The full text on this page is automatically extracted from the file linked above and may contain errors and inconsistencies.
LfBf::tARY
ROOM 5030
JUN 1 51972
TREASURY DEPARTM ENT
5,003
29,521
864
~{~TURED
4,993
29,445
833
10
75
32
120
.25
3.70
,
aries E: ~
I!
1,851
8,175
13,156
15,340
12,031
5,422
5,119
5,281
5,205
4,546
3,936
4,121
4,697
4,779
4,972
4,776
4,476
4,335
4,057
4,049
4,070
3,917
4,347
4,242
3,753
408
13.78
13.47
13.23
14.02
15,81
19.88
23.13
24.96
26.51
27.94
27.98
28.90
31.38
33.69
36.18
38021
39.48
42.54
43.21
46.36
49.98
52.31
57.81
61.15
75.19
151,881
32.44
- 1957) •••••
2,872
36873
.J--:>' mat urea
' ••••••••
) iT ov~
U Serie~l Total ur~~tured ••••••
Grand Total ••••••••••
35,388
154,753
190,141
.33
32052
26.53
194~ •••••••.•••..••..••••.
19
\'?
~
.....................•
1943 ••••••••••••••••••••••
19),1,
- ...,...... .,
.................... .
'i,C
l o,~~
••••••••••••••••••••••
I
I
t
1946 ••••••••••••••••••••••
1947 •••.••••••••..••••••••
1948 ••••••••••••••••••••••
1949 •••••••••••• ~ ••••••••• I
I
1950 ••• ~ ••••••••••••••••••
1951 •••••••••••••••••••
1952 ••••••••••••••••••••••
8 ••
1953 ••••••••••••••••••••••
Q954 ••••••••••••••••••••••
t955 •••••••••••••••••••••
Q
1956 ••••••••••••••••••••••
1957 ••••••••••••••••••••••
1958 ••••••••••••••••••••••
1959 ••••••••••••••••••••••
1960 •••••••••••••••••••• ~.
1961 ••••••••••••••••••••••
1
i
r
!
!
!
.,- 9/u~0 •••••••••••••••• ~ ••••• i'
1963 •••••••••••••••••••• ~~ I
1964 •••••••••••••••••••• ~. t
19 6~c •••••••••••••••••••••• I
I
Unclassified.
f• • • • • • • • • • • • • • • • • •
~ries J and K (195~
I'
Includes accrued discount.
Current redemution value.
At option of ~wner bonds may be held ~~Q
•. r.i.ll earn interest for additional periods
after original rna turi ty dates.
Includes matured bonds i/aich have not been
presented for redemption.
BUREAU OF 'I'HZ
?UBC~
'G:,•.'.. ·,,80 S',:,,3. :,..::.:S SaV:Lr.cs 3o:,.cis IS31.:;.eci
(Do::'!..:..r aIT.O-u.r.t.s in ;r.i::'iior!s - rO~.Gec.
a:,.d Recee::-:ti.,C ':':-.r0''':',): February 26. 1966
a:',c 'v.'"ill not nr-:r.p.;'i:ii1rily a.dd t.('\ totals)
I!
I
.
ll"'w;l.Ju...~~
'-0""'''
..'"'\....I~
W.i.V
I
'~,,"r4
..
?
r:.. OutSt~.",;,-,',
"'44\a
.l.l~sS~t;:!: :c~ci~'
' L-..L'..:::t~e~d.:::.e~8:n~le~c!....·-=l;LI-+o: : . ;u: . :t: .: s;. : -c,~a;.:.r.a: :;.:·l=-:'n=,r!;.-.:;2,,---- ' of Amt. ISs~
./L,j,l../t"..I...!.v
,-
_-:-:-,---:-_=-_ _ _ _ _ _ _ _ _ _ _ _--,-1
,':':'" ll,:t.:..j
Series
~-19)5
1
!
- D-19Gl ••••••••••••
Series? & G-19Gl - 1952 ••.••••••• :
Series J and K - 1952 - 1953 .••••• !
1,852
8,177
13,160 .
15,346 I
12,034
1,598
7,079
11,425
13,201
10,141
4,350
3,941
3,970
3,832
3,281
2,839
2,935
3,231
3,178
3,188
2,960
2,7 16
2,496
2,309
2,177
2,oh3
1,875
1,843
1,663
993
10
74
26
.20
.25
3.24
~====~========:~======~
JI
\1
~ 9~I
.................... · ..
- l'
·······················1
~)~
4,993
29,44 6
837
I
C"X.,:':::'l.;:1~j)
Seric3 2:
5,003
29,521
86G
2
I
19 L~ 3 ••.•••••••••••••••••• • •
-.1. 9'L~~I
•••••••••••••••••••••••
I!
19G5 •••••••••••• •••••••••••
19L6 •••••••••••••••••••••••
19~7 ••••••••••••••• •• •• ••••
19G8 ••••••••••••••••••••••
19~9 •••••••••••• •• •• •••••••
1950 ••••••••••••••••••••••• :
1951 •••••••••••••••••••••••
1952 •••••••••••••••••••••••
1953 •••••••••••••••• •••••••
5, l.i2 5
5,123
5,285
5,?09
4,5L9
3,939
4,127
0
4,702
4,784
4, ?78
4,781
G,484
4,341
4,063
4,055
4,077
3,923
4,354
4,249
3,910
1954 ......•••••..•••.•.•.••
1955·······················1
1956 ••••••••••••••••••••••• 1
1957 ••••••••••••••••••••••
0 \'
1958 •••.•••••••• • • • • • • • • •• •
1959 •••••••••••••••••• •• •• •
1960 ••••••••••••••••••••••• j
1961 •••••••••••••••••••••
00
1962 •••••••••••••••••••••••
1963 ••••••••••••••••••••••
1964 ••••••••.••••••••••••••
0
1965 •••••••••••••••••••••
1966 ••••••••••••••••••••••• :
0
•
13.71
13.u3
13.18
13.98
15.73
19.82
23.07
2u.88
26.u4
27.87
27 .93
28.86
31.28
33.55
35.96
38.11
39.43
42.48
43.15
46.31
49.87
52.20
57.67
60.86
7u.63
100.00
2
2
-Ill
682
571
Unclassified ••••••••••••••••••••• \
Total Series E•••••••••••••••••••
25h
1,098
1,735
2,146
1,893
1,075
1,182
1,315
1,377
1,268
1,100
1,191
1,471
1,605
1,790
1,822
1,768
1,SLh
1,753
1,878
2,033
2,Oh8
2,511
2,586
2,918
---------+----------~-------------~-------i
Series H (1952 - Jan. 1957) 3/ •••
H (Feb. 1957 - 1966) •• : ....
Total Series H•••••••••••••••••••
141,499
99,947
3,670
7,196
10,866
1,882
1,222
3,104
41,552
I
I
i
1,788
5,974
7 ,762
29.37
48.72
83.02
71.43
1
Total Series E and
H •••••••••••••
Series J and K (195G - 1957) ••••••
ITo~l
matured •••••••••
All Series ---- Total umnatured •••••••
I~,...~
ri
I~..I. u.r:'-....4
:1
Incl~ces
lota 1 0
m
accrueQ
••••••••••
-15-2-,-36-6-+--1-0-3-,-05-2--+--h-9-,3-14---l---3-2.-37
It-,
2,873
35,388
155,239
~ ___190,627
1,852
I
I
35,277
10h,904
Iho,180
i ~I
1,021
I
III
50,335
50,4h7
Qiscoun~.
~I
Currer. .:. recie;n?~ion value.
At op~ion of owner bonas ;nay be held and will earn interest for additional
perioas a:ter original maturity dates.
hi Includes matured bon0s which have not been presented for redemption.
11
BUREAU OF THE PUB1:C DEBT
35~
.3l
32.42
26.U6
Uni tM-itatos gavi~e~~nds Issued and Redeemed Through February 28 1966
(Dollar amounts in millions - rounded and will not necessarily add to totals)
.
, % Outstanding
Amount
Amount
I
. of Amt.lssued
Outstanding
2/
Redeemed 1/
Amount
Issued 1/
jRiD
~ A-1935 - D-1941 ..•.........
,'ies F & G-1941 - 1952 ••••••••••
'.ies J and K - 1952 - 1953 .•••••
5,003
29,521
864
4,993
29,446
837
1,852
8,177
13,160
15,346
12,034
5,425
5,123
5,285
5,209
4,549
3,939
4,127
4,702
4,784
4,978
4,781
4,484
4,341
4,063
4,055
4,077
3,923
4,354
4,249
3,910
2
571
1,598
7,079
11,425
13,201
10,141
4,350
3,941
3,970
3,832
3,281
2,839
2,935
3,231
3,178
3,188
2,960
2,716
2,496
2,309
2,177
2,043
1,875
1,843
1,663
993
10
74
28
.20
.25
3.24
254
1,098
1,735
2,146
1,893
1,075
1,182
1,315
.1,377
1,268
1,100
1,191
1,471
1,605
1,790
1,822
1,768
1,844
1,753
1,878
2,033
2,048
2,511
2,586
2,918
2
-111
13.71
13.43
13.18
13.98
15.73
19.82
23.07
24.88
26.44
27.87
27.93
28.86
31.28
33.55
35.96
38.11
39.43
42.48
43.15
46.31
49.87
52.20
57.67
60.86
74.63
100.00
,TURED
'ies E: 3/
19~1 •••••••••••••••••••••••
,-
1942 •••••••••••••••••••••••
1943 •..•.••..••.•••...•••••
1944 •••••••••••••••••••••••
1945 •••••••••••••••••••••••
1946 •••••••••••••••••••••••
1947 •••••••••••••••••••• • ••
1948 ••••••••••••••••••••••
1949 •••••••••••••••••••••••
1950 ••••••••••••••••••••••• ~
1951 •••••••••••••••••••••••
0
1952 •••••••••••••••••••••••
1953 •••••••••••••••••••• • ••
1954 •••••••••••••••••••••••
1955 •••••••••••••••••••• •••
1956 ••••••••••••••••••••••• ,
1957 •••••••••••••••••••• ··0
1958 •••..••••••••••••••••••
1959 •••••••••••••••••••••••
1960 •••••••••••••••••••••••
1961 •••••••••••••••••••••
1962 •••••••••••••••••••••••
1963 •••••••••••••••••••••• 0
1964 •••••••••••••••••••••••
1965 ••••.••..•.. ···.·····0.
1966 •••••••••••••••••••••••
.1assified •••••••••••••••••••••
00
I
,
I
I
I
I
I
-
682
,
I
I
-
I
,I
al Series E.•••.••••••••••••••
141,499
99,947
es H (1952 - Jan. 1957) 3/ •••
H (Feb. 1957 - 1966) •• : ••••
3,670
7,196
10,866
1,882
1,222
3,104
1,788
5,974
7,762
48.72
83.02
71.43
152,366
103,052
49,314
32.37
(1954 - 1957) ••••••
2,873
1,852
1,021
35.54
ITotal matured •••••••••
Series---Tota1 unmatured •••••••
I~rand Tota1o ••••••••••
35,388
155,239
190,627
~al
Series H•.......•••••••••••
.al Series
es J
E
and K
and
H •••••••••••••
I
i
--< -
,
I
35,277
104,904
140,180
41,552
I
~!
111
50,335
50,447
29.37
:
.31
32.42
26.46
I
I
.ncludes accrued discount.
:urrent redemption value.
t option of owner bonds may be held and will earn interest for additional
eriods after original maturity dates.
ncludes matured bonos which have not been presented for redemption.
BUREAU OF THE PUBLIC DEBT
-
~
TREASURY DEPARTMENT
(
FOR RELEASE A.M. NEWSPAPERS
WEDNESDAY, FEBRUARY 2, 1966
TREASURY DEPARTMENT ADOPTS NEW GUIDELINES FOR
APPRAISING VALUE OF IMPO~TED RUBBER FOOTWEAR
The Treasury Department today announced approval of
new' guidelines for appraising the value of imported rubbersoled footwear.
The new guidelines will have the effect of lowering the
actual duties paid on such footwear.
Customs appraising officers are being instructed to
put the new guidelines into effect immediately.
Approval of the new guidelines clears the way for the
U. S. Tariff Commission to proceed with its own investigation
of the basis of customs valuation known as the American
Selling Price method. The commission's findings are to be
transmitted later to President Johnson and to Christian A.
Herter, the President's Special Representative for trade
Negotiations.
The new guidelines shift the appraisement of imported
rubber-soled footwear from the level reflecting the highest
price of a similar domestic product to the lowest price of
a similar domestic product. The criteria already are in
effect for other imports (knit gloves, canned clams and
certain benzenoid chemicals) where the American Selling Price
method must be used for customs valuation purposes.
Rubber-soled footwear imports have a value of about
$17 million per year currently. The other imports covered
by the American Selling Price valuation method have a value
of approximately $97 million annually.
The Treasury's action came after consultation with
affected individuals and organizations, and full consideration
of all relevant data, views and arguments by interested parties.
The guidelines, in proposed form, were published in the
Federal Register of August 19, 1965. These guidelines now have
been adopted by the Treasury, and will be published soon in the
Federal Register as the final regulations.
F-36l
000
- 3 -
5
aa1e or other disposition of Treasury bills does not have any special treatment, as
such, under the Internal Revenue Code of 1954.
The bills are subject to estate,
inheritance, gift or other excise taxes, whether Federal or State, but are exempt fran
all taxation now or hereafter imposed on the principal or interest thereof by any State,
~r
or any of the possessions of the United states, or by any local taxing authority.
purposes of taxation the amount of discount at which Treasury bills are originally Bold
by the United states is considered to be interest.
Under Sections 454 (b) and 1221 (5)
of the Internal Revenue Code of 1954 the amount of discount at which billa issued here·
under are sold is not considered to accrue until such bills are sold, redeemed or other.
wise disposed of, and such bills are excluded from consideration as capital assets.
Accordingly, the owner of Treasury bills (other than life insurance companies) issued
hereunder need include in his income tax return only the difference between the price
paid tor such bills, whether on original issue or on subsequent purchase, and the
81001Jll~
actually received either upon sale or redemption at maturity during the taxable year
tor which the return is made, as ordinary gain or loss.
Treasury Department Circular No. 418 (current revision) and this notice, prescribe
the terms of the Treasury bills and govern the conditions of their issue.
the circular may be obtained from any Federal Reserve Bank or Branch.
Copies of
6
- 2 -
printed forme and forwarded in the special envelopes which will be supplied by Pede1\]
Reserve Banks or Branches on application therefor.
p~.
Banking institutions generally may submit tenders for account of customers
vided 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 companies
and from responsible and recognized dealers in investment securities.
Tenders
rna
others must be accompanied by payment of 2 percent of the face amount of Treasury bill
applied for, unless the tenders are accompanied by an express guaranty of payment by
an incorporated bank or trust company.
Immediately after the closing hour, tenders will be opened at the Federal Resel"l!
Banks and Branches, following which public anouncement will be made by the Treasury
Department of the amount and price range of accepted bids.
will be advised of the acceptance or rejection thereof.
Those submitting tenders
The Secretary of the Trea8U%
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
~
rese~·
tions, noncompetitive tenders for each issue for $200,000 or less without stated
price from anyone bidder will be accepted in full at the average price (in three
decimals) of accepted competitive bids for the respective issues.
Settlement for
accepted tenders in accordance with the bids'must be made or completed at the
Fe~ro
Reserve Bank on February 10, 1966
, in cash or other immediately avail.e.ble ~
(b)
• Cash
or in a like face amount of Treasury bills maturing February 10, 1966
(::m )
and exchange tenders will receive equal treatment. Cash adjustments will be made for
differences between the par value of maturing bills accepted in exchange and the istu
price of the new bills.
The income derived from Treasury bills, whether interest or gain from the sa~~
other disposition of the bills, does not have any exemption, as such, and
10S8
~~
7
TREASURY DEPARTMENT
Washington
FOR IMMEDIATE RELEASE,
February 2, 1966
xxxxxxxxxxxxxxxxxxxxxxxxxxaxxxxxx
(f4
TREASURY'S HEEKLY BILL OFFERING
The Treasury Department, by this public notice, invites tenders for two series
of Treasury bills to the aggregate amount of $2,300,000,000
(1 )
, or thereabouttJ, tor
cash and in exchange for Treasury bills maturing February 10, 1966
(~)
of
$2t200t935~000
(X
, in the
~~t
,as follows:
,
91 -day bills (to maturity date) to be issued FebTU!XX 10. 1966
(X) )
(15 )
in the amount of $1,300,000,000
eX )
, or thereabouts, represent-
ing an additional amount of bills dated November 12, 1965
and to mature
00
May 12 J 1966
---=""'--"';=\t-=.»~);.--..,;:----
, originally issued 1n the
amount of $ l,OOQ.027,000 , the additional and original bills
(~)
to be freely interchangeable.
182 -day bills, for $
(U)
1,000.0~0.QOO
February 10, 1966
Ea)
(~
, or thereabouts, to be dated
, and to mature
August 11, 1966
(~)
The bills of both series will be issued on a discount basis under
competiti~
and noncompetitive bidding as hereinafter provided, and at maturity their face
will be payable without interest.
~
They will·be issued 1n 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 closiDi
hour, one-thirty p.m., Eastern standard time, Monday, February 7, 1966
• 'l'e~
(11)
will not be received at the Treasury Department, Washington. Each tender must be
for an even multiple of $1,000, and in the case of competitive tenders the price
offered must be expressed on the basis of 100, with not more than three decimals,
e. g., 99.925.
Fractions may not be used.
It is urged that tenders be made
ont~
TREASURY
C~PARTMENT
February 2, 1966
FOR TIMMEDIATE 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
$2,300,000,000, or thereabouts, for cash and in exchange for
Treasury bills maturing February 10 1966 in the amount of
$2,200,935,000, as follows:
'
,
91-day bills (to maturity date) to be issued February 10, 1966,
in the amount of $ 1,300,000,000, or thereabouts., representing an
additional amount of bills dated November 12, 1965, and to
mature May 12, 1966,
originally issued in the amount of
$1,000,027,000, the additional and original bills to be freely
interchangeable.
182-day bills, for $ 1,000,000,000, or thereabouts, to be dated
February 10, 1966, and to mature August 11, 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, February 7, 1966.
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 received
without deposit from incorporated banks and trust companies and from
responsible and recognized dealers in investment securities. Tenders
from others must be accompanied by payment of 2 percent of the face
amount of Treasury bills applied for, unless the tenders are
accompanied by an express guaranty of payment by an incorporated bank
or trust company.
F-362
- 2 -
Immediatelv after the closing hour, tenders will be opened at the
rl'deral Reserve' Banks and Branches, following which public announcement will be made by the Treasury Department of the amount and price
range of accepted bids. Those submitting tenders will be advised
of the acceptance or rejection thereof. The Secretary of the Treasury
expressly reserves the right to accept or reject any or all tenders,
in whole or in part, and his action in any such respect shall be
final. Subject to these reservations, noncompetitive tenders for
each issue for $200,000 or less without stated price from anyone
bidder will be accepted in full at the average price (in three
decimals) of accepted competitive bids for the respective issues.
Settlement for accepted tenders in accordance with the bids must be
made or completed at the Federal Reserve Bank on February 10, 1966, in
cash or other immediately available funds or in a like face amount
of Treasury bills maturing February 10, 19660 Cash and exchange tenders
will receive equal treatment. Cash adjustments will be made for
differences between the par value of maturing bills accepted in
exchange and the issue price of the new bills.
The income derived from Treasury bills, whether interest or
gain from the sale or other disposition of the bills, does not have
any exemption, as such, and loss from the sale or other disposition
of Treasury bills does not have any special treatment, as such,
under the Internal Revenue Code of 1954. The bills are subject to
estate, inheritance, gift or other excise taxes, whether Federal or
State, but are exempt from all taxation now or hereafter imposed on
the principal or interest thereof by any State, or any of the
possessions of the United States, or by any local taxing authority.
For purposes of taxation the amount of discount at which Treasury
bills are originally sold by the United States is considered to be
interest. Under Sections 454 (b) and 1221 (5) of the Internal
Revenue Code of 1954 the amount of discount at which bills issued
hereunder are sold is not considered to accrue until such bills are
sold, redeemed or otherwise disposed of, and such bills are excluded
from consideration as capital assets. Accordingly, the owner of
Treasury bills (other than life insurance companies) issued hereunder
need include in his income tax return only the difference between
the price paid for such bills, whether on original issue or on
subsequent purchase, and the amount actually received either upon
sale or redemption at maturity during the taxable year for which the
return is made, as ordinary gain or loss.
Treasury Department Circular No. 418 (current revision) and this
notice prescribe the terms of the Treasury bills and govern the
conditions of their issue. Copies of the circular may be obtained froc
any Federal Reserve Bank or Branch.
000
a
'"-'
- 2S -
will call for examination of many other areas in which lawyers have
special skills and experience.
If we use our knowledge and insights
constructively in the improvement of the tax system and the
institutions which that system has fostered, then we will play oor
part in shaping the Great Society.
The problems are difficult and
complex and encrusted with history -- but this is only to say that
they are worthy of your talents.
----(;,;;
.
- 24 -
then were just beginning to flourish and economic conditions
institutions were different.
fli' J;. J. 'i 11
I
c
and
One can properly doubt that the
f! /-/;''/'
knowledge, available back in 1942 was ~OMQR~ sufficient to produce
/1
decisions that could stand as immutab~~ wise for all
~
time. ~e
Treasury and other Departments involved thus welcome a serious,
objective examination by business, labor, and others concerned, such
as the actuarial profession, of the present pattern and operation of
pension plans and of the Cabinet Report recommendations.
We are
hopeful that out of this dialogue we can fashion useful improvements
in the present system in keeping with the goals I have stated
and
the fulfillment of the function of these plans in providing
supplemental retirement security to the labor force.
~~'Er eJt"' ;"A, CJ/=
The p_mp~O¥eme1it
"
011 our
tax system which President Johnson seeks
1-..4.:
- 23 -
slowly but the need for a constructive dialogue is now recognized
by those concerned with this area.
[ ; (II}
,
•
,- ,!'~,
for
AI
r;.:'
C l!ir:If/~ c>r PP/Wtir
Basically, the goals are to Lt!cilitate an inere'ase in "the
? /,.•. ,
,'; C~-vb' l:" '·,rfj .I: Ii t
Gf- EII.'\,' ) JEJS J\,
.
)
number of employees who will receive benefits from prLvAte peMion
\ ',; ;)
planlJ to provide greater assurance·
~
': ,.J
that ~e promise~benefits
to make these plans as compatable as possible with a free lymo~.~le lab.
'wiil--~eriaii;~
and
b~
ce~tain
paid";\;8IIIlto make
that the
fun~
J\
I
be administered solely in behalf of particpating employees, and to
eliminate those special tax preferences assoc~ted ~th these plans whld
do not meet the test of efficiency or fairness.
Essentially the rules governing the development of private pensl
r,
plys, set forth as qualifications for eligibility for special tax
treatment, have not changed since 1942.
Such basic problems
as~
vesting of pension benefits, the funding of benefits, the portability
of benefits, the coverage of employees, and the integration of these
plans with
,~e
Social Security system are
~oday~erne~lbY concepu
and patterns developed a quarter of a century
agO~~ension
plans
1 'J
- 22 -
private foundation is in large part the handiwork of the tax bar,
~
..
,'-
in its use as a tool for family and business planning-'of tax.'
,...
-"------
,
provisions designed to foster general philanthrophy)
........
.-.,
Society can
properly call upon us to recognize the wider concerns involved and
to fashion our handiwork into a genuinely philanthropic
instrum~t
not tainted by the present defects and abuses.
C,.,.j
~ 1r", t:- ! .j~
"b ~
!J:~ J~' L ~I
Let me~ay a wo~about another social instrument that also
owes much of its widespread presence to the tax law.
private pension plan.
,..... L .
I
~_
l....)~v.,..
This is the
A Cabinet Committee on Corporate Pension
t (,
<, ;-.. -'.
.. . . . . . . . ~'
Fundsl!repared a report
~ recoamendat ions
to improve the basic
"
soundness and equitablel character of these private plans.
January 1965, the President made
~'
l
of public examination and discussion.
In
Report public in the interest
it/iS
The discussion developed
"
13
- 21 -
The Treasury Department in its Report to the Congress on
Private Foundations addressed itself to these difficult problems
and made specific recOlllDendations.
G
examining .. the reapon8es
submitted to the House Ways and Meana Committee respecting those
recommendations, one is often struck by the wide variation
betwe~
the comments from heads of major foundations recognizing the concem
I have described and the need for remedial action andthe-coments
under legal letterheadsaeeking, only defensive
TeS'ponse'-itt,.,~tioa'
of. the status quo -- not to be in printed versi.on.
careful study of these recoumendations.
J
1 urge your
For here also legal
ing~uit
should be equal to the task of removing the present clouds that
over the private foundation.
responsibility in this regard.
h~g
And indeed tax lawyers have a real
t!~lhe
proliferation of the
'1
)
I
I,
- 20 -------.;.",...
be freed from them\
_. ~ Vv f\. ,! "",'
~, ..~ ..aY.!l whereby
can shed the activities which :ne
the private foundatioo
~onor's financia,rhi~tory bef~re
Hit J,~
its organization or his present financial concerns thrust
,r:
upont~
1\
t=" 0 U r~ i)-\ . ~ r ;:.:JJ
lHC
AFfA'
Nor should we look only at involvements with ~ financial ~"!
l4, t~
£ i~
~
~Again,
.-
",'" ,"~,,->t l.' ~"
". ' " - ' " .
--~.
"-
s,. .,'
"
I have not found any responsible trustee who has not
recognized the need to maintain a balance between the influence of
those donors desirous of playing a role in the philanthrophic spendug'
~I(;
n;J
___ -
of the funds which used to be theirs., but legally are Eos longer
---
1\
-~,
their private concern\and the claims of society that philanthropic
funds be controlled by trustees with a fiduciary
t:'::;~:d a
degree of detachment and outlook that is not submerged in submissivel
to the donors.
'h
1 - 19 -
continuing financial benefits to their donors and trustees.
I doubt there is anyone who looks upon these matters as
positive benefits to philanthrophy or society.
I have not found
~ t..b "JC. A
a responsible foundation trustee who, l}~ndin8. ~th~i foundation ~ it~
J
lS)l:gaai2ation\ with a diversified investment portfolio, would switch
that portfolio into the ownership of a business corporation or a
minority interest in a family corporation or unimproved land or
only non-dividend paying growth stocks.
The present involvement of
foundations in these investments and activities is thus only an
accommodation to their donors, be it a reflection of the donor's
past activities or as a response to a present desire of the
donor~
tbut the involvement is hardly an inherent philanthropic virtue.
t1 {Our
--
task is not to perpetuate these involvements of private
,,-
/
foundatiorl/;' but to seek ways in which foundation philanthrophy can
""
- 18 -
upon the Congress "to deal with abuses of tax-exempt private
foundations."
Here is a fitting example of what we are discussing.
We are all well aware that private foundations have been under
a cloud for many years, despite the fundamental and strong attachment
Americans hold for private philanthrophy.
Of all the areas in which
j;"-'"
that philanthrophy can be exercised -- in
-'~"
-.
01 ;'-~jTI ,;.;)'
private[educati~
"
religion, in community programs -- basically only the area of the
1~JAr
private foundation stands suspect.
~'i'~NT/AJ.~
And~iiS because-'Ls~rivate
,
f\
foundations have not been able to separate their philanthrophy froo
activities and relationships that have nothing to do with
l
f
I (," ,tJ i . ' .,
_ _ _- ' _
}t..<_'.I
,: • ",
i til
',t,
1\\ r t( IS, /·V t
~'·"h (; 1(,.
philanthrophy. \']'hese are the presen;) involvement
"
\l\ f' !!'~
f.2.,£
"
business relationships and '.-the, maintenance of arrangements and
'"
I
transactions which give the appearance and often the actuality of
17
- 17 -
yourself -- because of the way his income is obtained.
Each day
you apply provisions of the tax law that cannot be reconciled with
a proper measure of net income but are the means to some social or
economic end or the way in which some activities -- and thereby
taxpayers -- are preferred over others.
S~
Given the President's
desire to reform the tax system and his criteria, which of the
l·~·tr~-r
provisions you apply each day would you keep, discard or modify?
/\
./
lThe President has a-sked the -Secretary of -ehe Treasury to develep
.......
-~
recoIllXlendations for appropriate reform of the tax system./ As you
'I
bend each intricate part and detail of the Tax Code to some
particu~
task, how would you answer the question whether that provision rea1l1
has any reason to exist in a proper tax
cOde~
, t.-\ 1-;Ei.> 1/1 '"i i
The President also made a specific recommendation and called
"
- 16 -
These interlocking pulls and counterpulls and the constant
need to seek the right balance make the task of tax reform difficult,
But the President's words underline that the goal can be clearly
perceived and there are standards against which the present
can be tested.
provisi~
One is that of achieving a greater degree of
horizontal tax equity than we have today:
"great variations of
tax liability among persons with equivalent income or wealth must
be reduced."
The other is that special tax preferences must --
just as direct governmental expenditures -- justify their current
existence:
"tax benefits • • • like all other activities of
Government, must stand up to the test of efficiency and fairness."
Here indeed is a grand challenge to lawyers.
Each day you
apply the many provis ions of the tax system that result in a lower
ili);L(
C. lJ,.- rII r,,~
tax for this client as compared with other clients --~- indee~
"
- 15 extends through direct expenditures are periodically reviewed and often
altered in the budget-appropriation process, but too little attention is
gi ven to reviewing particular tax benefits.
These benefits, like all other
activities of Government, must stand up to the tests of efficienty\~d
fairness."
These themes of equity and special tax preferences are interjoined,
and with simplification form
th~\interlocking
facets on which the
probl~
~"r
!.~ lhe determination from time to
of structural tax refom are rooted.
time of how the balance among these three factors should be struck will
if
E
we stress special. tax preferences
decide the nature of our tax system.
and \the use of the tax system
(ttu.=O~-~h~o
"'--_._- -
.. -
----" ..-,.-~
accomplish on a wide -scale
benefi ts for particular taxpayers or various non-tax goals, then the price
must be paid through a lessening in the equitable distribution of the tax
ifl
load and in increased complexity_
IIf
we push simplification too far at the
~.",...
W
expense of fairness, then also the equity of the tax system suffen.el
if we push the demands of equity to refinement after refinement, then
complexity triumphs.
And if we discard each and every tax preference, t~
certain needed values in our SOCiety can be lost.
- 14 to explore what may be done to achieve tax simplification.
Society can
then weigh rfor~lfl the values gained and lost, and determine the extent
I.-
----..
to which the initial premise is valid.
But unless lawyers assist in pro-
viding the public with this means to an intelligent choice, much of the
responsibility for continued tax complexity will be laid at our door.
As President Johnson pOinted out, simplification is only one of the
Ji; ~\
major goals to be achieved in seeking improvement of our tax system.lJaj
A
Economic
t!feasag~
r
stressed two additional themes -- equity and the review
of special tax preferences:
"Another aim must be a more equitable distribution of the tax load.
The great variation of tax liability among persons with equivalent income
or wealth must be reduced.
Further, when tax reduction once again becomes
feasible, particular attention must be given to relief of those at or
ne~
poverty levels of income.
"Finally, we must review special tax preferences.
In a fully employed
economy, special tax benefits to stimulate some activities or investments
mean that we will have less of other activities.
Benefits that the Qove~
- 13 .--
President Johnson in his Economic'~ftge stressed the same theme,
-1\
stating:
" •••• improvement of our tax system is a continuing need which
will concern this Administration and which deserves the support of all
Americans •••••• One major goal must be simplification of the tax law."
Here, indeed, is a task in which lawyers can play an important role.
LForjbe achievement of tax simplification requires a high measure of sheer
ingenui ty mixed with an intelligent weighing of what is valuable complexity
proper to achieve needed fairness and what is expendable refinement and
detail.
We must recognize that society is willing to tolerate considerable
tax complexity in the areas where lawyers are needed anyway -- corporate
organizations and reorganizations, partnerships, trusts and the like. But,
in turn, society can properly ask that the lawyers join in seeking solutions
to the complexities that now seriously complicate the tax system for the
average taxpayer -- the retirement income credit, the standard and itemized
deductions, and other matters similar to those referred to by Chairman MiJ,lJ.
The lawyers are being asked to approach the task with a willingness to asSIJI
makes l~ttloenet contribution
to eitherroe uity or ~ other social goal
lnltla1ly that much of this complexity il!~.-needle~l and, given that prem1 se ,
"
-12A third plan would reduce the rates by 10 percent, and even more in
the upper ranges, and then allow no standard deduction and
~n all~
itemized deductions only above a 10 percent of gross income level.
Thls
plan could be aimed at achieving a revenue balance or only as little loss
as would be needed to make finer adjustments among the different taxpayers
involved in the restructuring.
Chairman Mills has called on the Congressional and Treasury tax staffs
to explore these various suggestions and the exploration is under way.
Chairman Long, of the Senate Finance COmmittee, is also interested in
tax simplification, and, indeed, his approach, like that of Mr. Mills,
recognizes the complications now involved in our system of personal
deduct1o~
Senator Long's proposal goes beyond these deductions, and would provide
substantially lower effective tax rates for those who optionally forego
all tax preferences, including most of the personal deductions.
The
~~
is also studying the implications and possibilities of this approach. ~
important factor, of course, is that the two leaders in the tax field in
the respective branches of Congress are both publicly calling attention to
the need for tax simplification.
- 11 -
simplification.
Chairman Mills, in a recent and significant article, in
the December 1965 issue of Nation's Business, called for greater emphasis
on simplifying the tax laws.
His suggestions were specific.
He pointed
to the retirement income credit, to the averaging provision, and to the
sick pay exclusion as deserving re-examination in the interest of
s1mpli~
the computations and rules they now entail.
To improve administration he pointed to the treatment of tax liens,
the direct filing of tax returns at regional offices, and an improved nUe
Wii~~
to determine which parent should receive a dependency exemption
has been a divorce.
H
there
"
In an area of wider scope, that of personal deductions, he stated alt~
plans whereby the complexities involved in the present itemization of
de4uct~
would be reduced.
One plan would increase the standard deduction -- this plan would lose
revenue and maintain income tax rates at present levels.
~~J.p~~tit ~
A second plan would reduce tax rates by about 10 percent orfinore ror-..,~
) h
those willing to forego the standard deduction or itemized deductions.
This plan, being optional, would also lose revenue.
2'
Insert D - p. 10.
No para:
If it can be handled in a manner that effectively stabilizes
the economy, greater freedom of private action is possible.
Businessmen can then plan in terms of what new activities
will best meet the requirements of market efficiency in
a high employment economy.
This freedom of action becomes
narrowed if)because of excessive instability in the
econom~
they must design cut-back plans to weather
the instabilities.
2S
- 10-
/
---r~IP--I..w::_~m.ne time we must improve our tools of econ~~. ..f'orecast1Ds II1II
"'-
ysis, so that we know the degree of tax adjustment to seek lid
economic
"""'-,
when to do so.
If rnl\r
,<'-.
~''''
production bottlenecks,"
~~""-..,.~
...
. - . - .• . . , - -..
-
A
~-".
----'-""-''''''---''''''
.. -.
I-:i.... ~-
~.-
.,, ..... ....
.......
_.
-
- .. ~ -- ...• -.-.--
..... -.-.... ~--.........
d hence on price levels A \ as the unemployment
drops below 4 perc en:::. " We ~st
'0' __
~
1'a~ , ~ need to know more about the impact on labor aM
---
~.
..
.-
ra~)
-
. ..
~
am more about the conditions governing
~
'. "
the susta1nability of high levels of b~iness investment and the responsive.
~bat inves~t_.t.. --ses-1.n-tlilH>eor.~J,!!n.---All of this is the essence of fiscal responsibility.
It means that Government seeks to handle its part of the economy so
that the private sector can make its decisions intelligently in the light
of responsible governmental action.
The Federal budget, its expenditures and its receipts, is the largest
factor in our economy directed by a single unit.
~,
-_...aiil~"...(Ipy
....-
stBhility in private decisions becomes
:.0J..,....,t--_,. .'e._._A.....' -
....
I N\£l\~
r
Unless it is prudently
impoSSible.~ e.....
D
-
So far I have discussed tax policy in terms of the "new economicS" ..
its current tasks.
But you are lawyers and properly also ask what pa.rt of
the current tax scene calls for your skills.
Let me begin with tax
26
If we can through consideration of these substantive
questions obtain a consensus on the relevant criteria and
appropriate techniques, then our Government will be in a better
position to act quickly if ever the need for action arrives.
We could thus reserve our searching debates over tax policy
for the occasions when we are seeking permanent, long-run
revisions of the tax system, as the rate reductions of the
1964 Act.
The President in his Economic Report for 1966 stressed
the need for adequate guidelines for temporary tax changes:
"We must always be prepared to meet quickly any problems
that arise in the path of continued, stable economic growth,
whether the problems call for fiscal stimulus or fiscal
Background tax studies ~y both the Congress and
restraint.
Executive Branch should therefore be adequate to permit quick
decisions and prompt action to accommodate short-run cyclical
changes.
If quick action is ever needed, we should not have
to begin a long debate on what the changes in the taxes
should be."
Hearings held at this time by a Committee of Congress,
involving expert witnesses and representatives of interested
groups, could be helpful in developing the Congressional background tax studies that are desirable.
tax bracket; or is it an equal percentage increase in aftertax income for all taxpayers?
~ ~f
the need is for a tempo-
rary upward adjustment, which of these approaches when phrased II
L Should the answer be the same for upward as for downward adjq
in termS-of tax increases is most "neutral "f I In sum -- for
other questions can also be asked
~,
how should corporate
taxes be changed relative to the individual income
tax~
what are the guidelines for framing temporary tax changes?
Our need is not for the adoption of special Congressional
procedures or standby measures to ensure that Presidential
tax
requests for temporary/rate changes will be acted upon promptly,
The Congress has demonstrated -- in the Excise Tax Reduction
of 1965 and now in its prompt consideration of the President's
present program
that measures framed responsibly and
properly balanced will obtain quick and efficient Congressional
consideration if that is required under the circumstances.
~
need instead is for a general understanding of the principles
to be followed in structuring these temporary measures.
In
urging tax flexibility, some of the economists have unfortunately placed far too much stress on Congressional procedures
and far too little on the fiscal principles and techniques
that should determine the substantive content of these tempo·
rary tax rate proposals.
Jul- studies :)£ the tax system therefore must be designed
t,,) T;.eld l:urt:her ins~_ghts -into the adjustments that are proper
\1hen
\-Je
re'iuire short-range, temporary changes in income tax
ra te s, up or dmvn.
If we need such quick temporary adjust-
ments, it seems desirable to aim for an approach that leaves
the distribution of the tax burden between the various
brackets essentially unchanged
inco~
Over the long run, of course,
we must concern ourselves "l;vi th the problem of equity in the
distribution of the tax burden, for this lies at the heart
of any tax system.
It is a difficult problem and involves deep'
seated feelings, so that important changes are usually attended
by lengthy Congressional consideration and public debate.
&t
when we are dealing with a short-term change in tax levels to
meet current economic conditions, we do not have the time fm
such debate.
~~hat
is called for, therefore, is an approach
that is !:neutral'! in its effect upon the existing structure.
I'Neutrality;; when applied to the individual income tax
means no change in the present progressivity of the rate struc'
ture.
\)hat type of temporary downward adjustment to prevent a
faltering of the economy best achieves this neutrality?
Is it
a reduction of an equal percentage in the final tax liabiliU
for all ta:q)ayers' or a reduction of an equal percentage of
taxable income before tax for all taxpayers, which is the same
a s a reduc tion or the same number of percentage points in eacl:
,b
_Q.)/-A ~ I)
,)./1
r'
v
,/~' f
'.
.. ,
!"
" )""
29
11.:: ~t II '-
~. ~.·teloSEl~ttH~e
cash budget and national
.A-~ • -tu~ ~ (.
income account budgets~~h]are both close to balance.
~
But we can never be certain about future economic conditions ,
and the uncertainty is far greater than ever this year
because of Southeast Asia and its uncertainties.
.( I
I
vv
/')
/ ;1,
I •
The President in his Economic Report buttressed
this program by clearly indicating that special tax
reduction measures are incompatible with the need for
fiscal restraint.
He said:
"Against a background calling for fiscal
restraint, I cannot this year endorse any
specific legislative measure, however meritorious,
involving significant net tax reductions.
The
danger of inflation from increased demand would
be too great, and any special tax reduction now
would postpone the time when we can achieve a
meaningful general tax reduction."
This current tax program is directed at immediate
budgetary problems.
It achieves an administrative
budget for fiscal year 1967 that has a deficit of only
$1.8 billion -- instead of a deficit of over $ ,
bit,)
31
- 7 Theae are moderate steps, each s~~~ t~~~t~:. ~~~~~i~ Situation]
or
1t '-sourtd
ileeb repze.,en1Ht
r
Ff ~r( r' -" I ~ --
.s
·-additi~ i'DtheiJ permanent structural effec ~
_A
"
r-~'
ted withholding,
' e current tax payment and est-imated
AI; A-LL )OUj.JD Al)/·; I(fi/~' TO~f0 ~ )~
'Payment of the self-employment ~s - aU-~.,"".'efts. fThese
~
I VOl II 1./)(;/1--
recommendations do not involve any consideration. of tbeAincame or CO~ftW
\,..)
tax rates or other factors affecting final tax liabilities, such as the
investment credit.
studie~f ~ax~$:s1gne~ ·:~·~::er
;r
the
\
'"
I
",
"
\. insights
It
\
'"
,~'
\ ,.-:., .. ; l
n,
J " , ... r·....
,"
~'
/'
/'
~
~
adj~~~e. nts, t~t \;.~ be. ~4s ~.,.. -w.~. Tquire sbo~-r
/.1),,' I' ,I... 1I1X 1\ t': "JUf"l[Jf j)f U)~.
J
nto the
L
~ c~e~ A Ttttts' j'-ttth& .ne;-t' is for'te+.Di
.. b'!"e~ eHII~_
,emporary .~
/~
..
.... -~~ ~---............... ...,.~
iPADme.taxrates,
,-
I
or down J, can., we
•
este» .that
~.;~utraJ" in
\
;\
......
,
,
,'.
i
/
.....
"
'
the:tr'effect upon the elQ.sting st,fieture, so that their ~ion involves
~
I \ "
I
)
/
\
.
/
I
.l
no new.·aW..f:ts, among taXi>aye~ in
the ':fiIij;)aCT;·'or'"the--IDcome·~t"
It 'heut"""ral1~
tp~ \ . '
'..
:i.a..the ttiteri.",.
~A~traJ.it; when app~~ to the 1n~1v1dual inC,",
~
-...
",,:
"
tax ." meartSno, c~ge in the present ·Nogressivit~.Of the :cate structure..
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economy best
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flowins; frotl the "bunching!' of payments will be appropriate.
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self-employment tax to a current estimated basis.
1\
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33
- 6 remain flexible and responsible.
And just as tax policy was called upon
by the "new economics" to provide the needed fiscal stimulus in the past,
so again it is called upon but this time to produce the needed measure of
b =: h=b5 E f i :' j : I - h' ,~~ .)
E!~ .- . '~I· 1:But now the steps (!re more delicat!d for the "balance is
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We need) at this;! time, no -Jor
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changes [Q'!:8 only adjustments in the tax structure that permit shifts in
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,~tJ- kt 1J i';4W/~~,:..!J/ /,.',_ m.~ ~t1.~]t.1l!§
timing without altering fundamental policies / -- an! Shifts that can be
1\
acc~s~~~~c~~
We are beginning to see how tax policy can, under our form of
government, be used flexibly and promptly.
The f,resident's tax program, now before Congress, fits
this prescrirtion. It calls for temporary changes in the Bebedul
of excise tax reductions for automobiles and telephone service.
It propose s an r-n
T~}:
J.:r
acce 1era t·10 n 0 f the scheduled transi t'lOD
&--1'
to current payments for our larger corporations.
A
It reco_nat
action now on a previously studied graduated withholding s1stel
for individual taxpayers, ~~ at a time when the economic effe-
- 5 -
The present concern is not with econatie
the two narrows rapidly.
.-W
plateaus or a faltering economy, but instead the need to reduce
'\
the risk' of ~.fl-ati-GRJ
"
And all of this comes at a time when
!\
a thriving peacetime economy has been suddenly saddled with a
~
,
\4osTlk' r'£~
sharp rise in military expenditures for
E- 'i/1Nl3 the
nature and
duration of which cannot be predicted.
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~
J<. 'f- [~_:i 1- t 7
•
I
1~ E ~"''';l/t w'THIN
conditions, the need now is ~r fiscal measures to tone--down
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stimulus to private spendin:,j"
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;It,.,,.,
I
f\!:...,
1(;:
The change from strong fiscal stimulus to a measure of fiscl
restraint -- from a willingness to accept temporary deficitsU
a desire to maintain a budget within the range marked balanced·'
does not indicate any error in past policy.
success of
Rather it marks tl:t
, and a recognition that fiscal policy mu9
3r::
- 4 -
of faster growth and increasetrevenues has come true.
rU~
We have thus moved into the range of a ~u~ employment
economy.
Do we now turn to the economis ts to say:
"Your
prescription was fine, these budget deficits work wonders,
let's have more of this stuff."
mistaken.
I
If we do, we will be sadly
( • fV~ eU;~'1 A")
For our bold economists -- still practicing the new
economics -- are now cautious men.
They will tell us that there
are now more matters to be more carefully watched than simply
the upward climb of GNP.
We must maintain price stability, we
must not let a fine performance by private investment accelerate
wildl¥ into an unsustainable investment boom, we must keep
O~
costs competitive in world markets so that we can achieve
balance-af-payments
eqUilibriU~
There is no longer a shortage of demand, but rather the
beginnings of a pressure of demand upon supply as the gap betwe4
Throughout the past five years, those who disagreed with the
tax reduction program have said we should follow instead a restrictive
course to maintain price stability, to prevent an unsustainable boom and
to prevent deterioration of our balance of payments position.
Histo~
has proven the error of this viewpoint and that the wise course was to
reject it in favor of an
_~K;
expansionary program.
But clearl¥ it was
never decit!Gd that at some point an expansionary program
may not be
. .L
suited to
prevailing economic conditions.
9Lilli •
~d9.Y oureconornists
tell us that an expansionary policy is no longer appropriate.
- 3 -
The "new economics" called for a reduction in the weight of the
tax system and a continuation of temporary deficits, rather
than a preservation of existing tax rates and an immediate
endeavor to balance the budget.
Since there was a high level
'I
'{
of unemployment and large unused capacity, the new economics
demanded large and bold measures -- indeed, the concern of
many economists was that public unfamiliarity with the new
measures and any resulting timidity would yield only cautious
stepp that could well have meant failure.
But the steps were
large and bold -- the reduction in the income tax through rate
-rHf
decreases, . investment crediq and depreciation reform came to
J\
v
20 percent of tax liabilities.
that the economists predicted
And the economy responded. All
E
in their talk of· the_lrlPlier
effect of tax reduction, of the need for eliminating fiscaldra,
of the adverse effect of a full employment surplus
J
in the ""
.,
r~
.\
- 2 -
of broad policy impac t than in any comparable period.
And we
were already starting work on the next tax reduction and reform measureJwhich culminated in the Excise Tax Reduction Act
of 1965.
But this year the scene has changed -- the Congress is
tEAl\,
now engaged in considering a revenue act that, in fiscal 1967,
1\
will increase revenues by over $4.8 billion.
And yet, though the scenes have markedly altered in tW0
years, there are strong links between them.
The current
picture, indeed, has a logical relationship to the earlier
one.
Throughout the past five years, our fiscal policy has
~
B 'p~~.'dC
concentrated on [oaeJ goal, that of eliminating the gap between
our actual economic position and our potential position.
Tax
policy, for the first time in our history, was asked to
stimulate investment and expand consumer demand through measures that reduced tax rates despite a budget deficit.
TP.EASURY DEPARTMENT
V'ashington
?OR flELEAS E P. ~~. 'JEY;SPAPEP.5
TPPRSDAY, FEf:lRUA r;y J, 1966
REMARKS BY THE HONORABLE STANLEY So SURREY
ASSISTANT SECRETARY OF THE TREASURY
BEFORE THE SECTION OF TAXATION
r\
NEW YORK STATE BAR ASSOCIATION
TH~SDAY, FEBRUARY 3, 1966, J ~rj,:\ P.M •.
)'
THE CURRENT TAX SCENE
I had the pleasure of addressing this group two years
ago - January, 1964 - and my title then was "The Current
Tax Scene."
My title today is the same, but the speech
cannot be the same.
Economic conditions, national goals and
international problems are never static.
And so my talk
today - on The Current Tax Scene - describes a different
panorama from that of two years ago.
l=
I
N
1) L,
Then we were in the [£oncludinj] stages of the largest tax
reduction bill in our history.
Through the Revenue Act of
1962, depreciation reform, and the Revenue Act of 1964, we
were also concluding a revision of the income tax that in
the few years involved had produced more structural changes
TREASURY DEPARTMENT
February 2, 1966
MEMORANDUM FOR THE PRESS:
Assistant Secretary of the Treasury Stanley S.
Surrey's remarks before the Section of Taxation, New York
State Bar Association, Thursday, February 3, 1966,
12:30 P.M., will be read by Mr. Mitchell Rogovin,
Chief Counsel, Internal Revenue Service.
Text attached.
TREASURY DEPARTMENT
Washington
FOR RELEASE P.M. NEWSPAPERS
THURSDAY, FEBRUARY 3, 1966
REMARKS BY THE HONORABLE STANLEY So SURREY
ASSISTANT SECRETARY OF THE TREASURY
BEFORE THE SECTION OF TAXATION
NEW YORK STATE BAR ASSOCIATION
THE NEW YORK HILTON HOTEL, NEW YORK, NEW YORK
THURSDAY, FEBRUARY 3,1966,12:30 P. M., EST
THE CURRENT TAX SCENE
I had the pleasure of addressing this group two years
ago -- January, 1964 -- and my title then was "The Current
Tax Scene." My title today is the same, but the speech
cannot be the same. Economic conditions, national goals and
international problems are never static. And so my talk
today -- on The Current Tax Scene -- describes a different
panorama from that of two years ago.
Then we were in the final stages of the largest tax
reduction bill in our history. Through the Revenue Act of
1962, depreciation reform, and the Revenue Act of 1964, we
were also concluding a revision of the income tax that in the
few years involved had produced more structural changes of
broad policy impact than in any comparable period. And we were
already starting work on the next tax reduction and reform
measure, which culminated on the Excise Tax Reduction Act
of 1965.
But this year the scene has changed -- the Congress is
now engaged in considering a revenue act that, in fiscal year
1967, will increase revenues by over $4.8 billion.
And yet, though the scenes have markedly altered in two
years, there are strong links between them. The current
picture, indeed, has a logical relationship to the earlier
one. Throughout the past five years, our fiscal policy has
concentrated on a basic goal, that of eliminating the gap between
F-363
- 2 -
our actual economic position and our potential position. Tax
policy, for the first time in our history, was asked to
stimulate investment and expand consumer demand through
measures that reduced tax rates despite a budget deficit.
The "new economics" called for a reduction in the weight of the
tax system and a continuation of temporary deficits, rather
than a preservation of existing tax rates and an immediate
endeavor to balance the budget. Since there was a high level
of unemployment and large unused capac ity, the "new economics"
demanded large and bold measures -- indeed, the concern of
many economists was that public unfamiliarity with the new
measures and any resulting timidity would yield only cautious
steps that could well have meant failure. But the steps were
large and bold -- the reduction in the income tax through rate
decreases, the investment credit and depreciation reform came
to 20 percent of tax liabilities. And the economy responded.
All that the economists predicted in the way of faster growth
and increased revenues has come true.
We have thus moved into the range of a full employment
economy. Do we now turn to the economists to say: "Your
prescription was fine, these budget deficits work wonders,
let's have more of this stuff." If we do, we will be sadly
mistaken.
Throughout the past five years, those who disagreed with
the tax reduction program have said we should follow instead
a restrictive course to maintain price stability, to prevent
an unsustainable boom and to prevent deterioration of our
balance of payments position. History has proven the error
of this viewpoint and that the wise course was to reject it
in favor of an expansionary program. But clearly it was never
denied that at some point an expansionary program may not be
suited to prevailing economic conditions. Today our economists
tell us that an expansionary policy is no longer appropriate.
There is no longer a shortage of demand, but rather the
beginnings of a pressure of demand upon supply as the gap
between the two narrows rapidly. The present concern is not
with economic plateaus or a faltering economy, but instead
the need is to reduce the risk of inflationary pressures. And
all of this comes at a time when a thriving peacetime economy
has been suddenly saddled with a sharp rise in military
expenditures for hostilities the nature and duration of
which cannot be predicted.
- 3 -
Using the same "new economics" but recogn~z~ng the changed
conditions, the need now is to keep total demand within the
bounds of our productive capacity and thereby maintain essential
price stability.
The change from strong fiscal stimulus to a measure of
fiscal restraint -- from a willingness to accept temporary
deficits to a desire to maintain a budget within the range
marked balanced -- does not indicate any error in past policy.
Rather it marks the success of that policy, and a recognition
that fiscal policy must remain flexible and responsible. And
just as tax policy was called upon by the "new economics" to
provide the needed fiscal stimulus in the past, so again it is
called upon but this time to produce the needed measure of
restraint. But now the steps must be finely tuned, for the
economic balance is more sensitive, and the future is uncertain.
We need, at this particular time, no major changes. We
need only adjustments in the tax structure that permit shifts
in timing without altering fundamental policies or even
changing income tax liabilities -- and shifts that can be
accomplished quickly. We are beginning to see how tax policy
can, under our form of government, be used flexibly and promptly.
The President's tax program, now before Congress, fits
this prescription. It calls for temporary changes in the
schedule of excise tax reductions for automobiles and
telephone service. It proposes an acceleration of the scheduled
transition to current tax payments for our larger corpprations.
It recommends action now on a previously studied graduated
withholding system for individual taxpayers, at a time when
the economic effect flowing from the "bunching" of payments
will be appropriate. It also calls for a companion shifting
of the payment of the self-employment social security tax to
a current estimated basis.
These are moderate steps, each suited to the economic
situation. Their permanent structural effects are all sound
additions to our tax system. These recommendations do not
involve any consideration of the individual income or corporate
tax rates or other factors affecting final tax liabilities,
such as the investment credit.
- 4 The President in his Economic Report buttressed this
program by clearly indicating that special tax reduction
measures are incompatible with the need for fiscal restraint.
He said:
"Against a background calling for fiscal
restraint, I cannot this year endorse any
specific legislative measure, however
meritorious, involving significant net tax
reductions. The danger of inflation from
increased demand would be too great, and any
special tax reduction now would postpone the
time when we can achieve a meaningful general
tax reduction."
This current tax program is directed at immediate budgetary
problems. It achieves an administrative budget for fiscal
year 1967 that has a deficit of only $1.8 billion -- instead
of a deficit of over $6 billion -- and that closely reflects
the cash budget and national income account budgets, which
are both close to balance. But we can never be certain about
future economic conditions, and the uncertainty is far greater
than ever this year because of Southeast Asia and its
uncertainties.
Our studies of the tax system therefore must be designed
to yield further insights into the adjustments that are proper
when we require short-range, temporary changes in income tax
rates, up or down. If we need such quick temporary adjustments,
it seems desirable to aim for an approach that leaves the
distribution of the tax burden between the various income
brackets essentially unchanged. Over the long run, of course,
we must concern ourselves with the problem of equity in the
distribution of the tax burden, for this lies at the heart
of any tax system. It is a difficult problem and involves deep·
seated feelings, so that important changes are usually attended
by lengthy Congressional consideration and public debate. But
when we are dealing with a short-term change in tax levels to
meet current economic conditions, we do not have the time for
such debate. What is called for, therefore, is an approach
that is "neutral" in its effect upon the existing structure.
"Neutrality" when applied to the individual income tax
means no change in the present progressivity of the rate
structure, What type of temporary downward adjustment to
prevent a faltering of the economy best achieves this
neutrality? Is it a reduction of an equal percentage in the
final tax liability for all taxpayers; or a reduction of an
- 5 -
equal percentage of taxable income before tax for all taxpayers,
which is the same as a reduction of the same number of
percentage points in each tax bracket; or is it an equal
percentage increase in after-tax income for all taxpayers?
Are there other approaches to "neutrality"? If the need is for
a temporary upward adjustment, which of these approaches when
phrased in terms of tax increases is most "neutral"? Should
the answer be the same for upward as for downward adjustments?
In sum -- for other questions can also be asked -- e.g., how
should corporate taxes be changed relative to the individual
income tax -- what are the guidelines for framing temporary
tax changes?
Our need is not for the adoption of special Congressional
procedures or standby measures to ensure that Presidential
requests for temporary tax rate changes will be acted upon
promptly. The Congress has demonstrated -- in the Excise Tax
Reduction Act of 1965 and now in its prompt consideration of the
President's present program -- that measures framed responsibly
and properly balanced will obtain quick and efficient
Congressional consideration if that is required under the
circumstances. Our need instead is for a general understanding
of the principles to be followed in structuring these temporary
measures. In urging tax flexibility, some of the economists
have unfortunately placed far too much stress on Congressional
procedures and far too little on the fiscal principles and
techniques that should determine the substantive content of
these temporary tax rate proposals.
If we can through consideration of these substantive
questions obtain a consensus on the relevant criteria and
appropriate techniques, then our Government will be in a
better position to act quickly if ever the need for action
arrives. We could thus reserve our searching debates over
tax policy for the occasions when we are seeking permanent,
long-run revisions of the tax system, as the rate reductions
of the 1964 Act.
The President in his Economic Report for 1966 stressed
the need for adequate guidelines for temporary tax changes:
"We must always be prepared to meet quickly
any problems that arise in the path of continued,
stable economic growth, whether the problems call
for fiscal stimulus or fiscal restraint. Background
tax studies by both the Congress and Executive
Branch should therefore be adequate to permit quick
decisions and prompt action to accommodate short-run
cyclical changes. If quick action is ever needed,
we should not have to begin a long debate on what the
chang-e~c;:. in r-hp taxps should be."
- 6 -
Hearings held at this time by a Committee of Congress,
involving expert witnesses and representatives of interested
groups, could be helpful in developing the Congressional
background tax studies that are desirable.
All of this is the essence of fiscal responsibility.
It means that Government seeks to handle its part of the
economy so that the private sector can make its decisions
intelligently in the light of responsible governmental action.
The Federal budget, its expenditures and its receipts, is
the largest factor in our economy directed by a single unit.
Unless it is prudently managed, stability in private decisions
becomes impossible. If it can be handled in a manner that
effectively stabilizes the economy, greater freedom of private
action is possible. Businessmen can then plan in terms of
what new activities will best meet the requirements of market
efficiency in a high employment economy. This freedom of
action becomes narrowed if, because of excessive instability
in the economy, they must design cut-back plans to weather the
instabilities.
So far I have discussed tax policy in terms of the "new
economics" and its current tasks. But you are lawyers and
properly also ask what part of the current tax scene calls
for your skills. Let me begin with tax simplification.
Chairman Mills, in a recent and significant article, in the
December 1965 issue of Nation's Business, called for greater
emphasis on simplifying the tax laws. His suggestions were
specific. He pointed to the retirement income credit, to
the averaging provision, and to the sick pay exclusion as
deserving re-examination in the interest of simplifying the
computations and rules they now entail.
To improve administration he pointed to the treatment of
tax liens, the direct filing of tax returns at regional
offices, and an improved rule to determine which parent should
receive a dependency exemption when there has been a divorce.
In an area of wider scope, that of personal deductions,
he stated alternative plans whereby the complexities involved
in the present itemization of deductions would be reduced.
- 7 -
One plan would increase the standard deduction -- this
plan would lose revenue and maintain income tax rates at
present levels.
A second plan would reduce tax rates by about 10 percent,
or perhaps more,in the upper brackets, for those willing to
forego the standard deduction or itemized deductions. This
plan, being optional, would also lose revenue.
A third plan would reduce the rates by 10 percent, and
even more in the upper ranges, and then allow no standard
deduction and itemized oeductions only abowe a 10 percent
of adjusted gross income level. This plan could be aimed
at achieving a revenue balance, or only as little loss
as would be needed to make finer adjustments among the
different taxpayers involved in the restructuring.
Chairman Mills has called on the Congressional and
Treasury tax staffs to explore these various suggestions and
the exploration is under way.
Chairman Long, of the Senate Finance Committee, is also
intere~ted
in tax simplification, and, indeed, his approach,
like that of Mr. Mills, recognizes the complications now involved
in our system of personal deductions. Senator Long's proposal
goes beyond these deductions, and would provide substantially
lower effective tax rates for those who optionally forego
all tax preferences, including most of the personal deductions.
The Treasury is also studying the implications and possibilities
of this approach. The important factor, of course, is that
the two leaders in the tax field in the respective branches
of Congress are both publicly calling attention to the need for
tax simplification.
President Johnson in his Economic Report stressed the
same theme, stating:
" •..• improvement of our tax system is a
continuing need which will concern this
Administration and which deserves the support
of all Americans .•.. One major goal must be
simplification of the tax law."
- 8 -
Here, indeed, is a task in which lawyers can play an
important role. The achievement of tax simplification
requires a high measure of sheer ingenuity mixed with an
intelligent weighing of what is valuable complexity proper
to achieve needed fairness and what is expendable refinement
and detail. We must recognize that society is willing to
tolerate considerable tax complexity in the areas where lawyers
are needed anyway -- corporate organizations and reorganizations,
partnerships, trusts and the like. But, in turn, society can
properly ask that the lawyers join in seeking solutions to the
complexities that now seriously complicate the tax system for
the average taxpayer -- the retirement income credit, the
standard and itemized deductions, and other matters similar
to those referred to by Chairman Mills. The lawyers are being
asked to approach the task with a willingness to assume initially
that much of this complexity makes little net contribution to
either equity or any other social goal and, given that premise,
to explore what may be done to achieve tax simplification.
Society can then weigh the values gained and lost, and
determine the extent to which the initial premise is valid.
But unless lawyers assist in providing the public with this
means to an intelligent choice, much of the responsibility for
continued tax complexity will be laid at our door.
As President Johnson pointed out, simplification is only
one of the major goals to be achieved in seeking improvement
of our tax system. His Economic Report stressed two additional
themes
equity and the review of special tax preferences:
"Another aim must be a more equitable
distribution of the tax load. The great
variation of tax liability among persons
with equivalent income or wealth must be
reduced. Further, when tax reduction once
again becomes feasible, particular attention
must be given to relief of those at or near
poverty levels of income.
"Finally, we must review special tax
perferences. In a fully employed economy,
special tax benefits to stimulate some
activities or investments mean that we will
have less of other activities. Benefits that
the Government extends through direct
expenditures are periodically reviewed and
often altered in the budget-appropriation
process, but too little attention is given to
- 9 reviewing particular tax benefits. These
benefits, like all other activities of Government,
must stand up to the tests of efficiency and fairness."
The determination from time to time of haw the balance
among three factors -- equity, special tax preferences, and
simplification -- should be struck will decide the nature of
our tax sys tern.
If we stress special tax preferences arnthrough them the
use of the tax system to accomplish on a wide-scale benefits
for particular taxpayers or various non-tax goals, then the
price must be paid through a lessening in the equitable
distribution of the tax load and in increased complexity.
If we push simplification too far at the expense of
fairness, then also the equity of the tax system suffers.
But if we push the demands of equity to refinement after
refinement, then complexity triumphs. And if we discard each
and every tax preference, then certain needed values in our
society can be lost.
These interlocking pulls and counterpulls and the constant
need to seek the right balance make the task of tax reform
difficult. But the President's words underline that the goal
can be clearly perceived and there are standards against
which the present provisions can be tested. One is that of
achieving a greater degree of horizontal tax equity than we
have today: "great variations of tax liability among persons
with equivalent income or wealth must be reduced." The
other is that special tax preferences must -- just as direct
governmental expenditures -- justify their current existence:
"Tax benefits .•••. like all other activities of Government,
nust stand up to the test of efficiency and fairness."
Here indeed is a grand challenge to lawyers. Each day you
apply the many provisions of the tax system that result in a
lower tax for this client as compared with other clients -- but
rarely yourself -- because of the way his income is obtained.
~ach day you apply provisions of the tax law that cannot be
~econciled with a proper measure of net income but are the means
:0 some social or economic end or the way in which some
lctivities -- and thereby some taxpayers -- are preferred over
)thers. Given the President's desire to reform the tax
;ystem and his criteria, which of the provisions that you apply
!ach day would you keep, discard or modify? As you bend
!ach intricate part and detail of the Tax Code to some
,articular task, how would you answer the question whether that
Irovision really has any reason to exist in a proper tax code?
- 10 The President also made a specific immediate recommendation
and called upon the Congress" to deal with abuses of tax-exempt
private foundations." Here is a fitting example of what we
are discussing.
We are all well aware that private foundations have been
under a cloud for many years, despite the fundamental and
strong attachment Americans hold for private philanthrophy.
Of all the areas in which that philanthrophy can be
exercised -- in private educational institutions, in religion,
in community programs -- basically only the area of the
private foundation stands suspect. And that is because a
substantial number of private foundations have not been able
to separate their philanthrophy from activities and relationships that have nothing to do with philanthrophy. Prominent
among these aspects are their involvement in business
relationships and their maintenance of arrangements and
transactions which give the appearance and often the actuality
of continuing financial benefits to their donors and trustees.
I doubt there is anyone who looks upon these matters as
positive benefits to philanthrophy or society. I have not
found a responsible foundation trustee who, finding a
foundation with a diversified investment portfolio, would
switch that portfolio into the ownership of a business
corporation or a minority interest in a family corporation or
unimproved land or only non-dividend paying growth stocks. The
present involvement of foundations in these investments and
activities is thus only an accommodation to their donors, be
it a reflection of the donor's past activities or as a response
to a present desire of the donor. But the involvement is
hardly an inherent philanthropic virtue.
Our task is not to perpetuate these involvements of
private foundations, but to seek ways in which foundation
philanthrophy can be freed from them -- ways whereby the
private foundation can shed the activities which the donor's
financial history before its organization or his present
financial concerns have thrust upon it.
Nor should we look only at foundation involvements with
the financial affairs of their donors. Again, I have not found
any responsible trustee who has not recognized the need to
maintain a balance between the influence of those donors
desirous of playing a role in the philanthropic spending of
the funds which used to be theirs -- but legally are no longer
their private concern -- and the claims of society that
- 11 -
philanthropic funds be controlled by trustees with a fiduciary
regard and a degree of detachment and outlook that is not
submerged in submissiveness to the donors.
The Treasury Department in its Report to the Congress on
Private Foundations addressed itself to these difficult
problems and made specific recommendations. I urge your
careful study of these recommendations. For here also legal
ingenuity should be equal to the task of removing the present
clouds that hang over the private foundations. And indeed
tax lawyers have a real responsibility in this regard. The
proliferation of the private foundation is in large part the
handiwork of the tax bar, in its use of tax provisions designed
to fO'ster general philanthrophy as a tool for family and
business planning. Society can properly call upon us to recognize
the wider concerns involved and to fashion our handiwork into a
genuinely philanthropic instrument not tainted by the present
defects and abuses.
Let me comment briefly about another social instrument
that also owes much of its widespread presence to the tax
law. This is the private pension plan. A Cabinet Committee
on Corporate Pension Funds developed recommendations to
improve the basic soundness and equitable character of these
private plans. In January 1965, the President made this
Report public in the interest of public examination and
discussion. The discussion has developed slowly but the need
for a constructive dialogue is now recognized by those
concerned with this area.
Basically, the goals are to broaden the coverage of private
pension plans to include a wider range of employees; to
provide greater assurance that the pension benefits will
materialize and be paid; to make these plans as compatible
as possible with a freely mobile labor force; to make
certain that the funds will be administered solely in behalf
of participating employees, and to eliminate those special
tax preferences associated with these plans which do not meet
the test of efficiency or fairness.
Essentially the rules governing the development of
private pension plans, set forth as qualifications for
eligibility for special tax treatment, have not changed since
19420 Such basic problems as the vesting of pension benefits,
the funding of benefits, the portability of benefits, the
- 12 :overage of employees, and the integration of these plans with
the Social Security system are governed today by concepts and
patterns developed a quarter of a century ago. Pension plans
then were just beginning to flourish and economic conditions
and institutions were different. One can properly doubt
that the knowledge and experience available back in 1942 was
sufficient to produce decisions that could stand as immutably wise
f or all t ime .
The Treasury and other Departments involved thus welcome
a serious, objective examination by business, labor, and
others concerned, such as the actuarial profession, of the
present pattern and operation of pension plans and of the
Cabinet Report recommendations. We are hopeful that out of
this dialogue we can fashion useful improvements in the present
system in keeping with the goals I have stated and the fulfillment
of the function of these plans in providing supplemental
retirement security to the labor force.
The reform of our tax system which President Johnson
seeks will call for examination of many other areas in which
lawyers have special skills and experience. If we use our
knowledge and insights constructively in the improvement of
the tax system and the institutions which that system has
fostered, then we will play our part in shaping the Great
Society. The problems are difficult and complex and encrusted
with history -- but this is only to say thOC they are worthy of
your talents.
000
I REAST fRY DE PARTtvfFNT
Washington
STATEMENT OF THE HONORABLE HENRY H. FOWLER
SECRETARY OF THE TREAS URY
BEFORE THE
JOINT ECONOMIC COMMITTEE
FEBRUARY 3, 1966
10:00 A.M.
Mr. Chairman and Members of the Joint Economic Committee:
We meet today in economic circumstances of rather different
complexion from those of a year ago or any of the past several
years.
At home our work force, more productive than ever, is
also more fully employed than at any time in nearly a decade.
Adding to the increasing demands of our own people for more of
the fruits of our highly productive economy, is our firm
commitment to the defense of freedom of Viet Nam, which places
a high-priority claim on our human and material resources.
Rather than stimulate the economy further, it is now the
broad task of Government economic policy to take in some sail.
We have become more concerned with economic overheating than
Nith the shortfalls of demand that marked most recent years.
Our international economic position has taken a decided
:urn for the better -- and we expect that it will do still
)etter in this current year.
Yet here, too, our progress in
leeting older problems has tended to uncover new ones -- in
F-364
- 2 this case the need to move ahead with improved machinery to cope
with the international financial problems we will face in the
future.
Economic Accomplishments of 1965
With the President's Economic Report now before you, there
is no need to recount in detail the economic. accomplishments of
1965.
A few highlights will serve to make the point.
In this
fifth full year of business expansion, real output gained
5-1/2%.
During the year, industrial production climbed 7.4%,
about 2.5 million more workers found employment, and the
unemployment rate fell from 5.0% at the end of 1964 to just
4.1% of the civilian labor force at the end of 1965.
In early
1961, when the current economic upswing was just getting
under way, the unemployment rate reached a high of about 7%.
No stronger witness is needed to the success of earlier
policies.
The stimulus of carefully planned reductions in
tax rates, working in tandem with a moderately expansive
monetary policy, and blended with a range of Government
progr~
addressed to more specific economic problems, has helped produce
a 5-year economic rise of enormous scope.
Our real growth rate
- 3 during the expansion from early 19G1 t.hruugh 1965,
5-1/2'1~
annually, can stand proudly beside the record turned in by
other industrial countries.
And it far overshadows our own
frustratingly slow growth during the recession-pocked 1950's.
Yet the very success of earlier policies has brought into
range a different set of probJems and hence of near-term policy
ob j ec ti ves
¢
On the tv-ho Ie, (,ur
remarkably free
0f
price
lont~ f:'C onornic
j I1C Leases,
c:pans ion has been
but j"-l the pas t: yeAr there
has been greater uphard presSlll".- - - unckrstdnd-1ble in light of
our own closer approach to capacity operatj(.JTls dnd ful]
employm~;nt
-- but nevertheless most unwelcome.
Amidst all our progress toward greater economic wellbeing, however, there remains a residue of older problems
ameliorated, but not solved, by gains in the economy at large.
Unemployment among nonwhites, for example, has declined but
Lemains about double the rate for whites, and is surely too
~igh.
Too many pockets of poverty remain; perhaps their
1umber and extent are less than before, but their very existence
- 4 is the more glaring in view of the general economic advance.
And even among the employed, and among the many who are above
the poverty threshold, there is much more they can contribute
and gain in the framework of a healthy expanding economy.
Fiscal Policy -- a Turning Point
It is the over-all economic picture to which general
Government financial policy must be addressed, however, and
that picture is clearly changed.
The key factor calling for
a different policy approach is our commitment in Viet Nam -but I would emphasize that we had a very solid economic upswing
in progress well before the buildup in our Viet Nam effort that
started this fall.
It was an upswing that resoundingly
demonstrated the logic of the reductions in tax rates of the
last few years.
In this current fiscal year, for example, our income tax -even with its lower rates -- will bring in substantially higher
revenues than ever before because of the higher income base.
The investment tax credit enacted in 1962 and improved in 1964,
and the steps taken in 1962 and 1965 to liberalize depreciation
have also borne fruit, stDnulating a level of investment that
not only contributed to over-all economic activity and productivity,
- 5 -
but also added to our productive capacity, so that our economy
could expand without generating excessive inflationary pressure.
Industrial capacity is being more fully utilized than at
any time in the past decade, but over all, we have the potential
to meet both our commitments in Viet Nam and our economic demands
at home.
I am convinced that the fiscal measures of the last
few years to encourage investment deserve a good share of the
credit for this.
Taken together, the stimulative effect of tax reductions
on the economy has been such that tax revenues in the current
fiscal year, apart from the effect of our new recommendations
are estimated to be $21 billion more than in fiscal year 1961,
despite tax rate reductions that have cut the burden of taxes
by some $20 billion at this year's income levels -- more than
twice the revenue increase in the preceding five years when
there were no substantial tax reductions.
Now, however, with the economy already moving in high gear
and our Viet Nam commitment superimposed on robust private demands,
there is a clear need for a shift away from the stimulative
policies of the past few years.
An obvious first step is that
additional "fiscal dividends" in the form of tax cuts must be
put off for the time being.
This was already apparent several
nonths ago, before our new budget for fiscal 1967 began to take
solid shape.
- 6 Moreover, in mapping out that new budget, and modifying
our posture for the balance of fiscal 1966, it is clearly
not sufficient merely to come up with a 1967 deficit that is
no greater than that of 1966.
With private demands running
stronger, the flexible exercise of sound fiscal policy means
that the Government's posture should be more restraining.
This is precisely what underlies the President's request
for an acceleration of revenues in the balance of this fiscal
year and fiscal 1967.
The principle behind this tax program
is to take actions that can be put in effect quickly and that
do not make basic changes in tax programs already enacted.
For corporations and individuals there is no change at all in
final tax liabilities, but only a speed-up in the payment of
taxes against the currently accruing liabilities.
The proposed two-year postponement in certain excise
tax reductions which Congress had previously scheduled for
graduated reduction follows through on the standard adopted
by the Congress to govern these excise taxes -- that their reduction be scheduled so as to be of particular benefit to the
as they take effect.
econ~
Their reduction now would be stimulative
when stimulus is not needed; their reduction later will come
- 7 -
at a time when it is more likely that stimulus would be welcome
or appropriate.
Altogether, these tax measures will be withdrawing an
extra $2.9 billion in cash payments during calendar 1966.
Coupled with the most rigorous pruning of expenditure plans
consistent with meeting our urgent commitments abroad and at
home, if enacted promptly they will substantially lower a
budget deficit in fiscal 1966 and lead to a budget deficit of
just $1.8 billion in fiscal 1967.
On a cash basis, the proposed
budget would produce a surplus of $500 million, while on a
national income basis there would be a deficit of about $500
million.
The estimated deficits for fiscal 1966 are:
administrative,
$6.4 billion; cash, $6.9 billion; and national income $2.2
billion -- not far from the averages during the current expansion.
But now with the need to shift in the direction of fiscal
restraint, the administrative deficit will be reduced by about
$4~1/2
billion during fiscal 1967 and the cash and national
income budgets will be coming into approximate balance over the
same period.
- 8 -
Some critics have called our tax proposals "one-shot"
remedies.
Indeed they are.
None of us knows the duration and
extent of our commitment to the defense of freedom in Viet Narn.
We earnestly hope that our objective can be achieved quickly.
In that case, our "one-shot" measures are quite appropriate.
But if it turns out that our needs in Viet Nam are of longer
duration, then the meeting of that commitment will take first
claim on the fiscal dividends deriving from an expanding tax
base in fiscal year 1968.
And if our Viet Nam needs are greater
in magnitude than is currently contemplated, or should unforeseen inflationary pressures develop, then further fiscal measures
will be requested.
This is the course of maximum flexibility -- requesting
some moderately restraining measures, appropriate to the tasks
at hand, and that can be put into effect quickly, while standing
alert to ask for whatever further actions might be needed as
circumstances unfold.
Harmonizing Financial Policies
Developments in the credit markets during 1965 reflected
stronger demands from a variety of sources, centered in the
- 9 -
private economy, while the central bank followed a somewhat
less accommodative policy.
Thus, while we had record flows of
funds through the markets, in support of the record level of
economic activity, these funds mewed at higher rates of interest.
For short-term interest rates the rise during 1965 represented a continuation of the upward trend that has proceeded
over the last several years from the low point in the 1960-61
recession.
For longer term rates, the rise after mid-1965
was the first significant upturn in the extended period of
business expansion that began in 1961.
Through most of this
period, long rates were little changed despite rising demands
for long-term money, because ample savings flows were augmented
by the enormous efficiency of our financial institutions in
placing
~elatively
short-term deposits in long-term employment.
The higher long rates of the past year emerged as demands for
long-term credit accelerated further.
Against the background of less receptive credit markets,
Treasury debt management in the past year faced a difficult
task even though the Treasury's net cash borrowings were
relatively modest; indeed, with the Federal Reserve and Government
- 10 investment accounts adding significantly to their holdings of
Treasury debt there was actually a decline in the volume of
Federal debt in the hands of the public during calendar year 1965.
As the year progressed, the prodigious value of earlier
advance refunding operations was increasingly apparent.
Those
operations, including one completed very successfully in
January 1965, lightened the task that remained to be accomplished
later in the year, and built up a reserve that we could draw
on in subsequent debt operations.
That cushion cannot be drawn
on indefinitely, however, and in our current refunding we are
taking advantage of an opportunity to lighten the refinancing
tasks awaiting us next spring and summer.
We see our Savings Bond program as another area of prime
importance to debt management.
A higher rate on these savings,
and a planned invigoration of the Savings Bond sales program, is
expected to playa significant part in achieving our over-all
economic obj ec tives in 1966.
Indeed, in addition to the higher
rate which will be announced shortly, we are exploring intensively the feasibility of several new types of special appeal
- 11 -
to the 8 million participants in the Industrial and Governmental
Payroll savings bond programs and to new participants as well.
It has also become increasingly clear over the past year
that Treasury debt management, and other official financial
policies, require close coordination
other Federal credit activities.
with the multitude of
To a growing extent, Federal
credit programs are expanding their reliance on the private
sector for financing, rather than use Treasury financing as
a permanent crutch.
In view of the great variety of different
programs involved here, and the increased level of activity,
an effort is now being made to centralize the bulk of these
asset sales so as to achieve the best marketing terms and
maximum coordination with over-all financial policy.
Like debt management and fiscal policy, monetary policy
also has a new environment to work with during this period.
In view of recent events, I believe it would be more appropriate
for this Committee to hear directly from the monetary authorities
on this important topic.
As the President stated last December 5,
" . • . I will continue to do my best to give the American people
the kind of fully-coordinated, well-integrated economic policy
- 12 -
to which they are entitled, which has been so successful for the
last 58 months, and which I hope will preserve the price stability
so necessary for America's continued prosperity."
Cost-Price Stability Essential
In 1965 we developed some cracks in the excellent record
of cost and price stability that has characterized the current
economic expansion.
Consumer prices rose 1.7% over the past
year, a slightly greater rise than the gradual increases of
other recent years which averaged about 1.3%.
In wholesale
prices we saw virtual stability from 1958 to early 1965, but
then a 3.4% rise by the end of 1965.
These increases are still quite mild, and of limited
duration as of now, compared either with U.S. experience in the
mid-1950's, or the more recent experience of practically every
other country in the world -- but even a mild rise is not
welcome and is a cause for concern.
We are well aware that any
complacency toward mild increases in costs and prices is an
open invitation to more persistent or larger increases, and
this we cannot have without endangering an enviable record of
substantial economic growth at horne with relative price stability,
- 13 -
declining unemployment, and progress toward balanced international payments.
The attainment of nearly full employment means that our
efforts to maintain stable costs and prices must be even greater
than before.
policies.
This calls for a combination of coordinated
The framework of fiscal and monetary policy is already
in the process of shifting away from the stimulative leaning
of recent years.
But greater effort is needed on the cost and
price side, too.
"Responsible restraint" whether urged upon
business, labor, or Government, is meant to be more than a
catch phrase.
I believe it can work.
But as the President
pointed out in his January 27th Economic Message to Congress,
the "extent of the fiscal or monetary restraint that will be
needed to avoid inflationary pressures will depend directly
on the restraint and moderation exercised by those who have
power over wages and prices."
Progress in the Balance of Payments
The United States made a giant stride last year in its
march toward balance of payments equilibrium.
Between 1960
and 1964 we reduced our over-all deficit, in uneven steps,
- 14 from $3.9 billion to $2.8 billion.
In 1965, it was cut to
$1.3 billion -- the improvement exceeding the total progress
of the previous four years.
While the data for 1965 are still incomplete, it appears
that this gain was achieved despite some setbacks on particular
items'.· Our trade surplus, for example, was down about $1. 9
billion and our tourist deficit widened by about $200 million.
Direct investment by U.S. corporations rose by roughly $900
million for the year and was only partly offset by a $500
million increase in direct investment income.
Moreover, purchase,
of U.S. securities by foreigners were offset by liquidations
of securities and other U.S. assets totaling over $500 millioo
by the United Kingdom Government.
How, then, was such outstanding over-all progress made
in 1965?
The voluntary restraint program, announced by the
President just a year ago, deserves the lion's share of credit.
Its impact was felt first, and most dramatically, in the field
of bank credit.
Outflows of short- and long-term bank credit
were reduced from $2.5 billion in 1964 to virtually nothing
in 1965.
As for nonbank capital, excluding the direct inves~t
- 15 flows which did increase, we moved from an outflow of almost
$1 billion in 1964 to an estimated inflow of around $300 million
last year.
More than half of this improvement came from
repatriation of liquid funds by corporations in response to the
voluntary program guided by the Commerce Department.
Operating
alongside the voluntary program, the Interest Equalization Tax
-- strengthened by the Congress and extended to July 1967 -continued as an integral and effective part of our over-all
effort.
In early December, the Administration announced its
)alance of payments program for 1966, continuing the measures
lnitiated in February and intensifying the effort to moderate
:orporate direct investment abroad.
On
the assumption that our trade surplus, in the absence
)f special factors, will improve in 1966, and in the expecta:ion of smaller direct investment outflows, sustained success
,n other areas covered by the voluntary restraint program,
ontinued vigilance on government expenditures abroad, and
he cessation of the large United Kingdom asset liquidations
- 16 we believe we can achieve equilibrium in our international
payments -- $250 million on either side of balance.
The importance of reaching equilibrium is vividly brought
home by the fact that last year, despite the smaller payments
deficit, the United States lost $1,664 million in gold -- the
largest loss since 1960.
Of this, $259 million represented
our payment of 25% of our quota increase to the International
Monetary Fund, which will be offset by increased automatic
drawing rights on the Fund.
Much of the remainder of the loss
was attributable to the large deficits we incurred in previous
years, as foreign countries used their dollar accumulations to
acquire gold.
The rate of gold loss fell steadily throughout
the year; $832 million in the first quarter, $589 million in
the second including the IMF payment, $124 million in the
third, and $119 million in the fourth.
The fact that so much of last year's gold drain went to
a single country -- nearly $900 million to France -- coupled
with the fact that the rate of drain dwindled as the year pro·
gressed and our payments position improved, make it clear that
- 17 there is at present no general lack of confidence in the
dollar.
The reverse is certainly the case.
We must make sure this confidence continues.
If further
action is necessary to bring our payments into equilibrium in
1966 -- -either because circumstances change or our present
expectations of success are unjustified -- such action will
be taken.
We look forward, of course, to the day when the restrictions necessary today can safely be removed.
None of us wants
to keep these trappings of constraint any longer than necessary.
But we do have to be reasonably confident first that the
underlying conditions for sustained balance are met, and this
will require continued effort on our part and on the part of
others as well.
Given price stability at horne, the ingenuity of our
marketing and scientific community, and the energy of our
businessmen, I am sure that over the long-run our trade surplus
will widen -- and this will help.
Given the high level of overseas direct investment by
our corporations in recent years .and the sizable level still
- 18 -
permitted under the new Commerce Department guidelines, I am
confident that investment income will grow -- and this will
help.
Given passage of the Foreign Investors Tax bill we will
have created a domestic climate more conducive to foreign
portfolio investment here -- and this will help, too.
But over and above these, there must be a greater understanding by all industrial nations that the task of sustaining
meaningful equilibrium -- over the long-term -- requires adjustment by both surplus and deficit countries.
simply cannot all be in surplus at once.
Obviously, we
We are unlikely
all to be in equilibrium at once.
Before turning to a discussion of international financial
arrangements, I wish to take note of your request that the
advantages and disadvantages of wider permissible limits of
exchange rate variation be examined.
The Treasury has begun
such a study and will carry it forward in consultation with
other agencies.
We hope to be in a position to make our
conclusions available to the Committee during this Congressio~l
session.
- 19 Progress Toward Better International Financial Arrangements
There is no need to remind this Committee that our progress
in correcting our own balance of payments deficit gives added
urgency to the problem of strengthening the international
payments system.
The Committee and its members have made
substantial and highly useful and influential contributions
to the now nearly universal recognition of this need.
As international trade and payments continue to expand
we need to provide for the appropriate growth of world reserves.
The dollar will no longer be supplying the rest of the world
with increased monetary reserves as it has in the past.
You will recall that I visited many of the capitals of
Europe last summer to impress upon my colleagues in the finance
ministries the importance which this Government places upon
timely preparation for the period when some additional form of
international monetary asset will be required.
Economic Report reviews this question again this
points out that progress is being made.
The President's
ye~r
and
We have moved from the
discussion stage to the negotiating stage, and are coming to
grips with some specific proposals.
- 20 -
Two major lines of approach have received serious
in discussion and negotiations over the pas t year.
attenti~
One involves
the gradual expansion of automatic drawing rights in the International Monetary Fund.
A second approach involves creation
of a new reserve unit to supplement the dollar as a part of
available liquidity.
Participating countries would put up their
own currencies as backing for the new units and would undertake to accept the units under agreed procedures in international monetary settlements.
At the moment, negotiations are proceeding actively among
the Group of Ten nations that are of maj or importance in international financial arrangements.
Within the past few days
the United States representatives at the Group of Ten have
introduced certain proposals for consideration by the Group
which reflect some of our basic thinking and which entail a
combination of drawing rights and new reserve units.
I would
not be so rash as to predict when some measure of agreement
~y
be reached, or precisely what form it will take, but it is
encouraging that these negotiations are going on, and are tackling
the underlying issues.
- 21 When the Group of Ten countries have reached agreement on
general lines of approach this will mark the first phase in
realizing an improved system.
A second phase will be needed
to insure that the interests of countries not among the ten
are fully heard and weighed.
The third phase will be to achieve
adoption of a satisfactory plan by the governments concerned.
The potential for growth in production and trade, which
has been so dramatically demonstrated in the postwar period,
must not be constrained by inadequacy of world liquidity.
Once we have agreed on satisfactory means of providing for
the appropriate expansion of reserve assets, providing flexible
responses to changing needs, and providing proper safeguards
for our own best interests (including appropriate provision
for the role of the dollar), we shall have set the foundation
for a significant improvement in the international monetary
system.
Conclusion
In conclusion, I feel compelled to observe that the path
of progress consists inevitably of substituting one set of
- 22 problems for another.
In the economic sphere, some of the
problems emergent today are a bit more welcome than those
beset us for the last few years.
t~t
Domestically, the more
immediate danger is one of overexuberance and upward pressures
on costs and prices, rather than unemployment and shortfalls
in activity.
On the international payments side we are well
along the road to eliminating our own payments deficit, but
we have the rest of the way to go; and we have seen that as
our own deficit is reduced we bring to the forefront the adjust.
ment problems thus placed on the rest of the world, and the
potential strains on international liquidity.
If these problems are less unwelcome than their predecessors
it does not follow that they are any more easily solved.
Yet,
I believe· these challenges, too, are within our capabilities,
000
SUPPLEMENTARY STATEMENT OF THE HONORABLE HENRY H. FOWLER
SECRETARY OF THE TREASURY
BEFORE THE
JOINT ECONOMIC COMMITTEE
FEBRUARY 3, 1966
10:00 A.M.
During these hearings members of the Committee have
expressed their concern about the threat of inflation.
Administration shares that concern.
The
Its actions on the
government employee pay raise in August, the steel settlenent in September, and the aluminum, copper, and steel price
,ituations this past fall, as well as its current budget,
)ear witness to this concern.
There are those who propose that the Administration come
:orward now with a program to enforce much harsher restraints
In
the economy than those now in effect or proposed in the
'resident's budget.
The Administration disagrees with the
,remise that more needs to be
done~.
However, it welcomes
he putting forward of any specific proposals since they may
dd to the range of contingency planning in which it itself
s engaged.
Indeed, it suggests that the House Ways and Means
ommittee or this Joint Committee study, review, and recommend
- 2 the type of tax increases which would be most suitable if
inflationary pressures require additional fiscal action.
First, let us be very clear as to the position of the
Administration in the uncertainties that the situation in Viet
Nam makes inescapable.
The President has given to the Congress
an unqualified commitment that "Should unforeseen inflationary
pressures develop, I will propose such fiscal actions as are
appropriate to maintain economic stability."
He has pointed
out that "The extent of the fiscal or monetary restraint
that will be needed to avoid inflationary pressures will depend
directly on the restraint and moderation exercised by those
who have power over wages and prices."
This is our answer to
those who ask, "Will the government go for tax increases later
this year?"
Second, the Administration does not believe it is wise to
impose measures of restraint on the economy in addition to those
in e ffec t or proposed in the President I s Budget and Economic
Report unless or until the "unforeseen inflationary pressures"
develop.
We have seen too many expansions turned into recessions
by slamming down too hard on the brakes.
We have seen too 1l\IlCh
- 3 -
unemployment and underemployment too long to cut back drastically
and unnecessarily on private demand to provide purposefully
an idle reserve of manpower and capacity.
We advocate a course
of moderation and balance in dealing with any danger of economic
excess as we have advocated moderation and balance in curing
economic deficiency.
The national economic objectives as set forth in the
Employment Act of 1946, under which this Committee functions,
provide that "It is the continuing policy and responsibility of
the Federal Government to use all practicable means ... for the
purpose of creating and maintaining, in a manner capable to
foster and promote free competitive enterprise and the general
welfare, conditions under which there will be afforded useful
employment opportunities, including self-employment, for those
able, willing and seeking to work, and to promote maximum employment, production and purchasing power."
This Administration includes price stability as a goal
to be sought along with these more particularized objectives
Jf full employment and a healthy rate of growth.
It believes
- 4 that there is a fundamental compatibility of these three
objectives and that in seeking one of them it is unwise to
sacrifice the others.
If one objective, such as price stability
or full employment, is sought with the utmost rigor without
concern for the others, this is not wise national policy.
Of course, from time to time very special situations
~y
force one economic objective to move ahead of the others.
It
is quite conceivable that the threat of an inflation of such
size or duration might cause stabilization of the price level
to be given top priority.
seldom occur.
These black and white situations
The more usual task is to seek price stability,
growth and high employment simultaneously and in a reasonable
degree.
The challenge today is to find the mix of monetary,
credit, and fiscal measures best designed to achieve all
t~~
objectives, recognizing that public policies will not be adequatf
if some groups who enj oy and exercise substantial market power
choose to push up or maintain prices or wages at unwarranted
levels.
Against this background let us look at the present situat~
objectively and carefully with a concern that we press toward
all these goals rather than become preoccupied with a single
one.
In this calendar year 1966 restraints which did not
- 5 characterize 1965 have already been imposed upon the economy.
Beginning in January an extra $6 billion a year in Social
Security and Medicare taxes is being withdrawn from private
purchasing power to flow into the trust funds.
This was not
true of December 1965, or November, or October.
In December 1965 the Federal Reserve Board announced two
:lctions designed, in its words, "to dampen mounting demands on
)anks for still further credit extensions that might add to
Lnf1ationary pressures."
The full effect of these actions,
lhich take a considerable period of time to be felt, is yet to
>e ascertained.
The new tax proposals recommended by the President, if
dopted by March 15 as he urged, would withdraw from private
I~rchasing
power an additional $2.9 billion during calendar 1966.
The shift in the budgetary situation from substantial
eficits in fiscal 1966, brought on by the response to the
ha11enge of Viet Nam, to surpluses or minor deficits in the
dministrative, cash and national income account budgets has
een made possible by expenditure reductions coupled with the
ew tax proposals.
- 6 Coming on stream in 1966 are vast quantities of new
industrial capacity which are the fruits of investment made
in recent years.
Coming into the labor force are a million
and one-half additional new entrants from the younger age group
and, in addition, many hundreds of thousands are being given
the benefit of manpower training to better equip them to fill
the needs of the labor market.
And, of course, the dwindling
rate of unemployment is stimulating renewed effort in the
private sector to train and better utilize the available labor
force.
Given all these new factors the wise course of balance
and moderation in pursuing continued growth, a higher rate of
employment and relative price stability would seem to call
for determining how the economy reacts to this ne,,] mix of
relatively moderate restraints before adopting without apparent
present reason the far harsher measures -- presumably increased
tax rates, direct price and wage controls, and much tighter
monetary restraint.
TREASURY DEPARTMENT
OR lMMEDIATE RELEASE
February 4, 1966
PRELIMINARY RESULTS OF TREASURY REFUNDING
Preliminary figures show that $9,732 million, or 33.8~, of the $28,758 million
ecurities of the seven issues eligible for exchange have been exchanged for the two
ew notes included in the current refunding offer. About $4,938 million, or 90.3~
f the $5,467 million outstanding, were exchanged by holders of notes maturing
ebruary 15 and April 1, and $4,794 million, or 20.6~ of the $23,291 million outstandng, were exchanged by holders of the notes and bonds that will mature May 15 and
ugust 15.
Subscriptions total $2,110 million for the 4-7/8~ notes of Series E-1967 and
7,622 million for the 5% notes of Series A-1970, of which $860 million for the
-7/8% notes and $6,501 million for the 5% notes were received from the public.
Of the eligible securities held outside the Federal Reserve Banks and Government
$2,667 million, or 83.6~ of an aggregate of $3,190 million, of February 15
1d April 1 maturities and $4,694 million, or 44.8~ of an aggregate of $10,488 milLon, of May 15 and August 15 maturities were exchanged.
~counts
1
Following is a breakdown of securities to be exchanged for the new notes (amounts
millions):
ELIGIBIE FOR EXCHANGE
Securities
Date
Due
Amount
5/8;' notes, B-1966 2/15/66
7/8;' notes, C-1966 2/15/66
l/~ notes, EA-1966 4/1/66
tal Feb. & Apr. maturities
$ 2,195
2,597
675
5,467
PREREFUNDING
notes, D-1966
5/15/66
5/15/66
3/4~ bonds, 1966
notes, A-1966
8/15/66
bonds, 1966
8/15/66
tal prerefunding maturities
9,519
1,688
11,060
lz024
23,291
SECURITIES TO BE ISSUED
5a"
4-7/8a"
Notes
Notes
A-197O
Total
E-1967
$
507
1,450
153
2,110
$1,447
1,013
368
2,828
$1,954
2,463
521
4,938
1,231
654
2,587
322
4,794
1,231
654
2,587
322
4,794
UNEXCHANGED
Amount
or:.
$
241
134
154
529
11.0
5.2
22.8
""9.7
8,288 87.1
1,034 61.3
8,473 76.6
702 68.6
18,497 79.4
66.2
-=
Details by Federal Reserve Districts as to subscriptions will be announced later.
Grand Totals
F-365
$28,758
$2,110
$7,622
$9,732
$19,026
DEPARTMENT
.
.TREASURY
;
FOR
R;':;~MSZ
; 14
6 :30 ?I-l.
J
J.:onc.i.ay J February 7} 1966.
RESULTS OF TREASURy'S WEEKLY BILL OFFffiING
Tne Treasur'/ Department annOtmced that the tenders for tvo series of Treasury
bills, one series to be an additional issue of the bills dated November 12, 1965,
and the other series to be dated Februal~ 10, 1966, vhich were offered on Pebruft~
2, 1966, \oIere opened at the Federal Reserve Banks today. Tenders were invited for
$1,300,000,000, or thereabouts, of 91-day bills and for $1,000,000,000, or thereabouts, of 182-day bills. The details of the two series are as follows:
OF ACCEPTED
COMPf.'TITlVE BIDS:
RA~fu E
High
10\01
Average
182-day Treasury bills
maturing August 11, 1966
Approx. Equ1"
Price
Annual Rate
91-day Treasury bills
maturing May 12, 1966
Approx. Equiv.
Price
Annual Rate
98.831 f3:i
98.822
98.825
97.593
97.582
97.586
4.625,%
4.660~
4.650~
Y
4. 761~
4. 783~
4. 774~
Y
a/ Excepting one tender of $1,600,000
69~ of the amount of 91-day bills bid for at the low price was accepted
74% of the amount of 182-day bills bid for at the low price vas accepted
TOTAL TEJ."\1)illS APPLIED FOR AND ACCEPTED BY FEDlliAL RESERVE DISTRICTS:
District
Boston
New York
Philadelphia
Cleveland
Richrnond
Atlanta
Chicago
St. Louis
Minneapolis
Kansas City
Dallas
San Francisco
TOTALS
E.J
£I
Y
AJ2plied For
$ 21,849,000
1,686,839,000
27,044,000
44,683,000
16,858,000
43,190,000
325,553,000
54,848,000
18,717,000
26,680,000
27,701,000
105 z510z000
;p2,399,472,000
Accepted
$ 11,849,000
838,699,000
20,044,000
39,683,000
16,358,000
29,804,000
156,622,000
33,193,000
15,407,000
24,310,000
20,391,000
951.720z000
$1,302,080,000
·
··
·
£/
Applied For
25,529,000
$
1,368,013,000
20,327,000
68,953,000
5,745,000
28,588,000
285,285,000
23,111,000
10,596,000
14,436,000
12,884,000
146 z 1881,000
$2,009,655,000
AcceEted
$ 15,529,00:
651,533,00:
7,327,00:
44,758,00:
5,645,00:
14,280,00:
125,643,00:
9,659,00:
9, 096 ,00:'
13,936,00:
1l,624,OO:
91 z684 zoo:
$1,000,714,00:
Includes .$252,819,000 noncompetitive tenders accepted at the average price of 98.81
Includes ~1ll,366,000 noncompetitive tenders accepted at the average price of 97.sa
These rates are on a bank discount basis. The equivalent coupon issue yields are
4.77~ for the 91-day bills, and 4.96~ for the 182-day bills.
F-366
TREASURY DEPARTMENT
(
t
RELFASE 6 :30 P.M.,
lday, February 7, 1966.
RESULTS OF TREASURY'S WEEKLY BIIL OFFmUNG
Tbe !reasury Department announced that the tenders for two series of Treasury
~s, one series to be an additional issue of the bills dated November 12, 1965,
l the other series to be dated February 10, 1966, which were offered on February
1966, were opened at the Federal Reserve Banks today. ~nclers were invited for
300,000,000, or thereabouts, of 91-day bills and for $1,000,000,000, or thereluts, of 182-day bills. '!'he details of the two series are as follows:
OE OF ACCEPTED
IPE:lITIVE BJ:Dq:
High
ww
Average
91-day Treasury bills
maturing May 12, 1966
Approx. Equiv.
Price
Annual Rate
98.831 ~
98.822
98.825
4.625~
4.660~
4.650~
Y
182-day ~reasury bills
maturing August 11, 1966
Approx. Equ1v.
Price
Annual Rate
·•
97.593
97.582
97.586
4.. 761~
4.783~
4.. 774~
Y
!I
Excepting one tender of $1,600,000
of the amount of 91-day bills bid for at the low price was accepted
74~ of the amount of 182-day bills bid for at the low price was accepted
69~
~
'l'ENDmS APPLIED FOR AND ACCEPTED BY FEDERAL RESERVE DIS'l'RICTS:
listrict
os ton
'ew York
h1ladelphia
1eveland
ichmond
tlanta
hicago
t. Icu1s
inneapolis
ansas City
allas
1Ul
i'rancisco
~
AEplied For
$ 21,849,000
1,686,839,000
27,044,000
44,683,000
16,858,000
43,190,000
325,553,000
54,848,000
18,717,000
26,680,000
27,701,000
105 z510 t,000
$2,399,472,000
Acce12ted
AEE1ied For
$ 25,529,000
$ 11,849,000
1,368,013,000
838,699,000
20,327,000
20,044,000
68,953,000
39,683,000
5,745,000
16,358,000
28,588,000
29,804,000
285,285,000
156,622,000
23,1ll,000
33,193,000
10,596,000
15,407,000
14,436,000
24,310,000
12,884,000
20,391,000
95,720,000 :
146,188,000
$1,302,080,000 ~/ $2,009,655,000
·
·
·
·
Accepted
15,529,000
$
651,533,000
7,327,000
44,758,000
5,645,000
14,280,000
125,643,000
9,659,000
9,096,000
13,936,000
11,624,000
91 z684 z000
$1,000,714,000
£I
:Inc1udes $252,819,000 noncompetitive tenders accepted at the average price of 98.825
Includes $1ll,366,000 noncompetitive tenders accepted at the average price of 97.586
!'hese rates are on a baok discount basis. ~ equivalent coupon issue yields are
~.77i for the 91-day bills, and 4.96~ for the 182-day bills.
-366
TREASURY DEPARTMENT
.....
A
~-
.' I
'--
February 9, 1966
FOR IMMEDIATE RELEASE
TREASURY MARKET TRANSACTIONS IN JANUARY
During January 1966, 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
$75,072,000.00.
000
F-367
TREASURY DEPARTMENT
(
February 9, 1966
FOR IMMEDIATE RELEASE
TREASURY MARKET TRANSACTIONS IN JANUARY
During January 1966, 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
$75,072,000.00.
000
F-367
STATEMENT OF MISS EVA ADAMS
DIRECTOR OF THE MINT
BEFORE THE HOUSE GOVERNMENT OPERATIONS
SUBCOMMITTEE ON LEGAL AND MONETARY AFFAIRS
FEBRUARY 8, 1966
Mr. Chairman and members of the Legal and Monetary
,
Affairs Subcommittee of the Committee on Government Operations,
I am delighted to be here.
It has been almost a year since the Treasury last
testified before your committee which has been concerned,
not alone with the economy and efficiency of Mint operations,
but also with there being an adequate supply of coin to
meet the needs of our economy.
In a sense, our opportunity
to appear before your committee does furnish the means by
which we can give the American public a full report on the
current coin situati6n and to tell them our plans for the
future.
This, we hope will lead to confidence and under-
standing.
There has been a tremendous improvement in the availability of coin.
This is due,
in large measure, to the
assurance that the Government intends to flood the country
-2with new coins, if need be, and this has been backed up
by the full support of the Congress in giving the Mint
everything it needs to accomplish this end.
It has been unfortunate that in the past few years
we have had to face not only a coin shortage, but also to
enter into a relatively uncharted course on a change in
our coinage alloys.
In the relatively few months since the
coinage Act of 1965 has been passed, we are on top of both
problems:
we are producing a mass of coins, and we are
well under way ln shifting to the production of our new
alloy coins.
Late last summer we started to make the first of our
new alloy coins--the cupro-nickel quarter.
As the finished
coins came from the presses we packed them in Federal Reserve
bags, to destrqy any value that a "Mint Bag" might attach
to them for speculative purposes.
In November, 1965, the
Treasury sent word to the Reserve Banks they could start
using these new quarters, and within the next sixty days,
over 400 million went into circulation.
The impact of this
large quantity of coin hitting the marketplace in so short
-3a time, accomplished what we hoped it would--it brought
an end to the acute coin situation in every denomination
except the half dollar.
-4-
PART 1.
PRESENT SITUATION WITH RESPECT TO COIN SHORTAGE
Mr. Chairman, I know you are interested in specifics, and not in
assumptions.
To report to you factually on the coin situation in every area
of the country, we asked the Federal Reserve Banks, 36 in all, to sound
out merchants and bankers.
What has come back sounds like an unbroken
record - every Federal Reserve District and Zone reports there has been
improvement in the availability of every denomination, except half dollars.
With your permission, sir, I would like to read these reports into
the record.
-5ATLANTA:
The principal Atlanta banks report very few
problems were encountered in meeting customer
demands for quarters, dimes, nickels and cents during the
past holiday season. Availability of half dollars were
critical during this period, and at the present time.
These banks report present coin inventories about normal.
Observations of local merchants are very much like that
of the banks. A typical comment:
"The new quarters have
done a tremendous job in easing the shortage." The lack
of halves does not disturb them. Our observation as to
the composite picture in the area served by this office is
that there is continuing improvement.
BALTIMORE:
Except for a short period in November when we
had to ration dimes, we had no problems in
meeting all requests for coin during the past holiday season,
with the exception of half dollars which we had to ration.
The situation at present is the same. We are filling all
orders except half dollars which we are rationing. Three
local member banks plus one large non-member bank report
as follows:
Maryland National Bank - The holiday season was OK
except for a slight shortage of dimes for a short period
and the shortage of half dollars. We are currently OK
except for half dollars.
First National Bank of Maryland - The holiday season
presented no problems except for half dollars. We currently
have no problems except for half dollars.
Union Trust Company of Maryland - We had no problems
during the holiday season except for half dollars.
In fact,
we have been able to supply correspondents' requests to
some extent except for half dollars. We are currently OK
except for half dollars.
Equitable Trust Company (non-member) - The holiday
season was OK except for dimes and half dollars. We are
currently OK except for half dollars.
The large Baltimore department stores report as follows:
Hochschild, Kohn & Co. - The holiday season presented
no problems except for half dollars. We are currently having
-6no problems except for half dollars.
Hutzler Brothers - The holiday season was OK except
for half dollars. We are currently OK with a slight
improvement in half dollars.
E. J. Korvette (large discount house) - We had no
probl.ems during the holiday season except for half dolla rs.
We currently have no problems except half dolla rs.
BIRMINGHAM:
with the exception of halves, we have had
an ample supply of coin since the release
of the clad quarters.
Since then, the statement heard
almost universally from merchants and bankers is:
"No
problem except for halves."
Those using coin change machines have a problem,
but most seem to have kept the machines operating by
spreading available supply.
Some have purchased attachments
that bypass the half dollar section of the machine.
-7BOSTON:
Our coin supplies are presently adequate in all
denominations except half dollars. Our coin
inventory, except for half dollars, is at approximately
a normal level. The flowback of all denominations except
half dollars has shown substantial improvement, but this
good situation has been made possible only by continued
receipt of supplies from the Mint.
'The banks in this district have generally accepted
the use of quarters in lieu of half dollars, but we get
numerous complaints from banks and their customers that
half dollars are essential for the functioning of changemaking machines.
with the exception of nickels, we were unable to
meet all the coin requests in full during the holiday
season. Nevertheless, inquiries of local banks and large
users of coin confirm that sufficient coin was available,
with the exception of half dollars, to cope with seasonable
needs.
Local banks and large users now report adequate stocks
for present and foreseeable needs except for half dollars.
Large banks report a considerable slackening in demands
from correspondent banks. We are continuallY urged to seek
improvement in the half dollar situation because of serious
difficulties with change-making machines.
BUFFALO:
The coin situation has eased in this area except
for halves which are in very short supply. We
contacted the Buffalo banks and found that during the holiday season they were short in the supply of quarters and
halves. The situation has eased now for quarters, but
they are still very short of halves. We contacted one of
the large department stores and two of the large grocery
chains and found that they had no problem with coin during
the holiday season except for halves.
-8-
CHARLOTTE:
Of six local merchants contacted, four said
they experienced no shortage except halves
during the past holiday season and they had sufficient
supply of quarters to substitute. The other two reported
some shortages of dimes, quarters and halves.
Of four local banks contacted, only one reported a
coin shortage during the holidays. That bank purchased
coin 'in December. At the present time, except for halves,
coin is in ample supply in this territory.
CHICAGO:
Broadly stated, the coin situation in this area
is considerably improved as compared with preholiday period. However, while nickels and cents have been
and are in adequate supply to meet all demands, we continue
to ration halves, quarters and dimes.
There is no flowback in halves, and approximately
once a month as we receive Mint shipments, the entire
amount is allocated to member banks on the basis of deposit
size.
In every instance, our survey today of banks and
merchants has reflected an extremely critical situation
for this denomination during the holiday season and at
present.
Percentage payments of quarters and dimes are
currently higher than heretofore, and for next week for both
denominations will be 125 percent of pattern. None the
less, even with this percentage, we are unable to meet
demands for quarters and dimes as illustrated by our
experience this current week when, even though payments
of quarters were 100 percent of pattern, total demands
from banks outside of Chicago were 150 percent of payments:
and for dimes, with payments 125 percent of pattern, total
demands from banks outside of Chicago were also 150 percent
of payment s.
Increased percentage payments of dimes have been due
to increased flowback, with some reduction of orders. with
-9curtailment of Mint receipts, we are concerned as to our
being able to maintain this high percentage payment level.
For quarters, flowback has not increased to any significant
degree, and our high level of percentage payments results
from Mint receipts.
with continuation of Mint shipments of quarters ln
the coming months comparable to January receipts and the
February expectation, we feel that we can maintain a high
level of percentage payments, and possibly in the near
future we can remove restrictions for payments of this
denomination.
In our contacts today with banks and merchants regarding quarters and dimes, the consensus reflects in
almost every instance severe shortages of quarters during
the holiday season and presently moderate shortages in some
areas and no problems in others. For dimes, moderate
to severe shortages during the holiday season and presently
in almost every instance no problems were reported.
For
dimes, however, we are apprehensive as to our ability to
maintain the present high level of payments, which is
almost entirely supplied fromreasonal flowback and reduced
requests. We are fearful that unless Mint shipments increase,
we may be obliged to reduce our percentage payments drastically
and thus curtail the flowback with a return to our former
problems.
-10-
CINCINNATI:
During the past holiday season the coin situation
was critical in this area except for cents and
nickels.
Since the first of the year, there have been some
signs of easing except for halves. Local bankers report:
IIDuring the holiday season the coin supply was grossly
inadequate. We had to send a truck to rural areas of Kentucky to buy a few dimes and quarters from country banks
and others. No halves are available.
Since the first of
the year, the situation has eased a bit, but still we are
unable to fill customers' orders.1I
IIWe were able to get through the holiday season with
a considerable amount of rationing.
Since that time, we
have had slightly less demand, but we are unable to satisfy
our customers' needs. Halves are almost a thing of the past.
We recommend that the Mint release a sufficient supply to
end constant rationing of coin to our customers. II
"During the holiday season we were very embarrassed,
particularly in making change at tellers' windows. We
were unable to satisfy our customers. At the present time
the demand for silver coins has lessened to some extent
but our supplies are still inadequate, especially halves. II
"We were very short during the holidays, and we still
have a problem. We cannot see much difference between now
and December."
Two department stores report:
"Our biggest problem is halves and quarters. We are
wrapping ourselves. We cannot get coin from the banks.
Halves are still a problem, but other coins are now OK."
"Our cashiers keep a good supply of coin on hand. We
do not get coin from the banks. We have the situation under
control."
A supermarket reports:
"We had many problems during the holiday season. No
halves, and pressure on quarters. The situation eased by
the end of the year, but now we are only getting 75 to 80
percent of our needs. II
-11-
A hotel reports:
"We had no coin problems during the holiday season
or after. We accumulate our own coin from operations."
CLEVELAND:
We have met all requests for quarters and
dimes this past week and most requests in
prece¢l.ing week due to heavy Mint shipments and falloff in demand. The return flow from banks for the first
three weeks of January, however, has been light. The
return flow of dimes was only 89 percent of the 1965 level
and one-fourth of the 1962-64 levels. The return flow of
quarters was 126 percent of 1965 level but about oneeighth of 1962-64.
Both dimes and quarters were in short supply and
rationed through December. Banks generally complained
that they could not satisfy merchants. Many banks were
still making special efforts to obtain quarters at additional
expense, including purchase at a premium.
The payment of halves is still limited to the receipts
from the Mint. This requires severe rationing. Almost
no halves appear in circulation in this community, nor do
they return to the Reserve Bank. The supply of cents was
adequate through the holiday season and nickels were
plentiful. The return flow of both is currently close
to the 1962-63 levels. We have a very large inventory of
nickels.
Local banks report:
"The clad quarters gave a tremendous lift, but did
not do the whole job. We could not supply customers with
what they wanted."
"Whole coin situation is not too bad right now except
for halves."
"We had no problems since the holidays except for halves."
"We made out all right during the holidays because we
bought quarters at a premium and got dimes from the telephone
-12company. "
"Our situation was not too drastic during the holidays.
We arranged to get quarters from non-bank sources, but we
did not buy any."
"The situation seems to be clearing somewhat.
I have
not had a complaint in two weeks."
DALLAS:
During the past month our coin receipts from
commercial banks exceeded coin shipments for the
first time since February of 1962. The stock of coin on
hand totaling $3,822,000 constitutes twice the amount of
coin which, prior to the coin shortage, was considered to
be a normal working stock or a one month's supply. We do
not, however, have a normal supply of half dollars; they
are still in short supply.
Local banks report:
First National Bank - "We were able to supply coin to
customers during the holiday season with the exception of
half dollars. The demand for halves is still a current
problem. "
Republic National Bank - "We have a good supply of
coin except halves, but most customers have learned to
use quarters instead. The half dollar problem is the only
current one."
Mercantile National Bank - "We had no coin problem
during the holiday season except we were not able to supply
the demand for half dollars. Our only current problem is
half dollars."
Texas Bank and Trust Co. - "We have a good stock of
coin except halves. Many customers are content to use
quarters in place of halves. We have no current coin problem
except the shortage of half dollars."
Merchants report:
Automatic Canteen Company of America - "We have had
no problem for ~uite some time. We are making deposits
of coin in the bank of about $5,000 daily."
-13-
Neiman-Marcus - "Some difficulty was experienced
because of the shortage of half dollars. Our supply of
quarters helped to alleviate this situation. We have no
current problem except for half dollars."
Sanger-Harris - "We started accumulating coin in
November in anticipation of holiday needs and had no
difficulty during the buying season. Our only problem
now is .shortage of half dollars for change machines."
Titche-Goettinger Company - "We had no problem during
the holiday season except for half dollars. Our company
uses change-making machines and the half dollar shortage
did present a problem. All other denominations are in
good supply. We have no current problems other than halves."
Sears-Roebuck and Company - liThe half dollar shortage
was the only problem this year as compared with a shortage
of all coins in 1964. No special instructions were issued
to sales people for making change because of adequate supply
of coin during the past holiday season.1I
At the present time, with the exception of half dollars,
we consider the coin in circulation, that in commercial
banks and this bank's current supply to be adequate to meet
the demands of business and industry in the area served by
the Dallas office.
DENVER:
Coin situation in this area appears to be easing
in all denominations except halves. The situation
during the past holiday season was "very tight," according
to bankers contacted. However, since January 1, coin appears
to be adequate for needs except for halves.
-14-
DETROIT:
The consensus of a group of leading and representative bankers meeting in Detroit recently
was that the coin shortage is not over. They pointed out
that the Treasury and the Fed may think this is so. This
feeling of optimism, however, has not spread to some of
the banks, and certainly many, many merchants are not too
satisfied in their minds that if this coin problem erupts
again the Mint's resources are adequate to meet it.
Contributing to this feeling of uncertainty on the
part of the merchants is the half dollar shortage. Detroit
was never a big user of this denomination until recent
years. Through an "education" program carried on by the
banks, the merchants began using more halves than before.
It involves fewer coins to count, and it moves around so
fast that it considerably lessens the demand for quarters.
Many of the change machines in the city of Detroit still use
half dollars, and though they have been hard to get, the
banks still are scrounging around to pick up enough to
furnish their customers who operate them.
In other words, the bankers say:
"As long as there is
a shortage of half dollars, there is still a coin shortage."
EL PASO: Banks and merchants fared generally well during
the holiday season with the exception of an extreme
shortage of halves. However, our extremely low supply of
quarters from December 10 through December 14 seriously
handicapped local merchants. We were completely out on
December 15, but received a new supply on December 17.
Since then there has not been any strain except for the
continuing problem of halves.
Sears and large federal mart discount house report:
"No special problems on cents, nickels and dimes, but
we constantly pushed banks for really adequate supply of
halves in order to be able to be in a reasonable operating
condition on quarters."
-15-
Our largest department store which has suburban
branches stated it was badly short on half dollars which
were urgently needed to operate selectronic NCR cash
registers.
Quarters were a very poor substitute because
this denomination only fouled up the situation by completely locking the machines, thereby making them inoperable.
Our principal theatre chain also complained that lack of
halves was a headache on their change machines.
'The contacted bank officials further stated that the
most consistent complainers were food, beverage, cigarette,
etc., companies that use vending machines. But this has
been going on so long that they have learned to live with it.
HELENA:
In Montana the supplies of all coin except half
dollars were adequate during the holiday season.
Increased flowback of coin from banks to this Branch within
the past two weeks suggests that banks are less concerned
about their inventories, except for halves.
Despite increased quantities of halves that were
distributed during December, we are still unable to supply
the amounts requested. Local merchants and banks have not
complained about the shortage of coin during the holidays.
HOUSTON:
With the exception of halves, there has been a
gradual buildup of our coin stock and banks in
this area are being adequately supplied.
In our contacts
with selected banks and chain stores today, we were informed
that, except for halves, they encountered no problems during
the recent holiday season and are currently obtaining ample
coin to satisfy their needs.
Some of the larger banks also
indicated some acceleration in over-the-counter receipts in
the past month or so, enabling them to gradually add to
their inventory.
JACKSONVILLE:
All denominations are in ample supply and
the return flow from banks is good except
for halves which are in extremely short supply and are
-16-
being rationed.
Quarters are available to substitute for
halves without creating serious problems except for many
grocery chain stores needing halves for electronic change
makers.
Two local banks report:
"We suffered slightly for quarters during the Christmas
season, but the half situation was not as critical as expected because businesses and the public readily accepted
quarters as a substitute. The present situation is that
coin is in ample supply except for halves. We have no
serious problems."
lOWe needed additional quarters and halves during the
Christmas season, but were not seriously handicapped. At
present we could use additional halves, but so long as
quarters are available, this does not pose a real problem."
One local department store stated:
"We had no trouble during the Christmas season and we
are experiencing no difficulties at present. However, we
will be able to use additional halves when available."
The headquarters of a large grocery chain operating
several hundred stores reported:
"For some time we have experienced constant problems
with the shortage of halves that are needed in electronic
change makers that were acquired about the time the shortage
of halves began to be felt.
During December we also had
some difficulty in getting all the quarters that were needed,
but other denominations were available in satisfactory supply."
KANSAS CITY:
The coin situation has improved considerably
and we are presently rationing only halves.
The flowback is increasing and we are now approaching the
level of receipts of the spring of 1964. Total coin on
hand is highest since January 1963. Half dollars disappear
from circulation immediately and there are almost none in
-17-
circulation in this area. The supply of cents, nickels
and dimes was plentiful during the past holiday season.
Comments of local banks and merchants ranged from "Not
nearly enough quarters and no halves," to "We got by but
had to shop for several sources for quarters." All are
critical of the half dollar shortage.
LITTLE ROCK:
The supply and demand situation is near
normal for all denominations except halves.
Commercial banks report that all needs during the holiday
season were satisfied except halves. Lack of uniformity
in new clad quarters is reported to be causing some problems in use of coin wrapping machines and coin changers.
LOS ANGELES:
Banks and others are presently disgorging
cents and nickels. We are presently faced
with an extreme and serious shortage of storage space because
of the heavy inflow from all sources of these denominations.
We have already exceeded our normal coin vault capacities,
requiring storage in a manner that is hampering operations.
The dime situation is easy. One large central vault
informs us they are experiencing some return flow of dimes
from outlying branches and commercial customers, so their
demands on us are abating. Another large user gives us
substantially the same information, though the return flow
to them is still rather nominal.
Quarters show signs of circulating with some surpluses
developing in particular areas.
One central cash vault
informs us that it is receiving quarters out of circulation
from vending companies, which is a complete turnabout from
former experience. Another source informs that quarters are
still in short supply with the demand still strong, but not
at former critical levels.
Halves, of course, are not circulating in areas to
any accretive extent. None have been received by us out
-18-
of circulation for a considerable period of time.
Merchants who are large coin users fared reasonably
well, though their suppliers did receive and continue to
receive many complaints regarding continuing shortages,
particularly in the denominations of quarters and halves.
Frequently, they are required to substitute smaller denomination coins for quarters and halves.
Large coin users have apparently learned to live with
the continued extreme shortage of halves, though it meant
they had to substitute quarters or smaller denomination
coin when making change. The shortage of halves continues
to be a critical factor to large chain stores and merchants
who use automatic coin machines, these machines being
inoperable without all denominations being available to
stock them.
LOUISVILLE:
We are meeting all requests for coin received
from banks served by this office with the
exception of half dollars. Normal flow is becoming more
evident. Banks and merchants contacted reported no problem coin-wise during the holiday season nor at present.
A typical quote is: "No coin problem except halves and
that will not be corrected until the issuance of the clad
halves."
MEMPHIS:
In general the local coin situation during the
past holiday season was satisfactory. One large
bank indicated sufficient supply of all denominations.
Another indicated only minor scarcity of half dollars.. A
few merchants reportedly modified their automatic coin
changers to operate without half dollars.
Pressure on half
dollars now appears to be easing and over the past three
months, the flow back on other denominations has established
an upward trend.
-19-
MINNEAPOLIS:
Our desirable inventory is more than adequate
in quarters, nickels and cents. The inventory
on dimes is about two-thirds of what we would like. We
are out of halves and have been severely rationing them
for many months. We are experiencing some flowback of all
denominations except halves.
Large local banks report:
,"During the holiday season, the only problem was the
shortage of halves, and this condition still exists."
"During the holiday season, we rationed halves and
dimes. However, dimes are rationed only to the extent of
'below desirable' inventory. At present, no problem
except for halves. We continue to have considerable demand
for all denominations."
"No problem except for half dollars. At present we
have more than an adequate supply of all denominations
except halves."
"Halves were in extremely short supply. Quarters
were also in tight supply, but we were able to meet legitimate
demand. Requests by two national firms for quarters for
promotional purposes were turned down. At present we are
meeting complete demand except for halves."
Quotes from local merchants (food chain, theatre chain,
parking lot chain, coin laundry, and department store)
"Halves, quarters and dimes were a real problem to us
during the past holiday season; nickels to a lesser extent.
We bought coin from our customers (consumers) by offering
100 free trading stamps for $10 in coin. The situation has
improved considerably since the holiday season as our supplier
banks have not rationed us except for halves."
"We can't get any half dollars, which of course, you
know. The coin shortage eased up over the holiday season
when the new quarters came out.
I can speak for all the
managers downt.o-wn.
It is rather difficult to operate as
our change machines must be operated to punch two quarters
instead of one half and the element of error is there."
"Half dollars are very short. The pressure is off a
-20-
little with the new quarters.
In selling two tickets at
$1.75 each, totaling $3.50, our cashiers must punch two
quarters for change and mistakes can occur.
Southtown had
a little problem for about a week with dimes. Until the
new quarters came out, they were also a problem. The
fellows are getting pretty good at scrounging. We have
managed to get by with quarters, but it does make for a
lot of mistakes."
"We get most of our coin from Olrown lots. We operate
by customer envelopes. We don't have any trouble with coins
for our own operations. We turn in approximately $150
every day in coins, mostly quarters, nickels and dimes.
We do have trouble with half dollars, and that is the
only denomination we are short of now.
In a $1,000 or
$1,100 day, we never turn in more than two rolls of half
dollars."
"My son operates a coin laundry and the fifty-cent
pieces have disappeared from the face of the earth."
"We experienced a very pleasant holiday season in 1965
as compared to 1964. Our local banks were able to supply
us with everything except halves. The release of the clad
quarters helped our situation. We have an adequate supply
of coin now except for halves."
NASHVILLE:
We are now in the position to furnish all denominations of coins needed by banks except
halves. Banks and merchants report:
Third National Bank - No coin shortage during holiday
season with the exception of halves. The flowback was
good after the holiday season.
Commerce Union Bank - Some shortage in quarters during
the holiday season, but enough smaller denominations so
as not to create a serious problem. The largest problem
is in supplying halves to machine users.
First American National Bank - We met requests for
coin during the holiday season except for halves. The
-21-
supply of halves was sufficient to satisfy machine users.
A surplus of cents, nickels, dimes and quarters are now
on hand.
Some flowback of halves is beginning to show,
but few Kennedy halves are coming back.
Hamilton National Bank - (Knoxville) During the
Christmas season we had difficulty in obtaining enough
quarters and there was not enough halves to meet the demand
for ~egitimate use.
First National Bank - (Greeneville) We were able to
meet the demand during the holiday season except for halves.
Most customers were satisfied to use quarters instead of
halves. The demand for halves has decreased.
Commerce Union Branches in Columbia and Camden Sufficient supply of all coin except halves. The demand for
halves has been strong, but no serious problem. The flowback of all denominations is good except for halves.
H. G. Hill Grocery - The coin situation is now good.
The shortage of halves is not causing any particular problem. Very few halves &e received in change.
Sears, Roebuck & Co. - We were able to make change
during the Christmas season. No noticeable shortage of
any denomination.
Cain Sloan Co. - During the holiday season we experienced difficulty in getting halves and quarters in
sufficient amounts. The shortage of halves was a problem
because of change machines. We have noticed some customers
looking through change to pay with clad quarters instead
of old quarters.
Harveys Department Store - We were not able to get all
the coin we needed during the holiday season.
Problem in
quarters and halves for change-maker. We had to go out of
town in December to get quarters from a branch store.
We were conscious of a coin situation each day. No problem
now except for halves.
A & P Grocery - No problem in any denominations except
halves. We do not get halves in change. This slows up
change operations.
-22NEW ORLEANS:
Most merchants fared considerably better during
the recent holiday season than during the
same period a year ago. There were reportedly some shortages
in dimes and rather critical shortages in halves. Merchants now report coin supplies adequate in this area
except for half dollar denomination where a critical shortage
still exists. One large food chain indicates an inability
to use their change dispensing machines because of the half
dollar shortage. A local bank reports that a valued
customer threatens to change banks unless the bank can
supply more halves.
NEW YORK:
During the past holiday season, the coin situation
was markedly improved over the previous year
with the exception of half dollars, which have been and
continue to remain in extreme short supply. During the
month of December we were able to fill orders from the
small banks with minor exceptions. However, it was
necessary to continue, with the exception of nickels,
to impose maximums ranging in cents from $5,000 to $15,000,
in dimes from $5,000 to $30,000 and in quarters from $10,000
to $35,000. The maximums, however, came into play mainly
with respect to our larger banks.
Information obtained from a number of banks indicates
that during the holiday season, and in varying degrees,
banks were able to acquire sufficient coin by various means
to satisfy most demands made on them, and only one bank
reported that it had been necessary to purchase coin at a
premium during the holiday season. We understand that
this bank has purchased some coin each week since October,
1964. We heard of no complaints that business activity
was affected by the coin shortage.
As to the present conditions, this week, for the first
time in a long time, we were in a position to satisfy all
demands for coin, except for half dollars.
The amount of
-23coin deposited with us by banks this week amounted to
$1,520,000 which was about three times the amount deposited
in the comparable week last year.
Local banks agree that for practical purposes the
situation now can almost be considered back to normal,
except for half dollars.
OKLAHOMA CITY:
The consensus of local banks and merchants
is that no shortage of coin, other than
halves, has existed since December 14. We concur. Half
dollars have been critically short since shortly after
the introduction of the Kennedy design. There appears to
be an abundant supply of all other denominations.
OMAHA: Regarding the coin situation during the past holiday
season, generally speaking, we were able to take
care of the demands of all our banks during this period.
Some rationing was necessary on quarters prior to the
receipt of $200,000 in halves on December 16, 1965, and
$100,000 in quarters on December 21, 1965. Since that
time, with the exception of half dollars, our supply of
other coins is sufficient to take care of demands without
rationing. We are receiving many inquiries regarding the
availability date of the new half dollars.
PHILADELPHIA:
The banks in all areas of this district,
although not able to meet all customer
requests over the recent holiday period, were able to keep
customers reasonably supplied with all denominations of coin
except half dollars.
Present coin supplies are meeting
most requests except for half dollars. Two bank officers,
one in northeastern Pennsylvania and the other in a south
New Jersey seashore resort, felt that some large users of
coin were still maintaining higher than necessary inventories.
Two officers of Philadelphia banks felt that the coin flow,
except for half dollars, resembled its pre-shortage patterns.
-24PITTSBURGH:
The present coin situation at this office is
good except for the stock of halves which
will last only about two days. We are filling all requests
for quarters and dimes which are believed to be reasonable.
Prior to receipt of recent shipment, both were rationed
$500 to $1,000 per order. Nickels and cents are plentiful.
Additional quarters and dimes provided prior to the holidays
were 'timely and greatly appreciated.
No halves have been
deposited here in 1965 or 1966 by banks.
Local banks indicate that their situation is practically
the same as ours. Cents and nickels are excellent, dimes
and quarters are greatly improved both now and prior to
the holidays, and halves are critically short.
Principal complaint of merchants received by banks
is the lack of halves and having to dissipate a limited
supply of quarters to substitute for them.
Two large local banks bought substantial amounts of
quarters from a New Jersey firm prior to the holidays for
their own and their correspondents' use. The premium plus
shipping costs are understood to have been substantial.
PORTLAND:
During the past holiday season and several
months prior thereto, halves, quarters and
dimes were rationed to banks in our zone as supplies
were not available to meet their requirements. Nickels
and cents were in good supply and no problems existed.
At present, we are experiencing a good return flow of
dimes and a small amount of quarters. We are now filling
all orders for coin in full with the exception of halves,
which are in critically short supply.
One local bank states:
"We barely got by during the
holiday season. We had demands for coin that we couldn't
meet. We have no problem now except for halves."
Another bank reports:
"We were not able to supply
all requests during the holiday season. The situation was
-25-
quite tight. Halves are our only problem now."
One local concern says:
"The situation was very
tight during the holiday season. We barely got by.
It
was necessary to close down the coin change registers
as no halves were available and quarters were in short
supply. We has to obtain coin sources outside banks.
We have no problem now except for halves."
RICHMOND:
Eight banks were contacted in our area and
the results were almost identical - no real
problem during December and no problem today except for
halves. Three banks reported slight problem in quarters
prior to the distribution of the new type quarters. All
banks report pressure from customers for halves.
A large drug chain reports:
"No coin problem before
Christmas or now - not since the new quarters came out."
A large department store reports:
"A real problem
with half dollars, but no problem with any other coins
before Christmas or now."
One large grocery chain reported problems in dimes
and quarters until late in the year, but the situation
eased before Christmas. No problems at this time."
The drug and grocery chains report no need or desire
for half dollars.
This office has filled all requests for all coins
except halves since the middle of December. No halves
are returning from circulation and Mint deliveries of new
halves are rationed and paid out two to three days after
receipt. Mint shipments and the coin return from circulation
provide satisfactory supplies in cents. Nickels, dimes and
quarters returning from circulation at a very high rate.
ST. LOUIS:
with the exception of half dollars, the present
coin situation in this area is good. Half
dollars continue to be rationed severely. Supplies of other
-26denominations appear to have caught up with demand. Coin
flow back for January 1966 is about 41 percent above
December 1965 for cents through quarters, but is only 48
percent of January 1963. Flow back of halves is nil.
Two large local banks informed us that beginning
with the receipt of the initial supply of clad quarters
in November 1965, all requests for coin from customers
were fully supplied except for halves. One other large
local bank informed us that some rationing of quarters
was necessary in the early holiday season.
SALT LAKE CITY:
During the past holiday season we had
ample supplies of dimes, nickels and cents
with quarters barely adequate and halves scarce. Virtually
all quarters received from the Mint was disbursed to the
banks. The quantity of halves was insufficient to meet
the demand. Our present situation indicates we have
ample supplies of all denominations except halves, for
which there is still a large demand. Requests for other
denominations is now reduced considerably.
The return flow of quarters started the first of the
year and is accelerating. We have a large supply of nickels
and cents, with the return flow of these denominations becoming relatively heavy, and this may present future storage
problems. There is no return flow of halves.
All banks and merchants contacted indicate that
adequate supplies of coin presently available except for
halves. One local bank indicated difficulty experienced
in supply coin about the middle of the year, but by Christmas
season the early release of the clad quarters had eased
the situation greatly. This was echoed by other local
banks contacted.
Local merchants experienced only temporary and minor
disturbances in coin supply during the Christmas season~
-27however, as they used automatic change return devices on
their registers, the lack of half dollars made such devices ineffective. One of our rural banks indicated it
has been able to acquire enough coin before the Christmas
season to adequately supply all customers, while another
rural bank observed that the present ample supply of
quarters is apparently causing hoarders to return quarters
into 'circulation.
In general comments of all banks and merchants contacted was that the large supply of quarters made available
during the last part of the year materially reduced the
problems they were experiencing with coin shortages prior
to the holiday season.
SAN ANTONIO:
We have no silver dollars on hand and seldom
receive requests for this denomination. with
the exception of halves, we now have an adequate supply of
other denominations to meet the demand for coin in our
area and rationing is no longer necessary. This was brought
about by ample shipments from the Mint and a substantial
return flow from member banks. As was necessary during
the entire year of 1965, it is still necessary to ration
halves because of rather small shipments from the Mint and
no return flow from member banks. Our present inventory
of halves is almost mmpletely exhausted. While we are
compelled to refuse request orders for halves, few complaints
are received as adequate supply of quarters is available.
One large local bank advises that the coin situation
is now satisfactory with the exception of halves. Only
about one-third of the orders from correspondent banks
can be filled for halves.
Several customers are unhappy
over the inability to obtain this denomination and some have
altered change machines to eliminate the half dollar slot.
-28Another large bank advises that the quarter situation
was corrected during the latter part of December, but it
is unable to meet the demand for halves from both correspondent banks and local customers. A third large bank
says the coin situation is OK except for halves, and that
fewer complaints are received.
Two local merchants handling large amounts of coin
are not concerned over the half shortage as ample supplies
of quarters are available. Both have altered change
machines to eliminate the slot for halves.
SAN FRANCISCO:
The coin situation in this area has greatly
improved in recent weeks with the exception
of half dollars. The situation by denomination is:
Cents - All orders met in full during the past year
resulting in improved inflow. We are still experiencing
net payments.
Nickels - Permanent elimination of rationing last
June apparently disgorged hoarded coin and resulted in
abrupt acceleration in return flow during the past several
months.
Inventory build-up in this denomination causing
critical problem in availability of coin storage space.
Present inventory of nickels, $2,880,000, represents at
least a six month's supply.
Dimes - Rationing discontinued in mid-December, 1965.
Now experiencing some inventory build-up in this denomination.
Quarters - Although rationing during pre-holiday
season was still severe, heavy payout around holidays may
have improved shortage. Discontinued rationing January 25.
During the past few days, orders have begun to drop off
and inflow appears to be developing.
Halves - This is our only critical denomination.
Severe rationing continues and return flow is nil.
Discussions with large banks reveal that the situation
at the commercial banking level is apparently in accord
with observations cited above. All banks contacted agree
there is no problem with cents, nickels or dimes at this
time, nor was there during the Christmas season.
Some
-29=
banks indicated quarters fell considerably short of meeting
customers' demands during December, while others indicated
they met orders in full.
However, all agree that present
supply is adequate and customer rationing has been discontinued. The supply of half dollars is critical at all
conunercial banks and they are receiving no deposits of
consequence in this denomination.
Inquiry of a food store chain, department store and
national chain department store developes that halves and
quarters were in short supply during the holidays, necessitating use of smaller denominations. The merchants reported
that except for halves sufficient coin is now available
for normal conduct of business.
SEATTLE:
Coin inventories in this area were adequate during
the past holiday season with the exception of
quarters and halves. Cents and nickels have been in good
supply most of the past year.
In October we asked you to
curtail shipment of nickels to us as our inventory was
high. Since then our receipt of nickels from commercial
banks has been sufficient to fill new orders received
without lowering our inventory.
Dimes have been in good supply the past two or three
months. Quarters were in short supply all year and this
continued during the holiday season as our December allotments were received late.
Since then the situation for this
denomination has improved to the point where some banks are
now actually returning a few quarters to us. Orders from
banks the last two weeks have been much lighter than usual.
Halves were inadequate all year and continue to be so.
Inquiries made at local banks today indicate that they got
through the holiday season satisfactorily but with a few
uncomfortable situations.
Regarding quarters and halves, the situation during the
holiday season was more severe in eastern Washington as far
-30as we can determine. Merchants fared satisfactorily with
most complaints being with regard to halves. Many of
these were because of automatic change machines which will
not function without halves. On an overall basis, the
coin situation in this zone seems much improved since
Christmas.
* * * * * * * * *
-31Our main problem with half dollars, obviously, is their
use in change and vending machines.
Of the 250,000 wall-
type change makers in use in the united states, approximately
190,000 are equipped to receive the u.s. half dollar and
issue coins of lower denomination.
Fifty percent are ln laundromats; forty percent are
in food and refreshment vending machine locations, such as
in offices, factories, and hospitals; ten percent are located
adjacent to pay telephones, airport parking meters, automatic
"car wash" establishments, etc., and other "un-tended"
establishments.
In addition, approximately 470,000 "juke" boxes are
equipped to receive the half dollar.
Several years ago, there was little demand for the half
dollar.
Most stores sent them back to the banks.
halves are almost non-existent.
Now the
The general public seems
to be hoarding the halves; as they get a half dollar, they
evidently stash it away.
explain.
Why they are doing this is hard to
Four hundred million Kennedy half dollars have
-32-
disappeared; they are not widely ln circulation--and the
fact they are not in circulation and are being held in
"mint condition" puts them ln a category as showing no
promise to having especial value for many, many years, if
even then.
Think of the potential interest on their money
which the hoarders of these coins will lose!
Related to the matter of people holding half dollars
out of circulation, this also seems to apply to the silver
quarters.
Cain-Sloan Company is quoted in the Reserve Bank
of Nashville report:
"Have noticed some customers looking
through change to pay with clad quarters instead of old
quarters."
Here in Washington, I have had reports from
merchants that a large percentage of the quarters they find
in circulation are the new clad quarters, and fewer silver
quarters.
Pulling these older quarters out of circulation,
just to hold them, seems senseless.
Twenty-five years from
now they will still be worth only a quarter.
And though
I am not a coin collector, I would judge that these circulated
quarters, too, will be a poor numismatic investment.
-33The dime has given us little trouble in recent months.
At the Denver Mint we have been making the 90% silver dimes
which have been released to circulation as fast as they have
been made.
At the Philadelphia Mint we have been making
the clad dimes, which we are holding until we have a sufficient
supply to release, ard
this will be very soon.
The general
availability of dimes is evidenced by the fact that the
Reserve Banks are now experiencing some build-up in their
inventory of this denomination.
As for nickels, we have plenty of them.
purposely so.
This is
While we were waiting for authority to strike
the clad coins, we entered into contracts for cupro-nickel
strip and struck a substantial number of these coins to
overcome what had previously been a serious nickel shortage,
and to make available to the public a denomination which
could reasonably substitute for the dime and quarter, if
need be, during the transition period.
We are happy there
is an excess of nickels, and we want to keep it this way,
at least until we are satisfied that the transition to the
new coins has been completed.
-34Our cent production schedule in recent months has been
kept at a minimum and has been geared to meeting actual needs
rather than accumulations for a stockpile.
* * * * * * * * * * * * * * * *
Mr. Chairman, with your permission, I offer for the
record a table showing the coin holdings at the Federal
Reserve Banks during the last few Fridays, as compared with
the same situation for a few ye&s past.
This table reflects
the amount of coin which has flowed back to the Reserve
Banks, as it normally does after a holiday season.
You will
note that flowback has been largely in the five and one cent
denominations, with some improvement in dimes.
Storing the minor coin, if it continues to flow back
ln large quantities, may present something of a storage
problem, which we are now working out with the Reserve Banks
and, to a limited extent, with commercial banks.
Perhaps I can give you a better picture of how coin is
moving by showing how much coin was received by the Reserve
-35Banks from member banks (excluding Mint shipments).
Since
the bulk of coin ordinarily paid out by the Reserve Banks
is circulated coin, in my judgment these figures are better
indicators than current Reserve Bank inventory figures.
Sir, with your permission, I offer the following table,
for the record.
The receipt of circulated coin by the Reserve Banks
in fiscal year 1965, and in the first six months of fiscal
year 1966, points to the fact that COln is not coming back
to the Reserve Banks in any appreciable volume.
F~
this
reason, we think we still have a substantial production
schedule ahead of us--a schedule which we are fully prepared to meet.
FEDERAL RESERVE INVENTORIES - WEEKLY REPORT
(In Pieces - Add 000)
1-29-65
1-7-66
1-14~66
1-21-66
1-28-66
3,748
1,988
2,948
1,676
28,352
47,919
84,007
107,413
136,771
102,776
98,294
151,809
179,095
215,962
239,437
105,129
42,554
61,308
758,333
780,573
801,625
823,999
327,787
100,257
311,861
289,245
285,245
326,906
388,834
719,701
313,890
506,994
1,251,054
1,330,908
1,454,854
1,590,717
2-1-63
1-31-64
Halves
23,033
14,558
7,179
Quarters
89,067
53,745
Dimes
174,685
Nickels
Cents
Total
WEEKLY COIN PRODUCTION
9,600
6,186
3,888
3,270
Quarters
41,920
59,284
54,825
54,696
Dimes
23,130
37,030
39,800
35,810
4,360
9,404
12,860
11,948
Cents
10,895
48,820
74,025
80,245
Total
89,905
160,724
185,398
185,969
Halves
Nickels
Bureau of the Mint
Coin Management Division
February 1, 1966
FEDERAL RESERVE BANKS AND BRANCHES
RECEIPTS FROM THEIR MEMBER BANKS AND OTHERS
(Excluding Mint Shipments)
(Pieces)
FISCAL
YEAR
HALVES
QUARTERS
DIMES
NICKELS
CENTS
TOTAL
1961
254,428,190
2,036,66"8,248
3,726,646,770
2,706,591,820
1,934,082,200
10,658,417,228
1962
256,279,928
2,225,441,428
3,828,937,680
2,693,803,360
2,399,551,600
11,404,013,996
1963
241,947,460
2,099,061,132
3,635,121,660
2,312,117,140
2,260,014,900
10,548,262,292
1964
168,123,638
1,402,072,800
2,780,741,040
1,119,288,620
1,228,706,200
6,698,932,298
1965
12,602,006
431,309,552
1,549,955,710
753,990,940
1,050,724,600
3,798,582,808
1966(1st 6 months)
1,290,346
233,409,612
810,086,400
831,069,540
808,490,600
2,684,346,498
Bureau of the Mint
February 1, 1966
-36-
PART II.
(A)
STEPS TAKEN TO FURTHER ALLEVIATE OR FORESTALL
ANY COIN SHORTAGES
THE CRASH PROGRAM
In July, 1964, the Mint embarked on a "Crash Program" to end the
coin shortage.
The first step in this program was to place the Mints in
Philadelphia and Denver on a continuous operating basis, 24 hours a day,
seven days a week.
At the same time approximately 50% of the space in
the Assay Office in San Francisco was being converted for use as facilities
for the production of 1 ¢ and 5¢ blanks.
At the beginning of the program the critical needs were for production
equipment, space, and trained employees.
Through cooperative efforts of
the Department of Defense and the General Services Administration the Mint
was able to locate and obtain 16 coining presses and 16 blanking presses,
annealing and cleaning equipment, and other support equipment, including
tools to equip a small machine shop in San Francisco.
Some specific actions taken to implement the crash program are:
(1)
Obtained, without charge, production and support equipment with
acquisition value of approximately $1,200,000 from the Department
of Defense and the General Services Administration.
Department of
Defense converted the equipment for coinage production for the Mint
at cost.
(2)
Operated the Mints at Denver and Philadelphia and the San Francisco
Assay Office 24 hours a day, seven days a week.
-37(3)
Increased coining presses from 60 to 120.
147 presses will be in operation.
By June 30, 1966,
Blanking, blank annealing, and
cleaning and other supporting equipment items were increased in
proportion.
(4)
Discontinued the production and sale of proof coins and uncirculated
coin sets.
Space and other resources released were used in the
'production of domestic coins.
(5)
Utilized private industry in the purchase of 46,500,000 pounds of
bronze strip for the production of cents and 41, 500,000 pounds of
cupro-nickel strip for the production of five cent coins.
Also, contracts
have been awarded for 115,000,000 pounds of clad strip for the production of the new clad dimes, quarter dollars and half dollars.
(6)
Utilized other Government Agencies to the extent possible, including
transfer of tool and die makers facing a reduction in force in the
Defense Department, to the Philadelphia Mint where a build-up in
coinage die capacity was critical to the coinage program.
Also, the
Frankford Arsenal annealed one cent blanks for the Philadelphia Mint
from July, 1964, to June, 1965.
(7)
Employees were increased from 1190 in June, 1964, to 1835 in
December, 1965.
Of the total employees on the rolls as of
December 31, 1965, 335 held term appointments not to exceed two and
one half years.
(8)
Since the beginning of the Crash Program the Mint has made over
12 billion coins.
-38B.
THE PUBLIC RELATIONS PROGRAM
Your committee, Mr. Chairman, recommended a public relations
program emphasizing the temporary nature of the shortage.
endeavored to accomplish.
This we have
In doing this, however, we have been conscious
of those who are inclined to criticise us for talking too much, and those who
think we haven't talked enough.
bur chief source of strength in making known to the American people
the problems related to the shortage and the change-over to the new alloys
has been the American Bankers Association.
today to testify before your committee.
I am pleased that they are here
They have performed a truly great
public service in this changeover period, especially in the educational program
they have undertaken to acquaint everyone with the new coins.
The fine public
acceptance of these new coins is due in large measure to their help.
I would
like to say this, too, that they have done this at their own expense--not the
taxpayer's.
Mr. Chairman, I would like to submit for your files a photograph of
the Mint Exhibit at the ABA Convention last fall, when the bankers were first
shown the new United States clad coins.
Here too, I might mention that
though it was an official Government exhibit, the ABA paid the cost of setting
it up and they have since transferred it to us, where it is now on exhibit in
the Main Treasury.
Visitors at this exhibit are given a copy of a "Fact Sheet
About New U. S. Coins", which I offer for the record.
-39As to our own efforts, public relations-wise, Assistant Secretary
Wallace and I have appeared before numerous groups throughout the country,
explaining the coin situation and acquainting people with the new alloy coins.
We have sent material over to the Smithsonian where the thousands of visitors
there can see the experimental coins which were the progenitor of our new
clad coins.
As developments have occurred in coinage, we have endeavored to
keep the public fully informed through Treasury Department press releases.
Mr. Chairman, with your permission, I offer for the record a number of
press releases which have been put out by the Treasury since our last hearing
before you, dealing with this matter.
When word reached us that a coin broker was getting his coin from
a vending machine company, we called the National Automatic Merchandising
Association in Chicago.
Their representative, Mr. Thomas Bo Hungerford,
called at our office and went all-out to put a stop to this practice.
His efforts
in this direction, and the cooperation of the vending machine industry given,
are evidenced by the enclosed exhibits which I offer for the record.
The numismatic press has done its part to keep down speculation in
rolls and bags of coins, old as well as new.
Possibly less dramatic, but tremendously sincere and helpful, has
been the word given to us by the "little people", whose coin clubs we have
visited.
With almost militant fervor, they have assured us that they are
going to wait to get their specimens of the new clad coins, until after the
-40-
needs of commerce have been met.
cooperation from them.
The Treasury has had wonderful
Though they, at times, were the whipping boy
as a contributing cause of the shortage, you and I know they were much
maligned.
I wouldlike to mention, too, Mr. Chairman, the fine spirit of
cooperation we have received from the Federal Reserve Board as well as
from all of the folks connected with the Federal Reserve Banks and Branches
throughout the country.
They have been hard pressed and harassed, but
they have come through this with good spirit.
They have done a splendid
job of fostering good will and cooperation on the part of commercial banks,
even though the coin stocks have been inadequate, for most of the time.
fREASURY DEPARTMENT
July 2R, 1965
FOR RELEASE AT 5: 00 PH EDT
WEDNESDAY, JULY 28, 1965
TREASURY A.'1NOUNCES CONTRACTS FOR MATERIALS
TO SlART NEW COIN PRODUCTION NEXT WEEK
The Treasury today announced the signing of procurement contracts
expected to permit production of the new dimes and quarters, authorized
in the Coinage Act of 1965, to begin late next week.
The contracts signed today were the first three of a group of
contracts for the material required for production of the new dimes and
quarters.
The new coins will he issued late this year and early in 1966.
The new dimes and Cluarters wi 11 have faces of the same copper-nickel
alloy used in the current five cent piece, bonded to a core of pure copper.
They wi 11 be manufactured from st rips of the three I ayers of metal, honded
together and rolled to the requi red. thickness.
Mint Director Eva Adams said:
"Ne are announcing today the signing of the first of several planned
contracts with suppliers for the composite metal strip reCluired for the
new dimes and quarters.
"Negotiations are underway with other potential suppliers of cupronickel clad strip and also for supply of the silver-copper alloy strip
required for the new half dollar.
"The r·1int expects to get into production of the new 25 cent piece
before the end of next week. This quick start was made possible by advance
contingency planning hy the Mint, and by advance preparations undertaken
at their own risk by potential suppliers.
"We intend to make some 3-1/2 billion pieces of the new subsidiary
coinage in the first year of production, and doub Ie that amount, if needed,
in the second year. We wi 11 begin with the new quarter, and follow wi th
the new dime and half dollar.
F-143
(OVER)
- 2 -
"Both the Phi !adelphia and Denver ~lints wi 11 produce the new dimes
and quarters, but the new hal f dollar wi 11 he made ini tially at. Denver.
The San Francisco ~Iint facilities will be used in the beginning for one
cent and five cent pieces. lbis will release much of the Denver and
Philadelphia equipment for production of the new coins whi Ie sti 11 continuing the production of current silver coins at the existing high rates
of output. All ~lint coinage facilities will continue on a 24 hour a day
basis.
"Full production of the current silver coinage will continue meanwhile, until the new coins become availahle in sufficient quantities to meet
all demands. We have some 12 billion silver coins in circulation now and
we will add to that amount during the coming year. The silver coinage will
continue to circulate, side by side with the new coinage indefinitely into
the future.
"IVe plan to place the new quarter in circulation late this year, and
the JH~\v dime be fore mid-1966. Plans for the new hal f do II ar, wh j ell wi II
be 40 percent silver, are not yet complete, but output will begin at the
Denver ~lint as soon as supplies of silver clad strip hecome available.
Unti 1 the Secretary of the Treasury determines that supplies of the new
coins are adequate, none wi 11 hear mint marks."
~Iiss
Adams announced signing of the following contracts:
-- An initial contract with ~letals and Controls, Inc., Attleboro,
a subsidiary of Texas Instruments, Inc. of Dallas, Texas,
approximately $30 million, for production at Attleboro.
~lassachusetts
-- An initi;ll contract with l. I. du Pont de Nemours and Company, of
Wilmington, Dela\vare, approximately $3 million, for production primarily at
Pompton Lakes, ~ew Jersey.
An initial contract with the Olin Mathieson Company of East Alton,
Illinois, approximately $9 million for production at East Alton.
When facilities for producing clad metal strip at the new ~1int to be
built at Philadelphia come into being in 1968, clad strip required for the
new coins will be produced there. Facilities for production of clad strip
are also planned for the present Denver ~lint. Procurement of strj p outside
the Mint will continue until the necessary ~lint equipment hecomes available.
The cont racts announced today wi 11 provide the
million pounds of cupronickel-on-copper strip.
~lint
with about 85
Average costs of cladding the metal strip procured under these and
other contracts under negotiation will fall within the range of 40 cents
to 70 cents per pound estimated by the Treasury in its presentation to
Congress on the coinage hill.
000
TREASURY DEPARTMENT
4
August 11, 1965
FOR RELEASE AT 5:00 P.M., EDT
WEDNESDAY, AUGUST 11, 1965
TREASURY ANNOUNCES ADDITIONAL
CONTRACTS FOR COINAGE MATERIAL
The Treasury today announced signature of the first
contracts for procurement of materials for the new silver half
dollar, approved in the Coinage Act of 1965. A further
contract for procurement of materials for the new quarter and
dime has also been completed.
Production of the new half dollar, which will be the
silver standard bearer of the new fractional coinage, will be
started at the Denver Mint this fall. The new 50-cent piece
will be a composite coin, with faces of 80 percent silver and
20 percent copper, bonded to a core of 21 percent silver and
79 percent copper.
Two contracts have been signed for the purchase of the
silver-copper on copper-silver alloy for this coin. They were:
-- A contract for approximately $8 million
with Engelhard Industries, Inc., of Newark,
New Jersey, for production at plants in Newark and
in Plainville, Massachusetts.
-- A contract for approximately $3 million with
Handy and Harman, of New York City, for production
in its plant at Fairfield, Connecticut.
A $3 million contract for the supply of the composite
metal strip needed for the new quarter and dime has been
signed with Composite Metal Products, Inc., of Eighty-four,
Pennsylvania. The new 10 cent and 25 cent pieces will have
faces of the same 75 percent copper, 25 percent nickel alloy
from which the 5 cent piece is made, bonded to a core of pure
copper. On July 27 the Treasury announced the signing of
three contracts for this material, amounting to approximately
$42 million.
F-166
- 2 production of the new quarters will begin this month at
the Philadelphia Mint. The new COlns will be issued late
this year, or early in 1966, according to the need for coins.
When facilities for produclng clad metal strip at the
new Mint to be built at Philadelphia come into being the
composite materials for the new coins will be produced there.
Facilities for production of clad strip are to be added in
the Denver Mint. Procurement of materials for the new coins
will continue outside the Mint until facilities for its
production become available.
000
TREASURY DEPARTMENT
Monday August 23, 1965
FOR RELEASE AT 10:30 A.M. EDT
MONDAY AUGUST 23, 1965
STATEMENT OF DIRECTOR OF THE MINT MISS EVA ADAMS
AT THE FIRST STRIKING OF COINS FROM THE NEW COINAGE M~TERIAL
U.S. MINT, PHILADELPHIA, PA.
AUGUST 23, 1965 -- 10:30 A.M.
Production of the new quarter, authorized by the Coinage
Act of 1965, started today at the Philadelphia Mint.
The new quarter will have the face of the same copper-nickel
alloy used in the current five-cent piece and will be bonded to
a core of pure copper. It will be manufactured from strips
of three layers of metal, bonded together and rolled to the
required thickness.
Production of the new fifty-cent piece of silver copper
clad on silver copper is scheduled for sometime in November,
at the Denver Mint. It will continue to be made of silver and
copper, but will become a composite coin with the silver content
reduced from 90 percent to 40 percent.
The ten-cent piece will be the last of the new alloy
denominations to enter production. Having the same composition
as the new quarter, the dime is scheduled to be struck in
December. The new coins will all bear the 1965 date.
Reactivation of minting operations at the San Francisco
Assay Office has been set for September 1, 1965. The one-cent
piece to be struck there will constitute the first coins produced
at the Assay Office since 1955 when coining operations were
discontinued.
None of the new coins will be released to the public until
a sizeable supply is on have for distribution. Meantime, the
Mint is continuing production of the present coinage alloy, as
authorized by the Coinage Act of 1965.
000
-REASURY DEPAR·TMENT
WASHINGTON. D.C.
Monday, August 23,196
FOR RELEASE AT 10:30 A.M. EDT
MONDAY, AUGUST 23, 1965
STATEMENT OF ROBERT A. WALLACE,ASSISTANT SECRETARY OF THE TREASURY,
AT THE FIRST STRIKING OF COINS FROM THE NEW COINAGE MATERIAL
U.S. MINT, PHILADELPHIA, PA.
AUGUST 23, 1965 -- 10:30 A.M.
The start of coin production from new coinage materials
authorized by Congress this summer is a source of great satisfaction to the Treasury Department. It represents the result
of a two year effort to develop and obtain the authorizalion of
a satisfactory substitute for silver in the dime and quarter.
Had Congress not authorized the new material, Treasury
stocks of silver would have been exhausted in less than three
years. The elimination of silver in the dime and quarter, and
the reduction of the silver content of the half dollar will make
our silver supplies for coinage sufficient for the forseeable
future.
The new coins will have precisely the same purchasing
power as current coins. They will work in all existing coin
operated devices. From an esthetic point of view, the new
dimes and quarters will be just as attractive and durable as
the old.
The new half dollar, which will continue to contain silver,
will be nearly indistinguishable from existing coins of this
denomination.
All new coins will bear the date 1965.
The first of the new coins minted will be the quarter. Aside
from the one-cent and five cent pieces, this is the key coin
for COmmerce. By the end of December we expect to produce a
half billion of these new quarters, a year's supply. These will
be released through the banking system late this year or early
in 1966. Production of the new dime and half dollar will begin
(MORE)
- 2 -
late this year.
mid 1966.
Both coins are expected to be released before
Despite the large production of new quarters we are actually
increasing the output of current quarters and dimes by 25 percent.
Mint and Federal Reserve Bank inventories of these coins are
nearly double the levels of a year ago. Nevertheless, the
Treasury is continuing to increase their production in order
to reduce any potential possibility of shortages in the future.
The Treasury is deeply grateful to the Congress for its
quick action in the program, to the Bureau of the Mint for its
help in the development of the new materials, especially to
Mint employees for production records beyond our most optimistic
expectations, and to our suppliers for their understanding of
our problem and ability to produce the new material quickly.
000
TREASURY DEPARTMENT
September 16, 1965
FOR RELEASE A.M. NEWSPAPERS
FRIDAY, SEPTEMBER 17, 1965
GROUND BREAKING FOR A NEW
MINT AT PHILADELPHIA
Ground will be broken today (Friday, September 17,
11:30 a.m. E.D.T.) in Philadelphia for the world's
biggest and most modern Mint, by Joseph W. Barr, the
Under Secretary of the Treasury.
Others participating
will include James H. J. Tate, Mayor of Philadelphia,
Robert A. Wallace, Assistant Secretary of the
Treasury, Miss Eva B. Adams, Director of the Mint and
Michael H. Sura, Superintendent of the Philadelphia
Mint.
The new $37 million plant will take the place of
the present Philadelphia Mint, now 64 years old.
000
F-199
TREASURY DEPARTMENT
(
FOR RELEASE AT 10:00 A.M., PDT
WEDNESDAY, SEPTEMBER 1, 1965
STATEMENT BY DIRECTOR OF THE MINT MISS EVA ADAMS
AT CEREMONIES REACTIVATING MINTING OPERATIONS AT
THE SAN FRANCISCO ASSAY OFFICE
SEPTEMBER 1, 1965, 10:00 A.M., PDT
Reactivation of minting operations at the San Francisco
Assay Office, authorized by the Coinage Act of 1965, began today,
September 1, 1965. The one-cent pieces to be struck here will
constitute the first coins produced at the Assay Office since
1955, when coining operations were discontinued. Four new
stamping presses are to be in operation. Later, five-cent
pieces will also be struck at the San Francisco Office.
Production of the new quarter started August 23 at the
Philadelphia Mint. The new quarter has the face of the same
copper-nickel alloy used in the current five-cent piece and is
bonded to a core of pure copper. It is manufactured from
strips of three layers of metal, bonded together and rolled to
the required thickness.
Production of the new fifty-cent piece of silver copper clad
on silver copper is scheduled for later in the year, at the
Denver Mint. It will continue to be made of silver and copper,
but will become a composite coin with the silver content reduced
from 90 percent to 40 percent.
The ten-cent piece will be the last of the new alloy
denominations to enter production. Having the same composition
as the new quarter, the dime is scheduled to be struck later
this year.
The new coins all bear the 1965 date. None of them will
be released to the public until a sizeable supply is on hand
for distribution. Meantime, the Mint is continuing production
of the present coinage alloy, as authorized by the Coinage Act
of 1965.
The newly minted pennies from San Francisco, however,
like those made in Denver and Philadelphia, will go immediately
into circulation.
The penny and the nickel are not changed in
composition by the new legislation.
000
TREASURY DEPARTMENT
Washington
FOR RELEASE AT 11:30 A.M., EDT
FRIDAY, SEPTEMBER 17, 1965
REMARKS OF THE HONORABLE JOSEPH W. BARR
THE UNDER SECRETARY OF THE TREASURY
AT GROUND BREAKING FOR A NEW MINT AT
PHILADELPHIA, 11:30 A.M. ON FRIDAY,
SEPTEMBER 17, 1965
Mr. Chairman, Mayor Tate, Members of the Congress,
Commissioner Cohen, Miss Adams, Mr. Sura and other friends
gathered here, I very much hope that you will believe that I
do much more than express a well worn convention when I tell you
that I am delighted to be here to share with you a propitious
event. The facts are that this is a delightful and propitious
occasion, and that I take a very real pleasure in being with you
to share in it.
Because getting started on the building of this new
Mint is a matter of such importance to the City of Philadelphia,
and to the nation at large, I want to draw attention to some,
at least, of the people present here today who have made it
possible for us to get started at this early date.
I will begin with Mayor James Tate, because without his
work on its behalf, we could not be here today to break ground
for the new Mint. At the time in 1963 when Mayor Tate set
aside this site for a new Mint, as part of the redevelopment
of downtown Philadelphia, the urgency that has since increasingly
overtaken it, in the form of a coin shortage, was only beginning
to be felt. However, the existing 64-year-old Mint was getting
no younger, and Philadelphia wanted to get on with its renewal
program. After 1963, as the coin shortage worsened, increased
Mint capacity became a pressing national need.
Secretary Wallace, Mint Director Adams and the
Superintendents of the Philadelphia and the Denver Mints
Mr. Sura, Superintendent of the Philadelphia Mint is here with
us -- turned to, and, with the Mint's fine staff in Washington j
- 2 -
in the Philadelphia and Denver Mints, and in the San Francisco
Assay Office have done what can only be described as a heroic
job. They succeeded in pushing existing Mint production
capacity beyond all previous estimates in meeting, as they have,
the mounting demand for coins to keep our growing and changing
economy going smoothly at the retail level.
But despite these ingenious and massive accomplishments,
our existing coin making capacity is definitely not adequate
to satisfy the demand for coins on an efficient and economical
basis.
It was for these reasons that the Philadelphia Redevelopment
Authority re-drew the boundaries of the Independence Mall
Urban Renewal Area late in 1963 to move this site on which we
stand today to the immediate action stage.
This involved relocation of some 70 businesses, which
Mayor Tate managed with skill and energy to get relocated so
that this site could be cleared, as it was, by the middle of
August this year.
Another hard worker in this vineyard has been
Representative Byrne, in whose district we stand. I served
with him in the Congress, as I did with Congressmen Barret,
Nix and Toll, also of the Philadelphia delegation. I did not have
the pleasure of serving in the Congress with Representative
Green, but I know from my experience in the Executive Branch
that he and the rest of the Philadelphia delegation in the
House, stand- out for the hard work and the zeal with which
they look out for this city's interests.
Let me add just one more, and very well deserved, word
of thanks. This is to the Old Philadelphia Development
Corporation, headed by Mr. William Day, which is developing the
Mall. Much that we are doing today had its roots in the
efforts of Mr. Day and of the Old Philadelphia Development
Corporation, and I would not want this role to be forgotten.
The new Mint that will go up on this site is scheduled
for coin production by mid-1967. It is going to cost 37
million dollars. It will be the world's foremost Mint: the
world's biggest and the world's most productive.
- 3 The new Philadelphia Mint will be the fourth Mint in this
city, which was the site of the Nation's first Mint.
The first Philadelphia Mint, in turn, was the first building
erected in the United States for public use, under authority of
the federal government.
The site for the first United States Mint, at Seventh
Street near Arch -- only a few hundred feet from where we will
break ground today for the fourth mint structure in Philadelphia
also had to be cleared, but under somewhat different conditions.
On July 19, 1792, destruction began on an old distillery
building which was then located on the site chosen for the
first Philadelphia Mint. Some of the junk of the old distillery
was sold for one dollar, which the Mint Director, David
Rittenhouse, directed should be laid out for punch for the
bricklayers and other workmen.
After forty years at the original location, the Mint came
uptown to a newly erected building at the northwest corner of
Chestnut and Juniper. The cornerstone for this was laid
July 4, 1829, but it was not finished and occupied until 1833.
By the end of the 19th Century the Nation again needed a
bigger Mint at Philadelphia. So the Philadelphia Mint now to
be replaced was begun in 1898 and completed in September,
1901.
The new Philadelphia Mint is a prime example of what
President Johnson is demanding throughout the government: more
service, and better service to a growing country, at lower
cost. That is a big order -- most of President Johnson's orders
are on the big side. But the new Mint will demonstrate, as is
constantly being demonstrated, that the President's insistence
upon these hard accomplishments sets tasks that are difficult,
but not impossible. We are achieving more and better service,
meeting the growing demands of a growing population and of a
growing economy, at lower costs, and this Mint will be an
outstanding example.
We are using ingenuity to try to make the Mint, when it
enters operations, the last word in coin production. To do
this, Secretary Wallace and Mint Director Adams, who are
responsible for planning the new Mint, have approved orders
for the building of an entirely new type of coin press,
capable -- if it works as it is expected to work -- of turning
out the fantastic number of 10,000 pennies a minute: not an
- 4 lour, or a day, but a minute. That compares with production of
300 a minute, the best existing machines can do.
No one knows yet, for sure, whether these presses will
lmmediately perform up to expectations, or whether they will
~equire a development period.
But we are planning for them on
1 contingency basis.
At the same time, Mr. Wallace and
fiss Adams have developed parallel plans for the installation
)f other facilities to yield the required coin production, if
:he new type of penny coin presses cannot be brought into use
Lmmediately.
This is merely one example of many new features of the
1int that is now to be built in this city. It will be capable
)f doubling the capacity of the present Mint, without a bigger
~yroll.
It will produce at 15 to 20 per cent less cost per
mit of output. It will allow an unimpeded production flow,
:hrough a first floor production space 50 feet high and 600
:eet long, with almost as much additional space on other floors
:or laboratories, offices, die making, coin storage and other
:upporting activities.
The new Mint will be able to produce the three layer metal
,trip needed for our new dimes, quarters and half dollars, as
'ell as the bronze alloy s trip metal needed for pennies and
he cupronickel strip needed for five cent pieces. The material
or our new coins must be bought outside the Mint until this
,lant comes into production. The new Philadelphia Mint will
e capable of making coins of all denominations, from the
elting, casting, and rolling of coinage alloy to production
f the finished coin.
At the new Mint, ingots that are 17 feet long and that
eigh 5,400 pounds will be cast, compared to the present
apability for casting ingots five feet long, weighing 400
ounds. The new Mint's strip making machines will roll these
ngots to finished coin thickness five times as fast as at
resent. It will be fully mechanized for the handling and storage
f materials. The coins produced by the new Mint will be
eighed automatically, and automatically inspected. The new
int's capacity will be such tm t it can serve the coin needs
E the whole country east of the Mississippi, making a
Jnsiderable saving in the costs now incurred in moving
Jin materials, coin blanks and coins to and from the Philadelphia
ld Denver Mints and the San Francisco Assay Office.
- 5 -
A good deal more could be said, for the new Mint will be a
treasure house of advanced production and handling techniques, and will
have a good many other features besides: for instance, all of its operations
will be visible from the visitors' gallery.
TREASURY DEPARTMENT
October 30, 1965
DVANCE FOR USE IN SUNDAY PAPERS
F OCTOBER 31, 1965
BACKGROUND TO WHITE HOUSE ANNOUNCEMENT THAT
CIRCULATION OF THE NEW 2S CENT PIECE
WILL BEGIN ON NOVEMBER 1
The new quarter was placed in circulation when a massive
nitia1 supoly was available, backed up by a very large ~roduction
tream.
The Mint will be able to provide approximately half a billion
dditional pieces of the new coin for circulation within two months
f the initial distribution.
:0
The traditional silver dimes, quarters and half dollars are
circulate side-by-side, interchangeably, with the new coinage
The silver coinage will not be withdrawn. On the contrary,
lroduction of silver coins is continuing at high rates, and at
~ast 13 billion pieces of silver coins will be in circulation
lefore production is ended. Much of this circulating silver
oinage will have been made in the lJst three years of greatly
ncreased output, and these coins can continue in use for the
.ormal 25 year life of a silver coin.
The Treasury still has very large stocks of silver -- nearly
00 million ounces -- and is authorized by the Coinage Act of
965 to use these stocks to keep the price of silver below the
oint at which it would become profitable to melt the silver
oinage for its silver content.
The Coinage Act of 1965 gives the Treasury authority to
orbid the melting or export of United States coins. This
uthority has not been exercised.
-253
- 2 -
The new dime, to go into circulation early in 1966, will be
ide of the same alloy as the new quarter.
The new half dollar will be faced with layers of 80 percent
l1ver and 20 percent copper, bonded to a core of approximately
~ 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 their 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
E 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
llf dollar, were adopted in the Coinage Act of 1965 due to a world
llver shortage. In 1964, new silver production was less than half
) much as total annual silver usuage in the Free World. Most other
itions have removed most or all the silver from their coinage in
?cent years.
The United States was able to continue making 90 percent silver
lmes, quarters and half dollars because the silver could be supplied
~Om s tacks owned by the Treasury.
The changeover became necessary
1 the United States when, early this year, the Treasury's silver
:ock became eq.lal to less than a three year supply a t current exInded rates of demand for coinage.
000
F01\ RELEASE BUNDAY A. M.
OCTOBER 31, 1965
OUlce of the White House Press Secretary·
(Austin. Texas)
. . - . . . . . - - - - - - - - - - - - - - - -. - - . . -. . . - . . .
..
THE WHITE HOUSE
STATEMENT BY THE PRESIDENT
ON mlTlAL DISTRIBUTION OF THE
NEW Z5 CENT PIECE
President Johnson announced today that circulation of the new Z5 cent piece
authoriZed by the Coinage Act of 1965 will begin Monday, November 1.
The new - - non- silver - - quarter dollar will be added to the circulation of
the traditional 90 percent silver quarter. Both the old and the new quarters
are to circulate together.
Approximately 230 million pieces of the new quarter will be distributed during
the week beginning November 1. Initial distribution will be backed by productiOD
that will rise from 28 million to 60 million pieces a week during November,
and will be still higher thereafter.
The number of new quarter s ready for initial distribution is 10 times curren~
inventol'ies of Z5 cent pieces available for use. The supply of quarters will
be augmented by continued production of silver ZS cent pieces.
Introduction of the non- silver quarter will make the first basic change in the
Nation's co;r:..:ge since the United States monetary system was established in
179Z. All coins above five cents value since then have contained 90 percent
silver.
The new quarters will by placed into use in the way that coins normally move
into circulation. by distribution, on the basis of needs for coins, through the
36 Federal Reserve banks and branch banks to commercial banks, and {rom
commercial banks to individuals and businesses. As the new comrge is to
circulate interchangeably with silver coins, deliveriel of quarter. to commercial banke, DOW and in the future, will con.llt of both the Don- .Uver and the
eUver coine. •
The Mint hils allocated initial SUppUC6 of the
n~w quaFtenll
to the
Rl?t;ll~rve
bank.
on the baois of the population of the area.s served by each Rf":;;!'Hc'rv<t ba.nk or
branch bank. Plans call for deliverie~ of iUl'lhcr aupplies of th(~ 'lH~'(N coin
{rom the Mint to Reserve banks to contmue on this basiB •.
Faster than anticipated production of the new quarters pelrmittcd their introduction about a month earlier than previously expected. The initial 230 million
of the new coina being distributed by the Federal Reserve Banks was made in
70 days following the beginning of production on August 23. This initial supply
is equal to a third of the record uutput of 714 million quart'!I"s produced in the
full 12 months of fiscal year ~ 965, which ended last June. Production of the
new quartera will rise to a quarter of a billion pieces 0>. month hereafter.
The new quarter dollar 18 a three layered coin. The outer fac·f'.a arc the fHune
alloy used for the five cent piece -- 75 percent copper and 2.5 percent nickel" .
The cupronickel faces are bonded to a core of pure copper~ giving the new coin
a copper colored edge.>
The new 25 cent yiece is full legal tender~ equal in all mon'btdilY ~e(';pectIJ «j
the sHver quarter. It was engineered to wor k in all colli Op0~9,.~~d ode wic>ea
let to operate with (inver COU\8.
Tho new quarter is tho same size a(;j the eilvcA' quartcra, at.d
design. The hoad of Georgo WaahlngJd:.n appeal"1li on ct~·~ 9)de,~
bf:.U':'fl! th~ B~1a
fh th('
date~
and the words "Liberty" and I!ln God We Trust;" on the oth~r f}~.de~ an eaglll3
with spread wings, clutching a bundle of arrOWB~ above c!"o5l!cd oHve branche.,
and the words, "Quarter Dollar. tl "United States of Alnel'iett.'· and ~~E Ph11~lb\u,
Unum. U
fill United Statcs silver- coins now b~in.g produced D,ra dat~d i '~M," Th~ ,fH.iN
~o1n. will bo dated 1965 until ail .@hm.. ta~ol ~:H4.~pp6It:l:'<p
TREASURY DEPARTMENT
December 28, 1965
FOR RELEASE: P.M. NEWSPAPERS
WEDNESDAY, DECEMBER 29, 1965
FIRST STRIKING OF HALF DOLLARS FROM NEW
COINAGE MATERIAL AT U. S. MINT AT DENVER ON THURSDAY
Production of the new half dollar, authorized by the
Coinage Act of 1965, will start on Thursday, December 30, at
10:00 a.m. at the Denver Mint.
The new half dollar will continue to bear the Kennedy
design approved by the Congress two years ago. Coin designs
are retained for 25 years unless the Congress directs an
earlier change.
The new half dollar will contain 40 percent silver
compared to the traditionnl 90 percent silver half dollars.
However, in appearance the new coin will be nearly identical
to the old half dollar as it will have outer layers of 80
percent silver. The core will be 21 percent silver -- lowering
total silver content to 40 percent.
All of the new half dollars will bear the date 1965
until the shortage of this denomination has been overcome.
Some 390 million 90 percent silver Kennedy half dollars
made during 1964 and 1965 all bear the date 1964.
The new half dollars will be placed in circulation early
next year. They will be shipped to the Federal Reserve
Banks and branch banks and will be used by them in their
regular weekly coin shipments to supplement the supply of
circulating half dollars, through the medium of commercial
banks, throughout the country.
This was the procedure followed in issuing the first of
the three new coins -- the 25-cent piece -- authorized by the
Coinage Act of 1965. Production of the new quarter, which
(MORE)
F-3l9
- 2 -
has cupronickel faces bonded to a core of pure copper, began
August 23, 1965 and circulation began November, 1965. In
the past two months, over 400 million of the new quarters have
been placed in circulation. The Philadelphia Mint has begun
minting of the new, non-silver dime -- also with cupronickel
faces clad on a core of pure copper. Circulation of this
coin is also expected to begin early in the new year.
The new dimes, quarters and half dollars are three layer,
"clad" coins because this construction permits duplication in
a non-silver coin, or a coin with low silver content, of the
electrical properties of coins of 90 percent silver. This
allows the new coins and the old; 90 percent silver coins, to
be used interchangeably in coin operated devices.
The switch to coins of lower silver content, or none,
was made necessary by a growing world silver shortage.
The silver coinage will continue to circulate, side-by-side
with the new coinage.
The Coinage Act of 1965, which became law on July 23, 1965,
made no change in the penny, the nickel or the silver dollar.
There are no plans at present for minting of silver dollars.
Like the Kennedy half dollars dated 1964, those dated
1965 will not bear a mintmark. The Coinage Act of 1965
specifies that no mintmarks will be authorized until five
years from the the date of initial issuance.
000
National Automatic Merchandising Association
7 SOUTH DEARBORN STREET, CHICAGO, ILL. 60603
TELEPHONE: (312) fllNANCIAL 6-0370
NAMA
November 15, 1965
MEMBERS LETTER NO. 1175
THE TREASURY DEPARTMENT HELPED US - NOW WE CAN HELP THEM!
Speculation about coinage needs for the Christmas retailtrrg boom has
produced some sales "pitches" to banks from coin exchanges and dealers,
offering ample supplies of coins at a premium-E!lc~.
Understandably, such "for-profit" promotion has caused some concern at
the U. S. Treasury Department and has irritated some Congressmen, since
it is not in the public interest.
This type of advertising can do serious damage to the reputation of the
vending industry in important Washington circles. SomE of our friends
in Congress are grumbling, even to the point of suggesting legislation
"to curb profiteering in coins". There is a strong possibility of an
investigation by the Secret Service to determine where the advertised
coins are coming from.
We at N A M A know that nearly all vending operators have
set up strict policies against selling coins at a premium,
and that a majority of companies is cooperating fully with
the Treasury Department's request to speed coin circulation
by assisting locations and local banks as a public service
through prompt collection of coins.
Yet advertisements have appeared offering coins "from vending machines",
Without the Treasury Department's recognition that coins must work in
vending machines, our industry would be in turmoil today (now that the
new silverless coins are in circulation). Every vending operator, in
turn, owes the Treasury an obligation to see that coins are put back
in circulation quickly through regular channels, and are not sold at
a profit by anyone - whether the offender be in vending or in any other
type of coin business.
If you learn of offers to sell coins at a premiu~, promptly
notify N A M A of the circumstances. If your local news
media carry a story about such sales, promptly call them
and explain your policy, whether vending is mentioned or not.
We have nothing to gain - and much to lose - if vending o~rators sell
coins at a premium at any time!
Thos. B. Hungerford
Executive Director
FROM:
Public Relations Department
National Automatic Merchandising
7 South Dearborn Street
Chicago, Illinois 60603
(312) FInancial 6~0370
For Immediate Reiease
By Walter W. Reed
Vending Industry Denounces Coin Sales At A Profit,
Supports Measures to Recirculate Coins Through Banks
CHICAGO, November 18 - - Profiteering from the sale ryf
coins in bulk to retail establishments, banks and similar user9
drew criticism today in a statement issued by the National Automatic Merchandising Association, national trade group of the $3.5
billion automatic vending industry.
"Although the supply of coins is considerably improved
over a year ago, some short-sighted businessmen might reach for
a few extra dollars by selling coins at a mark-up to retailers
or banks during the busy Christmas season,"
said Thomas B.
Hungerford, executive director of the association.
"The vending industry has for several years taken
measures to recirculate coins quickly to banks and retail stores
without any charge," Hungerford said.
"While a few selfish individuals might indulge in
such practices, this is strictly against the established policies of most vending firms.
Organizations which try to make a
profit out of coin shortages definitely act against the best
interests of the public," he sta ted.
Hungerford said that reports from the association's
members across the country indicate no effect on vending firm
sales as a result of coin shortages.
-30-
JAVID D. DAYTON
ASSISTANT TO TM& PRI:SIOENT
AUTOMATIC RETAIL.ERS OF AMERICA, INC.
November 19, 1965
Mr. Thomas B. Hungerford
Executive Director
National Automatic Merchandising Association
c/o ·Ambassador Hotel
Los Angeles, California
Dear Tom:
In connection with the coin shortage and the silver
situation, we are enclosing copies of memoranda and
instruction to our field people in the early days.
We have not issued any policy statements since the
new. ~Qj.nage regulations were passed by Co •. -;:,:-css.
In view of the recent development mentioned in your
letter to Bill Fishman, we are circulating an
announcenent to over one thousand managers throughout the country. As soon as this statement is in
final form, we will send you a copy.
I tr~e-d to get l.n touch with you by telephone today
seeking your suggestions for this new policy directiv~,
but was unable to reach you because of the activity
with the opening of the western exhibit.
We welcome any suggestions from you or your staff
on this entire question.
Sincerely yours,
c=\ _
0-/'-'-;
DDD:hh
cc:
David D. Dayton
Vice President
Messrs. W. Fishman
Walter Reed
L.OMEIARO AT 26TH ST., PHI1.AOE1.PHIA, PENNSYLVANIA 19146
...... - .. ......... -------iio-i1ai--";cn-eral-- I'ianage-rs---- _...........
,
. .
,-
\
DIVISION
:r,ionr,l Sales Director
it \vllson
H Public Relations
elease
64
INTER.OFP"CE
MEMO
e coin shortage is making news in the rlaily paper~ in the key cities in
ur region. In some cases vending operators and machines have been
justifiably accused of contributing to thnt shortage. This information
not correct.
order to help remedy the situation and also to pyovide you and ARA with
ssible exposure in the5e nowspapers. I'm attaching a 5ucgc5ted pross
loase. It should be typed on your lattarhood and on those of any
visions within your rogion Q9 you soe fit. The stories can be inclivid-
lilcc! by typing "For the (nElmo of n~,w5pt.nor)" below the line "For
l10cliate Release," The blanks should bel filled-il:. by quoting either the
sional general manager or tho Ji~ision ~0n0ral managor.
osc storios should bo mBile:;d to
\,1",:0 t,;-,:r;I,.;~r':1·1 d!JJly nowspapers in tho
tics within your region or delivered p~r30nally if you happen to know
o of tho editors. The envolopos shoul~ be addressed to the BU5inoss
~s Editor at large papers p Citv Scli~o: at smaller ones.
11 appreciate receivins
..
'hh
t~~r!hnot~
of any stories that to get printed.
On Region or Division letterhead
For Immediate Release
VENDING OPERATORS KEEP COINS
CIRCULATING, ARA OFFICIAL SAYS
Vending machines help keep coins circulating and are a means of
combatting the current shortage, according to
of ARA Service
-------------------"Less than one coin
any one
time~"
in every 200 is tied up in vending machines at
---------said.
industry in the United States.
"Vending is a $3 billion annual
Most vending operators collect from their
machines about 150 times a year.
That means about $22 million in coins
will be found in all machines at anyone time.
a dollar, that'i 220 million coins.
At an average of ten coins
With 4S billion coins in circulation,
this figure is not significant."
_____________________ cited a study recently completed by Arthur D•
•ittle, Inc., for the National Automatic Merchandising Association.
~irm
found no relationship between any shortage and vending.
The
It put chief
,lame on population increase and greater gross national product without a
imilar boost in coinage.
Miss Eva Adams
t
director of the mint e has also
aid she didn't blame vending machines.
"The vending industry wants to keep coins in circulation,"
aid.
------
"Our gross sales depend on pennies. nickels, dimes and quarters.
hese are our working capital.
Merchandise vending is a thin profit,
igh volume, fast turnover type of business.
Cash must be available for
oth merchandise and payrollsp so coins are removed from the machines
5
quickly as possible and deposited.
The industry is a principal
upplier of coins to banks. retai lers and others in need of coins."
AUT 0 \\1 AT 1QUE
1NT E R ~ 0 r. F
TO
: Sub:3idiary Manage L
,
OFFICE: All Offices
r c r:-,
CO H H. E.s P 0\.' f)
REFERENCE SUBJECT
CO:Lncg2
r
BEe 1 1985
1.: N C !.~
FROM : B. G1~sGgold
OFFICE: Kansas Ci.ty
DATE
1/19/65
At a recent meetins of 1: A ~1 A, 'vhic~1 l<r. Stevens attended on
the c..bove subject, rr.l.~c:, c;::phr-.sis \-~:: p:i..::ced on company policie3
\vith n~spect to t:1C p:r:ob i.e:\). lllc:::-e -:Tc:re ::> trong recomm2nc1ati.ons
that ~ny sale of coi~s should be ~:scouraged because of the
effect it may h~ve !n th2 area of public relations for the
industry as a ,t-7holc ~_:1ci ;:~::ry- cocp.s.ny i~ particular.
'During the
of th2 great pressure, soxe
opera.ting corr.pz,nicn sold coins to v,::::-ious stores, banks, etc.
This practice is not Teco2~ended.
holiday~,
bec3~ce
I-~(j,.;ever,
because of tl-:e co1.n sho-ctc.;c, !.:here are Go~e prc:ctices
that rr.ay well help b-:.2iid the CGtec2. of tI1e company Guch as:
10
Developing closer local bQ.71ld.ng ::-cla.tio::.ship by making
coins avai1Clble to YCl.1r 02.:11, ~:c.G:l they require it.
Per:1aps the bank ','or.:lc1 p~ck up the coins and in that v.iay
save any delivery co~t8.
2.
Arrange "'1ith yct:r cc.nk to rD.::ke your coins available to
your C t13 tomer:3 •
Arrange to make CO:;,,::18 G.v.s.il2,ble ci::-ectly to your
cus tomer-s and have tr1c:n pick up the coin::;.
GO~C
Perhaps you have c2vcloped
merit.
other programs that have
v:e
"Jould c:pprecia te k~c:d:1g t·;h2t ,~rou nmv do and any recorr.menGatio'!}::; you reay hc.ve t:::~t COuld be rccoL-'.r:cnded to other
subsidiaries.
BG:pm
REFER TO NOTED
/
~
1}j;J
1
1
•
COPIES TO:
.t
A. D.
~v • A.
/'
/
Stcver.o!~
Ru~I1
Nax Lan::b
"~~?ARe OR!GI~ ---------&COPIES
-
.. '
IN r.LUE - FILE COpy IN YelLOW
-
..
-
I
,-
,
:
FILE
fO!\M G 101·J
--- --
,\
CABle ADDRESS. ROVEND
ALGONQUIN 4-7350
CCrtPORATION
3 lEA S T
.t 7th S T R E C T. NEW
Y 0
R K. N. Y.
1 0 0 0 ::3
World s lcrgest Operctor of Cig6rette Merchcndising Mcch ines
November 22, 1965
Mr. T. V. Hungerford
National Automatic Herchandi. sing Assn.
7 S. Dearborn street
Chicago 3, Ill.
Dear Tom:
I think your letter No. 1175 to the operators
is very appropriate and well-advised at this
time.
Just to make sure that our branches read it
carefully and adhere to it, I have sent them
the enclosed memorandum.
ag/rkm
enc
Arthur Gluck
ALL
Nova~er
22, 1965
~RANCH.ES
The attached photostat of N.A.M.A.'s letter No. 1175
is something that every operator should scrupulously
fCIllow.
So trLat there can be no possible slip-up, \10 \\'ant
you to know that a.s a l'llattQr of policy you arc £1Q:!
to sell coins to anyone. They have to 00 handled
tl:rough your regulnr 'barJd.ng SO';,1rca and your cuato.":Iers,
tl:e same as we al't,.rays have 1n L.'1e past.
ag/rkm
eno
cc: Torn Hunger£ord
0
.~
.
, ,
.
/'
INTERSTATE UNITED CORPORATION
4301 WEST TOUHY AVENUE' LINCOLNWOOD, ILLINOIS 606~6
ALEX KRAMER
PRESIDENT
November 18, 1965
Mr. Thomas 8. Hungerford
Executive Director
National Automatic Merchandising
Association
7 South Dearborn Street
Ch icago, III i no is 60603
Dear Tom:
I am enclosing a copy of the Management Bulletin
which I have just sent to our field organization.
I want to do everything that I can to cooperate in
this important program. Please let me know if I can
be of any further help.
Sincerely,
~~~/\//
AK:LL
~.
.' '"'
. . . . . . . . . t.. ... :
u~itcd
November 19, 1965
TO:
All Branch Managers
FROM:
Alex Kramer
As a member of the NAMA Coinage Committee which worked closely with
the U. S. Treasury Department in helping obtain compatible cOinage,
I now ask for your continued cooperation in a matter of increasing
concern to the Treasury DepartmP.nt, members of Congress, and the
vending industry.
Speculation about coinage needs for the Christmas retailing boom
has produced some sales "pitches" to banks from coin exchanges and
dealers, offering ample supplies of coins at a premium price. There
have been some advertisements offering coins "from vending machines."
In my memorandum of July, 1964 on this subject, I stressed three
points:
1.
Under no circumstances should any company
employee ever be involved in coin profiteering.
2.
Make certain that all coins get to the bank
as quickly as possible.
3.
Make coi~s available at no extra cost to
customers who need them.
It is extremely important that we extend an extra effort to combat
profiteering in coins, especially during the Christmas season. If
you learn of offers to sell coins at a premium, please notify the
N.A.M.A. of the circumstances.
Our industry has nothing to gain--and much to lose--if vending operators
sell coins at a premium. Let us be certain that we support N.A.M.A. in
this ~mportant program of combating coin profiteering.
nit e
d
.orporation
Nlanagement Bulletill
TO:
All Branch Managers
.FROM:
Alex Kramer
Recently you received a bulletin from N.A.M.A. discussing their policy
on the coin shortage that exists in this country.
Interstate fully subscribes to N.A.M.A.'s position and supports it
wholeheartedly. Under no circumstances are any of you to do anything
which could possibly be construed as profiteering on the coin shortage.
There are two things you can do, however, that can help to alleviate
the situation and to improve our image in regard to it.
First, make certain that your coins get to your regular bank as promptly
as possible. Secondly, make available at no extra cost coins to those
of your customers who may have a need for them. These should not be
delivered by you but should be on a C.O.D. basis if your customer would
like to call at your place of business to buy coins.
No other arrangements for the disposition of coins is authorized and we
expect you to follow this policy rigidly.
AK:brk
PRESIDENT'S POLICY LETTER # 11
To : Chief Executives, Macke Operating Companies
Subj: Coin Shortages
Macke Memorandum MM 9-64 dated June 18, 1964, is hereby
cancelled and revoked.
Macke policy in regard to the current shortage of coins and the
growing shortage of silver for coin production is identical with NAMA
policy as expressed in NAMA MEMBERS LETTER No. 115.5 dated
Novembe r 13, 1964. We urge you to familianze you:"self ~!lth said
letter and to act accordingly.
Here is the key paragraph:
"To profit from a national shortage is nearsighted foolishness. C!"itics of such practices could
well maintain that 'it is no more ethical thar. blackmarketeering,' Gain good will in your community by
putting coins back in circulation through normal bankmg
channels, and by announcing that you~ re doing so.
Yielding to the temptation of 'cashing in' on the shortage
can result in far more damaging bad pUblicity than the
unthinking operator may realize. It's unlikely that many
will yield. It's against the public interest. It's Elai.~.Ead
public relations behavior. "
Part of the coin shortage has developed because of hoarding by
collectors. Hence none of your coins should be sold to collectors.
Naturally, if you can assist Macke customers who have coin shortage
problems, it would be good business to do so.
A, Goldman
AG:eg
November 25, 1964
Distribution I, II, III, IV
SERVOMATION OF" CENTRAL CONNECTICUT, I
:-1::~J.A.M.t.•
. ..=:a.\
", ).
19 NORTH GEORGE STREET. MERIDEN. CONNECTICUT 06450 • PHONE 2
.. . ...
-.. -... ...
,
~
;,
•• -
.-.-~- •• _ .
&-,
_
....
- - - . - ••
- - - .... - - . . . . . . -
.. -
-.'~'
.
~-
...- .... :'........... , "
.- .. _-
..
-',
".
- ._ ............ -.-.-,......
".
-
'".
'"
.... - . - - .... ~- ... , -~ ..... , - . , - - . - - . , -
. . . . . . _ - - .... _ : _ -
N. A. M. A.
"".--'
DATE
7 south Dearborn st.,
Chicago, ill.
60603
1l..J.9-65
Gentlemen:
In reference to MDlBERS LETTER
No. 1175, please be assured that we are
forwarding to the three banks that handle
our account, all collections as promptly
as they are counted.
We do not favor
profiting on the sale or coins and have
so notified all personnel.
This we would
SIGNED
INSTRUCTIONS TO RCCEIVER:
"
....
-..
BBl ... '
.-,~"
' '"
......
>'
-41-
PART III.
PROSPECTS FOR THE FUTURE
(A) PRODUCTION CAPABILITIES OF THE MINT
Philadelphia
Your Committee, as well as the Committee on Appropriations and others, have repeatedly urged the Mint to continue
its efforts with industry to develop the most modern
machinery possible for installation in the new Philadelphia
Mint.
Mint technical personnel, in conjunction with our
engineering consultants have been very active in seeking
and evaluating new developments.
While this is a never-
ending process, and we will be making improvements continually,
we are confident that the new Mint will contain the most
up-to-date processes and equipment available.
The new Mint, to be completed in July, 1967, will
have a production capability of 2 billion coins per shift
per year, or a total capacity
on a 24-hour, 7-day week
basis --- of about 8 billion.
This capacity will be entirely
"in-house~"
that is, no purchases of strip from industry
will be required.
Production facilities will include melting,
-42-
casting, rolling, and coining of all coins, plus the
capability to produce the new clad strip.
While the basic
process will be essentially the same as the present Mints,
great innovations are planned for the equipment.
Among the more significant innovations we have planned
are the following items.
Raw material
(copper, zinc, nickel,
and process scrap) will be sheared into small pieces, conveyed to storage bins, metered and weighed into batches
("make-up"), conveyed and discharged into the melting
furnaces --- all automatically.
The molten alloyed metal
will be discharged into semi-continuous casting machines
which will cast ingots 18 feet long, 16 inches wide, and
six inches thick --- about 16 times larger than present
ingots.
They will weigh 6600 pounds; our present ingots
weigh 400 pounds.
The ingot will be re-heated, by electric
induction, and will be rolled red-hot in a rolling mill
controlled automatically with punch-cards and X-ray gauges.
It will be "scalped"
(surface milled, to remove imperfections
and scale) and passed through two more rolling mills.
The
material for clad coins will then be processed through a
-43-
still-to-be-determined cladding line.
Following stamping, which will be discussed below, the
finished coins will pass through novel electronic "scanning"
devices
currently under development --- which will
inspect the coins as effectively and much more rapidly than
our present visual inspection.
Coins will be counted and
bagged (or, possibly, placed in other containers) automatically,
and conveyed to vaults for storage.
Pending further study,
special equipment and/or special containers may be utilized
for transporting coin from vaults to trucks and for shipping
to the Federal Reserve Banks.
The most exciting innovation is the new process being
developed for stamping or coining.
The preliminary engineering
has been completed and prototypes (full-size models of the key
operations) have been made and successfully demonstrated.
The
actual production equipment is now in the design stage, and
we expect to have it completed and ready for testing by late
summer.
Thus, progress has been excellent and we are very
confident that the new machine will be ready for full-scale
-44operation before the new Mint is completed.
The new stamping machine, or coin-roller, is expected
to produce coins at the rate of 10,000 per minute --- contrasted with 300 per minute for conventional Mint presses
and about 600 per minute for newly-designed stamping presses.
In addition to the great increase in output, the coinroller will eliminate the need for the current operations
of blanking, riddling, and blank annealing.
This new
process and equipment --- which will be started on pennies,
but may be utilized for other denominations --- will
revolutionize the art and science of coin-making.
Denver
Denver's current "in-house" (without purchases of
strip) capability is about 1.0 billion coins per shift per
year, or roughly 4.0 billion on a 24-hour,
7-day week basis.
Its stamping press capacity in a few months will be about
1.6 billion on a single shift basis, or 6.4 billion total.
In order to make the Denver Mint self-sufficient, and to
eliminate the high costs of purchasing strip and/or shipping
strip from Philadelphia in the future,
it will be necessary
-45-
to provide a cladding capacity in Denver.
Furthermore, it
will be desirable to modernize the Denver processes and
facilities to make them comparable to the operating economies
and efficiencies anticipated in Philadelphia.
Therefore,
the Mint is currently undertaking a study to determine what
will be required to provide cladding facilities and to
incorporate the Philadelphia innovations at Denver.
San Francisco
The San Francisco Assay Office (now also operating
under Public Law 89-81 as a Mint) will have a stamping
capacity of about 1.4 billions coins per shift per year,
or a total of about 5.6 billion annually.
Since no melting,
casting, or rolling facilities are available, all the strip
for San Francisco must be acquired from outside purchases
or from the other Mints.
Thus, in line with legislaion,
we plan to utilize San Francisco's coining capacity for
foreign as well as domestic coinage for as long as the demand
for coins dictates, and sound economic judgment indicates.
-46Total Coinage Capacity
The "capacity" of the Mint, as indicated in the foregoing, depends upon the definitions used, whether one is
referring to self-contained,
"in-house" capacity or whether
outside purchases are involved, and also whether one refers
to one or two shifts, or to an "around-the-clock" basis.
By July, 1967, the Mint will have a total stamping
capacity of about 20 billion coins per year, operating aroundthe-clock, seven days a week, and purchasing clad and other
strip from industry.
On the more economical basis of operating
two or three shifts, but still with some outside purchases
required, the capacity will be between 10 and 15 billion
coins annually.
This data is summarized as follows:
1967 Stamping Capacity (billions of coins annually)
One
Shift
Two
Shifts
Three
Shifts
24-hrs.
7-days
Philadelphia (new)
2.0
4.0
6.0
8.0
Denver
1.6
3.2
4.8
6.4
San Francisco
1.4
2.8
4.2
5.6
5.0
10.0
15.0
20.0
Totals
-47-
(B) TREASURY-FEDERAL RESERVE PLAN FOR RESERVE SUPPLY OF COINS
Your committee, sir, has recommended that the Mint and
the Federal Reserve should maintain inventories of coin adequate
to prevent recurrence of any serious shortage.
be done.
This will
The Federal Reserve Board has been working with
us closely on this and has given its full support to this
program.
While such an inventory backlog may create storage
?roblems, we have agreed that these problems should be met
~nd
solved in such a way as to prevent storage capacity from
Jeing a dominant factor in the determination of the amount
)f coin to be held by the Mints and the Reserve Banks as
cushion against unforeseen demands.
i
They, and we, are
Jiving consideration also to a reserve supply of coins to
neet a national emerg.ency.
You will remember that., for this
~eason
as well as for efficient production scheduling,
~rthur
D. Little, Inc., recommended a year's supply of coins
Ln
inventory.
As soon as we find beyond any question of doubt, that
~e
coin shortage is over, we intend to work out an agree-
-48ment with the Federal Reserve System providing for an inventory backlog.
In the meantime, the joint committee of
the Treasury and the Federal Reserve will continue to work
on this matter, with studies as to storage space and
dist~ibution
of the proposed coin reserve stock.
-49-
(C)
HALF DOLLAR PROGRAM
Shortly after the enactment of the Coinage Act of 1965,
contracts were awarded to Handy and Harman and Engelhard
Industries for their maximum capacity of silver clad 50¢
strip.
These are the only companies who are in the business
of producing silver alloys in such quantities as to produce
SO¢ strip economically.
A limiting factor in production of silver clad strip
for the new 50¢ coin are melting and casting facilities
and technical know-how.
Historically, the silver industry
had not required the capacity to produce silver alloy
castings in the quantities required by the coinage program.
Due to different melting and casting techniques, it has not
been feasible to utilize facilities now engaged in producing
cupro-nickel clad strip in making silver clad strip.
Present contracts call for the delivery of enough silver
clad strip to produce 47,000,000 new half dollars by June 30.
Plans are being made to increase the delivery of strip to
provide for a substantial increase in the production of
half dollars.
-50-
In addition, we have under way three experimental contracts for production of silver clad strip.
experiments appear to be favorable at
th~
Results of these
point.
In one
of these experiments, the silver is being melted, cast and
rolled to a cladding gauge at the Denver Mint.
The metal
is then bonded by outside industry and returned to the Mint
for finish rolling.
by this method.
Satisfactory blanks have been produced
We are evaluating these processes and
intend to utilize these production methods to the extent
needed to increase production of this denomination.
-51-
(D) PROJECTED COINAGE PROGRAM, FISCAL YEARS 1966 and 1967
The Bureau of the Mint obtained a supplemental appropriation for the fiscal year 1966, in order to produce as
many of the new coins as possible.
Its objective is to
manufacture enough of the new coins to replace the 12.4
billion silver coins estimated to be in circulation, within
a two and one-half year period,
if that should become
necessary.
The appropriation requested for the fiscal year 1967,
in continuation of this policy, includes provision for producing a total of 15.1 billion coins during that year,
of which approximately 10 billion will be the new subsidiary
coins authorized by the Coinage Act of 1965 and the balance
will be the minor coihs (nickels and cents).
Maximum pro-
duction rates will be continued on the new subsidiary coins
as long as necessary to assure adequate supplies of coins
to circulate the goods of the country.
-52-
(E)
SALE OF SPECIAL COIN SETS FOR COLLECTORS
We have not made any concrete decisions relating
to the production of special coin sets for collectors.
If we do find that the coin shortage has been overcome,
you may be sure we will produce these special sets as
soon as possible.
-53PART IV.
FORECASTING OF FUTURE COIN NEEDS AND IMPROVEMENT
IN DISTRIBUTION PROCEDURES
Your committee, Mr. Chairman, has evidenced much interest, and
properly so, in having the monetary agencies develop determinative criteria
or specifics for estimating future coin needs and for fostering equitable
distribution of coin.
This will be done.
If I may, sir, I would like to lay the groundwork for the discussion
on this matter by a chronological presentation of this problem, and to bring
your committee up to date on the developments in this area since your last
hearing.
To go back a bit, you know that Arthur D. Little, Inc. of Cambridge,
Massachusetts, did a survey under the sponsorship of the Executive Office
of the President, Bureau of the Budget, with funds provided by the President's
Management Improvement Fund.
This study was concluded on January 16,
1963.
The objectives of the survey were to study the operations and facilities
)f the Bureau of the Mint in relation to current and long-range coinage
requirements.
In order to fulfill the over-all objective of the survey,
'\rthur D. Little:
L.
Forecast coinage requirements for the next twenty-five years.
Their
forecast included projections of demand for domestic coinage by
denomination for each Federal Reserve District.
~.
Developed a forecasting system which was designed to permit the
Bureau of the Mint to prepare its own forecasts as required in the future.
-54-
As you know, there developed a considerable variance between
he Arthur D. Little forecast and coinage programs we found necessary
J
schedule because of the coin shortages which developed, and because
f the change in the alloy of subsidiary coins which involved an expanded
rogram to make enough coin with new alloy to replace all existing subidiary coins, if need be.
By House Report No. 194, 89th Congress, 1st Session the
ommittee on Government Operation, House of Representatives
ecommended that:
"Inasmuch as the shortage is attributable in part to inadequacies
in the available means of determining coin needs and the scheduling
of coin production, it is recommended that-A.
The Sec"retary of the Treasury specifically clarify
these responsibilities as they pertain to the Mint and
to the Federal Reserve System.
-55B.
The Treasury and the Federal Reserve System continue their
efforts to devise more exact means of ascertaining coin requirements, to increase the efficiency and economy of coin production,
to provide the Congress with more adequate information on which
to determine production appropriations, and to avoid the necessity·
of requesting supplemental appropriations.
C. The Federal Reserve System give consideration to developing
more scientific bases for the uniform and equitable distribution of
coin. "
y House Report No. 195, 89th Congress, 1st Session, this committee
!commended that -liThe Treasury Department, the Bureau of the Mint, and the Federal
Reserve System, in their efforts to devise more exact means for
determining coin needs and fostering the equitable distribution of coin,
jointly (a) explore the possibilities of obtaining assistance in those
regards from extragovernmental sources and (b) determine whether
(and, if so, how), the coin holdings of commercial banks should be
invento rie d p e rio d ic ally.
r
It
House Report 223, 89th Congress, 1st Session, the Committee on
)propriations, House of Representatives, requested that careful consideration
given to the development of reliable coinage estimates of coinage requiremts under considerations which may prevail in the foreseeable future,
-56-
and that no opportunity be overlooked in its endeavor to meet those requirements.
It was further requested that the Department maintain close liaison
with the Committee concerning the problems facing the Department in this area.
***************
Mr. Chairman, between your first hearing in 1964 and your second
hearing in 1965, I can assure you I was and am still much concerned about
5etting basic data which would throw light on the end-use being made of the
Jillions of coins we have produced and released for circulation.
My concept,
:hen, of the approach to this problem can perhaps be shown best by offering
:or the record a memorandum which I prepared and distributed to my staff
m November 15, 1964.
~ymnastics,
This turned out to be an exercise in mental
primarily because of prevailing opinion that the more we delved
nto this matter, during a period of acute shortage, the more the problem
¥ould be aggravated.
We did write to the Federal Reserve Board, early in January, 1965,
isking for an estimate of their coinage needs for fiscal year 1966.
Later,
\ssistant Secretary Wallace and I met with the Board and the Reserve Bank
)residents to discuss this matter.
From this meeting, and prior discussions,
here evolved a plan to establish a joint Treasury-Federal Reserve committee
o develop a data collection plan.
Mr. Chairman, with your permission, I would like to include in the
'ecord my letter of January 14, 1965, to the Federal Reserve Board, Chairman
tIartin's reply to Under Secretary Deming on March 16, 1965, and the latter's
cknowledgement of April 2, 1965.
~
,
".".".'
TREASURY DEPARTMENT
.-::-
WASHINGTON, D.C. 20220
: ....
~
"..
OFFICE OF
·OR OF THE MINT
November 15, 1964
MEMORANDUM FOR THE STAFF:
As coins are made to be used in the commerce of this country,
the Mint should and must find out the end-use which is actually being
made of billions of coins, especially in view of the present and past
problems in connection with the coin shortage.
I know that all of you are busy, but I ask that you particularly
concentrate on this probl.em, letting only the crash program interfere
with our going forward to solve related problems.
In connection with our attempts to ascertain this end-use, which
goes to the core of the shortage, and the channels being used to arrive
at all end-uses for coins, we should write, among others:
1. The Chairman of the Federal Reserve Board, asking for
monthly reports on coin holdings of member banks, together
with information about the coin situation reported to their
representatives when they make their routine visits to
member banks.
2. The ComI;>troller of the Cu~rency, asking that he break down
the Call Reports (of which there are 4 a year), in order to
reflect the quantities of coin, by denominations, being held
in National bank vaults. At the present time these call
reports contain only a single item for Cash, which includes
coin and currency ..
j
3. The Chairman of the Federal Deposit Insurance Corporation,
asking that he secure from banks, not members of the Federal
Reserve System, who come under the jurisdiction of FDIC,
monthly reports on coin holdings ..
Kew Freedom in Your Future With U.S. Savings Bonds
- 2 -
4. The National Association of Chain Stores, asking if they
would make a survey of their members as to how much
coin is in their possession, and where it is kept, as of the
date requested.
5. The Association of Retail Merchants, and/or Board of
Trade groups, (lists probably obtainable from the Association
of Trade Associations), asking them to secure the same
information. (This includes laundries. cleaners, all such).
6. The Coin Operated Device Associations, including Vending
Machine groups, Telephone Companies, Highway Commissioners,
etc., where not members of any Association. asking the same
information.
7. Have our New York Office, through FBI, SS, or by personal
inquiry, ascertain from companies renting storage space
(warehouses, vaults - outside of banks - and such), whether
or not coin is stored therein. If so. by and for whom.
8. Write Mr. Saxon, Mr. Barr. and the Federal Reserve Board
to ascertain if we could have information as to the amount of
coin known to be stored in large quantities (upward of $10, 000)
in their various institutions. Naturally. names of the owners
would be privileged information.
9. Make a spot-check of areas where shortages exist - i. e.
Chicago,' Colorado Springs. etc., and secure details as to
where coin normally is secured, amount of flowback, changes
in pattern chronologically. and opinions as to reasons for
increasing seriousness of shortage.
10. Ask the Federals for their best estimate of NEED for coins
for 1965. Also. for their best estimate of probably flowback
to be expected. and when. with probable source.
11. Check carriers. especially large companies such as Brink's.
as to known instances of payment of premium for coins. or
arrangements existing for them to buy coin to sell at a
premium. (Names privileged).
- 3 ...
12. Make spot check of businesses, banks, etc., as to instances
where coin has been offered for sale at premiums. When
willing, specific names could be given as no privilege would
exist in this situation. Follow through by checking sources
for coins thusly sold for profit.
13. Check 11 ads II for sale of coins at premium. Have offerors
interviewed by properly authorized persons, as to the source
of their supply, their operating procedures (customers, rate
of profit, whether operating on borrowed funds or not).
14. Investigate possibilities, or seek to have legislation introduced,
making it illegal to sell coins for profit unless (1) licensed as
a coin dealer, or (2) registered with Mint or other authorized
agency - Treasury, Federal Trade, etc.
15. Have S. E. C. or Federal Trade investigate practices of
individuals or firms engaging in so-called lICoin Investment"
activities. Ascertain how they fulfill their promises to
"turn $5,000 into $20,000 in 4 years".
16. Stiffen penalties, procedures, or whatever is necessary to
stop practices of bank employees selling rolls or bags of coin
in any quantities for "tips", "premiums" or what have you.
17. Permit Bureau of the Mint to engage specialists, consultants,
experts, economists, and whatsoever may be necessary to
ascertain/the complete and ~'true facts" as to the cause of this
problem and the solution.
18. Attempt through the Professional Numismatic Guild, the
Retail Coin Dealers Association, and coin teletype outfits, to
have a survey made as to the amount of coin held by coin
dealers. Again, individual's names are privileged, but an
over-ali and fairly accurate estimate probably could be made.
Eva Adams
Director of the Mint
:: .......
TREASURY DEPARTMENT
. .
•
WASHINGTON, D.C.
....
20220
OFFICE OF
DIRECTOR OF THE MINT
January 14, 1965
Hon. William McC. Martin, Jr.
Chairman, Board of Governors
F~deral Reserve System
Washington, D. C.
Dear Mr. Martin:
It would be helpful to the Bureau of the Mint if each of
the Federal Reserve Banks and Branches were to formulate
an estimate of their coinage needs for fiscal year 1966. For
planning purposes, the assumption may be made that no silver
dollars will be produced and that there will not be any change
in the alloy of the subsidiary and minor coins now being produced.
In making such an estimate, I of course appreciate that
the traditional January coin flow-back, or diminution of such a
flow-back this year, will in large degree influence estimates
dealing with the new fiscal year. Accordingly, if you are in
agreement that estimates on the part of the Federal Reserve
Banks and Branches can serve a useful purpose, may we hope
to have this information some time early in February, 1965?
Sincerely,
f sf Eva Adams
Eva Adams
Director of the Mint
Keep Freedom in rour Future With U.S. Savings Bonds
BOARD OF G6VERNORS
of
THE:
FEDERAL R'~SERVE SYSTEM
WASHINGTON
0,.,.10£ 01" THE OHAIR"'AN
March 16, 1965.
The Honorable Frederick L. Deming,
Under Secretary of the Treasury
for Monetary Affairs,
Department of the Treasury,
Washington, D. C. 20220.
Dear Fred:
The Board was gratified to note that coin received
by the Reserve Banks from circulation during February continued the upward trend begun in the previous month, and that
this was the first time since before 1963 that February
receipts were above those for January. This experience would
seem to indicate that the massive production program of the
Treasury is beginning to make substantial progress in abating
the coin shortage, and that it would be appropriate at this
time td give consideration to means for developing better
measures of future coin needs.
In her letter of January 14, 1965, Miss Adams said
that it would be helpful to the Bureau of the Mint if each
of the Federal Reserve Banks and Branches could formulate an
estimate of their coinage needs for the fiscal year 1966, and
in the meeting which Mr. Wallace and she had with the Board
and the Reserve Bank Presidents on February 2, 1965, the
possibility of estimating future requirements ano,r obtaining
inventory reports from member banks was explored furthe~.
Although the views of the Presidents indicatE~d a strong feeling that no significant data along these lines could be
obtained at this time, the general need for better data on
coinage requirements is fully recognized. TIle problem seems
to be in the nature of the steps that might be taken to
improve the reporting system and the timing of such steps.
It is understood that, in discussions you and
Mr. Wallace have had with Mr. Farrell of the Board's staff,
the suggestion has been made that a conference actended by
representatives of the Treasury, the Bureau of the Mint, and
the Board, and by representatives from the Federal Reserve
Banks knowledgeable in the coin problem might be helpful in
developing a better data collecting program. The Board concurs in this view and would be pleased to arrange for such a
conference at the convenience of the Treasury.
BOARD 0,. OOVERNORS
he Honorable Frederick L. Deming
0,. THE ,.EDERAL. REBERVE SYSTEM
-2-
The Board also feels, however, that the benefits of
such a conference would be maximized if the Reserve Banks could
be furnished in advance with an agenda or other indications of
the matters to be discussed. Any thoughts that you and your
associates may have in this regard would be appreciated.
f
~b:)~
Sincerely yours,
,
Wm. MCC. Martin, Jr.
,h
THE UNDER SECRETARY OF THE TREASURY
FOR MONETARY AFFAIRS
WASHINGTON 25, D,C,
April 2, 1965
Dear Bill:
Thank you for your letter of March 16, about the proposed
conference between the Treasury, the Board, and representatives
of the Federal Reserve banks, to discuss coinage problems. The
Treasury is pleased to know that the Board concurs in the belief
that such a meeting would be useful.
Preliminary to the conference, may I suggest that a working
staff composed of representatives from the Mint and the Board's
Division of Bank Operations meet to prepare an agenda? Agreement can then be reached by the Board and the Treasury as to
specific topics to be covered and the priority to be assigned each,
if they should be so extensive as to cover a number of study projects.
In the course of preparing the agenda, I believe, and am sure you
will agree, that the comments and recomrnendations made in the
recent reports on the coin shortage, by the Committee on Government
Operations, House of Representatives, should be given full attention.
Sincerely,
/s/ Fred
Frederick Lo Deming
The Honorable William McC. Martin, Jr.
Chairman, Board of Governors
Federal Reserve System
Washington 25, D. Co
-57-
In July, 1965, a joint Treasury-Federal Reserve Ad Hoc
Coin committee was organized, to give attention to the
recommendations of your own committee as well as the House
Appropriations Committee.
The Ad Hoc Coin Committee consists of the following:
Wilbur T. Billington
Vice President and Senior Economist
Federal Reserve Bank of Kansas City
Kenneth M. Failor
Assistant to the Director of the Mint
and Chief of Coin Management
Bureau of the Mint
A. M. Gustavson
Vice President
Federal Reserve Bank of Chicago
R. Duane Saunders
Director, Office of Debt Analysis
Treasury Department
Thomas
o.
Waage
Vice President
Federal Reserve Bank of New York
John R. Farrell
(Chairman Pro Tem)
Director, Division of Bank Operations
Federal Reserve Board
This joint committee met in Washington on July 21 and
22, and again on November 29, 1965.
by this committee,
The matters considered
its conclusions and recommendations were
placed before the Conference of Presidents in September,
1965, and before the Board of Governors of the Federal
Reserve System.
The details concerning the recommendations,
-58-
and the action taken on them by the Board of Governors, are
given in Chairman Martinis letter of February I, 1966,
and the enclosures thereto.
Mr. Chairman, I offer these
for the record.
Mr. Chairman, we will not burden the record with the
deliberations of the Ad Hoc Coin Committee, which led up to
the report which was submitted to the Conference of Presidents and the Board of Governors.
However, this information
is available for inspection by the members of your committee
and your staff, should you find this data useful.
As things now stand, the Treasury will soon reply to
Chairman Martinis latest letter, and then we will be ready
to move forward to accomplish what your committee has recommended.
We will make&ery effort to make improvements,
not only in the field of forecasting coin needs, but also
in developing better and more economical means of distribution.
FEB 2 1966
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON
OFFIOe: 0"" THE: OHAIR"' .......
February 1 t 1966 •.
The Honorable Frederick L. Deming,
Under Secretary of the Treasury
for Monetary Affairs,
Treasury Department,
Washington, D. C. 20220.
Dear Fred:
This refers to the report dated December 1, 1965, of
the jOint Treasury - Federal Reserve Ad Hoc Coin Committee. It
is understood that copies of this report were previously furnished to you and other Treasury representatives, as well as to
the Conference of Presidents and the Board. For convenient
reference, a listing of the recommendations in the report is
enclosed.
On December 13, 1965, the Conference of Presidents
approved the recommendations in this report with the following
exceptions. The Conference reaffirmed the positions taken at
its September 27, 1965, meeting with respect to distribution
procedures, namely, that (1) the Conference does not see any
net gain in proposing any change in the distribution procedures
at the present time in view of the likelihood of the coin shortage being improved in 1966, and (2) the Reserve Banks should in
principle accept coin orders direct from nonmember banks but
that this requirement should not be made mandatory at this time
because such action would aggravate the problem of equitable
distribution of coin among the commercial banks.
The Board concurs in the actions taken by the Conference of Presidents with respect to the recommendations made by
the Ad B2£ Coin Committee. In considering this matter the Board
noted that, while some of the recommendations call for action
mainly on the part of the Reserve Banks or the Board, nearly all
of the recommendations would directly or indirectly affect Treasury operations. Accordingly, before taking any further action,
the Board would like to have the views of the Treasury with
respect to the Ad ll2£ Committee report, and would particularly
appreciate any comments or suggestions as to further steps in
this matter.
Sincerely yours,
WID. MCC. Martin, Jr.
Enclosure.
RECOMMENDATIONS IN THE DECEMBER 1, 1965, REPORT OF
JOINT TREASURY - FEDERAL RESERVE AD HOC COIN COMMITTEE
Inventory Reports
1.
With respect to Federal Reserve Banks and Branches, the existing
arrangement be continued under which coin holdings at the end of
each week and at the end of each month are reported to the Mint,
with the monthly reports also including data showing coin receipts and payments, as well as comments on the degree of rationing by Reserve Banks. In addition, however, if and when desired
inventory holdings are obtained from commercial banks pursuant
to the immediately following recommendation, arrangements should
be made to obtain comparable figures from the Reserve Banks and
Branches.
2.
With respect to commercial banks, the Federal Reserve System
Research Advisory Committee be requested to develop arrangements
under which-(a)
All weekly reporting member banks would submit
special reports showing, by denominations, as
of the last Wednesday of each month the amount
of coin on hand and the desired inventory level
at that time of year.
(b)
A representative sample of smaller banks in each
Federal Reserve District (preferably member banks)
not included in the weekly reporting group would
report the same information.
3.
With respect to large users of coin (such as department stores,
supermarkets, armored carriers providing wrapping service, etc.),
the Federal Reserve System Research Advisory Committee be asked to
study the feasibility of setting up by Federal Reserve Districts a
sampling reporting arrangement that would provide on a continuing
monthly basis data that would show, by denominations, coin holdings
and desired inventory and that would be representative of the "on
hand" or "float" needs of large users of coin.
4.
Copies of the reports suggested above be furnished to the Bureau
of the Mint and the Board's Division of Bank Operations.
-2Hoarding
1.
The Office of the Comptroller of the Currency, the Federal Deposit
Insurance Corporation, and the Federal Reserve Board be asked to
make arrangements under which, as part of every bank examination,
a separate report would be submitted to the appropriate Federal
Reserve Bank showing for the bank being examined the number of
loans collateraled by silver dollars and other coin, and the
amount of coin so pledged by denomination.
2.
The Treasury consider hiring an outside research group to develop
and carry out a proposal for sampling coin dealers and collectors
for the purpose of obtaining a representative indication of their
holdings.
Coins in Circulation
The Treasury continue its study of sampling techniques to improve
statistics on coin in circulation, and the Federal Reserve Banks
and the Board stand ready to lend any assistance the Treasury may
desire in this undertaking.
Production Planning
1.
The Bureau of the Mint investigate and develop a long-range
planning program based on sound statistical techniques.
2.
The Federal Reserve Banks develop a procedure under which each
Bank would submit to the Board's Division of Bank Operations
(a) in April of each year a preliminary estimate showing the
coin needs for its District, by denominations, for each of the
next two calendar years broken down by quarters, and (b) in
August of each year furnish any revisions that may be appropriate
in the April figures.
3.
The Division of Bank Operations coordinate these figures on a
System-wide basis and furnish them to the Mint in May and August
of each year for advisory purposeso
4.
A permanent Treasury - Federal Reserve liaison committee be
appointed to review proposed production before firm estimates
are submitted to Congress.
-3-
Distribution
1.
The Mint, for purposes of making its coin allocations among the
Federal Reserve Banks and Branches, (a) take into account the
degree of rationing at the different Federal Reserve offices,
as now shown on the monthly reports to the Mint on Form 9000;
and (b) obtain from each Federal Reserve office a mid-month
report showing, by denominations, coin receipts desired from
the Mint during the next calendar month.
2.
The Board consider the desirability of asking the Presidents'
Conference to adopt, in the Cash Circulars of the Reserve Banks,
uniform paragraphs covering coin service to nonmember banks,
with a view to eliminating any provisions that discriminate
against nonmember banks other than those that have to do with
absorption of shipping charges and risks.
3.
Treasury Circular No. 55 be revised to delineate specifically
between responsibilities of the Treasury and the Federal Reserve
Banks with respect to the distribution of coin, and to eliminate
the prohibition against paying out new coin when circulated coin
is available.
Storage
1.
Long-range production planning by the Mint include provision
for a backlog of coin beyond current needs. Minimum holdings,
by the Mint and Federal Reserve Banks together, for this purpose
are recommended as follows: cents--three months' supply;
nickels--six months' supply; other coins--one year's supply.
2.
The "supply" used in such planning goals be based on the Reserve
Banks' gross payments less their receipts from circulation, and
on inventory data reported by Reserve and commercial banks.
3.
The Mint make a survey of storage possibilities available to it
(such as the Assay Offices, West Point, and Fort Knox); that
such survey include data showing the bag capacity of the space
available and transportation and other costs involved in utilizing such space; and that these data be coordinated with similar
data previously compiled by the Federal Reserve Banks and
Branches.
-4-
4.
The Treasury and the Federal Reserve System work out an agreement
under which, in building up an inventory backlog-(a)
The Mint will be basically responsible for the
storage of new coin and the Reserve Banks will
be basically responsible for the storage of
circulated coin.
(b)
Supplies be built up first at Reserve Banks,
next at the storage space under Mint control?
and finally at other points if necessary; and if
space outside of the Federal Reserve Banks and of
Mint control is necessary, the Mint and the
Federal Reserve System work out an agreement as
to appropriate sharing of the rental cost.
5.
The Mint bear any transportation costs resulting from its request
to move part of the inventory backlog from one Federal Reserve
office to another.
6.
Any reflow of coins to Reserve Banks beyond inventory needs be
removed from current inventories and stored in dispersal areas
until there is an adequate stock for a national emergency.
Miscellaneous Items
1.
A policy be adopted under which rebagging and mixing of a specific
denomination of coin will be continued by the Reserve Banks only
as long as any Reserve Bank is rationing such coin.
2,
The Federal Reserve Banks continue to accept deposits of wrapped
coin and pay shipping charges on receipts from nonmember banks
until an ample supply of cOln is generally available,
3.
A policy be adopted under which persons wi th particular knowledge
of the coin situation would be very careful in volunteering any
information about it and equally careful about the implication
that might be drawn from replies to responsible inquiries.
4.
The Treasury consider re-establishing a numismatic service as
Soon as possible in order to realize the revenue that would come
from such a service and to provide collectors with proof sets
and possibly other new coin.
-59PART V:
RETURN TO MORE NORMAL AND ECONOMICAL PRODUCTION
Your Committee, Mr. Chairman, has recommended that
the Mint give consideration to, and formulate plans for
decreases in production of coin when the present needs
and inventory requirements have been met,
including termi-
nation of any uneconomic steps undertaken during the crash
program.
In the months which lie ahead, you may be certain, sir,
this is something we will work earnestly to achieve.
How-
ever, as you know, we are just beginning our transition
to the new coinage.
It will be some time, even yet,
before coin needs are fully met, on a national scale.
We
are particularly appreciative of the support you lend to
an inventory reserve which does many things.
It will be
a powerful force in giving assurance to the coin-using public
that coin will be available when it is needed.
It will,
in itself, level out the peaks and valleys in the coin demand
and equate that demand to more of an actual need basis,
rather than a demand which is based on a fear of a future
-60scarcity.
And, most importantly, at least to us, it will
give us a chance to level out our own production on a most
efficient and economical basis.
Our greatest step toward "normalcy", efficiency and
economy of operation will be taken in July, 1967, when the
doors of the new Mint at Philadelphia are opened for business.
So that you may have some idea of what this important new
edifice will look like, there is enclosed with each of the
statements given to the members of your Committee, a photograph of the architectural rendering.
If it would not be
inappropriate, sir, I would also like to offer for the
printed record a line drawing, should your Committee desire
to have it.
Not only will the new Mint at Philadelphia provide a
significant increase in production capacity--over three
times that of the present mint--but it will permit the
production of coin on a highly efficient and economical
basis.
This mint will be completely self-sufficient.
side purchases of strip,
including the clad, will be
Out-
UNITED STATES MINT
-61eliminated.
Overtime, premiums, and other extra labor
costs will be minimized.
Transportation costs for incoming
material, blanks, scrap, and finished coin will be greatly
reduced.
The economies of automation will be realized .
.Technological developments which came about as a result
of the Coinage Act of 1965, made it necessary that a number
of changes be made in our original plans for the structure
on the new Mint site which was selected some time ago.
We have managed to fit in the cladding and other processes
necessary to support the new coinage operations.
The story
on this, Mr. Chairman, is given in a letter, in response
to an inquiry we received from you not long ago.
I would
like, sir, to offer this correspondence for the record.
If I am not already running over time, I would like
to touch briefly on some of the areas in which we hope to
economize:
OVERTIME:
Currently overtime and shift premium pay are
running at a rate of about $10,000 a month.
If
production remains at about the same revel which prevails
at this time, the new Mint at Philadelphia should enable us
o
•,AFLoA,. CHAIRMAN
ONALD. MASI.
lAGH£R. N.J.
u
EIGHTY·NINTH CONGRESS
<!ongre~s
or t0e ~rdte~ 0~~~~~
~)ouse
DONALO RUMt,;;-':LO. ILL •
WU...... AM L.
c.:·:.:.~I,·.~ONj
CA,.'fOL. 5-44(;7
of lletJrex:entatfuez
LEGAL AND MONETARY AFFAIRS SUBCOMN;;TIEi::
OF THE
COMMlTIEE ON GOVERNMENT OPERATIONS
RAYBURN HOUSE OFFICE BUILDING, ROOM B349-A
WASHINGTON, C.C. 20515
October
19, 1955
Xiss Eva Aclo..rns
Director of '~he !,fint
Tre~sury Department
Hashington, D. C.
Dear !l.iss Adx:l.S:
711e ?hiladelphia Inquire~1 nE!.s ~.eCen-~J.y ca~~~:."i.cc. a.~"':1 ~_C;3 (;:)~' .•"
eerninG ti1e nevl Philadelphia !<;int, the r::.o~-::' ?ec(:;~:~ of 1._:.::'2.:-" ~,:: c:c.'.'!.e
to my attentiorl is the e::;.closed f:::-cLl the Octobe:c :5, ~S65, L . 8c:..:.:.
7ne articles have c?i ticized the site 0:.... -C(•..:: ~-.;:;\;- :.1:...n~ c.c c. ::100::::'
one because of its location in a cro',...':'ed d:,,~-;::-~-cc~.;~:~ &::.'ec., ~:"c. be2~,-.:;e
it is of such restricted size as to proh:2.b:' t 12::;:'::':'::-.:" (;~·:>;:;..:.;.s':::'o::.... ':'110
articles have also co:r::nented on the incl'easc:CL C0':':':;-~::""J.c"~::'cn (;s-c::':-!i.<:~es
~'1d the :,eed :;:'01' :::'Cl'e e:h.'"Pensi vc· rllachinery "v~'1a:..1. r.ac:. eG.rliel' been
indicaoced.
:: \-[0"'.110. appreciate your
aa.v~sir..c: ~;;::c:
Sll~co:,::.-.'_:: __ v':.:;C:
c~·.;:-_.:; :-:',~::;'"lC:'.'
::'n i-Thier.. :'::2 site 1-[aS selected., <;..r1d the C0:::'8i6.(;Ta"c::'c~::.:; ':::-.::..::::-.. ~:';;;:.::- im~G
::'ts sel;::ction. Also please advise vihe'~l:2l' -~?l.e:.~e i':':"S .:.::w .:.-~::c:::.' ?..::d.c~'::'.l.
or privately moffied land in tile Philadelp:'1ic. ::::.":=a i::~i.:::h cc·-L..G. ilD.V.? bc(;;~.
utilized, i,lith perhaps bettel' trG.l1sportatic;:: :.:~aci::~-::':'e.:; [;.nc. ,>"i i:.h ::.:ore
room for expansion.
In vie'\'l of ~::e hit::~ cc::ts 0-: e;u:"?i~:C c:..::Q C::·:-.9~:",~ir:G the )..:r:.~·l r::i~"'"t,
please advise ''i':'le".:.ner considc?at:'on h2.S -::;22,1 C;iv(;:-. -co t!-l02 ac.visG.bility
or possi':Jility of elir.1inatinG ~.:.ne mar.1.::f::l.c~"c:l':L::2 s-ceps \·rl1ich ~:.~ccec.e
'
blanldns, "by purchasing bronze, l1ic~cl :::.:"..0. -.:.l1e ~_2';.' c::"ad .3tri:;?pin,:; from.
private i~dustry
Please give any addi ~ioncJ..
::'nt'ol~::~:,-~:,c='-4 1';~~·~ic['.l YC"':'" ·...)~.L:i.eve r{'.~y
be
hclpfu.: -'';0 the Subcon..mttee in its cOr.:t.i:1Ui::; :':r~c:.~e::;-;:. i:1 -~he efi'icie:J.cy
and eco~:c:;.y of coinage operations.
Sincerely yours,
,,
r _
-,,',
--
, ,iDante B.
'Ch~irma.n
Enclosu:.'e
ALA.
TREASURY DEPARTMENT
WASHINGTON, D.C. 20220
IFF ICE OF
October
IR OF THE MINT
26, 1965
Dear Mr. Fascell:
Thank you for your letter of October 19, asking for information
on our new Mint planning, and indicating the Subcommittee's continuing'interest in the Bureau of the Mint and its coinage operations.
We are grateful for that interest. We will try to answer your
questions in this letter and its attachments, and we would welcome
the opportunity to discuss the new Mint in more detail with you,
your staff, and the Subcommittee members should you so desire.
First, let me say that we in the Treasury completely understand your concern about the adequacy of the Independence Mall site
and the advisability of building and equipping the new Mint as
currently conceived. FUrther, I assure you that both we and G. S. A.
have done a great deal of soul-searching during the past months and
have given the problem a thorough analysis. We are still firmly
convinced that the selection of the Independence Mall site was the
proper one and that any change in plans at this late date would be
definitely against the public interest.
Construction was begun on October 1. The excavation work is
almost completed and the forms for the concrete foundations and
footings are well underway.
The processes and operations planned for the new Mint are
baSically the same as carried out in the existing Mints, but on
higher-capacity and more efficient equipment. That is, the basi~
operations Will be melting and alloying of metals, casting the alloys
into ingots, rolling the ingots into strip, punching blanks from the
strip and coining the blanks. Even the cladding process will be
Similar, but will require additional preparation of the ingots and/or
strip and a bonding operation (e.g., rolling and heating). We have
no intention of carrying out primary metal operations, such as steel
mills perform, which would be impractical, uneconomical, and constitute a "public nuisance" in an urban area, and its location will not
adversely affect our economy of operations.
The site is large enough for the Mint's
acres, on about three city blocks, it is more
size of the existing Mint I s site. We plan to
ations, including cladding processing, on the
Kf~p-fTel:dum
requirements. At
than three times
have all coinage
ground floor, as
in Your FuJure With U.S. Savings Bonds
5·3
the
operwell
- 2 -
truck-loading, and storage for both raw material and finished coins.
Only office, die-making, proof cOin, long-term storage, and other
supporting activities will be located on upper floors. The production
areas will have high ceilings (55') and only a portion of the building will be multi-story. As with many modern plants, production will
be on a single floor with a multi-story office area on the front of
the building.
Trucking operations will be "off-street". We expect about
30 trucks per day, an average of 2-3 per hour, and a loading dock,
completely inside the building, which will permit us to load or unload seven or eight large highway tractor-trailers simultaneously.
In addition, a'driveway off the street will contain at least six
trucks waiting to enter. Our present Mint can load or unload only
one at a time, and waiting vehicles have to park on the street. We
are sure that these provisions are more than adequate for the efficiency of our operations, and Philadelphia officials who are concerned with traffic problems, have approved our plans.
The trucking operations will be off Fourth Street, a Bidestreet and not a main artery, which will be most convenient to the
proposed Delaware River Expressway, only four blocks away. As with
department stores, post offices, newspaper plants, and other truckintensive operations which are located in the City, we foresee no
special problems. (As a sidelight, the contractor has 50-75 trucks
per hour presently hauling dirt, with no apparent problems).
Regarding parking, we feel it is unnecessary and too costly to
provide spaces for all our employees. Space for 1,000 cars would
require about 10 acres of parking area. Public transportation is
excellent, and the location is readily accessib~e to all our employees,
including the many who live in Camden, New Jersey, across the river.
A large municipal parking garage is currently under construction across
the street under the Mall. Further, we will have much fewer empl~yeeB
than many of the office buildings in the area. Our present Mint has
no parking at all.
Planned production, which will include process equipment for
the new clad-alloy, is 2 billion coins per shift per year, or 8 billion
on a 24-hour, 7-day basis. This capacity is more than double the existing Philadelphia Mint's; in fact, it exceeds the total capacity,
under norm~l operating conditions, of the three existing Mints combined.
Thus, provisi on for expans ion has been "builtin" and we firmly believe
that the new Mint will haVe sufficient capacity to meet the coinage
needs of the Eastern United States for the next 15 to 25 years.
We believe that it will be undesirable to expand the Mint in
Philadelphia further. For economic reasons, especially freight costs,
if and when coinage needs exceed our new total capacity, additional
- 3 capacity should be provided elsewhere than the East Coast. Shipping
tons of raw material and finished coins, at $1 to $2 per hundred
pounds, first to Philadelphia and then back West for coin distribution
would be excessively expensive. As the population-center moves further
West, it will become more efficient and economical to ship coins from
a closer point than Philadelphia.
The question of "the advisability and possibility of eliminating
some of the manufac'turing steps in the new Mint has "been g1 ven a great
deal of consideration. This question, which is not a new one, touches
on many issues. For many reasons --- constitutional, statutory,
economic, security, quality, scheduling, and over-all public service --it is our conviction that the manufacture of United States coins is a
function of ,the Federal Government. Only in times of extreme emergency
should it be delegated to private industry. We are currently purchasing
strip, as you know, because the Mint has not been permitted to expand
its facilities in the past and, consequently, does not have the production equipment or the space to produce sufficient quantities of
bronze, cupro-nickel, or the new clad materials to meet the demand for
coins. Because of this situation, particularly with several new
companies now producing the clad material under profitable government
contracts, there is natural pressure on legislative and other critics
to force a continuation of present conditions, i.e., to postpone or
cancel entirely the building of the new Mint.
For the next two years, until the new Mint becomes operative,
we expect to pay close to $60,000,000 each year for the fabrication
(i.e., exclusive of material costs) of strip purchased from several
industrial companies. This figure is more than double the current
operating cost for the Mint's entire coinage operations. Furthermore,
we estimate that the Mint can produce strip at ~bout 60~ less cost than
that we must pay private companies, or a potential annual savings, at
present production levels, of $40,000,000. This fact alone justifies
the non-recurring cost of $37,700,000 for the new Mint, and certainly
mitigates against continuing outside purchases.
The Secret Service, as well as the Bureau of the Mint, has
always been concerned about contracting coinage operations to the
private sector. Past and current experience have indicated that special
securi ty measures must be taken to avoid "slugging" problems when private companies are producing material of an identical thickness, weight,
and alloy as U. S. coins.
The control of the quality of outside purchases is a continuing
problem. Our experience of the past two months with the new clad
material has firmed our belief that the Mint cannot with confidence
rely on industry to produce materials of the quality level required
for coins. Nobody in industry, so far as we know, produces the same
- 4 quantity ~ methodically holds the close tolerances which are required
normal practice in the Mint. This requirement for close tolerances is
not merely a matter of pride nor the fact that U. S. coins are involved;
coins that are of improper thickness and/or weight will not be accepted
in coin-operated machines.
Further, it is·undesirable for the Mint to lose control over
its source of materials, not only in day-to-day operations but especially in times of national emergency. Experience has shown that
in wartime and other emergencies the materials for coinage become diverted to more essential and/or profitable usage. We would not be
fulfilling our responsibilities if we did not consider this possibility.
The Mints must be as self-sufficient as possible.
Regarding the selection of the Independence Mall site for the
new Mint, I am enclosing two letters to the General Accounting Office
(June 28 and July 19, 1965) and a memo from Assistant Secretary Wallace,
(June 28, 1965) which describe in detail the steps leading to and the
reasons for the selection of this specific site. These are replies to
General Accounting Office's letters of June 10 and July 8, also enclosed.
The gist of the replies is as follows: There 'Was a pressing need for a
new Mint; it is even greater today. Experience has shown that putting
its location "up-for-grabs" in the political and civic arena would
delay the project, perhaps for years. Thus, a site was selected which
was not only "politically feasible" but which also satisfactorily met
the Mint's operating and other criteria.
Also enclosed is a copy of a letter-to-the-editor by Mr. William L.
Bafsky, which accurately reflects the community's reaction to the Mall
si te. Mr. Rafsky, incidentally, formerly was Philadelphia 1 s Development Coordinator and is recognized as "Mr. Development ll in that city.
In summary, recent developments such as the continuing high
demand for coins and the new alloy have presented new problems.
Nevertheless, Mint and Treasury officials are firmly convinced that the
additional costs for the new Mint are fully justifiable in light of what
it will do; that the pressing need of satisfying the coin demand and
reducing costs dictate no change in current plans; that the present site
is fully adequate; and that it is against the public interest to plan to
continue purchasing strip for coinage. Most important, we do not foresee any additional changes which would increase the current estimate
of $37,700,000 for constructing and equipping the nev Mint. We in the
.. 5 ..
frollSUT'f and t.be involved of'f1uials in G.S.A. are fully nWl"e of tbe
Dace!lsity tor teeping to thia est1nate, an4 1t 1s our intention to 40
80.
J'>~
\Ie
your further 1n:foI"'.:.lStil.)n, the t'ollo"Jins ill the aobedul. vh10h
bave eata'blishe4 for'tbc balance of tho project:
Jov. '65
Doe.
'65
~.
'66
Apr. '66
Ma.y
&apt.
Spring
July
'66
'66
1
67
'61
tor lona-leadt1ma
A~a con~cts
p~xe6" equi~':ieIlt (e. g., rolling m:J.lls).
Avard Cl"/:4tra.ct for Pba!'Je 2 of ¢Onatruction
(~truotural c':lncrete fre.rJe).
C,')J:jl1>lete Phru:;e 1 ot Cvutotruction
(fO'.lrAt\t1oue, etc., begun on Oct. 1).
Avard contra:.lt for Pha!le 3 ot con.struction (balD.xe of ra~llity).
COI;l:plete Pllwse 2 o~ constN.ct10I1.
:ae~n 1n~tall.at1on or FOC03S equ1pt.ent..
Prove-out process
equipt~nt.
Cor:Iplete eonstrwlt1on .n4 beet",
operat1.oca.
Again, let me state that
41acua. th1a proJ~t in pen.on.
m;J Qtaft
and I will. be
~
S1ncerel$,
Eva Adao.s
J)1~tor
The R')tlorable
Innto B. Fascell
Chair.oon
legal and Ibnetary AffairG SubcoZ::lIli tteo
of the C,~ttoe on G:,VertIDCnt OperationG
F.a.yburn Ibuae Office Du11d1r.g, Beom B349~
.
Wtulh1ngton, D. C•
Enolosurea •
ot
the lU.nt
11'111104 to
-62-
to reduce this figure by about 80%, or an annual savings
of about $100,000.
PURCHASED STRIP (BRONZE AND CUPRO-NICKEL):
The excess cost
of purchasing bronze and nickel strip as compared with
Mint manufacture at Denver and Philadelphia was previously
estimated at approximately $7 million on an annual basis.
All future production of nickel and cents at the Philadelphia
Mint will be from the ingots cast and rolled within the Mint.
At Denver, we have not started this program because the
contracts for this material run until next month.
Even
then, a large part of our capacity there may be used to
melt and roll silver for the new fifty-cent piece.
BLANK SHIPPING:
Sinc€ San Francisco was reactivated on
September 28, 1964, that plant has been
supplying Denver with a large proportion of nickel and cent
blanks.
Pre-fabricated strip has been shipped to San
Francisco where it is blanked and annealed, ready for
stamping.
At the present time we are continuing to feed
one-cent blanks from San Francisco to Denver and this will
-63-
be discontinued when Denver melts and rolls their own bronze.
In the meantime, San Francisco is gearing up to produce clad
dime and quarter blanks.
Part of these will be stamped at
San Francisco and the remainder will be used at Denver.
REDUCED MINT MANUFACTURING COSTS:
The actual savings which
will be realized through automation and other economies
when the new Philadelphia Mint is in operation cannot
be accurately estimated until additional engineering is
accomplished and we have gained operating experience.
However, we believe a conservative estimate to be $0.15
per 1,000 coins.
Operating on a two shift basis (4 billion
coins per year) this savings would be about $600,000 per
year~
operating on three shifts (6 billion coins per year)
it would be about $900,000.
Similar cost reductions could
be achieved at the Denver Mint, assuming we are permitted
to have a modernization program there.
PURCHASED CLAD STRIP:
Since the Mint has had no experience
in the manufacture of clad strip, it
is impossible to tell just how costly the use of private
industry has been in relation to the production of the new
subsidiary coins.
-64A comparison of Mint and industry costs in the manufacture of bronze and nickel strip indicates that Mint
costs are usually 65 to 70 percent less than industry cost.
* * * * * * * * * * * * * * *
-65\RT VI.
EXPERIENCE WITH CLAD
corn
Public Law 89-81, the "Coinage Act of 1965", authorized the
cretary of the Treasury to issue clad coins in lieu of the existing subdiary silver coins whose alloy was 90% silver and 10% copper.
The first
these new coins, the quarter-dollar, was struck in September and issued
the Federal Reserve Banks for release on November 1, 1965.
Thus, the
lnt has now had about four months' experience with the new coins, and we
esent herewith our observations, preceded by an explanation of the reasons
[' selecting this particular substitute for silver.
~ASON
FOR SELECTION
The sole reason for the clad coin - as opposed to a homogeneous one its ability to be accepted in the same vending machines as silver coins.
The simplest analogy of the principle of coin acceptors / rejectors is
)asketball travelling towards the basket.
If thrown too hard - - i. e., is
Lvelling too fast - - it will hit the backboard and bounce back to the floor.
lot thrown hard enough, it will fall short of the basket.
If thrown just
ht, it will" swish through the hoop. "
A coin placed on an inclined plane or chute picks up speed as it
Is down.
When it reaches the end, depending on its speed, it will do one
:hree things, like the basketball.
If travelling too fast, it will fly past
-66-
the "accept" slot, hit a plate and bounce back into another slot (reject).
If too slow, it will fall short of the proper shot (reject).
If the speed is
just right, it will" swish" into the proper slot (accept).
Rej Acc
Rej Acc
Rej Acc
Too Slow
(Reject)
Too Fast
(Reject)
O.K.
(Accept)
COIN ACCEPTOR/REJECTOR
PRINCIPLE
The speed with which a coin travels down a slope is affected by its
weight or density.
Heavier coins pick up speed faster than lighter ones.
However, in vending machines another factor is added.
A small magnet is
placed along the chute, and it creates a "magnetic field" through which the
coin must pass.
Coins of different materials are affected differently,
depending on their" susceptibility" to the magnetic field.
This is the so-
called" eddy current effect." Those "highly susceptible" will be impeded
or slowed (so they fall short of the basket.) "Less susceptible" coins will
have their speed impeded less.
-67"Susceptibility", or the degree to which a given material is affected
by the interaction between the magnetic field and the coin, depends on
electrical characteristics of the coinage material, as measured by its
resistivity.
Since resistivity varies between different metals and alloys,
it follows that different alloys will be impeded to varying degrees by the
magnet.
Low resistance (i. e., good conducting) metals like silver and copper
will be impeded much more than materials with high resistance.
Thus, the speed at which a coin is travelling when it reaches the end
of the chute depends on its weight, or density, and also on how much it was
affected by the magnet, or its resistivity.
The measure of these two
characteristics is called the" resistivity-density product. "
The 90/10 silver-copper alloy has a particular resistivity-density
product (21. 9), and vending machines which utilize the "eddy current"
principle are set to accept coins with a comparable ratio and reject those
which deviate from the standard.
There is no single metal or homogeneous
alloy, suitably white, which approximates the density-resistivity ratio of
90/10 silver-copper.
Because of this fact, a sandwich metal had to be
selected for dimes and quarters.
A copper core (very low resistivity) and
a cupronickel cladding (higher resistivity), the combination of which matches
the reSistivity of the old silver-copper alloy.
A comparable result is
achieved for the half -dollars by utilizing a core of about 80% copper and 20%
silver and a cladding of 80% silver and 20% copper.
-68Although we are continuing to investigate and to seek advice and
mggestions from outside sources, there is still no evidence that a less
complicated" and homogeneous alloy will serve to work side-by-side with
he existing silver coins in vending machines as they are presently constituted.
n short, circumstances are the same today as they were a year ago, and
he Mint sees no better substitute than that selected.
:HARACTERISTICS OF THE CLAD COINS
The clad dimes and quarters resemble the nickels, but have a
istinctive edge evidencing the pure copper core.
3
The clad or outer layer
exactly the same cupronickel alloy as used in the nickel, 75% copper
nd 25% nickel.
As such, the characteristics of dimes and quarters, in terms
f wearing qualities and appearance, will be the same as the nicke.
While
ley will not be so "white" or bright as the silver coins, they will wear
mSiderably better.
Also, the new coins are very slightly lighter than
Ie old.
The half dollar coin, when issued, is indistinguishable to the naked
re from 90/10 silver coins.
In this case, the outside or cladding layers
!presenting 30% of the total thickness, consist of 80/20 silver-copper alloy,
ld the core consists of 20/80 silver-copper alloy.
Properties relating to
nding machine acceptability are virtually identical with those of the 90/10
tver coins.
-69-
MECHANICS INVOLVED IN THE PRODUCTION OF THE CLAD STRIP
In accordance with Public Law 89-81 we have negotiated contracts
with several companies to supply the clad strip.
Some of these companies
produce the strip on an in-house basis whereas others require the services
of several subcontractors.
'The Mint obtains all of its nickel and copper for the clad strip from
the GSA stockpile.
Under our contractual relationship with our prime
suppliers we deliver to them or their subcontractors electrolytic copper
and nickel cathodes.
All of the copper we are obtaining from the stockpile
must be refined into electrolytic cathodes before being shipped for the
3.ccount of our prime contractors.
At the present time contracts have been
3.warded for the refining of 66,000 tons of stockpile copper.
The copper
Nas made available for production of coins by Public Law 89-251, which
!armarked 110,000 tons for Mint use.
The silver required is supplied from the Treasury stocks.
In order to manufacture the clad strip the contractors prepare the
:ladding and core separately before bonding.
The bonding of the materials
s done in strip or cake form depending upon each contractor's process.
For the outer layer of the clad strip we ship electrolytic nickel
rom the stockpile and electrolytic copper from various refineries to either
1e prime contractor or his subcontractor for casting into cupro-nickel slabs.
hese slabs are then prepared in a form suitable for the contractors bonding
rocess.
-70-
To produce the copper core, we ship, at the contractors direction,
electrolytic copper to either his plant or a subcontractor.
In order to meet
the specifications, our contractors are using various special types of copper
for the core of the strip.
Some of the types of copper used are,
a) Deoxidized Low Phosphorus; b) Oxygen Free High Conductivity; and
c) Boron Copper.
The core metal is then prepared in a form suitable for
the contractor to use in his bonding process.
After bonding and rolling to finished gauges and widths, the strip
is shipped to the mints for processing into finished coin.
-71-
)RODUCTION EXPERIENCE
To date, we have had four months' experience and the Mint has
,roduced a total of at least 750 million new clad dimes, quarters, and halves.
Vhile we have experienced considerable operating and other production
,roblems, they probably are no more severe than we anticipated.
Among
he difficulties we have experienced were production delays, slow delivery
f material by suppliers, strip that was not acceptable because of unacceptable
uality or undependable gauge, poor die-life, and varied inspection problems.
Suppliers of clad material have unfortunately fallen short of their
elivery commitments, with the result that the Mint has not produced as
lany of the new clad coins as originally
schedule~.
However, the situation
as improved significantly in the past few weeks, and most suppliers now
ppear to be up to their scheduled delivery dates.
As anticipated, the Mint has experienced some serious quality
roblems with the clad material as delivered by outside suppliers.
The
lajor problem, which is still rather serious, is the apparent inability of
)me suppliers to deliver strip within the thickness tolerances specified by
le Mint.
The close strip thi ckness, or gauge control (plus or minus . 001")
hich is normal practice to the Mint - and is required in coinage - is con~derably tighter than usual commercial brass mill practice.
Suppliers
,sure us that this problem can be corrected, but it is still with us.
-72-
'ortunately, other than the thickness problem, we have had fairly good
xperience with the new material as supplied.
Other problems, such as
elamination of the metals or other quality defects, have been minimal.
We have experienced relatively little trouble in processing the clad
laterial in the Mints.
oinage dies.
The major difficulty is in the rapid wearing of the
Because the cupronickel cladding is a much harder alloy
1an silver-copper, the dies wear much faster, and die-life is therefore
lUch shorter.
This situation, while not unexpected, has required many
lOre dies for a given quantity of coins and has forced significant expansion
f the Mint's die-making operations.
Because of foreseen and possible unforeseen problems, we have
reatly increased the scope of inspection operations.
We have acquired
dditional reviewing tables and added many inspection operators to review
3th blanks and finished coins.
As a result, we are confident that we have
3ne everything possible to assure that the new coins meet the high quality
tandards established for United States coinage.
XPERIENCE WITH PUBLIC ACCEPTANCE
To date, only the quarters have been released, but some 690 million
: these have been issued to the Federal Reserve Banks.
All the evidence
Idicates that the transition, so far as the public is concerned, has so far
me much more smoothly than we had dared hope.
The new clad quarters
-73seem to be circulating side-by-side with the old ones, and we have little
evidence of either being withdrawn from circulation.
While the Mint is
concerned about any and all comments and complaints, we have received
much fewer negative reactions than might have been anticipated.
Initially, a few of the banks experienced some trouble in wrapping
the new coins in paper rolls.
However, with some minor adjustments to
their wrapping machines and slight changes to the pape r used, plus the Mint f s
reducing the sharpness of the coin edges, this problem seems to have abated.
We have had few complaints from industry associations; on the
contrary, the vending machine trade associations have praised the Mint for
the smoothness with which the transition has occurred.
The few communications which the Mint has received have been
limited to a smattering of individuals and small business firms who complain
that the coins do not look as good as silver, and/or that they do not work in
particular vending machines.
We have not yet recovered from circulation a
single coin which would not operate a vending machine, and it is the opinion
of the Mint technical personnel that in virtually every case the fault lies
with the coin acceptor / rejector and not the coins,
In short, it appears that the new clad quarters are operating the
vending machines as well as the old coins, and that public acceptance is
excellent.
-74-
PRODUCTION AND RELEASE OF CLAD COINS
The new half dollars were first struck in Denver on December 30,
1965. The new quarter dollars were first struck in Philadelphia on
August 26, 1965, and started in Denver on November 15, 1965.
New dimes
were struck first in Philadelphia on December 6, 1965, and production of
new dimes will start in Denver on February 14, 1966.
Clad strip for the new
dimes and new quarters have been ordered for San Francisco and production
of these coins will be started at that plant within the next couple of weeks.
Before release of the new quarters each Federal Reserve Bank and
Branch Bank was supplied with a fairly substantial quantity of these coins.
180,000, 000 new quarters were issued from the Mint before they were
released to the public on November 1, 1965.
We expect to follow the same
general pattern with respect to the new dimes and halves.
Silver dimes will
be discontinued on February 14, 1966, and the new dimes will be issued as
Soon thereafter as an ample supply has been made.
-75-
All the facts,
figures,
statistics, information and
naterial about the Mint, which we have presented here today,
nerely form the framework around a truly great,
institution of this government.
~peration--bringing
synchronized
The heart and soul of our
miracles accomplished, records set,
success in the face of obstacles--all of this centers in
the stout hearts, willing hands, and magnificent loyalty
~f
the hundreds of fine Americans who work in the Bureau
of the Mint.
Through every segment of our operation, men and women
~like
have worked hard and long,
singly and collectively,
thoughtfully and ingeniously, and most of all, with true
jedication and unselfish devotion to our common goals.
These
people are not just names in a staffing pattern-- "manyears" in an organizational chart.
The Bureau of the Mint
has a real team which works together with head and hands
3.nd heart.
To the workers in the Mint service, each single little
:oin is just as important as each million which goes out
in bags.
Mint people care about the quality of the coins,
3.bout their being shipped out on time, their abundance in
-76-
the banks, and their final mission in contributing to the
smooth-working of the commerce of this country.
I personally am deeply grateful to each and every employee
Jf the Mint, as each has performed his given job far
Jeyon~
Jack
the call of duty.
If you have any pats-on-the-
to give to any group, give them to these civil servants
yho cared enough to see that their Mint performed not only
=fficiently and effectively, but in manner far
lighest tradition of public service.
Thank you.
ab~ve
the
STATEMENT OF THE HONORABLE ROBERT A. WALLACE
ASSISTANT SECRETARY OF THE TREASURY
BEFORE nlE
HOUSE GOVERNMENT OPERATIONS SUBCOMMITTEE ON LEGAL AND MONETARY AFFAIRS
10:00 A.M. FEBRUARY 8, 1966
The Current Situation
r. Chairman, and Members of the Subcommittee:
I appear before you today
onsiderab 1y more comfort than was t rue of my appearance be fore you a year
The supply of our most vital coins -- the quarter, dime, nickel and penny
better shape now than in any comparable period during the last 10 years.
have enough of these coins to take care of current demands and coin proscheduled for the fiscal year beginning next July 1 is IS bi 11ion pieces
11
our 1965 production; 3-1/2 times our 1964 output and ten times the number
3d in 1959.
The new clad quarters have worked their way into circulation
ly and we expect no unusual difficulties when we introduce the new dimes and
)Hars in the next month or so.
lthough the coin situation is such that at this time there is no shortage of
,ins most vital to the transaction of business, it is, of course, vital that we
Ie our current high levels of production.
We need to build up our inventories
enough to forestall any future shortages •
I
. have learned that a coin shortage, even if only temporary or local, feeds
self.
This means that we cannot feel secure if our supply of coins is merely
ent unto the day.
A sudden upsurge of demand causes businessmen and banks to
to protect themselves by hoarding coins.
f a further coin shortage.
A coin shortage thus becomes the
Then the speculators move in, taking yet further
s because scarce coins can be sold at a premium.
A worsening and widening
arcity cycle thus gets going that can only· be overcome if the Mint is able to
t
out with new supplies.
With over 12 million coin operated devices and a
- 2 -
nal economy which is growing at a substantial rate, we must have tremendous
ies of coins on hand at all times.
Quick and massive production of the new coinage, following the prompt action
ngress approving it last summer saved us from a crisis last fall.
ber 1, 1965, despite
rising
By
production our inventory of silver quarters
hnmk to only 15 million pieces for the entire Nation -- this at a time when
remendous demands of the Christmas Season were just beginning.
By that time,
er, our all-out production had enabled us to build up a supply of nearly 200
on of the new clad quarters which we quickly ptonped into the economy, and we
ved the Christmas Season without a crisis.
i\fter this last Christmas Season coins began to flow back through the banking
11\
and I am happy to report that at the end of January, there were in the Federal
ve inventories 137 million quarters; 239 million dimes; 824 million nickels;
89 million pennies.
lrt supply.
We have less than 2 mi Ilion half dollars, so these continue
But, at least, we have no current shortage of those coins most
to connnerce.
( would like to take this opportunity to pay public tribute to Mint Director
lams and the employees of the Bureau of the Mint.
For over 18 months they have
:he Mints operating continuous lyon a 24-hour-a-day, 7-day-a-week basis, foreholidays and, in many instances, even vacations.
re are especially grateful for the support and assistance we have had from the
!SS.
This Subcommittee's inquiry which began a year and a half ago has been
elpful by its studies and its recommendations.
The Appropriations Committees
ed us with the necessary funds and the Banking and Currency Committees moved
y in securing the enactment of the Coinage Act of 1965 which was so vi tal to
forts.
- 3 -
The Federal Reserve System, American Bankers Association and the entire
)~king
industry have given us fine cooperation as has the National Automatic
lerchandising Association and the vending machine industry.
Also the manufacturers
If the clad materials for the new coins along with their many sub-contractors who
lave made available their melting and rolling faci li ties.
I should also like to express our appreciation to the coin collectors of this
lation.
They have, I think, been unfairly b lamed for the coin shortage.
The fact
.s that the true coin collector is not interested in hoarding large quanti ties of
:oins -- only those which have numismatic value or those which are needed to comIlete coin collections.
The new Coinage Act itself, of course, could not possibly have met the full
lesires of both the silver users and the silver producers.
Nevertheless, following
:he full expression of their views on the new coinage legis lation and after all the
Inal decisions had been made, both groups have given us full cooperation.
Further,
think nearly everyone underestimated the sophistication of the American people
hout their money:
They want a plentiful and well designed and technically adequate
loney J and they are enti re ly capab Ie of unders tanding that if clinging to silver
n the coinage means coin shortages, then the use of si 1ver should be reduced to
he point where it has no such effect.
Our original plan had been to put both the Philadelphia and Denver Mints on
ound-the-clock operations, increasing the production of coins sufficiently to take
are of the coinage deJBands tDltil our new Mint in Philadelphia could be completed.
arly in 1964 however, it became apparent that even more extreme measures would
e necessary J and we were happy to be able to obtain the approbation of this Subommittee for the crash program annoWlced in JtDle of 1964.
Our plan was to double
-
.. -
,roduction of coins by (1) having private industry produce all strip for
.es and nickels, (2) procurement of surplus Defense Department presses and
~
equipment for use in our Mints, and (3) reopening our San Francisco facility
·.he production of coin blanks.
Our crash program enabled us to get by the period of high coin demand in
mer and December of 1964.
Although the coin situation remained tight that
. we .were able to avert a crisis.
The Recent Silver Shortage
Had the coin shortage been our only problem, we could have mastered it in
. 1965.
Unfortunately, however, there was still another -- and a more intract-
.- problem affecting coin supplies: the silver shortage.
As far back as 1963, we realized that action with respect to the silver content
Ir subsidiary coins would ultimately be necessary.
Estimates were made during
year that our si lver supplies would last approximately 7 years.
That. however,
efore our tremendous but essential build-up in the production of coins.
During
it was apparent that at anticipated rates of coin production our supplies of
r would not last anything like 7 years unless prompt action were taken.
The silver situation directly affected our coin supplies.
When silver
ed the monetary price of $1.29 an ounce our silver dollars contained one
r's worth of silver.
In the expectation that the price of silver would rise
se of shortages, speculators bought up all of our silver dollars and they
)eared from circulation.
This was not a crisis as far as commercial transac-
were cencerned since a dellar bill can be used in the place of silver dollars.
~r,
if silver had reached the price of $1. 38 an ounce, dimes, quarters and
IOUars would then have contained silver worth as much as the coin itself.
:icipation of this, speculators began to buy up these coins by the roll and
- 5 :he bag.
Some of these purchases were made because of the expectation that these
s would be melted down for their silver content and those remaining would
'efore, become rare and valuable.
Whatever the reason, it seemed that no
er how many dimes, quarters and half dollars were produced, large numbers
inued to disappear from circulation.
It was impossible to build up inventories.
while, of course, our higher production schedules meant that we would soon
out of sil ver unless something was done.
Developing a New Coinage Material
I think I need not go into great detail about our problems in developing a
titute alloy for our subsidiary coins, although I would be happy to do so if
,ubcommittee desires.
I will simply touch on two aspects of that problem which
lertinent to the considerations of this Subcommittee.
First, we had the problem of coin operated devices -- 12 million of them.
:ing the alloy of a coin which had been the same since 1792 would have caused
ems enough.
If we added to these problems the complication of new coins that
not work in vending machines, we would have had chaos indeed.
The vending
ne companies coule have eliminated their selector mechanisms designed to reject
ulent coins.
However, that would have opened up the entire industry to the
~ility of slugs and low-value foreign coins, jeopardizing the usefulness and
lienee of these mechanisms, raising the cost of their operation, and thereby,
15ing the cost of the services and goods sold through them.
That this was a
Situation can quickly be seen by the fact that in 1964, $3-1/2 billion worth
lsumer items were sold through these devices.
In growing numbers, factories
'spitals and other similar organizations were coming to depend on automatic
.g for goods and services.
A million and a half people relied upon coin
- 6 'oUed vending machines for at least one meal a day.
Some 30 bi llion coins
into these machines in 1964.
The problem
was that the coin selectors in almost half these machines were
o accept only coins of 90 percent silver content, except for nickels.
There
other white metal that would be accepted by their magnetic sensing devices.
,0
:ientific experimentation, however , it was found that a laminated material
sting of outer layers of 25 percent nicke 1 and 7S percent copper, bmded
core of pure copper, possessed the same electrical properties as 90 percent
:r coins.
That is why we recommended this particular material for the new
; and quarters.
Simi larly, a new half dollar of only 40 percent over-all silver
mt was also found to be acceptable in coin operated devices, if it were made
I
ao percent silver outer layer bonded to an approximately 21 percent silver
The Coinage Act of 1965
On June 3, 1965, the President sent to the Congress his recommendations con.ng the new coinage.
On July 23, 1965, he signed into law the Coinage Act of
, which the Congress had carefully considered and upon which it had worked its
At the same time the President sent his Message to the Congress, the Treasury
: Study of Silver and Coinage and the Battelle Memorial Institute's study of
Lge alloys were made avai lab Ie.
These were very thorough studies of the entire
Lge problem which resulted basically from an excess demand for silver over the
.able Supplies.
The Treasury study considered in detai I the probable future
ltion with respect to silver supply and demand and also considered in detail
'US
alternatives to the existing silver coinage.
This study attempted to
.der all of the various interests involved in a changeover of our coinage.
- 7 -
In his Message to the Congress the President reviewed the long tradition
lur silver coinage, pointed out that we should not hesitate to change our
age to meet new and growing needs, and proposed changes designed in the
ident's words to "ensure a stable and dignified coinage, fully adequate in
tity and in its specially designed technical characteristics to the needs of
Twentieth Century Li fe."
The Presidential Message discussed in some detail
necessity of reducing the silver content of our coinage, recommended the new
coins which we are now producing, called the attention of the Congress to the
for early action, and pointed out the necessity of adequate measures to protect
~xisting
coinage.
In the finest traditions of our Democratic processes the Congress responded
~diately
considering and promptly enacting the necessary legislation.
As a result of this legislation silver has been completely eliminated from
lime and the quarter and has been reduced from 90 percent to 40 percent in the
dollar.
The result, once the initial needs for the new coins have been met,
be to reduce our coinage uses of si I ver to about IS mi lli on OWlces per year.
e
s~
time we have a dignified coinage similar in appearance and identical in
asing power and in necessary technical characteristics to our silver coins.
Because of farseeing provisions in the Coinage Act of 1965, the Mint has been
~d to achieve an Wlprecendented rate of production of the new coins.
For
le, it was authorized to use existing facilities in San Francisco, authorized
litures for the construction of new facilities and the acquisition of necessary
.ic strip were increased, special procurement authority was granted for the
ition of necessary equipment and supplies, etc.
These provisions, together
he loyal and dedicated service of Mint employees have enabled us to meet the
e needs of the nation while at the same time bui lding up large inventories
- 8 'le new clad coins which were necessary before they could be placed in
Jlation.
Production of the New Coins
Although Congress moved very quickly and enacted our recommendations into
lut summer, we faced still another hurdle.
Could these coins be produced
ely enough to meet the tremendous coin demand expected in November and
aber? The principle of bonding different metals together was not new, but
lction of the strip in the quantities and tolerances required was a formidable
Since pennies and nickels contain no silver they were not as subject to hoarding
~~
ly.
the subsidiary coins, so coins of these denominations were not in short
We decided, therefore, to concentrate all of our production of coins of
lew material on the quarter.
.es
we~
~eplace
We felt that if supplies of quarters, nickels and
plentiful that we could avoid a coin crisis.
After all, two quarters
a half dollar and two nickels can replace a dime.
!ut 3 coins to replace a quarter.
But it requires
As a result of this strategy, we were able
lur into the economy 200 mi Ilion of the new clad quarters when our supp ly of
!uarters dropped to only 15 million last November 1.
Initial circulation of the new clad quarter thus began 101 days from the
ng of the bill to public use of the new coinage.
In addition to the 200 million new quarters issued last November, another
illion quarters have been placed in circulation since then.
Production of
ew dimes and half dollars started last December and inventories of both are
rapidly acquired.
Both coins will be in circulation in a month or so
large quantities are expected to be available.
- 9 Present Silver Situation
Since the necessity for the new coinage resulted from the rapid depletion
Ir silver stocks, I should like to review for you the silver situation.
:rux of the matter was that there was simply not enough silver appearing on the
!t to satisfy rapidly growing industrial demand and coinage requirements in
:ree World.
The Free World si lver de fi ci t, wholly aside from U. S. coinage
.rements had reached some 130 million ounces by 1964, roughly double the 1957rerage.
And, in 1964 the United States had used 203 million ounces in its
Ige and in 1965 before enactment of the Coinage Act this rate was running at
: 300 million ounces per year.
Silver also had to be made available freely in
mge for silver certificates.
There was no likely prospect that the market gap
!en silver supply and demand could be appreciably narrowed in the foreseeable
~e
and U. S. stocks of silver were being depleted rapidly.
During the transition period it was necessary to protect our silver coins so
they would not disappear from circulation.
Accordingly, during the change-
to the new coinage it was and is vital that the market price of silver be
:ained at a point where it will not be profitable to melt our present silver
i.
In order to prevent the value of silver from rising above the monetary value
.. 29+ per fine troy ounce, we are continuing to redeem silver certificates for
!r bullion at the monetary value.
Also, the Coinage Act confirmed the Treasury
lrity to sell at its monetary value any unobligated silver.
!
As a result,
should be no incentive to hoard or melt silver coins for the value of their
!r content.
Since the Treasury still has very large stocks of silver -- clese
;s million otmces, and since our use of silver for coinage is being very sharply
.iled it is quite clear that no one can expect to profit from hoarding ei ther
r bullion or si I ver coins.
- 10 The success of our silver policy is illustrated by a considerable lessening
eculation in silver evidenced by a substantial reduction in withdrawals of
r from the Treasury.
5,
In fiscal 1965, withdrawals amounted to 165,099,833
or an average of 13.7 million ounces per month.
At the present time
are running at the rate of 4.1 million ounces per month.
Future prices of
r have dropped from a high of $1.3870 per ounce on January 4, 1965, to the
nt $1. 3170 per ounce.
These figures are on the basis of 12 months forward
acts.
Joint Commission on the Coinage
The Committee may be interested in our plans for the Joint Commission on the
ge authorized by the Coinage Act.
~d
As you know, this Commission is to be
by the Secretary of the Treasury and is to consist of other Government
ials, Members of Congress, and pub lic members not associated or identi fied
)r representative of any directly interested industry or group.
~lated
!
It was
that this Commission would be established some time after completion
transition to the new coinage.
At that time it will study the entire matter
.nage and silver in the light of any problems which may have arisen in the
~
of the transition, new technological developments, the silver supply and price
:ion, etc.
Ie are very much aware of the contributions which this commi ttee wi 11 be able
.e at the appropriate time.
As soon as aur operations under the Coinage Act
5 have been in operation for a period long enough to enab Ie the Commission
'ectively perform its functions we will take steps to proceed with its full
ishment.
We hope that this transition will be fairly well completed in a
r so, when our inventories will have been built up and all the new coins
ave been circulating side by side with existing coins long enough to provide
- 11 lund basis for assessment.
Summary
Briefly, our round-the-clock activities averted a crisis in the fall of
i; our crash program of doubled production averted a crisis in 196. and the
~ly
action of the Congress, and quick adaptation by the Mint to production of
iive amounts of the new coinage, averted a coin crisis last Fall.
We now have enough coins on hand to take care of demands.
Our production
:he new clad strip and our press capacity at the three Mint facilities in
ladelphia, Denver and San Francisco, will be enough to belin building up
lble inventories to forestall any future shortages.
Our new Mint in Philadelphia wi 11 be ready for use in about a year and a
:.
At that time, we can resume complete, in-house production of all our coins
we shall have the most efficient mint operation in the world.
We shall then
tble fully to combine massive production and efficient and economical operation.
- 3 -
sale or other disposition of Treasury bills does not have any special
such, under the Internal Revenue Code of 1954.
t~~m,_
The bills are subject to estate,
inheritance, girt or other exc ise taxes, whether Federal or State, but are exempt n
all taxation now or hereafter imposed on the principal or interest thereof'
br anr I
or any of the possessions of the United States, or by any local taxing author1tr.
J
purposes ot taxation the amount of discount at which Treasury bills are or1ginal11I
by th~ United states is considered to be interest.
Under Sections 454 (b) and l221
of the Internal Revenue Code ot 1954 the amount of discount at which .billa blUed ~
under are sold is not considered to accrue until such bills are sold,
rede~edor~
wise disposed of, and such bills are excluded from consideration as capital aaani.
Accordingly, the owner of Treasury bills (other than life insurance companies) b.
hereunder need include in his income tax return only the difference between the p1i
paid for such bills _ whether on original issue or on subsequent purchase, and the.
actually received either upon sale or redemption at maturity during the taxable,.
for which the return is made, as ordinary gain or loss.
Treasury Department Circular No. 418 (current revision) and this notice, pre.
the tenus of the Treasury bills and govern the conditions of their issue. CopielG
the circular may be obtained from any Federal Reserve Bank or Branch.
- 2 -
printed forms and forwarded in the special envelopes which will be supplied by Pt
Reserve Banks or Branches on application therefor.
Banking institutione generally may submit tenders for account of customers p
vided 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 &ccOllDt
Tenders will be received without deposit from incorporated banks and trust caqin
and from responsible and recognized dealers in investment securities. Tenden rz,
others must be accompanied by payment of 2 percent of the face amount of Treslllr)'
applied for, unless the tenders are accompanied by an express guaranty of payment
an incorporated bank or trust company.
Immediately after the closing hour, tenders will be opened at the Federal Re
Banks and Branches, following which public anouncement will be made by the i'rea1U
Department of the amount and price range of accepted bids.
will be advised of the acceptance or rejection thereof.
Those submitting ted
The Secretary of the !II
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 resert
tions, noncompetitive tenders for each issue for $200,000 or less without stated
price from anyone bidder will be accepted in full at the average price (intm.
decimals) of accepted competitive bids for the respective issues.
Settlement tor
accepted tenders in accordance with the bids' must be made or completed at the Fed
Reserve Bank on
February 17, 1966
(XmO
, in cash or other immediately available
or in a like face amount of Treasury bills maturing
and exchange tenders will receive equal treatment.
February 17, 1966
• ~
oaaJ
Cash adjustments will be --
differences between the par value of maturing bills accepted in exchange and the
price of the new bills.
The income derived from Treasury bills, whether interest or gain fraa the'
other disposition of the bills, does not have any exemption, as Buch, and lOll tJ
TREASURY DEPARTMENT
Washington
FOR IMMEDIATE RELEASE,
February 9, 1966
TREASURY t S WEEKLY BILL OFFERING
The Treasury Department, by this public notice, invites tenders for two Ber
of Treasury bills to the aggregate amount of $ 2,300,000,000 , or thereaboutB, f
(5i)
cash and in exchange for Treasury bills maturing
February 17, 1966 , in the
(Xi)
l1li
of $ 2,201,653,000 , as follows:
CiO
91 -day bills (to maturity date) to be issued
February 17, 1966
QGO
X:eQ
in the amount of $ 1,300,000,000 , or thereabouts, represent·
(Xi)
ing an additional amount of bills dated November ~ 1965
and to mature
amount of $
May 19, 1966
, originally issued in the
00
1, 0C&xJ58. 000, the additional and original billa
to be freely interchangeable.
182_day bills, for $
1,000,000,000, or thereabouts, to be dated
.......,{X1kiX)~~
February 17, 1966
6ffi0O
, and to mature _Aug~U,;.-S_t---.;1;;,..;8~tMJ~1;..y9~66..;;;...-_ __
e<D3O
The bills of both series will be issued on a discount basis under compet1ti
and noncompetitive bidding as hereinafter provided, and at maturity their faee I
will be payable without interest.
They will·be issued in bearer form only, aD4
denominations of $1,000, $5,000, $10,000, $50,000, $100,000, $500,000 and $1,1XX
(maturity value).
Tenders will be received at Federal Reserve Banks and Branches up to the cl
hour, one-thirty p.m., Eastern Standard time, Monday, February 14, 1966
_,!
QCii)
will not be received at the Treasury Department, Washington.
Each tender- 1
for an even multiple of $1,000, and in the case of competitive tenders tbeprial
offered must be expressed on the basis of 100, with not more than three
e. g., 99.925.
Fractions may not be used.
~C~
It 1s urged that tenders be made ~
REASURY C~PARTMENT
IMMEDIATE RELEASE
TREASURY'S WEEKLY BILL OFFERING
The Treasury Department, by this public notice, invites tenders
two series of Treasury bills to the aggregate amount of
~OO,OOO,OOO,or thereabouts, for cash and in exchange for
lSUry bills maturing
February 17, 1966,in the amount of
Wl,653,000, as follows:
91-day bills (to matYrity date) to be issued February 17, 1966,
he amount of $1,300,OUU,OUO, or thereabouts, representing an
tional amount of bills dated November 18, 1965, and to
re May 19, 1966,
originally issued in the amount of
100,958,000, the additional and original bills to be freely
rchangeable.
18~day bills, for $1,000,000,000, or thereabouts, to be dated
'uary 17, 1966, and to mature August 18~ 1966
0
The bills of both series will be issued on a discount basis under
etitive and noncompetitive bidding as hereinafter provided, and at
rity their face amount will be payable without interest. They
be issued in bearer form only, and in denominations of $1,000,
00, $10,000, $50,000, $100,000, $500,000 and $1,000,000
.lri ty value).
Tenders will be received at Federal Reserve Banks and Branches
) the cloSing hour, one-thirty p.m., Eastern Standard
" Monday, February 14, 1966
Tenders will not be
Lved at the Treasury De~artment, Washington. Each tender must
)r an even multiple of $1,000, and in the case of competitive
!rs the price offered must be expressed on the basis of 100,
:not more than three decimals, e. g., 99.925. Fractions may not
led. It is urged that tenders be made on the printed forms and
:trded in the special envelopes which will be supplied by Federal
~e Banks or Branches on application therefor.
0
Banking institutions generally may submit tenders for account of
mers provided the names of the customers are set forth in such
rs. Others than banking institutions will not be permitted to
t tenders except for their own account. Tenders will be received
Qt deposit from incorporated banks and trust companies and from
nslble and recognized dealers in investment securities. Tenders
others must be accompanied by payment of 2 percent of the face
t of Treasury bills applied for, unless the tenders are
pan1ed by an express guaranty of payment by an incorporated bank
lst company.
368
- 2 Immediately after the closing hour, tenders will be opened at
Federal Reserve Banks and Branches, following which public announce
ment will be made by the Treasury Department of the amount and pric
range of accepted bids.
Those submitting tenders will be advised
of the acceptance or rejection thereof.
The Secretary of the Treas
expressly reserves the right to accept or reject any or all tenders
in whole or in part, and his action in any such respect shall be
final.
Subject to these reservations, noncompetitive tenders for
each issue for $200,000 or less without stated price from anyone
bidder will be accepted in full at the average price (in three
decimals) of accepted competitive bids for the respective issues.
Settlement for accepted tenders in accordance with the bids must ~
made or completed at the Federal Reserve Bank on February 17, 1966,
cash or other immediately available funds or in a like face amount
of Treasury bills maturing February 17, 1966~ Cash and exchange ten
will receive equal treatment. Cash adjustments will be made for
differences between the par value of maturing bills accepted in
exchange and the issue price of the new bills.
The income derived from Treasury bills, whether interest or
gain from the sale or other disposition of th~ bills, does not have
any exemption, as such, and loss from the sale or other disposition
of Treasury bills does not have any special treatment, as such,
under the Internal Revenue Code of 1954. The bills are subject to
estate, inheritance, gift or other excise taxes, whether Federal or
State, but are exempt from all taxation now or hereafter imposed on
the principal or interest thereof by any State, or any of the
possessions of the United States, or by any local taxing authority.
For purposes of taxation the amount of discount at which Treasury
bills are originally sold by ~he United States is considered to be
interest. Under Sections 454 (b) and 1221 (5) of the Internal
Revenue Code of 1954 the amount of discount at which bills issued
hereunder are sold is not considered to accrue until such bills an
sold, redeemed or otherwise disposed of, and such bi lls are exclude
from consideration as capital assets. Accordingly, the owner of
Treasury bills (other than life insurance companies) issued hereunc
need include in his income tax return only the difference between
the price paid for such bills, whether on original issue or on
subsequent purchase, and the amount actually received either upoo
sale or redemption at maturity during the taxable year for which tt
return is made, as ordinary gain or loss.
Treasury Department Circular No. 418 (current revis ion) and tl
notice prescribe the terms of the Treasury bills and govern t~
conditions of their issue.
Copies of the circular may be obtained
any Federal Reserve Bank or Branch.
000
-2-
··•
Commodity
Period and Quantity
: Unit of : Imports'"
: Quantity: Jan. 29J
Icbsolute Quotas:
Butter substitutes containing over L15% of butterfat,
and butter
Calendar year
Fibers of cotton processed
but not spun ••••••••••••
12 mos. froM
Sept. 11, 1965
1,000 Pound
Peanuts, shelled or not
shelled, blanched, or
otherwise prepared or
preserved (except peanut
butter) •••••••••••••••••
12 mos. from
August 1, 1965
1,709,000 Pound
oil..........
1/
Imports as of February
F-369
t1,
19660
1, 200,000 Pound
Quota fill
1,077 ,~
5755
TRF->£,\SU7i.Y JEPARTNENT
,':'ashinr-ton
THURSDAY, FEBRUARY 10,1966
F-369 4
The Bureau 0': Customs announced today preliminary i'ieures on imports for
consumpti_on of the fol10v'ing cOTl1T'1odities from the beginning oi' the respectil'l
quota. periods through January 29, 1966:
Period an,l Quantity
Co T!lJT1.D r1 i ty
Uni t of : Importi
Quanti ty: Jan. 2J.,
'T'Clriff-Eate C"IUotas:
Cream, frEsh or sour
;~al
cmdar year
1,500,000
Gallon
"Thole Milk,
Calendar year
3,000,000
Gallon
-,~resh
or sour .•.
l~
Cattle, 700 Ibs. or more each
(other than dairy cows) •••
Jan. 1, 1966 Mar. 31, 1966
120,000
Head
Cattle, less than 200 Ibs.
each ••••••••••••••••••••••
12 mos. from
April 1, 1965
200,000
Head
Fish, fresh or frozen, filleted, etc., cod, haddock,
hake, pollock, cusk, and
rosefish ••••••••••••••••••
Calendar year
23,591,432
Pound
Quota ~
Tuna Fish •••••••••••••••••••
Calendar year
To be
announced
Pound
S,6!
Fhite or Irish potatoes:
Certified seed ••••••••••••
other •••••••••••••••••••••
12 mos. from
114,000,000
Sept. 15, 1965 45,000,000
Pound
Pound
Nov. 1, 1965 Oct. 31, 1966
84,000,000
Pieces
!';hiskbrooms •••••••••••••••••
Calendar year
1,380,000
Number
other brooms ••••••••••••••••
Calendar year
2 ,)~60, 000
Number
Knives, forks, and spoons
Hith stainless steel
harldle s •••••••••••••••••••
Quota t
1/ Imports for consumption at the quota rate are l:L-rnited to 5,897,858 pOUDlk
during the first 3 months of the calendar year.
TREASURY DEPARTMENT
Hashinr:ton
lIATE RELEASE
)DAY, FEBRUARY 10,1966
F-369
The Bureau 0: Customs announced today preliminary f'iVlres on imports for
mption of the fol10i-ring commodities from the beginning of' the respective
periods through Janua~! ?9, 1966:
----------------------Periorl a.n,l 111.1.anti ty
eommor1i ty
Unit o~ : Imports as of
gucmtity: Jan . .-?1, 1966
'f -Ita te Quo tas:
year
1,500,000
Gallon
Milk,iresh or sour ...
Calendar year
3,000,000
Gallon
,e, 700 Ibs. or more each
her than dairy cows) •••
Jan. 1, 1966 Mar. 31, 1966
120,000
Head
6,924
e, less than 200 1bs.
h ••••••••••••••••••••••
12 mo s. from
April 1, 1965
200,000
Head
73,542
fresh or frozen, filed, etc., cod, harldock,
e, pollock, cusk, and
efish ••••••••••••••••••
Calendar year
23,591,432
Pound
Fish •••••••••••••••••••
Calendar year
To be
announced
Pound
5,629,133
or Irish potatoes:
tified seed ••••••••••••
er .••••.•••••••••••••••
12 mos. from
114,000,000
Sept. 15, 1965 45,000,000
Pound
Pound
58,116,225
9,938,455
nes •••••••••••••••••••
.
Nov. 1, 1965 Oct. 31, 1966
84,000,000
Pieces
Quota filled
)rooms •••••••••••••••••
Calendar year
1,380,000
Number
546,804
brooms ••••••••••••••••
Calendar year
2,460,000
Number
539,160
I,
fresh or sour
~~al(mdar
156,282
Quota
fil1ed-~/
s, forks, and spoons
h stainless steel
)or~s for consumption at the quota rate are limited to 5,897,858 pounds
iunng the first 3 months of the calendar year.
-2-
.•
Commodity
Period and Quantity
Uni t of : Imports--;
: Quantity: Jan. 29 1
1
Absolute Quotas:
Butter substitutes containing over 45% of butterfat,
and butt~r
Calendar year
Fibers of cotton processed
but not spun ••••••••••••
12 mos. froM
Sept. 11, 1965
1,000 Pound
Peanuts, shelled or not
shelled, blanched, or
otherwise prepared or
preserved (except peanut
butter) •••••••••••••••••
12 mos. from
August 1, 1965
1,709,000 Pound
oil..........
11
Imports as of February
F-369
4,
19660
1,200,000 Pound
Quota fill
1,077 "
-2-
COTTON WASTES
(In pounds)
COTTeN CARD STRIPS made from cotton having a staple of less than 1-3/16 inches in length, roMBER
WASTE, LAP WASTE, SLIVER WASTE, AND ROVING WASTE, WHEI'HER 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 following countries: United Kingdom, France, Netherlands,
Swi tzer land, Be 19iurn, Germany, and Italy:
Country of Origin
:
:
Established
TOI'AL QUOTA
:
United Kin~dom ••••••••••••
Canada....................
France....................
India and Pakistan.5......
Netherlands...............
Switzerland...............
Belgium...................
Japan.....................
China.....................
Egypt.....................
Cuba......................
Germany...................
Italy.....................
Other, including the U.S ••
1.1
~n
Established:
33-1/3% of:
Total Quota:
4,323,457
239,690
227,420
69,627
68,240
44,388
38,559
341,535
17,322
8,135
6,544
76,329
21,263
1,441,152
5,482,509
1,599,886
Included in total imports, colunm 2.
Prepared
:
Total Imports
:
: Sept. 20 1965, to:
: Fea. 7, 1966
:
the Bureau of Customs.
75,807
22,747
14,796
12,853
...
25,443
7,088
-Imports-~-l/
Sept. 20, 1965, to Feb. 7, 1960
TREASURY DEPAR'IMENT
I
I
Washington, D. C.
MMID lATE RELEASE
THURSDAY, FEBRUARY 10,1966
F-370
Prel.1.mi.na.ry data on imports for consumption of cotton and cotton waste chargeable to the quotas established by
Presidential Proclamation No. 2351 of September 5, 1939, as amerxied, a.rxl as IOOdified by the Tariff Schedules of the
United states which became effective August 31, 1963.
(The country designations in this press release are those specified in the apperxiix to the Tariff Schedules of the
United States. There is no political connotation in the use of outm:xled names.)
COTTON (other than linters) (in poums)
Cotton umer 1-1/8 inches other than rough or harsh under 3/4"
~rts Sept~e~ 20. 1265__- February 7. 1266
Country of Origin
Egypt and Sudan ••••••••••••
Peru •••••••••••••••••••••••
India and Pakistan •••••••••
Ch.iJla ••••••••••••••••••••••
axico •••••••••••••••••••••
Socialist Republics ••••••
Ig8l1t1na. •••••••••••••••••
'a1ti ••••••••••••••••••••••
~~or ••••••••••••••••••••
Established Quota
783,816
247,952
2,003,483
1,370,791
8,883,259
618,723
Country of Origin
Imports
Established Quota
Horxiuras....................
48,956
756,135
475,124
5,203
237
9,333
11
~I
!MI
Par~....................
871
124
195
2,240
British East Africa.........
Indonesia and Netherlands
New
_
Guinea................
71,)88
Africa...........
16,004
British W. Indies...........
.igeria.....................
British W.
Other, including the U.s....
Eltcept Barbados, Bermuda, Jamaica, Trinidad, ani Tobago.
Eltcept Nigeria am Ghana.
Cotton l-1/St. or more
Established YearlY Quota - 45.656.420 Ibs.
Imports Auguat 1.. 1.967 - Febrpary 7, ) 966
51;."'i\_ Length
1.-3/" or _ _
752
Colombia....................
Iraq........................
w=_uon
n8
• 590.
Tl!!J'?!?rts
38_9~_024
I!ports
21,321
_
5,377
~
_
~
TREASURY DEPAR'IKENT
Washington, D. C.
I
MMIDIATE RELEASE
THURSDAY, FEBRUARY 10,1966
F-370
Prel.1mi.nary data on imports for consumption of cotton and cotton waste chargeable to the quotas established by
Presidential Proclamation No. 2351 of September 5, 1939, as amenied, an:l as modified by the Tariff Schedules of the
United States which became effective August 31, 1963.
(The country designations in this press release are those specified in the apperrlix. to the Tariff Schedules of the
United States. There is no political connotation in the use of outmxied names.)
COTTON (other than linters) (in poums)
Cotton urrler 1-1/8 inches other than rough or harsh lmier 3/4"
lJDports S_~tqber~ 1965 _- F_ebr_uar~7. 1966
Country
or
Origin
Established Quota
EgJpt and Sudan ••••••••••••
Peru •••••••••••••••••••••••
India and Pakistan •••••••••
China ••••••••••••••••••••••
Mexico •••••••••••••••••••••
783,816
247,952
2,00),483
1,370,791
8,88),259
618,723
Socialist Republics ••••••
475,l24
5,20)
237
9,333
tr~~;·s~;t~t········Q···
1rgent~ •••••••••••••••••
Raitt ••••••••••••••••••••••
~r ••••••••••••••••••••
11
Imports
Country of Origin
Established Queta
Horrluras ••••••••••••••••••••
Par~ ••••••••••••••••••••
48,956
Colombia ••••••••••••••••••••
Iraq ••••••••••••••••••••••••
British East Africa •••••••••
IJXionesia and Netherlaois
756 ,135
11 New
~I
g
Guinea ••••••••••••••••
British W. Indies •••••••••••
.1ger1a •••••••••••••••••••••
Britiah 11. Africa. ••••••••••
other, i ncl nd1 rag the U.s ....
~eept Barbados, BenmJda. Jamaica. Trinidad, and Tobago.
~V EZeept
Nigeria and Ghana.
Cotton l-l/Stt or more
Established YearLy Quota -
45.656.4.20 1bs.
Imports Augwst. 1. 1962 - February 7,
,
S t.apl.e
Length
.. 1-.
____
_
J
966
A!]ocat.1o~
T!'P9rt.S
752
871
l24
195
2,240
71,388
21.321
5,m
16.004
Iprts
-2COTTON WASTf.S
(In pounds)
COTl'(}l CARD STRIPS made from cotton ha~ a staple c f less than 1-3/16 inches in leO«th, OOHBER
WASTE, LAP WASTE, SLIVER WASTE, AND ROVING WASTE, WHETHER OR NOT MANUFACTURED OR OTHERWISE
ADVANCED IN VAUJE: Provided, however, that not }'TIore than 33-1/3 percent 0 f the quotas shall
be filled by 'cotton wastes other than comber wa:l.-es made from cottons of 1-3/16 inches or more
in staple le~th in the case of the fo11owin~ countries: United Kin~dom, France, Netherlands,
Switzerland, Belgium, Germany, and Italy:
:
:
:
Country of Origin
Established
TaI'AL QUOTA
Kin~dom ••••••••••••
L,323,L.57
Canada ••••••••••••••••••••
France ••••••••••••••••••••
India and Pakistan ••••••••
Netherlands •••••••••••••••
Switzerland •••••••••••••••
239,690
United
Belgium •••••••••••••••••••
Japan •••••••••••••••••••••
China •••••••••••••••••••••
Egypt •••••••••••••••••••••
227,L20
69,627
68,2LO
LL,388
38,559
3Ll,535
11,322
8,135
:
Total Imports
:
: Sept. 20 1965, to:
: Feb. 7, i 966
:
Established I
33-1/3% of:
Total Quota:
1,LL1,152
75,807
22,1L7
14,796
12,853
Cuba ••••••••••••••••••••••
6,544
Ge~8I'I1" •••••••••••••••••••
16,329
21,263
25,443
1,088
5.L82,509
1,599,886
Italy •.••••••••••••.••••••
other, inc1udin~ the U.S ••
!/
Included in total imports, column 2.
Prepared
:in
the Bureau
of"
CUstOI'llB.
~
tmports--"T/
Sept. 201, 1965 J to Feb. (, 196b
5757
TREASURY DEPARTHENT
T!ashington
I~IATE
RELEASE
F-371
THURSDAY, FEBRUARY 10,1966
The Bureau of CuStOMS has announced the following preliminary
figures sho~dng the imports for consumption from January 1, 1966, to
January 29, 1966, inclusive, of commodities under quotas established
pursuant to the Philippine Trade Agreement Revision Act of 1955:
Commodity
:Established Annual
Quota Quantity
:
:Unit of : Imports as of
: Quantity: Jan. 29 , 1966
.............
510,000
Cigars ••••••••••••••
120,000,000
Number
Coconut oil •••••••••
268,800,000
Pound
121,625,295
6,000,000
Pound
879,308
3,900,000
Pound
846,165
Buttons
Cordage
•••••••••••• 0
Tobacco
.00 ••••••••••
Gross
20,726
1,110,215
TREASURY DEPARTMENT
r'!ashington
IMMEDIATE RELEASE
THURSDAY, FEBRUARY 10,1966
F-371
The Bureau of Customs has announced the following preliminary
figures showing the imports for consumption from January 1, 1966, to
January 29, 1966, inclusive, of commodities under quotas established
pursuant to the Philippine Trade Agreement Revision Act of 1955:
:Established Annual
Quota Quanti tl
Commodity
:
:Unit of : Imports as of
: Quanti ty: Jan. 29.2 1966
Gross
20,726
Buttons • ••••••••••••
510,000
Cigars ••••••••••••••
120,000,000
Number
Coconut oil •••••••••
268,800,000
Pound
121,62$,29$
Cordage • ••••••••••••
6,000,000
Pound
879,308
Tobacco
3,900,000
Pound
846,165
•
•
0 ••••••••••
1,110,215
- 2 -
apply.
Under the new system, the concept of "a tax appropriate to the
dividend" will no longer be germane, and in the absence of clarifying
language in the convention there may be situations in which the calculation
-h
(j ,S
of the credit for United Kingdom taxes would be uncertain.
1\
The new credit
rule is in conformity with the basic objectives of the foreign tax credit
provisions of the treaty.
The United Kingdom corporation tax, now a major element of the British
tax system, was instituted in the United Kingdom Finance Act of
cannot apply to profits earned before April
6, 1964.
1965 and
Consequently, the
new credit rule in the protocol can affect only dividends paid after that
date and before April
6, 1966.
Technical Explanation
The protocol amending the income tax convention between the
United States and the United Kingdom will contain, in addition to the
provisions described in the Treasury
Departmeu~~~ease
~----~t'fJanuary 5, 1966, a provision to the effect
that~wlth
/
-"
of
f/'';M M~)
respect to divi-
deneds paid prior to April 6, 1966 by a United Kingdom corporation, the
United States will continue to consider as "United Kingdom tax appropriate
to the dividend" the tax which under United Kingdom law is required to be
deducted from that dividend when it is paid.
However, no United Kingdom
tax will be considered "appropriate to the dividend" received by a
United States corporation if it claims a credit under Section 902 of the
Internal Revenue Code for United Kingdom corporation tax paid by the
United Kingdom corporation distributing the dividend.
The new tax credit rule is designed to eliminate uncertainties that
tl,s-#r
might otherwise arise with respect to the credit to be allowed in conA
nection with dividends paid by a British corporation during a transition
period when elements of both the old British tax system and the new one
TREA.JURY DEPARTMENT
FOR RELEASE P.M. NEWSPAPERS
THURSDAY, FEBRUARY 10, 1966
FINAL AGREEMENT REACHED ON
U.S.-U.K. TAX TREATY
,Final agreement has been reached by the United States and
the United Kingdom on amendments to an existing income tax
treaty between the two countries, the Treasury announced today.
It is expected that the amendments will be signed in the
near future, after which they will be submitted to the Senate
for its approval.
The Treasury announced on January 5, 1966 that the
United States and the United Kingdom had agreed in principle
on the terms of the protocol amending the income tax treaty
between the two countries. Modification of the treaty was .
considered desirable because of changes in the U.K. tax system.
In the January 5, 1966 announcement, it was explained
that further consideration was being given to the proper
treatment of United Kingdom taxes for U. S. tax credit
purposes. This matter has been resolved. In general, U. S.
corporations receiving dividends from the United Kingdom will
in no case be entitled to a lesser credit than the taxes
actually imposed by the United Kingdom and for which a credit
could be claimed by the U. S. corporation under the Internal
Revenue Code.
(For technical explanation, see attached summary.)
Attached for Background:
The January 5, 1966 Treasury
Department announcement, and the
"Summary of the Terms of Agreemen til
000
F-372
Technical Explanation
The protocol amending the income tax convention between
the United States and the United Kingdom will contain, in
addition to the provisions described in the Treasury Department
press release of January 5, 1966, a provision to the effect
that, for U. S. foreign tax credit purposes, with respect to
dividends paid prior to April 6, 1966 by a United Kingdom
corporation, the United States will continue to consider as
"United Kingdom tax appropriate to the dividend" the tax which
under United Kingdom law is required to be deducted from that
dividend when it is paid. However, no United Kingdom tax will
be considered "appropriate to the dividend" received by a
United States corporation if it claims a credit under
Section 902 of the Internal Revenue Code for United Kingdom
corporation tax paid by the United Kingdom corporation
distributing the dividend.
The new tax credit rule is designed to eliminate
uncertainties that might otherwise arise with respect to the
U. S. tax credit to be allowed in connection with dividends
paid by a British corporation during a transition period when
elements of both the old British tax system and the new one
apply. Under the new sys tern, the concept of "a tax appropriate
to the dividend" will no longer be germane, and in the absence
of clarifying language in the convention there may be situations
in which the calculation of the U.S. tax credit for United
Kingdom taxes would be uncertain. The new credit rule is in
conformity with the basic objectives of the foreign tax credit
provisions of the treaty.
The United Kingdom corporation tax, now a major element
of the British tax system, was instituted in the United
Kingdom Finance ~ct of 1965 and cannot apply to profits earned
before April 6, 1964. Consequently, the new credit rule in the
protocol can affect only dividends paid after that date and
before April 6, 1966.
000
TREASURY DEPARTMENT
Janua ry
5, 1966
HOLD FOR RELEASE AT 6:30 P.M. (EST)
WEDNESDAY, JANUARY 5, 1966
(Simultaneous release in London)
AMENDMENT OF U.S.-U.K. TAX TREATY
The Treasury announced
to~
that delegations from the United States
and the United Kingdom have agreed in principle on the terms of amendments
to the existing income tax treaty between the two countries.
The United
States delegation was led by Assistant Secretar,y of the Treasury Stanle.y
S. Surrey and the United Kingdom delegation by Mr. W. H. B. Johnson, a
Conunissioner of Inland Revenue.
The purpose of such income tax treaties is to prevent double
taxation.
Amendment of the treaty is required because of changes
made in the tax law of the United Kingdom last year.
A summary of the terms of agreEll1ent is attached.
F-328
SUMMARY OF THE TmMS OF AGREEMl!lIrT
It was announced today that representatives of the United Kingdom
and the United States had agreed in principle on the terms of a
protocol amending the income tax convention between the two countries.
Amendment of the convention was considered desirable because of changes
made in the tax law of the United Kingdom by the Finance Act of 1965.
The following is a brief outline of the more important provisions of
the protocol.
A major amendment to the treaty made by the protocol provides
that the rate at which tax will be withheld by the two countries on
dividends from a corporation of one country received by residents of
the other shall not exceed 15 percent.
Under the treaty as presently in force, the United States may
withhold tax at the rate of 15 percent on such dividends except where
the dividend is received by a U.K. corporation controlling at least
95 percent of the voting power of the U.S. company paying the dividend,
in which event the maximum rate of withholding is 5 percent. The
only restriction in the existing treaty on the right of the U.K.
Government to tax dividend payments prohibits the levy of U.K. surtax
on such p~ents.
On June 30, 1965, the United States gave notice of tennination
of these dividend provisions of the existing treaty, which termination is effective January 1, 1966, with respect to dividends from a
U.S. corporation, and April 6, 1966, with respect to dividends from
a U.K. corporation. Consequently, as of those dates the rate of
wi thholding tax levied by the two countries on dividends from a
corporation of one country received by residents of the other would
be, in the absence of the protocol, the statutory rate provided by
the laws of the two countries, i.e., 30 percent in the case cf the
United States and 41-1/4 percent in the case of the United Kingdom.
However, the protocol provides that the 15 percent limit on the
wi. thholding tax rate on dividends es tablished by it shall become
effective on the same dates on which notice of termination of the
dividend provisions of the existing treaty becomes effective,
January 1, 1966, in the case of the United States and April 6] 1966,
in the case of the United Kingdom. Dividends received on or after
such dates and prior to the ratification of the protocol will be
subject to withholding at the above statutory rates, but appropriate
refunds will be made after ratification of the protocol. Such
refunds will be made by the persons withholding the tax or, if such
tax has been paid over to the respective government, by such government.
- 2 In addition, the protocol provides that the lS-percent dividend
wi thholding rate will apply as a maximum rate to dividends paid by a
U.K. corporation prior to April 6, 1966, i f such dividends are regarded
by the United Kingdom as subject to income tax under Section 83 of
the Finance Act 1965 because such dividends are in excess of the
standard amount of dividends ordinarily paid by such U.K. corporation.
Another major change which the protocol makes in the treaty is to
provide that no credit shall be allowed by either country to its residents who receive a dividend from a corporation of the other country
for corporate tax paid by the corporation pB\Ving such dividend on the
profits out of which duch dividend is paid unless the recipient is a
corporation owning at least 10 percent of the voting power of the corporation paying the dividend. Under the existing treaty, a resident
of one of the countries receiving a dividend from a corporation of the
other was entitled to credit for corporate tax paid by such corporation.
Each country will allow credit to its residents for tax withheld by
the other country on dividends paid to such residents by corporations
of such other country. These changes are effective in the case of
U.S. residents with respect to dividends paid by a U.K. corporation
on or after April 6, 1966, and in the case of U.K. residents with
respect to dividends payable by a U.S. corporation on or after the
date of ratification of the protocol or, for corporation tax purposes,
April 6, 1966, whichever is later. FUrther consideration is being
given to the proper treatment governing the credit allowed for U.K.
tax to U.S. corporations receiving dividends prior to April 6, 1966,
where the U.S. corporation receiving the dividend owns 10 percent or
more of the voting power of the U.K. corporation paying such dividend
and such dividend is paid, under U.S. tax law, out of profits which
have been subject to U.K. corporation tax.
In addition to the foregoing provisions, the protocol continues
an exanption from tax for interest and royal ties paid by residents
of one country to residents of the other.
The protocol also provides that deductions for tax purposes shall
be allowed to corporations of one country for interest and royalties
paid to residents of the other (apart from royalties and interest paid
by a U.K. corporation before April 6, 1966, for which the p~ company will have had relief for income tax); but there are certain
exceptions,notably where the recipient corporation is controlled by
residents of the other country.
The provisions of the protocol exsnpting interest and royalty
payments from withholding tax only apply i f such interest and royal ties
are not affecti v ely connected with a pennanent establishment maintained
- J by the recipient thereof in the country from which such payments are
made. In the case of dividends, the protocol provides that the tax
on dividends received by such a permanent establifibment ~hall not
exceed 15 percent except in certain enur~erated circumstances, notably
if the profit on the sale of the shares on which the dividend is paid
would be taxed as a trading receipt in the United Kingdom.
The exemption from tax applicable to interest and royal ties and the
reduced rate of tax applicable to dividends are not generally condi tioned on the recipient of these payments being subject to tax.
Such a condition, which does appear in tile comparable provi0ions of the
existing treaty, will apply only in certain enumerated circumstances.
The protocol also contain:: provisions exempting residentfi of
one of the cOW1tries from the capital gains tax of the other. However,
under thiE provision in the protocol, the United States may apply its
capital gains tax if a resident of the United Kingdom is present in
the U:li ted States for 183 days during the taxable year in which such
gain i~~ realized. In the case of the United Kingdom, the exemption
from U.K. caoital gains tax provided in the protocol applies with
respect to gains subject to such tax for any year of assessment
beginning on or after ADril 6, 1965. In the case of tile United States,
tile amended prov~fion is applicable to gains realized on or after
the date of ratification of the protocol; until such date, the present
complete exemption from U.S. capital gains tax provided in the existing
treaty will continue in effect.
Other provh:ions of the protocol include those relating to the
taxation of business profits to eliminate the force of attraction
approach; the definition of "recognized stock ex change 11 for purposes
of the U.K. tax law; consultation between the competent authorities
of the two governments to avoid double taxation, and nondiscrimination. The last mentioned provision provides that it shall not affect
the right of either country to levy tax on certain dividends at the
rate of 15 percent.
In general, tne proVls~ons of the protocol become effective in
the case of the United States on January 1, 1966, and in the case of
the United Kingdom the protocol becomes effective for purposes of
U.K. co~oration tax and capital gains tax for all years to which
euch taxe::: apply, and for purposes of U.K. income tax and surtax
for all year5 of assessment beginning on or after April 6, 1966.
However. as noted above, certain provisions become effective at
other times.
- 4'!he amendments made by the protocol do not affect the application
of the treaty to certain territories outside the United Kingdom to
which the treaty previously has been extended by mutual. agreement
between the two countries. In the case of such territories, the treaty
as in effec t on December 31, 1965, including Article VI thereof, will
continue to apply.
TREASURY DEPARTMENT
Washington
FOR RELEASE AM NEWSPAPERS
FRIDAY, FEBRUARY 11, 1966
REMARKS BY THE HONORABLE TRUE DAVIS
ASSISTANT SECRETARY OF THE TREASURY
AT THE UNIVERSITY OF MISSOURI LAW SCHOOL
COLUMBIA, MISSOURI
THURSDAY, FEBRUARY 10, 1966
7:30 P.M., CST
The International Monetary System
It is medicinal to come here, to return here, to let the
mid-continent feel of things sink in, to be assured and bolstered
by the sweep and depth of American achievement seen, as it can
only truly be seen, from the nation's great sustaining heartland.
There is nowhere else, that I know of -- after quite a bit of
travelling -- where one can fly for more than two hours at modern
jet transport speeds from the nation's capital, and, upon landing,
find that he is still at the leading edge of education and of
industrial skills, that standards of the arts and the sciences
are as high as they are anywhere, that the heartlands of America,
far from passively accepting national traditions and understanding
of the national purposes created elsewhere, are originators in
these vital areas of th~ nation's life.
This, if I may digress from my principal subject for another
moment, is the conformism, if you will, that makes America strong:
the knowledge everywhere of the best that the nation affords
anywhere, and the use of that knowledge to make standards everywhere compare favorably to the highest standards.
It is the widening and deepening and perfecting of this
American tendency to level things upwards that is the objective
of President Johnson's Great Society programs. A Great Society is
not one that is great in some places, among some people. It is
one in which the whole genius of the people is discovered and
given the fullest opportunity to develop, without distinction as
to the color of skin in which genius happens to come disguised, or
whether genius happens to be born
as it does happen to be born
on a remote farm, in a city slum, or at the gates of some great
center of learning.
This is why education and health programs lie at the very
heart of the Great Society prospectus President Johnson has placed
before the nation, and at the core of the war on poverty.
- 2 But the Great Society is not intended only to make sure that
we are able to find and permit the full development of unusual
talent, important as that is. On the contrary, the Great Society
is neither for nor by any elite. It is a society in which all
are given the chance that has always been the basic American
promise, the chance to perform up to the highest standards they
personally can attain.
Only when this is done will the nation be getting the benefit
of its full human resources. And, to the extent that we blot out
pools of ignorance, ill health and want we will be able to enjoy,
even more fully, that national conformity to high standards that
lends a pervasive cohesion and sense of purpose to American life.
The Great Society is a restatement of, and rededication to, the
oldest American objective: a land of free people with full
equality of opportunity. It is provision against the disabilities
of conditions all too common elsewhere, in which a few great
centers of learning and technology contrast with generally low
standards, making it possible for the national purpose to be
commanded by a few of the elite, in a few great cities -- or in
only one -- all problems referred to the center, all decisions
radiating from that center.
The Great Society aims at ensuring that in the United States,
despite the higher demands we must now meet if we are to continue to
have a generally educated and technologically capable public,
we shall in the future, as now, be able to rest our strength in
the fact that the whole 'nation debates national policies.
The fact that we do make our policies in this way is the
reason I have come here today to discuss, before a law school
audience,
a national concern -- improvement of the international
monetary system -- that in other nations at a comparable remove
from the policy making center might be regarded as too remote, in
terms of subject matter and of geography, from your daily lives
to be of interest to you.
In real terms of course, there is no remoteness: improvement
of the international monetary system is a matter that involves the
future value of the dollar that we all use alike. The good
functioning of the international monetary system involves the
ability of businesses in every part of the nation -- and of farms
everywhere -- to sell their products abroad, and to compete here
at home with foreign products. And, very importantly, the international monetary system must be such as to help us -- a~d encou~age
increasing participation of others in the Free World ~- 1n car~y~ng
out economic, cultural and military programs abroad a1med at glvlng
- 3 the world of the future a chance to evolve toward the kind of
society of free men of equal opportunity that we are building here.
President Johnson reminded us only last Sunday, in his speech
at Honolulu, that we have a vital interest in programs for building
and for defending abroad, because these programs, together, preserve
growing room for freedom overseas, while they keep threats to our
own freedom at the maximum remove.
One of the great forces for preserving and extending the writ
of freedom in recent years has been the adoption and the spread
in use of a growing system of international cooperation. The
participants in organizations such as the North Atlantic Treaty
Organization, the General Agreement on Tariffs and Trade, the
United Nations, the World Bank and its affiliates, the Alliance
for Progress in Latin America, the projected Asian Development Bank,
and many others, are increasingly meshed in a network of mutual
benefits.
These institutions build the conviction that the highest profit
for each is to be found in the highest general level of growth
and progress. What is learned, in essence, is that there is
nothing to be gained by subtraction from another that cannot be
gained ten times over -- at least -- through cooperation aimed at
multiplying the overall available resources for improving our
lives, national ~nd personal.
One of the most important, extensive, effective, and beneficial
of all the international systems of cooperation is one that I did
not name before, for the simple reason that it has not got a name,
unless you consider the generality, international monetary system,
to be a name.
Before discussing this system, and the effort your government
is making to ensure its continued good functioning in the future,
I must put in a word or two about the United States balance of
payments. It is the facts that we have been running big payments
deficits, but that we will not be doing so in the future, that
create the need for the chief change in the international monetary
system that the United States has suggested: a new way, or ways,
of creating international monetary reserves in the future.
Why is this so?
- 4 First comes the fact that the United States dollar is the
chief reserve currency in the world. This arises from the size and
productivity of the U. S. economy and from the fact that we alone
dke our currency freely convertible to gold, at a fixed price,
for official foreign holders of dollars.
Second, the U. S. has been running balance of payments deficits
during the past decade and a half. That is, we have been paying
~t to the world more than we have taken in.
The outflow of
dollars does not result from trade. On the contrary, on trade
alone, we have large annual surpluses -- lately, in the region of
$5 billion surpluses of exports over imports annually. We have had
balance of payments deficits because our payments abroad for private
investment, bank and other lending abroad, foreign assistance and
military operations have been greater than our trade surpluses and
~r income from loans and investments abroad.
Consequently, since
1950 we have wound up with dollar pa,ments to the rest of the world
in excess of our receipts in every year but one -- 1957, when
financial flows were distorted by the Suez crisis -- on the overall,
or liquidity, accounting basis. Looked at on the other principal
accounting basis, called the official transactions accounts, the
record is essentially the same, although the deficits tend to be
smaller. Although it is necessary to specify what accounting basis
we are using, I think you will agree that for our purposes we need
not delay to examine the differences in these methods of assessing
our payments position abroad. Each has its particular value and uses.
Our deficits have run as high as $2.5 billion or more in six
out of the last ten years, on the overall accounting basis. They
averaged $2-3/4 billion in the five years 1960-1964, inclusive.
Last year -- calendar 1965 --the deficit fell to an estimated
$1.3 billion. Most international pa~ents deficits since 1957
have been at least twice that size.
This improvement followed upon a new and vigorous balance of
payments program instituted by president Johnson last year. The
new program continued the previous strong pressure upon all
government programs involving spending abroad to eliminate balance
of payments costs to the greatest possible extent. This is done
~hlefly by specifying that U. S. funds should be used for purchases
lU the United States, not elsewhere. In this way the balance of
payments cost of the program is reduced or eliminated because dollar
flows to foreign quarters are reduced or eliminated.
- 5 The balance of payments program initiated by President Johnson
a year ago this month added something new. This was a nationwide
program of voluntary cooperation by lenders and other businessmen
to bring home excess dollar balances held overseas, and to reduce
dollar loans and investment flows to foreign parts.
The 1966 balance of payments program continues and further
tightens this program, with the objective of bringing out foreign
accounts into equilibrium at an early date, and of keeping them
m equilibrium thereafter.
Now, dollar deficits from 1958 through 1964 have provided
the world with something like three fourths of the increases that
have o~curred in world monetary reserves.
Clearly, if reserves are going to go on increasing in good
relation to desirable economic growth in the world after u. S.
payments deficits a~e ended, something must be done to substitute
for the dollar flows that would result if our deficits continued.
That is why it is necessary at this time to seek agreement with
other principal reserve holding nations on provisions for some
new means of increasing world monetary reserves in the future.
Otherwise, world economic growth would stand to be hampered, if
not halted outright, at some point in the not very distant future.
You may ask, why, if bringing our payments into equilibrium
may have a potential undesirable side effect of such magnitude,
why are we pressing so hard to balance our payments?
One reason is to be found in the United States gold reserve.
Since-we guarantee full conversion of our currency into gold, for
official foreign holders of dollars, every dollar sent abroad is
a potential drain on our gold reserve. In fact, the dollar deficits
that have been stored in foreign reserves in recent years have
been used to draw down our gold reserve from a total of $24.6 billion
at the end of 1949 to $13.8 billion estimated for the end of 1965.
Obviously, this process cannot be permitted to continue, or else
we will run out of reserves. The only way to end it is to bring
an end to the accumulation abroad of dollar claims on our gold,
and the only way to do that is to bring our payments into equilibrium.
The second reason is related. It is, simply, that money is
like anything else. A surfeit of it reduces its value. Whe~,
through constant dollar flows abroad, foreign holders accu~ulate
more dollars than they believe they need to have as a worklng
currency, and as a reserve store of value, they tend to downgrade it.
- 6
They signal this, first, by trading dollar reserves for gold. But
if the process is permitted to go on, the dollar's international
exchange value against other currencies will slip. When that
happens, it will not be long before the dollar you use at horne
will tend to decline in value in relation to other currencies.
Third, in these conditions -- dollars being traded for gold
instead of being held in reserves -- continued large dollar
payments deficits would tend to reduce the world's monetary reserves,
instead of increasing them, because there would be a tendency
for more dollars to be turned in for gold than were added to
reserves. Thus, balances that might have been reserves of a
foreign country would be "extinguished." The other country's reservE'S
would stay the same, because it would merely change part of its
reserves from dollars into gold. But, since our gold stock is
our monetary reserve, and since part of our gold would become
foreign owned, our reserves, and, consequently, total world reserves,
would be reduced in this process.
So, we must bring our payments into balance, and, meantime
seek ways to increase reserves other than by dollar payments
deficits or by accumulation of gold.
Gold, I might say, is being added to official reserves at
a rate in no way comparable to world economic growth. In fact,
last year, all newly available gold went into private hands.
Secretary of the Treasury Fowler last summer launched an
effort to get early agreement on how to keep reserves adequate
in the absence of large United States net dollar outflows.
Negotiations are now actively in progress among what is known as
the Group of Ten -- Belgium, Canada, France, Germany, Italy,
Japan, the Netherlands, Sweden, the United Kingdom and the
United States -- the principal holders of international monetary
reserves.
The Group of Ten is to report upon its negotiations this
Spring. After that, a second stage will be opened, involving
the International Monetary Fund and, through it, the less
developed nations of the world. The less industrialized countries
have a major stake in seeing world liquidity adequately maintained.
Inadequate reserves would in time tend to dampen the growth of
world trade, and the development of these countries depends in a
Mjor degree upon the development of the world trade, through
which they exchange their products for capital, capital goods and
services.
- 7 -
While precise current positions cannot of course be discussed
in the midst of the Group of Ten discussions that have been
going forward in Paris, it can be said that the United States
believes that there is a definite need to move now to provide
for future world liquidity because even if everything moves along
as smoothly as possible the new devices for creating reserves
could probably not be in full effect for another two years, at
least. Further, the United States believes that the future
increase in reserves should be sought in a flexible, dual
approach. This would involve the greater use by nations needing
reserves of their automatic right to draw funds -- to be repaid
later -- from the International Monetary Fund. And it would
involve agreement upon a separate, new reserve asset that would
enter into world reserve holdings not as a substitute
for, but in addition to, the present international reserve
assets, chiefly gold and dollars.
The International Monetary Fund stands out in any discussion
of the monetary system, and in United States ideas for improving
international monetary arrangements. Let us look a moment at its
origins and functions in the system.
While World War II was still going on, the Allied nations
held an international monetary conference in 1944, at
Bretton Woods, New Hampshire. From that conference there emerged
certain general principles that have formed the foundation of the
international monetary system during the past two decades, with
the International Monetary Fund occupying a central place.
The experience of the inter-war period had vividly
impressed the delegates to the conference at Bretton Woods.
They, therefore, established an international monetary system
designed to obviate the evils they knew. First, to avoid
the competitive monetary devaluations that had marked -- nay,
branded -- the 19308, they established the International Monetary
FUnd as a stabilizing agency, where exchange rates would be
registered and fixed, not to be altered except when a country's
fundamental economic position changed to an extent requiring a
change in its money's value. This established two principles:
first, that exchange rates should be changed only for
compelling .- not cut-throat or beggar-thy-neighbor -- reasons
and, second, that exchange rate stability is not the same as
exchange rate paralysis: for good reasons, exchange rates can
and should be altered.
The second major element, also embodied in the IMF, was
the provision there of a pool of international credit which
could supplement the reserves of individual countries by
establishing specified lines of credit availability.
- 8 -
The third major principle was that current exchange
transactions -- the transactions paying for international trade
in goods and services -- should be carried out freely without
exchange restrictions.
Continental Europe recovered its financial strength rapidly
after the exchange adjustments in 1949, and with the help of the
Marshall Plan and large U. S. military expenditures in Europe.
During this period, the world seemed to be carrying out
more and more successfully the objectives of the Bretton Woods
Conference. The international monetary system appeared to be making
steady progress and to be serving the world well. The postwar
economic recovery of Europe was in striking contrast to the
difficulties that had been encountered in the first fifteen years
after World I. The burden of postwar indebtedness to the
United States was extremely moderate because of the enormous
quantity of our resources made available to Europe through
the Lend-Lease System and the Marshall Plan.
Recent Additions to International Monetary Cooperation
In 1958-59, national 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 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 -- the
aforementioned
Group of Ten -- under which these countries
contracted to provide loans to the Fund under specified
conditions, up to $6 billion. This understanding, among the
Fund and the Group of Ten, became known as the General Arrangements
to Borrow.
There is now in process a further increase in the Fund
resources, amounting to 25 percent increases in quotas, across
the board, plus additional amounts for a number of individual
countries.
- 9 -
Finally, through direct contacts among the monetary
authorities of leading countries, additional short-term credit
facilities have also been provided through a network of swap
facilities, developed by the Federal Reserve System, that
has now reached a total of $2.8 billion.
The Tasks Ahead
Against this background, there are, as I have previously
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 will not relax
our program for doing so until we succeed.
The second major task,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. balance of
payments deficits, after our payments have been brought into
equilibrium.
This has several aspects, but I will focus on one of
them, the task, now being approached in the negotiations I
mentioned earlier, of providing new means for the growth of
international monetary reserves.
The deliberate creation of additional reserve assets
differs from anything previously done 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.
What are some of the major negotiating problems?
First, there are differing views among the Group of Ten,
itself, as to the imminence of a need for additional reserves.
During the past decade, they have had large-scale annual
increases in reserves amounting to about 10 percent a yearo
They believe these increases have contributed to the inflationary
pressures which present to them their most difficult internal
problem of economic policy.
- 10 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 balanceo The United States,
while agreeing entirely that deficits cannot become a way of
life, has also, for its part, endorsed more intensified
study of the adjustment processo It is hoped this study will
emphasize more clearly the responsibilities of surplus countries,
as well as the responsibilities of deficit countries to adopt
policies -- internal and external -- leading to a return to
equilibrium in their international payments. For instance,
the surplus country can move in the direction of equilibrium
by increasing -- as many of them should -- their participation
in development assistance to the less developed countries, and
by liberalizing their trade policies, to permit larger imports.
In conclusion, let me cite a statement that President Johnson
made on this subject last October 1. It illustrates, in a
nutshell, both the long term view of the problem of the need
to improve upon present international monetary arrangements,
and the shorter term urgencies that impel your government to
counsel action now, in the interests of continued growth and
stability in the whole Free World latero I quote:
"The long period of large Uo S. deficits
has come to an end o If growth is to continue
and trade is to expand, we must provide an
effective and adequate substituteo
"This is not a matter of an immediate
crisiso But it is a matter on which we must
begin to act -- nowo 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 o It will not be
enough in the future any more than it has
been in the pasto
"There is no shortage of plans for
reforming the world1s monetary system o
"L et us try to choose the besto
But
let us remember the best is sometimes the
enemy of the possibleo Let us not become
so preoccupied by questions of mere detail
that we end up doing nothing. Ours is a
large an~ growing world o It has a large
an~ growlng tradeo Let us provide for
thlS growth o "
000
- 13 and upon whose shoulders rests the responsibility for making
the Silver Anniversary campaign of the U. S. Savings Bonds
program an overwhelming success in 1966.
I' ~-~~--~--~.~
....
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- 12 price and wage decisions that President Johnson is seeking
fr~
every business leader and every leader of labor, represents an
investment in the nation's economic well-being.
We should -- very soon now -- have an announcement that
will provide an added spark to the success of our 25th
anniversary savings bond campaign.
President Johnson, as you
know, recently directed the Treasury to increase the rate of
interest on savings bonds, both the newly issued ones and all
that'are currently outstanding.
I expect that announcement will
be coming in a few days.
I would like to conclude, now, with a word of thanks to our
savings bond volunteers -- the dedicated men and women who get
important things done for their neighbors and their country··
- 11 -
of the nation -- but they are more important today than ever
before. .
Today I am happy to say that U. S. Savings Bonds account
for about 23 percent of the publicly . held national debt.
~en ~reater
si..gAifiesaee is ERe :!aet! t!hat!
(II
~
1:8.88 ell d grQJflipi
The savings bond program has really achieved an impressive
record and we in the Treasury are justly proud of that record.
No other country has achieved anything like the broad
public participation in financing a government that we -- as
a direct result of the Savings Bond
program -- take largely
as a matter of course in the United States.
The purchase of a savings bond, no less than the moderate
- 10 -
of government financing wherever possible.
What all this adds up to is that now as seldom before in
the peacetime history of our savings bonds program, the purchasl
of savings bonds by individuals -- particularly through the
payroll savings program -- has taken on an added dimension of
importance in the economic policy of the United States.
of
For each dollar/debt that we finance in this way allows
us,
b~X~j~D~c~r~e~8~sMi~i~lg~tjl~ie~Ir.e~n~ggrthn-ooIt-rtnh~e~d~e~~~,
long-tenn stability of our economy,"
V~~
~.
().
to strengthen the
~
i ~ ~
~~~
Tnus the purpose of our meeting today'takes on an added
importance in the light of our current economic climate.
Savings bonds have always been important -- both to the
individual who invests in them and to the economic well-being
- 9 ~
why we have made repeated efforts to lengthen
/
in our
debt.
debt management operation/-.
consistently attempted --
c-
.<~
wherever possip~~~der existing
/
-- to focus new
/~
~wing in the long and medium term area.
~
This is not always easy.
Particularly in times when the
economy is moving strongly ahead, as it is at present.
opportunities for government to
increase
The
the average
length of the national debt are not as great as we would like.
At the same time during a period of rapid economic expansio
there is greater danger in financing the debt through the
commercial banking structure.
can /
Such debt financing, as you
kn~,
have
the effect of multiplying credit expansion, and I am
proud of our record over recent years in avoiding this method
- 8 -
Most people are aware of the importance of expenditure
policy and tax policy in preventing inflation.
Most people
are also aware of the importance of monetary policy.
Few
people, however, are aware of the important role of debt
management.
TIle truth is that preven-t;.:i..n.g-inflation-reqlJires......mo re thatL
s~t con~rol
e :x~p:an::.:::s~io~n~.
,of debt
of expenditures,
_,LJ..LlI_
wbj
ell
Cititr.
more~an
a tax
pol~~~nequat&--
inanei n-g--of---ehe-p-r-e-sen.t-pub lie de b t - - whi c h
necessary
deficit~
add,
to this totat
41so important-ift-reduc1ng any 1nflationary potential
~conomy~_.------------
___
i~
is
the
- 7 are essentially "one-shot" measures in corporate speed-up and
graduated withholding?
Why did we not reconnnend a straight-out
increase in taxes on individuals and corporations?
The answer
is related to the uncertainties of our involvement in Vietnam,
and the only answer that I can give you is that we simply do not
know precisely what will be required or for how long.
Therefore
it seemed only prudent to use the "one-shot" measures which were
available.
very clear:
I should add that the President has made his course
If the Vietnam situation requires additional revenw
he will not hesitate to go to the Congress to ask for them.
At this time when avoiding inflation is a major concern of
an
the United States and/ essential goal of national' policy it is
tool
important that we use everyeccoOmic/available with maximum
effectiveness.
- 6 budget close to balance with a deficit of $1.8 billion.
It
will produce a small surplus of $500 million in our cash
budget.
Without these additional revenues the increased costs
of Vietnam would have triggered an administrative deficit of
$6.6 billion.
A deficit of this magni'tude was clearly not
appropriate in our present nearly full-employment economy.
As you know, the revenue measures involve a postponement
for two years of the reduction in excise taxes on automobiles
and telephones; a speed-up in the rate at which corporations
move to a "pay as you go" system for meeting their tax
liabilities.
The question is often asked:
Why did we select a package
of temporary postponements of excise tax reductions plus what
- 5 -
what's done is done, and it would b"e pOintless --to try to tum
:back tba clD&k.
That step alone changed the "economic mix."
Another, later development, involves the tax proposals
President Johnson now has before Congress.
These are designed
not only to produce about $6 billion in additional revenues ovel
two fiscal years -- fiscal year 1966 and fiscal year 1967
starting July 1 -- but also to serve as a moderating influence
in an economy which,
~
continue to expand at
sustainable levels throughout 1966 and beyond.
The moderating influence that the President proposed was
a package of revenue measures that will total $1.2 billion for
the rest of fiscal 1966 and $4.8 billion for fiscal 1967. This
package will bring the Administration's fiscal 1967 Administrati
- 4 message to Congress, on January 27, when he said the extent of
the fiscal or monetary restraint that will be needed to avoid
inflationary pressures "will depend directly on the restraint
and moderation exercised by those who have power over wages and
prices. tI
Although there are some who seem to want to jam on the
brakes now, the most careful appraisals of the economic outlook
we have managed to make do not justify such a drastic course.
Over the past few weeks, as I'm sure you all know, the
"economic mix" in Washington has been modified.
The Federal Reserve Board last December approved an increas
in the discount rate.
Wbj 1 e we diffeled with the policy=makers
Sf the Federal ResQrve System about the
t~ing of
that step,_
- 3 -
serious economic challenge in 1966" the task of preserving the
essential stability of costs and prices which has contributed
so significantly to our balanced economic progress.
In an economy moving closer and closer to full use of its
resources, the requirements of Vietnam are making the task of
maintaining price stability more difficult.
d<ling
alone, Vietna
in the current.
fj
~i1lion
1R ftleLley
terms
to the cost of govemmeitt
seal yellr--and-iu the fiscal year starting -
.J1lly 1, 1
Maintaining price stability, of course, is not just
something for the Federal Government to worry about.
It is the responsibility of every American.
President Johnson certainly made that clear in his econooic
- 2 -
During the past five years we have faced up to other
problems and we have found that recessions are NOT inevitable;
we have learned that high production does not necessarily mean
over-production.
We have learned, too, that carefully-tuned government
fiscal policies can contribute to higher levels of employment
and lower levels of unemployment
and tbatthis can be done
within the context of reasonable price stability.
The gap between "potential" gross national product and the
actual rate of GNP growth now is narrowing.
of this.
We all are aware
And no one will contend that the economic problems a.
prosperity can be swept under the rug.
President Johnson recently defined as possibly "our most
REMARKS BY THE HONORABLE JOSEPH W. BARR
UNDER SECRETARY OF THE TREASURY
BEFORE U. S. SAVINGS BONDS VOLUNTEER CONFERENCE
SHOREHAM HOTEL, WASHINGTON, D. C.
THURSDAY, FEBRUARY 10, 1966, 2 P.M., EST
E
ing proof of the effectivenel
past five
of the "New Economics"
e lp· g to bring our economy out of
the rut of boom and re
strength and ste
onto a new and higher plane of
growth.
There is today -- I'm happy to say -- a much greater
awareness that fiscal and monetary policies can be used to help
match total demand to our gcowing productive potential, while
spurring the growth of that potential through education, researc1
and
developme~t,
~nveStmlrl2""
manpower policies and enlarged public and priva
~.-.~~
~~~~
D.. ~ Qj/J 0..0 M
'
~ ~-o"'1'""-'IX........,.c..-, ~ 0. I"l
J
1) ~ ~-D
,...J:;~J.L_ ~~
'1'.---\j (J
.,---
-~
'-
'V
The very effectiveness of national economic policy, in
~ ~
fact, has brought us new problems -- eertaiftly not: prelll&ms to.-
-)AJ.
~~~
'~::~
_fear - iet~ome probleiilS+P9speri ty.
u{
b1lt
-)(
TREASURY DEPARTMENT
WASHINGTON
FOR RELEASE UPON DELIVERY
REMARKS BY THE HONORABLE JOSEPH W. BARR
UNDER SECRETARY OF THE TREASURY
BEFORE U. S. SAVINGS BONDS VOLUNTEER CONFERENCE
SHOREHAM HOTEL, WASHINGTON, D.C.
THURSDAY, FEBRUARY 10, 1966, 2 P.M.,EST
There is today -- I'm happy to say -- a much greater
awareness that fiscal and monetary policies can be used to help
match total demand to our growing productive potential, while
spurring the growth of that potential through education, research
and development, manpower policies and enlarged public and private
investment. This awareness -- in the country and in the Congress
-- has helped to bring our economy onto a new and higher plane of
strength and steady growth.
The very effectiveness of national economic policy, in fact,
has brought us new problems -- the much more welcome but strangely
unfamiliar problems of prosperity.
During the past five years we have faced up to other problems and we have found that recessions are NOT inevitable; we
have learned that high production does not necessarily mean overproduction.
We have learned, too, that carefully-tuned government fiscal
poliCies can contribute to higher levels of employment and lower
levels of unemployment -- and that this can be done within the
context of reasonable price stability.
The gap between "potential" gross national product and the
actual rate of GNP growth now is narrowing. We all are aware of
this. And no one will contend that the economic problems of
prosperity can be swept under the rug.
President Johnson recently defined as possibly "our most
serious economic challenge in 1966" the task of preserving the
essential stability of costs and prices which has contributed so
significantly to our balanced economic progress.
F-373
- 2 In an economy moving closer and closer to full USe of its
resources, the requirements of Vietnam are making the task of
maintaining price stability more difficult.
Maintaining price stability, of course, is not just something for the Federal Government to worry about.
It is the responsibility of every American.
President Johnson certainly made that clear in his economic
message to Congress, on January 27, when he said the extent of
the 'fiscal or monetary restraint that will be needed to avoid
inflationary pressures "will depend directly on the restraint and
moderation exercised by those who have power over wages and prices."
Although there are some who seem to want to jam on the
brakes now, the most careful appraisals of the economic outlook
we have managed to make do not justify such a drastic course.
Over the past few weeks, as I'm sure you all know, the
"economic mix" in Washington has been modified.
The Federal Reserve Board last December approved an increase
in the discount rate. That step alone changed the "economic mix."
Another, later development, involves, the tax proposals President
Johnson now has before Congress. These are designed not only to
produce about $6 billion in additional revenues over two fiscal
years -- fiscal year 1966 and fiscal year 1967,starting July 1 -but also to serve as a moderating influence in an economy which
should continue to e.xpand at sustainable levels throughout 1966
and beyond.
The moderating influence that the President proposed was a
package of revenue measures that will total $1.2 billion for the
rest of fiscal 1966 and $4.8 billion for fiscal 1967. This
package will bring the Administration's fiscal 1967 Administrative
budget close to balance with a deficit of $1.8 billion. It
will produce a small surplus of $500 million in our cash
budget. Without these additional revenues the increased
costs of Vietnam would have triggered an administrative deficit
of $6.6 billion. A deficit of this magnitude was clearly not
appropriate in our present nearly full-employment economy.
- 3 As you know, the revenue measures involve a postponement
for two years of the reduction in excise taxes on automobiles
and telephones; a speed-up in the rate at which corporations
move to a "pay as you go" system for meeting their tax
liabilities.
The question is often asked: Why did we select a package
of temporary postponements of excise tax reductions plus what
are essentially "one-shot" measures in corporate speed-up and
graduated withholding? Why did we not recommend a straight-out
increase in taxes on individuals and corporations? The answer
is related to the uncertainties of our involvement in Vietnam,
and the only answer that I can give you is that we simply do not
know precisely what will be required or for how long. Therefore,
it seemed only prudent to use the "one-shot" measures which were
available. I should add that the President has made his course
very clear: If the Vietnam situation requires additional revenues,
he will not hesitate to go to the Congress to ask for them.
At this time when avoiding inflation is a major concern of
the United States and an essential goal of national policy, it is
important that we use every economic tool available with maximum
effect iveness.
Most people are aware of the importance of expenditure
policy and tax policy in preventing inflation. Most people
are also aware of the importance of monetary policy. Few
people, however, are aware of the important role of debt
management.
The financing of the public debt -- which stands at about
$320 billion -- offers an additional tool which can be used as
a moderating force in times of expansion and a stimulating force
in times of recession. By moving into the longer maturities in
boom times and by retreating into shorter areas in times of slack,
the debt managers of the Treasury can also play their role in
keeping the economy moving in a non-inflationary growth pattern.
The Treasury's willingness to employ this tool was demonstrated in our most recent debt management operations when
we moved out as far as possible in the maturity range to meet
our financing obligations.
This is not always easy-- particularly in times when the
economy is moving strongly ahead, as it is at present. The
- 4 opportunities for government to increase the average length
of the national debt are not as great as we would like.
At the same time during a period of rapid economic expansion,
there is greater danger in financing the debt through the
commercial banking structure. Such debt financing, as you know,
can have the effect of multiplying credit expansion, and I am
proud of our record over recent years in avoiding this method
of government financing wherever possible.
What all this adds up to is that now as seldom before in
the peacetime history of our savings bonds program, the purchase
of savings bonds by individuals -- particularly through the
payroll savings program -- has taken on an added dimension of
importance in the economic policy of the United States.
For each dollar of debt that we finance in this way allows
us to strengthen the long-term stability of our economy and to reduce any present inflationary pressures.
Thus the purpose of our meeting today takes on an added
importance in the light of our current economic climate.
Savings bonds have always been important -- both to the
individual who invests in them and to the economic well-being
of the nation -- but they are more important today than ever
before.
Today, I am happy to say that U.S. Savings Bonds account
for about 23 percent of the publicly held national debt. These
investments in Savings Bonds represent genuine, bona fide,
long-term savers.
The Savings Bond program has really achieved an impressive
record and we in the Treasury are justly proud of that record.
No other country has achieved anything like the broad
public participation in financing a government that we -- as
a direct result of the Savings Bond program -- take largely
as a matter of course in the United States.
The purchase of a Savings Bond, no less than the moderate
price and wage decisions that President Johnson is seeking from
every business leader and every leader of labor, represents an
- 5 investment in the nation's economic well-being.
We should -- very soon now -- have an announcement that
will provide an added spark to the success of our 25th
anniversary Spvings Bond campaign. President Johnson, as you
know, recently directed the Treasury to increase the rate of
interest on Savings Bonds, both the newly issued ones and all
that are currently outstanding. I expect that announcement will
be coming in a few days.
I would like to conclude, now, with a word of thanks to our
Savings Bond volunteers -- the dedicated men and women who get
important things done for their neighbors and their country -and upon whose shoulders rests the responsibility for making
the Silver Anniversary campaign of the U.S. Savings Bonds
program an overwhelming success in 1966.
Those of you who contribute your time and effort to these
Savings Bond campaigns have helped your country in different
ways at different periods of our recent history. Today, however,
it is apparent that you are helping your government move
purposefully toward the President's goal of balanced growth
without inflation.
000
TREASURY DEPARTMENT
4
February 11, 1966
FOR TIMMEDIATE RELEASE
JOHN H. AUTEN NAMED
DIRECTOR OF OFFICE OF FINANCIAL ANALYSIS
Treasury Secretary Henry H. Fowler today announced the
appointment of John H. Auten as Director of the Office of
Financial Analysis. Mr. Auten, who joined the Treasury on
July 1, 1963, has served as Deputy Director of the Office since
April 1964.
The Office of Financial Analysis is primarily responsible
within the Treasury for the review and analysis of current
monetary and business developments. It also undertakes special
studies of domestic and international economic problems,
frequently in cooperation with other offices of the Department.
The activities of the Office are under the general supervision
of the Deputy Under Secretary for Monetary Affairs.
Mr. Auten was born in Ames, Iowa, on June 29, 1922. He
attended public schools in Columbus, Ohio, served in the Air
Force during World War II, and was graduated from Ohio State
University with a B.S. degree in 1947. He began graduate work
in economics at Ohio State University and continued at the
Massachusetts Institute of Technology before traveling to
New Zealand under the Fulbright program in 1950-51. Mr. Auten
was awarded the Ph.D. degree from the Massachusetts Institute
of Technology in 1954. He has served on the faculties of
Ohio State University and Rice University where he was
Professor of Economics. He is a member of the American
Economics Association and the American Finance Association.
Mr. Auten and his wife, the former Ethel Anne Pye, have
three children. They reside at 3603 North Abingdon Street,
Arlington, Virginia.
000
F-374
- 2 -
He served as a staff economist with the Council of
Ii
l...,~~-
Economic Advisers in 1947-1948 and as an economist on the
staff of the Federal Reserve Board, 1948-1950.
~~. White, who was a Fulbright Professor in Norway and
France in 1956-1957, also has been a consultant on various
fiscal projects for the City of New York.
He also has
served as a research associate with the National Bureau of
Economic Research, New York, and has performed research work
for the Brookings Institution, Washington.
He is the author
of numerous articles in various economic journals, and is
a member of several professional organizations in the field
of economics.
~ ~';.~ ,~married to the former Anne Schapiro, who also
J'.
g,-,t.
',:, i I .'
is afPw •.
i.i J"i If ,;\"....
They have four children and make their home
at 5405 Newington Road, Bethesda, Maryland.
000
DRAFT PRESS RELEASE
MELVIN I. WHITE NAMED TO TREASURY POST
..
Treasury Secretary Henry H. Fowler today announced the
i
'w'"
appointment of Melvin I. White, of New York, as Deputy
I
Assistant Secretary of the Treasury for Tax Policy. -Mr. White
L-
leave of absence from that university.
~He
has been serving as a Treasury Department consultant
on tax matters since 1962.
~ native of Cincinnati, Ohio, Mr. White, 48, holds a
B.A. degree from the University of Cincinnati and a
'\.-\..l
~·t t: r·· ,.~ i t/'~,
Ph.D. from Columbia University.
/l.
TREASURY
DEPARTMENT
February 14, 1966
RELEASE A.M. NEWSPAPERS
TUESDAY, FEBRUARY 15, 1966
MELVIN I. WHITE NAMED TO TREASURY POST
Treasury Secretary Henry H. Fowler today announced the
appointment of Melvin I. White, of New York, as Deputy
Assistant Secretary of the Treasury for Tax Policy.
Mr. White, who will serve as deputy to Assistant
Secretary Stanley S. Surrey, has been a professor of
economics at Brooklyn College, City University of New York,
since 1950. He will be on leave of absence from that
university.
He has been serving as a Treasury Department consultant
on tax matters since 1962.
A native of Cincinnati, Ohio, Mr. White, 48, holds a
B.A. degree from the University of Cincinnati and a Ph.D.
in economics from Columbia University.
He served as a staff economist with the Council of
Economic Advisers in 1947-1948 and as an economist on the
staff of the Federal Reserve Board, 1948-1950.
Mr. White, who was a Fulbright Professor in Norway and
France in 1956-1957, also has been a consultant on various
fiscal projects for the City of New York. He also has
served as a research associate with the National Bureau of
Economic Research, New York, and has performed research work
for the Brookings Institution, Washington. He is the author
of numerous articles in various economic journals, and is a
member of several professional organizations in the field of
economics.
Mr. White is married to the former Anne Schapiro, who
also is a statistician. They have four children and make
their home at 5405 Newington Road, Bethesda, Maryland.
000
F~
375
TREASURY DEPARTMENT
=
~
6:30 P.M.,
1966.
g, Febru&14,
RESULTS OF TREASURY'S WEEKLY BILL OFFERING
The Treasury Dep&1."'tment announced that the tenders for two series at Treasury bills,
series to be an additional issue of the bills dated November 18, 196" and the other
IS to be dated FebI'll aI7 17, 1966, which were offered on February 9, 1966, ware opened
be Federal Reserve Banks todq. Tenders were invited tor $1,300,000,000, or thereta, of 9l-tiq bills and for $1,000,000,000, or thereabouts, at 182-dq bUls. The
1ls or the ·two series are as follows:
E OF ACCEPTED
91-day Treasury bills
maturing May 19. 1966
Approx. &qUiv.
ETITIVE BIDSs
Price
High
Low
••
182-cl.q Tre8.SUZ",Y bills
maturing August 18. 1966
Annual Rate
·•••
Price
4.672%
4. 704;~
4.~95. ~
••
••
••
97.542
97.531
97.535
98.819
98.811
98.813
Awrage
••
Y
Approx. Equiv.
Annual Rate
!I
4.862%
4.884%
4.876%
!I
!lExcepting 2 tenders totaling $900,000
2~ of the 8IIlount at 91-day bills bid tor at the low price was accepted
47~ of the amount of l82-day' bills bid tor at the low price was accepted
L TENDERS APPLIED FOR AND ACCEPTED BY FEDERAL RESERVE DISTRICTS:
strict
Applied For
41,)66,000
1,609,405,000
32,984,000
A
....c_C8-.p
...te_d_ _ :
Accepted
31,366,000: $ 23,071,000
$
9,116,000
872,350,000: 1,351,19,,000
622,345,000
lladelph1a
20,9~,OOO :
12,839,000
4,539,000
n.llDd
34,068,000
)0,218,000
51,1d4,ooO
40,404,000
:hmond
12,342,000
11,114,000
!~, 950,000
4,645,000
Umta
43,072,000
31,277,000
25,440,000
15,640,000
~ago
321,925,000
144,335,000
294,646,000
147,196,000
I Louis
55,714,000
40,934,000
25,896,000
1 8,696,000
8 8,000
~~
20,918,000
14,123,000
11, 23A, 000
14,2140
lias City
24,021,000
23,453,000
15,189,000
8,5 ,000
~
22 311 000
12 311,000
13,)09,000
,)09,000
1 Francisco
147:000:000
61:591,000
154,557,000
106,674,000
TOTALS
$2,.365,258,000 $1,300,642,000 td .~:l,983,6.34,OOO
$1,000,346,000 y
lCluQes $266,574,000 noncompetitive tenders accepted at the average price of 98.813
~uda8 $111,958,000 noncompetitive tenders accepted at the average p~ce of 97.535
tess rates are on a. bank discount basis. The equivalent coupon issue YJ.e1ds are
.82~ tor the 9l-day bUls, and 5.07% tor the 182-day bUls.
ston
,York
F-376
$
$
Applied For
- 2 -
Prior to 1951, Mrv Brannon was assistant professor of
economics at the University of Notre Dame.
Since 1951 he
has been a lecturer at the Graduate School of Georgetown
University.
Born in Manila, the Philippines, in 1922, Mro Brannon
holds A.B. and M.A. degrees from Georgetown University and a
Ph.D. from Harvard University where he was a Littauer Fellow.
Mr. Brannon is married to the former Frances Maguire.
They have five children and make their home at 4813 North
24th Street, Arlington, Virginia.
000
DRAFT RELEASE
BRANNON NAMED HEAD OF TREASURY'S
OFFICE OF TAX ANALYSIS
Treasury Secre tary Henry H. Fowler today anftctlDeeG- ,.theappo1ncm.~' . t Gerard M. Brannon as Director of the Treasury's
Office of Tax Analysis.
I/~,
Mr. Brannon, who has been ..associate director
of the
...,
;\
...
Office of Tax Analysis, joined the Treasury in May 1963.
Previously, he was for six years the staff economist for the
House Ways and Means Committee.
Before that he served for
six years as an economist on the staff of the Joint Committee
on Internal Revenue Taxation.
The Treasury's Office of Tax Analysis prepares
economic, statistical and technical analyses relating to
federal tax policies.
TREASURY DEPARTMENT
(
February 15, 1966
RELEASE A.M. NEWSPAPERS
WEDNESDAY, FEBRUARY 16, 1966
BRANNON NAMED HEAD OF TREASURY'S
OFFICE OF TAX ANALYSIS
Treasury Secretary Henry H. Fowler today designated
Gerard M. Brannon as Director of the Treasury's Office of
Tax Analysis.
Mr. Brannon, 43, who has been Associate Director of the
Office of Tax Analysis, joined the Treasury in May 1963.
Previously, he was for six years the staff economist for the
House Ways and Means Committee. Before that he served for
six years as an economist on the staff of the Joint Committee
on Internal Revenue Taxation.
The Treasury's Office of Tax Analysis prepares economic,
statistical and technical analyses relating to federal tax
policies.
Prior to 1951, Mr. Brannon was assistant professor of
economics at the University of Notre Dame. Since 1951 he
has been a lecturer at the Graduate School of Georgetown
University.
Born in Manila, the Philippines, in 1922, Mr. Brannon
holds A.B. and M.A. degrees from Georgetown University and
a Ph.D. from Harvard University where he was a Littauer Fellow.
Mr. Brannon is married to the former Frances Maguire.
They have five children and make their home at 4813 North
24th Street, Arlington, Virginia.
000
F-377
- 11 -
In concluding my part of these remarks with a
of our gold transactions t 1
\~ant
SUID8ry
to emphasize that gold
movements B.re not necessarily related to the balance of p.WI'_~
in anyone year.
Gold claim6 arise from official dollar
balances accumulated in any year, past or present.
Net gold sales last year amounted to nearly $1.7 billUm,
OL 'trlhiclr. $?59 million represented a gold payment to the
Intel~ational
Monetary Fund in connection with an incr••••
• ~ our drawLug rights, and $118 million represented .al•• to
(lome.; ti.c indust rial users.
Of the remaining $1.3 billion
gold sales, $1.1 billion occurred during the first half aad
$177 million during tbe second half of the year.
The steady decline in gold sales throughout the year,
I~
,\Jith some strengtl!eninr; of the dollar in foreign exchange - ::.·u.gsestr-: a healthy state of
f~reign
000
confidence in the dollar.
- 10 F~vorable
items included the following:
The largest single impact of our balance of payments
program, th.rough the end of 1965, was in the fiell of baak
credit.
Outflows of short and long term credit reported by
bank.s, which were B.lmast $2.5 billion in 1964, shifted to I
slight inflow in 1965.
In addition·· although the information on this po1at.
still incomplete -- non-bank clatms on foreigners, excluding
United States
~rchases
of foreign securities, shifted fro.
an outflow in 1964 of over $900 million to an inflow in 1965
which we estimate at around $300 million.
More than half of
this estimated $1.2 billion shift in non-bank flows last
,.r
represents repatriation of liquid linds by financial and
~
financial cornorations in response to the voluntary
pro8r~
- 9 already been made.
What is encouraging is that there was a
substantial improvement during the year.
Secretary Comaor
will tell you more about this progra.mJt. and the outlook
Net transactions in foreign securities, new and
lMI.
fe~
out.t~~
remained almost unchanged in 1965 from the 1964 level, dar
to the Interest Equalization Tax and the .voluntary prograa
.r
restraLnt by non-bank financial institutions.
One major unfavorable factor was of a quite specLd
character.
This was the shift during 1965 of wome Unitecl Stat..
securities, and some other long term ass.ts held by the
Ki1l8dom government, into short term liquid assets.
in type of asset held affects our deficit.
involved was some $500 million.
The chili'
The amount
This item largely expla~
the figure in the table that you have for net sale8 of
Un~ted
Od~
States securities by foreigners.
- 8 -
The largest adverse change in our payments last '·..,ear . .
the decline of nearly $1.9 billion in our trade surplul.
1;01&8
~
due, as you can see, to an iaerease of nearly $2.9 bill.
(about 15 percent) in imports, while our gain for the ,.ar
on exports waa only $1.0 billion, or 4 percent.
The tr••
surplus for the year was $4.8 billion as compared with $6.7
billion in 1964; but in the fourth quarter of 1965 it
wa.
rllnaing at an amtual rate of about $5.2 billion.
Our tourist deficit apparently rose again, from $1.6
billion to $1.8 billion.
Direct investment abroad in 1965 was larger than ill Itl4.
But it should be recalled that the new balance of pa,.entl
program did not get started until February of 1964 -- jUlt
a year ago _. and that many investment commitments had
- 7 -
balance and other requirements for some time ahead.
-- American firms repatriated dollars that had been
abroad, to cooperate with the
~sidentls
~.
program.
-- Tightening of domestic credit in a number of
COUD~
inspired foreign banks to shift from dollar to domestic
-- The improvement in the British pound sterling
.'M~.
bro~t
about shifts from dollar accounts to starling accounts.
I will try, in the remainder of my summary, to point out
some
of the main facto.s that, taken altogether, added up tc
last year's achievement, in reducing the deficit on the 0ftft11.
or liquidity, basis, concluding with a summary of our gold
transactions during the year.
Let me begin with the adverse factors affecting our
payments
~n
1965:
- 6 less than two thirds the size of the average deficit of $2.2
billion a year, on this same basis, in the seven years 195.
through 1964.
By and large, the official se.tlements deficit will
~
from the liquidity deficit to the extent of change in li4.w
dollar holdings of pr6vate foreigners, since inclusion of
these liabilities in the liquiiity account is the major
difference between the two concepts.
It is characteristia for private dollar balances held
abroad to vary
t~ir
rate of growth sharply from year to
,..~
There was very little increase in pr6vate foreign dollar
holdings last year, making for very little difference in
two accounts for the year.
a.
The chief reasons are:
-- The large increase in pr69ately held dollars abroad
in 1964 must have sufficed to satisfy increases in working
- 5 -
rise sharply over the increases presently projected.
Let ..
add and emphasize that as of now the program we have 1, ..
effective program,.and we see no reason to change its
ch~,
secretary Connor will discuss with you the part of the
Pres:W ent' s balance of pa.yments program that is hi. relpouDiUI
chiefly, international trade and the voluntary program for
keeping the growth of American business investment over....
l
within our balance of payments possibilities. '
Governor Robertson will discuss the p,ogram concerDed
with United States lending overseas.
On
the other princi.-l accounting basis, the official
settlements account, our deficit in 1965 was somewhat le ••
than $1.4 billion.
-- This was slightly larger -- about $126 million __
than the official settlements deficit in 1964.
-- However, the official
.cc~ ~f~l. ~
1965 vat
- 4 -
With this in mind, we must, certainly, make every
effort -- we must not fail in our continuing efforst, both
in and out of government -- to find and to make every
rNI*II
and practical offset to the impact of Vietnam on our ba~
of payments.
But, it should be kept in mind that the balance of
payments costs of the Vietnam conflict are not peraaaneat .r
ordinary costs, and that, although we have made provi.ioD for
an increase in these costs in our outlook for 1966. it 1,
not possible to say at this time how greatly, in fact,
~.,.ill
.1Ifl,
~
affect our balance of payments in 1966.
What I can tell you now is that we still have equil1bn..
as we have defined it, as our goal for 1966, but we CadDot N
certain that present measures as they currently operate
lead us to that goal
l!
the foreign exchange costs of
will
V1.~
- 3 -
I would hope particularly that the Foreiln Tax In... ton
Act, now in the House Ways and Means Committee, could bee. .
law this year, providing the basis for a long term expanllea
of the scale of private foreign portfolio investment ift the
United States.
This prospect, the increase in investment incom., a
moderation of direct investment outflows, and a movement
toward an expanding trade surplus, interrupted in 1965 by
special
circumstance,~
offer the most promising area. for
~
march toward wquilihrium in 1966.
Of course the two main
~nderables
are the rising
balance of payments costs in Southeast Asia in both the
{i}1..SL
military and the aid programg which . . the result of Viebda
and the direct and indirect impact of Vietnam on the d~.tu
economy and the balance of trade.
- 2 -
I want to go over with you some of the main compoaeat.
of the 1965 record, as they bear upon the future.
There an
both favorable and unfavorable elements.
The $1.5 billion net reduction in the payments deficit
on an overall basis occurred despite heavy outflows on
private capital account during the early months and d••pite
setbacks for the year
88
a whole in trade and other ..count••
The improvement ia in very large part attributable to dw
effectiveness of the program of voluntary cooperation which
President Johnson called for in his balance of payments ......
of February 10, 1965.
This 1965 record, and the tightening and sharpeniDs of
this phrase of the President's balance of payments progr.. fft
1966, give reason to believe that there will be cODtiDuiDI
improvement in the private capital area.
"') '7 )
- 3 -
L..
I
'.I
Secretary Connor will discuss with you the part of the
'resident's balance of payments program that is his
~esponsibility, chiefly, international trade and the voluntary
)rogram for keeping the growth of American business investment
)Verseas within our balance of payments possibilities.
Governor Robertson will discuss the program concerned
7ith United States lending overseas.
On the other principal accounting basis,the official
;ettlements account, our deficit in 1965 was somewhat less
:han $1.4 billion.
This was slight~ larger -- about $126 million -than the official settlements deficit in 1964.
However, the official accounts deficit in 1965
was less than two thirds the size of the average
deficit of $2.2 billion a year, on this same
basis, in the seven years 1958 through 1964.
By and large, the official settlements deficit will
iffer from the liquidity deficit to the extent of change in
iquid dollar holdings of private foreigners, since inclusion
f these liabilities in the liquidity account is the major
ifference be tween the two concepts.
It is characteristic for private dollar balances held
broad to vary their rate of growth sharply from year to year.
here was very little increase in private foreign dollar
oldings last year, making for very little difference in the
wo accounts for the year. The chief reasons are:
The large increase in privately held dollars
abroad in 1964 must have sufficed to satisfy
increases in working balance and other requirements
for some time ahead.
American firms repatriated dollars that had been
held abroad, to cooperate with the President's
program.
Tightening of domestic credit in a number of
countries inspired foreign banks to shift from
dollar to domestic assets.
- 4 -- The improvement in the British pound sterling
brought about shifts from dollar accounts to
sterling accounts.
I will try, in the remainder of my summary, to point out
some of the main factors that, taken altogether, added up to
last year's achievement, in reducing the deficit on the
overall, or liquidity, basis, concluding with a summary of our
gold transactions during the year.
Let me begin with the adverse factors affecting our
payments in 1965:
The largest adverse change in our payments last year was
the decline of nearly $1.9 billion in our trade surplus. This
was due, as you can see, to an increase of nearly $2.9 billion
(about 15 percent)in imports, while our gain for the year on
exports was only $1.0 billion, or 4 percent. The trade
surplus for the year was $4.8 billion as compared with $6.7
billion in 1964; but in the fourth quarter of 1965 it was
running at an annaul rate of about $5.2 billion.
Our tourist deficit apparently rose again, from $1.6
billion to $1.8 billion.
Direct investment abroad in 1965 was larger than in 1964.
But it should be recalled that the new balance of payments
program did not get started until February of 1964 -- just
a year ago -- and that many investment commitments had
already been made. What is encouraging is that there was a
substantial improvement during the year. Secretary Connor
will tell you more about this program, and the outlook for
1966.
Net transactions in foreign securities, new and outstanding,
remained almost unchanged in 1965 from the 1964 level, due
to the Interest Equalization Tax and the voluntary program for
restraint by non-bank financial institutions.
One major unfavorable factor was of a quite special
character. This was the shift during 1965 of some United States
securities, and some other long term assets held by the United
Kingdom government, into short term liquid assets. The change
in type of asset held affects our deficit. The amount
involved was some $500 million. This item largely explains
the figure in the table that you have for net sales of
United States securities by foreigners.
- 5 -
Favorable items included the following:
The largest single impact of our balance of payments
program, through the end of 1965, was in the field of bank
credit. Outflows of short and long term credit reported by
banks, which were almost $2.5 billion in 1964, shifted to a
slight inflow in 1965.
In addition -- although the information on this point
is still incomplete -- non-bank claims on foreigners,
excluding United States purchases of foreign securities,
shifted from an outflow in 1964 of over $900 million to an inflow
in 1965 which we estimate at around $300 million. More than
half 0f this estimated $1.2 billion shift in non-bank flows last
year represents repatriation of liquid funds by financial and
non~financial corporations in response to the voluntary program.
In concluding my part of these remarks with a summary
of our gold transactions, I want to emphasize that gold
movements are not necessarily related to the balance of
payments in anyone year. Gold claims arise from official
dollar balances accumulated in any year, past or present.
Net gold sales last year amounted to nearly $1.7 billion,
of which $259 million represented a gold payment to the
International Monetary Fund in connection with an increase
in our drawing rights, and $118 million represented sales to
domestic industrial users. Of the remaining $1.3 billion
gold sales, $1.1 billion occurred during the first half and
$177 million during the second half of the year.
The steady decline in gold sales throughout the year, along
with some strengthening of the dollar in foreign exchange
markets, suggests a healthy state of foreign confidence in the
dollar.
000
,.-., r
.~.
:.. ....
TREASURY DEPARTMENT
)R IMMEDIATE RELEASE
1"\
J
il- .....
t
' ......
February 14; 1966
SUBSCRIPTION FlGURl5 FOR CURRE!fl' REFUlfDING
Tone results of the Treasury's current exchange offering of 4-7/~ notes dated
~bruary 15 ~ ~966 ~ maturing August 15 ~ ~967, and 510 notes dated February 15, 1966,
Lturing November 15, 1970, open to holders of $28, 758 million of securities maturing
~om February 15 to August 15~ 1966, are summarized in the tables below.
Total sub~r1ptions amount to $9,806 mil1ion~ including $4,962 million of notes maturing
~bru.ary 15 and April 1, 1966~ leaving $505 million, or 9. 2'J,~ of such notes for cash
!demption.
Federal Reserve
Exchange for the
Exchange for the
District
5 Notes A-1970
4-7/~ NOtes, ~1967
Boston
$ 18,006,000
391,173,000
New York
1,601,497,000
3,541,058,000
Philadel.phia
13,017,000
231,443,000
Cleveland
81,157,000
397,176,000
181,203,000
:Richmond
26,438~000
67,423,000
302,686,000
Atlanta
Chicago
~22,197,000
1,223,093,000
St. Louis
311,267,000
51,146,000
Minneapolis
221,397,000
11,326,000
Kansas City
322,069,000
28,808,000
203,079,000
34,527,000
Dallas
319,783,000
San Francisco
59,560,000
2,744,000
Treasury
42,215 / °00
$7,687,642,000
Total
$2,117,846,000
SUMMARY OF AMOtmT AND NUMBER OF SUBSCRIPTIONS BY INYmTOR CLASS
tividuals
!I
(Dollar amounts in millions)
5~ Notes
4-7/f31, Notes
A-1970
:&-1967
Amount No. Sub.
Amount No. Sub.
19,495
387
1,171
$ 44
mnercial Banks
(Own account)
lothers
Totals
$
525
1,650
299
709
868
3,530
, TOTAL
Amount No. Sub.
431.
20,666
*
3,926
13,865
*
4,451
15,515
2.z254
$6,567
7.z 639
40,999
2 z553
$7,435
8 z348
44,529
Lera! Reserve Banks
and Government
.Accounts
Grand Totals
1,250
$2,118
1.,l.21
$7,688
Includes partnerships and personal trust accounts.
F-379
2,371
$9,806
TREASURY DEPARTMENT
Washington
FOR RELEASE AFTERNOON NEWSPAPERS
WEDNESDAY, FEBRUARY 16, 1966
ADDRESS OF THE HONORABLE FREDERICK L. DEMING
UNDER SECRETARY OF THE TREASURY FOR MONETARY AFFAIRS,
WASHINGTON UNIVERSITY ASSEMBLY SERIES LECTURE
AT GRAHAM MEMORIAL CHAPEL
WASHINGTON UNIVERSITY, ST. LOUIS, MISSOURI,
ON WEDNESDAY, FEBRUARY 16, 1966,
AT 11:00 A.Mv, C.S.T.
UPDATING OUR INTERNATIONAL MONETARY SYSTEM
It is an honor and a great personal pleasure for me to
be a guest lecturer in the Washington University Assembly
Series. The honor comes, of course, from the high repute
of the lecture series. The personal pleasure derives from
the fact that I am a triple alumnus of this University.
There is nothing quite like the pleasure of lecturing on a
campus where one was lectured at so often.
My academic career here stretched over a period of about
12 years -- from the onset of the Great Depression to just
prior to American entry into World War II. Those were
eventful years in many respects, and, in relation to my
subject today, they may be classed as quite significant.
Particularly in the years 1929-35, there was a period of
severe testing of the banking and monetary system, both in
the United States and internationally.
The University, of course, goes back further than I do.
In this Founders Week, it becomes officially 113 years old.
Not long ago, I heard a very distinguished statesman and a
very distinguished central banker both characterize the
international monetary system as lagging a century behind the
development of national monetary systems.
These comments caused me to look back into our awn
monetary history to see what was happening at the time ~his
University was founded.
I am not at all sure, after dOLng
F-380
- 2 so, that I would draw this conclusion -- at any rate, I
would not draw it quite so starkly.
In the United States,
the year 1853 fell between the demise of the second United
States bank in 1836 and the establishment of the national
banking system in 1863. It was a time when the average
citizen had to be careful as to the money he would accept
in day-to-day transactions.
It is said that, toward the end
of that period, there were in circulation 7,000 different kinds
of bank notes, 3,000 varieties of altered notes, 1,700
varieties of spurious notes, and over 800 varieties of imitations
One of the major reasons for public support of the National
Bank Act was the prospect that a uniform currency could thus
be provided. State bank note issues were not taxed out of
exist~nce until Congress acted to do so in 1865.
The first Clearing House for daily settlements among
American banks was established in 1853 in New York.
It was
in 1855 that deposits began to exceed notes for the first
time, foreshadowing the very striking development of deposit
banking in the ensuing century.
Locally, Missouri had established a single State Bank
in 1837, in which the State owned two-thirds of the capital.
Iowa prohibited all banks until 1857, when it set up a State
Bank. It was not until 1857, when St. Louis had become the
eighth largest city in the United States, that the monopoly
of the State Bank of Missouri was broken and the chartering
of nine banks was permitted. By 1859, there were seven banks
in St. Louis, one in St. Joseph and one in Lexington.
I would not want to suggest that the problems we face
today in the international monetary sphere are, in any degree,
the same kinds of problems that faced Missouri and the
United States in 1853 or those with which the world was
dealing in 1929-33. In fact, the reforms and improvements
needed by the domestic monetary system a century ago were
much more extensive and fundamental than those that now seem
to be called for to improve and modernize the international
monetary system. For example, most international transactions
by the world business community are now efficiently handled
by using two or three major reserve currencies. That is to
say, there is no multiplicity of confusing currencies for use
in private international trade.
- 3 There may be a somewhat greater similarity, however,
between the present problem and the groping efforts of the
U. S. banking system in the 1850's to find a satisfactory
monetary supplement to limited supplies of gold and silver.
The domestic banking system has found the answer in Federal
Reserve notes and in demand deposits that are readily accepted
in trade settlements, in part because their quality is
protected by Governmental supervision and sound banking
administration.
There is, today, a need to find a supplement to gold and
reserve currencies to assure an adequate future growth in the
reserve holdings of the national monetary authorities.
One reason that monetary reserves cannot be expected to
meet future needs lies in insufficient new gold supplies,
and another lies in the fact that the source in recent times
of most additions to reserves -- large net dollar outflows -is not expected to continue.
The new supplies of monetary gold that have become
available have been insufficient for some years. New gold
has been added to monetary stocks at no more than $500-600
million a year on the average. Preliminary figures suggest
that last year no more than half this much new gold became
available. That does not measure the amount of gold added
to national reserves, however, because countries were able
to enlarge their holdings by acquisition of previously
existing gold from the International Monetary Fund and the
Bank for International Settlements. But, of course, there
are limits to those sources.
For a number of years, an outflow of United States
dollars has permitted continuing additions to the reserves
of the rest of the world. Next to gold, the dollar is the
chief international reserve. The dollar outflow resulted
from large annual United States balance of payments deficits
from 1958 onwards. Since some of these dollars were used to
buy U. S. gold, our dollar deficits have also resulted in a
redistribution to other countries of a part of our gold stock.
It is not in our interest, nor in that of the world that
the United States should continue alone to provide for the
growth of reserves by dollar outflows, as it has been doing
in recent years, in the form of large balance of payments
deficits.
- 4 The Secretary of the Treasury made it clear last Summer
that the United States would vigorously pursue the goal of
equilibrium in its balance of payments and that we would seek,
with the rest of the world, agreement upon additional ways of
supplying reserves in the future, through an international
procedure rather than solely on the responsibility of the
United States.
Although such deliberate creation of international
reserves by multilateral action of nations would be something
entirely new and uncharted, and the negotiations necessary
to attain the objective may be difficult and lengthy, the
way for it has been prepared in part by developing within
the p~st five years a much higher degree of international
monetary cooperation. This new network of cooperative
monetary arrangements involves the extension of mutual credit
facilities among national monetary authorities far beyond what
had existed before.
Let us look at some of the new international arrangements
for avoiding international monetary strains. You will note
a great and reassuring difference from the situation in the
1930's, when a weakness here and a strain there were permitted
to grow into a general rotting of the international monetary
fabric.
For meeting short-term credit needs, the United States
has taken the lead in developing a network of reciprocal
swap facilities with other important financial centers,
through the Federal Reserve System, that now has reached
the impressive total of $2.8 billion.
Under these new arrangements, each country agrees to
provide its currency to the other upon demand up to
specified amounts.
Swap operations move in both directions.
For instance, the United States is sometimes a net borrower of
foreign currencies and sometimes a net lender.
Swaps are
essentially designed to provide short-term financing
facilities.
The Treasury has issued special nonmarketable securities
to foreign monetary authorities and has joined with the
Federal Reserve System in exchange market operations.
- 5 -
The medium-term credit facilities of the International
Monetary Fund were reinforced in 1961-62 with $6 billion of
support pledged by the major countries, and these resources
have been invoked twice in the last year or two to deal with
strains on the pound sterling.
Still and all, when we come to deliberate creation of
new reserve assets, we are in terra incognita, in its way,
perhaps as much of a departure from past monetary history
as the development of space craft and nuclear power departs
from tradition in the application of physical sciences.
This is one way of stressing that difficult negotiations lie
ahead.
Let me pause a moment to emphasize that the present
monetary system is by no means decrepit, is not about to
collapse, and that it has, indeed, shawn itself, in the new
credit arrangements we have just been discussing, to have a
youthful vigor and openness to creative change that is, in
itself, a hopeful indication that new changes can be made
successfully. Throughout the postwar period, our Free World
monetary system has supported an expansion of world
production and world trade of unprecedented magnitude. This
is a system that needs modification -- not replacement. As is
true of any successful human institution -- be it a
university, a government, an industry, or a monetary system
adaptation to changing conditions is both evidence of its
vitality and a condition for its survival.
In one vitally important aspect, however, the present
international monetary system does threaten to lag behind
the march of economic progress. The lag is in its ability to
provide for adequate growth in the supply of international
money to be held by national monetary authorities as reserves,
if large dollar outflows are not to continue. Two elements
must be corrected:
First, the system must free itself from
undue reliance upon the uncertain and unpredictable
flow of newly mined gold into the hands of monetary
authorities; and
Second, the system must find some means of
expansion in world reserves which does not de~e~d
upon continuing large balance of payments def~c~ts
of the reserve currency countries.
- 6 Let me give you a very few of the many facts and figures
that lie behind these policy judgments.
Total reserves of the free world amount to the equivalent
of nearly $70 billion. Of this amount, roughly $41 billion
consists of gold, and $22 billion of official holdings of
reserve currencies, of which the largest share is U. s.
dollars.
Over $5 billion consists of drawing rights on
the International Monetary Fund, which countries can utilize
virtually at will. Technically, these are called "gold
tranche" or II super gold tranche" positions in the
International Monetary Fund. These we have come to designate
as "reserve positions in the Fund."
In the six-year period from the end of 1958 through the
end of 1964, the total of Free World reserves, excluding
those of the United States, increased by just over $17 billion.
This was an average increase of nearly $3 billion per year.
Our study of these data indicates that nearly three-quarters
of this increase, or some $12.5 billion, can be traced to
United States' financing of its very substantial balance of
payments deficits in the period covered. The United States
made net sales of gold to foreign countries of more than
$5 billion during that six-year period, and our dollar
liabilities to foreign monetary institutions -- or their
dollar claims on us -- increased by more than $6 billion.
Finally, our reserve position in the International Monetary
Fund declined by more than $1 billion, with the result that
the reserve positions of foreign countries increased by a
comparable amount.
The rest of the in~rease in foreign reserves during
the period appears to be made up of an additional $1.6
billion increase in reserve positions in the Fund and about
$3 billion of newly available gold:
including newly mined
Free World gold and Russian gold sales.
The point I wish to emphasize is that new gold production,
even including sales of gold by Russia, contributed, on
the average, less than $500 million annually to the reserves
of the Free World in these years.
In the same period, various
methods of financing the United States deficit supplied, on
the average, over $2 billion a year to foreign reserves.
Our present estimate is that the U. S. balance of
payments deficit in 1965 declined to about $1.3 billion.
Our aim is to reach equilibrium in our balance of payments.
- 7 The small volume of new monetary gold supplies and the
prospective disappearance of the United States deficit
provided the background against which the Group of Ten major
industrial countries -- Belgium, Canada, France, Germany,
Italy, Japan, the Netherlands, Sweden, the United Kingdom,
and the United States -- some two years ago began a careful
examination of ways for improving the international monetary
system.
In 1964-65, a subgroup prepared a thorough technical
study of ways of creating reserves. Last Fall, Secretary
Fowler visited a number of the major capitals of Europe to
inform his colleagues in Finance Ministries and central
banks that the United States believed that, with the
completion of the 1964-65 studies, it was now time to begin
contingency planning in order to avoid a situation in which
the growth of total reserves would be sharply curtailed by
the end of the United States balance of payments deficit.
Last September, the Finance Ministers and central bank
Governors of the Group of Ten accepted this view and
instructed their Deputies to accelerate their work. They
were asked to seek first a basis for agreement in this group
of major financial powers, to be followed by a second stage
of broader negotiations covering the interests of the world
as a whole.
Determination of what is or what is not an adequate
level of reserves for the world as a whole is one of the
most difficult questions ahead of us, but difficulty in
determining an adequate level of world reserves does not
relieve us of the necessity of seeking such determination.
We know that most nations have a strong and understandable
desire to increase the "total of their reserves as their domestic
economies expand and as their international trade and financial
transactions increase. Recent indications of expectations
of major industrial countries as to reserve trends showed a
clear tendency on the part of most nations to anticipate that
reserves would expand as trade and payments grew.
Where such an expectation is widely held, there is a
real danger that a sharp cessation in the expansion of the
over-all total of reserves might lead to a drift toward
nationalistic policies that would restrict international
trade and investment as each country tried individually and,
probably for the most part unsuccessfully, to preserve a
growing trend in its own reserves.
If this were to occur,
the difficulties might well become cumulative and a
- 8 competitive cycle could develop which would be most disruptive
to economic growth and to international economic cooperation.
It could damage the continuing expansion of world trade and
disrupt the serious efforts of the developed nations of the
world to assist in a meaningful way the economic development
of the less developed countries.
The most direct use of reserves is, of course, to finance
imbalances.
But a "comfortable" level of reserves is desired
whether or not a particular nation foresees a need to draw
upon them. A large volume of reserves insures a country
that it will be able to exercise a degree of independent
judgment in determining its internal economic policies, if
it should get into balance of payments difficulties.
It
means that the country could make the necessary international
adjustments at a pace that would not entail extreme internal
measures or stringent restrictions on external transactions.
Adequate and growing reserves also improve the credit standing
of the country, contribute to confidence in that country's
currency, and add to its ability to obtain foreign loans
when needed.
Over the years, partly for want of a better measure,
most studies of the adequacy of reserves have measured
reserves against total annual imports. Such studies have
shown that individual countries have accepted -- or have been
forced to live with -- varying ratios of reserves to imports.
Clearly, the appropriate or indeed the optimum ratio for
a particular country should take into account the regularity
and dependability of the country's foreign income, the
extent to which the country is heavily dependent upon foreign
trade, the traditional level of its reserves in prosperous
periods, the international use of its currency, and many
other fac tor s .
We shall look here at the over-all world picture, which
shows a declining ratio of reserves to trade, implying a
widespread reduction in individual country ratios.
According to a compilation covering countries for
which complete data are available, the ratio of total
reserves to the annual value of Free World imports stood,
at the end of 1964, at 46 percent, as against 62 percent
in 1958. For the Group of Ten countries, excluding the
United States, the ratio fell from 42 percent to 36 percent,
- 9 even though this group of countries accounted for most of
the $17 billion increase in world reserves which I mentioned
earlier. For less developed countries, the ratio of reserves
to total imports fell from 46 percent in 1958 to 39 percent
at the end of 1964. The ratio for the United States moved
from 154 percent to 84 percent during the same period.
The decline of the over-all ratio of reserves to trade
does not reflect a decline in reserves. Rather, it reflects
the rapid increase in world trade which has characterized
most of the postwar period. The total of Free World imports,
for example, was approximately $100 billion in 1958 and
nearly $160 billion in 1964. During this period when trade
increased by some 60 percent, world reserves -- to take a
somewhat more inclusive view than provided by the countries
cited above -- moved up by about 20 percent.
There is no suggestion either in the statistics or in
the theoretical relationship of world trade and reserves
that reserves must increase pari passu with increases in
trade. Trade is financed, in the first instance, in
national currencies, and trade credits are extended, for the
most part, by the private banking systems of the individual
countries.
But these data certainly suggest that the increase of
reserves has been anything but excessive relative to the
growth of trade.
Reserves are used for settling imbalances which" remain
among countries after all of the earnings and expenditures
arising from trade and capi.tal transactions have been offset
in the accounts of each" country. The very fact that ~hese
trade and financial transactions have grown so rapidly suggests
that the amount by which a country may find its payments and
receipts failing to balance at any particular time is
substantially larger in money terms than it would be at a
lower level of transactions.
It is too early to get complete data for 1965 trade
and reserve positions. Preliminary indications, however,
are that the over-all ratio of reserves to trade declined
somewhat further in that year. Free World imports appear
to have increased by more than $10 billion, while the increase
- 10 in reserves was something just over $1 billion.
In order to
maintain the ratio of reserves to trade which existed at the
end of 1964, the increase in world reserves would have been
more than $4 billion, rather than $1 billion. And to restore
the relationship between imports and reserves prevailing in
1960 for countries other than the United States would call
for the addition of about $5-1/2 billion to the present
level of their reserves.
I should note here, however, that reserves, or, more
explicitly, "owned reserves," are not the only resource upon
which a country can rely if it finds itself in balance of
payments difficulties.
International credit facilities also
provide means of financing.
The last substantial institutional revision of the
international monetary system occurred some 21 years ago,
when the International Monetary Fund was established. That
institution was founded in the desire to contribute to the
expansion of world trade and the adoption of liberal trade
policies by institutionalizing the availability of international credit.
Each member of the International Monetary Fund has a
quota governing the amount that may be borrowed from the
Fund in case of need and in accordance with well-understood
criteria. The Fund is financed by its member countries, who
pay in a percentage of their respective quotas (generally
25 percent) in gold and undertake to pay in the balance
of their quotas in their awn currencies, if these should be
needed by the Fund.
Each country may draw, or borrow, its "gold tranche"
contribution virtually on demand, simply on a showing that
it requires additional international means of payment. As
a country's drawings represent progressively larger portions
of its total quota, the Fund demands increasing evidence
that the drawing country is following economic policies appropriate
to a return to balance of payments equilibrium. A country's
Fund quota, accordingly, except for the'" gold tranche' portion,
is customarily not regarded as a part of that country's
"owned" reserves, because the availability of the cre.dit
is conditional.
- 11 I should point out also that, when a country's currency is
drawn by another country, the country whose currency is taken
acquires an asset (or a reduction in its liabilities). Under
certain conditions, it acquires a "super gold tranche," which
can be drawn at will and without repayment obligations.
The United States has taken the position, in discussing
improvements in the world monetary system, that it would be
well to explore the possibilities of further improvement in
credit facilities as an adjunct to the creation of some new
form of international reserve asset. We have felt that owned
reserves and credit facilities both have a significant role to
play in a flexible and adaptable world monetary system.
All countries have a vital interest in the strength,
resiliency, and liquidity of the world monetary system. All
countries need adequate reserves and require access to credit
facilities.
Indeed, as indicated earlier, the developing
countries, as a group, hold reserves which bear much the
same relationship to their imports as is the case for the major
industrial countries, excluding the United States.
There are also, however, differences between major
industrial, intermediate industrial, and various groups
developing countries. Thus, it may well be that meeting
reserve and international credit needs of all countries
require more than one technique. Neither a new nor an
evolutionary development necessarily need be restricted
a single technique or procedure.
of
the
will
to
The major industrial nations have had the primary
responsibility for insuring that the international monetary
system operates smoothly. They account for about 70 percent of
the world's total reserves. Their currencies are the ones
usually drawn upon when the Fund extends credits, and their real
resources are transferred when these credits are utilized. They
are exposed at times to disequilibrating capital flaws.
The
Group of Ten countries found it desirable in 1961-62 to take joint
action to "forestall or cope with" any threatened impairment
of the international monetary system. They did this by pledging
loans up to $6 billion, on which the Fund might call for this
purpose.
In the International Monetary Fund, there has been
recognition of some of the special monetary needs of the
developing countries, in the form of assistance when the
incomes of these countries, derived from a limited range of
exports, have fluctuated through no fault of their awn.
Special
facilities, known as "compensatory financing arrangements ," have
facilitated dr~jngs on the Fund to ease these problems.
- 12 -
Thus, there are both world-wide interests and needs,
and special interests, needs and responsibilities, in regard
to the international monetary system o That is the reason
negotiations looking toward modification of the system are
proceeding as they are~ Currently, the initial negotiations
are going forward in the Group of Ten nations o They have
worked closely together for some years in international
monetary cooperation o
For the past two years, they have
studied extensively the general and technical aspects of new
reserve creationo They, I believe, recognize that improvements in the monetary system should take account of the
interests of the world as a whole, including both industrial
and developing countries.
But, as noted, following a broad basis for agreement
within the Group of Ten, further negotiations will take place
with the interests of the rest of the members of the International Monetary Fund being directly representedo
At the meeting of the Deputies of the Group of Ten at
the end of January, the United States put forward in outline
form a proposal for assuring adequate future world liquidity.
This proposal involves a dual approach, using two different
techniques -- a special drawing right in the International
Monetary Fund and an entirely new reserve asset in the form
of an international reserve unit o
The proposed new drawing rights in the Fund would be
in addition, but broadly similar, to those existing drawing
rights that are available virtually on demand and that,
therefore, have come to be regarded as "reserve positions"
in the Fund
The new element involved in the proposal is
that new drawing rights could be established in the Fund
without a payment of gold to the Fund.
Instead, the country
acquiring the new drawing right would make an amount of its
currency available to the Fundo
0
A member country could use its special drawing right
on a declaration that it had a present needo This proposal
is based on the expectation that all members of the Fund
would treat these claims on the Fund as reserves and would
restore their positions in accordance with the policies
applied by the Fund to "reserve positions" in the Fund
0
'.,' p q
L.V
- 13 -
_'
On the basis of experience with the present reserve
positions in the Fund, many countries would not make persistent
use of these drawing rightso Countries might well prefer to
retain these special drawing rights as reserves while using,
if necessary, their normal credit tranches in the Fund, in
accordance with existing Fund rules and regulations o
By using the Fund mechanism in this way, the nations of
the world would be using a familiar institution and a familiar
mechanism. All members of the Fund would be included -- the
less developed countries as well as the industrialized nations.
The experience of the Fund in the management of drawings would
be applied to these new drawing rights, but the pr~ary
emphasis would be on their character as reserves rather than
as credit availabilitieso
Special drawing rights would, of course, need to be
backed by cash subscriptions or lines of credit opened in
favor of the Fund by all member countries, which could be
utilized when the drawing rights were used o In practice,
experience has demonstrated that the currencies needed by
the Fund members have usually been those of the more highly
industrialized countrieso It follows that these countries
would be called upon to give meaningful and effective support
to any system for special drawing rights in the Fund
0
In addition to suggesting the development of special
drawing rights, which would be closely tied into the operations of a familiar technique, the United States has also
proposed creation of a completely new reserve asset
Such
an asset is of the general family frequently referred to as
a "CRU," since the initials have been used as shorthand for
"collective reserve unit" or "composite reserve unito" These
phrases are, indeed, descriptive of the type of asset which
we have in mind, though it would not embody all the elements
sometimes associated with that terminology
Q
0
To develop a new reserve asset would be a unique undertaking in the international sphere. The proposal is that a
group of major industrial countries should contribute their
own currencies, which would be held in a common pool by a
trustee. The unit would be, in effect, a composite obligation of these countrieso Against these national currency
- 14 contributions, an equal value of new reserve units would be
issued to the members of the groupo Each member would
receive units equal in value to its own contribution in
national currency. The new unit would then be included
in the country's reserve totals o
Under this proposal, the reserve unit would have full
backing in national currencies.
In addition, it would benefit
from a firm agreement by the members of the group to accept
units offered by another member. While not participating
directly in the distribution, management, and responsibility
for these reserve units, the interests of other members of the
Fund 'could be taken into account, in an appropriate way, and
they would derive benefit from the creation of new reserve units.
I have said that this would be a unique undertaking in
international affairs, and so it would o
For the first time,
leading nations would be establishing machinery for the express
purpose of creating a reserve asset which would rest upon the
credit of a number of countries and would be accepted by their
monetary authorities
The new asset, nevertheless, would fit
into the long sweep of international monetary development
A
country which is holding dollars or pounds sterling or francs
in its international reserves is, in fact, holding the
obligation of the United States or the United Kingdom or
France
The new reserve unit would represent the obligation
of a group of strong countries banded together, and instruments
representing fractional parts of this composite obligation
would be freely exchanged among the monetary authorities of
members of the groupo
0
0
0
The most important attribute which a new reserve unit
would have -- and which no existing reserve asset possesses
is that its creation would be determined by conscious decision
of international representatives looking at the needs of the
world for reserves o It would not depend either upon the
uncertain and limited supply of new gold produced from year
to year nor upon the balance of payments position of reserve
currency countrieso
United States agreement on creation of a new asset
rests on understanding that the asset would supplement
existing reserve assets -- gold and reserve currencies.
- 15 There would be little point in creating a new asset if it
were to be used to substitute for present reserves o
It is,
in other words, designed to be a separate reserve asset with
attributes somewhere between gold and reserve currencies,
rather than an alternative form of either~ When a reserve
currency country is called upon to convert its currency
into gold, the total of world reserves declines by an equal
amount
This is because the gold moves from the reserves of
one country into those of another -- the total value of gold
reserves remaining unchangedo The reserve currency taken
in exchange for the gold by the reserve currency country,
however, ceases to be an international reserve asset. An
international liability and an international asset are
simultaneously extinguished o And world liquidity in the
form of reserves is reduced. This is not the objective we
have in mindo And I am sure it is not the objective of our
colleagues in the Group of Ten o
0
The procedures governing the acceptance of reserve
units by its sponsoring members is one of the important
questions related to this objective and on which different
points of view have been taken o
We believe any new international reserve unit should
stand on its own feeto
Some versions of the CRU call for a
combination of gold and units in international settlementso
Our view is that countries entering into the creation and
management of a reserve unit will be motivated by a constructive desire to make the new system work, and this
interest is the basic reliance for assuring acceptabilityo
There are many aspects of this subject that I have not
attempted to touch upono The United States proposal does
not stand alone in the Group of Teno Other countries have
put forward proposals or ideas of their own which differ in
various respects from those put forward by the United StatesG
We prefer at this stage to speak of proposals, rather than
plans, for many aspects remain flexible and the give and
take of negotiations will be required before the Deputies
of the Group of Ten can, in the terms of their most :ecent
mandate, "determine and report to Ministers what bas~s of
agreement can be reached on improvements needed in the international monetary systemo"
- 16 The Deputies have been asked to report to Ministers
this Springe I hope that report will reflect a measure of
agreement among the highly industrialized countries that
we believe must be reached as a prerequisite for discussions
in a broader context, where the views of other countries
will be examined
I cannot close more appropriately than
by quoting President Johnson in his Economic Report to the
Congress this year, when he said:
0
"I hope that the major industrial nations -and then the entire community of free nations -will reach an agreement that will make creation
of new reserve assets a deliberate decision of the
community of nations to serve the economic welfare
of all."
--000--
TREASURY DEPARTMENT
February 16, 1966
ADVANCE FOR 12:00 NOON, EST TODAY
WEDNESDAY, FEBRUARY 16, 1966
NEW SAVINGS BONDS INTEREST RATE
President Johnson today announced an increase in
the interest rate on United States Savings Bonds. New
bonds will earn at the rate of 4.15% instead of the
previous 3.75%. Future rates of earning on outstanding
bonds are also being increased.
Attached is a letter to the President from
Secretary Fowler recommending the new program and a
summary sheet detailing the new bond offerings directed
to all the Federal Reserve Banks and other issuing and
paying agents who transact U. S. Savings Bonds business
with the public. A printed circular will later be
distributed. Also attached are tables showing redemption
values and investment yields for Series E and H Bonds
issued beginning December 1, 1965. All Savings Bonds
purchased since December 1, 1965, will earn at the new
rate of 4.15% to maturity.
In addition to the issuance of new Series E and
H Savings Bonds at an interest rate above the previous
rate, the Presidential action raised the earnings after
December 1, 1965, of outstanding E and H Savings Bonds.
000
Attachments
F-381
•
THE SECRETARY OF THE TREASURY
.:..... :-.:-.
.:
WASHINGTON
., ....
...
,
(
-,
,,-
)
Dear Mr. Pre sident:
In your letter oJ: January 18, 1966, you directed me to recommend
as soon as possible a higher interest rate on United States Savings
Bonds, in order to sustain and enlarge the vital role of this program.
You stated in your letter that a rate increase at this time would
serve' important national purposes. This conclusion, meeting the requirements oJ: the Act of September 22, 1959, which amended the Second Liberty
Bond Act, is clearly justified not onl.y in view of the higher rates now
available on various private savings accounts, but also in light or current needs to sustain vigorous nan-inflationary growth and manage our
public debt soundly. Above all, such a move is in our national interest
now, so that a healtQy economy at home provides maximum support to our
efforts on behalI: oJ: deJ:ending f'reedom in Viet Nam. Wi th these £acts
in mind, I recommend the following:
(1) that all Series E and H bonds sold beginning December
1965 earn 4.15% per annum cOIDpOl.U1ded semiannually, if
held to maturity, with yields for shorter periods of
holding also increased from current levels;
(2) that all outstanding Series E and H bonds sold before
December 1965 earn 4/1.0 of 1% more than before to next
maturity, starting with the interest period of five
months or more which begins on or after December 1.,
1965, with lesser improved yields for shorter periods
of holding;
that Series E bonds with issue dates of April 1956
through April 1957 (which had not reached maturity
before December 1965) on which a ).75% ten-year extension had already been promised and those wi 1.h issue
dates of May 1957 through May 1959 on which a ten-year
extension had been promised earn interest at an annual
rate of about 4.15% Cor each half-year period oC holding
to extended maturity;
that matured Series E bonds with issue dates of December
1945 through May 1949 (which had not reached first extended
maturity before December 1965) on which a ).75% second tenyear extension had already been promised earn interest at
an annual rate of about 4.15% for each half-year period
of holding to second extended maturity; and
2
(5) that unmatured Series H bonds with issue dates of
April. l.956 through January 1957 (which had not
reached maturity before December l.965) on which
a 3.75% ten-year extension had alreaqy been pro~
ised ear.n interest at an annual rate of about
4.15% far each half-year period of holding to
extended maturity.
Your approval of the above recommendations will. enable the Treasury
to issue the necessary regulations and put them into effect.
Faithfully yours,
Henry H. Fowler
The President
The White House
SUMMARY
1965
Improvements in Series E and H Savings Bonds, Effective December 1,
L.
~arn
New Series E and H bonds with issue dates of December 1,
4.15% compounded semiannually, if held to maturity (instead of former
3.75%).
On the accrual type E bonds the increase from
~ccomplished
~ars and
~ent
1965 and after
by reducing the term of the bond to
9 months).
of face value.
7
3.75% to 4.15% is
years (instead of former
The purchase price of E bonds will continue to be
7
75 per-
On the current income H bond the increase is accomplished
)y raising the amounts of the semiannual interest checks.
The H bond is issued
~t par, is redeemable at par (on one month t s notice after six months
lOd matures at par at the end of
t
holding),
10 years.
a) There are also improved redemption values and investment yields
if the new E bonds are held for less than the
7 years to maturity.
Some
examples are:
When
held for:
1 year
2 years
3 years
5 years
Redemption
value per
~lOO bond
$77~28
80.40
2.3034
91.44
Period
held
3.02%
3·51
3·75
4.00
Yield for:
Period remaining
to maturitl
4.34%
4.41
4.46
4·52
b) As before, interim yields on the new H bonds are generally in line
with the new Ers for equal periods of holding.
first two will be level providing
of holding.
Interest checks after the
4.3% current income after the first year
- 2 Outstanding E and H bonds purchased before December 1, 1965 -- earn 4/10 of
_~ more than before for the remaining period to next maturity.
_esser improvement in yields if bonds are redeemed earlier.
There will be
The increase will
Je on a graduated scale, starting with the first interest period of
10re which begins on or after D=cember 1, 1965.
5 months or
There is no retroactive increase
n interest rates for periods prior to December 1, 1965.
l-
Interest rates on bonds entering a new extension period beginning December 1,
-965:
a)
Unmatured E bonds:
1)
Issued April 1956 through April 1957 (which had not reached maturity before December 1, 1965) on which a 3-3/4% lO-year extension had already
been promised and those issued May 1957 thr01l3h May 1959 on which a 10year extension had been promised, will earn interest at an annual rate of
about 4.15% for each half year period of holding to extended maturity.
2)
Issued beginning with June 1959 have already been promised a 10-year
extension privilege.
Interest rates and other terms and conditions
will be determined as they approach maturity.
b)
Matured E bonds, issued' December 1945 through May 1949 (which had not
reached first extended maturity before December 1, 1965) on which a 3-3/4
%
second la-year extension had already been promised will now earn interest
at an annual rate of about 4.15% for each half year period of holding to
second extended maturity.
c)
Unmatured H bonds, issued April 1956 through January 1957 (which had not
reached maturity before D=cember 1, 1965) on which a 3-3/4% 10-year extension had already been promised will earn interest at an annual rate of
about 4.15% for each half year period of holding to extended maturity.
UNITED STATES SA VINGS BONDS - SERIES E
TABLE OF REDEMPTION VALUES AND INVES'JMENT YIELDS
FOR BONDS BEARING ISSUE DATES BEGINNING DECEMBER 1, 1965
Table showing: (1) How bonds of Series E bearing issue dates beginning December 1, 1965, by denominations, increase
in redemption value during successive half-year periods following issue; (2) the approximate investment yield on the purchase price from issue date to the beginning of each half-year period; and (3) the approximate investment yield on the
current redemption value from the beginning of each half-year period to maturity. Yields are expressed in terms of rate
percent per annum, compounded semiannually.
:
:
:
:
:
:
:
:
: Approximate Investment Yield
Maturity Value ..... :$25.00 :$50.00 :$75.00 :$100.00 :$200.00 :$500.00 :$1,000.00 :$10,000 :
Issue Price ...•.. '. : 18.75 37.50: 56.25: 75.00: 150.00 : 375·00:
750.00: 7,500 :(2) On pur~hase:(3) On current
: price from is-: redemption
: sue date to be-: value from bePeriOd after
(1) Redemption values during each half-year period
:ginning of each:ginning of each
issue date
(Values increase on first day of period shown)
:ha1f-year period
half-year
to maturity
:gerj,Qd
Percent
Percent
First 1/2 year ...•. $18.75 $37.50 $56.25 $ 75·00 $150.00 $375.00 $ 750.00 $ 7,500
0.00
4.15 *
1/2 to 1 year ......
18.96 37.92 56.88
2.24
4.30
75.84 151.68 379.20
758.40
7,584
1 to 1-1/2 years ...
19.32 38.64
77.28 154.56 386.40
772.80
4.34
57.96
3.02
7,728
1-1/2 to 2 years .•.
78.80 157.60 394.00
19.70 39.40 59.10
788.00
7,880
4.38
3·32
2 to 2-1/2 years ...
80.40 160.80 402.00
20.10 LO.20 60.30
804.00
4.41
8,040
3· 51
2-1/2 to 3 years ...
20.52 41.04 61.56
82.08 164.16 410.40
820.80
4.44
8,208
3.64
20.96 41. 92 62.88
3 to 3-1/2 years ...
8
4.46
83.84 167.68 419.20
838.40
8,3 4
3.75
21.42 42.84 64.26
3-1/2 to 4 years ...
856.80
4.46
85.68 171. 36 428.40
8,568
3.84
4 to 4-1/2 years ...
21.89 43.78 65.67
4.48
875.60
87.56 175·12 437.80
8,756
3.91
4-1/2 to 5 years ...
22.37 44.74 67.11
89.48 178.96 447.40
894.80
8,948
4.50
3.96
5 to 5-1/2 years ... 22.86 45.72 68.58
182.88
4.00
914.40
9,144
91.44
457.20
4.52
5-1/2 to 6 years ...
4.04
23.36 46.72 70.08
934.40
93.44 186.88 467.20
9,3 44
4·57
6 to 6-1/2 years .•.
23.88 47.76 71. 64
4.07
4.64
9,552
955·20
95·52 191. 04 477.60
24.42 48.84 73.26
6-1/2 to 7 years .•.
4.11
97.68 195.36 488.40
976.80
9,768
4.75
MA TURITY VALUE
(7 years from
issue date) ....
$25.00 $50.00 $75.00 $100.00 $200.00 $500.00 $1,000.00 $10,000
4.15
*
Approximate investment yield for entire period from issuance to maturity.
UNITED STATES SA TINGS BONDS - SERIES H
TABLE OF CHECKS ISSUED AND INVES'Jl!IENT YIELDS
FOR BONDS BEARING ISSUE DATES BEGINNING DECEMBER 1,
1965
Table shoyring: (1) Amount of interest checks paid on United states Savings Bonds of Series H bearing issue dates
beginning December 1, 1965, by denominations, on each interest payment date following issue; (2) the approximate investment yield on the face value from issue date to each interest payment date; and (3) the approximate investment yield on
the face value from each interest payment date to maturity. Yields are expressed in terms of rate percent per annum,
compounded semiannually.
$500
$1,000
$5,000
$10,000
500
1,000
5,000
10,000
500
1,000
5,000
10,000
(1) Amount of interest check for each
denomination
{Maturity Value
Face Value (Redemption Value 1/
(Issue Price
Period of time bond is held
after issue date
1/2 year .........................
1 year ..........................
1-1/2 years ..............
2 years ......... , ........ , .. , ...
2-1/2 years .....................
3 years., ................
t
••••••
0
••••••
3-1/2 years .....................
4 years ........................ ,
4-1/2 years .....................
5 years ........ , .................
5-1/2 years ... , ..... , ...........
6 years .........................
6-1/2 years ....................•
7 years ..........................
7 -1/2 years .....................
8 years .......................... , ...
8-1/2 years ....•................
9 years .............................
9-1/2 years .....................
10 years (maturity) .. ..........•
$
5.5 0
9·70
10.75
10.75
10.75
10.75
10.75
10.75
10.75
10.75
10.75
10.75
10·75
10.75
10.75
10.75
10.75
10.75
10.75
10.75
311.00
19.40
21.50
21.50
21.50
21. 50
21.50
21. 50
21.50
21.50
21. 50
21.50
21.50
21.50
21.50
21. 50
21.50
21.50
21.50
21.50
$ ::5·00
97·00
107·50
107.50
107·50
107·50
107·50
107·50
107·50
107·50
107·50
107.50
107·50
107.50
107·50
107·50
107·50
107.50
107·50
107·50
$110.00
194.00
215·00
215.00
215·00
215·00
215.00
215.00
215·00
215·00
215.00
215.00
215.00
215.00
215.00
215.00
215·00
215.00
215.00
215·00
Approximate Investment Yield
on Face Value
~2~ From issue : (3) From each
:. at etta each t :interest payment
ln eres paymen
.
/
date
:date ~o maturlty 2
:
Percent-- - Percent
2.20
4.27
4.30
3.03
3.45
4.30
3.65
4.30
3.78
4.30
3·86
4.30
3.92
4.30
3.96
4.30
4.00
4.30
4.30
4.03
4.30
4.05
4.07
4.30
4.08
4.30
4.10
4.30
4.11
4.30
4.12
4.30
4.13
4.30
4.13
4.30
4.14
4.30
4.15
!I
At all times, except that bond is not redeemable during first 6 months.
gj
Approximate investment yield for entire period from issuance to maturity is 4.15 percent per annum.
sale or other disposition of Treasury bills does not have any spec1al treatment, ..
Buch, under the Intemal Revenue Code of 1954.
The bills are subject to estate,
1nher1tance, g1rt or other exeise taxes, whether Federal or State, but are exempt
all taxation nov or hereafter imposed on the
pr1~cipal
~
or interest thereot b'.QJ BIll
or any ot the possessions ot the United States, or by any local tax1ng autborit7. _
purposes at taxation the amount ot discount at which Treasury b1lls are or1g1DaJ.q ..
b7 the Un1ted States 1s considered to be interest.
Under SectioDs 454 (b) and 1221 •
at the Internal Revenue Code ot 1954 the amount ot discount at which bill. ilsued"
under are sold 1s not considered to accrue until such bills are sold, redeemed or otII
vise disposed
ot, and such bills are excluded from consideration as capital ....t ••
Accordingly, the owner of Treasury bills (other than 11te 1nsurance cOJllP8D.ies) 11_
hereunder need include in his income tax returD only the difference betweea the price
paid tor such b1lls, whether on or1ginal 1ssue or on Bubsequent purchase, and the lilt
actually received either upon sale or redemption at maturity during the taxable 711'
for wh1ch the retum 18 made, as ordinary gain or
10S8.
Treasury Department C1rcular flo. 418 (current revision) and this notice, prelcl'I
the terms of the Treasury bills and govern the cond1tions
ot their issue. Copies of
the circular may be obtained from any Federal Reserve Bank or Branch.
- 2 1"'\1"'1.
printed forms and forwarded in the special envelopes Which will be suppl1ed
b7 "-
Reserve Banks or Branches on application therefor.
Banking institutions generally may submit tenders :for account of customer. pro.
others than ~
vided the names ot the customers are set torth in such tenders.
institutions will not be pe:nnitted to submit tenders except tor their own accO\ld.
Tenders will be received without deposit from incorporated banks and trust
and from responsible and recognized dealers in investment securities.
c~
!enderl tnI
others must be accompanied by payment of 2 percent of the face amount ot TreaSU1'J_
applied tor, unless the tenders are accompanied by an express guaranty of payment 1{
an incorporated bank or trust company.
Immediately a:t'ter the closing hour, tenders will be opened at the Federal BtA
Banks and Branches, following which public anouncement will be made by the TreaI1U'1
Department ot the amount and price range of accepted bids.
will be advised ot the acceptance or rejection thereof.
Those submitt1nS teDde.
The Secretary ot the !'NUl
expressly reserves the right to accept or reject any or all tenders, in whole or 11
part, and his action in any such respect shall be final.
Subject to these realm-
tions, noncompetitive tenders for each issue for $200,000 or less without
Bta~
price from any one bidder will be accepted in full at the average price (in three
decimals) of accepted competitive bids tor the respective issues.
Settlement tor
accepted tenders in accordance with the bids' must be made or completed at the ,...
Reserve Bank on
February 24, 1966
«WC
, in cash or other innnediately available fill
or in a like face amount of Treasury b1lls maturing
and exchange tenders will receive equal treatment.
February 24, 1966
• cal
~
Cash adjustments will be madI j
diff'erences between the par value of maturing bills accepted in exchange and tile UI
price ot the new bills.
The income derived trom Treasury b1lls, wbether interest or gain frca the III
other disposition of' the bills, does not have any exemption,
8S
Buch, and
10.' til
TREASURY Ci:::PARTMENT
FOR IMMED IA TE 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
$2,300,000,000,or thereabouts, for cash and in exchange for
Treasury bills maturing February 24,1966, in the amount of
$2,200,856,boo, as follows:
91-day bills (to maturity date) to be issued February 24,1966,
in the amount of $ 1,600,000,000, or thereabouts) representing an
additional amount of bills dated November 26,1905, and to
mature May 26, 1966,
originally issued in the amount of
$1,001,322,000, the additional and original bills to be freely
interchangeable.
182-day bills, for $1,000,000,000, or thereabouts, to be dated
February 24,1966, and to mature August 25, 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 1n bearer form only, and in denominations of $1,000,
$5,000, $10,000, $50,000,
$100,000, $500,000 and $1,000,000
(maturi ty value).
Tenders will be received at Federal Reserve Banks and Branches
one-thirty p.m., Eastern Standard
time, Monday, February 21, 1966.
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 orrered must be expressed on the basis or 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 thereforb
up to the clOSing hour,
Banking institutions generally may submit tenders Cor 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 Cram incorporated banks and trust companies and from
responsible and recognized dealers in investment securities. Tenders
from others must be accompanied by payment of 2 percent of the face
amount or Treasury bills applied for, unless the tenders are
accompanied by an express guaranty of payment by an incorporated bank
or trust company.
F-382
TREASURY DEPAR'lMENT
Washington
February 16, 11
FOR IMMEDIATE RELEASE,
JIlSBBBBBBBBBa~8~~WEEKLY BILL OFFERING
'!'be Treasury Department, by this public notice, invites tenders tor two aer1et
ot Treasury bills to the aggregate amount of $ 2z300~OO,OOO , or thereabouts, tor
Feb~4:,
cash and in exchange for Treasury bills maturing
1966 ~ in the __
ot $ 2,200,856,000, as follows:
Ifa
Feb~24,
91 -day bills (to maturity date) to be issued
~
in the amount ot $1J300~aOOO
,
, or thereabouts, represent-
ing an additional amount of bills dated
and to mature
amount of
M
I
November~
, originally issued
May 26, 1966
$l,OO~,ooo
1968 ,
1965 "
in the
the additional and original billa
to be freely interchangeable.
182 -day bills, for
XfdiU
$ 1,003.?J90,OOO, or thereabouts, to be dated
~
_F_eb_ruary_~....2,....4...::,,--1_96_6_, and
~
to mature
AUS\!st~1966
~
•
The bills of both series will be issued on a discount basis under c~itlft
and noncompetitive bidding as hereinafter provided, and at maturity their face . .
will be payable without interest.
They will· be issued in bearer torm only, 8Il4 Sa
denominations ot $1,000, $5,000, $10,000, $50,000, $100,000, $500,000 and $1,000,1
(maturity value).
Tenders will be received at Federal Reserve Banks and Branches up to the clGltl
hour, one-thirty p.m., Eastern Standard time , Monday, February 21, 1966
_.l1li
~
will not be received at the Treasury Department, Washington.
Each tender IlUIt 111
for an even lDllltiple of $1,000, and in the case of competitIve tenders the p:ddl
offered must be expressed on the basis of 100, with not more than three decDlllt
e. g., 99.925.
Fractions may not be used.
It 1s urged that tenders be macJ.e
OD
til
TREASURY
C~PARTMENT
,
/
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
$2,300,OOO,OOO,or thereabouts, for cash and in exchange for
Treasury bills maturing February 24,1966, in the amount of
$2,200,856,boo, as follows:
91-day bills (to maturity date) to be issued February 24,1966,
in the amount of $ 1,600,000,000, or thereabouts, representing an
additional amount of bills dated November 26,1965, and to
mature May 26, 1966,
originally issued in the amount of
$1,OOl,322,OOO, the additional and original bills to be freely
interchangeable.
l82-day bills, for $1,000,000,000, or thereabouts, to be dated
February 24,1966, and to mature August 25, 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 rorm 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, February 21, 1966.
Tenders will not be
received at the Treasury De~artment, Washington. Each tender must
be for an even multiple of $1,000, and 1n the case of competitive
tenders the price orrered must be expressed on the basis of 100,
with not more than three decimals, e. g., 99.925. Fractions may not
be used. It 1s urged that tenders be made on the printed forms and
forwarded 1n the special envelopes which will be supplied by Federal
Reserve Banks or Branches on application therefor.
Banking institutions generally may submit tenders ror account of
customers provided the names of the customers are set forth in such
tenders. Others than banking institutions will not be permitted to
submit tenders except for their own account. Tenders will be received
without deposit from incorporated banks and trust companies and from
responsible and recognized dealers in investment securities. Tenders
from others Inust be accompanied by payment of 2 percent of the face
amount of Treasury bills applied for, unless the tenders are
accompanied by an express guaranty of payment by an incorporated bank
or trust company.
F-382
TREASURY DEPAR'lMENT
Washington
Februarr 18, _
FOR IMMEDIATE RELEASE,
JU8SBBBBBBBae~B~WEEKLY BILL OFFERING
The Treasury Department, by this public notice, invites tenders for two aer1et
ot Treasury bills to the aggregate amount of $ 2,300~O,OOO
cash and in exchange for Treasury bills maturing
of
J
or thereabouts, tor
Feb~4, 1966 ~ in the 8IIIOUDl
$ 2,200,856,000, as follows:
Cia
91 -day bills (to maturity date) to be issued
Gii)C
Feb~24! 1966 ,
in the amount of $lz~OO~zOOO , or thereabouts, represent-
ing an additional amount of bills dated
and to mature
May 26, 1966
M
amount of $ 1,OO~,ooo
,
November~
1965
I'
, originally issued 1n the
the additional and original bills
to be freely interchangeable.
182 -day bills, for
~
$ 1,000,000,000, or thereabouts, to be dated
Odi#
-
_F_e_b_ruary~-=-=T2_4..;.,_l9_6_6_,
and to mature
Allg1-!:str.v1966
•
xe&i)C
~
The bills of both series will be issued on a discount bas1s under compet1t1ft
and noncompetitive bidding as hereinafter provided, and at maturity their face I11III
will be payable without interest.
They will· be issued in bearer form only, 1114 ill
denominations ot $1,000, $5,000, $10,000,' $50,000, $100,000, $500,000 and $1,000,1
(maturity value).
Tenders will be received at Federal Reserve Banks and Branches up to the clOI8
hour, one-thirty p.m., Eastern Standard time, Monday, February 21, 1966
~
will not be received at the Treasury Department, Washington.
.·11
Each tender JDUd 111
for an even multiple of $1,000, and in the case of competitive tenders the pr10I
orrered must be expressed on the basis of 100, with not more than three deC~
e. 8., 99.925.
Fractions may not be used.
It is urged that tenders be made
GIl
d
- 2 -
Immediately after the closing hour, tenders will be opened at ~
Federal Reserve Banks and Branches, following which public announcement will be made by the· Treasury Department of the amount and price
range of accepted bids. Those submitting tenders will be advised
of the acceptance or rejection thereof. The Secretary of the TreasU!
express ly reserves the right to accept or rejec t any or all tenders,
in whole or in part, and his action in any such respect shall be
final. Subject to these reservations, noncompetitive tenders for
each issue for $200,000 or less without stated price from anyone
bidder will be accepted in full at the average price (in three
decimals) of accepted competitive bids for the respective issues.
Settlemertt for accepted tenders in accordance with the bids must be
made or completed at the Federal Reserve Bank on February 24,1966, b
cash or other immediately available funds or in a like face amount
of Treasury bills maturing February 24, 1966. Cash and exchange tende
will receive equal treatment. Cash adjustments will be made for
differences between the par value of maturing bills accepted in
exchange and the issue price of the new bills.
The income derived from Treasury bills, whether interest or
gain from the sale or other disposition of the bills, does not have
any exemption, as such, and loss from the sale or other disposition
of Treasury bills does not have any special treatment, as such,
under the Internal Revenue Code of 1954. The bills are subject to
estate, inheritance, gift or other excise taxes, whether Federal ~
State, but are exempt from all taxation now or hereafter imposed on
the principal or interest thereof by any State, or any of the
possessions of the United States, or by any local taxing authority.
For purposes of taxation the amount of discount at which Treasury
bills are originally sold by the United States is considered to be
interest. Under Sections 454 (b) and 1221 (5) of the Internal
Revenue Code of 1954 the amount of discount at which bills issued
hereunder are sold is not cons idered to accrue until such bills are
sold, redeemed or otherwise disposed of, and such bi lIs are excluded
from consideration as capital assets. Accordingly, the owner of
Treasury bills (other than life insurance companies) issued hereunder
need include in his income tax return only the difference between
the price paid for such bills, whether on original issue or on
subsequent purchase, and the amount actually received either upon
sale or redemption at maturity during the taxable year for which t~
return is made, as ordinary gain or loss.
Treasury Department Circular No. 418 (current revision) and ~~
notice prescribe the terms of the Treasury bills and govern the
conditions of their issue. Copies of the circular may be obtained f1
any Federal Reserve Bank or Branch.
000
-
2 -
nking insti tutiono will not be permI i~'Led to submIt tenders except :for their own
COlUlt.
Tenders ,.nll be received vr}. thout dcpos:i.t :from
ineorporat~d
banks and
llst companies and from responsible and recognized dealers in investment securities.
ndcrs :from others must be accompanfed by pa,')'1nent of' 2 percent of the face amount
. Treasury bills applied for, unless the tenders are accompanied by an express
o.ranty of payment by an incorporated bank or trust company.
Immediately after the closing hour ~ tenders, wil.l he opened at the Federal Re ...
rve
Bo.nl(S
and Branches., f'ollm·,-tJl(3 \[h1ch public announcement '\rill be made by the
casury Department
<Dr
th
omount and price range o_f accepted bids.
'I'hose Gubrni t-
ng tenders \-rill be advised of' the acceptance or rc 112cLion thereof.
The Secretary
the rrreasury Ca'1)resnly- reserves ·the riGht to nccc-pt or reject any or all tenders,
vThole or in part, and his action in ·any such respect shall. be final.
these reservations, noncompetitive tenders for $ 200,000
omo
Subject
or less without
ated price from any one bidder will be accepted in rull at the average price (in
ree decimals) of accepted competitive bids.
Settlement f'or acc.epted tendc'rs in
cordance l-r.i:t.h the bids must be made or completed at the Federal Reserve Bank Dn
oruary 28, 1966
, in cash or other immediately available funds or in a like
-~orn==:T-)- - - ce amotUlt of' Treasury bills maturinc February 28, 1-966
• Cash and exchange
tJCK)
nders 'lorill receive equal treatment.
ces between the par valUe of' maturine
Cash adjustments will be made
biJ~s
accepted in exchange
-POI'
ana
<itii'fer--
~he
i p ,8ue
ce of the ne", bi lls •
The income derived from TrectGury billn, vmether inte-rest or gain from the sale
other disposition of' the bills, does not have any excmpJ~ion, at::l. such) and loss
:>JIl
the sale or other disposi tioh of Treasury bills does not have any special
~E~tment, as such, under the Internal Revenue Code of 1954.
The bills are subject
estate, inheri-bance, girt or other cxc-ise taxes, \-rhether Federal or state, but
- :5 ..
304
t.tl'(~
exemp L from 0.11 truw:tion now or hcreai't.cr :Lmposcd on the principal or 1ntere
Lhereof by My state, or any of the p030essions of the United States, or by 8Jl7
loct::d. tnx:tnr:
flU Lhorlty •
For purponco of tnxnt:l.on t.he amount.
01'
cliscount at whiel
'llreo.Gury 'hills nrc origInnlly Gold by the United states is considered to be interest.
Und.er Sections 4:54, (b) and 1221 (5) of the Internal Revenue Code of 18
the omount of' discount at ,·Thieh bIlls :I.saued hereunder are sold 1s not cons1derej
1..0 accrue W1til such billn arc Gold, redeemed or otherwise disposed of I and suc!J
billa nl'(,
c}~clttdcd
from comd(i(>rn.'liton nn cP.p t tvJ.
ft •.H1ete.
Accordingly, the owner
01' 'l'rcoGul'Y b:i..LI.s (ot.hcr "Llw.n l'L'i'e JnGlu'unec companieo) issued hereunder need
m
elude In hiG income tax return only the difference betwe€n the price paid for SUI
billa, ",hethcr on or1c;:lno.l .tnnue or on rmbfJequcnt ptlrchase, a.nd the amount actus
l'ac~.I.ved
either upon eBle or redempt,lon a.t mn.tur1ty dur:f·na the taxable year for
\o,hieh the l'e"turrl is mru1<=l, n,f) orrHno.ry entl1 or lmso.
'l'l'Cn.Dury Dopnrtmell·t C:l.rc:ula.r No. 418 (currcn'b x'cvis1on) Md this notice, ~
$cribc the ternlD 01' 'tho Trern.oury bills and govern tho cond1 tions of their issue.
Cop:Les of the circular
~ b~
obtained. from any Federal Reserve Dank or Branch.
- 2 -
nking insti tutiono will not be pennl t'Led to subntl t tenders except
COWlt.
1'01'
their own
Tone.. ~rs 1rill be received vrJ thout deposit f'rom incorporated banks and
ust companies and from responsible and recognized dealers in investment securities.
ndcrs from oth
~rs
must be accompanied by pa;yment of' 2 percent of' the f'ace amoWlt
Treasury 1>ilJ_...; applied for, unless the tenders are accompanied by an express
o.ranty of payment by an incorporated bank or trust company.
ImmediatE,!l.y after theclQSing hour? tenders, wIll be opened at the Federal RerYe Bonks and Bronches"
f'ollm.,inc; lThich IRtblic ann01.ll1cement. will be made by the
zasury Department 0f the omount· and price range of' 'accepted bids.
ng tenders "rill be advised of' ,the acceptance or, rejec'Lion thereof'.
'I'hose submi tThe Secretary
the rrreasury cA'})resoly reserves the riGht to accept or reject any or all tenders,
"Thole or in part, and his action in ,any ouch respect shall be fina].
these reservations, noncompetitive tenders for ~ 200~OOO
omo
Subject
or Ie G-S without
lted price from any one bidder lrrlll be a-cccptcd in full at the average price (in
ree decimals) of o:ccepted competitive bids.
::ordance
'\o~th
Settlement for accepted tenders in
'the bids must be made or compJetcd at the Federal Reserve Banl.. -on
ruar.r 28, 1966
, i n cash or' other illDnediately available funds or in a like
«U)
!c amount of Treasury bills mnturineFebruary ,28, 1,966
Cash and exchange
bi)
lders vTill receiVe equal treatment.
Cach adjustments will be made :for <itii'fer-
:es between the par "IfD,lue of maturing biJ~s accepted in, exchange and, the issue
ce of the ne,\-, bills.
The income derived from Treasury biJ_ls, Vlhether interest or g{lin from the sale
other disposition of' the bills, does not have any cxemption.1 as such, and loss
lU
the sale or other disposi ti.oh of Treasury .bills does not have '1¥lY special
atment, as such, under the Internal Revenue Code of 1954.
The bills are subject
estate, inheritance, gi:ft or other exc,ise taxes, vThether Federal or state, but
-
:::> -
304
ure exempL from all tD..Xntion now or hereafter :tmposcd on the principal or 1nter.
t..hcrcof by rulY Sto,te, or any of the posoessions or the United States, or by 819
locn.l. tuxJnr; tluLhorlt.y.
For purpooco of to.J{o.t:l.on
l~he
amoWlt of' discount at
vb1"
'l'reo.vllry lJills nrc origlno.lly Gold by the United States is considered to be 1n-
terest.
Under ScctIons 454, (b) and 1221 (5) of the Internal Revenue Code of
111
the omount of discount at \·lhlch billn :I.ssucd hereunder are sold is not cons1dere
1.0 a.ccrue Wltil such bill~ arc cold, redeemed or otherwise disposed of, and suell
bills nl'(,
01'
c)~cJ.t\(kll
from conFJiCkrn:t.i.on l1.n ct',pl t.tl.l n,wcto.
'l'rco.ouI'Y b:UJ.s (other -LImn l'i'i'c~
:f,l1OlU'Unec
A(!cordlng~,
the ower
cornpanieo) issued hereunder need 111
elude j.n hiD income tax return only t.he difference between the pr1ce paid :for
billa, ",hethcr on orlc:lno.l
l'CCC .I.ved
.trlr;u(o~
81
or on nnbn0t],ucnt pl.lTchnoe, and the amount acttl
el thcr upon an.le or rcdemptl.on at mC:l.tur1 ty dur:f.na the taxa.ble year for
'\-rh:lch tho return if] mo.de,
'l.fl
o):'cll.no.ry en1.n or loss.
'l'l'ensur,y Dcl'nrtll1el1l.i Ci.rcular No. oi18 (curran-b ;revision) and this notioe, p
scribe the termo 01' ·the Treasury bills ond Bovern the cond1 tiona of their IBM
Copies of the circular may be obtained from any Federa.l Reserve Bank or Branch.
TREASURY DEPARTMENT
)R
February 16, 1966
IMMEDIATE RELEASE
TREASURY REFUNDS ONE-YEAR BILLS
The Treasury Department, by this public notice, invites tenders
r $1,000,000,000, or thereabouts, of 365-day Treasury bills, for cash
d in exchange for Treasruy bills maturing February 28, 1966, in the
aunt of $1,000,705,000, to be issued on a discount basis under COIDtitive and noncompetitive bidding as hereinafter provided. The bills
this series will be dated February 28, 1966, and will mature
bruary 28, 1967, when the face amount will be payable without interesto
ey will be issued in bearer form only, and in denominations of $1,000,
,000, $10,000, $50,000, $100,000, $500,000 and $1,000,000 (maturity
lue)
a
Tenders will be received at Federal Reserve Banks and Branches up
- the closing hour, one-thirty p.rn
Eastern Standard time, Wednesday,
bruary 23, 19660 Tenders will not be received at the Treasury Departnt, Washingtono
Each tender must be for an even mUltiple of $1,000,
d in the case of competitive tenders the price offered must be exessed on the basis of 100, with not more than three decimals, eoge,
.925. Fractions may not be usedo
(Notwithstanding the fact that
ese bills will run for 365 days, the discount rate will be computed
a bank discount basis of 360 days, as is currently the practice on
1 issues of Treasury billso) It is urged that tenders be made on the
inted forms and forwarded in the special envelopes which will be
pplied by Federal Reserve Banks or Branches on application therefor.
o
,
Banking institutions generally may submit tenders for account of
stomers provided the names of the customers are set forth in such
nders. Others than banking institutions will not be permitted to
)mit tenders except for their own accounto Tenders will be received
thout deposit from incorporated banks and trust companies and from
sponsible and recognized dealers in investment securitieso Tenders
Jm others must be accompanied by payment of 2 percent of the face
Junt of Treasury bills applied for, unless the tenders are accompanied
an express guaranty of payment by an incorporated bank or trust
o.pany
0
·383
,~
", " , '.
'
..
TREASURY DEPARTMENT
Washington
FOR
I~-1MEDIATE
RELEASE,
Februa17 16, 1966
TRBASURY BEFUJIDS OlfE-YEAR BILLS
The Treasury Department, by this public notice, invites tenders for
$
1,000,000,000
W4
, or the:reabouts, of
in exchange for Treasury bills maturing
of $ 1,OO~705,OOO
(
)
365
(iJO
-de¥
bills, for cash an!
_F_e_b_ru_a_17~2_8p,_1_96_6
_ _ _ _,
in the amotI
~
, to be issued on a discount basis under competitive
noncompetitive bidding as hereinafter provided.
February 28, 1966
dated
Tr~asury
The bills of this series will b
, and. will mature February 28, 1967
6tiJ
(j()
the face amount will be payable without interest.
mm
, when
They will be issued in beartl
form only, and in denominations of $1,000, $5,000, $10,000, $50,000, $100,0001
$500,000 and $1, 000, 000 (maturity value).
Tenders will be received at Federal Reserve. Banks and Branches up to the
closing ho\U", one-thirty p.m., Eastern Standard time, Wednesd!l, J'eb1'U8l'l 23,J
Tenders will not be received at the Treasury
Dep~rtment,
Cit)
Washington.
Each te-'
must be for an even multiple of $1,000, and in the case of competitive tendersti
price offered must be expressed on the basis of laO, with not more than three,
1mals, e. g., 99.925.
Fractions may not be used.
these bills vill run for 365
AA
(Notwithstanding the fact.
days, the discount rate will be computed on
a,)
di~t
basis of' 360 days, as is current~ the practice on all issues of Tre8I
bills.)
It is urged tbat tenders be made on the printed ~orms and to~U
the ~cial enveloPes which will be supplied by Federal Reserve Banks or
BraJlCbII
on application therefor.
Banking institutions general~ may submit tenders for account of cus~
provided t.he names of the customers are set forth in such tenders.
Others tM
- 2 Irrunediately after the closing hour, tenders will be opened at the
Federal Reserve Banks and Branches, following which public announC~eDt
will be made by the Treasury Department of the amount and price range
of accepted bids o Those submitting tenders will be advised of the
acceptance or rej ection thereof. The Secretary of the Treasury expresal
reserves the right to accept or reject any or all tenders, in whole or
in part, and his action in any such respect shall be final. Subject
to these reservations, noncompetitive tenders for $200,000 or less wi~
out stated price from anyone bidder will be accepted in full at the
average price (in three decimals) of accepted competitive bids. Settlement for accepted tenders in accordance with the bids must be made or
completed at the Federal Reserve Bank on February 28, 1966, in cash or
other immediately available funds or in a like face amount of Treasury
bills maturing February 28, 1966. Cash and exchange tenders will receive equal treatment
Cash adjustments will be made for differences
between the par value of maturing bills accepted in exchange and the
issue price of the new bills.
0
The income derived from Treasury bills, whether interest or gain
from the sale or other disposition of the bills, does not have any exemption, as such, and loss from the sale or other disposition of Treasua
bills does not have any special treatment, as such, under the Internal
Revenue Code of 19540 The bills are subject to estate, inheritance,
gift or other excise taxes, whether Federal or State, but are exempt
from all taxation now or hereafter imposed on the principal or interest
thereof by any State, or any of the possessions of the United States, ~
by any local taxing authority
For purposes of taxation the amount of
discount at which Treasury bills are originally sold by the United St~
is considered to be interest
Under Sections 454 (b) and 1221 (5) of
the Internal Revenue Code of 1954 the amount of discount at which bilb
issued hereunder are sold is not considered to accrue until such bills
are sold, redeemed or otherwise disposed of, and such bills are exch~
from consideration as capital assetso Accordingly, the owner of Trea~
bills (other than life insurance companies) issued hereunder need inclUl
in his income tax return only the difference between the price paid fOl
such bills, whether on original issue or on subsequent purchase, and~
amount actually received either upon sale or redemption at maturity
during the taxable year for which the return is made, as ordinary ga~
or loss.
0
Q
Treasury Department Circular No 418 (current revision) and this
notice, prescribe the terms of the Treasury bills and govern the con"
ditions of their issue. Copies of the circular may be obtained fr~
any Federal Reserve Bank or Branch
0
0
000
-"
- 15 -
\
over prices and wages."
In one area, certainly, we can join forces very
effectively in pursuit of responsible restraint -- and
that area is our Savings Bond program, where we are now
/
ready to move ahead at full steam, our efforts invigorated,
,-----~
~ .-~ew
·;-er
r~~-~~~:
._-1
---
•
S=V'~b& cha~
~
will all agree, nQt
~--.
to the m
the pur
asers
C4.-
,
~
change is ti
light
avings, and thus g ve maximum su
national purposes.
In this 25th Anniversary Year campaign, I know that we
can count on the full support of all of you to keep our
economic ship on a steady keel.
In leading the industrial
payroll savings campaign in this key area of the country, you
are performing a service of extraordinary value, and I know
that it will be well done.
- 14 For further improvement this year we look particularly
to the trade sector, where certain adverse factors last
year should not be operative in 1966, to a reduction in
direct investment outflows in line with the more restrictive
guidelines set last December, and to continuing increases
in our investment income as a result of past investmepts
abroad.
Certainly in the trade area, success will depend in good
measure on how well we can contain price and cost pressures
at home, both to maintain the competitive position of our
exports and to ensure that domestic products are available
in competition with the growing volume' of imports.
Conclusion
As you can see, this brief excursion into the
internatio~
payments area soon brings us back, full circle, to the
domestic economy and to the high-priority need for charting
a course of noninflationary growth at home.
This is a matter that embraces every area of economic
decision-making, both in and out of government.
For as the
President observed in his Economic Message, " ••• the extent
•
of the fiscal or monetary restraint that will be needed to
avoid inflationary pressures will depend directly on the
restraint and moderation exercised by those who have power·
- 13 -
On the other side, a part of these large gains was
offset, particularly because our favorable trade balance
shrank by nearly $1.9 billion as imports rose considerably
more than exports.
Direct investment outflows also increased
for the year as a whole, although there was a marked improvement after mid-year, when the voluntary program in this area
began to take hold.
For this year, 1966, our goal is to close the payments
gap the rest of the way.
This might seem an easy task, aftu
having succeeded in cutting the deficit back by better than
50% from 1964 to 1965, but we do not regard the job
any complacency.
with
We recognize, for example, that some of
last year's gain, such as the repatriation of corporate
short-term balances, was one-shot in nature and we could not
look to a repeat performance.
Nor can we reasonably expect
the banking sector to show another improvement of $2-1/2
billion, although we certainly expect the voluntary program
to check any re-emergence of a sharp outflow of bank funds.
In addition, we may experience some greater outflow on
account of the balance of payments impact: of our military
and aid programs in Southeast Asia.
- 12 -
Balance of Payments Progress
Before concluding these remarks a few words should be
said about our balance of international payments, for in this
area, too, policies aimed at price and cost stability, and
noninflationary growth, are essential to achieving national
objectives.
Last year, the United States made decisive progress
achieving a balanced payments position.
t~ard
Our deficitJ' on the
over all, or liquidity, accounting basis was cut more than
50% from the level of recent years to just $1.3 billion in
the calendar year 1965.
In large measure the improvement last year is traceable
to the program of voluntary restraint called for by the
President just a little over a year ago -- in his Balance of
payments Message of February 10, 1965.
Most impressively,
instead of an outflow of long- and short-term bank credit
which reached the high leva of $2.5 billion in 1964, there
was a small inflow to the banks in 1965.
And, Similarly,
in the area of nonbank capital flows (excluding direct invesad
abroad) we shifted from a net outflow of some $900 million b
1964 to an inflow of perhaps $300 million in 1965.
Much of
this swing reflected the repatriation of'ahort-term corporate
funds, also under the guidance of the voluntary program.
- 11 -
Thus even when the debt manager is in the fortunate
position of looking forward to a reduced need for placing
debt in the hands of the public, he can still feel some
qualms about the large volume of marketable debt that comes
due each week in the case of Treasury bills, or in each
quarterly refunding in the case of coupon-bearing issues.
It is at such times that the debt manager can contemplate
wi~
particular pleasure the $49 billion of publicly held debt that
is in the form of U. S. Savings Bonds.
It is no small comfort to recall that fully 23% of the
publicly held Treasury debt is in the form of Savings Bonds,
and that this proportion has tended to
gr~
over the years.
Some twenty years ago, shortly after the end of World War
It~
Savings Bonds comprised about 15% of the publicly held debt.
In the intervening two decades, the value of Savings Bonds
outstanding has grown by about $19 billion, while the amount
of other Treasury debt in the hands of the public has declined
by some $6 billion.
Little wonder, then, that we are
concem~
about sustaining and improving the Savings Bond program as an
aid to debt management as well as in the broad context of
economic stabilization.
- 10 -
greater decline than in the current fiscal year in the volume
of Treasury debt in the hands of the public.
Indeed, even
after allowing for the increased sale of Federal financial
assets both this fiscal year and next
sales that have been
()n~ ,--.jJrW~ -fW lM /'19~~
IIJ~
_
gradually expanded ~arting under th@ E.ienh~ier *~m1n1stra~t
~ p40. __ l'-I1_~_ _!~ ._~!!!_J~ __~~~_!__ -:;
(Tn order to aevelop increased private participation in Federal
credit programs -- the Federal Government's net financing
demand on the private economy will be minimal.
And in fiscal
1967 the credit market role of Government, including in this
the Federal Reserve System, would actually work out to be one
of supplying funds to the private economy.
Let me hasten to add that all of this does not leave the
debt manager with as easy a task as one might suppose.
For
we must, this year and probably next fiscal year, too, meet
very keen competition for loanable funds from the private
sector.
It is this kind of competition that has moved interest
rates into new high ground for recent years, even while the
Treasury's own credit demands have remained on the moda:ateside.
To cite just one area, bank loans were up some $24 billion
or 15% last year, with loans to business showing a particularly
steep rise.
- 9 -
far as debt management goes.
Just a few days ago
we completed
a combined refunding of February 15 debt maturities and prerefunding of other issues maturing this spring and summer.
With the public subscribing for $6-1/2 billion of a 4-3/4
y~r
note we have accomplished some useful debt lengthening and
materially lightened the task of refunding maturing issues
this coming May and August.
Apart from the May refunding, and the routine roll-over
of maturing weekly and monthly Treasury bills, there is only
a modest amount of additional cash to be raised -- perhaps
half a billion dollars -- before our coffers begin to fill up
with the usual seasonal inflow of heavy tax receipts in the
April-June quarter.
Moreover, mainly because of the steady
increases in holdings of Treasury debt by the various Government
investment accounts (such as the Social Security trust fund)
and by the Federal Reserve Banks, there will he, by June 30,
a considerable reduction from a year previous in the volume
of Treasury debt in the hands of the public.
Commercial
ba~
holdings, in particular, will show a sizable decline over the
year.
During fiscal 1967, assuming passage of the proposed
program of tax acceleration measures, there should be an even
- 8 $1.8 billion, and to produce a small surplus on a cash basis.
Beyond this, the President has stated quite clearly in his
Economic Message:
"If it should turn out that additional
insurance / against inflation lis needed, then I am convinced ~
that we should levy higher taxes rather than accept inflation-.
which is the most unjust and capricious form of taxation."
The Savings Bond program is ideally suited to playing a
key part in our efforts to maintain price stability.
This is
noninflationary financing par excellence, comprising a feature
of our economic system that is the envy of many other countries.
For savings dollars, particularly those generated in the
payr~l
savings program, are quite directly set aside out of the incme
stream and diverted from immediate spending,
Role of Debt Management
More generally, our debt management job in the current
period is also being shaped to the over-all need for a less
stimulative set of financial policies.
It may be helpful,
in assessing the role of debt management, to take stock
briefly of where we are now and where we may be heading in
the months to come,
For the current fiscal year -- the year that will end
this June 30 -- we are now quite clearly "over the hump" as
- 7 -
preferring economic well-being to conditions of recession and
unemployment.
General prosperity is a key element 'to the
solution of many of the social problems to which we are now
awakening, and which demand our utmost efforts and imagination.
This new challenge of prosperity calls for a coordinated
mix of flexible and responsive policies.
As the President
said in his Budget Message, "Inflation need not be the price
of social progress; nor should it be a cost of defending
freedom."
In line with the need for a changed fiscal approach, the
President has proposed, and the Congress is now considering,
certain measures to put corporate and individual income taxes
on a more nearly current basis.
That is, ultimate tax liabilitie
would not change but payments would be made more closely in line
with the actual earning of income and accrual of the tax
liabili~
The President has also proposed restoring the levels of the
a~.
mobile purchase and telephone service excise taxes to those
prevailing before a reduction took place this past January .thus, in effect, delaying that scheduled reduction for two years.
Taken together, these revenue measures would bring in an
additional $2.9 billion during calendar year 1966, and during
fiscal year 1967 the added revenue would be $4.8 billion .enough to bring the fiscal 1967 budget deficit down to a modest
?.
I
•
\.I • .
- 6 was slightly more than the average increase of 1.3 per cent
in other recent years.
Largely because of higher food costs,
wholesale prices at the end of 1965 were 3.4 per cent higher
than a year earlier, compared with virtual stability from
1958 to early 1965.
I am not going to gloss over these unwelcome price rises -.
moderate as they were in comparison to the recent performance
of prices in other countries of the world and our own
experience during the 1950's.
Complacency toward even mild increases in costs and
prices can easily become an open invitation to more persistent
and larger increases which could endanger continued economic
expansion at home andrefeat the substantial progress we have
already made toward achieving equilibrium in our balance of
payments.
I, for one, however, welcome the new challenge -- to
maintain continued solid economic growth within a framework
of stable costs and prices -. because this new challenge
means that we have overcome the problems of wide scale
underemployment and slow growth toward which our effects of
the past five years have been directed.
And I might add,
I welcome this challenge not only from the viewpoint of
- 5 -
Today, our position is quite different, calling for a
different policy emphasis.
The economy is moving in high
gear, with unemployment reduced to 4 per cent in January and
further improvements in sight.
Some 2-1/2 million Americans
have been added to payrolls in the past year, and personal
income had risen, by the closing months of 1965 to an annual
rate of $546 billion
up nearly 8% from a year earlier.
Indeed, throughout the past year, well before the
enlarg~
military effort in defense of freedom in Viet Nam was
superimposed on the economy, we had a very solid upswing,
based on robust business and consumer demands.
The record-
breaking performance of the economy was daily demonstrating
the logic of the reductions in tax rates and the other measures
taken during the last few years to relieve the economy from
an excessive burden of taxation, promote a fuller employment
of our resources, and to give freer rein to private energy
and initiative.
But as we have approached more closely a full
utilizati~
of our labor force and productive capacity, upward pressures
on costs and prices have increased, and some scattered cracks
have begun to appear in the over-all excellent record of cost
and price stability that has characterized the current econmdc
expansion.
In 1965, consumer prices rose 1.7 per cent, which
- 4 The opportunities for expanding this program are greater
ever before.
n~
With our economy beginning its sixth year of broadly
based expansion, more Americans are employed than ever before in
our history, and they are working for higher wages and salaries.
Each day many more Americans are reaching a threshold of financial
well-being where they are ready to take part in a program of
systematic savings.
These new workers, and better-off workers should also be
n~
savers, participating in a program in which both they and their
country are the beneficiaries.
Many of the new workers are younge.
people, some of them perhaps not so cognizant of the vast
contr"~
tions Savings Bonds have made to our country's security and stabiU
through the years.
This is an area of particular opportunity to
enlist added support.
Cost-price Stability Essential
We have, today, a particularly vital need to strengthen our
economy by encouraging Savings Bonds purchases.
During the earlier years of this decade it was appropriate
for the Federal Government I s fiscal posture to be one of stimulatiDi
economic growth and fuller employment of resources.
In early 19M,
unemployment was 7 per cent of our civilian labor force, and for
some groups such as teenagers and nonwhites the rates were much
higher.
·:1
- 3 -
a
industry throughout the country have exceeded one million each
year.
One of the most notable successes is visible right
he~
b
one of your awn area organizations where more than 190,000 new
savers were signed up during the three-year period.
In addition to the new savers that have been added year
after year all across the Nation, many thousands of employees
already participating in the program have increased the amount
of their systematic savings.
The net result is that payroll savings now account for
approximately 60 per cent of all E Bond sales.
Last year, smalle:
denomination E Bonds -- the type normally purchased by payroll
savers -- reached a peacetime high of more than $3 billion.
This
makes the payroll savings plan not only the backbone of the bond
program, but the key ingredient of a vital thrift program for
millions of American citizens.
Today, in this Silver Anniversary year of the Savings Bond
program more than $49 billion of Series E and H Savings Bonds
is outstanding.
This represents a tremendous reservoir of persOIi
financial security for millions of Americans.
in our economic life.
It is a major fact
We seldom stop to think that a good
~ny
of these dollars probably would not have been saved if not for~
payroll savings plan through which so many Americans have systelli
cally amassed security for themselves and their families.
- 2 -
A. P. Fontaine,
Chairman and Chief Executive Officer of the
Bendix Corporation, who is serving as a member of the Committee
this year in charge of the payroll savings campaign in the Detro"
area.
In the past years, we have also had the valuable support, as
members of the Committee, of Mr. Ray Eppert of the Burroughs
Corporation and Mr. John Gordon of General Motors.
We also appreciate the fine support we have received from
such organizations as General Motors, Chrysler Corporation, U.S.
Rubber, Bendix Corporation, Kelsey-Hayes Company and many other
companies in the Detroit area which, as a result of the interest
on the part of their management at every level, have attained
outstanding participation in the payroll savings program.
These leaders of industry in Michigan have given
selfless~
of their time, their energy and their money to help make the
Savings Bond program the tremendous success it has been here.
Many of your leaders have worked on an industry-wide basis to
contribute even more to the national success of the Savings
Bo~
program.
The measure of accomplishment achieved by the Committee is
reflected in the fact that, during the three years the group
has been functioning, new enrollments of payroll savers in
TREASURY DEPARTMENT
Washington
OR RELEASE: UPON DELIVERY
."~~
-:t'
,..
V I - .!.~
REMARKS OF THE HONORABLE FREDERICK L. DEMING
UNDER SECRETARY OF THE TREASURY
FOR MONETARY AFFAIRS
BEFORE THE
DETROIT TOP MANAGEMENT MEETING
DETROIT, MICHIGAN, FEBRUARY 17, 1966
12:15 P.M., EST.
It gives me great pleasure indeed to meet with you today and
help launch your Payroll Savings Bond Campaign in the Detroit area.
During ~orld War II, and throughout the postwar years, payroll
savings have been the bulwark of the Savings Bond program. In this
Silver Anniversary year of the Savings Bond program, we look forward
to a stronger-than-ever payroll savings campaign. We have,
this year, a very great deal going for us. This is going to
be a banner year.
The hallmark of the industrial payroll savings program ever
the years has been the solid support of American industry. Thus,
it is only fitting that you receive. the much-deserved thanks
of this Nation for the very substantial contribution you have made
to the financial stability of the country.
Congratulations go out also to two of your distinguished
business leaders -- Mr. Lynn A. Townsend, President of the Chrysler
Corporation, who is now serving with distinction as Chariman of
the Treasury's Industrial Payroll Savings Committee, and to
Mr. A. P. Fontaine, Chairman and Chief Executive Officer of the
Bendix Corporation, who is serving as a member of the Committee
this year in charge of the payroll savings campaign in the Detroit
area.
In the past years, we have also had the valuable support, as
members of the Committee, of Mro Ray Eppert of the Burroughs
Corporation and Mr. .John Gordon of General Motors.
We also appreciate the fine support we have received from
such organizations as General Motors, Chrysler Corporation, U. S.
Rubber, Bendix Corporation, Kelsey-Hayes Company and many other
Companies in the Detroit area which, as a result of the interest
on the part of their management at every level, have attained
outstanding participation in the payroll savings program.
D R Ar r
2/14/66
PDS/JR
REMARKS OF THE HONORABLE FREDERICK L. DEMING
UNDER SECRETARY OF TIlE TREASURY
FOR MONETARY AFFAIRS
BEFORE THE
DETROIT TOP MANAGEMENT MEETING
DETROIT, MICHIGAN, FEBRUARY 17, 1966
It gives me great pleasure indeed to meet with you today
a~
help launch your Payroll Savings Bond Campaign in the Detroit area
During World War II, and throughout the postwar years, payroll
savings have been the bulwark of the Savings Bond program.
In
~k
Silver Anniversary year of the Savings Bond program, we look fo~
~
ward to a stronger-than-ever payroll savings campaign. We have,
..-#Jr
this year, a very great deal going for us.:-~-~~~~;g
UI Z
.HiM"" tria 3;9;- bEed
aRiAiL~ This
is going to be a banner
year.
The hallmark of the industrial payroll savings program
the years has been the solid
support of American industry.
~er
Th~,
t.pOl)
it is only fitting that in~8~~Y receive the much-deserved tha~S
of this Nation for the very substantial contribution
to the financial stability of the country,
TaQ8C
';j0u have.
~I:
hs:s made
thanl'! I
-'
Congratulations go out also to two of your distinguished
business leaders
Mr. Lynn A. Townsend, President of the Chr)'.1t
Corporation, who is now serving with distinction as Chairman~
the Treasury's Industrial Payroll Savings Committee, and toMt.
- 3 These new workers, and better-off workers should also be new
avers, participating in a program in which both they and their
ountry are the beneficiaries. Many of the new workers are younger
eople, some of them perhaps not so cognizant of the vast contributions
avings Bonds have made to our country's security and stability
hrough the years. This is an area of particular opportunity to
nlist added support.
ost-price Stability Essential
We have, today, a particularly vital need to strengthen our
conomy by encouraging Savings Bonds purchases.
During the earlier years of this decade it was appropriate
or the Federal Government's fiscal posture to be one of stimulating
eonomic growth and fuller employment of resources.
In early 1961,
nemployment was 7 percent of our civilian labor force, and for
orne groups such as teenagers and nonwhites the rates were much
igher.
Today, our position is quite different, calling for a
ifferent policy emphasis. The economy is moving in high
ear, with unemployment reduced to 4 percent in January and further
mprovements in sight.
Some 2~ million Americans have been added
o payrolls in the past year, and personal income had risen, by
he closing months of 1965 to an annual rate of $546 billion -p nearly 8 percent from a year earlier.
Indeed, throughout the past year, well before the enlarged
ilitary effort in defense of freedom in Vietnam was superimposed
rr the economy, we had a very solid upswing, based on robust
usiness and consumer demands. The record-breaking performance
f the economy was daily demonstrating the logic of the reductions
1 tax rates and the other measures taken during the last few years
) relieve the economy fram an excessive burden of taxation, promote
fuller employment of our resources, and to give freer rein to
~ivate energy and initiative.
But as we have approached more closely a full utilization
our labor force and productive capacity, upward pressures on
lsts and prices have increased, and some scattered cracks have
gun to appear in the over-all excellent record of cost and
ice stability that has characterized the current economic expansion.
1965, consumer prices rose 1.7 percent, which was slightly more
~n the average increase of 1.3 percent in other recent years.
rgely because of higher food costs, wholesale prices at the
d of 1965 were 3.4 percent higher than a year earlier, compared
th virtual stability from 1958 to early 1965.
- 2 These leaders of industry in Michigan have given selflessly
of their time, their energy and their money to help make the
Savings Bond program the tremendous success it has been here.
Many of your leaders have worked on an industry-wide basis to
contribute even more to the national success of the Savings Bond
program.
The measure of accomplishment achieved by the Committee is
reflected in the fact that, during the three years the group
has been functioning, new enrollments of payroll savers in
industry throughout the country have exceeded one million each
year. One of the most notable successes is visible right here in
one of your own area organizations where more than 190,000 new
savers were signed up during the three-year period.
In addition to the new savers that have been added year
after year all across the Nation, many thousands of employees
already participating in the program have increased the amount
of their systematic savings
0
The net result is that payroll savings now account for
approximately 60 percent of all E Bond sales. Last year, smaller
denomination E Bonds -- the type normally purchased by payroll
savers -- reached a peacetime high of more than $3 billion. This
makes the payroll savings plan not only the backbone of the bond
program, but the key ingredient of a vital thrift program for
millions of American citizens.
Today, in this Silver Anniversary year of the Savings Bond
program more than $49 billion of Series E and H Savings Bonds
is outstanding. This represents a tremendous reservoir of persona]
financial security for millions of Americans. It is a major fact
in our economic life. We seldom stop to think that a good many
of these dollars probably would not have been saved if not for t~
payroll savings plan through which so many Americans have syste~·
tically amassed security for themselves and their families.
The opportunities for expanding this program are greatern~
than ever before. With our economy beginning its sixth year of
broadly based expansion, more Americans are employed than ever
before in our history, and they are working for higher wages and .
salaries. Each day many more Americans are reaching a threshold of·
financial well-being where they are ~eady to take part in a
program of systematic savings.
- 5 -
$1.8 billion, and to produce a small surplus on a cash basis o
Beyond this, the President has stated quite clearly in his
Economic Message: "1f it should turn out that additional
insurance I:against inflation_7 is needed, then I am convinced
that we should levy higher taxes rather than accept inflation
which is the most unjust and capricious form of taxationo"
The Savings Bond program is ideally suited to playing a
key part in our efforts to maintain price stability. This is
noninflationary financing par excellence, comprising a feature
of our economic system that is the envy of many other countries.
For savings dollars, particularly those generated in the payroll
savings. program, are quite directly set aside out of the income
stream and diverted from immediate spending.
Role of Debt Management
More generally, our debt management job in the current
period is also being shaped to the over-all need for a less
stimulative set of financial policies.
It may be helpful, in
assessing the role of debt management) to take stock briefly
of where we are now and where we may be heading in the months
to come.
For the current fiscal year -- the year that will end this
June 30 -- we are now quite clearly" over the hump" as far as
debt management goes. Just a few days ago we completed a
combined refunding of February 15 debt maturities and prerefunding of other issues maturing this spring and summer.
With the public subscribing for $6-1/2 billion of a 4-3/4 year
note we have accomplished some useful debt lengthening and
materially lightened the task of refunding maturing issues this
coming May and August.
Apart from the May refunding, and the routine roll-over
of maturing weekly and monthly Treasury bills, there is only
a modest amount of additional cash to be raised -- perhaps half
a billion dollars -- before our coffers begin to fill up with
the usual seasonal inflow of heavy tax receipts in the
April-June quarter. Moreover, mainly because of the steady
increases in holdings of Treasury debt by the various Government
investment accounts (such as the Social Security trust fund)
and by the Federal Reserve Banks, there will be, by June 30, a
- 4 I am not going to gloss over these unwelcome price rises -.
moderate as they were in comparison to the recent performance
of prices in other countries of the world and our own experience
during the 1950's.
Complacency toward even mild increases in costs and prices
can easily become an open invitation to more persistent and
larger increases which could endanger continued economic expans~n
at home and defeat the substantial progress we have already made
toward achieving equilibrium in our balance of payments.
I, for one, however, welcome the new challenge -- to
maintain continued solid economic growth within a framework of
stable costs and prices -- because this new challenge means that
we have overcome the problems of wide scale underemployment and
slow growth toward which our effects of the past five years have
been directed. And I might add, I welcome this challenge not
only from the viewpoint of preferring economic well-being to
conditions of recession and unemployment. General prosperity is
a key element to the solution of many of the social problems
to which we are now awakening, and which demand our utmos t efforts
and imagination.
This new challenge of prosperity calls for a coordinated mb
of flexible and responsive policies. As the President said in
hiw Budget Message, "Inflation need not be the price of social
progress; nor should it be a cost of defending freedom."
In line with the need for a changed fiscal approach, the
President has proposed, and the Congress is now considering,
certain measures to put corporate and individual income taxes
on a more nearly current basis. That is, ultimate tax liabilities
would not change but payments would be made more closely in line
with the actual earning of income and accrual of the tax liability.
The President has also proposed restoring the levels of the aut~
mobile purchase and telephone service excise taxes to those
prevailing before a reduction took place this past January
thus, in effect;) delaying that scheduled reduction for two years.
Taken together, these revenue measures would bring in an
additional $2.9 billion during calendar year 1966, and during
fiscal year 1967 the added revenue would be $4.8 billion
enough to bring the fiscal 1967 budget deficit down to a modest
- 7 -
It is no small comfort to recall that fully 23% of the
publicly held Treasury debt is in the form of Savings Bonds,
and that this proportion has tended to grow over the years.
Some twenty years ago, shortly after the end of World War II,
Savings Bonds comprised about 15% of the publicly held debt.
In the intervening two decades, the value of Savings Bonds
outstanding has grawn by about $19 billion, while the amount
of other Treasury debt in the hands of the public has declined
by some $6 billion. Little wonder, then, that we are concerned
about sustaining and improving the Savings Bond program as an
aid to debt management as well as in the broad context of
economic stabilization.
Balance of Payments Progress
Before concluding these remarks a few words should be
said about our balance of international payments, for in this
area, too, policies aimed at price and cost stability, and
noninflationary growth, are essential to achieving national
objectives.
Last year, the United States made decisive progresstaward
achieving a balanced payments position. Our deficit on the
over all, or liquidity, accounting basis was cut more than
50% from the level of recent years to just $1.3 billion in
the calendar year 1965.
In large measure the improvement last year is traceable
to the program of voluntary restraint called for by the
President just a little over a year ago -- in his Balance of
Payments Message of February 10, 1965. Most impressively,
instead of an outflow of long- and short-term bank credit which
reached the high level of $2.5 billion in 1964, there was a
small inflow to the banks in 1965. And, similarly, in the area
of nonbank capital flows (excluding direct investment abroad)
we shifted from a net outflow of some $900 million in 1964 to
an inflow of perhaps $300 million in 1965. Much of this swing
reflected the repatriation of short-term corporate funds, also
under the guidance of the voluntary program.
On the other side, a part of these large gains was
offset, particularly because our favorable trade balance
shrank by nearly $1.9 billion as imports rose considerably
more than exports. Direct investment outflows also increased
for the year as a whole, although there was a marked improvement
after mid-year, when the voluntary program in this area
began to take hold.
- 6 considerable reduction from a year previous in the volume
of Treasury debt in the hands of the public. Commercial bank
holdings, in particular, will show a sizable decline over the
year.
During fiscal 1967, assuming passage of the proposed
program of tax acceleration measures, there should be an even
greater decline than in the current fiscal year in the volume
of Treasury debt in the hands of the public. Indeed, even after
allowing for the increased sale of Federal financial assets
both this fiscal year and next -- sales that have been gradually
expanded under a program that has received increasing emphasis
since the mid 1950's in order to develop increased private
participation in Federal credit programs -- the Federal
Government's net financing demand on the private economy will
be minimal. And in fiscal 1967 the credit market role of
Government, including in this the Federal Reserve System, would
actually work out to be one of supplying funds to the private
economy.
Let me hasten to add that all of this does not leave the
debt manager with as easy a task as one might suppose. For
we must, this year and probably next fiscal year, too, meet
very keen competition for loanable funds from the private
sector. It is this kind of competition that has moved interest
rates into new high ground for recent years, even while the
Treasury's own credit demands have remained on the moderate side.
To cite just one area, bank loans were up some $24 billion
or 15% last year, with loans to business showing a particularly
steep rise.
Thus even when the debt manager is in the fortunate
position of looking forward to a reduced need for placing debt
in the hands of the public, he can still feel some qualms about
the large volume of marketable debt that comes due each week
in the case of Treasury bills, or in each quarterly refunding
in the case of coupon-bearing issues. It is at such times that
the debt manager can contemplate with particular pleasure the
$49 billion of publicly held debt that is in the form of U. s.
Savings Bonds.
- 9 -
In one area, certainly, we can join forces very effectively
in pursuit of responsible restraint -- and that area is our
Savings Bond program, where we are now ready to move ahead at
full steam, our efforts invigorated.
In this 25th Anniversary Year campaign, I know that we
can count on the full support of all of you to keep our
economic ship on a steady keel.
In leading the industrial
payroll savings campaign in this key area of the country, you
are performing a service of extraordinary value, and I know
that it will be well done.
000
- 8 -
For this year, 1966, our goal is to close the payments
gap the rest of the way. This might seem an easy task, after
having succeeded in cutting the deficit back by better than
50% from 1964 to 1965, but we do not regard the job with any
complacency. We recognize, for example, that some of last
year's gain, such as the repatriation of corporate short-term
balances, was one-shot in nature and we could not look to a
repeat performance. Nor can we reasonably expect the banking
sector to show another improvement of $2-1/2 billion, although
we certainly expect the voluntary program to check any reemergence of a sharp outflow of bank funds.
In addition, we
may experience some greater outflow on account of the balance of
payments impact of our military and aid programs in Southeast
Asia.
For further improvement this year we look particularly
to the trade sector, where certain adverse factors last
year should not be operative in 1966, to a reduction in
direct investment outflows in line with the more restrictive
guidelines set last December, and to continuing increases in
our investment income as a result of past investments abroad.
Certainly in the trade area, success will depend in good
measure on how well we can contain price and cost pressures
at home, both to maintain the competitive position of our
exports and to ensure that domestic products are available
in co mpetition with the growing volume of imports.
Conclusion
As you can see, this brief excursion into the international
payments area soon brings us back, full circle, to the
domestic economy and to the high-priority need for charting
a course of noninflationary growth at home.
This is a matter that embraces every area of economic
decision-making, both in and out of government.
For as the
President observed in his Economic Message, " .•• the extent
of the fiscal or monetary restraint that will be needed to avo~
inflationary pressures will depend directly on the restraint
and moderation exercised by those who have power over prices
and wages."
TREASURY DEPARTMENT
Washington
FOR RELEASE P.M. NEWSPAPERS
THURSDAY, FEBRUARY 17, 1966
REMARKS BY THE HONORABLE HENRY H. FOWLER
SECRETARY OF THE TREASURY
BEFORE A FINANCIAL CONFERENCE OF
THE NATIONAL INDUSTRIAL CONFERENCE BOARD
AT THE
WALDORF-ASTORIA HOTEL, NEW YORK, NEW YORK
THURSDAY, FEBRUARY 17,1966,12:30 P.M., EST
In less than two weeks, our economy will enter its sixth
year of uninterrupted expansion -- an expansion without rival
in our history for its overall stability and strength,for its
buoyancy and its balance.
In the broadest sense, our economic objective today is -and must be -- the same as it was one year or three years
yes, even five years ago:
to sustain the expansion.
But
sustaining the expansion today means that, although our
objectives are the same, the means chosen to further them today
may be different from those employed five years ago, three
years ago, or even a year ago -- for circumstances have changed
and our policies must, and do reflect that change.
Today our work force, more productive than ever, is also
more fully employed than at any time in nearly a decade. Our
productive capacity -- larger and more efficient than ever -is also more nearly fully utilized than at any time since the
Korean War.
In addition to the growing private and public
demands of our citizens for more of the fruits of our highly
productive economy, our firm commitment to the defense of
freedom in Vietnam has entailed essential new claims upon our
economic capacity and resources.
In these circumstances the task of sustaining our expansion
requires new diligence in the avoidance of both old and new
dangers. The old danger -- always with us for a variety of
reasons -- is the loss of price stability which could lead to
inflation. The new danger, a contributing factor to the old,
is the danger no longer of deficient, but of excessive, economic
demand as it relates to available supply_ We have thus pointed
our economic policy mix in a new direction -- away from stimulus
and toward restraint.
F-384
- 2 Our current programs and our recent actions -- actions on
the government pay raise in August, the steel settlement in
September, and the aluminum, copper and steel price situations
this past Fall, as well as the current budget -- have
abundantly demonstrated our determination to forestall any
onslaught of inflation.
Yet there are those who feel we have not gone far enough.
There are those who urge much harsher restraints than those
now in effect or proposed in the President's budget.
It may indeed happen that harsher measures will be
required -- and when they are required we will not shrink
from ~mploying them.
In his Budget Message to the Congress, President Johnson
has made an unqualified commitment that " .... should unforeseen
inflationary pressures develop, I will propose such fiscal
actions as are appropriate to maintain economic stability."
Time and again, he has emphasized the fact that -- in the
words of the Economic Message -- " ••.. the extent of the
fiscal or monetary restraint that will be needed to avoid
inflationary pressures will depend directly on the restraint
and moderation exercised by those who have power over wages
and prices." This is part of the answer to those who ask
whether there will be tax increases later this year.
Events alone -- events in Vietnam which are not ours alone
to determine, and events here at home which only we ca~
determine -- will decide whether or not we will need further
restraints. In the meantime, the course of wisdom is not to
impose further restraints unless or until the "unforeseen
inflationary pressures" referred to by the President are
clearly foreseeable.
We have seen too many expansions turned into recessions
by slamming down too hard on the brakes.
We have seen far
too much unemployment and underemployment and too much idle
productive capacity far too long to countenance needless and
drastic cutbacks in private demand -- thus deliberately creating
idle reserves of manpower and capacity.
Today, in short, there is no less need for moderation
and balance in dealing with any danger of economic excess
than there has been in recent years in dealing with economic
deficiency.
- 3 Our policy mix -- while it must always be attuned to the
times -- must continue to be inclusive rather than exclusive
to be directed toward the pursuit, not of one economic goal
at the expense of all others, but of all our major economic
goals at one and the same time -- the paramount goals of a
balanced budget in a balanced economy, of full employment with
reasonable price stability, and of relative equilibirium in
our international balance of payments.
Indeed, this is a somewhat exciting if novel challenge -to be so near to the attainment of our long sought objectives
to be confronted by the unique and welcome task of preserving
and managing a balanced prosperity -- rather than striving to
appr~ach it.
We will continue to reject the view that these goals are
incompatible -- indeed, the record of the past five years
proves they are not. We will continue to believe that to
seek one of them by sacrificing the others is, to say the
least, unwise national policy -- indeed, the record of the
50's proves how unwise.
We recognize, of course, that from time to time special
situations may occur which will require that we place one
economic goal ahead of the others.
It is not, for example,
inconceivable that there may arise a threat of inflation of
such size or duration that we will have no choice but to
place highest and most urgent priority upon price stability.
But situations are seldom this extreme -- and they are not
this extreme today.
Our challenge is, instead, to find the mix of monetary,
credit and fiscal measures best calculated to move us ahead
toward all our goals -- while at the same time recognizing
that public policies will not be adequate if some groups
who enjoy and exercise substantial market power choose to
push up or maintain prices or wages at unwarranted levels.
There are those in recent weeks who are raising their
Voices in a clamor of impatience for the immediate imposition
of additional and much harsher restraints on demand than
contemplated by present or proposed measures. Many of these
are the same voices which have been historically preoccupied
with inflation -- they were apprehensive about inflation in
1962, in 1963, and in 1964 -- indeed, at every stage in the
current economic expansion when public policy has been
directed towards a moderate support of the growth of that
demand. Indeed, they seem to have forgotten that in the
- 4 good old days of the Fifties, before the emergence of the
wage-price guidelines, which they now decry, they managed
to have a sharp price-wage spiral together with a recession.
There is an important difference between a policy mix
designed to moderate carefully the growth of demand so as not
to press too hard on expanding supply, thereby serving to
sustain the expansion and harsher policies applied so
suddenly and massively as to risk a sharp downturn or a return
to stagnation. It is important that this line of difference
be sought with care and moderation. We have had experience
in the not too distant past when the sharpness and magnitude
of that shift from stimulus to harsh restraint induced
recession.
In order to maintain perspective in the making of national
decisions about how far and how fast we go to cut back on the
increase in demand which has been the life blood of the fiveyear expansion, it may be well to recall the genesis of our
current expansion.
The economic expansion we now enjoy was far from a
foregone conclusion five years ago. Then the nation was
gripped by the fourth post-war recession -- somberly aware that
each of the three prior recessions had been followed by
shorter and weaker recoveries, and that the previous recession
had produced the largest peacetime budget deficit in our
history induced in large part by too sharp a turn to a
deflationary policy mix. Unemployment was intolerably high.
Business investment in new plant and equipment for some years
had been unable to clear a barrier to the path of steady
increase because of the structural drag of excessive wartime
taxation, too long endured. This business investment was far
less than we needed to generate more vigorous economic
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
balance of payments deficits -- averaging almost $4 billion
a year for the three preceding years, had made the dollar
vulnerable and threatened the international monetary system
based upon it.
- 5 Five years ago this nation faced dire possibilities;
economic stagnation at home; an interruption of the unprecedented
growth of free world trade and economic development; and the
weakening of the economic and financial base of U. S. political,
diplomatic and milit~ry power.
Since that
of policy and a
result economic
scale new peaks
goals.
time there has been a constant re-evaluation
steadily evolving program of action. As a
progress in the year 1965 has enabled us to
of achievement in moving toward our national economic
It may well be that the major difference between what has
happened to our economy before 1961 and since is the stress on
what President Johnson's Council of Economic Advisers calls
"a continuous, rather than a cyclical, framework" for economic
policy. As the economic commentary in "Business Week" recently
put it "This means that instead of ner\lously switching policy
around to counteract upswings or downswings, policymakers should
aim at promoting continuous long-term growth. A steady stimulus
to demand should, according to the new economics, be kept on
the economy to keep recessions from ever starting."
c
As of now the Administration, whether practicing new
economics or old, is shifting from a policy of a steady
stimulus to demand to a policy of moderate restraint to counter
the new cyclical consequences of the Vietnam build-up. But,
in so doing, it is very mindful of the continuing task of
preserving and promoting continuous long term growth -both now and in the period that will surely come after Vietnam
has been settled.
If we in the Administration are to be proven guilty of
economic sin or bad judgment, it will be that of striving to
support the policy of achieving the maximum of all our
economic goals in the spirit, framework and policy set forth
by the Congress in the Employment Act of 1946.
Against this background let us look at the present situation
objectively and carefully with a concern that we press toward
all these goals rather than become preoccupied with a single
one. In this calendar year 1966 restraints which did not
characterize 1965 have already been imposed upon the economy.
Beginning in January an extra $6 billion a year in Social
Security and Medicare taxes is being withdrawn from private
purchasing power to flow into the trust funds.
This was not
true of December 1965, or November, or October.
- 6 In December 1965 the Federal Reserve Board announced two
actions designed, in its words, "to dampen mounting demands
on banks for still further credit extensions that might add
to inflationary pressures." The full effect of these actions,
which take a considerable period of time to be felt, is
yet to be ascertained.
The new tax proposals recommended by the President, if
adopted by March 15 as he urged, would withdraw from private
purchasing power an additional $2.9 billion during calendar
1966.
The shift in the budgetary situation from substantial
defiGits in fiscal 1966, brought on by the response to the
challenge of Vietnam, to surpluses or minor deficits in the
administrative, cash and national income account budgets has
been made possible by expenditure reductions coupled with
the new tax proposals.
.
Coming on stream in 1966 are vast quantities of new
industrial capacity which are the fruits of investments made
in 1964 and 1965. Coming into the labor force are a million
and one-half additional new entrants from the younger age
group and, in addition, many hundreds of thousands especially
disadvantaged in the labor market are being given the
benefit of specially designed manpower training opportunities
to better equip them to fill the needs of the labor market.
And, of course, the dwindling rate of unemployment is
stimulating renewed effort in the private sec for to train and
better utilize the available labor force. Thus, although
purposefully ignored by some, there is a public-policy
reliance now upon structural unemployment programs to push
down the unemployment rate -- which programs were not
recently improvised but have been developed in years past.
Given all these factors the wise course of balance and
moderation in pursuing continued growth, a higher rate of
employment and reasonable price stability calls for first
determining how the economy reacts to this new mix of
relatively moderate restraints before rushing to embrace the
far harsher measures -- presumably substantially increased tax
rates, direct price and wage controls, and much tighter
monetary restraint.
- 7 I see no good reason why, if we keep our heads and resist
any temptation for precipitate action, and, if additional
action becomes necessary, choose the appropriate course with
a concern for all our objectives and a sense of the need for
flexibility when the pressures of Vietnam are removed, we
cannot sustain our success of recent years in moving ahead
simultaneously upon all major economic fronts. And there can
be no denying that success and the vast benefits it has brought
to the American people these five years past.
Under the impetus of the massive federal tax reductions,
totalling over $20 billion per year on projected 1966 levels,
and other measures of the past five years, our gross national
product -- which stood at an annual rate of $503.6 billion
in early 1961 -- had risen $193.6 billion by late 1965 -- an
increase of over one-third. Over that same period, virtually
every economic indicator -- employment, corporate profits,
business investment, retail sales, personal income -- all
have set new records.
In the preceding half-decade -- the 1955-1960 period -our annual rate of real growth was only 2.2 percent -- far
lower than that of virtually all other major countries.
In
the 1960-65 period it rose to 4.5 percent -- an immense
improvement, but still behind most of the others.
In 1965,
however, we forged ahead with a rise in real national output
of 5.5 percent. As a result, our growth in real output has
now surpassed that of every other major country in the world.
As our economy has expanded, the unemployment rate has
continued to fall -- despite the growing impact of automation
and the huge influx into the labor force of young people born
in the baby-boom of the early postwar years. Last month, we
reached our long-sought" interim" target of 4 percent
unemployment -- the lowest monthly rate since April of 1957.
Nor have we purchased this progress in output and in
employment by sacrificing price stability. We have, on the
contrary, maintained a record of price stability unequalled by
any other major country in the world -- a record surpassed by
no industrial nation and by only three other small countries
Guatemala, El Salvador and Venezuela -- a record unrivalled
in any other period of our own postwar experience.
- 8 Last year, fihht record developed some blemishes. Consumer
prices rose 1.7 percent -- a slightly greater rise than the
average increase of 1.3 percent over other recent years. But
from December 1964 to December 1965 it rose by 2 percent.
In wholesale prices, we experienced virtual stability from
1958 to early 1965, but saw a 3.4 percent rise by the end of
1965.
These increases are still quite mild, and thus far of
limited duration, compared with either our experience in the
mid-50's, or the most recent experience of practically every
other country in the world. But even a mild rise is unwelcome,
and calls for vigilant concern. We are well aware that any
complacency toward mild increases in costs and prices is an
open invitation to more persistent or larger increases -- and
to allow these is to endanger our excellent record of progress
on our other major economic fronts.
But, in any meaningful sense of the phrase, we have over
recent years achieved reasonable price stability. As a result,
the abundant economic gains our citizens have enjoyed have, in
large measure, been real and not illusory gains.
Even in the year just past when price indexes showed a
steeper rise, these gains were real. From the fourth quarter
of 1964 to the fourth quarter of 1965, for example, per
capita disposable personal income -- even after adjustment
for price changes -- grew by 4.7 percent. Between 1961
and 1965 it rose 15.2 percent in real terms.
Lest there by any doubt about this record -- and
there are those who seem to have their doubts -- let them
heed the words of the Wall Street Journal, which stated in
a recent "Outlook" column -- and I quote:
" ..• pr1ces,
.
af
. .
course, are r1s1ng.
But over the span of the present long expansion
cycle the general level of prices has risen
much less so far than income. Buying power
for most consumers has gained.
- 9 -
"A quick glance at the record of
both retail and wholesale prices compared,
for example, with the rise in the average
weekly wage of a factory worker, tells
what has happened in this area."
The column then goes on to point out that, while
wholesale prices have risen by 3 percent and consumer prices
by 7 percent since 1961, the average weekly wage of a
factory worker has risen by a full 24 percent -- more than
three times the rise in consumer prices. Even in the
more recent period -- when .theprice rise has picked up
somewhat -- real earnings have continued to make solid
gains. Between December of 1964 and December of 1965, the
average weekly spendable earnings of a manufacturing worker
with three dependents has risen by 2.2 percent -- after
adjustment for changes in prices.
Nor is this the whole story. For it neglects one of
the most impressive accomplishments of this expansion -its ability to create jobs not only for those without jobs
but for the host of young people entering our labor force for
the first time. From January of 1961 to January of this
year, our economy has created 8.4 million new jobs -an average of 1.7 million new jobs a year. And in the
most recent l2-month period -- from January of 1965 to
January of this year -- our economy has generated 2.8
million new jobs -- half again as high as the annual
average of the past five years.
The expansion has also meant a strong and steady rise
in after-tax corporate profits -- thus avoiding the unhappy
pattern of other expansions when profits after taxes would
show a strong early surge and then succumb to the growing
squeeze exerted by increased labor and other costs". Thus,
after-tax corporate profits last year stood at $44.5
billion -- up from $37.2 billion in 1964, $32.6 billion in
1963, $31.2 billion in 1962, $27.2 billion in 1961, and
$26.7 billion in 1960.
"-",
w~
- 10 -
/")
,
........ . - ,
' - ' V 'oJ
These gains were the result of an expansionary fiscal and
monetary policy that included -- not only massive reductions
in Federal taxes to generate greater growth in the private
sector -- but a policy of rigorous restraint in the growth of
Federal expenditures.
Through the tenacious pursuit of that policy, President
Johnson has accomplished a truly remarkable result. In the
fiscal year 1964 that he took over the responsibilities of
office, the original estimated expenditure level was $98.8
billion.
Jhe expenditure target for fiscal 1966, the third year
of his service, was fixed last January at $99.7 billion. But
accelerated military activity in Vietnam required extra expenditures of some $4.7 billion. In addition, uncontrollable
or legislated expenditures required another unavoidable increase amounting to a net figure of some $2 billion. These
expenditures included $740 million of military and civilian
pay increases voted by Congress in excess of Presidential
recommendations, an additional $500 million increase in
veterans pensions, a $500 million increase in interest
charges on the debt and two further increases of $500 million
each as a result of payments required by law under the space
and agricultural programs
All of these increases more than
wiped out economies realized since the original budget estimate
for fiscal 1966.
o
Had it not been for these unavoidable increases as a result
of Vietnam and these other uncontrollable increases I have cited,
the President in nearly three years in office would have held
expenditures in the admini.strative budget to a total increase
of less than $1 billion over the amount estimated for the
fiscal year in which he assumed office. We can gain some
idea of what a remarkable achievement this is when you compare
it with the average increase of $3 billion per year over the
previous ten years.
Yet to talk about expenditure control solely in terms of
expenditure totals is to tell only half the story -- for we
receive the greatest benefits from the President's insistent
emphasis on cost reduction and program evaluation in the urgent
new programs it enables us to afford through savings on those
of lesser urgency and through greater productivity in existing
programs.
- 11 And joined with rising Federal revenues from rising economic activity, this program of rigorous expenditure control
has allowed us to meet urgent national needs while at the same
time reducing the Federal deficito
The record is
years ago forecast
part, on major tax
actual fiscal 1964
clear: the 1964 budget submitted three
a deficit of $11e9 billion premised, in
reduction o This figure was reduced to an
deficit of $8 2 billiono
0
Last year's budget contained an estimated deficit for
fiscal 1965 of $6.3 billion. This was trimmed down to $304
bi1liono
The budget submitted last January projected a $5 3 billion
deficit for fiscal 19660 As of June 30, this estimate had been
cut to $4 2 billion. Had it not been for the additional defense
needs resulting from Vietnam,
the higher revenues flowing from
our vigorous economic expansion would have cut even further that
estimated deficit for the current fiscal year.
0
0
Had it not, in fact, been for the increases projected for
Vietnam expenditures in fiscal 1966 and fiscal 1967 since the
1966 budget was originally submitted last January, we could
have used the fiscal dividends furnished by this continued expansion to balance the budget in fiscal 1967 and still have
had room for some increases in civilian expenditures or for
additional tax reduction o
As a result of all these policies which have proven so
productive, we now have the economic strength and the fiscal
resources -- and the firm confidence these accomplishments
more than justify -- to carryon the fight for freedom in
South Vietnam without abandoning our efforts at home. This
was the real significance of the President's announcement -in his State of the Union Message -- that the enactment of all
his recommendations will entail a deficit in the administrative
budget for fiscal 1967 of only $1.8 billion -- the smallest
in seven years -- and will give us a surplus of $500 million
in the cash budget.
And this accomplishment is made all the more extraordinary
by the fact that fiscal 1967 expenditures include an increase
in the special costs of Vietnam of $10.4 bil~ion. over the
fiscal 1965 level -- a $5 8 billion increase ~n f~scal 1967 on
top of an increase of $406 billion in fiscal 19660
0
- 12 While thus we have surged strongly ahead on all major
fronts in our domestic economy, we have also made real progress
in reaching equilibrium in our international balance of payments. Indeed, our domestic economic growth -- as reflected
in our excellent record in price stability and our significant
gains in productivity -- has served as one of our greatest
sources of strength on the international front
0
Nor
upon the
anywhere
deed, is
~-
should we forget that the strength of the dollar rests
strength of our economy -- and both are without peer
in the world todayo Our international position, inawesomely strong. For we enjoy:
a record of cost-price stability unsurpassed by
any other major country;
the world's most productive and efficient economy;
the world's largest supply of gold;
the world's strongest creditor position;
the world's most favorable trade position.
And while we still have a tough job ahead, we now stand within
reach of equilibrium in our balance of payments. Between 1960
and 1964, we reduced our overall balance of payments deficit,
in uneven steps, from $3.9 billion to $2.8 billion. Last year,
we cut it to $103 billion -- an improvement in one year that
exceeded the total improvement over the previous four yearso
Last year's Lmprovement occured despite heavy outflows of
private capital during the early months, despite a decline of
nearly $1.9 billion in our trade surplus, and despite the
conversion of some $500 million in UoS o securities by the
United Kingdoffio Without question the lion's share of credit
for our excellent progress must go to our businesses and banks
who participated in the program of voluntary restraint over
private capital outf1ows o
Our 1965 record, and the heightening of the voluntary
program for 1966, give us good reason to expect continuing
improvement in the private capital area
q
- 13 In general, the enactment this year of the Foreign Tax
Investors Act -- now in the House Ways and Means Committee -a rise in investment income, a moderation of direct investment
outflows, and a movement toward an expanding trade surplus,
interrupted in 1965 by special circumstances, offer the most
promising areas for our march toward equilibrium in 1966.
Of course, the two main imponderables center around rising
bal;ance of payments costs in our military and aid programs as
the result of Vietnam and the direct and indirect impact of
Vietnam on the domestic economy and the balance of tradeo
We must, therefore, be more rigorous and unrelenting than
ever in our search -- both in and out of government
for
ways to offset the impact of Vietnam on our balance of payments.
But, we should also keep in mind that the balance of payments costs of the Vietnam conflict are not permanent or
ordinary costs, and that, although we have allowed for an
increase in these costs in our outlook for 1966, it is simply
not possible to say at this time how much they will affect our
balance of payments in 1966.
Equilibrium, nevertheless, remains our goal for 1966 -and we mean to reach ito
Thus, both on the international and on the domestic
economic front we face uncertainties -- uncertainties stemming
from our commitment in Vietnamo
We have behind us, however, a record of five years of
solid achievement in the pursuit of our four paramount economic
goals: a balanced budget in a balanced economy, full employment
with reasonable price stability -- and equilibrium in our balance
of payments
0
We intend to continue that achievement -- neither lessening
nor abandoning our effort on any of these fronts, but pushing
steadily ahead on each of them alikeo We intend also to remain
acutely alert to new needs and new circumstances -- ready to
shift gears should that be warranted while refusing to veer
toward extremes
0
We stand now on solid economic ground -- and there is no
reason for us to lose our footing as long as we keep our heads o
000
,', 1\
~v
- 3 -
steadily ahead on each of them alikeo
We intend also to remain
acutely alert to new needs and new circumstances -- ready to
shift gears should that be warranted while refusing to veer
toward extremes.
We stand now on solid economic ground -- and there is no
reason for us to lose our footing as long as we keep our heads.
- 2 -
more than three times the rise in consumer prices.
Even in
the more recent period -- when the price rise has picked up
somewhat -- real earnings have continued to make solid gains.
Between December of 1964 and December of 1965, the average
weekly spendable earnings of a manufacturing worker with three
dependents has risen by 2.2 percent -- after adjustment for
changes in prices.
We have behind us a record of five years of solid
achievement in the pursuit of our four paramount economic goals:
a balanced budget in a balanced economy, full employment -reasonable
with price/ stability -- and equilibrium in our balance of paymenl
We intend to continue that achievement -- neither lessening
nor abandoning our effort on any of these fronts, but pushing
TREASURY DEPARTMENT
FOR IMMEDIATE RELEASE
WASHINGTON. D.C.
February 17, 1966
Secretary of the Treasury Henry H. Fowler made the following
statement for broadcast use today in New York in connection with
a meeting of the Na tional Indus trial Conference Board:
"In any meaningful sense of the phrase, we have over
recent years achieved reasonable price stabili~y. As a
result, the abundant economic gains our citizens have enjoyed have, in large measure, been real and not illusory
gains.
"We have, on the contrary, maintained a record of
price stability unequalled by any other major country in
the world -- a record surpassed by no industrial nation
and by only three other small countries -- Guatemala,
El Salvador and Venezuela -- a record unrivalled in any
other period of our own postwar experience.
"While wholesale prices have risen by 3.6 percent
and consumer prices by 6.8 percent since 1961, the average
weekly wage of a factory worker has risen by a full
23~ percent -- more than three times the rise in consumer
prices. Even in the more recent period -- when the price
rise has picked up somewhat .... - real earnings have continued
to make solid gains.
Between December of 1964 and DecembE~r
of 1965, the average weekly spendable earnings of a
manufacturing worker with three dependents has risen by
2.2 percent -- after adjustment for changes in prices.
"We have behind us a record of five years of solid
achievement in the pursuit of our four paramount economic
goals:
a balanced budget in a balanced economy, full employment -- with reasonable price stability -- and
equilibrium in our balance of payments.
"We intend to continue that achievement -- neither
lessening nor abandoning our effort on any of these fronts,
but pushing steadily ahead on each of them alike. We intend
also to remain acutely alert to new needs and new circumstances
-- ready to shift gears Should that be warranted while refusing
to veer toward extremes.
"We stand now on solid economic ground -- and there is
no reason for us to lose our footing as long as we keep our
heads "
F-385
•
000
T.fb».t~ ,~
.
6tv Air.
~ ( ,."aJ\l'l t f
\
.f! ""
lu ~ c,·, N,{ H~~t1.
17rf..b '(r~
In any meaningful sense of the phrase, we have over recent
years achieved reasonable price stability.
As a result, the
abundant economic gains our citizens have enjoyed have, in large
measure, been real and not illusory gains.
We have, on the contrary, maintained a record of price
stability unequalled by any other major country in the world ••
a record surpassed by no industrial nation and by only three
other small countries -- Guatemala, El Salvador and Venezuela ••
a record unrivalled in any other period of our own postwar
experience.
While wholesale prices have risen by 3.6 percent and
consumer prices by 6.8 percent since 1961, the average weekly
wage of a factory worker has risen by a full 23% percent --
TREASURY DEPARTMENT
(
LEASE 6 :30 P.M.,
J
February 21, 19660
RESULTS OF TREASURY'S WEEKLY BILL OFFERING
The Treasury Department announced that the tenders f"or two series of' Treasury bills,
ries to be an additional issue of' the bills dated November 26, 1965, and the other
to be dated February 24, 1966, which were off'ered on February l6, 1966, were opened
Federal Reserve Banks today. Tenders were invited for $1.,300,000,000, or there, of S1.-day bills and for $1,000,000,000, or thereabouts, of' 1.82-day bills. The
s of the two series are as follows:
OF ACCEPTED
ITIVE BIDS:
igh
'JW
'l'erage
5~
3~
91.-day Treasury bills
maturin~ Mal 26 l. 1966
Approx. Equi v.
Price
Annual Rate
98.817
4.680~
98.810
4.708'/0
98.813
4.696'/0 1/
···
·
··
182-day Treasury bills
maturing August 25z. 1966
Approx. Equi v.
Annual Rate
Price
4.882~
97.532
4.900%
97.523
97.527
4.892%
Y
of the amount of 91-day bills bid for at the low price was accepted
of the amount of 182-day bills bid f'or at the low price was accepted
rENDERS APPLIED FOR AND ACCEPTED BY FEDERAL RESERVE DISTRICTS:
rict
App1.ied For
Accepted
: Applied For
Accepted
$
26,166,000
$
14,316,000
$
27,373,000
$ 17,373,000
mrk
1.,555,437,000
751,437,000
1,389,124,000
668,709,000
ldelphia
31.,690,000
17,140,000
16,282,000
3,282,000
~~nd
30,410,000
29,8l0,000:
52,596,000
27,896,000
~nd
14,137,000
14,137,000:
3,804,000
3,804,000
lta
40,270,000
26,260,000
35,489,000
14,297,000
LgO
340,519,000
209) 984,000:
32l,461,000
1.07,361,000
~u1s
52,090,000
31,585,000:
22,873,000
9,873,000
!apolis
16,973,000
12,698,000
9,293,000
6,323,000
LS City
27,892,000
26,392,000
11,314,000
10,029,000
s
21,722,000
12,872,000
11,802,000
6,832,000
rancisco
237,039,000
155,022,000:
193,343z.000
l24,673,000
~
$2,394,345,000
$1,301,653,000 ~ $2,094,754,000
$1,000,452,000 £I
udes $238,835,000 noncompetitive tenders accepted at the average price of 98.813
udes $105,484,000 noncompetitive tenders accepted at the average price of 97.527
e rates are on a bank discount basis. The equivalent coupon issue yields are
'/; for the 91-day bills, and 5.09'; :for the 1.82-a.ay bills.
)n
TREASURY DEPARTMENT
g;=
.;
a-r
h
t
7
FOR RELEASE 6 :30 P.M.,
l>kmday, February 21, 1966.
RESULTS OF TREASURY'S WEEKLY BILL OFFERING
T..'1e Treasury Department announced that the tenders :for two series of' TreasU17
one series to 'be an add1tiona~ !lB5ua or tho bill5 da'eee1 No'vefflbor 26, 1083, AIl4_
series to be dated February 24, 1966, 'Which were offered on February 1.6, 1966, VV4
at the Federal Reserve Banks today. Tenders were invited for $~",300,OOO,OOO, or tal
abouts, of 91-day biLls and for $1,000",000",000, or thereabouts, of 182-day billa •.
details of the two series are as follows:
RANGE OF ACCEPTED
COMPETITIVE BIDS:
High
WW
Average
·
··
·
·
·'·•.
·•
91-day Treasury bills
•
maturin& May 26, 1966
Approx. Equiv.
Annual Rate
Price
•
98.817
98.810
98.813
4.680~
£.t 708'/0
4.696i
Y
Im~-day
Treasury bills
maturin~ Au~st 25 z 1966
Approx. EqUf
Price
Annual Rate
97.532
4.882~
97.52:3
4.900~
97.527
4.a92~y
~5cfo of the amount of 91-day bills bid :f'or at the low price was accepted
3% of the amount of 1a2-day bills bid for at the low price was accepted
TOTAL TENDERS APPLIED FOR AND ACCEPTED BY FEDERAL RESERVE DISTRICTS:
District
Boston
New York
Philadelphia
Cleveland
Richmond
Atlanta
Chicago
St. Louis
Minneapolis
Kansas City
Dallas
San Francisco
Applied For
$ 26,166,000
1,555,437,000
31,690,000
30,410,000
14,137,000
40,270,000
340,519,000
52,090,000
16,973,000
27,892,000
21",722,000
237,039,000
Accepted
: Applied For
$ 14,316,000 : $ 27,,373,000
751,437,000: 1,389,124",000
17,140,000:
16,282,000
29 ,8l0 ,000:
52,596,000
14,137,000:
3,804,000
26,260,000:
35,489,000
209,984",000:
321)461,000
31,585",000:
22,873,000
12,698,000:
9,293,000
26,392,000:
ll,314,000
12,872,000:
11,802,000
155,022,000:
193, 343 zOOO
~cepte~
$
17,,31
668,70
3,~
27,SI
3,~
l4,2'
107,3(1
9,81
6,1
10,01
6,_
J1244~
TOTALS
$2,394,345,000
$1)301,653,000 ~ $2,094,754",000
$1,Ooo"f
~/ Includes $238,835,000 noncompetitive tenders accepted at the average price~
Includes $105,484,000 noncompetitive tenders accepted at the average priceoi
Y Tnese rates are on a bank discount basis. The equivalent coulX)n issue yields
4.82~ -ror the 91-day bills, and 5.0910 for the 182-day bills.
£I
F-386
-
2 -
reads as follows:
COpy
~
advice to all of you gentlemen in the savings
and loan industry is ax to take this admonition seriously.
prudence and good judgment are the appropriate watch words
----.-
"~,-.
,
for all of us today HB1. . . . .s.tRR
-
private sector.
/'
. -\-
~
,~
~
j
whether in the public or
,j!ould enable the President to cut taxes and putche responsibility on the
Congress for raising taxes and they objected that this approach HQuld
ViOlatE
1)
t
\,
the constitucional responsibility of the Congress to control tax policy
From my particular vantage point it appears that there may be some
\
ch nge in (chink"ng occuring in the country"
ju ,ifiable pride . n the economic climate
1962
The Congress s e e r be
th~t
~nd
they have cry-ted Hith the
1964.
ena . troent of the
of
cer ain th _"~ tax
effective economic
They
the Congress
I believe tho.t the
,-md -he c01mcry th3,~ under a
poli ''[cakes no::'
mO~lths
t.Jtin~
any change in over-all Lax
bu::- years.
erienc'e, I i'Tould say that
this lengthly deliberation is appropriat
of tax policy
carr
that it is not
so many ramifications and spread .
al;/a s easy for a small group of
a~ti
n.
In
uickly on the best course
e
e Par liamen cary
~0hat
our
lm er such
c
days or ,reeLs
From all
r
ther \,'ide s
essional system is superior
prevail in most
HoweVEr, it is equall, apparent that
more quickly to
0:
ry system can move
ect short run economic disloca . ons.
The Gover!1'!!en: 1
akes its proposals vJhich are either enacted in a perid
the Government falls.
e::perience I Hould imagine
acceptance of Secretary Dillon 1 s statement that the
343
- 2 -
"This does not mean ths. t
(
/
u~eful
.)
cyclical changes incax policy Hould nOL be
Nor, fortUD&. tely, does it me.::in that tax policy is entirely impotent
.
in moderating cy(~lical fluctuations today.
By promoting sus tained e;rollth and
a stronzer economy )b-x pelicy can be and, as i~ has been developed over the
pa:::;~
three and one-half years, nOl·r is an important counter force both to
recessions 3.nd to inadequate gro,:!th.
\
\,
But
~!e
clearly have a major piece of
unfinished business to resolve before ,·re can.::l::lim that tax policy is fully
\
\
equipped
On
I
co
do for us the job that any modernecoflomy requires of it."
Hay 8,
NAVl.
1]62 the
tal~~~i~t~~o(n' d~~ ::~d ~0
Congress a recormnendation
TO
uhich l!ould givif..!f:tj the President SLandby ta:: reduction authority.
It
1\
~A~ t
_~,L~
Such authority ·Hould permi ~ the President to reduce the fixed statucory
rates by u:;:: to 5 percentage points for a period of six months 'dith the
possibili-ty of eXvending the reduction for another six months.
~) ~
/
/J
event could the period of unin-,erru_pted tax reduction exceed'-one year vTithout
/'
specific affirma--cive Congressional )..ction.
)J
talce effecc
,..
31 days after submission
A IJlan of tax reduction would ~~~
by the President, but only if in the
course of this period Congress did not disapprove the plan by concurrent
I
,
resolutiO'."1_ .
\
\
vf.
But in no
\
Th"~lS the proposed legislation at tempted to combine assuran~€ of
COl1 cressional control \Ii th provision for the flexibility of action needed tJ
\ achieve "~hc objectives of ma:cinum employment and output, economic stabili·:Y
\
¥d ESrmlth.
l{§
fDBW} isJiet tjhis con:.:;ept -;-ras simply too
novel for the
I
/
~ongTess eVEn to consider.
They objected that t.here ,'[as no proof' that tax
. PJ1i:::y ~"fas a usefu_l ,,::oun'~e:r- cyclical tool; they obj ected that this approac!i
STANDBY TAX
A~"RITX
A IT RELATE
TABILITY IN THE
.J~~~CIAL B
STEM
) \ q b q ')
on~.
L,(' ~
d?~r>Ju~:__~:~....':~e ~onorable Douglas.Dillon, sec:.;t~~Y~Jf"~
sider to be must reading for anyone in the financial community or
~_ l
anyone in ~
this government \-Jho is charged with responsibility in this area.
I will not
Treasury,
dciiv@p~ln
'1
address at the Harvard
Bus~ness
School whish T
attempt to~~ ,'S'tl~t.8~.d.i~~,a~~~~r._~.::~:ta~~._~.~l":O~' b.~t I do ~
'tTant to
to your attention the following three paragraphs of his remarks:
"While the prime purpose of our overall tax program is-and always has
been-the long-range stimulation of our economy to permanently higher levels)
the timing of the program has been important in sustaining the present expansion, and deliberately so.
We must not, however, let this question of
timing obscure the underlying objectives of the tax program.
the Revenue Act of
The fact that
1964 is having some beneficial counter-cyclical effects
should not be taken to mean that
~re
have succeeded in developing a new and
effective counter-cyclical tool.
"There remain, in my opinion, great obstacles to the use of tax policy
for purely counter-cyclical purposes.
The chief of these obstacles is the
fact that, wi thin our constitutional system, a long lag typically intervenes
bebveen a request for a change in tax rates and legislative approval.lUnles s
and until some method is 'l-rorked out-acceptable to the Congress and consistent i.vith its prerogatives-"rhereby tax rates can be varied 't-rithout undue
delay, the purely counter-cyclical function of tax policy vrill remain outside
our arsenal of economic tools.
! However,
in the excise tax legislation last year and
in this year's tax proposals, the Congress is
demonstrati~
the rather amazing adaptability which has characterized its
history.
While it is unwilling to surrender what it con-
siders to be its constitutional prerogative to control the
taxes of the U. S., it is also demonstrating that it does
understand that tax policy as well as budget policy and
monetary policy are tools the U. S. can and should be
prepared to use flexibly and quickly.
The doubts which
Secretary Dillon expressed in 1964 and in which I shared
at that time are being dispelled at this moment by the demonst
ability of the Congress to act prudently and carefully but
with great speed.
I must confess that I find this responsiblf
ac tion on the part of the Congress to be further proof of
the dynamism of our system of government.
.
L--
In conclusion, let me draw your attention to a short
paragraph on page 20 of the President's Economic Report. It
;4
- 6 -
ec:::c~~~
: . --
b~'
T
tax program involves four parts:
1.
A
ew graduated withholding sy tern for the payment of
\,
\
individual inc~axes.
This i~
e to go into operations on
While\no taxpaye"i ' final tax liabilities will
May 1, 1966.
\,
;1
be increased, the new V ' d i n g system will put many more
individual taxpayers
,/~
a cu,\"rent
OQ,!
payments b asis.
Th e gra d uate d
"'\
~
withholding
Iso will
re~e
the amount of overwithholdin.
",
'\
and underwithho~ing of income taxes~~\.,which we have under the
I
/
"
present 14 rrcent flat-rate withholding ""~an, and far more
I
~
;'"
.f
taxpayeys will find, under the new
IDjthat they will wind up their taxable years
I
/'
reak-even" situation -- that is, with the amount of
i
withheld being withing $10 of final tax liabilities.
- 6 -
"Tax Adjustment Act of 1966" for House floor action.
Barring unforeseen circumstances, this legislation will be
passed by the House -- perhaps by nightfall tomorrow (Wednesday,
February 23, 1966).
We expect that the Senate Finance Committee,
before the week is out, will start its public hearings on the bill.
Our goal is to have it enacted by March 15 -- that is, within
60 days of the time President Johnson called for action.
We are
confident this deadline can be met.
Congress was justifiably proud of the economic climate created
through the application of tax policy to economic problems in the
Revenue Acts of 1962, 1964, and 1965.
Now we are again witnessing how tax changes, as an integral
part of fiscal policy, can be used as a counter-cyclical
- 5 approval of such changes.
That theory is no longer valid.
The Congress right now
is demonstrating -- as it did with the swift enactment of the
excise tax legis lation in 1965 -- that
tax~"policy
is an effective
economic weapon which can be brought into play both responsibly
and responsively without protracted delays.
The excise tax legislation of last year was on the books
within about a month of the time it was proposed.
President Johnson proposed the tax adjustments now before
Congress in mid-January.
The House Ways and Means Connnittee moved
swiftly to consider his recommendations.
By last week -- on
February 17 -- the distinguished chairman of the Ways and Means
Committee, Representative Wilbur Mills of Arkansas, was before tM
House Rules Committee seeking the necessary action to clear the
- 4 objectives.
In the different economic circumstances facing us
today, it is natural enough that we look again to flexible fiscal
policy, and that is what the Administration has done.
The House of Representatives tomorrow is scheduled to consider
the President's tax program, which will increase Federal revenues
by some $6 billion between now and July 1, 1967.
This legislation,
in both its timing and content, illustrates how tax policy is being
used for counter-cyclical purposes.
There was a time, not too many years ago, when the generally
accepted theory was that tax policy wasn't a very useful tool -either to help nip inflationary developments in the bud, or to head
off cyclical declines.
It was argued that -- in our system of
government -- there would always be a long time lag between a
Presidential request for changes in the tax structure and legisl ati,
- 3 -
I
It is tempting t
say that Vietnam is the reason f
the
/-economy.
It has indeed been a
But the roots go deepe.
considerab
is being
The Vietnam
ed on an economy that
or less steadily over
has been gathering
that
the past five years.
gth should be credited to
the timely income tax
in 1964 and the excise tax
cuts enacted last year.
investment tax credit of
More
epreciation allowances and till
h\ve helped,
But most of all,
~
the economy's strength
refltction of
initiative, which
~
has been unfettered
rough the
A clear lesson of the experience
of needles ly high tax
~n
the past several years is
that flexible fiscal policy can be made to Serve national econrnnc
- 2 Fortunately, our economic policy is not a "stop-and':'go"
proposition.
The basic goal of economic policy today is the
sa~
as a year ago, or three years ago, or even five years ago -- to
keep the United States moving forward in terms of real economic
growth.
In the earlier years of this decade the gap between actual and
jotential Gross National Product was very substantial.
The economic
policy "mix" then was designed to stimulate demand.
Today, unemployment is down to four percent -- with good
prospects of going still lower.
Our productive capacity is closer
to full utilization then it has been for a number of years.
Further
we are facing the greater Vietnam build-up programmed in the neW
budget.
In these circumstances our fiscal and monetary policies are
appropriately aimed at moderate restraint.
TREASURY DEPARTMENT
Washington
FOR RELEASE:
UPON DELIVERY
REMARKS OF THE HONORABLE JOSEPH W. BARR
UNDER SECRETARY OF THE TREASURY
BEFORE THE
NATIONAL LEAGUE OF INSURED SAVINGS ASSOCIATIONS
AT THE
WASHINGTON HILTON HOTEL, WASHINGTON, D. C.
TUESDAY, FEBRUARY 22,1966,12:30 P.M., EST
There seems to be something about the gray, gloomy days of
the late winter season that brings out all the doubts and
uncertainties about the nation's economic health.
A year ago -- it was just about this time of year -- there
was considerable talk to the effect that the economy was running
out of steam.
We were moving then into our fifth straight year of
sustained expansion -- an expansion which, no matter how you
measure it, was solid and real.
Today we are on the threshold of the sixth year of that
economic expansion.
But now we are hearing about a new set of doubts and
uncertainties -- keyed largely to an anxious scanning of the skies
for signs of infla t ion.
Fortunately, our economic policy is not a "stop-and-gol f
proposition. The basic goal of economic policy today is the same
as a year ago, or three years ago, or even five years ago -- to
keep the United S ta tes moving forward in terms of rea 1 ec onomie
growth.
In the earlier years of this decade the gap between actual
and potential Gross National Product was very substantial. The
economic policy "mix" then was designed to stimulate demand.
Today, unemployment is down to four percent -- with good
prospects of going still lower. Our productive capacity is closer
to full utilization than it has been for a number of years.
~urther, we are facing the greater Vietnam build-up programmed in
the new budget.
In these circumstances our fiscal and monetary
)olicies are appropriately aimed at moderate restraint.
REMARKS OF THE HONORABLE JOSEPH W. BARR
UNDER SECRETARY OF THE TREASURY
BEFORE THE NATIONAL LEAGUE OF INSURED SAVINGS ASSOCIATIONS
AT THE WASHINGTON HILTON HOTEL
TUESDAY, FEBRUARY 22, 1966, 12:30 P.M., EST
There Seems to be something about the gray, gloomy days of
the late winter season that brings out all the doubts and
uncertainties about the nation's economic health.
A year ago -- it was just about this time of year -- there
was considerable talk to the effect that the economy was running
out of steam.
We were moving then into
our fifth straight year of
sustained expansion -- an expansion which, no matter how you
measure it, was solid and real.
Today we are on the threshold of the sixth year of that
economic expansion.
But now we are hearing about a new set of doubts and
uncertainties -- keyed largely to an anxious scanning of the
for signs of inflation.
sne.
- 2 -
A clear lesson of the experience in the past several years is
that flexible fiscal policy can be made to serve national economic
objectives.
In the different economic circumstances facing us
today, it is natural enough that we look again to flexible fiscal
policy, and that is what the Administration has done.
The House of Representatives tomorrow is scheduled to consider
the President's tax program, which will increase Federal revenues
by some $6 billion between now and July 1, 1967. This legislation,
in both its timing and content, illustrates how tax policy is being
used for counter-cyclical purposes.
There was a time, not too many years ago, when the generally
acceplted theory was that tax policy wasn't a very useful tool -either to help nip inflationary developments in the bud, or to
head off cyclical declines.
It was argued that -- in our system
of government -- there would always be a long time lag between a
Presidential request for changes in the tax structure and
legislative approval of such changes.
That theory is no longer valid. The Congress right now
is demonstrating -- as it did with the swift enactment of the
excise tax legislation in 1965 -- that tax policy is an effective
economic weapon which can be brought into play both responsibly
and responsively without protracted delays.
The excise tax legislation of last year was on the books
within about a month of the time it was proposed.
President Johnson proposed the tax adjustments now before
Congress in mid-January. The House Ways and Means Committee
moved swiftly to consider his recommendations.
By last week -on February 17 -- the distinguished chairman of the Ways and
Means Committee, Representative Wilbur Mills of Arkansas, was
before the House Rules Committee seeking the necessary action to
clear the "Tax Adjustment Act of 1966" for House floor action.
Barring unforeseen circumstances, this legislation will be
passed by the House -- perhaps by nightfall tomorrow (Wednesday,
February 23, 1966). We expect that the Senate Finance Committee,
before the week is out, will start its public hearings on the
bill.
Our goal is to have it enacted by March 15 -- that is, within
60 days of the time President Johnson called for action. We are
confident this deadline can be met.
- 3 Congress was justifiably proud of the economic climate created
:hrough the application of tax policy to economic problems in the
~venue Acts of 1962, 1964, and 1965.
Now we are again witnessing how tax changes, as an integral
oart of fiscal policy, can be used as a counter-cyclical economic
)olicy tool.
On June 6th, 1964, the Honorable Douglas Dillon, then
secretary of the Treasury, in an address at the Harvard Business
school had this to say:
"While the prime purpose of our overall tax
program is -- and always has been -- the long-range
stimulation of our economy to permanently higher
levels, the timing of the program has been important
in sustaining the present expansion, and deliberately
so. We must not, however, let this question of timing
obscure the underlying objectives of the tax program.
The fact that the Revenue Act of 1964 is having some
beneficial counter-cyclical effects should not be
taken to mean that we have succeeded in developing
a new and effective counter-cyclical tool.
"There remain, in my opinion, great obstacles
to the use of tax policy for purely counter-cyclical
purposes. The chief of these obstacles is the fact
that, within our constitutional system, a long lag
typically intervenes between a request for a change
in tax rates and legislative approval. Unless and
until some method is worked out -- acceptable to
the Congress and consistent with its prerogatives -whereby tax rates can be varied without undue delay,
the purely counter-cyclical function of tax policy
will remain outside our arsenal of economic tools.
"This does not mean that cyclical changes in
tax policy would not be useful. Nor, fortunately,
does it mean that tax policy is entirely impotent
in moderating cyclical fluctuations today.
By
promoting sustained growth and a stronger economy,
tax policy can be and, as it has been developed over
the past three and one-half years, now is an
important counter force both to recessions and to
inadequate growth. But we clearly have a major piece
of unfinished business to resolve before we can claim
that tax policy is fully equipped to do for us the
job that any modern economy requires of it."
- 4 On May 8, 1962 President Kennedy did send to Congress a
recommendation which would have given to the President standby
tax reduction authority.
Such authority would have permitted the President to
reduce the fixed statutory rates by up to 5 percentage points
for a period of six months with the possibility of extending
the reduction for another six months.
But in no event could
the period of uninterrupted tax reduction have exceeded one
year without specific affirmative Congressional action. A plan
of tax reduction would have taken effect 31 days after
submission by the President, but only if in the course of this
period Congress did not disapprove the plan by concurrent
resolution. Thus the proposed legislation attempted to combine
assurance of Congressional control with provision for the
flexibility of action needed to achieve the objectives of
maximum employment and output, economic stability, and growth.
This concept was simply too novel for the Congress even to
consider. They objected that there was no proof that tax
policy was a useful counter-cyclical tool; they objected that
this approach would enable the President to cut taxes and put the
responsibility on the Congress for raising taxes and they
objected that this approach would violate the constitutional
responsibility of the Congress to control tax policy.
do not believe that this Congressional attitude has
changed.
I
However, in the excise tax legislation last year and
in this year's tax proposals, the Congress is demonstrating
the rather amazing adaptability which has characterized its
history. While it is unwilling to surrender what it considers
to be its constitutional prerogative to control the taxes of the
U. S., it is also demonstrating that it does understand that tax
policy as well as budget policy and monetary policy are tools the
U. S. can and should be prepared to use flexibly and quickly. The
doubts which Secretary Dillon expressed in 1964 and in which I
shared at that time are being dispelled at this moment by the
demonstrated ability of the Congress to act prudently and carefully
but with great speed.
I must confess that I find this responsible
action on the part of the Congress to be further proof of the
dynamism of our system of government.
In conclusion, let me draw your attention to a short
paragraph on page 20 of the President's Economic Report.
It
reads as follows:
- 5 -
"Perhaps our most serious economic challenge in
1966 will be to preserve the essential stability of
costs and prices which has contributed so significantly
to our balanced progress."
My advice to all of you gentlemen in the savings and loan
industry is to take this admonition seriously. Don't count on
inflation to bail you out on poorly considered judgments in
your day-to-day activities. Restraint, prudence and good judgment
are the appropriate watch words for all of us today whether in the
public or private sector.
000
- :3 -
BETA - MJDltIED
sale or other disposition ot Treasury bills does not have any special treatment, ..
sucb, under the Internal Revenue Code of 1954.
The bills are subject to estate,
Inheritance, gi:rt or other excise taxes, whether Federal or State, but are exeapt fit
all taxation nov or hereafter impo8ed on the prj,.ncipal or interest thereot b,. ..., . .
or an,:! ot the possessions ot the United States, or by any local taxing autborltl. It
purposes ot taxation the amount ot discount at which Treasury bllls are orig1Dalq
by th,: United States i8 considered to be interest.
Under SectioDS 454 (b) and 1221
ot the Internal Revenue Code ot 1954 the amount ot discount at which billa ilaue4"
under are 80ld i8 not considered to accrue until such billa are 80ld, recleemed or 011
vise disposed ot, and such billa are excluded trom consldel'8tion aa capital a88et••
Accordingly, the owner 0'1 Treasury bills (other than lite insurance companie.) 1••
hereunder Deed include in his income tax retul'll only the difference betweeD the priaI
paid 'tor such bills _ whether
OD
original issue or' OD subsequent purchase, and
*
actually received either upon sale or redemption at maturity during the taxable , .
tor which the return is made,
8S
ordinary gain or
1088.
Treasury Department Circular No. '18 (current revision) and this notice, pre_
the terme of the Treasury bills and govern the conditions of their issue. Coptea of
the circular may be obtained from an,:! Federal Reserve Bank or Branch.
- 2 BETA - MODIP'!EII
printed fonns and forwarded in the special envelopes which will be supplied b7 ret.
Reserve Banks or Branches on application therefor.
Banking institutions generally may submit tenders for account of customere,.
v1ded the names ot the customers are set forth in such tenders.
others than _
institutions will not be permitted to submit tenders except for their own acCOUl\.
Tenders v1ll be received without deposit from incorporated banks and trust cClQlld
and tram responsible and recognized dealers in investment securities.
T~n
n.
others must be accompanied by payment ot' 2 percent of the face amount of freaaurr
applied for, unless the tenders are accompanied by an express guaranty at paJlllllt
an incorporated bank or trust company.
Immediately at'ter the closing hour, tenders will be opened at the Federal B.
Banks and Branches, following which public anouncement will be made by the TreaIlUl
Department of the amount and price range of accepted bids.
will be advised of the acceptance or rejection thereof.
Those submittinS
~
The Secretary at the !III
expressly reserves the right to accept or reject any or all tenders, in whole or I
part, and his action in any such respect shall be final.
Subject to thele re..rtI
tions, noncompetitive tenders for each issue for $200,000 or less without statH
price from any one bidder vill be accepted in full at the average price (in thrtl
dec1JDals) of accepted campetl ti ve bids t:or the respect1 ve issues.
Settlement tal
accepted tenders in accordance with the bids'must be made or completed at the 11
Reserve Bank on ___Marcb
_ _. . .,. . .3-::,:-Tl_9_66
____ , in cash or other immediatelyava1181tlt
(IS)
or in a like face amount of Treasury bllls maturing
March:5, 1966
•
and exchange tenders will receive equal treatment.
(17)
Cash adjustments will be.
differences between the par value of maturing bills accepted in exchange and t;JIe
price of the new bills.
The income derived t:rom Treasury billa, whether interest or gain frcJI tile
other disposition of the bills, does not have any exemption, as such, and 1011
TREASURY CEPARTMENT
February
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
$2,300,000,000, or thereabouts, for cash and in exchange for
Treasury bills maturing March 3, 1966,
in the amount of
$2,201,257,000, as f'ollows:
91-day bills (to maturity date) to be issued March 3, 1966,
in the amount of $ 1,300,000,000, or thereabouts, representIng an
additional amount of bills dated December 2,1965,
and to
mature June 2,1966,
originally issued in the amount of
$1,000,153,000, the additional and original bills to be freely
interchangeable.
182-day bills, for $ 1,000,000,000, or thereabouts, to be dated
March 3,1966,
and to mature September 1, 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
(maturi ty value).
Tenders will be received at Federal Reserve Banks and Branches
up to the clOSing hour, one-thirty p.m.,
Eastern Standard
time, Monday, February 28, 1966.
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 1s 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 thereror.
Banking institutions generally may submit tenders for account of
customers provided the names of the customers are set forth 1n such
tenders. Others than banking institutions will not be permitted to
submit tenders except for their own account. Tenders will be received
Without deposit from incorporated banks and trust companies and from
responsible and recognized dealers in investment securities. Tenders
from others must be accompanied by payment of 2 percent of the face
amount of Treasury bills applied for, unless the tenders are
accompanied by an express guaranty of payment by an incorporated bank
or trust company.
Elthibit 2-A
....'
BETA - MODIFIED
'mEASURY DEPAR'IMENT
Washington
FOR IMMEDIATE RELEASE, 4: 00 p.m., EST
Wednesday, February 23, 1966
•
(l )
TB!ASURf'S WIIICLY BILL 0FPBRlJIJ
'!be Treasury Department" by this public notice, invites tenders tor two
lin.
ot Treasury bills to the aggregate amount ot $ 2,300,000,000 , or thereabouts, for
(2)
cash and in exchange for Treasury bills maturing March 3~ 1966
.. in the . . .
(3)
of $ 2,201,257,000 ,
8S
tollows:
(4)
91 -day bills (to maturity date) to be issued ....:.:Mar=.;cb=-,;:::~#-..~1;::.;:9;..;:66;:...._ _ ,
(5)
(6)
in the amount
ot $
l,:500,OOO.QQ9. or thereabouts, represent·
,
{7}
ing an additional amount ot bills dated
and to mature
amount of
Decaaber 2, 1986
(s)
_...;J:.:UD=e:.,.::;2~,~1:.::9;.;:66~__ , originally issued in
(9}
the
$ 1, OOO,15S, 000 , the additional and original bills
(10)
to
be freely
interchangeable.
182 -day bills, tor $1,000,000,000 .. or thereabouts, to be dated
(11)
(12)
March ~, 1966
, and to mature Sep1;mbV 1,
(~)
(U
t*
•
The bills ot both series vill be issued on a discount basis under c~tit1ft
and noncompetitive bidding as hereinaf'ter provided, and at maturity their taci
11111 be payable without interest.
They will, be issued in bearer
tOl'll
oaly, -
denominations ot $1,000, $5,000, $10,,000,' $50,,000, $100,000, $500,000 and
fl,.
(maturity value).
1'enders will be rece1ved at Federal Reserve Banks and BrancheS up to the .11
hour, one-thirty p.m., !astern Standard time,
JfoD4q, hbJ"Ua17 28, 1'" _,
(15)
¥ill Dot be received at the Treasury Department, Washington.
Each tender'"
for aD even multiple of $1,000, and in the ease or competitive tenders the . .
offered !lUst be expressed on the basis
e. g., 99.925.
ot 100, with not
Fractions may not be used.
more than three ~
It 1s urged that tenders be . . . .
- 2 -
Immediately after the closing hour, tenders will be opened at t~
Federal Reserve Banks and Branches, following which public announcement will be made by the Treasury Department of the amount and price
range of accepted bids. Those submitting tenders will be advised
of the acceptance or rejection thereof. The Secretary of the TreasUE')
expressly reserves the right to accept or reject any or all tenden,
in whole or in part, and his action in any such respect shall be
final. Subject to these reservations, noncompetitive tenders for
each issue for $200,000 or less without stated price from anyone
bidder will be accepted in full at the average price (in three
decimals) of accepted competitive bids for the respective issues.
Settlement for accepted tenders in accordance with the bids must be
made or completed at the Federal Reserve Bank on March 3, 1966, ~
cash or other immediately available funds or in a like face amount
of Treasury bills rna turing March 3, 1966.
Cash and exchange tendel
will receive equal treatment. Cash adjustments will be made for
differences between the par value of maturing bills accepted in
exchange and the issue price of the new bills.
The income derived from Treasury bills, whether interest or
gain from the sale or other disposition of the bills, does not have
any exempt ion, as such, and loss from the sale or other disposition
of Treasury bills does not have any special treatment, as such,
under the Internal Revenue Code of 1954. The bills are subject ~
estate, inheritance, gift or other excise taxes, whether Federal ~
State, but are exempt from all taxation now or hereafter imposed on
the principal or interest thereof by any State, or any of the
possessions of the United States, or by any local taxing authority.
For purposes of taxation the amount of discount at which Treasury
bills are originally sold by the United States is considered to be
interest. Under Sections 454 (b) and 1221 (5) of the Internal
Revenue Code of 1954 the amount of discount at which bills issued
hereunder are sold is not considered to accrue until such bills are
sold, redeemed or otherwise disposed of, and such bi lIs are excluded
from consideration as capital assets. Accordingly, the owner of
Treasury bills (other than life insurance companies) issued hereunder
need include in his income tax return only the difference between
the price paid for such bills, whether on original issue or on
subsequent purchase, and the amount actually received either upoo
sale or redemption at maturity during the taxable year for which t~
return is made, as ordinary gain or loss.
Treasury Department Circular No. 418 (current revision) and thiS
notice prescribe the terms of the Treasury bills and govern the
C ond i t ions of the ir issue.
Copies of the circular may be obtained ft
any Federal Reserve Bank or Branch.
000
TREASURY DEPARTMENT
~
ISciay,
6s30 P.M.,
February 23, 1966.
RESULTS OF REFUNDING OF $1 BILLION OF ONE-YEAR BILLS
The Treasury Department announced that the tender~ for $1,000,000,000, or thereH, of 365-day Treasury bills to be dated February 28, 1966, and to mature February
1967, which were offered on February 16, were opened at the Federal Reserve Banks
.,.
The details of this issue are as follows:
Total applied for - $1,771,167,000
Total accepted
- $1,000,027,000
(includes $33,026,000 entered on a
noncompetitive basis and accepted in
fUll at the average price shown below)
Range of accepted competitive bids:
- 95.007 Equivalent rate of discount approx. 4.925% per annmn
- 94.974
"
n"
"
"4.957% 11
"
_ 94.986
11
II
It
"
"4.945% II
II Y
High
Lov
Avera.ge
(81 percent of the amount bid for at the low price
Federal Reserve
District
Boston
New York
PhUadelphia
Ricblnond
Atlanta
Chicago
St. Louis
Minneapolis
Kansas City
naJ.l..
San Franoisco
TOTAL
Total
Applied For
Accepted
$
37,223,000
1,312,53 2 ,000
$
35,900,000
6,423,000
17,107,000
224,285,000
26,758,000
6,660,000
2,223,000
16,262,000
74,108,000
$1,771,167,000
1. rate :18 on a bank discount bas:1s.
-388
accepted)
Total
11,686,000
Cleveland
~as
16,223,000
769,342,000
1,686,000
30,900,000
6,423,000
12,107,000
86,335,000
20,758,000
5,660,000
2,22),000
2,262,000
46,108,000
$1,000,027,000
The equivalent coupon issue yield i8
5.21%.
TREASURY DEPARTMENT
-
FOR RELEASE 6:30 P.M.,
Wednesday, February 23, 1966.
RESllLTS OF REFUNDING OF $1 BILLION OF ONE-YEAR BILLS
The Treasury Department announced that the tenders for $1,000,000,000" or then
abouts, of 365-day Treasury bills to be dated February 28, 1966, and to mature ~
28, 1967, which were offered on February 16, were opened at the Federal Reserve.
to~.
The details of this issue are as follows:
Total applied for - $1,771,167,000
Total accepted
- $1,000,027,000
(includes $33,026,000 entered on a
noncompetitive basis and accepted b
.full at the average price shown below)
Range of accepted competitive bids:
- 95.007 Equivalent rate of discount approx. 4.925% per II.
... 94.974
"
II"
..
II
4.957%"
- 94.986
"
tI
It
"
It
4.945%"
High
Low
Average
(81. percent. of the amount bid for at the low price ....as accepted)
Federal Reserve
District
Boston
New York
Philadelphia
Cleveland'
Richmond
Atlanta
Chicago
Sto Louis
Ninneapolis
Kansas City
Dallas
San Francisco
Total
Accepted
$ 16,223,000
769,342,000
1,686,000
30,900,000
1,312,532,000
11,686,000
35,900,000
6,423,000
17,107,000
224,285,000
26,758,000
6,660,000
2,22],000
16,262,000
74,108,000
TOTAL
!I This
Total
Applied For
$ 37,223,000
$1,771,167,000
rate is on a bank discount basis.
F-J88
6,42,3,000
12,107,000
86,335,000
20,758,000
5,660,000
2,223,000
2,262,000
46,108,~
$1,000,027,000
The equivalent coupon issue yield:1a
S
TREASURY DEPARTMENT
February 24, 1966
FOR D1MEDIATE RELEASE
WITHHOLDING OF APPRAISEMENT ON
TITANIUM DIOXIDE
The Treasury Department is instructing customs field officers
to withhold appraisement of titanium dioxide, pigment grade, rutile
type, from Japan, exported by Sakai Trading Co., Ltd., Osaka, Japan,
The Kouyoh Trading Co., Ltd., Osaka, Japan, and Marubeni-lida Co.,
Ltd., Osaka, Japan, pursuant to a determination that this merchandise
is being sold at less than fair val.ue within the meaning of the Antidumping Act" 1.921, as emended.
Notice to this effect is being pub-
lished in the Federal Register.
Under the Antidumping Act" determination of sales in the United
states at less than fair value requires reference of the case to the
Tariff Commission, which would consider whether American industry was
being injured.
Both dumping price and injury must be shown to justify
a finding of' dumping under the law.
~e
information alleging that the merchandise under consideration
was beiZlg sold at less than fair value within the meaning of the Antidumping Act was received in proper form on November 17, 1964.
TREASURY DEPARTMENT
February 24, 1966
FOR IMMEDIATE RELEASE
WITlillOLDING OF APPRAISEMENT ON
TITANIUM DIOXIDE
The Treasury Department is instructing customs field officers
to withhold appraisement of titanium dioxide, pigment grade, rutile
tYJ)e, from Japan, exported by Sakai Trading Co., Ltd., Osaka, Japan,
The Kouyoh Trading Co., Ltd., Osaka, Japan, and Marubeni-lida.
Co.,
Ltd., Osaka, Japan, pursuant to a determination that this merchandise
is being sold at less than fair value within the meaning of the Antidumping Act, 1921, as amended.
Notice to this effect is being pub.
lished in the Federal Register.
Under the Antidumping Act, determination of sales in the United
States at less than fair value requires reference of the case to the
Tariff Commission, which would consider whether American industry was
being injured.
Both dumping price and injury must be sho'WIl to justify
a finding of dumping under the law.
The information alleging that the merchandise under consideration
was being sold at less than fair value within the meaning of the Anti.
dumping Act was received in proper form on November
17, 1964.
2
'rna teclmical points in this decision will be of interest to
students of the Antidumping Act.
1.
Regulations adopted in January 1965 state that Treasury
will make a determination of no sales at less than fair value where
the foreign producer revises his prices promptly after the start of
the antidlunping investigation so as to eliminate the likelihood of
future sales at the prices vlhich prevailed before the revision.
The
Japanese titaniun1 dioxide decision states that this provision of the
regulations does not prevent Treasury from making a positive determination of sales at less than fair value where the sales made prior
to the price revision may be sufficiently substantial so as to
constitute ,rhit and run lT dumping -- traditionally viewed by economists
as the most haroful type of dumping.
\lfuether the less than fair value
sales in this case are sufficiently substantial to constitute injury
to domestic industry v/ill now be decided by the Tariff Commission.
2.
The Antidumping Act provides for dumping findings where
merchandise "is being" sold at less than its fair value.
The
Japanese titanium dioxide decision construes this use of the present
tense to refer, not to the time of the decision itself, but to the
period at or reasonably near to the time vlhen the complaint was filed.
TREASURY DEPARTMENT
February 24, 1966
FOR IMMBDIATB REa:ASE
TREASURY mI:ISION ON TITANllJM DIOXIDE
UNDER THE ANTIDUMPING ACT
The Treasury Department has determined that titanium dioxide,
pigment grade, rutile type, from Japan, exported by Sakai Trading
Co., Ltd., Osaka, Japan, The Kouyoh Trading Co., Ltd., Osaka, Japan,
and Marubeni-lida Co., Ltd., Osaka, Japan, is being, or i8 l.1keJ.y
to be,
8o~d
at l.ess than fair vaJ.ue within the meaning of the Anti-
dumping Act, 1921., as amended.
This action is being taken after
consideration of all. comments received pursuant to a "Notice of In-
tent to Discontinue Investigation and of Tentative Dete%'lllination That
No Sales Exi8t Bel.ow Fair Value," publ.ished in the Federal. Register
on November 24, 1965.
Accordi.ng.l.y, this case is being referred to the United States
Tariff Commission for an injury determination.
Notice of the determination, of the reasons therefor, and ot
the reference of the case to the Tariff Commission vU.l. be publ.ished
in the Federal. Register.
IDIports
J~ l.,
1964,
ot the invol.ved merchandise received
thrOugh DeceDiber J].,
during the period.
1965, amounted to approx.imBteJ.y
$5,770,000. The sales at less than fair value amounted to approximately
$4 00 ,000, with a dumping margin (difference between Japanese home price
and price to the United states) of approximately $11,250.
TREASURY DEPARTMENT
r-.
-I
..
'.,
I
(,.
FOR IMMEDIATE RELEASE
TREASURY DEX!ISION ON TITANIUM DIOXIDE
UNDER THE ANTIDUMPING ACT
The Treasury Department has determined that titanium dioxide,
pigment grade, rutile type, from Japan, exported by 8akai Trading
Co., Ltd., Osaka, Japan, The Kouyoh Trading Co., Ltd., Osaka, Japan,
and Marubeni-lida Co., Ltd., Osaka, Japan, is being, or 1s likely
to be,
so~d
~ess
at
than :fair value Within the meaning of the Anti-
dumping Act, 1921, as a.nended.
This action is being taken after
consideration of aJ.J. cOIIlDlents received pursuant to a "Notice of Intent to Discontinue Investigation and of Tentative Determination TbBt
Be~ow
No Sales Exist
on November 24,
Fair Value," published in the Federal. Register
1965.
Accordingly, this case is being referred to the Un1ted States
Tariff Commission for an injury determination.
Notice of the determination, of the reasons therefor, and of
the reference of the case to the Tariff Commission will be published.
in the Federal. Register.
Imports of the involved merchandise received during the peri04
Jul.y 1,
1964,
$5,770,000.
through December
31, 1965, amounted to approximatel1
The sales at less than fair value amounted to approximBt el1
$4 00 ,000, with a dumping margin (difference between Japanese home price
and price to the United states) of approximately $11,250.
2
Two technical points in this decision vliil be of interest to
students of the Antidumping Act.
1.
Regulations adopted in January 1965 state that Treasury
will make a determination of no sales at less than fair value where
the foreign producer revises his prices promptly after the start of
the antidumping investigation so as to eliminate the likelihood of
future sales at the prices which prevailed before the revision.
The
Japanese titanium dioxide decision states that this provision of the
regulations does not prevent Treasury from making a positive determination of sales at less than fair value where the sales made prior
to the price revision may be sufficiently sUbstantial so as to
constitute "hit and run" dumping -- traditionally viewed by economists
as the most hannful type of dumping.
Whether the less than fair value
sales in this case are sufficiently sUbstantial to constitute injmy
to danestic industry will now be decided by the Tariff Commission,
2.
The Antidumping Act provides for dumping findings where
merchandise "is being't sold at less than its fair value.
The
Japanese titanium dioxide decision construes this use of the present
tense to refer, not to the time of the decision itself, but to the
period at or reasonably near to the t:iI.ne when the complaint was filed.
FORTSON~ogram Advisor-~iF;ft8:ti8
ROBERT M.
tQ the
in Elwood,
('I\.l
_
Indiana'AAugu~t
! ... ; .
~~~ ;;~Ic::negie
lIu;::a,:s
&
g public schools
i1_~.
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Had .
for Carnegie Illinois
lAC~ fI
Stee~ 'a~d
:oj: j
-Tti't.£
Ellicc],
illinois Steel Trade School at G a r y , .
rt -so A o;wWilMj
~ worked
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ell
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16,
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.....
~
a number of
engineering and tool firms in the area until 1955 •
..5 1:- t< iJ I AI 6
0 ./\ /
After II I
i •• we the City Council of Elwood, Indiana,
>81('
ia lsd. _~
!1':.e
j
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_
utl for three years, he was stlceessfal £L£t
~ i.- Ji;
AI (!}
V,
SCldO; ef 'tttat "b'i~ 2 •• <91'1_ •• tim mayo},(rom 1956 to 1961.
In 1961 he was appointed Collector of Customs for Indianapolis.
been. active in civic and patriotic organizations J
A::.. /l
'1=
serving
the Indiana Municipal League, trustee of the Knights of
Mr.
1f
F~rtson h~s
f ...' , ~..1 Q :.,f..../
Pythias, and. the executive committee of the American Legion.
Mr. and Mrs. Fortson reside at 519 West 3rd Street, Anderson,
Indiana.
# # #
Mr. Green was engaged in newspaper work for many years.
After working on the Marquette, Mich., Mining Journal and the
Duluth Herald, he joined the Superior, Wis., Telegraml as a
linotype operator.
He later worked in the advertising and
JAI
editorial departments until his appoAtment as general
manager of t he commercial department i n .
193 6.
"-'"
He subsequently became vice-president of' the
Superior Telegram Co.
>
_i i: .•a
JOHN G. GREEN~Ograrri" Ad\Yi sor-designate'- to~ Regtefta 1
at Chioe-go5 was born on October 31, 189y in St. Ignace,
~sioner
Mich.
He attended parochial and public schools in Marquette, Mich.
e Marquette,
he
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Y th}1 Eveni ng Te
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active in many civic and business organizations.
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~ served on the Superior City Council for 12 years and has been
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)
.'"-----....-~-- . -",.,-.--... ,....' .-.---.. -.-----~
was named Collector of Customs for Duluth-Superior
i
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on November 29, 1962.
Mr. and Mrs. Green live at 2327 Hammond Avenue, Superior, Wis.
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schools and ~
1911, in
Jefferson School of Law in Louisville.
Mr. Crimmins h as h a d a 1ong career
local and state government:
.blll!t
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ill
n..entucky _.
~
From 1939 to 1943 he was Chief Deputy,
Probate Department in the Clerk's Office, Jefferson County. and
OF Tor
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AdministratorA Alcohol Beverage Control Administration at Louisville
in 1946.
In 1962 he was appointed Collector of Customs at Louisville.
Mr. and Mrs. Crimmins reside at 2524 Broadmeade, Louisville,
Ky.
They have two sons and three daughters.
# # #
!.' ... MARGUERITE R.
BENSON~gIi!m J.8:visg:r.desig(£i!~e""'--
~
C~~oner -ofGust0fttS"'~Cbicil80"
to -the Rggional
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was born . .
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9
7 t' ,
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She
attended parochial and commercial schools in Milwaukee, 'MIIiC, Buffalo
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University, BuHalo, N. Y.;I and Columbia Universi ty,..-lt. f., Ii. !fo,. IN
IN III ~ L
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appointed Collector of Customs for MilwaUke" ~
---.....,
2.l'iOI
She
j)s::m~rried
to tti1 s sile
~Ql
d SQ'Tcral aigil
to Charles Carpenter Benson.
Cbf'fhE9 Amt scace
They live at 1616
West Wisconsin Avenue in Milwaukee.
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ft.}
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ANTON SESTRIC~"AdvlS:::Sigmrte ttl the
.-Regional
()ommiSMffil8r--....of-·~..cm.c~ ~.,.
was born in
L.~
St. Louis, Mo. ,,,March 11, 1907.
Mr. Sestric1 ttu!leer
i;;;rZ-;-;;;;=1:i7h.,
IJI S11 ~:'.-I!-/
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served as Justice of the Peace'I\an electei office, from 1934 to
)j
j\
1946.
In 1947 he was elected _
Judge of the Magistrate Court,
"
a position which he held until his appointment as Collector of
Customs in 1961.
He served as Chairman of the Federal Executive Board
of Greater St. Louis for two terms.
Mr. Sestric has also been
active in other civic organization, such a, the
BOYS~Uh of St.
Louis, South Broadway Redevelopment Association, lay advisory
.1'" a)
board for St. Anthony' s
HosPitaJ~
Tn F
United Givers Fund.
Mr. and Mrs. Sestric reside at 3137 Allen Ave., St. Louis, Mo.
#= =iF #=
WILLIAM RUMMELd"f'~8:m Advt~61' desigfl8:te to the
---.~
Regional Commissioner ot--Ctlsiems fn-€hiGaga., was born in
ON
1/:.,
r{)
Chicag0/'l!lffr November 13, 1913
'tl
)
ii attend~ public
schools
the Central YMCA College, and LaSalle Extension
;)
Universityl
7 /I £' 1\
,--'
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I
From 1949 to 1964 he served as Jury Statistical Clerk
in the Municipal Court of Chicago.
his own construction business.
He has, in addition, operated
In 1964/ he entered the Federal
Government se rvice as Comptroller of Customs in Chicago.
Mr. and Mrs. Rummel reside at 9201 S. Yates Ave., Chicago. Ill.
# # #
~Q
., .
-
Mr. Rostenkowski was in the insurance and
r~al
estate
businesses until he was ap90inted Collector of Customs in
1961.
He was elected to the Illinois state Legislature in
1930.
From 1931 to 1957 he served as
the 32nd ward of Chicago.
N. Noble
st., Chicago.
.ii?
Z
Alderman from
He is a widower and lives at 1349
JOSEPH P. ROSTENKOWSKI~am-Adv.i-sor--deSigna'te·
to the
Regtomrl
Commissioner of Customs in Chica~ was born on September 15, 1892J ,~
~ Chicago. ~
He attended St. Stanislaus School in Chicago and
Metropoli tan Business College.
~\
to his appointment as Col
f
in
and real estate
widower and lives
I
\"
~iness~,He
<t
,.
tor of Customs in 1961,
of
~~~~~~~~~~~
Noble St.,
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- 3 Under the reorganization, the Program Advisors will serve
as special
assistan~o
the Regional Commissioner of Customs in
Chicago, with responsibility for development of projects and
programs in public affairs to keep travelers and traders fully
informed of Customs laws and procedures.
(Biographies of the Program Advisors are attached).
000
- 2 -
~the Milwaukee Customs District -- Mrs. Marguerite
1M Ii
( . ,L:;'
c,':
R. Benson, currentlYACollector of Customs.
~r the Louisville Customs District -- John W. Crimmins,
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currentl Y Collec tor of Cus toms.
A
~r the Duluth C~stoms District -- John R. Green,
f It:·
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,
,
currently~Collector
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of Customs.
~r the Port of Indianapolis -- Robert M. Fortson,
rAJ
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A~J'" r'~t
•S
currentlYACollector of Customs.
The appointments were made in accordance with Civil Service
regulations and are part of the Presidential reorganization of the
Bureau of Customs.
The reorganization is designed to place the
l76-year-old lervice wholly on a career basis and to make the agenc)
more responsive to the growing needs of the traveling public and tb
commercial community.
TREASURY DEPARTMENT
(
;
February 24, 1966
RELEASE A.M. NEWSPAPERS
FRIDAY, FEBRUARY 25, 1966
PROGRAM ADVISORS APPOINTED FOR
CHICAGO CUSTOMS REGION
Assistant Secretary of the Treasury True Davis today
announced the appointment of seven Program Advisors for the
new Chicago Customs Region IX, which will be activated
Tuesday, March 1.
The Program Advisors, whose appointment will be effective
March 1, are:
For the Chicago Customs District -Joseph P. Rostenkowski, currently Collector of
Customs for Chicago; and William Rummel, currently
Chicago Comptroller of Customs.
For the St. Louis Customs District
Anton Sestric, currently St. Louis Collector of
Customs.
For the Milwaukee Customs District -Mrs. Marguerite R. Benson, currently Milwaukee
Collector of Customs.
For the Louisville Customs District -John W. Crimmins, currently Louisville Collector
of Customs.
For the Duluth Customs District -- John R. Green,
currently Duluth-Superior Collector of Customs.
For the Port of Indianapolis -- Robert M. Fortson,
currently Indianapolis Collector of Customs.
F-389
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R. L L [ /I 'j E;-
HOLtr:fOif RELEA9R-~-12 :-30':P .H3:; EST--
!!:IUKsDAk-rn~p~Z4ld-%'ti~.-.-··~
PROGRAM ADVISORS APPOINTED FOR
CHICAGO CUSTOMS REGION
Assistant Secretary of the Treasury True Davis today
announced the appointment of seven Program Advisors for the new
Chicago Customs Region IX, which will be activated Tuesday,
March 1.
The Program Advisors, whose appointment will be effective
March 1, are:
lFor the Chicago Customs District -- Joseph P. Rostenkowsk
currently Collector of Customs for Chicago; and
/ "r-t
C-
i('' '1~ t:',
,1
.'
1
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William Rummel, currentlYAComptroller of Customs.
IFO~
the St. Louis Customs District -- Anton Sestric,
ST
J,
0'.;' ':,
currently~Collector
of Customs.
- 2 The appointments were made in accordance with Civil
Service regulations and are part of the Presidential
reorganization of the Bureau of Customs. The reorganization
is designed to place the l76-year-old service wholly on a
career basis and to make the agency more responsive to the
growing needs of the traveling public and the commercial
community.
Under the reorganization, the Program Advisors will serve
as special assistants to the Regional Commissioner of Customs
in Chicago, with responsibility for development of projects
and programs in public affairs to keep travelers and traders
fully informed of Customs laws and procedures.
(Biographies of the Program Advisors are attached.)
000
BIOGRAPHICAL SKETCH OF JOSEPH P. ROSTENKOWSKI
Joseph P. Rostenkowski was born on September 15, 1892,
in Chicago. He attended St. Stanislaus School in Chicago and
Metropolitan Business College.
Mr. Rostenkowski was in the insurance and real estate
businesses until he was appointed Collector of Customs in 1961.
He was elected to the Illinois State Legislature in 1930.
From 1931 to 1957 he served as Alderman from the 32nd ward of
Chicago. He is a widower and lives at 1349 N. Noble Street,
Chicago.
BIOGRAPHICAL SKETCH OF WILLIAM RUMMEL
William Rummel was born in Chicago on November 13, 1913.
He attended public schools, the Central YMCA College, and
LaSalle Extension University there.
From 1949 to 1964 he served as Jury Statistical Clerk
in the Municipal Court of Chicago. He has, in addition, operated
his own construction business. In 1964 he entered the Federal
Government service as Comptroller of Customs in Chicago.
Mr. and Mrs. Rummel reside at 9201
s.
Yates Avenue, Chicago.
BIOGRAPHICAL SKETCH OF ANTON SESTRIC
Anton Sestric was born in St. Louis, Missouri on March 11, 1907.
Mr. Sestric served as Justice of the Peace, in St. Louis,
an elective office, from 1934 to 1946. In 1947 he was elected
Judge of the Magistrate's Court, a position which he held until
his appointment as Collector of Customs in 1961.
He served as Chairman of the Federal Executive Board of
Greater St. Louis for two terms. Mr. Sestric has also been active
in other civic organizations, such as the Boys Club of St. Louis,
South Broadway Redevelopment Association, lay advisory board for
St. Anthony's Hospital, and the United Givers Fund.
Mr. and Mrs. Sestric reside at 3137 Allen Avenue, St. Louis, Mo.
BIOGRAPHICAL SKETCH OF MRS o MARGUERITE R. BENSON
Mrs. Marguerite R. Benson was born in Milwaukee, Wisconsin.
She attended parochial and commercial schools in Milwaukee,
Buffalo University, Buffalo, New York, and Columbia University
in New York.
Mrs. Benson has been very active in Milwaukee c~v~c organizations. She was appointed Collector of Customs for Milwaukee
in 1961.
She is married to Charles Carpenter Benson.
1616 West Wisconsin Avenue in Milwaukee.
They live at
BIOGRAPHICAL SKETCH OF JOHN W. CRIMMINS
:
John w. Crimmins was born December 29, 1911, in Louisville,
Kentucky. He attended public schools and Jefferson School of
Law in Louisville.
Mr. Crimmins has had a long career in Kentucky local and state
government:
From 1939 to 1943 he was Chief Deputy, Probate
Department in the Clerk's Office, Jefferson County, and
Administrator of the Alcohol Beverage Control Administration at
Louisville in 1946.
In 1962 he was appointed Collector of
Customs at Louisville.
Mr. and Mrs. Crimmins reside at 2524 Broadmeade, Louisville,
Kentucky. They have two sons and three daughters.
BIOGRAPHICAL SKETCH OF JOHN G. GREEN
John G. Green was born on October 31, 1894, in St. Ignace,
Michigan. He attended parochial and public schools in Marquette,
Michigan.
Mr. Green was engaged in newspaper work for many years.
After working on the Marquette, Michigan, Mining Journal and the
Duluth Herald, he joined the Superior, Wisconsin, Telegram as a
linotype operator. He later worked in the advertising and editorial
departments until his appointment as general manager of the
commercial department in 1936. He subsequently became vice-president
of the Superior Telegram Co.
Mr. Green served on the Superior City Council for 12 years
and has been active in many civic and business organizations.
He was named Collector of Customs for Duluth-Superior on
November 29, 1962.
Mr. and Mrs. Green live at 2327 Hammond Avenue, Superior,
Wiseons in.
BIOGRAPHICAL SKETCH OF ROBERT M. FORTSON
Robert M. Fortson was born in Elwood, Indiana, on August 16,
1921, and attended public schools there. After attend ing the
~arnegie Illinois Steel Trade School at Gary, Indiana, he worked
for Carnegie Illinois Steel Co. and a number of engineering and
tool firms in the area until 1955.
After serving on the City Council of Elwood, Indiana, for
three years, he was elected mayo~ serving from 1956 to 1961.
In 1961 he was appointed Collector of Customs for Indianapolis.
Mr. Fortson has been active in civic and patriotic organizations,
:erving as a member of the Indiana Municipal League, trustee
of the Knights of Pythias, and the executive committee of the
.merican Legion.
Mr. and Mrs. Fortson reside at 519 West 3rd Street,
nderson, Indiana.
000
TREASURY DEPARTMENT
Washington
REMARKS OF THE HONORABLE HENRY H. FOWLER
SECREI'ARY OF THE TRFASURY
BEFORE THE SENATE FINANCE COMMITTEE
ON H.R. 12752
FRIDAY, FEBRUARY 25,1966, 9 A.M. EST
Mr. Chairman and Members of the Committee:
I thank the Committee for the promptness of this hearing on the
tax changes embodied in H.R. 12752, which has been passed by the House
of Representatives.
program.
This bill essentially embodies the President's tax
We urge that it be approved as quickly as possible.
There are times when rapid action on tax legislation is needed.
is particularly true in the present case.
for us to reduce the deficit in fiscal year
This
Each passing day makes it harder
1966,
and much delay could
lower our ability to reduce the deficit in fiscal year 1967.
Briefly, H.R. 12752 involves (a) temporary restoration of the rates
of excise tax on automobiles and telphones that were in effect at the
end of 1965 and (b) the adoption of certain collection procedures which
will put income and self-employment tax payments closer to a pay-as-you-go
system, thereby increasing current revenues without changing income tax
rates and without changing anyone's final tax liabilities.
The main budgetary fact behind this program is that increased special
costs associated with Vietnam will add $4.7 billion in fiscal year
1966
expenditures over the amount originally estimated in the budget for that
year presented in January
1965
and an additional
$5.8
billion, for a total
of $10.5 billion in fiscal year 1967.
The increased cost of Vietnam with its economic and psychological
uncertainties came at a time when the success of a balanced and expansionary
mix of fiscal and monetary policies, combined with wise practices in a
F-390
- 2 dynamic private sector, had brought the Nation close to the achievement
of many of its most important economic goals -- a healthy rate of growth
(the highest of any of the larger industrialized nations) in a full
employment economy with a balanced budget, accompanied by price stability
unparalleled in the industrialized world, and an equilibrium in our balance
of payments.
Past tax reduction actions of the Congress, recommended or approveO
by this Committee -- the investment credit in the Revenue Act of
the tax reduction program in the Revenue Act of
Reduction Act of
1962,
1964, the Excise Tax
1965, and the administrative depreciation reforms of
1962 and 1965 -- made a signal contribution to this achievement.
Despite tax reductions that have cut the burden of taxes by some
$20 billion at this yearts income levels, revenues under present law will
be $21 billion higher in fiscal year
1966 than they were in fiscal year 1961.
This contrasts with a growth in receipts of only $10 billion in the five years
preceding
1961, a period in which there was no significant tax reduction.
Our fiscal policy has been successful.
Had our defense commitments
remained unchanged, the rise in receipts without the current tax bill would
have produced a budget surplus in fiscal year
1967 with room for increases
in Federal civilian expenditures or further tax reductions or debt retirement.
In this situation we face the current problem of meeting the added
costs of our Southeast Asia operations.
these costs because of the
five years.
solutions.
We are better prepared to meet
25 percent increase in real GNP in the last
We must recognize, however, that new problems call for new
- 3 The immediate response of this Administration to the problem presented
by the increased Vietnam expenditures in a nation nearing full employment
was a maximum of economy in the preparation of budget expenditure proposals,
consistent with recognition of clear international and domestic needs.
Elimination of unnecessary activities and the reduction in the cost of
continuing activities were pursued ruthlessly.
There was still a dilemma which President Johnson clearly described
in a letter of January
19
addressed to Chairmen Long and Mllis as coming
down to three choices:
"
A deficit in excess of $6.5 billion, which would require the
Government to borrow the additional money.
An increase in corporate and personal income tax rates, or
other new taxes.
Temporary restoration of certain excise taxes, and adoption
of graduated withholding of individual income taxes and
current payment of corporate income taxes -- to put the
American people on a pay-as-you-go basis without increasing
1I
the total tax bill due.
In the Presid ent ! swords, lIFirst, we could raise revenue or borrow
it.
I chose to raise the money."
This decision recognizes that our
fiscal policy over the last five years has substantially reduced the
level of unused plant capacity and unused worker skills.
With the Vietnam
commitment superimposed on the robust private demands, a moderate and
balanced shift away from the stimulative policy of the last five years
is called for.
In the light of the uncertainty about the duration of the increased
expenditures for Vietnam, a solution which involves predominantly temporary
and passing changes largely in the timing of tax payments without increaSing
- 4 income tax fiscal liabilities is a first_preference to increasing personal
and corporate income tax liabilities.
This makes the last of the Presidentially
stated alternatives clearly preferable.
On the need for this bill, let me re-emphasize first my point that
for the most part the provisions of H.R. 12752 represent structural
improvements in the tax law and the increased receipts are primarily
associated
~th
the transition.
This means that it involves less of a
burden than one would normally associate with an increase of revenues of
$4
billion in one fiscal year.
Nevertheless, could even this be avoided
by expenditure cuts?
First as to timing, the bill in part is intended to deal with the
budget problem in fiscal year
1966.
These expenditures are based on
programs that have been voted and are in operation.
back materially.
They cannot be cut
We need the bill to red uce the deficit in fiscal year 1966
by $1.2 billion.
In assessing expenditure reduction possibilities for fiscal year 1967 as a
substitute for this bill, it should be noted that the
for an increase of only
$600
non-Vietnam sector of the
1967 budget provides
million over the expenditure levels in the
1966 budget.
Moreover, this minor increase in
expenditures, apart from the requirements of Vietnam, comes after several
years in which expenditure totals in the administrative budget have been
held down.
This requires a summary examination of the record on expenditure
control under President Johnson which is set forth on Chart 1 attached
to my statement.
- 5 1.
He cut the original estimated expenditure level of
for fiscal year
2.
3.
by
$1.1
billion to an actual
$97.7
$96.5
1965 --
ending last June 30 -- by
$97.9
billion
billion to an
billion.
The expenditure target for fiscal year
January at
$1.4
billion
billion.
He cut the original estimated expenditure level of
for fiscal year
actual
1964
$98.8
$99.7
billion.
was fixed last
But accelerated military activity in Vietnam
required extra expenditures of some
or legislated expenditures
1966
re~uired
net figure of some $2 billion.
$4.7
billion.
In addition, uncontrollable
another unavoidable increase amounting to a
These expenditures included
$740
million of
military and civilian pay increases voted by Congress in excess of Presidential
recommendations 7 an additional
$288
million increase in veterans pensions,
a $500 million increase in interest charges on the debt and two further
increases of
$500
million each as a result of payments re~uired by law
under the space program and
$462
million under the Commodity Credit Program.
All of these increases more than wiped out economies realized since the
original budget estimate for fiscal year
1966.
What all this adds up to is the striking fact that7 had it not been
for these unavoidable increases as a result of Vietnam and these other
uncontrollable increases I have cited, the President in nearly three years
in office would have held expenditures in the administrative budget to a total
increase of less than $1 billion over the amount estimated for the fiscal
year in which he assumed office.
- 6 We can gain some idea of what a remarkable achievement this is when
you compare it with the average increase of $3 billion per year over the
previous ten years.
The program that we are urging meets the immediate and clearly foreseen needs, but this does not foreclose future dealing with longer run
problems or new developments.
The President in his letter stated further:
"If our needs in Vietnam require additional revenues, I will not
hesitate to request them. On the other hand, if our efforts for
a peaceful resolution of the Vietnam situation are successful -and those efforts will continue day and night -- then your Government's need for revenues will be sharply reduced, thus permitting
downward tax revisions as we had following Korea. II
In his Budget Message, he clearly committed himself to recommend
additional measures in either of two contingencies.
He said:
IIIf, on the other hand, events in Southeast Asia so deyelop that
additional funds are required, I will not hesitate to request
the necessary sums. And should that contingency arise, or should
unforeseen inflationary pressures develop, I will propose such
fiscal actions as are appropriate to maintain economic stability."
Insofar as inflationary pressures are concerned, the President stated
his position concerning these tax proposals as recently as January 27 in
his Economic Message saying:
lITo insure against the risk of inflationary pressures, I have asked
Americans to pay their taxes on a more nearly current basiS, and
to postpone a scheduled tax cut. If it should turn out that
additional insurance is needed, then I am convinced that we should
levy higher taxes rather than accept inflation -- which is the
most unjust and capricious form of taxation. It
- 7 Taxation is an effective and flexible instrument of economic policy.
It can be adapted to the needs of the present circumstances without
changing basic policies already incorporated in our tax law.
The tax changes in H.R.
12752 will:
balance the cash budget.
reduce the deficit in the administrative budget to the lowest
level in seven years.
help maintain economic growth and reduce the risks of inflation.
12752
The specific sources of increased budget receipts under H.R.
for fiscal years
1966
and
1967
are shown in the following table:
(In Millions of Dollars)
FY 1966
Excises:
Communication
Automobiles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
Total, administrative budget ...••..•.....•..••
V
$ 785
420
1,205
1,000
3,200
210
95
1/
150
1,155
Self-employment tax, social security, quarterly payments
(goes into a trust fund) •..•.....•..••....••...•
Total, cash budget .•...•..•.•.•.•..•...•....••
1967
60
Total eXClses ..•....................•....•.•••
Corporate speed-up . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Graduated withholding •.•...•..••.•....••.•.•.•..••
Increase in declaration requirement under individual
income tax from 70 to 80 percent ••..•...•....••
60
FY
4,765 1/
200
1,155
Prior to the House floor amendment, the gain in fiscal year 1967
from graduated withholding was $275 million; the total administrative
budget was $4,830 million; and the total cash bud~et.was $4,965 million.
The floor amendment reduced each figure by $65 mllllon.
- 8 EXCISE TAXES
H.R. 12752 would restore promptly the 7 percent rate of the
manufacturers excise tax on automobiles, which was reduced to 6 percent on January 1, 1966, and the 10 percent tax rate on local and
long distance telephone and teletypewriter service, which fell to
3 percent the same date.
The automobile tax would be restored on
the day after enactment, and the telephone tax would be restored for
bills rendered on and after the first day of the first month beginning
more than 15 days after the legislation is enacted.
Those pre-January 1
rates would remain in effect until April 1, 1968, when they would
revert to the level that would prevail at that time under present
law, that is, 2 percent on the automobile tax and 1 percent on the
telephone tax.
The question arises naturally, why are the rates restored on
these two excises only?
Why not restore some of the taxes that were
repealed last June or last
D~cember?
Part of the answer to this question is that in the Excise Tax
Reduction Act of 1965 it was recognized that these two taxes involved
such large amounts of revenue that their ultimate reduction had to be
scheduled gradually in the light of economic and budget conditions.
Another way of saying the same thing is to point out that a large number
of excise taxes would have to be restored to match the revenue involved
in the continuation of the automobile and telephone excises.
- 9 Another reason for this particular excise tax program is that
the restoring of taxes that have been completely repealed in contrast to continuing taxes still being levied would impose substantial compliance and administrative burdens.
The whole series
of accounting and reporting procedures associated with payment of
the taxes which disappeared when the taxes were repealed would have
to be reconstituted.
With regard to the al1tomobile and telephone
taxes, however, only a change in rate is involved -- not a restoration
o~
an entire tax.
No additional accounting and reporting are
involved, and there is no reintroduction of the compliance and
administrative difficulties involved in the various smaller taxes.
Nor is there a reintroduction of all the competitive and other distortions that were involved in the various selective excise taxes
that were repealed in 1965.
In fiscal year 1967, the increase in revenues would be $420 million
from the automobile tax and $790 million from the telephone
tax, a total of $1.2 billion.
A floor stocks tax of 1 percent would be imposed on all new
automobiles held in stock by dealers or distributors on the day the
7 percent rate becomes effective.
Under the bill, this tax is to
be paid by the dealer, but it is to be collected by the manufacturer
and paid over by it to the Treasury.
This procedure, which parallels
that for the floor stocks refunds under this tax, was chosen in the
House bill to assure that the dealers will have the correct information as to the tax base for the cars affected.
- 10 I~
the legislation is enacted by March 15, 1966, excise tax
revenue in ~isca1 year 1966 would be increased by $60 million, all
o~
which would come from the automobile tax.
There are, as you
realize, lags between the time the taxes are collected and when they
are paid into the Treasury.
The increase in cash payments by consumers reflecting these tax
changes in calendar year 1966 would be $200 million from the automobile
tax and $570 million
~rom the telephone tax.
The bill differs somewhat from the Administration recommendations
as to the period a~ter 1967.
We had proposed that the whole schedule
of automatic reductions of the automobile and telephone taxes beginning
with the January 1, 1966
reductions be moved later by two years so
that the reductions previously scheduled for January 1, 1966 through
January 1, 1969 would take place instead frOm January 1, 1968 to
January 1, 1971.
Under H.R. 12752, the restored rates would be carried to April 1, 1968,
and then the rates would revert to the level that they would have been on that
date under present law, that is, 2 percent on the automobile tax and
1 percent on the telephone tax.
The final reduction of these taxes
to 1 percent and zero, respectively, would take place on January 1,
1969.
H.R. 12752 would provide as much revenue from the excise provi-
sions as the Administration proposal in fiscal years1966 and 1967, just
slightly more in fiscal year 1968, and less in ~iscal years 1969 and
1970.
We have no objection to the method of treatment in H.R. 12752
- 11 -
for these excise tax rates on automobiles and telephones after the
temporary postponement period is ended.
GRADUATED WITHlIOLD:mG
A most important part of the Administration program as well as
H.R. 12752 is the provision for graduated withholding.
In evaluating these withholding changes, it is important to note
that a very substantial proportion of our citizens regard a pay-as-yougo tax system as a convenience, not as a penalty.
Further, I believe,
since the withholding system cannot be perfect, most taxpayers prefer
some overwithholding with a
re~Qnd
on April 15 to underwithholding,
which means a final tax bill due in April.
Many wage and salary earners, for example, voluntarily understate
the number of exemptions to which they are entitled for withholding
purposes in order to have their withholding more closely approximate
their tax liability or even to result in overwithholding.
A withhold-
ing system should not, of course, seek to create unnecessary overwitbholding.
But as a practical matter, taxpayers with the same amount
of wages will very often differ in other respects.
A withholding rate
that would cause overwithholding for one taxpayer would therefore
underwi thhold on the other.
Thus a taxpayer might have income from
nonwage sources that is not subject to withholding; or have actual
deductions that are more or less than the assumption used in the
withholding system; or the taxpayer may not be employed continuously
during the year.
All of these factors -- and others -- affect the
- 12 amount of his final tax liability and thus the relationship between
the amounts withheld and that liability.
Under the present law, a flat
14 percent of an employee's earn-
ings is withheld for income tax purposes, while final tax liability
is computed under a series of graduated rates.
Consequently~
many
taxpayers are faced with large, and frequently unanticipated, unpaid
tax liabilities at the end of the year.
The burden to taxpayers
these year-end payments, as well as the collection
pr~blems
~f
imposed on
the Internal Revenue Service, warrants a system of withholding from
wages on a graduated basis that will more effectively synchronize
withholding
~th
actual tax liability.
MOreover, the present withholding system takes into account the
10 percent standard deduction, but not the minimum standara deduction
added by the Revenue Act of
1964.
This omission results in overwith-
holding for many low-income employees.
Additional overwithholding
occurs under the present system for single employees with taxable
incomes of less than $2~000 and married employees with taxable incomes
of less than $4,000.
This results from the use of a flat withholding
rate which is an average of the rates for the first four income tax
brackets, adjusted for the 10 percent standard deduction.
The basic graduated withholding system in H.R. 12752 is designed
to minimize these problems.
(1)
First, in place of the present flat
14
percent withholding
rate, the proposed system would provide for withholding at six graduated
- 13 rates ranging ~rom 14 percent to 30 percent.
relate the amount
o~
This would closely
withheld tax with the actual tax due for single
people with taxable income up to $12,000 and for married couples with
taxable income up to $24,000, whose deductions are approximately 10
percent of income.
For people above this income level with deduc-
tions of approximately 10 percent of income, withheld and actual
taxes would be more closely related than under the present system.
(2)
Second, the minimum standard deduction would be reflected
in the new withholding system through an increase to $100 in the value
of the personal exemptions for withholding purposes, and through a
zero withholding rate on $200 of wages on an annual basis.
This
change would appreciably reduce overwithholding for those employees
who use the minimum standard deduction.
The use of the minimum
standard deduction in combination with graduated rates would also
eliminate the overwithho1ding that presently exists in the first
four income tax brackets.
The six rate graduated system, proposed in the Administration
program and adopted in H.R. 12752, is designed to produce the correct
amount of withholding for an individual whose deductions were either
the standard deduction, including the minimum standard deduction, or
10 percent of his wage income, whichever was the larger, who had no
nonwage income, and who worked a full year.
If a taxpayer has no
nonwage income, and has itemized deductions in excess of the standard
deduction or 10 percent of his wage income, it is quite likely that
there would be some overwithholding under the Administration proposal.
- 14 While modest overwithholding is not a significant hardship for
the wage or salary earner, there could be cases of large overwithholding both under present law and under the basic graduated withholding
system.
The basic graduated system by itself would in many cases
tend to aggravate the situations of large overwithholding.
For this
reason; a provision was added to the bill in the Ways and Means Committee that would make it possible for individuals, who would expect
to be overwithbeld due to high itemized deductions; to avoid or
minimize large overwithholding by claiming additional withholding
allowances.
The withholding system heretofore has permitted each
taxpayer to declare to his employer the number of income tax exemptions
to which he is entitled, for himself and his dependents.
These are
taken into account in the graduated withholding formula and in the
withholding tables, through permitting the taxpayer to earn free of
withholding $700 (on an annual basis) for each exemption to which he
is entitled.
H.R. 12752 would simply expand this technique to deal
with employees with high itemized deductions by affording additional
withholding allowances (in $700 multiples) because of those deductions.
Specifically, H.R. 12752 permits the
deductions for the current year.
deductions for the previous year.
taxp~yer
to state his estimated
These cannot exceed his actual itemized
He can also put down his estimated
salary Or wages for the current year, Which cannot be less than his salary
or wages for the previous year.
These ceiling and floor limitations are
necessary to prevent seriOUS abuse of the new allowance.
H.R. 12752
- 15 then allows the taxpayer to compute his excess deductions, that is,
his deductions in excess
cent of the first
the balance.
o~
a base line which is made up of 12 per-
$7,500 of his salary or wages and 17 percent of
The taxpayer is given an additional withholding allow-
ance for each full $700 by which the excess deductions exceed the
base line.
Under an amendment added on the House floor, the tax-
payer would be allowed the first additional withholding allowance if his
excess deductions were equal to at least
$350.
As respects the operation of this additional allowance system,
the employer would treat these claims for additional withholding
allowances in exactly the same way as a claim for additional exemptions, so basically the procedure will not complicate the withholding
system for employers.
So far as employees are concerned, the provi-
sion for extra withholding allowances does involve some complication.
It is, of course, optional wlth the employee whether or not he wants
to claim an additional allowance.
But an option itself is a complexity
since a taxpayer may feel he ought to find out what it is before he
decides whether or not to use it.
Because of this complexity, it is
the course of wisdom to use this technique initially to deal only
with the relatively large overwithholding situations.
This is the
reason for the particular decision in H.R. 12752 to measure excess
deductions over a base line which is higher than the 10 percent of
deductions built into the withholding system.
We believe that the
basic technique of additional allowances which the Ways and Means
- 16 Committee adopted is appropriate to moderate overwithholding where it
may be too large.
However, there are problems associated with the
variation in that technique introduced by a Committee floor amendment
which we will be glad to discuss in your technical sessions.
~ariation
That
involves added complexity, and also produces underwithhold-
ing in some situations.
The additional allowance system would be applicable for the first
time in 1967.
Taxpayers would file claims for additional withholding
allowances with their employers on the basis of their estimates for
1967 and their actual tax returns for 1966.
allowances
~uld
The new withholding
go into effect in the spring of 1967.
Thereafter the
taxpayer would continue to use the additional withholding allowance
until May 1, 1968, although it could be terminated at his option
earlier.
The taxpayer could file another claim for additional with-
holding allowances on the basis of his 1967 return, which would take
effect May 1, 1968.
This timing is necessary in order to develop the required forms
and to provide the necessary information program, so that people will
know how to operate the system.
Also important is the fact that
graduated withholding would start only in May of this year and hence
overall overwithho1ding will not be as significant in 1966 as it would
be if the six graduated rates were in effect for a full year.
The
additional allowance provision will thus not affect the expected
increase of $90 million in budget receipts from the introduction of
- 17 graduated withholding as proposed in the Administration program for
fiscal year 1966.
It would also have no impact on the calendar year
1966 effect of graduated withholding.
Thus it ~ll not reduce the
short-term economic impact of the adoption of graduated withholding.
Under the House bill the net increase in budget receipts in the
fiscal year 1967, from the adoption of graduated withholding is estimated to be $210 million.
Due to the additional withholding allowance
under H.R. 12752, there would be a decline in budget receipts in the
fiscal year 1968 estimated at $290 million.
To describe the economic impact of the whole withholding provision,
it is userul to use calendar year totals.
In round numbers, the
graduated withholding provision in the six rate system would have
involved an increase in withholding on a fUll year basis of $1.2 billion.
Because of the date of introduction, the increase in withholding receipts
will be only $0.8 billion in 1966 (although it will be at an annual
rate of $1.2 billion).
In calendar year 1967, the increase in withholding receipts from
the six rate system will be offset by two things:
(1) the smaller
year-end payments on 1966 returns filed in the spring of 1967 as people
take credit for the prior year additional withholding and (2) the
beginning of the additional allowance system by May.
INDIVIDUAL ESTIMATED TAX
H.R. 12752 adds a provision, which originated in the Ways and Means
COmmittee, which would modify the monetary penalty provision with
respect to payments of individual estimated tax on declarations.
Under
4 1.
l
,:_
- 18 present law, a taxpayer who is required to file a declaration of
estimated tax is subject to a monetary penalty of 6 percent per
annum for underpayment of estimated tax unless his estimated tax
meets one of five alternative tests.
unchanged.
Three of the tests remain
These are that the estimated tax must be at least as
high as the tax paid last year or at least as high as the tax that
would be paid on the basis of last year's income and this year's tax
rates or at least 90 percent of the tax liability based on the actual
taxable income to date.
If the taxpayer does not meet these tests
with his estimated tax, he may under present law still avoid the
penalty if his estimate is at least 70 percent of his final tax liability or 70 percent of the tax liability that would emerge if he
annualized the income that he has earned to date.
Annualizing means
multiplying the income of the first quarter by four, or multiplying
the income of the first half year by two, or multiplying the income
of the first three quarters by one and one-third.
Under H.R. 12752, the 70 percent provision, which relates to
the actual tax liability or the annualized tax liability, is changed
to 80 percent.
The requirement was originally set in 1943 at 80
percent and was reduced to 70 percent in 1954.
At a time when we are,
by graduated withholding, making most wage earners more current with
respect to their payment of tax liability, it is reasonable to ask
that people w.i.th nonwage income also pay an estimated tax which is
closer to their final tax liability.
- 19 The 80 percent requirement on estimates of individual tax would
come into effect with respect to estimates filed in the calendar
year 1967.
It is expected that this would increase budgetary receipts
in fiscal year 1967 by $150 million and in fiscal year 1968 by
$150 million.
CORPORATE ACCELERATION OF CURRENT TAX PAYMENTS
The provision for acceleration of corporate tax payments is the
same in H.R. 12752 as it was proposed by the Administration.
This
change would leave the basic tax liability unchanged.
Under present law, by 1970 corporations will
to their estimated tax in excess of
$lOO~OOO,
pay~
with respect
quarterly payments of
25 percent in April, June, September, and December.
In 1963, these corporations paid during the current year only
two quarterly payments, those in September and December.
The
Revenue Act of 1964 required these corporations to begin to make
quarterly payments on a current basis in April and June.
These
April and June payments were scheduled to increase gradually up to
the 25 percent level in 1970.
At present they must be 9 percent
each in 1966 and 14 percent each in 1967.
Under H.R. 12752 these
figures would be raised to 12 percent in 1966 and to the permanent
level of 25 percent in 1967.
The only change from present law is in the timing of the additional payments.
If, in 1971, a corporation reviewed its financial
experience, it would find that its payments of taxes in that year
were exactly the same as they would have been if the current proposal
- 20 -
for speeding up the acceleration had not been adopted.
If it added
up all of its corporate tax payments from 1964 through 1970, it
would still find that the total
o~
those payments was exactly the
same as it would have been under present law.
At a time when we are close to full employment and
~Qll
utiliza-
tion of capacity, a sizeable Federal budget deficit could have inflationary implications.
For this reason, it is desirable to absorb some
of the additional liquidity in the economic system that could otherwise be used in bidding up the prices of capital goods.
We believe
that our proposed speed-up of corporate tax payments would remove
some of this excess business purchasing power.
In recent years, corporations have reduced their holdings of
liquid assets relative to current liabilities.
An accelerated pay-
ments requirement would make some corporations re-examine their
expenditure plans.
They might give second thoughts to some marginal
investment projects, deferment of Which might ease pressures on
costs and prices today and, incidentally, leave more investment
possibilities for the future when the expenditures could be more
easily accommodated. The tightness in the credit markets that already
exists would reinforce the effectiveness on business expenditures of
the accelerated
p~yment
proposal.
This proposal on corporate tax payments would increase budget
receipts in fiscal year 1966 by $1.0 billion and, in fiscal year
1961, by $3.2 billion.
It would increase total tax payments in
calendar year 1966 by $1.1 billion (including fiscal year corporations).
- 21 SELF-EMPLOYMENT TAXES
To round out the program to make tax-paying more current,
H.R. 12752 provides that social security taxes of the self-employed
be paid on an estimated basis.
The present law requires a self-employed individual to estimate
and make quarterly installment payments of his income tax if the
estimated tax is at least
$40.
There is no logic in applying this
requirement only to income taxes and not to self-employment taxes.
Under present law, however, for a self-employed individual, the
requirement
~or
current payment bears only on the part of his end-of-
the-year tax liabilities represented by the income tax.
In some
cases this income tax liability may be only a small part of the final
total liability for income and self-employment taxes; in otbers it
may be a large part.
Since the
taxes relate to the same type of
income, it would be appropriate for the entire liability to be subject to the same requirement of estimated payment.
The estimated tax system would have the double purpose of making
tax payment more convenient for individuals and providing some
equality between people with nonwage income and people with wage income
who are subject to withholding.
Since employee social security taxes
are withheld, it is appropriate to include the self-employment tax
in the estimated tax base.
In a tentative General Accounting Office report recently submitted for Treasury Department comments, the GAO recommended an
U'j
/
t '_ iT ,
- 22 identical proposal.
We understand that the GAO will issue a formal
report shortly which includes this recommendation.
H.R. 12752 provides that the requirement for current payment of
se1~-emp1oyment
tax would came into operation in 1967, starting
April 15.
Under H.R. 12752, this provision would increase revenue collections in fiscal year 1967 by $200 million.
Under the original pro-
posal, which would have commenced the current payment system on
June 15
o~
this year, this increase would have occurred as follows:
$100 million in fiscal year 1966 and $100 million in fiscal year 1967.
We will develop a procedure for crediting the estimated quarterly
declaration payments of self-employment tax to the Social Security
Trust Fund as these payments came into the Treasury.
For this reason
the provision will affect oULY cash budget receipts and not administrative budget receipts.
Under H.R. 12752, these increased payments
would be $300 million in calendar year 1967 ($400 million if the
January 15, 1968 payment is included).
CONCLUSION
The particular measures involved in H.R. 12752 are designed to
have minimum long-range impact on tax burdens and to achieve desirable
structural changes.
hand.
They are appropriate to the fiscal problem at
They deal almost entirely with matters on which there has been
study in the past.
I am hopefUl that they may be acted upon promptly.
Attachments
000
I$Bil.
$8i1.I
Originol
Estimotes
)(
100
Viet Nom 112.8
Add-on r····
Actuo/s
... P.b:IIJ
106.4/
...........
:,........
47 ,:
:t»,ss:a'
•
' !.10.5
•
:,...........i .....
Non-Viet Nom
Add-on
I
100
(0.6)
75
75
\.:l
f&~
8
I--'
7
50
~
Lotest
. . ~ Estimate
101-
1"-/966 Bose
25
50
25
-+:..
i·~
(,
o
I I
~
1964
Office of the Secnltary of the Treasury
I
1965
1966
1967
o
e-1518-1
Explanation of Chart 1
The increase of $0.6 billion in budget expenditures, outside
c~
special Vietnam costs, between :966 and 1967, reflects many increases
and decreases.
buc~ct
For example, the 1967
of expenditure increases.
provides for $5.3.billion
These increases include (1) $3.2 billion
war on poverty; (2) $0.3 billion :or higher interest costs and $.4
billion for the "cried costs over 1966 of the military and civilian
em?loyec pay raises enacted last October; and (3) $1 billion for other
worklo~d
unavoidable
for construction
A~ainst
in
t~e
commitments,
ects stal"i:ed ilJ. es.:rlier
su~\
as expenditures
yea~I';:;.
these inCrC2SGS there are reduction of $4.7 billion included
1967 budget.
~ctivities
savin~s
p~oj
co~t~actu~l
ahd
These
co~sist pa~tly
excludi~g ~h~ ~d~~d Vietn~
through
prunin~
lower p£iority
and the nonrecurrcnce of
ce~tain
costs.
of (1) $1.6 billion in defense
costs
~~d
~rograms~
(2) $1.5 billion in
management improvements.
T.,e remaining $1.6 billion
reduction stems from increused sales of mortgages and other financial
assets or
the
conversio~
su~stitution
of direct Federal loans
of private
Former Budget Di=ector
pendituras can be
fOT
~o
guaranteed private loans
public credit.
Mau~ice
Stans has estimated that nondefense ex-
eA~ected to rise by $2 to
$2-1/2 billion each year due
to ~he gro\'iing wOTklvads which accoL1;?sny incr~as:"'1g population and incomes.
A nat increase of o~:y $0.6 b~llion in fiscal 1967, therefore indicates
extraordinary s"t.-iu3e'ncy .•
TREASURY DEPARTMENT
4
February 25, 1966
FOR RELEASE A.M. NEWSPAPERS
SATURDAY, FEBRUARY 26, 1966
REGIONAL COMMISSIONERS AND DISTRICT DIRECTORS
APPOINTED FOR CHICAGO CUSTOMS REGION
Assistant Secretary of the Treasury True Davis today announced
the appointment of Fred R. Boyett, Washington, D. C., a career
Customs official, as Regional Commissioner of Customs for the new
Chicago Customs Region IX.
Mr. Davis also announced the appointment of James W. Polk,
Acting Collector at Buffalo and Rochester, N.Y., as Assistant
Regional Commissioner (Operations), and Arthur R. Adams, Assistant
Collector at Chicago, as Assistant Regional Commissioner
(Administration).
The appointments -- together with those of eight Customs
District Directors, also announced today -- will be effective
Tuesday, March 1, with the activation of the Chicago Customs Region.
The Customs District Directors for the new region
are~
Chicago Customs District - Heinz L. Herz of Chicago.
Cleveland Customs District - John F. Kovacic of
Cleveland, Ohio.
Detroit Customs District - Louis A. Mezzano of
Detroit, Michigan.
Duluth Customs District - Clarence L. Bingham of
Duluth, Minnesota.
Milwaukee Customs District - Walter P. Turek of
Louisville, Kentucky.
Minneapolis Customs District - Mrs. Marjorie Maki
of Minneapolis, Minnesota.
Pembina Customs District - Corwin S. Snyder of
Pembina, North Dakota.
St. Louis Customs District - Joseph P. Garrity of
St. Louis, Missouri.
F-39l
- 2 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 the 176-year-old Customs Service wholly
on a career basis.
Chicago will be the fifth region to be activated in accordance
with the year-long timetable. Regions already activated are:
San Francisco, November 1, 1965; Los Angeles, January 1, 1966;
Miami and Houston, February 1, 1966. The remaining four regions
are scheduled as follows:
Baltimore -- April; Houston and
Boston -- May; and New York -- June.
Offices of the Chicago regional headquarters will be in the
Brunswick Building at 623 South Wabash Avenue, Chicago.
United States Commissioner of Customs Lester D. Johnson heads
the Bureau of Customs, which is part of the Treasury Department.
His offices are in Washington, D. c.
Biographies follow.
000
- 3 -
BIOGRAPHICAL SKETCH OF FRED Ro BOYETT
FRED R. BOYETT was born near Mart, Texas, on August 26 1930
'
= received a bachelor , s degree in accounting from Rice Institute
1 1951 and also attended Texas University and Wayne University,
~troit .
.
Mr. Boyett joined the Customs Service in 1952 as an examiner's
Ld. He served as appraiser in Sault Ste. Marie, Michigan, and
~e examiner in Detroit.
In 1959 he was promoted to liaison officer at the Bureau of
lstoms headquarters in Washington, and later became a specialist Ln
.praisement.
Mr. Boyett became Assistant Deputy Commissioner, Division of
praisement Administration, in 1963.
He and Mrs. Boyett reside with their five children at 11005
eeler Drive, Silver Spring, Maryland.
BIOGRAPHICAL SKETCH OF JAMES Wo POLK
JAMES Wo POLK was born in Fort Worth, Texas, on June 13, 1916,
1 attented Texas Wesleyan College.
Mr. Polk's Government career began in 1940 as a messenger.
:ing World War II he saw action in the South Pacific in the
mter Intelligence Corps of the Army. After the war, Mr. Polk
oined the Customs Bureau and was promoted to Customs Patrol
pector in Arizona.
In 1948 he was reassigned as Customs Inspector at Sasabe, Arizona.
1950, Mr. Polk was promoted to Customs Agent in New York. In
1 he was reassigned to Buffalo, New York, becoming Customs Agent
:harge at that port three years later.
From 1957 to 1959 Mro Polk served as Senior Customs RepresentaIn 1958 he was named adviser at a United Nations
:erence in Bangkok, Thailand. The following year he was
;signed to Bureau headquarters in Washington, D. Co Later the
~ year he was promoted to Acting Collector in Buffalo, New York.
~ in Hong Konge
Mr. and Mrso Polk reside at 334 Summer Street, Buffalo, New York.
- 4
-
BIOGRAPHICAL SKETCH OF ARTHUR R. ADAMS
ARTHUR R. ADAMS was born in Benton Harbor, Michigan on
September 2, 1910. He joined the Federal Government in 1938 as
an inspector with the Customs Service in Port Huron, Michigan.
From 1943 to 1945, he served with the Army in the European
theater.
Mr. Adams returned to the Customs Service in 1945 and was
promoted to Customs Agent at Chicago in 1947. He subsequently
served two years as Deputy Co11ec tor (Entry) in the Chicago
District, and in 1953 was promoted to Supervisory Customs Entry
and Liquidating Officer.
In 1964 he was promoted to Assistant Collector for
Chicago, Illinois.
He and his wife live at 10932 South Green Street, Chicago,
Illinois.
BIOGRAPHICAL SKETCH OF HEINZ L. HERZ
HEINZ L. HERZ was born in Germany on June 19, 1925. He
eceived his bachelor of science degree in mechanical and
ndustrial engineering from Wayne University, Detroit, Michigan,
n 1949.
Mr. Herz entered the Customs Service in 1950 as an examining
id in Detroit, Michigan.
During World War II, Mr. Herz served as an infantryman in
S. Army in Europe. He vJon two Bronze S tars for ac tion in
rance and Germany.
He was captured in ac tion in January 1945
1d was a prisoner of war until the German
surrender.
ne u.
From 1953 to 1955 Mr. Herz was a Customs Examiner in Houston,
!xas. He served as Customs Representative in Frankfurt am Main,
rmany, and later in London, England.
In 1962 he became Senior
stems Representative in London.
- 5 Mr. Herz was promoted to Assistant Supervising Customs
Agent in Chicago, Illinois, in 1964.
He and his wife live at 1445 Executive Lane, Glenview,
Illinois.
BIOGRAPHICAL SKETCH OF JOHN F. KOVACIC
JOHN F. KOVACIC was born in Cleveland on March 19, 1907 and
attended the John Huntington Polytechnic Institute Evening School
there.
Mr. Kovacic was in the insurance business, serving as Assistant
District Manager for a life insurance firm until 1961, when he was
named Collector of Customs in Cleveland. He served on the Cleveland
City Council from 1953 to 1961.
Mr. Kovacic is active in civic, educational and business
organizations. He organized the St. Clair Businessmen's
Association and the Norwood Community Area Council, and has
received several awards of merit for civic activities.
Mr. and Mrs. Kovacic live at 7416 Donald Avenue in Cleveland.
BIOGRAPHICAL SKETCH OF LOUIS A. MEZZANO
LOUIS A. MEZZANO was born in Wakefield, Michigan,on
June 21, 1918. He has been Collector of Customs in Detroit since
1961.
Mr. Mezzano served on the Wakefield City Commission from
1942 to 1948,and from 1945 to 1960 he was a member of the Michigan
House of Representatives.
Mr. and Mrs. Mezzano reside at 901 Pierce Street, Wakefield,
'lichigan. They have four daughters.
- 6 BIOGRAPHICAL SKETCH OF CLARENCE L. BINGHAM
CLARENCE L. BINGHAM was born in Exeland, Wisconsin on
July 9, 1928. He studied at the University of Wisconsin and the
University of Minnesota. He served in the U.S. Marine Corps
and was a member of the Marine Corps Reserve.
Before entering the Customs Service in 1949 as a clerk in
the Collector's office at Pembina,North Dakota J Mr. Bingham
spent a year as a customs broker in Noyes, Minnesota.
In 1953 he was promoted to Customs Agent, and in 1960 he
became Assistant Collector of Customs for Duluth.
Mr. and Mrs. Bingham, reside at 5731 Junita Street,
Duluth, Minnesota.
BIOGRAPHICAL SKETCH OF WALTER P. TUREK
WALTER P. TUREK was born in Bridgeport, Connecticut on
lovember 13, 1922. He received a B.A. degree in sociblogy and
,olitical science from the University of Bridgeport and has done
;raduate work in education.
Mr. Turek was on active duty with the U.S.Marine Corps for
hree years during World War II and one year during the Korean
onflict.
Mr. Turek began his career in Customs as an examiner in Boston
n. 1959, and subsequently worked in New York, Bridgeport and Duluth.
1 1963 he was promoted to Appraiser gf Merchandise in Louisville,
mtucky.
Mr. and Mrs. Turek live at 3113 Mylanta Place, Louisville,
mtucky.
**** *** *
- 7 BIOGRAPHICAL SKETCH OF MRS. MARJORIE MAKI
MRSe MARJORIE MAKI was born in St. Paul, Minn. and received
a B.A. degree in political science in 1943 from Macalester College
in St. Paul.
Before her marriage to A. V. Maki, a city official in St. Paul,
Mrs. Maki worked as a police and city hall reporter for the Duluth
Herald and News Tribune.
For several years she was employed as a
reporter-photographer for the Associated Press, and later was district information officer for the Office of Price Stabilization.
Mrs. Maki has been active in civic and community work.
She
served on the Mayor's special tax research committee in Duluth,
and she was appointed to the Twin Cities Metropolitan Planning
Commission, which she later served as secretary-treasurer and
legislative chairman.
Mr. and Mrs. Maki live at 2302 North Seventh Street, North
St. Paul, Minn.
- 8
BIOGRAPHICAL SKETCH OF CORWIN S. SNYDER
CORWIN S. SNYDER was born in Osceola, Nebraska on November
11, 1911. He has a bachelor's degree in industrial education
from the University of North Dakota, and attended Boone Jr. College
Boone, Iowa, the University of Minnesota, and Ohio State University.
Mr. Snyder, after a career as a college and high school
teacher, was appointed Collector of Customs for Pembina, North
Dakota in 1961.
Mr. Snyder is president of the Pembina Community Club and
a member of the Pembina Economic Development Committee.
He and his wife reside in Pembina.
BIOGRAPHICAL SKETCH OF JOSEPH Po GARRITY
JOSEPH P. GARRITY was born in Patton, Penna., November
16, 1919. He was educated in the public schools in Patton, and
received an LLB Degree from LaSalle Extension University
in Chicago.
Mr. Garrity began his career with the Customs Service in
1941, serving for seven years as an inspector until he became
an examiner in Norfolk, Virginia.
In 1955 he transferred to
St. Louis, Mo. where he has served as an appraiser until the
)resent time ..
Mr. and Mrs. Garrity reside at 6603 Bartmer Ave., University
aty, Mo.
TREASURY DEPARTMENT
RELEASE 6: 30 P.M.,
day, February 28, 1966.
RESULTS OF TREASURY I S WEEKLY BILL OFFERING
The Treasury Department announced that the tenders ~or two series o~ Treasury bills,
series to be an additional issue of the bills dated December 2, 1965, and the other
ies to be dated March 3, 1966 J which were offered on February 23, 1966, were opened at
Federal Reserve Banks today. Tenders were invited for $1,300,000,000, or thereabouts
91-day bills and for $1,000,000,000, or thereabouts, of 182-day bills. The details of
two series are as follows:
GE OF ACCEPTED
PE'l'ITIVE BIDS:
High
LDw
Average
91-day Treasury bills
maturing June 2, 1966
Approx.. Equi v ..
Price
Annual. Rate
98.825 ~
98 .. 820
98.822
tH
4.648~
4.668i
4.661~
Y
··.
·
··
·
··
··
182-day Treasury bills
maturin~ September l~ 1966
Approx.. Equi v.
Price
Annual Rate
97 .. 547
97.540
97.542
4.852i
4.866~
4.86li
Y
Excepting 1 tender of $1,000
57~ of the amount of 91-day bills bid for at the low price was accepted
82~ of the amount of 182-day bills bid for at the low price was accepted
J,
TENDERS APPLIED FOR AND ACCEPTED BY FEDERAL RESERVE DISTRICTS:
.strict
Iston
lW York
L1ladelphia
.eveland
chmond
lanta
1C8BP
Applied For
$
24,675,000
1,594,201,000
Accepted
: Applied For
Accepted
$
12,675,000: $
22" 730,000
$
1l,830,000
881,412,000:
1,355,675,000
666,195,000
31,119,000
14,119,000 :
19,123,000
6,123,000
25,674,000
25,,545,000 :
48,074,000
45,003,000
10,998,000
10,998,000 :
9,711,000
9,171,000
49,682,000
3~,500,000 :
36,530,000
14,451,000
290,356,000
158,714,000 :
298,177,000
110,793,000
• Louis
55,585,000
31,563,000 :
27,575,000
10,421,000
nneapolis
19,949,000
13,589,000 :
9,879,000
6,789,000
nsas City
23,848,000
21,828,000 :
15,388,000
13,892,000
Uas
25,786,000
14,356,000 :
14,240,000
10,060,000
1 Francisco
191,007,000
85,093,000 :
191,962,000
96,759,000
~
$2,342,880,000
$1,301,392,000 b/ $2,049,064,000
$1,001,487,000 ~,
Lcludes $244,282,000 noncompetitive tenders accepted at the average price of 98.822
~ludes $118,221 000 noncompetitive tenders accepted at the average price of 97.542
lese rates are o~ a bank discount basis. The equivalent coupon issue yields are
.18tfo for the 91-day bills, and 5.051> for the 182-day bills.
TREASURY DEPARTMENT
55
423
,---
WASHINGTON. D.C.
FO~ R~r.2ASE
6:30 P.M.,
l-1onday, February 28, 1966.
RESULTS OF TREASVRY r S
~1EEKLY
BILL OFFERING
Thq ~Qdt:l\\ry Depa.I1;ment announced that the tenders for two series of 'I'reasU17 ~
one series to be an additional issue of' the bills dated December 2, ~geS, and the ot!
series to be dated March 3, 1966, which were off'ered on February 23, 1966, were Opea
the Federal Reserve Banks today. Tenders were invited for $1,300,000,000, or the~
of 91-day oills and for $1,000,000,000, or thereabouts, of 182-day bills. The ~
the two series are as f'ollows:
RANGE OF ACCEPTED
CO~~ETITIVE
BIDS:
High
Low
Average
~
91-day Treasury bills
maturing June 2, 1966
Approx. Equiv.
.Annual Rate
Price
98.825 ~
98.820
98.822
4.648%
4.668%
4.661~
Y
··
··
·•
·
·
··
182-day Treasury bills
maturing Sep'cember I,! 1966
Approx. Eqi"'
Price
Annual Rate
97.547
97.540
97.542
4.852~
4.866~
4.861~
Excepting 1 tender of $1,000
5770 of the amount 01: 91-day bills bid for at the low :price was accepted
82% 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:
Applied For
Accepted
: Applied For
Accepted
$ 24,675,000 $ 12,675,000: $ 22 1 730,000
$ 11)
1,594,201,000
881,412,000:
1,355,675,000
6G6~
31,119,000
l4,1l9,OOO :
19,123,000
6,
25,674,000
25,545,000 :
48,074,000
45,
Richmond
10,998,000
10,998,000 :
9,711,000
9,
Atlanta
49,682,000
31,500,,000 :
36,530,000
14,
Chicago
290,356,000
158,714,000 :
298,177,000
lW,
st. Louis
55,585,000
31,563,000 :
27,575,000
la,
Minneapolis
19,949,000
13 1 589,000 :
9,879,000
6,
Kansas City
23,848,000
21,828 1 000 :
15,388,000
13
Dallas
25 1 786,000
14,356,000 :
14,240,000
10
San Francisco
191,007,000
85,093,000 :
191,962,000
9~
TOTALS
$2,342,880,000
$1,301,392,000 EJ $2,049,064,000
$1,001,
EJ Includes $244,282,000 noncoopetitive tenders accepted at the average pr1ceo1
£J Includes $118,221,000 noncompetitive tenders accepted at the average price !I
1/ 7nese rates are on a bank discount basis. The equivalent coupon issue y1~
4. 78~ for the 91-day bills, and 5.05~ :E'or the 182-day bills.
District
Boston
New York
Philadelphia
Cleveland
~
Y
if
.' ..
~/~,
"
,
STATEMENT OF FRED BURTON SMITH,
ACTING GENERAL COUNSEL, U. S. TREASURY DEPARTMENT,
BEFORE THE HOUSE COMMITTEE ON WAYS AND MEANS,
ON H. R. 12676, H. R. 12677, H. R. 12678, and H. R. 12768.
March 1, 1966
Mr. Chairman and Members ot: the Committee:
I appear
be~ore
your Committee in support ot: the Administration's
proposal to suspend temporarily the duty on
materials, including copper scrap.
~ports
of copper raw
This proposal is part
o~
the Admin-
istration's t:our-step program on copper announced by Secretary of Det:ense
McNamara on November 17, 1965.
In announcing this program, Secretary
McNamara stated:
"Our greatly increased defense efforts in Vietnam and
recent international political disturbances threaten both to
disrupt and to distort the market for copper despite the best
efforts of our American copper industry to supply that market.
"This market disruption can lead to strong inflationary
pressures, not only in copper essential to de£ense needs but
also more generally througbout our economy.
Such developnents
would seriously impair our defense efforts in Vietnam. *
*'
*"
The four-step program, designed to maximize the supply of copper
at home, sta.bilize the domestic copper market and thus to maintain a
noninfla.tionary price level for copper, was as follows:
Step One was the orderly release of 200,000 short tons of copper
fram the national stockpile.
This has been done.
Step Two called for discussions with the directors of the New York
- 2 -
Commodity Exchange for the purpose of securing checks on excessive speculation in copper trading.
As a result of these discussions, the
Commodity Exchange has raised margin requirements
~or
New York
trading in copper.
Step Three was the invocation of export controls on copper as of
November 18, 1965.
Formal regulations tightening controls over the flow
of copper out of the United states were issued later the same month and
on January 20, 1966, an export quota of 25,000 short tons was placed on
virtually all types of domestic-origin copper.
Step Four is the legislation now before this Committee and Congress
to suspend temporarily the import duty on copper raw materials.
Copper is a metal of vital importance to our domestic economy.
It
is, at the present time, in short supply in the United States and in the
world at large.
The consumption of refined copper in the united states
has been rising steadily since
1961.
In 1965, the ratio of military
requirements to the total. for all purposes was about 4 percent.
This
ra.tio is expected to double and it may possibly treble in 1966.
Our
commitments in Viet Nam, coupled with the growing needs of our civilian
economy, will create a very tight copper supply situation in 1966.
The shortage of copper has been reflected in pressures on the price
of copper both at home and abroad.
The U. S. producers' price for refined
copper, which until March 1964 had remained constant at 31 cents a pound
for almost three years, experienced three increases in the space of a
little more than one year, going from 31 cents to 32 cents to 34 cents
and f'inally to 36 cents per pound in May, 1965.
The producers' price
- 3 in other countries not only foLlowed price developments in the United
states, but has increased to a level of 42 cents a pound.
In 1966, it is expected that the copper supply situation will continue to be critical with
est~ated
domestic consumption of copper
amounting to 2.37 million short tons, roughly 330,000 tons greater than
in 1965.
Domestic production is expected to continue to increase in
1966, and we are hopeful that Lmports will increase over 1965 levels.
Our imports of WlITlanu:factured copper came principally from Chile, Peru
and Canada, with net imports in 1965 amounting to about 8 percent of
our new supply of copper.
The tariff items principally covered by this bill are now subject
to a duty rate of 1.7 cents per pOWld.
Suspension of the duty will
reduce the cost of foreign copper to U. S. consumers by an equivalent
wnount, thereby contributing to our efforts to hold the price line in
the United States.
I would note, in passing, that the import duty on
unmanufactured copper was suspended by legislation from ApriL 30, 194 7
to June 30, 1950 and again :from April 1, 1951 to June 30, 1958 when the
available supply was insufficient to meet demand and there was pressure
on prices.
The proposal being considered by the Committee is an integral and
necessary part of' the Administration t s program.
It will have no ill
effect on the domestic copper mining industry; it will be of great benefit
to the industrial consumers of copper; and it will contribute to our
efforts to maximize the supply of copper, stabilize the copper market and
hold the price line in the united States.
- 4 Mr. Chairman, I believe the need for the temporary suspension of
duties on copper raw materials is clear and its purpose unobjectionable.
For the period covered by this bill, there is no possible threat to
domestic producers of copper fram foreign competition.
Moreover, they
are adequately protected by the column l-b duties which would automatically
come into effect in the unlikely event that the market price of copper
falls below 24 cents per pound.
I therefore urge favorable consideration of the Administration's
proposal.
.. 3 -
1 ' ) ....
·1
·-.v
sale or other disposition of Treasury bills does not have any special treatment, ..
aueh, under the Internal Revenue Code of 1954.
The bills are subject to estate,
inheritance, gift or other excise taxes, whether Federal or State, but are exempt tria
all taxation DOV or hereafter imposed on the principal or interest thereot b,. I.., &ell
or any of the possessions of the United states, or by any local taxing autborit7. ,.
purposes ot taxation the amount ot discount at which Treasury bills are orisiDlll1l11
Under Sections 4~ (b) anell221 (t
by the 11Dited States is considered to be interest.
ot the Internal Revenue Code ot 1954 the amount ot diacount at which bills i.lued buj
under are sold 1s not considered to accrue until such bills are sold, redeemed or oW
vise disposed ot, and auch billa are excluded trom consideratioD as capital a..at••
Accordingly, the owner ot i'reasur:y bills (other than lite insurance cClllPU11el) 11_
hereunder Deed include in his income tax return only the d11'terence between the Pliet
•
]8id tor such bills, whether on original issue or on subsequent purchase, anel the III
actually received either upon aale or redemption at maturity during the taxable 7IIr
tor which the return i8 made, aa ordinary gain or loss.
Treaaury Department Circular No. 418 (current reVision) and thia notice, pre._
the terms of the Treaaury bills and govern the conditions ot their issue. Copill of
the circular may be obtained :from any Federal Reserve Bank or Branch.
- 2 -
il.
I
\ ..
'
'-,
printed forms and forwarded in the special envelopes which will be supplied b)' " -
Reserve Banks or Branches on application therefor.
Banking institutions generally may submit tenders for account of customers ~
others than ~
vided the names of the customers are set forth in such tenders.
institutions will not be permitted to submit tenders except for their own accoat.
Tenders will be received without deposit from incorporated banks and trust cCll.Pl11rt
and trom responsible and recognized dealers in investment securities.
Tenderlf.NI
others must be accompanied by payment of 2 percent of the face amount of 1'resBUl'f 1t
applied for, unless the tenders are accompanied by an express guaranty of
pa~eDt
II
an incorporated bank or trust company.
Immediately after the closing hour, tenders will be opened at the Federal Reli
Banks and Branches, following vhich public a.nouncement will be made by the
Department of the amount and price range of accepted bids.
will be advised
ot the acceptance or reJection thereof.
Trea.~
Those submttt1ng tenAt
The Secretary
ot the '.PteI
expressly reserves the right to accept or reject any or aU tenders, in whole or it
part, and his action in any such respect shall be final.
Subject to theBe reserftl
tions, noncompetitive tenders for each issue for $200,000 or less without 8~t~
price from anyone bidder vill be accepted in full at the average price (in tbl'll
decimals) of accepted competItive bids for the respect1ve issues.
Settlement tor
accepted tenders in accordance with the bids'must be made or completed at the JIll
Reserve Bank on _ _M_ar_c_h_l
...0...,~1_9_6_6_ _ _ , in cash or other 1mmed1ateiy available
fUJ
or in a like face amount of Treasury bills maturing
and exchange tenders will receive equal treatment.
March 10, 1966
ml
Cash adjustments will
be"
d1fferenees between the par value of maturing bills accepted in exchange and till
price of the new bills.
The income derived from Treasury bills, whether interest or gain f'rc:a tile
other disposition of the bills, does
DOt
have any exemption,
88
Buch, and loll
TREASURY
r:~PARTMENT
March 2, 1966
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
$2,300,000,000, or thereabouts, for cash and in exchange for
Treasury bills maturing March 10,1966,
in the amount of
$2,202,125,000, as follows:
91-day bills (to maturity date) to be issued March 10, 1966,
in the amount of $ 1,300,000,000, or thereabouts, representing an
additional amount of bills dated December 9,1965, and to
mature June 9, 1966,
originally issued in the amount of
$1 1 000,088,000, the additional and original bills to be freely
1nt;erchangeable.
182-day bills, for $ 1,000,000,000, or thereabouts, to be dated
larch 10,1966,
and to mature September 8, 1966.
The bills of both series will be issued on a discount basis under
ompetitive and noncompetitive bidding as hereinafter provided, and at
aturity their face amount will be payable without interest. They
111 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
maturi ty value).
Tenders will be received at Federal Reserve Banks and Branches
to the closing hour, one-thirty p.m., Eastern Standard
1me, Monday, March 7, 1966.
Tenders will not be
eceived at the Treasury De~artment, Washington. Each tender must
~ for an even multiple of $1,000, and in the case or competitive
~nders the price orfered must be expressed on the basis of 100,
lth not more than three decimals, e. g., 99.925. Fractions may not
used. It 1s urged that tenders be made on the printed forms and
rwarded 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
stomers provided the names of the customers are set forth in such
nders. Others than bank~ng institutions will not be permitted to
bmlt tenders except for their own account. Tenders will be received
thout deposit from incorporated banks and trust companies and from
ponsible and recognized dealers in investment securities. Tenders
)m others must be accompanied by payment of 2 percent of the face
~unt of Treasury bills applied for, unless the tenders are
:ompanied by an express guaranty of payment by an incorporated bank
trust company.
F-393
TREASURY DEPAR'lMENT
Washington
FOR IMMEDIATE RELEASE,
Ma.rch 2, 1966
~KLY BILL OFFERING
The Treasury Department, by this public notice, invites tenders for two ••1'1tI
01' Treasury bills to the aggregate amount 01'
$ 2,30.0,000 ,or thereabouts, tor
cash and in exchange for Treasury bills maturing
of'
$ 2,202,125, 000 ,
)(jik
8S
March
i%x
1966
~ 111 the ....
follows:
Marcb~ 1966
~'
91-day bills (to maturlty date) to be issued
~~~
,
1n the amount of $1,300.,000 ,or thereabouts, representlng an additional amount of bills dated
and to mature
June 9 ~66
Decembe~ 1965
"
, originally issued 1D the
amount 01' $1,00.,000 , the additional and original b1lls
to be freely interchangeable.
182 -day bills, for $1,00.000 , or thereabouts, to be dated
5(jjjI)X
March 10, 1966
,and to mature
septemb.1966
~
The bills of both series vill be issued on a discount basis under
•
compet1~.
and noncompetitive bidding as hereinaf'ter provided, and at maturlty their tact
will be payable without interest.
They will·be issued in bearer torm only,
III
denominations 01' $1,000, $5,000, $10,000, $50,000, $100,000, $500,000 and $1,.
(maturity value).
Tenders will be received at Federal Reserve Banks and Branches up to the
hour, one-thirty p.m., Eastern Standard time, Monda..xz Marc\l;, 1966
will Dot be received at the Treasury Department, Washington.
_
Each tender
tor aD even multiple Of $1,000, and in the case of eompetitive tenders the p
offered must be expressed on the basls of 100, with not more than three c1ed
e.
g.,
99.925.
Fractions may not be used.
It 1s urged that tenders be ....
STATEMENT BY THE HONORABLE STANLEY S. SURREY
ASSISTANT SECRETARY OF THE TREASURY
BEFORE THE HOUSE WAYS AND MEANS COMMITTEE
ON H.R. 11256 AND H.R. 11290
WEDNESDAY, MARCH 2, 1966
Mr. Chairman and Members of the Corrmdttee:
I welcome this opportunity to urge prompt and favorable action
on H.R. 11256, introduced by Chairman Mills, and H.R. 11290, introduced by Mr. Byrnes, nearly identical bills, which propose a
"Federal Tax Lien Act of 1966."
The proposed Act is the first com-
prehensive revision and modernization of the provisions of the
Internal Revenue Code relating to the priority of federal tax liens
over the interests of other creditors.
Some of the present basic
provisions of our lien law antedate the 1913 income tax, and others
were adopted in 1913.
Subsequent commercial developments have re-
sulted in a variety of new security interests which the present tax
lien provisions do not accommodate.
Moreover, a number of technical
defects in the operation of the lien procedure have accumulated over
the years.
In adapting the tax lien provisions of the Code to
present business practices, and in resolving a number of technical
questions which have arisen over the past several years, the proposed Act is in the best interests of both private enterprise and
the government.
In my statement I intend to cover only the high-lights of the
proposed Act, as I am submitting a technical explanation discussing
it in detail.
- 2 -
Immediately after the closing hour, tenders will be opened at the
Federal Reserve Banks and Branches, following which public announcement will be made by the Treasury Department of the amount and price
range of accepted bids. Those submitting tenders will be advised
of the acceptance or rejection thereof. The Secretary of the Treasury
expressly reserves the right to accept or reject any or all tenders.
in whole or in part, and his action in any such respect shall be
final. Subject to these reservations, noncompetitive tenders for
each issue for $200,000 or less without stated price from anyone
bidder will be accepted in full at the average price (in three
decimals) of accepted competitive bids for the respective issues.
Settlement for accepted tenders in accordance with the bids must be
made or completed at the Federal Reserve Bank on March 10, 1966, in
cash or other immediately available funds or in a like face amount
of Treasury bills maturing March 10, 1966.
Cash and exchange tenders
will receive equal treatment. Cash adjustments will be made for
differences between the par value of maturing bills accepted in
exchange and the issue price of the new bills.
The income derived from Treasury bills, whether interest or
gain from the sale or other disposition of the bills, does not have
any exemption, as such, and loss from the sale or other disposition
of Treasury bills does not have any special treatment, as such,
under the Internal Revenue Code of 1954. The bills are subject to
estate, inheritance, gift or other excise taxes, whether Federal or
State, but are exempt from all taxation now or hereafter imposed on
the principal or interest thereof by any State, or any of the
possessions of the United States, or by any local taxing authority.
For purposes of taxation the amount of discount at which Treasury
bills are originally sold by the United States is considered to be
interest. Under Sections 454 (b) and 1221 (5) of the Internal
Revenue Code of 1954 the amount of discount at which bills issued
hereunder are sold is not considered to accrue until such bills are
sold, redeemed or otherwise disposed of, and such bi lIs are excluded
from consideration as capital assets. Accordingly, the owner of
Treasury bills (other than life insurance companies) issued hereunder
need include in his income tax return only the difference between
the price paid for such bills, whether on original issue or on
subsequent purchase, and the amount actually received either upon
sale or redemption at maturity during the taxable year for which t~
return is made, as ordinary gain or loss.
Treasury Department Circular No. 418 (current revision) and thiS
notice prescribe the terms of the Treasury bills and govern the
conditions of their issue. Copies of the circular may be obtained frI
any Federal Reserve Bank or Branch.
000
- 2 -
Background of bill.
As you may know, the proposed comprehensive revision of the priority and effect of federal tax liens was initiated by the
Bar Association and other interested industry groups.
~~2rican
These groups
have worked with the Treasury Department and the Internal Revenue
Service for several years to perfect a bill which would represent a
fair and desirable revision of the rules governing tax liens.
I
believe that, except for proposed section 3506 of H.R. 11256 relating
to withholding taxes in the construction industry, which I will discuss later, to which the construction industry has objected, all
interested parties, including the Treasury, are in favor of the
proposed Act and agreed that it represents a careful and proper
balancing of the interests of the government and the needs of the
business community.
Necessity for legislation.
Even before World War II attempts were being made to prepare a
uniform commercial code to bring together the best business laws and
practices prevalent in the United States.
The Uniform Commercial
Code was finally completed in the early 1950's and has been widely
adopted.
The Uniform Commercial Code is an historic revision of the
laws governing commercial practices in the United States.
That re-
vision in turn requires a revision of the rules governing federal tax
liens, as these rules play an important part in day-to-daY commercial
activity.
In addition, the present law of federal tax liens had resulted,
even prior to the widespread adoption of the Uniform Commercial Code,
- 3 in a number of difficulties.
Section
6321 of present law imposes a
lien for any unpaid taxes upon all the property and rights to property
of the taxpayer.
The lien arises as of the time the tax is assessed
and attaches to all property of the taxpayer then owned or tbereafter acquired.
The assessment of the tax occurs when the tax is
entered upon the records of the district director.
The occurrence
of this act is not published and creditors are not in a position to
learn that a lien exists.
unFublished lien section
In order to limit the aFFlication of this
6323 (a) presently provides that a lien
will not be valid against a "mortgagee, pledgee, purchaser or judgment
creditor!! unless public notice of the tax lien has been filed.
The creation of a federal tax lien which arises as of assessment,
and the inapplicability of this lien, until publication, to a mortgagee, pledgee, purchaser, or judgment creditor have resulted in two
maj or prob lems :
First, questions arise as to whether a particular person is a
"mortgagee, Fledgee, purchaser, or judgment creditor."
For example,
is a bank which engages in trusts receipts financing of inventory a
mortgagee or pledgee of the inventory?
Second, other questions flow from the Supreme Court's rulings
that, to qualify as a !!mortgagee, pledgee, purchaser or judgment
•
creditor," the interest of the clallnant
must be
reasoned that when Congress
•
sa~d
II
11
c h oa t e. II
The Court
mor t gagee, II for example, it was re-
ferring to the holder of a current, effective mortgage in the traditional
- 4 sense of that word, and not to some contractual right to obtain a
mortgage at a future date.
Thus, if A grants B a mortgage in cer-
tain real property to secure whatever amounts B may choose to loan
to A in the future, B will not at that time be a 11mortgagee II entitled
to protection against a federal tax lien as B is considered to merely
have a right to become a mortgagee at a future date by loaning money
to A.
However, BTs interest may be entitled under state law to pro-
tection against other creditors as a mortgage.
In addition, in some cases it may be inappropriate to grant a
federal tax lien priority even if notice of the lien has been filed.
For example, it seems unreasonable to
re~uire
someone purchasing
securities to ascertain whether the seller has a federal tax lien on
file against him, and a rule affording protection against a filed
tax lien to a purchaser of securities without actual knowledge of
the lien has long been a part of the Code.
The passage of time has
indicated other situations where similar protection is appropriate.
Changes made by the bill.
Expansion of persons protected against an unfiled federal tax
lien.--To solve the
~uestions
which have arisen as to whether cer-
tain persons are a Tlmort gage e , pledgee, purchaser or judgment credi tor!1
the bill expands the protected categories in order to avoid litigation over the technical label for a particular interest.
Thus sec-
tion 6323 (a) is revised to provide that a federal tax lien shall not
be valid as against any purchaser, mechanics lienor, judgment lien
creditor, or holder of a security interest until public notice of the
- 5 lien has been filed by the Secretary or his delegate.
Thus, mechanics!
lienors and holders of security interests, which term would include
pledgees and mortgagees, are given protection against unfiled federal
tax liens.
The term "security interest" is one used in the Uniform
COlJlIIlel"cial Code.
The proposed Act would define the term broadly to
encompass any interest in property acquired by contract for an adequate and full consideration for the purpose of securing payment or
performance of an obligation or for indemnifying against any loss
or liability.
Expansion of classes of property entitled to protection against
a filed federal tax lien.--Furthermore, certain interests are given
priority--in effect a "super-priority"--over the federal tax lien
even if notice of that lien is filed.
For example, under provisions
of present law, a federal tax lien is not valid against stocks or
bonds, or a motor vehicle, even though notice has been filed, if the
purchaser is without actual notice or knowledge of the existence of
the lien.
The proposed Act will continue these rules, and grant a
similar priority in the case of personal property purchased at retail; in the case of property subject to possessory liens, as in a
case where a mechanic retains possession of an automobile until his
bill for repairs is paid; in the case of attorneys' liens; in the
case of real property tax and special assessment liens; and in the
case of insurance contracts.
All these prOVisions solve problems which have arisen under
present law.
The rationale of these proposed rules is that it is
- 6 not reasonable to expect one acquiring an interest in property in
such cases to check on the existence of a federal tax lien.
Expansion of classes of proE€rty entitled to protection against
a filed federal tax lien to encompass interests which are not technically "choate, II but which are related to an earlier, protected,
security interest.--As indicated above, for a mortgagee, for example,
to be entitled to protection against an unfiled federal tax lien his
interest must be
11
choate , " or clearly established.
Where a mortgage
is obtained which provides that, in addition to the amount loaned,
the property is subject to accrued interest, and expenses such as
attorneys
I
fees in the event of default, any rigbt to interest and
expense s i s not
11
choate II as the amount of such a right is unknown.
The mortgage debt would itself be prior to any unfiled federal tax
lien, but the filing of such a lien after the mortgage is obtained,
and before the mortgagee
became
11
choate,
II
IS
interest in accrued interest or expenses
would cut off the mortgagee I s right to accrued in-
terest and expenses even though such right would usually be protected
against subsequently filed liens under state law.
To solve this problem a "super-priority" is granted to interest
and expenses attributable to an obligation which is otherwise prior
in right to the federal tax lien.
'I'hus such interest and expenses
will be prior to a federal tax lien even though notice of that lien
was filed prior to the existence of a specific debt for interest and
expenses.
-
'(
-
Similarly, "\-There a security interest has priority over a
federal tax lien because it arose before notice of the lien was
filed, the priority of the security interest shall extend (and a
ltsuper-priority" shall be granted) to advances (obligatory advances)
required to be made either under a contract which runs to a person
other than a taxpayer, so as to protect a surety's claim for reimbursement for payments pursuant to a bond, or which is in negotiable
form, as where a letter of credit is given by a bank.
Furthermore,
the priority of a security interest, such as a mortgage, which has
priority over a fed2ral tax lien shall extend (and a "sup;:;r-priority"
shall bc granted) to advances (completion advances) which are made
to complete the construction or improvement of real property or the
raising or harvesting of a crop or the raising of livestock.
Ac-
cordingly, such advances will be prior to a federal tax lien even
though notice of that lien was filed before the advances were made
and became "choate. 11
Expansion of classes of property entitled to protection against
a filed federal tax lien to encompass interests which are not technically "choate" and which are not related to an earlier, protected,
security interest.--In some cases financing techniques are used under
which a series of "choate" interests are to be created on a day-to-day
basis.
However, while part of the series not yet "Choate" is cut of:f
from protection against a federal tax lien under present law as soon
as notice of the lien is :filed, it is not feasible to check each day
to see if notice of a federal tax lien has been filed.
- 8 To deal with this problem advances made under financing agreements providing for loans on the security of or the purchase of
accounts, contract rights, chattel paper, documents, notes, instruments or mortgages, are given a 45-day grace period of priority.
In
other words, for the purpose of determining the priority of the lien
arising under local law on these interests, as against a federal tax
lien, such local liens will be deemed to have priority if they arise
within 45 days after the notice of federal lien has been filed.
If
notice has not been filed they will, of course, be protected as
security interests against the unfiled federal lien.
As a practical matter this means, for example, in the case of a
lender engaging in accounts receivable financing, that he need check
with the local registrar for federal tax liens against a borrower
only every 45 days.
If he checks, and no lien is on file, he will
be assured that he can make loans on a day-to-day basis for 45 days
as the accounts receivable are forwarded from the borrower, without
fear that a federal tax lien may be filed against the borrower and
be prior in right to his advances~
At the end of the 45-day period
he can check the records of the local registrar again and determine
whether to continue making advances for the next 45-day period.
In addition to these fundamental alteratiornin the present
priority rules for federal tax liens, the proposed Act makes a series
of technical changes to solve particular problems that have arisen
over the years, many of which inconvenience, or even seriously hamper
- 9 commercial activity_
Moreover, specific rules are added governing
suits against the United States when a third party has an interest
in the property levied upon.
The bill also makes various technical
amendments to title 28 of the United States Code (relating to the
judiciary and judicial procedure) to cure existing technical defects and simplify the procedure for litigating with the United
states concerning title to property, as in connection with actions
to partition or condemn property and actions in interpleader.
Some special problems.
There are four provisions of the proposed Act which are of
special interest to the Treasury Department.
Under present law the only means of reaching a delinquent taxpayerts interest in an insurance contract is to bring a foreclosure
action.
However, this will terminate the policy and is a clumsy and
lengthy proceeding.
The proposed Act establishes a procedure by
which the government can levy on a policyholder1s interest in an
insurance contract without extinguishing the policy by foreclosure.
Thus, although the government can obtain the taxpayer's interest in
the policy, the policy itself may be continued by the beneficiary or
other interested party.
The other three provisions of particular interest to the Treasury
Department deal primarily with various aspects of collecting withholding taxes in the construction industry, and in the case of the provision dealing with 'Inet payroll financing," in the garment industry
as well.
- 10 -
As you know employers are required to withhold income and employment taxes £rom the wages of their employees 7 deposit these taxes
monthly in a local depository7 and file returns and pay any balance
quarterly.
Substantial problems have arisen with respect to the
collection o£ these withholding taxes, often known as trust fund
taxes, particularly in the construction industry.
First7 where a contractor has overextended himself and is unable
to complete a contract, a surety company, which bas guaranteed his
performance and is required to complete tbe job, is now able to arrange to discharge its obligation in a way which completely avoids
the payment of the withholding taxes which otherwise would be due on
the completion of the job.
financing. II
This technique is called Ilnet payroll
What happens is that the surety advances only the pay-
roll net of withholding taxes to the contractor who continues to do
the work to complete the job.
However, the contractor is unable to
pay the trust fund taxes attributable to the wages he has paid, for
the surety company has provided no funds for that purpose and the
contractor has none of his own.
The assets of the contractor are
usually heavily mortgaged in such cases, often to the surety, so
that their seizure by the Internal Revenue Service results in
practically no recovery.
The courts have held tbat a promise to
guarantee the payment of "wages" does not constitute a promise to
guarantee the payment of withholding taxes attributable to those
wages.
Moreover, several courts have held that in such instances
- 11 -
the surety company is not liable for the employment taxes under the
Internal Revenue Code as it is not technj_cally the lIemployer" in
such a case.
Thus, by using the bankrupt contractor as a middleman,
surety companies have been able to honor their obligations under a
surety contract without making provision for the payment of the
federal withholding tax liabilities which are a necessary concomitant
of the completion of the job.
The significant industries in which
this practice has been used so far are the construction and garment
industries.
This is a wholly indefensible practice, and the proposed Act
would impose liability upon all third parties paying or providing
for wages in such instances.
In light Ol the proposal for graduated
withholding recently adopted by the House, the limitation of liability under the proposed Act to 20 percent of the funds provided for
wages should be raised to 25 percent, to cover both income and employment tax withholding.
Second, as I have indicated, the courts have held that a promise
of a surety to guarantee the payment
0f
wages
i l I I
d oes no t
a promise to guarantee the payment of withholding taxes.
constitute
This has
often resulted in a problem on federal construction jobs inasmuch
as the performance bonds now required do not insure against nonpayment of the goverament 1 s own taxes.
the Miller Act (40
u.s.c.
The proposed Act would amend
270(a)) to require that performance bonds
on federal construction jobs specifically insure payment of the emnl
t axes lncurre
.
d on that J'oib •
~ oymen t
proposed in the past by members
01'
A sl'Tn;lar
amendment has been
~
Congress.
- 12 -
These two provisions remedy these periodically troublesome
problems.
A third, and more general problem, is dealt with in H.R.
11256, but not H.R. 11290.
II.R. 11256 provides, in proposed section
3506, that if taxes withheld on wages paid to an employee for services performed in the construction of real prop2rty, where the contract price exceeds $2,,000 (other than a single family, owner occupied
dwelling), are not paid, the U. S. shall have the same rights (including liens), remedies and priorities against any person or property
to collect such unpaid wages as are provided by any law for the collection of such wages by such employee.
This solution was developed as an alternative to an earlier proposal which imposed liability for any unpaid withholding taxes of an
employer upon any person who contracted with the employer for the
improvement of real property, except where such person obtained a
certificate from the employer, executed under penalties of perjury"
that such taxes had been paid.
In our judgment this earlier proposal
had some advantages over the present solution from the standpoint of
those affected by the proposal, but either solution to this problem
would be acceptable to the Treasury Department.
The problem here is a real one.
All too frequently general con-
tractors or subcontractors in the construction industry receive
money to pay their employees, but, after deducting "I-rithholding taxes
from the wages paid, do not turn these trust fund taxes over to the
federal government.
Although the construction industry is estimated
to withhold only about
5.67
percent of the trust fund taxes collected
- 13 annually from all employers, a recent study of current delinquencies
showed that
26
percent of the dollar value of delinquent trust fund
taxes was attributable to the construction industry.
cent amounted to more than $55 million annually.
This
26
per-
At this point I
submit for the record a copy of a memorandum containing an analysis
which was made by the Internal Revenue Service of trust fund
delinquencies.
The provision of
H.R. 11256, proposed section 3506, to which I
refer, would give the U. S. the same rights with respect to unpaid
trust fund taxes which the employee of a contractor, to whose wages
the taxes apply, would have if his wages were not paid.
AliSO
states have mechanics' lien laws which, in different degrees and
through different procedures, impose a liability for unpaid wages
of construction workers upon the owner of real property to whose
property the wages are attributable.
The adoption of proposed section
3506 would merely reinstate a
responsibility of the owners of real proPerty.
When the withholding
tax system was adopted in the early 1940's, owners of real property
were inadvertently relieved of a portion of their obligation to see
that all the wages of their contractor's employees were paid, inasmuch
as they remained liable under state law only for the portion of the
wages to be paid to the employees, and federal law did not impose
responsibility for the portion to be withheld and paid the United
States.
- 14 The federal government should be in no worse position with respect to withheld taxes than a workman whose wages have not been
paid.
These withheld
wages represent money that, were it not for
tax withholding, would be owed and paid to the workman from whose
wages the money was withheld.
Thus, the funds which proposed sec-
tion 3506 is intended to help collect do not in any sense belong to
the withholding agent, and every reasonable step should be taken to
insure the integrity of these trust funds.
These trust fund taxes
contribute value to the real property constructed just as do the
labor and materials which go into the building.
Since the owner of
the property receives the ultimate value of these taxes) it is
reasonable to expect him to help insure that they are in fact paid.
As I have indicated) under state law if a contractor or subcontractor fails to pay his employees) even though funds have been
provided to him by the owner of a building for such purpose, the
employees may hold the owner of the building on which the work was
performed responsible for the unpaid wages.
It is the ordinary
practice for persons contracting for construction work on their real
property to take special steps to see that wages incurred on the job
will be paid.
The purpose of proposed section 3506 is to require
that an owner of real property who is contracting for the construction of improvements on real property take the same steps to guarantee
the payment of withholding taxes incurred on the job as he would to
guarantee the payment of wages.
- 15 Often owners of real
~roperty
protect themselves against any
liability for unpaid wages by withholding one week's wages from the
contractor until the work is completed.
By withholding an additional
amount eQual to one week's wages the owner may also
from any liability for unpaid taxes.
can
sim~ly
~rotect
himself
In the alternative, the owner
pay the contractor the net wages owed to his workmen, and
give the contractor a check payable to the United States for the
withheld taxes to protect against any possible liability.
surety bond could be obtained by the owner.
Or a
In the case of employees
of subcontractors the property owner often shifts the risk of nonpayment of wages to the general contractor by contract.
The general
contractor could take steps similar to those mentioned above to
protect himself against any liability which he may incur under
ffil
agreement with the owner of real property with respect to the unpaid
withheld taxes of his subcontractor.
In view of the extremely high and entirely disproportionate trust
fund tax delinquencies in the construction industry, despite concerted
Internal Revenue Service efforts to cope with the problem under
present procedures, some way must be found to assure the collection
of these taxes.
I urge the Committee to schedule hearings on pro-
posed section 3506~ contained in HoR. 11256, so that the Treasury
Department may present the reasons for this proposal in detail.
- 16 Summary.
In summary, the Treasury Department is in favor of the proposed
Federal Tax Lien Act of
Committee.
1966 and recommends its adoption to the
The proposed Act represents a sound balancing of the
interests of the government and of the business community and is
needed to insure the proper functioning of our private credit system
and the government's tax collection activities.
It also corrects a
great variety of technical defects that have accumulated over the
years.
In addition, the Treasury Department urges that hearings be
held on proposed section 3506 of H.R. 11256, designed to solve a
pressing withholding tax collection problem in the construction industry, so that the Committee may be advised of the details of this
problem and the proposed solution, and take appropriate action.
I said above, measures must be found to end the failure of this
industry properly to account for the trust funds which it obtains
through the withholding system.
As
~FOR"NO.'O
5010-106
MAY . _ EDITION
GSA Go.. REG. NO. 17
UNITED STATES GOVERNMENT
Memorandum
TREASURY DEPARTMENT
Washin~ton, D.C.
TO
stanley S. Surrey
Assistant Secretary
FROM
Sheldon S. Cohen
Commissioner, Internal Revenue
SUBJECT:
Trust Fund Tax Collection in the Construction Industry.
DATE:
February 12, 1965
Proposed section 3506 of H.R. 11256 (89th Congo 1st Sess.)
deals with a serious problem in the collection of trust fund
(income and employment) taxes from employers in the construction
industry.
That the Internal Revenue Service has encountered serious
difficulties in collecting trust fund taxes withheld by employers
in the construction industry, which difficulties have not been
overcome by remedies presently provided, is made clear by a study
recently completed by the Service.
The attached tables are based on an analysis of all delinquent
employment tax accounts in January 1965 by all district directors.
These tables show:
(I)
(II)
The percentage of employment tax returns (Federal
Insurance Contributions Act taxes and income tax
withholding) filed on Form 941 without full payment
which is allocable to the construction industry, and
the dollar amount of the delinquency;
The percentage of employment tax accounts attributable
to the construction industry which is allocable to
those of such accounts which are one year old or older,
and the dollar amount of such accounts;
(III)
The percentage of employment tax accounts which were
written off as uncollectible in fiscal year 1964
which is allocable to the construction industry, and
the dollar amount of accounts written off.
(rv)
The percentage of employers having a history of
delinquency in the employment tax area which is
allocable to employers in the construction industry.
Buy tf.S. Saving) Bonds Regularly on the Payroll Savings Plan
- 2 ...
In brief summary, the tables reveal that, although the
construction industry is estimated to pay only about 5.67 percent
of trust fund taxes collected annually, 26 percent of the dollar
value of delinquent trust fund taxes is attributable to the
construction industry. Twenty-eight percent of the dollar value
of trust fund taxes written off in fiscal 1964 as uncollectible is
attributable to the construction industry. Thus, $16,290,098 of
trust fund taxes which should have been paid by the construction
industry were written off as uncollectible in fiscal 1964.
Supplementing the statistical data obtained from the Service's
recent study is the fact that, in the almost unanimous opinion of
the fifty-eight District Directors of Internal Revenue all across
the country, employers in the construction industry gave them the
greatest difficulty in terms of number, frequency, dollar volume,
and duration of delinquencies. No other industry group presents
a problem of the same magnitude. The problem in the garment
industry, the industry group which gives perhaps the next greatest
amount of difficulty, is not nearly as great, and to a large extent
that problem should be alleviated by the adoption of proposed
section 3505 of the proposed Federal Tax Lien Act of 1966 which
attacks the practice of rtnet payroll financing."
Attacrunent s
.
TABLE I
!>el1nquent ~'Oft4 9Ja. .(CCOtmts
C'utetanding Aga1nat
CoMtl"\lCt1on Industry ~CJy8r8
Current
(2)
Total
:fur:tber of
AcOO\mts
For ·~ll
t!:m'pl oyer s
li'o:rm
l
'fetal.
of Pom 941
Accounts
to
Col. (1)
to
\
Construction
I
For
':11
" 1.,-,y~~'s
~',n'~::
..
Industry
15)
Dollar Val.ue
Col. (2
Accounts
196$
l~l
Percents
91al
A~tr.1butahl.e
i
Janua~J
{3}
t~J
}.nmber of '
Form 941
1~{;1.an
Inven!=2Z -
•r
!
(oj
Uollar Val.ue
of fo1"ftl 941-
Accounts
f'ercont,
Col. (5)
to
! ..ttr.l.butable
fl. )
Col. l;
...
to
Gonstructi.on
Induo1iry
-
.\
tCit.;\!.
rAJ.
~.... t
_s~
163,.16)
28,)66
17
$210, 950 ,Jl~
22,419
=',077
16,876,204
1.567
23
16
2,744
~6
2$, 82S,.3$2
lo,lOt~
1:; .. 9.31
"It
2,28)
17,0l4
nl
JNeet
yon,....
A.tlan t.i.c
em
ce of
ernat1onaJ.
rations
17,S79
4.194
2 .. lU8
26,981
2),187
27.790
2O,0l$~OOO
21
17
397
!i
i
24
9
,,7bh
2,39h
l~,m.>.L4
11
3,922
ll,69l.,9S0
J.4
47 ..199,)16
34,296,l44
38,2$),1l8
88),$42
'''55 , 60£'0, 6"'"
e.G
'"
!1 , 081. # SiC 1
26
.
y'
,
2 .. 458 .. 0)2
21
5.4h6.t497
1,S)8,,(XX)
8.. 557,21$
9.071,429
21
3,7S8,099
1),370,617
326,U6
\
I
Each account 1nc1.uded. in t.be ftgures a:ppear1.Dg in Colus (1) and CoIUlllR
(2) of Tabl.e I reprea.aw a retum :fUed Oft Fom 9Ll td.tbollt .tull pq"*it ~ the ire,... IIbcYn thcecrt to be doe. The mlllber of accr:nmte ahotm
10 Cal.'-1 (1) 1nclllde8 t.be ~ aepaate'l7 shO'iftl in ColUIZ (2). 1he
dollar ...unta ehoIe 111 ColUIIIUI (4) UHl (5) repreeent 8IIJll.Oi'IS' tax
l.1abU1t.1._ reporMd _" DOt pd.cl.
*Tbe Ncl"'theu1o aDd r. . tcrk ~ "... ocuol1dated. 1n JaDUalY
under the n.-. f4 Horth-At.laDtiLc NiIIi-.
1965
24
3~
t.
1(3
26
3$
.37
TABLE II
Form
9hl
Accounts
outatand..1.ng Aga1nst,
:Qqployera in the Conatrue'bion Induat.ry
For One Year or More
Current
{ll
Total Form
9hl Account.
IAttrJ.butabl.e
fiBgion
Invantorz - Jan9Fll96S
121
Form 941
Accounts
At~r1butable
to
to
Construe t1.on
Indu8try
CcmstNC\:1on
_W_
(5)
(4)
Peremt, Total Dollar Dollar VaJ.ue
Col.. (2)
to
Col. (1)
Induatry
Value at
FOft 941
9lel.
Accounte
ot
Form
Co}
Percent~
Col.. ($)
to
ACCOWlts
Att.r1butable Col. (4)
Attrl.butable
to
Whioh Ha".
to
Conatn&ct.1on
Been
Incluet.r,y
Cons1;ructiQll
IndwstJ7
1 Year
Which 11a~
Been
outet.nd1Dg
or More
1 Year
Outst.nd1Dg
or More
~NAL
U.
leUt
.at
at
'Dl
. .t
ork
tlantJ.c
m
• 01
ma1aonal
1\10l1Il
28,)66
9,78S
34
5,077
1"S67
1.,532
30
472
2,744
1,100
30
29
2,263
4,194
2,438
3,922
S,14h
391
6S6
1 .. S7L.
1,073
1,1al3
1,8S3
112
$SS,606,622 $29, 7.30, SOB
S_o8J.,987
2,168,0)2
40
3.7$8,699
S,h46,1Q7
L4
8,SS7,21$
)8
)6
)2
28
7,538,000
9.071,U29
1),310,61.7
326,1h6
2,349,9$7
1,l49,610
J.,885,820
),)26,,13S
3,881,000
S,$46,03$
S,ala9,214
6,412,670
1.30,047
53
46
47
So
61
>1
6S
56
4B
40
Form 941 Account. .Attributable to
Er.1ployere in the Con~truct1on Industry
::hich \:ore Wr1 ttan C~£ as Uncollectible
in Fiscal lear 1964
-
(~l
(2)
r.rotall~
orr
~
For',ll
Employers
.. _.-
Col. (2)
i
At'tributable
pncollee"ttbl.e
ill
I Percent
Total llwaber
of ~'onn 941
Account.
of Form 9h1
Account.s
ih'1. tten
a.s
J
to
Col. (1)
to
Carust.ruetion
l.nd.w1 t.ry
Ilhich :Iere
Hrit.W1 Cff ,
as
Uncollectible.
.~
(4)
Total. ~J.ar
VaJ.ue of
DoUarValue
~'8rcent
0:£ }'ona
Col.. (~)
941
Form 941
AccOWlts
'ir11iten CfE
Accounts
,.. ttributable
t.o
as
1Jneol..lectJ..ble
()ons
For ,',11
2Jnploye1" s
(~
i
to
1
(I \
.... 0 • ,.i.;. J
~
truct.ion
InduatrJ
',.'h1ch
~·{.re
-,'nt-ton err
as
UncoJ..loctible
(
.
!
At
utUlt
63~G2e
~o~604
~ .. 691
1.,&)$
1,lJ5
>,712
~
6,411
l
ast
'k
.antic
ot
aticnal.
7,0fJ7
6,6$l.
6#886
1. 1 0)6
~..ll4
1.,603
6J.)
i3~S
1.,.353
220
77
llJ9SS
~,918
leas
i
,
1
I
,i
I
i
17
17
1
9
11
I
$,937,164
6..174,5)1
16
!I
!I
I,
5.22),196
6.214,966
20
16
23
,
~S7,604#521
17
JS
S~1S7 ,000
7,812,163
1,7lO.9L5
13.l99,6>1
94,3l.9
$16, 29O,o<?0
2('c
l.t49J~6£.3
29
1, S2J., 9OL.
1,,852 .. 089
2,,3Se J 22J
2 .. U6,OOJ
1,199,1.29
2,09:1..196
3.. 560.6$7
46 .. 615
t
f
~t a.cccMlta ae clua1ft.ed as UDOOll_t1bJ.e
mlT vbal all
ettortaba.. bMft e:wl8wrtId to loaate t:oec. 02" . . . . . o'L the ~
oon..trt.Am ean be 1Ittecne4. All.uoh aoooew are
~ pG"lI.ocIt.eal.ll' aDd ..... ~t4p1Jlld, All . . . ?Sa appl'Opl'1.ate.
out o.t wh:lch
to
~ ~ ~
JJl'08I*'W ...
_iV' ....
~4
31
39
LJ.
15
21
27
b9
nepea ted Del.1nquents
in the C0n3tru.ctJ.on I.ndwJtr.r
Ctu.-rent lnven~r, - JW1J!~UY
l~}
nsgiOll
flunbGr of Ta..~
\.~ th eutrJt...."Ul~
l'~orm 9h1 Aee.ounts
Who Haft il1story of
Pr.l.or DeJ.1nquet1C'tJ
1965
(2)
Number of Cawttruct:Lon
InduatrJ
l'~
39,,098
1.0.272
Sout.heast
tS,)76
Northeast
!1l.4IIea1;
2.600
),048
1.746
Sea1lhwut
New York
Mld-Atls:nU.c
Wutem
Ott1ce or
Intemat.1cnsJ.
Opwat4ona
S.~
26
27
25
27
968
19
747
21
2,21&6
34
l,tm
6 ..16O
1~
Boo
20)
6,S61&.
r~ent
Col. (2)
to
Col.. (1)
6$7
6)0
4,S68
3~602
-:.r1th
Outatanding Font 941
AOcounUi ~.:ho HaYe Iastory
of Pr.tor Del1.nqutncy
NA'l'IONAL
'roTAL
Cmtra1.
(J)
:n
2)
1
2S
I
All of 'tihe p~ng tsbl.ea nttlecrt atat.U'tS.cal data and. perc-teaNla1d.oneh1po in respect, of de"J'CfH1llCS_ !rl ~t.. 1tcIne ~ thaa
parWn 1n IJ¥fT ~ t.o f"allure 110 rue or to late t1l.:1.nc. No deta are
a'ftdlablA 111 theM ...... ~t. ncb .. hM been obW.Md ." ~ in
the course of ~ :raxpa;,er CORplJaaoe ~1; ~, wb:l.ch
F'J.amdna and a.••arch 1. concbtt.'b,g. ~""" the data .....11abl. show
that-, in the SGtlt.b4a8t. Beg1tm. baaed CD a S1U"NT COD<bac.... iD t.be .1MJOIld
quarteI' ~ 196), 6 0 6 percent t4 the te~ who . . . ~, bqi;
taUed, to ru.. Fora 94l £or aHJ or I!I)Z'e qu.arMr8 1n 1962 1I8I'e ~
in the cCII18truetdan 1ndu3ia'y. 'l'heae Nl1.ng deltnq".v:1" ..,llDt ror
10.4 percent of 1ihtI ureportecl empl.03l11mt tax dollarS in that P.esS m
tor that year.
-
The Proposed Federal Tax Lien Act
H.R. 11256 and H.R. 112 90, nearly identical bills, propose
a Federal Tax Lien Act of 1966. H.R. 11256, which this memorandum
will discuss, is divided into two titles. Title I covers all
changes to the Internal Revenue Code. Title II contains various
amendments to title 28 of the United states Code (relating to
judiciary and judicial procedure).
Background
Section 63 2 1 imposes a lien upon all the property and rights to
property of a taxpayer for any unpaid taxes. The lien arises as of
the time the tax is assessed and attaches to property then owned or
thereafter acquired. The assessment of the tax occurs when the tax
is entered upon the records of the district director. The occurrence
of this act is not published and creditors are not in a position to
learn that the lien exists.
In order to limit the priority of -this
unpublished lien, section 6323 (a) provides that the tax lien will not
be valid against a "mortgagee, pledgee, purchaser or judgment
creditor" unless notice of the tax lien has been filed. The fundamental
problems in the tax lien area stem from judicial interpretations of
section 6323 (a).
First, questions sometimes arise as to whether a particular
person is a "mortgagee, pledgee, purchaser or judgment creditor."
With the development of various new financing techniques in recent
years, these problems have become somewhat more serious. For example,
is a bank which engages in trust receipts financing of inventory a
mortgagee or pledgee of the inventory? The bill is designed to expand
the protected categories to avoid litigation over the technical label
for a particular interest.
Far more questions flow from the Supreme Court's rulings that,
to qualify under any of the terms listed in section 6323 (a), the
interest of the claimant must be "choate. 1f The Court reasoned that
when Congress said lI mor tgagee n , for example, it was referring to the
holder of a current, effective mortgage in the traditional sense of
that word and not to some ill-defined contractual right to obtain a
mortgage at a future date. ThUS, if A grants B a mortgage in certain
real property to secure whatever amounts B may later choose to loan
to A, B will not be at that time a 1Imortgagee", within the meaning of
section 6323.
B is considered to have merely a right to become a
mortgagee at a future date by loaning money to A. This interest may
well be entitled to protection under State law as a mortgage. Under
the Court's decisions , however , even an unfiled federal tax lien will
be valid against that interest because it is inchoate.
- 2 -
The Supreme Court has ruled that for a mortgage to be choate
the identity o~ the mortgagee, the property subject to the mortgage
and the amount of the mortgage must all be established. U.S. v.
City of New Britain (195 4 ) 347 u.s. 81. The identity of ~mortgagee
is rarely a problem.
Both of the other two requirements can cause
practical problems.
In the example discussed above, the amount of
the mortgage is not established; therefore, the mortgage is inchoate.
The choate test operates to deny priority in some very ordinary cases.
For example, it is common for mortgages to provide that the costs of
foreclosure in the event of default, including attorneys' fees, shall
be added to the mortgage. Under most state laws such amounts are
entitled to priority under the mortgage.
However, if a federal tax
lien is filed after the mortgage but before the foreclosure, the tax
lien will be junior to the mortgage itself but superior to the
attorneys' fees.
The courts hold that, to the extent of the attorneys'
fees, the amount of the mortgage is not established and thus the
mortgage is, to that extent, inchoate at the time the federal tax
lien is filed. U.S. v. Pioneer American Insurance Co.
(1963)
314 U.s. 84.
Similarly, the requirement that the property subject to the
mortgage be established prior to the filing of notice of the federal
tax lien can cause problems. A common means of finanCing business
is to make loans secured by inventory. It is equally common for such
loans to provide for substitution of inventory. As inventory is sold,
new inventory is purchased and is substituted under the mortgage for
the inventory sold.
State laws normally provide methods for making
this substitution without jeopardizing the priority position of the
lender. Under the choate test, however, if the property subject to
the mortgage on the date the tax lien is filed is subsequently sold
and new inventory substituted for the property sold 7 the federal tax
lien will have priority with respect to the new inventory. The property
subject to the mortgage was not, to the extent of the substitution,
established at the time notice of the tax lien was filed and the
mortgage was to that extent inchoate.
The bill attempts to solve these problems by providing speci~ic
exceptions to the choate test in new subsections (f) and (g) of
section 6323. The choate test is, however, retained.
In addition to these fundamental alterations in the present
priority rules for federal tax liens, the bill makes a series o~
technical changes to solve particular problems that have arisen over
the years. The bill also provides certain new procedural rules
concerning litigation over property in which the United States claims
a tax lien.
- 3 Section 101.
Priority of Liens
Section 6323 (a)
Present subsection (a) of section 6323 provides that a fede~al
tax lien for which no notice has been filed is invalid against a
"mortgagee" pledgee" purchaser or judgment creditc;r." The terms "pur_
chaser" and IIjudgment creditor" are retained without change. The term
"holder of a security interest" lIQuld be substituted for IImortgagee"
and "pledgee." Subsection (j) (4) of section 6323 defines "security
interest" broadly to include traditional mortgages and pledges and
to cover certain other interests which are not protected under present
law.. In addition" tlmechanic's lienor!! is added to the list of persons
entitled to protection against unfiled tax liens. Mechanic's liens
are not entitled to protection under present section 6323.
Present law requires the Internal Revenue Service to file notice
of a tax lien in an office designated by the state" if such a designation has been made. The proposed legislation makes it clear that
a state may deSignate only one office for the filing of a notice of
lien with respect to a single parcel of real property and one office
for the filing of a notice of lien with respect to the personal property
of a taxpayer. Thus, a state may not require the Internal Revenue Service
to file notices with respect to various kinds of personal property in
various State offices. At the time a notice of lien is filed the
Internal Revenue Service frequently does not ~ow what kinds of personal
property a taxpayer owns, and therefore could not file as required.
Furthermore, any state requirement for multiple filing of liens on
personal pro:(>erty could create an impossible administrativ:e burden.
Subsection (b)
Subsection (b) of the proposed legislation provides that the
Secretary or his delegate shall prescribe the form of the notice of
a tax lien. Present law requires that the notice be in a form acceptable to the clerk of the local district court. In the interest
of uniform application of this law, a delegation of the authority to
the Secretary of the Treasury on this point seems preferable.
Section 6323 (c)
Present section 6323 requires that the notice of lien be filed
in the state in which the property subject to the lien is situated.
Present law does not provide rules for determining the state in which
property is situated. The proposed legislation specifies that the
situs of real property is the place where it is physically located
and the situs of all personal property is at the place where the taxpayer resides at the time the notice of lien is filed.
- 4 There is some confusion in the present case law concerning whether
tangible personal property is situated at the place of its physical
location or at the place of domicile or residence of the taxpayer.
If personal property is considered located at its physical situs, it
will be necessary for the Internal Revenue Service to seek out such
property and file notices of the lien in several offices. This
would be administratively burdensome for the Service and also "makes
it difficult and expensive for potential creditors to search the
records for the existence of a tax lien. The proposed legislation
would solve this problem by requiring that a notice of lien be filed
only at the place of residence of the taxpayer in order to be valid
against personal property.
The proposed legislation specifies that the residence of a
corporation or partnership will be at the principal executive office
of the business. In the case of a taxpayer who resides outside the
United States, the notice of lien will be filed with the clerk of the
district court for the District of Columbia.
This subsection will fix the situs of property for purposes of
filing notices of federal tax liens notwithstanding any State or
federal law to the contrary.
Section 6323 (d)
Present law provides two instances in which a federal tax lien
is subordinated even after notice has been filed. A person acquiring
an interest in a stock, bond or other security without actual knowledge
of a tax lien takes such interest free and clear of any tax lien.
Similarly, as the result of an amendment by the Revenue Act of 1964,
the purchaser of a motor vehicle without actual knowledge of the
existence of a tax lien takes free and clear of the tax lien. These
two present exceptions are continued in the law without significant
change by paragraphs (1) and (2) of section 6323 Cd).
The succeeding paragraphs of subsection (d) add various new
exceptions to the priority of a federal tax lien. It should be noted
that the exceptions provided by subsection (d) grant "super -priorities."
The interests described in that subsection will prevail even over tax
liens that arose and were filed before such interests were created.
Under present law if a notice of lien has been filed against a
retail merchant, a purchaser of goods from the merchant takes those
goods subject to the tax lien. This priority has been invoked only
rarely. Nonetheless, it seems unrealistic to expect retail purchasers
to check the lien records against their vendors. Indeed, to be fully
protected a purchaser must check the records for liens against the
manufacturer.and every subsequent owner of the goods. Paragraph (3)
of section 6323 Cd) provides therefore that the tax lien shall not be
valid with respect to tangible personal property purchased at retail
in the ordinary course of the seller's trade or business. In order
- 5 to assure that this provision is not abused, the bill specifically
provides that this exception will not apply if the purchase is
intended to hinder, evade or defeat the collection of tax.
Most States have statutes granting a lien to a mechanic for
work on personal property so long as he retains possession of the
property. For example~ an auto mechanic is normally entitled to
retain possession of an automobile until paid for work performed on
the automobile. Paragraph (4) of section 6323 (d) provides that a
lien against property in the possession of a mechanic or artisan
to secure payment for services shall have priority over a federal
tax lien, even if notice of the lien was filed before the work was
perfonned.
Paragraph (5) of section 6323 Cd) grants priority over all
federal tax liens (filed and unfiled) to a lien provided by State law
against a judgment or an amount paid in settlement of a cause of
action to the extent of the reasonable compensation of an attorney
for securing such judgment or settlement.
Under State law real property taxes are usually given priority
even over prior mortgages on the property. Such local real property
tax liens are usually not superior to federal tax liens, however, since
they are not among the classes of interests entitled to protection
against unfiled tax liens under section 6323 (a).
Serious problems of
circular priority have resulted since the real property tax lien, though
superior to a mortgage, will be junior to the federal tax lien. The
mortgage, on the other hand, may be superior to the federal tax lien
but junior to the real property tax lien. Paragraph (6) of section
6323 Cd) would grant priority to a lien securing real property taxes
(including special assessments and charges for public utilities) over
all federal tax liens, whether or not filed, if such liens are granted
"super" priority under State law. This change would avoid most of the
circular priority problems referred to above.
During the past few years there has been a great deal of
litigation concerning the rights of the Government to a taxpayer's interest in an insurance policy to which a tax lien
has attached.
Paragraph (7) of section 6323 is designed to
resolve the problems that have arisen. It grants an insurance
company with respect to a life insurance, endowment, or annuity
contract it has issued and which is subject to a tax lien,
priority over all federal tax liens (filed and unfiled) in three
circumstances:
first, priority with respect to all payments or
advances made by the company before it has actual notice or
knowledge of the tax lien; second, priority with respect to ,
automatic premium loans (and interest thereon) if the automat~c
premium loan agreement was entered into by the company and the
taxpayer before the company has actual notice or knowledge of the
tax lien', and , third , with respect to any payment or advance made
d
after the company had satisfied a levy under the new levy proce,ure
provided in section 104 (b) of the bill and before the company lS
served with another notice of tax lien.
- 6 Section 6323 (e)
Mortgages frequently provide that any unpaid interest on the debt
and various costs of foreclosing the mortgage will be added to the
amount of the mortgage. Under the choate test, the courts have ruled
that even though the amount originally loaned under a mortgage is
entitled to priority over the federal tax lien, amounts expended by
the lender after the filing of notice of a federal tax lien for attorneys'
fees are inchoate and are not entitled to priority over the tax lien. See
U.S. v. Pioneer American Insurance Co. (1963) 374 U.s. 84. Subsection
re;-Of the bill would change this result by expressly extending the
priority of the underlying mortgage to interest (including finance charges)
and foreclooure expenges {including reasonable attorneys' fees, costs of
preserving the property and the costs of satisfying liens on the
property which are superior to the federal tax lien). The reference
to attorney~' fees would ,include fees for establishing the priority
of the security interest as well as for actually foreclosing.
Section 6323 (f)
As indicated in the discussion of interest and foreclosure
expenses, any amount which is advanced after the date on which a notice of
federal tax lien is filed, even though such amount is secured by a
prior mortgage, is inchoate and junior to the federal tax lien.
Without some such limitation, a situation could arise in which a lender
is able to loan money indiscriminately to a taxpayer long after the
Internal Revenue Service has filed tax liens against the taxpayer and
to give those additional advances the priority of an earlier mortgage.
The choate requirement has thus served a useful and important purpose
and would be retained by the bill. The rule has~ however, created
problems in the case of various legitimate financing arrangements.
For example, where the operation of a business is being financed on
the security of accounts receivable, it is common for a lender to make
additional loans secured by new accounts receivable on virtually a
daily basis. In order to be protected against federal tax liens, it
would be necessary for such a lender to check the public records for
notices of lien before each advance is made. This is a practical
impossibility. The proposed legislation allows advances in certain
limited situations to take priority over a federal tax lien even though
the advance is made after notice of the lien has been filed, but only
if the advance is, under State law, protected by a mortgage or other
security interest which arose prior to the date on which the federal
tax lien was filed.
Paragraph (1) of section 6323 (f) provides a blanket rule allowing
lenders to continue to make advances under a prior security interest
for 45 days after the filing of notice of a federal tax lien or until
actual notice of the lien is received, if that occurs earlier.
Similarly substitutions of property subject to a prior security
interest ~an be made at any time within the same period without loss
of priority. For example, if a loan is secured by a lien on inventory,
that inventory can be sold and replaced during the 45-day period
without any loss of priority. Thus, by checking the records at
intervals of not more than 45 days a lender can be fully protected.
- 7 -
.. r:: '
•
", j
~ t,
Paragraph (2) of that subsection extends the priority of a prior
security interest to advances made after notice of a tax lien has been
filed if those advances are made pursuant to a binding contractual
obligation running to a person other than the borrower (or pursuant to
a negotiable instrument) if the contract was entered into (or the
negotiable instrument was issued) prior to filing of notice of the
tax lien. In order to prevent abuses of this privilege, the priority
for obligatory advances made after filing of notice of the lien only
applies against (1) property which is subject to the security interest
within 45 days after the notice of lien is filed and (2) property which
is purchased, constructed or earned with the funds advanced. This
provision will give protection against the federal tax lien to payments
by a bank pursuant to a letter of credit issued before notice of the
tax lien was filed. This provision will also protect surety companies
for payments pursuant to a bond entered into before notice of a lien
is filed. The priority of sureties would also be effective as against
the proceeds of a contract in connection with which the bond was issued
and any other property aCQuired by the taxpayer a:rter the 45-day "grace
period Tl for the purpose of performing that contract.
Finally, nonobligatory advances made a:rter the filing of notice of a
tax lien to complete the construction, etc., of a building or the raising
or harvesting of a crop or livestock will take priority over the tax
lien if the advances are secured by a mortgage or other security
interest which arose prior to the filing of notice of the lien. Here
again, however, the property out of which amounts advanced after the
filing of a notice of lien can be collected is strictly limited. In
the case of construction loans, such advances can be collected only
out of (1) the property constructed or (2) the rents from a lease of
such property; if the lease was entered into before the security
interest arose. Advances relating to crops and livestock may be
collected out of the crops or livestock and out of any other property
~hich was owned by the taxpayer and subject to the security interest
within 45 days after the filing of notice of the lien. For example,
assume that a farmer borrows money to feed cattle and that he gives the
lender a mortgage on the cattle and on his farm. Assume that a tax
lien is subsequently filed and that additional advances are made by
the lender to the farmer to feed the cattle. The lender's security
interest in the cattle and farm will take priority over the federal tax
lien to the extent of the full amount loaned.
In addition, paragraph (3) of section 6323 (f) gives similar
protection to advances to enable a contractor to complete a contract
for the construction of a building on real property. In such a case
priority granted to the lender by this provision over the federal
tax lien only applies to a security interest in the proceeds of the
construction contract.
The various prOvisions for priority in subsection (f) serve only
to extend the priority of the underlying sec~rity interest .. In no
event will a creditor prevail over the tax llen unless appllcable
State law so provides.
- 8 The Supreme Court has repeatedly held that the determination
of the meaning of "property" is a matter governed solely by state and
local law. The proposed Act is not intended to reflect in anyone
way on the question of what constitutes "property. II Furthermore,
the changes in the law made by new subsection (f) of section 6323 of
the Code are not intended to restrict the protection for creditors
already available under present law. Thus, while certain so-called
purchase money mortgages will be protected by the new subsection (f),
any purchase money mortgage which is not covered by subsection (f)
but which would have been protected by prior decisional law will
continue to enjoy that protection.
Finally, nothing in this bill is intended to reverse U.S. v.
Munsey Trust Co. (1947) 332 u.s. 234, which held that the United States
may set-off amounts due it for taxes against amounts owed by the
United States to the taxpayer under a contract.
Section 6323 (g)
This subsection provides rules similar to those provided by
paragraph (1) of subsection (f).
That paragraph would allow advances
to be made for 45 days after the filing of a federal tax lien if
protected by a prior security interest. In some cases, however, such
finanCing is conducted without taking a security interest, as for
example by purchasing accounts receivable.
Subsection (g) will give
a 45-day Ilgrace period" after the filing of a tax lien for lenders
who are purchasing accounts receivable or making loans upon accounts
receivable in reliance upon a prior financing agreement. As in the
case of subsection (f) (1), the "grace period" will end before the
expiration of 45 days if the lender has actual notice or knowledge of
the existence of the lien.
Section 6323 (h)
This subsection contains definitions applicable to all of
section 6323. The definition of the term "securityH is carried oyer
from present law and includes bonds, stocks and other forms of
commercial paper.
Paragraph (2) adds to the law a definition of the term II purc haser,IT
which is one of the classes of persons against whom a tax lien is
invalid until filed.
This definition makes it clear that the term
"purchaser" includes the holder of an executory contract or option
to purchase or lease property and the holder of a lease.
- 9 Paragraph (3) of this subsection provides a definition of the
o~ creditors added
to subsection (a) against whom the tax lien will be invalid until
filed. In general, this definition conforms to the definition of
"mechanic t s lienor" under State laws.
. I s 1"~enor, " h
.
w 'lC h lS
a new c 1 ass
t erm " mec h an~c
Paragraph (4) of subsection (h) defines the term "security
interest,rr which is the other new class of' interests in property
against which the tax lien is invalid until filed. This class will
include interests covered by the present terms "mortgagee" and
ltpledgee." With the development in recent years of' new kinds of
financing devices, there have been an increasing number of disputes
over whether such devices qualify as mortgages or pledges under
section 6323 (a), The definition of the term "security interest" in
the proposed legislation, which differs significantly from the definition
of that term in the Uniform Commercial Code, is broad enough to encompass
all contractual security arrangements and should avoid future litigation
on this point. In order to fix the date as of which such security interests
come into being vis-a-vis the federal tax lien, the proposed legislation
provides that the security interest will be deemed to "arise" at the time
when it becomes protected under local law as against subsequent contractual
liens against the property.
The definition of rrmotor vehicle Tl which was added to section 6323 by
the Revenue Act of 1964 has been carried over into the proposed legislation
as paragraph (5) of section 6323 (h).
Section 6323 (i)
This subsection provides special rules deSigned to solve certain technical problems that have arisen under present law. Paragraph (1) continues
the prOvision of present section 6323 (d) which specifically authorizes the
Secretary or his delegate to make available to appropriate persons information as to liens against a taxpayer.
Paragraph (2) of subsection (i) provides rules for determining
the circumstances under which knowledge of a tax lien on the part of
one employee of a business organization will be chargeable to other
employees of the organization. It states that the employees of an
organiZation will not be charged with knowledge of another employee
unless that knowledge has come to the attention of the responsible
individual acting for the organization in the transaction in question.
The individual will however be deemed to have knm-lledge of the
existence of the li~n from the time when that information would have
been brought to the attention of' the individual involved had the
- 10 organization exercised due diligence. An organization will be deemed
to have exercised due diligence if it has maintained reasonable
routines for communicating significant information to the individual
conducting the transaction and there is reasonable compliance with
the routines.
Due diligence does not require an individual acting
for the organization to communicate information unless such communication is part of his regular duties or unless he has reason to know
of the transaction and that the transaction would be materially
affected by the information.
Under the proposed legislation, in order for certain interests
to take priority over the federal tax lien, they must have been
received for consideration "in money or money's worth. rt Paragraph (3)
makes it clear that forbearance to sue or collect a debt can
constitute valid consideration in money or money's worth. Thus, a
general creditor who receives a mortgage in exchange for his agreement
not to bring suit to collect his debt will be deemed to have received
such mortgage for consideration in money or money's worth, but only
to the extent that applicable local law would treat such forbearance
as consideration.
Paragraph (4) provides that a person who is subrogated to the
rights of a creditor will have the same rights against the federal tax
lien as the person to whose rights he is subrogated. This is
declarative of present law.
Paragraph (5) provides that the priority of a mortgage extends
to property which is attached to and physically becomes a part of
property subject to a security interest. Thus, a mortgage on real
property will give the mortgagee rights in any fixtures attached to
the real property, even though the fixtures are attached after the
date on which a federal tax lien is filed.
Section 102.
Special Liens for Estate and Gift Taxes
Section 6324
In general the provisions relating to estate and gift tax liens
have been conti~ued ~rom present law. The classes of interests which
are entitled to protection against the estate and gift tax liens have
been modified to conform to the changes made in section 6323 (a).
Thus, mechanic's lienors will be protected against estate and gift
tax liens.
In addition, the term "holder of a security interest" has
d fT p 1 e d gee. It
been substituted for the present terms rt mortgagee " an
- 11 -
Under present law estate and gift tax liens have a life of 10
years. The Internal Revenue Code has long provided however that
a tax is collectible for only six years after asses~ment unless the
taxpayer agrees to an extension of that period. Thus e~tate and gift
tax liens may exist after the tax has ceased to be coilectlble
The
bill amends the language of section 6324 to make clear that th~ lien
ceases to exist when the tax becomes uncollectible.
Final~~
section 6324 has been amended to make estate and gift
tax liens invalid against any of the liens which are entitled to
"super_priority" over the income tax lien. This exception will grant
priority to all the interests listed in section 6323 (d) which includes
the interest of purchasers at retail~ attorney's liens~ real property
tax liens, etc. In addition) the priority granted to interest and
foreclosure expenses by section 6323 (e) wili apply against estate
and gift tax liens.
Section 103.
Section
6325.
Certificates Relating to Liens
Release of Lien or Partial Discharge of Property
Present section 6325 provides £or a lien to be released~ thereby extinguishing; the lien itself? or for property subject to a lien to be
discharged, thereby freeing that property from the lien. In the latter
case the lien continues to exist. The Internal Revenue Service normally
issues certificates releasing the lien whenever the tax liability
underlying the lien has been paid or has become legally unenforceable.
Certificates of partial discharge are used to facilitate the transfer
of property. For example, if a taxpayer wishes to sell property in
order to pay the tax, he can arrange with the Internal Revenue Service
to obtain for the purchaser a certificate discharging the property
from the tax lien if the taxpayer pays over to the Internal Revenue
Service an appropriate part of the proceeds of the sale. The pOwer
to issue these certificates has proved helpful in arranging for the
orderly payment of delinquent taxes and the prompt clearing of title
to property after notice of a lien has been filed.
In order to allow
even more flexibility for the Internal Revenue Service to cooperate
with delinquent taxpayers and other creditors in the collection of
taxes, the bill grants certain new powers to the Secretary or his
delegate.
Section 6325 (b) (3) allOWS the Secretary or his delegate to
discharge certain property from a lien if it is sold and the proceeds
are held as a fund subject to the same rights as the United States
had in the property discharged.
In the event of a dispute with a
third party over rights to certain property, this provision will allow
the property to be sold and the proceeds held subject to subsequent
court action.
- 12 -
Subsection (d) of section 63257 which would be added by the
bill, empowers the Secretary or his delegate to issue a "certificate
of subordination" subordinating the lien of the United States to a
subsequent lien on the property under two circumstances. First, the
tax lien can be subordinated if the amount of the lien to which the
tax lien is subordinated is paid over to the Secretary or his delegate.
For example, if the taxpayer wishes to borrow funds to pay a part of
the tax, the new provision would allow the district director to grant
priority over the tax lien to a mortgage securing that loan, if the
proceeds of the loan are paid over in partial satisfaction of the
tax liability.
Second7 the new SUbsection (d) would allow subordination of the
tax lien to a subsequent security interest if the district director
believes that the amount of money realized by the Federal Government
will be increased and that collection of the tax will be facilitated
by the subordination. Occasionally a situation arises where it is
essential to the government that the taxpayer be allowed to obtain
additional credit. Assume, for example, that the taxpayer's only
asset is a growing crop and that the taxpayer lacks the funds necessary
to harvest the crop.
In these Circumstances, if the taxpayer is
unable to borrow the money necessary to harvest the crop, the government may be unable to collect any part of its tax liability.
Nonetheless, because of the priority of the federal tax lien, a
private lender would normally refuse to make such a loan. Under the
proposed language of section 6325 Cd) (2) the district director could
under those circumstances issue to a lender a certificate of subordination which would grant priority to the amount loaned over the federal
tax lien. The issuance of such a certificate would be discretionary
with the Secretary or his delegate and proper controls could be set
up to assure that the funds are used for the intended purpose.
Proposed subsection (e) of section 6325 provides for a certificate
of nonattachment. This certificate would be used in the event of
confusion because of the similarity of names or otherwise and would
state that a particular tax lien never attached to the property of a
named individual.
Instances of such confusion occasionally occur and
the Code does not at present provide any reliable means for ending
the confusion.
- 13 New subsection (f) provides specific rules for the first time
for determining the precise effect of any such certificates issued
by the district director.
In general, if such a certificate is
filed in the same office in which the notice of lien is filed, it
will be binding on the government and can be relied upon by creditors.
Paragraph (2) provides, however, that if a certificate of release or
nonattachment was issued erroneously or improvidently or if such a
certificate was issued in connection with an offer in compromise
which is ultimately breached, the Secretary or his delegate may revoke
the certificate and reinstate the lien by mailing notice of the
revocation to the taxpayer and by filing a notice of the revocation
in the same office as the notice of lien to which it relates.
This
revocation will not be effective, however, to reinstate the lien
against any person (other than the taxpayer) who has taken substantial
action to his detriment in reliance upon the certificate of release
or nonattachment. Paragraph (3) of subsection (f) makes it clear that
a certificate of discharge or nonattachment would not prevent the lien
from attaching to property which is later acquired or reacquired by
the taxpayer. This paragraph is declarative of present law.
Finally, subsection (g) provides that, notwithstanding the usual
requirement that a certificate or notice of revocation must be filed
in the same office in which the notice of lien is filed, if the
officer designated by state law refuses to accept a certificate or
notice provided for by this section, such certificate or notice may
be filed with the clerk of the district court for that district.
Section 104.
Section
6331.
Seizure of Property for Collection of Taxes
Levy and Distraint
A minor amendment would be made to section 6331. That section
presently provides authority for the Secretary or his delegate to
seize property and to levy upon property in order to collect taxes.
A sentence would be added to section 6331 (b) to make it clear that a
levy upon a debtor o~ the taxpayer applies only to property of the
taxpayer in the possession of the debtor at the time of the levy.
For example, if a levy is served upon a bank and the bank pays over
to the district director the amount of money in the taxpayer's account
at the time Of the levy a question has been raised as to whether
the levy applies to sub~eqUent deposits and the bank is thereby prohibited from honoring checks drawn against the subseq~e~t defosits.
The proposed language would make it clear that the or~g~nal evy
was fully satisfied by delivery to the district director of all f~ds
due the taxpayer by the bank at the time the levy was served. Th~s
prOvision is considered declarative of present law.
- 14 section
6332.
Surrender of Property Subject to Levy
A new procedure by which the United states may levy upon a
delinquent taxpayer's life insurance or endowment policies is
provided in a new section 6332(b). The new procedure authorizes
the Secretary or his delegate to levy on an insurance company to
secure the cash loan value of the taxpayer's insurance policy, as
of the ninetieth day after the levy is made. The levy may be made
without surrendering the contract document, and it constitutes the
exercise of the taxpayer's right to an advance under the insurance
contr~ct.
The levy must include a certification that a copy of
the notice of levy has been mailed to the delinquent taxpayer. An
insurance company may satisfy a levy by paying over the amount to
which the taxpayer would have been entitled under the policy ninety
days after service of the notice of levy. This amount will be
increased by any advance (including interest thereon) made to the
taxpayer after the date the company had actual notice of the tax
lien other than an automatic premium loan (including interest
thereon) made pursuant to an agreement entered into by the company
and the taxpayer before the company had such notice. In some
circumstances it may still be necessary for the United states to
bring an action to foreclose its tax lien on an insurance policy
or to enforce the lien in some other civil action. The new
subsection specifically provides that the satisfaction of a levy
by an insurance company will be without prejudice to any such
proceeding.
Present section 6332 provides that the Secretary or his delegate
may collect a lfpenaltylf equal to the amount of money which a debtor
of the taxpayer should have turned over to the district director in
response to a levy.
Designation of' this amount as a lfpenaltylf has
caused some cor~usion.
Doubt has existed as to whether the amount so
collected should be credited against the tax liability of the taxpayer
with respect to whom the levy was made. Since a suit to enforce a
levy is basically a means of collecting the underlying tax liability,
there has been general agreement that amounts SO collected should be
credited against the taxpayer's tax liability and the Internal Revenue
Service has usually followed that practice. Nonetheless, to avoid any
confusion on the point in the future, all references to "penalty" in
this enforcement prOvision have been dropped.
However, a specific penalty of 50 percent of the amount
recoverable under the above provision would be added to the law
and would apply to any person who fails or refuses to surrender
property pursuant to a levy without just cause. This amount would
not be credited against the tax liability of the taxpayer with
respect to whom the levY was made.
Any bona fide dispute over
the amount owing to the taxpayer or over the legal effectiveness
- 15 of the levy itself will constitute a just cause for refusing to
honor the levy and will relieve the taxpayer of the penalty. The
Internal Revenue Service has on occasion been forced, however, to
sue a debtor of a taxpayer repeatedly in order to collect successive
amOlUlts owing to the taxpayer. The first such refusal to honor a
levy may well have been founded upon "just cause. 1t Nonetheless, the
successive refusals after determinations by a court that the amount
should be paid over to the United states were a form of harassment
which cannot be justified. Such actions would in the future result
in an additional 50 percent penalty on the reluctant debtor.
Finally, a new subsection (d) would be added to section 6332 to
specify that any person who surrenders to the United states pursuant
to a levy property belonging to a taxpayer would be relieved of any
liability to the taxpayer for having honored the levy. This will not,
of course, relieve the debtor of liability to a third party whose
property is mistakenly handed over to the United states. The debtor
is charged with knowledge of the ownership of the property which he
holds. In addition, an insurance company which satisfies a levy
under the new procedure will be discharged from any obligation or
liability to a beneficiary of the policy with respect to which the
levy was made.
Section 6337.
Redemption of Property
Section 6337 provides rules by which a delinquent taxpayer may
redeem property seized by the United States for nonpayment of taxes.
At present, the owners of any real property sold at a federal tax sale
are entitled to redeem such property at any time for a period of one
year following the sale. The one-year period would be reduced by the
bill to 120 days. A similar change has been made in title II of the
bill with respect to the right of the United States to redeem property
on which it has a tax lien following a foreclosure sale of that
property by a creditor superior to the United States.
See bill
section 201 which amends section 2410 (c) of title 28 of the
United States Code. A right of redemption constitutes a cloud on the
title of a purchaser at any such sale. It may well depress the price
which purchasers are willing to pay at such sales and thereby reduce
the amount which may ultimately be recovered by the United States and
other creditors.
Some period of time for redemption by the United
States, or the taxpayer in the case of a sale by the United States,
is necessary in order to guard against sales at unreasonably low
prices. It is believed that the 120-day period provided in the
proposed legislation is ample to protect the rights of all parties
and will avoid needlessly depressing the price that can be obtained
at such a sale.
- 16 Section 6343.
Authorit~- to Release Levy and Return Property
Present section 6343 authorizes the Secretary or his delegate
to release a levy. This section would be amended to add a provision
authorizing the Secretary or his delegate to return to its rightful
o~ner any property which has been wrongfully levied upon.
The
provision would allow return of the amount of any money received
pursuant to a levy, specific property seized or an amount of money
equal to that received from a sale of seized property. The specific
property could be returned at any time prior to its sale by the
district director. Money could be returned by the district director
only within nine months of the date of the levy. It is important that
third parties who claim an interest in any property seized by the
United States take prompt action to recover their property. If the
district director seizes property under the belief that it belongs to
a particular taxpayer, he will frequently end collection efforts against
the taxpayer on the assumption that he has collected the tax. If
action is to be taken promptly against the taxpayer, it is essential
that the district director be advised promptly that the property seized
does not belong to the taxpayer.
In addition to the above changes, various minor amendments have
been made by section 104 of the bill. For example, section 6335 has
been amended to relax somewhat the requirements for publication of
notice of a sale of delinquent taxpayers' property. Present law
requires that notice be published in a newspaper published within the
county where the seizure takes place. This has been expanded to allow
publication in any newspaper generally circulated in such county.
Section 6338 (c) has been amended to simplify the method for
preparation of deeds to property purchased by the United states at
a tax lien sale. The amendment drops from the law a requirement
that the deed be prepared by the United States attorney. Section 6339
would be amended by adding a new subsection (c) which specifies that
a sale of property to satisfy a federal tax lien will cut off all
mortgage, liens and encumbrances on the property which are junior to
the lien of the United States. This provision is declarative of
present law.
Section 105.
Collection of Withheld Taxes
This section of the bill adds two new sections to chapter 25 of
the Internal Revenue Code, which deals with liability for employment
taxes. New section 3505 would impose personal liability for employment taxes where 'a lender or surety pays wages directly to employees
or advances funds to an employer for the payment of wages with actual
knowledge that the employer does not intend or will not be able to
- 17 -
pay the withholding taxes relating to such wages.
Section 3506
provides that where taxes to be withheld on wages paid to an
employee for services performed in the construction of real property,
where the contract price exceeds $2,000 (other than a single family,
owner occupied dwelling), are not paid, the U. S. shall have the
same rights (including liens), remedies and priorities against any
person or property to collect such unpaid wages as are provided by
any law for the collection of such wages by such employee.
As a preliminary matter it should be understood that the courts
have uniformly held that a promise of a surety to guarantee the
payment of 1fwages" does not constitute a promise to guarantee payment
of the withholding taxes attributable to those wages. U.S. v. Crossland
Construction Co. (4th Cir. 1955) 217 F. 2d 275. Thus, payment of the
withholding taxes are almost never guaranteed by a surety bond. Even
bonds issued under the Miller Act in connection with government
contracts do not guarantee the payment of federal withholding taxes.
This latter problem would be corrected by the amendment to the Miller
Act in section 105 of this bill.
Section 3505.
Liability of Third Parties Paying or Providing Wages
Section 3505 is intended to assure that a lender, surety or other
person who assumes responsibility for completion of a construction
contract or a contract for the production of goods, such as articles
of clothing, will also assume responsibility for the employment taxes
subsequently incurred in connection with the job. If any person pays
wages directly to the employees, subsection (a) will require withholding
of the proper employment taxes.
Subsection (b) is aimed at a device
that has been the subject of some litigation in recent years.
When
a prime contractor or surety is forced to complete a contract for an
insolvent contractor or subcontractor, the necessary funds are routed
through the insolvent contractor, frequently by means of a joint bank
account.
The person advancing the funds avoids the withholding tax
responsibilities of an employer. Only an amount equal to the payroll
net of withholding taxes is advanced. The insolvent contractor has
no assets out of Which the employment taxes can ever be collected. Nonetheless, since the employees were paid only the amount of their wages less
withholding taxes, they are entitled tp claim credit for the lI withheld"
taxes on their returns.
By this means withholding tax liabilities can
be incurred for a substantial period of time with no practical possibility
for collection of the tax.
See, for example, Westover v. Simpson
Construction Co. (9th Cir. 1954) 209 F.2d 908; Phinney v. Southern
!arehouse Corp. (5th Cir. 1954) 212 F.2d 448.
- 18 In order for subsection (b) of section 3505 to apply, the funds
must be advanced for the purpose of paying wages and the person
advancing the funds must have actual notice or knowledge that the
employer does not intend or will not be able to make timely payments
of the employment taxes.
Subsection (b) is intended to apply only in
the case of devices designed to avoid the tax. It is not intended
to apply to an ordinary loan of working capital to a businessman by
a bank and will not impose upon lenders a general obligation to
determine the purpose of every loan or the ability of the borrower
to pay subsequent withholding taxes.
Subsection (b) limits the
potential liability of the surety, lender or other person to 20 percent
of the amount so adVanced, approximately the total withholding taxes
which could arise from the amount loaned.
Section
3506.
Liens for Withheld Taxes
Section 3506 provides that where a contractor fails to withhold
and pay over trust fund taxes on the wages of his employees, where
those wages are paid for services performed in the improvement of real
property (other than a single family, owner occupied dwelling) pursuant
to a contract exceeding $2,000, the United States shall have the same
rights (including liens), remedies, and priorities against any person
or property to collect such unpaid taxes as are provided by any law
for the collection of such wages by such employee.
Section 3506 would give the United states the same rights with
respect to the collection of the unpaid trust fund taxes as the
employee of a contractor, to whose wages the taxes apply, would have
if his wages were not paid. All 50 states have mechanics' lien laws
which, in different degrees and through different procedures, impose
a liability for unpaid wages of construction workers upon the owner
of real property to whose property the wages are attributable.
Generally speaking, the United states must perfect its rights, with
respect to each quarterly period for which a return of withheld taxes
was required, by taking the same actions which are required by law
of an employee for the collection of his wages. Thus, if under state
law an employee must perfect his right against an owner of real property
for his unpaid wages by filing a notice with the local registrar of
deeds, the United states must file a separate notice of its claim for
unpaid withholding taxes for each quarterly return period with the
local registrar of deeds.
Where the United states takes all the actions required by law
of an employee for the collection of his wages against any person
or property its actions shall be timely for all purposes, and the
rights of the United states shall have the same priority against
other interests as the rights of the employee would have if the
employee had taken the same actions on the first day he could take
- 19 such actions. Under some state laws the priority of an employee's
claim for wages relates back to the time the services to which the
wages are attributable were performed, and the claim of the United
states, if properly asserted in the manner provided under state law,
also would relate back in such an instance to the time the services
to which the taxes were attributable were performed.
The section contains rules to deal with state requirements which
too drastically extend or curtail the period available to an employee
to perfect his rights. It provides that, with respect to amounts
attributable to any particular calendar quarter, the United states
has the same period of time after the date when a return for that
calendar quarter was due to meet any requirement of state law as
the employee has to meet that requirement except that such period
shall not be less than 30 days after the date the return for the
calendar quarter was required to be filed, or 30 days after the date
on which a return for the quarter was filed, if that period expires
later. However, the period of time allowed to the United states,
with respect to the first requirement of law to be satisfied, shall
not exceed six months from the date when a return for a calendar
quarter was required to be filed.
Thus, even if no return is filed,
the United states shall have no more than six months after the time
the return should have been filed to assert its claim under this
provision, no matter how much longer the period is that state law
provides.
If a document required by law may not be filed by the United
states in the office designated by state law for the filing of
such document by an employee, the required certificate or notice
shall be effective if it is filed in the office of the clerk of
the United states district court in which the state recording office
is located.
Subsection (c) of proposed section 3506 provides that if the
person subject to a liability under section 3506 pays withholding
taxes he will be relieved of liability to the contractor to the
extent of such payments. Thus, for example, the property owner
may pay over the withheld portion of the contract price to the
United states in satisfaction of the withholding tax liability.
To the extent of sucb payment, the property owner will be treated
as having paid the general contractor.
Section 3506(d) provides that a district director may enter
into an agreement to extend or waive any time limitation required by
law to perfect its rights under the section. ThUS, if a property
owner were willing to grant a district director an extension of
time in which to enforce the government's rights, the district
director would have an extended period to collect the unpaid taxes
from the employer who was delinquent in withholding and p~Ying o~er
the taxes. The authority to enter into such agreements Wlll avold
unnecessary enforcement actions against property owners.
- 20 Miller Act Amendment
Finally, section 105 amends the Miller Act (40 U.S.C. 270a)
to require that performance bonds on federal construction jobs
specifically insure payment of the employment taxes incurred in
that job. At present the surety bonds written on federal construction jobs normally do not insure against nonpayment of the
government's own taxes.
Section 106.
Suspension of the Running of the
Period of Limitation
This section of the proposed legislation makes minor changes in
provisions of the Internal Revenue Code relating to suspension of the
period of limitations, in part to solve technical problems that have
arisen under present law and in part to conform the limitation
provisions to the changes made elsewhere by the proposed legislation.
Section 6503.
Suspension of Running of Period of
Li~tation
Subsection (a) of section 106 of the bill would amend section 6503
(b) to suspend the statute of limitations on collection of taxes
during the period when the assets of a taxpayer are subject to the
control or custody of a court on behalf of the estate of a deceased
or incompetent taxpayer. The law is clear that no administrative collection
actions can be taken against assets which are in the custoqy of any court.
The Internal Revenue Code presently provides for suspension of the
running of the period of limitations in all other circumstances in
which the assets are subject to the custody of a court.
Present section 6503 (c) provides that the period of limitations
on collection after assessment will be suspended during the period
that collection is hindered or delayed because property of the
taxpayer is held outside the United States. Proof that collection has
been hindered or delayed is difficult. Furthermore, any suspension of
the period of limitation should be for a specific and readily
ascertainable period of time. The terms of section 6503 (c) WOUld,
therefore, be altered by the bill to provide that the period of
limitations on collection be suspended for the period during which the
taxpayer himself is outside the United States and for six months after
his return.
Section 104 (i) of the bill amended section 6343 to grant to the
Secretary or his delegate authority to return property wrongfully
seized to its rightful owner. Section 110 of the bill adds a new
section 7426 to the Internal Revenue Code allowing a third party to
sue for return of property or money wrongfully levied upon. During
the period when property of a third party is held by the district
director the district director will frequently suspend efforts to
collect the tax from the taxpayer in the belief that the seized property
will satisfy the tax liability. A new subsection (f) has been added to
section 6503 which will suspend the period of limitations on collection
after assessment for a period from the date of wrongful seizure of
property of a third party until the date such property is returned or
a judgment secured pursuant to new section 7426 is satisfied, and for
- 21 -
six months thereafter. This suspension of the statute of limitations
will apply only to tax liability equal to the amount of money or the
value of the property of' the third party.
Section 107.
Section 7402.
Proceedings Where United States
Has Title to Property
Jurisdiction of District Courts
Under section 6335 (e) (1) of the Internal Revenue Code~ when
the United states holds a sale of property to foreclose its tax lien,
a minimum bid figure is fixed in advance by the revenue officer holding
the sale. If the bids are not equal to the minimum bid price, the
officer will declare the property purchased by the United states.
In such cases, and under certain other circumstances~ the United states
takes actual title to property pursuant to the enforcement of a tax
lien. The United states does not at present have any express
authOrity to bring a quiet title action to establish by court decree
its rights in such property. Therefore~ section 7402 of the Internal
Revenue Code would be amended to add a new subsection (e) which will
give the United States district courts jurisdiction over any action
brought to quiet title to property if the United States alleges that
it has title to such property as a result of the enforcement of a
tax lien.
Section 7403.
Action to Enforce Lien
Present section 2410 of title 28 allows an officer of' the
United States to bid at a sale pursuant to a foreclosure action brought
by a senior lien holder. The bid is limited to the amount of the lien
of the United States. Thus~ no cash payment by the United states is
ever required in such cases. Section 107 of' the bill amends section
7403 (c) to allow the United States to bid at a sale ordered in an action
brought by the United States in a federal district court to foreclose
its tax lien. As in the case of section 2410 of title 28~ the bidding
is limited to the amount of the tax lien.
Section 108.
Section 7424.
Intervention by United States
Intervention
Section 108 of the bill repeals the present section ;424 which
prOvides a rarely used method of bringing suit against the United
States to quiet title to property in which the United States claims
a lien or interest. In its place a new section 7424 would be added
to the Code which would specifically grant to the United States the
right to intervene in any civil action to assert a federal tax lien
4 ?I~,
- 22
-
against any property which is the subject of any such action. The
new section provides that the civil action or suit shall have no
effect upon the federal tax lien or the interest of the United states
if intervention is denied.
Section
Section
7425.
109.
Discharge of Liens Held by United States
Discharge of Liens Held by United States
Under many State statutes junior liens may be extinguished
without the lienor being joined in a foreclosure action.
In some States, property subject to a mortgage or a deed of trust
may be sold by the trustee without any judicial action and junior
liens will be cut off by the sale. The Supreme Court has ruled that
a federal tax lien may, if State law so prOvides, be extinguished
by such judicial or nonjudicial sales. U.S. v. Brosnan (1960)
363 U.s. 237. As a result tax liens are-soffietimes extinguished
without the United States having actual notice of the foreclosure
action or nonjudicial sale. Under these circumstances, it is not
possible for the Internal Revenue Service to take the necessary steps
to protect the interests of the United States in the collection of
its tax revenues.
Section 109 of the bill adds a new section 7425 to the Internal
Revenue Code.
Subsection (a) of that section provides that a lien of
the United States may not be extinguished by a judicial foreclosure
unless the United States is jOined, if notice of the lien of the
United States is on file on the date the foreclosure action is
commenced. Thus, a litigant need only check the record for federal
tax liens on the date of commencement of the action.
Subsection (b) of section 7425 provides that an interest of the
United States in property may not be affected by a nonjudicial sale
if notice of the lien was on file 30 days prior to such sale unless
the district director is given notice of such sale by registered or
certified mail not less than 25 days prior to the sale. Such notice
must advise the district director of the time, place and terms of the
sale and certain other information concerning the taxpayer and the
tax lien. This provision will assure that the district director will
have ample opportunity to protect the interests of the United States.
The United States would be entitled to redeem real property from
a nonjudicial sale for a period of 120 days following the sale. This
is the same period of time allowed for redemptions by the United States
(under the amendments to 28 U.S.C. 2410) from judicial sales.
- 23 -
Section 110.
Section 7426.
Proceedings by Third Parties
Against the United States
Civil Actions by Persons Other than Taxpayers
Under present law if a district director seizes property for
the payment of' taxes of' a taxpayer and a third party claims an
interest in such property (as owner, mortgagee, etc.), the courts
frequently allow the third party to sue the district director to recover the property. In these cases though the judgment is
technically against the district director, that officer is defended
by the Department of' Justice and is held harmless against the judgment by the United states.
New section 7426 of the Internal Revenue Code, added by section 110
of the bill, would codify for the first time specific rules under
which a third party could sue the United States directly to recover
property or money wrongfUlly seized by a district director. The
remedy provided by new section 7426 will be the exclusive means of
redress for actions which may be brought under this section. Any
action which cannot be brought under this section may still be brought
against the district director under the rules applicable in the past.
In general, new section 7426 will allow a civil action to be
brought against the United States in a federal district court if
(1) a levy has been made on the property and the plaintiff can show
that the levy would irreparably injure his interest in the property,
or (2) if the property has been sold and the interest of the third
party has been transferred to the proceeds of the sale by agreement
or applicable local law. An action can be brought under this provision
immediately after a levy has been made and before the property has
actually been surrendered to the government. For example, this
prOvision would, in appropriate circumstances, permit an action for
an injunction against the government's enforcing its levy.
Subsection (b) of new section 7426 limits the kinds of relief
that the district courts may grant under this section. As indicated,
the court may grant injunctions against enforcement of a levy or
sale of property. The court may order return of specific property
held by the United States or may grant a money judgment for the amount
of cash levied upon or the proceeds of the sale of seized property.
,.
.I~
/
,
.
- 24 If the property has been sold for an amount in excess of the
government's tax lien, an action may be brought under this section
to recover the excess proceeds of the sale. Finally, specific
provision is made for allowing the United States to enter into an
agreement with the various persons claiming an interest in property
for the sale of the property and the transfer of those interests to
the proceeds of the sale. An action could be brought under new
section 7426 to recover all or part of the proceeds of such a sale.
In order to avoid a period of confusion in litigation after
passage of this bill and before practicing attorneys have become
fully familiar with its terms, section 71+26 (e) grants authority to
the district courtsto amend pleadings to conform to the new rules.
ThUS, if, after the passage of this bill, an action is brought against
a district director under the former rules applicable to such actions,
the pleadings may be amended to substitute the United states as
defendant.
Section 110 (b) of the bill amends section 6532, relating to
periods of limitation, to provide that the statute of limitations on
actions under section 7426 will expire nine months after the date of
the levy giving rise to such action. Since after seizure of property
for nonpayment of taxes a district director is likely to suspend further
collection activities against the taxpayer, it is essential that he
be advised promptly if he has seized property which does not belong
to the taxpayer.
It is appropriate that the owner of property be
required to take steps within a reasonable period of time to protect
his interest.
Subsection (c) of section 110 of the bill amends section 7421 (a)
of the Code. That section presently prohibits injunctions against
the assessment or collection of tax. The cases decided under this
provision raise a question as to whether this prohibition applies
against actions by persons other than the taxpayer. New section 7426
will specifically allow actions by third parties to enjoin the enforcement of a levy or sale of property. The amendment to section 7421
makes clear that third parties may bring injunction suits only under
the circumstances provided in new section 7426 (b) (1) of the Code.
Section 111.
Sale of Property Acquired by United States
This section of' the bill makes minor technical amendments to the
prOvisions of the Internal Revenue Code providing authority to the
Secretary or his delegate to sell property. The purpose of the amendments is to extend those sections to cover all property acquired by the
United States without regard to the means by which the property is
acquired.
For example, these sections would be expanded to apply to
property redeemed by the United states.
; -reI
j
,
- 25 Section 1l2.
Fund for Redemption of Real Property
by United states
Under present law the United States is entitled to redeem real
property ~hich is sold at a foreclosure sale by someone having an
interest superior to the United States. The purpose of that provision
is to allow the United States to redeem property when property is sold
at a price substantially less than its fair market value. It is
contemplated that the property will be resold by the United States
at a more realistic price and that the "profit" on the sale can be
used to satisfy a part of the taxpayer's tax liability.
Though this provision has been in the law for rr~ny years, no
funds have ever been provided to the Secretary of the Treasury for
use in redeeming property. A question has been raised as to the
propriety of using the general appropriations of the Treasury for
this purpose. This bill would, therefore, establish a revolving fund
of $1 million for the redemption of real property as permitted by
section 7'125 of the Code and section 2410 of title 28. The fund ~ill
be reimbursed out of the proceeds of subsequent sales of the property
redeemed. Any surplus proceeds will be deposited in the Treasury.
Section 113.
Effective Date
In general, title I of the bill, which covers all amendments
to the Internal Revenue Code, will apply after the date of enactment.
Exceptions to that rule are provided to assure that passage of this
statute will not impair any rights whicb are in existence prior to
its passage or disturb the judgments in any cases which have become
final prior to its passage.
Title II.
Consent of United States to be Sued in
Actions Affecting Property in Which
It Has a Lien or Int~rest
Title II of the bill makes various technical amenr:.iments to
title 28 of the United States Code, relating to judiciary and judicial
procedure. In general, the purpose of these amendments is to cure
certain technical defects in present title 28 and to simplify in
certain circumstances the procedures for Ittigating with the United
States concerning title to property.
- 26 Section 201.
Joinder of United states in Certain Proceedings
28 U.S.C. 2410
In section 2410 of title 28 of the United States Code, the
United states has consented to be sued in an action brought in any
district court or any State court to quiet title to property or to
foreclose a mortgage on property. The United States has not consented
to be sued in actions to partition or to condemn property or to be
sued in an action in interpleader. Private litigants frequently join
the United States in such actions. The United States is forced to
move to dismiss the action and then to move to intervene in the
action. The bill would avoid these needless procedural steps in the
future by adding to section 2410 of title 28 a waiver of sovereign
immunity in connection with actions to partition or condemn property
and actions in interpleader.
Section 2410 would also be amended to require that the complaint
in any such action involving a federal tax lien set forth certain
information concerning the lien and the time and place of filing.
This will enable the United States to respond to the complaint more
promptly.
Subsection (c) of section 2410 has been amended to specify that
an action to foreclose a mortgage under section 2410 must seek a
judicial sale of the property. This will prevent a court from
merely decreeing that the lien or other interest of the United states
is junior to the lien being foreclosed and is therefore "cut ofL"
In such cases it will be necessary for the property to be sold so that
the United States may claim any proceeds of the sale in excess of
the liens and interests which are superior to the interest of the
United States.
Section 2410 (c) of title 28 is also amended to reduce the period
for redemption of real property provided by that section from one year
to 120 days. This change applies only if the interest of the United
States in the property is a tax lien. An identical period is provided
in new section 7425 (section 109 of this bill) for redemptions from
nonjudicial sales.
Finally, a new subsection (d) is added to section 2410 prescribing
the amount that shall be paid by the United States in order to redeem
property from a purchaser at a foreclosure sale. The courts presently
determine this amount by reference to State law, although the law
of some states does not prescribe this amount. The new subsection
provides a formula of uniform application in all, jurisdictions.
t.J.R
- 27 Section 202.
Jurisdiction and Venue in Certain
Cases Against United States
This section makes the necessary technical amendments to
title 28 to provide jurisdictional and venue rules for actions under
the new section 7426 (relating to civil actions by persons other
than taxpayers).
Section 203.
Time for Removal of Actions Against
United States from State Courts
This section amends section 1446 (b) of title 28 to permit the
United States to move for removal of an action from a State court
~ithin 60 days after receipt by the United States of any paper from
~hich it may be ascertained that an issue concerning rights of the
United States is involved. Under present law such a motion must be
made ~ithin 30 days after receipt of the first pleading by the
United States. This has caused some practical problems in the past
because it may not be clear from the original pleadings in a lawsuit
that any interest of the United States is involved.
Section 204.
Effective Date for Title II
In general, title II, like title I, would apply after the date
of enactment. The new rules relating to removal of actions from
State courts would apply only to cases in which the first document
raising an issue concerning rights of the United States is received
by the United States after enactment of the bill.
TREASURY DEPARTMENT
March 2, 1966
FOR IMMEDIATE RELEASE
PERSONNEL CHANGES IN THE ADMINISTRATIVE AREA
The Treasury Department announced today changes in several
key administrative positions in the Office of the Secretaryo
Elton Greenlee has been appointed Director of the Office of
Management and Organization o He was formerly Deputy Director of
that office and succeeds James H. Stover who became Regional
Commissioner of Customs at Miami, Florida on February 1, 19660
Mr. Greenlee joined the Treasury Department in 1961 after six years
with private research institutes following several years of
management work in the Bureau of the Budgeto
James D. Burris has been assigned as Deputy Director of the
new Office of Planning and Program Evaluation. He has been Deputy
Director of the Office of Budget and Finance of Treasury for the
past two and one-half yearso
In his new position, he will assist
Dro Benjamin Caplan, Director of the office, in establishing the
new Planning-Programming-Budgeting System in the Treasury Department. He recently completed the course at Monterey, California in
PPBS which the Department of Defense provideso Mrs Burris is an
alumnus of the Civil Service Commission Interdepartmental Management Intern Program and has extensive background in Federal
financial administration, including service on the staff of the
House Appropriations Committeeo
Norman Eo Sims, Jr. succeeds Mro Burris as Deputy Director of
the Office of Budget and Finance
Mr. Sims has served in that
office since 1951, and most recently has been one of the two senior
budget examiners
0
0
These positions are under the general supervision and direction of the Assistant Secretary for Adrninistrationo
000
TREASURY DEPARTMENT
(
March 2, 1966
FOR
I~fEDIATE
RELEASE
PERSCNNEL G-lANGES IN mE AIMNISTRATlVE AREA
The Treasury Department annolDlced today changes in several key
administrative positions in the Office of the Secretary. ~. Elton
Greenlee has been appointed Director of the Office of Management and
Organization. He was fonnerly Deputy Director of that office and
succeeds ~ James H. Stover who became Regional Commissioner of Oustmu
at Miami. Florida on February 1. 1966. Mr. Greenlee joined the Treasury
Department in 1961 after six years with private research institutes
following several years of management work in the Bureau of the Budget.
Mr. James D. Burris has been assigned as Deputy Director of the new
Office of Planning and Program Evaluation. He has been Deputy Director
of the Office of Budget and Finance of Treasury for the past two and onehalf years. In his new poSition, he will assist Dr. Benjamin Caplan.
Director of the office. in establishing the new Planning-ProgrammingBudgeting System in the Treasury Department. He recently completed the
course at ~nterey, California in PPBS which the Department of Defense
provides. Mr. Burris is an alumnus of the Civil Service Comission
Interdepartmental Management Intern Program and has extensive background
in Federal financial administration, including service on the staff of
the House Appropriations Committee.
Jrko'l Nonnan E. Sims, Jr. succe~ds Mr. Burris as Deputy Director of
the Office of Budget and Finance. Mr. Sims has served in that office
since 1951, and most recently has been one of the two senior budget
examiners.
These positions are under the general supervision and direction
of the Assistant Secretary for Administration.
TREASURY DEPARTMENT
March 7, 1966
FOR IMMEDIATE REIEASE
,
TREASURY DECISION ON VELVET FLOOR COVERINGS
UNDER THE ANTIDUMPING ACT
The Treasury Department has deter.mined that velvet floor coverings from Great Britain, manufactured by Carpet Trades Limited,
Kidderminster, Great Britain, are not being, nor likely to be, sold
at less than fair value within the meaning of the Antidumping Act,
1921, as amended.
A "Notice of Tentative Determination," was pub-
lished in the Federal Register on January 15, 1966.
No written submissions or
re~uests
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 December 31, 1965, amounted to
TREASURY DEPARTMENT
l
March 7, 1966
FOR IMMEDIATE REIEASE
TREASURY DECISION ON VELVET FIDOR COVERINGS
UNDER THE ANTIIl.JMPING ACT
The Treasury Department has determined that velvet f'loor coverings from Great Britain, manufactured by Carpet Trades Limited,
Kidderminster, Great Britain, are not being, nor likely to be, sold
at less than fair value within the meaning of the Antidumping Act,
1921, as amended.
A "Notice of' Tentative Determination," was pub-
lished in the Federal Register on January 15, 1966.
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 I, 1964, through December 31, 1965, amounted to
approximately $55,000.
TREASURY DEPARTMENT
(
R RELEASE 6 :30 P.M. ~
nday, March 7, 1966.
RESULTS OF i'REASURY I S WEEKLY BILL OFFERING
The Treasury Department annotmced that the tenders for two series of' Treasury bills,
series to be an additional issue of' the bills dated December 9, 1965, and the other
des to be dated March 10, 1966, which were offered on March 2, 1966, were opened at th.
~rBl Reserve Banks today.
~enders were invited ror $1,300,000,000, or thereabouts, of
day bills and for $1,000,000,000, or thereabouts, of 182-day bills. The details of' thE
I series are as f'ollows:
~
GE OF ACCEPTED
IPETITIVE BIDS:
High
WW
Average
9l-day Treasury bills
maturing June 9, 1966
Approx. Equiv.
Price
Annual Rate
98.841
4.585';£
98.827
4.640~
98.8.32
4.620i Y
lB2-day Treasury bills
maturing September 8, 1966
Approx. Equi v.
Annual Rate
Price
97.580
4. 787rf,
97.557
4.832i
97.565
4.816i
Y
·
54 t:J, of the amount of 91-day bills bid f'or at the low price 'WaS accepted
48 t:J, of the amount of' 182-day bills bid for at the low price was accepted
U. !ENDERS APPLIED liUR AND ACCEPTED BY FEDERAL RESERVE DISTRICTS:
Lstrict
)ston
lW
York
dladelphia
.eveland
chmond
!ants
1cago
• Louis
tllleapolis
nsas City
Las
"'. Francisco
TOTALS
A;EE1ied For
25,165,000
$
1,419,517,000
27,627,000
33,698,000
13,142,000
48,408,000
163,921,000
56,406,000
23,666,000
27,723,000
24,717,000
1441.°991.° 00
$2,008,095,000
Acce;J2ted
$
··
·
:
15,165,000
844,937,000
15,621,000 •
33,698,000
13,142,000
39,224,000
132,062,000
48,106,000 •
21,114,000
27,723,000
16,257,000
94 z 099 z 000
$1,300,153,000 ~
··
···
·
·
··
·
··
·
Applied For
Accepted
$
$
5,963,000
1,231,952,000
15,938,000
39,984,000
6,370,000
30,402,000
140,474,000
25,778,000
10,272,000
12,700,000
13,900,000
108 z 013 l 000
$1,641,746,000
5,963,000
699,332,000
7,938,000
32,984,000
6,370,000
16,202,000
82,873;000
19,278,000
9,012,000
12,700,000
9,900,000
97 1 813 1 000
$1,000,365,000 b/
eludes $258,155,000 noncompet1tive tenders accepte~ at the average price or 98.832
eludes $128,232,000 noncompetitive tenders accepted at the average price of 97.565
ese rates are aD a bank discount basis. The equivalent coupon issue yields are
74~ for the 91.-day bille, a.nd 5.01~ for t.he l82-day bills.
F-394
TREASURY DEPARTMENT
486
6
FOR RELEASE 6 :30 P.M.,
funday, March 7, 1966.
RESULTS OF TREASURY'S WEEKLY BILL OFFERING
The Treasury Department announced that the tenders f"or two series of Treasury bW
one series to be an additional issue of the bills dated December 9, 1985" and the ota.
series to be dated March 10, 1966, which were off'ere4 oq ~rch 2, 1966, ver~ QImRl4.
Ped.eral Reserve Banks today. 'lenders Yere invited t'or $1,300,,000,000, or tberitatilll
Sl-day bills and tor $1,000,000,000, or thereabouts, ot 182-day bills. i!Je detaU••
two series are as follows:
9l-day iTeasury bills
maturing June 9, 1966
Approx. Equ1v.
RANGE OF ACCEPTED
C<»IPETITIVE BIDS:
Pr1ce
98.84.1
98.827
98.832
High
{Dw
Average
Annual Rate
4.58S~
4.6~
4.620~
!I
••
••
••
••
••
••
••
lS2-day Treasury' billa
maturing September BI 1966
Approx. _
Price
ArmualRate
97.580
4. 7a7~
97.557
4.832~
97.565
4.816~ 1:1
54 ~ of the amount of 9l-day bills bid for at the loy price was accepted
48 ~ ot the amount o~ 182-day bills bid for at tbe lov price was accepted
!O'rAL 'lENDERS APPLUD lOR AND ACCm'DD BY FEDERAL RESERVE DISTRICTS:
District
App1.ied For
Accepted
Boston
•
$
Ch1cago
st. Louis
Minneapolis
Kansas City
Dallas
San Francisco
25,165,000
1,419 ,517 ,000
27,627,000
33,698,000
13,142,000
48,408,000
163,927,000
56,406,000
23,666,000
27,723,000
24,717,000
144,099,000
TO!ALS
$2,008,095,000
New York
Philadelphia
Cleveland
Richmond
Atlanta
!I IncJ.udes
:
Applied For
15,165,000 : .
5,963,000
844,937,000'
1,231,952,000
15,627,000:
15,938,000
33,698,000:
39,984,000
13,142,000:
6,370,000
39,224,000:
30,402,000
131,061,000:
140,474,000
48,106,000:
25,778,000
21,114,000:
10,272,000
27,723,000:
12,700,000
16,257,000:
13,900,000
94,099,000:
108,013 , 000
$1.,300,153,000!l .1.,641,746,000
Accepted
•
5,963
699 , 332
7,938
32,98'
6,37Q
16,201
82,873
19,27.
9,OU
12,101
9,9(1
97,8H
$l,OOO,~
$258,155,000 DODcanpet1t1ve tenders accepted at the average price of ..
~ Inc1.udes $128,232,000 noDcaapet1tive tendel"S accepted at the average price of It
!hese rates U'e on 8 bank discount basis. Ibe equivalent coupon lelUe )'181414. 74~ tor the 91-4&7 b:Ule, and 5.01~ for the 182-da7 bills.
y
TREASURY DEPARTMENT
WASHINGTON, D.C.
Ma r c h 8, 1966
FOR RELEASE TO AM NEWSPAPERS
WEDNESDAY, MARCH 9, 1966
THE UNITED STATES MAKES A TECPNICAL DRAWING
FROM THE
INTERNATIO:JAT_ HO\,ETARY
FUND
Secretary of the Treasury Henry H. rowler today announced
a further technical drawing by thc United States from the
International Monetary Fund.
The new arrangements provide for
periodic draw downs of up to $90 million in Canadian dollars.
These drawings continue the nractice begun in February 1964
of obtaining currencies for sale to other countries that have
repayments to make to the Fund.
The present arrangement 1JI7illh~-ing co Sl,150 million the
amount of U. S. drawings from th (:: T;;:1C. The bulk of these have
been made in this "technical" series _ A sizable part of these
drawings has been offset by drawi~~: ci United States dollars
by other countries.
These restore t~e C. S. position in the Fund
and in effect amount to repayment by the United States.
As a result, the United States' liability to the Fund
prior to these further drawings is a lout 5515 million. Drawing
rights in the "gold tranche" (virtual~_y automatic U. S. drawing
rights in the Fund) of $ 775 million rem2_in.
Part of these
drawing rights result from the recent ge~eral increase of
25 percent in the Fund quota of t};e C'nit.ed States (also applicable
to the quotas of other members) .
oOc
F-395
TREASURY DEPARTMENT
48~
BACKGROUND TO ANNOL~CE~ffiNT OF
UNITED STATES TECHNICAL DRAWING FROM THE
INTERNATIONAL MONETARY FUND
A technical drawing by the United States
of the currency of another country from
the International Monetary Fund, such as
announced today, permits countries in debt
to the IMF to make arrangements for
repayment without creating a new or
potential drain upon United States gold
holdings.
'Arrangements for making such 'technical drawings were worked
out in 1963 when the Fund I s abilit~,~ to accept dollars -- except
from the United States -- approached the limit under the Fund's
regulations.
(The Fund may not acceot dollars, except as a
result of a United States drawin~, after its holding of dollars
reach 75 percent of the U. S. quota in the Fund.)
This meant that a country possessing dollars that it wished to
use in repaying previous drawings from the Fund could not make the
debt payment direc tly to the Fund i_n dollars.
It would be obliged, instead, to use its dollars (1) to buy gold
with which to pay its Fund debt, or (2) to buy a currency the Fund
was in position to accept as debt ~epaymcnt.
The first course -- purchase of golo -- would in most cases
result in a reduction of U. S. gold rererves.
Usually, the gold
would be purchased directly from the United States. However, gold
purchases with dollars from any source would at least indirectly
affect the U. S. gold stock.
~
The second course -- purchase of another currency -- would
)lace the dollars in the hands o[ anothe~ country, where they would
)e a potential claim upon n. s. ~01d resprves.
(OVER)
- 2 To avoid either result:
1. The United States draws from-the Fund
(that is, purchases with dollars, since the
Fund can accept dollars -- from the U. S. -beyon~he 75-percent-of-quota limit) a
currency or currencies the Fund is in position
to accept for debt repayments.
2. The United States sells the currency
purchased from the Fund to a country
wishing to make debt payments to the Fund.
3. The United States receives the dollars
the debtor country has accumulated.
The end results of these transactions are:
-- The country in debt to the Fund gets currency the IMF is i
position to accept, as a debt repayment.
It winds up with,a redoc
debt to the Fund and with reduced dollar holdings. The net effuct
is that it has been able to use dollars indirectly to effect its
debt payment to the Fund.
-- The country whose currency the U. S. purchases from the Ft
for this purpose is not affected, since its currency is returned
to the Fund (as a debt repayment) shortly after it is drawn out oj
the Fund, and in the same amount.
-- The dollars accumulated by the debtor country to pay its
IMF debt wind DE with the United States, instead of being used to
buy gold, or instead of being transferred to a country where they
would be a potential claim upon U. So gold reserves.
000
TREASURY DEPARTMENT
March 8, 1966
FOR IMMEDIATE RELEASE
TREASURY MARKET TRANSACTIONS IN FEBRUARY
During February 1966, 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
$334,464,000.00.
000
F-396
4avv.-,
TREASURY DEPARTMENT
(
March 8, 1966
FOR IMMEDIATE RELEASE
TREASURY MARKET TRANSACTIONS IN FEBRUARY
During February 1966, 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
$334,464,000.00.
000
F-396
TREASURY DEPAR· 'MENT
~~~~~~~
WASHINGTON. D.C.
March 8, 1966
FOR IMMEDIATE RELEASE
UNITED STATES FOREIGN GOLD TRANSACTIONS IN 1965
The Treasury announced today that net sales of monetary
gold by the United States to foreign holders during 1965
amounted to approximately $1,547 million.
Sales of gold to domestic users -- shown separately for the
fir&t time in the gold transactions report -- came to $118 million.
This brought the total net outflow of gold from the gold stock
of tne United States in 1965 to $1,664 million.
During the fourth quarter of 1965, net gold sales to foreign
llolders amounted to just under $82 million. This was approximately
the same as in the third quarter.
But it was greatly reduced
from the outflow of gold to foreign buyers in the first two
luarters.
Table 1, attached, shows gold transactions by country and by
~nternational organization.
More than half of the total outflow
Tent to France, and a third 0 f the total to Aus tria, Belgium,
:taly, the Netherlands, Spain and Switzerland combined. The
rnited States had ne t receipts of gold during the year from
:razil, Colombia, Morocco, the United Kingdom and the Vatican.
Most of the remainder of the outflow went to the International
:onetary Fund, as the required 25 percent gold portion of a recent
ncrease in the United States quota at the Fund.
The quotas of all Fund members were increased by 25 percent, and
11 are required to pay a fourth of the quota increase in gold.
able 2, attached, shows sales of gold by the United States during
~65 to other countries to enable them to pay the gold portion
F-397
(ova)
UNITED STATES NE'l' MONETARY GOLD TRANSACTIONS WITH
TABLE 1
FOREIGN COUNTRIES AND INTERNATIONAL INSTITUTIONS
January 1, 1965 - December 31, 1965
(In millions of dollars at $35 per fine troy ounce)
Negative figures represent net sales by the
United states; positive figures. net purchases
Fir$t
Second
Third
Fourth
Quarter Quarter Quarter
Quarter
1965
1965
1965
1965
Austria------------------------- - 25.0
- 37.5 - 37.5
Belgium------------------------- - 39.6
- 22.1 - 21.0
Brazil-:.------------------------- - 1.0
+ 28.2 1.0
- 1.0
Ceylon-------------------------- 4.3
1.3
2.6
Chile--------------------------- - 1.0
Colombia-----------------------*
Costa Rica---------------------- - 1.3
Doodnican Rep.-----------------*
Egypt--------------------------- - 1.0
~rance-------------------------- -482.5
- 0.1
- *1.0
[MF-----------------------------
-258.8**
ran---------------------------raq---------------------------reland-------------------------
-
0.4
taly---------------------------
+ 30.0
-147.5
-
10.0
1.0
- 80.0
-
11vador------------------------ -
)~n---------------------------
-
1.5
90.0
IdaIl--------------------------litzerland--------------------- - 37.5
rria--------------------------- - 0.2
rkey------____________________
15.7
ited Kingdom------------------ - 75.7
\lgU.ay------------------------- 0.1
~ticBll.----------- - ------- ------
~oslavia---------------------l Dther-----------------------
Total
ial U. S. Gold
ii'loW:
eluding domes-
0.6
0.2
-
*1.0
-- 117.2
-
0.8
0.1
0.1
1.1
-137.0
-
0.4
-
5.2
-+
2.2
ordan-------------------------orocco------------------------etherlands--------------------- - 35.0
anama-------------------------- - 2.7
~ilippines--------------------- 0.1
0.1
-
Calendar
Year
1965
-
+
29.2
1.6
0.2
-
884.2
-
258.8**
7.5
10.0
2.4
80.0
4. 1
0.6
+
0.1
60.0
7.6
- 12.5
- 0.2
-
0.2
-
0.2
- 10.6
2.5 - 8.0
- 29.4
63.7
132.:3
- 0.1 - 0.1 -+ 0.1
4.5
0.5
0.7
0.5 - 0.5
0.1 - 0.6
+
+
+
0.6
4.7
35.0
2.7
0.2
1.5
180.0
7.6
50.0
0.8
30.0
-
82.7
25.2
4.3
4.9
+
5.3
0.6
9.9
l.OO.-U
36.8
+
149.7
+
0.4
4.5
2.3
1.4
- 811.1
-558.:3
-
95.5
_81.6
-1,546.5
_ 832.4
-589.2
-
124. 1
-118.7
-1,6644
(... 117 .. 9)
(_ 21.3) (- 30.9)(- 28.6) (- 37.1)
of:)
ures may not add to totals due to rounding
ss than $50,000.00
epresents gold portion (25 percent) of U. S. quota increase with the IMF
tl'A.n~A'1tionQ
- 2 -
of their quota increases, and deposits of like amounts of gold
by the IMF with the United States, to mitigate the effects upon
the U. S. gold stock of the quota increases. It is expected that
there will be other such offsetting transactions in the future as
other countries complete payment of their IMF quota increases.
Other sales of gold for IMF purposes that are not subject to
this mitigation procedure show in Table 1, and account for a large
part of the sales to the less developed countries.
000
TREASURY DEPARTMENT
t1
Q r'~
" \,.;
Q
March 8, 1966
FOR RELEASE TO AM NEWSPAPERS
¥EDNESDAY, MARCH 9, 1966
THE MINT ISSUES THE NEW DIME AND HALF DOLLAR
-- Special Mint Sets Go On Sale -The Treasury announced today that the Mint is placing in
circulation this week the new dime and the new half dollar
authorized by the Coinage Act of 1965.
Circulation of the new 10 cent and the new 50 cent pieces
Nill complete initial issuance of the new coinage authorized in
the Coinage Act of 1965 to reduce the dependence of the United
)tates coinage on silver, which is in short supply throughout the
vorld. The first of the three new coins authorized by the new
!oinage legislation, the 25 cent piece, has been in circulation
iince November.
The new 10 cent piece -- like the new quarter already in
irculation -- is made of cupronickel (25 percent nickel,
5 percent copper) faces bonded to a core of pure copper. The
opper color of the core shows on the edge of the coin.
The new half dollar has an overall 40 percent silver content,
ith faces of 80 percent silver and 20 percent copper bonded to a
Jre of 21 percent silver and 79 percent copper.
It is nearly
ldistinguishable from the 90 percent silver half dollar.
The new dimes and half dollars will reach the public within a
~w days through the normal channels for distribution of new
Ipplies of coins:
from the Mint to the Federal Reserve Banks
ld branch banks, then to commercial banks and, through the
'mmercial banks, to bus inesses and individuals.
The usual practice will be followed, in putting the new dimes
d half dollars in circulation, of delivering coins only to banks
at have need of additional supplies. New deliveries may
elude both the new and old coins.
398
Table 2
UNITED srATFS Il<JfETARY GOLD TJWlSACTICWS
WITH FOREIc. COUNTRIES MITIGATED TBROU<ll
SPECIAL DEPOSITS BY THE INF
(~llians ot U. S. $)
First
Quarter
Country
~
Second
Quarter
~
Australia
Third
Quarter
~
Quarter
~
- 8.3
--
Paraguay
Sub-Total
---
---
Calendar
Year
~
- 8.3
-
0.9
- 0.9
- 25,0
-2'.0
--S.3
- 25.9
-34.2
+ 8.l
t
25.9
+34.2
Venezuela
IMF Deposit
Fourth
- 2 The dime and half dollar now being issued, like the previously
issued new quarter, are dated 1965 and retain the design and size
of the 90 percent silver coins they succeed. The cupronickel-oncopper construction of the new dime and quarter, and the three-layer
construction of the new half dollar, permit them to opera~e in
all coin operated devices that accept 90 percent silver coins.
All of the new coins are to circulate side-by-side with the
90 percent silver coins they succeed. There are no plans to
withdraw the 90 percent silver coinage.
Special Mint Sets
Meanwhile, the Treasury announced that the Bureau of the
Mint would begin immediately accepting orders for Special Mint
Sets composed of the new half dollar, the new quarter, the new
dime and the five cent and one cent pieces. The sets sell for
$4, including handling and shipping costs.
Coins in the new sets will be struck one at a time from
,pecially prepared blanks, on high tonnage presses, and handled
Lndividually after striking. They will have a higher relief than
~egular coins and be better in appearance than any of the regular
mcirculated sets heretofore issued. All coins in the new sets
rill be dated 1965. They will not carry mint marks.
The Special Mint Sets will be sold in lots of one, two,
ive, or ten sets, only, to a customer. They will be made at the
an Francisco Assay Office.
Those who purchased 1964 proof coin sets, or uncirculated c0in
ets, from the Mint will receive order forms for the new sets from
:1.e Mint.
Others should send their orders to:
Officer in Charge
United States Assay Office
Numismatic Service
350 Duboce Avenue
San Francisco, California 94102
Orders will not be received at any of the other Mints. The
Qt said that inclusion of zip codes with addresses would speed
livery of the new sets.
000
TREASURY DEPARTMENT
Hashington
I!WiSDIA TE RELEASE
WEDNESDAY, MARCH 9,1966
F-399
The Bureau of CustomR has announced t~e follo~dn~ preliminary
figures shov..rl..'!1g the imports for consumption from January 1, 1966, to
February 26, 1966, inclusive, of commodities under quotas established
purs1.l::tnt to the Philippi'!1e Trade Agreement Rf'!vision !~ct of 1)/)):
:Established ~ual
SOr.1."'1or1.i ty
(~uota
Quantity
:Unlt of : Imports as of
: Quantity: Feb. 26 z 1966
55,855
Buttons •••••••••••••
510,000
Cigars ••••••••••••••
120, 000, JOO
Number
Coconut oil •••••
268,800,000
Pound
169,510,798
.............
6,000,000
Pound
1,39 8 ,9S7
'l'oh::l.CCO •••••••••••••
':;,900,000
Pound
1,117,852
Cordage
0
•••
Gr,oss
1,577,090
-------------------------------------------------_.---- -------------
t
Q C:
.
',1
TREASURY DEPARTMENT
Hashington
I:vlMwIATE !tELEASE
WEDNESDAY, MARCH 9,1966
F-399
The Bureau of Customs has announced the following preliminary
figures shovnng the imports for consumption from Januar,y 1, 1966, to
February 26, 1966, inclusive, of commodities under quotas established
pursuant. to the Philippine Trade Agreement Revision Act of 1955:
CormTIodi ty
Buttons
Annual
..:Established
Quota Quantity
:Unit of : Imports as
of
: Quantity: Feb • 26, 1966
• ••••••••••••
510,000
Cigars ••••••••••••••
120,000,000
Number
Coconut oil •••••••••
268,800,000
Pound
169,510,798
Gross
55,855
1,577,090
Cordage
• ••••••••••••
6,000,000
Pound
1,398,957
Tobacco
·............
3,?OO,000
Pound
1,117,852
,Q{.)
I
,\_,
-2-
·
·
Commodity
Period and Quantity
of :
·• Unit
• ~antit~:
U
I~orts as
Fe • 26 z 19
-
Absolute Quotas:
Butter substitutes containing over 45% of butterfat,
and butter oil ••••••••••
Calendar year
Fibers of cotton processed
but not S'P'J.n ••••••••••••
12 mos. from
Sept. 11, 1965
Peanuts, shelled or not
shelled, blanched, or
otherwise prepared or
preserved (except peanut
butter) •••••••••••••••••
~/
Imports as of March
F-400
4,
1,200,000
Pound
1,000
Pound
12 mos. from
August 1, 1965 1,709,000
Pound
1966.
Quota filled
Y
1,080,577
THEASURY DEPARTMENT
Hashington
HlMEDIATE :illLEASE
WEDNESDAY, MARCH 9,1966
F-400
The Bureau of Customs annOlU1ceci. today prel i..minary figures on imports for
of the following cOmI1odities from the beGinning of the respective
quota periods through February 26, 1966:
.
consu~ption
.:
Corunodity
: Unit of : Imports as of
Pe_r_i_o_d__
an_d__Qu
__an
__t_~_'t_~_r____~~Q~u~antity: Feb. 26, 1966
Tariff-Rate Quotas:
Cream, fresh or sour
Calendar year
1,500,000
Gallon
hlhole Milk, fresh or sour •••
Calendar year
3,000,000
Gallon
Cattle, 700 lbs. or more each
(other than oairy COHS) •••
Jan. 1, 1966 !'Tar. 31, 1966
120,000
Head
15,112
Cattle, less than 200 Ibs.
each ••••••••••••••••••••••
I? mos. from
llpril 1, 1965
200,000
Head
78,623
Fish, fresh or frozen, filleted, etc., carl, haddock,
hake, pollock, cusk, and
rosefish ••••••••••••••••••
Calendar year
23,591,432
Pound
Calendar year
To be
announced
Pound
9,620,93 0
61,918,112.5
funa Fish •••••••••••••••••••
~,'hite
Dr Irish potatoes:
Certified seed ••••••••••••
other •••••••••••••••••••••
392,294
Quota
filled.~/
Sept. IS, 1965
LS, 000, 000
Pound
Pound
1, 1965 Oct. 31, 1966
81~, 000, 000
Pieces
Qu ota filled
12 mos. from
11)~, 000, 000
13,957,256
mives, forks, and spoons
With stainless steel
handles ••••
NoV.
~iskbrooms
Calendar year
1,380,000
Number
572,11l8
Calendar year
2,460,000
Number
799,018
0
~her
••••••••••••••
•••••••••••••••••
brooms ••••••••••••••
0.
Imports for consumption at the quota rate are limited to 5,897,858 pounds
during the first J months of the calendar year.
THEASURY DEPARTMENT
Hashington
,~~
' .. t
INMSDlATE =tELEASE
F-400
WEDNESDAY, MARCH 9,1966
The Bureau of Customs announced today preliminary figures on imports for
consumption of the follm'7ing comnodi ties from the beginning of the respective
quota periods through February 26, 1966:
Go MlTIodi ty
·
··•
Period and Quantity
: Unit of : Imports a.s of
: Quantity: Feb. 26, 1966
Tariff-Rate Quotas:
Cream, fresh or sour ••••••••
Calendar year
1,500,000
Gallon
Hhole Milk, fresh or sour •••
Calendar year
3,000,000
Gallon
392,294
Cattle, 700 lbs. or more each Jan. 1, 1966 ( 0 ther than dairy C01{S) •••
Mar. 31, 1966
120,000
Head
15,112
Cattle, less than 200 Ibs.
each ••••••••••••••••••••••
12 mos. from
April 1, 1965
200,000
Head
18,623
Fish, fresh or frozen, filleted, etc., cod, haddock,
hake, pollock, cusk, and
rosefish ••••••••••••••••••
Calendar year
23,591,432
Pound
Tuna Fish •••••••••••••••••••
Calendar year
To be
announced
Pound
9,620,9,30
61,918,42,
13,957,256
or Irish potatoes:
Certified seed ••••••••••••
Quota fille~
~<'hite
12 mos. from
other •••••••••••••••••••••
Ilh, 000, 000
Sept. 15, 1965 45,000,000
Pound
Pound
forks, and spoons
Hith stainless steel
handles •••••••••••••••••••
Nov. 1, 1965 Oct. 31, 1966
84,000,000
Pieces
•••••••••••••••••
Calendar year
1,380,000
Number
Other brooms ••••••••••••••••
Calendar year
2,460,000
Number
~ives,
1~iskbrooms
1:/
Imports for consumption at the quota rate are limited to 5,897,858 pounds
during the first 3 months of the calendar year.
-2-
-,_.- -
-.---------.--~-----.-------:-----------
Cornnodity
.
Period and Quantity
: Unit of : Imports as ;;
: Quantity: Fell. 2~~
':bsolute Quotas:
Butter substitutes containing over h5/~ of butterfat,
ann butter oil..........
Calendar year
Fibers of cotton processed
but not spun ••••••••••••
Peanuts, shelled or not
shelled, blanched, or
otherwise prepare~ or
preserver! (except peanut
butter) •••••••••••••••••
3./
1,200,000
Pound
12 mos. from
Sept. 11, 1965
1,000
Pound
12 mos. from
August 1, 1965
1,709,000
Pound
Imports as of l"'::trch Ll, 1966.
F-400
Quota filled
1,080,577-1
~n·•
-2-
,j
COTTON WASTES
(In pounds)
COTTrn CARD STRIPS made from cotton havin~ a staple of less than 1-3/16 inches in length, OOHBER
WASTE, LAP WASTE, SLIVER WASTE, AND ROVING WASTE, WHETHER OR NOT MANUFACTURED OR OTHERWISE
ADVANCED IN VAIIJE: 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. 20, 1965, to:
: Mar. 7, 1966
:
Kin~dom ••••••••••••
4,323,457
239,690
227,420
69,627
Netherlands •••••••••••••••
68,240
United
Canada ••••••••••••••••••••
France ••••••••••••••••••••
India and Pakistan ••••••••
Switzerland •••••••••••••••
Belgium •••••••••••••••••••
Japan •••••••••••••••••••••
China •••••••••••••••••••••
Egypt •••••••••••••••••••••
Cuba ••••••••••••••••••••••
GeI'lnarJ;Y' •••••••••••••••••••
Italy •••••••••••••••••••••
other,
1/
includin~
Total Imports
:
:
Established.-. - - - - Imports - - i/
33-1/3% of: sept. 20, 1965; Total Quota: to Mar. 7, 196b
1,L41,l52
75,807
44,)88
22,747
14,796
38, >59
12,853
34 1 ,535
17,322
8,135
6,544
76,329
21,263
..,
25,443
7,088
5.u82,509
1,599,886
the U.S ••
Inoluded in total import.s, column 2.
Prepared 'in the Bureau of Olstoms.
TREASURY DEPAR'OOlIT
Washington, D. c.
-\ i-) -
IMMIDIATE RELEASE
\ "
WEDNESDAY, MARCH 9, 1966
F-401
Prel.1mina.ry data on imports for consumption of cotton and cotton waste chargeable to the quotas established by
Presidential Proclamation No. 2351 of September 5, 1939, as amemed, a.rxi as modified by the Tariff Schedules of the
United States which became effective August 31, 1963.
(The country designations in this press release are thOse specified in the appendix to the Tariff Schedules of the
United States. There is no political connotation in the use of outm.xled names.)
COTTON (other than linters) (in pouma)
Cotton umer 1-1/8 incheB other than rough or harsh umer
Imports S®tembE~r20. 1263_-:JrarcQ~1966
COUntry of Origin
Egypt and Sudan ••••••••••••
Peru •••••••••••••••••••••••
India and Pakistan •••••••••
Chizm ••••••••••••••••••••••
Established Qqota
783,816
2,(0),483
1,370,791
8,88),259
Socialiat Republics ••••••
475,124
Argent~ •••••••••••••••••
5,203
Haiti ••••••••••••• v • • • • • • • •
Ecuador ••••••••••••••••••••
237
9,333
1/ Except Barbados, Benuia,
Y Elccept Nigeria am Ghana.
Established Quota
Honduras ••••••••••••••••••••
13U, IJ :~2
Par~ ••••••••••••••••••••
1,282,019
Colombia •••••••••• , •••••••••
Iraq •••••••••••• , •••••••••••
British East Africa •••••••••
Indonesia and Netherlands
New Guinea••••••••••••••••
247,952
Mexico •••••••••••••••••••••
Brasil •••••••••••••••••••••
Union ot Sorlet
Country of Origin
~s
314"
618,723
11
~j
til
Jamaica, Trinidad,
am
British W. Indies •••••••••••
ligeria •••• , ••••••••••••••••
Britiab W. Africa. ••••••••••
Other, 1rclD'iing the U.s ....
Tobago.
.
Cotton l-1/St. or more
Established YearlY Quota - 45.656.429 1bs.
Imports Augyt 1. 196 ~ - I'·Iarch 7, 1966
Staple Lengt.h
A'lOcation
1-3/8tt or more
39,590, Tf8
1-5/32"
or III!~ ~ ,).~~:- --'~ -~-~~~...
'"'~~-:-.
~_~ '""'i t\P)~ ~itU
-:lt--~·,
• - ...
-. Bcn
-.J
",,-._.....-
( i .........
c::: ..
"v·';3~~ .. ii/TO o"t" u~
:
;Imports
3 8 ,95l,024
752
871
124
195
2,24£)
71,388
21,321
;,'571
16,004
T'P?rts
TREASURY DEPAR'IMENT
J4MFI) lATE
Washington, D. C.
RELEASE
1\
EDNESDAY, MARCH 9, 1966
F-401
Prellminary data on imports for consumption of cotton and cotton waste chargeable to the quotas established by
)residential Proclamation No. 2351 of September 5, 1939, as amemad, arxl as modified bY' the Tariff Schedules or the
Jnited States which became effective August 31, 1963.
(The country designations in this press release are those specified in the appemix to the Tariff Schedules of the
Jnited States. There is no political. connotation in the use of ouUDcded names.)
COTTON (other than linters) (in poun:is)
Cotton l.llXler 1-1/8 inches other than rough or harsh UDier 31W!
Imports SfJP~4t~20____ 196~- Marc~l966
Count" ot Origln
EgJpt and Sudan ••••••••••••
Peru •••••••••••••••••••••••
India and Pakistan•••••••••
China ••••••••••••••••••••••
Mexico •••••••••••••••••••••
Brasil •••••••••••••••••••••
Uft10n or Son.et
Social1at Republics ••••••
.rgent~ •••••••••••••••••
Haiti ••••••••••••••••••••••
~r
••••••••••••••••••••
.I EEcept Barba:los, Bermuda,
J EEcept Nigeria and Ghana.
Established Quota
783,816
247,952
2,003,483
1,370,791
8,883,259
618,723
lDIJ?9rts
Countrx ot Origin
130,458
Honduras ••••••••••••••••••••
Par~ ••••••••••••••••••••
752
Colombia ••••••••••••••••••••
Iraq ••••••••••••••••••••••••
British East Africa •••••••••
124
195
2,240
IDionesia and Netherlanis
New Guinea••••••••••••••••
71,)88
Briti8h W. Indies •••••••••••
21,)21
.igeria•••••••••••••••••••••
British V. Africa. ••••••••••
Other_ ioc1ud i DR the U.s ....
1.6,004
1,282,819
!I
475,l24
5,203
2'51
9,333
~I
SJ
Jamaica, Tr1n1dad,
am
Established Quata
Tobago.
Cotton
l-lISt.
or more
Established Yearll Quota - 45.656,~ 1bs.
ImDorts Awmat. 1 •. 1965 -March 7. 1966
St.We Length
1.-3/an
1-& h 7
or Imre
It&"..,:re an4 under
AlloMt.1on
39.590.718
:J. &aD aoo
Imr!9rt.s
38,951,024
2~5,62h
871
5,m
!!POrta
CO'l.'TOR WASTES
(In pounds)
COTTCIl CARD STRIPS made from cotton ha~ a staple of less than 1-3/16 inches in 1enK"th, COMBER
WASTE, LAP 'WASTE, SLIVER WASTE, AND ROvmG WASTE, WHETHER OR NOT MANUFACTURED OR OTHERWISE
ADVANCED IN VAWE: 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 le~th in the case of the fol1awin~ countries: United Kin~dom, France, Netherlands,
Swi tzerland, Belgium, Germany, and Italy:
Country of Origin
:
Established
:
TarAL QUOTA
:
United Kin~dom ••••••••••••
Canada ••••••••••••••••••••
France ••••••••••••••••••••
4,323,457
239,690
227,420
India and Pakistan ••••••••
69,627
Netherlands •••••••••••••••
68,240
44,388
38, S59
341,535
Switzerland •••••••••••••••
Belgium •••••••••••••••••••
Japan •••••••••••••••••••••
China •••••••••••••••••••••
Egypt •••••••••••••••••••••
CUba ••••••••••••••••••••••
Gey,narr::/' ••• • • • • •• • • • • •• • • • •
Italy •••••••••••••••••••••
Other,
inc1udin~
!/ Included
-To-tal Imports- :
1,441,152
22,147
75,807
14,796
12,853
17,322
8,135
6,544
~
76,329
21,263
25,443
7,088
'J482,509
1,599,886
the U.S ••
in total imports, column 2.
Prepared in the Bureau of CUstoms.
F-401
EstabIisned , - Iq>orts -1/
: Sept. 20, 1965, to:
33-1/3% of: Sept. 20, 19 65) : Mar. 7, 1966
: _TotalQu.Qt~ to Mar. 7, 1960
:
,.4
S" n"
... :3 -
8a1e or other disposition of Treasury bills does not have any special treatment,
such, under the Internal Revenue Code of 1954.
'1
The bills are subject to estate,
inheritance, s1tt or other excise taxes, whether Federal or State, but are exempt
rr.
all taxation now or hereatter imposed on the principal or interest thereot by IV lUI
or any ot the possessions of the United States, or by any local taxing authorlt,.
~
purposes ot taxation the amount of discount at which Treasury bllls are orig1nall11C11
by the United states is considered to be interest.
Under Sections 454- (b) and 1221 ~
of the Internal Revenue Code of 1954 the amount ot discount at which billa isaued"
under are sold 1s not consldered to accrue until such bills are 801d, redeemed or.
wise disposed of, and such bills are excluded from consideration as capital a,aetl.
Accordingly, the owner ot Treasury bills (other than lite insurance coarpan1ea) 1a.
hereunder need include in his income tax return only the <utterence between t.he priat
IBid tor such bills, whether on original issue or on subsequent purchase I aDd the ..
actually received either upon sale or redemption at maturity during the taxable
)'IIf
for which the retum il made, a8 ordinary gain or 1088.
Treasury Department Circular No. 418 (current revision) and thil notice, pre"
the terns
o~
the Treasury bills and govern the conditionl ot their i8sue. Copies of
the circular may be obtained from any Federal Reserve Bank or Branch.
.. 2 ., ~ It ' .
505
"f /' 't'; • .,' .~,.!
printed forma and forwarded in the special envelopes which will be supplied by
recw.
Reserve Banks or Branches on application therefor.
Banking institutions generally may submit tenders for account of customers pz.
vided the names ot the customers are set forth in such tenders.
others than
~
institutions will not be pennitted to subm1t tenders except for their own aeeoUU.
Tenders will be received without deposit from incorporated banks and trust cOlllPlldl
and from responsible and recognized dealers in investment securities.
Tenderltftl
others must 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
pa~Dt'
an incorporated bank or trust company.
Immediately a1'ter the closing hour, tenders will be opened at the Federal Be..
Banks and Branches, follOwing which public anouncement will be made by the TreaIUl'J
Department of the amount and price range of accepted bids.
will be advised of the acceptance or rejection thereof.
Those submitting tendl
The Secretary ot the !'rei
expressly reserves the right to accept or reject any or all tenders, in whole or if
part, and his action in any such respect shall be final.
Subject to these resent
tions, noncompetitive tenders for each issue for $200,000 or less Without stat.
price from any one bidder will be accepted in full at the average price (in threl
decimals) of accepted competitive bids for the respect1ve issues.
Settlemem~
accepted tenders in accordance with the bids'must be made or completed at the N
Reserve Bank on
March 17, 1966
, in cash or other immediately available·
BiiJ
or in a like face amount of Treasury bllls maturing
and exchange tenders will receive equal treatment.
March ~ 1966
Cash adjustments will
• QI
be'"
differences betveen the par value of maturing bills accepted in exchange and tbt
price of the new bills.
The income derived from Treasury bills, whether interest or gain froll till
other disposition of the bills, does not have any exemption, as such, ancllDt'
TREASURY DEPARTMENT
Washington
FOR RELEASE IN A.M. NEWSPAPERS
TUESDAY, FEBRUARY l5:t 1966
REMARKS BY THE HONORABLE HENRY H. FOWLER
SECRETARY OF THE TREASURY
AT A NEWS CONFERENCE ON
THE BALANCE OF PAYMENTS OF THE UNITED STATES IN 1965
FEBRUARY 14, 1966 AT 2:30 P.M.
Final computations, now available, confirm the earlier
preliminary estimate of a substantial improvement in the
United States balance of payments in 1965.
In 1965 we had a balance of payments improvement of
$1.5 billion, so that we ended the year with a deficit in
our international payments of $1.3 billion. That is on the
overall, or liquidity, accounting basis.
That is the smallest overall balance of payments
deficit since 1958.
It is less than half the size of our deficits of
$2.8 billion in 1964 and $2.7 billion in 1963.
It compares with average deficits, on this same
accounting basis, of $3 billion a year in the
seven preceding years, 1958 through 1964.
I want to go over with you some of the main components
of the 1965 record, as they bear upon the future.
There are
both favorable and unfavorable elements.
The $1.5 billion net reduction in the payments deficit
on an overall basis occurred despite heavy outflows on
private capital account during the early months and despite
setbacks for the year as a whole in trade and other accounts.
The improvement is in very large part attributable to the
effectiveness of the program of voluntary cooperation which
President Johnson called for in his balance of payments messag~
of February 10, 1965.
F-378
TREASURY DEPA RTMENT
"fashington
FOR REIFASE IN A.M. lJE\'t'SPAPBRS
TUESDAY, FEBRUARY 15, 1966
REMARKS BY THE HONORABLE HENRY H. FOWLER
SECRETARY OF THE TREASURY.
AT A NEWS CONFERENCE
ON THE BALANCE OF PAYMENTS aF THE UNITED STATES IN 196.
FEBRUARY 14, 1966 AT 2:30 PM
Final computations, now available, confirm the earlier
pre~t.ary
estimate of a substantial Lmprovement in the
United States balance of payments in 1965.
In 1965 we had a balance of payments improvement of
$1.5 billion, so that we ended the year with a deficit in
our international
payments of $1.3 billion.
That is on the
overall, or liquidity, accounting basis.
-- That is the smallest overall balance of payments
deficit since 1958.
-- It is less than half the
si~e
of our deficits of
'<
$2.8 billion in 1964 and $?7 billion in 1963.
-- It compares with average deficits, on this same
accounting basis, of $3 billion a year in the seven
years, 1958 through 1964.
pr.ce6~
TREASlffiY DEPARTMENT
Washington
March 9, 1966
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,:300,000,000, or thereabouts, tor
.
(B)
, in the amount
cash and in exchange for Treasury bills maturing March 17, 1966
(XiO
of $ 2,206,604,000 , as follows:
bOO
91-day bills (to maturity date) to be is sued __M......:ar~c__h--r:l~7t-,~1..:..9..:..66.:..-_,
-CEO""'~
in the amount of $ 1,:300,000,000, or thereabouts, represent~
ing an additional amount of bills dated December 16, 1965
and to mature
ceo
, originally issued in the
June 16, 1966
(lJQ
amount of $ 1,000,50:3,000 , the additional and original bills
{to(}
to be freely interchangeable.
182-day bills, for $ 1,000,000,000 , or thereabouts, to be dated
{~
{iijO
March 17, 1966 , and to mature
September 15, 1966
~
(j.i@
The bills of both series will be issued on a discount basis under competitift
and noncompetitive bidding as hereinafter provided, and at maturity their face
will be payable without interest.
81lIOII
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,OC
(maturity value).
Tenders will be received at Federal Reserve Banks and Branches up to the clo.
hour, one-thirty p.m., Eastern Standard. time, Monday, March 14, 1966
• 'l'eDl
{mo
will not be received at the Treasury Department, Washington.
Each tender must be
for an even multiple of $1,000, and in the case of competitive tenders the price
offered must be expressed on the basis of 100, with not more than three decu-l.,
e. g., 99.925.
Fractions may not be used.
It 1s urged that tenders be made on tb
TREASURY C~PARTMENT
March 9, 1966
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
$2,300,000 ,000, or thereabouts, for cash and in exchange for
Treasury bills maturing March 17,1966,
in the amount of
$2,206,604,000, as follows:
91-day bills (to maturity date) to be issued March 17, 1966,
in the amount of $1 ,300 ,000 ,000, or thereabouts" representing an
additional amount of bills dated December 16,1905, and to
mature June 16,1966,
originally issued in the amount of
$ 1,000,503,000~he additional and original bills to be freely
interchangeable.
182-day bills, for $ 1,000,000,000, or thereabouts, to be dated
March 17, 1966,
and to mature September 15, 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, March 14, 1966.
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 ins~itutions will not be permitted to
submit tenders except for their own account. Tenders will be received
without deposit from incorporated banks and trust companies and from
~sponsible and recognized dealers in investment securities.
Tenders
from others must be accompanied by payment of 2 percent of the face
amount of Treasury bills applied for, unless the tenders are
accompanied by an express guaranty of payment by an incorporated bank
or trust company.
F-402
- 2 Immediately after the closing hour, tenders will be opened at the
Federal Reserve Banks and Branches, following which public announcement will be made by the Treasury Department of the amount and price
range of accepted bids. Those submitting tenders will be advised
of the acceptance or rejection thereof. The Secretary of the Treasury
expressly reserves the right to accept or reject any or all tenders,
in whole or in part, and his action in any such respect shall be
final. Subject to these reservations, noncompetitive tenders for
each issue for $200,000 or less without stated price from anyone
bidder will be accepted in full at the average price (in three
decimals) of accepted competitive bids for the respective issues.
Settlement for accepted tenders in accordance with the bids must be
made or completed at the Federal Reserve Bank on March 17, 1966, in
cash or other immediately available funds or in a like face amount
of Treasury bills maturing March 17,196 Q c:>
Cash and exchange tender
will receive equal treatment. Cash adjustments will be made for
differences between the par value of maturing bills accepted in
exchange and the issue price of the new bills.
The income derived from Treasury bills, whether interest or
gain from the sale or other disposition of the bills, does not have
any exemption, as such, and loss from the sale or other dispositioo
of Treasury bills does not have any special treatment, as such,
under the Internal Revenue Code of 1954. The bills are subject ~
estate, inheritance, gift or other excise taxes, whether Federal or
State, but are exempt from all taxation now or hereafter imposed 00
the principal or interest thereof by any State, or any of the
possessions of the United States, or by any local taxing authority.
For purposes of taxation the amount of discount at which Treasury
bills are originally sold by the United States is considered to be
interest. Under Sections 454 (b) and 1221 (5) of the Internal
Revenue Code of 1954 the amount of discount at which bills issued
hereunder are sold is not considered to accrue until such bills ~
sold, redeemed or otherwise disposed of, and such bills are excluded
from consideration as capital assets. Accordingly, the owner af
Treasury bills (other than life insurance companies) issued hereunder
need include in his income tax return only the difference between
the price paid for such bills, whether on original issue or on
subsequent purchase, and the amount actually received either upon
sale or redemption at maturity during the taxable year for which ~
return is made, as ordinary gain or loss.
Treasury Department Circular No. 418 (current revision) and dds
notice prescribe the terms of the Treasury bills and govern the
conditions of their issue. Copies of the circular may be obta~~
any Federal Reserve Bank or Branch.
000
TREASURY DEPARTMENT
Washington
FOR RELEASE:
()
~n ...
Jl
UPON DELIVERY
REMARKS BY THE HONORABLE JOSEPH W. BARR
UNDER SECRETARY OF THE TREASURY
AT THE PHI BETA KAPPA CHAPEL, DEPAUW UNIVERSITY
GREENCASTLE, INDIANA, FRIDAY, MARCH 11, 1966
10:30 A.M.
THE CHALLENGE OF MACRO-LEADERSHIP
In May of 1965 the then President of the Carnegie
Foundation and now Secretary of Health, Education and Welfare,
the Honorable John W. Gardner, delivered a speech entitled,
"The Antileadership Vaccine." A year earlier, at the
Annual Loeb Awards Dinner in New York, I delivered a speech
entitled "Political Economy -- The Need for a New Look."
Both addresses dealt with this question of leadership, and as
I pondered the subject of my discussion today it seemed
appropriate, with Secretary Gardner's permission, to attempt
to advance this important inquiry.
A Phi Beta Kappa Chapel seems an especially appropriate
forum in which to undertake an intellectual exercise of
this kind. Election to Phi Beta Kappa is tangible recognition
of excellence in a particular area of human endeavor.
But it is no less true that those who aspire toward a leadership role today -- and I hope people such as you are so
aspiring -- face a difficult task in making the transition
from particularized excellence to the more general and
complex problems of leadership.
Secretary Gardner in his "Antileadership Vaccine" address
made several particularly relevant points in this respect.
Leadership and power in this nation are dispersed,
and communication or cooperation between leaders in various
areas (education, government, the arts, science) is often
tenuous and sometimes non-existent. This fragmentation of
leadership in a highly pluralistic society such as ours
often produces in individual leaders the conclusion that,
"it isn't anybody's business to think about the big questions
that cut across specialties -- the largest questions facing
our soc ie ty •"
F-403
- 2 -
Secretary Gardner also had this to say about the training
of leaders: " •.• the best students are carefully schooled
to avoid leadership responsibilities • . . . the academic world
appears to be approaching a point at which everyone will
want to educate the technical expert who advises the leader,
or the intellectual who stands off and criticizes the leader,
but no one will want to educate the leader himse If." Such
leaders will lack the essential element of confidence so
necessary for reaching and following through on difficult
decisions. Indeed, Secretary Gardner refers to what he calls
the latest modern art, "How to reach a decision without really
deciding."
How serious is our problem? What is its exact nature?
It seems to me that in a highly developed pluralistic society
such as ours, two contradictory forces are at work which
severely complicate the problem of leadership. On the one
hand, increasing specialization in all professions makes
technical expertise an essential prerequisite for anyone who
seeks a position of influence within his or her profession.
On the other hand, in this age of large-scale organization
and increasing specialization, we face a more urgent need
than ever before for people who are capable of practical
action in complicated areas requiring deep knowledge of
several related disciplines. A person who has climbed the
ladder within his profession may be incapable later in life
of thinking in broad terms about what Secretary Gardner called
"the largest questions facing our society." And, the person
who dabbles in a number of disciplines may find that despite
his good intentions he lacks the depth, experience, and
expertise required to relate various complex fields. I would
suggest that this is a very real dilemma which this country
will face increasingly in coming years.
Perhaps one way out of the dilemma is to identify some
of the "largest" questions facing our society, and then to
inquire as to the specialized training and generalized
experience that will equip future leaders to deal with the
"largest questions." Let me identify what in my opinion is
certainly one such question: "How are we to fit a highly
sophisticated industrialized society into the political,
economic, and cultural institutions that are realities in
the world today?" The technical revolution which has
characterized the development of Western economies for the
- 3 -
past century has increasingly demanded ever-larger markets
for efficient functioning. We have seen two costly world
wars, the break-up of colonial empires, and the emergence
of a new balance of power in the world. In the West, the
result has been increasingly interdependent economies, and
larger markets which have become increasingly intolerant of
political and cultural restraints. This is natural because
the thrust of modern economic development is toward largescale organization. To some extent, the same process is
now occurring in the Soviet bloc countries, but in the underdeveloped world of Asia and Africa, where the need for modern
economic development is urgent, the trend of the past two
decades has been toward political fragmentation.
It is not simply a question of rich and poor nations,
though this indeed is one of the most serious problems we
face. Rather, it is a question of somehow building new
relationships between individual countries and groups of
countries. Europe has moved slowly but purposefully toward
the creation of a common market whose breadth and depth will
support and sustain a modern economy. There are faltering
steps of this type in other regions -- Latin America,
parts of Africa, and even parts of Asia. These are
processes which in my view must be encouraged and to
which the United States should lend its support. They
raise whole new areas for world leadership which will be
wide open to the political economist.
If we accept as given the political boundaries of
today's world -- if we also accept as given the economic
imperative for developing markets and trading areas with
the depth and breadth to support modern economies, then it
seems we are faced with a conundrum. A striking example
is Southeas t As ia.
With the nations of the region turning their attention
to economic development, the obvious course for development
is apparent. South Vietnam, North Vietnam, Laos, Cambodia,
Thailand, and Burma are all connected in one way or another
with the vast Mekong River system. Up to now this river
has been literally untouched; not a bridge has been thrown across
its banks. Its potential for the development of power,
irrigation, and transportation sys terns would seem to be a basic
requirement for any sort of balanced economic development in
this area. But obviously the solution to this problem is
- 4 made more difficult by political subdivisions which, however,
represent real boundries between ancient and hostile peoples.
The problem is to develop the Mekong through a regional plan
which minimizes the inefficiency inherent in narrow political
divisions without eliminating all possibility of progress
by ignoring national tradition and tribe. This will require
a rare combination of specialized expertise and experience.
It would also be most difficult to build a viable
system of higher education in Southeast Asia through some sort of
a regional concept. It may even be impossible to do this job
in any other way. In all probability the same concept will
logically apply to the operations of their central banks, the
development of road and rail systems, and quite possibly to
the practical problem of developing the savings and ra~s~ng
the capital which will be required to finance these projects.,
What is obvious in Southeast Asia is almost equally
apparent in other areas. The Indus basin project in
India and Pakistan demonstrates that this sort of problem
can be solved in the most difficult circumstances, given a
constructive attitude, enormous technical skill, and a
generous measure of hard work. Africa, the Middle East,
and Latin America offer many other examples. In each case
the problem and the solution may be apparent to the
economist, though not nearly so clear to the politician.
Even Europe, with its close economic ties and its relatively
common historical traditions, is experiencing severe
difficulties in establishing a common market and trading
organization. How much more difficult is the problem among
the new states who so jealously guard their recently acquired
independence~
One can see here the vastness of the problems. Are
there any solutions in sight? I think the answer is yes,
but the steps forward are slow and tentative, the barriers
both formidable and complex. In general, the solution is one
of regional development. One aspect of this approach is the
recent creation of regional development banks. There has been
~Inter-American Development Bank since 1959, an African
Development Bank since 1963, and most recently the world is
currently engaged in forming the new Asian Development Bank. This
bank will be made up of 19 Asian countries supported by the
contributions of 12 industrialized nations who have joined
together in an institution which can focus the attention of the
world on rational economic development in Asia.
In April 1965 in an address at Johns Hopkins, President
Johnson threw the support of the United States behind this concept,
which had been developed initially by the nations of Asia.
- 5 I was assigned responsibility for coordinating the United States
effort in this undertaking, with Mr. Eugene Black, ex-President of
the World Bank, acting as the President's special representative.
I must confess that I undertook this responsibility with
some doubts that were shared rather widely by economists and
financiers. I wondered whether or not it was appropriate to
fragment and to regionalize our approach to economic development.
Reasonable men can still debate this point and can possibly
argue that from a purely economic standpoint, the global
approach is more appropriate. However, from the standpoint of
a political economist, the concept of a regional development
bank appeared sound, because it offered the best possibility
of reconciling the economic imperatives of regional development
with the political difficulties involved in reaching decisions
that cut across national boundaries.
During the negotiations which led to the bank's creation,
it was reassuring to discover that Indians and Pakistani could
sit across the table and discuss the problems of economic
development on a rational basis; that my own personal relations
with the Finance Minister of Cambodia were cordial and easy; and
that the cultural differences which have separated Muslims, Hindus,
and Buddhists for centuries did not appear to have a divisive
influence. It seems that the comparatively simple and obvious
demands of economic development can bring together men of
diverse cultures, religions, and nationalities.
If this conclusion is true, and I believe that it is, then
the man who can lead and guide these institutions is a crucially
important leader in the world today. It is not reasonable to
expect the tensions that are built into boundary lines, cultural
differences, and religious differences to disappear quickly from
our world. But if it is true that the concept of regional economic
development can override the realities of these tensions, then the
man who can organize, finance, and get political agreement on
these projects is truly a leader in whom all of us can place great
hope.
There are such men in the world today, though they are
in critically short supply. I refer to men such as Mr. Eugene
Black, the former President of the World Bank; his successor,
Mr. George Woods; the Managing Director of the International
Monetary Fund, Mr. Pierre-Paul Schweitzer; the President of the
Inter-American Development Bank, Mr. Felipe Herrera; and finally
to the man for whom the world is currently searching to lead the
new Asian Development Bank.
- 6 -
This, then, is an area which warrants our close attention
and the interest of the American public generally. It is an
area which will demand leaders capable of practical action in
the fields of both politics and economics. In the past we have
been extremely fortunate in developing leaders in all fields,
but as our national and international problems multiply, and the
economic and political milieu in which we are called upon to
operate becomes increasingly complex, the question arises as to
whether there will be enough such leaders for the future.
I dealt with this problem in my Loeb Awards speech of 196~,
where I expressed my regret that the academic discipline of
political economy had been divided into the specializations of
political science and economics. The result has been to create
economists with too little knowledge of how to implement their
theories and political scientists who have no real grasp of the
economic forces determining political action. I also referred to the
French system of "inspecteurs de finance" which has produced men of
outstanding skill both in academic economics and in politics,
many of whom have come to occupy the very highest positions in
French Government. I myself proposed the creation of what I
called a financial reserve corps, a group of leaders experienced
in the field of political economy. I might add that since then,
Secretary Gardner put forward a leadership program which has
now been implemented by the President, I refer to the White
House Fellows Program under which 15 able young men ranging in
age from 23 .to 35 are assigned to the White House, to the Vice
President, and to the various executive departments, with
definite instructions from the President that they should be
included in the policy process at the highest levels in our
government. One of these young men, Mr. David Mulford, serves
as my assistant and is with me today.
It is clear to me that the white House Fellows concept has
developed into a remarkable program which should provide an
important nucleus of leadership in the next 20 years. Legislation
will soon be submitted to Congress which if enacted will make the
White House Fellowships a permanent Federal program. My hope is
that the same approach might be taken in other areas of Government,
such as the financial sphere which I have discussed today.
In 1964 I proposed the creation of a Financial Reserve
Corps to meet our future leadership needs in the financial sphere.
- 7 ·J C ~
I believe that such a Corps could make a unique contributiong
in this area and in closing I would like briefly to outline my
proposal. Though set up on a permanent basis, the Corps would
have to be created gradually through a carefully planned education
and on-the-job training program running over a period of
something like three years. During this period participants
would be put through two cycles of a year-and-a-half each -six months' intensive academic training, for example, followed
by one year of practical experience in one of the departments
or agencies of the Federal Government. Thus, in the three-year
period, participants would have two rounds of academic training
and hold two responsible posts in the Government. Assignments
might be arranged in the Treasury Department, the Bureau of the
Budget, the Council of Economic Advisers, the Federal Reserve,
State Department, the Pentagon, the Commerce Department. To
administer the program a Presidential Commission might be appointed,
comprising a professional staff and leading private c~tizens,
Congressiona 1 representa ti ves, and high Government offic·ta Is
to conduct the selection of candidates.
As for candidates, I think it should be recogni~ed from
the outset that we are talking about an exceptional type of
person with a rare combination of talents, attitudes, and
experience. Such people defy both specific description and
broad generalizations, but certain attributes would seem to be
essential. They should be well educated, relatively mature
possibly between ages 25-33 -- and have some idea about the
general direction of their career. Hopefully, candidates might
be drawn from a wide variety of sources, including government,
banking and investment institutions, business, the legal professions,
and the universities. Their background training might be equally
diverse -- say, for example, economics, law, political
science, mathematics and engineering, history, or philosophy.
Above all, it would seem essentail that candidates show unusual
capacity for creative thinking, as well as the ability to relate
their ideas to complicated economic and financial data. This is
a great deal to ask, and I think it would be unwise to be too
specific here, because the capacity to make decisions and to
follow them through politically is not an easy thing to assess.
I do think, however, that participants in the scheme should be
expected to commit themselves to serving three or four years in
government, either immediately after their training or later in
life. In this way a reservoir of trained men would be built
up over the years which the Government could draw upon to fill
top level positions in the economic and financial spheres.
- 8 -
In the final analysis, however, leadership is essentially
an attitude of mind. No matter what programs of specialized
training and generalized experience any of us can devise, there
must be the willingness by some individuals to accept the risks
that are the inevitable companions of leadership.
Today, more than any other type of leader, we need the man
who can relate diverse and complicated fields, the man who has
specialized but also remains a sophisticated generalist. This
is where "attitude of mind" comes in. The men and women who can
achieve expertise but retain flexibility, who can define
alternatives and still put their hand to the task of implementation
these will be the leaders of the future.
000
BIOGRAPHICAL SKETCH OF FRANK E. RANDA
Frank E. Randa, District Director-designate, Philadelphia Customs
District, was born in Pittsburgh on December 11, 1911 and attended AUenby
High School in that city.
He received a certificate in accounting and com-
mercial law at -the Pittsburgh Academy (Park Institute).
Mr. Randa started his Customs career as a marine officer-clerk in
Pittsburgh in 1931, serving as assistant entry officer, marine admeasurer.
and deputy collector (marine).
He became an examiner in 1948 and in 1957
was appointed to his present position as Appraiser of Merchandise in
Philadelphia.
Mr. and Mrs. Randa reside at 405 Longfield Road, Philadelphia. Pa,
***
BIOGRAPHICAL SKETCH OF H. SINGLETON GARRETT
H. Singleton Garrett, District Director-designate, Norfolk Customs
District, was born in Norfolk on February 2, 1916.
He received his
education at the College of William and Mary, Williamsburg, Va., graduating
with a B. S. in 1937.
He did post-graduate work in management and busineSS
administration at Old Dominion College.
Mr. Garrett served in the U. S. Navy during World War II.
_lQ,W.f
IL8
yars
1\
e ~ insurance and real estate business.
~
,
~
For many
He was appointed
ollector of Customs in Norfolk in 1961.
Mr. and Mrs. Garrett reside at 1123 West Princess Anne Road,
Norfolk, Va.
***
BIOGRAPHICAL SKETCH OF CHARLES W. HENDERSON
Charles W. Henderson, Assistant Regional Commissioner-designate
(Administration), was born in Buckingham, Fla., on November 17, 1906.
He received a Bachelor of Commercial Science degree at the Benjamin
Franklin University, Washington, D. C., and studied accounting and banking
at Tampa College.
Mr. Henderson entered the Customs Service in 1937 after several
years as a clerk with the Atlantic Coast Line Railroad Co. in Tampa.
He served with the U. S. Navy during World War IT returning to Customs
in 1945 as· a field auditor in Baltimore.
Comptroller,
He is currently Acting
J-~~;Cl.Q.... >c
Mr. and Mrs. Henderson reside at 6 Thornhill Road, Lutherville. Md.
***
BIOGRAPHICAL SKETCH OF JOHN EUGENE -KENNEDY
John Eugene Kennedy, District Director-designate, Baltimore Customs
District, was born in Havre de Grace, Maryland, on July 7, 1906.
He
attended the Havre de Grace High School and studied management at the
Federal Executive Management School in Allenberry Lodge, Pa.
Mr. Kennedy, whose hobby is music» once was a concert pianist.
He joined the Customs Service in 1924 as a clerk-stenographer, rising
through the ranks until his appointment as Assistant Collect or of Customs
in Baltimore in 1946.
He was detailed on loan to the Department of state
in 1956 to serve as a member of the U. S. Delegation to the first Inter-
American Port and Harbor Conference in San Jose, Costa Rica.
Mr. and Mrs. Kennedy reside at 1307 Southview Road. Baltimore.
***
BIOGRAPmCAL SKETCH OF GEORGE H. HEIDBREDER
S7
~J~~k~~~{~
George H. Heidbreder was born in New York City on February 6,
1922.
.J"
He received his BS degree at Centenary College in Shreveport,
La., and a master of science degree at the University of Illinois,
Urbana, in
1956~
He served in the U S. Army from 1940 to 1945 and as an Air
Force Intelligence Officer from 1948 to 1955.
Mr. Heidbreder started his career with the U. S. Customs Service
in Washington, D. C •• as a liaison officer in 1957 and was given responsibility for making studies of work simplification, work flow,
staffing and operations.
In 1961 he was promoted to the position of
administrative officer, and in 1964 was named air operations officer
with responsibility for carrier control and inspection operations with
respect to the air transportation industry.
Mr. and Mrs. Heidbreder live at 9705 Corkran Lane, Bethesda, Md.
***
BIOGRAPHICAL SKETCH OF PAUL (liIii&) LAWRENCE
~"-G'cw f"k Cor4r",,'<;010N[/l.njJ,.~
Paul Lawrence wasbornm Aramore", 0
a. a on May 24, 1910.
He studied at Chil1}lcothe Business College, Mo.
He completed courses
in the Treasury Agents School in Seattle, Washington, and Washington,
D. C., and the Treasury Agents Supervisors Institute in Washington, D. C.
Mr. Lawrence served in the U. S. Army during World War
n
in the
Pacific campaign.
Mr. Lawrence was first employed by the Government in March1939
and in
,~ he transferred to the position of Customs guard in Seattle,
It
Washington.
In 1945 he became a Customs inspector and one year later
was transferred to New York as a Customs agent.
In 1954 Mr. Lawrence
was Treasury Representative in Charge at Hong Kong.
He was recalled to the U. S. in July 1957 to assume the duties as
Customs agent in charge at Buffalo, N. Y., remaining in that position
until 1960.
He was then appOinted Supervising Customs Agent in Seattle,
Washington, and in 1963 assumed the duties of SuperviSing Customs Agent
at Chicago, Ill.
Mr. and Mrs. Lawrence reside at 749 Westmere Rd., Des Plaines,
Ill.
***
(more)
2
appointment.
The Reorganization Plan placed the 176-year-old Customs
Service wholly on a career basis.
Baltimore will be the sixth region to be activated in accordance
with a year-long timetable.
Regions already established are San
Francisco, Los Angeles, Miami, New Orleans, and Chicago.
remaining three regions are scheduled as follows:
The
Houston and Boston --
May; New York -- June.
Offices of the Baltimore region will be in the U. S. Customhouse
'D6
at 3IK S. Gay Street, Baltimore.
"United States Commissioner of Customs Lester D.
Johnson heads
tile Bureau of Customs, which is part of the Treasury Department.
offices are in Washington, D. C.
Biographies follow.
# # #
His
REGIONAL COMMISSIONERS AND DISTRICT DIRECTORS
APPOINTED FOR BALTIMORE CUSTOMS REGION
Assistant Secretary of the Treasury True Davis today announced the
appointment of Paul Lawrence. Supervising Customs Agent at Chicago. as
Regional Commissioner of Customs for the new Baltimore Region III.
Mr. Davis also announced the appointment of George H. Heidbreder,
Operations Officer at the Bureau of Customs in Washington, D. C., as
W.e
Assistant Regional Commissioner (Operations). and Charles
A.
Henderson.
Acting Comptroller of Customs at Baltimore. as Assistant Regional Commissioner (Administration).
The appointments -- together with those of three Customs District
Directors, also announced today -- will be effective, Friday, April 1.
with the activation of the Baltimore Customs Region.
The Customs District Directors for the new region are:
Baltimore Customs District - John Eugene Kennedy of Baltimore, MeL
Philadelphia Customs District - Frank E. Randa of Philadelphia, Pa.
Norfolk Customs District - H. Singleton Garrett of Norfolk, Va.
The appointments were made as _part of the President's Regorganization
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
_ _ _/ _ _ _ _
I
;-I /
~,
I
L/ -
TREASURY DEPARTMENT
(
FOR RELEASE SUNDAY NEWSPAPERS
MARCH 13 2 1966
REGIONAL COMMISSIONERS AND DISTRICT DIRECTORS
APPOINTED FOR BALTIMORE CUSTOMS REGION
Assistant Secretary of the Treasury True Davis today
announced the appointment of Paul Lawrence, Supervising Customs
Agent at Chicago, as Regional Commissioner of Customs for the
new Baltimore Region III.
Mr. Davis also announced the appointment of George H.
Heidbreder, Operations Officer at the Bureau of Customs in
Washington, D. C., as Assistant Regional Commissioner (Operations),
and Charles W. Henderson, Acting Comptroller of Customs at
Baltimore, as Assistant Regional Commissioner (Administration).
The appointments -- together with those of three Customs
District Directors, also announced today -- will be effective,
Friday, April 1, with the activation of the Baltimore Customs
Region.
The Customs District Directors for the new region are:
Baltimore Customs District - John Eugene Kennedy of
Baltimore, Maryland.
Philadelphia Customs District - Frank E. Randa of
Philadelphia, Pennsylvania.
Norfolk Customs District - H. Singleton Garrett of
Norfolk, Virginia.
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 the l76-year-old Customs SerVLce
wholly on a career basis.
F-404
- 2 -
Baltimore will be the sixth region to be activated in accordance
with a year-long timetable. Regions already established are
San Francisco, Los Angeles, Miami, New Orleans, and Chicago. The
rema~n~ng three regions are scheduled as follows:
Houston and
Boston -- May; New York -- June.
Offices of the Baltimore region will be in the U. S.
Customhouse at 103 South Gay Street, Baltimore.
United States Commissioner of Customs Lester D. Johnson heads
the Bureau of Customs, which is part of the Treasury Department.
His offices are in Washington, D. C.
Biographies follow.
000
- 3 -
BIOGRAPHICAL SKETCH OF PAUL LAWRENCE
Paul Lawrence Regional Commissioner-Designate, was born
in Ardmore, Okla., on May 24, 1910. He studied at Chillicothe
Business College, Mo. He completed courses in the Treasury
Agents School in Seattle, Washington, and Washington, D. C.,
and the Treasury Agents Supervisors Institute in Washington, D.C.
Mr. Lawrence served in the U.S. Army during World War II
in the Pacific campaign.
Mr. Lawrence was first employed by the Government in
March 1939, and in 1941 he transferred to the position of
Customs guard in Seattle, Washington. In 1945 he became a
Customs inspector and one year later was transferred to
New York as a Customs agent. In 1954 Mr. Lawrence was Treasury
Representative in Charge at Hong Kong.
He was recalled to the U. S. in July 1957 to assume the
duties as Customs agent in charge at Buffalo, N. Y., remaining
in that position until 1960. He was then appointed Supervising
Customs Agent in Seattle, Washington, and in 1963 assumed the
duties of Supervising Customs Agent at Chicago, Ill.
Mr. and Mrso Lawrence reside at 749 Westmere Road,
Des Plaines, Ill.
BIOGRAPHICAL SKETCH OF GEORGE H.. HEIDBREDER
George H. Heidbreder, designated to be Assistant Regional
Commissioner (Operations), was born in New York City on
February 6, 1922. He received his B.S. degree at Centenary
College in Shreveport, La., and a master of science degree
at the University of Illinois, Urbana, in 19560
He served in the U.S. Army from 1940 to 1945 and as an Air
Force Intelligence Officer from 1948 to 1955.
Mr. Heidbreder started his career with the U.S. Customs Service
in Washington, D. C., as a liaison officer in 1957 and was given
responsibility for making studies of work simplification, work flow,
staffing and operations. In 1961 he was promoted to the position
of administrative officer, and in 1964 was named air operations
officer with responsibility for carrier control and inspection
operations with respect to the air transportation industry.
Mr. and Mrs. Heidbreder live at 9705 Corkran Lane, Bethesda, Md.
- 4BIOGRAPHICAL SKETCH OF CHARLES W. HENDERSON
Charles W. Henderson, Assistant Regional Commissioner-designate
(Administration), was born in Buckingham, Fla., on November 17, 1906.
He received a Bachelor of Commercial Science degree at the Benjamin
Franklin University, Washington, D. C., and studied accounting
and banking at Tampa College.
Mr. Henderson entered the Customs Service in 1937 after
several years as a clerk with the Atlantic Coast Line Railroad Co.
in Tampa. He served with the U.S. Navy during World War II
returning to Customs in 1945 as a field auditor in Baltimore. He
is currently Acting Comptroller, at Baltimore.
Mr. and Mrs. Henderson reside at 6 Thornhill Road, Lutherville,
Maryland.
BIOGRAPHICAL SKETCH OF JOHN EUGENE KENNEDY
John Eugene Kennedy, District Director-designate, Baltimore
:ustoms District, was born in Havre de Grace, Maryland, on July 7,
1906. He attended the Havre de Grace High School and studied
nanagement at the Federal Executive Management School in Allenberry
~odge, Pa.
Mr. Kennedy, whose hobby is music, once was a concert pianist.
Ie joined the Customs Service in 1924 as a clerk-stenographer,
:ising through the ranks until his appointment as Assistant Collector
)f Customs in Baltimore in 1946. He was detailed on loan to the
lepartment of State in 1956 to serve as a member of the U.S.
lelagation to the first Inter-American Port and Harbor Conference
.n San Jose, Costa Rica.
Mr. and Mrs. Kennedy reside at 1307 Southview Road, Baltimore.
BIOGRAPHICAL SKETCH OF FRANK E. RANDA
Frank E. Randa, District Director-designate, Philadelphia
lstoms District, was born in Pittsburgh on December 11, 1911 and
ttended Allenby High School in that city. He received a certifilte in accounting and commercial law at the Pittsburgh Academy
~ark Institute).
- 5 -
Mr. Randa started his Customs career as a marine officer-clerk
in Pittsburgh in 1931, serving as assistant entry officer, marine
admeasurer, and deputy collector (marine). He became an examiner
in 1948 and in 1957 was appointed to his present position as
Appraiser of Merchandise in Philadelphia.
Mr. and Mrs. Randa reside at 405 Longfield Road, Philadelphia,
Pa.
BIOGRAPHICAL SKETCH OF H. SINGLETON GARRETT
H. Singleton Garrett, District Director-designate, Norfolk
Customs District, was born in Norfolk on February 2, 1916. He
received his education at the College of William and Mary, Williamsburg, Va., graduating with a B.S. in 1937. He did post-graduate
work in management and business administration at Old Dominion
College.
Mr. Garrett served in the U.S. Navy during World War II.
For many years he was in the insurance and real estate busniess.
He was appointed to his present position as Collector of Customs
in Norfolk in 1961.
Mr. and Mrs. Garrett reside at 1123 West Princess Anne Road,
Norfolk, Va.
000
BIOGRAPHICAL SKETCH OF STANELY E. RUTKOWSKI
Stanley E. Rutkowski was bor.n in Trenton, N. J., on August 29,
1917.
He studied at Temple University in Philadelphia and completed
requirements for a law degree at Rutgers Law School in Newark.
World War
n Mr. Rutkowski served
During
in the U. S. Army Intelligence.
Mr. Rutkowski started his government career as Assistant U.
Attorney
~~
the ;::;......._
ef
.~~ in 1950 at Trenton.
6}-
IJ~ ST
f- \J 1;
C>tf:
s.
He was
,
jJ 'C"-J .::J;f:?<;'t;YJ
named Deputy Attorney General in 1954 with responsibility for coordinating
"
the activities of 21 county prosecutors.
He was later appointed County
post which he held
P¥e~ieleIibifti
~
appeiBt-
and Mrs. Rutkowski reside at 41 Roxboro Road, Trenton.
BIOGRAPHICAL SKETCH OF J. NEIL McCARDELL
J. Neil McCardell was born on April 8, 1907 at Baltimore, Md.,
and received his education at Georgetown University, Washington, D. C. ,
and Loyola College in Baltimore.
He served in the Coast Guard during
World War II, holding the rank of Mate, Ensign, and Lieutenant.
Mr. McCardell was proprietor of the Maryland Office Supply Company
for many years and later a distributor of frozen fruit juice.
During
1947-1955 he served two terms as Comptroller of the City of Baltimore.
He is presently Collector of Customs in that city.
Mr. and Mrs. McCardell reside at 106 St. Martins Road, Baltimore.
***
BIOGRAPHICAL SKETCH OF EUGENE V. ATKINSON
Eugene V. Atkinson was born on April 5, 1927 at Aliquippa, Pa.,
and was graduated from the high school in that town in 1945.
He was
employed as a steelworker and later as an insurance agent in Aliquippa.
From May 1945 to August 1946 Mr. Atkinson served in the U. S.
Navy.
He was appointed Collector of Customs in Pittsburgh in 1961.
Mr. Atkinson resides with his wife at 690 Franklin Ave., Aliquippa, Pa.
(more)
529
to keep travelers and traders fully informed of Customs laws and
procedures.
(Biographies of the Program Advisors are attached.)
# # #
2
~.
RELEASE
hft4 t!, M
NEWSPAPERS
t ~ \ '(l L 4t
PROGRAM ADVISORS APPOINTED FOR
BALTIMORE CUSTOMS REGION
Assistant Secretary of the Treasury True Davis today announced the
appointment of three Program Advisors for the new Baltimore Customs
Region In which will be activated on April 1st.
The Program Advisors, whose appointments will be effective on
April 1, are:
Pb LI 1II12HiiSit.
<=2
11-'
p' nt IJ1 L J. Neil McCardell, currently
Collector of Customs for Baltimore.
U
!..
C
ts,*
,;;'0;;;= b
Eugene V. Atkinson, currently
Collector of Customs for Pittsburgh.
!I.
~
I 'phlll. L'IIII'.
Stanley E. Rutkowski,
Comptroller of Customs for Philadelphia.
r
•
~e a~!!'::et,',";~=-mad:>~
80th QIo It"@s "lIiG.
currerIIJ
~~.II~lI! 1
~ 2 PQ part of the Presidential reorganization of the Bureau of Customs,
,...
cial communi •
L
Under the reorganization, the Program Advisors will serve as special
assistants to the Regional Commissioner of Customs in Baltimore, with
responsibility for development of projects and programs in public affairs
.I
f /'.
I'
V
(;;
TREASURY DEPARTMENT
(
March 11, 1966
FOR RELEASE SUNDAY NEWSPAPERS
MARCH 13, 1966
PROGRAM ADVISORS APPOINTED FOR
BALTIMORE CUSTOMS REGION
Assistant Secretary of the Treasury True Davis today
announced the appointment of three Program Advisors for the new
Baltimore Customs Region III which will be activated on
April 1st.
The Program Advisors, whose appointments will be effective
on April 1, are:
J. Neil McCardell, currently Collector of Customs
for Baltimore.
Eugene V. Atkinson, currently Collector of Customs
for Pittsburgh.
Stanley E. Rutkowski, currently Comptroller of Customs
for Philadelphia.
The appointments were made as part of the Presidential
reorganization of the Bureau of Customs.
Under the reorganization, the Program Advisors will
serve as special assistants to the Regional Commissioner of
Customs in Baltimore, with responsibility for development of
projects and programs in public affairs to keep travelers and
traders fully informed of Customs laws and procedures.
(Biographies of the Program Advisors are attached.)
000
~-405
- 2 -
BIOGRAPHICAL SKETCH OF J. NEIL McCARDELL
J. Neil McCardell was born on April 8,1907 at Baltimore, Md.,
and received his education at Georgetown University, Washington, D.C.,
and Loyola College in Baltimore. He served in the Coast Guard
during World War II, holding the rank of Mate, Ensign, and
Lieutenant.
Mr. McCardell was proprietor of the Maryland Office Supply
Company for many years and later a distributor of frozen fruit
JULce. During 1947-1955 he served two terms as Comptroller of
the City of Baltimore. He is presently Collector of Customs
in tha t city.
Mr. and Mrs. McCardell reside at 106 St. Martins Road,
Baltimore.
BIOGRAPHICAL SKETCH OF EUGENE V. ATKINSON
Eugene V. Atkinson was born on April 5, 1927 at Aliquippa, Pa.,
and was graduated from the high school in that town in 1945. He
was employed as a steelworker and later as an insurance agent
in Aliquippa.
From May 1945 to August 1946 Mr. Atkinson served in the
He was appointed Collec tor of Cus toms in
?ittsburgh in 1961.
1. S. Navy.
Mr. Atkinson resides with his wife at 690 Franklin Avenue,
,liquippa, Pa.
BIOGRAPHICAL SKETCH OF STANLEY E. RUTKOWSKI
Stanley E. Rutkowski was born in Trenton, N.J., on August 29,
917. He studied at Te~ple University in Philadelphia and
ompleted requirements for a law degree at Rutgers Law School
n Newark.
During World War II Mr. Rutkowski served in the
. S. Arr~y Intelligence.
- 3 -
Mr. Rutkowski started his government career as Assistant
U. S. Attorney in 1950 at Trenton. He was named Deputy
Attorney General of the State of New Jersey in 1954 with
responsibility for coordinating the activities of 21 county
prosecutors. He was later appointed County Prosecutor by
Governor Grover C. Richman, Jr., a post which he held for seven
years. He presently is Comptroller of Customs in Philadelphia.
Mr. and Mrs. Rutkowski reside at 41 Roxboro Road,
Trenton.
000
.
- -- a nation willing and worthy to bear the responsibilities
for leadership in an interdependent world.
-. 11
the 25th or Silver Anniversary year of the Savings Bonds
progr~.
I need not tell you how important it is to reach -- even
exceed -- that goal.
For every dollar that goes into United
States savings bonds does double duty in the fight against inflatil
-- for it not only diminshes the private spending stream but
strengthens our ability to finance our national debt in a
noninflationary manner.
At the same time, the savings bonds
program -- and the payroll savings plan in particular -- help all
who participate to enhance their own personalnnancial well-bemg
and establish the sound financial habit of systematic savings.
The Savings Bonds program is one way -- and an important way
in which you, and all Americans, can demonstrate that in deed as
in ideal, in performance as in promise, we are a nation of greatDI
.
2~
- -
S3S
Savings Committee.
Prior to today's announcement, members of that Committee ••
such as Detroit area Chairman, MI. A.P. Fontaine, and chairmen
in other cities throughout the nation -- have been enlisting the
campaign support of the top executives of their major companies.
I know that Mr. Townsend and the members of his Committee
are volunteering much of their time, talents and resources to
this campaign.
I know, too, that the members of this audience
are all active -- or will be active -- in supporting this campai,
for you represent the executive leadership whose efforts are so
essential to the Payroll Savings drive throughout industry in
Detroit and elsewhere in the nation.
The goal of the nationwide Committee is to spearhead the
enrollment of at least 1,200,000 new Payroll Savers during 1966,
~ ~hc ~ederal
,overnment these
re~sibilities require
the kind or
r~
and effective restraint so full - displayed in the budgets President Johnson
has presented. For you in the private sector these
-1ti3D'J-t 1tL.'require -- as a matter of
pl~in
~*
responsibilities
national need -- that you continue to follow
the path of restral.nt so clearly mapped out in the wage-price guideposts of
the Pres3dent's Council of Economic Advisers. While r cannot overemphasize
the importance today of adhering to these guideposts, r know that
Gardner Ackley, has
~
recently explored this subject
~ith
~
colleague,
you in some depth.
lrnstead, J want to avail myself of the pleasure and IT ivilege of paying
tribute to the host of this meeting -- t.he distinguished president of Chrysler
Corporation, Mr. Lynn Townsend --
~;~utiOn)
special
-
;'"'or particular
~md
to many in this audience for a very
(imporlance)
e:e:-~
it to my Department, ttat they are maldne
to a sound and strong America.
f
l..!.ile we in Treasury have been cont inuilli our contieenC)" planniDc in
that field in which we are at all times regularly engaged, I welcome the
a SubcollJlittee
announcement over the weekend that J7 S) e .,' e of the Joint Economic
(,;ommittee of the C'"'ngress, chaired by Congresswoman Martha W. Griffiths
of Detroit, will open
hearin~s
this Wednesday to .. consider -- and I quote --
"the need for and design of temporary tax changes which could be enacted
promptly in response to a recognized need for stimulating or restraining the
economy." In appearing before the Joint Economic Committee 6n February 3,
I had suggested that the House Ways and Means Committee or the Joint Economic
Committee study and recommend the type of tax increases most suitable should
inflationary pressures require additional fiscal action.
~the
meantime, we must all understand that whether or not such action
will be required will
in large measure -- 'l,d"I' depend on how all
of us, jn government and in the private economy, exercise our clear responslbWt1l
for restraint and moderation. As I have 'ItIM tried to demonstrate, these re~
- while they take on new urgency in the context of our
~nd
~
bUOYBnt econo.,
of the struggle in Vietnam -- are not something newly invented to make
or
business leaders unhappy
~
labor leaders irate or the lives of all of us
difficult. These responsibilities,on the contrary, are but the inevitable
1\8'....4"11J*
~e
~
natural consequence of the :responsibility that we as a nation - tJIIl
every single one of us as Americans -- must bear for Free 1Jofiti
leMerSh~
)1
- 11For the restraint and responsibility required of us all do not
arise out of any extraordinary emergency -- thet are simply
the natural
con~quence
leadership as they
a~e
of the responsibilities we bear for world
reflected in
th~
flow of events.
We have
had to live with this kin" of thiot for the past several decades,
and there are no indications
~at
the decades to come are gomg
to be any easier.
It is today my pleAsure and pri'Clilege to pay tribute to the
mst of this meeting -- the President o~ Chrysler Corporation,
Mr. Lynn Townse1ld -- and to many in this audience for a very
special ei"fort that they are making to insure a strong and s0ua4
today, March 14, marks the announcement of the "1966
Business BondwagOD'~ campaign is the brainchild of Lynn Town.....
in his capacity as Chairman of the nationwide Industrial Pa~U
- 2 -
Likewise, the realization that the large amounts of idle
and obsolete productive capacity which characterized the America
H4JJe
scene too much in the last decade~ been whittled away by
increasing demand and investment should not be a cause for gloOl.
Coming on stream in 1966 are vast quantities of new industrial
capacity reflecting the most modern and up-to-date tecbnolacr.
-r-h e
st'
;+/2 C,
'flidt 18 wbat· the fruits of investment made in recent years and
~
~
the fact that this type of activity promises to continue in
JvyXCvJJvl
1966 should not be
viewe~with
alarm.
The annO\Blcement last week that unemployment had dwindled
to less than four percent (3.7 percent) in February -- the loweat
/2 7
.."...~~ years -- should not be greeted with j ittera. That
NoT ih (,( Jc.rJt( I Ie 1J 0 t-= rt
REAl Nit-II oAf
point
{2Ekftt*1
~-n~~~~~~~~~~~~~ess
S'p
long as the \Blemplo,..t
F 012
rate
~a<3 &8
/lie bl!.D
E: 5
8cra 10.9
was still seven percent", and fM In!
,-.
WJ212~
S7;LL/lr
1}Y
,
jobs •.
percentAand three million would- e workers
3
The lessening \Blemployment should be welcomed fO.~fi~ently with
IN
r:.u(L I+ND CCN [::,DENI 1<.f.(06JJI'IDAJ 6~rHE f l206 f(i
c=. "'0 Fe f: j go OJ e Pf Pb S G S r;J i J, ; I IV V /FJ£C;; J I i-= Y~eo~ition th!.t gi:ves poi-Dt ~lie cCi'lk;PIl~en orc Lb. greateaC
u.~Q. ca.-v CO·UIIAlUf-i (0 lYlal{
175 £Oe NOt' CJA/(V Su..s:..L./lIJJ
BuT INTeNSIFY 2V/l19//5 /).(J2ER.uy
rl!F
GICE/l7CSI
public man~ower(training and retraining effort in our hlato~
1M ?..412//{/~,,{'5);/? UJ /Th Me /Jf?/6 //T£/Jc. ~ /?/coy/2,4A/l-t
~
0"=
TR/IIA//Il/ 6-
A/;/9A/;D6we-'?
rP.4T /),4Ve
u:diJutt _ tl0---?i3-e stimulated tresiti6ftel pri'-.l8te seetsl' sq-i"
l
C(;ztJ'(:,·;~eE.6i i'i e/;i6-(l(~!2:>,
IN D/2/\//fIE /J./J)US//zIIJ{ En
/f {19/2 rYe 1-0 LC
r'
r
l'Laetieeaf IBaDpOWe traiaiag. We expect our labor force to apaI
L... ON 6-
pC::/l
yeo
~G:>.~
tt' I U-Irs,-
by
£X~/fNS
/DAj
~
li;;mYvu
l1.J 0/2 f{ -t:
.
Nee,o
.11'1'11
.emers this year.
_
"c D
Thi8
;,J
/ ~~ II; %~Utet(
PeR C t.'N/ /AI'U~ ;se ,~Wi
L
600retatt and the i'1k!llillsIi1;g national ability to deal with probll
1\
I\.
C6NS
of structural unemploymen~ au
in the private sector.
~ luTE R f"~e Sf' I
A.J
G-
Ae 11 *" challenge to job creatill
_. ~~"(I' - ~
"'. _ _ \1( ~ <-).~(b-J-.b
ftl
Zl
come after Vietnam has been
D ,.
~
IJ ."1
~
settled'~ 7fwe d~1t wa~t' to
~
WHuT TD
put the brakes on unnecessarily or too fast. We watch
L)ND ~ellrHALL ..br~~,L;t·~>JJI-':V
"
~ ,!(!1i!4;rgiiilscare£ully -;:''1 ' those that point up J and
J
f \
those that point
down.
t~ to
a
levellin~and
those that point
We are watching carefully what happens to the
President's budget in the appropriation process.
It could
move the budget from the posture of approximate balance to
either a meaningful deficit or surplus.
I
,,1,(
~.j
I
We are watching
~
carefully .lie dcOaMpHEf'tts in Vietnam so as to determine
1\
. .(', q .. I, tU j,
.,.,1
whether or not the Reeis currently contemplated in the
1\
1967 budget
~pet1dltare t!Gta~ will be adequate to meet
the situation as it develops.
As the President said only
last week he will not hesitate "to act quickly in the
field of taxation if such action appears necessary."
-1 ~8
works
~ through the appropriation process.
it7~l
-
.... _ .. _
1...~
1"
_-111
C
1.._
The economic ;mpact of this bill will btin to be felt almost
,."
_
immediately
after the President si~ns and will build tl\)ug-hout the year __ withdrawing
from private p 11rchasing power a total of ttl'. billion dUrina c I d
6
.~
a en ar 19 6.
Allor us W1.1.1
De
wat:e~
.... _ _ --'!I";;-
.
tax measures join together with the other forces that
tend to moderate the growth of the private sector of the
economy
forces such as the Federal Reserve action a
few months ago and the increase in jocial Security and
h\edicare taxes at an annual rate of $ 6 billion which began
to takeMfect last January.
As
of now the Administration, whether practicing new
FeO'/j f+'
economics or old, is shifting
II)
~
"
sTe~y
policy of s.sjy stimulus
~
to demandAa policy of moderate restraint to counter the
cyclical consequences of the Vietnam situation, coming ~
Hf~~ A TAT, Y'Yle W J,elJ CO f< eto~O'N." 'S
it d~ Ott bep of atl
Ssuy scaling new peaks of achievement
in moving toward our national economic goals.
(:;0 f?,
But in Shi~ ~ policy, the Administration is very
"
mindful of the continuing task of preserving and promoting
continuous long-term
~~~~~J
growt~Aand
dealing with our balance
of payments -- both now and in the period that will sure~
raise additional revenues in the sum of approximately
$6 billion during the remainder of this fiscal year 1966
and fiscal year 1967. ~BY adding these revenues to those
~
which app.lve naturally as fiscal dividends from the
application of existing tax rates to a burgeoning
econo~,
we expect the fiscal 1967 budget to pass or approach
bal~e,
whether measured by the administrative budget, the cash ood~
or the income and production account budget
providing,
of course, that the totals reflected in the President's
budget
lU\...c
,w.~e
not subs tantially increased as the Congress
... 1'
deployment in Southeast Asia, Secretary McNamara made this
striking statement:
"The Southeast Asia effort is unique in our
military history.
Never before has this nation or
any other nation been able to deploy so large a force
within so short a period of time, from 10,000 miles
from the shore, without calling for reserves, without
extending active duty tours, and without invoking
the kind of strict economic controls normally
associated with military emergencies."
1967 over the level contemplated in Fiscal 1965, our defense
expenditures in anyone of these three years are lower in
relation to our economic output than in anyone of the precedu.
five years from 1960 through 1964.
Or, if one wishes to look at the total Federal budget in
n\»'O"_'''''··'.v..-~ ...'~'''~ ............
these terms, it
Korean
rose0r~ ;:;-;~~cent
outP~ during
of our
the
war~~ent.t;!"~='~~ree-~i:c~l- years 1965·196J
I am sure that against this statistical background this
AsTuTe.
p(:r(F£c..TC~ UUDr~fHJ~
audience, §ta~ as
Il
is simply this:
...et my point)which
WJ!I!. . .
~
our level of military preparedness at the
11.i
beginning of the intensified
1i ;l'j/eTAJItM
....
.""
II-
conflict, and our abUiq
to bear the burden of required military expenditure!)are ~
vastly greater than they were at the time of the Korean c~
In his recent review of the military and supply ~
dJ!!!S
however -- the period during which all of the $10\ billion
increase in special Viet Nam expenditures is scheduled to
AlJh?/ A.J/.5'
TIi?.4 /lv-Q
occur -- our defense expenditures in theA budget will have ria.
~ ~
_ 0 ....l~ r... ' '" ,--. t " ,J
L (\. r ' b.l Lei,' ~I
til ~
~
I
in 1967, or an increase of only
b,gur
es for the total Federal budget tell exactly the same story.
From fiscal
1950
soared from
$39.5 billion to $74.1 billion, a rise of 87 percent. Total
to fiscal
1953, total expenditures in the administrative
the
expenditures in the current . . . period --/fiscal
by only
17 percent, from $96.5 billion to
1965- 67 period -- will grow
tIIIII: $112.9
billion.
of our national output infiscal 1950 -- at the beginning of
the Korean War -- to a peak of 14 percent of our output in lilcal
1953, or nearly
J
three-fold over three years.
Fromjiscal 1965
through fiscal 1967 our defense expenditures are scheduled to
rise hardly at all as a percentage of our national output, go~
f
t.,/
7,7
from
Y4: .,_,
percent to
; ....-
u :> I
't'~
0 V (Il
(1
0
j percent.
Equally revealing is the fact that, despite the scheduled ri
of $10\ billion in special Viet Nam expenditures in the fiscal,.
Since the Korean War three administrations, under
Pre8i~~
Eisenhower, Kennedy and Johnson, have maintained with great can
and expense a highly modernized, up-to-date force in being
designed to deal from a state of intensified preparedness with
any situation which might develop.
I invite your attention and that of every American to the
recent press statement of a man familiar to most of you in this
audience by dx reason of his former association with one of yout
great companies, Defense Secretary Robert McNamara, in which he
outlined the situation in terms of military and logistical
dispositions.
I will limit my comments to some interpretation of this
meaning in economic terms.
In the regular administrative budget our defense expeadi t1lll
~~ ,I:"
i_
..j
C -•
rose drastically from $ . ,--- i~-195o to $
r'.
increase of ,~
). ~
percent.
7
~
['
i::;Uk. .
t.
SO. '1
(" LL,/#
in 1953, or.
k..PI ",t'-
,
From/isca1 1965 through Ji8cal196
-
INSEIli' "BI' . ,
.21.
ICj
iii
Nothing is better calculated to destroy the calmness,
moderation and restraint necessary to crest our current
~uv
problems withoutl\dislocation than to confuse the situation
today with that which faced us during these two previous
experiences.
Having served as
~
Admini8t~ati8ft
of the National
Production Authority and the Defense Production
Administ.ati~
and as Director of the Office of Defense Mobilization during tM
height of the Korean mobilization period, the sharp contrast
TI+Ai SITiJAI/oA) AAli) Tl+t
our
T(;/)~I
between §e two perio~ is particularly striking to me.
me
~
Let
. . . "M~.'""'c."~~7kIl5t~,'~
if ..?fean"t_~. 41;.-£....
po] .
During the Korean War this nation carried out an intensive
.jlY'\}
. ,~ 1\
,j
\
defense mobilization program for two purposes -- to wage tM
conflict in Korea and at the same time reset, restore and build
up a military and industrial mobilization base, substantially d1
mantled after World War II, adequate to meet any escalation of
the Korean War into a world conflict on the scale of worldW~
- 18 I have, today, no new facts to give you on our economic
situation -- no new programs or policies to announce.
You are
well acquainted with the issues -- and, I am sure, with the
~
arguments.
What I wish to do,
s~ply,
is to put the
t.i I.: I.
I
..
/,JI
whole~
discussion in proper perspective -- a perspective that I am
firmly convinced is as often overlooked or ignored as it is
profoundly required.
For one thing,
,.. ('"
..
"""
~t
Q
,r;
N
Ascale
of activities
'
our capacity to sustain without anything like the drastic measures
~<II ~~II ~v~,-··J'1
J)O C S I( I! G\~J~ ~
,
(f7
required ifnA the Korean War. if What the si tuation
(~Vl'\.U~~~,j;·~~3'-'·Y;",,~L
Hqtli.;:aB
is the
"
exercise of responsible restraint on the part of all of us, for
(,{\- tJ
it somewhat limits our margin for economic
_i?..!:!..Ii 'I"~
error,~our toler~ce
Continued Insert on Page 17
Today, many in our country are disturbed that the
situation in Vietnam -- against the backdrop of our
"
other world-wide
Ie
He.-NI./l) "AI
[!bSUdOUd£Ut
.,. ,~," ;;, ...J',
\~.
A',
~.,
! I",~
commitmen~aWilJ~~Ither·tiri
,/,~"l
7\
t!a
.~
e~ ..-h..j goals of a Great Society at home or
A -S" ~ " '-.' •
1!l:.el~
the
./;
,:.
... ,. 1
,f
._-
oJ.t.Lv-.()....t~.:;t
severe economic dislocation attGilikti upon
71-11'1"
war and inflation'" we have known in ;:twcs sf the past.
These are
"
~
legitimate and proper concerns.
President Johnson answered them in his State of the
Union message when he said;
"But we will not permit those who fire upon us
in Vietnam to win a victory over the desires and the
intentions of all the American people.
This nation is
mighty enough, its society is healthy enough, its people
are strong enough, to pursue our goals in the rest of the
world while still building a Great Society here at home."
1'/1'
\ f1 )
"---
Insert , on Page 17
@
In all these waY5, and more, we must
[§!twe to el\e~e tQQ njJfdEffi§ 'iiitl
'-IN Cc- ".".'..;,..;...t,J 1./ (J .I'~
iie;eiirt;;ltlctee 01}
-r;, :. /
,<:j
;~/il
0
~]e' stI1h';~!9~he'~'-iik;':;inded nations1~in -helping .
I.l)l;j
better the world we share with all.
But in so doing we must recognize that, in the
final analysis)our ability to discharge our responsibilities of ~hee World leadership will depend on how
Ii
flu
we act at home -- in maintaining a strong dynamic
economy~-in
"
pursuing vigilantly our national economic
goals of full employment, a healthy rate of growth,
reasonable price stability and a balance in our
international bali
Ii·
~
, .' J.. U
. I I
/
?
I
5 payments -- in extending
AI 5
the boundaries of economic opportunity and social
dtt now
ttt.~N
~
tis
justiC~
- 17 allies in bold new efforts to promote free trade, to strengthen
the international monetary system, and to
all these ways, and more, we must continue to lead in
helping better the world we share with others.
And we must do so in full understanding and acceptance
of the fact
t~at
the requirements of Free World leadership
will affect, and often profoundly, the conduct of our own
domestic affairs -- as today the requirements of the war in
Vietnam so profoundly affect the conduct of our domestic
economy.
~/
/
I
/~
_--- -r -v
......
/'
- 16 -
freedom cannot unite in its defense they lessen the chances for
peaceful accommodation with those who are so fiercely united
against it.
And we must continue -- together with other developed
nations of the Free World -- to carry our share of the burden
of leadership in the common task of helping the developing
nations of the world to realize their destiny and enrich the
lives of their people in dignity and freedom.
We must continue to seize every opportunity to strengthen
and reinforce the fabric of Free World economic and financial
cooperation.
openi~new
We must continue to work with other peoples in
vistas for world trade and development, financial
cooperation, and the education and nourishment of peoples
everywhere.
-
And we are taking the initiative in these endeavors ••
1·;'~~~.(A..{\"'~{~1 ~~;{t~(4..1 rwJ-l.u... ~~
seeking,\tai ."a.the ~a~iftatioliS vand eLZ~a~e tke ejii'rt? fi ..
N~~~~~r;u~
- 15 freedom of our fellowman.
We must be willing to bear aIt the burdens and accept ~
the uncertainties that come with such a war as we fight in Vietnam.
For Vietnam is a war of wills as well as a war of weapons.
It is
a test of our wilingess to survive -- to surmount -- the
strain of constant, continual conflict whose end is never
clearly in sight.
It is a crucial test.
And we cannot afford to fail,
for if we do we shall fail ourselves as well as the people
of South Vietnam -- if we do, we shall have undermined the
~
~ ~~,-\;w~~1:A.M.~tbMJ.A~ v~vv~~~
faith of all whose freedom dependsupon ~~ and shali -ha;e
undermined our own faith in ourselves.
't®
We must live up to our commitment to the defense of
e.
freedom. (;;. At the same time. we IlUlst strive to
eXPlor~ every
enlarg~
and
avenue for unified action with our allies in tbe
common defense -- for, indeed, to the extent that the all~sof
Insert on Page 14
But in answering these questions in the affirmative
we must ask ourselves another question -- what are some
~~
of the practices and pexse,~ of national greatness that
must be reflected in our individual and collective
attitudes if we are to back up our words with deeds.
I shell touch only on a few.
- 14 freedom and a world in which tyranny cannot be imposed by
aggression from without or subversion from within?
Is it worth
To ask these questions today is to answer them -- as we
~ ~\A.A_ ~:A rp/~(kL-~a..
have for two long
decade~--
in the clear and unqualified
affirmative, for that is the only answer a truly great nation
can give that bears the burden of Free World leadership in an
interdependent world.
~~~
We must continue to yield to no nation in the patient pursuit
of peace and the works of peace -- and continue to demonstrate,
as we do in Vietnam, that we have the will and the weapons to
wage war, if wage war we must to defend our own freedom and dw
- 13 own destinies.
We have understood -- and our accomplishments have
proclai~d
our understanding -- that with might must come maturity, with
wealth and riches must come wisdom and responsibility, and
with success must come sacrifice.
We do not say we have always been right.
We do not say
we have always been successful.
But no man and no nation can justly deny what history makes
manifest:
in the hour of need, we have not been found wanting.
Arid we will not be found wanting now.
We look back over the past two decades at all we have
accomplished and at all its incalculable cost, and ask
all worth the cost?
is it
"'---
Is it worth it to devote se httge a portion
of our human and material resources to the military effort
required for the promotion and preservation of peace and
- 12 -
World Bank, the Marshall
Pla~,
the Inter-American Development
Bank, the Alliance for Progress, and now the Asian Development
Bank.
Through these multilateral efforts, through bilateral
government aid, and through numerous private channels -- such as
our private foundations and multi-national corporations -- we
have devoted a vast share of our wealth and our resources to
the task of helping others increase their share of the world's
abundance.
In the postwar uecades we have contributed a net
StlYl'\
E...
total of ~reAth~ $100 billion of our national wealth to
helping better the lives of others through our major government
foreign assistance programs.
Indeed, in meeting the great challenges of our times, we
have not been found wanting.
Never in the memory of man has
~y
nation done so much and at such great cost, not to gain
dominion over the lives or the resources or the territory of
G- iii l.J
AND FR.i:Eothers, but to help others ~rive ~ full "dominion over their
1\
- 11 -
-- cowvlq ftMal ,... ltll
~h
I~
..:;.
[,"
I
1967 -- our ex.,.n41tun. for natl_l . . . _ . , .
~ I? ~ h ,:r tJ D T r ( () AI D l c (,.
7 LLt:" h. J I l J,L
•,...~CIMI t .
~
'I)
lntAtr•• t on . r de,
<i!-
'J tr.'
/(
uh1cb
t.s the nault of pat wra)
69-70 percAmt. or S1NII
.... '" ft'i 1.1 .
";: $&
I~"
~.
beA ..--.
I
~hIM-.(pgpvr.of
f_ • etll • .,
. . toeal. .nl
tbat a1. . w111 enable _n to bette' tbe1l: 11....
Tt»n tau been
lf~
tt. decade. since Weld W. II . . . . . .
multllatltral oqanlaatlO1l. or • .ff_t f_ ........ , . dill .....
J)o
-...
of peace vb. . advertt and whOM acc.,llV· I.q lie!"
A.
- 10 -
~.
ba_ _ aa.red up to tbe ebau..a. -
tban )3,000 AmericAns die<.t
~b.n
_
. . . . . . . 1M
rx, thq battle fiAt lds of !torea -
11,000 had been wOUDded.
hAlve .,.at ..at a.a of .oney to _bUin ...
.ut.a:a, •• u• • •
NI;'il(JAl41... l)EFl!AJS.t· EiP cAlC
«rlllJ
an4 that of _tt. Free \;iorld. Our E'11car, •••••• t~ 'AJ i H £ 12,.1;.. 6 (."~'1-~ 6 r( 1tJ) M t UI ST i {\/ 1 13 (J b & L,. i W I l (.
I
1,..4
de ••••• 44d up to a *taaerlna $ ,.7(1 Q,,_
«ar
e
h.IL_t....l Q;/J, ~f.:i:1A.) Qe. tJ
P
- 9 On both of these fronts -- over a period of two decades
~d
under the leadership of four Presidents -- ours is a record of
t~
most unrelenting effort and the most enduring accomplishment
toward the preservation of peace, the protection of freedom and
the promotion of human rights and human welfare.
We have helped counter aggression in all its guises -- whethel
open or concealed -- on nearly every continent on the globe,
m
countries great and small -- in Greece, in Turkey and in Berlwj
in Lebanon, in Iran and in India; in Taiwan, in the Congo,
w
Laos, and now in Vietnam.
We have sought, not to act alone and apart, but to join with
other nations in forging effective alliances against aggression ....
aggression in the Atlantic Community through the North AtlantiC
Treaty Organization, aggression in Southeast Asia and the Pacific
- 8 justice and freedom and well-being throughout the world.
To meet the great and common challenges before us -- the
great and common opportunities as well as dangers -- will require
of ourselves and our allies in the Free World the highest
qualtities of leadership on two major fronts:
First, leadership in standing firm and united against
Communist aggression and subversion with sufficient force
~d
power to deter such efforts and to demonstrate beyond any doubt
that they are far too unrewarding and dangerous to be worth the
risk.
Second, leadership in assisting on a multilateral basis the
new nations in their struggle to achieve both essential stability
and sufficient progress toward meeting the rising needs and
demands of their people.
- 7 -
up to our responsibilities as first among the nations of the
Free World, by measuring up to the exacting and unceasing
requirements of national greatness in this interdependent world.
These requirements and these responsibilities are not wholl,
ours to determine, nor are they ours alone to meet and to
b~.
They are determined by the realities and events of the world ~
l\hich we live, realities and events which are often open to
influence but beyond our control.
our
And they are shared by all
the other nations of the Free World -- nations who cherish their"
freedom and independence no less than we, nat ions with whom It
share the responsibilities for furthering the cause of p~eand
- 6 -
of the world's more developed nations -- that considerably
complicates the efforts of nations to work together on a
multilateral basis to attack common problems and to achieve
common objectives.
~~
These are the overriding challenges that. in the two critical
1\
decades since World War II
t'-~
-
bav~
.:50 T,)
/+(r
so much of our energies
{(I
and our resources and ~ve affect!.~ so profoundly the course
"
and character of our lives as well as the conduct of our
national affairs.
These are the overriding challenges that
will continue to require our fullest energies and efforts for 10Q
hard years to come.
For, surely there is not one of us who M8
not long ago shed -- if, indeed, we ever entertained -- the
illusion that these challenges will surrender to a&¥
'-' ~~.
suddeD~
..J']
simp le SOlutiO~ ~less it: loe"' .... c-gOlu t;1on which is no ...lu"!j
- 5 First, the challenge posed by the Communist commitment to
world conquest -- and in particular by the Communist effort to
impose their will and extend their influence by outright
aggression and by subversion backed by the threat of
aggressi~.
Second, the challenge posed by the collapse of colonialin
and the emergence of new nations -- thus far more than fifty h
number -- coupled with the growing demands of underprivileged
peoples everywhere for full and immediate deliverance from
~e
hunger and the disease and the illiteracy and the grin4ing
poverty that had ruled their lives for centuries.
Third, the challenge posed by the spreading outbreak of
excessive nationalism -- most noticeable and understandable U
I'/f.yv-~ct the less developed countries, but highly visible as well in . -
- 4 Here in this city and this region -- here in the very
heartland of our national economic and industrial power -- I
would like today to consider with you some of
requirements and
impl~cations
interdependent world.
t do
rudimentary
of national greatness in this
So becaus~
that we can find adequate and
t~
1 am firmly convinced
app~o~iate
answers to the many
pressing questions now before- us here at home only in the context
of the broader but no
~ss
important question -- are they the
answers of a grea~ nation that fully understands and
.
~'-iL
Sj;
lC'
_ "
inte~ep~ndent worldt.-\./ill,\ u~ A/\J~
•
The challenges confronting that leadership are many, but
these surely are three of the most basic:
we withdrew
which
from an international effort to preserve world order and freed~,
and within two decades found ourselves embroiled in the far
greater horror of World War II.
So today, as in all the years since the beginning of World
'war II, we carry out our responsibilities of leadership in the
Free World -- in full awareness and full acceptance of all that
those responsibilities require of us in a deeply interdependent
world.
None of us underestimates the gravity of those responsibO
rI
h\
"
... !
ties, for IIiIt of us understand\,that the way in which the United
1\
States exercises £tslinternational leadership will do much to
determine the future for the world and for succeeding generatioaJ
of Americans.
- 2 labored, instead, to
~
our own
~,
and to secure
our own borders, so that -- free of foreign entanglements -- we
could pursue our dream of a Great Society in whose abundant life
every man could share to the fullest measure of his desire and
his ability.
But by the beginning of this century we had grown too grut
to live aloof and alone in a world grown so small.
In such a
world, as we have come to learn, any threat to freedom anywhere
is a potential threat to our own freedom.
In such a world, as
we have come to learn, isolation offers only the illusion of
security and strength -- but is, in reality, the course of great..
weakness and greatest danger.
For a while we retreated -- for a while we refused to accept
the responsibility history had thrust upon us.
In the 1920's,
after the horror of World War I, we washed our hands of a worl.cl
REMARKS BY THE HONORABLE HENRY H. FOWLER
SECRETARY OF THE TREASURY
BEFORE THE ECONOMIC CLUB OF DETROIT
AT THE VETERANS MEMORIAL BUILDING, DETROIT, MICHIGAN
MONDAY, MARCH 14, 1966, 1: 00 P.M., EST
~-
Wh:: this nation was founded nearly two centuries ago, it
was small in size, and poor in material goods or power -- but it
knew riches beyond measure in the strength of its spirit and ita
courage, in
the~eatness
of its ideals and its dreams.
Today, we mow a greatness of power and wealth and influence
that no nation in the world can equal or, indeed, approach.
And so, by the very innnensity of our power and the strength
of our ideals, we have come to bear upon our shoulders the mantle
of Free World leadership.
We have not sought that leadership.
Indeed, throughout IIIlcb
of our history as a nation, we have deliberately sought to avoid
involvement in the volatile affairs of foreign powers.
We haVe
Insert A -- page 1
Here in this oi ty end thi s region -- here in the very heartland ot
our
national economic and industrial power, 1 would like today to consider w1t1l
you some of the rudimentary requirements and implications of national
greatness in the closely interdependent world in which we live.
1 think it is important for those of us whose daily concerns are
concentrated in the economic and financial sphere to pause now and thill,
and to look at our particular problems and pur sui ts in the broad perapH'\1.,.
of national end international affairs. For I am convinced that we Oq
,
find adequate end approprf.ate answers to the . . . pressing economio
questions that come before us, in both the private and the public aph••,
__ ___ ,..H f M 0 ~ [ ~o 1-11 P" 0 { Ai S i v
(~u C sri ~ JJ
S
<::'OPJ/€'I./ ofi i i , ~,;)
MUSI C)t.)C{lli/d {::.i.1.. fjW.w.RI(AtJ.
the ,c9Qts t ".a 1'10a:4. And "me.Hme qUI_ion -,.'"'lre the" tal ........,.
e
. _ .. ,............
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. ........,.,i'~_.:.._ • .
C·-·-- ' - - . ' .
fully, acc..!:2.ts and fullLexercises Preel0rld
answers of a great natl.on that &4Qt.
ElOab 1 eladUliei' 61 10S&2 • . ,
leaderShip in our interdependent world?
I
. I
l\
TREASURY DEPARTMENT
Washington
FOR RELEASE P.M. NEWSPAPERS
MONDAY, MARCH 14, 1966
REMARKS BY THE HONORABLE HENRY H. FOWLER
SECRETARY OF THE TREASURY
BEFORE THE ECONOMIC CLUB OF DETROIT
AT THE VETERANS MEMORIAL BUILDING, DETROIT, MICHIGAN
MONDAY, MARCH 14, 1966, 1:00 P.M., EST
Here in this city and this region -- here in the very
heartland of our national economic and, industrial power, I would
like today to consider with you some of the rudimentary requirements and implications of national greatness in the closely
interdependent world in which we live.
I think it is important for those of us whose daily concerns
are concentrated in the economic and financial sphere to pause
now and then, and to look at our particular problems and pursuits
in the broad perspective of national and international affairs.
For I am convinced that we can find adequate and appropriate
answers to the pressing economic questions that come before us,
in both the private and the public sphere, only in the context
of the more comprehensive question that must concern all
Americans -- Are they the answers of a great nation that fully
accepts and fully exercises Free World leadership in our
interdependent world?
When this nation was founded nearly two centuries ago, it
was small in size, and poor in material goods or power -- but
it knew riches beyond measure in the strength of its spirit and
its courage, in the greatness of its ideals and its dreams.
Today, we know a greatness of power and wealth and influence
that no nation in the world can equal or, indeed, approach.
And so, by the very immensity of our power and the strength
of our ideals, we have come to bear upon our shoulders the
mantle of Free World leadership.
We have not sought that leadership. Indeed, throughout
much of our history as a nation, we have deliberately sought to
avoid involvement in the volatile affairs of foreign puwers.
We have labored, instead, to develop our own country, and to
secure our own borders, so that -- free of foreign entangelemts
F-406
- 2 -
we could pursue our dream of a Great Society in whose abundant
life every man could share to the fullest measure of his desire
and his ability.
But by the beginning of this century we had grown too great
to live aloof and alone in a world grawn so small. In such a
world, as we have come to learn, any threat of freedom anywhere
is a potential threat to our awn freedom. In such a world, as
we have come to learn, isolation offers only the illusion of
security and strength -- but is, in reality, the course of
greatest weakness and greatest danger.
For a while we retreated -- for a while we refused to accept
the responsibility history had thrust upon us. In the 1920's
after the horror of World War I, we washed our hands of a world
which was none of our making and not to our liking -- we withdrew
from an international effort to preserve world order and
freedom, and within two decades found ourselves embroiled in the
far greater horror of World War II.
Since that time, the world has become increasingly interdependent as communications, missiles, and the movement of
ideas, goods and people make our globe an ever smaller planet.
So today, as in all the years since the beginning of
World War II, we carry out our responsibilities of leadership
in the Free World -- in full awareness and full acceptance of
all that those responsibilities require of us in a deeply
interdependent world. None of us underestimates the gravity
of those responsibilities, for each of us understands that the
way in which the United States exercises its international
leadership will do much to determine the future for the world
and for succeeding generations of Americans.
The challenges confronting that leadership are many, but
these surely are three of the most basic:
First, the challenge posed by the Communist
commitment to world conquest -- and in particular
by the Communist effort to impose their will and
extend their influence by outright aggression and
by subversion backed by the threat of aggression.
Second, the challenge posw by the collapse of
colonialism and the emergence of new nations -thus far more than fifty in number -- coupled with
the growing demands of underprivileged peoples
everywhere for full and immediate deliverance from
the hunger and the disease and the illiteracy and
the grinding poverty that had ruled their lives for
cen tur ie..s ..
- 3 -
Third, the challenge posed by the spreading outbreak
of excessive nationalism -- most noticeable and understandable in some of the less developed countries, but
highly visible as well in some of the world's more
developed nations -- that considerably complicates the
efforts of nations to work together on a multilateral
basis to attack common problems and to achieve common
objectives.
These are the overriding challenges that have emerged in
the two critical decades since World War II to engage so much
of our energies and our resources and
to affect so profoundly
the course and character of our lives as well as the conduct
of our national affairs. These are the overriding challenges
that will continue to require our fullest energies and efforts
for long, hard years to come. For, surely there is not one of
us who has not long ago shed -- if, indeed, we ever entertained
the illusion that these challenges will surrender to sudden or
simple solutions.
We must continue to meet these challenges -- by measuring
up to our responsibilities as first among the nations of the
Free World, by measuring up to the exacting and unceasing
requirements of national greatness in this interdependent world.
These requirements and these responsibilities are not wholly
ours to determine, nor are they ours alone to meet and to bear.
They are determined by the realities and events of the world in
which we live, realities and events which are often open to our
influence but beyond our control. And they are shared by all
the other nations of the Free World -- nations who cherish
their freedom and independence no less than we, nations with
whom we share the responsibilities for furthering the cause of
peace and justice and freedom and well-being throughout the
world.
To meet the great and common challenges before us -- the
great and common opportunities as well as dangers -- will
require of ourselves and our allies in the Free World the highest
qualities of leadership on two major fronts:
First, leadership in standing firm and united
against Communist aggression and subversion with
sufficient force and power to deter such efforts and
to demonstrate beyond any doubt that they are far
too unrewarding and dangerous to be worth the risk.
- 4 Second, leadership in assisting on a multilateral
basis the new nations in their struggle to achieve both
essential stability and sufficient progress toward
meeting the rising needs and demands of their people.
On both of these fronts -- over a period of two decades and
under the leadership of four Presidents -- ours is a record of
the most unrelenting effort and the most enduring accomplishment
toward the preservation of peace, the protection of freedom and
the promotion of human rights and human welfare.
We have helped counter aggression in all its guises
whether open or concealed -- on nearly every continent on the
globe, in countries great and small -- in Greece, in Turkey
and in Berlin; in Lebanon, in Iran and in Iridia; in Taiwan,
in the Congo, in Laos, and now in Vietnam.
We have sought, not to act alone and apart, but to join
with other nations in forging effective alliances against
aggression -- aggression in the Atlantic Community through the
North Atlantic Treaty Organization, aggression in Southeast
Asia and the Pacific through the Southeast Asia Treaty
Organization, aggression in Latin America through the
Organization of American States, and aggression anywhere in
the world through the United Nations.
We have measured up to the challenge -- we have made the
required sacrifices, and we have borne the required costs. More
than 33,000 Americans died on the battlefields of Korea -and more than 103,000 were wounded. As of the end of last
month, more than 2,000 Americans had died in Vietnam -- and more
than 11,000 had been wounded.
And in the
have spent vast
and that of the
in the regular,
staggering $790
two decades since the end of World War II, we
sums of money to maintain our military security
Free World. Our national defense expenditures
or administrative, Budget will add up to a
billion between fiscal years 1947 and 1966.
During the current decade -- covering fiscal year 1961
through 1967 -- our expenditures for national defense, for
space, research and technology, and for interest on our debt
(the bulk of which is the result of past wars) have accounted
for a steady 69-70 percent, or nearly three-fourths, of our
total annual expenditures.
- 5 -
Nor have we been found wanting on the second front -where also we have led the way toward helping assure throughout
the Free World the economic development and the social progress
that alone will enable men to better their lives.
There has been in the decades since World War II no great
multilateral organization or effort for peace and for the works
of peace whose advent and whose accomplishments do not
reflect, in large measure, our leadership and our support
the United Nations, the International Monetary Fund, the
World Bank, the Marshall Plan, the Inter-American Development
Bank, the Alliance for Progress, and now the Asian Development
Bank. Through these multilateral efforts, through bilateral
government aid, and through numerous private channels -- such
as our private foundations and multi-national corporations -- we
have devoted a vast share of our wealth and our resources to
the task of helping others increase their share of the world's
abundance. In the postwar decades we have contributed a net
total of some $100 billion of our national wealth to helping
better the lives of others through our major government foreign
assistance programs.
Indeed, in meeting the great challenges of our times, we
have not been found wanting. Never in the memory of man has
any nation done so much and at such great cost, not to gain
dominion over the lives or the resources Or the territory of
others, but to help others gain full and free dominion over
their own destinies.
We have understood -- and our accomplishments have
proclaimed our understanding -- that with might must come
maturity, with wealth and riches must come wisdom and
responsibility, and with success must come sacrifice.
We do not say we have always been right.
have always been successful.
We do not say we
But no man and no nation can justly deny what history makes
manifest: in the hour of need, we have not been found wanting.
And we will not be found wanting now.
We look back over the past two decades at all we have
accomplished and at all its incalculable cost, and ask -- is it
all worth the cost? Is it worth it to devote a portion of our
human and material resources to the military effort required for
the promotion and preservation of peace and freedom and a
- 6 world in which tyranny cannot be imposed by aggression from
without or subversion from within? Is it worth it to devote
a share of our resources to help shape a world that will
day by day witness nations, new and old, beat back the tides of
hunger and disease and illiteracy in an atmosphere of economic
and social progress and of political freedom and order?
To ask these questions today is to answer them -- as we
have for two long decades under four great Presidents -- in the
clear and unqualified affirmative, for that is the only answer
a truly great nation can give that bears the burden of Free
World leadership in an interdependent world.
But in answering these questions in the affirmative we
must ask ourselves another question -- What are some of the
practices and precepts of national greatness that must be
reflected in our individual and collective attitudes if we are
to back up our words with deeds?
I shall touch only on a few.
We must continue to yield to no nation in the patient
pursuit of peace and the works of peace -- and continue to
demonstrate, as we do in Vietnam, that we have the will and
the weapons to wage war, if wage war we must to defend our own
freedom and the freedom of our fellowman.
We must be willing to bear the burdens and accept the
uncertainties that come with such a war as we fight in Vietnam.
For Vietnam is a war of wills as well as a war of weapons. It
is a test of our willingness to survive -- to surmount -- the
strain of constant, continual conflict whose end is never
clearly in sight.
It is a crucial test. And we cannot afford to fail, for
if we do we shall fail ourselves as well as the people of
South Vietnam -- if we do, we shall have undermined the
faith of all whose freedom depends upon us, we shall have
undermined the web of alliances on which world peace and
security depend, and we shall have undermined our own faith
in ourselves.
We must live up to our commitment to the defense of
freedom. At the same time, we must strive to enlarge and
explore every avenue for unified action with our allies in the
common defense -- for, indeed, to the extent that the allies of
freedom cannot unite in its defense they lessen the chances for
peaceful accommodation with those who are so fiercely united
against it.
- 7 And we must continue -- together with other developed
nations of the Free World -- to carry our share of the burden
of leadership in the common task of helping the developing
nations of the world to realize their destiny and enrich the
lives of their people in dignity and freedom.
We must continue to seize every opportunity to strengthen
and reinforce the fabric of Free World economic and financial
cooperation. We must continue to work with other peoples in
opening new vistas for world trade and development, financial
cooperation, and the education and nourishment of peoples
everywhere.
And we ~ taking the initiative in these endeavors -seeking assiduously in both quiet and public diplomacy
to enlist the cooperation of our allies in bold new efforts to
promote free trade, to strengthen the international monetary
system, and to make available to needy peoples everywhere the
opportunity and the means and the incentives for conquering
hunger and disease, and for living under the liberating light
of education and knowledge.
In all these ways, and more, we must continue in company
with other like-minded nations to lead the way in helping
better the world we share with all.
But in so doing we must recognize that, in the final
analysis, our ability to discharge our responsibilities of
Free World leadership will depend on how we act at home -- in
maintaining a strong and dynamic economy -- in pursuing
vigilantly our national economic goals of full employment, a
healthy rate of growth, reasonable price stability and a balance
in our international payments -- in extending always for our own
citizens the boundaries of economic opportunity and social
justice.
Today, many in our country are disturbed that the
situation in Vietnam -- against the backdrop of our other
world-wide commitments -- will require us either to abandon
our goals of a Great Society at home or suffer the severe
economic dislocation attendant upon war and inflation that we
have known in the past.
.
These are legitimate and proper concerns. President
Johnson answered them in his State of the Union Message when
he said:
- 8 -
"But we will
in Vietnam to win
intentions of all
is mighty enough,
people are strong
rest of the world
here at home."
not permit those who fire upon us
a victory over the desires and the
the American people. This nation
its society is healthy enough, its
enough, to pursue our goals in the
while still building a Great Society
I have, today, no new facts to give you on our economic
situation -- no new programs or policies to announce. You are
well acquainted with the issues -- and, I am sure, with the
arguments. What I wish to do, simply, is to put the whole
current discussion in proper perspective -- a perspective that
I am firmly convinced is as often overlooked or ignored as it
is profoundly required.
For one thing, let me make it absolutely clear that both
the present scale of activities in Vietnam -- and the
prospective scale insofar as those closest to it can foresee -remain within our capacity to sustain without anything like the
drastic measures required during the period of the Korean War.
What the situation does require is the exercise of
calmness, moderation, and responsible restraint on the part of
all of us, for it somewhat limits our margin for economic error,
and narrows our tolerance for economic excess and irresponsibility.
But it does not require drastic taxation, direc~ price and wage
controls, and all the disturbing paraphernalia of conversion
to war that marked World War II and the Korean War.
Nothing is better calculated to destroy the calmness,
moderation and restraint necessary to crest our current
problems without retreat or dislocation than to confuse the
situation today with that which faced us during these two previous
experiences. Having served as Administrator of the National
Production Authority and the Defense Production Administration
and as Director of the Office of Defense Mobilization during the
height of the Korean mobilization period, the sharp contrast
between that situation and the one today is particularly
striking to me. Let me make that contrast clear.
During the Korean War this nation carried out an intensive
defense mobilization program for two purposes -- to wage the
conflict in Korea and at the same time reset, restore and build
up a military and industrial mobilization base, substantially
dismantled after World War II, adequate to meet any escalation
of the Korean War into a world conflict on the scale of
World War II.
- 9 -
Since the Korean War three administrations, under
Presidents Eisenhower, Kennedy and Johnson, have maintained with
great care and expense a highly modernized, up-to-date force in
being designed to deal from a state of intensified preparedness
with any situation which might develop.
I invite your attention and that of every American to the
recent press statement of a man familiar to most of you in this
audience by reason of his former association with one of your
great companies, Defense Secretary Robert McNamara, in which he
outlined the situation in terms of military and logistical
:lispositions.
I will limit my comments to some interpretation of this
situation in economic terms.
In the regular administrative budget our defense
~xpenditures rose drastically from $13.0 billion in fiscal 1950
:0 $50.4 billion in fiscal 1953, or an increase of 287 percent.
~rom fiscal 1965 through fiscal 1967,however -- the period
iuring which all of the $10~ billion increase in special
Tietnam expenditures is scheduled to occur -- our defense
!xpenditures in the administrative budget will have risen from
;50.2 billion in 1965 to $60.5 billion in 1967, or an increase
)f only 21 percent.
The figures for the total Federal budget tell exactly the
:ame story. From fiscal 1950 to fiscal 1953, total expenditures in the
.dministrative budget soared from $39.5 billion to $74.1 billion,
. rise of 87 percent. Total expenditures in the current
'eriod -- the fiscal 1965- 67 period -- will grow by only
7 percent, from $96.5 billion to $112.9 billion.
Let us look at this disparity of increases in volume in
erms of its toll on our national output.
Defense expenditures in the Korean War rose from 4.9
~rcent of our national output in fiscal 1950 -- at the
!ginning of the Korean War -- to a peak of 14 percent of our
ltput in fiscal 1953, or nearly three-fold over three years.
:om fiscal 1965 through fiscal 1967 our defense expenditures
:e scheduled to rise hardly at all as a percentage of our
ttional output, going from 7.7 percent to just over 8 percent.
- 10 Equally revealing is the fact that, despite the scheduled
rise of $10~ billion in special Vietnam expenditures in the
fiscal year 1967 over the level contemplated in fiscal 1965,
our defense expenditures in anyone of these three years are
lower in relation to our economic output than in anyone of the
preceding five years from 1960 through 1964.
Or, if one wishes to look at the total Federal budget in
these terms, it rose during the Korean War from 15 percent of
our output to 20.7 percent. Yet in the three fiscal years
1965-1967 our total Federal budget, as a percentage of our
output,wi11 show only a negligible rise from a relatively low
14.9 percent to just over 15 percent.
I am sure that against this statistical background this
audience, astute as it is with figures, perfectly understands
my point, which is simply this: our level of military
preparedness at the beginning of the intensified Vietnam conflict,
and our ability to bear the burden of required military expenditures,
are vastly greater than they were at the time of the Korean
conflict.
In his recent review of the military and supply deployment
in Southeast Asia, Secretary McNamara made this striking
statement:
"The Southeast Asia effort is unique in our
military history. Never before has this nation
or any other nation been able to deploy so large
a force within so short a period of time, some
10,000 miles from our shores,without calling for
reserves, without extending aptive duty tours,
and without invoking the kindsof strict economic
controls normally associated with military
emergencies ."
There are many reasons for this, but one fundamental reason
is simply that we are far better able today than we"" were in the
Korean period to handle without excessive strain or dislocation
the economic and military burdens of a conflict abroad such as
the one in which we are now engaged. The $10.5 billion of
additional expenditures for the Vietnam War sChe~~~d for
fiscal 1967 is less than 1~ percent of the $722!'l
0e- national
product originally projected for calendar 1966, and now viewed
by most as a slightly conservative figure.
- 11 Unquestionably, we must guard with unrelenting vigilance
against the danger of inflation in an economy closer to full
employment and full utilization of productive capacity than
at any time in many years. Since last fall I have been regularly
calling attention to this factor and the upward drift in the wholesale price index for the first time in seven years -- mainly
in the farm product and processed food categories, which account
for approximately two-thirds of the rise in that index from
January of 1965 to January of this year. As I have said
repeatedly on many occasions since last fall the situation also
requires all of us -- government, business, labor and the
individual citizen -- to accept our responsibilities, exercise
due restraint, and exemplify the moderation expected of a great
and confident people.
The Congress is completing action this week on the
President's tax proposals, which are designed to raise additional
revenues in the sum of approximately $6 billion during the
remainder of this fiscal year 1966 and fiscal year 1967.
By adding these revenues to those which arise naturally
as fiscal dividends from the application of existing tax rates
to a burgeoning economy, we expect the fiscal 1967 budget
to pass or approach balance, whether measured by the
administrative budget, the cash budget, or the income and
production account budget -- providing, of course, that the
totals reflected in the President's budget are not substantially
increased as the Congress works its will through the
appropriation process.
The economic impact of this bill will begin to be felt
almost immediately after the President signs it and will build
throughout the year -- withdrawing from private purchasing power
a total of $2.7 billion during calendar 1966.
All of us will be watching with interest as these new
tax measures join together with the other forces that tend
to moderate the growth of the private sector of the economy
forces such as the Federal Reserve action a few months ago and
the increase in Social Security and Medicare taxes at an annual
rate of $6 billion which began to take effect last January.
As of now the Administration, whether practicing new
economics or old, is shifting from a policy of steady stimulus
to demand to a policy of moderate restraint to counter the
cyclical consequences of the Vietnam situation, coming as
it has at a time when our economy is scaling new peaks of
achievement in moving toward our national economic goals.
- 12 But in shifting our policy, the Administration is very
mindful of the continuing task of preserving and promoting
continuous long-term growth,pursuing competitive efficiency,
and dealing with our balance of payments -- both now and in the
period that will surely come after Vietnam has been settled.
The announcement last week that unemployment had dwindled
to less than four percent (3.7 percent) in February -- the
lowest point in more than 12 years -- should not be greeted
with jitters. That is not the reaction of a great nation as
long as the unemployment rate was still seven percent for Negroes
and 10.9 percent for teenagers and three million would-be
workers were still wanting jobs. The lessening unemployment
should be welcomed in full and confident recognition of the
progress we can continue to make as we not only sustain,
but intensify what is already the greatest public manpower
training and retraining effort in our history in partnership
with the heightened programs of manpower training that have
long played a large role in private industrial effort. We
expect our labor force to expand by 1.6 million workers this year.
This expansion, and the need for continued improvement in our
national ability to deal with problems of structural unemployment,
constitute a pressing challenge to job creation in the private
sector.
Likewise, the realization that the large amounts of idle
and obsolete productive capacity which characterized the
American scene too much in the last decade have been whittled
away by increasing demand and investment should not be a cause
for gloom. Coming on stream in 1966 are vast quantities of new
industrial capacity reflecting the most modern and up-to-date
technology. These are the fruits of investment made in recent
years, and the fact that this type of activity promises to
continue in 1966 should not be viewed entirely with alarm.
We do not want to put the brakes on unnecessarily or too fast.
We want to watch and weigh all developments carefully -- those
that point up, and those that point to a levelling, and those .
that point down. We are watching carefully what happens to the
President's budget in the appropriation process. It could move
the budget from the posture of approximate bal~nce to either
a meaningful deficit or surplus. We are watching carefully
events in Vietnam so as to determine whether or not the measures
currently contemplated in the 1967 bridget will be adequate to
meet the situation as it develops •. As the President said only
last week he will not hesitate" to act quickly in· the field of
taxation if such action appears necessary."
- 13 While we in Treasury have been continuing our contigency
planning in that field in which we are at all times regularly
engaged, I welcome the announcement over the weekend that a
Subcommittee of the Joint Economic Committee of the Congress,
chaired by Congresswoman Martha W. Griffiths of Detroit, will
open hearings this Wednesday to consider -- and I quote -"the need for and design of temporary tax changes which could
be enacted promptly in response to a recognized need for
stimulating or restraining the economy." In appearing before
the Joint Economic Committee on February 3, I had suggested
that the House Ways and Means Committee or the Joint Economic
Committee study and recommend the type of tax increases most
suitable should inflationary pressures require additional fiscal
action.
In the meantime, we must all understand that whether or not
such action will be required will -- in large measure -- depend
on how all of us, in government and in the private economy,
exercise our clear responsibilities for restraint and moderation.
As I have tried to demonstrate, these responsibilities -while they take on new urgency in the context of our buoyant
economy and of the struggle in Vietnam -- are not something newly
invented to make business leaders unhappy or labor leaders irate
or the lives of all of us more difficult. These responsibilities,
on the contrary, are but the inevitable and natural consequence
of the responsibility that we as a nation -- that every single one
of us as Americans -- must bear for Free World leadership.
For the Federal government these responsibilities require
the kind of firm and effective restraint so fully displayed
in the budgets President Johnson has presented. For you in the
private sector these responsibilities above all require -- as a
matter of plain national need -- that you continue to follow
the path of restraint so.clearly mapped out in the wage-price
guideposts of the President's Council of Economic Advisers.
While I cannot overemphasize the importance today of adhering to
these guideposts, I know that my colleague, Gardner Ackley, has
recently explored this subject with you in some depth.
Instead, I want to avail myself of the pleasure and privilege
of paying tribute to the host of this meeting -- the distinguished
president of Chrysler Corporation, Mr. Lynn Townsend -- and to
many in this audience for a very special contribution, of
particular importance to my Department, that they are making to
a sound and strong America.
- 14 For today, March 14, marks the announcement of the "1966
Business Bondwagon" campaign, which is the brainchild of Lynn
Townsend in his capacity as Chairman of the nationwide Industrial
Payroll Savings Committee.
Prior to today's announcement, members of that Committee
such as Detroit area Chairman, Mr. A. P. Fontaine, and
chairmen in other cities throughout the nation -- have been
enlisting the campaign support of the top executives of their
maj or companies.
I know that Mr. Townsend and the members of his Committee
are volunteering much of their time, talents and resources to
this campaign. I know, too, that the members of this audience
are all active -- or will be active -- in supporting this
campaign, for you represent the executive leadership whose
efforts are so essential to the Payroll Savings drive throughout
industry in Detroit and elsewhere in the nation.
The goal of the nationwide Committee is to spearhead the
enrollment of at least 1,200,000 new Payroll Savers during 1966,
the 25th or Silver Anniversary year of the Savings Bonds
program.
I need not tell you hm., important it is to reach -- even
exceed -- that goal. For every dollar that goes into
United States savings bonds does double duty in the fight against
inflation -- for it not only diminishes the private spending
stream but strengthens our ability to finance our national debt
in a noninflationary manner. At the same time, the savings bonds
program -- and the payroll savings plan in particular -- help all
who participate to enhance their own personal financial well-being
and establish the sound financial habit of systematic savings.
The Savings Bonds program is one way -- and an important
way -- in which you, and all Americans, can demonstrate that in
deed as in ideal, in performance as in promise, we are a nation
of greatness -- a nation willing and worthy to bear the
responsibilities for leadership in an interdependent world.
000
TREASURY DEPARTMENT
FOR :i.ET.EASE 6:30 P.t·;.,
Honday, ~larch 14, 1966.
RESULTS OF TREASURY'S \-lEEKLY BILL OFFSRING
The Treasury Department announced that the tenders for two series of Treasury bill
one series to be an additional issue of the bills dated December 16, 1965, and the othe
series to be dated March 17, 1966, which were offered on Harch 9, 1966, were opened at
Federal Reserve Banks today. Tenders were invited for $1,300,000,000, or thereabou~,
9l-day bills and for ;51,000,000,000, or thereabouts, of 182-day bills. The details of,
two series are as follows:
RANGE OF ACCEPTED
COHPET1T:IVZ BIDS:
182-day Treasury bills
maturing September 1~, 19~ J
Approx. 2qui'l
Price
Annual Hate
91-day Treasury bills
maturing June 16, 1966
Approx. Equiv.
Price
Annual Rate
High
Low
Average
98.813
98.505
98.807
4.696%
4.727%
4.718,t
97 .519 a/
97.513 97.515
!/
4.907%
4.9l9~
4.915~
Y
~/ Excepting 1 tender of $50,000
69 ;~ of the amount of 91-day bills bid for at the lmv price was accepted
4 %of the amount of 182-day bills bid for at the low price was accepted
TOTAL TE}IDERS APPLIED FOR AND ACCEPTED BY FEDERAL RESERV3 DISTRICTS:
District
Applied For
Accepted
Applied For
Accepted
Boston
New York
Philadelphia
Cleveland
Richmond
Atlanta
Chicago
St. Louis
Hinneapolis
Kansas City
Dallas
San Francisco
TOTALS
$
24,142,000
1,498,124,000
35,544,000
30,685,000
13,839,000
50,327,000
426,983,000
64,319,000
20,889,000
27,260,000
25,904,000
102,281,000
$2,320,297,000
$
$
13,592,000
751,572,000
17,049,000
28, 5hl, 000
13,836,000
28,603,000
295,646,000
40,399,000
13,767,000
25,120,000
14,504,000
~8,135,OOO
$1,3 00,764,000
£/
9,209,000
1,853,179,000
21,462,000
116,474,000
16,152,000
43,886,000
3$9,473,000
36,474,000
12,283,000
1$,037,000
1$,1$2,000
268,778,000
$2,767,$59,000
$
4,009,
616,671,
7,197,
53,374,
5,202,
9,562,
149,)42,
12,07b,
6,88),
12,751,
10,002,
liS 726
$1,002,79),
b/ Includes $281,601,000 noncompetitive tenders accepted at the average price of 98.8
c/ Includes $1,38,317,000 noncompetitive tenders accepted at the average price of 9705
These rates are on a bank discount basis. The equivalent coupon issue yields are
4.84% for the 91-day bills, and 5.11% for the 182-day bills.
Y
TREASURY DEPARTMENT
:
RELEASE 6: 30 P. H. ,
&1, March 14, 1966.
RESULTS OF TREASURY I S WEEKLY BILL OFFEHING
The Treasury Department announced that the tenders for two series of Treasury bills,
series to be an additional. issue of the bills dated December 16, 1.965, and the other
es to be dated March 17, 1966, which were offered on Narch 9, 1966, were opened at the
Tal Reserve B~~s today. Tenders were invited for $1,300,000,000, or thereabouts, of
ay bills and for ~l,OOO,OOO,OOO, or thereabouts, of 182-day bills. The details of the
series are as follows:
~
OF ACCEPTED
BIDS:
~TLTm
High
Low
Average
91-day Treasury bills
maturing June 16, 1966
Approx. Equiv.
Price
Annual BAte
98.813
4.696%
98.805
4.727:1>
98.807
4. 718,~ !/
182-day Treasury bills
maturing September 15, 1966
Approx. Equiv.
Price
Annual hate
97.519 a/
97.513 97.515
4.907%
4.919%
4.915fo
!/
~/ Excepting 1 tender of ;')50,000
9 ::b of the amount of 91-day bills bid for at the 1001'1 price was accepted
4 %of the amount of 182-d.ay bills bid for at the low price was accepted
TENDERS APPLIED FOR AND ACCEPTED BY FEDERAIJ RESERV~ DISTRICTS:
trict
Accepted
Applied For
Applied For
Accepted
ton
$
24,142,000 $ 13,592,000
$
9,209,000 $
4,009,000
York
1,498,124,000
751,572,000
616,671,000
1,853,179,000
ladelphia
35,544,000
17,049,000
21,462,000
7,197,000
veland
30,685,000
28, 5hl, 000
116,474,000
53,374,000
Mond
13,839,000
13,836,000
16,152,000
5,202,000
anta
50,327,000
28,603,000
43,886,000
9,562,000
cago
426,983,000
295,646,000
149,,342,000
359,473,000
Louis
64,319,000
40,399,000
12,074,000
36,474,000
neapolis
20,889,000
13,767,000
12,283,000
6,883,000
sas City
25,120,000
27,260,000
12,751,000
15,037,000
Las
25,90'-1.,000
14,504,000
10,002,000
15,152,000
Francisco
102 2 281,000
1) 8 2135,000
115 2 726 2 °00
268 2 778 2 °°0
TOTALS
$2,320,297,000 $1,300,764,000 £/ $2,767,559,000 $1,002,793,000 sf
~udes
~udes
$281,601,000 noncompetitive tenders accepted at the average price of 98.801
$138,311 000 noncompetitive tenders accepted at the average price of 97.515
Ise rates are o~ a bank discount basis. The equivalent coupon issue yields are
14% for the 9l-d.ay bills, and 5.11% for the 18e-day bills.
March 14, 1966
MEMORANDUM FOR THE PRESS:
Secretary of the Treasury Henry H. Fowler's remarks
at the 1966 Chicago Area Savings Bond Campaign Luncheon,
Chicago, Illinois, Tuesday, March 15, 1966, 12:00 Noon,
CST, will be read by Frederick L. Deming, Under Secretary
of the Treasury for Monetary Affairs.
Text attached.
TREASURY DEPARTMENT
Washington
FOR RELEASE ON DELIVERY
REMARKS BY THE HONORABLE HENRY H. FOWLER
SECRETARY OF THE TREASURY
AT THE 1966 CHICAGO AREA SAVINGS BOND CAMPAIGN LUNCHEON
THE PALMER HOUSE, CHICAGO, ILLINOIS
TUESDAY, MARCH 15, 1966, 12:00 NOON CST
Here in this city and this region -- here in the very
heartland of our national economic and industrial power, I would
like today to consider with you some of the rudimentary requirements and implications of national greatness in the closely
interdependent world in which we live.
I think it is important for those of us whose daily concerns
are concentrated in the economic and financial sphere to pause
now and then, and to look at our particular problems and pursuits
in the broad perspective of national and international affairs.
For I am convinced that we can find adequate and appropriate
answers to the pressing economic questions that come before us,
in both the private and the public sphere, only in the context
of the more comprehensive question that must concern all
Americans -- Are they the answers of a great nation that fully
accepts and fully exercises Free World leadership in our
~~r~~~~_~_~~_~ .w-u~r'.Ld0
.
'-'-J..
.... J.L
UC: tJC l1U. C ill..
When this nation was founded nearly two centuries ago, it
was small in size, and poor in material goods or power -- but
it knew riches beyond measure in the strength of its spirit and
its courage, in the greatness of its ideals and its dreams.
Today, we knmv a greatness of pOvler and vlealth and influence
that no nation in the world can equal or, indeed, approach.
And so, by the very immensity of our power and the strength
of our ideals, we have come to bear upon our shoulders the
mantle of Free World leadership.
We have not sought that leadership. Indeed, throug~out
nuch of our history as a nation, we have deliberately sought to
:lvoid involvement in the volatile affairs of foreign po,·cers .
.[e have 1 abored, ins tead, to deve 1 op our m·m C oun tTY, "c-:'::: ::-:
~ecure our ()1;'7n borders, so tha t - - free of fore ign er:. t,:::r'-6L: 1..2 :::C':;
- 2 -
we could pursue our dream of a Great Society in whose abundant
life every man could share to the fullest measure of his desire
and his ability.
But by the beginning of this century we had grown too great
to live aloof and alone in a world grown so small. In such a
world, as we have come to learn, any threat of freedom anywhere
is a potential threat to our own freedom. In such a world, as
we have come to learn, isolation offers only the illusion of
security and strength -- but is, in reality, the course of
greatest weakness and greatest danger.
For a while we retreated -- for a while we refused to accept.
the responsibility history had thrust upon us. In the 1920's
after the horror of World War I, we washed our hands of a world
which was none of our making and not to our liking -- we withdrew
from an international effort to preserve world order and
freedom, and within two decades found ourselves embroiled in the
far greater horror of World War II.
Since that time, the world has become increasingly interdependent as communications, missiles, and the movement of
ideas, goods and people make our globe an ever smaller planet.
So today, as in all the years since the beginning of
World ~~ar II, we carry out our responsibilities of leadership
in the Free World -- in full awareness and full acceptance of
all that those responsibilities require of us in a deeply
interdependent ~'7orld. None of us underes tima tes the gravity
of those responsibilities, for each of us understands that the
way in which the United States exercises its international
leadership will do much to determine the future for the world
and for succeeding generations of Americans.
The challenges confronting that leadership are many, but
these surely are three of the most basic:
First, the challenge posed by the Communist
commitment to world conquest -- and in particular
by the Communist effort to impose their will and
extend their influence by outright aggression and
by subversion backed by the threat of aggression.
Second, the challenge posffi by the collapse of
colonialism and the emergence of new nations -thus far more than fifty in number -- coupled 1'7ith
the gr.O\ving demands of underprivileged peoples·
everywhere for full and immediate deliverance from
the hunger and the disease and the illiteracy and
the grinding poverty that had ruled their lives for
centurjes.
- 3 Third, the challenge posed by the spreading outbreak
of excessive nationalism -- most noticeable and understandable in some of the less developed countries, but
highly visible as well in some of the world's more
developed nations -- that considerably complicates the
efforts of nations to work together on a multilateral
basis to attack common problems and to achieve common
objectives.
These are the overriding challenges that have emerged in
the two critical decades since World War II to engage so much
of our energies and our resources and
to affect so profoundly
the course and character of our lives as well as the conduct
of our national affairs. These are the overriding challenges
that will continue to require our fullest energies and efforts
for long, hard years to come. For, surely there is not one of
us who has not long ago shed -- if, indeed, we ever entertained
the illusion that these challenges will surrender to sudden or
si~ple solutions.
We must continue to meet these challenges -- by measuring
up to our responsibilities as first among the nations of the
Free World, by measuring up to the exacting and unceasing
requirements of national greatness in this interdependent world.
These requirements and these responsibilities are not wholly
ours to determine, nor are they ours alone to meet and to bear.
They are determined by the realities and events of the world in
which we live, realities and events which are often open to our
influence but beyond our control. And they are shared by all
the other nations of the Free World -- nations who cherish
their freedom and independence no less than we, nations with
whom we share the responsibilities for furthering the cause of
peace and justice and freedom and well-being throughout the
world.
To meet the great and common challenges before us -- the
great and common opportunities as well as dangers -- will
require of ourselves and our allies in the Free World the highest
qualities of leadership on two maj or fronts:
First, leadership in standing firm and united
against" Communi.st aggression and subversion ~vith
sufficient force and power to deter such efforts and
to demonstrate beyond any doubt that they are far
too unre~\72Tding and danger.ous to be r..Jorth the ~.' i..:::1~.
- 4 Second, leadership in assisting on a multilateral
basis the new nations in their struggle to achieve both
essential stability and sufficient progress toward
meeting the rising needs and demands of their people.
On both of these fronts -- over a period of two decades and
under the leadership of four Presidents -- ours is a record of
the most unrelenting effort and the most enduring accomplishment
toward the preservation of peace, the protection of freedom and
the promotion of human rights and human welfare.
We have helped counter aggression in all its guises
whether open or concealed -- on nearly every continent on the
globe, in countries great and small -- in Greece, in Turkey
and in Berlin; in Lebanon, in Iran and in Iridia; in Taiwan,
in the Congo, in Laos, and now in Vietnam.
We have sought, not to act alone and apart, but to join
with other nations in forging effective alliances against
aggression -- aggression in the Atlantic Community through the
North Atlantic Treaty Organization, aggression in Southeast
Asia and the Pacific through the Southeast Asia Treaty
Organization, aggression in Latin America through the
Organization of American States, and aggression anywhere in
the world through the United Nations.
We have measured up to the challenge -- we have made the
required sacrifices, and we have borne the required costs. More
than 33,000 Americans died on the battlefields o~ Korea -and more than 103,000 were wounded. As of the end of last
month, more than 2,000 Americans had died in Vietnam -- and more
than 11,000 had been wounded.
And in the
have spent vast
and that of the
in the regular,
staggering $790
two decades since the end of World War II, we
sums of money to maintain our military security
Free World. Our national defense expenditures
or administrative, Budget will add up to a
billion between fiscal years 1947 and 1966.
During the current decade-- covering fiscal year 1961
through 1967 -- our expenditures for national defense, for
space, research and technology, and for interest on our debt
~he bulk of which is the result of past wars) have accounted
for a steady 69-70 percent, or nearly three-fc:~rths, of our
total annual expenditures.
- 5 Nor have we been found wanting on the second front -where also we have led the way toward helping assure throughout
the Free World the economic development and the social progress
that alone will enable men to better their lives.
There has been in the decades since World War II no great
multilateral organization or effort for peace and for the works
of peace whose advent and whose accomplishments do not
reflect, in large measure, our leadership and our support
the United Nations, the International Monetary Fund, the
World Bank, the Marshall Plan, the Inter-American Development
Bank, the Alliance for Progress, and now the Asian Development
Bank. Through these multilateral efforts, through bilateral
government aid, and through numerous private channels -- such
as our private foundations and multi-national corporations -- we
have devoted a vast share of our wealth and our resources to
the task of helping others increase their share of the world's
abundance. In the postwar decades we have contributed a net
total of some $100 billion of our national wealth to helping
better the lives of others through our major government foreign
assistance programs.
Indeed, in meeting the great challenges of our times, we
have not been found wanting. Never in the memory of man has
any nation done so much and at such great cost, not to gain
dominion over the lives or the resources Or the territory of
others, but to help others gain full and free dominion over
their own destinies.
We have understood -- and our accomplishments have
proclaimed our understanding -- that Hith might must come
maturity, with wealth and riches must come wisdom and
responsibility, and with success must come sacrifice.
We do not say \Ve have always been right.
have ahvays been successful.
He do not say vIe
But no man and no nation can justly deny what history makes
manifest: in the hour of need, we have not been found wanting.
And we will not be found wanting now.
We look back over the past two decades at all we have
accomplished and at all its incalculable CO&t, and ask -- is it
all worth the cost? Is it worth it to devote a portion of our
human and material resources to the military effort reo c.2ireC r.J:the promotion and preservation of peace and freedom 2~d ~
- 6 -
world in which tyranny cannot be imposed by aggression from
without or subversion from within? Is it worth it to devote
a share of our resources to help shape a world that will
day by day witness nations, new and old, beat back the tides of
hunger and disease and illiteracy in an atmosphere of economic
and·social progress and of political freedom and order?
To ask these questions today is to answer them -- as we
have for two long decades under four great Presidents -- in the
clear and unqualified affirmative, for that is the only answer
a truly great nation can give that bears the burden of Free
World leadership in an interdependent world.
But in answering these questions in the affirmative we
must ask ourselves another question -- What are some of the
practices and precepts of national greatness that must be
reflected in our individual and collective attitudes if we are
to back up our words with deeds?
I shall touch only on a few.
We must continue to yield to no nation in the patient
pursuit of peace and the works of peace -- and continue to
demonstrate, as we do in Vietnam, that we have the will and
the 'tveapons to wage war, if wage war we must to defend our own
freedom and the freedom of our fe I lowman •
We must be willing to bear the burdens and accept the
uncertainties that come with such a war as we fight in Vietnam.
For Vietnam is a war of wills as well as a war of weapons. It
is a test of our willingness to survive -- to sur.mount -- the
strain of constant, continual conflict whose end is never
clearly in sight.
It is a crucial test. And we cannot afford to fail, for
if we do we shall fail ourselves as well as the people of
South Vietnam -- if we do, we shall have undermined the
faith of all whose freedom depends upon us, we shall have
undermined the web of alliances on which world peace and
security depend, and we shall have undermined our own faith
in ourselves.
We must live up to our commitment to the defense of
freedom. At the same time, we must strive to enlarge and
explore every avenue for unified action with our allies in the
Common defense -- for, indeed, to the extent that the ~llies of
freedom cannot unite in its defense they lessen the chances for
peaceful 2ccomrnodation with those T.\7ho 2re sc fiercel" '_~;-;i=:c=
agains t J.. t .
- 7 And we must continue -- together with other developed
nations of the Free World -- to carry our share of the burden
of leadership in the common task of helping the d~ve10ping
nations of the world to realize their destiny and enrich the
lives of their people in dignity and freedom.
We must continue to seize every opportunity to strengthen
and reinforce the fabric of Free World economic and financial
cooperation. We must continue to work with other peoples in
opening new vistas for world trade and development, financial
cooperation, and the education and nourishment of peoples
everywhere.
And we ~ taking the initiative in these endeavors -seeking assiduously in both quiet and public diplomacy
to enlist the cooperation of our allies in bold new efforts to
promote free trade, to strengthen the international monetary
system, and to make available to needy peoples everywhere the
opportunity and the means and the incentives for conquering
hunger and disease, and for living under the liberating light
of education and knowledge.
In all these ways, and more, we must continue in company
with other like-minded nations to lead the way in helping
better the world we share with all.
But in so doing we must recognize that, in the final
analysis, our ability to discharge our responsibilities of
.Free World leadership will depend on how we act at home -- in
maintaining a strong and dynamic economy -- in pursuing
vigilantly our national economic goals of full employment, a
healthy rate of growth, reasonable price stability and a balance
in our international payments -- in extending always for our own
citizens the boundaries of economic opportunity and social
justice.
Today, many in our country are disturbed that the
situation in Vietnam -- against the backdrop of our other
world-wide commitments -- will require us either to abandon
our goals of a Great Society at home or suffer the severe
economic dislocation attendant upon war and inflation that we
have known in the past.
These are legitimate and proper concerns. President
Johnson ans~vered them in his State of the Union c.Iessage \vhen
he said:
- 8 "But we will
in Vietnam to win
intentions of all
is mighty enough,
people are strong
rest of the world
here at home."
not permit those who fire upon us
a victory over the desires and the
the American people. This 'nation
its society is healthy enough, its
enough, to pursue our goals in the
while still building a Great Society
I have , today, no new facts to give you on our economic
situation -- no new programs or policies to announce. You are
welL acquainted with the issues -- and, I am sure, with the
arguments. What I wish to do, simply, is to put the whole
current discussion in proper perspective -- a perspective that
I am firmly convinced is as often overlooked or ignored as it
is profoundly required.
For one thing, let me make it absolutely clear that both
the present scale of activities in Vietnam -- and the
prospective scale insofar as those closest to it can foresee -remain within our capacity to sustain without anything like the
drastic measures required during the period of the Korean War.
What the situation does require is the exercise of
calmness, moderation, and responsible restraint on the part of
all of us, for it somewhat limits our margin for economic error,
and narrows our tolerance for economic excess and irresponsibility.
But it does not require dras tic taxation, d irec,tprice and wage
controls, and all the disturbing paraphernalia of conversion
to war that marked World War II and the Korean War.
Nothing is better calculated to destroy the calmness,
moderation and restraint necessary to crest our current
problems without retreat or dislocation than to confuse the
situation today with' that which faced us during these two previous
experiences. Having served as Administrator of the National
Production Authority and the Defense Production Administration
and as Director of the Office of Defense Mobilization during the
height of the Korean mobilization period, the sharp contrast
between that situation and the one today is particularly
striking to me. Let me make that contrast clear.
During the Korean War this nation carried out an intensive
defense mobilization p.rogram for two purposes -- to Hage the
:!onflict in Korea and at the same time reset, restore and build
lp a militarv and industrial mobilization base, substantially
iism2.n.tled 2fter ~\lorld Har II, adequ2_te to meet an:- 2Sc:::~:::'::"~~')r,
)f the KDrean Har into a world conflic t on the scale of
Jorld War II.
- 9 -
Since the Korean War three administrations, under
Presidents Eisenhower, Kennedy and Johnson, have maintained with
great care and expense a highly modernized, up-to-date force in
being designed to deal from a state of intensified preparedness
with any situation which might develop.
I invite your attention and that of every American to the
recent press statement of Defense Secretary Robert McNamara,
in which he outlined the situation in terms of military and
logistical dispositions.
I will limit my comments to some interpretation of this
situation in economic terms.
In the regular administrative budget our defense
expenditures rose drastically from $13.0 billion in fiscal 1950
to $50.4 billion in fiscal 1953, or an increase of 287 percent.
From fiscal 1965 through fiscal 1967,hovlever -- the period
during which all of the $10~ billion increase in special
Vietnam expenditures is scheduled to occur -- our defense
expenditures in the administrative budget will have risen from
$50.2 billion in 1965 to $60.5 billion in 1967, or an increase
of only 21 percent.
The figures for the total Federal budget tell exactly the
same story. From fiscal 1950 to fiscal 1953, total expenditures in the
administrative budget soared from $39.5 billion to $74.1 billion,
a rise of 87 percent. Total expenditures in the current
period -- the fiscal 1965- 67 period -- will grmv by only
17 percent, from $96.5 billion to $112.9 billion.
Let us look at this disparity of increases:in volume in
terms of its toll on our na tional output.
Defense expenditures in the Korean War rose from 4.9
percent of our national output in fiscal 1950 -- at the
beginning of the Korean War -- to a peak of 14 percent of our
output in fiscal 1953, or nearly three-fold over three years.
~rom fiscal 1965 through fiscal 1967 our defense expenditures
are scheduled to rise hardly at all as a percentage of our
national output, going from 7.7 percent to just over 8 ;J2:::"ccnt.
- 10 Equally revealing is the fact that, despite the scheduled
rise of $10~ billion in special Vietnam expenditures in the
fiscal year 1967 over the level contemplated in fiscal 1965,
our defense expenditures in anyone of these three years are
lower in relation to our economic output than in anyone of the
preceding five years from 1960 through 1964.
Or, if one wishes to look at the total Federal budget in
these terms, it rose during the Korean War from 15 percent of
our output to 20.7 percent. Ye t in the three fiscal years
1965-1967 our total Federal budget, as a percentage of our
output,will show only a negligible rise from a relatively low
14.9 pe!cent to just over 15 percent.
I am sure that against this statistical background this
audience, astute as it is with figures, perfectly understands
my point, which is simply this: our level of military
preparedness at the beginning of the intensified Vietnam conflict,
and our ability to bear the burden of required military expenditures,
are vastly greater than they were at the time of the Korean
conflic t.
In his recent review of the military and supply deployment
in Southeast Asia, Secretary McNamara made this striki~g
statement:
"The Southeast Asia effort is unique in our
military history. Never before has this nation
or any other nation been able to deploy so large
a force within so short a period of time, some
10,000 miles from our shores,without calling for
reserves, without extending active duty tours,
and without invoking the kindsof strict economic
controls normally associated vlith military
emergencies."
There are many reasons for this, but one fundamental reason
is simply that we are far better able today than we were in the
Korean period to handle without excessive strain or dislocation
the economic and military burdens of a conflict abroad such as
the one in which we are now engaged. The $10.5 billion of
additional expenditures for the Vietnam War scheq~J~d for
fiscal 1967 is less than l~ percent of the S722/bg{-b~:{~' rJ_tio~al
?roduc t originally proj ec ted for ca lendar 1966, 2nd no,',' vie~':ed
)y most as a slightly conservative figure.
- 11 Unquestionably, we must guard with unrelenting vigilance
against the danger of inflation in an economy closer to full
employment and full utilization of productive capacity than
at any time in many years. Since last fall I have been regularly
calling attention to this factor and the upward drift in the wholesale price index for the first time in seven years -- mainly
in the farm product and processed food categories, which account
for approximately two-thirds of the rise in that index from
January of 1965 to January of this year. As I have said
repeatedly on many occasions since last fall the situation also
requires all of us -- government, business, labor and the
individual citizen -- to accept our responsibilities, exercise
due restraint, and exemplify the moderation expected of a great
and confident people.
The Congress is completing action this week on the
President's tax proposals, which are designed to raise additional
revenues in the sum of approximately $6 billion during the
remainder of this fiscal year 1966 and fiscal year 1967.
By adding these revenues to those which arise naturally
as fiscal dividends from the application of existing tax rates
to a burgeoning economy, we expect the fiscal 1967 budget
to pass or approach balance, whether measured by the
administrative budget, the cash budget, or the income and
production account budget -- providing, of course, that the
totals reflected in the Pre~ident's budget are not substantially
increased as the Congress works its will through the
appropriation process.
The economic impact of this bill will begin to be felt
almost immediately after the President signs it and will build
throughout the year -- withdrawing from private purchasing power
a total of $2.7 billion during calendar 1966.
All of us will be watching with interest as these new
tax measures join together with the other forces that tend
to moderate the growth of the private sector of the economy
forces such as the Federal Reserve action a few months ago and
the increase in Social Security and Medicare taxes at an annual
rate of $6 billion which began to take effect last January.
As of na.;v the Administration, Ivhether practicing ne""
economics or old, is shifting from a policy of steady stimulus
to demand to a policy of moderate restraint to counter the
cyclical co~s2qu2nces of the Vietnam situatio~, co~in~ ~3
it has at a time when our economy is scaling ne\V peaks oi
achievement in moving toward our national economic goals.
- 12 But in shifting our policy, the Administration is very
mindful of the continuing task of preserving and promoting
continuous long-term growth,pursuing competitive efficiency,
and dealing with our balance of payments -- both now and in the
period that will surely come after Vietnam has been settled.
The announcement last week that unemployment had dwindled
to less than four percent (3.7 percent) in February -- the
lowest point in more than 12 years -- should not be greeted
with jitters. That is not the reaction of a great nation as
long as the unemployment rate was still seven percent for Negroes
and 10.9 percent for teenagers and three million would-be
workers were still wanting jobs. The lessening unemployment
should be welcomed in full and confident recognition of the
progress we can continue to make as we not only sustain,
but intensify what is already the greatest public manpower
training and retraining effort in our history in partnership
with the heightened programs of manpmver training that have
long played a large role in private indus trial effort. We
expect our labor force to expand by 1.6 million workers this year.
This expansion, and the need for continued improvement in our
national ability to deal with problems of structural unemployment,
constitute a pressing challenge to job creation in the private
sector.
Likewise, the realization that the large amounts of idle
and obsolete productive capacity which characterized the
American scene too much in the last decade have been whittled
away by increasing demand and investment should not be a cause
for gloom. Coming on stream in 1966 are vast quantities of new
industrial capacity reflecting the most modern and up-to-date
technology. These are the fruits of investment made in recent
years, and the fact that this type of activity promises to
continue in 1966 should not be viewed entirely with alarm.
We do not want to put the brakes on unnecessarily or too fast.
We want to watch and weigh all developments carefully -- those
that point up, and those that point to a levelling, and those
that point down. We are watching carefully what happens to the
President's budget in the appropriation process. It could move
the budget from the posture of approximate balance to either
a meaningful deficit or surplus. We are watching carefully
events in Vietnam so as to determine whether or not the measures
currently con templa ted in the 1967 budge t Hill be adequa [2 to
meet the situation as it develops.
As the President said only
last I,'leek he. ;7ill not hesitate "to act quickly If'.. t':P =2..",i..c c=
taxation if such action appears necessary.If
- 13 -
While we in Treasury have been continuing our contingency
planning in that field in which we are at all times regularly
engaged, I welcome the announcement over the weekend that a
Subcommittee of the Joint Economic Committee of the Congress,
chaired by Congresswoman Martha W. Griffiths of Detroit, will
open hearings this Wednesday to consider -- and I quote -"the need for and design of temporary tax changes which could
be enac ted promptly in response·· to a recognized need for
stimulating or restraining the economy." In appearing before
the Joint Economic Committee on February 3, I had suggested
that the House Ways and Means Committee or the Joint Economic
Committee study and recommend the type of tax increases most
suitable should inflationary pressures require additional fiscal
action.
In the meantime, we must all understand that whether or not
such action will be required will -- in large measure -- depend
on how all of us, in government and in the private economy,
exercise our clear responsibilities for restraint and moderation.
As I have tried to demonstrate, these responsibilities -while they take on new urgency in the context of our buoyant
economy and of the struggle in Vietnam -- are not something newly
invented to make business leaders unhappy or labor leaders irate
or the lives of all of us more difficult. These responsibilities,
on the contrary, are but the inevitable and natural consequence
of the responsibility that we as a nation -- that every single one
of us as Americans -- mus t bear for Free World leadership.
For the Federal government these responsibilities require
the kind of firm and effective restraint so fully displayed
in the budgets President Johnson has presented. For you in the
private sector these responsibilities above all require -- as a
matter of plain national need -- that you continue to follow
the path of restraint so clearly mapped out in the wage-price
guideposts of the President's Council of Economic Advisers.
I want to avail myself of the pleasure and privilege of
paying tribute to the distinguished chairman of this meeting
Mr. William J. Quinn -- and to the members of this audience for a
very special contribution that they are making to a sound and
strong America -- a contribution of particular interest to the
Treasury Dep2rtment.
- 14 I speak of your efforts on behalf of United States Savings
Bonds -- efforts that I know ~vi11 surpass even your remarkable
past successes in the forthcoming campaign which Mr. Quinn has
outlined so eloquently and cogently.
I speak of the leadership so brilliantly displayed by such
men as Mr. Quinn, Mr. Patrick H. Hoy, the State Chairman of your
Savings Bonds program; Mr. Crowdus Baker and Mr. James Griffin of
Sears Roebuck, who have served on the National Payroll Savings
Committee as co-chairmen for retail merchandising; Mr. John
deButts of Illinois Bell Telephone, former chairman for
telecommunications; Mr. E. S. Marsh, president of the Atchison,
Topeka and Santa Fe Railway and former chairman for railroads.
I speak of the kind of executive leadership exemplified by each of
you here today -- the kind of leadership so essential to the
success of the Payroll Savings drive throughout industry in the
Chicago area and throughout the nation.
As Mr. Quinn has explained, the goal of the nationwide
Committee is to spearhead the enrollment of at least 1,200,000
new Payroll Savers during 1966, the 25th or Silver Anniversary
year of the Savings Bonds program.
I need not tell you how important it is to reach -- even
exceed -- that goal. For every dollar that goes into United
States savings bonds does double duty in the fight against
inflation -- for it not only diminishes the private spending
stream but strengthens our ability to finance our national debt
in a noninflationary manner. At the same time, the savings bonds
.. program -- and the payroll savings plan in particular -- help
all who participate to enhance their own personal financial
well-being and establish the sound financial habit of systematic
savings.
The Savings Bonds program is one way -- and an important
way -- in which you, and all Americans, can demonstrate that
in deed as in ideal, in performance as in promise, we are a
nation of greatness -- a nation willing and worthy to bear the
responsibilities for leadership in an interdependent world.
000
- 3 -
~
sale or other disposition of Treasury bills does not have any special treatment, as
such, under the Internal Revenue Code of 1954.
The bills are subject to estate,
inheritance, gift or other excise taxes, whether Federal or State, but are
exem~ t~
all taxation nov or hereafter imposed on the principal or interest thereot by any State
~r
or any of the possessions of the United States, or by any local taxing authority.
purposes ot taxation the amount of discount at which Treasury bills are originally lold
by the United States is considered to be interest.
Under Sections 454 (b) and 1221 (5)
of the Internal Revenue Code ot 1954 the amount ot discount at which bills issued here.
under are sold is not considered to accrue until such bills are sold, redeemed or otheJ
vise disposed of, and such bills are excluded from consideration as capital ssset ••
Accordingly, the owner ot Treasury bills (other than lite insurance companies) issued
hereunder need include in his income tax return only the difference between the price
paid tor such bills, whether on original issue or on subsequent purchase, and the
lid
actually received either upon sale or redemption at maturity during the taxable year
tor which the return is made, as ordinary gain or loss.
Treasury Department Circular No. 418 (current revision) and this notice, prescrib
the terms of the Treasury bills and govern the conditions of their issue.
the circular may be obtained from any Federal Reserve Bank or Branch.
Copieaof
- 2 -
printed forms and forwarded in the special envelopes which will be supplied by Fedel'l
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
bankiDa
insti tutions will not be permitted to submit tenders except for their own account.
Tenders will be received without deposit from incorporated banks and trust companiee
and from responsible and recognized dealers in investment securities.
Tenders ton.
others must be accompanied by payment of 2 percent of the face amount of Treasury bi:
applied for, unless the tenders are accompanied by an express guaranty of payment by
an incorporated bank or trust company.
Immediately ai'ter the closing hour, tenders will be opened at the Federal Reser
Banks and Branches, following which public anouncement will be made by the Tre8BI1l7
Department of the amount and price range of accepted bids.
will be advised of the acceptance or rejection thereof.
Those Bubmitting tendert
The Secretary of the TreaIllE
expressly reserves the right to accept or reject any or all tenders, in whole ora
part, and his action in any such respect sha.ll be final.
Subject to these reeem·
tions, noncompetitive tenders for each issue for $200,000 or less without stated
price from anyone bidder will be accepted in full at the average price (in three
decimals) of accepted competi ti ve bids for the respective issues.
Settlement for
accepted tenders in accordance with the bids'must be made or completed at the Fedeli
Reserve Bank on
March 24, 1966
------~~d=~~----
, in cash or other immediately available tI
or in a like face amount of Treasury bills maturing
March 24, 1966
• CUll
j(ij0Q
and exchange tenders will receive equal treatment.
Cash adjustments will be made ~
differences between the par value of maturing bills accepted in exchange and the 11
price of the new bills.
The income derived from Treasury bills, whether interest or gain fromthe~
other disposition of the bills, does not have any exemption, as such, and ~•• ~
TREASURY DEPARTMENT
Washington
March 16, 1966
FOR IMMEDIATE RELEASE,
TREASURY'S WEEKLY BILL OFFERING
The Treasury Department, by this public notice, invi tea tenders for two series
, or thereabouts, for
of Treasury bills to the aggregate amount of $2,300,000,000
cash and in exchange for Treasury bills maturing
ki)
March 24, 1966
(CI)
,in the &OO~t
of $ 2,208,747,000 , as follows:
&)
91
.
-day bills (to maturity date) to be issued __M_ar_c_h-r.:::2~4~,_1_9_6_6__
tit)
C6}
in the amount of $ 1,300,000,000 , or thereabouts, represent-
Cd)
ing an additional amount of bills dated
and to mature
amount of $
December 23, 1965
June 23, 1966
,originally
---""':6a""'r)---
Ii)
,
issued in the
1,003,298,000, the additional and original bills
CdiX)
to be freely interchangeable.
182 -day bills, for $
1,000,000,000, or thereabouts, to be dated
ecii)
6»j
March 24, 1966
~
, and to mature
September 22, 1966
---~---~~~~----
The billa of both series will be issued on a discount basis under competitive
and noncompetitive bidding as hereinafter provided, and at maturity their face
will be payable without interest.
8I1)1III
They will be issued in bearer fonn only, aDd ill
denominations of $1,000, $5,000, $10,000, $50,000, $100,000, $500,000 and $1,000,001
(maturity value).
Tenders will be received at Federal Reserve Banks and Branches up to the clo.1I
Monday, March 21, 1966
• 'lWIdf.
¢(Iii)
will not be received at the Treasury Department, Washington. Each tender must be
hour, one-thirty p.m., Eastern Standard time,
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 decU.~,
e. g., 99.925.
Fractions may not be used.
It is urged that tenders be made ontbe
TREASURY DEPARTMENT
Ma r c h 16, 1966
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
$2,300,000,000,or thereabouts, for cash and in exchange for
Treasury bills maturing March 24,1966,
in the amount of
$2,208,747,000, as follows:
9Gday bills (to maturity date) to be issued March 24, 1966,
in the amount of $ 1,300 OOO,000, or thereabouts, r~presenting an
additional amount of bil i s dated December 23,1965, and to
nature June 23,1966,
originally issued in the amount of
$1,003,298,000,the additional and original bills to be freely
interchangeable.
182 -day bills, for $1,000,000~000, or thereabouts, to be dated
\larch 24, 1966,
and to mature ::;eptember 22, 1966.
The bills of both series will be issued on a discount basis under
:ompetitive and noncompetitive bidding as hereinafter provided, and at
aaturity their face amount will be payable without interest. They
lill 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 !t'ederal Reserve Banks and Branches
p to the closing hour, one-thirty p.m., Eastern Standard
ime, Monday, March 21, 19660
Tenders will not be
eceived at the Treasury De~artment, Washington. Each tender must
e for an even multiple of $1,000, and in the case of competitive
enders the price offered must be eAPressed on the basis of 100,
ith not more than three dec imals, e. g., 99. ~l25. Frac t ions may not
e used. It is urged that tenders be made on the printed forms and
orwarded in the special envelopes which will be supplied by Federal
eserve Banks or Branches on application therefor.
Banking institutions generally may submit tenders for account of
lstomers provided the names of the customers are set forth in such
,mders. Others than banking institutions will not be permitted to
Ihmit tenders except for their own account. Tenders will be received
thout deposit from incorporated banks and t.rust companies and from
!Sponsible and recognized dealers in investment securities. Tenders
'am others must be accompanied by payment of 2 percent of the face
lount of Treasury bills applied for, unless the tenders are
companied by an express guaranty of payment by an incorporated bank
trust company.
F-408
- 2 Immediately after the closing hour, tenders will be opened at t~
Federal Reserve Banks and Branches, following which public announcement will be made by the Treasury Department of the amount and price
range of accepted bids. Those submitting tenders will be advised
of the acceptance or rejection thereof. The Secretary of the Trea~~
expressly reserves the right to accept or reject any or all tenders,
in whole or in part, and his action in any such respect shall be
final. Subject to these reservations, noncompetitive tenders for
each issue for $200,000 or less without stated price from anyone
bidder will be accepted in full at the average price (in three
decimals) of accepted competitive bids for the respective issues.
Settlement for accepted tenders in accordance with the bids must be
made or completed at the Federal Reserve Bank on March 24, 1966, in
cash or other immediately available funds or in a like face amount
of Treasury bills maturing March 24,1966.
Cash and exchange tender.
will receive equal treatment. Cash adjustments will be made for
differences between the par value of maturing bills accepted in
exchange and the issue price of the new bills.
The income derived from Treasury bills, whether interest or
gain from the sale or other disposition of the bills, does not have
any exemption, as such, and loss from the sale or other disposition
of Treasury bills does not have any special treatment, as such,
under the Internal Revenue Code of 1954. The bills are subject to
estate, inheritance, gift or other excise taxes, whether Federal or
State, but are exempt from all taxation now or hereafter imposed on
the principal or interest thereof by any State, or any of the
possessions of the United States, or by any local taxing authority.
For purposes of taxation the amount of discount at which Treasury
bills are originally sold by the United States is considered to be
interest. Under Sections 454 (b) and 1221 (5) of the Internal
Revenue Code of 1954 the amount of discount at which bills issued
hereunder are sold is not considered to accrue until such bills are
sold, redeemed or otherwise disposed of, and such bi lIs are excluded
from consideration as capital assets. Accordingly, the owner of
Treasury bills (other than life insurance companies) issued hereunder
need include in his income tax return only the difference between
the price paid for such bills, whether on original issue or on
subsequent purchase, and the amount actually received either upoo
sale or redemption at maturity during the taxable year for which t~
return is made, as ordinary gain or loss.
Treasury Department Circular No. 418 (current revision) and thiS
notice prescribe the terms of the Treasury bills and govern the
conditions of their issue. Copies of the circular may be obtai~b
any Federal Reserve Bank or Branch.
000
- 2 -
The Under Secretary said:
"I am honored to have the privilege of going to
Venezuela to sign with that growing country the
(0-AQ4U')-.
4~~ ~.~
f~
"kttbilia tie £lij§iii7W.roetween the United States and a
I'-"'~
South American country.
"I am very pleased that a distinguished congressional
delegation has agreed to accompany me, to emphasize
~
2
this event.
'~e
are looking forward to seeing at first hand,
while we are in Venezuela the evidences of Venezuela's
social and economic progress, accomplishments that place
Venezuela wittnesses to the signing included Minister of Finance
Dr. Morales Crespo and members of the Board of Directors of the
Central Bank of Venezuela.
000
March 1;;'. 1966
For Immediate Release
~R\.lrsdeYr
March 17.,.-
1~6&-
UNDER SECRETARY BARR LEAVES FOR CARACAS TO SIGN
AN EXCHANGE STABILIZATION AGREEMENT
The Under Secretary of the Treasury, Joseph W. Barr,
left today for Caracas to sign with Venezuela the first
~
exchange stabilization agreement between the United ,States
and a South American country.
The Agreement, expected to be signed tomorrow, will
be in force for two years and will permit each side to
draw up to $50 million of the other's currency in amounts
and at times mutually agreeable.
~~
...!o..s..,p
Under Secretary Barr was accompanied by Senat
~
ntoy~
.
~~vll~\~~~(fc0~~
of New Mexico, Representative Talcot~of California and
CUW{/"!
r;O~er
Representat'iv~Whit~ of Idaho}as Congressional Advisers.
i2l!t«Q~
)11
TREASURY DEPARTMENT
March 17, 1966
FOR IMMEDIATE RELEASE
UNDER SECRETARY BARR LEAVES FOR CARACAS TO SIGN
AN EXCHANGE STABILIZATION AGREEMENT
The Under Secretary of the Treasury, Joseph W. Barr,
left today for Caracas to sign with Venezuela the first reciprocal exchange stabilization agreement between the United
States and a South American country.
The Agreement, expected to be signed tomorrow, will
be in force for two years and will permit each side to
draw up to $50 million of the other's currency in amounts
and at times mutually agreeable.
Under Secretary Barr was accompanied by Senator
Joseph M. Montoya, Democrat of New Mexico, Representative
Burt L. Talcott, Republican of California and Representative
Compton I. White, Democrat of Idaho, as Congressional Advisers.
The Under Secretary said:
"I am honored to have the privilege of going to
Venezuela to sign with that growing country the first currency
"swap" arrangement between the United States and a South
American country.
"I am very pleased that a distinguished congressional
delagation has agreed to accompany me, to emphasize the
national scope of our interest in this event.
"We are looking forward to seeing at first hand, while
we are in Venezuela the evidences of Venezuela's social and
economic progress, accomplishments that place Venezuela in
the forefront of countries carrying out the Alliance for
Progress."
Venezuela witnesses to the signing included Minister of
Finance Dr. Morales Crespo and members of the Board of Directors
of the Central Bank of Venezuela.
F-409
000
- ::> -
n\'(~
exempt; from all trucation now or hereafter :i.mposcd on the principa.l or interest
l,hercof hy any state, or any of the pOBnessions of the United States, or by
Jocn I. tux.i.nr; uuLhor:tty.
For purpoGcfJ or tnxuU,on l.he amount of discount at which
'l'l'ea.[;ury bills nrc originally sold by the United States is considered to be
terest.
~
in-
Umlcr Scctions ·1:54, (b) and 1221 (5) of the Internal Revenue Code of 1$.
t.he nmount of discount at uhich bills j,ssued hereunder are sold is not considered
to accrue until such bills are nold, redeemed or otherwise disposed of, and such
bills n1'C'
c)~cludcrl
from conGiaerntJon [u; eq>i tal flJHctn.
Accordingly, the owner
or 'l'reo.sury b:Uls (other tlwn li.fe inmu'ancc companies) issued hereunder need in.
clude in h],s income tax return only the di1'ference betvreen the price paid for such
bi llG, ,·,hether on oriGinal in riue or on
~;ub oelJ.ucnt
purchase, and the amount actuan,
received either upon Gale or redemytion at rna-turi ty durinc the taxable year for
"'hleh the return is made, as ordi.nary cnin or losn.
'l'rensury Department Circular No. 4:18 (current revision) and this notice, prescribe the termn of the Treasury bills and govern the conditions of their issue.
Copies of the circular may be obta.ined from any Federal ReGel"'J'e Bank or Branch.
-
XJOOtiX
lon.king insti tutiono will not be permI tkd to subml t tenders except for the.ir own
Lecount.
~rust
Tenders 1vill be recci.ved
Vi
tllout deposit from incorporated banks and
companies and from responsible cwd recoGnized deniers in investment securities.
~endcI's
from oLhers must be nccompani.eu by payment o:f 2 percent of the face amount
)f Treasury bills applied for, unle::1G the tenders are accompanied by an express
;uo.ranty of payment by an incorporated.bonk or trust company.
Immediately after the closing hour, tenders will be opened at the Federal Recrve
Ba.nl~s
and Branches, follm-linr; 11111c11 11l,b] lc announcement will be made by the
rcasury Department of the Dmount and price ranee of accepted bIds.
lor, tenders 1-Till be advisod of the acceptance or rejec Lion thereof.
l' the
~lreaGury
'l'hose Gubml tThe Secretary
e;.-presDly reserves the riGht to accept or reject o.ny or all tenders,
n 1'Thole or in part, and his action in any Guch respect shalJ- be final.
o these reservations, noncompetitive tenders for ;Ji 200,OQO
~
Subject
or less without
tated price from anyone bidder "rlll be accepted in full at the average price (in
hree decimals) of accepted competitive biue.
Settlement for accepted tenders in
ccordance "Tith the bids munt be made or completed at the Federal Reserve Banlc on
_M_a_r_c_h~3r:l~'r-l_9_6_6
_ _ _ , in caah or other immediatQly available funds or in a like
;w;ax
:Lce amount of Treasury billa maturinc;
~nders
will receive equal treatment.
March 31, 1966
~
Cash and exchanee
Canh adjustments will be made for differ-
lces bet1-Teen the par value of maturinc bills accepted in exchange and the issue
Ice of the
nCI-T
bills.
'!'he income derived from Treasury b illo, ,mether intere at or gain from the sale
other disposition of the b:Ula, does not have any exclIlption, as such, and loss
'OIU
the sale or other dispos1 tion of Treasury bills does not have any special
'eatment, an such, under the Internal Revenue Code of 1954.
'I'he bills are subject
estate, inheritance, gift or other cxcise taxes, 1-,hether Federal or state, but
TREASURY DEPARTMENT
Washington
FOR Ir-tlYIEDIATE RELEASE,
March 17, 1966
~~y REFUNDS
ONE-YEAR BILLS
The Treasury Department, by this public notice, invites tenders for
$1,000,000,000
, or thereabouts, of
(at):
365
iii
-d~
Treasury bills, for cash and
in exchange for Treasury bills maturing __M_a_r_ch_3_1..;.,~1_96_6_ _ _ _ _ , in the amount
of $ 3,200,714,000
XWX
, to be issued on a discount basis under competitive
il&l
noncompetitive bidding as hereinafter provided.
dated
March 31, 1966
The bills of this series will be
, and will mature
(CU-
the face amount ViII be payable without interest.
~d
March 31, 1967
, when
ru
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 Vill be received at Federal Reserve. Banks and Branches up to the
closing h.our, one-thirty p.m., Eastern Standard time, Thursday, March 24:, 1966.
m
Tenders ,,1111 not be received at the Treasury Department, Washington.
Each tender
must be for an even multiple of $1,000, and in the case of competitive tenders the
price offered must be expressed on the basis of 100, with not more than three deciMals, e. g., 99.925.
Fractions may not be used.
these bills viII run for
365
(Notwithstanding the fact that
days, the discount rate will be computed on
8
bali
tiijX
discount basis of 360 days, as is currently the practice on all issues of Tre8SU1'J
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
BranclJeI
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.
----
.0-fl c .
Others t;b8IJ
TREASURY DEPARTMENT
FOR IMMEDIATE RELEASE
TREASURY REFUNDS ONE-YEAR BILLS
The Treasury Department, by this public notice, invites tenders
or $1,000,000,000, or thereabouts, of 365-day Treasury bills, for
ash and in exchange for Treasury bills maturing March 31, 1966, in
he amount of $3,200,714,000, to be issued on a discount basis under
ompetitive and noncompetitive bidding as hereinafter provided. The
ills of this series will be dated March 31, 1966, and will mature
arch 31, 1967, when the face amount will be payable without interest.
hey 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
naturity value) .
Tenders will be received at Federal Reserve Banks and Branches
) to the closing hour, one-thirty p.m., Eastern Standard time,
1ursday, March 24, 1966. Tenders will not be received at the Treasury
;partment, Washington. Each tender must be for an even multiple of
1,000, and in the case of competitive tenders the price offered must
~ expressed on the basis of 100, with not more than three decimals,
g., 99.925. Fractions may not be used.
(Notwithstanding the fact
tat these bills will run for 365 days, the discount rate will be
Imputed on a bank discount basis of 360 days, as is currently the
actice on all issues of Treasury bills.) It is urged that tenders
made on the printed forms and forwarded in the special envelopes
ich will be supplied by Federal Reserve Banks or Branches on
plication therefor.
Banking institutions generally may submit tenders for account of
stomers provided the names of the customers are set forth in such
lders. Others than banking institutions will not be permitted to
)mit tenders except for their own account. Tenders will be received
:hout deposit from incorporated banks and trust companies and from
;ponsible and recognized dealers in investment securities. Tenders
)m others must be accompanied by payment of 2 percent of the face
)unt of Treasury bills applied for, unless the tenders are accompanied
an express guaranty of payment by an incorporated bank or trust
Ipany.
Lmmediately 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
~-410
- 2 range of accepted bids. Those submitting tenders will be advised of
the acceptance or rejection thereof. The Secretary of the Treasury
expressly reserves the right to accept or reject any or all tenders, ~
whole or in part, and his action in any such respect shall be final.
Subject to these reservations, noncompetitive tenders for $200,000 or
less without stated price from anyone bidder will be acc~pted in full
at the average price (in three decimals) of accepted competitive bids.
Settlement for accepted tenders in accordance with the bids must be
made or completed at the Federal Reserve Bank on March 31, 1966, in
cash or other immediately available funds or in a like face amount of
Treasury bills maturing March 31, 1966. Cash and exchange tenders
will receive equal treatment. Cash adjustments will be made for differ'
ences between the par value or maturing bills accepted in exchange a~
the issue price of the new bills.
The income derived from Treasury bills, whether interest or gain
from the sale or other disposition of the bills, does not have any
exemption, as such, and loss from the sale or other disposition of
Treasury bills does not have any special treatment, as such, under the
Internal Revenue Code of 1954. The bills are subject to estate, inheritance, gift or other excise taxes, whether Federal or State, but
exempt from all taxation now or hereafter imposed on the principal or
interest thereof by any State, or any of the possessions of the United
States, or by any local taxing authority. For purposes of taxation
the amount of discount at which Treasury bills are originally sold by
the United States is considered to be interest. Under Sections 454 (b)
and 1221 (5) of the Interna 1 Revenue Code of 1954 the amount of discount at which bills issued hereunder are sold is not considered to
accrue until such bills are sold, redeemed or otherwise disposed of, an,
such bills are excluded from consideration as capital assets. Accordingly, the owner of Treasury bills (other than life insurance companies
issued hereunder need include in his income tax return only the difference between the price paid for such bills, whether on original issue
or on subsequent purchase, and the amount actually received either up~
sale or redemption at maturity during the taxable year for which the
return is made, as ordinary gain or loss.
Treasury Department Circular No. 418 (current revision) and this
notice, prescribe the ter.ms of the Treasury bills and govern the conditions of their issue. Copies of the circular may be obtained fr~
any Federal Reserve Bank or Branch.
000
Treasury Department
Washington
FOR RELEASE P. M. NEWSPAPERS
FRIDAY, MARCH 18, 1966
REMARKS BY THE HONORABLE ROBERT A. WALLACE
ASSISTANT SECRETARY OF TREASURY
AT THE PRESENTATION CEREMONIES OF THE
SAM RAYBURN GOLD MEDAL
THE SAM RAYBURN LIBRARY, BONHAM, TEXAS
2: 00 P. M., MARCH 18, 1966
THE GOOD OF MAN MUST BE THE END RESULT
OF THE SCIENCE OF POLITICS
Each time I return to the Southwest where I was born and
where I lived the first 20 years of my life, I feel a deep
surge of pride.
Here is the Pioneer tradition
of accomplishment by hard work and perseverance.
the tradition
My grandfather,
John Milton Stewart, was the Chief Machinist at the S. L.
Irvin Company at nearby Honey Grove, Texas.
He was also a
railroad man, farmer and businessman, possessing the versatility
necessary to the taming of the prairie wilderness when the
Cheyenne Territory was opened in Southwestern Oklahoma in 1893.
This is also ancient land.
run broad and deep.
Here the roots of our history
Here the cultures of many people met
Indian, Spanish, Mexican, and American.
other.
One complemented the
Each contributed to the cultural heritage of the past
which we presently enjoy.
- 2 The man we honor here today was both a product of this
rich, diversified culture and a contributor to it.
Conscious
of the land's history, understanding of its people, Sam Rayburn
reflected in his long life of political purpose and purposeful
action their aspirations and their dreams.
The land and its
people are both richer for his having lived.
The strength and dignity of any monument, whether it
is a library fashioned of wood or a statue carved from stone,
is derived not from the wood or marble of which it is built,
but from the man in whose name it was erected.
The strength
of Mr. Rayburn was as the strength of the land which he loved.
His dignity was the dignity of the people whom he served for
over half a century.
Both the Sam Rayburn library and the
principles of the man which give it strength and dignity are
now a meaningful portion of the cultural legacy future
generations will share.
The gold medal presented here today honors Mr. Rayburn
as an outstanding representative of his people before the
greatest political tribunal of our land.
It is also a
testament wrought in gold of his country's appreciation and
indebtedness.
In creating this symbol of unselfish service
to the people he represented, the country he served, and
- 3 l,'
1 ,
the democratic principles in which he believed, we fbl10w
a tradition as old as our government -- a tradition that
recognizes a citizen's contribution to the preservation of
those ideals and principles that are the cornerstones of our
democratic institutions and which give substance and meaning
to democracy itself.
Aristotle taught that "the good of man must be the end
of the science of politics."
It was this principle that
guided Sam Rayburn throughout his illustrious life.
He was
eminently successful in bringing together diverse political
elements in our complex political structure.
Out of this
political synthesis, this crystallization of intellectual
ideas from all portions of our country, came laws that strengthened
the fabric of our society and enriched th~ lives of our people.
The laws that he helped fashion reflect his belief that the
good of man must be the end result of political thought and
action.
It is extremely important that we never lose sight of
this principle when we formulate laws, enforce them, and
interpret them within the framework of contemporary thought
and belief.
In every facet of our undertakings today, in our
endeavor to create a great society at home and a good society
- 4 of nations throughout the world, we are consious of this
principle -- that the good of man must be the end result of
political thought and action.
It guides our course of action
in Vietnam where we seek to restore peace and order in a
troubled land so that free people may choose a government and
a way of life of their own free choice.
It guides our course
of action here at home in our efforts to rebuild and dignify
our cities, preserve our country's beauty and safeguard our
natural resources, eliminate social ills that degrade and
destroy fellow Americans, expand and improve our educational
systems, and alleviate prejudice and bigotry so that all of us
regardless of his race, religion, or color
may live in
harmony and work in unison with each other to achieve goals
and dreams we share.
President Johnson, in his message to Congress on American
cities, talked about answering an ancient dream:
That dream is of .•. a land •.. of promise, of
hope, where it could truly be said, to every
man his chance, to every man, regardless of his
birth, his shining golden opportunity, to every
man the right to live and to work and to be
himself and to become whatever thing his manhood
- 5 and his vision can combine to make him.
There are few Americans who have not shared this dream.
It is a recurrent dream, because the moulding of a society
where the good of man is the end result of political thought
and action is a continuous process.
It develops through
succeeding generations, and each generation enriches or
distorts this dream in proportion to its attitude and approach
to solving the innumerable problems we face in our communities
and our country.
The complexity and enormity of the problems
that surround us at home and abroad preclude to any of us the
luxury of leisure or indifference in our search for solutions.
It is a search in which all must participate, for all are
effected.
Here in Bonham and as a Congressman and Speaker of the
House of Representatives in our nation's capital, Sam Rayburn
continually sought opinions of people in all walks of life to
help guide his thought and direct his actions.
For he realized
that democracy to live and flourish must reflect and mirror
the thoughts and aspirations of peoples of varied backgrounds,
different nationalities, and diverse interests.
He realized
that to the extent political action reflects the best thought
which can be brought to bear on any given problem, to that
- 6 extent do political laws enrich the lives of human beings and
contribute to democracy's growing legacy.
He was fortunate
to see within his own lifetime the beneficial effects of
numerous social and economic laws he helped formulate and
bring to fruition -- laws that enriched the lives of all
Americans and strengthened the democratic principles upon
which our society rests.
By his life and actions he contributed
toward the fulfillment of the American dream and enriched our
common heritage.
TREASURY DEPARTMENT
ADVANCE FOR USE AT 3:30 PM EST
FRIDAY, MARCH 18, 1966
UNITED STATES AND VENEZUELA
SIGN $50 MILLION EXCHANGE AGREEMENT
The Under Secretary of the United States Treasury,
Joseph W. Barr, and the President of the Central Bank of
Venezuela, Alfredo Machado Gomez, signed a $50 million Exchange
Agreement today, in Caracas.
The Agreement between the United States Treasury and the
Venezuelan Central Bank will be in effect for two years.
It provides for reciprocal currency "swap" facilities
under which:
-- The U. S. Treasury Exchange Stabilization Fund may
purchase Venezuelan bolivares in exchange for dollars, and
The Venezuelan Central Bank may purchase United States
dollars in exchange for bolivares,
Up to $50 million, at times and in amounts as may be
mutually agreed.
The availability of these currencies to the two countries
will increase the ability of their financial authorities to
cooperate effectively in international economic affairs, and
to promote stable and orderly conditions in exchange markets.
Senator Joseph M. Montoya, of New Mexico, Representative
Burt L. Talcott, of California and Representative Compton I. White,
of Idaho accompanied the United States delegation to Caracas as
Congressional Advisers, and were present at the signing of the
agreement in the new headquarters of the Venezuela Central Bank
at Caracas.
Venezuelan witnesses to the signing included Minister of Finance
Dr. Marales Crespo and members of the Board of Directors of the
Central Bank of Venezuela.
F-4ll
000
._----::)
--W
C
stat~~",;~~Of th~ Rf~~~:~!:JJ...lJ£"J~
Tax Treaty
Representatives of the United
China will meet shortly in Washington
between the two countries.
to~cus~~~~~ax
treaty
The treaty ~~ed to avoid
double taxation and to encourage trade and investment between the two
countries.
-.
"". ':1. ·.III\I(."l$b~,cl*~~ - AoII'I. IJ . . . . "'r ~~~..,;
.~~rop-osed-treaty
will be concerned with the tax treatment of
trading and other business enterprises, investment income and income
from services. (!he United
.
__
"
8LaLe~ i~ al~o
ploposing inclusioft of all
~
.
~.nV~Ilt.., ~~1;.",~~~_ w.r~c~ ;Utvestme~t- i ~n9111~ In .
fMT: J
ft.. ;f' f . .!t 1~ ~<!::~Lf-. -----jJl('Y .......'j
~
-J.a '2r:_.. ~
general i:;fie--.alscuss:lofi1l will be -Reeel ~8Q ~ income tax LI eatl with ---...
(/~t".A-j
;(:/-..-?_'.1('r;;::(j1
I
~
/,
Israel, the most recent treaty negotiated with a developing countrj.
::.w
l:ae,rsons having an interest in a tax treaty with the
Republ~of
China
may wish to consult that treaty and those with Thailand and Philippines,
A..
all three of which are now pending in the Senate, as well as the
Statement by Assistant Secretary of the Treasury Stanley S. Surrey
contained in the hearings on the treaty with Thailand before the
Subcommittee on Tax Treaties of the Senate Foreign Relations Committee
held in August 1965.
-=w
hlc-~
..,...I-~'>_~·J~·
/:.
Pe! ~WiSh __ to offer suggestions for consideration in connection
.!l
~
before April 1, 1966
with the proposed treaty are invited to send their views/'to Assistant
Secretary Surrey, Treasury Department, Washington, D. C.
- hV""
. . _ ___
20220.
TREASURY DEPARTMENT
IMMEDIATE RELEASE
UNITED STATES AND REPUBLIC OF CHINA
TO DISCUSS INCOME TAX TREATY
Representatives of the United States and of the Republic of
China will meet shortly in Washington to resume discussions
previously held in Taipei on an income tax treaty between the
two countries. The treaty would be designed to avoid double
taxation and to encourage trade and investment between the two
countries.
The proposed treaty will be concerned with the tax treatment
of trading and other business enterprises, investment income and
income from services. In general, it is expected that the
treaty will be along the lines of that concluded with Israel,
the most recent treaty negotiated with a developing country.
Persons having an interest in a tax treaty with the
Republic of China may wish to consult that treaty and those
with Thailand and the Philippines, all three of which are now
pending in the Senate, as well as the Statement by Assistant
Secretary of the Treasury Stanley S. Surrey contained in the
hearings on the treaty with Thailand before the Subcommittee
on Tax Treaties of the Senate Foreign Relations Committee held
in August 1965.
Individuals who wish to offer suggestions for consideration
in connection with the proposed treaty are invited to send
their views before April 1, 1966 to Assistant Secretary Surrey,
Treasury Department, Washington, D. C. 20220.
000
F-4l2
OFFICE OF THE SECRETARY OF THE TREASURY
Washington, D. C. 20220
STATEMENT
by
DAVID C. ACHESON
Special Assistant to the Secretary
(for Enforcement)
before the
SUBCOMMITTEE ON CRIMINAL LAWS AND PROCEDURES
COMMITTEE ON THE JUDICIARY
UNITED STATES SENATE
ON S. 2187, S. 2188, S. 2190, S. 2191 AND S. 2578
TUESDAY, MARCH 22, 1966
Mr. Chairman:
I am here this morning to discuss the views of the
Treasury Department on several bills which deal with various
aspects of criminal enforcement and criminal procedures.
I
will deal with the bills individually.
S. 2187
This bill, if enacted, would outlaw membership in the
Mafia and similar organizations.
While many of the details
of such criminal organizations are shrouded in secrecy,
diligent investigation sometimes is able to penetrate this
- 2 secrecy and to produce evidence of association, participation in criminal designs, and some objective evidence of a
furtherance of those designs by overt acts.
Such organiza-
tions should receive the continuing intensive investigation
of federal law enforcement officers.
This Department has a strong interest in measures which
seem likely to provide useful weapons in its continuing
efforts against organized crime.
It is not clear to us,
however, that S. 2187 would extend the reach of the system
of statutes that is already available, or make accessible
evidence which investigation cannot now provide.
Where the
evidence would support prosecution under the provisions of
s.
2187, we think it likely that the prosecution could also
resort to 18 U.S.C.
§
371, punishing conspiracies to commit
offenses against the United States, or 18 UQS.C.
§
1952,
punishing a variety of uses of interstate and foreign commerce
facilities in furtherance of criminal activity.
These provi-
sions, when coupled with the provisions of 18 U.S.C.
§§
2 and
3, defining parties to criminal offenses, would probably cover
the same evidentiary ground that would be encompassed by
s.
2187.
- 3 -
s.
2188
This bill would supplement the protection against
intimidation afforded witnesses under 18 U.S.C.
§
1503, by
making it a crime to endeavor to obstruct, delay or prevent
the communication of information relating to a violation of
any federal law to a criminal investigator.
Section 1503
has been interpreted to apply only where there is a proceeding pending before a court.
The proposed section would apply
where no formal proceeding is pending, although it also could
be applied with respect to such proceedings.
The Treasury
Department sees important advantages in punishing the interference with communication of information to investigators,
without regard to the pendency of a formal court proceeding.
The cases are many in which potential witnesses against major
criminal subjects have disappeared, died or changed their
story during an investigation.
We support the enactment of
S. 2188.
Organized crime cases present special risks of intimidation before the matter becomes one of judicial cognizance.
Organized crime figures commonly employ subterfuge and
secrecy.
The development of cases against them often involves
- 4 a protracted investigation before sufficient information is
gathered to commence a prosecution.
The risk that potential
witnesses will be identified and silenced during such
extended investigations is substantially greater than in
the typical brief police investigation.
Two technical matters in S. 2188 deserve mention.
First,
it appears that the proposed new section should be numbered
§ 1510, placing it at the end of the chapter dealing with
obstruction of justice.
Second, because potential witnesses
may in some cases be dealing directly with federal prosecutors,
it would appear wise to include prosecuting attorneys for the
United States within the group to which communication of
information is protected.
This could be accomplished by
adding, after the words "criminal investigator," wherever
they appear in subsection (a) of the proposed new section,
"or prosecuting attorney," and by adding to subsection (b)
a definition of the term prosecuting attorney which would
include United States Attorneys, Assistant United States
Attorneys, Special Assistant United States Attorneys, and
other appropriate Department of Justice attorneys assigned
prosecuting duties.
The precise language of this definition
- 5 should reflect the views of the Department of Justice.
S. 2190
S. 2190 would add new categories of criminal offenses
under Title 18 of the United States Code as to which immunity
from prosecution may be granted to those whose testimony is
sought.
The immunity procedure would apply in proceedings
before a grand jury or court of the United States.
Most of
the offenses to which immunity provisions would be extended
are within the investigative jurisdiction of the Department
of Justice.
As to those, we defer to the views of that
Department concerning the advantages which would result from
the immunity provisions.
This Department's Bureau of Narcotics has had experience
with immunity grants under the provisions of 18 UoS.C.
~
1406,
which authorizes such grants in connection with certain narcotic and marihuana offenses.
We have found that grants
of immunity to carefully selected individuals can be an
- 6 extremely helpful tool in penetrating multi-party criminal
transactions.
Based on our experience, we believe that
immunity provisions, subject in every case to procedures
like those in S. 2190 as a safeguard against improper use,
would be helpful to federal enforcement efforts, if immunity
were available generally without narrow limitation to particular crimes.
Any review of immunity provisions generally must,
of course, come from the Department of Justice and we would
defer to that Department's views on the broad question.
Pending any such general review, we see no objection, and
some advantages, to attaching immunity provisions to additional criminal statutes where they can be effectively utilized.
Investigations of violations of
§
1952 of Title 18
involving liquor and narcotics are under subsection (c) of
that section, designated to be supervised by the Secretary
of the Treasury.
Our experience with that section supports
the Justice Department's view that it is an effective tool
in combatting organized crime operations.
Considering the
multi-party nature of most of the operations involving liquor
and narcotics which would be punishable under section 1952,
it might well be necessary to grant immunity to peripheral
participants in order to develop certain cases against those
- 7 principally responsible for the enterprise.
We therefore
support the addition of immunity provisions to section 1952.
s.
2190 would also provide immunity procedure in prose-
cutions for the offenses set forth in Chapter 11 of Title 18,
dealing with bribery, graft and corruption.
We agree that
immunity provisions would be helpful with respect to such
offenses.
There is some common ground between that chapter
and the offenses set forth in 26 U.S.C.
§
7214, which punishes
certain similar acts committed by officers and employees of
the United States acting in connection with the revenue laws.
For the reasons applicable to Title 18 offenses, we believe
that immunity provisions should be added to § 7214.
S. 2191
This bill would provide procedures for civil commitment
of certain classes of drug addicts who either voluntarily
seek such commitment, or who have been convicted of a federal
penal law relating to narcotics.
In addition, provision is
made for post-hospitalization care programs and appropriations
are authorized for certain grant programs in the field of
treatment of narcotics addiction.
We view the provisions of S. 2191 in the context of
the Administration's support for programs of treatment for
- 8 -
narcotics addiction, a position recently expressed in the
proposal and support by the Treasury and Justice Departments
of
s.
2152.
Both S. 2152 and S. 2191 are expressions of
concern over the social problem posed by victims of narcotic
addiction.
A comparison of the two bills reveals several
differences in approach to this difficult problem.
We believe
that there are certain advantages in S. 2152, which are detailed below.
S. 2152 is limited in application to those addicted to
narcotic drugs, while S. 2191 extends, in addition, to users
of marihuana and peyote.
There is a substantial difference
in the addictive characteristics of narcotics, compared to
marihuana and peyote.
There is little evidence that the anti-
social behavior of marihuana and peyote users stems from a
compulsion to obtain drugs comparable to that which governs
the lives of narcotics addicts, especially those addicted to
heroin.
Peyote and marihuana users are presently eligible for
treatment at the federal treatment centers at Lexington and
Fort Worth.
In the present state of medical knowledge, we do
not believe that the extended programs of treatment that are
appropriate for narcotic addicts would achieve much for marihuana
and peyote users.
- 9 -
s.
2191 provides a separate procedure for persons who
voluntarily petition a District Court for civil commitment
for narcotics addiction, while S. 2152 limits the commitment
procedures to persons charged with or convicted of certain
federal crimes.
This voluntary commitment procedure affords
the petitioner the right to counsel, including the assignment
of counsel for indigent petitioners; provides for medical
examination and report by two doctors, including one psychiatrist; affords a right to trial by jury of issues relating
to addiction; provides for a full adversary hearing; and permits final orders of commitment to be reviewed by a Court of
Appeals and the Supreme Court.
We doubt that this complex procedure is either necessary
or desirable.
We see a waste of the time of court and counsel
in pushing through a litigation in order to sustain a result that
both parties want.
Moreover, we think great care ought to be
taken not to establish federal programs of treatment which would
either duplicate or be inconsistent with state programs.
One
way to avoid this is to limit federal commitment procedures to
those who are in federal custody or are otherwise a primarily
federal responsibility.
S. 2191 also provides for commitment for treatment, following
conviction for federal narcotics offenses, in lieu of imposition of
- 10 imprisonment or other penalty.
S. 2152, on the other hand,
provides for both pre-conviction and post-conviction commitment.
In addition, S. 2152 permits the procedure to be
invoked with respect to those charged with or convicted of
non-narcotics offenses, subject to certain limitations concerning more serious crimes and persons showing recidivistic
tendencies.
The pre-conviction procedure of S. 2152 has several
advantages.
First of all, it provides a means for choosing
between conviction and treatment early in the proceedings.
If commitment for treatment is elected, the addict is not
free on bond during the pendency of the proceedings, but is
confined for examination.
In view of the substantial evidence
that addicts are frequently engaged in the daily commission of
crimes to finance their habit, there is a definite value in
removing them from circulation as early as possible.
Second, this procedure may result in avoiding the necessity of a criminal trial.
The commitment procedure, unencum-
bered by the need for jury determination of issues, would
take off of the court the burden of a criminal trial in a
case which was appropriate for civil commitment.
- 11 Finally, the procedure of S. 2152 offers substantial
incentive for successful treatment to the addict by enabling
him to avoid a criminal conviction if he satisfactorily
completes the prescribed course of treatment and follow-up
care.
Similarly, providing for commitment in lieu of prosecution for non-narcotic offenses has substantial merit.
Many
narcotic offenders become involved in other crimes--the theft
and forgery of government checks is one common form--for the
specific purpose of funding their addiction.
Whether the
addict comes before the court charged with a narcotic offense
or another offense may be purely fortuitous, and should not
affect the availability of civil commitment proceedings, so
long as the individual is not a dangerous criminal or a
clearly inappropriate case for treatment.
S. 2578
This bill would modify much of the current federal court
interpretation of the "McNabb-Mallory Rule, "i, by providing
that confessions made by persons under arrest or detention
by law enforcement authorities would not be rendered inadmissible
* McNabb
v. United States, 318 U.S. 332 (1943)
Mallory v. United States, 354 U.S. 449 (1957)
- 12 -
solely because of delay in bringing such persons before a
committing authority.
In addition, the bill would require,
as a prerequisite to the admissibility of such confessions,
that the person making the confession be (1) advised of the
nature of the offense believed to have been committed by
him, (2) advised of his right to remain silent and of the
possibility that any statement might be used against him,
and (3) accorded reasonable opportunity to retain and consult
with counsel.
Legal problems arising during the interval between arrest
and subsequent arraignment of an accused are among the most
difficult which today affect law enforcement work.
There is
a compelling need for clear and workable standards which will
permit enforcement officers to ask questions of persons under
arrest while fully complying with the law and heeding considerations of basic fairness.
No such standards are now
available and the general requirements of the McNabb-Mallory
rule have widely disparate and unpredictable application in
the federal court system.
The McNabb-Mallory rule is derived from Rule 5 of the
Federal Rules of Criminal Procedure, rather than from a constitutional provision.
There are, however, several constitu-
tional provisions which must be accommodated--the right-to-
- 13 counsel provisions of the Sixth Amendment and the selfincrimination and due-process provisions of the Fifth
Amendment.
At the present time the Supreme Court has before it for
review four cases* the decisions in which may clarify the
effect of those constitutional guarantees upon questioning
procedures after arrest.
Questioning procedures and standards
are also being considered by the Pre-Arraignment Procedure
Advisory Committee of the American Law Institute, by the
American Bar Association's Special Committee on Minimum
Standards for Criminal Justice, and by the Office of Criminal
Justice in the Department of Justice.
The Supreme Court's
action in the pending cases and the conclusions of the groups
just mentioned will surely affect the course of executive
policy governing pre-arraignment practices and the nature of
the legislative remedies that the government should seek.
We do believe that some post-arrest questioning is
essential to determine whether to invoke subsequent steps in
* Morando v. Arizona, #759; Vignera v. New York, #760;
Westover v. United States, #761; and Johnson v. New Jersey,
#762. Certiorari in each case was granted on November 22,
1965.
- 14 the criminal process, and, if so, what precise offenses and
degrees of offenses should be charged.
Such questioning is,
we believe, consistent with a proper concern for the rights
of those in custody, with fundamental fairness, and with the
public interest in the solution of criminal cases.
We think
that we would be wise to await court disposition of presently
pending cases, and a sense of the direction of the studies
mentioned above, before making a specific legislative proposal.
# # # # # # #
TREASURY DEPARTMENT
RELE:ASE 6: 30 P.M.
~, March 21, 1966.
RESUL£S OF TREASURY'S WEEKLY BILL OFFERJNG
The Treasury Department announced that the tenders for two series of Treasury bills,
series to be an additional issue of the bills dated December 23, 1965, and the other
es to be dated March 24, 1966, which were offered on March 16, 1966, were opened at
Federal Reserve Banks tod~. Tenders were invited for $1,300,000,000, or thereabouts,
l-day bills ~~d for $1,000,000,000, or thereabouts, of 1H2-day bills. The details of
two series are as follows:
~
OF ACCEPTED
BIDS:
~TITIVE
High
Low
Average
'0 % of
91-day Treasury bills
maturing June 23, 1966
Approx. Equiv.
Price
Annual Rate
98.848
4.557%
98.839
4.593%
98. Bli3
4.576~
182-day Treasury bills
maturing September 22, 1966
Approx. Equiv.
Price
Annual Hate
97.592
97.582
97.585
Y
4.763%
4.783%
4.776%
Y
the amount of 91-day bills bid for at the low price was accepted
'4 % of the amount of 1e2-day bills bid for at the low price was accepted
TENDERS APPLIED FOR AND ACCEPTED BY FEDERAL RESERVE DISTRICTS:
trict
ton
York
Applied For
.$
34,290,000
Accepted
Applied For
Accepted
$
24,140,000: $
7,167,000
$
7,167,000
1,~86,67h,000
758,57li,000
1,255,258,000
575,338,000
lad~lphia
32,685,000
15,420,000
20,603,000
6,953,000
{eland
33,934,000
33,584,000
50,905,000
45,887,000
mond
14,330,000
14,330,000
10,299,000
10,299,000
mta
46,8B1,000
37,781,000
35,082,000
22,425,000
:ago
337,384,000
218,245,000
329,941,000
160,130,000
Louis
51,973,000
45,973,000
40,586,000
37,584,000
leapolis
22,532,000
19,732,000
12,137,000
9,637,000
las City
31,481,000
31,461,000 :
13,487,000
13,457,000
as
29,065,000
24,265,000
14,145,000
11,085,000
Francisco
101,293,000
76,913,000
133,541,000
100,151,000
TOTALS
$2,222,522,000 $1,300,418,000
$1,923,151,000
$1,000,113,000 £/
lUdes $280,101,000 noncompetitive tenders accepted at the average pr~ce of 98.843
ludes $138,098 000 noncompetitive tenders accepted at the average prlce of 97.585
se rates are o~ a bank discount basis. The equivalent coupon issue yields are
~ for the 91-day bills, and 4.96% for the 182-day bills.
!I
3
- 16 In conclusion, economic conditions, national goals
and international problems are never static -- nor can
we stand still in the application of tax policy to
improve these conditions, to help achieve these goals,
or to solve these problems.
Tax policy contributed in a material way in closing
the GNP gap in the first half of this decade and in helping to obtain our other objectives.
\~e
will find it necessary to use tax policy in the
second half of this decade to aid us in maintaining a
continued balanced economic expansion with reasonable
price stability.
I am confident that this fiscal tool
will continue to serve us in this period as well as it
has in the past few years.
-ou" -
- IS In addition, there is a Deed for re-ezamiDatioa of
the rules relating to private pension plans.
The lleport
of a cabinet Committee on corporate pension funds many
months ago set certain goals for thia re-examiaatiOll:
to broaden the coverage of such plans to inc Iud. a wider
range of employees, to provide greater assurance that th.
pension benefits will materialize and be paid; to .aka
these plans as compatible 8S pos8ible with a freely
mobile labor force; and to eliminate special tax pref..ences associated with these pIau which do not
~
the
test of efficiency and fairneas.
The tax rules applicable to private pension pla..
were adopted almost a quarter-century ago -- in 1942 .when pension plans were just beginning to flourish.
Th.
Treasury and other departments are hopeful that the
a.
re-examina tian of these rules currently under way throuab
discussions with representatives of business, labor J
t. i
the actuarial profession will
5 'J/. ;:tD$Ur~) that
I
the rules aDd
j\
standards governing the qualification of these private
pension plans are fully in keeping with current
and objectives.
eondit~
- 14 -
priority of Federal tax liens in relation to the interestl
of other creditors.
This technical and unspectacular
legislation has great significance for insurance companie.,
hanks, factors, sureties, and others in adapting the lien
provisions to modern methods of financing and credit extension, and in solving the accumulated problems of many
years in this area.
The Treasury recommendations for curbing abuses by
tax-exempt private foundations are another part of the
current tax scene.
These recommendations deal with activ-
ities which have put private foundations under a cloud for
many years, despite the fundamental and strong attachment
Americans hold for private philanthrophy.
President
Johnson called for action this year on tax reforms to
correct theseSbuses -- which involve such matters as
"self-dealing" by foundations, unjustifiable delays in the
distribution of benefits to charity, the involvement of
foundations in business activities, the use of foundatimd
by families to control corporate and other property, and
other practices having no connection with philanthrophy.
- 13 The Ways and Means Coamittee t after detailed and
painstaking consideration of the rules governing the tax
treatment of foreign individuals and corporations inveating in the United States, last week ordered reported the
proposed Foreign Investors Tax Act.
This measure ia
designed to modernize the technical rules in this area
by eliminating provisions of present law having no tax
policy justification, and which as a consequence can act
as irritants tending to deter foreign investors from
investing in the United States.
This legislation alao
would eliminate provisions permitting unjustifiable preferences to such investors over our own citizens.
~
a
consequence, the legislation covers a wide area of both
income and estate taxation, and indeed is the first comprehensive review of this subject that has been undertaken.
Another measure is the proposed Federal Tax Lien Act
of 1966, now also nearing the final stage of consideration
in the House Ways and Means Committee.
This Act would
carry out the first comprehensive revision and
mod.~tl~
of the provisions of the Internal Revenue Code govemiDI the
- 12 -
be reduced.
Further, when tax reduction once again becOlllel
feasible, particular attention must be given to relief of
those at or near poverty levels of income."
The matter of equity in the distribution of the tax
burden involves difficult problema and deep-seated feel ina•.
Basic tax reforms are usually attended by lengthy Coaare.aional consideration and public debate, all of which leems
to me to be entirely appropriate.
What may
ev~olve,
ing tax legislation.
therefore, is a dual system respectIn dealing with short-term temporary
changes in tax levels to meet current economic conditioD
@FedFRASER