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LIBRARY
ROOM 5030
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LIBRARY
pnOM
70
'I,'
i· I t
50~O
JUN 161972
TREASURY DEPARTMENT
LIBRARY
~I)OM
5030
JUN 1 6 1972
TREASURY DEPARTMENT
TREASURY DEPARTMENT
•
WASHINGTON. D.C.
November 7, 1969
LIBRARY
ROOM 5030
FOR IMMEDIATE RELEASE
EDWARD J.GENG APPOINTED
TO DEBT MANAGEMENT POST
n--AR TIJeNT
•r
TRF~·~"'-·'·'
:.. ,_i-1Y}l, i LId'"
Secretary of the Treasury David M. Kennedy today announced
the appointment of Edward J. Geng as his Special Assistant for
Debt Management.
Mro Geng succeeds R. Duane Saunders who returned to
private industry in July of this year.
Mr. Geng, 38, of North Merrick, New York, received a
Bachelor of Business Administration degree from St. John's
University in 1957 and a Master of Business Administration
degree from New York University in 1962. Mr. Geng completed
the course of study at the Stonier Graduate School of Banking,
Rutgers University in 1966. From 1951 to 1952 he served in
the United States Army.
Mr. Geng joined the Federal Reserve Bank of New York as
an Assistant Bank Examiner in 1957 and transferred to the
Open Market Trading Desk in the Bank's Securities Department
that same year. In 1964, he was appointed an officer of the
Bank with the title Manager, Securities Department.
From 1966 to April 1967, Mr. Geng served as Assistant
Secretary of the Banko He was appointed an Assistant
Vice president in 1968, with responsibility in the Open
Market Operations and Treasury issues function.
Mr. Geng is married to the former Arlene Fuchs of
Glendale, New York. They have three children and live at
8617 Fenway Road, Bethesda, Maryland
0
000
K-260
TREASURY DEPARTMENT
Washington, D. C.
FOR RELEASE UPON DELIVERY
REMARKS OF THE HONORABLE MURRAY L. WEIDENBAUM
ASSISTANT SECRETARY OF THE TREASURY FOR ECONOMIC POLICY
BEFORE THE MORTGAGE BANKERS ASSOCIATION
CHICAGO, ILLINOIS
FRIDAY, NOVEMBER 7, 1969, 12:00 NOON, CST
ECONOMIC POLICY AND THE BUSINESS OUTLOOK
This is the dangerous season for economic forecasting
even the innocent observer is likely to get caught in the
crossfire of conflicting predictors.
Rather than add to the
barrage of diverse views, I would like to offer for your
consideration a framework of economic analysis which I hope
1S
useful to all of the participants, bulls and bears alike.
A wise economic policy at any time depends, of
on an evaluation of the economic outlook.
c~urse,
Here, the richness
of our statistical information system seems to present a problem
to some analysts.
It appears that at present we have a mixed
bag of economic signals which, unfortunately, do not all point
in the same direction.
This mixed assortment of indicators
includes such portents of expansion during the months ahead
as rising new orders for durable goods; a number of private
surveys of business plans which point to an expansion in
K-26l
-
2 -
plant and equipment outlays in 1970 in a range of 5 percent
to 9 percent; some resurgence in consumer spending in August,
September, and apparently in October -- following a period
of sluggishness since last April.
Indeed, in September,
the index of the "leading indicators," which had been
declining ln recent months, rose noticeably, which might
suggest expansion of economic activity in the months ahead.
On the other hand, some other statistical indicators
do point to lessened inflation.
Most measures of real
economic activity -- GNP in constant dollars, industrial
production, employment, and manhours
no longer are
registering the strong gains which were being made during
1968.
Perhaps this is best summarized by the decline in
the rate of real economic growth to little more than 2 percent
during the first three quarters of 1969, as compared with about
5 percent in the preceding three quarters.
At such times as this, it is not an unnatural temptation
among some of our brethren in the forecasting fraternity to
project a trend line from a single observation point, often
times the most recent.
After all, using two observation
points could really inhibit the creativity of the projector.
Amidst all this attention focused on statistical
indicators, I would like to make a personal statement for
the record.
I have never subscribed to the simple-minded
notion that we measure major swings in economic activity by
3
- 3 fine percentages.
Specifically, it has become fashionable
to state that a recession occurs in our economy anytime that
real economic activity declines in two successive quarters,
even by as little as one-tenth of one percent.
As a professor
of economics, I always cautioned my students against excessive
reliance upon our ability to measure such minute changes in
our massive economy.
I wish to make it clear that I am not forecasting any
such condition.
Rather, I am drawing attention to what
I consider misleading economic analysis.
For one thing, small
differences in the rate of change in GNP, when they first
become available in preliminary estimates, may not hold up
subsequently when revised figures are published.
Against this perspective, here is my personal interpretation of the mixed bag of signals that we are getting.
To
me, it signifies a substantial change in the underlying
environment.
If we had taken similar soundings six or even
three months ago, almost all of the indicators would have
pointed in a single direction -- upward, with an accompanying
upsurge of
inflat~onary
pressures.
It is this change to a mixed pattern in the array of
statistical indicators that leads me to expect that -- with
continued application of economic restraint -- inflationary
pressures will begin to subside.
If we look at the recent
quarterly patterns of the consumer price index, for example,
- 4 -
we find that the upward movement has leveled off -- at an
annual rate of 6 percent for each of the three quarters of
1969 to date.
Perhaps not much evidence of slowing price advances
may be registered in this and other general measures of
the prices in the immediate future.
This will be reflecting
the slow adjustment of the price level to an ongoing inflationary
momentum which has been underway for four years.
Strong
pressures have been generated on the cost side, and these
may not subside quickly.
Of course, I have already learned from my most recent
tour in government service that any future-oriented evaluation
is fraught with great dangers, especially to the person taking
the look forward.
Specifically, changes in public policy
both designed as well as unintentional -- may make the
evaluation out-of-date.
I do see such risks in the present
environment.
As the Treasury Department has stated repeatedly in the
last several months, prompt congressional action on extending
the surcharge and related revenue-raising
~egislation
is needed
to maintain a significant budget surplus for the current fiscal
year.
Any delay in such action introduces uncertainty in
private planning and, unnecessarily, reduces the anti-inflationary
impact of the tax action when it is finally taken.
- 5 -
Thus, my relatively sanguine prognosis that the
inflationary pressures will begin to dampen in coming months
is based on the assumption that the Congress will soon take
the necessary fiscal action: extending the income tax surcharge
at 5 percent to June 30, 1970, eliminating the investment tax
credit, and extending some expiring excise tax rates.
Without
such tax action, fiscal policy will move from its present
position of moderate restraint to one of unnecessary and
unfortunate ease.
Maintaining the flow of revenue into the
Treasury is extremely important in terms of the current effort
to control inflation.
This is no time for a large tax reduction.
Yet, that is exactly what will happen if the surcharge is
permitted to expire in less than two months.
I know that recommending tax extensions and increases
is not a very popular thing to do.
But the consequences of
inaction, when the public realizes the significance of inaction,
may become even more unpopular and undesirable.
Specifically,
failure to continue the surcharge and take related tax action
would cost the Treasury $4 billion in revenue this fiscal year.
The general effect on our anti-inflation effort would be clear
and unfortunate. But also this would mean that in the absence
of legislation action, we in the Treasury would have to be
going into the money market for approximately $4 billion
and beyond our basic needs.
tDOVe
Such a move by the Government
could only increase the pressure on a tight money market,
- 6 -
thus exerting an upward force on interest rates -- at a time
when we all hope that they will recede somewhat from their
current historic peak.
subject.
There is another side to the Federal
We also need to be aware of the importance of
resisting many of the ever-present upward pressures on the
budget which emanate from the expenditure side.
r believe that there is a considerable greater equity
to be achieved in continuing to rely on fiscal restraint.
The broadly-based Federal income tax system tends to affect
the population as a whole, and tax reform may carry that
further.
In contrast, monetary policy often tends arbitrarily,
although perhaps inadvertently, to bear down hardest on
selected groups of the population, notably residential
construction, small and new businessmen, and state and
local governments.
This last point leads us to the important and often
neglected area of the optimum mix of economic policy tools
in the United States.
What r have in mind is the relative
importance of monetary and fiscal policies and the changing
balance between them.
Personally, r would characterize monetary policy as
tight -- properly tight.
The amount of Federal Reserve
credit extended to member banks has declined since the middle
of the year, as have member bank reserves.
The money supply
- 7 (narrowly defined to include currency plus demand deposits)
has been virtually stable during this period, while time
deposits have declined sharply, mainly as a result of the
continued run-off of certificates of deposits.
In contrast, fiscal policy most accurately can be
labeled as being moderately restraining.
Though essential,
the surpluses contemplated are quite modest.
I certainly
find it very hard to characterize a $3 billion surplus in
the fiscal year 1969 or even a projected $6 billion surplus
in fiscal 1970 as representing "tight" fiscal policy in an
economy approaching an annual GNP level of one trillion
dollars.
Looking ahead, I am concerned that fiscal policy is in
the process of loosening.
As Paul McCracken, Chairman of
the President's Council of Economic Advisers, recently told
the Joint Economic Committee, we expect a budget surplus at
an annual rate of about $7 billion in the second half of 1969
on the so-called national income and product (GNP) accounts
basis.
Even with enactment of the income tax surcharge and
related tax measures, the budget surplus for the first half
of 1970 is now estimated at only $3 billion.
However, if the tax requests are not granted, we may
well face a budget deficit at the annual rate of about $S
billion in the first six months of 1970 (on national income
and product account).
This concerns the Treasury on at least
- 8 two grounds.
First of all, for the immediate future, it is
premature to ease our efforts of economic restraint.
The
inflationary pressures are still too severe.
And secondly, when the time for some moderation in
economic restraint arrives -- and we all look forward to that
day -- I would prefer to see some shift in monetary policy.
I do not mean a massIve change, but some reduction of pressure
on credit markets and, hence, some easing of interest rates
and increased availability of funds for such areas as housing.
Fiscal policy has an important role to play in economic
decision-making, both in helping to stabilize the economy as
well as determining the relative roles of the public and
private sectors.
Hence, it appears sensible to avoid making
long-term budgetary commitments (either in terms of revenue
loss or expenditures) because of changing short-term
considerations.
Under foreseeable circumstances, and my
crystal ball may be at least as cloudy as yours, budget
surpluses are the order of the day.
Prompt and effective
action by the Congress to assure this situation will give
both a real as well as a psychological boost to our efforts
to contain and dampen down the inflationary pressures which
continue to be present in our economy.
The Administration is taking important steps to danlpen
the pressures that raise costs and prices.
Among the many
examples of our efforts to deal with underlying conditions
are the actions that we have taken to reduce cost pressures
- 9 -
in the difficult and important area of construction.
Specifi-
cally, the President has ordered a 75 percent cutback in the
new Federal construction contracts.
This Federal action should
free up resources for housing and other private uses.
The President also has set up a collective bargaining
commission for the construction industry.
This tri-partite
body is developing new voluntary procedures for settling labor
It will also serve as a forum for discussion and
disputes.
study of important industry problems such as manpower training
and seasonality of employment.
Spokesmen for the Administration have frequently stated
that the fight against inflation is our number one economic
objective.
This continues to be the case.
never been our only economic objective.
However it has
High and rising levels
of productive employment and a rapidly growing standard of
living, of course, are among our important long-term
objectives.
As prudent men, we are genuinely concerned over the
"slowing" pains, as President Nixon recently described them,
that may accompany the transition to a less inflationary
economy.
To assist in that transition, the Administration
has embarked on the most ambitious effort in three decades
to improve our built-in automatic stabilizers.
This will
be one of the major advances in the application of modern
fiscal policy.
- 10 -
The Administration has recommended to the Congress
several important changes in the unemployment insurance
system which would improve the ability of the Federal budget
to act as an automatic stabilizer during periods of decline
in economic activity.
Prudent planning calls for taking such
measures now when the economy is healthy and continuing to
expand.
An analysis of the record of the unemployment insurance
program demonstrates its effectiveness as a stabilizer.
For
example, in the 1958 recession, as a result of lowered national
output (GNP), personal income before taxes (excluding transfer
payments) declined at an annual rate of over $3 billion between
the middle of 1957 and the middle of 1958.
However, because
of the response of automatic stabilizers such as unemployment
benefits, disposable personal income actually increased at an
annual rate of almost $3 billion during the same period.
To the extent that automatic stabilizers become structured
into our economy, limits are placed against cumulative and
substantial declines in aggregate economic activity.
This
enables economic forces to respond more quickly to adverse
employment impacts which may result from periods of substantial
economic restraint.
Thus, our proposal would help minimize
the social costs which may accompany necessary changes in
economic policies.
-
~~
-
Another forward-looking proposal is our plan to share
Federal revenues with state and local governments.
This will
make a major contribution to the ability of the public sector
to adjust to fluctuations in the level of national economic
activity.
Specifically, we propose that each year a substantial
sum of money (a portion of the Federal individual income tax
base) be made available to state and local governments to
augment their own resources.
In contrast to many state and city levies that do not
respond positively to changes in GNP, Federal revenue sharing
funds would introduce an element of greater stability simultaneous with a built-in growth factor into the financial
structures of the other parts of the public sector of the
United States.
We believe that revenue sharing in its
decentralization of decision-making -- as well as a no strings
approach toward how money is used -- will prove to be the most
important innovation in the structure of the public sector
of the United States in several decades.
Let me conclude briefly, returning to the short-run
economic outlook.
Numerous signs suggest that our policy of
gradual restraint is becoming increasingly effective.
In
fact, we have progressed fro~ the recent period when some
doubters worried that perhaps our policy of economic restraint
- 12 -
would not work to a time when some of these very same
doubters now wonder whether it may work too well.
This
reinforces the view expressed earlier that we are on the
right path.
While we may be on the right road, the inflationary
momentum is still strong -- far too strong to warrant
any complacency, or to suggest that a change in policy is
advisable.
We need to continue economic restraint until
inflation is under much better control.
Many of us recall
the lesson of 1967, when restraints were removed too quickly,
and that led to a rapid resumption of inflation.
If we maintain the necessary resolve, the economic
policy which we are carryin$ out will both contain the current
inflation and lay the necessary foundations for a period of
rapid real growth in employment, production, and living
standards.
000
TREASURY DEPARTMENT
WASHINGTON. D.C.
November 7, 1969
FOR IMMEDIATE RELEASE
WILLIAM LAWRENCE CHRISTIAN NAMED
CAPTAIN OF TREASURY GUARD FORCE
Assistant Secretary of the Treasury for Enforcement and
Operations Eugene T. Rossides announced today the promotion
of Lieutenant William Lawrence Christian to the command
position of Captain of the Treasury Guard Force. He is
replacing Guy N. Bates who recently retired after 29 years
service.
The Treasury Guard Force is under the superv1s10n of
the Director of the U.S. Secret Service. In addition to
protecting personnel and equipment, the members of the
Force are responsible for the safety of millions of dollars
in currency, bonds and other securities in the Treasury
Building and the Treasury Annex in Washington, D. C.
Captain Christian came from the Internal Revenue
Service to the Treasury as a private, he advanced to
Sergeant in 1966, and to the rank of Lieutenant later in the
same year.
Born in Washington, D. C., Captain Christian, 34,
graduated from Cardozo High School, and later attended the
District of Columbia Teachers College. He served with the
United States Army from 1955 to 1957, in Korea.
Captain Christian was the recipient of a "High Quality
Pay Increase" for his outstanding work with the (Guard)
Force, in 1968.
Captain Christian is the son of James and Lucy Christian
of Washington, D. C.
000
K-262
UNITED STATES SAVINGS BONDS ISSUED AND REDEEMED THROUGH
October
31, 1969
(Dollar amounts in millions - rounded and will not necessarily add to totals)
DESCRIPTION
MATURED
Spries A-1935 thru D-1941
Series F and G-1941 thru 1952
Spries J and K-1952 thru 1957
AMOUNT ISSUEDlI
AMOUNT
REDEEMEDlI
AMOUNT
OUTSTANDINGY
% OUTSTANDING
OF AMOUNT ISSUED
5,003
29,521
3,754
4,997
29,484
3,729
36
24
.12
.12
,64
1,885
8,320
13,390
15,616
12,274
5,572
5,289
5,471
5,405
4,725
4,087
4,283
4,892
4,987
5,195
5,019
4,727
4,607
4,320
4,329
4,387
4,232
4,714
4,595
4,493
4,837
4,787
4,528
2,416
1,671
7,386
11,915
13,814
10,689
4,674
4,285
4,344
4,210
3,626
3,140
3,264
3,643
3,644
3,741
3,570
3,299
3,091
2,828
2,720
2,601
2,411
2,518
2,464
2,388
2,385
2,244
1,856
534
214
935
1,475
1,802
1,586
897
1,004
1,127
1,194
1,099
947
1,019
1,249
1,342
1,454
1,449
1,428
1,517
1,492
1,609
1,786
1,821
2,196
2,131
2,105
2,452
2,544
2,672
1,883
11.35
11.24
11.02
11.54
12.92
16.10
18.98
20.60
22.09
23.26
23.17
23.79
25.53
26.91
27.99
28.87
30 21
32.93
34.54
37.17
40.71
43.03
46.58
46.38
46.85
50.69
53.14
59.01
77.94
728
995
-267
-
164,111
119,949
44,162
26.91
5,486
7,182
3,478
1,835
2,00'1
5,347
36.58
74.45
12,667
5,313
7,354
58.06
176,778
125,262
51,516
29.14
38,277
176,778
215,055
38,210
125,262
163,472
67
51,516
51,583
.18
29.14
23.99
6
UNMATURED
Series E.JJ :
1941
1942
1943
1944
1945
1946
1947
1948
1949
1950
1951
1952
1953
1954
1955
1956
1957
1958
1959
1960
1961
1962
1963
1964
1965
1966
1967
1968
1969
Unclassified
Total Series E
Series H (1952 thru May, 1959)}j
H (June, 1959 thru 1969)
Total Series H
Total Series E and H
{Total matured
All Series
Total unmatured
Grand Total
I Includes accrued discount.
I Current redemption value.
I At option of owner bonds may be held and will earn Interest for eddltlonal periods after orl~/nel maturity detes.
Form PO 3812 (Rev. Apr. 1969) - TREASURY DEPARTMENT - Bureau of the Public Debt
0
/0
TREASURY DEPARTMENT
WASHINGTON. D.C.
FOR RELEASE 6: 30 P.M.,
Monday, November 10, 1969.
RESULTS OF TREASURY'S WEEKLY BILL OFFERING
The Treasury Department announced that the tenders for two series of Treasury
bills, one series to be an additional issue of the bills dated August 14, 1969, and the
other series to be dated November 13, 1969, which were offered on November 5, 1969, were
opened at the Federal Reserve Banks today. Tenders were invited for $1,800,000,000, or
thereabouts, of 92-day bills and for $1,200,000,000, or thereabouts, of 182-day bills.
The details of the two series are as follows:
RANGE OF ACCEPTED
COMPETITIVE BIDS:
High
Low
Average
92-day Treasury bills
maturi!!S February 13 z 1970
Approx. Equiv.
Price
Annual Rate
98.190
98.163
98.171
Y
182-day Treasury bills
maturing Mal 14.z 1970
Approx. Equiv.
Price
Annual Rate
96. 250 W
1. 418«;C
96.235
7. 447'fo
96.241
7.435'fo
1.083~
7.188
7.157
Y
Y
~ Excepting 4 tenders totaling $1,669,000; E/Excepting 6 tenders totaling $6,050,000
54'fo of the amount of 92-day bills bid for at the low price was accepted
63~ of the amount of 182-day bills bid for at the low price was accepted
TOTAL TENDERS APPLIED FOR AND ACCEPTED BY FEDERAL RESERVE DISTRICTS:
District
Boston
New York
Philadelphia
Cleveland
Richmond
Atlanta
Chicago
st. Louis
Minneapolis
Kansas City
Dallas
San Francisco
WTALS
Applied For
Acce~d
$ 35,311,000 $,311,000
2,034,547,000
1,178,747,000
42,862,000
27,357,000
39,719,000
41,358,000
38,692,000
32,192,000
45,299,000
34,299,000
212,692,000
222,938,000
50,440,000
61,140,000
26,193,000
19,193,000
33,866,000
33,866,000
27,356,000
17,356,000
169,168,000
129, 268 l 000
$2,778,730,000
A~J21ied
For
Accetted
11,246,000 $1,046,000
1,891,605,000
872,397,000
18,888,000
8,812,000
66,593,000
37,851,000
18,287,000
11,287,000
39,148,000
17,54~,000
187,235,000
113,235,000
51,620,000
28,670,000
19,302,000
6,802,000
21,852,000
20,242,000
24,107,000
13,788,000
243,159,000
62,814,000
$
$1,800,440,000 .~ $2,593,042,000
$1,204,487,000 ~
~ Includes $363,883,000 noncompetitive tenders accepted at the average price of 98.171
~ Includes $225,327,000 noncompetitive tenders accepted at the average price of 96.241
These rates are on a bank discount basis. The equivalent coupon issue l1e1ds are
7.39'fo for the 92-day bills, and 7.83'fo for the 182-day bills.
11
TREASURY DEPARTMENT
Washington
{f
FOR RELEASE AT 6:30 P.M., EST
THURSDAY, NOVEMBER 13, 1969
REMARKS BY THE HONORABLE
DAVID M. KENNEDY
SECRETARY OF THE TREASURY, BEFORE THE
GREATER SOUTH DAKOTA ASSOCIATION, MITCHELL, SOUTH DAKOTA
NOVEMBER 13, 1969
THE FISCAL SIDE OF THE NEW FEDERALISM
Tonight I want to discuss a subject in which president
Nixon is vitally interested -- the future of our American
Federal system. This Administration is firmly convinced
that our progress as a free and progressive society depends
importantly on the health and vitality of government at
all levels -- Federal, state, and local. The president is
deeply disturbed over the imbalance that now exists among
these partners in federalism.
The story of American government in the 20th century
has been one of increasing concentration of power and
responsibility at the Federal level. This flow of power to
Washington was induced and stimulated by major wars, both
hot and cold, and by economic crises. In recent years it
has been accelerated by a variety of efforts to cure major
domestic ills through the force of Federal programs and
Federal money. The remarkable capacity of the Federal tax
system to generate revenues has sustained and even
encouraged this transfer of power.
But this expansion in the scope of Federal influence
and responsibility has produced an undesirable imbalance
in the American public sector. Our State and local
governments have been asked to deliver an ever growing quantity
of vital domestic services, bu"[ they lack efficient and
productive systems of taxation to respond adequately. In
short, they have been unable .to play their rightful role in
our Federal system.
K-263
- 2 -
IJ-
The traditional functions of State and local government
education, welfare, police protection, health and
hospitals, highways, sanitation -- are more important today,
on our scale of national priorities, than ever before.
Over the years, the Congress and the Federal executive
branch have recognized the importance of these local
services, and have considered it essential that they be
provided to our citizens o As a result, Federal grants-in-aid
to State and local governments have grown enormously -from $1 billion in 1946 to a level of $25 billion this
fiscal year.
But this significant rechanneling of Federal tax
dollars torur states and localities has not been as successful
in increasing the scope and quality of state and local public
services as one might hope. The transfer of Federal funds
has been accompanied by an ever growing maze of program
authorizations, restrictions, formulas, matching provisions,
project approval requirements, and a host and variety of
administrative burdens.
Over a period of years the Federal system of assistance
to States and communities has evolved in piecemeal fashion.
Federal, State and local officials are today confronted
with over 600 programs for narrow categorical grants. Many
of these programs are extremely cumbersome and each is equipped
with its own array of administrative procedures and its own
set of requirements to be levied upon State and local
governments.
In draw~ng upon several funding sources to help finance
one neighborhood project, for example, a local official may
be confronted with a series of application forms weighing
several pounds, a tortuous application process which may
require many months to elicit a "yes" or "no" response from
the Federal government, and a continuing process which may
burden that community with hundreds of reports to the
Federal government which are rarely read. Further, the local
official may have to work with Federal people located in
three or four different States in the course of putting this
one project together.
- 3 -
/3
I am told that a single program may require over a
hundred different kinds of forms and reports, and that it may
take over a hundred pages merely to list the administrative
steps involved in the processing o
We have found instances
in which Federal, State and local governments make scores
of independent studies in the same community without one
knowing what the other is doing or having an opportunity to
share in the results of the other study efforts.
On March 27th, president Nixon undertook a major
three-year program to simplify Federal assistance. He has
mounted a multi-pronged attack on the mass of red tape which
is smothering the efforts of our three levels of government
to work together effectively. Initial results are encouraging,
and I am confident that in three years the president's
efforts will have resulted in the elimination of many of
these costly procedures and requirements which today burden
our public officials and limit their ability to respond to
public needs.
Against this background, the president also has come
forward with a bold and challenging new domestic policy
program designed to restore balance to American federalism
while strengthening government's ability to deliver needed
public services as efficiently as possible. This "New
Federalism" seeks to redefine and redirect the role of the
Federal Government toward those public functions where its
capacity and effectiveness are unquestioned. It will move
to restore to our states and localities the decision-making
power rightfully theirs.
At the heart of our New Federalism is the proposal
for sharing Federal revenues with State and local governmentso
The Treasury has had a major hand in drafting this
revenue-sharing proposal, and we will be working very hard
in the coming months to secure its enactment by the Congress
u
I would like to take this opportunity to outline for
you the main features of this revenue-sharing plano It
can be conveniently discussed in terms of its four major
provisions.
- 4 First, the annual revenue-sharing appropriation will
be a stated percentage of personal taxable income -- the
base on which Federal individual income taxes are levied.
For the first year of operation, this percentage will be
modest, yielding about $500 million.
But in 1976 we will
be sharing a full one percent of the tax base, or about
$5 billion. In subsequent years, the revenue-sharing
appropriation will automatically respond to the growth in
taxable income. This is only one more reason why our
State and local governments have a strong stake in seeing
a healthy national economy -- a point which I will turn to
shortly.
Second, the state-by-state distribution of funds will
be made on the basis of each state's share of national
population, with a small adjustment for revenue effort to
provide an incentive for maintenance of local taxing
efforts. This adjustment will mean that a state like
South Dakota, whose revenue collections in relation to state
personal income are 24 percent above the national average,
would receive a 24 percent bonus above its basic per
capita portion of revenue sharing.
Third, each State government must distribute a portion
of these revenue-sharing payments to all its general
purpose local governments, regardless of size.
Some
alternative proposals would only include our brger cities and
counties in direct revenue sharing. We strongly believe that
all local governments are faced with fiscal pressures and
that all deserve specific inclusion in this program.
The total amount a state must share with all its
cities, counties, and townships will depend on the existing
division of public financing responsibilities within each
state. An individual local government will receive a
fraction of each revenue-sharing payment which corresponds
to the relative role which its general revenues bear in
relation to the total of all state and local general revenues.
We use this basis for allocating funds among local
governments because a per capita distribution cannot
distinguish between the importance of overlapping jurisdictions.
- 5 -
Fourth, state and local officials will receive not
only the funds, but also the decision-making authority over
the use of those funds. This is perhaps the most important
feature of revenue sharing, and one which clearly distinguishes
it from the Federal government's existing grant-in-aid
system. Without the Federal program or project "strings,"
state and local authorities are free to initiate ideas
which respond directly to the particular needs and
interests of their jurisdictions o Only simple accounting
and reporting requirements will be in force.
This revenue-sharing program represents an important
new direction in the relationships between Federal Government
and State and local governments. It gives our Federal
system both a sound financial center and a needed
decentralization of controlo It will serve as an important
supplement to our existing categorical aid programs. I am
especially pleased to have this opportunity to describe the
major features of our proposal to you, since Senator Mundt,
as a long time supporter of revenue sharing, was one of its
sponsors when the plan was introduced in the Senate. We
greatly appreciate the stront support and interest he has
given us.
As I noted earlier, the size of the annual revenuesharing appropriation will be primarily determined by the
level and growth of the American economyo Therefore, the
State and local governments will be vitally interested in
seeing our Nation maintain a steady and healthy rate of
economic expansion. Of course, these governments have
always had a strong stake in our economic good health,
particularly as the state of the economy affected their
tax receipts, operating expenses, and borrowing costs.
With revenue sharing there is even more to be gained by
State and local governments from non-inflationary economic
growth o
The responsibility for national economic policy is one
public function which the Federal Government cannot delegate
to the states and cities o It can only be exercised from
Washington. However, when the Nixon Administration took
office last January, the economy was suffering from
several years if failure by the Federal Government to
exercise that responsibility in a timely and effective
manner. As a result, a serious inflation had
been permitted to work its way deeply into the fabric
of our economic life. We moved quickly and firmly to
- 6 -
I~
to bring the policies of the Federal Government in line with
our urgent need to halt the spiral of rising prices, and
we are now beginning to see some hopeful signs of success o
But inflationary pressures are currently much too
strong for us to assume any complacencyo Our policies of
economic restraint -- especially our efforts to achieve
a significant budget surplus -- must be maintained until
inflation is brought under control. For this we must depend
on the Congress to approve the revenue measures we
recommended last Aprilo Without the extension of the income
tax surcharge at the reduced rate of five percent for the
first half of 1970, plus the repeal of the investment tax
credit and the extension of certain excise taxes, we stand
to lose about $4 billion in urgently needed revenues.
A revenue loss of this magnitude would have two
serious impacts. First, we would lose most of our fiscal
restraint in the budget -- a restraint which is only
moderate without the revenue loss. This is not the time
to bring about an abrupt easing of fiscal policy. Second,
and perhaps even more significant, this $4 billion shrinkage
in Federal revenues would mean an equivalent strain on our
already tight financial markets. This would be most
unfortunate at a time when we might hope that interest
rates could begin to ease from their historic high levels.
These extraordinarily high interest rates have had a
particularly severe impact on the flow of funds into housing
and State and local government projects.
It is quite clear, therefore, that our State and local
governments have a strong interest in seeing the income
tax surcharge extended and the other revenue-raising
measures enacted. For a shift in the mix of economic
policies to even tighter monetary measures because of an
easier fiscal position would seriously upset the essential
borrowing efforts of states, cities, and counties o
Thus, at the Treasury we are engaged in two very
important efforts to strengthen the fiscal structure of
our American Federal system o On the one hand we are working
hard to enact a program of revenue sharing -- to provide
both the encouragement and the resources for local and
state officials to exercise leadership in solving their
own problemso On the other hand, we are striving to
exercise our unique Federal responsibility for restoring
the American economy to a prosperous, growing, and stable
1/
,I
- 7 conditiono Both these efforts are vital to our national
well-being, and I hope you will join me in encouraging
the Congress to move forward on both frontsQ
My remarks this evening would be incomplete if I did
not outline for you the relationship between these two
efforts which occupy so much of our attention at the
Treasury, and the Administration's total package of
domestic policy initiatives. president Nixon's new domestic
program has been described by many observers as the most
significant presidential proposal for domestic reform in
recent decades. It is significant both for qualitative and
quantitative reasons, both for the number of new ideas
it presents and for the boldness with which they were
conceived. The President's package of proposals included
the most striking conceptual change in the history of the
welfare program, the most sweeping administrative change
in the history of manpower training programs, and this
entirely new and different approach to the fiscal relationship
between the Federal Government and the states and localities
which I have described to you.
Each of these proposals was historic in its own right.
Yet the president chose to discuss all of them together9
for he saw them as component parts of a single strategy.
"They make both a package and a pattern," he observed o
"They should be studied together, debated together and
seen in perspective."
I look forward to the time, hopefully quite soon,
when we have this exciting new package of proposals fully
implemented
Their institution will signal a new direction
and a new hope for effective government performance
That
is an objective which we all must share o
0
0
000
TREASURY DEPARTMENT
Washington
FOR RELEASE AT 4:00 P.M. (CST)
MONDAY, NOVEMBER 10, 1969
REMARKS OF THE HONORABLE DAVID M. KENNEDY
SECRETARY OF THE TREASURY
BEFORE
THE AMERICAN PETROLEUM INSTITUTE
HOUSTON, TEXAS
NOVEMBER 10,1969
I am delighted with this opportunity to join you today and
participate in this annual meeting of the American Petroleum
Institute. Over many years I have had the privilege of attending
the annual A.P.I. meeting when held in Chicago, and as a result
of working with the oil industry as a banker made many close
friends in your industry. In fact, I didn't realize just how
many friends I had until they all started writing to share their
views with me on some aspects of the tax reform legislation
now awaiting Senate action.
When President Nixon assumed the reins of government
ten months ago, the problems facing our society were both
numerous and complex.
After four years of mounting intensity, the war in
Vietnam still defied a permanent and justifiable solution.
It had required increased manpower and greater resources,
with satisfactory results still not in sight.
The economy was in the grips of an inflationary vise
that was squeezing harder and harder on the purchasing
power of the dollar.
State and local governments found themselves in the
front line of the battle against countless social ills, and
yet they lacked the ammunition to wage the fight effectively.
On the international scene we found ourselves high in
terms of commitments but low in terms of our standing
in many corners of the world.
And to make these challenges more formidable there was
a growing doubt among many Americans about the ability of
this nation and its institutions to respond to its tangled
and entrenched problems. Understandably, this frustration
created many tensions in our society.
~_?h~
- 2 -
17
f
No one in the Administration, least of all the President,
had any naive notions that these problems would be overcome
quickly or painlessly. That is why he .c'Csisted the
temptation of arousing false hopes by sending a long list of
legislative proposals to the Congress early in the ses~on.
Instead the Administration followed the more prudent
course of establishing priorities and making certain that
proposals were carefully weighed before they were submitted.
Obviously the overriding problem was to find a way to
establish a stable peace in Vietnam. The President discussed
the background, alternatives, and reasons for his present
course of action last Monday night, and I do not need to
repeat them here. I will only say that now, one week later,
it is clear that the great majority of the American people
agree with this policy of a carefully conceived scaling
down of our involvement.
The number one domestic concern of this Administration
is curbing the inflationary spiral that pushed up the
consumer price index by 17 percent between August 1965 and
August 1969.
Inflationary pressures and expectations had become deeply
ingrained in our economic system and our economic thinking.
Businessmen moved full speed ahead on investment programs
because they feared they would just have to pay more later
for the same projects. Labor leaders demanded larger
settlements because they wanted to show a real gain in
wages after discounting the increased cost of livingo Savers
were penalized because their savings, even with interest,
would buy no more than the amount they started with. Lenders
raised interest rates to compensate for the decreased value
of the dollars that would be repaid.
Last January we stated that we were de~ermined to employ
restrictive monetary and fiscal policies until this overheated economy was cooled and people no longer believed that
inflation was inevitable. This plan has been followed. The
Federal Reserve restricted the growth of the money supply,
and President Nixon insisted on an anti-inflationary budget
surplus.
Some critics claimed that the policies were not
sufficiently severe to send the necessary shock waves through
the economy to show that we meant what we said.
- 3 -
The press dubbed our approach "gradualism" because we
admitted that there would be a time lag before the policies
started to take hold o
Now we are starting to see some evidence that these
policies are beginning to bite. The indicators, while still
mixed, show that we can accomplish our objective if we have
the determination to stick with our plan. Premature
relaxation of our present policies would only reinforce the
notion that inflation is inevitable and that we do not have
the backbone to curb rising prices.
Some of the critics who originally claimed our approach
was too weak now say that it may be too harsh. Others insist
that we should find new tools for stabilizing the economy.
They claim that the classic approach of restrictive monetary
and fiscal policies cannot be effective with an economy as
large and complex as ours.
If this position is proved right, we will have to
rewrite all the economics textbooks. The problem in
recent years is not that the policies have not worked.
problem is that they were not given a chance to work.
The
The budget showed a surplus of $3.3 billion for fiscal
1969, the first surplus in nine years o We want to maintain
this anti-inflationary budget for the current fiscal year.
Our goal is a surplus of $5.9 billion.
This surplus is now in jeopardy on both sides of the
balance sheet. Increased congressional appropriations are
putting pressures on the Administration to push expenditures
above the $192.9 billion level -- a level which the President
is determined to hold. And a failure to extend the surtax
at the reduced rate of 5 percent through next June and failure
to repeal the investment incentive credit could cut into revenues.
The President has pledged that he will observe the budget
ceiling he has set even if it means vetoing some bills. The Senate
Majority Leader, Mike Mansfield, who controls the scheduling
of legislation in the Senate, has publicly stated that he
recognized the need for the extension of the surtax and
repeal of the investment credit. These measures have been
pas3ed by the House on two separate occasions and could be
taken up in the Senate as a separate package or as part of
the tax reform billo If the tax reform bill gets slowed
down in the Senate or in conference, I feel confident that
the Senate will then work its will on the separate measures.
- 4 -
'J..(
Failure to pass these measures within the very near
future could result in a revenue loss of $4 billion in the
current fiscal year. This would be a serious setback for
all of us who are convinced that monetary policy alone cannot
and should not carry too much of the burden in fighting
inflation.
While the current tight budget posture is an essential
ingredient of our anti-inflationary policy, it has not
prevented the Administration from submitting many innovative
and sound proposals, some of which would take effect after
inflation is brought under control.
The welfare reform bill promises the most dramatic
change in our nation's welfare system since the 1930's.
The Administration's revenue-sharing plan will give state
and local governments some of the fiscal resources they need
to meet their increasing responsibilities.
New legislation to control drug traffic is being sought.
This will supplement the heightened enforcement programs now
being implemented at all points of entry. The Administration
is also working through diplomatic channels to improve
cooperation with other governments in suppressing the
production and transportation of illicit drugs.
A comprehensive approach to improve the protection of
consumer interests has been proposed.
Manpower training programs and reforms in unemployment
compensation have been presented.
Draft reform legislation is pending in Congress and,
hopefully, will be enacted in the near future o
These are only a few of the major leg~slative items
advanced by the Administration. Together they represent a
comprehensive package of proposals to set this nation on a
new course o
As you may have noticed in the press, this has also been
a somewhat busy yea:c for the Treasuryo Tax reform, which I
want to touch on in a minute, has received the headlines
and has consumed much of our time and energy_
But we also have been involved in numerous other
matters. We had to get a temporary increase in the debt
ceilingo We sought and mope shortly to obtain an increase
in the interest rate we can pay on savings bonds.
- 5 -
Internationally, we have been successful in winning
agreement on activation of Special Drawing Rights by the
International Monetary Fund. We have also been deeply
involved in negotiations for the return of Okinawa to Japan,
and in Operation Intercept, the drug control effort on the
Mexican border, which was recently conuerted to Operation
Cooperation.
Now let me turn briefly to the Tax Reform Act of 1969
its impact on the nation and its impact on your industry.
I don't think I need to go into detail in describing the
genesis of this legiFlation. It resulted from a growing
conviction on the part of many Americans that the Federal tax
system is unfair -- that too many people with high incomes
were getting by with small tax bills.
As you know, the bill was passed by the House overwhelmingl
in August and was ordered reported by the Senate Finance
Committee just ten days ago. It is scheduled to be brought
before the Senate shortly, perhaps as early as next week.
If so, final enactment of the bill may come this year. If
Senate debate is excessively drawn out, the legislation may
not pass the Congress until early in 1970.
Today I will not go into the details of the bills.
Instead, I would like to comment on three general criticisms
that have been leveled at the Senate bill: that it is too
complex, that it will stifle productive investment, and that
it will vastly complicate our batt] ': : against inflation.
The fact is that HoR. 13270, if enacted in either the
Senate Finance Committee version or House form, will greatly
simplify tax computations for millions of taxpayers o Whatever
complexities do result will affect primarily those who normally
rely on the assistance of expert tax lawyers and accountants.
For example, the Low Income Allowance'which President
Nixon proposed in April -- and which is included in both
versions of the bill -- will remove some 5 million people
from the tax rolls o If the Senate Finance version is accepted,
these low-income individuals, many of whom are at or below the
poverty level, will not have to file returns at alIa
- 6 -
In addition, the increase in the standard deduction
which will be phased in during calendar years 1971 and 1972
will greatly sLmp1ify the computations of another 12 million
taxpayers. In the past most of these people itemized their
deductions but in the future will find it advantageous to use
the standard deduction.
The bias of the bill against investment in favor of
consumption has been a source of concern to us, but that thrust
should not be greatly overstated. It is true that the bill
would raise taxes on corporations by some $5 billion and, on
balance, reduce individual taxes by $7.5 billion. What is
not commonly understood is that more than half of the
corporate rate increase reflects the proposed repeal of the
7 percent investment tax credit.
The Administration proposed this repeal in April after
careful consideration of the probable impact on business
investment. We concluded that however justifiable in the
early 1960's, when investment in this country needed
stimulation, the credit was not an appropriate device in the
economic environment of the 1970's. We are convinced that
the economic policies we are putting in place will maintain
the strong markets which provide the only lasting incentive
to high capital investment.
Whatever other impact the bill has on business investment
has to be analyzed in terms of the particular industry which
would pay higher taxes under the bill. By and large, they are
all industries which have been paying a relatively low rate
of Federal tax. These include financial institutions, your
own petroleum industry, and real estate activities. Our analysis
convinces us that tax equity can be achieved without undue
curtailment of investment incentives. We would be more certain
of this if the Senate Finance Committee had acceded to our
request for a 2-point cut in the corporate income tax rate,
but it did not do so.
Although a tax bill which provides some $9 billion of
tax relief for individuals, and an ultimate revenue shortfall
of $2-1/2 billion, would appear to be inflationary, the fact
is that the Senate Finance version postpones enough of the
tax relief provisions so that there is no shortfall until
calendar year 1972. In total, the bill -- which includes
extensions of the surtax and excises, and repeal of the
- 7 -
investment credit -- is in strong surplus in calendar year
1970 and slight surplus in 1971.
In the short run, therefore, the legislation ,does not
conflict with our anti-inflationary program.
The real concern about the revenue short mIl is that we
simply cannot foresee today what the revenue needs of the
Government will be during the years when the legislation
produces a short fall. The short fall climbs to about $3-1/2
billion in 1974, then gradually declines to about $2-1/2
billion by 1979, when substantially all of the phased-in
reform measures become effective. During that period,
additional revenues may be badly needed, either for
inflation control or for pressing national programs. I hope
the Senate will take this into consideration as it acts on the
bill. The President has made it crystal clear that although
he is dedicated to the cause of tax reform, he will not
hesitate to veto the bill if the ultimate revenue shortfall
is more than the country can stand.
The petroleum industry is one of several industries
which will pay more taxes under the Tax Reform Act. This
result seemed clear from the beginning of consideration in the
House Ways and Means Committee. The question was, in what
way and how much?
Inasmuch as this Administration has from the start
favored the 27-1/2 percent depletion allowance, we discussed
various proposals with the Ways and Means Committee which
would have protected the depletion provision. The Committee,
and the House, rejected these approaches and voted instead
to cut depletion to 20 percent.
As you know, the Senate Finance Committee reduced
the amount of the cut to 23 percent, but also provided for a
minimum income tax that would in effect reduce the percentage
to about 21 percent. Of interest to rnany producers, however,
is the Finance Committee's action in raising the net income
limit on percentage depletion from 50 to 65 percent of net
income.
What do these provisions mean to the nation and to your
industry? Your tax bill will be higher. We estimate that
the petroleum industry will pay approximately $400 million
in taxes under the Senate Finance Committee bill -- this
represents an increase in your effective tax rate
- 8 from about 21 percent to approximately
26 percent.
Although the Administration would have preferred a
different approach, this modest increase in your tax burden
should not unduly curtail efforts to find and develop
the petroleum reserves which this nation must have.
Now I would be surprised if everyone of you agreed
completely with everything the Administration, or the Treasury,
is doing. But I do think it is a good exercise occasionally
to view the total package to get a better fix on the
directions we think this nation should be taking.
We are scaling down our involvement in Vietnam. But it
cannot and should not be done in a precipitous manner.
We are slowing the economy so that rising price levels
will not be a permanent part of our way of life.
We are attempting to increase the efficiency of
government operations by putting resources at the command of
state and local governments which are facing increasing
responsibilities.
We are gaining increased respect for this nation around
the world, while at the same time reducing our far-flung
commitments.
These programs and approaches offer some startling new
departures. We Americans have never been known for our
patience. That has always been one of our strong points.
And I do not want to underestimate the importance of creative
restlessness. But I do feel that the times and circumstances
call for controlled impatience rather than simply making
t'apid changes in direction just for the want of apparent activity.
I hope this government can count on your support as we
try to deal with these military, social, and economic problems.
Change is the nature of our society. Let's work to make sure
these changes are prudently planned, and effectively
implemented. If we do, I am sure the Nixon Administration will
be able to make a major contribution to an enriched
life for all Americans.
000
TREASURY DEPARTMENT
WASHINGTON, D.C.
November 7, 1969
FOR IMMEDIATE RELEASE
TREASURY ANNOUNCES SPECIAL PROCEDURES TO
ISSUE SUBSTITUTE RETIREMENT CHECKS
The Treasury said today it has instructed urgent
procedures to issue substitute checks for those reported
missing in Virginia localities near Washington and the
Norfolk area.
Several hundred Civil Service retirees in Virginia
have reported that their November 1 retirement pay
checks have not been received. These checks, the
Treasury said, were released to the Post Office Department
by the Treasury's Disbursing Center in Washington on
Wednesday, October 29, to be delivered on Saturday,
November 1.
The Treasury said that those Civil Service
retirees in Virginia who have not received their November
check should take immediate action, depending upon their
locality:
Those living near Washington and who can,
should visit the Civil Service Commission, Bureau
of Retirement and Insurance, 1900 E Street, N.W.,
to complete a non-receipt form.
Those for whom such a visit would be difficult
or impractical should write to the Commission,
explaining the problem, and giving their Civil
Service account number.
These non-receipt letters or forms will be immediately
processed and dispatched to the Treasury Disbursing Center.
Treasury Department is geared up to issue substitute checks
within hours of receiving the letters or forms.
000
K-265
The
TKLA:;; URY DEPARTMENT
l~ASHINGTON,
DoC.
FOR RELEASE UPON DELIVERY
REMARKS OF THE HONORABLE EDWIN S. COHEN
ASSISTANT SECRETARY OF THE TREASURY FOR TAX POLICY
BEFORE THE
TWENTY-EIGHTH AN1~AL NEW YORK UNIVERSITY
INSTITUTE ON FEDERAL TAXATION
HOTEL COMMODORE, NEW YORK, NEW YORK
TUESDAY, NOVEMBER 11, 1969, 8:00 P.M., EST
Tax Equity and Tax Incentives
I am delighted to have the opportunity of speaking to
you this evening at this 28th Annual Institute on Federal
Taxation.
It is appropriate, I suppose, that this occasion
falls on Veteran's Day.
I believe that I first spoke to
this Institute at the Fourth Sessiorl in 1946 and it has
been my pleasure to participate in many subsequent programs.
Moreover, I am fast becoming a veteran in tax reform
legislation.
We have recently completed three and a half
weeks of executive sessions of the Senate Finance Committee
on the Tax Reform Act of 1969, and prior to that some three
months of similar sessions of the Ways and Means Committee.
If'. addition, we have appeared at public hearings of both
committees in support of the Administration's tax reform
proposals.
K-266
- 2 The Senate Finance Committee has ordered the bill
reported and the revised version of the bill and the
committee report should be available shortly.
It was a privilege to participate in the long and
arduous executive sessions of both committees.
The
chairmen of the committees, Congressman Mills and Senator
Long, and the ranking Republican members, Congressman
Byrnes and Senator Williams, provided strong and able
leadership and the committee members were dedicated to
the urgent task of tax reform.
While one may agree or
disagree with specific decisions, the country owes, I
believe, a sincere debt of gratitude to these men for their
untiring efforts to bring forth this vital tax reform
legislation within the limits of an urgent time schedule.
Improvement of the equity of the Federal tax structure
is a cardinal objective of the bill.
It accomplishes this
in a number of different directions.
Among the foremost
of these is the Low Income Allowance, which the Administration
proposed in April to remove from the tax rolls all those
whose income is below the poverty level.
This will render
nontaxable some five million persons at the bottom of the
economic scale who now are required to pay tax.
For example,
17
- 3 -
it will provide that a single person will pay no tax
unless his income exceeds $1,700; a married couple without
dependents will be taxed only if their income exceeds
$2,300, and the minimum rises further $600 for each dependent.
It accomplishes this at a cost of only $625 million and it is
to be effective January 1, 1970.
The Low Income Allowance should be a major boon to
students who work during their years of higher education,
as it raises for them the level of their nontaxable earnings
from $900 to $1,700.
In addition, the Finance Committee
has adopted recent Treasury proposals to eliminate the need
for filing income tax returns when income is below the
new levels of nontaxable income; and it eliminates the need
for withho1ding--on summer jobs, for examp1e--when the
employee certifies that he estimates he will owe no Federal
income tax for the year and, in fact, owed no tax for the
preceding year.
Another notable change will produce greater equity for
single persons, whose tax liability under existing law can
be as much as 40 percent above that of a married couple
with the same income.
The Finance Committee has adopted
a rate schedule for single persons that will assure them
that their tax will not be more than 20 percent above that
- 4 payable by a married couple with the same income.
The Tax Reform Act focuses the spotlight of attention
on the use of incentives, or tax preferences, in the Federal
income tax lawo
In the more than half century history of
the Federal income tax, there have been many provisions
inserted in the law for the purpose of stimulating investment
in particular types of property or other expenditures deemed
desirable in the national interest.
They act as inducements
to particular types of private investment or expenditures.
Some of these provisions, such as the investment credit,
have been enacted after much debate, with the expressed
intent of stimulating certain kinds of expenditures.
have resulted without studied forethought.
Others
In this latter
category, for example, we might place the deduction of
interest not connected with business or the production of
income.
Thus the deduction of home mortga&e interest has
acted as a stimulant to home ownership, to cooperative
apartments and to condominiums in preference to the renting
of homes or apartments.
Every preferential provision in the tax law serves
to reduce the tax of those who take advantage of the
- 5 -
preferences and reduces the revenue yield to the government
derived from the tax.
Thus we can attempt to put a price
tag on each of the preferences by estimating loss of
revenue to the government resulting from the existence
of the preferences.
We should then decide whether the
benefits derived by the nation from the existence of the
tax preferences are worth the price tag.
This cost-
benefit analysis is of primary importance in evaluating
the desirability of the preference and should be made at
frequent intervals as a matter of
con~inuing
concern.
We must also take into account that each of these
preferences tends to shift the burden of the income tax
from one taxpayer to anotherQ
Since the government needs
a certain level of revenue to finance its needs, the
preferences utilized by some taxpayers will cause a
shift of a higher burden on those taxpayers who either
do not choose to take advantage of the preferences or are
not able financially or otheKwise to do so.
The preferences
can, therefore, create significant inequities in the tax
structure.
This is particularly true where adequate limits are
not placed upon the extent to which the preferences may be
- 6 -
used.
In many provisions in the law we do put limits on
the particular incentive.
For example, the income tax law
encourages donations to charity by allowing deduction for
such contributions.
This is an incentive to charitable
giving, since it reduces the donor's tax at his highest
bracket.
But historically the law has limited to a
prescribed percentage of adjusted gross income the amount
of charitable contributions that are deductible.
Thus
while a person may reduce his tax payments to the Federal
government by virtue of his charitable contributions, he
cannot generally eliminate all tax by this route.
Only
in the case of a few individuals who are able to meet the
requirements of the so-called "unlimited charitable contributio
deduction" can tax liability be eliminated entirely through
making contributions, and this provision is being phased out
in the pending Tax Reform Act.
But other incentive provisions of the law contain no
limits on their use.
For example, there are no limits in
the provisions regarding the use of accelerated depreciation
on real estate, of
accele~g':1
depreciation on personal
property involved in net leases, of intangible drilling
expenses in the oil and gas field, or of farm losses
under a cash method of accounting.
calculate~
Because of the lack
- 7 of any limits, an individual making use of these provisions
can eliminate entirely his tax liability to the government
while enjoying a substantial cash flow and a substantial
economic income, and while growing steadily in wealth.
To foreclose this possibility the Administration
proposed in April 1969 that in addition to any revision
of the preferences separately, there should be imposed an
overall limit for each individual on the extent to which
he could offset his income by resort to these incentives.
The basic concept of this proposal was that, assuming the
desirability of the incentive provisions in the law, there
is the competing consideration that every citizen should
make some meaningful contribution to the cost of maintaining
the Federal government, commensurate with his ability to
pay.
He should not be able to offset that responsibility
fully by resort to the preferences.
We proposed, therefore, that there be enacted a Limit
on Tax Preferences (LTP) under which the amount deductible
on account of these preferences could not exceed in any
year more than half of a person's income calculated before
allowance of the preferences.
Thus a person with $200,000
of taxable income, calculated before allowance of the
preferences, could use the preferences to reduce his taxable
- 8 -
income to $100,000 but not below that amount.
We provided for a
five-year averaging device, for transitional rules and
other ameliorating provisions.
The House of Representatives
adopted this general concept in the bill which it passed
and sent to the Senate.
We also recommended, and the House bill also provides,
that personal deductions of a taxpayer should be allocated
between the taxable portion of his income and the portion
rendered nontaxable because it is offset by use of the
incentive provisions.
Only those personal deductions which
were allocable to the taxable portion of his income could
be deducted.
The Senate Finance Committee has reached a different
solution to the problems of incentive provisions and their
effect upon the equity of the tax structure.
The committee
has voted to delete from the bill the Limit on Tax Preferences
and the Allocation of Deductions provisions and to substitute
for it a five percent tax on the dollar amount of the
preferences, in excess of $30,000, used by the taxpayer
each year.
This is an entirely different approach to the problem.
The five percent tax would be payable on all the preferences
taken in excess of $30,000 a year, regardless of the amount
of income on which the person is otherwise paying tax.
For
- 9 -
example, if a married person with $200,000 of taxable
income before deducting preferences has $100,000 of
preferences in accelerated depreciation on real estate,
he would pay on his net taxable income of $100,000 a tax
of about $41,500 (using the rates applicable in 1972 and
subsequent years).
He would pay no additional taxes under
the Limit on Tax Preferences in the House bill since his
preferences do not exceed half of his income, but he would
have personal deductions reduced to the extent allocable
to his preferences.
Under the Senate bill he would pay a
special tax at five percent on $70,000 (the excess of his
$100,000 of preferences over the $30,000 allowable amount)
or a tax of $3,500 in addition to his regular tax of about
$41,500.
If this person with $200,000 of income offsets it
fully by virtue of $200,000 of preferences, he would pay
no tax under existing law.
Under the Senate Finance
Committee provision he would pay a tax of $8,500 (five
percent of $170,000--the excess of preferences of $200,000
over the $30,000 allowance)
Under the Limit on Tax Prefer-
ences, however, this person would have had to pay tax on not
less than $100,000 of net taxable income--a tax of about
$41,500.
- 10 The five percent tax is estimated to raise some $700
million, when fully effective, whereas the Limit on Tax
Preferences and Allocation of Deductions provisions under
our revised proposals to the Senate were estimated to
raise some $540 million in total.
The five percent tax
raises so much revenue, despite its relatively low rate,
because it is applicable to corporations as well as to
individuals, and more than half of its estimated yield
would be derived from corporations.
The LTP and Allocation
proposals were applicable only to individuals.
The burden
of the five percent tax on individuals is less than that
under the LTP and Allocation proposals, but a substantial
additional burden is imposed on corporations.
In general, the Finance Committee version is less
onerous than the House bill for the taxpayer who is using
the incentive provisions beyond half his income determined
without the preferences, but imposes more tax than the House
bill upon the person who is using them to a more modest
extent.
It does accomplish a prime objective of seeing
that the persons using the preferences pay some tax to
the Federal government.
a flat low rate.
Yet the tax they pay will be at
~I
- 11 A major effect of the five percent tax would be
simply to water down the tax savings stemming from use
of the preferences beyond the $30,000 exemption.
For
example, assume that an individual or corporation has
~lOO,OOO
of oil and gas royalty income, that the depletion
rate is 23 percent as set by the Finance Committee and
that the taxpayer has used up his $30,000 exemption in
other items.
His depletion allowance would be $23,000.
If he is in a 50 percent tax bracket the depletion would
save him $11,500 in tax. But the five percent tax would
then cost him $1,150, leaving him a net tax saving of
$10,350.
This would have the same effect for him as
though, instead of imposing the five percent tax, the
law reduced the depletion allowance from 23 percent to
20.7 percent; for if his depletion allowance were $20,700
it would have given him, at a 50 percent incce tax bracket,
a tax saving of $10,350--the same saving that he nets
from 23 percent depletion with a five percent tax imposed
on percentage depletion.
- 12 The five percent tax would apply to a much longer list
of preferences than are affected by the House bill.
For
example, it would apply to the excluded portion of longterm capital gains, and thus in combination with other
changes in the bill could raise the effective tax on longterm capital gains to close to 35 percent in some cases.
The five percent tax would also apply to the difference
between the option price and the market value at time of
exercise of qualified stock options.
It includes the amount
of deductions for interest on indebtedness
incurre~
to pur-
chase or carry investments to the extent the interest paid
exceeds current investment income.
It also includes the
special bad debt allowances of financial institutions, and
hence reduces the special effects of those provisions.
The Senate Finance Committee version of a minimum tax
is so different in concept and effect from the House bill
that it is difficult to predict at this time how they might
be adjusted in the conference between the two Houses.
- 13 The pending bill significantly reshapes the incentive
provisions of existing law with respect to real estate.
The
allowance of accelerated depreciation and the limited recapture
of depreciation under Section 1250 on sale of real property
have produced substantial preferences in favor of real property construction and acquisition.
Our studies indicated
that these preferences had proved excessive in some respects.
Nevertheless the Housing Act of 1968, which was designed to
enlist private capital to produce 26 million additional housing units within the next decade, was drawn with existing
real estate preferences in mind.
Any substantial change in
the tax provisions affecting new construction of multi-family
housing would require reconsideration of the housing program.
Hence the Tax Reform Bill, while reducing the incentives
applicable to real estate generally, retains the present
accelerated depreciation provisions for new housing.
In
addition, under the Senate Finance Committee version the
recapture of depreciation rules will be more favorable to
new housing than to other types of real property, particularly
so with respect to publicly assisted housing programs under
which the return to the investor is tightly limited.
- 14 Furthermor~
the bill contains a provision that the
Treasury and the Department of Housing and Urban Development
recommended to permit five-year amortization of the costs
of rehabilitating certain rental housing.
The present
law, it has frequently been observed, creates a preference
either for destroying old structures and replacing them
with new, or for purchasing old buildings and taking 150
percent declining balance depreciation on the purchase
price.
It discourages rehabilitation since the costs
must be capitalized and depreciated over a long period.
The pending bill would limit depreciation on purchased
old buildings to straight-line and would put emphasis on
rehabilitating the old rental housing structures through
allowance of the fast write-off for such rehabilitation
costs.
We hope that this will encourage projects to remodel
existing structures' in the heart of our cities.
It should
help to preserve the unique architecture and historical
values of residential areas in our cities as an alternative
to holding them in tawdry condition or to applying the
bulldozer at every turn.
As with many incentives when they are first introduced,
no one can be sure that they will attain the desired
- 15 objective or will be worth the revenue cost.
Hence the bill
as reported by the Senate Finance Committee will limit
the amortization of rehabilitation costs to those incurred
before January 1, 1975.
This will provide an opportunity
to study the effectiveness and cost of the new amortization
provision and to reshape, extend or terminate it as the
experience of the next several years proves desirable.
A constant watch on the cost of tax incentives and
periodic reexamination of their individual merits seem
essential to the maintenance of the integrity and equity
of the tax structure.
This is as true of tax incentives as
it is of appropriations.
Each has its merits and its
demerits, and each may encompass the possibilities of
abuse and of continuation without thorough reappraisal.
While in the main appropriations are reviewed annually,
once started they have their own momentum for continuation
and expansion.
Tax incentives, if carefully designed and explicitly
described and circumscribed in the statute, have advantages
in some areas in their simpii.::i.ty of operation, in the
reduction of bureaucracy and in the enlistment of private
capital toward the attainment of national goals.
They must
- 16 be approached with caution, bathed in the floodlight of
public attention and scrutiny and weighed in the balance
with the obvious need of maintaining the equity of our
tax system.
They require the constant attention of those
in government and those, such as you, who as students
of the tax law are so vitally interested in its design
and in its successful operation.
TREASURY DEPARTMENT
"~AS~fNGTON,
D"C.
November 12, 1969
FOR IMMEDIATE RELEASE
TREASURY'S WEEKLY BILL OFFERING
The Treasury Department, by this public notice, invites tenders
tor two series of Treasury bills to the aggregate amount of
$3,000,000,000, or thereabouts, for cash and in exchange for
T~easury bills maturing
November 20, 1969, in the amount of
$2,902,408,000,
as follows:
91-day bills (to maturity date) to be issued November 20, 1969,
in the amount of $1,800,000,000,
or thereabouts, representing an
addi tional amount of bills dated August 21, 1969,
and to
mature February 19, 1970, originally issued in the amount of
$1,202,422,000,
the additional and original bills to be
freely interchangeable.
182-day bills, for $1,200,000,000,
dated November 20, 1969,
and to mature
or thereabouts, to be
May 21, 1970.
The bills of both series will be issued on a discount basis under
competitive and noncompetive bidding as hereinafter provided, and at
maturity their face amount will be payable without interest. They
will be issued in bearer form only, and in denominations of $1,000,
$5,000, $10,000, $50,000, $100,000, $500,000 and $1,000,000
(maturity value).
Tenders will be received at Federal Reserve Banks and Branches
up to the closing hour, one-thirty p.m., Eastern Standard
time,
Monday, November 17, 1969.
Tenders will not be
received at the Treasury Department, Washington. Each tender must
be for: an even multiple of $1,000, and in the case of competitive
tenders the price offered must be expressed on the basis of 100,
with not more than three decimals, e. g., 99.925. Fractions may not
be used. It is urged that tenders be made on the printed forms and
forwarded in the special envelopes which will be supplied by Federal
Reserve Banks or Branches on application therefor.
Banking institutions generally may submit tenders for account of
customers orovided
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
K-267
-
L
-
responsible and recognized dealers in investment securities. Tenders
from others must be accompanied by payment of 2 percent of the face
amount of Treasury bills applied for, unless the tenders are
accompanied by an express guaranty of payment by an incorporated bank
or trust company.
Immediately after the closing hour, tenders will be opened at
the Federal Reserve Banks and Branches, following which public announcement will be made by the Treasury Department of the amount and price
range of accepted bids. Those submitting tenders will be advised
of the acceptance or rejection thereof. The Sec~tary 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 November 20, 1969, in
cash or other immediately available funds or in a like face amount
of Treasury bills maturing
November 20, 1969. Cash and exchange
tenders will receive equal treatment. Cash adjustments will be made
for differences between the par value of maturing bills accepted in
exchange and the issue price of the new bills.
The income derived from Treasury bills, whether interest or
gain from the sale or other disposition of the bills, does not have
any exemption, as such, and loss from the sale or other disposition
of Treasury bills does not have any special treatment, as such,
under the Internal Revenue Code of 1954. The bills are subject to
estate, inheritance, gift or other excise taxes, whether Federal or
State, but are exempt from all taxation now or hereafter imposed on
the principal or interest thereof by any State, or any of the
possessions of the United States, or by any local taxing authority.
For purposes of taxation the amount of discount at which Treasury
bills are originally sold by the United States is considered to be
interest. Under Sections 454 (b) and 1221 (5) of the Internal
Revenue Code of 1954 the amount of discount at which bills issued
hereunder are sold is not considered to accrue until such bills are
sold, redeemed or otherwise disposed of, and such bills are excluded
from consideration as capital assets. Accordingly, the owner of
Treasury bills (other than life insurance companies) issued hereunder
need include in his income tax return only the difference between
the price paid for such bills, whether on original issue or on
subsequent purchase, and the amount actually received either upon
sale or redemption at maturity during the taxable year for which the
return is made, as ordinary gain or loss.
Treasury Department Circular No. 418 (current revision) and this
notice prescribe the terms of the Treasury bills and govern the
conditions of their issue. Copies of the circular may be obtained
from any Federal Reserve Bank 0oO~ranch.
TREASURY DEPARTMENT
Washington
FOR RELEASE UPON DELIVERY
REMARKS OF THE HONORABLE MURRAY L. WEIDENBAUM
ASSISTANT SECRETARY OF THE TREASURY FOR ECONOMIC POLICY
BEFORE THE FALL MANAGEMENT CONFERENCE
GRADUATE SCHOOL OF MANAGEMENT, NORTHWESTERN UNIVERSITY
CHICAGO, ILLINOIS
WEDNESDAY, NOVEMBER 12, 1969, 2:00 P.M., CST
DEFENSE SPENDING AND THE ECONOMIC OUTLOOK
Important developments are taking place in the national
defense sector which have significant implications for the
Federal budget and the economy as a whole.
The essential
facts are public knowledge, but they seem not to have received
the attention they deserve.
The fact of the matter
1S
that military expenditures --
and more important the leading indicators of defense activity,
which foreshadow changes in the months ahead -- have passed
a crest and are now receding.
This is now helping in
a significant way to reduce the inflationary pressures that
are present in our economy.
Somewhat further in the future
there lies the prospect of a sizable release of budgetary
resources from the defense effort into high priority domestic
programs.
I suppose it is somewhat ironic that an alumnus of
the Bureau of the Budget and a former economist for a major
defense contractor should corne here to talk about defense
K-268
- 2 -
spending in neither capacity.
But I notice from page 9
of the latest Monthly Treasury Statement of Receipts and
Expenditures that the Treasury paid about $6.6 billion in
Defense Department bills in September which should entitle
me to say something on the subject.
As some may recall,
I had quite a lot to say about defense expenditures during
1966 and 1967 without benefit of organizational support.
A voice from the wilderness, or perhaps it was a chorus,
tried to stress the inflationary nature of the economic and
financial impact of the defense buildup then underway,
a process which was somewhat shielded from view at the time,
in part, by the inadequacy and limited understanding of our
statistics.
During that unfortunate miscalculation of economic
policy in the period of the Vietnam buildup, many of us
were urging improvements in the Federal Government's
statistical reports in order to obtain better indications
of changes in the military demand for goods and services.
I am pleased to report that the Census Bureau now issues
each month a publication, Defense Indicators, which is
a most useful compendium of information for those of us
concerned with evaluating the impact of Federal fiscal
policy.
The present is one oi
[~2
times of change in the
spending patterns of the public sector when such data are
of particular use.
- 3 -
What is the current situation with respect to the
advance indicators of defense activity?
The main point is
that a significant decline has occurred in the key measures
of defense activity for the past year or so.
emphasize:
Let me
There has been an absolute decline, not just
a slower rate of increase.
I find it useful to work in
terms of quarterly averages in order to avoid the possibility
of the analysis being obscured by the erratic movements which
occur in a particular month.
Using the latest available
quarterly data, we find that by the middle of this year:
Defense Department gross obligations incurred
(contracts awarded and other commitments made)
were running 12 percent below a year earlier,
and 20 percent below the peak rate last year.
In the procurement area, gross obligations
were down 34 percent from last year's peak.
Military prime contract awards were running
24 percent below a year earlier in the
second quarter before edging up a bit.
In July and August, military prime contract awards
continued to run below a year earlier.
Make no mistake
about it, the softening of these advance defense indicators
is a significant development in terms of the control of
inflation.
As Secretary of Defense Melvin Laird pointed out
- 4 recently, the intermediate and final indicators of the
impact of defense spending -- what the National Bureau of
Economic Research would term the coincident and lagging
indicators -- are still at historic highs.
But as we know,
they tell us where we are -- actually where we have been
rather than where we are going.
It is the advance or
leading indicators that matter in terms of the future.
And
these leading indicators point clearly to a sharp reduction
in inflationary pressures from the defense sector.
These advance indicators to which I have referred are
measured in current dollars.
This is ordinarily the form
in which they are compiled and used.
Nevertheless, there
is also interest in having at least a rough idea of the
defense sector's demands on the economy in real terms,
i.e., after correction for price changes.
We know that
everything costs more than it used to, defense equipment
as well as civilian goods.
But how does current military
demand compare with that of the recent past in terms of
claims on real resources?
No precise and statistically
exact answer can be given to this question.
However, after
approximate adjustment for price change it appears that:
Total Defense Department obligations in the
second quarter of this year were running at
about the levels of late 1965 and early 1966.
- 5 -
Obligations for procurement were running
at about the levels of late 1964.
Military prime contract awards were running
at about the levels of early 1965.
These comparisons can only be suggestive.
But they
do imply that in real terms the defense sector may soon be
making no greater claims on real resources that it did in
the pre-Vietnam buildup period.
Just how soon this might
be the case, it is hard to say.
And this would not mean,
of course, that defense expenditures in current dollars had
returned to the earlier levels.
The same output now costs
much more.
Some perspective is useful here.
During World War II,
about half of our economy was devoted to war production.
During the Korean War, the ratio was about 15 percent.
At
present, the military share of our Gross National Product
is about 8-1/2 percent, down from 9 percent in 1967 and 1968.
We clearly have achieved some measurable reduction in the
relative importance of defense spending in the American
economy.
There are encouraging signs that the defense budget
will be coming down in an absolute as well as a relative
sense.
Secretary Laird has pointed to the following actions
- 6 -
already taken or planned to be taken in the current fiscal
year:
a $4 billion reduction in expenditures.
an $8 billion cut in budget authorizations.
a 220,000 man reduction in military manpower.
a 68,000 man reduction in the civilian work
force of the Department of Defense.
It is still too early to be making anything more -than
an educated guess as to where defense expenditures may be
set for fiscal year 1971.
to be made.
Key budgetary decisions are yet
But current trends are in an encouraging
direction.
*
Looking beyond the immediate future into, say, the
mid-1970's, there is the prospect of a more sizable release
of Federal budgetary resources.
dividend"?
Will there be a "peace
If this is defined as a reduction in U. S.
military expenditures for Vietnam following the cessation
of hostilities in Southeast Asia, certainly there should
be a dividend, and a sizable one.
But, if we are referring
to the net expenditure-revenue position from now on out to
the mid-1970's, the answer gets a bit more complicated.
There are already very heavy pressures for expenditure
increases.
Just how much of a net "dividend" will remain
depends upon quite a few developments.
- 7 First of all, in the military area itself, some
requirements have been put aside temporarily because of
the Vietnam effort.
For example, in real terms, total
expenditures on defense research and development are perhaps
lower than the pre-Vietnam level, despite the new needs
related to Vietnam.
This could mean a substantial amount
of "catch-up" spending.
Also, new military needs arise.
Various new strategic and tactical aircraft, missile, and
ship systems are being considered, often to replace
obsolescent weapons of fairly considerable vintage.
In
addition, some defense inventories have been permitted to
decline.
As a consequence, some of the so-called peace
dividend will probably be used up in the defense area itself.
Second, the price tag on existing defense and nondefense
commitments rises with the price level itself.
But even
with a stable price level, population growth will cause some
increase in many areas of civilian expenditures.
ClearlY,
of course, outlays for veterans' services and benefits will
be expanding in the next few years as
ne~ly-discharged
servicemen qualify for education and training, health, and
other government assistance.
Third, President Nixon is, himself, committed to
a carefully chosen set of new programs, ranging from welfare
reform to improved manpower development and training activities.
- 8 -
Among those programs is the proposal for revenue sharing.
By the mid-1970's, this could be allocating $5 billion or
so of Federal revenues to the states and localities.
The
Treasury had a good bit to do with the development of this
proposal which, I think, is a very practical and essential
undertaking if we are to make the "New Federalism" a reality.
But, like so many other good things the Government thinks
of doing, the program has a price tag in the Federal budget.
By now, I am sure you see that in the "peace dividend"
context, the answer depends a great deal on where the
expenditure level is drawn.
One thing we can be sure of:
the grand total of possible, and seemingly desirable,
expenditure increases far outruns the capacity of the
revenue system to pay for them.
The post-Vietnam fiscal
outlook is not one of great liberality.
Hard budgetary
choices will continue to be the order of the day.
One thing I do believe.
The achievement of peace in
Vietnam, in addition to the obvious social and humanitarian
benefits, will also have important favorable economic
effects, given the current state of the American economy.
For one, it would represent a reduction in inflationary
pressures and, hence, on money and credit markets and interest
rates.
Secondly, it would ease the budgetary outlook and
)1
- 9 -
to some extent make more resources available for civiliam
programs related to the cities, the environment, and so forth.
Third, it would make possible a substantial improvement in
our international balance-of-payments position, because so
much of the current deficit is attributable to the Vietnam
War.
To sum up: Advance indicators of defense activity
point to a substantial lessening of inflationary pressures
from the military sector.
Beyond the near term, a further
reduction in defense expenditures could be expected to
follow an acceptable Vietnam settlement.
But pressures
for higher nondefense expenditures, as well as new weapon
systems, will continue to be very heavy.
Careful management
of the national finances will be needed to get the economy
back onto a non-inflationary path and keep it there.
Although it is always pleasant to contemplate the
favorable aspects of future prospects, let us not forget
the needs of the current situation.
We continue to face
substantial inflationary pressures.
Extension of the
income tax surcharge through the middle of 1970 is essential
in order to regain reasonable price stability.
The successful
completion of our domestic war against inflation will provide
the necessary groundwork for real and rapid growth in
employment, production, and living standards.
- 10 -
Any examination of the military sector of the United
States, such as the one on the agenda of this conference,
needs to keep in mind the central role of a strong and
healthy economy as the basis for continuing to maintain
an effective national security posture.
000
TREASURY DEPARTMENT
----------.-----WASHINGTON, D.C.
FOR IMMEDIATE RELEASE
November 13, 1969
ENGRAVED PORTaAlTS OF PRESIDENT RICHARD NIXON
NOW AVAILABLE FROM BUREAU OF ENGRAVING AND PRINTING
The Bureau of Engraving and Printing today announced the
addition of the portrait of President Richard Nixon to its
collection of engravings of all the Presidents.
This bust portrait is available in two size images,
approximately 2 by 2~ inches and 4 lby 5 inches. A photograph
of the President, taken just prior to his inauguration by the
well-known photographer, Philippe Ha1sman, was selected by
The White House as the subject matter for the Bureau portraits.
Portrait engraving is an art little used today, except in
the production of securities. The artistry of the craft lies
in the delicate gradations of tone and the third-dimensional
and lifelike effect of the finished rendition.
The print was produced by the same process employed in the
printing of United States currency and postage stamps.
Copies of President Nixon's portrait are available from
the Bureau at 60 cents each for the small size and $1 each
for the large. Orders for the prints accompanied by either
check or money order should be addtessed to the Bureau of
Engraving and printing, Washington, D. C. 20226.
000
K-269
TREASURY DEPARTMENT
-------WASHINGTON. D.C.
November 13, 1969
FOR IMMEDIATE RELEASE
FRENCH TAX TREATMENT OF U.S. PORTFOLIO
INVESTMENT TO BE REVISED
The Treasury Department announced today that the French
Government has agreed to grant American shareholders with
portfolio investments in French companies a cash refund of
one-half the French tax collected at the corporate level. This
payment is similar to the tax credit now granted to French
shareholders in French corporations. (In France this credit
is known as 'the "avoir fiscal. ") rhe new rule will not apply
to a U.S. cor.poration which owns 10 percent or more of the
stock of the paying French corporation.
The contemplated change in the French tax treatment of
American shareholders will be incorporated in a modification
of the existing income tax convention between France and the
United States and is to be submitted to the U.S. Senate for
advice and consent to ratification. The effective date is
expected to be January 1, 1970.
An example of the operation of the "avoir fiscal" is as
follows: Under French law, a corporation with profits of
$200 would pay a corporate tax (at the rate of 50 percent) of
$100. ~f the remaining $100 of after-tax earnings is
distributed to a French shareholder, one-half of the $100 tax
collected from the corporation is regarded as having been paid
on behalf of the shareholder, who receives a tax credit of $50.
The French shareholder includes the amount of credit in his
income. He has income of $150 ($100 dividend and $50 credit).
K-270
- 2 He then takes the $50 credit against the resulting tax as
follows:
Corporate Profits •••••••••••••••• 200
Tax at Corporate Level .•..•..•••.• 100
Amount distributed to
French Shareholders............. 100
Credit included in Income •.•••.••
50
Total dividend income to
French shareholde r. . . . . . . . . . . . .
150
Tax (at assumed 35 percent rate).
52.5
Credit ...............
50
Tax Due ..
If his tax
a refund o
00
••••
0
o.o • • • • • • o ••
•••••
0.000
••••
00
2.50
is less than the credit, he is entitled to
The same principle will in the future be applied by the
French Government to U.S. shareholders, except that a cash
payment will be made to the U.S. shareholder by the French
Government in lieu of the tax credit allowed to a French
shareholder. If a French corporation declares a $100 dividend
payable to a U.S. shareholder, the shareholder receives the
$100 from the corporation plus $50 from the French government,
or a total of $150, less the French withholding tax (set by
treaty at 15 percent) on the gross amount ($150 x 15 percent =
$22.50).
For U.S. tax purposes, the American shareholder who receives
a $100 dividend plus a $50 refund must include the full $150
in his gross income and is entitled to a credit against his
U.S. tax for the amount of French withholding tax on the gross
amount -- $22.50 in the example above. At present the u.S.
shareholder receives $100 less $15 French withholding tax and
includes the $100 dividend in his taxable income. He claims
a credit of $15 with respect to that amount.
- 3 -
Upon enactment of the Interest Equalization Tax
Extension Act of 1969, that tax will continue to be applicable
to the acquisition of French portfolio securities by United
States persons.
000
Treasury Department
Washington
FOR RELEASE ON DELIVERY
STATEMENT BY THE HONORABLE PAUL A. VOLCKER
UNDER SECRETARY OF THE TREASURY FOR MONETARY AFFAIRS
BEFORE THE
SUBCOMMITTEE ON INTERNATIONAL EXCHANGE AND PAYMENTS
OF THE JOINT ECONOMIC COMMITTEE
ON FRIDAY, NOVEMBER 14, 1969, AT 10:00 AM
This Subcommittee has corne to play a most valuable role
in the never-ending task of keeping our international
financial arrangements
abJ~ast
of the needs of the times.
You have promoted informed public discussion of important
issues too often considered the preserve of experts, prodded
practitioners to seek new and better solutions, and -- not
least -- provided leadership and support when the need for
change has been demonstrated.
I am pleased to assist in this
process this morning by discussing U. S. policies related to
the proposed increases in International Monetary Fund quotas
and the two-tier gold market arrangements.
I am doubly pleased that we can consider these matters
against a backdrop of relative calm in international financial
markets.
The recurrent stresses and strains characteristic
of recent years have been symptoms of underlying imbalances
K-271
#
\
- 2 -
within and among national economies, as well as of some
shortcomings in international financial arrangements.
It
would be too much to claim these problems are all behind us.
But I think we can see some tangible and significant progress
toward dealing with a number of the principal sources of
uneasiness.
The evident strengthening of the external position of
the United Kingdom, the adjustment of the French franc parity
without serious disturbance, and the wise and courageous action
of the new German Government in revaluing the mark have together removed the main sources of immediate speculative
tensions.
More than that, I believe they have helped establish
a solid footing for moving ahead to deal simultaneously with
remaining external and internal imbalances.
For instance, by making imports relatively cheaper and
dampening strong incentives to divert current production into
foreign markets, the revaluation of the mark should -- at one
and the same time -- assist the German Government in dealing
with emerging inflationary pressures at home and significantly
improve the prospects of achieving a better equilibrium in
external trade flows.
- 3 Accompanied by effective, sustained policies of internal
fiscal and monetary restraint, the new exchange rate for the
franc provides a basis for orderly restoration of the French
competitive position.
In weathering the strains of the past
year -- and with clear signs of basic improvement now showing
through in recent trade and balance of payments data -sterling need no longer be a focus for speculative pressure.
The sense of greater stability fostered by these recent
developments in particular countries had been strongly reinforced,
I believe, by the multilateral decision at the IMF
meeting to move ahead with the creation of Special Drawing
Rights in the sizable volume of $9.5 billion over the next
three years.
This decision has been clearly presaged by
intensive preliminary discussion through the Summer.
Neverthe-
less, the formal activation decision -- taken with only one
abstention -- emphasized the extent of the consensus to move
forward into a new era of managed reserve creation.
More
broadly, this wide agreement about so sensitive a subject as
international money creation seems to me the best possible
omen of our capacity to deal cooperatively with the problems
in other difficult and complex areas.
- 4 Indeed, this process of monetary cooperation is now
reflected in the fact that, as a result of discussions by
the Governors of the Fund at the Annual Meeting, the Executive
Board is now preparing to examine carefully and systematically
the possible usefulness of introducing a somewhat greater
degree of flexibility into the exchange rate mechanism.
of this matter will take time.
Study
A wide variety of points of
view must be brought to bear, many of which stem from the
basically different economic circumstances in which various
countries find themselves.
It is far too soon to pronounce
judgment on what, if any, specific proposals will pass the
test of practicality and widespread usefulness.
Certainly,
we want to be imaginative in seeking ways to eliminate rigidities that inhibit the adjustment process or tend to build up
incentives to speculation.
But we also want to take prudent
care that, in making changes, we do not undermine the broader
stability and disciplines of the system as a whole
stability and
disciplin~that
provide an essential base for
expanding trade and orderly planning and investment decisions.
I can assure you that the United States will be actively
participating in this joint effort in this spirit.
- 5 The series of crises and near crises in international
financial markets that have been characteristic of recent
years have been a prod for constructive change.
But we can
also take some satisfaction from the fact that massive speculative flows have been absorbed and contained without rupturing
the basic international financial structure or impeding the
growth of trade.
Our defenses have been tested, and they have
stood firm.
Nowhere has this been more striking than with respect to
the new gold market arrangements introduced in March of 1968
the so-called two-tier system.
In essence, the decisions
taken at that time separated dealings in gold among national
authorities from the vagaries of industrial and speculative
demands and new production in the private markets.
The
immediate result was to break the link between currency
disturbances or speculation and a drain of gold from official
stocks into private hoards -- a link that, in practice, had
become self-reinforcing.
Instead, speculation in gold now
spends itself in fluctuations in the price in private markets.
The process is self-limiting, as the rising price of an asset
that yields no return simply increases the risk of subsequent
loss.
- 6 -
Since the two-tier system was introduced, we have, in
fact, seen the private price move over a considerable range
in the leading markets.
The upper end of that range, at
about $44 an ounce, was reached in the course of the first
year -- a period when the market was growing accustomed to
the new arrangements even while the supplies of newly-mined
gold released to the market were unusually light.
Since March
of this year, the trend has generally been downward.
The
current price happens to be close to the lowest point since
the two-tier system was established.
At least to those not actively participating in the
market, the forces pushing the price in one direction or
another at a given time are often obscure.
But what is im-
portant is that fluctuations in the private price have increasingly corne to be viewed as a characteristic of what is
essentially a commodity market, with limited significance for
the monetary system.
Indeed, the private market reacted only
slightly, if at all, to some of the more severe currency
crises of the past year.
The price movements that have
developed in response to private forces and interests only
seem to reinforce the wisdom of separating our basic monetary
arrangements from the vagaries of this market.
~
,
I
- 7 The existing national stocks of some $39 billion of
gold of course remain the most important single element in
official world reserves, accounting for somewhat over half
the total.
I believe gold will continue to have an important
role in the monetary system as far ahead as we can foresee.
The institution of the two-tier system recognizes that,
relative to other reserve assets, the role of gold will
decline
over time
as the need for total reserves grows.
Indeed, operation of the two-tier system must assume the
creation of acceptable reserves in other forms.
In this sense, the SDR is a natural complement.
Within
three years, the volume of SDR's will be the equivalent of,
roughly, one-fourth of the entire official stock of gold.
On the basis of performance, I believe the two-tier
system must be judged a success.
This is true despite the
fact that it has not been possible so far to reach an understanding with the world's largest gold producer -- South
Africa -- as to appropriate
means by which it might wish to
handle its newly-mined gold within the framework of the
generally accepted arrangements.
Normally, South Africa
accounts for almost 80 percent of all new production.
!
- 8 South African authorities have indicated that, as a
practical matter, a substantial portion of this production
has been channeled to private hands at premiums over the
official price.
Unlike other gold producers, however, South
Africa has also chosen to withhold a portion of its potential
supply from the private market.
The manner of handling South
African gold has, of course, been a recurrent element of
market uncertainty that I doubt is in anyone's long-term
interest.
That is why I remain hopeful that an understanding
can ultimately still be reached as to the appropriate methods
of handling South African sales within the framework of the
best interests of the system as a whole.
Consistent with the basic premises of the two-tier system,
I am aware of no attempt by official institutions to profit
from the higher price of gold in private markets by official
sales.
Moreover, the collective judgment embodied in the
March 17, 1968, Communique that there is no need to add to
reserves in the form of gold from the private markets has been
reflected in the abstention of all major countries from purchases of South African or newly-mined gold, apart from
certain transactions arising from the normal mechanism of the
IMF .
- 9 The exceptions to this practice, to the best of my
knowledge, have been confined to a very few, small countries.
These purchases seem to me to have been distinctly unfortunate.
Obviously, the amounts of gold involved have not, in themselves,
impaired the effective operation of the two-tier system.
Nevertheless, all countries and all central banks seem to me
to share a common responsibility for maintaining the health
of the system as a whole, from which all benefit.
In this
instance, the proper expression of this common responsibility
seems to me a willingness to abide by the generally-accepted
implications of the two-tier system.
In a world'of more than 100 countries, misunderstandings
of the purpose and importance of the new arrangements are,
of course, possible.
In those few instances where some
question has come to our attention, we have, naturally, communicated our views directly to those concerned.
On this basis,
I feel confident that the basic principles inherent in the
two-tier system are increasingly well understood.
In announcing these hearings, your Chairman correctly
noted that new gold has entered the monetary system from
South Africa as a by-product of certain IMF transactions.
- 10 -
Some $100 million of South African rand have been drawn from
the Fund since the beginning of the two-tier system.
In
addition, as reviewed earlier in an exchange of letters between Messrs. Reuss and Widna11 and Secretary Kennedy
published last Spring, in certain circumstances South African
drawings from the Fund may be repaid in gold.
A total of
$50 million was involved in such repayments last Summer.
These transactions follow long-standing IMF procedures,
and the United States has not felt it necessary or desirable
to raise questions about these particular applications of
established procedures so long as no clear record developed
of their repeated use simply to divert gold from the private
market.
This has not been the case so far.
The use of rand
in drawings has not been out of proportion to the use of
other currencies, on the basis of established criteria.
So
far as the South African drawing in the Spring was concerned,
Secretary Kennedy noted, in his letter to the Chairman, that:
"
We have long supported the concept that gold
tranche drawings be virtually automatic, and we continue to believe that no doubt should be cast on the
ability of a country to mobilize these funds promptly
should it deem a need exists.
I am convinced that
- 11 -
should experience show that the privilege is being
abused by repeated drawings and repayments unrelated
to the basic objectives of the IMF, adequate means
exist to effectively halt such practices."
Your Chairman, in his announcement, also raised the
question of what plans there might be for handling the gold
portion of the payments required in connection with the
anticipated increase in IMF quotas.
The problem arises
essentially because the Fund Articles -- drafted 25 years
ago -- require that 25 percent of any increase in quotas must
be made in the form of a single kind of reserve asset -namely, gold.
Because some countries hold very little gold,
the potential arises for a large conversion of dollars into
gold, presumably at the expense of U. S. reserves, simply to
enable these countries to make necessary quota payments.
One effective and straightforward way of averting this
incidental -- but quantitatively large -- potential drain
of U. S. reserves as a result of quota increases would be to
permit SDR's to be used as well as gold ..
As a result of the
initial activation of SDR's in January, virtually every country
would then be equipped to make the necessary payment from
- 12 its own reserves, just as major countries, including the
U. S., are prepared to pay in gold.
Moreover, this procedure
would further demonstrate the essential equivalence of gold
and SDR's as reserve assets.
Unfortunately, the amendment to the Articles of Agreement
providing for SDR's failed to include such a provision.
I
believe many foreign officials would now share the regret
expressed publicly by Emilio Colombo, the Italian Minister
of the Treasury, who was a principal in the SDR negotiations,
over this omission.
However, I think we must recognize the
difficulty of amending the Articles at this time for this
purpose.
In any event, other techniques are available to forestall
the so-called secondary impact of quota payments on our own
reserve position.
These techniques are more cumbersome.
They essentially entail a series of transactions by which
countries with insufficient gold would initially obtain the
gold from one or more other countries; the gold is then paid
into the Fund; and the Fund, in turn, repurchases with equivalent
gold needed currencies
0
In the end, the Fund will be adequately
supplied with usable currencies, qr perhaps SDR's, without
impairing the reserve position of any country.
I believe in
.~
'.'
,j/
- 13 concept the need for such an arrangement is widely accepted,
and there is every reason to expect that the Executive
Directors will propose a fully acceptable and technically
sound plan.
The Executive Directors are now shaping a proposal to
the Governors as to the size and distribution of quota increases themselves.
The U. S. welcomes this prospective
addition to the Fund's resources, which I anticipate will be
reasonably in line with the growth of the world economy.
In
a sense, this prospective addition to the supply of international credit is a natural complement to the inauguration
of SDR's, which provide an expanded reserve base.
The task of achieving a distribution of quotas that
fairly reflects the relative needs and circumstances of
various member countries is a delicate process.
In balancing
the various considerations involved and to facilitate the
negotiating process, the United States has indicated a willingness to accept a slightly smaller percentage increase in its
own quota -- now at $5.2 billion -- than seems likely for the
average member.
Nevertheless, we anticipate that, for the
- 14 first time since the Fund was founded, the United States,
in addition to its share of a general increase applicable
to all members, will accept a portion of the additional
selective increase to which it would be entitled on the basis
of commonly-used formulas calculated to reflect relative
economic growth and weight.
This decision may raise the
further question, in the light of previous practices, of
whether we are prepared to increase in approximately the
same proportion our capital subscription to the World Bank.
Both the quota and any possible increase in the World Bank
subscription would, of course, require legislation.
All of this, as I suggested at the start, suggests
progress in dealing with the problems of the international
financial system.
But we must also recognize there is one
area -- fundamentally more important than any other I have
touched on today -- where the needed progress has been all
too slow.
I am referring, of course, to the related problems of
our balance of payments position and our internal inflation.
The preliminary third quarter payments figures show a seasonally adjusted deficit on the so-called liquidity basis
- 15 of some $2-1/2 billion, only a bit below the average of
$2.8 billion during the first two quarters of the year.
Moreover, on the official settlements basis, where we had a
sizable surplus in the first half of the year, a defic:t
approaching $1 billion developed in the third quarter.
It would·be misleading to focus too closely on precise
numbers.
The conventional measure of the liquidity deficit
continues to be distorted by some transient factors of little
real economic significance, including a sizable reversal of
so-called special receipts.
Outflows related to speculation
in the German mark, which subsided only at the end of the
quarter, probably had some impact on both measures of our
payments position.
Conversely, a reflow of funds from Germany,
the apparent need for many corporations to repatriate funds to
conform to the direct investment regulations, and other factors
should work toward some improvement during the current quarter.
Nonetheless, any analysis makes it plain that, beyond
short-run distortions, we face a major challenge.
of the problem is perfectly clear.
The nub
If we. expect to invest
freely abroad, to provide aid, and to carry our military
- 16 responsibilities, we must, over time, provide the bulk of
the resources through a strong trade and current account
position.
Instead, we have permitted, over recent years, an
erosion in our international competitive position, and overheating has sucked in imports.
By 1968, our traditional
large trade surplus had almost vanished.
In recent months, there have been some glimmerings that
the process of restoring that favorable trade balance may
have begun; at the least, the deterioration has been stemmed.
A vigorous business climate abroad should provide a clear
opportunity for improvement in the year ahead.
But it is
plain that the full job of restoring our competitive position
can't be accomplished easily or quickly.
What is essential is that the signs of underlying progress
are plain.
The most important sign of all will be a dampening
of our internal inflationary pressures.
I know this kind of plea is familiar to you all, and I
have no new approach to recommend other than the tough and
painful -- but also indispensable -- course of fiscal and
monetary restraint.
I repeat these words today only because
it is always too easy -- in the euphoria of the moment, intrigued by the intellectual challenge of developing one monetary
- 17 mechanism or another -- to lose sight of this fundamental.
The size and distribution of Fund quotas, the performance of
the two-tier system, the effects of the German revaluation,
even the major accomplishment of the SDR and the potential
for some limited flexibility of exchange rates will be of
limited consequence if we do not meet our own responsibilities
for a reasonable degree of price stability.
In the end, world monetary stability rests on the stability
of the dollar itself.
Failing that, I will be in no position
to report in the future the same grounds for confidence that
I have cited today.
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VVI\.SHiNGTON, D.C.
Eoven'ber 17, 1969
FOR IM1.vlEDINl'E
RELEASY~
SALE OF P.DDI'l'IOl'lAL f.Jv10UIJTS OF APRIL 1\1:D Jillffi 1'AX ANTICIPj'..'l'IOH BILLS
The Treasury Department annotL'1ced tod,:ty the sale of $2.5 billion of tax
anticipation bills; :)1. 0 biD.ion matur:Lng j.n April 1970 end ~~1. 5 billion matud.ng
in June 1970.
The bills are in addjtjon to the $2.0 billicn of April t8X bills
and :);3.0 billion of June tax bills alreQdy outstanding.
The bills ,·,ill be auctioned on }yiclBY, IJove'nber 21, for paymer.t on
vlednesday, . November 26.
Commercial b2,n1(s may make pJ.yment for their o"m [md
their cust.omers 1 8.cccpted tender::; by credit to 'liree.sm-:), tax and loan 2.ccounts.
The bills mature on April 22 and June 22, 1970, but rr,ay be used at face
value in payment of Federal income taxes due' on April 15 and June 15, 1970,
respectively.
K-272
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NOVEMBEH 17, 1969
TREASURY OFFERS $2.5 BILLION OF APRIL AND JUNE TAX BILLS
'1'11e 1'reasury ])opar Llllcnt, by this Pll.1JJLC notice, :invi tes tenders for hro series
of Treasury bills to the abt~reGate amount of ~)2,500,000,000, or thereo.houts, as
follo\\'s:
147-day bills (Lo matu:1'i ty date) to be is sued November 26, 1969, ir'! the
amo\mt of $1,000,000,000 ,or thereabouts, l'eprescnting an
add:L tional mnount of bills 'dated. October 14, 1969, o:nd to mature
April 22,1970,'
oriGinally issued in the amount of ~i2,006,704,000,
the additional and o:dGinE'.l bills to be freely interchangeable.
The bills ,,'ill be accepted at fhce vahle j n payment of income taxes
dl.l.e on April 15, 1970.
208 -day bills (to maturity date) to be issued Novpmber 26, 1969, in the
amolmt of $1,500,000,000, or thc1'C::abouts, represenbng E'....n
addi tional amount of bills dated October 29, 1969, ",I;d to mature
June 22, 1970,
originally issued in the Cl!Jlount of $;3,004,380,000,
the addi tiona} and od.sinal bills to be freely interchangeable.
'Tb.e bills ,-:ill be accepted at face value hi l)ayment. of income taxesdue on June 15, 1970.
The bills of both series 'rill lie is(med on a diSCOlUlt hasjs under CO;;-.l")ctitive ancl
nonco:Trpeti tive biddinG as hereinafter provided ana at maturity, to the extent they
?Ie not presented in payment of inCOTf.C tD.zes, their fD.ce alllount lTill be payable '.:i thout intcrest. 1'hey will be issued in b<:;arel' form only, and in denomina.tioDS of ~;l,OOO,
$5,000, $10,000, $50,000, $100,000, $500,000 and $1,000,0.00 (",a.turity value).
'Taxpayers desiring to apply these bills in payrlent of incor:;(; taxes rr.ay subrr.i t
the bills to a Federal Reserve Bank or Bre_nch or to the Office of the Treasurer of
the United. States, Hashington, not more than fifteen clays before the appropriate
income tax payment date. In the case of hills submi tled in pa::''l::ent of income taxes
of a corporation they shall be acco~iI'anied. by a duly completed Form 503 and the
office receiving these items "rill effect the deposi ~ on the date the taxes are due.
LYl the case of bills submitted in po.yment of income taxes of all other tax!)ayers,
the office receiving the bills "rill issue receipts therefor, the original of i'7hich
the taxpayer shall submit on or before the date the taxes are due to the District
Director of Internal Revenue for the District in \'Thien such tazes are payable.
Tenders v,ill be received at Federal Reserve Banks and Branches up to the
closing hour, one-thirty p.m., Eastcrn Standard time, Friday, November 21, 1969.
Tenders '\d 11 not be received at the Treasury Depart]()(~nt, HashiJ'.~;ton. Each tender
must be for an even multiple of $1,000, and in the case of cor::petitive tenders
the price offered must be ezpressed on the basis of 100, with not ];lOre than three
decimals, e.g., 99.925. Fractions ma,y Hot be used., IJ-:, is urU::c1 thc~t tenders be
made on the printed. formf; and fon-mrded in tbe special envc:lop(~3 Vihich v,ill be
supplied by Federal Reserve Banks or Branches on app1icc.t.ion. therefor.
K-273
- 2 Banl;:ing insti tutionG e;enerally )flay sul)mi t tenders foY' account of C"ltsto::lcrs
provided the names of the customers are set forth In such tenders. OUlel's than
bank:ing institutions "'ill not he pcrrr.-i t,i,ecl to ;_ijLlr1it tenclers except for their Ov111
account. Tenders ,'rill be l'ccei '\Teel \-Ii iJJCui: depo~~:\ t from j ncorpor2tccl banl:s c\)ld
trust companies and from re;3pow~ible Clnd rec:ogJJi7.cd clealers in investr1ent [o(;curitics.
Tenders from others must be c_cco:T!ponj(;d by payrl1('ut of 2 percent ()£' the face 1:.:.:';;Olmt
of Treasury bills applieel for, unles:-s tl1C~ tcndcys arc DCCO!irjJanieel by an exp:cc;3S
guaranty of pa_yrncnt by all incoTpora ted 1)::dJl~ or trust CO!::}xtYj~r.
All bidders are required to agree Hot to purchase; or to sell, or t.o ma];e any
agreclnents 1,,;:i t11 respect to tbe purch2_se or sale or other elisposi 1,ion of any bills
of the issue for Ivhic}> they are l)iddin(~ n L a Sp(~':::ific J'atc or price, until after
one-thirty p.m., Eastern Standard time, Friday, november 21, 1969.
Immediately after the clocing hoy:c, tenelers '.-Till be opened at the Federa.l
Reserve Banks Dlld Branches, follOl·rinC \,'llich public anrJu:.mcc;r:clit Hill be made by
the Trcasury Department of thc amount emd price ran 0 e of accepteel bids. Those
submitting tenders I·rill be advised of the hcceptc.ncc or rej '2ction thercof'. Tile
Secretary of tbe Treasury expressly r(:2,(:-1'\"eS tl'!e Tight to c.ccept or reject any or
all tenders, in 'l-7hole or in part, anel his action in any sucb respect sball to final.
Subject to these reservations, nonco:T'peti tive tCi,dprs for ~; 200,000
or less
for the 147 -day bills and ~200 }OOO
or less for the 20&clay bills, without
stateel price frolO. anyone bidder ,-rill l:e accepteel in full at the average price (in
three decimals) of accepted con,-:)ctit·i ve bids 1'01" the respective issues. Payn,ent of
accepted tcnelers at the prices offered must be n;s_dc or co;:;pletcd at the Feeleral
Rescrve Bal1k in cash or oiJler imr:.ediately 8_vails'c'le funds on November 26, 1969.
My qU3.1ified depositary 1'1 i J]_ be permitted to rNl~:e settle2:1ent by credit in its
T:ce8_..;,u:f'y tax cend loan account for Treasury bills Q-llottecl to it for itself and its
customers.
Tne income derived from Treas1U'y bills, I'lhether interest or gain from the sal,"
or other disposition of the bills, does not have any exemption, 2-S such, and loss
from the sale or other disposition of TTC2-Sury bills does not h2-ve any speci2~1
treatment, as such, under the Internal Revenue Code of 195-1. The bills are subject
to estate, inheritance, gift or other excise tax~s, vThether Feder2-l or state, but
are exempt from all taxation now or hereafter imposed on t',e prinCipal or interest
thereof by any State, or 2-ny of the possessions of t.he United States, or by any
10c8,1 taxinG authority. For purposes of taxation the amOll.'1t of c1iscoW1t at l,·.-hicD
Treasury bills are originally sold by the United St.ates is considered to be interest.
Under Sections 154 (b) and 1221 (5) of the Internal Revenue Code of 1954 the a,';lOll.l1t
of discount at I'lhich bills issued hereunder are sold is not consieleTed to accrue
until such bills are sold, redeemed or otherwise disposed of, and such bills 2-re
excluded from consideration 8,S c2-pi tal 2-ssets. Accordingly, the owner of Treas1U'Y
bills (other than life insurance companies) issued hereun::ler need include in his
income tax return only the difference br:'L'iieen the price P2:Lel for such bills, .[hether
on origiPll issue or on subsequent purchase, anu the 8.mon:-lt octually received eit:1cr
upon sale or redemption at maturity dud_n8 the tax3.ble yec.1' for ".'Jlich the return is
made, as ordinary gain or loss.
'Treasury Department Circular No. 41(3 (currrm t. revision) e.ncl this notice: pre-scribe the terms of the. Tl'easUl'y bills a:1d gOVel'll the cor;,jitiollf3 of' their is~;ue.
Copies of the circular iuay be obtained from any federal l-((:serve Eanl: or Brcmch.
TREASURY DEPARTMENT
WASHINGTON, D.C.
FOR RELEASE 6: 30 P.M.,
Monday, November 17, 1969.
RESULTS OF TREASURY'S WEEKLY BILL OFFERING
1he Treasury Department announced that the tenders for two series of Treasury
bills, one series to be an additional issue of the bills dated August 21, 1969, and the
other series to be dated November 20, 1969, which were offered on November 12, 1969, were
opened at the Federal Reserve Banks today. Tenders were invited for $1,800,000,000,
or thereabouts, of 91-day bills and for $1,200,000,000, or thereabouts, of 182-day
bills. ']he deta11s of the two series are as follows:
RANGE OF ACCEPTED
COMPETITIVE BIDS:
91-day Treasury b111s
matur1!!fi February 19.. 1970
Approx. Equiv.
Pr1ce
Annual Rate
98.206
7.09~
98.184
7.184~
98.195
7.141~
!I
High
Low
Average
!I Excepting
one tender
··
·
182-day Treasllr1 b111s
maturi!!,6 Mal 21,t 1970
Approx. Equ1v •
Annual Rate
Price
96.212 !I
7.493J
96.192
7.532~
7.518~
96.199
Y
of $1,000
3~ of the amount of 91-day b111s b1d for at the low price was accepted
7~ of the amount of 182-day bills bid for at the low price was accepted
roTAL TENDERS APPLIED FOR AND ACCEPmD B! FEDERAL RESERVE DIS'l'RIC'l'S:
Distr1ct
Boston
New York
Phi lade 1phia
Cleveland
Richmond
Atlanta
Chicago
St. Lou1s
Minneapolis
Kansas C1ty
Dallas
San Francisco
~
For
Acce12ted
30,716,000 $ 20,716,000
2,063,811,000 1,297,511,000
24,509,000
39,509,000
34,284,000
34,284,000
21,585,000
27,085,000
36,003,000
43,003,000
140,962,000
140,962,000
46,175,000
53,885,000
15,616,000
22,366,000
26,009,000
26,010,000
17,007,000
26,617,000
119,2762 .. 000
1'6,t182,t000
A~11ed
$
·
:
Ap;El1ed For
$
8,494,000
1,676,091,000
20,228,000
53,838,000
24,142,000
35,268,000
148,935,000
34,272,000
. 19,823,000
22,381,000
22,348,000
198,2835 02 000
$2,654,430,000 $1,800,139,000 ~ $2,265,255,000
Acce12ted
$
8,494,000
853,609,000
9,895,000
35,867,000
11,642,000
18,233,000
84,435,000
22,852,000
9,113,000
21,581,000
12,348,000
1121.3552000
$1,200,424,000 ~
'lj Includes $340,055,000 nooccapetit1ve tenders accepted at tbe average price of 98.195
if Includes $204,203,000 DODCc.pet1tive tenders accepted at the average price of 96 .199
fI bse rate. are OD a -.nk discount basis. 'Dle equivalent coupon issue yields are
7.3~ for tile 91-4q bills, and 7.9~ for the 182-daJ bills.
TREASURY DEPARTMENT
Washington
FOR RELEASE AT 8:00 P.M., E.S.T.
TUESDAY, NOVEMBER 18, 1969
REMARKS OF THE HONORABLE DAVID M. KENNEDY
SECRETARY OF THE TREASURY
BEFORE
THE ECONOMIC CLUB OF NEW YORK
HOTEL WALDORF ASTORIA
TUESDAY, NOVEMBER 18, 1969
Thank you for permitting me to share this evening with
so many old friends of the business and banking world, and
for the privilege of addressing so distinguished an audience.
My acquaintance with the New York Economic Club and
its contributions to our national life goes back over many
years. My respect has deepened as the acquaintance has
widened
0
I welcome this opportunity to discuss some of the
economic problems this Administration is trying to resolve,
to tell you what we are doing about them, and to enlist
your support where you believe we are right.
It has been said often enough to become a national
cliche that our number one economic problem is inflation.
That was true when president Nixon took office ten months
ago. It is equally true tonight.
We must halt the spiral of rising prices. We must
not permit inflation to become a permanent way of life.
Our social and economic aspirations cannot be bought or
built with dollars whose value is steadily declining.
I would emphasize, too, that the control of inflation
is also one of our top international priorities. A number
of important re'cent developments have stren~thened the
world financial system, markets are calmer, and prospects
K-274
- 2 -
are good for further improvements. But this progress must
go hand in hand with internal economic stability. If we
falter in our anti-inflation program, consequences for the
international monetary system would be disruptive.
No one looking at trends in our trade accounts can be
comfortable with our international position. Tight money in
the United States has tended to keep the dollar relatively
scarce in foreign markets, as well as at home. This has
been a major element of strength for our position in the
short run. But it is no substitute for progress toward a
better balance in our basic trade and investment accounts,
and solid confidence in the long-term purchasing power of the
dollar. Failure to deal with this aspect of our problem
could be a serious setback to international economic
stability and to mutually beneficial trade inve~tment and
travel. It would be an illusion to think that, in such
circumstances, the United States itself could escape
repercussions at home.
I have said that inflation remains our number one
economic problem. And this Administration's plan for
dealing with that problem remains unchanged: it is to
persevere in the use of restraining monetary and fiscal
policies until our overheated economy has cooled and people
can no longer reasonably expect that the cost of living, and
the cost of doing business, will continue to rise as
inevitably as tomorrow's sun.
In at least one respect, the climate is already
changing. Some of our most voluble critics -- those who
claimed originally that our approach was too weak and
conventional -- are now concerned that our policies may
be too harsh, too risky. At the same time, there are
some who would like to see faster, more dramatic change.
Let me say to both groups that our concern is not for
dramatic effect -- rather it is for an orderly transition
from an overheated economy to a healthy rate of noninflationary growth. I also want to reassure them that we
are keeping a careful eye on the economic harometer. We
will respond pr~mptly when the signs are clear that the
balance of risk has shifted away from inflation. But
we will not anticipate success before the evidence is at hand.
- 3 We know from past experience that deep-rooted cost
and price inflation can be corrected effectively only
after a fairly long period of economic adjustment. If we
learned anything from 1967, it was that a premature
lifting of restraints only leads us into an even worse
inflationary situation.
I have long felt that the most self-destructive
course we could follow would be the stop-and-go route.
Under such a misguided policy, we would fight inflation,
but only so long as our policies were not too painful.
When our anti-inflation efforts began to work -- and hurt
pressures would build up to change course. But if we
would then shift to expansionary monetary and fiscal
policies, the economy would heat up once more. Soon
underlying price pressures would reassert themselves and,
once more, we would feel the pain of inflation. Public
officials and the average citizen would demand action to
curb the upward price spiral, and government would turn
again to restrictive policies -- and on and on the cycle
would go.
This Administration rejects that policy. A faltering,
stop-and-go approach to our current problems would only
lead to stagnation marked by excess unemployment and
continuing upward pressures on prices. We seek a
return to basic economic stability.
Only in this way
can we build the foundation for a genuine prosperity
in which our citizens enjoy high and rising levels of
secure employment and a rising standard of living.
When the time arrives for a change in policy, we will
have a variety of automatic and discretionary tools for
implementing that change. There are the traditional fis.cal
and monetary policies. There also are a number of built-in
features which, if necessary, would operate to sustain the
economy and to support those segments of society which are
least able to protect themselves.
Anyone concerned with the approach of this Administration
toward the lower income groups in our economy should simply
look at the record of what the President has proposed to the
Congress: a'low income allowance to remove millions of
individuals from the tax rolls, fundamental restructuring of
(G
- 4 -
the welfare system, reform of Social Security to provide
increased payments and protection from inflation, and
modernization of the federal-state unemployment insurance
system to provide a more responsive mechanism for
stabilizing the economy automatically. No one recognizes
more clearly than president Nixon that the Federal Government
itself has been a major contributor to inflation in recent
years.
One of the first directives we in the Federal
departments and agencies received from the president last
January was to re-examine from top to bottom the budget
requests for the 1970 fiscal year which had been sent to
Congress by the outgoing administration. We completed that
review in April, with a resulting $4 billion cut from
expenditures that would have resulted from programs proposed
in January by the previous Administration.
Another similar $3.5 billion cutback was accomplished
through a second spending review last summer, making a
total of $7.5 billion of expenditure restraint that has
been exercised by this Administration.
Without these actions -- $4.1
programs and $3.4 billion in other
spending in this fiscal year would
billion and our chances of halting
seriously weakened.
billion in military
programs -- budget
be more than $200
inflation would be
As it is, this fiscal restraint combined with a tight
monetary policy, is beginning to produce clear evidence that
the overheating which started the inflation escalator some
four years ago is beginning to subside. The escalator has
not stopped, nor even perceptibly slowed, but the underlying
developments necessary for effective control of inflation
are beginning to show up.
For example:
The rate of increase in final sales of
goods and services in current prices has
slowed significantly, and real GNP has
been advancing at a rate less than half
as great as a year agoe
- 5 The growth rate of industrial production
declined in the second quarter and
actual production has edged downward
for the past three months.
Corporate profits peaked in the first
quarter and declined in the second and
third, a development which, although not
a happy one by itself, has frequently
preceded a reduction of inflationary
pressures.
Another major development now taking place has
significant implications for the Federal budget and for the
economy as a whole. Military expenditures and particularly
the indicators of defense activity which foreshadow changes
in the months ahead -- are now receding. This development
will help greatly in our efforts to reduce the inflationary
pressures on the economy.
Most forecasters now look for a further slowdown in the
rate of growth of gross national product in this final
quarter of 1969, and an even more noticeable slowing
through the first half of 1970.
But make no mistake, the war against inflation is not
yet won. Indeed, the battle of the budget goes on. There
has been no let-up in the pressure for new programs, in
new ways of spending government funds. Everybody wants
economy, but always at the other fellow's expense. Right
now, for example, there are measures under consideration
in the Congress that could add another $5 billion to
Federal spending for the 1970 fiscal year.
In addition, if Congress fails to extend the
excise taxes and income tax surcharge at 5 percent, and
repeal the investment tax credit, revenues for this fiscal
year will drop by $4 billion, and the surplus which we
feel is needed as an important part of our anti-inflationary
program will be drastically reduced.
if
- 6 The challenge for fiscal 1971 is equally plain.
The
real starting point for fiscal analysis in 1971 is our
present revenue base less the surtax revenues of $8.5
billion -- a net of about $190 billion for the 1970 fiscal
year. Economic growth should increase revenues to about
$200 billion for the fiscal year 1971, but even this is a
smaller than normal increase, and it represents only a
little more than our expected 1970 revenues.
The unfortunate truth is that the Federal budget has
some built-in escalators. Existing laws provide for
mandatory increases on such items as higher interest
cost on the public debt as we refinance maturing Treasury
securities that were issued many years ago when interest
rates were much lower, on Social Security and other
retirement benefits, as well as on veterans' benefits,
Medicare, and Medicaid. As the Budget Director has noted,
these could push our spending in fiscal 1971 over the
$200 billion mark -- quite apart from any new or expanded
programs that might emerge.
This is the context in which
we must shape our future revenue program.
The tax reform bill has an importantlearing on our
fiscal posture.
This Administration strongly supports
tax reform.
But it is of vital importance to avoid a tax
reform bill which would, through an early revenue shortfall,
cripple our anti-inflationary program.
Although the Senate Finance Committee version
provides some $7.5 billion of net tax relief for individuals
and raises taxes on corporations by some $5 billion, it
does postpone almost all of the tax relief provisions and
does not produce a shortfall of revenue until calendar
year 1972. Taken as a whole, including revenue raising
measures, the bill would produce large additions to
revenues in calendar year 1970 and smaller additions in
1971.
There are likely to be attempts on the Senate floor
to enlarge and to speed up tax relief provisions. To
the extent that these significantly reduce revenues in
calendar years 1970 and 1971, they would seriously
undermine our effort to control inflation. If the
legislation approved by the Congress contains an inflationary
- 7 revenue shortfall, the President has made clear that he
would not hesitate to veto the bill in spite of his strong
support for the cause of tax reform.
I have confidence
that in the end the Congress will exercise fiscal
responsibility as it furthers the important cause of tax
reform.
There is, of course, an additioi-u:ll reason for maintaining
the budget in strong surplus. If the budget falls into deficit,
the Treasury would be obliged to go into the money markets to
finance the increased deficit.
This could only intensify
pressures on already tight financial markets, thus putting
further upward pressures on interest rates and limiting even
more the availability of funds for such areas as housing and
municipalities.
There is always a temptation to try to place our
problems in little compartments -- to adopt one device
or another to ameliorate the pains of inflation. Nowhere
is that tendency clearer than in the effort to escape the
impact of high interest rates, or to push the pressure
on the other fellow.
No one could be more anxious than
I to see interest rates move lower, and to see homebuilders
and our local governments more liberally supplied with
funds.
But there is no real escape from present pressures
until overall credit demands can be reduced, and that in
turn rests on a budget surplus and beating back inflation.
Clearly, this situation calls for the exercise of
legislative statemanship to get us through this fiscal
year, to say nothing of fiscal 1971 and beyond.
Clearly, too, businessmen, bankers, workers and consumers
all have a job of self-restraint, based on a true understanding
of their own economic interests, if we are to succeed in
stabilizing our economy. I believe there is a growing
public understanding of its key role.
We must consider the time required to bring inflationary
pressures under control, the tendency for spending programs
to grow almost automatically, and the scheduled expiration
of the income surtax next June.
I hope, too that
business and labor, as they appraise the outlook, and
assess their own interests, will consider the consequences
of building into our cost structure wage settlements
inconsistent with a return to price stability or pricing
practices inconsistent with a realistic appraisal of market
growth.
70
- 8 Much depends now on the action or inaction of Congress.
The anti-inflation budget surplus we now project includes
income from the extension of the surtax at 5 percent,
repeal of investment incentive tax credit, and an extension
of certain excise taxes.
The House of Representatives has passed those measures
twice -- once in a separate tax measure, and again as part
of the Tax Reform Bill. The Senate has linked action on
the revenue measures with the tax reform bill.
Timing is of critical importance. Further delay
in the Senate can only create uncertainty in the business
community and cast doubt on our determination to pursue
an effective anti-inflationary fiscal policy.
It is conceivable that the complex legislative
process, the reconciliation of differences between House
and Senate bills, may not be completed by the end of this
year. If that should happen, I believe that the Senate
leadership has an urgent responsibility to separate tax
reform from the short-run revenue raising measures and
to bring the latter up as a separate bill.
I t would be a grave mis take for the Congre s s to
reverse our fiscal course by dropping the surtax and
neglecting to repeal the investment credit at the very
time we are beginning to make headway against inflation.
Any realistic appraisal of our budgetary outlook emphasizes
how sorely these revenues are needed.
The only reasonable
question can be, not whether they are too much, but
whether they are enough.
Defending the value of the doilar is not simply a
narrow end in itself. Price stability is at the very
heart of a strong American and world economy. Without
a balanced and vital economic system, our more basic
objectives -- high employment, growth and the achievement
of our social goals -- are threatened.
Our commitment to
fight inflation is based ultimately on our concern about
people and meeting their most pressing needs.
It is my hope this evening that you will make your voices
heard and your influence felt in successfully resolving
this issue in which all Americans have such an important
stake o
000
FOR RELEASE ON DELIVERY
STATEMENT BY '!HE HONORABLE PAUL A. VOICKER
UNDER SECRETARY OF 'mE TREASURY FOR ~ AFFAIRS
BEFORE THE SUBC(M.ITTIEE CN VETERANS LEGISLATION
OF THE SENATE CCMMITIEE CN FINANCE ON S. 3008
CN WEINESDAY, NOJEMBER 19, 1969
AT 10:00 A. M. (BB!)
Mr. Chainran:
I am pleased. to have this opportunity to present the views
of the Administration arrl the Treasury DepartJrent on S. 3008, a
bill "To increase the availability of guaranteed hare loan financing
for veterans and to increase the incare of the national se:rvice
life insurance fund."
S. 3008 would provide for the investJrent of the assets of
the national se:rvice life insurance (NSLI) fund in VA guaranteed
nortgages.
'!he bill would establish a national se:rvice life
insurance investnent fund to which the Secretary of the Treasury
would be required to transfer fran the NSLI fund su:h arrounts as
the Administrator of Veterans Affairs may request, except that
the total arrount transferred could not exceed $5 billion in the
pericxl between the enactment of the bill and June 30, 1974, and.
could not exceed $1 billion in anyone fiscal year.
'!he
Administrator \\Uuld use the amounts transferred to purchase
guaranteed rrortgage loans p..rrsuant to ccmnitJrents made at the
tine the loans were guaranteed.
'!he new invest:Irent fund would
pay interest to the insurance fund at the average rate on loans
purchased by the investnent fund less 1 percent but not less than
K-275
- 2 -
the average return on the other invested portion of the insurance
fund.
'!he Administrator would also be authorized to utilize the
investlrent furd. to purchase loans fran the direct loan revolving
fund.
It seems to me that one fundamental issue FOsed by S. 3008
is whether the Congress is willing to face up to the hard choices
that must be made anong the many pressing needs for funds through
the regular authorization-appropriations process or whether
instead certain Federal outlays, in this case in support of VA
guaranteed rrortgages, are to short circuit that process.
Under
the neil unified budget adopted pursuant to the recamendations
of the Budget Concepts canmission, trust fund aCXIUisitions of VA
guaranteed·rrortgages V\Duld in any event constitute Federal budget
outlays.
The anticipated Federal bu:igetary sw:plus would be
reduced by an equivalent anount 1 and the Treasury v.ould be
required to increase the arrount of its borraving fran the public
in order to raise na.'l funds to replace the Treasury special
issues now held by the NSLI fund.
During the present fiscal year 1970, the Administration is
operating within the confines of a tight expenditure ceiling.
'!hus the use of VA insurance reserves ill1der S. 3008 to acquire
VA guaranteed mortgages V\Duld require a reduction in other
p.rograms.
This is why I feel that the Congress should have the
73
- 3 -
opportunity through the regular appropriations process to consider
hav Federal budget support of VA guaranteed mortgages fits into
the overall fiscal posture and budgetary priorities of the Federal
Government.
Apart fran these i.rrm:=diate budgetary implications, I believe
it is evident that use of trust fund monies for the acquisition
of VA mortgages would make it increasingly difficult to resist
pressures to finance other, perhaps equally pressing, programs
by the sane rreans.
The net result would be to undermine orderly
budgeting and rational allocation of scarce Federal financial
resources.
Apart fran this fundarrental question of budget policy, it
is hard to see what would be accomplished by S. 3008 which could
not be accomplished more effectively and more equitably under
existing arrangerrents for the support of mortgage loans to
veterans and for the investment of Federal trust funds.
An efficient rrechanisIil for ma.rket support of VA guaranteed
mortgages has already been provided by the Congress in the nON
private Federal National Mortgage Association, which purchases
mortgage loans guaranteed by other Federal agencies, including
the Veterans Administration.
The establishment of the proposed
facili ty for VA guaranteed mortgages would in key respects
duplicate the activities of FNMA.
If the intent of the Congress
- 4 -
is to provide additional subsidies for VA guaranteed nortgages,
this oould be accarplished consistent with existing institutional
arrangerents and without involving trust fund purchases.
Instead,
the proposal enbodied in S. 3008 would tend to obscure the element
of subsidy and, in principle, give rise to an uneasy carpranise
between the interests of the trust fund beneficiaries and the
recipients of the nortgage credit.
The Federal National M:>rtgage Association has been purchasing
a large vol\.lITe of VA guaranteed loans; about a third of its
activities is in such nortgages.
In the year ended June 30, 1969
FNMA purchases of VA loans were about $600 million, and purchases
have recently been running about $150 million per rronth or at an
annual rate about three t..iIres the 1969 level.
FNMA is also
active, in tandem with GNMA, in purchasing nortgages for which
the Federal Governrrent wishes to provide greater subsidy, with
the cost of the subsidy absorbed by the general revenues.
S. 3008 establishes a minimum purchase price of 96 percent
of par for loans purchased by the new investment fund.
'lliis
price carpares with the current FNMA purchase price of about 93.
Thus those nortgage lenders nCJ.V selling VA guaranteed loans to
FNMA would presumably choose instead to sell to the new investment
fund at the higher price.
Since FNMA has been purchasing VA
guaranteed nortgages at a IIDnthly rate of $150 million, or at
- 5 -
an annual rate of $1. 8 billion, the authorized purchases under
S. 3008 of up to $1 billion a year v.ould apparently involve
m::>rtgages which would otherwise have been purchased by FNMA and
thus tend to duplicate the activi ty of FNMA.
I would like to eITq?hasize that I fully share the Ccmni ttee IS
concern over the limited availability of IrOrtgage funds in the
present enviroI'lm2l1t.
For this reason, a number of specific steps
have been taken to help support hare construction.
Operating
directly to naintain a flo.v of m::mey into housing, the
HCIIE
Loan
Banks have very substantially stepped up their volurre of their
advances to member savings and loan associations.
In fact, total
Hate Loan Bank borro.vings have increased by over $2 billion since
June 30.
Similarly, the Federal National Mortgage Association
has been making new conmitments at a rate of roughly $10 billion
per year, or about three-fourths of the entire volurre of FHA and
VA rrortgages originated.
President Nixon recently announced a
sharp cutback in Federal construction projects, which should also
help to relieve pressures on construction resources.
Finally, the
Government National Mortgage Association is expected to commit
SCIIE
$650 ~llion of special assistance funds to multi-family
housing units in cooperation with the Federal National Mortgage
Association in the "tandem" plan.
7'
- 6 -
While these measures are not all aimed specifically at
providing IIDrtgage funds to veterans, they are intended to
provide strong support for the flow of IIDrtgage credit generally,
and thus help cushion the effects of tight lOOl1ey on hare building.
I must emphasize, however, that the only effective means of
assuring an adequate flON' of IIDrtgage funds to veterans and
others in need of housing finance is to continue to exercise
the btrlgetaJ:y and rronetary restraint nea=ssary to assure that
the econany returns to a path of stable grONth.
Ieflecting a long standing Congressional policy, the major
trust funds, including social security , civil service, and the
veterans insurana= funds, are now invested largely in special
Treasury issues which are redeemable an demand.
'Ibis provides
unifonn treat:rrent and avoids any potential conflict between
trust fund requirements and program financing.
'!he apparent
intent of the Congress, as evidenced by specific legislative
enactnents, has consistently been that trust funds be invested
at rates which approxima.te current Treasury borrONing rates.
If the Congress desires to increase the invest:nent incare
of the NSLI fund, this could be accarplished rrore effectively
under existing arrangements without confusing this oojective
with the objective of IIDrtgage support.
The present proposal
can only confuse the question of identifying the costs and
17
- 7 -
benefi ts of the veterans life insurance and housing assistance
programs.
Moreover, there is a lack of coincidence between the
beneficiaries of the NSLI fund -- which are largely World War II
veterans -- and the beneficiaries of the proposed rrortgage
purchase program.
Federally assisted life insurance for Korean
and Vietnam veterans has been provided through other insurance
programs and funds.
I see no apparent reasrn for increasing the
insurance dividends paid to World War II veterans through the
Irechanism of higher inves1::Irent yields fran rrortgage loans to
Vietnam veterans.
In sum, we believe the approach to.vard Federal trust fund
inves1::Irent embodied in S. 3008 conflicts with sound budgetary
and trust fund policy.
Moreover, we do not believe it is a
necessary or desirable Irechanism for channeling rrore funds into
VA rrortgages.
Consequently, the Adm.in.istration strongly
recarmands that it not be passed.
TREASURY DEPARTMENT
WASHINGTON, D.C.
November 19, 1969
FOR IMMEDIATE RELEASE
JOINT U.S.-MEXICAN WORKING GROUP NAMED ON
NARCOTICS, DANGEROUS DRUGS AND MARIJUANA PROBLEMS
The membership of a joint United States-Mexican Working
Group which is preparing recommendations for both governments
on the control of illicit traffic in narcotics, marijuana and
other dangerous drugs, was announced today by the United States
Treasury and Justice Departments.
The working group, which has been meeting in Mexico
since the bilateral talks ended on October 29, is due to
submit a progress report by December 15 and further reports
from time to time with the understanding that such reports will
only be recommendations to the respective governments.
The working group was established after representatives
of the governments of the United Srntes and Mexico met in
Mexico City on October 27, 28, 29, 1969 for bilateral talks
on problems of marijuana, narcotics and dangerous drugs.
At that time, the U.S. delegation, headed by Deputy Attorney
General Richard G. Kleindienst and Treasury Assistant Secretary
Eugene T. Rossides, presented to the delegation of Mexico for
its consideration working materials relating to the various items
on the discussion agenda.
The two delegations decided to establish a joint working
group to examine these materials and others presented by the
Mexican delegation in detail to identify possible bases for
agreements between the two governments and to report their
findings to the two governments.
The members of the Working Group are:
For the United States: Jack Kubisch, Chairman,
U.S. Department of State, Deputy Chief of Mission,
American Embassy, Mexico; George H. Gaffney, Chief
Assistant to the Director, Bureau of Narcotics and
Dangerous Drugs, U. S. Department of Justice.
(OVER)
K-276
- 2 -
William B. Butler, Consultant to the
Commissioner of Customs, u.s. Treasury Department;
Dr. Archibald B. Park, Assistant to the
Administrator, Agriculture Research Service,
U.S. Department of Agriculture.
Robert B. Service, U.S. Department of State,
Second Secretary of the U.S. Embassy in Mexico City;
Marco A. Padilla, Customs Attache, u.S. Bureau of
Customs, U.S. Embassy, Mexico City.
For Mexico: S. Huerta Grados, Chairman, of
the Office of the Attorney General of Mexico;
J. Barona Lobato, Office of the Secretariat of
Foreign Relations; J. A. Vaszquez Robles of the
Ministry of Government; G. Garcia Camberos of the
Department of the Treasury.
Major J. Quinonex Cruz of the Secretariat of
Defense; G. Posada Retana of the Secretariat of
Health, and A. Blackaller V. of the Secretariat of
Agriculture.
000
TREASURY DEPARTMENT
WASHINGTON, D.C.
FOR RELEASE AT 3:00 P.M., E.S.T.
WEDNESDAY, NOVEMBER 19, 1969
REMARKS OF THE HONORABLE EDWIN S. COHEN
ASSISTANT SECRETARY OF THE TREASURY FOR TAX POLICY
BEFORE THE
TAX SESSION OF THE 56TH NATIONAL FOREIGN TRADE CONVENTION
WALDORF-ASTORIA HOTEL, NEW YORK CITY
WEDNESDAY, NOVEMBER 19, 1969, AT 3:00 P.M., EST
REFORM IN TAXATION OF FOREIGN SOURCE INCOME
It is indeed an honor for me to speak at the 56th National
Foreign Trade Convention.
I am especially pleased as this
occasion gives me an opportunity to emphasize the importance
this Administration attaches to the international tax problems
faced by exporters and others engaged in international
business.
We recognize that whenever more than one country
is involved, special efforts must be made to assure a tax
system that is fair to the taxpayers and to each of the
countries.
This afternoon I would like to share with you
some of our preliminary thoughts on reform in the taxation
of foreign source income.
Let me emphasize that I us.e the word "reform" in the
broadest sense of the concept of reformation, and you should
not conclude, depending upon your point of view, that U. S.
taxes on foreign source income will move up or down.
K-277
- 2 As ym.i
k~lOvl)
since we took office early this year, the
Treasury tax staff has been devoting almost complete attention
to the Tax Reform Act of 1969.
While this bill is largely
devoted to domestic tax matters, there are a limited number
of foreign items included in the House version, the Senate
Finance Committee version, or both.
I will assume that
this audience is familiar with these items and the Treasury
views on them as expressed in my statement of September 4,
1969 before the Finance Committee, and the Treasury Technical
Memorandum of September 30, 1969.
Exclusion of Income Earned Abroad
There is, however, one provision of the Senate Finance
bill on which the Treasury has not commented and that is the
provision which would reduce the exclusion for income earned
by U. S. citizens abroad to $6,000 per year.
As you know,
under present law a United States citizen has a limited
exclusion for income earned abroad, typically salary, if the
citizen establishes foreign residence for at least one year
or if he remains abroad for 17 months in an 18 month period.
The exclusion is limited to $20,000, except that in the
case of foreign residence the exclusion becomes $25,000 after
three years.
- 3 -
It can be argued that since the United States provides
a credit against the U. S. tax for foreign income earned
abroad, double income taxation cannot occur, and an
exclusion for compensation earned abroarl 10 unnecessary.
When the foreign income tax rate is less than the U. S.
rate, the exclusion may be said to represent a preference
for the citizen working abroad as compared to the citizen
working at horne.
On the other hand, proponents of the exclusion have
pointed out that foreign countries rely to a great extent
upon sales taxes and other forms of taxes for which we
allow neither a credit nor a deduction; that the foreign
tax credit is a complex provision for which tax advice
and assistance is needed by the average employee stationed
abroad; and that there are a number of other practical
factors affecting American exports and American business
abroad that should be taken into account before any such
change in this provision is made.
This subject was not the subject of public hearings
either before the House Ways and Means Committee or the
Senate Finance Committee and was last dealt with in public
hearings in 1962.
The Treasury believes that the persons
:: d've::sely affected by the p:...:'oposed amendment, aud U:.ci..l..
(:::ffiployers, should be given the opportunity to present
testimony and to be heard before any change so drastically
altering their tax liability is made.
Accordingly, we
recommend that this provision be deleted from this bill
dnd deferred for review in connection with other proposals
relating to the taxation of foreign source income.
In that review consideration should be given to the
treatment of the excluded earned income in computing the
foreign tax credit.
At present there appears to be an
unwarranted advantage in allowing the credit for the
foreign tax imposed on income not subject to U. S. tax.
Aside from this discussion of section 911, I will not
now comment further on the Tax Reform Act of 1969.
Instead,
let me use this opporturdty to consider with you our tentative
long-range thinking in the area of taxation of foreign source
:LT.lcorne.
C011side.E§-!~JGns"i2E-..F0reign
Income
R~form
In our tcstimony before the Senate Finance Committee on
September 4 I indicated that the Treasury was developing
~ornprehensive ~roposals
relating to the U. S. taxation of
- 5 -
foreign source income for presentation to Congress.
We
believe it is time to review our system of taxation of
foreign source income in the light of changes in the nature
of international business activities, including the growing
conduct of such business through the multi-national
corporation.
We should reexamine the effect of our tax
laws on the conduct of international business, taking into
account revenue and balance of payments factors, and the
equity and administrative costs of our tax structure, and
we should determine whether the results match our goals.
While our work in this regard is still in its early stages,
I believe it would be useful for you to know what we have
found so far and what we consider significant.
In our present view there are a number of basic
considerations which deserve primary attention in developing
proposals for revising the system of taxation of foreign
source income.
First, present law is far too complex.
It is too
complex for taxpayers and too complex for efficient administra·
tion.
It shows all of the marks of the series of compromises
that were involved in its development from 1913 to 1962.
While the inherent complexity of business, especially
- 6 -
international business, limits what we can do to achieve
simplicity, it seems to me that it is not necessary to
seek the precision that our present system appears to be
striving for when the cost of that search is such a high
degree of complexity.
The cost of complexity both to taxpayers and the
government in this area is real, stemming largely from the
necessity to assign large numbers of very intelligent people
in an effort to make the present mechanism function.
I
think we should strive to shift some of this talented manpower
both inside and outside of government away from such
intricacies as subpart F income, the deemed-paid foreign
tax credit, and section 367 rulings to work creatively on
such critical needs as low income housing, transportation,
legal services for the
poo~
and other frontiers of the law.
I doubt that with our present detailed rules and
calculations we really attain in the last analysis in the
foreign area more than rough approximations of tax liability.
Realistically we should take this limitation into account
in the design of our tax system.
We must recognize, of
course, that complexity is very difficult to avoid, but
we do consider simplification an important goal and intend
to weigh it heavily in the process of developing our proposals.
,,/(
- 7 Second, it is not clear that our present tax system
treats manufacturing in this country for export to foreign
markets fairly in relation to manufacturing overseas for
foreign markets.
One illustration that underscores this
question is that the U. S. tax on foreign manufacturing
income earned by a subsidiary is deferred until the income
is distributed as a dividend or the stock of the subsidiary
is sold.
However,
U.s. tax on export income of a corporation
organized in the United States is payable currently.
To
the extent exports are routed through a foreign corporation
organized in a low-tax country, deferral can be achieved only
if subpart F can be avoided."
Even though subpart F can be
avoided in some cases, I question the desirability of a tax
system that offers benefits to those who conduct an export
business through foreign corporations in order to obtain
deferrals that are not available to those American companies
that export directly.
Another factor which has caused us to consider whether
we are treating equitably foreign source income generated
by selling abroad from the U. S. arises from a comparison
between the operation of our income tax system and those
of other countries.
A number of other countries, parti-
cularly in Western Europe, exempt the foreign source profits
- 8 -( ?cL~'-
of~
resident corporations from tax.
Export income
qualifies as foreign income if it is earned by a foreign
permanent establishment or, at least in some cases, if it
is generated through an employee in a foreign country.
It does not seem to us that we should perpetuate a
system which so inequitably treats those in industry and
labor who seek to sell abroad from this country.
I will
discuss later an approach to this matter that we think is
likely to be preferable to our present structure.
Third, the Treasury must bear constantly in mind the
revenue needs of the Federal Government.
Any loss in
revenue from revision of the present system is a matter
or prime concern, to be weighed in the balance with
advantages stemming from the revision.
Fourth, to the extent our tax system is regarded as
departing from neutrality between different types of
income, the departure is considered as constituting a tax
incentive or tax preference.
Any preference for foreign
income is an important aspect of this, but neutrality also
has other implications.
As I stated last week at the New
York University Tax Institute, some of the tax preferences
- 9 have been enacted after much debate with the expressed
intent of stimulating certain kinds of expenditures,
while otherjhave resulted without studied forethought,
partially or completely by accident.
I then observed
"Every preferential provision in the tax
law serves to reduce the tax of those who take
advantage of the preferences and reduces the
revenue yield to the government derived from
the tax.
Thus we can attempt to put a price
tag on each of the preferences by estimating
loss of revenue to the government resulting
from the existence of the preferences.
We
should then decide whether the benefits derived
by the nation from the existence of the tax
preferences are worth the price tag.
This
cost-benefit analysis is of primary importance
in evaluating the desirability of the preference and should be made at frequent intervals
as a matter of continuing concern."
It is time, we think, to make this cost-benefit analysis
of our existing structure for dealing with foreign income
and of various proposals for its modification.
Fifth, there are traditional and appropriate limits
to the tax jurisdiction of each country.
In my view the
- 10 justification for these limits are based on three factors:
a recognition of the limits of sovereignty, the fact of
foreign competition, and the need to avoid double taxation.
I note, however, that the scope of these traditional limits
was
questioned in 1961 and 1962 and at that time the
United States extended its jurisdiction by taxing the subpart F income of controlled foreign corporations currently.
Some would now even go further and tax generally all income
of controlled foreign corporations currently.
By taxing
the U. S. shareholders on undistributed income of a foreign
corporation rather than taxing the corporation itself,
these approaches appear to have avoided the international
law problems on the limits of sovereignty which would have
arisen from an attempt to tax foreign corporations directly.
The United States limits its tax jurisdiction by
applying to foreign corporations rules different from those
pertaining to domestic companies.
Domestic corporations are
taxed on all of their income while foreign corporations are
taxed on their income from U. S. sources.
While certain types
of foreign source income of foreign corporations were made
subject to U. S. tax by the Foreign Investors Tax Act of 1966,
this change can be regarded as an extension of our source
- 11 rules rather than a departure from the source principle.
We, of course, determine whether a corporation is domestic
or foreign on the basis of its place of incorporation but,
this, however, is not the only standard used in the world.
~
A number of countries use the managed and controlled test
either solely (the United Kingdom is a prime example) or as
an alternative to the place of incorporation test.
Under
the managed and controlled test a foreign subsidiary in
fact managed by persons located in the home country could
be subject to tax on world-wide income.
Turning to the question of foreign competition, U. S.
companies have achieved a highly respectable performance
in producing for foreign
competition.
ma~kets
in face of increasing foreign
Generally this has been accomplished through
foreign subsidiaries operating in the country where they
are incorporated.
Except in the limited cases where subpart
F applies, the manufacturing income of these foreign
subsidiaries have not been subject to U. S. tax until
distributed to their U. S. shareholders.
This means that
the tax burden of these subsidiaries has been that
imposed in the country of incorporation, and the foreign
subsidiaries have been able to reinvest in their
- 12 businesses the margin by which the effective foreign rate
is lower than the U. S. rate.
While tax rates throughout the world have been
approachi~
the U. S. rate in recent years, there are still important
countries where the tax rate is lower, either generally or
under special arrangements to attract new industry, and our
deferral system permits the foreign subsidiary to grow
through the retention of earnings which have enjoyed the
benefit of this margin.
Whether our foreign subsidiaries
would be as successful if this benefit were removed may
be open to question.
Finally, we believe we must do more to prevent the
use of international boundaries for tax evasion through
foreign bank accounts and other means.
While
every taxpayer has a right to take all legal measures to
reduce his tax liability to a minimum, tax evasion through
international avenues, even if the aggregate sums involved
are not large, is an important problem which must be dealt with
as forcefully as we can.
We work closely with other countries
and we are urging them to do more.
We must also make sure
that we are doing all that we can in our own country.
We
are in the process of reviewing the types of legislative and
administrative measures, as well as treaty changes, that are
needed to make these efforts more effective.
- 13 Basic Reform
With these considerations in mind, we are in the midst
of a review and reappraisal of the provisions of the
Internal Revenue Code dealing with taxation of foreign
income, in an effort to determine the changes needed as
we approach the challenges of a new decade.
One of our
most important tasks is to analyze the effect of our
current system on revenue and balance of payments and the
likely results of changes in the Code.
To a large extent
this involves the science, or perhaps the art, of revenue
estimating.
Among the specific questions for which we are
now seeking to develop answers are the following:
(1)
In the case of dividends from 10 per.cent or
more owned subsidiaries, and from foreign
bran~
actively engaged in trade or business
abroad, how much income tax do we collect
after the foreign tax credit?
(For con-
venience, I will refer to such dividends
and branch income as direct investment
income.)
- 14 (3)
To what extent does the deduction of foreign
losses reduce U. S. tax collections on U. S.
source income?
(4)
To what extent do excess foreign tax credits
generated on direct investment income spill
over and reduce U. S. tax on foreign royalties,
foreign interest and foreign dividends from
foreign corporations that are less than 10
percent owned by U. S. persons?
To what
extent does this occur in the case of taxpayers
on the per-country limitation and in the case of
taxpayers on the overall limitation?
(5)
To what extent do foreign countries tax royalties,
interest, dividends and other income paid to U. S.
residents at effective rates higher than the U. S.
rate?
(6)
How much income of foreign subsidiaries is taxed
at rates substantially less than the U. S. rate and
where does this occur?
- 15 (7)
To what extent are U. S. exports effected
through foreign subsidiaries incorporated and
operating in a foreign country other than the
country of destination?
Since our study is not yet complete I shall not attempt
to predict the direction our proposals will take, but it
might be interesting to list some of the possibilities:
1.
Keep the current structure and make improvements.
Unless we can develop a reform in the basic structure which
we feel is likely to result in an overall improvement, we
would be inclined to keep the structure we now have.
We
would build on that structure by recommending a number of
significant changes, some of 1:.vhich I will discuss later on.
2.
Eliminate· defe.!,.ral ~ taxing _foreign_ subsididaries as
foreign branches are now taxed.
It has been strongly urged
by some that to avoid a tax preference situation a United
States owned foreign corporation should be subject to the
same taxes as a United States owned domestic corporation.
After extensive consideration Congress rejected this approach
in 1962.
Moreover, eliminating deferral for those foreign
subsidiaries n.ot closely controlled from the United States
would mean extending our tax jurisdiction further than any
- 16 other country, and issues other than pure tax policy would
have to be weighed carefully.
It is not impossible that
our studies will indicate that ending deferral would yield
little revenue, if abuse cases can be dealt with by specific
provisions.
3.
Exempt direct investment income.
The opposite
direction to ending deferral would be to exempt foreign
direct investment income from U. S. taxes.
This would
follow the approach of most foreign countries and, generally,
the approach recommended in the Canadian White Paper issued
recently.
Foreign losses would no longer be deductible
this would produce a revenue gaino
~nd
The great advantage of
this approach is that it goes a long way toward the goal
of simplicity and it is possible that our studies will show
that it does not involve substantial revenue 10ss o
However, if it is decided to adopt the exemption approach
two areas of possible exception might be considered:
a.
It might be appropriate to limit
the
exemption to income of foreign subsidiaries
earned from the active conduct of a trade or
business in the country of incorporation.
If
foreign interest, royalties, etc. are not exempt
when earned directly by a U. S. taxpayer, why
- 17 should they be exempt if derived through a foreign
corporation?
One approach would be to retain the
foreign personal holding
~ompany
part of subpart F,
and interestingly this is the course recommended in
the Canadian White Paper.
b.
While an exemption might seem appropriate
when the foreign rate parallels our own, some will
feel that complete exemption from U. S. tax is not
warranted when the foreign rate is substantially less
than the U. S. rate.
A possible solution would be to
limit the exemption to direct investment income
earned in countries with a tax rate not less than,
say, 35, 40, or 45 percent.
To achieve simplicity
the Treasury could make this determination for the
major countries.
Under such a system exempt income and taxes
thereon would not require a foreign tax credit but
in other cases the foreign tax credit would have to
continue.
Of course in considering this approach we must
make sure that an exemption system with conditions
or exceptions would not be as complex or even more
complex than our current system.
- 18 Improvements in the Current Structure
If we change our basic structure for taxing foreign
source income, some of the problems that are now bothering
taxpayers and the government might nocarise or might arise
in a different context.
In any event we are turning our
attention to the urgent need to deal with these problems,
some of which I will discuss:
1.
Section 367
We are particularly mindful of the continuing problems
arising in connection with section 367 of the Code, under
which gain from incorporation, liquidation or reorganization
of a foreign corporation is recognized unless the taxpayer
satisfies the Internal Revenue Service, in advance of the
proposed exchange of property or stock, that the exchange is
not "in pursuance of a plan having as one of its principal
purposes the avoidance of Federal income tax."
In May, 1968, the Service made public Revenue Procedure
68-23 setting forth guidelines on the circumstances in which
- 19 favorable private rulings will be issued under section 3ii.
We have recently received a number of thoughtful comments
on the application of these guidelines, which are quite
helpful in reviewing the operation of section 367.
We believe that improvement in its current operation is a
matter of high priority.
We do believe that there is a substantial question as
to whether the retention of the advance ruling requirement
is not an unwarranted impediment to the conduct of international business in view of the necessity for prompt
action on business decisions.
It does not seem to be a
legitimate function of the tax laws to subject transactions,
whether routine or major, to delays by requiring the obtaining of advance rulings where business necessity requires
action and where a taxpayer is willing to take his chances
as in other tax matters.
Yet the mere failure to obtain
the ruling in advance under section 367 constitutes a veto over
any possibility that the transaction could be tax free, regardless of whether statutory non-recognition provisions were
- 20 -
complied with, regardless of whether the taxpayer is
willing to pay any applicable toll charges and regardless
of whether tax avoidance was in fact a principal purpose.
/
One approach that has been suggested is incorporating
in the Internal Revenue Code those toll charges which are
properly of general applicability and substituting a
reporting requirement for the advance ruling requirement
in most, or all, cases.
It should be pointed out that the
role for section 367 in preventing tax avoidance is very
closely related to the basic structure for taxing foreign
source income and, if any changes are made in this basic
structure, section 367 could be substantially affected.
2.
Section 482
Since I have taken office, and in those few moments
that I have had to discuss matters other than the Tax
- 21 Reform Act of 1969, I have heard frequent criticism
expressed concerning the operation of section 482, particularly as to inter-company pricing on export sales.
We are concerned about this question because it does
not seem to us that the tax laws should operate in a
fashion that has such undertainty or with such inflexibility as to encourage
u.
S. companies to turn to foreign
manufacturing or to foreign suppliers to avoid complexities of U. S. tax law and apprehension over possible
double taxation.
But I do not think that to date we have
accumulated sufficient information or examples of these
alleged problems to say that the 482 regulations as
promulgated in April 1968 and January 1969 require extensive revision.
If and when sufficient such examples under
the new regulations are found, we are prepared to act;
both the Service from the standpoint of administration and
the Treasury from the standpoint of policy are giving this
matter intensive consideration.
- 22 We do have a responsibility to protect the integrity
of the U. S. tax system to see that U. S. taxpayers cannot
freely reduce their taxes by shifting income to foreign
entities through inter-company pricing.
While we must
remain on guard against tax avoidance, we can also
recognize that in as difficult a science as allocating
income and expenses between related entities, it can be
wasteful and inefficient to attempt to obtain too precise
a division between two enterprises in countries with
comparable corporate tax burdens.
We intend particularly
to make sure that our inter-company pricing rules do
not mean unnecessary harrassment and expense to companies
engaged in exporting.
Since under any approach that may be adopted there
will be some cases of allocation of income that results
in actual or threatened double taxation, we are putting
our efforts toward developing a more meaningful competent
authority procedure for negotiating adjustments with
other countries on a reasonably expeditious basis.
~
3.
23 -
Foreign Tax Credit
As stated above, if direct investment income were to
be exempted from U. S. tax under described conditions,
this would drastically restrict the field of operation of the
foreign tax credit and hopefully achieve simplification.
In
any event, we find that a number of aspects of the foreign
tax credit need reexamination
or further work, including
effective foreign rates in excess of the U. S. rate, the
payment of foreign taxes in excess of the minimum due, the
computation of the limitation where there have been losses
in prior years, the different effective rates in the U. S.
and some foreign countries on capital gains and mineral income,
the allocation of domesticclly incurred expenses to foreign
income, and the somewhat mechanical source rules.
4.
Investment in United States Property
The Revenue Act of 1962 provides for current taxation
of the income of controlled foreign corporations invested
in certain types of United States property.
While I cannot
quarrel with the application of this provision in such
cases as quasi-permanent loans by foreign subsidiaries to
their domestic parents, we are studying this provision
to determine whether in its present form it is excessively broad.
- 24 5.
Simplification
Even within the existing structure it seems to me
that we should make every effort to achieve simplification.
One area where I believe we can do something is in
eliminating duplication in the reporting
requiremen~with
respect to the operations of foreign corporations.
A
second problem area that has been called to our attention
is the fact that Uo S. tax accounting rules must be used
by foreign subsidiaries for purposes of computing the
foreign tax credit and minimum distributions.
While we
are considering this I cannot see how we can apply our
tax in an even-handed way without some control of the
accounting rules used.
Nevertheless it may be possible
to achieve some greater flexibility without complete
abandonment of controls, perhaps by accepting the tax
accounting rules of certain countries fully or with certain
adjustments.
Another area where simplication may be achievable
is in our source rules.
For example, the income from U.S,
exports is considered to arise partially or completely froo
foreign sources only if title passes outside of the
United States.
This seems overly technical and requires
- 25 taxpayers to make complex arrangements.
Perhaps a
destination test for U. S. exports would be useful.
Income from Export of Goods Manufacture~
in the United States
Under our present Code income from export of goods
manufactured in the United States is, in general, subject
to full U. S. income tax unless the sales are routed
through a subsidiary incorporated in the foreign country
to which the goods are destined, or in some cases to
third countries where the relief provisions under subpart
F can be utilized.
The requirement that a foreign corpolation
be used for this purpose requires operation under a foreign
corporation law, with foreign accounting principles involved,
and foreign lawyers, accountants and other advisors required.
Through the years I have wondered why we draw this distinction
based on incorporation abroad, with its inherent complexities
for the American businessman.
Where goods are produced in
the United States for sales abroad, can we not achieve some
advantages of simplification, as well as other practical
advantages, by permitting international sales subsidiaries
to be
organize~
under United States laws, subject to
appropriate safeguards, with substantially the same
as if they were incorporated abroad?
eff~~t
- 26 -
While one approach would be to broaden the exemptions
to subpart F, possibly by liberalizing the existing Export
'. '~rade Corporation exemption so that foreign corporations
could be used for this purpose, it seems to me that we
should not force our exporters to use foreign corporations
to minimize their tax.
Therefore, we have been examining
the possibility of extending to a domestically incorporated
international sales corporation the same privileges now
accorded foreign corporations which qualify under the
existing Export Trade Corporation Or other exceptions to
subpart F.
Under an approach we are considering the United States
tax on a domestic international sales corporation's income
would be deferred as long as its income is used in the
corporation's export business or invested in export related
assets and not distributed to shareholders.
The income
from investments in export related assets would be similarly
deferred.
It would be our intention to avoid the excessive
limitations on qualifying export assets that are presently
found in the existing Export Trade Corporation provisions.
Domestic 'international sales corporation status would
be available for the sale of goods produced in the United
- 27 -
States by related and unrelated manufacturers and regardless
of whether the income is earned by purchase and resale or
through sales commissions.
We would contemplate that inter-company pricing between
such a domestic corporation and a related supplier would
be subject to specific rules intended to assure an
appropriate division of profit, but the rules would not
necessarily be limited to the application of the present
section 482 provisions.
In order to qualify as a domestic international.sales
corporation a corporation would be required to have, say,
95 percent of its gross receipts from the sale of goods
manufactured, extracted or produced in the United States
for use, consumption, or distribution abroad or from
qualifying export related investments.
Ancillary services
related to exports would give rise to qualifying income,
as would income from leasing and subleasing of export goods
and interest on trade receivables and working capital deposits.
Qualifying income would also include income of foreign sales
and service branches and dividends from foreign sales
subsidiaries which, except for their foreign situs of
incorporation, would themselves qualify as domestic inter:.latior: '.:1
sales corporationso
- 28 To the extent that income is invested in assets that
produce qualifying export trade income,including reasonably
adequate working capital, such income need not be distributed.
We would contemplate some limitation on the propor-
tion of income that cculd be earned from investment in
export related assets, other than on trade accounts, in
relation to total income in order to preserve the sales
character of the corporation.
A qualifying domestic
international sales corporation would not itself be subject
to the provisions of subpart F.
I should emphasize that this and other approaches are
now receiving study in the Treasury, and I am not now in
a position to indicate when, or if, a formal proposal will
emerge.
However, the Treasury is aware of the need and
we shall bend our efforts to move forward as rapidly as
possible.
Conclusion
I am sure that my remarks this afternoon have
made it clear to you that there is much work ahead of us
in connection with the U. S. taxation of foreign source
- 29 income.
The Treasury considers this a vital matter and
intends to devote a great deal of effort to this very
important area.
Moreover, the Commissioner of Internal
Revenue has assured us of the desire of the Service to
administer these provisions of the law without undue
burdens on exporters or others carrying on international
trade.
We solicit your comments and suggestions.
will be carefully studied and much appreciated.
000
They
TREASURY
f)EPARTMENT
ttl_
iI
WASHINGTON. D.C.
November 19, 1969
FOR IMMEDIATE RELEASE
WILLIAM L. DICKEY NAMED
DEPUTY ASSISTANT SECRETARY
Secretary of the Treasury David M. Kennedy today announced
the appointment of William L. Dickey as Deputy Assistant
Secretary for Enforcement and Operations. Mr. Dickey will work
under the direction of Assistant Secretary for Enforcement and
Operations Eugene T. Rossides.
Mro Dickey, 37, of Sioux Falls, South Dakota, received a
Bachelor of Arts degree from Augustana College, Sioux Falls,
in 1957, and a Juris Doctor degree from George Washington
University in 1962.
Since rece1v1ng his Juris Doctor degree, Mr. Dickey has
been practicing law both in Washington, Do C., and South Dakotao
He served as Minority Counsel for the Intergovernmental Relation
Subcommittee of the U.So Senate Committee on Government
Operations, 1963-64, and as a staff attorney for the Western
Union Telegraph Company in New York, 1967-68. During 1962-63, he
was Assistant Professor of Law at the University of South Dakota,
Vermillion, South Dakota o
In 1962, Mr. Dickey was admitted to the Virginia State
Bar, District of Columbia Bar, and the South Dakota Baro He
is a member of the American Bar Association, Federal Bar
Association, American Trial Lawyers Association, and the
South Dakota and Virginia State Bar Associations.
Mro Dickey enlisted in the U.S. Air Force in 1951, served
four years, and was honorably discharged in 1954 with the rank
of Staff Sergeanto He is married to the former Patricia McCormick
of Salem, South Dakota o They have one child, Diane, and reside
at 8403 Felton Lane,'Alexandria, Virginia.
000
K-278
TREASURY DEPARTMENT
FOR IMMEDIATE RELEASE
tiy
WASHINGTON, D.C.
November 19, 1969
TREASURY'S WEEKLY BILL OFFERING
The Treasury Department, by
for two series of Treasury bills
$ 3,000,000,000, or thereabouts,
Treasury bills maturing November
$2,900,235,000,
as follows:
this public notice, invites tenders
to the aggregate amount of
for cash and in exchange for
28, 1969,
in the amount of
bills (to maturity date) to be issued November 28, 1969,
in the amount of $1,800,000,000,
or thereabouts, representing an
additional amount of bills dated August 28, 1969,
and to
mature February 26,1970,
originally issued in the amount of
$1,201,022,000,
the additional and original bills to be
freely interchangeable.
90~day
181-day bills, for $1,200,000,000,
or thereabouts, to be
dated November 28,1969,
and to mature May 28, 1970.
The bills of both series will be issued on a discount basis under
competitive and noncompetive bidding as hereinafter provided, and at
maturity their face amount will be payable without interest. They
will be issued in bearer form only, and in denominations of $1,000,
$5,000, $10,000, $50,000, $100,000, $500,000 and $1,000,000
(maturity value).
Tenders will be received at Federal Reserve Banks and Branches
up to the closing hour, one-thirty p.m., Eastern Standard
time, Monday, November 24, 1969.
Tenders will not be
received at the Treasury Department, Washington. Each tender must
be for an even multiple of $1,000, and in the case of competitive
tenders the price offered must be expressed on the basis of 100,
with not more than three dec'imals, 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
K-279
-
i. -
responsible and recognized dealers in investment securities. Tenders
from others must be accompanied by payment of 2 percent of the face
amount of Treasury bills applied for, unless the tenders are
accompanied by an express guaranty of payment by an incorporated bank
or trust company.
Immediately after the closing hour, tenders will be opened at
the Federal Reserve Banks and Branches, foll~wing 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 rej ection thereof. The Secte tary 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 November 28,1969, in
cash or other immediately available funds or in a like face amount
of Treasury bills maturing November 28,1969.
Cash and exchange
tenders will receive equal treatment. Cash adjustments will be made
for differences between the par value of maturing bills accepted in
exchange and the issue price of the new bills.
The income derived from Treasury bills, whether interest or
gain from the sale or other disposition of the bills, does not have
any exemption, as such, and loss from the sale or other disposition
of Treasury bills does not have any special treatment, as such,
under the Internal Revenue Code of 1954. The bills are subject to
estate, inheritance, gift or other excise taxes, whether Federal or
State, but are exempt from all taxation now or hereafter imposed on
the principal or interest thereof by any State, or any of the
possessions of the United States, or by any local taxing authority.
For purposes of taxation the amount of discount at which Treasury
bills are originally sold by the United States is considered to be
interest. Under Sections 454 (b) and 1221 (5) of the Internal
Revenue Code of 1954 the amount of discount at which bills issued
hereunder are sold is not considered to accrue until such bills are
sold, redeemed or otherwise disposed of, and such bills are excluded
from consideration as capital assets. Accordingly, the owner of
Treasury bills (other than life insurance companies) issued hereunder
need include in his income tax return only the difference between
the price paid for such bills, whether on original issue or on
subsequent purchase, and the amount actually received either upon
sale or redemption at maturity during the taxable year for which the
return is made, as ordinary gain or loss.
Treasury Department Circular No. 418 (current revision) and this
notice prescribe the terms of the Treasury bills and govern the
conditions of their issue. Copies of the circular may be obtained
from ~Y2f~deral Reserve Bank 0oO~ranch.
REASURY DEPARTMENT
,
FOR IMMEDIATE RELEASE
WASHINGTON. D.C.
November 19, 1969
TREASURY'S HONTHLY BILL OFFERING
The Treasury Department, by
for two series of Treasury bills
$1,500,000,000, or thereabouts,
Treasury bills maturing November
$1,501,001,000,
as follows:
this public notice, invites tenders
to the aggregate amount of
for cash and in exchange for
30, 1969, in the amount of
27~day
bills (to maturity date) to be issued December 1, 1969,
in the amount of $ 500,000,000,
or thereabouts, representing an
3.dditional amount of bills dated August 31, 1969,
and to
nature August 31,1970,
originally issued in the amount of
?1,200,526,000,
the additional and original bills to be
creely interchangeable.
365 -day bills, for $l,OOO,QOO,OOO,
or thereabouts, to be
fated November 30, 1969,
and to mature November 30, 1970.
The bills of both series will be issued on a discount basis under
ompetitiv€ and noncompetive bidding as hereinafter pr0vided, and at
aturity their face amount will be payable without interest. They
ill 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
to the closing hour, one-thirty p.m., Eastern Standard
ime, Tuesday, November 25, 19690
Tenders will not be
eceived at the Treasury Department, Washington. Each tender must
e for an even multiple of $1,000, and in the case of competitive
enders the price offered must be expressed on the basis of 100,
ith not more than three decimals, e. g., 99.925. Fractions may not
e used. (Notwithstanding the fact that the one-year bills will run
or 365 days, the discount rate will be computed on a bank discount
asis of 360 days, as is currently the practice on all issues of
reasury bil1s e ) Tt is urged that tenders be made on the printed
~rms and forwarded in the special envelopes which will be supplied
Y Federal Reserve Banks or Branches on application therefor.
.p
Banking institutions generally may submit tenders for account of
ustomers provided the names of the customers are set forth in such
enders. Others than banking institutions will not be permitted to
K-2BO
-
1. -
submit tenders except for their own account. Tenders will be reoeived
without deposit from i~corporated b~nks and trust ~Q~pan;es apd:~from
respons~ble ana recogn~zed dealers ~n investment securit1es •. Ten8ers
from others must be accompanied by payment of 2 percent of the face
amount of Treasury bills applied for, unless the tenders are
accompanied by an express guaranty of payment by an incorporated bank
or trust company.
Immediately after the closing hour, tenders will be opened at
the Federal Reserve Banks and Branches, following which public announcement will be made by the Treasury Department c[ che amount and price
range of accepted bids. Those submitting tenders will be advised
of the acceptance or rejection thereof. The Sec~tary 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 December 1, 1969, in
cash or other immediately available funds or in a like face amount
of Treasury bills maturing
November 30,19690 Cash and exchange
tenders will receive equal treatment. Cash adjustments will be made
for differences between the par value of maturing bills accepted in
exchange and the issue price of the new bills.
The income derived from Treasury bills, whether interest or
gain from the sale or other disposition of the bills, does not have
any exemption, as such, and loss from the sale or other disposition
of Treasury bills does not have any special treatment, as such,
under the Internal Revenue Code of 1954. The bills are subject to
estate, inheritance, gift or other excise taxes, whether Federal or
State, but are exempt from all taxation now or hereafter imposed on
the principal or interest thereof by any State, or any of the
possessions of the United States, or by any local taxing authority.
For purposes of taxation the amount of discount at which Treasury
bills are originally sold by the United States is considered to be
interest. Under Sections 454 (b) and 1221 (5) of the Internal
Revenue Code of 1954 the amount of discount at which bills issued
hereunder are sold is not considered to accrue until such bills are
sold, redeemed or otherwise disposed of, and such bills are excluded
from consideration as capital assets. Accordingly, the owner of
Treasury bills (other than life insurance companies) issued hereunder
need include in his income tax return only the difference between
the price paid for such bills, whether on original issue or on
subsequent purchase, and the amount actually received either upon
sale or redemption at maturity during the taxable year for which the
return is made, as ordinary gain or loss.
Treasury Department Circular No. 418 (current reviSion) and this
notice prescribe the terms of the Treasury bills and govern the
conditions of their issue. Copies of the circular may be obtained
from any Federal Reserve Bank 060~ranch.
TREASURY DEPAR1"'fViEr\J'r
f?
WASHINGTON. D.C.
November 20, 1969
FOR IMMEDIATE RELEASE
DECISION ON BARBERS' CHAIRS
UNDER THE ANTIDUNPING ACT
The Treasury Department announced that a
determination has been made that barbers' chairs from
Japan are not being, nor likely to be sold at less
than fair value within the meaning of the
Antidumping Act, 1921, as amended (19 U.S.C. 160 et seq.)o
A tentative determination was published in
the Federal Register on August 28, 1969. This notice
provided for the submission of written views or
requests for an opportunity to present views orally.
No submissions or requests were received.
During the period April 1, 1968,through August 30,
1969, barbers' chairs valued at approximately
$1,000,000 were imported from Japan.
000
FOR IMHEDIATE RELEASE
DECISION ON JU11NOACE~'::CC ACID (GLYCINE)
UN'DEE THE
!ICT
... AH'J.'IDlJ1.TIHG
.,
The 1"'reasury D-2partment announced today that Aminoacetic
Acid (Glycine) from France is being, and is likely to be,
sold at less than fair value within the meaning of' the Antidumping Act, 1921, as amended.
Notice of the determination and the case reference to the
Tariff C01l1lJ',ission vill be published in the Federal Register.
During the period March 1, 1968, throlleh August 31, 1969,
Aminoacetic Acid (G1ydne) valued at approxil119.tely $98,000
was imported from France.
II # #
FOR IMMEDIATE RELEASE
DECISIONS ON PIG IRON
UNDER THE ANTIDUMPING ACT
The Treasury Department announced today that it has
investigated charges of possible dumping of pig iron from
Brazil, Sweden, and the United Kingdom.
Notices announcing a tentative determination that this
merchandise is not being, nor likely to be, sold at less
than fair value within the meaning of the Antidumping Act
will be published in an early issue of the Federal Register.
Information gathered in this investigation shows sales
to the United States of the merchandise were terminated.
There is no information indicating that pig iron will be
shipped to the United States from Brazil, Sweden, or the
United Kingdom in the near future.
Appraisement of the above-described merchandise from
Brazil, Sweden, and the United Kingdom has not been
withheld.
# # # # #
TREASURY DEPARTMEi\lT
eE
-
WASHINGTON. D.C.
FOR INMEDIATE RELEASE
November 20, 1969
DECISION ON TETRACYCLINE PRODUCTS
UNDER THE ANTIDUMPING ACT
The Treasury Deparcnent announces that a determination has
been made that tetracycline products manufactured by Carlo Erba,
S.p.A., Milan, Italy, are not being, nor likely to be, sold at
less than fair value within the meaning of the Antidumping Act,
1921, as amended (19 U.S.C. 160 et seq.).
A tentative determination was published in the Federal
Register on September 18, 1969.
This notice allow<:!d 30 days
for the submission of written views or requests for an opportunity
to present views orally.
No submissions or requests were received.
During the period March 1, 1968, through November 30, 1968,
tetracycline products valued at approximately $883,990 were
exported to the United States by Carlo Erba, S.p.A., Milan, Italy.
(0
TREASURY DEPARTMENT
0
WASHINGTON, D.C.
FOR RELEASE 6:30P.M.,
Friday, November 21, ~969.
RESULTS OF TREASURI' S OFFERING OF $2.5 BILLION TAX ABTICIPA1'ION BILLS
The Treasury Department announced that the tenders for two series of Treasury
Tax Anticipation bills, one series to be an additional issue of the bills dated
october 14, 1969, and the other series to be an additional issue of the bills dated
october 29, 1969, which were offered on November 17, 1969, were opened at tm Federal
Reserve Banks today. Tenders were invited for $1,000,000,000, or thereabouts, of 147day bills and for $1,500,000,000, or thereabouts, of 208-day bills. The details of
the two series are as follows:
RANGE OF ACCEPTED
COMPETITIVE BIDS:
High
Low
Average
147-day Treasury bills
maturin~ A~ril 222 1970
Approx. Equiv.
Price
Annual Rate
7.668~
96.869
96.782
7.881~
96.809
7.815~
208-day Treasury bills
maturi!!E5 June 22.1 1970
Approx. Equiv.
Price
Annual Rate
7.816j
95.484
95.349
8.05~
95.392
7. 975~
Y
Y
Y
Y
Excepting 1 tender of $200,000; b/Excepting 3 tenders totaling $400,000
1~ of the amount of 147-day bilTs bid for at the low price was accepted
21~ of the amount of 208-day bills bid for at the low price was accepted
'roTAL TENDERS APPLIED FOR AND ACCEP'J!ED BY FEDERAL RESERVE DISTRICTS:
District
Boston
New York
Philade lphia
Cleveland
Richmond
Atlanta
Chicago
st. Louis
Minneapolis
Kansas City
Dallas
San Francisco
'roTALS
A}2~lied
Applied For
Acce:yted
:
$ 20,620,000 $0,620,000:
366,454,000:
1,284,204,000
13,340,000:
106,340,000
115,427,000:
166,827,000
20,739,000:
55,189,000
20,760,000:
53,550,000
161,595,000:
243,595,000
31,846,000:
54,316,000
59,800,000:
99,600,000
51,406,000:
59,006,000
5,151,000:
51,451,000
143,077,000:
294,575,000
$2,489,273,000
$1,000,215,000
For
1,727,456,000
103,080,000
62,982,000
57,030,000
35,630,000
253,643,000
59,343,000
97,546,000
58,222,000
50,858,000
290,062,000
Acceited
$1,082,000
769,056,000
61,280,000
55,482,000
52,030,000
28,630,000
147,323,000
38,235,000
61,746,000
49,222,000
14,858,000
141,385,000
$2,910,434,000
$1,500,329,000
$ 114,582,000
~
~
sI Includes $113,168,000 noncompetitive tenders accepted at the average price of 96.809
[( Includes $102,082,000 noncompetitive tenders accepted at the average price of 95.392
g These rates are on a bank discount basis. The equivalent coupon issue yields are
8.l8~ for the 147-day bills, and 8.43~ for the 208-day bills.
r~-281
II!
REVISED COpy
TREASURY DEPARTMENT
Washington
FOR RELEASE UPON DELIVERY
SCHEDULED FOR 3:50 P.M.
REMARKS OF THE HONORABLE DAVID M. KENNEDY
SECRETARY OF THE TREASURY
BEFORE THE "BRIEFING FOR BUSINESS"
HOTEL SHERATON-PARK
FRIDAY, NOVEMBER 21, 1969
Chairman McCracken has described for you the basic
ingredients in our anti-inflation package. I want to impress
upon you, as clearly and as strongly as I can, that we are
determined to pursue a policy of monetary and fiscal
restraint until we have restored basic health and stability
to the econom •
If you take but one thing home with you this afternoon,
I hope it will be this all-important message: The Nixon
Administration intends to halt the spiral of rising prices.
We have no illusions that it will be easy. We make no
false promises of quick success. But we do say we are
prepared to see the job through. And the sooner that message
gets through -- the sooner business, labor, and consumers can
again make their plans in the expectation of a leveling
of prices -. the better foundation we will have for a
resumption of orderly, healthy growth.
I will be frank to say that after four years of mounting
inflationary pressures, the new Administration found the
degree and per.sistence of inflation greater than anticipated.
Today we see a few heartening signs that progress is
beginning to be made. But we must not jump to the conclusion
that our job is done.
The batt1elines against inflation are being drawn on
several fronts -- nowhere more critically than in the halls
of Congress as it deals with tax and expenditure legislationo
Plainly, our strategy co~ld be upset if any Congressional
attitude were to develop that Ita few billions added to the
budget, or a few extra billions in tax cuts won't make any
difference
0
K-282
"
- 2 -
I believe that in the end the Congress will act with
a high degree of fiscal responsibility. But I have learned
since coming to Washington that you can take nothing for
granted. The Administration has to sell its program -and that is as it should be. We have tried to make clear
to the Congress and to the public the vital importance of
the Federal budget posture to our overall fight against
inflation.
Frankly, I don't think we have yet succeeded in
getting fully across to the Congress and the public the
importance of this effort.
Look what is happening in the Congress today. Large
future tax cuts are being considered at the same time
as tax increases designed to control inflation. And while
the Congress is moving ahead on vital short-run, revenue
measures, it also has under consideration measures which
could add another $5 billion to spending in the current
fiscal year.
Some of the very people who urge the Administration to
expand public spending on important national needs are
leading the fight for future tax cuts that will limit our
fiscal ability to meet those needs without inflation.
Personally, I have deep concern for the future of a people
who permit their aspirations to outrun their willingness or
ability to pay the necessary costs.
I suppose it is hard for a people accustomed to a
steady and rapid rise in affluence to tighten its belte
But there comes a time when a mild dose of austerity and
restraint can save us from more serious medicine later on.
I think we are living in such a time today.
There is little doubt in my mind that over the long run
the balance of risks in our economy lies on the side of
inflation. The expectations of our people are high and
r1s1ng. Demands for better housing, more and better education
and a rising standard of living for all people are very
large.
- 3 -
l()3
v
Yet if we try to satisfy all these demands at once, our
efforts will be self-defeating. They can only be met by
striking a balance between spending and saving. Only by
moderating current spending can we release the resources
required to better meet our society's great needs without
inflation. Unless we remember this lesson, which is as old
as economic history itself, I foresee a difficult and
frustrating time ahead for the American people.
As leaders of the American business community, I think
this is a lesson you understand and accept. I believe that
you have an obligation not only to heed that lesson in
your corporate and business affairs but, equally important,
to help carry that message to the American people.
The record will show that this Administration is
attempting to practice what we preach. Two years ago, the
government ran a massive, and inflationary budget deficit
of $25 billion. For the fiscal year that ended last
June, the budget showed a long-overdue surplus -- one of
$3 billiono For the current fiscal year, we seek a
badly-needed anti-inflationary surplus of about $6 billion.
Since taking office, the Administration has cut back
the spending level implied in the last Johnson budget by
$7.5 billion. The president has pledged to hold government
spending below the level set by Congress.
In addition to achieving these tough controls on
spending, we have recommended legislation to raise the
revenues needed to produce a significant budget surplus.
These revenues are vitally important to our program. As I
have said before, the question is not whether they are
too much, but whether they will prove enough.
Unless these tax measures are enacted by the Congress,
we will fall $4 billion short of our minimum necessary
measure of budget restraint this fiscal year. This would
inject additional billions into the private spending stream,
further increasing the inflationary pressure. In addition,
the Treasury would be required to place additional strain
on the money markets.
I need not describe to this audience
the pressures alteady prevailing in credit markets, and the
historically high rate levels that have been reached.
- 4 Plainly, we must end the vicious cycle in which inflation
and inflationary expectations, on the one hand, make lenders
shy away from long-term commitments in fixed interest
securities and, on the other hand, unnecessarily add further
to the already heavy demands in those markets. Restrictive
money policy has its logical complement in a budget surplus,
and we must carry through on both sides of the equation.
Let me emphasize, too, that it is the small saver who
fares worst in this inflationary cycle. We in the Treasury
have been particularly conscious of the loyal investor in
U.S. Savings Bonds, who is plainly not being paid an adequate
rate of return. Fundamentally, these millions of individuals
are entitled to a fair return on the dollars they save. In
today's markets they are entitled to a higher interest return
on their Savings Bonds. This inequity should be corrected
immediately, and I hope the Congress will move quickly on
passage of the increase in the Savings Bond rate to 5 percent
that we proposed last summer.
But the small saver is not the only one hurt by the
inflation of interest rates. A lot of deserving and
needy borrowers, particularly home buyers and state and
local governments, are also being priced out of the capital
markets.
Let me add one other variable to this picture.
Inflation not only disrupts economic life here in the
United States, it also deeply affects our relationship to
the international economy. With unrestrained price
increases, our competitive position and our foreign trade
balance suffer, our balance of payments position is
weakened, and confidence in the dollar -- on which our
international monetary system depends -- is eroded.
Recently a number of encouraging developments have
strengthened the world financial system, leading to
calmer markets and a substantially improved outlook.
A key factor in sustaining and building upon that progress
is the success of the United States in dealing with
its internal economic problems. I know from my
- 5 -
own personal discussions that foreign central bankers and
finance ministers applaud our anti-inflationary program. They
regard our success vital not only to our own economic progress
but to that of the world community at large.
Largely because of domestic inflation, our balance
of payments data -- and particularly the virtual
disappearance of our traditional large surplus on trade account
do not make happy reading. We have a long, hard road
ahead of us to restore that position. We in the Administration
conceive of this as a long-term challenge, to be dealt
with through fundamentals.
Intensive work is underway to provide for a more
aggressive export effort. Export credit programs have had a
thorough review, and will be more adequately funded and
administered with energy and imagination. Our tax arrangements
are under intensive study to remove unnecessary and undesirable
impediments and inequities that may impede the exporter.
Incidentally, we are now completing a review of the
Federal Reserve and Commerce Department programs dealing with
capital outflows. Given the balance of payments situation,
those programs must be retained. But we can do much to
simplify their administration, and to make sure they do not
inhibit exports or investment in less developed countries.
But in the end, this challenge will be met or not met
on the basis of our success against inflation and our success
in maintaining the productivity and efficiency of our industry.
One of the factors that will be important in achieving
this goal is the lower level of interest rates that will
become possible when inflation is under control. Lower interest
rates are important to your future investment plans. The
economic policies we have set in motion will not only lead to
lower interest rates, but will re-establish the strong,
healthy markets which, in the end, provide the only lasting
incentive to high capital investment~
If we are tQ rely on our tax structure to help lick
inflation, we must be sure the burden is distributed fairly
and equitably.
- 6 -
For the past ten months, the Treasury tax staff, with
their counterparts on the tax-writing committees of Congress,
have been working around the clockon a sweeping revision of
our tax laws. The tax reform bill will come up on the
floor within the next several days. Hopefully, the Senate
will complete action this year. But if not, I believe it is
vital to our inflation-control program to split off the
short-run, revenue-raising measures and enact them separately
For the future, the Treasury'hopes to propose
additional reformscaffecting depreciation, employee benefits,
foreign income, particularly including provisions relating to
exports; exempt organizations, and other matters. One
objective of our efforts will be to provide a better
balance between consumption and investment. In a number of
these areas, we are being aided by the current
studies of the Presidential Task Force on business taxation.
The task we face -- which we cannot accomplish
without your assistance -- is to make certain that every
change we make is a step forward, that it makes our tax
policy serve our changing society more effectively.
In moving forward, we must not let the myriad detail
involved in tax legislation obscure our broad objectives.
Essentially, our goal is a revision of our income tax
structure which will be fair to all our citizens and will
contribute to a strong and growing economy, to the strong
and growing America we all desire.
In all these matters, we have now reached a critical
stageo On the surface, the strains are plain. But, beneath
the surface turbulence, I also believe we can see the process
of constructive change at work. It has been slow, hard work,
and we do not mean to falter now.
We will need your cooperation and understand~mg, as we
do of all elements in our economy. But with that help, I
have every reason for confidence that these difficult days
are laying the groundwork for renewed balance and orderly
growth in the American ec'onomy.
000
~7
(
DEPARTMENT OF THE TREASURY
Washington, D. C.
FOR RELEASE UPON DELIVERY
REMARKS OF THE HONORABLE MURRAY L. WEIDENBAUM
ASSISTANT SECRETARY OF THE TREASURY FOR ECONOMIC POLICY
BEFORE THE CONFERENCE ON SOCIAL SCIENCE AND NATIONAL POLICY
RUTGERS UNIVERSITY, NEW BRUNSWICK, NEW JERSEY
TUESDAY, NOVEMBER 25, 1969, 8:00 P. M., EST
THE ROLE OF THE COLLEGE PROFESSOR IN THE NIXON ADMINISTRATION
I welcome the opportunity to participate in this pioneering effort to evaluate the role of social science in the
formation of national policy.
As a member of the Administration
in office, I believe that it would be presumptuous of me to
make such an evaluation.
Rather, I believe that I can provide
some factual information which may be of use and interest to
my fellow participants.
I am pleased to report that the Nixon Administration has
brought in faculty from colleges and universities and appointed
them to some of the most senior positions in the White House,
in the Cabinet Departments, and in many other agencies of the
Fede-al Government.
Although it may have escaped widespread
attention, I believe that this substantial infusion of academic
talent is one of the hallmarks of the Nixon Administration.
This movement of professional personnel between government
and academia, which we take for granted in the United States,
is, in contrast, a rarity in many European countries.
Personally,
- 2 -
I think that this aspect of labor mobility provides an element
of considerable strength in our society.
This relatively fluid
situation, of course, requires that channels of communication
between the public and private sectors be open and further
developed.
The White House
Let me now turn from generalizations to specific instances.
Perhaps the most prominent example of the utilization of outstanding academic people in the Federal Government was the
appointment of Professor Arthur F. Burns of Columbia University
to the new Cabinet-level position of Counsellor to the President.
A former president of the National Bureau of Economic Research,
Dr. Burns has made fundamental contributions to the field of
business cycle analysis.
Recently, the President has announced
that he will appoint Dr. Burns to the position of Chairman of
the Board of Governors of the Federal Reserve System -- the
first time, to my knowledge, that a university professor has
been appointed to that influential post.
I do not mean to be partial to economists.
Other out-
standing social scientists have been appointed to top-level
positions in the White House.
For example, sociologist
Dr. Daniel Patrick Moynihan resigned his position as Director
of the Joint Urban Center at Harvard University and MIT to
take on the new post of Assistant to the President for Urban
- 3 -
Affairs.
Dr. Moynihan is also the primary motivating force
in the new Cabinet-level Council on Urban Affairs.
Dr. Burns
leave~
When
the White House early next year, Dr. Moynihan
is scheduled to be elevated to the position of Counsellor to
the President.
In the field of international affairs, Political Science
Professor Henry A. Kissinger of Harvard University serves as
the President's Assistant for National Security Affairs, a post
which continues to be one of the most influential in Government.
Other noted academics hold senior positions in the White
House.
Professor Martin Anderson is on leave from Columbia
University to serve as Special Assistant to the President.
Special Assistant Roger Freeman is on leave from Stanford
University.
Also, one of Professor Kissinger's key assistants
is Professor Richard Cooper of Yale University.
The Executive Office of the President
Within the Executive Office of the President -- the
agencies which report to the President but are not part of
the White House proper -- a rather distinguished group of
university men are in residence.
The Science Adviser to the
President, who also serves as head of the Office of Science and
Technology, is the world-renowned scientist, Dr. Lee A. Du Bridge.
Dr. Du Bridge
as~umed
his present position from the presidency
of the California Institute of Technology.
- 4 ~he
are
three members of the Council of Economic Advisers
P~ofessor
Paul W. McCracken of the University of Michigan,
Chairman; Professor Hendrik S. Houthakker of Harvard University,
and Dr. Herbert Stein, on leave as a Senior Fellow at the
Brookings Institution.
Houthakker is a recipient of the John
Bates Clark Award of the American Economic Association, which
is given for outstanding contribution to economics.
In the Bureau of the Budget, Dr. James R. Schlesinger
was brought in from Rand Corporation to serve as an Assistant
Director.
Previously, Dr. Schlesinger had been a member of
the faculty of the University of Virginia.
Another Assistant
Director, Dr. Richard Nathan, came from the Brookings Institution.
Cabinet Departments
When we examine the major departments of the Federal
Gove~nment,
we find that two are headed by men from the aca-
demic world and that most of the others have brought in college
and university faculty to senior policy-making positions.
The Secretary of Agriculture is Clifford Hardin, formerly Chancellor of the University of Nebraska.
The Assistant
Secretary of Agriculture for Rural Development, Thomas Cowden,
was previously Dean of the School of Agriculture at Michigan
State University.
The Director of Agricultural Economics,
Jr. Donald A. Paarlberg, came from a professorship of economics
It
Purdue Uni vers i ty.
- 5 -
The Secretary of Labor is Professor George P. Shultz,
formerly Dean of the School of Business at the University of
Chicago.
Dr. Shultz is a nationally-known expert in labor
economics and mediation.
Other senior members of the new
Labor Department administration include Assistant Secretary
Arnold R. Weber, formerly a professor of economics at the
University of Chicago, and Deputy Under Secretary George
H. Hildebrand, on leave from an economics professorship at
Cornell University.
The newly-appointed Commissioner of the
Bureau of Labor Statistics is Dr. Geoffrey H. Moore, formerly
Director of Research of the National Bureau of Economic
Research.
At the Department of Commerce, the Assistant Secretary
for Science and Technology, Myron Tribus, came from the position
of Dean of the School of Engineering at Dartmouth College.
At the Department of Health, Education and Welfare, the
Assistant Secretary for Health and Science Affairs, Dr. Roger
Egeberg, previously was Dean of the Medical School of the
University of Southern California.
Cambridge also provided an attractive recruiting grounds
for the Department of Transportation.' Assistant Secretary
Paul Cherington came from Harvard where he was Professor of
Business Administration, and Assistant Secretary Secor D. Browne
came from a professorship of Aeronautical Engineering at the
Massachusetts Institute of Technology.
Professor Browne has
recently been appointed Chairman of the Civil Aeronautics Board.
- 6 At the Post Office Department, Assistant Postmaster
General Ronald E. Lee previously had served at Michigan State
University where he was a professor and Director of the Center
for Urban Affairs.
At the Department of Defense, Assistant Secretary
G. Warren Nutter is the former Chairman of the Department
of Economics at the University of Virginia.
At the Department of the Treasury, Professor Edwin
S. Cohen of the Law School of the University of Virginia
serves as Assistant Secretary for Tax Policy and I was
formerly Chairman of the Department of Economics at Washington
University (and am currently on leave of absence).
Also at
Treasury, Professor Henry C. Wallich of Yale University serves
as Senior Consultant in part-time residence.
I should hasten to add that this listing is meant to be
more illustrative than exhaustive, excluding as it does the
various agencies, commissions, and boards not attached to the
Cabinet Departments.
Undoubtedly and unwittingly, I may have
omitted the names of several fellow members of the Nixon
Administration with whom I serve.
I am confident that they
will correct my error upon my return from this conference.
In any event, I should like to emphasize that the new
Administration in Washington has drawn a most diversified
group of people to staff its senior positions.
The White
/Iu
- 7 House, Cabinet, and sub-Cabinet personnel who have been
appointed by the President include businessmen, state and
local government officials, men and women in the various
professions, as well as a good representation of college
professors.
Some New Mechanisms
I thought that it might be helpful for me to indicate
some of the current projects and new mechanisms for problem
solving adopted by the Nixon Administration which particularly
lend themselves to scholarly examination.
The broad gauge
nature of our approach may be indicated by the listing of
some of these current projects: reforming the welfare system,
analyzing various economic policy options for the post-Vietnam
time period, and originating a program of revenue sharing with
the states and localities.
This latter project, I might add,
has had very strong academic ties both at the conceptual
period as well as the more recent developmental stage. Professor
Walter Heller, now back at the University of Minnesota, and
Dr
,Joseph Pechman, of the Brookings Institution, of course
m2ne important contributions to the basic concept.
Ad~inistration
Task Force on Revenue Sharing operated under
gll;Jance of Dr. Arthur Burns.
ot
The
Some of the most active members
the Task Force included Dr. Richard Nathan and Dr. Martin
Anderson.
I had the pleasure of serving as chairman.
- 8 -
In addition, there are several important new mechanisms
for problem solving which are being utilized by the Nixon
Administration.
IS
The Urban Affairs Council, mentioned previously,
an effort to deal forthrightly with the crises in our cities
by fostering the close interaction of the various departmental
programs which can contribute to solving our urban problems.
Similarly, the Cabinet Committee on Economic Policy is an
innovative, high-level attempt to coordinate economic policies
within our government.
Perhaps some of the most striking examples of innovation
are the long-range planning projects being undertaken by the
Presidential Task Forces and the National Goals Project.
Both
of these latter activities serve as arenas for thoughtful
examination and debate and will provide bases for decisions
on future courses of action.
Both have a high proportion of
representation from the academic community.
The National Goals Research Staff, operating under the
direct auspices of the White House, has an ambitious and
formidable charter.
Its mandate includes the following im-
pressive array of activities that it is empowered to undertake,
at least from time to time:
forecasting future developments and
assessing the longer-range consequences
of present social trends.
III
- 9 -
measuring the probable future impact of
alternative courses of action, including
the degree to which change in one area would
be likely to affect another.
estimating the actual range of social choice,
indicating what alternative set of goals might
be attainable, in light of the availability of
resources and possible rates of progress.
developing and monitoring social indicators
that can reflect the present and future quality
of American life, as well as its direction and
rate of change.
summarizing and correlating the results of
related research activities being carried on
within the various Federal agencies, and by
state and local governments and private
organizations.
The first assignment of this new research group is to
assemble data that can help illuminate the possible range of
national goals for 1976 -- our 200th anniversary.
It will
prepare a yearly public report, the first scheduled for
July 4 of next year, setting forth some of the key choices
open to us, and examining the consequences of those choices.
The National Goals Research Staff is essentially an in-house
- 10 effort, drawing in good measure on personnel on leave from
government agencies and university departments.
In contrast, the Administration task forces are composed
entirely of volunteers who are not on the Federal payroll.
These task forces provide a most effective method for opening
up a new channel of communication between academia and the
Federal Government.
Five of the 16 task force chairmen so far
named are college professors or administrators.
When I last
checked, 61 of the 214 task force members were holding academic
positions.
As you might suspect, the Task Force on Priorities in
Higher Education is chaired by a university president (James
M. Hester of New York University) and the membership consists
almost entirely of college presidents (Kansas State, Utah,
Tuskegee, Vanderbilt, Rockford, MIT, Chicago, Minnesota,
Williams, Portland, and Missouri).
In addition, academic
personnel from Columbia, Harvard, Northwestern, and UCLA chair
the task forces on low-income housing, model cities, highway
safety, and economic growth.
As I examine the composition of the other task forces,
I find that college professors -- along of course with representatives of the other segments of our society -- are liberally
included in the studies of such diverse areas as urban renewal,
oceanography, problems of the aging, science policy, rural
/ /'l- 11 -
development, business taxation, and international development.
The colleges they come from include Stanford and Prairie View
A
&M,
Dartmouth and Vassar, Washington and Oregon State, to
indicate just some of the variety.
In a sense, what I have been describing here is the
academic input to policy-making in the Federal Government.
What contribution we make to the output of policy decisions
and implementation will, in good measure, depend on our
ability to effectively relate our professional skills and
knowledge to the needs and requirements of the President and
his Administration.
I hope that the input-output analysis
that will be performed some day will show that the results
are somewhat proportional to the quality and quantity of
those intellectual inputs.
000
TREASURY DEPARTMENT
(
WASI-IINGTON, D.C.
November 21, 1969
FOR IMMEDIATE RELEASE
GEOFFREY A. SHEPARD APPOINTED
WHITE HOUSE FELLOW
Geoffrey A. Shepard, a native of Southern California, has
been appointed a White House Fellow and assigned to the
Office of the Secretary of the Treasury.
Mr. Shepard, 24, received a Juris Doctor from the
Harvard Law School, Cum Laude, in June 1969. Previously, he
was graduated from Whittier College, Whittier, California, with
high honors in 1966, with a major in Political Science. While
at Whittier, he received the Richard M. Nixon political
Science Award, which was personally presented by Mr. Nixon in
1965. Mr. Shepard attended both Whittier and Harvard on
scholarships, distinguishing himself at both schools
academically and in student affairs and government.
He was graduated from the Woodrow Wilson High School in
Long Beach, California, in 1962~ where he was a National Merit
Finalist. Since he was 12, Mr. Shepard has worked every
summer to help support himself. He has been a box boy,
electrician, weightmaster and law clerk. He is a member of
the Washington State Bar and practiced law briefly in Seattle
prior to accepting his White House Fellow appointment.
Established in 1964, the White House Fellows program
is designed to give potential leaders a year of first-hand,
high-level experience working with government officials in
formulating and effecting national policy. In his assignment
to Treasury Secretary David Mo Kennedy and his staff,
Mr. Shepard will have opportunity to observe and study
Treasury's domestic and international operations
0
In addition to their jobs, White House Fellows participate
in an educational.program that includes informal discussion
with government officials, scholars, journalists, and leaders
from other segments of private life. The Fellows program is
open to all persons who are between 23 and 35 years of age,
excluding Civil Service employeeso During the first fivE' years
of the program over 7,000 young men and women have applied and
86 Fellows have been appointed.
000
TREASURY DEPARTMENT
)
•
WASHINGTON. D.C.
OR RELEASE 6: 30 P.M.,
onday, November 24, 1969.
RESULTS OF TREASURY S
I
~'EEKLY
BIT.L OFFERING
The Treasury Department announced that the tenders for two series of Treasury
ills, one series to be an additional ~3sue of the bills dated August 28, 1969, and the
ther series to be dated Novembel" 28, 1969 J which were offered on November 19, 1969, were
pened at the Federal Reserve Banks today. Tenders \Jere invited for $1,800,000,000,
r thereabouts, of 90-day hills and for $1,200,000,000, or thereabouts, of 181-day
ills. The details of the two series are as follows:
MfGE OF ACCEPrED
OMPETITIVE BIDS:
High
Low
Average
90-day Treasury bills
maturing February 26 2 1970
Apprcx. Equiv.
Price
Annual Rate
98.178
7.288~
~
98.119
7.524~
98.131
7.476~
11
181-day Treasury bills
maturing May 28, 1970
Approx. Equiv.
Price
Annual Rate
95.968 E./
8.019~
95.962
8.031~
95.964
8.027~
!I
Excepting 1 tend€~ of $1,212,000:
21Excepting 2 tenders tot~ling $5,115,000
41~ of the amount of 90-day bills bid for at the low price was accepted
76~ of the amount of 181-day bills bid for at the low price was accepted
OTAL TENDERS APPLIED FOR AND ACCEP'nID BY FEDERAL RESERVE DISTRICTS:
District
Boston
New York
Philadelphia
Cleveland
Richmond
Atlanta
Chicago
St. Louis
Minneapolis
Kansas City
Dallas
San Francisco
Applied For
$ 33,786,000
2,154,552,000
41,866,000
37,357,000
21.,306,000
37,858,000
145,947,000
42,426,000
22,252,000
28,217,000
24,209,000
143,474,000
TOTALS
$2,733,250,000
Acce~ted
$
23,786,000
1,319,102,000
26,866,000
37,357,000
21,306,000
28,878,000
143,677,000
41,949,000
13,252,000
28,217,000
20,209,000
95,859,000
Ai!~lied
For
7,2'10,000
$
2,719,358,000
21,519,000
46,808,000
16,228,000
32,222,000
227,837,000
41,916,000
18,590,000
23,145,000
21,473,000
216,090,000
$1,800,458,000£/ $3,392,456,000
Accei!ted
7,270,000
$
975,507,000
10,540,000
25,199,000
10,228,000
15,676,000
36,288,000
31,016,000
6,590,000
18,728,000
ll, 457, 000
52,845,000
$1,201,344,000 ~
Includes $337,510,000 noncompetitive tenders accepted at the average price of 98.131
Includes $225,295,000 noncompetitive tenders accepted at the average price of 95.964
These rates are on a bank discount basis. The equivalent coupon issue yields are
7.72~ for the 90-day bills, and 8.48~ for the 181-daY bills.
IClcltr.~:~·;':7.;'~!~~"'--·.~_:!:':'-;:-:_""":-;'-~~~.. ':;"~:iZ:')~~-.\·
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November 1.5, 1969
FOR UINEDTATE RELFASE
ANTIDUMPING DECISION HADE ON
STEEL BARS, REINFORCING BARS, AND SHAPES
The 'r""cssury Depa;r.tment H!1..nOUnc(;G. to (l.Ct;)f th[-i,t steel
bars, reinforcing bal"s, and sha,pes )y)2.nufuctured
BY'oken Hill Proprietary Co., Ltd., !';ellJc'l1rne,
B,re beint;~
OJ.'Jd
b~f
'l'he
Australia~
are likely to be, Eold at less than fair
ve,lue \-ri thj.n 'the mea..ning of the Antid1jmping J\ct ~ 1921,
&'3
amended,.
Notice of the determin:-ltion and the case reference
to the TariL: COTIunission ,,;ill be published in the Fed-
eral RegistE:r.
During the period M,ay 1968 throu@l 1\1ay 1969, steel
ba.rs, reinfoi"cing bars, and. shapes valued at approximately
$5, lQO ,800 rrei,'e imported from Austr81i~::..
been no imports sUbSc<]'-l,c:nt to thb P21':lod.
'There have
TREASURY DEPARTMENT
lit
WASHINGTON, D.C.
R RELEASE:
r..: 3:::
P.r.!.,
esday, November 25, 1969.
RESULTS OF TREASURY' S M)NTHLY BILL OFFERmG
The Treasury Department anr.ou~ced that the tenders for two series of Treasury
1:5, one se~ies to be an additional issue ~f the bills dated August 31, 1969, and the
her series t8 be dated November 30, 1969, which were offered on November 19, 1969, were
ened flt the Federal Reserve Banks t.:xiay. Tenders were invited for $500,000,000, or
ereabouts, of 273-day bills and for $1,00~,000,000, or thereabouts, of 365-day bills.
e' detcils ,f tbe two series are as fol1o~s:
273-day Treasury bi1=s
maturin~ Au~st 31 z 1970
Approx. Equiv.
Price
Annual Rate
94.167
7.6921%
94.085
7.800%
94. }02
7.778% 1:1
NGE OF ACCEP:SD
MPF.TITIVE BIDS:
High
Low
Avera/;t'
365-day Treasury bills
maturins November 30 z 1970
Approx. fEqui v .
Annual Rate
Price
7.54810
92.347 ~I
7.62oi
92.274
7.592% 1/
~2.303
~nder :::f $400,000
of the amount cf 273-day bills bid for at the low price was accepted
64% of the amount of 365-day bills bid for at the low price was accepted
8/ Excepting one
62%
TAL TENDERS APPLIED FOR AND ACCEPI'ED BY FEDERAL RESERVE DISTRICTS:
District
Boston
New York
Philade Iphia
Cleveland
Richmond
Atlanta
Chicago
St. Louis
Minneapolis
Kansas City
Dallas
San Francisco
'roTALS
Acce;Etcd
For
383,001J
1,703,000 $
429,019,000
1,212,198,000
2,574,000
8,469,000
4,653,000
6,663,'000
6,336,000
6,336,000
2,743,000
14,043,000
37,158,000
104,210,000
1,630,000
10,330,0-JO
230,000
230,000
2,007,000
2,0:;7,000
2,168,000
12,168,000
11,208,000
143,208,000
A~lied
$
$1,521,565,000
$
AEElied For
17,301,000
$
1,581,641,000
12,853,000
29,496,000
20,410,000
18,807,000
275,860,000
15,704,000
1,171,000
5,386,000
11,928,000
256,279,000
500,039,000 ~I $2,246,836,000
AcceEted
$
6,901,O~O
727,318,000
2,853,000
3,696,000
6,965,000
8,346,000
217,860,000
5,404,000
1,171,000
5,370,000
1,928,000
12,226,000
$1,00O,038,OOC' ~I
Includes $19,476,000 noncompetitive tenders accepted at the average price of 94.10?
Includes $59,118,000 noncompetitive tenders accepted at the average price c)f 92.30:5
These rates are on a bank discount basis. The equivalent coupon issue yields are
8.27~ for the 273-day bills, and 8.17% for the 365-day bills.
REASURY DEPARTMENT
/ / ---1
$
WASHINGTON. D.C.
November 26, 1969
(OR 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
$ 3,000,000,000, or thereabouts, for cash and in exchange for
Treasury bills maturing December 4, 1969,
in the amount of
$ 2, 9 3 , 7 6 7 ,
as follow s :
°
°°°,
91 -day bills (to maturity date) to be issued December 4, 1969,
in the amount of $ 1,800,000,000, or thereabouts, representing an
additional amount of bills dated September 4, 1969,
and to
nature March 5, 1970,
originally issued in the amount of
$1,201,020,000,
the additional and original bills to be
freely interchangeable.
182 -day bills, for $1,200,000,000,
:iated December 4, 1969,
and to mature
or thereabouts, to be
June 4, 1970.
The bills of both series will be issued on a discou~t basis under
:ompetitive and noncompetive bidding as hereinafter provided, and at
naturity their face amount will be payable without interest. They
"ill be issued in bearer form only, and in denominations of $1,000,
?5,000, $10,000, $50,000, $100,000, $500,000 and $l,OOO~OOO
(maturity value).
Tenders will be received at Federal Reserve Banks and Branches
Ip to the closing hour, one-thirty p.m., Eastern Standard
:ime, Monday, December 1, 1969.
Tenders will not be
~eceived at the Treasury Department, Washington.
Each tender must
le for an even multiple of $1,000, and in the case of competitive
:enders the price offered must be expressed on the basis of 100,
lith not more than three decimals, e. g., 99.925. Fractions 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
teserve Banks or Branches on application the refor.
Banking institutions generally may submit tenders for account of
:ustomers provided the names of the customers are set forth in such
:enders. Others than banking institutions will not be permitted to
:ubmit tenders except for their own account. Tenders will be received
lithout deposit from incorporated banks and trust companies and from
K-284
-
L
-
responsible and recognized dealers in investment securities. Tenders
from others must be accompanied by payment of 2 percent of the face
amount of Treasury bills applied for) unless the tenders are
accompanied by an express guaranty of payment by an incorporated bank
or trust company.
Immediately after the closing hour, tenders will be opened at
the Federal Reserve Banks and Branches, following which public announcement will be made by the Treasury Department of the amount and price
range of accepted bids. Those submitting tenders will be advised
of the acceptance or rejection thereof. The Secre tary 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 December 4, 1969, in
cash or other immediately available funds or in a like face amount
of Treasury bills maturing December 4, 1969.
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. Accordingl,7 , the owner of
Treasury bills (other than life insurance companies) issued hereunder
need include in his income tax return only the difference between
the price paid for such bills, whether on original issue or on
subsequent purchase, and the amount actually received either upon
sale or redemption at maturity during the taxable year for which the
return is made, as ordinary gain or loss.
.)
Treasury Department Circular No. 418 (current revision) and this
notice prescribe the terms of the Treasury bills and govern the
conditions of their issue. Copies of the circular may be obtained
from any Federal Reserve Bank 050§ranch.
TREASURY DEPARTMENT
II
~
WASHINGTON, D.C.
November 28, 1969
FOR LMMEDIATE RELEASE
SECRETARY KENNEDY SCHEDULED TO GO TO EUROPE
Secretary of the Treasury David Kennedy is scheduled
to attend the annual ministerial meetings of the North Atlantic
Treaty Organization in Brussels next week.
He will take advantage of his presence in Europe to
visit a number of his counterparts and others. In addition
to Belgium, the Secretary plans visits to the Netherlands,
the United Kingdom, Germany, France, and Italy. He will
leave Washington with Secretary of State William Rogers on
December 2to attend the NATO meeting and will return
December 14.
Secretary Kennedy looks upon the visit as an opportunity
to emphasize the importance of sound financial planning to
the NATO alliance, as well as to exchange views with Finance
Ministers and Central Bank Governors on the general
international monetary outlook.
In Brussels he plans to meet with Baron Snoy et D'Oppuers,
Minister of Finance, and Hubert Ansiaux, Governor of the
Belgian National Bank. He will also see Jean Rey, President
of the Commission of the European Communities., and
Raymond Barre, Vice Presi~ent of the Commission responsible for
economic· and financial affairs.
In the Netherlands he will meet with Hendrikus Witteveen,
Minister of Finance, and J.Zijlstra, President of the
Netherlands National Bank.
In London he expects to see Prime Minister Harold Wilson,
and Chancellor of the Exchequer Rc;>y Jenkins.
K-285
- 2 In Germany he plans to meet with Karl Schiller,
Minister of Economics; Alex Moeller, Minister of Finance,
and Karl Blessing, President of the German Bundesbank.
In Paris, ~eetings have been arranged with Valery Giscard
D'Estaing, Minister of Economy and Finance, and Oliver Wormser,
Governor of the Bank of France, as well as with Emile Van Lennep,
Secretary General of the Organization for Economic Cooperation
and Development.
While in Rome he will see Emilio Colombo, Minister
of the Treasury, and Guido Carli, Governor of the Bank of
Italy.
Under Secretary of the Treasury for Monetary Affairs
Paul A. Volcker will accompany the Secretary on his trip.
000
, I
\.
TREASURY DEPARTMENT
--
WASHINGTON, D.C.
November 28, 1969
FOR IMMEDIATE RELEASE
TREASURY TERMINATES GOLD DEPOSITS AT THE
MINTS FOR EXCHANGE
The Treasury Department announced today that after
close of business on December 31, U.S. mints and assay
offices will no longer accept gold exchange deposits.
The decision was made, Treasury said, because it
has been determined that private refineries have the
capacity to fulfill the refinery needs of industrial users
of gold, and it is not necessary for Treasury to maintain
this service.
Under the present exchange program, Industrial
users of gold, upon payment of a fee have been able to
deposit gold with the Treasury -- usually in the form of
scrap -- and receive an equal amount of fine gold in return.
For all extents and purposes, Treasury purchases
and sales of gold in the private market ended when the
United States in March 1968 -- along with other major
Western nations -- agreed to segregate monetary gold
transactions from private gold transactions. However,
Treasury continued to accept gold exchange deposits pending
a study of the availability of private refinery capacity in
the United States. The study showed that private capacity is
now fully adequate to fulfill the refinery needs of
industrial users of gold and Treasury should no longer
maintain this service.
000
K-286
TREASURY DEPARTMENT
WASHINGTON. D.C.
:>R RELEASE 6:30 P.M.,
onday, December 1.L.._1969.
RESULTS OF 'mEASURY' S WEEKLY BILL OFFERING
The 'lTeasury Department announced that the tenders for two series ot Treasury
ills, one series to be an additional issue ot the bills dated September ~, 1969, and the
ther series to be dated December 4, 1969, which were offered on November 26, 1969, were
pered at the Federal Reserve Banks today. ~nders were invited tor $1,800,000,000,
r thereabouts, of 91-day bills and for $1,200,000,000, or thereabouts, at 182-day
111s. The details of the two series are as tallows:
WGE OF ACCEPTED
)MPETITIVE BIDS:
High
Low
Average
91-day Treasury bills
maturin~ March 5 z 1970
Approx. Equiv.
Price
Annual Rate
98.132
7.39~
98.109
7.481~
98.116
7.453~
11
182-day Treasury bills
June
1970
Approx. Equiv.
Price
Annual Rate
7.552~
96.182
96.132
7.651~
96.151
7.613~
maturin~
'z
!I
Y
~
Excepting 1 tender af $200,000
of the amount of 91-day bills bid tor at the low price was accepted
l7i of the amount of 182-day bills bid tor at the low price was accepted
72~
)TAL TENDERS APPLIED FOR AND ACCEPTED BY FEDERAL RESERVE DISTRICTS:
District
Boston
New York
Philadelphia
Cleveland
Richmond
Atlanta
Chicago
St. Louis
Minneal?olis
Kansas City
Applied For
42,424,000
~
2,113,535,000
39,637,000
33,816,000
26,531,000
42,208,000
262,303,000
44,969,000
30,742,000
32,762,000
~llas
28,142,000
San Francisco ~70, 737,000
'roTALS
$2,867,806,000
Accel!ted
$ 32,424,000
1,190,895,000
24.,627,000
32,966,000
26,521,000
28,183,000
248,223,000
39,369,000
26,102,000
32,762,000
18,862,000
99 z397, 000
Applied For
Acce;Eted
$
8,956,000
8,956,000
~
79~,539,000
1,615,234,000
14,154,000
24,155,000
40,104,000
41,554,000
31,483,000
31,483,000
27,283,000
40,569,000
107,433,000
140,433,000
29,769,000
32,799,000
16,599,000
20,259,000
27,278,000
28,281,000
15,584,000
25,414,000
86,868,000
142,531,000
$1,800,331,000 ~
$2,151,668,000
$1,200,050,000 ~
Includes$346,417,000 r.~nco~titive tenders accepted at the average price of 98.116
Includes$259,909,000 noncompetitive tenders accepted at the average price of 96.151
These rates are on a bank discount basis. The equivalent coupon iSlue yields are
7.7~ for the 9l-day bills, and 8.03~ for the l82-day bills.
rREASURY DEPARTMENT
WASHINGTON. D.C.
December 1, 1969
FOR IMMEDIATE RELEASE
STATEMENT BY TREASURY SECRETARY DAVID M. KENNEDY
ON PRESIDENT NIXON'S SIGNING INTO LAW
NEW SAVINGS BOND LEGISLATION
The president today signed into law legislation
permitting interest rates on U.S. savings bonds to be increased
to 5 percent when held to maturity.
This 5 percent rate
assures a more equitable return to the millions of purchasers
of savings bonds.
It also will permit these bonds to continue
to make an important contribution to a sound structure of the
public debt, by enabling them to remain competitive with
other types of savings instruments.
All outstanding series E and H savings bonds now
yielding less than 5 percent to their maturity, regardless
of when they were purchased or in what maturity period they
are, will have their interpst increased to yield a full
5 percent from June 1, 1969, to their maturity. This means
there is no reason for any savings bond owner to redeem
outstanding savings bonds for new ones.
Sales of freedom shares, which already pay 5 percent
interest , will be discontinued after June 30, 1970.
The delay I:l7ill give employees who buy freedom shares through
payroll ~avings plans an opportunity to change their
deduction programs to savings bonds in an orderly
manner.
The continued purchase of savings bonds is especially
important today when h'e are engaged in an all-out effort
to control inflation and restore health to our economy.
The new interest rate of 5 peLcent should provide an
added incentive to those Americans h 7ho find savings bonds
an attractive and convenient way to provide for their own
financial security and contribute to the sound financing of
the nation's government.
000
K-287
SUMMARY OF WEIDENBAUM SPEECH
TO 46th ANNUAL CONGRESS OF CITIES
Assistant Treasury Secretary Murray L. Weidenbaum presents
answers to the most frequently raised questions on the
Administration's revenue-sharing plan.
1.
He points out that every city and county automatically
gets a share of the Federal funds. "We have worked
out a guarantee which both protects the cities and
maintains the Federal form of government."
2.
"Nearly every large city will receive proportionately
more funds than its smaller neighbors. However, the
large central cities will get more revenue-sharing
money, not just because they are bigger, but because
they bear a larger fiscal burden."
3.
"So-called suburban 'tax havens' with low tax collections
and a narrow range of functions will receive very small
shares. Cities with heavy program responsibilities and
hence large tax revenues will get larger amounts, even
if their populations are the same."
4.
"This Federal money will be far different from any
Federal money currently b~ing disbursed to our states
and cities. It does not come with specific instructions
on how to spend the money. Instead, it comes with a
challenge -- that you spend the money wisely."
DEPARTMENT OF THE TREASURY
Washington, D. C.
FOR RELEASE UPON DELIVERY
REMARKS OF THE HONORABLE MURRAY L. WEIDENBAUM
ASSISTANT SECRETARY OF THE TREASURY FOR ECONOMIC POLICY
BEFORE THE 46th ANNUAL CONGRESS OF CITIES
SAN DIEGO, CALIFORNIA
WEDNESDAY, DECEMBER 3, 1969, 2:00 P.M., PST
THE STAKE OF THE CITIES IN REVENUE SHARING
I do not come here to present a panacea to cure all
city ills.
I do not have with me the Twentieth Century
version of snake oil.
I do welcome the opportunity to
explain a forward-looking proposal of the Nixon Administration
which should be of definite value to local governments and
particularly to urban areas.
The Administration's proposal to share Federal income
tax revenues with state and local governments is the financial
heart of what the President calls the "New Federalism."
Every mayor with whom I have talked in recent months is
familiar with the broad outlines of the proposal, so I would
like to turn immediately to the major questions that have
arisen.
To be sure, I would be pleased to provide your offices
with the detailed analyses of the revenue-sharing plan.
Legislation to put it into practice has been introduced in
K-288
- 2 -
the Senate by Senator Howard H. Baker, Jr., and co-sponsored
by 32 other Senators (S. 2948) and in the House by Congressman
Jackson E. Betts and over 30 other Congressmen (H.R. 13982).
Here are my answers to the questions most frequently
asked concerning the Administration's revenue-sharing proposal.
Does all the money go to the state governments exclusively?
The simple answer is "no".
Each city gets a portion
of the revenue-sharing fund automatically.
We have worked
out a guarantee which both protects the cities and maintains
the Federal form of government.
It is true that, initially,
the U. S. Treasury makes payments to the states but -- and
this is a fundamental "but" -- each state must, in order to
qualify for the Federal money, pass on to each city and county
a predetermined share of the Federal money.
Certainly, many governors would have preferred to have
discretion over the amounts they share with the cities.
Indeed,
many earlier revenue-sharing proposals left it that way.
Of
course, many mayors, in contrast, would have liked to have
a direct pipeline to the Federal Treasury.
However, in numerous meetings with mayors and governors,
we emphasized the critical importance of developing a plan
which has the support of both the state governments as well
as the local governments.
The Administration's revenue-
sharing proposal -- with its mandatory pass-through to all
cities and counties -- is that middle ground where both state
and local interests are adequately and fully protected.
I
,I
)
(
3 -
Does the Administration proposal provide enough funds for
our large urban centers?
The amounts provided are relatively quite generous.
I feel obliged to point out that in developing our local
pass-through provision we had to discard many easy-sounding
solutions as unworkable.
For example, you cannot use
a simple per capita distribution among local governments
because of the overlapping jurisdictions of cities and
counties.
The approach that we have adopted is to distribute
revenue-sharing funds within a state to all general-purpose
governments in proportion to each unit's general revenue
collections.
This method not only takes account of the
many differences within states and between governments; it
also
~istributes
revenue-sharing funds in proportion to the
relative activity of each local government.
So-called suburban "tax havens" with low tax collections
and a narrow range of functions will receive very sm81l shares.
In contrast, cities with heavy program responsibilities and
hence large tax revenues will get larger amounts, even if
their populations are the same.
In practice, large cities raise most of the lucRllyraised revenues, and they will receive most of the locallyshared revenues under the Administration's proposal.
In
fact, nearly every large city will receive not only absolutely
- 4 -
more funds, but also proportionately more funds than its
smaller neighbors.
However, the large central cities will
get more revenue-sharing money not just because they are
bigger, but because they bear a larger fiscal burden.
For example, New York City raised $404.81 per capita in
general revenues in 1967-68 (the latest figures available),
while New Rochelle raised $152.55 and Mount Vernon $121.89.
Similar relationships hold for Boston, Chicago, Sah Francisco,
Seattle, Newark, Philadelphia, and other large central cities.
ID fact, for all cities in the United States of one
million or more, the average per capita revenues were $255.95,
compared to $130.14 for cities with population of 200,000 to
300,000 and $78.74 for cities of less than 50,000 (see table).
Average Per ca¥ita Revenues by City Size, 1967-68
Genera Revenues From Own Sources
City Size
Per Capita Revenues
1,000,000 or more
500,000 - 999,999
178.11
300,000 - 499,999
138.79
200,000 - 299,999
-130.14
100,000 - 199,999
133.11
50,000 -
Source:
$255.95
99,999
124.11
Less than 50,000
78.74
U. S. Bureau of the Census
- 5 -
Is it desirable to share revenues with all cities and
counties, regardless of size?
Yes, we believe that all local governments are faced
with fiscal pressures and that all deserve specific inclusion
in a general assistance program.
Also, we were unable to find an acceptable or logical
point at which direct revenue-sharing funds should be denied
a local government.
Some proposals would exclude all cities
and counties of less than 50,000 population from direct
sharing.
But over 45 percent of all city residents and
27 percent of all county residents live in such jurisdictions,
and it would be patently unfair to exclude such a large portion
of our population.
Is the Administration proposal large enough?
This is not really a substantive objection to the basic
concepts of the proposal, but rather a disappointment over
its size.
I can sympathize with such disappointment, but do
not believe it is really warranted.
Given the current and near-term budget outlook, we
realistically faced two alternatives for introducing revenue
sharing: (1) either delay introducing the plan until the
funds were available to begin a large-scale program of
revenue sharing, or (2) establish the program now -- if only
on a modest scale -- and provide for phased increases in
- 6 -
funding as budget pressures permit.
action was clearly preferable.
for limited Federal revenues, it
The second course of
With all the competing claims
1S
important to establish
the principle of revenue sharing as soon as is practicable.
Even with the "phase-in" approach to introducing
revenue sharing, the amounts involved are not trifling.
For
the first six months of 1971, $500 million will be shared.
This will increase to $1.5 billion in the fiscal year 1972,
and grow to $5.1 billion by fiscal 1976.
These figures
represent substantial and achievable distributions.
We have
deliberately promised only what could be afforded, so that
no false expectations might be raised.
Finally, a modest
but prudent start now of a certain amount need not preclude
increased amounts later if conditions warrant.
Some perspective may also be useful here.
The taxes
that state and local governments collect from their own
sources have been growing by about $10 billion a year.
The
infusion of Federal revenue-sharing funds -- particularly
when we reach the full-year effect of $5 billion -- will
represent a most substantial increase in the financial intake
of state and local treasuries and hence of the fiscal resources
available for local programs.
Are state and local governments competent to use revenuesharing funds effectively?
This question presents a real challenge to you.
Personally, I view revenue sharing as an experiment.
I hope
I)
,
~
- 7 and believe that it will work.
I certainly think that
strengthening our Federal form of government by helping
state and local governments is an objective worthy of
several billion dollars a year.
Frankly, I am not certain that all of the money will
be used wisely.
Neither am I certain that all direct Federal
spending or indeed that all private expenditure is sensible.
You probably have heard, as I have, cynics express the
sentiment that the money will be used to pave the mayor's
driveway and, if enough is left over, to fancy up the sidewalks in front of the houses of the city councilmen.
I do believe that the ultimate amounts that the Congress
will be willing to appropriate for revenue sharing will depend
on how effectively the funds are used.
This is one of the
major reasons that we have a reporting requirement in the
Administration bill, so that Treasury can keep the President
and the Congress informed as to where the money is going.
More than money is transferred to state and local
governments under our revenue sharing plan.
Unlike the
existing grant-in-aid system, decision-making responsibility
for the use of these funds is also delegated.
State and
local officials, not Federal agencies, will establish
priorities and allocate expenditures in accordance with
the needs of their jurisdictions.
The ultimate success
of revenue sharing, therefore, will depend on the ability
- 8 -
of state and local governments to make the most efficient
and judicious use of these funds.
This, in turn, will
depend largely on the potential sensitivity of state and
local officials to the legitimate needs and interests of
their constituents.
This Administration maintains a large measure of
confidence in the ability and the willingness of the other
levels of government to respond positively to
tho~particular
local problems which require public involvement.
A major
purpose of revenue sharing is to enhance the financial
ability of these governments to make such responses.
We
recognize that all governments, including the state and
local governments, are beset with problems.
But we are
convinced that the potential for effective management of
social and public systems is extremely high at the local
levels.
How then best to realize this potential?
Unlike
the Federal Government, your problems are not those of
sheer size -- rather you must seek to rekindle interest in
local government.
For too long, talented people interested
in government service have journeyed to Washington.
State
or local government was too often dismissed as irrelevant.
Only later did these people realize that in spite of all
the money and publicity in Washington, the really hard
practical tasks are at the more local level.
,.
- 9 -
The Administrationts
revenue~sharing
proposal does not
require the states or cities to use the money to increase
management training or personnel upgrading, although some
people urged us to earmark a portion of the funds for such
purposes.
However meritorious such suggestions may be, we
have firmly decided against earmarking any of the revenues.
However, there are indications that there is developing
a "skill mismatch" as well as a "fiscal mismatch" between
the Federal and state-local governments.
Not enough good
people have been moving into city government service.
What
is needed is a new sense of involvement in local government.
Fortunately, there are increased signs of the growing
professionalism in the area of city government.
But we
need far more of this awareness, of this professionalism.
Fortunately, colleges and universities across the Nation
are now beginning to design graduate programs geared
specifically toward training young men and
wom~n
for
professional careers in state and local governments.
The
opportunities would seem to be very great in this area.
Does revenue sharing separate the responsibility for raising
taxes from the
~ct
of spending tax revenues?
To some extent, the answer is in the affirmative.
How-
ever, the argument about the separation of tax and spending
responsibility is weakened when we examine some obvious
facts.
For one thing, at the national level, we have the
- 10 -
precedent of the Federal Government already sharing about
$25 billion a year with state and local governments, in the
form of categorical grants-in-aid.
Furthermore, at the state level, we have the precedent
that every state shares revenues with its local governments,
many in a completely unrestricted manner.
Any adverse
criticism that I hear of this arrangement usually comes
down to the cities desiring a more generous sharing arrangement.
In good measure, the argument about the separation
of responsibilities seems to me to be very artificial in
its division of the public sector into separate water-tight
compartments.
(1)
If you grant the three assumptions that
the Federal Government is a relatively efficient (i.e.,
low administrative cost) tax collector, (2) the Federal
income tax is a relatively equitable levy, and (3) state
and local governments are best equipped to determine local
needs and administer local programs, then the conclusion
is that some amount of revenue sharing makes good political,
social, and economic sense.
Conclusion
We have been pleased by the strong support that the
Administration's revenue-sharing proposal has received from
many local groups and officials.
I believe that an objective
- 11 -
examination of your best interests -- your enlightened
self-interest -- will reveal that the enactment of a Federal
revenue-sharing plan will be a real help in the perennial
fiscal squeeze faced by our Nation's cities.
But we should not forget that this Federal money will
be far different from any Federal money currently being
disbursed to our states and cities.
It does not come with
specific instructions on how to spend the money.
Instead,
it comes with a challenge -- that you spend the money wisely.
000
Il~
TREASURY DEPARTMENT
WASHINGTON, D.C.
December 1, 1969
FOR IMMEDIATE RELEASE
In response to inquiries the Treasury today released
a copy of a letter sent to Russell B. Long, Chairman of
the Senate Finance Committee by Edwin S. Cohen, Assistant
Secretary for Tax Policy. The letter concerns
Senator Albert Gore's proposals dealing with increases
of the personal exemption in substitution for standard
deduction increases and tax rate reductions contained
in H.R. 13270 as reported by the Senate Finance
Committee.
A copy of the letter is attached.
Attachment
K-289
THE DEPARTMENT OF THE; TREASURY
WASHINGTON. D.C.
I':;TANT SC(f;LTARY
20220
December 1, 1969
Dear Mr. Chairman:
In accordance with your request, we are writing to
summarize the results of our studies of the proposals of
Senator Gore for an increase in the personal exemption and
a flat $1,000 standard deduction in lieu of the larger standard
deductions and the rate reductions provided in the bill as
reported by the Committee on Finance.
We join with the Senate ~inance Committee in preferring
the provisions of the pending bill to the amendment proposed
by Senator Gore. The analyses and computer studies which lead
us to agree with the conclusions you yourself reached in your
eloquent address to the Senate upon the opening of debate on
the bill may be briefly stated as follows:
1. Fiscal Considerations. Senator Gore's first proposal
is for a $1,000 personal exemption and a flat standard deduction of $1,000 (hereinafter called the Gore $1,000 plan).
Adoptio" of such an amendment T>7ould increase the net longterm revenue loss from $2.3 billion under the Committee bill
to $8.1 billion a year. We have already expressed serious
concern about the $2.3 billion long-term annual revenue loss
under the bill in its present form; such a large further
increase could not be countenanced.
Senator Gore's alternate plan involving a personal
exemption of $900 would produce a long-term annual revenue
loss of $5.3 billion. This would be $3 billion more than the
Committee bill -- again a loss that could not be countenanced.
Senator Gore's further alternate proposal for a personal
exemption of $800 (hereinafter called the Gore $800 plan)
would produce a net revenue loss in the long run substantially
the same as that under the Committee bill. However, for the
calendar years 1970 and 1971 the Gore $800 plan would lose
- 2 -
approximately $4Bbillion in revenue as contrasted with the
Committee bill. This loss would be reflected in fiscal years
as follows:
Year Ended
June 30, 1970
Lpss in Revenue
$0.9 billion
June 30, 1971
2.5 billion
June 30, 1972
1.4 billion
Total
$4.8 billion
In view of current budget restrictions and the intense need
for fiscal restraint to combat inflation, we believe such a
large loss would be most unwise.
2. Basic Concept of the Personal Exemption. In preparing the Administration's proposal for a Low Income Allowance,
we adopted the concept that through the standard deduction
and the personal exemption the income tax law should impose
no tax on persons whose income is below the poverty level.
We found that by current HEW standards the minimum income
needed to support a single person is approximately $1,700
and that the minimum additional income needed for additional
persons in the family rises about $600 per person.
This is
what the Committee bill allows -- $1,700 income without tax
for a single person, $2,300 for a married couple without
children, $2,900 for a married couple with one child, etc.,
rising $600 for each additional child. These are the levels
at which the tax is zero under the Committee bill.
It is true without doubt that most persons will spend
more than $600 on the maintenance of each additional member
of the family. But when incomes rise above the minimum level
we believe it is then appropriate for the persons involved
to begin to contribute something to the cost of maintaining
the Federal Government. Present law imposes a high tax rate
upon the incomes above the exempt minimum. We believe that
.,
I
-
efforts should be concentra.ted, through increases in the
staac·'::;';:L2 decJucti_on CHid '-: :"'--Uc ', ::-cduCt_~oLl in the tax rates,
UpOi.1 :c,:;jucing the ttlX f'&yill~nts ;::-equired upon incomes above
the exempt minimum. The Committee bill proceeds on this
theory and we believe that it is sound and desirable policy.
Senator Gore's proposal would exempt from tax an amount
per person that substantially exceeds the minimnm Amonnt needed
to sp~tain each individuol. This would require foregoing
:'~ - .cases in the stan.dard deduction above $1,000 and foregOhlg rate reductions, thus imposing a greater tax burden
C~ incomes above the levels set under his proposals.
We
believe it is fairer and sounder policy to exempt only the
an;;j~nts needed as a minircUitl living standard and to reduce
the burdens on mnounts above the minimum.
3. Shift in Tel.?: _Burden to Single Persons and Smaller
Fc:=5. ~-'___ ~
Sen2 tor Gore! s $800 plan \vould significantly shift
::h-,· t8-~C t'lrden from large f?-T.·ilies to single persons and
smallei-
"::.lillilic::.~.
Under th3
1)1.:11.1
--
(a) Persons ~lith_ three or fewer exemptions
(single persons and married couples with no children
or one dependent child) would pay additional taxes of
$1.2 billion.
(b) Persons with four exemptions (generally
married persons with two dependent children) would
have their taxes reduce~ by $0.2 billion.
(c) Persons with five or more exemptions
(generally married persons with three or more
dependent children) would obtain tax reductions
of almost $1.0 billion.
Thus the burden of supporting children above the minimum
HEW standards would be shifted from the large families which
have the children to the single persons and smaller families.
Through appropriations for education and other purposes the
- 4 costs of raising large families is already borne to a considerable extent by those who did not beget the children.
We believe the Committee has acted wisely in lowering the
burden on all taxpayers whose incomes are above the minimum
HEW levels, particularly upnn those whose incomes are
modestly above such levels, rather than distributing the
tax relief by size of families.
The average additional tax payable by persons with
less than four exemptions under the Gore proposal as compared
with the Committee bill would be:
Adjusted Gross
income
$ 5,000
7,500
10,000
12,500
15,000
17,500
20,000
25,000
Percent of Additional Tax
Married-no
Married-one
Single Persons
children
child
+ 2.7%
+ 4.1%
+11.7%
+11.9%
+ 8.9%
+ 5.6%
+ 3.4%
+ 4.3%
.'~
.-
.'~
.-
+ 7.8%
+ 9.0%
+ 6.7%
+ 4.8%
+ 2.9%
+ 300%
*
*
+ 4.5%
+ 6.4%
+ 4.6%
+ 2.6%
+ 1.5%
+ 1.4%
(*Less tax under the Gore proposal. The table is based upon
personal deductions of 10 percent of adjusted gross income.)
/11
- 5 4.
Loss in Simplification of the Tax System. The
Committee bill through the Imv income allowance removes 506
million persons from the tax rolls and through the standard
deduction increases permits 11.6 million persons to shift
from itemizing personal deductions to the simple standard
deduction. This raises the percentage of total taxable returns
that can be filed on the simplified standard deduction basis
from 58 percent to 74 percent.
The Gore $800 plan removes 8.4 million persons from the
tax rolls but permits only 4.4 million taxable persons to
shift from itemizing deductions to the standard deduction.
Thus the Gore plan forfeits the benefit of simplification for
a large number of taxpayers and for the Internal Revenue
Service.
5. Reduction in the Tax ~ase. The Committee bill,
primarily through the low income allowance, reduces the
taxable income base ~o which the specified rates of tax are
applied from a present aggregate of $372 billion at present to
$350 billion. The tax rate reduction in the bill does ~ot
lovler the taxable income base.
The Gore $800 plan, by confining the relief to the
standard deduction and the personal exemption, would reduce
the taxable income base to $327 billion, some $23 billion
below the Committee bill level and $45 billion below the
current level. This further reduction would seriously affect
our fiscal flexibilityo If for any reason tax increases
should become necessary in the future, the smaller tax base
would make larger increases in tax rates necessary to raise
the same amount of additional revenue. The effect would be
to shift more of the burden of any future tax increases to
the middle income groups, where the bulk of the taxable
income base is concentrated. We believe that greater flexibility for future chHnges in the tax structure can be provided
if only the minimum sustenance levels are removed from the
tax base.
- 6 -
6. Overall Impact of the Bill and the Gore $800 Plan.
Taking into account both the reform and the relief provisions,
the Committee bill reduces the existing tax burden by about
66 percent on persons with incomes below $3,000 and grants
decreasing percentage reductions as income levels rise until
it increases the tax by 2.6 percent on incomes above $100,000.
Senator Gore's $800 plan \vould generally follow the same
pattern, but with somewhat further reductions in income
levels below $10,000 and lesser reductions above the $15,000
level, and a 10.3 percent increase on incomes above $100,000.
The overall impact of the Committee bill and Senator Gore's
proposal is shmVTl belovJ:
Adj us ted gros s
income class
0 - $3,000
3,000 - 5,000
5,000 - 7,000
7,000 - 10,000
10,000 - 15,000
15,000 - 20,000
20,000 - 50,000
50,000 -100,000
100,000 and over
$
Total
Committee bill
increase or decrease
from J2resent lm-J
Gore $800 plan
increase or decrease
from Eresent law
-66.1%
-30.3%
-17 . O/~
-10.9%
-10.3%
8.6%
- 7.2%
- 4.8%
+ 2 'clio
+10.3%
-10.1'10
-10.0%
-
-72.5%
-36.2%
-23.0%
-16.2%
-10.570
- 7.5%
- 5.0%
-
0.6%
---
We believe that the Corrnuittee bill allocates the overall
relief with proper emphasis on incomes below $10,000.
Senator Gore's proposal would not be significantly different
in overall effect except in its impact on persons with
above $50,000. In that category the Committee bill has
taken important action to close loopholes and reduce or
eliminate tax preferences in the upper brackets, and we
believe that having done so it is appropriate for the bill
to allocate some part of the tax relief to persons in the
11 ~
J
- 7 higher levels. This was done in the Revenue Act of 1964 and
earlier laws when the tax burden was significantly reduced,
and we believe it 'ivould be unfair and unwise to alter that
course in the present bill.
Our studies lead us to conclude that the Comnittee bill
avoids the added fiscal problE'ms of Senator Gore's proposal;
proceeds upon a sounder theory in exempting entirely from
tax only the incolOe nee,d~d Lo maintaiiJ nd.nilllum living standards;
avoids shifting the burden of tax from larger families to
single persons and small families; achieves greater
simplification of the tax system; avoids an unwarranted
narrowing of the tax base and achieves a more equitable
and sounder allocation of the tax reliefo
For these reasons the Treasury strongly supports the
provisions of the Con~ittee bjll in preference to Senator
Gore's proposals.
Sincerely yours,
Edwin S. Cohen
Assistant Secretary
The Honorable
Chairman Russell B. Long
Senate Finance Committee
United States Senate
Washington, D.C. 20510
REASURY DEPARTMENT
WASHINGTON. D.C.
December 3, 1969
FOR IMMEDIATE RELEASE
DECISION, MADE ON AMINOACETIC ACID (GLYCINE)
UNDER THE ANTIDUMPING ACT
The Treasury Department announced that a determination
has been made that Aminoacetic Acid (Glycine) from Japan
is not being, nor likely to be, sold at less than fair
value v1thin the meaning of the Antidumping Act, 1921,
as amended (19 U.S.C. 160 et leq.).
A tentative determination vas published in the Federal
Regi~ter
on October 7, 1969.
This notice allowed
30 daJs for the submission of written views or requests
for an opportunity to present views orally.
No submissions
or requests vere received.
During the period October 1, 1967, through October
31, 1968, Aminoac~tic Acid (G11cine) valued at apprOximately
$119,800 vas imported trom Japan.
subsequent to this period.
II II I
There have been no imports
WASHINGTON, D.C.
December 3, 1969
FOR IMMEDIATE RELEASE
DECISION MADE ON FIXED RESISTORS OF CARBON COMPOSITION
UNDER THE ANTIDUMPING ACT
The Treasury Department annQunced tods¥ that it has
investigated charges of possible dumping of fixed resistors
of carbon composition from Japan.
A notice announcing a tentative determination that
this merchandise is not being, nor likely to be, sold at
less than fair value within the meaning of the Antidumping
Act will be published in an early issue of the Federal Register.
During the period May 1, 1967, through September 30 ,
1969, fixed resistors of carbon composition valued at ap.
proximately $3,000,000 were imported from Japan.
III
REASURY DEPARTMENT
WASHINGTON. D.C.
December 3, 1969
?OR IMMEDIATE RELEASE
TREASURY'S WEEKLY BILL OFFERING
The Treasury Department, by
:or two series of Treasury bills
?3,000,000,000, or thereabouts,
rreasury bills maturing December
?2,900,826,000,
as follows:
this public notice, invites tenders
to the aggregate amount of
for cash and in exchange for
11, 1969,
in the amount of
91 -day bills (to maturity date) to be issued December 11,1969,
~n the amount of $1,800,000,000,
or thereabouts, representing an
ldditional amount of bills dated September 11, 1969,
and to
lature March 12, 1970,
originally issued in the amount of
i1,20l:360,000,
the additional and original bills to be
:reely interchangeable.
182-day bills, for $1,200,000,000,
or thereabouts, to be
.ated December 11,1969,
and to mature June 11, 1970.
The bills of both series will be issued on a discount basis under
ompetitive and noncompetive bidding as hereinafter provided, and at
laturity their face amount will be payable without interest. They
'ill 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
p to the closing hour, one-thirty p.m., Eastern Standard
ime, Monday, December 8, 1969.
Tenders will not be
eceived at the Treasury Department, Washington. Each tender must
e for an even multiple of $1,000, and in the case of competitive
enders the price offered must be expressed on the basis of 100,
ith not more than three dec"imals, e. g., 99.925. Fractions 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
ustomers provided the names of the customers are set forth in such
enders. Others than banking institutions will not be permitted to
ubmit tenders except for their own account. Tenders will be received
ithout deposit from incorporated banks and trust companies and from
:-290
- 2 -
responsible and recognized dealers in investment securities. Tenders
from others must be accompanied by payment of 2 percent of the face
amount of Treasury bills applied for, unless the tenders are
accompanied by an express guaranty of payment by an incorporated bank
or trust company.
Immediately after the closing hour, tenders will be opened at
the Federal Reserve Banks and Branches, following which public announcement will be made by the Treasury Department of the amount and price
range of accepted bids. Those submitting tenders will be advised
of the acceptance or rejection thereof. The Secretary of the
Treasury expressly reserves the right to accept or reject any or all
tenders, in whole or in part, and his action in any such respect
shall be final. Subject to these reservations, noncompetitive tenders
for 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 December 11, 1969 , in
cash or other immediately available funds or in a like face amount
of Treasury bills maturing December 11, 1969. Cash and exchange
tenders will receive equal treatment. Cash adjustments will be made
for differences between the par value of maturing bills accepted in
exchange and the issue price of the new bills.
The income derived from Treasury bills, whether interest or
gain from the sale or other disposition of the bills, does not have
any exemption, as such, and loss from the sale or other disposition
of Treasury bills does not have any special treatment, as such,
under the Internal Revenue Code of 1954. The bills are subject to
estate, inheritance, gift or other excise taxes, whether Federal or
State, but are exempt from all taxation now or hereafter imposed on
the principal or interest thereof by any State, or any of the
possessions of the United States, or by any local taxing authority.
For purposes of taxation the amount of discount at which Treasury
bills are originally sold by the United States is considered to be
interest. Under Sections 454 (b) and 1221 (5) of the Internal
Revenue Code of 1954 the amount of discount at which bills issued
hereunder are sold is not considered to accrue· until such bills are
sold, redeemed or otherwise disposed of, and such bills are excluded
from consideration as capital assets. Accordingly, the owner of
Treasury bills (other than life insurance companies) issued hereunder
need include in his income tax return only the difference between
the price paid for such bills, whether on original issue or on
subsequent purchase, and the amount actually received either upon
sale or redemption at maturity during the taxable year for which the
return is made, as ordinary gain or loss.
Treasury Department Circular No. 418 (current revision) and this
notice prescribe the terms of the Treasury bills and govern the
conditions of their issue. Copies of the circular may be obtained
from any Federal Reserve Bank 060~ranch.
TREASURY DEPARTMENT
/~7
WASHINGTON. D.C.
FOR IMMEDIATE RELEASE
December 3, 1969
UNITED STATES FOREIGN GOLD TRANSACTIONS
THIRD QUARTER 1969
The Treasury Department released figures today on
United States net monetarY gold transactions with foreign
countries and international institutions during July September 1969.
During this period the United States gold stock
increased by about $10 million, to $11,164 million.
Largest purchases were $16 million from Ireland and
$11 million from the Philippines, while the largest sales
were $10 million to
Argenti~a.
Also, a net of about $8
million was received as the result of transactions with
the International Monetary Fund.
The latter reflects
IMF gold transactions related to a large drawing on the
IMF by France.
In order to acquire currencies needed
for this drawing, the IMF sold gold to several member
nations including nearly $17 million to the United
States.
Part of the gold sold by the IMF, $9 million,
was withdrawn from the gold deposit with the united
States Treasury.
As of September 30, the IMP gold
deposit with the Treasury amounted to $219 million.
Detailed figures are shown in the attached table.
K-291
UNITED STATES NET l4CIiEl'AltY GOLD TRANSACTIONS WITH
FOREIGN COUNTRIES AND INTERNATICNAL INSTITUTlOOS
January l-September JO, 1969
(In millions of dollars at $35 per fine troy ounce)
Third
Area and Country
!ell:liern EJ,l,!:Ql;le
Denmark
France
Greece
Iceland
Ireland
Italy
Switzerland
Turkey
Yugoslavia
Total
Lit!n Amel:;i.sa~
Argentina
Bolivia
Chile
Costa Rica
Dominican Republic
Ecuador
El Slavador
Guatemala
Haiti
Honduras
Nicaragua
Panama
Peru
Surinam
Total
+50.0
+25.0
+275.0
-D.5
*
*
-76.0
-25.0
...::.LQ
-52.0
-7.0
...::Q...2
+291.6
*
+16.0
-6.1
~
+9.0
-10.0
-D.l
-0.6
-D.l
-D.l
+4.0
-0.1
-D.l
-D.l
-D.l
-0.1
-0.1
-0.1
-D.l
*
-0.1
-4.2
-5.1
*
*
-3.3
-D.l
*
-1.4
-D.l
-D.l
-0.1
*
-1.8
-D.l
-0.1
*
*
-3.1
--6.6
~
-D.2
--15.4
Afghanistan
-D.l
-0.1
Burma
-D.l
*
-D.2
*
*
I3 J
Total
+25.0
+325.0
-0.5
-D.l
+16.0
-76.0
-25.0
-13.1
...:2&
+248.6
-10.0
-0.1
-3.8
-0.3
-D.4
+4.0
-D.3
-0.3
-D.l
*
-0.2
-4.3
-11.5
-±2....Q
-22.2
~
Ceylon
Cyprus
Indonesia
Nepal
Pakistan
Philippines
Singapore
Southern Yemen
Syria
Total
H~
Zei1g,ng
-0.4
-D.2
*
-0.4
-D.4
-0.4
*
-0.4
-0.4
-D.l
-D.2
-D.4
-1.3
*
..0.8
-0.2
+17.3
+11.3
+11.2
-1.2
:Q..J.
+4.6
-1.1
-=:Q..J.
+27.8
+9.8
*
~
*
*
-0.1
-D.l
-D.l
-D.l
-0.1
-D.l
-D.l
-0 01
-0.1
-0.1
-D02
*
*
-0.3
-0.3
-0.2
-D.l
-1.7
--1.0
-D.5
+7.9
+316.9
+10.2
+271.2
..0.8
!:Jl.~.2
!:lQ.~
t~:Z~.Q
-0.8
+35.3
+11.3
-1.2
+42.1
-1.1
~
Burundi
Central African Republic
Chad
Congo (Brazzaville)
Dahomey
Gabon
Guinea
Liberia
Mauritius
Morocco
Niger
Rwanda
Somalia
Sudan
Tunisia
Upper Volta
Total
m
TarAL
Domestic Transactions
Ig:!iAl. Il'.:!lDIiISOli2!l1l
*
*
-D.2
--0.8
-55.9
..0.8
-22.1
-0.1
-D.l
-D.l
-0.1
-0.1
*
*Under $50,000.
Figures may not add to totals because of rounding.
*
*
-0.2
*
-D.4
*
-D.5
-D.l
-0.1
*
~.l
-0.4
-1.1
-0.6
-D.2
*
....:Q.l
-3.6
+7.4
TREASURY DEPARTMENT
Washington, D. C.
FOR IMMEDIATE RELEASE
REMARKS OF THE HONORABLE PAUL A~ VOLCKER
UNDER SECRETARY OF THE TREASURY FOR MONETARY AFFAIRS
AT THE FIRST ANNUAL EUROPEAN INSTITUTIONAL INVESTOR CONFERENCE
THE SAVOY HOTEL, LONDON, ENGLAND
ON WEDNESDAY, DECEMBER 3, 1969
Capital Transactions, Balance of Payments
Equilibrium, and the Monetary System
During the early part of this year, when this conference was
organized, no official of the u.S. Treasury could in good conscience
have turned down an invi tation t.O appear. After all, investors
abroad -- and mostly in EuropA -- had in the course o~ 1968 invested
some $2 billion in American eq~}ities. That was an important factor
balancing our external payment~ last year, even in the face of sharp
deterioration in our trade accounts. Moreover, in the first quarter
of this year, foreign money po~red into our stock market at the
extraordinary rate of $3 billion a year.
By summer, all that had ch •. nged. The net flow had dwindled
toward zero.
I began to think t-re conference was unduly delayed
that somehow you were losing your enthusiasm.
I am comforted by the thought that at least a part of the
decline over the first half of the year in foreign purchases is said
to reflect the competitive attractions of the Euro-dollar market during
a period of stock market decline. But I must also admit that -- from
my parochial viewpoint -- Euro-dollars costing our balance of payments
10 percent or more are ha~dly an equal trade-off for more permanent
money looking to longer term rewards!
You have been listening to others better equipped than I to
appraise those potential rewards.
I will not trespass on their
ground, apart from making one general point. We look forward to
continuing flows of foreign risk capital into the United States in
the years ahead. We believe that expectation is warranted by the
long-run potential of the American economy: by the breadth, diversity,
and liquidity of our financial markets; and (not least) by the fact
that many of our leading corporations help provide the cutting edge
for technology and growth internationally.
- 2 -
That prospect must be placed in the larger perspective of
what seems to me an emerging North Atlantic market for capital.
This audience is living testimony that such a market already
exists. You, as I, are directly concerned with whether this
market will continue to prosper and grow. I want to examine with
you today some of the basic conditions that, in my opinion, must
be met if this bright promise is to materialize.
I recognize this is an area where our ability to look ahead
is notoriously poor. Theory and doctrine -- and even the statistics
are unsatisfactory. I may leave you with more questions than
answers. Nevertheless, I will plunge ahead in the conviction that
much more thinking needs to be done on the role of relatively free
international markets for capital in achieving our basic economic
objectives.
I have always been struck by the fact that the benefits of
international capital markets have received much less attention
than international trade. Consider the broad in.ellectual consensus
that underlies the trading policies of most of our nations. That
consensus is embodied in such institutions as GATT. It has inspired
repeated rounds of tariff cuts, and -- hopefully for the future -a broad attack on non-tariff barriers.
Obviously, there are in practice many violations of our
liberal trading ideals. But contrast the intellectual consensus
in that field with the spectrum of thinking and policies with
respect to international investment. Controls and inhibitions
on investment are frequently considered not a deviation from a
norm but as more or less permanent -- and not especially troublesome
-- instruments of national policy. The contrast in thinking appears
starkly in the Articles of Agreement of the International Monetary
Fund, where certain provisions clearly envisaged restrictions on
capital account as matter of course.
Fortunately, that sharp distinction has not been strongly
pressed in actual Fund practices. I believe there is more
recognition today of the practical difficulties of enforcing tiqht
restrictions on capital without a panoply of exchange controls
that affect current as well as capital transactions. Nevertheless,
many restrictions on capital movements exist, in the United States
as elsewhere. If we are to make better progress toward dispensinq
with those controls, we need to recognize why they are imposed and
what conditions must be met if they are to be abandoned.
.
~
The benefits of foreign investment to provider and recipient
alike have frequently been demonstrated, perhaps nowhere more than
in the rapid development of the United States itself.
-
3 -
The modern multinational corporation -- shifting large
amounts of capital from one nation to another -- can be a highly
effective vehicle for equalizing returns on capital in every part
of the world, for diffusing rapidly new technology and effective
managerial techniques, and for sharing the resulting benefits of
increased productivity among investors and citizens of the host
country alike. International markets for shares of equity capital
are a natural corollary of the immense gr,Jwth of the international
corporation. At least in concept, flows of bonds, bank loans, and
other credit instruments should help assure a maximum flow of
resources to the points of highest real return and thus help speed
the process of real growth.
Yet, to governments, this economic case has not always been
considered of overriding importance. Lord Cromer, in talking to
an American audience a few years ago, brought a true British sense
of historical continuity to the problem. He traced suspicion of
foreign investment back at least to the medieval kings of England.
Their concern over a seeming loss of sovereign power is not
unfamiliar to modern ears. From the viewpoint of a single
government, foreign investment, responding to the logic of the
international market place, may seem a threat to autonomy in
its international economic or social management -- a threat not
worth the gains in growth and productivity that it may bring.
Moreover, differences in national structures of taxation, tariff
walls, varied mixes of fiscal and monetary policies, and sheer
institutional inertia can produce discrepancies between the most
productive pattern of investment and actual investment flows.
These basic issues are never far from the surface where
international investment is concerned. Nevertheless, among
developed countries, I suspect most restraints on international
investment grow not out of concerns with sovereignty or
inefficiency, but as a by-product of balance of payments and
monetary problems.
The present controls in the U.S. are a prime case in point.
Shortly after taking office, President Nixon made plain the
cOmmitment of his Administration to move toward freedom for
investment. He acted to liberalize the controls already in place.
But our progress in that direction has been sharply limited by
our balance of payments position. We must bring other elements
in our payments into greater consistency with the volume and
direction of investment flows that are likely to emerge as controls
are abandoned.
- 4 -
Anyone viewing the pattern of tatemational iftv•• t.eat
in recent year. moat be .truck by th. . . . . iv• •bilt. that ba..
developed. In the fir.t half of the 1960'., the Uaited Stat••
s.eaed to stand almost alone .. a major net .xporter of private
capital: individual. and busine •••• invested an average of
$4-1/2 billion a year abroad, while attractin9 le.s than
$1/2 billion a year of private forei9ft capital. Direct inv•• t.ent
outflows increa.ed rapidly -- reaching $3.5 billion by 1965.
They were also increasingly concentrated in .anufacturing rather
than resource developaent and in Europe rather than in Canada
or other primary producing countries. Other U.S. private
investment abroad -- .ainly in the form of debt in.truments -.aunted rapidly, r.aching annual total. of $2 billion or mor••
This flow too was heavily concentrated in the developed countries
of the North Atlantic area -- plus Japan.
This outpouring of American investment -- on top of
substantial aid and military expenditures abroad -- more than
.atched the real resources we were able to transfer to other
countries in the form of a current account surplu.. Moreover,
it appeared to many thoughtful Americans at that time that a
substantial portion of this outflow did not reflect real or
lasting differences in the productivity of capital. Direct
investment was stimulated by a desire to get within the Common
Market tariff of the IEC. Portfolio investment reflected, in part,
the absence of broad and strong financial markets in Europe. Th.
thesis was advanced that the United States, at least in part,
simply acted as a kind of financial intermediary, bridging
deficiencies in foreign markets and helping to close the gap
between the preferences of foreign citizens to save in liquid tom
but to borrow long term.
In any event, the impact on our balance of paymen~s seemed
too great to the American authorities, and by the middle of the
decade, they felt it necessary to curb virtually all types of
capital outflows. The Interest Equalization Tax and controll on
both direct investment by corporations and portfolio investment.
by banks and other financial institutions remain today. Partly
for that reason -- and also reflecting the tightne.s of money
and higher interest rates -- the gross outflow of private capital
(excluding funds initially borrowed abroad by u.S. companies to
finance their direct investment) was reduced in 1968 to little
more than $3 billion, less than half the 1964 peak.
There have been even more striking changes on the aurop.an
side of the equation. With American sources of funds restricted,
the Euro-bond and Euro-dollar markets grew under forced draft.
/i/
-
5 -
Seemingly overnight, Europe developed through these vehicles
sources of long-term money that made it financially self-sufficient,
even for U.S. firms requiring finance for direct investment in
Europe. By 1968, some $4-3/4 billion of foreign issues were
placed in European markets -- almost ten times the volume five
years earlier. Over $2 billion of those bonds were sold by
American companies.
Indeed, over the past two years, Europe has not only taken
care of its own capital needs but turned into a large capital
exporter to other areas.
This development has reflected a variety of forces. Some
portion of the outflows reflected the success of American mutual
funds in penetrating the European market or the rediscovery of
the U.S. stock markets by institutional investors seeking to
diversify. In Germany, Government policy has encouraged large
outlaws of portfolio capital.
In other cases, capital outflows were largely inadvertent
a ref1ect~Qn of unsettled domestic conditions or currency concerns.
But, whatever the cause, the main countries of Europe appear to have
exported almost $6 billion of capital in 1968, excluding banking
outflows.
The United States was a principal beneficiarr. As a result,
U.S. private capital outflow was exceeded by fore1gn private capital
inflows for the first time in many decades.
On the surface these capital flows helped achieve a closer
equilibrium in both Europe's and America's balances of payments.
But this IIstatistical balance surely did not reflect a sustainable
economic equilibrium. From the United States side, reinforced
capital controls played a large part. In Europe, the capital
outflows were highly concentrated and reflected diverse circumstances
not likely to be repeated. There was a decided lack of balance in
the accounts of individual European countries.
ll
Already, in 1969, these patterns are changing. The United
States -- despite the highest interest rates in a century and
continued administrative restraints -- has reverted to its traditional
position of net long-term capital exporter. Without a compensating
change in current account performance, an adverse impact on our
reserve position has been avoided only by an unprecedented inflow
of short-term capital. Plainly, the magnitude of these short-term.
- 6 -
inflowl cannot be sustained. Europe a. a whole hal r.mained
a heavy net exporter of capital, but . .inly becau•• of the
exceptional German effort to encourage foreign u.e of ita ..rketa
and lome special circumstances in Italy.
Obviously, it would be wrong to gen.ralize too much fro.
this recent experience. But amid the turbulence, I b.lieve
there are some trends of more lasting significance.
First, it is worth noting that, while th. form and direction
of the capital flows have shifted under the pres.ure of controll
and events, the volume of international inveltment among the
highly developed countries of the Weltern world has continu.d to
expand rapidly. The observation hal often been mad. that econoaic
development seems to go hand in hand with more than proportionate
increases in trade. The same phenomena appears at work in capital
markets.
Second, the United States has a Itrong propensity toward
exporting long-term capital. This tendency s .... to me 10
strong that, in the absence of controls, it is likely to perlilt
in fairly high volume even in periodl when doaeltic capital
markets and the domestic economy are under strong expanlionary
pressure. The driving force behind American direct invelt.ent
overseas is likely to remain particularly strong for lome yearl,
aince this inveatment is a powerful force carrying new technoloqy
and products to leas wealthy countriel. We hope and expect that
European firms will also invest more in the United States, but
the net balance should remain substantially with the United State••
Third, and working in the opposite direction, there is evidence
that the structural imbalance between Europe and the United State.
in capital market facilities has been, at the least, appreciably
narrowed, mainly by the development of the Euro-bond and Euro-dollu
markets.
Moreover, the chronic disparities in intereat rates th"at characterized
the early 1960 I S may be closed from another direction as well. pre.ent
interest rate levels in the United States are abnormal -- I hop.
they will soon decline. But assuming the American economy remain.
generally prolperous -- and given our evident domestic de. .otl for
capital -- there is room for doubt that we will see for many ye.r.
the relatively low long-term intereat rates that prevailed in the
United States aa late al the early part of thil decade.
This suggests that, even without controll, more of United Stat••
direct investment might be financed locally. I have already laid
that I see atrong E'eaaons for European equity invest..nt in the U.S.
to remain relatively high. Consequently, a .uch better balanc. in
flows of portfolio ca~ital and bank credit between Europe and the
United States can be Yoreseen.
I
I
I
142
I
.
- 7 -
Fourth, as a corollary, industrial countries outside of
Europe and the United States seeking foreign capital should
also continue to find a more evenly balanced choice between
the European and American markets than in the first half of
the present decade. These countries (and international financial
institutions) should certainly remain heavy net demanders of funds
in both markets, although the largest of these countries may be
able to generate more of the needed savings domestically.
Viewed broadly, this outlook would seem to me to suggest
the possibility of achieving a more balanced pattern of investment
than has characterized the past. It implies less dependence on U.S.
markets and U.S. foreign investment than during the early 1960's.
But it does not assume that flows from Europe to the United States -stimulated by American tight money and controls in recent years -will remain at recent levels, and I believe this emerging pattern
of investment flows could become a part of a sustainable equilibrium
in balance of payments, without the present reliance on controls.
But for this happier state of affairs to materialize, I would
emphasize at least two prerequisites.
First, I suspect it is an almost inevitable consequence of
freedom for capital flows that substantial volatility will develop
from quarter to quarter or year to year. In the past year, for
instance, we have seen the sensitivity of equity investment to
short-term swings in sentiment and the response of short-term
capital to cyclical swings in interest rates. We must be prepared
to cope with these swings. This points up the need for elasticity
in our monetary arrangements so that short-term deficits or surpluses
in balance of payments results can be absorbed and diffused without
forcing resort to controls -- or without setting off reinforcing
speculative movements that exaggerate the difficulties.
This is, of course, the traditional function of national
reserves and official credits -- areas in which very considerable
achievements are being made. In addition, we are learning that
the immense reservoir of internationally mobile short-term funds -a growth epitomized by the Euro-dollar market -- can often help
bridge the gaps that develop in the other elements of the balance
of payments.
There is, of course, another side to the coin. Short-term
money can move perversely, contributing to speculative crises or
tending to reinforce other forces working toward deficit or surplus.
Even when they do not move perversely, reliance on short-term capital
could reduce incentives and pressures for more lasting adjustments.
One can also visualize instances in which domestic monetary policy
objectives and balance of payments requirements are so far opposed
that it is not possible to influence constructively the flows of
short-term money.
- 8 -
This is why it seems to me absolutely fundamental, if
we are to achieve and sustain a free flow of international financ!al
capital, that there must be clear proqre.s toward achieving a
.
better aliqnment of current accounts. ..al re.ource. to match
the flow of capital can only be provided by current account SurplUl•• ,
yet the United States, as potentially the large.t net capital exporter,
has seen its current account balance decline fro. a surplus of
alaost $6 billion in 1964 to a deficit of several hundred millioa
dollars in 1968. Meanwhile, a few other industrial countries ha.e
built up current account surpluses well beyond their capacity to
sustain capital outflows.
The implications for the U.S. are evident: we can satisfy
our propensity to export capital only if we help provide the
counterpart through rebuilding our current surplus.
The steady growth in earnings on foreign investment gives ua
a head start on that job. A decline in foreign military spending
after Vietnam, and a more effective sharing or offsetting of our
remaining military burdens could also help. But, in my judgment,
a viable pattern will also require a sizable trade surplus. We
are under no illusions that this necessary surplus can be rebuilt
quickly -- although we do expect some real progress next year.
Indeed, given the weight of the u.s. in the world economy and
the reluctance of other countries to see a sudden deterioration
in their own trade, it seema to me doubtful that there is any
fe.sible technique by which the United States could quickly restore
a trade surplus as large, say, as the average of almost '5.5 billion
a year from 1960 to 1965. To attempt to do so by depressing bUlin•••
at home or by restrictive trade practices would be destructive of
the very goals we seek.
What we must do is restore and improve, in an orderly way,
our competitive position and remove the inflationary pressures trom
the domestic economy_ Our domestic and international goals coincide
in this respect. Achieving that end has proved even aore difficult
than we antiCipated. But you can be sure we plan to keep at it
until the job is done. At the same time, we have been working,
too, to make sure that our export effort is not unnecessarily
frustrated by inadequate export credit facilities or by tax distortiona,
It does not seem to me inconsistent that, as we strive fer
an adequate trade and current account surplus, other developed
countries in Europe and Japan also maintain surpluses. It is
a matter of keeping these surpluses within range of their long-run
capacity or desire to invest abroad.
- 9 -
/~
I will resist the temptation to deal with these problems
of current account adjustment today, including all those interesting
proposals now under study in the IMF for introducing an element of
greater flexibility in our exchange rate system. But I would urge
that those concerned with capital markets recognize that international
investment can thrive only against a background of complementary
flows of trade. In seeking freedom for the former, we must not
neglect the latter.
I believe we can take some satisfaction in these closing weeks
of 1969. Markets are in a vastly better position than a year ago.
The main challenge is clear enough -- to deal with the inflationary
pressures in the united States. It has proved a tough, durable
opponent. But I believe we are making·progress. I can assure
you that we are determined to achieve results, and are prepared to
take reasonable risks to get them.
Success in that endeavor will, in my judgment, be the best
possible augury we could have that we will maintain a favorable
climate for the further growth of the international capital market.
TREASURY DEPARTMENT
WASHI,NGTON, D.C.
December 4, 1969
FOR IMMEDIATE RELEASE
UNITED STATES AND AUSTRALIA TO DISCUSS REVISION
OF INCOME TAX TREATY
Representatives of the United States and Australia will
meet early in 1970 to discuss revision of the income tax
convention between the two countries, the Treasury announced
today.
,
The existing tax tre aty with Australia has been in force
since 1953. The negotiations are expected to deal with a
number of specific problems which have evolved out of the tax
law changes which have taken place since 1953, and out of
changes in economic relations between Australia and the
United States. Among the items likely to be discussed will
be the tax rules to be applied by one country to corporations
and residents of the other who derive royalties, interest,
income from activities on the continental shelf, and income
from a permanent establishment in the other country.
It is also expected that the "Draft Double Taxation
Convention," published in 1963 by the Fiscal Committee of
the Organizat{on for Economic Cooperation and Development
(OECD), will be considered in the course of the negotiations,
along with recent United States treaties with other industrial
countries, such as the treaty with France which went into
force in August 1968.
Persons having comments or suggestions to make
concerning the income tax treaty between the United States
and Australia should submit their views by January 5, 1970,
to Assistant Secretary of the Treasury Edwin S. Cohen,
United States Treasury Department, Washington, D.C. 20220.
000
K-292
TREASURY DEPARTMENT
Washington
FOR RELEASE ON DELIVERY
December 5, 1969
EXCERPTS OF ADDRESS OF THE HONORABLE
PAUL W. EGGERS
GENERAL COUNSEL OF THE TREASURY
AT THE DEDICATION OF THE CITIZENS TRUST COMPANY
ATLANTA, GEORGIA, DECEMBER 5, 1969
12 NOON (EST)
I corne not as a banker, or even as an economist,
but as a public servant.
My own field has been the law, and at the United
States Treasury I am chiefly concerned with legal issues
as General Counsel.
But as a public servant I know the importance of
community action and of meaningful community services,
and that's why I'm so pleased and proud to take part
in the dedication of this bright new facility on the
Atlanta skyline.
The Citizens Trust Company is celebrating its fiftieth
year as a banking institution.
Let me say that no bank
could be prouder of the services it has rendered down
through the past ten decades -- decades which have included,
as we all know, the best of times and the worst of times.
One reason Citizens Trust can be particularly proud
is that its very reason for existing has been service to
-2its community.
In recent years many men in public life
have talked anout the importance of community involvement
and achievement in business and industry.
But Citizens
Trust has been doing something about it for half a
century now, and this bright new skyscraper is testimony
to its brilliant success.
As a lawyer I have seen, in private practice, men
and women from all walks of life and in all sorts of
trouble.
Economic trouble is perhaps the most common
kind of trouble.
Assets and liabilities are at the heart
of most disputes among citizens, just as they are a common
cause of a host of other difficulties.
But I have also seen what economic power can mean
to an individual, a corporation, a group of individuals.
I have seen the progress that has been achieved and the
good that has been accomplished by thousands of people
who wisely, and with good intentions, managed their assets
and operated within the framework of our free economic system.
This new building is symbolic of many things.
First,
it is symbolic of what imaginative and intelligent men can
do with their resources in a dynamic and free society.
-3-
Second, it is symbolic of the untold good that can
come of that imaginative leadership.
that we can never know
its
Good so widespread
full effects on hundreds of
thousands of families, institutions, and communities.
Third, it is symbolic of the great progress made
here in the South.
I am a Texan as you know, and I'm very proud of my
state. Your sparkling city, however, has corne to symbolize
for millions of Americans the tremendous vitality and
economic growth of the New South.
And, most importantly, that vitality has corne to be
synonymous with economic equality of opportunity.
In sum, your bank
stand~
today as a shining symbol
of the best Americans are capable of achieving, for one
another and for their neighbors.
And your bank is
symbolic of the economic justice which we are striving to
make a reality for all Americans.
At the United States Treasury, we are vitally
concerned with economic justice and equality of opportunity
both at horne and abroad.
-4As you know,
the gap between the rich and the poor
is not merely a personal gap, here at home, serious as
that gap is.
It is a world-wide problem involving all
the nations of the globe, free and enslaved.
Thus, each
year the differences between the rich, mighty nations
and the poor, struggling nations, grow more serious.
The task at the United States Treasury is to assist
in international arrangements and cooperation which will
help ease these differences.
The President is moving on
many fronts to assist other nations to find their best
footing in a free market world, because he knows that the
awful price of failure is to have untold millions slip
behind a political system in which economic justice is a
meaningless slogan devised to hide such realities as
political oppression, religious persecution, and economic
slavery.
We have not always been successful even here at horne,
and so we cannot expect overnight success throughout the
world.
Our own resources of treasure, talent and time
are extensive, but limited.
-5But occasions such as this tend to renew the spirit
of those who share our concern for nation-wide and worldwide economic justice.
And I personally am confident that with the continued
involvement of distinguished men such as Mr. Milton, the
Citizens Trust Copmany will continue for yet another fifty
years -- and beyond -- to stand as a symbol for the best
that is in us, and as a real, tangible means for achieving
just and rapid economic progress here in Atlanta.
000
HI
DEPARTMENT OF THE TREASURY
Washington, D. C.
FOR RELEASE UPON DELIVERY
REMARKS OF THE HONORABLE MURRAY L. WEIDENBAUM
ASSISTANT SECRETARY OF THE TREASURY FOR ECONOMIC POLICY
BEFORE THE BUSINESS WEEK CONFERENCE ON MONEY AND THE CORPORATION
NEW YORK CITY
MONDAY, DECEMBER 8, 1969, 12:00 NOON, EST
1970:
A YEAR OF TRANSITION
It seems appropriate at this time to review the prospects
for the American economy and governmental policy in the coming
year.
Perhaps some perspective would furnish us a useful
prelude to our task.
With the decade of the 1970's just around the corner, the
economic situation is rather different from that of a decade
ago.
To those who can recall what now seems almost ancient
American history, then there was concern over slow growth and
the "gap" between actual and potential output.
Now there is
a certain satisfaction in knowing -- or hoping -- that slow
growth may have finally created a gap, after too long a period
of excess demand and mounting inflationary pressure.
We are, so to speak, approaching the problem of achieving
steady growth from a different direction.
As we are finding,
getting onto a noninflationary path from above is not quite
as easy a task as coming up from below.
So far as I can recall,
there is no exact parallel in our previous economic experience.
K-293
- 2 There have been quite a few crash landings after soaring too
high but no gradual glides back onto the original flight path.
Now, almost a year after the changing of the guard in
Washington, what is the verdict on gradualism
or impercepti-
bilism as one of my colleagues has termed it?
I guess we would
have to say that the jury is still out.
It seems clear to me
that the right course was chosen, in the sense of neither aiming
for recession nor accepting an escalating inflation.
of output has been slowed down just about as expected.
The growth
Visible
sign of relief from rising costs and prices is yet to corne.
But it was always known that this would be late in the game.
Although some of us seem to have forgotten, wholesale prices
occupy a prominent place in the array of coincident indicators,
those economic series that do not show a significant change in
direction until the economy as a whole has altered its path.
While I am on that subject, let me .point out that business
plant and equipment outlays are a lagging indicator of future
economic developments.
Although I will let someone else draw
the moral of the tale, the historical record certainly shows
that business in general has an uncanny knack of reaching
a peak in new capital investments sometime after the underlying market has softened.
You may want to recall that the
next time you comment on our lack of perfection in making
forecasts of the government's budget.
- 3 Here are a few other statistical series that are laggards
in the economic process: inventories, unit labor costs, interest
rates on residential mortgages, interest rates on short-term
business loans, the volume of consumer installment debt , and
the amount of commercial and industrial loans outstanding.
We
need to keep these basic relationships in mind as we examine
current statistical reports on the progress of the Administration's anti-inflation program.
The Economic Outlook
What is the outlook for 1970?
a year of transition.
As I see it, 1970 will be
Basically, 1970 will be the year of
transition to a less inflationary environment.
I expect the
inflation rate to show a clearly downward pattern during the
course of the year -- six percent rates of inflation should be
a thing of the past.
In technical economics, this means that each quarter's
increase in the GNP price deflator will generally be less than
that registered in the preceding quarter.
I use the term
"generally" advisedly; t·he odd way we measure the government
sector in the GNP accounts may make for an upward "blip" in
one quarter of the year.
1970 will also be a year of transition to a more peacetime economr.
A significant decline has been occurring in 1969
in the key "leading" indicators of military demand -- the
statistical series which foreshadow actual Defense Department
expenditures in 1970.
Total Department of Defense obligatio,s
- 4 which cover commitments made for government payroll as well
as orders for work to be performed in the private sector -are now running at an annual rate which is $5.4 billion lower
than in 1968.
Military prime contract awards to American
business firms are running $6.8 billion lower than in 1968.
Let me emphasize: there has been an absolute decline, not just
a slower rate of increase.
Of perhaps even greater interest, when we convert these
numbers on military demand to real terms -- by eliminating the
price effects in order to estimate the change in the physical
volume of resources being devoted to military purposes -- we
find that the defense sector now is making no greater claims
on the output of the American economy than it did before the
Vietnam War.
This is the best economic evidence that 1 can
find of the major extent to which we as a Nation are shifting
to a more peacetime economy.
1970 will also be a year of transition to a lower rate
of Federal income taxation.
It is hardly surprising that the
winding down of the United States commitment in Vietnam is
accompanied by the phase-out of the income tax surcharge.
That does not mean that I am about to clap my hands and
stamp my feet in glee at the recent action on the tax bill in
the Congress.
Tax reduction is obviously a popular activity.
But it needs to be considered in connection with the long-run
I~/
(7../
- 5 -
expenditure commitments that the Government is making at the
same time.
I am reminded of a dialogue which was popular during the
heyday of the New Economics:
"How are you going to pay for all of those new expenditure programs?"
"Why with the tax cuts we are making."
I believe that we will be hearing more about tax and
fiscal actions, even if the tax bill is enacted into law in
its present form.
Certainly the less fiscal restraint that
we can achieve, the longer I would expect monetary policy to
remain tight.
On this note, I would like to offer a few observations
on fiscal policy.
As in most walks of life, there are fads and
fashions in economics.
Just a few years ago, it seemed that
fiscal policy was all that mattered; monetary considerations
were largely ignored.
At present the pendulum of economic thinking is in danger
of swinging to the opposite extreme.
Money does matter, but
I include government money when I make that statement.
We
cannot blithely exclude from our calculations a public sector
of $200 billion annual volume.
Even in an economy rapidly
approaching the trillion dollar mark, financing a budget
deficit -- in sharp contrast to achieving a surplus -- would
~
6 -
put considerable strain on already very tight money markets.
Neither do I think that the effects on a1ready high interest
rates would be trivial.
We have too few effective policy tools to be in a position
to abandon any.
In using both fiscal and monetary policies
there is much to be said for moving toward budget surpluses
and lower interest rates.
This should be conducive to a higher
rate of capital formation and more rapid economic growth.
Tax Policy
To be an advocate of fiscal policy does not require that
we necessarily agree with every fiscal action being taken or
contemplated.
Perhaps I will be forgiven if I take this oppor-
tunity to offer a few personal remarks on the course of the
current tax bill.
I happen not to be one of those who contend that the
Congress is irresponsible.
sible.
I think that they are quite respon-
If they cut taxes enough and increase expenditures
enough, they can even be responsible for generating another
round of inflationary pressures.
I may not agree with that course of action but, as an
economic adviser, I respect the power of governmental decisionmakers.
If the Congress thinks that the country needs weaker
fiscal policy, then it can probably legislate that.
It will
also probably mean that -- in order to continue to dampen
- 7 down inflationary pressures -- the Nation will experience
tighter monetary conditions than we would have otherwise.
A little perspective is useful here, too.
As I look
backward at the record of decision-making on fiscal policy in
recent decades, I see a great many and variety of actions.
In a sense, it is like examining an economy in the course of
a business cycle.
We see a myriad of currents, many of which
are going counter to the main stream, with different twists
and turns, and with a basic
p~ttern
emerging only in the light
of long-term historical perspective.
There are striking similarities when we examine the current
tax bill.
Some provisions raise revenues, while others reduce
the Government's income.
Some sections close or reduce loop-
holes, and others add or widen special benefits.
main thrust?
What is the
Before we satisfy ourselves with any easy or
obvious answers, I would like to point out that it has been
customary for the Congress to consider and act on
8
number of
tax bills over a period of a year or two, and not all of them
seem
to have been motivated by the same economic or social
philosophy.
Hence, I would not be at all surprised if -- even assuming
that a tax bill somewhere along the lines of recent Senate
action is ultimately passed into law -- next year the Congress
will be considering additional tax legislation, perhaps of
a somewhat different nature.
- 8 -
I offer these observations as a long-term student of
public finance who is looking simultaneously at both sides
of the budget -- at the expenditure consequences of the program and appropriation decisions that the Congress appears to
be making and the revenues that are likely to be forthcoming.
On that basis, even after making allowance for the expected
reductions in Vietnam expenditures, it is hard to avoid the
conclusion that some additional fiscal legislation will be
necessary.
Perhaps the traditional Presidential messages in January -on the state of the union, the budget, and the economy -- will
provide the necessary information for a more informed public
discussion of the role and operations of a public sector in
a modern economy.
Conclusion
As you may have surmised, I am hardly forecasting that
1970 will be the time when we enter the economic Valhalla.
I do believe that it will be and certainly can be that very
necessary period when we finally overcome the Vietnam-induced
inflation that has been plaguing our economy for over four years.
If we maintain the necessary resolve to continue the
current stance of economic restraint, then the policies of the
Administration will both contain the current inflation and lay
the necessary foundations for a period of rapid real growth in
employment, production, and living standards.
/ )).~.
-
9 -
I
I would like to conclude with a quotation from a wellknown Twentiety-Century economist.
"No one can be certain of anything in this
age of flux and change. Decaying standards of life
at a time when our command over the production of
material satisfactions is the greatest ever, and
a diminishing scope for individual decision and
choice at a time when more than before we should
be able to afford these satisfactions, are sufficient
to indicate an underlying contradiction in every
department of our economy. No plans will work for
certain in such an epoch. But if they palpably fail,
then, of course, we and everyone else will try something different."
"Preserving all due caution in our own activities,
the job for us is to get through the next five
years in conditions which are favourable and not
unfavourable to the restoration of our full productive efficiency and strength of purpose, of our
prestige wi th others and of our confidence in 01lYselves. We shall run more risk of jeopardising the
future if we are influenced by indefinite fears
based on trying to look ahead further than anyone
can see".
"We shall do well not to fear the future too much."
That passage is taken frem the concluding section of the
last article, published over 23 years ago, by John
Keynes.
000
~aynard
UNITED STATES SAVINOS BONDS ISSUED AND REDEEMED THROUGH
November
30, 1909 /
(Dollar amounts in millions - rounded and will not necessarily add to totals)
DESCRIPTION
,TURED
Series A-1935 thru D-1941
Series F and G-1941 thru 1952
series.J and K-1952 thru 1957
AMOUNT ISSUEDlI
Unclassified
Total Series E
3eries H (1952 thru May, 1959) 11
H (June, 1959 thru 1969)
Total Series H
Total Series E and H
{Total matured
fl.ll Series
Total unmatured
Grand Total
AMOUNT
OUTSTAND1NGY
6
36
23
.12
.12
.61
1,885
8,323
13,394
15,621
12,283
5,574
5,291
5,474
5,408
4,729
4,090
4,285
4,897
4,991
5,200
5,023
4,732
4,613
4,322
4,334
4,393
4,244
4,121
4,602
4,500
4,845
4,195
4,545
2,116
688
1,672
7,391
1l,924
13,826
10,699
4,679
4,291
4,351
4,219
3,633
3,146
3,271
3,651
3,653
3,151
3,580
3,309
3,103
2,841
2,732
2,616
2,423
2,531
2,411
2,404
2,406
2,210
1,905
656
915
213
932
1,470
1,795
1,584
895
1,001
1,123
1,190
1,096
944
1,014
1,245
1,338
1,449
1,443
1,423
1,510
1,481
1,602
1,716
1,820
2,190
2,124
2,096
2,439
2,525
2,640
2,061
-228
11.30
11.20
10.98
11.49
12.90
16.06
18.92
20.52
22.00
23.18
23.08
23.66
25.42
26.81
27.81
28.13
30.07
32.73
.34 .27
.36.96
40.43
42.88
46.39
46.15
46.58
50 •.34
52.66
58.09
15.88
164,519
120,326
44,193
26.86
5,485
1,203
3,496
1,812
1,989
5,330
36.26
14.00
12,681
5,368
1,319
51.69
111,206
125,694
51,512
29.01
38,211
171,206
215,484
38,212
125,694
163,906
65
51,512
51,518
.11
29.01
23.94
rudes accrued discount.
'lption of owner bonds may be held and will earn interest for additional periods after oriRinal maturity dates.
PO
--
4,997
29,485
3,731
rent redf'OnJption value.
Form
'~: OUTSTANDING
OF AMOUNT ISSUED
5,003
29,521
3,754
IMATURED
Series Ell :
1941
1942
1943
1944
1945
1946
1947
1948
1949
1950
1951
1952
1953
1954
1955
1956
1957
1958
1959
1960
1961
1962
1963
1964
1965
1966
1967
1968
1969
AMOUNT
REDEEMEDlI
5J
3812 (Rev. Apr. 1969) - TREASURY DEPARTMENT - Bureau of the Public Debt
-
roR RELEASE 6: 30 P.M.,
Ifonday, December 8, 1969.
RESULTS OF THEASURY' S vTEEKLY BILL OFFERING
The Treasury Department announced that the tenders for two series of Treasury
)ills, one series to be an additional issue of the bills dated September 11 1969 and
Ghe other series to be dated December 11, 1969, which ,.jere offered on December 3,' 1969,
rere opened at the Federal Reserve Banks today. Tenders were invited for $1 800 000 000
)r thereabouts, of 91-day bills and for $1,200,000,000, or thereabouts, of 182-d~y'
.
)ills. The dets.i1s of the two series are as follows:
~GE
OF ACCEPTED
BIDS:
~OMPETITIVE
High
Low
Average
91-day Treasury bills
182-day Treasu.ry bills
_ _maturj,ng June 11, 1970__ _
maturing 1,13.rch 12, 1970
--~.,----- Approi': -Equi v .
P,pprox. Equiv.
Price
Annual Rate
Price
Annual Rate
- ---7 ...../S8"'+%-98.068"ij -7.64.3%,- : - - 9 6 . 078
7.849%
96.032
98.041'
7.750%
96.055
7.803%
98.053
7.702$
1/
E.I
Y
~ Excepting 2 tenders totaling $324,000j
£/Excepting 3 tenders totaling $7,000
66% of the amount of 91-day bD,ls bid for at the 1m? price was accepted
9% of the amount of 182-day bills bid for at the low price ,.res accepted
:t'lTAL TENDERS APPLIED FOR MTl) ACCEPTED BY FEDERlU" RESERVE DISTRICTS:
District
Boston
New York
Philade lphia
Cleveland
Richmond
Atlanta
Chicago
St. Louis
Minneapolis
Kansas City
Dallas
San FranCisco
mTALS
Applied For
"$ 3'9,597,006
1,741,402,000
42,699,000
68,118,000
17,488,000
48,598,000
149,077,000
52,047,000
15,019,000
35,179,000
30,305,000
140,783,000
Accepted
$29,597,000
1,234,802,000
2'1,699,000
53,118,000
17,488,000
45 ,598,000
149,043,000
49,047,000
15,019,000
35,179,000
23,305,000
___120,_~±~LQ0.Q
$2,32-0,312,000
$1,800,338, COO
V
Applied For
8,834,000
f
1,548,418,000
27,154,000
46,000,000
23,400,000
56,643,000
144,877,000
37,370,000
10,224,000
40,882,000
25,612,000
_ _127,887 J 000
Accevted
8, 83-1";000$
803,368,000
16,025,000
46,000,000
17,580,000
50,642,000
101,877,000
29,815,000
10, 22.A.t, 000
38,192,000
19,312,000
~)2, 037,301, COO
$1, 2GO, 29~), 000
58L~?1L(?C)0
d/
Includes $407 158 00·:) noncompetl tive tenders accepted at t.he average priCe of 98. OS:
Includes $289' 784' 000 nonc[)Iapeti t.h'2 tcriC'l.crs 8cceptC'd at the average price of 95,05:
,
,
.
. '
. ld
These rates are on a bank discount basis. '1':'1'2 equJ,Y21ent coupon lssue Yle s are
7.96% for the 91-day bills, and 8.24:0 for the 1[)2-Ciuy bills.
T'REASURY-.. DEPARTMENT
WASHINGTON. D.C.
December LU, l~b~
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
$3,000,000,000, or thereabouts, for cash and in exchange for
Treasury bills maturing December 18,1969, in the amount of
$2,901,799,000,
as follows:
91-day bills (to maturity date) to be issued December 18, 1969,
in the amount of $1,800,000,000,
or thereabouts, representing an
additional amount of bills dated September 18, 1969, and to
mature March 19, 1970,
originally issued in the amount of
$1,200,698,000,
the additional and orisinal bills to be
freely interchangeable.
182-day bills, for $1,200,000,000,
dated December 18, 1969,
and to mature
or thereabouts, to be
June, 18, 1970.
The bills of both series will be issued on a discount basis under
competitive and noncompetive 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, December 15, 1969.
Tenders will not be
received at the Treasury Department, Washington. Each tender must
be for an even multiple of $1,000, and in the case of competitive
tenders the price offered must be expressed on the basis of 100,
with not more than three dec"imals, 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 the rafor.
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
K-294
-
'-
.
responsible and recognized dealers in investment securities. Tender.
from others must be accompanied by payment of 2 percent of the face
amount of treasury bills applied for, unle'l the tenders are
accompanied by an~xpress guaranty of payment by an incorporated bank
or trust company.
~
Immediately after the closing hour, tenders will be opened at
the Federal Reserve Banks and Branches, following which public announce
ment 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 Secmtary of the
Treasury expressly reserves the right to accept or re,ject 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 aceepted 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 December 18, 1969, in
cash or other immediately available funds or in a like fa~e amount
of Treasury bills maturing December 18, 1969. Cash and exchange
tenders will receive equal treatment. Cash adjustments will be made
for differences between the par ',a1ue 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, inhert~ance. gift or other excise taxes, whether Federal or
State, but are exempt from all taxation now or hereafter imposed on
the principal or interest thereof by any State, or any of the
possessions of the United States, or by any local taxing authority.
For purposes of taxation the amount of discount at which Treasury
bills are originally sold by the United States is considered to be
interest. Under Sections 454 (b) and 1221 (5) of the Internal
Revenue Code of 1954 the amount of discount at which bills issued
hereunder are sold is not considered to accrue until such bills are
sold, redeemed or otherwise disposed of, and such bills are excluded
from consideration as capital assets. Accordingly, the owner of
Treasury bills (other than life insurance companies) issued hereunder
need include in his income tax return only the difference between
the price paid for such bills, whether on original issue or on
subsequent purchase, and the amount actually received either upon
sale or redemption at maturity during the taxable year for which the
return is made, as ordinary gain or loss.
Treasury Department Circular No. 418 (current revision) and this
notice prescribe the terms of the Treasury bills and govern the
conditions of their issue. Copies of the circular may be obtained
from any Federal Reserve Bank 050~ranch.
TREASURY DEPARTMENT
Washington, D.C.
STATEMENT BY THE HONORABLE EUGENE T. ROSSIDES
ASSISTANT SECRETARY OF THE TREASURY
for
ENFORCEMENT AND OPERATIONS
before the
HOUSE BANKING AND CURRENCY COMMITTEE
WEDNESDAY, DECEMBER 10, 1969, at 10:00 A.M.
Mr. Chairman and Members of the Committee.
The Treasury Department appreciates the opportunity
to comment on H.R. 15073, which is designed to prevent
the use of foreign bank accounts for illegal purposes by
U.S. citizens and residents.
The bill would accomplish
this:
--by requiring U.S. banks to copy checks and
certain other instruments and maintain certain
records;
--by requiring U.S. financial institutions and
persons dealing with them to report certain U.S.
currency transactions to the Treasury;
2
--by requiring persons importing or exporting
substantial amounts of U.S. currency to furnish
reports to the Treasury; and
--by requiring citizens, residents, and persons
doing business in this country to report certain
transactions with foreign financial agencies
which do not make their records available to
U.S. authorities.
The bill provides that the detailed requirements are to
be promulgated by the Secretary of the Treasury.
To summarize our position, the Treasury fully
supports the objective of HoR. 15073 to deal with secret
foreign accounts which aid tax evasion and other violations
of United States laws.
We feel, however, that the bill
goes too far and that additional work is required to
determine the best way to achieve this objective without
hampering the free flow of international commerce, without
creating unciue cost and administrative burdens on both
the private sector and government, while preserving the
traditional freedoms of American life, and the status
of the dollar as the major transactions currency
3
and reserve currency of the world.
We believe that
measures can be developed which would not create these
problems and which would be effective in helping us
fight tax evasion and other criminal activities of
United States citizens and residents.
To some extent because of bank secrecy laws, we
are unable to offer any precise estimates as to the
extent to which U.S. citizens and residents use foreign
bank accounts and the magnitude of the tax evasion and
other criminal violations shielded by such bank accounts.
I can say, however, .that the Treasury regards any
.
evasion as serious even if the total amount involved
is not large.
Two areas of special concern to the Treasury are
the use of foreign bank accounts by those involved in
smuggling narcotics into the United States and by
organized crime generally.
The Treasury has given two
programs the highest priority:
1.
Prevention of the smuggling of narcotics,
4
marijuana, and other contraband drugs into
the United States; and
2.
The fight against organized crime.
If information could be obtained about such accounts,
it would be of great help in our efforts to stop
smuggling of narcotics into the United States and our
general efforts against organized crime.
A number of
narcotics smuggling financings have been traced to some
of these foreign banks.
Participants in organized crime
frequently evade taxes and the prosecution of such
evasion is often the only practical means to attack such
crime.
I understand that the Securities and Exchange
Commission will testify on the use of foreign bank accounts
in connection with securities law violations.
I will not
discuss that aspect of the problem other than to indicate
that the Treasury feels that the protection to the
investor provided by disclosure, insider trading, antimanipulation and other rules, embodied in our securities
laws, plays a significant part in making u.S. security
markets attractive to investors, including foreign investors.
5
There is another area of equal concern to the
Treasury.
That is the evasion of income or estate
taxes by otherwise law-abiding citizens and residents.
We properly regard such evasion as a serious crime,
whether committed by a taxpayer who is a
or by a
u.s.
citizen living abroad.
U.s.
resident
The American tax
system is grounded on voluntary compliance and, on the
whole, that compliance is and continues to be excellent.
One of the foundations for this compliance is a
feeling by taxpayers that other Americans are also paying
their fair share of taxes.
The citizen or resident paying
the taxes which he owes has a right to demand that his
neighbor, whether he is a man who stays close to home or
who travels widely, also pay the taxes imposed by the
Internal Revenue Code.
This Administration has elevated the development of
solutions to the foreign bank account problem from an
ad hoc case-by-case approach to a foreign policy level.
We have actively sought to enlist the help of the
Government of SwitzerlanQ in dealing with these problems
and are in the process of contacting the governments of
6
some of the other countries with bank secrecy where
Americans have accounts.
We are exploring with officials
of the Government of Switzerland the possibility of a
mutual assistance treaty in criminal matters so that
information can be exchanged for use in criminal
investigations and prosecutions in a routine and
expeditious fashion.
This has been an interdepartmental
effort and includes the active participation of the State,
Treasury, and Justice Departments and the Securities and
Exchange Commission.
Representatives of the Swiss
Government visited the United States last April and an
Administration team visited Switzerland in June.
Further
talks have been held and presently both countries are
studying a United States draft treaty in preparation for
discussions at a higher level.
We hope that these
discussions will take place in the next few months.
We trust that these discussions will lead to a
meaningful treaty, agreeing, among other things, on
the types of cases in which the mutually recognized
need to enforce criminal laws takes precedence over
the traditional Swiss requirement that banks keep
7
the affairs of their customers confidential.
We are
confident that the Swiss are also anxious to do
something about the use of secret foreign accounts
by organized criminals
0
The United States must also look to its own laws
to determine whether we are doing all that we can to
stop tax evasion and other crimes.
The Treasury has,
therefore, undertaken a full review of our existing
legislation and administrative practices to determine
what is required to increase our effectiveness against
crimes which are facilitated by foreign bank accounts.
We have formed a Treasury task force to review our
current authority, to confer with the banking and other
financial institutions on evasion techniques and possible
remedies, and to make administrative and legislative
recommendations.
A number of possible approaches,
some of which are similar to elements of H.R. 15073,
are being considered.
Our concern is with American citizens and residents
who violate tax and other UoSo laws.
We are improving
the means to detect and prosecute crimes where all of
8
the events take place within our borders.
But where
our citizens and residents use foreign territory and
institutions for criminal violations of U.S. law or
for hiding the fruits of their crimes, law enforcement
requires special techniques.
The Treasury has had a highly useful experience
in working with the private sector to cut down tax
evasion.
This was in the spring and summer of 1967
when we stopped the serious evasion of the interest
equalization tax which had developed.
At that time,
we worked closely with U.S. brokers and banks to
develop systems which would close loopholes that had
been used to evade payment of this tax.
Similarly,
the Treasury intends to work closely with U.S. banks
and other financial institutions to establish procedures
designed to reduce the evasion helped by foreign bank
accounts.
Without the cooperation of U.S
o
financial institutions,
we cannot be effective in dealing with the use of
foreign bank accounts by Americans who violate our laws.
o
9
Without this help, we might find that we have succeeded
in devising measures which give us mostly useless
information or information which is difficult and
time consuming to utilize.
While such measures might
result in more information on certain routes used by
Americans to and from foreign banks, other routes might
be left completely unobserved.
I will now outline some of the areas that the
Treasury believes need to be explored for usefulness
and feasibility in connection with the secret foreign
bank account problem and set forth our tentative views
on H.R. 15073.
Bank Recordkeeping
The Treasury is considering the extent to which
additional records and reports of international
transactions are practicable to require of financial
institutions and to what extent they would be useful
to the Internal Revenue Service and other law enforcement
agencies in connection with investigations of tax
evasion and other crimes.
10
H.R. 15073 includes recordkeeping requirements in
Title I.
The principal recordkeeping provision of the
bill requires banks to maintain (i) copies of checks
and other instruments drawn on them and presented for
payment, and (ii) a record of instruments received by
them for deposit or collection with identification of
the persons for whose account the instruments are
deposited or collected.
This is understood to go much
beyond current practice and would result in a substantial
increase in banking costs and charges.
As an objective, recordkeeping and reporting
should provide benefil3 to law enforcement without
undue interference with normal commercial transactions
and undue cost and administrative burdens on both
banks and their customers and government agencies.
Clearly, mounds of additional paper or microfilm
which may ge of negligible assistanc'e to law enforcement
officelw are not an intended by-product of this effort.
If recordkeeping and reporting requirements are impos2d,
they should be limited to those documents which are the
most significant in tracing tax evasion and other
ICo
11
criminal violations, thus excluding small transactions
and transactions which are not informative, such as,
possibly, inter-bank transfers.
An important purpose
of these limitations would be to assure a volume of
information that the Internal Revenue Service and
other agencies are in fact able to work with.
There
is a point when the volume of records and reports
becomes counterproductive.
We have not yet reached a conclusion on whether
the additional records and reports on foreign
transactions which might be required and which could
be effectively utilized by the Internal Revenue Service
and other agencies would significantly add to our
efforts to prevent the violation of our tax and other
laws.
We are in the process of learning much more
about international transactions, existing recordkeeping
practices, and the capacity of the Internal Revenue
Service to utilize the additional records and reports
which might be required.
12
Financial Institution Currency Reports
Chapter 2 of Title II of the bill requires reports,
as set forth in Treasury regulations, of transactions
involving the payment, receipt, or transfer of
U.S. currency.
The reports are to be filed by both
domestic financial institutions (including currency
exchanges, securities and
commo~ties
brokers, as well
as banks) and one or more of the other parties to the
transaction.
Banks currently are required to file currency
reports, but these reports have been of limited
usefulness because of uncertainty as to when they
are required and the extent of the banks' responsibility
to report the identity of the person engaging in
currency transactions.
We are inclined to the view
that such reports should be continued and are seeking
ways to increase their usefulness.
It does not seem,
however, that the requirements should be applicable
except to financial institutions.
We are also considering how unnecessary reports
might be avoided without an adverse effect on the
Ie
I
13
utility of the reports so as to avoid unnecessary
burdens on retail establishments that deal in cash,
employers with cash payrolls, and the financial
institutions which would be required to file the
reports.
Unnecessary reports, particularly when
small amounts are invblved, would not only impede
commercial transactions, the life blood of our
complex economy, but also make it more difficult
for the Internal Revenue Service and other government
agencies to utilize effectively the reports.
The
existing rules might be modified so that a corporation
or individual often
in~olved
in large currency
transactions for legitimate purposes could obtain
an
IRS exemption from reporting.
If such reporting requirements are to be effective,
individuals involved in currency transactions must be
required to provide adequate identification to the
reporting institutions.
14
International Currency Movements
Persons who do not use financial institutions to
send funds out of or into this country but who export
or import substantial amounts of currency or the
equivalent by other means such as mailing or the
physical carrying of currency could frustrate attempts
to obtain information through financial institutions.
The bill would require a report of the physical
movement of currency or coin of the United States in
or out of this country of $5,000 or more or if the
transferor has transferred more than $10,000 in the
calendar year.
The Treasury task force is considering whether
an approach along these lines would be useful and
whether it is feasible.
In evaluating such an approach,
we must balance the freedom to travel without cumbersome
formalities and legitimate enforcement needs.
In
addition, a number of specific problems would have to
be resolved.
15
Reporting of Foreign Bank Accounts
Section 241 of the bill requires reports of
transactions with foreign financial institutions that
do not make records available to U.S. authorities, which
are made by U.S. residents, citizens, or persons doing
business here, both acting for themselves or acting on
behalf of others.
This provision seems to require
excessive reporting and raises many serious issues.
Perhaps a more productive approach would be to
require that U.S. citizens and residents be required to
disclose the existence and identification of accounts
they maintain in foreign financial institutions.
We are
exploring whether such information might be filed with
the annual income tax return.
Once the Internal Revenue
Service knows of an account, it would be in a position
to make necessary inquiries.
Presumptions
While under the Internal Revenue Code the taxpayer
generally has the burden of proof in connection with
his tax liability, we are considering whether it would
16
also be helpful and appropriate for certain special
presumptions to be established so that information can
be effectively used in tax cases where the taxpayer
hides behind the bank secrecy laws of other countries
and refuses to supply the Revenue Service with information
that the taxpayer has a right to obtain.
In discussing the use of foreign secret bank
accounts with Internal Revenue enforcement personnel,
we have been informed that in a substantial number of
cases, it has been established that taxpayers have
engaged in transactions with foreign banks in countries
that recognize bank secrecy under circumstances in which
it 'was reasonable to presume that the taxpayer's unreported
income was involved in the transaction.
However, the
Service has generally concluded that the evidence
available to it would not be considered adequate by a
court.
We are reexamining this from two points of viewo
First, whether under current case authorities,
courts might be willing to make factual inferences as to
transactions with foreign banks along the lines of the
17
inf~rences
courts now make in passing on determinations
of tax made by the Commissioner of Internal Revenue by
the use of such methods as the net-worth method and the
bank deposit method.
Second, whether legislative
recommendations to effectuate comparable results should
be made either because of the limitations of, or
uncertainty as to, existing law.
It might be useful if I indicated, by way of example,
a specific type of case in which a presumption might be
used.
In a number of instances, United States taxpayers
have borrowed money from foreign banks and have claimed
interest deductions on the basis of the interest paid.
The loan might or might not be perfectly legitimate, but
the bank secrecy laws prevent the Revenue Service from
obtaining the facts necessary to make that judgment
itself.
The taxpayer might have deposited his own funds
in the foreign bank which could represent unreported
income, earned legally or illegally, and have failed to
report the income earned by investing such funds.
In order
to obtain the use of the funds, he might arrange to have
18
the foreign bank purport to lend him his own money.
In
addition, he could claim deductions for the alleged
interest paid on the purported loans.
In such a case, it might be reasonable to require
the taxpayer to obtain a full statement from the foreign
bank as to the source of and security for the borrowed
money and other appropriate details of the transaction
and related transactions.
For example, a customer
of
a bank is generally entitled to a full report on his
transaction with the bank.
In cases where he fails to
do this, we are considering whether it would be
appropriate to presume that he has obtained from the bank
his own untaxed income.
In other cases where U.S. citizens or residents
cannot explain their participation in international
transactions (and they refuse to make available to the
Internal Revenue Service information which they could
obtain from foreign banks) we are considering whether it
might also be appropriate to presume that the amounts
involved represent the citizen's or resident's untaxed
income.
!/~/j
I
(
19
The Treasury task force referred to is actively
looking into the presumption area.
This completes my discussion of areas which the
Treasury is studying.
We have not submitted a technical analysis of the
bill nor discussed all aspects of the bill going beyond
the foreign bank account problem.
The Treasury task
force has the bill under technical review and our comments
in that regard will be made available to the Committee.
In developing new approaches in this area, we are
mindful of our responsibilities and the special role of
the dollar as the world's major transactions currency and
reserve currency.
The ability to use and invest dollars
is fundamental to the functioning of the international
monetary system and has been an important element in the
great expansion of trade and investment and has facilitated
the prosperity which the world now enjoys.
Nothing
should be done which would adversely affect the usefulness
of the dollar for these purposes.
We must proceed
carefully in this area since any legislation which
20
inadvertently had the effect of lessening confidence in
our currency or our economy could do substantial damage
without furthering our objective of improved law
enforcement.
In addition, it must be recognized that the use of
foreign banking facilities is a necessary and vital
element in today's world where international trade and
investment play such major roles.
We are also mindful of the precious freedoms
recognized by our Constitution, such as the freedom
from search and seizure and the privilege against
self incrimination.
We also recognize that fundamental
to our society is the concept of the right of privacy.
Any measures which deal with the foreign bank account
problem must be consistent with these freedoms.
The Treasury will continue to work on these matters
and continue its meetings with banks and other financial
institutions.
At the completion of tpis study, the
Treasury will be in a position to offer the Committee
further help in this important work.
21
In conclusion, the Treasury recognizes that evasion
by United States citizens and residents through the use
of foreign secret bank accounts is a serious enforcement
problem for which strong measures are required.
The
Treasury fully supports the objective of H.R. 15073 to
deal with secret foreign accounts which aid tax evasion
and other violations of United States laws.
We feel,
however, that the bill goes too far and that additional
work is required to determine the best way to achieve
this objective without hampering the free flow of
international commerce, without creating undue cost and
administrative burdens on both the private sector and
government, while preserving the status of the dollar as
the major transactions currency and reserve currency of
the world.
We believe that measures can be developed
which would not create these problems and which would be
effective in helping us fight tax evasion and other
criminal activities of United States citizens and
residents.
The Treasury has given this effort high priority
22
and in so doing will continue its work with other
governments and will actively pursue its review of
measures which can be developed administratively and by
legislation.
21
In conclusion, the Treasury recognizes that evasion
by United States citizens and residents through the use
of foreign secret bank accounts is a serious enforcement
problem for which strong measures are required.
The
Treasury fully supports the objective of H.R. 15073 to
deal with secret foreign accounts which aid tax evasion
and other violations of United States laws.
We feel,
however, that the bill goes too far and that additional
work is required to determine the best way to achieve
this objective without hampering the free flow of
international commerce, without creating undue cost and
administrative burdens on both the private sector and
government, while preserving the status of the dollar as
the major transactions currency and reserve currency of
the world.
We believe that measures can be developed
which would not create these problems and which would be
effective in helping us fight tax evasion and other
criminal activities of United States citizens and
residents.
The Treasury has given this effort high priority
22
and in so doing will continue its work with other
governments and will actively pursue its review of
measures which can be developed administratively and by
legislation.
TREASURY
J
i
'i .... i"-Y .(~\ ' . <4) :
\
\
WfI.SH[NGTON. D.C.
D0cember 10, 1969
\
FOR IMMEDIATE RELEASE
TREASURY SECRETARY KENNEDY
RETURNS EARLY fOR TAX CONFERENCE
The Treasury Department announced today that
Secretary David H. Kennedy vJil1 return Thursdav from
Europe in order to be in \'Jashington \.J11ile Hous~ and
Senate conferees determine the fina] shape of the
tax bill.
The Secretary, who attended the NATO Ministerial
meeting in Brussels last vleck, also visited the Hague,
London, Frankfort, Ponn anj Paris, to discuss the currE.'nt
interna-i.:ional economic and financial situation vJi th
his counterparts.
The Secretory had also hoped to visit Rome, but
returning early because it appears that the tax
bill will be sen~ to confer'E'~nce sooner than vJas antici·pated.
lS
Pau] Volcker, Under Secretary for Monetary Affairs,
who accompanied ttle Secretary, wi]l continue to Rome
for visits there with Emilio Colombo, Minister of the
Treasury, and Guido Carl i, Governor of the Bank of Ita ly.
000
TREASURY DEPARTMENT
Washington
FOR RELEASE 1~30 P.M., EST
FRIDAY, DECEMBER 12, 1969
EXCERPTS FROM REMARKS BY PROFESSOR HENRY C. WALLICH
SENIOR CONSULTANT TO SECRETARY OF THE TREASURY DAVID M. KENNEDY
AT THE AMERICAN BUSINESS AND THE FUTURE OF THE
INTERNATIONAL MONETARY SYSTEM SEMINAR OF
THE AMERICAN MANAGEMENT ASSOCIATION,
NEW YORK, NEW YORK, DECEMBER 12, 1969
THE VIABILITY OF THE PRESENT INTERNATIONAL SYSTEM
The sponsors of this session have wisely disposed that,
before turning to the subject of reform, a look be taken at
the system that is proposed to be reformed. To consider the
viability of the present system is the purpose of these remarks.
I would hope that viability of the existing system is not
the sole criterion of the need for reform. We should have
enough interest in improvements to make us willing to reform
a system even if it has not become unviable, provided we have
something better to put in its place. But neither should we,
in order to promote a reform that we find intellectually
stimulating, give up a well working system for something
about which we know very little.
First, let me note that "the present system" is capable of
different interpretations. Is it a system, as one might have
said a year ago, in which major countries refuse to adjust
their exchange rates even when confronted with the evidence
of strong disequilibrium? Or is it a system in which, as some
might say today, major countries make rate adjustments
Skillfully and with a relative minimum of disturbance to the
system? Unwillingness to make discrete rate changes of the
sort provided for in the Fund's charter has been one of the
main reasons for proposing limited flexibility. The two recent
major rate changes don't add up to conclusive evidence that the
adjustable peg system is now at last working flexibility. But
neither can one proceed to talk about limited flexibility as if
nothing had happened this summer and fall. At a minimum, the
K-296
- 2 degree of urgency that some countries may have felt about the
need for reform may have changed. On the other hand the starting
conditions for a crawling peg have improved thanks to the
realignments that have occurred. In addition, the short happy
life of the floating D-markhas provided some new evidence to
which I want to return later.
To put the matter in briefest terms, I believe that the
difficulties that have cumulated within the existing system,
as a system, are still with us. They are familiar. The
development of large capital movements, inadquately foreseen
at Bretton Woods, has made rate changes more difficult
because every prospective change evokes massive speculation.
Maintenance of stable rates has become more difficult because
some countries, including our own, have indulged in higher
rates of inflation. Meanwhile it has begun to appear also
that there may be systematic differences among countries in
their degree of inflation-proness. We would then confront,
not just the danger of random over-and-undervaluation of
currencies, but systematic trends in one or the other direction.
Finally, as my colleague Hank Houthakker has documented, the
long term elasticities of demand for imports differ among
countries, so that even if rates of inflation and rates of
income growth were the same among countries, their imports
would develop differently.
All these developments calling for more frequent rate
changes could be brought under control if countries were
willing and able to coordinate their policies with each other
and if the results of these policies were reasonably
predictable. Efforts in that direction have been going on.
Whatever results may have been achieved can at best have
prevented greater destabilization than actually occurred.
Even within the Common Market, which is based on the assumption
of fixed rates among the members, balance has not been preserved
by coordination.
I have no doubt that at some future time, a system of
durably stable exchange rates will again come into being. It
existed for a hundred years when sterling was the world's
currencyo It exists within every country, including a very
large one such as ourso The experience of the world points
to the overwhelming preference of traders and bankers for such
a system, provided it is truly stable. But the effort to attempt
/ C
i9'
I'
- 3 -
such a system after World War II evidently was premature.
What we got was rigidity, not stability. For the time being,
we must accept not infrequent rate changes. The question is
simply whether occasional changes be relatively large amounts
or continuous changes by small amounts are preferable, and if
the latter, how these frequent small changes should be guided
and limited.
At the last International Monetary Fund meeting in
Washington, Secretary of the Treasury Kennedy proposed a
study of limited flexibility of exchange rates. He indicated
qen-mindedness on the subject but pointed out that in the
U.S. no conclusion on desirability of any of the
techniques widely discussed had been reached. Among other
specific points he noted that, since the dollar was fixed,
the initiative rested with other countries. Subsequently,
Under Secretary of the Treasury Paul Volcker said before a
subcommittee of the Joint Economic Committee that we should
examine the possible usefulness of introducing greater
flexibility into the foreign exchange mechanism, but that
it was far too soon to say which, if any, of the existing
proposals would prove feasible. Thus for the brief official
history of the matter.
It is of some interest to review the evolution of the
counterproposals that have been made to the present system of
temporarily fixed rates, with its built-in temptation to
postpone rate adjustments too long. The first counterproposal, still supported by many, was unlimited flexibility.
Let rates float, free of all intervention, and you will have
no more balance of payments problems, no reserve problems,
no international constraint of domestic policies. The
unrealism and great risks of this proposal led to the wider
band, the grandfather of all limited flexibility plans,
already discussed during the 1920s. It has been referred to
as the solution for the nervous floater. But the wider band,
primarily designed to reduce speculation and cope with random
payments imbalances, aside from giving greater freedom to
domestic monetary policy, was seen to have substantial defect~.
It would not cope with systematic trends in imbalances result1ng,
for instance, from systematically different national rates of
inflation. And cynical critics refused to believe that a
government unwilling to defend its basic parity would nevertheless
bleed reserves to the last drop and die to hold the exchange rate
at some fixed distance from parity.
/7tJ
.
!'
- 4 Thus we came to the crawling peg. It has been described as
the solution for the nervous stabilizer o Of all the devices, it
is closest to stable rates, both in the very limited maximal
variation within a given moderate time period, and in the
relative stability of the rate at anyone moment. Thus, the
defenders of stable rates could tell the flexible rates side
that essentially they, the defenders, had won the argument, and
go horne.
But there is more to the matter than that. The crawling peg
is an ingenious device, but it comes in a large number not only
of sizes, but of structural types. Its usefulness depends not
only on the speed and therefore possible extent per time period
of the crawl, but on whether it is automatic or discretionary,
up and down or one way only, universal or selective, optional
or mandatory, and so on. It has been explored vJith
considerable intensity in recent months and much has been
learned. But the period of exploration and discusion has been
short. Many of the findings remain to be tested and evaluated.
The findings indicate that some of the problems are less
serious than the critics had feared or hoped. This seems to
apply, for instance, to the interest rate constraint, and to
the limitations it might place on monetary policy. A
systematic crawl in one direction is likely to have some effect
on interest rates, not necessarily a great deal, and the
consequences seem livable. Likewise, the concern that foreign
traders and investors could not live with the uncertainties
of a crawl seems overdone. Businessmen know that the system
of adjustable pegs involves the risk of periodic crises with
potentially large gains or losses, and that the defense of these
temporary parities implies the threat of controls. The real
contrast is not between these two systems, but between both of
them and a system of reliably stable rates, made credible by
coordinated policies.
But several problems not initially seen with equal clarity
have also corne into focus.
(1)
It is obvious that so long as the dollar is used
as the intervention currency, the dollar cannot
crawl at all. Other currencies only can crawl
against the dollar. This passive role of the
dollar means, first, that even under a discretionary system the U.S. would have no control
over its own exchange rate. One may
- 5 see in this a certain resemblance to conditions
under the present system. But in any event, the
point needs to be recognized. The passive role of
the dollar means, second, that if the U. S. were
to enter into a negotiation of this proposal with
other countries, and were to urge its adoption,
it would be urging other countries to do something
which it would not do itself. This is different,
for instance, from negotiating SDRs.
(2)
The experience of post World War II exchange rate
movements seems to indicate that currencies more
often go down than up, and go down by larger amounts
than they go up. This bias threatens the dollar
with overvaluation. To be sure, to the extent
that the bias reflects higher rates of inflation
in countries other than the U. S., or other phenomena
causing deficits, a justification can be found.
But there are many reasons for thinking that the
bias goes further. One must suppose that a
similar bias would operate under a crawling
peg system. If so, the dollar would be exposed
to progressive overvaluation. Arrangements
would have to be made to counteract this tendency,
such as firm rules controlling the crawl, or
perhaps limiting it to an upward direction.
(3)
Alternatively, it has been argued that the fear
of excessive downward crawls is overdone, and
that in fact few if any countries would want to
crawl downward at all. This is because the
announcement of downward crawl policy, or the
evidence of it in the exchange markets, would
start speculation. In the words of one commentator,
a country might not admit the need to crawl
down before it was ripe for substantial devaluation.
Under these conditions, crawls would be predominantly
or exclusively upwards, as well as probably
infrequent.
(4)
It seems clear that, at a m~n~mum, many countries
will want to be able to control the timing,
direction, and extent of their exchange rate
movements. This implies a discretionary crawl system.
- 6 -
I
j.r)
I
But for the U. S., and for other countries that
do not expect to crawl, a requirement that
crawlers follow an automatic system holds certain
attractions. In that way, there would be less
danger of blocking movements toward equilibrium.
A conflict of interest thus seems possible.
(5)
There seem to be good reasons for many countries
to avoid crawling-type adjustments altogether.
Small, highly open economies have much to gain
from exchange rate stability. Countries tied
to each other by common market or free trade
area relations may wish to preserve stable rates
among themselves. The recent upward movement
of the D-mark,which may be described as a quick
and limited crawl, demonstrates that this kind
of flexibility creates serious problems for the
Common Market. Members of a common market or
free trade area could of course crawl jointly
while preserving stable rates among themselves.
This would require, however, developing
the appropriate instruments and
techniques for market intervention. It would
require, more importantly, a harmony of interests
in exchange rate matters. If one member of the
group wished to crawl up while another wished to
crawl down, the most likely result would be no
movement at all.
If it should turn out that few countries desire to change
their rates through a crawling peg, does it make sense to
negotiate rules? Practical men do not care to construct
elaborate systems of little practical applicability. Might
it not be more sensible to wait until a candidate presents
himself, allow him to obtain a waiver for his enterprise
from the IMF, and then let him do the best he can for himself
while gathering experience for all of us?
This might seem to be the simple pragmatic answer, and
yet I wonder whether it is. For the U. S. and probably for
others, the experimental approach could hold some risks. As
pointed out above, countries have different interests in the
degree of discretion and automaticity of the crawl. The U. S.
particularly must be alert to a tendency toward overvaluation
of the dollar. These and other issues require prior negotiation,
if the danger of injury is to be forestalled. An experimental
.. 7 ..
17 }
crawl, free from constraining rules and conditions, would
have appeal mainly if it were exclusively in an upward direction.
If the United States were to consent to a more general
scheme involving crawls in both directions, some of the
terms probably would have ~o be spelled out in advance.
000
/
r.~\ t"~i# ~,,,'~ '1'
WASHINGTON. D.C.
~~. ~'; r
~(Jf~;;;li - -~
December 12, 1969
FOR ll-U:·1EDIATE RELEASE
TREASURY ANNOUl'JCES SCHEDULE CHAl;GE FOR
WEEKLY BILL AUCTION DUE TO HOLIDAY SEASON
The Treasury announced today that the vleekly bill auction
normally scheduled for Monday, December 22, "7ill be held.
instead on Friday, December 19.
The day for the auction is
being advanced to assure ample time betvleen it and the payment
date during the holiday season.
The payment and delivery date
for these bills will be Friday, Decenilier 26.
000
K-298
17 )
TREASURY DEPARTMENT
WASHINGTON, D.C.
December 12, 1969
FOR IMMEDIATE RELEASE
DECISION MADE ON TRANSFORMERS
UNDER ANTIDUMPING ACT
The Treasury Department announced today that it has
investigated charges of possible dumping of transfor.mers (of
the type used in consumer electronic products) from Japan.
A notice announcing a tentative determination that this
merchandise is not being, nor likely to be, sold at less than
fair value within the meaning
o~
published in an early issue of
The investigation
reveale~
the Ant1dumping Act will be
~he
Federal Register.
sume instances ot dumping
margins in the earlier part ot the period covered by the
investigation.
Subsequently, however, these aargins were
significantly reduced where they were not coapletely eliainated.
Thereafter, formal assurances were received tram all the manufacturers investigated that they would make
DO
future sales at
less than fair value.
Treasury's tentative negative deter.mination was based
OD
these assurances in the light of the facts Just described.
During the period January 1, 1968, throuah July 31, 1969,
transforaers valued at approximately $4,150,000 vere taported
frOIIl Japan.
000
rREASURY DEPARTMENT
('V
WASHINGTON, D.C.
December 15, 1969
FOR IMHEDIATE RELEASE
TREASURY'S WEEKLY BILL OFFERING
The Treasury Department, by
for two series of Treasury bills
$3,000,000,000, or thereabouts,
Treasury bills maturing December
$ 2,900,840,000,
as follows:
this public notice, invites tenders
to the aggregate amount of
for cash and in exchange for
26 , 1969 , in the amount of
9~day bills (to maturity date) to be issued December 26, 1969,
in the amount of $ 1,800,000,000,
or thereabouts, representing an
additional amount of bills dated September 25, 1969, and to
mature March 26, 1970,
originally issued in the amount of
$1,201,115,000,
the additional and original bills to be
freely interchangeable.
l8l-day bills, for $ 1,200,000,000,
dated December 26, 1969,
and to mature
or thereabouts, to be
June 25, 1970.·
The bills of both series wi:1 be issued on a discount basis under
::ompetitive and noncompetive bia(~ing as hereinafter pr·ovided, and at
naturity their face amount will be payable without interest. They
~ill 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
~ to the closing hour, one-thirty p.m.,
Eastern Standard
~ime,
Friday, December 19, 1969.
Tenders will not be
~eceived at the Treasury Department, Washington.
Each tender must
)e for an even multiple of $1,000, and in the case of competitive
:enders the price offered must be expressed on the basis of 100,
vith not more than three decimals, e. g., 99.925. Fractions may not
>e used. It is \lrged 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 the refor •
•
Banking institutions generally may submit tenders for account of
!Ustome~s provided the names of the customers are set forth in such
:enders. Others than banking institutions will not be permitted to
;ubmit tenders except for their own account. Tenders will be received
lithout deposit from incorporated banks and trust companies and from
K-299
-
L.
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 fJc, unless the tenders are
accompaniei by an express guararty of payment by an incorporated bank
or trust company.
Immediately after the closing hour, tenders will be opened at
the Fede,:al Reserve Banks and Branches, following which public announce
ment 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 Secmtary 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 on December 26, 1969, in cash or other immediately
available Dnds or in a like face amount of Treasury bills maturing
December 26, 1969; provided, hOvlever, that if tenders are submitted
to a Federal Reserve Bank or Branch that will be closed on
December 26, settlement must be co;npleted at such bank or branch on
either D~cember 24, or on Dece'lher 29 with payment of trree clays'
ace ::ued iGterest unless settle:nent is made with Treasury bills maturing
December 26. 19690 Cash and e'J.hr.;:lge tenders will reCE.lVe equai
treatmen:::.. Cash adjustment~ will be made for differences between the
par- valu,~ ')f maturing bills accepted in exchange and the i~;sue price of
the neh' i)il 1S.
The income derived from TreQBury bills, whether interest or
gain from the sale or other di~nnsition of the bills, does not have
any exempt:!cn, 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, iL'heritance, gift or other excise taxes, whether Federal or
State, but are exempt from all taxation now or hereafter imposed on
the princ:!.?al or interest ther20f by any State, or any of the
possessions of the United States~ or by any local taxing authority.
For PUL'POE2S of taxation the amo~rct of discount at which Treasury
DilLS are originally sold by the Vnited 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
3c1 d ~ t'E deemed or otherwise disposed of, and such bill s are excluded
frow corsideration as capital as;;ets. Accordingly, the owner of
l.'reasury bills (other than life insurance companies) issued hereunder
;':2eCi. ::'nc lude in his income ta~~ ::.""'turn only the difference betlaleen
->E Drice ?aid for such bills, 'Nhether on original issue or on
- 3 -
subsequent purchase, and the amount actually received either upon
sale or redemption at mat~rity during the taxable year for which the
return is made, as ordinary gain or loss.
Treasury Department Circular No. 418 (current revision) and this
notice prescribe the terms of the Treasury bills and govern the
conditions of their issue. Copies of the circular may be obtained
from any Federal Reserve Bank 0bO~ranch"
TREASURY DEPARTMENT
WASHINGTON. D.C.
FOR RELEASE 6:30 P.M.,
Monday, December 15, 1969.
RESULTS OF TREASURY'S WEEKLY BILL OFFERIHG
The Treasury Department announced that the tenders for two series of Treasury
bills, one series to be an additional issue of the bills dated September 18, 1969, and
the other series to be dated December 18, 1969, which were offered on December 10, 1969,
were opened at the Federal Reserve Banks today. Tenders were invited for $1,800,000,OOC
or thereabouts, of 91-day bills and for $1,200,000,000, or thereabouts, of 182-day
bills. The details of the two series are as follows:
RANGE OF ACCEPTED
COMPETITIVE BIDS:
91-day Treasury bills
maturing March 19, 1970
Approx. Equiv.
Price
Annual Rate
98.033
7.782~
97.988
7.960%
97.998
7.920%
11
!I
High
Low
Average
182-day Treasury bills
maturing June 18, 1970
Approx. Equiv.
'Annual Rate
Price
96.030 pJ
7.853~
95.980
7.952%
95.995
7 .92~
11
!I Excepting
2 tenders totaling $202,000; b/ Excepting 1 tender of ~;4 000
3~ of the amount of 91-daY'bills bid for a~the low price was accepteJ
9~ of the amount of 182-day bills bid for at the low price was accepted
TOTAL TENDERS APPLIED FOR AND ACCEPTED BY FEDERAL RESERVE DISTRICTS:
District
Boston
New York
Philadelphia
Cleveland
Richmond
Atlanta
Chicago
St. Louis
Minneapolis
Kansas City
Dallas
San Francisco
TOTALS
U
~
AcceEted
AEElied For
$ 37,536,000 $ 27,536,000
1,027,S16,000
1,756,936,000
44,504,000
29,504,000
47,419,000
47,419,000
19,108,000
19,108,000
44,028,000
56,028,000
218,044,000
228,044,000
44,016,000
52,516,000
16,115,000
16,600,000
29,690,000
29,690,000
21,096,000
28,096,000
276,978,000
349.478,000
AEElied For
$ 19,884,000
1,430,225,000
24,175,000
61,629,000
13,939,000
47,738,000
131,039,000
37,575,000
11,278,000
29,361,000
26,922,000
342,170,000
$1,801,050,000
£I $2,175,935,000
$2,665,955,000
AcceEted
9,884,000
$
705,125,000
13,723,000
46,629,000
13,939,000
33,538,000
87,620,000
31,975,000
10,228,000
28,244,000
16,922,000
202,667,000
$1,200,494,000 Q)
Includes $395,810,000 noncompetitive tenders accepted at the average price of 97.99E
InclUdes $263,488,000 noncompetitive tenders accepted at the average price of 95.99~
These rates are on a bank discount basis. The equivalent coupon issue yields are
8.1~ for the 91-day bills, and 8.37~ for the lB2-~ bills.
/7,f
TREASURY DEPARTMENT
WASHINGTON. D.C.
December 16, 1969
FOR IMMEDIATE RELEASE AT 9 A.M. (EST)
The Treasury today released the following statement:
The question of the appropriate handling of newly
mined gold within the framework of the two-tier gold
market has been reviewed by United States officials in
contacts over the past several weeks with financial
officials of a number of individual countries in Europe
and elsewhere, including the Union of South Africa
as well as with officials of international financial
organizations.
These discussions suggest that a basis for a
satisfactory mutual understanding may be emerging.
It is anticipated that these discussions will now
be pursued in the framework of the International
Monetary Fund.
(This statement was released simultaneously by the
U. S. Embassy in Rome)
000
K-300
TREASURY DEPARTMENT
FOR IMMEDIATE RELEASE
WASHINGTON, D.C.
December 16, 1969
TREASURY'S MONTHLY BILL OFFERING
The Treasury Department, by
for two series of Treasury bills
$1,500,000,000, or thereabouts,
Treasury bills maturing December
$1,499,702,000,
as follows:
this public notice, invites tenders
to the aggregate amount of
for cash and in exchange for
31,1969,
in the amount of
273-day bills (to maturity date) to be issued December 31, 1969,
in the amount of $500,000,000,
or thereabouts, representing an
additional amount of bills dated September 30,1969,
and to
mature September 30,1970, originally issued in the amount of
$1,005,264,000,
the additional and original bills to be
freely interchangeable.
365-day bills, for $1,000,000,000,
or thereabouts, to be
dated December 31,1969,
and to mature December 31,1970.
The bills of both series will be issued on a discount basis under
competitive and noncompetive 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, Tuesday, December 23, 1969.
Tenders will not be
received at the Treasury Department, Washington. Each tender must
be for an even mUltiple of $1,000, and in the case of competitive
tenders the price offered must be expressed on the basis of 100,
with not more than three dec"imals, e. g., 99.925. Fractions may not
be used. (Notwithstanding the fact that the one-year bills will run
for 365 days, the discount rate will be cmmputed on a bank discount
basis of 360 days, as is currently the practice on all issues of
Treasury bills.) It is urged that tenders be made on the printed
forms and forwarded in the special envelopes which will be supplied by
Federal Reserve Banks or Branches on application therefor.
Banking institutions -generally may submit tenders for account of
cus~omers provided the names of the customers are set forth in such
tenders. Others than banking institutions will not be permitted to
K~301
- L -
submit tenders except for their own account. Tenders will be received
without deposit from incorporated banks and .tr~st companies and from
responsible and recognized dealers in investment securities. Tenders
from others must be accompanied by payment of 2 percent of the face
amount of Treasury bills applied for, unless the tenders are
accompanied by an express guaranty of payment by an incorporated bank
or trust company.
Immediately after the closing hour, tenders will be opened at
the Federal Reserve Banks and Branches, following which public announce
ment 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 Secmtary of the
Treasury expressly rese~es 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 Rese~e Bank on December 31, 1969, in
cash or other immediately available funds or in a like face amount
of Treasury bills maturing December 31,1969.
Cash and exchange
tenders will receive equal treatment. Cash adjustments will be made
for differences between the par value of maturing bills accepted in
exchange and the issue price of the new bills.
The income derived from Treasury bills, whether interest or
gain from the sale or other disposition of the bills, does not have
any exemption, as such, and loss from the sale or other disposition
of Treasury bills does not have any special treatment, as such,
under the Internal Revenue Code of 1954. The bills are subject to
estate, inheritance, gift or other excise taxes, whether Federal or
State, but are exempt from all taxation now or hereafter imposed on
the principal or interest thereof by any State, or any of the
possessions of the United States, or by any local taxing authority.
For purposes of taxation the amount of discount at which Treasury
bills are originally sold by the United States is considered to be
interest. Under Sections 454 (b) and 1221 (5) of the Internal
Revenue Code of 1954 the amount of discount at which bills issued
hereunder are sold is not considered to accrue until such bills are
sold, redeemed or otherwise disposed of, and such bills are excluded
from consideration as capital assets. Accordingly, the owner of
Treasury bills (other than life insurance companies) issued hereunder
need include in his income tax return only the difference between
the price paid for such bills, whether on original issue or on
subsequent purchase, and the amount actually received either upon
sale or redemption at maturity during the taxable year for which the
return is made, as ordinary gain or loss.
Treasury Department Circular No. 418 (current revision) and this
notice prescribe the terms of the Treasury bills and govern the
conditions of their issue. Copies of the circular may be obtained
from any Federal Reserve Bank 0oO~ranch.
/
TREASURY DEPARTMENT
WASHINGTON. D.C.
December 17, 1969
FOR IMMEDIATE RELEASE
TREASURY ANNOUNCES CHANGES FOR 1970 IN PROGRAMS
TO RESTRAIN CAPITAL OUTFLOWS
The Treasury Department announced today limited changes
for 1970 in the programs to restrain capital outflows from
the U. S.
These programs include the Foreign Direct Invest-
ment Program administered by the Commerce Department and the
Voluntary Foreign Credit Restraint Program administered by
the Federal Reserve Board.
Changes in these programs for
the coming year are designed to assure an ample supply of
export credit finance and to provide somewhat greater leeway
to commercial concerns for investment in less developed
countries.
The Administration objective, as set forth by the
President in his balance of payments statement of April 4,
1969, is to relax and ultimately dismantle these programs of
selective restraints on capital outflows as soon as the
balance of payments position of the United States permits.
However, major progress toward that goal is not possible at
this time in the light of the balance of payments trends this
year and the persistence of strong inflationary pressures
in the domestic economy.
K-302
(OVER)
- 2 The specific changes in the programs administered by
the Commerce Department and by the Federal Reserve Board
are described in separate releases issued by them today.
TREASURY DEPARTMENT
Washington
STATEMENT OF EUGENE T. ROSSIDES
ASSISTANT SECRETARY OF THE TREASURY
before the
SUBCOMMITTEE ON PUBLIC aUILDINGS AND GROUNDS
SENATE COMMITTEE ON PUBLIC WORKS
December 18, 1969
10 a.m.
Mr. Chairman and Members of the Committee.
As Assistant Secretary of the Treasury for
Enforcement and Operations, my duties include supervision
of the activities of the Secret Service and the White
House Police Force.
In this connection, I am appearing
before your Committee in support of H.R. 14944 relating
to the establishment of an Executive Protective Service.
H.R. 14944, as amended by the House Public Works
Committee, would change the name of the White House Police
Force to the Executive Protective Service.
In addition
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to the protective duties now performed by the White
House Police, the new protective service would be
authorized to provide protection of foreign embassies
located in the Metropolitan area of the District of
Columbia and in such other areas within the United States
as the President may direct on a case by case basis.
The
authorized statutory strength of the Executive Protective
Service would be limited to 850 members.
The protection to be provided the foreign diplomatic
missions will be preventive in nature, not investigative.
It is not contemplated that the Executive Protective
Service to be authorized by the legislation pending before
this Committee will operate as a police force.
It will
not assume the responsibility of the local police department
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to enforce the laws relating to the protection of persons
and property.
The narrowly restricted responsibility
granted to the Executive Protective Service by the bill
is a security authority.
The new Service will not have
a broader police role than is necessary to fulfill the
purposes for which it is established.
Its jurisdiction
will be restricted to the performance of preventive
security functions in very limited areas of responsibility,
i,e., the Executive Mansion and grounds, Presidential
offices, and foreign diplomatic missions.
The
~ltimate
responsibility for the security of foreign
diplomatic missions is a Federal responsibility.
It is
an obligation of the central government under international
law and practice.
American embassies in foreign countries
3
4
receive protection from the central government of the
countries in which they are located.
this protection has been
adeq~ate
In most instances,
to provide reasonable
security for American diplomatic personnel stationed
abroad.
In order to insure the continued security of
American diplomatic personnel, it is incumbent upon the
Federal government to reciprocate and insure reasonable
security to foreign diplomatic missions located in this
country.
To this end, the foreign diplomatic corps has
repeatedly petitioned the State Department and the Office
of the President for increased protection due to the
high incidence of crime directed at foreign embassies
5
and their personnel.
These complaints have come to the
attention of the President and, at his direction, the
Treasury Department sponsored legislation that would
create a force having the responsibility for protection
of foreign embassies.
With the increase in the crime rate and the current
condition of violence and protest prevailing in our
contemporary society, the President has become increasingly
concerned over the problem of security involving foreign
diplomatic missions and the adverse effect on our foreign
relations which could result if the Federal government
fails to discharge its obligation to provide adequate
security for these missions.
The Executive Protective
Service is designed to meet our responsibility in this area.
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I wish to emphasize again, however, that is is not
coqtemplated that the Executive Protective Service would
assume the responsibility of the local police to provide
protection for foreign diplomatic personnel and to conduct
criminal investigations involving embassy personnel, or
to furnish officers in adequate numbers to control
demonstrations and other disturbances occurring in close
proximity to foreign diplomatic missions.
As spokesman for the Administration and the President
concerning this problem, I urge your favorable consideration
of the legislation now pending before this Committee.
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Mr. Chairman, the distinguished Director of the
Secret Service and the White House Police, Mr. James J.
6
Rowley, will discuss in more detail the Executive
Protective Service and will amplify the operational
aspects of this approach.
Director Rowley and I
will be pleased to answer any questions that you or any
other members of the Committee may have.
TREASURY DEPARTMENT
WASHINGTON. D.C.
FOR IMMEDIATE RELFASE
December 18, 1969
ISSUANCE OF DUMPING FINDING ON POTASSIUM CHLORIDE
IMPORTS FROM CANA VA, FRANCE AND WEST GERMANY
The Treasury Department announced today that it has issued a finding
that potassium chloride, otherwise known as muriate of potash, from Canada,
France and West Germany is being dumped in the United States within
meaning of the Antidumping Act, 1921, as amended.
~he
The finding, which is
required under tile Antidumping Law, will be published in the Federal
Register of December lY, 1969.
Earlier the Treasury Department determined that potassium chloride from
these three countries was being, and was likely to be sold in the
at less than fair value.
States Tariff Commission
Uni~ed
States,
This was followed by a determination of tne Unhed
tba~
an industry in the United States was being and
was likel: to be injured by reason v r the less than fair value imports.
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Tile
Treasury's determination was published in the Federal Registers of
August. 23 and 26, 1969.
That of the Tariff Commission was published in the
Federal Register of NovemLer 27, 1969.
Following today's fInding, dwmping duties will be assessed on al~ Canadian.
French and West German potassium chloride imported into the United States on
or after June 18, 1968, at dumped prices.
From August 1, 1967, tilrough December 31, 1968, potassium chloride imports
frOm Canada were valued at approximately $35 million.
West Germany were considerably less.
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Imports from France anu.
TREASURY DEPARTMENT
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WASHINGTON. D.C.
December 19,1969
FOR IMMEDIATE RELEASE
TREASURY REALIZED t22.3 MILLION SAVINGS IN
FISCAL 1969 THROUGH MANAGEMENT IMPROVEMENTS
The Treasury Department said today it saved $22.3 million
by management improvements in fiscal year 1969, the highest in
the 23-year history of the Department's program.
In a pamphlet entitled, "Progress in Management Improvement,"
the Department said that additional benefits amounting to
$141.3 million came about from legislative or administrative
policy changes. The total figure -- $163.6 million -- exceeded
the previous record high by approximately $18 million.
Examples of the achievements of the Department listed in the
booklet include:
3~-page
The Bureau of Accounts ~;aved $1.8 million in process ing
tax deposits under a newly developed automated Pederal
Tax Deposit Sys tern.
The Bureau of the Mint r~alized $6.5 million in revenue
from the sale of proof coin sets and uncirculated coin
sets.
By applying a sophisticated "discriminant function"
t0chnique to the automated selection of tax returns
for audit, the Internal Revenue Service produced an
additional $504 million tax yield.
Bureau of Customs saved $3.4 million from tts
management improvements such as the "accelerated
passenger inspection system" which reduced the time to
clear arriving passengers at John F. Kennedy International
Airport in New York from 45 to 20 minutes.
l'hp
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TREASURY DEPARTMENT
WASHINGTON. D.C.
)R RELEASE 6:30 P.M.,
t'iday, December 19 z 1969.
RESULTS OF TREASURY'S WEEKLY BILL OFFERING
The Treasury Department announced that the tenders for two series of Treasury
ills, one series to be an additional issue of the bills dated September 25, 1969, and
le other series to be dated December 26, 1969, which were offered December 15, 1969,
!re opened at the Federal Reserve Banks today. Tenders were invited for $1,800,000,000,
r thereabouts, of 90-day bills and for $1,200,000,000, or thereabouts, of 181-day bills.
le details of the two series are as follows:
lliGE OF ACCEPrED
lffi:TITIVE BIDS:
High
Low
Average
90-day Treasury bills
maturing March 26. 1970
Approx. Equiv.
Price
Annual Rate
98.060
7.76~
98.041
7.836~
98.049
7 .804~
11
181-day Treasury bills
maturing June 25. 1970
Approx. Equiv.
Price
Annual Rate
96.094
7 .76~
96.057
7.842~
96.071
7 .815~ 11
52%. of the amount of 90-day bills bid for at the low price was accepted
47% of the amount of 181-day bills bid for at the low price was accepted
ITAL TENDERS APPLIED FOR AND ACCEPrED BY FEDERAL RESERVE DISTRICTS:
District
Boston
New York
Philadelphia
Cleveland
Richmond
Atlanta
Chicago
St. LOUis
Minneapolis
Kansas City
Dallas
San FranCisco
TarALS
~lied
Acce~ted
$2,432,178,000
$1,800,058,000
For
46,331,000
1,737,369,000
34,177,000
39,257,000
30,203,000
46,551,000
198,831,000
51,303,000
14,182,000
35,865,000
26,661,000
171,448 ,000
$8,931,000
1,255,329,000
19,177,000
39,222,000
25,243,000
33,876,000
167,043,000
41,719,000
13,182,000
35,627,000
18 ,181,000
112,528 ,000
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A,E,E1ied For
$ 20,007,000
1,304,927,000
21,314,000
53,988,000
13,489,000
38,762,000
186,036,000
31,764,000
8,814,000
29,739,000
24,277,000
130,222,000
AcceEted
$ 10,007,000
823,503,000
11,314,000
50,940,000
11,489,000
28,367,000
153,836,000
25,164,000
8,814,000
29,589,000
15,277,000
31,719,000
$1,863,339,000
$1,200,019,000
£I
Includes $339,315,000 noncompetitive tenders accepted at the average pr~ce of 98.049
Includes $203 692 000 noncompetitive tenders accepted at the average prlce of 96.071
These rates a;e o~ a bank discount basis. The equivalent coupon issue yields are
8.07~ for the 90-day bills, and 8~25~ for the 18l-day bills.
"REASURY DEPARTMENT
WASHINGTON. D.C.
December 22, 1969
~OR
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
?3,000,000,000, or thereabouts, for cash and in exchange for
rreasury bills maturing January 2, 1970,
in the amount of
~2,911,209,000,
as follows:
90 -day bills (to maturity date) to be issued January 2, 1970,
the amount of $1,800,000,000,
or thereabouts, representing an
ldditional amount of bills dated October 2, 1969,
and to
lature April 2, 1970,
originally issued in the amount of
;1,208,450,000,
the additional and original bills to be
:ree1y interchangeable"
~n
181-day bills, for $1,200,000,000,
or thereabouts, to be
and to mature July 2, 19700
.ated January 2, 1970,
The bills of both series will be issued on a discount basis under
ompetitive and noncompetive bidding as hereinafter provided, and at
.aturity their face amount will be payable without interest. They
ill 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
p to the closing hour, one-thirty p.m., Eastern Standard
ime, Monday, December 29, 1969.
Tenders will not be
eceived at the Treasury Department, Washington. Each tender must
e for an even mUltiple of $1,000, and in the case of competitive
enders the price offered must be expressed on the basis of 100,
ith not more than three dec·imals, e. g., 99.925. Fractions may not
~ used.
It is 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
lstomer.s previded the names of the customers are set fortl in such
mders. OtI-ers than banking instii.:utions will not be perl1itted to
~bmit tenders except for their own account.
Tenders will be received
Lthout depo' it from incorporated banks and trust companie; and from
K-304
- 2 responsible and recognized dealers in investment securities. Tenders
from others must be accompanied by payment of 2 percent of the face
amount of Treasury bills applied for, unless the tenders are
accompanied by an express guaranty of payment by an incorporated bank
or trust company.
Immediately after the closing hour, tenders will be opened at
the Federal Reserve Banks and Branches, following which public ann Ounc I
ment 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 rej ection thereof. The Secre tary 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 January 2, 1970, in
cash or other immediately available funds or in a like face amount
of Treasury bills maturing January 2, 1970.
Cash and exchange
tenders will receive equal treatment. Cash adjustments will be made
for differences between the par value of maturing bills accepted in
exchange and the issue price of the new bills.
The income derived from Treasury bills, whether interest or
gain from the sale or other disposition of the bills, does not have
any exemption, as such, and loss from the sale or other disposition
of Treasury bills does not have any special treatment, as such,
under the Internal Revenue Code of 1954. The bills are subject to
estate, inheritance, gift or other excise taxes, whether Federal or
State, but are exempt from all taxation now or hereafter imposed on
the principal or interest thereof by any State, or any of the
possessions of the United States, or by any local taxing authority.
For purposes of taxation the amount of discount at which Treasury
bills are originally sold by the United States'is considered to be
interest. Under Sections 454 (b) and 1221 (5) of the Internal
Revenue Code of 1954 the amount of discount at which bills issued
hereunder are sold is not considered to accrue until such bills are
sold, redeemed or otherwise disposed of, and such bills are excluded
from consideration as capital assets. Accordingly, the owner of
Treasury bills (other than life insurance companies) issued hereunder
need include in his income tax return only the difference between
the price paid for such bills, whether on original issue or on
subsequent purchase, and the amount actually received either upon
sale or redemption at maturity during the taxable year for which the
return is made, as ordinary gain or loss.
Treasury Department Circular No. 418 (current revision) and this
notice prescribe the terms of the Treasury bills and govern the
conditions of their issue. Copies of the circular may be obtained
from any Federal Reserve Bank o~n~ranch.
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REASURY DEPARTMENT
,
WASHINGTON. D.C.
December 23, 1969
FOR IMMEDIATE RELEASE
TREASURY SECRETARY KENNEDY NAMES WENDELL E. GILE
AS NEW SAVINGS BONDS CHAIRMAN FOR STATE OF UTAH
Wendell E. Gi1~, Senior Vice President and Director, The
Continental Bank and Trust Co., Salt Lake City, Utah, was appointed by Secretary of the Treasury David M. Kenned '/ as volunteer State Chairman for the Savings Bonds Program in Utah,
effective December 18, 1969.
He has served as State Coordinator for the American Bankers
Association Savings Bonds Committee since 1965.
Mr. Gi1e will head a committee of state business, finance,
labor and government leaders who -- working with the Savings
Bonds Division -- will assist in promoting the sales of Savings
Bonds.
Hr. Gi1e, who is also Chairman of the Board, First National
Bank, Evanston, Wyo., has bee71 active in civic and banking circles for many years. He is Ch;:tirman, Great Salt Lake Committee,
Salt Lake Chamber of Commerce; Chairman, Utah State Library
Commission; Member and former President and Director, Bonneville
Knife and Fork Club; Chairman, Neighborhood House Committee,
Kiwanis Club.
He was a member of the Utah Bankers Association Executive and Legislative Committees for several years. He also
served two terms as President, Mountain States Chapter,
Robert Morris Associates.
Mr. Gi1e was born in Montpelier, Vt., on February 10, 1914.
He received a Bachelor of Arts Degree in Business Administration from Boston University, and also attended law school. During World War Two, he served in the Air Force Finance Department, retiring as a colonel. He is married to the former Jane
Dooly; they have a daughter, Bonnie Jane.
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TREASURY DEPARTMENT
WASHINGTON, D.C.
FOR RELEASE 6: 30 P.M.,
Tuesday, December 23, 1969.
RESULTS OF TREASURY'S MONTHLY BILL OFFERING
The Treasury Department announced that the tenders for two series of Treasury
bills, one series tJ be an additional issue of the bills dated September 3(;, 1969,
and the other series to be ciated December 31, 1969, which were offered on Decer:'.ber 16,
1969, were opened at the Federal Reserve Banks today. Tenders were invi tecl f:Jr
$500,000,000, or thereabouts, of 273-day bills and for $1,000,000,000, or thereabJuts,
of 365-day bills. The cietails of the ti":J series are as f:)11ows:
RANGE OF ACCEPTED
COMPETITIVE BIDS:
High
L:Jw
Avcrar:;8
273-clay Treasury bills
n"caturin~ SeEtember 302 1970
Appr:)x. Equiv.
Price
Annual Rate
94.127
7 . 74o,v
94.047
7 .85070
7 .801(i~
94.084
Y
365-day Treasury bills
rr.aturinEj Decel.lber 31~ 1970
Approx. Equiv.
Price
Annual Rate
92.384
7.o12/J
92.289
7 .605~j
92.33,1
1/
7.561,v
--'
99~ of the aM:Junt Jf 273-day bills bid f:Jr at the 1:J~ orice was accc~tei
99j; :.If the al:lJUnt ')f 36;;-day bills bid. fJr at the ::':.lI'J price 1:1as Clcceptec.
'i'OTAL TEl'rD3RS APPLIED FOR AK.o ACCEPrED BY FEj)ERAL RESERVE
DL,trict
Bosbn
New York
Philadelphia
Cleveland
Richrlond
Atlanta
Chicag:)
St. L0u2.s
Hinneapolis
Y~nsas City
Dallas
San Francisco
TOTALS
AcccEteJ
AEElied F:::;r
6,634,000
6,634,000 $
$
362,708,000
779,803,000
1,682,000
6,682,000
2,217,000
2,217,000
9,559,000
9,559,000
8,639,000
14,639,000
60,687,000
100,687,000
12,477,000
16,477 ,000
938,000
938,000
1,418,000
1,418,000
10,125,000
11,125,000
22,960,000
52,965,000
~1,O03,149,000
~ Includes $24,446,000
$
~00,044,000 ~
DIS~RICTS:
APlllieci For
$ 11,G81,OC1O
1,168,136,000
14,685,000
44,654,000
5,051,000
17 ,644,000
241,767,000
21,204,000
1,107,000
5,957,000
12,915,000
98,645,000
AccCI2 tec
:p
781,000
699,136,000
4,667,000
34,454,000
5,051,000
9,644,000
197,517,000
12,204,000
1,107,000
5,957,000
5,915,000
23,645,000
$1,643,046,000
~1,000,078,000
£./
noncompetitive tenders accepted at the average ~rice of 94.084
noncompetitive tenders accepted at the averac;e price of 92.334
1/ These rates are::m a bank discount basis. The equivalent coupon issue yields are
8.29)S for the 273-day bills, and 8.14% for the 365-day bills.
E./ Includes $60,336,000
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TREASURY DEPARTMENT
t
WASHINGTON, D.C.
FOR IMMEDIATE RELEASE
December 23, 1969
COIN PRODUCTION AT NEW PHILADELPHIA MINT
REACHES 8 MILLION PIECES DAILY
Eugene T. Rossides, Assist~nt Secretary of the Treasury
for Enforcement and Operations, today issued the following statement:
Production of coins at the new Philadelphia Mint has
reached 8 million coins a day.
The "break-in" period at the new facility, which
opened August 14, will continue through calendar 1970.
When the new mint is operating on a full two-shift, five
day week schedule it is expected that production will
reach 16 million coins per day. Current production is
achieved on the same work schedule.
The new facility has resulted in improved security,
better docking, loading al~ ~torage facilities and more
efficient lay-outs with cuntinuous casting and rolling
procedures. For the first time the Philadelphia i'-r~nt
will have capacity to prepare the bonded strip foe the
manufacture of the cupro-nickel dimes and quarters. A
portion of the bonded strip produced in Philadelphia
will be shipped to Denver for coining operations since
the Denver Mint is not equipped for the bonding process.
The Mint, with the approval of the Congress, had sought
higher speed and more efficient coining equipment. One
of the methods tried was a General Motors Corporation
suggestion for the production of coins by a rolling rather
than stamping methodo In 1965, the Bureau of the Mint
entered into a contract with General Motors for a
prototype coin rolling machine. That corporation 'l1.ade
an extensive study of coin production and constructed and
tested a prototype coin rolling machine at its own expense.
K-306
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For several months this prototype machine underwent tests
at the new Philadelphia Mint. It is capable of producing
U.S. cent coins. However, lengthy t~sts have shown that
the effective life of dies used on the roller is much
shorter than dies used in the conventional stamping
processes.
This short die-tool life and other mechanical
problems makes the coin roller uneconomical in comparison
with a four-strike presses which the Mint developed
during the coin shortage and during the development of
the coin roller. In view of this, the Treasury and
General Motors have mutually agreed to abandon further
efforts to complete the coin roller at this time.
Treasury, with concurrence of the Bureau of the
Budget and the appropriate Congressional appropriation
committees, is issuing orders for conventional stamping
presses of the most modern high speed four-strike type
with improved supporting equipment to meet the planned
coin production capacity of 8 million coins per shift
per day. Until the new equipment is installed, the Mint
will meet the Nation's coinage requirement with existing
equipment and use of both the new and the old facility
in Philadelphia.
It is expected that ')peration at the Old Mint will
be terminated in approximately a year.
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TREASURY ; DEPARTMENT
WASHINGTON, D.C.
December 24, 1969
FOR RELEASE AT 10:00 A.M., EST
WEDNESDAY, DECEMBER 24, 1969
UNITED STATES AND MEXICO EXTEND
EXCHANGE STABILIZATION AGREEMENT
Secretary of the Treasury David M. Kennedy and the
Ambassador of Mexico, Hugo B. Margain, have exchanged
letters extending the $100,000,000 Exchange Stabilization
Agreement between the United States Treasury, the Bank
of Mexico, and the Government of Mexico signed on
December 21, 1967, for a two-year period ending
December 31, 1971.
This exchange of letters represents a continuation
of the stabilization arrangements between the United
States and Mexico which have been in effect since 1941,
and have proved beneficial to the financial relationships
between the two countries.
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K-307
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TREASURY DEPARTMENT
WASHINGTON, D.C.
FOR RELEASE A.M. NEWSPAPERS
FRIDAY, ,DECEMBER 26, 1969
December 24, 1969
TREASURY NAMES TWO AIDES TO COMMISSIONER OF CUSTOMS
TO ASSIST ON DRUG SMUGGLING AND FRAUDS
The Treasury Department today announced the appointment of
Anthony L. Piazza and William B. Butler as Special Assistants to
the Commissioner of Customs for Organized Crime and Smuggling.
They will also act as liaison to Eugene T. Rossides, Assistant
Secretary for Enforcement and Operations.
Mro Piazza will report from New York to Commiss~oner of
Customs Myles J. Ambrose as a member of the Customs team concerned
with the combatting of organized crime, especially drug smuggling
and frauds against the United States Government.
Mr. Butler will operate from Houston in advising the
Commissioner on problems relating to drug smuggling along the
Hexican border.
Mr. Piazza received his B.S. degree from Manhattan College in
1948 and his LL.B. degree from New York Law School in 1953. He was
born in New York City and is a graduate of LaSalle Academy.
Prior to his present appointment he worked for the District
Attorney of New York County, and was Assistant Counsel for the
Waterfront Commission of New York harbor.
Mr. piazza is married and is presently living at Avon-by-theSea, New Jersey. The Piazzas are the parents of five children.
Born in Hillsboro, Texas, Mr. Butler graduated from
San Jacinto High School and attended Houston Junior College (now
the University of Houston) before rece1v1ng his degree from the
University of Texas. He received his LL.B. with highest honors from
the University of Texas.
K-308
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Prior to his appointment, Mr. Butler was the United States
Attorney for the Southern District of Texas and served as the
Assistant United States Attorney in charge of the Civil Division
for the same district.
Mr. Butler is married and lives in Houston, Texas.
Butlers are the parents of three child~en.
000
The
TREASURY DEPARTMENT
FOR IMMEDIATE RELEASE
WASHINGTON. D.C.
December 24, 1969
ASSISTANT SECRETARY ROSSIDES
COMMENTS ON FOREIGN BANK ACCOUNTS
In answer to queries, Assistant Secretary for Enforcement and
Operations Eugene T. Rossides today issued the following statement:
The Treasury Department fully supports the objectives
of H.R. 15073, a bill aimed at the prevention of use of
foreign bank accounts for tax evasion, the smuggling of
narcotics into the United States and other illegal
purposes by U.S. citizens and residents. We so testified
before the House Banking and Currency Committee on
December 10.
We further testified: "To summarize our position,
the Treasury fully supports the objective of H.R. 15073
to deal with secret foreign accounts which aid tax
evasion and other violations of United States laws. We
feel,however, that the bill goes too far and that
additional work is required to determine the best way
to achieve this objective without hampering the free
flow of international commerce, without creating undue
cost and administrative burdens on both the private
sector and government, while preserving the traditional
freedoms of American life, and the status of the dollar
as the major transactions currency and reserve currency
of the world. We believe that measures can be
developed which would not create these problems and
which would be effective in helping us fight tax evasion
and other criminal activities of United States citizens
and residentso"
We did indeed supply the Banking and Currency
Committee at their request with some technical assistance
in drafting the bill it is considering. It has long
been the custom of Treasury to supply technical
assistance to any member of Congress or any Committee
of Congress which is preparing a bill which involves
Treasuryo Such assistance in itself does not constitute
(OVER)
K-309
- 2 evidence that Treasury or the Administration concurs
with the bill' being prepared and the Committee was so
informed. Indeed, since the Treasury's consideration
of this problem had not been completed, we were not
able to determine the exact measures which should be
taken and, therefore, could not make extensive
recommendations to the House Banking and CUrrency
Committee staff. Our ~ole ~n.this case was limited to
a brief technicar-r;view of' drafts made available to us
by the staff of the House Legislative Counsel.
Treasury is studying the problem of the foreign
bank accounts as outlined on December 10 and I expect
to make concrete recommendations at an early date.
While we want to eliminate or greatly restrict the
illegal use of such accounts by Americans, we do not want
to endorse a bill which in fact may fail in its objectivel
We feel that the bill, as drafted, could create a selfdefeating mountain of paperwork. It is essential that
any legislation be carefully tailored to the problem and
to the manpower and other resources of the Internal
Revenue Service and other Government agencies. Without
this, the records made available to us could not be
used with any significant degree of effectiveness.
000
Iff
TREASURY DEPARTMENT
Washington, D. C.
FOR RELEASE UPON DELIVERY
REMARKS OF THE HONORABLE MURRAY L. WEIDENBAUM
ASSISTANT SECRETARY OF THE TREASURY FOR ECONOMIC POLICY
BEFORE THE ANNUAL MEETING OF THE
ALLIED SOCIAL SCIENCE ASSOCIATIONS
NEW YORK CITY
DECEMBER 28, 1969, 2:00 P.M., EST
IS FISCAL POLICY DEAD?:
COMMENT
Only a few years ago, it seemed that fiscal policy was
all that mattered.
ignored.
Monetary considerations were largely
Now the pendulum of economic thinking may be in
danger of swinging to the opposite extreme.
such a swing is ill-advised.
I believe that
One can have great respect for
the analytical and statistical work done by monetary
economists without really believing that money is all
that matters.
Sometimes when I read the studies that attempt to show
that fiscal policy does not matter, it seems that they have
all the objectivity of an impartial evaluation of George
Washington's Army prepared by General Cornwallis.
Money, of course, does matter; but the fiscal position
is also important, from at least two standpoints.
On the
one hand, there is the direct fiscal impact on spending,
on income and output.
On the other hand, there is the
fiscal impact on credit markets.
K-3W
-
2 -
Events following the tax cut of 1964 seemed to verify
the predictability of fiscal policy in promoting, as forecasted, a substantial expansion in output and employment.
The belated tax increase of 1968 has not quite lived up to
that earlier standard of predictability in terms of producing
the forecasted behavior in total spending.
The reasons are complex and deserve careful study.
Is there a basic lack of symmetry between tax reductions
and tax increases?
Or, from a purely analytical view, is
it more important that the 1968 tax increase was viewed by
some taxpayers as a purely temporary measure soon to be
reversed?
expansion?
Was the tax increase thwarted by premature monetary
Or was it the expenditure underestimate in 1968
which caused the damage by encouraging the Federal Reserve
System to ease to avoid an overkill which in reality was not
to occur?
Provisional answers could be given to some of these
questions, but only careful study and research can provide
full insight.
It does seem to me that disillusionment with fiscal
policy, while understandable, is decidedly premature.
Some
of the claims for "fine tuning" undoubtedly were exaggerated.
But some of the current wave of fiscal skepticism seems almost
equally ill-advised.
Fiscal measures have helped to slow
down the economy this year.
What neither fiscal nor monetary
restraint has done -- or should have been expected to do -- was
to quickly arrest a strong inflationary momentum.
- 3 -
The monetarists are riding high these days, but I
suggest that a touch of humility would be in order for them.
I recall that some of them have been urging since early
April that the policy of economic restraint be eased.
Assuming the usual lags that we are so often told of, we
would be in our ninth month now.
I wonder what burst of
renewed inflationary pressures the monetarist approach would
have given birth to by now.
I find the subject of lags in monetary policy a particularly fascinating one.
It seems that the estimate of lag
increases with the application of monetary policy.
Before you
begin to apply monetary restraint, the estimate of the lag
seems to be around six months.
After you have begun monetary
restraint, the estimated lag is set at about nine months.
And when you are in an environment of fairly full monetary
restraint, the lag seems to lengthen to about 12 months or
even becomes "uncertain."
I do not mean to be excessively
critical of the potentials of monetary policy.
I am a strong
adherent of the position that "money matters, but it is not
all that matters in economic policy."
To this observer, one clear lesson of the last few years
is the importance of the Federal fiscal position to money and
capital markets.
Federal deficits at full employment spell
trouble in terms of overstrained financial markets and
upward pressures on interest rates.
- 4 -
Some fiscal skeptics fail to see how a few billion
dollars -- of government money
another.
can matter one way or
"A relatively small budget surplus or deficit,
what's the difference?" seems to be the attitude of at least
a few observers.
What some of the critics forget is that the extra
Federal borrowing, while small relative to total output,
impinges on credit markets whose short-run capacity is
limited.
This can be disruptive in terms of the functioning
of markets, the allocation of credit among different classes
of borrowers (e.g., for home mortgages), and the level of
interest rates.
From a long-run standpoint, there is much to be said
for a Federal surplus, rather than a mere budget balance,
as the high employment target.
Other things being equal,
interest rates will be lower and private capital formation
including housing -- will be higher.
With a surplus, the
Federal Government will be adding to the pool of savings
available for investment rather than competing for private
savings.
However, such long-term policy must take account
of the role of fiscal policy in short-run economic
s tab iIi zation.
-
5 -
Personally, I find that perhaps one of the most
balanced and informed appraisals of the relative merits
of monetary and fiscal policy has been made by Governor
J. Dewey Daane of the Board of Governors of the Federal
Reserve System.
It has become somewhat fashionable to
cite portions of Governor Daane's recent Dartmouth speech
as a vindication of monetary policy.
My own reading of this significant statement is somewhat different.
To be sure, he made the often quoted statement
that the FRB-MIT model "suggests that monetary policy is a
more powerful tool of stabilization policy that most economists,
except perhaps Milton Friedman, would have guessed ... "
However, I find it instructive to read further.
Several
pages later, Governor Daane states that, "What it [the model]
says is that fiscal policy is important and fiscal actions
powerful, independently of what monetary policy does."
For
example, the FRB.:.MIT model appears to show that an increase
in Federal Government purchases of goods and services, not
accompanied by increased tax rates, produces an increase
in GNP of three to four times the rise in Federal outlays,
"even if the Federal Reserve does not finance the deficit
by purchasing securities in the open market."
Governor Daane concludes, from his examination of the
econometric model, that, "In short, monetary policy is quicker
to change, but the lag in effects is larger; fiscal policy is
slower to change
but the lag in effects is shorter."
1
0
~
- 6 -
That is hardly sufficient cause for the burial of
fiscal policy.
We need to recognize the practical
limitations under which fiscal policy operates.
There
are serious barriers to very frequent changes for short-run
stabilization purposes.
Political restraints may at times
result in an inappropriate fiscal policy.
Certainly, the
$25 billion budget deficit in the fiscal year 1968 was a
mark of wrong, but not ineffectual, fiscal policy.
In
retrospect, we would have hoped that fiscal effects then
were weaker than they actually were.
To sum up, there are many sides to the economic elephant,
around which economists are stumbling and of which we are
taking various measurements.
actions.
Money matters, as do fiscal
The state of our economic knowledge does not
justify a doctrinaire dismissal of either stabilization
policy approach.
We have too few effective economic policy
tools to be in a position to abandon any.
The answer to the
question, "Is Fiscal Policy Dead?" is, and should be, a
resounding "NO!"
000
For Releape:
Monday, December
10:30 a.m.
2~), 19VJ
EXCEHPTS F'ROt<1 IUNAHKS BY HENRY C. WALLICH
PROFESSOR OF ECONOllICS, YALE TTNIVERSITY
AND SENIOR COnSULTANT TO THE SECRETARY OF TWJ TREASURY
BEFORE THE JOINT t.1EE'l'ING OF THE AMERICAN ECONOMIC ASSOCIATION
AND THE AMERICAN AGRICULTURAL ECONOMIC ASSOCIATION
Nf.'W YORK, NEVT YORK, DECE:tiBER 29, 1969
CURRENT ECONOMIC POLICIES:
THEIR APPROPRIA'rENESS AND EFFECTIVENESS
In an econOl/ly where policy ",orks with considerable lags, the only
policies one can evaluate are, strictly, those prevailing up to six
months
a~o
or so.
At some risk of being let doyrn by events, I shall
nevertheless comment on policies up to the present.
What I find is
that policies have been both appropriate and effective, the former
perhaps a little more than the latter.
The principal objective of domestic economic policy has been to
end the inflation without incurring excessive risk of recession.
To
this end, expenditures ",ere held dO'.m severely and the tax surcharge
continued in effect throughout 1969.
Monetary policy ",as tightened
around the turn of the year, and made still more restrictive in the
spring.
briefly.
K-311
I would like to review these fiscal and monetary policies
- 2, -
First, it should be apparent that it would not have been easy
to- pursue significantly more
re~trictive
policies.
It has sometimes
been said that very tight policies, pursued at considerable risk of
recession, would have bC0n more effective in halting inflation.
Just \rllaL would have had to be done to implement this prescription?
Cut expenditures still more? -impossible.
Raise taxes beyond the surcharge?
to 'he vi t'turt.lly
flexibility.
Very difficult though perhaps not
i JJlpor.sihJ
I).
So difficult as
Monetary policy alone had sir,nificant
Allow me to give a few details.
Monetary policy, in 1969, seems to ha.ve been guided principally
by a money supply target rather than by an interest rate target.
This seems appropriate at a tj.me of inflation, when the "real" interest rate is almost impossible to diagnose.
But note also that a
money supply target, rigorously pursued, may produce extreme movements
in interest rates.
Observers who favor a balanced approach to policy
targets have found themselves born out in this respect in 1969.
Monetary policy has encountered considerable difficulty in
focussing on a convincing definition of the money supply.
In
mid-year, the Federal Reserve, thanks to.a timely redefinition of the
money supply, discovered th8rt its growth rate had been about four
;lcrccnt instead of only about half as much, as previously believed.
-. 3 I might add that a simUal' miscalculation could be laid at the
door of fiseal policy, "'h:i.ch defines the !"ederal budr;et without
takin~
account of the booming Federal credit programs financed
in the private sector.
In any event, monetary policy makers and
watchers seem to have reached an unspoken agreement to look at
all the large monetary aggregates together -- money supply narrowly
defined, broadly defined, bank credj.t, the monetary base.
This
sidesteps the arr;ument ovr.r what definition of the money supply
to use, of which I nml count. ten.
I must add that all ten definitions suffer from the conunon
defect of bej.nG denominated in current dollars.
i-!e have often
been told that the demand for money must be viewed in real terms,
since people decide the
"That these balances
"rj
sl~.e
11 huy.
of their balances on the basis of
With inflation at four to six
percent and the nominal );'Ioney supply constant, the real supply
has been falling at an annual rate of almost six percent recently.
This has been a very tight policy indeed.
Let me now turn to effectiveness,
were about right.
The policies, I believe,
Ho'''' "rell have they worked?
- 4In an overall sense,
jt
is probably broadly correct to say
that the overexpansion of the economy is beinf, slowed dO\oTn not
too far behind schedule.
I!owever, more of the restraint than
might have been expectcd has fallen upon output, and less upon
prices.
zero.
The rate of output growth has been slowed to close to
But because this has involved reducing productivity gains
also to approx5.mately zero, a reduction in the rate of inflation
has been delayed.
This is understandable in the face of an in-
flat:i.on that, over a period of four, years, has become embedded
and much harder to deal vii th than a short price spurt.
By and
large, this is therefore the order in which one would expect
disinflation to affect ma.ior variables:
first output, then
employment, then prices.
The lags_ of these policies have been on the long side.
Lags
have given rise to scepticism as to the ultimate success of disinflationary policy.
Scepticism has further slowed the process.
But the broad sweep of the monthly data, often observed and
commented much beyond their ability to convey reliable information,
confirms that the process is working.
Only interest rates seem
to be markedly off pattern, reflecting probably the combined effect
of inflation and a money supply target followed by thc monetary
authorities.
The price pattern may become somewhat distorted by
earlier bu5.lt-in cost increases not iJ'!ll'llediately transmitted to
final prices.
- 5 A third area of infll'l.tion control, which I want merely to mel)tion,
relates to a Jeries of steps at the
micro-~conomic
level, covering
Government Procurenlent practices, attempts to eliminate conntruction
cost rigidities. import poHcieo. breakdo . .rn of discrimi!1ntory practices,
and others.
Some progress has Leen made in each of these areas, but
it has been necessarily slow.
I would like to turn quickly on some policies that were not
used. speak:i.ne purely in
my
professorial
capacity.
guideposts for prices and wa6es has been much noted.
The ahsence of
Personally,
I have seen some potential meri.t in guideposts during periods of
relative stability, provided they remained pedagogi.cal instruments,
which was not always the case.
can propose, let alone
inflation.
I fail to see ho'" an Administration
imple~ent,
guideposts in the midst of an
Either the wage guideposts might state, correctly, that
wage increases should not, ordinarily exceed nationwide productivity
gains.
Under present conditions that would he wholly unrealistic.
Or the guideposts might state that wage increases should not exceed
some rate which took account of productivity .and partly but presumably not fully· of inflation.
But what "'ould that imply?
6
Guideposts, if observed, powerfully influence the distributlon
of national
in~ome
between labor and
capita~.
A government ar,ency
setting guideposts under inflationary conditions ls in fact trying
to tell labor and capital what their respective income shares are
to be.
This is a tremendous decision,'and a particularly sensitive
one during an inflation.
be made by government.
In our free system such a deci.sion cannot
If it can be made explicitly at all, it
must come out of some consensus of the parties affected -- labor
and business.
It would be a social contract, of a kind attempted,
with very variable success, in some lruropean countries.
If there
is evidence that labor and business are prepared to discuss such a
contract, it should be discussed, but without that evidence I see
nf' point for government, in an inflation t to propose r;ui.deposts.
A second policy that was not used was a flexible tax device
based on an excise tax.
~he
income tax surcharge has been, to me,
a partial though by no meClllS a total disappointment.
One may
suspect, without having strong evidence, that this has had to
do with its temporary character.
Theory tells us that income
windfalls do not get fully spent, negative windfalls do not cut
deeply into
spendin~
A variable tax with· an excise character
would have just the opposite effect.
The more temporary it was
expected to be, the more surely its imposition . vTould lead to
postponement of spending.
I hate to think of the administrative
compllcations of such a device.
Pe:rha~s
they would be sufficient
- 7 ..
to rule it out.
sur~harge.
But sim1.lar things were said of the income tax
Clearly,
becaus~
sueh a device would have perverse
announcement effects, its a.dJn:f.nistration would have to be in the
hands of the executive branch, not of the Congress.
This couJ.d
further reduce such promi:;c a.s it may hold.
Yet, as the Nation's demand for expert performance in
stabilizine the economy increases. we cannot afford to reject
out or hand the possible need for adclitipnal policy instruments.
This view of our policies hns shm-Tn, '1 hope, that policies and
instrUnients have worked well, although far-from perfectly.
way of doing better is to
st~t
One
thinking today about techniques
that may need to become operational five or ten years from now.
2 "1/
,
.
)
,/
TREASURY DEPARTMENT
-"~'-~;===:==~~==~==~~
WASHINGTON. D.C.
December 31, 1969
FOR IMMEDIATE RELEASE
TREASURY'S WEEKLY BILL OFFERING
The Treasury Department, by
for two series of Treasury bills
$3,000,000,000, or thereabouts,
Treasury bills maturing January
$ 2,902,671,000,
as follows:
this public notice, invites tenders
to the aggregate amount of
for cash and in exchange for
8, 1970,
in the amount of
9rday bills (to maturity date) to be issued January 8, 1970,
in the amount of $ 1,800,000,000, or thereabouts, representing an
additional amount of bills dated October 9, 1969,
and to
mature April 9, 1970,
originally issued in the amount of
$1,200,584,000,
the additional and original hills to Ill>
freely interchangeable.
182-day bills, for $ 1,200,~00,000,
dated January 8, 1970,
and to mature
or thereabouts, to be
July 9, 1970.
The bills of both series will be issued on a discount basis under
competitive and noncompetive birlding 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, January 5, .1970.
Tenders will not be
received at the Treasury Department, Washington. Each tender must
be for an even multiple of $1,000, and in the case of competitive
tenders the price offered must be expressed on the basis of 100,
with not more than three dec-imals, 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 generrtllv may submit tenders for. account of
Customers provided the names of th(~ customers are set for~~h in such
tenders. Others than banking institutions will not be pecmitted to
submit tenders except for their OWl! account. Tenders will be received
without deposit from incorporated anks and trust companies and from
K-312
- 2 -
responsible and recognized dealers in investment securities. Tenders
from others must be accompanied by payment of 2 percent of the face
amount of Treasury bills applied for, unless the tenders are
accompanied by an express guaranty of payment by an incorporated bank
or trust company.
Immediately after the closing hour, tenders will be opened at
the Federal Reserve Banks and Branches, follqwing which public announce
ment 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 rej ection thereof. The Secre tary 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 January 8, 1970, in
cash or other immediately available funds or in a like face amount
of Treasury bills maturing January 8, 1970.
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 a~ount 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 0 f the circular ma~T be obtained
from any Fede~a~ Reserve Bank 060~ranch.
TREASURY DEPARTMENT
,
WASHINGTON, D.C.
December 31, 1969
FOR RELEASE IN A.M. NEWSPAPERS
FRIDAY, JANUARY 2, 1970
TREASURY ANNOUNCES REPORTING PROCEDURES
TO BE USED IN ACCOUNTING FOR SPECIAL DRAWING RIGHTS
The Treasury Department announced today the reporting
procedures it will use in accounting for its Special Drawing
Rights (SDRs) in the International Monetary Fund.
Treasury said it would account for the SDRs in a manner
generally analogOtlS to that used in accounting for gold
transactions.
Special Drawing Rights will be held by the
Exchange Stabilization Fund of the Treasury. Against these
SDRs, the Stabilization Fund may issue to the Federal
Reserve, Special Drawing Rights Certificates, just as the
Treasury may now issue Certificates to the Federal Reserve
against gold. Thus the balance sheets of the Exchange
Stabilization Fund which appear quarterly in the Treasury
Bulletin will show holdings of SDR and the amount of SDR
certificates outstanding.
A new column will appear in the table on U.S. Reserve
Assets in the monthly Treasury Bulletin showing snR holdings
as of each month end.
The Quarterly Treasury press release which shows
gold transactions of the United States with other countries will
in the future also include data on SDR transactions.
In addition, the monthly Receipts and Expenditures
statement of the Treasury will show SDR holdings and snR
certificates outstanding. The weekly Federal Reserve
statement will also show the amount of SDR certificates held
by the Federal Reserve.
000
K-3l3
rREASURY DEPARTMENT
:
WASHINGTON. D.C.
January 2, 1970
FOR RELEASE A.M. NEWSPAPERS
SUNDAY, JANUARY 4, 1970
TREASURY SECRETARY DAVID M. KENNEDY
ANNOUNCES INCREASED ANTI-NARCOTICS SMUGGLING DRIVE
Treasury Secretary David M. Kennedy today made
the following statement:
"The signing of the supplemental appropriations
bill by the President gives to the Treasury Department
additional resources for its campaign against
smuggling of narcotics and other dangerous drugs into
the United States.
"The measure contains $8.75 million in funds
for Treasury's Bureau of Customs for use in this
effort. I congratulate the Congress for passage of
this anti-narcotics smuggling appropriation.
"President Nixon, during his campaign, pledged
strenuous efforts to combat illegal drug traffic.
It is a high priority program of the Administration.
The Treasury Department has made this campaign the
number one effort in the area of law enforcement.
"The President, in his July 14, 1969, Message
to the Congress on the Control of Narcotics and
Dangerous Drugs stated:
'''The Department of the Treasury,
through the Bureau of Customs, is charged with
enforcing the nation's smuggling laws. I have
directed the Secretary of the Treasury to
K-3l4
- 2 initiate a major new effort to guard the
nation's borders and ports against the
growing volume of narcotics from abroad.
There is a recognized need for more men
and facilities in the Bureau of Customs to
carry out this directive.'
"This anti-narcotics smuggling supplemental
appropriation is the end product of the president's
request and gives the Treasury the funds for the
manpower and facilities urgently needed to carry
out the President's directive for a major new
effort. Customs will now be able to step up its
activities to stop the smuggling of illegal drugs.
"Plans for the new drive have been under
formulation for months. I have directed Assistant
Secretary for Enforcement and Operations,
Eugene T. Rossides, to implement these plans with
an emphasis on heroin smuggling.
"Customs·Commissioner Myles Ambrose already
has established a command post for the new antiheroin drive. While the intensified anti-smuggling
activity will be nationwide, the command post is
in New York City since heroin smuggling is most
prevalent in the northeast section of the country.
Regional command posts will be established as needed
in other parts of the country. The program will be
fully coordinated with other Federal and state and
local law enforcement agencies."
The Department said the funds will make it possible for
Customs to employ 879 additional people, including 378 inspectors,
307 criminal investigators, and supporting personnel.
000
TREASURY DEPARTMENT
(
January 5, 1970
rOB IMMiDIATI RlIeEASi
DECISIORS
OJ(
PIG lROI
UJlDER THE AlTIDJMPDIG Ac:1
The 'l'reasu17 Depan..ent anDOWlced that dete1"ll1nations have
been -.de that pig iron fro. Brazil, Swede., and the United
Kiagdoa is not beina, nor lik.ely to be, 801d at less than tair
'Y8.1ue wi thin the ._iag ot the Antidullpina Act, 1921, as
uended (19 U.S.C. 160 et seq.).
Tentative deterainations were published in the Federal Register on loveaber 21,
the
su~ssion
1969.
These notices allowed 30
~s
tor
ot written views or requests tor an opport unit7
to present views orall1".
Ho 8ubJlis.iollS were recei'ftd.
lntor..ation lathered in this investigation shows sales ot
the _rchandise to the United States were tera1nated.
no
into~tion
'Blere is
indicating that pig iron will be shipped to the
United States traa Brazil, Sweden, or the United Kingdom in the
near future.
111#
;2 IS
rREASURY DEPARTMENT
4
=
WASHINGTON. D.C.
t RELEASE 6 :30 P.1-1.,
lday, January;:), 1970.
RESULTS OF TREASURY'S HEEKLY BILL OFFERING
The Treasury Department announced that the tenders for two series 0f Treasury
Lls, Qne series to be an additional issue of the bills dated October 9, 1969, and the
~r series to be dated January 8, 1970, which were offered on December 31, 1969, were
med at the Federal Reserve Banks today. Tenders were invited for ~l,COO,OOO,OOG,
thereab~)Uts, of 91-day bills and for $1,200,000,000, or thereabouts, elf lC2-day
_is. The details of the two series are as follovls:
JGE OF ACCEPTED
lPETITIVE BIDS:
H:gh
1')1;)
91-day Treasury bills
maturing April 9, 1970
Approx. Equiv.
Price
Annual Rate
98.012 §.;!
7 .\"...'(~6c::i
VI..)
7 . 983(,~
97 .982
97.988
7 . 9€O;~
182-iay 'i'reasury oills
t:1aturinc July S , 197:::
A"JPY'lX. ECJ.ujv.
Price
Anr:ua 1 R:? .te
95.966
7 .979,"
95.956
7 . 99~/~
95.96("
1./'
7 . S91,J
:e./
~/ ExceptinG 1 tencler of $50,C:~0;
Excepting 2 tenders :'otel.:i.nrj ;~lCl,(jO~:
:'7::'f the a!,:l)Unt of 91-day bilh b~rJ f:)l' at the loYl pricr; i'Ja' accr;oveCi
5?.j~ of the arr.ount of 182-day bills bid for at the low price wa: acce:pted
A1 J:'ELIERS APPLIED FOR AIm ACCEPTED 3Y FEDERAL RESERVE DISTRICTS:
istrict
.;stJn
eH Y')rJ:
hilauc 10:12.a
level2.nd
ich~.·. :m.:
t1anta
w F:o:-n nc;_ sc:)
For
AEElied
,
40,626,000
~
1,835,184,OCO
42,082,000
57,284,000
38,291,000
:J8,29c,000
278,675,000
67,098,000
24,669,000
49,320,000
39,333,000
18:5,289,000
Accr:pted
$ 36,241,0::;'0
1,l..)9,614,OOO
26,306,000
211,673,'JOO
3·[;,291,000
(~), 0:::5, COO
199,CCll,COO
.~1,169 ,000
9 , c·z:· J ,000
42,::68,000
2~.:; , :::33,000
112 , C~80 , 000
':L)'I'ALS
$2,716,146,000
$1,f30C:,150,OOO
hicD.~C:
1;. 1Jui:::
innc2 T;.;1L:
Ci:
~n!':a.;
'r
.1,)
~lla~
AEPlied For
$
28,654, C·OO
".
,;>
:) , 919 ,O()O
1,718,285,080
726,9:>'-,C,C)C
30,060,JOC!
12,136, ~OO
76,315,800
48,4,95, COO
65,638,OCO
192,969, c>~:·
48,929, lOO
22,28:.5 , ·=:::·0
50,74A,Cc;~
49,405,C(;0
l70,558,OCO
s./
i~cceplecl
$2,507,337,lOC'
6c~,[63,~:80
33, 11{ ,000
:':8,o:':C',OOO
55, C,16 , (;~}o
36,3L2,OCO
Ei,73C,OCC
18,617, COO
Z:,~ ,tiCS ,Gc.:O
61,17:;,:;CU
:;1, 20(), f; 9Z , COO -d/
'
bcluJe? ~?514,428,OOO nonc::lt",De'..;::.tj.·'c; -:~enc:erG accepted at the 2','eraL~e price ::Jf 97.968
L~ ~(CO,49C,000 nonco~;eiiLivr tenjers accepted at ~hc 2vcra~e 9rice :;f 95.96~
'L1C;J(:'~'.J;~; c:re ')n;:; ban~: '}isc~~un.t -oaGL:. The equivalent CeU,';'] iG'ue yiclGS are
G. 2~ I ~':, l' 1,I:re 91-day oill;::;, and. 8 .44',~ £'::::r the 182-day bill'.
11Cll
rREASURY DEPARTMENT
WASHINGTON, D.C.
FOR IMMEDIATE RELEASE
January 7, 1970
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
$ 3,000,000,000, or thereabouts, for cash and in exchange for
Treasury bills maturing January 15, 1970,
in the amount of
$ 2,905,533,000,
as follows:
9l-day bills (to maturity date) to be issued January 15, 1970,
in the amount of $1,800,000,000,
or thereabouts, representing an
additional amount of bills dated October 16, 1969,
and to
mature April 16, 1970,
originally issued in the amount of
$ 1,203,109,000,
the additional and original bills to be
freely interchangeable.
l82-day bills, for $ 1,200,000,000,
dated January 15, 1970,
and to mature
or thereabouts, to be
July 16, 1970.
The bills of both series will be issued on a discount basis under
competitive and noncompetive 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
to the closing hour, one-thirty p.m.,Eastern Standard
time,
Monday, January 12, 1970.
Tenders will not be
received at the Treasury Department, Washington. Each tender must
be for an even mUltiple of $1,000, and in the case of competitive
tenders the price offered must be expressed on the basis of 100,
with not more than three dec-imals, 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 the refor.
up
Banking institutions generally may submit tenders for account of
~ustomers provided the names of the customers are set forth in such
tenders. Others than banking instituti.ons will not be pernitted to
:;~bmit tenders except for their own account.
Tenders wil~_ be received
vlthout depoEit from incorporated b1nks and trust compani~s and from
K-315
- 2 -
cesponsible and recognized dealers in investment securities. Tenders
from others must be accompanit'd hv payment of 2 percent of tl,e face
amount of Treasury bills applied LJr, unless the tenders c;re
accompanied by an express guaranty of payment by an incorporated bank
or trust company.
I~nediately
after the closing hour, tenders will be opened at
the Federal Reserve Banks and Branches, following which public announce.
ment 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 rej ec tion the reof. The Secre tary 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
bjdder 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 t~e bids must be
made or completed at the Federal Reserve Bank on January 15,1970, in
cash or other immediately availabJp funds or in a like face amount
of Treasury bills maturing .]anUJrv l5, 1970.
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.
TI-le 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
Treasury bills does not have '~II'v special treatment, as such,
under the L1ternal Revenue Code ()( 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 hy 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
hills are originally sold by the United States is considered to be
interest. Under Sections 454 (b) and 1221 (5) of the Internal
Revenu~ Code of 1954 the amount of discount at which bills issued
hel"C.'lInCCr are sold is not considered to accrue until such bills are
sold, )'edeemed or otherwise disposed of, and such bills are excluded
fl'om c(lnsideration as capital assets. Accordingly, the owner of
Treasury hills (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
:-;ubseqt'ent purchase, and the amount actually received either upon
:-;ale 0)' redemption at maturity during the taxable year for which the
return is made, as ordinary gain ur loss.
()f
T 'easury Department Circula::- ;~o. 418 (current revision) and this
il..'e prescribe the terms of the Treasury bills and govern the
,undit .ons of their issue. Copies of the circular may be obtained
1 rum ally Federal Reserve Bank 050§i.-anch.
I),d
TREASURY DEPARTMENT
WASHINGTON, D.C.
January 8, 1969
FOR RELEASE A.M. NEWSPAPERS
FRIDAY, JANUARY 9, 1970
TREASURY SECRETARY KENNEDY
ANNOUNCES DONNELLEY'S RETIREMENT
Treasury Secretary David M. Kennedy today announced
designation of Calvin E. Brumley as his Acting Special
Assistant for Public Affairs.
The post of Special Assistant for Public Affairs
became vacant at year end when Dixon Donnelley, who was
appointed to the position last March, resigned to accept
a positi(n as Vice Presid0nt for Public Affairs of thp
Arnericar Paper Institute. He will maintain his rcsid~nce
in Wash~_ngton and work out of Washington and New York
offices.
Mr. Brumley was appoint<-'d Deputy Special Assistant
to the Secretary for Public Affairs on April 14, 1969.
Prior to the appointment he was news editor of the
Associated Press-Dow Jones Economic Report, an international
business news wire in New York. He had been employed by
Dow Jones and Company, Inc., which publishes the Wall Street
Journal, for nearly 15 years as a reporter, bureau manager
and news editor.
Mr. Donnelley has had ~n extensive newspaper career
and completed 20 years of government service.
000
K-316
~/3
TREASURY DEPARTMENT
~.. -~---- . -~-
:=
==::!!
WASHINGTON. DoC.
January 8, l\JjO
", .
" . )- j-'~
H"l'IEDIATE RELEASE
INDUSTRL~.I.
PAYROLL SAV INGS COMMITTEE
MEETS JANUARY 14 HITH SECRETARY KENNEDY
The U. S. Industrial Payroll Savings Committee) made up of
top executiv~of American business and industry, meets in Washington on Wednesday, January 14, to review program accomplishments
in 1969 and to formulate plans for the 1970 campaign.
secretary of the Treasury David M. Kennedy and other Treasury
officials will meet with the Committee
Gordon M. Metcal~ Chairman of the Board and Chief Executive Officer of Sears, Roebuck and
Co., Chicago, Ill., is to be installed as 1970 Chairman, succeeding 1969 Chairman James M. Roche, Chairman of the Board, General
Motors Corpo, Detroit, Mich.
0
Mr. ~oche is to preside over the meeting, to be held in the Benjamin Franklin Room of the Department of State's Diplomatic Functions Suite, with a reception at 11:45 and a luncheon at 12:300
Other speakers on the day's program include Under Secretary
of the Treasury for Monetary Affairs Paul A. Volcker, and Elmer
L. Rustad, National Director of the Treasury's Savings Bonds Division. George Meany, President, AFL-CIO, will also speak.
During the pas t year, the COfJnni t tee, members of which led
Payroll Savings activities in the major industrial and geographical areas of the Nation spe£r.Eaded a drive in which more than
2,300,000 new payroll s~vers or savers who increased their purchases were signed up for the regular purchase of Savings Bonds
and Freedom Shares
Of these , more than 900 ,
000 were from within the companies of the Committee members. In terms of dollar
volume, the Committee's accomplishment comes to $3.7 billion.
.
A list of the 1969 and 1970 Committee members is attached.
Attachment
000
A
U. S. INDUSTRIAL PAYROLL SAVINGS COMMITTEE
1970 MEMBERS
Ex Officio General Chairman
HOnorable David Mo Kennedy
Secretary of the Treasury
1970 Chairman
Gordon M. Metcalf
Chairman of the Board
Sears, Roebuck and Company
Chicago, Illinois
1963 -1969 Chairmen
James~Roche
Chairman of the Board
General Motors Corporation
Detroit, Michigan
( 1969 Chairman )
William P. Gwinn
Chairman
United Aircraft Corporation
East Hartford, Connecticut
( 1968 Chairman )
Daniel J. Haughton
Chairman of the Board
Lockheed Aircraft Corporation
Burbank, California
( 1967 Chairman )
Lynn A. Townsend
Chairman of the Bo ard
Chrysler Corporation
Detroit, Michigan
( 1966 Chairman )
Dr. Elmer W. Engstrom
Chairman of the Executive
Committee
RCA Corporation
New York, New York
( 1965 Chairman )
Frank R. Milliken
President
Kennecott Copper Corporation
New York, New York
( 1964 Chairman )
Harold S. Geneen
Chairman and Pt"esident
International Telephone and
Telegraph Corporation
New York, New York
( 1963 Chairman )
Geographic Members
Roger S. Ahlbrandt
President
Allegheny Ludlum Steel Corpo
Pittsburgh, Pennsylvania
Rexford A. Bristol
Chairman of the Board
The Foxboro Company
Foxboro, Massachusetts
John G. Brooks
Chairman and President
Lear Seigler, Inc.
Santa Monica, California
Donald W. Douglas, Jr.
Vice President
McDonnell Douglas Corporation
St. Louis, Missouri
Edward J. Dwyer
President
ESB Incorporated
Philadelphia, ,Pennsylvania
- 2 -
Milton L. Elsberg
President
Drug Fair Stores Corp.
Alexandria, Virginia
Harold R. Lilley
President
Frito-Lay, Inc.
Dallas, Texas
N. Wo Freeman
President
Tenneco Inco
Houston, Texas
Ray W. MacDonald
President
Burroughs Corp.
Detroit, Michigan
E. Clayton Gengras
Donald S. MacNaughton
President
Prudential Insurance Company
of America
Newark, New Jersey
Chairman of the Board
Security Corporation
Hartford, Connecticut
Leister F. Graffis
President
Bendix Field Engineering Corpo
Columbia, Maryland
H. B. Groh
President
Wisconsin Telephone Co.
Milwaukee, Wisconsin
Palmer Hoyt
Editor and Publisher
The Denver Pos t
Denver, Colorado
Robert S. Ingersoll
Chairman of the Board
Borg Warner Corporation
Chicago, Illinois
Edgar F. Kai s er
Chairman of the Board
Kaiser Industries Corporation
Oakland, California
Stephen F Keating
President
Honeywell, Inc o
Minneapolis, Minnesota
0
Tom Ro May
President
Lockheed - Georgia Company
Marietta, Georgia
Cornelius Wo Owens
President
New York Telephone Company
New York, New York
Alfred Jo Stokely
President
Stokely-Van Camp, Inc o
Indianapolis, Indiana
T. A. Wilson
President
The Boeing Company
Seattle, Washington
W. H. Wilson
President
Addressograph-Multigraph Corp.
Cleveland, Ohio
J ~I
~
Industry Members
Thomas G. Ayer s
President
Commonwealth Edison Company
Chicago, Illinois
Harry O. Bercher
Chairman of the Board
International Harvester Co.
Chicago, Illinois
3 -
Dro J. C. Hodge
Chairman of the Board
Warner & Swasey Company
Cleveland, Ohio
Downing B. Jenks
President
Missouri Pacific Railroad
St. Louis, Missouri
Charles Go Bluhdorn
Chairman of the Board
Gulf & Western Industries, Inc 0
New York, New York
William J. Kane
President
The Great Atlantic & Pacific
Tea Company, Inc.
New York, New York
Michael Daroff
President and Chairman of the
Board
Botany Industries, Inc.
New York, New York
J. Ward Keener
Chairman of the Board
The B. F. Goodrich Company
Akron, Ohio
John D. deButts
Vice Chairman of the Board
American Telephone and
Teleg~aph Company
New York, New York
B. R. Dorsey
President
Gulf Oil Corporation
Pittsburgh, Pennsylvania
Edwin H. Gott
Chairman, Board of Directors
United States Steel Corporation
Pittsbur'~h, Pennsylvania
Edward Bo Hinman
President
International Paper Company
New York, New York
Harding L. Lawrence
Chairman and President
Braniff International
Dallas, Texas
Roger Lewis
President
General Dynamics Corporation
New York, New York
Oscar G. Mayer, Jro
Chairman of the Board
Oscar Mayer & Company
Madison, Wisconsin
Frederick Co Maynard, Jr.
Senior Vice President
The Travelers Insurance
Companies
Hartford, Connecticut
A
- 4 -
C. Peter McColough
President
Xerox Corporation
Stamford, Connecticut
Joseph Ho McConnell
President
Reynolds Metals Company
Richmond, Virginia
Robert Eo McNeill, Jr.
Chairman of the Board
Manufacturers Hanover Trust
Company
New York, New York
Honorable Raymond Po Shafer
Governor
Connnonwealth of Pennsylvania
Harrisburg, Pennsylvania
E. Clinton Towl
Chairman
Grunnnan Aircraft Engineering
Corp
Bethpage, New York
0
Robert G. Wingerter
President
Libbey-Owens-Ford Company
Toledo, Ohio
fi
U. S. INDUSTRIAL PAYROLL SAVINGS COMMITTEE
1969 MEMBERS
Ex Officio General Chainnan
Honorable David M. Kennedy
Secretary of the Treasury
Geographic Members
Edd H. Bailey
President
Union Pacific Railroad Company
Omaha, Nebraska
R. F. Barker
Chairman of the Board
PPG Industries, Inc.
Pittsburgh, Pennsylvania
Rexford A. Bristol
Chairman of the Board
The Foxboro Company
Foxboro, Massachusetts
Edwin O. George
President
The Detroit Edison Company
Detroit, Michigan
Chairman
James M. Roche
Chairman of the Board
General Motors Corporation
Detroit, Michigan
Floyd Do Hall
Chainnan of the Board
Eastern Air Lines
New York, New York
Fred L. Hartley
President
Union Oil Company of
California
Los Angeles, California
Robert Ro Herring
President
Houston Natural Gas Corporation
Houston, Texas
Palmer Hoyt
Editor and Publisher
The Denver Pos t
Denver, Colorado
J. E. Gosline
Vice Chairman of the Board
Standard Oil Company of
California
San Francisco, California
Stephen Fo Keating
President
Honeywell, Inc.
Minneapolis, Minnesota
Leister F. Graffis
President
Bendix Field Engineering
Corpor ation
~olumbia, Maryland
Sherman Ro Knapp
Chairman of the Board
Northeast Utilities
Wethersfield, Connecticut
Iarold Bo Groh
Iresident
l~sconsin Tf lephone Company
[llwaukee, 1.Jisconsin
Harold R. Lilley
President
Frito-Lay, Inc.
Dallas, Texas
B
- 2 -
William L. Lindholm
President
Chesapeake and Potomac Telephone
Companies
Washington, D. C.
T. A. Wilson
President
The Boeing Company
Seattle, Washington
Sanford N. McDonnell
President
McDonnell Aircraft Corporation
Sto Louis, Missouri
Industry Members
William R. Adams
President
Sto Regis Paper Company
New York, New York
Donald Ao McMahon
President
Monroe International
Orange, New Jersey
T. R. May
President
Lockheed-Georgia Company
Marietta, Georgia
Gordon M. Metcalf
Chairman of the Board
Sears, Roebuck and Company
Chicago, Illinois
Horace Ao Shepard
President
TRW Inco
Cleveland, Ohio
Alfred J. Stokely
President
Stokely-Van Camp, Incorporated
Indianapolis, Indiana
Robert Mo Wachob
President
The Bell Telephone Company of
Pennsylvania
.
Philadelphia, Pennsylvania
J. L. Atwood
President
North American Rockwell
Corporation
El Segundo, California
Thomas Go Ayers
President
Commonwealth Edison Company
Chicago, Illinois
Harry O. Bercher
Chairman of the Board
International Hervester Company
Chicago, Illinois
Charles Go Bluhdorn
Chairman of the Board
Gulf & Western Industries, Inc o
New York, New York
John Wo Brooks
President
Celanese Corporation
New York, New York
Hugh G. Chatham
President
Chatham Manufacturing Company
Elkin, North Carolina
- 3 -
Michael Daroff
President and Chairman of the
Board
Botany Industries, Inc.
New York, New York
William J. Kane
President
The Great Atlantic & Pacific
Tea Company, Inc.
New York, New York
Edward S. Donnell
President
Montgomery Ward & Company, Inc.
Chicago, Illinois
T. Vincent Learson
President
International Business Maahines
Corp or ation
Armonk, New York
B. R. Dorsey
President
Gulf Oil Corporation
Pittsburgh, Pennsylvania
Roger Lewis
President
General Dynamics Corporation
New York, New York
Henry W. Gadsen
President
Merck & Company, Inc.
Rahway, New Jersey
Ben S. Gilmer
President
American Telephone & Telegraph
New York, New York
Eo Lo Ludvigsen
Chairman of the Executive
Corrnnittee
Eaton Yale & Towne, Inc o
Cleveland, Ohio
Co.
Edwin H. Gott
Chairman, Board of Directors
U. S. Steel Corporation
Pittsburgh, Pennsylvania
Harold E. Gray
Chairman of the Board
Pan American World Airways, Inc
New York, New York
Herbert Eo Harper
President
Public Service Coordinated
TransDort
Maplewo~d, New Jersey
Frederick C. Maynard, Jr.
Senior Vice President
The Travelers Insurance
Companies
Hartford, Connecticut
Michael R. McEvoy
President
Sea-Land Service, Inc.
Elizabeth, New Jersey
0
Louis Wo Menk
President
Northern Pacific Railway Company
St. Paul, Minnesota
William H. Moore
Chairman of the Board
Bankers Trust Company
New York, New York
J
2- ~
- 4 -
William Wood Prince
Past Chairman of the Board
Armour & Company
Chicago, Illinois
T. J. Ready, Jr.
President
Kaiser Aluminum & Chemical Corp.
Oakland, California
Honorable Raymond P. Shafer
Governor of Commonwealth of
Pennsylvania
Harrisburg, Pennsylvania
George R. Vila
Chairman and President
Uniroyal, Inc.
New York, New York
Robert Go Wingerter
President
Libbey-Dwens-Ford Company
Toledo, Ohio
FORMER CHAIRMEN
1968
WITriam Po Gwinn
Chairman
United Aircraft Corporation
East Hartford, Connecticut
1967
Daniel J Haughton
Chairman of the Board
Lockheed Aircraft Corporation
Burbank, California
0
1966
Lynn A. Townsend
Chairman of the Board
Chrysler Corporation
Detroit, Michigan
1965
Dr. Elmer Wo Engstrom
Chairman of the Executive
Committee
RCA Corporation
New York, New York
1964
Frank R. Milliken
President
Kennecott Copper Corporation
New York, New York
1963
Harold S. Geneen
Chairman and President
International Telephone
and Telegraph Corporation
New York, New York
B
TREASURY DEPARTMENT
,
WASHINGTON, D.C.
January 9, 1970
FOR IMMEDIATE RELEASE
TREASURY ANNOUNCES MONETIZATION OF
GOLD AND SPECIAL DRAWING RIGHTS
The Treasury confirmed today that it had recently
bought $500 million in gold from the Federal Republic of
Germany. This transaction, which was announced by
Germany, and purchases from other countries in recent
months have resulted in a considerable drain on the cash
resources available to the Exchange Stabilization Fund
and have required some temporary sales of foreign exchange
holdings to the Federal Reserve.
To reverse this cash drain and permit the Exchange
Stabilization Fund to reacquire the foreign exchange from
the Federal Reserve, the Exchange Stabilization Fund, on
January 8, sold $1 billion of gold to the Treasury. The
Treasury in turn monetized this gold through the issuance
of gold certificates to the Federal Reserve System.
At the same time, the Exchange Stabilization Fund
also monetized $200 million of the $867 million of
Special Drawing Rights distributed on January 1, 1970,through
issuance of SDR certificates to the Federal Reserve.
Additional amounts of SDR may be monetized in subsequent
months to maintain a margin of available funds for
exchange stabilization operations.
The additional gold certificates and first
issuance of SDR certificates will be reflected in the
Federal Reserve Statement of Condition for the week ended
January 14, 1970. These transactions among the Exchange
Stabilization Fund, the Treasury, and the Federal Reserve
System have been arranged in a manner to avoid an impact on
member bank reserves.
000
K-3l7
TREASURY DEPARTMENT
4
WASHINGTON, D.C.
OR HELEA3::': 6:30 P .1';;.,
onday, January 12, 1970.
RESULTS OF '.!.'REASURY';:; WEEKLY 3ILL OFFERIl:G
The ':c'reasury Department ann::Juncci ,~hat the tenders for t'll:'; series :)f ~reasury
,ills, Jne series to be an additional i~sue ~f the bills dated October 16, 1969, anj the
~her 3cr~es to be datei January 1~, 1970, which were offered on January 7, 1970, ver~
l:}cnej at the Federal Reserve 3anks t'Jday. Tenders vlere invited for ~1,20C ,OGO ,coe,
lr thereab:lUts, of 91-day u':ll:::: and. f'Jr ~jJl,200,000,000, or thereabouts, 0;: 122-Jay
lills. T:10 d.etails of the tvlO series are as follmls:
(ALGt; OF kXEPTED
:OI,'PET IT IVE .JIDS:
91-c.ay Treasury :)ills
t:'1aturins April 16, 1970
A.j)p:CS;':. Equi v .
Price
Annual Rate
98.029 Q..!
7 .797;~
98.009
7 .8767:'
98.C1S
7.237J;
1/
IIigh
L')",
Avcra·;c
182-day Treasury bills
maturing July 16, 1970
t,!l",;Y")X. Equi v.
Price
Annu~l Rate
96.076
96.064
96.06;)
--J
EJ
7.762,.)
7 . 7GS,~
7 . 7i:~/~
1./
~I ~~ceptinz 1 tender of $2,~52,COO;
~/Excep~ing 1 tender ~f $20,000
7; ~f the a~Junt of 91-&ay bil1~ oi0 f~r at the l::Jw price was acce~ted.
:-U Jf the ar'1ount ')f 182-day oil1s bid f(;r at the 1:::1-1 price "JaS accepted
'OTAL TEnDERS APPLIED FOR AIm J>.CCEPTZD B'f FE.JERAL RESERVE DISTRICTS:
Jistrict
BJst)n
;·;e'. ' Y:Jri:,
Ph:~ladelp~lia
Clc-reland
Ric br ;Yll~
Atlanta
ChicaGO
St. I"::Juis
l,anneapclis
Kansas City
Dallas
San Francisc'J
TOTALS
Applied For
$
3G,~02,00C
1,97;':,299,000
LJ3 ,613, COO
':37,797,-')0('
42,588,000
;:;7,962,000
237,670,000
65,310,000
32,286,000
51,023,000
42,067,000
227,022,000
Applied For
Accepted.
,.
'I)
35,922,000
1,C0:5,740,000
43,483,000
'07,174,800
32,568,000
46,044,0:::0
22:),020,000
;)U,055,000
26,286,000
::)1,002,000
32,136,000
136,695,000
$1,-300,145,000
o
2,2:7 ,28: , ~'2C
sf
j~cccptcJ
71S, 1~7 ,orr:-
32,CS5;C~C
21,~3~,c.,OC
99, SCl:: , ~":;OrJ
91. 862, GOC
38, S15 ,:';00
72,020,0(-C'
241,27;."OCC
65,760,000
20,304,OCC
61,426,0(/)
57,017 ,OCO
198,284,8(:0
::3,211:,0(0
43,431, :::;00
54,804,OC(;
15,701", >~O
:):::; ,767 , Q:;C
4,2,:::72,:::00
71 , 52'2 ; CO'.
$3,156,461,000
$1,202,563,000
~7,957,CCC
3/
j Includes ¥~65,4~5,00~ n'Jncom.,petitive tenders accepted at the average pr~ce ::J~ 98.019
. Includes ,090,501,000 nonco~petitive tenders accepted at the average prlce o~ 96.065
I These rates are 'In a ban;~ ciiscClunt basis. The equivalent c'Jupon issue yields are
G.ll~~ for the 91-day bills, and 8. 217b for the 182-day bills.
UNITED STATES SAVINGS BONDS ISSUED AND REDEEMED THROUGH
)2t
Deceaber
31 1969
(Dollar amounts in millions - rounded and will not necessarily add to totals)
DESCRIPTION
-
AMOUNT ISSUEDY
--_ ... _ - '
TURED
srrif" i\-1935 thru 0-1941
SHIPS I" and G-l fl4: thru 1952
Sl'ri r~, I i:l nd K -1 fl5 2 thru 1957
--
AMOUNT
REOEEMEDY
AMOUNT
OUTSTANDINGY
,
~: OUTSTANDING
OF AMOUNT ISSUEO
--._.
.----- --
5,003
29,521
3,754
4,997
29,485
3,732
6
36
22
.12
.12
.59
1,887
8,327
13,398
15,632
12,292
5,578
5,295
,,479
5,414
4,733
4,094
4,287
4,901
1l,995
214
928
1,461
1,792
1,581
891
997
1,119
1,185
1,092
941
1,008
1,240
1,331
1,442
1,436
1,413
1,502
1,472
1,592
1,764
1,818
2,182
2,116
2,085
2,424
2,503
2,601
2,326
11.34
4,5,8
3,125
1,674
7,399
11,936
13,840
10,7ll
4,687
4,298
4,)60
4,229
3,6il1
3,153
3,279
3,661
3,6614
3,763
3,592
3,322
3,117
2,8,6
2,747
2,634
2,439
2,547
2,494
2,423
2,4)0
2,301
1,956
799
10.90
11.46
12.86
15.97
18.83
20.42
21.89
23.07
22.98
23.51
25.30
26.65
27.71
28.56
29.84
32.52
34.01
36.69
40.10
42.71
46.14
45.90
46.25
49.94
52.10
57.06
74.43
613
812
-199
-
16,,022
120,763
44,259
26.82
5,485
7,228
3,513
1,909
1,972
5,319
35.95
73.59
12,712
,,422
7,290
57.35
177,734
126,185
51,549
29.00
38,277
177,734
216,012
38,213
126,185
164,398
6h
.11
29.00
23.89
MATURED
Sf'ri"'; E1I :
1941
1942
1943
1944
1945
1946
1947
1948
1949
1950
1951
1952
1953
1954
1955
1956
1957
1958
1959
1960
1961
1962
1963
1964
1965
1966
1967
1968
1969
,,2~
,,028
4,735
4,619
4,328
4,339
4,399
4,257
4,729
4,610
4,508
4,8S4
4,8~
Unclassified
Total Series E
lries H (1952 thru May, 1959) 1/
H (June, 1959 thru 1969)
Total Series H
Total Series E and H
{Total matured
I Series 'Total unmatured
Grand Total
51,549
51,613
'ea .ccrued discount.
value.
Ian 01 own.r bonde may b. h.ld and will .arn Interest for additional periods afler ori~inBI mllturity detes.
II redempllon
ForI!) eO 3812 (Rev. Apr.J969) - TREASURY DEPARTMENT - Bureau of the Public Debt
11.14
TREASURY DEPARTMENT
WASHINGTON. D.C.
January 13, 1970
FOR IMMEDIATE RELEASE
UNITED STATES AND NEW ZEALAND TO DISCUSS
REVISION OF INCOME TAX TREATY
Representatives of the United States and New Zealand are
expected to meet in late February to discuss revision of the
income tax convention between the two countries, the Treasury
announced today. The meetings are scheduled to take place in
Wellington, New Zealand.
The existing tax treaty with New Zealand has been in force
since 1951. The negotiations are expected to deal with a
number of specific problems which have evolved from the tax
law changes which have taken place since 1951, and from changes
in economic relations between New Zealand and the United States.
Among the items likely to be discussed will be the tax rules to
be applied by one country to corporations and residents of the
other who derive interest income, income from activities on the
continental shelf, and income from a permanent establishment in
the other country.
It is also expected that the "Draft Double Taxation
Convention", published in 1963 by the Fiscal Committee of the
Organization for Economic Cooperation and Development (OECD),
will be considered in the course of the negotiations, along
with recent United States treaties with other industrial
countries, such as the treaty with France which went into force
in August, 1968.
Persons having comments or suggestions to make concerning
the income tax treaty between the United States and New Zealand
should submit their views by February 2, 1970, to Assistant
Secretary of the Treasury Edwin S. Cohen, United States
Treasury Department, Washington, D. C. 20220.
000
K-3l8
TREASURY DEPARTMENT
:
WASHINGTON. D.C.
FOR IMMEDIATE RELEASE
January 14, 1970
U. S. INDUSTRIAL PAYROLL SAVINGS COMMITTEE MEETS
TO PROGRAM NEW-SAVER GOAL OF TWO MILLION IN 1970
The U. S. Industrial Payroll Savings Committee, headed by
James M. Roche, Chairman of the Board~ General Motors Corp.,
Detroit, met today with Treasury Secretary David M. Kennedy to
report on 1969 accomplishments and to initiate 1970 campaign
plans to sigp up ~WQ mil~ion industrial employees as new Payroll
Savers or as savers who increase their allotments for the purchase of U. S. Savings Bonds. The meeting was in the Diplomatic
Functions Suite of the State Department on the eighth floor, beginning at 2:00 pm,
Members of the Committee are the chief executives of leading
corporations thrpughout the nation. It was first organized in
late 1962 by th~n Secretary of the Treasury Douglas Dillon, as a
means of increasing sales
Savings Bonds to aid the management
of the na tiona 1 de bt.
of
The mission of the Committee is to stimulate the regular purchase of Savings Bonds by the industrial employees of America,
using the guaranteed method of the Payroll Savings Plan; also to
increase the number of employees who utilize the program to gain
greater personal and family security.
The 1970 Committee has 53 members. Included are representatives of 22 geographic areps and 23 major industries. Its Chairman, who will succeed Mr. Roche at the meeting, is Gordon M. Metcalf, Chairman of the Board, Sears, Roebuck and Co. In accepting
his appointment , he said , "The Payroll Savings plan is the. besth
self-defense against inflation. It is invaluable in help1ng t e
employee to develop a systematic savings program. With the new
rate increase to 5 percent, retroactive to June 1, 1969, Savings
Bonds are a better than ever purchase for the employee who wants
to improve his s take in the future.
k-3l9
- 2 For ~: cf the group, it was their first Conunittee meeting.
They were ~nstalled as members of the 1970 Conunittee, in official
ceremonies during the meeting, receiving Certificates of Appointment signed by the Secretary of the Treasury.
In his opening remarks to the meeting, regarding the role of
Savings Bonds in debt management, Under Secretary Paul Volcker
noted that "Since its beginning in January 1963, the U. S. Industrial Payroll Savings Committee -- with the support of Organized
Labor and the vast army of Savings Bonds volunteers -- has been
the prime force in advancing the sound management of the debt
through widespread Savings Bonds sales. The Committee, through
its annual campaigns and through the highly successful drives the
members have conducted in their own companies, has contributed to
the American people having a reservoir of $52 billion in Savings
Bonds and rreedom Shares. The annual sales of the small denomination E Bonds -- 52~ to S200 -- customarily purchased by Payroll
Savers., are toda:' r:l:., , 1 hnT1 ,(jl,OOO,OOO,OOO higher than lhey were
in 1962, the year hefore the Committee began its work. The Committee has proven d most effecti,e force, benefitting the nation
as well as the indi.'/i,Jual ~;,lvcr'"
Tn his remarks, Chairman Pcche reported that during the 1969
Drive his I.,;ommittee signed up :.. .1 million new or increased Savings
Bond savers against B goal of ~.2 million.
.
.
"In d -ear tha t 'Jas no [ an .~ .. s y one for the sa le ,)..: Sa v~ngs
Bonds," he sa id, "this Committee exceeded its goa 1 by 5~. It made
1969 the third best year in history for the number of new or increased sign-ups. It made 1969 the second best year fo ..." the dollar value -- 53.7 billion -- of Savings Bonds sold in the smaller
($25 to $200) denominations, the so-called payroll-saver bonds."
Concerning the work of the Committee Mr. Roche said, "America
needs our efforts today. We have every reason to take great pride
in our opportunity to sell an investment in America
in its
growth, its stability and its integrity. Let there be no question
about it, this is what we are selling."
Commend ing the Commi ttee on its 1969 accomplishments, Secretary
Kennedy said, "During 1969, Jim Roche and the 57 members of his
Committee organized Payroll Savings Drives in 23 major business
centers and 28 basic industries. These campaigns also provided
the pattern for community Payroll Savings efforts in 113 additional
areas. Committee members also conducted drives in their own com- _
panies which served as an example and inspiration for their communlties and industries.
- 3 -
"In their own companies, Committee members signed up more
than a half million new Payroll Savers and some 350 000 savers
who increased their allotments -- for a total of mo~e than 900
000. Approximately 250,000 of their employees also signed up ,
for Freedom Shares."
In his message to the Committee and to leaders of industry
throughout America, President Nixon said, '~e have already made
the interest paid on Savings Bonds more attractive. Only recently
I signed into law a bill permitting us to raise the effective rate
on Savings Bonds to five percent. And other fundamental steps to
make investment in Bonds more appealing are in prospect; for it
is a primary objective of this Administration to conduct fiscal
and monetary policy in such a way that inflation will not further
erode the savings of our people.
"Enrollment in a Payroll Savings Bond Program is a good individual and collective defense against the causes of inflation.
Regular purchases contribute to the financial security of the individual and the family, as well as to the fiscal strength of the
nation."
Secretary Kennedy presented awards to outgoing Chairman Roche
and to the members of his Committee; the Treasury Gold Medal of
Merit to the Chairman and Silver Medals of Merit to the members.
Secretary Kennedy's Citation to Mr. Roche reads, in part,
" . . • Inspired by his enthus iasm and splendid example, American
industry in 1969 substantially exceeded its goal of enrolling more
than two million two hundred thousand savers in E Bonds and Freedom Shares through the Payroll Savings PIa n. While these men and
women benefit directly, our nation as a whole has been well served
by his devoted efforts.
His generous service is in the finest
tradition of the volunteer spirit which symbolizes the Savings
Bonds Program and gives strength and vitality to our American way
of life."
George Meany, President, AFL-CIO, who has, over the years, led
Organized Labor's staunch support of the Savings Bonds Program, and
who has served with distinction as Chairman of the National Labor
Committee for D. S. Savings Bonds, received a special award for his
distinquished leadership,
- 4 Secretary Kennedy's Citation to President Meany reads, in
part, " . . . Inspired by his zeal for their personal well-being
and independence, American wage earners in record numbers have
enrolled in the Payroll Savings Plan for U. S. Savings Bonds.
In keeping with the spirit of the Labor movement, he has encouraged the nation's workers to build personal security by investing
in their country. Both the Labor community and the nation as a
whole have been enriched by his devoted service."
Past Chairmen of the Committee are as follow -- 1963, Harold
S. Geneen, Chairman and President, International Telephone and
Telegraph Corp.; 1964, Frank R. Milliken, President, Kennecott
Copper Corp.; 1965, Dr. Elmer W. Engstrom, Chairman of the Executive Committee, RCA Corporation; 1966, Lynn A. Townsend, Chairman
of the Board, Chrysler Corp.; 1967, Daniel J. Haughton, Chairman
of the Board, Lockheed Aircraft Corp., and 1968, William P. Gwinn,
Chairman, United Aircraft Corp.
000
TREASURY DEPARTMENT
:
WASHINGTON, D.C.
January 14, 1970
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
$3,000,000,000, or thereabouts, for cash and in exchange for
Treasury bills maturing January 22, 1970,
in the amount of
$ 2,900,192,000,
as follows:
9l-day bills (to maturity date) to be issued January 22, 1970,
in the amount of $1,800,000,000,
or thereabouts, representing an
additional amount of bills dated October 23, 1969,
and to
mature April 23, 1970,
originally issued in the amount of
$ 1,200,393,000,
the additional and original bills to be
freely interchangeable.
l82-day bills, for $ 1,200,000,000,
dated January 22, 1970,
and to mature
or thereabouts, to be
July 23, 1970.
The bills of both series will be issued on a discount basis under
competitive and noncompetive 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, January 19, 1970.
Tenders will not be
received at the Treasury Department, Washington. Each tender must
be for an even multiple of $1,000, and in the case of competitive
tenders the price offered must be expressed on the basis of 100,
with not more than three decimals, e. g., 99.925. Fractions may not
be used. It is urged that tenders be made on the printed forms and
forwarded in the special envelopes which will be supplied by Federal
Reserve Banks or Branches on application the refor.
Banking institutions generally may submit tenders for account of
customers pr.ovided the names of the customers are set forth in such
tenders. Others than banking institutions will not be permitted to
s~bmit tenders except for their own account. Tenders will be received
wlthout deposit from incorporated banks and trust companies and from
K-320
- 2 -
t"'esponsible and t"'ecognized dealet"'s in investment secut"'ities. Tenders
ft"'om othet"'s must be accompanied by payment of 2 pet"'cent of the face
amount of Tt"'easut"'y bills applied fot"', unless the tendet"'s are
accompanied by an expt"'ess guat"'anty of payment by an incorporated bank
or tt"'ust company.
Immediately aftet'" the closing hour, tenders will b~ 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. Only those submitting competitive 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 is sue for $ 200,000 or 1es s 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 January 22, 1970, in
cash or other immediately available funds or in a like face amount
of Treasury bills maturing January 22, 1970.
Cash and exchange
tenders will receive equal treatment. Cash adjustments will be made
fot'" differences between the par value of maturing bills accepted in
exchange and the issue price of the new bills.
The income derived from Treasury bills, whether interest or
gain from the sale or other disposition of the bills, does not have
any exemption, as such, and loss from the sale or other disposition
of Treasury bills does not have any special treatment, as such,
under the Internal Revenue Code of 1954. The bills are subject to
estate, inheritance, gift or other excise taxes, whether Federal or
State, but are exempt from all taxation now or hereafter imposed on
the principal or interest thereof by any State, or any of the
possessions of the United States, or by any local taxing authority.
For purposes of taxation the amount of discount at which Treasury
bills are originally sold by the United States is considered to be
interest. Under Sections 454 (b) and 1221 (5) of the Internal
Revenue Code of 1954 the amount of discount at which bills issued
hereunder are sold is not considered to accrue until such bills are
sold, redeemed or otherwise disposed of, and such bills are excluded
from consideration as capital assets. Accordingly, the owner of
Treasury bills (other than life insurance companies) issued hereunder
need include in his income tax return only the difference between
the price paid for such bills, whether on original issue or on
subsequent purchase, and the amount actually received either upon
sale or redemption at maturity during the taxable year for which the
return is made, as ordinary gain or loss.
Treasury Department Circular No. 418 (current revision) and this
notice prescribe the terms of the Treasury bills and govern the
conditions of their issue. Copies of the circular may be obtained
from any Federal Reserve Bank 060~ranch.
TREASURY DEPARTMENT
Washington
FOR RELEASE UPON DELIVERY
REMARKS BY THE HONORABLE DAVID M. KENNEDY
SECRETARY OF THE TREASURY
BEFORE
ANNUAL MEETING OF THE U. S. INDUSTRIAL
PAYROLL SAVINGS COMMITTEE
DIPLOMATIC FUNCTIONS SUITE
DEPARTMENT OF STATE
WEDNESDAY, JANUARY 14, 1970, 3:00 P.M., EST
It has been a great pleasure, as I said earlier, to
pay honor today to Jim Roche for his outstanding leadership
of the 1969 Industrial Payroll Savings campaign, to
George Meany for his long and distinguished chairmanship of
the Savings Bonds program in organized labor, and to the
members of Mr. Roche's Committee for their devoted and
patriotic service.
The Treasury and the nation are indebted to each of you
for an important and inspiring contribution to our
country's finances, to the battle we are waging against
inflation, and to the economic future of all Americans.
Because of the effectiveness of your campaign last year,
more than 2,300,000 persons signed up to purchase
Savings Bonds or Freedom Shares or to increase the amounts
they were already investing. You exceeded your goal by
more than 100,000 employees, making 1969 another banner
year for the Payroll Savings program.
Bonds and Freedom Shares bought primarily through
Payroll Savings totaled about $3.7 billion in 1969. The
American people now own more than $52 billion of Bonds and
Freedom Shares, or nearly one-fourth of the publicly held
portion of the Federal debto
Last year's progress resulted -- as progress generally
does -- from a great deal of hard, dedicated and
enthusiastic work. Mr. Roche and his Committee organized Payroll
Savings drives in 23 major business centers and 28 industries.
K-32l
- 2 -
Those campaigns also set a pattern for similar drives in more
than 100 other communities. In addition, Committee members
enrolled more than 900,000 employees in their own companies
for new or increased savings.
The continued growth of the Payroll Savings program
'-las one of the highlights of a busy and productive year
for the Treasury. In several of the areas with which we
are vitally concerned -- curbing inflation, building a
more equitable tax structure, strengthening the world
monetary system -- Treasury's efforts contributed to
encouraging progress, especially in the last few months.
While progress in overcoming the inflation that has
taken ever deeper roots in the economy since 1965 has not
been as rapid as we had hoped, we now are clearly making
headway as the policies of fiscal and monetary restraint
are taking effect. The cooling of our over-heated economy
should result in an easing of price pressures this year
and a return to sound, sustainable growth.
Tax reform, culminating in the Tax Reform Act which
President Nixon signed on December 30, also occupied much
of Treasury's attention last year. In April, the
Administration submitted a package of tax reform proposals
to the Congress. Through the ensuing months, our tax staff
worked almost daily with the Ways and Means and Finance
Committees to develop a more equitable tax system. The
reforms that were finally enacted included most of the
president's major proposals.
the other hand, as contrasted with the president's
tax recommendations made to the Congress last April, the
tax reductions in the bill will substantially reduce
Treasury revenues next fiscal year. This, of course, makes
all the more difficult the job of balancing the budget,
slowing the rising cost of living and meeting the costs of
essential services, many of which have uncontrollable, built-in
increases.
On
While a major part of our energies in recent months
has been devoted to inflation control and tax reform, we
also have been active in many other important areas.
- 3 -
In the international field,
been achieved in recent months
nations has brought the monetary
stormy periods, and given it new
0
considerable progress has
Close cooperation among
system through potentially
strength for the future.
The creation and distribution of Special Drawing Rights in
the International Monetary Fund has helped to assure a planned,
orderly growth of world reserves. The agreement for the
handling of South African gold gives new strength to the
two-tier system. Changes in parity of the French franc and the
West German mark were accomplished without serious monetary
disturbances
Our strong anti-inflation effort, and
the impt"ovement in the economic position of the United Kingdom,
have added further confidence in the system.
0
These developments, taken together, give promise of a
period of calm for world exchange markets and continued
steady growth of world trade and investment.
Touching briefly on some other highlights of
Treasury's year, we obtained Congressional approval to
increase the interest rate on Savings Bonds to 5 percent.
This increase was sorely needed to provide a fairer return
to the millions of Americans who regularly buy Bonds.
I believe and hope that the higher interest rate will
help Gordon Metcalf and the members of his 1970 Payroll
Savings Committee reach the ambitious goal they
have set for themselves.
We also have given our law enforcement activities a high
priority. The experience last fall along the Mexican border
on controlling the smuggling of marihuana and other drugs,
demonstrated that Treasury, in cooperation with other
Departments, can greatly reduce the flow of illegal drugs into
the United States. Supplemental funds recently appropriated by
the Congress at the request of the President will enable us to
hire additional Customs personnel and" intensify antismuggling activity, especially against heroin smuggling. We
are. supplying much of the manpower and know-how in the fight
aga1nst organized crime. We are seeking curbs on the use of
secret bank accounts abroad for illegal purposes.
j3l
- 4 -
In other significant activities, Treasury has:
Submitted to the Congress legislation
embodying the President's proposal for
sharing income tax revenues with State
and local governments.
Obtained Congressional approval of the
extension of the Interest Equalization Tax.
Worked closely with the international
development banks to help meet the needs of
the developing nations, and received
favorable Congressional action on
replenishment of the International Development
Association funds.
Obtained Congressional approval of a necessary
increase in the debt ceiling.
Asked Congress to approve an increase in the size
of the White House police force and extension
of its responsibilities to include protection of
foreign embassies.
Submitted legislation providing for the first
major modernization in 80 years of U. S.
CUstoms Court procedures and Customs Bureau
duty determination.
And submitted legislatio~ providing for
Federal regulation of one-bank holding companies.
As you can see, 1969 was a year of Treasury activity
on many fronts, and a time in which we were able to resolve
a number of urgent problems and make a needed and
encouraging start on dealing with others.
I'd like to take just a minute here to recognize the
outstanding performance of the Treasury staff during the last
year. Many appointees and staff literally worked night and
day, seven days a week for months on the tax bill and other
measures. Their dedication is an inspiration to me and
should be to you.
- 5 -
1--. 3 f
The task before us now is to build on the progress
achieved, and contribute to the fullest to the attainment
of essential national objectives -- the continuation of
responsible fiscal policies, the curbing of inflationary
forces, the continued strengthening of the international
monetary system.
By your generous and patriotic service in promoting
the sale of Savings Bonds, the members of the Payroll
Savings Committee will play a vital part in the attainment
of each of those objectives. I am confident that
Mr. Metcalf and the members of this year's Committee, like
Mr. Roche and the 1969 Committee, will be eminently successful.
Thank you.
000
-.--- -
---- - ~
._---
-----
-----.~
-------
- - , .. ---.-~.--.--~- ..
---_._._--------.-----
'f'nc ~lreasW7 ])c9:.lrtrnent announce::d tod<lY th2.t it
nW5
investi~atcd char~es of p08siblc dumpin3 of poJypro~ylene
fibn r~an1)f::ccture(l b~r /~o~1jin Co., l.t(J., 'i'ol~yo, ,JaTwD.
A notice announc:inc:" u tent~';.t:i vo d'2tcrn,in~"tj_on that
this ncrc)12ndisc is not beinG,
1101'
Act FiJI bc 'rJUbl:ishcJ in an carl;.'
Resister.
lil-:ely to :)c ~ sold at
j SSlJC
of the ~1'ec5c:n:tl
t} c/o
.
o
TREASURY DEPARTMENT
WASHINGTON. D.C.
January 16, 1970
FOR IMMEDIATE RELEASE
MINT DIRECTOR HONORS TWO MINT OFFICIALS
WITH SPECIAL AWARD FOR UNUSUAL INVENTION
Two longtime career employees of the United
States Mint, have been issued a patent for the new clad
metdl combinations now being used in the production
of dimes, quarters, and half-dollars. The inventors
have assigned the patent and all rights to the process
to the United States Government.
Mrs. Mary Brooks, Director ,)f the Mint 1 today
presented a joint Special Achievement Award to
Philip B. Neisser and Morris V. Boley, for their
invention of the new composite materials. They will
share a $5,000 cash award.
The development of this coin materiql by Messrs.
Nelsser and Boley, Technical Consultant and Assistant
TEchnical Consultant to the Director of the Mint, was
begun in the early 1960's, when the U~ited States
found it necessary to produce a substitute for the
traditional silver coinage. The substitution of a
silver-free alloy, or an alloy containing a smaller
percentage of silver, presented complex problems. Any
metal or alloy to be used in coins must possess certain
mechanical, chemical and physical properties, as well
as provide for the protection of the coinage system.
The coin material has outer layers of either
copper-nickel or silver-copper alloys bonded directly
to either a pure copper or silver-copper base, and
is used for the production of the half~dollar, quarter
and dime coins.
Mr. Neisser, a chemist and metallurgist, began
his Government career with the Mint in Philadelphia in
1934 as a helper in the Assay Division. He advanced
K-322
- 2 -
through the ranks and in 1942 was named Assistant
Superintendent of the Melting and Refining Division.
In 1951 he moved to the Bureau in Washington as
Assistant Technical Consultant to the Director and
in 1958 was promoted to his present position.
Mr. Boley, a chemist, also entered Government
service in 1934 and came to the Bureau of the Mint's
laboratory in 1939 as a scientific aide. In 1948
he transferred to the San Francisco Mint where he
progressed to the position of Superintendent of Melting
and Refining. In 1958 he returned to the Bureau in
Washington as Assistant Technical Consultant to the
Director. Mr. Boley will retire from Government service
on January 31, 1970.
000
TREASURY DEPARTMENT
Washington
FOR RELEASE ON DELIVERY
ABOUT 12 NOON, CST
TUESDAY, JANUARY 20, 1970
REMARKS BY BRUCE K. MacLAURY
DEPUTY UNDER SECRETARY OF THE TREASURY
FOR MONETARY AFFAIRS
BEFORE THE 1970 "SHARE-IN-AMERICA"
SAVINGS BONDS VOLUNTEER CONFERENCE
MILWAUKEE, WISCONSIN
TUESDAY, JANUARY 20, 1970
Chairman Groh, distinguished guests, ladies and gentlemen.
It is a very real pleasure for me to be here in Milwaukee
today and to have this opportunity to discuss with you some
thoughts about our Savings Bonds Program at this Share-in-America
Campaign Meeting for metropolitan Milwaukee and metropolitan
Racine.
This is quite an assembly of Milwaukee/Racine/Madison
business leadership.
I am especially pleased to see here today
-- Thomas Go Cook, President, Walker Manufacturing Co., Racine
SIA Chairman; Charles K. Albrecht, President, DEC International,
Inc., Madison SIA Chairman; and Oscar J. Mayer, Jr. (myer),
Chairman of the Board, Oscar Mayer & Co., Milwaukee, the 1970
Chairman for the Food Manufacturing Industry.
As you know, last Wednesday, members of the U. S. Industrial
Payroll Savings Committee met in Washington to discuss the results
of its 1969 campaign and to formulate plans for the 1970 campaign.
K-323
- 2 -
It was a highly successful meeting, and I should like to
touch on a few of the highlights.
In reporting the results of the 1969 Committee, outgoing
Chairman James M. Roche, Chairman of the Board, General
Motors Corp., said, "In a year that was not an easy one for
the sale of Savings Bonds, this Committee exceeded its goal
by five percent.
It made 1969 the third best year since World
War Two for the number of new or increased sign-ups.
It
made 1969 the second best year for the dollar value -$3.7 billion -- of Savings Bonds sold in the smaller ($25 to
$200) denominations, the so-called payroll-saver Bonds."
The goal for 1970 is to sign up two million industrial
employees as new Payroll Savers -- or as savers who increase
their allotments for the purchase of U. S. Savings Bonds.
Gordon M. Metcalf, Chairman of the Board, Sears, Roebuck and
Co., accepted his appointment as the incoming Committee
Chairman for 1970, and got off to an enthusiastic start toward
this year's challenging goal.
Secretary Kennedy and Under Secretary Vo1cker both pointed
out the importance of the Savings Bonds Program to the sound
management of the National debt and I should like to return
- 3 -
to this subject in a minute.
Their remarks were underscored
by President Nixon in his message to the Committee and to
leaders of industry throughout America.
President Nixon
said, "We have already made the interest paid on Savings
Bonds more attractive.
Only recently I signed into law a
bill permitting us to raise the effective rate on Savings
Bonds to five percent.
And other fundamental steps to make
investment in Bonds more appealing are in prospect; for it is
a primary objective of this Administration to conduct fiscal
and monetary policy in such a way that inflation will not
further erode the savings of our people.
"Enrollment in a Payroll Savings Bond Program is a good
individual and collective defense against the causes of
inflation.
Regular purchases contribute to the financial
security of the individual and the family, as well as to the
fiscal strength of the nation."
We all know the value of Savings Bonds as a nest egg -for emergencies, retirement, a new home, education for the
children, a well earned vacation, and so on.
- 4 But many of us have a rather imprecise view of the value
of Savings Bonds to our Government.
We know they have
something to do with fighting inflation; with managing the
National debt.
But we aren't quite sure how this is accomplished.
And so I'd like to take a few minutes today to discuss briefly
the character of the National debt
and to relate the Savings
Bonds Program to debt management.
To begin with, Savings Bonds are an important component of
our entire Federal debt structure.
Treasury debt totalled
about $368 billion at the end of 1969.
Of that total, about
$89 billion was held by Government accounts, such as the
Social Security Trust Fund, Civil Service Retirement Fund,
Unemployment Trust Fund, and others.
The Federal Reserve
System held about $57 billion of Treasury debt which it
had accumulated in the process of providing reserves to the
banking system to support the orderly growth of the money
supply.
This left in the hands of the general public $222
billion of U. S. Treasury securities, about 60 percent of
the total outstanding.
Of this $222 billion total, $162 billion is in the form of
marketable securities, and a small additional amount ($8 billion)
is in nonmarketable securities other than savings bonds.
balance -- $52 billion -- is made up of E and H Bonds and
The
- 5 -
Savings Notes (FLeedom Shares).
This $52 billion represents
just under 25 percent of the $222 billion of Treasury obligations
held by the general public.
But the importance of Savings Bonds in terms of managing
the national debt is not fully reflected in this single
fraction, significant though it is.
The fact is that Savings
Bonds today, even with their shorter initial maturities,
constitute the backbone of the Government's long-term debt.
Because of the 4-1/4 percent interest rate ceiling on
Government bonds that dates from the first World War, the
Treasury has been prevented from issuing any securities of
more than 7 years to maturity since 1965.
Largely as a result,
the average maturity of the privately held marketah1e debt has
declined from 5 yrs. 9 mo. in 1965 to 3 yrs. 9 mo. at the
end of 1969.
This is hardly a satisfactory or reassuring
picture, from at least two points of view.
First, as the average maturity of the debt declines, this
debt increasingly takes on the characteristics of money -- it
becomes more liquid, and hence more "spendable", even at times
such as the present when in the interests of curbing inflation
there is a need to hold down spending.
- 6 Second, when the average maturity of the Government's
debt is as short as it now is, the job of refinancing that
debt can become one of considerable difficulty, not just
for the debt managers such as myself who are paid to worry
about such things, but much more importantly, for the capital
markets in general, on which you depend as
wel~
as we.
Even
after eliminating Treasury bills, which come due as frequently
as every ninety days, it is still the case that nearly $1 in
$5 of the marketable securities held by the general public
mature and must be refunded each year.
Against this background, it is not difficult to understand
why we are concerned that we continue to be able to count on a
solid base of funds provided to the Government in the form of
Savings Bonds.
On the basis of past experience, we can predict
that the Savings Bonds sold today on the average will not be
redeemed for 5-1/2 years, almost twice as long as dollars
obtained through marketable issues.
This may sound strange when one hears so often that
Savings Bonds are cashed in practically as soon as they are
bought.
It is true that there are those who turn them in
after the minimum waiting period, and early redemptions are a
- 7 problem.
But, by and large, our buyers hold onto their
Savings Bonds.
Every analysis we have made shows that in
comparison with deposits at commercial banks, savings and
loan associations, and mutual savings banks, people hold
their Savings Bonds.
Let me mention one other fact bearing upon the importance
of Savings Bonds to the Government that may surprise you as it
did me:
over the past 25 years, increased holdings of Savings
Bonds represent a substantial part of the total increase in
the amount of Federal debt in the hands of the general public.
So that you are not misled by this statement, let me hasten
to say that this is so not because the net increase in Savings
Bonds has been so large, nor because the budget deficits you
have read about never really occurred, but rather because the
trust funds and the Federal Reserve, through their normal operations, have absorbed a large part of the net increase in the
Government's marketable debt.
Nevertheless, it is significant
that Savings Bonds and Notes provided $2.3 billion of the $6.5
billion net increase since 1946 in the total amount of Government
debt held by the general public at the end of fiscal 1969.
If Savings Bonds continue to be important to the Government
and these remarks indicate why I think that that is the case
then the Government has a responsibility to see to it that
- 8 those who buy Savings Bonds are given a fair return on their
investment.
Exactly what constitutes a fair rate of return ,
of course, is a matter on which reasonable men may differ.
But there was no disagreement that the 4-1/4 percent rate that
applied during the early
with reality.
months of last year had lost touch
Had it been possible for the Administration to
increase the rate through discretionary action, that action
would have been much faster in corning.
But the same law that
continues to limit to 4-1/4 percent the rate the Treasury may
pay on marketable bonds applied to Savings Bonds as well.
Thus
Secretary Kennedy, as early as July of last year, proposed
that this anachronistic ceiling be removed.
But with first
the House Ways and Means Committee, and then the Senate Finance
Committee, preoccupied with another sort of equity -- equity in
the tax field -- the buyer of Savings Bonds had to wait until
December to be sure that the new rate proposed by the Secretary
5 percent -- would actually take effect as of June 1 as promised.
That uncertainty is now behind us.
With the new yield to
maturity of five percent, Savings Bonds are again reasonably
competitive with the types of investment alternatives that are
most comparable.
I do not believe that we need to apologize
for the fact that Savings Bonds do not carry a return related
- 9 to marketable securities which at the moment is at historically
high levels.
After all, they provide a convenient method of
saving for the small saver that is not available to him in
marketable instruments; they bear none of the risks associated
with such investments, and in general are designed to provide
a fair and stable return over the longer run.
Moreover, even
if one were inclined to 'vary the rate on Savings Bonds in
conjunction with movements in market rates -- down, I might
say, as well as up -- as a practical matter, it would be
highly disruptive and not in the national interest to pay
a market rate at the moment, given the inability of a major
segment of savings institutions to meet this sort of competition.
It is not the intent of the Government to pull savings out of
such financial institutions into Savings Bonds, but simply to
provide a rate of return that does not discriminate against the
purchasers of Savings Bonds and provides you with a product
that you can sell in good conscience.
I think we now have that
product.
But if the Government has a responsibility to the Savings
Bond purchaser to provide a fair rate of return, it has an
even greater responsibility to do all it can to see that the
value of the dollars it pays back to him at the time of
- 10 encashment have not been eroded by inflation.
Obviously,
this is a matter that goes far beyond the question of
Savings Bonds alone.
It bears on the whole question of
financial stability and the ability of major segments of
our economy to continue to finance themselves on the basis
of fixed income liabilities.
There is a danger, too serious
to be ignored, that the Federal Government, State and local
governments, and homeowners -- i.e., those who are not in
a position to provide equity participations or other hedges
against inflation -- are likely to lose out progressively
for the investor's dollar unless inflation itself is curbed
decisively.
President Nixon has described inflation as the
most unjust tax of all, and has made the restoration of
stable prices his first domestic priority.
The relevance
of this fight in terms of Savings Bonds is clear, and it is
thus encouraging that the signs of restraint in excessive
economic activity are becoming clearer every day.
From the beginning of the Savings Bond program, the
industry-oriented Payroll Savings Plan has been the backbone
of the program.
Today, more than 40,000 companies, large and
small, operate the plan and the Savings Bonds purchased by
their employees account for over two-thirds of total sales.
- 11 Thus, the U. S. Industrial Payroll Savings Committee
lth the support of organized labor and the vast army of
lvings Bonds volunteers -- has accomplished a formidable task
1
promoting the sales of E Bonds.
The 1969 Committee has
cceeded its goal, and sales were 40 percent higher than in
1~62,
the year before the Committee began its campaign.
The
incoming 1970 Committee has taken on a similar challenge.
We are confident that it, too, will not only meet but exceed
its goal.
Those of you who are spearheading our 1970 campaign are
selling a product that is tried and true -- one that is good
for the Nation and good for each of us as individuals.
Good luck.
00
00
00
TREASURY DEPARTMENT
)R RELEASE 6:30 P.M.,
)nday) January 19, 197
°.
WASHINGTON. D.C.
RESULTS OF TREASURY'S WEEKLY BILL OFFERING
The Treasury Department announced that the tenders for two series of Treasury
ills, one series to be an additional issue of the bills dated October 23 1969 and
1e other series to be dated January 22, 1970, which were offered on Janu~ry 14', 1970 ,
ere opened at the Federal Reserve
Banks $today. Tenders were invited for dol
800 , 000 , 000 ,
.
~,
r thereabouts, of 91-day bllls and for 1,200,000,000, or thereabouts, of 182-day
ills. The details of the two series are as follows:
a.NGE OF ACCEPTED
91-day Treasury bills
)MPETITIVE BIDS : _ _.......;;;m;.;;;a::.;:;t..:;ur::..;::;in;;;!g--=.A.:.p::.;:;r-=i=1~23::...z..,...:1::9:..:,7.::.0
Approx. Equiv.
Price
Annual Rate
High
98.041
7.750%
Low
98.027
7.805~
Average
98.031
7.789%
.
11
182-day Treasury bills
maturing July 23, 1970
Approx. Equiv.
Price
Annual Rate
96.158 ~
7.600%
96.120
7.675%
96.126
7.663%
11
~ Excepting 1 tender of $10,000
54% of the amount of 91-day bills bid for at the low price was accepted
6010 of the amount of 182-day bills bid for at the low price was accepted
lTAL TENDERS APPLIED FOR AND ACCEPI'ED BY FEDERAL RESERVE DISTRICTS:
District
Boston
New York
Philadelphia
Cleveland
Richmond
Atlanta
Chicago
St. Louis
Minneapolis
Kansas City
Dallas
San FranCisco
Accepted
Applied For
$ 42,053,000 $ 28,890,000
1,164,625,000
2,259,587,000
30,195,000
45,445,000
53,608,000
57,806,000
27,532,000
27,533,000
38,113,000
72,722,000
221,974,000
285,542,000
42,620,000
60,845,000
14,000,000
29,460,000
42,074,000
48,215,000
23,205,000
37,205,000
113 ,348 ,000
191.>608 ,000
$1,800,184,000
t3,158,021,000
:
£I
Applied For
$
21,315,000
1,775,397,000
30,573,000
82,699,000
49,239,000
56,132,000
188 ,438 ,000
45,327,000
25,307,000
47,283,000
39,658,000
167,540,000
$2,528,908,000
Accepted
$ 14,737,000
707,388,000
20,170,000
72,249,000
35,795,000
37,132,000
120,287,000
40,927,000
11,324,000
43 ,232,000
26,158,000
71,386,000
$1,200,785,000
£I
TOTALS
Includes $536 906 000 noncompetitive tenders accepted at the average price of 98.031
.
f 96.126
Ineludes $440 "181 000 noncompetitive tenders accepted at the average prlce
0
These rates a;e o~ a bank discount basis. The equivalent coupon issue yields are
8.06% for the 91-day bills, and 8.08 %for the 1B2-day bills.
TREASURY DEPARTMENT
t
WASHINGTON. D.C.
FOR IMMEDIATE RELEASE
January 21, 1970
UNITED STATES AND NORWAY TO DISCUSS REVISION
OF INCOME TAX CONVENTION
The Treasury announced today that representatives of the
united States and Norway are expected to meet in Washington
in March to discuss revision of the income tax convention
between the two countries.
The existing convention was signed in 1949.
A supple-
mental convention signed in 1958 added an article providing
for the taxation of dividend income.
The forthcoming negotia-
tions will be the occasion for a general review of the existing
convention, taking into account the "Draft Double Taxation
convention" published in 1963 by the Fiscal Committee of the
Organization for Economic Cooperation and Development (OECD)
and recent conventions concluded by the two countries with
other industrial nations, such as the convention between the
United States and France which entered into force in August,
1968.
Among the provisions to be discussed will be the rules
governing the taxation by either country of income derived by
residents of the other country from investment, personal services, activities on the continental shelf, and permanent
establishments.
Anyone wishing to offer comments or suggestions concerning
the income tax convention between the united States and Norway
is requested to submit his views to Assistant Secretary of the
Treasury Edwin S. Cohen, united States Treasury Department,
Wi~~icgton, D. C., 20220 by February 27, 1970.
iREASURY DEPARTMENT
FOR IMMEDIATE RELEASE
WASHINGTON. D.C.
January 21, 1970
TREASURY'S WEEKLY BILL OFFERING
The Treasury Department, by
for two series of Treasury bills
$3,000,000,000, or thereabouts,
Treasury bills maturing January
$2,900,641,000,
as follows:
this public notice, invites tenders
to the aggregate amount of
for cash and in exchange for
29,1970,
in the amount of
91-day bills (to maturity date) to be issued January 29, 1970,
in the amount of $ 1,800,000,000,
or thereabouts, representing an
additional amount of bills dated April 30, 1969,
and to
mature April 30, 1970,
originally issued in the amount of
$1,000,634,000,(additional amounts of $500,151,000 and $1,200,988,000
were issued July 31, 1969, and October 30, 1969, respectively), the
additional and original bills to be freely interchangeable
0
182 -day bills, for $ 1,200,000,000,
or thereabouts, to be
lated January 29, 1970,
and to mature July 30, 1970.
The bills of both series will be issued on a discount basis under
:ompetitive and noncompetive bidding as hereinafter provided, and at
laturity their face amount will be payable without interest. They
Till 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
to the closing hour, one-thirty p.m., Eastern Standard
:ime,
Monday, January 26, 1970.
Tenders will not be
'eceived at the Treasury Department, Washington. Each tender must
Ie for an even mul tiple of $1,000, and in the case of competitive
:enders the price offered must be expressed on the basis of 100,
rith not more than three decimals, e. g., 99.925. Fractions 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 the refor.
~
Banking institutions generally may submit tenders for a:count of
ustomers provided the names of the customers are set forth 1n such
enders. Others than banking institutions will not be permitted to
ubmit tenders except for their own account. Tenders will be received
ithout deposit from incorporated banks and trust companies and from
K-325
- 2 responsible and recognized dealers in investment securities. Tenders
from others must be accompanied by payment of 2 percent of the face
amount of Treasury bills applied for, unless the tenders are
accompanied by an express guaranty of payment by an incorporated bank
or trust company.
Immediately after the closing hour, tenders will be opened at
the Federal Reserve Banks and Branches, following which public announce.
ment will be made by the Treasury Department of the amount and price raJ
of accepted bids. Only those SUbmitting_competitive tenders will be
advised of the acceptance or rej ection 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. Subj ect 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 January 29, 1970, in
cash or other immediately available funds or in a like face amount
of Treasury bills maturing January 29, 1970.
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
K-325 from any Federal Reserve Bank 060~ranch.
TREASURY DEPARTMENT
WASHINGTON, D.C.
January 21, 1970
FOR IMMEDIATE RELEASE
TREASURY'S MONTHLY BILL OFFERING
The Treasury Department, by
for two series of Treasury bills
$ 1,500,000,000, or thereabouts,
Treasury bills maturing January
$ 1,500,666,000,
as follows:
this public notice, invites tenders
to the aggregate amount of
for cash and in exchange for
31, 1970,
in the amount of
271-day bills (to maturity date) to be issued February 2, 1970,
in the amount of $500,000,000,
or thereabouts, representing an
additional amount of bills dated October 31, 1969,
and to
mature October 31, 1970, originally issued in the amount of
$ 1,002,537,000,
the additional and original bills to be
freely interchangeable.
365-day bills, for $ 1,000,000,000,
dated January 31, 1970,
and to mature
or thereabouts, to be
January 31, 1971.
The bills of both series will be issued on a discount basis under
competitive and noncompetive 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, Tuesday, January 27, 1970.
Tenders will not be
received at the Treasury Department, Washington. Each tender must
be for an even multiple of $1,000, and in the case of competitive
tenders the price offered must be expressed on the basis of 100,
with not more than three dec"imals, e. g., 99.925. Fractions may not
be used. (Notwithstanding the fact that the one-year bills will run
for 365 days, the discount rate will be computed on a bank discount
basis of 360 days, as is currently the practice on all issues of
Treasury bills.) It is urged that tenders be made on the printed
forms and forwarded in the special envelopes which will be supplied by
Federal Reserve Banks or Branches on application therefor.
....
Banking institutions generally may submit tenders for account of
customers provided the names of the customers are set forth in such
tenders. Others than banking institutions will not be perm.itted to
K-326
- 2 -
submit tenders except for their own account. Tenders will be received
without deposit from incorporated banks and, trust companies and from
respons ible and recognized dealers in investment securities. Tenders
from others must be accompanied by payment of 2 percent of the face
amount of Treasury bills applied for, unless the tenders are
accompanied by an express guaranty of payment by an incorporated bank
or trust company.
Immediately after the closing hour, tenders will be opened at
the Federal Reserve Banks and Branches, following which public announcement will be made by the Treasury Department of the amount and price ran!
of accepted bids. Only those tubmitting competitive tenders will be
advised _Qf,the accepta~ce 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 2, 1970, 'in
cash or other immediately available funds or in a like face amount
of Treasury bills maturing January 29,19700
Cash and exchange
tenders will receive equal treatment. Cash adjustments will be made
for differences between the par value of maturing bills accepted in
exchange and the issue price of the new bills.
The income derived from Treasury bills, whether interest or
gain from the sale or other disposition of the bills, does not have
any exemption, as such, and loss from the sale or other disposition
of Treasury bills does not have any special treatment, as such,
under the Internal Revenue Code of 1954. The bills are subject to
estate, inheritance, gift or other excise taxes, whether Federal or
State, but are exempt from all taxation now or hereafter imposed on
the principal or interest thereof by any State, or any of the
possessions of the United States, or by any local taxing authority.
For purposes of taxation the amount of discount at which Treasury
bills are originally sold by the United States is considered to be
interest. Under Sections 454 (b) and 1221 (5) of the Internal
Revenue Code of 1954 the amount of discount at which bills issued
hereunder are sold is not considered to accrue until such bills are
sold, redeemed or otherwise disposed of, and such bills are excluded
from consideration as capital assets. Accordingly, the owner of
Treasury bills (other than life insurance companies) issued hereunder
need include in his income tax return only the difference between
the price paid for such bills, whether on original issue or on
subsequent purchase, and the amount actually received either upon
sale or redemption at maturity during the taxable year for which the
return is made, as ordinary gain or loss.
Treasury Department Circular No. 418 (current revision) and this
notice prescribe the terms of the Treasury bills and govern the
conditions of their issue. Copies of the circular may be obtained
from any Federal Reserve Bank o~n~ranch.
STATEMENT OF EUGENE To ROSSIDES
ASSISTANT SECRETARY OF THE TREASURY
BEFORE
SUBCOMMITTEE NO o 3
OF THE
HOUSE JUDICIARY COMMITTEE
ON So 2624
January 22, 1970
10 a.m.
Mr. Chairman and Members of the Subcommittee:
I am Eugene T. Rossides, Assistant Secretary
of the Treasury for Enforcement and Operations.
My
duties include supervision of the activities of the
Bureau of Customs.
I appreciate the opportunity to appear before
your Committee to present the Treasury's unequivocal
support for the enactment of So 2624 "To improve the
judicial machinery in customs courts by amending the
K-327
statutory provisions relating to judicial actions and
administrative proceedings in customs matters, and for
other purposes", as passed by the Senate on December 9,
1969.
The original bill was prepared by the Treasury
and Justice Departments, working in the closest kind of
joint effort.
Continuing discussions which extended
over many months with all the interested groups--the
United States Customs Court, the bar, importers,
Government agencies and, of course, the Federal
Judicial Center--resu1ted in July, 1969 in the introduction of identical bills in both the House (HoRo 12691,
H.R. 12857 and H.R. 12921) and the Senate (S. 2624).
But, in a larger sense, these bills are a
tribute to the efforts of Mr. Justice Clark and the
Federal Judicial Center and Judge Rao and the Customs
Court.
Their support and efforts have been crucial.
I would also like to add that Judge Rao and his
colleagues on the Customs Court have done an outstanding
job working under an archaic statute.
The bills provide that:
first, archaic statutory procedures for determining
duty liability will be replaced by modern methods;
second, fewer cases will need to come to the court; and,
third , those that do can be handled more efficiently and
expeditiously.
The Subcommittee on Improvements in
4
Judicial Machinery of the Senate Judiciary Committee
held extensive hearings on the bill on August 4 and 5
and September 8, 1969.
Testimony was taken from
representatives of the Federal Judicial Center, the
Customs Court, the Departments of Treasury and Justice,
the Association of the Customs Bar, the American Bar
Association, the American Importers Association, the
Commerce and Industry Association and numerous local
and regional trade associations and organizations of
importers and customs brokers.
Subsequently, the
Judicial Conference endorsed the bill.
On the basis of this testimony, and after
full consideration of comments directed against various
provisions of the bill, the Subcommittee recommended
that the bill with 18 amendments--many of them
technical--do pass.
The Departments of Treasury and
Justice believe the bill, as amended in the Senate,
meets the major objections raised in the hearings and
is an improved vehicle for modernizing customs procedures
in the Bureau of Customs and the Customs Court.
bill was passed by the Senate on December 9.
The
We urge
its favorable consideration by this Committeeo
Now, I wish to place this proposal in
perspective.
It is a "trade neutral" bill.
The bill's
purpose is confined to revising the administrative
proc~nures under which duty liabilities are determined
and to modernizing the judicial procedures in the
6
United States Customs Court and Court of Customs and
Patent Appeals.
It does not affect rates of duty nor
the substantive provisions of law relating to the basis
of duty assessment, such as the statute governing the
determination of value of imported merchandise.
In
other words, it is not intended to have any commercial
or financial impact on our international trade, favorable
or unfavorable.
It has been deliberately drafted to be
"trade neutral".
We believe that this bill will enable the
Treasury's Bureau of Customs, the Department of Justice
and the customs courts to deal with the ever-escalating
volume of import transactions far more efficiently and
effectively than they have been able to in the past.
7
To give this Committee an idea of how the
volume of customs collections and transactions has been
rising, even in the last five years--in fiscal year 1964
the Customs Service collected over $1.8 billion aild
processed 1.7 million formal entries; in fiscal year 1969,
however, Customs collected over $3-1/4 billion and
processed over 2-1/2 million formal entries.
Each year
Customs handles hundreds of millioffi of other types of
transactions
0
For example, each of the more than 200
million persons who arrived in the United States in 1968
had to clear customs.
I present figures only for the
formal entries because typically they cover commercial
importations and, therefore, are the source of nearly all
the litigation in the customs courtso
Under Reorganization Plan No.1 of 1965, the
Bureau of Customs took a giant step into the 20th century
by redesigning the Customs administrative organization to
meet the demands of expanding international trade and
travel.
Major goals achieved under that plan were the
elimination of all Presidentially-appointed customs officials
at the local level and the consolidation, primarily under
career district directors, of the separate organizational
units for which those former Presidential appointees were
responsible.
The primary authority and responsibility for
supervising the administrative and operating field
activities of these district directors were placed in nine
regional commissioners of customs, who report directly to
the Commissioner of Customs.
The Treasury Department, the Bureau of Customs,
and the Justice Department now seek to complete the
procedural phase of the reorganization process begun in
1965 by revising the outmoded statutory procedural
9
requirements.
We believe that the bill does so in a
way which balances the interest of the Government, the
importing community and the domestic producers.
Before briefly describing the highlights of
the bill, an outline of the history of the procedures
for determining the value of imported goods is relevant
and would be of interest to your Committeeo
In the earliest days, Customs valuations of
goods were not open to judicial review.
The first
Congress, in 1789, provided that collectors of customs
would accept value stated on original invoices as the
basis for assessment of duty.
If original invoices were
not produced, the collector would appoint a merchant
appraiser familiar with the goods, the importer would
1
also appoint a merchant and the two, under oath, would
make the appraisement.
In 1823, the President was authorized to
appoint United States Appraisers for certain ports and
at other ports
Collectors appointed "responsible
resident merchants" to be appraisers.
If an importer
was dissatisfied with the Government's appraisal, he
could employ, at his own expense, two "responsible
resident merchants" who, together with the government
appraisers, would determine the value.
Appeals could
be taken to the Secretary of the Treasury but his
decision was final.
During this period, an importer
could obtain judicial review of duty assessments by
bringing an action in federal court for a refund of
I
duty paid and the court would decide whether the
collector of customs had assessed the proper rate of
duty.
However, the court could not inquire into the
merits of the value on which the duty was assessed.
Various changes were made in this system
during the 19th century but it was not until 1890,
when the Board of General Appraisers was created to
review decisions of the Bureau of Customs, that a system
of quasi-judicial review of value determinations was
established.
Nine general appraisers, three of whom sat
as a Board, were appointed by the President with the
consent of the Senate.
The Board's decisions relating
11
12
to duty assessments, including classification as well as
value, were reviewable by the circuit courts of appeal.
The specialized Court of Customs Appeals was
created in 1909 to have exclusive jurisdiction over
decisions of the Board of General Appraisers.
The
court became the Court of Customs and Patent Appeals
in 1929.
In 1926, the United States Customs Court was
established replacing the Board of General Appraisers.
However, the change was largely one of name.
The
limitations and restrictions imposed on the Board by the
statute were retained for the Court.
Thus, it is almost 80 years since the
existing system of administrative determinations of
/.') ( 1
,
l,..
13
duty liability coupled with judicial review saw its
beginnings.
We believe that the time has come to
revamp and modernize the system.
Before turning to a description of the changes that
we propose to bring the present procedures in the
Bureau of Customs up to date, let me describe briefly
the present procedures leading to judicial reviewo
Under Reorganization Plan No. 1 of 1965, the
appraisement and classification functions were
consolidated under the supervision of local district
directors.
Essentially, the purpose of appraisement is
to determine the value of merchandise against which the
statutory rate of duty is to be applied.
The purpose of
classification is to determine the dutiable category
14
under the law into which the merchandise falls.
Notwithstanding this administrative amalgamation
of the two functions, the applicable statute still
requires separate procedures for the appraisement and
classification of imported merchandise o
The importer is
entitled to separate judicial review of the appraisement
determination and if this is undertaken, other processes
relating to the assessing of duties must be halted while
the appeal is pending in court.
The classification of
the merchandise and completion of other administrative
processing necessary to "liquidate" the entry
(procedures involving the fixing of the duties due, the
assessment of any additional duties due or the refunding
of any overpayments of duty tentatively estimated and
paid when the merchandise is initially landed) must
await the final court decision on the appeal for
reappraisement.
When the process is resumed, after the
judicial review of the appraisement determination has
been completed, and the entry is liquidated, the
importer is entitled to administrative as well as a
new judicial review of the liquidation.
Thus, the final
determination of the duty actually owed to the Government,
or refund due the importer, may be delayed for years.
Moreover, under present law, which, as we have
seen, was enacted substantially in the 19th century,
appeals from initial Customs' administrative
appraisements are automatically referred to the Customs
16
Court without opportunity for any administrative review
of the appraisement.
On the other hand, the present law
provides that when an entry is liquidated and the
importer files a "protest" against the liquidation,
Customs shall review all aspects of the liquidation
which are challenged in the protest.
If the protest
is denied, however, the matter is automatically referred
to the Customs Court.
No further or separate action is
needed to invoke the Court's jurisdiction.
These automatic referrals demean the dignity
and status of the Customs Court as a constitutional court.
In addition, the procedures do not permit the importer
the conscious choice normally exercised by allegedly
aggrieved parties of deciding, after administrative review,
17
whether or not to litigate.
In some cases, the
importer might be quite content to accept the Customs
position after the original decision has been reviewed
and affirmed at the administrative level.
This automatic and indiscriminate judicial
review procedure, at a time when the volume of international
trade is rising, has resulted in a tremendous increase
in court workload.
It has also caused manpower and
storage facilities at
~h~
Customs administrative level
to be wastefully utilized in transmitting records to the
court and maintaining open files on numerous cases which
experience has demonstrated will be abandoned by the
importer or settled through stipulated agreement between
the Government and the importer.
18
s.
2624 provides for a single customs
administrative procedure for the determination of the
duty liability of imported merchandise.
All decisions,
including appraisement and classification, which are
necessary to the final duty determination and entry
"liquidation", will be combined in a consolidated
administrative process and subject to administrative
review in a single proceeding.
In addition, the bill
authorizes administrative reconsideration of the
appraisement decision, thereby eliminating the archaic
situation under existing law which compels a district
direr tor to appeal his own appraisement decision to the
Customs Court to correct an admitted appraisement error
discovered after the entry has been officially appraised!
19
The bill gives to importers a 90-day period
from the date of liquidation in which to protest any
administrative determination, and permits the importer
and Customs to take up to 2 years to resolve their
differences at the review level before the importer must
resort to judicial review.
The extended time periods
i.n which the importer may file his protest and the
Government may review it will help to eliminate the
protest filed merely as a protective measure and will
insure that each protest receives the administrative
consideration it deserves.
Furthermore, an amendment
made by the Senate requires that the Secretary of the
Treasury shall provide by regulations, in appropriate
circumstances , for a further review of protests by a
customs officer other than the officer who made the
original liquidation.
A further Senate amendment requires affirmative
action by reviewing customs officers to dispose of a
protest within the 2-year period allowed for its review,
and to mail a notice of the action taken to the
protesting party.
An importer or other protesting party
who believes that he cannot obtain satisfactory action
upon his claim at the administrative level will be able,
under the bill, to accelerate the disposition of his
protest at his own request any time after 90 days from
the date the protest is filed
o
While we anticipate that
the vast majority of protests will have been reviewed
within 90 days after they were filed, this provision
3tl
affords the importer a legal tool which can effectively
force action on his protest well short of the two-year
maximum, thus safeguarding his right to invoke the
court's jurisdiction at an earlier dateo
Finally, the bill provides that decisions
made in disposing of a protest become final and
conclusive unless the protesting party affirmatively
initiates an action in the Customs Court by filing a
summons within 6 months following the denial of a protesto
The Treasury Department believes that the bill
as passed by the Senate will provide significant
benefits to importers and all other segments of the public
and will permit the Bureau of Customs to perform its
important role more effectively and efficiently in the
future at our gateways of international tradeo
21
TREASURY DEPARTMENT
,
WASHINGTON. D.C.
'OR RELEASE 6 :30 P.M.,
[onday, January 26 I 1970.
RESULTS OF TREASURY'S WEEKLY BILL OFFERING
The Treasury Department announced that the tenders for two series of Treasury
)ills, one series to be an additional is sue of the bills Dated April 30, 1969, and the
)ther series to be dated January 29, 1970, which were offered on January 21, 1970, were
lPened
at the Federal Reserve Banks today. Tenders were invited for $1,800 , 000 , 000 , or
.
;hereabouts, of 91-day bills and for $1,200,000,000, or thereabouts, of 182-day bills.
~he details of the two series are as follows:
lANGE OF ACCEPTED
:OMPETITIVE BIDS:
High
L::>w
Average
91-day Treasury bills
maturing April 30, 1970
Approx. Equiv.
Price
Annual Rate
98.018 ~
7.841%
97.998
7.920{.
98.006
7 .88e~~
11
182-uay Treasury bills
rr,aturina; Jul;Z 30 ~ 1970
ApprJX. Equiv.
Price
Annual Rate
96.090
7 . 734S~
96.061
7.791%
96.069
7 . 776~~
Y
9
£/ Excepting 2 tenders totaling $301,000
of the arr_ount of 91-day bills bid for at the low price was accepted
of the amount of 182-day bills bid for at the low price was accepted
~/ Excepting 2 tenders totaling $25,000;
G4'i~
8~o
~OTAL
TENDERS APPLIED FOR AND ACCEPTED BY FEDERAL RESERVE DISTRICTS:
.0istrict
n::>st::>n
New York
Philadelphia
Cleveland
Richm::md
Atlanta
Chicago
St. Louis
Minneapolis
Kansas City
Dallas
San Francisco
TOTALS
AcceEted
AEElied F::>r
$ 38,34::>,000 $ 38,34::>,000
1,114,919,000
1,982,999,000
38,873,000
48,953,000
54,006,000
54,006,000
24,026,000
24,526,000
50,320,000
56,040,000
222,113,000
238 , 113 ,000
::55,633,000
62,741,000
19,069,000
24,319,000
48 ,415 ,000
48,415,000
24,834,000
34,834,000
109
684
16°2
2°00
2540,000
$2,773,975,000
$1,800,093,000
£I
AEElied For
$ 23,848 ,000
1,565,262,000
24,828,000
71,587,000
20,031,000
42,960,000
239,373,000
37,442,000
19,617,000
37,893,000
36,478,000
144,399,000
AcceEted
$ 23,598,000
696,052,000
14 ,828,000
61,762,000
18 ,031,000
32,160,000
173,368,000
28,142,000
11,117 ,000
37,758,000
24,478,000
78,897,000
$2,263,718,000
$1,200,191,000
3J
£/ Includes $492,023,000 noncompetitive tenders accepted at the average pr~ce of 98.C06
Q/
Includes $329,311,000 noncompetitive tenders accepted at the aver~ge pr1 e of 96.069
rates are on a bank discount basis. The equivalent coupon lssue Ylelds are
8 .16~~ for the 91-day bills, and 8.21,% for the 182-day bills.
11 These
7
TREASURY DEPARTMENT
WASHINGTON. D.C.
FOR RELEASE 6 :30 P.M.,
Tuesday, January 27, 1970.
RESULTS OF TREASURY'S MONTHLY BILL OFFERING
The Treas~ry Department ~~unced.that the tend~rs for two series of Treasury
bills, one serles to be an addltlona1 lssue of the bl11s dated October 31 1969 and
the other series to be dated January 31, 1970, which were offered on Janu~y 21: 1970,
were opened at the Federal Reserve Banks today. Tenders were invited for $500 000 OO(
or thereabouts, of 271-day bills and for $1,000,000,000, or thereabouts, of 365-da;
,
bills. The details of the two series are as follows:
RANGE OF ACCEPl'ED
COMPETITIVE BIDS:
High
Low
Average
271-day Treasury bills
maturing October 31, 1970
Approx. Equiv.
Price
Annual ~te
94.211
7.69
94.151
94.185
7.77~
7.725~
~ Excepting 1 tender of $1,000
75~ of the amount of 271-day bills
93~ of the amount of 365-day bills
11
365-day Treasury bills
maturing January 31, 1971
Approx. Equiv.
Price
Annual Rate
92.421 !I
7.475~
92.300
7.595~
92.362
7.533~
bid for at the low price was accepted
bid for at the low price was accepted
rorAL TENDERS APPLIED FOR .AND ACCEPl'ED BY FEDERAL RESERVE DISTRICTS:
District
B)ston
New York
"Philadelphia
Cleveland
Richmond
Atlanta
Chicago
St. Louis
MinneapOlis
Kansas City
Dallas
San Francisco
TOTALS
AcceEted
AEElied For
1,058,000
1,058,000
$
$
394,901,000
1,109,901,000
7,784,000
8,534,000
3,901,000
3,901,000
840,000
840,000
7,516,000
10,516,000
34,509,000
84,509,000
10,963,000
13,963,000
6,704,000
16,204,000
2,081,000
2,081,000
7,239,000
14,239,000
22,531,000
76 1781 1°°0
$1,342,527,000
~ Includes $ 25 130 000
$ 500,027,000
AEElied For
$ 13,767,000
1,301,721,000
17,295,000
17,895,000
7,918,000
23,696,000
145,176,000
26,10g,000
17,421,000
14,365,000
19,713,000
89,830,000
AcceEted
3,767,000
$
724,371,000
17,295,000
16,725,000
7,918,000
13,947,000
117,176,000
26,109,000
10,921,000
14,239,000
12,713,000
34,830,000
£I $1,694,906,000
$1,000,011,000
~
noncompetitive tenders accepted at the average price of 94.185
j Includes $133:565:000 noncompetitive tenders accepted at the ave:age pr~ce of 92.362
"j These rates are on a bank discount basis. The equivalent coupon lssue Yle1ds are
8.21~ for the 271-day bills, and 8.l1~ for the 365-day bills.
TREASURY DEPARTMENT
,
WASHINGTON, D.C.
FOR IMMEDIATE RELEASE
January 28, 1970
TREASURY'S WEEKLY BILL OFFERING
The Treasury Department, by this public notice invites tenders
for two series of Treasury bills to the aggregate a~ount of
$3,000,00~,000, or thereabouts, for cash and in exchange for
Treasury b1lls maturing February 5, 1970,
in the amount of
$ 3,004,928,000,
as follows:
9~day bills (to maturity date) to be issued February 5, 1970,
in the amount of $ 1,800,000,000, or thereabouts, representing an
additional amount of bills dated November 6, 1969,
and to
mature May 7, 1970,
originally issued in the amount of
$1,201,387,000,
the additional and original bills to be
freely interchangeable.
l8~day bills, for $l., 200,000,000,
and to mature
dated February 5, 1970,
or thereabouts, to be
August 6, 1970.
The bills of both series will be issued on a discount basis under
competitive and noncompetive 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 2, 1970.
Tenders will not be
received at the Treasury Department, Washington. Each tender must
be for an even mUltiple of $1,000, and in the case of competitive
tenders the price offered must be expressed on the basis of 100,
with not more than three dec'imals, 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
S~bmit tenders except for their own account. Tenders will be received
wIthout deposit from incorporated banks and trust companies and from
K-329
-
"' -
responsible and recognized dealers in investment securities. Tenders
from others must be accompanied by payment of 2 percent of the face
amount of Treasury bills applied for, unless the tenders are
accompanied by an express guaranty of payment by an incorporated bank
or trust company.
Immediately after the :::losing hour, tenders will be opened at
the Federal Reserve Banks and Branches, following which public announce
ment will be mad.l~ by the Treasury Department of the amount and price ra
of accepted bids. Only those submitting~ompetitive tenders will be
advised of the acceptance ot"- rejection thereof. The ?ecretary of the
Treasury expressly reserves the right to accept or reject any or all
tende rs, ;_n whole or in part, and his ac tion in any such respect
shall be final. Subj ect 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 5, 1970, in
cash or other immediately available funds or in a like face amount
of Treasury bills maturing February 5, 1970.
Cash and exchange
tenders will receive equal treatment. Cash adjustments will be made
for differences between the par value of maturing bills accepted in
exchange and the issue price of the new bills.
The income derived from Treasury bills, whether interest or
gain from the sale or other disposition of the bills, does not have
any exemption, as such, and loss from the sale or other disposition
of Treasury bills does not have any special treatment, as such,
under the Internal Revenue Code of 1954. The bills are subject to
estate, inheritance, gift or other excise taxes, whether Federal or
State, but are exempt from all taxation now or hereafter imposed on
the principal or interest thereof by any State, or any of the
possessions of the United States, or by any local taxing authority.
For purposes of taxation the amount of discount at which Treasury
bills are originally sold by the United States is considered to be
interest. Under Sections 454 (b) and 1221 (5) of the Internal
Revenue Code of 1954 the amount of discount at which bills issued
hereunder are sold is not considered to accrue until such bills are
sold, redeemed or otherwise disposed of, and such bills are excluded
from consideration as capital assets. Accordingly, the owner of
Treasury bills (other than life insurance companies) issued hereunder
need include in his income tax return only the difference between
the price paid for such bills, whether on original issue or on
subsequent purchase, and the amount actually received either upon
sale or redemption at maturity during the taxable year for which the
return is made, as ordinary gain or loss.
Treasury Department Circular No. 418 (current revision) and thiS
notice prescribe the terms of the Treasury bills and govern the
conditions of their issue. Copies of the circular may be obtained
from any Federal Reserve Bank o~~~ranch.
TREASURY DEPARTMENT
Washington
FOR RELEASE AT 6:30 P.M.
WEDNESDAY, JANUARY 28, 1970
REMARKS OF THE HONORABLE DAVID M. KENNEDY
SECRETARY OF THE TREASURY
BEFORE
THE AMERICAN-SCOTTISH FOUNDATION INCORPORATED
HOTEL PIERRE, NEW YORK, NEW YORK
WEDNESDAY, JANUARY 28, 1970
This last year most of my efforts and most of my
discussions have been on the econo~y, about the necessity
and the problems of curbing inflation.
As you must certainly know, our policy has been
to cool the overheated economy, without slamming on the brakes
so hard as to cause unnecessary dislocation in the economy.
These policies will bring the economy into balance where
we might enjoy sustainable growth. They have been and are
working.
This is the first year since the current inflation began
that we have ended the year with prices rising at a slower rate
than they were when we started the year. We have had five
months of declining industrial production. The Gross National
Product, in real terms, actually declined slightly in the
fourth quarter of 1969.
These examples are indicative, as are many others,
that we are controlling inflation without major disruptions
of our economy.
Most of you, I'm sure, are wondering about the budget
which the President will submit to Congress next Monday.
I won't discuss it tonight other than to say that, in true
Scottish Style, it is credibly balanced.
What I would like to discuss with you tonight is
something the president emphasized in his State of the ~nion.
message, the environment in which we live and its relatlonshlp
with our economy.
K-330
- 2 -
During recent months, and especially in recent days
we have been hearing and reading much about the environm~nt
about air and water pollution, about the quality of life. '
Let me assure you, my choice of topic is appropriate
for the man responsible for paying the government's bills
and raising the necessary revenues.
I am discussing the environment with you tonight
because the talk of improving, or saving our environment
requires judgment, the making of choices, the arrangement
of priorities. If we are going to do it, we are going to
have to pay for it. And, chances are that if we pay for
this, we'll have to give up something else. We cannot have
everything we want in either the private sector or the
public sector. We have to set priorities.
The Scottish people have a reputation for thrift, for
paying the bills as they come due, for denying themselves
the things for which they cannot pay.
That quality, which the Scots have contributed to the
plurality of folklore of our countrY,is essentially what
I want to talk about tonight.
We must not let pollution control the quality of
environment, become a fad, with all that word implieso
This business is too serious, too important to us and
to generations to come. We have to generate enthusiasm,
to be sure. But we must also generate an enthusiasm we
can sustain through the long years of difficult choices
and hard work that lie ahead before it will all come true.
Our work must be programmed and our enthusiasm budgeted
so that determination will not fade before we reach our
objectives. I would not like us to spend all our enthusiasm
in the initial stages.
I see this as a climb up a steep and icy hillo No
vehicle can reach the peak, along such a road as this,
without good tractiono
The foolish driver spreads all the sand of this enthusiasm
at the bottom of the hill and guns it, hoping his momentum
will carry him over the top. We must save some of that sand
to give us the grip, the traction, we need to reach the
summit and go over the top.
- 3 -
One of the first things we must do is define the
problem, trace its causes and balance cause and result
benefits and costs. It is not enough simply to say we'must
have clean air and water.
The quality of environment, the quality of life, means
more, much more than that. It involves the spirit and
the spiritual, the politics and the political process,
the society and the social system.
More specifically, it involves having enough to eat;
being warm enough in the ,winter and cool enough in the
summer; having enough to wear; having bathtubs, cars,
radios and television sets; having a house we can call our
own; enjoying the artistic and the cultural; having the
leisure to expand our horizons and travel to historic and
exotic lands; having medicine to sooth and cure our ills;
developing resources to educate our children; assuring
equality of opportunity and freedom from fear on the
streets, and insuring all other aspects of our cherished
way of life. In short, it embraces all of us, everything
about us and everything around us.
And as Secretary of the Treasury, I can state
unequivocally that it involves the state of our economy,
our fight against inflation.
Inflation erodes our dollar, the measure of our labor,
our productive time, just as surely as strip mining scars
the hills and silts the rivers of West Virginia, as wanton
ploughing erodes the plains of Kansas or automobile exhaust
fouls the air of the Los Angeles basins.
Inflation diminishes our ability to cope with the
environment and our ability to find resources to improve
it.
It is not difficult to spot the causes of pollution.
What is difficult is to understand how the problem was
permitted to develop in the first place. It also will
take brain power to determine how we can ~ake the c~anges
necessary in our city and state programs;1n our bus1ness
machines, and practices and in living habits to end
and
Pollution • And , how we can finance all of the changes
• ?
improvements necessary to clean our streams and a1r.
.~~
J
. ., 1
- 4 Frankly, we oversimplify when we blame the selfish
interest of the manufacturer, the apathy of our political
leaders or the inertia of the public. The causes are much
more fundamental. Essentially, pollution is a natural
process.
Undisturbed, nature preserves an ecological balance.
If there are too many deer for the feed, the weak starve.
If there are too many trees competing for the nutriments
in any given plot of ground and for the sunshine falling
on that plot, the strong grow tall, shading the weaker and
depriving them of the life-giving light. Waste decays,
producing food for surviving plants.
But man, in his wisdom and intellect, learned how to
manipulate nature and to utilize her resources to what
he thought, at least, was his advantage.
When Europeans first came to this continent, they
felled trees for shelter, they farmed and fished for
food and trapped for furs. The ecological balance was
hardly disturbed, if at all. But things changed when they
established the first mill at the fall line. Although
those mills used water power, waste material was often
dumped in the streams. Man began burning coal and other
hydrocarbons for heat and energy, increasing his capacity
to work and produce. He built factories that spewed smoke
into the air and more and more waste into the streams. But
those factories also produced goods and provided jobs.
In the past the jobs and goods seemed more important
than the smoke and waste because man just couldn't
conceive that the endless sky could be polluted or that
the constantly running brook could not carry away all
the waste.
He kept building and building, manufacturing and
manufacturing and -- as a byproduct -- polluting and
polluting.
As technology improved and population increased, there
was a heavy migration to the cities for higher paying jobs
than were available on the land. And agriculture had
progressed so rapidly in this country that there was little
demand for labor on the farmo As he made money in the
cities, man longed to return to open spaces and ~u~ suburbs
grew up, cluttering the open spaces around our C1t1es.
~~
- 5 -
The new suburbanites had to have cars to commute between home
and job, and a second car for the wife to use in shopping and
transporting the children to school, dance classes and
little league ball games. Cars, as I'm sure you are aware,
are one of the greatest source of air pollution.
He also had money to buy more of almost everything, and
manufacturers s~rove to meet the demands. And with every
worldly good wh~ch was produced for a rapidly increasing
population, there was more waste.
While man was managing one side of his environment, the
productive side, he failed to realize that the side of waste
disposal and control also needed management. In the context
of the span of time, man has suddenly realized that he is
producing more waste than nature can cope with.
Our system produced the most affluent economy known, an
economy which is still the envy and the goal of most other
peoples of the world.
I don't believe that our people need to accept a decreased
standard of living as the price of pollution control. I think
that we can and must increase our output while containing and
decreasing pollution.
In some instances the natural competitive process will solve
this problem, as public policy results in laws to curb pollution.
Just last Saturday a fertilizer plant in Houston, Texas,
announced it was shutting down because it would cost too much
for remodelling to meet the standards for clean air set by the
Texas Air Control Board. It is logical to assume that pther
plants, with different management skills, will manage to
produce fertilizer -- which is certainly needed to maintain
agriculture -- without polluting the air, or they will
incorporate plant improvements and pass the cost on to the
farmer who will add the cost to the food he grows. However
it works, someone is paying the bill.
And there is another cost which must be weighed in this
equation. The plant which shut down had a number of emplo~e:s
who must now find work elsewhere. Management made the dec~s~on
to shut down the plant, but I wonder if the workers, had they
had the chance , would have voted to throw themselves out of work.
Implied in this example is one of the greatest problems of
pollution control. We can't shut down all the plants, we can't
curb all the automobiles and we can't ground all the airplanes.
We have to order our priorities.
- 6 -
As President Nixon said in his State of the Union
message last week: "I shall propose to this Congress a
ten billion dollar nation-wide clean waters program to
put modern municipal waste treatment plants in every
place in America where they are needed to make our waters
clean again, and to do it now."
The President was ordering his priorities. Clean
water is vitally necessary, and we have the technology and
the industrial capacity to reach the municipal waste treatment
goal.
The Tax Reform Act of 1969, recently signed by the
President, provides tax incentives for the installation
of pollution control equipment. We may be able to do more
in this field. And I'm confident that our engineers and
scientists, under the pressure of government policy, the
desires of the people and the competition of the market place
will come up with new and effective anti-pollution techniques
and devices in the reasonable near future. The automobile
companies are now making substantial investment in pollution
control research. And already we see signs that industry
is working on self-cleanup, under the stimulus of the
developing public consiousness of the problem. In Gary,
Indiana, one steel company is spending an extra $37 million
on equipment to purify millions of gallons of waste water
it discharges into Lake Michigan. In Washington, a paper
mill has found that it can profitably extract a by-product
from its polluting effluent and thus meet the cost of
pollution control.
It is only in recent years that we have realized the
dangers of the fumes our automobiles spew into the air. Only
a few years ago we laughed at the Bob Hope jokes about
Los Angeles smog. While anti-pollution devices now required
on all new automobiles solve part of the problem, further
improvement is needed if we are to gain on the overall
output of exhausts as the number of cars increase. Here
again we see an ordering of priorities, a choice that we have
to make.
- 7 -
Despite all that has been written about automobile
smog,Americans continue to buy millions of new automobiles
each year. I take it that the public, which highly prizes
its mobility, is betting on improved technology and is
willing to pay the cost of the anti-pollution devices
rather than give up the second family car or the home in
the subtIr'b s .
But individuals and government only have so many
resources. We must make choices.
Pollution control, as strange as it may sound to say
it, is infinitely more complex than landing man on the
moon. That landing was the united effort of a relatively
small group of men with one common objective. Cleaning up
our environment involves millions of participants with
conflicting ideas and opinions. And I would dare speculate,
as a layman, that we knew more about space propulsion and
navigation in 1961 than we do about ecology now.
In the city of New York, for example, air pollution
is a very serious problem. During the last 30 years
Consolidated Edison, the local electric utility, has spent
$150 million dollars on pollution abatement equipment.
Currently it wants to spend millions more for atomic
powered electric generating plants, but it is stymied by
those who feel the atomic plant, which won't spew pollutants
into the air as do existing coal and oil plants, will overheat
the Hudson River, killing fish and wildlife. I'm not taking
sides in this dispute. I point it out to illustrate that
the job is complicated by these conflicting opinions. Here
a conflict between air and thermal pollution.
This is a major task which the President and the people
have set before us. Its solution will require long range
determination, an ordering of priorities, a budgeting of our
resources, a concentration of our energies. A diffusion
of any of these will result in failure to show concrete
results in a reasonable length of time. Americans like to
see results.
- 8 While cleaning up our environment will require
patience and under~tanding, the settling of differences, the
objective at least is one upon which almost all can agree.
I believe if we are willing to pay the price, we can afford
it. The Harvard Center for Population Studies estimates
it will cost $5.1 billion a year in capital investment and
$8.4 million fur current operation. While I would suspect
this is substantially underestimated, it is a modest price
to pay from a trillion dollar Gross National Product. Double
or triple the estimate is reasonable if we order our priorities
and take it a step at a time.
Another factor which must be taken into consideration
is the cost of not controlling pollution. We cannot make
precise estimates, but it is safe to say that the cost of not
controlling pollution is even heavier than that of restoring
our ecological balance.
I think most of us are agreed that this should not
become a political issue. But if some prefer to make it
a political issue, I would like to point out that we noW
have the first really conservation and environmental-minded
President in the White House since Theodore Roosevelt.
But I prefer to believethat this in one issue
on which all parties, the old and the young can unite, one
on which we older people won't be called reactionaries
for saying lets go back to the good old days -- the good
old days of clean air and water.
000
/,\
:·1
\.NASHH"!GTON. D.C.
Januo.ry 28, 1970
TREASUI\.Y ANNOUNCES $6.7 BILLION HI:IiUrmmG
O}'
Ji'l~Dl:UfIRY IS Arm l'.1f'illCH 15 l.']j'l.TURITIES
The Treasury today announced that it is offering holders of the 4,ii T'i'easury
Bonds of 1970, lnfltu.:rinc; February 15, 1970, and the 2.-1/2:;£ 'ITeaS1.ITY Bonds of 19G5-70,
maturing March 15, 1970, the rje;ht to exchange their holdings for an lB·-month note ~ .
3-1/2-year note, or a 7 -year note, at puy.
The notes being offered are:
8-l/4%
Treasury Notes of Series F-1971, dated February 15, 1970, due
August 15, 1971,
8-1/f.!/J Treasury Notes of Series B-1973, claterl February 15, 1970, due
AIJgust 15, 1973, and
8% Treasury Notes of Series A-1977 , dated Febyuary 15, 1970, (JtH?
February l5, 19TI.
In the case of exchanges of the 2-1/2% bonds intel"Cst ,'Till be adjusted as
of tfmrch 15, 1970. The payJtl.ents due to and from subscribers and the nee C),mounts
payable to subscribers art-;' as foJlows (per $1,000 face vc~ue) :
If
Payable to S,~bscriber
to ,lI,djust for Harket
Value of BonJs
Exchange
is For
NOTES
8 -1/4%
To Subscriber
9715/69 to
3/15/70 on
2-1/2% Bonds
2/J5
Net A'llOlXlJ1to be P2:i<
to
SubscyilcT
$
G.3B122
.$ 7. 258'()
Bv
Sub;~criber-
to
3/15/70 on
new notes
--~-~~----------------------
Due
8/15/71
8-1/8% Due
.$
1.14
.$
12.50
8/151'(3
8% Due
1.04.
12.50
6.28453
7.25517
2/15/77
0.95
12.50
6.18785
7.262JS
']'he public :holds a:)out $5.6 billion of the bonds eli8iblc for exchanGe, and
about' $1.1 bilJiun is held by Federal Heserve and Government o'c:co1Jnts.
Cash Sl)bsc::r' ip~~ions for the new notes will not be rece:i ved,
Th e boot,::; ,rill be open fOT three clays on 1 y, OY1 li'e1J}.'·L·'G.:r.'v
,--. , 2. throulQ',r
. ':"Cb="U3T~V- !"
for the receipt of sub;:;criptions. Sub;;criptions )o.u,st lw :)n' 8n D2110UJi"t:; CJt' ;:;l,O()O ("
a multiple the:ceof ami nay be ~paid for only Hith ",lig:il;}c n:r~u:cj~ll!.: ~_CCl' J-i.i::~es. f'
Subscril)tions cvlclressecl to Ei. Federal }ksc~}''.'c Ban; or B(,~;~lCl,) (':L'GuCile ~'. -'- H~C c,
the '1'1'e'o.;:;urer of the Un:i.tccJ, States, ant) T)Jaccd in the JI(;LLll(.<'c'rc~ miUJlj&)," ~
:-331
- 2 -
February 4, 'vill be, considereel as timely. The payment anci elelivery elate
for the notes will be February 16, 1970. '1'lJ e nutc;;; ",Till be !i!::r1(~ availa'b 12
in registered as \,rell as bearer form. All su1x::criiJ(.:'rs reqlu:"ctinc; reg-L;~t(;lccl
notes will be required to i'urni sh i.-\Or1l'oJ)riate iden fifyillg nLlJl1i(;l',c; QS :ccqULreu
on tax returns anel other dOClUnents iJUumittecL to the InterWll Hevenue Sc1'vice.
Coupons elated February 15, 19'10, on the bond~: lnG.turing on that elate s}lOulcl
be detached and cashed \ihcn due. 'l'tw F'cbru13xy 15, 1970, interest clue on
registered bonds "I'li11 be paid by issue of interei~t checks in r(':gular course
to hold.ers of record on January 15, 1970, the d8.te tIle tra:nsfcr bool,-s closcrl.
Coupons dated MeTCh 15, 1970, on the bonds due on th2.t ela,te must be att3.ehe~.
Interest on the notes due August IS, 1971, "lil_1 be payable on August 15, 1970,
and February 15 and August 15, 1971. IntercGt on the notes clue August IS, 1973,
and February 15, 1977, ,<Jill be payable on Auc;ust IS, 19'10, and thereafter on
February 15 and August 15 until maturity.
TREASURY DEPARTMENT
Washington
FOR RELEASE AT 6:30 P.M.
FRIDAY, JANUARY 30, 1970
EXCERPTS FROM REMARKS BY PROFESSOR HENRY C. WALLICH,
SENIOR CONSULTANT TO THE SECRETARY OF THE TREASURY
DAVID M. KENNEDY,
AT THE TRUSTEES' DINNER, CLARKSON COLLEGE OF TECHNOLOGY ,
POTSDAM, N.Y., JANUARY 30, 1970.
THE UPHILL BATTLE AGAINST INFLATION
We have just passed a milestone in the long battle
against inflation. In the last quarter of 1969, the
Gross National Product, stated in constant dollars ceased
to grow, although continued inflation raised its value in
current prices.
This event, an unhappy but unavoidable part of the
effort to defeat inflation, carries a message. It is that,
in the evolution of efforts to halt inflation we are not
very far behind schedule. When the present Administration
came into office, its objective was to end the inflation,
if possible, without a recession. Encountering as it did,
many circumstances not of its own making, it could hardly
expect to make a decisive impact upon the overheated economy
during the first half of 1969. The earliest opportunity to
show results might have been the third quarter of the year.
During that quarter, GNP was still rising. The halt carne
in the fourth. One might reasonably say that, as regards
the overall rate of activity, we are one quarter behind
schedule. The lag in the attainment of stabler prices
is greater, however, and to this problem I would like to
address myself.
The resistance that prices are showing to restraint is
indeed a cause for concern. It reflects the widespread
expectation of continued inflation, nurtured by four years
of rising prices. It reflects also the many defensive actions
taken in the private sector, in the areas of wages,
K-332
- 2 -
interest rates, and price policies, through which various
economic groups have sought to shield themselves. This is
not a brief inflationary flame that can be snuffed out
with a few blasts from fiscal or munetary policy. It is a
fire that needs to be fought tenaciously, the embers of which
may smoulder for a long while.
The persistence of the present inflation has had one
small fringe benefit: it has convinced some erstwhile
skeptics of the need to fight inflation. In former years,
one used to hear a good deal about the benefits of inflation,
and this talk is by no means dead. But increasingly I hear
the opposite. Commentators who used to scoff at inflation
and at concern over it now are heard to say that not enough
has been done to stop the price rise. To take this assertion
literally, it seems to be an argument in favor of provoking
a recession, for if substantially more had been done, surely
by now we would long have had a falling real GNP. Whatever
the detail of such views, as fellow soldiers in the battle
against inflation any erstwhile skeptics are a great help.'
Welcome to the team.
During good part of the past year, inflation accelerated.
It also accelerated in 1968, and 1967, and 1966. This has
been a painful experience for everybody, but it has also
provided a badly needed lesson. There has been a school
of thought that has advocated the use of inflation as a means
of raising employment. There was a trade-off, so we were
told, between inflation and unemployment. Accept a higher
rate of inflation, and you can have a lower rate of unemployment. If this were true, it would be a tempting proposition.
It would be morally hard to reject, say, one percent more
inflation if for it one could buy a reduction in unemployment
of a significant amount.
Recent experience has made clear that this is a
fallacy. The theory rests on the assumption that inflation
does not tend to accelerate. At the very low rates of
unemployment that we have been fortunate to have, inflation
unfortunately has not remained constant. It has speeded up,
because people have observed what went on and protected
themselves -- by raising wages, interest rates, and prices.
- 3 -
3J('
If this was an effort to fool all of the people all of the
time it miscarried, as this kind of thing usually does.
Inflatio~ stays constant only so long as it stays unobserved.
Over a few months, no doubt, the trade-off between inflation
and unemployment can always be practiced.
In the longer run,
it cannot.
I hope that the present experience will add to
our understanding and will generate support for non-inflationary
policies.
It would be inappropriate, of course, to imply that
as a result of this experience we now know all that we need
to know. A great deal is still to be learned about the control
of inflation.
It is important to remain open-minded about
new ideas. This does not mean that we should hopefully
re~ch for remedies such as wage and price controls that are
now increasingly being advocated. We do know a great deal
about the damage they can cause. But I do not believe that
fiscal and monetary policy, working through unemployment of
man and machine, are necessarily the sole and best remedies,
particularly in the face of what is increasingly becoming
a cost push inflation.
If some of the answers still elude us, some of the
questions are at least coming into better focus. Time was
when inflation was viewed principally as a problem concerning
wages and prices. Today we know that inflation poses very
serious problems also about interest rates and capital
markets in general.
In speaking to a group whose members must
necessarily be deeply concerned with the finances of their
college, I hope it is appropriate to devote a few words to
this topic.
The United States has passed through other periods
of inflation , some not much less virulent than the present.
But today's inflation is unique in what it has done to
interest rates and capital markets.
For the first time,
investors have made a real effort to protect themselves.
Protection has taken the form of demanding rates of interest
that include a substantial inflation premium. The true
value of this premium differs as between taxable and taxexempt investors.
For a college, a rate of 9 percent leaves a
reasonable return even after today's inflation. For a
taxpayer in the 50 percent bracket, it was still not adequate
even to preserve capital during the year 1969.
- 4 -
Not long ago, many investors believed that they could
hide from inflation by holding common stocks. So far, this
ltd s been .] drast ic miscal eli lation. Corporate profit s after
taxes have not risen since 1966. The stock market is about
where it was in late 1965.
The bond market, in seeing its yields escalated
to today's levels, has undergone severe damage. Investors
now know that they can lose almost as much money in bonds
as in stocks. Hereafter, they surely will charge the
borrower a risk premium not only against inflation, but
against the instability and at times illiquidity of the
bond market. This will permanently increase the cost of
bond financing, and will weigh against investment and growth.
Corporate borrowers, to be sure, so far have acted
as if interest did not matter. There is very little in
their profit and loss accounts to validate such a cheerful
hypothesis. It is not obvious how far the return on assets
justifies the high rates paid. Neither is it clear how
the return on assets justifies the enormous capital
expenditures undertaken in the last few years. The vast
amounts of capital employed particularly in 1968 and 1969 have
so far failed to produce significant productivity gains.
This bears an a1rming resemblance to events in 1956 and 1957,
when heavy investment likeWise went unaccompanied by
corresponding productivity gains.
The response sometimes made to this situation, that
interest is only half of what it seems because it is tax
deductible, I find wholly unconvincing. The tax, after all,
also reduces earnings. It simply cuts back all values to the
same scale. I have never heard a corporate officer say that
wages are only half of what they seem. Wages, too, are tax
deductible, yet no one seems to consider wage increases any
the less burden for that reason.
Borrowers have been increasingly compelled, meanwhile,
to give up a "piece of the action" in the form of so-called
equity kickers or sweeteners. This has raised the cost
of capital. Increasingly, as one observes the statements
of earnings converted to a "fully diluted" basis, one becomes
aware of the restraint on investment that will eventually
be exerted by these arrangements. At the present time,
restraint is desirable, and the effect as yet scarcely
- 5 observable. In the long run, however, capital spending
may suffer and the growth of the economy's capital stock
may be slowed down.
Looking to this longer run, one is bound to discern
a new factor that is likely to affect interest rates. It is
the great demand for capital that one can see ahead.
Even if corporate investment should be somewhat
constrained by high capital costs, there will be other
claimants. Home owners and state and local authorities
must anticipate a great expansion of their financial needs.
The Federal Government's agencies -- not, I hope and believe,
the Federal Government itself -- will be large borrowers.
We have developed the habit of debudgeting certain programs,
pushing their financing upon the private sector, without
however developing new sources of financing from which to
meet these needs. Even without inflation, therefore, pressure
on financial markets seems likely.
Looking at this situation from the viewpoint of the
investor, his prospects are not unattractive. His old
investments, to be sure, may in some degree remain depressed.
But any new money he can commit should give him a good
return. If inflation is brought under control, the rewards
to financial investment in a period of capital scarcity
will be considerable. If these Fewards include also an
inflation premium, as for some time at least they may,
the return will be particularly attractive to a tax exempt
institution, for instance, a college. It is an ill wind
that blows nobody any good. With the great financial
needs of institutions of higher learning that loom ahead,
which now are being intensified by inflation, it is partial
compensation at least to be able to point to this small
fringe benefit.
000
Treas.
u.s.
Treasury Dep t.
HJ
10
.A13P4
v.167
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10
• A13P4
Press Releases
U.S . Treasury Dept.
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TITLE
v.167
~o-_
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PHONE
NUMBER
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