of the Free World.
We do not, I might note here, sell gold to foreign individuals.
lowever, we se 11 gold for legitimate industrial, professional and artistic
se in the United States.
Inasmuch as the dollar claims he ld by others, which we stand
~ady
to convert into gold, were accumulated through our balance-of-
yments transactions, I think it would be appropriate to trace briefly
e history of the U. ·S. payments picture during the period since World
ar II. This will give us a picture of where we stand today.
Our payments balance was in surplus during the period 1946 through
- 5 -
1949 and totaled about $7 billion.
During this period our gold stock roee
by $4. 5 billion and amounted to $24.6 billion at the end of 1949.
In 1950 our balance -of -payments picture changed from surplus to
deficit and during the seven-year period through 1956 we had a total deficit
of $10. 7 billion.
During this period our gold stock declined only $2.5 billil
At the end of 1956 our gold stock amounted to $22.1 billion.
In 1957, due to the Suez crisis, we again showed a surplus in our
palance of payments which amounted to $500 million; however, our gold
stock increased $800 million.
Our gold stock at the end of 1957 amounted
to $22.9 billion which was nearly $3 billion more than we had at the close
of World War II and only $1. 7 billion less than we had at the end of 1949.
In 1958 we started a period of very large and persistent balance·
of-payments deficits which have been with us every year since. During
the period 1958 through 1964 our deficits amounted to $24. 3 billloD and
our gold losses were $7.4 billion.
- 6 On the basis of figures for the first half of this year we are running
deficit of about $1. 3 billion on an annual basis. Our gold losses. however,
lve been large and we lost $1. 2 billion during the first half of this year.
)t including $258.8 million 'paid Into the International Monetary FUnd on
me 30. Our gold stock after this payment stood at $14 billion.
The picture tod,ay with respect to 'foreign exchange holdings shows
at foreign monetary authorities hold about $14 billion in their reserves.
ivate holdings amount to about $11 billion. Nonmonetary international
stitutions also hold about $1. 5 billion.
The United States balance -of -payments deficits which provided the
hible for the accumulations of dollar balances by others. plus our loss
gold. have provided in many quarters the opportunity to come forth with
arietyof solutions to our problem. some of\\hich relate to gOld.
Let's
e a look at some of these proposals.
It has been said that a subsidy to gold producers in the United States
- 7 -
would bring forth enough gold within a few years to offset our decrelfJe in
gold stocks. This decrease has amounted to $8.8 billion in the past seven
and one half years -- the period when our gold losses were greatest.
Is it conceivable, therefore, that subsidization could reverse the
trend and cause such an increase in production that our gold stocks would
reach the 1950 or 1958 level? What does experience tell us? In 1934,
when the price of gold was increased 69 percent -- when labor and suppues
were cheap, so that it was feasible to rework old ore dumps and tailing piS.
and to dredge the gold-bearing streams in the West -- our gold production
slightly more than doubled.
Consider the different economic conditions pre·
vailing today -- the present cost of labor and machinery -- and speculate'"
to the kind of subsidy that would be required to insure the large -scale pro·
duction necessary to restore the lost gold.
The Department of the Intetior
a few years ago, in commenting on one of the proposed subsidy bills,
m-
dicated that a 100 percent subsidy would about double today's production.
At that rate, it would take the increase due to the subsidy about 170 yeatt
- 8 -
to replace the gold losses of the last seven and one -balf years.
In this connection. let's take a look at recent gold production figures
lere in the United States and in the Free World.
In the United States production reached its peak in 1940. when it
.mounted to $1 70 million.
nly $51. 4 million.
In 1964, United States production amounted to
Free World production. on the other hand, has in-
reased from $738 miLLion after World War II to $1. 4 billion in 1964.
stimates are that for at least the next few years Free World production
ill continue to increase. As it now stands, based on 1964 figures, United
ates production is only 3.7 percent of Free World production.
A subsidy, in short, cannot solve the problem. And it would present
very real danger to our dollar.
We cannot afford to run the risk of having a second price for gold
the United States alongside the official price. Our creditors - - those
Lt hold dollar balances -- would interpret any price other than the
- 9 officiaL price to mean that we had made a judgment that the official price
was too Low; that in some way, directly or indirectly, we were on the way
to changing our official price.
This could lead to speculation against our
currency.
We often hear it said that subsidies are paid by other countries,
therefore, why not by the United States.
The answer is that the monetary units of other countries do not
have the status of the dollar, and other countries do not have the responsibUity for maintaining a fixed re lations hip between their currencies and
gOLd. GoLd in the United States is a monetary metal and cannot be treated
as a commodity, as are products of other industries, or as gold is
treated in some countries. The usual reasons, therefore, for urging
gold subsidies in other countries or for urging subsidies to other induatrie'
in this country are not applicable to gold in the United States.
- 10 Another suggested solution to our balance-of-payments problem
to return to a gold standard system. Some may have other motives
many advocates of this solution be lieve that the international monetary
tem at the present time is experiencing a surplus of liquidity mainly
ause of too many dollars.
They believe the automatic adjustment which
y attribute to the gold standard would correct the situation and bring
lut a balance.
A return to the gold standard and its so-called automatic adjustment
lies a sharp curtailment of world reserves and world liquidity. Inherent
his solution is the threat of worldwide deflation. Some who suggest the
Jrn to the gold standard recognize the threat of dangerous deflationary
ssures and, therefore, recommend that there be a general increase in
price of gold so as to offset this deflationary pressure.
Such suggestions are thoroughly unacceptable to the United States.
- 11 -
18
They combine the proposal that the world once again accept automatic
regulation of its money supply according to the vagaries of world gold
production with the proposal that the implied and stated commitments
of the gold exchange standard be repudiated to the advantage of a few
and the disadvantage of many. It is easy to see how it might be appeal-
ing to the major gold-producing countries. including the Union of South
Africa and the U. S. S. R .. and even perhaps to a few countries holding a
high proportion of their reserves in gold. It would. of course. be discriminatory against countries which have kept a substantial fraction of
their reserves in the form of reserve currencies. We believe our com-
mitment to maintain the fixed parity of $35 an ounce between gold and
dollars is basic to the stability of the world monetary system.
It has also been proposed that we abandon our rigid policy or
buying and selling gold at $35 per ounce, thus letting the exchange rate
for the dollar fluctuate or float.
Some advocates would limit the amouat
- 12 of fluctuation, whereas others would let the dollar float freely.
This
school holds that fixed exchange rates create the need for large reserves.
They fee 1 that fixed exchange rates tend to restrain individual countries
from following indicated and desirable domestic policies. They contend
that if exchange rates were free to move up and. down in the market, a
balance-of-payments deficit would be reflected in a cheapening of the
country's currency which would bring about desired adjustments in the
crade pattern; that is. lower imports and higher exports.
During the postwar period we have striven through the International
\lonetary Fund and through international monetary cooperation to deve lop
payments system based on stable exchange rates firmly linked to gold.
"ree exchange rates woo Id introduce uncertainties and disruptions in exbange transactions and would not be conducive to trade between countries,
bich has grown so greatly since World War II under a system of basically
xed exchange rates among the major industrial countries. It should be
- 13 -
noted. for example, that world trade virtually doubled in the last decade
alone, while domestic economies were moving briskly forward.
The theoretical arguments for floating exchange rates can be pr...
with great effectiveness and appeal but we believe that such a system. ill
practice, could prove extreme ly disruptive to world trade and financial
transactions.
There is another school that would have the United States continue
its fixed seLLing price of gold at $35 but they would have us suspend purcbll
or make purchases on a limited scale.
This plan contemplates a lower prj
for go ld by removing the United States from the buying side at the fixed
$35 price.
The advocates of this plan contend that the guaranteed price
for gold is conducive to speculation, especially by ilidividuals, and. there'
fore, if the guaranteed price is removed, private speculation in gold ,oaM
at least be less attractive.
It is further contended that the desire of"
countries to hold a large proportion of their reserves in gold would be
dampened.
-.14 -
This plan would be in serious conflict with the various obligations
IMF members. who have agreed to maintain a parity within a margin
r one percent on either side of the declared par value. This proposal
se If. of course. is based on the assumption that the United States I offer
buy gold is the controlling factor in the gold market.
But certainly this
Isumption can be challenged. And. in any event. the risks inherent in a
Ilve that could trigger generalized uncertainty and doubt far outweigh
latever dubious advantages such a move might offer.
At this point I wish to repeat what I said before; namely. the role
the dollar internationally has been possible for a number of reasons
the overriding one is the knowledge that dollars are freely convertible
gold at the fixed price of $35 per ounce. At the same time we have
red to buy gold freely, thus making it a two-way street. The fact that
tlave not varied from this policy and this fixed price for over thirty years
the fact that we are the only country which stands ready to exchange
- 15 -
gold for its currency internationally, has made the dollar - - along With gold
the basic international reserve assets.
We cannot afford to take side excur.
tions from our present policy which could cause a loss of confidence in us
~nd
in turn the dollar.
In summary, I point out that the root cause of our monetary problem
is our balance-of-payments deficit and this is the problem to which we mull
direct our attention and which we must solve. This is the course of action
which we are following and must follow, for we cannot continue to sustain
deficits of the magnitude of recent years.
Consequently, it is essential
that we continue to pursue vigorously the measures outlined by the Presidellt
to stem the outflow of dollars abroad and thus reduce substantially, if not
complete ly eliminate, the deficits which have led to our gold losses in the
last few years. Our effort in this direction, by the very nature of the probb
must be broad. Not only does it inVOlve many interre lated programs whicb
quire support and partiCipation by many departments and ag1!ncies of tbe Go
ment but it also requires the understanding and cooperation of businesS, III
and finance.
TREASURY DEPARTMENT
FOR RELEASE A.M. NEWSPAPERS
WEDNESDAY, OCTOBER 13, 1965
ANNUAL SECRET SERVICE REPORT
James J. Rowley, Chief of the United States Secret Service, in
his annual report to the Secretary of the Treasury today made kn~
that during fiscal year 1965, 723 persons were arrested for
manufacturing and passing counterfeit currency. Seventy-five percel
of the $3,363,809 counterfeit currency printed was confiscated befO!
it was circulated.
Almost $4 million in U. S. Government checks were stolen and
forged during fiscal year 1965, Chief Rowley reported. The
Secret Service investigated 39,399 forgery cases and arrested 2,720
persons for forgery offenses. The Service also kept its close watc
on forgeries involving U. S. Savings Bonds. More than 5,500 cases 0
this sort were investigated during the same period.
The report, transmitted to Secretary Henry H. Fowler, showed
that during the past ten fiscal years (1956-1965), 5,029 persons
were arrested for counterfeiting offenses -- an average of almost
503 each year. Of the $26 million known to have been counterfeited
during this period, 82 percent -- $22 million -- was seized befoR
it could be circulated.
"The dollar amount of counterfeiting reported this year is
considerably smaller than last year," Chief Rowley said, "but it is
significant that the number of arrests have varied very little
over the past several years. This seems to indicate that the
counterfeiters caught and convicted this year did not attempt to
make bogus money on as large a scale as they did last year, in whic
a record amount was both made and seized."
Chief Rowley, again this year, credited local, State and other
Federal law enforcement agencies for their part in assisting the
Secret Service in the suppression of counterfeiting and forgeries
of government securities and checks. He also praised the aid giveD
by citizens in the identification of violators.
A copy of the Secret Service's Annual Report is attached.
Attachment
F-227
TREASURY DEPARTMENT
UNITED STATES SECRET SERVICE
WASHINGTON, D.C.
20220
OFFICE OF THE CHIEF
October 11, 1965
MEMORANDUM TO THE SECRETARY
Attention:
From:
Mr. David C. Acheson
Special Assistant to the
Secretary (for Enforcement)
Mr. James J. Rowley
Chief, U. S. Secret Service
Subject:
Secret Service Annual Report
The Annual Report of the activities and
accomplishments of the U. S. Secret Service
for the Fiscal Year ended June 30, 1965, is
herewith submitted.
7
//,,/
{"C'
", y
-u
~
1?.:
Annual Report of the United States Secret Service
for Fiscal Year Ended June 30, 1965
James J. Rowley, Chief
The following summary reflects the results of Secret Service
criminal investigations of counterfeit activities during
fiscal year 1965:
Secret Service recovered $3,363,809 in counterfeit
currency. Seventy-five percent of this amount, $2,517,59
was seized before it was placed into circulation.
723 persons were arrested for counterfeiting offenses.
36 counterfeiting plants (Places of manufacture) were
captured and destroyed.
The following statistics summarize counterfeiting activities
during the past ten fiscal years (1956-1965):
The Secret Service seized $22 million in counterfeit
notes and coins before they could be placed in
circulation. This amount represents 82 percent of t~
total amount known to have been counterfeited -- approxill
$26 million.
There were 5,029 arrests for counterfeiting offenses.
350 counterfeiting plants were captured and destroyed.
During the past decade there was a noticeable increase in
the amount of money counterfeited. The primary reasons for this
increase were improved methods in photography and printing, both
of which facilitated and simplified the techniques of counterfeit
Improved technical equipment also made it easier for anyone with
minimal skills and talents to manufacture passable notes andco~
Modern transportation facilities also enabled criminal groups to
operate nation-wide in short periods of time. In spite of t~
ease with which currency was counterfeited and the speed with
which it was distributed simultaneously in numerous widely
separated geographical areas, Secret Service was successful not,
only in confiscating all known counterfeit plants and apprehendill
over five thousand counterfeiters, but it seized 82 percent of
all known counterfeits before they were circulated among the
public.
- 2 Forgery of government checks and bonds remains a major enforceit problem for the Secret Service. Thousands of government checks
'.1 to reach the people entitled to them because checks are stolen
cashed by thieves posing as rightful owners.
During the past fiscal year the Secret Service investigated
399 forgery cases involving the amount of $3,967,777.04. A
:a1 of 2,720 persons were arrested for check forgery offenses.
The Secret Service also investigated 5,586 cases involving the
gery of U. S. Savings Bonds, representing a maturity value of
5,980.93. During the year 69 persons were arrested for bond
gery offenses.
Of all Secret Service cases brought to trial in the past fiscal
r, 97.5 percent resulted in conviction.
The incidence of crimes over which the Secret Service has
estigative jurisdiction remains generally consistent with the
ion-wide crime trend.
Local, state and other federal law enforcement agencies deserve
h credit for their part in assisting the Secret Service in the
pression of counterfeiting and forgeries of government securities
checks. The assistance of interested citizens has also aided
easurably in the identification of violators.
The major functions of the United States Secret Service are
lned by the United States Code, Title 18, Section 3056. The
lcipal duties are:
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 the order of succession
to the office of President, and the Vice-Presidentelect; protect a former President and his wife
during his lifetime and the person of a widow and
minor children of a former President for a period
of four years after he leaves or dies in office,
unless such protection is declined.
Detection and arrest of persons engaged in
counterfeiting and forgery, or alteration of
currency, checks, bonds and other obligations of
the Unitpd States and of foreign governments.
oOct
... :3 -
MiW'){
r other disposition of Treasury bills does not have any special treatment, as
~der
the Internal Revenue Code of 1954.
The bills are subject to estate,
tance, gift or other excise taxes, whether Federal or State, but are exempt fram
EBtion now or hereafter imposed on the
pr~ncipal
or interest thereof by aQy State,
ot the possessions ot the United states, or by any local taxing authority.
For
a8 ot taxation the amount ot discount at which Treasury bills are originally sold
United States is considered to be interest.
Under Sections 454 (b) and 1221 (5)
Internal Revenue Code ot 1954 the amount ot discount at which bills issued here-
are
sold is not considered to accrue until such bills are ao1d, redeemed or other-
lsposed ot, and such bills are excluded from consideration as capital assets.
Lngly, the owner ot 'l'reaa:ury bills (other than life insurance companies) issued
ler need include in his income tax return only the difference between the price
Ir auch bills J whether on original issue or on subsequent purchase, and the amount
y received either upon sale or redemption at maturity during the taxable year
ch the return is made, as ordinary gain or 10s8.
'easury Department Circular No. 418 (current revision) and this notice, prescribe
me of the Treasury bills and govern the conditions of their issue.
cular may be obtained from any Federal Reserve Bank or Branch.
Copies of
-zted forms and forwarded in the special envelopes which will be supplied by Federal
rve Banks or Branches on application therefor.
Banking institutions generally may submit tenders for account of customers proi the D8Dles of the customers are set forth in such tenders.
~tutions
others than banking
will not be permitted to submit tenders except for their own account.
irs will be received without deposit from incorporated banks and trust companies
from responsible and recognized dealers in investment securities.
:'S
Tenders from
must be accompanied by payment of 2 percent of the face amount of Treasury bills
led for, unless the tenders are accompanied by an express guaranty of payment by
lcorporated bank or trust company.
Immediately af't;er the closing hour, tenders will be opened at the Federal Reserve
I
and Branches, following which public anouncement will be made by the Treasury
~ent
of the amount and price range of accepted bids.
be advised 01 the acceptance or rejection thereof.
Those submitting tenders
The Secretary of the Treasury
-ssly reserves the right to accept or reject any or all tenders, in whole or in
and his action in any such respect shall be final.
Subject to these reserva-
, noncompetitive tenders for each issue for $200,000 or less without stated
from any one bidder will be accepted in full at the average price (in three
~ls)
~ed
of accepted competitive bids for the respective issues.
Settlement for
tenders in accordance with the bids'must be made or completed at the Federal
, in cash or other immediately available funds
(8)
a like face amount of Treasury bills maturing _o_c_t_o_b_e_r--,21'!:1~,~1_9_65_ _ _ • Cash
(11)>)
cchange tenders will receive equal treatment. Cash adjustments will be made for
re Bank on October 21, 1965
:-ences between the par value of maturing bills accepted in exchange and the issue
of the new bills.
he income derived from Treasury bills, whether interest or gain from the sale or
disposition of the bills, does not have any exemption, as Buch, and 10SB from the
TREASURY DEPARTMENT
Washington
:MMEDIATE RELEASE,
October 13, 1965
TREASURY1S WEEKLY
BILL OFFERING
The Treasury Department, by this public notice, invites tenders for two series
easury bills to the aggregate amount of $ 2,200&000,000 , or thereabouts, for
( )
and in exchange for Treasury bills maturing October 21, 1965
(K)
,203,476 OOO , as follows:
, in the amount
(Ii
91 -day bills (to maturity date) to be issued October 21~ 1965
~
,
(K
in the amount of $1,200,000,000 , or thereabouts, represent(X)
ing an additional amount of bills dated July 22, 1965
(8)
and to mature January 20, 1966
, originally issued in the
(f)
amount of $1,004(637,000
5)
, the additional and original bills
to be freely interchangeable.
182 -day bills, for $ 1,000,000,000 , or thereabouts, to be dated
(n)
(n)
October 21i 1965
(n
, and to mature
April 21t 1966
h)
•
rhe bills of both series will be issued on a discount basis under competitive
lncompetitive bidding as hereinafter provided, and at maturity their face amount
Je payable without interest.
They will· be issued in bearer fonn only, and in
tnations of $1,000, $5,000, $10,000, $50,000, $100,000, $500,000 and $1,000,000
:Oity value).
will be received at Federal Reserve Banks and Bran~hes up to the closing
Daylight Saving
one-thirty p.m., Easteni~ time, Monday, October 18, 1965
• Tenders
(1)>)
lot be received at the Treasury Department, Washington. Each tender must be
~nders
even multiple of $1,000, and in the case of competitive tenders the price
dmust be expressed on the basis of 100, with not more than three decimals,
99.925.
Fractions may not be used.
It is urged that tenders be made on the
TREASURY DEPARTMENT
October 13, 1965
FOR IMMEDIATE RELEASE
TREASURY'S WEEKLY BILL OFFERING
The Treasury Department, by this public notice, invites tende"
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 October 21, 1965
in the amount of
$2,203,476,000 as follows:
91-day bills (to maturity date) to be issued
in the amount of $1.,200,000,000, or thereabouts,
additional amount of bills dated July 22, 1965,
mature January 20, 1966, originally issued in the
$1,004,637,000, the additional and original bills
interchangeable.
October 21, 1965,
representing an
and to
amount of
to be freely
182 -day bills, for $1, 000, 000, 000, or thereabouts, to be dated
October 21, 196~ and to mature April 21, 1966~
The bills of both series will be issued on a discount basis UM
competitive and noncompetitive bidding as hereinafter provided, and
maturity their face amount will be payable without interest. They
will be issued in bearer form only, and in denominations of $1,000,
$5,000, $10,000, $50,000, $100,000, $500,000 and $1,000,000
(maturity value).
Tenders will be received at Federal Reserve Banks and Branches
up to the clOSing hour, one-thirty p.m., Eastern Daylight Saving
time, Monday, October 18, 1965.
Tenders will not be
received at the Treasury De~artment, 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 fo~ ~j
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 0
customers provided the names of the customers are set forth 1n sucb
tenders. Others than banking institutions will not be permitted to;
submit tenders except for their own account. Tenders will be ~ce~
without deposit from incorporated banks and trust companies and tl'Gl
responsible and recognized dealers in investment securities. TeMfrom others must be accompanied by payment of 2 percent of the tace
amount of Treasury bills applied for, unless the tenders are
accompanied by an express guaranty of payment by an incorporated baJI
or trust company.
F-228
- 2 Immediately after the closing hour, tenders will be opened at the
eral Reserve Banks and Branches, following which public announce~ will be made by the Treasury Department of the amount and price
ge of accepted bids. Those submitting tenders will be advised
the acceptance or rejection thereof. The Secretary of the Treasury
ressly reserves the right to accept or reject any or all tenders,
whole or in part, and his action in any such respect shall be
al. Subject to these reservations, noncompetitive tenders for
h issue for $200,000 or less without stated price from anyone
der will be accepted in full at the average price (in three
ima1s) of accepted competitive bids for the respective issues.
tlement for accepted tenders in accordance with the bids must be
e or completed at the Federal Reserve Bank on October 21 , 1965 , in
h or other immediately available funds or in a like face amount
Treasury bills maturing October 21, 1965. Cash and exchange tenders
1 receive equal treatment. Cash adjustments will be made for
ferences between the par value of maturing bills accepted in
hange and the issue price of the new bills.
The income derived from Treasury bills, whether interest or
n from the sale or other disposition of the bills, does not have
exemption, as such, and loss from the sale or other disposition
rreasury bills does not have any special treatment, as such,
er the Internal Revenue Code of 1954. The bills are subject to
~te, inheritance, gift or other excise taxes, whether Federal or
te, but are exempt from all taxation now or hereafter imposed on
principal or interest thereof by any State, ·or any of the
3essions of the United States, or by any local taxing authority.
purposes of taxation the amount of discount at which Treasury
ls are originally sold by the United States is considered to be
~rest.
Under Sections 454 (b) and 1221 (5) of the Internal
~nue Code of 1954 the amount of discount at which bills issued
~under are sold is not considered to accrue until such bills are
I, redeemed or otherwise disposed of, and such bills are excluded,
1 consideration as capital assets.
Accordingly, the owner of
lsury bills (other than life insurance companies) issued hereunder
I include in his income tax return only the difference between
price paid for such bills, whether on original issue or on
:equent purchase, and the amount actually received either upon
• or redemption at maturity during the taxable year for which the
.rn is made, as ordinary gain or loss.
Treasury Department Circular No. 418 (current revision) and this
ce prescribe the terms of the Treasury bills and govern the
itions of their issue. Copies of the circular may be obtained from
Federal Reserve Bank or Branch.
000
-2-
Commodity
Period and Quantity
:
:
Unit of
as of
··• Imports
.• Quantity
Oct.
2,
1965
·•
te QUotas:
substitutes containover 45% of butterfat,
butter oil •••••••••••
Calendar year
of cotton processed
not spIn ..•.•••.•.•..
s, shelled or not
led, blanched, or
rwise prepared or
3rved (except peanut
er)
..................
~rts
1,200,000
Pound
12 mos. from
Sept. 11, 1965
1,000
Pound
12 mos. from
August 1, 1965
1,709,000
Pound
as of October 8, 1965.
F-229
Quota filled
668,582~/
TREASURY DEPARTMENT
Washington
WI ATE RELEASE
JRSDAY, OCTOBER 14, 1965
F-229
The Bureau of Customs announced today preliminary figures on imports for
sumption of the following commodities from the beginning of the respective
ta periods through October 2, 1965:
Period and Quantity
Commodity
:Urrl. t
of
: Quantity
Imports as 0 f
Oct. 2, 1965
iff-Rate Quotas:
........
Calendar year
1,500,000 Gallon
Ie Milk, fresh or sour •••
Calendar year
3,000,000 Gallon
am, fresh or sour
tIe, 700 Ibs. or more each July 1, 1965 other than dairy cows} ••• Sept. 30, 1965
Oct. 1, 1965 Dec. 31, 1965
J:/
780, 83
53
120,000 Head
64,163
120,000 Head
1,428
200,000 Head
62,982
ach ..•••.•..•..•.........
12 mos. from
April 1, 1965
fresh or frozen, filsted, etc., cod, haddock,
1ke, pollock, cusk, and
)sefish ••••••••••••••••••
Calendar year
24,383,589 Pound
21,097,228
Fish •••••••••••••••••••
Calendar year
66,059,400 Pound
35,332,411
tIe, less than 200 Ibs.
1,
or Irish potatoes:
lrtified seed ••••••••••••
:;e
iher .••.•.•.••.••.•.•..•.
'es, forks, and spoons
th stainless steel
ndles .................. .
Adjusted
12 mos. from
Sept. 15, 1964
12 mos. from
Sept. 15, 1965
Nov. 1, 1964 Oct. 31, 1965
114,000,000
45,000,000
114,000,000
45,000,000
Pound
Pound
Pound
Pound
69,000,000 Pieces
Quota filled
Quota filled
309,820
Quota filled
TREASURY DEPARTMENT
Washington
IMMEDIATE RELEASE
THURSDAY, OCTOBER 14, 1965
F-229
The Bureau of Customs announced today preliminary fip,ures on imports tor
conSUl'Tlption of the folio1.ring commodities from the beginning of the respectb,
quota periods through October 2, 1965:
f
Col'llJlX)di ty
Perio; an:i Quanti ty
;Unit of
__________________________
________________________
~.
f Import~
:Qu~an~t~i~tLy~I~O~c~t.~2~~
Tariff-Rate Quotas:
Cream, fresh or sour
~~ole
MilK, fresh or sour ••.
cattle, 700 Ibs. or more each
(other than dairy co~s) •••
Calendar year
1,500,000
Gallon
Calendar year
3,000,000
Gallon
July 1, 1965 Sept. 30, 1965
Oct. 1, 1965 Dec. 31, 1965
700
120,000 Head
120,000 Head
less than 200 Ibs.
each •••••.•...•.••..•.•••.
12 mos. from
April 1, 1965
200,000
fresh or frozen, filleted, etc., con, haddoc<,
ha~e, pollock, cusk, and
rosefish ••••••..••••••••.•
Calendar year
24,383,589
Pound
21,091
Tuna Fish...................
Calendar year
66,059,400
Pound
35,33~
12 mos. from
llL,OOO,OOO Pound
Sept. 15, 196L L5,ooo,000 Pound
12 mos. from
114,000,000 Pound
Sept. 15, 1965 h5, ()()() ,000 Pound
Quota !i
~uota !i
C~ttle,
Head
6?
~sh,
"tihi te or Irish potatoes:
Certified seed ..•••...•.••
Other .•••••••••.••••.••.•.
Knives, forks, and spoons
with stainless steel
handles .................. .
,!/ .. Adjusted
Nov. 1, 196L
Oct. 31, 1965
69,000,000
Pieces
-
-2-
Commodity
·•
·•
Unit of
as of
.:• Imports
Oct. 2, 1965
1,200,000
Pound
Quota filled
Period and Quantity
··
•
Quantity
•
te Quotas:
substitutes containover 45% of butterfat,
butter oil ••••••••.••
Calendar year
of cotton processed
not spun ..•.•.•.•....
12 mos. from
Sept. 11, 1965
1,000
Pound
5, shelled or not
led, blanched, or
rwise prepared or
erved (except peanut
er)
12 mos. from
August 1, 1965
1,709,000
Pound
..................
ports as of October 8, 1965.
F-229
668,58~/
TREASURY DEPARTMENT
Washington
IMMEDIATE RELEASE
THURSDAY, OCTOBER 14, 1965
F-230
The Bureau of CUstoms has announced the following preliminary
figures showing the imports for consumption from January 1, 1965,
to October 2, 1965, inclusive, of commodities under quotas established pursuant to the Philippine Trade Agreement Revision Act of
1955:
Conunodity
.
:
.
··
---
Established _~nual
Unit of •• Imports as of
: Quantity
Quota Quantity
Oct. 2, 1965
:
·......
510,000
Cigars ••••••••
120,000,000
Number
Coconut oil •••
268,800,000
Pound
Quota filled
6,000,000
Pound
4,832,914
3,900,000
Pound
3,652,783
Buttons
Cordage
Tobacco
·......
·......
Gross
344,679
7,520,596
_.
TREASURY DEPARTMmT
Washington
IMMEDIATE RELEASE
THURSDAY, OCTOBER 14, 1965
F-230
The Bureau of CUstoms has announced the following preliminary
figures showing the imports for consumption from January 1, 1965,
to October 2, 1965, inclusive, of commodities under quotas established p.lrsuant to the Philippine Trade Agreement Revision Act of
1955:
--
Commodity
Established _~a1 : Unit of : Imports as of
Quota Quantity
Quantity •• Oct. 2, 1965
.
:
·......
510,000
Cigars ••••••••
120,000,000
Number
Coconut oil •••
268,800,000
Pound
Quota filled
·......
6,000,000
Pound
4,832,914
3,900,000
Pound
3,652,783
Buttons
Cordage
Tobacco
·......
Gross
344,679
7,520,596
_.
In
.t'l<IO~l. DDrU&L PRccr.. w'fi~ 110. 3257 or SKPlDmER 22, 1958, .AS MODIJ'DI) BY 'l!IE T.lJtDT scsmm.ES 01' !lIS
t:IlQDD Sft'l'lS, WIIJCII BIlCIIGl D','IttIVI .UGUS!' 31, 1963.
Q[UUR~y QU~
PERIOD -
IMP~
I'l.'Df 925,01-
_
Oetob.~
1, 1,65 - December )1, 1,65
Ootober 1, 1,65 - Oetober 8, 1,65 (er as noted)
lftM 915.0"
lTD(
I
c...v"
a
.f
Pronni-
LeM-beU"~ ore.
•
•
•
I~
oaoota
•. _!.abl. 1...
( P01IiIi )
...'tra11a
U,220,ooo.
_orb
11,220,000
13,440.000
1),440,000
~1l•
' I ......
lA,880,OOO
IGiiii'\iI'1j Qi1ita
I Dat!.ab1. 10_
( riiiii)
22.540,000
I
IClUriiI"q CIIIIi'ta
I!per!!. ZiM eo.teat
(Pounds )
2,608,1)7
..
15,920,000
4,754,540
66,480,000
ooaDtrle. (t.tal)
6,560,000
POWlIU)
..
..
7,520.000
··'2,114,626
66,480,000
37,840,000
12,265,364
..
3,eoo,000
12,880,000
)01,,81
3',120,000
173,427
3,760,000
..
-
•••1,'58,46,
..
15,760,000
···58,4'4
6,080,000
6,080,000
17....000
,.....
-
'·'8,186,051
-s•• Part 2, .,polUl1% to Tariff Seheaul•••
"Republ1o of South Atrloa.
···Imports as _t Ootober 11, 1,65.
PREPARED Dl '.l'HI BURJ:&.U 01' COST<KS
.
QM'&&
6,320,000
T1ICodaria
.lll. ot'ber
r.porta.., ••1fV
I
.UIIii'tiit'J:7'
1,542,561
14,880,000
all.,.
a .
I
70.-.eo,OOO
eo.c.
c.c.)
So.~_
sSM ( . . .pt
.f . . . . . .s.. ...,) aM
te ... . . . ,
8,0'5,044
• , 'tbo
(1.--17' BelClaa
• ..,..
I
36.880,000
Mad. .
~,leo,OOO
I
-.teriala
Itaq
P. . .
• u.re.t
I
•
5,040,000
Ceo....
I'l'IM 92S.Q4-
i
• ZiMo-lteariJtC one ...
~ 1... ...
leu wute .... . . . .
..
~,..-:'( total)
Bo11ria
:
aD4 ...terlala
925.02-
•
1,64:h~2
'.,440,000
-
17,840,000
6,080.000
6,080,000
•
_a:.,
lTDf 925.01-
LeaA-beu-1;t.~.
C..aU7
•f
PrOII1Iril_
......te
•
••
•
~1"'''''
le
.... ,...te . . . . .,
-
laiiiriii'lO,.- oa..\i
1 -Dlnlablo le...
(PCniiIIi)
11.220.000-
.... tnlJ.a
UIM 91!Se03-
ICIIIii'\ii'1,. CIII.it&
!!porta I Dlltlabl0 le..
(,. . . . ,
11 11 220,000
22.5«>.000
,
ITIM 925e04-
l'1'DI 925.02I
Z~ou-1JtC on.....
-.terlal.e
I~q
QiiIi't&
lIIp!ria I Zs..o Coated
r.p....
(Pounds)
13,440,000
1),440pOOO
I
QUt&
Br We!@!
~. . .
7,520,000
···2,11.,626
15,920,000
·,754,540
66,480,000
66,480,000
37,840,000
12,265,)606
3,eoo,000
Mid..
16,leQ,OOO
P....
~lle
·"S,186,051
36,880,000
S,0~5,04.
70,.480,000
1,542,561
6,120,000
12,880.000
)01,~81
3',120,000
173,427
3,760,000
of t.be OnCo
(f..-.l'l,. Be141aD
c-c.)
Se • .&.tr1_
(tetal)
5rMO,000
lA,880,OOO
6,560.000
···1,~5Sp.6~
-S. . Part 2, .1,peDllh to Tu-ift Seheaule ••
"AepallU,o of South J.frloa.
···l.p,~. as at Ootobar 11, 1~65.
PREPJ.RD IX 'I'D BURUO
or
1,6063,,42
14,880,000
YWCeal.arla
.u..r
••
IQIiiiftiiJ'1,.
2,608,137
I~
~..
st.. aM .lao tut) ....
.1M,...
.........
.f
5,040,000
Bol1rla
.lll.
I
I
(Pouacll)
~wi'( total)
-eva.
•• u.roqht st... (. . .pt ..u~
COST<IIE
15,7fAJ,000
···58,4~04
6,080,000
6,oso,000
17,1MO,000
17,840,000
6,080,000
6,oso,000
COTTON WASTES
(In pounds)
COTTCN CARD STRIPS made from cotton havint; a staple of less than 1-3/16 inches in length, OOMBER
WASTE, LAP WASTE, SLIVER WASTE, AND ROVING WASTE, WHETHER OR NOT MANUFACTURED OR OTHERWISE
ADVANCED IN VALUE: Provided, however, that not more than 33-1/3 percent of the quotas shall
be filled by cotton wastes other than comber wastes made from cottons of 1-3/16 inches or more
in staple length in the case of the followint; countries: United Kint;dom, France, Netherlands,
Switzerland, Belgium, Germany, and Italy:
:
Country of Origin
Estaolisnea---:- Total Imports
: Estabushed:
: TarAL QUOTA
: Sept. 20, 1965, to:
33-1/3% of :
•
: Total Quota :
: Oct. 11, 1965
.
United Kint;dom............ 4,323,457
Canada....................
239,690
France....................
227,420
India and Pakistan........
69,627
Netherlands...............
68,240
Switzerland...............
44,388
Belgium...................
38,~~9
Japan.....................
341,~3~
China.....................
17,322
Egypt.....................
8,135
Cuba......................
6,544
Germany...................
Italy.....................
Other, includint; the U.S ••
!/ Included
75,807
22,747
14,796
12,853
~
76,329
21,263
25,443
7,088
52 482,509
1,599,886
in total imports, column 2.
Prepared in the Bureau of Customs.
F- 2 32
1,441,152
Imports
····1/
Sept. 20, 1965 to Oct. 11, 1965
Prel..iJDina.r;y data on imports for consumption of cotton and cotton vaste chargeab1.e to the quotas established by'
Presidential Proclamation No. 2.351 of September 5, 19.39, as &melded, and as modified by the Tariff Schedule8 of the
United States which became effective August .31, 196.3.
(The country designations in this press release are those specified in the appeMix to the Tariff Schedules of the
United St,ate8. There is no political connotation in the U8e of outmoded. names.)
COTTON (other than linters) (in poums)
Cotton uDier 1-1/8 inches other than 1"OU8h or harsh uDier
ImPorts Septe1llber 20. 1965 - October~1~ 1965
Country or Origin
Ec1Pt and Sudan••••••••••••
P.m •••••••••••••••••••••••
I~ia and Pakistan •••••••••
China ••••••••••••••••••••••
Mexico •••••••••••••••••••••
arasil •••••••••••••••••••••
Established Qqota
78.3,81.6
247,952
2,00.3,48.3
1,.370,791
8,88.3,259
618,72.3
Imports
Ecuador ••••••••••••••••••••
11
Y
&stabli shed Quota
Honduras ••••••••••••••••••••
2,838
Union or Sonet
Social.1at Republics ••••••
Argent~ •••••••••••••••••
Haiti ••••••••••••••••••••••
Country or Ori8in
314"
475,l24
5,20.3
2.37
9,3.3.3
!I
~I
~
752
Par~ ••••••••••••••••••••
871
Colombia••••••••••••••••••••
Iraq ••••••••••••••••••••••••
British East Africa •••••••••
IDionesia and Netherlan:ls
New Guinea••••••••••••••••
British W. Indies •••••••••••
l24
Rigar.La•••••••••••••••••••••
British
V. Africa. ••••••••••
Other, including the U.s ....
Except Barbados, &mula, Jamaica, Trinidad, alii Toba80.
EZcept Nigeria and Ghana.
.
Cotton 1-1/St. or more
Established Yearly Qqota - 45.656.420 1bs.
Imports AU8UBt 1. 1.965 - October 11. 1965
staple Length
l-.3/en or more
1-5/.32" or mre and umer
l-)/St. (Tanguis)
1-l/en or mre alii umer
l-.3/en
Allocation
39.590,718
!1!mnrts
27,311,158
1,500,000
82,235
4,565,642
156,667
195
2,240
7l,J88
21,321
5,J7l
16,004
Iemrts
THURSDAY,
OCTOBER 14,
1965
F-232
Pre~ data on imports ror COIl8Ulllpt.1.on or cot.ton and cot.ton wast.e chargeab1e to the quot.aa eat.ab1:1i1hed b7
President.ial Procl.amat.ion No. 2.351. or Sept.ember 5, 19.39, as amemed, ani as modi.f'ied bY' the Tari.!"!" ScheduJ.es of t.he
nited States which became ef!"eetive August 31, 1963.
The country designations in this press release are those specified in the appeDiix to the Tariff Schedules of the
nited States. There is no political connotation in the use of outmoded names.)
COT'l'OH (other than linters) (in poums)
Cotton UDier 1-1/8 inches other than l"OU8h or harsh umer
~rts
Country of Origin
EgJpt and Sudan ••••••••••••
Peru •••••••••••••••••••••••
India and Pakistan •••••••••
China ••••••••••••••••••••••
Mez1co •••••••••••••••••••••
Brasil •••••••••••••••••••••
Septellher 20____ 1965 -
Established Quota
Ig!orts
Argent~ •••••••••••••••••
Haiti ••••••••••••••••••••••
Ecuador ••••••••••••••••••••
!I
Y
11___ 1965
Country
or
Origin
3/4"
Established Quota
Honduras ••••••••••••••••••••
78),816
247,952
Par~ ••••••••••••••••••••
2,(0),48)
Colombia ••••••••••••••••••••
1,370,791
8,88),259
61.8,723
Iraq ••••••••••••••••••••••••
2,838
!I
Union of Sodet
Socialist Republics ••••••
Qctobe~
475,l24
5,203
237
9,333
~J
!ill
British East Africa•••••••••
Indonesia and Netherlards
New Guinea••••••••••••••••
British W. Indies •••••••••••
B1ger.La •••••••••••••••••••••
Britiah V. Atrica. ••••••••••
Other, 1m' Jldi ng the
U.s ....
Except Barbados, Belwlda, J8III&ica, Tr1n1dad, and Tobago.
EXcept Nigeria and Ghana.
.
Cotton 1-1/81' or more
Established YearlY Quota - 45.656.420 1bs.
Imports August. 1. 1965 - October 11. 1965
staple Length
1-3/f3tt or more
1-5/32" or DlDre ani umer
1-)/f3tt (Tangu1s)
1-l/f3tt or DlDre and under
1-3/8"
All.ocat.1.on
I!!!I?9rts
39,590,778
27,311,158
1,500,000
82,235
4,565,642
156,667
752
871
l24
195
2,240
n,388
21,321
5,m
16,004
Iapcrte
COTTON WASTES
(In pounds)
COTTCIl CARD STRIPS made from cotton havin~ a staple of less than 1-3/16 inches in length, OOMBER
WASTE, LAP WASTE, SLIVER WASTE, AND ROVING WASTE, WHETHER OR NOT MANUFACTURED OR OTHERWISE
ADVANCED IN VAUJE: Provided, however, that not more than 33-1/3 percent of the quotas shall
be filled by cotton wastes other than comber wastes made from cottons of 1-3/16 inches or more
in staple length in the case of the followin~ countries: United Kin~dom, France, Netherlands,
Switzerland, Belgium, Germany, and Italy:
Country of Origin
:
:
:
Established
TOTAL QUOTA
4,323,457
239,690
227,420
69,627
68,240
44,388
38,559
Japan •••••••••••••••••••••
341 ,535
China •••••••••••••••••••••
17,322
Egypt •••••••••••••••••••••
8,135
United Kin~dom ••••••••••••
Canada ••••••••••••••••••••
France ••••••••••••••••••••
India and Pakistan ••••••••
Netherlands •••••••••••••••
Switzerland •••••••••••••••
Belgium •••••••••••••••••••
Cuba ••••••••••••••••••••••
Gennarty" •••••••••••••••••••
Italy ..•••••••..•.•.••••.•
Other, includin~ the U.S ••
!/ Included
6,544
Established:
33-1/3% of:
Total Quota:
1,441,152
15,801
22,141
14,196
12,853
~
76,329
21,263
25,443
1,088
5,482,509
1,599,886
in total imports, column 2.
Prepared in the Bureau of Customs.
F- 2 32
:
Total Imports
:
: Sept. 20, 1965, to:
: Oct. 11, 1965
:
Imports
Sept. 20, 1965
to Oct. 11, 1965
1/
-
COTTON WASTES
(In pounds)
COTTCN CARD STRIPS made from cotton havin~ a staple of less than 1-3/16 inches in length, OOMBER
WASTE, LAP WASTE, SLIVER WASTE, AND ROVING WASTE, WHETHER. OR NOT MANUFACTURED OR OTHERWISE
ADVANCED IN VAUJE: Provided, however, that not more than 33-1/3 percent of the quotas shall
be filled by cotton wastes other than comber wastes made from cottons of 1-3/16 inches or more
in staple length in the case of the followin~ countries: United Kingdom, France, Netherlands,
Switzerland, Belgium, Germany, and Italy:
Country of Origin
:
:
.•
United Kingdom ••••••••••••
Canada ••••••••••••••••••••
France ••••••••••••••••••••
India and Pakistan ••••••••
Netherlands •••••••••••••••
Switzerland •••••••••••••••
Belgium •••••••••••••••••••
Japan •••••••••••••••••••••
China ••••••• •"•••••••••••••
Egypt •••••••••••••••••••••
Cuba ••••••••••••••••••••••
Germany •••••••••••••••••••
Italy ..•••••••..•.•.••••.•
Other,
inc1udin~
!/ Included
EStablished
TarAL QUOTA
4,323,4.57
239,690
227,420
69,627
68,240
44,388
38,559
341,535
17,322
8,135
11,713
239,393
Established:
33-1/3% of:
Total Quota:
1,441,152
75,807
43,264
22,747
14,796
12,853
6,544
~
76,329
21,263
25,425
25,443
7,088
5,482,50 9
319,795
1,599,886
the U.S ••
in total imports, colunm 2.
Prepared in the Bureau of Customs.
F-~3
:
Total Imports
:
: Sept. 20, 1964, to:
: Sept. 1.9, 1965
:
Imports-T.I
Sept. 20, 1964 to Sept. 19, 1965
Prel1lld.nary data on imports for consumption of cotton and cotton waste chargeab1e to the quotas establ:lshed by'
Presidential Proclamation No. 2351 of September 5, 1939, as amemed, and as modified bY' the TarUf Schedules of the
United States which became effective August 31, 1963.
(The country designations in this press release are those specified in the appeDi1x to the Tariff Schedules of the
United States. There is no political. connotation in the use of ou'blDied names.)
"
COuntry of Origin
~t and Sudan••••••••••••
~ru •••••••••••••••••••••••
1mia and Pakistan•••••••••
Ch1.Ila. ••••••••••• e.e • • • • • • • • •
Mexico •••••••••••••••••••••
.Brasll ••••••••••••••• e' • • • • •
Union of Son-et
Social1st Republics ••••••
Argent~ •••••••••••••••••
Haiti ••••••••••••••••••••••
Ecuador ••••••••••••••••••••
Established Quota
783,816
247,952
2,00.3,48.3
1,.370,791
8,883,259
618,723
Established Quota
Country of Origin
Imports
Honduras ••••••••••••••••••••
68,899
Par~ ••••••••••••••••••••
Colombia••••••••••••••••••••
Iraq ••••••••••••••••••••••••
British East Africa •••••••••
2,770,015
}/
475,124
5,20.3
2.37
9,3.3.3
~J
~
Hew QJinea••••••••••••••••
British W. Indie••••••••••••
Riger.La•••••••••••••••••••••
British V. Africa. ••••••••••
other, including the U.s ....
BenllKla, Jamaica, Tr1n1dm, and Tobago.
EEcept Nigeria and Ghana.
cotton 1-118" or IIIOre
Established Yearll Quota - 45.656.420 lbs.
Imports AugD!t 1.
1962 -
September 19. 1965
Staple Length
1-3/8ft or more
1-5/.32" or mre and under
l-)/St· (Tanguis)
1-1/8" or mre and under
1-.3/8ft
124
195
2,240
IDiones1a and Netherlan:ls
11 EJtcept Bai"bmos,
2/
752
871
AlJpcation
T!!I!2rt.
39. 590,TlS
26,058,092
1,500,000
82,235
4,565,642
156,667
71,.388
21,.321
5,m
l6,00Ie.
l!l!9rts
TRURSDAY.
OCTOBER 14,
l-~~
1965
Pre11a1.nal'"7 data on :import. for consumpt.1.on of cotton and cotton vast. chargeabl..e to the quota. _t.b'1 ilhed 'b7
Pre.1dent1&l Procl.amat1on No. 2.351. of September 5. 1.9.39. as aDIeII1ed, aui as IIIDd1fied b7 the Tari.rf Schedul.ee o~ the
United
St~tee
which became effective August 31., 1.963.
(The count!7' designations in this press release are those specitied in the apperxt ix to the Tariff Schedul.es ot the
United States. There is no political connotation in the use ot outmoded names.)
n
Country ot Or1g1.n
EgJpt and Sudan••••••••••••
Peru •••••••••••••••••••••••
India and Pakistan •••••••••
C~ •••••••••••
e· • • • • • • • • • •
Mez1co •••••••••••••••••••••
Brasil •••••••••••••••••••••
Union ot Souet
Social18t Republics ••••••
Arg8Dt~ •••••••••••••••••
Haiti ••••••••••••••••••••••
Eeaadar ••••••••••••••••••••
II
Y
Eetablished. Quota
783,816
2A7,952
2,003,483
1,370,791
8,883,259
618,723
Country ot Origin
T!!I!ftrts
68,899
2,770,015
11
475,124
5,203
237
9,333
~J
~
Established quota
Honduras ••••••••••••••••••••
Par~••••••••••••••••••••
752
Colombia••••••••••••••••••••
Iraq ••••••••••••••••••••••••
British East Africa•••••••••
Indonesia and NetberlaDls
Haw Q,'nea••••••••••••••••
British W. lDdies •••••••••••
124
195
.1ger.La•••••••••••••••••••••
Britiab V. Africa. ••••••••••
other,
1mlwl1ng the
U.s ....
EJ[cept Barbados, Bemud.a. Jamaica. Tr1n1da1, alii Tobago.
Eltcept Nigeria and Ghana.
.
Established
Cotton 1-1./8" or IIOre
Quota - 45.656.429 lbs.
Yearlr
Imports Auggt. 1. 1%5 - September 19, 1965
Stap1e Length
1-318" or DlDre
1-5/32" or 111)1"8 8IIl under
1-)18" (Tangu1s)
1-1/8" or DlDre alii under
1-3/8"
Allocation
I!!IV!ri.s
39. 590, Tl8
26,058,092
1,500,000
82,235
4.565,642
156,667
871
2,240
71,_
21,321
5,m
16,OOIe.
.,....
COTTON WASTES
(In pounds)
CO'l'TCJl CARD STRIPS made from cotton hav:l.n~ a staple of less than 1-3/16 inches in 1ensth, OOMBBR
WASTE, LAP WASTE, SLIVER WASTE, AND ROVING WASTE, WHETHER, OR NOT MANUFACTURED OR OTHERWISE
ADVANCED IN VALUE: Provided, however, that not more than 33-1/3 percent of the qUotas shall
be filled by cotton wastes other than comber wastes made from cottons of 1-3116 inches or more
in staple 1e~th in the case of the fol1owin~ countries: United Kin~dom, France, Netherlands,
Switzerland, Belgium, Germany, and Italy:
Country of Origin
:
:
:
United Kin~dom ••••••••••••
Canada ••••••••••••••••••••
France ••••••••••••••••••••
India and Pakistan ••••••••
Netherlands •••••••••••••••
Switzerland •••••••••••••••
Belgium •••••••••••••••••••
Japan •••••••••••••••••••••
C'hina ••••••••.• ••••••••••••
Egypt •••••••••••••••••••••
Cuba ••••••••••••••••••••••
Germany •••••••••••••••••••
Italy •.•••••••.••••.••••.•
Other, includin~ the U.S ••
1/ Included
Established
TarAt QUOTA
1,441,152
4,323,457
239,690
227,420
69,627
68,240
44,388
38,559
341,535
17,322
8,135
11,713
239,393
76,329
21,263
2,,425
25,443
7,088
5,482,509
319,795
1,599,886
in total imports, column 2.
75,807
43,264
22,747
14,796
12,853
...
6,544
Prepared in the Bureau of CUstoms.
P-233
y
:
Total Imports
: Established I
IiilPorts
: Sept. 20, 1964, to:
33-1/3% of I Sept. 20, 1964
: Sel't. l.9, _196, _ _: _Tota!~ota~:~ to_Sept. 19, 1965
r r · ....
·'_,u
.uruJa"~ T\.M "'UI'C:>UIIt"J."~ll"
wu:& UI'I
ur .......Ur.&"..'TUHlOU
"UU .&ItU :lOUR,; \iJi&J(GU.l:JJ.di TV "1'I9i WU'J:.&::I JM::i'J:AlSloDIIIiU
Br PRESIDElft'UL PRcx:r.AVU'Zaf NO. 3257 or SKPftMJD 22, 1958, .is MODD'DD BY mE T.l.RDT SCBEOOLES OJ' '1'BK
tnn'1'ED SD'DS, 1fB:ICII BIlClMI ~ '&'UGUS'l' 31, 1963.
CllIiRTERLY QUO!.&. PDUOD DWP~
l'l"A(
925.01e
-
July 1,
1~65
.. S.pt •• ber ,30,
1~65
July 1,
1~65
- S.pt •• ber 30,
1~65
I!IM 925.o,e
D'D(
Leat-b.u-iq ore.
c...~
.t
I
Pr-..u. a
UI4 . .teria1a
u.r.qht 1... ...
1.actwute aM ....,
925.02 e
••
• Zi.-h.u-iaC on. . . .
I
I
:I
l'l7M 925.04 e
-.teria1a
I
J..tra11a
U.220.ooo
11,220,000
22,540.000
-
22,540,000
JIelCt.,. ...
1-.. ''''
(total)
Bo11ria
r..........
5,040.000
3,3 65,262
13,440,000
13,44°,°00
15,920,000
15,~20,000
66.480,000
66,480,000
:rtaq
Mlzl..
~.lC1Q,ooo
P....
~U•
16,160,000
lA.880,OOO
.ll1 otlaer
.GaIltri•• (t.tal)
6,560.000
6,560,000
-S. . Part 2, .l,pelUlh to Tarift Sehe4ul•••
eeRepub110 of South Atrloa.
PREPARED DJ 'l'HI BURElU
or
COSTCIIS
37,8<&0,000
3,eoo,000
1,102,300
70r480,OOO
70,480,000
6,320,000
6,3 18,730
12,880,000
12,87611 133
35,120,000
35,120,000
3.760.000
3,759,64~
5,440,000
5,.,38,847
6.080.000
6,080,000
-
14,880,000
TWC_l.ari.a
37,840,000
36,776,14~
• t tbe ColIC.
So. J.tri_
7,520,000
36,880,000
t . . . .17 BelCiua C.,.)
e4l(Ja.
7.520,000
15,760,000
15,76° 11 °00
6,080,000
6,080,000
17.-.000
17,1J40~OOO
.... ....
~
~....
a.r .....
ocro....":"Je......
rHlIRSMY.
ar . . . _
•
.at ............. ~
.9 . . . . . . . .
UII:n'BD
CIlI&RTI:RLY ClJm& PDUOO -
DF<mS -
l'n!M 925.01-
.,
c ••""'
a
~-
1IIDaI
sa::us
.um
.as
July 1, 1,65 - Sept •• be .. )0, 1,65
July 1,
1,65 - Septe.be .. )0, 1,65
IDM 925.03-
LeM-4>.U"u. ore.
aM . .teriala
~,....
...
l'rIM 92S.,D4-
n'DI 925.02-
••• z~.ari.aC""'"
leu wut. ........
•
_t.nu.
:1
itliiiii'\ii'ly OQi'\i
l ' Dll\1able ~
( P01iiiIIi)
1l,220 .000-
u.tnl.1a
SD~.
s:.c ca. . . . . . .,. . . _ . . . . . . . . . . .. . . . .
WDDD'1&D BY TJD: 'rAJl:IlI"r IiCIiii&WLES oW' . . .
UiiiCTH& "UGUS~ n. 1963.
L1I:&D
Br 1'ImS~ P'POC'd-nar WO. 3257 01' SWF.-zat 22. 1958.
I!!e!I"!!
11,220,000
aCliiiiriil'lj' Qiiit&
I DdiaU. le..
( POiIiii )
22, '540,000
ee....
5,040,000
)p)65,262
13,440,000
1),440,000
15,n'O,ooo
lQiiIitiI'lj' aJIIria
t.pma. Zs.. Coatat
( Pound. )
••
16,l.eQ,ooo
r...
"
16,160,000
lA,880,ooo
6,560,000
6,560,000
-S. . Part Z, .l,peD4b 'to TU"lff Sebe4ul•••
........110 et Soutb AtM._.
PRIP.uD
m
'l'HI JMIDIJ f:6 COS'l'CllS
lilt.
e-
15,920,000
66,480,000
7,!5Z0,000
7,520,000
37,840,000
37,840,000
3,eoo,OOO
1,102,300
70,4S0,000
6.n'O,000
6,31S,7)0
35,12°11°00
3,7eo,OOO
3,759,649
5,.440.000
~,438,847
6,080,000
6,oso,000
66,480,000
36,880,000
36,776,149
70,480.000
12,880,000
12,876,133
lS,l2O.ooo
14,880,000
T. ._laria
.&.1l. .u..r
• _tel.. ('teta!)
IT ••If(.
22,54°,000
ee.c.
c-c-)
Se.~_
I
Powacb)
t
U _ ef tlae
1---1)- Be141aD
--0..
ss..wute . . . . . . .
.~1y QIiij'I&
r.p....
I~
Mad. .
I
•
~.-;'( '\eta!)
BollYla
:.•s ~'t
.1M (.-.p'\ all!.t.1 siM . . . .1M hat) ...
15,760,000
15,760,000
6,080,000
6,080,000
17....000
17,840,000
- 2 -
1Q~
:.
-...)
Those accomplishments include:
-- A business expansion that has long since
broken all peacetime records for durability and
is still going strong in its 56th month, providing
a growth in gross national product of over $70 billion
since November, 1963, or about as much as the entire
annual product of Sweden, the Netherlands and
Italy combined.
-- The creation of some $3.7 million non-farm
jobs from November 1963 through September 1965,
cutting the unemployment rate from 5.8 percent to
4.4 percent -- the lowest in eight years, at a
time when automation and a rapidly expanding rate
of entry of young people into the labor force
threatened to create a crisis;
-- A rise in personal income
in which we
all share -- of $56.9 billion, or 12 percent from
November 1963 through August 1965, bringing per
capita income to by far its highest level in the
history of this or any other nation;
A $10.6 billion, or 31.4 percent, rise in
business profits after taxes since the fourth
quarter of 1963, a rise that appears all the more
remarkable when you recall that it came on top of
an already hefty increase of $9.4 billion, or
38.5 percent, from the first quarter of 1961 to
the fourth quarter of 1963; and a rise that has
brought back return on a dollar invested to its
highest level since the Korean war-affected
quarters of 1950-51;
-- A reduction in federal income and excise
taxes that would yield some twenty billion
dollars per year at current income levels, with
increased incentives for investment and purchasing
power for the private sector.
194
- 3 -
There could be no better proof than these enormous economic
gains -- than the continued strength and stability of our
economic advance -- of the remarkable feats that American
government and American business can accomplish when they work
as allies rather than as antagonists -- when they seek, not
cause for senseless conflict, but common cause in the national
interest -- when there is confidence in a national leadership
that works to give the private enterprise system an opportunity
to do its job.
Today, more than ever, continued economic expansion depends
upon a strong partnership for progress between the private and
public sectors of our economy.
Today, more than ever, the national welfare requires a
dialogue, not discord -- cooperation, not conflict
between
the leaders of American government and the leaders of American
business.
There will -- there must -- be honest differences, but
let them not be divisive. There will -- there must -- be
mutual criticism when those differences occur, but let it be
constructive, not destructive, criticism.
Night after night, as well as day after day, like no
President before him, President Johnson has brought together
leaders of business, finance, labor, educators, doctors,
clergymen and professional groups -- meeting with his Cabinet
and White House staff and each other -- seeking advice,
exchanging views, swapping ideas on what each could do
separately and all could do together for a better America.
He has made "Come, let us reason together" a national slogan
as well as his personal attitude of heart and mind.
The President has amply demonstrated his determination
to pursue policies to encourage in every way possible the
growth and vitality of the private sector of our economy -- as
well as his determination to seek solutions to our national
economic problems within the framework of the free enterprise
system.
Through its policies -- highlighted by its program of
major reductions in Federal taxes matched by strict control
over Federal expenditures -- the national government has given
continued evidence of its faith in the vigor and viability of
our free enterprise system, and of its recognition of the viul
and basic role that the American businessman can, and must, play
in the promotion of our national welfare.
- 4 -
It is of that role that I would speak to you tonight because
I know it is close to the heart of the man and President you
honor here tonight.
He applauds this organization for its recognition -- in
both deed and word -- of the role of the businessman as leader
in community and nation and world -- a role described so well
in the words of your former president, Mr. Henry L. Lambert:
"In the past two decades a 'corporate
citizenship' role has developed, revealing that
the leadership responsibility of businessmen is
not confined to the economic area alone but
embraces the total community. Today's executive
finds he must not only understand what the social
needs of the community are, but he must know how
the political process serves to channel the human
and economic resources which meet the total needs
of society at local, national and international
leve ls ."
It was more than ninety years ago, in an article calling
upon businessmen to concern themselves with questions of
national legislation, that Hamilton A. Hill, later the first
Secretary of the National Board of Trade, wrote:
"The present time is favorable for commencing
such a movement. The issues between the two
political parties are less sharply defined than
they have been for years, and there seems to be
a growing disposition on the part of moderate
men on both sides to work together."
There could be no more appropriate description of the
political climate in this country today.
And today the task of the business leader as of all
Americans -- was set forth by President Johnson in his State
of the Union Message last January in these words: "to keep
our economy growing; to open for all Americans the opportunity
that is now enjoyed by most Americans; and to improve the
quality of life for all." That, surely, is a task whose
accomplishment must require nothing less than the best efforts
of all Americans
and, in particular, of America's business
leaders.
- 5 -
No one que s t ions tha t the firs t and mos t bas ic respons ibility
of a business leader is to succeed in his business, for thus he
provides jobs and incomes and goods and services that bolster
his local economy and the economy of the nation.
Nor, in today's intricate and fast-moving world does anyone underestimate how difficult and demanding is that
responsibility alone -- requiring not only considerable personal
ability and character but competence in a broad and ever-widen~g
spectrum of fields.
But a businessman is also a human being responsible for
his fellow man, and a citizen responsible for the welfare of
his city, his state and his country -- and he is all these
things not at different times but at one and the same time and
all the time.
I cite that simple truth only because too often our very
familiarity with it leads us to take it for granted, because
too often our inevitable preoccupation with the incredible
complexities and subtle sophistications of today's world leads
us to overlook or ignore it.
Yet in that world, above all, we cannot forget or ignore
it -- for that world, above all, requires that the le.aders
of the business community exercise their responsibilities for
leadership in helping solve the pressing problems that confront
cities and communities throughout the land as well as the
nation as a whole.
There is, I would venture, scarcely a city or community
of any size in this country that is not beset by a host of
serious and stubborn problems -- problems of poverty and slums,
of deliquency and crime, of schools, of housing, of race
relations, of traffic and transportation. So acute and widespread are these problems that many have long since passed
beyond the reach of purely local concern or local effort to
arouse national concern and to demand national effort.
But at its very best -- and let me stress this truth with
all the force at my command -- national effort can only
supplement and support local effort -- it can never supplant it,
it can never succeed without it.
- 6 It is to effective local action that we must look for
solid and enduring solutions to these problems
and effective
local action must depend very largely upon the willingness of
local business leadership to fulfill its civic responsibilities.
What we need in far more cities from far more of our business
leaders is the application to local problems of the same kind
of initiative, imagination and effort that they bring to their
businesses.
These problems, as I have suggested, are manifold, but
three of the most crucial -- three which underly and encompass
all the rest -- are poverty and prejudice and ignorance.
Under the leadership of President Johnson, we have
developed broad national programs to attack these problems
that have been too long obscured or ignored in the life of our
land.
But these programs -- like our national economic policies
are designed to support, not to supplant, efforts in the
private sector -- efforts in our communities, our cities and
our states.
More perhaps than any in our history, the Education Program
that President Johnson has sponsored will hasten that day in our
land when ability to learn, rather than ability to pay, will be
the sole standard of educational opportunity. But that program
must be matched by far greater efforts to improve the quality
and the opportunity for education at the local level -- efforts
in which business leadership is essential.
There can be no question but that businessmen throughout
the country have heard and heeded the call to arms against
poverty -- particularly in helping equip the untrained or
ill trained with appropriate skills for production employment.
But there remains enormous room, and need, for far greater
effort on the local level by local businessmen -- for their
involvement in all phases of local and regional retraining
programs -- in management, in planning, in teaching, in
counselling -- for only thus can we assure really effective
and durable results.
But perhaps there is no more crucial area in which our
cities and communities cry out for far greater, far more
constructive and courageous leadership from the business
community than in the war on p.rejudice.
- 7 I would be the last to deny that progress -- very genuine
progress -- has been made on a national level, particularly in
recent years. And New York surely is an example of the very
palpable progress we have made in many of our cities.
However, it is high time that in all of our cities and
all of our communities we really open our employment doors to
qualified people of all races and colors.
It is also high time for business leaders to playa far
more positive and progressive role in seeking solutions to the
incendiary problems of de facto segregation in schools and
housing.
It is high time for our business leaders to set in motion
in our cities and communities positive and effective efforts
toward solving these problems before they get out of hand -before the deep frustrations of men long denied become the
explosive rage of men who will no longer be denied.
But while the concept of corporate citizenship must find
its first and full expression in cities and communities, it
cannot -- in today's world
be confined simply to these
areas -- even to a city so vast in fact and in influence as
New York. It has national and international dimensions.
We have recently seen at least two instances of its crucial
importance to our national welfare -- the wage settlement in
the steel industry and the voluntary efforts of our businesses
and financial institutions to moderate our capital flows
abroad to the end of achieving and assuring equilibrium in our
balance of international payments, so fundamental to a sound
dollar and Free World monetary system.
It was a little more than a month ago, as you know, that
President Johnson announced that the representatives of labor
and management of the steel industry had reached basic agreement
in their negotiation of a new contract. That agreement averted
a possible steel strike that posed -- in the President's
words -- a "grim threat of thousands of men out of work, of idle
plants, of declining production for our economy and declining
prosperity for our people ... "
.
- 7 I would be the last to deny that progress -- very genuine
progress -- has been made on a national level, particularly in
recent years. And New York surely is an example of the very
palpable progress we have made in many of our cities.
However, it is high time that in all of our cities and
all of our communities we really open our employment doors to
qualified people of all races and colors.
It is also high time for business leaders to playa far
more positive and progressive role in seeking solutions to the
incendiary problems of de facto segregation in schools and
housing.
It is high time for our business leaders to set in motion
in our cities and communities positive and effective efforts
toward solving these problems before they get out of hand -before the deep frustrations of men long denied become the
explosive rage of men who will no longer be denied.
But while the concept of corporate citizenship must find
its first and full expression in cities and communities, it
cannot -- in today's world
be confined simply to these
areas -- even to a city so vast in fact and in influence as
New York. It has national and international dimensions.
We have recently seen at least two instances of its crucial
importance to our national welfare -- the wage settlement in
the steel industry and the voluntary efforts of our businesses
and financial institutions to moderate our capital flows
abroad to the end of achieving and assuring equilibrium in our
balance of international payments, so fundamental to a sound
dollar and Free World monetary system.
It was a little more than a month ago, as you know, that
President Johnson announced that the representatives of labor
and management of the steel industry had reached basic agreement
in their negotiation of a new contract. That agreement averted
a possible steel strike that posed -- in the President's
words -- a "grim threat of thousands of men out of work, of idle
plants, of declining production for our economy and declining
prosperity for our people ... 1S
- 8 -
Equally important, the settlement reached during those
negotiations fell within the bounds of the Wage-Price Guideposts
set forth by the President's Council of Economic Advisers, and
thus brightens the outlook for continuing our record of wageprice stability -- a record unexcelled over the past five years
by any other major industrial country -- and a record whose
maintenance is essential not only to the continued strength and
soundness of our domestic economy, but to our continued success
against foreign competition here and abroad.
We have also witnessed in recent months some very real
progress in moving toward sustained equilibrium in our
international balance of payments as a result of the
voluntary efforts of our businesses and financial institutions
to curb capital outflows. In the five months from April through
August our banks have reduced their dollar placements abroad by
$500 million. Businesses have also given evidence of their
support by bringing home $575 million in funds that they had on
deposit abroad and by substantially increasing foreign borrowings.
I have every confidence that we will continue to see good
results from these efforts by our financial institutions and
our businesses.
There may have been a
opportunities of corporate
at a nation's borders. In
has long since passed when
time when the responsibilities and
citizenship were regarded as ceasing
this country, at least, the time
we could entertain such a view.
For part and parcel of the leading role which this country
plays on the world stage are the activities of our multi-national
businesses -- a number of whom, I am sure, are represented here
tonight.
The expansion of international trade, the freedom of money
to flow across national boundaries, the welcome extended to
foreign business units, the stimulating effects of broadened
competition and the spread of technical and organizational
knowledge -- these hallmarks of multi-national business have
helped to bring an expanding, more integrated and efficient
economic structure to the West since World War II. The extent
of their contributions to our economy -- as to the economies
of the nations of the Free World -- defies measurement.
- 9 Not the least of those contributions is the sensitive
and enlightened handling of the host of delicate and difficult
problems involved in reconciling the interests and endeavors
of the multi-national business corporation with the often
intense nationalism it encounters in both developed and
developing countries. Today the need for good, indeed for
exemplary, corporate citizeng"ip by multi-national companies
is more imperative than ever -- if these companies -those mighty engines of private capitalism and economic
development -- are to play the congenial and beneficent
role in international affairs that the interstate company
plays in the United States.
These, then, are but some of the critical problems -the great challenges -- of local, of national and of
international scope whose resolution must depend very largely
upon the conscience and the commitment of business leadership.
No one imagines that their resolution can be quick or
easy.
But there is on this planet, and in this life, no final
resting place for any problem of real human import.
And what is asked of us in our time is only what is asked
of all men in their time: that with all their resources they
wrestle with the problems of their time so that their lives
and the lives of those after them will be fuller and more
free.
I know that, were he here tonight, President Johnson would
tell you how well he thinks this organization has met the stern
standard of citizenship that the times require of the American
businessman.
I know that he would thank you for your work in an
organization that -- in a real sense -- heard and heeded long
before he uttered them the words he spoke earlier this year at
a meeting of the National Industrial Conference Board:
"So I ask you then, as enlightened men of
our times, to join as full partners in all the
problems of the nation, the social problems as
well as the economic problems. For we shall
be judged not by what we take with us, but by
the society that we leave behind us."
000
TREASURY DEPARTMENT
Washington
Statement on the Protocol to the
U. S. - Belgium Income Tax Convention
by
Stanley S. Surrey, Assistant Secretary of the Treasury
before the Subcommittee on Tax Conventions of the
Senate Committee on Foreign Relations, October 13, 1965
(10:00 A.M. ,EDT)
Hr. Chairman :
I am appearing before you today to urge favorable action on
the supplementary protocol to the income tax convention now in
effect between the United States and Belgium.
The original con-
vention was agreed to in October, 1948 and has been the subject
of two protocols since that time, in 1952 and in 1957.
The
existing convention follows in broad outline the general pattern
of tax treaties which the United States has negotiated with the
other industrialized countries of the world.
The provisions of
this protocol are also consistent with the general principles
contained in these treaties.
The agreement contained in tltts protocol covers a limited
range of matters, and is principally directed toward issues
arising out of Belgium I s 1962 revision of its domestic tax system.
This revision required the United States and Belgium to renegotiate the existing income tax convention between the two
countries, since that convention had been negotiated against the
background of an altogether different Belgian tax system.
F-236
The
- 2 -
two countries agreed to deal in this protocol with the most pressing
points which emerged from the Belgian revision of its tax laws.
It is the intention of both countries to renegotiate the remaining
portion of the convention when there is a further opportunity to
do so.
In order
to ensure such fUrther consideration, the protocol
contains an expiration date beyond which it can not be extended.
The principal matters dealt with in the protocol relate to
(1) the Belgian taxes which are the subject of the convention"
(2) the taxation of dividends and interest" and (3) the Belgian
commitment to provide tax relief for its residents and corporations
deriving income from sources within the United States upon which
the United States also imposes tax.
A detailed technical memo-
randum describing the provisions of the protocol is attached.
Description of Belgian Tax Law
In order to better understand the provisions of the protocol,
it is necessary to describe briefly the basic provisions of the
new Belgian tax law.
of income tax:
Under Belgian law, there are four classes
an individual income tax; a corporate income tax;
an income tax on legal entities (political subdivisions and non-
- 3 profit-making organizations); and an income tax on nonresidents.
The income tax on nonresidents applies both to individuals and
corporations and applies generally only to income which nonresidents receive from sources within Belgium.
The collection of Belgian income taxes relating to investments and wages is accomplished generally through a system of
wi thholding or prepayments applicable to certain ld.nds of income.
In the case of income from personal property (including stocks
and bonds), there is both a standard and an additional personal
property prepayment.
In the case of income from real property, a
standard and an additional prepayment are also imposed.
In the
case of wages and other remuneration, a standard professional prepayment is imposed.
The protocol specifically applies the convention to these
various Belgian taxes.
Taxation of Dividends and Interest
Belgian In. thholding on Dividends
Under the present treaty, the United States may impose a tax
- 4on dividends from U. S. sources received by a resident or corporation of Belgium not having a permanent establishment within the
United States at a rate not exceeding
15
percent.
Under the
existing treaty, Belgium is precluded from imposing a tax similar
to the withholding tax imposed by the United States in the case
of nonresident aliens and foreign corporations.
The protocol pernr1ts Belgium to impose a tax not in excess
of
15
percent on dividends denved from Belgian sources by aU. S.
resident or corporation not having a permanent establisbnent in
Belgium.
The protocol specifies that the
15
percent rate of tax
shall apply only to dividends which are paid on registered shares.
Thus, in the case of registered shares, a reduction to
15
percent
is provided by the protocol from the regular Belgian wi thhold:ing
rate of 18.2 percent under its standard personal property pre-
II
payment.-
!I
It should be pointed out that the 18.2 percent rate
The 18.2 percent rate results from the fact that the standard
personal property prepayment is imposed at the rate of 15 percent
of the amount of dividends actually distributed grossed up by an
amount equal to the special d! vidends received cred! t granted
under Belgian law. To take account of this special crad! t, the
standard personal property prepayment applicable to dividends is
calculated on 85170ths of the amount actually distributed and the
effective rate of tax is thus 18.2 percent of the dividend actually
distributed.
- 5of tax still applies in the case of dividends which are pa.id on
bearer shares.
Typically" shares held by a U. S. parent corpora-
tion in a Belgian subsidiary are in registered form.
During the negotiations leading to the protocol, the United
states urged a general Belgian w:Lthholcij,ng rate under the treaty
of
15
percent.
However, the Belgian autOOri ties indicated that
they would encounter serious difficulties in administering their
tax system 1£ a reduced rate of tax were appl1ed
as well as registered shares.
to bearer shares
As I have indicated" th1.s protocol
will be in effect for a limited period of time, and it is expected
that by the expiration of that period Belgiwn will have developed
appropriate procedures to permit a general maximum rate of tax an
Belgian source dividends paid to U. S. persons of
1,
percent.
Actually, even under present Belgian law, because of the exemptions and credits which are contained therein, the effect!ve rate
of tax on dividends paid on bearer shares is generally below 18.2
percent and frequently less than
15
percent.
Even in those cases
where the eftective rate ot tax on bearer shares may exceed
1,
percent, the holder ot those shares can readily convert them to
registered shares and thereby obtain the benefits of the
rate.
1, percent
- 6 Elcemption from Belgian Add!tionaJ. Personal
Property Prepayment
The protocol provides an exemption from the Belgian additional
personal. property prepayment with respect to dividends and interest
paid to a resident or corporation of the United States not having
a permanent establishment in Belgium.
In the absence of this pro-
vision, a U. S. resident or corporation would be subject to a
15
percent tax on the amount received (after deduction of the standard
personal property prepayment) in addition to the amount withheld
as the standard prepayment.
Thus, under this provision of the
protocol, Belgium will not impose this additional prepayment on
dividends and interest paid to U. S. residents and corporations
fran Belgian sources.
Dividends and Interest Paid by Belgian
and U. S. Corporations
Under the protocol, the United states agrees to exempt from
tax dividends and interest paid by a Belgian corporation to a
person other than a citizen, resident or corporation of the United
States.
A provision of this type is contained in many of the tax
treaties to which the United States is a party and operates to
eliminate application of those rules contained in the Internal
Revenue Code under which in certain circumstances dividends and
.
')n ,.
- 7 -
"-
interest paid by a foreign corporation may be regarded as being
from U. S. sources.
The protocol contains a reciprocal provision under which
Belgium will not tax d1vidends or interest paid by U. S. corpora-
tions to a person other than a resident or corporation ot Belgium
unless collection is made in Belgium.
The reservation regarding
collection in Belgium was included because ot the problem ot
administering the Belgian tax laws in those cases where dividends
or interest are paid on bearer shares or bonds to a recipient in
Belgium through a collection agent (such as a bank) located there.
Relief from Double Taxation
As is standard in tax treaties, the United States agrees
to
allow an appropriate credit against U. S. taxes for Belgian taxes
paid by a U. S. resident or corporation.
The obligation of the
United States under this provision of the protocol is satistied
by the foreign tax cred! t provisions contained in the Internal
Revenue Code.
The protocol also contains a series of provisions under which
Belgium agrees to grant re~ef from double taxation to its res!dents and corporations on U. S. source income.
In general, the
.. 8 ..
protocol contains a broader commitment by Belgium to avoid double
taxation than is present in the existing convention.
In the case of Belgian corporations not having a permanent
establishment in the United States which receive dividends from
U. S. sources, Belgium agrees to grant to these corporations the
same exemptions from Belgian corporate income tax as wouJ.d be
granted if the paying corporation were a Belgian company.
exemption amounts to either
85
percent or
95
The
percent of the amount
of the dividend after deducting the U. S. tax withheld, depending
on the character of the reCipient's business.
In addition to
these exemptions, Belgiwn also agrees to permit a Belgian corporate
reCipient of U. S. dividends to elect under certain conditions to
have the dividends exempted from Belgian personal property prepayment.
This provision will operate to permit a Belgian corporation
receiving U. S. dividends to accumulate or reinvest a larger portion
of these dividends than would otherwise be permitted under Belgian
law.
In the case of a Belgian resident receiving dividends and a
Belgian resident or corporation receiving interest from the United
States, Belgium agrees in the protocol to permit a deduction from
its tax attributable to the dividends and interest of at least 15
percent of the amount received, after deducting the U. S. tax
- 9 wi thheld.
This provision, wltLch is contained in present Belgian
law, represents a commitment by Belgium to continue to allow this
deduction.
It a Belgian resident or corporation has a permanent establish.
ment in the United States and dividends, interest and royalties
derived by such Belgian resident or corporation are taxed by the
United States because of the existence of the permanent establishmant, Belgium agrees in the protocol to exempt such income fran
tax.
The protocol also deals with the problem of double taxation
in the case of a U. S. citizen residing in Belgium who is liable
for income tax in both countries on his world-wide income.
The
convention does not restrict the right of the United States to tax
its citizens, and consequently this individual is not entitled to
the reduced rates of U. S. tax provided in the treaty for residents
of Belgiwn on U. S. source income.
Consequently, both Belg1um and
the United states will be tax:i.ng his U. S. source income at
progressive rates.
The protocol provides a measure of relief from
double taxation to such an individual by l1m:Lting the Belgian
income tax which may be imposed on U. S. source dividends, interest,
pensions, annuities and royalties received by a U. S. citizen
- 10 residing in Belgium to
1, percent of
such income after reduction
of that tax by the 1$ percent Belgian foreign tax credit on income
from personal property.
Effective Date. ana Expiration
The effective dates provided in the protocol correspond
generally to the effective dates of the new Belgian tax law applicable to the items of income involved.
Where a new feature has
been introduced into the convention the provisions are applied
proapectively.
1 speCial transitional rule is provided primarily for the
benefit of U. S. tax-exempt organizations deriving dividend incons
from Belgium.
Belgium is prohibited under the existing convention
from imposing tax "similar to" that withheld at the source by the
United States in the case of nonresident aliens and foreign corporations.
Under the protocol Belgium is permitted to impose such
a withholding tax effective as to payments on or after January 1,
1963. The special transitional rule, effective until January 1,
196" preserves for tax-exempt organizations and other comparable
taxpayers any rights which they might have under t1l3 treaty prior
-11to this protocol, since such taxpayers can not benefit from the
foreign tax credit provided in the Internal Revenue Codeo
The protocol is to remain in effect until January 1, 1968
except that it may be extended by mutual consent of the parties
until no later than December 31, 1970.
Conclusion
The protocol which is before you deals with a limited nwnber
of questions primarily arising from the Belgian revision of its
tax system.
These changes in the treaty are essential to co-
ordinate the new Belgian system with the treaty and thereby permit
the treaty to operate as intended.
The protocol liberalizes the statutory taxation by Belgiwn
of Belgian source dividends paid to U. S. investors.
The reduction
in the rate of Belgian wi thhold1ng tax in the case of registered
shares from 18.2 percent to
15
percent and the elimination of
the additional personal property prepayment are significant benefits to U. S. investors in Belgium and the United States.
The
agreement by Belgium to provide relief from double taxation where
U. S. source income is involved is an important addi tiona1 benelit
to the U. S. citizens involved.
For these reasons, and because
- 12 -
the protocol is an important step in keeping our existing treatie s
current, I urge you to recommend that the Senate advise and consent
to the ratification of this protocol.
TREASURY DEPARTMENT
Washington
STATE~NT ON TH£ ffiOTCCOL AMENDING THE INCCJ1E TAX CONVENTION
IETWEEN THE UNITED STATES AND THE FEDmAL REPUBLIC OF GERMANY
BY STANI£Y S. SURREY, ASSISTANT SECRETARY OF THE TREASIRY
r£F(RZ 1'HE: SUBCOMMI'ITEE ON TAX CONVENTIONS OF THE
SENATE FCREIGN RELATIONS CoMMITTEE
OCTOaER J3, 1965
(10:00 A.M. ,EDT)
Hr. Chairman and Members of the Conunittee:
I am very glad to discuss the protocol signed September 17, 1965
to amend the incolll3 tax convention between the United States and the
Federal Republic of Germany, which was entered into in
1954.
The
protocol is the result of discussions which have taken place over
a period of years to deal with a number of problems that emerged
under the convention as it now stands and to take account of changes
made in the German income tax system in the years since the convention
came into effect.
I do not propose to discuss each provision of the protocol,
since the President, in transmitting the protocol to the Senate, also
transmitted a l1I8JOOrandwn which summarizes each article in the protocol.
Moreover, at the end of my remarks I will submit for the record a
comprehensive technical memorandum which goes into considerable detall
in connect.ion ttith each article of the protocol.
I shall therefore
confine my remarks to the principal provisions of the protocol.
I should like, first, to note that on the whole the protocol
will have a greater impact on the application of German tax laws
than on United States tax laws.
It will bring German tax practices
IOOre into line with United States tax practices and thus bring about
F-237
- 2 a greater degree of reCiprocity than has hitherto
prev~iled
respect to certain types of transactions and income flows.
with
In
general, therefore, the protocol produces tax changes which are
beneficial to Americans having interests in Germany.
Article 1 of the protocol restates the taxes covered by the
convention.
It describes more preCisely than at present the German
taxes falling within its scope and adds certain German taxes which
are not measured by income, the trade tax, and the tax on capital.
The consequence of this change is to enlarge the tax benefits accruing
to
u.
S. residents and corporations holding German assets by also
granting them exemption from these non-income taxes on those assets.
Article 2 of the protocol provides for a new definition of the
term permanent establishment.
This is a key term in tax treaties
since a taxpayer not having a permanent establishment in a country
may not under our treaties be taxed on industrial or commercial profits
arising within the country.
The definition of the term, in effect,
sets forth what types of activity constitute a permanent establishment
and hence establishes the limits within which an enterprise of one
country may conduct activities in the other country without being
subject to tax on industrial or commercial profits in that other
country.
The definition of a permanent establishment in this protocol
is essentially the same as in our tax conventions with Luxembourg
- J and Sweden, which have been approved by the Senate, and in our
convention with Belgium which is also batore your coDlllittee.
I
would like specifically to mantion one aspect of this definitioD,
the phrase which refers to a "place of management".
A place of
management, like an office, store or factory, can constitute a permanent establishment.
Soma have feared that this phrase may be
interpreted by Germany to hold a permanent establishment to exist
if a business executive from an American corporation should make
certain decisions in that country with respect to the operations
of his fjrm' s subsidiary there, even though the decisions are made
in a place temporarily occupied by the executive as living quarters.
In this connection, I woulc:i like to submit a memoraDCium of UDder-
standing which accompanies the protocol.
The first item in that
tneIJ'X)randum p."ovicies that ". hotel room or similar place taaporaril1
occupied by officials of an enterprise exercising managaDBDt tunctioDi
shall not be interpreted to coDstitute a place ot management".
This
issue also was considered in connection with the tax convention with
Luxembourg, and we there entered into an exchange of letters which
provided that decisions taken by executives which are solely of a
technical or scientific nature will not be interpreted to constitute
"management ll •
We have agreed with tbe German tax authorities that
- 4a similar principle will apply in the application of the term
Itmanagement" used in this }rotocol.
We have not included this in
the memorandum of understanding only because the time necessary to
reach terminological precision in both the English and Gerraan
languages would have delayed too long consummation of the protocol.
I am confident that in the application of tba term "place of
management", the fears that have been expressed will prove to
be groundless.
I should like to point out that the language used
in the protocol is taken from the OECD model convention.
We are
seeking to achieve as much uniformity among the industrialized
countries as possible in the terminology used in tax conventions.
For this reason, we and the German authorities preferred not to
alter the permanent establishment language but to arrive at a
clearer understanding of what the language means through the memorandum of understanding and our discussions.
Article III of the existing convention provides that an enterprise of one country with a permanent establishment in the other may
be taxed in that other country on its industrial or commercial profits.
The tax will be at the regular rates applicable to bUsiness income.
It goes on to say, moreover, that all other income from that country,
such as investroent income or royalty income, which accrues to the
- 5enterprise will be treated as income of the permanent establishment
and taxed at such regular rates together with the jrofits which are
actually attributable to the operations of the permanent est-ablishment.
Thus, if' a German company having a marketing branch in the
United States holds, say, U. S. Government bonds, the interest it
receives is treated as the iD:ome of the permanent establishment
and taxable to it even though the convention provides for tax
exemption of intersG't paid to a German corfOration which does not
have a permanent establishment berea
The taxation of a foreign
enterprise which has a permanent eatablishmaut Qn all income trom
sources within the United States at regular rates has coma to be
referred to as the "force of attraction".
It produces aDOmalous
situations and tends to discourage invest_nt in the United States
by the foreigners mat likely to invest here.
The protocol amends the convention so as to abandon the "force
of attraction".
To accomplish this result, the protocol amends
Articles III, VI, VII and VITI and adds a new Article IIA..
UDder
these new proviSions, a permanent establishment ot a firm in the
other country will be taxable at regular rates. only on tba busineSS
income attributable to the activities of the permanent establishment
or the investment income lIeUectively connected" nth the ac:tivit:1.ts
of the permanent establishment.
other income, such as investment
income or royalties which are not effectively connected to the firll'l
- 6 business activities in the country, will be treated in accordance
with the relevant provisions in the convention regarding those types
of income.
Hence, if' a German firm derives interest income which
is not effectively connected with the activities of its permanent
establishment in the United States, the interest 'WOuld be tax exempt
under the convention.
This is not the first tax convention to depart from the "force
of attraction" approach.
Our tax convention with the United Kingdom
was amended some years ago to extend the exemption which otherwise
applied to royalty payments to Cases where the recipient of the
royalties had a permanent establishment situated in the country from
which the royalties were derived where such payments are not directly
associated with such permanent establishment.
However, this protocol
is the first convention which fully-eliminates the "force of attractionn
principle.
I should like to add that the treaties written among the
European countries, as well as the OEeD
100 de 1
convention, generally
do not contain the nforce of attraction lt principle.
Instead, they
rely on the "effectively connected" doctrine.
Tna memorandum of understanding expounds on the neaning of the
term "effectively connected" and is intended to minimize administrative
problems that might arise in its application.
In the existing income tax convention, provision is made for a
- '7 reduced rat.~ of withholding tax of 15 percent on dividends paid ;y
a lO-percent-or-I1IOre-owned subsidiary corporation in one country to
a parent corporation in the other country.
A13 respects the Unitecl
States, this is in lieu of our 30 percent statutory rate.
Article
4
Und.9r
of the protocol, this reduced rate would apply to all non-
effectively connected dividends paid from one country to a recipient
in the othel:', and thus will extend to portfolio invastnents.
This
extension of the reduced rate of tax applicable to dividends brings
the German convention more nearly into line with most of the other
tax conventions to which the United States is a party.
At the same
time, the protocol increases the withholding tax rate in certain
situations to deal with what Germany has consi_ed to be an abuse
resulting from the interaction of the split rate German corporation
tax and the reduced withholding tax rate in the treaty.
The Garman
corporate tax on distributed profits (15 percent) is much lower than
that on retained profits (51 percent).
As a result, some American
companies with German subsidiaries have found it to their tax advantage
to
dist~ibute
all of the profits from such German subsidiaries as
dividends to the United States parent, subjecting those
profi~s
low German corpcn"ate tax rate on distributed profits and to the
to the
1,
percent German withholding tax (and also to the United States tax, but
with application of a credit for the German taxes), am then i.mIlIediatel1
to reinvest the balance in the German subsidiary.
The combination
- 8 of the low German corporate tax on distributed profits and the treaty
withholding tax, even with any United States tax that had to be
paid, often was lower than what the German corporate tax alone would
have been on the undistributed profits involved had they been siJllply
retained by the German subsidiary rather than being distributed and
reinvested.
To eliminate the incentive to distribute and reinvest
in such cases, the protocol lZ"ovides that Germany may continue to
impose its statutory Withholding tax rate of 2$ percent on dividends
which are distributed and then reinvested in Germany by the parent
company.
For this purpose, an investment made in a German subsidiary
by a United States parent company in the year in which the latter
receives dividends from the subsidiary, or in either the year
immediately preceding or foliowing the receipt of such diVidends,
is considered to be a reinvestment of the dividends received.
How-
ever, the amount deemed reinvested in any year must exceed 1-1/2
percent of the dividends received from the subsidiary in such year
for this prOvision to apply.
In connection with the abandonment of the "force of attraction"
prinCiple which I mentioned earlier, the lZ"otocol also provides in
Article
4 that
it dividends paid to a foreign enterprise are unrelated
to the operations of its permanent establishment in the country from
which the dividends are paid, such dividends will mt be taxable at
regular rates to such foreign enterprise.
Instead they will be taxed
- 9 -
at the
15
percent withholding tax rate applicable to a foreign
enterprise which does not have a permanent establishment in the
source country.
The same principle is established by Article
5 of the protocol
with respect to interest received by a company in one country from
sources within the other, and by Article 6 with respect to royalties.
Both types of income are thus exempt. undertbe convention from tax
in the source country when not effectively connected with a permanent
establishment situated therein.
Article 6 of the protocol revises the tax treatment of
in
one other respect also.
royal~ies
Prior to the protocol, royalties were
exempt from tax in the source country when raceived. by a resident
or corporation of the other country.
However, in some cases the
German authorities had been placing a stricter construction on the
term "royaltyt' than was the case in the United States.
For example,
they did not apply the exemption to payments for "know-how".
The
protocol revises the definition of royalties so that not only are
payments for the usa of or right to use patents, copyrights aDd
similar property rights covered by too exemption, but also payments
for the use of or right to use knowledge, experience and skill
("lmow-how") are exempt.
It has been agreed that this expanded
exemption will be applicable from January 1, 196), and in sone cases
- 10 -
the exemption will apply to earlier periods as well.
In this con-
nection, I would like to submit for the record an exchange of
letters between the Treasury and the German Ministry of Finance
relating to this question, which indicates the cases in which the
German exemption will apply prior to January 1, 1963.
Under existing United States law, capital gains realized by
nonresident aliens and foreign companies are exempt from tax. in the
United States except in limited ca ses.
Under German law, however,
capital ga:ins of Americans are taxable under circumstances that are
not so restricted.
S:ince the treaty now contains no pI'ovieion on
capital gains, the reciprocity in the tax treatment of capital gains
is lacking.
Article 8 of the protocol remedies this by establishing
rules for the exemption of capital gains.
The principal advantage
to the United States lies in the changed tax treatment with respect
to what the Gar_Ds ref.. to as fta substantial participation" -where a taxpayer, aD individual or corporation, owns 25 percent or
more of the shares of a German company.
If the owner of such an
interest in a German company dispose s of any shares, the profits
derived from their sale are treated under German law as profits derived from within Germany and are therefore subject to tax there.
The German view is that under these circumstances the owner of the
stock is in effect do ing bu siness in Germany and therefore the
gains derived from the sale of the stock represents the realization
- 11 of profits -..ithin Germany.
This situation has posed problems for
American companies who sought to reorganize their holdings in a
German subsidiary or to dispose of their interest in a German
corporation.
Such companies found themselves subject to tax in
Germany under circumstances where no tax was levied in the United
States, as in the case of a tax-free reorganization.
or
if the
sale took place in the United states, the gain was considered to haft
a source in the United States aId therefore no credit was allowad
for the tax imposed by Germany.
Under the protocol, such situations
will no longer arise since Germany will not tax any gain on the
disposition of shares in a German company.
The memorandum of under-
standing attached to the protocol makes explicit that the exemption
applies to stock in a subsidiary company (substantial participation)
disposed of by a parent corporation.
Moreover, as in the case of
other income, the "force of attraction" principle will be replaced
by the "effectively connected" concept with respect to capital gain,.
Under German law, payments received by a United States resident
for services which are performed in the United States but the results
of which are utilized in Germany are considered to be income earned
in Germany and subje ct to tax there.
For example, if an engineer
in the United States prepares drawings for use in connection with a
- 12 manufacturing process, which drawings are transmitted to Germany
and utilized there, Germany would tax the engineer on the income
he receives for his services in preparing the drawings.
This German
tax would be imposed even though the engineer never left the
United States, on the ground. that his income is derived from the
utilization in Germany of the fruits of his services.
Und.er United
States law, the income would. have a sour·ce in the United States
because the services are performed here and no part of the German
tax imposed on such income would be allowable as a credit against
United States tax.
Article 9 of the protocol amends the existing
convention to eliminate German tax in such situations and thus removes the double taxation that now exists.
This article of the protocol also tightens up somewhat the tax
treatment of personal service income.
Prior to the protocol, the
exemptions contained. in Article X of the convention applied. to services perforD'8d. as an employee of, or und.er contract with, either
(1) a natural person resid.ent in, or a company of, the country of
the taxpayer's resid.ence -- in which case there was no limitation on
the amount of compensation which was exempt from source country
taxation, or (2) any other employer -- in which case the exemption
from source country taxation was limited. to cases in which
compensation received. for such labor or personal services did. not
- 13 -
exceed $3,000.
Amended Article X of the convention requires that,
as a prerequisite to exemption, compensation be received for serVi~8
performed as an employee of, or under contract with, only a natural
person resident in, or a corporation of, the country of the taxpa;yar'B
residence.
Moreover, the amended article requires that such compensa.
tion be borne clirectly by such an individual resident or corporate
employer J and not by a perruanent establishment maintained by such
employer in the country of source.
This change brings the convention
into conformity with the OECD model draft convention.
Article XV of the existing convention contains the basic provisions for eliminating double taxation.
Under its terms Germany
does not impose a tax on its residents or companies receiving income
from sources within the United States i f under the convention such
income is taxable in the United States.
This has resulted in certaUi
tax advantages which Germany does not wish to perpetuate for GarIlIIn
taxpayers receiving some forlll5 of income from sources within the
United States.
Consequently, Article 12 of the protocol revises the
tax treaty so that in the case of portfolio dividends and Government
wages, salaries and pensions Germany will be permitted to impose tax
on amounts received from U. S. sources but will allow a credit for
United States tax imposed on such income.
Elcemption w:i.l.l continue
where diVidends are paid by a U. S. corporation to a German parent
- 14 corporation.
which owns
For this purpose a parent company is defined as one
25
percent or more of the voting stock of the corporation
paying the dividends.
Article XV also lZ"ovides that United Stat,es
cit,izens or residents who also are residents of Garmany for tax
purposes (and, therefore, are subject to tax in both countries on
their world-wide income) shall be allowed a credit against German tax
for U. S. taxes on any U. S. source income regardless of other provisions of the treaty.
Under United States tax law, nonprofit institutions abroad
may qualify for exemption from U. S. tax on their income from United
States sources and may secmoe a ruling from the Internal Revenue
Service as to their nontaxable status.
In other words, a German
nonprofit institution may acquire the same tax-exempt status as a
domestic nonpr.oiit institution.
However, German law does not accord
United States organizations the exemption from German tax which
German institutions enjoy.
There are some American nonprofit
institutions that have obtained German securities by bequest or
otherwise and are subject to tax in Germany on the income from such
securities.
Article 13 of the protocol revises the existing conven-
tion by inserting a new article as a result of which American
nonprofit institutions may qualify far exemption from tax in Germany
on income from sources there.
It thus 1«)uld achieve reciprocity
- 1.5 in the tax treatment of DOnprofit institutions.
The existing convention contains provisions for exchanges of
informtion between the tax authorities of the t'WO cOUDtries to
prevent fraud and to carry out the various proVisions of the convention.
&wever, the existing language ha s been construed to pre-
clude the use by one country of tax information obtained in the
other in proceedings before a court or other administrative body.
Article 14 of the protocol would amend the existing language of
the convention so as to permit the disclosure of such information
in a court or other administrati va proceeding involving the assess-
ment and collection of taxes.
The objective of the tax conventions to eljmjnate double
taxation has sometimes been frustrated by the fact that refunds
could not be made in appropriate cases.
Assume for example that
transactions have taken place between a Garman subsidiary and a
United States parent corporation and that upon audit of the return
of the parent company the United States tax authorities find that
the income reported by the parent company had been understated.
Perhaps the price charged the subsidiary company for goods sold
to it by the parent corporation was too low.
A deficiency might
be assessed against the parent company and United States tax imposed
on an amount which had previously been reported as a profit by the
- 16 German subsidiary and had been sub ject to tax in Germany.
Assume,
. further, that the German tax authorities are in agreement with the
United States tax authorities that the price charged the German
subsidiary is too low.
Unless the Germans can make a refund of
the tax previously co llected on the incoIIB of the subsidiary, which
is now to be treated instead as additional profits of the American
parent company, there will be double taxation.
However, the authority
for Germany to make refunds might bave expired because the length of
time taken for the United States tax authorities to make the deficiency
assessment exceeded the time during which a refund could be made by
the German authorities.
Article 15 of the protocol amends the
existing convention so tha t under these circumstances a refund could
be made by the German authorities.
In other words, the protocol
would extend the statute of limitations for the purpose of making
refunds in appropriate cases.
The same provision would apply to the
United States.
The dividend article of the protocol will affect dividends paid
on or after January 1, 1965; the royalty article will affect such
payments made on or after January 1, 1963; and all other articles of
the protocol will become effective for taxable years beginning on or
after the first day of January in the year in which the exchange of
instruments of ratification occurs.
I have discussed what I believe to be the most important
- 17 provisions of the p-oposed. protocol to the convention between Gerllllll1
and the United States, and I urge the committee to take prompt action
in reporting it out with a recommendation for ratification.
With
your permission, I am submitting tor the record a memorandum
ot
understanding with the German authorities on the permanent establish.
ment and other questions, an exchange ot letters on the "know-how"
question, and the technical memorandum on the protocol.
- 2 -
Mr. Zeitlin was a Phi Beta Kappa graduate of Columbia
College in 1951 and received his LL.B. from Columbia University
Law School in 1953 where he was a member of the Law Review.
After serving with the U.S. Army from 1953 to 1955, he
practiced law in New York City until he came to the Treasury
Department in 1962.
Mr. Loengard was graduated from Harvard College in 1953
and the Harvard Law School in 1956.
He practiced law in
New York City until he came to the Treasury Department in 1964.
Mr. Rothkopf was graduated from Lafayette College in 1955
and the Harvard Law School in 1958.
After serving as a Treasury
Department attorney from 1958 until 1960, he was employed until
1963 by the Securities and Exchange Commission where he held a
)upervisory position in connection with the Commission's Special
)tudy of Securities Markets.
TREASURY TAX LAWYERS PROMOTED
Stanley S. Surrey, Assistant Treasury Secretary for Tax
Policy, today announced three promotions in the office of his
principal legal assistant, Tax Legislative Counsel Lawrence M.
Stone.
Those promoted:
George Zeitlin,from Associate Tax Legislative Counsel
to Deputy Tax Legislative Counsel;
Richard O. Loengard, Jr., from Associate Tax Legislative
Counsel to Deputy Tax Legislative eounsel for International Tax'
Affairs (continuing in his present pOSition as Special Assistant
to Mr. Surrey for
~ternational1ax
fo-tfairs);
Arthur J. Rothkopf, from Assistant Tax Legislative Counsel
to Associate Tax Legislative Counsel for International Tax Affairs
G
TREASURY DEPARTMENT
October 14, 1965
FOR RELEASE A.M. NEWSPAPERS
FRIDAY, OCTOBER 15, 1965
TREASURY TAX LAWYERS PROMOTED
Stanley S. Surrey, Assistant Treasury Secretary for
Tax Policy, today announced three promotions in the office
of his principal legal assistant, Tax Legislative Counsel
Lawrence M. Stone. Those promoted:
George Zeitlin, from Associate Tax Legislative Counsel
to Deputy Tax Legislative Counsel;
Richard O. Loengard, Jr., from Associate Tax Legislative
Counsel to Deputy Tax Legislative Counsel for International
Tax Affairs (continuing in his present position as Special
Assistant to Mr. Surrey for International Tax Affairs);
Arthur J. Rothkopf, from Assistant Tax Legislative
Counsel to Associate Tax Legislative Counsel for International
Tax Affairs.
Mr. Zeitlin was a Phi Beta Kappa graduate of Columbia
College in 1951 and received his LL.B. from Columbia
University Law School in 1953 where he was a member of the
Law Review. After serving with the U. S. Army from 1953 to
1955, he practiced law in New York City until he came to the
Treasury Department in 1962.
Mr. Loengard was graduated from Harvard College in 1953
and the Harvard Law School in 1956. He practiced law in
New York City until he came to the Treasury Department in
1964.
Mr. Rothkopf was graduated from Lafayette College in 1955
and the Harvard Law School in 1958. After serving as a
Treasury Department attorney from 1958 until 1960, he was
employed until 1963 by the Securities and Exchange Commissioo
where he held a supervisory position in connection with the
Commission's Special Study of Securities Markets.
F-238
oOe
- 27 -
in our balance of payments for as long as the dollar is a key
currency in the Free World monetary system.
For -- let me repeat in closing -- we are determined to
master the balance of payments situation, because continued
deficits would destroy confidence in the dollar, including
confidence in your investment dollars.
And we are determined
to solve the balance of payments problem with the least possible
impact on freedom of economic choice.
This is why making a
success of the voluntary program is so important.
000
- 26 as government alone can do -- decides what is national policy
and sets the national goals; business -- as only business can
do expertly -- is left free to make its many and varied individual
decisions as to how to operate consistently with national
policy and to contribute to the achievement of national goals.
I do not know if the business community is doing as much
as it can, as fast as it can, to increase its exports, and to hold
its foreign investment to levels that will assure an equilibrium
in our balance of payments.
I am not sure we in government
have done all that we can do to provide you with guidelines
that can be evenly applied to achieve the national objective
under competitive conditions.
What is certain is that you,
and we, must be willing to do more, willing to refine our
procedures, willing to enlarge the scope of our activities,
and willing to innovate, to achieve and maintain an equilibrium
- 25 price stability; reduction,by the methods I have already
mentioned, of the growth of net dollar balances abroad due
to foreign assistance and military operations; promotion of
exports and reduction of imports by fair competitive methods
that do not invite a deterioration of good trade relationships;
and finally,
voluntary programs for the maintenance of private
investment abroad by American banks and other business at levels
that do not make a U•. S. balance of payments equilibrium
achievable only by a withdrawal of U. S. political, military
and diplomatic power from its role in world affairs.
In the background of the voluntary
p~ogram
is the Adminis-
tration's desire to operate its overall balance of payments
program with the least possible interference in private economic
decisions. The voluntary program keeps government in its
proper role and lets business perform its function:
government--
- 24 -
In this situation, which is totally unlike the conditions
of the classic balance of payments difficulty, the basic and
t
ral!e iuc±€l!$e&*6£ !Ie%. a&Q 1.9..,
could only result in jeopardizing
the long and sound business expansion we are experiencing.
The program we have adopted is the program needed by the
United States, tailored to its highly unusual balance of
payments trouble.
It is, in skeleton, the use of tax and
monetary policy to increase the profitability of investment
and to increase the demand for investment
in this country
by keeping economic growth high and rising in conditions of
- 23 _,
-.f-'
,
•..(.. 1/..,1 }1i'I·..tlA-"'C'"IN """,
]
of public \ and private
/
I
Ir
,:)v \..,,'v""'" ~
~I-~))
-'-'"<~
I
~J.~LW-l~
1flV~t:~.
.,/
..,.,-....
_.-
Public expenditures
abroad -- that is, foreign assistance and the costs of external
military deployment -- are instruments of national foreign
policy.
The balance of payments effects of foreign outlays
__....
of public funds have been very sharply
redUce~bY
decreased
_~<i11"I_~~
e~ty~ng our grants
8 ......11. attd 1!!t!I'!!!tSett.....
and loans to
the purchase of United States products, and by many other
01f.ce l
measures,
'w.16
~e~ a~
the reciprocal promotion of the purchase of
I\.....
U. S. military supplies by governments of countries in which
there are heavy U. S. troop concentrations, such as West Germany.
!~
In the ~.~50s and the early 1960s there was an extraordinary
outflow
with an upsurge of economic development in industrial Europe,
made foreign
inve~::~;::~~~~:~i;;~'J
-
,
- 22 power due to low productivity and rising prices -- that is,
inflationary conditions.
strongly® l,.,-
titive.
Our productivity is high, and rising
=:S:;:~tSMI wlElll
::....
Our capacity to produce is easy:
and deliver on time.
Our prices are compewe can fill orders
Our efficiency is all-around:
industrial,
agricultural and even
automation and mechanization is helping us to gain upon others.
Due to the competitiveness of our goods, our trade is
large and our trade balance is highly favorable.
High and
rising investment at home is keeping the growth of capacity to
produce goods and services in good relation to private and
public demand, making for extraordinary price stability
underwriting continuation of what is already by far the
or thereabouts, is what is in the
be
t(',-.
,
better than last, that we expect the improvement to continue
in 1966, and that we intend and expect that it will continue
for as long as necessary to bring our payments into an
equilibrium that we can, and we will, sustain.
Now, let me close with a few words about the nature of
our balance of payments defict, because that is the controlling
factor in the nature of the cure.
Our balance of payments is not due to the ailment that
is generally the cause of deficits, loss of competitive
- 20 -
one of the key elements of the balance of payments program -export promotion.
Exports in July and August were substantially
better than earlier -- disappointing -- figures.
Further,
the information we have to date suggests that imports, which
had been rising faster than exports,
ma~
be flattening out.
other factors
with net favorable implications is the general strengthening
in this very big and complex matter, we shall come out in 1965.
But while I cannot tell you that a deficit of $1.3 billion,
- 19 -
l,-~l,\ G-.. . <l'-"-.l).c,-(;G-..~\ ~~,
in the first half of the
yea~pu:t
tC'-',.l-c.c: ... "'.ll'-V"Vi). )
together with i-n-i()rm.ation ./ /
f....,,//
f-.-c c 1, '" --A....:
our warnings that our excellent showing in the,fi'f'Bt half of.
"t-v'"""- a:~) Lv-t~c ~~_~.':L~":":"Tl,, (- ~ _.~~~'::1 ~:\} lc~) .~; .':LI.'I
thQ Y@8r~Ue in part to benefits that could not be
l~
repeated, at least, in such large degree, such as the
repatriation of deposits abroad.
And you are aware of our
further warnings that results for the last half of the year
would reflect some unfavorable factors that do not show in
the first half, such as tourist spending abroad.
However, we must be cautious not to stretch all unfavorable
factors into the future, and neglect to project favorable
influences.
There are some of the latter.
While we cannot declare a trend from the experience of
gne or two months, there is at least tentative good news about
- 18 -
determination can insure success in making one of the principal
improvements needed in the system as it now stands:
an end to
:-~l
.. :;
(/1',
United States balance of payments deficits.
~r
I have already
0'
(
"\,
\~
~.
'v
indicated to you our general view of our balance of payments
situation at present:
"
>J
I
~J
-~\
we have been making good progress indicati~
that we are on the right track, we are continuing to do so,
and we see no reason to think that we will not succeed in
good time by vigorous and constantly improved and refined
use of our present methods.
I will add what little detail that I can to
tha~without
venturing onto the shaky ground of predictions based upon
incomplete and preliminary data.
L .. " (it -i.. ltv,,", ~(.,~·h \
You have seen published Sf'CcBJeJij,9n that our balance of
"'-.
,
L
(
~.
J.
iJ_\ __ \_"',- \,... \.,.
'- '-.-
not in position to confirm tfrr.S projection of our experience
- 17 monetary system that we have just been examining that would
relieve us, or others, of the obligation the system now imposes
to bring our international payments into equilibrium.
We do
seek agreement upon changes designed to permit continued growth
of reserves to underwrite the continued sound economic growth
of the free world
and chronic United
~_~v~~~~~_~:~c\r~~'-':L\'~(L-Ll<-l .~ V'~{L''iL '- tc, l,-t~I."L,
States payments
deficit~And
.,} ,.);l •.• ,l2
we seek adjustment processes promoting
steady and general free world economic growth with stable exchange
rates.
I believe that the others with whom we are entering into
discussion of improvement of our international monetary system
have these same fundamental objectives, even though there are
deeply held differences of emphasis and approach.
I am,
consequently, confident of success.
A further reason for this confidence is the fact that our own
- 16 rising private and public consumption with little or no
change in the general price level.
It is also an argument for laying an obligation upon
surplus nations to adjust their policies so as to open the
way to a return circulation of the reserves they accumulate.
This adjustment could be in the rate of domestic growth or
consumption, in foreign trade policies, in policies affecting
the flow of capital to foreign parts, including economic
assistance, and in the sharing of free world defense costs.
Such adjustments encourage the reestablishment of equilibrium,
by deficit and surplus countries alike, at higher levels of
production and trade, by contrast with the groping for
equilibrium at lower levels that has so often proved disastrous
in the past.
The United States seeks no change in the international
- 15 ''It ... ",
their EQbalances.
If they are reserve currency countries, such
as the United States, loss of confidence in their money following
upon failure to end their deficits results eventually ina i~
~Orll/elISl'~X
U
, .. of the
~ic
reserve currency
"-
~
into gold.
In this
process, world reserves are reduced because the amount of
currencies held in national reserves is reduced.
, \. . '-' ).'~'- '- ~ T\. v - 'achievement of equilibrium by re.s::trl:ct10W'!!J1"¥--
This, like
••
pol~c~es,
is
unacceptable because it tends to depress the world economy.
What is wanted, instead, is a circulation of reserves
that facilitates the maintenance of equilibrium at rising
levels of production and trade.
Let me specify that this is
an argument for sound economic growth, such as we have been
experiencing in this country now for years, in which incentives
to save are preserved, making possible high and rising investment
to expand production and increase productivity, in turn permitting
- 14 harsh losses of employment or profits.
Second, the process
would require adjustment by surplus as well as deficit nations.
At present, there is an imbalance in the system as a
whole.
On one side of the scale is the fact that a deficit
nation does come to a point where it must adjust its economy
or its international payments, or both, because it reaches the
limits of its reserves and of its power to borrow.
On the other
side is the fact that there are no comparable limitations
enforcing adjustment of its policies by surplus nations.
ulft.
prl'MvI..pf.)
re!tfl)1C~ W cO)r/cc~:n\ ~
l'h-io;&~.$.ua .lis'177"t:oltt:e:iJ:f5
c/ct'c;f
1Vt+1~~~)
Jut t1 tn;:::!l% Elm s•• d~'.'S117""'t
--;;t;p;ir;,-~::' c::' ;;
&8 • ::G2ld .8 771h__~!!.:."!W% +t.l£P~:~m?j£9JOiijJtu.z_ '(JI.IiI!,~
~---.-:~-'~~ ,~
equilibrium~. f lSi I ~conomic restrictio~ 88
~
~ A
@@Fiei.
A.
Deficit countries must, certainly, be obliged to cure
- 13 reserves.
We estimate that as of the end of 1964 more than
a quarter of the official reserves of the remainder of the Free
World were held in the form of dollars.
In addition to this single lodestone fact -- that the
~
necessary and desir;able actions of the United States to correct
~
its balance of payments situation will soon end the process
by which most additions to official reserves have been made
in recent times -- there is a second flaw, which is under special
study by the OECD.
This is the fact that the free world monetary
_sys~emh'~:" I:a","~.. ", ~
Moo...
~)
~~atlsfactory
or surpluses.
2--
-v
• 41
.1.11"
J
u--------tto=y ZlMIIii
•• "'- -liibftf''ii taell"ef :J
machinery for the adjustment of payments deficits
~
A process
for the adjustment of payments imbalances
that could be called satisfactory would have, in my opinion,
at least two features.
First, the process would both enforce
timely adjustment, and make enforcement palatable, by avoiding
- 12
~l~,officia1
reserves and in private
can continue to function as an essential part of the world's
must be, and is being, stopped now.
That the world must know, and that the world expects,
because it requires that the dollar be as good as gold.
I~despite
the ending of the long period of large U. S.
deficits)growth is co continue and trade is to expand,
we must provide an effective and adequate substitute for the
creation of additional reserves, when needed.
The growth of reserves deriving from
U. S. deficits
has taken two forms -- dollar balances held as such, and dollars
acquired and converted into gold.
The latter development, of
course, resulted in a substantial decline in United States
- 11 -
I will now turn:
the absence of large annual U. S. balance
of payments deficits.
Despite its many and great virtues and accomplishments,
our international monetary system stands at a crossroads.
The
answer, if you ask why, goes to the heart of the matter.
This
The President, the Congress, and informed financial
authorities around the world all are agreed that the United
States must put its international accounts in order, and keep
them so.
It must do so to preserve the integrity of the,dollar
at home and abroad, so that the more than $27 billion held in
- 10 -
being tipped over by the force of speculation.
nothing automatic about it:
But there is
help can be denied if the nation
in question does not take action to strengthen its money.
It
thus is cooperation and assistance that can help a nation
survive attacks upon its currency from the outside, while it
insists upon correction of weaknesses from the inside.
This is a big, practical, fast and flexible international
monetary system, a system aware of its duty to protect national
currencies, but never to keep them in sin, responsible for
keeping liquid funds adequate at all times to float the world's
commerce, but cautious never to sponsor a flood.
It is our
objective to make certain that the system continues to evolve
so that it can discharge these tasks as well under different
conditions in the future as it has done in the past.
Chief
among the differences in the future will be the fact to which
- 9 -
truly Herculean tasks of providing required amounts of money,
at the right time and place, in the postwar
huge task of repairing the damages of war, the free world has
carried out the greatest economic advance, benefitting the most
poeple, by the widest margin, in history.
Moreover, the free world monetary system has showed itself
capable of fast and effective action at time of crisis.
By
contrast with the 1930s, when the world financial system could
not rally a few hundred million dollars to keep it .' from
crumbling, on four occasions in recent years the present system
has produced credits ranging up to several billion dollars -when necessary, in a matter of hours -- to help the Canadian
dollar, the Italian lira and the British pound.
By this type of cooperation we can -- and will -- effectively
protect currencies in a temporarily vulnerable position from
- 8 -
up since 1958 a network of cooperative and consultative arrangements that has substantially increased the free world's ability
to maintain international monetary stability.
These include
the Fund's General Arrangements to Borrow up to $6 billion from
the Group of Ten nations -- Belgium, Canada, France, Germany,
Italy, Japan, the Netherlands, Sweden, the United Kingdom and
the United States -- just renewed for a further four years;
arrangements by which central banks swap currencies for short
periods of time to meet exchange requirements; the sale of
fOTeign currency bonds by the United States; the operations
of an international, cooperative gold pool in London, and
cooperation and consultation carried on through such institutions
as the Bank for International Settlements and the Organization
for Economic Cooperation and Development.
The free world international monetary system has performed
- 7 -
to smooth out balance of payments adjustments, and by promoting
a
=;;~
ef sound international financial conduct.
The Fund's resources are increased by enlargement of
national subscriptions to its capital -- national quotas.
The
latest increase, now in process of approval, will bring its
capacities to $21 billion.
Every member has virtually automatic
reserves
U)1V
_~_.-..--;,.,.--:~--,~of its quot~
~
equivalent to 25 percent
e
()o)/ /cJ)l...
1/u.'<l"
t;
,arawing
.!_?___ L~l@;1jeL 95.?:t;~~
- - CU'(/~t·(t(_~..~._I1~__((j(~~:..:."
have
d
. _ ..}?.~~~U(:(~-:~(
\:O:e::~:=::::a:]l:::J~~:~:~tQo1:I.W!=~};'@t::*:i+:1 -',~:.: ".:1I I i I:6: ;: ~ ~ : :t
Sui
£--..-
"- C>~ C!<,J,f,d''',!> c.-;../. ~.
Iilillitan. (The Fund can provide"aQ,-1iEiel"lei-"ii(~@~ha"f1
d:... ..J:ts..,-a&.'{c-.;.~lu.,~.
\.J.o..
~t
J:.
~the full amount of a nation's quota.
&9
These cefttl1"2ig8n.-rl!eo~@j "
presently totals some $l2~ billion.
Secondly, upon the margins of the IMF, there has grown
- 6 -
more or less to the same factors business judgment contends
with domestically.
The admixture of foreign currency holdings
and credits with gold in national reserves reflects the practical
r'
desir/ability of holding private and official balances in the
.-----
~_J
j(urrencies of countries with production facilities and financial
~fr:!C gf~'-'-
institutions that '~em a leading position in the world's
trade and finance.
'"
Two major developments since World War II have added to
the system's unfeeling heart of gold a sensory apparatus of
consultation and cooperation.
This permits us not only to
know when something has gone wrong, but also to find means of
correction that put the carrot ahead of the stick.
The first of these is the International Monetary Fund,
established in 1945.
The Fund's principal task is to help
", ~"".~"Vvt<.41 c~-:
stabilize world monetary affairs, by providing 's-ft~r'term credit
"-'''''''=f\:''
- 5 -
disposition to seek the means for the solution of economic
problems in an increase in the economic resources available
for use -- bigger helpings for all, from a
~dgger
pie, rather
than a new division of the existing pie.
Our international monetary system stands on two pillars
which, I would emphasize, will remain unchanged.
The first is
stable exchange rates, based upon the United States commitment
to buy or sell gold at $35 an ounce.
Exehangs
rat~s are
stab~/"
_re~\
Second, international reserves include not only gold, but
also foreign currency holdings -- chiefly dollars and pounds
. \. W, fm~,dtj) ,. T
sterl~nge\
and! £gftl
;~,
;'//:1
"au••,,' ' tI,~
~
I.S i
-''''
f' f, s,
_ sli 8itte19'1it .ee£I1·~~--from·t!if8'~In1!~]"oQ;iol
jr:~J.P";t ~.s dr~'H( \ t·: /,~/:
,~,~lcli Jr\f;wlL-~~
....t~p~UJPJoi~:~tili .awlWry~dr. ~"'.t!I~J~'8~;I I IiI~Io,__
. - , _ ,},f.,dh r/tJL .])./. "id", -x/'lf. ,Alha(/,_s 1:7;./
I.(-ILa.;I! ~ t/( tD t1f., I!j a (/1(:' J/,/
eeun.1
/f14UYH.;:
..J
_.J
{I'
.........
,i. ( ; ' - (
Stability of exchange rates reduces the risks run by the
trader and financier operating across international boundaries
'
- 4 monetary arrangements are not adequate to handle.
~~CJA.:5--)
at~nternational
These would be, in essence, agreements aimed
"'-.;;.;::;..\..-,--,1)
monetary
vi~~-:.. (2-(_~t~--·r
growth of reserves in good relation
upon deficits by reserve currency countries, at the same time
~eduCing
the present tendency for conflict between
international and domestic objectives.
The international monetary system that we have is a very
good one.
Like the improvement of it that we now seek, it
was not invented, but evolved to fit evolving practical needs,
economic and otherwise.
It reflects the necessities of
private trade and finance, and it reflects the existence of
governments with domestic and international policies of
varying kinds that must be served.
It likewise reflects --
and this is primary -- the growth in the free world of a
- 3 -
on the workings of the free world monetary system, on what
needs exist for changes as the stimulus of large annual
dollar balance of payments deficits is withdrawn, and on how
we could go about making needed improvements.
In talks in
Washington, and in visits last month to the principal financial
centers of Western Europe, we added to our information, and
assisted, I think, in increasing gene real awareness and appreciation of the
proble~~ ffF~allY,
,
-'
during the meetings in
\~~ ...... .t'
Washington late in September of the governors of the World
Bank and the International Monetary Fund -- who include
most of the free world's monetary authorities -- procedural
agreements were reached which -- optimistically -- may make
possible fundamental agreements upon substance within another
year.
That, in our opinion, would be timely, for we see no
problems arising within the next year that present international
- 2 -
international monetary arrangements, and how best to go about
making changes, is often lamed by inadequate discussion of the
system within which our international payments are made,
and their domestic and national policy contexts.
I would be
the last to suppose that in one small speech we could clarify -let alone agree upon -- so much contentious matter:
were we
to do so it would surely have to be said of us that never did
so few labor so little to bring forth so much.
~~'~~: " \
~~~~~~O~=king progr~s/toward decisi~n
/
i
.r
how our
\
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~/
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monetary arrangements shofld and c~y./"6·e improved in as much
i
.,/"
<'
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'one, even in one
i
,
light, and as little fo~,as p6~sible, let us do what can be
/
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j
/~/;/
sfl~:eCh'
.] ..
(
)
.
As you know, since last July, with the authorization and
encouragement of President Johnson, I have been trying to
assess the thinking of the international monetary community
!
- 3 -
... '-'"n •• .. they concern every American.
But you have
••peela1 a.poI1Ilbillty for understancl1ng and helping in
-tla& tbeee challenges.
'l'baniow. I "ant to take advantage of this opportunity
to Iad.1a& JOU hard up agaiDst the opportunities and difficulties
_ . . . eopthez-.
- 2 -
"~I".
v. _ &
_ _zo foqe~ that the ability of the United
1 _ . c. .a.ul". . .....tely the burdens of Free World leader-
Ult - ...........o8gh~
..... _
bu~ DDV • naUty -- 10 tM political,
Cbe fiD foundation of • strong dollar and a viable
. . . - - - lIDy other slagle factor 1t 18 the strength and
,~
,_. . . . .
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, .•." ............. ,.'.,.. . . .
,
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, _..... aDd stability
.
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:,~~:.:~-;.~
.... _"., •• , k ..
dol~t
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serves
88
1IOI!aC;,ary 8ye tam through which
!be solution of
0U1:
balaDce of payments difficulties and
. . ItnDltheaiDI of the internatiOnal monetary system are
.....1 _teen which
1IIUSt
deeply concern you
88
businessmen
_IIr-,..1
•
*. ChdaaD. III 'ben ~ The Bua1aesa Couacil. Colleagues
ARt"
d1*
4·" £LE : .
~of the
_ _ .on .an thaD _at of our cit!
.
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of t:be ~_ ~ mel ~ of the Fne
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effective world IID_tary
.,.... 1IId.ch in tum . , . . on the eOUDClneaa _d 8tability
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f' f"t If;'~/ /fp.) ~ ((' i~'~·
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$
the
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Pl:Ob'-~ _1:1oa f _ in I:IriD&1II8 ita balance
--:i,~
.f latanatiooal payments
lit aU the
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inJ
equl11br1um aDd .' •• the aaed
Datio. of the h'ee World to move toward agreement
• ..,. of .auring the flD8DClal resources and monetary system
•••• to 8Upport 1ncreuLng lDtemational trade and economic
-.-1
./
,i'
REMARKS BY THE HONORABLE HENRY H. FOWLER
SECRETARY OF THE TREASURY
AT A MEETING OF THE BUSINESS COUNCIL
AT HOT SPRINGS, VIRGINIA
ON OCTOBER 15, 1965, MORNING SESSION
/
Mr.
Ch~i.rman, ~rs
/
;/
in aoverofuent,
' "
ent1emen:
/
/
/'
/-ji/,
t~~iness
/
,/
.
of
I
~am very
/
cou7i1:", my
cOl~.;,.agues
/",//
p1e~d to be wi~ you
/ '
'
/ /
/~
.
~~thiS b¢utiful spot :j.t'I my home s~;>ie of Virginia.
At xhe outset of my remarks, let me say of our present
balance of payments situation that I think there is undue
pessimism now where there was undue optimism earlier.
In July,
we were succeeding in our drive to bring our payments into
sustainable equilibrium, the job was not yet done, and we warned
of less favorable circumstances later in the year; in October,
"FAt
st •• l
8~~
the job is still far from done, and
the less favorable circumstances we foresaw have become realities.
I think that debate over what improvement is needed in our
TREASURY DEPARTMENT
Washington
FOR RELEASE P.M. NEWSPAPERS
FRIDAY, OCTOBER 15, 1965
REMARKS BY THE HONORABLE HENRY H. FOWLER
SECRETARY OF THE TREASURY
AT A MEETING OF THE BUSINESS COUNCIL
AT HOT SPRINGS, VIRGINIA
FRIDAY, OCTOBER 15,1965,11:00 A.M., EST.
Mr. Chairman, Members of The Business Council, Colleagues
in Government, and Gentlemen: You are more aware than most of
our citizens of the interdependence of the American economy and
the rest of the Free World -- and the dependence of both on an
effective world monetary system which, in turn, depends on the
soundness and stability of the U. S. dollar.
You are familiar with the problems this nation faces in
bringing its balance of international payments into equi1ibri~
and the need for all the nations of the Free World to move
toward agreement on ways of assuring the financial resources
and monetary system needed to support increasing international
trade and economic development.
These financial challenges transcend the economic sphere.
We must never forget that the ability of the United States to
shoulder adequately the burdens of Free World leadership -however unsought but now a reality -- in the political,
military, and diplomatic spheres, as well as the economic one,
depends on the firm foundation of a strong dollar and a viable
Free World monetary system.
The solution of our balance of payments difficulties and
the strengthening of the international monetary system are
crucial matters which must deeply concern you as businessmen
and bankers -- as they concern every American. But you have
a special responsibility for understanding and helping in
meeting these challenges.
Therefore, I want to take advantage of this opportunity to
bring you hard up against the opportunities and difficulties we
face toge ther .
F-239
- 2 At the outset of my remarks, let me say of our present
balance of payments situation that I think there is undue
pessimism now where there was undue optimism earlier. In July,
we were succeeding in our drive to bring our payments into
sustainable equilibrium, the job was not yet done, and we warned
of less favorable circumstances later in the year; in October,
the job is still far from done, and the less favorable
circumstances we foresaw have become realities.
I think that debate over what improvement is needed in our
international monetary arrangements, and how best to go about
making changes, is often lamed by inadequate discussion of the
system within which our international payments are made, and
their domestic and national policy contexts. I would be the
last to suppose that in one small speech we could clarify -let alone agree upon -- so much contentious matter: were we
to do so it would surely have to be said of us that never did
so few labor so little to bring forth so much.
As you know, since last July, with the authorization and
encouragement of President Johnson, I have been trying to
assess the thinking of the international monetary community
on the workings of the Free World monetary system, on what
needs exist for changes as the stimulus of large annual
dollar balance of payments deficits is withdrawn, and on haw
we could go about making needed improvements. In talks in
Washington, and in visits last month to the principal financial
centers of Western Europe, we added to our information, and
assisted, I think, in increasing general awareness and
appreciation of the problem.
Finally, during the meetings in Washington late in
September of the governors of the World Bank and the
International Monetary Fund -- who include most of the Free
World's monetary authorities -- procedural agreements were
reached which -- optimistically -- may make possible fundamental
agreements upon substance within another year. That, in our
opinion, would be timely, for we see no problems arising within
the next year that present international monetary arrangements
are not adequate to handle.
- 3 -
These would be, in essence, agreements a~m:d at reinforc~g
international monetary stability, and at prov~d~ng for the
growth of reserves in good relation to real needs for them,
without reliance as in the past upon deficits by reserve
currency countries, at the same time reducing the present
tendency for conflict between international and domestic
objectives.
The international monetary system that we have is a very
good one. Like the improvement of it that we now seek, it
was not invented, but evolved to fit evolving practical needs,
economic and otherwise. It reflects the necessities of
private trade and finance, and it reflects the existence of
governments with domestic and international policies of
varying kinds that must be served. It likewise reflects
and this is primary -- the growth in the Free World of a
disposition to seek the means for the solution of economic
problems in an increase in the economic resources available
for use -- bigger helpings for all, from a bigger pie, rather
than a new division of the existing pie.
Our international monetary system stands on two pillars
which, I would emphasize, will remain unchanged. The first
is stable exchange rates, based upon the United States
commitment to buy or sell gold at $35 an ounce. Second,
international reserves include not only gold, but also foreign
currency holdings -- chiefly dollars and pounds sterling.
Additionally, it is becoming common practice to count among
reserves drawing rights -- rights to medium term credits -upon the International Monetary Fund that are virtually automat!
Stability of exchange rates reduces the risks run by the
trader and financier operating across international boundaries
more or less to the same factors business judgment contends
with domestically. The admixture of foreign currency holdings
and credits with gold in national reserves reflects the practiCl
desirability of holding private and official balances in the
reserve currencies of countries With production facilities and
financial institutions that have given them a leading position
in the world's trade and finance.
Two major developments since World War II have added to
the system's unfeeling heart of gold a sensory apparatus of
consultation and cooperation. This permits us not only to
know when something has gone wrong, but also to find means of
correction that put the carrot ahead of the stick.
- 4 -
; C, ')
-
\....i
The first of these is the International Monetary
established in 1945. The Fund's principal task is to
stabilize world monetary affairs, by providing medium
credit to smooth out balance of payments adjustments,
promoting sound international financial conduct.
Fund,
help
term
and by
The Fund's resources are increased by enlargement of national
subscriptions to its capital -- national quotas. The latest
increase, now in process of approval, will bring its capacities
to $21 billion. Every member has virtually automatic rights
to borrow reserves from the IMF equivalent to 25 percent of
its quota. As I have already indicated, the unused portion
of these drawing rights -- currently some $5 billion -- have
come to be counted among international reserves. The Fund
can provide other conditional credit, at its discretion, up
to the full amount of a nation's quota. This contingent
type of IMF credit presently totals some $12~ billion.
Secondly, upon the margins of the IMF, there has grown
up since 1958 a network of cooperative and consultative
arrangements that has substantially increased the Free World's
ability to maintain international monetary stability. These
include the Fund's General Arrangements to Borrow up to
$6 billion from the Group of Ten nations -- Belgium, Canada,
France, Germany, Italy, Japan, the Netherlands, Sweden, the
United Kingdom and the United States -- just renewed for a
further four years; arrangements by which central banks swap
currencies for short periods of time to meet exchange
requirements; the sale of foreign currency bonds by the
United States; the operations of an international, cooperative
gold pool in London, and cooperation and consultation carried
on through such institutions as the Bank for International
Settlements and the Organization for Economic Cooperation and
Deve lopmen t.
The Free World international monetary system has performed
truly Herculean tasks of providing required amounts of money,
at the right time and place, in the postwar era. In addition
to the huge task of repairing the damages of war, the Free
World has carried out the greatest economic advance, benefitt~g
the most people, by the widest margin, in history.
Moreover, the Free World monetary system has showed itself
capable of fast and effective action at time of crisis. By
contrast with the 1930s, when the world financial system could
not rally a few hundred million dollars to keep it from
crumbling, on four occasions in recent years the present
- 5 -
system has produced credits ranging up to several billion
dollars -- when necessary, in a matter of hours -- to help
the Canadian dollar, the Italian lira and the British pound.
By this type of cooperation we can -- and will -- effectift~
protect currencies in a temporarily vulnerable position from
being tipped over by the force of speculation. But there is
nothing automatic about it: help can be denied if the nation
in question does not take action to strengthen its money.
It thus is cooperation and assistance that can help a nation
survive attacks upon its currency from the outside, while it
insists upon correction of weaknesses from the inside.
This is a big, practical, fast and flexible international
monetary system, a system aware of its duty to protect national
currencies, but never to keep them in sin, responsible for
keeping liquid funds adequate at all times to float the world's
commerce, but cautious never to sponsor a flood. It is our
objective to make certain that the system continues to evolve
so that it can discharge these tasks as well under different
conditions in the future as it has done in the past. Chief
among the differences in the future will be the fact to which
I will now turn: the absence of large annual U. S. balance
of payments deficits.
Despite its many and great virtues and accomplishments,
our international monetary system stands at a crossroads.
The answer, if you ask why, goes to the heart of the matter.
This is, that since 1958, United States balance of payments
deficits have supplied the principal source of additional
liquidity to the world monetary system. About three quarters
of the new official reserves of other nations have been built
out of these deficits, and large foreign private holdings of
dollars have added to the potential strain on U. S. reserves.
We are now well along in the process of ending our deficits
and bringing our international payments into sustainable
equilibrium. This fact gives rise to a new situation.
The President, the Congress, and informed financial
authorities around the world all are agreed that the United
States must put its international accounts in order, and keep
them so. It must do so to preserve the integrity of the
dollar at home and abroad, so that the more than $27 billion
held in foreign official reserves and in private commercial
hands abroad can continue to function as an essential part
of the world's monetary system. It must do so to arrest
drains of United States reserves that have flowed from some
portion of these deficits being paid off in U. S. gold. That
erosion cannot go on indefinitely. It must be, and is being,
stopped now.
- 6 -
That the world must know, and that the world expects,
because it requires that the dollar be as good as gold.
If, despite the ending of the long period of large U. S.
deficits, growth is to continue and trade is to expand, we must
provide an effective and adequate substitute for the creation
of additional reserves, when needed.
The growth of reserves deriving from U. S. deficits has
taken two forms -- dollar balances held as such, and dollars
acquired and converted into gold. The latter development,
of course, resulted in a substantial decline in United States
reserves. We estimate that as of the end of 1964 more than
a quarter of the official reserves of the remainder of the
Free World were held in the form of dollars.
In addition to this single lodestone fact -- that the
necessary and desirable actions of the United States to
correct its balance of payments situation will soon end the
process by which most additions to official reserves have
been made in recent times -- there is a second flaw, which
is under special study by the DEeD. This is the fact that
the Free World monetary system requires more satisfactory
machinery for the adjustment of payments deficits or surpluses.
A process for the adjustment of payments imbalances
that could be called satisfactory would have, in my opinion,
at least two features. First, the process would both enforce
timely adjustment, and make enforcement palatable, by avoiding
harsh losses of employment or profits. Second, the process
would require adjustment by surplus as well as deficit nations.
At present, there is an imbalance in the system as a whole.
On one side of the scale is the fact that a deficit nation
does come to a point where it must adjust its economy or
its international payments, or both, because it reaches the
limits of its reserves and of its power to borrow. On the
other side is the fact that there are no comparable limitations
enforcing adjustment of its policies by surplus nations.
With primary reliance for correction by deficit nations,
the path to economic equilibrium may lead to economic
restriction.
- 7 Deficit countries must, certainly, be obliged to cure
their imbalances. If they are reserve currency countries,
such as the United States, loss of confidence in their money
following upon failure to end their deficits results eventually
in conversions of the reserve currency into gold. In this
process, world reserves are reduced because the amount of
currencies held in national reserves is reduced. This, like
achievement of equilibrium by restrictive policies, is
unacceptable because it tends to depress the world economy.
What is wanted, instead, is a circulation of reserves
that facilitates the maintenance of equilibrium at rising
levels of production and trade. Let me specify that this
is an argument for sound economic growth, such as we have been
experiencing in this country now for years, in which incentives
to save are preserved, making possible high and rising
investment to expand production and increase productivity,
in turn permitting rising private and public consumption with
little or no change in the general price level.
It is also an argument for laying an obligation upon
surplus nations to adjust their policies so as to open the
way to a return circulation of the reserves they accumulate.
This adjustment could be in the rate of domestic growth or
consumption, in foreign trade policies, in policies affecting
the flow of capital to foreign parts, including economic
assistance, and in the sharing of Free World defense costs.
Such adjustments encourage the reestablishment of equilibrium,
by deficit and surplus countries alike, at higher levels of
production and trade, by contrast with the groping for
equilibrium at lower levels that has so often proved disastrous
in the past.
The United States seeks no change in the international
monetary system that we have just been examining that would
relieve us, or others, of the obligation the system now imposes
to bring our international payments into equilibrium. We do
seek agreement upon changes designed to permit continued gr~th
of reserves to underwrite the continued sound economic gr~th
of the Free World without depending on large and chronic
United States payments deficits which might eventually endanger
the whole system. And we seek adjustment processes promotWg
steady and general Free World economic growth with stable
exchange rates.
- 8 -
I believe that the others with whom we are entering into
discussion of improvement of our international monetary system
have these same fundamental objectives, even though there are
deeply held differences of emphasis and approach. I am,
consequently, confident of success.
A further reason for this confidence is the fact that
our own determination can insure success in making one of
the principal improvements needed in the system as it now stands:
an end to United States balance of payments deficits. I have
already indicated to you our general view of our balance of
payments situation at present: we have been making good
progress indicating that we are on the right tract, we are
continuing to do so, and we see no reason to think that we
will not succeed in good time by vigorous and constantly
improved and refined use of our present methods.
I will add what little detail that I can to that, without
venturing onto the shaky ground of predictions based upon
incomplete and preliminary data.
You have seen published information that our balance of
payments deficit for the first six months of 1965 was at an
annual rate of $1.3 billion, compared to $3.1 billion in 1964,
both figures on a regular transactions basis. I am not in
position to confirm whether a projection of our experience
in the first half of the year will be duplicated in the
second half. You are aware of our warnings that our excellent
showing in the second quarter, when there was the first
quarterly surplus since 1958, was due in part to benefits that
could not be repeated, at least, in such large degree, such
as the repatriation of deposits abroad. And you are aware of
our further warnings that results for the last half of the
year would reflect some unfavorable factors that do not shaw
in the first half, such as tourist spending abroad.
However, we must be cautious not to stretch all unfavorable
factors into the future, and neglect to project favorable
influences. There are some of the latter.
While we cannot declare a trend from the experience of
one or two months, there is at least tentative good news
about one of the key elements of the balance of payments
program -- export promotion. Exports in July and August
were substantially better than earlier -- disappointing -figures. Further, the information we have to date suggests
that imports, which had been rising faster than exports,
- 9 -
2c;·
'-'
may be flattening out. Among other fa:tors with ne~ ~avorab1e
implications is the general strengthen~ng of the Br~t~~h pound,
where previous weakness had given rise to an added dra~n due
to the liquidation of some British government owned U. S.
securities to provide liquid assets.
We do not yet have enough information to indicate where,
in this very big and complex matter, we shall come out in 1965.
But while I cannot tell you that a deficit of $1.3 billion,
or thereabouts, is what is in the cards, let me point out that
anything in the region of $1.3 billion, when all the chickens
are in, would be a very solid improvement over the 1964 deficit
of $3.1 billion.
What I can say is that on present readings, this year
will be far better than last, that we expect the improvement
to continue in 1966, and that we intend and expect that it
will continue for as long as necessary to bring our payments
into an equilibrium that we can, and we will, sustain.
Now, let me close with a few words about the nature of
our balance of payments deficit, because that is the
controlling factor in the nature of the cure.
Our balance of payments is not due to the ailment that
is generally the cause of deficits, loss of competitive power
due to low productivity and rising prices -- that is,
inflationary conditions. Our productivity is high, and rising
strongly. Our prices are competitive. Our capacity to produce
is easy: we can fill orders and deliver on time. Our efficiency
is all-around: industrial, agricultural and even in services,
where the advance of automation and mechanization is helping
us to gain upon others.
Due to the competitiveness of our goods, our trade is
large and our trade balance is highly favorablec High and
rising investment at home is keeping the growth of capacity
to produce goods and services in good relation to private and
public demand, making for extraordinary price stability
underwriting continuation of what is already by far the longest
peacetime economic expansion we have ever experienced.
Our balance of payments problem does not arise from a
balance of trade deficit that characterizes the usual payments
deficit in other countries. Our difficulty arises, instead,
- 10 from very large outflows of public expenditures and private
capital movements. Public expenditures abroad.-: that is,
foreign assistance and the costs of external m1l1tary
deployment -- are instruments of national foreign policy. The
balance of payments effects of foreign outlays of public funds
have been very sharply reduced by tying our grants and loans to
the purchase of United States products, and by many other
measures, especially the reciprocal promotion of the purchase
of U. S. military supplies by governments of countries in
which there are heavy U. S. troop concentrations, such as
West Germany.
In the late 1950s and the early 1960s there was an
extraordinary outflow of private capital, in response to
market forces. The high level of saving in our high income
society, and ready availability of capital through highly
organized capital markets, coinciding with an upsurge of
economic development in industrial Europe, made foreign
investment, both direct and portfolio, uncommonly attractive.
In this situation, which is totally unlike the conditions
of the classic balance of payments difficulty, the basic and
classic cure -- rising interest rates in the deficit country -cannot be the sole and simple answer. We have taken monetary
policy action to moderate the differential in the short term
area: the Federal Reserve Board discount rate increases of
1963 and 1964 are cases in point. However, the difference
between long term interest rates here and in Europe is so
great that an attempt to eliminate capital outflows through
tight money policy at home could only result in jeopardizing
the long and sound business expansion we are experiencing.
The program we have adopted is the program needed by
the United States, tailored to its highly unusual balance of
payments trouble. It is, in skeleton, the use of tax and
monetary policy to increase the profitability of investment
and to increase the demand for investment in this country by
keeping economic growth high and rising in conditions of
price stability; reduction, by the methods I have already
mentioned, of the growth of net dollar balances abroad due
to foreign assistance and military operations; promotion of
exports and reduction of imports by fair competitive methods
that do not invite a deterioration of good trade relationships;
and finally, voluntary programs for the maintenance of pr~vate
inves tment abroad by Amer ican banks and other bus iness at levels
that do not make a U. S. balance of payments equilibrium
achievable only by a withdrawal of U. S. political, military and
diplomatic power from its role in world affair3.
- 11 -
In the background of the voluntary program is the
Administration's desire to operate its overall balance of
payments program with the least possible interference in
private economic decisions. The voluntary program keeps
government in its proper role and lets business perform its
function: government -- as government alone can do -- decides
what is national policy and sets the national goals; business
as only business can do expertly -- is left free to make its
many and varied individual decisions as to how to operate
consistently with national policy and to contribute to the
achievement of national goals.
I do not know if the business community is doing as
much as it can, as fast as it can, to increase its exports,
and to hold its foreign investment to levels that will assure
an equilibrium in our balance of payments. I am not sure we
in government have done all that we can do to provide you
with guidelines that can be evenly applied to achieve the
national objective under competitive conditions. What is
certain is that you, and we, must be willing to do more, willing
to refine our procedures, willing to enlarge the scope of
our activities, and willing to innovate, to achieve and maintain
an equilibrium in our balance of payments for as long as the
dollar is a key currency in the Free World monetary system.
For -- let me repeat in closing -- we are determined to
master the balance of payments situation, because continued
deficits would destroy confidence in the dollar, including
confidence in your investment dollars. And we are determined
to solve the balance of payments problem with the least possible
impact on freedom of economic choice. This is why making a
success of the voluntary program is so important.
000
TREASURY DEPARTMENT
October 15, 1965
FUR IMMEDIATE REIEASE
TREASURY DECISION ON LIGHTERS
UNDER· THE ANTIDUMPING ACT
The Treasury Department has determined that lighters,
pocket, cigar and cigarette, butane gas-fueled, from Japan
are not being, nor
like~
to be, sold at less than fair value
within the meaning of the Antidumping Act" 1921, as amended.
A "Notice of Tentative Determination, II was published in the
Federal Register on September 1" 1965.
No written submissions or requests for an opportunity to
present views in opposition to the tentative determination
were presented within 30 days of the publication of the abovementioned notice in the Federal Register.
Imports of the involved merchandise received during the
period June 1, 1964, through July 31, 1965, amounted to
$73,000.
TREASURY DEPARTMENT
(
October 15, 1965
FOR IMMEDIATE REIEASE
TREASURY DECISION ON LIGJrnmS
UNDER THE ANTIlXJMPING ACr
The Treasury Department has determined that lighters,
pocket, cigar and cigarette, butane gas-fueled, fran Japan
are not beiDg, nor
l1ke~
to be, sold at less than fair value
within the meanillg of the AntidwlrpiDg Act, 1921, as amended.
A "Notice of Tentative Determination," was published in the
Federal Register on September 1, 1965.
No written submissions or requests for an opportunity to
present views in opposition to the tentative determination
were presented within 30 da¥s of the publication of the abovementioned notice in the Federal Register.
Imports of the involved merchandise received during the
period June 1, 1964, through Jul¥ 31, 1965, amounted to
$73,000.
2
Appraising officers are being instructed to proceed with the
appraisement of this merchandise from Japan without regard to any
question of dumping.
Imports of the involved merchandise received during the period
September 1, 1963, through July 31, 1965, amounted to approximately
$145,000.
The merchandise 1 popularly known as lfDNPTTl, is a chemical
foaming agent used in the production of foam rubber.
TREASURY DEPARTMENT
October 15, 1965
FOR IMMEDIATE REIEASE
TREASURY DECISION ON DINITROSOPENTAMETHYIENETJ:l'RA.MIN
UNDER THE ANTIDUMPING ACT
The Treasury Department bas determined tbat dinitrosopenta.metl\Ylenetetramine from Japan is not being, nor
like~
to be, sold at less
than fair value wi thin the meaning of the Antidumping Act, 1921, as
amended.
A "Notice of Intent to Discontinue Investigation and to
Make Determination That No Sales Exist Below Fair Value, \I was published in the Federal Register on September 1, 1965, stating that
price revisions and termination of sales with respect to dinitrosopenta.metb;ylenetetramine from Japan were considered to be evidence
that there are not, and are not likely to be, sales below fair value.
The price revisions and termination of sales occurred soon after
the exporters were advised that price discriminations existed with respect to their sales.
The complaint was withdrawn based on the assur-
ances that there would be no resumption of sales at prices which could
be
like~
to be below fair value.
No persuasive evidence or argument to the contrary was presented
within 30 days of the publication of the above-mentioned notice in
the Federal Register.
264
TREASURY DEPARTMENT
October 15, 1965
FOR DtmDIATE RElEASE
TREASURY DECISION OB DIlfITROOOPDTANBTBYJ.BlIE'.1'E'BAM
UIDZR THE -AI'l'lDJMPING ACr
The Treasury Department bas determined that
diD1trosopentamet~l-
enetetram1ne :fran Japan is nat beiJJgl nor likely to be, sold at le88
thaD fair value within the meaning of the Antidumping Act, 1921, as
amended.
A "Notice of Intent to Discontinue Investigation and to
Make Determination That No Sales Exist Below Fair Value," was published in the Federal Register on September 1,
1965, stating that
price revisions and termination of sales with respect to d1nitrosopentametb¥lenetetramine :from Japan were considered to be evidence
that there are not, and are not l1kel¥ to be, sales below fair vall1e.
The price revisions and termination
ot sales occurred soon after
the exporters were advised that price discriminations existed with respect to their sales.
The caaplaint was withdrawn based on the assur-
ances that there would. be
be
l1ke~
DO
resumption. ot ..les at prices which could
to be below fair value.
No persuasive evidence or argument to the contrary was presented
within 30
~s
of the publication. of the above-mentioned natice in
the Federal Register.
2
Appraising officers are being instructed to proceed with the
appraisement. of this merchandise fram Japan without regard to any
question of dumping.
Imports of the involved merchandise received during the period
September 1, 1963, through
$145,000.
J~
31, 1965, amounted to approximately
The merchandise, popularly known as ttDNPI' " , is a chemical
foasL.'1g agent used in the production of foam rubber.
- 17 need to have such contingency plans is, I think, ove:n,lheL"T':::'nG.
He ex:::;;ect,
therefore, to press forward in the full confidence that we vTlll be providing the world with a facility that Will. increasingly co;.'!e to
recognized as an essential and valuable one.
"i.Jw
- 16 There are also general institutional questions concerning the
ext~~tJ
form, and degree of participation and responsibility that is to be given
to the International Monetary Fund.
Under some proposals, deliberate
creation of' reserves woul.d become integrated into the use of Fund
dra~·rin3
facilitiesj under other proposals, the Fund might receive a share or the
assets created.
Under still others, reserve assets might be esta.blished
by a group of countries with limited relationship to the Fund.
Taere are
a number of differing attitudes on these questions.
Finally, a very key question is how decisions would be made govern-
ing the amount and timing of periodic creation of reserve assets.
Tnat
is, how is a decision made as to where to set the thermosta;1; in the vlorld' s
heating system?
Is it to be set rather firmly for a long period of time,
or is it to be made highly variable'l
Is one resident to be given a veto
on any change in the thermostat, or even a veto on turning on the furnace
at all?
The views of the minority must certainly be protected, but, at
the same time, large sections of the world economy must not be exposed to
temperatures w.nich could impair their health and efficiency.
These are some of the problems, in addition to many lesser and more
technical questions, that we can expect to face in the forthccming
G1ons.
~t
ne~otia
No doubt it vi1l require some time to reach a satisfactory resolution.
I am
s&~lsfied
that there will be a common determination to establish
?lana that can be used to create additional reserves.
The logic of the
- 15 Tnere are several problems "I-lhich star.d. out as issues
t~8.t
'Ir.:.ll need
to be resolved during the negotiutions on "Thich 'I1e are now e::J.tering.
Tilese issues were, in fact, highlighted in the technic2.l re:;ort prepared
by experts of ten leading countries that is called the OS501a Group Report,
published in August of this year.
Tne first of these issues is i-fnether a nell reserve asseJ(i sho....ud be
usable
O!l
its own, or whether it should only "0e used i:1 conjuIlction with
gold or in conjunction With other existing reserves.
U::J.der
so~e
proposals,
it has been argued that any such new" asset should only be utilized in
international settlements along with a fixed a.'1d substan":;ial amount of
gold.
Against thiS, there are other views that, fram the beginning, it
would be desirable for any new asset to stand on its own feet.
Tne second major questions concerns the number of countries that should
~articipate
in creating a new reserve asset and in
bility for ultimately receiving it in payment.
taki~g
the responsi-
Nei{ reserve assets, to be
useful, must provide access to the currencies of the major industrial and
trading nations.
This mea.'1S that these cour.tries must be prepared, in the
last analysis, to sell their goods against the nev asset in international
trade or accept the new asset in payment of
internatior~
debts.
At the
same time, the developing countries of the world have an interest iu the
adequacy of world reserves, though they, themselves, generally do not
follow the practice of building up substantial reserve holdings.
- 14 Looxing ahead to
t~e
longer term problem of creating an adequate
supply of additional reserve assets for the world, we are
new and largely uncharted area.
T.~e
a
world has never before set about
the deliberate task of creating reserve assets.
He can, therefore,
expect that all of the countries participating in this
contingencies will be cautious.
ent~ring
pla~ng
for
~~ture
I use the term "additio:lal reserve asset"
consciously, because some of the ways of creating more reserve assets
v.'Ould simply enlarge claims on the Fund '''hich are already being trea.ted
as reserve assets.
Questions and Issues
Wnat are some of the major questions that are to be negotiated?
Underlying most of these problems is some difference of view among members
of the Group of Ten as to what "rill be the future need for addi tionaJ..
reserves.
Continental European countries generally have large reserves
that have been
gro~ng
by something like 10 percent a year.
To change
the metaphor, their concern about the inflationary pressures in their overaeated economies leads them to want a heating system on which the thermo5tat will not be set at an excessively high temperature, from their point
)f view'.
On the other hand, other parts of the world "Those economies are
Less subject to overheating, and who fear that they vrill be insufficiently
?rotected against cold. weather in the future, want to be sure that there
:6 a fully adequate furnace installed and
in good working order.
- 13 is that the world has to live in the house and conduct its business all
the time; it cannot move out, because there is no other place to go.
The trade and business activity of the vorld could suffer considerably
if large parts of the house were made uninhabitable by the process of
tearing dOvm and rebuilding.
Nor {i;i~ entirely certain that all of the
nations that live in the house would readily agree on just how a major
restructuring should be carried out.
Consequently, I would expect that the practical solution would be
found to be in improving certain parts of the structure, 1-lhile building
additions to it to accommodate the growth of the nations living in the
house.
In my own thinking, I have found it useful to consider as improvements the things we can do to meet short-term and cyclical problems, and
to consider as additions the more permanent requirements for larger reserves
for the growing world.
As I have indicated, we have made very striking progress in the past
four years in developing short-term credit facilities that protect the
3ystem against short-period strains on major currencies.
In a sense,
;e have improved the heating system in the house, so that those rooms
lost exposed to the vreather from time to time are less dependent on their
)w.n fireplaces and can draw more effectively on the central heating system.
- 12 -
In addition, through direct contacts between the monetary autLoriti23
of lea.ding countries, short-term credit fa.cilities have been develc',)ed
-"
on a. large scale, both on a standby basis and through ad hoc
1'rom time to time.
~-:.'ra.nger:le~ts,
The Federal. Reserve System has esta,1:>lished a netw·ork
of standby swap fa.cilities 'Which, in effect, provide short-term credit
on a reciprocal basis in case of need.
This network was initiated in
1962, and now bas reached the total of $2.8 billion.
Tae United Kingdo~
has, from time to time, made use of special ad hoc short-term facilities
to meet the particular periods of strain.
In addition to the enlargement of regular and supplementary resources
of the Fund, and the striking development of' short-ter.ul crec1i t
to support major currencies, the years 1961 to 1965 have been
:fc.clli·ciC'~
re~rkab1e
for the establishment of' close and frequent consultations between
responsible of'ficials of' treasuries and central banks of the leading
countries.
Through one organization, known as the Deputies of the Group of Ten,
responsible officials meet to consider the basic problems of the fUnctionLng of the international monetary system and future needs for liquiv
~y.
9nProving the System
I have said that the international. monetary system in vfnich vre live
La something like
~ave
~or
a rambling house to which additions and improvements
been made tTom time to time.
A number of' proposals have been made
radically rebuUding this structure, but the
difficu1~IiY
with so doing
- 11 -
International r·:onetary Cooperation
Since the end of 1958, there has been a remarkable develop~ent of
internatior~
monetary cooperation, centering around multilateral concern
with the deficits of major countries, and findine its most practical
expressions in the enlargement, improvement, and elaboration of credit
facilities available to monetary authorities.
In 1958-59, quotas in the International ll.onetary Fund "rere increased
by
50 percent generally, with additional selective increases for several
of the leading industrial countries.
FollowIng extensive negotiations
in 1961 and 1962, the General Arrangements to Borrow'VTere set u:p, under
which ten leading industrial countries agreed to provide additional credit
to the Fund under specified conditions in arnounts up to $5 billion.
T.ae
combination of quota increases and the General Arrangements to Borrow
thus considerably strengthened the official credit facilities available
to major currencies to insure against a severe strain on the international
monetary system, which could be accompanied by a severe shrinkage of
international liquidity.
T.ae Fund has, in fact, been called upon by
Canada, Italy, and the United Kingdom, in periods of special strain on
their currencies.
T.ae United States, While not drawing heavily on the
Fund, has passed from a net creditor of the Fund to a moderate user of
Fund resources, and this has helped in financing the United States deficit.
The resources of the Fund a=e again being enlarged and strengthened by
~
increase in quotas now in process, amounting to 25 percent, plus
additional amounts for a number of individual couiltries.
- 10 -
'WOuld 'Qe tendencies to convert more dollar balances into gold.
conversion would fUrther reduce U. S. reserves.
Such
Therefore, the deficits
must stop.
But, at the same time, if the U. S. deficits stop, the bulk of the
increase in international reserves, in world liquidity, also stops.
This is so simply because new gold supplies are insu:fi'icient to meet
needs for additional reserves as the volume of world business grovs.
Additions to creditor claims on the IMF, as presently handled, help a
little but are not in very great volume.
Thus, some new way to provide
for additions to world liquidity must be found.
The U. S. is determined to get into equilibrium in its balance of
payments and has mounted strong efforts to achieve that end.
The progress
made in the balance of payments this year. is;, in my judgment, encouraging.
Since the announcement of the new program of February 10, 1965, there
has been a very marked change. <Taking the first half as a it.aole, which
includes rather heavy deficit figures in January and February, the regular
deficit 'Was down to an a.nnuaJ. rate of $1.3 billion, as compared 'With $3.1
billion for the year
1964.
The large gold outflow in the first half of the year was not attributable to this year's balance of payments, but rather to the large dollar
accumulations by foreign monetary authorities in 1964.
Over all, the program is particularly encouraging in shovling that
the banks and business community have made real adjustments in their
current operations and activities in order to cooperate ~th the President's
program.
- 9Continental Europe recovered its financial strensth rapidly
the exchange adjustments of 1949.
a~~er
Over-all, foreign industrial countries
increased their reserves by $14 billion from 1948 to 1958, to near:y $22
billion, almost as much as United States reserves of $22.5 billion.
The U. S. Balance of' Payments Deficit
The next six years were characterized by large-scale deficits in
the balance of payments of the United States.
The dollars :paid out by
the United States flowed into the reserves of' the other industrial caantries,
especially those on the Continent of' Europe.
All in all, nearly three-
quarters of the growth in official reserves of' the rest of the world
during these years resulted from these U. S. deficits, with tte ren:ainder
of the $17 billion total growth in their reserves coming from new monetary
gold supplies, or through the build-up of their creditor claims on tae
International Monetary Fund.
During these six years, the reserve assets
of the United States, however, fell from $22.5 billion ($20.6 billion in
gold) to $16.7 billion ($1.5.5 billion in gold).
Now, in these very figures you can see the heart of the international
liquidity problem of today.
The great bulk. of such reserves sUPJ?lied to
the world came from U. S. deficits in its balance of payments.
The U. S.
cannot afford to continue to run such defiCits, because they result in a
run-dow of its own reserves and a consequent impairment of iJcs
national liquidity situation.
C1'i1l
i4ter-
If that situation worsens, the acceptability
of dollar assets in f'oreign monetary hands would tend to weaken, and there
- 8 of domestic currency, vehicle currency, and reserve assets.
1r.e reserve
assets are, by definition, those carried as such by monetary authorities
and hence do not include privately held stores of foreign ex C:13.nge ,
.although there are links between the two, and, in a broad sense, both
together are elements in international liquidity. We shall, however J
confine our discussion of international liquidity to official reserves
and credits available to monetary authorities.
I have referred to the fact that reserve assets now total about
$68
billion, partly in gold, partly in foreign exchange, and partly in the
form of creditor claims on the IMF.
The amount of reserve asset gain
in the postwar period has been striking.
need underlining.
First, since
But three importa.."lt pOints
1948, the amount of new gold coming into
the monetary system has been a relatively small part of the total gain -about 48.5 billion, or $500 million per year on the average.
Second, the
great flow of new reserve assets to the rest of the world has reflected
the large U. S. deficits which resulted in the accrual of' dollar asse".:;s
in the hands of foreign monetary authorities.
Third, the outflow of these
dollars from the U. S. did not affect our gross reserve position in the
first instance, but any exchange into gold of such dollars acquired
reduced the level of U. S. reserves.
l1mple.
The reason is, of course, quite
U. S. reserves are held mainly in the form of gold and the U. S.
stands ready to buy or sell gold at
$35 per ounce.
- 7 of the foreign exchange, and these must be safe, acceptable, and marketable quickly and easily.
Thus, there must be broad and deep markets.
And, obviously, there must be sufficient supply of such foreign exchange
for it to be 'Widely held.
these characteristics.
Today, only the dollar and the pound have
The foreign exchange component -- mostly dollars
and sterling -- held as international reserves by monetary authorities
presently totals about $22 billion, 'With about two-thirds in the form
of dollar assets.
~The last type of reserve asset is of fairly recent origin.
It
represents virtually unconditional drawing rights on the International
Monetary Fund.
The basic asset here is the gold tranche -- the amount
of each country's contribution to the FUnd paid in gold -- usually onequarter of a country's contribution.
But there also is the so-called
Hsuper gold tranche" which represents an amount equal to any credit
claims acquired on the Fund in excess of the gold tranche.
All together,
these "unconditional drawing rights" on the Fund total now about $5
billion.
Thus, in total, the Free World has about $68 billion in reserve
assets -- $41 billion in gold, $22 billion in foreign exchange, and $5
billion in uneondi tiona.l Fund drawing rights.
International Lisuidity
Let me turn now to the subject of international liquidity.
So far,
ve have spoken about the international monetary system and the functions
- 6 international trade, in large part because of this use, thE::.:'e is a
substantial amount of international trade financing by ba::2.(s in
?~'''''-iT Yor:~,
London, and Paris in the form of dollar, sterling and franc credi"':;s.
Tbe third category is reserve assets held by a n.:..tic;:l r S
authorities.
";;..or;.c/"a:'7
These are reserves that are dravn upon to make paY..:.1ents
to monetary authorities in other countries.
settle balance of
~ents
Thus, they may be used to
dericits.
Reserve Assets
Presently, there are three basic kinds of reserve assets:
gold,
foreign exchange, and virtually unconditional drawing rights on
International. Monetary Fund.
t~e
Let me say a "WOrd about each.
Gold is the oldest and best knovn form of reserve asset.
It has
served this purpose for centuries, mainly because it has universcl
acceptabUity.
"As good as gold" is a phrase well knO"tm and oft repeated..
The Free World presently has $41 billions in gold in its inter.1.e.;i;iona.l
reserves, about one-third held by the United States, and about 50 percent
held by industrial Western European countries.
In practice, the foreign exchange component of in-cernational reserves
is mainly in the form of dollars and sterling.
In theory, there is no
reason why any important convertible currency cannot be held by cnother
nation in its reserves.
The basic factor, of course, is confidence in
the maintenance of value of the currency so held.
important factors also.
But
t~ere
are other
There must be assets available for investment
- 5and houses its tenants more or less comfortably.
the Plumbing springs leaks, or the root needs
fails.
At times,
re~air,
hmleve:~,
or the electricity
And it is a drat'ty structure.
The world
p~ents
system requires thi-ee ty:pes of money:
(1) domestic
currency for use within a country; (2) vehicle or transactions currencies
used by the banks and traders of each country in making payments to the
banks and traders of other countries; and (3) reserve assets held by
and used by monetary authorities in making payments to monetary authorities
of other countries.
Domestical.l.y, countries use money created by their central bs.•..:\:~ and
their commercial banking systems in the form of currency and dcposi"GJ.
If a bank lends or inVests more money than it is currently receiving
from its depositors or other banks" it will lose reserves.
And, if its
reserves go below the required margin, they must be replenished by borrow'-
ing from the central bank, by attracting more funds from the public
through deposits or borrowing, by calling in loans, or by selling invest-
ments.
ihe second type of currency is a "trading" or a "vehicle" currency.
For this purpose, certain important national currencies, 'tmich are wiG-ely
acceptable and easily convertible, are used in foreign trade.
Most inter-
national trade utilizes dollars or sterling, though the French franc is
also used, to some extent, for transactions between France and certain
of the former French colonies.
Along 'With the use of their currencies in
- 4But, even so, the system established at Bretton Wood::;
the world well.
t.3.3 se:.~\,'ed
It has evolved over time and is a better sys·;;a
than it was twenty years ago.
!lenT
Why, then, is there so much tallc tod;;;.y
about the need to improve the system?
The International Monetary System
Before answering that question, let us see just w.aat we mean by tbe
term "international. monetary system."
My distinguished predecessor,
Robert Roosa,. has just published a brilliant book on that subject
L~
Which he notes that it is not, in a strict sense, really a system at all.
Rather, it is an organization of institutions and procedures, which
provide a pattern of conventionally acceptable arrangements for
ma~ing
the payments that are needed for the flow of goods and capital. throughout. the world.
There is, first, the International Monetary Fund, to 11.aich I have
referred.
It receives fram each of the monetary authorities of its 103
member countries a sum of gold and local currency which, under various
conditions, it can lend to its members.
Then there are a host of special
arrangements between particular countries, or groups of countries, concerning the terms on 'Which trade or payments may be conducted or on 1/hic:1
reserves may be borrowed or loaned.
network of functioning arrangements.
The system, thus, is a
r~ther
loose
It is not a nicely conceived
structure of pleasing proportion, but a rambling building
li_".:;h
many
additions planned by different architects -- but one which functions vlell
- 3 conference established the base for a new system, which 'Was to vlcar 'Wc:u.
and serve the 'WOrld excellently for the next two decades.
At that Con-
terence were born the World Bank and the Internationcl gonetary Fund.
The experience of the inter-war period was much in the minds of:
the men of Bretton Woods.
They sought to establish a system that would
(a) limit competitive exchange rate depreciation, (b)
supple~ent cOlli~triesf
reserves vith credit lines, and (c) maintain f:reedom f:or current transactions in world trade.
dollar.
The keystones of the system were gold and the
Tbe dollar was pegged to gold at $35 an ounce, and other
currencies vere pegged to the dollar and, through it, to gold.
Tbe Bretton Woods program did not provide an
all problems, nor a perfect one.
~ediate
solution to
Many of the countries in the Inter-
national Monetary Fund had to maintain restrictions on trade and ca.pital
movements for a long time.
Many were unable to develop strong currencies
for some years; a number still suffer from this condition.
A number of
changes in parities were to come, vith one major change in 1949, involving
JI18llY countries.
Currency convertibility -- the right to exchange one
currency into another, the sine qua non ot competitive trade and free
m.oney movements -- vas some time in the future, even for most of the
industrial countries.
Not until
1958 had fourteen European
co~!tries
announced de facto convertibility for new acquisitions of foreign currencies by foreigners, thus taking a major step in relaxing exchange controls.
- 2 At the center of the international. monetary system stood the Ba."1lc of
England.
London was the main international. banking center and sterli:c.g
was the major vehicle currency through which most
was carried on.
internatior~ tradin~
The great English banks financed much
o~
that trade.
At all times, London had large short-term claims on, and large liabilities
to, the rest of the world.
In the next thirty-five years, two World Wars and the Great Depression played havoc with international. trade and the international monetary
system.
Domestic finance also underwent great stress duri.'"1g this period,
but, by the middle 1930' s, it had been further reformed and made stron3
enough to withstand the shock of World War II and contribute mightily
to its finance and the needs of the postwar era.
The international
monetary system, however, never really functioned very well after World
War I, until the late 1950' s.
The record of the 1930's in international trade and finance is a
sorry one.
Competitive currency depreciations, restrictive trade policies,
recurrent crises were the rule rather than the exception.
World War II,
with its great devastation, left much of the Western world prostrate, its
resources ruined, and its trade and money arrangements a shambles.
Bretton Woods
Before the war ended, however, some farsighted men saw both the need
and the opportunity for a major step forward in international finance.
At Bretton Woods, New Hampshire, in 1944, an international monetary
TREASURY DEPARTMENT
WASHINGTON
R>R RELEASE ON DELIVERY
REMARKS BY THE HONORABLE FREDERICK L. D::;\IT:;-G
UNDER SECIIDrARY OF THE TREASURY FOR MOlw'J:!.c'u'1Y ..\}-y,i.i'iURS
AT THE ANNUAL CONVENTION
OF THE IOWA BANKERS ASSOCIATIOn
AT THE HOTEL FORT DES MOINES, DES NOlI-illS, IO/.'J.
ON MONDAY, OCTOBER 18, 1965, AT 3:15 P.~''l. (cs~)
INTERNATIONAL DISCUSSION OF MONErARY ARRANG:E:·illJTS
More than a half century ago when I was born in this capitol city
of Iowa, Woodrow Wilson was about to be elected President of the United
states.
World War I was about two years in the future and i.m.erican entry
into that war was almost t1ve years away.
American business and banking was concerned primarily with eomestic
affairs in 1912.
I suspect that Iova bankers were talking about the need
to reform the American banking system, which had suffered from recurrent
money panics and had been under extended study for some years.
The
Federal Reserve System was to be established in another year and was
destined to vrovide the impetus for a new era in banking, with an elastic
currency, the concentration and economical use of reserves and the
powe~
to provide the needed base for adequate credit expansion to support a
growing economy..
Monetary reform in 1912 meant domestic monetary .reform..
was. operating under the gold standard
ma~or
am
Tne 1rorld
was operating fairly 'ivell.
T.n.e
currencies of the world were tied to gold with fixed rates of exchanGe.
TREASURY DEPARTMENT
Washington
FOR RELEASE ON DELIVERY
REMARKS BY THE HONORABLE FREDERICK L. DEMING
UNDER SECRETARY OF THE TREASURY FOR MONETARY AFFAIRS
AT THE ANNUAL CONVENTION
OF THE IOWA BANKERS ASSOCIATION
AT THE HOTEL FORT DES MOINES, DES MOINES, IOWA
ON MONDAY, OCTOBER 18, 1965, AT 3:15 P.M. (CST)
INTERNATIONAL DISCUSSION OF MONETARY ARRANGEMENTS
More than a half century ago when I was born in this capit~
city of Iowa, Woodrow Wilson was about to be elected President of
the United States. World War I was about two years in the future
and American entry into that war was almost five years away.
American business and banking was concerned primarily with
domestic affairs in 1912. I suspect that Iowa bankers were
talking about the need to reform the American banking system,
which had suffered from recurrent money panics and had been under
extended study for some years. The Federal Reserve System was to
be established in another year and was destined to provide the
impetus for a new era in banking, with an elastic currency, the
concentration and economical use of reserves and the power to
provide the needed base for adequate credit expansion to support
a growing economy.
Monetary reform in 1912 meant domestic monetary reform. T~
world was operating under the gold standard and was operating
fairly well. The major currencies of the world were tied to golQ
with fixed rates of exchange. At the center of the internatio~l
monetary system stood the Bank of England. London was the main
international banking center and sterling was the major vehicle
currency through which most international trading was carried 00
The great English banks financed much of that trade. At all
times, London had large short-term claims on, and large
liabilities to, the rest of the,world.
F-240
- 2 -
?83
In the ne~-t thirty-five years, two World Wars and the
Great Depression played havoc with international trade and the
international monetary system. Domestic finance also underwent
great stress during this period, but, by the middle 1930's, it
had been further reformed and made strong enough to withstand
the shock of World War II and contribute mightily to its finance
and the needs of the postwar era. The international monetary
system, however, never really functioned very well after
World War I, until the late 1950's.
The record of the 1930's in international trade and finance
is a sorry one. Competitive currency depreciations, restrictive
trade policies, recurrent crises were the rule rather than the
exception. World War II, with its great devastation, left much
of the Western world prostrate, its resources ruined, and its
trade and money arrangements a shambles.
Bretton Woods
Before the war ended, however, some farsighted men saw both
the need and the opportunity for a major step forward in
international finance. At Bretton Woods, New Hampshire, in 1944,
an international monetary conference established the base for a
new system, which was to wear well and serve the world excellent~
for the next two decades. At that Conference were born the
World Bank and the International Monetary Fund.
The experience of the inter-war period was much in the minds
of the men of Bretton Woods. They sought to establish a system
that would (a) limit competitive exchange rate depreciation,
(b) supplement countries' reserves with credit lines, and
(c) maintain freedom for current transactions in world trade.
The keystones of the system were gold and the dollar. The dol~r
was pegged to gold at $35 an ounce, and other currencies were
pegged to the dollar and, through it, to gold.
The Bretton Woods program did not provide an immediate
solution to all problems, nor a perfect one. Many of the
countries in the International Monetary Fund had to maintain
restrictions on trade and capital movements for a long time. ~ny
were unable to develop strong currencies for some years; a numb~
still suffer from this condition. A number of changes in
parities were to come, with one major change in 1949, involving
many countries. Currency convertibility -- the right to exchange
one currency into another, the sine qua ~ of competitive trade
and free money movements -- was some time in the future, even
for most of the industrial countries. Not until 1958 had
fourteen European countries announced de facto convertibility f~
new acquisitions of foreign currencies by foreigners, thus
taking a major step in relaxing exchan~~ eent&Q.~.
- 3 -
28.;
But, even so, the system established at Bretton Woods has
served the world well. It has evolved over time and is a better
sys tern now than it was twenty years ago. Why, then, is there so
much talk today about the need to improve the system?
The International Monetary System
Before answering that question, let us see just what we mean
by the term "international monetary system." My distinguished
predecessor, Robert Roosa, has just published a brilliant book 00
that subject in which he notes that it is not, in a strict sense,
really a system at all. Rather, it is an organization of
institutions and procedures, which provide a pattern of
conventionally acceptable arrangements for making the payments
that are needed for the flow of goods and capital throughout t~
world.
There is, first, the International Monetary Fund, to which I
have referred. It receives from each of the monetary authorities
of its 103 member countries a sum of gold and local currency whicl
under various conditions, it can lend to its members. Then then
are a host of special arrangements between particular countries,
or groups of countries, concerning the terms on which trade or
payments may be conducted or on which reserves may be borrowed or
loaned. The sys tern, thus, is a ra ther loose ne twork of functioni!
arrangements. It is not a nicely conceived structure of pleasing
proportion, but a rambling building with many additions planned
by different architects -- but one which functions well and
houses its tenants more or less comfortably. At times, however,
the plumbing springs leaks, or the roof needs repair, or the
electricity fails. And it is a drafty structure.
The world payments system requires three types of money:
(1) domestic currency for use within a country; (2) vehicle
or transac tions currenc ies used by the banks and traders of each
country in making payments to the banks and traders of other
countries; and (3) reserve assets held by and used by monetary
authorities in making payments to monetary authorities of other
countries.
Domestically, countries use money created by their central
banks and their commercial banking systems in the form of
currency and deposits. If a bank lends or invests more money
~an it is currently receiving from its depositors or other ban~,
it will lose reserves. And, if its reserves go below the requ~E
margin, they must be replenished by borrowing from the central
bank, by attracting more funds from the public through deposits C
borrowing, by calling in loans, or by selling investments.
- 4 , a " tra d'1ng " o.
r a "veh1' cle"
The second type of currency 1S
currency. For this purpose, certain important nat10nal currenc~s,
which are widely acceptable and easily convertible, are used in
foreign trade. Most international trade utilizes dollars or
sterling, though the French franc is also used, to some extent,
for transactions between France and certain of the former French
colonies. Along with the use of their currencies in international
trade, in large part because of this use, there i~ a substantial
amount of international trade financing by banks 1n New York,
London, and Paris in the form of dollar, sterling and franc
credits.
The third category is reserve assets held
monetary authorities. These are reserves that
make payments to monetary authorities in other
they may be used to settle balance of payments
by a nation's
are drawn upon to
countries. Thus,
deficits.
Reserve Assets
Presently, there are three basic kinds of reserve assets:
gold, foreign exchange, and virtually unconditional drawing
rights on the International Monetary Fund. Let me say a word
about each.
Gold is the oldest and best known form of reserve asset.
It has served this purpose for centuries, mainly because it has
universal acceptability. "As good as gold" is a phrase well
known and oft repeated. The Free World presently has $41
billions in gold in its international reserves, about one-third
held by the United States, and about 50 percent held by industr~l
Western European countries.
In practice, the foreign exchange component of international
reserves is mainly in the form of dollars and sterling. In theory,
there is no reason why any important convertible currency cannot
be held by another nation in its reserves. The basic factor, of
course, is confidence in the maintenance of value of the currency
so held. But there are other important factors also. There must
be assets available for investment of the foreign exchange, and
these must be safe, acceptable, and marketable quickly and easily.
Thus, there must be broad and. deep markets. And, obviously,
there must be sufficient supply of such foreign exchange for it
to be widely held. Today, only the dollar and the pound have
these characteristics. The foreign exchange component -- mostly
dollars and sterling -- held as 'international reserves by moneta~
authorities presently totals about $22 billion, with about
two-thirds in the form of dollar assets.
- 5 -
The last type of reserve asset is of fairly recent origin. It
represents virtually unconditional dr~wing rights o~ the
International Monetary Fund. The bas~c asset here ~s the gold
tranche -- the amount of each country's contribution to the Fund
paid in gold -- usually one-quarter of a country's contribution.
But there also is the so-called" super gold tranche" which represents
an amount equal to any credit claims acquired on the Fund in
excess of the gold tranche. All together, these "unconditional
drawing rights" on the Fund total now about $5 billion.
Thus, in total, the Free World has about $68 billion in
reserve assets -- $41 billion in gold, $22 billion in foreign
exchange, and $5 billion in unconditional Fund drawing rights.
International Liquidity
Let me turn now to the subject of international liquidity. So
far, we have spoken about the international monetary system and
the functions of domestic currency, vehicle currency, and reserve
assets. The reserve assets are, by definition, those carried as
such by monetary authorities and hence do not include privately
held stores of foreign exchange, although there are links
between the two, and, in a broad sense, both together are elements
in international liquidity. We shall, however, confine our
discussion of international liquidity to official reserves and
credits available to monetary authorities.
I have referred to the fact that reserve assets now total
about $68 billion, partly in gold, partly in foreign exchange,
and partly in the form of creditor claims on the IMF. The amount
of reserve asset gain in the postwar period has been striking.
But three important points need underlining. First, since 1948,
the amount of new gold coming into the monetary system has been
a relatively small part of the total gain -- about $8.5 billion,
or $500 million per year on the average. Second, the great flow
of new reserve assets to the rest of the world has reflected
the large U. S. deficits which resulted in the accrual of dollar
assets in the hands of foreign monetary authorities. Third, the
outflow of these dollars from the U. S. did not affect our gross
reserve position in the first instance, but any exchange into
gold of such dollars acquired reduced the level of U. S. reserves.
The reason is, of course, quite simple. U. S. reserves are held
mainly in the form of gold and the U. S. stands ready to buy or
sell gold at $35 per ounce.
- 6 -
Continental Europe recovered its financial strength rapidly
after the exchange adjustments of 1949. Over all, foreign
industrial countries increased their reserves by $14 billion from
1948 to 1958, to nearly $22 billion, almost as much as United
States reserves of $22.5 billion.
The U. S. Balance of Payments Deficit
The next six years were characterized by large-scale deficits
in the balance of payments of the United States. The dollars paid
out by the United States flowed into the reserves of the other
industrial countries, especially those on the Continent of Europe.
All in all, nearly three-quarters of the growth in official
reserves of the rest of the world during these years resulted
from these U. S. deficits, with the remainder of the $17 billion
total growth in their reserves coming from new monetary gold
supplies, or through the build-up of their creditor claims on the
International Monetary Fund. During these six years, the reserve
assets of the United States, however, fell from $22.5 billion
($20.6 billion in gold) to $16.7 billion ($15.5 billion in gold).
Now, in these very figures you can see the heart of the
international liquidity problem of today. The great bulk of such
reserves supplied to the world came from U. S. deficits in its
balance of payments. The U. S. cannot afford to continue to
run such deficits, because they result in a run-down of its own
reserves and a consequent impairment of its own international
liqudiity situation. If that situation worsens, the acceptability
of dollar assets in foreign monetary hands would tend to weaken,
and there would be tendencies to convert more dollar balances
into gold. Such conversion would further reduce U. S. reserves.
Therefore, the deficits must stop.
But, at the same time, if the U. S. deficits stop, the bulk
of the increase in international reserves, in world liquidity, also
stops. This is so simply because new gold supplies are insufficienl
to meet needs for additional reserves as the volume of world
business grows. Additions to creditor claims on the IMF, as
presently handled, help a little but are not in very great volume.
Thus, some new way to provide for additions to world liquidity
must be found.
The U. S. is determined to get into equilibrium in its balance
of payments and has mounted strong efforts to achieve that end.
The progress made in the balance of payments this year is, in my
judgment, encouraging. Since the announcement of the new program
of February 10, 1965, there hcs been a very marked change. Taking
- 7 the first half aE a whole, which includes rather heavy deficit figure.
in January and February, the regular deficit was down to an annual
rate of $1.3 billion, as compared with $3.1 billion for the year
1964.
The large gold outflow in the first half of the year was not
attributable to this year's balance of payments, but rather to the
large dollar accumulations by foreign monetary authorities in
1964.
Over
that the
in their
with the
all, the program is particularly encouraging in showing
banks and business community have made real adjustments
current operations and activities in order to cooperate
President's program.
International Monetary Cooperation
Since the end of 1958, there has been a remarkable development
of international monetary cooperation, centering around multilateral
concern with the deficits of major countries, and finding its most
practical expressions in the enlargement, improvement, and
elaboration of credit facilities available to monetary authorities.
In 1958-59, quotas in the International Monetary Fund were
increased by 50 percent generally, with additional selective
increases for several of the leading industrial countries.
Following extensive negotiations in 1961 and 1962, the General
Arrangements to Borrow were set up, under which ten leading
industrial countries agreed to provide additional credit to the
Fund under specified conditions in amounts up to $6 billion. The
combination of quota increases and the General Arrangements to
Borrow thus considerably strengthened the official credit facilities
available to major currencies to insure against a severe strain 00
the international monetary system, which could be accompanied by a
severe shrinkage of international liquidity. The Fund has, in fact,
been called upon by Canada, Italy, and the United Kingdom, in
periods of special strain on their currencies. The United States,
while not drawing heavily on the Fund, has passed from a net
creditor of the Fund to a moderate user of Fund resources, and
this has helped in financing the United States deficit. The
resources of the Fund are again being enlarged and strengthened by
an increase in quotas now in process, amounting to 25 percent,
plus additional amounts for a number of individual countries.
- 8 -
In addition, through direct contacts between.the m?n:tary
authorities of leading countries, short-term cred1t fac1l1ties ha~
been developed on a large scale, both on a standby basis and
through ad hoc arrangements, from time to time. The Federal
Reserve System has established a network of standby swap facilities
which, in effect, provide short-term credit on a reciprocal basis
in case of need. This network was initiated in 1962, and now has
reached the total of $2.8 billion. The United Kingdom has, from
time to time, made use of special ad hoc short-term facilities
to meet the particular periods of strain.
In addition to the enlargement of regular and supplementary
resources of the Fund, and the striking development of short-term
credit facilities to support major currencies, the years 1961 to
1965 have been remarkable for the establishment of close and
frequent consultations between responsible officials of treasuries
and central banks of the leading countries.
Through one organization, known as the Deputies of the
Group of Ten, responsible officials meet to consider the basic
problems of the functioning of the international monetary system
and future needs for liquidity.
Improving the System
I have said that the international monetary system in which we
live is something like a rambling house to which additions and
improvements have been made from time to time. A number of
proposals have been made for radically rebuilding this structure,
but the difficulty with so doing is that the world has to live
in the house and conduct its business all the time; it cannot
move out, because there is no other place to go. The trade and
business activity of the world could suffer considerably if large
parts of the house were made uninhabitable by the process of
tearing down and rebuilding. Nor is it entirely certain that all
of the nations that live in the house would readily agree on just
how a major restructuring should be carried out.
Consequently, I would expect that the practical solution
would be found to be in improving certain parts of the structure,
while building additions to it to accommodate the growth of the
nations living in the house.
In my own thinking, I have found it useful to consider as
improvements the things we can do to meet short-term and cyclical
problems, and to consider as additions the more permanent
requirements for larger reserves for the growing world.
- 9 As I have indicated, we have made very striking progress in
the past four years in developing short-term credit facilities
that protect the system against short-period strains on major
currencies. In a sense, we have improved the heating system in
the house, so that those rooms most exposed to the weather from
time to time are less dependent on their own fireplaces and can draw
more effectively on the central heating system.
Looking ahead to the longer term problem of creating an adeq~
supply of additional reserve assets for the world, we are enter~g
a new and largely uncharted area. The world has never before set
about the deliberate task of creating reserve assets. We can,
therefore, expect that all of the countries participating in this
planning for future contingencies win be cautious. I use the
term "additional reserve asset" consciously, because some of the
ways of creating more reserve assets would simply enlarge claims
on the Fund which are already being treated as reserve assets.
Questions and Issues
What are some of the maj or ques tions tha t are to be negotiate(
Underlying most of these problems is some difference of view amoq
members of the Group of Ten as to what will be the future need for
additional reserves. Continental European countries generally havi
large reserves that have been growing by something like 10 percent
a year. To change the metaphor, their concern about the
inflationary pressures in their overheated economies leads them
to want a heating system on which the thermostat will not be set
at an excessively high temperature, from their point of view.
On the other hand, other parts of the world whose economies are
less subject to overheating, and who fear that they will be
insufficiently protected against cold weather in the future, want
to be sure that there is a fully adequate furnace installed and
in good working order.
There are several problems which stand out as issues thatwU
need to be resolved during the negotiations on which we are n~
entering. These issues were, in fact, highlighted in the technics
report prepared by experts of ten leading countries that is call~
the Ossola Group Report, published in August of this year.
The first of these issues is whether a new reserve asset shm
be usable on its own, or whether it should only be used in
conjunction with gold or in conjunction with other existing reserl
Under some proposals, it has been argued that any such new asset
should only be utilized in international settlements along with a
fixed and substantial amount of gold. Against this, there are ad
views tha t, from the beginning, it would be des irable for any new
asset to stand on its own feet.
- 10 The second maj or questions concerns the nuraber of countr1'el
that should participate in creating a new reserve asset and in takiJ
the responsibility for ultimately receiving it in payment. New
reserve asse ts to be use ful, mus t provide access to the currencies
of the major i~dustrial and trading nations. This means that
fuese countries must be prepared, in the last analysis, to sell
their goods against the new asset in international trade or accept
the new asset in payment of international debts. At the same time,
the developing countries of the world have an interest in the
adequacy of world reserves, though they, themse lves, generally do
not follow the practice of building up substantial reserve
holdings.
There are also general institutional questions concerning the
extent, form, and degree of participation and responsibility that
is to be given to the International Monetary Fund. Under some
proposals, deliberate creation of reserves would become integrated
into the use of Fund drawing facilities; under other proposals,
the Fund might receive a share of the assets created. Under
still others, reserve assets might be established by a group of
countries with limited relationship to the Fund. There are a
number of differing attitudes on these questions.
Finally, a very key question is how decisions would be made
governing the amount and timing of periodic creation of reserve
assets. That is, how is a decision made as to where to set the
thermostat in the world's heating system? Is it to be set rather
firmly for a long period of time, or is it to be made highly
variable? Is one resident to be given a veto on any change in the
thermostat, or even a veto on turning on the furnace at all?
The views of the minority must certainly be protected, but, at
the same time, large sections of the world economy must not be
exposed to temperatures which could impair their health and
efficiency.
These are some of the problems, in addition to many lesser
and more technical questions, that we can expect to face in the
forthcoming negotiations. No doubt it will require some time to
reach a satisfactory resolution. But I am satisfied that there
will be a common determination to establish plans that can be
used to create additional reserves. The logic of the need to
have such contingency plans is, I think, overwhelming. We expect
therefore, to press forward in the full confidence that we will
be providing the world with a facility that will increasingly
come to be recognized as an essential and valuable one.
000
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.
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- 2 L&sc June, Eug2~e E~ack) forme~ ~~esid2nt o~ ~~2 W0~lj Ba~k ~~d
M S?8cial Adviser to ?residenc Johnson, atten~~~ a meeting 0~ che
,nsul.tdtive Cc::::';'-,1ittee . . . . t B.:ng:~ok w:'lere he plecigedthe Unitee States
r;:::'ovide 20 peycent of the D;:.nk IS initL.l c2?italiz3tion -- $200
llion. In additicn, he piedged the United States to prOViG2 up
$100 million in loans or grants -- provided thdt there are
milar contributions from other nations -- to establish a Trust
nd for Southeast Asian Regional Development. Both pledges are
bject to Congressional approval.
Afcer agreement on the charter h&s been reached, a ministerial
eting will De r.eld st.:n"ting Decem'o2r 2 at lvlan:"la f,):::" represetl-::atives
the goverr.rJents to sign the charter which wiil then be submitted
their gover~~2nts for ratification.
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October 17, 1965
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*
*
*
RELEASE: A.M. NE~\TSPAPERS
~DAY , OCTOBER 17, 1965
~
u.s.
SENDS DELEGATION ~O BANGKOX FOR
MEETING TO DRAFT ASIAi~ DEVELOn·'1EK':'
BANK CHARTER
The United States Delegation headed by Assistant Treasury
:retary for Inte~~ational Affairs Merlyn N. Trued will leave soon
Bangkok, Thailand, to take part in a meeting to prepare a draft
.lrter for the Asian Development Bank.
The Asian Development Bank was first proposed two years ago at
leeting of tne Asian members of ECAFE -- the Economic Commission
Asia and the Far E&st -- a United Nations Regional Commission.
Bank was proposed by ECAFE to strengthen regional economic
peration and to provide additional financial resources for
elopment.
At the last a~nual meeting of ECAFE at Wellington, New Zealand,
March of 1965 a resolution supporting the Bank was approved which
ablished a group of nine experts from Asian nations -- the
sultative' COITh'1littee -- to .Q:::tt~t"~-a--d-r'a'f.t: charter for the Bank.
(J'{ ~
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t() /
Il.
If .,', I!'
/-t,
ECAFE includes all the countries of Asia v'lith the exception of
munist China, Indonesia (which withdrew last year), and Singapore
ich has a~plied for membership). Non-regional members of ECAFE
lude the United Kin~dom, France, the Netherlands, the Soviet Union,
the United States.
The Bangkok meeting is scheduled to last from October 21 to
ember 1. It will be a meeting of approximately 25 nations interested
establishing the Asian Development Bank -- including representatives
,everal developed countries outside ECAFE.
,
-:) /'~
,
}
TREASURY DEPARTMENT
FOR RELEASE: A.M. NEWSPAPERS
MONDAY, OCTOBER 18, 1965
u.S. SENDS DELEGATION TO BANGKOK FOR
MEETING TO DRAFT ASIAN DEVELOPMENT
BANK CHARTER
The United States is sending a delegation headed by Assistant
Secretary of the Treasury Merlyn N. Trued to attend a meeting at
Bangkok, Thailand, at which representatives of some 25 nations
will prepa~a draft charter for the projected Asian Development
Bank. The meeting opens next Thursday, October 21.
The Asian Development Bank was first proposed two years ago at
a meeting of the Asian members of ECAFE -- the Economic Commission
for Asia and the Far East -- a United Nations Regional Commission.
The Bank was proposed by ECAFE to strengthen regional economic
cooperation and to provide additional financial resources for
development.
At the last annual meeting of ECAFE at Wellington, New Zealand,
in March of 1965 a resolution supporting the Bank was approved which
established a group of nine experts from Asian nations -- the
Consultative Committee -- to begin work on a charter for the Bank.
ECAFE includes all the countries of Asia with the exception of
Communist China, Indonesia (which withdrew last year), and Singapore
(which has applied for membership). Non-regional members of ECAFE
include the United Kin~dom, France, the Netherlands, the Soviet Uni~
and the United States.
The Bangkok meetin~ is scheduled to last from October 21 to
November 1. It will be a meeting of approximately 25 nations interet
in establishing the Asian Development Bank -- including representatW
of several developed countries outside ECAFE.
F-241
"Q
,,
;~
- 2 -
Last June, Eugene Black, former President of the World Bank and
now Special Adviser to President Johnson, attended a meeting of the
Consultative Committee at Bangkok where he pledged the United States
to provide 20 percent of the Bank's initial capitalization -- $200
million. In addition, he pledged the United States to provide up
to $100 million in loans or grants -- provided that there are
similar contributions from other nations -- to establish a Trust
Fund for Southeast Asian Regional Development. Both pledges are
subject to Congressional approval.
After agreement on the charter has been reached, a ministerial
meeting will be held starting December 2 at Manila for representatb
of the governments to sign the charter which will then be submitted
to their governments for ratification.
000
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RELE.I,.SS A.K ..
~sd.ay, OCtCb81"
1965
CE OF ACCEPl':L~
'PETrrm BIDS:
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Ti'l.::G~:W-:g J~~~~~.t:.' 20<)
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1965
:"o'o';v 0
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l1iZ:1
H"'c"''''+'~rrr
~lJ,"""""""o
90 0 977
98 9SJ
Q
~~oCL~.. 7~~
Approx. Equ.iv.
.r.,.n..rlU~l Rate
c/ ' - - --r:--203
......
/w
40219%
o
d
b,O:L%
Apz-U 21" 1966
·
·.·
-_¥_-'
"' -. -- A--. . ~~~G19%-Rate
93 ~~<~. ~
"l:.'l.t'.e.l
Lo~·]
;';'V0j."'~gO
TreaSUl7 bills
2 -"""-r"O',,,,.,,
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v.::..:....L.~
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'7 percent of t::'e s;:.ocrc. of 91-(..2..Y eU:";:; tid for .:t, t,:"lO 10';, :)~ice was ",ccopted
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3 p8 .... cer.t 0:
t~~3 ~~:;.ow:::,
of
l32-~y
bill.;;
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accepted
.~
n:;IJERS APPLIED iTOR LND LCCZ?i'ED LY FELERAL RESERVE j)ISTf:.ICTS:
L~pli8C: Fo::.,...
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bst,on
2') 1'"-~;)
r C'"'J
66,0)';'1,000
$
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1,4:::5,720,000
17,944,000
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20,167,CCO
32,532;1000
328,197,000
26,109,000
12,315,000
~.,095,ooo
1 ;:') 2el~ 000
2219 6~;.l:> oeo
~r2,-243, 293,000
Accepted
29,701,000
723,300.,000
7,015,000
39,351,000
8,377,000
13,477,000
97,120,000
13,959,000
8,715,000
20,695,000
3,681,000
32,206,000
$1,002,597,000
p:."::'CG of
price of
£I
98.980
97.870
TREASURY DEPARTMENT
FOR REL&\sE A.M. NEWSPAPERS,
'l'uesday, October 19, 1965.
RESULTS OF TREASURY·.3 WSEJ\LY BILL OFFERING
The Treasury Department announced last evening that the tenders for two series ot
Treasury bills, one series to be an additional issue of the bills dated July 22, 1965,
and the other series to be dated October 21, 1965, which were offered on October 1),
were opened at the Federal Reserve Banks on October 18. Tenders were invited for
$1,200,000,000, or thereabouts, of 9l-day bills and $1,000,000,000, or thereabouts,
of 182-day bills. The details of the two series are as follows:
RANGE OF ACCEPl'ED
91-day Treasury bills
:
182-day Treasury bills
COMPETITIVE BIDS:
maturing January 20, 1966
maturing April 21, 1966
Approx. E q u i v . :
Approx. Equiv.
Price
Annual Rate
Price
Annual. Rate
High
-98.984
4.019%
97.875!1 4.203i
Low
98.977
4.~7%
:
97.867
4.219%
98.980
4.034%
1/
:
97.870
4.214%
Average
a/ Excepting 2 tenders totaling $2,434}000 b7 percent of the amount of 91-d~ bil~s bid for at the low price was accepted
48 percent of the amount of 182-day bills bid for at the low price was accepted
Y
TOTAL TENDERS APPLIED FOR AND ACGEP1'£D BY FEDERAL RESERVE DISTRICTS:
District
Boston
New York
Philadelphia
Cleveland
Richmond
Atlanta
Chicago
St. Louis
Minneapolis
Kansas City
Dallas
San Francisco
TOTALS
Applied For
$
22,915,000
1,345,532,000
30,393,000
25,838,000
23, 51.l5, 000
43,164,000
282,345,000
48,507,000
22,029,000
31,145,000
26,174,000
121,179.1 000
Accepted
$
22,715,000
749,487,000
18,393,000
25,838,000
23,380,000
27,667,000
160,345,000
40,857,000
19,369,000
30,485,000
16,844,000
6h,690,000
Applied For
Accepted,.;
: $
66,~,000
$ 29, 701,~
1,425, 720,000
723,300,~
17,944,000
1,ol"a
54,
251
,
000
39,3,1,0'
:
20,167,000
8, 377,q"
32,532,000
13,477,0
328,197,000
97,120,0
:
26,109,000
13,959,0
12,315,000
8, 71S,.
:
24,095,000
20, 69S,.
14, 281,000
8,681,4
:
22l,64l,000
32,206
1
$2,022,7b6,OOO $1,2Ov,J70,OOO ~
$2,243,293,000 $1,002,597,0
~ Includes $263,023,000 noncompetitive tenders accepted at the average price of 98
c'/ Includes $136,374,000 noncompetitive tenders accepted at the average price of 91
On a coupon issue of the same length and for the same amount invested, the retunr·
these bills would provide yields of 4013~~, for the 91-day bills, and 4.37%, for t
l82-d.ay bills. Interest rates on bills are quoted in terms of bank discount with
the return related to the face amount of the biLls payable at maturity rather tbI
the amount invested and their length in actual number of days related to a J6O-dI
year. In contrast, yields on certificates, notes, and bonds are computed in ten
ot interest on the amount invested, and relate the number of days re~~.
interest payment period to the actual number of days in the period, with ~
compounding i f more than one coupon period is involved.
Y
r:'-2h2
°
TREASURY DEPARTMENT
FOR RELEASE A. M. NEWSPAPERS
WEDNESDAY, OCTOBER 20, 1965
CUSTOMS DISTRICT DIRECTORS
APPOINTED FOR SAN FRANCISCO REGION
The appointment of six district directors for the San Francisco Customs Regior
VIII was announced today by Assistant Secretary of the Treasury True Davis.
The appointments will become effective on November 1, 1965 and are the first
to be made at the district level since the selection of Ben A. Burk as Regional
Commissioner in September. Selections were made in accordance with Civil Servic!
regulations from a large number of qualified applicants.
The following were appointed:
San Francisco Customs District - George K. Brokaw of San Francisco,
Calif.
Honolulu Customs District - Dr. Ernest 1. Murai of Honolulu, Hawaii
Seattle Customs District - Roy L. Peterson of Seattle, Washington
Portland (Ore.) Customs District - Leslie L. Spiers of Arizona
Juneau Customs District - Joseph Bailey of Juneau, Alaska
Great Falls Customs District - Harold L. Swanson, Sr., of Great
Falls, Montana.
The appointments were made as part of the President's Reorganization Plan
No. 1 of 1965 wh~h was sent to Congress last March and became effective on
May 25, 1965. It c aIled for the elimination of 53 Customs positions throughout
the U. S., which were previously filled by Presidential appointment. The ReorganiZ
tion Plan placed the 176-year-old Customs Service wholly on a career basis.
F-243
(more)
2
San Francisco is the headquarters of Customs Region VIIT which is the first
to be established under the Reorganization Plan. The regional office is on the
16th floor of the Federal Office Building at 450 Golden Gate Avenue, San Francisco.
With Regional Commissioner Burk at this location are Assistant Regional Commissioners Frank W. Hammar and Albert G. Bergesen.
There will be a total of nine Customs regions established in accordance with
a year-long timetable, as follows: Los Angeles, Calif., January 1, 1966; Miami,
Fla. and New Orleans, La., in February 1966; Chicago, lll., March; Baltimore,
Md., April; Houston, Tex. and Boston, Mass., May; and New York City in June.
United States Commissioner of Customs Lester D. Johnson heads the Bureau
of Customs, which is part of the Treasury Department. His office is in Washington,
D.C.
# # #
(Biographies attached)
BIOGRAPHICAL SKETCH OF GEORGE K. BROKAW
George K. Brokaw, District Director-designate of the San Francisco Customs
District, was born May, 1911 in Carmel, Indiana, and holds B.S. and M.S. degrees
from the University of California. During World War II he was in charge of
mechanical and electrical design at various Army and Navy installations and had
his own consulting engineering office in San Francisco.
Mr. and Mrs. Brokaw reside at 2317 Hearst Avenue, Berkeley, Calif., and
they have three daughters. Mr. Brokaw has been Collector of Customs at San
Francisco since August 21, 1961.
Ports of entry under the San Francisco District are San Francisco-Oakland
and Eureka, Calif.
***
BIOGRAPHICAL SKETCH OF ERNEST I. MURAl
Dr. Ernest 1. Murai, District Director-designate for the Honolulu Customs
District was born in September, 1900 in Honolulu, Hawaii. He was educated at
the University of California Dental College, graduating in 1926 with a degree of
Doctor of Dental Surgery. He has been active in the Red Cross and Veterans
Affairs; has served as a member of the Honolulu Police Commission; is a former
member of the Selective Service System; and past president of the Honolulu
Japanese Civic Association. He is fluent in speaking and understanding Japanese.
Dr. and Mrs. Murai reside at 2954 Alphonse Place, Honolulu, Hawaii and
have three married daughters, Ernestine Kozuma, Jeanette Otsuji, and Lorraine
Mortimer.
Dr. Murai was appointed Collector of Customs in Honolulu on July 10, 1961.
Ports of entry under the Honolulu District are:
Nawiliuili-Port Allen.
Honolulu, Hilo, Kahului, and
** *
(more)
BIOGRAPHICAL SKETCH OF ROY L. PETERSON
Roy L. Peterson, District Director- designate of the Seattle Customs District,
as born in 1907 in Oakland, Nebraska. He studied at the University of Washington
Seattle, and was employed in private industry until his entry into the U. S. Im,igration and NatUralization Service in 1940 as a patrol inspector in Custer,
ashington. He served as an immigration inspector and investigator for the
nmigration Service until his appointment as Collector of Customs in Seattle
1961.
Mr. and Mrs. Peterson reside at 1100 University Street, Seattle, Washington.
Ports of entry under the Seattle District are: Aberdeen, Anacortes,
9Uingham, Blaine, Danville, Everett, Ferry, Friday Harbor, Laurier, Lynden,
etaline Falls, Neah Bay, Nighthawk, Northport, Olympia, Oroville, Port Angeles,
Jrt Townsend, Seattle, South Bend-Raymond, Spokane, Sumas, and Tacoma.
***
BIOGRAPHICAL SKETCH OF LESLIE L. SPIERS
Leslie L. Spiers, District Director-designate for Portland (Ore.) Customs
strict, was born in Oklahoma in 1906 and was educated at the University of
~izona in Tucson.
After service as a railroad clerk, he entered the Customs
!'Vice as an inspector in 1938. He served as deputy collector, entry officer,
11idator, fiscal accountant, and field auditor in Nogales, New Orleans, and San
ancisco. Mr. Spiers was promoted to organization and methods examiner in
.55 in Washington, and in 1956 was named assistant collector of customs at
larleston, South Carolina. In November 1963 he was transferred to Manila
der the AID Program, serving as advisor to the Commissioner of Customs
the Republic of the Philippines.
During World War II he served with the
S. Navy.
Mr. and Mrs. Spiers are currently residing in Manila.
Ports of entry under the Portland District are:
Portland in Oregon, and Longview, Washington.
Astoria, Coos Bay, Newport
***
(more)
BIOGRAPIDCAL SKETCH OF JOSEPH BAILEY*
The new District Director-designate for Juneau, Alaska was born in Lancashire,
England in 1908. He graduated from the Ketchikan High School, Ketchikan, Alaska
in 1927 and studied at Whitman College.
Prior to joining the Customs Service at
Skagway, Alaska in 1941, Mr. Bailey was a cost accountant in Seattle. He served
as Deputy Collector of Customs in Ketchikan from 1942 to 1950, and in 1964 he was
appOinted Assistant Collector in Juneau, with responsibility for supervising all phases
of Customs activities in the District of Alaska.
Ports of entry under the Juneau District are: Anchorage, Fairbanks, Juneau,
Ketchikan, Kodiak, Pelican, Petersburg, Sand Point, Sitka, Skagway, and Wrangell.
*no middle initial
* * *
BIOGRAPIDCAL SKETCH OF HAROLD L. SWANSON, SR.
Harold L. Swanson, Sr., District Director-designate for the Great Falls euston
District, was born in Anaconda, Mont., in 1917 and attended business college in Butt'
Mont.
He entered the Government service as a clerk with the Veterans AdministratiOll
in Washington, D. C. in 1940 and in 1941 transferred to the Customs Service. He
was promoted and transferred to Sweetgrass, Mont. in 1946 as a customs inspector.
Mr. Swanson served as deputy collector at Great Falls for many years. Since 1963
he has been assistant collector in that city, supervising 46 employees.
Mr. and Mrs. Swanson reside at 1501 15th Street South, Great Falls.
have four sons and two daughters.
They
Ports of entry under the Great Falls District are: Del Bonita, Great Falls,
Morgan, Opheim, Piegan, Raymond, Rooseville, Scobey, Sweetgrass, Turner,
Whitetail, Whitlash--all in Montana--and Eastport and Porthill, in Idaho.
** *
END
... :3 -
or other disposition of Treasury bills does not have any special treatment, as
under the Internal Revenue Code of 1954.
The bills are subject to estate,
dtance, girt or other excise taxes, whether Federal or State, but are exempt from
~tlon
now or hereafter imposed on the
D'1ot the possessions
pr~~cipal
or interest thereot by aqy State,
ot the United States, or by any local taxing authority.
For
)lSes ot taxation the amount ot discount at which Treasury bills are originally sold
~e tinlted States is considered to be interest.
~
Under Sections 454 (b) and 1221 (5)
Interaal Revenue Code ot 1954 the amount ot discount at which bills issued here-
t'ire sold is not considered to accrue until such bills are sold, redeemed or other-
disposed ot, and such bills are excluded trom consideration as capital assets.
!'d1ngl.y, the owner
ot Treasury bills (other than lite insurance companies) issued
aDder need include in his income tax return only the difference between the price
tor such bills, whether on orIginal issue or on subsequent purchase, and the amount
Illy' received either upon sale or redemption at maturity during the taxable year
~lch
the return i. made, as ordinary gain or los ••
Treasury Department Circular No. 418 (current revision) and this notice, prescribe
ems of the Treasury bills and govern the conditions of their issue.
ircular may be obtained from any Federal Reserve Bank or Branch.
Copies of
- 2 ~ ~'!
:'! . •• • :" ,. !
lnted forms and forwarded in the special envelopes which will be supplied by Federal
serve Banks or Branches on application therefor.
Banking institutions generally may submit tenders for account of customers proied. the names of the customers are set forth in such tenders.
~titutions
others than banking
will not be permitted to submit tenders except for their own account.
lders will be received without deposit from incorporated banks and trust companies
1 from responsible and recognized dealers in investment securities.
Tenders from
lers must be accompanied by payment of 2 percent of the face amount of Treasury bills
)11ed for, unless the tenders are accompanied by an express guaranty of payment by
incorporated bank or trust company.
Immediately at'ter the closing hour, tenders will be opened at the Federal Reserve
:ks and Branches, following which public anouncement will be made by the Treasury
artment of the amount and price range of accepted bids.
1 be advised of .the acceptance or rejection thereof.
Those submitting tenders
The Secretary of the Treasury
ressly reserves the right to accept or reject any or all tenders, in Whole or in
t, and his action in any such respect shall be final.
Subject to these reserva-
ns, noncompetitive tenders for each issue for $200,000 or less without stated
ce from any one bidder will be accepted in full at the average price (in three
bala) of accepted competitive bids for the respective issues.
Settlement for
!pted tenders in accordance with the bids'must be made or completed at the Federal
!rve Bank on
October 28, 1965
M)
, in cash or other immediately available funds
In a like face amount of Treasury bills maturing
exchange tenders will receive equal treatment.
~erences
October
~1965
•
Cash
Cash adjustments will be made for
between the par value of maturing bills accepted in exchange and the issue
ie of' the new bills.
The 1ncome derived from Treasury bills, whether interest or gain from the sale or
r dispoSition of the bills, does not have any exemption, as such, and
10S8
from the
.. ' I .T"~ ~ :,:",:: ... ~ . .-:-~;'"
..... ';l".,;..·jYtlt..,;t .. t~~~.~ •.;-•.,..
TREASURY DEPARTMENT
October 20, 1965
Washington
R IMMEDIATE RELEASE,
.
~
G@
TREASURY'S WEEKLY BILL OFFERING
The Treasury Department, by this public notice, invites tenders for two series
~asury
bills to the aggregate amount of $ 2,200,000,000 , or thereabouts
(IJO
sh and in exchange for Treasury bills maturing October •
1965
for
, in the amount
$ 2,204,228,000 , as follows:
(Ji
91 -day bills (to maturity date) to be issued October 28, 1965
1Ir
,
~
,
in the amount of $ 1.200tiS0'000 , or thereabouts, representing an additional amount of bills dated
and to mature
January 2~ 1966
(
JuLy 29tJ965
,
, originally issued in the
amount of $ l,000ti86,000 , the additional and original bills
.
()
to be freely interchangeable.
182 -day bills, for $1,000~000,000
, or thereabouts, to be dated
{fi2J
October 28, 1965 , and to mature
April 28, 1966
(Ii)
( D)
--"-"'"---'(~B:=")l""'"'-----
•
The bills of both series will be issued on a discount basis under competitive
noncompetitive bidding as hereinafter provided, and at maturity their face amount
be payable without interest.
They will, be issued in bearer form only, and in
flmlD8tioDs of $1,000, $5,000, $10,000,' $50,000, $100,000, $500,000 and $1,000,000
tur1ty value).
~nders
will be received at Federal Reserve Banks and Branches up to the closing
Daylight Saving
one-thirty p.m., Eastern/~ time, Monday, October 25, 1965
• Tenders
(m
DOt be received at the Treasury Department, Washington.
Each tender must be
in even multiple of $1,000, and in the case of competitive tenders the price
Ired must be exPressed on the basis of 100, with not more than three decimals,
Iii, 99.925.
Fractions may not be used.
It 1s urged that tenders be made on the
TREASURY DEPARTMENT
FOR IMMEDIATE RELEASE
TREASURY'S WEEKLY BILL OFFERING
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 October 28, 1965, in the amount of
$ 2,204,228,000, as follows:
91-day bills (to maturity date) to be issued October 28, 1965,
in the amount of $1,200,000,000, or thel"'eabouts, representing an
and to
additional amount of bills dated July 29,1965,
mature January 27,1966, originally issu~d in the amount of
$1 000 586,000, the additional and original bills to be freely
interchangeable.
182 -day bills, for $ 1,000,000,000, or thereabouts
October 28,1965, and to mature April 28, 1966.
J
to be dated
The bills of both series will be issued on a discount basis under
competitive and noncompetitive bidding as hereinafter pr01/ided, and at
maturity their face amount will be payable without interest. They
will be issued in bearer form only, and in denominations of $1,000,
$5,000, $10,000, $50,000, $100,000, $500,000 and $1,000,000
(maturity value).
Tenders will be received at Federal Reserve Banks and Branches
up to the cloSing hour, one-thirty p.m., Eastern Daylight Saving
time, Monday, October 25, 1965.
Tenders will not be
received at the Treasury De~artment, 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 rece1v~
without deposit from incorporated banks and trust companies and from
responsible and recognized dealers in investment securities. Tende"
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 ba~
or trust company.
F-244
- 2 -
Immediately after the closing hour, tenders will be opened at the
,deral Reserve Banks and Branches, following which public announce!nt will be made by the Treasury Department of the amount and price
.nge of accepted bids. Those submitting tenders will be advi-sed
~ the acceptance or rejection thereof.
The Secretary of the Treasury
pressly reserves the right to accept or reject any or all tenders,
whole or in part, and his action in any such respect shall be
nal. Subject to these reservations, noncompetitive tenders for
ch issue for $200,000 or less without stated price from anyone
dder will be accepted in full at the average price (in three
cimals) of accepted competitive bids for the respective issues.
ttlement for accepted tenders in accordance with the bids must be
de ar completed at the Federal Reserve Bank on October 28, 1965, in
sh or other immediately available funds or in a like face amount
Treasury bills maturing October 28,1965. Cash and exchange tenders
11 receive equal treatment. Cash adjustments will be made for
fferences between the par value of maturing bills accepted in
~hange and the issue price of the new bills.
The income derived from Treasury bills, whether interest or
disposition of the bills, does not have
loss from the sale or other disposition
Treasury bills does not have any special treatment, as such,
ler the Internal Revenue Code of 1954. The bills are subject to
~te, inheritance, gift or other excise taxes, whether Federal or
.te, but are exempt from all taxation now or hereafter imposed on
principal or interest thereof by any State, ·or any of the
sessions of the United States, or by any local taxing authority.
purposes of taxation the amount of discount at which Treasury
18 are originally sold by the United States is considered to be
erest. Under Sections 454 (b) and 1221 (5) of the Internal
enue Code of 1954 the amount of discount at which bills issued
eunder are sold is not considered to accrue until such bills are
d, redeemed or otherwise disposed of, and such bi lIs are exc luded .
n consideration as capital assets. Accordingly, the owner of
~rury bills (other than life insurance companies) issued hereunder
:i include in his income tax return only the difference between
price paid for such bills, whether on original issue or on
3equent purchase, and the amount actually received either ~pon
! or redemption at maturity during the taxable year for wh1ch the
lrn is made, as ordinary gain or loss.
~ from the sale or other
r exemption, as such, and
Treasury Department Circular No. 418 (current revision) and this
.ce prescribe the terms of the Treasury bills and govern the
itions of their issue. Copies of the circular may be obtained from
Federal Reserve Bank or Branch.
000
ll'C
exempt;
'
t
. from aLL taxat:ton now or hereafter :tmposeQ on the princ.'·lpal or j.nucrer:;
,hereof l)y ru1Y sta.te, or any of thc P0:'H3c8310n8 of the Un.t·tcd States, or by any
LoeoJ ta.xJnr; uuLhorlty.
For purponcfJ of tnxnLJol1 t.he amount of' discount at ,.,hich
.'reasul'Y bills nrc or:i.glnnlly sold by the UnHed States 18 considered to be in;erest.
Und.cr Scctions 4,54 (b) and 1221 (~3) of the Internal Revenue Code of 1954
;he amount of discount at ,·,hich bills issued hereunder are sold is not considered
;0
accrue ul1tilsuch bills arc nold, rcQccmcd or otherwise disposed of, and such
,ills
If
0.1'(' e)~cltvlctl
from
conf~i.d('rn.t:i.on
'l'rcnsury b:UJ.s (other LInn li."i'p
~lude
nr; cqll tal a.wet::::.
inGlll'VX1Ce
r~ccordingly,
the mmer
companies) issued hereunder need in-
in hj.G income ta.'{ return only the difference bctvTCen the pr1ce pa1el for such
,ills, ,·,hether on oric;:i.nal
lSf;uc
or on :mbsequcnt purchar.;e, and the amount actually
eceived either upon sale or redemption at maturity durtnG the taxable year for
'11leh the return is mude,
I1S
ordlno.ry cnin or lose.
'l'reo.sury Department Circular Ho. 4:18 (current revision) and this notice, precr:i.bc the "Germs of thc Treasury bills ond govern thc conditions of their issue.
opies of the circular may be obtained. from any Federal ReGeT"le Bank or Branch.
- 2 -
bankInG inoti tutionD wJll not be perml tted to submIt tenders except for their
necount.
Tenders ,rill be received
'vri.
own
tllOut depos:i.t frorn ineorporat~d banks and
trust companies and from responsible and l'ecoGni.zed dealers in investment secur1t1t
Tendcrs from oLhers must be accompanied by payment of 2 percent· of the face am~
of Treasury bills applied for, unless the tenders are aceoriipartied by' an eJtlii'eS"4euaranty of payment by an incorporated ban}\: or trust company.
ImmediaLely after the closing hour, tenders wi,ll. be
open~d
at the Federal Jie..
serve Donks and Branches, follmfine "hid~.lmb1ic apnoupcemont will be made.~.thft
'l'rcasury Department of the omount· and price range of accepted bIds.
r.I.'hose GubJllit.
UTlG tendcrs "Jill be advised of the acceptance or r~jec·Lion tl1.c reof •.. The : ~ec;r~tM
of' the'l'reaoury
c;~resGly
rCGerves the riGht to Q.ccept or reject any or all tendeJ
in ,·,hole or in part, and his action in any ouc.h respect.shall be·tina)_t
.,SU9J~ct
to these reservations, noncompetitive tenders for 4> 200,0000]' l,ess :with~t
~
stated price from any one bidder "rill be accepted in full at tp.e .aveI'8&e . pric~ :(11
three decimals) of acceptedcompeti.tive bidn.
Settlement for accepted. tel,\Q.ers in
accordance ,·Tith the bids must be made or completed at the
~ederal Rtilsery:~:~t.~
__N_o_v_e_m..,b;F;e::r~1.z-.;;;;:1.;:..9€=5__ , in caoh or other. inunediately available fund.s;or in a like
tftJ
face amount of Treasury bills maturinc;
tenders "Till receive equal treatment.
October. 31, ;1.965
~~
~
·Cash
~d e~c~
Cash adjustments: will be m&de for
ences bet,,'een the par value of maturine bills accepte<;l
inexc.hang~
diff~
and .the.ist\ue.
pr:tce of the nc,", bills.
The income derived from TreaGury hills, whether intereot or gain-;fr.oDlHP~"
or other dispo'si tion of' the billp ,does not haveWJY.. exemrrtj"pn". .,{l.,S s:u,ch,· and ~
frOIIl thc sale or other disposition of Treasury billi~.. does :~ot .l:!.ave .any s~~~~~ .!
treatment J as such, under the Internal Revenue Code of 1954. " .The biUs.~r~ SlIb~
to estate J inheritance, gift or other' cxcise.tcyce~,.
;i-Ihet~~r Federal or state. WJ
TRFASUIr.{ DEPARTMENT
Washington
OR ptIMEDIATE RELEASE ~
October 20, 1965
~ REFUNDS
ONE-YEAR Bll.LS
The Treasury Department, by this public notice, invites tenders for
,1,°°&300 ,000
~
, or ,the:reabouts, of
365
-d8¥ Treasury bills, for cash and
~fii9~--
n exchange for Treasury bills maturing __0_c...t;..;o_b_e.;;r..,.;::;.3l~,...;l;;;9;.:;6;;;5~_ _ , in the amount
til
r $ 999l9~000
, to be issued on a discount basis under competitive and
'lncom,petitive bidding as hereinafter provided.
The bills of this series will be
,lted __0;;,;c:;.;t:;.;;o;.;;b;,;;e;.;.r.,3:;:1:;"'-o';1:;;:::9~6;.:::5:.-.___ , and will mature
til
,1e
face amount will be payable without interest.
October 31, 1966
M
, when
They will be issued in bearer
,rm only, and in denominations of $1,000, $5,000, $10,000, $50,000, $100,000,
100,000 and $1,000,000 (maturity value).
Tenders will be received at Federal Reserv~ Banks and Branches up to the
Daylight Saving
.oGing hour, one-thirty p.m., Eastern~ftnl time, Tuesday. October 26, 1965.
iib)
nders will not be received at the Treasury Department, Washington.
Each tender
st be for an even multiple of $1,000, and in the case of competitive tenders the
1c~
offered must be expressed on the basis of 100, with not more than three dec-
~8, e. g., 99.925.
Fractions may not be used.
ete bills will run for
365
(Notwithstanding the fact that
days, the discount rate will be computed on a bank
liJ
~t baGis of 360 d~s, as is current~ the practice on all issues of Treasury
Lls. ) It is urged that tenders be made on the printed forms and forwarded in
~ 8pecj,al envelopes which will be supplied by Federal Reserve Banks or Branches
application therefor.
Banking institutions generallY ~ submit tenders for account of customers
wided the nantes of the cUst-omers are set forth in such tenders.
l_
:)
ei4-
Others than
TREASURY DEPARTMENT
FOR IMMEDIATE RELEASE
TREASURY REFUNDS ONE-YEAR BILLS
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 bills maturing October 31,1965, in
the amount of $999,950,000, to be issued on a discount basis under
competitive and noncompetitive bidding as hereinafter provided. The
bills of this series will be dated October 31, 1965, and will mature
October 31, 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 Bar.ks and Branches UJ
to the closing hour, one-thirty p.m., Eastern Daylight Saving time,
Tuesday, October 26, 1965. Tenders will not be received at the
Treasury Department, Washington. Each tender must be for an ~ven
multiple of $1,000, and in the case of competitive tenders the ~rice
offered must be expressed on the basis of 100, with not more than thrt
decimals, e. g., 99.925. Fractions may not be used. (Notwithstanding
the fact that these bills will run for 365 days, the discount rate •
will be computed on a bank discount basis of 360 days, as is current~
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 accountoc
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 receive(
without deposit from incorporated banks and trust companies and fr~
responsible and recognized dealers in investment securities. Ten~n
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 baM
or trust company.
Immediately after the closing hour, tenders will be opened at t_
Federal Reserve Banks and Branches, following which public announcemd
will be made by the Treasury Department of the amount and price ran,of accepted bids. Those submitting tenders will be advised of-t~
acceptance or rejection thereof. The Secretary of the Treasury
expressly reserves the right to accept or reject any or all tenders,
F-245
- 2 Nhole or in part, and his action in any such respect shall be final.
ject to these reservations, noncompetitive tenders for $200,000 or
s without stated price from anyone bidder will be accepted in full
the average price (in three decimals) of accepted competitive bids.
tlement for accepted tenders in accordance with the bids must be
~ or completed at the Federal Reserve Bank on November 1, 1965, in
1 or other immediately available funds or in a like face amount of
lsury bills maturing October 31, 1965. Cash and exchange tenders
l receive equal treatment. Cash adjus tments will be made for
Eerences between the par value of maturing bills accepted in
lange and the issue price of the new bills.
The income derived from Treasury bills, whether interest or gain
1 the sale or other disposition of the bills, does not have any
~tion, as such, and loss from the sale or other disposition of
lsury bills does not have any special treatment, as such, under the
!rnal Revenue Code of 1954. The bills are subject to estate,
!ritance, gift or other excise taxes, whether Federal or State, but
exempt from ~ taxation now or hereafter imposed on the principal
.nterest thereof by any State, or any of the possessions of the
:ed States, or by any local taxing authority. For purposes of
.tion the amount of discount at which Treasury bills are originally
by the United States is considered to be interest. Under
ions 454 (b) and 1221 (5) of the Internal Revenue Code of 1954
amount of discount at which bills issued hereunder are sold is not
idered to accrue until such bills are sold, redeemed or otherwise
osed of, and such bills are excluded from consideration as capital
ts. Accordingly, the owner of Treasury bills (other than life
rance companies) issued hereunder need include in his income tax
rn only the difference between the price paid for such bills,
her on original issue or on subsequent purchase, and the amount
ally received either upon sale or redemption at maturity during
taxable year for which the return is made, as ordinary gain or
Treasury Department Circular No. 418 (current revision) and this
!e, prescribe the terms of the Treasury bills and govern the
ltions of their issue. Copies of the circdar may be obtained
any Federal Reserve Bank or Branch.
000
TREASURY DEPARTMENT
(
October 22, 1965
FOR IMMEDIATE REIEASE
TREASURY DECISION ON FERROCHROMIUM
UNDER THE ANTIDUMPING ACT
The Treasury Department has completed its investigation with
respect to the possible dumping of ferrochromium, not containing over
3 percent by weight of carbon, from Norway.
A notice of a tentative
determination that this merchandise is not being, nor
sold at less than fair value will be published in an
like~
ear~
to be,
issue of
the Federal Register.
Appraisement of the above-described merchandise from Norway has
not been withheld.
The information alleging that the merchandise under conSideration
was being sold at less than fair value within the meaning of the Antidumping Act was received in proper form on June 29, 1964.
The com-
plaint was submitted by Vanadium Corporation of America, New York,
New York.
Imports of the involved merchandise received during the period
June 1964 through July 1965 amounted to approximate~ $85 0 ,000.
TREASURY DEPARTMENT
October 22, 1965
FOR IMMEDIATE REIEASE
TREASURY DECISION ON FERROCBROMIUM
UNDER THE ANTIDUMPING ACT
The Treasury Department has completed its investigation with
respect to the possible dumping of ferrochrom1um, not containing over
3 percent by weight of carbon, from Norway.
A notice of a tentative
determination that this merchandise is not being, nor like1¥ to be,
sold at less than fair value will be published in an
ear~
issue of
the Federal Register.
Appraisement of the above-described merchandise from Norway has
not been withheld.
The information alleging that the merchandise under consideration
was being sold at less than fair value within the meaning of the Antidumping Act was received in proper form on June 29, 1964.
The com-
plaint was submitted by Vanadium Corporation of America, New York,
New York.
Imports of the involved merchandise received during the period
June 1964 through Ju1¥ 1965 amounted to approximate1¥ $850,000.
TREASURY DEPARTMENT
~LEASE A.M.
lY. October
NEWSPAPERS,
WASHINGTON. D.C.
26. 1965.
October 25, 1965
RESULTS OF TREASURY'S WEEKLY BILL OFFERING
rhe Treasury Department announced last evening that the tenders for two series of
Jry bills, one series to be an additional issue of the bills dated July 29, 1965,
~e other series to be dated October 28, 1965, which were offered on October 20 ,
,)pened at the Federal Reserve Banks on October 25. Tenders were invited for
~,OOO,OOO, or thereabouts, of 91-day bills and for $1,000,000,000, or thereabouts,
~.day bills.
The details of the two series are as follows:
OF ACCEPTED
91-day Treasury bills
l82-day Treasury bills
,'ITIVE BIDS:
maturing Janyary,27, ~1966
maturing April 28. 1966
Approx. Equiv.
Approx. Equiv.
Price
Price
Annual Rate
Annual Rate
,gh
98.983 al
4.023%
97.885
4.184%
.IW
98.976
4.051%
97.879
4.l95~
'erage
98.979
4.040% 11
97.881
4.192% 11
:cepting one tender of $150,000
,rcent of the amount of 91-day bills bid for at the low price was accepted
:rcent of the amount of 182-day bills bid for at the low price was accepted
TENDERS APPLIED FOR AND ACCEPTED BY FEDERAL RESERVE DISTRICTS:
:rict
AEElied For
AcceEted
Accel2ted
AEElied For
·on
3,623,000
38,037,000
27,967,000
44,119,000 $
$
$
$
York
635,774,000
1,273,850,000
701,650,000
1,555,228,000
-adelphia
4,108,000
16,471,000
28,471,000
12,208,000
eland
39,599,000
32,584,000
30,584,000
84,123,000
mond
6,064,000
15,120,000
14,044,000
18,620,000
nta
12,826,000
27,497,000
27,310,000
35,937,000
ago
130,583,000
169,380,000
335,536,000
295,280,000
"Louis
15,586,000
40,713,000
33,774,000
48,713,000
eapolis
8,489,000
12,029,000
17,786,000
17,786,000
16 City
11,018,000
15,578,000
35,492,000
35,892,000
18
7,637,000
11,617,000
16,519,000
24,919,000
Francisco
0
96
125
000
542
199
°°0
116 286°2
2
1887 2 °°0
2
10°2 °2°°
TOTALS
$1,200,139,000 ~I $2,345,108,000 $1,001,194,000 £1
$1,966,949,000
:ludes $243,347,000 noncompetitive tenders accepted at the average price of 98.979
:ludes $118,689,000 noncompetitive tenders accepted at the average price of 97.881
a coupon issue of the same length and for the same amount invested,.the return on
lse bills would provi1:Ie yields of 4.14%, for the 91-day bills, and 4.34%, for the
:-day bills. Interes't rates on bills are quoted in terms of bank discount with
.! return related to the face amount of the bills payable at maturity rather than
I amount invested and their length in actual number of days related to a 360-day
:r. In contrast, yields on certificates, notes, and bonds are computed in terms
'interest on the amount invested, and relate the number of days remaining in an
erest payment period to the actual number of days in the period, with semiannual
pounding if more than one coupon period is involved.\
TREASURY DEPARTMENT
FOR RELEASE A.M. NEWSPAPERS,
Tuesday. October 26, 1965.
RESULTS OF TREASURY'S
The Treasury Department announced last evening that the tenders for two series oj
Treasury bills, one series to be an additional issue of the bills dated July 29,
and the other series to be dated October 28, 1965, which were offered on October 20.
were opened at the Federal Reserve Banks on October 25. Tenders were invited for
$1,200,000,000, or thereabouts, of 9l-day bills and for $1,000,000,000, or thereaoou
of 182-day bills. The details of the two series are as follows:
nu
RANGE OF ACCEPTED
COMPETITIVE BIDS:
High
Low
Average
91-day Treasury bills
maturing J_a_n~ary 27, 1.9.66
Approx. Equi v •
Annual Rate
Price
4.023%
98.983 a/
4.051%
98.976
4.040% 11
98.979
182-day Treasury bills
maturing April 28. 1966
Approx. Eq;;t:
Price
Annual Rate
97.885
4.1841."'"'1
97.879
4.195'4
97.881
4.1921.1/
a/ Excepting one tender of $150,000
60 percent of the amount of 9l-day bills bid for at the low price was accepted
2 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:
AcceEted
AEElied For
AcceEted
District
AEElied For
38,037,000
27,967,000
Boston
44,119,000 $
3,623,01
$
$
$
New York
1,273,850,000
701,650,000
1,555,228,000
635,774.00
Philadelphia
28,471 ,000
16,471 ,000
12,208,000
4'lO8'~
Cleveland
32,584,000
30,584,000
84,123,000
39,599.
Richmond
18,620,000
15,120,000
6,064,
14,044,000
Atlanta
35,937,000
27,497,000
12,826,ot
27,310,000
Chicago
295,280,000
169,380,000
130,583,~
335,536,000
st. Louis
48,713,000
40,713,000
15,586,00
33,774,000
Minneapolis
17,786,000
17,786,000
12,029,000
Kansas City
35,892,000
35,492,000
11 ,018, .
15,578,000
Dallas
24,919,000
7,637,
16,519,000
11,617,000
San Francisco
96
0
125.887.011
116 186°2 000
199 1 542 1 °°0
1°°1 °2°°
TOTALS
$1,966,949,000
$1,200,139,000 bl $2,345,108,000 $1,001,194,00
bl Includes $243,347,000 noncompetitive tenders accepted at the average price of 9j
cl Includes $118,689,000 noncompetitive tenders accepted at the average price of 91
11 On a coupon issue of the Same length and for the same amount invested, the retuD
these bills would provide Yields of 4.14%, for the 9l-day bills, and 4.341., forJ
182-day bills. Interest rates on bills are quoted in terms of bank discount ri
the return related to the face amount of the bills payable at maturity rather d
the amount invested and their length in actual number of days related to a 360-4
year. In contrast, yields on certificates, notes, and bonds are computed in t_.
of interest on the amount invested, and relate the number of days remaining io.
interest payment period to the actual number of days in the period, with s~~
compounding if more than one coupon period is involved.
8,489,;
F-2u6
TREASURY DEPARTMENT
WASHINGTON, D.C.
A. M. NEWSPAPERS,
October 27, 1965.
~LEASE
~sday,
October 26, 1965
RESULTS OF REFUNDING OF $1 BILLION OF ONE-YEAR BILLS
,The Treasury Department announced last evening that the tenders for $1,000,000,000,
'Ierea.bouts, of 365-day Treasury bills to be dated October 31, 1965, and to mature
')er 31, 1966, which were offered on October 20, were opened at the Federal Reserve
I on October 26.
The details of this issue are as follows:
Total applied for Total accepted
$2,304,508,000
1,000,141,000
Range of accepted competitive bids:
High
Low
Average
(includes $49,209,000 entered on a
noncompetitive basis and accepted in
full at the average price shown below)
(Excepting one tender of $700,000)
- 95.758 EqUivalent rate of discount approx. 4.184% per annum
It
4.197% II
- 95.745
"
" 1/
" "
"
4.192% II
- 95.750
"
"
" "
"
"
(59 percent of the amount bid for at the low price was accepted)
Federal Reserve
District
Boston
'New York
:Philade1phia
~Cleve1and
:Richmond
"Atlanta
-Chicago
',St. Louis
'Minneapolis
'Kansas Ci ty
'Dallas
:San FranCisco
TOTAL
Total
Applied for
$
48,839,000
1,656,361,000
12,818,000
51,830,000
17,902,000
23,784,000
314,420,000
17,463,000
11,924,000
10,899,000
22,046,000
116,222,000
$2,304,508,000
Total
Accepted
27,739,000
$
709,496,000
2,818,000
45,830,000
11,672,000
8,725,000
124,330,000
6,422,000
9,424,000
5,899,000
7,046,000
40,740,000
$1,000,141,000
a coupon issue of the same length and for the same amount invested, the return on
ese bills would provide a yield of 4.39%. Interest rates on bills are quoted in
rms of bank discount with the return related to the face amount of the bills payIe at maturity rather than the amount invested and their length in actual number
days related to a 360-day year. In contrast, yields on certificates, notes, and
nds a.re computed in terms of interest on the amount invested, and relate the number
. days remaining in an interest paymen~ period to the actual number of days in the
riod, with semiannual compounding if more than one coupon period is involved.
.~'
7)
TREASURY DEPARTMENT
tOR RELEASE A. M. NEWSPAPERS,
Wednesday, October 27, 1965.
October 26, 1965
RESULTS OF REFUNDING OF $1 BILLION OF ONE-YEAR BILLS
The Treasury Department announced last evening that the tenders for $1,000,000,~
or thereabouts, of 365-day Treasury bills to be dated October 31, 1965, and to mature
October 31, 1966, which were offered on October 20, were opened at the Federal Resent
Banks on October 26.
The details of this issue are as follows:
Total applied for Total accepted
$2,304,508,000
1,000,141,000
Range of accepted competitive bids:
High
Low
Average
(includes $49,209,000 entered on a
noncompetitive basis and accepted in
full at the average price shown below)
(Excepting one tender of $700,000)
- 95.758 Equivalent rate of discount approx. 4.184% per annll
- 95.745
II
4.197% "
It
- 95.750
II
4.1927. "
.
..
.. ..
.. ..
..
..
..
( 59 percent of the amount bid for at the low price was accepted)
Federal Reserve
District
Boston
New York
Philadelphia
Cleveland
Richmond
Atlanta
Chicago
St. Louis
Minneapolis
Kansas City
Dallas
San Francisco
TOTAL
Total
Applied for
$
48,839,000
1,656,361,000
12,818,000
51,830,000
17,902,000
23,784,000
314,420,000
17,463,000
11,924,000
10,899,000
22,046,000
116,222,000
$2,304,508,000
Total
Accepted
$
27,739,000
709,496,000
2,818,000
45,830,000
11,672,000
8,725,000
124,330,000
6,422,000
9,424,000
5,899,000
7,046,000
40,740,000
$1,000,141,000
liOn a coupon issue of the same length and for the same amount invested, the retu~
these bills would provide a yield of 4.39%. Interest rates on bills are quoted!
terms of bank discount with the return related to the face amount of the bills ~
able at maturity rather than the amount invested and their length in actual n~~
of days related to a 360-day year. In contrast, yields on certificates, notes,.
bonds are computed in terms of interest on the amount invested, and relate the ~
of days remaining in an interest payment period to the actual number of days iDI
period, with semiannual compounding if more than one coupon period is involv~.
F-2u7
.. :3 -
"
.. "
',,:
" or other disposition of Treasury bills does not have any special treatment, as
I, under the
Internal Revenue Code of 1954.
The bills are subject to estate,
dtance, gift or other excise taxes, whether Federal or State, but are exempt from
~tion
now or hereafter imposed on the
pr~ncipal
or interest thereot by aQy State,
D'1 of the possessions ot the United States, or by any local taxing authority.
For
Hes of taxation the amount ot discount at which Treasury bills are originally Bold
~e United states is considered to be interest.
~
Under Sections 454 (b) and 1221 (5)
Internal Revenue Code ot 1954 the amount of discount at which ,bills issued here-
r ire sold is not considered to accrue until such bills are sold, redeemed or otherdisposed ot, and such bills are excluded tram consideration as capital assets.
t"d1ngJ.y, the owner
ot Treasury
~il1s
(other than lite insurance companies) issued
mder need include in his income tax return only the difference between the price
tor such bills, whether on original issue or on subsequent purchase, and the amount
lui
received either upon sale or redemption at maturity during the taxable year
rhlch the return i8 made,
8S
ordinary gain or 10s8.
Treasury Department Circular No. 418 (current revision) and this notice, prescribe
;ems of the Treasury bills and govern the conditions of their issue.
1rcular may be obtained from any Federal Reserve Bank or Branch.
Copies of
- 2 -
1nted fonns and forwarded in the special envelopes which will be supplied by Federal
!serv'e Banks or Branches on application therefor.
Banking institutions generally may submit tenders for account of customers proded the names of the customers are set forth in such tenders.
others than banking
st1tut10ns will not be per.mitted to submit tenders except for their own account.
~ders
will be received without deposit from incorporated banks and trust companies
d trom responsible and recognized dealers 1n investment securities.
Tenders fram
tiers must be accompanied by payment of 2 percent of the face amount of Treasury bills
plied for, unless the tenders are accompanied by an express guaranty of payment by
incorporated bank or trust company.
Immediately at'ter the closing hour, tenders will be opened at the Federal Reserve
Iks and Branches, following which public anouncement will be made by the Treasury
~rtment
~
of the amount and price range of accepted bids.
be advised of the acceptance or rejection thereof.
ThOBe submitting tenders
The Secretary of the Treasury
lressly reserves the right to accept or reject any or all tenders, in whole or in
t, and his action in any such respect shall be final.
Subject to these reserva-
ns, noncompetitive tenders for each issue for $200,000 or less without stated
•
ce from any one bidder will be accepted in full at the average price (in three
hBls) of accepted competitive bids for the respective issues.
Settlement for
epted tenders in accordance with the bids'must be made or completed at the Federal
~rve
Bank on November W65
, in cash or other immediately available funds
Ln a like face amount of Treasury bills maturing
exchange tenders will receive equal treatment.
November 4, 1965
~
•
Cash
Cash adjustments will be made for
~erences between the par value of maturing bills accepted in exchange and the issue
Ie of the new bills.
!lb.e income derived from Treasury bills, whether interest or gain from the sale or
:r diSPOsition of the bills, does not have any exemption, as such, and loss from the
TREASURY DEPARTMENT
Washington
R IMMEDIATE RELEASE,
TREASURY'S WEEKLY BILL OFFERING
October 27, 1965
•
~"BaBBBB~Bee~
noncompetitive bidding as hereinafter provided, and at maturity their face amount
1 be payable without interest.
They will,be issued in bearer
fOnD
only, and in
:,1ID1nations ot $1,000, $5,000, $10,000,' $50, 000, $100, 000, $500,000 and $1,000, 000
turity value).
Tenders will be received at Federal Reserve Banks and Branches up to the closing
" one-thirty p.m., Eastern Standard time,
Monday, NOVXfi§xl. 1965
, not be received at the Treasury Department, Washington.
an even
'red must
•
Tenders
Each tender must be
multiple of $1,000, and in the case of competitive tenders the price
be exPressed on the basis of 100, with not more than three decimals,
,_, 99.925.
Fractions may not be used.
It 1s urged that tenders be made on the
TREASURY DEPARTMENT
October 27, 1965
FOR IMMEDIATE RELEASE
TREASURY'S WEEKLY BILL OFFERING
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 November 4,1965,
in the amount of
$2,201,813,000, as follows:
91-day bills (to maturity date) to be issued
in the amount of $ 1,200,000,000, or thereabouts,
additional amount of bills dated August 5,1965,
mature February 3,1966, originally issued in the
$1,000,955,000,the additional and original bills
interchangeable.
November 4,1965,
representing an
and to
amount of
to be freely
182-day bills, for $ 1,000,000,000, or thereabouts, to be dated
November 4,1965, and to mature May 5,1966.
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, Monday, November 1, 1965.
Tenders will not be
received at the Treasury De:partment, 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 rece1v~
without deposit from incorporated banks and trust companies and from
responsible and recognized dealers in investment securities. Tender8
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 ba~
or trust company.
F-248
- 2 -
Immediately after the closing hour, tenders will be opened at the
deral Reserve Banks and Branches, following which public announcent will be made by the Treasury Department of the amount and price
nge of accepted bids. Those submitting tenders will be advised
the acceptance or rejection thereof. The Secretary of the Treasury
pressly reserves the right to accept or reject any or all tenders,
·whole or in part, and his action in any such respect shall be
la1. Subject to these reservations, noncompetitive tenders for
:h issue for $200,000 or less without stated price from anyone
Jder will be accepted in full at the average price (in three
:imals) of accepted competitive bids for the respective issues.
ttlement for accepted tenders in accordance with the bids must be
je or completed at the Federal Reserve Bank on November 4, 1965, in
sh or other immediately available funds or in a like face amount
Cash and exchange tenders
Treasury bills maturing November 4,1965.
II receive equal treatment. Cash adjustments will be made for
Eferences between the par value of maturing bills accepted in
:hange and the issue price of the new bills.
The income derived from Treasury bills, whether interest or
In from the sale or other disposition of the bills, does not have
, exemption, as such, and loss from the sale or other disposition
Treasury bills does not have any spec ia 1 treatment, as such,
ler the Internal Revenue Code of 1954. The bills are subject to
~te, inheritance, gift or other excise taxes, whether Federal or
lte, but are exempt from all taxation now or hereafter imposed on
! principal or interest thereof by any State, or any of the
Isessions of the United States, or by any local taxing authority.
: purposes of taxation the amount of discount at which Treasury
.. 1s are originally sold by the United States is considered to be
~rest.
Under Sections 454 (b) and 1221 (5) of the Internal
'enue Code of 1954 the amount of discount at which bills issued
'eunder are sold is not considered to accrue until such bills are
.d, redeemed or otherwise disposed of, and such bi lIs are exc luded ,
1m consideration as capital assets. Accordingly, the owner of
!asury bills (other than life insurance companies) issued hereunder
!d include in his income tax return only the difference between
! price paid for such bills, whether on original issue or on
Isequent purchase, and the amount actually received either ~pon
.e or redemption at maturity during the taxable year for wh~ch the
urn is made, as ordinary gain or loss.
Treasury Department Circular No. 418 (current revision) and this
ice prescribe the terms of the Treasury bills and govern the
ditions of their issue. Copies of the circular may be obtained from
Federal Reserve Bank or Branch.
000
- zBIOGRAPHICAL SKETCHES
~
Ro CREED, 55, Regional
. Commissioner-designate , has
leen for a number of years Ass~stant Collector and Acting Collector
1£ Customs in Los Ange1eso He was born at Bellmore, New York
lnd studied business administration at New York University
in
.927 he joined the Customs Service at New York City and has risen
hrough the ranks
He served in a number of responsible positions
,he last of which was special assistant to the Collector in the
'ort of New Yorko
0
0
In addition, Mr. Creed conducted a number of special studies
£ work methods and Customs procedures in Los Angeles and other
reas in various parts of the UoS o This led to an assignment to
he government of Ecuador for several months in 1963, to help
eve10p its Customs operations under the United States AID program.
Mr. and Mrs. Creed reside at 4519 Los Feliz B1vd o, Los Angeles.
*m"
RAY M. OSBORN, Assistant Regional Commissioner-designate
is the Customs Appraiser in San Francisco. He was
)pointed to that post in 1956.
~erations),
Mro Osborn was born in Alabama in 1914 and educated at the
!w Mexico State Teachers College where he received a B.S. degree in
1410 He began his Customs career as an examiner in Laredo, Texas,
t 1944 and later was transferred to San Francisco.
He served as a
.aison officer at the Bureau of Customs in Washington, D.C. and
.ter spent a year in Mexico City as a Treasury Representative.
Mr. and Mrs. Osborn reside at 26 Mohawk Ave., Corte Madera,
lifornia.
ROGER Ao MORIN, Assistant Regional Commissioner=desig~ate
~dministration) started his career in Customs as a clerk ~n
}37, transferring a year later. to the Office of Collector of
lstoms in Boston Masso Since 1948 he has served as head of
Ie Accounting Sy;tems Unit and later as Acting Assistant Deputy
Immissioner (Fiscal) at the Bureau of Customs in Washington, DoCo
Mro Morin was born in Nashua, New Hampshire, October, 1~15o .
received a degree in Business Administration at Boston Un~vers~ty
l 1948, majoring in accounting.
He was an Air Force officer
lring World War II.
!
Mr. and Mrs. Morin reside at 5516 Dawes Ave., Alexandria, Va.,
d they have a daughter, age 14 ..
000
TREASURY DEPARTMENT
(
October 27, 1965
~OR
RELEASE A.M. NEWSPAPERS
nillRSDAY, OCTOBER 28, 1965
CUSTOMS REGIONAL COMMISSIONERS
APPOINTED FOR LOS ANGELES
The selection of Frank R. Creed as Regional Commissioner
:)f Customs in Los Angeles and Ray M. Osborn and Roger A. Morin
lS Assistant Regional Commissioners was announced today by
lssistant Secretary of the Treasury True Davis.
The selections were made in accordance with Civil Service
~egulations from a large number of qualified candidates.
The regional appointments will become effective January 1, 1966
md are the second to be made under the Reorganization Plan for
:;he Bureau of Customs which was announced last March by President
::ohnson. The Los Angeles region comprises three Customs districts
!ith headquarters at Nogales, Ariz., San Diego, and Los Angeles.
Office space for the regional headquarters in Los Angeles
is been tentatively secured by the Bureau of Customs on the third
loor of the Federal Building at 300 N. Los Angeles St.
Biographical sketches are attached.
F-249
-(
"-
TREASURY DEPARTMENT
../.
\.'
October 27, 1965
FOR RELEASE AoM. NEWSPAPERS
THURSDAY, OCTOBER 28, 1965
CUSTOMS REGIONAL COMMISSIONERS
APPOINTED FOR LOS ANGELES
The selection of Frank Ro Creed as Regional Commissioner
of Customs in Los Angeles and Ray M. Osborn and Roger Ao Morin
as Assistant Regional Commissioners was announced today by
Assistant Secretary of the Treasury True Daviso
The selections were made in accordance with Civil Service
regulations from a large number of qualified candidateso
The regional appointments will become effective January 1, 1966
and are the second to be made under the Reorganization Plan for
the Bureau of Customs which was announced last March by President
Johnsono The Los Angeles region comprises three Customs districts
with headquarters at Nogales, Arizo, San Diego, and Los Angeles o
Office space for the regional headquarters in Los Angeles
has been tentatively secured by the Bureau of Customs on the third
floor of the Federal Building at 300 No Los Angeles Sto
Biographical sketches are attached.
F-249
- 2 BIOGRAPHICAL SKETCHES
FRANK R. CREED, 55, Regional Commissioner-designate, has
been for a number of years Assistant Collector and Acting Collector
of Customs in Los Ange1eso He was born at Bellmore, New York
and studied business administration at New York University~ in
1927 he joined the Customs Service at New York City and has risen
through the ranks o He served in a number of responsible positions
the last of which was special assistant to the Collector in the
Port of New Yorko
In addition, Mr. Creed conducted a number of special studies
.0£ work methods and Customs procedures in Los Angeles and other
areas in various parts of the UoS o This led to an assignment to
the government of Ecuador for several months in 1963, to help
develop its Customs operations under the United States AID program o
Mro and Mrso Creed reside at 4519 Los Feliz Blvdo, Los Angeleso
RAY Mo OSBORN, Assistant Regional Commissioner-designate
(Operations), is the Customs Appraiser in San Franciscoo He was
appointed to that post in 1956 0
Mr. Osborn was born in Alabama in 1914 and educated at the
_New Mexico State Teachers College where he received a BoS. degree in
1941 He began his Customs career as an examiner in Laredo, Texas,
in 1944 and later was transferred to San Franciscoo He served as a
liaison officer at the Bureau of Customs in Washington, DoCo and
'later spent a year in Mexico City as a Treasury Representative.
0
;~a1 i
Mro and Mrso Osborn reside at 26 Mohawk Ave., Corte Madera,
fornia
0
ROGER Ao MORIN, Assistant Regional Commissioner~designate
~Administration) started his career in Customs as a clerk in
1937, transferring a year later to the Office of Collector of
Customs in Boston, Masso Since 1948 he has served as head of
the Accounting Systems Unit and later as Acting.Assist~nt Deputy
Commissioner (Fiscal) at the Bureau of Customs ~n Wash~ngton, DoCo
Mr o Morin was born in Nashua , New Hampshire, October, 19150
•
Re received a degree in Business
•
Administrati~n at Boston.Un~vers~ty
in 1948, majoring in accounting o He was an A~r Force off~cer
during World War II.
Mro and Mrso Morin reside at 5516 Dawes Ave., Alexandria, Va.,
ind they have a daughter, age 140
000
TREASURY DEPARTMENT
?O~
October 27,
iH!:EDIATE JZL2ASE
~9G5
HIGHLIGIITS OF NOw,nBS REFINANr, ING
The Treasur:y today released the tC:JTIS for refinancinG
of notes that will mature on November 15.
form
o~~ 3. cas~\
offe::'ine; of a ne·....
approxi;natel~r 4.37%.
8er1ailCin~
year are
Tnis financiD.[j vill ta':e the
4-1/4 percent note in the
Boo:{s 1-Till lee open for subscriptions only
::-cq,ui rer.1ents for nev cash for the balance of this
nO\·; estir~ated
billion
Tr.le lCew note wHl be priced at 99.:3 to ,';,ield
billion.
a:r.cunt of
l:=-mont~,
~jJ3. 7
at
~Z.O -
this cast: vill 'oe provided by an
2.5 'oillior...
iSS 1)e
0;'"'.
cale~dar
it is antidIJated. t11at
of Ju..'1e Tax AnticiIJatj,oll Ji lls in
late ?Jove:::te::.
T:,e ':'reasG::'y also announced ;niniJ:1tL'Il allotment provisj.ons have been
:nade to
:·2.~ilitate
investol'S, ·.hic;l
issGes.
tr.e ::einvest:nent of t:ie GoldinGs of smaller be.nks and
accOU~lt
for a relatively large percentage of tl':e r.laturint;
1:1e provisions are set out in
description of telCDs.
000
F-250
~nore
detail in the accoT;:panyinij
TREASURY DEPARTMENT
FOR DftviEDIATE IlliLEA.SZ
October 27, 1965
TREASURY ANNOUNCES NOVEMBER REFINANCING TERMS
The Treasury will borrow $9.7 billion, or thereabouts, through the issuance
of 18-month 4-1/410 Treasury notes, at a price of 99.83 (to yield about 4.37~),
for the purpose of payin8 off in cash a like amount of the following Treasury
notes maturing Novenber 15, 1965:
$1,617 million of 3-1/2% notes of Series B-1965, dated November 15,
1962; and
$8,099 million of 4~ notes of Series E-1965, dated !fi.ay 15, 1964.
The ne,.,- notes will be dated November 15, 1965, and will mature May 15, 196,
Interest will be payable semiannually on May 15 and November 15, 1966, and on
r.1ay 15, 1967.
The notes will be made available in registered as well as bearer form. AD
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.
Payment and delivery dat.e l'or "tne notes will be November 15. Paymem may
be made in cash, or in 3-1/2% notes of Series B-1965 or 4~ notes of Series
E-1965, which will be accepted at par, i~ payment or exchanbe, in whole or in
part, for the notes subscribed for, to the extent such subscriptions are aHott
by the Treasury. The new issue may not be paid for by credit in Treasury Tax
and Loan Accounts.
---The subscription books will be open only on Monday I November 1. Any subscriptions witn the required deposits addressed to a Federal Reserve Bank or
Branch, or to the Treasurer of the United States, and placed in the mail befOrE
midnight November 1, 1955, will be considered timely.
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 from commercial and other banks for their own account, Federally-insured savings and loan associations, States, political subdivisions 0
instrumentalities thereof, public pension and retirement and other public ~d
international organizations in which the United States holds membership, fo~i
central banks and foreign States, dealers who make primary markets in Gove~
securities and report daily to the Federal Reserve Bank of New York their posl
tions with respect to Government securities and borrowings thereon, Govenme~
Investment Accounts, and the Federal Reserve Banks will be received without
deposit.
- 2 -
Subscriptions from all others must be accompanied by the payment of deposits
(in cash, or Treasury Notes of Series B-1965 or Series E-1965, maturing November
15, 1965, at par), not subject to withdrawal until after allotment, as follows:
(1) 10% for subscriptions in an amount of $200,000 or less, or
(2) 2% for subscriptions in an amount in excess of $200,000 with a
minimum deposit of $20,000.
The Secretary of the Treasury reserves the ri&~t to reject or reduce any
subscription, to allot less than the amount of notes applied for, and to make different percentage allotments to various classes of subscribers; and any action he
may take in these respects shall be final. Subject to these reservations subscriptions will be allotted:
1.
in full
(a)
(b)
2.
for amounts up to and including $200,000, and
for States, political subdivisions or instrumentalities thereof,
public pension and retirement and other public funds, international organizations in which the United States holds membership, foreign central banks and foreign States, Government
Investment Accounts, and the Federal Reserve Banks, if a statement is submitted certifying that the amount of the subscription
does not exceed the 8.l!lount of the tvTO maturing securities owned
or contracted for purchase for value by the subscriber, at
4 p.m., Eastern Daylight Saving time, October 27, 1965; or
on a percentage basis, to be publicly announced, i f they (otler than
those covered in item 1 above) are over $200,000, but such allotment
will not be less than $200,000.
Allotment notices will be sent out promptly upon allotment.
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
of the new 4-1/4% notes at a specific rate or price until after midnight November 1, 1965.
Commercial banks in submitting subscriptions will be required to certify .
that they have no beneficial interest in any of the subscriptions they enter for
the account of their customers, and that their customers have no beneficial interest in the banks' subscriptions for their own account.
- 4 counter or through the mail, for $3.00.
The price includes
shipping costs.
Medals have been made for each Secretary of the Treasury
.
since 1897, with the exception of D. F. Houston, who
served a brief term in 1920-1921.
000
- 3 -
the place and date of his birth.
Other parts of the reverse design note Mr. Fowler's
service with the Tennessee Valley Authority, 1934-1939;
the Department of Justice 1939-1941; the Federal Power
Commission, 1940-41; Office of Production Management, War
Production Board and Foreign Economic Administration 1941-1945;
the Department of Commerce, where
Mr. Fowler was Administrator
of the National Production Authority in 1952; Defense Production
Administration and Office of Defense Mobilization, both of
which he headed in 1952-1953, and the National Security
Council, 1952-1953.
The reverse of the medal is the work of Edgar Z. Steever
of the Engraving Department of the Philadelphia Mint.
The medal may be purchased from the Superintendent,
United States Mint, Philadelphia, Pennsylvania, over the
- 2 in the Federal government, where half of Mr. Fowler's career
to date has been spent.
While not in government, he practised
law in Washington, D.C. in the years 1933 and 1934, 1946 to
1951, and 1953 to 1961.
In the center of the reverse side of the medal is the
seal of the Treasury, surrounded by the inscription,
"Henry H. Fowler, Secretary of the Treasury, April 1, 1965,"
the date he took office.
Around the border, clockwise from the top, are governmental
seals and inscriptions noting earlier periods of public
service.
At the top is the Great Seal of the United States,
followed by the inscription, "Und. Secretary of Treasury
1961-1964."
Next, clockwise, is the seal of the Secretary's
native state, Virginia, where Mr. Fowler attended school and
college, with the inscription "Roanoke, Va., Sept. 5th 1908,"
~ry)
October
FOWLER MEDAL ADDED TO MINT SERIES
~
1965
'"
The Bureau of the Mint today placed on sale a portrait
medal of Secretary of the Treasury Henry H. Fowler.
The medal is the latest in a series honoring Presidents,
other public officials, heroes and outstanding citizens, and
recording events of national historic significance, that have
been issued by the Mint since 1860.
The medal is of Mint
bronze, three inches in diameter.
The obverse, or front, of the Fowler medal shows a front
view portrait of the Secretary executed by Frank Gasparro,
Chief Sculptor of the Mint.
"Henry H. Fowler" is inscribed
above the portrait and around the border.
The reverse, or back, notes the Treasury Secretary's place
and date of birth and traces the main events of his service
TREASURY DEPARTMENT
October 28, 1965
FOR IMMEDIATE RELEASE
FOWLER MEDAL ADDED TO MINT SERIES
The Bureau of the Mint today placed on sale a portrait
medal of Secretary of the Treasury Henry H. Fowler.
The medal is the latest in a series honoring Presidents,
other public officials, heroes and outstanding citizens, and
recording events of national historic significance, that have
been issued by the Mint since 1860. The medal is of Mint
bronze, three inches in diameter.
The obverse, or front, of the Fowler medal shows a front
view portrait of the Secretary executed by Frank Gasparro,
Chie f Sculptor of the Mint. flHenry H. Fowler" is inscribed
above the portrait and around the border.
The reverse, or back, notes the Treasury Secretary's place
and date of birth and traces the main events of his service
in the Federal government, where half of Mr. Fowler's career to
date has been spent. While not in government, he practised law
in Washington, D. C. in the years 1933 and 1934, 1946 to 1951,
and 1953 to 1961.
In the center of the reverse s ide of the medal is the seal
of the Treasury, surrounded by the inscription, "Henry H.
Fowler, Secretary of the Treasury, April 1,1965," the date he
took office.
Around the border, clockwise from the top, are governmental
seals and inscriptions noting earlier periods of public service.
At the top is the Great Seal of the United States, followed by
the inscription, "Und. Secretary of Treasury 1961-1964."
Next, clockwise, is the seal of the Secretary's native state,
Virginia, where Mr. Fowler attended school and college, with
the inscription "Roanoke, Va., Sept. 5th 1908," the place
and date of his birth.
F-252
- 2 -
Other parts of the reverse design note Mr. Fowler's setvtce
with the Tennessee Valley Authority, 1934-1939; the Department
of Justice 1939-1941; the Federal Power Commission, 1940-41;
Office of Production Management, War Production Board and Foreign
Economic Administration 1941-1945; the Department of Commerce,
where Mr. Fowler was Administrator of the National Production
Authority in 1952; Defense Production Administration and
Office of Defense Mobilization, both of which he headed in
1952-1953, and the National Security Council, 1952-1953.
The reverse of the medal is the work of Edgar Z. Steever
of the Engraving Department of the Philadelphia Mint.
The medal may be purchased from the Superintendent,
United States Mint, Philadelphia, Pennsylvania, over the counter
or through the mail, for $3.00. The price includes shipping
costs.
Medals have been made for each Secretary of the Treasury
since 1897, with the exception of D. F. Houston, who served a
brief term in 1920-1921.
000
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million ounCCJ -to use
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...... _ . . .1\..0 ..... .,J
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to:;
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of silver --
cor::e
to melt
oZ
authoJ:ity has not been e:::;:.::;-;:c::'cccl.
go i-:~';;o c:'::cul.:.tion ea~ly i11 1966, vr:u. .i.
be 1n2Ge 0:'2
l'~,
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TREASURY DEPARTMENT
October 30, 1965
ADVANCE FOR USE IN SUNDAY PAPERS
OF OCTOBER 31, 1965
BACKGROUND TO WHITE HOUSE ANNOUNCEMENT THAT
CIRCULATION OF THE NEW 25 CENT PIECE
WILL BEGIN ON NOVEMBER 1
The new quarter was placed in circulation when a massive
initial supoly was available, backed up by a very large production
stream.
The Mint will be able to provide approximately half a billion
additional pieces of the new coin for circulation within two months
of the initial distribution.
The traditional silver dimes, quarters and half dollars are
to circulate side-by-side, interchangeably, with the new coinage.
The silver coinage will not be withdrawn. On the contrary,
production of silver coins is continuing at high rates, and at
least 13 billion pieces of silver coins will be in circulation
before production is ended. Much of this circulating silver
coinage will have been made in the l~st three years of greatly
increased output, and these coins can continue in use for the
normal 25 year life of a silver coin.
The Treasury still has very large stocks of silver -- nearly
900 million ounces -- and is authorized by the Coinage Act of
1965 to use these stocks to keep the price of silver below the
point at which it would become profitable to melt the silver
coinage for its silver content.
The Coinage Act of 1965 gives the Treasury authority to
forbid the melting or export of United States coins. This
authority has not been exercised.
F-253
- 2 -
The new dime, to go into circulation early in 1966, will be
ide of the same a lloy as the new quarter.
The new half dollar will be faced with layers of 80 percent
.1ver and 20 percent copper, bonded to a core of approximate ly
I percent copper and 21 percent silver, giving an overall 40 per'nt silver composition.
Like the new quarter, the new dime and half dollar will also
ve the same designs as the silver coins they succeed. All the
w coins will be the same size as the ir silver counterparts.
The
me and quarter are 9.3 percent lighter and the half dollar is
percent lighter.
The 90 percent silver dollar remains without change as a part
the United States coinage, but the Coinage Act of 1965 forbids
oduction of silver dollars for five years.
Pennies and nickels are unchanged.
The non-silver dimes and quarters, and the low silver content
If dollar, were adopted in the Coinage Act of 1965 due to a world
lver shortage. In 1964, new silver production was less than half
much as total annual silver usuage in the Free World. Most other
:ions have removed most or all the silver from their coinage in
:ent years.
The United States was able to continue making 90 percent silver
~s, quarters and half dollars because the silver could be supplied
1m stocks owned by the Treasury. The changeover became necessary
the United States when, early this year, the Treasury's silver
'ck became eQlal to less than a three year supply a t current exded rates of demand for coinage.
000
TREASURY DEPARTrv1:::N1........--...--_
'
c:
;
.....-
;::
,
..
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~
.~
..
,./4
----
. . . ....,...-
"VASHiNGTON. D.C.
'tELEASE 6:30 P.l1.,
1;;:, November 1, 1965.
RESULTS OF TREASURY' S ~I}EEKLY BILL OE'E:ERING
The Treasury Department announced today that the tenders for two series of Treasury
i, one series to be an additional issue of the bills dated Au~st 5 1965
and the
• series to be dated November 4, 1965) which liere offered on Octobe; 27, ;lere opened
~ Federal Reserve B~ks on November 1. Tenders were invited for $1,200,000,000, or
labouts, of 9l-day bills and for $1,000,000,000, or thereabouts of l82-d~ bills.
letails of the two series are as follows:
'
: OF ACCEPTED
91-day Treasury bills
182-day Treasury bills
TITIVE BIDS:
maturin~ February 32 1966
maturin~ May 5, 1966
Approx. Equiv.
Approx. Equiv.
Price
Annual Rate
Price
Annual Rate
.
·
\ 209.:(
High
~-:97.9 ij
4.039%
97.872 §j
4.
_/0
'Low
98.966
4.091%
970.864
4.225%
Average
4-.082% Y
98.968
91.867
40219%
·
Y
~xcepting 1 tender of $15~,000;
~ ~xcepting 5 tenders totaling $4,275,000
/percent of the araount of 91-day bi.... s bid for at the 10,-1 price was accepted
~ercent of the amount of 182-day bills bid for at the low price was accepted
TENDERS APPLIED FOR AND ACCEPTED BY FEDERAL RESERVE DISTRICTS:
:
Accepted
Accepted
Applied For
~rict
Applied For
~on
$ 19,474,000 $
9,074,000
$ 33,105,000 $ 33,105,000
'York
700J> 800,000
1,292,848,000
767,811,000
1,503,651,000
Lade1pbia
8,919,000
16,919,000
16,645,000
28,645,000
re1and
22,855,000
23,5 03,000
42,855,000
23,503,000
unond
10,580,000
15,729,000
21,740,000
22,289,000
mta
15,842,000
40,180,000 ·
27,.342,CCO
48,312,000
:ago
128,101,000
149,432,000
258,501,000
272,372,000
Louis
15,511,000
48,327,000
22,205,000
58,439,000
11,253,000
leapolis
14,822,000
13,253,000
19,102,000
las City
16,084,000
22,332,000
17,084,000
23,332,000
,as
12,566,000
22,367,000
16,646,000
30,647,000
Francisco
46,852,000
~8.!4252000
9!t.260~.2000
76 2294 2 °00
TOTALS
$2,139,69l,000 $1,201,105,000 cf. $1/843,470,00~ $1,000,016,000
G
..
.
-
-
~ludes $254,518,000 noncompetitive tenders accepted at the average price of 98.96t
.eludes $123,096,000 noncompetitive tenders accepted at the average price of 97.86,
•a coupon issue of t.he same length and for the same amount invested, the return or
~se bUls vlould provide yields of 4.18%, fer the 91-day bills, and 4.37%, for the
i.-day bills. Interest rates on bilis are quoted in terms of bank discount with
3 return related to the face amount of the bills payable at maturity rather than
~ amount invested and their length in actual number of days related to a 360-day
~. In contrast, yields on certificates, notes, and bonds are.compu~ed in. terms
,lnterest on the B..;lOunt invested, and relate the nw..ber of days remaining m an
ierest payment period to the actual number of days in. the period, with semiannual
~ounding i f more than one coupon perio~ is involved.
TREASURY DEPARTMENT
FOR RELEASE 6:)0 P.~.,
Monday, November 1, 1965.
RESULTS OF TREASURY I S WEEKLY BILL OFFERING
The Treasury Department announced today that the tenders for two series of Tre_
bills, one series to be an additional issue of the bills dated August 5, 1965, and V
other serie s to be dated November 4, 1965, which were offered on October 27, were~
at the Federal Reserve Banks on November 1. Tenders were invited for $1,200,000,
thereabouts, of 91-day bills and for $1,000,000,000, or thereabouts, of 182-da1b
The details of the two series are as follows:
182-day Treasury bill.
RANGE OF ACCEPTED
91-day Treasury bills
maturing
February
3,
1966
maturing May 5, 1966
COMPETITIVS BIDS:
Approx. EqUiv.
Approx. Eii\i
Price
Annual li&tA
Annual Rate
Price
High
4.039%
97.872
4.26,ij
98.979 !l
Low
4.091%
98.966
97 .864
4.22S~
Average
4.082~ -y
98.968
97.867
4.219%
§I
a/ Excepting 1 tender of $155,000;
b/ Exoepting 5 tenders totaling $4,27),000
percent of the amount of 9l-day biIis bid for at the low price was accepted
92 percent of the amount of l82-day bills bid for at the low price was accepted
TOTAL TENDERS APPLIED FOR AND ACCEPTED BY FEDERAL RESE.'1VE DISTRICTS:
Applied For
District
Accepted
!eP.1ied For
Boston
$ 19,474,000
$ 33,105,000 $ 33,105,000
New York
1,503,651,000
767,811,000
1,292,848,000
Philadelphia
28,645,000
16,645,000 :
16,919,000
Cleveland
23,503,000
23,503,000
42,855,000
Richmond
22,289,000
15,729,000
21,740,000
Atlanta
48,312,000
40,180,000
27,)42,000
Chicago
272,372,000
149,432,000
258,.5Ol,OOO
St. Louis
48,)27,000 •
58,439,000
22,205,000
Minneapolis
19,102,000
14,822,000
1),253,000
Kansas City
23,332,000
22,332,000
17,084,000
Dallas
30,647,000
22,367,000
16,646,000
San Francisco
76,294,000
46,852,000
94, 603,000
TOTALS
$2,139,691,000 $1,201,105,000 sf $1,843,470,000 $l,OOO,OU
12
c/ Includes $254,518,000 noncompetitive tenders accepted at the average price ~
Includes $123,096,000 noncompetitive tenders accepted at the averase price of
On a coupon issue of the same length and for the same amount invested, the ret
these bills would provide yields of 4.18%, for the 9l-day bills, and 4.37%, t.
182-day bills. Interest rates on bills are quoted in terms of bank discount
the return related to the face amount of the bills payable at maturity ratblr
the amount invested and their length in actual number of days related to a 36
year. In contrast, yields on certificates, notes, and bonds are .computed in'
of interest on the amount invested, and relate the number of days ramai ning i
interest payment period to the actual number of days in the period, with _
compounding i f more than one coupon period is involved.
_d/;
r/
F-2S4
\
November
FOR RELEASE A.M. NEWSPAPERS
WEDNESDAY, NOVEMBER 3, 1965
....
~,
~~65
(~af~"
TREASURY TO EMBARGO WIGS
The Treasury will put into effect on November 10 an
embargo on imports of wigs made with human hair from Communist
China
0
Imports of such wigs have significantly increased
recently.
Treasury is taking this action to cut off a source
of exchange to the Communist Chinese which could amount
several millions of dollars a year.
The Federal Register on November 10.
000
to
Details of the embargo
and of temporary licensing policies will be published in
~~I,;tl'
TREASURY DEPARTMENT
November 2, 1965
FOR RELEASE A.M. NEWSPAPERS
WEDNESDAY, NOVEMBER 3, 1965
TREASURY TO EMBARGO WIGS
The Treasury will put into effect on November 10
an embargo on imports of wigs made with human hair
from Communist China.
Imports of such wigs have
significantly increased recently.
Treasury is taking
this action to cut off a source of exchange to the
Communist Chinese which could amount to several
millions of dollars a year.
Details of the embargo
and of temporary licensing policies will be published
in The Federal Register on November 10.
000
F-255
- 3 -
or other disposition of Treasury bi'lls does not have any special treatment, as
it
a,
under the Internal Revenue Code of 1954.
The bills are subject to estate,
!ritance, gift or other excise taxes, whether Federal or State, but are exempt from
taxatIon now or hereafter imposed on the
mY'
pr~ncipal
ot the possessions ot the United States, or by any local taxing authority.
~8e8
!r
I
For
ot taxation the amount ot discount at which Treasury bills are originally sold
ihe United States is considered to be interest.
~e
or interest thereot by aQY State,
Under Sections 454 (b) and 1221 (5)
Internal Revenue Code ot 1954 the amount of discount at which ,bills issued here-
are
sold is not considered to accrue until such bills are sold, redeemed or other-
disposed of, and such bills are excluded from consideration as capital assets.
Irdingly, the owner
ot Treasury b,iUs (other than life insurance companies) issued
under need include in his income tax return only the difference between the price
, tor 8uch bills, whether on original issue or on subsequent purchase, and the amount
lUi
received either upon sale or redemption at maturity during the taxable year
which the return is made, as ordinary gain or loss.
Treasury Department Circular No. 418 (current reVision) and this notice, prescribe
~erma
of the Treasury bills and govern the conditions of their issue.
!lrcular may be obtained from any Federal Reserve Bank or Branch.
Copies of
- 2 ,,
~1nted
forms and forwarded in the special envelopes which will be supplied by Federal
!serve Banks or Branches on application therefor.
Banking institutions generally may submit tenders for account of customers prolded the names of the customers are set forth in such tenders.
~itutlons
~ders
others than banking
will not be per.mitted to submit tenders except for their own account.
will be received without deposit from incorporated banks and trust companies
,d from responsible and recognized dealers in investment securities.
Tenders from
hers must be accompanied by payment of 2 percent of the face amount of Treasury bills
plied for, unless the tenders are accompanied by an express guaranty of payment by
incorporated bank or trust company.
Immediately after the closing hour, tenders will be opened at the Federal Reserve
aka and Branches, following which public anouncement will be made by the Treasury
~rtment
of the amount and price range of accepted bids.
U be advised of the acceptance or rejection thereof.
~ress1y
Those submitting tenders
The Secretary of the Treasury
reserves the right to accept or reject any or all tenders, in whole or in
:t, and his action in any such respect shall be final.
Subject to these reserva-
Ins, noncompetitive tenders for each issue for $200,000 or less without stated
.ce from anyone bidder will be accepted in full at the average price (in three
:~ls)
of accepted competitive bids for the respective.issues.
Settlement for
epted tenders in accordance with the bids'must be made or completed at the Federal
trve Bank on
November
~
1965
, in cash or other immediately available funds
~)
in a like face amount of Treasury bills maturing _ _.;;;:;No:::..v-:...;e~m~b~e~r=,,1;.:;;;.2.1.,_1_9_6~5___ •
W)
eXchange tenders will receive equal treatment.
Cash
Cash adjustments will be made for
ferenees between the par value of maturing bills accepted in exchange and the issue
~e
of the new bills.
The income derived from Treasury bills, whether interest or gain from the sale or
ar diSPOSition of the bills, does not have any exemption, as such, and
10S8
from the
TREASURY DEPARTMENT
Washington
IR IMMEDIATE RELfASE,
November 3, 1955
xa.~\An~.~~'"'~W'"U~'U'.UU""U'JU"UW'~
TREASURY'S HEEKLY BILL OFFERING
The Treasury Department, by this public notice, invites tenders for two series
Treasury bills to the aggregate amount of $ 2,200,000,000
.
, or thereabouts, for
(X)
sh and in exchange for Treasury bills maturing
November 12, 1965 , in the amount
(3)
$ 2,201,832,000 , as follows:
(I)
90.day bills (to maturity date) to be issued November 12, 1965
liJ
(OC)
in the amount of $1,200,000,000
,
(X)
,
, or thereabouts, represent-
.
,
ing an additional amount of bills dated August 12, 1965
(II)
and to mature February 10, 1966
, originally issued in the
M
amount of $1,000,124,000 , the additional and original bills
.
(m)
-
to be freely interchangeable.
181 -day bills, for $ 1,000,000,000 , or thereabouts, to be dated
(n)
cD)
November 12, 1965, and to mature
Cm)
May 12, 1966
(n)
•
The bills of both series will be issued on a discount basis under competitive
noncompetitive bidding as hereinafter provided, and at maturity their face amount
,il be PB)'8ble without interest.
They will· be issued in bearer form only, and in
~
~,dm1nations of $1,000, $5,000, $10,000,' $50,000, $100,000, $500,000 and $1,000,000
tUl'ity value).
~ders
will be received at Federal Reserve Banks and Branches up to the closing
'if, one-thirty p.m., Eastern Standard time, Monday, November 8, 1965
(i5'Q
~~
t:L not be received at the Treasury Department, Washington.
an
•
Tenders
Each tender must be
even multiple of $1,000, and in the case of competitive tenders the price
tiI!red must be expressed on the basis of 100, with not more than three decimals,
~i,
99.925.
Fractions may not be used.
It is urged that tenders be made on the
TREASURY DEPARTMENT
November 3, 1965
FOR ]MMEDIATE RELEASE
TREASURY'S WEEKLY BILL OFFERING
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 biils ~aturing November 12,1965, in the amount of
$2,201,832,000, as follows:
90-day bills (to maturity date) to be issued November 12, 1965,
in the amount of $1,200,000,000, or thereabouts, representing an
and to
additional amount of bills dated August 12,1965,
amount
of
mature February 10,1966priginally issued in the
to
be
freely
$ 1,000,124,000,the additional and original bills
interchangeable.
181-day bills, for $1,000,000,000~ 9r thereabouts, to be dated
November 12,1965, and to mature May 1L, 11)66.
The bills of both series will be issued on a discount ba$is un~
competitive and noncompetitive bidding as hereinafter provided, and a
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
Eastern Standard
up to the clOSing hour, one-thirty p.m.,
time, Monday, November 8,1965.
Tenders will not be
received at the Treasury De~artment, 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 or
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 recelVi
without deposit from incorporated banks and trust companies and f~.
responsible and recognized dealers in investment securities. Tende~
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 b~
or trust company.
F-256
- 2 -
Immediately after the closing hour, tenders will be opened at the
ederal Reserve Banks and Branches, following which public announce,ent will be made by the Treasury Department of the amount and price
ange of accepted bids. Those submitting tenders will be advised
·f the acceptance or rej ec t ion there of. The Secre tary of the Treasury
xpressly reserves the right to accept or reject any or all tenders,
:n whole or in part, and his action in any such respect shall be
inal. Subject to these reservations, noncompetitive tenders for
ach issue for $200,000 or less without stated price from anyone
idder will be accepted in full at the average price (in three
ecimals) of accepted competitive bids for the respective issues.
ettlement for accepted tenders in accordance with the bids must be
,ade or completed at the Federal Reserve Bank on November 12,1965, in
:ash or other immediately available funds or in a like face amount
f Treasury bills maturing November 12,1965. Cash and exchange tenders
ill receive equal treatment. Cash adjustments will be made for
.ifferences between the par value of maturing bills accepted in
~change and the issue price of the new bills.
The income derived from Treasury bills, whether interest or
,:o:ain from the sale or other disposition of the bills, does not have
ny exemption, as such, and loss from the sale or other disposition
f Treasury bills does not have any special treatment, as such,
nder the Internal Revenue Code of 1954. The bills are subject to
state, inheritance, gift or other excise taxes, whether Federal or
tate, but are exempt from all taxation now or hereafter imposed on
he principal or interest thereof by any State, or any of the
"ossessions of the United States, or by any local taxing authority.
or purposes of taxation the amount of discount at which Treasury
,:ills are originally sold by the United States is considered to be
nterest. Under Sections 454 (b) and 1221 (5) of the Internal
evenue Code of 1954 the amount of discount at which bills issued
ereunder are sold is not considered to accrue until such bills are
~old, redeemed or otherwise disposed of, and such bills are excluded
rom consideration as capital assets. Accordingly, the owner of
reasury bills (other than life insurance companies) issued hereunder
eed include in his income tax return only the difference between
he price paid for such bills, whether on original issue or on
ubsequent purchase, and the amount actually received either ~pon
ale or redemption at maturity during the taxable year for wh~ch the
eturn is made, as ordinary gain or loss.
Treasury Department Circular No. 418 (current revision) and this
otice prescribe the terms of the Treasury bills and govern the
onditions of their issue. Copies of the circular may be obtained from
:ty Federal Reserve Bank or Branch.
TREASURY DEPARTMENT
November 3, 1965
FOR IMMEDIATE RELEASE
RE3ULTS OF TREASURY'S CASH OFFERING OF 4-1/4% NOTES
Reports received thus far from the Federal Reserve Banks show that subscriptions total $12,039 million for the offering of $9,700 million, or
thereabouts, of 4-1/4 percent Treasury Notes of Series D-1967, due May 15,
The total amount of subscriptions accepted is about $9,730 million.
1967.
The Treasury will allot in full, as provided in the offering circular,
$777 million of subscriptions in amounts of $200,000 and less, and $6,764
million of subscriptions from States, political subdivisions or instrumentalities thereof, public pension and retirement and other public funds, international organizations in which the United States holds membership, foreign
central bamcs and foreign States, Government Investment Accounts, and the
Federal Reserve Banks, where the subscriber made the required certification
of ownership of notes maturing November 15, 1965.
All other subscriptions will be subject to a 48 percent allotment, with
a minimum of
~200,000
per subscription.
Government Investment Accounts were
allotted $192 million on this basis.
Details by Federal Reserve Districts as to subscriptions and allotments
will be announced when final reports are received from the Federal Reserve
Banks.
000
F-257
\ ~" t -
::J
t -~, _ ....
;u 2:. ~ r. Q"\~ II
l
:
~,
,~'I
r;---
r'
':"
"4 ",'
.... .,.
~\I'j ~ L\~ ~
.~,
\,./
,LEASE 6: 30 P. K ,
":.J.,. November 8 -~ 1965.
RESUL'I'S C:? TREl.Slm.Y'S UEEKLY BILL OFFERING
:he Treasury D2partment &nnounced today that the tenders for t~vo series of Treasury
one series to be an additional issue of the bills dated August 12, 1965, and the
series to be dated Novereber 12, 1965, w~ich were offered on November 3, were opened
'~ Federal Reserve Banks on November 8.
Tenders w'ere invited for $1 , 200 , 000 , 000 , or
tbouts, of 90-day bills and for $1,000,000,000, or thereabouts, of 181-day bills.
'~tails of the two series are as follows:
90-day Treasury bills
?ebruary 10, 1966
Approx. Equiv.
;.:mual Rate
98.994
4.024% 98.985
4.060%
93.989
4.045% 11
OF ACCEJ?TED
~ITlVE
181-day Treasury bills
maturing May 12, 1966
Approx. Equiv •.
Price
Annual Rate
97.886
4.205%,
97.874
4.229~
97.878
4.221% 11
~~turing
BIDS:
$igh
... ow
,Average
lercent o~ t~e ~ount of 90-day bills bid for at the low price was accepted
Olercent of t:... e c..mount of lSl-day bills bid for at the Iml p.:-ice was accepted
TE;f;)ERS
~?LrED
:rict
;;:on
York
FOR AND ACCEPTED BY ::?:2:DERP.L RESERVE D:STRICTS:
22,933,CCJ
1,255,143,000
29,409,000
31,496,000
22,198,000
45,125,000
/.ccented
11,L..47,OJJ
$
712,853,000
17,409,000
31,496,000
22,198,000
38,538,000
275,93L~,OOO
lL~9,589,OOO
55,442~000
25,295,000
3G,96l,OCO
44,442,000
21,251,000
26,295,000
24,08l,OCO
Lop1ied For
27,932,000
1,258,962,000
13,198,000
25,008,000
14,249,000
28,847,000
342,448,000
30,326,000
12,955,000
17,603,000
20,975,000
133~L:.55,GvJ
lC120~5,OOO
1242286~000
~\J~1~'2d
$
~adelphia
re1and
lIl10nd
mta
;ago
.Louis
leapo1is
las City
.as
Francisco
Ear
2~,941,OCO
$
..
AcceEted
27,932,000
$
606,002,000
5,198,000
22,908,000
7,409,000
15,279,000
188,551,000
20,574,000
11,745,000
16,893,000
18,555,000
58 2 981 2 000
T07ALS
$1)900,392,000
$1,200~644,000 al
$1,916,789,000
$1,000,027,000 ~I
:lude3 $256)9L~3)OCO noncompetitive tenders accepted at t~e average price of 98.989
!ludes $125,648,000 nonco~petitive tenders accepted at the average price of 97.878
:a Coupon issue of the sama length and for the sama amount invested, the return on
~se bills \-lould provide yields of 4.14%, for the 90 .. day bills, and 4.37%, for the
~.day bills. Interest r~tes on bills are quoted in terms of bank discount with
l return related to the face ~.Q~nt of the bills payable at maturity rather than
1 amount invested snd their lenoth in actual numbar of dsys related to a 360-day
'"
.r. In contrast, yields on certificates,
notes, and bonds are computed in terms
interest on the aillount invested, and relate t~e number of days remaining in an
:erest payment period to the actusl m;.mber of cays in the per~od, \vith semiannual
lpounding if more thfoU"1 one cou?on period is involved.
_
.-
tl
.--
(
(
TREASURY DEPARTMENT
FOR RELEASE 6:30 P.M.,
Monday, November 8, 1965.
RESULTS OF TREASURY'S WEEKLY BILL OFFERING
The Treasury Department announced today that the tenders for two series of Trea
bi11&, one series to be an additional issue of the bills dated August 12, 1965, and
other series to be dated November 12, 1965, which were offered on November 3, were 01
at the Federal Reserve Banks on November 8. Tenders were invited for $1,200,000,000
thereabouts, of 90-day bills and for $1,000,000,000, or thereabouts, of l81-day bill
The details of the two series are as follows:
RANG E OF ACCEPTED
COMPETITIVE BIDS:
High
Low
Average
90-day Treasury bills
maturing Februar~ lOa 1966
Approx. Equiv.
Annual Rate
Price
4.024%
98.994
4.060%
98.985
4.045% 11
98.989
l81-day Treasury bills
maturiE!Bi Ma~ 121 1966
Approx. Equ1
Price
Annual Rate
97.886
4.205'%
97.874
4.229%
97.878
4.221'7. II
31 percent of the amount of 90-day bills bid for at the low price was accepted
58 percent of the amount of lSI-day bills bid for at the low price was accepted
TOTAL TENDERS APPLIED FOR AND ACCEPTED BY FEDERAL RESERVE DISTRICTS:
District
AcceEted
AEElied For
AEElied For
Boston
22,983,000
11,447,000
$
$
27,932,000
$
New York
1,265,143,000
712,853,000
1,258,962,000
Philadelphia
29,409,000
17,409,000
13,198,000
Cleveland
31,496,000
31,496,000
25,008,000
Richmond
22,198,000
22,198,000
14,249,000
Atlanta
45,125,000
38,538,000
28,847,000
Chicago
275,934,000
149,589,000
342,448,000
St. Louis
55,442,000
44,442,000
30,326,000
Minneapolis
21,941,000
21,251,000
12,955,000
Kansas City
26,295,000
26,295,000
17,603,000
Dallas
30,961,000
24,081,000
20,975,000
San Francisco
133 2 465 2 °°0
101 2°45 2 °°0
124 2 286 2 °°0
Acce2ted
27,932,0
$
606,O02,~
5,198,Q
22,908,e
7,409,0
15,279,G
188,551,C
20,574,',
11,745,'.'
16,893,('
18,555,'-.
58 a981l
TOTALS
$1,960,392,000
$1,200,644,000 a/ $1,916,789,000
$1,000,027l
a/ Includes $256,948,000 noncompetitive tenders accepted at the average price of 98. 1
bl Includes $125,648,000 noncompetitive tenders accepted at the average price of 97.1
11 On a coupon issue of the same length and for the same amount invested, the retUrD'
these bills would provide yields of 4.14%, for the 90-day bills, and 4.37%, fort
181-day bills. Interest rates on bills are quoted in terms of bank discount rifi
the return related to the face amount of the bills payable at maturity rather t~
the amount invested and their length in actual number of days related to a 3~·~
year. In contrast, yields on certificates, notes, and bonds are computed in ten
of interest on the amount invested, and relate the number of days remaining in"
interest payment period to the actual number of days in the period, with sad~
compounding if more than one coupon period is involved.
F-258
TREASURY DEPARTMENT
Washington
FOR RELEASE A.M. NEWSPAPERS,
TUESDAY, NOVEMBER 9, 1965
REMARKS BY THE HONORABLE HENRY H. FOWLER
SECRETARY OF THE TREASURY
BEFORE
THE ECONOMIC CLUB OF NEW YORK
WALDORF-ASTORIA HOTEL, NEW YORK, NEW YORK
MONDAY, NOVEMBER 8, 1965, 8:30 P. M., EST.
It has been said that "The Great Society is the one
in which businessmen think greatly of their function."
The author of that statement was not President Johnson, but
Alfred North Whitehead, the great philosopher, speaking more
than half a century ago.
A more contemporary American, speaking of our presentday economy said: "It is an economy where the health of
business benefits all the people. It is an economy where
the prosperity of the people benefits the health of business.
It is an economy where, in large measure, the fortunes of
each are tied to the fortunes of all."
Gentlemen, that speaker was not the head of one of our
giant corporations -- it was the President of the United
States. Incidentally, in the spate of economic statistics
which confuse us daily, one thing emerges loud and clear:
namely, what is good for the country is certainly proving
good for General Motors. And the same is true of virtually
every business represented here tonight.
Instead of fortifying that last statement with a barrage
of statistics about what has happened in the last two or
five years to profits before taxes, profits after taxes, cash
flow, gross national product, personal disposable income,
consumption, weekly pay, employment, and numerous other indices
let me be one speaker out of Washington who spared you a
glorious statistical recital. There is no need to belabor
the statistics, when to paraphrase one well known commentator:
"In your heart you know I'm right." And, I might add -in your annual report, too.
F-259
- 2 Behind all those heartwarming statistics you are being
spared, there is an important fact of life in this good year
1965 -- you in business and we in government are a partnership
for progress. We are bound by a common conviction that the
right answer to our problems on both the d~restic and ihternational economic fronts must be based on a dynamic private sect(
as the prime mover in the achievement of our economic goals.
Business, labor, and government have learned that by pulling
together we can all achieve much more than by pulling apart.
It is against this background of a fruitful, working
partnership between business and government that I would speak
to you tonight about the most important task of that
partnership -- sustaining the greatest, longest, and best
balanced economic advance in the Nation's history as it moves
through its 57th month.
You will forgive me for speaking frankly and in a more
personal vein than is customary. This is a very personal
subject to you, and both this partnership and the economic
advance are a personal and public thing to me. Much of the
last four and one-half years of my life have been given to
promoting both -- because it is good business for the Treasury
and the country.
My personal credentials for a deep and demonstrated
conviction that we must enable the private sector to play the
prime and dynamic role in our national economy, include
scars and bruises incurred in helping to secure the development,
adoption, and execution of the liberalization of depreciation
allowances -- the investment tax credit in 1962 -- the
corporate tax cut and further improvement of the investment
credit in 1964 -- individual tax reductions of 1964 that
included top-to-bottom rate reductions -- and excise tax
reductions this year.
But my most important credential by far is that I serve
under a President of the United States who has done more and
worked harder than any man in our long national history to
bring about the better understanding that is essential to a
fruitful working partnership between business, labor, and
government. Night after night, day after day, as no
- 3 -
President before him, President Johnson has brought together
leaders of business, finance, and labor to meet with him, his
Cabinet, and White House staff members -- seeking advice,
swapping ideas on what each could do separately and all could
do together for a better America. He has made, "let us
reason together", a national slogan as well as his personal
expression of heart and mind.
It is in that spirit that we turn to our task -- sustaining
the economic advance.
Debate is raging on how best to keep it rolling. A
number of my friends have engaged publicly in this debate.
An even larger number are debating privately. There are
those who are fearful of "overheating" or inflation. There
are those who feel that the economy may run out of power and lOSE
its upward thrust. Some of my friends see the expansion explodil
with a boom and a bang because it is being excessively stimulate(
End some of my friends see the expansion running out of gas
unless there is more stimulus. My own position on this issue
is frank and forthright. I am for my friends.
Since I am a mere lawyer by profession, I am not
eligible to join either offuese economic schools. So I have
been thinking of starting my own new school of economics.
To be a member you must have the capacity to worry about both
inflation and deflation at the same time. Students in this
school, when they read each morning's ration of glowing
economic statistics, will not know whether to laugh or cry.
They must be aware of the dangers of unbridled optimism
either as a strategy for successful performance or as a medium
for successful prophecy. They must also not be inclined to
surrender to pessimism. In my school, neither Cassandra nor
Pollyanna will be eligible as coeds.
The curriculum will be simple. It will consist of
persistent study of the policies which have been employed to
sustain the present expansion and the adjustments, adaptations,
and changing emphasis appropriate to new problems, new needs,
or new facts.
The unprecedented economic expansion we are seeking
to sustain has consistently confounded those who have
failed to discern its true course and character -- those,
often, who have also failed to comprehend the policies that
have supported and sustained its progress.
- 4 And those policies have amply proven their worth.
While they have not -- and I would not dare to claim they have -.
eliminated the business cycle, it has been demonstrated that
the cycle does not move by the calendar but by our private
and public policies.
In considering the future of the current economic
expansion and my views of the policies necessary to sustain
it, my thoughts instinctively go back to the summer and
fall of 1961. The views I held then -- and hold now -were perhaps best expressed in my response to a request by
the late President Kennedy at a Cabinet Meeting in
mid-November 1961 -- just four years ago to the week -- for
suggestions with reference to the coming year's legislative
and administrative program. It was entitled: "A Recommended
Program to Avoid Recession in 1963-64 or Minimize Period of
Decline." Sparing you the analysis and commentary and much
of the detail of the program recommended, let me outline the
policies to which it was directed:
First, a steady and healthy increase in the
rate of business investment in modernized plant
and equipment, providing the capacity and efficient
facilities essential to support more rapid growth
at stable prices but without encouraging an
unsustainable burst of investment activity;
Second, coordination of monetary and fiscal policies
to promote this growth by providing new investment
incentives in our tax structure, while maintaining the
availability of ample credit for investment, homebuilding, and state and local construction at reasonable
rates of interest;
Third, an early attack on structural problems
potentially constricting our growth potential,
including especially the training of additional
supplies of manpower equipped to play a useful role
in modernized industry or expanded services,private
and public, and enactment of a Federal aid to education
bill;
Fourth, the avoidance of destabilizing price, wage,
inventory, and budgetary policies, including action to
avoid a violent shift back and forth between large
deficits and large surpluses in the Federal budget, to
- 5 -
develop productivity measures and guidelines, and to
encourage labor-management-Government understanding
of appropriate price and wage changes;
Fifth, improvement of countercyclical tools
through the enactment of automatic or discretionary
countercyclical tax and expenditure devices that
could be promptly brought to bear, in coordination
with monetary policy, when desirable to counter
actual or reasonably forecast sharp changes in
demand.
What stands out, as we look back upon the expansion
of the four years that have ensued since that early analysis,
is how far we have come toward those goals, and how smooth
the ride has been. For this expansion has remained remarkably
free from the excesses and imbalances that too often in the
past have upset our periods of prosperity.
There were tests that might easily have tripped up a
less solidly based expansion -- but that we have met and
mastered, avoiding recession on the one hand and inflation
on the other, as business, labor and government have worked
together in a climate of mutual cooperation and confidence.
I am not here tonight to contend that there is no need
for flexibility in the public and private policy mix we
have so successfully lived by for nearly five prosperous
years.
Of course, new facts and new circumstances may call
for a reexamination of policies. Policies must be adjusted
and adapted to new problems and new needs as they emerge.
And we must not airily dismiss potential new dangers. But
there are dangers, too, in acting prematurely in response to
fears for the future that are not grounded in hard facts and
hard analysis.
A few months ago, many were concerned that the expansioo
might sputter and fail -- particularly after the turn of
the year, when the large rise in payroll taxes to finance
Medicare and increased Social Security payments would take
effect. We took steps to meet the legitimate problem that
did exist. Now that fear has largely receded and the
principal concern seems to be that there will be inflation
- 6 -
entailing risks to the expansion. \ This position must be
examined and dealt with frankly. Are there solid grounds
for these fears or, as "Fortune" magazine recently put it,
has "the curve of business activity and the curve of sentiment
about it parted company"?
In amassing the gains from our expansion, the Nation has
brought unemployment down from 6.8 to 4.3 percent. We have
raised industry operating rates from about 78 percent to
some 90 percent of capacity in recent months. In so doing,
we have brought our economic performance far closer to our
r~s~ng economic potential.
These welcome developments are
the fruits of efforts which have been zealously pursued.
Are they to become bitter frUit, giving rise to inflation and
the loss of our expansion?
What is the situation?
The situation is that private demand is increasing at a
healthy rate and defense expenditures are rising because of
Viet Nam at a time when the gap between demand and the
availability of manpower and unused capacity has narrowed to
the lowest point in this 57-month expansion.
Defense Department spending currently accounts for less
than eight percent of our total output, and the current levels
of the build-up will mean no appreciable change in that
percentage. During the Korean War period, by contrast,
military spending necessarily zoomed from five percent to
thirteen percent of a much smaller gross national product.
There is still some room to absorb that spending through
the fuller use of our current resources. For instance,
unemployment is still significantly above the levels that
we feel represent a realistic non-inflationary target for our
economy.
Much larger elbow room is assured by the growth in our
productive cap?city. There is the prospect of large
annual net additions to the labor force averaging 1.5
million each year. There is under way in both the public
and private sector the most massive effort ever undertaken
to attack the problem of structural unemployment, involving
the training and retraining of young and old and those whose
- 7 skills have been outmoded or neve~ properly developed to
take a more useful and efficient role in our economic society.
Furthermore, industry is already adding to capacity at a rap
rate, and most industries are ready and able to expand
production substantially, even with present facilities. The
McGraw-Hill reports last week of projected plans for 1966
expenditures for plant and equipment were reassuring. In no
sense do they add up to a non-sustainable rate of expansion
or modernization or an inflationary strain on the capital goods
industry such as characterized 1956-57. The bulk of the new
capacity seems to be going to the right places
to those
industries where operating rates are highest.
Thanks to rigid Federal expenditure control in fiscal
1965 and 1966, our budgetary deficit position was rapidly
approaching a balanced condition until the additional
expenditures of the conflict in Viet Nam intervened. At
present tax rates, we can look forward to a revenue growth of
some $6 to $7 billion or so a year as the economy graws in
line with its potential -- revenues which can be allocated to
meeting increased budget requirements.
There are also several restraining factors on the economic
horizon -- including not only the rise in payroll taxes I
mentioned earlier, but the run-off of steel inventories and
the less than exuberant outlook for housing.
In the price sector, some disturbing signs have
appeared. The last year has seen more of a tendency for
price increases to outweigh declines than any year since
1958. Industrial wholesale prices have risen by 1.5 percent
in twelve months after six years of comparative flatness.
Consumer prices are 1.7 percent above a year ago, as
compared with yearly increases averaging 1.3 percent since
1958.
In summary, the situation calls for confidence in our
capacity to adjust to increased demands upon our economy.
But, at the same time the situation requires us -- both in
the public and in the private sector -- to recognize that
the margin for error is much smaller and the need for
responsible action is much greater.
- 8 What are some of the elements of responsible action?
The situation requires that we forego further tax cuts
until some more opportune time when the stimulation that would
result from increased private consumption and investment will
be more appropriate. Fiscal dividends from our economic
growth in the form of tax cuts seem, for the present, to be
a casualty of the increasing requirements for the defense of
freedom in Viet Nam. A favorable change in that situation
might call for a review.
Responsibility also requires a budget that will enable
us both to meet our domestic objectives and our international
commitments without fostering inflationary pressures. It
requires a budget that, without neglecting national needs,
seeks to finance new programs from savings on old ones to the
maximum extent possible. It requires a budget that achieves
all possible savings to offset greater defense needs by
eliminating or reducing low priority civilian programs, and
by stretching out or deferring the impact on spending of some
of the new and proposed civilian programs -- without delaying
basic authorizing legislation or otherwise unduly impairing
important, but longer-run objectives.
It requires, in short, the kind of budget that President
Johnson is going to give us -- a budget that reflects both the
most stringent kind of fiscal discipline and the most
effective response to essential national needs.
Some are not content to tackle any present or potential
risks of inflation with that responsible kind of fiscal
policy. They advocate abrupt restrictions on the expansion
of money and credit to restrain the growth of demand, and
would invite sharply higher long-term interest rates. This
would be a substantial change in our policy mix of the last
five years and amount to a new ball game. It would raise in
the minds of our producers and consumers serious questions
about whether or not to continue to buy and expand in the
light of increased cost of money and tightness of credit.
The important point is that no sufficient evidence has
yet developed to justify this kind of treatment of the price
situation or of the supply-demand relationship by cutting
back on demand rather than emphasizing efforts to expand
supply. To restrain demand at this time would be to admit t~t
- 9 -
the continued growth of the U. S. economy in amounts comparable
to the advances of the last two years is beyond our resources.
In those years our pluses and minuses have added up to a
generally smooth and well-phased expansion of about
ten and a half billion dollars a quarter in our GNP. The
pluses and minuses that are in prospect, according to the
analyses of most of our economic forecasters, public and
private, do not suggest a marked deviation from that pattern
in the next year -- either upward or downward. Is it too
much? I bel ieve the answer is, and should be, "no."
I would urge that from here on our priority objective
should be to achieve that growth without increasing pressure
unduly on reserve capacity. To do so we must increase our
efforts to provide the capacity to absorb that growth so that
the risks of pressure on prices and of aggregate demand on
productive capacity are minimized by increases in supply rather
than restrain of demand.
We must intensify our attack on structural causes
of unemployment by more job training and retraining, a better
organization of the labor market, and the decasualization
of many types of seasonal or part-time employment. We must
use every effort to increase productivity and hold down costs.
In that effort, we must not forget the lessons of the
1950's -- that the steady gains in productivity required
to absorb increases in wages and other costs rest on steady
growth and output -- that the investment required to enhance
efficiency, cut costs, and assure ample capacity over the
longer run is dependent on the combination of steadily
expanding markets and profits.
And to digress for a moment, we hear again a refraim
that a solution to the balance of payments problem can be
found in tight money and higher interest rates. Presumably
proponents of this approach must be referring to rather drastic'
measures since that is what would be necessary to bring into
equilibrium the interest rate levels that characterize the
U. S. economy and other capital markets.
- 10 Let me also remind you that twice before the Federal
Reserve has raised its discount rates -- one half percent in
the summer of 1963 and one half percent in the fall of
1964 -- to deal with balance of payments problems. We have
clearly not overlooked this instrument. But our rises were
followed by rises abroad and the gap remained -- and in some
important areas widened. Only a few months after the second
increase it was necessary to request voluntary action to
restrain an accelerating outflow of capital from our banks
and nonbank financial institutions. As my predecessor,
Douglas Dillon, several times pointed out -- as early as
Rome in 1962 -- the problem of disparity between interest
rates and capital availability here and abroad is rooted in
rates abroad that are far too high, and in the woeful inadequacie!
of foreign capital markets. This kind of substantial
disequilibrium cannot be eliminated or reduced to manageable
proportions under present circumstances by any monetary action
at all consistent with our domestic needs.
May I suggest that the zealous exponents of the use of
monetary policy to achieve a better balance among international
interest rates have a fertile field for missionary work
in Western Europe. We should not play the game of the dog
chasing its tail to the point of severely damaging our economy
and risking a recession. It makes no sense to raise
persistently our interest rates to a point where they may
conflict with the maintenance of our domestic expansion and
yet not provide a real solution to our balance of payments
problem.
But in no sense is this the end of the discussion.
In any marriage or partnership, there comes a time for frank
talk. That time has now arrived in the partnership between
business and government -- if we are to maintain our
excellent record of price stability, which must continue to
be a key element in sustainingthe current expansion, as
well as in bringing our balance of payments deficits to an
end.
There is a particular danger today -- when we are engaged
in war in Viet Nam at a time when margins between supply and
demand have narrowed, in hasty and ill-considered action in
wages and prices -- a misguided effort to exploit present
markets for short term individual advantage at the inevitable
expense of damaging the prospects for future markets and
for healthy growth for all.
- 11 -
I would like every single businessman who is now
contemplating or who may be contemplating in the future an
increase in price to stop, look and listen. Do changes in his
unit costs and profit trends justify that action or permit him
to hold steady? Or do gains in productivity and lower costs
offer an opportunity to lower prices, broaden markets and
increase sales?
The wage-price guideposts of the Council of Economic
Advisors point out the kinds of policies that serve the
public interest in this sphere, but they can do no more than
point out. It is business and labor that must carry the
burden of responsibility.
The man who unnecessarily raises prices today or fails
to take advantage of opportunities to cut costs and reduce
prices will only add to other producers' costs tomorrow.
That is a cycle that we must stop before it starts.
Everyone in the business and financial community, and in
labor organizations, and everyone concerned with wages or
prices, should look beyond their own personal and professional
responsibilities to their very real -- and much broader-common
responsibility toward the economy at large.
That standard would be true in any season or year.
But the need for resp0.,sible action of this nature is
particularly acute in the period ahead against the background
of smaller margins of unutilized labor and production
capacity and the especial responsibility that the situation
in Viet Nam places on every American.
Today's prosperity reflects a combination of sound
fiscal&dmonetary policies, intelligent business planning,
and responsible restrain by business and labor in making wage
and price decisions.
The future is in our hands -- government, business, labor
and the public. It is not in the private interest and it is
contrary to the public interest to gamble with that future for
the sake of immediate -- and very possibly temporary -gain.
- 12 In conclusion, I do not see before us any economic problems
in sustaining our economic advance which we cannot handle -and without abandoning the essentials of the policy mix that
has served us so well thus far.
Our task is simply to prove that we can stand prosperity.
I have no doubt that we can and will -- if we remember that
the one thing which prosperity cannot stand is to be taken
for granted. It must, on the contrary, be earned anew every
day, every week, every year -- earned by the continued
cooperative effort of business, labor and government. For it
is that effort -- and not some phantom force -- that
determines how well our economy performs.
Once again we are approaching a crossroads of national
decision. There are those in the private sector -- in both
business and labor -- who would abandon this time-tested
policy mix which has served so well as the basis of the working
partnership between business, labor and government and has
given the Nation 57-months of uninterrupted and unparalleled
prosperity. If it should be abandoned, what is to be used
as a replacement? Old formulas that have not worked?
New formulas that have not been thought through or grounded
on a new consensus? Or the chaos of divergent policies that
add up to no policy at all? The real question is: Why give
up a winning combination? My answer is let's not throw it
away.
000
TREASURY DEPARTMENT
November 9, 1965
FOR IMMEDIATE RELEASE
TREASURY MARKET TRANSACTIONS IN OCTOBER
During October 1965, market transactions in
direct and guaranteed securities of the government
for Treasury Investment and other accounts resulted
in net purchases by the Treasury Department of
$39,796,500. 00 •
000
F-260
TREASURY DEPARTMENT
(
November 9, 1965
FOR IMMEDIATE RELEASE
TREASURY MARKET TRANSACTIONS IN OCTOBER
During October 1965, market transactions in
direct and guaranteed securities of the government
for Treasury Investment and other accounts resulted
in net purchases by the Treasury Department of
$39,796,500.00.
000
F-260
- 50 Let us not become so preoccupied by questions of
mere detail that we end up doing nothing.
is a large and growing world.
growing trade.
Ours
It has a large and
Let us provide for this growth. 1I
--000--
- 49 is to expand, we must provide an effective and
adequate substitute.
"This is not a matter of an immediate crisis.
But it is a matter on which we must begin to act -now.
We must begin now to provide machinery for the
creation of additional reserves.
Gold alone will
not be enough to support the healthy growth which the
entire world demands.
It will not be enough in the
future any more than it has been in the past.
rtThere is no shortage of plans for reforming the
world's monetary system.
"Let us try to choose the best.
But let us
remember the best is sometimes the enemy of the possible.
II
- 48 -
On the other hand, many of the member countries of the IMF
at the recent annual meeting supported IMF Managing Director
Schweitzer's view that "liquidity is the Fund's business."
The rules for decision-making present both economic and
political difficulties.
How can the minority be protected,
while avoiding the exercise of an inordinate degree of power
on the part of a country or countries which, at any given time,
would be reluctant to approve the creation of the reserves
generally desired?
Conclusion
In conclusion, let me cite a statement of the President
of the United States on October 1, 1965:
"The long period of large U. S. deficits has
Come to an end.
If growth is to continue and trade
- 47 -
For our part, we believe that the creation or use of a new
unit should not influence nations directly or indirectly to
seek to add unnecessarily to their holdings of gold.
As the
country to whom others turn for gold when new supplies are not
available, we have a vital interest in this aspect.
The width of membership for purposes of management and
distribution of additional reserve assets raises economic,
financial, and political questions, involving the status of
nations outside the Group of Ten, and their relationship to
the process of creating and distributing new reserve assets.
In the third place, a view has been expressed that the
.IMF should properly be provided with sufficient resources to
fulfill its function of providing credits to individual
countries, but that the Fund should not have a leading or
important policy role in the deliberate creation of reserves.
- 46 -
Some are simple ones which could be instituted fairly quickly
through modifications in the operating policies of the IMF.
Others would call for the creation of a new reserve unit,
either within or outside the IMF.
Still others would aim
primarily at changing the character of present reserve elements
without necessarily adding to the supply.
Some envisage that
combinations of schemes should be adopted.
Four issues have been conveniently listed at the end of
the Ossola Group Report, and these four will clearly confront
the negotiators.
The substantive views of the United States
are being developed in these questions, and I shall not try
to anticipate them here.
One question is whether or not a new reserve asset can
be utilized in international settlements only along with a
specified quantity of gold or other reserves or
ay circulate
- 45 Second, the European concern about inflation also causes
them to put a great deal of emphasis on the ways of imposing
adequate discipline on countries in deficit to take prompt
and effective measures to restore balance.
The United States
has, for its part, endorsed more intensIfied study of the
adjustment process in the hope this study will emphasize more
clearly that surplus countries, as well as the deficit countries,
have essential responsibilities in this area.
Third, there are a number of substantive questions concerning the techniques for creating reserve assets.
The Study
on the Creation of Reserve Assets by a study group of the Group
of Ten countries, headed by Rinaldo Ossola, of Italy, and made
public last August, has explored in depth a wide variety of
ways in which a new reserve asset might be created.
- 44 proportion of the world's reserves do remain largely inert
for long periods of time.
What are some of the major negotiating problems?
I shall
merely sketch them briefly, though much has been and will be
written about these questions, I am sure.
First, there are differing views among the Group of Ten,
itself, as to the imminence of a need for additional reserves.
The Continental European countries generally believe there is
too much liquidity now.
They have had large-scale annual
increases in reserves amounting to about 10 percent a year.
They believe these increases have contributed to the inflationary pressures which present to them their most difficult
internal problem of economic policy_
- 43 -
Group of Ten must be represented in the second stage of the
preparations for formal improvements in the monetary system,
after the first stage of negotiations in the Group of Ten has
provided some basis for an eventual international understanding.
In doing this, however, we fully recognize that there is a
conceptual difference between the problem of creating adequate
reserves for the world and the capital needs of developing
countries.
In the same way, there is a conceptual distinction between
the financing of a cyclical or short-term deficit and the
creation of reserves of an indefinite duration.
But, again,
reserves, however created and for whatever purpose, can be
spent.
Reserves which could only be held and never spent would
be strange instruments, indeed, though, in practice, a large
- 42 The world has never before set about this task deliberately.
Monetary authorities are going to be careful before they
introduce into balance sheets a reserve asset to be held more
or less indefinitely.
I have used the term "additional reserve asset" consciously.
There are ways of creating d'eliberately more reserve
assets of the type that we already have, such as reserve
positions in the Fund.
There are also approaches that would
require an entirely new type of asset, such as special reserve
units created by a group of countries, either in partnership
with the Fund or independently.
The United States has stressed that the interests of all
members of the International Monetary Fund must be considered
in these negotiations and that countries not members of the
- 41 This is now being recognized, and the global statistics on
reserve,s, carried in the publications of the International
Monetary Fund, include a category called Reserve Positions in
the Fund.
It is in considering the longer term, or secular area
of creating reserves intended to be more or less permanently
or indefinitely carried on the books of monetary authorities,
that we encounter the third aspect of the task.
This is
usually described as the "deliberate creation of additional
reserve assets."
There are a number of difficult problems ahead for
negotiators.
The deliberate creation of additional reserve
assets differs from what has been done up to now, in somewhat
the same way as our nuclear and space activities in the scientific field differ from conventional weapons and conventional
aircraft of the past.
- 40 -
y
How to assure this, to couple the use of the Fund's facilities
with appropriate encouragement of correction of the imbalance
and to gain the cooperation of surplus countries in correcting
imbalances, are the key problems in the cyclical aspect of the
over-all task.
Whether there is a field for bilateral credits
of a medium-term character, through special securities issued
to creditor countries directly, could also be explored, since
increases in quotas or changes in the scale of the General
Arrangements to Borrow may occur only at relatively infrequent
intervals.
As in the case of short-term monetary credits, mediuwterm credits are likely to create reserve assets on the books
of the monetary authorities of the creditor countries.
- 39 -
The first aspect is the perfecting of our arrangements
for safeguarding the monetary system against abrupt and shortterm strains on major currencies.
Here, bilateral and other
credit arrangements, involving direct action by national
monetary authorities, are particularly useful, due to their
flexibility and speed of activation.
Secondly, cyclical imbalances of particular countries must
be expected, even if we had an all but perfectly adjusted
economic world.
To deal with such imbalances, medium-term
credit is called for, and the Fund has come increasingly to be
relied upon for this purpose, supplemented, in appropriate
cases, by the General Arrangements to Borrow.
TQ fulfill this
function, the Fund needs adequate access to the Gurrencies of
surplus countries.
- 38 -
The Tasks Ahead
Against this background, there are, as mentioned, two
basic tasks ahead.
Our first major responsibility is to reach
and maintain a sustained equilibrium in the United States
balance of payments.
We are well advanced in this task.
We
know that we can succeed in it, and we will not relax our
program for doing so until we succeed.
The second major task, on which I will comment here, is
to improve our international monetary arrangements so that
they will continue to meet the needs of the rest of the world
and of the United States in the future, when reserves are no
longer supplied by U. S. deficits because our payments have
been brought into equilibrium.
this into several aspects.
We may conveniently divide
- 37 In the meantime, the Deputies of the Group of Ten bring
together responsible officials of these countries to consider
the basic problems of the functioning of the international
monetary system and future needs for reserves.
Under the aegis
of this group, a technical study, known as the "Ossola Report, Ii
was published in August, 1965.
This Report examines a number
of possible ways of creating reserve assets.
For its part, the International Monetary Fund has also
examined the question of creating reserve assets.
In its
Annual Report for 1964, the Fund strongly urged that any
alterations made in the monetary system be evolutionary and
be based on supplementing the existing system, where necessary.
rhe Fund also indicated its belief that further development of
lnternational reserves could, and should, be based on the Fund.
- 36 -
The United Kingdom has, from time to time, made use of similar
short-term facilities, arranged to meet particular needs.
The largest such operation took place at the end of November,
1964, when $3 billion in short-term credits was arranged to
strengthen the pound sterling.
In addition to the development of credit
facilities~
close and frequent consultations between responsible officials
of treasuries and central banks are now a regular feature,
through the Bank for International Settlements,
~nd
through
a Working Party of the Organization for Economic Cooperation
and Development.
This Working Party is now und,rtaking a
thorough study of the process of adjustment of !nternational
imbalances under modern conditions.
- 35 -
This understanding became known as the General Arrangements
to Borrow, and the participants in it became known as the
Group of Ten.
Parallel arrangements were set up by the Swiss
authorities to provide up to about $200 million in Swiss francs
directly to the Fund for GAB members.
There is now in process a further increase in the Fund
resources, amounting to 25 percent across the board plus
additional amounts for a number of individual countries.
Generally speaking, Fund resources make available mediumterm credit.
Through direct contacts among the monetary
authorities of leading countries, short-term credit facilities
have also been provided on a very large scale, both on a standby basis and through ad hoc arrangements.
A network of swap
faCilities, develQped by the Federal Reserve System, has now
reached a total of $2.8 billion.
- 34 First, in 1958-59, quotas in the International Monetary
Fund were increased by 50 percent across the board, with
additional selective increases for several leading industrial
countries.
This provided about $2.7 billion in additional
gold and European currencies to the Fund, with a total en1argement of its resources of about $5 billion.
However, in
1961, it was realized that, even with the quota increase, the
resources of the Fund might prove insufficient to meet severe
strains on leading currencies and that such strains could
threaten to impair the functioning of the monetary system as
a whole.
After negotiations carried on during 1961, agreement
was reached between the Fund and ten leading industrial countries
under which these countries contracted to provide loans to the
Fund under specified conditions in amounts up to ~6 billion.
- 33 -
it will be helpful to review briefly what has been accomplished
in the field of international monetary cooperation during the
six years of large
u~
S. deficits.
It is important to do this
not only because the progress made in this area makes it now
possible to mount an international approach to the new and more
difficult task of deliberate reserve creation, but also because
the developments of the past six years are, themselves,
unprecedented and represent really gigantic steps in international understanding and in determined efforts to organize
international activities in the monetary field.
The monetary history of these years is so crowded that
it is difficult even to touch upon these achievements in a
brief commentary of.this type.
may be mentioned.
However, some of the highlights
- 32 -
This means that reserves of other Free World countries were
roughly sufficient to cover four months of imports, if fully
utilized.
Naturally, there were wide differences among
countries and regions, but the over-all ratio of 35 percent
is the same as it was in 1928, lower than it was in 1958, when
it was 41 percent, and as low as at any time since 1948, when
the ratio was 43 percent.
The ratio of U. S. reserves to
imports, at 66 percent, is nearly twice as high as that of
other Free World countries taken together.
But United States
reserves can be called upon by foreign holders of dollars as
well as for financing our own imports in case of need.
Our
own ratio to imports has been halved since 1959.
International Monetary Cooperation -- 1958 to 1964
Before noting some of the issues that will be faced in
trYing to find a solution to the problem of reserve creation,
- 31 For this means that a major part of the secular growth in
international reserves also stops.
New monetary gold supplies
are not sufficiently large to meet needs for additional reserves.
The world economy is growing rapidly and, while no one sees as
necessary an exact or mechanical relationship between. the
growth in world trade or world activity and the need for additional reserves, it seems quite clear that, sooner or later,
more reserves will be required.
Thus, some alternative
procedures that will provide for additions to world reserves
must be established.
In this connection, it is of interest that, in June, 1965,
the official reserves of all Free World
countri~s
gether -- excluding the United States -- stood
percent of world imports, c.i.f. basis.
a~
taken toabout 35
- 30 -
The acceptability of dollar assets to foreign monetary
authorities would be weakened, and this could lead to a
shrinkage in existing world liquidity, concentrated on our
own reserves, which have been declining over quite a long
period.
For these reasons, President Johnson has made clear that
United States deficits must be stopped.
Speaking in Washington
on the first of October, he told the Governors of the International Monetary Fund:
"I want to be very clear about this.
We must, in our own interest and in the interest of those who
rely on the dollar as a reserve currency, maintain our payments
in equilibrium.
This we will do. n
But the second part of the problem then faces us with
the cessation of U. S. deficits.
- 29 -
they also derived rather small amounts from new monetary gold
supplies or through the net increase of their creditor claims
on the International Monetary Fund.
These figures give a quick indication of the two major
problems that are faced by the United States and the world in
dealing with international reserves in the future.
The United
States cannot afford to continue to run deficits and supply
reserves in this fashion.
To do so would mean that our own
reserves would be reduced and our own international position
impaired, not only financially but in many other ways as well.
An internationally strong currency and a strong voice in world
affairs tend to go together.
Financially, our current assets
would be reduced too far relative to our current liabilities.
- 28 -
During the six years beginning with 1959, the United States
recorded a series of very large international deficits.
It
is true that a substantial part of the deficit reported by the
Department of Commerce during these years, about $5 billion,
took the form of additions to private dollar holdings.
Never-
theless, the amount of the deficit which resulted in an increase
of officially held reserves in foreign countries was nearly
$13 billion.
Continental European countries acquired the
lion's share of these reserves:
We have estimated that nearly
three-quarters of the growth in official reserves of the rest
of the world was accounted for by the counterpart of United
States deficits.
Since the over-all growth in reserves of
other countries was about $17 billion during these six years,
V
I
- 27 -
Thus, over-all, the countries of the Free World now have
about $68 billion in reserve assets -- $41 billion in gold,
$22 billion in foreign exchange, and $5 billion in unconditional drawing rights on the Fund.
The U. S. Balance of Payments Deficit and World Reserves -1958 to 1964
After this survey of the principal types of reserve assets,
we may now look at the crowded monetary history of 1959-64 to
find the answer to the question as to why there is so much current
interest in improving our monetary system.
By 1958. the United
States had swung sharply into a large deficit, following the
somewhat favorable balance of payments position
b~ought
about
in 1957 by exceptional difficulties of the United Kingdom and
France.
- 26 -
II
The third type of reserve asset has developed more
recently, as the Fund has extended credits to its members.
It has come to be realized that there is a basic claim on the
Fund known as the gold tranche -- tranche being French for
"slice" or "cut" -- which arises initially when a country
contributes gold to the Fund in the amount of one-quarter of
its quota subscription.
But, in addition to this gold tranche,
there is also the so-called "super gold tranche," which represents an amount equal to any credit claims that countries may
acquire in the Fund in excess of the gold tranche.
These
credit claims on the Fund arise when the currency of a given
country is utilized by the Fund to make loans to other countries.
Countries may draw virtually at will on the Fund, so long as
they have super gold tranche or gold tranche claims.
II
These
unconditional drawing rights" on the Fund total about $5 billion.
- 25 They like to find assets in which the foreign exchange can
be safely invested and which can be sold quickly and easily,
with a minimum of possible loss.
This means there must be
broad and deep markets for the securities in which their
reserves are invested.
There must be a large supply of
foreign exchange available to be widely held by foreign
countries.
Today, only the dollar and the pound, and, to a
more limited extent, the franc, are used as reserve currencies
in this way.
The pound and the franc are held as reserves
largely by countries within the sterling area and the franc
area.
The foreign exchange component in international reserves
now totals about $22 billion, of which about three-fifths is
in the form of dollar assets.
- 24 -
It is, as someone once pointed out, one of the few commodities
that can move in international trade without tariffs or
restrictions, at least when it is destined for monetary
authorities.
In effect, it has universal acceptability.
The
countries of the Free World presently have $41 billion in gold
in their international reserves, with about one-third held by
the United States
and about 50 percent held by Western European
countries.
The foreign exchange component of international reserves
consists principally of dollars and sterling.
Currencies held
as reserves depend partly upon history and practice.
A very
important factor is confidence in the maintenance of value of
the currency in terms of gold and other currencies.
But there
are other important considerations that lead countries to hold
reserves in a particular currency.
- 24 It is, as someone once pointed out, one of the few commodities
that can move in international trade without tariffs or
restrictions, at least when it is destined for monetary
authorities.
In effect, it has universal acceptability.
The
countries of the Free World presently have $41 billion in gold
in their international reserves, with about one-third held by
the United States
and about 50 percent held by Western European
countries.
The foreign exchange component of international reserves
consists principally of dollars and sterling.
Currencies held
as reserves depend partly upon history and practice.
A very
important factor is confidence in the maintenance of value of
the currency in terms of gold and other currencies.
But there
are other important considerations that lead countries to hold
reserves in a particular currency.
- 23 In the -last analysis, reserves for the commercial banking
system are whatever is defined as reserves and accepted as
reserves by national authorities and by the practice of commercial banks.
Internationally, in somewhat the same manner,
reserves, or reserve assets, represent those assets which major
central banks will accept freely from other major central banks.
Types of Reserve Assets
At present, there are three basic forms of international
reserve assets:
gold, foreign exchange, and virtually uncondi-
tional drawing rights on the International Monetary Fund.
The oldest and most firmly established form of reserve is
gold.
It has served this purpose for many
deca~es,
and its
Use in some form as a basic money goes back for centuries.
- 22 -
A word must be said here about the applicability of much
of what has just been said to reserve currencies.
So long as
other monetary authorities are prepared to acquire and hold
additional deposits or investments denominated in a reserve
currency, the monetary authorities of such a reserve country
may be able to finance deficits without using reserves or
calling upon specific credit facilities.
That is, they are in
the position of being able to transfer domestic assets to
foreign monetary authorities without losing reserves.
But this
situation lasts only so long as other monetary authorities are
prepared to add to their holdings of such assets.
And at any
time, foreign holders may decide to turn in such assets for
Conversion and draw down the reserves of the reserve center.
- 21 There is, of course, an important inter-connection between
the growth of demand and of business activity in the region
and the supply and price of credit within the region, but credit
cost and availability are by no means the sole factors affecting
the relative competitive positions of two currency areas.
The
efficiency of labor, the availability of natural resources,
the many other factors affecting the aggregate levels of demand
in the two areas, the structure of savings, consumption and
investment, the form and magnitude of public outlays for defense
and other purposes, and many other variables will affect the
volume of transactions between two currency areas
~nd,
hence,
the net settlements which must be met out of reserves or out
of credit facilities that supplement reservese
- 20 -
International reserves may also perform, sometimes in
rather severe fashion, the function of exercising restraint
upon the lending and investment activities of the national
currency system.
But there is no direct and true analogy of the
~orkings
of the international monetary system in laying a restraining
hand upon the monetary expansion of a country and the workings
of domestic monetary systems in restraining the credit expansion
of banks within the system.
For there is only one monetary
authority for a given region or country.
Consequently, its
reserve position is affected not only in the narrow sense by
its own liberality or tightness in credit
policy~
but also in
the broader sense by the vigor and competitive strength of all
the business activity that is carried out within the region
or country it serves.
- 19 Internationally, reserve assets are available in case of
need to finance deficits in a country's balance of payments.
However, central banks cannot replenish their reserves in quite
the same way as a commercial bank in the United States.
They
do have access to certain credit facilities in the International
Monetary Fund and they may have arranged bilateral swaps with
the United States or other countries, but these credit facilities
are usually limited as to the amount that is quickly available
without any questions being asked (unconditional credit).
Additional borrowing is likely to be accompanied by searching
international inquiry into the policies of the borrowing country.
Especially important is their inability, in most cases, to sell
or discount abroad their assets representing domes,tic loans
or investments.
- 18 French franc would be the normal currency for transactions
between France and the French-speaking areas of Africa, for
example.
Along with the use of their currencies in inter-
national trade, there is likely to be a substantial amount of
financing of trade by banks in New York or in London or Paris
in the form of dollar, sterling, and franc credits.
During
the postwar period, privately held international balances have
risen rapidly in the form of dollars to $10.6 billion at the
end of 1964, while sterling balances in private hands have
grown more slowly to about $4.8 billion.
The third category, reserve assets, are held as reserves
by the monetary authorities of the major
countrie~.
Although
private holdings have their bearing on the over-all liquidity
problem, the main questions relate to official reserves.
of these remarks deal with this category of money_
Most
- 17 vehicle or transactions currencies that are used by banks
traders of one country in making payments to banks and
ders of other countries; and (3) reserve assets that are
d by and used by monetary authorities in making payments to
etary authorities of other countries.
Domestically, countries utilize money created by their
tral banks and their commercial banking systems in the form
:urrency notes and deposits.
The use of domestic money is
e familiar and needs no further comment.
The second type of currency may be called a "trading"
"vehicle" currency.
For this purpose national currencies
normally used in foreign trade, and especially the national
encies of Some of the major countries.
Most international
e, in practice, utilizes dollars or sterling, though the
- 16 ch trade or payments are conducted, or reserves are transred, lent or borrowed.
The system may be likened somewhat to a rather rambling
se that has grown up over a considerable period of time,
various additions made from time to time by different
1
lders.
It is not necessarily an artistic whole, but it
~tions
rather well and keeps the currencies of the world
Lng together more or less comfortably.
~e
At times, however,
is a certain restiveness among the tenants and a feeling
the house needs some further expansion or some major repairs,
loth.
This is one of those periods.
There appears to be increasing agreement that the world
tents system as a whole requires three types of money:
national or domestic currencies for internal use;
- 15 t
that, in a strict sense, there is not really an inter-
lonal monetary system at all.
What we have is a set of
:itutions and procedures which, over time, have become con:ionally acceptable arrangements for making international
Lsfers of funds that settle international transactions and
providing reserves that are held by monetary authorities.
The International Monetary Fund and the Articles of Agreeunder which it was established provide a certain foundation
basic framework for the system.
This is essentially the
em of exchange rates that are fixed for considerable periods
ime and are changed only when there is a clear case of a
imental disequilibrium.
In addition, there are a number of
lal arrangements between particular countries and groups of
:ries, such as the franc area or the sterling area, under
- 14 ~urope,
full employment contrasted with the heavy unem-
rment of the Twenties.
Ldity.
Reserves were built up with great
The burden of postwar indebtedness to the United
:es was extremely moderate because of the enormous quantity
lur resources that was made available to Europe through
Lend-Lease system and the Marshall Plan.
This was the situation at the end of 1958.
Why, now, is
e so much talk about the need to improve the international
tary system?
t
To find an answer to this question, let us
review some of the elements that make up the inter-
)nal monetary system.
~nts
of the International Monetary System
Mr. Roosa, my distinguished predecessor as Under Secretary
le Treasury for Monetary Affairs, has pointed out in a recent
- 13 7ever, France was still troubled with currency weakness
i1 1958.
Sterling also came under pressure periodically,
British reserves showed no persistent upward trend.
Over-
, however, industrial countries other than the United States
already increased their reserves by $14 billion from 1948
1958, to nearly $22 billion, a figure almost as large as
ted States reserves of $22.5 billion.
During this period, the world seemed to be approaching
ldi1y toward carrying out more and more of the objectives
:he Bretton Woods Conference.
The international monetary
em appeared to be making steady progress and to be serving
world well.
The postwar recovery of Europe, both economi-
y and financially, was in striking contrast to, the diffi-
ies that had been encountered in the first fifteen years
r World War I.
- 12 -
exchange rates of most European countries were depreciated
terms of the dollar in 1949.
Although exchange restrictions
,an to be relaxed, in the Fifties, and the European Payments
on brought liberalized payments within the Western European
up of countries, world-wide convertibility did not come until
e in the Fifties.
At the end of 1958, fourteen European
ntries announced de facto convertibility for new acquisitions
their currencies by foreigners, and this was the crucial
p in eliminating an important barrier to flows of goods and
ay between the Western Hemisphere and Western Europe.
Continental Europe recovered its financial strength rapidly
!r the exchange adjustments of 1949, with the help of the
lhall Plan and large U. S. military expenditures in Europe.
- 11 -
third major principle was that current exchange transactions,
listinguished from capital transactions, should be carried
freely without exchange restrictions.
However, it
Is.
~ok
some time for reality to overtake these
The world emerged from the war with the dollar as the
,r key currency.
Other currencies were fixed in relation to
dollar, and their value was maintained by official purchase
sale of dollars.
Through the convertibility of the dollar
gold, the major currencies were connected with gold.
But,
a number of years after the war, restrictions were maintained
Jropean countries, even on current transactions.
Many
:ries did not achieve strong currencies until after the
lall Plan had poured very large amounts of dollars into their
~ies.
- 10 1
Hampshire.
From that conference there emerged certain
leral principles that have formed the foundation of the inter:ional monetary system during the past two decades.
And out
this conference came the International Monetary Fund and the
.ernational Bank for Reconstruction and Development.
The experience of the inter-war period had vividly imssed the delegates to the conference at Bretton Woods.
They,
refore, established the system of so-called "adjustable pegs,"
exchange rates, that remained fixed unless a country was
sidered to be in fundamental disequilibrium.
~
was to limit competitive exchange rate
The purpose
depre~iation.
The
>nd major element was to provide a pool of int~rnational
lit which could supplement the reserves of individual countries
:stablishing specified lines of credit availability.
- 9 it also introduced a general presumption against exchange
~eciation
among these leading countries.
During the Thirties, world trade fell off in terms of value.
938, trade was only about 10 percent higher than it had been
913 and was about 25 percent below the 1928 level.
Because
his shrinkage, and because currency depreciation raised the
e of gold, reserves became very large by comparison with
a.
For the world as a whole, reserves rose to 117 percent
~ade,
and, for the world outside the United States, reserves
63 percent of trade.
However, these very large reserves
lot stimulate an effective recovery of world trade under
lost-depression conditions.
on Woods and the Period 1945 to 1958
While the war was still going on, the Allied nations held
ternational monetary conference in 1944 at Bretton Woods,
- 8 -
united States also withdrew for some years from the business
extending international credit in the form of bonds and loans
foreign banking systems.
The depreciation of sterling in 1931
followed by dollar depreciation in 1933, and by the eventual
Lapse of gold bloc exchange rates in 1936.
The record of the Thirties was not a happy one in inter.ona1 trade and finance.
It was marked by competitive
,
~ency
depreciation, by restrictive trade practices, and by
!nera1 breakdown in international capital flow.
And in the
er years, prior to the War, large amounts of Continental
pean funds sought refuge in London and in the United States.
In 1936, the first tentative efforts to develop continuing
tary cooperation by the major governments appeared with the
~rtite Agreement of that year.
Technically and operationally,
agreement assured temporary official support for the gold
!t, and thus for the major exchange rates.
- 7 -
-.-3
funds from the United States to Europe, the outflow being
vided by our banks and private investors, and the inflow
resenting intergovernmental debt receipts.
When it began
be difficult to sell European bonds in the United States,
ere exchange pressures soon developed, first in Central Europe
then on the pound sterling.
The great depression brought serious disorganization of
international monetary system, as well as the banking system,
he United States.
rely shrunk.
However liquidity is defined, it was
At least some part of the severity of the
ession must probably be attributed to the cumulative weakes that became evident in the U. S. financial and monetary
em.
These weaknesses led to certain important modifications.
internal redeemability of dollar currency into gold was
inated, thus reserving our gold reserves for international use.
- 6 -
During the Twenties, balance of payments data began to
collected and discussed.
The dollar became a major world
ding and reserve currency.
Intergovernmental transfers
oss the exchanges in the form of reparations and debt
ments directed the attention of economists to international
hange and monetary problems.
After 1926, the stabilization of the French franc at an
ar-va1ued level was followed by very large receipts of
~ign
exchange by the French monetary authorities.
The
1gement of these funds became a critical aspect of interona1 financial developments of the late Twenties, and the
'ersion of some of these foreign exchange resources into gold
.uk international liquidity.
The international financial
tionships of this period were noteworthy for a circular flow
- 5 -
After the First World War, it was soon realized that the
ce level was tending to settle down on a plateau about 50
:ent higher than prewar prices.
there would be a shortage of
There was considerable fear
gold~
even though a large
of the gold previously circulating among the public in
,pe had been called into official reserves during the war.
Genoa Conference in 1921 recommended wide use of the gold
ange standard in order to economize on gold.
By the year
world imports had risen about 45 percent above the 1913
1, but the ratio of gold and foreign exchange to imports
approximately doubled, to 42 percent.
t
And, of this total,
one-quarter consisted of foreign exchange reserves.
Out-
the United States, countries held, on the average, reserves
)ld and foreign exchange equal to about 35 percent of annual
,ts.
)
--
- 4 How did the system manage to function -- with what, in
rospect, we can see were relatively few periods of stress
tl
such limited reserves?
First, deficit countries generally were net borrowers on
~-term
capital account, and surplus countries were net
~stors
of long-term capital.
When the capital outflow from
creditor countries tightened up, this probably led rather
!ctly to a shrinkage in the imports of capital equipment
other goods by deficit countries, which were simply not
to raise the capital needed to finance them.
Note that
type of adjustment process is a rather stringent one.
nd, governmental transactions were much less important in
balance of payments at that time.
Finally, and perhaps
important over-all, imports of capital by surplus countries,
ley occurred at all, probably took the form of short-term funds.
- 3 -
Excluding countries now in the Communist bloc, the Fund
imated total world gold reserves at about 19 percent of
orts in 1913, with an additional 2 percent of imports, or
~t
$400 million, held in the form of foreign exchange
erves.
On the whole, the international monetary system was rather
Ly loaned up.
When pressure developed on the system, credit
:kly became tight, leading to the financial panics which
!ntuated the cyclical down-turns in business
:e times.
ac~ivity
in
At such times, there was not only a drain on gold
rnationally, but an internal drain on gold reserves could
be expected, because most major currencies could be
emed in gold coin.
- 2 -
.nges in the availability and price of credit in London had
ery important impact on the attraction of funds to London.
inflow and the outflow of funds from London was a major
ect of the adjustment mechanism under which international
tlements were kept within limits that could be met either
h a national reserve or borrowings.
Even before the first World War, there was a considerable
iation in the extent to which countries held gold.
Accord-
to a study made by the International Monetary Fund in 1958,
1
France and Italy in 1913 had gold reserves equivalent to
It 40 percent of annual imports, whereas the Netherlands,
zerland, and the United Kingdom held gold reserves that
of an entirely different order, equivalent to 4 to 8
ent of imports.
TREASURY DEPARTMENT
Washington
RELEASE ON DELIVERY
REMARKS BY THE HONORABLE FREDERICK L. DEMING
UNDER SECRETARY OF THE TREASURY FOR MONETARY AFFAIRS
AT THE JOINT LUNCHEON MEETING OF THE
'nmRN ECONOMIC ASSOCIATION AND SOUTHERN FINANCE ASSOCIATION
AT THE DEAUVILLE HOTEL, MIAMI BEACH, FLORIDA
ON FRIDAY, NOVEMBER 12, 1965, AT 12:30 PM (EST)
THE INTERNATIONAL MONETARY SYSTEM -ITS EVOLUTION AND THE PROBLEMS AHEAD
System Prior to World War II
Before the First World War, the major currencies were tied
,old by fixed exchange rates, and sterling was the maj or
'ency used in international transactions.
The Bank of England
'at the focal point of the whole international monetary system.
was able to operate on a remarkably small gold reserve,
valent to about 5 to 7 percent of the annual imports of the
ed Kingdom.
As the main international banking center,
on had at all times large short-term claims on the rest of
~orld,
as well as large liabilities to foreign countries.
TREASURY DEVARTMENT
Washington
FOR RELEASE ON DELIVERY
REMARKS BY THE HONORABLE FREDERICK L. DEMING
UNDER SECRETARY OF THE TREASURY FOR MONETARY AFFAIRS
AT THE JOINT LUNCHEON MEETING OF THE
SOUTHERN ECONOMIC ASSOCIATION AND SOUTHERN FINANCE ASSOCIATlQ~
AT THE DEAUVILLE HOTEL, MIAMI BEACH, FLORIDA
ON FRIDAY, NOVEMBER 12, 1965, AT 12:30 PM (EST)
THE INTERNATIONAL MONETARY SYSTEM -ITS EVOLUTION AND THE PROBLEMS AHEAD
The System Prior to World War II
Before the Firs t World War, the maj or currenc ies were til
to gold by fixed exchange rates, and sterling was the maj~
currency used in international transactions. The Bank of Eng]
was at the focal point of the whole international monetary sy!
and was able to operate on a remarkably small gold reserve,
equivalent to about 5 to 7 percent of the annual imports of tl
United Kingdom. As the main international banking center,
London had at all times large short-term claims on the rest 0
the world, as well as large liabilities to foreign countries.
Changes in the availability and price of credit in London had
a very important impact on the attraction of funds to London.
The inflow and the outflow of funds from London was a major
aspect of the adjustment mechanism under which internatioMl
settlements were kept within limits that could be met eithu
with a national reserve or borrowings.
Even before the first World War, there was a considerabll
variation in the extent to which countries held gold. Acco~
to a study made by the International Monetary Fund in 1958,
both France and Italy in 1913 had gold reserves equivalent~
about 40 percent of annual imports, whereas the Netherlands,
Switzerland, and the United Kingdom held gold reserves that
were of an entirely different order, equivalent to 4 to 8
percent of imports.
F-26l
- 2 Excluding countries now in the Communist bloc, the Fund
estimated total world gold reserves at about 19 percent of
imports in 1913, with an additional 2 percent of imports, ~
about $400 million, held in the form of foreign exchange
reserves.
On the whole, the international monetary system was ratbe
fully loaned up. When pressure developed on the system, credb
quickly became tight, leading to the financial panics which
accentuated the cyclical down-turns in business activity in
those times. At such times, there was not only a drain on gok
internationally, but an internal drain on gold reserves cooW
also be expected, because most major currencies could be
redeemed in gold coin.
How did the system manage to function -- with what, in
retrospect, we can see were relatively few periods of stress.
with such limited reserves?
First, deficit countries generally were net borrowers on
long-term capital account, and surplus countries were net
investors of long-term capital. When the capital outflow fr(l
the creditor countries tightened up, this probably led rather
directly to a shrinkage in the imports of capital equipment
and other goods by deficit countries, which were simply not
able to raise the capital needed to finance them. Note tMt
this type of adjustment process is a rather stringent one.
Second, governmental transactions were much less important in
the balance of payments at tha t time. Finally, and perhaps
mos t important over-all, imports of capi tal by surplus countr
if they occurred at all, probably took the form of short-term
funds.
After the First World War, it was soon realized tMtt~
price level was tending to settle down on a plateau about 50
percent higher than prewar prices. There was considerable fe
that there would be a shortage of gold, even though a large
part of the gold previously circulating among the public in
Europe had been called into official reserves during the war.
The Genoa Conference in 1921 recommended wide use of the gold
exchange standard in order to economize on gold. By the yea!
1928, world imports had risen abou t 45 percent above the 19U
level, but the ratio of gold and foreign exchange to ~mportsl
had approx imate ly doubled, to 42 percent. And, of thlS tota
about one-quarter consisted of foreign exchange reserves.
Outs ide the United States, countries held, on the average,
reserves of gold and foreign exchange equal to about 35
percent of annual imports.
- 3 During the Twenties, balance of payments data began to
be collec ted and discussed. The dollar became a maj or worle
trading and reserve currency.
Intergovernmental transfers
across the exchanges in the form of reparations and debt
payments directed the attention of economists to internatiof,al
exchange and monetary problems.
After 1926, the stabilization of the French franc at a~
under-valued leve 1 was followed by very large rece ipts of
foreign exchange by the French monetary authorities. The
management of these funds became a critical aspect of
international financial developments of the late Twenties, ani
the convers ion of some of these foreign exchange resources inl
gold shrank international liquidity. The international
financial relationships of this period were noteworthy for a
circular flow of funds from the United States to Europe, the
outflow being provided by our banks and private investors, aD
the inflow representing intergovernmental debt receipts. Whel
it began to be difficult to sell European bonds in the
United States, severe exchange pressures soon developed,· firs
Central Europe and then on the pound sterling.
The great depression brought serious disorganization of
the international monetary system, as well as the banking sys
in the United States. However liquidity is defined, it was
severe ly shrunk. At leas t some part of the severity of the
depression must probably be attributed to the cumulative
weaknesses that became evident in the U. S. financial and
monetary system. These weaknesses led to certain important
modifications. The internal redeemability of dollar currene,
gold was el iminated, thus reserving our gold reserves for
international use. The United States also withdrew for
years from the bus iness of extending international credit in
the form of bonds and loans to foreign banking systems. ~
depreciation of sterling in 1931 was followed by dollar
depreciation in 1933, and by the eventual collapse of gold bl
exchange rates in 1936.
s.
The record of the Thirties was not a happy one in
.
international trade and finance.
It was marked by competit;'
currency depreciation, by restrictive trade practices, and~
a general breakdown in international capital flow. And ind
latter years, prior to the War, large amounts of Continental
European funds sought refuge in London and in the United
States.
- 4 In 1936, the first tentative ~fforts to develop C~t~_
monetary cooperation by the major governments appeared with ~
Tr~partite Agreement of that year.
Technically and operatiOQj
this agreement assured temporary offic ial support for the go~
market, dnd thus for the maj or exchange rates. But it also
introduced a general presumption against exchange depreciati~
among these leading countries.
During the Thirties, world trade fell off in terms of.
In 1938) trade was only about 10 percent higher than it had ~
in 1913, and was about 25 percent below the 1928 level. Beclil
of this 3hr Inkage, and because currency depreciation raised d
price of gold, reserves became very large by comparison with
trade. For the world as a whole, reserves rose to 117 percenl
of trade, and, for the world outside the United States, reser
were 63 percent of trade. However, these very large reserves
did DQt stimulate an effective recovery of world trade under
the post-depression conditions.
Bretton Woods and the Period 1945 to 1958
·While the war was still going on, the Allied nations hell
an international monetary conference in 1944 at Bretton Woods
New Hampshire.
From that conference there emerged certa~
general principles that have formed the foundation of t~
international monetary system during the past two decades. k
out of this conference came the International Monetary Fund!
the International Bank for Reconstruction and Development.
The experience of the inter-war period had vividly
impre~,3€d ':he delegates to the conference at Bretton Woods.
The~), tbErefore, established the system of so-called "adjusts
pegs ,Ii or e>{chaI!ge rates, that remained fixed unless a count!
wa·3 c:onsi.dered to be in fundamental disequilibrium. The pur'!
her:e v7as to li.mit compet.itive exchange rate depreciation. Tb
second me::.] or element was to provide a pool of international
cred~t wnich could supplement the reserves of individual Cd
by estBb:;"ishing specified lines of credit availability. The
third major principle was that current exchange transactions,
as distinguished from capital transactions, should be carried
out freely wit~out exchange restrictions.
HCTtleVer, it took some time for reality to overtake these
ideals. The world emerged from the war with the dollar as tb
maj or key currency. Other currenc ies were fixed in relatiOD I
the dollar, and their value was maintained by official purcba
and sa~e of dollars.
Through the convertibility of the dol~
iuto g;:;td, dlE wCiJor currencie~ were--C.O.nnected with gold. IW
- 5 for a number of years after the war" restrictions were mainta~
by European countries, even on current transactions. Many
countries did not achieve strong currencies until after t~
Marshall Plan had poured very large amounts of dollars into ~
economies. The exchange rates of most European countries~n
depreciated in terms of the dollar in 1949. Although exchange
restrictions began to be relaxed, in the Fifties, and the
European Payments Union brought liberalized payments within t~
Western European group of countries, world-wide convertibility,
did not come until late in the Fifties. At the end of 1958,
fourteen European countries announced de facto convertibility,
for new acquisitions of their currencies by foreigners, and t~
the crucial step in eliminating an important barrier to fll7fls
of goods and money between the Western Hemisphere and Western
Europe.
Continental Europe recovered its financial strength
rapidly after the exchange adjustments of 1949, with the ~~
of the Marshall plan and large U. S. military expenditures ~
Europe. However, France was still troubled with currency weaW
until 1958. Sterling also came under pressure periodical~,
and British reserves showed no persistent upward trend. Over~
all, however, industrial countries other than the United Sta~
had already increased their reserves by $14 billion from 1948
to 1958, to nearly $22 billion, a figure almost as large as
United States reserves of $22.5 billion.
During this period, the world seemed to be approach~g
steadily toward carrying out more and more of the objectives
of the Bretton Woods Conference. The international monetary
sys tern appeared to be making steady progress and to be servillJ
the world well. The postwar recovery of Europe, both
economically and financially, was in striking contrast to t~
difficulties that had been encountered in the first fif~~
years after World War I.
In Europe, full employment
contrasted with the heavy unemployment of the Twenties.
Reserves were built up with great rapidity. The burden of ,
postwar indebtedness to the United States was extremely mode~
because of the enormous quantity of our resources that was
made available to Europe through the Lend-Lease system and t~
Marshall Plan.
- 6 This was the situation at the ,end of 1958. Why, now, is
there so much talk about the need to improve the international
monetary system? To find an answer to this question, let us
first review some of the elements that make up the
international monetary system.
Elements of the International Monetary System
Mr. Roosa, my dis tinguished predecessor as Under Secretaq
of the Treasury for Monetary Affairs, has pointed out in a rect
book that, in a strict sense, there is not really an
international monetary system at all. What we have is a set ~
institutions and procedures which, over time, have become
conventionally acceptable arrangements for making internationa
transfers of funds that settle international transactions and
for providing reserves that are held by monetary authorities.
The International Monetary Fund and the Articles of
Agreement under which it was established provide a certa~
foundation and basic framework for the system. This is .
essentially the system of exchange rates that are fixed fm
considerable periods of time and are changed only when there
is a clear case of a fundamental disequilibrium. In addition,
there are a number of special arrangements between particular
countries and groups of countries, such as the franc area or
the sterling area, under which trade or payments are conducted
or reserves are transferred, lent or borrowed.
The system may be likened somewhat to a rather rambling
house that has grown up over a considerable period of time,
with various additions made from time to time by different
builders.
It is not necessarily an artistic whole, but it
func tions ra ther we 11 and keeps the currenc ies of the world
living together more or less comfortably. At times ,however,.
there is a certain restiveness among the tenants and a feel~
that the house needs some further expansion or some major
repairs, or both. This is one of those periods.
There appears to be increas ing agreement that the world
payments system as a whole requires three types of money:
(1) national or domestic currencies for internal use;
(2) vehicle or transactions currencies that are used by bankS
and traders of one country in making payments to banks and
traders of other countries; and (3) reserve assets that are
held by and used by monetary authorities in making payments ~
monetary authorities of other countries.
- 7 Domestically, countries utili~e money created by t~~
cen tra 1 banks and the ir commerc ia 1 banking sys terns in the for.
of currency notes and deposits. The use of domestic moo~b
quite familiar and needs no further comment.
The second type of currency may be called a "trading"
or a "vehic Ie" currency. For this purpose na tiona 1 currencies
are normally used in foreign trade, and especially the nationa
currencies of some of the maj or countries. Most international
trade, in practice, utilizes dollars or sterling, though t~
French franc would be the normal currency for transactioos
between France and the French-speaking areas of Africa, for
example. Along with the use of their currencies in
international trade, there is likely to be a substantial am~
of financ ing of trade by banks in New York or in London or Pal
in the form of dollar, sterling, and franc credits. During
the postwar period, privately held international balances have
risen rapidly in the form of dollars to $10.6 billion at t~
end of 1964, while sterling balances in private hands ha~
grown more slowly to about $4.8 billion.
The third category, reserve assets, are held as reserves
by the monetary authorities of the maj or countries. Although
private holdings have their bear ing on the over-all liquidity
problem, the main questions relate to official reserves. Mos'
of these remarks deal with this category of money.
Internationally, reserve assets are available in case of
need to finance deficits in a country's balance of payments,
However, central banks cannot replenish their reserves in qui!
the same way as a commercial bank in the United States. They
do have access to certain credit fac ilities in the Internatill
Monetary Fund and they may have arranged bilateral swapsw~~
the United States or other countries, but these credit facH'
are usually limited as to the amount that is quickly availab
without any questions being asked (unconditional credit).
Additional borrowing is likely to be accompanied by searching
international inquiry into the policies of the borrowing
country. Especially important is their inability, in most ca
to sell or discount abroad their assets representing do~s~
loans or investments.
International reserves may also perform, sometimes W
ra ther severe fashion, the func t ion of exerc is ing res traint
upon the lending and investment activities of the national
currency system.
- 8 But there ~s no direct and tr\1e ~nalog~ of the workings
of the internat10nal monetary system 1n laY1ng a restra~bg
hand upon the monetary expansion of a country and the workinsl
of domestic monetary systems in restraining the credit expanst
of banks within the system. For there is only one monetary
authority for a given region or country. Consequently, its
reserve pos it ion is affec ted not only in the narrow sense by
its own liberality or tightness in credit policy, but also in
the broader sense by the vigor and competitive strength of all
the business activity that is carried out within the region
or country it serves. There is, of course, an important intel
connection between the growth of demand and of business acti~
the region and the supply and price of credit within the regu
but credit cost and availability are by no means the sole
factors affecting the relative competitive positions of two
currency areas. The effic iency of labor, the availability of
natural resources, the many other factors affecting the aggr~
leve ls of demand in the two areas, the s truc ture of savings,
consumption and investment, the form and magnitude of public
outlays for defense and othe.r purposes, and many other variab
will affect the volume of transactions between two currencY81
and, hence, the net settlements which must be met out of
reserves or out of credit facilities that supplement reserves,
A word must be said here about the applicability of much
of wha t has jus t been sa id to re serve currenc ies . So long as
other monetary authorities are prepared to acquire and hoN
additional deposits or investments denominated in a reserve
currency, the monetary authorities of such a reserve country
may be able to finance deficits without using reserves or
calling upon specific credit facilities. That is, they aR~
the position of being able to transfer domestic assets to
foreign monetary authorities without losing reserves. But tb
situation lasts only so long as other monetary authorities am
prepared to add to their holdings of such assets. And at any
time, foreign holders may decide to turn in such assets for
conversion and draw down the reserves of the reserve center.
In the last analysis, reserves for the commercial bankiJ
system are whatever is defined as reserves and accepted as
reserves by national authorities and by the practice of
commercial banks.
Internationally, in somewhat the same ~
reserves, or reserve assets, represent those assets which 108:
central banks will accept freely from other maj or central bal
- 9 Types of Reserve Assets
At present, there are three basic forms of international
reserve assets: gold, foreign exchange, and virtually
unconditional drawing rights on the International Monetary
Fund.
The oldest and most firmly established form of reserve is
gold.
It has served this. purpose for many decades, an~ itsuse in some form as a bas~c money goes back for centurles.
It is, as someone once pointed out, one of the few commodities
that can move in international trade without tariffs or
restrictions, at least when it is destined for monetary
authorities.
In effect, it has universal acceptability. T~
countries of the Free World presently have $41 billion in gold
in their international reserves, with about one-third held by
the United States, and about 50 percent held by Western
European countries.
The foreign exchange component of international reserves
consists principally of dollars and sterling. Currencies he14
as reserves depend partly upon history and practice. A very
important factor is confidence in the maintenance of value of
the currency in terms of gold and other currenc ies. But then
are other important considerations that lead countries to holf
reserves in a particular currency. They like to find assets!
which the foreign exchange can be safe ly invested and which CI
sold quickly and easily, with a minimum of possible loss. ~
means there mus t be broad and deep marke ts for the securities
which their reserves are invested. There must be a large suA
of foreign exchange available to be widely held by forei~
countries. Today, only the dollar and the pound, and, toa
more limited extent, the franc, are used as reserve currencie
in this way. The pound and the franc are he ld as reserves
largely by countries within the sterling area and the franc
area. The foreign exchange component in international resert
now totals about $22 billion, of which about three-fifths is
in the form of dollar assets.
The third type of reserve asset has developed more
recently, as the Fund has extended credits to its members.
It has come to be realized that there is a basic claim oo~
Fund known as the gold tranche -- tranche being French for
- 10 "slice" or "cut" -- which arises initially when a country
contributes gold to the Fund in the amount of one-quarter of
its quota subscription. But, in addition to this gold tranclw
there is also the so-called "super gold tranche," which
represents an amount equal to any credit claims that countriel
may acquire in the Fund in excess of the gold tranche. These
credit claims on the Fund arise when the currency of a given
country is utilized by the Fund to make loans to other countr~
Countries may draw virtually at will on the Fund, so long as
they have super gold tranche or gold tranche claims. T~~
"unconditional drawing rights" on the Fund total about $5 bill
Thus, over-all, the countries of the Free World now have
about $68 billion in reserve assets -- $41 billion in gold,
$22 billion in foreign exchange, and $5 billion in unconditi(ll
drawing rights on the Fund.
The U. S. Balance of Payments Deficit and World Reserves .1958 to 1964
After this survey of the prine ipal types of reserve asse
we may now look a t the crowded mone tary his tory of 1959-64 to
find the answer to the question as to why there is so much curl
interest in improving our monetary system. By 1958, the
United States had swung sharply into a large deficit, foll~iI
the somewhat favorable balance of payments position brought
about in 1957 by exceptional difficulties of the United
Kingdom and France. During the six years beginning with 19~
the United States recorded a series of very large internati~
deficits.
It is true that a substantial part of the deficit
reported by the Department of Commerce during these years, ab
$5 billion, took the form of additions to private dollar hold
Nevertheless, the amount of the deficit which resulted in an
increase of officially held reserves in foreign countries was
nearly $13 billion. Continental European countries acquired
the lion's share of these reserves. We have estimated t~t
nearly three-quarters of the growth in official reserves ofd
rest of the world was accounted for by the counterpart of
United States deficits. Since the over-all growth in reserve
of other countries was about $17 billion during these su
years, they also derived rather small amounts from new moneta
gold supplies or through the net increase of their creditor
claims on the International Monetary Fund.
- 11 These figures give a quick indication of the two major
problems that are faced by the United States and the world in
dealing with international reserves in the future. The
United States cannot afford to continue to run deficits and
supply reserves in this fashion. To do so would mean that ~
own reserves would be reduced and our own international
position impaired, not only financially but in many other ways
as well. An internationally strong currency and a strongv~~
. in world affairs tend to go together.
Financially, our curren:
assets would be reduced too far relative to our current
liabilities. The acceptability of dollar assets to foreip
monetary authorities would be weakened, and this could lead tG
a shrinkage in existing world liquidity, concentrated 00 oor
own reserves, which have been declining over quite a long
period.
For these reasons, President Johnson has made clear that
United States deficits must be stopped. Speaking in WashingtlJ
on the first of October, he told the Governors of the
International Monetary Fund: "I want to be very clear aoout
this. We mus t, in our own in teres t and in the in teres t of thlJ
who re lyon the dollar as a reserve currency, maintain our
payments in equilibrium. This we will do."
But the second part of the problem then faces us with
the cessation of U. S. deficits. For this means that a major
part of the secular growth in international reserves also st~
New monetary gold supplies are not sufficiently large to meet
needs for additional reserves. The world economy is growing
rapidly and, while no one sees as necessary an exact or mecluU
relationship between the growth in world trade or world
activity and the need for additional reserves, it seems ~i~
clear that, sooner or later, more reserves will be required,
Thus, some alternative procedures that will provide for
additions to world reserves must be established.
In this connection, it is of interest that, in June, 196
the official reserves of all Free World countries taken
together -- excluding the United States -- stood at about 35
percent of world imports, c.i.f. basis. This means that
reserves of other Free World countries were roughly suff~~
to cover four months of imports, if fully utilized. Natural!
there were wide differences among countries and regions, but
the over-all ratio of 35 percent is the same as it was in d
1928, lower than it was in 1958, when it was 41 percent, an
as low as at any time since 1948, when the ratio was 43 perl
- 12 -
The ratio of U. S. reserves to imports, at 66 percent, is
nearly twice as high as that of other Free World countr~s
taken together. But United States reserves can be called~~
by foreign holders of dollars as well as for financing our <74
imports in case of need. Our awn ratio to imports has been hi
since 1959.
International Monetary Cooperation -- 1958 to 1964
Before noting some of the issues that will be faced in
trying to find a solution to the problem of reserve creation,
it will be helpful to review briefly what has been accomplis.
in the field of international monetary cooperation during the
six years of large U. S. deficits. It is important to do thia
not only because the progress made in this area makes it n~
possible to mount an international approach to the new andm~
difficult task of deliberate reserve creation, but also becau.
the developments of the past six years are, themselves,
unprecedented and represent really gigantic steps in international understanding and in determined efforts to organize
international activities in the monetary field.
The monetary history of these years is so crowded that
it is difficult even to touch upon these achievements in a
br ie f c ommen tary of this type. However, some of the highlighb
may be mentioned.
First, in 1958-59, quotas in the International Monetary
Fund were increased by 50 percent across the board, with
additional selective increases for several leading industrial
countries. This provided about $2.7 billion in additional
gold and European currencies to the Fund, with a total
enlargement of its resources of about $5 billion. However, in
1961, it was realized that, even with the quota increase, the
resources of the Fund might prove insufficient to meet severe
strains on leading currencies and dat such strains could
threaten to impair the functioning of the monetary system as
a whole. After negotiations carried on during 1961, agre emenl
was reached between the Fund and ten leading industrial coon~
under which these countries contracted to provide loans to~
Fund under specified conditions in amounts up to $6 billion.
This understanding became known as the General Arrangements
to Borrow, and the participants in it became known as the
Group of Ten. Parallel arrangements were set up by the ~W
authorities to provide up to about $200 million in Swiss fr~
directly to the Fund for GAB members.
- 13 There is now in process a further increase in the Fund
resources, amounting to 25 pcercent across the board plus
additional amounts for a number of individual countries.
Generally speaking, Fund resources make available mediumterm credit. Through direct contacts among the monetary
authorities of leading countries, short-term credit facilities
have also been provided on a very large scale, both on a stand.
by bas is and through ad hoc arrangemen ts . A ne twork of swap
facilities, developed by the Federal Reserve System, has nw
reached a total of $2.8 billion. The United Kingdom has, fr~
time to time, made use of similar short-term faci1it~es,
arranged to meet particular needs. The largest such operation
took place at the end of November, 1964, when $3 billion ~~
term credits was arranged to strengthen the pound sterling.
In addition to the development of credit facilities,
close and frequent consultations between responsible officials
of treasuries and central banks are now a regular feature,
through the Bank for International Settlements, and through
a Working Party of the Organization for Economic Cooperatioo
and Development. This Working Party is now undertaking a
thorough study of the process of adjustment of international
imbalances under modern conditions.
In the mean time, the Depu ties of the Group of Ten bring
together responsible officials of these countries to consider
the basic problems of the functioning of the international
mone tary sys tem and future needs for reserves. Under the aeg~
of this group, a technical study, known as the "Ossola Report,
was published in August, 1965. This Report examines a number
of possible ways of creating reserve assets.
For its part, the International Monetary Fund has also
examined the question of creating reserve assets. In its
Annual Report for 1964, the Fund strongly urged that any
alterations made in the monetary system be evolutionary a~
be based on supplementing the existing system, where necessary
The Fund also indicated its belief that further development of
international reserves could, and should, be based on the ~d
- 14 The Tasks Ahead
Against this background, there are, as mentioned, ~o
basic tasks ahead. Our first maj or responsibility is to reach
and maintain a sustained equilibrium in the United States
balance of payments. We are well advanced in this task. ~
known that we can succeed in it, and we will not relax our
program for doing so until we succeed.
The second maj or task, on which I will comment here, is
to improve our international monetary arrangements so that
they will continue to meet the needs of the rest of the world
and of the United States in the future, when reserves are no
longer supplied by U. S. deficits because our payments have
been brought into equilibrium. We may conveniently divide
this into several aspects.
The first aspect is the perfecting of our arrangements
for safeguard ing the mone tary sys tern agains t abrupt and short·
term strains on major currencies. Here, bilateral and other
credit arrangements, involving direct action by national
monetary authorities, are particularly useful, due to their
flexibility and speed of activation.
Secondly, cyclical imbalances of particular countries 1111'
be expected, even if we had an all but perfectly adjusted
economic world. To deal with such imbalances, medium-term
cr'edit is called for, and the Fund has come increasingly to be
relied upon for this purpose, supplemented, in appropriate
cases, by the General Arrangements to Borrow. To fulfill thil
function, the Fund needs adequate access to the currencies of
surplus countries. How to assure this, to couple the use of I
Fund's facilities with appropriate encouragement of correctia
of the imbalance and to gain the cooperation of surplus countt
in correc ting imbalances, are the key problems in the cyclica
aspec t of the over-all task. Whe ther there is a field for
bilateral credits of a medium-term character, through special
securities issued to creditor countries directly, could a~o
be explored, since increase in quotas or changes in the scale
of the General Arrangements to Borrow may occur only at
relatively infrequent intervals.
As in the case of short-term monetary credits, mediumterm credits are likely to create reserve assets on t~ bo~
of the monetary authorities of the creditor countries.
is now being recognized, and the global statistics on
reserves, carried in the publications of the Internatiooa1 .
Mone tary Fund, inc lude a category called Reserve Position.Jj
the Fund.
nU
- 15 It is in considering the longer term, or secular area
of creating reserves intended to be more or less permanently
or indefinitely carried on the books of monetary au thorities
that we encounter the third aspect of the task. This is
'
usually described as the "deliberate creation of additional
reserve assets."
There are a number of difficult problems ahead for
negotiators. The deliberate creation of additional reserve
as se ts d if fer s from what has been done up to now, in somewhat
the same way as our nuclear and space activities in the
scientific field differ from conventional weapons and
conventional aircraft of the past. The world has never before
set about this task deliberately. Monetary authorities are
going to be careful before they introduce into balance sheets
a reserve asset to be held more or less indefinitely.
I have used the term "additional reserve asset"
consciously. There are ways of creating deliberately more
reserve asse ts of the type tha t we already have, such as -resen
positions in the Fund. There are also approaches that would
require an entirely new type of asset, such as special reserve
units created by a group of countries, either in partnership
with the Fund or independently.
The United States has stressed that the interests of all
members of the International Monetary Fund must be considered
in these negotiations and that countries not members of the
Group of Ten must be represented in the second stage of the
preparations for formal improvements in the monetary system,
after the firs t stage of negotiations in the Group of Ten has
provided some basis for an eventual international understand~
In doing this, hCMever, we fully recognize that there is a
conceptual difference between the problem of creating adequate
reserves for the world and the capital needs of developing
countries.
In the same way, there is a conceptual distinction between
the financing of a cyclical or short-term deficit and the
creation of reserves of an indefinite duration. But,again,
reserves, however created and for whatever purpose, can be
spent. Reserves which could only be held and never spent wool
be strange instruments, indeed, though, in practice, a large
proporti.on of the world's reserves do remain large 1y inert
for long periods of time.
- 16 What are some of the maj or negotiating problems? I shall
merely sketch them briefly, though much has been and will be
written about these questions, I am sure.
Firs t, there are differing views among the Group of Ten
itself, as to the imminence of a need for additional reserve;,
The Continental European countries generally believe then~
too much liquidity now. They have had large-scale annual
increases in reserves amounting to about 10 percent a year.
They believe these increases have contributed to the
inflationary pressures which present to them their most
difficult internal problem of economic policy.
Second, the European concern about inflation also causes
them to put a great deal of emphasis on the ways of imposing
adequate discipline on countries in deficit to take prompt
and e ffec tive measures to res tore balance. The United States
has, for its part, endorsed more intensified study of t~
adjustment process in the hope this study will emphasize more
clearly that surplus countries, as well as the deficit countr
have essential responsibilities in this area.
Third, there are a number of substantive questions
concerning the techniques for creating reserve assets. The
Study on the Creation of Reserve Assets by a study group of
Group of Ten countries, headed by Rinaldo Ossola, of Ita~,
and made public last August, has explored in depth a wi~m
of ways in which a new reserve asset might be created. Sooe
are simple ones which could be instituted fairly quickly
through modifications in the operating policies of the nIT.
Others would call for the creation of a new reserve unit,
either within or outwide the IMF. Still others would aim
primarily at changing the character of present reserve
elements without necessarily adding to the supply. Some
envisage that combinations of schemes should be adopted.
Four issues have been conveniently
the Ossola Group Report, and these four
the negotiators. The substantive views
are being developed in these questions,
anticipate them here.
listed at the end of
will clearly confront
of the United States
and I shall not try t
- 17 One question is whether or not a new reserve asset can
be utilized in international settlements only along with a
specified quantity of gold or other reserves or may circulate
on its own. For our part, we believe that the creation or use
of a new unit should not influence nations directly or indireo
to seek to add unnecessarily to their holdings of gold. As~
country to whom others turn for gold when new supplies are not
available, we have a vital interest in this aspect.
The width of membership for purposes of management and
distribution of additional reserve assets raises economic,
financial, and political questions, involving the status of
nations outside the Group of Ten, and their relationsip to
the process of creating and distributing new reserve assets.
In the third place, a view has been expressed that the
IMF should properly be provided with sufficient resources to
fulfill its function of providing credits to individual
countries, but that the Fund should not have a leading or
important policy role in the de liberate creation of reserves.
On the other hand, many of the member countries of the nIT
at the recent annual meeting supported IMF Managing Director
Schweitzer's view that" liquidity is the Fund's business."
The rules for decision-making present both economic and
political difficulties. How can the minority be protect~d,
while avoiding the exerc ise of an inordinate degree of power
on the part of a country or countries which, at any given tim
would be re luc tan t to approve the crea tion of the reserves
generally desired?
Conclusion
In conclusion, let me cite a statement of the President
of the United States on October 1, 1965:
"The long period of large U. S. deficits has
come to an end. If growth is to continue and
trade is to expand, we must provide an effective
and adequate substitute.
"This is not a matter of an immediate crisis.
But it is a matter on which we must·begin to
ac t - - now. We mus t beg in now to provide machinery
for the creation of additional reserves. Gold
- 18 alone will not be enough to support the healthy
growth which the ent ire world demands. I t will not
be enough in the future any more than it has been
in the past.
"There is no shortage of plans for reforming
the world's monetary system.
"Let us try to choose the best. But let us
remember the best is sometimes the enemy of the
possible. Let us not become so preoccupied by
questions of mere detail that we end up doing nothing.
Ours is a large and growing wor ld . I t has a large
and growing trade. Let us provide for this growth."
000
Country or Group
.Gold
Fore1.gn
Exchange
IMF
Position
Industrial Europe
Canada and Japan
United Kingdom
Other Western Europe
Australia, New Zealand,
South Africa
Less Developed Areas
7.7
0.2
-0.7
0.6
2.8
1.3
-0.1
1.1
2.0
0.3
0.4
-0.2
0.6
0.6
8.0
~J
-5.1
2.9
Total above *
United States
Total all Countries*
*
Columns may not add due to rounding
Tota1
Increase
(6 Years)
A:vera.ge
A.~~'-1a'1..
Rate of Increase
Amount
fir
2.1
.3
- .1
.3
10.1 17.9 1-
0.2
12.5
1.8
- 0.8
1.9
0.2
0.2
1.2
0.6
.2
.1
9.5 1.
1.0 1.
2_._a
17.1
2.9
6.8 1-
0.4
-1.2
- 5.9
-1,0
6.8
1.6
11.3
1.9
-
11.5 1.
3.0 1.
1959
54
126
41
64
43
48
1960
51
117
40
61
45
50
1961
51
117
41
61
47
51
1962
48
97
40
56
45
50
1963
47
~l
40
52
43
47
1994
43
82
38
48
40
46
39
66
35
43
37
42
106 5·~·tf'''''''
..'.
(1st half)
:;,J
;~':('k
~
As percentage of estimated 1965 imports
QQl..I2 HQ.I..t:!:l:Bacl
A3.1
~tri.eB
~
.aa
.
All Countri.es
Minus U.S p
1913
19
14
1928
32
23
1937
93
53
1.938
110
54
.EliRCEta:
Q~
~.PC-.I.-bit
0-10 Plus
l2.witzerland
G-10 Plus
Sw~tzerland
Minus U.S.
G-10 Plus
.
Sw~tzerland
Mi.n:us_U~S~ ~
0-948
- 55
i
302
16
97
21
31
1949
57
326
17
98
22
26
1950
57
237
22
86
27
23
1951
41
192
15
62
18
18
1952
43
199
15
64
18
20
1953
46
186
19
65
23
22
1954
44
196
18
65
24
23
1955
39
174
17
58
22
23
1956
36
158
16
52
20
21
1957
35
156
15
50
19
21
1958
38
141
20
55
28
28
1959
y;
115
21
51
28
30
1960
32
108
20
45
27
29
U.K.
--1°1.3
21_
17
1923
42
35
1 n 37
101
63
193~
III
63
1948
81
319
43
104
30
34
1949
77
345
48
109
31.
37
19§O
84
252
50
100
41
)"
<-)
1951
62
204
37
72
2"'J
31
1~52
63
211
38
80
3!+
3~~
1953
69
108
45
81
40
41
1954
68
206
45
82
43
4~
1955
62
183
42
73
40
/~
1956
58
169
39
67
)/
41
1957
53
170
35
63
33
3t~
1958
58
154
41
71
44
'jO
*
**
4
Total reserves at the end of the indicated period including r,old, foreip,n exchange, and re~erve
position in IMF.
All IMF members plus Switzerland
GOLD HOLDINGS AS PERCENT OF IMPORTS
All
Countries
1J...§....
All Countries
Minus U.S.
G-IO Plus
Switzerland
- Contin°
G-IO Plus Switze
Minus U.S.
G-IO Plus Switzerlan
Minus U.S. and U.
1961
31
105
20
44
27
30
1962
-
30
90
20
40
27
28
1963
28
84
20
37
26
27
1964
26
76
18
34
24
28
1965** 24
(First half)
60
18
:31
23
25
* All IMF members plus Switzerland
** As percentage of estimated 1965 imports
WORLD IMPORTS AND MONETARY RESERVES
DOLLARS
Billions
1958-1965 (Quarterly Beginning March 1963)
I
Total World .,---_ _+--_June
200 f-----+-------+----t-----_+_ Imports" \
1
200
....... .-.........
.........- ....... . _.l----r-----r-:.
........... ........
IMPORTS
100
.......
~ World Imports*_-t-_ _- - I 100
•••••••••••••••• •••••
(Excl
................ ......
u.s.)
80~-----+-------~------_r------_1--------t_------+_----~~
--
RESERVES
60~---~__
--__
==a-~--~--~--~~--==--~--~----r--------+-
~-+----~
40
40
l
----..-20
Industrial Europe
(Excl. u.K.)
...............--. ------..- _.-.......
~us
10
60
.-
20
,---
Less Developed
Areas
~
8
10
8
I' Canada
Plus
Japan
6
----
4
2~~~~-----+------~~
~ Australia, N Zealand,
and S. Africa
1~~58~----~~~9~----~OO--------oLI--------oL2-L-OL3-L~~-·64~~~J-o~5~
.. Quarterly data for imports expressed as annual rates.
Source: IMF. International Financial Statistics.
6
4
TREASURY DEPARTMENT
November 9, 1965
CANADIAN SECURITIES ISSUES POSTPONED
fhe Treasury today issued the following statement in response
luiries:
The United States and Canada have agreed that the
authorities of both countries will solicit the
!ooperation of borrowers and underwriters of both countries
1n deferring delivery until 1966 of further securities
)fferings.
~inancia1
It is hoped, in this way, to smooth the quarterly flow
If capital between the two countries consistently with the
easona1 balance of payments considerations of both.
The background to the above moves is the following:
The United States and Canada have agreed, as part of
~bntinuing cooperative arrangements made in 1963
to make a
loint effort to limit during the remainder of this year the
lmount of funds delivered to Canadian borrowers raising
'1oney in U. S. capital markets.
In July 1963, at the time when the Canadian exemption
rom the Interest Equalization Tax was secured, Canada
tated that it was neither her desire nor intent to increase
~r foreign exchange reserves through the proceeds of
lorrowing in the U. S. The two governments agreed to
laintain close consultation on this matter in the interest
If both countries.
As a result of recent large sales of wheat to the
SSR and the usual seasonal strength in her current account,
he level of Canada's foreign exchange reserves, including
er creditor position with the International Monetary Fund,
as been running somewhat higher in recent months than the
eve1 used as a base in the 1963 understanding. At the
ame time, Canadian security offerings have been running
t a high rate, with expected deliveries in the fourth quarter,
n the absence of deferments, expected to reach $250 million.
While Canada's balance of payments picture is seasonally
trong in the fourth quarter, it traditionally has a large
urrent acco~nt Q~fi~it to meet in the winter and in the spring.
006\
TREASURY DEPARTMENT
November 9, 1965
CANADIAN SECURITIES ISSUES POSTPONED
The Treasury today issued the following statement in response
to inquiries:
The United States and Canada have agreed that the
financial authorities of both countries will solicit the
cooperation of borrowers and underwriters of both countries
in deferring delivery until 1966 of further securities
offerings.
It is hoped, in this way, to smooth the quarterly flOil
of capital between the two countries consistently with the
seasonal balance of payments considerations of both.
The background to the above moves is the following:
The United States and Canada have agreed, as part of
continuing cooperative arrangements made in 1963 to make a
j oint effort to limit during the remainder of this year the
amount of funds delivered to Canadian borrowers raising
money in U. S. capital markets.
In July 1963, at the time when the Canadian exemption
from the Interest Equalization Tax was secured, Canada
stated that it was neither her desire nor intent to increase
her foreign exchange reserves through the proceeds of
borrowing in the U. S. The two governments agreed to
maintain close consultation on this matter in the interest
of both countries.
As a result of recent large sales of wheat to the
USSR and the usual seasonal strength in her current account,
the level of Canada's foreign exchange reserves, including
her creditor position with the International Monetary Fund,
has been running somewhat higher in recent months than the
level used as a base in the 1963 understanding. At the
same time, Canadian security offerings have been running
at a high rate, with expected deliveries in the fourth qu~rtd
in the absence of deferments, expec ted to reach $250 milllon.
While Canada's balance of payments pic ture is seasonallY
strong in the fourth quarter, it traditionally has a large
current account deficit to me..et: In the wlnt:er ~nd in the sprl
afIl)o
.. :3 -
ther disposition of Treasury bills does not have any special treatment, as
er the Internal Revenue Code of 1954.
The bills are subject to estate,
ee, girt or other excise taxes, whether Federal or State, but are exempt from
10D DOW or hereafter imposed on the principal or interest thereof by artY State,
the possessions of the United States, or by any local taxing authority.
For
01' taxation the amount of discount at which Treasury bills are originally sold
lted states is considered to be interest.
Under Sections 454 (b) and 1221 (5)
ternsl Revenue Code of 1954 the amount of discount at which.bills issued heresold is not considered to accrue until such bills are sold, redeemed or otherosed ot, and such bills are excluded from consideration as capital assets.
J.y, the owner of Treasury bills (other than life insurance companies) issued
Deed include in his income tax return only the difference between the price
luch billa, whether on orIginal issue or on subsequent purchase, and the amount
received either upon sale or redemption at maturity during the taxable year
the return is made, as ordinary gain or loss.
5Ury
Department Circular No. 418 (current revision) and thia notice, prescribe
of the Treasury bllla and govern the conditions of their issue.
lar may be obtained from any Federal Reserve Bank or Branch.
Copies of
- zfor.ms and forwarded in the special envelopes which will be supplied by Federal
Banks or Branches on application therefor.
:!king institutions generally may submit tenders for account of customers pro1e names of the customers are set forth in such tenders.
~ions
others than banking
will not be permitted to submit tenders except for their own account.
will be received without deposit from incorporated banks and trust companies
m responsible
and recognized dealers in investment securities.
Tenders from
rust be accompanied by payment of 2 percent of the face amount of Treasury bills
for, unless the tenders are accompanied by an express guaranty of payment by
:'})Orated bank or trust company.
lediately after. the closing hour, tenders will be opened at the Federal Reserve
ld Branches, following which public anouncement will be made by the Treasury
Int of the amount and price range of accepted bids.
advised of.the acceptance or rejection thereof.
Those submitting tenders
The Secretary of the Treasury
.y reserves the right to accept or reject any or all tenders, in whole or in
,d his action in any such respect shall be final.
Subject to these reserva-
oncompetitive tenders for each issue for $200,000 or less without stated
om anyone bidder will be accepted in full at the average price (in three
) of accepted competitive bids for the respective issues.
Settlement for
tenders in accordance with the bids'must be made or completed at the Federal
Bank on
November 18, 1965
(Ii)
, in cash or other immediately available funds
like face amount of Treasury bills maturing
lnge tenders will receive equal treatment.
November 18. 196;:)
--~==~(~~)~~---
•
Cash
Cash adjustments will be made for
~es between the par value of maturing bills accepted in exchange and the issue
the new bills.
income derived from Treasury bills, whether interest or gain from the sale or
IPOsition of the bills, does not have any exemption, as such, and
10S8
from the
TREASURY DEPARTMENT
Waship.gton
November 10, 1965
roIATE RELEASE,
TREASURY'S WEEKLY BILL OFFERING
Treasury Department, by this public notice, invites tenders for two series
JUry
bills to the aggregate amount of $ 2,200,00 J 000 , or thereabouts, for
in exchange for Treasury bills maturing November 18, la6S
(}i)
22558,000
i
(X)
, in the amount
, as follows:
1 -day bills (to maturity date) to be issued November 18, 1965
r
in the amount of
$ 1,200,000,000
(1)
(i)
I
or thereabouts, represent-
ing an additional amount of bills dated
and to mature February 17, 1966
(»1
amount of $
l,ooCifil'OOO ,
,
August
«tJ
,
1965
, originally issued in the
the additional and original bills
to be freely interchangeable.
182-day bills, for $ 1 2000 OOO,00o , or thereabouts, to be dated
If
( z)
November 18, 1965 , and to mature
May 19, 1966
t
(Ii)
(U)
•
bills of both series will be issued on a discount basis under competitive
~petitive
~yable
bidding as hereinafter provided, and at maturity their face amount
without interest.
They will·be issued in bearer
fo~
only, and in
~1ona of $1,000 I $5,000, $10,000,' $50 I 000, $100 I 000 , $500, 000 and $1,000, 000
r value).
'iera will be received at Federal Reserve Banks and Branches up to the closing
"-thirty p.m., Eastern Standard time, Monday, November 15, 1965
• Tenders
~
be received at the Treasury Department, Washington. Each tender must be
~nmultiple of $1,000, and in the case of competitive tenders the price
~st be expressed on the basis of 100, with not more than three decimals,
.925.
Fractions may not be used.
It is urged that tenders be made on the
TREASURY DEPARTMENT
November 10, 1965
FOR IMMEDIATE RELEASE
TREASURY'S WEEKLY BILL OFFERING
The Treasury Department, by this public notice, invites tender
for two series of Treasury bills to the aggregate amount of
~ 200 000 000 or thereabouts, for cash and in exchange for
Tr~asun, billS 'maturing November 18, 1965, in the amount of
$2,202,558,000, as follows:
91-day bills (to maturity date) to be issued November 18, 196~
in the amount of $ 1 ,200 ,000 ,000, or thereabouts, representing an .
additional amount of bills dated August 19, 1965, and to
mature February 17, 1966,originally issued in the amount of
$1,000 ,551 ,000, the additional and original bills to be freely·
interchangeable.
182 -day bills, for $ 1, 000, 000, 000, or thereabouts, to be dated
November 18, 1965, and to mature May 19, 1966.
The bills of both series will be issued on a discount basis uBi
competitive and noncompetitive bidding as hereinafter provided, and
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, Monday, November 15, 1965.
Tenders will not be
received at the Treasury De~artment, 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 ~y~
be used. It is urged that tenders be made on the printed fOnM.
forwarded in the spec ial enve lopes whic h will be supplied by Federl
Reserve Banks or Branches on application therefor.
Banking institutions generally may submit tenders for account
customers provided the names of the customers are set forth in suet
tenders. Others than banking institutions will not be perm1tted tI
submi t tenders except for their own account. Tenders will be reeel
without deposit from incorporated banks and trust companies and f1'l
responsible and recognized dealers in investment securities. Te~
from others must be accompanied by payment of 2 percent of the fa~
amount of Treasury bills applied for, unless the tenders are
accompanied by an express guaranty of payment by an incorporated b
or trust company.
F-262
- 2 -
Immediately after the closing hour, tenders will be opened at the
~al Reserve Banks and Branches, following which public announcewill be made by the Treasury Department of the amount and price
! of accepted bids. Those submitting tenders will be advised
le acceptance or rejection thereof. The Secretary of the Treasury
!ssly reserves the right to accept or reject any or all tenders,
lole or in part, and his action in any such respect shall be
Subject to these reservations, noncompetitive tenders for
issue for $200,000 or less without stated price from anyone
~r will be accepted in full at the average price (in three
~ls) of accepted competitive bids for the respective issues.
_ement for accepted tenders in accordance wi th the bids mus t be
or completed at the Federal Reserve Bank on November 18, 1965, in
or other immediately available funds or in a like face amount
:easury bills maturing November 18, 1965. Cash and exchange tenders
receive equal treatment. Cash adjustments will be made for
~rences between the par value of maturing bills accepted in
mge and the issue price of the new bills.
The income derived from Treasury bills, whether interest or
from the sale or other disposition of the bills, does not have
~xemption, as such, and loss from the sale or other disposition
'easury bills does not have any special treatment, as such,
, the Internal Revenue Code of 1954. The bills are subject to
:e, inheritance, gift or other exc ise taxes, whether Federal or
!, but are exempt from all taxation now or hereafter imposed on
~incipal or interest thereof by any State, or any of the
!ssions of the United States, or by any local taxing authority.
lurposes of taxation the amount of discount at which Treasury
are originally sold by the United States is considered to be
'est. Under Sections 454 (b) and 1221 (5) of the Internal
ue Code of 1954 the amount of discount at which bills issued
.nder are sold is not considered to accrue until such bills are
redeemed or otherwise disposed of, and such bills are excluded
consideration as capital assets. Accordingly, the owner of
ury bills (other than life insurance companies) issued hereunder
include in his income tax return only the difference between
rice paid for such bills, whether on original issue or on
quent purchase, and the amount actually received either upon
or redemption at maturity during the taxable year for which the
n is made, as ordinary gain or loss.
Treasury Department Circular No. 418 (current revision) and this
e prescribe the terms of the Treasury bills and govern the
tions of their issue. Copies of the circular may be obtained from
ederal Reserve Bank or Branch.
000
Mr. Youngblood was appointed to the United States Secret
,.t.. &f-c::;
"'" rl p flo r )"\ vI) {<.()
ervice in 1951. He served in the Atlanta office and~on the
nite House Detail, and was assigned to the Vice Presidential
etai1 shortly after Vice President Johnson took office.
~ember,
In
1963, Mr. Youngblood became an Assistant Special
gent in Charge of the White House Detail.
He was promoted
o Special Agent in Charge of the White House Detail on January
1, 1965.
Born in Macon, Georgia, on January 13, 1924,
r. Youngblood received a Bachelor of Science Degree from the
eorgia Institute of Technology in 1949.
He is married to the
ormer Peggy Behman, and has three daughters and one son.
,-~
"';
,II
t;,"t
r '"
Mr. Johns was appointed to the Service in 1954.
"
},
He has
,
served in the Birmingham, Chicago, and Atlanta office, and on
the Vice Presidential and White House Details.
In November,
1963, he was assigned to the White House as an Assistant
Special Agent in Charge.
Born on December 11, 1925, at
Sirmingham, Alabama, he holds a Bachelor of Science Degree in
~aw
and Business Administration from Howard College, Birmingham.
Ie is married to the former Nita Jean Parker.
Ion.
They have one
A--
,e 1cea.MI!fj t.ti"' __ MlRe.~ following people will fill
,e positions created under Treasury Department Order No.
3-3:
James J. Rowley
(Presently Chief of the U. S.
Secret Service)
,rector:
sistant to the Director
nspection and Audit)
sistant to the Director
nformation and Liaison)
unsel
Jackson N. Krill
(Presently Chief Inspector)
Burrill A. Peterson
(Presently Inspector)
Robert O. Goff
sistant Director
nvestigations)
sistant Director
rotective Intelligence)
sistant Director
r:otective Forces)
;istant Director
hninistration)
~
Thomas J. Kelley
(Presently Inspector)
Walter H. Young
(Presently Special Agent in
Charge, Protective Research
Section)
Rufus W. Youngblood
(Presently Special Agent in
Charge, White House Detail)*
-- Yet to be filled --
Thomas L. Johns, Assistant Special
Agent in Charge, White House Detail,
to became Special Agent in Charge,
White House Detail.
- 2 ~~
Warren Co~i~sion recommended that the Service Lmprove
elligence crit~r:i:a'i~ntake, and processing, and obtain
led personnel and resource's"""L." . - '
' ' ' ' ' , 'I\W:I
secretary Fowler noted tha't'exec~t1bn·'o,£"these recommendations
to a separation of protective logistics ancf'fuanp,Qwer from
tective intelligence, under two Assistant Directo~sv-''dil:e,ctly
ponsible to the Director of the Secret Service o Other cllang.es
e in the reorganization are the creation of Assistant Directors
"Administration and _~nve$tigatiOllS... ".,.s ...
. ..
~
_.~'1'
._ .
-",,,,,,,,,~,,
~-"..WI_,~.-r~''"'
<.'.
A copy of the order outlining the reorganization is
:ached A': ii() t (: t
7G1 {~ .: -IN ('" It,.. W I Tit A L,' :; 7
,:\.
6$~
J
NAkI (
I)
" (;;
71l t " l t:: .: ~j::" (', i:" tTl ()
000
f' l
S
TREASURY DEPARTMENT
po''''
//'"
'-"~"HEADQUARTERS REORGANIZATION
UNITED
ST~~E~~ECRET SERVICE
Secretary of the Treasury Henry Ho Fowler announced
lay that a headquarters reorganization of the U S. Secret
~vice has been put into effecto
The reorganization was
Lnned and recommended by David C. Acheson, Special Assistant
the Secretary in .charge of Law Enforcement and by James J.
ley, Chief of the Secret Service, and was approved by
.'
. . . Secretary Joseph W. Barr. Mro Rowley wililremain as ~,_',·.n I~',!(] head @:Uthe Service j~der the .new organizationil with his
I' 0
':le changed from Chief to Director.
0
The purpose of the reorganization, the Secretary said,
to give the Washington headquarters of Secret Service a
'e effective means of supervision over a Service that is
landing in size and changing in methods. The changes do
affect the number of agents regularly employed on the
.te House detail.
j)
In addition to the post of director, the order provides
Il
~
,4
J
four assistant directors, tvvo assistants to tlJe director and
lnsel.
TREASURY DEPARTMENT
November 10, 1965
FOR IMMEDIATE RELEASE
HEADQUARTERS REORGANIZATION
OF THE
UNITED STATES SECRET SERVICE
Secretary of the Treasury Henry H. Fowler announced today t
a headquarters reorganization of the U. S. Secret Service has ~
put into effect. The reorganization was planned and recommendei
by David C. Acheson, Special Assistant to the Secretary in c~q
of Law Enforcement and by James J. Rowley, Chief of the Secret
Service, and was approved by Under Secretary Joseph W. Barr.
Mr. Rowley will head the Service, with his title changed from
Chief to Director.
The purpose of the reorganization, the Secretary said, is1
give the Washington headquarters of Secret Service a more effeci
means of superv~s~on over a Service that is expanding in size 81
changing in methods. The changes do not affect the number of
agents regularly employed on the White House detail.
In addition to the post of Director, the Reorganization
Order provides for four Assistant Directors, two Assistants to
Director and a Counsel .
.
A copy of the Order outlining the reorganization is attac~
together with a list of those named to the new positions.
000
F-263
THE SECRETARY OF THE TREASURY
WASHINGTON
TREASURY DEPARTMENT ORDER NO. 173-3
,Realignment of Headquarters Functions and Responsibilities
in the United States Secret Service
By virtue of the authority vested in me as Secretary of
the Treasury, ·including the authority in Reorganization Plan
No. 26 of 1950, the following offices are hereby establish~
in the Headquarters of the United States Secret Service:
Director
Assistant to the Director (Inspection and Audit)
Assistant to the Director (Information and Liaison)
Counsel
Assistant Director (Investigations)
Assistant Director (Protective Intelligence)
Assistant Director (Protective Forces)
Assistant Director (Administration)
The Director of the Secret Service will proceed to carty
out the provisions of this Order as expeditiously as possible.
He shall, with the approval of the Special Assistant to the
Secretary (for Enforcement):
(1)
create appropriate subordinate offices
and assign to all offices such functions
and duties as he determines to be necessary
or desirable, and
~.
N·
- 2 -
(2)
eliminate, during the process of realigning
functions "and responsibilities, those
positions which in his judgment are made
superfluous or duplicative by this Order.
The Counsel of the Secret Service shall be subject to~
general supervision of the General Counsel of the Treasu~.
All present functions and duties of the Chief, United
States Secret Service, including functions under any delegat~
of authority to that officer made purs~ant to the provisions
of any Treasury Order, are transferred to the Director, Unit.
States Secret Service.
~.w~
o eph W. Barr
Ac ing Secretary
Dated:
October 29, 1965
The following people will fill the positions created under
Treasury Department Order No. 173-3:
James J. Rowley
(Presently Chief of the U. S.
Secret Service)
Director:
Assistant to the Director
(Inspection and Audit)
Assistant to the Director
(Information and Liaison)
Jackson N. Krill
(Presently Chief Inspector)
Burrill A. Peterson
(Presently Inspector)
Robert
Counsel
Assistant Director
(Investigations)
Assistant Director
(Protective Intelligence)
Assistant Director
(Protective Forces)
Assistant Director
(Administration)
o.
Goff
Thomas J. Kelley
(Presently Inspector)
Walter H. Young
(Presently Special Agent b
Charge, Protec t ive Research
Section)
Rufus W. Youngblood
(Presently Special Agent b
Charge, White House Detail)*
--Yet to be filled--
*Thomas L. Johns, Assistant Special
Agent in Charge, White House Detail,
to become Special Agent in Charge,
White House Detail.
• 2 •
.-cad fna ell- produei.ft& OOUfttry -
later than November 30 --
Iditionally, licenses will generally be issued for goods exported
'ter November 30 if a letter of credit covering the export has
en opened prior to November 10, 1965.
TREASURY DEPARTMENT
November 2, 1965
FOR
RELEASE
A.M. NEWSPAPERS
I
.... , ..
WE9NESDAY, NOVEMBER 3, 1965
----_ _._---_...
The
)
TREASURY
-- - ..........- .....- .
~asury
T~R6{ft~iGs'
•
c __
•••••
>.
t
•
.'.
•
•
".
~
'"
--
•
_k
V
'''_, ~ ~~
,
h'
will put i,nto effect .0;]November 10
;;u.(1
[aj embargo on imports of/\wigs
from Communist China.
Eade with human hair
Imports of such wigs have
significantly increased recently. Treasury is taking
(p 1\ 5 I HI ;.) ():;r D
this actio~to cut off a source of exchange to the
Communist Chinese which could amount to several
millions of dollars a year.
~tails of the embargo
and of temporary licensing policies will be published
in The Federal Register on November 10.
\
.~
000
F-255
Hoveaber 10, 1965
! '.
• ' . . . .1 ",later
Oil
lfovabeZ' 10. but the Treasury baa
. . . . . . . 1MIb. of iaquiri.a requeatiDg clarification of
- - lle_1D& policie••
~e r ..tr1etlona probibit all unlicensed dealingj~uch
II ...
uu
produeta .a of lIovember 10.
Licenses will
,I
~--.
I
t
.,/'
~~
.
I
....11, be laaued In cas •• 1@-_~t.~"£or goods will be
TREASURY DEPARTMENT
November 10, 1965
FOR IMMEDIATE RELEASE
DEADLINE ON WIG LICENSES
The Treasury announced today that no specific licenses for
importation of wigs made with human hair from Asian countries
will be issued for orders placed on or after November 10, 1965.
The November 10 embargo on imports of such wigs was
imposed to cut off a source of exchange to the Communist
Chinese which could amount to several millions of dollars a
year.
This ruling was contained in restrictions published in the
Federal Register on November 10, but the Treasury has received a
number of inquiries requesting clarification of these licensing
policies.
The restrictions prohibit all unlicensed dealings in such
wigs and ha ir produc ts as of November 10. Licenses will general
be issued in cases where the goo~are exported from the
producing country no later than November 30 -- provided that
a firm contract for these goods was entered into before Novembel
Additionally, licenses will generally be issued for goods
exported after November 30 if a letter of credit covering the
export has been opened prior to November 10, 1965.
000
F-264
TREASURY DEPARTMENT
Washington
FOR RELEASE P.M. NEWSPAPERS,
FRIDAY, NOVEMBER 12, 1965
REMARKS BY DAVID C. ACHESON
SPECIAL ASSISTANT TO THE SECRETARY (FOR ENFORCEMEm)
BEFORE
THE WOMAN'S NATIONAL DEMOCRATIC CLUB
WASHINGTON, D. C.
FRIDAY, NOVEMBER 12, 1965, 12:15 P.M.
It is a happy chance for me to be able to talk to this
nonpartisan civic association instead of to a political gr0ll!
We at the Treasury always try to keep anything as serious as
money away from politics. For that matter, I thought everyO!
knew that the Woman's National Democratic Club follows a
tradition of asking only statesmen to speak here, until. one
of my friends who saw the luncheon notice said, "Well, thatl
what they used to do."
So apparently I am here neither as a politician nor as
a statesman and will have to follow the last resort of a
luncheon speaker--I will stick to the facts. I would like
to talk to you about the national crime problem and particu·
larly about what President Johnson's administration is doing
about it and proposes to do about it.
First--the scope of the problem: The Uniform Crime
Reports for 1964 show 2.6 million maj or offenses, reported
in from local police organizations across the nation. That
figure represents an increase of 13% over the previous year.
I will spare you further heartwarming statistics, exceptto
say that this figure really is limited to local crimes·-it
does not take account of federal narcotics violations, n~
ing about 1750 arrests during 1964, and about 10,000 reporu
~ addicts.
It does not take account of organized crime all
racketeering violations, of which the number and the cost,,·
social and financial--are very difficult to measure accuratf
Ironically, another 13% increase was recently in the
news. About two weeks ago General Motors announced a
profit for 1965 that was 13% over the figure for last year,
9--
- 2 to give it the highest 9-month profit in the world's corporate
history. While this doesn't pro:re that ,:,hat's good for Gener~
Motors is good for the country, l.t certal.n1y does show that
crime is keeping up with national growth. Actually crime is
moving ahead--it is growing faster than the national debt,
faster than the GNP, faster than the popu1ation--and all
Democrats know how fast the population is growing.
Crime is not only a big prob1em--it has a lot of extran~
complications. There are serious differences, for example,
between many judges and enforcement agencies--differences of
obj ective and of method. There is not enough connnunication
between these two groups, not enough mutual education. Also
crime has a way of getting into connnunity politics and confust
its race relations, federal-state relations, and the relatiOtll
between the local citizenry and local government author~ty.
Now, what is President Johnson's administration doing
about this problem of crime? The program was very concretely
laid out in the President's message to Congress on law enforce
ment last March.
The three main parts of the program are:
increased federal law enforcement effort
federal assistance to local law enforcement
efforts
a comprehensive, penetrating analysis of the
origins and nature of crime in modern America.
Federal enforcement is concerned particularly with organ
ized crime, narcotics and dangerous drugs, firearms control,
and crime in the District of Columbia. In the first three of
these the Treasury has major responsibility.
In organized crime, federal enforcement has been greatl'
accelerated since 1961 and very impressive resources throw
into it, with marked success. Our job now is to keep the
pressure on the racketeers and put them out of business. ~
month, for ex amp 1e, the key Internal Revenue field superviSOI
- 3 in the organized crime program met in Washington, and fresh
emphasis was given to this program and to the importance it
has to the President, the Secretary of the Treasury and the
Attorney General.
In the firearms control field, the administration pushed
hard in the last session of Congress for a bill which would
prohibit retail mail order purchases. This effort ran into
organized opposition, particularly in the House. One can't
help but wonder how many more people must be killed or maimed
with firearms before the voice of the gun lobby loses its ma~
spell. Las t year about 4400 reported murders were committed
with guns, 55 per cent of all the reported murders. Approxi·
mately 26,000 aggravated assaults and the vast majority of
64,000 armed robberies were cOlmnitted with guns. Apparently
these figures must go higher yet before the facts will speak
more eloquently than the propaganda of the gun lobby. '
In narcotics enforcement we have solid evidence that
greater effort in the countries where narcotics originate
can substantially reduce the traffic in heroin and opium,
all of which originates abroad. This evidence is a shortage
of heroin on the illegal market, much greater dilution, and
skyrocketing prices. But we have a long way to go before we
reach an acceptable level of interdiction of heroin and o¢~
let alone the dangerous nonaddictive drugs that are manufactl
domestically. New enforcement methods at home and abroad are
going to be essential.
Leadership in something like enforcement is a lot oftM
at a lot of levels. I t is important at the level of professi
enforcement officers working on the cases, but it is also ir
portant for political leadership to give elements of directia
that professional enforcement people cannot be expected ta~
First among these elements of direction is priority. 01
political leadership can change a low priority problem taa
high priority problem, and the President has given to l~
enforcement the highest priority. He is giving his own aWl
tion to it, he is calling the attention of Congress to it, b
has underwritten resources for it, he has let the enforc~
- 4 communi ty know that he is backing them up. This is the way
priorities are changed and enforcement has needed this
change of priority. Law enforcement too closely affects
the quality of our cormnunity life to permit neglect. I think
we can now realistically hope that in ten years it will be
hard to remember that policemen were once underpaid, that
officers once typed their own reports, that investigation
data were once manually processed, that judges once patronized enforcement officers and even held them in suspicion.
These ills are still with us today, but their days are
running out. Enforcement work will involve some of the best
engineers, computer programmers, lawyers, psychologists and
intelligence experts, and these developments are unfolding
rapidly today in the Treasury enforcement agencies. They
will depend upon the comprehension of a more aware society
that it cannot advance, or even stand still, without effectiVi
professional law enforcement. The President I slaw enforcemeDi
program is intended to bring about this comprehension and to
relieve society from the drain on its energy that crime has
caused.
The other major ingredient of political leadership in
enforcement is originality, the capacity and willingness to
make major changes. Again, this must come from the top.
Originality is based upon skepticism, a conviction that what
one is doing is not good enough. It is unders tandably difficult for professionals to work from this premise. After aU
esprit de corps is based on the conviction that one is the
best there is. But at the political level there must bea
kindly but critical scrutiny--a scrutiny that reexamines
objectives, priorities, and resources.
The President has taken care to assure originality of
approach in the law enforcement program. The uncomfortable,
fundamental questions that he has put to the Commission on
Law Enforcement are intended to get at what we should be doir
and how, and what it will take to do it:
What is the best organization of enforcement
functions to meet present needs?
- 5 How can we improve understanding between the
enforcement community and the courts?
What are the best programs for federal assist.
ance of state and local enforcement?
How can we improve training of enforcement
personnel?
- - What correction programs can best reclaim first
offenders?
How can we improve citizen support and respect
for law enforcement?
How can federal and local authorities best deal
with organized crime?
The answers to these questions, if there are answers,
will point to new targets and bring new methods in their wake.
In short, the crime program is a three-way program of
increased federal enforcement, federal assistance to local
enforcement, and a critical, co ld-eyed examination of what
we ought to be doing and how we ought to be doing it.
The thought I would leave with you is that law enforce~
is in a state of revolution--in objectives, methods, standar~
resources, and relations with community life. This revoluti~
will be given helpful direction and added momentum by the
Johnson administration's greater involvement in the problems
of crime and enforcement. In all of this the interest and
attention of any group that has influence on opinion is usefu
c~v~c groups, political groups, church groups and many more.
There is plenty of work here for all of us.
draft
11/12/65
luctioned W.ednesday, November· 170
~ ~).{..P;J
Tb.e-Treasury-a-l-sQ-not-ed. t-hat: this financing wou~
~
olTIplet·e--al"fan.ge.ment.s to provide for i,;es remaining cash needs
~~~
lL-t-he balaBG&~ 1965.
1
tr..aury Plan. Sal. of $2.5 Billion June Tax Bills
ID accordaDce with earlier plans, the Treasury announced
~
that it will ahortly borrow $2.5 billion in cash through
a aticipatioa bill. that .111 _ture June 22, 1966.
This
.... will be sold by ca.petitive bidding on Wednesday,
...... 17. aDd pa:paent is scheduled for the following
.......,. loY. . . . 24.
eo-rcial bank. _y make full
.,..t for bill. allotted
them for t . . . .lv.. or cu8t01Ders
, cr..it to Trea.ury tax and loan accouats.
!ld.. fiDaDclDa 1s expectecl to provide for the remaining
ub
DeedS
of the Treasury for cal.dar 1965.
TREASURY DEPARTMENT
November 12, 1965
FOR TIMMEDIATE RELEASE
Treasury Plans Sale of $2.5 Billion June Tax Bills
In accordance with earlier plans, the Treasury announci
today that it will shortly borrow $2.5 billion in
casht~o
tax anticipation bills that will mature June 22, 1966. Thl
issue will be sold by competitive bidding on Wednesday,
November 17, and payment is scheduled for the following
Wednesday, November 24.
Commercial banks may make full
payment for bills allotted them for themselves or customerl
by credit to Treasury tax and loan accounts.
This financing is expected to provide for the remainil
cash needs of the Treasury for calendar 1965.
000
F-265
5
- 3 [X
r other dlsponi tion of Treasury bills does not have any special treB:tment, ns
r the Intcrnal Revenue Code of 1954.
n
The bills are subject to estate, inher-
or other excise taxes, whether Federal or State I but are exempt from all
ow or hereafter imposed on the principal or interest thereof by any State, or
possessions of the United States, or by any local taxing authority.
For
f taxation the amount of d:l.scount at which Trea.sury bills are originally Bold
ted Statec is considered to be interest.
Under Sections 454 (b) and 1221 (5)
ernal Revcnue Code of 1954 the amount of discount at which bills issued heresold :1.5 not considered to accrue until such billa are sold, redeemed or othersed of, and such bills are excluded from consideration as capital assets.
y, the mnler of Treasury bills (other than life insurance companies) issued
need inclu.de in his income tax return only the difference between the price
llch bills, whether on original issue or on subsequent pruchase, and the amount
~ceived
either upon sale or redemption at maturity during the taxable year
the return is ma.de, as ordinary gain or
1080.
U7 Department Circular No. 410 (current revision) and this notice, prescribe
)f the Treasury bills and govern the conditions of their issue.
lrmay be obtained from any Federal Reserve Bank or Branch.
Copies of
--
..
- 2 -
Lng institutions generally may submit tenders for account of customers pronames of the customers are set forth in such tenders.
others than banking
)ns will not be permitted to submit tenders except for their own account.
tIl be received without deposit from incorporated banks and trust companies
~eBponsible
and recognized dealers in investment securities.
Tenders from
it be accompanied by payment of 2 percent of the face amount of Treasury bills
)r, unless the tenders are accompanied by an express guaranty of payment by an
;ed bank or trust company.
,idders are required to agree not to purchase or to sell, or to make any agreel respect to the purchase or sale or other disposition of any bills of this
, specific rate or price, until after one-thirty p.m., Eastern Standard time,
r,
November 17, 1965
AA
,iately after the closing hour, tenders will be opened at the Federal Reserve
Branches, following which public announcement will be made by the Treasury
of the amount and price range of accepted bids.
of the acceptance or rejection thereof.
Those submitting tenders will
The Secretary of the Treasury ex-
serves the right to accept or reject any or all tenders, in whole or in part,
tion in any such respect shall be final.
Subject to these reservations, non-
~
tenders for $ 400,000 or less without stated price from any one bidder will
~t
i in full at the average price (in three decimals) of accepted competitive bids.
accepted tenders at the prices offered must be made or completed at the Federal
~
in cash or other immediately available funds on ___r~Jo_v_e_jn_t_0~r~2~4~,___
1;_3'_)~_~_____ ,
~)<~
~wever, any qualified depositary will be permitted to make payment by credit
LSUry
tax and loan account for Treasury bills allotted to it for itself and
!rs up to any amount for which it shall be qualified in excess of existing
len so notified by the Federal Reserve Bank of its District.
,come derived from Treasury bills, whether interest or gain from the sale
sposition of the bills, does not have any exemption, as such, and loss from
)IATE RELEASE
TREASURY OFFERS ADDITIONAL $2-1/2 BILLION IN .TLJNE TA.X BILLS
Treasury Department, by this public notice., invite s tenders
f'0l~ ~?2 J
500,000, COO,
tbouts, of 210-day Treasury bills (to maturity date), to be issued November 24,
a discount basis under competitive and noncompetitive bidding as hereinafter
The bills of this series will be designated Tax Pillticipation Series and
an additional amount of bills dated October 11, 1965, to ID2.ture June 22J
Lginally issued in the amount of $1,002,548,000.
~l
be freely interchangeable.
taxes due on
June 15
The additional and oriGinal
They "rill be accepted at face value in J!aY:lle:w.t
1966
--";;;~-=¥i£.';'-·-i=,)x~--
, and to the extent they are not presented
::purpose the face amount of these bills will be payable without interest at
Taxpayers desiring to apply these bills in payr..tlent of
,
June 15, 1966
-n%
-\,-Jfj.J;
.lees have the privilege of surrendering them to any, Federal Reserve Bank or
to the Office of the Treasurer of the United
::1Y5 before
June 15 J 1966
f:;::;\'
,-.0")
Hashington, no"\; mo:re -'chan
, and receiving receipts therefor showing the
It of the bills so surrendered.
on or before
sta'~es,
June 15, 1966
These receipts may be submi"1ited in lieu of
, to the District Director of Internal Rev-
{W
che District in which such taxes are payable e
'lne bills will be issued in
~ only, and in denominations of $1,000, $5,000 , $10,000, $50,000, $100,000,
md $1,000,000 (maturity value).
~rs
will be received at Federal Reserve Banks and Branches up to the closing
-thirty p.m., Eastern Standard t:L:ne,
Wednesiay, NoveL'ii:Jer 1.7, 18(35
Tend.ers
.
4>_"1?~,
.l(•.J-U-.!'
·;)e received at the Treasury Department, Washington. Esch t8nder mu::.:::"c be icr
tltiple of $1,000, and in the case of competitive tenders the price offered
":pressed on the basis of 100, with not more than three decimals, e.
may not be used.
It is urged that tenders be made on the l)rin"'.;ed.
,';v,
1'Ol"L18
99.925.
[;.nd.
in the special enVelopes which will be su?plied by Federal Rese~~e ~nks or
,n application tiJ.ereror.
TREASURY DEPARTMENT
November 12, 1965
FOR IMMEDIATE RELEASE
TREASURY OFFERS ADDITIONAL $2-1/2
BILLION IN JUNE TAX BILLS
The Treasury Department, by this public notice, invites tender.
$2,500,000,000, or thereabouts, of 2l0-day Treasury bills (to maturl
date), to be issued November 24, 1965, on a discount basis under
competitive and noncompetitive bidding as hereinafter provided. ~
bills of this series will be designated Tax Anticipation Ser~s a~
represent an additional amount of bills dated October 11, 1965, to
mature June 22, 1966, originally issued in the amount of $1,002,548
The additional and original bills will be freely interchange,b~.
They will be accepted at face value in payment of income taxes due I
June 15, 1966, and to the extent they are not presented for this
purpose the face amount of these bills will be payable without inte
at maturity. Taxpayers desiring to apply these bills in pay~nt~
June 15, 1966, income taxes have the privilege of surrendering them
any Federal Reserve Bank or Branch or to the Office of the Treasure
the United Sta tes, Washington, not more than fifteen days before
June 15, 1966, and receiving receipts therefor showing the face amc
of the bills so surrendered. These receipts may be submitted in 11
of the bills on or before June 15, 1966, to the District Director I
Internal Revenue for the District in which such taxes are payable.
bills will be issued in bearer form only, and in denominations of!
$5,000, $10,000, $50,000, $100,000, $500,000 and $1,000,000 (mawr
value).
Tenders will be received at Federal Reserve Banks and Braoc~
to the closing hour, one-thirty p.m., Eastern Standard time, Wedne
November 17, 1965. Tenders will not be received at the Treasury
Department, Washington. Each tender mus t be for an even multiple
$1,000, and in the case of competitive tenders the price offer:d lll
be expres sed on the bas is of 100, wi th not more than three deClmal
99.925.
Fractions may not be used.
It is urged that tenders bem
on the printed forms and forwarded in the spec ial enve lopes which
be supplied by Federal Reserve Banks or Branches on applieatiOO
therefor.
Banking institutions generally may submit tenders for a~c~~
eus tamers provided the names of the cus tomers are se t forth tn SU I
.
.
.'
tenders.
Others than bankLng
LstLtutLons
WL. 11 no t b e permitted to
Ten d ers WL. 11 be rece
submit tenders except for their awn account.
F-266
- 2 -
without deposit from incorporated banks and trust companies and ~
responsible and recognized dealers in investment securities. Ten~
from others must be accompanied by payment of 2 percent of t~ ~c
amount of Treasury bills applied for, unless the tenders are acc~
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
make any agreements with respect to the purchase or sale or other
disposition of any bills of this additional issue at a specific rat
price, until after one-thirty p.m., Eastern Standard time, Wednesdl
November 17, 1965.
I
Immediately after the closing hour, tenders will be opened at
Federal RFserve Banks and Branches, follmving which public announct
will be made by the Treasury Department of the amount and price ral
accepted bids. Those submitting tenders will be advised of t~
acceptance or rejection thereof. The Secretary of the Treasury
expressly reserves the right to accept or reject any or all tender:
whole or in part, and his action in any such respec t shall b~ finaU
Subject to these reservations, noncompetitive tenders for $400,0001
less without stated price from anyone bidder will be accepted in I
at the average price (in three decimals) of accepted competitive bl
Payment of accepted tenders at the prices offered mus t be made or
completed at the Federal Reserve Bank in cash or other immed~~~
ava ilable funds on November 24, 1965, provided, however, any quali
depositary will be permitted to make payment by credit in its Trea:
tax and loan account for Treasury bills allotted to it for itself
its customers up to any amount for which it shall be qualified in
excess of exis ting depos its when so notified by the Federal Resen
Bank of its District.
The income derived from Treasury bills, v.7he ther interest or g
from the sale or other disposition of the bills, does not have any
exemption, as such, and loss from the sale or other disposition 3f
Treasury bills does not have any special ~reatment, as such, under
Internal Revenue Code of 1954. The bills are subject to esta~,
inheritance, gift or other excise taxes, whether Federal or State,
are exempt from all taxation now or hereafter imposed on the prinil
or interest thereof by any State, or any of the possessions of the
United States, or by any local taxing authority.
For purposes.o~
taxation the amount of discount at which Treasury bills are ongl.ll
sold by the United States is considered to be interest. Under Sec
454 (b) and 1221 (5) of the Internal Revenue Code of 1954 the am(XJ
discount at which bills issued hereunder are sold is not considere
accrue until such bills are sold, redeemed or otherwise disposed a
such bills are excluded from consideration as capital assetS.
- 3 Accordingly, the owner of Treasury bills (other tnan llre lnsurano
companies) issued hereunder need inc lude in his income tax return
only the difference between the price paid for such bills, whether
original issue or on subsequent purchase, and the amount actually
received either upon sale or redemption at maturity during tM tu
year for which the return is made, as ordinary gain or loss.
Treasury Department Circular No. 418 (current revision) a~l
notice, prescribe the terms of the Treasury bills and govern t~
conditions of their issue. Copies of the circular may be obtained
from any Federal Reserve Bank or Branch.
000
TREASURY DEPARTMENT
November 12, lCJ6S
FOR r;·IHEDIA'IE RELEASE
SUBSCRIPTION MID ALLOTMENT FIGURES FOR TREASURY'S CURRENT CASH 0FF~::,
The Treast:ry DepartmenL today announced 1. he sllbscrir" ion and a L:>' ':"
figures wi 1 h ] eSI'ec~ to the current offeJ'ing oi 4-J.,4i Treasul'Y NO',es 0:
Series D-1967, due !1e.y 1.5, 1967.
Subscriptions and allotmcn' s ,.ere divided aTY'ong the sevc:ral Fede:al :'.
Sel"ve Districts and th~ Treasury as follows:
Total Subscriptions Received
<$
417,571,000
8,671,017 ,000
210,510,000
312,590,000
200,553,000
3t:l,343,000
811,31::),000
Federal Rese)ve
District
Boston
New York
Phi lade lpbia
Cleveland
Richmond
Atlanta
Chicago
St. Louis
Minneapolis
Kansas City
Dallas
San Francisco
Treasury
2~3,360,000
Totals
129,830,000
216,796,000
153,960,000
325,002,000
2,903,000
$12,066,7 4 8,000
Subscriptions by inves', or classes:
States , political subdi vjsions 01' instnlIncn'tali ties thereof, public pension
and retil'cment and other public funds,
international organizations in which the
Uni ted States holds 'TIembership, fo:':'eie;n
cen L j al ban)~s and for~ign States which
received full allotment ---------------Commercial Banl~s (own account) --------All Others ----------------------------Total
Fed. Res. Banks
& Govt. Inv. Accts.
G:::-and Total
F-267
;)
383,991,000
3,288,073,000
1,609,802,000
$
5,281,866,000
6, 7 8!r J 882 J 000
$12,066,748,000
Total
Allot.ments
$ 243,071,):(
7,675,37E,:X
117, n: ,):~
18G,CE2,)X
120,78S,C:O
205,0 1 9,:';:
i 85, 21 l,::~
ltiO,7 i S,O:'1
S~ ,296,:01
151,061,00J
95,231,0:0
209/81,OCO
2,8:9 10:0
$9, 717,615,J)l
-2-
Cormnodity
·•
·
Period and Quantity
of ·• Imports as of
. Unit
guantity · Oct. 30. 1965
e Quotas:
substitutes contain-
ver 45% of butterfat,
utter oil •••••••••••
Calendar year
of cotton processed
ot spun •••••••••••••
, shelled or not
ed, blanched, or
wise prepared or
rved (except peanut
r) ••••••••••••••••••
1,200,000
Pound
12 mos. from
Sept. 11, 1965
1,000
Pound
12 mos. from
August 1, 1965
1,709,000
Pound
)rts as of November 8, 1965.
Quo ta filled
11
811, 401
TREASURY DEPAR'lMENT
Washington
TE RELEASE
I{,
NQVEf-I.~"'{ 15, 1965
Ie Bureau of Customs announced today preliminary figures on imports for
tion of the following commodities from the beginning of the respective
eriods through October 30, 1965:
Commodity
·
·
Period and Quantity
of :
· Unit
Quantity:
·
Imports as of
Oct. 30, 1965
Rate Quotas:
fresh or sour ••••••••
Calendar year
1,500,000
Gallon
ilk, fresh or sour •••
Calendar year
3,000,000
Gallon
700 Ibs. or more each Oct. 1, 1965 r than dairy cows) ••• Dec. 31, 1965
793,4841/
53
120,000
Head
20,500
••••••••••••••••••••••
12 mos. from
April 1, 1965
200,000
Head
63,981
resh or frozen, fil, etc., cod, haddock,
pollock, cusk, and
ish ••••••••••••••••••
Calendar year
24,383,589
Pound
Quota filled
sh •••••••••••••••••••
Calendar year
66,059,400
Pound
37,954,445
12 mos. from 114,000,000
Sept. 15, 1965 45,000,000
Pound
Pound
1,218,000
1,340,470
Nov. 1, 1964 Oct. 31, 1965
Pieces
less than 200 Ibs.
Irish potatoes:
ried seed ••••••••••••
r
•••••••••••••••••••••
forks, and spoons
stainless steel
::as •••••••••••••••••••
69,000,000
Quota filled
TREASURY DEPAR'lNmT
Wash~ton
IMMEDIATE RELEASE
The Bureau of Customs armounced today preliminary figures on imports tor
consumption of the following commodities from the beginning of the re~eeU~
quota periods through October 30, 1965:
Commodity
..
Period and Quantity
of : Importii
: Quantity: Oct. 30,
: Unit
Tariff-Rate Quotas:
Cream, fresh or sour ••••••••
Calendar year
1,500,000
Gallon
Whole Milk, fresh or sour •••
Calendar year
3,000,000
Gallon
Cattle, 700 1bs. or more each Oct. 1, 1965 (other than dairy cows) ••• Dec. 31, 1965
120,000
Head
12 mos. from
April 1, 1965
200,000
Head
leted, etc., cod, haddock,
hake, pollock, cusk, and
rosefish ••••••••••••••••••
Calendar year
24,383,589
Pound
Quota
Tuna Fish •••••••••••••••••••
Calendar year
66,059,400
Pound
37,9
White or Irish potatoes:
Certified seed ••••••••••••
Other •••••••••••••••••••••
114,000,000
12 mos. from
Sept. 15, 1965 45,000,000
Pound
Pound
1,2
Knives, forks, and spoons
with stainless steel
handles •••••••••••••••••••
Nov. 1, 1964 Oct. 31, 1965
Pieces
Cattle, less than 200 Ibs.
each ••••••••••••••••••••••
Fish, fresh or frozen, fil-
69,000,000
1,'
11
Adjusted
F-268
-2-
Commodity
·
·
Period and Quantity
Unit of · Imports as of
··· guantity
·· Oct. 30. 1965
lte Quotas:
• substitutes containover 45% of butterfat,
butter oil •••••••••••
Calendar year
of cotton processed
not spun •••••••••••••
's, shelled or not
led, blanched, or
rwise prepared or
erved (except peanut
er) ••••••••••••••••••
J
1,200,000
Pound
12 mos. from
Sept. 11, 1965
1,000
Pound
12 mos. from
August 1, 1965
1,709,000
Pound
::lorts as of November 8, 1965.
Quo ta filled
811, 40111
TREASURY DH>AR'lMENT
Washington
MEDIATE RELEASE
lliDAY~
NOVEMBER
15~
1965
The Bureau of Customs has announced the following preliminary
.gures showing the imports for consumption from January 1, 1965, to
:tober .30, 1965, inclu~ive, of commodities under quotas established
l1'suant to the Philippine Trade Agreement Revision Act of 1955:
lmmodity
Annual . Unit of · Imports as of
. Established
Quota Quantity
Quantity · Oct. 30, 1965
ttons ••••••••••••
510,000
gars •••••••••••••
120,000,000
Number
lconut oil ••••••••
268,800,000
Pound
Quo ta filled
rdage ••••••••••••
6,000,000
Pound
5,076,3.32
bacco ••••••••••••
3,900,000
Pound
3,829,518
·269
Gross
373,77.3
7,999,396
TREASURY 0 J1> AR '!MENT
Washington
IMMEDIA TE RELEASE
MQNDAY~
NQVEMBER 15,1965
The Bureau of Customs has announced the following pre1iminal'J
figures showing the imports for consumption from January 1, 1965, til
October 30, 1965, inclu~ive, of commodities under quotas establis.
pursuant to the Philippine Trade Agreement Revision Act of 1955:
Commodity
Annual
. Established
Quota Quantity
of
Imports as of
· Unit
.
Quantity
Oct.
30, 1965
·
Buttons ••••••••••••
510,000
Cigars •••••••••••••
120,000,000
Number
Coconut oil ••••••••
268,800,000
Pound
Quota filill
Cordage ••••••••••••
6,000,000
Pound
5,076,332
Tobacco ••••••••••••
3,900,000
Pound
3,829,518
F-269
Gross
373,773
7,999,396
.
OUA.RTERLY QU~ PERIOD -
Oatober 1, 1,65
-
Decembe .. 31, 1,65
DlFCRI.'S -
Ootober 1, 1,65
-
Novembe .. 5, 1,65 (or as noted)
ITA(
925.0l e U
IDM 925.03-
••
I
c...tr,r
•f
•
~...u_
I
I
~traUa
LeM-beariDC ore.
aD4
-.tert.aJ.
u.r.1JClrt 1.......
I
lead. wute aDI .ora,
rnw 925.02 e Y
ITDi 925.04I
Zu..-beariDC ore. ...
t
materiala
11,220,000
22,540,000
-
9,006,146
Bel4'l" ....
' . , (total.)
law
Bol1ria
("--..
..
5,040,000
531,962
13,04«>,000
13,440,000
15,920,000
9,457,580
66,480,000
66,480,000
Italy
16,leQ,OOO
P....
···4,559,21;
37,840,000
31,404,81~
12,011,477
36,880,000
19,460,550
70r480,OOO
10,018,289
6,320,000
3,762,62?
12,880,000
4,5°2,116
35,l2O,OOO
173,427
3,760,000
1,599,952
5,440,000
···5,108,151
6,090,000
6,080,000
~ll• •f the eo.,.
f...rly BelCl&D Ccmc.)
.&.rri_
114,880,000
14,880,000
TlIC- larla
..u.
other
eountrie. (t.tal.)
6,560,000
2,048,570
-Se. Part 2, Appendix to Tariff Seheclul•••
--Republio of South Africa.
···Imports as of November 8, 1965.
!I ~otas terminated effective October 22, 1965.
PREP~
F-270
7,520,000
3,600,000
u.n..
-4Ua. So •
.f d.D8 .....be luat) ....
s1aewute . . . . . . .
:t
U,220.ooc>.
• u.rroqllt .1M ( . . .pt all..,.
:I
III THE BURU.u 01' COSTCIIS
15,760,000
···5,496,347
6,080,000
6,080,000
17,840,000
17,840,000
~T ~ P~OD -
Oe~ob.r 1. 1,65
Do.ember 31. 1,65
~ -
Oei;obor 1, 1965
Newo.bor 5, 1965 (or
l'I'Df 925 eOl-.!L
IDM 9ZS.o3-
•••
J
I
LeM-beU'~
c...b7
.t
Pwo ........
.-t.i_
or••
aM .ateriala
J
~1"''''
lead
wute aM ....,
I
.I
&8
:r:rD(
notod)
925.02 - Y
l'l'IM 925Jl4I
Z~eU'iJtC on. aM
-.terial.a
•
:.
I
I
I
u.rro~t s1u ( . . .pt
all.,.
.t stu ... s1ao tat) ...
slM ..... te . . . . . . .
•
11,220 .000.
.... tral1a
D.,
BeJ4t.- ....
la-
11,220,000
22,540,000
-
9,006,146
(total)
Bollrla
~,O4O,OOO
531,962
13 ,.04<40 , 000
13,4.0,000
15,920,000
9,457,580
66,480,000
66,480,000
Mlrl..
~u.. ef the
16,leQ,ooo
eo.,.c.c
t...-rly Be141.u
'4iUa. Se. A.tr1_
12,011,477
eeuatrle. (tet&l)
lA,980,OOO
31,.04,813
6,560,000
:,0,048,57 0
••• 1~port9 ~8 or Novo~b8r B, 1965·
~otA9 terminated erroctive October 22, 1965·
II
PREPARID DI THI BURUU
or
19,460,55 0
70,480,000
10,018,289
6,320,000
3,762,627
12,880,000
4,502,116
3~,l2O,OOO
17],.27
3,760,000
1,599 r 952
~,.440,OOO
.0°5,108,151
6,080,000
6,080,000
14,880g 000
-S . . Part 2, Appendu to Tariff Sehe4u1e ••
"JWpubll0 of South Afr1oa •
F-270
37,EMO,OOO
36,880,000
-
e)
T'C.1.aT1a
III etlaa'
···4, 559,2~
3,600,000
I~
P....
7,520,000
CtlSTC16
15, UIJ,OOO
• ·°5,.96, 347
6,080,000
6,OBO,000
17,840,000
17,840,000
\..Ln
pounas)
".
,
JI
.
COTTCE CARD STRIPS made :from cotton having a staple of less than 1-3/16 inches in length, OOMBER
WASTE, LAP WASTE, SLIVER WASTE, AND ROVING WASTE, WHETHER OR NOT MANUFACTURED OR OTHERWISE
ADVANCED IN VALUE: Provided, however, that not more than 33-1/3 percent of the quotas shall
be filled by cotton wastes other than comber wastes made from cottons of 1-3/16 inches or more
in staple length in the case of the followin~ countries: United Kin~dom, France, Netherlands,
Switzerland, Belgium, Germany, and Italy:
Country of Origin
:
EStablished
:
:
TarAL QUOTA
: Sept.
:
United Kin~dom ••••••••••••
Canada ••••••••••••••••••••
France ••••••••••••••••••••
India and Pakistan ••••••••
Netherlands •••••••••••••••
Switzerland •••••••••••••••
Belgium •••••••••••••••••••
Japan ••••••••••.••••••••••
4,323,457
239,690
221,420
69,621
68,240
44,388
38,559
341,535
China •••••••••••••••••••••
11,322
Egy"pt •••••••••••••••••••••
8,135
Cuba ••••••••••••••••••••••
6,544
GeI'JTlany •••••••••••••••••••
16,329
Italy ..•••.•••....•..•.•••
21,263
Total Imports :
20, 1965, to:
: Nov. 8, 1965
:
Established:
33-1/3% of :
Total Quota :
1,441,152
15,801
22,141
14,796
12,853
~
25,443
7,088
Other, including the U.S ••
5,482,509
11 Included
in total imports, column 2.
Prepared in the Bureau of Customs.
~"271
1,599,886
Imports
i/
Sept. 20, 1965 to Nov. 8. 1965
Prel..1m:1nary data on imports for consumption of cotton and cotton waste ehargeab~e 'to the quot.as estab11 ahed by
Presidentia1 Proc~amation No. 2.35~ of September 5, ~9.39, as amemed, ani as modified by the Tariff Schedu1es ot the
United States which became effective August .3~, 196.3.
(The country designations in this press re1ease are those specified in the appemix to the Tariff Schedules of the
United States. There is no political connotation in the use of outmoded names.)
"
Clountrz of Origin
ti
t and Sudan ••••••••••••
eru •••••••••••••••••••••••
ndia and Pakistan •••••••••
China ••••••••••••••••••••••
Mexico •••••••••••••••••••••
Brasil •••••••••••••••••••••
ot Sodet
Socialist Republics ••••••
Established Quota
783,816
247,952
2,003,483
1,370,791
8,883,259
618,723
!I
Y
••••••••••••••••••••
Colombia ••••••••••••••••••••
Iraq ••••••••••••••••••••••••
British East Africa•••••••••
IDionesia ani NetherlarJis
New ~~a••••••••••••••••
British W. Indies •••••••••••
Par~
2,838
!I
475,l24
5,203
237
9,333
Except Barbados, Benmia, Jamaica, Trinidad,
Except Nigeria and Ghana.
Established Quota
Homuras ••••••••••••••••••••
Union
Argent~ •••••••••••••••••
Haiti ••••••••••••••••••••••
Ecuador ••••••••••••••••••••
Country ot Origin
Imports
~I
!itI
am
.1geria•••••••••••••••••••••
British 11. Africa. ••••••••••
Other, including the U.s ....
Tobago.
.
Cotton 1-1/8tt or more
Established Yearly Quota - 45.656.420 Ibs.
Imports Auguat 1. 1965 - November 8. 1965
staple Length
1-3/8" or more
1-5/32" or more am umer
1-)/81' (Tanguis)
1-1/8" or more am umer
1-3/8"
F-271
Allocation
39;590,718
28,170,614
1,500,000
175,594
4,565,642
198,804
Imports
752
g'Tl
l24
195
2,2l.O
71,388
21,321
5,m
16,004.
T'P9rt
-HONpA'Y.
N( )VI!:MOF-R
15_
L9K~
Pre1.:l.a.1...na.r data on 1..mporte r o r CO~1;.~on
or
cot"t.on and cot"t.on _ _ 1;.e cha.rgeab1e t o the quotaa
_.+.ab"''' 8hed.
b7
Pra.1.dent1..u. Proc1.amat1.on No. 2351. or September 5, 1.939, as amended. and as modified by- the Tar:1.r1" ScheduJ....e or t.h.
Un1.t.ed States which became el'l'ect1.ve August 31, 1963.
(The country designations in this press release are those specif'ied in the appeDiix to the Tarif'f' Schedu1es of' the
United States. There is no political connotation in the use of' outuKied names.)
(in pounds)
harsh UD1er
Established Qnota
Brasil •••••••••••••••••••••
783,816
2A7,952
2,003,483
1,370,791
8,883,259
618,723
UniDn or Sorlet
Socialist Republics ••••••
Argent~ •••••••••••••••••
Haiti ••••••••••••••••••••••
~r ••••••••••••••••••••
475,l24
5,203
237
9,333
and Sud811 ••••••••••••
ndia and Pakistan •••••••••
China ••••••••••••••••••••••
Mazico •••••••••••••••••••••
Y.
y
Country of Origin
Imports
"U l.n
Established Quota
Honduras ••••••••••••••••••••
Par~ ••••••••••••••••••••
752
Colombia ••••••••••••••••••••
l24
195
2,240
Iraq ••••••••••••••••••••••••
British East Africa •••••••••
Indonesia and Netherlands
2,8)8
J/
~11nea ••••••••••••••••
71,)88
British W. Indies •••••••••••
21,321-
~I
g
.lgeria•••••••••••••••••••••
Srit1ab V. Atrica. ••••••••••
16,004.
Hew
Other, 1mbxJ1M the U.s ....
Except Barba:los, Benmia, Jamaica, Tr1nida:l, alii Tobago.
~cept Nigeria am Ghana.
Cotton l-1/St. or more
Established Yearly Quota - 45.656.420 1bs.
Imports Augwst
1. 1965 - November 8. 1965
staple Length
1-318ft or more
1-5/32" or DlDre am UD1er
1-)18ft (Tanguia)
1-1I8ft or
1-3/8ft
F-271
IIDre
871
ani UDier
Allgcation
Import.a
39.590,718
28,170,614
1,500,000
175,594
4,565,642
198,804
5.m
T-pn$a
-2COTTON WASTES
(In pounds)
COTTCN CARD STRIPS made from cotton havin~ a staple of less than 1-3/16 inches in length, OOMBER
WASTE, LAP WASTE, SLIVER WASTE, AND ROVING WASTE, WHETHER OR NOT MANUFACTURED OR arHERWISE
ADVANCED IN VAlliE: Provided, however, that not more than 33-1/3 percent of the quotas shall
be filled by cotton wastes other than comber wastes made from cottons of 1-3/16 inches or more
in staple length in the case of the followin~ countries: United Kin~dom, France, Netherlands,
Switzerland, Belgium, Germany, and Italy:
Country of Origin
:
:
:
United Kin~dom ••••••••••••
Canada ••••••••••••••••••••
France ••••••••••••••••••••
India and Pakistan ••••••••
Netherlands •••••••••••••••
Switzerland •••••••••••••••
Belgium •••••••••••••••••••
Japan •••••••••••••••••••••
China •••••••••••••••••••••
Egypt •••••••••••••••••••••
Cuba ••••••••••••••••••••••
Genn.~ •••••••••••••••••••
Italy •.••••••••.•.•.••••••
other, includin~ the U.S ••
Established
TarAL QUOTA
4,323,457
239,690
221,420
69,627
68,240
44,388
38,559
341,535
17,322
8,135
6,544
76,329
21,263
5.. 482,,09
!/
Included in total imports, column 2.
:
Total Imports
: Established: - !q>orts
1/
: Sept. 20, 1965, to:
33-1/3% of: Sept. 20, 1965 : Nov. 8, 1965
: . Total Quotjl !~Q Nov. ~~_ ..l9M
1,441,152
75,807
22,747
14,796
12,853
..
25,443
7,088
1,599,886
0-, ."
,
~EASURY
DEPARTMENT
.
I
SE 6:30 P.M.,
ovember 15, 1965.
RESULTS OF TREASURY'S WEEKLY BILL OFFERING
rreasury Department announced today that the tenders for two series of Treasury
,e series to be an additional issue of the bills dated August 19, 1965, and the
',les to be dated November 18, 1965, which were offered on November 10, were opened
deral Reserve Banks on November 15. Tenders were invited for $1,200,000,000, or
.ts, of 9l-day bills and for $1,000,000,000, or thereabouts, of 182-day bills.
'ls of the two series are as follows:
91-day Treasury bills
l82-day Treasury bills
ACCEPTED
maturing February 17. 1966
maturing Hay 19, 1966
VB BIDS:
Approx. Equiv.
Approx. Equiv.
Annual Rate
Price
: _ _~P::.;r;.;:i~c=-;;e::-..:.~ Annual Rate
98.971 al
4.071%
97.854 bl
4.245~
•
98.963 4.1021
97.845 4.2631
98.964
4.097% 11
97.847
'age
4.2591 l'
"
:pting 2 tenders totaling $220,000; £1 Excepting 1 tender of $1,400,000
ent of the amount of 91-day bills bid for at the low price was accepted
',ent of the aIIount of l82-day bills bid for at the low price was accepted
IDERS APPLIED lOR AND ACCEPTED BY FEDERAL RESERVE DISTRICTS:
Applied For
Accepted
: Applied For
Accepted
•
24,999,000
•
14,999,000 : $
24,599,000
•
15,530,000
'k
1,448,805,000
819,747,000:
1,478,508,000
745,903,000
~lph1a
31,019,000
19,019,000:
12,632,000
4,632,000
,nd
26,614,000
26,614,000
26,178,000
25,485,000
Ld
18,511,000
12,511,000:
10,457,000
4,457,000
38,877,000
24,251,000:
32,316,000
14,093,000
265,782,000
137,952,000
329,894,000
112,494,000
Lis
42,503,000
35,879,000
25,200,000
15,920,000
10US
14,832,000
8,541,000
4,741,000
18,204,000
:Clty,
26,504,000
25,504,000:
16,541,000
15,501,000
22,198,000
13,138,000
12,623,000
7,623,000
::~cisco
93,841,000
56,331,000
122,048,000
34,548.000
~TALS
$2,057,857,000
$1,200,777,000 £1 $2,099,537,000
$1,000,927,000 ~I
'\les $247,618,000 noncompetitive tenders accepted at the average price of 98.964
:;\es $123,552,000 noncompetitive tenders accepted at the average price of 97.847
';~oupon issue of the same length and for the same amount invested, the return on
~bi1ls would provide yields of 4.201, for the 9l-day bills, and 4.41%, for the
~y bills. Interest rates on bills are quoted in terms of bank discount with
~~turn related to the face amount of the bills payable at maturity rather than
:tount invested and their length in actual number of days related to a 360-day
,i In contrast, yields on certificates, notes, and bonds are computed in terms
~erest on the amount invested, and relate the number of days remaining in an
1St payment period to the actual number of days in the period, with semiannual
~lnding if aore than one coupon period is involved.
:t
TREASURY DEPARTMENT
FOR RELEASE 6:30 P.M.,
Monday. November 15, 1965.
RESULTS OF TREASURY'S WEEKLY BILL OFFERING
The Treasury Department announced today that the tenders for two ser1e~ of~
bills, one series to be an additional issue of the bills dated August 19, 1965,
other series to be dated NoveDlber 18, 1965, which were offered on November 10, WI
at the Federal Reserve Banks on November 15. Tenders were invited for $1,200,01»
thereabouts, of 91-day bills and for $1,000,000,000, or thereabouts, of 182-day
The details of the two series are as follows:
RAM:;E OF ACCEPTED
COMPETITIVE BIDS:
High
Low
Average
91-day Treasury bills
maturing Februar~ 17a 1966
Approx. Equiv.
Annual Rate
Price
4.071'4
98.971 al
4.102'4
98.963
4.09710 11
98.964
182-day Treasury bill
maturing MIl:Z: 19. l~
Approx.
Price
Annual!
97.854 bl
4.24~
97.845
4.261
97.847
4.25~
-
al Excepting 2 tenders totaling ~220,000; ~I ;~xcepting 1 tender of $1,400,000
94 percent of the amount of 91-day bills bid for at the low price was accepted
20 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
Applied For
Accepted
Applied For
Accept!
Boston
$
24,999,000
$
14,999,000
$
24,599,000
$ 15,5
New York
1,448,805,000
819,747,000
1,478,508,000
745,'
Philadelphia
31,019,000
19,019,000
12,632,000
4,6
Cleveland
26,614,000
26,614,000
26,178,000
25,~
Ricbaond
18,511,000
12,511,000
10,457,000
4,4
Atlanta
38,877,000
24,251,000
32,316,000
14,0
Chicago
265,782,000
137,952,000
329,894,000
112,~
St. Louis
42,503,000
35,879,000
25,200,000
15,!
Minneapolis
18,204,000
14,832,000
8,541,000
.,1
Kansas City
26,504,000
25,504,000
16,541,000
lS,l
Dallas
22,198,000
13,138,000
12,623,000
7,1
San Francisco
93,841,000
56,331,000
122,048,000 ~
TOTALS
$2,057,857,000
$1,200, 777,000~./ $2,099,537,000
$l,OOO,!
cl Includes $247,618,000 noncOIDpeti tive tenders accepted at the average price ~
dl Includes $123,552,000 noncompetitive tenders accepted at the average price ~
lIOn a coupon issue of the same length and for the same amount invested, the r.
these bills would provide yields of 4.201, for the 91-day bills, and 4.411, f
l82-day bills. Interest rates on bills are quoted in terms of bank discoUDt
the return related to the face amount of the bills payable at maturity rattler
the aaount invested and their length in actual number of days related to a ~
year. In contrast, yields on certificates, notes, and bonds are computed lD
of interest on the amount invested, and relate the number of days remaioin&l
interest payment period to the actual number of days in the period, with
coapounding if more than one coupon period is involved.
s.
F-272
.. 3 -
)ther disposition of Treasury bills does not have any special treatment, as
~r
the Internal Revenue Code of 1954.
The bills are subject to estate,
lee, gift or other excise taxes, whether Federal or State, but are exempt from
~ion
now or hereafter imposed on the pr1.ncipal or interest thereof by
r the
a~
State,
possessions of the United States, or by any local taxing authority.
For
ot taxation the amount of discount at which Treasury bills are originally sold
l1ted states is considered to be interest.
Under Sections 454 (b) and 1221 (5)
lternal Revenue Code ot 1954 the amount of discount at which.bills issued heresold is not considered to accrue unt1l such bills are sold, redeemed or other-
!
~sed
of, and such bills are excluded from consideration as capital assets.
p.y, the owner of Treasury
~111s
(other than life insurance companies) issued
r need include in his income tax return only the difference between the price
such bills, whether on original issue or on subsequent purchase, and the amount
received either upon sale or redemption at maturity during the taxable year
1
the return is made, as ordinary gain or loss.
LSUry
I
Department Circular No. 418 (current revision) and this notice, prescribe
of the Treasury bills and govern the conditions of their issue.
llar may be obtained from any Federal Reserve Bank. or Branch.
Copies of
- 2 -
~d
fonns and forwarded in the special envelopes which will be supplied by Federal
re Banks or Branches on application therefor.
~1ng
institutions generally may submit tenders for account of customers pro-
the names of the customers are set forth in such tenders.
others than banking
iutions will not be permitted to submit tenders except for their own account.
~8
will be received without deposit from incorporated banks and trust companies
~om
responsible and recognized dealers in investment securities.
Tenders from
I must be accompanied by payment of 2 percent of the face amount of Treasury bills
~d
for, unless the tenders are accompanied by an express guaranty of payment by
:orporated bank or trust company.
rnmediately after the closing hour, tenders will be opened at the Federal Reserve
and Branches, following which public anouncement will be made by the Treasury
~ent
of the amount and price range of accepted bids.
)e advised of the acceptance or rejection thereof.
Those submitting tenders
The Secretary of the Treasury
Isly reserves the right to accept or reject any or all tenders, in whole or in
and his action in any such respect shall be final.
Subject to these reserva-
noncompetitive tenders for each issue for $200,000 or less without stated
fram anyone bidder will be accepted in full at the average price (in three
~lB)
of accepted competitive bids for the respective issues.
Settlement for
;ed tenders in accordance with the bids'must be made or completed at the Federal
'e Bank on
. November 26,
1965
, in cash or other immediately available funds
<Jii)
a like face amount of Treasury bills maturing __I_To_v_e_m_b_'2..,ro:::~=c.,6~~,,-_1_S-.;.'G_~_ _ •
Cash
<JIl)
tchange tenders will receive equal treatment.
Cash adjustments will be made for
-eDces between the par value of maturing bills accepted in exchange and the issue
of the new bills.
he income derived from Treasury bills, whether interest or gain from the sale or
diSPOSition of the bills, does not have any exemption, as such, and loss from the
,r
TREASURY DEPARTMENT
Washington
~IATE
RELEASE,
~EKLY BILL OFFERING
ne Treasury Department, by this public notice, invites tenders for two series
:l.sury bills to the aggregate amount of $ 2,200,000,000
, or thereabouts, for
(I )
ad
in exchange for Treasury bills maturing
HOVCJijOCl' (~G z
19G5
, in the amount
(!)
201,196,000 , as follows:
(X)
,90 -day bills (to maturity date) to be issued
november 26, 19(']0
fi)
,
(li )
in the amount of $ 1,200,000,000 , or thereabouts, represent-
(X)
,
ing an additional amount of bills dated August 26. lJC:::,
(I)
and to mature Februar¥
(2~"
19l::;6
, originally issued in the
(I)
amount of $ 1,000,381,000 , the additional and original bills,
(D)
to be freely interchangeable.
181-day bills, for
,liJ
$ 1,000,000,000 , or thereabouts, to be dated
Novenber 26, 1965
(~)
(~)
, and to mature
nay 26, 196G
--~-r(D='T")---
•
:le bills of both series will be issued on a discount basis under competitive
lcompetitive bidding as hereinafter provided, and at maturity their face amount
payable without interest.
They will·be issued in bearer form only, and in
,lations of $1,000, $5,000, $10,000,' $50,000, $100,000, $500,000 and $1,000,000
,ty value).
nders will be received at Federal Reserve Banks and Branches up to the closing
·,ne-thirty p.m., Eastern Standard time,
Monday, IJovembc1.' :-:-':2, 19(:;5
(itij
,t be received at the Treasury Department, Washington.
•
Tenders
Each tender must be
even multiple of $1,000, and in the case of competitive tenders the price
must be expressed on the basis of 100, with not more than three decimals,
99.925.
7)
Fractions may not be used.
It is urged that tenders be made on the
TREASURY DEPARTMENT
November 17, 1965
FOR IMMEDIATE RELEASE
TREASURY'S WEEKLY BILL OFFERING
The Treasury Department, by this public notice, invites tendel'l
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 November 26,1965, in the amount of
$ 2,201,196,000, as follows:
90-day bills (to maturity date) to be issued
in the amount of $1,200,000 ,000, or thereabouts,
additional amount of bills datedAugust 26,1965,
mature February 24,1966,originally issued in the
$ 1,000,381,000,the additional and original bills
interchangeable.
November 26,1965,
representing an
and to
amount of
to be freely
181-day bills, for $ 1,000 ,000 ,000, or thereabouts, to be dated
November 26,1965, and to mature May 26,1966.
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,
Monday, November 22,1965.
Tenders will not be
received at the Treasury De~artment, 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 ~
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~
customers provided the names of the customers are set forth in sucb
tenders. Others than banking institutions will not be permitted to
submit tenders except for their own account. Tenders will be ~ce1.
without deposit from incorporated banks and trust companies and r~
responsible and recognized dealers in investment securities. TeM~
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 incorporat~ ~
or trust company.
F-273
- 2 Immediately after the closing hour, tenders will be opened at the
eral Reserve Banks and Branches, following which public announcet will be made by the Treasury Department of the amount and price
ge of accepted bids. Those submitting tenders will be advised
the acceptance or rejection thereof. The Secretary of the Treasury
ressly reserves the right to accept or reject any or all tenders,
whole or in part, and his action in any such respect shall be
al. Subject to these reservations, noncompetitive tenders for
h issue for $200,000 or less without stated price from anyone
der will be accepted in full at the average price (in three
imals) of accepted competitive bids for the respective issues.
tlement for accepted tenders in accordance with the bids must be
e or completed at the Federal Reserve Bank on November 26,1965, in
h or other immediately available funds or in a like face amount
Treasury bills maturing November 26,1965. Cash and exchange tenders
1 receive equal treatment. Cash adjustments will be made for
ferences between the par value of maturing bills accepted. in
hange and the issue price of the new bills.
The income derived from Treasury bills, whether interest or
n from the sale or other disposition of the bills, does not have
exemption, as such, and loss from the sale or other disposition
Treasury bills does not have any special treatment, as such,
er the Internal Revenue Code of 1954. The bills are subject to
ate, inheritance, gift or other excise taxes, whether Federal or
te, but are exempt from all taxation now or hereafter imposed on
principal or interest thereof by any State, or any of the
sessions of the United States, or by any local taxing authority.
purposes of taxation the amount of discount at which Treasury
ls are originally sold by the United States is considered to be
erest. Under Sections 454 (b) and 1221 (5) of the Internal
enue Code of 1954 the amount of discount at which bills issued
eunder are sold is not considered to accrue until such bills are
d, redeemed or otherwise disposed of, and such bills are excluded
'm consideration as capital assets. Accordingly, the owner of
asury bills (other than life insurance companies) issued hereunder
d include in his income tax return only the difference between
price paid for such bills, whether on original issue or on
,sequent purchase, and the amount actually received either upon
.e or redemption at maturity during the taxable year for which the
urn is made, as ordinary gain or loss .
. Treasury Department Circular No. 418 (current revision) and this
lce prescribe the terms of the Treasury bills and govern the
.ditions of the ir issue. Copies of the circular may be obta ined from
. Federal Reserve Bank or Branch.
TREASURY DEPARTMENT
FOR IMMEDIATE RELEASE
November 17, 1965
.
TREASURY DECISION ON TITANIUM DIOXIDE
UNDER THE ANTIDUMPING ACT
TREASURY DEPARTMENT
FOR IMMEDIATE RELEASE
November 17, 1965
TREASURY DECISION ON TITANIUM DIOXIDE
UNDER THE ANTIDUMPING ACT
The Treasury Department has completed its investigation with
respect to the possible dumping of titanium dioxide, pigment grade,
from West Germa.IlY, manufactured by Farbenfabriken Bayer A. G.,
Isverkusen, Germa.ny.
A notice of a tentative determillB.tion that
this merchandise is being, or is likely to be, sold at less than
fair value within the me8Jl1Dg of the Antidumping Act, 1921, as
amended,will be published in an early issue of the Federal Register.
There are under consideration two types of pigment grade titanium. dioxide, anatase and rutile.
Anatase titanium dioxide is
a low-energy crystal form. used in paper manufacture and in the
production of paints where chaJkjDg tendencies are desired, while
rutile, a higher-energy crystal form, is used in paints where
higher opacity per unit of weight is deSired.
Appraisement of the above-described merchandise, manufactured
by Farbenfabriken Bayer A. G., Ieverkusen, Germany, is being withheld
at this time.
The information alleging that the merchandise under consideration was being sold at less than fair value within the meaning of
the Antidumping Act was received in proper form on November
1964.
17,
The complaint was submitted by Cabot Corporation, Boston,
loassachusetts.
~rts of the involved merchandise received during the period
J~ I, 1964,., tli.rough September 30, 1965, amounted to approximately
f3,o50.00c.
TREASURY DEPARTMENT
November 17, 1965
FOR IMMEDIATE RELEASE
TREASURY DECISION ON TITANIUM DIOXIDE
UNDER THE ANTIDUMPING ACT
The Treasury Department has completed its investigation With
respect to the possible dumping of titanium. dioxide, pigment grade,
from West Germany, manufactured by Farbenfabriken Bayer Ao Go,
Ulverkusen, Germa.ny.
A notice of a tentative determination that
this merchandise is being, or is likely to be, sold at less thaD
fair value within the me8Jl i ng of the Antidumping Act, 1921,
&8
amended,will be published in an early issue of the Federal Register.
There are under consideration two types of pigment grade titanium dioxide" anatase and rutile.
Anatase titanium dioxide i8
a low-energy crystal form. used. in paper manufacture and in the
production of paints where
chalking
tendencies are desired, while
rutile, a higher-energy crystal form, is used in paints where
higher opacity per unit of weight is desired.
Appraisement of the above-described merchandise, manufactured
by Farbenfabriken Bayer A. G." Ieverkusen, Germany, is belq vitbhe14
at this time.
The ini'ormat1on alleging that the merchandise under consideration was being sold at less than fair value within the meaning of
the Antidumping Act vas received in proper form. on November 17,
1964.
The complaint was submitted by cabot Corporation, Bostal,
loBesachusetts
0
Imports of the involved merchandise received during the ~
July I" 1964, through September 30, 1965, amounted to app~
$3,650,000.
TREASURY DEPARTMENT
FOR RELEASE 6:30 P.M.,
Wednesday, November 17, 1965.
RESULTS OF TREASURY'S OFFER OF ADDITIONAL
$2-1/2 BILLION IN JUNE TAX BILLS
The Treasury Department announced today that the tenders for an additio~l
$2,500,000,000, or thereabouts, of the Tax Anticipation Series Treasury bills datld
October 11, 1965, and to mature June 22, 1966, were opened at the Federal Reserve I
on November 17. The additional amount of bills, which were offered on November 12.
will be issued November 24 (210 days to maturity date).
The details of this i,sue are as follows:
Total applied for Total accepted
$5,152,146,000
2,500,906,000
Range of accepted competitive bids:
(includes $459,951,000 entered on a
noncompetitive basis and accepted 1n
full at the average price shown below)
(Excepting 12 tenders totaling
$12.10~1
97.638 Equivalent rate of discount approx. 4.0494 per I
II
II
II
4.0874 II
••
97.616
II
II
II
II
4.075'7. 1
97.623
(2% of the amount bid for at the low price was accepted)
..
High
Low
Average
10
Federal Reserve
District
Boston
New York
Philadelphia
Cleveland
Richmond
Atlanta
Chicago
St. Louis
Minneapolis
Kansas City
Dallas
San Francisco
TOTAL
Total
AEElied For
$ 182,060,000
1,981,180,000
156,165,000
377,930,000
95,650,000
197,800,000
808,066,000
164,980,000
136,310,000
98,640,000
173,180,000
780 2 185,000
$5,152,146,000
Total
AcceEted
88,360,000
$
441,860,000
88,205,000
195,290,000
44,550,000
135,600,000
645,486,000
82,480,000
73,810,000
76,640,000
123,320,000
505,305,000
$2,500,906,000
1/ On a coupon issue of the same length and for the same amount invested, the reU
these bills would provide a yield of 4.22%. Interest rates on bills are quoted
terms of bank discount with the return related to the face amount of the billl
at maturity rather than the amount invested and their length in actual n~rG
related to a 360-day year. In contrast, yields on certificates, notes, ~d.
computed in terms of interest on the amount invested, and relate the number~
remaining in an interest payment period to the actual number of days in the pel
with semiannual compounding if more than one coupon period is involved.
F-27~
~xempl; from all to...'<:ation now 01' hereafLer :imp08Cu. on the princ:Lpal or lnCerent
')of by any StD.-I.e, or Bny of the pOGGessions of the Dntted States, or by any
I. tuxJnr: uuLhorlty.
For purpoGeG oJ' tnxrJl.:i.on l.bc amount of diocount at which
[jury bills v_re originally sold by the Dnlted States is considered to be in-
st.
Under SectIon::> 4:54 (b) and 1221 ([)) of the Internal Revenue Code of 1954
amount of discount at 1-1hich bills issued hereunder are sold is not considered
ccrue u11ti1such bills arc sold, redeemed or otherwise disposed of, and such
S 111'(' e)~cludc:d
rCUGUI'Y
~
from
b:t11s (other
cOl1f;inr'rat "ion nf~
[.1 pin
cqli.Lal
n..;~~ct::;.
(I.ccordingly, the mroer
liJ(~ :i.nmu'<.tnce companies) issued hereunder need in-
in h:i.G income tax return only the difference betvrccn the price paid for such
~,
lihether on oric.;inal
1,:;[iU('
or on fmbcequent purchase, and the amount actually
ived e1 ther upon sale or redemption at maturity durinG the taxable yee.r for
"11
the return is made, as ordinary Ccdn or loss.
'l'l'easury Department Circular No. ~18 (current revision) and this notice, pre-
'be I.he terms 01' the Treasury bills GIld Govern the conditions of their issue.
':es of the circular may be obtained from any Federal Reserv-e Bank or Branch.
- 2 -
bonkInG insti tutionc will not be penni tted to sllbmJ. t tenders except for their
nccoWlt.
T~ndcrs
,.nll be received v.i.thout deposit from incorpornt~d banks 8D4
trust compMies ond from responsible and reco~nized dealers in investment &ee1II
Tenders from oLhers must be aecompanled by paJl1nent of 2 percen~ of the face
of Treasury bills applied for, WllesG the tenders nre accoIllponied by an eXlftI
euaranty of payment by an incorporated ban1~ or trust company.
Immedio.tely after the closing hour, tenders will be opened at the Federal.
serve funks and Bronches, fol1mlinc; uhich public announcement will be made:bJ
'l'rco.sury Department of the omoWlt and price range of accepted bids.
'l'hose 6Iti
tine tendcrs "rill be advised of the acccptance or rejection thereof.
'l'heiSeGII
of the '1'reasury c::-.-presGly reserves thc riGht to D.ccept or reject
~.
or all tal
in '·Thole or in part, and his action in any such rcspect shall be finaL
to these rcservations, noncompetitive tenders for
*200,000
)(mOX
SUb3.
or less 'withOut
stated price from any one bidder "rlll be acccpted in full at the average price
three decimals) of accepted competi ti ve bid::;.
Settlement for accepted tenders
accordance vrith the bids must be made or completcd at the Federal Reserve BaU
_N_o_v_e_m_h_e"rIl2'll31!U0.;,~1_9...;6...;5_ _ , in cash or other inunediatcly available funds or in a]j
~
race amount of Trcasury bills maturinG
November 30, 1965
Cash and exchll:
{Cir4
tenders "rill receive equal treatment.
Cash adjustments will be made for d11'ft
ences bet"Teen the par value of maturing bills accepted in exchange and 1ihe 181
price of the new bills.
The income derived from Treasury bills, "mether interest or gain tr(lll~
or other disposition of the bills, does not have any exempt,ion, as, such,. aQl
froJil thc sale or other disposition of Treasury bills does not have fJ1JY ~
treatment, as such, under the Internal Revenue Code of 1954.
The bills.re'
to estate J inheritance, gift or other excise taxes, ~me:ther Fedpral: OF
State
TREASURY DEPARTMENT
Washington
t_IATE RELEASE,
November 17, 1965
REFUNDS ONE-YEAR BILLS
The Treasury Department, by this public notice, invites tenders for
,0,000,000
fii{'
, or thereabouts, of
i
365
--'(W--
-da.y Treasury bills, for cash and
change for Treasury bills maturing _N_o_v_e_m_ib_e_r__3~0...,_l_96_5____ , in the amount
~
1,000,542,000
, to be issued on a discount basis under competitive and
, J(i&)X
.'f8)etitive bidding as hereinafter provided.
The bills of this series will be
November 30, 1966
...,_1-9...6-5-_--, and will mature
..._No_ve_m..,.ib_er_3.,0
J{'GOt t
ace amount will be payable without interest.
~nly,
,when
"f$f
They will be issued in bearer
and in denominations of $1,000, $5,000, $10,000, $50,000, $100,000,
')00 and $1,000,000 (maturity value).
renders will be received at Federal
':lg
Reserv~
Banks and Branches up to the
hour, one-thirty p.m., Eastern Standard time,
..
'rs wi~l
November 23, 1965
~
not be received at the Treasury Department, Washington.
Each tender
le for an even multiple of $1,000, and in the case of competitive tenders the
offered must be expressed on the basis of 100, with not more than three dece. g., 99.925.
Fractions may not be used.
bills will run for
(Notwithstanding the fact that
365 days, the discount rate will be computed on a bank
M
mt basis of 360 days, as is currently the practice on all issues of Treasury
It is urged that tenders be made on the printed forms and forwarded in
ecial envelopes which will be supplied by Federal Reserve Banks or Branches
llication therefor.
~1ng institutions generally may submit tenders for account of customers
led
the nameG---.f
tbe
cllstomers &re set forth in such tenders.
Others than
TREASURY DEPARTMENT
November 17. 1965
FOR IMMEDIATE RELEASE
TREASURY REFUNDS ONE-YEAR BILLS
The Treasury Department, by this public notice. ~nvites tenders for
$1,000,000,000. or thereabouts, of 365-day Treasury b111s, for cash and in exchar-il
for Treasury bills maturing November 30. 1965, in the amount of $1,000,542,000, .
to be issued on a discount basis under competitive and noncompetitive bidd~u
hereinafter proveded. The bills of this series will be dated November 30, 1965, II
will mature November 30. 1966, when the face amount will be payable without intel'tl
They will be issued in bearer form only, and in denominations of $1,000, $5,~,
$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 cbsi
hour, one-thirty p.m., Eastern Standard time, November 23, 1965. Tenders rl11n~
be received at the Treasury Department. Washington. Each tender must be for an ell
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., 99.92),
Fractions may not be used. (Notwithstanding the fact that these bills will run f~
365 days, the discount rate will be computed on a bank discount basis of 360 days,
is currently the practice on all issues of Treasury bills.) It is urged that tend
be made on the printed forms and forwarded in the special envelopes which rlll~
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~
institutions will not be permitted to submit tenders except for their own account.
Tenders will be received without deposit from incorporated banks and trust co~
and from responsible and recognized dealers in investment securities. Tenders f1'fJ
others nrust be accompanied by payment of 2 percent of the face amount of Treasury
applied for, unless the tenders are accompanied by an express guaranty of paymer,t
an incorporated bank or trust company.
Immediately after the clOSing hour, tenders will be opened at the Federal ?,es
Banks and Branches, following which public announcement will be made by the T~
Department of the amount and price range of accepted bids. Those submitting tenal
will be advised of the acceptance or rejection thereof. The Secretary of theT~
expressly reserves the right to accept or reject any or all tenders, in whole or:
part. and his action in any such respect shall be final. Subject to these res e:'f1
noncompetitive tenders for $200,000 or less without stated price from any one b:~
be accepted in full at the average price (in three decimals) of accepted compet~t:
bids. Settlement for accepted tenders in accordance with the bids must be made ,:
completed at the Federal Reserve Bank on November 30 1965 in cash or other
immediately available funds or in a like face amount' of Tr~asury bills maturing
November 30, 1965. Cash and exchange tenders will receive equal treatment. c~t
adjustments will be made for differences between the par value of maturi~ bills
accepted in exchange and the issue price of the new bills.
F-275
~
2 -
income derived from Treasury bills, whether interest or gain from the sale or
isposition of the bills, does not have any exemption, as such, and loss from the
other disposition of Treasury bills does not have any special treatment, as
nder the Internal Revenue Code of 1954. The bills are subject to estate,
ance, gift or other excise taxes, whether Federal or state, but are exempt
1 taxation now or hereafter imposed on the principal or interest thereof by
teo or any of the possessions of the United States, or by any local taxing
ty. For purposes of taxation the amount of discount at which Treasury bills
gina11y sold by the United States is considered to be interest. Under
5 454 (b) and 1221 (5) of the Internal Revenue Code of 1954 the amount of
t at which bills issued hereunder are sold is not considered to accrue until such
re sold. redeemed or otherwise disposed of, and such bills are excluded from
ration as capital assets. Accordingly, the owner of Treasury bills (other than
5urance companies} issued hereunder need include in his income tax return only
ference between the price paid for such bills, whether on original issue or on
ent purchase, and the amount actually received either upon sale or
ion at maturity during the taxable year for which the return is made. as ordinary
loss.
9
!asury Department Circular No. 418 (current revision) and this notice,
Ie the terms of the Treasury bills and govern the conditions of their issue.
If the circular may be obtained from any Federal Reserve Bank or 8ranch.
000
- 9 -
... ewe .ow ift • poaition to put dollars .aide for the
.... 1cYtaa-
• .-ala
la
BORda offer them an excellent opportunity
OM
of the world'. fineat and safeat invest-
...
lith til. jucl1cioua use of your own time and talents I
l~it.e.t
of even a greater army of volunteers. I feel
liM. that you will help them to do thi., and in doing
,.. ...... the public. the government and the country.
- 8 -
5~-
long •• t peacetiBe economic expansion we have known;
•• lD that tiale a total of 1.6 million non-farm. jobs
have been created -- 4 million of them in the last
two
-
years;
In that time personal income has increased from
$406.6 billion to $536.9 billion -- an increase of
l2 percent •
.. 1D that time business profits after taxes have
increased by $20 billion o
te •• our economic outlook for the future is bright, and
•• 1,
110
serious dlreat of over-exuberance.
It is an
-.., well suited to the Savings Bond program, because.
,S:.
\_,
- 7 -
~
are a au.ber of factors working in your favor
. . .,1_r Aaaiveraary year belW.
Not the least of these
. . eoat1aued atreagth. 8tability and soundness of our
!lail la .oaethiug of extreme importance to each of you,
• odr •
pl.ate 01t1ll.... but 1D your work in behalf of
. . . .- . . . . . ,,,oll'a.
Ita iaportaD.ce to the bOlld program
.. ill till fact tu.t a solid economic foundation is e.sential
-lei of boRda are to continue to mount.
AM I . .au..a JoU that foundation ia sound, for instance:
-. !be ,reaeBt business expansion baa continued
to ita curreot record length of 57 month., the
.....ltat1ea of th••• f ••t. ia really DOt Me....ry for
. . . an .-klag in the laVi. ._ Bond prograa day aiter
Ir.
'fee dleJ .,.11 out tlut s-a.lty of this effort .. a
IIIl .. tile . . , rMl a1p.1ficaae_ of the program to tho ••
.. _ ............. with the _ , __t of the national
.....
al.1Nlwark of ••triage ,.-.tecta the fiuneul HCUrlty
.. .u.l.... ef
our cltu.e •
............. wltaout dle availability of the•• dollar •
....taa
to -Mae tile natloaal debt. the govemaent
n.I'••l, could be force. lata
hIghly inflationary
)
.
• J •
I , . _ . . He . . . . . .
t . . . . their fellow Aaerica. .
Ie•
. . . . ..eft. . . . by the fact ...t in the past 2S year ••
I·..s.c.t 100 1Il111ea . _. . . have 1tw••tetl 149 billloa
. . . . 1a ...... i1lCludiftg ac.crQed lat• •at.
Proe.eels
. . . . . . . that ha•• beea redeaaed have been used to
•• ta. .......
.. ..t.
echtcate eh1141:'e. . .•• tlte burdea_ of
aad suppl,. tllcNUDCI. of other needed it __ •
-4-
. r;-'
_ . , . , . .••••• tU.. _11_ b.a4. total.d
....UlfAa
dell.. ..
_1:8
thaD
61 , .....t of 811 Savi",. load. lold •
..... flpw•• an ."........id. ._ of the degre. of
• •_
Gat .... b _ Utalaed 1. ,.,..11 IiIvl",_ activitie.,
__ tIa_ _11_ DoDd, ue tit. . . . . . .nally aCMIUtracl by
. . .11. . . . .1 __1....
. . . ef t1tei'l'
-nd.a&.
~,
ea. payela,. ue putting a
late boac:la.
" .....f t:lMb' tlae. taleat
All• ....,.
1. behalf of the program.
l& t. _ . . . that _ _14 have tr_dou.. appeal to thou_ad.
- 1- I am well aware that you in the SavinGs Bond:;Division
taave Lor year. continued to achieve record sales with a
__11 staff.
You have done this by enlisting thousands and
thousands of volunteers who have been willing to
n~lp
you
and their government in the sale of Saving. Bonda.
But more and 1IlOre volunteers must be enl1.ced in the
caule if we are going to achieve maximum effoJ:t at minimum
lOst.
You already have a splendid record, 'which includes:
-- 25 years of solid progress;
-- a record high in the total of bonos outstandin6 ;
-. 1aereaatng purchases of smaller bonds -- those
in the $25 to $200 range -- reflecting the evergrowing appeal of the bond probram to
~l
investors.
- ~
,'j
as dollars in the process.
President Johnson has made it clear that it is imperative
. .t greater·attention be given-throughout the Federal
lI"erftlleftt to sound coat-reduction techniques -- and that
...lude. the management of our program.
That Means better utilizAtion of our manpower facilitiesj
,t ...D8 taking aetilma to simplify, expedite. or lessen
Ia. eo.t of carrying on our programs; it means taking every
.etion p08.1ble to conserve time, WODey and manpower.
'lb.at ia the expressed desire of President Johnson a.nd
•• been eonveyed 1ft executive orders issued by the t.jhite
••e to every department and agency.
- 2 -
I am well aware that you in the Savings Bonds Division
have for years continued to achieve record sales with a
small staff. You have done this by enlisting thousands and
thousands of volunteers who have been will ing to he lp you and
their government in the sale of Savings Bonds.
But more and more volunteers must be enlisted in the
cause if we are going to achieve maximum effort at minimum cost.
You already have a splendid record, which includes:
25 years of solid progress;
a record high in the total of bonds outstanding;
increas ing purchases of smaller bonds - - those
in the $25 to $200 range -- reflecting the evergrowing appeal of the bond program to small
investors.
In fact, during the first nine months of this calendar
year, purchases of these smaller bonds totaled more than
two billion dollars -- 68 percent of all Savings Bonds sold.
These figures are strong evidence of the degree of
success that has been attained in Payroll Savings activities,
since these smaller bonds are the ones normally acquired by
the millions of Americans who, each payday, are putting a
portion of their earnings into bonds.
These gains have been accomplished, as you know, largely
under the leadership of a group of America's leading
industrialists and businessmen, all of whom serve as volunteers
giving of their time, talent and money in behalf of the program.
It is an area that should have tremendous appeal to thousands
of persons who are anxious to see their fellow Americans
gain greater financial stability and at the same time assist
the government in sound management of the Nation's debt.
The extent to which the bond program has succeeded
is best reflected by the fact that in the past 25 years, an
estimated 100 million persons have invested 149 billion
dollars in bonds, including accrued interest. Proceeds froo
those that have been redeemed have been used to purchase homes,
educa te children, ease the burdens of retirement, and supply
thousands of other needed items.
- 3 A recitation of these facts is really not necessary f~
you who are working in the Savings Bond program day after
day. Yet they spell out the immensity of this effort as
well as the very real significance of the program to those
of us who are charged with the management of the national debt.
This bulwark of savings protec ts the financ ial security
of millions of our citizens.
Furthermore, without the availability of these dollars
in helping to manage the national debt, the government
conceivably could be forced into highly inflationary financing.
There are a number of factors working in your favor
as the Silver Anniversary year begins. Not the least of these
is the continued strength, stability and soundness of our
domestic economy.
This is something of extreme importance to each of you,
not only as private citizens, but in your work in behalf of
the Savings Bond program. I ts importance to the bond program
lies in the fact that a solid economic foundation is essential
if sales of bonds are to continue to mount.
And I assure you that foundation is sound, for instance:
The present business expansion has continued
to its current record length of 57 months, the
longest peacetime economic expansion we have
known;
In that time a total of 7.6 million non-farm jobs
have been crea ted
4 mill ion of them in the last
two years;
In that time personal income has increased from
$406.6 billion to $535.9 billion -- an increase
of 32 percent;
In that time business profits after taxes have
increased by $20 billion.
- 4 -
(r")
~,
Yes, our economic outlook for the future is bright.
It is an economy well suited to the Savings Bond program, because
people are now in a position to put dollars aside for the
future. Savings Bonds offer them an excellent opportunity to
do this in one of the world's finest and safest investments.
Wi th the j ud ic ious use of your own time and ta lents, and
recruitment of even a greater army of volunteers, I feel
confident tha t you will he lp them to do this, and in doing so
you serve the public, the government and the country.
000
Yn '~I
I
C
_
_
BIOGRAPHJ SAL SKETCH OF DONALD C. UTTERBACK
Donald C. Utterback, District Director-designate for the
San Diego Customs District, was born in Wendell, Idaho, July 1915,
and attended the U. S. Marine Corps Institute and the University of
Oregon at Eugene.
He has taken management courses for Customs
supervisors.
Mr. Utterback entered the Customs Service in San Ysidro,
Calif. as an inspector in 1942.
After military duty with the
Marine Corps in 1945 and 1946 he returned as a Customs inspector.
He was promoted in 1950 to the poSition of Deputy Collector at
Calexico, Calif.
He served for a time as a Customs agent and
became Deputy Collector in Charge in 1954.
He has been Assistant
Collector of Customs in San Diego since April 23, 1956 where he
has supervised the work of 107 employees in the San Diego area.
Mr. and Mrs. Utterback reside at 38 East Shasta Street,
Chula Vista, Calif.
***
r
n,
~
~
,I
BIOGRAPHICAL SKETCH OF WILLIAM R. KNOKE
William R. Knoke, District Director-designate of the Los
Angeles Customs District was bom on August 29, 1911 at Santa
Maria, Calif.
He holds a Bachelor of Arts degree from the
University of Southern California at Los Angeles and majored in
political science.
Later he attended the School of Engineering
at the University of Southern California, specializing in textile
e nginee ring.
Mr. Knoke served with the U. S. Army in Europe.
He has
traveled extensively and has a working knowledge of German,
Spanish, and French.
Mr. Knoke was employed as a Customs Examiner in Los
Angeles from 1947-58 except for a 2-year period in
Germany, for the Customs Agency Service.
P&~~e~
to
F/lrllill\rt.
Jt'L
0
F~ankfl\rt,
In 1958 he was
the position of Senior Customs Representative in
He
represented the Treasury Department as an
observer at conferences of the Customs Cooperation Council in
Brussels, Belgium.
Since December 1963 he has been Assistant
Supervising Customs Agent in Los Angeles.
Mr. and Mrs. Knoke reside at 2085 Canyon Close Road,
Pasadena, California.
* **
BIOGRAPHICAL SKETCH OF CARROLL R. LONG
Carroll R. Long, District Director-designate of the
Nogales Customs District, was born in 1905 at Lancaster, Pa.
He was educated at the Lancaster Business College and took a
law course given by the LaSalle Extension University in Chicago,
ill.
Mr. Long started his career with the Customs Service in
July 1927 and has
~ordustoms in Nogales, Ariz.
since August, 1951, with 63 clerical, administrative, and
inspectional employees under his supervision.
Mr. and Mrs. Long reside at 217 Pajarito Street, Nogales,
Arizona.
# # #
END
.
~
,-,.
I:
Street.
.~
'
'~
With Regional Comm.ssioner Creed at this location
<lIe
Assistant Regional CommissioneJdesignate Ray M. Osborn (Operations)
and Roger A. Morin (Administration).
There will be a total of nine Customs regions established in
accordance with a year-long timetable, as follows: Los Angeles,
Calif., January 1, 1966; Miami, Fla. and New Orleans, La.» in
February 1966; Chicago, ill., March; Baltimore, Mda, April;
Houston, Texas, and Boston, Mass., May; and New York City in
June.
Region VITI in San Francisco became operational November 1,
1965.
United States Commissioner of Customs Lester D. Johnson
heads the Bureau of Customs which is part of the Treasury Department.
His office is in Washington, D. C.
# # #
(Biographies follow)
(more)
GFOR RELEASE A. M~ NEWSPAPERS
WgDNE!iMY N9HEMB E K ft;;~
I /!' /// ::;)/1 l' IV tJ V
/
I
I f~ I 1? )
CUSTOMS DISTRICT DIRECTORS
APPOINTED FOR LOS ANGELES REGION
The appointment of three district directors for the Los Angeles
Customs Region VII was annoWlced today by Assistant Secretary of the
Treasury True Davis.
Selections were made in accordance with Civil
Service regulations from a number of qualified applicants.
The Los Angeles Region comprises three districts-- Los Angeles,
San Diego, and Nogales, Ariz-Jna. and the appointments, effective
January 1, 1966, are as follows:
William R. Knoke of Pasadena -- Los Angeles Customs District;
Donald C. Utterback of San Diego -- San Diego Customs District;
Carroll R. Long of Nogales -- Nogales (Ariz.) Customs District.
The appointments were made as part of the President's Reorganization
Plan No. 1 of 1965 which was sent to Congress last March and became
effective on May 26, 1965.
It called for the elimination of 53 Customs
positions throughout the U. S., which were previously filled by Presidential appointment.
The Reorganization Plan placed th~ 76-year-old
Customs Service wholly on a career basis.
Mr. Frank R. Creed was named Regional Commissioner-designate
of the Los Angeles Region on October 27, 1965, with headquarters
offices on the third floor of the Federal Building at 300 N. Los Angeles
(more)
TREASURY DEPARTMENT
FOR RELEASE A.M. NEWSPAPERS
THURSDAY, NOVEMBER 18, 1965
CUSTOMS DISTRICT DIRECTORS
APPOINTED FOR LOS ANGELES REGION
The appointment of three district directors for the Los Angeles
Customs Region VII was announced today by Assistant Secretary of the
Treasury True Davis. Selections were made in accordance with
Civil Service regulations from a number of qualified applicants.
The Los Angeles Region comprises three districts -- Los
Angeles, San Diego, and Nogales, Arizona, and the appointments,
effective January 1, 1966, are as follows:
William R. Knoke of Pasadena -- Los Ange les Customs Diserict;
Donald C. Utterback of San Diego -- San Diego Customs District;
Carroll R. Long of Nogales
Nogales (Ariz.) Customs District
The appointments were made as part of the President's
Reorganization Plan No. 1 of 1965 which was sent to Congress last
March and became effective on May' 26, 1965. It called for the
elimination of 53 Customs positions throughout the U. S., which
were previously filled by Presidential appoitment. The Reorganizatl
Plan placed the l76-year-old Customs Service wholly on a career
bas is.
Mr. Frank R. Creed was named Regional Commissioner-designate of
the Los Angeles Region on October 27, 1965, with headquarters office
on the third floor of the Federal Building at 300 N. Los Angeles
Street. With Regional Commissioner Creed at this location are
Assistant Regional Commissioners-designate Ray M. Osborn (Operationt
and Roger A. Morin (Administration).
There will be a total of nine Customs regions established in
accordance with a year-long timetable, as follows:
Los Angeles,
California, January 1, 1966; Miami, Fla. and New Orleans, La., W
February 1966; Chicago, Ill., March; Baltimore, Md., April; Ho~stri
Texas, and Boston, Mass., May; and New York City in June. Reg 10n
in San Francisco became operational November 1, 1965.
United States Commissioner of Customs Lester D. Johnson heads,
the Bureau of Customs which is part of the Treasury Department. ~
office is in Washington,D. C.
F-277
(Biographies follow)
BIOGRAPHICAL SKETCH OF WILLIAM R. KNOKE
William R. Knoke, District Director-designate of the Los
Angeles Customs District was born on August 29, 1911 at Santa
Maria, California.
He holds a Bachelor of Arts degree from the
University of Southern California at Los Angeles and majored in
political science.
Later he attended the School of Engineering
at the University of Southern California, specializing in textile
engineering.
Mr.
~oke
served with the U. S. Army in Europe.
He has
traveled extensively and has a working knowledge of German,
Spanish, and French.
Mr. Knoke was
e~ployed
as a Customs Examiner in Los
Angeles from 1947-58 except for a 2-year period in Frankfort,
Germany 1 for the Customs Agency·Service.
In 1958 he was
promoted to the position of Senior Customs Representative in
Frankfort.
He represented the Treasury Department as an
observer at conferences of the Customs Cooperation Council in
Brussels, Belgium.
Since December 1963 he has been Assistant
Supervising Customs Agent in Los Angeles.
Mr. and Mrs. Knoke reside at 2085 Canyon Close Road,
Pasadena, California.
000
BIOGRAPHICAL SKETCH OF DONALD C. UTTERBACK
Donald C. Utterback, District Director-designate for the
San Diego Customs District, was born in Wendell, Idaho, July 1915,
and attended the U. S. Marine Corps Institute and the University of
Oregon at Eugene.
He has taken management courses for Customs
supervisors.
Mr. Utterback entered the Customs Service in San Ysidro,
California as an inspector in 1942.
After military duty with the
Marine Corps in 1945 and 1946 he returned as a Customs inspector.
He was promoted in 1950 to the position of Deputy Collector at Calexico,
California.
He served for a time as a Customs agent and
became Deputy Collector in Charge in 1954.
He has been Assistant
Collector of Customs in San Diego since April 23, 1956 where he has
supervised the work of 107 employees in the San Diego area.
Mr. and Mrs. Utterback reside at 38 East Shasta Street,
Chula Vista, California.
000
~,
BIOGRAPHICAL SKETCH OF CARROLL R. LONG
Carroll R. Long, District Director-designate of the
Nogales Customs District, was born in 1905 at Lancaster, Pa.
He was educated at the Lancaster Business College and took a
law course given by the laSalle Extension University in Chicago,
Ill.
Mr. Long started his career with the
C~stoms
Service in
July 1927 and has been Assistant Collector of Customs in
Nogales, Arizona since August, 1951, with 63 clerical, administrative,
and inspectional employees under his supervision.
Mr. and Mrs. Long reside at 217 Pajarito Street, Nogales,
Arizona.
000
- 13 own interest and in the interest of those who rely on the dollar
as a reserve currency, maintain our payments in equilibrium.
This we will do.
"The world not only expects but requires that the dollar
be as good as gold."
- 12 $489 million.
We estimate that from January 1 through September of
~V~NS,IO¥\
this year the
l'~v~at~Qnof
British held U. S. securities,
~.
undertaken to help the pound, had unfavorable payments results
I
for us of about half a billion dollars.
Let me close by quoting what the President told the
meeting here of the World Bank and International Monetary Fund
Directors this fallon the subject of ending our payments
deficits, because his statement clearly indicates the extent
of our commitment to success in this national task.
He said,
and 1 quote:
"The U. S. has taken firm action to arrest the dollar
drain.
Should further action be necessary in the future,
such action will be taken.
"1 want to be very clear about this.
We must, in our
f
- 11 were $85 million better off, and debt prepayments making a
favorable difference of $174 million.
The situation was less favorable in the third quarter in
~r!1,
.. , ' .r.~:l1-,. .t.'" "_,._~.~.·.·
/.7_,.: ~,_i;.'
' .,-' " /';/..:
1/
.-_'-' l") ~',,', ," lf ;·1.0.~
three other respe'cts':", new issues of foreign securitiesl\·J.
/;'.,;
.s .'
v~,
l
"., ••
••
/ J
(II{.:
j
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t\
where the difference was a minus $162 million; bank loans,
I.
........ II '.
bo th long and s ho r t, whe re
~ ~,"'~'
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I\{'
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•
,l.
"".w
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r \
,
,I
J,
f
t..{',' ,
f
r. '
.,..tlhl..,.e.......fdHii--fFof~e~:rt!"e,.,nrT'c"t'e'!-llilJjffl'i-g~t1t1T'1nMf~aMvTl'oT:rr-:a:!Tbtrl'l~erlb"yri , ,
,.,'
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$431 million, and payments for United States~ military
exports, where there was an unfavorable difference between
the second and the third quarters coming to $176 million.
"'V \ : ~ /~ ....... , t';\';f~(!
'i;
f
I.
third
"-_-#'
Ihese items fail to account for some $489 million of the
f,"
'··l·'t'
!)-i,.I'.J
A>' I,
,
~
quarter deficit,
•
j
:\'N""~-('"
"-'J"
.
'<i' '.,
W'\.,tC\··,\r.t". \' '.
!
because we 60 not yet
,! .. ; t
)
~e
"-
full
lnformation on the payments results of direct investment,
Lnvestment income, loans by lenders other than banks, tourism,
md errors and omissions.
We do know that tourist spending
,
;\
..
1
,~.JI.
"\'v·.
' .. "
.broad will probably account for a
[\
, t) ,
v~ry
.'
.a~~
part of the
"4.f-'"f.}
- 10 -
inevitably affect in significant amount both total expenditures
and our balance of payments.
Room must be made by improvements
elsewhere to provide for these expenditures for which there
is no alternative as well as deal with the 1965 margin of deficit
that surely will emerge.
Wherever improvements can be made
by willful effort -- and no amount is too small to be given
attention -- these improvements will be made.
I intend to
carry out the President's declared intention in that regard.
Now, permit me to say a word or two about the third
quarter results before my colleagues speak and we try to
answer your questions:
~.~>
"-.Q M-'H
~.~ / /
I am discussing the overall aileax:ctI results.
,,'
•
"
There were improvements in three principal sections:
trade, where we were $257 million better off than in the
V!s
fht<-.eF/~~,
__ _
second quarter;~, 'of--foreign ~ securities, where we
A,
- 9 1965 and 1966 outflow together -- and it is important that
this be clearly understood. Performance by the individual
company will be measuredAiu
t~~8
of 1965 and 1966 combined.
So, it will not be of advantage to invest at a high rate in
1965 with the expectation that the new target in 1966 will
ignore 1965 performances.
As JOcr will see, I am both confident that we are on the
path toward equilibrium in 1966 but equally aware that we
have a substantial distance to go to cap our efforts with
full success.
And I would not want to leave any impression,
in talking here primarily about the programs administered by
the Department of Commerce and the Federal Reserve, that other
3ectors of our balance of payments are not receiving intense
lna1ysis and critical review.ff7we must, in any look ahead,
:ake into account the fact that expenditures in Vietnam will
-
{
8 -
only like to say that the banks and nonbank financial
institutions continue to perform admirably and we are confident
that they will continue this very heartening cooperation in
an effort so deeply imbedded in the national interest.
\
r
Secretary Connor wi11;T
\:':'.
@ID
""~"
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~q;!;~~e ha~py--t:e-'-answer
-
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discuss the program which he administers.
I would simply
note, as Secretary Connor has done previously, that the
program he administers will continue through 1966 on a
voluntary basis.
There will certainly be some sharpening of
the targets, including a specific one for direct investment
lbroad, and the performance under the 1965 program will
:ertain1y be taken into account.
The target to be set for
:avings under this program will cover, as it should, the
b
rcoming our balance of payments deficits.
--:-7
C
But while these results showed the very substantial
~mprovement
required, they also underline the need for following
'through deliberately and purposefully to assure a similar
improvement in the year ahead.
At this time an intensive
review of our balance of payments is underway to prepare the
'1966 program.
The results of that review will be announced
sometime later this year.
At this time I would only like to
underline what the Federal Reserve announced some time ago,
~,
I
~
namely, that the guidelines for banks and nonbank financial
~
"
~
'-,
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institutions next year will use the same base as was used for "~
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...:J~·~·""""''''·T:''':':::.:,t
~ram
during
196~~
0
'\-
Governor Robertson will discuss the
results of the program administered by the Federal Reserve
juring the third quarter in somewhat more detail.
I would
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millionAOn the now disused "regular" account our deficit
this year would be running at an annual rate of $1.7 billion,
compared to $3.1 billion in 1964.
---
~
..consequeRtly, I:he"dif.i@~eItt result for the third quarter
when the official account is used indicates that during the
bItlr~;~; '. ",' .
period there was a very sharp increase in the dollar h~1G~
' .+,' -+.~,,,-~
11- I ".'."J~
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vi,(t.<,o,\
v.A~
of
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fOreign~~S.)i Tillsd~;;;;:'~~~~~~s
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that the official account measure conveys important information
about the position of the dollar in the world, and is not
merely a statistical flourish.
The rise in private dollar
\
holdings a f fore igne:1w.ijbL
~-<, .......... -
Q fU:_ 1
bOi ]'.1;"9 -
"<le..m~d
.-
!\AayA~l~.~U (-'i~'dicates
that private holders, rather than
\..
turn dollars over to central banks, are content to hold them
is working balances.
This indicates confidence among
- 5 -
~U~f.t>\ '\ i.lJAJ
$,did not take into account dollar receipts resulting from
l\
special government transactions, consisting mainly this year
of advance repayments of U. S. Government loans and payments
in connection with military exports.
If these receipts were
omitted, as they have been in the past, our deficit would
(j-z.
"{"Ivk',
be $130 million higher in the third quarter,'f'rt Imp,,?
5;t;piJ IU'
+t \~l Slh~,fto~·1,"1
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tbal*".-i~~""eas-e~"'''el1~m!p~'''a'fe:-~ rep-O'tt-ed'(}Q"
(t' f
t ,
the oV€l1'a11
)
On any accounting basis, there is a great improvement
over both 1963 and 1964.
On the overall account, our seasonally
adjusted deficit through the first three quarters, on an annual
,1t1.J..S)
rate basis, is~i11ion, compared with $2.8 billion in
"
1964 and $2.7 billion in 1963.
~~{'
The official
rri'l/'~f!ij{ ~-,
a~ts
~
~'
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version
is at a seasonally adjusted annual rate of approximately
- 4 of $260 million, or, a slight improvement over the second
\...I\J'---'{.....J....-/v'-" )
quarter performance, en ~ 8anre-b&s~i&..
/tIn.
this same bas is,
:
"Ne
had a surplus of $210
millio~l~e·
,'I
seeondqua·r·uerand'&-o
ieficit of $634 million in the first quarter.
L:u./(~A'
The difference
44.'. -
f4t the
two measures of our payments
5L
)alance arises from the fact that the official
ttk~,.1;j bft (thtt ~',
~cco~
embraces
"-....
)nly changes in our direct liabilities to official holders
)f dollars.
That is, changes in private foreign dollar
Loldings are excluded, on the grounds, among others, that they
hould be regarded as working balances, and are therefore
.nlikely to be converted into official holdings which in turn
ould be used as a claim against our gold reserves.
Both these accounts differ from a third measure used
efore now, and which may be the one most familiar to you.
J.at is the "regular"
.
(
- 3 -
On this same accounting basis, we had a surplus of $247
million in the second quarter and a deficit of $701 million
in the first quarter.
The balance of payments report distributed to you also
shows another measure of our payments situation -- known as
the
OffiC~-{ef~~,;;
more favorable.
'-
we have become "CIC:C'tfst'oltlicr>-"to!eaaIn~"Vi tb6\:lY"~i"l'l.
S..e
tt4t.*c(;;-- 6~~ct. c'"-
The use of this officialA.@r 81t!8lilRtiue meailwwa.M'_"
implements one of the major recommendations made last Spring
)y the Review Committee on Balance of Payments Statistics led
>y Dr. Edward M. Bernstein.
Our balance of payments statistics
Till show this alternative view of our payments balance
'egularly hereafter.
This measure indicates a surplus in the third quarter
(.
- 2 -
f" S ns.
You have in your hands figures for the year through the
third quarter showing that our prediction that"we would lose
some ground in the third quarter" was justified.
We are reporting to you a deficit, after taking account
of seasonal influences, of $485 million dollars.
This is the
result for the third quarter on the accounting basis -- known
changes in United States reserve assets, and in our liquid
liabilities to all foreign holders of
~.
a_
m '!VY9R@ 'If
101ders rose oy
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11
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dOllars.~:Qd
LU,. .at .M1 ....
StateE
Advance for Use in Morning Newspapers,
Thursday, November 18, 1965
STATEMENT BY THE HONORABLE HENRY H. FOWLER
SECRETARY OF THE TREASURY
AT A NEWS CONFERENCE ON THE BALANCE OF PAYMENTS
NOVEMBER 17, 1965 AT 2:15 P.M.,
IN ROOM 4121, MAIN TREASURY
You will recall that when we announced, last August,
that we had a small surplus in our foreign payments during the
second quarter of thi.s year, we emphasized, first, that we
would not be benefitting infue third quarter from favorable
factors that helped earlier, and second, that on the contrary,
adverse factors would be at work during the third quartero
Special factors in the second quarter involved the \ effect
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,
the shipping strike, ~_ ,f3~r EFade bi!lla-nee~ __the very
;Q\.,l,,:1 , . i I "d;."(",, ~ ~r':;1 (,) (l 'v\.{
\,",'J
:Ea¥&~ble
Il,\,
results", under the voluntary restraint program for
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~
banks achain is ter~ ey
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F"'1Z"i
i1
\re'Se lVi\and the· sharp
reflow of corporate liquid funds under the program administered
!
by the Department of Commerce 0/' 1/,
, j/
'- ,
TREASURY DEPARTMENT
November 17, 1965
ADVANCE FOR USE IN MORNING NEWSPAPERS
THURSDAY, NOVEMBER 18, 1965
STATEMENT BY THE HONORABLE HENRY H. FOWLER
SECRETARY OF THE TREASURY
AT A NEWS CONFERENCE ON THE BALANCE OF PAYMEt
NOVEMBER 17, 1965 AT 2:15 P. M.,
ROOM 4121, MAIN TREASURY
You will recall that when we announced last August t~t
we had a small surplus in our foreign payments during the
second quarter of this year, we emphasized, first, that we
would not be benefitting in the third quarter from favorable
factors that helped earlier, and second, that on the contrary,
adverse factors would be at work during the third quarter.
Spec ial fac tors in the second quarter involved the effect
on our trade balance of exports deferred from the first quarter
because of the shipping strike, the very favorable results
from the net reduction of capital outflows under the voluntary
restraint program for banks as they reduced the scale of n~
loans to come within the prescribed ceiling, and the sharp
reflow of corporate liquid funds under the program administered
by the Department of Commerce.
You have in your hands figures for the year through the
third quarter showing that our prediction that "we would lose
some ground in the third quarter" was justified.
We are reporting to you a deficit, after taking account
of seasonal influences, of $485 million dollars. This is tM
result for the third quarter on the accounting basis -- knmm
as the "overall" payments balance -- that includes changes
in United States reserve assets, and in our liquid liabilit~S
to all foreign holders of dollars.
On this same accoun ting bas is, we had a surplus of $247
million in the second quarter and a deficit of $701 millioo
in the first C111,qrtpr_
F-278
I,; .
- 2 -
~, . ' ....\
The balance of payments report distributed to you also
shows another measure of our payments situation
known as
the official settlements balance -- that is far more favorable.
The use of this offic ial settlements balance implements
one of the major recommendations made last Spring by the
Review Committee on Balance of Payments Statistics led
by Dr. Edward M. Bernstein. Our balance of payments statistics
will show this alternative view of our payments balance
regularly hereafter.
This measure indicates a surplus in the third quarter
of $260 million, or, a slight improvement over the second
quarter performance, when, on this same basis, we had a
surplus of $210 million. On this same basis, there was a
deficit of $634 million in the first quarter.
The difference between the two measures of our payments
balance arises from the fact that the official settlements
balance embraces only changes in our direct liabilities to
official holders of dollars. That is, changes in private
foreign dollar holdings are excluded, on the grounds, among
others, that they should be regarded as working balances, a~
are therefore unlikely to be converted into official holdings
which in turn could be used as a claim against our gold reserves
Both these accounts differ from a third measure used
before now, and which may be the one most familiar to you.
That is the "regular" balance. That method did not take into
account dollar receipts resulting from special government
transac tions, cons is ting ma inly this year of advance repayments
of U. S. Government loans and payments in connection with
military exports. If these receipts were omitted, as they
have been in the past, our defic it would be $130 million higher
in the third quarter. This Ilregular transactions balance"
will no longer be shown as a summary line in our balance of
payments statistics.
On any accounting basis, there is a great improvement
over both 1963 and 1964. On the overall account, our seasonally
adjusted deficit through the first three quarters, on an annu~
rate basis, is $1.25 billion, compared with $2.8 billion in
1964 and $2.7 billion in 1963. The official settlement
version is at a seasonally adjusted annual rate of approximately
$200 million as compared to $1.25 billion in 1964. On the n~
disused "regular" account our deficit this year would be
running at an annual rate of $1.7 billion, compared to $3.1
billion in 1964.
- 3 In measuring 1965 performances to date against 1964
one special factor should be noted. We estimate that from
January 1 through September of this year the conversion of
British held U. S. securities, undertaken to help the pound,
had unfavorable payments results for us of about half a billion
dollars.
The result for the third quarter when the official
account is used indicates that during the period there
was a very sharp increase in the dollar balances of
foreign private holders as distinct from official reserves.
This demonstrates that the official account measure conveys
important information about the position of the dollar in the
world, and is not merely a statistical flourish. The rise
in private dollar holdings of foreigners indicates that
private holders, rather than turn dollars over to central
banks, are content to hold them as working balances. This
indicates confidence among businessmen and investors abroad
that we are on the road to overcoming our balance of payments
deficits.
It should be noted that net sales of gold to foreign
official accounts during the third quarter totalled only
$96 mill ion. Ne t sales of gold in the second quarter totalled
$299 million, exclusive of $259 million of gold sold to the
International Monetary Fund. Net sales of gold in the first
quarter came to $811 million.
But while these results showed the very substantial
improvement required, they also underline the need for following
through deliberately and purposefully to assure a similar
improvement in the year ahead. At this time an intensive
review of our balance of payments is underway to prepare the
1966 program. The results of that review will be announced
sometime later this year. At this time I would only like to
underline what the Federal Reserve announced some time ago,
namely, that the guidelines for banks and nonbank financial
institutions next year will use the same base as was used for
the program during 1965, namely, the outstanding!
of each
financial institution on December 31, 1964. The percentage
factor to be applied to this base in determining the 1966
ce i 1 ings has not ye t been de termined . Governor Robe rtson will
discuss the results of the program administered by the Federal
Reserve during the third quarter in somewhat more detail.
I would only like to say that the banks and nonbank financ~l
institutions continue to perform admirably and we are confident
that they will continue this very heartening cooperation ~~
effort so deeply imbedded in the national interest.
- 4 Secretary Connor will discuss the program which he
administers. I would simply note, as Secretary Connor ~s
done previously, that the program he administers will COOt~
through 1966 on a voluntary basis. There will certain~~
some sharpening of the targets, including a specific onef~
direct investment abroad, and the performance under the 1965
program will certainly be taken into account. The target to
set for savings under this program will cover, as it shoo~
the 1965 and 1966 outflow together -- and it is important t~
this be clearly unders tood. Performance by the individual
company will be measured by adequate reporting devices, and
measured in terms of performance in 1965 and 1966 combined.
So, it will not be of advantage to invest at a high ra~ ~
1965 with the expectation that the new target in 1966 will
ignore 1965 performances.
I am both confident that we are on the path toward
equilibrium in 1966 and equally aware that we have a
substantial distance to go to cap our efforts with full
success. And I would not want to leave any impression, 'in
talking here primarily about the programs administered by
the Department of Commerce and the Federal Reserve, that otl»
sectors of our balance of payments are not receiving intense
analysis and critical review.
We must, in any look ahead, take into account the fact
that expenditures in Vietnam will inevitably affect in
significant amount both total expenditures and our balaoce
of payments. Room mus t be made by improvements elsewhere
to provide for these expenditures for which there is no
alternative as well as deal with the 1965 margin of deficit
that surely will emerge. Wherever improvements can be made
by willful effort -- and no amount is too small to be given
attention -- these improvements will be made. I intend to
carry out the President's declared intention in that regard.
Now, permit me to say a word or two about the third
quarter results before my colleagues speak and we try to
answer your questions:
I am discussing the overall balance results.
There were improvements in three principal sections:
trade, where we were $257 million better off than in t~
second quarter; sales by Americans of foreign securities,
where we were $85 million better off, and debt prepayments
making a favorable difference of $174 million.
- 5 -
The situation \Vas less favorable in the third quarter in
three other respects:
in the amount of new issues of fore~n
securities purchased by Americans, where the difference wasa~
$162 million; bank loans, both long and short, where the early
level of gains achieved in the se~ond quarter v:a~ diminished by
$431 million, and payments for UnLted States mL11tary
exports, where there was an unfavorable difference between
the second and the third quarters coming to $176 million.
The balance of these items fail to account for some $489
million of the swing from the second quarter surplus to t~
third quarter deficit, because we will not have until some
time in December full information on the payments results of
direct investment, investment income, loans by lenders other
than banks, tour ism, and errors and omis s ions. We do know that
increased tourist spending abroad in the third quarter as
compared to earlier quarters will probably account for a part
of the $489 million.
Let me close by quoting what the President told the
meeting here of the World Bank and International Monetary Fund
Directors this fallon the subject of ending our payments
deficits, because his statement clearly indicates the extent
of our commitment to success in this national task. He said,
and I quote:
"The U. S. has taken firm action to arrest
the dollar drain. Should further action be
necessary in the future, such action will be taken.
"I want to be very clear about this. We must,
in our own interest and in the interest of those
whc rely on the dollar as a reserve currency,
maintain our payments in equilibrium. This we will
do.
"The world not only expects but requires that
the dollar be as good as gold."
000
- 22 -
The main pOint I would emphasize in closing is that we
hould not permit the very diversity and diffuseness of the
arious Federal credit programs to foster an exaggerated
mpression of their over-all size and their total demand on
he economy.
There are many pieces to keep track of, but
he problem is essentially one of orderly management that
an be resolved within the framework of ample total credit
esources.
--000--
- 21 t the same time, we must be aware, at the Treasury,
that
Jng-term agency borrowing may compete quite directly with
pportunities for the Treasury itself to tap the intermediate
r longer-term markets.
These problems of coordination are now under more inensive study within the Administration, alongside further
Kamination of particular techniques that might be used 'to
acilitate further asset sales.
~e
No one would pretend that
present arrangements are· the best that could be devised
n every respect.
And, in considering alternative approaches
J improve the coordination and effectiveness of the various'
ederal credit programs, I believe we should give pretty free
ein to the imagination.
Particular approaches should not be
ejected, for example, merely because they might call for
Jme recasting of the present budgetary procedures, if they
ight be helpful in improving coordination among programs and
1
minimizing costs.
- 20 -
Rather, the coordination problem reflects the multipli~ity
of agencies dealing directly with the market, each with
Lts own scheduling problems and each with fairly specific
Einancing objectives or requirements, all of which have to be
:itted within an over-all schedule.
Obviously, this requires
letailed planning, careful consideration of alternatives, and
Lard appraisals of amounts, maturities, and pricing.
All the agencies have some degree of flexibility in
.heir financial operations, but there are also constraints -mposed either by law, market acceptability, or
f prudent financial management.
consideration~
Patterns of cash flow
bviously pose some constraints, too.
Certainly, long-term
orrowing is more appropriate for some agencies than shorterm borrowing, particularly where it has become fairly clear
hat a portion of the agency's need is of a truly long-term
a.ture.
- 19 -
Borrowings of these agencies typically take the form of
regular offerings of relatively sizeable fixed amounts.
Their quality is well-known, and they enjoy high acceptability in the market.
The investors in these issues, of
course, in many cases are also investors in direct United
States Government securities.
From the Treasury's standpoint, the main problem presented by the myriad Federal agency credit programs is one
~f
coordination.
This is not to say that there is any lack
)f genuine cooperation.
The various agencies are all con-
:erned with dOing the best job possible, and there is a spirit
)f give and take among the agencies and with the Treasury and
.ts debt management problems.
;pecific
financin~
Moreover, with respect to any
the Treasury must, by law, be consulted
n most cases, while, in other cases, we are in close touch
s a matter of practice.
- 18 -
to be transferred to the private sector by "repackaging"
the loans from a pool, while the Government retains the
;ervicing chore through well-established arrangements.
~ffect,
In
the participation technique provides the private
Lender with a standardized obligation which passes through
to him most of the income on these assets after servicing
:osts.
The sale of the certificates is facilitated by an
Lbility to offer them in fairly large segments through the
!stablished techniques of the private market.
Regular agency issues -- Home Loan Bank notes, FNMA
lecondary market debentures and the rest -- stand on a
lifferent footing.
In these cases, special institutions have
)een developed to provide credit in certain areas.
Their
:inancing is designed to raise funds efficiently at minimum
:ost in private markets, but the same stress on stimulating
.nd encouraging direct private lender-borrower contact is
,ot present.
- 17 These certificates have been sold to the banks with an
interest in export financing, and,
in fact,
the bank acquir-
ing this paper may have originated some of the underlying
loans behind the participations certificates.
Another innovation along these lines has been the sale
of FNMA participation certificates in pools of FHA and VA
mortgages held by the Government -- a technique that should
be potentially applicable to certain other financial assets
held by the Government as well.
In this instance, large
numbers of relatively small loans are involved, and the direct
sale of these assets in volume -- given the wide dispersal of
borrowers geographically and the need for servicing and surveillance of performance -- would be difficult, if not
impOSSible.
The participation technique offers a means of
escaping this impasse by permitting the basic financing load
- 16 One line of approach that has been under way now for
some time is the sale of a variety of financial assets held
by
the Federal Government.
Several techniques have been
developed for this purpose.
Direct sales of loans are generally made to the types of
investors who are also normally engaged in that same type of
lending business.
For instance, a substantial part of the
farm housing and farm ownership loans sold by the Farmers
Home Administration go directly to banks in the local communities in which the borrower resides.
These sales, and
other direct sales, are largely on a retail basis; the paper
is on tap, to be distributed as the market demands it.
Another effort to reinforce direct borrower-lender
contact is to encourage holdings of more export paper by
banks in the form of Export-Import
certificates.
Bank participation
- 15 L-
ut, even in subsidy programs, there are often methods
~
~
hich private participation can be encouraged.
In general, I believe that Federal credit programs should
'ork to the maximum feasible extent through the private credit
larket, helping to make it stronger, more competitive and
lore responsive to the needs of a rapidly developing economy.
n a country in which we rely on efficient private markets
or the great bulk of all credit extensions, there is, I
lelieve, recognition throughout Government that the objectives
If Federal credit program will often be better realized by
lSing private institutional arrangements, both to reduce the
'ederal administrative burden and to make the credit assistance
lore widely accessible.
More than that, this desire to permit
laximum scope for private participation in Federal credit
Irograms is a matter of basic economic philosophy.
C~
- 14 -
c/
Most Federal credit programs, whether direct loans or
loan guarantees, have been undertaken in areas where private
credit channels have left a gap unfilled.
Private lenders
may have been unwilling or unable to make certain types of
credit directly available -- sometimes because of lack of
experience, sometimes because of risks or costs, sometimes
because of institutional structure.
In cases where
pri~ate
lending develops to fill the gaps, the Federal programs can
decline and ultimately most demand can be met directly from
private sources.
It is neither practical nor desirable for
Government to preempt functions that private lenders can
perform economically and efficiently.
Of course, we must also recognize that the basic social
and public objectives of some credit programs by their nature
cannot be achieved without some subsidy element.
In those
instances, the private market, however efficient, venturesome
and competitive, cannot be expected to function unaided.
- 13 -
For most of these agencies, market borrowing is a major
sow'ce of new capital funds.
As we have seen, the needs for
additional funds have grown substantially in the recent past,
and I would venture to predict that further growth lies ahead -not necessarily every year -- but over the course of
years.
sever~l
Growth is also in prospect for other Federal credit
programs, which either obtain funds from the Treasury or
which guarantee obligations sold to private institutions.
These programs, as I am sure you are aware, are already
large and are expanding further, while new programs are being
developed.
Without debating the merits of any particular Federal
credit program, they clearly are all intended to serve public
purposes by improving the availability and reducing the cost
of credit for specific uses.
In the end, like other Federal
programs, they must be judged in terms of how effectively and
economically the techniques used and the policies followed
meet national objectives.
- 12 And, in directing your attention today to that relatively
neglected area of the financing of Federal credit programs,
it is particularly important to keep in mind the sizeable
aggregate job that faces us each year.
Federal agency financing is, as I have noted, not new.
You are all familiar, I am sure, with such well established
instruments as the FNMA debentures, the notes and bonds of
the Federal Home Loan Banks, and the obligations of the three
farm credit agencies -- the Land Banks, Federal Intermediate
Credit Banks, and the Banks for Cooperatives.
FHA debentures
are a special case; they are only issued in settlement of
defaulted mortgages and are, consequently, not a net addition
to credit demands.
TVA now issues its own bonds.
We also
have the Public Housing Administration, acting as the agent
for local housing authorities, and the long-established CCC
participation certificates.
- 11 -
In this calendar year, the total flows will be appreciably larger, and all indications are that the share of
the Federal Government -- direct Treasury issues held by the
public, agency financing, and asset sales -- will actually
decline appreciably.
Thus, while we look on Government
financing as an important factor in the money and capital
markets -- as it surely is -- the growth of our economy,
its vast savings potential, and the rising credit demands of
other sectors have meant that the demands of Government
finance have shrunk quite appreciably, relative to other
demands.
Large as it is in absolute terms, Federal financing
is clearly far from a dominant force in financial markets and
is potentially a far more easily manageable part of our
~xpanded
markets than earlier in the postwar period.
But, however comforting this long view may be, the
management of the Federal debt and its coordination with
)ther Federal credit activities is certainly not a matter
;0
be glossed over.
- 10 -
In the perspective of the entire flow of financial savings
and investment, these demands are but a modest part of the
total.
The rough orders of magnitude you might bear in mind
are these:
the net flows of credit into the credit markets
in calendar year 1964 were about $71 billion.
Some $30
billion went to the mortgage market, most of it in loans on
one to four family properties.
Consumer credit rose $7
billion, while State and local governments increased their
outstanding indebtedness by almost $6 billion.
Much of the
remainder was borrowed by private businesses or foreigners.
Net Federal Government and agency financing placed in the
private market -- including participations and some other
asset sales -- came to around $4-1/2 billion.
- 9 Since the end of World War II, the gain has been just $10
billion -- from $205 billion to $215 billion.
And, since
1960, the increase has been $7 billion -- or less than $1-1/2
billion a year.
Thus, the net indebtedness of the Federal
Government and its agencies today, as a proportion of total
debt, has fallen sharply and steadily over the postwar period.
It was 52 percent at the close of 1946, 24 percent at the end
of 1960, and 20 percent at the end of 1964.
In other words,
even with the great growth in Federal agency financing and
in asset sales, the over-all demands on the market of Government finance have shrunk relatively.
Let me underscore firmly this point.
Despite the sub-
stantial volume of Federal financing outside the Treasury,
and its recent growth, this financing, neither by itself nor
in conjunction with regular Treasury debt operations, represents an unsustainable burden on our capital markets.
- 8 is equivalent to about one-third of the rollover of maturing
coupon issues of the Treasury itself.
But two important points should be noted in connection
with this.
First, while these magnitudes of agency financing
and asset sales are high and have grown rather sharply in
recent years, the activities are not brand new.
The net
anticipated asset sales of roughly $3 billion in fiscal 1966
are double the amount sold in 1965 and three times the level
in 1964 -- but, as this implies, there was $1 billion of such
sales in 1964.
The volume of outstanding Federal agency
securities is about $14 billion today, but was already more
than $8 billion at the close of fiscal 1960.
Second, the rise in direct Treasury debt held by the
public -- that is, excluding the growing amounts held by the
Government investment accounts and the Federal Reserve -- has
been quite moderate.
- 7 These programs have been moving ahead; FNMA is now in the
process of completing a second installment ($375 million)
of its sales of participations to banks and other private
investors, bringing the total so far to $900 million.
The January budget document also contemplated that
Federal agencies, including the Public Housing Administration,
would sell over $1.6 billion of their own securities in'the
market -- again net.
To these totals should be added the
figures for CCC -- perhaps $1/2 billion of added financing.
So it is evident that these scheduled asset sales and
agency financings -- adding up to some $5 billion in terms
of new market demands -- have become a very significant
element in the over-all financial planning of the Government,
alongside direct Treasury financing.
And, insofar as agency
issues alone are concerned, the refinancing of existing debt
some $11 billion of issues maturing in fiscal 1966 --
- 6 -
While the financial road ahead will thus call for careful
driving, and perhaps a narrower squeeze here and there than
we might have hoped for some several months ago, I believe
the course can be safely negotiated without serious strains
on the market.
Now, alongside these Treasury cash needs, net sales of
financial assets by the Government for this fiscal year were
estimated at about $3 billion in last January's budget -and that is still the best benchmark we can use in measuring
the planned volume.
Direct sales of mortgage loans, princi-
pally by the Farmers Home Administration and the Veterans
Administration, were expected to account for about one-fourth
of this total.
~bout
The Export-Import Bank was expected to sell
$700 million of participations in its loan portfolio,
while FNMA was scheduled to sell about $1.3 billion of
partiCipations in FHA and VA mortgage pools for which it would
a.ct as trustee.
- 5 -
some additional cash drain because of the bunching of payments
for the retroactive increase in Social Security benefits.
While the impact on our cash position and borrowing
requirements has been quite limited thus far, it is no secret,
of course, that the expanded military effort in Viet Nam will
be producing larger cash needs than could have been anticipated before July, 1965.
But, as our financing program 'suggests,
the magnitude of the increase in these requirements will not
lead to striking changes in our demands on the market in this
fiscal year.
It should be borne in mind, too, that our strong
ind growing economy is generating tax receipts at a somewhat
faster clip than earlier forecasts had envisioned.
~am
What Viet
does mean, in this short-run cash perspective, is that we
¥ill not be able to show the improvement in the Government's
financial position that we might have looked forward to
>therwise.
- 4 -
This comprises $4 billion of Tax Anticipation Bills in October
and the additional $2-1/2 billion TAB's auctioned this week.
As usual, additional cash will need to be raised after the
turn of the year and before the heavy March tax payments
some of it quite early in January.
While we have not definite-
ly fixed our sights on the total amount of this further cash
requirement, it is clear that, for the entire period from
now to the end of the current fiscal year, we will retire debt
on balance, taking advantage. of the regular seasonal upswing
in receipts in the Spring.
This prospect suggests that at
least a portion of the January financing needs might also
properly be done in the form of tax bills.
The only unusual element in this picture is the lateness
with which we came into the market for our Fall seasonal
borrowing.
The amounts involved have been about normal by
the standards of recent years, even though this year we had
- 3 -
flows, point up some of the financial management problems,
and discuss the rationale for the programs and the philosophy
behind our present approach to their financing.
Financial management problems associated with these
activities are not new in kind, but they are new in terms of
the levels and varieties of activity involved.
And with the
increase in volume have come some essentially new implications
for financial markets and for prudent monetary management -implications that emphasize the need for coordination within
the fabric of over-all financial policies of the Government.
To provide some perspective, it may be useful first to
briefly review the magnitude and general outlook for the
Treasury's own debt management operations.
During the first
balf of this fiscal year, July I to December 31, we will have
raised about $6-1/2 billion of new cash from the public.
- 2 -
I thought today, however, I might deal largely with an area
of Government financial management which generally has
received less public attention than regular Treasury debt
management but which recently has attracted more comment.
I refer to the expanding amount of Government financing
outside the channels of direct Treasury issues -- the growth
in Federal agency borrowing and the expansion in Federal
credit programs, particularly the direct loan programs and
the associated sale of assets.
There are several aspects to this subject, but I would
like to focus particularly on the problems of financial
management associated with Federal agency borrowings and
sales of Government-owned financial assets.
What I propose
to do in this talk is to try to give you a picture of the
magnitude and growth of agency borrowings and asset sales,
relate them to direct Treasury borrowing and to total credit
Treasury Department
Washington
FOR RELEASE ON DELIVERY
REMARKS BY THE HONORABLE FREDERICK L. DEMING
UNDER SECRETARY OF THE TREASURY FOR MONETARY AFFAIRS
AT THE 34TH MID-CONTINENT TRUST CONFERENCE
OF THE AMERICAN BANKERS ASSOCIATION
AT THE SHERATON-JEFFERSON HOTEL, ST. LOUIS, MISSOURI
ON FRIDAY, NOVEMBER 19, 1965, AT 12:30 P.M. (CST)
PROBLEMS OF GOVERNMENT FINANCIAL MANAGEMENT
In this momentary escape from my regular schedule
between excursions to Europe to discuss problems of international finance and following the last Treasury cash financing
for this year -- it is a pleasure to stop for a moment again
in St. Louis and to greet old friends and acquaintances.
I see that the keystone has been placed on the Gateway Arch,
the new bridge is nearly across the Mississippi, and the
downtown development boom is flourishing.
Usually I have taken occasions like this to talk about
our balance of payments -- the progress we have made and the
problems still before us -- or to discuss the management of the
~ublic
debt -- past accomplishments and our plans for the future.
TREASURY DEPARTMENT
Washington
FOR RELEASE P.M. NEWSPAPERS
FRIDAY, NOVEMBER 19, 1965
REMARKS OF THE HONORABLE HENRY H. FOWLER
SECRETARY OF THE TREASURY
BEFORE THE EXECUTIVES' CLUB OF CHICAGO
HOTEL SHERMAN, CHICAGO, ILLINOIS,
FRIDAY, NOVEMBER 19,1965,12:30 P.M., CST.
I have come to you today to talk about:
"An economy where the health of business benefits all
the people;
"An economy where the prosperity of the people benefits
the health of business;
"An economy mere, in large measure, the fortunes of
each are tied to the fortunes of all."
Perhaps, that description of the nature, and at the same
time of the objectives, of our American economy is familiar
to you. For it is the description, in his words, of the
aims of President Johnson's economic policy.
I have come to Chicago to talk to you about the working
partnership -- and, let me emphasize, the shared
responsibilities -- of business, labor, and government in
the light of that statement by the President of the
United States.
What I am here to say can be summed up very briefly:
Since my speech involves, at bottom, only one simple
thought, let me try to state it first of all in a single.
sentence:
'!-279
- 2 I want to talk with you today about a working partnership,
le working partnership that exists, and has existed for some
ime now -- to the great benefit of all concerned -- among
)ur government, the business community, and labor; a working
lrtnership for economic responsibility in the United States.
Now let me expand upon that just a little:
In this partnership for economic responsibility we are
)und by a comnlon conviction that the right answer to our
;onomic problems, on the domestic and on the international
:onts, must be based upon a dynamic private sector.
It is a partnership with many, varied objectives.
It seeks to continue -- hale, hearty, and soundly
tlanced -- our already nearly unprecedented economic expansion.
It seeks to underwrite the costs, out of the fruits of
!onomic growth, of the great enrichment of the quality 'of
lerican life that, under this working partnership, is now
full swing.
It seeks to provide the unquestionable economic strength,
ld the evident economic stability, that alone can be the
lundation stones upon which'we can build the solution to our
.lance of payments problem.
It seeks to provide the wherewithal for America to
'ntinue, while it undertakes great new tasks at home, to do
s part in building the economic base for a better life for
ople in the now less developed countries.
And it now seeks to shoulder a new burden, the burden of
r intensified participation with the brave people of Vietnam
the defense of freedom.
I want, in closing this little summary, to stress a
ecial feature of this last element: it is a test, I think,
t so much of our economy, as of our commitment to economic
alism and responsibility. We have an economy with the
pacity to produce, the capacity to increase its production
j its productivity, to pay the costs of greater economic
rdens than Vietnam thrusts upon us. The question is not,
we have the capacity and the ability? We do have them and
~ increase them swiftly.
The question is, do we have the
nmon sense, and the sense of common responsibility to keep
L of our economic actions and policies realistic, and not let
: economic problems become the p'laythings of fears and unfounded
)ec ta t ions?
- 3 -
It is against that background that I want to
discuss with you the responsibilities this working partnership
must discharge in the period ahead.
As personal credentials of a deep and demonstrated
conviction that we must enable the private sector to play the
prime and dynamic role in our national economy, I bear
scars and bruises incurred in helping to secure the
development, adoption, and execution of the liberalization
of depreciation allowances -- the investment tax credit in
1962 -- the corporate tax cut and further improvement of
the investment credit in 1964 -- individual tax reductions
of 1964 that included top-to-bottom rate reductions -and excise tax reductiorn this year.
But my most important credential by far is that I
serve under a President of the United States who has done more
and worked harder than any man in our long national history
to bring about the better understanding that is essential
to a fruitful working partnership between business, labor,
and government. Night after night, day after day, as no
President before him, President Johnson has brought
together leaders of business, finance, and labor to meet
with him, his Cabinet, and White House staff members -seeking advice, swapping ideas on what each could do
separately and all could do together for a better America.
He has made, "let us reason together," a national slogan as
well as his personal express ion of heart and mind.
It is in that spirit that we must approach the task
of sustaining our long and sound economic expansion.
Can we do it? The answer must be an emphatic,yes~
Anything else would not only be adverse to our economic
advance, but would be precisely what our adversaries believe
will happen, the thing upon which they have staked their
only real hope of winning: the soft crumbling of a
society so accustomed to easy superiority that it cannot
keep its unity and sense of purpose under real pressure.
The leaders of Red China and North Vietnam are
apparently taking much comfort in the magic lantern they
never give up rubbing: the assertion that, put to the
test, capitalism will fall to quarreling over its profits,
and freedom will become a mere source of internal division,
while socialism's regiments take our baubles away from
us.
- 4And there is no lack of Cassandras to suggest that we are
doing just what is expected:
-- In the wake of events surrounding aluminum prices,
it has been alleged that the Administration is losing its
partnership with business by reason of its efforts to maintain
price stability.
-- Some weeks back it was said that the government is
destroying its working relationshlpwith the banking industry
by insisting that the stability of long term interest
rates is important to a continuing high rate of growth.
-- And now it is alleged that we will jeopardize our
working partnership with both business and finance by
insisting that they hold down private capital outflows so that
the United States can achieve an equilibrium in its
international balance of payments.
Government, business and labor have common problems __
and there will continue to be differences about how they
can best be solved. But if we clearly understand the importance to all of us of these common problems, and of the
roles business, labor and government must play together in
the current setting to meet them -- the working partnership
of government, business and labor will continue to function
in the future even better than it has over the past 57
months of economic expansion.
So, let us examine more closely three areas of potential
or alleged friction between the government and the private
sector.
Two of these areas of strain -- prices and wages, and
interest rates -- result from th~ very success the working
.
partnership has achieved in our long lasting economic expansion,
and events in Vietnam. The gap between demand and the
availability of skilled manpower and unused efficient capacity
has narrowed to the lowest point in this 57-month expansion -at the very time when defense expenditures are rising because
of the intensification of hostilities in Southeast Asia.
Unemployment, at approximately 4-1/3 percent, is at
the lowest level in eight years and is getting close to the
point at which questions arise about the continued
availability of an adequate labor force, particularly among
better skilled workers. We should note that recent employment
- 5advances have been most rapid in manufacturing, a sector
where rapid automation has increased productivity greatly.
It appears from this that automation has also kept the prices
of manufactured goods at levels which have spurred consumption
sufficiently to increase -- not decrease -- the supply of jobs.
At that, these new jobs made possible by automation are better
paying jobs, since higher productivity permits higher pay
without increases in unit cost.
The rate at which capital resources -- our plant and
equipment, for the most part -- are utilized, is also rising
toward the so-called preferred utilization point. The overall
rate in September according to the latest McGraw-Hill survey
was still 4~ points below the preferredra te, although some
industries -- including the automobile industry, paper and
pulp, and nonferrous metals -- were above their preferred
point of capital utilization.
Now these are factors that begin to put pressure on
wages and prices. We have seen the pressures operating. And
you have seen your government urging that an especially high
order of responsibility be exercised by management and labor
in countering and dealing with them in the present situation.
Although this is one of the areas of manifest irritation
between government and labor and business, it is an altogether
bootless conflict. In the past five years the U. S. economy
has experienced an expansion which is unprecedented in its
duration, its extent, and in its balance.
A crucial element in this U. S. expansion has been the
stability of costs and prices. The wholesale price index
today stands within 2 percent of its level at the beginning
of the expansion. The index of consumer prices has risen at
an average rate of only 1.3 percent a year. Reflecting moderate
wage increases and good productivity gains, unit labor costs
in manufacturing are no higher than they were a year ago and
lower than 5 years ago. However, all of the wholesale price
increase has come in the past year; and the increase in
consumer prices has been faster this year than in the previous
four.
Without stability in costs and prices it would have
been impossible for the U. S. Government to pursue the
expansionary fiscal and monetary policies which have been
largely responsible for the sustained and healthy growth of
production and incomes. This is partly because price
inflation is politically unacceptable to the majority of
-6American citizens. Equally significant, it is because rising
prices would have reduced our favorable trade balance and thereby
intensified an already serious balance of payments deficit and
loss of U. S. gold reserves. Inflation not only would worsen
our balance of merchandise trade, but would, as well, impair
the confidence of foreign businesses, banks, and official
institutions in the stability of the U. S. dollar. A healthy
balance of payments is an absolute necessity for the United
States in order for it to defend freedom in the world,
continue its program of economic assistance, maintain and
extend liberal trade policies, and pursue effectively the
reform of the international monetary system, on which future
growth in trade and general economic development depend.
The considerations I have just cited are no more than
a few of the outstanding factors among many others indicating
the fundamental importance to the working partnershi~and
its objectives"of maintaining wage and price stability.
Recent events demonstrate that your government stands ready
to blow the whistle impartially on labor and on business and,
indeed, on its own employees. The recent successful settlement
of the wage controversy in the steel industry is so well known
it need not be elaborated. Less well known, outside of
Washington, is the fact tha~ when wage increases that violated
the guidelines for labor settlements were proposed for the
nation's largest work group -- civilian employees of the Federal
Government
President Johnson parried that inflationary thrust
by letting it be known he would veto any such legislation.
No matter how unwelcome the burden, the government, in
the present situation, has the clear and undeniable
responsibility to identify, without fear or favor, price or
wage developments that threaten continued economic stability
and expansion.
Along that way lies sure -- and large -- gains for all,
capital and labor alike. Along any other way lies sure and
swift losses for the nation as a whole, with only a few reaping
only short term benefits.
Now let us turn to a second area of strain upon the
wonderfully successful and mutually profitable partnership
we have enjoyed in recent years among government, business
and labor. That is, the necessity for voluntary economic
discipline to solve our balance of payments difficulties.
- 7 We have just announced our third quarter of balance of
payments results, and I will not go through them again in
detail here, because in addressing this group, which is on the
firing line, I want to focus on what is required for better
results. In the third quarter, we had a deficit of $485
million, seasonally adjusted. Through the first nine months
of the year our deficit was at an annual rate of $1.25 billion.
That is a great deal better than the deficit for the whole year
1964, which was $2.8 billion, or 1963, when we had a deficit
of $2.7 billion. It is evidence, at one and the same time,
that our program is working, but that it is not working well
enough.
What is needed, and urgently needed, is to bring our
foreign payments into equilibrium, and to keep them there.
To this end, an intensive review of our payments program
is underway to prepare for its continuation and improvement
in 1966. The detailed results will be announced later this
year. But let me stress the following here, as I did in announcing
the third quarter results in Washington earlier this week:
The guidelines for banks and nonbank financial institutions
next year will use the same base as was used for this year.
The voluntary program for restraining the dollar outlays
abroad of other businesses will also continue next~ar, and
it is here that we are looking for, and must get, big new
additional results.
In the interests of getting new gains here, there will
:ertain1y be some sharpening of the targets, including a
specific one for direct investment abroad. Performance under
the 1965 program will be taken into account in establishing
these targets. The target for saving on dollar placements
lbroad under this program will cover, as it should, the
L965 and 1966 outflow together -- and it is important that
~his be clearly understood.
Performance by the individual
~ompany will be measured in terms of 1965 and 1966 combined.
)0, it will not be of advantage to invest at a high rate in
1965 with the expectation that the new target in 1966 will
~gnore 1965 performances.
- 8 Other sectors of our balance of payments are receiving
equally critical review. We must, in looking ahead, take
account here of the fact of Vietnam.
Expenditures in Vietnam
will inevitably affect in significant amount both total
expenditures and our balance of payments. Room must be made
by improvements elsewhere to provide for these expenditures,
for which there is no alternative. And there must be room to
deal with the 1965 margin of deficit that surely will emerge.
Wherever improvements can be made by determined effort -and no amount is too small to be given attention -- those
improvements will be made.
In this balance of payments area, the working partnership
has particular importance. We must have the full cooperation
of the business community in balancing our payments for
the simple reason that unless we do, we will imperil the
value of the d~llar, first abroad, but then, as night follows
day, at home. Nothing less than the stability of the
international monetary system and its improvement for future
growth in trade and Free World development is at stake.
But beyond that the solution of our balance of payments
difficulties and the strengthening of the international
monetary system are crucial matters which must deeply concern
you as businessmen and bankers -- as they concern every
American. So you have a special responsibility for understanding and helping in meeting these challenges.
Business has nothing to lose by the voluntary moderation
of its investments abroad that is required in the period
ahead that it would not lose in future opportunities ten
times over if we do not correct this situation.
Furthermore, it cannot be said that this program places
an unfair burden of correction on American investment funds.
In the first place, steady -- but disciplined and calculated
increases in investment are permissible under the program.
In the second place, the dollar costs of foreign assistance
and our foreign military outlays must be -- and we do all
we can to reduce the dollar component of those costs -- must
be measured primarily by the value of the national purposes
those programs serve. The business community, like every
other community in the nation, benefits by the gains and
safeguards of the whole nation, and one of the greatest of the
.. 9 -
t r
gains our foreign programs return to us is the maintenance
abroad of areas of free enterprise. Ours is an interdependent
world. Interdependence has its costs. They are costs that
must be met because the cost of not meeting them is independent
failure.
Let me close now, with a brief discussion of a third,
and related, area of strain on our working partnership of
government, labor and business, for the maintenance of
economic prosperity and the support of our national aims
through economic responsibility. This is the subject of interest
rates.
We have been hearing again the refrain that a solution
to the balance of payments problem can be found in tight
money and higher interest rates. Presumably proponents of
this approach must be referring to rather drastic measures
since that is what would be necessary to bring into
,
equilibrium the interest rate levels that characterize the
U. S. economy and other capital markets.
Interest rates have already moved up in the United
States significantly, particularly in the past two years,
mainly in response to balance of payments problems. But our
rises were followed by rises abroad and the gap remained
and in some important areas widened. As my predecessor,
Douglas Dillon, several times pointed out -- as early as Rome
in 1962 -- the problem of disparity between interest rates and
capital availability here and abroad is rooted in rates abroad
that are far too high, and in the woeful inadequacies of
foreign capital markets.
It makes no sense to raise persistently our interest
rates to a point where they may conflict with the maintenance
of our domestic expansion and yet not provide a real solution
to our balance of payments problem.
You have demanded fiscal and monetary responsibility from
your government, and you are getting it in the rigorous at~ention
President Johnson pays to the expenses of government, and· in h-is
insistence that where outlays go up, they must be balanced
off, in every possible instance, by decreased outlays elsewhere.
- 10 No President has ever paid closer attention to costs, and
no President has ever done more about keeping the cost of
government within responsible bounds, than the present
President.
Your government regards itself as being in a working
partnership with the business community and with labor to
determine and put into effect the rules of economic
responsibility. It is a partnership that has worked to the
great benefit of all of us: when have our incomes, personal,
business or government been higher, and when has the nation
been able to undertake, by reason of such great increases
in its means, such vast improvements in the quality of its
life, while at the same time it shoulders the burdens of
protecting that quality life from aggression abroad?
It is imperative that we continue it, for our
business, our labor, our personal and -- above all -- for
the national purposes that make all the rest possible.
000
TREASURY DEPARTMENT
FOR IMMEDIATE RElEASE
TREASURY DECISION ON OFFICE MACHINE SFOOrs
UNDER THE ANTIDUMPING ACT
The Treasury Department has determined that office machine
spools trom West Germany, manufactured by Regentrop & Bernard,
Wuppertal, Germany, are not being, nor likely to be, sold at less
than fair value within the
as amended.
~aning
of the Antidumping Act, 1921,
A "Notice of Tentative Determination, II was published
in the Federal Register on October 1, 1965.
No written submissions or requests for an opportunity to present views in opposition to the tentative determination were presented within 30 days of the publication of the above-mentioned
notice in the Federal Register.
Imports of the involved merchandise received during the period
October 1, 1964, through June 30, 1965, amounted to approximately
$22,500.
TREASURY DEPARTMENT
November 18, 1965
FOR IMMEDIATE REIEASE
TREASURY DECISION ON OFFICE MACHINE SFOOIS
UNDER THE ANTIDUMPING ACT
The Treasury Department bas determined that office machine
spools from West Germany, manufactured by Regentrop & Bernard,
WuppertaJ., Germany, are not being, nor likely to be, sold at less
than fair value within the IJ:Meaning of the Antidumping Act, 1921,
as amended.
A "Notice of Tentative Determination, It was published
in the Federal Register on October 1, 1965.
No written submissions or requests for an opportunity to present views in opposition to the tentative determination were presented within 30 days of the publication of the above-mentioned
notice in the Federal Register.
Imports of the involved merchandise received during the period
October 1, 1964, through June 30, 1965, amounted to approximately
$22,500.
TREASURY DEPARTMENT
FOR IMMEDIATE REIEASE
TREASURY DECISION ON TITANIUM DIOXIDE
UNDER THE ANTIDUMPING ACT
The Treasury Department has completed its investigation with
respect to the possible dumping of titanium dioxide, pigment grade,
from Japan. A notice of intent to close this case with a determination that this merchandise is not being, nor likelY to be, sold at
less than fair value within the meaning of the Antidumping Act, 1921,
as amended, will be published in an earlY issue of the Federal Register.
Anatase and rutile titanium dioxide, pigment grade, are used in
the manufacturing of paper and paints, respectivelY.
Purchase price was found to be lower than adjusted home market
price in the case of three firms out of seven exporting to the united
States. Purchase price was not lower than adjusted home market price
with regard to the other firms' shipments.
During the earlY stages of the antidumping investigation, one of
the three firms increased its prices to United States customers. Such
prices have not been lower than adjusted home market prices since the
increase. There appears to be no likelihood of a resumption of prices
which prevailed before the increase.
Of the other two firms, one revised its prices promptlY upon
learning that price discrimination existed. The other ceased shipments. Both gave assurances that there would be no resumption of
sales to United states customers at prices which could be likelY to
be at less than fair value.
Appraisement of the above-described merchandise from Japan has
not been withheld at this time.
The information alleging that the merchandise under consideration was being sold at less than fair value within the meaning of the
Antidumping Act was received in proper form on November 17, 1964. The
complaint was submitted b,y Cabot Corporation, Boston, Massachusetts.
Imports of the involved merchandise received during the period
July 1, 1964, to September 1, 1965, amounted to approximatelY $4,400,000.
TREASURY DEPARTMENT
November 22, 1965
FOR IMMEDIATE REIEASE
TREASURY DECISION ON TITANIUM DIOXIDE
UNDER THE ANTIDUMPING At::r
The Treasury Department has completed its investigation With
respect to the possible dumping of titanium dioxide, pigment grade,
fram Japan. A notice of intent to close this case with a det,ermination that this merchandise is not being, nor likeJy to be, sold at
less than fair value within the meaning of the Antidumping Act, 1921,
as amended, will be published in an early issue of the Federal Register.
Anatase and rutilp. titanium dioxide, pigment grade, are used in
the manufacturing of paper and paints, respectively.
Purchase price was found to be lower than adjusted home market
price in the case of three firms out of seven exporting to the United
states. Purchase price was not lower than adjusted home market price
with regard to the other firms' shipments.
During the ear ly stages of the antidumping investigation, one ot
the three firms increased its prices to United states customers. Such
prices have not been lower thari adjusted home market prices since the
increase. There appears to be no likelihood of a resumption of prices
Which prevailed before the increase.
Of the other two firms, one revised its prices promptly upon
learning that price discrimination existed. The other ceased Shipments. Both gave assurances that there would be no resumption of
sales to United states customers at prices which could be likely to
be at less than fair value.
Appraisement of the above-described merchandise from Japan MS
not been withheld at this time.
The information alleging that the merchandise under conside~·
tion was being sold at less than fair value within the meaning of the
Antidumping Act was received in proper form on November 17, 1964. The
complaint was submitted by Cabot Corporation, Boston, JoBssachusetts.
Imports of the involved merchandise received during the period
July 1, 1964, to September 1, 1965, amounted to approximately $4,lJOO,WJ.
/-1
TREASURY DEPARTMENT
(~
~~ S
!ASE 6:30 P.M.,
November 22, 1965.
RESULTS OF TREASURY I S WEEKLY BILL OFFERING
Treasury Department announced today that the tenders for two series of Treasury
Ine series to be an additional issue of the bills dated August 26, 1965, and the
!ries to be dated November 26, 1965, which were offered on November 17, were
~t the Federal. Reserve Banks on November 22.
Tenders were invited for
)00,000, or thereabouts, of 90-day bills and for $1,000,000,000, or thereabouts,
lay bills. The details of the two series are as follows:
, ACCEPTED
lIVE BIDS:
~h
r
90-day Treasury bills
:
maturing February 24, 1966:
Approx. Equiv • :
Price
Annual Rate
:
98.980
4.080~
:
98.970
4.120~
:
98.974
4.104~ 1 / :
181-day Treasury bills
maturing May 26, 1966
Approx. Equiv •
Price
Annual Rate
97.865
4.246~
97.859
4.258~
97.862
4.253~ 1/
'cent of the amount of 90-day bills bid for at the low price was accepted
'cent of the amount of l81-day bills bid for at the low price was accepted
'lIDERS APPLIED FOR AND ACCEPTED BY FEDERAL RESERVE DISTRICTS:
ct
Applied For
Accepted
: Applied For
Accepted
$ 23,183,000 $ 13,183,000
$ 18,519,000 $
3,472,000
rk
1,308,659,000
784,132,000:
1,357,220,000
747,283,000
,e1phia
27,746,000
15,746,000:
19,634,000
9,134,000
.and
31,930,000:
43,904,000
27,037,000
31,930,000
nd
18,652,000
18,652,000:
14,076,000
9,136,000
a
42,649,000
32,899,000:
46,136,000
21,470,000
o
260,887,000
152,762,000:
306,582,000
114,779,000
uis
43,661,000
38,911,000:
23,682,000
10,735,000
polis
13,902,000
13,902,000:
11,771,000
8,801,000
City
29,607,000
27,607,000
1l,115,00Q
10,115,000
21,428,000
13,678,000
10,725,000
7,255,000
ancisco
85,362,000
56,862,000
140,873,000
32,206,000
OTALS
$1,907,666,000 $1,200,264,000!l $2,004,237,000 $1,001,423,000 £I
ies $229,498,000 noncompetitive tenders accepted at the average price of 98.974
ies $108,988,000 noncompetitive tenders accepted at the average price of 97.862
:oupon issue of the same length and for the same amount invested, the return on
bills would provide yields of 4.2~, for the 90-day bills, and 4.41%, for the
3:y bills.
Interest rates on bills are quoted in terms of bank discount with
~turn related to the face amount of the bills payable at maturity rather than
~ount invested and their length in actual number of days related to a 360-day
In contrast, yields on certificates, notes, and bonds are computed in terms
~erest on the amount invested, and relate the number of days remaining in an
~st payment period to the actual number of days in the period, with semiannual.
nding if more than one coupon period is involved.
I
C
y-Lp-
(
.•••
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-(
TREASURY DEPARTMENT
~
......
.
',:.
•
lOR BELlASE 6:30 P.M.,
Monday, November 22, 1965.
•
*
•
WASHINGTON. D.C.
RESULTS OF TREASURy I S WEEKLy BILL OFFERING
The Treasury Department announced today that the tenders for two series of b.
bills one series to be an additional issue of the bills dated August 26, 1965, l::
other , ser i es t 0 be dated November 26 , 1965 , which were offered on November 17, ~.,.
opened at the Federal Reserve Banks on November 22. Tenders were invited tor
000 000 or thereabouts of 90-day bills and for $1,000,000,000, or thereco
$1 , 200 ,
"
fll
.
ot lSl-day , bills.
The details of the two series are as 0 ows.
lSI-day Treasury bill:
90-day Treasury bills
RAWGE OF ACCEPTED
maturing May 26, lS::
maturing February 24, 1966
cCllPftrrIVE Bms:
Approx, :~
Approx. Equi v .
Price
Annual h:.
Annual Rate
Price
97.865
4o,2~1
4.0S~
9S.980
High
97.859
4o.2:t1
4.120~
9S.970
Low
97.862
4o,25Z\
9S.974
4.104~
Average
-
11
25 percent of the amount of 90-day bills bid for at the low price was accepted
53 percent of the amount of lSI-day bills bid for at the low price was acceptec
TOTAL TElIDERS APPLIED FOR AND ACCEP'l'ED BY FEDERAL RESERVE DISTRICTS:
District
Applied F~r
Accepted
Applied For
Accepted
Boston
$
23,183,000
$
13,lS3,000
$
18,519,000
$ 3,4':/
New York
1,308,659,000
784,132,000
1,357 ,220,000
747,~;
Philadelphia
27 ,746,000
15,746,000
19 , 634 ,000
9,:~t,
Cleveland
31,930,000
31,930,000
43,904,000
27,t;',
Richmond
18,652,000
18,652,000
14,076,000
9,~1,
Atlanta
42,649,000
32,899,000
46,136,000
21,4::
Chicago
260,887,000
152,762,000
306,582,000
1H/=
St. Louis
43,661,000
38,9il,000
23,682,000
10,,::
Minneapolis
13,902,000
13,902,000
il,771,000
8,e::
Kansas City
29,607 ,000
27 ,607 ,000
11) 115, 000
lO,~
Dallas
21,428,000
13,678,000
10,725,000
7,'::
San Francisco
85,362,000
56,862,000
140,873,000
321~
TOTALS
$1,907,666,000
$1,200,264,000 ~ $2,004,237,000
f1,OOl'~":1
Includes $229,498,000 noncompeti ti ve tenders accepted at the average price c~ ~
Includes $108,988,000 noncompetitive tenders accepted at the average price c~:
On a coupon issue of the same length and for the same amount invested, the re::::l
these bills would provide yields of 4.20;" for the 90-day bills, and. 4.41~, f:d
181-da¥ bills. Interest rates on bills are quoted in terms of bank discount .,..~
the return related to the face amount of the bills pe.,yable at maturity rather?
the amount invested and their length in actual. number of days related to a 3H~
year. In contrast, yields on certificates, notes, and bonds are computed in :d
of interest on the amount invested, and relate the number of days remaining;; ~
interest payment period to the actual number of days in the period, with s~d
compounding if more than one coupon period is involved.
!I
E.I.
Ii
F-281
TREASURY
ASE 6:30 P.M.,
November 23, 1965.
ltESULTS OF REFUNDING OF $1 BILLION OF ONE-YEAR BILLS
Treasury Department anno~ced today that the tenders for $1,000,000,000, or
uts, of 365-day Treasury bills to be dated November 30, 1965 and to mature
30, 1966, which were offered on November 17, were opened at' the Federal
18anks on November 23.
details of this issue are as follows:
Jtal applied for Jtal accepted
t~a
~1,948,046,000
$1,000,12l,000
(includes $45,550,000 entered on a
noncompetitive basis and accepted in
full at the average price shown below)
of accepted competitive bids:
Lgh
- 95.681 Equivalent rate of discount approx. 4.260% per annum
- 95.652
"
It"
II
II
4.288% tI
"
rerage
- 95.664
"
II
II"
II
4.276%, II
II
(25 percent of the amount bid for at the low price was accepted)
)W
:ral Reserve
Y
Total
Total
AEP1ied for
Acc6Eted
;;,on
$
9,700,000
$ 25,700,000
;'York
1,386,330,000
706,080,000
,.ade1phia
23,896,000
13,896,000
'eland
41,362,000
39,362,000
'iIrlond
12,208,000
12,208,000
nta
22,017,000
12,017,000
·,ago
227,504,000
79,.504,000
:Louis
17,990,000
14,390,000
,eapo1is
7,278,000
7,278,000
'as City
4,095,000
4,09.5,000
as
8,831,000
32,331,000
Francisco
92 z760 z000
147 z335 z000
$1,000,121,000
TOTAL
$1,948,046,000
~upon issue of the same length and for the same amount invested, the return on
bills would provide a yield of 4.48%. Interest rates on bills are quoted in
lof bank discount with the return rela.ted to the face amount of the bills payIt maturity rather than the amount invested and their length in actual number
~ related to a 360-day year. In contrast, yields on certificates, notes, and
~e computed in terms of interest on the amount invested, and relate the number
IS remaining in an intere st payment period to the actual number of days in the
, with semiannual compounding if more than one coupon period is involved.
~rict
TREASURY DEPARTMENT
lOR RJlt,E1Sg 6130 P.M.,
Tuesd!l, NoTeaber 23, 1965.
RESULTS OF REFUNDING OF $1 BILLION OF ONE-YEAR BILLS
The Treasury Department announced today that the tenders for $1, 000, OOO,(X)J, II
.thereabouts, of 365-dq Treasury bills to be dated November 30, 1965, and to matun
November 30, 1966, which were offered on November 17, were opened at the Federal
ReserYe Banks on November 23.
The details of this issue are as follows:
Total applied for Total accepted
-
~1,948,Oh6,OOO
$1,000,12l,000 (includes $45,550,000 entered on a
noncompetitive basis and accepted in
full at the average price shown below)
Range of accepted competitive bids:
High
- 95.681 Equivalent rate of discount approx. 4.260% per III
Low
- 95.652
n
"It
It
"4.288% " I
Average
- 95.664
"
II
" "
II
4.276%" I
(25 percent of the amount bid for at the low price was accepted)
Total
Applied for
$
25,700,000
'Federal Reserve
District
Boston
New York
Philadelphia
Cleveland
Richmond
Atlanta
Chicago
St. Louis
Minneapolis
Kansas City
Dallas
San Francisco
TOTAL
1/
-
1,386,330,000
23,896,000
41,362,000
12,208,000
22,017,000
227,5Oh,OOO
17,990,000
7,278,000
4,095,000
32,331,000
147,335,000
$1,948,046,000
Total.
Accepted
$
9,700,0::0
706,080,0::0
1),896,0::0
)9,)62,00J
12,208,(0)
12,017,00J
19"o4,00J
14, 390,00J
7,278,00J
4,095,00J
8,8)1,00)
92, 760,~
$1, 000, 121,00J
On a coupon issue of the same length and for the same amount invested, the nt1!
these bills would provide a yield of 4.48%. Interest rates on bills are quoted
terms of bank discount with the return related to the face amount of the billJ I
able at maturity rather than the amount invested and their length in actual l1li
ot days related to a 360-clay year. In contrast, yields on certifi~ates, notes,
bonds are computed in terms of interest on the amount invested, and relatet~1
of days rema i ning in an interest p~nt period to the actual nUBlber of daYs 1D
period, with semiannual compounding i f IlOre than one coupon period is inVol,ed.
F-282
- 9 -
·tti AU.. tliq:C:: ""Ue_i i";;; i"
<Iii: t be
'9
Political leader s
in many less developed countries find themselves uncomfortably
placed between their need for economic assistance, on the one
I
-
hand, and the national pride of their people on the other.
Beyond this is often their suspicion that the patterns of
world trade and economic growth are loaded against them.
The range for misunderstanding and conflict between the
multi-national corporation and the less developed country
is extremely wide and poses many dangers for the future.
The Convention is certainly an important contribution in
this field, but it is difficult to emphasize enough the
vast job that remains to be done to create greater mutual
understanding in this whole area.
I would hope that groups
like yours, which meet to discuss such questions, may be able
to offer advice and assistance in these matters
a~Jl'asu -Rq~~:J
••
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klitil
li&g~
*0
1~ \'t~
1-11 ~ 'f"
't
",.!,~l•• fJlhZt-c.L ~'h'\I,,,£A.~\i~, ~
V · ~. a " ;/ ,;.~:,w .J;J:<!<Jet* 't':(' I.,,,";... '-....,. ~ ,(
L,'u ,Of'-\. ",,}"\"\'\J~'f': Q'f'f-;:t, ~ -0" >Att"c..,,,,L 141., vt,c..~"",,,,,~""ff'
t
.
- 8 uQ~~there.
a local market is to establish an operating
,-
U.S.
corp'Gr~tions
alone have
-.,.'
"~
.. "~ ~
nearly~*aotjG''''f~reign
whose sales are doublew~1'rthe U. S. exports.
:,
....."...
~:-.,,,-~r~
subsidiaries
t<f'l,,,,,,,I;-·(·~,,,,.~t~'
Such companies
""'.
conduct manufaqj;.lH"f'ng enterprises, extract and process
.-,--,~
.'~
natural~resources,
market goods and services on an inter........
,~~
D:at~~nal
scale
J
They are in a unique position to contribute
to economic growth in the less developed countries.
Before the contribution will be made, however, the
atmosphere for investment must be congenial.
The postwar
revival of Europe and Japan was strongly influenced by the
tendency of national governments to lessen their interference
with international business.
Bretbn Woods, GATT, currency
convertibility, the emergence of the Common Market with its
limitations on certain aspects of national sovereignty in
economic matters, the hospitable reception for any influx of
outside capital -- these all played a part in avoiding a clash
between national interests and mUlti-national business.
Unfortunately, the atmosphere seems to be changing, not just
in Europe and Japan, but also among the developing nations,
which need all the outside capital and enterprise they can
possibly attract.
Many developing nations were formerly under the great
Colonial Powers.
many of the new
Anti-imperialistic attitudes run deep in
states'[~J:= _lelllil~"1'.!'_~lQ.
s&nera J lJL 'l"""#~l'l"';";'-"i'~' pa i:fs"'''t'$ti''TflIHhwre.ther~~£!LH9l:i2z,uE ..,
- 7 -
specific classes of disputes.
When the issue first came to
a vote a substantial majority favored the broad jurisdiction
approach, but a number of capital-importing countries persisted in their efforts to insert in the draft a provision
Nhich would allow a country to specify the types of invest.) i.
nent disputes which it would
agr~e~t~' 'k~'bmi t to the Center.
/'
rheir argument was that even though the consent of both
parties would be required before a dispute could be subnitted to the Center, many capital-importing countries would
lot, in a realistic sense, be completely free to withhold
their consent.
In the end it was agreed to insert such a provision in
the Convention.
I mention this case because it raises a
lasic issue -- one which constitutes a serious problem today
)etween the developed and less developed nations.
In the
:ield of private foreign investment, the multi-national
!orporations, which I referred to earlier, are a key part
)f the developed nations' collective economic capacity.
-
~~e
goods, capital equipment, skills, and
techni~al
~now-how~aces where they are needed ox can be used
Lore ef fee t i ve ;;'.
~. !!",t:~Sion
.ational corporatio
of opera t ions of the mul t i-
is desigrie'd. ",to take advantage of trading
,r market oppartuni ties at a profit, and i.J;t many areas today
he only way for an outside entity to compete effectively in
- 6 -
early date.
If enough other countries follow suit, the
Convention should come into operation late next year.
While I recognize that almost any international agreement
concerning private foreign investment is likely to be politically sensitive among capital-importing countries, I am confident that many such countries will ratify the Convention.
My
observation is based on the extensive consultations and
negotiations which the World Bank recently conducted with
its 102 members, especially the less developed nations, prior
to the formulation of the final text of the Convention.
It
is interesting to note the particularly positive response
cJ,..L
among the new states of Africa, 15 of whom W&Pe among the
25 original signers.
The European countries generally support
\
$\
the convention; Pakistan, Malaya, and Japan have signed; but
'\
the response among Latin American countries has been much
less favorable.
One of the important areas of difference between capitalexporting and capital-importing countries which arose during
the negotiations on the Convention was the question of the
proposed Center's jurisdiction -- that is, the various classes
of disputes which should be submitted to the Center for arbinations
tration and conciliation. Capital exporting/generally sought
broad jurisdiction for the Center, while the Capital-importing
lations favored limiting the Center's jurisdiction to certain
- 5 ;oday is:
will the mUlti-national corporations -- "those
lighty engines of enlightened western capitalism" -- succeed
.n playing their vital role in the less developed world.
In
ly own mind, there is no doubt that these enterprises are
:apable of playing a leading role in the economic advance
,f the less developed countries.
'emains an unresolved question.
Whether or not they will
One point is clear, however;
.f a positive solution is to be achieved and the right sort
If atmosphere for investment created, the initiative must
Ie taken by the governments of all interested nations, both
:he developed and less developed alike.
In effect, this is what has happened in this case, which
.s why the Convention represents an interesting development
.n the fields of both international relations and international
aWe
The Convention will enter into force after it has been
atified by 20 member governments of the World Bank.
.oment it is still in mid-stream:
i
l
~
.
t; .
At the
member governments,
ncluding the United States, have signed the Convention, but
uly Nigeria has so far ratified it.
After Congress reconvenes
ext January, we plan to submit the Convention to the Senate
or ratification.
Implementing legislation, mainly concerned
ith enforcement of arbitral awards in U.S. courts, will go up
bout the same time.
We have already had consultations with
enators Fulbright and Hickenlooper, and we have every hope
hat the Convention will be well received and ratified at an
- 4 Set against this background, the Convention under coniideration here today represents a significant new step in
,his vast but crucially important area.
he
QOFj&~
As you know/ icr:II
eisLzleuwea, the Convention will establish a
:enter associated with the World Bank to arbitrate investment
lisputes which arise between private citizens or corporations
tf one country and the government of another country.
tasic purpose,
The
of course, is to help create an atmosphere
If greater mutual confidence between private foreign investors
.nd less developed countries which, hopefully, will lead to
.n increasing flow of private capital into these regions during
,he next decades.
Admittedly, this is a difficult question with a host of
,omplicated variables, but it is right and prudent to regard
Irivate investment, and particularly the great multi-national
orporations, as the most potent and promising vehicle outside
overnment to breathe economic life into the less developed
ations.
The expansion of world trade, the freedom of money
o flow across national boundaries, the stimulating effects
f broadening competition and the spread of technical and
rganizational knowledge -- these are the ~hallmarks of multiational business, and these are the'developments which have
elped to bring an expanding, more integrated and efficient
conomic structure to the West since 1945.
The question
- 3 -
For some time now, the United States Government has
been searching for ways of increasing U.S. private invest-
:::~~~_c~u~e") 6~ ~eiitu9'lepattmJ,<7
-
/
rhe Treasury has been constantly alert to this problem.
In the
tax field, this concern has been reflected in the 1962 Revenue
\ct, which extended special tax treatment to investment in
:hese countries; in the Interest Equalization Tax legislation,
vhich exempted such investment from the tax, and in several
:ax treaties recently negotiated with less developed countries
:here has been included a 7 percent tax credit for U.S. investment
.n those countries.
The Treasury also operates the Foreign
ax Assistance Program to help less developed countries
trengthen their tax administration -- and thus help to improve the
limate for investment.
Finally, Secretary Fowler has emphasized,
n his exploratory talks looking toward changes in the inter-
Itiona1 monetary system, the need to keep the concerns of
~ss
developed nations in mind.
._) _2--&h! /) (I
- 2 of dollars have been spent, not only by the U.S., but by
other industrial nations and by various international organizations, to assist countries in ASia, Africa, and Latin
America.
huge.
Taken as a raw figure, the amount involved has been
Viewed against the problems which still require solu-
tion, however, the contribution has never been more than a
meager beginning.
The potential for expanding official
economic development assistance clearly falls short of the
level which would be desirable.
In our own case, internal
needs are emerging in the areas of education, urban renewal,
and poverty, to mention but a few, which make it unrealistic
to assume that we can step up our external official assistance.
\nd the same is true for many of the industrial nations of
the
wes;J
Yet if one hard fact has emerged from the past two decades,
It is that the momentous problems presented by the less devel>ped nations cannot safely be ignored.
Economic assistance
.s not merely an act of charity,. The Uni ted States, indeed
t-i (\.it.
Lll the nations of the world,~a~a fundamental interest in
1\
;he creation of free and viable economies in the less devel.ped world, not simply because such economies provide growing
,arkets for
~:~~i' ~Oducts
and services, but more importantly
A
'ecause an expanding world economy which includes the less
eveloped nations offers the best hope for stability and peace.
)~ __J
11/22/65
1(- ~
Speech
C ') /l
. I I have been
which has been
Ls not merely
REMARKS OF THE HON8RABLEJOSEPH W. BARR
BEFORE THE INTERNATIONAL LAW COMMITTEE
OF THE D.C. BAR ASpOCIATIONJ)~ER 23,
1965, a,;i 4 p.m.,~n theCBoard Room ~
the National Savings and Trust Co.
. I-~'?--" &-.. c.. "
__
~
{!:---- ...- . - ._.-.- - -
and depression
~tion
has grown
rId trade and
_....... -
j
Mr. Barr has cleared this speech
and would like to have it prepared for
delivery and release tomorrow afternoon.
1940s, have
roduction. ChiS
elop~~ll'tS'
has
rived great
ayments diffied a tremendous
siness has
direct
disturbing
been the inability
,a tisfactory rate
lent, through
David C. Mulford
1
3423
Ext. 2446
;he dramatic reconstruction
~rams
:ommi tted itself
01 ~urope,
~ne
!
program.
~u~us
After
of our pro-
has shifted from Europe to the less developed nations
)f the world, a group which since the late 1950s has become
.ncreasingly important in international affairs.
Billions
TREASURY DEPARTMENT
Washington
FOR RELEASE:
UPON DELI\-ERY
REMARKS OF THE,::;\lORABLE JOSEPH W. BARR
b1FORE
THE INTERNATIONAL LAW COMMITTEE OF THE D. C. BAR ASSOCIATION
BOARD ROOM OF THE NATIONAL SAVINGS AND TRUST COMPANY
WASHINGTON, D. C., TUESDAY, NOVEMBER 23, 1965,
4: 00 P. M., EST.
The two decades since the end of World War II have been
unique in a multitude of ways, not the least of which has been
the dramatic growth of the world economy. It is not merely
that the world has escaped the usual deflation and depressioo
these past years; on the contrary, world production has grown
at a rate unprecedented in modern history. World trade and
investment, both trouble spots in the 1930s and 1940s, have
increased at an even greater rate than world productio".
There has, however, been oreconsistently disturbing feature
in this hopeful picture, and that has been the inability of
most less-developed countries to attain a satisfactory rate of
economic growth. The United States Government, through four
administrations since World War II, has committed itself to a
strong and imaginative foreign assistance program. Af~e~ the
dramatic reconstruction of Europe, the focus of our programs
has shifted from Europe to the less developed nations of the
world, a group which since the late 1950s has become increasingly
important in international affairs. Billions of dollars have
been spent, not only by the U. S., but by other industrial natiOn!
and by various international organizations, to assist countr~s
in Asia, Africa, and Latin America. Taken as a raw figure, the
amount involved has been huge. Viewed against the problems which
still require solution, however, the contribution has never
been more than a meager beginning. The potential for expanding
official economic development assistance clearly falls short ~
the level which would be desirable. In our own case, internal
needs are emerging in the areas of education, urban renewal,
and poverty, to mention but a few, which make it unrealistic
to assume that we can step up our external official assistance.
Ye t if one hard fac t has emerged from the pas t two decades,
it is that the momentous proble~s presented by the less devel~
nations cannot safely be ignored. Economic assistance is not
F-283
,..,
-
L.
-
nerely an act of charity. The United States, indeed all the
)ations of the world, have a fundamental interest in the
~reation of free and viable economies in the less developed
vorld, not simply because such economies provide growing markets
.~or their products and services, but more importantly because an
~xpanding world economy which includes the less developed nations
~ffers the best hope for stability and peace.
For some time now,the United States Government has been
,;earching for ways of increasing U. S. pr~vate investment in
:less developed countries. The Treasury has been constantly
.llert to this problem.
In the tax field, this concern has been
'~eflected in the 1962 Revenue Act, which extended special tax
~reatment to investment in these countries; in the Interest
jqualization Tax legislation, which exempted such investment from
~he tax, and in several tax treaties recently negotiated with
'less developed countries there has been included a 7 percent tax
.:redit for U. S. investment in thosE' countries. The Treasury
:tlso operates the Foreign Tax Assistance Program to help less
:!eveloped countries strengthen their tax administration -- and
:hus help to improve the climate for investment. Finally,
:;ecre tary Fowler has emphas ized, in his explora tory ta lks looking
:":oward changes in the international monetary system, the need to
":eep the concerns of less developed nations in mind.
Set against this background, the Convention for the
.:ettlement of International Investment Disputes you are discussing
~ere today represents a significant new step in this vast but
rucially important area. As you know, the Convention will
·stablish a Center associated with the World Bank to arbitrate
_.nvestment disputes which arise between private citizens or
:orporations of one country and the government of another country.
:;'his is the first time that a special institution has been set
:p to settle such disputes.
The basic purpose, of course, is to
:elp create an atmosphere of greater mutual confidence between
·.rivate foreign investors and less developed countries which,
:opefully, will lead to an increasing flow of private capital
:nto these regions during the next decades.
Admittedly, this is a difficult question with a host of
~mplicated variables, but it is right and prudent to regard
::rivate investment, and particularly the great multi-national
~rporations, as the most potent and promising vehicle outside
~vernment to breathe economic life into the less developed
~tions.
The expansion of world trade, the freedom of money
o flow across national boundaries, the stimulating effects of
roadening competition and the spread of technical and
rganizational knowledge -- these are the hallmarks of multiltional business, and these are the developments which have
=lped to bring an expanding, more integrated and efficient
- 3 -
economic structure to the West since 1945. The question tod~
is: will the multi-national corporations -- "those mighty
engines of enlightened western capitalism" -- succeed in playing
their vital role in the less developed world. In my own mind,
there is no doubt that these enterprises are capable of playing
a leading role in the economic advance of the less developed
countries. Whether or not they will remains an unresolved
question. One point is clear, however; if a positive soluti~
is to be achieved and the right sort of atmosphere for investment
created, the initiative must be taken by the governments of all
interested nations, both the developed and less developed aliQ.
In effect, this is what has happened in this case, which
is why the Convention represents an interesting development
in the fields of both international relations and international
law. The Convention will enter into force after it has been
ratified by 20 member governments of the World Bank. At the
moment it is still in mid-stream: 25 member governments,
including the United States, have signed the Convention, but
only Nigeria has so far ratified it. After Congress reconvenes
next January, we plan to submit the Convention to the Senate
for ratification. Implementing legislation, mainly concerned
with enforcement of arbitral awards in U. S. courts, will go up
about the same time. We have already had consultations with
Senators Fulbright and Hickenlooper, and we have every hope
that the Convention will be well received and ratified at an
early date. If enough other countries follow suit, the
Convention should come into operation late next year.
While I recognize that almost any international agreement
concerning private foreign investment is likely to be politically
sensitive among capital-importing countries, I am confident
that many such countries will ratify the Convention. My
observation is based on the extensive consultations and
negotiations which the World Bank recently conducted with its
102 members, especially the less developed nations, prior to
the formulation of the final text of the Convention. It is
interesting to note the particularly positive response among
the new states of Africa, 15 of whom are among the 25 original
signers. The European countries generally support the conventi15;
Pakistan, Malaysia, and Japan have signed; but the response
among Latin American countries has been much less favorable.
- 4 One of the important areas of difference between capitalcporting and capital-importing countries which arose during
.le negotiations on the Convention was the question of the
·~oposed Center's jurisdiction -- that is, the various classes
:: disputes which should be submitted to the Center for
~bitration and conciliation.
Capital exporting nations generally
mght broad jurisdiction for the Center, while the Capitallporting nations favored limiting the Center's jurisdiction to
:~rtain specific classes of disputes.
When the issue firs t came
,) a vote a substantial maj ority favored the broad jurisdiction
')proach, but a number of capital-importing countries persisted
1 their efforts to insert in the draft a provision which would
Llow a country to specify the types of investment disputes
lich it would agree in principle to submit to the Center.
leir argument was that even though the consent of both
Lrties would be required before a dispute could be submitted
) the Center, many capital-importing countries would not, in
realistic sense, be completely free to withhold their consent.
In the end it was agreed to insert such a provision in
le Convention. I mention this case because it raises a
lsic issue -- one which constitutes a serious problem today
!tween the developed and less developed nations. In the field
: private foreign investment, the multi-national corporations,
lich I referred to earlier, are a key part of the developed
.tions' collective economic capacity. They are in a unique
)sition to contribute to economic growth in the less developed
mntries.
Before the contribution will be made, however, the
:mosphere for investment must be congenial. The postwar
~vival of Europe and Japan was strongly influenced by the
·ndency of national governments to lessen their interference
th international business. Bretton Woods, GATT, currency
nvertibility, the emergence of the Co~on Market with its
mitations on certain aspects of national sovereignty in
onomic matters, the hospitable reception for any influx of
tside capital -- these all played a part in avoiding a clash
tween national interests and multi-national business.
fortunately, the atmosphere seems to be changing, not just
Europe ann Japan, but also among the developing nations,
ich neen all the outside capital and enterprise they can
ssibly attract.
Many 0eveloping nations were formerly unrler the great
lonial Powers. Anti-imperialistic attitudes run deep in many
the new states. Political leaners in many less develop~rl
lntries find themselves uncomfortably placerl between the~r
~d for econonUc assistance, on the one hand, and the national
- 5 -
pride of their people on the other. Beyond this is often t~h
suspicion that the patterns of world trade and economic gr~~
are loaded against them. The range for misunderstanding and
conflict between the multi-national corporation and the less
developed country is extremely wide and poses many dangers for
the future. The Convention is certainly an important contribution
in this field, but is difficult to emphasize enough the vast
job that remains to be done to create greater mutual understanding
in this whole area. I would hope that groups like yours,
which meet to discuss such questions, may be able to offer
advice and assistance in these matters.
000
RE:~RKS
BY THE HO~ORABLE HENRY ft. ~~
SECRETARY OF THE TREASURY
AT THE S~~ARI~G-I~ OF PETER D. STERNLIGHT
AS DEPUTY U~DER SECRETARY FOR MONETARY AFFAIRS
ROO~ 4121, MAIN TREASURY
12:00 ~OO~ EST, WEDNESDAY, NOVEMBER 24, 1965
l~~
It is a real pleasure to welcome Peter Sternlight back
to the Treasury, particularly to the important post of
Deputy Under Secretary for Monetary Affairs.
It would be difficult indeed to find anyone who could
fully replace Paul Volcker In the Treasury.
His capacity fm
hard work and his broad range of knowledge across the entire
spectrum of Treasury interest, combined with his excellent
policy judgment, have made him one of the most valuable
members of the Treasury team.
For that reason, we looked long and hard for a man to
succeed him as Deputy Under Secretary for Monetary Affairs
and we
w~re
very fortunate in getting Peter Sternlight to
accept the job.
He is not a stranger to the Treasury,
havi~
worked here for a short while in 1961 advising former Under
- 2 -
Secre tary for
operations
~n
~one tary
Affa irs Robert Roosa on his pioneering
the foreign exchange field.
These operations
proved successful and valuable and Mr. Sternlight can justly
claim some credit for that success.
More recently, as an Assistant Vice President of the
h~n
Reserve Bank of New York Mr. Sternlight has been active in
planning and supervising the open market operations of the
Federal Reserve System in marketing U. S. securities.
As
you know, the open market operations of the Federal Reserve Systi
are of tremendous importance to the economic we lfare of the
United States and require keen judgment, the ability to
decisions, and the capacity to work creatively and
ma~~
effecti~~
under great pressure.
But Mr. Sternlight has also had experience in the more
contemplative side of an economist's life.
He spent a good
- 3 many years in the Research Department of the Federal Rese~e
Bank of New York, where he brought his ability to bear on
both international and domestic financial and economic
problems.
He at one time was chief of the Domestic Research
Division of the Bank, and In that capacity was responsible
for directing one of the most highly skilled staffs of
researchers on monetary problems.
Mr. Sternlight's background and training will stand
him in good stead in his new post, where he will advise
and assist Under Secretary Fred Deming in all aspects of
Mr. Deming's responsibility for international and domestic
economic affairs.
Mr. Sternlight comes to us at a very challenging time,
\Ve are attempting to break new ground in the international
monetary area and at the same time maintain our very success~l
- 4 record of domestic economic ,progress.
He comes to us very
highly recommended and I look forward with pleasure and
confidence to his success in his new post.
TREASURY DEPARTMENT
FOR RELEASE AT 12:00 NOON, EST
WEDNESDAY, NOVEMBER 24, 1965
NEW DEPUTY UNDER SECRETARY FOR MONETARY AFFAIRS
Treasury Secretary Henry H. Fowler today named Peter D.
Sternlight -- an Assistant Vice President of the New York
Federal Reserve Bank -- as Deputy Under Secretary for Monetary
Affairs, to succeed Paul A. Volcker, who is returning to
private business.
Mr. Sternlight has played an important part in planning
and supervising the open market operation of the Federal
Reserve -- the operation through which the U. S. Government
markets its securities. Earlier he served in the Research
Department of the Bank, where he dealt with both international
and domestic problems. In his new position he will act as
general deputy to the Under Secretary for Monetary Affairs
in all aspects of the Under Secretary's responsibilities in
both domestic and international economic affairs, including
supervision of the offices of Debt Analysis, Financial
Analysis and Gold and Silver Operations.
Mr. Sternlight was born May 21, 1928 in New York City.
He holds three degrees in economics -- a Bachelor's Degree
from Swarthmore College and Master's and Doctor's Degrees
from Harvard University.
Mr. Volcker joined the Treasury in January, 1962 as
Director of the Office of Financial Analysis. In November, 1963
he was appointed Deputy Under Secretary for Monetary Affairs
by Treasury Secretary Douglas Dillon.
Mr. Volcker twice received high commendation for his
service with the Treasury. He received the Arthur S. Flemming
Award in 1964 as one of the ten outs tand ing young men in Federal
service and early this year Secretary Dillon selected him for
the Treasury's Exceptional Service Award in recognition of his
"impress ive grasp of banking, finance and economic matters."
NOTE:
F-284
Mr. Sternlight will be sworn in in Room 4121 of t~
Treasury at 12:00 noon today. A copy of the
Secretary's remarks at the swearing-in is attached.
REMARKS BY THE HONORABLE HENRY H. FOWLER
SECRETARY OF THE TREASURY
AT THE SWEARING-IN OF PETER D. STERNLIGHf
AS DEPUTY UNDER SECRETARY FOR MONETARY AFFAIRS
ROOM 4121, MAIN TREASURY
12:00 NOON EST, WEDNESDAY, NOVEMBER 24, 1965
It is a real pleasure to welcome Peter Sternlight back
to the Treasury, particularly to the important post of Deputy
Under Secretary for Monetary Affairs.
It would be difficult indeed to find anyone who could ful~
replace Paul Volcker in the Treasury. His capacity for hard wort
and his broad range of knowledge across the entire spectrum of
Treasury interest, combined with his excellent policy judgment,
have made him one of the mos t valuable members of the Treasury team.
For that reason, we looked long and hard for a man to succeed
him as Deputy Under Secretary for Monetary Affairs and we were
very fortunate in getting Peter Sternlight to accept the job. He
is not a stranger to the Treasury, having worked here for a sh~t
while in 1961 advising former Under Secretary for Monetary Affi~s
Robert Roosa.'
More recently, as an Assistant Vice President of the Federal
Reserve Bank of New York Mr. Sternlight has been active in
planning and supervising the open market operations of the Fedenl
Reserve System in marketing U. S. securities. As you know, the
open market operations of the Federal Reserve System are of
tremendous importance to the economic welfare of the United s~~s
and require keen judgment, the ability to make quick decisions, and
the capacity to work creatively and effectively under great pressure,
But Mr. Sternlight has also had experience in the more
contemplative side of an economist's life. He spent a good ~ny
years in the Research Department of the Federal Reserve Bank of I
New York, where he brought his abil ity to bear on both international
and domestic financial and economic problems. He at one time was
chief of the Domestic Research Division of the Bank, and in that
capac ity was respons ible for d irec ting one of the mos t highly skill'
staffs of researchers on monetary problems.
Mr. Sternlight I s background and training will stand him in g~1
stead in his new post, where he will advise and assist Under Secre~
Fred Deming in all aspects of Mr. Deming's responsibility for
international and domestic economic affairs.
- 2 -
Mr. Sternlight comes to us at a very challenging time, w~n
we are attempting to break new ground in the international monetary
area and at the same time maintain our very successful record
of domestic economic progress. He comes to us very highly
recommended and I look forward with pleasure and confidence to his
success in his new post.
000
- :3 {HEjrJtm:f)
r other disposition of Treasury bills does not have any special treatment, as
~der
the Internal Revenue Code of 1954.
The bills are subject to estate,
tance, gift or other excise taxes, whether Federal or State, but are exempt from
mt10n now or hereafter imposed on the principal or interest thereof by
a~
State,
of the possessions of the United States, or by any local taxing authority.
Fbr
!s of taxation the amount of discount at which Treasury bills are originally sold
United states is considered to be interest.
Under Sections 454 (b) and 1221 (5)
Internal Revenue Code of 1954 the amount of discount at which.bills issued heresre sold is not considered to accrue until such bills are sold, redeemed or otherlsposed of, and such bills are excluded from consideration as capital assets.
1ng17, the owner of Treasury bills (other than l1fe insurance companies) issued
1sr need include in his income tax return only the difference between the price
Jr such bills, whether on original issue or on subsequent purchase, and the amount
Ly
received either upon sale or redemption at maturity during the taxable year
Lch the return is made, as ordinary gain or loss.
reasury Department Circular No. 418 (current revision) and this notice, prescribe
nns of the Treasury bills and govern the conditions of their issue.
rcular may be obtained from any Federal Reserve Bank or Branch.
Copies of
- 2 -
lted for.ms and forwarded in the special envelopes which will be supplied by Federal
~rve
Banks or Branches on application therefor.
Banking institutions generally may submit tenders for account of customers pro!d the names of the customers are set forth in such tenders.
others than banking
iitutions will not be per.mitted to submit tenders except for their own account.
~rs
will be received without deposit from incorporated banks and trust companies
from responsible and recognized dealers in investment securities.
Tenders from
!rs must be accompanied by payment of 2 percent of the face amount of Treasury bills
.ied for, unless the tenders are accompanied by an express guaranty of payment by
,ncorporated bank or trust company.
Immediately after the closing hour, tenders will be opened at the Federal Reserve
,s and Branches, following which public anouncement will be made by the Treasury
rtment of the amount and price range of accepted bids.
be advised of the acceptance or rejection thereof.
Those submitting tenders
The Secretary of the Treasury
essly reserves the right to accept or reject any or all tenders, in whole or in
, and his action in any such respect shall be final.
Subject to these reserva-
s, noncompetitive tenders for each issue for $200,000 or less without stated
e from anyone bidder will be accepted in full at the average price (in three
DaIs) of accepted competitive bids for the respective issues.
Settlement for
pted tenders in accordance with the bids'must be made or completed at the Federal
rYe Bank on __D__
ec_e_m~b_e~l'~(~1id~1~S_'S_5______ , in cash or other immediately available funds
1 a
like face amount of Treasury bills maturing
~xchange
tenders will receive equal treatment.
_..;:D;;.;;e:~c;.;;c;.;..(j:..:~)..;;;;.'2~~_,..:::::;~~.~l;:;;;:,~Jc,;;;.-~_:..'_ _ •
Cash
(EX)
Cash adjustments will be made for
!rences between the par value of maturing bills accepted in exchange and the issue
of the new bills.
The income derived from Treasury bills, whether interest or gain from the sale or
dispoSition of the bills, does not have any exemption, as such, and loss fram the
TREASURY DEPARTMENT
Washington
IMMEDIATE RELEASE,
axxxxxxxxxx-,'OCvrn:xxxxxxxxx:xxxx
(E)
TREASURY IS i:JEEELY BILL OFFERI! fe
The Treasury Department, by this public notice, invites tenders for two series
'reasury bills to the aggregate amount of $
,
~~ z 200, (Jon, ():JO
(%)
, or thereabouts, for
and in exchange for Treasury bills maturing Decc"lo:'l, J UC" , in the amount
(3)
2,20-'r,552,OJO , as follows:
(X)
91 -day bills ( to maturity date) to be issued DCCc~lll;(~) ;;, LC~
,
(!I)
(K)
in the amount of $ 1 z 200 OOO.ooo , or thereabouts, represent'z)
,
ing an additional amount of bills dated S2ptem~>2:c' ~~, LJG::)
,
t
and to mature
amount of $
(~)
l:iarch 2" ~ 1::; 66
, originally issued in the
( Sf)
, the additional and original bills
(m)
to be freely interchangeable.
182 -day bills, for
(n)
1,OOO,~59,OOO
$
1,000,000,000 , or thereabouts, to be dated
(U)
, and to mature
June 2, L;(jG
------~0~~r)-------
The bills of both series will be issued on a discount basis under competitive
loncompetitive bidding as hereinafter provided, and at maturity their face amount
be payable without interest.
They will,be issued in bearer form only, and in
~inations of $1,000, $5,000, $10,000,' $50,000, $100,000, $500,000 and $1,000,000
:trity value).
Tenders will be received at Federal Reserve Banks and Branches up to the cloSing
one-thirty p.m., Eastern Standard time,
ilonrl::':'/,
lToVC:,)():::l' :~~,
L;u::;
•
Tenders
(m)
'not be received at the Treasury Department, Washington. Each tender must be
n even multiple of $1,000, and in the case of competitive tenders the price
'ed must be expressed on the basis of 100, with not more than three decimals,
99.925.
'/
Fractions may not be used.
l.--"'--
~ 0
~
.
It is urged that tenders be made on the
TREASURY DEPARTMENT
November 24, 1965
FOR IMMEDIATE RELEASE
TREASURY'S WEEKLY BILL OFFERING
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
Treasu~ bills maturing December 2, 1965,
in the amount of
$2,204,552,000, as follows:
91-day bills (to maturity date) to be issued December 2, 1965,
in the amount of $ 1,200,000,000, or thereabouts, representing an
additional amount of bills dated September 2, 1965, and to
mature March 3, 1966,
originally issued in the amount of
$1,000,459,000, the additional and original bills to be freely
interchangeable.
182-day bills, for $ 1,000,000,000, or thereabouts, to be dated
December 2, 1965, and to mature June 2, 1966.
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 Br~n~he8
up to the closing hour, one-thirty p.m., Eastern Standard
time, Monday, November 29, 1965.
Tenders will not be
received at the Treasury De~artment, 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 spec ial enve lopes whic h 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 f~m
responsible and recognized dealers in investment securities. Tender8
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 b~
or trust company.
F-285
- 2 Immediately after the closing hour, tenders will be opened at the
eral Reserve Banks and Branches, following which public announcet will be made by the Treasury Department of the amount and price
ge of accepted bids. Those submitting tenders will be advised
the acceptance or rejection thereof. The Secretary of the Treasury
,ressly reserves the right to accept or reject any or all tenders,
whole or in part, and his action in any such respect shall be
ale Subject to these reservations, noncompetitive tenders for
h issue for $200,000 or less without stated price from anyone
der will be accepted in full at the average price (in three
imals) of accepted competitive bids for the respective issues.
tlement for accepted tenders in accordance with the bids must be
e or completed at the Federal Reserve Bank on December 2,1965, in
h or other immediately available funds or in a like face amount
Treasury bills maturing December 2, 1965. Cash and exchange tenders
1 receive equal treatment. Cash adjustments will be made for
.ferences between the par value of maturing bills accepted in
hange and the issue price of the new bills.
The income derived from Treasury bills, whether interest or
from the sale or other disposition of the bills, does not have
exemption, as such, and loss from the sale or other disposition
rreasury bills does not have-any special treatment, as such,
~r the Internal Revenue Code of 1954.
The bills are subject to
Ite, inheritance, gift or other excise taxes, whether Federal or
~e, but are exempt from all taxation now or hereafter imposed on
principal or interest thereof by any State, or any of the
;essions of the United States, or by any local taxing authority.
purposes of taxation the amount of discount at which Treasury
Ls are originally sold by the United States is considered t@ be
!rest. Under Sections 454 (b) and 1221 (5) of the Internal
!nue Code of 1954 the amount of discount at which bills issued
!under are sold is not considered to accrue until such bills are
I, redeemed or otherwise disposed of, and such bi lls are excluded
'1 consideration as capital assets.
Accordingly, the owner of
-sury bills (other than life insurance companies) issued hereunder
include in his income tax return only the difference between
price paid for such bills, whether on original issue or on
equent purchase, and the amount actually received either upon
or redemption at maturity during the taxable year for which the
rn is made, as ordinary gain or loss.
~
Treasury Department Circular No. 418 (current revision) and this
ce prescribe the terms of the Treasury bills and govern the
itions of their issue. Copies of the circular may be obtained from
Federal Reserve Bank or Branch.
000
TREASURY DEPARTMENT
Washington
FOR RELEASE A.M. NEWSPAPERS
MONDAY, NOVEMBER 29, 1965
REMARKS BY THE HONORABLE HENRY H. FOWLER
SECRETARY OF THE TREASURY
BEFORE THE PRESS CLUB OF NEW ORLEANS
HOTEL ROOSEVELT, NEW ORLEANS, LOUISIANA
SUNDAY, NOVEMBER 28,1965,8:00 P.M., CST
For the South, as for the Nation, the closing decades oft~
Twentieth Century hold forth the promise of progress and
prosperity in all spheres of human endeavor of a kind and scale
to surpass all we have seen and all we might surmise. To realize
this promise we must look back on what we have learned and look
ahead to the adaptation of these lessons to new situations.
Now, to look back.
For the last 57 months, nearly five years, the nation has
experienced an economic resurgence without parallel -- an
expansion remarkable not only for its length, but for its streng
its soundess and its stability.
Certa inly, the expans ion we now enj oy was far from a forego
.conclusion five years ago. Then the nation was gripped by the
fourth postwar recession -- somberly aware that each of the thre
prior recess ions had been followed by shorter and weaker recover
and that the previous recession had produced the largest peaceti
budget deficit in our history. Unemployment was intolerablyh~
Business investment in new plant and equipment which for some ye
had been unable to clear a barrier to the path of steady increas
was far less than we needed to generate more vigorous economk
growth and a stronger competitive position in world markets .including our own home market which was becoming increasingly
open to import competition. At the same time, a series of balm
of payments deficits -- averaging almost $4 billion a year f~
three years, had made the dollar vulnerable and threatened t~
international monetary system based upon it.
l
We faced dire possibilities: economic stagnation at ho~;
interruption of the unprecedented pos twar growth of Free World
trade and economic development; and the weakening of the
F-286
- 2 financial base of U. S. political, diplomatic, and military POWer
These prospects clearly called for a revaluation of policy anda'
new program of action.
Since that time, there has been constant revaluation of polie
and a steadily evolving program of action.
As a result, the 57-month-01d expansion in our national
economy has restored the dollar and the productive and
competitive strength behind it to its previous position of
preeminence. The expansion has been broadly based, and its
benefits have been broadly shared. They include:
--
a 35 percent rise in our total national output;
--
a 32 percent rise in consumer spending;
--
a 51 percent rise in business investment in
plant and equipment;
-- a 39 percent rise in manufacturing production;
an 84 percent rise in corporate profits after
taxes;
-- a 32 percent rise in personal income.
Our resurgent economic performance since early 1961,
increasing our gross national product from a rate of $504 billion
in the first quarter of 1961 to $677-1/2 billion in the third
quarter of this year has been marked by a rate of economic growth
exceeding more than five percent a year, in constant prices, as
compared to 2.5 percent in the four preceding years. This
increase -- this extra slice of the cake -- exceeds the entire
gross national product of France and Belgium. In fact, the
increase alone in our national output over the past 57 months
surpasses the total annual output of any other nation of the
Free World and continues to widen the already enormous gap
between the productive capacity of the Soviet Union and our mm,
During that expansion, as well, the unemployment rate has
fallen from 6.9 percent in early 1961to4.3 percent last
month -- the lowest figure in nearly eight years.
- 3 -
What is most impressive about this decline in the
unemployment rate is that it has occurred at a time when Our
labor force has been growing at a phenomenal rate -- as the YOUng
people born in the early postwar years have entered our work
force in enormous numbers.
In the past year, from October 1964 to October 1965, the
expansion has created 2.6 million new nonfarm jobs. In other
words, in one twe 1 ve -mon th span the U. S. economy has provided
additional nonfarm jobs equal to the total employed in our
eighth largest state -- the state of New Jersey -- or in the
entire country of Denmark.
Impress ive tes timony, also, to the power of this expansion
is the fact that -- despite the impact of automation -- employmen
in manufac tur ing rose las t month to a record high of 18.2 million
on a seasonally adjusted basis -- slightly above the previous
peak reached in November 1943 at the height of World War II
factory production.
This region -- this state -- have shared fully in these
abundant benefits of expansion.
Between 1961 and 1964, for example, in the states of the
Sixth Federal Reserve District which include Louisiana,
Alabama, Florida, Georgia, Mississippi and Tennessee:
the total number of nonfarm workers has grawn
by 8.3 percent, compared with 5.2 percent for
the nation as a whole;
average weekly earnings of production workers in
manufacturing have grown by 12.7 percent,
compared with 11.5 percent for the nation as a
whole;
total personal income has grown by 23 percent,
compared with 18 percent for the nation as a
whole;
per capita personal income has grown by 16
percent, compared with 13 percent for the
nation as a whole.
- 4 This awesome economic advance -- in which so many have sharet
so amply -- did not simply happen. It has been demonstrated tMt
the business cycle does not move by the calendar but by our
private and public policies. This economic advance is the direct
result of public policies deliberately fashioned and coordina~d
to reinvigorate the private enterprise system as the prime mowr
in the achievement of our national economic goals on both the
domestic and international fronts.
What are some of those policies?
In the presence of my good friends, Senator Russell Long and
Congressman Hale Boggs, it is easy to give primacy to tax policy.
As the Majority Whips of the Senate and House, and as leading
members of the Senate Finance Committee and the House Ways and
Means Committee, these two gentlemen from Louisiana played
outstanding roles in the formation and adoption of a series of
tax measures since 1962 that most analysts consider the key to
the prosperity and dynamic growth that has marked the last four
years. Senator Long will be remembered in history for, among
other reasons, being the man whose superb leadership on the Floor
and in Committee carried the Revenue Act of 1964 through the
Senate. And Congressman Boggs has been a tower of strength in
pushing for these constructive tax policies in the House.
The investment tax credit of 1962 and its improvement in
1964, the liberalization of depreciation in 1962 and 1965, the
corporate tax cut and individual tax rate reductions from
top-to-bottom of the scale, the excise tax reductions enacted ~~
year -- these measures, at next year's levels of income, will
add up to a net total of over $20 billion worth of annual tax
reduction. And yet, during that same five year period -- fiscal
1961 to 1966 -- Federal income tax revenues will have increased
more than $18 billion because of the increased scale of
corporate profits and personal income created by the rapid growth
of the economy. It might be noted in passing that this revenue
increase is substantially greater than the increase for the
previous five years, when there was no tax reduction.
These measures provide dramatic new incentives and
opportunities for the private individual and business to assume
the dynamic constructive role that characterizes our American
system. They have materially eased the burden of oppressive
wartime tax rates that were imposed partly to restrain
private investment and consumption and allowed to persist long
after that need had passed. They have raised the profitabili~
of a typical investment in new equipment by more than one-third.
They have provided a massive increase in prjvate demand.
- 5 To these tax reduction and incentive measures for expanding
the rate of growth and role of the private sector, there was
joined a vigorous program of con tro1 over increases in Federal
Government expenditures -- a program that reached new heights
of intensity and effectiveness under the leadership of
President Johnson. By combining severe restriction on
increasing expenditures in 1964 and 1965 with revenues that
increased beyond expectation, he pulled the projected budget
deficit of $11.9 bil1icn in Fiscal 1964 down to $8.2 billion
and in Fiscal 1965 to $3.5 billion, despite the impact of
the tax reductions previously cited.
These fiscal policies were coordinated effectively with
monetary programs of the Federal Reserve Board which combined
a reasonably expansionary credit policy and a relative stability
of long-term interest rates to facilitate domestic growth with
several increases in short-term interest rates to diminish outfh
of short term capital disadvantageous to achieving an equilibrium
in our international balance of payments.
I would venture to say that, at no time in our history ~s
our national government pursued with such vigor or such success
public policies designed to promote private economic growth,
t han over the las t four and one -half years.
The mix of public policies employed in this period of
economic expansion has been designed to attack problems of
inadequate growth and excessive unemployment in a manner planned
to avoid inflation and to restore equilibrium to our balance of
payments. Let me cite a few examples:
A dangerous reliance upon increasing aggregate demand as
the sole answer to unemployment, with its attendant risks of
inflation, was avoided by initiating early in the recovery an
attack on structural unemployment through a Manpower Retraining
Program in the Department of Labor. This has been intensified
and supplemented by various parts of the program of the Office
of Economic Opportunity.
- 6 A first and early priority was given to securing incenti~s
for investment in both expanded and more efficient productive
and distributive capacity designed to encourage business
(a) to avoid bottlenecks and inflationary strains, (b) to com~~
more effectively at home and abroad, and (c) to hold down
increasing unit costs that might otherwise result from wage
and other cost increases.
Early in 1962 the Council of Economic Advisers issued
wage-price guideposts to help both business and labor arrive
at non-inflationary wage and price decisions.
But the key to our unexampled economic achievements has
not been this mix of public policies alone -- although it has
crea ted the c 1 ima te and offered the encouragement and inducement.
The decisive element has been the response to that policy
mix of the private sector of the economy -- business, finance
and labor.
It is largely the character of that response that has kept
our expansion relatively free from the excesses and imbalances
that too often in the past have undermined our periods of prosper
Businessmen, for example,have greatly enlarged their
productive facilities to keep pace with their expanding market
potential, thus avoiding bottlenecks in production and
inflationary strains on capacity. But at the same time, they
have refrained from building far beyond foreseeable needs -- and
thus inviting the inevitable contraction.
Similarly, while inventories have been r~s~ng steadily
in absolute terms, businessmen have by and large maintained them
at conservative levels in relation to the growing volume of
sales -- thus forestalling another potential pitfall in the way
of continuing economic advance.
A vast growth in the internally generated funds of business
has helped assure ample financing for this growth in investment.
But, in addition, the financial community has demonstrated its
ingenuity in drawing upon our enormous potential for saving for
funds to meet the financing needs of our businesses, our homebuyers and our state and local governments.
- 7 -
Even more crucial -- both in terms of sustaining our domestic
prosperity and improving our international competitive positi~ ..
has been our excellent record of balance between wages and
productivity gains.
We can all point to blemishes on that record -- they have
been widely publicized, and rightly so. But the key fact is
that, for manufacturing as a whole, wage increases since 1960
have remained within the bounds of productivity growth -- and,
today, factory unit labor costs in manufacturing are actually a
bit lower than they were when this expansion began.
We have refused, therefore, to fall prey to that sometimes
alluring but always illusory process by which we force wages up
beyond the capacity of the economy to absorb them, only to
see the dollar gains in workers' income washed away by higher pril
with the attendant dangers of pressures on profit margins and of
an inflationary and speculative psychology that would distort a~
impede an orderly growth in real output.
We see the ample fruits of this balance and this restraint
in the relative stability of our industrial prices -- which, at
the wholesale level, are only about 1-1/2 percent higher than
they were six years ago.
We see them also in the demonstrated ability of our expansiOl
to adjust to potentially severe disturbances without serious
damage or distortion.
For our expansion has not only survived, but surmounted,
the sharpest break in stock prices in many years in 1962, as
well as the smaller, but still sizable, declines earlier this
year; the Berlin crisis in 1961 and the Cuban missile crisis
in 1962; and large variations in our budgetary deficit, which
rose to a peak of $8.2 billion in Fiscal 1964 before it fell
sharply to $3.5 billion only a year later.
These were tests that might easily have tripped up a less
viable and durable expansion -- but tests that we have met and
mastered, avoiding recession on the one hand and inflation on
the other, as business, labor, and government have worked together
in a climate of mutual cooperation and confidence.
And now to look ahead:
- 8 -
Since July 28 of this year, this winning combination of publk
policies and private cooperation has been subjected to its gr~b.
test since early 1961. For on that day, after securing all t~
information available to him and hearing the advice of spokes~n
for every admissible point of view, after exhausting every
honorable means to bring the situation in Vietnam and Southeast AI
to the negotiating table, and after searching his own mind and
heart for countless hours, President Johnson told the world why
he had been forced to make the dec is ion to send tens of thousands
of our young men into battle in Vietnam to fulfill our commitment
to stand against aggression.
He said:
"I have been in public life for more than
three decades. In each of those thirty-five
years, I have seen good men and wise men work
to bring the blessings of our land to all our
people .....
"It is what I have wanted all my life.
I do not want to see all those hopes -- the
dreams of so many people for so many years
drowned in the wasteful ravages of war.
And
"I will do all that I can so that never
happens.
"But I also know, as long as there are men
who hate and destroy we must have the courage
to resist or see it all -- all that we have built
and all that we hope to build -- dreams, freedom
and all -- all swept away on the flood of conquest.
"So this too shall not happen, we will stand
in Vie tnam. II
Since that day, and that statement, every American, whether
in public or in private life, has carried an added burden of
responsibility. This is particularly true in the economic
and financial sphere. Let me tell you why:
- 9 -
In amassing the gains from our expansion we have narr~ed
the gap between demand and supply so that today it is at the
lowest point in our 57-month expansion. Private demand is
increasing at a healthy rate and defense expenditures are ris~g
because of accelerating action in Vietnam at a time when the
availability of manpower, particularly skilled manpower, and
unused efficient productive capacity, are at their lowest levels
since early 1961.
We now have some new preliminary estimates of the
administrative budget for fiscal 1966. It is expected that
expenditures will fall within the range of 105 to 107 billion
dollars -- some five to seven billion dollars more than
originally estimated. The increase reflects not only Vietnam,
but higher expenditures as a result of interest payments,
increased crop output, higher pension payments, and other
uncontrollable items. Controllable expenditures will actually
be below original estimates, testifying to the discipline
that President Johnson has enforced on the Federal budget.
While budget expenditures are rising, the expected deficit
is rising by a smaller amount. The deficit is now estimated
at seven to eight billion dollars -- up just 1.5 to 3 billion
dollars from the last official figure. Thus, while the budget
will be more of a stimulative force in Fiscal 1966, the additioll
stimulus will be appreciably less than many have expected. I
believe that the new estimates do not imply any major
inflationary threat stemming from the increased expenditures
and the higher deficit, although the situation obviously calls
for careful watching.
I want to stress that these figures for Fiscal 1966
are preliminary and that work is still going on to refine
them. As you know, work on the budge t for Fiscal 1967 is still
far from complete and consequently, we have no very good f~
on expenditures, revenues, or deficit for the coming fiscal yeal
In the price sector, some disturbing signs have appeared.
This year, there is a greater tendency for price increases to
outweigh declines than in any year since 1958. Industrial
wholesale prices have risen by 1.3 percent in twelve months
after six years of comparative flatness. Consumer prices are
1. 7 percent above a year ago, as compared with yearly increases
averaging about 1.3 percent since 1958.
- 10 The situation calls for confidence in our private sect~
capacity to match available supplies of men, materials, and
productive margins with increasing demand, so that excessive
pressures of demand on supply do not give rise t~ inflation.
And it calls for action to do so. At the same t~me, we must
recognize, both in the public and the private sector, that
the margin for error is much smaller and the need for responsib~
restraint -- particularly restraint on wage and price increases
is much greater; certainly until the conflict in Vietnam
moves from the battlefield to the negotiating table and we no
longer face its unpredictable consequences.
Some of the elements of responsible restraint in the
period ahead for both Government and private industry seem
clearly discernible:
Fiscal dividends from our economic growth in the form of
tax cuts are, at least for the present, a casualty of the
increasing requirements for the defense of freedom in Vietnam.
These requirements have first claim on our anticipated revenue
growth.
Responsible restraint in the period ahead also calls fora
Fiscal 1967 budget that vJill enable us to meet both our domestic
objectives and our international commitments without fostering
inflationary pressures. It calls for the kind of budget that
President Johnson has given us in the past and is going to giww
next year -- a budget that reflects both the most stringent kWI
fiscal discipline and the most effective response to essent~l
national needs.
A policy of responsible restraint also requires an all-oot
effort by Federal and local government and private business
to intensify the attack on structural unemployment and the
upgrading of manpower resources by accelerating job training and
retraining and improving the organization of the labor market.
Despite gratifying improvement, overall unemployment is still
significantly above the levels that represent a realistic
noninflationary target for our economy. Moreover, there are
some categories -- particularly nonwhit~and teenagers -where rates of unemployment are clearly excessive by any
standard.
- 11 Responsible restraint also calls for joint action by
government and business to utilize and absorb in an order~
manner that will not disrupt normal markets the surpluses of
materials in government stockpiles which are determined to be DO
longer needed for mobilization requirements, particularly when
shortages or intense pressures of demand on supply may be
reasonably anticipated.
The need for responsible restraint in making private
price and wage decisions consistent with the wage-price guidepost
of the Council of Economic Advisers is particularly acute againS!
the background of smaller margins of unutilized labor and
production capacity and the special responsibility the situation
in Vie tnam places on every American. I t is not in the private
interest and it is contrary to the national interest to ga~~
with the future for the sake of immediate -- and, very possibly,
~mporary
gain.
There is one other area which requires comment
money, credit, and interest rates. There are those who
have advocated without any detailed knowledge of
the budget for Fiscal 1966 and the new budget for Fiscal
1967, a sharp change in monetary policy to restrict further
the expans ion in money and cred it. I t seems to me tha t monetary
policy so far has played a vital and constructive role in t~
coordinated mix of fiscal and monetary policy that has broog~
us to our present posture of economic strength. Credit has
been ample, but not excessive, and has fueled a balanced
economic expansion. It is premature and unwise to call for
further restrictive monetary action now, in order to curtail
the expansion of money and credit and raise interest rates
more than the market has already raised them.
There may be room for honest differences of op~n~on
among well-informed and unprejudiced persons on this issue.
However, it is my strong belief that any orderly adjustment
of a properly coordinated mix of fiscal and monetary polic~s
to deal with the period ahead calls for that policy mix to be
determined only with full knowledge of the President's new
budget.
Of course, I recognize, as all realists must, that new
facts and new developments may at any time call for a
reexamination of the policy mix that has served us so well .and that there may well be circumstances when the use of
- 12 -
monetary policy to combat inflation would be wholly appropr~t
However, today's circumstances call for a policy of watchful e,
waiting until the 1967 fiscal year outlook is clarified in
mid-January with the presentation of the President's new
budge t.
It must never be forgotten that today's balanced expansi!X\
free from inflation, reflects a combination and coordinatioo I
of sound fiscal and monetary policies, intelligent business
planning, and responsible restraint by business and labor in
making wage and price decision.
Our task at home now is to prove that we can nourish
and preserve that balanced expansion, free from inflation,
in the darkening shadows of intensifying battle in Vietnam
as well as we did in the months prior to July 28.
000
.-,..L,.."y'"
.
,._i'-\'
.~-
daa. • ..tiag til. k1n4 of climate that w111 remove the need
t.r veluatary r ..tra1Dta. !hat responsibility requires that
/)
....x
aDt and
th.~financial community continue to make
a. .. ..... tB th. national iRterest.
Let
DOlle
... it t.a
of
-a-t.
U8
at.take the challenge -- it 1s large
We
1II18t
. - f l " ' t we un and will.
meet it _. and together 1 am
3(
- lB-
. . . . .terpc1ae,
,a._
da..
~.,
ba•• b... abl. to borrow ttore pxten81vely
ttl., had aatlelpated.
Ita ....zot. if
Dar.,...
autborl~i.a 8!'4
impatient with
...... ,e:~/(.~ -;:H~"'lA ~t~'''~i~ ~:t~o!~~;<.";'
)
-.......,
\
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~
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L ~i I
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'markets
- -.I I.)}: I,,:;::..., I ,j,
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pap1tal/ J.or ~.aaoderui&.~ioD /
.
'
........ 18 aCI'-atitea1ng their
-,
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TH/ff WIL( -Pi,2tj ((t:''J.ft.}(_ 7ji.i I,P" to (r',/<'
I
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af Du:opMa marketa F.-ln. the moat etfQCtiv~ way to r • .iO~
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po..;.
"1' {Je:; M
r. t\ ,. f{ {
1.
t-t
,I)
t:
r:.;
fJ;,
~ Med fo~ our pro:i;r... of voluntary reatra.int
1\
,
ear latereat Equallzation
\.,(,J
Ed
iot'
!\
I'
(C[
Ii :)
j
.""",
tAX •
... "JIIMlta into swift ad fu~e eGu111ul~lum.
'.'
'fu'l*t
resp'm~hdlitJ
c~
'1() &-
-wft•
.uItR. tbnugb
stem
of this year,
..... ,--t.........a ••• have r18. to the 7-8 percent
&.wei.....r
fuz~
w!cae•• to the Deed for greater effort.
, . tile .ltvatlea ,. ao& wltbout
......
801M
eneouraglng
. . . fer.lp lIoad 1.8U~ 1ft luI'opean capital . .rkets
IIItU , . . will ,nbably DOt b. far below the lIIpre •• ive $1
W11lea of laat ,.. .r .-
coap&I'ecl
te .. annual average of
. . . . . . 1d.l1loa 1a the 1961-63 period.
The IDAlrket for
-.....;,~
. . . . . . . . . 'a."" 11\ Genay has escaped sany of the
. . . . . . . "'tpec1 to effect iIaportaDt .true-tur.l chaDg •• in
.... .,. fbar.telal laatltuti_.
....le.n corporations have
• •1 tlaet, with til• •aftl •• of tb61r custcmary ingenuity
-
•.
tnafflcient or restricted, or both.
Beginning with the efforts
.f ., dlatlQ1Uiahed predece8aor, Douglas Dillon, our governMDt haa pereiatently
urged improvements in the structure,
capacity and efficiency of European capital markets -- thus
C
C
r...
~ aul eventually remov~
the deep divergence between
_rlteta here and abroad.
Wile we have always realized that these desired improvements
could DOt b. accomplished overnight, it has become clear
that at the pre.ent pace the necessary development and
srowtb of capital markets abroad will take longer than we
expected.
The persistence of high interest rates in the
f ..e of ecoftDale slack in eome countries -- even when the
pollcy ia one of monetary ease -- is in iflaelf proof of the
~"~t8
that still remain.
The conditions which
- :J -
f~",
c_' O·AI: Ilt./SIAI)C'£
~~/~
,.,~
~
teeei.. 8Uba141arl••• C_ral Motors,'
ror ij.stanc.~
ha$
..... . .tive ill exteDClilq it. etock option aud honu. plau to
...1-.r". ta .~ eouaeri•• witb
~~t•
..am ••
.'.,,,,~"
excellent re.ulta.
tha•• are quite li~lJ to carry
~
__tlU foe .11 _Mened -- 11K tb. i.at of whicb 1e the
~~
.....fU . . . . . . . . Hlaaee
of paywaeat8p.911tJ.Of
..
_.
.- #r
~
R(..~
Ia tile .aacille, wb.11e . . are/; uld.ug the.. efforts to
. . . . . . . __i p ,....a. of our eecu1!'itl•• , we look forward
.......
We _ _ fralcly acbowledge that it 1. proDably impo•• ible
fa tIN ....1. to _1ataia ...i.factory bal.ance of payments
- 1J ..... ef thi.
~rtant
piece of legislation, I hope you will
_ b fI'IIery effort to present your views.
till. effort to encourage foreign investment in our
securiti.a . .at of course extend beyond the financial coumunlty.
IBlted Itat.s corporations. for example, are seeking out ways
to .ake
th.ir ahares more accessible to foreign purchasers.
,
_ .. ___
~
... c_
~
"
"B~~i~--tb~ ba.e
of foreign ownership of American securities
'''----- '-
1a e_ta1aly a V~ .._effective way to help improve6ur balance
. f ,.,...ta position.
In acklttlon. it 41so benefits the inter-
aati...l corporation and individual
i~estgrs.
Finally, it
cen.t1tut.. a 8ignificant step in bringing about wider acceptance
--- -Ill. ~.k force. 1 headed auuested that (progress in this
t-
;~ (:7 /C.1'0 /e;t}-// 0 A./.,.J M 16- ;i,"
'" DCJ fJ"7
-lgbt be made in the adoption by corporations of i programs
iUected ....... lt~la"l. . share ownership by employees of
\.{
\
-IJCAlI
at. In....~. .
~.t ••
If tll.lr: U. S. income exceeds $21,200 •
. . . . . . edt.. c....... 8re d•• igned to modiIY those
....1a1ea. . . . . have . . . . . to c.,11cate present law or _1ch
• • _eKed _fon_t dJ.ffleultle. without producing
en,-..atilta
"'ata,••
fer the Valted ltate..
!hey ahoulcl do
••eIa c. S_.n a . r . faverable tax olimate for fore1gn
Iav...
at
t.a tile UDlt.. ltat•••
Late ill th. 1_. _
......108111 .... lem, thl. legislation
• • latn..... at the la.tnction of the _
(
'- L'
<'
i'
•• Ways and Mean.
!.)
117 'the ~ ..... ,';\ ...llable for: the bfomatlon of the geaera1
J;
~,
"
,.lie. ...
itt.. hint 18auad at the time the bill waa
.............tat•• that
~ ~.... ~.!or.
.,_.ta received by
the Coadttee will
the 1111 i . ~eported to the House in the next
....~ of ooagr....
If you have 8ft tater.at in the ultimate
. . it. l.oaae .bleb 1. effectively coanected with a trade or
{ . /A/ L) e.. k::
. .taee. la the Ualeed
,6 u..s" .A.;? e s. -.5
h~J< .t.:".J
//V \I.e S t n l .(; AI"'i)
!be
18w.
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~111
I $
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d
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S.
V8Uld .ak. .everal other modifications 10 present
•••
ple:
.- It would elt.feat. application of the capital gains
tax to foreign i.Ddlvlduals who are not diing business
la thl. country aad are
~lag
DOt
here for 183 days or more
the year;
i~
-- 8cI it ellalaatea the r..-ulrement that foreign
tndlviduala not engaged in trade or business here pay
i
;
,. /
ment, is taxed at corporate rates.
A similar rule applies to
fore~n Individuals doing business here.
matt~r,
I~ c?nsidering the
it did not seem proper to us to tax income which is un-
rela~ to
the conduct of a trade or business carried on in the
,r
/-/
United states as part of the proFits of that business.
:
l1oreover J
c
','
the present rule often required a foreign corporation to establish
I
'\l-.,
.'
a subsidiary here to isolate i ts i~vestment income from its busi.,..,.1
t.. ~
,,..,,...
ness income.
S
; .""e.J 1\... j "tiI,;,",I, r ,:.:.
..,J
.,,-
i
~1'~.".... , AIl.~
t()
("e-;"';;;' ( If)';' d' Ai
'''>
~
~p'ieqni'ptl~.. theJ?jlJ,,~<MCB'~
a foreign corpo-
j;:;.'~t~~ci0 at'~egular rates ~niy on its
\
~
effectively connected with a trade or business:in
ration or indivi1ual
income
Hhich is
the
United States.
Wo
(.j
--~
'-b
,,~""'~
several other modifications in present law.
/A.) () u L.{;;/ eJ ,/H' :._(.-1' 4.,~t
~~m:m
application of the capital gains tax
Fbr
to foreign individuals who are not doing business in this country
)
r'
Tl- -
are no:t...he.--e..fo~~·~dJ' ~ ~r more durine t~~_,y~.ar~_.:~,Ie. btil."
J
r
w ~ tI (1)
A/l ~ /:) J f:.
'I
.,;,
__...me&fi8S the application of the personal holding company
..,
~ax and ~i~
. ;r.,
as applied to nonre~id~nt alien indj r::.duals..)
~~ l:e~,6J:i!t~~ eliminates
1\
\
1
the requirement that foreign
individuals not engaged in trade or business here
pa~r
graduated rates if their U. S. income exceeds $21,200.
)
...../
tax at
'Plnls,
\\
+)f~
~ as ftIIINII~ _
•.
.i
'-'"
.f
(I'
v"/ . /).. I L ,tha ~ ~ datarraata
j,,I'
i
to
.-'ID l.....
mt la....
~iilCiilpffliMtcll..... IIIIhodUd 1ft thla legJ.alat1oll
at._.
..~
~_
taa&t. . f 1_ ••• received
by a foreiga corporat1cm
\
i"
........... l_.·~f • foJ:elp corporatloaj.At"-..,
•• ill tracle
,.
J."
J:~
-:~-,
.!-'~
.t~-
_
_ ........ " - . all . f -4-t.
~. bu~ __••
ad lav ..tIlftt.
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).
Ie ta•• at .......t. eat•• ~\, A
.~i..r
.\t~
nl. appl1•• to forelp
!
l' . . DOt • • • pnp_to
WI
to tax 1..... _loll 1. uuelate•
. . . . . . . .c of dae pEent• •f that . . .taea........... til•
...... _1• •f t . r . . . . . . a fore1p. corporation to •• tabli_
2..:~
-11Yes Ut.
ala , . , .... lestelat.len. art.tag ,fl'Ola the
W"'. • ...t.oaa of tile Yaak Foree d.acr1bed earlier.
....... .. • 11111_c. t ...... tax
J:. .t ..1eti0a8 wIl1ch
u. s. au.
1•
have aerY"
.. t .....
t.elp l a....~ 11l tile
I8ettiIII
ill .... "'I.d IUt•• by _Id... the ux u.ataeat . f
....... a . . . . t.t . . . .-111
.......lac
Til {,j S
I
/ ;-
at the . . . tiae.
to tbe t~..t _ t . .
to
ty (,/ (. J)
/.;.;:'
'c ;/1
i
./
,~~.
>,..1"\
~.
)
................ t , .....iv..
fu.. .... ..,....
'."'K-" •
.. iII •• I••
-
& •• 480 at 610 duriD.I the l ••t five year ••
..,i... 1e •
...1.....
~
_II...........
a._
S
'lb• .....,. of foreip.
.....u.aa rapidl,.
lew offle•• are
a.a,........1tl.. b.,.era.
11M Min th.nat of til. ...___t
...c. _
1/
t.
Many
of
efforts to help
in wIalcb fo..e1gll 1avdtor8 ,,111 want to
1., at: tb. . . . .t. !be lor.lp Investor.
'2-J
ttlo U:.titcd
It
£t~tcs
::".i.:~::c.::~eG
is testimony to your efforts and skill.
clcurly that ycu will still have' a vital role
.;./
, !"A
::;0 plc.y b
~
;:O/?
a
\'~orlcl
in 't\'hich a sr.mller portion of long-term
.t:HiIf A-& 12(.; J9..,ZJ I,
.....
~'''''L~~'
Cw):tul{iS r~iscd
~
in this country -- in
are playing
vital role in c=coting such a world.
the
~1
'::~c
p~ograQ
to promote increased purchase of existing
ef£q;t;s . of the fir..aneial
?;;;--;';;;-'/e4
R /JAiO
_.f
7lfIS
ye,/t;l'<
~,& rrlCSe~
~ /2
$
fac~you
-/"o«'e/:i~('4S
corznun1tyto~11cit
7N42CVo.;/
foreign
S'Y./;IU"""'O!:-~
!!It:'
A/"lIi/e
6~~' AI A./~·7 ,( "(I·"'·\'.I./H7(~t'~<S
I../'t,s- - /Lv e ,.(/ A~ T.t r< At.. (t-.<!< .. ".jAI<:c;"
,
W;V ft./' 12 Af. .,f I () AI S 6 ,-::.' 7 rl c f./AJI ,,,.. L>
~ ;(1 (i, jjeJ,II./ JJ'
....-.
/S..!
.
4f) I(!j":'~'~.~'_~"_'-".'-'.'-"J"-'~'" ·.....·.• JM'· .•• •
,...••• ".
, .....
J
•
- t:9' -
aliaiDated.
We can only urge all of you, as you form your
dealer groups and as you allot the offerings in question, to
make every effort to see that the funds you raise come in fact
a. well a8 in appearance from outside the United States.
While recognizing the problems involved -- and there are
many -- 1 cannot help but believe the process in which you are
engaged is the early foreDUnner of an international capital
market comparable in scope and efficiency to our wwn but
characterized specifically by intemational ~derwtiting groups ,,-,,\
loffering the securities of international/corporations to the
'"
-
---~..--""
--_.
lave.tors of the leading i\ldustrial nations of the world.
The fact that U. S. firm. have already been chosen to head up
underwriting groups .elling aecurities exel.siveiy outside
now
ap?~oachin3
$200 million.
I understand there are others
CO CO"1C.
The flotation of these issues requires sacrifice on the
of corporations, who could raise the money more inexpensively
P~4t
here~
and risk on the part of underariters, who must deal with
the; '-.:: probleras of forming international syadclcates and selling
in Q.Urkcts
that
Vlll.:1
in character, size, and receptivity.
Not every deal will be sucoessful.
r~iva
~ll
Furthermore, we are
as to believe that in the case of the
success!~l
~
so
ones,
of the proceeds will come from outside the United States •
.r::
C/""
:,'
,','~
"/
I
() ./":'
Tee eQ~em of Upass-throughs," the related problem o-U
"
fa.
rOl'Ce:
Hapoft. .
tbeir COIltrlbutlon to it was considerable; and the
of the lnv••taent banking eoraun1ty as a whole to the
reca ,.atioDa baa been IIOlt heartenlng.
I k80W of
DO
.adtetl abroad co~~atlo..
to
force _zoe poteat ill developing capital
a1ld at the ....
.,,3.d abroad with
t~.-nalttlng U.
min~
s.
negative Lmpact
... our pa)'llel'd:8 poaitlO1l -- tlum the pre.ent efforts of you
,atl_ _ 1D undenrltlag aad placing abroad
DeW
offerings by
U.I. eorporatlO1l8 and their for-elga subsidiaries.
eorpont1ou for
'lb. list of
"'081 you have recently perfoftled this role 18
11Ipr•••lve _. 1aeludiag auch name. a. DuPont. Monsanto. Standard
011 of IDdlaM. Alaerican Cyaaaadd. and U.S. J.ubber.
The dollar
t8tal 1s illpr•••lv. _. witll i.sues s:btce June alone [~"f
,/
- l-b -
United States.
And this is where the investment banking
industry bas an
~ortant
L
role to play.
T#e. .:spl'Cll.JG- oj:: I 'l~
ZAJ
2.!~;c:u .know',
11
e. r'Ar.S.
It) U
/Is
President Kennedy, . in ,October 1963,
ff?e E..$/J:1EM n" '-. iNS k' ./
A-
'6
0 k
r': k".
,J/
k, ~ 6~
appOin~~
4lV H I C, H
aak rorce, UDder my leadership, to ex~ine the prob~~S ~1J
,o/4.IV1 (.,.e6-E 1:1 rO '-~~./ ;VJr}..f)L;; ~"'................~_.
~--- IIIIi!.k .~;it,. ,.;:., ... ;E'..
,
....... ,
__..
,-- Promot ing I,ncreased Foreign.
...
..
. .. '
Inve.t~ent
in 1hlited States Corporate
S!CI[ities andi?roViding Increased Foreign Financin& for United
..
~"""""'JI' tn·
. .JlllbL&
.
States Corporations Operating Abroad ....~ In December 1963
.
~'Pr;.laent Jebneon
-------------------------~
reaffirmed President Kenn-.'- -~==O;~
_,.=
the Task Foree. which proC'.;,A_T&n
ita
~~0
_.---=---i~~:-<
.,
of 1964.
activities and completed
The report of the Task Force
.!
~~!f..~.~.
action by government t by -~"-:.
,.......... ~8try. and by the U.S. financial community~
I
f
,:;
",",-,-
A number of distinguished investment bankers aerved on
~/~!
(c\!
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4
)nlted States begins
j/
I
/?
{,/
(
talents to the challenge of
st~ulating
domestic travel, I
~, let us
tour1 .. -- take place, as I have suggested they may. the need
for our voluntary restraints may subside.
to
But we cannot look
the current account alone for our answer.
We have, after
all, been blessed with a current account surplus
fOXh
many
years, and a larger-one does not itself assure an end to our
payments problems.
We must also search for ways to stimulate
• freer ewo-way flow of capital -- !2 as will as £Dam the
.. R'<if
"if
1960 to 1964 our tourist deficit
, - - iAA,vv,- 1> 1.3 ~-:,. ,II5- SJ~ r
~--:,,~,
increa.ed~y
...
I
-.
&eMI! • •&'-
~\
<,'
.111101l! waaht1'l3 out hard-earn~d gains in other areas. _ This
~tr
v'v-r'li 1.,'Y ') {; ~~~
f4h
y ..r the deficit will b. atill
tide
highe~
We must see that tn.
~t;~~!:.;;i.:~,:
.
.
~~P~t
a.-J.
i()~_,. ~CI~Jl</1
~~/~" Il~l
/.~~j;
e:;J'
W. ,,,,';.
K
/' <_.
_
'7' ".=-.....
L!!..~t ~rft~iy~. ~l'ea~l~'i;/ ;ifO~Vfo/;e1l. . c;;..~ pr~ti,5L~
tnvel in the United States .- more imasinatively.
,
\i
We must
tben we IllUst .;;.~ the product itself a"ailable on more
"";,.
"-",
attractive term.
thr~~,
I
the va. of promotional fares anJ
!
~~
'"
/
/
/
f
packaged tours -- davYes of 16'ns~,~tanding effectiven,.s in
A. .tandards of living impeDve overseas, a8 more people
abroad aecu.ulate more money to spend on travel, as the
.
- 14 you ia the iftveabDent bU8iness are
at • breathtaking rate.
80
well aware --
When we exaudne our exports,
we -at conaider not only the outlook (unfavorable,
1. 80ae ia.taace8 ) for undifferentiated industrial
.orecco.plex and more sophisticated specialty products -our co.putera. our jet a ireraft • our electronic
l . .trumeata. to name just a faw.
Let us also look
to agriculture ... where research and capital invest..at are producing remarkable results that cannot
hel, but banefit our performance in world markets
oyer tbe loag ruD.
,
, 11'& tour! •• the tide has been running against us.
From
- 13 -
t
r'--<l
~ K-&-W.-~ lZ,. l-v-r LJv'-~-"t--. .... ~i=
'wi....
.eed . . . __a, of ~tor.:
r·
f . yt.'/}
~
.
"'"
to II • .,
aa4 wag •• UDder better
--'.
~-....LI ~\. t:c..... ~~\.-LLl-t.5 ~1r,,~. ~"-"'''-f~.,
~~ .~--I.... ~ '~'"V\~J ~ ~~'--'Q
••
'I.l...
tA~
""tA-
sa aJAr . for.lpe""'Pe~iCiOa".
.
~.~.~ ~'-' ~r'--:::()<-'U\Aj~v=1i~ •
• - au wUl1ape••
to
1rIY••t agree.ively alld imaginatively
. . . . . . . . . .1 bilJ:.iqrl
Oft
plant ,~8quip.ent abroad,
-- IIR furcher 1f111iqae.8 to inv.st. em a truly ma •• tve
_le,
'8 r ....reb
.ad development.
......edetltecl ... \IIIlque.
This effort is
It create.
Dew products --
.a
~ifj?'
;~
'.
v
_ 12 -
I
d-"
To _
that que.tion 1& to begin to answer the more
~'
i .' basic qu••tl_ of where the 10M-range solution _
~
our
J
"\" j
~ pa~ta problaa taul, U •••
{
~
d]
1J
,. fl
~"
~.
1b.r. la. of cour.e. no !!! solution.
Instead. we wst
look to • vari.ty of answers -- none dramatic. none quickly
or 84s11y aclaiwed.
Y- 1.11 the investment b....ing industry
have an baportant role to play in providing some of these
~('
ttnu.d aood progress over the long run.
Tnat confijence is
b
lcet those costs
-- ~ for the cost of not meeting t!:em is isolation
Id inevitable failure.
2. Clearly, few paths to enduring progress in our balance of payments
e more promising than continued improvement in our trade surplus ...
l*H
i
~i) We have, as I have sa5d, spared no effort ever the past five years J"'?:::,
~ ""u(.E
Il'tE iUl
DUO '-ltI
.04
4.1
.... \ -uA
~
h L H M(...(-,", I;;'" 1)
r 11 Me", i S () t-
c...'"
fc.
Y
l
military and
road.
'!!IS
IlJS
XL> aid expenditures
T:@w::;!::~!:lJ:::h;ite:iqll1:~:"15:i=~i2 €~y
not 0nly sustain it, but
at effort has brought excellent results -- and we i'\rill CoJiU at • 3 Jt i Iti
'!
;..ensify it wherever ~_~an.)
t;, as"T have also said, we cannot ft~"ii-*Htt"'~~it"11'itt!tS--l:' in the foreseeable future
whose potential for savings we have • 7
pect large savings in this area --
'@
ulllll
~
1
' • • 111::'
thoroughly explored
Dr 5
ii D IS _ II
d anc1 in f'uch large measure exhausted.
-
At the sal'!le time' while we can and must "*tal*,**,!-~Httt~ reduce in every
3sible way
road -- the
** the
dollar drain through
over~ll
~~
military and aid expenditures
dollar costs of those programs must be
~easured
by
:.: value of the national purposes they serve. 1*lre busi~;; ::111101 '*1J l'ths
And when those
rposes are well served, when the welfare of the nation js advanced -- then..,.
are all well served, then the welfare of us all is advanced -- including the
our
3iness community. And one of t-htt greatest benefits from our foreign
~!tl?&aH-:*,
)grams -- benefits in which the business and financial community most abund;mtly
ire -- is the maintenance abroad of areas of free enterprise. Ours is an
:.erdependent world -
and inte!r!ndence has its costs-. We must be prepared to
- 11 -
the near future, _y , • • • • •avlngs in government accounts
of any large _gnltud•••
We DIet. 1D abort t continue to rely upon the voluntary
P1:08r_ for the lDOat of the improvements we need -- for it is
t> I./T;: Lo!.JJ S.J
p~~;I <.. " (..I} ,,',
'-I
r Ii (J.) t;~. .) I;~
(.) (J.. /';;
lr,j: j
." I
¢'.\ .J (
<j
ill the realm of private capital QIow-:!J where eIle need for
~
Igg •• iate
restraint and the opportunities for immediate sabings
are greatest.
We muat
F
tntain these voluntary programs in full force
\JIltil we can maintain payments equilibrium without them.
7f/ /) i
.
..])4'/ - -
T~E
We all' look forward to the day when ~u.!) voluntary
t
<: A-AJ"
resb;a1nt pregrau )iil} he lifted.
~) ILL
e,ertt8
, ....,l4..
)..//hl c
1\
What kind of • day Wll1~
TD
H It
P":" [ 1\.1
-8 C i ()ILl.~
...........
that ba? What
wl11 -he\!a.,..t.o..-taka .. place to aJ..h.lr..,.pa;.8~
.
.IT '" .'"" ~l '. '7
~
-'ii~
-vhul N ~ •
.
au.£fieient:ly to p8l'llltt! tAbkS..'" of relaxati~
:~ •
L5iiIL
- 10 ....
iorci;;n policy.
cut
of
ZC2~ ~700
millien in
if, ?-~c
IJ (
ircx$'l .:rem-oJ ~~ .. t~ billion in 1901 to ~li~ billion l.!wt ycs.r -/,
,r t .1 '., ~
and would
huve{.:~t
it ito
-.........."
e££o:;:t to trim its doll.2r cutlsys cbl'o.ad to the bone.
to the bene -- .and
?'Y~
1 ., "
•• ~".A,,.;
in
;--
c...
- 9 -
~roed
a. • re8dlt of Viet ....
. .at y_r, therefora, );. muat) aeek out .aDd secure every
1,.".".-.---,<
,.••1hl. ialpftweaeat -- large or _11 -- in every sector of
rc.
.f~
ica part tile gcwenaeat will contim.1e ita auce••• ful
eo reduce the balcace of payments
~t
of all its
.. 8 ..
~_.III,
..
tbel'et... totally ..-itted to the cour. .
_ ..... __ -- -....... w. are flraly eonvlaced that it
_
1'" to ........
. . .W
1f we continue to follow it
Fee •••IP tiM __ • we Mye heeD et'I8A8ed 18 a crJ.cical
We .Ul ......... the c • .,lee..
. .lt.
~
of
~at
revi_ lac_
"f,. H~;~:~:/clNl;!d:~ea.J~~1~~1 ~~i. (~.t~:- ~~- we
~~-:-_I / )
~-tidid~;~~ '!:<.g';•• i~~. ~ E_~iJ
. -
.
(
j
'f
'
j;y,.- ',~ l:.-,·;'>'//:;
-.k._.... <_"-.,-.-
'.
__ S - to .,.
."'
,"
_
.
"
.",--,~.
__ . '
('
f
ta.t1t.utieDa to r ••teaia
~~fJt
'--
'C>~'
:.
, ..
...?'"
.Jt~J..
'"
I'r'if'!Yti
.
I
I
'
fo.
a~
';l7-/'
• "
thei~~aPit.l
·~~~f~
.~)
1/.
I--I"'
: .. _'~il')~.,.
.X.,.laatay @fort~·· ....,.....-•••••
/'
~
r'
'-_•. _f>'!i.~r:..
1'"
"
'."
outflows.
_ _ II1abIke tile .agaltude of tbe taR Mead --
- 7 ...
_rpltt. of $247 111111_ ill tile aecond quart.x aDd .. deficit
. f pOl ia tbe fU8t . .rt.~.
Tbroup the flr.t aiDe I'AOllths
.f tile , __ • tllerefore. CNr deficit raa at .aan"al rate
4alielc
~
all of 1'64 aad the $2.7 billion for 811 of 19i3 •
. . , tell . . 'botll that •• are ...lDg til the right direct10a
_ ......._
..ud haYe Ita rough
••• -..11 .s ita
~
... 6 ...
lad....
... ..c
at
~
DAt10D d...ada it-- for there L.a before the
ter"d.... the CGftt.iaued eoepuative effort. ot bua1ness
1.1 l~
dei1cit of $485
dle taak. . .fon ua on the
.111~ ........11,
~.tie
front.
adjuated.-- iollowiag a
• sfu~
••• n I
tIM _ _ io •• well.. social aad political
r. ...
tile bu....... ad fi.......e1al . . . . . .ty he.
COOl.
I . . . . . .__ of tRia partaertb1p oft_ i . reaeat weeka
... . . . . . .
1 baY. . . .
eo -
b . . . . . . . . . .tl_ . . . . lC.
aDd do . . . . --
becaus. 1
,A/ 0
r
)
5
[E
r rJ
~
/5£
~ ... I
;e ~~ C.O(j-M ,. Z
A
I'
E-ua ••• aFft.. "" To
- 4 •
A..,., .... T11
~,,....
~I
l/
~:"I-' / e;f./;--
~ .....7(.
paper arre._eat t
? ,q. '- P A cd ( ~-:'
It 18 .. Mv11t1.
!',•.
1'01' it 1a --
/ AJ...s /.);1 .I.;"":: 1/',.1''1 £.5
C· J:>
, . .an cba~ a
1:f .....__.:(.
M
.81'_,.
fonal
? IJ () Ie E.. '/) IIJ 1<,44'-' it,
c::
c.o
-
,11,
.~~
/7-..(/-i:;>
or a .arl'1~.~!
gr_~ilf.ct of
/1
lila ad
it _lllte 1teMu. . . .It tile . . .t fl•• year. both govenaeat
/f-Al.Z>
I A.I t~~~ C 1'/1';)/1 ~ CC
........... Iuw. _ _ to reeogabe . . . vuy cneial", feeta
......e -~ •• ~1
;-(ia 11ft. OlIO.
..
the prJ..ary role that
......,.-
......... Ud.t1AlCive. ad i_eDt!•• aDd lAg_ity
~p~
- iI!) ..
~
,,..t
,lay if
R£~~~
t:'eallce ouree0M8to pet.tt.al ad !!.COIIpll*' our
~ .~
. . . . .1 _Ie.
1aevlaal. feat of ___le life •
. . . tM . . .t flve y..ra, we have
, ......... tllaC
1M . .
tbat
Wtl Call
1MI'll fna ,.at . .c ....
c/
~
8bOWtl
__ .,. d"'l~~~1 ~I' . . . . .ic ace..... o.er ta.
- 2. . . . . 1. daU ..tid. ._ DIOre justified thaD on tile
.............~ .- fa&"
CIa. '1itl. . ad _
w.
110ft --
by tbe 1. . . . . ". baY.
-- net a patten. of atnmg .ad stable
bay. 8Uceeeded 1Jl that.
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1"4Ii$Ol,!G
TREASURY DEPARTMENT
Washington
FOR RELEASE P.M. NEWSPAPERS
TUESDAY, NOVEMBER 30, 1965
REMARKS BY THE HONORABLE HENRY H. FOWLER
SECRETARY OF THE TREASURY
BEFORE THE INVESTMENT BANKERS ASSOCIATION
AT THE HOLLYWOOD BEACH HOTEL, HOLLYWOOD, FLORIDA
TUESDAY, NOVEMBER 30, 1965, 11:00 A.M., EST
In a few weeks a new year will begin -- and thus we will
enter a new time of trial and testing, of opportunity and
promise.
And we will enter it with confidence. For we know that,
whatever challenges the next year -- indeed, the next five
years -- may hold, we have the resources and the resolve to
meet them.
Nowhere is this confiden"ce more justified than on the
economic front -- justified not only by the enormous gains
we have made but -- far more -- by the lessons we have
learned over 57 months of unprecedented peacetime expansion.
Five years ago, in the early moments of this decade,
things were different. We looked back upon the decade of
the Fifties and saw -- not a pattern of strong and stable
economic progress -- but a succession of slow and sluggish
beginnings coming more and more frequently to untimely ends.
We looked ahead and we saw a long and difficult struggle
first to regain our economic footing -- and then to sustain it.
We have succeeded in that struggle -- succeeded thus far
in breaking a pattern of frequent recession and faltering
recovery which many had come to accept as an unavoidable,
inevitable fact of economic life.
Over the past five years, we have shown that we can
learn from past mistakes. Our task over the next five years
is to shaw that we can learn from past success.
F-287
- 2 You are familiar with the policies that have emerged over
the past five years -- policies that have required both
business and government to revise old assumptions and to
put aside old prejudices.
For our economic successes over the past five years have
but one essential source -- the working partnership that has
emerged between our business and financial community and our
national government.
That partnership is not simply a convenient fiction to
be recognized in speeches and ignored in reality. It is a
palpable fact of life and it exists because over the past
five years both government and business have come to recognize
some very crucial and inescapable facts of economic life.
Government, for its part, has come to recognize and to
respect -- m deed as in word -- the primary role that
private initiative and incentive and ingenuity must play if
we hope to realize our economic potential and reach our
national goals.
Business, for its part, has come to recognize and to
respect the responsibilities of government in furthering
the economic as well as social and political welfare of the
nation.
Government has come to a greater understanding that
the national interest requires a healthy and vigorous private
economy. And the business and financial community has come
to a greater understanding that its own interests are
inseparably a part of the broader national interest -- that
its growing role in our economic life requires also a
growing sense of responsibility for our national welfare.
I have spoken of this partnership often in recent weeks
and months. I have done so -- and do so now -- because I
believe in it, because President Johnson believes in it, and
because the nation needs it.
Indeed, the nation demands it -- for there is before the
nation no major economic or social task whose accomplishment
does not require the continued cooperative efforts of business
and government. In recent weeks and months I have discussed
at some length the tasks before us on the domestic front. I
want to talk today about our most urgent task in the
international economic sphere -- to reach and to maintain
equilibrium in our balance of payments.
287
- 3 -
We have -- since President Johnson announced his balance
of payments program in early February -- made some solid
progress toward the equilibrium we seek.
Recently, as you know, we announced a third quarter
deficit of $485 million, seasonally adjusted -- following a
surplus of $247 million in the second quarter and a deficit
of $701 in the first quarter. Through the first nine months
of the year, therefore, our deficit ran at an annual rate of
$1.25 billion -- a marked improvement over the $2.8 billion
deficit for all of 1964 and the $2.7 billion for all of 1963.
These results give cause for neither elation nor alarm.
They tell us both that we are moving in the right direction
and that we have far yet to go before we reach our goal.
They tell us what we knew from the very outset: that the road
we have chosen would have its rough spots as well as its
smooth stretches, and that we must seek the true measure of
our progress, not in sudden speedups or slowdowns, but over
the long-haul.
We remain, therefore, totally committed to the course
we have chosen -- because we are firmly convinced that it
can and will lead to success, if we continue to follow it
with redoubled effort and resolution in the year ahead.
For some time now, we have been engaged in a critical
and intensive review of our entire balance of payments
program. We will announce the complete results of that
review later this year.
But as we said earlier this month -- when we announced
the third quarter results -- the heart of our efforts toward
early equilibrium must continue to be the programs of voluntary
restraints upon private capital outflows.
Let no one mistake the magnitude of the task ahead -a magnitude whose measure we must seek not only in the size
of this year's deficit but in the prospect of growing outlays
abroad as a result of Viet Nam.
Next year, therefore, it is imperative that we seek out
and secure every possible improvement -- large or small -in every sector of our balance of payments.
287
- 4 For its part, the government will continue its successful
efforts to reduce the balance of payments impact of all its
expenditures abroad -- including those for defense and
development, which are so essential to the conduct of our
foreign policy.
Those efforts have cut our dollar outflow as a result
of foreign aid from $1.1 billion in 1961 to an annual rate
of some $700 million in the first half of this year.
Those efforts have cut our dollar outflow for defense
from $2.6 billion in 1961 to $1.8 billion last year -- and
would have cut it even further this year were it not for
essential expenditure increases as a result of Viet Nam.
The government, for its part, will continue to spare no
effort to trim its dollar outlays abroad to the bone. We must
recognize, however, that those outlays are already very close
to the bone -- and we cannot therefore expect, at least in
the near future, any savings in government accounts of any
large magnitudes.
We must, in short, continue to rely upon the voluntary
programs for the most of the improvements we need -- for it
is in the realm of private capital outflows, particularly
those of our businesses, where the need for immediate restraint
and the opportunities for immediate savings are greatest.
We must maintain these voluntary programs in full force
until we can maintain payments equilibrium without them.
We all look forward to that day -- the day when the voluntary
programs can be lifted. What kind of a day will that be?
What will have to happen before it dawns?
To answer that question is to begin to answer the more
basic question of where the long-range solution to our
payments problem truly lies.
There is, of course, no ~ solution. Instead, we must
look to a variety of answers -- none dramatic, none quickly
or easily achieved. You in the investment banking industry
have an important role to play in providing some of these
answers. I will come to this in a moment. But, first, let
us review the long term outlook in some of the major accounts.
287
- 5 -
(1) We have, as I have said, spared no effort over the
past five years to reduce the impact on our balance of payments
of our military and aid expenditures abroad. That effort has
brought excellent results -- and we will not only sustain it,
but intensify it wherever we can. But, as I have also said,
we cannot in the foreseeable future expect large savings in
this area -- whose potential for savings we have so thoroughly
explored and in such large measure exhausted.
At the same time -- while we can and must reduce in every
possible way the dollar drain through military and aid
expenditures abroad -- the overall dollar costs of those
programs must be measured by the value of the national purposes
they serve. And when those purposes are well served, when the
welfare of the nation is advanced -- then we are all well served,
then the welfare of us all is advanced -- including the business
community. And one of our greatest benefits from our foreign
programs -- benefits in which the business and financial
community most abundantly share -- is the maintenance abroad
of areas of free enterprise. Ours is an interdependent
world -- and interdependence has its costs. We must be
prepared to meet those costs -- for the cost of not meeting
them is isolation and inevitable failure.
(2) Clearly, few paths to enduring progress in our balance
of payments are more promising than continued improvement in
our trade surplus. The small trade surplus in 1959 of
less than $1 billion has been followed by a balance of trade
surplus of $4.8 billion in 1960, $5.4 billion in 1961,
$4.4 billion in 1962, $5.1 billion in 1963, $6.7 billion in
1964. In this year after a discouraging first half in which
our trade surplus dropped back to an annual rate of
$4.4 billion, the third quarter saw a comeback to an annual
rate of $6.2 billion. I will not dwell on the outlook
in detail, except to express my confidence in our ability to
make continued good progress over the long run. That
confidence is based on a number of factors:
Our national record of proven ability to
keep wage increases reasonably related to product~U
gains and to maintain reasonable price stability
in sharp contrast to some of our major foreign
competitors.
287
- 6 Our willingness to invest aggressively and
imaginatively in the most modern and efficient
facilities.
Our further willingness to invest, on a truly
massive scale, in research and development.
This effort is unprecedented and unique.
It creates new products -- as you in the
investment business are so well aware -at a breathtaking rate. When we examine our
exports, we must consider not only the outlook
(unfavorable, in some instances) for undifferentiat~
industrial commodities but the outlook as well
for the newer, more complex and more sophisticated
specialty products -- our computers, our jet
aircraft, our electronic instruments, to name
just a few. Let us also look to agriculture -where research and capital investment are
producing remarkable results that cannot help
but benefit our performance in world markets
over the long run.
(3) In tourism, the tide has been running against us.
From 1960 to 1964 our tourist deficit increased by $350 million ..
from $1.3 billion to $1.6 billion -- washing out hard-earned
gains in other areas. This year the deficit will be still
higher, threatening to peak at $1,850 billion. We must see
that the tide turns. We hope and seek to turn it, not by
restrictive practices, but by a positive, creative effort to
sell our product -- travel in the United States -- more
imaginatively.
As standards of living improve overseas, as more people
abroad accumulate more money to spend on travel, as the
United States begins to apply its formidable marketing
talents to the challenge of stimulating domestic travel, I
believe we can check the adverse trend in our tourist account.
(4)Our earnings from U. S. direct investment abroad have
been one of the major sources of dollar inflows in our
balance of payments. These inflows have risen steadily
from a level of $2.4 billion in 1960 to $3.7 billion in 1964
and in 1965 they should be over $4 billion. The knowledge
287
- 7 -
that these inflows will continue to grow in the future is one
of the reasons why we can have confidence in the long-run
outlook for our balance of payments.
But there is also an outflow side to direct investment,
and in the past three years this has been rising very
rapidly. From a fairly stable level of $1.6 to $1.7 billion
during 1960 to 1962, direct investment rose to $2.0 billion
in 1963 and $2.4 billion in 1964. In the first half of 1965
it was at an annual rate of $4.1 billion.
This sharp upward trend in direct investment would not
be expected to continue indefinitely, and if left to run its
course it is probable that in time it would level off while
direct investment income should continue to rise. But for
the immediate future, the outlook is that, in the absence of
any restraint, direct investment would continue to go up
sharply, leaving us with little or no gain in our direct
investment account, and possibly a worsening.
Turning to the problem of private capital flows, if
improvements in our current account -- in trade and tourism
take place, as I have suggested they may, the need for our
voluntary restraints may subside. But we cannot look to the
current account alone for our answer. We have, after all,
been blessed with a current account surplus for many years,
and a larger one does not itself assure an end to our payments
problems. We must also search for ways to stimulate a freer
two-way flow of capital -- to as well as from the
United States. And this is where the investment banking
industry has an important role to play.
In the spring of 1964, as you know, a Presidential Task
Force, which I was privileged to lead, made 39 recommendations
for action by government, by industry, and by the u.S. financial
community, toward Promoting Increased Foreign Investment in
United States Corporate Securities and Providing Increased
Foreign Financing for United States Corporations Operating
Abroad.
A number of distinguished investment bankers served on
that Task Force; their contribution to it was considerable;
and the response of the investment banking community as a
whole to the recommendations has been most heartening.
287
- 8 I know of no force more potent in developing capital
markets abroad -- and at the same time permitting u. S.
corporations to expand abroad with minimum negative impact
on our payments position -- than the present efforts of you
gentlemen in underwriting and placing abroad new offerings
by U. S. corporations and their foreign subsidiaries. The
list of corporations for whom you have recently performed this
role is impressive -- including such names as DuPont,
Monsanto, Standard Oil of Indiana, American Cyanamid, and
U. S. Rubber. The dollar total is impressive -- with issues
since June alone now approaching $200 million. I understand
there are others to come.
The flotation of these issues requires sacrifice on the
part of corporations, who could raise the money more
inexpensively here, and risk on the part of underwriters,
who must deal with the problems of forming international
syndicates and selling in markets. that vary in character, size,
and receptivity. Not every deal will be successful.
Furthermore, we are not so naive as to believe that in the
case of the successful ones, all of the proceeds will come
from outside the United States. The possibility of
substitutions by foreign buyers of new high-yielding issues
abroad by major U.S. firms for previous holdings of loweryielding domestic U. S. issues can never be completely
eliminated. We can only urge all of you, as you form your
dealer groups and as you allot the offerings in question, to
make every effort to see that the funds you raise come in
fact as well as in appearance from outside the United States.
While recognizing the problems involved -- and there are
many -- I cannot help but believe the process in which you are
engaged is the early forerunner of an international capital
market comparable in scope and efficiency to our own but
characterized specifically by international underwriting groups
offering the securities of international corporations to the
investors of the leading industrial nations of the world.
The fact that U.S. firms have already been chosen to head up
underwriting groups selling securities exclusively outside
the United States is testimony to your efforts and skill.
It indicates clearly that you will still have a vital role
to play in a world in which a smaller portion of long-term
capital for use abroad is raised in this country -- in fact,
you are playing a vital role in creating such a world.
287
- 9 -
In the program to promote increased purchase of existing
u.s. securities by foreigners, recent results have been less
encouraging. Both last year and through September of this
year foreigners have been net liquidators of these issues -even after allowance for conversions of the United Kingdom's
portfolio.
The efforts of the financial community to solicit foreign
business have been impressive. The number of foreign
registered representatives employed by New York Stock Exchange
firms has moved up from 480 to 680 during the last five years.
The overseas installation of modern communication and
interrogation devices is proceeding rapidly. New offices are
being opened. The failure of foreign purchases, on balance,
to reflect these and other efforts can most probably be
attributed to the level of our stock market, which seems high
to income -- oriented European securities buyers. Many of
their markets, in turn, are depressed.
The main thrust of the government's efforts to help
create an environment in which foreign investors will want to
make purchases here is, at the moment, The Foreign Investors
Tax Act. This proposed legislation, arising from the
recommendations of the Task Force described earlier, is
designed to eliminate those tax restrictions which have served
to impede foreign investment in the u.S. and, at the same time,
to bring our laws on the taxation of foreigners more into
line with generally accepted international tax policy.
One of the principal changes proposed in this legislation
would reduce substantially the estate tax burden on foreigners
investing in the United States by making the tax treatment of
their assets generally equivalent to the treatment now
received by Americans. Thus, it would remove what is widely
regarded as one of the principal deterrents to foreign investment
here.
In another significant change, the new legislation
would allow a foreign corporation or individual to be taxed
at regular rates only on its income which is effectively
connected with a trade or business in the United States.
Under current law, if a foreign corporation is engaged in
trade or.
business here, all of its U. S. income , bus·1ness and
.
1nvestment, 1S taxed at regular rates.
287
- 10 The bill would make several other modifications in present
law. For example:
It would eliminate application of the capital
gains tax to foreign individuals who are not
doing business in this country and are not
here for 183 days or more during the year;
It would modify the application of the
personal holding company tax and the gif.t
tax as applied to nonresident alien individuals;
And it eliminates the requirement that foreign
individuals not engaged in trade or business
here pay tax at graduated rates if their u.s.
income exceeds $21,200.
These and other changes are designed to modify those
which have served to complicate present law or which
have created enforcement difficulties without producing
compensating advantages for the United States. They should do
much to insure a more favorable tax climate for foreign
investment in the United States.
prov~s~ons
Late in the last congressional session, this legislation
was introduced at the instruction of the House Ways and Means
Committee so that it would be available for the information
of the general public. The Committee Print issued at the
time the bill was introduced states that comments received by
the Committee will be reviewed before the Bill is reported
to the House in the next session of Congress. If you have an
interest in the ultimate shape of this important piece of
legislation, I hope you will make every effort to present your
views.
This effort to encourage foreign investment in our
securities must of course extend beyond the financial
community. United States corporations, for example, are seeking
out ways to make their shares more accessible to foreign
purchasers. The task force I headed suggested that
corporations might adopt programs directed toward stimulating
share ownership by employees of foreign subsidiaries.
General Motors, to cite one instance, has been active in
extending its stock option and bonus plans to employees in
other countries with excellent results.
287
- 11 -
7~(
In the meantime, while we are all making these efforts to
encourage foreign purchase of our securities, we look forward
to more rapid improvement in the development of capital
markets abroad.
We must frankly acknowledge that it is probably impossible
for the world to maintain satisfactory balance of payments
equilibrium with the United States market both efficient and
free of controls or disincentives and European markets either
inefficient or restricted, or both. Beginning with the
efforts of my distinguished predecessor, Douglas Dillon, our
government has persistently urged improvements in the
structure, capacity and efficiency of European capital
markets -- thus to help reduce and eventually remove the deep
divergence between markets here and abroad.
While we have always realized that these desired improvements
could not be accomplished overnight, it has become clear
that at the present pace the necessary development and growth
of capital markets abroad will take longer than we expected.
The persistence of high interest rates in the face of economic
slack in some countries -- even when the policy is one of
monetary ease -- is in itself proof of the impediments that
still remain. The conditions which prevailed in German
markets through much of this year, where long-term bond rates
have risen to the 7-8 percent levels, bear further witness to
the need for greater effort.
Yet the situation is not without some encouraging signs.
New foreign bond issues in European capital markets this
year will probably not be far below the impressive $1 billion
of last year -- compared to an annual average of under $500
million in the 1961-63 period. The market for foreign bond
issues in Germany has escaped many of the difficulties
experienced in markets for domestic securities there. The
French authorities have introduced a number of measures
designed to effect important structural changes in French
financial institutions. American corporations have found that,
with the exercise of their customary ingenuity and enterprise,
they have been able to borrow more extensively in Europe for
the financing of their overseas investment plans than they had
anticipated.
In short, if European authorities are impatient with
our progress in eliminating our payments deficit, then we
must urge them to show equal impatience with their own
287
- 12 progress in strengthening their capital markets -- for,
more than any other factor, it is the persistent inadequacy
of European markets that will prolong the need for, and
postpone the end of, our programs of voluntary restraint as
well as our Interest Equalization tax.
We must not, however, imagine -- even for a moment -that anything can relieve us of our responsibility to bring
our payments into swift and sure equilibrium. That
responsibility requires that we both improve the surplus in our
current account and reduce world dependence upon our capital
market, thus creating the kind of climate that will remove the
need for voluntary restraints. That responsibility requires
that government and the business and financial community
continue to make common cause in the national interest.
Let none of us mistake the challenge -- it is large
and it is urgent. We must meet it -- and together I am
confident we can and will.
000
287
TREft.SURY DEPARTMENT
t
=
-
P .:-1. )
!·:onday, Uovember 29? 1935.
FOR P3LEASE 6: 30
IU::SU"LTS OF TREASURY I S WEEKLY BILL OFFERING
'Ule Treasury De:partment anl'lounced today that the tenders for two series of Treasuj
bills, one seTies to be an additional issue of the bills dated September 2, 1965, ~d
t:~e other series to be dated December 2, 1965, which were offered on November 24, were!
ove~cd ~t the Federal Reserve Banks on November 29.
Tenders were invited for
~>i,200,OOO,OOO, or thereabouts, of 91-uay bills and for $1,000,000,000, or therea.bout~
of 182-day bills. The details of the two series are as follows:
RANGE OF ACCEPTED
91-day Treasury bills
182-day Treasury bills
COMPETITIVE BIDS:
maturing March 3, 1966
:
maturing June 2, 1966
Approx. Equiv •
Approx. Equiv.Price
Annual Rate
Price
Annual Rate
High
4.09110
:
97 .856 E.I
4. 241~
98.966 !I
Low
98.957 .
4.126%
:
97.848
4.257~
Average
98.960
4.115~ Y
97.852
4.249% Y
~ Excepting one tender of $158,000;
£I
Excepting one tender of $100,000
62 percent of the amount of 91-day bills bid for at the low price was accepted
23 percent of the amount of 182-day bills bid for at the low price was accepted
TC·L:.L 7SIDERS APPLIED FOR 111ID ACCEPJ:ED BY FEDERAL RESERVE DISTRICTS:
Ap:plied For
Accented
: A'PPlied For
boston
$ 26,862,000 $ 16,862,000 : ~ 21,169,000
HelT York
1,368,027,000
814,467,000:
~,368,985,000
Philadelphia
25,978,000
13,978,000:
17,117,000
Cleveland
26,067,000
26,067,000:
35,126,000
Ricboond
19,606,000
13,416,000:
15,611,000
Atlanta
43,152,000
29,646,000:
32,437,000
Chicago
162,848,000
118,558,000:
151,107,000
st. Louis
39,889,000
30,395,000:
22,244,000
Minneapolis
19,786,000
18,026,000:
10,916,000
K~~sas City
25,025,000
25,025,000:
13,337,000
t~s
26,199,000
18,819,000:
12,193,000
S~ ~Tancisco
81,079,000
75,329,000:
84,036,000
TOTALS
$1,864,518,000 $1,200,588,000 £l $1,784,278,000
$1,000,353,~
£I Includes $237,361,000 noncompetitive tenders accepted at the average price of 98,!
~ Includes $112,595,000 noncompetitive tenders accepted at the average price of 97,1
On a coupon issue o~ the same length and for the same amount invested, the returo l
these bills '\olould provide yields of' 4.22~, for the 91-d'ay bills" and 4.40~" for tb
l82-day bills. Interest rates on bills are quoted in terms of bank discount with
the return related to the face amount of the bills payable at maturity rather than
the amount invested and their length in actual number of days related to a 360-~
yeax. In contrast, yields on certificates, notes, and bonds are co~uted in terms
of interest on the amount invested, and relate the number of days remaining in ~
interest payment period to the actual number of days in the period with semi~~
compounding if more than o~e coUpon period is involved.
'
:!):Ls·G:.~ict
11
.
'''''ou..;.' .
._'. ."
Ar..o~~t
\
I Issucc.
1/
~~cee~ed 1/
I
~~ 'l'tnt~D
5,003
29,521
400
I~er-.i.es L-1935 - D-19Lw. •••••••••••
I:)c~ies F & C--19U - 1952 •••••••••
l~eries J and K - 1952 ••••••••••••
~'L\TUm:D
>3ries
I
E:
1,848
8,163
13,l43
1944 •••••••••••••••••••••• 15,313
1945 ••••••.••••..••.•••••• l 12,005
1946 ••••••••••••••••••••••
5,410
1947 •••.••••••••••••••••• •
5,107
1948 ••••••••••••••••••••••
5,268
1949 •••••••••.••••••••••••
5,191
1950 ••••••••••••••••••••••
4,533
1951 ••••••••••••••••••••••
3,925
1952 ••••••••••••••••••••••
4,112
1953 ••••••••••••••••••••••
4,685
1954•••••••••••••••••••• ~. 4,766
1955 •••••••••••••••••••••
4,958
1956 ••••••••••••••••••••••
4,754
1957 ••••••••••••••••••.•••
4,454
1958 ••••••••••••••••••••••
4,315
1959 •••••••••••••••••••••• 4,039
1960 •••••••••••••••••••• ,. ~ 4,029
1961
••••••••••••••••••••••
4,048
,~9o~
1'(,
3,896
••••••••••••••••••••••
1963 •••••••••••••••••••••• 4,322
1964 •••••••••••••••••••• ~.
4,219
1965 •••••••••••••••••••••• I 2,674
unc1assified.,••••••••••••• • • • .. •
429
0
!
.20
.21
2.00
10
80
8
1,591
'1,051
11,319
13,llJ4
10,080
4,324
3,914
3,940
3,801
3,252
2,813
2,905
3,192
3,133
3,117
2,917
2,681
2,463
1I
2,277
2,143
2,001
1,829
1 , 717
II
1,544
553
433
251
1,112
1,764
-2,169
1,926
1,081
1,193
1,328
1,390
1,281
1,112
1,206
1,492
1,633
1,841
1,836
1,773
! 1,852
i 1,762
1,887
\ 2,048
2,067
2,545
2,615
!
2,121
-3
98,254
1,811
1,130
2,941
41,353
1,8(:()
5,881
7,1U
I
I
I
I
ies H (1952 - Jan. 1957) 2/ ... I -3,-670
H (Feb. 1957 - 1965) ••••••
7,011
Total Series H••••••••••••••••• 10,682
I
rotal Series E and H••••••••••• 150,288
(1953 - 1957) •••••
3,333
'
) Total matured •••••••• 34,924
L SerieS Total unIn3.tured •••••• 153,622
Gra~d Total •••••••••• 188,546
l
;~t.I$sucd
:
otal Series E ••••••••••••••••• 1139,607
,
p
-
0'.1"
.... ...I.."..L.." .......
.... V"I,.:~-.O
-~ ....
I Cutst~ndL~~
..' 2V or
4,993
29,441
392
I
~-/
I
1941 ••••••••••••••••••••••
1942 ••••••••••••••••••••••
1943 ••••••••••••••••••••••
~ies J and K
+
A;rou.."'..,
i
y
I,
--1
,
l
I
.
Includes accruea disco~~t.
Cur~~nt redemption value.
At option of ovmer bonds may be held and
,'t-Ti11 earn interest for addi.tional periods
~ter original maturity dates.
Includes matured bonds rITUch have not bean
presented for rademption~
I
I
-
\
I
101,195
I
49,093
2,168
I
1i{,166
34,825
103,362
1)8,187
13.91
13.62
13.b2
14.16
16.04
20.09
23.36
25.21
26.78
28.26
28.33
29.33
31.85
34.26
37.13
38.62
39.81
42,,92
43.62
46.84
50.59
53.05
58 •88
63.40
79.32
99
50,259
50,358
I,
II
1
II
29.62
50.68
83.88
72.47
32.67
34.98
.28
32.72
26.71
BUREAU OF THE PUBUC DEBT
United States SavinGs i3onc3 I.ss..:::d ;:::~d. 2ec:.8-';::~GC ':'::::-ct:.:;h September
(Doll~ a.":'lounts in rnillion3 - rO'.:..":.C0C
a."1c. -•.:ill
I i~-~~~ 1./ I
--HA'I'U:~~·~D
.
r
~
m~·!!\ TURED
Series E:
J....·. :-··.0 U:;'~c,
r.
. . ·-.c ....~ e e r.:..,'
. . a.
21
I
~
149,791
I
!
I
-,
i
) ' T"'"al
Ov
All Series Total
11
~
11
~
l
Gr~"1d
"'" ,
, ••••••••
ur~~~tured ••••••
Total ••••••••••
ma~urea.
,
1
Inc_ud~s
'"
'" ~ccruea
.
discount.
3,332
34,924
153,123
188,047
I
I
Current redemption value.
At option of owner bonds may be held ~"1d
~dll earn interest for additional periods
ci"ter origi:1al maturity dates.
Incluces ~ztured bonds lihich have not been
presented for redemption.
.20
.28
2.25
10
82
9
13.97
13.66
13.46
14.23
16.l2
20.14
23.43
25.30
26.87
28.37
28.16
29.47
32.00
34.47
37.,2
38.68
39.93
43.0S
43.76
46.98
50.7953.36
59.2,
64.23
81.2S
97,895
1,7tjo
1,1l6
2,902
41,257
1,88,5
5,853
7,737
29.~
100,797
48,994
2,147
JY 1,185
35.S6
34,823
102,943
137,766
101
50,180
50,281
.29
32.77
26.74
,
Series J and K (1953 - 1957) •••••
$
258
1,1l5
1,768
2,179
1,935
1,089
1,196
1,332
1,394
1,285
1,116
1,2ll
1,498
1,641
1,861'
1,834
1,776
1,855
1,765
1,890
2,053
2,075
2,556
2,706
1,937
-67
1,507
448
442
Total Series E •••••••••••••••••
Total Series E and H•••••••••••
1_/
_
1,589
'7,045
1l,368
13,131
10,066
4,318
3,908
3,933
3,793
-3,245
2,806
2,898
3,182
3,120
3,099
2,907
2,673
2,454
2,268
2,133
1,988
1,815
1,758
1,847
8,160
13,136
,- 9lili ...................... '15,310
1945 ••••••....•.•••.•••••• 12,001
5,407
1946 ••••••••••••••••••••••
5,104
1947 •••.••••••••..••••••••
5,265
1948 ••••••••••••••••••••••
5,187
1949 ••••••••••••••••••••••
4,530
1950 ••••••••••••••••••••••
3,922
1951 ••••••••••••••••••••••
4,109
1952 ••••••••••••••••••••••
4,681
1953 ••••••••••••••••••••••
4,761
1954 ••••••••••••••••••••••
4,960
~955 ••••••••••••••••••••••
4,7U
1956 ••••••••••••••••••••••
4,448
1957 ••••••••••••••••••••••
4,309
1958 ••••••••••••••••••••••
1959 ••••••••••••••••••••••
4;033
1960 •••••••••••••••••••• , •.
4,023
1961 ••••••••••••••••••••••
4.042
., 90~2 • • • • • • • • • • • • • • • • • • • • • •
3,889
4,314
1963 ••••••••••••••••••••••
4,213
1964 •••••••••••••••••••• ~.
2,384
1965 ••••••••••••••••••••••
Unclassified.,••••••••••••••••••
375
139,152
3,670
Se~ies H (1952 - Jan. 1957) 2/ ... I
6,969
H (Feb. 1957 - 1965) ••••••
10,639
Total Series H•••••••••••••••••
,r-;;-.-:--:-:-
ArnOU-"1 t
! '" Ou ~::.; ",;::r.ColI
Cutstandir.C" 2/\ of /5.t.Issu
29,439
391
1941 •••••••••••••••.••••••
1942 ••••••••••••••••••••••
1943 ••••••••••••••••••••••
1965
:-~o-;:; r.~cess.;.ril.Y ao.a to -;:.,)~als)
$ 4,993
L-1935 - D-19L~ ••••••••••• $ 5,003
Se-ie
- F ~ G-'941 - 1952 ......... 29,521
400
Series J and K - 1952 ••••••••••••
SGF~eS
)0,
I
I
-
i
i
I.
51.36
83.99
72.72
32.71
BUREAU OF THE PUBLIC DEBT
--
@FedFRASER