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JUL 241972
TREASURY DEPARTMENT

The Department 01 the TREASURY
WASHINGTON. D.C. 20220

TElEPHONE W04·2041

FOR RELEASE ON DELIVERY
STATEMENT BY TIlE HONORABLE JOHN B. CONNALLY
SECRETARY OF THE TREASURY
BEFORE THE BANKING AND CURRENCY COMMITTEE
u.S. HOUSE OF REPRESENTATIVES
WEDNESDAY, MARCH 1, 1972

Mr. Chairman and Members of this Distinguished Committee:
I welcome the opportunity to appear today to express
my strong support for the Par Value Modification Bill
(HR 13120) and to urge its prompt enactment.
This bill has one essential purpose, and a very important
purpose--to establish a new par value for the dollar at the
equivalent of $38 per ounce of gold, as part of a general
realignment of world currencies.
The agreement reached at the Smithsonian Institution
last December 18 was an unprecedented step in wor1d.monetary
affairs.

It was the first negotiated multilateral exchange

rate rea1ignment--the first attempt to reorder the entire
pattern of exchange rates among major currencies to seek a
better equilibrium.

Countries in large and persistent balance-

of-payments surp1us--Japan, Germany, and others--agreed to
0-259

- 2 increase the par value of their currencies.

We, for the

United States, agreed to propose to the Congress a reduction
in the par value of the dollar, by increasing the dollar
price of gold by 8.57 percent.
The total of the agreed exchange rate changes is sizable.
We calculate that it is equal to a weighted average realignment of approximately 12 percent between the dollar and the
currencies of our major industrial competitors, excluding
the Canadian dollar which continues to float.
I do not expect the currency realignment alone to solve
our international financial and economic problems.
no panacea for these difficulties.
major progress.

There is

But it does renresent

Exchange rate changes have a pervasive

quality--in time they work their way through the entiLe
fabric of the economy, influencing all aspects of foreign
trade and payments.

The multilateral realignment. chnnging

not only the dollar relative to other currencies but also
the relationship of the other currencies among themselves,
should strongly promote an improved equilibrium in the entire
worldwide payments structure, enabling the monetary system
to operate more smoothly and more effectively.
Another dimension of our overall effort concerns trade
arrangements.

Material has been submitted to the Committee

on the results of recent trade negotiations with our major

- 3 -

trading partners.

He made clear in the Smithsonian Agreement

that we would not propose devaluation of the dollar until
at least the first phase of these negotiations was completed
and the results made available for Congressional scrutiny.
These negotiations have signalled a change in the u.S.
a~proach.

That approach continues to look oubvard, toward

expanded trade.

But it recognizes that liberal policies in

the United States must, in the last analysis, rest on the
firm economic and political base of equitable opportunities
for our exporters abroad.

We mean to pursue that objective

with diligence and vigor.

I believe it is not only in our

self-interest but that of the

~.,or1d

community, for in the

absence of success our will and capacity to support liberal
trade and payments policies will inevitably be eroded.
I can report we have concluded agreements of value with the
European Community and particularly Japan.

These provide some im-

mediate progress toward improving our access to foreign
markets.

They look to more comprehensive negotiations this

year and next.

These agreements are useful first steps.

They do not represent full success, but they are a beginning.
Regrettably, we have not been able to reach agreement
with Canada.

\.:]e are concerned that a number of trade agree-

ments and arrangements with that country, established at an

- 4 earlier time in a quite different economic environment ,
need to be brought into better balance in accord with present
needs and realities.

While the two Governments have remained

some distance apart on this matter, we intend to continue
to seek appropriate means of achieving our objectives.
Combined with the necessary changes in par values by
other countries, devaluation of the dollar will formalize
the pattern of exchange rates negotiated last December and
which

s~nce

markets.

then, de facto, has prevailed in the exchange

The formal change in par value does not end the

suspension of the convertibility of the dollar into gold
or other reserve assets that was initiated on August 15 of
last year.
The prime consequence of the international

realign~ent

of currency values is, of course, to improve substantially
the competitive position of
and overseas markets.

u.s.

producers, in both domestic

Over time, these changes should work

strongly toward restoring a trade surplus for the United States.
I believe these changes can and will be achieved consistent
with the needs of our trading partners.

A healthy external

position for the United States economy demonstrably requires
a substantial improvement in our trade position.

seems to me evident that a healthy world economy, a stable
monetary system, and a liberal trading order rest in part

- 5 -

on our success in achieving that objectivew
\ve have made clear on many occasions that we do not
expect the currency realignment to correct our trade and
payments position quickly.

We expect--and our trading

partners expect--the U.S. underlying balance of payments
to remain in deficit this year.

Experience by other

countries shows the initial price effects of currency
realignment on imports and exports are all too likely
to be perverse.

Moreover, cyclical factors may be less

favorable to the U.S. balance this year, with our economy
growing more vigorously than those of most of our major
competitors.

In contrast, the full benefits of favorable

changes in physical volumes of trade due to the shifts in
exchange rates may not be felt for two years or more.
We anticipate that our basic deficit (which includes
current account plus long-term capital flows) will be substantially below the roughly $11 billion deficit recorded
last year.

The official reserves transactions deficit

(which also includes short-term capital flows) should be
enormously reduced from the highly abnormal $30 billion
recorded last year.
The Treasury did not share the exaggerated hopes of
some that there would be a massive return flow of dollars

- 6 -

to the

U~:',i ted

;:; i.::at~:~; iliiinedi at.~ 1y after the Sr;'li thsonian Agree-

ment.

Likewis~, '\t.!e

de; not &hare tr,e abrupt r"i-\7 ing to pessimism

in some quarters when these •..mfounded expectations were not
realized.

One of the most hel':?ful things we could have now

is a greater senSE> of realism in vie't-Jing the international
monetary scene.

Aft~r

all, we've had quite an upheaval.

Some

of the presumptions of the past are no longer valid and the
process of change inevitably results in some uncertainties.
It's going to take time to achieve a more satisfactory pattern
of world payments, and to revise and improve our international
monetary system.

But we have also made large and demonstrable

progress in establishing the basic conditions to restore
equilibrium.

I am confident the benefits will become apparent

as we move ahead.
I want to emphasize the devaluation of the dollar b·reaks
with most earlier currency devaluations in one important respect.
It came not at a time of overheating and excess demand at
home, but at a time of economic slack.

In this cont.ext, the

so-called "classic" measures to accompany devaluation--tight
money and restraint--to release additional resources for export are not necessary.
they would be harmful.

Indeed, in our present circumstances,
Instead, we can welcome the stimulus

to domestic jobs and production implicit in the international
adjustment.

As a rule of thumb--but no more than that--each

$1 billion improvement in the trade balance nught bring a gain

- 7 of about 60,000 jobs.

The gain in jobs from realignment would

not be immediate.

It would come over a period of two years

or morp

th~

~1ong

with

improvement in the trade balance.

Apart from these economic effects of the realignment,
the change in Dar value of the dollar more or less automatically
entails some changes in the asset and liability position of
the United States Government, expressed in dollars.

One

effect is to m.c,intain the relative share of U.S. participation in international financial institutions and, thus, our
share of the m'mersh:tp and votin3 power.

The adjustments

in assets anci liabilities can be condensed into four categories:
(1)

The dollar value of our gold holdings

~li11

increase

by some $828 million, or 8.57 percent, resulting
in an equivalent cash gain for the Treasury and
reduction in our borrowing need.
(2)

Our International Monetary Fund subscription will
be increased in terms of dollars by 8.57 percent.
This increases our rights to draw foreign currencies
from the Fund by $575 million.

Our obli3ation to

provide additional dollars to the Fund will increase
by only $525 million, since that part of past subscriptions paid in gold will be revalued without
additional dollar payments.

These monetary trans-

actions have no budgetary or cash impact.

- 8 (3)

Maintene.nce of value of the paid in subscriptions
to the international development institutions will
require as much as $406 million.

Initially, these

subscriptions will be paid in letters of credit,
as
but!<.lralvn upon, this will entail both a cash
and budgetary drain.
be

sp~ead

The impact, however, will

over a period of ten years or more, and

not begin until fiscCI.I year 197L:·.
(4)

Our subscriptions to the callable capital of the
international development institutions will increase by some $663 million.

These subscriptions

provide ultimate security for the private market
bor~owings

of these institutions; they have never

been called in the past, and it is highly unlikely
they uould be called in future.
tion

re~resents

Thus, this obliga-

a remote contin3ent liability, without

budgetary or cash impact.
It is contemrylated that the various obligations incurred
by maintenance of value requirements, however t'emote, ,·Ii 11
need to be covered by appropriations in an approximate amount
of $1.5 to Sl.6 billion.

These appropriations, of course,

only <.leal with the liability side of the equation 8.nd do not
reflect the offsetting gains.

- 9 Over-all, the net result of the series of transactions
will be:
--In terms of its effects on Treasury cash, to increase
our resources, through the write-up of our gold holdings.
--In terms of budgetary expenditures, a probable rough
balance

be~7een

savings on interest expense (as a

result of the added cash resources of the Treasury)
and the additional paid-in capital subscription to
the international development institutions.
~-In

terms of our over-all asset and liability position,

an approximate offset between added contingent and
deferred liabilities and the increased value of our
gold and capital subscriptions.
In addition to these adjustments in assets and liabilities,
net losses on certain operational foreign exchange accounts,
including both so-called swaps and foreign currency borrowing,
maintained by the Exchange Stabilization Fund and the Federal
Reserve will be absorbed by those institutions.

These losses

are presently estimated at about $145 million for the ESF
and under $200 million for the Federal Reserve.

These losses

do not affect the budget except, indirectly, to the extent
a reduction in net Federal Reserve profits reduces its payments to the Treasury.

- 10 In the international negotiations following the suspension
of convertibility on August 15, a prime United States objective
'-Jas to obtain a maj or international currency realignment.
I woulci recall to the Committee that we entered these negotiations with the strong view that the preferable course would
be to achieve the

necessa~y ~ealignment

without disturbing

the long-established official dollar price of gold.

That

conclusion 1;oJas based on several considerations.
\,\Te 'tvished to emphasize the view that, over time, the
monetary role of gold should diminish, anQ we did not wish
to foster speculation over price increases that would tend
to maintain that role.

Moreover, unilateral U.S. action to

change our stated price for gold did not appear a useful
method of achieving the desired realignment of exchange -rates
because of the probability that other countries would follow
suit in whole or in part by changing the price of gold in
their currencies.

The net effect would have been a general

increase in the official price of gold.

Thus, international

agreement on an appropriate pattern of exchange rates was
the heart of the problem.
As the negotiations progressed, however, certain other
countries strongly resisted a realignment of exchange rates
not accompanied by formal devaluation by the United States

- 11 in terms of the official gold price.

At the same time, the

negotiations confirmed that, whether or not the United States
agreed to change the dollar price of gold, the size of the
effective exchange rate change would be determined by the
decisions of our trading partners with respect to their own
parities.
In this difficult negotiating

situat~on,

the conclusion

was reached that, if a change in the dollar price of gold
was to be included, we could obtain an earlier and more
favorable resolution of the realignment question.

At the

same time, we limited the change to a level acceptable to
other industrial countries without substantial emulation.
This was the nature of the bargain concluded at the Smithsonian-combining the maximum feasible exchange rate realignment with
an increase in the official dollar value of gold as well as
decreases in the value of gold expressed in terms of a number
of other currencies.
I want to make clear that this decision does not change
our view that the monetary role of gold shoulL continue to
diminish--a trend already well established.

In this instance,

a change in the official dollar gold price has been necessary
to facilitate a currency realignment.

At the same time, the

official price of gold in terms of a number of other currencies
will decline.

These changes in no way indicate that gold

- 12 provides a satisfactory basis for supplying necessary increases in world liquidity in the years ahead.

I believe

the difficulty oi these recent negotiations, and the ensuing
speculation in private gold markets, emphasize further the
need to mO-ve a\-Jay from dependence on gold in the monetary
system internationally, an objective long since achieved
by virtually all counti:ies domestically.
I rio not believe that our objective of reducing the monetary role of gold vlould be furthered by bills now before the
Congress to facilitate private holding of gold.

In fact,

such legislation might simply foment gold speculation and
raise entirely unnecessary questions of our intentions in
that respect.

This is a matter that should be considered

and resolved at a later date, when the monetary role of gold
has been definitely settled as part of over-all monetary reform.
In the period ahead, we must resolve not only the question
of the rol8 of gold in the international monetary s~stem but
other
also many1Critical problems of reform. Today, I hope the
Committee will direct its attention to the single issue in
the bill before you--devaluation of the dollar as part of
a general currency realignment.

I urge you to report this

bill promptly and favorably, without complicating amendments.
Swift enactment oj: a clean bill vJill serve to consolidate

- 13 the neH pattern of exchange rates which has been negotiated.
It

~vill

remove a source of uncertainty for the markets. It
the
will allmv us to turn our full attention to Tsearch Eor solutions to fundamental problems in our monetary and trading
structure.
The new pattern oE exchange rates thus consolidated

~vill

pro-fide an opportunity to rebuild our nation's external strength.
But realignment alone

~'7i 11

not assure that strength:

--He must intensify our efforts .cor better balanced
trading arrangements that provide our exporters with
equitable access to markets.

Lowering our export prices

accomplishes little if other trade barriers frustrate
our efforts to expand overseas sales.
--He must achieve growth without inflation.

Renewed

growth is essential to raise our productivity.

I have

great confidence in the ability of our country--industry,
labor, and government--to control costs and prices
not just as well as our competitors, but better than
our competitors.
--He must restore the visor of our export industries, and
imyJrove our technology.
These are fundamental

requi~ements.

achieved without determination and effort.

They will not be
But

vle

are moving

in the right direction, and I C2.nnot doubt that this nation
will measure up to the tasks.

2/29/7 2

The Departmento! the

TREASURY

WASHINGTON, D.C. 20220

TELEPHONE W04·2041

FOR RELEASE ON DELIVERY
STATEMENT BY THE HONORABLE JACK F. BENNETT
DEPUTY UNDER SECRETARY OF TdE TREASURY
FOR MONETARY AFFAIRS
BEFORE THE
HOUSE AND SENATE COMMITTEES ON THE
DISTRICT OF COLUMBIA
ON H.R. 11877 AND S. 2297, THE
NATIONAL CAPITAL TRANSPORTATION ACT OF 1971
WEDNESDAY, MARCH 1, 1972, AT 10:00 A.M.

Mr.

Chairman and members of the committees,
Secretary Connally is

testifying this morning

before the House Banking and Currency Committee on
the proposed Par Value Modification Act,
called the "Gold Bill."

sometimes

am sure you can appreciate,

therefore, why he was not able to accept your invitation
to be here
me

this morning.

But just last night he asked

to convey his sincere regrets,

and he asked me to

do my best to make clear the Treasury Department's
strong support of the proposed National Capital
Transportation Act of 1971.
and in particular Mr.

The Treasury Department,

Frank Cavanaugh, Associate

Director of the Office of Debt Analysis, who is with
me

this morning,

have worked closely with the

Department of Transportation and with
Metropolitan Area Transit Authority

the Washington

(WMATA)

to develop

the

financing plans which would be implemented under

the

legislation before you.

2 -

Revenue bond financing of the METRO was provided
for in the WMATA Compact and Was authorized by the
Congress in the 1969 Act.

The possibility of a

Federal guarantee of the bonds was recognized in the
Compact;

the Compact specifically permits a Federal

guarantee so long as such guaranteed issues are
approved by the Secretary of the Treasury.
until now,

Yet,

the Congress has not been asked to authorize

a Federal guarantee of the bonds, and it was expected
that the bonds would be issued on the same basis as
most other municipal bonds,

that is, without a Federal

guarantee and with the interest on the bonds exempt
from Federal income taxation.
Since the enactment of the 1969 Act, however,
WMATA nas encountered two major obstacles to its
contemplated borrowing arrangements.

First,

Secretary Volpe testified, WMATA's revised financial
plan last year showed that the estimated net cost of
the METRO would be almost $450 million higher than
the net cost assumed in 1969.

Second, WMATA waS

advised by its private financial consultants that
in their opinion,

the Authority's bonds could not

be marketed without either a Federal guaranteee or

3 -

some form of pledged taxes by the participating local
jurisdictions.

Even if the additional $450 million

of costs were fully offset by increased Federal and
local government grants, we were advised that investors
could not be attracted to unsecured t :ansit revenue
bonds at anything like reasonable rates of interest.
Originally it was planned that Some security for
the bondholders would be provided by service contracts
with each of the participating jurisdictions, but it
was

found that such

s~curity

could not be provided

under the existing Constitution of Virginia.

understand that the possibility of developing Some
form of pledge of local taxes
bonds was

to secure the transit

then considered but had to be ruled out

because of the serious legal problems and the delays
perhaps in terms of years -- which would be encountered
in gaining the necessary approvals by the eight
participating local jurisdictions.

Moreover,

it was

realized that a guarantee by the Federal Government,
as compared to various tax pledges by the participating
local governments, would clearly be a more

effec~ive

means of attracting investors and thus reducing the
interest rate which the Authority would be required

- 4 -

to pay on its bonds.

The decision was made therefore

to request authority for Federal guarantees.
In keeping with established Congressional and
Administration policies,
provides

the proposed legislation

that the interest on the guaranteed

obligations to be issued by the Authority after
enactment of the legislation shall be subject to
Federal income taxation.

A similar provision appears

in three Acts passed by the Congress in 1970 to
provide for Federal guarantees of taxable municipal
bonds for rural water and sewer facilities
medical facilities
(P.L.

91-609).

(P.L.

91-617)

91-296), and new communities

Without this provision the Federal

Government would be in the position of guaranteeing
tax-exempt bonds.

The Treasury Department has

opposed tax-exempt bond guarantees,
reports

in a number of

to committees of the Congress,

for

four

fundamental reasons:
1.

The guarantee of tax-exempt obligations
is an inefficient form of subsidy since
the Federal tax revenue loss probably
exceeds the interest savings to the
borrower resulting from the tax exemption.

The guarantee of tax-exempts disproportionately
benefits investors in the higher Federal
income tax brackets and thus fosters
inequities in the Federal income tax
system.

- 5 -

The guarantee of tax-exempt obligations
heightens the competition for the limited
amount of funds available to State and
local borrowers from the market for
tax-exempt securities and raises the
cost of financing other local projects
for which direct Federal credit aid is
not provided.

Such guarantees conflict with Federal
debt management policy since they would
create a class of tax-exempt securities
which the Federal Government itself is
prohibited from issuing by the Public
Debt Act of 1941.

The Congress, by its actions has given evidence
of agreeing

~ith

these Treasury reasons.

In order to offset

the additional interest cost

to WMATA from taxable bond financing,

the bill

provides for payment by the Secretary of Transportation
of 25 percent of the net interest cost on the Authority's
obligations.

This

Federal interest subsidy is

expected to be offset by additional Treasury tax
receipts

res~lting

from the use of taxable,

rather

than tax-exempt, bond financing of the METRO.
The 25 percent direct interest subsidy,

coupled

with the Federal guarantee, will assure that WMATA's
net borrowing rate will be in line with the rates on
the highest quality tax-exempt municipal bonds.

- 6 -

Because of the reduced borrowing rate an additional
$300 million of METRO bonds can be supported from
system revenues,

and there will still be sufficient

revenues in excess of debt service requirements

provide an adequate margin of safety to protect the
Federal Government's interests as guarantor.

Thus

the proposed combination of a Federal guarantee and
interest subsidy on the bonds will be sufficient to
make up for $300 million of the $450 million shortfall
in WMATA's revised financial plan.
total borrowing will increase,
$1.2 billion,

While WMATA's

from $900 million to

there should be no significant change

in the required fare structure or in the financial
soundness of the system.
To maintain the present cost-sharing formula,
under which the local governments aSSume one-third
of the net costs of the METRO and the Federal
Government assumes the remaining two-thirds,

the

local government should pay $150 million of the
estimated $450 million increase in the net cost
of the system.

This additional local payment is

provided for in the proposed legislation by th~
requirement in section 101 for a local matching

- 7 -

contribution not less than 50 percent of the $300
million amount of additional borrowing.
In the drafting of this proposed legislation
the interested Federal agencies and WMATA have sought
to provide the most efficient
bonds.

To this end,

market:~g

of the METRO

an essential provision in the

bill is the authority in section 101 for the Secretary
of Transportation to borrow from the Secretary of the
Treasury if at any time the moneys available to the
Secretary of Transpol_ation from appropriations are
insufficient to enable him to discharge his guarantee
and interest subsidy payment responsibilities.
borrowings
necessary.

Such

from the Treasury are not expected to be
Yet the borrowing authority is essential

to aSSure the lowest possible market interest rate on
the METRO bonds.

That is,

investors will be willing

to purchase the METRO bonds at low interest rates
because of the assurance that funds will always be
available for the Secretary of Transportation to make
timely payments of any amounts required under his
guarantee and interest subsidy contracts.
In conclusion Mr.
Treasury,

Chairman, on behalf of 'the

I should like to urge your support for the

8 -

proposed National Capital Transportation Act as it
lies before you.

r would be happy to attempt to answer any
questions you may have.

000

The Department 01 the

TREASURY

WASHINGTON, D.C. 20220

TElEPHONE W04·2041

March 1, 1972

FOR IMMEDIATE RELEASE

WITHHOLDING OF APPRAISEMENT ON PENTAERYTHRITOL
FROM JAPAN
The Treasury Department announced today that the Bureau of
Customs is instructing Customs field officers to withhold appraisement
of pentaerythrito1, including nitration grade pentaerythrito1,
monopentaerythrito1, technical pentaerythrito1, dipentaerythrito1,
tripentaerythrito1, and mixtures thereof, from Japan pending a
determination as to whether this merchandise is being, or is 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.). Pentaerythritol is used chiefly in the manufacture of alkyd resins,
varnishes, plasticizers and explosives.
Under the Antidumping Act the Secretary of the Treasury is
required to withhold appraisement whenever he has reasonable cause
to believe or suspect that sales at less than fair value may be
taking place.
A final Treasury decision in this investigation will be made
within three months. Appraisement will be withheld for a period
not to exceed six months from the date of publication of the "Withholding of Apprai.sement Notice" in the Federal Register.
Under the Antidumping Act, a determination of sales in the
United States at less than fair value requires that the case be
referred to the Tariff Commission, which would then consider whether
an American industry is being injured. Both dumping margins and
injury must be shown to justify a finding of dumping under the law.
The total value of pentaerythrito1 imported from Japan during
the period from January 1971 through October 1971 amounted to
approximately $1,250,000.

The Department 01 theTRfASURY
WASHINGTON. D.C. 20220

TELEPHONE W04·2041

FOR IMMEDIATE RELEASE

March 1, 1972

TREASURY ISSUES COUNTERVAILING DUTY PROCEEDING NOTICE
ON COMPRESSORS AND PARTS THEREOF FROM ITALY
The Treasury Department announced today that it has
issued a countervailing duty proceeding notice covering
compressors and parts thereof from Italy.
Compressors are found principally in refrigerators, air
conditioners, and other cooling units. Their basic function
is to convert the freon from its gaseous form into water.
The notice states that the Treasury has received information that Italian compressors and parts thereof receive
certain payments upon export to the United States.
If the
payments constitute the payment or bestowal of a "bounty or
grant" within the meaning of the United States countervailing
duty law, the imports in question would be subject to an
additional (countervailing) duty equivalent to the net amount
of the bounty or grant.
The notice invites submission of comments in time to be
received within 30 days from the date of publication in the
Federal Register.
It is scheduled to be published on
March 2, 1972.
If the Treasury finds that bounties or grants are being
paid or bestowed within the meaning of the countervailing duty
law, it will issue a countervailing duty order proclaiming the
amount of countervailing duties to be assessed as imports of
compressors and parts from Italy. The countervailing duty would
become effective 30 days after publication of the order in the
Customs Bulletin
Based upon information presently available, compressors
receive payments amounting to 35 lire per kilogram, or approximately 2.7 cents per pound. Compressor parts receive payments
ranging from 15 lire per kilogram, or approximately 1.1 cents
per pound, to 80 lire per kilogram, or approximately 6.1 cents
per pound.
During the period January 1971 through November 1971, imports
of Italian compressors and compressor parts totaled approximately
$15 million.

The Department 01 the TREASURY
WASHINGTON. D.C. 20220

TelEPHONE W04·2041

FOR IMMEDIATE RELEASE

March 1, 1972

ANTIDUMPING INVESTIGATION INITIATED ON STAINLESS STEEL
AUTOMOBILE SPLASH GUARDS FROM CANADA
The Treasury Department announced today the initiation of an antldumping investigation of imports of stainless steel automobile splash
guards from Canada.

Splash guards are mounted to automobl Ie fenders

for the purpose of preventing damage caused by sand, gravel, salt and
other road debris.
The Treasury announcement followed a summary investigation conducted by the Bureau of Customs after receipt of a complaint alleging
that dumping was taking place in the United States.
The total value of stainless steel automobile splash guards imported
from Canada during the period from January 1971 through December 1971,
amounted to approximately $50,000.
II

/I #

The Department 01 the TREASURY
WASHINGTON. D.C. 20220

TelEPHONE W04·2041

Wednesday, March 1, 1972

RELEASE 6:30 p.m.

RESULTS OF OFFERING OF $3.0 BILLION STRIP OF WEEKLY BILLS

The Treasury Department announced that tenders for additional amounts of fifteen
Les of Treasury bills to an aggregate amount of $3,000,000,000, or thereabouts, to
Lssued March 6, 1972, which were offered on February 24, 1972, were opened at the
~ral Reserve Banks today.
The amount of accepted tenders will be equally divided
19 the fifteen issues of outstanding ~easury bills maturing March 30, April 6,
Ll 13, April 20, April 27, May 4, May 11, May 18, May 25, Jun~ 1, June 8, June 15,
~ 22, June 29 and July 6, 1972.
The details of the offering are as follows:
rotal applied for - $6,365,800,000
rotal accepted
$3,000,300,000

}E OF ACCEPTED
PETITIVE BIDS:

High

Low
Average

Approximate equivalent annual rate of discount based
on 73 days (average number of days to maturity)

Price
99.327
99.301
99.309

(includes $152,175,000 entered on a
noncompetitive basis and accepted in
full at the average price shown below)

3.31~
3.447~
3.408~

Excepting 1 tender of $900,000
%of the amount bid for at the low price was accepted
~

TENDERS APPLIED FOR AND ACCEPTED BY FEDERAL RESERVE DISTRICTS:

trict

Applied for

Accepted

ton
York
ladelphia
veland
h.mond
anta

~ago

Louis
neapolis
sas City
las
Francisco
TOTALS

313,950,000
2,890,425,000
269,100,000
188,325,000
56,250,000
115 ,950,000
754,725,000
105,225,000
697,950,000
250,500,000
73,950,000
649,425 ,000

$ 6,365 ,"775 ,000

This rate is on a bank discount basis.

247,125,000
976,500,000
153,600,000
79,~0,000

9,000,000
93,225,000
330,825,000
72,300,000
655,875,000
247,500,000
40,875,000
93.525.000
$ 3,000,300,000

The equivalent coupon issue yield is 3.48%.

!'
1

TIlE

D[PART~lENT

OF TIlE

TI~L!\SllRY

RE~IARKS

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HONORABLE JOlIN B.
SECRETARY

BEFORE

CON~'!J\LLY,

THL TREi\SURY
TIlE

NATIONAL CONFERENCE
OF TJIE

MORTGAGE BANKERS OF

AMERIC~

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February 25, 1972

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[This transcript was prepared from a t3pe recording.]

2
~1ay I extend to you
~1R •
I
2 ,I visitors to Houston a belated welcome. We are delighted to

have you here and we hope you come back often .
We have with us today a number of local friends and

we appreciate your being here.
Without further ado, I would like

you your first Vice President, Fverett

MR.

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~fatson.

[Applause. ]

to'pr~sent

~~TSON:

Ladies and gentlemen, once In a gener-

ation there walks a man upon the scene who by the very

ma~nitud(

of his personality and his deeds leaves an indeligible mark
in history and in the minds and hearts of all of thOSE he has
touched.
Our honored guest today is such a man.

lIe has rIsen

from the humble sandy fields of South Texas to a pinnacle of
international stature that brings pride to all who

k~ow

him.

Throughout his adult life, he has built an exceptional record of achievement and success in hoth private end
public life.

He served as an aide to th,e former President

Lyndon B. Johnson when }·fr. Johnson was a young member of the
United States House of Representatives.

lIe served him agc:in

when he was Senator Lyndon B. Johnson.
In the decade that followed, our guest huilt a
b rill i an t bus in e s s car e e r wit h the 1 ate Sid

\'"r.

Ric h a r d son .

Once again he returned to public service as Secretary of the

Navy under the late President John F. Kennedy.

A year later

he returned home and was elected Governor of Texas over a
field of five well-known oppbnents, including an incumbent
Governor and an incumbent attorney general.

lIe was twice

reelected to that post by overwhelming margins.
During his service as Governor, he brought neh'

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stature and dignity to that office and maintained the highest

level of popularity In history before retiring voluntarily in

1969.

After two years of successful private practice as

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a senior partner with one of the largest law firms in the
United States, he again answered the call to public serVlce
jus t a lit tIe m0 ret han aye a rag 0

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he a c c e pte d a p poi n t -

ment by President Richard Nixon as Secretary of the Treasury
of the United States.
His performance In that position has impressed

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'" her.

Washington, the Na tion:, and the wo-rld.

lIe has met some of

the greatest problems that face· this Nation In a century with
courage and skill and has been ac.claimed hy friend and foe
alike.

It is significant in OLr rank that In an election
year when a crowded field of candidates from one party and an
incumbent President in the other vying for puhlic attention
and headlines, that the most talked about and precious
political figure in Arlerica tod;ly in ne\':s rooms in Washington,

l I n boa r d roo msin r, fa n hat tan,
2

1 i v in g roo ms ] n Pe 0 ria

s a

non-candidate for President.
That is why there is growing talk wherever you go
that the. man who has counseled and served three Presidents

has got a greater destiny in the service in this country.

does us great honor in joining us today.

Ladies and gentlemen, the Secretary of the

Treasury of the United States, the Honorable John B. Connally.

[Applause.]
SECRTITARY CONNALLY:

Master of ceremonies, President- Jackson, Mr.

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Thank you very much.

Hatson.

You know, Everett, I couldn't help but think as you

were introducing me and telling about all the jobs I had had
and things' I had done and the places I had been, tha t people
that don't know me might think I am a pretty shiftless fellow.
[Laughter.]
But r-realy don't think I am.

But I was impressed

by Everett's introduction.

It reminds me of the pastor who

had pr~p&red a very special sermon, and on the Sunday he was
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to delive~~ it a blizzard hit, and an old rancher came to the
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town and decided he would do some shopping.

It was the first

time he had been In in about a month so he decided he
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couldn't get home hecause of the hlizzard and he would go to
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church the next morning.

Sure enough, this pastor found that

the only parishoner present was tIlis old rancher.
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Well, the preacher had "forked on this sermon for a

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week and he had it all down and the thought was in his mind

whether he ought to give it.

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here ,\'as this lone rancher out there and whether or not he

After all, he had a church and

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ought to just get down out of the pulpit and go out and shake

hands with him and thank him for coming and tell him he

appreciated it and save his sermon for a lar':;er croh'd on
another day.
Well, he decided he had prepared it for this special

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day, this particular Sunday and he was going to deliver it,

regardless of the size of the audience.

great eloquence, great feeling, great humbleness and

sincerity.

the pulpi t to shake hands 'vi th the old rancher who sa t there

entranced by the sermon and he said, "Well, Zeke, how did you

like that sermon?'"

So he did, with

And when it was allover, he walked down out of

The old rancher kind of scratched his head and ,;aid,

"Well, parson, it's good, but," he said, "I was reminded,

just looking here," he said, "on a day like this when the

sno'''' is allover everything, covering the ground," he sa id,

"you kno,,,,, I hauled a whole truckload of hay out to my ca

in the pas tures and," he sa id, "bu t if onl y one old cow ShOi-:S

up, I don't d U In P the

"I hoI e

loa d . "

[Laughter.]

But I will tell you, In this jntroduction this

~r.le

mornIng you got the whole load, I Hill tell you that.
[Laughter.]

But I wish I could have been here yesterday instead
of· today.
5

[Laughter, applause.]

I would tave liked to have been here ~when my dear

friend, Wright Patman, whom I have kno\\'n from my days, my

young days when I first went to Washington in 1939, was

speaking to you.

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I re~lly woul1 have liked to have heard

his modern version of interest rCites.
[Laughter. ]
And his predictions of the dire things to come.

\vonder, I didn I t hear the whole speech, I didn I t get a chance
to read it -- when he was talking about interest rates of
thirty and forty years ago, during the thirties, being down
to 2.5 percent, did he also mention the unemployment rate
during that period?
[Laughter.]
'It was -- well, it was a little over -- during the

five-year period, it was a little over 14 percent, the unem-

ployment rate, running all the

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cent unemployment.

w~y

up to as high as 25 per-

As a matter of fact, from about 1929 to

1933, it dropped from about 47 million people employed to 38
million people, it dropped by 9 million people in 36 months
unemployed, that number out of a job.

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And I was struck -- now, let me say at the outset

just so the record is clear here, so there is not any confusion

in any of your minds -- unfortunately I have to say this in
the presence of tHO

f my dea res t fr iends and my banker s, t·rr.

Jam e sA. Elk ins, Jr. and t·! r. Nat Rag e r s .

I a P.1 not a h i g h

interest rate man, let me make that clear.

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{Laughter.]

Everett alluded to the fact that I Has once associ-

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a ted w~i_ th Sid IV. Richa rdson and Ha rry Bas s in Fort Worth, and
one of the things I learned, which I never followed -- you
know, young people get good advice and they never take it -but Mr. Richardson never served on a bank board in his life
and he repeate(lly Has asked to serve on bank boards.
no, he said I am not about to.

[Laughter.]
And he didn't want to think like a banker, he

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lIe said I am a borrower, not

a hanker.

He said

wanted t) think like a borrower.

Well, that is the Nay I am.

I still think like a borrower and interest rates to me still
are too high.

So to that extent I agree with the distinguished

Chairman of the House Banking and Currency Committee, Chairman
Patman.

I think they are too high.
But having said that, you don't say

P.1UC}l,

you have

to analyze why they are high.

And I don't want to necessarily

take off today in defense of the thrift institutions, hanks,
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other~,

insurance companies, and

because that is quite a load

to carry.

are paying 4.5, 5, and receitly 5.S percent for money, it

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a little difficult for them to think about loaning it out at

2.5 percent.

But it is significant that \Vhen those institutions

[Laughter.]

That much I think is fairly clear.

And ahout forty

years ago -- of course, I didn't have any money ]n those days

and I don't kno\V whether they had CD's or not.

until the last three or four years I ever heard of a CD, you

kno\V.

thirties so I don't know that they were paying anything for

money in those days.

and just put it on deposit for safe-keeping and the banker

used it.

It wasn't

Certificates of deposit were unknown in the middle

I thought you took money to the bank

That is the way I grew up.
But times have changed and I think basically it is

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not qui t e fa i r tot a 1 k abo u t what con cl i t ion s are to d i1 Y co rl1 -

pared to what they were forty years ago in an insolated

instance, just talking ahout fair interest rates, or anything

else, because we live in a different world from what we lived

in forty years ago, or fifty years ago.
Or" if you want to be even more precise, we live In

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a different world from what we did ten years ago, and tllat
par t

what I ,,' ant tot a I k toy 0 II abo u t to day, and in the

process I want to cover a numher of different things.

I don't need to talk to you about housing In par-

ticular, because you know more about it than I do.

I don't

really need to talk to you about money or the cost of it or
interest rates, because you deal with it all day every day.

You know as much about it as I do.

So there is no point In belahoring you with all of

the things that you already know.

Perhaps it would best

serve me and most interest you to try to viChI some of our

problems from a little different perspective and talk about

them.

1 1 1 think really to analyze where we are in talking

to you today, whetl1er we are talking about economic problems,

whether we are talking about budget deficits, whether we are

talking about international trade, balance of payments, or

whatever.

thing s .

saying to you that we a.re living in a time of enormous,

drastic, exciting and challenging change.

We really ought to put into context all of these
And 1 et me very br :'_cfly try to do tha t, hy simply

ff you are like nearly every other American that'

know of, in the last few days you have been transfixed,

completely captivated by the President's visit to China and

by what we have reen able to see of China, and you have been

thrilled by the progress that has apparently heen made and

excited by the prospects of what it means In tlds decade and

in the decades to come, of harmony, of peace, of progress,

between that nation of 800 million people, so dominant of all

of Asia, and the United States, so po\vcrful among the nations
of the free world.
And yet we shouldn't get our hopes too high.

shouldn't get our hopes too high.

great potential trade opportunities with China.

point out to you that last year the latest figures we have

indicate for this enormous land mass known to us as mainland

world

tr~de

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last year.

Now, to put that into perspective, that is almost
precisely what the little island of Taiwan did with 15 million
people.

They did $4 billion in world trade last year.
So to assume that we are going to immediately open

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Yet, let me

China, comprising 800 million people, they did $4 billion in

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We think in terms of the

up enormous trade opportunities with China or it is going to
mean much to us, I think is assuming too much.
can be

h~pe

And yet there

that the removal of the barriers will permit some,

and throlgh this economic expansion and ecbnomic activity we
can begiIL to understand and to know each other better and let
commerce do what diplomacy sometimes cannot do.

Let commerce

open the doors, give the opportunity for people to talk and
to understand and to appreciate each other.
But this symbolizes much of the change that surrounds
this nation today, and I want to try to cast this change in a
\.; a y t hat will c au s c you tot 11 ink a bit hut not i 11 the

5 ens

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.)

discourage you or scare you.

Let's think for

moment.

Last year, the President himself talked ahout
American revolution when he recommender. L.i the Congress that
we reform the structure of the federal government and com-

press eight maj or departments into four, and I tId nk it should

be done, no question about it.

We talk about changes that are occurrIng ln the

structure of state government, constitutional revisions In

state after state, restructuring, reforming of the agencies

and the departments through which state and local .governments

do their business.

We look at our school system.

We now have the

courts saying that the traditional method of financing public

SCllool systems in America is unconstitutional, that you can't

do it by property taxes alone any more, not in the manner in

which they have been levied.

You look at the federal courts again, and they

~ay

that you can 't have the school systems that you have al'valS

had because you have to inject an element of busing to

achieve certain objectives in the school system.

enormous impact.

This has an

All of tllese things have an enormous im)3ct.

Here in Texas, you have a federal court agaIn salIng

that the districts which the Legislature dre\'! for the

congressional districts of

Th iss h a k e sun the \\' hoI cst r u c t u reo f go v ern r.1C n t .

th~

state arc unconstitutional.
And the

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court says, "I will draw the lines myself or get someone to

draw them."

rogatives.

IIe assumes unto himself the legislative pre-

So this shakes up people.

So there is turmoil and

there is torment in our school system, which is very funda-

mental and very basic because this affects the young people

of this country and they are th~ hope of the future of this

Nation.

So people are unsettled.
You can talk ahout crime and what it is doing, the

unsettling nature of it.

and ""hat it is doing, how unc;ett1ing it is to business and to

people, how they concern themselves with the air we breath,

the water we drink, the impact that it is going to have on

the industrial might of this Nation, the job opportunities

for people.

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And can it be kept within reason?

This is a

very unsettling, tumultuous change in this society as we
know it.
And all of these tllings I mentioned, without trying

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You can talk about the environment

to get into the merits of anyone 6f them, nevertheless
the

accumulated effect of all of them is having a profound

change.
And our international situation, international
economIC situation.

Last year, 1971, for the first time

since 1888, tJlis Nation ran a deficit in its trade balances,
for the first time since 1888.

This should tell us sOT'1cthing.

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Our balance of payments last yeJr ran a deficit of

$29.6 billion, the largest by far in the llistory of this

Nation.

This should tell us' something.

This caused the

President to act as he did, very courageously, on August 15,

to suspend the convertibility of the dollar, an enormous

impact on the world monetary system.

change.
It

and abroad.

And this is a great

a change in the economy, an economy at home

It is a change in the structure of government

itself.

today under attack.

been a time in the history of America when business as such

was more suspect, more criticized, more defiled than it is

today.

You're under attack.

But it doesn't stop there.

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But it doesn't just stop with business, which is

bu~;iness

There has never

It doesn't stop with the

institutions or the structure of government itself

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or the e'.:cnomy of this country, or the environment. It

permeate3 even the religious

under attack, all of tIle faiths, the Protestants, the Jewish,

the Catholics -- the priests want to marry -- all of them.

They want a change.

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institutions~

They are also

There is an upheaval, there is a torment

there is a turbulence in all of the life that we lead.
Now, what does this mean to us?

Well, it doesn't

mean that it is something that should frighten us.

shouldn't scare us.

But it is something He oup,ht to he a,,"arc

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of.

We ought to be aware of it In the sense that we arc not

gOIng back to ",hat we knew.

in the early 1950's or what happened in the 1930's, you're

talking about history and YOll can read ahout it in history

books, and experience is a great teacher, and frequently you

can judge the future by the past.

it alone by the past.

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When we talk about ",helt happened

But you can't just judge

And in this whole structure, we talk today of unemployment.

We have 5.9 percent, according to the latest

figures of unemployment, and much is made of it.

We are

conducting a study now, the preliminary results of it clearly

show that the structure of the unemployed 11as changed and

changed very rapidly, and changed just In the last few years.
When you talk about what was happening In the late

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forties and the early fifties, certainly during the thirt·;es,

your work force was entirely different.

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You hear people today

talking about we are on the throes of a depression, of a
great recession.
at all.

Why?

And. yet I don't believe that at all, no:

Because I think everything points to just the

opposite.
Savings are up at an all-time high.

Last year';

savings, in terms of ratio to disposable income, was 8.1
percent, and it continues unabated.

Savings are 11 igh.

Personal income this ycar ,d1l he 8 pcrcent ahove \\'hat it ,·:as
last year, 8 percent.

Estimated corporate profits wi1] l,c up

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16 percent over what they were last year.
People are employed; people are unemployed.

Yes,

there are too many people unemployed, and we are doing our
4

best to try to bring down those numbers of unemployed people.

But you again have to put this into perspective, because

approximately 60 percent of these people who are unemployed

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have never been employed, have never been employed.
are not in the labor force today in that sense.

They

They are

not people that we traditionally think of as the head of a
family, who has been employed, wLo is nol'! out of work.

That

isn't the case at all.
About 60 percent of those of the five million who

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are unemployed have never heen employed.

lng about those unemployed, let's talk about those who are

gainfully employed.
On the annualized hasis of January, there were

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While we'are talk-

80,636,000 people gainfully employed at the highest wages In

the history of this Nation.
to stop.

And I don't think that is going

Now, when you consider 86,636,000 gainfully employed,

when you consider that 60 millior Americans are under the
age of 18, and 20 million

American~

are over the age of 65,

this begins to put into perspective how effective tIlis economic
system is and of which you are a part and "'hich you partially
finance.
[Applause.]

So I don't think, in the first place, husiness ought

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to hang its head in shame about anything.

There are too many

people going around the country today attacking business.

What is.business?

conduct themselves to provide goods and services.

all it is.

talk about it?

face up to whatever problems we have, and this is what I am

trying to talk about this morning.

It is a legal entity through which people

Why should you be ashamed of it?

That IS

Why don't we

Let's face up to some of these things.

Let's talk about this deficit.

enormous deficit that we have in this fiscal year.

President doesn't like it, I certainly don't like it.

not a deficit spending man, never have been, don't intend to

ever become one.

the time when we have the largest deficit In the history of

the country.

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Sure, it

Let's

And the
I am

And yet I am Secretary of the Treasury at

And that reminds me of when the President talked to
me about going up and being Secretary qf the Treasury.

assured lim that I didn't think it was probably a wise idea,
that I probably wouldn't feel at home in a Republican administration, with a bunch of Republican colleagues.

He said,

"Oh, John," he said, "come on, we are gOIng to make you feel
at home because I assure you, you are going to feel right at
home as a Democrat," and, sure enough, I do.
[Laughter, applause.]

Because He have got the l:lrgest "dcfici t in history,

and the largest balance of payments deficit in history.
[Laughter.]
Well, what is your alternative, what is your choice?

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It isn't just a question of what you did, it is what could
you have done.
budget?

Impose taxes?

Reduce taxes?

Have a balanced

What would that do?
Nothing, in my judgment, except turn

th~_s

economy

into a tail-spin and create more problems and a bigger
deficit and have more unemployment and less economic expansion
and activity, and it would be exactly the opposite of what
everyone of you in this room would want.
We have just gone through a tax reduction In order
to find some type of stimulus to the economy to get it
moving, because if we want to accomplish the things that
people talk about, that people hope for and d~eam of, if you
want to help the handicapped, if you want to help enrich ~}le
lives of the poor, if you want to clean up this environme'lt,
I

if you want t6 do and take these great social strides, I
assure you the only way you are going to do it is with an
expanding economy, and that is what we are trying to do.
are trying to get an expanded economy_

We are trying to get

back some of the economic vitality of this c6untry.
But let me point out to you that this deficit

not an accident.
25

You C:ln he critical of it, and a lot of

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1

people are, but you rught to know that it happened not just by,·

accident.

It is a deliberate thing, and the deficit of 1973

is also deliberate, but it

w~s

done for a purpose.

It was

done for a reason.

of it, but at least it wasn't accidental.

judgment, the combined judgment that we had ahout how we

should try to solve some of our problems.

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It was the best

And unfortunately

you can't always isolate these ryroblems, that we talk about
today.
We are being criticizeQ abroad by nations around the

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You may argue with the logic, the merit

world, because they say our interest rates are too low over
here and there is an outflow of dollars into the European
community and creates an enormous huildup of [uro dollars,
because

OUT

interest rates are too low in disparity to

theirs.
Well, what is the answer?
terest rates?

No, I don't think so.

For us to raise our InWe are not unmindful of

the fact that our short-term rates are low.
outset our long-term rates

werenft~

I said at the

I don't think they are

low enough.
While lYe are talking

al~out

deficits, there is some

question ahout wllat impact these deficits are going to have

on interest rates.

country that really feel that to finance' this deficit, we

are going to urjve up interest rates.

And there are a great many people in t]lis

thoug~t

a great deal

1 ~}
1

about that, and I don't think tllat is so.

I disagree with a

great many of the people who predict that, and some of them

are economists and some of them are large institutions of

this country.
But the mere fact that we have a deficit, a planned

deficit indicates that we don't have the economic vitality,

that we don't have the demand, and the very situation that

created the deficit is also a si tuation in which I think

there

enough ma rgin in the money markets to lv-here we are

not going to drive up interest rates, at least not any of the

lona-term
rates.
."

was up to 317 ycsterday, and that is a fairly substantially

low rate, and very materially below its high of last year.

i,~

has been.

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It was down to 292 ahout ten days ago; it

But I have traveled a great dcal around and speaking

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16

The short-term rate might well fluctuate,

with our international friends who find it advantageous sometimes,

f~r

reasons of their own, to be critical of us.

I was,

as you kY.O\"l, in Rome earlier in the year ,before the
Smithsonian meeting, around the first of December, and I was
struck by a sign that I saw there.
Everywhere we go we were very cordially treated, as
a matter of fact.

But I-have gotten the feeling all last

fall, when I Has traveling and talking with these international monetary conferences, th[lt the good-bys that I got
were al\\rays a little more enthusiastic than the hellos I

received.

[Laughter.]

And I was particul~ry struck In Rome when I went
down to the fountain, where you always toss in three coins,

you know, and it had a little sIgn up there that said, "If

U.S., throw four."

[Laughter.]

But it is a world without any easy problems that I

know of, and we haven't solved all of our international

monetary problems.

economic problems.

We haven't 30lved all of our domestic

I hear a great deal of criticism, and read more

12
13

really than I 11ear ahout the Pay Board and the Price Commis-

sian,

just don't see how it can ,,-'ork."

and'~hen

is it going to work,

it going to work.

Well, if you want. to be a pessimist, you can say

16
17

that, and it just can't work.

alternative?

It has to work.

~ry

Again, though, what

the

answer to you IS that it is gOIng to work.
We are going to make it work, because there

not any alternative.
Do you want to go back to inflation?

Do you want

to go back to 7 and 8 percent in:lation?

year we arc going to have an

mately $100 billion in 1972.

And to put it into perspective, let me point out to you that

incri~ase

Now, we tl1ink this

in the GNP of approxi-

Now, that is a large figure.

21
1

our anticipated 9 percent increase in GNP in 1972 will be

equivalent to the entire gross national product of the

United Kingdom, to put it

in~o

perspective.

So every year, if we get a 9 percent growth, we are

growlng in the United Kingdom in new plants.

That is the

size of this economy, and when you start dealing with it,

and when people expect you to perform miracles, they are

unreasonable in their request and their demands.
How are you gJing to take -- we had a freeze, and

the President very wisely and very courageously imposed a 90-

day freeze beginning August 16th on this American economy.

It was an unprecedented step in peacetime, but in my judgment,

agaIn, it was called for.

proved it was a very WIse decision.
Now, it had to be follo,.,ed hy somethjng.

15
16
17

20
21
22
23

21
25

You can't

keep this dynamic economy completely In chains forever, so we
have what is known as Phase II.

So what do we do in Phase II?

Well, among other tJling3, the Price Commission and

18
19

And I think facts then and now

the Pay Board, for that matter, tries to separate out as

~uch

as possible, realizing that you can't set up and you ought not
try to set up a bureaucracy large enough and strong enougll and
permanent enough to control every facet of this economy.

You

just cannot and ought not do it in peacetime, and none of us
are for it, none of us want to do it, and we don't plan to do
it.

22
1

So we estnhlished in tIle Price Commission a threC'-

tier system.

he in this, or you knoh some folks that arc, ancl this is a

high honor to be in tier numher one.

of the big ones in the country.

[Laughter.]

But nevertheless, there are approximately 1,500

First, tier numher one -- some of you all may

This means you are one

companies In America that are in tier number one.

They are

the ones who have to so-called pl"e-notify before they can

raise prices, they have to notify the Price Commission what

the.y are going to raise prices on and how much they are going

to ra.Ise them.
Now, tier number two, what is it?

It is the next

group of companies, a latge, large numbci of companies.

They

don't have to pre-notify.

16 i

quarter.

17
18
19

~re

n~t

They just have to report every

Well, the first quarter isn't up yet, so, you know,
writing or reading or talking about what they are

doing.
Now, the third group comprIses the vast, vast

number cf business enterprises in this Nation, millions of

them, wh) don't even have to pre-notify or report

They are jllst subject to the rules and the regulations and

the statute, and they arc subject to being inspected and

audited hy the Internal Revenue Service, and they arc suhject

to fines if they violate the ru1ps and the regulations.

~~nything.

But

23
1

beyond tha t, they don't have to not ify, they don't have to

pre -notify, they don't have to report, and these arc the

millions of business

establi~hmcnts,

the smaller ones In

the country.
So what do you' read about?

All you read about are

the big ones, and the only ones of those you read about are

those who are asking for price increases.

of the 1,500 major companies in America, over 1,000 of them

have indicated that they don't intend to raise price·at all.
So you don't read about them.

Let me tell you,

You read about only

those that are asking for price increases. - The same thing

is true In the labor field.
the Pay Boa r d

D. red 0

Now, ,vhat the Price Commission,

in g - - I t h ink the y are do i n g a ve r y goo d

job.

Now, when you think that they had to start on

Nov9mber 15 and build a staff, write the rules, write the

16
I

17
18
19
20
21
22
23

24
25

regulations, set up an administration, to try to deal with
the literally billions of transactions In this country every
day carried on by tens of millions of businesses in t]lis
country, it is a monumental task.

And anybody can complain

and anybcdy can criticize, and I am here to concede and I
will stipulate today that it is not perfect and it is not
going to be perfect.

But I am also here to tell you that

you are not going to get rid of it until we do break the
back of inflation, and that incilldes the inflationary aspects

1
2

of interest rates, becausc we can't stand it.
[Applause.]
Now, finally, we ought to make up our minds in this
changing world what kind of a nation we want to be, <.nd

\o,'C

can't -- I was impressed by one other thing that I have been

seeing on television.

of thousands of people riding bicycles, and it is good for

the legs and good for the back and good for the heart, but I

doubt if we can sell it in this country.

I was impressed by the literally tens

[Laughter.]

It would cure a lot of our pollution problems.

was struck with the orderliness and the precision and the

obvious discipline that we have been witnessing, and in a way

it is great.

15
16

17
18
19
20

22
2 ",)

24
25

But I don't believe I

\~·ant

to sign up just yet.

[Laughter.]
I

like what I have got.

make this system work?

Now, how are we gOIng to

When \ve start looking around the 'Jorld

and we start complaining about this American system of fr!e
enterprise, you know, it IS one thing to criticize it, it is
something else to replace it.
What do you want to substitute for it?
a better system?

Do you know

Do you know any place in the world that is

bettcr housed and hetter fed, where people have more leisure,
where they have more frcedoT:1, more independence, more
opportunity to usc their own initiative, their

0\\'11

ir.13gjnation,

2S
1

use the i row n t a len t.s

want to build or do?

\oJ hat eve r

kin c.l toe rea t c w11 ate vcr the )'

I was struck when we went to the Azores to meet
President Pompidou.

We flew in to this island that was

settled really before the United States, some time before

the United States.

for four-hundred yenrs.

cent.

the white painted cottages.

a patchwork form, all rj.mmed with rock walls, free-standing

rock walls placed there lovingly by hand, rock by rock.

It really has been fairly well settled
Flying in, it is absolutely magnifi-

You see the red roofs, the red tile roofs.

You see the fields laid out in

And the pastures are frequently no higger than half

the SIze of this room we are ill.

are not enormous.

of the most lovely sights lIve ever seen.

16
17

18
19
20

You see

They arc very small.

It IS just a solid patchwork.

They

It IS one

So I rode around

for an hour or two and begall asking questions about it.

And

I talked about these lovely white-washed houses and I saw a
water hydrant, and I said, "Is this a little fountain?"
They said, "No, that IS the village water supply."
And to make a long story short, J found that on this magnifi-

cent little island they have no indoor plumbing at all, no

running \vater at all.

only two villages on the seven islands had electricity.

others have none at all.

Of the seven islands, I was told that

Ano their annual Income, average annual Income

The

26
1

$160 per year.

And I thought what a lovely sight, and yet

when you pierce the

su~facc

and get down and study what the

facts are, how vastly different it can be.
4

And

was

reminded. of the old saying, "Beauty is only skin deep."
What kind of a system do you want to have?
How are we gOIng to compete?

lvhat

are we going to build?

And I

have gotten into the world trade problem this mornIng hecause

I don't have time.

have been trying to cover a number of different subjects so

r have talked too long as it is, but

that at least from my perspective you can get a feel for

some of the things that you have to cope wit}l, that we are

trying to help this Nation cope with.

13
14

15
16
17

18
19
20

21
22
23

24
25

r want to finally say that don't just look to the
government, don't look to us for all the answers hecause we
don' tha're them, and we are not going to have them.

The

government is not that wise.

r was in Houston, Texas just about a year and two
months a1:0 and

will just be perfectly frank and say I don't

recall anybody around here that thought r was especially
endowed with any great wisdom.
[Laughter.]
And frankly, r don't think I gained any when r
automatically or magically crossed the Potomac River, either.
[Laughter.]
Because all the wisdom

not there and

We'

don't

27
1.

have all the answers, and no administration docs, nor should

it.

mar e and m0 r e

of. labor, the leadership of managemen t, the leader s11i p of

business and the leadership of government are-going to have

to form a quadrigae of support, of dedication, and of purpose

if we are really going to survive in this competitive "orld

In which we live, and it is that.

But the combined genlus of America docs have it, and
\V

ear ego in g to h a vet 0

\\' 0

rk.

The 1 e a d e r s 11 i p

And all that we do, all that we can do, all

hope to do is build upon a sound economic base.

finally close by saying to you:

You have

heard that.

nation, internationally.

in any sense we are incredibly strong, and every nation In

the world recognlzes it.

Let me

The United States In one sense IS weak.
You have heard me say it.

t~at

We are broke as a

We owe more than we can pay.

But

There is nohody even close to us.

I said to you a moment ago that just our 9 percent

growth In 1972 represents the total gross national product

of the United Kingdom or of France.

to us see a behemoth, a giant, an economic giant of tremendous

proportions.

22
23

24
25

So other nations looking

Now, what do we do ahout it?
this strength?

What do we do with

Nell, today we furnish the leadership for

the f r e e \\' 0 rId and, bel i eve me, no

the rna t ion

can or will do it except the United States.

l\O

nth i sea r t h

one

C.1I1

do it,

even if they wanted to.
If there is to be a security shield, a military

strength in the free world, °i t has to largely be provided by
the Un i ted S tat e s

r i t wi 11 no t be pro v i d cd .

I t i s t he

free world and we in particular that have to have a nuclear

capability and a strength in which to match those nations In

the Communist world who still view us as a threat.

strength has to be provided by the United States.

And that

And if we are to provide the diplomatic leadership,

if we are to provide the military strength, if we are to pra-

vide the nuclear shield for the free world, then I assure you

that we are going to have to have the economic vitality and

the foundation of economic strength in this country to

support both of those things.
·If we are to continue to gIve aid, military and

15
16

17
18
19

economic, to the developing nations of the world, we can only
do so so long as we can afford tc do so and so long as we
have the economic strength to surport it.

22
23

24
25

really

the choice that we have in this :ountry.
Do we turn our back?

And this

ship?

Do we give up this leader-

Are we willing to throw in the sponge?

What kind of a country do you want?
fight for?

What do you do?

\Vhat arc you Hilling to

What arc you willing to sacrificc for?
Are you happy with whnt you havc?

But how much of it did you carn?

I don't

Sure, you arc.

mCClI1

tllC

uollars in

your bank account.

I am talking about the privileges and the

freedoms and the immunities that you have.
Very fe\V of us con'tributed much to what this Nation
today-.

We are inheri tors.

We are inheri tors of a grea t

legacy, a great legacy of strengt}}, of freedom, of compassion,

concern, not only for ourselves and our own and our future but

for people throughout this \Vorld.

And what is your responsibility and mine

simply

not to merely eat the succulent fruit of the trees planted

by our ancestors but to do some plowing and planting of our

own, to enrich, to build, to strengthen this system that has

produced more for more people, more food, more clothes,

better housing, more luxuries, more privileges, more freedoms

than any people have ever enjoyed in the history of the world.

We have to convince ourselves, we have to constantly

reinstill in ourselves a sense of dedication and a sense of

purpose for tllis Nation if indeed we are to have a purpose.

Thank you very much.

[Applause.]

21
22
23
24
25

The Department of the TREASURY
WASHINGTON, D.C. 20220

TELEPHONE W04·2041

FOR IMMEDIATE RELEASE

March 3, 1972

WITHHOLDING OF APPRAISEMENT ON INSTANT POTATO GRANULES
FROM CANADA
The Treasury Department announced today that the Bureau of Customs is instructing Customs field officers to withhold appraisement
of instant potato granules from Canada pending a determination as to
whether this merchandise is being sold at less than fair value within
the meaning of the Antidumping Act, 1921, as amended (19 U.S.C. 160
et seq.).
Under the Antidumping Act the Secretary of the Treasury is required
to withhold appraisement whenever he has reasonable cause to believe or
suspect that sales at less than fair value may be taking place.
A final Treasury decision in this investigation will be made within
3 months. Appraisement will be withheld for a period not to exceed 6
months from the date of publication of the "Withholding of Appraisement
Notice" in the Federal Register.
Under the Antidumping Act, a determination of sales in the United
States at less than fair value requires that the case be referred to the
Tariff Commission, which would then consider whether an American industry
was being injured. Both dumping margins and injury must be shown to
justify a finding of dumping under the law.
During the period from August 1970 through December 1971, instant
potato granules estimated to be valued at approximately $1,120,000
were imported or ordered by United States purchasers from Canada.
If

March 3, 1972

FOR IMMEDIATE RELEASE

The Federal Administrative Serv-ices Officers Group, an organi=2tis::
to further improve efficiency, economy, and quality in administrati":e
services throughout the Federal Service, has selected Mr. Robert R.
Fredlund, Director of Administrative P-.cograms, Department of the Treas:.:.:c:: ~
to be its

nevI

Chairman, and Mr. Hilliam H. O'Donoghue, Director of

Administrative Services, Department of Justice, to be its new Vice
Chairman.
During the past year, the Group, vlhich was organized through the
efforts of Mr. Donald B. Moore, Director of Administrative

Serv-ices~

Department of Commerce, its first Chairman, and Mr. Richard D. Althaus,
former Director of General Services, Department of Housing and Urban
Development, its first Vice Chairman, has regularly met to discuss such
matters as office design,

l~out,

and landscaping -- improved space

utilization -- effective telecommunications -- more economical and

efficie~:

methods of procurement and supply -- printing management -- buildings
management -- and other areas important to productive working

enviror~:e~~s.

At its last meeting, the Group met with Commissioner of Public
Buildings, Art Sampson, and his key staff including Mr. George

Per~r~an,

Region:,l Director of Public Buildings Serv-ice, to discuss means of
improving communications betlveen GSA and the Federal Agencies in the

•
Washington, D. C., Metropolitan
Area, vlith a view to providing the Dest
possible working relationships.

The Department of the TREASURY
WASHINGTON, D.C. 20220

°TION:

TELEPHONE W04·2041

FINANCIAL EDITOR
March 6, 1972

ELEASE 6:30 P.M.,

RESULTS OF TREASURY I S WEEKLY BILL OFFERING
The Treasury Department announced that the tenders for two series of Treasury
, one series to b~ an additional issue of the bills dated December 9, 1971 ,and
ther series to be dated
March 9, 1972
,which were offered on February 29, 1972,
opened at the Federal Reserve Banks today. Tenders were invited for $2,400,000,000,
ereabouts, of 91-day bills and for $1,800,000,000, or thereabouts, of 182-day
The details of the two series are as follows:
91-day Treasury bills
maturin6 June 8, 1972
Approx. Equiv.
Annual Rate
Price

OF ACCEPTED
TITIVE BIDS:

99.116 ~
99.097
99.102

High
Low
Average

3.497%
3.572%
3.553%

182-day Treasury bills
maturin6 September 7, 1972
Approx. Equiv.
Price
Annual Rate
98.099
3.760%
98.072
3.814%
98.081
3.796%
Y

Excepting 1 tender of $50,000
83% of the amount of 91-day bills bid for at the low price was accepted
72% of the amount of 182-d~ bills bid for at the low price was accepted
TENDERS APPLIED FOR AND ACCEPTED BY FEDERAL RESERVE DISTRICTS:

trict
ton
York
ladelphia
V'eland
1IJ1ond
mta
:!ago
Louis
leapolis
sas City
las
Francisco
TOTALS

AEElied For

AEElied For
$ 11,240,000
2,939,450,000
18,990,000
49,800,000
15,970,000
59,205,000
230,880,000
41,285,000
27,250,000
28,640,000
45,745,000
14° 02 29° 02 °00

Accerted

20,525,000 $0,525,000

3,396,455,000
27,440,000
38,255,000
23,055,000
38,030,000
258,490,000
63,810,000
28,020,000
39,185,000
33,000,000
162 02 73° 02 °00

2,050,705,000
12,440,000
38,255,000
12,885,000
28,030,000
109,790,000
46,810,000
13,020,000
28,120,000
17,000,000
320297°02°00

$4,128,995,000

$2,400,550,000

~ludes $189,085,000

£I

$3,608,745,000

AcceEted
$
1,240,000
1,571,110,000
2,840,000
7,450,000
5,970,000
23,705,000
126,880,000
20,085,000
6,250,000
10,755,000
20,445,000
3~390.2000

$1,800,120,000 ~

noncompetitive tenders accepted at the average price of 99.102
$ 78,855,000 noncompetitive tenders accepted at the average price of 98.081
~se rates are on a bank discount basis.
The equivalent coupon issue yields are
3 %for the 91-day bills, and 3.92% for the 182-day bills.
~ludes

The Deportment 01 the TREASURY
WASHINGTON, D.C. 20220

TElEPHONE W04·2041

'OR IMMEDIATE RELEASE

March 7, 1972

TREASURY'S WEEKLY BILL OFFERING
The Treasury Department, by this public notice, invites tenders
:or two series of Treasury bills to the aggregate amount of
i 4,200,000,000, or the reabouts , for cash and in exchange for Trea~ury
lills maturing March 16, 1972,
in the amount of $3,901,460,000,
IS follows:
91-day bills (to maturity date) to be issued March 16, 1972,
.n the amount of $2,400,000,000,
or thereabouts, representing an
ldditional amount of bills dated December 16 , 1971 , and to mature
une 15,1972
(CUS!P No.912793 NF9) priginally issued in
~e hamgunf99tf{$ 1~600~4QOiOOOfan additional S2041310,000 was issued on
a~C
1
I. 1 tae aud1t ona and or1g1naI D111~ to De freely
nterc
ctngea
e.
182- day bills, for $1.800.000.000, or thereabouts, to be dated
arch 16, 1972, and to mature September 14, 1972
CUSIP No. 912793 PC4).
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 will
e issued in bearer form only, and in denominations of $10,000,
15,000, $50,000, $100,000, $500,000 and $1,000,000 (maturity value).
Tenders will be received at Federal Reserve Banks and Branches up
o the clOSing hour, one-thirty p.m. ,Eastern Standard
ime,
Monday, March 13, 1972.
Tenders will not be received
.t the Treasury Department, Washington. Each tender must qe for a
linimum'of $10,000. Tenders over $10,000 must be in mUltip'les of
5,000. In the case of competitive tenders the price offered must be
xpressed on the basis of 100, with not more than three decimals,
.g., 99.925. Fractions may not be used. It is urged that tenders be
.ade on the printed forms and forwarded in the special envelopes which
ill be supplied by Federal Reserve Banks or Branches on application
herefor.
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

(OVER)

2 -

submit tenders except for their Qwn account. Tenders will be recei~
without deposit from incorporated banks and trust companies and from
responsible and recognized dealers in investment securities. Tenders
from others must be accompanied by payment of 2 percent of the face
amount of Treasury bills applied for, unless the tenders are accompanie~
'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. 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 reiect 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 fori
accepted tenders in accordance with the bids must be made or completed
at the Federal Reserve Bank on March 16, 1972,
in cash or other immediately available funds or in a like face amount of
Treasury bills maturing March 16, 1972.
Cash and exchange tenderll
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.
Under Sections 454 (b) and 1221 (5) of the Internal Revenue C~e
of 1954 the amount of discount at which bills issued hereunder are sola
is considered to .accrue when the bills are sold, redeemed or otherwise
disposed of, and the bills are excluded from consideration as capital
assets. Accordingly, the owner 8: Treasury bills (other than life
insurance companies) issued hereunder must include in his income tax
return, as ordinary gain or loss, the difference between the price paU
for the bills, whether on original issue or on subsequent purchase, a~
the amount actually received either upon sale or redemption at maturitJ
during the taxable year for which the return is made.
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 f~
any Federal Reserve Bank or Branch.

000

The Department o[ the TREASURY
WASHINGTON, D.C. 20220

TElEPHONE W04·2041

FOR RELEASE UPON DELIVERY
EXCERPTS FROM REMARKS OF
THE HONORABLE EDGAR R. FIEDLER
ASSISTANT SECRETARY OF THE TREASURY FOR ECONOMIC POLICY
AT A SYMPOSIUM ON BUSINESS PLANNING
SPONSORED BY THE INSTITUTE FOR INTERINDUSTRY DATA
NEW YORK, N. Y., MARCH 7, 1972, 12:30 P. M.
Recent economic signs and portents appear to be confirming the widespread expectations of a healthy advance in
business activity through 1972. A few statistics -- retail
sales, notably -~ are falling a little short of expectations,
but other series are exhibiting as much or even more strength
than anticipated at the turn of the year.
Both private and Government surveys of capital spending
plans plus the upswing in equipment orders indicate that
business fixed investment is likely to outrun earlier projections. Similarly, housing starts seem destined for a
stronger performance in 1972. The January figure for starts
is over 2.5 million units, and this coupled with the continuing heavy flow of savings into financial institutions
suggest that forecasts for residential construction will
have to be revised upward. The leading business indicators
have taken a fairly vigorous posture of late, and there have
even been a few tenuous signs of life among the long-dormant
indicators of businessmen's inventory policies.
While several uncertainties are still with us -- e.g.,
the timing of the rebound in the trade balance -- on the whole
the evidence available to us now adds up to a healthy advance -not a rampant boom but a rise in economic activity during 1972
sufficient to put a meaningful dent in the unemployment rate.
The impact of Phase lIon the price-wage stabilization
program is difficult to assess at this juncture, since we are
currently navigating in uncharted economic waters. The reports
now coming in on consumer and wholesale prices and on average

C-261

- 2 -

hourly earnings reflect the anticipated post-freeze "bubble."
On the whole, however, the recent price and wage figures do
not contain anything that is inconsistent with the program's
goals for 1972, i.e., reducing the rate of inflation to an
annual rate below 3 percent by the end of this year. My own
belief is that the program is working reasonably well and
has a good chance of achieving its goal.
Evidence on the financial outlook for 1972 is highly
mixed. Heavy demands for funds are coming from the consumer
for both housing and consumer credit -- and from the Federal
Government.
At the same time, improved corporate liquidity and the
sharply rising cash flow available to corporate treasurers
suggest a reduction in corporate bond issues this year.
Demands from sta~e and local governments should be lower
this year if, as seems likely, a substantial Federal revenuesharing program is enacted. Savings generated by individuals
promise to be well sustained.
The balance of these forces is, as always, difficult
to judge. At the moment, the best bet appears to be that
we are not likely to see wide swings in interest rates over
the balance of this year.

The Deportment 01 the

TREASURY

WASHINGTON. O.C. 20220

TELEPHONE W04·2041

FOR RELEASE ON DELIVERY

REMARKS OF THE HONORABLE PAUL A VOLCKER
UNDER SECRETARY OF THE TREASURY FOR MONETARY AFFAIRS
TO THE MONEY MARKETEERS
AT THE BANKERS CLUB, NEW YORK, NEW YORK
TUESDAY, MARCH 7, 1972, AT 5:30 PM
A NEW LOOK AT DEBT MANAGEMENT
I want to say first how delighted I am to be attending,
for the first time, a gathering of the Money Marketeers.
I never attended the lectures of Marcus Nadler.

But no one

brought up, as I was, in the bond markets of the 1950's
could fail to be aware of the benign influence of the man
and of the intellectual ferment and enthusiasm he engendered
among his students -- from the most experienced bond men to
the rawest recruits.
alive.

This organization has kept that spirit

With so many familiar faces here, with so close a

friend as Bob Kavesh brilliantly carrying on the tradition
at

NY~

with so convivial an atmosphere, I am almost tempted

to beg for honorary membership here and now -- before you have
to hear the speech!
C-262

- 2 My intention is to talk about a subject that has gotten
much less attention in recent years than when Marcus Nadler
was here:

Federal debt management.

My reason is only

partly that debt management is, at the moment, one of our
leading growth industries.

There are, in addition, a

number of longer-term questions and issues that seem to me
to need more ventilation in the financial community as we
shape a debt management philosophy for the 1970's.
In the perspective of the whole postwar period, the
decline in emphasis on debt management has been striking.
When I first went to work in Wall Street -- not so long ago
monetary policy, fiscal policy, and debt management were
considered more or less equal building blocks of national
economic policy.

As Aubrey Lanston used to put it, it was

a three legged stool, and we would forget one leg at our
peril.
Somewhere along the line, though, debt management
seems to have been dropped from the triumverate.

Moreover,

if my antennae are at all sensitive, we hear much less concern
today about the traditional canons of "sound" finance that

- 3 -

used to be pronounced with such feeling about the Government
debt

even if no one was quite agreed as to what they were.
This may be partly a matter of fashion.

In little more

than a decade, we have seen first the "fiscalists" and then
the "monetarists" riding high, each in turn, in my view,
overemphasizing the contribution and potential of one policy
instrument.

But, in the case of debt management, it has

been more than fashion that accounts for the diminishing
attention.
The simple fact is that, if attention is directed
solely toward the conventional direct Treasury debt, it has
declined drastically in relation to the size of our economy
and our financial markets.

At the end of World War II, the

Treasury debt was fully half of the net public and private
debt in the United States and equalled about two-thirds of
the GNP.

Then -- to paraphrase one dead (and inaccurate)

politician -- as went the Treasury debt, so went the Nation.
Today, that debt, while absolutely 22 percent larger, is only
one-seventh of total debt and amounts to less than one-third
of the GNP.

- 4 Moreover, while Treasury debt once was important in
every maturity area, the protracted absence of the Treasury
from the long-term market because of the 4-1/4 percent
interest rate ceiling has concentrated our debt at the short
and intermediate area.

With only a few long-term issues

outstanding -- all closely held and with special advantages
for limited purposes -- it appears the Treasury has more or
less lost touch with the capital markets, leaving them to
the exclusive province of other public and private borrowers.
Finally, experience has not been encouraging with
respect to the vigorous countercyclical use of conventional
debt management policy.

There are theoretical doubts as to

its effectiveness and, even more, practical obstacles to
its implementation.
Looking at debt management more broadly, there is a
striking phenomenon working in the opposite direction -but a phenomenon still submerged in the public consciousness.
I am thinking of the exceptional rise in the size and impact
of Federal agency programs, mostly of an extra-budgetary
character.

These agencies, in combination, have assumed a

massive role in economic stabilization, most obviously, but

- 5 -

certainly not exclusively, in the housing area.

In the

process, the Treasury has consciously given priority to
their needs, including encouragement of longer-term
financing, where needed, to support the program objectives
and preserve the integrity of the agencies' individual
financial structures.

The proliferation of these agencies

has given rise to problems of coordination and policy unknown
in the days when the direct Treasury debt loomed relatively
much more important -- a problem to which I shall return
later.
Whatever the reasons for diminishing public concern with
debt management in past years, there is ample reason to pay
attention today.

We are faced with the need to finance

back-to-back deficits totaling over $60 billion in two consecutive
fiscal years.

top of those deficits, the expansion of

Federal credit programs means that perhaps half of the net
increase this year in all credit market instruments will,
in one way or another, be associated with the programs of
the Federal Government.
That is a chilling projection.

It more than justifies

- 6 a careful look at past policies and intensive exploration
of new approaches and new techniques.

Nor can we intelli-

gently approach the current problem without concern for the
whole range of economic goals and without thinking through
the longer-run implications for debt management itself.
Our first task in the Treasury debt management area,
of course, is simply to raise very substantial amounts of
money in the market, without undercutting the desired
stimulus inherent in the deficits themselves.

Simultaneously,

we must handle maturing securities, although that task is
not especially heavy this year.

Thirdly, we want to achieve

these essentials in a way consistent with orderly and
efficient handling of the debt in the longer run.

That

requires attention to maturity areas that may now be overloaded, avoiding undue concentrations of new debt, and
consideration of techniques that may facilitate and minimize
the cost of the eventual refunding of that debt.
In all of this, there must, I believe, be an underlying
presumption that our debt operations cannot be considered
exclusively a matter of economical and efficient financing.

- 7 -

As a public responsibility, they must be geared to support
our broader economic objectives, domestic and international.
I recognize there is a sharp disagreement over what that
glittering generality should mean in practice.

Indeed,

there is one vocal school of thought which goes to the
extreme of arguing that the best the debt managers can do
is "be neutral."

Stay "out of the way" they seem to be

saying -- out of the Fed's way, out of th e Budget Bureau's
way, and certainly out of Fannie Mae's and Ginny Mae's and
Sally Mae's way, maybe even out of the way of the men like
AT&T and GMAC.
The trouble with that counsel seems to me obvious.
When we have large deficits to finance, there are no
mechanical guidelines for keeping debt management neutral.
The securities have to be placed somewhere, and that
"somewhere" will make a difference to other borrowers and to
monetary policy.

Naturally, we want to be conscious of the

impact and, where possible, turn it to our advantage.
same time -- and this is the real challenge in dealing

At the

- 8 -

with debt -- we cannot singlemindedly focus on our problems
today, without

thought for all those tomorrows when our

successors will need to deal with what we have wrought.
The central fact for the debt managers in 1972 is that
we will need to raise some $35 billion of new money,
assuming the budget estimates are realized and we end the
year with a reasonable cash balance.

We have expressed

the view that, in the current and foreseeable economic
environment, that task can be managed without either
rekindling inflation or an escalation in longer-term
interest rates.

The basic element in our thinking is, of

course, the fact that there is slack in the economy, and
related slack in financial markets -- a high savings potential
and a tempering of competing credit demands.
Long-term rates, in particular, are still historically
very high, producing an exceptionally sharp yield curve, a
phenomenon certainly explained in part by remaining
inflationary expectations.

A priority task of our total

policies is to reduce and eliminate those expectations.
We can go a long way in that direction this year.

As we do

- 9 -

so, declines in long rates could help restore what, by
past standards, would be a more normal interest rate alignment.
There are more technical reasons to suggest the added
Federal debt can potentially be "shoehorned" into the
market reasonably smoothly.

Specifically, our analyses do

not bear out predictions that we will inevitably need to
draw out large volumes of individual money to accomplish
the job.
Given the slack in the economy, a relatively
strong expansion in bank credit and the money
supply should be both desirable and anticipated.
With corporate liquidity more comfortable, we
anticipate much more of that credit base can
and will be employed in Government securities.
Corporations themselves will probably be in a
position to resume large-scale buying.
this reflects their rising liquidity.

In part,
The con-

centrated attention given last year to large
foreign central bank purchases of Governments
often ignored the fact that those dollars

- 10 originally came from the United States -importantly from corporations.

If we cannot

look forward to renewed foreign buying

and

I do not -- I also do not look forward to the
related drain of funds from domestic markets.
We also anticipate more active State and local
purchases.

Indeed, to the extent revenue sharing

adds to our deficit and their liquid resources,
the immediate impact will be to provide an
offsetting demand for our securities.
Altogether -- and allowing for Federal Reserve purchases
the statistical analysis suggests we can manage equably
without sizeable purchases either by individuals or foreigners.
There are always uncertainties about whether, in practice,
it works out so smoothly.

Certainly, the recurrent scarcity

of short-term debt in the past year should evaporate.
Stability depends critically on the course of the economy
and prices.

But, in the light of the facts now at hand, the

collective market judgment embodied in the relative stability
of interest rates since the budget announcement

- 11 -

seems to me fully supportable.
The second of the problems I mentioned earlier
refunding -- is fortunately limited.

Our quarterly

maturities average only $4 billion, below recent years and
an amount that, in itself, is not troublesome.

Consequently,

we have considerable flexibility in handling those requirements, including a potential for combining refundings with
cash generating operations or with operations to improve
the debt structure, as was done in February.
Neither the cash raising nor the refunding problem
can be separated from the longer-range problem of
maintaining a reasonably spaced maturity structure and
efficient techniques for rolling over our debt with minimal
disturbance.

The striking innovation in debt management

technique recently has been the extension of the auction
process beyond the bill area.

I cannot claim that approach

has yet been fully tested in adversity.

But I can say it has

met or surpassed every expectation so far, to the advantage
of the Treasury and the market.

I am confident it will pass

- 12 further testing with larger amounts and longer maturities.
In the process, we are prepared to explore further variants,
including (as the maturity is extended) the possibility of
awarding all bids at the stop-out price to encourage wider
investor participation.
Perhaps more importantly, we are considering whether
the successful experience with auctioning offers an opportunity to routinize or regularize the handling of more of
our debt, as we have done for many years in the bill area.
Against the day when truly long-term financing may again be
appropriate, we should also consider the wisdom of providing
more notice to the market of such an offering than has been
the practice in the past; there are advocates of repetitive
small sales several times a year, or simply longer advance
notice prior to a more sizeable sale.
These are matters upon which we want and need more
advice from those participating in the markets.
We have already had discussion with our regular advisory
groups.

They have prodded our own thinking.

Without

attempting final judgments this evening, I would like to

- 13 review some of the ideas for public discussion.
The regular auction of Treasury bills is often pointed
to as a model for the relatively routine, trouble-free
handling of substantial blocks of securities.

Given the

substantial cash needs ahead of us, I think you can anticipate, as our recent operations suggest, placement of more
debt in this area.

As we do so, we want to consider the

desirability of phasing out the

ni~month

issue in favor

of the one-year maturity and perhaps shifting the annual
issue from month-end dates into a fifty-two week pattern.
In considering these technical possibilities, there appears
to be room for substantial increases in the bill issue without
overloading the supply going to private holders.

The

increased size of the Federal Reserve portfolio arid large
foreign holdings have actually reduced the supply of bills
to private domestic buyers over the last two years.
Relative to other forms of short-term debt, the Treasury
bill has actually been declining in importance.
More basic questions arise in connection with extending
essentially the same technique of regular auctions to longer
paper of two or three year -- or even longer -- maturities.

- 14 In contrast to building up the present concentration of note
and bond maturities at quarterly intervals, to be handled
flexibly at the Treasury's discretion at maturity, it is
contended the practice of more frequent but also more routine
rolling over of relatively short-term notes might:
reduce market uncertainties and adjustments
caused by large intermittent financing operations;
create sustained and broadened buyer interest
through greater assurance as to the future availability of securities of a given type; and
reduce the periods when the Federal Reserve may
feel constrained from major policy changes by
the fact the Treasury is approaching, in, or
just completing a major refunding.
Obviously, many technical questions arise as part of any such
judgment.
Should the new maturities be monthly or quarterly?
How large should the issues be?
Should the auction technique be changed?

- 15 How can the needs of the less sophisticated
investors who may not wish to engage in frequent
auctions be accommodated?
Further steps toward regularization could potentially
be made through a commitment regularly to refund present
quarterly maturities into pre-specified areas of the market.
As I suggested a moment ago, we could also extend the logic
to the regular sale of small issues of long-term bonds.
But, when I press the logic of that approach to its
extreme, some of the drawbacks are obvious.

Regularization

and routinization are nice sounding words; straightjacket
and rigidity are not.
From where I sit, I cannot help but be conscious of
the number of times in which particular market or economic
objectives may influence the Treasury's thinking as to the
form of a particular financing.
than the past few weeks.

I need look back no further

For some time in our tentative

planning, we had felt the logic of our cash and debt management needs suggested the desirability of offering a short

- 16 or medium-term note late in February or early in March.
When the time came to raise the money, however, a different
logic prevailed.
Meeting our near-term cash needs through a sizeable
offering of bills, tailored precisely to fit within the
remaining leeway under the debt limit, was in accord with
both our international and domestic market objectives.
Specifically, the immediate impact of the offering could
more appropriately come in the short bill area, where rates
relatively were quite low, than in an area that might risk
interfering with a welcome firming tendency in the note
and bill markets.
Of course, there are potential pitfalls in the exercise
of this type of flexibility.

The discipline of regulariza-

tion and future commitments may be needed, some would argue,
to meet the longer range objectives of debt management by
offering protection against what, in retrospect, might
sometimes appear to be "taking the easy way out."
You will not expect me to confess to personal sins in

- 17 that respect!

I would contend the progress toward redevelop-

ing the market in the ten to fifteen year area and the
persistence of longer.term options on our regular refunding
operations speaks for itself.

At the same time, I would

concede there is a recurrent tension between longer range
debt management objectives and the desire to tailor each
operation to fit the economic circumstances of the moment.
The proper balance between a relative routine scheduling
of debt operations to meet continuing objectives and the
desirability of retaining adequate short-term flexibility in
the hands of the Treasury can and should be re-examined.
Finally, a few words on the problem of the really longterm bond market.

It seems to me that, looking down the road,

the Treasury will want to have continuing contact with that
area of the market.,

In my judgment, this is not primarily a

matter of achieving some target average maturity, or even of
proper maturity spacing.

More importantly, we should retain

the potential for directly influencing that market, however
infrequently we wish to use our influence.

To accomplish

this purpose, at least a minimum number of readily tradeable
issues are probably necessary.

- 18 -

In concept, the task of re-establi$hing such a market
does not look forbidding.
years alone,

privat~

and

After all, in the last three
Stat~

and loeal borrowers have

raised some $135 billion in the capital markets.

The

purposes I have in mind could be accomplished with only a
relatively tiny fraction of that flow.
The practical difficulty is the familiar cliche:

time seems to be a good time for offering long-term
Treasury securities -- either rates are too high or there
is a desire to maximize the flow of funds to other
borrowers.

Today we have some of both.

So here, too, is

an area where we would invite your thinking and your
reactions in shaping our longer-term program.
Before concluding, I do want to say a few words about
the hottest new item in thinking about debt management in
Washington these days.

- 19 -

As I indicated at the start, the coordination and
control of the market borrowing activities of the numerous
Federal and Federally-sponsored agencies has become both
more important and more difficult.

As these agencies have

proliferated in number and scope, some Federal activity in
the securities markets is occurring on roughly every two
out of three business days.

The aggregate volume of funds

absorbed by these agencies is about as large as the Federal
deficit, even in this period of swollen deficits.
We have proposed legislation, in the form of the Federal
Financing Bank Act, to help bring order out of the actual and
potential confusion and congestion in the Federal agency
markets.

The legislation has three main purposes:
First, the Bill would establish a new financing
vehicle, the Federal Financing Bank, which would
consolidate the financing of a number of Federal
programs which are now financed individually in
the private securities market.

By reducing the

number and types of separate issues, we will
achieve a substantial savings in borrowing costs.

- 20 -

Second, the Bill would provide for better coordinaation by the Secretary of the Treasury of Federal
agency financing plans, consistent with better satisfaction of their requirements.

This will be

achieved by assuring early focus on the market
financing requirements for Federal programs and
then, in many cases, substituting the broader and
more efficient financing potential of the Financing
Bank for the market entry of individual agencies.
Better over-all coordination will be possible of
the market borrowings by the Treasury, the Federal
Financing Bank, and those Federally-assisted borrowings not financed directly through the Bank.
Third, the Bill would provide for subsmission to
the President of budget plans for loan guarantee
programs.

This will assure more effective

coordination of loan guarantee programs with
other Federal progrruns and with over-all economic
and financial policies.
In preparing the Federal Financing Bank legislation for
submission to Congress and subsequently, we have had extensive

- 21 discussions with the various Federal agencies involved,
with public interest groups representing State and local
governmental authorities, and with various associations
representing industry, banking and the securities industry.
We are gratified by the degree of support among those in
the financial community dealing with the problem on a daily
basis.

Indeed, we find few opposed to the basic concept,

in or out of Government.
Quite naturally, there are those who, while welcoming
the concept in general, would beg out for themselves on
grounds that their case is "special."

Of course, it is pre-

cisely the proliferation of special cases that makes the
problem!

There are also some specific areas of concern which

reflect lack of full understanding and, therefore, warrant
comment.
First, the Federal Financing Bank is a financing vehicle only.

The Bank will not add to

or subtract from existing Federal credit programs.
It would simply exist to facilitate the financing
of the programs which Congress has created or
will create in the future.
The Bank is not a device to remove programs from

- 22 the Federal budget.

It does not affect the

existing budget treatment of Federal credit
programs.
The Federal Financing Bank in no way infringes on
the prerogatives of State and local governments
in their access to the tax exempt municipal bond
market -- it is not an Urbank.

The Financing

Bank will acquire securities only in instances
where the Federal Government is otherwise involved
through guarantees or other forms of financial
backstopping.

Some tax exempt issues, such as

Public Housing Authority and Urban Renewal
Authority obligations, do fall into that categoryo
By removing this source of pressure on the
municipal bond market, State and local borrowers
should find a more receptive market for their
other issues.
We are strongly convinced that enactment of the Federal
Financing Bank Act will substantially improve

th~

efficiency

with which the Government's borrowing is accomplished without

- 23 -

any significant detrimental effect on other securities
markets or on the way the securities industry serves its
basic function of mobilizing capital.

Our principal opponent,

particularly in a year in which the Congress is easily distracted by issues with more political appeal

is apathy.

To overcome that, we will need the support of all of those
professionally concerned with the problem of Government
finance.
I make this "pitch" to you with no apologieso

The

concern of the Money Marketeers with economic policy and the
problems of Government finance is well established.
Indeed, there is no group that has more successfully
combined business and education through the years with the
pleasures of professional companionship.
having me.

--000--

Thank you for

The Department o{ the

TREASURY

WASHINGTON. O.C. 20220

TELEPHONE W04·2041

FOR RELEASE ON DELIVERY
REMARKS BY RICHARD V. ADAMS
SPECIAL ASSISTANT TO THE SECRETARY (DEBT MANAGEMENT)
BEFORE THE
CONFERENCE OF THE MID-CONTINENTAL DISTRICT
SECURITIES INDUSTRY ASSOCIATION
WEDNESDAY, MARCH 8, 1972, 10:00 A.M., C.S.T.
It is a pleasure to be here in Chicago today at this
conference of the Mid-Continental group of the Securities
Industry Association.
By way of background, I might explain that the Treasury
.
Special Assistant for Debt Management works in the area of planning the Treasury's financing operations and works also with
various Federal agencies in coordinating their market borrowing
activities.

I came to the Treasury about nine months ago from

commercial banking where I had been managing a bank bond
portfolio.

A move of this sort is something like moving

to the other side of the same counter.

As bankers, we were

always trying to figure out what the Treasury and the Federal
Reserve were going to do that would affect the bond market
and at the Treasury, we are trying to guess what the banks
will do about buying Treasury issues.

Of course, what we at

- 2 Treasury call debt management, the banks have developed a
euphemism for.

They call the management of their debts

liability management.

Maybe that's what we should call it

in Government -- liability management somehow has a little
nicer ring to it.
In any case, we do have a Federal debt to manage -- about
$426 billion of it now and it's heading higher, as you have
no doubt seen, with the unified budget deficit for this fiscal
year projected at $38.8 billion and for 1973 a further deficit
of $25.5 billion.
of this size.
situations.

We are not happy about the need for deficits

But this is one of these bad news-good news
The bad news is, of course, the absolute size of

the projected deficits which rubs against the grain of
our traditional ways of thinking about fiscal policy.

The good

news, on the other hand, is that these deficits will provide
a needed economic stimulus and that the deficits are manageable
in the sense that financing them will not impinge on an already
overburdened money and capital market.
In talking about Federal debt management today, I would
like to say something further on this matter of the budget,
then to talk about the debt management aspects of these deficit!

- 3 -

and finally to cover briefly the matter of the financing of
Federal agency and Federally-guaranteed borrowings.

This

last item involves the Administration's proposal to create a
Federal Financing Bank.
Now on the Federal deficits for FY 1972 and 1973, there
is no question that the budget numbers that were released
in late January caused concern in the financial markets.
The concern stemmed from a wide-spread feeling that
(1) deficits of this size are in and of themselves going to
intensify our inflation and (2) that at the very least,
financing these deficits will have the effect of driving up
interest rates.

Both of these assumptions are worthy of a

further examination.
Budget deficits or budget surpluses are just one of a
number of forces at work in the economy at any given time.
There are usually more important fundamentals affecting prices
and interest rates, and the budget has to be viewed in the context
of underlying economic conditions.

Looking at the history

of our Federal budgets, you discover that there is no reason
to conclude that budget deficits automatically lead to
inflation and escalating interest rates or, for that matter,

- 4 that surpluses mean low interest rates and less inflation.
In looking at the record, what stands out is the fact that our
major inflations in the United States are associated with
wars and that peak interest rate levels are related to our
inflations.

As far as budget deficits or surpluses in and of

themselves are concerned, there is no one-to-one relationship
between them and inflation and money rates.
Taking the last 20 years or so, we ran surpluses during
two out of the three Korean war years and nevertheless had
a sharp inflation and substantial increases in interest rates.
A recession followed the Korean war in 1953-54 and inflation
and interest rates subsided despite a large budget deficit in
FY 1954.

As the economy expanded in 1955-57, a sharp rise in

prices and interest rates occurred even though the Government
ran sizable surpluses during most of the period.
In all but one of the eight fiscal years, 1958 through
1965, Federal deficits were incurred.

These years were

characterized by the existence of unutliized resources and
unsatisfactory levels of unemployment.

Inflation was virtually

dormant and interest rates, after 1959, were remarkably stable.

- 5 -

More recently, the 1965-69 period was a time of inflationary
boom -- again associated with war.
levels became intolerable.

Inflation and interest rate

Here in this superheated climate

very large deficits did indeed aggravate the inflation and the
rise in interest rates of the late 1960's.
This quick review of recent history suggests clearly,
I think, that it is one thing to run a large deficit in an
overheated, full employment economy like FY 1968, but quite
a different proposition in the present environment when we
are moving in transition from war to peace and when fiscal
stimulation is needed to speed the transition.
Now to put the FY 1972 and 1973 budgets in their proper
context, we have to look at our economic objectives and our
current progress toward these objectives.

Our objectives are

as the President stated them last August:
(1)

to break the back of inflation.

(2)

to promote sustainable economic growth.

(3)

to create jobs and reduce unemployment.

(4)

to work toward restructuring the international
monetary system.

- 6 The steps already taken in furtherance of these objectives
are well known; a major reduction in personal and business
income taxes, automobile excise tax cut, an international
currency realignment and a coherent wage price stabilization
program which we know as Phase II.
These steps are producing good results, evidenced by a
real growth rate in the economy of nearly 6 percent in the
last quarter of 1971.

Further substantial gains in economic

activity are occurring so far this year.

However, we must

sustain this developing business expansion.

The Federal budget

in FY 1972 and 1973 will act to reinforce the major economic
policy initiatives taken in recent months.
In summary, we regard the budgets for fiscal 1972 and 1973
as appropriate stimulants for the economy.

We do not regard

these budgets as inherently inflationary nor do we believe
that financing these deficits will produce a major escalation
in interest rates.
All of this is not to say, however, that we do not have
a large financing job ahead of us over at least the rest of
year.

The new budget figures put a greater emphasis on debt

management.

th~

- 7 -

Based on our projections for the weeks ahead, our remaining
gross market borrowing requirements through April will be about
$5.4 billion, including $2.4 billion to be raised via continued
$300 million weekly additions to the bill auctions.

Our May

and June requirements will depend on actual budget developments
but will be fairly large in any case.

The period we are

in now, March-June, is where the unusual Treasury borrowing
pressures on the market will occur.

Normally, in the first

half of the calendar year, the Treasury retires some debt out of
seasonally heavy tax collections but this will not be the case
this year.

Fortunately, these unusual borrowing requirements

will not be impinging on already overloaded credit markets.
The present relatively low short-term rate structure indicates
a substantial capacity to accommodate the Treasury.

It re-

flects the low level of credit demand in the private sector,
the substantial foreign purchases of short-term Treasury
securities in recent months and an accommodative monetary
policy.

These conditions are generally expected to persist

at least until the present business expansion has progressed
far enough to absorb a significant portion of the unutilized
resources existing in the economy.

- 8 -

Moving into the first half of FY 1973, we will continue
to be active borrowers in the capital markets as we finance the
seasonally heavy portion of the deficit for the fiscal year.
However, the size of the financing job during that period will
be more in line with that of previous years, and as such, it
will be seasonally heavy but not extraordinarily so.
In addition to the cash raising job ahead of us, we
have three quarterly refunding operacions in the balance of
the year.

We are fortunate that the size of these operations

is not large.

Securities that will have to be refunded this

year total $12.2 billion privately-held or about $4 billion
per quarter.

These amounts are quite manageable and should

cause no special difficulty.
In our cash financing and refunding operations this year,
we do have to recognize and deal with the problem of debt
structure.

In recent years, our deficits and our inability to

sell Treasury securities beyond 7 years because of the 4-1/4
percent interest rate ceiling have resulted in a substantial
in the average length of the privately-held debt.

d~l~

In mid-1965,

the average length was 5 years, 9 months and it is now 3 years,
3 months.

This is not as alarming as it may seem since during

- 9 the past 6-1/2 years, the privately-held marketable debt
has increased very little as the Federal Reserve and the
various Government accounts on balance have acquired most
of the new Treasury issues.

So the debt structure problem

is really that of avoiding having big, unwieldy maturities
coming due at anyone time.

With our quarterly maturities

this year fairly light, we should find it possible to couple
our regular refunding operations with other operations
designed to relieve congestion in specific maturity areas and
to accomplish some lengthening into the 10-year and 10ngerarea.
The reception of the advance refunding of the February
and May 1974 maturities and the size of the exchange into
ten-year obligations suggests that the market is receptive
to moderate-sized issues of longer-term Treasuries now that
we have authority to issue a limited amount of bonds without
regard to the 4-1/4 percent interest rate ceiling.
With the large financing requirements arising from our
deficits, there is considerable thought among Government
securities market participants from whom we have received

- 10 -

helpful advice, that our financing operations should become
more regularized and routine in the manner, Dar example, of
our weekly Treasury bill auctions.
The main arguments in favor of this are said to be:
(1)

It would reduce market disturbances.

(2)

It would remove an element of uncertainty from
the market.

(3)

It would reduce the need of the Federal Reserve
to act in special ways to accommodate Treasury
financings.

In other words, it would reduce

the need for "even-keel."
Offsetting the advantages of regularizing debt management,
however, is a resulting loss of flexibility.

To debt managers,

it is not so clear that automatic and inflexible procedures
are completely desirable.

Flexibility is needed to permit

taking advantage of market demands in specific maturity
areas or conversely to avoid putting undesirable pressure
on unreceptive market sectors.

Our recent offering of short-

term bills is a case in point.

Here market demand as evidenced

by relative interest rate levels was strongest in the short-ten
sector of the market.

At the same time, it was also desirable

- 11 -

to minimize pressures in the intermediate and longer-term
market.

The short-market therefore represented the best

opportunity.
As a practical matter, in financing our large budget
deficits during the months ahead, we will almost automatically
be tending to regularize more of our debt.

This is because

a substantial portion of the deficit will be financed in the
short-term market, simply because this is where the greatest
absorptive capacity is.

To the extent that we sell bills,

which will be routinely rolled over, we are moving in the
direction of automating debt management.

We may further

this tendency by issuing short-term securities other than
bills on a regular basis because we recognize that in present
circumstances some degree of regularization has merit.

the same time, however, we will wish to retain flexibility
in handling our quarterly refundings and in interim cash
raising operations in intermediate and longer-term maturities.
Now, there is one other new item in debt management
which I would like to discuss and that is the Administration's
proposal to improve the borrowing efficiency of the Federal
agencies through the proposed Federal Financing Bank Act of

- 12 1972.

This pending legislation, as many of you know, has

three main features:
First, the bill would establish a new financing
vehicle, the Federal Financing Bank, which would
consolidate the financing of a number of Federal
programs which are now financed individually in
the private securities market.

By reducing the

number and types of separate issues we will
achieve a substantial savings in borrowing costs.
Second, the bill would provide for
coordination by the Secretary of the Treasury
of Federal agency financing plans.

This will

assure early focus on the market financing
requirements for Federal programs and better
overall coordination of the market borrowings
by the Treasury, the Federal Financing Bank,
and those Federally-assisted borrowings
not financed through the Bank.
Third, the bill would provide for
submission to the Presid ent of budget plans
for loan guarantee programs.

These programs

- 13 would continue to be excluded from the Federal
budget totals, but the President would be
permitted to place limits on them when necessary
in view of overall fiscal requirements and
demands for credit.

This will assure more

effective coordination of loan guarantee
programs with other Federal programs and
with overall economic and financial policies.
I won't belabor the need for the Federal Financing
Bank.

I know this audience is well aware of the Federal

debt management problems arising from the current
fragmentary approach to Federal financing.
During the course of our discussions of the Federal
Financing Bank with the various agencies involved, with
public interest groups and with capital market participants,
considerable support for the legislation has developed.
Most people agree that the economical financing of the
Government's activities and programs is clearly in the public
interest.

However, there are some specific areas of concern

with respect to this legislation which have come up and

- 14 which warrant emphasis and comment here.
The Bank would not be a program agency.
That is, it would neither add to nor subtract
from existing Federal credit assistance programs.
The Bank would not be authorized, nor would the
Secretary of the Treasury be authorized, to make
any judgments with respect to the recipients of
Federal credit aid.

The Bank is designed merely

to improve the financing of programs otherwise
authorized by the Congress.
The Federal Financing Bank would not be
another big bureaucracy.

It would rely upon the

existing staff and facilities of the Treasury
Department and the Federal Reserve banks in its
borrowing operations.

In fact, the establishment

of the Bank would reduce Federal bureaucracy since
it would eliminate the need for establishing new
financing staffs for each new Federal credit
program or agency.
The Federal Financing Bank is not a device
to remove programs from the Federal budget; nor

- 15 is it a device to bring programs back into the
budget.

The Bank would in no way affect the

existing budget treatment of Federal credit
programs.

If a program is now financed

outside of the budget, that treatment would
continue.

If a program is now financed in

the budget, that treatment would continue.
How these programs should actually be treated
in the budget may be debatable.

But that debate

involves more than just financial questions; it
goes to the heart of budget policy and resource
allocation.

Pending the resolution of these

broader questions, I think that we in the
financial community have a

responsibi~~ty

do the best job possible in the financing of
the Government's programs.
This legislation would in no way change
the financing of those Federally-sponsored
agencies which are now completely privatelyowned and which issue obligations not directly
guaranteed by the Government.

Those agencies,

- 16 namely FNMA and the institutions of the home
loan bank system and the farm credit system,
would continue their present practice of
consulting with the Secretaty of the Treasury
and borrowing directly in the private market.
Those agencies would not be authorized to
borrow from the Bank but would undoubtedly
benefit from this legislation, because the
Federal Financing Bank would reduce the number
of names and competing issues in the agency
securities market and would contribute generally
to more orderly market conditions.
The Bank would not heap new demands on
the securities market.

Most guaranteed loans,

such as the regular FHA and VA mortgages, are
generally originated, serviced, and financed by
widely dispersed lenders, rather than in the
securities market, and these practices would
continue.

The programs which would be financed

through the Bank are the ones which are already
being financed in the securities market.

- 17 consolidating this financing, and replacing a
variety of less efficient securities with a
single more marketable instrument, the Bank
would actually reduce the market impact of
Federal borrowing activities.
The Federal Financing Bank Act is not an
assault on the tax-exempt municipal bond market.
Rather than involving the Federal Government in
the tax-exempt market, the Bank would permit the
Federal Government to withdraw from that market.
Under existing arrangements Federal agencies
finance some of their programs in the municipal
market by means of Federal guarantees and debt
service subsidies on tax-exempt obligations,
e.g., for public housing and urban renewal.

These

programs currently require about one out of every
eight dollars invested in tax-exempt obligations.
The Federal Financing Bank would permit the
removal of the financing of these programs from
the tax-exempt market, thus reducing pressures on

- 18 that market.

Consequently, State and local

governments should benefit, in terms of more
receptive markets for all their borrowings,
by enactment of this legislation.
Concern has been expressed about other
legislative proposals, which would permit the
Federal Government to subsidize all municipal
bonds, either through a new central financing
institution or through interest subsidy payments
on taxable municipal bonds.

The concern, as I

understand it, is that the Federal subsidy will
be so irresistible to local officials that it
will lead to a drying up of the tax-exempt bond
market, to Federal control over municipal finance,
and to Federally-imposed restrictions on the
volume or purpose of municipal borrowing.

We feel

strongly, as is evident from our revenue sharing
proposals, that State and local governments
should have more, rather than less, financial
independence.

- 19 Yet, in the case of certain high priority
national programs, where the Congress has in
fact determined that Federal credit aid is
essential, e.g., for public housing, Federal
controls and subsidies are already facts of
life.

Financing those programs through the

Federal Financing Bank will result in significant
savings to Government at all levels and will
not involve the Federal Government in any
municipal borrowing or project it is not
already involved in.
If the Congress should determine at some
future date that direct Federal subsidies or
guarantees should be made available for all of
the bonds or notes of all 50 states, or just
for municipalities, or just for the weaker
borrowers, or just for general obligations
rather than revenue bonds, or just for certain
essential public facilities, then, in that
legislation, decisions must be made with respect
to the degree of Federal control, the degree

- 20 -

of subsidy, and the method of financing.

The

Federal Financing Bank Act does not prejudge
those issues.
I hope these comments have been helpful in clarifying
our intent in proposing the Federal Financing Bank
legislation.

We have attempted in drafting this bill to

assure the best possible market for the Financing Bank issues.
These securities will be full faith and credit obligations
of the United States and will be backed by the Treasury so
as to assure timely payment and minimize borrowing

costs.

We expect these issues to be second only to the Treasury's
direct issues in marketability.

We solicit your support

in gaining early enactment of this legislation by the
Congress.

The Department o[ theTREASURY
WASHINGTON, D.C. 20220

TElEPHONE W04·2041

March 8, 1972
FOR IMMEDIATE RELEASE
ATF TO BE TRANSFERRED TO TREASURY
AS NEW BUREAU
Secretary of the Treasury John B. Connally announced
today that the Alcohol, Tobacco and Firearms Division (ATF)
of the Internal Revenue Service will be transferred July 1
to the Treasury Department as a full Bureau.
The transfer is the result of a comprehensive study
ordered last July.
The study determined that placing the
functions of the IRS Division under the Assistant Secretary
in charge of all other Treasury enforcement bureaus would
result in improved coordination and control and greater
flexibility, without disturbing revenue functions.
The new bureau will report directly to Eugene T. Rossides,
Assistant Secretary of the Treasury for Enforcement, Tariff
and Trade Affairs and Operations.
He will take over policy
direction immediately while detailed plans are worked out
for the formal transfer on July 1.
The ATF now employs nearly 4,000 persons in 42 branch
offices and 376 other locations throughout the nation.
Congress appropriated $72 million for Fiscal 1972 operations
of the unit.
Revenue collections in the calendar year 1971
totaled $7 billion.
The ATF is responsible for such matters as:
Collecting excise taxes on alcohel and tobacco
products.
Regulating and supervising the alcohol and tobacco
industries.
Administering certain controls on the manufacture,
import, trade and disposition of firearms and
explosives.

C-264
more

Combatting illicit distilling and bootlegging.
Investigating violation of the gun and explosives
control regulations.
The unit is headed by Rex D. Davis.

000

UNITED STATES SAVINGS IINDS ISIUED AND REDEEMED THROUGH

February 29, 1972

(Dollar amounts in million. - round.d and will not nece .. arlly add to total.)
DESCRIPTION

JRED
ries A-1935 thru D-1941
ries F and G-1941 thru 1952
~ies J and K-1952 thru 1957

AMOUNT ISSUEDlI

AMOUNT
REDEEMEDlI

AMOUNT
OUTSTANCINGV

% OUTSTANDING
OF AMOUNT ISSUED

5,003
29,521
3,754

4,998
29,495
3,744

5
26
10

.10
.09
.27

1,910
8,423
13,538
15,808
12,438
5,663
5,390
5,585
5,534
4,851
4,196
4,397
5,024
5,124
5,340
5,162
4,867
4,758
4,463
4,485
4,564
4,429
4,964
4,828
4,710
5,079
5,030
4,775
4,483
4,680
5,263
114
368

1,716
7,564
12,194
14,157
10.990
4,843
4,472
4,555
4,437
3,838
3,319
3,451
3,871
3,890
4,010
3,842
3,570
3,387
3,135
3,052
2,974
2,794
2,930
2,842
2,767
2,845
2,789
2,560
2,256
1,950
1,206

194
859
1,344
1,651
1,448
820
918
1,030
1,097
1,013
877
945
1,153
1,234
1,330
1,320
1,297
1,371
1,328
1,432
1,590
1,635
2,034
1,987
1,943
2,234
2,241
2,215
2,228
2,730
4,057
114
-128

10.16
10.20
9.93
10.44
11.64
14.48
17.03
18.44
19.82
20.88
20.90
21.49
22.95
24.08
24.91
25.57
26.65
28.81
29.76
31.93
34.84
36.92
40.98
41.16
41.25
43.99
44.55
46.39
49.70
58.33
77.09
100.00

~TURED
~ies

E2I :
1941
1942
1943
1944
1945
1946
1947
1948
1949
1950
1951
1952
1953
1954
1955
1956
1957
195B
1959
1960
1961
1962
1963
1964
1965
1966
1967
196B
1969
1970
1971
1972
Unclassified

rotal Series E
.es H (1952 thru May, 1959) l/
H (June, 1959 thru 1972)
rota! Series H
rota! Series E and H

{ Total matured
Series

Total unmatured
Grand Total

496

180,242

132,703

47,539

26.38

5,485
8,237

3,848
2,657

1,636
5,580

29.83
67.74

13,721

6,505

7,216

52.59

193,963

139,208

54,755

28.23

38,277
193,963
232,241

38,237
139,208
177,445

41
54,755
54,796

.11
28.23
23.59

• accrued dJ ac aunt.
rede~Jon
11'1

own.,

value.
bCJlld. m.v h. ItA'd and will ••m

Inter.at lor .dditinn.' rvtrlnd. IIft"r arldlnlt' IJ'UIturltv d.t",a_

The Department o[ the TREASURY
WASHINGTON, D.C. 20220

TElEPHONE W04·2041

FOR IMMEDIATE RELEASE

March 9, 1972

TREASURY REMINDS THAT DISCOUNTS ON CERTIFICATES,
OTHER DEPOSITS, IS INCLUDIBLE IN 1971 GROSS INCOME
The Treasury Department today reminded taxpayers that a portion
of the "original issue discount" or interest on certificates of
deposit and certain other deposits made during 1971 with banks,
domestic building and loan associations, and other financial
institutions must be included in gross income in their tax returns
for the year.
The Department said that many taxpayers apparently are unaware
that a portion of the discount, determined on a monthly basis, must
be included annually in gross income.
Certificates of deposit are the most common type of deposit
arrangement covered by the requirement. Also covered are bonus
savings plans and time deposit open accounts.
To illustrate how a taxpayer determines the amount of original
issue discount or interest to be included in his 1971 gross income,
the Department provided this example:
On January 1, 1971, the taxpayer purchased a $10,000
certificate of deposit from his bank. The terms of the certificate
provide that upon redemption at maturity on December 31, 1975, he
will receive from the bank $10,000 plus 6 percent compound interest
from the date of purchase, or $3,382.26. Thus the stated redemption
price at maturity is $13,382.26. The $3,382.26 is original issue
discount, which the taxpayer must include annually in his gross
income on a monthly pro rata basis. The ratable monthly portion of
the discount is $56.371 ($3,382.26 divided by the 60-month maturity
period of the certificate). The original issue discount includible
in the taxpayer's gross income for 1971 is $676.45 ($56.371 times
12 months).
Under regulations which Treasury adopted December 28, 1971,
banks have until March 15, 1972 to provide depositors an Internal
Revenue Service Form, 1099-0ID, showing the amount of original issue
discount they should include in their 1971 gross income.
(OVER)

- 2 -

The Treasury urged taxpayers who have questions about the
rules for original issue discount or the nature of their
deposit arrangements to contact a Taxpayer Service Representative
at their local Internal Revenue Service office.

000

The Department of the TREASURY
TelEPHONE W04·2041

WASHINGTON, D.C. 20220

RELEASE UPON DELIVERY
REMARKS OF THE HONORABLE EUGENE T. ROSSIDES
ASSISTANT SECRETARY OF THE TREASURY
(ENFORCEMENT, TARIFF AND TRADE AFFAIRS, AND OPERATIONS)
before the
ANNUAL CONVENTION OF THE NEW YORK PRESS ASSOCIATION
ROCHESTER, NEW YORK
March 10, 1972

8:00 p.rn o

PRESIDENT NIXON'S WAR ON DRUG ABUSE

Mr. Rossides, in an address before the Annual Convention
of the New York Press Association in Rochester, New York,
Page
--Saluted the French Customs Service for
the largest heroin seizure in history •

•

--Called for full community support and
cooperation with local and state enforcement agencies, stating no community
will conquer the heroin problem unless
and until they cooperate fully with state
and local enforcement agencies . • • • • .

•

--Announced the results of Treasury's IRS
Drug Trafficker Program from July 1 to date • . 4
and Tables
I and II
413 targets in 31 states, 38 cities
and the District of Columbia; $13,616,900
in jeopardy assessments and $1,700,000 in
regular assessments; $3,300,000 in cash
seized and $300,000 in property seized;
6 criminal tax cases pending in Federal

- 2 Page

District courts, 9 criminal tax
cases recommended for prosecution and
one conviction for tax evasion--5-year
prison sentence.
--Gave the

rc~3ult.3

for

New

York Stdtf-

. ..
~.

Table III

92 targets selected from New York;
$492,100 in jeopardy assessments, and
$2,500,000 in cash seized.
---Announced a new goal -- 600 drug tr-afficker
targets under tax investibation by .JUI:e 30,
1972 .

• • • • • • • •

•••••••••••

The Department o[ the TREASURY
WASHINGTON, D.C. 20220

TElEPHONE W04·2041

REMARKS OF THE HONORABLE EUGENE T. ROSSIDES
ASSISTANT SECRETARY OF THE TREASURY
(ENFORCEMENT, TARIFF AND TRADE AFFAIRS, AND OPERATIONS)
before the

ANNUAL CONVENTION OF THE NEW YORK PRESS ASSOCIATION
ROCHESTER, NEW YORK
March 10, 1972

8:00 p.m,

PRESIDENT NIXON'S WAR ON DRUG ABUSE
The extraordinary seizure on March 2, 1972,
by the French Customs of 937 pounds of heroin,
the largest such seizure in history, has demonstrated to the 'world once again that the international and national heroin smugglers, 'wholesalers,
traffickers, and dealers can be beaten.
We salute
seizure and on
French Customs
at the Italian
Government for
moving against

the French Customs Service on this
the subsequent seizure by the
on March 6 of 321 pounds of morphine
border and we salute the French
their overall efforts in forcefully
the traffic in heroin.

We can assume that a substantial portion, if
not all, of the heroin was destined for the United
States. These seizures give renewed inspiration
to all of us involved in combatting this evil.

- 2 These recent French seizures are another
reflection of President Nixon's foreign policy
initiatives, to secure the cooperation of the
world community in the comprehensive war against
drug abuse. Although, in my judgment,we are
turning the tide on the supply of heroin, much,
much more remains to be done before we reach our
goal.
So my message tonight is one of challenge
and hope. The hope stems from the fact that
President Nixon's war against drug abuse is
succeeding. He has:
1.

Arrested the United States' incredible
downward slide into drug abuse;

Alerted the international community
to the global problem of drug abuse.
More has been done by the international community to attack drug abuse
in the last three years than in the
previous thirty years.

Many people have asked me 'what they can do to
help. "Am I not really powerless to do anything?"
My response is that everyone can help. There must
be cooperation in the treatment and rehabilitation
areas, but that is not enough. I say that no
community in this country will conquer the heroin
problem unless and until the people of the community
support and cooperate fully with their local and
state enforcement agencies o
Over 350,000 men and women in those agencies
stand as the first line of defense internally
against drug abuse
There must be a full cooperative
effort between the people and their law enforcement
agencies.
o

- 3 -

What, specifically, can an individual do?
There is no magic. The individual should honor
his duty as a citizen and give any information
he may have which could lead to arrest of a
drug dealer. Community leaders should speak out,
at every opportunity, against those who are
running the heroin trade.
A heroin trafficker could be anyone. He can
be a member of any ethnic or racial group. Blacks
are bleeding blacks, whites are bleeding whites,
and Spanish-speaking people are bleeding Spanishspeaking peopleo
I believe that progress has been made in
bringing the people in the various communities
throughout the nation and their state and local
law enforcement agencies into a closer understanding and relationship. Moreover, the attack
on heroin can be the mechanism for a full working
partnership which will have additional advantages
to 'society.
The weekly press can play a unique role in
this effort since you serve particular communities.
You should consider stressing to your readers the
urgent need for support of and cooperation with the
state and local enforcement agencies~
presidential Tax Program Against Middle and Upper
Echelon Traffickers, Smugglers, and Financiers
President Nixon's initiative of June, 1971,
in proposing tax investigations against the middle
and upper echelon narcotics traffickers, is succeeding and is adding to the success of the President's
overall war against drug abuse, particularly heroin
abuse.

- 4 I am pleased to report to you tonight that
we have achieved the following since July 1, 1971:
1.

413 targets in 31 states, 38 cities and
the District of Columbia, were selected
by the Treasury's Target Selection
Committee and referred to the Internal
Revenue Service. Under the direction
of IRS Commissioner Johnnie Walters,
300 Treasury Agents are presently
conducting intensive tax investigations
of the targets (see attached Table No. I).

$13,616,900 in jeopardy assessments and
$1,700,000 in regular assessments have
been made; and over $3,300,000 in cash
and over $300,000 in property have been
seized during this period.

One man has been convicted in St. Louis
and sentenced to imprisonment for five
years and fined $3,000 for violation of
the Internal Revenue Code; six other
criminal tax cases are pending in Federal
District Courts in New York, Miami,
Detroit, and Indianapolis, and nine
additional cases have been recommended
for prosecution (see attached Table No. II),

New York State
92 of the 413 targets are from New York State-25 targets in Manhattan, 11 in Brooklyn, 20 in Queens,
15 in the Bronx, five in Nassau County, one in Suffolk
County, and four in Westchester County; three targets
are in the Albany area and eight in the Buffalo area
(see Table No. III).

- 5 -

Jeopardy assessments in New York State total
$492,100 and over $2,500,000 in cash have been
seized in New York State.
We are working very closely with the local
and state law enforcement agencies in New York.
Because of the close cooperation established with
the District Attorneys in New York City and with
the New York City Police Department, we expect
additional targets in the coming months
o

•

We believe this represents a substantial
achievement. And, we have only just begun. It
confirms our prediction to the Appropriations
Committees in the Congress that this program Ilwill
make a major additional contribution to the
President's offensive against drug abuse."
Institutionalized Nationwide Tax
Investigative Program
Treasury's IRS Narcotics Trafficker Program has
been institutionalized on a nationwide and permanent
basis
In each area of the country, cadres of
Treasury Agents have been established to concentrate
full time on tax investigations of major narcotics
figures.
o

The word for the drug traffickers is "get out
of the illegal drug traffic or face up to intensive
tax investigations."
Target Selection
At Treasury, the program is under the direction
of Martin R. Pollner, Director, Office of Law
Enforcement,who is also the Chairman of the Target

- 6 -

Selection Committee. Members of the Committee are
drawn from the Treasury Department, its Bureau of
Customs and Intelligence and Audit Divisions of
IRS, and the Bureau of Narcotics and Dangerous
Drugs. Potential targets are selected based on
information received from various Federal, State,
and local enforcement agencies e Once selected,
the names are transmitted to the IRS for investigation o Before a suspect is identified as a target,
the Committee requires substantial information that
the subject is involved in middle and upper echelon
narcotics trafficking, smuggling, or financing.
Cooperation with State and Local
Enforcement Agencies
We have initiated a program to bring State and
local enforcement agencies into a cooperative effort
with us by:
(1) writing to the Chiefs of Police in
755 cities having a population in excess of 25,000;
and (2) contacting key enforcement officials in
major states. We have asked that they furnish us
with the names of the middle and upper echelon
drug traffickers in their states and cities and
with intelligence information on these individuals.
Computers
Computers will facilitate the year in, year out
scrutiny of the finances of each of the drug
traffickers. By computerizing our information each
year, we will be able systematically and quickly to
examine each trafficker targeted under the program.
600 Targets by the End of FY 1972
Initially, our projection was 400 targets by
June 30, 1972, the end of FY 1972
We have set a
new goal, which will be difficult to reach, of 600
targets by June 30, 1972
Q

- 7 Background to Presidential Tax Program
Secretary John B. Connally, in the spring,
recommended to the President this nationwide
program.
president Nixon announced the program of tax
investigations of major narcotics traffickers on
June 17, 1971, as part of a message on his multidimensional approach to combat drug abuse.
The program is designed to take the profit
out of the illegal traffic in narcotics and thereby
further disrupt the traffic. This is to be
accomplished by conducting systematic tax investigations of middle and upper echelon narcotics
traffickers, smugglers, and financiers. These are
the people who are generally insulated from the
daily operations of the drug traffic through
imtermediaries.
Reflecting the high priority given this program
by the President, Congress provided financial support
for it amounting to $7.5 million in Fiscal 1972 and
authorization for 541 additional positions in IRS-200 Treasury Intelligence Agents, 200 Treasury
Revenue Agents, and 141 support personnel.
Treasury has coordinated this tax program with
the anti-smuggling drive of its Bureau of Customs,
the drive against narcotics distribution of the
Bureau of Narcotics and Dangerous Drugs, and the
prosecution efforts of the Tax and Criminal Divisions
of the Department of Justice.
New procedures and techniques have been established
and older ones have been streamlined, in order to
reduce the time required for completion of successful
financial investigations, and to bring the cases to
court more expeditiously.

- 8 -

This program is a major enforcement effort but it
must be emphasized that it is only one part of this
Administration's comprehensive drive against narcotics.
Multi-Dimensional Program
President Nixon started his war on drugs the first
month of his Administration when he established the
Interdepartmental Task Force on Narcotics, Marijuana and
Dangerous Drugs that led to Operation Intercept in
September, 1969, and Operation Cooperation in October,
1969. He has escalated that war with a series of action
programs, and progress has been made.
First, he elevated the drug problem to the foreign
policy level and has taken personal initiatives in
soliciting the cooperation of other governments.
The aim of our diplomatic efforts is to have each
nation do its share and meet its responsibilities in
the worldwide war against drug abuse.
In September, 1971, he created a Cabinet Committee
on International Narcotics Control under the Chairmanship
of Secretary of State William P. Rogers
a

On June 30, 1971, there was a joint announcement by
Prime Minister Erim of Turkey and President Nixon that
Turkey had decreed that after the one-year delay required
by the law of Turkey, cultivation of the opium poppy would
no longer be legal in Turkey.
Progress of a similar kind was made in another part
of the world when the Royal Laotian Government enacted
a new law outlawing opium production and trafficking in
that country. Cooperation has been achieved with the
Governments of South Vietnam and Thailand for suppression
of illegal traffic in dangerous drugs.

- 9 -

Multilateral action through the United Nations has
been stimulated. A United Nations Fund for Drug Control
has been established. The United States has already
contributed $1 million and pledged $1 million more.
Bilateral arrangements have been concluded with
Canada and Mexico for cooperation and mutual assistance
along our land borders, and with Turkey and France to
control drug trafficking and smuggling.
Of course, the role of the press to provide full
exposition, on a continuing basis, of the actions or
lack of actions of foreign governments, as well as our
own government, is vital.
Second, he placed particular emphasis on the
crucial roles of education, research, and rehabilitation
and provided increased funds in these three essential
areas.
The Special Action Office for Drug Abuse Prevention
was established on an interim basis in June of 1971
under Dr. Jerome Jaffe to coordinate Federal action in
the fields of education, research, and rehabilitation.
In 1971, nearly 150 million dollars were devoted to
education, research, and rehabilitation. That figure
will be doubled in 1972 and increased further in 1973.
Third, he recommended differentiation in the criminal
penalty structure between heroin and marijuana; and
flexible provisions for handling first offenders.
Treating marijuana as though it were the same as
heroin created serious problems in convincing young people
who were conditioned to be skeptical of all established
programs that there was any logic or reason in the attack
on drug abuse. The minimum mandatory penalties created

- 10 -

serious problems for prosecutors and judges dealing
with first offenders. The essence of the President's
proposal was adopted by the repeal of the minimum
mandatory sentence provisions that under many
circumstances required prison terms, without probation
or parole, for handling even the smallest quantities
of marijuana. This permits the courts to make
reasonable distinctions between youths with small
quantities of marijuana and dealers in heroin.
The courts were also granted the important discretion
on any drug offense to clean the slate on the first
offender by striking from the record mention of the first
offense without adjudication of guilt.
Model State narcotics legislation, also recommended
by the President, has been adopted by 26 states and is
being considered in 15 others.
Fourth, he stressed total community involvement-as I have discussed here tonight--the private sector as
well as governmental agencies--in this anti-drug abuse
program.
Fifth, he provided a substantial increase in
budgetary support for Federal law enforcement in this
area.
In December, 1969, Congress provided $8.75 million
for 915 additional men and equipment for the drug antismuggling program of the Bureau of Customs. In 1971,
Congress authorized for the Customs program an
additional 1,000 personnel and major additions to
equipment. Comparable increases have been made in funds
provided for the Bureau of Narcotics and Dangerous Drugs.
I have already reviewed the $7.5 million appropriation fur
i~easury's IRS Narcotics Trafficker Program.

- 11 -

As the President stated on January 28, 1972:
"As far as law enforcement obligations
relating to drug abuse are concerned,
the level has increased more than eightfold
in our first three years in office--from
$20.2 million to $164.4 million. We plan
to increase this figure by another $64.6
million next year to the $229 million level."
Sixth, he recognized the central role of the states
and the need for close Federal-state cooperation in a
unified drive against drug abuse. The pioneering efforts
of Governor Rockefeller and the enormous resources applied
by New York State to the war on drug abuse have been of
tremendous assistance to the Federal Government's efforts.
More recently, on January 28, 1972, the President
established the Office for Drug Abuse Law Enforcement
in the Department of Justice headed by former Commissioner
of Customs Myles J. Ambrose. This program will concentrate
an assault on the street level heroin pusher. The new
office will be working closely with state and local
enforcement agencies.
In this program, we have seen for the first time
the total involvement of the institution of the Presidency
in the battle against drug abuse.
It is this program that has given me the basis for
the cautious optimism I am expressing. In my opinion,
drug abuse, particularly with regard to the supply of
heroin, has reached its peak and has leveled out. Perhaps
it has even begun to recede. But certainly I am aware,
as each of you is, that we have a long hard battle ahead
of us to bring that line back down to the level on the
chart from which it started!

000

TABLE I
STATE
Alaska
Arizona
California
Colorado
Connecticut
Florida
Hawaii
Georgia
Illinois
Indiana
Louisiana
Maryland
Massachusetts
Michigan
Minnesota
Missouri
Nevada
New Jersey
New Mexico
New York
North Carolina
Ohio
Oregon
Pennsylvania
Rhode Island
South Carolina
Tennessee
Texas
Vermont
Virginia
Washington

METROPOLITAN AREA
Anchorage
Phoenix
Los Angeles
San Francisco
Denver
Hartford
Miami
Honolulu
Atlanta
Chicago
Indianapolis
New Orleans
Baltimore - D.C.
Boston
Detroit
St. Paul
St. Louis
Las Vegas
Newark
Albuquerque
Albany
Buffalo
New York City & suburbs
Greensboro
Cleveland
Cincinnati
Portland
Philadelphia
Pittsburgh
Providence
Columbia
Nashville
Austin-Houston
Dallas
Burlington
Richmond
Seattle

14
22
24
2
7
50

16
20
6

7
13
6
23
1
5
1

25
7
3
8

81
3
5
2
1
8

6
1
1
2

25
1
2
1
7

413

Treasury Department
Office of Law Enforcement

SELECTED TARGETS

I·1arch 10 I

1~72

TABLE II

Jeopardy Assessments-

$13,616,900

Regular Assessments

$ 1,700,000

Total Assessments

$15,316,900

" t"lons-2/
Tax Year T ermlna

Dollars Seized

$ 3,330,700

Property Seized (Fair Market Value) over

Cases recommended for prosecution

300,000
9

Criminal tax cases ln U.S. Courts awaiting trial 6
Criminal tax cases completed
(5-year prison sentence and $3,000 fine)

1/
""
1 assessments of taxes
- Jeopar d y assessments are addltlona

made where a return has been filed, but where circumstances
exist under which delay might jeopardize collection of the
revenue.

~/Termination of tax year is a computation of the tax due
and assessment made where the time for filing the return
has not become due where circumstances exist under which
delay might jeopardize collection of the revenue.

Treasury Department
Office of Law Enforcement

March 10, 1972

TABLE III
NEW YORK STATE TARGETS

New York State
25

New York County
Kings County
Queens County
Bronx County
Nassau County
Suffolk County
Westchester County

11
20

15
5
1

Albany Area

Buffalo Area

$492,100

,
t 'lons2/
Tax Year Termlna
Dollars Seized

$2,507,500

Jeopardy Assessments

1/Jeopardy assessments are additional assessments of taxes
made where a return has been filed, but where circumstances
exist under which delay might jeopardize collection of the
revenue.

. March 10, 1972

The Department 01 the TREASURY
WASHINGTON, D.C. 20220

TElEPHONE W04·2041

March 10, 1972

FOR TIMMEDIATE RELEASE

TREASURY SECRETARY CONNALLY NAMES CLIFFORD C. SOMMER
AS NEW SAVINGS BONDS CHAIRMAN FOR THE STATE OF MINNESOTA
Clifford C. Sommer, Vice President, Northwest Bancorporation,
Minneapolis, has been appointed volunteer State Chairman for the
Savings Bonds Program in Minnesota, Secretary of the Treasury
John B. Connally announced today. The appointment is effective
immediately.
He succeeds George H. Dixon, President, First National Bank
of Minneapolis, who has served since April 1970. Dixon has been
given the Treasury's Award of Merit.
Sommer has been Steele County Savings Bonds Chairman for 11
years. As State Chairman, he will head a committee of business,
financial, labor, media, and governmental leaders who -- working
with the Savings Bonds Division -- assist in promoting the sales
of Savings Bonds.
He is immediate Past President of the American Bankers Association and Chairman of its newly constituted Governing Council.
Sommer, who has been active in many areas of banking, is a
Director of the Security Bank and Trust Co., Owatonna, having
served as President from 1955 to 1971 and Chairman of the Board
in 1971.
He served as a Senator in the State Legislature from January
1967 until January 1971.
He is an alumnus of the University of Minnesota and a lieutenant commander, U. S. Naval Reserve ( Retired ).
Sommer and his wife, Eleanor, have two married daughters and
two grandchildren.
000

The Deportmento! the TREASURY
WASHINGTON, D.C. 20220

TElEPHONE W04·2041

March 10, 1972

FOR IMMEDIATE RELEASE

TREASURY SECRETARY CONNALLY NAMES ELWOOD E. LEONARD, JR.,
AS NEW SAVINGS BONDS CHAIRMAN FOR THE STATE OF RHODE ISLAND
Elwood E. Leonard, Jr., President, H & H Screw Products Hanufacturing Co., Lincoln, has been appointed volunteer State Chairm81'
for the Savings Bonds Program in Rhode Island, Secretary of the
Treasury John B. Connally announced today. The appointment is
effective immediately.
He succeeds William H. Smith, President, Maurice C. Smith Co.,
Inc., Providence, who has served since January 1960. Smith has
been given the Treasury's Award of Merit.
Leonard will head a committee of state, business, financial,
labor, media, and governmental leaders who -- working with the
Savings Bonds Division -- assist in promoting the sales of Savings
Bonds. He has previously served as a "Take Stock in America"
Campaign Chairman.
Leonard was born in Taunton, Mass., where he attended public
schools. He moved to Rhode Island in 1941. From 1943-45, he
served as a cadet in the U. S. Army Air Corps. In 1951, he received the degree of Doctor of Science in Mechanical Engineering
from Brown University.
He joined H & H immediately following graduation and was
named President in 1958.
Leonard is director, corporator, or trustee of a long list
of business, educational, cultural, charitable, and civic organizations o He is a member of the pawtucket-Blackstone Valley Chamber of Commerce and the Rhode Island Sons of the American Revolution.
He is married to the former Barbara Martin; they have six
children -- Karin, William, Barbara Ann, Cynthia, Edward III, and
Anthony.
000

The Deportmento! the TREASURY
WASHINGTON, D.C. 20220

TElEPHONE W04·2041

March 10, 1972

FOR TIMMEDIATE RELEASE

TREASURY SECRETARY CONNALLY NAMES E. CLAYTON GENGRAS
AS NEW SAVINGS BONDS CHAIRMAN FOR THE STATE OF CONNECTICUT
E. Clayton Gengras, Chairman of the Board and President,
Security Insurance Group, Hartford, was appointed by Secretary
of the Treasury John B. Connally as volunteer State Chairman
for the Savings Bonds Program in Connecticut, effective
immediately.
He succeeds G. Harold Welch, President, Harwel Corp., New
Haven. Welch, who has served since March 1949, assumes the post
of Chairman Emeritus; he received the Treasury's Award of Merit.
Gengras has been Hartford Geographic Chairman of the U. S.
Industrial Payroll Savings Committee. As State Chairman, he
will head a committee of state, business, financial, labor,
media, and governmental leaders who -- working with the Savings
Bonds Division -- assist in promoting the sales of Savings Bonds.
He is active in a number of civic, cultural, educational,
religious, and charitable projects. In 1963, he was appointed
Knight of Saint Gregory by Pope Paul VI.
Gengras was born in West Hartford, where he lives with his
wife, Elizabeth, and six of their ten children.

000

The Department 01 the TREASURY
WASHINGTON, D.C. 20220

TElEPHONE W04·2041

FOR IWvlEDIATE RELEASE

March 13, 1972

TREASURY ISSUES DUMPING FINDING WITH RESPECT
TO ICE CREM~ SANDWICH WAFERS FROM CANADA
The Treasury Department announced today that it has issued a
dumping finding with respect to ice cream sandwich wafers from Canada.
The finding will be published in the Federal Register of March 14,1972.
On October 26, 1971, the Treasury Department advised the Tariff
Commission that ice cream sandwich wafers from Canada are being sold at
less than fair value within the meaning of the Antidumping Act, 1921,
as amended.
On February I, 1972, the Tariff Commission Issued a determination
that an industry in the United States Is being injured by reason of
the importation of ice cream sandwich wafers from Canada sold, or likely
to be sold, at less than fair value within the meaning of the Antidumping
Act, 1921, as amended.
After these two determinations, the finding of dumping automatically
fol lows as the final administrative requirement in antidumping investigat ions.
During the period Apri I 1970 through December 1971, ice cream
sandwich wafers valued at approximately $460,000 were imported from
Canada.
/I

The Deportmento! the TREASURY
WASHINGTON, D.C. 20220

TElEPHONE W04·2041

FOR IMMEDIATE RELEASE

March 13, 1972

TREASURY ANNOUNCES ADOPTION OF FINAL REGULATIONS
ON MINERAL DEPLETION DEDUCTIONS
The Treasury Department today announced the adoption
of final regulations concerning percentage depletion
deductions for "hard minerals" -- that is, for minerals
other than oil and gas. These final regulations adopt the
proposed regulations that were published on October 1, 1971,
with a number of changes reflecting comments that have been
received in written statements and at the public hearings
that were held on February 23, 1971.
These regulations provide general rules for determining
whether or not a process applied by a miner is part of the
mining treatment for the ore or mineral. If it is a mining
treatment process, the value it adds to the mineral is
included in the amount qualifying for percentage depletion.
In establishing these rules, the regulations are based upon
the provisions of a Senate amendment to the Public Debt and
Tax Rate Extension Act of 1960. Those statutory changes
were enacted to over-rule a line of court decisions that had
allowed integrated miner-manufacturers to compute their
depletion allowance on the value of manufactured products
rather than limiting the value to include only mining processes. The new statute established a list of '~ining
processes" that would be allowed and another list of "manufacturing processes" that would not be allowed.
These regulations represent the culmination of an
effort that extends back to 1959 when the Treasury Department
asked Congress for changes in the statute. During the
intervening period several versions of these regulatory
provisions have been published and commented upon by the
affected taxpayers and the interested public. These regulations
have been carefully drafted to reflect this history as well as

C-267

- 2 the experience of the Internal Revenue Service in administering
these provisions.
In addition to the rules relating to the question of
mining treatment processes, the regulations also contain
provisions for determining the value of the ore or mineral
at the point where mining ends and manufacturing begins -the so-called cut-off point. These rules provide several
different methods for determining that value and also indicate
when the different methods are applicable. One of these
methods, based upon a rate of return on investment, is currently
being studied and is shown as reserved at the appropriate
point in the text.
The Treasury Department also said it had concluded that
no Environmental Impact Statement unuer section 102(2)(c) of
the National Environmental Policy Act was required. Treasury
said that it had carefully considered the question of whether
such a statement was necessary in August of 1971 before the
proposed regulations were published and again this year before
the final regulations were adopted. In this regard, it should
be noted that the depletion allowance is Congressional action
and not an agency action. Taxpayers and the Internal Revenue
Service have been applying these basic statutory provisions
since 1961. These regulations are a public statement of the
interpretation of the statute by the Treasury Department and
the Internal Revenue Service.
The final regulations were filed as a public document
with the Federal Register on March 10, 1972, and will be
published during the week of March 13, 1972.

000

The Deportmento! the TREASURY
WASHINGTON, D.C. 20220

rENTION:

TElEPHONE W04·2041

Harch 13, 1972

F INANC IAL ED I'I'OR

':t RELEASE 6: 30 P. r-i.

RESULTS OF TREASURY'S vT.EEKLY BILL OFFERING
The Treasury Department announced that the tenders for two series of Treasury
lIs, one series to b~ an additional issue of the bills dated December 16, 1971 , and
= other series to be dated March 16, 1972
,which were offered on March 7, 1972,
re opened at the Federal Reserve Banks today. Tenders were invited for $2 ,400 ,000 ,000 ,
thereabouts, of 91-day bills and for $1,800,000,000, or thereabouts, of
182-day
lIs. The details of the two series are as follows:
OF ACCEPTED
v1PETITIVE BIDS:

~GE

High
Low
Average

91-day Treasury bills
maturing June 15, 1972
Approx. Equiv.
Price
Annual Rate
99.060 ~
99.010
99.028

3.719%
3.916%
3.845%

182-day Treasury bills
maturing September 14, 1972
Approx. Equiv.
Price
Annual Rate
97.903
97.861
97.879

E./

4.148%
4.231%
4.195%

:J:./

a/ Except 1 tender of $940,000; E./ Excepting 2 tenders totaling $800,000
60% of the amount of 91-day bills bid for at the low price was accepted
3% of the amount of 182-d~ bills bid for at the low price was accepted
.rAL TENDERS APPLIED FOR AND ACCEPTED BY FEDERAL RESERVE DISTRICTS:

)istrict
30ston
~ew York
'hiladelphia
aeveland
<ichmond
itlanta
~icago

;t. Louis
1inneapolis
Cans as City
)allas
Jan Francisco
TOTALS

AEElied For
$ 18,690,000
2,913,130,000
31,100,000
28,265,000
1l,885,000
44,985,000
190,535,000
51,170,000
17,820,000
36,570,000
35,165,000
81,660,000

AcceEted
8,690,000
$
1,978,630,000
24,330,000
28,265,000
11,885,000
39,985,000
146,535,000
50,170,000
7,820,000
36,570,000
19,365,000
47,860,000

AEElied For
$ 10,845,000
2,520,825,000
7,255,000
40,810,000
2,420,000
26,640,000
136,345,000
32,740,000
15,320,000
23,425,000
28,860,000
169,975,000

AcceEted
$
845,000
1,609,375,000
7,255,000
22,960,000
2,420,000
10,170,000
47,645,000
16,740,000
6,765,000
18,225,000
6,860,000
50,875,000

$3,460,975,000

$2,400,105,000 ~

$3,015,460,000

$1,800,135,000 ~

Includes $217,405,000 noncompetitive tenders accepted at the average price of 99.028
Includes $ 80,285,000 noncompetitive tenders accepted at the average price of 97.879
These rates are on a bank discount basis. The equivalent coupon issue yields are
3.94% for the 91-day bills, and 4.35% for the 182-day bills.

The Departmento! the TREASURY
WASHINGTON, D.C. 20220

TELEPHONE W04·2041

FOR IMMEDIATE RELEASE

March 14, 1972

TREASURY ANNOUNCES INITIATION OF
FOUR ANTIDUMPING INVESTIGATIONS
The Treasury Department announced today the initiation
of four antidumping investigations. These antidumping
investigations will cover imports of card clothing from the
United Kingdom, neopentyl glycol from Japan, collapsible
baby strollers from Japan, and manual hoists from
Luxembourg.
The Treasury announcement followed summary investigations
conducted by the Bureau of Customs after receipt of
complaints alleging that dumping of the above-mentioned
imports was taking place in the United States.
Card clothing is an item used to comb cotton, wool
and other fibers to prepare them for spinning purposes.
During calendar year 1971, imports of card clothing from
the United Kingdom were valued at approximately $270,000.
Neopentyl glycol is a chemical used primarily in
the manufacture of polyester resins which are in turn used
as inert finishes for plastic products. During calendar
year 1971, imports of neopentyl glycol from Japan were
valued at approximately $250,000.
During calendar year 1971, imports of collapsible
baby strollers from Japan were valued at approximately
$100,000, and imports of manual hoists from Luxembourg
were valued at approximately $470,000.

000

The Deportment 01 the

TREASURY

WASHINGTON, D.C. 20220

TELEPHONE W04·2041

March 14, 1972

FOR IMMEDIATE RELEASE

TREASURY'S WEEKLY BILL OFFERING
TIle Treasury Department, by this public notice, invites tenders
for two series of Treasury bills to the aggregate amount of
$4,200,000,000, or thereabouts, for cash and in exchange for Treasury
bills maturing
March 23, 1972,
in the amount of $3,909,510,000,
as follows:
91-day bills (to maturity date) to be issued March 23, 1972,
in the amount of $2,400,000,000,
or thereabouts, representing an
additional amount of bills dated December 23, 1971, and to mature
June 22, 1972,
(CUSIP No. 912793 NG7), originally issued in
the amount of $1,601,755,000 (an additional $204,310,000 was issued on
March 6, 1972), the additional and original bills to be freely
interchangeable
0

182_ day bills, for $ 1,800,000,000, or thereabouts, to be dated
March 23, 1972,
and to mature September 21, 1972
(CUSIP No. 912793 PD2)
0

The bills of both series will be issued on a discount basis under
competitive and noncompetive bidding as hereinafter provided, and at
maturity theii face amount will be payable without interest. They will
be issued in bearer form only; and in denominations of $10,000,
$15,000, $50,000, $100,000, $500,000 and $1,000,000 (maturity value).
Tenders will be received at Federal Reserve Banks and Branches up
to the closing hour, one-thirty p.m., Eastern Standard
time, Monday, March 20, 1972
Tenders will not be received
at the Treasury Department, Washington. Each tender must be for a
minimum'of $10,000. Tenders over $10,000 must be in mU1tip'les of
$5,000. 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.
0

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

- 2 submit tenders except for their Qwn account. Tenders will be recel~
without deposit from incorporated banks and trust companies and fr~
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 accompanie~
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. 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 re;ect any or all
tenders, in whole or in part, and his action in any such respect shall
be final. Subject to these reservations, noncompetitive tenders for
each issue for $200,000 or less without stated price from anyone
bidder will be accepted in full at the average price' (in three decimals)
of accepted competitive bids for the respective issues. Settlement for
accepted tenders in accordance with the bids must be made or completed
at the Federal Reserve Bank on March 23, 1972,
in cash or other immediately available funds or in a like face amount o~
Treasury bills maturing
March 23, 1972
Cash and exchange tender~
will receive equal treatment. Cash adjustments will be made for
differences between the par value of maturing bills accepted in
exchange and the issue price of the new bills.
0

Under Sections 454 (b) and 1221 (5) of the Internal Revenue C~e
of 1954 the amount of discount at which bills issued hereunder are sold
is considered to .accrue when the bills are sold, redeemed or otherwise
disposed of, and the hills are excluded from consideration as capital
assets. Accordingly, the O\>Hle ,~, Treasury bills (other than life
insurance companies) issued hereunder must include in his income tax
return, as ordinary gai~ o~ loss, the difference between the price paU
for the 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.
y

Treasury Department Circular No. 418 (current revision) and this
notice, prescribe the terms of the Treasury bills and govern the .
conditions of their issue. Copies of the circular may be obtained from
any Federal Reserve Bank or Branch.

000

The Deportment 01 the

TREASURY

WASHINGTON, D.C. 20220

TELEPHONE W04·2041

FOR RELEASE AT 7:30 P.M.
WEDNESDAY, MARCH 15, 1972
REMARKS BY THE HONORABLE JOHN B. CONNALLY
SECRETARY OF THE TREASURY
BEFORE THE COUNCIL ON FOREIGN RELATIONS
HAROLD PRATT HOUSE, NEW YORK, NEW YORK
WEDNESDAY, MARCH 15, 1972, AT 7:00 P.M.

On this date, seven months ago, the President of the
United States initiated what has come to be known as the
New Economic Policy.
The goals of that policy were three:
First, to curb the insidious inflation imperiling our
domestic stability and well-being;
Second, to stimulate responsibly the healthy growth
of our domestic economic activity and to provide the necessary
jobs for American workmen; and,
Third, to strengthen our Nation's position both for
more successful competition within and for more constructive
influence upon the world's systems of international trade
and finance.

C-269

- 2 -

It was recognized at the time that none of these goals
would be
mation.

or could be -- attained simply by their proclaFulfillment of such objectives, separately or

together, is a monumental task.

Nonetheless, it can be

said that implementation of the President's policy has
achieved striking progress in all spheres.
In this context, I want to consider with you tonight
the progress which has been made -- and the opportunities
for still greater progress which have been brought into
being -- in just one of these spheres:

that is, in regard

to the foreign monetary policy and international economic
leadership of the United States.
When the President acted last August, there was implicit
in his decision a recognition that the industrial and
trading nations of Europe, North America and the Pacific
have come to the end of what might be called "The Postwar
World."
That world was shaped and faithfully served by agreements, arrangements and attitudes born of another time.
At the time of conception, during and just after World War
II, it was undeniably the reality that the United States

- 3 -

stood apart, strong and unscarred, in a world weakened and
disfigured by a generation of tension, conflict and
devastation.

Under conditions then prevailing, men could

and did -- reason that the strength of the United States
was strength to which others might cling as they undertook
the long and demanding labors of restoring their own
societies and their own economies.

Furthermore, in that

time, Americans themselves could

and did -- accept as

the basis for their own policies that what was good for
the world must be, in the end, best for the United States
itself.
Accordingly, out of that time there came into being a
world in which the United States willingly assumed responsibilities others could not bear, willingly bore burdens others
did not share, and willingly lived with competitive disadvantages so that others could build their strength.
Over the span of a quarter of a century, those arrangements remained unchanging even as the world itself greatly
changed.

The realities, reason and rationales of the 1940's

eroded, yet the underlying structure of world trade and

- 4 finance stood still.

By the end of the decade of the '60 ' s,

it was supported not by a solid foundation but only by a
base of custom, convenience, and occasional contrivance.
Thus it was, in the months immediately preceding the
President's announcement last year, that developments in
the world payments system forced upon us all acknowledgement
of the unreality of the arrangements by which we were still
attempting to abide.
As you recall, one year ago, at the end of the first
quarter of 1971, it became apparent that the United States
and its principal trading partners were moving toward
crisis in the payments system.
Over the full year of 1970, our official reserve
transactions balance had run to a record deficit of about
$10 billion.

If temporary, that could have been absorbed.

In just the first three months of 1971, however, the deficit
in those transactions equalled and exceeded the half-yearly
rate for 1970.
The storm warnings were hoisted.

The dollar flow

pouring overseas in 1971 had become the unwanted orphan of

- 5 -

its father so eagerly courted by all the world a few
years ago.
As speculation took hold, defensive measures were put
in place.
currencies.

Germany and the Netherlands floated their
Switzerland and Austria revalued.

Other

European countries employed a variety of measures trying to
cope with the all but indigestible inflow of short-term
funds.
Relief was only brief and fleeting.
By mid-year, our trade balance was showing ominously
rapid declines, confirming and accelerating the trends of
the last part of the 1960's.

Projections confronted us

with the prospect of the first substantial trade deficits
of the century in both 1971 and 1972.
We were forced to consider deeply the full implications
of the massive deterioration in our trade balance.

- 6 Finally, we also faced the intolerable arithmetic of
our international reserve position.

The ratio of our

reserve assets to our liquid liabilities had still been in
our favor at the end of the 1950's, but by 1971, we
had more than five dollars of liquid liabilities for each
one dollar of reserve assets.
This was the balance sheet confronting the Nation and
the President seven months ago.

The fact is that we had

expended our surplus and extended our credit until both
were exhausted.
The post-war world brought some glorious achievements.
But the essential

underpinnings of that system were gone.

By any objective reading, it was entirely obvious that what
was not good for the United States certainly was not good
for the world.
The developments of 1971 -- and the longer-term trends
projected from them -- clearly meant that the industrial
nations were hurtling toward a time of tension and paralysis.
Under such an economic climate, it would have been
difficult, if not impossible, to carry forward with the

- 7 great and urgent works of peace and accord between the
blocs of East and West.
Under such a climate, it would have been difficult,
if not impossible, to sustain and nurture the Twentieth
Century's thrust toward liberality in trading relations
between industrial nations.
Furthermore, such a climate could only give impetus
on both sides of the Atlantic and on both sides of the
Pacific to protectionism, parochialism, and the ultimate
folly

of economic isolationismo

This was a situation demanding initiative and action.
Yet it was this very necessity for action which brought
home most forcefully the obsolescence and inadequacy of
those arrangements, which shaped and served the
postwar world.
In a situation indicating a need for devaluing the
dollar, we could not act freely without other currencies
moving with us.

- 8 -

In a situation obviously requiring that the explosive
growth of the economy of Japan be fit into a balanced
structure of trade, old arrangements of the postwar world
found the United States accepting Japanese exports at a
rate five times greater than the countries of the roughly
equivalent market of the European Community.
In a situation already inviting concern over
restrictive

t~riffs

and quotas, national attitudes

emerging -- or re-emerging -- in recent years facilitated
the spread of discriminatory preferences by the strongest
trading nations in Europe.

At a time when the United States

has negotiated limits on further growth of imports of textiles
and steel into OUr market, already neavily

p~n~trated

by foreign suppliers, the surplus countries of Europe and
Japan have maintained quotas established years ago,
virtually to exclude a variety of "sensitive" goods.
But there was -- and is -- a still greater problem.
When the United States faced the necessity for acting, we
were confronted with the fact that tOday's world provides no
fully adequate machinery for reconciling all the interests
involved.

- 9 Closely and critically inter-related as our world is
in this last one-third of the century, it remains true
that there was not last year -- and there still is not this
year -- a forum in which decisive negotiations could be
undertaken or lasting results accomplished across the full
range of monetary and trade issues involved.
Against this background, for the United States to act
effectively and with dispatch seven months ago, it was
necessary for us to act in a unilateral manner wholly
uncharacteristic of either our traditions or our desires.
This is not a state of affairs we wish to see prolonged.
Yet, in saying this, I must say that this is an area
to which we need to give attention at horne, as well.

The

developments of 1971 -- and, in particular, the events of
the past seven months -- demonstrate convincingly that our
own system is not properly or realistically structured to
cope with the making or the implementation of foreign
economic policy.
This is a function both of organization and of outlook.
It is, also, a function of what we may hope is now

- 10 -

a passing period in our national experience.
With the onset, first, of World War II and,
then, of the Cold War tensions,
we were thrust suddenly into a position of world
leadership for which there were no precedents.

By the

nature of the challenges which those years presented, our
popular attitudes, our political dialogue, and the performance
of our National Government were all shaped by the era's
priority emphasis upon military strategies and political
alignments.

Our interest in -- and, to some extent, our

basic understanding of -- the economic relationships between
nations remained an area of far lesser priorities.

- 11 With good hearts, good intentions, and good feeling,
we proceeded into the realms of foreign economic policy,
confident that the strength of our economic position must
be inexhaustible and convinced that, in any event, the
making of economic policy was subordinate to the making and
maintenance of policy assuring the mutual security of the
Western world.
In this spirit, we gave little thought to the organization of our Government for purposes of making and implementing foreign economic policy.

For both the Executive

Branch and the Legislative Branch alike, the postwar world
was a time of preoccupation with strengthening and streamlining mechanisms designed to respond to armed danger.
That such priorities were proper is beyond debate.
But the developments of the past year have emphasized what
should have impressed itself upon us more strongly years
ago:

other priorities have risen in our midst.
As early as the late 1950's, when our international

deficits suddenly grew much larger, the first warning clouds
were present -- only to be brushed away.

Then, over the

- 12 years of the 1960's, we saw the nature of the industrial
world had, indeed, changed.

The dependency of those

nations ravaged by World War II yielded to the industriousness of their

peop1e~

and both the European Community and

Japan emerged as vigorous competitors -- first reducing
their need for the products of U. S. industry and then
learning how to sell to us in vo1tuues not dreamed of a
decade earlier.
While this was occurring,we, in this country, were
preoccupied with a decade of ferment, change, and social
upheaval.

At home, we faced up to problems without

parallel in other industrial nations of racial tension,
decaying cities, and population growth and mobility.
Abroad, we became entangled in a prolonged and divisive war.
It is only realism to acknowledge that, in both private and
public sectors, these priorities distracted attention from
other fundamental needs.
We welcomed a domestic boom.
and let inflation get out of hand.

But we budgeted loosely
The erosion in our

external economic position was aggravated, and we wishfully

- 13 coasted on the illusion that confidence in the dollar could
be sustained apart from the underlying economic reality.
Now that is clearly changed.
In the public sector, we must give to foreign economic
policy that same intensive effort and emphasis which, until
now, has been principally reserved for foreign military
and political policies.
The conduct of foreign economic policy today is
characterized by traits of ponderousness, division of
responsibility, rivalry, and, in some sectors, innocence.
Too often, in times past, it has been fragmented and
immobilized by concern for other sectors of our foreign
policy.
New organizations -- and new missions for old organizations -- are clearly required if the Chief Executive is
to have the scope of counsel required for decision and the
sensitive apparatus required for securing coherent implementation of decisions.
Similarly, the private sector is no less concerned.
Industry, labor, and Government must realize that their

- 14 traditional adversary roles are not always suited to the
new realities of the international environment.

They,

together, have the obligation of finding ways of becoming
far more efficient and imaginative competitors in the far
more competitive world we now face beyond our borders.
What I am saying, essentially, is this.
Over the mid-century, we in this country have dwelled
upon the growing closeness of the world.

In the main, our

thoughts about the implications of modern communication,
transportation, and other technology have related largely
to the impact upon the matter of peace or war.

NOW, in

this era ahead, those thoughts must relate to the impact,
which is both far larger and far more intimate, of this
closeness upon our daily economic life.
In these times, as much as in all times past, traders
are destined to succeed, where soldiers and diplomats could
not succeed, at weaving the countries and continents of
this planet into one world.
I speak as I do of these things because I feel that
our concerns with such matters say more than anything else

- 15 of the very great distance we have come.
One year ago, certainly, such subjects would not have
seemed relevant and urgent.
Today, the realities are apparent because -- as I
said at the beginning -- the President has openly faced
the problem, pointed to the new priorities, and successfully launched the process of adjusting to them.
In negotiations with Japan, Canada, and the European
Community, and in the Smithsonian Agreement reached by
the Group of Ten, significant gains have been made toward
evolution of the policies and structures which this new
era so clearly requires.
At the same time, I believe it must be said that this
is not a period in which final decisions will be -- or can
be -- quickly reached.

National positions on complex

questions of trade and money well up from the whole of
national history, experience, perception, and, very often,
prejudice.

New imperatives are not readily recognized, new

visions are not readily embraced.

Having initiated this

- 16 present period of re-examination, reconsideration, and
reformulation of existing agreements and arrangements, the
United States readily acknowledges the need of others -- as
well as its own need -- to contemplate' future courses with
care and thoughtfulness.
At the outset, we anticipated that there would be
misunderstanding and even misrepr2sentation of our purposes
and objectives.

Needless to say, we have not been dis-

appointed.
In the heat of last August, the new policy was acclaimed
by many abroad -- and some at home -- as a return to
protectionism or even to isolationism.

Similarly, after

the Smithsonian Agreement was announced, voices again were
raised warning that the United States would not act, as
agreed, to increase the price of gold to $38 per ounce.
The intemperateness of these misrepresentations already
has been answered.
removed.

The temporary import surcharge has been

Agreements have been reached committing the

United States and other major trading nations to begin
comprehensive negotiations aimed at expanding trade by

- 17 reducing both tariff and non-tariff barriers.

At the

initiative of the Administration, Congress is proceeding
promptly on the legislation changing the par value of the
dollar.
Certainly the commitment of the United States to a
liberal trade and payments system is unchanged and unchangeable.

Yet it is the very depth of that commitment

which requires us today to speak with new frankness -- and
to act with new directness

in our efforts to move toward

arrangements accommodating to today's new realities.
There may be Some tempted to seek some profit for
their own interests from promoting the instability -- or
even the wreckage -- of the international monetary system.
The United States regards such parochialism only as folly.
Our basic point of departure is the Smithsonian understandings.

The new exchange rates provide a realistic

framework and a fresh opportunity for our own efforts
a framework forged in the crucible of hard bargaining on
all sides.

At the same time, the Smithsonian Agreement contemplates
that negotiations should proceed on the longer-range issues

- 18 involved in building a new monetary system.

The question

of convertibility of the dollar into reserve assets, upon
which so much attention has been focussed, is certainly one
of those issues.
to the others.

But it is just one -- inextricably linked
That is the context in which it was put at

the Smithsonian, and that is the context in which we intend
to proceed.
More than that, we believe premature commitments could
only undermine the stability we seek.
I distinguish sharply between premature efforts to
restore convertibility and the more technical problem of
finding means to facilitate the operations of the International Monetary Fund during this interim period.

The Fund

has been operating since August 15 without placing special
burdens on any member.

The future problems seem to me

manageable -- not simply by looking to the United States
to provide whatever reserve assets may be convenient to
others, but by truly cooperative efforts in which others
participate in accordance with their strength.

- 19 These concerns, of course, are all part of broader
and longer-term monetary reform.
We have not yet put forward an "American Plan" for
the future shape of the international monetary structure.
We shall not do so until we have fully wrestled with the
complexities of this most complex subject.

Nor do we

intend to make our decisions until such time as our internal
discussions and debates are fully complete and our thinking
can be tested against the thinking of others.
Reform of the world's trade and payments structure
will not be achieved quickly or easily.

Behind the facade

of technicalities, basic issues of national policy must be
faced and basic differences must be reconciled.

We need to

fit the reform in a longer vision of a world economic and
trading order.
Does the European Community want to function as a
tightly-knit monetary unit, with its members able and
willing to renounce independence of action in international
monetary affairs?
decide.

That is a matter for the Europeans to

But we cannot escape a close interest in whether

- 20 -

monetary unity is a potentially liberalizing and stabilizing
force in world financial affairs or will be converted into
a vehicle for promoting an inward-looking, defensive bloc.
There are other questions to face.
In future arrangements, how will we overcome philosophical and practical differences between those favoring
relatively liberal and unrestricted trade and payments
systems and those who regard controls as essential permanent
fixtures in any structure?
For our part, we want maximum freedom for international
flows of investment capital as well as goods.

We realize,

however, that others seemingly prefer restricted capital
and money markets, whether as counterparts to regional
trading blocs or otherwise.
To what extent can differences in national monetary
policies be accommodated?

In an interdependent world,

linkages between markets cannot be ignored.

Yet countries

have different economic structures, different problems, and
different monetary and interest rate traditions.
Other questions could be raised.

Not least among

them, of course, is the difficult question of the forum

- 21 or forums -- best serving the ends of such negotiations.
Discussions of changes bearing on the interests of all
nations must be broadly representative.

They should be

linked to the relevant institutions, particularly the
International Monetary Fund.

At the same time, there is

a critical point in the size of a group capable of conducting
manageable and effective negotiations without becoming
merely an academic seminar.
The Group of Ten has, in the past, provided a useful
forum.

That Group, however, is limited to industrial

nations and wealthy nations.

It provides no link to trade

and other aspects of the problem.
voices certainly must be heard.

Other groups and other
The representational

pattern of the IMF Executive Board provides one possible
approach.

In concept, some new grouping could be devised.

I have no settled answer to this question of the forum.
I do feel we should work to resolve the question promptly
and then proceed to more substantive issues.

To that end,

I have asked Under Secretary Paul Volcker to begin conferring with officials of other countries to explore possible
solutions to this and other problems.

In the light of his

- 22 -

discussions, I am prepared

to participate in

meetings -- formal or informal -- as may be needed
to facilitate progress in these matterso
During these recent months, I have sometimes heard the
accusation that I have become a sort of bully boy on the
manicured playing fields of international finance.
not expect me to accept that characterization.

You will

But I will

plead guilty to speaking in plain words as directly as I
can.

I do so because nuanceS and ambiguous phrases can

only mislead the American people as to the urgency of the
problems we face.

Equally, our friends abroad should know

of our determination to solve those problems, with good will
but with firm resolve.
With that determination and resolve, I am convinced
that the dollar will again be a currency sought after
throughout the world, fully capable of carrying its share
of the burdens of international finance.

Indeed, I believe

there is a truly unique opportunity for all nations to begin

- 23 building a durable trade and payments structure based on
equity and realism.
Without the actions initiated seven months ago, that
opportunity would not exist today.

We would have had, at

best, a much smaller realignment, no meaningful trade
negotiations in sight, and, worse still, no adequate
realization here or abroad of the tasks that lie ahead.
As we continue our efforts in the international forums
whatever they may be -- I do emphasize my conviction that
we also need to act within our own system, public and
private, if we are to grasp our opportunities.

The structures

of our Government in the area of foreign economic policy
needs repair.

We need to adhere to the discipline of sound

fiscal and monetary policies at home.
We have come to the end of the postwar world.
We are willing, I am sure, and we must be able to contribute constructively, effectively, and responsibly, to
the building of a new world in which money, trade, and
investment serve as instruments of gain and progress for
all peoples.

--00000--

The Department 01 theTRfASURY
TelEPHONE W04·2041

WASHINGTON, D.C. 20220

OR IMMEDIATE RELEASE

March 17, 1972

TREASURY'S MONTHLY BILL OFFERING

The Treasury Departmen,t, by this public notice, invites tenders for
'0 series of Treasury bills to the aggregate amount of $1,700,000,000,
, thereabouts, for cash and in exchange for Treasury bills
lturing March 31, 1972,
in the amount of $1,700,605,000,
follows:
275-day bills (to maturity date) to be issued March 31, 1972,
l the amount of $500,000,000,
or thereabouts, representing an
Iditional amount of bills dated December 31, 1971,
and to mature
cember 31, 1972
(CUSIP No. 912793 NP7) priginally issued in the
lount of $1,200,475,000,
the additional and original bills to be
'eely interchangeable.
365-day bills, for $1,200,000,000,
or thereabouts, to be dated
,rch 31, 1972,
and to mature March 31, 1973
:USIP No. 912793 PV2)
0

The bills 'of both series will be issued on a discount basis under
lmpetitive and noncompetitive bidding as hereinafter provided, and at
lturity their face amount will be payable without interest. They will
~ issued in bearer form only, and in denominations of $10,000, $15,000,
iO,OOO, $100,000, $500,000 and $1,000,000 (maturity value).
Tenders will be received at Federal Reserve Banks and Branches up
o the closing hour, one-thirty p.m., Eastern Standard
ime, Friday, March 24, 1972.
Tenders will not be received
t the Treasury Department, Washington. Each tender must be for a
inimum of $16,000. Tenders over $10,000 must be in multiples of
5,000. In the case of competitive tenders the price offered mu~t
e expressed on the basis of 100, with not more than thcee decimals,
.g. 99.925. Fractions may not be used. (Notwithstanding the fact
hat the one-year bills will run for 365 days, the discount'rate will
e computed on a bank discount basis of 360 days, as is currently the
ractice on all issues of Treasury bills.) It is urged that tenders be
ade on the printed forms and forwarded in the special envelopes which
ill be supplied by Federal Reserve Banks or Branches on application
1erefor.

- 2 Banking institutions generally may submit tenders for account of
customers provided the names of the customers are set forth in such
tenders. Others than banking institutions will not be permitted to
submit tenders except for their own account. Tenders will be received
without deposit from incorporated banks and trust companies and from
responsible and recognized dealers in invesbment 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. Only those submitting competitive tenders will be
advised of the acceptance or re,iection thereof. The Secretary of the
Treasury expressly reserves the right to accept or reject any or all
tenders, in whole or in part, and his action in any such respect shall
be final. Subject to these reservations, noncompetitive tenders for
each issue for $200,000 or less without stated price from anyone bidder
will be accepted in full at the average price (in three decimals) of
accepted competitive bids for the respective issues. Settlement for
accepted tenders in accordance with the bids must be made or completed
at the Federal Reserve Bank on March 31, 1972,
in cash or other immediately available funds or in a like face amount of
Treasury bills maturing March 31, 1972; provided however, that settlement
-for tenders submitted to the Federal Reserve Banks of Philadelphia and
Chicago, or tofue Federal Reserve Bank Branches in Baltimore and
Pittsburgh, must be completed at those Banks or Branches on April 3, 1911
and must include three days' accrued interest if settlement is made with
other than Treasury bills maturing March 3l.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 offue new bills.
Under Sections 454 (b) ?nd 1221 (5) of the Internal Revenue Code of
1954 the amount of discount at which bills issued hereunder are sold is
c~nsidered to accrue when the bills are sold, redeemed or otherwise
d1sposed of, and the bills are excluded from consideration as capital
~ssets. Accordi?gly, the owner of Treasury bills (other than life
1nsurance compan1es) issued hereunder must include in his income tax
return, a~ ordinary gain or loss, the difference between the price paid
for the b1lls, whether on original issue or on subsequent pur:chase and
the. amount actually received either upon sale or redemption at mat~ritY
dur1ng the taxable year for which the return is made.
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
anv Federal Reserup R~nk nr R~~n~~

The Department 01 the TREASURY
WASHINGTON, D.C. 20220

TelEPHONE W04·2041

FOR RELEASE ON MARCH 20, 1972
MAURICE H. STANS AWARD FOR DISTINGUISHED FEDERAL
FINANCIAL MANAGEMENT
The first annual Maurice H. Stans Awards for Distinguished
Federal Financial Management were today announced jointly
by Treasury Secretary John B. Connally, Office of Management and Budget Director George P. Shultz, Civil Service
Commission Chairman Robert E. Hampton, and Comptroller
General of the United States Elmer B. Staats, Principals
of the Joint Financial Management Improvement Program.
This award, established earlier this year through a grant
from the Stans Foundation, was created by Mr. Stans to
give public recognition to Federal employees who, through
the practice of effective financial management, have
achieved significant economies, efficiencies and improvements in the Federal Government.
The award W1nners are:
John P. Abbadessa of Rockville, Maryland, Controller,
United States Atomic Energy Commission. Mr. Abbadessa
holds a Masters Degree from the Wharton School of
Finance, University of Pennsylvania,and is a Certified
Public Accountant.
J. Patrick Dugan of Bethesda, Maryland, Senior Vice
President and Treasurer-Controller, Export-Import Bank
of the United States. Mr. Dugan is a graduate of the
University of Notre Dame, and is a Certified Public
Accountant.
Each award recognizes personal competence and leadership
resulting in notably exceptional accomplishments in the
application of effective financial management.
The awards,
in the form of an engraved bronze placque and lapel pin,
will be presented at a luncheon during a Financial Management Conference at the Washington Hilton Hotel on March 20.
This Financial Management Conference, sponsored by the
Joint Financial Management Improvement Program, is being
held to emphasize opportunities for improved financial
management in the Federal Government. About 400 top level
management officials from approximately 50 Federal agencies
will participate in the Conference.

The Department 01 the TREASURY
WASHINGTON, D.C. 20220

TelEPHONE W04·2041

REMARKS OF THE HONORABLE EUGENE T. ROSSIDES
ASSISTANT SECRETARY OF THE TREASURY
(ENFORCEMENT, TARIFF AND TRADE AFFAIRS, AND OPERATIONS)
before the
NATIONAL CONFERENCE OF HISPANIC LAW ENFORCEMENT OFFICERS, INC.
BROTHERHOOD IN ACTION, INC.
40th STREET AND SEVENTH AVENUE, NEW YORK CITY
March 20, 1972

10:30 a.m.
PRESIDENT NIXON"S WAR ON DRUG ABUSE

I want to discuss with you today Treasury's IRS Narcotics
Trafficker Program and its relationship to the president's
War on Drug Abuse.
President Nixon's initiative of June 1971, in proposing
tax investigations of middle and upper echelon narcotics
traffickers, is succeeding and is adding to the success of the
President's overall war against drug a~use, particularly heroin
abuse.
I am pleased to report to you that we have achieved the
following since the inception of the IRS Narcotics Program in
July 1, 1971:
1.

484 targets in 33 states, 42 cities and the
District of Columbia,were selected by the
Treasury's Target Selection Committee and
referred to the Internal Revenue Service.
Under the direction of IRS Commissioner
Johnnie Walters, 362 Treasury Agents are
presently conducting intensive tax
investigations of the targets (see
attached Table No. I).

- 2 2.

$13,881,900 in jeopardy assessments and
$1,700,000 in regular assessments have been
made; and over $3,396,000 in cash and over
$440,000, in property have been seized during
this period, to be applied toward payment
of taxes and penalties due from the targets.

10 Criminal tax cases are pending in Federal
District Courts in New York, Miami, Detroit, Baltimore,
and Indianapolis, 6 additional cases have been
recommended for prosecution, one man has been
convicted in St. Louis and imprisoned for five
years for violation of the Internal Revenue Code
(see attached Table No. II).

New York State
99 of the 484 targets are from New York State -- 27
targets in Manhattan, 12 in Brooklyn, 21 in Queens, 17 in the
Bronx, five in Nassau County, t'wo in Suffolk County, and
four in Westchester County; three targets are in the Albany
area and eight in the Buffalo area. Jeopardy assessments
in New York State total $492,100 and over $2,500,000 in
cash have been seized in New York State (see Table No. III).
We are 'working very closely with the local and state
law enforcement agencies in New York. Because of the close
cooperation established with the Ne'w York City Police
Department, we expect additional targets in the coming 'weeks.
We believe this represents a substantial achievement.
And,we have only just begun. It confirms our prediction to
the Appropriations Committees in the Congress that this program
'will make a major additional contribution to the president's
offensive against drug abuse."
In developing and executing this program we recognize
the challenge that is posed, to those of us engaged in law
enforcement and to the general community, for 'without
both 'we cannot beat the heroin problem.

- 3 Many people have asked me what they can do to help.
"Am I not really powerless to do anything?" My response is
that everyone can help. There must be cooperation in the
treatment and rehabilitation areas, but that is not enough.
I say that no community in this country will conquer the
heroin problem unless and until the people of the community
support and cooperate fully with their local and state
enforcement agencies.
As you are aware more than others, a heroin trafficker
could be anyone. He can be a member of any ethnic or racial
group. Blacks are bleeding blacks, whites are bleeding whites,
and Spanish-speaking people are bleeding Spanish speaking people.
I believe that progress has been made in bringing the
people in the various communities throughout the nation and
their state and local law enforcement agencies into a closer
understanding and relationship. Moreover, the attack on heroin
can be the mechanism for a full working partnership which will
have additional advantages to society.
I am particularly pleased to speak before your organization
and I want to congratulate you, because I know of the fine work
of this organization and of its members to develop a close
and cooperative relationship between law enforcement agencies
and the community.
We at Treasury recognize that t~e over 350,000 men and
women in the State and local enforcement agencies stand as
the first line of defense internally against drug abuse.
There must be a full cooperative effort between the people
and their law enforcement agencies.
Because of the effort we have been making, I am confidant
that we are reducing the supply of heroin. Just recently the
Washington Post carried an article noting the decline in
heroin quality, availability and the raise in price. Citing
comments of members of the Washington Metropolitan Police
Department, the article notes:
-- the scarcity of heroin in recent months.

- 4 "Records of chemical tests of narcotics
bought on the street by undercover D.C.
vice squad officers show that the purity
of heroin averaged 3 percent for the
first time last month, the lowest since
intensified testing began in 1969."
"The heroin market on the street is so
tight,
..,.
that D.C. vice
squad officers went for one 24-hour period
• • • this
recently 'without making a buy.
was the first time that had happened in
recent years."
"The decline in quality by more than half since
1969 means the effective cost has more than
doubled."
The article observes that this development occurs "at
a time 'when the Internal Revenue Service is investigating
persons suspected of being top heroin 'wholesalers for
possible income tax evasion."
Drug Traffickers "get out of the illegal drug traffic or face
up to intensive tax investigations"
This IRS Narcotics Trafficker Program has been
institutionalized on a nationwide and permanent basis. In
each area of the country, cadres of Treasury Agents have been
established to concentrate full time on tax investigations of
major narcotics figures.
The word for the drug traffickers is "get out of the
illegal drug traffic or face up to intensive tax investigations."
Target Selection
At Treasury, the program is under the direction of
Martin R. Pollner, Director, Office of Law Enforcement, 'who
is also the Chairman of the Target Selection Committee. Members

- 5 of the Committee are drawn from the Treasury Department, its
Bureau of Customs and Intelligence and Audit Divisions of IRS,
and the Bureau of Narcotics and Dangerous Drugs. Potential
targets are selected based on information received from
various Federal, State, and local enforcement agencies. Once
selected, the names are transmitted to the IRS for investigation.
Before a suspect is identified as a target, the Committee
requires substantial information that the subject is involved
in middle and upper echelon narcotics trafficking, smuggling,
or financing.
Cooperation with State and Local Enforcement Agencies
Our program includes close cooperation with State and
local enforcement agencies.
(1) We have written to the
Chiefs of Police in 755 cities having a population in excess
of 25,000; and (2) we have established contact with key
enforcement officials in major states. We have asked that
they furnish us with the names of the middle and upper
echelon drug traffickers in their states and cities and
with intelligence information on these individuals.
Computers
Computers will facilitate the year i , year out scrutiny
of the finances of each of tile d:t-t, '. t2c ~ii.ckers. By computerizing
our information eacb year, we w ~;, r
,;le systematically and
quickly to examine each trafficker a~getpd under the program.
600 Targets by the Erd Jf FY 1972
I n 1' t '1d.i.'1 y, our nrojection was 400 targets by June 30, 1972.

We have now set a ne
June 30, 1972.

anc

d~:_ffL_'1.) t

goal of 600 target3 by

In this connection I call on a~l of you present to contact
the Chief of the l.::~te lligence L· ',1 Lsion of IRS in your area.
You could thus assiEC us bot!:; r::' ~J'lrr'ishi-ng names of major
narcotics traffickers and by ci'.~ni:'-d 19 intelligence inforrra tion
on those engaged in the illicit traffic.

- 6 Background to presidential Tax Program
Secretary John B. Connally, in the spring, recommended
to the President this nationwide program.
president Nixon announced the program of tax investigations
of major narcotics traffickers on June 17, 1971, as part of a
message on his multi-dimensional approach to combat drug abuse.
The program is designed to take the. profit out of the
illegal traffic in narcotics and thereby further disrupt the
traffic. This is to be accomplished by conducting systematic
tax investigations of middle and upper echelon narcotics
traffickers, smugglers, and financiers. These are the people
who are generally insulated from the daily operations of
the drug traffic through intermediaries.
Reflecting the high priority given this program by the
President, Congress provided financial support for it
amounting to $7.5 million in Fiscal 1972 and authorization
for 541 additional positions in IRS -- 200 Treasury
Intelligence Agents, 200 Treasury Revenue Agents, and 141
support personnel.
Treasury has coordinated this tax program with the antismuggling drive of its Bureau of Customs, the drive against
narcotics distribution of the Bureau of Narcotics and Dangerous
Drugs, and the prosecution efforts of the Tax and Criminal
Divisions of the Department of Justice.
New procedures and techniques have been established and
older ones have been streamlined, in order to reduce the time
required for completion of successful financial investigations,
and to bring the cases to court more expeditiously.
This program is a major enforcement effort but it must
be emphasized that it is only one part of this Administration's
comprehensive drive against narcotics
o

7 -

Milti-Dimensional Program
president Nixon started his war on drugs the first month
of his Administration when he @stablished the Interdepartrrental
Task Force on Narcotics, Marijuana and Dangerous Drugs that
led to Operation Intercept in September 1969, and Operation
Cooperation in October 1969. He has ~ije~lated that war with
a series of action program~, and pregress has been made.
First, he elevated the drug problem to the foreign
policy level and has taken personal initiatives in soliciting
the cooperation of gther governme~t~.
The aim of our diplomatic efforts is to have each nation
do its share and meet its responsibilities in the worldwide
war against drug abu8@.
In September 1971, he created a Cabinet Committee on
International Narcotics Control under the Chairmanship of
Secretary of State William P. Rogers.
On June 30, 1971,
Prime Minister Erim of
had decreed that after
of Turkey, cultivation
be legal in Turkey.

there was a joint announcement by
Turkey and President Nixon that Turkey
the one-year delay required by the law
of the opium poppy would no longer

Progress of a similar kind was made in another part of
the world when the Royal Laotian Government enacted a new
law outlawing opium production and trafficking in that country.
Cooperation has been achieved with the Governments of South
Vietnam and Thailand for suppression of illegal traffic in
dangerous drugs.
Arrangements have been concluded with Canada and Mexico
for cooperation and mutual assistance along our land borders,
and with Turkey and France to control drug trafficking and
smuggling.

- 8 -

Multilateral action through the United Nations has
been stimulated. A United Nations Fund for Drug Control
has been established. The United States has already
contributed $1 million and pledged $1 million more.
The fruits of President Nixon's foreign policy initiative
are no'where more evident than in France, 'where the extraordinary seizure on March 2, 1972, by the French Customs of 935
pounds of heroin, the largest such seizure in history, has
demonstrated to the 'world once again that the international
and national heroin smugglers, wholesalers, traffickers, and
dealers can be beaten.
We salute the French Customs Service on this seizure
and on the subsequent seizure by the French Customs on
March 6 of 321 pounds of morphine at the Italian border.
We salute as well the French narcotics agents on their seizure
on March 16 of 220 pounds of pure heroin and their discovery
of a functioning heroin laboratory. We congratulate the
French Government for their overall efforts in forcefully
moving against the traffic in heroin.
We can assume that a substantial portion of the heroin
'was destined for the United States. These seizures give
renewed inspiration to all of us involved in combatting
this evil.
U. S. Ambassador Arthur K. Watson deserves tremendous
credit for the close cooperative effort between France and the
United States against the drug traffic. Ambassador Watson,
since his appointment, has placed this Presidential foreign
policy initiative at the top and has worked strenuously on
this matter with all levels of the French Government. I have
personally visited with Ambassador Watson and can attest to
the depth of his concern on this subject and the leadership
he has shown. I recall vividly his intense feelings as he
described a tour he took in Manhattan and the South Bronx,
including a heroin detoxification center.

- 9 Second, president Nixon placed particular emphasis on
the crucial roles of education, research, and rehabilitation
and provided increased funds in these three essential areas.
The Special Action Office for Drug Abuse prevention
was established on an interim basis in June of 1971 under
Dr. Jerome Jaffe to coordinate Federal action in the fields
of education, research, and rehabilitation. In 1971, nearly
150 million dollars were devoted to education, research, and
rehabilitation. That figure will be doubled in 1972 and
increased further in 1973.
Third, he recommended differentiation in the criminal
penalty structure between heroin and marijuana; and flexible
provisions for handling first offenders.
Treating marijuana as though it were the same as heroin
created serious problems in convincing young people who were
conditioned to be skeptical of all established programs that
there was any logic or reason in the attack on drug abuse.
The minimum mandatory penalties created serious problems for
prosecutors and judges dealing with first offenders. The
essence of the president's proposal was adopted by the repeal
of the minimum mandatory sentence provisions that under many
circumstances required prison terms, without probation or
parole, for handling even the smallest quantities of marijuana.
This permits the courts to make reasonable distinctions between
youths with small quantities of marijuana and dealers in heroin.
The courts were also granted the important discretion
on any drug offense to clean the slate on the first offender
by striking from the record mention of the first offense
without adjudication of guilt.
Model State narcotics legislation, also recommended by
the President, has been adopted by 26 states and is being
considered in 15 others.
Fourth', he stressed total community involvement -- as
I have discussed here this morning -- the private sector as
well as governmental agencies -- in this anti-drug abuse
program.

- 10 -

Fifth, he provided a substantial increase in budgetary
support for Federal law enforcement in this area.
In December, 1969, Congress provided $8.75 million for
915 additional men and equipment for the drug anti-smuggling
program of the Bureau of Customs. In 1971, Congress authorized
for the Customs program an additional 1,000 personnel and
major additions to equipment. Comparable increases have been
made in funds provided for the Bureau of Narcotics and Dangerous
Drugs. I have already reviewed the $7.5 million appropriation
for Treasury's IRS Narcotics Trafficker Program.
More recently, on January 28, 1972, the President
established the Office for Drug Abuse Law Enforcement in the
Department of Justice, headed by former Commissioner of Customs
Myles J. Ambrose. This program will concentrate an assault on
the street level heroin pusher. The new office will be working
closely with state and local enforcement agencies.
As the President stated on January 28, 1972:
"As far as law enforcement obligations relating
to drug abuse are concerned, the level has
increased more than eightfold in our first three
years in office--from $20.2 million to $164.4
million. We plan to increase this figure by
another $64.6 million next year to the $229
million level."
Sixth, he recognized the central role of the states and
the need for close Federal-state cooperation in a unified drive
against drug abuse. The pioneering efforts of Governor
Rockefeller and the enormous resources applied by New York State
to the war on drug abuse have been of tremendous assistance to
the Federal Government's efforts.

- 11 -

In my judgment, President Nixon's War against drug
abuse is succeeding. He has:
1.

Arrested the United States' incredible
downward slide into drug abuse;

Alerted the international community to
the global problem of drug abuse. More
has been done by the international
community to attack drug abuse in the
last three years than in the previous
thirty years.

In this program, we have seen for the first time the total
involvement of the institution of the Presidency in the battle
against drug abuse.
It is this program that has given me the basis for the
cautious optimism I am expressing. In my opinion, we are
turning the tide on the supply of heroin. I believe it has
reached its peak and has leveled out. Perhaps it has even
begun to recede. But certainly I am aware, as each of you is,
that we have a long hard battle ahead of us to bring that line
back down to the level on the chart from which it started!

000

TABLE I
STATE
Alaska
Arizona
California
Colorado
Connecticut
District of Columbia
Florida
Hawaii
Georgia
Illinois
Indiana
Louisiana
Maryland
Massachusetts
.~.1ich igan
Minnesota
Missouri
Nevada
New Jersey
New Mexico
New York
North Carolina
Ohio
Oregon
Pennsylvania
Rhode Island
South Carolina
Tennessee
Texas
Utah
Vermont
Virginia
Washington
West Virginia

METROPOLITAN AREA
Anchorage
Ptloenix - Tuscon
Los Angeles
San Francisco
Denver
Hartford
Washington, D. C.
Miami
Honolulu
Atlanta
Chicago
Indianapolis
New Orleans
Baltimore
Boston
. Detroit
St. Paul
St. Louis
Las Vegas
Newark & Suburbs
Albuquerque
Albany
Buffalo
New York City & suburbs
Greensboro
Cleveland
Cincinnati
Portland
Philadelphia
Pittsburgh
Providence
Columbia
Nashville
Austin-Houston
Dallas
Salt Lake City
Burlington
Richmond
Seattle
Parkersburg'

SELECTED TARGETS
1

18
22
26
3
8

13
S4
7

17
28
8

11
3

11
23
1

7
1

28
7
3

8
88

,.4
2
S

17
6
1
1
2

27
1
1
2
1

7
1

4ff""
Treasury Department
Office bf Law Enforcement

March 20,1972

TABLE II
Jeopardy Assessmentsl/

$13,881,900

Regular Assessments

$ 1,700,000

Total Assessments

$15,581,900

Tax Year Terminations~/
Dollars Seized

$ 3,396,100

Property Seized
(Fair Market Value) over

440,000

Criminal tax cases in U. S. Courts
awaiting trial

Cases recommended for prosecution

Criminal tax cases completed
(5-year prison sentence)

Jeopardy assessments are additional assessments of taxes
made where a return has been filed, but where circumstances
exist under which delay might jeopardize collection of the
revenue.
2/ Termination of tax year is a computation of the tax due
and assessment made where the time for filing the return
has not become due where circumstances exist under which
delay might jeopardize collection of the revenue.

Treasury Department
Office of Law Enforcement

March 20, 1972

TABLE III
NEW YORK STATE TARGETS
New York State
New York County
Kings·County
Queens County
Bronx County
Nassau County
Sufflok County
Westchester County

99
27
12
21

17
5
2
4

Albany Area

Buffalo Area

Jeopardy Assessments l /
Tax Year Terminations 2 /
Dollars Seized

$492,100
$2,507,500

1/ Jeopardy assessments are additional assessments of
taxes made where a return has been filed, but where
circumstances exist under which delay might jeopardize
collection of the revenue.
2/ Termination of tax year is a computation of the tax
Que and assessment made where the time for filing the
return has not become due where circumstances exist under
which delay might jeopardize collection of the revenue.

Treasury Department
Office of Law Enforcement

March 20, 1972

The Department o{ the TREASURY
WASHINGTON, O.C. 20220

~TENTION:

TElEPHONE W04·2041

FINANe 1::3..1 E!- ~,~ l, -

lR RELEASE G: 30

Tb.e 'ITeasury Depart.ment announced th8.t lhe tender2 fo:c two series of Treasury
.lis, one series to be an additional issue of t~e bi}_l.s dated. December 23, 1971 , and
le other series to be dated Ma.ret 23, 1.972
v.;hich v;ers cffered on
Mareh 14, 1972
~re opened at the Federal. Reserve Banks today.
IE:J"1.ers 'I>lere invited for $ 2,400 000 000
, thereabouts, of 91-day bills and ICl' $ 1,800,00,J,000 0r thereabouts, of 182 ~dayt
,lis. The details of the two series 3xe !is follows:

JfGE OF ACCEPTED
IMPETITIVE BillS:

High
Low
Average

91 -day Treast..ry bills
maturing Jurle 2?, 1§.Z_2_ __
Approx. Equiv.
Annual Rate
Price

99.819
99.002
99.009

:3.88l%
30948%
3.920%

~ Excepting 1 tender of $830,0(1); ~I Excepting

19% of the amount of
57% of the amount of

182 -day Treasury 'bills
_____
ffi_aturing September 21, 197~
Approx. Equi v .
Priee
Annual Ra. te
97,831
97.806
97.813
1

'EJ

tender c::f $.'3()~·I: .'

91day bills bid for at the ~ow price was
182day bills bid f0r 2.t the 1m" price was

~ccept~~

acc~pte:.1

TAL 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

Applied For
$ 22,480,000
2,932,480,000
25,030,000
24,465,000
40 ,8.50 ,ooe
5"1,295,0(C
326,790,000
64,485~I)OO

25,785;000
41,080,000
35,1=)95,000
217,900,00,J

Acc e.pted~_ _
$ 12,480,000
1 ,854: 73.c : ';1)0
17, :=<3C , CC C;
24 .4~'= ; 'I':)]
'2S;; 350; OJ!)
4:3 ,295 ~rJCC;
185,74'J:OOO
44,765,000
22,165,000
34,67C,000
17,695,000
l "7
~50
,,~r\
-,_J... , 'J,
, l,"v'
)

Applied For
$ 33,85(),~00
? ,3ll,4CO ,ooe,

ACCPpt2d

2, '250,000
1,556,640,000

2 9 } c: f S , ~ J C\

4 ,2G.S ~OoO

56 ,SJO ,~O')
29,805,'JOC
3G , 315) (;()8
209,210,000
45,265,000

14,4:50,000
12,355,000
10,680,000
119;(60,000
:W ~ 215,000
13,915,000
12,325,000
8,.'355,01)0

18,41.'3,000
24,375,0(,10
3(1,855,000
~~Sl ,,24:5 . JC')
(

07 ;'~
795
L_

O~'('<'

,'\.. V

$3,815, 335 ~ CJ'JO

t d' ~.J. "'-r,r:> ~-roY'8C~ prl',,,,,,, nJf 99.009
Includes $211,165,000 noncompetiti've :~2nrt21'S c,.cc:e-,J e . .i.l.. L "- o.,~~ 't>C
~~Includes $ 92,295,000 noncompeti tt ve tender s ace er·te(':;' at the aver2cge price of 97. 81S
These rates are on a bank disco;l~t basi3.
lr,( '3qui'.-s.l::",..r, 2C),Jp0n iesUE: yields are
L 01 %for the 91 -day bills, and. 4: Ae% for ':~h ~ -:_,:,:, -6_il.~~ c)'il~ .-::.

The Department 01 theTRfASURY
WASHINGTON. D.C. 20220

TELEPHONE W04·2041

FOR IMMEDIATE RELEASE

Ma r c h 21, 19 7 2

TREASURY'S WEEKLY BILL OFFERING
The Treasury Department, by this public noti~e, invites tenders
for two series of Treasury bills to the aggregate amount of
$4,100,000,000, or thereaboutf:, for cash and in exchange for TreaRury
bills maturing March 30, 1972,
in the amount of $4,107,255,000,
as follows:
91 -day bills (to matur:i~!:"y date) to be i.ssued March 30, 1972
Ln the amount of $ 2,300,000,000, or thereabouts, representing an
idditional amount of bills dated December 30,1971,
and to mature
June 29, 1972
(CUSIP No. 912793 NH5),originally issued in
:he amount of $1,601,370,000 (an additional $204,310,000 was issued on
1arch_ 6, 1972), ~he additional and original bills to be freely
lnterchangeab1e.
182 - day bills, for $ 1,800,000,000, or thereabouts, to be dated
furch 30, 1972,
and to mature September 28, 1972
CUSIP No. 912793 PEO).
The bills of hoth series will be issued on a discount basis under
ompetitive and noncompetive bidding as hereinafter provided, and at
aturity the~i face amount will be payable without interest. They will
e issued in bearer form 00)Y, ~nd in denominations of $10,000,
15,000, $50,000, $lOO~000. $~0G,OOO and $1,000,000 (maturity value).
Tenders will be received at Federal Reserve Banks and Branches up
o the clOSing hour, one-thirty p.m., Eastern Standard
ime, Monday, March 27, 1972.
Tenders will not he received
t the Treasury Department, Washington. Eac}l tender must be for a
inimum·of $10,000. Tenders over $10,000 must 0e in mUltip"ies of
5,000. In the case of competitive tenders the price offered must be
<pressed on the basis of 100, with not more than three decimals,
.g., 99.925. Fractions may not be used. It is urged that tenders be
ide on the printed forms and forwarded in the special e~velupes which
III be supplied by Federal Reserve Banks or Branches cn application
lerefor.
Banking institutions generally may su~rnit tenders for account of
Istomers provided the ~ames of the customers are set forth in such
~nders.
Others than banking institutions will not be permitted to

- 2 submit tenders except for their own account.
Tenders will be recei~
without deposit from incorporated banks and trust companies and from
responsible and recognized dealers in investment securities. Tenden
from others must be accompanied by payment of 2 percent of the face
amount of Treasury bills applied for, unless the tenders are accompaniea
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 submitting competitive tenders will be
advised of the acceptance or rejection thereof.
The Secretary of the
Treasury expressly reserves the right to accept or reiect 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 March 30 , 1972 ,
in cash or other immediately available funds or in a like face amount o!
Treasury bills maturing March 30, 1972.
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.
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 considered to accrue when the bills are sold, redeemed or otherwise
disposed of, and the bills are excluded from consideration as capital
assets. Accordingly, the owner of Treasury bills (other than life
insurance companies) issued hereunder must include in his income tax
return, as ordinary gain or loss, the difference between the price paid
for the 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.
Treasury Depa:::-tment Circular No. 418 (current revision) and this
notice, prescribe the terms of the Treasury bills and govern the ,
conditions of their issue. Copies of the circular may be obtained from
any Federal Reserve Bank or Branch.

000

The Department 01 the

TREASURY

WASHINGTON. D.C. 20220

TELEPHONE W04·2041

FOR IMMEDIATE RELEASE

March 21, 1972

TREASURY ANNOUNCES FINANCING PLANS
The Treasury Department announced today that it is
discontinuing for the time being the additions to the weekly
bills which had been initiated on February 17. A total of
$1.8 billion of new cash has been raised through these additions.
The Department also announced that it is offering for
auction on Tuesday, March 28, $1-3/4 billion or thereabouts
of a 3-year 5-7/8 percent note maturing on May 15, 1975.
Payment for the notes, to be issued on April 3, 1972, may be
made through Treasury Tax and Loan Accounts.
The sale of the note is expected to meet cash requirements through at least mid-May, when there is a regular
quarterly refunding.
The reduction in the Treasury's cash requirements from
earlier projections primarily reflects larger current revenue
collections than previously anticipated. The improvement in
the revenues appears related to some overwithholding of personal income taxes following the change in withholding
schedules required by the Revenue Act of 1971 and made effective in January.
Overwithholding can be eliminated by actions
by taxpayers themselves.
In particular, taxpayers with only
one wage earner in the family or in higher income brackets
with larger than normal itemized deductions may find it desirable to adjust the number of their exemptions for withholding purposes, as permitted by law, to bring the amounts
withheld into close relation to their ultimate tax liability.
The Treasury also noted it is reviewing the possibility
of introducing some changes in its financing techniques to
identif~ ways its routine debt management operations, including both its refunding and new cash raising operations, might
be facilitated.
Pending completion of this review, no announcement of changes are anticipated over the next month.

The Department 01 the

TREASURY

WASHINGTON. D.C. 20220

TELEPHONE W04·2041

IMMEDIATE RELEASE

March 21, 1972

DETAILS OF TREASURY ANNOUNCEMENT OF AUCTION OF $1-3/4 BILLION OF NOTES
The $1-3/4 billion, or thereabouts, of 3-year Treasury Notes to be sold at auction
.er competitive and noncompetitive bidding will be issued on April 3, 1972. The
/8% Treasury Notes of Series F-1975, will be dated April 3, 1972, and will mature
15, 1975.
The ~ notes will
be issued ~in registered and bearer form in denominations of tp,
~l 000
d>
,
000, tplO,OOO, <plOO,OOO and tp1,000,000. Interest will be payable on November 15,
2, and thereafter on May 15 and November 15 until maturity.

Tenders for the notes will be received up to 1:30 p.m., Eastern Standard time,
sday, March 28, 1972, at any Federal Reserve Bank or Branch and at the Office of
Treasurer of the United States, Washington, D. C. 20220; provided, however, that
competitive tenders will be considered timely received if they are mailed to any
h agency under a postmark no later than Monday, March 27.
Each tender must be in the amount of $1,000 or a multiple thereof, and must state
price offered, if it is a competitive tender, or the term "noncompetitive lt , if it
a noncompetitive tender. The price on competitive tenders must be expressed on the
is of 100, with two decimals, e.g., 100.00. Tenders at a price less than 99.26 will
be accepted. Fractions may not be used. The notation "TENDER FOR TREASURY NOTES"
uld be printed at the bottom of the envelope in which the tender is submitted.
Public announcement will be made of the amount and price range of accepted tenders.
se submitting tenders will be advised of the acceptance or rejection thereof. The
retary of the Treasury expressly reserves the right to accept or reject any or all
ders, in whole or in part, and his action in any such respect shall be final.
ject to these reservations noncompetitive tenders for $200,000 or less will be
epted in full at the average price (in two decimals) of accepted competitive tenders.
s price may be 100.00, or more or less than 100.00.
Commercial banks, which for this purpose are defined as banks accepting demand
osits, may submit tenders for account of customers provided the names of the
tomers are set forth in such tenders. Others than commercial banks will not be
mitted to submit tenders except for their own account.
Tenders will be received without deposit from commercial and other banks for their
account, Federally-insured savings and loan associations, States, political subiSions or instrumentalities thereof, public pension and retirement and other public

(OVER)

-2funds, international organizations in which the United States holds membership, fore~
central banks and foreign States, dealers who make primary markets in Government
securities and report daily to the Federal Reserve Bank of New York their positions
wi th respect to Government securities and borrowings thereon, Federal Reserve Banks,
and Government accounts. Tenders from others must be accompanied by p~ent of 5
percent of the face amount of notes applied for.
Payment for accepted tenders must be completed on or before Mond88', April 3, 1972,
at the Federal Reserve Bank or Branch or at the Office of the Treasurer of the United
States in cash or other funds immediately available to the Treasury by that date. ~
qualified depositary will be permitted to make settlement by credit in its Treas~t~
and loan account for the amount of the notes allotted to it for itself and its custome!'l
Where f'ull payment is not completed in funds available by the payment date, the allotmel
will be canceled and the deposit with the tender up to 5 percent of the amount of notes
allotted will be subject to forfeiture to the United States.
Nonbank investors should understand that their checks will constitute payment
only if they are f'ully and finally collected by the payment date Mond8¥, April 3, 1972,
Checks not so collected will subject the investor' s deposit to forfeiture as set forth
in the preceding paragraph. A check payable other than at a Federal Reserve Bank
received on the payment date will not constitute immediately available funds on that
date. The Treasury will construe as timely payment any check payable to the Federal
Reserve Bank or the Treasurer of the United States that is received at such bank or of.
fice by Wednesd8¥, March 29,1972, provided the check is drawn on a bank in the Federal
Reserve District of the bank or office to which the tender is submitted.
Commercial banks are prohibited from making unsecured loans, or loans collateraliZi
in whole or in part by the notes bid for, to cover the deposits required to be paid whel
tenders are entered, and they will be required to make the usual certification to that
effect. other lenders are requested to refrain from making such loans.
All bidders are required to agree not to purchase or to sell, or to make ~
agreements with respect to the purchase or sale or other disposition of the notes bid
for under this offering at a specific rate or price, until after 1: 30 p.m., Eastern
Standard time, Tuesday, March 28, 1972.

The Deportment of the TREASURY
WASHINGTON, D.C. 20220

TElEPHONE W04·2041

FOR RELEASE AT 2:00 P.M. CST

REMARKS OF THE', HONORABLE PAUL A. VOLCKER
UNDER SECRETARY OF THE TREASURY FOR MONETARY AFFAIRS
AT THE DEDICATION OF THE NEW RTE-ASEA CORPORATION PLANT
WAUKESHA, WISCONSIN
THURSDAY, MARCH 23, 1972, AT 2:00 P.M.
I am delighted to be able to participate in these
dedication ceremonies.

Two companies -- one Swedish, one

American -- joining hands in a new venture seems to me a
cause for celebration, not just for Waukesha but for the
Nation.
The RTE-ASEA Corporation will blend Swedish
technology and experience with American manpower and
management.

It will create jobs in Waukesha, bring

capital to the U. S., and, not least, develop markets and

profits~r both partners

In all these ways, it is a

manifestation of international cooperation, industrial
and financial, which can serve and benefit all.
We in the U. S. pride ourselves on our industrial
leadership, design, and efficiency.

Yet, here is

- 2 concrete evidence of the wayan infusion of new ideas
and new influences from abroad can contribute to our
strength and efficiency.

Our Government welcomes such

cooperation, and I know the Swedish Government does as
well.
I am particularly happy to see this visible
example of the benefits of foreign investment here in
Wisconsin.

In recent years, we have heard a great deal

of comment about foreign investment in the other
direction -- from the U. S. to other countries.

That is

not surprising, for there has been a good deal of it;
overseas investments of private U. S. citizens and firms
now total more than $100 billion.

About three-fourths of

that total is in the form of direct investment, where a
U. So-based business has a major or controlling voice in
management.
Some of the comment about this development has not
been favorable.

There is concern here and abroad about

the impact of the flow of capital on our balance of
payments.

There has been concern at home about possible

displacement of jobs.

There has been concern abroad

- 3 -

about new competition, or "foreign" influence in
particular industries.

But these complaints too often

obscure the simple fact that

just as in the case of

Waukesha today -- the influx of foreign capital,
technology and management is usually welcomed, and
eagerly sought, by those most directly concerned; and
the direct benefits to both parties usually bring
broader benefits as well.
The U. So Government does, in fact, reluctantly
maintain some controls over investment outflows.

have done so for nearly a decade, but we continue to
view these restraints only as an expedient during a
period when our balance of payments has been weak.
President Nixon has made clear our determination to
achieve and maintain a payments equilibrium that is not
dependent on such controls.

Investment as well as trade

decisions should be responsive to market forces and
business judgments.

We are working toward that

objective.
Much less attention has been paid to the importance
of foreign priv8.te investments in the u. S., such as the

- 4 facility we are dedicating today.

But the fact is those

investments are also substantial and growing rapidly.
At the end of 1970, they amounted to $45 billion.
Indeed, few realize that, in recent years,
private long-term investments in the United States by the
major countries of Western Europe have actually exceeded
our

investment~

there.

Since 1966, the U. S. actually

has been a net importer of long-term private capital from
Western Europe in the amount of $4.5 billion.

This

dramatic growth in foreign investment in the U. S.
discredits the outmoded view of a world in which the
United States lavishly buys up industry abroad, in
industrial as well as developing countries.

It is true

the bulk of the inward investment has been in U. S.
securities rather than direct investment.

But, plainly,

international investment has become a two-way street, with
both sides heavily traveled.
Foreign invesement has a long history in the United
States.

Until World War I, it played a major role in the

economic development of the United States, helping to build
our railroads and develop our land and industry.

Although

- 5 -

we shifted fifty years ago from a net debtor to a net
creditor Nation, we have continued to have an open door.
For my part, I would not only keep the door open,
but would put out a welcome mat.

And I believe that

investors from overseas will find that the recent currency
realignment makes the United States more competitive and,
therefore, a more attractive place to invest.
Our long-standing open door approach to the foreign
investor has remained unaltered in a period of farreaching change in our external economic relationships.
Actions by the President last August 15 -- and the period
of intensive negotiation that followed -- signaled the
start of a new chapter in world economic historyo

In a

real sense, the "Post-War Era" of world economics has
ended.

It has ended not because the policies failed in

their basic purposes of encouraging trade, investment and
development.

Nor have those basic purposes changed.

Rather, an era has ended because of fundamental changes in
the world economy that demand a reshaping of monetary and
and trade institutions, and a reshaping of our policies
in this country.

- 6 The "Post-War Era" was a time of predominant
American leadership, rooted in the financial, competitive,
and technological might with which we emerged from
World War II.

To our credit, we turned that economic

power to constructive ends.

But, in the process, we

permitted our competitive vitality to erode.

We under-

took burdens that others were not ready or capable of
accepting.

We often discounted heavily the economic or

financial costs incurred in the pursuit of our political
and defense policies.

For too many years, we watched

our balance of payments and trade position weaken, while
counting on ingrained confidence in the dollar to see us
through.
Inevitably, this approach could not be sustained.
The international monetary system, dependent on the
stability of the dollar, came under heavy strain.

our competitive position weakened, so did the essential
public support for liberal and outward-looking trade
policies.

Our will to maintain our defense and aid

commitments was increasingly challengedo

- 7 We are now embarked on the difficult process of
meeting this challenge with new policies and new
attitudes.

We sought, and achieved, a basic realignment

of currency values.

This provides a landing pad for

restoring our financial position.

But we cannot count

on exchange rates to do the whole job.
To help restore our balance of payments position
and, equally important, to help meet the legitimate
complaints of U. S. industry and agriculture, we have
urgently asked our major trading partners to reduce
barriers to United States products.

Already, we can

report the successful conclusion of a first round of
negotiations with Japan and the European Communities.
We are also seeking a more equal sharing of defense
burdens.

We are reviewing our aid program to make it

more responsive to today's requirements.
But, in some ways, the process of change has barely
begun.

In the end, there can be no substitute for action

to spur productivity, growth, and price stability at
home.

To put it plainly

if we do not work hard, if

we do not work together, if we do not work with pride in

- 8 achievement -- there is no way we will be able to meet
our responsibilities in a competitive world.
The problems we face today are in large measure the
inevitable problems of living in an open and interdependent world.

There are those who, facing these

problems, would choose to turn their backs on these
problems, to shelter themselves behind walls.

But that

is not the way of a strong America or a strong world.
An open society is competitive.
work.

It entails risks and

But the benefits are immense, in peace and

prosperity.
The new enterprise we are dedicating today is tangible
evidence of some of those benefits, and I am particuarly
pleased to welcome ito

00000

The Deportment 01 the

TREASURY

WASHINGTON, D.C. 20220

TELEPHONE W04·2041

FOR IMMEDIATE RELEASE

March 23, 1972

TREASURY ANNOUNCES CADMIUM FROM JAPAN IS BEING SOLD AT
LESS THAN FAIR VALUE
The Treasury Department announced today that cadmium from
Japan is being, or is likely to be, sold at less than fair value
within the meaning of the Antidumping Act, 1921, as amended.
Notice of the determination will be published in the Federal Register
of

March 24, 1972.

Cadmium is principally used in the nickel-cadmium alkaline battery
and as a pigment in paints.
The case wi II now be referred to the Tariff Commission for a determlnation as to whether an American industry is being, or is likely to be,
injured.

In the event of an affirmative determination, entries of cadmium

from Japan wil I be subject to the assessment of dumping duties.
A notice of Withholding of Appraisement was published in the Federal
Reg Ister of December 24, 1971, wh i ch stated that there was reasonab Ie cau'se
to believe or suspect that there were sales at less than fair value.

Pur-

suant to this notice, interested parties were afforded an opportunity to
present oral and written views prior to the final determination in this case.
During the period from January 1971

through December 1971, cadmium

valued at approximately $1,800,000 was imported from Japan.
II

The Departmento! the TREASURY
TELEPHONE W04·2041

WASHINGTON, D.C. 20220

FOR IMMEDIATE RELEASE

March 23, 1972

TREASURY DISCONTINUES ANTIDUMPING INVESTIGATION
OF SHOEBOARD FROM THE UNITED KINGDOM
The Treasury Department announced today a final discontinuance
of its antidumping investigation of shoeboard from the United Kingdom.
Shoeboard is the hard substance in the toe and heel of shoes.
On January 20, 1972, the Department publ ished a tentative
discontinuance notice after it was determined that importations of
shoeboard from the United Kingdom terminated in October 1970 and
p robab 1y wou 1d not be resumed.
This notice also invited submissions of written views and/or
requests for an opportunity to present views orally.

No submissions

or requests were received.
During the period from January 1970 through October 1970,
shoeboard valued at apprDximately $40,000 was imported from the
United Kingdom.

There have been no importations since October 1970.
# # #

The Deportment 01 the

TREASURY

WASHINGTON, D.C. 20220

TELEPHONE W04·2041

FOR IMMEDIATE RELE'ASE

March 23, 1972

TREASURY DISCONTINUES ANTIDUMPING INVESTIGATION
OF RAILWAY TRACK MAINTENANCE EQUIPMENT FROM AUSTRIA
The Treasury Department announced today a final
discontinuance of its antidumping investigation of railway
track maintenance equipment from Austria.
On December 22, 1971, the Deparment published a 6-month
"Withholding of Appraisement Notice" in the Federal Register
which stated that there were reasonable grounds to believe
or suspect that there were sales at less than fair value.
This notice also indicated that interested parties could make
written submissions or request an opportunity to present their
views orally at the Treasury Department.
Subsequent information submitted in writing and orally
indicated there were sales at less than fair value.

However,

these sales at less than fair value were determined to be
minimal in relation to the total value of sales.

Moreover,

formal assurances were received from the manufacturer that
he would make no future sales at less than fair value.
During the period from January 1971 through January 1972,
imports of railway track maintenance equipment from Austria
were valued at approximately $1.3 million.

Removal Notice
The item identified below has been removed in accordance with FRASER's policy on handling
sensitive information in digitization projects due to copyright protections.

Citation Information
Document Type: Transcript

Number of Pages Removed: 8

Author(s):
Title:

"Today Show" Interview with John Connally

Date:

1972-03-24

Journal:

Volume:
Page(s):
URL:

Federal Reserve Bank of St. Louis

https://fraser.stlouisfed.org

The Departmento! the TREASURY
WASHINGTON, D.C. 20220

rENTION:
~

TELEPHONE W04·2041

FINANCIAL EDITOR

RELEASE 6: 30 P.M.,

March 24, 1972

RESULTS OF TREASURY'S MONTHLY BILL OFFERING
The Treasury Department announced that the tenders for two series of Treasury
lis, one series to be an additional issue of the bills dated December 31, 1971 ,and
e other series to be dated March 31, 1972
, which were offered on March 17, 1972
re opened at the Federal Reserve Banks today. Tenders were invited for $500,000,000
thereabouts, of275 -d~ bills and for $1,200,000,000 or thereabouts, of 365 -day
Us. The details of the two series are as follows:
.
NGE OF ACCEPTED
MPETITIVE BIDS:

High
Low
Average

275-d~

Treasury bills
maturing December 31, 1972
Approx. Equi v . :.
Price
Annual Rate
96.566

96.532

4.495i
4.540i

96.554

4.511i!l

365-day Treasury bills
maturing March 31, 1973
Approx. Equiv.
Annual Rate
Price
4.620%
95 .316 EJ
4.700%
95.235
95.274
4.661% Y

Excepting 1 tender of $375,00C;
Excepting 2 tenders totaling $745,000
64% of the amount of 275-day bills bid for at the low price was accepted
15~ of the amount of 365-d~ bills bid for at the low price was accepted
TAL 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

AcceEted
AEElied For
320,000
$ 10,320,000 $
394,250,000
1,165 ,350 ,000
260,000
260 ,000
1,010,000
7,010,000
300,000
300,000
1,llO,000
1,110,000
88,165 ,000
177 ,165 ,000
1,740,000
10,740,000
570,000
570,000
1,475,000
11,475,000
800,000
23,100,000
10,305,000
126,600,000
$1,534,000,000

500,305,000

AEl21ied For
$ 10,360,000
1,913,245,000
11,920,000
20,715,000
1,375,000
1,940,000
136,185,000
14,7 45,000
500,000
21,000,000
24,020,000
164,270,000

AcceEtecl
$
360,000
962,725}OOO
1,920,000
20,715,000
1,375,000
1,940,000
87,185,000
7,745,000
500,000
4,150,000
6,020,000
106,020 ,000

$2,320,275,000

$1,200,655,000

Includes $ 13,095,000 noncompetitive tenders accepted at the average price of 96.554
Includes $ 24,400,000 noncompetitive tenders accepted at the average price of 95.274
These rates are on a bank discount basis. The equivalent coupon issue yields are
4.70 %for the 275 -day bills, and 4. 90i for the365 -day bills.

The Departmento! the TREASURY
WASHINGTON, D.C. 20220

TELEPHONE W04·2041

FOR IMMEDIATE RELEASE

March 27, 1972

TREASURY DEPARTMENT ANNOUNCES COUNTERVAILING DUTY ORDER
ON TOMATO PRODUCTS FROM GREECE
The Treasury Department announced today the issuance of
a countervailing duty order against tomato products from
Greece. Tomato products affected include tomato paste,
peeled tomatoes,and tomato juice.
A countervailing duty action arises under section 303
of the Tariff Act of 1930 (19 U.S.C. 1303). Under this
section, the Secretary of the Treasury is required to assess
a duty equal to a bounty or grant which is paid or bestowed
in the exporting country within the meaning of section 303.
The order will be published in the Federal Register of
March 28, 1972. Countervailing duties will be assessed 30
days after publication in the Customs Bulletin of April 12,
1972. The duties will thus become effective on May 13, 1972.
Subsidies on tomato paste vary from about $25 - $67 per
metric ton, or 8 - 17 percent F.O.B. value, depending on the
concentration and packing. Subsidies on peeled tomatoes and
tomato juice are approximately $11 per metric ton, or 3 percent F.O.B. value.
During 1971 imports of tomato paste from Greece were
valued at slightly more than $275,000. During the same
period, imports of peeled tomatoes were slightly more than
$77,000. The quantity of tomato juice imports was negligible.
000

The Deportment 01 the

TREASURY

WASHINGTON, D.C. 20220

TELEPHONE W04·2041

TENTION:

FINANCIAL EDITOR

March 27, 1972

R RELEASE 6: 30 P.M.

RESULTS OF TREASURY'S WEEKLY BILL OFFERING
The Treasury Department announced that the tenders for two series of Treasury
lis, one series to be an additional issue of the bills dated December 30, 1971 , and
March 30, 1972
,which were offered on March 21, 1972,
e other series to be dated
re opened at the Federal Reserve Banks today. Tenders were invited for $2,300,000,000,
thereabouts, of 91-day bills and for $1,800,000,000, or thereabouts, of
182-day
lis. The details of the two series are as follows:
NGE OF ACCEPTED

MPETITIVE BIDS:

High
Low
Average

91-day Treasury bills
maturing June 29, 1972
Approx. Equiv.
Price
Annual Rate
99.035
99.022
99.027

3.818%
3.869%
3.849%

182-day Treasury bills
maturing September 28, 1972
Approx. Equi v .
Price
Annual Rate
97.807
97.797
97.799

4.338%
4.358%
4.354%

54% of the amount of 91-day bills bid for at the low price was accepted
52% of the amount of 182-day bills .bid for at the low price was accepted
l'AL TENDERS APPLIED FOR AND ACCEPTED BY FEDERAL RESERVE DISTRICTS:

District
Boston
~ew York
Philadelphia
aeveland
Uchmond
\tlanta
~icago

Louis
Hnneapolis
(ansas City
)allas
lan Francisco
TOTALS

AEElied For
$ 26,380,000
3,063,785,000
36,265,000
25,090,000
18,790,000
38,365,000
285,455,000
59,600,000
51,175,000
37,660,000
34,395,000
299,455,000

AcceEted
$ 13,350,000
1,824,590,000
21,035,000
23,690,000
13,790,000
17,440,000
135,855,000
40,940,000
15,335,000
21,770,000
11,845,000
160,770,000

AEElied For
$ 30,910,000
3,628,510,000
18,975,000
88,080,000
23,690,000
30 ,635,000
262,965,000
38,235,000
29,400,000
19,985,000
28,305,000
243,115,000

AcceEted
910,000
$
1,572,790,000
8,975,000
9,220,000
12,690,000
6,560,000
18,820,000
12,735,000
3,000,000
9,605,000
5,605,000
143,970,000

$3,976,415,000

$2,300,410,000 ~

$4,442,805,000

$1,804,880,000

Includes $204,725,000 noncompetitive tenders accepted at the average price of 99.027
Includes $ 85,245,000 noncompetitive tenders accepted at the average price of 97.799
These rates are on a bank discount basis. The equivalent coupon issue yields are
).94 %for the 91-day bills, and 4. 51i for the 182 -day bills.

The Departmento! the TREASURY
TELEPHONE W04·2041

WASHINGTON, D.C. 20220

FOR LMMEDIATE RELEASE

March 28, 1972

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
$4,100,000,000, or thereabouts, for cash and in exchange for Treas.ury
in the amount of $4,105,475,000,
bills maturing April 6, 1972,
as follows:
91-day bills (to maturity date) to be issued April 6, 1972,
in the amount of $2,300,000,000,
or thereabouts, representing an
additional amount of bills dated January 6, 1972, and to mature
July 6, 1972, (CUSIP No. 912793 NT9), originally issued in the amount
of $1,601,305,000 (an additional $204,310,000 was issued on March 6,
1972), the additional and original bills to be freely interchangeable
182- day bills, for $ 1,800,000,000, or thereabouts, to be dated
April 6, 1972,
and to mature
October 5, 1972
(CUSIP No. 912793 PF7)o
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 $10,000,
$15,000, $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, April 3, 1972.
Tenders will not be received
at the Treasury Department, Washington. Each tender must ~e for a
minimum'of $10,000. Tenders over $10,000 must be in mU1tip'tes of
$5,000. In the case of competitive tenders the price offered must be
expressed on the basis of 100, with not more than three decimals,
e.g., 99.925. Fractions may not be used. It is urged that tenders be
made on the printed forms and forwarded in the special envelopes which
will be supplied by Federal Reserve Banks or Branches on application
therefor.
Banking institutions generally may submit tenders for account of
Customers provided the names of the customers are set forth in such
tenders. Others than banking institutions will not be permitted to

- 2 submit tenders except for their Qwn account. Tenders will be recei~
without deposit from incorporated banks and trust companies and from
responsible and recognized dealers in investment securities. Tenders
from others must be accompanied by payment of 2 percent of the face
amount of Treasury bills applied for, unless the tenders are accompanied
by an express guaranty of payment by an incorporated bank or trust
company.
Immediately after the closing hour, tenders will be opened at the
Federal Reserve Banks and Branches, following which public announcement
will be made by the Treasury Department of the amount and price range
of accepted bids. 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 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 April 6, 1972,
in cash or other immediately available funds or in a like face amount of
Treasury bills maturing
April 6, 19720
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.
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 considered to accrue when the bills are sold, redeemed or otherwise
disposed of, and the bills are excluded from consideration as capital
assets. Accordingly, the owner of Treasury bills (other than life
insurance companies) issued hereunder must include in his income tax
return, as ordinary gain or loss, the difference between the price paid
for the 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.
Treasury Department Circular No. 418 (current revision) and this
notice, prescribe the terms of the Treasury bills and govern the
conditions of their issue. Copies of the circular may be obtained from
any Federal Reserve Bank or Branch.

000

The Deportment 01 the

TREASURY

WASHINGTON, D.C. 20220

TELEPHONE W04·2041

AmNTION:

FINANCIAL EDITOR
~,arch

28, 1972

The Treasury announced that it has accepted $1.75 billion of the
$5.8 billion of tenders received for its new 5-7/8% 3-year notes
auctioned today. The range of accepted bids was as follows:
Price

Approximate Yield

High
100.5o~1I
5.69'/0
Low
100.20
5.80%
Average
100.26
5.78%
1/Except one tender of $2,800,000
Accepted tenc1_ers j_llclud.e 88% of the amount bid at the low price, 8.nd.
$0.5 billion of noncompetitive tenders accepted at the average pr.ice.

THE DEPARTHENT OF TIlE TREASURY

2
.)

REMARKS OF

HONORABLE JOHN B. CONNALLY,

SECRETARY OF THE TREASURY

BEFORE THE

MIDDLESEX CLUB OF BOSTON

8
9
10
11
12
13
14
15
16
17
18

March 24, 1972
Boston, Massachusetts

19
20
21
22

23
24
25

[This trJ.nscript Has prcparcd frcm a

t~rc

rccordlnq.]

1
2
0

REPRESENTATIVE HECKLER:

Thank you very much, Pill

Lowe.
Mr. Secretary, Governor and Mrs. Sargent, Senator

and Mrs. Brooke, my distinguished colleague Hastings Keith

and Mrs. Keith, Charlite Morrin, the incomparable,

distinguished

membe~~s

of the Middlesex Club, and friends.

NOW, it is time for the drawing and the door prize

tonight is someone special.

Spiro Agnew, or even Jack Anderson.

It is not Martha Mitchell or

[Laughter.]

In fact, it is a man who is truly national, a man

for the Nation.

he bridges administrations, and he does so very well.

He bridges geography, he bridges politics,

One is only to sit on the House Banking and Currency

Committee, as I have, and listen and watch John Connally in

action, testifying on Phase II or the international monetary

situation to be impressed very, vt!ry quickly.

Of course, he does have the added advantage of

having the Chairman of the committee, a native of Texas, who

realizes that John Connally, as a former governor, elected

three times, has reached a new pi1n ac le in American politics.

He is not addressed as governor but in the treatment that he

receives from the Chairman, he is truly a king.

24
25

Well, this all orders well for the fortunes of tIle
President's program, and it benefits the

adlninistr~tion,

although I am not sure that was what the Chairman had in mind

when he gave the Secretary such unusual welcome and such an

unusual entrance and introduction to the activities of the

Banking and Currency Committee.

This Secretary has fared

well before that committeE.

His predecessor suffered greatly.

The poor man had his very

integrity impugned constantly and dedicated Honnan though he

was, his integrity was always the subject of great question

by the Chairman.

But our present Secretary-has none of the liabilities

of his predecessor and the considerable asset of not only being

a Texan but really in fact having a true command of the subject

a presence and a persuasiveness that if you disagree with him,

makes you struggle to hold on to your own viewpoint, and if

you agree makes you unusually glad that you do.

He carne to Washington with very impressive creden-

tials.

Secretary Connally, it was all but overlooked that the new

Secretary brought with him a very rich background in business,

legal, corporate, agricultural affairs, as well as in public

service as Secretary of the Navy and Governor of Texas, and as

one who served with a distinguished war record.

When President Nixon shocks almost everyone by naming

I am inclined to feel that Secretary Connally has

rather than over-analyzed for the wrong reasons.

Everyone

so concerned \'lith his form they denlt really Zlnalyze the

substance of his programs or his postures.

pundits have a fair day and full play whenever the Secretary
appears.

The I.Jotornac

For a while they spent all of their time in a frenzy

trying to ascribe modus for his basic appointment, both to

the President and to Mr. Connally, to read into the situation

all kinds of convollted political maneuvering and machinations.

And, frankly, I have to confess for my part, I was reading in

something of the same skepticism, bewilderment and a little

hostility that I read

Party and indeed in the press.

a~out

and felt among the Republican

Let me lay bare my soul and confess my mistakes in

public.

Obviously this is a man who has served well with

great distinction.

a friend and, in fact, I am deeply impressed with his capacity,

his understanding, his dynamism, his po\vers of persuasion.

Peoplfr ask the question: why is John Connally in

From a position of hostility I have become

government today, and I think they very rarely ascribe the real

answer.

in the public sector, very often there is no other real

challenge that is adequate to us.

accused of poli tical naivety, aftnr having served on the

Massachusetts Governor's Council, or indeed in the Congress

itself.

why John Connally is in government.

For those of this

enorm~lS

dimension who have served

I don't think I can be

But it seems to me that there is an overriding reason

Whether one agrees or disagrees, one has to

~uitc

II
1

casily and fairly discern his

O\'1n

priority with the national

2 I interest~
!

I think he is a man who is genuinely motivated

and disposed to serving his country and to serving each one of

us as Americans.

it first tonight, and the country and we are the ,beneficiaries.,

He has put his country first, he is putting

Ladies and gentlemen, it is my great honor and

privilege to present to you the Secretary of the Treasury of

the united States, John B. Connally.

[Applause. ]

SECRETARY CONNALLY:

11
12

seated.

Than~you

very much.

Please be

Thank you very much.
Congresswoman Heckler, Governor and Mrs. Sargent,

Senator and Mrs. Brooke, President Lowe, Senator

Congressman and Mrs. Hastings Keith, other distinguished head

table guests, Miss Hagforth, ladies and gentlemen.

~1cKinsey,

I must-confess to being somewhat overpowered by the

most gracious, fulsome introduction which I have just received

from your distinguished Congresswoman, Mrs. Heckler.

It reminds me of a story that happened really before

my active days in politics in Texas when another man named

Connally was entering the political scene.

the 1920's, the late twenties, and Tom Connally was then a

young Congressman making his first bid for the united States

Senate, running against a man named Joseph Weldon Bailey.

This was back in

In those days they had no radio or tclcvi[:ion r so all,

of the poli tical spcakings \-Jere in t.he parks.

great gatherings und i.t..'(1~; ,!uite an occasion.

have experienced such here in your own home state.

And they had
I-1dllY

of you

Connally was relatively unknown in the southern part

of the state and he showed up at Corpus Christi on a Saturday

night for a great rilly, and there were two old nesters that

had been sitting out on the benches under the trees all

afternoon with nothing to do but whittle and talk, and they

were speculating on the political outcome of various races to

be held that. year.

Well, it so happened that Corpus Christi had a young

mayor named Roy Miller, who was known as "the boy orator.

was 27 years old when he became mayor of that city and was

indeed a great orator.

distinguished career there.

He later went to Washington and had a

They knew the young mayor extremely well.

He was a

very articulate and quite flambuoyant eloquent speaker.

Well,

as Roy Miller, the mayor, and thiA young Congressman walked up

on the platform, one of these gentlemen turned to the other and

said,

"~V'ho

is that going up on

tht~

He said, "I don't know.

platform with Roy Hiller?"
He said, "I guess Roy is

going to introduce him though."

thing," he said, "I don it know who he is, bu t he is going to

get the darndest introduction a man ever got.

[Laughter.]

He said,

I \ViII te 11 him one

And that is about the ~~y I feel tonight, Peggy.

think I hive just received an introduction that I don't deserve
,

but I nevertheless appreciate it.
[Laughter. ]
5

You know, I am particularly delighted to come to this

club.

One of the newsmen asked me this afternoon if I was

going to use this occasion to announce my switch.

[Laughteri applause.]

And I assured him that I had a little more sense of

history than that.

[Laughter.]

That I was at least going to relish for some time

with the distinction of being the only Democrat in 107 years

to address this congregation, and I wasn't about to destroy

that record tonight.

[Laughter, applause.]

You know, when I was appointed, Congresswoman

Heckler alluded to the fact that it upset quite a number cf

people in the country.

few and stunned some.

[Laughter.]

Pleased none.

[Laughter.]

Including me, I might add.

[Laughter.]

It bewildered others.

It angered a

I3u t one man

pLil:

t icu L:lr ly I thoug 11 t l-Ju t hi s .L iny c: r

011

what was running through the minds of most, in expressing his
own bewilderment by a very simple statement of only three

words.

It is amazing and how lasting three words can be.

And he said, and I quote, "Can he add?"

[Laughter, applause.]

Well, you knov:, after I got there I shortly learned

to count in groups of ten.

[Laughter. 1

I learned, among other things, to pile up bills, as

our deficit clearly shows.

[Laughter.]

I understand that you are confronted with similar

mathematical difficulties here in your own state today.

[Laughter, applause.]

I understand that your Constitution, like ours 1n

Texas, prohibits deficit spending.

[Laughter.]

But the bills are piling up in Boston faster than

they are in Washington, so I thougtt I might help do my part

to try to help solve your problem, and I want to share the

secret of my success with your distinguished Governor, with

whom I so deeply sympathesize tonight.

[Laughter.]

l\nd I \-lant to pre sen t hir:!

.J.

tnod for

II
1

[Laughter, applause.]

Charles Horrin just knew that I was gOlng to bring
you the keys to the Treasury and indeed I would have, but

among friends I never believe in making an empty gesture.

[Laughter, applause.]

In all seriousness, I want to pay my deepest

respects to your distinguished Senator, Senator and Hrs.

Brooke, for your presence here this evening, Senator.

I am

personally pleased and flattered that you would come.

I know

that there are tremendous demands on your schedule and the

other Congressmen who are here.

your presence.

I am equally grateful for

To Margaret Heckler, I must say to all of you in

all candor that maybe the fact that Wright Patman is from

Texas has a little something to do with the kind of treatment

that I get before that committee, but I don't want those of

you in tte banking fraternity here to think that I have too

much inf] uence with him.

[Laughter.]

Because you will be asking me to do things I know I

can't do.

Now, he doesn't like you all and ---

[Laughter.]

So I hope you won't give me an assignment to try to

24
25

lmprove your image wi th tha t distinguished ChcJ.irman of the
Banking and Currency

Commit~ec.

10
1

[Laughter. ]

But I also must confess to you In public, if confessions are indeed the thing of the evening, Margaret, that
I

have great respect for Mr. Patman.

He has been in the

Congress, he is dean of the Texas delegation, he has been

there many, many years, and I

chairman of every congressional committee, as a matter of

fact.

am very respectful of every

[Laughter. ]

But I must say that your distinguished Congresswoman

is somewhat of a striking influence on that committee to me,

for some reason, and I

most penetrating questions, and unfortunately you all have not

kept her there long enough yet to where she has seniority to

move up that line, and by the time they get down to her

you know, they take the questions in order of seniority of

people of either side of the aisle, and by the time i

her turn I am a bit beaten and bedraggled, and when she stlrts

coming at me with those penetrating questions about what will

they think on Main Street in Fall River, and I haven't been to

Fall River and I don't know.

want you to know that she has the

1: com~s

[Laughter, applause.]

And I find it very difficult to answer her questions.

[Laughter.]

It is indeed a trcrr.cnc~ous thrill for

r:1C

to DC hc;:-c

and to be in such a magnificent gathering of people in such a

great and wonderful state that has contributed so much to the

character and the strength and the history and the richness of

this Nation and all that it means in terms of personal freedom

for people.

You know, when I became a member -- or before I

became a member of this administration, when the President

first talked to me about :"t, whf=n I innocently walked into his

office thinking we were going to talk about the Foreign

Intelligence Advisory Board, I was rather stunned and shocked,

and I said to him, when he finally asked me to take a place in

his Cabinet, I said, "Well, Mr.. President, I am deeply

honored.

think I would be out of place in a Republican Cabinet.

just really think I would."

I am grateful beyond my ability to express.

He said, "No, no, John, you won I t be."

But I
I

said, HI'Ve

are going to do everything possible to make you feel at home.

And I want you all to know that

that today we have the largest budget deficit and the largest

foreign deficit we have ever had.

has been a man of his word,

[Laughter, applause.]

But, you know, in traveling around the world, it has

been a great experience for me and there have been a lot of

rich and rewarding days.

and Rome and talked to these finarice ministers of other

But somehow, as

went to London

,
1

II
nat.lons, and tdC Group of Ten, i t_

o~currccJ.

to mc, and. pcrll.Ji):J

it was just a sensitivity that I had, that after a meeting or

two, that the good-byes were always a bit more enthusiastic

than the-hellos.

[Laughter. ]

But I wasn't really too upset about it really until

we got to Rome, and then I was disturbed about a little s1gn

there, because in that great famous fountain, you know, in

which you are supposed to throw three coins.

up there that said, "If U.S. citizel1, throw four."

It had a sign

[Laughter, applause.]

It has been a difficult time for me to try to learn

all of the difficult problems that the Treasury Department

deals with, running all the way from printing of the currency

to minting the money, to running Customs and the Internal

Revenue Service,-and keeping the public accounts and financing

the deficits, and a great many other things.

And when I get to feel sorry for· myself I just sit

back and pause and think and try to reflect a bit and realize

that I.doL't have it really as bad as some of the other

fellows down there.

State Department who are trying to understand Chinese and

Russian

I think of those fellows over at the

and Henry Kissinger all at the same time.

[Laugh ter. ]

And I just think that I am

[orl\lnllt(~

:)(~ril,l!1s

II
1

than most.

2
o

But I didn't come here to compete with the Dob Hope
of Boston, Mr. Charlie Morrin, tonight

[Laughter, applause.]

And trying to be clever, because I am really not a

very clever fellow, and I never like to fly under false

colors.

frankly, I have in my heart, that I want to talk to you about.

carne here to say a few things to you that, very

hope it will be somet!1ing that will be of interest to you.

I think it sbould be.

way that you will find it of interest, and perhaps do it 1n

a way that you will think about it for a while.

I hope I can -present it in such a

Normally, my speeches are at an inverse ratio to the

length of the introductions I get, and Margaret tonight gave

me quite a lengthy one, so you nOL~ally can expect a short

speech, but 107 years is a long time to wait.

[Laughter.]

And you may be like the old rancher out in Montana

that showed up one day in town to do his shopping for the

month and a blizzard hit and he was snowed in.

couldn't get back to the ranch.

it.

could move.

24
25

He really

r:1here \'las just no \..;ay to do

As a matter of fact, the snow drifts were so high no one

lIe hadn't been to church in a long time so Sunday
morning he just decided, since he w~s 1n to~n, he ~8uld go to

14
He Ha.lr:r;rJ 1 n

he ~'7rl c;

church.

the only one.

had decided ten days before that he was going to prepare a

very special sermon for this occasion, and he had done it

and had it, he had it down, he had read it and had memorized

it.

relish and he looked out and here was this lone rancher.

2 rt r l

1- }l'"'

n Yl 1" fellow in church,

It was a special Sabbath day and the preacher

He really had been anticipating this dey with great

The preacher said to himself, "Shall I go down and
her~

just shake his hand and thank him for being

greetings and go on my way, or shall-I just really deliver

the sermon?"

occasion and I am going to deliver it; I shouldn't be guided

by whether or not I have a full house or one person.

and exchange

lie thought, "Well, I wrote the sermon for this

And he gave it.

When he was over, he went down

and said, "We 11, Zeke, what did you think of the sermon? II

said, "Well, pastor, I will tell you."

great. "

couldn't help but thinking:

weather is bad and you can't move around and the cattle

c~n't

find grass, I load myoId truck up and I drive out with

lo~ded

just as full as I can with hay and I drive out in the pasture.

"But," he said, "preacher, if there ain't but one old cow

that shows up, I don't dump the whole load.

He said, "It was good."

He said"

"It was

But he said, "You know, I

On a day like this, when the

(Laughter, applause.]

But unfortuantely for you, you've got a full house.

II
1

[Lau<]hter. J

We live in the most troublesome, tormented times
that I think this Nation has ever known.

And I would like for

you to think with me a bit tonight about some of this torment.

We can think back over the years, the past few, we

can think about the divisiveness of a war in Vietnam, we can

think about what it has produced at home, we can think about

riots in the streets and

about the rebellion against the parents, against the establish-

ment, we can- think about even the President of the united

States, who said last year, in addressing the Congress, in

his State of the Union Message, that he was proposing a

revolution in the structure of government itself.

President Nixon used that word "revolution."

the college campuses, we can think

And

We have seen vast changes in the educational world

in the United States, and we are still in the throes of this

great turmoil.

upset the traditional financing

American.

throughout this Nation that they ~dve to use busing in order

to bring about racial equality, a:~ this has brought great

torment to the school systems of A~erica.

But it hasn't ended just there.

We have seen

the courts of the united States

the public school system of

We have seen courts saying to school districts

It is not just in

the educational institutions, in the grade schools or on the

college campusc s .

You a:Ce sec ing tolli1 y t.he mas t

\0/ iJe :.;

I)re.:hl

attack against business, against this free enterprise system

that has ever been launched in the history of America, no

question about it.
You have seen the loss of confidence and the ques-

tioning in the minds of those who haven't completely lost

confidence in the ability of government,

and national levels, to respond to meet the needs of the

times in which we live.

th~!

state, local

We see a nation tormented by the costs of the jreat

welfare programs, and yet without any real hope that, as they

are structured today, that they are going to solve the

problem that all of us reach and strive to solve.

So this torment and this change is sweeping this

country, through our educational system, through our system of

free enterprise, through our governmental system.

hasn't stopped there.

institutions of America, in the Protestant faith, in the

Jewish faith, and the Catholic faith, the great changes trat

people want to bring, the great changes being wrought.

But it

It is also rampant in the religious

And I think it is time that we also recognize that l.n

the field of international trade, international finance ard

international relations, that this also is a period of change.

And let me try to draw you a brief but vivid picture of where

we are in some of these cases, and why we are there.

Let's picture for one moment something

th~t

most of

17
1

us can remember.

In the immediate afterma th of vlor Id \Jar I If

this Nation stood supreme, it

unscarred and unscathed in terms of its physical complexion

within our own borders.

nation.

military strength, we had the economic vitality, we had the

manufacturing and the productive capacity.

stoo~

relatively untouched,

We were a strong, vibrant, vital

We had all of the power in the world, we had the

No other country in the world was even in our class.

We were indeed then a super power in every sense of the word.

And we set out then, we set out then_to share the largess, to

share the abundance, and this Nation responded as it has

always responded, with a sense of care, a feeling of

compassion, and a great rr,anifesttation of generosi ty, to share

the abundance and the riches of this land with peoples around

the world, and we did that.
We helped to rebuild and rehabilitate peoples and

16
17

nations.

bring about some stabili ty, some ,:irce from sorrow and wars,

to try to establish some elements of peace in a world that

had been torn, repeatedly torn by great strife in times of

war.

We exercised the degree of leadership to try to

And we were successful to a remarkable degree.

did indeed rebuild nations and we strengthened people.

Then

we ourselves, acting in the role of leadership, became In-

valved in LClas Clnd Cambodia, und J..:.r.cn in Victno.m.

r~llcn Jurill')

18
r:~t1_c1r

the sixties we bcgan a torment and a turmoil ln this

that occupied the minds and the thoughts and the energics of

most of the leaders of this country for an entire decade.

And during this decade there came to economic power and

economic strength other nations in the world.

Japan today is an incredibly strong nation.

Germany

today, an incredib:ly powerful nation.

really in the world· today are the two that lay vanquished and

in waste a quarter of a century ago.

about, and it is to our credit that-we did.

The bvo most powerful

We largely brought this

But now the very system that permitted us to do

that is under question as to whether or not we can indeed

continue.

have been exhausted and we have extended our credits in the

international terms to the breaking point.

The reserves that we had twenty-five years ago

Japan -now has $17 billion in foreign 2.sset reserves,

and we anticipate it will be over $20 billion by the end cf

this year.

approximately $12.5 billion.

And we have liquid liabilities of $60 billion.

it.

Germany has approximately $16 billion.

We have

But they don't owe anything.
We can't pay

So we are faced \vi th the proposi tion of looking at

a change, at a change in the structure of our relationship

with our trading partners around the world because \,rc

longer support it.

CLln

19
1

Now, how does this so drastically affect us?

affects us, among other reasons, because, as President Nixon

has so clearly said, we are not living in a world that the

United States so clearly dominates.

open the emergence of Russia as a great economic force of

225 million people have begun to spread their'influence

throughout the reaches of this planet we call earth.

We can see with one eye

Mainland China, 800 million people, the oldest

civilization on this earth.

they be?

dedicated, they can be substantially whatever they want to

be.

understood that, and he went to China for the purpose of

opening a dialogue.

of contir!uing and enriching and enlarging a dialogue, because

he :<nows that out of these two great areas are coming t\vO

world powers.

Who can tell?

What will they do?

What will

Incredibly-disciplined, incredibly

And the President of the United States saw that.

lIe

And he is going to Moscow for the purpose

Western Europe is coalescing as never before, not in

modern times, to form a single unit, to become an economic

power, in their minds hopefully superior to that represented

by the Urited States of America.

currency.

They seek their oVln common

They have now the ir Ovln conunon market.
Japan sits, an island by itself and yet 1n a world bv

itself.

today_

So these are some of the forces with which we deal
And it 1S in the realizc:lt:ion of some of these

p~cblc;:~s

7.0

that the President did, on August 15, take very sweeplng dras-

tic action that had an impact on every phase of the domestic

economy and the international economic situation and the

international monetary situation.

time really in the history of this Nation wage and price

controls upon this American system.

He didn't want to do it.

He imposed for the first

He doesn't believe in

controls.

period of time.

forces of supply and demand were no-1onger working,_that forces

had been built in this country that denied the free play of

those forces, and that we were experiencing a rapid inflation

at the same time that we were witnessing an unacceptable degree

of unemployment.

He doesn't think that they will work over a long
But he felt that the forces, the economic

So he set about to bring under control this raging

inflation, to e£fect an expanded economy, to provide the jobs

that American people want.

convertibility of the dollar in order that we might have time

to breathe and to plan and to reBtructure an international

monetary system that had been so one-sided that it fell of

its own weight with the emergence of these great powers as

peers of this great Nation.

th~

same time he suspended the

These were very far-reaching, very drastic actions
courag~ous

taken by a very

President of the united States,

because no one could be sure --

21
1

[Applause.]

No one at that moment could be sure precisely what

was going to happen.

No such action had been taken under

circumstances such as these.

But the American people responded

as he felt they would respond, in their own interst, in the

interest of stability of this Nation.

frankly, they sensed the urgency and the need even more than

many of their leaders did throughout the country.
Now, what has happened?

Obviously, it couldn't last

They responded because,

The freeze lasted for 90
~~ch

days.

You can't keep a nation of 200 million people, with the most

complex economic system in the world in chains, in a strait-

jacket for too long.

It would be completely unacceptable.

It has never worked.

It won't work over a protracted period

of time.

longer.

It had to end.

So we entered Phase II, and the President called on

the American people for their utmost cooperation, and basically

we have t.ad it.

four labor leaders walking off the Pay Board.

on a

occasion in which I have met the press, is the Pay Board going

to work.

work, it has to work.

morn~.ng

And I was asked

program this morning, and again today at every'

My answer uniformally has been yes, it is going to

I have been asked why did they leave,

24
25

Yesterday we witnessed the sad spectacle of

leave

\·;11011

they

~;Llid

thdt

lhe

,),CtiCl1:.:3

Llw

1)2,/

..;hy did they

~C~HJ

\;ere.!

7.2

so partisan.

I said I can't explain that.

answer to that.

these:

I don't know the

All I know arc the facts, and the facts are

Notwithstanding the charge of favoritism, the facts
5

are these -- out of 54 major decisions of the Pay Board, 36 of

those decisions -- not 36 percent -- 36 of those decisions

labor was on the majority side.

in the Pay Board, only 13 of those decisions found labor in

the minority.

seems to me the facts are clearly ev_ident that it was favor-

itism in their favor.

[Applause.)

But walk off they did, and that is their privilege.

Of those 54 major decisions

And if indeed there has been favoritism, it

No one should be required to serve where they don't want to

serve.

reasons, political or

the interest of the American people above their own personal

or political reasons, but they didn't.

I am sorry they did.

I r8gret that, whatever their

p~rsonal,

that they couldn't have put

[Applause. )

But let me assure you that the Pay Board will go

forward.

is going to function, because it has to functi~n.

dealing wi th something here tha t we have to control.

live with the rate of inflation that we were building In '67,

'68, and

It is going to function

And the Price Commission

'69, \\Ihcn we were fuelinq the fires of tIle

We are
\'le can't

vJar

)

/_ .J

Vietnam with the tremenuous outlays that we were havinq ln

this country.

and it was rising and rising very rapidly.

work and "it is going to work.

And we are prepared to take whatever actions necessary to

make it work.

we believe in the future of this country, and because we

We were running an inflation rate of 7 percent,
And it has to

Let there be no doubt about it.

Not becuase we believe in controls but because

believe in doing whatever is necessary.

[Applause.]

On_the international economic front, we are going

back into negotiations with our friends and allies around the

world, and we are going to try to make some changes in our

trade arrangements with them.

nor tough nor mean nor undiplonatic for the sake of being any

of those things.

We are not going to be a bully

And I have alluded to the fact that I have been

called tte "bully boy of the manicured playing fields of

internatj onal finance," and I deny the charge.

[Laughter.]

don't accept that characterization.

have been,

in your jnterest, a bit firm at times.

[Laughter, applause.]

And I know this, and it

just this simple -- ever y -\

body talks about the international finance being a

mys tery, th<1 t i t is shrouded ina

!11y~3 tieJllc

tllLl

grc~t

t i s inczl p(l L 1c

of comprehension except by the most education in internatjonal

finance.

that he was the greatest expert in the world, and he said,

have studied at Harvard and I have done graduate work at the

London School of Economics, and I have got graduate degrees

from the Saur Bon and I am the finest expert: in the world.

understand economics so fully and so completely t.hat I

explain it in the most simple terms that any layman can

understand."

And I am about like that economist was who admitted

He said, "I explain it this way."

can

He said, "I've

been rich and I've been poor, and rich is better."

[Laughter, applause.]

Now, that is the way we a.re a.s a nation, we've been

rich and we've been poor.

better.

or two.

We are poor now, and rich is

But we are not rich.

Now, let me give you an example

For twenty-two years we've been running deficits in

our balance of payments.

had all the reserves.

billion, of the $40 billion of gold reserves that existed in

the world.

together.

to a moment ago.

2<1

afford to be morc than generous.

2~ IIi

extravag<Jllt.

Now, we could afford to do it.

Right after the war we had over S25

We had more than all the rest of the world put
We had all the productive capacity, which I alluded
We could afford to be generous.

We could

\'/e could afford to bc

He gave it 3.uu.j, arid tha t

is f inc.

But

'.:r.}

(lon t
I

II
1

live that way today.

Things have changed.

Now, the thing that the rest of the world has to

decide, . the first thing,when we go into these international

conferences, after twenty-two years of our deficits, which

simply means that during that time they ran surpluses', are

they now willing for us to ever run a surplus.

first

change the rules of the game, that's all.

below cost.

.question that has to be answered.

Now we can't do that any more.

That is the

We have got to
We've been selling

Now, we have got to

buy at a discount.

not?

they don't, we will have to be prepared to look after our own

interests.

Now, are they going to let us do it or

That is the first

quest~on

they have to decide.

And if

And this United States, in the aftermath of World

War II, assumed a role of leadership which it neither sought,

asked for, wanted, or even in a sense anticipated.

were again the lone surviving

strength, so we assumed the role of political leadership and

the economic leadership and the military leadership of the

free world.

world, and we provided the economic vitality.

the technology.

shipped that

it is now coming home to us in

nat~on

But we

with any substantial

We provided the secu:7i.ty shield for the free

pro~ided

technol~gy,

We provided

the expertise in management.

that management around the world, and
terrlls

[1. ni ':';llL2d tJ .cu,~ \..:.; L;; •

And it is closing the shoe factories in I1ussachusetts, and it

is closing the textile mills in Massachusetts and South

Carolina and elsewhere throughtout this Nation.
It has affected us -- it has run every American

business out of the radio manufactu~ing products.

last week, General Electric announced they \7ill make no more

toasters, no more irons, and a few other things, because they

can't compete.

Just this

Now, under these circumstances, what do we do?

Last

year, against Japan -- let me give you an example or two that

will highlight the problems that we have.

a balance of payments surplus of $5.9 billion.

Kingdom ran a balance of payments surplus of $2.4 billion.

NOW, in the case of the United Kingdom, that was the largest

balance of payments ever in the history of the 'Jni ted Kinsdom.

NOW, that

money around.

doesn~t

las~

Japan

year ran

The Ur.'i ted

snund too much to us, the way we throw

$2.4 billion, that doesn't sound like much,

[Laughter. ]

But let me put it in perspective for you.

This year

we will increase our gross national product by $100 billion

over last year.

will be more than the total GNP of the United Kingdom.

be equal to the total GNP of France.

bigger.

last

That $100 billion growth in the United S1·.ates
It will

We are eleven times

If \oJe ran a surplus as lar<]e as the united }~inljc1on

YO('1(" ,

\oJe

would run u sur!Jlus of $25 billion.

)\nd hOh'

II
1

long vlould our friends permit that?
They wouldn't want to do it.

2
o

are dealing with.

But that is what we

That is the problem we are dealing with.

And why are we working at it,"because in a sense everything
I

you touch, when you talk about inflation, when we talk about

expanding this econ()my, when we talk about providing jobs,

and we have provided 1,700,000 new jobs since June of last

year, and yet there is still 5.7 percent unemployed.

Why?

Of all of these people that are unemployed,

unemploy~d

approximately five million

today, let me_again put

that in perspective.

ployed people in America today have never worked before in

their lives, 60 percent of them haven't.

60 percent of the total number of un2ffi-

[Applause. ]

NOW,

[Laughter. ]

They are young people,

they are not all

w~lfare

~hey

cases.

are women, there are

others, entering the labor force ior the first time.

is significant that today we have 80,623,000 people gainfully

employed at the highest wages ever in the history of the

United States.

have to be competitive in the world markets, and this is why

we are going to continu~ this fight against inflation, this

But to keep them

But it

employed, we are going to

why we are not going to let or,].J.nized lo.00r or organizcJ

assume that they are gOlng to be bigger than the government of

the United States.
[Applause.]

. Finally, let me conclude, after too long a speech,
5

that please remember that with all our problems, with all our

difficulties, what else can you compare to this Nation?

Where else can you compare?

We have done more for more people in more ways than any

society ever created by man, and today the united States

There is no comparison, really.

[Applause.]

And today the united States still occupies a unlque

role of leadership.

a security shield for the free world.

provide the political and the economic leadership for the free

-15

Today the United States still provides
Today we still have to

world, and it is a costly role of leadership that we occupy.
I

But we- can't turn our back on it.

by being ahead of the game.

ventive.

talents of people.

exist in Doston University.

that

Wellesley and Tufts and all the rest.

We have done it

vle have done it by being in-

We have done it by giving free play to the individual

exi~t

in MIT.

\ve have done it through the brains that
We have done it through the brains

We have done it through the brains of

2 ..)7

[l\pplause. J

24 I

I3u t

I (lrn sure I d idn I t

name thel') all, ;)cca US'~ you

hl1vC CJot so

Pl<lny

up here,

\vc

sl.·nu

r,1<H1V

'j'ex,-I:,

;\"l_\:lH:,

lJC-J~;

and girls up here as we can, hoping they will get smart and

come home, but you keep them all.
[Laughter.]

Assume we give up this role of leadership.
5

you think is going to assume it?

assure you, there is no one, no one to assume it.

United States continues the role of leadership of the free

world or we all cast adrift.

Who can assume it?

Who do
Let me

The

The President of the Cnited States knows that.

understands that.

air

colloquies of Harry Truman.

John F. Kennedy, of Massachusetts.

rough bark of Lyndon Johnson, of Texas.

uniquely skilled to be President af the United States.

is a student.

in his habits and in his mind.

do all things, that he can't see

everyone.

He is a man who doesn't have the_patrician

of Franklin Roosevelt.

He doesn't have the homespun
He doesn't have the charisma of
I

He is a scholar.

He knows himself.

And he doesn't have the
But he is a man
He

He is a man \vho is disciplined
H8 knows that he can't see and
~veryone,

that he can't meet

He knows his strengths and he

knows his weaknesses.

standing, he has a deep-seeded perception of what this Nation

1S.

of this Nation.

He has an

And above 311 else, he has an under-

unquench~ble

thirst to expand the opportunities

lIe has an undeniable dedication to expanu
.
.
the strength und the influence o f this cic'InOCrclcy Lilllt \·.'t· helve

And he has an unquestioned COU.1.:llg~ to take

created here.

whatever actions are necessary to try to accomplish these

objectives.
. The question that we have today and next week and

the week after is what kind of a nation do we want.

you want to be?

do you want the United States to be?

inward?

What do

What do you want Massachusetts to be?

What

Do you want it to turn

One of your distinguished Congressmen who I have
great affection for,

Burke, of Massachusetts, ranking man

l I o n Ways and Means, has introduced a bill, the Burke-Hartke

bill, with Hartke of Indiana.

It might protect a shoe factory or two in Massachusetts and

a few other industries throughout the United States.

is a protectionist measure that begins to turn this Nation

in~lrd

far.

itself~

It is a protectionist measure.

But it

to look on itself, and I think it goes too

I don't think we can do that.
I think we are a Nation among nations, and I think

we have to learn to continue to live, and I think we ought to

be a lead8r in expanding and in breaking down the barriers

that exift between countries.

this role of leadership, that we have to exercise it in a way

to try to expand the influence of this democracy.

can I t be done unless you want it done.

Itl ere

not

the

f u t u:r~ t~

And I think while we exercise

()

L~ h

s co U n t 1 Y - - i

But it

lS,

..If I

1, \ V

judgment, in some doubt, because

this country are as committed today as they were almost two-

hundred years ago.

understand what commitment and what dedication and what

courage is, because it first flowered and bloomed here in

this city, in this State, within a stone's throw of where we

are tonight.

am not sure the people of

And you of all people should know and

And if we have lost that sense of history, if we

have reached the point where we assume that we can merely

reap and enjoy the fruits of a rich-legacy, that we-had very

little to do with, if we think that we can enjoy the privileges,

the immunities of free people, without contributing something

to the preservation of those freedoms and those irrmunities,

we couldn't be more wrong.

[Laughter.]

If we are a lesser people than those that every

school child in America has read &bout, when he read about

the old North Church and Faneuil Lall.

mitted and less courageous than they, then perhaps this country

has more troubles than I think.

If we are less com-

I don't think ,.,e are le~ s commi tted.

21
22

we are less determined.

.
have to manifest those qualifies.

I stand

II through your efforts.

I don't think

I think we need to understand that we
I think we have to under-

tha t wha tever this Na tion wants to be, it has to be
'l.nd it is \\-i th th,1 t

1c.:n,.70.

~','c arl~

going to be whatever we want to be.

Thank you very much.

[Applause.]
[Whereupon, the above-entitled address was
concluded. ]

5
6
7
8
9

10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25

I
Ii

The Deportment 01 the

TREASURY

WASHINGTON, D.C. 20220

TELEPHONE W04·2041

FOR IMMEDIATE RELEASE

~arch

30, 1972

IMPACT OF RECENT INTERNATIONAL CURRENCY REALIGNMENTS
ON TREASURY DEPARTMENT ADMINISTRATIO~~ OF ANTIDUMPING ACT
Eugene T. Rossides, Assistant Secretary of the
Treasury for Enforcement, Tariff and Trade Affairs, and
Operations, today issued the following statement:
Questions have arisen regarding the effect of
recent international currency realignments on the
Treasury Department's administration of the Antidum~ing
Act.
That Act requires the Secretary of the Treasury
to find dumping when:
(a)

The Treasury Department has issued a
determination of "sales at less than
fair value"~ and

(b)

The Tariff Commission has issued a
determination that the "less than fair
value" imports have caused, or are
likely to cause, injury to a u.S. industry.

In the normal situation, a "sale at less than fair
value" takes place when the adjusted ex factory price of
the merchandise sold by the foreign exporter to a
purchaser in the United States is less than the adjusted
ex factory price of such or similar merchandise sold by
the foreign exporter to a purchaser in its home market.
The recent appreciation of foreign currencies in
relation to the dollar has effectively increased the
adjusted home ~arket ex factory prices of foreiqn merchandise,
as expressed in dollars. This raises the possibility that
some of these home market prices may now exceed the adjusted
ex factory prices of such or similar merchandise sold to
the United States. To the extent this is so, this could
create margins that could form the basis for a determination
that sales at less than fair value have occurred or are
occurring.

C-271

(OVER)

-2-

Such margins are avoided to the extent that
foreign exporters revise their prices either by raising
their prices to the United States or by lowering the
home market prices.
If on the other hand, a foreign
exporter chooses in such a situation to absorb the
increased cost associated with an appreciation of its
home market currency, vis-a-vis the dollar, in order to
maintain the competitive position of its product in
the u.s. market, and fails to lower its home market
prices correspondingly, margins may well be created which
could form the basis for a determination of sales at
less than fair value. Such margins, if more than
minimal in relation to the volume of sales, would warrant
a determination of sales at less than fair value in such
cases.
In some instances, a foreign exporter, or its
u.S. subsidiary, may have no choice but to absorb some
or all of the increased costs associated with a currency
appreciation. This would occur in a situation in which
a fixed-price contract for the sale of merchandise to
the United States is entered into prior to the date of
any currency appreciation and the merchandise is not
imported until after the effective date of the appreciation.
Whether or not any apparent dumping marqins would be
created in the case of such involuntary absorption and,
if so, whether such margins would be considered as
warranting a determination of sales at less than fair
value can only be determined after the examination and
consideration of many factors, including all the
circumstances surrounding a qiven contract and the
importations made pursuant to it.

000

The Deportment 01 the

TREASURY

WASHINGTON, D.C. 20220

TELEPHONE W04·2041

FOR IMMEDIATE RELEASE

March 29, 1972

The following attended a meeting in the
Treasury today with Secretary John Connally to
discuss meat prices.

Attachment
C-273

OFFICIALS OF THE U. S. GOVERNMENT
The Honorable John BG Connally
Secretary of Treasury
The Honorable Earl Lo Butz
Secretary of Agriculture
The Honorable Peter Peterson
Secretary of Commerce
The Honorable Herbert Stein
Chairman, Council of Economic Advisers
The Honorable Marina Whitman
Member, Council of Economic Advisers
The Honorable Virginia Knauer
Special Assistant to the President
for Consumer Affairs
Elizabeth Hanford
Assistant to Mrso Knauer

Mro Edgar Ro Fiedler
Assistant Secretary of the Treasury
for Economic Policy
Mro James McLane
Deputy Director, Cost of Living Council
Mro Jo Dawson Ahalt, Economist
Cost of Living Council
Mro William No Walker
Deputy Director for Consumer Affairs, Cost of Living Council
Mro Richard Lyng
Assistant Secretary of Agriculture

REPRESENTATIVES OF RETAIL FOOD CHAINS

Acme Markets, Inc o
Paul Jo Cupp
Chairman of the Board
Allied Supermarkets Inco
Thomas McMaster
Chairman of the Board
Leonard Levitt
Vice President, Wage-Price Controls
Ervin Levinson,
Vice President, Marketing
First National Stores Inc o
Lowell Gramer
Vice President, Meat Operations
Austin Lyne
Vice President, Sales Development
Grand Union Coo
Charles Go Rodman
President
Ernest Ho Berthold
Vice President, Meat Operations
Great Atlantic & Pacific Tea Coo
William JoKane
Chairman of the Board

Jewel Tea Companies, Inc.
John M. Mugar, President, Star Markets (Division of Jewel
Kroger Co.
Robert O. Aders
Chairman of the Board
Lucky Stores
Wayne H. Fisher, Jr.
President
Jerry Sgobassi
Vice President, Meat Operations
National Tea Co.
Bruce Krysiak
President
Safeway Stores
William Mitchell
President
Stop & Shop Companies Inc.
Richard Spears
Vice President, Supermarkets
David Ginsberg
Washington Counsel
Supermarkets General
Frank Tucker
Vice President, Perishables
James Dougherty
General Counsel

The Deportment 01 the

TREASURY

WASHINGTON, D.C. 20220

TELEPHONE W04·2041

FOR RELRI\SE FRIDAY A.H.' s
lw\CH

31 , lSY{2
lill·V\RKS OF JUDGE 3AHUEL R. PIERCE, JR., GENERAL COUNSEL,
ON PROPOSED HEGULATIOliS ON FINANCIAL RECORDKEEPING
AND FEPORTING OF CUrffiENCY AIID FOREIGN TRANSACTIOI'm

Department of the Treasury ~oday issuE~ regulations
-v.~ ir:.plelTcnt Illitlt:= I anel II cf publ:Lc Law 91-503, the Flnar,cia~.
Recoru]\:eepinb alld Currency and. ForeiGn Transactions Hep:Jrtinc
Act of 1970. 'l'hesc rcgulations \.;ill become effective on
July 1, 19~(2.
T~c

Ac(!ordinG to Treasury General Counsel Samuel R. Pierce, Jr.,
the issuance of these regulations is a further step in the major
efforts of this Administration directed tOvrard frustratinG or8anized and white collar criminal elements who use secret foreign
account:..! to asstst in concea1in8 SUbstantive violations of Llrue
~;mueglin[:;, securities, gambling, and currency laws, as well f!S
the untaxed income generated from these and other illegal activities. The regulations are expected to benefit both such foreignrElated and domestic law enforcement efforts without burdening
lC6itlmatE commerce.
The regUlations i{ill:
Hequire all persons mair,taining foreign accounts to
disclose that fact on their Federal income tax returns,
and to maintain adequate records of such accounts;
Require all persons transportine, mailing, or shipping
from the United States to a foreign country, or receiving
from without the United states, currency or bearer instruments in amowlts in excess of $5,000, to report such
transactions to the Customs authorities;
Require fincUlcial institutions to secure a social security
or taxpayer identification number with respect to each
account opened after June 30, 1972;

C-272

- 2 -

Require all financial institutions to make reports to
the Treasury of unusual currency transactions involving
amounts of more than $10,000;
Require financial institutions to keep for five years
records of all transfers into or out of the United states
involving more than $10,000;
Require financial institutions to keep for five years
certain other records which will be useful for law enforcement purposes.
In addition to the above, the regulations require banks to
retain for a period of two years records which would be needed to
reconstruct a deposit or share account and to trace a checlt
deposited in such account. Treasury will continue to study both
the types of records to be kept and the most desirable retention
period in order to maximize enforcement benefits and minimize
unnecessary and burdensome paperwork. Assistant secretary
Eugene T. Rossides will head a small group within the Treasury to
work with the financial commwlity in this effort.

The new regUlations are a revision of proposed regulations
which were published in the Federal Register on June 10, 1971. The
rev~s~ons reflect the many pertinent and useful comments received
regarding the proposed regUlations.
In revising these regUlations the Department has taken account

of all comments received, and every effort has been made to insure
that the final regulations will serve their law enforcement purposes,
while at the same time not interfering with legitimate international
monetary transactions, unduly burdening financial institutions or
others, or imposing unreasonable requirements that would serve no
useful purpose. In doing this we have taken account of existing
recordkeeping procedures and the lengths of time existing records
are ordinarily kept. An internal committee ,,,ithin the Treasury
Department has spent a considerable amount of time revising and
reviewine the regUlations in the light of the comments received, to
be sure that these objectives are accomplished.
Governmental access to these records is not changed by either
the statute or the regulations, but will continue to be subject to
the requirements of existing law regarding subpoena and other legal
processes.

Attachment

TITLE 31 - MONEY AM> FINAlfCE:

TREASURY

CHAPrER I - MONETARY OFFlCE3, DEPAR'lMENT OF THE TREASURY

On June 10" 1971, a notice of proposed rule making to imple-

ment the provisions of Titles I and II of Public Law 91-508

(84 stat. 1114 et seq.)" was published in the Federal Register
(36 F.R. 11208 (1971».

In accordance with the notice, inter-

ested parties were afforded an opportunity to submit written
cClDDlents.
After consideration of all such relevant matters as were
presented by interested parties regarding the rules proposed,
the regulations set forth below have been ad ;t

t';u.Jilt!!IlLe T. Rossides
Assistant Secretary

2
PART 102 -

mSTRU~IONS

RELATING TO REPORTS OF CURRENCY

TRANSACTIONS

Part 102 is repealed effective

July 1, 1972.

PART 103 - FINANCIAL RECORDKEEPING AND REPORTING OF
CURRENCY AND FOREIGN TRANSACTIONS

Sec.
SUBPART A - DEFINITIONS
103.11 Meaning of terms

SUBPART B - REPORTS REQUIRED TO
BE MADE

103.21

Determination by the Secretary

103.22

Reports of CUrrency Transactions

103.23

Reports of Transportation of Currency or Monetary Instruments

103.24

Reports of Foreign Financial Accounts

103.25

Filing of Reports

103.26

Identification Required
SURPART C - RECORDS REQUIRED TO
BE MAINTAINED

103.31

Determination by the Secretary

103.32

Records to be Made and Retained by Persons Having Financial
Interests in Foreign Financial Accounts

103.33

Records to be Made and Retained by Financial Institutions

103.34

Additional Records to be Made and Retained by Banks

3
Sec •

.......

103.35 Additional Records to be Made and Retained by Brokers and
Dealers in Securities
103.36 Nature of Records and Retention Period
103.37 Person outside the United States
SUBPART D - GENERAL PROVISIONS
103.41 Dollars as Including Foreign Currency
103.42 Photographic or other Reproductions of Government Obligations
103.43 Availability of Information
103.44 Disclosure
103.45 Exceptions, Exemptions, Modifications, and Reports
103.46 Enforcement
103.47 Civil Penalty
103.48 Forfeiture of Currency or Monetary Instruments
103.49 Criminal Penalty
103.50 Enforcement Authority with Respect to Transportation of Currency
or Monetary Instruments
103.51 Effective Date

AUTHORITY: The prOVisions of this Part 103 issued under sec. 21 of the
Federal Deposit Insurance Act, 84 Stat.1114, 12 U.S.C. 182gb; 84 Stat. 1116,
12 U.S.C. 1951-1959; and the Currency and Foreign Transactions Reporting Act,
84 Stat. 1118, 31 U.S.C. 1051-1122.

SUBPART A - DEFDITIORS
§l03.ll

Meaning of Terms

When used in this part and in forms prescribed \Dlder this part,
where not otherwise distinctly expressed or manifestly incompatible
with the intent thereof, terms shall have the meanings ascribed in
this section.

Bank.
(a)

Each agency, branch or office within the United states

of any person doing business in one or more of the capacities listed
below.
(1)

a canmercial bank or trust canpany organized under

the laws of any state or of the United states;
(2)

a private bank;

(3)

a savings and loan association or a building and

loan association organized under the laws of any state or of the United
states;

(4)

an insured institution as defined in section 401

of the National Housing Act;

(5)

a savings bank, industrial bank or other thrift

(6)

a credit union organized under the laws of any

institution;

state or of the United states; and
(7)

any other organization chartered under the banking

laws of any state and subject to the supervision of the bank supervisory authorities of a
(b)

state.

Each agent, agency, branch or office within the

United states of a foreign bank.

5
Broker or dealer in securities.

A broker or dealer in

securities, registered or required to be registered with the
securities and Exchange Commission under the Securities Exchange
Act of 1934.
CUrrency.

The coin and currency of the United States or

of any other country, which circulate in and are custanarily used
and accepted as money in the country in which issued.

It includes

united States silver cert1ticates, United States notes and Federal
Reserve notes, but does not include bank checks or other negotiable
instruments not custanarily accepted as money.
Danestic.

When used herein, refers to the doing of

business within the United states, and limits the applicability
of the provision wherein it appears to the performance by such
institutions or agencies of t'unctions within the united states.
Financial institution.

Each agency, branch or office

within the United states of any person doing business in one or
more of the capacities listed below:
(1)

a bank;

(2)

a broker or dealer in securities;

(3)

a person who engages as a business in dealing

in or exchanging currency as, for example, a dealer in foreign

exchange or a person engaged primarily in the cashing of checks;

(4)

a person who engages as a business in the

iSSUing, selling or redeeming of travelers' checks, money orders,
or similar instruments I except one who does so as a selling agent eccllls1vely
or as an incidental part of another business;

6
(5)

an operator of a credit card system which

issues, or authorizes the issuance of, credit cards that may be
used for the acquisition of monetary instruments, goods, or
services outs-ide the ua1ted states.'

(6)

a licensed transmitter of funds, or other

person engaged in the business of transmitting funds abroad for
others.
Foreign bank.

A bank organized under foreign law, or an

agency, branch or office located outside the United states of a
bank.

The term does not include an agent, agency, branch or

office within the United states of a bank organized under
foreign law.
Investment security.

An instrument which

(1)

is issued in bearer or registered form;

(2)

is of a type commonly dealt in upon securities

exchanges or markets or canmonly recognized in any area in which
it is issued or dealt in as a medium for investment;
(3)

is either one of a class or series or by its

terms is divisible into a class or series of instruments; and

(4) evidences a share, participation or other
interest in property or in an enterprise or evidences an obligation of the issuer.

7
MOIletar;y instruments.

Coin or currency ot the United

states or of any other COtmtry, travelers' checks, money orders,
investment securities in bearer form or otherwise in such form that
title thereto passes upon delivery, and negotiable instruments
(except warehouse receipts or bills of lading) 111 bearer f'orm or
otherwise in such form that title thereto passes upon delivery.
The term does not include bank checks made payable to the order of
a named person which have not been endorsed or which bear restrictive
endorsements.
Person.

An individual, a corporation, a partnership, a

trust or estate, a joint stock company, an association, a syndicate,
joint venture, or other tmincorporated organization or group, and
all entities cognizable as legal personalities.
Secretary.

The Secretary of the Treasury or any person

duly authorized by the Secretary to perform the f'tmction mentioned.
Transaction in currency.

A transaction involving the

physical transfer of' currency fran one person to another.

transaction which is a transfer of' funds by means ot bank check,
bank draft, wire transfer, or other written order, and which does
not include the physical transfer of currency is not a transaction
in currency within the meaning of this part.

United states.

The various States, the District of'

CollBbia, the Caamonwealth of Puerto Rico, and the territories
and possessions of the United States.

8
SUBPART B - REPORTS RmUIRED TO BE MADE

§103.21

Determination by the Secretary

The Secretary hereby determines that the reports required by
this subpart have a high degree of usefulness in criminal, tax,
or regulatory investigations or proceedings.
§103.22

Reports of

Cu-~ency

Transactions

Each financial institution shall file a report of each
deposit, withdrawal, exchange of currency or other payment or
transfer, by, through, or to such financial institution, which
involves a transaction in currency of more than $10,000.
Except as otherwise directed in writing by the Secretary,
this section shall not (1) require reports of transactions with
Federal Reserve Banks or Federal Home Loan Banks; (2) require
reports of transactions solely with, or originated by, financial
institutions or foreign banks; or (3) require a bank to report
transactions with an established customer maintaining a deposit
relationship with the bank, in amolmts which the bank may reasonably conclUde do not exceed amounts camnensurate with the
customary conduct of the business, industry or profession of the
custClJ'ler concerned.

A report listing such custClJ'lers who engage

in transactions which are not reported because of the exemption
contained in this paragraph shall be made to the Secretary upon
deaand therefor made by him.

§l03. 23

R~orts

(a)

of Transportation of Currency or Monetary Instruments

Each person 1;iho physJcally -c!'&::J.spvr··Cs, mails, or

ships, or causes to "be pilYGically
currency or other monetary

trarjSp~jlted.,

instrume~ts

L~ ar~

mai':"ed

Ol~

shipped,

aggregate amount

exceeding $5,000 on anyone occasion from the United states to
any place outside the United sta"ces, or into the United states

fram any place outside the United states, shall make a report
thereof.

A person is deemed to have caused such

tr~lsportation,

mailing or shipping when he aids, abets, cOLl!lsels, commands, procures or requests it to be done by a financial institution or any
other person.

A transfer of funds through normal banldng pro-

cedures which does not involve the physical transportation of
currency or monetary instruments is not required to be reported
by this section.
(b)

Each person who receives in the United states cur-

rency or other monetary instruments in an aggregate amount
exceeding $5,000 on any one occasion which have been transported, mailed, or shipped to such person from any place outside
the United states with respect to which a report has not been
filed under subsection (a) of this section, whether or not
required to be filed thereunder, shall make a report thereof,
stating the amount, the date of receipt, the form of monetary
instruments, and the person from whcrn received.
(c)

This section shall not require reports by (1) a

federal reserve bank, (2) a bank, a foreign bank, or a broker or

10
dealer in securities,in respect to currency or other monetary instruments mailed or shipped through the postal service or by cammon carrier,
(3) a person who is not a citizen or resident of the United states in

respect to currency or other monetary instruments mailed or shipped
from abroad to a bank or broker or dealer in securities through the
postal service or by cammon carrier,

(4) a cammon carrier of pas-

sengers in respect to currency or other monetary instruments in the
possession of its passengers, (5) a common carrier of goods in
respect to shipments of currency or monetary instruments not
declared to be such by the shipper, (6) a travelers' check issuer
or its agent in respect to the transportation of travelers' checks
prior to their delivery to selling agents for eventual sale to the
public, nor by (7) a person engaged as a business in tpe transportation of currency, monetary instruments and other commercial papers
with respect to the transportation of currency or other monetary
instruments overland between established offices of banks or brokers
or dealers in securities and foreign banks.
(d)

This section does not require that more than one

report be filed covering a particular transportation, mailing or
shipping of currency or other monetary instruments with respect to
which a complete and truthful report has been filed by a person.
However, no person required by subparagraphs (a) or (b) of this
section to file a report shall be excused from liability for failure
to do so if, in fact, a complete and truthful report has not been
filed.

11
§103.24

Reports of Foreign Financial Account~

Each person subject to the jurisdiction of the United states
(except a foreign subsidiary of a United. states pt;rson) having a
financial interest in, or signature or otl'1er authority over, a bank,
securities or other financial account in a foreign country shall
report such relationship as required on his federal income tax
return for each year in which such relationship exists, and shall
provide such information concerni.."1g oo;<ch such account as shall be
specified in a special tax fom. to
§103.25

'[,e

filed by such persons.

Filing of Reports
(a)

Reports required to be filed by the first parB8raph

of Section 103.22 shall be filed on or before the forty-fifth day
following that on which the reported transactions occur.

They

shall be filed with the Camnissioner of Internal Revenue on forms
to be prescribed by him, with the approval of the secretary.

All

information called for in such forms shall be furnished.
(b)

Reports required to be filed by Section 103.23(a)

shall be filed at the time of entry into the United States or at
the time of departure, mailing or shipping from the United States,
unless otherwise directed or permitted by the Commissioner of
Customs.

They shall be filed with the Customs officer in charge

at any Customs port of entry or departure, or as otherwise permitted
or directed by the Commissioner of Customs.

If the currency or

other monetary instruments with respect to which a report is

12
required do not accompany a person entering or departing from the
United states, such reports may be filed by mail on or before the
date of entry, departure, mailing or shipping, with the Commissioner
of Customs, Attention:
D. C.

20226.

Currency Transportation Reports, Washington,

They shall be on forms to be prescribed by the

Secretary and all information called for in such forms shall be
furnished.
(c)

Reports required to be filed by Section I03.23(b)

shall be filed with the

C~missioner

of customs within thirty days

after receipt of the currency or other monetary instruments.

They

may be filed with the Customs officer in charge at any port of entry
or departure, or by mail addressed to the Commissioner of Customs,
Attention:

Currency Transportation Reports, Washington, D. C. 20226.

They shall be on forms to be prescribed by the Secretary and all
information called for in such forms shall be furnished.
(d)

Forms to be used in making the reports required by

Sections 103.22 and 103.23 may be obtained from any Internal Revenue
office; in addition, forms to be used in making the reports required
by Section 103.23 may be obtained from any office of the Bureau of
Customs.
§l03.26

Identification Required

Before effecting any transaction with respect to which a
report is required under the first paragraph of Section 103.22,

end

Verification of identity for e. customer of th;:: finaXlcial. inEtitlltion
depositing or withdrawing fUl1.d.s may\:1e by
or other mlIIlber on the books of the

~'eference

iEst:'~ :'J.tion "

identity in any other Cfise may "be by exsmi-nation,

to his account

Verification of
foT'

example, of

a driver's license, passport, alien iQentification card, or other
appropriate document normally acceptable as
cation.

means of identifi-

The

Sec:t'e~a:r':I ~,('reb;,

dctenrlines th,it the records required to

nal, tax, r)r i:e;Z'...l1.atory invest.igatio:ns or proceedings.

§l03.32

ReC0ris "to be Made and Retained by Persons Having
Interests in Foreign Financial Accounts

Fin~ncial

Records of accounts required by Section 103.24 to be reported
on a federal income tax return shall be retained -by each person
having a

fL~ancial

interest in any such account.

Such records

shall contain the name in which each such account is maintained,
the number or other designation of such account, the name and
address of the foreign bank or other person with whom such account
is maintained, the type of such account, and the maximum value of
each such account during the reporting period.

Such records shall

be retained for a period of five years and shall be kept at all
times available f-'or ir,spection as authorized by law.

In the

computation of the perj.od of five years, there shall be disregarded

ffilY

period beginning with a date on which the taxpayer

is indic ted or infc)nrration instituted or: account of the filing of
a false Gr :i:'raucLuley;t :<.:der8.1 jricorr.e tax return or failing to file
a feder8.l. ir:cOIrlc tax l'et 'cuT} J a".d ending vi th the date on which
final dispos i tim; is jf:aoe of the cri.r:J.inal proceeding.

15
§103.33

Records to be Made and Retained by Financial Institutions

Each financial institution shall retain either the original
or a microfilm or other copy or reproduction of each of the
following:
(a)

a record of each extension of credit in an amount

in excess of $5,000, except an extension of credit secured by an

interest in real property, which record shall contain the name
and address of the person to whom the extension of credit is made,
the amount thereof, the nature or purpose thereof, and the date
thereof;
(b)

a record of each advice, request, or instruction

received regarding a transaction which results in the transfer of
funds, or of currency, other monetary instruments, checks, investment securities, or credit, of more than $10,000 to a person,
account, or place outside the United states;
(c)

a record of each advice, request, or instruction

given to another financial institution or other person located
within or without the United states, regarding a transaction
intended to result in the transfer of funds, or of currency,
other monetary instruments, checks, investment securities, or
credit, of more than $10,000 to a person, account or place outside
the United states;

16
§103.34 Additional Records to be Made and Retained by Banks
(a)

With respect to each deposit or share account opened

with a bank after June 30, 1972, by a person residing or doing
business in the United states or a citizen of the United states,
such bank shall secure and maintain a record of the taxpayer
identification number of the person maintaining the account; or
in the case of an account of one or more individuals, such bank
shall secure and maintain a record of the social security number
of an individual having a financial interest in that account.
(b)

Each bank shall, in addition, retain either the

original or a microfilm or other copy or reproduction of each of
the following:
(1)

Each document granting signature authority over

each deposit or share account;
(2)

Each statement, ledger card or other record on

each deposit or share account, showing each transaction in, or
with respect to, that account;
(3)

Each check, clean draft, or money order drawn

on the bank or issued and payable by it, except those drawn on
accounts which can be expected to have drawn on them an average

of at least 100 checks per month over the calendar year or on
each occasion on which such checks are issued, and which are
(i) dividend checks, (ii) payroll checks, (iii) employee benefit
checks, (iv) insurance claim checks, (v) medical benefit checks,
(vi) checks drawn on governmental agency accounts, (vii) checks
drawn by brokers or dealers in securities, (viii) checks drawn

on fiduciary accounts, (ix) checks drawn on other financial
institutions, or (x) pension or annuity checks;
(4)

Each item other than bank charges or periodic

charges made pursuant to agreement with the custaner, canprising
a debit to a custaner's deposit or share account, not required to
be kept, and not specifically exempted, under subparagraph (b)(3)
of this section;
(5) Each item, inc luding checks, drafts, or transfers

of credit, of more than $10,000 remitted or transferred to a
person, account or place outside the united states;

(6)

A record of each remittance or transfer of funds,

or of currency, other monetary instr\Dl1ents, checks, investment
securities, or credit, of more than $10,000 to a person, account
or place outside the United states;

18
(7)

Each check or draft in an amount in excess of

$10,000 drawn on or issued by a foreign bank, purchased, received
for credit or collection, or otherwise acquired by the bank;

(8) Each item, including checks, drafts or transfers of credit, of more than $10,000 received directly and not
through a domestic financial institution, by letter, cable or
any other means, from a person, account or place outside the
United states;
(9)

A record of each receipt of currency, other

monetary instruments, checks, or investment securities, and of
each transfer of funds or credit, of more than $10,000 received
on anyone occasion directly and not through a domestic financial
institution, from a person, account or place outside the united
states; and
(10)

Records prepared or received by a bank in the

ordinary course of business, which would be needed to reconstruct
a demand deposit account and to trace a check deposited in such
account through its domestic processing system or to supply a
description of a deposited check.

This subsection shall be

applicable only with respect to demand deposits.

19
§l03.35 Additional Records to be Made and Retained by Brokers and
Dealers in Securities
(a)

With respect to each brokerage account opened with

a broker or dealer in securities after June 30, 1972, by a person
residing or doing business in the united states or a citizen of the
united states, such broker or dealer shall secure and maintain a
record of the taxpayer identification number of the person mainta1ning the account; or in the case of an account of one or more
individuals, such broker or dealer shall secure and maintain a record
of the social security number of an individual having a financial
interest in that account.
(b)

Every broker or dealer in securities shall, in addition,

retain either the original or a microfilm or other copy or reproduction of each of the following:
(1)

Each document granting signature or trading

authority over each customer's account; .
(2)
(2), (3),

Each record described in section 240.17a-3(a)(1),

(5), (6), (7), (8) and (9) of Title 17, Code of Federal

Regulations;
(3~

A record of each remittance or transfer of funds,

or of currency, checks, other monetary instruments, investment
securities, or credit, of more than $10,000 to a person, account or
place outside the united states;

(4) A record of each receipt of currency, other
monetary instruments, checks, or investment securities and of each
transfer ot funds or credit, of more than $10,000 received on any

one occasion directly and not through a domestic financial institution, from any person, account or place outside the United states.
§l03.36

Nature of Records and Retention Period
(a)

Wherever it is required that there be retained

either the original or a microfilm or other copy or reproduction
of a check, draft, monetary instrument, investment security, or
other similar instrument, there shall be retained a copy of both
front and back of each such instrument or document, except that no
copy need be retained of the back of any instrument or document
which is entirely blank or which contains only standardized printed
information, a copy of which is on file.
(b)

Records required by this subpart to be retained by

financial institutions may be those made in the ordinary course
of business by a financial institution.

If no record is made in

the ordinary course of business of any transaction with respect
to which records are required to be retained by this subpart,
then such a record shall be prepared in writing by the financial
institution.
(c)

Records which are required by Section l03.3 4 (b)(lO)

to be retained by banks shall be retained for a period of two years.
All other records which are required by this subpart to be retained
by financial institutions shall be retained for a period of five
years.

All such records shall be filed or stored in such a way

//C/
as to be accessible within a

res.;~'Yi[,:'- :'...~- C)t;CV'..

oi -:

ill!'''')

taking into

expired since the .I.·ecord vas rrk-;d.e.

§l03.37

Person Outside the

Un:::""~F.c.

c;. Tt.,c,s

funds, or of currency, other mOl1etexy i.nstri.!TIlents, checks, invest-

ment securities, or credit to the domEstic
whose address is

knO\/TI by <~e

gCC:ClUl1t

of a person

per,e,er_ lilakln[1, the rem::'.. ttance or

transfer .. to be outside the United States, sh8.11 be deemed to be
a remittance or transfer to a person outside the United states,
except that, unless otherwise directed by the Secretary, this
section shall not apply to a transacticn on the books of a domestic
financial institution involving the account of a custClIler of such
institution whose address is wi thin approximately fifty miles of
the location of the institution, or who is known to be temporarily
outside the United states.

§l03. 41

nollers as : Ee -1_ud.:Lng Foreign Currency

Vl~C:_·2V(_.,~·

§l03. 42

--'

-.-----~----------

:~:irt

ir tOt:;

Photograp;'i.,~

~-Jm(·unt

is stateJ in dollars, it shall

or Other Reproductions of Government

Ob liga"l1. 011~.
Nothing hereil: contained shall require or authorize the microfilming or other' reVfo.illction of

(J) currency or other obligation or security of
the United states as defined in

18 u.s.c. 8,

(2:; any obligation or other security of any
foreign government,
the reproduction of lfhich is prohibited by law.

§l03.43

Availability of Infonnation

The Secretar.:r may make any information set forth in any reports
recf:ived pursuant

t,(·

this part available to any other department or

agency of the United states upon the request of the head of such
department or ae;enr.y, made in i-!ri ting and stating the particular
information desired, the criminal, tax, or regulatory investigation
or proceeding in connection with wbich the information is sought,
and the official need therf:for.

§l03.44

Disc lus~lre

All reports req;lirp:J.. lL'1der this part and all records of such

reports are s pec:ifiC'ally exempted from disclosure under section

§l03. 45

Excep-cions "
."~-"~

J:::,~::'l!"_r(J\'.'

-I"

--",,,->~,.~-

.•

wri tten order or aut ,(lOT ~,?;atici'

authorized. by

'~, ~

t- ·~C(l~'J,
r:3..;.~li
---' - - .. -..:..- ·_o......:.L ______ ~. _

.R.:-"o\)rts

_____.':~.,.........._. _-"~

~.xem~otions

8 t.8tut,E'",

this part.

" -"'--or" zatl.' 011 J

.....~.

8J~J i..... . 1 J . . . t .

.. \

define all terms used herei."1.

§l03.46

Enforcement
(a)

Respons~,bil..i.':-:z,'

requirements of this part i5

respect to national ban':f\.S

delega~~n

8..1',;1., 'f:, 3.Tlk3

Reserve System, with respect
Reserve System,:

for AsslU:ing r:ampliance with the

t~)

~'_r;

-:'.::1E' Iistrj ct of Coltnnbia;

statE; baz;.k lTleLbe:cs 8f the Federal

(4)

to the Administrator of the National Credit

Union Administration, ",,"itt respect to federal credit unions;
(5)

to the Federal Deposit Insurance Corporation,

with respect to all other banks except agents of foreign banks
which agents are not supervised by state or federal bank supervisory authorities;
(6)

to the Securities and Exchange Camnission, with

respect to brokers and dealers in
(7)

se~urities;

to the Commissioner of Customs with respect to

§l03.23 and §l03.48;
(8)

to the Carnmissioner of Internal Revenue except

as otherwise specified
(b)

this section.

Over-all responsibility for coordinating the pro-

cedures and efforts of the agencies listed herein and assuring
compliance with this part, is delegated to the Assistant Secretary
(Enforcement, Tariff &ld Trade Affairs, and Operations).
reports shall be made

Periodic

each such agency to the Assistant Secre-

tary, with copies to the General Counsel of the Treasury Department
and to the Commissioner of

L~ternal

Revenue.

§103.47

Civil Penalty
(a)

For any willful violation of any requirement of this

part, the Secretary may assess upon any danestic financial insti tution, and upon any partner, director, officer or employee thereof
who willfully participates in the violation, a civil penalty not
exceeding $1,000.
(b)

For any failure to file a report required tmder

Section 103.23 or for filing such a report containing any material
omission or misstatement, the Secretary may assess a civil penalty
up to the ainount of the currency or monetary instrunents transported, mailed or shipped, less any amount forfeited under Section
103.48.

26
§103.48

Forfeiture of Currency or Monetary Instruments

Any currency or other monetary instruments which are in the
process of any transportation with respect to which a report is
required under Section 103.23 are subject to seizure and forfeiture
to the United states if such report has not been filed as required
in Section 103.25, or contains material omissions or misstatements.
The Secretary may, in his sole discretion, remit or mitigate any
such forfeiture in whole or in part upon such terms and conditions
as he deems reasonable.
§103.49

criminal Penalty
(a)

Any person who willfully violates any provision of

this part may, upon conviction thereof, be fined not more than
$1,000 or be imprisoned not more than one year, or both.

Such

person may in addition, if the violation is of any provision
authorized by Title I of Public Law 91-508 and if the violation
is committed in furtherance of the commission of any violation
of Federal law punishable by imprisonment for more than one year,
be fined not more than $10,000 or be imprisoned not more than
five years, or both.
(b)

Any

person who willfully violates any provision of

Title II of Public Law 91-508, or of this part authorized thereby,
where the violation is either
(1)

cc.mmitted in furtherance of the canmission

of any other violation of Federal law, or

2'7
(2)

caami tted as part ot a pattern ot illegal activity

1nvolv1l'lg transactions exceeding $100,000 in any tvelve-month period,
may, upon conviction thereot, be tined not more than $500,000 or be
:1mprisaned not more than tive years, or both.
(c)

Any

person who knowingly makes any talse, ticti tious

or traudulent statement or representation in any report required
by this part may, upon conviction thereot, be tined not more than
$10,000 or be imprisoned not more than 5 years, or both.
§l03.50 Ebtarcaaent Authority with respect to Transportation ot
CUrrency or Monetary Instruments
(a)

It the Secretary has reason to believe that currency

or monetary instr\lllents are in the process of transportation and
with respect to wbich a report required under Section 103.23 ot this
part bas not been tiled or contains material anissions or misstate-

aents, he may apply to any court of canpetent Jurisdiction for a
search warrant.

Upon a showing of probable cause, the court may

issue a warrant authorizing the search of any or allot the
following:
(1)

One or more designated persons.

(2)

One or more deaf. gnated or described places

(3)

One or more dea1gnated or described letters,

or premis.es.

parcels, packages, or other physical objects.

(4)

One or more designated or described vehicles.

28
Any application for a search warrant pursuant to this section shall
be accompanied by allegations of fact supporting the application.
(b)

This section is not in derogation of the authority

of the Secretary under any other law or regulation.
§l03.51 Effective Date
This part shall became effective July 1, 1972.

Currency Transaction Report

4789

onn

Replaces TCR-I)

File a separate report for each transaction

1I1/1WI1I~ 9 72)
1.~/f1III!It

0, the Treasury

(Complete all applicable parts-see 'instructions)

nternl l Revenue ServIce

M,5'

Identity of person who conducted this transaction with the financial institution

~8me (Last, first and middle initial)

Social security number

~umber and street

Business, occupation or profession

:ity or town, State and ZIP code

1:m"D

"Person or organization for whom this transaction was completed (Complete only if different than Part I)

Name

Identifying number

Number and street

Business, occupation or profession

City or town, State and ZIP code

l:mllil

Description of transaction (If additional space is needed, attach a separate schedule)

1. Nature of transaction (check the applicable boxes)

o Deposit

o Withdrawal
o Currency exchange

Check--------_._cashed
----2. Total amount of currency transaction
'(in U.S. dollars)

--~-~--

o
o
o
o

Check purchased
Traveler's checks purchased
Security purchase (specify) ..................................................................... .
Other (specify)

5. If other than U.S. currency is involved, please furnish the following information:

Currency name

4. Date of transaction (Month, day and
year)

3. Amount in denominations of $100 or
higher

----~

country.

Total amount of foreign currency

6. If a check was involved in this transaction, please furnish the following
information. (See
._--_.
. . . :instructions):
..---------'----------Date and amount of check

Payee

Drawer of check

Drawee bank and City of location

liltilN'

Type of identification presented in this transaction

By customers:

I By others:

o Savings account

number ................................. .

Checking account numbeL ............................. ..
Share account numbeL ..................................... .

Loan account number ........................................ .

o Safety deposit box number ................................

o Other

ail::;: ]

Driver's permit

Passport

Alien ID card

(specify)

State

Number

Country

Number

Country

Number

[J Other (specify)

Financial institution reporting the financial transaction
, Identifying number (see instructions)

Name and address

Business activity

Sign ~

lere

-_ ............ ---- ... -- ---------_ ... -_... -.. -_ ..... -_ .... ----- .. --Authorized signature

TrtI.

.. -_ ....... --- -_ ........ ----------_ ..

Oat.

'1-'757
General Instructions

Part

This report is required by Treasury Department regulations (31 Code
of Federal Regulations 103).
July
..
Who Must File.-Beginning
. I, 1 ?72, each financial
'nstitution (as described in these InstructIOns) shall file are·
~ort of each deposit, withdrawal, exchange of currency or
other payment or transfer, by, throu~h,
to such financial
institution, which involves a transaction In currency of more
than $10,000.
Exceptim'rs.-Financial institutions are not required to tile
Form 4789 for transactions:
(1) with Federal Reserve Banks or Federal Home Loan
Banks;
(2) solely with, or originated by, financial institutions or
foreign banxs; or
(3) between a bank and established customers maintain·
ing a deposit relationship with the bank, in amounts
which the bank may reasonably conclude do not exceed
amounts commensurate with the customJry conduct of
the customer's business, industry or profession.
However, upon request each bank shall submit a report
listing those customers who engage in transJctions which
were not reported because of the exemption in (3).
When and Where to File.-This report shall be filed on or
before the 45th day fellowing the date of the transaction with
the Internal Revenue Service Center, 11601 Roosevelt Boule·
vard, Philadelphia, Pennsylvania 19155. Forms may be ob·
tained from any Internal Revenue Service office.
Identifying Number.-Social security number or employer
identification number if other than individual.

Identification Required.-Before any transaction is effected
financial institution shall verify and record the identity, and
'ecord the account number on its books or the social security
)r taxpayer identification number, if any, of a person with
vhom or for whose account such transaction is to be effected.
lerification of identity for a customer of the financial institu·
ion depositing or withdrawing funds may be by reference to
lis account or other number on the books of the institution.
'erification of identity in any other case may be by exam ina·
ion, for example, of a driver'S license, passport, alien identifi,
at ion card, or other appropriate document normally accept·
ble as a means of identification.

Penalties.-Civil and criminal penalties are provided for
ailure to file a report or to supply information, and for filing
I false or fraudulent report. See sections 103.47 and 103.49
If the regUlations.

ipecific Instructions
Part 1.-(1) In the address block, enter the permanent
address of the person conducting the
transaction.

(2) In the social security block, enter the socia:
security number of the person conducting
the transaction. If the person has no num·
ber, write "None" in this block.
Part 11.-(1) In the name block, individuals should enter
their last name, first name and middle initial,
if any, in that order. All others should enter
their complete organization name.
(2) In the identifying number block, enter the
social security number or employer identi.
fication number.
Part III, line 6.-This part should be completed only where
:heck is cashed or a bank check is purchased with currency.
Part

IV.-See instruction "Identification Required," above.

V-Institutions may also enter in the name and
address block other identifying inforrnatioft.

Definitions
Bank.-Each agent, agency, branch or office within the
United StJt •.'s of a for(;ign bJnk and each agency, branch or
office Within the United States of any person doing business
in one or more of the capacities listed below:
(1) a cor'lmercial bank or trust company organized under

the laws of any state or of the United States;
(2) a private bank;
(3) a savings and loan association or a building and loan
assocla~ion organized under the laws of any state or
of the United States;

(4) an iI1sured institution as defined in section 401 of the
National Housing Act;
(5) a savings bank, industrial bank or other thrift institu·
tion;

(6) a credit union organized under the laws of any state
or of the United States; and
(7) any other organization chartered under the banking
laws of Jny state and subject to the supervision of the

bank supervisory authorities of ~ state.

Currency.-The coin and currency of the United States or
of any other country, which circulate in and are customarily
used and accepted as money in the country in which issued.
It includes United States silver certificates, United States
notes and Federal Reserve notes, but does not include bank
checks or other negotiable instruments not customarily ac·
cepted as money.
Financial Institution.-Each agency, branch or office within
the United States of any person doing business in one or more
of the capacities listed below:
(1)

a ban,,;

(2) a broker or dealer in securities, registereu .~. (equired
to be ~egistered with the Securities and Exchange Com·
m i ssi0n 'Jnder the Securities Exchange Act of 1934;

(3)

'" r:;er;Gr. who engages as a business in dealing in or

e;,changi,lg currency as, for example, a dealer in for·
r:igil exchange or a person engaged primarily in the
cashing of checks;
(4) a aerson who engages as a business in the issuing,

seiling or redeeming of travelers' checks, money or·
ders or similar instruments, except one who does
so a's a s811ing agent exclusively, or as an incidental
f)3rt of dncther business;

(5) an operator of a credit card system which issues, or
authorizes the issuance of, credit cards that may be
used for the acquisition of monetary instruments,
goods. or services outside the United States.
(6) a licrnspd transmitter of funds, or other person en·

gaged in the business of transmitting funds abroad
for ot hers.
Person.-Afl individual, a corporation, a partner~hip, a
trust ar estate, a joint stock company, an associati~n, ~ syn·
dicate, iair,t venture, or other unincorporated orga.n~zatlon or
group, ar"ld ali entitles cognizable as legal personalities.
Transactio": in Currency.-A transaction involving the phys·
iC<l1 transfer Q: currency from one person to another. A trans·
action VJ:ilch is a T,9C;fer of funds by means of bank che~k,
bank draft, Wire tr3;;sfer, or other written order, and which
does not Inciude the physical transfer of curr~ncy IS not a
transaction in currency within the meaning of thiS part.

Report of International Transportation of
Currency or Monetary Instruments
D.,.rtmenl " tbl Tro.,ury
11dIm1' RlVlnu. S,rvie.

1@1t]

Date of currency or monetary instrument activity .

... ..... ...........• 19

This form is to be

tiled with the
Bureau of Customs

Person Transporting, Mailing, Shipping, or Receiving a Monetary Instrument
(Items 5 through 11 are applicable "to alien irn:lividuals only)

1. Name (last or family, first. and middle) or business name

2. Identifying number

3. Check whether the currency or
monetary instrument was:
(a) 0 Received
(b) Shipped or mailed:
Into the U.S.
From the U.S.

(see instructions)
4. Permanent address in United States or abroad

o
o

5. Address while In the United States

6. Date of birth (month. day, and year)

8. Visa date

I 7. Alien registration card number. if any

9. Place United States visa was issUed

10. Of what country are you a citizen or subject?

Entering the U.S.City •.•.•.......••••••...•......

leaving the U.S.City

/11. Passport number and country

12. Were you acting as an agent, attorney. or in other capacity for anyone in this currency or monetary instrument
. activity?
• , D Y e s
If "Yes," please complete the following:

CI) Name of person in whose behalf you are acting ••.......•....•.•.........................• _ ••..•...•..••..••••.•.••••.•.•••.••••.••••....••......
(b) Complete address of that person ..•.....••....................•..•........•............•....•• _ •.•••••....•..••••.••••••.•••......••.•••.....•.•......
(c) Business activity. occupation or profession of that person

QijtMlj,)

Currency and Monetary Instrument Information (See Instructions)

13. Type and amount of currency and lor monetary instrument:
Ca)
(b)

0
0
0

Coins (specify amount) •
Currency (specify amount) •

•
•

• $ .• _ .......•.. _ ......•.•..
• ._ ••• _. ___ •• ___ •• _____ •__ •

•
•

(e)
Bearer instrument (specify type and amount) .•••.•• _••••••••••••• _._ •••••••• _••••••.• __ ._ •••• _•••••• __ •••• __ 1_ _ _ _ _ _ _ __
Cd) Total amount (add lines (a), (b) and (c» .
• • $
14. If other than United States cu~ren~y is involved, please complete the following:
Ca) Currency na me ••• , ••••••. _•••••• _ ••• _.~ •..••• _•••••••••...••.•.. _'" , ••. , ••••• _.••• ___ ..••.•. '_'_"_"""'" ••••.•.•••• _••••••• '_""""""""'" .
(b) Cou ntry """"" •••••••••••......•.•...•.••••.•.•.•••••......... "" ._ •..•..••..•...•••••.•••.••.•• _._._ •• __ •••••••••••••....••••••••••••..•••..••.•....
(c) Equivalent in United States dolla~ (specify .~mount) .
• $
5. Name of person from whom the currency or monetary instrument was received (to be completed by recipients only>. .............. .
6. If the currency or monetary instrument was mailed, shipped. transported or carried

please complete the following:

(a) Method of sh Ipme'1t """ ...........•......................... '" ................ '" ............................................................... .
(b) Nar1e of tr3rS;Jor:er or C2"r:er
Under J:ena:t!es, of

perJu~j. I ~to:",lare t::at I have exarr.,ned thiS report. and to the

be5t of my knonie:_ ..=:: and belIef It IS true, c.::>rrcct and

CCr;1~ ~te.

,ign Here ~ ............. __ ...................................................................................___ ......................... _..................... _., .. .
Slenatu"

- •••••• - ••• '" .-••• -•••••••-••••••••••••..•••.. -. Ti iii (o;;,;.r.· ,ie.)··············· -... -. "'-"""" -... -... ' --'-'"

.-......... ·······liiii............. , ..... .

Instructions
This report is required by Treasury Department regulations (31 Code of Federal Regulations 103).
July
Who Must File.-Beginning
1,
1972, each person who physically transports, mails, or ships, or causes to be
physically transported, mailed, or sh ipped.
currency or other monetary instruments
in an aggregate amount exceeding $5,000
on anyone occasion from the United
States to any place outside the United
States, or into the United States from
any place outside the United States, shall
make a report thereof. A person is
deemed to have caused such transportation, mailing or shipping when he aids,
abets, counsels, commands, procures or
requests it to be done by a financial institution or any other person. A transfer of
funds through normal banking procedures
which does not involve the physical transportation of currency or monetary instruments is not required to be reported.
Also each person Who receives in the
United States currency or other monetary
instruments in an aggregate amount exceeding $5,000 on anyone occasion
Nhich have been transported. mailed, or
shipped to such person from any place
outside the United States with respect
to which a report has not been filed shall
make a report.
Exceptions.-The following persons are
not required to file reports: (1) a Federal
reserve bank, (2) a bank, a foreign bank,
" a broker or dealer in securities in re;pect to currency or other monetary inltruments mailed or shipped through the
)ostal service or by common carrier,
(3) a person who is not a citizen or resijent of the United States in respect to
:urrency or other monetary instruments
nailed or shipped from abroad to a bank
lr broker or dealer in securities through
;he postal service or by common carrier,
.4) a common carrier of passengers in
'espect to currency or other monetary
nstruments in the possession of its pasiengers, (5) a common carrier of goods
n respect to shipments of currency or
nonetary instruments not declared to be
iuch by the shipper, (6) a travelers' check
ssueror its agent in respect to the trans.
lortatlon of travelers' checks prior to
heir delivery to selling agents for even.
ual sale to the public, nor by (7) a peron engaged as a busi ness I n the transortatlon of currency, monetary instrulents and other commercial papers With
!spect to the transportation of currency
r other monetary instruments overland
etween established offices of banks or
~okers or dealers in securities and forIgn banks.
When and Where to File:
A R ..
. eClplents.-Each person who reo
.'Ive-;, currency or other monetary instru-

ments shall file Form 4790, within 30
days after receipt, with the Customs officer in charge at any port of entry or
departure or by mail with the Commissioner of Customs, Attention: Currency
Transportation Reports, Washington, D.C.

(5) a savings bank, industrial bank or
other th rift institution;
(6) a credit union organized under the
laws of any state or of the United
States; and

20226.

B. Shippers or Maiters.-If the currency or other monetary instrument does
not accompany the person entering or
departing the United States, Form 4790
may be filed by mail on or before the date
of entry, departure, mailing, or shipping
with the Commissioner of Customs, Attention: Currency Transportation Reports,
Washington, D.C. 20226.
.
C. Traveters.- Travelers shall file Form

4790 at the time of entry into the United
States or the time of departure from the
United States with the Customs officer
in charge at any Customs port of entry
or departure.
An additional report of a particular
transportation, mailing, or shipping of
currency or other monetary instruments,
is not required if a complete and truthful
report has already been filed. However.
no person otherwise required to file a
report shall be excused from liability for
failure to do so if, in fact, a complete
and truthfu I report has not been filed.
Forms may be obt3ined from any Internal
Revenue or Bureau of Customs office.
Penalties.-Civil and criminal penalties are provided for failure to file a
report, supply information, and for filing
a false or fraudulent report. In addition,
the currency or monetary instrument may
be subject to seizure and forfeiture. See
sections 103.47, 103.48 and 103.49 of
the regulations.

Definitions
Bank.-Each agent, agency, branch or
office within the United States of a foreign bank and each agency, branch or
office within the United States of any
person doing business in one or more of
the capacities listed:

(7) any other organization chartered
under the banking laws of any
state and subject to the supervision of the bank supervisory authorities of a state.
Foreign Bank.-A bank organized
under foreign law, or an agency, branch
or office located outside the United States
of a bank. The term does not include
an agent, agency, branch or office within the United States of a bank organized
under foreign law.
Broker or Dealer In Securitles.-A
broker or dealer in securities, registered
or required to be registered with the Securities and Exchange Commission under
the Securities Exchange Act of 1934.
Identifying Number.-Individuals
should enter their social security number,
if any. However, aliens who do not have
a social security number should enter
passport or alien registration number. All
others should enter their employer identification number.
Investment Security.-An instrument
which: (1) is issued in bearer or registered
form; (2) is of a type comrvJnI'1 dealt
in upon securities exchanges (
larkets
or commonly recognized in .JnYlrea in
which it is issued or dealt in as a medium
for investment; (3) is either one of a
class or series or by its terms is divisible into a class or series of instruments;
and (4) evidences a share, participation
or other interest in property or in an
enterprise or evidences an obligation of
the issuer.

(3) a savings and loan association or

Monetary Instruments_~oin or currency of the United States or of any
other country, travelers' checks, money
orders, investment securities in bearer
form or otherwise in such form that
title thereto passes upon delivery, and
negotiable instruments (except warehouse receipts or bills of lading) in bearer
form or otherwise in such form that title
thereto passes upon delivery. The term
does not include bank checks made payable to the order of a named person
which have not been endorsed or which
bear restrictive endorsements.

a bUilding and loan association
organized under the laws of any
state or of the United States;

a partnership, a trust or estate, a jOint

(1) a commercial bank or trust com-

pany organized under the laws of
any state or of the United States;
(2) a private bank;

(4) an insured institution as defined

. in section 401 of the National
Housing Act;

Person.-An individual, a corporation,
stock company, an association, a syndi·
cate, jOint venture, or other unincorporated organization or group, and all entities cognizable as legal personalities.

The Departmento! the TREASURY
WASHINGTON, D.C. 20220

TELEPHONE W04·2041

REMARKS OF THE HONORABLE EUGENE T. ROSSIDES
ASSISTANT SECRETARY OF THE TREASURY
(ENFORCEMENT, TARIFF AND TRADE AFFAIRS, AND OPERATIONS)
BEFORE THE
DIRECTORS' CONGRESS OF THE AMERICAN FOOTWEAR INDUSTRIES ASSOCIATION
AT
LA COSTA, CALIFORNIA
~h 2, 1972
10:00 A.M.
THE ANTIDUMPING ACT, 1921
THREE YEARS OF REJWENATION
INTRODUCTION

u.s.

In his Report to the Congress of February 9, 1972, on
Foreign Policy for the 1970's, President Nixon stated:
"The year 1971 marked a turning point in the
world economy. We undertook a series of far-reaching
measures which revitalized our foreign economic policy
and set the stage for fundamental and long term
reforms in the international economic system."

What the President was referring to, of course, was his
New Economic Policy which established a milestone in the
financial and trade fields.
The Policy served notice on our principal trading partners
that:
" • • • no longer will the American people
permit their government to engage in international
actions in which the true long-run interests of
the U.S. are not just as clearly recognized as those
of the nations with which we deal."

- 2 -

Although this last quotation was extracted from a speech
made by Secretary Connally in Munich last May -- several
months before the New Economic Policy was announced -it nevertheless is as true now as it was at the time it
was delivered.
Nowhere can this be better illustrated than by the
actions taken by this Administration over the last three years
to rejuvenate the Antidumping Act.
ANTIDUMPING ACT -- ITS OBJECTIVE
The Antidumping Act, 1921, as amended, is intended to
nullify the impact on domestic industry of international
price discrimination which injures United States producers.
From an affirmative standpoint, the statute fosters international trade on a fair and equitable basis.
In the view of the Treasury/the aim of the Act is clear
to defend American industry against unfair international
pricing practices. It is not designed as a prop for American
industry to assist it in meeting fair and open competition
from abroad.
In the context of the Antidumping Act, an "unfair" sale
or, if you will, international price discrimination, occurs
when a foreign company sells a product for less in the United
States than in its home market, thereby causing injury to
U.S. industry.
IMPACT OF ANTIDUMPING ACT AS OF JANUARY 1969
There may be disagreement as to the interpretation of
some of the finer points of the Antidumping Act and its
administration in the past. There appears, however, to
have been general agreement at the time this Administration
took office that the Act had a relatively minor impact not

- 3 -

only on international trade matters generally, but more
importantly, in defending American industry from injurious
international price discrimination.
The reason for this was rather obvious. Important antidumping investigations were taking two years and even longer
to complete. Investigations that take that long tend to be
devoid of economic significance to the domestic industry.
Many American concerns suffering from unfair international
trade practices were compelled to bear their lot patiently
until the Treasury had completed an exhaustive investigation
ferreting out all of the underlying facts.
Moreover, import trade suffers too when the spectre of
a dumping investigation hovers for an overlong period
even if the investigation ends with a determination that
the goods have not been sold below fair value. Delays can
cause unfair and inequitable treatment to everyone concerned
regardless of the ultimate outcome of the investigation.
Accordingly, acceleration of our dumping investigations,
without sacrificing reasonable thoroughness, introduced a
specific element of fairness of its own, which benefited all.
STEPS TAKEN BY TREASURY TO REJUVENATE ADMINISTRATION OF
ANTIDUMPING ACT
Procedural and Manpower Changes
Treasury Management Survey
In April, 1969, we initiated a Treasury management survey
of the administration of the Antidumping Act to determine why
it was taking so long to decide these cases and what could be
done to improve the situation. It seemed to us that it had
to be possible to reduce the investigation period without
derogating from the essential fairness of the Treasury's
investigation procedures.

- 4 This study revealed that there was inadequate staff
assigned to the processing of antidumping cases; that the
limited staff was inadequately supervised; and that the investigation process was handicapped by cumbersome procedures inherited
from the distant past. These factors, taken together, were
delaying inordinately decisions on cases of vital concern to
American industry.
Decisions Following Management Survey
Increase in Manpower
The Commissioner of Customs was directed to increase the
manpower assigned to this area. Treasury stressed to him and
his senior staff the importance it attached to this field and
that antidumping work was now to be upgraded so that Customs
officers assigned to antidumping would realize that it offered
broad, future opportunities for promotion in the career service.
By November, 1970, the headquarters professionals had been
increased from 5 to 21. The additional personnel were transferred to antidumping from other assignments to which the Bureau
of Customs had agreed to give a lower ?riority pending Treasury's
request for supplemental funds.
The President submitted to the Congress his request for
supplemental funds for this program. Treasury's Appropriations
Committees in the House and Senate (together with the members
of the Senate Finance and House Ways and Means Committees)
gave full bipartisan support to the request. In December, 1970,
the Congress enacted the President's antidumping supplemental
appropriation bill which provided funds for 41 professionals for
antidumping and related matters. This gave us the means to
continue the advancement already made and to institute additional
procedural and policy reforms. The 41 positions were filled by
the middle of 1971, and the new personnel have now been trained
to administer the Antidumping Act effectively. We are also

- 5 -

in the process of increasing and improving the training of
our manpower abroad so that Customs representatives responsible
for carrying out antidumping investigations overseas will be
thoroughly knowledgeable in the intricacies of the law and its
administration.
Establishment of Office of Tariff and Trade Affairs
At the Treasury level, I confined the responsibilities
of my deputy for Customs to administration of the Treasury
laws concerned with unfair international trade practices and
other related tariff matters. Three professional staff officers
were assigned to him and he was made the Director of a newly
established Office of Tariff and Trade Affairso The Secretary
has recently approved the expansion of this office with still
more personnel.
We have thus institutionalized the changes that had been
made and established a more permanent mechanism for adequate
Treasury supervision in this area. We now have the basis for
insuring that the Treasury Department will have an ongoing
operation for proper supervision and administration of the
international price discrimination statutes.
Timetable for Collection and Collation of Information
Another decision made was to establish firm timetables
for each step in the collection and collation of information by
Customs. In the past, it has taken as long as six months to
decide whether a "complaint" was sufficiently meritorious to
justify the formal initiation of an antidumping investigation.
Such decisions are now being made in approximately one month.

- 6 -

Questionnaires to foreign exporters and letters replying
to typical inquiries have been standardized. Firm time periods
are being established for replying to such questionnaires.
Much of the clerical work involved in the processing of letters
and questionnaires is being simplified by the use of modern
tape typewriters and calculators with memory capabilities.
Conferences with attorneys are being restricted to set
periods when the antidumping case handler is fully prepared
to discuss particular aspects of an investigation with
interested attorneys. The day when attorneys could drop in
on case handlers without prior appointment is a practice of
the past.
Most important of all, the case handlers and Customs
representatives abroad have been given a renewed sense of the
urgency and the importance of their work ·and impressed by the
need for completing their investigations as rapidly as possible.
Results in Processing Cases
Treasury has now reached its first goal of complet;ng
antidumping cases on the average within one year from the
date the case is presented. Our next objective is to reduce
the time required for the handling of normal cases still
further, to approximately 270 days. I have announced this new
timetable to the Bureau of Customs which is already initiating
steps to see that it is carried out.
I would like to add one word of caution. Because of
the Treasury's continued emphasis on the essentiality of
fairness in rendering decisions in antidumping cases, it may
occasionally be necessary to allow a somewhat longer time for
particularly complicated cases. The normal cases, on the
other hand, will be completed in accordance with the schedule
that I have outlined.

- 7 -

This achievement in speeding up our investigations is
due in large part to the foresightedness of a number of
officials. It stems in the first instance from the desire
of the President to redress the United States' adverse
competitive situation. Its accomplishment is owing in large
part to Secretary of the Treasury Kennedy, and later Secretary
Connally, without whose active support the results outlined
above would have been impossible. Moreover, the improved
procedures could not have become a reality if it had not been
for the bipartisan cooperation of the Congress which approved
the additional appropriations for supplementing Treasury's
manpower requirements in this field.
No matter how effective a policy may be, its implementation,in the final analysis, depends on the dedicated men and
women in the career service who devoted long hours and hard
work to our common objective.

Policy Changes
The efforts to improve the administration of the Antidumping Act were accompanied by a thorough review of policy.
This review, which is continuing, has already resulted in
significant changes.
Price Assurance Policy
In May, 1970, Treasury formally announced a change in the
policy with respect to price assurances in antidumping investigations. We took this action after concluding that the previous

- 8 policy of readily accepting price assurances was actually
encouraging sales at less than fair value in the United
States. Under that policy, foreign firms seeking to sell
their merchandise in the U. S. market had no need to give even
a passing consideration to the antidumping implications of the
step they were about to take. There was no reason why they
should do so under the old rules. Let us discuss for a moment
what happened under the earlier price assurance policy.
A foreign concern would price its merchandise in the
U. S. market at whatever level it considered necessary to
compete effectively. Since its product was normally unknown
to the American consumer, it would generally price its
merchandise below the level of its American competitors in
order to attract customers. If the foreign competition started
to make itself felt and resulted in an antidumping complaint
being filed with the Treasury Department, the foreign firm still
had no cause for undue concern. Treasury's antidumping investigations would, under the former procedures, often take over
two years, and even longer to complete.
Moreover, if the Treasury Department tentatively concluded
that the merchandise was being sold at dumping margins, price
assurances could be offered and would almost invariably be
accepted by the Department. By this time, with the firm's
product well known to American consumers, the foreign concern
could afford to raise its prices to the level of its American
competitors without fear of a drastic drop in sales.
Better yet from the standpoint of the foreign manufacturers
when the Treasury Department accepted price assurances, it
would issue a formal determination of No Sales at Less Than
Fair Value. To say the least, this determination was
misleading, since there had in fact been sales at dumping
margins.
Under the new policy, price assurances are accepted only
when the dumping margins are minimal in relation to the volume
of sales involved. Moreover, in those cases where price
assurances are accepted, the case is no longer terminated with

- 9 -

a determination of No Sales at Less Than Fair Value as it was
under the old price assurance policy. We felt that such a
determination after the acceptance of price assurances was
a misnomer. Accordingly, the Treasury Department revised its
regulations in cases where price assurances are accepted so
as to provide for discontinuance of investigations. This
procedure, I feel, realistically expresses exactly what takes
place in a price assurance case.
Under the new policy, if price assurances are rejected,
the case is then referred to the Tariff Commission for, as
you know, before a finding of dumping may be issued and dumping
duties assessed, it is necessary under the Antidumping Act
that there be a determination of sales at less than fair value
by the Treasury Department and a determination of injury by
the Tariff Commission.
The objective of the new policy is to induce foreign
concerns to take the Antidumping Act into account before
they engage in sales to the United States.
The 25 Percent Rule
The Antidumping Act provides that in normal situations
fair value shall be determined by comparing the ex factory
home market price of the merchandise under investigation with
the ex factory price at which the merchandise is sold in
the United States. If the price in the United States is less
than the home market price, then there are "sales at less than
fair value" within the meaning of the statute.
The Act also states that in situations where the quantity
of merchandise sold in the home market is so small in relation
to the quantity sold for exportation to countries other than
the United States as to form an inadequate basis for comparison,
then third country price should be used as the basis for
compari son.

- 10 The Antidumping Regulations originally provided that
generally for purposes of determining what constituted an
"inadequate basis of comparison" for fair value purposes,
home market sales would be considered to be inadequate if
less than 25 percent of the non-U. S. sales of the merchandise
were sold in the home market.
The selection of home market or third country price for
fair value comparison can easily be crucial to the results of
antidumping investigations, for frequently home market price
tends to be higher than third country price. This is particularly
true where merchandise is sold in a protected home market and,
when sold in third countries, is exposed to the vagaries of
world competition.
It has been Treasury's experience that cases arise where
sales in the home market are adequate as a basis for fair value
comparison, even though less than 25 percent of the non-U. S.
sales are sold in the home market.
Accordingly, on May 22, 1970, the Treasury Department
revised its Antidumping Regulations to eliminate the 25 percent
rule. All that is required under the Regulations, as now
revised, is that the sales in the home market be adequate
for purpose of fair value comparison.

GENERAL REVISION OF ANTIDUMPING REGULATIONS
The Antidumping Regulations have been in effect in
substantially their present form since July 1, 1968, when
they were amended to conform with the provisions of the
International Anti-Dumping Code. We felt that with all
the changes in the administration of the law that had taken
place, it was now time to take another broad look at the
Regulations and the administration of the law. Accordingly,
the Treasury ~epartment-announ~ed last year that it
was reviewing its Regulations and invited suggestions from
the public as to how they might best be improved. I am happy

- 11 -

to state that the Treasury Department will be announcing within
the next few days proposed changes in the present Antidumping
Regulations.
Since the Notice of Proposed Rule Making has not yet been
published, I do not feel that it would be proper for me to say
at this time what the specific proposals are designed to
accomplish. I can assure you, however, that all the individual
changes in the Regulations are aimed at one broad objective-strict administration of the Antidumping Act so as to make
it an even more effective instrument in defending the United
States against unfair international trade practices, consistent
however with fairness to all parties concerned.
RESULTS TO DATE
As a result of the Administration's rejuvenation of the
Antidumping Act, the American public's interest in this law
has increased noticeably. Complaints filed during the past
three years have been 50 percent greater than during 1966-l~68.
And the number of final decisions published by the
Treasury over the same time periods has increased by 80 percent.
These figures are particularly noteworthy when account
is taken of the fact that accomplishments such as these over
a three-year time span are, of necessity, gradual. They cannot
be achieved overnight or even in one year. Thus, our record
during calendar year 1971 must overcome the start-up inertia
which is inevitable before a new approach and policy can be
put into motion.

In closing, I want to emphasize that the Administration
strongly supports a freer trade policy. Our rejuvenation of
the Antidumping Act, so as to defend American industry from
unfair international trade practices, is part and parcel of

- 12 -

this policy. Despite what some of our foreign trading partners
may have said on this subject, the increase in the Treasury
and Customs staff for the purpose of administering the
Antidumping Act more effectively is fully consistent with a
liberal trade policyo
The President has made it clear that he intends to meet
the challenge of the future by stimulating our economy to
ensure our continued efficient and competitive position in the
world. This means that inflation and unemployment in the
United States will be reduced while investment in new plants
and equipment by the private sector are stimulated
0

While building this stronger eccnomy at home, we must
remain outward looking and international in our initiatives
overseas. This Administration is committed to such a course.
As Secretary Connally said when he addressed the Economic
Club last fall:
'~e

do not intend to become provincial. We
shall not resort to protectionism. We shall carry
our burdens on the international scene. But to do
so it is essential to attain an equilibrium in our
overall financial balance with the rest of the world.
We seek no advantage of others. We propose to suffer
no disadvantage. We seek a balance which will be to
the benefit of all the nations."

'~t

stake are not narrow or selfish economic
goals; beyond a fair balance of opportunity, we
seek none. The basic issue is much broader.
It is nothing less than rebuilding the economic
foundation for promoting economic development,
military security, and the free flow of commerce.

- 13 -

000

The Departmento! the TREASURY
WASHINGTON, D.C. 20220

TELEPHONE W04·2041

'OR IMMEDIATE RELEASE

March 31, 1972

TREASURY ISSUES DUMPING FINDING WITH RESPECT
TO DIAMOND TIPS FROM THE UNITED KINGDOM
The Treasury Department announced today that it has issued
l

dumping finding with respect to diamond tips for phonograph

leedles from the United Kingdom.

The finding will be published

.n the Federal Register of April 1, 1972.
On November 18, 1971, the Treasury Department advised the
~ariff

Commission that diamond tips for phonograph needles from

:he United Kingdom were being sold at less than fair value within
:he meaning of the Antidumping Act, 1921, as amended.
On February 17, 1972, the Tariff Commission issued a
letermination that an industry in the United States is being
.njured by reason of the importation of diamond tips for phonorraph needles from the United Kingdom sold, or likely to be sold,
It less than fair value within the meaning of the Antidumping Act,
.921, as amended.

After these two determinations, the finding of dumping autoatically follows as the final administrative requirement in
ntidumping investigations.
During the period January 1971 through December 1971, diamond
ips for phonograph needles valued at approximately $325,000 were
nported from the United Kingdom.
000

The Department 01 the TREASURY
WASHINGTON. D.C. 20220

TION:

TelEPHONE W04·2041

__.::~:.._

FINANCIAL EDITOR

~972

ELFASE 6: 30 P. M. ,

L~URY'

RESULTS OF

~~:::~-.:-

0?FERTI~G

BliL

The Treasury Department 8JlJlounced that the tenders for two series of 'ITeasury
, one series to be an additional issue of the bills dated
0" 2-'1U2.!'=." :: ~ 2..972 ,and
,ther series to be dated
A;ri2.. 6 ~ ___ 972
,which were offered on : :2.r2!: 28 ~ 1972,
opened at the Federal Reserve Banks today.
Tenders were invited for $2: 3JC, COO, JOO,
.ereabouts, of 9 ___ -day bills and f'JY $::..~S:::::~=::::=:::=: or thereabouts, of
~S2-day
The details of the two series are as follows:
: OF ACCEPTED

:TITIVE BIDS:

9 ___ -day Treasury bills
maturing J~y 6. ~972
Approx. Equiv.
Price
Annual Rate

High

99.0SJ

:::. -:-l9:::

Low
Average

99.0:4
99.040

::.522~

::"B2-day Treasury bills
maturing C2~~ber 5, 1972
Approx. Equi v .
Price
Annual Rate
4. :12~
4.391~
4. 387~

97.320 a

:."79S::':

Excep: 1 ~e:1dey - '-~''l'' 1""\
'-'
9
___
-day
bills bid for at the low price was accepted
81% of the amount of
___
S2-day
66% of the amount of
bills bid for at the low price was accepted
I

~-~

'-,

"- '-'

TENDERS APPLIED FOR AND ACCEPTED BY FEDLRAl RESERVE DISTRICTS:

itrict
iton
r York
.ladelphia
~veland

:hmond
.anta
.cago

Louis
lIleapolis
lSas City
~as
I

...;.,. "-

Applied For
$ 19,80C,000

_
:x:

"t'

:,374,390,OJC
33, 92:J

,~'2C'

'Z~c::

-",1'"'\,,)

...:........, ,

,.....,......

v , ____

_
l

......,...

G;:'~
...;

'-''-''

-"-'

~2 ~ ::5:- ~ =-='::'
:2 ~~~=-.'2=~~ ~::~=

,
'"'''1""'\
~

'"',--;~

~---"

'-' '-' '-'

,"--"

"- '- '-"

-8
-"-

'2:::::-::
'-''--....-

5,125,::;00

. . . ....,"'"
~

'- '-

22,975~:)OJ

::::,-.

,...., -.,

',.-.

..............

. : : . . :=---=._'-''-

37~eJ5,OO::

--r-

234,940, J,)C

............. ,

,-.

TOTALS

...'::;-1'"'~

.: : '-

30,142,000

~ ~

'""'

7.-

--; 35., JC<)

::::8'""'

'-'-'"
<.-- ..............
(
,

~r"

c. , ,7-"
..:'- '--

..., -

! _

...... '"'

---

:cludes $187,310,002 noncompeti ti ',re te:1cie!'s
Icludes $ 88,375,:)0; n':>r..~o:r:petiti-le teder.s
r- o
lese rates are on a ba.'1k ciisC~)1.L'1t tas:s.
19 ~ for the 9='-dCi.y bills, and ~.: 3{ foy :::e

-,....,..
---'

.-.,,.
__- =_

'-"'

,485, J~~\~
::1 ~ 452, ']:=::1
=-5,:::3S~JJ~

~~ ~~.~.~==

::.42-=!J22
--,::,i- : ;::-::::
.................

--....

-Cl?'~-

1""\",,1""\

"",......""\

~.= ~ ~

.,. . .,

,;;"

~ '- '-'

'"" '"' ........

-...,

9,102,20C

~~'""'

,-" '- '- '-'

'-' '-'

-...-.,-.

-'= . - - -- . -- '- -

~~~

-= "-' ~ '- '- ,-,'
J.......

5:4 7 0,JJO
____ , '-<'v, . . . --..\. -

",-..-'--

.-.,

24,390,2,)0
-

.. :::: -= '-- ....... -- -

,ceo
,.....,

"'"

=::::- """ '""', . . . .
-"---=.--- --'--

~-.::::..'-~'-~'-'---

,-.

z - -"

'"',...." ......

34,~25:2JJ

Francisco

1~32E:,205~OOO

8,935,:J':'

10~ ,.

Accepted
$ 2,350,000

r-,
"' ...... """
-'-'~~-"-'~'--''-'-

,-",,-,,,-' ,'-' '"" v

5~ ~530

Au-plied ?or

Accepted

-,-...

L-

I"'~
'-' '-- ' -

The Department of the TREASURY
WASHINGTON. D.C. 20220

TelEPHONE W04·2041

FOR IMMEDIATE RELEASE
WEDNESDAY, APRIL 5, 1972
Nation's Currency Gets New Signature
The first ciollar bills with the signature of the new
Treas1lrer of the United States, Romana Acosta Banuelos, were
run off the press today at the Bureau of Engraving and Printing.
The bills, which also bear the signature of Secretary of the
Treasury, John B. Connally, will start circulating later this
year as current supplies of currency are depleted or retired.
Under Secretary for Monetary Affairs Paul A. Volcker,
representing Secretary Connally, and Mrs. Banuelos attended a brief
ceremony this morning as the first bills, bearing her signature,
came off the presses. As is traditionBl~ Secretary Connally got the
first sheet of bills and the Treasurer got the second.
The new bills bear her full name "Romana Acosta Banuelos"
in the lower left hand corner of the currency. Mr. Connally's
signature is directly opposite on the right hand corner.
The new Connally-Banuelos bills will replace the old ones
bearing signatures of Secretary Connally and the late Dorothy
Andrews Kabis, who died in July 1971.
Her successor, Mrs. Banuelos, took office Jan. 3, 1972,
following nomination by President Nixon last September, and
confirmation by the Senate on Dec. 6, 1971. She was sworn in by
Secretary Connally on Dec. 17, 1971. Born in Miami, Arizona,
Mrs. Banuelos is the thirty-fourth treasurer and sixth woman to
hold office since it was established in 1789. A California
businesswoman and organizer of the Pan American National Bank in
East Los Angeles, Mrs. Banuelos is married to Alexander Banuelos.
She is the mother of two sons and a daughter.
The new series of Federal Reserve notes, designated 1969B
for the $5 through $100 denominations, and 1969C for the $1
denomination will be released through the Federal Reserve System,
probably in May. It will require several months to supply all
banks with the Connally-Banuelos currency.
The $1 denomination will be released to banks first. The
serial numbers of the notes will not revert back to zero, but
will continue in their regular numerical sequence.
. C-274
000

The Department 01 the TREASURY
WASHINGTON. D.C. 20220

)R IMMEDIATE RELEASE

TelEPHONE W04·2041

April 4, 1972

TREASURY'S WEEKLY BILL OFFERING
The Treasury Department, by this public notice, invites tenders
:)r two series of Treasury bills to the aggregate amount of
4,100,000,000, or thereabouts, for cash and in exchange for Treasury
Uls maturing April 1~, 1972,
in the amount of $4,106,900,000,
9 follows:
9l-day bills (to maturity date) to be issued April 13, 1972
the amount of $2,300,000,000,
or thereabouts, representing an
~ditional amount of bills dated January 13, 1972,
and to mature
lly 13, 1972
(CUSIP No.912793 NU6 ) ,originally issued in
,e amount of $1,600,200,000, the additional and original 'bills to be
~eely interchangeable.

182 - day bills, for $1,800,000,000, or thereabouts, to be dated
ri1 13, 1972,
and to mature October 12, 1972
~SIP No. 912793 PGS).
The bills of both series will be issued on a discount basis under
Impetitive and noncompetive bidding as hereinafter provided, and at
turity their face amount will be payable without interest. They will
issued in bearer form only, and in denominations of $10,000,
5,000, $50,000, $100,000, $500,000 and $1,000,000 (maturity value).
Tenders will be received at Federal Reserve Banks and Branches up
the closing hour, one-thirty p.m., Eastern Standard
me, Monday, April 10, 1972.
Tenders will not be received
the Treasury Department, Washington. Each tender must be for a
nimum·of $10,000. Tenders over $10,000 must be in mUltiples of
,000. In the case of competitive tenders the price offered must be
pressed on the basis of 100, with not more than three decimals,
g., 99.925. Fractions may not be used. It is urged that tenders be
de on the printed forms and forwarded in the special envelopes which
Ll be supplied by Federal Reserve Banks or Branches on application
!refor.
Banking institutions generally may submit tenders for account of
stomers provided the names of the customers are set forth in such
lders. Others than banking institutions will not be permitted to

- 2 -

submit tenders except for their own account. Tenders will be recel~
without deposit from incorporated banks and trust companies and frQl
responsible and recognized dealers in investment securities. Tenderi
from others must be accompanied by payment of 2 percent of the face
amount of Treasury bills applied for, unless the tenders are accompanil
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. 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 issue for $200,000 or less without stated price from anyone
bidder will be accepted in full at the average price (in three decimal!
of accepted competitive bids for the respective issues. Settlement fOI
accepted tenders in accordance with the bids must be made or completed
at the Federal Reserve Bank on April 13, 1972,
in cash or other immediately available funds or in a like face amount (
Treasury bills maturing April 13, 1972.
Cash and exchange tender
will receive equal treatment. Cash adjustments will be made for
differences between the" par value of maturing bills accepted in
exchange and the issue price of the new bills.
Under Sections 454 (b) and 1221 (5) of the Internal Revenue C~e
of 1954 the amount of discount at which bills issued hereunder are sole
is considered to accrue when the bills are sold, redeemed or otherwise
disposed of, and the bills are excluded from consideration as capital
assets. Accordingly, the owner of Treasury bills (other than life
insurance companies) issued hereunder must include in his income tax
return, as ordinary gain or loss, the difference between the price pa~
for the bills, whether on original issue or on subsequent purchase, anC
the amount actually received either upon sale or redemption at maturit)
during the taxable year for which the return is made.
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 fr~
any Federal Reserve Bank or Branch.

000

The Department 01 the TREASURY
WASHINGTON. D.C. 20220

TelEPHONE W04·2041

April 6, 1972

FOR IMMEDIATE RELEASE

WITHHOLDING OF APPRAISEMENT ON DRYCLEANING
MACHINERY FROM WEST GERMANY
The Treasury Department announced today that the Bureau
of Customs ia instructing Customs field officers to withhold
appraisement of drycleaning machinery from West Germany
pending a determination as to whether this merchandise is
being sold at less than fair value within the meaning of the
Antidumping Act, 1921, as amended (19 U.S.C. 160 et seq.).
Under the Antidumping Act the Secretary of the Treasury
is required to withhold appraisement whenever he has reasonable
cause to believe or suspect that sales at less than fair value
may be taking place.
A final Treasury decision in this investigation will be
made within three months. Appraisement will be withheld for
a period not to exceed six months from the date of publication
of the "Withholding of Appraisement Notice" in the Federal
Register.
Under the Antidumping Act, a determination of sales in
the United States at less than fair value requires that the
case be referred to the Tariff Commission, which would then
consider whether an American industry was being injured.
Both dumping margins and injury must be shown to justify a
finding of dumping under the law.
The total value of drycleaning machinery imported from
West Germany during the period from July 1970 through Novembel
1971 amounted to approximately $4 million.
#

The Department 01 the TREASURY
WASHINGTON. D.C. 20220

TelEPHONE W04·2041

II~

REMARKS OF THE HONORABLE EUGENE T. ROSSIDES
ASS ISTANT SECRETARY OF THE TREASURY
(ENFORCEMENT, TARIFF AND TRADE AFFAIRS, AND OPERATIONS)
before the
ANNUAL SPRING LUNCHEON
of the
ITALY-AMERICA CHAMBER OF COMMERCE, INC
ESSEX HOUSE, NEW YORK, NEW YORK
April 6, 1972
1:00 porn.
0

PRESIDENT NIXON'S NEW ECONOMIC POLICY AND THE
DOCTRINE OF FAIRNESS IN INTERNATIONAL TRADE
President Nixon's New Economic Policy, announced
on August 15, 1971, marked a watershed in world
history, not just U.S. history. The president's
actions marked the end of one era -- "the end of the
post-war 'world" as Secretary Connally said last
month -- and the dawn of a new era in international
economic relationshipso
The President's goals were three -- to curb
inflation, to generate jobs by stimulating
responsible economic growth, and to strengthen the
position of the United States in the international
trade and financial community.
Today, I shall talk primarily about the u.s.
position in international trade--a Doctrine of
Fairness--with special emphasis on Treasury's role
and responsibilities in this area and the need to
perfect international organization and procedures
for effective solutions of trade problems.

- 2 -

Why Are We in a New Era?
At the end of World War II, the United States
was the wealthiest, most powerful nation on earth.
A large part of the world was in ruins, physically,
politically, and economically, after the holocaust
that it had just experienced. The United States
exhibited truly unselfish and generous leadership
in an effort to bring these ravaged areas back to
normal. We did this in our own long-range national
interest but at considerable sacrifice.
It made sense for the United States to do
everything possible to assist both our former
allies and enemies to regain their feet. And so,
we literally showered U.S. dollars and expertise
on these countries. The American taxpayer accepted
the burden of the nearly $150 billion in economic
and military aid that was made available over the
past 25 years, for he understood the relationship
between a prosperous world economy and his own
well-being.
But, conditions have changed and we now find
ourselves confronted with an entirely different
picture. Although the United States is still the
most important free world power, it is no longer
the only free world power. Other nations are
again in a position to challenge us economically and
politically. The United States is now one giant
among several.
The Long-Run Task
What does this new era signify for the United
States and the rest of the trading world? Essentially,
the long-run task facing the United States and the
world community is the creation of an international
economic system which, on the basis of mutual advantage,

- 3 -

will stimulate international trade and freer competition,
draw nations and people together, and thus form the
basis for a lasting peace with prosperity.
Progress Made Since August 15, 1971
In his policy role as chief economic spokesman
for the President, Secretary Connally has already
sketched in broad outline fonn the new policies to be
followed.
Considerable progress has been made in the seven
and one-half short months since August 15, 1971. The
Smithsonian Agreement of December 18, 1971, was a
significant breakthrough and has given the new era a
substantial forward thrust. That agreement included a
multilateral realignment of exchange rates, commitments
to discuss more general reforms of the international
monetary system, and commitments to begin discussions
to reduce trade barriers, including some most harmful to
the United States. For its part, the United States agreed
to recommend to the Congress that the price of gold in
dollars be raised when progress had been made in trade
liberalization.
On February 9, Secretary Connally transmitted to
the Congress a draft bill providing for devaluation of
the dollar by 8.57% to $38 per ounce of gold. In
signing that bill into law on Monday, April 3, the
President said that the basic significance of the
Smithsonian Agreement and the legislation is:
" ... that it provides for continued cooperation
among our allies and ourselves--and thus
strengthens our unity--as we work toward an
'open world' based on a more balanced monetary
system and a more equitable international
trading environment."

- 4 Simultaneously with the smithsonian Agreement,
commitments were made by some of our allies to assume
a larger share of the costs of common defense.
Substantive agreements have also been reached
with the European Community and with Japan to remove
or lower certain barriers against U.S.products and to
support multilateral and comprehensive trade negotiations
in 1973, meanwhile solving more immediate problems in
1972 through the GATT.
The Administration will seek
the necessary legislative authority for these comprehensive
negotiations.

Doctrine of Fairness in International Trade-Abroad and at Home
Abroad
These are some of the accomplishments to date on
the international trade front. All of the United States
efforts in international discussions have been dedicated
to one objective--the establishment of a Doctrine of
Fairness in International Trade.
The President and Secretary Connally have served
notice that the United States is no longer going to
compete with one hand behind its back.
To compete fairly
abroad, we must have fair access to the markets of
Europe, Asia, South America, Africa, and the rest of the
world.
I do not mean to imply that the United States is
expecting to obtain something for nothing.
But in our
trade negotiations we do have a right to demand a fair
bargain. We insist only on the right to compete fairly
abroad.
As Secretary Connally said in Munich last May:

- 5 -

" ... no longer will the American people
permit their government to engage in international actions in which the true long-run
interests of the U.S. are not just as clearly
recognized as those of the nations with
which we deal."
The point he conveyed to all is that the United
States can no longer stand by complacently when markets
are closed to us or where the "rules of the game"seem
to be rigged against us.
When our foreign friends complained about the
temporary 10% additional duty adopted as part of the
President's new economic program, they did not
mention in their complaints the barriers they maintain
against U.S. exports to their countries.
These barriers take various forms--quotas no
longer justified by economic factors, discriminatory
taxes such as progressive taxes on horsepower directed
at the export of U.S. automobiles, discriminatory
tariff arrangements such as the Common Market
preferences and reverse preferences, which establish a
lower tariff on the exports of Common Market members
than on those of the u.S. and others into third markets,
both in developing and developed countries. These
were not wiped out by the Smithsonian Agreement. We
have a long way to go in order to achieve for American
industry a fair break in international trade.

- 6 -

Let me make it clear that we are not seeking
special treatment for the United States. We recognize
that some of our practices are regarded by other
countries as discriminatory. We do not pretend to
be blameless in this regard.
At Home--Treasury's Role in Combatting
Unfair Trade Practices
Against this backdrop, there are very positive
measures this Administration has already taken at
home to rectify our trade imbalance and protect jobs
in the U.S.
From the inception of President Nixon's
Administration, the Treasury Department has vigorously
attacked discriminatory pricing techniques of foreign
exporters. Treasury and its Bureau of Customs have
accelerated and expanded the use of statutes specifical:y
designed to protect U.S. industry against unfair foreigr
competition. We have institutionalized the supervision
of the administration of the Antidumping Act and the
countervailing duty statute and other aspects of tariff
and trade relations by setting up an Office of Tariff
and Trade Affairs in the Office of the Secretary.
The Antidumping Act is designed to prevent injurioLs
international price discrimination--typically, selling
in the U.S. market at prices lower than in the foreign
home market. The countervailing duty statute is designed
to counteract and prevent foreign subsidies on exports
to the U.s.
The Treasury, under this Administration, has
rejuvenated what was largely a moribund Antidumping
Statute. We have significantly increased actions under
this statute in the past three years. We have eliminated
loopholes. And we have expedited consideration of

- 7 -

complaints from domestic manufacturers by adding
manpower and streamlining procedures. In short,
Treasury is now administering the Antidumping Act·
more in the manner intended by Congress and which
industry has a right to expect, although more is
needed.
Perhaps, criticism from abroad had to be expected.
But, the point is that these actions are taken and
justified in defense of fair trade--and without a sense
of fairness, the prospects for freer trade would be
bleak.
Now, we are studying possible refinements and
expansions of the use of these measures which protect
U.S. industry against unfair competition. In new
proposed antidumping regulations which will be published
in the near future, we plan to clarify and tighten
further the procedures of the Antidumping Act. Amendments of our Antidumping Act and countervailing duty
statute may be required to achieve freer and fairer
competition in international trade. And, once the
long-range adjustments of tariffs, quotas, and other
barriers are accomplished, these same measures can serve
to maintain the integrity of those agreements.
International Reforms
In analyzing what we can do to enable u.s. producers
to compete more effectively under fair rules of international trade, we must of necessity examine closely
the implementation of those rules and even question the
nature of the rules themselves.
We face a situation in which such basic GATT rules
as most-favored-nation treatment are increasingly
violated. We are also ccncerned that foreign dumping
and subsidizing of exports to third countries have the

- 8 -

effect of freezing u.s. manufacturers out of these
markets. Moreover, while we favor U.S. capital
investment abroad on as liberal terms as our balance
of payments allows, we cannot continue to permit U.S.
capital to create jobs abroau if domestic u.s.
manufacturers are prevented by discriminatory barriers
from selling in these markets on equal terms.
If the GATT itself proves unable to face up to
the realities of today's world, and we hope that it
can measure up to its responsibilities, we may have
to give thought to other ways of meeting the needs.
If we are to reach our goal of a bright new international
future, the rules and procedures of the past must be
adapted to the world of the 1970's.
There is clearly a need for an international forum
or forums in which the interrelationship of all the
factors affecting international economic matters-monetary, tax, and trade--can be discussed, not piecemeal, but as part of a whole problem of economic health
for all participating nations.
Secretary Connally, in his March 15 remarks,
stressed the need to recognize such links in the international economy when approaching the issue of monetary
reform.
Indeed, the international discussions of last fall,
following the President's declaration of his New
Economic Policy, were successful in achieving the
recognition of the interrelationship between international
monetary and trade matters. Accordingly, the President
placed in the hands of Secretary Connally, his chief
economic spokesman, the broad responsibility and
negotiating authority to do the job.
secretary Connally has commissioned Under Secretary
Volcker to discuss with our principal trading partners
the development of an appropriate forum or forums. Under
Secretary Volcker has recently talked with his colleagues

- 9 -

in Europe and hopes to go in the next week or so to
Japan for discussion of this matter.
Implementation Versus Policy-Making
It has often been said, "Important as it is to
make policy, it is even more important to implement
it."
It could very well be that more forceful administration of the Antidumping Act and countervailing duty
law in earlier years would have eased our problems
today. I can well remember my confirmation hearing
when each and every question of the Senate Finance
Committee dealt with these two statutes and whether I
intended to enforce them. For months thereafter, the
same Senators were telling me, rfyou have those
statutes, use them." Well, this Administration has
used the Antidumping Act effectively and, as I mentioned,
is reviewing the countervailing duty law.
But, there are other aspects of implementing trade
policy in day-to-day operations which strongly affect
our international trade and our balance of payments.
The main day-to-day operating bureau in the u.S.
Government affecting international trade is the Bureau
of Customs. Secretary Connally has directed that the
trade and tariff aspects of that Bureau's operations be
given the highest priority. This included not only the
operating responsibilities of the Bureau of Customs in
the area of antidumping and countervailing duty, but
also its role in classification and valuation of
imported merchandise, administration of quotas and
marking requirements, prevention of smuggling, monitoring
voluntary restraint arrangements, and investigation of
commercial frauds.
We also have under way a Treasury study to analyze
the data that is available in international trade matters.
Here again, the Bureau of Customs is the prime source for
data regarding trade matters and yet, for analyzing and

- 10 -

interpreting that data, its resources have not heretofore
been fully utilized. This also we are moving to correct.
The Future
In swmnary, President Nixon's Administration has
moved forcefully to improve our international trade
and monetary position. We have given our anti-price
discrimination tools the most vigorous exercise they
have ever had. We have negotiated the removal of
various trade barriers and set the stage for an overhaul
of the international trade mechanisms in the near future.
Secretary Connally has demonstrated what can be
accomplished by a single chief economic spokesman for
the President. We are seeking an international forum
which ~vill enable us to deal with the problems in their
full depth and perspective. And we have identified the
need within the Executive Branch to institutionalize
these capabilities.
The President has made it clear that he intends to
meet the challenge of the future by stimulating our
economy to ensure our continued efficient and competitive
position in the world. This means that inflation and
unemployment in the United States will be reduced while
investment in new plants and equipment by the private
sector are stimulated.
While building this stronger economy at home, we
must remain outward looking and international in our
initiatives overseas. This Administration is committed
to such a course. Of course, our foreign friends and
trading partners must be equally outward looking and
international in their approach to their problems.
All Americans and all countries must be willing
to make the necessary sacrifices and, as a result, all
Americans and all countries will be beneficiaries.

- 11 -

What we seek are the conditions that will encourage
freer and fairer trade throughout the entire world,
develop growing domestic enterprise and employment, and
insure these gains against the erosion of inflation.
The President's New Economic Policy advances
these goals by laying the foundation for peace with
prosperity throughout the world.

000

Harch 31, 1972

UNITED STATES SAVINGS BONDS ISSUED AND REDEEMED THROUGH

(Dollar amounts in millions - rounded and will not necessarily add to totals)
DESCRIPTION

lED
~s

A-1935 thru D-1941
~s F and G-1941 thru 1952
es J and K-1952 thru 1957

AMOUNT ISSUEDY

AMOUNT
REDEEMEDY

AMOUNT
OUTSTAN DINGY

5,003
29,521
3,754

4,998
29,495
3,744

5
26
10

.10
.09
.27

1,910
8,427
13,548
15,811
12,441
5,666
5,394
5,588
5,539
4,856
4,200
4,401
5,031
5,130
5,347
5,169
4,875
4,763
4,472
4,491
4,570
4,437
4,973
4,836
4,717
5,088
5,039
4,783
4,491
4,689
5,360
608
340

1,718
7,571
12,204
14,169
11,001
4,849
4,479
4,563
4,446
3,845
3,326
3,458
3,879
3,899
4,019
3,851
3,580
3,400
3,148
3,066
2,991
2,810
2,950
2,862
2,782
2,873
2,807
2,595
2,281
1,992
1,416

192
855
1,344
1,642
1,440
817
914
1,026
1,093
1,010
874
943
1,151
1,232
1,327
1,318
1,295
1,363
1,324
1,425
1,580
1,626
2,022
1,974
1,936
2,215
2,232
2,188
2,210
2,697
3,943
608
12

10.05
10.15
9.92
10.39
11.57
14.42
16.94
18.36
19.73
20.80
20.81
21.43
22.88
24.02
24.82
25.50
26.56
28.62
29.61
31. 73
34.57
36.65
40.66
40.82
41.04
43.53
44.29
45.75
49.21
57.52
73.56
100.00
3.53

rURED
es ElI :
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
1970
1971
1972
fnciassified
'otal Series E
~s H (1952 thru May, 1959)}j

H (June, 1959 thru 1972)
otal Series H
otai Series E and H

{Total matured
,eries

Total unmatured
Grand Total

"10 OUTSTANDING
OF AMOUNT ISSUED

329

180,989

133,161

47,828

26.43

5,485
8,299

3,859
2,678

1,626
5,621

29.64
67.73

13,784

6,537

7,247

52.58

194,773

139,698

55,075

28.28

38,277
194,773
233,050

38,237
139,698
177,935

40
55,075
55,115

.10
28.28
23.65

accrued discount.
'ad_Dlption value.
101 ownar bonds may be held and will earn interest lor additional periods after

ori~inal maturity dales.

The Department 01 the TREASURY
WASHINGTON. D.C. 20220

TelEPHONE W04·2041

For Immediate Release

April 7,1972

secretary of the Treasury John B. Connally announced
today that he is ordering withdrawal of a proposal to
reorganize certain dis'tricts wi thin the Bureau of Customs.
On March 10, 1972, the Department of the Treasury
published in the Federal Register a notice of proposed
changes in district organization within customs Regions I
and VI. This proposed rule-making would have consolidated
the Customs districts of providence, Rhode Island, and
Bridqeport, Connecticut, into the Boston district, and the
Customs districts of Port Arthur and Galveston, Texas,
into the Houston district.
In view of the public comments received in response
to the notice, Secretary Connally determined that it would
not be in the public interest to proceed with the proposed
reorganization at this time. He has directed that an
appropriate notice withdrawing the proposed rule-making
be published in the Federal Register at an early date.
000

C-276

The Department 01 the TREASURY
WASHINGTON. D.C. 20220

~DIATE

RELEASE

TelEPHONE W04·2041

April 7, 1972

STATEMENT OF EUGENE T. ROSSIDES
ASSISTANT SECRETARY OF THE TREASURY
(ENFORCEMENT, TARIFF AND TRADE AFFAIRS, AND OPERATIONS)
NINE MONTH REPORT OF THE
TREASURY/IRS NARCOTICS TRAFFICKER PROGRAM

On June 17, 1971, as part of a major message on his
multi-dimensional narcotics program, President Nixon
announced the Treasury/IRS Narcotics Trafficker Program.
On July 1, 1971, the program was initiated. In each area
of the country, cadres of Treasury Agents were established
to concentrate full time on intensive tax investigations
of major narcotics traffickers, smugglers and financiers.
I am pleased to report on the results of the first
three quarters.
In the initial nine-month period (July 1 - March 31,
1972), we have achieved the following:
1.
530 targets in 34 states, 52 cities and the
District of Columbia were selected by Treasury's Target
Selection Committee and referred to~e IRS. Under the
direction of IRS Commissioner Johnnie Walters, 369
Treasury Agents are presently conducting intensive tax
investigations (See attached Table 1);
2. $31.8 million in taxes and penalties have been
assessed under the program, of which more than $4.1 million
has already been collected in the form of cash or valued
property;
3.
2 men have been convicted of criminal tax charges;
9 other criminal tax cases are pending in Federal District
Courts in N.Y., Miami, Detroit, Los Angeles, Indianapolis,
and Baltimore; and another 12 investigations have been
completed with prosecution recommendations.

- 2 -

We believe this represents a significant achievement.
It confirms our prediction to the Appropriations Committees
in the Congress that, by focusing attention on the key
figures responsible for the narcotics distribution, this
program "will make a major additional contribution to
the President's offensive against drug abuse."
The program is designed to take the profit out of
the illegal traffic in narcotics and thereby further
disrupt the traffic. This is to be accomplished by
conducting systematic tax investigations of middle and
upper echelon narcotics traffickers, smugglers, and
financiers. These are the people who are generally
insulated from the daily operations of the drug traffic
through intermediaries.
The word for the drug traffickers is "get out of
the illegal drug traffic or face up to intensive tax
investigations.

000

TABLE I
STATE

METROPOLITAN AREA

Alabama
Alaska
Arizona
California

Mobile
Anchorage
Phoenix - Tucson
Los Angeles
San Francisco
Denver
Hartford
Washington, D. C.
Miami
Honolulu
Atlanta
Chicago
Indianapolis
New Orleans
Baltimore
Boston
Detroit
St. Paul
St. Louis
Las Vegas
Newark & Suburbs
Albuquerque
Albany
Buffalo
New York City & Suburbs
Greensboro
Cleveland
Cincinnati
Portland
Philadelphia
Pittsburgh
Providence
Columbia
Nashville
Austin - Houston
Dallas
Salt Lake City
Burlington
Richmond
Seattle
Parkersburg
Mil\iaukee

Colorado
Connecticut
District of Columbia
Florida
Hawaii
Georgia
Illinois
Indiana
Louisiana
Maryland
Massachusetts
Michigan
Minnesota
Missouri
Nevada
New Jersey
New Mexico
New York
North Carolina
Ohio
Oregon
Pennsylvania
Rhotie Island
South Carolina
Tennessee
Texas
Utah
Vermont
Virginia
Washington
West Virginia
Wisconsin

SELECTED TARGETS
1
1

23
26

7
9

14
54
7
18
36
8
11
3
11
27
1
7
1

30
7
3

9
89
8
7
2
7
22
9

1
4

2
31
1
1
2
1

7
1
1

ITO

34 States
52 cities and the District of Columbia
Treasury Department
Office of Law Enforcement

March 31, 1972

TABLE II

Target Assessments:
Regular Assessments

$ 2,521,168

Jeopardy Assessments l /

$ 8,037,736
$10,558,904

sub-Total
Spontaneous Assessments~/
(Jeopardy Assessments
Terminationsli )

~nd

Tax Year

Total Assessments

$21,193,386
$31,752,290

Tax Year Terminations
Dollars Seized

$ 3,633,497

Property Seized

440,000

Cases Recommended for Prosecution

Criminal Tax Cases in u.S. Courts
awaiting trial

criminal Tax Convictions

1/ Jeopardy assessments are additional assessments of taxes
made where a return has been filed, but where circumstances
exist under which delay might jeopardize collection of the
revenue.
2/ Spontaneous Assessments are expedited assessments made
against narcotics traffickers as a result of seizures by
other law enforcement agencies of large sums of cash or
other assets during the course of an arrest or a search.
Because of .the expedited procedures employed, the figures
for spontaneous assessments are frequently in excess of the
amount ultimately determined to be due.
3/ Termination of Tax Year is a computation of the tax due
and assessment made where the time for filing the return
has not become due where circumstances exist under which
delay might jeopardize collection of the revenue.
Treasury Department
Office of Law Enforcement

April 7, 1972

TREASURY'S I.R.S. NARCOTICS PROGRAM
Number of Targets by State

530

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4/7/72

BACKGROUND PAPER
secretary John B. Connally, in the spring of 1971,
recommended to the President this nationwide program.
President Nixon announced the program of tax
investigations of major narcotics traffickers on
June 17, 1971, as part of a message on his multidimensional approa~h to combat drug abuse. The objective
of the program is to disrupt the narcotics distribution
system by taking the profits out of the illegal traffic
in drugs.
Reflecting the high priority given this program
by the President, Congress provided financial support
for it amounting to $7.5 million in Fiscal 1972 and
authorization for 541 additional position in IRS -200 Treasury Intelligence Agents, 200 Treasury Revenue
Agents, and 141 support personnel.
Treasury has coordinated this tax program with the
anti-smuggling drive of its Bureau of Customs, the drive
against narcotics distribution of the Bureau of Narcotics
and Dangerous Drugs, and the prosecution efforts of the
Tax and Criminal Divisions of the Department of Justice.
We have also had the full support and cooperation of State
and local enforcement agencies in the conduct of this
program.
This program is a major enforcement effort but it
must be emphasized that it is only one part of this
Administration"s comprehensive drive against narcotics.
Multi-Dimensional Program
President Nixon started his war on drugs the first
month of his Administration when he established the
Interdepartmental Task Force on Narcotics, Marijuana and
Dangerous Drugs that led to Operation Intercept in
September, 1969, and Operation Cooperation in October,
1969. He has escalated that war with a series of action
programs, and progress has been made.
First, he elevated the drug problem to the foreign
policy level and has taken personal initiatives in
soliciting the cooperation of other governments. The aim
of our diplomatic efforts is to have each nation do its
share and meet its responsibilities in the worldwide
war against drug abuse.

2 -

Second, he placed particular emphasis on the crucial
roles of education, research, and rehabilitation. The
Special Action Office for Drug Abuse Prevention was
established within the White House under the direction
of Dr. Jerome Jaffe to coordinate Federal action in
the fields of education, research, and rehabilitation.
In 1971, nearly 150 million dollars were devoted to
education, research, and rehabilitation. That figure
will be doubled in 1972 and increased further in 1973.
Third, he recommended differentiation in the criminal
penalty structure between heroin and marijuana; and
flexible provisions for handling first offenders.
Fourth, he stressed total community involvement
the private sector as well as governmental agencies -in this anti-drug abuse program.
Fifth, he provided a substantial increase in
budgetary support for Federal law enforcement in this
area.
Sixth, he recognized the central role of the states
and the need for close Federal-state cooperation in a
unified drive against drug abuse.
More recently, on January 28, 1972, the President
established the Office for Drug Abuse Law Enforcement
in the Department of Justice headed by former Commissioner
of Customs Myles J. Ambrose. This program will concentrate
an assault on the street level heroin pusher. The new
office will be working closely with state and local
enforcement agencies.
In this program, we have seen for the first time
the total involvement of the institution of the Presidency
in the battle against drug abuse.

The Department 01 the TREASURY
WASHINGTON. D.C. 20220

TelEPHONE W04·2041

FOR IMMEDIATE RELEASE

April 7, 1972

TREASURY ANNOUNCES SPECIAL SECURITIES ARRANGEMENT
WITH GERMAN BUNDESBANK
The Treasury today announced an arrangement with the
German Bundesbank to issue to the Bundesbank $2.5 billion
of medium-term special, non-marketab1e Treasury securities
in exchange for a like amount of shorter-term special,
non-marketab1e and marketable Treasu~y securities now held
by the Bundesbank.
This arrangement represents a continuation of the
program of investments entered into with the Buridesbank
and announced in June 1971 and the new investments are to
be issued on s~i1ar terms to those of last year.
Of the total of $2.5 billion, approximately $600 million
is being exchanged from shorter-term special non-marketab1es
earlier acquired by the Bundesbank. The remaining $1.9 billion
will be exchanged by the Treasury for short-term marketable
Treasury bills held by the Bundesbank. These bills, which
have weekly maturity dates spread fairly evenly throughout the
second quarter of this year, will be available for gradual
sale in the market in the light of emerging Treasury cash
requirements and market conditions.

C-278

The Department 01 the TREASURY
WASHINGTON. D.C. 20220

TelEPHONE W04·2041

FOR IMMEDIATE RELEASE

June 28, 1971

TREASURY ANNOUNCES SPECIAL SECURITIES ARRANGEMENT
WITH GERMAN BUNDESBANK
The Treasury today announced an arrangement with the
German Bundesbank for the purchase by the Bundesbank of
up to $5 billion of special Treasury securities. This
operation will be completed within the next few weeks.
The arrangement reflects the willingness of the
United States, recently expressed by Secretary John B.
Connally, to assist with appropriate dollar investment
outlets for foreign central banks which have received
large amounts of dollars.
The securities are medium-term, nonmarketable U. S.
Treasury notes with maturities of one to five years.
Interest rates on these obligations will be in line with
rates on outstanding Treasury securities of comparable
maturities in the domestic market at the time of issuance~
In accordance with the terms of the notes, should
the Bundesbank require early redemption, proper advance
notice is necessary and the interest rates would be adjusted
downward to reflect the shorter life of the obligation.
Of the total of up to $5 billion, $3 billion has
already been accomplished. This amount was partially
financed by the Bundesbank through the retirement of
approximately $2 billion of short-term special Treasury
securities acquired earlier in the year. To the extent
outstanding special securities now held by the Bundesbank
are not retired, the Treasury's market borrowing requirements later this Summer will be reduced.

C-83

The Department 01 the TREASURY
WASHINGTON. D.C. 20220

TelEPHONE W04·2041

FOR RELEASE ON DELIVERY

STATEMENT BY THE HONORABLE JOHN B. CONNALLY
SECRETARY OF THE TREASURY
BEFORE
THE SUBCOMMITTEE ON LEGISLATION AND MILITARY
OPERATIONS OF THE HOUSE COMMITTEE ON
GOVERNMENT OPERATIONS
TUESDAY, APRIL 11, 1972, 9:45 A. M.
It is a pleasure for me to appear before this Committee
on behalf of the President to urge enactment of H.R. 6962,
a bill to create a Depa~tment of Community Development.
The Administration is deeply appreciative of this
opportunity to make a summation of its case in behalf of
this particular reorganization proposal.
My purpose today is to affirm the concern of the
President that we complete action on this vital reorganization
and that we do so without amendments which would undermine
the central purposes or the effectiveness of the new
departme'lt.
As you know, two weeks ago the President sent to the
Congress a message calling for action on the departmental
reorganization proposals which he initially placed before
the Congress on March 25, 1971. In this message the
President called attention to H.R. 6962 and observed:

279

"Prompt, favorable action on this bill
would represent a much-n~eded victory for
common sense and the public good. Its
defeat or emasculation would serve no
interest except entrenched privilege and
private advantage, and would cruelly disserve
the interest of literally thousands of
urban and rural communities with millions of
people who are tired of waiting for
Washington to get itself together and help

- 2 -

them. I urge all those concerned with
the cause of ixectttive ~.organization
to redouble their efforts to bring
H.R. 6962 to my desk for signature
during 1972 ••• "
It was my privilege to serve as a member of the
President's Advisory Council on Executive Organization,
which intensively studied the organieation of the
domestic departments and made the recommendations on which
much of the current ~eorganization plan is based. We
found,~n .our revi~w, as had other commissions and't~sk forces
which had preceded us, that our departments were simply not
organized or equipped to deal effectively with the problems
before us. No where was this clearer than in the vital
area of assisting communities -- urban, suburban and
rural -- in their development as wholesome, viable places
in which to work and live. The e£isting picture is one of
a number of departments providing piecemeal, overlapping,
poorly coordinated support to physical and institutional
development within our communities. The origins of this
situation go back to the way our departments have evolved
over the past century, with their concern over clientele,
over means instead of ends, and over jurisdiction in the
face of competing agencies. We have learned the hard way,
and the case for reorganization can no longer be
ignored.
We cannot charge one department with housing and
community planning and another with highway programs. We
cannot organize around arbitrary distinctions between
large and small towns. And we cannot expect three or four
agencies to be effective in providing virtually the same
assistance for sewage treatment and other commuhity
facilities.
The Federal government's organization does not
adequately reflect the fact that the problems of communities
are basically similar regardless of where one lives. People
require adequate housing, roads, community facilities,
and community institutions. There is no reason why a
citizen should have different benefits of life in one
location as compared to another, just because the Federal
Government is not organi~ed'to distribute equitably and
effectively funds and other forms of assistance. Nor should
the efforts of one agency run counter to those of ~nother
as has too often been the case.

- 3 -

As a former Governor, I can assure you that we have
done poorly in helping State and local governments improve
their capability for planning and management because of the
Federal disarray. Agencies at the State and local level
now have to work with too many Federal agencies and it is
often close to impossible for them to secure prompt and
consistent action in meeting their needs.
While there has been broad, bipartisan support for
the concept of a Department of Community Development, I
understand this Committee has received objections to the
placement in this department of certain rural development
programs of the Department of Agriculture, and the
highway functions of the Department of Transportation o
I would like to emphasize that the Administration regards
the inclusion of these programs in the new department as
critical to the realization of the objectives of this
reorganization o
Let me turn first to the proposed placement of the
housing and community facilities functions of the Farmers
Home Administration and the programs of the REA in the
Department of Community Developmento The President is
deeply concerned that the needs of small communities and
rural areas not be neglected o In his message of February 1,
1972, on rural development, he emphasized the interrelationships
between rural, urban, and suburban problems and urged that
the Department of COmmunity Development be established,
to assure maximum impact for every dollar spent for rural
development
0

The Committee has heard testimony from those who preter
the conversion of the Department of Agriculture into a
department concerned with rural development as well as the
efficient production and marketing of food and fibero In
my judgment this approach would be harmful to the farmer as
well as rural America, and would constitute an unsound basis
for organizing a departmento
If we take the misguided path of attempting to split
the Nation between its urbanized areas and those of less
dense population we will only be aggravating the problems
of duplication, conflict and confusion which already are
proving so frustrating to State and local officials and to
the publico

- 4 All my life I have been associated with rural America
and its needs o I think I understand a little about why
we have fallen short in giving rural communities the
support which they need o In my judgment the Department of
Agriculture can never do its basic job of assistance to
farmers and at the same time develop the expertness and
machinery to administer large and complex community
development programs o
All communities need housing, need public utilities,
need water and sewer services, need roads and highways,
need constructive planning and need 'institutions for
effective citizen andgpvernmental action o This being the
case, we need a single Department, under one Secretary who
is concerned with the direction and coordination of all
Federal programs aimed at helping our communities o
The fear has been expressed that the new Department of
Community Development will be dominated by a concern for
the large cities o There has also been much criticism about
the way HUD has attended to rural needs o First, I would like
to emphasize what others have said: If we move into the
Department of Community Development the programs which belong
there, including those concerned with rural development, we will
have a new department characterized by a balanced
organization and a Secretary with the authority to fight for
the needs of all communitieso He will have a mission which
will permit him to give his undivided attention to community
I think it can be established that HUD has done
development
much more for rural communities -- even under its present
charter -- than it receives credit foro But we should not
blame HUD for its shortfalls when many of the tools to serve
rural America were in the hands of other agencies over which
it has had no effective controlo
0

Let me now turn to the highway issueo When the President
recommended moving highway and mass transporation functions
to DCD last year, he had compelling evidence that the bulk
of the problems associated with our highway programs related
to the impact of roads on the communities which they served
or traversed o He noted that the location of the highway
organization of the Government has been changed frequently since
the first Federal Roads Act and that each move took into
account changes in the nature of highway needs o

- 5 -

Virtually every significant event involving highways
in the past year has served to make clear the jeopardy in
which our highway programs have been placed as a result of
the rising concern wfrh their impact on communities and their
environment. I am surprised that there are still those
who contend that we can build highways and then let
communities emerge willy-nilly around them o This is thinking
out of the past. If we are to continue to provide needed
highways, future progress must take place within the
department best able to assure that Federal highway programs
contribute to balanced, attractive and coordinated community
development
0

I know there are those who are concerned over the impact
of the Department of Community Development on the Departments
of Agriculture and Transportation o I want to stress to this
Committee that both Departments will remain strong and viable
without the programs proposed for transfer to DCD o The Congress
is in the excellent position of being able to establish
the new Department this year without in any way committing
itself to el~ination of any Executive Department other than
the Department of Housing and Urban Developmento
No functions of government more directly or broadly
affect the quality of life in this nation than those related
to community developmento This country can no longer
tolerate unmanageable governmental organization, providing
a piecemeal approach to this fundamental need o Ho Ro 6962
answers this need o It would give us a single department
under one official, accountable to the President, the
Congress, and the people -~ providing leadership and
assistance to developing communities across this broad lando
I urge prompt enactment o
I would be pleased to answer questions which you,
Mro Chairman, or members of the Committee may haveo
000

The Department 01 the TREASURY
WASHINGTON. D.C. 20220

'OR

TelEPHONE W04·2041

IMMEDIATE RELEASE

April 10, 1972

RAYMOND F. HARLESS, IRS CAREER OFFICIAL,
NAMED TO DEPUTY COMMISSIONER'S POST
Secretary of the Treasury John B. Connally announced today the
Ipointment of Raymond F. Harless, a career official, as Deputy
Immissioner of the Internal Revenue Service. Mr. Harless'
Ipointment is effective immediately.
Mr. Harless, who has been IRS District Director in
m Francisco since July 1970, replaces William H. Loeb, who
~cently retired.
In his new post, the second highest in the IRS,
~ will be Deputy to IRS Commissioner Johnnie M. Walters.
Secretary Connally said that the appointment of Mr. Harless
Deputy Commissioner "is in line with the Treasury Department's
licy of recognizing and advancing outstanding career officials."
Mr. Harless began his IRS career in 1946 as a revenue agent in
n Francisco. After holding a series of increasingly responsible
sitions, he was selected in 1956 for the IRS executive development
urse
0

On completing the program, Mr. Harless was named Assistant
strict Director in Detroit. After serving there and in a similar
sition in Chicago, he returned to San Francisco in 1960 as the
S Western Region's Assistant Regional Commissioner for Audit.
held that position until he became IRS District ~irector in
11 Franc isco.
Born in San Francisco, Mr. Harless, 52, received a B.S.
accounting from the University of California in 1942,_and an M.S.
He
~ree from the California Institute of Technology in 1943.
~ved in the Air Force in --World War I I.
Mr. Harless is married to the former Helen McCastline of
Francisco. They have three children.
000

',80

The Department 01 the TREASURY
WASHINGTON. D.C. 20220

TelEPHONE W04·2041

FOR RELEASE ON DELIVERY

STATEMENT BY THE HONORABLE JOHN B. CONNALLY
SECRETARY OF THE TREASURY
BEFORE
THE SUBCOMMITTEE ON LEGISLATION AND MILITARY
OPERATIONS OF THE HOUSE COMMITTEE ON
GOVERNMENT OPERATIONS
TUESDAY, APRIL 11, 1972, 9:45 A. M.
It is a pleasure for me to appear before this Committee
on behalf of the President to urge enactment of H.R. 6962,
a bill to create a Depaf"tment of Community Development.
The Administration is deeply appreciative of this
opportunity to make a summation of its case in behalf of
this particular reorganization proposal.
My purpose today is to affirm the concern of the
President that we complete action on this vital reorganization
and that we do so without amendments which would undermine
the central purposes or the effectiveness of the new
departme 1t.
1

As you know, two weeks ago the President sent to the
Congress a message calling for action on the departmental
reorganization proposals which he initially placed before
the Congress on March 25, 1971. In this message the
President called attention to H.R. 6962 and observed:

·279

"Prompt, favorable action on this bill
would represent a much-needed victory for
common sense and the public good. Its
defeat or emasculation would serve no
interest except entrenched privilege and
private advantage, and would cruelly disserve
the interest of literally thousands of
urban and rural communities with millions of
people who are tired of waiting for
Washington to get itself together and help

- 2 -

them. I urge all those concerned with
the cause of executive reorganization
to redouble their efforts to bring
H.R. 6962 to my desk for signature
during 1972 ••• "
It was my privilege to serve as a member of the
President's Advisory Council on Executive Organization,
which intensively studied the organieation of the
domestic departments and made the recommendations on which
much of the current reorganization plan is based. We
found,~n.our revi~w, as had other commissions and" task forces
which had preceded us, that our departments were simply not
organized or equipped to deal effectively with the problems
before us. No where was this clearer than in the vital
area of assisting communities -- urban, suburban and
rural -- in their development as wholesome, viable places
in which to work and live. The eKisting picture is one of
a number of departments providing piecemeal, overlapping,
poorly coordinated support to physical and institutional
development within our communities. The origins of this
situation go back to the way our departments have evolved
over the past century, with their concern over clientele,
over means instead of ends, and over jurisdiction in the
face of competing agencies. We have learned the hard way,
and the case for reorganization can no longer be
ignored.
We cannot charge one department with housing and
community planning and another with highway programs. We
cannDt organize around arbitrary distinctions between
large and small town9. And we cannot expect three or four
agencies to be effective in providing virtually the same
assistance for sewage treatment and other commuhity
facilities.
The Federal government's organization does not
adequately reflect the fact that the problems of communities
are basically similar regardless of where one lives. People
require adequate housing, roads, community facilities,
and community institutions. There is no reason why a
citizen should have different benefits of life in one
location as compared to another, just because the Federal
Government is not organized "to distribute equitably and
effectively funds and other forms of assistance. Nor should
the efforts of one agency run counter to those of ~nother
as has too often been the case.

- 3 -

Let me turn first to the proposed placement of the
housing and community facilities functions of the Farmers
Home Administration and the programs of the REA in the
Department of Community Developmento The President is
deeply concerned that the needs of small communities and
rural areas not be neglectedo In his message of February 1,
1972, on rural development, he emphasized the interrelationships
between rural, urban, and suburban problems and urged that
the Department of Cbmmunity Development be established,
to assure maximum impact for every dollar spent for rural
development
0

The Committee has heard testimony from those who preter
the conversion of the Department of Agriculture into a
department concerned with rural development as well as the
efficient production and marketing of food and fibero In
my judgment this approach would be harmful to the farmer as
well as rural America, and would constitute an un80und basis
for organizing a department g
If we take the misguided path of attempting to split
the Nation between its urbanized areas and those of less
dense population we will only be aggravating the problems
of duplication, conflict and confusion which already are
proving so frustrating to State and local officials and to
the publico

- 4 All my life I have been associated with rural America
and its needs o I think I understand a little about why
we have fallen short in giving rural communities the
support which they need o In my judgment the Department of
Agriculture can never do its basic job of assistance to
farmers and at the same time develop the expertness and
machinery to administer large and complex community
development programso
All communities need housing, need public utilities,
need water and sewer services, need roads and highways,
need constructive planning and need 'institutions for
effective citizen andgpvernmenta1 action o This being the
case, we need a single Department, under one Secretary who
is concerned with the direction and coordination of all
Federal programs aimed at helping our communitieso
The fear has been expressed that the new Department of
Community Development will be dominated by a concern for
the large cities o There has also been much criticism about
the way HUD h~s attended to rural needs o First, I would like
to emphasize what others have said: If we move into the
Department of Community Development the programs which belong
there, including those concerned with rural development, we will
have a new department characterized by a balanced
organization and a Secretary with the authority to fight for
the needs of all communities o He will have a mission which
will permit him to give his undivided attention to community
I think it can be established that HUD has done
development
much more for rural communities -- even under its present
charter -- than it receives credit foro But we should not
blame HUD for its shortfalls when many of the tools to serve
rural America were in the hands of other agencies over which
it has had no effective contro1 o
0

Let me now turn to the highway issue o When the President
recommended moving highway and mass transporation functions
to oeD last year, he had compelling evidence that the bulk
of the problems associated with our highway programs related
to the impact of roads on the communities which they served
or traversed o He noted that the location of the highway
organization of the Government has been changed frequently since
the first Federal Roads Act and that each move took into
account changes in the nature of highway needs o

- 5 -

Virtually every significant event involving highways
in the past year has served to make clear the jeopardy in
which our highway programs have been placed as a result of
the rising concern with their impact on communities and their
environment e I am surprised that there are still those
who contend that we can build highways and then let
communities emerge willy-nilly around them o This is thinking
out of the pasto If we are to continue to provide needed
highways, future progress must take place within the
department best able to assure that Federal highway programs
contribute to balanced, attractive and coordinated community
development
0

I know there are those who are concerned over the impact
of the Department of Community Development on the Departments
of Agriculture and Transportation o I want to stress to this
Committee that both Departments will remain strong and viable
without the programs proposed for transfer to DCD o The Congress
is in the excellent position of being able to establish
the new Department this year without in any way committing
itself to elLmination of any Executive Department other than
the Department of Housing and Urban Developmento
No functions of government more directly or broadly
affect the quality of life in this nation than those related
to community developmento This country can no longer
tolerate unmanageable governmental organization, providing
a piecemeal approach to this fundamental need o Ho Ro 6962
answers this need o It would give us a single department
under one official, accountable to the President, the
Congress, and the people -~ providing leadership and
assistance to developing communities across this broad lando
I urge prompt enactment o
I would be pleased to answer questions which you,
Mro Chairman, or members of the Committee may haveo
000

UNITED STATES DEPARTMENT OF THE TREASURY
OFFICE OF THE SECRETARY

PRESS CONFERENCE
held by

TREASURY UNDER SECRETARY for MONETARY AFFAIRS
PAUL A. VOLCKER
in the

U.S. DELEGATION OECD OFFICES,
PARIS, FRANCE
MARCH 28, 1972

This

transcript

was made from a tape recording.

Greetings Ladies and Gentlemen,
I think we might begin.

There is some interest, I take

it, that I might meet with you and I just thought that it
was most convenient if we did it all together here.

I haven't

anything special that I want to start with, but I would just say
that I will be on the record here.

Of course, I don't think

it is fair for me to attempt to discuss the WP3 meeting which
has just started, so if you would not expect me to volunteer
or respond to questions on the WP3 meeting, itself, I think we
can proceed and I am open to questions.
Recently,
QUESTION: /Mr. Volcker, there have been some reports that
the United States Treasury is considering gold sales and
these reports had an effect on the gold market yesterday,
knocking down the price

about 25 cents

an ounce.

wondered if you might be able to comment on it.
ANSWER:

I should say the first I have seen of those

reports is what I read in the Paris Herald-Tribune this morning.
I think the only comment I can make is that I think our views
on the role of gold in the longer run have been made clear,
perhaps ad nauseua

You know that we look for that to have a

diminishing role in the 3ystem and I think we ought to explore
alternative policies in that respect and alternative techniques
in that respect certainly in connection with the longer term
issues that are before us.
term problem.

That is one facit of the longer-

Certainly I know of no action planned at this

- 2 -

time nor would I contemplate any action apart from discussions
that we might have with our partners on this matter and we have
had none.
QUESTION:

Mr. Under SecretarY,could you tell us roughly

what you see as the time table or scenario for the discussion
of the issues of longer-term monetary reform which were left
over from the Smithsonian agreement over the next months or
years so that we get roughly the right respective.
ANSWER:

Well, I think in the most general terms this

has begun - - maybe never stopped is the right word.

But so far

it has been primarily limited to some discussions within the
Executive Board of the Fund.

We want to move ahead in this,

I think, just as fast others are ready.

We do have a question

of resolving the appropriate forum here, and, at the same tiree,
think the appropriate substantive issues ought to b~~raised.
I think we are dealing with some extremely fundamental
questions here and they're not simply limited to the monetary
system.

There are inter-relationships with trade.

There are

inter-relationships with fiscal po~ whic~ in their broadest
sense,
economy

directl~

particulari1y impinge upon the external

taxes, subsidies, all the rest.

I think one of the

lessons of recent experience is that all these problems are
inter-related so there is a very sizeable agenda and a difficult
agenda because beneath all the techniques that get discussed
so avidly there are some very basic issues on the organization

- 3 -

of the world economy.

There will be philosophical divergences

and there will be, in particular instances some divergences of
interest that are going to take some time to resolve.

We want

to build a monetary system for a generation, so to speak, and
that is not something you do, at the least, on the back of an
envelope.

It involves, I think, an agreed view or consensus

on the outlook for the world economy and the organization of
the world economy.

There are some interesting developments

here in Europe and that is one aspect of it.

How do they fit

into a world whule?
Some of this, I think, is reflected in our views towards
the forum issue itself, which we would like to dispose of just
as rapidly as we can.

But we want to do it in a way that

provides an appropriate back drop, appropriate environment for
conducting these discussions.

We don't have any fixed views on

just how this should be done.

As Secretary Connally indicated

I think we have certain criteria in mind -- certain characteristics that any foum should have and I might just review that
a bit because that is one of my current concerns.

There is the

question -- you might call it fair representation.

You get a

fair balance of the different interests in the world involved
and you don't get some over balanced and you have a balanced
representative group representing all the important interests.
At the same time I would put down another criteria that it has
to be of a managable size.

That is a matter of numbers, in a

sense, and I would think preferably, when one is looking for an

- 4 efficient negotiating forum, one would think of less than 20,
but let us think of something like 20
necessarily at all the preferred size.

as a maximum, not
If you would ask me

for an outer limit that might be it.
I think fair representation, managable size -- I think
we should approach this with a broad perspective and I would
include several things under that heading.

As I mentioned a

moment ago, we are not just dealing with some narrow monetary
techniques here.

I think we have to recognize, for instance,

the inter-relationships with the trading order.
this is a question.

Now how you do

But we would not want to see the agenda so

circumscribed or the group so circumscribed that these interrelationships are kind of ruled out of order because they are
not our of

orde~They

are part of the problem and we have to

take account of these inter-relationships and have a forum
that fairly reflects that.

I think that even within the

monetary area there are some rather broad issues of the adjustment process, national attitudes that are inherent in the
monetary problem itself that sometimes are shoved under the
table or obscured by concentration too strongly, simply, on
Some particular techniques.
Let me give you an example of the kind of thing I think
of -- talking about an asset settlement system, full
convertibility -- many of these plans discussed.
They should be discussed.

It is fine.

But we have to look at the implicatic

of those systems and we have to look behind the mechanics.

-5United States starts with a lot of liabilities and not many
reserves.

If we are going to run that kind of a system, I

think, for instance, you have to look forward to a substantial
period of US surpluses if the United States is going to regain
its financial position and make that kind of a system work.
So, naturally, we ask the question -- if that is the implication
of this kind of a scheme, well, which countries are willing to
look forward to this period of substantial deficit that offsets
the American surplus?
this

And if there isn't a willingness to face

kind of a prospect, well, we'd better consider that in

shaping the monetary system.

There is no sense in making a

monetary system that rests for its stability on this kind of
presumption but nobody agrees with the presumption.

So that

kind of question, I think, has to be put on the table and
explored.
Finally, I think, we want to say a balanced, wide,
institutional participation apart from the countries involved,
as I suggested, in the representation issue.

I think there

are a lot of talents, expertise, points of view to be brought
to bear on this issue and I think there is some presumption,
quite reasonably, that in the monetary area particularly the
Fund has a special role to play but that should not be to the
exclusion of other groups.
of other groups.

It must not be to the exclusion

Here, we discuss these problems and relevant

aspects of it in the DEeD all the time, for instance, and what
role can this organization bring to bear?

How can it participate?

How should it get into the more narrowly monetary issues?

What

- 6 role is there for the calling upon, say, the expertise of the
BIS and other groups?

We want to bring in other various

points of view -- what I termed in Washington last week, I
guess, fresh air from whatever direction the air is fresh and
look at this in a rounded way.

I don't think any of this

dictates any particular organizational pattern.
I think you can probably say that no existing forum fully
meets by itself, if you look at any existing forum and
look at it in a vacuum, I don't think any of them fit all these
criteria.

But through some combination of forums or through

some new forum I don't think these are- at all impossible kind
criteria.

We want to come to some conclusion on this relative!]

quickly and I would aim to devote, not to the exclusion of
substance, but a considerable amount of my efforts in tre

cornin~

weeks in trying to resolve this and will get some preliminary
expression of views by some people while I am here in Europe
this weeko

I don't think that can be anything more than

preliminary but I am prepared to come back just as soon as
anybody is willing to have me, I suppose, and explore these
issues in more detail and attempt to get them resolved not
only in -- I don't limit that comment just to Europe because
as my earlier

co~nments

imply there are more than the United

States and Europe involved here.

QUESTION:

Have you had any initial reaction from the

other members of the Group of Ten on these plans?

- 7 -

ANSWER:
much here.

I don't think enough

to dignify very

I will be getting some this week but we haven't

sat down -- Mr. Connally made a speech, as you know, and he
roughly outlined these kinds of views.

I am not -- it is

perhaps too much to say you are encouraged because I just
haven't had that much reaction.

I am not unencouraged by what

scattered rreactions I have heard but it is really unfair to
say more than that because I will only really begin to get the
reactions now and we begin to see them face to face now.
QUESTION:

Do you really tllink when talking about groups

of not more than 20
system that's going

to carry out major surgery and build a
to last a generation and the other situations,

in your earlier words, that a group of 20 would work?

Is it your

hope that the Common Market nations would have a single
representative?
ANSWER:

You are concsnwwith whether a group of 20 is

too big or too small?

Well I feel, as I suggested, when we

are writing on a blank sheet of paper and could write down
an ideal group -- you would start with a number smaller than
that.

I think that is probably about the maximum you can

expect as an active negotiating group.

Even then at some

stage you are going to have to bring in a wider group or have
Some facility for dealing with a wider group.

One problem

with the size, quite frankly, is if every Common Market
country is to be represented you start out with I don't know
what -- ten potentially?

- 8 QUESTION:

Is it the US government's hope that the

Common Market countries would talk with a single voice?
ANSWER:

Well, I would say, in general, if the common

market talks with a single voice and that is consistent with
talking flexibly that would be an assistance to the negotiation.
I am not sure those two criteria are fully compatible.

But

since you ask me ideally, it would obviously facilitate things
if they not only talk with a single voice but could talk with
a single voice.
QUESTION:
think this is

But do you feel, in your soundings, do you
realis~If

you were mentioning 20, I take it

that the would and the could are mutually exclusive?
ANSWER:

I have given up nothing at this stage because

we haven't got -- as I suggested -- there is more than one
way to skin a cat.

I wouldn't want to go above 20.

know what the views of the Common Market are now?

I don't
We would

prefer a smaller group.
QUESTION:

ANSWER:

How small a group would you ideally prefer?

There is no magic number.

thrust of my comment.

I think that is the

I don't think we can call a magic number

but if you told me what was ideal I would say 10 or 12 would be
plenty to have sitting around the tableo
QUESTION:

We have 10.

- 9 ANSWER:

We've got ten.

That particular group, by

itselfaslsuggested, doesn't quite meet all the criteria that
are involved here but I don't exclude a combination of
possibilities.
QUESTION:

There have been suggestions that the United

States is less than happy with the Fund. (Inaudible)

You

have mentioned other groups as the OECD, the BIS , etc. in the
same breath as the IMF.

Does this mean that you feel that the

IMF needs some rethinking of its own?
ANSWER:

I don't think anything I say can be interpretered

as criticism of the Fund and I suggested that the Fund has
perhaps a special role to play here.

What I am suggesting is

the Fund isn't the repository of all wisdom.

It has particular

points of view which are useful but it is not the only point
of view.

They have a particular institutional setting and a

particular institutional history, which has its values.

has, in some sense perhaps, some deficiencies when one is
looking at restructuring their very organizationo

It has been

very much limited to the monetary area and I think one of the

- 10 -

questions, for instance, that arises out of this whole
a truly longer term

question-~s

discus~oo

whether in our international

institutional structure itself there shouldn't be closer
integration between the trade institutions and the monetary
institutions.

That is an

i~sue

that ought to be looked at.

Shouldn't GATT be involved in some extent since that is an
issue.

GATT again isn't inviolate as one looks down the road

and tries to structure the future, so I don't think we can
consider this the exclusive province of any group, recognizing
that the Fund certainly has a close and prDnary interest in the
thing.
QUESTION:

Do you rule out any further meetings of the

Group of 10 or Deputies of the Group of 10?
ANSWER:
QUESTION:
ANSWER:

No.
You would not be opposed?
Well if the Group of 10 has a useful purpose to

plaY,let us have it play it.

As I suggested, the Group of 10

in and of itself, as presently constituted, I don't think
meets all these criteria.

That doesn't mean that the Group of

10 necessarily has to be abandoned and never meet or whatever.
Maybe there is no single forum that answers all these questions
but then we have to get some way of integrating various forums.
QUESTION:

Do you contemplate that the Group of 20 or

whatever it is would have an independent Secretariat, ad hoc or
permanently?

- 11 ANSWt.;R:

This is the kind of

has to explored.
Secretariat.

quest~.on

vJhich obviously

In my thinking, it would have no substantial

But it might well be useful ... it might well be

essential that there be a minimal Secretariat and an Executive
D~ector,

a Chairman or

wha~ever,

that is going to devote, if

not full time, a very appreciable amount of time to organizing
the negotiation, so to speak.

But if you are suggesting an

elaborate Secretariat, I don't think that is necessary because
there are good and efficient and effective existing Secretariats,.
certainly the Fund Secretariat, for instance, is there to be
drawn upon and should be drawn upon.

We would want to draw upon

the talent wherever it is.
QUESTION:

Do you contemplate the possibility the Chairman

of this group might be not a national financial minister but
somebody appointed specifically to fill this spot?
ANSWER:

I think anything is open at this stage.

think I can express a judgment on that issue.

I don't

You may have a

chairman at the finance minister level, could well be a finance
minister, but does he have somebody to assist him, at less than
the finance minister levels?

A finance minister is not obviously,

in himself, a Secretariat or full time or anything like a full
time man.

You can get a finance minister to chair a meeting and

obviously pay some attention but who follows through, who organizes
the work, how the meeting agenda is developed and so forth.
There is going to be obviously some one to pay attention to these
matters.

- 12 -

Ql' :2:STION:

Cou 1d you answer the question whether (where?)

rLJu/,hly the "rump'! Secretariat would be based or the Executive

!Jircctor or Chairman?
'~NSWER:

I don 't know why you say "rump" Secretariat?

can't answer those questions because I did not come over here
~vith

any blueprint.

I cane over here with a desire to sound out

what others might think on these matters and I think you will
find us flexible and open minded within the context and criteria
I suggested.
QUESTION:

How would you feel, Mr. Under Secretary, with

the problem of dollar weakness over the extended period that
these negotiations will take place if this - do you have any
plans - what are your thoughts about coping with the problem?
ANSWER:

You are making a presumption that I am not ready

to make Mr. Farnsworth.

I think our point of departure is

certainly the basic Smithonian Agreement and we are assuming
that in effect, that is the interim arrangement and we are
proceeding on the basis certainly of those exchange rates and
related arrangements and we intend to continue to do so.
think other countries intend to do so.

That is what was

I hope, at the Smithonian and I think was resolved.

I
resol~(

That is

interim arrangement.
QUESTION:

But there are some demands for interim convert-

ibility, for example, in this type of thing and there are
questions.

- 13 -

ANSWER:
premature.

Our position is quite clear.

These demands are

Convertibility is something to be looked at in the

context of the longer term reform.
whole system.
Smithonian.

It has implications for the

That is what was precisely agreed to at the
I don't think it would be wise for the United States

to undertake commitments of a sartthat are subject to doubt and
question.

I simply don't think that would be a stabilizing

influence during this interim period.

We will look at that in

the context which I think was intended and we should look at
it in that context.
QUESTION:

The point is also raised about what they call

mini-convertibility, in which the British would be able to
pay.

At any rate, what are your views on this?

You see I

think that Secretary Connally made some reference to indicate
that the United States would look with favor on this now and
would try to accommodate as much as it could.
ANSWER:

You detect changes in attitude that I do not

think are valid.

We have always looked at this as a technical

issue that has to be looked at and resolved.

I would suspect

in coming weeks there would be conversations on this and we
will look at it and try to resolve it.

I don't think there

can be any expectation, given the current position of the
United States, that we resolve it single handly at any means.
I suppose that is what we are saying.

We are not in a position

to solve problems single handedly any more.

And contributions

have to be in some relationship to the strength of various
countries externally and the strength of their reserve position

- 14 -

and the strength of their balance of payments.
I think this is the basic message, if you will, that we
have been trying to say since August 15th.

The United States

position has eroded for a long series of years.
be a change here.
external position.

We have
Th~re

our position in the past.

There has to

find the way to strengthen our

rightly have been complaints about
Well let us look at ways to examine

that position because the long term erosion has accelerated
in recent years and you are not going to have a stable monetary
system without a stable dollar and a stable United States and
a strong United States balance of payments position.

This is

at the heartof a good many of these issues and it is a hard
and difficult problem.

We have been trying to say that since

August and let us not underestimate the problem.
some progress.

We have made

We have got a structure of exchange rates that

we are ready to work within and that will help things but that
is not the end of the story.

We have got a lot of other actions

and activities to engage in over a period of time to restore
the external position of the United States and we have to look
at monetary arrangements partly from the view point of those that
are liveable in this kind of context and its fundamental to this
whole problem.
Our pos ition is not what we would like to see it in and it
is going to take some time to restore it and it is going to take
hard and even aggressive effort by the United States in a
number of areas.

Things that we could tolerate for a long perioc

of time cannot be tolerated if we are going to move in a positiOf

- 15 -

where the United States position is strong.

Presumably, that

is what people want and we want to move in that direction in a
way consistent with a liberal orientation and certainly an
outward view from the United States.

We want to move in a

way that removes barriers (and there are plenty of them!) that
inhibit our exports, for instance, and not in away that closes
economies or areas.

That seems to us not only essential and

desirable economically in terms of political pressures but I
think that is the only reasonable way in which we could move
because the current position of the United States is unsustainable
politically within the United States as well as externally.

we cannot move in a direction of restoring the strength of our
external position we will have failed.
QUESTION:

It has been reported that the United States is

resigned to living in a world of major economic power blocs
rather than the more mUlti-(?) world of the GATT and the IMF
as conceived.

Is that so, and is that consistent with what you

just said about the liberal philosophy?
ANSWER:

Well blocs is rather an (?) word.

I think we

ought to certainly base the view of the world on some appreciation of what the practical realities are.

I think the movement

toward monetary unity, for instance in Europe, seems to be
here and present.

That seems to be the direction in which

Europe wants to move and is moving.

I do not think we need to

resist monetary unity in Europe or should resist it if that's
what they want.

I don't necessarily call that a bloc.

I guess

- 16 -

VCll
-'

can call it a bloc

but it's got both potential goods atd

potential problems from the standpoint of the world.

I guess

we want to maximize the goods and minimize the problems.
We frankly see tendencies in different directions in Europe,
T~1ere

is some convergence on the idea of wanting unity.

Whether

that is a unity that closes within itself or opens out to the
rest of the world, I think is the question and it's a question
that in the end is going to be answered by Europe not by the
United States.

I suppose in that sense we're disquieted by some

trends we see within

Euro~e

and I don't think we can (?) that,

but that is not our objective and this is one of those areas
where the linkages with non-monetary policies are so clear and
evident.

There are direct monetary implications or financial

implications in the area of controls where we may have some
differences in philosophy.

Does Europe want to build a wall

of financial controls around itself?
as the Cormnon Market or Europe

generall~1

they want discrimination in trade?
Favored Nation treatment.

Is discrimination in trade
sees it interent?

We base policies on Most

Non-discrimination in financial

affairs is the financial parallel of Most Favored Nation.
which direction does Europe want to go here?
should be asked this question.

Well,

I think they

This is one of those underlying

issues in monetary and trade reform that have to be resolved and
I think our answer to that is quite clear.

We don't resist the

unity of Europe -- never have, we've encouraged it.
an official American policy.

It has been

If that turns inward on itself,

- 17 we are not going to be very happy.

I don't think Europe

basically should be very happy but that's going to be a question
for Europe.

I hope not a question for Europe alone.

It is

something that has to be worked out with others and I hope
international discussions will influence that development.

But

we would be blind to say that is not an issue.
I think there are other issues.

They are basic apart from

the issue of monetary unity in Europe in general.
philosophies on the control issue.

Different

We see the necessity to have

a strong current account in the United States and we want a liberal
investment order as well as a liberal trading order to help
support that.

Well if that is not congruent with the rest of

the world's desires, they would rather have controls, we are
going to have to hear about that and resolve that issue.

There

are difficult issues of the national independence of monetary
policy that run behind this.
want?

How much independence do people

How much are they willing to sacrifice to an international

authority?

This is no issue that is unique to the United States.

This is an issue that every country has to face rather directly
and adopt a philosophy that is consistent with others.

Some of

these issues appear quite evidently in a current context.
is worried about too many dollars, I understand now.
liberalize outward investment?

Why not

Or does that reflect some

philosophy that we do not want investment liberalized.
want to live within a block.

Europe

That we

I'm just picking out one little

symbol and I wouldn't make much importance of this.

It sounded

- 18 -

interesting that in the United Kin8dom, for instance which is
presumably worried about too many dollar inflows, they didn't
do much to liberalize the outflows, really, and the measure that
they took to liberalize the access of companies in the U.K. to
sterling was with a

discrirn~natory

action.

It liberalized in

part if you were outside a depressed area for Corrnnon Market
countries.

They are not worried about inflows of marks and

francs and all the rest presumably but those companies can
borrow sterling and American companies cannot borrow sterling.
So it is got to bring in the dollars from abroad if it wants tc
expand.

I don't know.

Does this indicate anything of the

philosophy in which Europe wants to move?

If so, let's take

account of that.
Now I only picked that out as one little thing.

I think

you are all familiar with the general nature of the problem
and perhaps conflict within Europe as to what direction they
want to move in these respects.
We would like to get these issues I might say on the table
and discussed just as soon we can because they lie at the heart
of what is going to be a long process and I think inevitably in
some respects controversal process.
QUESTION:

What role do you think does the high-level OECD

Trade Committee have in the working out of these plans?
ANSWER:

It's dealing w.th some aspects, I think.

I view

their role as essentially a temporary one but this is, I think,
the creation of that group and the deliberations of that group

- 19 -

are in fact a symptom of the kind of problems that I am talking
about and an attempt to take a view and put it in cont2xt but
I am not ready to attach any permanence to that particular body
or approach.

But again we are not wedded to any particular

institutional approach here within the criteria I suggested and
certainly in the monetary area the Fund has a particu lar role
to play which we fully recognize.
QUESTION:

How strongly do you feel about the idea of auto-

matic discipline on surplus countries, so that they must take
certain actions automatically if they have surpluses?
ANSWER:

We feel very strongly that this is a problem and

it is a particular problem with certain types of systems.

you ask me how strongly we feel about any particular device at
this stage of the game, not very strongly.

We do not know what

the right device is, but the problem seems to us quite evident,
and in fact becomes more severe with some kinds of monetary
systems that seem to be popular in some circles.

If you are

goind to have a tightly constructed asset settlement system ---

:0 use the technical jargon--- well, as I suggested, I think the
short-term implication of that (and the short-term is quite a
few years) is the United States better run a surplus.

And the

longer term implication is you cannot be put in a position of
running a deficit for any period of time

That is a fundamental

economic fact that adjustment process is going to have to work.
How's it go ing to have to work?
You know, you can have such a tight asset settlement system
that you're forcing changes in exchange rates every three weeks

- 20 -

when something gets out of whack.

I'm exaggerating with every

three weeks, but is that what people are really talking about
in these kinds of terms?

You've got to put that kind of issue

on the table, if, or maybe there's some other adjustment techniqu
What is it?

Tariffs?

Trade policy?

.W1~atever.

But let's not

talk about that kind of system without simultaneously

consideri~

what it's implications are for the pattern of international payments.

And, how are you going to keep that pattern?

How are

you going to make these adjustments?

If you're not willing to

make the adjustments, let's not talk

about that kind of a system

QUESTION:

When the United States was the largest creditor

country in the war and afterwards, we fought against any type of
automatic disciplines for, I believe we were against any type of
automatic disciplines for surplus countries.

Do you think that

the present surplus oountries like Germany and Japan will accept
with a system like this with any
ANSWER:

grea~equanimity?

I think that's an interesting question which is

better directed to the other countries.

But this is precisely

the kind of implication that has to be put on the table.

would point out in reference to the American experience.

It's

so long since we were in surplus that I find it difficult to cast
myself back in that point of history.

What we in fact did, we

were, for a long period of time, a potential surplus country
that turned ourselves into a deficit country.

Alright, because

we recognized that in those circumstances the other countries
were weak, they had to build their asset position.

So, to ask

- 21 -

this question, who is the United States of the 1970s?
willing to run those deficits for the 1970s, to restore r. '1~S
.

kind of balance?

I think that's a very good w~y to put

'.l-

lL..

The United States ran it during the 50s and the United Stazes
ran it during the 60s.

They ran it too long.

to play that role in the 1970s?

~i .~ -,-:lV

Bu t ivho 1 s \\

It's not the United States.

Yon know, we ran out of gas in that role.

And, so, let's consider

who's going to play the role in the future, if you're going to
have that kind of a system.

And maybe any kind of a system

going to be dependent upon that.
This raises another kind of problem that cuts across all
these issues.

The United States relative to other countries 01

the irrrrnediate post-war period was obviously very strong.

\/2S

the United States in one position and in some degree all other
countries and in a greater or lesser degree in another position,
hy a very large order of magnitude.

It doesn't exist any more.

It doesn't exist particularly with the growth of Europe and tne
growth, the unity of Europe and the growth of Japan.

Now that

has, I think, certain implication for, you might think of as
the Constitution of the monetary system.

Who runs it?

WelL,

you know nominally the 1.M.F. ran it, and the I.M.F. is ar impor··
tant institution in the, you could say that in the 50s or 60s.
But the I.M.F. had the United States behind it.
going to be behind it in the future?
power centers here of much more equal
clearly a Constitutional issue here.

You kno~}, who'~

You've got a number of
weight.

And there's

How do these power centcrs

work together when you don't have one that's dominant.

A very

- 22 -

oasic issue of international monetary, financial trading
organization.
QUESTION:
ANSWER:

? (Scarce Currency Clause?)
Well, this kind of discipline on the surplus, so

to speak, isn't a new idea as you suggest.
at Bretton Woods, neven been effective.

It was thought of

How do you, you can

think of this problem and how to make the scarce currency
clause in the I.M.F. effective.
esting clause.
tL~e,

You know, it's rather inter-

It says if you got a surplus for any period of

all sorts of
QUESTION:
ANSWER:

But it's never been invoked, has it?
Well, it may not as it's, there's a question whethf

it's constructed in a way that facilitated it, its invocation.
Haybe a refurbishing of the scarce currency clause will do the
job.

That's something to be looked at.

That's certainly what

y,'€

are talking about, in effect, whether you take that precise aveOl
or not.

The problem, which is not a new problem was recognized

the time of Bretton Woods.

You know this so-called Bretton

Wood~

system really hasn't worked the way the founders envisaged.
envisaged such things as scarce currency clauses and a lot of
discipline on the surplus countries.
a very simple reason.

And they envisaged it for

They probably envisaged the kind of, what

,.vould nO\oJ be called an asset settlement system.

And, I guess all

11m saying in that respect is that if you go back to the original
vis ion of the I.M.F. founders, don't forget about some of these
very important problems that the founders were in fact very
concerned with.

Now implicitly the decision

sys tern.

I don't mean by the United States, OJ

collectively.

That clause then did not seem so important but once
go back to that kind of a system it becomes very

QUESTION:

),0,-

importc;~lt.

May I ask what areas of the world do

YOLl

VVarti-::

to see in the Group of 20?
ANSWER:

It has been suggested

the possibility th3t

adopt the representational pattern that is now on the I.M.I'.
board.
QUESTION:

Mr. Secretary, you have been saying that

YOll

want this on the table and you want this and you want these
other things on the table.

Are you imputing that there are

people who do not want them on the table?
ANSWER:

I don't know.

I am imputing that a lot of the

discussion that I see in the press has a kind of preoccupation
with some surface mechanics that I do not think puts these
issues on the table.

The issues are kind of brushed aside

Some concern about mechanics.

In the broadest sense,

obvi::::"j sJ

this process takes place simultaneously but in the broadec.:t
sense the mechanics flow in place when you have got the
philosophy straight, not the reverse.
philosophy to fit the mechanics.

You do not make up the

As a practical matter chc

discussion proceeds simultaneously.
QUESTION:
ANSWER:

How long do you think the (Assessment?)
It is going to take a period of time.

\,17

ill

l~;

rot

- 24 ,-,':,'o~hing I,.'e

dre going to finish this year certainly, in my
He don

ill>.'
'.
L

l.'

,
L

know whetherv:e'll finish it next year.

ta lking about a major reconstruction of the monetary system
I think the important thing is to get at it, and we are

rt~adv

to get at
QUESTION:

question.

• +-

~~.

I would like to pick up on my colleague's

Do you get the feeling that some people are not

,villing - other of your partners - are not willing to get at it?
ANSWER:

I think it would be unfair to characterize my

partners' attitudes before the discussions proceed in an intens ive \Vay.
I

\.<1OU

I can only say I am not going to criticize my partner!

ld . .. If you think it is fa ir that I think the pres s has

perhaps neither always appreciated the depth of some of these
problems, or market operators who quite understandably say, you
know) do something, do anything, make us feel better.

I wish I

could make them feel better but there are some real issues here
and there is no automatic simple solution here.
QUESTION:

•.. You say you don't think anything will

be done till next year.

I mean is this because of political

considerations, elections ..•.

- 25 ANSWER:

No, no I do not.

For a very simple reason.

do not think that we can work through these problems, if you
are thinking of the American election.
QUESTION:
ANSWER:

Well other elections too.
People always have el2ctions and I would not

worry excessively about the elections.

I just myself --

maybe I will be pleasantly surprised but talking about putting
a new system sort of in being by the fall of this year, as a
practical judgment does not seem to me to be in the cards.
Now if it is possible, fine.
basic judgments are involved.

I suppose if it was possible I -It is not th2 best time In the

world to make a basic decision of this sort on the eve of a
Presidential election -- I would freely admit that.

But I

don't think that is a relevant consideration since I don't
think we are going to be at that stage by the fall in any
event.
QUESTION:

Do you really think that anybody --- the average

man will understand tre
ANSWER:

(?)?

We are not talking about the average man,

think we are talking about, I should say even an extraordiGary
president, I won't call him an average President.

He is not

going to be prepared to make a decision of this sort on the
eve of an election but I don't think that is a relevant
consideration.

It does not enter into our thinking because

I don't think we are going to be prepared to go with that

- 26 kind of a package in September of this year.
think that is on.
feelings.

I just don't

Here I can, I think, speak of my colleagues'

I do not know one government, maybe I am wrong.

But I don't know of one government that has that kind of
timetable anywhere near in mind.
QUESTION:

Are you going to wait until the next meeting

of the Fund to have formal discussions on these things or are
they going to be he Id ad hoc whenever any so rt of other bodies
get together?
ANS\,JER:

I would expect discussions long before the next

annual meeting of the Fund.

I would hope that this forum -- tit

question of the formal forum so to speak can be resolved very
quickly.
QUESTION:
ANSWER:

Such as the meeting right now?
Oh no, in a perspective of weeks.

But as your

question implies I don't think all discussion has to cease befc
the establishment of a formal forum.
these questions on
QUESTION:

I think we are putting

table so to speak now.

At the Rome Group of 10 meeting, one authority

discussed, then under consideration only, the devaluation of
the dollar of the order of 8 to 10 per cent (?) only being a
half way solution to the fundamental disequilibrium cy,f tre
United States.

Would it be your view now that that would be d

correct characterization of what came out of the Smithsonian
Agreement?
ANSWER:

Well, I am not

~oing te ~hara~L~rI

- 27 --

It is not a full solution.
solution.
Til or ki ng

wi~l

We never

It is obviously a help.

and th inking \vi thin t ha t
say what is obvious but

)::t

.
rat t? ,-::.
c:mE:':JOl>

~ xc hange

Oft2J

,~."

ovctl~o~2J_

gets

cepends on the performance of our ;],)mest:'Lc

eCODC':-J.'''!.

r1',(".o<

that is fundamental -- how well we do on prices, how well
we do in promoting an orderly but not inflatimu.::.y <..,dv2nc2.
\,]e

have a total program introduced at the same

tir'~e

suspension

of convertibility was introduced designed for jl-,st that
objective.

I tuink basically the prospects for the American

economy taking together the price performance, thi? expansion
performance is probably better than any other
around the world at this point in time.

m~jor

country

We are moving in the

right uirection but I do not want to imply by that that we
have solved the problem domestically.
suggest anything else.

I would not Ivant to

It is the key to a

favorable outcome.

But in addition to that, we think that there are a lot of
trade barriers around the world which are somewhat biased
against the United States, for instance.

The United States is

in a position where our cost of production for basic agricultural commodities approximates half of that in the
Market.

Well, that sounds pretty good.

competitive advantage.
market?

Co®~on

We've got a great

How much access do we have to that

How much is that situation being correcte(i by the

actions being taken in Europe?

Is this another one of those

symptoms, a much more fundamental symptom of the kind of

- 28 -

ching chat I mentioned earlier 9 that Europe essentially
"ants to go it alone ~

Here is an important trading sector

in which the United States has an enormous competitive advanta~
l)Ur

europe:: \...;ants to go it alone in this area

Well, that is

rather an inhibition if that attitude were to persist on Our
d~)ility

to make an adjustment.

What about the preferential

agreements and the spread of preferential agreements in
Europe?

Is this a contribution to the adjustment process or

is this an inhibition on the adj ustment process to say nothing
of its implications for a multilateral world or kind of
integrated world society?
Nov; I by no means want to pick on Europe.
problems with other sectors of the world.
trade surpluses.

We have had

Japan has enormous

How quickly are they going to move to

liberalize in the interests of their own consumers as well as
in the interests of the world economy?
triple play at work here.

There is kind of a

You know, we take 30 percent of

the Japanese exports and it is not entirely accidental, I
think, that the Common Market takes 6 percent.

I don't think

that is purely a reflection of relative competitive positions.
There aLe a good many arrangements of one sort of another in
place here that inhibit what would seem to be a reasonable
adj

IJstment process.

kind of development.

We are concerned about precisely that
We'd ask our trading partners, are you

100king for free trade, does that mean free trade for the
Japanese exports as well as for others, or is this some kind
a uore limited concept of liberal trade that people have

- 29 -

in mind?

If so, let's know about it.

So their exchange

rates are not the answer to this questtol1

our opinion,

by any means. We have done the exchange rate bi t.
2

But there are

lot of other compcnents of the problem that remain to be

worked on.
QUESTION:

Not all the trade barriers are biased against

the United States, some of them are biased against other
countries.
ANSWER:

We are all guilty in this respect.

a question of relative importance.

I think it is

In some important areas

and this is a question of what contributes to an adjustment
that one wants to see.

But if you wanted me to say the

United States has no trade barriers I am not going to say so
~ecause

obviously it does.

QUESTION:

How precisely do you expect to get your

agreement on this forum.

I mean will there be private

soundings, with various people, will there be a meeting
similar to todayrs meeting or something?
ANSWER:

Well, today's meeting is accidental In the sense

that it is a WP3 meeting which is .•.
QUESTION:

How will we know that you have an agreement

on the procedures when .••

- 30 \';ell, 1 presume when \Ve get agreement it

P.NSVTER:
bec~,slt'

l~nC\vn

~.."i

that th.ere is a consensus on how to proceed

but I think that it will take a lot of bilateral contacts,
informal contacts.
QUESTION:
ANSWER:
game, yes.

(?)

I would think primarily at this stage of the
But we are ready to facilitate this process any

way that seems best.

We will meet bilaterally, jointly,

multilaterally.
QUESTION:

Are you going to have bilateral meetings

during this trip now?
ANSWER:

Well, I will have contacts with the various

officials here and I am sure ••.
QUESTION:
ANSWER:

Where else are you going?
Well I am just going to Portugal with this

Bellagio affair right nowo
there.

There will be a few other officials

We will have some opportunity to talk.

pared to come back to Europe or elsewhere.

But I am pre-

I would like to be

home with the family for Easter, but I mean I am prepared to
come back.
QUESTION:
ANSWER:

How long will you stay on this trip?
Just till tomorrow.

- 31 QUESTION:
ANSWER:
QUESTION:

You are leaving tomorrow?
Yes.
Mr. Volcker, if this matter is of such great

urgency why don't you organize a conference in Which this
question on the forum and other matters are on the formal
agenda?
ANSWER:

We are willing to proceed, we want to proceed

as fast as seems reasonable.

If it seems useful to organize

a conference we would organize a conference.

We would not want

to haggle for six weeks over organizing a conference.

But we

have no predilections against conferences -- if they are going
to be useful.

I am not sure there is a consensus that a

conference is useful.
QUESTION:
ANSWER:

If so, we will have a conference.

What will be the next step then after ...
I think that at this point my intention would

be essentially some bilateral soundings or, I don't know
whether I would dignify it with multilateralo

You know I

don't confine myself to sitting in a room with one person
if it seems more useful talking with several at the same time.
It may well be we will talk with several at the same time.

But

I would guess right at this particular stage the best way to
proceed is by contacting my counterparts or other ministers in
Europe or elsewhere and get their views, get them as directly
and concretely as we can.

We want to go home and make up our

- 32 own mind on the specifics of tie matter which were now,
as I suggested, quite open-minded about.

What kind of

mechanism best meets, best goes towards meeting the kind
of criteria I set out.

Thank you gentlemen.

The Department 01 the TREASURY
WASHINGTON. D.C. 20220

NTION:

TelEPHONE W04·2041

FINANCIAL EDITOR

April 10, 1972

RELEASE 6: 30 P.M.

RESULTS OF TREASURY'S WEEKLY BILL OFFERING
l~e

Treasury Department announced that the tenders for two series of Treasury
3, one series to be an additional issue of the bills dated
January 13, 1972 , and
April 13, 1972 , which were offered on April 4, 1972,
)ther series to be dated
opened at the Federal Reserve Banks today. Tenders were invited for $2,300,000,000,
lereabouts, of 91-day bills and for $1,800,000,000, or thereabouts, of
182-day
). The details of the two series are as follows:
~

OF ACCEPTED

~TITIVE

BIDS:

High
Low
Average

91-day Treasury bills
maturin~ July 13, 1972
Approx. Equiv.
Annual Rate
Price
99.067
99.043
99.057

3.691%
3.786%
3.731%

182-day Treasury bills
rnaturinB October 12, 1972
Approx. Equiv.
Price
Annual Rate
97.886
97.843
97.865

4.182%
4.267%
4.223%

10% of the amount of 91-day bills bid for at the low price was accepted
ll%of the amount of 182-day bills bid for at the low price was accepted

TENDERS APPLIED FOR AND ACCEPTED BY FEDERAL RESERVE DISTRICTS:

Louis
leapolis
las City
Las
Francisco

AEElied For
$ 21,145,000
3,073,960,000
35,780,000
18,760,000
11,440,000
36,285,000
218,785,000
47,120,000
28,990,000
39,130,000
35,560,000
96,145,000

Acce12ted
$ 10,145,000
1,917,960,000
15,780,000
18,760,000
11,440,000
27,285,000
125,785,000
40,320,000
20,990,000
29,130,000
13,560,000
69,145,000

AE121ied For
$ 13,780,000
2,802,555,000
5,505,000
20,715,000
14,445,000
23,500,000
200,695,000
29,345,000
28,800,000
19,695,000
29,565,000
99,945,000

Acce12ted
3,780,000
$
1,561,355,000
5,505,000
15,515,000
10,445,000
11,100,000
89,030 ,000
20,345,000
18,800,000
9,695,000
7,565,000
46,945,000

TOTALS

$3,663,100,000

$2,300,300,000 ~

$3,288,545,000

$1,800,080,000E./

trict
ton
York
ladelphia
vel and
Wlond
mta
~ago

:ludes $195,470 ,000 noncompetitive tenders accepted at the average price of 99.057
:ludes $ 93,220,000 noncornpeti ti ve tenders accepted at the average price of 97.865
~se rates are on a bank discount basis.
The equivalent coupon issue yields are
~ for the 91-day bills, and 4.38% for the 182-day bills.

The Department 01 the TREASURY
WASHINGTON. D.C. 20220

TelEPHONE W04·2041

April 11, 1972

FOR IMMEDIATE RELEASE

ANTIDUMPING INVESTIGATION INITIATION ON
PIG IRON FROM BRAZIL
The Treasury Department announced today the initiation

of an antidumping investigation of imports of pig iron from
Brazil.
The Treasury announcement followed a summary investigat ion conducted by the Bureau of Customs after receipt of
a complaint alleging that dumping was taking place in the
United States.
The total value of pig iron imported from Brazil during
the six-month period from September 1971 through February
1972 amounted to approximately $2.2 million.

000

The Department 01 the TREASURY
WASHINGTON. D.C. 20220

TelEPHONE W04·2041

April 11, 1972

?OR IMMEDIATE RELEAg

TREASURY'S WEEKLY BILL OFFERING
The Treasury Department, by this public notice, invites tenders
:or two series of Treasury bills to the aggregate amount of
;4,100,000, 000, or thereabouts, for cash and in exchange for Treasury
dlls maturing April 20, 1972,
in the amount of $4,105,740,000,
IS follows:
91-day bills (to maturity date) to be issued April 20, 1972
,n the amount of $2,300,000,000,
or thereabouts, representing an
:dditional amount of bills dated January 20, 1972, and to mature
'u1y 20, 1972,
(CUSIP No912793 NV4 ), originally issued in
he amount of $1,600,815,000, the additional and' original bills to be
reely interchangeable.
182- day bills, for ~,800,000,000, or thereabouts, to be dated
pri1 20, 1972,
and to mature
October 19, 1972
8USIP No. 912793 PH3)
0

The bills of both series will be issued on a discount basis und~~
)mpetitive and noncompetive bidding as hereinafter provided, and at
lturity their face amount will be payable without interest. They will
! issued in bearer form only, and in denominations of $10,000,
.5,000, $50,000, $100,000, $500,000 and $1,000,000 (maturity value).
Tenders will be received at Federal Reserve Banks and Branches up
) the closing hour, one-thirty p. m., Eastern Standard
.me, Monday, April 17, 1972
Tenders will not be received
the Treasury Department, Washington. Each tender must qe for a
,nimum'of $10,000. Tenders over $10,000 must be in multip·les of
1,000. In the case of competitive tenders the price offered must be
pressed on the basis of 100, with not more than three decimals,
g., 99.925. Fractions may not be used. It is urged that tenders be
de on the printed forms and forwarded in the special envelopes which
11 be supplied by Federal Reserve Banks or Branches on application
ere for.
0

Banking institutions generally may submit tenders for account of
stomers provided the names of the customers are set forth in such
~ders.
Others than banking institutions will not be permitted to

- 2 -

submit tenders except for their own account. Tenders will be recei~
without deposit from incorporated banks and trust companies and from
responsible and recognized dealers in investment securities. Tenders
from others must be accompanied by payment of 2 percent of the face
amount of Treasury bills applied for, unless the tenders are accompan
by an express guaranty of payment by an incorporated bank or trust
company.
Immediately after the closing hour, tenders will be opened at th,
Federal Reserve Banks and Branches, following which public announcemel
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 reiect any or all
tenders, in whole or in part, and his action in any such respect shal
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 decima
of accepted competitive bids for the respective issues. Settlement f
accepted tenders in accordance with the bids must be made or complete
at the Federal Reserve Bank on April 20, 1972,
in cash or other immediately available funds or in a like face amount
Treasury bills maturing April 20, 1972.
Cash and exchange tend
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.
Unde r Sec t ions 454 (b) and 1221 (5) of the Inte rna 1 Revenue CuG
of 1954 the amount of discount at which bills issued hereunder are sc
is considered to Bccrue when the bills are sold, redeemed or otherwis
disposed of, and the bills are excluded from consideration as capital
assets. Accordingly, the ownet" L,Z Treasury bills (other than life
insurance companies) issued hereunder must include in his income tax
return, as ordinary gain or loss, the difference between the price pc
for the bills, whetner on original issue or on subsequent purchase, '
the amount actually received either upon sale or redemption at matur:
during the taxable year for which the return is made.
Treasury Department Circular No. 418 (current revision) and thi~
notice, prescribe the terms of the Treasury bills and govern the .
conditions of their issue. Copies of the circular may be obtained f
any Federal Reserve Bank or Branch.

000

The Department 01 the TREASURY
WASHINGTON. D.C. 20220

TelEPHONE W04·2041

MMEDIATE RELEASE
12, 1972

VERNON D. ACREE NAMED
COMMISSIONER OF BUREAU OF CUSTOMS
Secretary of the Treasury John B. Connally
today announced the appointment of IRS Assistant
Commissioner Vernon D. Acree as Commissioner of
the Bureau of Customs.
Mr. Acree will direct the operations of the
14,000 personnel of the Bureau under the supervision of Assistant Secretary Eugene T. Rossides.
He replaces Myles J. Ambrose, who was recently
named to head the Office of Drug Abuse Law
Enforcement in the Department of Justice.
In making the announcement, Secretary Connally
said that he "selected Mr. Acree, a 30-year career
law enforcement official, to ensure that the
Treasury Department will continue to play a lead
role in President Nixon's anti-narcotics program."
At the same time, the Secretary stated that he has
"directed that the tariff and trade aspects of the
Bureau of Customs operations be given the highest
priority."
Mr. Acree, 52, has been with the Federal
Government since 1937 in progressively responsible
positions and was appointed IRS Assistant Commissioner
on September 1, 1959. He is a founder of the
Association of Federal Investigators and served as
its national President in 1964-65 and on its Executive
Committee for several terms. He has been a lecturer
and organizer of many conferences and seminars on law
enforcement conducted by the Association, several
universities, and the Brookings Institute. During
World War II, Mr. Acree served with the Army's
Criminal Investigation Division (CID) in Europe.

- 2 -

Mr. Acree has received a number of awards:
In 1964, the Treasury Department's Gold
Medallion Exceptional Service Award;
In 1966, the Arthur Flemming Award by
the D.C. Junior Chamber of Commerce
as one of the outstanding young men in
Government;
In 1968, the Leadership Award of the
Association of Federal Investigators; and
In 1970, a National Civil Service League
Career Service Award as one of the
Government's ten outstanding career
executives.
A native of Washington, D.C., Mr. Acree attended
local schools and the University of Minnesota. He
is a member of the American Legion and has been
active in 'work for the Boy Scouts of America. He
resides in Fairfax, Virginia, with his wife, the
former Doris Wight of Washington, and daughter,
Beth. The Acrees have three older children, sons
Darrell, who lives in Washington, and Allan, of
Bethesda, Maryland; and a daughter, Mrs. Jean
Winters, of Falls Church, Virginia.
000

The Department 01 the TREASURY
WASHINGTON. D.C. 20220

TelEPHONE W04·2041

ADVANCE FOR RELEASE IN A.M., WED., APRIL 12, 1972
JAMES w. DONLEY APPOINTED AS
SPECIAL ASSISTANT TO THE SECRETARY OF THE TREASURY
FOR PUBLIC AFFAIRS
Secretary of the Treasury John B. Connally, today announced
the appointment of James W. Donley as Special Assistant to the
Secretary (Public Affairs). He succeeds the late Calvin E. Brumley.

Mr. Donley has been Vice President and Assistant to the
Chairman of Edward Gottlieb & Associates, a New York public relations
counseling firm for the past year. He specialized in financial
relations counseling to corporations, including a major bank holding
company. While at Gottlieb, he was also President of Multi-Guide
Publishing Company and Publisher of Medi-Guide, the Physician's
Conference and Travel Journal.
Previously, Mr. Donley was Senior Vice President of the Thomas J.
Deegan Company, Inc., a management counseling firm, and head of its
West Coast office in Los Angeles. Prior to that he was Director of
Business Communications for the New York City Department of Commerce.
He began his career in communications at Time Incorporated in
1960 where, during six years, he was a promotion executive in the
international division, Assistant to the Publisher of Time and Assistant
to the corporate Vice President.

Mr. Donley, 37, was born and raised in Hudson, Ohio. He graduated
from Denison University in Granville, Ohio, and has a Master's degree in
international business from the Wharton School of Finance. He was a
public information specialist with the U.S. Army in Europe.
He is a member of the Board of Directors of the Citizens Union
of New York and past member of the Board of Governors of the New York
Young Republican Club.
Mr. Donley and his wife, the furmer Francis Elizabeth Jordan of
Portland, Maine, live in Greenwich, Connecticut with their two-year~
old daughter, Dana Louise.

000

C-282

THE DEPARTilEtJT OF TIlL THL:!I,.SURY

2
RE! 1ARI(S OF
4

HOHORABLE JOHN B. CONlJALLY,

SECRETARY OF THE TREASURY

BEFORE THE

NATIONAL ASSOCIATION OF BROADCASTERS

11
12

13
14

It>

IE
17

April 10, 1972

Chicago, Illiriois'

19
20
21

22
23
,

24
25

I
I
II

[This transcript was prepared from a tape recording.]

MR. !-1AYS:

If John Connally hcl.d stayed in the busi--

2 I· ncss he entered upon leaving the Navy, after \']orlc1 Har II, he
J

might have had to pay a $35 registration fce to attend this

convention instead of appearing here as an invited and

honored guest.

In 1946, he helped to organize na.dio station KVET,

in my horne tovln of Austin, Texas, and served for nearly four

years, until 1949,' as its President and General ?~anager.

1949 an opportunity even more glittering than broadcasting

presented itself, a chance to rejoin his old mentor, then

senator Lyndon B. Johnson.

broadcasting and returned to his earlier loves, law and

politi~s,

So John Connally left Austin and

and broadcasting's loss became the Nation's gain.
Ultimately, President John F. Kennedy designated :ir.

Connally Secretary of the Navy, and three years later, in

Dallas, on November 22, 1963, he was critically wO'lnded while

riding with President Kennedy when the President was

assassinated.o

In 1962, Mr. Connally resigned as Secretary ot the

Navy to run as Governor of Texas.

in 1964 and 1966 he was elected to two additional terms,

he has served for six years as the Governor of my state, and

he is as good a Governor as Texas or any other state has ever

had.

He won that election, and

In 1971 he was nOMinated by President Nixon to

Thus,

Secretary of the Treasury.

broadcasting and welcome hir:1 not only as one of our or:ln but

as a great American in the fullest sense of the Hard .

So we forgive

hi~

departure from

Will you welcome now, please, the Secretary of the

Treasury of the united states of American, the Honorable John

Connally.

[Applause.]

SECRETARY CONNALLY:

Hr. Hays, Chairman Campbell, PresidGnt Haslu.:;ki,

Thank you very mu"";h.

Dr. stephens, Dr. Graham, merrlbers of the Federal Communlca tion.

Commission, other distinguished head table guests, ladies and

gentlemen.

First, may I bring you the personal greetings of the

President of the United states who asked me to convey to you

his deepest appreciation for the outstanding service Hhieh

thi s indus try has rendered this Nation since

half century ago.

j. ts

founding a

[Applause.]

He also asked that I convey to you his highest

respects for your willingness to continue to accept the

challenge to inform, the American people in times of turn oil

and turbulence which this IJation faces.

greetings from him with great relish, I· must say, because I

knO\'l th<lt he meant thelil in all sincerity.

regrets that he couldn't he here himself.

And I bring thos8

KnO\" th(1t he

And I must say that I am grateful for the

privilcg(~

of being here because I have indeed attencled other mcctinr;s

of this great organization, and I have indeed paiG by regis

tration fees in the past.

though that I left broadcasting was that elere were times

when I was afraid I couldn't continue to afford to pay the

registration fees.

I suppose one of the reasons

[Laughter.]

And it is well that I did, because I am sure that

with the new rules and regulations that face many of you

today, I probably couldn't get my license renewed anyway.

[Laughter, applause.]

And I wish I could have donG what I would really

like to do.

I was not here privileged to hear Dr. Graham

this morning.

my choice and had a tape recording of ",hat he said this

morning, I would merely like to ackno\.vledge the introduction,

express my gratitude for being

and let his message be

it would be far better than

that all he did was lay down

I said to him a bit ago that if I really had

~ere,

repeat~d

to you, because I assure you

list~ning
th~

and then press the tape

to me.

But he said no,

broad general guidelines.

[Laugh ter . ]

He was sure"that he, as well as everyone here, ex-

pected me to deal somevlhat in morc specific terms.

i
I

I
1

[Laughter. ]

5
~]cll,

indeed, if I do deell in specific terms, I

~Nill

assure you i t

the guidelines.

not be in the field in which he laicl dm·m

[Laughter.]

You know, you are quite unfortunate today, more

unfortunate than JOu know, you have a full house.

the old I10ntana preacher who had prepared his special sermon

for this particular Sunday, was confronted with a great

problem when a blizzard hit to,,;rn.

church only to find one old rancher ".;rho had come in on

Saturday to do his shopping, got caught in the blizzard and

couldn't get home and, because he hadn't been in' church. in

almost a year, decided he would just attend.

And unlike

He opened the doors of the

Sure enough, the two looked at each other, one

fro~

the pulpit and one from thepe"."

decide whether or not he ,.;'as going to deliver this very

special sermon that he had.

very specific message, but he

to it.

I prepared it really without regard to the size of the crowd

who would here it, this is the

ahead and deliver it.

The preacher was trying to

He had worked on it, he had a
o~ly

had one fellow to listen

He thought perhaps it vrould be wasted.

~ccasion

He said, no I

for it, I will go

When it was allover, he asked the rancher, he said,

"Zeke, wlla t diel you think abou t my sermon this morning?

said

"~'lell,

preacher, it is fine."

He said,

\'laS

very

lIe

good.

Eu t," he said, "you knm'l, I can't he lp bu t CO::1ntcn t. on

a bad, cold day like this, when we have had a blizzard and

snOvl is covering the ground and nothing can move,

to try to give some hay to my cattle.

always stack it full, of course, but if I get out there,

preacher, and find just one old cow, I ddn't dump the whole

load.

he said,

I try-to load up myoId truck and get out in the pastures
II

And he said,

[Laughter, applause.]

But unfortunately, you have got a full house here

today, you are apt to get the full load.

[Laughter. ]

But in all seriousness, I came here today first

because I have a great personal admiration and respect for
those (,I you \..rho made up this organization, that brings back

many memories for me.

was in Chicago in this hotel, and so from that standpoint it

has' a ,"ery personal meaning for me.

The first meeting that I ever attended

But more than that, I came because of the makeup of
o:~:Tanization,

this

to try to say some things to you that I

hope yew will feel are important, because I most certainly do.

So I am going to try to tell you some things that I have in

my own thought, my own mind, with the express hope that some

of it might indeed coincide with your own thoughts, and betl"leen

us we can do something about it.

\
I
I

1
2

I think it is f air to say tha t

l ..

live in a

ti~-:1c

trouble and turmoil and trial and dissension in ]\JTIerica.
don't think there is any doubt about that.

~'le

of
I

can start ,·:i tl1

the diVisiveness of vietnan and, regardless of the merits of

it, this is an issue that has plagued this Nation for all of

the decade of the sixties and even into the seventies, and

it has been divisive.

But it is not just the divisiveness of vietnam.
There is dissension at home, dissension over our educational

system, dissension over busing that is running deep nm.,

throughout the school systems of America.

selves have questioned the financing of the public school

systems of this land.

applied on the local level can no longer be the basis for

supporting and sustaining public education as we have always

k::lo\'ln it.

The courts them-

They have held that property taxes

We have seen the revolt of the young people, the

questic,ning by the youth of America about the tradi tional

.values.

attack

businefs.

You are under attack as never before in the history of this

country.

You have seen business as such, '!business" under
2S

never before.

Your own industry is a part of that

Your own industry is a part of that establish:'1ent.

Groups are challenging your right to determine
things for yourselves.

They ar2 saying that you have no

to use your own judgment.

cause you are a broadcast industry, that you cLln't even sell

The Con<Jress itself says th<l.t be-

cigarettes, and the other media can but you can't .
.4

You are the

victi~

of a great deal of emotion

throughout this country, just as many other establishrnents

are.

ment.

question the Congress, '"ants to question the government, the

honesty and the integrity of it.

do, to criticize those in political life, and welcome to

the fraternity, because you are now subjected to some of the

same criticism that those of us in political life have been

for a long, long time.

And it doesn't stop just with the
It is true of the Conqress.

b~siness

establish-

Everybody wants to

It is the popular thing to

Your motives are being questioned.

Your objectivity

is being questioned.

questioned.

to the point of placing your licenses in jeopardy.

are in a posi·tion to understand something of

ing in this broad land.

Your ability and your judgment is being

Your sense of fairness is being questioned, even

~"hat

yo~

is happen-

But it doesn't stop just with the business

est~blish·

It has invaded the

ments or the schools or the government.

provinces of the religious institutions as well, the

Protestant, the Jewish and the Catholic, all of them.

are in upheaval, they are in turmoil.

standards are being questioned.

They

Their mores and their

So we indeed live in a time of uncertainty, of in-

stabili ty.

And more than tha t

change.

challenges for all of us.

Let me very quickly, in order to try to bring things into

perspective for you, go back over the brief twenty-five-year

period or twenty-seven years since World War II.

posturing this now primarily in economic terms.

'(de.

live 'in a time of groat.

And the t\vO together holds great problems and. great
We live in a time of great change.

And I am

Think of whex;-e we ,,,ere at the end of Hor Id Har I I,

in 1946.

stood alone in its capacity to produce, stood alone with a

viable economy.

the earth was in wrack and ruin, buildings destroyed, th8

productive capacity demolished and devastated, millions of

homes destroyed, tens of thousands of people i:hemselves 90ne

as a result of a great holocaust of a war.

This Nation, among all the nations in the worid,

Nearly every other country on the face of

The united States had the strength, the only rema1n-

ing strength ..

We had all of the reserves 1n the world.

billion of the $40 billion of gold reserves that existed on

this earth in our treasuries and in Fort Knox.

We had the only viable economy in the world.
We had $25 or $26

So we set about, as a nation of compassionate

people, to share the bounty of this land with the people of

the world, to rebuild and to rehabilitate, in a physical

sense areas of the world that b:J.d been destroyecl, and to

10
rckin<lle the spirit of a subjugated people.

ful we were.

we no longer stanel alone.

we have our extended our credit to the point that today,

Vlithin the last twelve months, you have seen a devaluation

of the dollar, th3 first time and the only time since the

depression days of the early thirties, in 1934.

l\nd

hO~;l ~;uccess·-

We have indeed been successful, because today
\"1e hClve expended our surplus a.nd

No,v, 'vhat does this mean?

It means more than just

a problem of international monetary affairs, because money

really is a sterile object.

It is really not vlorth anything except as it ref lects the

credit and the stability and the strength of the nation that

issues it.

It doesn't produce anything.

So should we be concerned about it?

si~:uation

Should we be

concerned about the economic

selves today?

reasons.

and this is why on August 15 he took the drastic actions

that he did, actions unprecedent~d in the history of this

country.

Yes, I think so.

And the President of

l\Jhy?

in which we find our-

I think so for a number of
~he

United States thought so,

Because foresa\v \-That \vas happening to this

country at home and abroad, and he knew '.ve could no longer

live with this raging "inflation that had become a part of our

lives in the latter part of the sixties and the early part

of the seventies.

He knew it had to stop.

11
1

He knew that the pyramiJing of costs

the cscalatioJ:

of the labor costs and. the Hages and. the prices had to be

stilled.

He knew that ""Je had to suspend the convertibility

of the dollar, that we had to say to our people at home as
5

well as the people abroad that we had to stop, we have to

pause, we have to reflect, we have to take stock of where we

are and where we're going, because he realized better than

most that the leadership in the poli tical arena and the

security in the military field

for the free world for a quarter of a century was indeed in

jeopardy if

it.

'\~!e

did not

havl~

that this Nation has proviued

the econoP.lic strength to sustain

So he had the courage, he had the ray] courage to

take unprecedented action and put a freeze on the entire

economy of this country, and to suspend, the convertibility of

the dollar, to take these unprecedented steps that sent

shock waves around the

surprise anyone, not that he wanted to shock anyone, but

because he felt it was absolutely essential in our own inter-

ests and the interests of our friends and freedom that '\..,e do

it.

wor~d

-- not because he wanted to

And what has been the aftermath anu where are we?

The freeze was follo\,,6d by Phase II, and I am constantly

asked, is it going to work?

supports it.

Well, it woti't work if no one

It won't work if all \ve get is a constant

12
1

criticism and carping.

tion.

of the American people to make it ",ork, because it is essen-

tially"a voluntary program, and we can't hire enough

controllers to make it work against an unwilling people.

it ough not to be on that basis, because none of us who have

a part in administering the ~rogram want to administer the

program, we don't believe in wage and price controls, we

believe in a free enterprise system in this country, we

believe in the capitalist system that has made this country

wtat it is today, none of us want to put shackles on this

economy or to put this Nation in a straitjacket; but neither

do we want to see the ruin that inevitably accompanies run-

away inflation, and that is what we had.

It won't \Vor}: if there is no cooy)<;ra--

It vlon' t wor]:: if there is no \villingness on the part

But

So you have got wage and price controls, and you

ask me is it going to work, the answer is, yes, it is going

17'

to \Vork, because there is no alternative to it.

doesn't work, what will you have?

~ize

Nothina

lS.

world.

~ve

to leave one.

glaring, some of them small, but always enough where sonebody

that \vants to criticize can find something to carp about.

it.

If it

Sure,-everybody can criti-

It is not going to be perfect, we all know that.
This society isn't.

We didn't find a perfect

are not going to build one and we are not going
It is going to have f la\vs in it, some of theJl1.

Now, it has to work, because the truth of the matter

1
2
~

is Hhat I said a moment ago, the President realized that tho
I'

poli tical leadership which this IJation has <ll\'lays provid(~cl
for the free world, and the security shield which we have
provided for freedoD around this world is wholly dependent

upon the economic viability of this Nation to support it and

to sustain it.
So \ve have to improve this econor.tic system, and it

s~lpport

has to be done Hi th the knmvledge and \vi th the

of the

American people.

character, just as our tax collection system is basically

voluntary in character.

And it has to be basically voluntary in

But let me give you some startling news.

ran a survey in the southeastern part of the United states,

\\Thich has just been finished,

returns of people who had their returns prepared by others.

We call them preparer-returns.

sample of them, a fairly large sample of several hundred of

them.

returns prepared by others for taxpayers, we found 97 percent

were fraudulent -- 97 percent were fraudulent.

't..

~:.Tere

We recentl

investigating the

We checked those returns, a

And you will be interested to know that of those

Is this symptomatic of '!,,,hat is happening in thi.s

country?

He, have the finest tax collection system in the

world, beyond any question.

is going to be effective, it is going to be one that evokes

and meri ts the confidence of the lI.merican people so lonq as

Now, it is going to be good, it

lit

it is done fairly and as long as it

long as it

done c;quita:Jly

LlIHl

done honestly.

Obviously, this requires new action on our part, and
4

we are going to take it, because there are already 40 indict-

ments as a result of those inspections that

are going to checJ: hundreds of thousands and perhaps even

millions of returns now that we had not anticipated checking,

because this is indeed an incredible performance, where we

check and find 97 percent fraudulent returns where people

ask others to help them in the preparation of them.

\'le

made.

And t,ve

So I say to you sinply that this system that we

have in this country depends entirely on the voluntary com-

pliance of the American people, vlhether you are talking about

the payment of taxes or whether you are talking about wage

and price controls.

Now, hOl,v important

it?

Just this important:

we don't recognize some of the problems that we have, if we

don't recognize that times have changed, if we don't recognize

that the largess of this Nation ihat was bountifully bestowed

upon other peoples in other lands produced competitors that

are real and continuing, if we don't come to the realization

and soon that we are no longer on a pedestal by ourselves,

that we are only nOH a nation among equals, if we don't

understand that \ve are off of that perch, that \ve clon' t sta.nu

alone, if we don't understand that Cor:ununist Russia is

spreading its economic ten tac 1es, its mov inc; ou t in to the

Horld markets, if \ve don t under~tand the significClncG of thc~

President's visit to mainland China, that this anticipates

what we know must come, that 800 million people will take

their place in the economic \'lorld are going to be a factor

to be considered, if we don't understand that today you see

a coalescing of the Corunon ['1arket to an unusual degree I and

a creation of a Common

strengthened in

econonic force in this '-lorld, if you don't think Japan is

an economic force by itself. -- you couldn't be more wrong, if

you don't read the statistics, because in spite of the

revaluation of 17 percent in December, their balance of

p~yments

nation in the world, in spite of the revaluation of 16.9

percent, their balance of payments surplus this year is

going to be larger than last year because their exports are

running 25 percent above \vha t t ley \Vere in 1971.

~veste:rn

~~arket

broadened and expanded and

Europe that is going to be a third

last year was $7.9 billion, the highest of any

If you don't think this means competition for us

from that part of the world and from the European part of

the world and every other part

more VlTrong.

the world, you couldn't be

Now, what are we going to do about

i~?

~re

going to close our eyes and say this is a matter for the

secretary of the Treasury with monetary magic?

I don't know

IG
1

any tricks, and I sure don't have a bag of thcf'1 t.hat

to solve this

solve. basic economic problems.

The only reason we have an economic problem is because we

have an economic problem, because we have a trade

proLle~,

because monetary magic

.1S

'Joi);(;

not going to

These are economic problens.

proble~.

So we have to face up to the fact that we live in

a competitive vlorld, we live -in a world 6f peers and,

frankly, they are more efficient than we are in many ways.

They are certainly more dedicated than we are in many ways.

They are challenged more than we.

out-plan us.

economic days in our lives, and we might as well face up to

it.

They out-work us.

They

And we are in frankly for some fairly rough

This is rough economic competition from abroad.

\7e

are obviously going to be plagued by continuing turmoil and

trials and tribulations at home because of the unrest that

is seething and is a part of this Nation and of this changing

society of which we are a part.

And how essential is it that we maintain a perspec-

tive of what we want to be, of what we are, or what duties

and obligations r.-le have?

have to be concerned about our competitive capabilities is

that we should want to maintain the standard of living that

we have in the United states.

ground.

\']0

One of the reasons \vhy \-le obviously

We shouldn't want to lose

really ought to continue to make some strides.

17
1

l3u t more than tha t, vIe have to

HlU.kc

some vcr; bas ic

decisiohs about what kind of a nation

NhCl t do

challenging the policies of'the estClblishrnent, so to speak.

Vlhat arc we going to be?

the problems around us?

",ant to be?

'\:/e

arc going to

b"::"; •

:everyone is challeng ing \1ha t we are,

Are we going to close our eyes to
Are we going to continue to try to

be a leader of the free people of the vlorld?
If so, it has certain costs.
~tlho

tain sacrifices.

the

anwer

work.

political leadership of the free world and provide the

military shield, the security shield for the free world, my

answer has to be in the affirmative.

Pr~ce

Now,

if He don't,

He have to make cerwill?

You ask me if

and t-vage Boards are going to be successful, my
yes, because there is no alternative.

It has to

You ask me are we going to continne to maintain the

If we don't, who will?

We didn't ask for the mantle

of leacership that has been ours since the end of the '.-1ar, but

we havE it.

~uild a protective wall around this~a~ionmd try to live

\vi thin ourselves?

haven't done it since the first Pilgrims landed at PlYMouth

Rock and started forging their way west.

Do you 'vant to cast it aside?

I think not.

Do you r:Tant to

He
have never done it.
,

He didn't do it in the 19GO' s Hhen 'de said \'18 Hant

to go to the moon, and He \Vent.

ne have never been a na tion

that was willing to be harnessed within the confines of the

18
But these are SOi:1C of tJv~ c1cci~io;1~;

geography of this lJation.

wc hLlvc to make.

going to have to have a perspective and a dedication thClt is

unlike anything we have seen in the last few years in this

country, and it has to be a conscious decision on the part of

everyone.

1\.i1Cl if <I'l(~ "lUnt to r:takc ther1,

then

1,'.'C

arc

And don't look just to Washingtor. to supply the
anS"("ler

part of it, because you represent an industry that, more

than any other in this rJation, has an impact on the minds and

the thoughts of every American every hour of every day.

because you largely have part of the

anS~'ler,

And what are you telling them?

a good

Are you telling

them about a wreck on Third street, and you are giving them

three seconds on what the Dow Jones was today.

extent of your newscasts on the economic situation in the

country.

ne\'7S or are you trying to give them some balar,ce and some

perspective in what our l problems are and how we solve them?

That is the

Are you giving them' spectacular and start:ling

We have a great many problems.

We have problems and

we are going to continue to have them.

education, we have problems of the environment, we have

problems of .purifying the air and cleaning the water, no

question about it,

it.

~nd

We have problems of

we have to establish priorities to do

Bu t to turn over to those who sec nothing bu t tILt t

1
2
.)
.4

the conscious decisions of this government 1'l0ulJ inlleccl be a
i

mistake, because all things must COr'l.e in their O\'7n tir.te and
in their o\..,n place and in their

O~;ln

priori ties .

So it is really for each of us to decide

~lat

kind

of a nation we want.

time and again that he doesn't have the

have all the answers, that he tried to

he can a best he can. a foreign policy, that he

very politically perilous mission to China, nGt because he

wants to make news, because he can make news any

hour that he wants to by stepping out of that oval office to

appear before the press corps.

recognized that here was a great emerging nation containing

one-fourth of the people on this earth that hd to be brought

into the partnership of nations.

I think the President has tried to say
a~swcr,

art~culate

~oesn't

the best

u~dertakes

d~y,

any

But he did it because he

And he is going to Moscow.·

Not because he

,,,ants a trip.

this visit might hold some promise, some promise for stilling

the first that burn in the hearts of many that might suddenly

flare up in a conflagration that would encompass us all, and

he is going because he thinks there is some hope of providing

some stability and some peace in this .world at a tiMe when

indeed we have unrest at home, uncertainty and instability in

our own midst.

He has been there.

lvhy?

But because he knovls that

He has taken the actions on the econo:nic.front.

has shown great perception, great understanding and grcnt

courage.

people agree vli th everything the federal govermncnt does.

But there must be a time when objectivity and fairness itself

requires some semblance of objectivity in the consideration

of the policies of this government, local, state and

national.

No one expects, no one asks that the American

am not talkin-g on a partisan basis.

am simply

saying that if all of us spend all our time criticizing

government, the structure of governr.lent and the policies of

government, the days are numberecl before \ve sow enough

discord and dissent in the minds of people to where they will

indeed lose confidence in government, and a democracy in

which there is no confidence in government will not be a

democracy long.

T!Jhen there is a total lack of f ai th in the governing

process, there can be but one answer and that is the despotism

of dictatorship, and in a real sense what we are talking about

is the preservation and the conservation of this society of

free men and free women.

with all our

frailtie~

and all our weaknesses and

all our shortcomings, let's occasionally sit back and let's

think and let's reflect and let's give credit for the fact

that whatever our weaknesses we have indeed accomplished

somethinC] in this country.

And let's quit assuming that our

21
1

particular generation, or that the young generation lias sud-

denly been endowed by an almighty beine; wi th tLe \'lisc1om that

has been denied centuries of mankind.

tha. t s<1me of us are Vlrong in Vlanting some change s .

entirely possible that the system that has evolved through

all of the civilization since the beginning of time might

have some substance to it.

fairness and success in it.

sometimes to say we have indeed created a form of goverr~ent

that has fed better, fed more, housed better, housed more,

clothed better, clothed more, given more, more time, more

leisure than any other system ever devised by man in the

history of the world.

[Applause.]

Finally, \vhen we talk about all of the things that

entirely possible
It is

It might hav~ some element of
It might be well for some of us

want to do, let's finally come to the reali za tion th"a t a l l

of us can't do our thing our way all the tine; that in a

nation of over 200 million people, some bf us have to exercise

"some restraints, and that there haVe to be certain rules and

regulations that govern and guide us all, moral and physical

rules itpd regulations and restraints.
He are not all that \vise.

And \vhen \vo think we are

I hope everyone within the sound of my voice will remember

that he or she is not responsible for r:luch ",hieh T:le enJoy

today.

You contributeu miqhty Ii ttlc to it.

;'lc arc the

inheritors, we are the inheritors of a great legacy of frG8Jo~,

and you want freedom in this industry, and you want freedor.!

in America, and you vlant the freedom of speech and you want
the freedom of the press.

But did you provide it, did you

start it?

There are very few signers of the Declaration of

Independence or the Consti tu tion of the Uni ted Sta tes in

this room today.
We are inheritors of a great legacy of strong men

tvlo-h~ndred

and great women who i.1a.ve over

us the richest and the ripest fruits that mankind has ever

enjoyed.

obligation that surpasses lying on our backs gathering the

fruit off the tree and in a

eating it to our satisfaction without occasionally understand-

~ng

fertilize it in order that future generations might 113.ve some

hope of enj oying ,·,ha t

And I submit to you that we have some duty and some

Thank you

[Applause.]

21
22
23
24

laz~

fashion suckerin0 it or

that vve also have to plo\v the ground and we have to

years provided for

~'le

have already had in such abundance.

very much.

The Department 01 the TREASURY
WASHINGTON. D.C. 20220

TelEPHONE W04·2041

April 12, 1972

FOR IMMEDIATE RELEASE

DECISION ON VINYL ASBESTOS FLOOR TILE FROM CANADA
UNDER THE ANTIDUMPING ACT
The Treasury Department announced today that a final
determination has been made that vinyl asbestos floor tile
from Canada is 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 Notice of Tentative Negative Determination was
published in the Federal Register on January 26, 1972.

This

notice invited interested parties to submit written views
or arguments, or requests for an opportunity to present
their views orally.

No submissions or requests were received.

During the period from January 1971 through December 1971,
imports of vinyl asbestos floor tile from Canada were valued
at approximately $650,000.

000

The Department 01 the TREASURY
WASHINGTON. D.C. 20220

TelEPHONE W04·2041

MEMORANDUM TO CORRESPONDENTS:

April 13, 1972

Attached is a series of letters exchanged
between Treasury Secretary John B. Connally,
Chairman of the Emergency Loan Guarantee Board,
and Elmer B. Staats, Comptroller General of the
United States, outlining their respective views
on the authority of the General Accounting
Office to review the activities of the
Emergency Loan Guarantee Board.

000

Attachments

C-283

MP.R 3 0 1972

Dear ElMrI

8l:lee HCri~ o-t )"Oal> 1rl~ at PebruU"J' 10. 1m. ~tna
the autborit7 ~ the ~n1 Aecwnttna otti" to nriw. the
actlY1t1e. ot tbe _~~r«t' JAM ~ Bcud. I haft rn1.evect
tbe m1ro .tt,.~ apia.

bow,

rf~..~l"'.

or ~ .ottlee Mw

e_.Iue4 aDd
verified tM ~e0Ut48 ~ tM ~ LeU. ~ loUd. OD
tbe but. of . . J'niw or t!le
how' .... I oca\t. . to boUft'ft
tbat the ccmo1us1o:a ~aaM4 b7 tbe ICaT'd
1t. JIGNabaJt 1911eet1Dc.
at act tOl"Ul 1ft f1l7 l.tt.er ...
or DeGl?~ 9. 1971. . . eotI'ecrt
w t_t. it Vb not the ln~ ot CoDpeo tliat the declalou t4
70Q

_tr'ft',

"tea

tho t1;)aM bel reri~l Jq tbe O~~ Ac:eCW1tltlc~.

III .-ehlaa

tbd eone1ustoa. tm Uoe;r\t eD:! It.• • tatt.",. euctul att~ntloa. 'to
tho pt'00"1!I1ou or thl: ~~ Md McOUDtinlJ A~ ot
tho
~~tlVll Re~..1~lQU ~ tIt 19a.6, aQr1 tho Aceoanttnc ~
A~lt1.r.6 Act ~ 1950.

1m.

!be HoMrAbla lQaer D.

staat.

C~ller ~ ttl tM tlaitN ftatea
General Aceount1~ otnoe lIUt14l»C

....l.G S~t_ !f. V.
Vub1nrton, I). c. ~

COMPTROLLER GENERAL OF THE UNITED STATES
WASHINGTON. D.C, IOU'

B-l69300

FES 101972

Dear John:

December 9 you wrote me that records or the Emergency LOaD
Guuantee Board t which has guaranteed a loan, to the 'Lockheed Corporation, would not be ave.11able to the Gener81 Accounting Ottice in
carl"7ing out its aud! t and review responsibIlities. Your letter
indicates that there Is· nothing in the EmergencY' Loan Guarantee Act t
or its legislntlve history, ..bich provides for a GAO review ot the
Board's activi~ie8 and suggest that Congress might need to pass
additional legislation to make it clear that GAO bas this authority •
•

I am afraid tha.t your staff han overlooked the basic authority
of GhO as set forth io'the Budget and Acc'-ountlng Act ot 1921 to audit

the activities ot the GovernMent ngencie~. Also included in the Act
is the right ot access to the records of ~he agencies. In sbort,
there would have been no reason for the Congress to repeat this
a.uthori ty in connection with the Emergency Loan Guarantee Act. I
wonder if you would not wnnt to take a personal look at the situation.
Best visbes.
Sincerely,
(Signed)

ELMER

Elmer B. Gtaats

'!'he Honoro.ble John B. Connally
Secretary of the Treasu.ry

DEC 9 1971

Thb 18 to

turt~ rHl.'QI1~

to • u Chatr.zl or the

~ ~r

2l. 1911

btu~

LoCi ~ Do&rd ~1na
tba\ rcC!~ of the Board be tJ&de na1101$ to the 0tMre1

AeoouraUaa otnce tor 1U l'CTi..w. la rov 1nter J'OU !Ja41eate JOUl'
aatbc;rltt to r6v1ev 4ec~ of tho Boar<l ea4 Ita ftCOZU t..
touBc.t 1D the ~ Mlt AceCWttS. Mt. or 194, ~ kC1e 1&ttw
B~1aIt1oa ~ f4191t6 a.a \bel AccOllllttas ana AoIitlfts Ad
lit 19'0.
llOa:r~ Y1abe. to ~ .. tullJr ... pou1bl. viUt
the a~~ .AocOl£1t!n.3
I~ nnf'~ ~16(l'J'1n& )"OUr
reqetat. hOftYe'.t. tlw ~~ e~l..do4
Ita ~ ou };O~r 11
tbat it yq JWt the intent or ~ ~ t!tc OeAucl ~o=.t1QS
ottic- I'QYlew lta ~~ou.. i'ht.t
beU~
b&aod 0I!l it.

!be

Gtt1ce.

BoVt!'.

~~a\and1ng C£ ybc.t ~-o.a luteD..'}~ to be acC~ll:iM~ b7 the
ElAcm!~l\...'7 Lca:l Guamnteo
It ~t:1I 1$9~
C~ral
AeeQUllt~ ON'1ee to rnlev t.t_ a~1l:1oM of the ElMrgcmq I.otl.a

..ror the

Aot..

aual"~tc:e

BOard, VS

maklQ1 it

clear tba\ 'h'! GAO tau trh1I

--1t7.

~ p;:ae~t.0J:7

l.ecUlatlcu oawld "

~.4

CoDcra~!ttono1 rt:-vlw of 10M ~ utten t. ~
ill th~ o.=~" Act! ~ GAO U 4~4 to e.u41t the
bonOttel" I1l:1 ~
tinllDgs to the Doe.rd aM to the C~'81

C'pc!lJ.(td M

s.to.

Ia4 the Do4r4 1:1 4irceWd to r:a&k1t t& 8'tu.ll report- f4 1ta O,perU1ons
t~ tho C~G.. \"e t1ll4 :tGtMnZ :l.Q t~ CJuarMtH Act or ita

last.latin h18t4:7 wteh AGOlt. un 1J4eDt tba.t eocrpeUtt/I ~
or the ncaN'. opt-nt1QQS VIr« t.o be Nde k tM c~ or that.
tn Doardt. d"utons 1ta'e to bo nvlt1Ptcl bt tho OcaonJ. ~1QG
otftoe.
~ ~ aa
«ll*Ut1~ to ...1t:

..n

\1!11qQe~
by the ~

ctCInStltutd bJ' tho COQtlNSC 18

tbe d~um1n&tlO!!, callG" tar
Act. lnoluMllg the erit1enJ. t1nd Jug or ~hC'r tatl..lare to ~oe
.. loa voul~ ba~ M acVqrQ em:~ Ql tlle CtC~.

v. vould Iso M.:.~ 'to d1ectwt th1.a Ulatte:- turt~ v1th 7011 i t
7CIII vtah. Qu~5t1o:u conC(!~1ng tM bAala t~ tl1e
4~1ts1.0l'l
also r:.ny bo dlracteJ t.o £2.!'.%Ut:"1 n. Piuee, ~ •• C~cmU Counul ot
tbe tftuUX7• .e.nJ ~Qtlve l>1rector to tt= .!!oud.

DoaN·.

tak~Q the lJ.bert7 of tumiah11W • cORY of
lette~ to lie tcunba' 1IS.th • COW ~ ~

riD"),., I b&w

1971

Sept~r ?~,
~:1POUO to t,bs l~03OJ"&~b JobB S~. CbaS..raa of the
eCQllltt~. oa ~1og. Bot:alns Ud Urbaft Aft'tirs u4 t1se
lron~nbu \t~ 1'*tmm~ ~ of ttt. Hoa=e BMklQl aaJ

70fIr

s..t.
CVnnq

C<alit\e".

(Signed) John B. CnnnallT

...bU. 2', 1J71

IMu lk. Ituul

You lett_ ctated Sept._ 21, U71, .-d4r_ea Co die
. . . . .1. 301mB. Coau1l.)',
c::b.a1nwa 01 &be EaaqaDCJ
I.oaa Gua'aAtea 108cl ......... I:M"':wecl •. Tea lett.. vU1
.. broqbt to the att_tioo ef eM
toea Qaar_C_
..... at it. Dat __ t1q.
.

h.,

.2q...,

Ut_ the IoucI baa 1la4 _ opporeaait)' tct 001Ul14. Jou
leereta7 CQaaJ1J or

,'*

~t to ~.nav ita I"&corda, eltbec
I trW CD .,d.eac. with
fwtbc.

1 do eee ba11eft tho Boercl'. eoulcl. .tlOD of 10M'
requaat ehou14 PnYfJDC Che Geural AcC:CMIIlUDa office &_
~eaefD.l . . aucU.t of toc» ... AlnI'aft CorporatiOil .. ia
r"ukecl uD4er the a._qUe)' Loa Cuu_C. . Act.

V..,

.1ManlJ 70ur8.

'(S1gne'd) Samuel B. Pierce... lr...

'.1

,Wee.

Jr.

IuftU. . Dinctft
"'aacr toaD Guu_tee load
!La BoDOl"abl.

u.. B.

Staat-.

co.ptrolle~ ~a1

of the \JDLted ltat. .
vUh1qtoD. D. C. ,20548

COMPTROLLER GENERAL OF THE UNITED STATES
WASHINGTON. D.C. 10UI

B-169300

September 21, 1971

Dear Mr. Chairman:
As you are aware the Emergency Loan Guarantee Act, lUblic
Law 92-70, requires the General Accounting Office to make a
detailed audit of any borrower with respect to which a loan
guarantee is made.
In this connection, a meeting to initiate our.review was
held on September 16, 1971, between representatives of our
Office and Mr. Tim Greene, Secretary of the Emergency Loan
Guarantee Board.
The discussion centered on three areas; decisions of the
Board in appr~ving, executing, and administering any guaranteed
loans; the provisions of the guaranteed loan agreements established between the Board and the borrower; and the audit of the
borrower. Mr. Greene had some question concerning our authority
and responsibility for review of Board decisions.
As you know the authority and responsibility of the GAO for
making audits and investigations of Government agencies are
stated in a number of laws including the Budget and Accounting
Act, 1921; the Legislative Reorganization Act, 1946; and the.
Accounting and Auditing Act of 1950. For example, Section 312
of the Budg~t and Accounting Act requires the Comptroller General
to examine all matters relating to the receipt, disbursement or
application of public funds and report to the Congress the results
of such examinations. Section 313 of the same Act states that
all departments and establishments shall furnish information as
may be required of them by the Comptroller General. It further
provides that the Comptroller General shall have access to any
books, documents, papers or records of such departments or
establishments. Section 2 of "this Act defines department or
establishment to include boards such as the Emergency Loan
Guarantee Board.
In view of the fact that Lockheed has already received a
substantial amount of the guaranteed loan and is likely to
receive additional amounts in the near future, we are anxious

50TH ANNIVERSARY ...,." _ nr7T

to begin our work as soon as possible. We would appreciate advice
as to when the records of the Board can be made available for
review.

1y Y(:J.
Comptroller General
of the United States
Honorable John B. Connally, Jr.
Chairman, Emergency Loan Guarantee
Board

~he

The Department 01 the TREASURY
TelEPHONE W04·2041

WASHINGTON. D.C. 20220

FOR RELEASE ON DELIVERY

STATEMENT BY RICHARD V. ADAMS
SPECIAL ASSISTANT TO THE SECRETARY
OF THE TREASURY (DEBT MANAGEMENT)
BEFORE THE
SUBCOMMITTEE ON NATIONAL PARKS AND RECREATION
OF THE HOUSE COMMITTEE ON
INTERIOR AND INSULAR AFFAIRS
ON H. R. 10751
THURSDAY, APRIL 13, 1972 AT 10:00 A.M.
Mr. Chai rman,
I am pleased to be here today to express the views
of the Administration on the borrowing provisions of
H.R. 10751,

the "Pennsylvania Avenue Bicentennial

Development Corporation Act."
Subsections (9)

and (10)

of section 6 of the bill

would authorize the proposed development corporation
to borrow money either from the Treasury Department or
from the private market.

We have no objection to the

proposal to borrow from the Treasury, but we strongly
recommend against the proposed authority for the
Corporation to borrow in the private market.

Such

market borrowings would clearly be substantially more
costly than borrowings from the Treasury, and the
additional borrowing costs would be borne by the
Federal taxpayer.

- 2 -

While the Congress has authorized a number of
Federal and Federally-sponsored agencies to borrow in
the private market to finance privately-owned or selfsupporting business-type activities, market borrowing
authority is not authorized for Federal agencies
performing governmental functions financed by the
general taxpayer.
Subsection (g) of section 2 of the bill states
a Congressional finding "that the powers conferred by
this Act are for public uses and purposes for which
public powers may be employed, public funds may be
expended, and the power of eminent domain and the police
power may be exercised, and the granting of such powers
is necessary in the public interest."
The public character of the proposed development
corporation is also evident from the facts that the
Corporation would be included in the Federal

budge~,

would be wholly owned by the Government, and would be
conducting Government functions with Government employees
and with appropriations from the general fund of the
Treasury.

We believe that every effort should be made

to minimize the costs to the Government of financing
such an activity.

- 3 -

has

been

estimated

that

the

Corporation would borrow approximately $125 million
between the time of enactment of this legislation and
July 1, 1981, and the bill provides that the maturities
of such borrowings shall not be in excess of 40 years.
The actual cost of market borrowing by the
Corporation would depend upon conditions in private
financial markets and on such market factors as the
amounts, maturities,

timing, and other terms and

conditions of each borrowing.

Yet, based on our

experience with other direct and guaranteed borrowings
by Federal and Federally-sponsored agencies, the
interest rates which the Corporation would be required
to pay on obligations issued in the private market
would probably be at least a full percentage point
above the Treasury's current borrowing rate.
Assuming that the Corporation issues 8 percent
bonds in the amount of $125 million amortized over a
period of 40 years,

the Corporation would be required

to pay an extra $43 million in interest because of the
additional 1 percentage point on market borrowings as
compared to direct borrowings from the Treasury.

Thus,

since the Corporation's outlays would be included in

- 4 -

total Federal budget outlays regardless of whether it
borrows from the Treasury or from the market, actual
Federal outlays over the life of the Corporation's
borrowings would be increased by $43 million.

The

discounted present value of this increased Federal
cost would be $14 million.
In addition to the extra interest costs,

the

Corporation would also incur additional personnel costs
because of the debt management functions which the
Corporation would be required to perform in connection
with its private market borrowings.

Preparation of

each market financing over the authorized 9 year
borrowing period would require a great deal of
financial expertise and a considerable expenditure
of time by the staff and officers of the Corporation.
We believe these essentially debt management functions
of the Federal Government should be performed by the
Treasury Department, which is already equipped to do
the job.
Another significant cost item would be the payments
by the Corporation to private financial advisers, bond
counsel, and underwriters necessary to successful
placement of the Corporation's securities in the market.

- 5 -

While these costs vary considerably, depending upon a
number of factors,

they may well average from 1/2 to

1 percent of the total amount borrowed, or from
$625,000 to $1,250,000 on the contemplated borrowing
of $125 million.

Such payments would not be required

1f the Corporation were to borrow only from the Treasury.
In short, Mr.

Chairman, market borrowing by the

Corporation would be very costly to the Government,
and we see no offsetting benefits from such borrowings.
We are also concerned with the undesirable
precedent which would be established by enactment of
market borrowing authority for the proposed Corporation.
Because of the marketing and other problems resulting
from the present proliferation of borrowing activities
by Federal agencies, largely in connection with loan
guarantee programs financed outside of the Federal
budget, Secretary Connally submitted proposed legislation
to the Congress in December 1971 to establish a Federal
Financing Bank to coordinate and consolidate such
borrowings.

We believe that our overall efforts to

achieve greater efficiency in the financing of Government
programs would suffer a setback if the Congress were
now to authorize market borrowings by Federal budget
agencies financing subsidized activities.

- 6 -

Consequently, the Treasury Department has
submitted specific amendments to your Committee which
would delete the market borrowing authority contained
in subsection (9) of section 6 and make conforming
changes to subsection (10) so that the Corporation
would be authorized to borrow from the Treasury in
the manner proposed by the Administration and provided
for in an earlier version of this legislation,
H.R. 18677, 9lst Congress.
If amended as suggested, the Department would have
no objection to the financial provisions of the bill.

000

The Department 01 the TREASURY
WASHINGTON. D.C. 20220

TelEPHONE W04·2041

FOR IMMEDIATE RELEASE

April 13, 1972

UNDER SECRETARY CHARLS E. WALKER TO HEAD U.S. DELEGATION
TO FIFTH ANNUAL MEETING OF
THE ASIAN DEVELOPMENT BANK AT VIENNA, AUSTRIA
Charls E. Walker, Under Secretary of the Treasury, will head
the United States Delegation to the fif~h annual meeting of the
Asian Development Bank in Vienna April 20-22.
Under Secretary Walker will be Temporary Alternate Governor
for the United States, representing Treasury Secretary
John B. Connally, who is the U.S. Governor of the Bank.
Deputy Under Secretary of State Nathaniel Samuels, Alternate
U.S. Governor of the Bank, also plans to attend these meetings if
possible. Mr. SEw:.ie1s will be in Moscow for maritime negotiations
during part of the ADB conference, and, therefore, his plans are
tentative.
The U.S. delegation also will include Samuel R. Pierce, Jr.,
General Counsel of the Treasury, John M. Hennessy, Acting
Assistant Secretary of the Treasury for International Affairs,
Mr. Herman Barger, Deputy Assistant Secretary, Bureau of East
Asian and Pacific Affairs, Department of State, and
~bassador Artemus E. Weatherbee, U.S. Director of the Bank at its
~ni1a headquarters
0

The Asian Development Bank began operations in 1966 to
help accelerate economic growth of developing Asian nations
\fembership includes 23 Asian nations as well as 14 non\sian countries. Donor countries subscribe to 68 percent
)f the Bank's capital shares with the United States and Japan
laving equal subscriptions of 20 percent each. The Bank has
mde over $600 million in loans to date.
Q

C-284

The Department 01 the TREASURY
WASHINGTON. D.C. 20220

TelEPHONE W04·2041

STATEMENT OF CHARLOTTE TUTTLE LLOYD
ASSISTANT GENERAL COUNSEL, u. s. TREASURY DEPARTMENT,
BEFORE THE SUBCOMMITTEE ON FOREIGN OPERATIONS AND GOVERNMENT
INFORMATION OF THE HOUSE COMMITTEE ON GOVERNMENT OPERATIONS,
ON FREEDOM OF INFORMATION OPERATIONS
April 14, 1972

Mr. Chairman and Members of the Subcommittee:
I am Mrs. Charlotte Tuttle Lloyd, an Assistant General Counsel of
the Office of the General Counsel, Treasury Department. My responsibilities
include providing advice, under the supervision of the General Counsel,
on legal questions of administrative procedure arising in the Office of
the Secretary and, where appropriate, on Departmentwide questions. I am
also one of the two Treasury members of the Administrative Conference of
the United States. It is a privilege to report on compliance with the
Freedom of Information Act by the Treasury Department. I trust that I
will be able to clarify areas of concern to the Subcommittee.
This report is presented under four headings, covering first, the
overall compliance with the Freedom of Information Act by the Office of
the Secretary and other bureaus and offices, excepting the Internal Revenue
Service, which has reported separately; secondly, the use of administrative
classifications of documents; third, the functioning of the Treasury
Library as a public reading room, and fourth, improvements in our operations
now in progress.
I. Overall compliance with the Act. This is a brief review of our
compliance with the Freedom of Information obligations placed upon Federal
agencies in 5 U.S.C. 552(a)(1), (2) and (3). As of the effective date of
the Act, July 4, 1967, the Office of the Secretary and almost all of the
bureaus and offices of the Treasury had revised their disclosure regulations
for publication in the Federal Register, together with their Statements of
Organization, Functions and Procedure. The Office of the Secretary
Administrative Circular No. 159, dated June 1, 1967, provided internal
guidance throughout the Department on the meaning and requirements of the
Act, and the appropriate methods of compliance. Copies of the present
disclosure regulations, and of all internal instructions on compliance,
including Administrative Circular 159 and its first 3 supplements, have
been provided to this Subcommittee in response to Chairman Moorhead's
questionnaire of August 17, 1971, as attachments to the response by
General Counsel Pierce with his letter of October 12, 1971. All the

Attachment s (2)

-2regulations fixed procedures for the submission of requests, for their
consideration, for appeals from any denials of information, and for
charges for minimum necessary expenses.
In order to facilitate compliance with subsection (a)(2), Treasury
agencies established public reading rooms. The Treasury Library was
designated as the public reading room in Washington, D. C., for all materials required to be made available to the public under this subsection,
except materials from the Internal Revenue Service, the Bureau of Customs,
and the Bureau of Narcotics, then part of the Department. This designation
was made in Administrative Circular 159, with more detailed directions on
use of the Library given in Supplement No.1, Revised, of July 3, 1967.
The basic regulations of the Treasury Department for use by all
agencies not having complete separate regulations, namely, Part 1 of
Title 31 of the Code of Federal Regulations, described the materials to
be made available to the public in the public reading room through the
definitions of "Statements of policy and interpretations" not published
in the Federal Register, and of "Administrative staff manuals and instructions to staff" (§ 1.3(c), (d». I t is important to note that the definition of manuals and instructions to staff reflect the discussion of these
documents in the legislative history of the Freedom of Information Act,
namely that these documents do not include "instructions which set forth
criteria or guidelines in auditing or inspection procedures, or in the
selection of handling of cases, such as operational tactics, allowable
1
tolerances, or criteria for defense, prosecution or settlement of cases."
Since July 4, 1967, additional matters have been made available in
the public reading rooms which were considered of interest to the public,
particularly comments received from the public in response to notices of
proposed rule making, where the comments were not requested to be, and
found appropriately to be, kept confidential,2 and comments on cases in
which there was substantial public interest. As a result of our efforts
to comply with subsection (a)(2), there has been a great deal of Treasury
documentation provided in the Treasury Library as the principal public
reading room for Treasury operations, other than those of the Internal
Revenue Service and the Bureau of Customs.
Treasury compliance with the requirement in subsection (a)(3) to
make identifiable records available to persons upon request is reported
at some length in the response of our General Counsel of October 12, 1971,
to Chairman Moorhead's questionnaire of August 17, 1971. Our response
covered the Office of the Secretary and 8 additional bureaus and offices,
excepting the Internal Revenue Service, which had been asked to report
separately.
believe that this response shows substantial and cooperative
compliance with the intent of the Act. Out of a total of the 987 requests
of which we had specific record for the 4-year period following the effective date of the Act, 50 were denied in part and 61 were fully denied.
r

House Report 1497, 89th Congo 2d Sess., 7-8
31 CFR 1.4(h), added 36 F.R. 13835, July 27, 1971.

-3-

Only 5 denials were appealed within the Departm~nt. Two cases only had
been taken to court, and both were terminated by the plaintiffs. Since
our report to this Subcommittee last October, there have been two more
court cases. In one of these, City of Concord v. Ambrose,3 in the Northern
District of California, the district court denied to the plaintiff certain
surveillance training manuals for Bureau of Customs agents. In the other
case involving disclosure of customs entry documents, Devlin v. the
Department of the Treasury,4 in the District of Columbia district, the
matter is still at the pleadings stage.
In order that all the administrative officials in the various bureaus
and offices of the Department acting upon Freedom of Information requests
should have the benefit of the principles and guidelines on this subject
in Recommendation 24 adopted by the Administrative Conference of the United
States at its 5th Plenary Session, this Recommendation was circulated to
heads of bureaus through Supplement No. 4 of February 10, 1972, to
Administrative Circular 159. Copies of this Supplement were recently provided to your staff1 since it was issued subsequent to the material provided
to this Subcommittee by the General Counsel last October.
It should be remembered that the requests considered to be Freedom
of Information requests, to be handled in accordance with the Act and regulations, are a very small part of the inflow of requests from the public
for information. Many thousands of pieces of mail are received in the Main
Treasury Building every month, much of it asking for information which is
routinely provided. The Executive Secretariat handled over 2800 pieces of
mail addressed to the Secretary or the Under Secretary last February alone.
The Bureau of the Mint, in providing numismatic information and materials,
is the largest user of the mails next to the IRS among the Treasury bureaus.
In a single week the Office of Public Affairs handles about 1500 requests
for information from the general public and over 250 news media requests.
That office also provides news of Treasury operations to 375 news media
outlets and maintains a mailing list of over 3000 names. The Public Affairs
Office provides a news room for full-time use by 4 wire service reporters
and for occasional use by the other 70 correspondents who regularly cover
the Treasury Department.
A request for information is treated as a Freedom of Information
request only if it raises difficult and novel questions of disclosure.
Our repcrc to this Subcommittee could enumerate less than 1000 over a
4-year period, although there might have been a few score more if complete
tabulation of all questions raised in all the bureaus was justified by the
time and expense involved.
II. Administrative class ifications "Limited Offic ial Use" and "Offic ial
Use Only". Information on the meaning and authorized use of these class ifications was submitted to your Subcommittee with the General Counsel's
response last October, in answer to question 4 of Chairman Moorhead's
questionnaire. The authority for these classifications is stated in Part II

Civil No. C-7l 1796 ACW
riui1

Ar~inn

?n~_7?

-4of Treasury Order 160 which, as revised in 1968, contains the instructions on the relationship between these classifications and the Freedom
of Information Act, which were spelled out in Supplement 2 of August 14,
1967, to Administrative Circular 159. Copies of both the Order and the
Supplement were submitted with the General Counsel's response. However,
I am attaching copies of Part II and Supplement 2 to this Statement for
inclusion in the record because of their importance to the matters presently
under consideration.
In accordance with these instructions, the legend "Limited Official
Use" is to be used for non-defense documents of an important, delicate or
sensitive nature which should be treated confidentially and restricted to
the officials who have a need to know such information. These documents
are to have the protection accorded to confidential documents of a defense
nature. The legend "Official Use Only" is to be used for non-defense
documents which should be safeguarded but to a lesser degree and are to
be handled in a manner which will not make them available to unauthorized
persons. The attached directives make clear that the marking of documents
with these legends is only a preliminary determination that they are not
to be disclosed under the Freedom of Information Act. The legends are
intended to be warnings to officials, conveying the admonitions that distribution within the bureau or office is restricted and that disclosure
to the public requires special consideration and a decision by the responsible official.
In fact, the original and primary purpose of these legends has been
to restrict the distribution of the covered documents within the particulu
offices concerned with them. The legends were adopted in Treasury in 1954
to conform to the legends adopted by the State Department at that time for
non-defense materials described as "certain types of personnel records,
information received through privileged relationships, and matters which
if released would offend foreign govermnents and peoples." This designation
of the precise legends to be used, from among a variety of restrictive
legends, followed advice given in 1953 by the Attorney General to the
Civil Service Commission agreeing that the use of the term "Confidential"
provided for in the 1953 Executive Order 10501 for defense information
was not as appropriate as "Official Use Only" for test materials and investigatory personnel files which needed protection from unauthorized
disclosure.
We believe that the use of these legends is consistent with, and
justified by, the Freedom of Information Act, considering both its terms
and its legislative historyo The provisions in section 552(a)(2) for
making available to the public statements of policy not published in the
Federal Register, and staff manuals and instructions to staff, recognize
that this disclosure is selective and is to be made in accordance with
published rules. As preViously stated, the basic Treasury regulations
published in 31 CFR Part 1 make clear that the material made available
under this subsection does not include internal management instructions
or studies which are of such a character that they shoUld not be made

-5-

available to unauthorized persons. Furthermore, the specific exemptions
under section 552(b) include exceptions justifying the use of these
legends when a distribution warning is needed. These exemptions include
(2) for internal practices, (4) for private confidential information,
(5) for internal memorandums of a sensitive, policymaking nature, (6) for
personnel files, and (7) for investigatory files. These exemptions are
applied in accordance with our published regulations, as the Act requires.
The Office of the Comptroller of the Currency has an additional administrative classification to carry out exemption (8) for reports of bank examinations. This statement reads, "This report of examination is strictly confidential. "
By way of example, these legends are used in the Office of the
Secretary on between-office memorandums on trade negotiations, antidumping
investigations and narcotics control programs; on Foreign Assets Control
private license application files; on the periodic fiscal "Memorandum for
the President" for signature by the Secretary, advising the President of
Treasury's financing plans and on the "Financing Schedule" prepared monthly
showing agency and Treasury financing scheduled for the following 2 or 3
months, arranged according to sale dates, which schedules are considered
declassified after all financing to which they relate has been officially
announced. Additional Office of the Secretary usage is on records of pending
and recent gold and foreign exchange transactions and of other financial
dealings with foreign governments or international financial institutions.
I am advised that there is no occasion to use these legends in the
Office of Economic Opportunity Program, in the Bureau of Public Debt, in
the Office of the Treasurer of the United States and in the Bureau of
Accounts, except with respect to incoming classified State Department
material. In the Bureau of Customs the legends are used in law enforcement
instructions and guidelines for personnel in appraisement, classification,
examination of merchandise, and investigative activities.
III. Functioning of the Treasury Library as a Public Reading Room.
There has been some misunderstanding concerning the removal from the open
shelves of the Treasury Library of Internal Revenue Service documents marked
"Official Use Only". I believe that the reason for this removal and its
consistency with the Freedom of Information Act may be explained in the
light of the following facts. Prior to the effective date of the Act, the
Treasury Library was a relatively small, internal facility, designed to
provide necessary Treasury and other reference material to officials of
the Office of the Secretary in fiscal, legal, economic and other operational
fields. In recent years the Library, now housed in an expanded area, has
become one of the major Government libraries in the City of Washington,
with more than 175,000 volumes on its open shelves, including law books,
works on domestic and international finance and economics, and Treasury
publications. The Library is used extensively by journalists, financial
writers, private attorneys and other members of the public for whom special
tables, marked "For Public Use," are kept available. The gues t book, kept

-6-

at one of the two entrances to the Library, discloses 924 signatures
for the calendar year 1971, but many members of the press and other
outside users of the Library do not sign the guest book.
The Library receives a continuous flow of Treasury Department documents from bureaus and offices, which are accessioned as quickly as
possible by a limited staff. The staff devotes a considerable amount
of time to assisting members of the public in obtaining materials. The
fa'ct that certain documents were marked "Official Use Only" was not
questioned, in view of the burden of duties upon the staff.
The officials in charge of the disclosure of information in the
Internal Revenue Service were not aware that the original system of transmitting to the Treasury Library for Treasury official use of "Official
Use Only" documents had continued subsequent to the time that the Treasury
Library was designated the public reading room. Their attention was not
called to this until a court request for one of these documents, addressed
to the Internal Revenue Service, and a disclosure of the presence of these
documents upon the shelves by a journalist who had made use of them.
"Official Use Only" documents, in accordance with the regulations
I have recited, do not belong on the open shelves in a public reading room.
Their availability to the public must be determined by separate consideration by appropriate officials. Consequently, the "Official Use Only"
documents were removed from the Treasury shelves with the concurrence of
the General Counsel's Office and the Office of the Assistant Secretary for
Administration until further determination could be made concerning them.
Instructions have been issued by the Office of the Assistant Secretary
for Administration that such documents shall not be placed on open shelves
in any public reading room until they have been properly declassified.
IV. Improvements in progress. Treasury Order 160 must be revised
prior to June 1, the effective date of Executive Order 11652, in order to
conform to the new directives in that Order for the classification and
declassification of defense materials. This revision is expected to
include a revision of Part II of the Treasury Order on the use of administrative classifications in order to fix responsibility for the dec1assifi.cation of documents classified "Limited Official Use" or "Official Use
('n1y", ~TiLn the requirement that this declassification occur as soon as
the r~ason for the original classification no longer holds. The revision
will probably require an automatic declassification, after a given number
of years, unless otherwise specifically authorized.
At the same time, attention is being given to improvement of the
disclosure regulations generally, particularly as a result of consideration
of Recommendation 24 of the Administrative Conference, and of inquiries
made by oversight committees of the Congress.
This completes my written submission. I shall be glad to try to
answer questions or to obtain answers from the appropriate officials in
the Department.

THE SECRETARY OF THE TREASURY
WASHINGTON

July 16, 1968

TREASURY DEPARTMENT ORDER NO. 160, REVISED

(Supersedes Treasury Department Order No. 160, Revised
of March 23, 1962, and Ame~at No.1, dated JUDe 27, 19(2)
SAFEGUARDING OFFICIAL INFORMATION
PART I:

SAFEGUARDING OFFICIAL INFCEMATION IN
THE INTERESTS OF THE DEFENSE OF THE
UNITED STAn;S

PART II:

SAFEGUARDING NON· DEFENSE OFFICIAL
INFORMATION REQUIRING CONFIDENrIAL
HANDLING

. .

...................... .
PART II

1. Purpose. The purpose of Part II of this Order is to provide
authority for the administrative classification of certain non-defense
official information which requires confidential handling and which
is not subject to classification safeguards or dissemination restrictions imposed by law or by Executive Order No. 10501. Classification
UDder this Part represents an initial determination that the information is exempt from disclosure under 5 U.S.C. 552(b). If a request
far information classified under this Part is received under 5 U.S.C.
552(a), a determination must be made pursuant to 31 CFR 1.4(b), or
UDder the appropriate regulations of the bureau concerned, as to
whether the record should be made available under 5 U.S.C. 552.
2. Classification Categories. Non-defense official information
which is not entitled to protection under Executive Order No. 10501,
~s amended, but requires confidential handling shall be classified
administratively and marked accordingly, in compliance with the
following classes and guides:
(a)

Limited Official Use. To be used for non-defense
documents or material of an important, delicate or
sensitive nature which should be treated confidentially and restricted to the officials and their
immediate subordinates who have a need to know
such information. Documents or materials so
marked shall be haLdled and transmitted in a
manner equivalent to "Confidential" in Part I

(b)

Official Use Ocly. To be used for non-defense
documents or materials which should be safeguarded, but to a le s ser degree than "Limited
Official Use ll , and which have wider distribution than "Limited Official Use". Documents
or materials so marked shall be restricted to
official use and handled and transmitted in a
manner which will not make them available to
unauthorized persons.

3. Authori ty to Classify. Authori ty to administratively
classif.y non-defense information or material "Limited Official
Use" shall be exercised only by persons covered in Part I, Sections
4(a) and 4(b) of this Order. Authority to administratively classify
information or material "Official Use Only" shall be exercised only
by those persons set forth in Part I, Sections 4(a) and 4(b), of this
Order and other persons to whom they delegate such authority. Delegations of authority to classify "Official Use Only" may include
authority to redelegatej however, the redelegated authority shall be
limited to as few persons as is consistent with the orderly and expeditious transaction of Government business.
4. EXisting Categories. Any bureau which already has in use
its own classification categories for non-defense official information
or material may continue to use such classifications if the bureau
head finds that its present system will serve its purposes better
than the classification categories in Part II of this Order. Each
bureau electing to continue its present system shall furnish the
Executive Secretariat and the Director, Office of Security, definitions of its classification categories, including the degree of
safeguarding for each category. In addition, each such bureau
shall assure that the definitions of its classification categories
are known to those persons, if any, outside the bureau who are or
shall become authorized recipients of the bureaus' classified
non-defense information or material.

EFFECTIVE DATE
1.

This Order shall become effective upon issuance.

H~H.~
Henry H~ Fowler

TREASURY DEPARTMENT
WASHINGTON. D.C.

20220

omcr06
tlllIISTUTIVI SERVICES

Administrative Circular No. 159
Supplement No.2
August 14, 1967
To Heads of Bureaus,
Treasury Department
SUBJECT:

Classification of records and information subsequent to
the Freedom of Information Act

As a consequence of the coming into effect of the Freedom of
Information Act (Public Law 90-23, 5 U.S.C. 552), there has developed a misunderstanding concerning the classification of documents
under Treasury Department Order No. 160, Revised, as amended. The
purpose of this Circular is to advise on the continued use and
effect of the classifications provided for in the Treasury Order
in the light of the new public information law.
(1) Treasury Order No. 160, Revised, as amended, continues
in full effect.
(2) Bart I of the Treasury Order implements Executive Order
10501, as amended, which is directed to safeguarding official information in the interests of the national defense. The designations TOP SECRET, SECRET, or CONFIDENTIAL should not be carried on
information or records unless the information or records fall within
the definitions in section 1 of Executive Order 10501 or a·statute
expressly requires such designations.
(3) Part II of the Treasury Order provides authority for the
administrative classification of certain non-defense information
and records which require confidential handling and which are not
subject to classification under Executive Order 10501. Under
Part II the following designations may be used in classifying
records and information: LIMITED OFFICIAL USE or OFFICIAL USE ONLY.
Since the designation LIMITED OFFICIAL USE requires the handling and

Keep Freedom in Your Future With U.S. Savings Bonds

- 2 -

of information or records so classified with security
equivalent to "CONFIDENTIAL" in Part I of the Order, care should
be taken to restrict the use of this designation.
tran~ittal

(4) If a request is made under the Freedom of Information
Act by a private person for records administratively classified
LIMITED OFFICIAL USE or OFFICIAL USE ONLY, the classification
should not be considered determinative as to whether or not the
particular record requested falls within the exemptions in 5 U.S.C.
552(b). Therefore, on request for a record, a determination must
be made pursuant to 31 CFR 1.4(b) (or under the appropriate regulations of the bureau concerned) whether the record should be made
available under the Freedom of Information Act.
(5) If a request is made under the Freedom of Information
Act for records classified under Part I of the Order as TOP SECRET,
SECRET, or CONFIDENTIAL, the classification will be considered to
be a determination that the records are exempt under 5 U.S.C.
552(b)(1). Normally the records would not be subject to disclosure
and no further determination need be made by the bureau involved.
However, if a bureau has adopted a regulation similar"to the one
adopted by the Office of the Secretary in 31 CFR 1.5(b), the bureau
should deter.mine whether in the particular case there is need to
rely on the exemption. Prior to making such a record or part
thereof available, the record or part thereof must be declassified
in accordance with the Treasury Order.

/)cg£{t-~~&!A~~~~

J~ J. Coughli
Deputy Director of Administ

ive Services

The Department 01 the TREASURY
WASHINGTON. D.C. 20220

TelEPHONE W04·2041

FOR IMMEDIATE RELEASE

April 14, 1972

ANTIDUMPING INVESTIGATION INITIATED ON RECORD CHANGERS
FROM THE UNITED KINGDOM
The Treasury Department announced today the initiation
of an antidumping investigation of imports of record changers
from the Uni ted Kingd om.
The Treasury announcement followed a summary investigation
conducted by the Bureau of Customs after receipt of a complaint
alleging that dumping was taking place in the United States.
The total value of record changers imported from the
United Kingdom during the period from January 1971 through
December 1971 amounted to approximately $43,000,000.

1
2
PRESS

COI'~FE~L1JCE

u. S • A.

AS BROADCAST OVER

VOICE OF ,-\;1I:!\ICA

HITH

HONORABLL JOHN 13. CONNALLY,

SECRETARY OF THE TREASURY

10
11
12
13
14
15
16
17
18

April 15, 1972
Washington, D. C.

19
20

21
22
23
24
25

[This transcrijJt ':las prcpar~d fro'":1 u. t3De rccordinq.]

place of Issues in the lIews

time next week.

'.'lhich ,·,il1 1)e heard at i ts

Press Conference U.S.A.

[Husic.]

From

~\Tashington,

r.c~uular
.'

the Voice of )\.merica brings you

Press Conference

Each week at this time, reporters interview a personality in

the news.

U.S.~.,

an unrehearsed discussion program.

To introduce our guest and the news correspondents,

here is Les Higbee, this "'veel:' s moderator of Press Conference

U.S.A.
I1R. HIGBEEi

13
14

Our guest today is the Honorable John

B. Connally, Secretary of the Treasury.

At the time !-lr. Connally took office in February last

:'~onetar

year, he also became U. S. Governor of the International

Fund, the International Bank for Reconstruction and Development

the Inter--American Development B'3.nk, and the l\.sian Development

Bank.

During the past year, ,"'r. Connally has played a key

role in the continuing efforts toward international monetary

reform.

guided the ~"age-price control program in the administration's

And as head of the Cost of Living Council, he has

anti-inflation campnign.
secretary Connlllly i~. a grClduate of tl'.c :Jnivcrc;i t-;

School, has practiced la,',r 1n his home ~~ta lr: of

of 'l'exCls

Texas, and has been active in business enterprises there.

began his public cnreer as AdMinistrative Assistant Lyndon B.

Johnson; when the former Pres ident v]as a member of the U. S .

Senate.

1,,:11'1

lIe

Hr. Connally was appointed Secretary of the Navy by

President Kennedy in 1961, rp.signing to seek the office of

Governor of Texas, 1n which he served three terms.

Mr. Secretary, welcome to Press Conference U.S.A.

SECRETARY CONNALLY:

11
12
13

14
15

Thank you, sir.

I am delighted

to be here.
~·1R.

HIGBEE:

Now ,,,ill the members of our panel please

identify themselves.
f1R.
Philadel~hia

SLEVIH:

Joseph Slevin, Syndica ted Columnist,

Enquirer.

MR. MARK: Ross Mark, Daily Express of London.

r'IR.

TRAVI\ST:

~R.

HIGBEE:

Jerry Travast, Detroi t NevIs.
Mr. Slevin, would you take the first

question, please?
MR. SLEVIN:

Mr. Secretary, how do you view the busi-

ness ou ':~'.ook; do you think the economy "...,ill grow a t the pace

that President Nixon forecast in January?

SECHETARY CONNALLY:

flr. Slevin, I really do.

I
~trong

think, as a matter of fact, we arc seeing a very, very

economic expansion of t.he uni ted States to(1Z1Y, a.nc1 I thil'lL

ZF;

1
2

the year

progres~;es

incrc~Cl::;c.

,sincerity and Hith all conficJcncp

rC:llly

thiJ';~

lTl

all

tllat we are gOlnq to h;l\Tf~

quite a good year.
i·1R.

it Hill

How lonq do you think it

SLEVIN

\>Jill tab:::! to get back to full eI'lploYfT1o.nt, ~1r. Secretary?
5ECRE'rARY COIJN1'.LLY:

\)ell, !Ir. S:.Gvin, I think that

is a question I really can't answcr unless 'lIe eJtter1.pt to define

I, full employment.

when we got the figures, 620,000 new people had been e~ployccJ

in thG united states, making a total of 81,200,000 people

gainfully employed in this country.

ever in the history of the Nation.

new jobs that were found, over 700,000 people registered for

jobs so that in effect i'le had an increase in the number of

unemploycd.

Let p.1e approach it thi s \vay.

Las t month

That is the highest total
But in spite' of ~he 620,000

How long this is gOlng to keep up, I don't kno~.

Frankly, \,·,e are seeing a nc\V phenomena in the social str1lcture

of Arnerica.

entering the labor force.

we found 620,000 new jobs last month, that is the highest

number for any month since 1967, five years, and still

lose ground.

nore, I don't think, and particularly when you consider the

fact that of the S, 20D, 000 that are toclay class uS uncrl;--doY('l1,

\'1e are seelng more \'lomen and more young peoDle
And ln spite of the fact, as I say,

YYll

50 I don't kno\'l \\rhat full employment is any

have

'D(~V(; r

Harked be,: fore.

c~ 0

I c -, n 't r () (-,. t1. 1-.) T
Lt

<..--,1

'''1 '...". ,1..-=
I n )-_
j

question, other than thClt.
;~O\'l,

I think. \'1e arQ going to continuC! to :ll1Ve

econom1c cxpanS1on.

I thillk '.:<3 are goir:q to contir.ue to creel te

new job.

the lahor force in these nUMbers, then I frankly

say

that VIe use for the uneP1ployed 'dill stay fairly high,

than \ve ,·;ould like tc see it.

But so long as we have more and more people entering

that I

afraid to

have to 3ay that this rate, this specific number

I1R.

!'1R. liARK:

IIIGBI:E:

~'lr

1\1r.

hig~1er

. ! lark?
Se~retary,

last month in Europe there

\Vas SOJ'1e rather hectic speculation against the dollar aga1n,

and thi s ".TClS met bv trerr.endous calP1 in

CalJ:1 real or is it assumed?
S:CCRETl'.RY CCLJNALLY:

~-Jd.shington.

No, I think it is very real.

It is real, for a number of reasons.

cavalier about this, but we think that we are on the road to a

very strong econoT:1ic expansion.

better job in fighting inflation ~han any najor industrial

nation 1n the world.

our \'lase:, Clre incrc3sins at a lesser rate than the o'c:ler 1n-

dustrial nations of the world.

year

\-]C

t;1ClD

most other cO'Jntries, ~1J1(1 th'1t there is t]oinS to

J~no\-: \-.'12

~'le

are.

And I don't want to be

think He are doing a

\'7e

thin}~

So \:7e think a t

our Dr ice sane

the end of

t~l i

Clre goiner to h'<lve our si tuation l)(~tter in contr01
'-('r

'J:;-:

(

tha t '..Ie are i nc1cec..1 :cunninrr

by some perha9~) as a little jibe or jest,

talk a.bout the convertibili ty of thp <..101Iar, and I ab.,rays li1-:e

to point out that the dollar is

convertible into any goods or services that anyhodv in the

world wants to buy from the United states.

HR. HARK:

I call it:

convertibl~,

t)jcy

riqht today fully

In fact, !lr. Secretary, tllC cheaper

dollar abroad, the speculation lJringing down tlw price of the

dollar abroad might in fact \'lork for tile Uni ted Sta ::es?

SECRETARY CONNALLY:

Well, we don't obviously like
I Don't think this is (:Tood

to see speculation in the dol1Clr.

for anyonc.

realignment of exchange rates, \vhich

the dollar considerably, and

caused it but nevertheless they ;,'Jere there.

nothing '\vorse .than to have a bad situation than to fail

recognize that you have a bad situation.

up to it, in great cooperation and a great spirit of

tion wi th all our principal trading partners, entered in-:o

this unique agreement "Ii th respect to the realigI1ncnt of c:(-

change rates, anu I think this year anJ next YC'<lr is

'J01 ne)

;,C(~

the

a va s

It is certainly not good for us.

~:le

~.'Je

~'le

had t:-w

think is going tv help

regret the cir-:::umstances that
Anu there i!3

So I think '-. 72 faced

il 1provenen t bo tIl in the tr {)c1o lJa lance', () f
1

":0

Coo~)(:ra-

1
2

r1R.

'l'Rl\V7\ST:

~;ocrctar} r

;lr.

the President on his trip to

Does tha t

indica te tha t

Otta~"Ta

did ,lot

Va'll

o.Cco;<l~nny

in the past feT:l dC1yS .

our trade pro!Jlcr:ls Tdi th Canada arc so

tough that it '-'lould have been uselesfOj for you to hav~ gone

with him?

SECRETARY CONN!\.LLY:

IJo, no, I don't think' anything

is so tough that we Hon' t

commi tted to go and planned to go

mind.

into anything like tough trade negotiations or tradG negotia-

tions tough or otherwise.

that the President

should, in r.1y judgment specif ically concern themselves h'i tIl.

face up to it.
,i th

T••

lJo, I think

differc~llt

}-'.e

had

ideas in

7his was not a trip that had been designed to enter

Tl1ese are not the sort of things

of the Uni tec1 Sta tes Cl.nd

You know, when you

g~t

T~r.

Trudeau

into these trade negotintions,

you have to be prepared to get down into the minute details of

all types of arguments and trades and, frankly, these types

of negotiations should not be carried on at the highest :_evels

of government, and no one ever contemplated that they \·!oulc1

be ln this case.

i'1R.

And I didn't need to make the trip.

rrRl\.V7\S'l' :

One of our big
aut~10bile

pnc~,

Canada, and continues to be, of course, the

which we contend is unfair unduly to the Unitecl States, c1e:-;pite

lIlnerican point of Vle\·, on thi:-;,· or is the c1 iS~)D.ri t j

the ;lixon adr:linistration and Geor<Je ':eany as Llcute on the

trade with Canada as it may be, say, on the Price

on the Pay Board?
SECRETARY CONNALLY:

hel~

~)ct"c)(:n

Comrni~sion,

I don't think we are getting

any particular

from labor on this issue, not because of

any political partisanship, in my view, but simply because I

don't think they fully understand what the facts are.

they are beginning to realize the impact that the automotive

agreement is having on automobile production in the united

States, but I don't think they fully understand it yet.

MR. HIGBEE:

Mr. Slevin?

i'lR. SLEVIlJ:

r'~r.

I think

Secre tary, vou have Bade it c Ie ar

that you do not think the negotiatinq of a ne . ." monetary agree-

ment should be carried on within the Group of Ten forum that

negotiated the Smithsonian agreement.

you want?
SECRETARY CONNALLY:

What kind of forum do

Me. Slevin, let me take a very

perhRps_b~

minor exception to that

have tried to make it clear that I did not think that the

negotiations should be carried on solely within the Group of

Ten.

adding only one word.

I think the Group of 78n has a role to play in the
syste~,

deliberations on a new international monetary

but I

think frankly that there should be adc1itional farUlY> in ':::licI1

()

the matter is also consicl.crccl. and_ clir:cus;--;ed in groat c1._'i_·~LiJ

and vlitllout having any fixed or fino vie 1:1s on it to tllC~ cx-

clusion of any ideas, I ,",auld say that discussions should

deed be carried on by the nations, ei ther formally or

informally, the members of the Group of Ten.

I think, in addit.ion to that,

di~cussions

1 " --

should be
~oard

carried on by the nations that comprise the Executive

the International j'1onetary Fund.

even a third more or less ad hoc group should pot be con-

suIted at least, and I would think that the United States

would go out of its way probably to discuss with nations not

represented on either group some of the problems' that we will

face in the new monetary system.

l1R.

SLEVIN:

And then I am noi.: sure that

There have been suggestions that other

countries should do more to help the United St:l.tes and the

dollar, to take greater responsibili ties.

can they do, should they do to help this count:cy?

SECRETARY

CON~JALLY:

I-'Jha·t sort of ::hings

I'lell, I, of course,

al\·,ay~~

get

back to what I believe to be the very fundamental question,

that we can't really ever solve our monetary problems

\ye talk about a system tha t permi ts very frequent revalucn:ions

and devaluations of various currencies around the \yorld, unless

there is a better equilibrium established with respect to

trade matters because, after all, this

discrepa.ncy in balance of pclymcnts, if ll1cre be onc.

unl~ss

~'711(1t prO(lL1C('S

the

. some cases.

I thin}: this is vcr;y true of Japan .

any bones about it.
.4:

I have told mv friends in Janan thot
.L

they have certain practices tha t

they enC) age in tha t

\1e

think

is to our detriment, and that so long as we take 30 percent of

all the products that we ship in \vorlc1 trac"'.e, that there is a

limi t

market without also having access to their market for some of

our pooeuts.

tc hOH much we can permit them to sa tura te the J-Jrerican

The same

~'7e

true of nations around the world.

are going to have to all come to grips with changes in our

trade practices.

rest of the ,",orld is gOln<] to have to P.1aJ::c a func1ar1cntal de-

cision before we can establish any new monetary

they have to for themselves individually and collectively

answer the question, are they ever going to be willing for the

Unitec1 States to run a surplus.

Finally, I would simply say that most of the

~IR.

~LEVIN:

SECRETARY CONNh.LLY:

syste~,

and

Does that mean they have to run deficits.
Tl1a t rneans they have to rCln
year~:.

deficits.

Our c1eficits are somebody's snrpluses.

any type of convertibility then we obviously have to have a

system that ".rill perP1it us to qCl_in as Hell as lose, or

never hllve any realistic convr:rti 1)i1i 1:.\7.

Uow, ';,'e have run a deficit for t'"mnty-b'lo

nm-"

for us to rnaintLlin

110

can

the strict monetary sen:.;c, convc;rt5bility into reserv'';

then

the united States to run surpluses at some time.

"de

are goinq to have to have

!·lR. HIGBLE:

HR.

Hl\HK:

D:oc'.?l:S

systef:l that 17ill pr.3r:'li t

ilr. r'lark?
'This follo':,1s on 11r. Slevin's question

tremen~ous

dealing with the Common T1arket.

in l\merica for Bri tish

years

you give us some idea of the sort of things, the considerat.ions

that have caused this lack of enthusiasm in Washington?

There is

enthusiasm

~ntry

to the Common 'larket for many

and no'i'! it seems t.o be t:enpered by some caution.

SECnLTARY CONlJALL?:

I am not sure ,that I reflect all of the

vie~..ls

in i'?a:-;hington, by any manner or means.

that I don't, that I reflect a minority viel1point.

Let me

ans~.ver

Could

it for myself I and
that are extant

frequently think.

I don't think there is any diminution of enthusiasm

for Bri tain' s entry into the Comrl'\on narket.

I think if there

is any caution in the minds of people in Hashington today, it

perform during the decade of the ~eventies.

tha t we vie':l the Comillon !'larke',: now 1n terms of hm) \l1i 11 it

By O'ivn view is that,

in spi te of the best intentions

g()vcrnment,~

of individuals and of

Cornmon i'1arket is trying to perfect itself as an econo;l1.ic unit,

as a political unit, a§ a financial unit, that it inevit~bly

18 qoing to look im·lard.

don't

s~y

that critically.

that at a time

~,\T:1en

11 as to.

It
I

ClP1

I,! e

~ rca 11

11 u;:: .-d1 •

the

.7\ n t..1

saylnq "it, I hone, ohjcC'Livc1v

and in all fairness, without nny critici~m at aJl.

think you are going to he lookinq im:larc1 bcc(1u::~c tllCJ. t i::; '"There

your problems are going to be.

I sit at that desk all day long and I give my attention to

things that are pressing me the greatest, and we all do, and

that is what you are going to be doing, all of you in Europe.

Bull

di(fer~nt frOM MC.

And it is no

th~

So I think what concerns us is thE, t, given the se

re~ct,

h~w

circumstances, if this be true, then how do we

we conduct ourselves in international monetary affairs and in

world trade matters.

There

the inward-looking.

:·1R. HARK:

That is the only reason for cautior ..

no criticism, and I am not in the least critical for
I think it is inevitable.
This then comes back to your point that

there has to be a bvo-way street in trade.

Common

~larket

Obviously, the

will be looking for surpluses

SECRETARY CONNALLY:

MR.

HARK:

Yes.

and it \ViII have to come to some form

of negotiation. with the united states on exchanging surpluses

and deficits over the years.
SECRETARY CONNALLY:

And \ve are going to be loo}: ing ,

the European Community and other nations around the world.

23
24

'\.Je

are going to have to obviously' he in consultation ';'i th

nR.

HIGBEE:

He Hill have more questions for

Secretary Connally in just a

mo~ent.

You are 100kil1CJ to Press Conf0rencc

U.~;

.1\.,

;;rouqht

to you each 'dcck at this ti!~\c. ~v the '.Toicc of /\TYWricCl.

Our guest
Secr(~tary

toda~T

of the Treasury.

is the lIonorable John 11. Connally,
Correspondents on our pa.nel include>

Joseph Slevin, thc Phi lade 11)hia En'1u irer; Ros s T'1ark, London
5

Daily Express; and Jerry Travast, Detroit News.

r,1r. Travitst I Hill you continue, please?

HR.

TRAV~.sT:

Secretclry Connally, it has been several

weeks no\'1 since four of the five labor members of the Pederal

Pay Board walked off the job ccntending that the Nixon adminis-

tration was, in their words, anti-labor.

which are related in connection with that.

Pay Board effectively been crippled or liberated by their de-

parture;

come back on the board?

I have two questions
One is, has the

Z\nd, b.vo, do you see any real hope that labor may

SECRETARY CONNALLY:

Mr. Travast, I would say, in

answer to the first question, that no, the Pay Board has not

been crippled by the departure of the four labor members who

walked off of it.

In response to your second question, I don't antici-

pate at all that the labor members will come back.

Now, may

I respond a bit further to both of those by sinply saylng

that I think the Pay Board, notwithstanding the departure of

the labor members, can continue to operate just as effectively

and pcrhClps even more efficiently than it has in the TJ..l.st,ullCl

I thin1-: it \'Till do so \\1ith the somo objcctiviLv.

2aclministration favors big business, that it i;; allti·-lLl];or.
,)

Hell, the truth of the matter

cisions that were taken while the labor memhers sat on

Pay Board -- there were 54 in number -- labor was in the

majority on 3G of those decisions, and in the minority only 13

times.

over two-thirds of the time.

lS,

if you view the Tl1C1jor de-

Nov], those are the facts.

th~t

So they uere in the maj ori ty

Now, I don't think that this administration should

be classed as anti-labor;

classed as pro-labor.

The Pay Board hopefully is objective.

job to stop inflation in this country, as is the Price Commis--

sian, and I think they are doing it with great dedication and

with considerable success.

on the other hand, it should not be

The Pay Board is hopefully not either.
It is trying to do a

HR. HIGBEE:

!1r.

MR. SLEVIN:

Mr. Secretary, do you think thougt the

Slevin?

American people are giving the Price Commission the suppcrt it

must have if it is to be effective?

SECRETARY COaNALLY:

I1r. Slevin, that is

quest~_onable

I frankly don't think they are giving it quite the support that

I think i t needs or even deserves.

deal of question in the minds of most peorle as to \',rhether or

not it is going to be effective, and I re<]rct thClt.

that it had a higher dc<]ree of

I think there is a great

1pport.

Sl..

I thin]: it

I ,..,.,i5;1
ncc<1~~

,'..11

J :)

the support 'd(~ can possibly glVC it

really be effective only if there

high degree of voluntary compliance 'f,vi th its rules and Hi th

its regulations.

M~.

SLEVIN:

bcctlusc it is (l'oil1(J to
great cooperation

Clncl

Hha t do you thinJ: the chances are now

then that the united States will achieve the President's goal

of slowing the inflation to 2~5 to 3 perc~nt by the end of

SECRETARY CONNALLY:

I think good

~1r.

Slevin, I

really do.

I think we have made headway up to now and, again,

we have to

I guess you have to be somewhat of a seer or a

prop~et

gone through the worst period, in My judgment, that we are

goinCJ to sec.

number of times, and a number in the

it, that following the lifting of the freeze itself that we

were

ent figuces were used, 60 days, 90 days,

--. in Hhich ,de were going to feel the hulge f 'de \'lere going to

see reaction to the freeze in terms of price increases and

wage increases.

and perhaps be somewhat optimistic.

goi~g

110\'';,

We have just

if you will recall, 1'I1r. Slevin, \'7e
ad~inistration

. 1

S3.1('.

repeated

to enter into a period perhaps of 90 days -- differ~ome

Now, we have had that pretty much.

as high as 120

It is significant

to me that last week the new wholesale pricc index came out and

\olent up only onc·.. tcnth of onc percent.

because it may reflect

i~O'.. T,

this is Si(1l1if.i.C'ln

anc1 I lHlderlinc the '.'lord

"I:l;l1"

.-.-

'·
l
\
\

Ie,

incrcCl.sc~J.

these Hage und price

expect to sec a <J-reater leavening of :)riccs and \·laqc:"
really

thin]~

So I think fro:'1 :;cre on

cl.lvl I

"w have got an excellent chance of hi tting

t~c

2.5 to 3 percent.
HIGB:SE:

I1R.

J1R. I'lARK:

~lr.

nark?

'1'he Pres ident has been to China and is

about to go to the Soviet Union raising a question of trade

vii th Communist Bloc cO·lntries.

credit to the Soviet Union and China different from what we

have seen in the past?
SECRETARY COiE1ALLY

11ill there be an extension of

I would nbt want to anticipate

\Vhat might come out of the President I s visit.

think that \'lould be \,li thin the realm of possi:,Jili ty.

sion has been made on it.

conversations go, that we could extend some credit to the

Soviet Union.

~lR.

unredeemed

again?

CZ-il~

rll\RK:

There

Czarist bonds.

I certainly
:Jo dcci-

It ma:' well be, depending on

hO~,'7

the

al'"ays the business here of

JIas that co,e up for negotiatiom

SECRETARY COlnm.LLY:

I don I t

recall that that is, but

we have that problem with all the countries in the world.

have got problems like' tha t wi th Crea t Dri tain, \-:i th France!

and other countries around t:1e 1,,,rorlc1, so I thin}: this cer-

tainly ",ill be one m.3tter th.J.t \·"i11 be discussed, or the

17
I thin}: that certainly 11ill Jx~ a rr:,lttr:;r

matter of lenu--Ieasc.

that will be on the agenda, and tha repayment of lend-lease

items.

rE~.

~11\IUZ;

SECRETARY COimALLY:

Do you recall hOH much that is offhand?
Oh, it varies.

It depends

aga1n, this is one of those things that depends on who 1S doing

the calculatin<], do you add the interest or don't you, and if

so hOT:" much interest do you charge.

between I guess $500 and $700 million, in that range.

11R. HIGBEE:

T-1R. TRAVAST:

But it will run some1dhere

Hr. Travast?
Secretary Connally, 'va are at that

point in the year when income tax day is upon all the }\J:1erican

people.

SECRETARY CONNALLY:

~1R.

SECRETARY' CONNALLY:

TRAVAST:

A black day.

That's right.
A bright day for the TreCl.sury

ane a black day for everyone else.
~·1R.

TRAVAST:

\'Jell, that is exactly \·;rhat I "las

about to ask, and that is, are we runn1ng on schedule, 1n your

terms,

begin tl-,.c ne\,7 one \'7i th a defici t?

the picture?

q~.ven

the fact that ....,e

running

amount

a~1eac1
C1 t

the fiscal year and \"ill
ir1!JrovcJ.l.~nt

Do you see anv

Ara we maintaining, are we calling behind?

SECRETARY

~egan

CON1~ALLY:

?Jo, our collections Clre actuClll'.'

and \'78 are ah0.Cl.d of projection') by

th i stine.

Nm· r ,

lJart

()f

tha t

I.'lre:

i1.

consi.c1cr.:1')lr:;

t tr i~)l1 tc' tn

0'/(' r

Hithholdinq.

Last year He unclcr-Hothhc:ld.
t~e

and now we arc over-withholding.
<1

If.1e

The lalll

"rEi S

CllClnc;(?cl

hRve hoen tryinq as bost

knolv hOv7 through employer groups, through radio and tele-

vision spots, and everything else to ask people to fill out

their W-4 forms

are entitled to under the law.

success in persuading pecple to do that and consequently we are

over-withholding for the moment.

our collections are running ahead of our projections and we

are doing exceedingly well.

a~d

claim an additional dependent which they

!·1R •.TRAVAST:

But we haven't had Much

But even putting that aside,

~)e

So this would then, in your opinion,

another sign that the economy is on the mend in the United

states?

SECRETARY CONNALLY:

MR.

HIGBEE:

!·1r. Slevin?

HR.

SLEVIN:

Hr. Secre tary, hOyT soon do you anticipat

YGs.

the United States will be able to get rid of wage-price con-

troIs?

SECRETARY CONNALLY:

~p'?aking.

In the price anJ pay

'lye had

realm, our objective was arithr,wtic in character.

ought to bring price -- the ra te of inflation c1m'll1 \·!i t~l regard

to both of these factors to bob-Icon 2. S anc} 3 perccnl, th.l.t

'Ivi th rc spcct to 1"Tago s they

b'IO

objectives, broadly

Mr. Slevin, when we started out

OlF}! 1t

to :)c

dO':lll

\\10

r:l :Iq(~

said

'1..

of .ri. S

percent.

1Jow, I think we can acconp1ish that objective l.JY the
end of the year.

equallY'inportant if not more important, and that is to try to

purge, to try to expunge from the A:nerican mind that we are on

this vicious cycle of inflation in this country, and to try to

per~;uc.~de

indeeC live for a period of time and a number of years without

this horrendous inflationary cycle eating us up.

But 'de had a second obj cct ',-,hich I

think

and to convince the Ame:::-ican people that l,:le can

Now, 'I think we are going to achieve the arithmetic

goals.

And whether or not we are going to reach the second one

by the end of the year,

think they are going to be on beyond the end of the year.
HR. SLEVIN:

I don't know.

If we don't, then I

Hell, once this inflation psychology

expunged, if it is, do you think that it will be possible then

just to decontrol or \vill some new system have to be devised

for a continuing period?
SECRETARY CON:~ALLY:

(10,

I' really think if 'de opera te

\vill, I think we can elir:tinate the controls.

need a '"lew sys ten.

'.-lell as I think 'de can, and if we do as well as I think vIe

t·m.• SLEVIN:

I don't think

You don't hold wi th those \'1ho believe

that the United states' economy has become inflation prone,

that there arc structural changes in the 1\J1erican

SECRErl'ARY COIJIJJ\LLY:

\'7(~ 11,

cconol\~'?

there 3.re s truc tur a 1

':,12

changes in the econoP.1Y, of courS0,

continued demands.

system of supply and demand econoRic theories 1S indeed a

fantasy.

econom1C theories, but I don't think it has reached the point

where we have to look at permanent controls as a part of the

structural economic sY3tern of the United States.

tha. t tend to auq(;r [or

To say that we are operGting J.n a pure

He are not.

~1R.

MR. MARK:

HIGBEE:

There arc factors that belie those

r1r. nark?

For many years the united States deliher-

ately ran deficits to help the rest of the '-7orld have a stable

economy.

surpluses.

the Ar.l<:~rican econony thclt has to be eradicated?

nOv7 tha t

deficits in American history and ---

It deliberately held back surpluses, agricultural
lIa.s this produced sort of an inherent ~'Jeakness in

last month, I think i t

SECRETARY CONNALLY:

~'7as

I am thinking

one of the wors t trade

Yes, i t has done several things

to us, !1r. nark.

]\mong oth2r things, it has convinced all of

the Amer ican people erroneous ly no'..! tha t ",e \'7Cre indeed

,,,ere the biggest and the strongest and the richest a.nd the most

vital and the most efficient.

that there has been an enorr1OUS c'1 an cr G 1n the last decade.

i'Jow, there are certain areas of our economy \oThere

the most efficient, by far, but this is true prirrtarily 1n

agriculture.

in the \·lorld, '.vith u real productivity rate of u})out G r':rcent

~:,e

J\nd the truth of the P.1atter is

~'Te

still are

I'Ve have the rrtost efficient agriculturLl.l syStC~l

21
1

per year.

ture, but thllt is about all.

than the Germans or the French or the Britisll or the Japanese

or a grdat many other nationalities in other things is going

too far.

when we were indeed the most vital economy existing in the free

world, we did convince ourselves of all these things, that we

could just kind of loaf along and take it easy and we would

still be able to out-distance all the other countries in the

world.

rea Ii ze tlla t .

'Ide

arc more efficient

But unfortunately, over the last quarter of a century

We don't know it in business.
nesses they don't know it.

14
15

To say that

But that is not true any more, and we haven't come to

12
13

It is a fantastic rate of productivity in agricul--

T1R. nARK:
agricul~ural

We don't know it in government.

You are not producing these tremendous

surpluses you used to, are you?

SECRETARY COUNALLY:

In many of our busi-

Some of them \.,e are.

But last

year "le exported $7.5 billion worth of agricultural cor:unodi ties

It \\7a8

we are not producing these surpluses is because of the type of

subsidy program that we have in the united states.

type' of subsidy that In effect keeps our problems t.Ji thin our

Q'.vn country.

great year for agriculture.

Nov], one of

t~e

reasons

Now, contrary to the aqricultural policies of the

European comTimni ty, their policies a.re fashioned in such a

\vily that it tends to throH the ir prol) 10m on the T.vor Ic1 ['F1rLe ts .

22
1

!H~.

Thank you, r'lr. Secretary.

,)
4

HIGBEE:

'P.1

sorry, qcntlefTlen, our tine

i~.;

up.

,Thank you, meMbers of the

press.
Our guest today \>7as the Honorable John B. Connally,

Secretary of the Treasury.

Here Joseph Slevin, Philadelphia Enquirer; :Ross !'1ark, the

London Daily Express; and Jerry Travast, the Detroit News.

10
11
12
13

14
15

16
17
18

19
20

21
22

23
24
25

Correspondents aslcing the questions

.
. .wes
T
!-1 l0'.)ee,
. 1
Th 1S
1S

:~n

,.
t on.
"', aSIl1ng

[~1usic.]

ANNOUNCER:

You have been listening to Press

Conference U.S.A., broadcast by the Voice of

A~erica.

Issues in the News, usually heard at this time, will
be presented at its reC}ulC'lr time next
[Husic. ]

~.,eek.

The Department 01 the TREASURY
WASHINGTON. D.C. 20220

TelEPHONE W04·2041

FOR IMMEDIATE RELEASE

April 17, 1972

MEMBERS OF HOUSE BANKING AND CURRENCY COMMITTEE WILL
ATTEND FIFTH ANNUAL MEETING OF ASIAN DEVELOPMENT BANK IN
VIENNA, AUSTRIA, APRIL 20-22
Congressional advisers to the U.S. Delegation attending the
Fifth Annugl Meeting nf the Asian Development Bank in Vienna,
Austria, .April 20-22 ~ill include the following members of the
House Banking and Currency Committee.
Congressman Thomas L. Ashley, D-Ohio,
Congressman Ben Bo Blackburn, R-Ga.,
Congressman Garry Brown, R-Mich.,
Congressman William P. Curlin, Jr., D-Ky.,
Congressman Thomas S. Gettys, D-S.C.,
Congressman Charles J. Griffin, D-Miss.,
Congressman Richard T. Hanna, D-Calif.,
Congressman J. William Stanton, R-Ohio,
Congressman Robert Go Stephens, Jr., D-Ga.
The UoS. Delegation, headed by Treasury Under Secretary
Charls E. Walker, will leave Washington April 18.
The Asian Development Bank began operations in 1966 to help
accelerate economic growth of developing Asian nations.
Membership includes 23 Asian nations as well as 14 nonAsian countries. Donor countries subscribe to 68 percent of the
Bank's capital shares with the United States and Japan having
equal subscriptions of 20 percent each. The Bank has made over
$600 million in loans to date o

C-285

000

The Deportment of the TREASURY
WASH1NGTON. D.C. 20220

TELEPHONE W04·2041

FOR RELEASE UPON DELIVERY

REMARKS OF EUGENE T. ROSSIDES
ASSISTANT SECRETARY OF THE TREASURY
(ENFORCEMENT, TARIFF AND TRADE AFFAIRS, AND OPERATIONS)
before the
MARINE EXCHANGE OF THE SAN FRANCISCO BAY REGION
and
THE CARGO PROTECTION COUNCIL OF
NORTHERN CALIFORNIA, INC.
ST. FRANCIS HOTEL, SAN FRANCISCO, CALIFORNIA
April 17, 1972

1:15 p.m.

TREASURY'S ACTION PROGRAM TO COMBAT
THEFT OF INTERNATIONAL CARGO
This Administration, I am proud to report, has
made substantial progress in the fight to curb
theft of international cargo. While the tide is
turning, more needs to be done. Lets look at the
record of what Treasury has accomplished.
Early in this Administration, President Nixon
directed an all out drive against drug smuggling
and organized crime. These became Treasury's
highest priorities in the area of law enforcement.
It became evident in 1969 that the long-neglected
problem of cargo theft fell into both these
priority areas, and Treasury therefore developed
an action program and charged the Bureau of Customs
with implementing it.
The Treasury program has two main thrusts-prevention of theft by improving cargo security
and deterrence of theft by intensifying our law
enforcement efforts.

C-288

- 2 -

The Preventative Program
There are four separate but interrelated parts
to our preventative program.
First, we issued several regulations to
improve the security of high risk cargo.
Second, we instituted pilot programs in New
York, San Francisco and Oakland to demonstrate
that if a few basic security measures are adopted
cargo theft can be significantly reduced.
Third, Treasury, on behalf of the Administration,
proposed legislation to Congress which would give
Customs the additional tools it needs to combat cargo
theft and pilferage effectively. The passage of this
legislation, known as the Customs Port Security Act
would, in my judgment, result in the reduction of
cargo theft to a minimum at all airports of entry
throughout the United States within 6 months to one
year and a substantial reduction of cargo theft at
all seaports of entry within one year.
Fourth, we published the Standards for Cargo
Security to stimulate carriers and other operators
of cargo terminals to improve voluntarily the physical
and procedural security of their facilities. We hope
that these standards will be observed by the industry
and produce a reduction in cargo theft.
Although the Treasury Department's preventative
program centers on international cargo at ports of
entry an important by-product is improved security
for the large amounts of domestic cargo flowing
through or temporarily stored at the same facilities.
Furthermore, the measures we are urging as a minimum
response to this problem are equally applicable to
terminals handling domestic cargo.
The Law Enforcement Program
Last month I ordered a nationwide step-up in
our law enforcement efforts and we are already
beginning to see some results.

- 3 -

East Coast

On the East Coast since March 3, 1972, we
have apprehended 91 individuals on cargo theft
charges and recovered merchandise valued at $140,000.
The close relationship between this drive against
cargo thieves and Customs other law enforcement
missions can be readily seen in the following cases.
In New York:Customs Agents working with the New York City
Police Department were able to crack two truck
hi-jacking rings, arrest a total of 7 individuals
and recover two truck loads-of electronic equipment and
general merchandise valued at $105,000. In both
cases, the "hi-jacks" proved to be phony ones-i.e. the truck driver simply gave~up his load to
accomplices. The role of organized crime in
these cases is being investigated further.
In Miami, Customs Patrol Officers on a routine
cargo security patrol of the seaport observed a
crew member acting suspiciously. He left his ship
carrying a suitcase which he loaded into a vehicle
parked on the dock. When the car attempted to
leave the dock, it was stopped and a search of the
suitcase revealed 70 plastic bags of pure heroin.
The crew member and two other persons in the car
were arrested and
twenty-two pounds of heroin,
having a wholesale 'value of $2.5 million, was
seized.
2.

West Coast

On the West Coast since March 3, 1972, we
have made 38 apprehensions and recovered merchandise
valued at $68,000. One case in Seattle involved the
recovery of $8,000 in frozen lobster tails and one
arrest. Another in Los Angeles involved the arrest
of four men who hi-jacked a truck containing
electronic equipment and china valued at $18,000.
Two of the persons arrested for cargo pilferage
here on the West Coast were found to have marijuana
and dangerous drugs in their possession.

- 4 -

I am pleased to report that this West Coast
effort is receiving the full cooperation and support
of all five u.s. Attorneys--James Browning, Jr. in
San Francisco; Stanley Pitkin in Seattle; Harry
Steward in San Diego; Willian Keller in Los Angeles;
and Sidney Lezak in Portland.
In addition to added pressure against drug
smuggling and organized crime one of the goals of
this stepped up enforcement campaign is to put the
brakes on petty thievery which, when multiplied over
and over again, constitutes an insidious and dangerous
attack on our transportation system.
Senator Bible deserves a great deal of credit for
focussing attention on the nationwide nature of the
cargo theft prdblem through the hearings held by
the Senate Select Committee on Small Bussiness.
Senator Bible's estimate that cargo theft amounts
to $1.5 billion annually has received much attention
and it does underscore the magnitude of the problem.
In fact, the depredations of cargo thieves cost
much more; in lost sales, markets, and jobs, in
swolen insurance rates, and especially in unfair
competition to the honest businessman. The government
is also directly affected. Treasury may not be able
to collect customs duties and internal revenue taxes
on imported merchandise that has vanished, and income
taxes are lost because the importers have lower
incomes and claim deductions for their uninsured
theft losses. And the loss of export cargo hurts
our precarious balance of payments.
As a result of the hearings held by Senator
Bible's Committee, the Interagency Committee on Cargo
Security was formed in 1971 to coordinate the response
of the various agencies of the Federal government.
Customs, which has been active in this area since
1969, spearheads this effort at all seaports and
airports. The following is a brief report on the
substantial progress that Treasury has made so far
and what still needs to be done.

- 5 -

The Car90 Security Regulations

The first phase of the Treasury cargo security
program involved writing regulations to increase
the protection given cargo in international trade
and to tighten up carriers accountability for cargo
in their custody. Most of these regulations became
'effective on April 1, 1971. The physical security
regulations require all carriers to have special
areas for the storage of hich value and brokenpackaged merchandise and, at airports, an adequate
number of lockable vehicles to transport such cargo
from aircraft to terminal. Failure to comply can
result in the denial of a permit to unlade international cargo. These regulations resulted in a
substantial improvement in the security of high-ris~
easily pilferea cargo.
2.

The Pilot Projects

The new regulations, which merely apply
sound security measures where laxity had become a
tradition, were developed partly out of Customs'
experience with a pilot project still in progress
at New York's JFK International Airport. Measures
prescribed in the regulations have been put into
practice there, plus,others recommended by Customs
for greater cargo security, such as locked boxes
to keep papers out of unauthorized hands and the use
of cameras which simultaneously photograph the person
who receives the merchandise, his identification
card and a special pick-up form.
The program has been getting results. In the
program's first year reported cargo thefts at JFK
declined by 28% and the dollar value of stolen goods
by 69% (from $3.3 million). For the six-month
period ending November 31, 1971, reductions of 27%
in number and 45% in value, were achieved. This
trend has continued to date. I must point out that
these figures were obtained from the Airport
Security Council which deserves a great deal of credit for
the success of this program.

- 6 -

Similar pilot projects have commenced at
selected piers in New York, San Francisco, and
Oakland. Customs has just finished a comprehensive
security survey of Piers 19 and 23 in San Francisco
and Berth H in Oakland. It is too early to tell if
we are going to have as dramatic results on the
San Francisco waterfront as we had at JFK Airport,
but the initial results on the New York waterfront
have been very encouraging.
3.

Treasury's Legislative Proposal

An important part of the Treasury Department
program was to develop Federal legislation that
would plug the loopholes still existing in
Customs'· control of the movement of international'
cargo so that it could tackle the cargo theft
problem with full effectiveness. Called the "Customs
Port Security Ac~" (S. 1654, the Bennett Bill, and
the identical H.R. 8476, the Mills-Byrnes Bill),
it was referred a1ffiost one year ago to the Senate
Finance and the House Ways and Means Committees.
Its main features are the establishment of natio'nal
standards for cargo security, the screening of
persons seeking access to high-risk areas, and the
restructuring of certain penalties to facilitate
prosecution of cargo theft cases.

The most important provision in the Customs
Port Security Act is the one giving the Secretary
of the Treasury authority to establish national
standards for cargo security at all ports of entry.
These standards will relate to matters such as
special storage areas for high-value merchandise,
lighting, fencing, alarm systems, patrols and
guards, and separate private parking areas. I
would like to emphasize that we are talking about
measures as basic as putting";up fences and locking
doors. The lack of these basic physical and
procedural safeguards is responsible for a large
portion of the cargo theft problem today.

We recognize that it may not be necessary
for a particular facility 1::.0 obserV'.= all of these
standards and still provide adequate security. You
m~y be assured that the District Director and
Regional Commissioner of Customs will have full
authority to grant waivers er exemptions to any
carrier or terminal operator that demonstrates that
a particular standard is impractical or unnecessary
for its facility.
Because issuing these national standards may
not be sufficient to curb theft in all instances,
the bill also authorizes the Secretary to designate
special "Customs-security areas" within ports
where he finds there is an unusual risk of theft.
Customs-security areas would be subject to more
stringent security measures, the Secretary could
require businesses whose employees sought access
to these areas to be licensed, and anyone entering
would have to display an approved identification
card or badge. Customs officers would carry out
these procedures and control the restricted areas.
However, the main thrust of the bill is to
empower the Secretary of the Treasury to make
certain that minimum security measures are adopted
at all international ports of entry. By requiring
the same minimum security standards at all ports
and terminals, the proposed legislation avoids
any port obtaining a competitive advantage over
another--a major defect of some regional programs
to combat cargo theft. At the same time, it
provides flexibility and controls costs by spotting
"Customs-security areas" only where and
when they are needed;not an entire port if a dock
area could be specified as especially vulnerable
to theft, not an entire airport if a particular
carrier terminal could be pinpointed. Treasury,
in fac~, expects that few "Customs-security areas"
will be established and that those that are will
not be needed long.

- 8 -

The Treasury Department and its action arm,
the Bureau of Customs, views passage of the Customs
Port Security Act as an appropriate development
of Customs' inherent strength. The Bureau is the
only enforcement agency with a presence, and over
180 years of experience, in all of the nation's
ports of entry. To carry out its mission to
collect revenue and to intercept contraband, it has
acquired a tremendous expertise in cargo security
matters.
The proposed legislation is supported by groups
which know about international cargo, including
the Transportation Association of America, the
American Importers Association, and the American
Institute of Marine Underwriters. We are still
hopeful there w~ll be hearings on the bill in this
session of Congress.
4.

The Voluntary Program and the Standards for Cargo
Security

In the meantime, to provide guidance to industry
and Customs officers in locating and correcting
security problems, Customs developed and issued in
January, 1972, the "Standards· f·or· C·argo seouritl: II
These standards, which will form the bas1s for he
national standards to·be issued pursuant to the
Customs Port Security Act, constitute the physical
and procedural security measures which we believe
should be implemented by most terminal operators
to provide a minimum level of cargo protection.
Underneath each standard in this pamphlet
there is set forth some "recommended specifications"
or suggested ways of meeting it. There may be
alternate means of meeting some of these qeneral
standards and each terminal operator should determine
what remedial action is most appropriate. We hope
that these standards will be observed by the industry
and that there will be a significant reduction in
cargo theft as a result.

9 -

While Customs can lead the way, businesses
engaged in handling cargo have the primary
responsibility for achieving good cargo security.
The joint C ustoms-indu8uy effort was the key
to success at JFK Airport. Customs helped develop
a few common sense rules and saw to it that all
airlines participated. The airlines at JFK -under the guidance of their own Airport. Security
Council -- then pitched in wi th determi.n.~ll)lr to
implement the protective measures needed at each
terminal. This is the sort of venture that succeeds.
I am confident that with the cooperation of the
Cargo Security Council of Northern California
Customs and industry can achieve similar results
in the San Francisco area.
Conclusion
I can assure you that this is an action program
which has made maximum use of the limited resources
available. It also ties in with two top priority
concerns of President Nixon--the drive to stop
smuggling of narcotics and dangerous drugs into
the United States and the campaign against organized
crime.
If the drug smuggler can remove packages
containing narcotics before entry is made, he does
not have to fear the more rigorous inspection of
cargo which Customs has implemented in order to
reduce the influx of illegal drugs into this country.
For organized crime, cargo theft has become
a profitable business, especially at large deep-water
ports and at major airports. For example, there
was considerable evidence that organized crime was
responsible for the substantial losses experienced
at JFK before the institution of the pilot project.
In my judgment, the tide is turning in the war
on theft of international cargo. With the cooperation of the cargo handling industry and only a
modest addition of funds and authority) Treasury

- 10 -

should be able to reduce cargo theft at our major
airports and seaports to a minimum within a very
short time. While I am optomistic, passage of the
Customs Port Security Act and your full cooperation
is needed if we are to succeed.

000

The Department 01 the TREASURY
WASHINGTON. D.C. 20220

TelEPHONE W04·2041

FOR RELEASE UPON DELIVERY

REMARKS OF THE HONORABLE EUGENE T. ROSSIDES
ASSISTANT SECRETARY OF THE TREASURY
(ENFORCEMENT, TARIFF AND TRADE AFFAIRS, AND OPERATIONS)
before the
TOWN HALL OF CALIFORNIA
BILTMORE HOTEL, LOS ANGELES, CALIFORNIA
April 18, 1972

1:00 p.m.

PRESIDENT NIXON'S NEW ECONOMIC POLICY AND THE
DOCTRINE OF FAIRNESS IN INTERNATIONAL TRADE
President Nixon's New Economic Policy, announced on
August 15, 1971, marked a watershed in world history, not
just U. S. history. The president's actions marked the
end of one era -- "the end of the post-war world" as
Secretary Connally said last month -- and the dawn of a
new era in international economic relationships.
The President's goals were three -- to curb inflation,
to generate jobs by stimulating responsible economic growth,
and to strengthen the position of the United States in the
international trade and financial community.
.
Today, I shall talk primarily about the U. S. position
in international trade -- a Doctrine of Fairness -- with
special emphasis on Treasury's role and responsibilities in
this area, and the need to perfect international organization
and procedures for effective solutions of trade problems.
Why Are We in a New Era?

At the end of World War II, the United States was the
wealthiest, most powerful nation on earth. A large part of
the world was in ruins, physically, politically, and
C-287

- 2 economically, after the holocaust that it had just experienced.
The United States exhibited truly unselfish and generous
leadership in an effort to bring these ravaged areas back
to normal. We did this in our own long-range national
interest but at considerable sacrifice.
It made sense for the United States to do everything
possible to assist both our former allies and enemies to
regain their feet. And so, we literally showered U. S.
dollars and expertise on these countries. The American
taxpayer accepted the burden of the nearly $150 billion in
economic and military aid that 'was made available over the
past 25 years, for he understood the relationship bet'ween
a prosperous world economy and his own well-being.
But conditions have changed and we now find ourselves
confronted with an entirely different picture. Although
the United States is still the most important free 'world
power, it is no longer the only free world power. Other
nations are again in a position to challenge us ,economically
and politically. The United States is now one giant among
several.
The Long-Run Task
What does this new era signify for the United States and
the rest of the trading world? Essentially, the long-run
task facing the United States and the 'world community is
the creation of an international economic system 'which, '
on the basis of mutual advantage, 'will stimulate international
trade and freer competition, draw nations and people together,
and thus form the basis for a lasting peace with prosperity.
Progress Made Since August 15, 1971
In his policy role as chief economic spokesman for the
President, Secretary Connally has already sketched in broad
outline form the new policies to be followed. The domestic
and international fronts,which cannot be separated, have
seen considerable progress in the eight months since
August 15, 1971.

- 3 -

On the domestic side, economists are virtually
unanimous that activity is expanding vigorously_ Industrial
production rose strongly in March, the seventh consecutive
monthly advance. The other two economic indicators for
March presently available -- total employment and retail
sales -- also showed strong gains. Employment rose by
620,000 to 81.2 million -- the largest gain for a month
since mid-1967. These indicators are further evidence
that the economy is in a strong expansionary phase.
J

On the international side, the Smithsonian Agreement
of December 18, 1971, was a significant breakthrough and
has given the new era a substantial forward thrust. That
agreement included a multilateral realignment of exchange
rates, commitments to discuss more general reforms of the
international monetary system, and commitments to begin discussions to reduce trade barriers, including some most harmful to the United States. For its part, the United States
agreed to recommend to the Congress that the price of gold
in dollars be raised 'when progress had been made in trade
liberalizat ion.
On February 9, Secretary Connally transmitted to the
Congress a draft bill providing for devaluation of the dollar
by 8.57% to $38 per ounce of gold.
In signing that bill
into law on Monday, April 3, the president said that the basic
significance of the Smithsonian Agreement and the legislation is:
" ..• that it provides for continued cooperation
among our allies and, ourselves--and thus
strengthens our unity--as we work toward an
'open world' based on a more balanced monetary
system and a more equitable international
trading environment."
Simultaneously with the Smithsonian Agreement, commitments
were made by some of our allies to assume a larger share of
the costs of common defense.

- 4 Substantive agreements have also been reached with
the European Community and with Japan to remove or lower
certain barriers against U. S. products and to support
multilateral and comprehensive trade negotiations in 1973,
meanwhile solving more immediate problems in 1972 through
the GATT. The Administration will seek the necessary
legislative authority for these comprehensive negotiations.
Doctrine of Fairness in International Trade -Abroad and at Home
Abroad
These are some of the accomplishments to date on the
international trade front. All of the United States' efforts
in international discussions have been dedicated to one
objective--the establishment of a Doctrine of Fairness in
International Trade.
The president and Secretary Connally have served notice
that the United States is no longer going to compete with
one hand behind its back. To compete fairly abroad, we must
have fair access to the markets of Europe, Asia, South
America, Africa, and the rest of the world.
I do not mean to imply that the United States is
expecting to obtain something for nothing. We recognize
that some of our practices are regarded by other countries
as discriminatory. But in our trade negoitations we do have
a right to demand a fair bargain. We insis.t only on the
right to compete fairly abroad.
As Secretary Connally said in Munich last May:
" •.. no longer will the American people permit
their government to engage in international
actions in -which the true long-run interests of
the U. S. are not just as clearly recognized
as those of the nations with which 'we deal."

- 5 -

The point he conveyed to all is that the United States
can no longer stand by complacently when markets are closed
to us or where the "rules of the game" seem to be rigged
against us.
When our foreign friends complained about the
temporary 10% additional duty adopted as part of the
President's new economic program, they did not mention
in their complaints the barriers they maintain against
U. S. exports to their countries.
These barriers take various forms--quotas no longer
justified by economic factors, discriminatory taxes such
as progressive taxes on horsepower directed at the export
of U. S. automobiles, discriminatory tariff arrangements
such as the Common Market preferences and reverse preferences,
which establish a lower tariff on the exports of Common
Market members than on those of the U. S. and others into
third markets, both in developing and developed countries.
These barriers were not wiped out by the Smithsonian
Agreement. Moreover, I regret to say that some new actions
have been taken since the date of that agreement. For
instance, the Netherlands has put a quota on electronic goods
from Japan. That action has the effect of putting further
pressure on our own market. We have a long way to go in
order to achieve a fair break in international trade for
American industry. and agriculture.
Since the post~war years, the United Kingdom has
maintained quotas for balance of payments reasons on
imports from the dollar area of fresh, frozen, and canned
grapefruit, orange juice, and rum--this despite the fact
that the balance of payments justification for these quotas
has long since passed. Indeed, the British are now in balance
of payments surplus, and removal of these quotas, which the
Unit~d States has been seeking for over 20 years, is
certainly long overdue. Is this fair trade?

- 6 Similarly, France imposed quotas several years ago
for balance of payments reasons on imports of semiconductors. Although the French authorities have liberalized
these quotas over the years, an intricate licensing system
inhibits our exporters from supplying the French market.
The balance of payments justification for protection has
long since ceased and this obstacle to trade should have
been eliminated years ago. Is this fair trade?
In the past few weeks, the European Community has
instituted a new system of compensatory duties so as to continu
to protect its domestic agricultural maEkets from more
efficient foreign production in the face o~ the recent
currency realignments. In so doing, the European Community
did not hesitate to break the negotiated rates (to which
all negotiating parties are supposedly bound) on some
40 million dollars' worth of trade. They did this despite
the fact that it was a clear violation of the GATT. The
United States has some interest in the EC's actions, for
our cost of productionfur basic agricultural commodities
approximates half of that in the Common Market. Is this
fair trade?
The Community's regulations have restricted Japanese
imports to 6 percent of that country's overall exports-this in contrast to the 30 percent which Japan exports to
the United States. By restrictions such as these, the
Common Market has literally forced the Japanese to concentrate their export drive on the United States. Is this fair
trade?
Japan now has $17 billion in foreign assets reserves.
We have approximately $12.5 billion. While the United States
had a balance of payments deficit last year--and has had
one for over 20 years--and our first trade deficit since
1888--Japan had a trade balance surplus last year of 7.9
billion dollars, the highest in the world and this year's
balance for them will be even larger since their exports
are likely to run 20% above 1971.

- 7 -

Many factors, in addition to U. S. policy, contributed
to Japan's economic success. Japan, which was a.llowed to
maintain quotas for balance of payments reasons when it
entered GATT, still retains many of these quotas, this despite
an economic recovery which is com..monly referred to as the .
Japanese miracle. "Administrative guidance" by Japan which
impedes our exports and focuses on their export drive to
the U. S. is a central factor in Japan! s economic success.
Is this fair trade?
At Home--Treasury's Role in Combatting
Unfair Trade Practices
Against this backdrop, there are very positive measures
this Administration has already taken at home to rectify our
trade imbalance and protect jobs in the U. S.
From the inception of President Nixon's Administration,
the Treasury Department has vigorously attacked discriminatory
pricing techniques of foreign exporters. Treasury and its
Bureau of Customs have accelerated and expanded the use of
statutes specifically designed to protect U. S. industry
against unfair foreign competition. We have institutionalized
the supervision of the administration of the Antidumping Act
and the countervailing duty statute and other aspects of
tariff and trade relations by setting up an Office of Tariff
and Trade Affairs in the Office of the Secretary.
The Antidumping Act is designed to prevent injurious
international price discrimination--typically, selling in
the U. S. market at prices lower than in the foreign home
market. The countervailing duty statute is designed to
counteract and prevent foreign subs idies on exports to the
U.S.
The Treasury, under this Administration, has rejuvenated
what was largely a moribund Antidumping Statute. We have
significantly increased actions under this statute in the
past three years. We have eliminated loopholes. And we have
expedited consideration of complaints from domestic
manufacturers by adding manpower and streamlining procedures.

- 8 In short, Treasury is now administering the Antidumping Act
more nearly in the manner intended by Congress. This is
what industry has a right to expect. But more is needed.
Perhaps, criticism from abroad had to be expected.
But, the point is that these actions are taken and justified
in defense of fair trade--and without a sense of fairness,
the prospects for freer trade would be bleak.
Now, we are studying possible refinements and expansions
of the use of these measures which protect u. S. industry
against unfair competition. In new proposed antidumping
regulations which will be published this week, we plan to
clarify and tighten further the procedures of the Antidumping
Act.
Amendments of our Antidumping Act and counter\Biling duty
statute may be required to achieve freer and fairer competition in international trade. And, once the long-range
adjustments of tariffs, quotas, and other barriers are
accomplished, these same measures can serve to maintain the
integrity of those agreements.
International Reforms
In analyzing "what "We can do to enable u. S. producers
to compete more effectively under fair rules of international
trade, we must of necessity examine closely the implementation
of those rules and even question the nature of the rules
themselves.
We face a situation in which such basic GATT rules as
most-favored-nation treatment are increasingly violated.
We are also concerned that foreign dumping and subsidizing
of exports to third countries have the effect of freezing
U. S. manufacturers out of these markets. Moreover, while
we favor U. S. capital investment abroad on as liberal terms
as our balance of payments allows, "we cannot continue to
permit U. S. capital to create jobs abroad if domestic U. S.
manufacturers are prevented by discriminatory barriers from
selling in these markets on equal terms.

- 9 If the GATT itself proves unable to face up to the
realities of today's world, and we hope that it can measure
up to its responsibilities, we may have to give thought to
other ways of meeting the needs. If we are to reach our
goal of a bright new international future, the rules and
procedures of the past must be adapted to the world of the
1970's.
There is clearly a need for an international forum
or forums in which the interrelationship of all the factors
affecting international economic matters--monetary, tax,
and trade--can be discussed, not piece-meal, but as part
of a whole problem of economic health for all participating
nations.
secretary Connally, in his March 15 remarks, stressed
the need to recognize such links in the international economy
when approaching the issue of monetary reform.
Indeed, the international discussions of last fall,
following the President's declaration of his New Economic
Policy, were successful in achieving the recognition of the
interrelationship between international monetary and trade
matters. Accordingly, the president placed in the hands
of Secretary Connally, his chief economic spokesman, the
broad responsibility and negotiating authority to do the job.
Secretary Connally has commissioned Under Secretary
Vo1cker to discuss with our principal trading partners the
development of an appropriate forum or forums. Under
Secretary Volcker has recently talked with his colleagues
in Europe and has been in Japan over the past weekend for
discussions of this matter.
Implementation Versus Policy-Making
It has often been said, "Important as it is to make
policy, it is even more important to implement it."

- 10 It could very well be that more forceful administration
of the Antidumping Act and countervailing duty law in
earlier years 'would have eased our problems today. I can
well remember my confirmation hearing when each and every
question of the Senate Finance Committee dealt with these
two statutes and 'whether I intended to enforce them. For
months thereafter, the same Senators were telling me,
.
"You have those statutes, use them." Well, this Administration
has used the Antidumping Act effectively and, as I
mentioned, is reviewing the countervailing duty law.
But, there are other aspects of implementing trade
policy in day-to-day operations which strongly affect
our international trade and our balance of payments.
The mrum day-to-day operating bureau in the u. S.
Government affecting international trade is the Bureau of
Customs. Secretary Connally has directed that the trade and
tariff aspects of that Bureau's operations be given the
highest priority. This included not only the operating
responsibilities of the Bureau of Customs in the area of
antidumping and countervailing duty, but also its role in
classification and valuation of imported merchandise,
administration of quotas and marking requirements, prevention
of smuggling, monitoring voluntary restraint arrangements,
and investigation of commercial frauds.
We also have under 'way a Treasury study to analyze the
data that is available in international trade matters. Here
again, the Bureau of Customs is the prime source for data
regarding trade matters and yet, for analyzing and
interpreting that data, its resources have not heretofore
been fully utilized. This also we are moving to correct.
The Future
In summary, President Nixon's Administration has moved
forcefully to improve our international trade and monetary
position. We have given our anti-price discrimination tools
the most vigorous exercise they have ever had. We have
negotiated the removal of vanious trade barriers and set the
stage for an overhaul of the international trade mechanisms
in the near future.

- 11 -

Secretary Connally has demonstrated what can be
accomplished by a single chief economic spokesman for the
president. We are seeking an international forum which will
enable us to deal with the problems in their full depth
and perspective. And we have identified the need within
the Executive Branch to institutionalize these capabilities.
The president has made it clear that he intends to meet
the challenge of the future by stimulating our economy to
ensure our continued efficient and competitive position in
the world. This means that inflation and unemployment in
the United States will be reduced while investment in new
plants and equipment by the private sector are stimulated.
While building this stronger economy at home, we
must remain outward looking and international in our
initiatives overseas. This Administration is committed to
such a course. Of course, our foreign friends and trading
partners must be equally out'ward looking and international
in their approach to their problems.
As Secretary Connally said when he addressed the
Economic Club of New York last fall:
"We do not intend to become provincial.
We shall not resort to protectionism. We
shall carry our burdens on the international
scene. But to do so it is essential to
attain an equilibrium in our overall financial
balance with the rest of the world. We seek
no advantage of others. We propose to suffer
no disadvantage. We seek a balance which will
be to the benefit of all the nations."

"At stake are not narrow or selfish
economic goals; beyond a fair balance of
opportunity, we seek none. The basic issue
is much broader. It is nothing less than
rebuilding the economic foundation for
promoting economic development, military
security, and the free flow of commerce.

- 12· -

"To fail in our effort would be to
fail not only as an Administration, nor
even as a Nation. At stake is nothing
less than the foundation for the freedom
and security of this generation, and
those that follow."
All Americans and all countries must be willing to
make the necessary sacrifices and, as a result, all Americans
and all countries will be beneficiaries.'
What we seek are the conditions that will encourage
freer and fairer trade throughout the entire world, develop
growing domestic enterprise and employment, and insure
these gains against the erosion of inflation •

The President's New Economic Policy advances these
goals by laying the foundation for peace with prosperity
throughout the world.

000

The Department 01 the TREASURY
WASHINGTON. D.C. 20220

TelEPHONE W04·2041

IMMED IA TE RELEAS E

April 18, 1972

STATEMENT OF THE HONORABLE EUGENE T. ROSSIDES
ASSISTANT SECRETARY OF THE TREASURY
(ENFORCEMENT, TARIFF AND TRADE AFFAIRS, AND OPERATIONS)
NINE MONTH REPORT ON TREASURY/IRS
NARCOTICS TRAFFICKER PROGRAM
On June 17, 1971, as part of a major message on
his multi-dimensional narcotics program, President
Nixon announced the Treasury/IRS Narcotics Trafficker
Program. On July 1, 1971, the program was initiated.
In each area of the country, cadres of Treasury Agents
were established to concentrate full time on intensive
tax investigations of major narcotics traffickers,
smugglers, and financiers.
I am pleased to report on the results of the
first three quarters.
In the initial nine-month period (July 1, 1971-March 31, 1972), we have achieved the following:
1. 530 targets in 34 states, 52 cities and the
District of Columbia were selected by Treasury's
Target Selection Committee and referred to the IRS.
Under the direction of IRS Commissioner Johnnie
Walters, 369 Treasury Agents are presently conducting
intensive tax investigations (see attached Table I);
2. $33.6 million in taxes and penalties have been
ed under the program, of which more than $4.1
D ha~already been collected in the form of cash
.ued property;

0..

3. Two men have been convicted of criminal tax
charges; nine other criminal tax cases are pending in
Federal District Courts in New York, Miami, Detroit,
Los Angeles, Indianapolis, and Baltimore; and another
12 investigations have been completed with
prosecution recommendations (see attached Table 11)0
California
49 of the 530 targets are from California, one
criminal tax case is awaiting trial, and three other
cases have been recommended for prosecution. $2,548,700
in taxes and penalties have been assessed and $170,900
in cash and $40,000 in property have been seized under
this program in California (see attached Table III).
We believe that this represents a significant
achievement. It confirms our prediction to the
Appropriations Committees in the Congress that, by
focusing attention on the key figures responsible for
the narcotics distribution, this program "will make a
major additional contribution to the President's
offensive against drug abuse."
The program is designed to take the profit out of
the illegal traffic in narcotics and thereby further
disrupt the traffic. This is to be accomp1isheq by
conducting systematic tax investigations of middle and
upper echelon narcotics traffickers, smugglers, and
financiers. These are the people who are generally
insulated from the daily operations of the drug traffic
through intermediaries.
The word for the drug traffickers is "get out of
the illegal drug traffic or face up to intensive tax
investigations."

000

TABLE I
STATE

METROPOLITAN AREA

Alabama
Alaska
Arizona
California

Mobile
Anchorage
Phoenix - Tucson
Los Angeles
San Francisco
Denver
Hartford
Washington, D. C.
Miami
Honolulu
Atlanta
Chicago
Indianapolis
New Orleans
Baltimore
Boston
Detroit
St. Paul·
St. Louis
Las Vegas
Newark &Suburbs
Albuquerque
Albany
Buffalo
New-York City &Suburbs
Greensboro
Cleveland
Cincinnati
Portland
Philadelphia
Pittsburgh
Providence
Columbia
Nashville
Austin - Houston
Dallas
Salt Lake City
Burlington
Richmond
Seattle
Parkersburg
Miluaukee

Colorado
Connecticut
District of Columbia
Florida
'Hawaii
Georgia
Illinois
Indiana
Louisiana
Maryland
Massachusetts
Michigan
Minnesota
Missouri
Nevada
New Jersey
New Mexico
New York
North Carol ina
Ohio
Oregon
Pennsyl vania
Rhotle lsI and
South Carolina
Tennessee
Texas
Utah
Vermont
Virginia
Washington
West Virginia
Wisconsin

SELECTED TARGETS

34 States
S2 cities and the District of Columbia
Treasury Department
Office of Law Enforcement

April 17,

1
, 1
20

23
26

7
9

14
S4

7
18

36
8

11
3

11
27
1

7
I

SO
7
3
9

89
8
-7
2
7
22
'9

1
4
2

31
I
I
2
I

7
I
I

1972

TABLE II

Target Assessments:
Regular Assessments

$ 3,224,200

Jeopardy Assessments l /

$ 8,310,300

Sub-Total

$11,534,500

Spontaneous Assessments 2/
(Jeopardy Assessments and Tax Year
Terminations].!)
Total Assessments

$22,110,700
$33,645,200

Tax Year Terminations
Dollars Seized

$ 3,719,700

Property Seized

433,700

Cases Recommended for Prosecution

Criminal Tax Cases in U8S. Courts
awaiting trial

criminal Tax Convictions

1/ Jeopardy assessments are additional assessments of taxes
made where a return has been filed, but where circumstances
exist under which delay might jeopardize collection of the
revenue.
2/ Spontaneous Assessments are expedited assessments made
against narcotics traffickers as a result of seizures by
other law enforcement agencies of large sums of cash or
Qther assets during the course of an arrest or a search.
Because of .the expedited procedures employed, the figures
for spontaneous assessments are frequently in excess of ~e
amount ultimately determined to be due.
3/ Termination of Tax Year is a computation of the tax due
and assessment made where the time for filing the return
has not become due where circumstances exist under which
delay might jeopardize collection of the revenue.
Treasury Department
Office of Law Enforcement

April 17, 1972

TABLE III

CALIFORNIA
SAN FRANCISCO/LOS ANGELES TARGETS
iln Francisco

Angeles

San Francisco

Los Angeles

lI'get Assessments:
Regular Assessments
)(mtaneous Assessments 1 /
. (Jeopardy Assessments 2 / and Tax Year
Termina tions 3/)
Total Assessments
LX

313,500(2)
1,628,200(10)

33,50G(3)
574,200(7)

$1,941,700

$ 607,700

68,500

102,400

Year Terminations

Dollars Seized
Property Seized
(Fair Market Value) over

,ses recommended for prosecution

minal tax cases in u.S. Courts
,waiting trial

40,000
1

See Footnote 2, Table II.
See Footnote 1, Table II.
See Footnote 3, Table II.

easury Department
fice of Law Enforcement

April 17, 1972

BACKGROUND PAPER
Secretary John B. Connally, in the spring of 1971,
recommended to the President this nationwide program.
President Nixon announced the progrw~ of tax
investigations of major narcotics traffickers on
June 17, 1971, as part of a message on his multidimensional approa~h to combat drug abuse. The objective
of the program is to disrupt the narcotics distribution
system by taking the profits out of the illegal traffic
in drugs.
Reflecting the high priority given this program
by the President, Congress provided financial support
for it amounting to $7.5 million in Fiscal 1972 and
authorization for 541 additional position in IRS -200 Treasury Intelligence Agents, 200 Treasury Revenue
Agents, and 141 support personnel.
Treasury has coordinated this tax program with the
anti-smuggling drive of its Bureau of Customs, the drive
against narcotics distribution of the Bureau of Narcotics
and Dangerous Drugs, and the prosecution efforts of the
Tax and Criminal Divisions of the Department of Justice.
We have also had the full support and cooperation of State
and local enforcement agencies in the conduct of this
~~ram.

This program is a major enforcement effort but it
must be emphasized that it is only one part of this
Administration"s comprehensive drive against narcotics.
Multi-Dimensional Program
President Nixon started his war on drugs the first
month of his Administration when he established the
Interdepartmental Task Force on Narcotics, Marijuana and
Dangerous Drugs that led to Operation Intercept in
September, 1969, and Operation Cooperation in October,
1969. He has escalated that war with a series of action
programs, and progress has been made.
First, he elevated the drug problem to the foreign
policy level and has taken personal initiatives in
soliciting the cooperation of other governments. The aim
of our diplomatic efforts is to have each nation do its
share and meet its responsibilities in the worldwide
war against drug abuse.

- 2 -

Second, he placed particular emphasis on the
crucial roles of education, research, and rehabilitation.
The Special Action Office for Drug Abuse Prevention
was established within the White House under the
direction of Dr. Jerome Jaffe to coordinate Federal
action in the fields of education, research, and
rehabilitation. In 1971, nearly 150 million dollars
were devoted to education, research, and rehabilitation.
That figure will be doubled in 1972 and increased
fUrther in 1973.
Third, he recommended differentiation in the
criminal penalty structure between heroin and marijuana;
and flexible provisions for handling first offenders.
Fourth, he stressed total community involvement -the private sector as well as governmental agencies
in this anti-drug abuse program.
Fifth, he provided a substantial increase in
budgetary support for the Bureau of Narcotics and
Dangerous Drugs and the Bureau of Customs and initiated
the IRS drug tax drive in this area. More recently,
he established the Office of Drug Abuse Law Enforcement
in the Department of JUstice to concentrate an assault
on the street level heroin pusher. The new office will
be working closely with state and local enforcement
agencies.
Sixth, he recognized the central role of the states
and the need for close Federal-state cooperation in a
unified drive against drug abuse.
000

The Department 01 the TREASURY
WASHINGTON. D.C. 20220

TelEPHONE W04·2041

FOR RELEASE ON DELIVERY
STATEMENT BY THE HONORABLE JOHN B. CONNALLY
SECRETARY OF THE TREASURY
BEFORE THE COMMITTEE ON INTERIOR AND INSULAR AFFAIRS
U. S. HOUSE OF REPRESENTATIVES
TUESDAY, APRIL 18, 1972, 10:00 A. M.
Mr. Chairman and Members of this Distinguished Committee:
There are few material things more important to our
Nation and our industrial civilization than energy.
Our
industry, transportation and the public utilities which
light, heat, and cool our homes, hospitals, and schools
must have energy generated from oil, gas, coal, nuclear and
hydropower, and other sources in order to function.
In spite of this, I am afraid it takes a Northeast
brownout or a Suez crisis to waken the public to its reliance
on energy. Unfortunately, between emergencies the public
tends to take energy for granted, and tends to disregard the
compelling need for a strong and effective policy on energy
geared to avoid national catastrophe in the future.
I do not consider myself one of the governmental
architects of U. S. energy policy.
The Treasury, however,
has a basic role to play in the tax, balance-of-payments
and general economic aspects of energy policy, and has
worked very closely in recent years with those agencies
having the fundamental responsibility for developing the
country's energy policy.
In addition, I feel that my past
2xperience in oil and gas matters has given me some degree
of expertise in this complicated field.
Please keep in mind, however, that my remarks represent
my personal views and those of my Department.
I neither
consider myself a spokesman for the Administration on
energy matters, nor would I want my remarks construed as
having Administration approval.
While my statement does
not represent any official Administration position, I can
say that it probably does not differ significantly from
our National Energy Policy as it stands now and as it may
be expected to develop in the foreseeable future.

C-286

Our energy policy, as I see it, 1S based on the
following:
security of supply of energy sources for the United
States.
adequacy of supply of energy sources for the Free
World.
minimization of import impact as a key element of a
viable trade and balance-of-payments situation.
minimization of real cost to U. S. consumers consistent
with the foregoing.
fair treatment of the world's producing and consuming
countries.
On June 4, 1971, the President, in his Energy Messa5e,
sketched out a National Energy Policy. However, in two 1mportant
areas, there have been unfortunate delays in implementing his
proposals.
We still do not have a Department of Natural Resources
and, because of court action, we cannot even manage to get on
with the President's very good proposal to accelerate leasing on
the Outer Continental Shelf.
In addition to this, we have yet to lay the first mile of
the Alaska pipeline; needed refinery capacity on the East Coast
has had to be delayed indefinitely because of concern over the
local environment; and there are many who oppose imports of
oil because of the danger of spills, of building deep-water ports
to accommodate giant tankers because of the industrialization
involved, of mining shale or coal because of damage to our
countryside, and of building nuclear plants.
In the case of
nuclear plants, we even have sub-division between ~he groups
emphasizing possible radioactivity, those concerned with landscape deterioration and those who warn of the threat to the
marine ecology.
I do not mean to make light of these concerns.
Individually, they all make sense.
But, taken together, I think they
are putting us in an insecure position. We find that instead
of getting on with the truly immense task of preventing an
energy crisis, which would mean for our citizens anything
from great inconvenience to real deprivation, and which could
throttle our economy, we are not even being permitted to begin
steps we know must be taken to avert this crisis.

I feel a deep sympathy for the growing national concern
for a clean environment -- for the desire to place a lower priority on industrial progress and a higher priority on other
more basic values which an industrial society tends to forget.
However, while I subscribe heartily to the goal of zero
environmental damage, I must reject the mischievous unreality
of zero industrial growth.
With this as a background, let me discuss with you some of
the suggestions that have come across my desk on what should
constitute a sensible energy policy for our country.
Expanded Imports and Storage Facilities
We have received many communications based on the assumption
that U. S. oil, gas and other hydrocarbon resources are In scarce
supply.
Building on this assumption, the suggestion has been
made that we do away with our restrictions on oil imports and
conserve our scarce energy resources by devising a system of
imports plus greafly expanded storage facilities.
The conclusion logically follows from the hypothesis.
However, the hypothesis is inaccurate.
Our oil and other hydrocarbon resources are not scarce. We have vast resources of
hydrocarbons.
We need not fear running out of these resources
physically.
As you know, in addition to huge, untapped oil and
gas reserves on our Outer Continental Shelf on all our coastlines,
we have great potential for oil and gas in Alaska.
There are
most probably still plenty of rich finds in oil and gas awaiting
discovery in other inland areas of the "lower 48", and there is
much oil to be recovered through new techniques from established
fields.
To this, we add the oil and gas which can be made from
coal and shale, plus direct burning of coal through clean-air
"stack-gas" procedure's, giving us a potential for at least
several hundred years supply of clean energy. Since, by the turn
of this century, we expect to rely increasingly on nuclear
power for our clean energy needs, it should be obvious that we
face no foreseeable shortage of hydrocarbons for energy purposes.
I think it makes more sense to keep these vital domestic
industries going and making use of this rich store of untapped
energy resources instead of increasing our import bill by huge
amounts.
Additional storage for emergencies may very well be
a sound idea.
But I feel it would be sheer folly to ignore
our domestic hydrocarbon potential and put all our security
bets on a system of foreign imports and domestic storage depots.

Energy Crisis
With their attention thus focused on our virtually
inexhaustible supplies of hydrocarbon resources, critics of
governmental policy -- in this case oil policy -- then raise
the question of whether the energy problem which the oil and
gas industry keeps warning us about is nothing more than a
false alarm scare story.
To this I reply that, in my view, we do face a possible
but avoidable energy crisis in the next few years. This
potential crisis has surfaced partly because of the economics
of world oil supplies, partly because of justifiable new
concern for the environment, and partly because of over-zealous
tactics of some conservation and environmental groups which are
keeping us from developing and obtaining more of our energy
needs from domestic sources.
We fully intend to avoid this
crisis, in spite of these problems.
The President, in his
Energy Message, mapped out our course which is to place primary
reliance for our energy needs on domestic sources, solve our
environmental problems with dispatch and have government-indust
consumer cooperation in developing our substitute oil, geothern
steam and nuclear energy resources.
Import Ceiling
Working from this analysis, various suggestions have been
made to put a new ceiling on imports.
This, the argument goes,
would give the industry the firm assurance it needs to go to
the expense of expanding domestic output.
This suggestion cannot be rejected out of hand. After all
buttressing the argument for a ceiling, we have our Mandato~
Oil Import Program.
Our oil imports, including residual fuel
oil, are now at about 25 percent of consumption, more than
double the permitted proportion of imports at the commencement
of the Mandatory Oil Import Program.
But setting a new ceilin~
lS not the answer.
Assuring adequate energy supplies to our economy is too
important to permit us the luxury of putting all of our eggs in
one supply basket.
U. S. Governmental policy is clearly to
rely to the greatest extent feasible on domestic sources of
energy.
The Oil Policy Committee and the Energy Committee of
the Domestic Council implement this policy with two basic ideas
in mind -- keep thi s country I s energy supplies based on secu~e
sources and to prevent an energy shortage occurring at any tl~

At the same time, as I have noted, environmental cODplaints
and problems have slowed down the timetable of energy development.
Artificially low natural gas prices have sharply reduced natural
gas availabilities, fo~cing us to consider much more expensive
foreign sources for thls cleanest of fuels.
We may, therefore, need to import more than we would prefer
to in order to avoid energy shortages.
But we sympathize with
the idea of minimizing our reliance on imports. We want to stop
the rising trend of imports and, if possible, reverse it.
But
we had better not tie our hands with a rigid ceiling.
Prorationing
There are those who ask us if we really intend to
place primary reliance on our domestic hydrocarbon resources,
why don't we get rid of prorationing and thus cut our
imports right now? The response to this suggestion is that,
apart from the political problems involving national versus
state and local jurisdiction, prorationing is probably the
least understood aspect of our oil situation.
Whatever
criticism one could have leveled against it in the past just
does not apply today.
Texas has been close to and is currently producing at
100 percent of capacity.
Most of the little remaining surge
capacity we felt we had for an emergency is probably gone.
Up to now, we were getting, in effect, free and convenient
storage ready for energy use.
Now, this leeway appears to
have ended.
Unless we can get some more surge capacity from
secure domestic or nearby sources, we may have to go to
considerable expense to build special storage facilities to
give us some minimum additional emergency supplies.
Import Impact
There is a body of opinion that questions how, aside
from the security aspects of the problem, Treasury can express
concern with the adverse trade impact of unrestrained oil
imports while opposing restrictive quotas on other imports.
As we see it, the potential impact of unrestrained oil and
gas imports is of such a great magnitUde as to pose a special
threat to our trade balance and to the very viability of the
international trading system.
If oil imports had not been restrained beginning in 1959,
the economics involved would have contracted domestic production
~nd exploration sharply.
I venture to say qur annual oil
lmport bill, instead of being $3-3-1/2 billion, as it is today,
Would have been over $10 billion.
We most probably would not
have had any Alaskan oil development.
Our trade problem, now
causing us IDttch concern, would have surfaced much earlier.

By the 1980's, unless we move along expeditiously with a
National Energy Policy based on domestic sourcing, we will be
faced with an adverse trade impact of much greater magnitude.
At the same time, many other developed countries, blessed
with little of the energy resources which are part of America
heritage, will find their energy import bill proportionately
higher than ours.
In these circumstances, increased domestic
oil and gas production will make it possible for us to
continue our other imports at higher levels than we could
otherwise afford, contributing to the viability of the
international trading systpm.
Natural Gas
Some people have wondered how we could countenance the
prospect of higher LNG imports and crude oil and oil product
imports for manufacturing synthetic gas in view of our
over-all position on oil and gas imports.
As I recently noted in a statement to the Senate Interim
and Insular Affairs Committee, the President's Economic Report
in both 1971 and 1972, stated that allowing freer play of m~~
forces in the case of domestic natural gas would expand these
supplies at lower prices for consumers than they would have tc
pay for foreign gas.
This policy has had our hearty support.
The Federal Power Commission has already taken some necessary
steps along these lines.
This approach is laying a firm basis
for slowing down the growth of reliance on foreign sources of
clean energy.
The fact remains that we probably have to rely on grow~g
amounts of imported gas and synthetic gas feedstocks for the
next few years.
Because of the recent sharp increase in
domestic requirements for clean energy, the domestic natural
gas supply has not been able to keep up with the rising
demand at the artificially low prices prevailing for many
years under government rulings.
The bargain prices at which natural gas has been avail~l
in our country has resulted, not only in widespread household
use, but in verv extensive industrial use.
If we are to keep
our economy run~ing at high levels while moving in the directi
of the clean environment we all want, we will have to pay mo"
for our energy.
As it turns out, even with higher prices
permitted for new domestic gas accruals, we will not get all
the natural gas we need on time and we will have to import at
SUbstantially higher prices all the natural gas and synthetic
gas we can use for an interim period.
We favor a National Energy Policy which is designed to
keep this interim period as short as possible. We wish to
avoid lockin~ the consumer into high-priced gas imports
beyond the tlme needed to locate, produce and deliver more
adequate supplies of less expensive domAstic natural and
synthetic gas and other forms of clean energy.

Conservation
We have been a surplus energy country for so long that
we have become wasteful. The automobile, with which Americans
were reputed to have an ongoing love affair, is now, in many
quarters, characterized as a polluting, energy-wasting culprit.
That sounds almost like a marriage gone wrong. I think the
marriage can be saved and that our automobile industry has seen
the light and the way to cut pollution way down toward zero.
We now have to think in terms of engines that get many
more miles per gallon and still do not contaminate the air we
breathe. We need mass transportation and we need it fast in the
next few years. We need tighter-built, better-insulated
houses. We need an individual awareness that if we are to get
the energy we need at a price we can afford, we had better
turn off some lights, turn down the heat, run the car less
and generally conserve energy.
However, regardless of what we can save through conservation, our energy needs will continue at extremely high
levels. We are the world's greatest consumers of energy.
This has been an important element in the so-called American
Way of Life. We can and will remain the world's greatest
consumers of energy. But, in addition to being much more
careful with its use, we will need to find and develop and
bring on stream vast amounts of clean energy. This is because
our population, even at close to so-called zero growth, will
still be growing. We do not propose .to bring our industrial
growth to a halt. We will need more energy each year into the
foreseeable future.
Foreign Oil and Gas
I want to emphasize again that I feel that, for security
purposes and in 6~der to avoid a major international payments
problem, the most prudent course is to place our basic reliance
for the satisfaction of our energy needs on domestic sourcing.
However, we will be hard-pressed to accomplish this in the
time frame we now have, and at the economic costs we would
wish to accept. Therefore, as I noted earlier, we must look
abroad for increasing amounts of oil and gas and for crude
oil and products from which we can produce pipeline quality
gas.
The international oil situation is currently in ferment.
The countries comprising the Organization of Petroleum
Exporting Countries (OPEC), have strengthened their cartel
t~ the extent that they are confronting the international
~ll companies and the consuming countries in a manner unparalleled
In recent economic history. The developed countries which signed
the Coffee Agreement some years ago and which have been urged

to sign other commodity agreements by the developing countries
might well be considering now how attitudes change when the
shoe is on the other foot. Canada and Venezuela, who only
recently were looked to by us as attractive sources for
imported oil are, for various reasons, not quite the bright,
prospects they were only two years ago.
I do not think that this is a proper forum or that I am
the proper speaker to say much more on this subject at this
time. Negotiations of many types are in progress and I.would
not like to interfere. I would only wish to say that the
United States and other oil-consuming countries will now be
drawn closer together in their common .interests. I foresee,
not a period of s lowdown in capital investment and exploration.
but one of expansion. I see more countries involved, both as
hosts and investors. Perhaps some international institutional
arrangements may be needed.
In this decade, upwards of $500 billion will have to be
invested and spent by the international oil industry to
provide the facilities and the working capital to help
satisfy the world's growing demand for energy. Much of
these funds may not be forthcoming if the climate for investment continues to deteriorate abroad. Such a prospect cannot
be accepted with equanimity by a world increasingly dependent
on imported energy resources.
Taxes and Incentives
The Treasury Department and the energy and environmental
protection agencies will be reviewing the tax and incentive
laws and the many proposals which have been made to get our
clean energy program into high gear. These studies will cover
all aspects of the problem -- domestic and international.
Oil, gas, shale, coal, nuclear power, geothermal steam, solar
energy -- whether in the United States, in OPEC countries or
in new energy source provinces abroad -- all will be included.
Where appropriate, we will invite other consuming and
producing countries to participate in the deliberations which
concern their welfare -- and we expect them to want to invest
in and to budget for the energy we all require.
Conclusion
We propose to move ahead with a program which will insure
our country and all the countries of the free world adequate
clean energy resources, obtained in the least environmentdamaging manner humanly possible, delivered· through means
made as environmentally safe and ecologically acceptable
as they can be made, at a cost which will reward finders ~
owners of oil substantially but not extravagantly and at a
price which consumers over the world can afford.

Gentlemen, this is how I feel about our energy problems.
We are all here for the same purpose. Let us get on with this
task as quickly as we can. There have been enough delays.
Let us start leasing, exploring, drilling,pipelining, shipping,
refining, and using more prudently the resultant clean energy
this country needs to keep our people employed, our economy
going, and our society alive and thriving in a healthy
environment.

000

The Department 01 the TREASURY
WASHINGTON. D.C. 20220

,ENTION:

FINANCIAL EDITOR

mRELEASE

6: 30 P.M.

TelEPHONE W04·2041

April 17, 1972

RESULTS OF TREASURY'S WEEKLY BILL OFFERING
The Treasury Department announced that the tenders for two series of Treasury
.11s, one series to b~ an additional issue of the bills dated
January 20, 1972 , and
Ie other series to be dated
April 20, 1972 , which were offered on April 11, 1972,
!re opened at the Federal Reserve Banks today. Tenders were invited for $2,300,000,000
'thereabouts, of 91-day bills and for $1,800,000,000, or thereabouts, of 182-day
11s. The details of the two series are as follows:
.NGE OF ACCEPTED
IMPETITIVE BIDS:

High
Low
Average

91-day Treasury bills
maturin~ July 20, 1972
Approx. Equiv.
Annual Rate
Price
99.031
99.021
99.027

3.833%
3.873%
3.849%

182-day Treasury bills
maturin~ October 19, 1972
Approx. Equiv.
Price
Annual Rate
97.860
97.826 .
97.837

4.233%
4.300%
4.Z78%

93% of the amount of 91-day bills bid for at the low price was accepted
36% of the amount of 182-d~ bills bid for at the low price was accepted
rAL TENDERS APPLIED FOR AND ACCEPTED BY FEDERAL RESERVE DISTRICTS:

)istrict
30ston
~ew York
Jililadelphia
!level and
tichmond
ltlanta
:hicarro
0
it. Louis
linneapolis
ansas City
lallus
an Francisco
TOTALS

A12121ied For
7,915,000
$
3,548,620,000
31,945,000
26,205,000
8,380,000
44,855,000
297,660,000
41,345,000
30,780,000
36,215,000
47,800,000
72,105,000

Acce12ted
7,915,000
$
2,093,140,000
11,545,000
20,075,000
8,280,000
16,885,000
49,100,000
25,695,000
10,780,000
21,625,000
25,450,000
10,030,000

AEElied For
$
5,395,000
2,676,620,000
4,840,000
19,645,000
ll,715,OOO
33,945,000
188,085,000
26,430,000
25,750,000
24,755,000
28,930,000
79,155,000

Acce:Qted
5,395,000
$
1,604,120,000
4,665,000
11,725,000
8,715,000
15,945,000
57,255,000
23,610,000
19,750,000
14,755,000
9,930,000
24,595,000

$4,193,825,000

$2,300,520,000 ~

$3,125,265,000

$1,800,460,000 ~

Includes $188,995,000 noncompetitive tenders accepted at the averaGe price of 99.027
Includes $101,525,000 noncompetitive tenders accepted at the average price of 97.837
These rates are on a bank discount basis.
The equivalent coupon issue yields are
.94 %for the 91-day bills, and 4.4?:Pjo for the 182 -day bills.

The Department 01 the TREASURY
WASHINGTON. D.C. 20220

TelEPHONE W04·2041

FOR IMMEDIATE RELEASE

April 18, 1972

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
$4,100,000,000, or thereabouts, for cash and in exchange for Treasury
bills maturing April 27, 1972,
in the amount of $4,105,835,000,
as follows:
91-day bills (to maturity date) to be issued April 27, 1972,
in the amount of $ 2,300,000,000, or thereabouts, representing an
additional amount of bills dated January 27, 1972,
and to mature
July 27, 1972
(CUSIP No. 912793 NW2),originally issued in
the amount of $1,603,210,000, the additional and" original 'bills to be
freely interchangeable.
lB~ day bills, for

$l,BOO,OOO,OOO, or thereabouts, to be dated

April 27, 1972,
and to mature
(CUSIP No. 912793 PJ9)'.

October 26, 1972

The bills of both series will be issued on a discount basis under.
competitive and noncompetive bidding as hereinafter provided, anG at
~turity their face amount will be payable without interest.
They will
be issued in bearer form only, and in denominations of $10,000,
$15,000, $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, April 24, 1972.
Tenders will not be received
at the Treasury Department, Washington. Each tender must be for a
minimum'of $10,000. Tenders over $10,000 must be in multiples of
$5,000. 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
~ill be supplied by Federal Reserve 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
tenders. Others than banking institutions will not be permitted to

- 2 submit tenders except for their own account.
Tenders will be rece1~
without deposit from incorporated banks and trust companies and fro.
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 accompani
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 Hnnounceme~
will be made by the Treasury Department of the amount and price range
.'f accepted bids.
Only those submitting competitive tenders ~vill be
advised of the acceptance or rejection thereof.
The Secretary of the
Treasury expressly reserves the right to accept or reiect any or all
tenders, in whole or in part, and his action in any such r-espect shall
be final.
Subject to these reservations, noncompetitive tenders for
each issue for $200,000 or less without stated price from anyone
bidder ~'ill ~e accepted in full at the average price (in three decimal
of accepted competitive bids for the respective issues.
Settlement h
accepted tenders in accordance with the bids must be made or: completed
at the Federal Eeserve Bank on April 27, 1972,
in cash or other immediately available funds or- in a like face amount
Treasury bills maturing April 27, 1972.
Cash and exchange tende
will receive equa~ treatment.
Cash adjustments will be made for
differences between the par value of maturing bills accepted in
exci~2nge and the issue price of the new bills.
:'o,'(.:r C:ec tiCt1S 454 (b) and 1221
(5) of the Internal Kfvenue CV~_
or 1_')5:. ::he ,·:til~"JnL of discount at which bills issued hereutid~r are sol
is C~:,,-- ~~del-eu,o pce rue when the bills are sold, redeemed or otherwiSE
Gi. s p ( n L Cl G f \ 'H'd t h (:' b i 11 s are e xc 1 u d e d fro m con sid era t ion as cap it a1
as;:e::s.
r.ccC'ldingly, the Uv'.'e'.
Tl'."'easury bills (other than life
in~llran,~e :~[jmrdnies) issued hereunder f:1USt inClude in his income :::ax
z.-etu:-:" as Gldinary gain or loss, the difference between the price ?ai
fOi:" the hill::o, w>:ct~<:?L OIl original issue or on subsequent plJr.::,hase, ar
the amount actually received either upon sale DC redemption :.it maturit
during the taxable year for which the return is ma~e.
Treasury DE::partfTent C'i.rcular No. 418 (current rev::::iir'ri) and th~s
not~...:e, Dl"C'scribe t:e terms of che Treasury bill..:; ane.; gl:\/ern the
.
condit:iu('s of their issue.
Copies of the cirCUlar may he C'brained frc
any F~deral Reserve Bank or Branch.

000

The Department 01 the TREASURY
WASHINGTON. D.C. 20220

TelEPHONE W04·2041

AUTOMATIC RELEASE AT 11:30 AM VIENNA TIME, APRIL 19, 1972
(5:30 AM EST)
REMARKS OF THE HONORABLE CHARLS E. WALKER
UNDER SECRETARY OF THE TREASURY OF THE UNITED STATES
AT THE
AUSTRIAN NATIONAL BANK
VIENNA, AUSTRIA
WEDNESDAY, APRIL 19, 1972, 11:30 AM
DOMESTIC ECONOMIC POLICY IN THE UNITED STATES
Returning to Vienna always provides me with a double
pleasure.

It gives me a chance to revisit many of your

beautiful and historic sites.

But more importantly, it

provides me with an opportunity to visit old friends from
international monetary conferences.
Since my last visit here in 1964, many far-reaching
developments have affected domestic economies as well as the
operation and structure of the international monetary system.
Undoubtedly the most significant was set in motion last
August 15 when President Richard M. Nixon announced a
sweeping set of economic policies designed to curb inflation,
Increase employment and restore balance to the U.S. trading
accounts.

These policies included:

a 90-day freeze on wages, prIces and rents (socalled Phase I, which was followed by a flexible
control system known as Phase II);
restoration of the tax credit for business investment in productive equipment;
C-289

-2-

repeal of the excise tax on automobile purchases;
income tax cuts for individuals;
cessation of purchases and sales of gold with
foreign governments and central banks; and
a temporary surcharge on about half
of the goods imported into the United States.
Those parts of this New Economic Policy which could
be handled administratively were effective immediately.

addition, Congress moved rapidly in enacting the tax portions of
the program.

With the consummation of the Smithsonian

Agreement on December 18, the import surcharge was dropped
and the President asked Congress for an increase in the
price of gold.

Again, Congress responded speedily and

the legislation was signed into law on April 3.
These new policies have been reported and analyzed
by the international press and have been discussed
extensively at international forums for the past eight
months.

Quite naturally the discussions here in Europe

and elsewhere around the world have focused on currency
realignments, trade negotiations and prospects for
establishing a new monetary system.
The impact of these policies on the U.Sr economy,
although equally important, has not received as much
attention abroad as it deserves.

Therefore, I would like

-3-

to use these few minutes to review some significant
developments in the domestic economy of the United States
and perhaps put the new policy in better perspective.
In doing so, we might address ourselves to three
questions:
1.

Why was the New Economic Policy adopted?

How successful has the policy been to date?

What are the prospects for the future?

Why the New Economic Policy Was Adopted
A few vocal critics would have us believe that the
New Economic Policy was adopted because the old policy was
a miserable failure.

Not so.

The Nixon Administration

policies of 1969 (an extension of the Johnson Administration
policies of 1968) had succeeded in the initial and distasteful
task of cooling a badly overheated economy.
The forces of demand-pull inflation were brought under
control.

Then, as the economy moved into a mild recession

and unemployment rose, expansive policies were effectively
used to stimulate domestic demand.

The slide in industrial

production was reversed and unemployment topped out as
employment rose fast enough to absorb the net addition of
new workers to the labor force.
In addition, the rate of inflation subsided somewhat
In the first half of 1971 relative to the extremely rapid
pace of 1969 and 1970.

-4-

If the old policy was thus working, why the New
Economic Policy?
For one thing, the old policy was not working fast
enough.

Unemployment remained too high, both in humanitarian

and economic terms.

And the slowness in bringing inflation

under effective control was trying the patience of the
American people.
Second, as most Europeans were aware, developments
ln 1971 in international trade and monetary relations
demonstrated clearly that new policies were badly needed.
The overvaluation of the dollar was reflected in the
first U.S. trade deficit Slnce 1888, along with recurring
currency crises.

The negative impact of the trade deficit

on U.S. output and employment was sufficient reason for new
departures.

But the pressing need to negotiate fairer

trading relationships, increased military burden-sharing
among Free World nations, and significant changes in the
international monetary system added greatly to the urgency
of the situation.
Unfortunately, before August IS neither the forum
nor the fulcrum for such negotiation existed.

But with

the dollar float and the temporary surcharge, a fulcrum
was created.

The nature of the forum is still under discussion.

Third, in 1971 the people of the U.S. came to understand
that for too long our nation had taken its economic might and

-5-

high productivity for granted -- that while we had enjoyed
the luxury of reducing Federal tax rates on individuals,
we had been paying far too little attention to the growing
need to promote the genuine savings and investment
the mainspring of economic growth and competitiveness.
"Productivity," and the need to stimulate it, moved in
1971 from the language of the economist into the public domain.
And this was good, for it provided the atmosphere and
understanding necessary for Congressional approval of
President Nixon's proposed restoration of the investment
credit, as well as Congressional ratification of the earlier
administrative action (challenged in the courts) to liberalize
the tax treatment of depreciation.

The Revenue Act of 1971

did contain some appropriate cuts for low-income individual
taxpayers.

But the major thrust of the legislation was to

undo the damage to the investment process resulting from
1969 legislation, and also to move toward reshaping our Federal
tax system so as to foster rather than penalize productivity
and efficiency.*
*One piece of paper carried the day in both House and Senate.
This table compared the acquisition costs in 1970 of new productive
equipment, adjusted for corporate tax rates, depreciation systems,
and investment credits, among the U.S., Japan, and major countries
of the European Community. The results showed that a piece of
equipment that cost the U.S. businessman 100 cents on the dollar
cost only 79 to 83 cents in these principal competitor countries.
The Administration successfully argued that the provisions of
the Revenue Act which reduced these costs to 87 cents in the
United States were fully justified as a partial step in removing
the bias of the U.S. tax system against productivity.

-6-

Fourth, by the summer of 1971 it had become clear to
President Nixon and his economic aides that although the
battle against demand-pull inflation had been won,
inflationary expectations remained almost as widespread and
strong as ever.

This view that the

u.s.

economy would be

plagued with steeply rising prices, year after year after
year, had two very serious implications.
In the first place, it meant that the instability in
financial markets that is bred by inflationary expectations
would continue and perhaps intensify.

Expecta~ions

endemic inflation have a double impact on interest rates.
First borrowers rush in to borrow today in order to beat
tomorrow's price increases.
Second, savers sooner or later realize that the 4 or
5 percent they earn at the bank or the savings and loan
association is, in real terms, wiped out by rising prices.
They therefore move to protect themselves by taking their
money out of the bank or the savings and loan
("disintermediation") and investing it directly in highyielding government and private securities.

Both of these

factors send interest rates to the sky.
These ultra-high interest rates significantly affect
every aspect of economic activity.

They are especially

damaging to American home buyers and the thousands of state
and local government units in the United States.

-7-

Just as inflationary expectations may cause interest
rates to rise to ultra-high levels, the level of rates can
in turn be viewed as one of the better indicators of such
expectations.

Inflationary expectations were probably at

their peak in early 1970 when Treasury notes and bonds were
yielding 8 percent and corporations were paying 9 to 10
percent for long-term funds.
The Nixon Administration was therefore extremely
pleased

~nd

optimistic when interest rates began to

decline in 1970 and on into the early months of 1971.
The trend helped convince us that our policies were
indeed working, and working well.

Imagine our dismay, then,

when yields turned sharply in the late winter of 1971
and moved back toward the peaks reached a year earlier.

Not

only did this reversal threaten to undermine what has turned
out to be the

biggest housing boom in U. S. history.

Ultra-

high rates could also curtail progress in other areas of
the economy.
Why did inflationary expectations re-emerge with such
force?

There are some who believe that the Administration's

overly optimistic economic forecast in January
major factor.

I doubt it.

1971 was the

Much more fundamental was the

clearly emerging failure of the economy to move back rather
speedily and handilY, as earlier expected, to the wageprice stability that is the sine qua non of a healthy

-8-

industrial economy.

And, just as the phenomena of cost-

push inflation and the wage-price spiral engender inflationary
expectations, such expectations themselves reinforce the spiral
In our earlier postwar experience, wage-price stability
had generally returned to the economy within a year or so
following the peaking out of demand-pull inflationary
pressures.

The stability resulted from a decline in the rate

of increase of labor compensation and an increase In output
per manhour.

Pay settlements tended to peak out within a few

months after demand-pull pressures subsided.
Administration economists were therefore hopeful that
the wage settlement by the General Electric Company in January
1970 -- at about 8 percent for the life of the contract -- woull
mark the topping out of compensation increases.

We had hoped

and bel ieved that the rate of increase would begin to fall back
and before too long - - wi thin a year or so - - would be back on
track wi th productivi ty gains, or increases in output per manho
The urgency of achieving this stable relationship--which means
steady uni t labor costs and thus no upward pressure from wages
on prices -- was demonstrated by the fact that, despite a
rebound in productivity growth during 1970 and the first half
of 1971, continuing sharp increases in wages resul ted in a rise
in unit labor costs at an annual rate of 4 1/2% over that perio

-9-

But wage settlements did not recede.

Organized labor

badly burned by long-term contracts which had not sufficiently
allowed for the inflation,
catch up.

This

VJ2.S

mo~ed

strongly and effectively to

'.l::~deystandable

and perhaps not too

damaging--if it were a one-time adjustment.

What was very

disturbing, however, was the tendency of labor -- with
might add -- to leapfrog into
~he

futu~e

by attempting to negotiate contracts with a sum

certain to offset the expected inflation which most people
were

aga~~

v12wlng as inevitable.

The continuation of cost-push inflation with a vengeance-and the prospects for a very long and drawn-out period of
adjustment back to stable unit labor costs -- was brought horne
hard to

Admi~istration

analysts last summer by the behavior of

the wholesale price index for industrial commodities.

It is

this index which is most closely related to unit labor costs.
In the six months prior to the wage-price freeze, this index
rose at the highly disturbing annual rate of 5.7 percent.

This

reflected the strong thrust of cost-push inflation, and it portended
considerable pressure on prices at the retail level.
With this background, it should be clear that the major
purpose of the wage-prlce freeze, and the subsequent control
program, was to eliminate the inflationary expectations which
had re-escalated interest rates and which were cuntinuing to
spark wage settlements far in excess of any conceivable gains

in outPUt per manhour.

-10-

Stated differently, the basic theory of Phases I and
II of the New Economic Policy is to temporarily reinforce
the market processes with an artificial control mechanism.
We believe that if we can significantly dampen inflationary
expectations, the time needed to make the transition from
severe demand-pull inflation to a situation of wage-price
stability can be greatly reduced.
The New Economic Policy:

An Evaluation

How is the United States doing under this new policy?
In my judgment, very well.

During the early stages of the

gO-day freeze, some very limited surveys indicated that the
program was not effective.

However, when the gO-day

period ended, the price indexes showed clearly that the
freeze worked.

Moreover, economists, businessmen and

consumers all agree that it was successful.
The Phase II program has now been in operation for
five months and some American observers have made the
premature judgment that it is failing.

I think it only

fair to point out that this is an election year at home
and some of the charges about the effectiveness of the
program are politically motivated.

In appraising the

progress of the program, it is important to look at the
right indicators.

-11-

Take the consumer price index.

Certainly it is of great

importance to the average American family.
like to see it stabilize.

We would very much

But with 22 percent of the index

representing food, and with the patent impossibility of
controlling prIces of raw agricultural products, the short-run
behavior of that index obviously is going to be affected
substantially by forces of nature.
I might note parenthetically that the U.S. consumer
doesn't realize what a great buy he has in food.

It uses up

less than 16 percent of his take-horne pay -- down from 22 percent
twenty years ago.

And I might add that the

u.s.

consumer pays

about half the price for agricultural products that the
European consumer pays.
The key price index to watch in gauging the success of
Phase II is the index for wholesale industrial commodities.

is these commodities that are most affected by cost-push
pressures.

Significantly, the Administration did not proclaim

victory in the Phase II fight because the overall wholesale
price index rose only

percent last month.

Within the

average, we noted that industrial commodities rose .3 percent
and that's too much.
But we also noted that the latter increase followed an
average monthly rise of .6 percent in the three months
December through February, reflecting the "bulge" at the end
of Phase I which we had anticipated, and even warned about.
In the future, the industrial index may jump around and may
have additional "ups" as well as "downs" -- those are

-12inevitable vagaries of monthly data.

But I submit that the

behavior of the index last month is a cause for optimism.
At the least, it greatly weakens the position of those labor
leaders and others who, politically motivated, wrongly and
demagogically concluded that the increase in meat prices in
the

u.s.

signified that "Phase II is a shambles."

Another significant indicator of the success of
Phase II -- and one that bodes well for the future of both
the workingman and the stabilization program -- is a statistic
which hasn't received proper attention either in the
or abroad.

u.s.

refer to the rapid recent increases in real

take-home pay -- what a worker with three dependents has
left over after taxes are paid and rising prIces have been
adjusted for.

Between 1965 and 1971, this index rose at

the almost standstill annual rate of 0.2 percent.
Between August 1971 and February 1972, however,
real take-home pay advanced at an almost phenomenal annual
rate of 5.4 percent. This ultra-high rate of increase cannot
continue.

But the restoration of a forward advance in

this figure after several years in the doldrums is
mightygood news to the American workingman.

And I think

it is an exceedingly good omen for the success of the
New Economic Policy.

-13-

This doesn't mean that wages are shooting skyward, out of
control.
job.

The fact is that the Pay Board has been doing a good

Labor has been treated fairly; so has the public.

compared to its initially stated goal of holding wage increases
to 5 1/2 percent, the sum total of its rulings to date -appropriately weighted and including all the big settlements
is to allow pay increases (including fringes) of just over 5
percent per year.
That sounds good to me and 1S another reason for my
optimism about Phase II.
The final evidence that I would point to on the pr1ce side
of the New Economic Policy pertains to interest rates.

After

President Nixon announced his program on August 15, interest
rates declined sharply, especially short-term rates.

Since that

time short-term rates have risen as the pace of economic activity
in the United States has quickened.

Long-term rates also

have risen somewhat from their lows, but consumer mortgage
rates have continued to decline.
I am personally convinced that the long-term interest
rate~structure

in the United States still contains a

substantial margin reflecting hedging against inflation.
This means that we have not yet convinced our borrowers
and lenders that we are determined to bring inflation under
control.

Once this determination becomes clear, and movers

-14-

of money in particular begin to look with even more favor
on long-term debt agreements, the impact on long-term interest
rates can be very favorable indeed.
Consequently, a big part of the interest rate problem
can be viewed as one of communication and education.

Again

speaking personally, I am convinced that the United States, wit
its tremendous capacity for generating genuine savings, can
achieve stable and strong economic growth with a long-term
interest rate structure at or lower than the one we now have.
But this can and should be achieved not through overly expansivi
monetary policies, but by convincing the financial community
through words and performance that we can and will win the
battle against inflation.

We are making progress.

On the employment and output side of the New Economic
Policy, almost all the news is favorable.

To cite a few

significant indicators
Industrial production has advanced for seven months runnin
and is now almos t four percent higher than a year ago, hay
grown at an annual rate of seven percent since last August
Housing starts continue at an all-time high, and nothing
short of a catastrophe can prevent 1972 from matching or
bettering the record performance of 1971.
The leading bus iness indica tors have been ris ing smartly f
e igh t months running, wi th advances predominating in ever~
sec tor of th is broad 1 i s t of s er ies . Worth spec ia1 note 1
the marked improvement shown by the sensitive measures of
labor-market conditions -- the workweek, hiring rate,
help-wanted advertising, etc. This widespread strength
clearly portends a continuing expansion in employment and
production through the remainder of 1972.

-15-

Despite the existence of what has been mistakenly
referred to as a large volume of unused capacity, a
capital spending boom of significant proportions seems
to be emerging in the United States with outlays
expected to increase by 10 1/2 percent this year.
Since last July alone, employment has risen by 2.3
million, or at an annual rate of four percent. If
such growth continues, unemployment should come down,
and perhaps rather rapidly.
The only two major sectors which have under-performed
relative to our January forecasts are business accumulation of
inventories and our trade account.

The latter

worrisome,

but all of us knew that the Smithsonian Agreement would
take some time to influence our trading position.

And the

short-term weakness in inventories can actually indicate
considerable and greater strength for the future.

Now that

retail sales seem to be moving up -- with consumer confidence
rising -- sooner or later the thin inventory-sales ratios
will cause businessmen to rebuild depleted stocks.

Indeed,

there are signs that the fundamental turn in inventory
policy already has occurred.
What are the Prospects for the Future?
We believe the economy of the United States will
continue its strong expansion throughout 1972 and on into
1973.

We have forecast a growth in the Gross National Product

of $100 billion for 1972.

That figure represents a growth of

about 9 percent -- 6 percent of which will be real growth

-16and approximately 3 percent in the form of price increases.
We expect profits to increase by 16 percent over 1971.
We expect unemployment to be nearing the 5 percent mark
by year-end 1972.
Does my unabashed optimism over the outlook for
economic activity in the United States indicate that a
return to demand-pull inflation is just around the corner?
Do the big deficits we are now incurring point in the same
direction?
No, not if we watch our step.

The deficits we now

have are easy to finance in an economy in which, despite
the New Economic Policy gains, still has considerable slack.
The danger point is down the road.

As unemployment moves

down toward and through 5 percent, then we shall have to be
increasingly careful that we don't overshoot the mark with
expansionary policies.

If we overshoot, we could again

face the same set of problems we've been trying to solve
for half a decade.
But you can be assured that Administration policymakers
are fully cognizant of that danger.
repeat the error --

We are not about to

"too much money chasing too few goods"

that caused all of our trouble in the first place.

-17-

Beyond Phas e I I
Can we ever agaln return the decision-making process
to the market place, at least to the extent it existed
before August 1,5?
I hope so, but I rather doubt it.

Although I do think

we have a better-than-even chance of almost going

back~

Let me emphasize most strongly that I have no fear at
all that the United States has cast its lot toward permanent
controls of the Phase II type.
not allow it.

The American people will

Democracy ln our country is true democracy.

Just as the American people forced their representatives in
Government to jettison price controls in 1946 much too soon
after the end of. World War II, so will they demand an end of
Phase I) if

~aIJd

when shortages replace plenty and rationing

become,s necessary.
Stated differently, a fundamental reason for optimism
over Phase II, enforced without a gigantic bureaucracy, is
that goods are plentiful.

We are not trying to substitute

a control system for the fundamental disciplines necessary
to c.ool.an ov,erheated economy.

Expansive policies are

definitely in order.
But as we move back towards full employment, as some
goods come into short supply, as consumers find that they
can't'-buy -what they want -- well, you can rest assured
that they will transmit their displeasure to members of

-18-

Congress in no uncertain terms, and that will mean the end
of controls.

I do not expect this to happen before Phase II

has accomplished its essential task.
Still this does not mean a return to business as usual.
Perhaps Paul McCracken, former Chairman of President Nixon's
Council of Economic Advisers, suggested the answer over three
years ago when he stated that Big Labor, Big Business, and
Big Government should enter into a social compact aimed at
limiting the pressures on prices that grow out of the
economic power of unions to set wages or bus ines 5 ·to s·et prices
at levels higher than they would be if we had more effective
competition.
I was skeptical of that idea three years ago.
not today.
achieved.

I am

I am in some degree optimistic that it can be
This is because the whole experience of the

recent inflation in the United States has been so wrenching
and traumatic for almost everyone concerned.
Who gained?
The workingman?

His real take-home-pay, as a1ieicty

noted, rose at a dismal rate of only .2 ·p·e'fcerif 6·etween
1965 and 1971.

The big money wage

incre~ses

disappeaied-ort

the way to the store.
The corporation and its stockholders?

Corporate

profits topped out in 1969 and dropped sharply Tn ·-1970,

-19-

falling to the lowest levels relative to gross national
product since the 1930's.
The banks?

The higher interest rates on loans

reflected -- and were offset by -- similar Increases In
,rates on the time deposits that are now so important a$
a source of lendable funds.
No, few people gained from an inflationary boom which
looked so good on the surface but down deep was so bad.
As a result, the prospects for getting representatives
of labor, business and government to sit down at the
table and attempt to agree on wage and price policies
that result in stable unit labor costs and a stable price
structure that is fair to the consumer -- these prospects
for some form of social compact -- look pretty good to me.
Business and labor would spurn such an opportunity
at their peril.

Because sooner or later the American

people will insist upon fundamental legislative and
regulatory actions to effectively reduce the abuse of
economic power -- and sooner, rather than later.

-20-

By way of summarizing these remarks, I would like to
stress three points:
First, the United States did not ignore its
responsibility for dealing with domestic inflation prior
to August IS, 1971.

Through the use of restrictive

fiscal and monetary policies, we had cooled a badly overheatedoconomy. However, the return to a growth pattern with
stable prices and declining unemployment was proceeding
too slowly in terms of both international and domestic
considerations.

The New Economic Policy was designed to

meet both objectives.
Second, the United States economy has responded to
the new policies and we expect continued growth in employment
while at the same time reducing inflationary pressures.
Finally, the Nixon Administration realizes full
well that a healthy and growing U. S. economy is absolutely
essential if Free World nations are to grow and prosper.
International monetary agreements, international trading
arrangements and mutual security efforts will be meaningless
gestures if they are not supported by strong national
economies.

Vigorous expansion of the United States

economy today is the best argument against emerging
protectionist sentiments.

For that reason, I can appreciate

your interest in our domestic economy, because it will have
a thorough impact on the growth of Free World trade.
-00-

The Department 01 the TREASURY
WASHINGTON. D.C. 20220

FOR

I~~EDIATE

TelEPHONE W04·2041

nELEASE

April 18, 1972

TR£ASURY ANNOUNCES ACTIONS ON
FOUR INVESTIGATIONS UNDF.R THE ANTIDUMPEJG .l\CT
Assistant Secretary of the Treasury Eugene T. Rossides
announced today Treasury's actions with respect to four
investigations under the Antidumping Act of 1921, as amended.
In two of the cases there are final determinations of
sales at less than fair value with simultaneous withholdings
of appraisement and referrals of the cases to the Tariff
Commission j:or injury determinations; in the third case,
the Treasury is withholding appraisement pending completion
of its investigation; and in the fourth, the Treasury is
amending an Antidumping Proceeding Notice.
All decisions will be published in the Federal Register
of April 19, 1972.
In the first case, the Treasury Department announced
that welded-wire mesh for concrete reinforcement from Belgium
is being, or is likely to be, sold at less than fair value.
The case will now be referred to the Tariff Commission for
a determination as to whether an American industry is being,
or is likely to be, injured.
Simultaneously with the
determination of sales at less than fair value, the Treasury
Department issued a three-month withholding of appraisement
order covering imports of this merchandise from Belgium. The
significance of the three-month withholding of appraisement
is that imoorts of the merchandise will not be appraised for
the three months pending the Tariff Commission's determination.
If the Tariff Commission issues an affirmative injury
determination, dumping duties will be assessable effective
as of the date of the withholding action.
If the Tariff
Commission issues a negative injury determination, the case
is closed, and no dumping duties will be assessed. During
the period from January 1971 through December 1971, imports
of welded-wire mesh for concrete reinforcement from Belgium
were valued at approximately $260,000.
In the second case, the Treasury announced that hand
pallet trucks from France are being, or are likely to be,
sold at less than fair value.
This case will also be referred
to the Tariff Commission for a determination as to whether
an American industry is being, or is likely to be, injured.

-2As in the first case, a three-month withholding of
appraisement notice is being issued simultaneously with the
determination of sales at less than fair value. During the
period from November 1970 through February 1972, imports
of hand pallet trucks from France amounted to over $900,000.
In the third case, Assistant Secretary Rossides
announced that the Bureau of Customs is instructing its
field officers to withhold appraisement of hat bodies of fur,
not on the skin, from Czechoslovakia pending a determination
by the Treasury Department as to whether this merchandise
is being sold at less than fair value. Under the Antidumping
Act, the Secretary of the Treasury is required to withhold
appraisement whenever he has reasonable cause to believe or
suspect that sales at less than fair value may be taking place.
A final Treasury decision in this investigation will be made
within three months. If a determination of sales at less
than fair value were to be made in this investigation, the
case would then be referred to the Tariff Commission for an
injury determination. Both sales at less than fair value
and injury must be shown to justify a judgment of dumping.
The total value of hat bodies of fur, not on the skin,
imported from Czechoslovakia during the period from
January 1970 through December 1971 amounted to approximately
$450,000.
In the last case, the Department announced that the
"Antidumping Proceeding Notice" relating to sulphur,
including elemental sulphur and nonelemental sulphur
from Canada, which was published in the Federal Register
of February 24, 1972, is being amended to restrict its
application to just elemental sulphur from Canada.
Nonelemental sulphur includes sulphur in combination with
other elements. Some of the common forms of nonelemental
sulphur are sulphuric acid and sulphur dioxide. Elemental
sulphur, on the other hand, is sUlphur which is not in
combination with other elements.

000

The Department 01 the TREASURY
WASHINGTON. D.C. 20220

TelEPHONE W04·2041

FOR IMMEDIATE RELEASE

April 18, 1972

TREASURY ISSUES PROPOSED AMENDMENTS
TO ANTIDUMPING REGULATIONS
Assistant Secretary of the Treasury Eugene T. Rossides
announced today a Notice of Proposed Rule Making amending
the Treasury's Antidumping Regulations.
The changes are intended to insure that the
Antidumping Act is made more effective in defending
u.s. industry against unfair international trade practices
in the dumping area, while at the same time providing
complete fairness in antidumping investigations. With
a view to speeding up antidumping investigations, the
amendments would establish specific timetables for
processing cases. Another amendment provides special
procedures tor accelerated renewal of an investigation
which was p~eviously discontinued on the basis of price
assurances, where the Treasury has reasonable cause to
believe that the assurances may have been violated. Still
other amendments affect the technical adjustments which
nay be made in comparing the prices at which merchandise
is sold abroad with those in the United States.
On April 13, 1971, a notice was published in the
Pederal Register which announced that the Treasury Department
"as reviewing the Antidumping Regulations. Interested persons
"ere invited to submit suggestions for improving the Regulations,
~fter consideration of all the suggestions and a review of
~e Department's administration of the Antidumping Act, the
rreasury concluded that various amendments to the Regulations
;hould be proposed.
A period of sixty days will be provided before final
ldoption of the proposed amendments in order to enable
.nterested persons to submit comments. These should be
Iddressed to the Commissioner of Customs in Washington, D. C.
The new amendments would apply to all antidumping
~oceedings with respect to which no decision, final or
_
entative, nor a notice of withholding of appraisement has
een pUblished as of the date the amendments become effective.
000

0-290

ORR 643.3 R

DEPARTMENT OF THE TREASURY
BUREAU OF CUSTOMS
[19 CFR PART 153J

Procedures Under Antidumping Act, 1921, as amended
NOT ICE OF PROPOS ED RUl E MA KING
A notice was published In the Federal Register of April 13, 1971
(36 F.R. 7012), that the Treasury Department was reviewing Its regulations
(19 CFR Part 153) relati"ng to procedures under the Antidumping Act, 1921,
85

amended <19 U.S.C. 160 et seq.).

Interested persons were Invited to

submit suggestions for Improving the regulations to the Commissioner of
Customs not later than 60 days after the publication of the notice In
the Federal Register.

On June 15, 1971, the time for submissions was

extended until June 30, 1971 (36 F .R. 11526).
After consideration of al I of the suggestions received pursuant to
the notice, It has been concluded that certain amendments to the regulations should be proposed.
The primary purpose of the proposed amendments Is to insure that
the Antidumping Act continues to be administered with'a view to defending
United States Industry effectively against unfair international trade
practices In the dumping area, whl Ie at the same time providing for complete fairness In the antidumping Investigations.

To this end, the pro-

posed amendments cal I, among other things, for more expeditious processing
of antidumping Investigations.

Notice Is hereby given that It Is proposed to amend certain sections
of Part 153 of the Customs Regulations (19 CFR 153), and to add certain
other sections.
I.

Sections 153.30 and 153.31 are proposed to be amended to establ Ish

limits on the time within which an Antidumping Proceeding Notice normally
will be published subsequent to the receipt, In satisfactory form, of Information alleging Injurious sales at less than fair value and on the time
within which a Withholding of Appraisement Notice, a Notice of Tentative
Negative Determination, or a Notice of Tentative Discontinuance of Antidumping Investigation no.mally wi I I be published following the publication
of an Antidumping Proceeding Notice.
2.

Sect Ion 153.8 I s proposed to be amended by de Iet I ng the word "rea-

sonably" wherever It appears before the words "direct relationship" In
order to make It clear that only circumstances of sale which are directly
related to the sales of the merchandise under consideration wll I be taken
Into account.

Under the proposal, such Items as bad debts and general

advertising wi II no longer be al lowed as differences In circumstances of
sale.
3.

Section 153.15 is proposed to be amended to provide for the re-

opening of discontinued antidumping Investigations by the publication,
forthwith, of a Withholding of Appraisement Notice when the Secretary,
subsequent to the discontinuance, has reason to believe or suspect that
merchandise which was the subject of the dlscountlnued Investigation, Is
being, or Is likely to be, sold at less than fair value.

Additionally,

It Is proposed to amend paragraph (a) of section 153.15, by deleting the

word "changed" before the word "circumstances" so as to make clear
that cIrcumstances which were not known at the time of the Initiation
of the Investigation may be taken Into account.
4.

Sections 153.33 and 153.37 are proposed to be amended to pro-

vide that all requests for an opportunity to make an oral presentation
be accompanied by a statement outlining the Issues which the person

making the request wishes to discuss, and to provide, further, that if
the request Is granted, the Secretary or his delegate wll I advise the
persons Involved as to which issues are appropriate for discussion.
5.

In addition, a number of other technical amendments are proposed.
Based on the foregoing, It is proposed that the fol lowing amend-

ments be made to Part 153 of the Customs Regulations (19 CFR Part 153):

PART 153 - ANTIDUMPING
Section 153.8 is amended by deleting the word "reasonably" before
"dl rect re Iat Ionsh i p" I n paragraphs (a) and (b>'

Section 153.8, as

amended, will read as follows:

153. 8 Fair value; circumstances of sale.
(a) General. In comparing the purchase price or exporter's sales
price, as the case may be, with the sales, or other criteria applicable,
on which a determination of fair value Is to be based, reasonable allowances wll I be made for bona fide differences In circumstances of sale If
It Is established to the satisfaction of the Secretary that the amount
of any price differential is wholly or partly due to such differences.
Differences in circumstances of sale for which such allowances will be
made are limited, in general, to those circumstances which bear a direct
relationship to the sales which are under consideration.
(b) Examples. Examples of differences In circumstances of sale
for which reasonable allowances generally wi II be made are those Involving differences in credit terms, guarantees, warranties, technical
assistance, servicing, and assumption by a seller of a purchaser's
advertising or other sel ling costs. Reasonable allowances will also
generally be made for differences In commissions. Except in those
instances where It Is clearly established that the differences In circumstances of sale bear a direct relationship to the sales which are
under consideration, allowances generally wi I I not be made for differences In research and development costs, production costs, and advertising and other sel ling costs of a seller unless such costs are
attributable to a later sale of merchandise by a purchaser; provided
that reasonable allowances for seiling expenses generally will be made
In cases where a reasonable allowance is made for commissions in one of
the markets under consideration and no commission is paid In the other
market under consideration, the amount of such allowance being limited
to the actual sel ling expense incurred in the one mar-ket or the total
amount of the commission al lowed in such other market, whichever Is
less.
(c) Relation to market value. In determining the amount of the
reasonable allowances for any differences in circumstances of sale,
the Secretary wi I I be guided primari Iy by the effect of such differences
upon the market value of the merchandise but, where appropriate, may
also consider the cost of such differences to the seller, as contributing to an estimate of market value.

5
Section 153.13 Is amended by adding a new sentence at the end thereof
reading:

"If there Is not a clear preponderance of the merchandIse

sold at the same prIce and weighted averages of the prIces of the
merchandise sold are determined by the Secretary to be inappropriate,
the Secretary may use any method for determining fair value whIch he
deems approprIate."

153.13

SectIon 153.13, as amended, wi II read as follows:

Fair value; sales at varying prtces.

Where the prices in the sales which are beIng examIned for a
determinatIon of fair value vary (after allowances provided for in
sections 153.7, 153.8, and 153.9), determination of faIr value wll I
take Into account the prices of a preponderance of the merchandise thus
sold or weighted averages of the prices of the merchandise thus sold.
Unless there is a clear preponderance of merchandise sold at the same
price, weighted averages of the prices of the merchandise sold normally
wI II be used. I f there I s not a clearprenol1der-ance of the merchandise
sold at the same price and weIghted averages of the prices of the
merchandIse sold are determIned by the Secretary to be inapproprIate,
the Secretary may use any method for determi n I ng fa I r va I ue wh i ch he
deems appropr i ate.
SectIon 153.15 is amended by substituting "Discontinuance of antldumping investIgatIon."
changed circumstance."

for "FaIr value; revisIon of prIces or other
In the main heading; by substItutIng "Price

assurances, termination of sales or other circumstances."
continuance of InvestIgatIon."

for "Dls-

In the headIng of paragraph (a); by

insertl ng the words "and assurances have been rece I ved to th I s effect"
after "revl s ion" in subparagraph (I) and after "resumed" I n subparagraph
(2), by deleting the word "changed" before "cl rcumstances," and by substItutIng "NotIce of Tentative DiscontInuance of Antidumping Investigation"
for "notice to this effect" In paragraph (a); by substItuting "Notice
of Tentative Discontinuance of Antidumping Investigation."

for "Notice."

In the heading of paragraph (b); by providing that the "Notice of Ten-

tative Discontinuance of Antidumping InvestIgation" shall set forth a
description of the merchandise Involved, that Interested persons shall
be given an opportunity to present their views under a procedure similar
to that set forth in section 153.33(b), by substituting "discontinuance"
for "termination" In the first sentence and "discontinuing" for "terminatllll
I n the second sentence, by add I ng the words "or assurances of terml nation
of sales to the United States, and price revisions" after the phrase "price
assurances" in the third sentence, and by substituting "wi II" for "shall"
wherever the latter occurs in paregraph (b); by adding a new paragraph
(c), relatinQ to the for.m of a statement of assurances; by adding a

paragraph (d) prov i ding for the pub I i cat Ion of a "01 scontl nuance of Antidumpi ng Invest i gat i on" not Ice I n the Federa I Reg Ister; by add Ing a new
paragraph (e) to provide for final discontInuance after withholding
of appraisement or notice of tentative negative determination; by adding a
new paragraph

(f)

to provide for periodic reports by foreign exporters;

and by adding a new paragraph (g), relating to the reopening of a dlscontinued investigation.

Section 153.15, as amended, will read as

follows:
153.15 Discontinuance of antidumping investigation.
(a) Price assurances, termination of sales or other circumstances.
Whenever the Secretary of the Treasury is satisfied during the course
of an antidumping investigation that either:
(I) Price revisions have been made which eliminate the
like I i hood of sa Ies at Iess than fa i r va Iue and that there is no Ii kellhood of resumption of the prices' which prevai led before such revision,
and assurances have been received to this effect; or
(2) Sales to the United States of the merchandise have
terminated and wil I not be resumed, and assurances have been received
to this effect;

7
or whenever the Secretary concludes that there are other circumstances
on the basis of which it may no longer be appropriate to continue an
antidumping investigation, the Secretary may publ ish a "Notice of Tentative Discontinuance of Antidumping Investigation" in the Federal
Register.
(b) Notice of Tentative Discontinuance of AntidumpinQ InvestiQation.
The notice wi I I set forth a description of the merchandise involved and
state the facts rei ied upon by the Secretary in publ ishing the notice
and that those facts are considered to be evidence warranting the discontinuance of the investigation. The notice wi I I also state that interested persons shal I be given the opportunity to present their views
under a procedure simi lar to that set forth in section 153.33(b), and
unless persuasive evidence or argument to the contrary is presented within such period as is specified in the notice the Secretary wi I I publish
a final notice discontinuing the investigation. The tentative acceptance
of price assurances or assurances of termination of sales to the United
states, and price revisions or the termination of sales to the United
States wil I not prevent .the Secretary from making a determination of sales
at less than fair value in any case where he considers such action appropriate.
(e) Statement concerninq assurances. Assurances provided for In
paragraph (a) shal I be in substantially the fol lowing form:
I hereby certify that I am (an officer)
(attorney-in-fact) of (name of foreiqn
manufacturer, producer or eXDorter) and am
authorized, on behalf of (name of foreign
manufacturer, producer or exporter), to qive
assurances that:
(Select the appl icable provision.)
I. AI I future sales of (commodity) by
(name of foreign manufacturer, producer
or exporter) for exportation to the
United States shal I be made at prices
which are not less than fair value within
the meaning of the Antidumping Act, 1921,
as amended (19 U.S.C. 160 et seq.) and
that (name of manufacturer, producer or
exporter) shal I make a report to the
Commissioner of Customs which shall contain or be accompanied by the information
required by section 153. 15(f), Customs
Regulations (19 CFR 153. 15(t», for such
period ot time and at such intervals as
the Secretary may deem appropriate; or

8
2. AI I sales of (commodity) by (name of
foreiqn manufacturer, producer or exporter)
for exportation to the United States have
terminated and shal I not be resumed.

Officer or Attorney-in-fact
(d) Final discontinuance. As soon as possible after the publication of a t'Notice of Tentative Discontinuance of Antidumping Investigation" the Secretary wi II determine whether final discontinuance is
warranted and, if he so determ i nes, pub Ii sh a "Di scont i nuance of Antidumping Investigation" notice In the Federal Register.
(e) Final discontinuance after withholdinq of appraisement or
notice of tentative negative determination. The procedure specified
in paraqraphs (b) and (d) wi I I not apply if the decision to discontinue
an antidumping investigation is made by the Secretary after a withholding of appraisement notice or notice of tentative negative determination
has been published and interested parties have already been afforded an
opportunity to present their views pursuant to the provisions of section
153.37 or !53.33(b>' In I ieu thereof, a "Discontinuance of Antidumping
Invest i gat i on" not i ce will be pub I i shed in the Federa I Reg i ster. The
notice wi I I set forth a description of the merchandise involved and state
the reasons upon which the discontinuance is based.
(f) Periodic reports by foreiqn exporters. Whenever an investigation has been discontinued by the Secretary on the basis of price
assurances, the foreign manufacturer, producer or exporter of the
merchandise which was the subject of the discontinued investigation
shal I thereafter make a report to the Commissioner of Customs for such
period of time and at such intervals as the Secretary may deem appropriate. The periodic reports to the Commissioner of Cu~-,tGrns ~Jt:n(;ri)"Y
shu 11, .J~ dO"'orm i ned by the Secretary, conta i n or be accompan i ed by
the fo I low i n9 :
(I) Prices at, and the terms and conditions on which,
the merchandise is being sold for export to the United
States and in the applicable foreign market (or information
regarding constructed value as set forth in section 206 of
the Antidumping Act, 1921, as amended (19 U.S.C. 165»;
(2)

Publ ished price lists, if any;

(3) Information regarding discounts, quantities
Involved on a per sale basis, shipping charges, packlnq
costs and other circumstances of sales in the two markets
under consideration;

(4) Information reqarding differences in cost
of manufacture where similar merchandise is compared
pursuant to section 153.9; and
(5) Such other information which the Secretary
deems appropriate.
(9) ReopenlnCl of discontinued investiaation. In the event that
the Secretary determines, subsequent to the discontinuance of an investigation pursuant to paragraph (d), that there are reasonable grounds
to believe or suspect that there are or are I ikely to be sales to the
United States at less than fair value, he wi I I reopen the investigation
by publishing forthwith in the Federal Reqister a "Withholding of
Appraisement Notice" with respect to the merchandise. If prior to the
discontinuance of the investigation, importers and exporters concerned
had requested a 6-month withholding of appraisement pursuant to section
153.34(b), when the investigation is reopened the Secretary may withhold
appraisement for 6 months. If no such requests have been received, the
Secretary may withhold appraisement pursuant to section 153.34(a). The
wIthholding of appraisement may be made effective with respect to merchandise entered, or withdrawn from warehouse, for consumption not more
than 90 days before the date of pUblication. Whenever an investigation
Is reopened, interested persons wi I I be given the opportunity to present
their views pursuant to section 153.37.
A new section :53.17, relating to fair value determinations in exporter's
sales price situations involving merchandIse not resold in the same
condition as imported, is added to read as fol lows:
153.17

Fair value; merchandise not resold in the same condition as
Imported.

If exporter's sales price (as defined in section 204 of the Antidumping Act, 1921 (19 U.S.C. 163», is appl icable and the Imported mercandise is not resold to an unrelated United States pvrchaser in the
condition in which it was imported, the Secretary may use such reasonable
basis as he deems appropriate to determine exporter's sales price.
A new section 153.18, relating to fair value comparison, which would
provide for a comparison between purchase price or exporter's sales
price and the applicable home market price or price to third countries
at the same Ieve I of trade, is added to read as fo I lows:

153.18 Fair value; level of trade.
The comparison of the purchase price or exporter's sales price
(as defined In sections 203 and 204, respectively, of the AntIdumpIng
Act, 1921, as amended (19 U.S.C. 162, 163», as the case may be, with
the applicable price in the home market of the country of exportatIon
(or, as the case may be, price to third country markets) will generally
be made at the same Ieve I of trade. However, I f the Secretary finds that
the sales of the merchandise to the United States or In the applicable
foreign market are Insufficient In number to permit an adequate comparison, the comparison will be made at the nearest comparable level
of trade and appropriate adjustments shall be made for differences
affectIng price comparabIlity.
Section 153.23 Is amended by adding to subparagraph (3) of
the fol towing:

parag~ph

(c)

"(v) Disclose the names of partIcular persons from whom

confidentIal information was obtained, If nondisclosure of the names
has been requested."

S9 that the subparagraph, as amended, reads as follows

153.23 Avallabi Ifty of InformatIon In antidumping proceedlnqs.

****
(3) I nformat Ion ord' narl f V regarded as cont I dent Ia I • Information
will ordinarily be regarded as confidential If its disclosure would:
(1)
Disclose business or trade secrets;
(II)
Disclose production costs;
(111) Disclose distribution costs, except to the extent
that such costs are accepted as justIfying allowances for quantity
or differences in circumstances of sale;
(f v)
0 I sc lose the names of pa rt I cu Iar customers or the
price or prices at which particular sales were made; or
(v)
Disclose the names of partIcular persons from whom
confidential Information was obtained, if nondisclosure of the names has
been requested. (5 U.S.C. 552).
Section 153.30 Is amended by Inserting U(a) PUblication of AntidumpIng ProceedIng Notice." before

th~

first sentence of the sectIon; by substItuting

"Secretary" for "Corrml ss loner", by de letl ng the phrase", with the approval of
the Secretary,"; by substituting "to" for "which may", and by substltutfng''w
for "sha II" I n the first sentence of paragraph (a); redes Ignat I ng present par
graphs (a), (b), (c), and (d), as subparagraphs, respectively, (2),

(3),(4)

(5); by adding a new subparagraph (I), reading "(I) A description

of the merchandise Involved."; by substituting "proceeding" for "Information" in redesignated subparagraph (2); and by adding a new paragraph (b).

Section 153.30, as amended, will read as fol lows:

153.30 Antidumping Proceeding Notice.
(a) Publication of Antldumpinq Proceeding Notice. If the case
has not been closed under section 153.29, the Secretary wi II publish a
notice In the Federal Register that information In an acceptable form
has been received pursuant to section 153.25 or 153.26. This notice,
to be referred to as the "Ant I dump I ng Proceed i ng Not ice", wi I I spec I fy-(I)

A description of the merchandise involved.

(2) Whether the proceedIng relates to al I shipments of the
merchandise In questIon from an exporting country, or only to shipments
by certain persons or firms; In the latter case, the names of such persons
and firms will be specified.
(3) The date on which· Information in an acceptable form was
received and that date shall be the date on which the question of dumping
was raised or presented for purposes of sections 201(b) and 202(a) of
the Ant Idump i ng Act, 1921, as amended (19 U. S.C. 160 (b) and 161< a» •
(4) The fact that there Is some evidence on record concerning
Injury to or likelIhood of injury to or prevention of establishment of
an Industry in the United States.
(5) A summary of the information received. If a person outside the Customs Service raised or presented the question of dumping,
his name may be included In the notice unless a determination under
section 153.23 requires that his name not be disclosed.
(b) Time limit on publication. Generally, antidumping proceeding
notices issued pursuant to section 153.30 shal I be published In the Federal
Register within thirty days after the date that information was received
pursuant to section 153.25 or 153.26 in a form acceptable to the Commissioner.
section 153.31 Is amended by deleting present paragraph (b) and substituting a new paragraph ·(b) to read as follows:
153.31

Ful I scale investigation.

****

(b) Pricing information. Ordinarily, the Commissioner will requl~
the foreign manufacturer, producer, or exporter to submit pricing InfonRetlOl'
covering a period of at least 120 days prior to the date that Information
In a form acceptable to the Commissioner was received pursuant to section
153.25 or 153.26. The Commissioner may, however, require the submission
of pricing information for such longer period as he deems necessary; and
he may also require the submission of pricing Information on a current
basis during the course of the investigation.
Section 153.32 is amended by adding a new paragraph (c), relating to time
limits on investigations, to read as fol lows:
(c) Time limit on investigations. Generally, within six months, or
in more campi icated investigations, within nine months, after the date
of the pub I i cat i on of an Ant i dump i ng Proceed i ng Not i ce, the Secretary will
publish in the Federal Register a "Withholding of Appraisement Notice"
(section 153.34), a "Notice of Tentative Negative Determl nation" (section
153.33), or a "Notice of Tentative Discontinuance of Antidumping Investlgatl~
(section 153.15), as appropriate. However, if the Secretary decides that
the appropriate tenative decision cannot satlsfactori Iy be made within ~e
nine month period, he wil I publish a notice of that fact in the Federal
Register, together with the reasons therefor. The notice also will announce
the length of additional time, usually not more than three months, within
which the appropriate action wi I I be taken.
Section 153.33 is amended by adding "a description of the merchandise
Involved and" after "include" in paragraph (a); by adding a new sentence
reading "All such requests shall be accompanied by a statement outlining
the Issues wh i ch the person wishes to discuss."

after the first sentence

in subparagraph (2) of paragraph (b); and by substituting the words "In
regard to those issues which the Secretary or his delegate has determined
to be appropriate for discussion" for "and to supply such further Informatlor
or argument as may be of assistance in leading to a conclusion as to the
accuracy of the information in question" in the penultimate sentence of
subparagraph (2) of paragraph (b).
as follows:

Section 153.33, as amended, will read

153.33 Negative determination.
(a) Not ice of Tentat i ve Neqat I ve Determ i nat Ion. Ifit appears to the
Secretary that on the basis of information before him a determination of
sales at not less than fair value may be required, he will publish In ~

Federal Register a "Notice of Tentative Negative DeterminatIon," which
will Include a description of the merchandise Involved and a statement
of the reasons upon whIch the tentative determInation Is based.
(b)

Opportunity to present vIews.

(I) Written. Interested persons may make such written submIssIons as they desire, within a period which wit I be specified In the
notIce, with respect to the contemplated action. Appropriate consideration
will be given to any new or addtional information or argument submitted.
(2) Oral. If any person believes that any Information obtained
by the Bureau of Customs in the course of the antidumping proceeding is
Inaccurate or that for any other reason the tentative determination Is in
error, he may request in writing that the Secretary of the Treasury afford
him an opportunity to present hIs views In this regard. All such requests
shall be accompanied by a statement outlining the Issues which the person
wishes to discuss. Upon receipt of such a request, the Secretary wi I I
notIfy the person who supplied any Information, the accuracy of which Is
questioned and such other person or persons, if any, as he in his discretion
~y deem to be appropriate.
If the Secretary is satIsfied that the circumstances so warrant, an opportunity wil I be afforded by the Secretary
or his delegate for all such persons to appear, through their counselor In
person, accompanied by counsel if they so desire, to make known, their
respective points of view In regard to those Issues which the Secretary
or his delegate has determined to be appropriate for discussion. The
Secretary or his delegate may at any time Invite any person or persons to
supply him orally with Information or argument.
(e) Final determination. As soon as possible thereafter, the Secretary
wIll make a final determination and publish his determination In the Federal
Reg Ister.
(d) Negative determination after issuance of a withholdln~ of appraisement notice. The procedure specified In paragraphs (a), (b) and (c) wll I
not apply if the decision to issue a negative determination Is made by the
Secretary after a withholding of appraisement notice has been Issued and
thereafter he has afforded Interested parties an opportunity to be heard
pursuant to the provisions of section 153.37. In lieu thereof a final
negative determInation wi II be published setting forth the statement of
reasons.
Section 153.34 Is amended by substItuting "Secretary" for "Commissloner lt
and by deleting the phrase", wIth the approval of the Secretary," wherever
either Occurs In paragraphs (a) and (b); by redesignating subparagraphs
(I) and (2) of paragraph (a) as (2) and (3), respectively, and adding a
new subparagraph

(I)

readIng

"(I)

a description of the merchandise involved;";

by substituting the phnlse "withholding of l!Ippralsement notIce" for
"Investigation" In redesignated subparagraph (2) of parl!lgrl!lph (a)i by
de letl ng the words "by the Importer l!Ind the exporter" I n new subparagraph
(3)

of paragraph (a); by deleting the phrase "from Importers and ex-

porters concerned" In paragraph (b); by substituting "the Secretary's"
for "his" and "each" for "the" preceding "district dIrector of Customs"
In paragrl!lph (c); and by deleting paragraph (d).

SectIon 153.34, as

amended, wIll read as follows:
153.34

Withholdin~

of appraIsement.

(a) Three-month perIod. If the Secretary determines durIng the course
of his I nvest I gat Ions that there are reasonab Ie grounds to be I i eve or suspect
thl!lt any merchandise is being, or Is lIkely to be, sold at less than Its
fore I gn market va I ue (or, I n the absence of such va I ue, then Its constructed
value) under the Antidumping Act, and- If there Is evIdence on record concern I ng i nj ury or If ke II hood of I nj ury to or prevent Ion of estab II shment of
l!In Industry of the United States, he shall publish notice of these facts In
the Federal Register In a "Withholding of Appraisement Notice" Indicating:
(I)

A descriptIon of the merchandise Involved;

(2) That the belief or suspIcIon relates only to certain shippers
or pnoducers, If this Is the case and that the wIthholding of appraisement
notIce Is limIted to the transactIons of such shippers or producers; and
(3) The expiratIon date of the notIce (whIch shall be no rrore
than 3 months fnom the date of publicatIon of the notice In the Federal
RegIster, unless a longer period of withholding of appraisement has been
requested pursuant to paragraph (b) and has been approved by the Secretary.)
This withholding of appraisement notice wi I I be Issued concurrently with the
Secretary's determination pursuant to section 153.35, unless appraIsement
Is being withheld pursuant to paragraph (b) of this s~ctlon.
(b) Six-month period. At any time prIor to the Issuance of the
wIthholding of appraisement notice referred to in paragraph (a) of this
section, Importers and exporters concerned may request that the period of
withholding of appraisement extend for a period longer than 3 months, but
I n no case longer then 6 months. Upon rece I pt of such a request the Secretar
wi I I decide whether appraisement should be withheld for a period lonqer
than 3 months. If the Secretary decides that a period of wlthholdlnq of
appraisement longer than 3 months Is Justified, he wi II publIsh a wlthhoi dl ng of appra I sement notl ce upon the same bas I sand contal nl ng Information
of the same type as Is required by paragraph (a) of this section, except
that the expiration date of the notice may be 6 months from the date of
publicatIon of the notIce In the Federal Register.

(c) Advice to District Directors of Customs. The Commissioner
shall advise al I district directors of Customs of the Secretary's actton.
Upon receipt of such advice each district director of Customs shal I proceed to withhold appraisement in accordance with the pertinent provisions
of section 153.48.
Section 153.35 is amended by deleting the word "adequate" in paragraph
(a) and by adding the word "involved" at the end of that paragraph; and
by subst i tut i ng "exporter or exporters or producer or producers, if the

determination covers shipments by less than al I of the exporters or producers" for

"supplier or suppliers, if practicable" in paragraph (c).

Section 153.35, as amended, wi II read as fol lows:

153.35 Affirmative determination; general.
>

If it appears to the Secretary on the basis of the information before
him that a determination of sales at less than fair value is required,
unless the withholding of appraisement notice was issued pursuant to section
153.34{b), he wi II publish in the Federal Register his Determination of
Sales at Less Than Fair Value. This determination wi II include:
(a)

A description of the merchandise involved;

(b)

The name of each country of exportation;

The name of the exporter or exporters or producer or producers, if the determination covers shipments by less than al I of the
exporters or producers;
(e)

(d)

The date of the receipt of the Information in an acceptable

formi
(e) Whether the appropriate basis of comparison is purchase price
or exporter r s sa Ies pr ice; and
'
(f)

A statement of reasons upon which the determination is based.

Section 153.37 is amended by substituting "Withholding of Appraisement
Notice" for "Affirmative Determination" in the heading; by adding a new
sentence following the first sentence to read:

"All such requests shall

be accompanied by a statement outlining the issues which the person wishes
to dlscu·ss."; by substituting "in regard to those issues which the

Secretary or his delegate has determined to be appropriate for discuSsion"
for "and to supply such further Information or argument as may be of
assistance in consideration of the matter" in the third from last sentence:
and by subst i tut i n9 "w i II" for "sha II" I n the next to Iast sentence. SectIon 153.37, as amended, will read as fol lows:
153.37 Withholdinq of Appraisement Notice; opportunity to present views.
As soon as possible after the publication of the withholding of apprals~
ment notice if any person believes that for any reason the withholding actl~
is in error, he may request that the Secretary of the Treasury afford him
an opportu n i ty to present his views In th is rega rd. AI I such requests sha"
be accompanied by a statement outlining the issues which the person wishes
to discuss. Upon receipt of such a request the Secretary will notify each
person who suppl ied any information, relied upon in connection with the
withholding action, and such other person or persons, if any, as he may
deem to be appropriate. If the Secretary is satisfied that the circumstances
so warrant, an opportuni.ty wi II be afforded by the Secretary or his del~ate
for al I interested persons to appear, through their counsel or in person,
accompanied by counsel if they so desire, to make known their respective
points of view in regard to those issues which the Secretary or his delegate
has determined to be appropriate for discussion. Unless for unusual reasons
It Is clearly impracticable, such meeting wit I be held within 3 weeks of
the date of the publ icatlon of the notice of withholdinq, unless such notice
was issued pursuant to section 153.34(b), when It will be held within 5
weeks of such publication. Reasonable notice of the meeting will be Qlven.
I

Section 153.39 is amended by inserting "set forth a description of the
merchandise Involved and" after "which notice wil I" in the first sentence
and by substituting "wi II" for "shall" in the last sentence. Section 153.39,
as amended, wll I read as fol lows:
153.39 Revocation of determination of sales at less than fair value;
determination of sales at not less than fair value.
If the Secretary is persuaded from information submitted or arguments
received that his determination of sales at less than fair value was in
error, and if the Tariff Commission has not yet issued a determination
re I at i ng to I nju ry , he wII I pub I ish a not ice of "Revocat Ion of Determl nation
of Sales at Less Than Fair Value; Determination of Sales at Not Less Than
Fa i r Va Iue J" or, if appropr i ate, a not Ice of "Mod If i cat i on of Determ i nation
of Sales at Less Than Fair Value", which notice wi II set forth a description
of the merchandise involved and state the reasons upon which it was based.
He wi II notify the Tariff Commission of his action.

Section 153.41 Is amended by substituting a new paragraph (c), wIth the
heading "Notice of tentative determination to rrodlfy or revoke dumping
finding."
(d).

for the present paragraph (c) and by adding a new paragraph

Paragraphs (c) and (d) of section 153.41, as amended, wi I I

re~d

follows:
153.41

~odiflcatlon

or revocation of finding.

(c) Notice of tentative determination to modify or revoke dumpTno
fInding. If it appears to the Secretary that a modification or revocation
of an existing dumping finding may be appropriate, he will publish In the
Federa I Reg i ster a "Not' ce of Tentat I ve Determ i nat Ion to Mod i fy or Revoke
Dumping Finding," which wi II Include a description of the merchandIse
Involved and a statement of the reasons upon whIch the tentative
determination is based. The notice wi II also state that Interested
parties wi II be given the opportunity to present their views under a procedure simi lar to that set forth In section 153.33(b), 'and unless persuasive
evidence or argument to the contrary is presented within such period as
Is specified in the notice the Secretary wi I I publish a final Determination
to ~di fy or Revoke Dump i ng Find I ng.

Cd) Final determination. As soon as possible after publication of a
"Notice of Tentative Determination to Modify or Revoke Dumping Finding,"
the Secretary wil I make a final determination and wi I I publish his determination in the Federal Register.
Sect i on 153.48 is amended by subst Itut I ng "Secretary's" for "Commlss i oner' s"
In the first sentence of paragraph (a).

Paragraph (a) of section 153.48, as

amended, wi II read as follows:
153.48 Action by the district director of Customs.
Ca) Appraisement withheld; notice to importer. Upon receipt of
advice from the Commissioner of Customs pursuant to section 153.34, the
district director of Customs shal I withhold appraisement as to such merchandise entered or withdrawn from warehouse, for consumption, after
the date of pul-ticatlon of the "WithholdinO of Appraisement Notice," unless
the Secretary's Withholding of Appraisement Notice specifies a different
effective date. Each district director of Customs shall notify the importer, consignee, or agent immediately of each lot of marchandis? with
~spect to which appraisement Is so withheld. Such notice shal I !rrlr,-~te:
(I) the rate of duty of the merchandise under the applicable Item ot the

18
TarIff Schedules of the United States If known; and (2) the estimated
margin of the special dumplnq duty that could be assesed. Upon advIce
of a finding made in accordance with section 153.40, the dIstrIct director
of Customs shal I give immediate notice thereof to the Importer when
any shipment subject thereto is improrted after the date of the ffndlng
and information is not on hand for completion of appraisement of such
shipment.
Sections 153.49, 153.50, and 153.51 are deleted.

Sections 153.52 through

153.59 are renumbered, consecutively, sections 153.49 through 153.56, and
the reference in renumbered section 153.50 (presently section 153.53) to
section 153.54 is amended to read sectIon 153.51.

Renumbered section 153.50.

as amended, wi II read as follows:
153.50 Release of merchandise; bond.
When the district director of Customs In accordance wIth sectl~n
153.34(c) has received a notice of withheld apprasiement or when he has
been advis~d of a finding provided for in section 153.40, and so long as
such notice or finding Is In effect, he shal I withhold release of any
merchandise of a class or kind covered by such notice or finding which Is
then in his custody or Is thereafter Imported, unless an appropriate bond
Is filed or Is on fl Ie, as specified hereafter in section 153.51, or unless the merchandise covered by a specified entry wi 11 be appraised wltho~
regard to the Antidumping Act, 1921, as amended.
Renumbered section 153.51 (presently section 153.54) Is amended by deleting
"and the Importer or his agent has f lied a cert I f Icate on Form 3 (SectIon
153.49)" and substituting l1and the resale price In the United States Is
unknown" In the first sentence of paragraph (b) thereof.

Paragraph (b)

of renumbered section 153.51, as amended, wil I read as fol lows:
153.51

Type of bond required.

****
(b) Bond on Customs Form 7591. If the merchandise Is of a class
or kind covered by a flndlnq provided for in section 153.40 and the resale
price In the United States is unknown, the bond required by sectIon 208
of the Antidumping Act, 1921 (19 lJ.S.C. 167), shall be on Customs Form 7591.
In such case, a separate bond shof: be required for each entry or withdrawal, and such bond shall be ir addition to any other bond required by
law or reguIL,tlon. The record of sales required under the condItIon of the
bond of Customs Form 759' sha II I dentl fy the entry cover I n9 the merchandise
and show the name and address of each purchaser, each seiling price, and

the date of each sale. The face amount of such bond shall be equal to
the estimated value of the merchandise covered by the finding.

Renumbered section 153.56 <presently section 153.59) Is amended by Inserting
"where purchase pr I ce I siess than fore I gn market va I ue," be fore "the spec Ia I
dumping duty", and by Inserting "or agreement to purchase" after "date of
purchase" I n the first sentence thereof; and by insert I ng "where exporter's
sales price is less than foreign market value," after "section 207," In the
second sentence thereof.

Section 153.56, as amended, wll I read as fol lows:

Method of comput I ng dump i nq duty.

153.56

If It appears that the merchandise has been purchased by a person not the
wIthin the meaning of section 207, Antidumping Act, 1921 (19 U.S.C.
166), where purchase price is less than foreign market value, the special
dumping duty shall equal the difference between the purchase price and the
foreign market value on the date of purchase, or agreement to purchase, or, If
there Is no foreign mar~et value, between the purchase prIce and the constructed
value, any foreign currency involved being converted into United States money
8S of the date of purchase or agreement to purchase. I fit appears that the merchandise Is Imported by a person who Is the exporter within the meaning
of such section 207, where exporter's sales price Is less than foreign
market value, the special dumping duty shall equal the difference between
the exporter's sales price and the foreign market value on the date of
exportation, or, If there Is no foreign market value, between the exporter's sales price and the constructed value, any foreign currency involved being converted Into United States money as of the date of exportation.
e~orter

It Is proposed that these amendments shal I apply to all antidumping
proceedings with respect to which neither a decision, final or tentative,
nor a notice of withholding of appraisement has been published as of the
d8te the amendments become effective.
(Sees
'II,

. 201 , 202 , 203 , 204 , 205 , 206 , 207,

208, 209, 212, 213, 42 Stat •

amended, 12, 13, as amended, 14, 15, as amended, 18, as amended, secs.

406, 407, 72 Stat. 585, sec. 486, 46 Stat. 725, as amended; 19 U. S .C. 160,
161,162, 163, 164, 165, 166, 167, 168, 171, 172, 173, 1486.)

Prior to final adoption of the proposed amendments, consld0ratlon wi II
be given to al I relevant data, vIews, or arguments which are submitted in
writing to the Commissioner of Customs, Washington, D.C.
than 60 davs

frnm +ho ,f::,+o nf nlll·tllr-;,.+Inn nf

20226, not later

this notice In the Federal Reqlster.

Written material or suggestions submitted will be available for
public inspection in accordance with section 103(b) of the Customs
Regulations (19 CFR l03.3(b»

at the Bureau of Customs, Washington, D.C.

Commissioner of Customs
Approved

;AP R 1 G1912
/ / )',

/.-(/ '. , (:'1"

I ,:

, ,

...... /·"r,,:. " ...( /
,~
Eugene T. Rossides
Assistant Secretary of the Treasury
/

Edwin F. Rains

The Department 01 the TREASURY
WASHINGTON. D.C. 20220

TelEPHONE W04·2041

IMMEDIATE RELEASE

April 19, 1972

TREASURY EXPLAINS CONDITIONS UNDER WHICH
:~ORT-IMPORT BANK OBLIGATIONS QUALIFY AS DISC EXPORT ASSETS
The Treasury Department today explained the conditions under
.ch obligations issued by the Export-Import Bank of the
.ted States will constitute qualified export assets of a
~stic International Sales Corporation (DISC).
The Internal Revenue Code -- Section 993 (b) (7) -- provides,
part, that obligations issued by the Export-Import Bank of
~ United States constitute qualified export assets of a DISC
such obligations are acquired from the Bank. Treasury's
Indbook for Exporters," published in January 1972 to provide
~rmation on the DISC program, states that obligations of the
ort-Import Bank will qualify as DISG export assets if bought
m the underwriting syndicate which purchased the obligations
m the Bank.
In today's announcement, Treasury said that a person who
otherwise entitled to DISC benefits and who purchases from
person obligations issued by the Bank, will be considered
have purchased these obligations from the Bank if, with
pect to any issue, they are purchased on or before the 90th
after any part of such issue was first offered to the public.
s the further condition specified in the Handbook -- that
chases must be made from the underwriting syndicate ~- will
be required.

000

291

The Department of the

TREASURY

WASHINGTON, D.C. 20220

TElEPHONE W04·2041

FOR IMMEDIATE RELEASE

April

19, 1972

TREASURY'S MONTHLY BILL OFFERING

The Treasury Departmen.t,
two series of Treasury bills
or thereabouts, for Gash and
maturing Ap ri1 30, 1972,
as follows:

by this public notice, invites tenders for
to the aggregate amount of $ 1,700,000,000,
in exchange for Treasury bills
in the amount of $1,701,685,000,

275-day bills (to maturity date) to be issued May 1, 1972,
in the amount of $500,000,000,
or thereabouts, representing an
additional amount of bills dated January 31, 1972,
and to Mature
January 31, 1973
(CUSIP No.912793 PT7 ), originally issued in the
amount of $1 , 200 , 370 , 000 ,
the additional and original bills to be
freely interchangeable.
365-day bills, for $1,200,000,000,
or thereabouts, to be dated
Ap ri 1 30, 197 2 ,
and to rna t u reAp r i 1 30, 1 9 7 3
(CUSIP No. 912793 PWO).
The bills of both series will be issued on a discount basis under
competitive and noncompetitive bidding as hereinafter provided, and at
maturity their face amount will be payable without interest.
They will
be issued in bearer form only, and in denominations of $10,000, $15,000,
$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, April 25, 1972.
Tenders will not be received
at the Treasury Department, Washington.
Each tender must be for a
minimum of $le,OOO.
Tenders over $10,000 must be in multiples of
$5,000. In the case of competitive tenders the pr-ice offered mu~t
be expressed on the basis of 100, with not more than thcee decimals,
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
~de on the printed forms and forwarded in the special envelopes which
will be supplied by Federal Reserve Banks or Branches on application
therefor.

- 2 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 receive
without deposit from incorporated banks and trust companies and from
responsible and recognized dealers in invesnment 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
trust company.
Immediately after the closing hour, tenders will be opened at th,
Federal Reserve Banks and Branches, following which public announcemeL
will be made by the Treasury Department of the amount and price range
accepted bids. Only those submitting competitive tenders will be
advised of the acceptance or reiection 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 shal:
be final. Subject to these reservations, noncompetitive tenders for
each issue for $200,000 or less without stated price from any one bid~
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 completec
at the Federal Reserve Bank on May 1, 1972,
in cash or other immediately available funds or in a like face amount
Treasury bills maturing April 30, 1972.
Cash and exchange tendecs will receive equal treatment. Cash adjustme
will be made for differences between the par value of maturing bills
accepted in exchange and the issue price of the new bills.
Under Sections 454 (b) and 1221 (5) of the Internal Revenue Code,
1954 the amount of discount at which bills issued hereunder are sold {
considered to accrue when the bills are sold, redeemed or otherwise
disposed of, and the bills are excluded from consideration as capital
assets. Accordingly, the owner of Treasury bills (other than life
insurance companies) issued hereunder must include in his income tax
return, as ordinary gain or loss, the difference between the price pai
for the bills, whether on original issue or on subsequent purchase, an
the amount actually received either upon sale or redemption at maturit
during the taxable year for which the return is made.
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 fro
any Federal Reserve Bank or Branch.
000

The Department 01 the TREASURY
WASHINGTON. D.C. 20220

TelEPHONE W04·2041

FOR IMMEDIATE RELEASE

April 20, 1972

JOHN J. McGINNIS NAMED SPECIAL ASSISTANT TO
THE SECRETARY FOR NATIONAL SECURITY AFFAIRS
Treasury Secretary John B. Connally announced today the
appoi~tment of John J. McGinnis to the position of Special
Assistant to the Secretary for National Security Affairs. He
succeeds Anthony J. Jurich who is now with the State Department.
~. McGinnis was formerly Deputy Special Assistant to the
~cretary for National Security Affairs.
Before joining Treasury in 1969, Mr. McGinnis was Manager
of Program Control and Management Systems, Radio Corporation of
America, Camden, New Jersey.
Born in New York City, New York on January 25, 1928, he
attended Hofstra University, Hempstead, New York and received
degrees of Bachelor of 'Science and Masters in Business
Adminis tration
0

He has also been a member of the faculty of Rutgers
University and Pennsylvania State University.
Mr. McGinnis and his wife, the former Lorraine Jan~t Hirn
of New York City, live in Vienna, Virginia with their two
children, John and Deborah.

000

C-292

AMERICAN SOCIETY
OF
NEWSPAPER EDITORS

- -FIFTIE~H

ANNIVERSARY

1972 CONVENTION

-- -

Wednesday, April 19, 1972
Shorehall Hotel
Washington, D. C.

C. A. Me KNIGH'l', President, ASNB
. .lIN PHILLIPS, Program Chairman
J,.

aso

HUltPHY; Floor Manager

01 )

.j ,
1
SECRE~t'A~Y

SECRETARY CONNF.LI.Y:

104

OF' '.rRE TREll..sURY
Thank you v~ry much, 1>ir.

McKnight, Mr. Deck and distinguished head table guests; z.tembzrs

5 of the Association, ladies an.d gentleman.
6

I am delighted that I'm not a candidate, announced

7 . or unannounced,

~or

any office in either party, so I can ind!3cd

be here today a.nd I am grateful for the privilege of being

here.

I feel in all

fairne~s

that I should enter a

disclaimer as to certain things that Mr. Deck has said in his

introduction about

me, but

perhaps I will not be too specific.

I will merely say that I don't agree with eV'erything

that he said, nor does my lack of refutation signify or

indicate approval of the accuracy of each and every one of

his statements.

The nice things I would like to admit to, but he

might have been given a little bit of erroneous information

about offers that have been made and decline-d.

event,

very grateful to you for a very gracious and a very extravagant

introduction.

23
24

In that

I won't pursue it further except to say that

r~m

Faced with four inquisitors, I assume that they will
be primarily interested in front page material, so my opening

105

ej 10

1
2

II1\

cmtanent today"
In any event, I think you all should know that I'm

always qui te nervous when I make any kind of a speech before

any kind of gatherinq.

trhis is particularly true before such a distinguished

gathering of newspaper editors, and just to be sure that I

was not too rela,:ed, they' va asked these four distinguished

gentlemen 'i:o come dr)wn here and occupy their chairH.

If 1 ever. saw buzzards on a roost

(G:Jnp-ral laughter.)

I must say I've had a great many t.hings happen in

my lifetime, various speaking enqagements, but nothing quite

so disquieting.

15
16

17
18

19
10
21

ej 9
1

(General lallgh-ter.)

But seriously, I am indeed grateful to you because

it gives me a chance to say seme things to you that, frankly,

I would like to say.

in hearing them but I assume that thi s is what these four

qontlemen are going to do.

aOO\lt. the things you are most concerned with, so I will say a

few things that I feel very deeply and very strongly, that

mig~t

You

may

not be the least bit interested

They're going to raise questions

or might not be uppermost in your own mind.
We live in probably the most turbulent and tormented

10
11

times in the long history of this nation, and I think this is

tru.:! -- 1 think everybody 1102:'8 or les8 admits to ·this -- this

,torment and this turbulence 1s a part of every facet of

A.m~!·:ical1

life.

It certainly is a part of school life in this

na-cion.

'i5

We see in courts in California, Texas and else.where,

me';-~hods by

strike down the laws and the procedures and the

which we have traditionally financed public school ed.ucation

in America.

East

students.

We have seen i:.he na1:ion plag1.1ed, NO:1:"th and South~

and west with the queation of husing

Beyond any question the educational.

~f:

school

sYf.~b:.):n

itself t

i~:s financing,

from a standpoint of its curriculum as well. as

is and has been in a stata of turmoil, but i.t ji.lst. does not

SblP

at the educational institutions.

It cert~d.nly lV.:.:l

ej 10

107
enterpris(~s

permeated the bUGiness

part of the economic life of the country, this tor:neut, this

turbulence, this frustration, this

of the nad.on.

I"t is a

d5.ssati~faction.

Business today is under attack as it never has been

before in the history of this nationo

•

being pictuX'ed a:3 an ogre, as a heartless legal entity designe,l

to suck from the veins of the soc:iety everyt.hing- that it can

wi thout returning anything in response.

Business generally is

It has been pictured as an entity totally without

any compassion or concern for the needs and wants of the

American people and the workmen of this country.

12
~Jo1Jrnal

yest8:cday morning did c: very excellent

the Wall Strent

job in objectively pointin9 cut \>Jhat b\l.siness is ~ ;;lud \.,ho is

the beneficiary of business in AI'lerica ..
!..,et me just point out t.o you one or

t\t.70

tcm~\

because::!

he took the ca.se of General r-iotors. and I dorl' t ne'::essarily

want to defend General Hotors but: I don't cb:joct

bus iness of them all, Generfll Mot.ors

thin1~

it is so pertinent -- if I can find ·them.

t.,.,)

think tbey!Z'e :eigh.t -- he ';:ook the example .')f ·i.:h()

i-e. if
bj.g~fes·~:

Corpora·~-.ion.

He said, here are some highlights of i 1.:3
sho~1ing

03.11 of th(~

recc:"rt~_y

released annual l:"eport of 1971

General Motors took in, and where the money ,,,7cmt.; .;lI:d
Motors received ~:-!3, ~~9 t.LI15.. olJ'_.

sa1.cl v

);lOp-ey

that

G~nel:'al

Nml, where d:i.C: ~_c. T:'-

ej 11

108

This is big business; what does it mean'? Hha\.: impact

2\ does it have?

Well, they paid out $.13. SO 0 billion -- I 'm

roilnding the figures -- to suppliers.

from whom they bought things and

II employed

I country.

~'1ho

These are the people

in turn hired peoplG,

people, and created pal':t of the prosperiity of

thj.~;)

Thirteen billion dollars 't'lent to suppliers, t.o

7 employees, the workmen themselves, tilose who tunl out the
8

products; $9.448 billion for taxes, and I am slightly interested

in that: $2.560 billion for depreciation allowance; $873 millioll

iO ' to the General Motors
11

stocY~olders.

Out (.£ !;29 billion received,

~::hey

go1: $905 milliofl..i

for expansion and modernization and so for·cll: $950 mill.icm.

'l'he net of ;l t

two and one half tirn\2:s as much as the stockholders did, and tli.';'

employees racei ved just a £xl:ctionunder ten times as much as

the stockholders did J and in effect the stock.hoJders got

3 1/2 percent.

tha

';::al~

collectors across t:h.a count1:Y got:

That is the net of it.

Yet, all indust.J:Y and all business i!:': l.lll.de:r- attack,

ne~l!jpaper

and thnt includes the

fraternity, cmd thC3.': includes

your mm television and your own radio facilities tha.t a.re

now

and challenge your right to renewal of your :U.censcs i and

many of you are under joint Qwnership and many of yon are not r

bu-" all business i3. picture!d as totally obliviot'l.s t.o the

surroundinCJs, to the environment, to

being attacked by people that

con~e

in~:o YOllr C(;H'J'(\\:.•D. tJ.CS

t.ht~

ecoyogy

0;': '!:'LLc:';.:,~

ej 12

'I
'I
p

~~1

109

are a part, but it doesn't just stop there.

~ ;1

It c€~rtainly has permeated the religious in;:;titutions

of America and all the churches, all the synagogues, all the

cathedrals; they are lln.der a'ctack, they are in upheaval.

Their ultimate f?lths a.re b;:::d.ng questioned: their mores are

certainly

\i.llde~:- qu~sts.on.

It doesn I t

just stop ·there

All

gov~:!rm\iun·':;.

is being

sUDjec'l:ed 'co the most severe crit.icism, probably, :'.1l t.he

history of this country, and it is being done in all gmTernment

local, state, anc federal levels. Not only the institution of

government but 'almost every single program is being questioned"

nQt in an object! ve and a fair basis with real

but always with a critical vein, always assuming that there

is something wrong with this country, that there is something

wronq with our institutions

Well, sure there is.

with our institutions.

perspi~cti ve

Sure; there's

somet~ing

They are not perfect.

wrong

They weren't

desiqned to be 7 they' re not. going to be, not in your lifetime

or my lifetime or in centuries of those who :(0110\'1

we are not perfect and we can't devise something without fault

and without shortcomings.

But let me say to you that inevitably

th~

u.s

because

criticism

has reached the point, whether you talk about the economy -24

and let's talk about that for a moment.
is the price and wage program going to

I am constantly asked,
work~

are ":.he controls

I
I

110

ej 13
1
2

g0i41g 'co do their job.
·;:hei~c·;cb.

Yes, I "think they are going to d.e

I
5

hav~

t.o do ·their job.

We don v t have any choicE;.

t-lh (:l.t.

alt;:;:rnat.ive'i'
8oci.r.~t~[

wnen you look a'c a great many thin9s in -<.::his

is the

you need to look, not only at the f aUl ts; the shortC!)l1Ullgs and

the \o1eaknesses of the inati ttl"l:;~onal programs, but :YOll have to

also analyze what the alternatives are, and the wage and price
control progri:!llB,

:::;~lre ~

they' re going to work.

Have they had troubles?

Sure, they've h2d t.roubles.

Yes f they are.

b(~yond

Are they going to have more troubles?

any question.

done very well ind.eed, as a matter of fact, ~nd le1:' me give

you some figures.

But what have they done?

~~ink

On t.he Pa.y Board, they have made a

they have

ntFt'.be~:

decisions since t:he program started last November 14th" and in

Category 1,

States, the cumulative weiiJhted average for catego:~y 1

businesses

14th on the \veighted average was 5.10%.

their standard of 5.5 percent.

are -the la:rgest businesses in t:h(: United
thi.

above 5000 employees -- the inci:easc s:':..nce Novemb€'

Now, in Category 2, these are the businesses betweer'

23
24
2.c;

th~;;sc

1000 and 5000 employees,
I

froIn February

14th

was

the cumula ti va av<.;!x'age
i .. 52

p.~rcent.

j TI

r-""'-

ej 14

III

making very substantial progress 1 and t.he cu.:mula:i:i ire ·"12ight8d

average of the

were pl.lt into effect, the average increase for t.hese two cate-

4 'qorl.es
5

t\,10

since November 14th when the

\'lage

controls

representing millions of workers, is 5.03%, and I

think "that's making very substantial progress.

On the price side, yes, \Ole've had inflation; no

1 I g'Uc:Jtion about i 1::.

W:~ I yr-J had inc::e£::J2s, bttt

'V€!

'h<T:'~ b::ld

9 I freeze 1a9-<: f£,11, t.l1at iIJh::m th!':!se controls were taj~en off r
t~OVt~rnber

\'1hen Phu3e II began on

bulge; there was going to be a bulge in the pay incre6.ses,

'/2

there

notwithstanding that t Jack Rayson said p no later than this woek

that the price incrElases represented 1.5% of the revenues of

those companies who had asl'ed fc\r price increases, and the

increa!3(;ls that: had been permitted by the Pric·a Commission repr.:;

sented only 3.2% of those comm:>dities for which inc:reases had

be~n

\'lfiS

ll}th, the;:e i'las

go:~ng

going t:o be a bulge in the price increases.

asked r

l'md

and I subrni t to you that that is a px,"e:.:::t.y good rec(.
No\-"

it just. so happens that duringt:1e fh::Jt 1l

quarter we did have a deflator of 6.2%.

knew it was going to be high.

to be a

It's high I' but

i',le

It couldn't be an/thing else.

After you release the reins of the

~bso}. ute

ireeze r

you in¢vitably got the bulge that we predic,ted

d.nd that

actually occurred, so that you've got 6.2 percent GNP deflated

for the first quart.er, but ....his was the rough Lruar';:;er.

ej lS

li?

II
.,

One full percentage point of that were govern.Tt:ent

pay increases, so you can reduce it to 5.2 percent, but the

net of it is, I think ~e' re on the road to do precisely ~Ilhat

we set out to do.

I think the program is going to be a success,

G II provided we can keep some degree of confidence in it and some
i

degree of volmLi.::.ary compliance in it, and it is essentially

a program of voluntary oompliance just as the oollaction of

taxas is, but agc:'.in here is a case ·where we have people running

over the

COWl try

about the inequities of ·the tax program, talking about the

loopholes in tne tax program as if the entire thing was

monstrosity and evil in its concept, and iniquitous in its

administration"

spent over one hundred years in the Congress, and there is not
a single Bill

today, denouncing the government, talking

c~nd

yet these are the same people who have

~elating

to taxes that bears their llame.

And sure, they talk about loopholes

ivr.l.at

loopholes?

I ask first, are they talking about charitable de.:il1ctions to

churches, museums, educational institutions?
loophole?

I don 9 t

'l'hat is a

think it is, but that's "That they're tal kin 9

about.

Are you talking about knocking out v

interest deductions on home mortgages?

that's what they're talking about.

loophole.

25
Il

elirn..~_nating

That's a loophole;

I don't call that a

the

ej 16

You talk about capital

geins~

destroy the real estate industry of the coun'l:ry or the financ:L:l.::

institutions of the country.

I hit

I don t t want to see the DO\'l-Jones

500 in a week's time by knocking out capital gains.

don't think it is a loophole.

by the Congress of the United States.

loophole.

It is a conscious decision nade
I don·t call it a

You talk about interest-free muni.cipal bonds..

booJ~.

a loophole by some definitions; not in my

That's

It is a very

deliberate decision that the ·Congress of the United States which

permits local units of government to issue tax-free municipal

1.2

bond'Sl nothing wrong with it, nothing evil about it.

It is

a poliCY decision that this government bas made that has been

'4
15

id existence for decades and for.. generations, and furthermore
they cannot do anything about it.
He had a 'tax reform act in 1969.

16
17

18
19
20

people that r'W\ around today talking about

a"'layi:.~e

a municipality to issue tax-free bonus in l:€n:urn

fm~'

right of
a federal

subsidy.
N()"~ I

the cities were

:t-~ind

on the football tea'll, and the coach

of these

a~~l

loopholes tried to do something about t.aking

Some of these same

back, he said, stodd Johnny in.
his play.

of likf..: i:he
kept

He said,

yo·;.'\ng balfhack

'Ccl:;..~,r;';ii::.h'~
c~.li

quarb:~~:'-

hi:,.; plr:ly, CO.:U

This went on three times, and each time it: get.

stopped on the line of sorimmage, and finally on the

~c,,;:c i:'}

ej 11

down the coa~h called t.Il,:; cparberback over and 9aid c ~'};lat' s

the matter

quarterback shook his head and said, I told you to give him the

ball, and t.he little boy finally said, Ccach I yes, sir, :( knovl.

But Jot-.:'lny, he don ~ t wa71t thE !J2.11.

ic~

J:"Wl

I toJ.d you to send Johnn~l in.

.., ",'--'n _" ... >....

_ . -:'.4w'J.

"""'-.'

T!,.e

)

Now that IS about the 'Vlay these cities are.

Ithese

9 I want:

f
~o

<~ J.10'{o79

-take

dOoll'';:

Some of

want to 9i ve the ci \:ies a subsidy"
2.~'.'ay

the right t:o issue municiP,3:1. bond3.

\.fa;.li;I:·:l n t i

on mat in

"they don't want

COZ'lg.t"(;!es

subsidy.

They
Eut the

'l'hsy made a

and they couldn f t do any'thing.

Politically, you can ~ t do that..

You canr:::)t 'coke .it

away from thel!i v so t.here's no point tryjong to go aloound 0 trying

13
14

you?

( l1a·"'e·~-]
~ -.. 1...
J .. <..i..

,\"1i th

Ito

;;,0';;1

on the basi,') ti1at.

'15

dj,~.3sadoDfaGtion

',Uscon;:.en-;.:.,

8offi'::d':j;.")d~' t
arour~d

O{:hc;rs go

with the federal government

s getting something for nothing.
taHdn.g about all these rich folks

Let me give you a few figures on tilat9

who don' t pay

About 74.5 million individual income tax re·turns werel:il.ed

Iin
I

1970, and a

mor'~

.i::a.<{~!g

lG~:' of ti:.emu

than one-xi.J?w of

taxabl\"5:, bore no °cax.:;::s.

you ~ 11 be surpris?d to knm.;; t..hat

·i.;.;,WSE:,

YOl.l'

14.9 milli.on returns

non-

11 also be interasted to know that

all but 39 rOOO of thase were fj_led by a person

~l:U:h

an adjusted

grOGS incOlWl of less than $lOqOOO, but you would also be

23
24

i,'/En-°e

I intere:-Tted -i;o l(l"l(J." that most of the rem~cil1dl2r ..'(':;r~; :_n the between

$10,000 and $25,000 category, so a great many peo?la filed
l

ej 18

that filed returns didn v t pa.y ·:~:2.XGS 1':;.5':: yea~:.

3
4

pr()graTi~5 it is VEry easy to ha critical, bu:t ~:;hm·. ~fon ge·t: dom:

to f;he problE.m of trying to Hori:: out

equitable solu.tions, that are fair t.O the ta:-:p,';\y:;r;;", of t.his

country f tllat c're fair t.o the govcrn.i1lents f }.ocal

federal.1 it is not em easy p:::oblem ..

But in any event {:his government

just criticism.

back, because

that ;'=>,re

st.:Jlu·i;j.o1l8

deserve~;

It deserves more than slander.

dc~asionally

fe:. ti'lt:.l.::

and

more thnn

It occasionall

something right is doneo

(Applat'.se ~ )

Let me also point out that I was amazed and I was

appalled last yea.r, right after the President~ showed magnificel:

courage in doing what. he did on August; 15th, not only to meElt

the problems B.t home but to meet the problems overS'3as in

imposing a 10 percene surcharge and suspendi.ng the converti-

bili ty of the dollar
Why?

!-lot because he t-7antea to, bu'': because over L

21 II lonf] pe~'iod of tima W€~ had reached a point in

thi8

country

d'I whE-:}:e

there "t>n'.s no acceptable alternat:ive for what h8 did,

23 . and h ..J ~~h(jwed grea'c courag0 in doing it.
i'..:nd \vha.t happened?

tr:.·:';.i.'1g to

negl~tiatG ~

~Vhile

\.:e were in ·the proc8ss of

we t'1ere pictured and painted

~.,ir:I~! :'~1l;i

ef 19

,'J
_)

h,)

lLi

4,ain, and very frankly, in many of your publicatic.ns: 0.5 tei,1S

unreasonable and demanding and ·tough a.nd undiplornai:.ic.
Well, at times we ~;'ierE probably al1 of those t. hin 9 s ,

3
j

I but probably not enough of them at any time
I ge·t all that. we
But were
e I unl..e~sonable?
~ie
4

deserved..

Had

"vIe

didn 9 t

we demanding, were we

been?

Had thls nai:ion been?

t-:1hnt. had

we done?
All we had done" all this nation had dona, wa::: given

hecaune

away $150 billion to try to rehabilitate, reconstitute

~,d

rebuild the victims of this great World War through \'1hich we

had gone.

compassion; we gave our concern and we rebuilt the world.

That is all

't-ie

ga'\fE:

of our material resources i we gav'e of ou:r

have done.

We did it to such

great degree, with such

outstanding gnnerosi ty: that we had expended our m·m rmrpluses

and we had exterlided our credit to t.he breakin.g point I toJhere

all of our friends, \-7hom we have succored so well I said l,ie

have no confidence in you,

business, and

tfe

about, that it was time that we do something to look after the

American interest.

We are overriding the interest of our friends.

problems with Gur friends.

~~ey

you don't know how to run your

were right because we should have done what

did long before we did it, but very few voices were ever

rai~~

It was always, we're being overbearing.
Wetr~

creating

No friend can ever be bought t not by an baC 1-""J'idual

ei 20

117

or not by a natlon.

The only true f~iend is one t-J:~.:,

h:'i8

., !respect
~

for you, and I assu:r'e you tllat

'WA

=}' r1
~1~

I":h'

no~_~ng

'A..h
1n
~ e

oonduct of those negot.iations that c:i;'eated contemp'.::, but

4 hopefully,
5

so~e

respect.

In any event we tried our best to see that the

interests of t.bis nation were represent'ad, and then we tried

to say to allQf our friends at home and abroad that we did

indeed mean business, that we had indeed entered a new day, anf.

that we bad gone so 10n9' on a certain course that we now had
to cbanqe that course.

t,1()\'i',

ho';'; else is s31f-flagellation .r,anifr::s'i:l;:d in t.hL,

society of: curs?

t'le have>. a classic example here n1cr:mtly.

is qoing on right today, and I was astounded,. in ove!: two hours

of t.estimony by Secretary of State William Roqar::3 hefore the

Foreign Relations Committee of the Senate, I do not recall a

single Senator of either party saying one word of denouncement

against the North Vietnamese who have beyond any doubt

entered upon a m".ssive military invasion of South

of ai ~'ler party.

criticism, of questions.

On the other hand, there was

Why don't we get out?

~by

What are we doing?

nur.lber of years.

24
I

I!j

t~.,o

~enator

hours of

Why are we there?

are we bombing?

The answers are very clear and t.hey·

2.';

~J'ietnam.

Not one single word was uttered by a single

You can question

whe~").,-::;;::

have been there in the first place, but

wr.;:.

0):

hE:.'.'7(:-)

not:

been
\',;'0

are t1:·s~ce.,

for a

s~lOuld

Ti.:':);;'>:

,j 21

i',yho question
2

~~ l
--~

the most, or

tr4083 1tlhc

apprmred ,;j,e most. at i:he

time that we went there in 1964, in 1965.

He haa e, con.cern

ft;'n~. t.he

United States has a concerll,

of our remaining troops in Viet!';',am.

troops.

entitled to SODS plaudits, it seems to me, for living up to

a c;omrni tt.ment th.at he made ..

He has withdrawn almo3t

He is liT! <·!:ldr~'Jing tnos'3

500~OOO

of them, and he is

He is "Tinding dO'Hn the war in Vietnam, and our peace

negotin'cicm'J

h.t~V{2 bee:<~

on tile tahle and proposals haye been on

'! t I, the table since; ,Jar. . uary.

cafet.y

didn't 9'et a

rC::;3i.)OnSe

Did

hl'(!

g-et a proper' response?

at th3 peace table in Paris.

All we got

was a massive invasion by the Communists of North Vietnmn agains'
the people of South Vietnam, and we are answerihq, as the Presi-

15
16

dent said repeatedly,

\-Ie l'la

would, that we t'ITould use the bombai:':::

we would use t.he Navy, that we would not use the ground troops

until all of our people have safely lef·t that land and until

Vietnamization had an opportunity to work.
So in the final analysis, without trying to use more

examples,

cri tical that those in the press and those in poli t.ics use somr;

restraint in the all-out criticism which '"e i'u.w.t. t.O inev~.. tably

inflict upon ourselves and upon our ins ".:ituti.ons •

think in this political year of 1972 it is absolutel

I personally believe that there i3

25 1confidence in qovernment in the United stat;.G~;

grovii;g li1.ck of

,I.

I!j 22

of anyone man or anyone party.

What is the inevitable re.sn.llt?

41' unsllsto.ined

ana llnsup.,ort"d 1>1 a high

A democrncy

d'~g"ee

of public confi-

;rna whet is the alternative to a

den(~e

demc}cracy?

dict.atorship..

in politics and in t1:"lerxcass and in t.h.e pu.hlic service to give

BOml3 of our tbOl.i:ght

'12

'l'he alternative to a democracy in this land is a

That is the altm:native, so it behoo"'les each of u

and s(),ne of om. . ti.me to try to objectively

portray 'i,';hut this nE',tion is and v;llat it has been and

cannot lcng survive.

I hopes

,
I

\~hat

to h .1.
Rave

t,;.?

bean so

neglectful?

Have we failed so

Let's ask ourselves, is there ,3.11y".yhere in the world

14
15

where people are better fed or better housed or better clothed?

t~ere

anywhere in the world where there are more freedoms?
How many countries in the world have the freedom of

17
18

assembly such as youtihave here, or even more than t.hat, how

many countries in the world have the freedom of the press

which you enjoy?
How many, how many have the freedoms that we

inalienable rights, and they are, in the language of

conr~ider

the Constitution and our Bill of Rights, but they

fragile

~re

the political stability of the system under which

they operate and no more, and when that political system begins

;j 23

.j
I

to totter and to weaken, then you can be sure tha-c you::::-. righi:s
and your privileges and your immunities, your ri9'hts as free

::!

r.,!,j'-: i:1l1.c1 women.. begin t.o ~l;eake:l and b'~gil1 t:o;:o-i.:t.9r '.

No nation as complex as this can surv3~ve without

.; !
5

rulos under which we all live and abide, and if.

destroy those institutions of government, we are in essence

destroying the very fabric of this society.

yes.

'Vle

tend to

Improve them,

Demol.ish them, no.
It is with that thought that I leave you then.

Each

one of us, it seems to me, has a very great duty and a very

great obligation, to criticize, yes1 to disagree, yes; but

also we have as leaders, if indeed we want to be leaders in
our community or in our nation -

\'18

have a

sol(~m.'l

obligation

to be fair f to be objective, and to keep in perspective Hhat

we are and what we hope -to be and what we have accomplished

and I submit to you that for all of our frailties, there is

no region of this planet, there is no nation on this earth,

that has done as

in as many ways as has this democracy of

America.

wel~

in as short a time for as many people

Thank you very much.

(Applause. )

23
24
25 I

b~e

United States of

1
2

IF;}$P.i~OGAr.i:ORS ~
"-..n"'_~""'~."_ =-------=--~_

EDWARD R. COay v THE WALT"

STro~ET. !jot~PJ.~AI~

ED J. DOOLEY I! SAN FRANCISCO EX.;-'~'1!NER

NELSON P. POYNTER, ST. PETERSBURG TIMES

7
8

biR. DOOLEY:

Mr. Secreta:c.."Y t I don' t

CONNl~LY:

at 2: 15, ruld I 1 V(-! got 1: 27..

thinJ~..

Am I ':'lrong?

MR. DOOLEY:

SECRETARY CONNALLY:

It's 2:27.
I'm wrone;.

I have used it all.

I apoloqi%e to you.

That just shows you those of

18 . make horrendous mistakes.

in government can

I used it all.

lim reminded of the TV commercial .. if that's not cur--

We were supposed to break u,?

··You've gl/t about 4:;' lllinubes, I

how much

buz~al:'ds have lef·~: dmm here.

time \fe

SECRETARY

kJiO'H'

sing

in this particular crowd --

just can't believe

used

the whole thing.

(General laughter.)
SECRETARY CONNALLY:

minutes.

Well, we can go ahout 20

I'll keep my answers brief.
MR. DooLBY;

\fe1l, before we gtt:t i:nto ;TIon-r::y

rr·£ittr~.'r..,

1
.....

')'-' "n e !Cl,..

.. '
.(:'a.:..i. :; . (;""~,"~~
~

~~. ,~. ~

#'c"l!n"~
v.....
\,.

tally, rtmnlng a,}a.inst. Bill Hobby of t.:he Hl)us·"t.on h::!~t"

Jo'~
.u... OV.

"11Q
~
'.:i

')"'011'~
"....

.•

~·'·'"·\-n.'''
'.~
400 ....... ~ .. ,1'0.",-'- -:-

5
6

MRa DOOIJEY ~

SECRETARY CONNALLY:

MR.. D()OLEY:

I don"t anticipab::: that I will.

l-lhat if your brot."I1er ge'tH in a li. ttle 1.:::'(

si tuation and ~?}::m. get a telephone call?
SECP.~TIHtY

anyt.hing..

ffiw.ch.

Wi.ll you go to Texas and f';ampaign?

a2s~:;r,::.:1

CorUUH.,LY:

Wil J. yet' go do:'·Jn t.!-,.ezy·' '?

He has not askec. ::ns: to do

ha d,clGsn! ,t feel like I can

MR .. DOOLEY.:

h:~lp

him very

Some of our Texas G!di to~:-;:; and 2\,SNE

have described you as the leader of the Republican" or

cor~servati"le

16
17

'\ving of the Democratic party.

In case Mr. Agnew is not on the ticket and Mr.
Nixon asks you to run, will you change your registration and

18 . become a part of the ticket?
19

SECRETARY CONNALLY:

Well, you've co-"ered a lot of

ground now.

(General laughter.)

SBCRETARY CONNALLY:

I have to first 2.ssurne that th~~

Vice President E not on the ticket, and I'm not willing to

make that assill"1\ption, and secol'ldly I I have

to [.S SUi.ne

t.hat It m

going to be asked to be on the ticket, and. then I h..::-,v3': '::0

ej 26

I' anm,'~r.
d

j\1;.;,0L: dc·' L ,; t believe I ca.n do all that in one

I h91i;;:;"J"8 ~< ~ m going to pass that question by simply

I say in9

I have no pl('.lI'.s to do anything.

toward any political

off:Lce~

I don lot ant.icipate ·that the Vioe President \.,.,i11

6
7

I have no aspirations

be on the
11

ticl~e'l::

L.G::

again, and if he isn't, I don't anticipate

that I wil.l be, So I just don't thin!< I can give you any

9 Ii better answer than that.

,., I
It)

III

i 0/

I' help

1i~

You ]m"", we can speculate all day, b\..l.t that doesn" t

l·iR. DOOLBY ~

Hell, letOg go to the ot.her end.

n ,. the even"·, of a dead.lock in Miami,
I'

vert muci10

,',

...

~'1Ould

you possibly be a

fall-back candidate?
SECRETA,,\RY CONNALT..IY:

It \"ould have to be a whale

of a deadlock.
17
18
19
20
21

24
25

(General laughter.)
SECRETARY CONNALLY:

It 11

tell you, if they get down

to me they're going to be on about the 72nd ballot, I imagine.
(General laughter.)
~1R.

POYNTER:

You have proved that you could

add~

Mlat we would like to know is, can you divide and subtract.
SECRETAR!{ CONNALLY:
depends on 'what the subject is.

Can I divide and subtract?

ej 27

12~

given the Administration

in'ceres'c rates,

any time in history.

this way,

"'""..

".L

oJ'"

• 1
i:
larA.

SECRETARY CONNALLY:

Mr.. Poynter, let me answer it

now,

know

because I

don' t

any

ot.her 'c~().y to answer it

product.ive.

or determin.e t:he avai labi 1ity of money at ce:ctain rates ..

down and they have come down in every single category.

recent,weeks

20
21

II
24

short-ter.m Treasury bills have gone back up_

They were as low as 2892 percent interest, and they are well

back. up, a point above that.
That isnit really what concerns us, thouqh.

None of us know how you can effectively dictate

All of us are interested in In'cerest. rat.es coming

rates is because all of us are convinced it would be counter-

.
a'(:

The reason we have not imposed a eeiling on,interest

8
9

our ho ..-ro. . .·; '. .~.,.{.jQ are mo!."e mass l.• ve

that we would freeze the price of interest?

6
7

to f.:Lx

The question is, at what point would you recommend

ar,,·a

-t.:~he PCi!Hl."

What we

are· more interested' in i8 seeing the long-term interest rates
come down, particularly on home

mortqages,a~d

we have made

some headway in the last few months on long-term interest
rates.
NOW', none of us, as far as I know

I certainly have

no hesitancy whatever in imposing a ceiling on interest rates

if I think it is necessary to do the job ..
Now frankly, we have proceeded on the assumption

them, that interest ra'i;es wou1d indeed come
Nrn.; if it appears thai:. that ia i.1.ot g'oing to YIork,

and at what point this ,\.;ould become clear I aln not sure todClY I

but I think you to,ill find no reluctance

it.

8
9

01"1

You spoke of loopholes.

MR. POYNTER:

Are

~~ere

any of the present deductions ti,at you regard as a loophole?
SECRETARY CONNALLY:
eve~l

No, I wouldn't point at .my one
~~em

of them, because

the Amarican taxpayer, is there by all Act

there for some reason.

our pclrt to impose

one of

that

is
O,f Congr<'~ss;

and i_ t ' n

Now you rriight questi()n whether or not a particular

incentive should tie there or whather or not there is a aoeial

need for a particular provision. That's a question of judqment,

a question of your own ideas or of your own philosophy, or

perhaps of qovernment, but I frankly do not class these things

and others about which I speak as loopholes.
POYN~R:

The figures came out last week that

MR.

97 percent of

help, in renderinq their tax retQrnS g were fradulsnt; not

~lose

who receive help, so called professional

mistakes but fraudulent.
23

Do you believe that figure?

SECRETARY CONNALLY:

Well, these figures arose out

of a survey that we made in the Southeast.el:"tl part of t.h~~

~!l

e; 29

I /

v'G l

Un! ted Stat~s.

126

Nr~v: l i t i~

•

simply because we made the smnplc of we1.l over

but these returns were suspect in the first place so the

percentage, the 91 pereent, is an absolute, accurate figure on

those that we tested, but I don't think that would hold up

nationwide on all of the returns.

~OO

re·;;.urns ~

Again, I want to make clear here that I am not

talking about established concerns.

the certified public accountants and so forth, who obviously

I am not talking about

assist a great many people in preparing their returns.

The principal ones we're speaking about are what I

would class as the one-man operations where you see a little

'siqn on a little house '=lr

says Income Tax Service or similar words.

people, Where we have encountered inaccurate returns to this

extent - .. it concerns us, and very frankly" it means two

things..

••

a little office somewhere, and it
These are the types ()

It means we're going to examine hundred$ of thousands

mere returns than tie normaliy would have this year.

It means we're going to ask for additional auditors

and agents for the Internal Revenue Service, because the whole

foundation of the tax system in this country, in revenue

collecting, is on a voluntary complianca basis.

we have the most effective, most efficient system

in the world, by far, and we're going to take whatever strin-

gent actions are neaessary to be sure that the American people

are

.,.

":'

i\lH.•

. ~~.'. -

.U.r i.~..:.

last July "to $38 . . B bi11ion<

or a

littl~

NC-,'1

I beljJ~v6' '.qe 1 :cc em (nO bill~ ... "··:

morc_

(;

...

deficits. are running too hlgh and arc t.o·;) j,llfla~;i::ma):.:l

mavh~

the

n b..i.d for a. 'tax

..vcu i'11J.l

pres~n';'::

aClJept this one.

A·.llninistr:d.:ion
inc:r.e'3.3(~

SECR·~:;·J.1P.HY

i.;:i.

Novera:Oer, \}ould you ant.:1..cip:J,te

e2.rly next year?

COmmLLY:

I wov,ldn' t be prep,;n:ed to say

that we \'lould go for a tax increase early next. yea;,: at this

point in time..

Administ.ration certainly 'lIQuId want to examine very closely

and very thoroughly the on-going programs that are nOH bein.g

funded to see if we can't cut substantial portions of those

programs out.

I think before we do that, I think this

Now, we didn't do this in the last year simply

because we felt that \lTe needed a fiscal stlm1.l1ant.

,#lhy Y01.1'Ve got that big deficit, but I ·vloul(.:, cmticl_pate thi.l.t

therl:1 would be a thorough examination of a great man:! of

programs # and frankly I think t.he Al7'ericB.n

•

to it •

F~:JpJ~

This is

t:t~CfY;:

","'::(-e anti '(:led

.......

.l:"(.~'I.\·J.r~:L.~j·t.:.:~,.1. ~·.>.f~·.~·.:

.
.L(:I ~;'v.

....

':.! -~

we ~ '.TJ:':l funded them Hit.ll has to hu

,"o:cthy, all th·::!' :money

ab.road, I take it in

,:~->.

'~e

mone-::ary field

a.lr:lo noticed you made a recent speech II and I'd

like t.o quote you if

may:

lSI have sometimes heard the

acousation tJ..'1at I have become a sort of bully-boy on the

manicured playing fields of international
SECRETARY CONNALLY:

What • s the r~ext sentence?

the next sentence.
MR. CONY:

That;s all I have.

(General laughter.)
SECRE'rARY

CONN~U.LY:

financ~."

All right.

Read

. :........ .

3 I'

IIL·1

fe~l

it inn't.

with fil1ance rttinLste,;;s aroun_d the

~lOrld?

9
10

what your vantage point is

I do deserve that characte:d.. zatioIl, and I have been qi.!L te firnl ..

I havenct: been a bully ..
I wish you

(~ould

I suppose in some p·eople" s eyes

have been with me Hhen

vTC

~rere

14
15

of all t.hose n"i,:mtn.s c-f ccrlv()T.sation, bilatoral and

latera.l, and it. Z:.!.nally

CCllr'.E! to me and said, '<Ie can' t

going to have -co settle it, tim€'! and again.

carn~:.

down

CQ"ltn try

ItP.~H:i-

ilf.b:n:: conn t.ry

agree among o\lrsel V'es.

You're

So I hadnat bullied them so badly, and I hadn!t

bec~

so overbearing that I had completely lost their confidence

their respect, and the truth of that matter is, in t.he fin?1

analysis they could not agree among themselves.

agree ,.,hat their relative exchange rates should be r ana. in

some cases I negotiated.

?'._0

They could

I was the negotiator; I \lIas the r,lediator ):.-,

0].:'

j1.';):.

,.,
J-'

1 '"
{'.aL--"
,".,:""1
J-...oAoo

4...·n.,.~:~i'·:
_~~

'-',t-. . {_'- __
i.'l.",.'-~__
..,:'.:,C"::':

. ,.•••.,

:3~·~.,',','
' ....:
0'

,~- '.'j'f.~___ :_,,;,_-...
......

','

\.:..........

."_

(,,~L

: ....... ).

.,..

_,:1
_\.;.I....~

~.',['oJ':/,

~~_!.~··t~i·."",;··.':'
,.,.

:.. .. \ ....

'i .'i

l',<J.'1J:-:

z.na ;.?vc:ry

persuasion I htld.

(Genorz,l laughter and applause_)
HR. CONY:

i.n~:€!I. naticn.al

Ie 11 a~31" a closing question to

YOlol

I,.bnetar;{ affairs"

What is the ad'TC':.".ntage to the U _50 of our. d:cagtJing

13
14

our feet in t-ej'.. m~j of a nt;Ht1 monetary 8ystem?

alJ~

Paul Volcker; iEi in Japr.·m today.

He's boen in Eurc,pe.

saying ..::0
.
them -.-

what they're prepared to do.

-)/1

30m;J

clue f:ccrm them

r..,;'~).y..

.:!f.

t,.:.:J

We thL11-t that:

if we look toward the return to a system of fixed ~xch~'-lge

ra.tes 1"
t..Jo .. ~.

re 'i.'i1ai ting for.

Let me try to explain it in this

\>1C'

~·]hicb.

and any sort of convertibility of ·;.:he dollar 1

is what they all say t.hey t,ant.., then obvict:.oIy

'~1~~

r(.

~jOinl;!
. ". -,..
"

..;~

t.e:

,I!

....,

for some period.

~rmit
r"~

the United States to run

~
'"

S t'U.·p J_us at s orne

t~me

Now, :Eor tu'ent.y-·two yeal:s we've run a defi<~it.

Now, as I said in my remarks a moment ago, vIe ha:ve exhausted~

substantially exhe,llsb;d, Our reserves in terms of our debts.

Our credit is e~~t.ended; they complain constantly abou'1: the

nwr..QOl:'

hold in banks in their reserves.

of your dollars around the world, the dollars '''hich the:r

m5.nds:

They havt,,\ to ;:'aaka up their

are they willing for us to

rWl 11

surplus?

Now let me give you an example.

Last year, the

United Kingdom ran a balance of payments surplus. of $2.4

billion.

our economy, but that is the larCJest balance of payments surplus

in the history of the United Kingdom.

That doesn' t sound liJ{e much to us with the size of

Now I on

a relative

basis, if we had rlm a surplus

of that size, we would have had a balance of payments last

year -- surplus -- of approximately

we're eleven times higger than the United Kingdom.

20'

a. United Kingdom every year.

$~6

billion, because
We grmrV

Every year.

OUr growth this year, 1972, will be $100 billion

21
~

greater than it was last year, and that's greater than

the total Gross National Product of the United Kingdom,

~4·S0

you have to keep things in perspective.

tZ'e '0 had

of payments surplus las r::. ye,1r of
HaN', if they

~"ill

$~O

b111i'))1.

le';: us run a sl.u::plt':;s or

that. fo,r a couple of iea:7S running, we f 11 t;:tlk
bility because

w~·l1.

be in

but that '9 the

fir~,t

decision

~10~: o,.;rilLLng

lib:?

(~bcnt coave~ti-

position '-'lhere •. . . e car) ccnvert.,

th\~y hav~~

mak~

now.

Tf th ~y; re not. <t:iI1ing for m3 to run ,;)

1,;Then theyi:ce

-t:.'i1.~O

surplu~:;

then

for us to run a s'ilrplus in our balance

of payments.
1. om sorry to take so long to anSlqer that ~

very important

q~estion

MR. CONY:

It' a a

and a very pertinent question.

~ank

lliR. Me KNIGTrr:

you.

Thank you.

SECHETi\RY CONNl'..LLY ~

Thank you V(,H.Y much.

(Applause. )
MR.

for a very

r-tc

KNI0HT:

spLd. ted

Secret:.ar~',

thank you very much

and stirr,t'lla"cing lunch3Cln?rog~'am u and

I cut it off only because we have anotLer :i.ro.port..:lrl'c proqram

'1cheduled, for the Empire Room in fifteen minut.:2.3; and one, 1,:;'8':'

·..:eminder:

the ballot box is open;

phy~~icn.lly t

~_ t

is a'l:

t;:\,;~

133

3
9
10
i1

12
13

15
16

18
19

Room. )

UNITED STATES DEPARTMENT OF THE TREASURY
OFFICE OF THE SECRETARY

PRESS CONFERENCE
held by
TREASURY UNDER SECRETARY for MONETARY AFFAIRS
PAUL A. VOLCKER
at the
HOTEL OKURA
TOKYO, JAPAN
APRIL 15, 1972

This transcript was made from a tape recording.

Mr. Volcker:
I should say that I'm delighted to be in Tokyo for the
first time since I have been Under Secretary.

I have been

looking forward to this for some time and I'm glad the occasion has arisen because of the personal delight in being in
Tokyo as well as the chance to talk informally and in a calm
atmosphere with government officials and others in Tokyo.

know that Mr. Connally, my boss, when he was here billed
himself as a gentle spring breeze but I think, given the
season of the year, I should be entitled to at least the same
characterization upon my arrival in Tokyo.
I think I would point out that the major purpose of my
coming at this time.is to discuss, essentially, multilateral
issues.

We have in a sense come to, I think, a new stage in

the evolution of monetary affairs and economic affairs where
we want to get to work with more intensity with the problems
of monetary reform and reform of the trading system as we move
ahead.

Questions of the appropriate forum of forums for discussing

this issue arise and I've been discussing that with my counterparts
in the Japanese government as well as some exchange of very
preliminary views on substance.

These conversations were not

designed to arrive at a conclusion.

They're of an exploratory

nature and we didn't arrive at conclusions at this stage.

- 2 -

are in a process of exploration that will last at least for
some weeks.
QUESTION:

Has there been any firming up of your proposal

on this so-called forum for action in negotiating international
monetary reforms?
ANSWER:

We have no specific concrete proposal at this

time for the forum.

We have in mind some very definite consider-

ations and criteria that any forum or forums should meet in
dealing with this problem .. But we think that there are a number
of ways' in

whi~h

these criteria could essentially be met and we

haven't got a specific proposal.

What we are doing is trying

to explore and see what the reactions and views of our major
trading partners are and then against that background we may De
prepared to make a very specific proposal.

We have no concrete

proposal at this time including, I must say, some of those that
I saw in the Japanese press upon my arrival.

We have no such

specific proposals.
QUESTION:

You mentioned in your opening remarks that the

process of exploration will last for at least some weeks.

got the implication that it is like six weeks and then you'd
have a conclusion.
ANSWER:

I'm glad yeu asked that question.

Because I was

afraid that I left a little ambiguity in what I said.

When I

speak of a matter of weeks as a process of exploration, I refer

- 3 -

specifically to the question of forum.

On the substantive of

issues we are engaged, obviously, in a very major and fundamental
look at the monetary system and world economic relationships.
The process of developing a consensus on that --- arriving at a
oonclusion --- negotiating the specifics
weeks.

is not a matter of

It's a matter that's going to occupy our attention for

a long and I'm afraid an extended period of time.
QUESTION:

When do you think you'll be in a position to

make your specific proposal for the forum?

Will it be next

month?
ANSWER:

I think the question implies a kind of process

that I'm not sure will take place.

I think that it is one

possibility that we will come to the kind of conclusion and
make a definite proposal of our own.

It may well be that a

sort of consensus evolves less formally and it would be difficult
to date when that consensus took place.

I would suspect with

this kind of process the latter development is more likely than
the former and I would hope in the matter of the next month or
So some consensus would arise on this issue whether it's in the
form of a American proposal of a proposal afanother country of a
less formal process of consensus.
If I may just add to. that answer, I would not think of this
process as having any specific target date.

I know when I went

to Europe recently and we discussed this some, the general

- 4 consensus of other governments is, well, this is something
they wanted some tim e to think about.

And they would come

back and give some reaction in the course of the next week or
so.

And this will be a process of give and take in arriving at

a consensus.
QUESTION:

In considering any fundamental refonn on the

international monetary system, do you conceive of the coming
Presidential election in the United States as being an
obstacle to this?

If you don't, I wonder what sort of. an ongoing

thought you have about what the international monetary restructuring should be like?
ANSWER:

So far as the first part of the question is

concerned, no, no obstacle whatever.

I think this is a process

that is going to take some time and go right through our
election period and thereafter.
So far as the shape of the future monetary system is
concerned, I don't think it's useful to try to be precise at
this point in terms of any mechanics or details.
would say the opposite.

Indeed, I

I think there has been some concen-

tration, some focusing of attention on some of the mechanics
of the system, in a sense prematurely, because what we've got
to settle and arrive at is some broad philosophy, if you will,
some broad consensus as to what we want, what the objectives
are.

And then I think the

mec~cs

will fall into place rela-

tively earily, whatever those mechanics are:

convertibility,

- 5 -

SDR's, role of gold, exchange rate regime, the type of exchange
rates that one has.

All those problems can be solved if we

have a consensus on what the broad objectives are.

We'd like

to focus attention on that prior fundamental question at this
point.

What kind of a monetary system, what kind of a world

economic order would we like?
Let me illustrate just to make this a bit more concrete
on the kind of questions that arise.

The United States has been

in deficit in its balance of payments for some twenty years.
That's the way the system operated, so to speak.

This was con-

venient in some ways, I think in many ways, for other countries.
Maybe it was convenient for the United States.

But whether or

not it was convenient we feel that we've come to the end of that
road.

That cost can no longer be sustained.

We've run out of

credit; we've run out of assets, so to speak, and we now look
toward a kind of system or many people look toward the kind of
system where the system forces an equilibrium.

And we accept

that as one approach toward international financial reform.
I would go further and say that certain types of systems
would require that the United States be in surplus for a while.
After twenty years of deficit we feel we are entitled to run a
surplus and that would be good for the world financial system.
But that Unmediately raises a question.
truism.

We face a mathematical

If the United States is in surplus, other countries

must be in deficit.

And are other countries willing to be in

- 6 -

deficit?

And what are the

mec~sms

in the system that would

bring about and help assure that kind of result?
not easy questions.

These are

They involve important questions of national

attitude and national policy as well as monetary issues and they
should be openly discussed if we are going to have a sensible
monetary reform that works and doesn't break down.
QUESTION:

This I believe is your first bilateral with

another government of the question of the forum.

Are you

planning sUni1ar trips elsewhere or talks in Washington with
other members of the Ten or outside the Ten?
ANSWER:

I was in Europe last week, I guess it was, and

had a little chance to discuss this then, both in an informal
multilateral setting and to some extent bilaterally.

I would

expect to be going back to Europe in relatively few days, partly
to continue this discussion.

I haven't got any specific plans

beyond that but the Unplication of your remarks that we will be
having continuing discussions, bilaterally or multilaterally
on this question is certainly correct.
QUESTION:

I wonder if, in· these discussions, you discussed,

I am sure that you discussed, I am sure that you did discuss the
Unbalance in the world balance of payments situation?

You also

probably discussed the recovery of restoration of some equilibriu
in the U.S. - Japan balances.

I wonder whether you also or

whether another subject came up and that is the so-called theory

- 7 of the responsibility of Japan in this area because of the
enormous reserves that it holds.

Could I ask you if these

points did come up and can I ask you what your views are
on the responsibilities of Japan as a major surplus nation?
ANSWER~

Well, I think your assumption is correct that

these subjects came up but they came up against a background
that the vast majority of our time was spent
lateral issues.

the multi-

We, in the United States, have a very large

imbalance in our payments of which we

ane~infully

we are dedicated to eliminating that imbalance.

aware and

We feel that

we have taken vigorous steps in that direction, in part, through
the exchange rate realignment, of course, that you are familar
with and that provides a certain platform and framework for
dealing with this problem.

But the answer doesn't lie fully

in exchange rates and we've been concerned with other aspects
of the problem as well and we recognize that we have a major
challenge ahead of us.
I think we recognize that this takes time.

The exchange

rate changes themselves take time to work themselves through
the economy and most economists have the opinion that this
takes a period of two years or more to fully have its reflection
in the trade balance and in the balance of payments generally.
We have a very, what we think is a very vigorous program at
home to restore price stability and restore the productivity
of the American economy and in the long term this, too, is not

- 8 only beneficial, it's essential to a lasting adjustment.

Indeed,

I think the prospects for the American economy, considering both
the growth prospects and the price prospects together are as
favorable or more favorable than any other industrialized country
at this time and that is the best possible foundation for working
through this problem over a period of time.
Given that background from the standpoint of the United
States, I think we recognize that in this area problems are
inherently not utilateral, but multilateral.

Our deficits are

someone else's surpluses and vise versa and when we adjust
others must adjust.

I think that's inherent in this kind of

problem and it's neither a mystery to you nor a surprise to you
for me to make the observation that we have a large deficit and
Japan has a very large surplus, and that as one considers this
adjustment process without implying any theoretical theory of
responsibility, the adjustment has to corne in both directions,
so to speak.
Now the same comments I made about taking time (in applicatio
to our deficit) I think are relevent to looking at the same
process from the other direction and looking at surpluses.

Cer-

tainly, in allowing for the time necessary when one looks at this
process, as our deficit disappears the surpluses must disappear.
Otherwise the deficit won't disappear.

I think there is a

recognition of that, certainly, among the officials and others
I have talked to in Japan.

- 9 -

Now you're here in Japan in a situation in which domestic
business trends, a slower growth pattern than you have been
used to may, at this time, be aggravating the external surplus.
I suppose I could only share the view that I have heard and
seen expressed within Japan that both the more rapid expansion
of the Japanese economy and a direction of your resources in
the direction of fundamentally improving the quality of life
of the Japanese citizen are fundamentally the medicines that are
of assistance and very important assistance in restoring an
external equilibrium.

And I don't think this should at all be

put in the context of sacrifice.

Here it's a question of, as

I say, improving the quality of life.

I would like to think that

increased imports to a significant extent could Dnprove the quality
of life and at the same time make ari adjustment, make a contribution to this adjustment process which I think is absolutely
necessary if looking at it from the standpoint of the United
States, if the United States is going to be able to make the
adjustment.

It is necessarily a mutual process.

I would summarize SDnply by saying I think this adjustment
has to be made and it's in everybody's interest that it be made
to the maximum extent possible by outward-looking, liberal
policies that are in the joint interest.
QUESTION:

You mentioned that fundamental reforms are

going to take some time before it comes about, if it does.

- 10 In the

inter~,

what does the United States plan to do to

maintain confidence with the doDar in foreign exchange markets
and to

prevent the type of speculations flurries and other

unrest that we've seen recently, and what should countries
like Japan and Europe do also to contribute to this effort?
ANSWER:

I think without question, the central and

fundamental point here must be the performance of the U.S.
economy itself and the basic adjustment process of our balance
of payments.

This situation will be as stable and as confidence-

inspiring as our performance on prices, our performance in
getting a vigorous but non-inflationery recovery of the American
economy and making steady progress towards correcting that
underlying balance of payments deficit.

Now without that no

financial manipulation, no financial gtmmicks, no financial
mechanisms are going to insure: stability.

Because this is the

basic underlying force at work and to the extent that that adjust:
ment process is speeded, facilitated by the actions of other
countries, that's the best possible fundamental medicine towards
maintaining the calm and stability of financial markets.
I would say, further, as the situation is better understood,
as the implications of the Smithsonian Agreement are better under
stood, we have seen what I've called elsewhere a kind of creeping
confidence returning, I

t~ink,

to financial markets.

And I

think if the fundamentals are working in the right direction, we
can expect that to continue and if the fundamentals aren't
working in the right direction, we're going to have difficulties.

- 11 -

And we shouldn't get our eyes diverted from those very fundamental factors.
QUESTION:

Earlier in talking about what might be done with

respect to the international monetary regUne and reform of the
system, you said that it was conceivable that a number of
~pproaches

might be tried with respect to a forum for such

discussion.

I wonder if you could tell us, in your discussions

with representatives of
forums.

other countries, of these possible

Have there been any that you have eliminated as being

not useful?

Second, that you're coming to Japan, in talking

with high-ranking officials of the government of Japan, and I
ask the same question:
ANSWER:
it's

~portant

have there been any you've elUninated?

Let me answer that question this way.

We think

that a forum have a fair representation of the

world's economic interests.

That means among other things that

the interest of the developing countries have to be taken into
account.
We think it's

~portant

that the forum not be too large

because then it becomes difficult to manage as a negotiating
forum.
We think it's important that we don't treat the monetary
issues in isolation from issues of trade, of issues of tax
policy that inevitably affect the international environment,
inevitably affect the shape of the world economic order.

- 12 -

If any existing forum met adequately all those criteria,
I probably wouldn't be in Japan today, and we wouldn't have
to conduct these discussions, because we could just take the
existing forum.

I think by

~p1ication

meets adequately all these criteria.

no existing forum

At the same time I don't

think it's necessary to say any existing forum need be dismissed
or dispanded.

Maybe we have a combination of forums and proceed

on that basis.
and old.

Maybe we proceed with some oombination of new

And we're approaching the problem with all these

possibilities in mind.

I would think, judging upon what conver-

sations I have had so far, that there is some agreement that no
existing forum fully meets the job before us.

But it's too

early to say just what the appropriate conclusion is in terms
of new forums.
QUESTION:

Is a further revaluation of the yen re1event

at this point?
ANSWER:

I think we did the exchange rate bit at the

Smithsonian and we're proceeding on that basis.
QUESTION:

What reaction did you get to this whole

philosophical presentation about monetary and trade matters
being linked?

You've talked at great length about the whole

thrust of your presentation.

What is your

~pression

of the

reaction you've gotten from Japanese officials?
ANSWER:

Many developments in Japan exceed my expectations.

I think the general, as you put it, and maybe I put it, philo.sophical point about the interrelationships is basically accepted ..

- 13 I would say that, not only in my conversations here, but

elsewhere.

I think the logic of the link is recognized.

Now

when one gets into the details of how one implements this
concept, there is room for discussion and question and this is
precisely the kind of discussion and question that we must get
mto and resolve so that we can proceed.

But I would say I am

encouraged by the recognition of the fact that there are linkages
and it would not be satisfactory to proceed without recognition
of these linkages.
Let me make one thing clear here, in case there is any
room for misunderstanding.

When I talk about trade in this

context I'm talking, in a sense, about the rules of the game
for trade, the Most Favorited Nation Clause, the role of trade
measures in the adjustment process.

I'm not talking about speci-

fic trade negotiations in terms of tariffs or quotas on particular
products.

That's a different matter.

talking about here.

That's not what I'm

I'm talking about the organization of the

world trading system.
QUESTION:

In considering a solution of it's balance of

payments problem, is the United States willing to accept any
sort of restraints or curbs on its overseas investments program
(inaudible) insist on complete freedom for overseas investment?
ANSWER:

I think we've made clear and the President has

made clear repeatedly in recent years that we look toward a
kind of system with maximum freedom, not only for trade but for
investment.
n~rinn~l

We don't like to think of building a new inter-

financial system that is dependent upon controls on

- 14 investment.

We seek an equilibrium in the market.

Now this is an issue that unquestionably will be discusse,
during this whole process.

Philosophies may differ on that

score but I think our philosophy has been made plain; the
spirit in which we approach this issue.

I think there are

practical questions here, too, particularly in the environment
of the United States as to how effective and sustabnsb1e such
controls are.

They may be a weak reed to lean upon when more

fundamental forces are not in equilibrium.
Thank you gentlemen.

I say again how much I appreciate

being here and I think of how impressed I am about the
vitality of the relationship between Japan and the United StatE
and the extent of the common interest we have to go through
some contentious periods in the economic arena that we have hac

The Department 01 the TREASURY
TelEPHONE W04·2041

WASHINGTON. D.C. 20220

FOR RELEASE AT 11 A.M.

VIENNA TIME, APRIL 21, 1972
(5:00 AM WASHINGTON TIME)
REMARKS OF THE HONORABLE CHARLS E. WALKER
UNDER SECRETARY OF THE TREASURY OF THE UNITED STATES
AND

TEMPORARY ALTERNATE GOVERNOR FOR THE UNITED STATES
BEFORE
THE BOARD OF GOVERNORS OF THE ASIAN DEVELOPMENT BANK
VIENNA, AUSTRIA
FRIDAY, APRIL 21, 1972
At the outset, let me express the appreciation of the
United States delegation to the government of Austria for its
gracious hospitality, and also for the excellent arrangements
made for our meeting in this beautiful city.
Secretary Connally,
who has asked me to send greetings and express his regrets for
being unable to attend, will be even more disappointed when I
inform him of the wonderful hospitality.
,

I would also like to welcome the delegation from the
Kingdom of Tonga as a new member of the Asian Development Bank.
The Asian Development Bank has now passed the mid-point
of its 'first decade of operation.
This transition point is an
appropriate time for a hard look at what the Bank has achieved
in these first, critical, five years, and also to chart the
next five years.
There is every reason to regard the progress
of the Bank to date with great satisfaction. After what some
considered a slow start, the Bank demonstrated in 1970 that it
was capable of achieving a high level of lending.
By lending
in excess of $250 million in 1971 it has now shown that it can
maintain such a lending level as well.
For many borrowing
countries, Asian Bank financing has corne to represent an
impressive proportion of total financing received from external
Sources, and in particular from multilateral sources.
The testing phase of the Bank is likewise over with respect
to the establishment of its credit standing in international
markets.
Borrowings are now approaching $200 million.

C-293

The Bank thus is now a full-fledged member of that group
of international institutions that successfully serve as
intermediaries between private capital markets and the capital
needs of developing countries.
The way is now open for the Bank
to carry out a selective borrowing strategy.
It can and should
aim at further diversification.
And its borrowing decisions can
and should be scaled to an appropriate level of liquidity in
relation to loan operations.
The Bank has matured organizationally as well as operationally -~ a fact well symbolized by its impending move into
a new permanent headquarters building provided by the government
of the Philippines.
While consolidating its internal organization, the Bank has
also been pioneering in the field of external relationships with
borrowing member countries, apart from direct lending operations.
Extensive assistance to members on project preparation since
the Bank's early years is now bearing fruit, where otherwise the
formidable task of project planning would have been an insuperablE
obstacle.
On a still broader plane, the Bank's sponsorship of
regional surveys, such as the recently completed regional
transportation survey, should provide further guideposts to usefuJ
areas of operation by the Bank in the future.
With the initial phase of "the Bank's operations now safely
behind, I believe the consensus is that the Asian Development
Bank is fulfilling ·the hopes held by its founders in 1965 and
1966.
It is here; it is operating well; it is now an important
factor in Asian development.
It has enjoyed the support of the
United States since its inception. Last month President Nixon
signed legislation authorizing a U. S. contribution of $100
million to the Bank's special funds supplementing the original
U. S. subscription of $200 million to the ordinary capital of
the Bank. An appropriation request for funds in implementation
of this authorization is now before the Congress.
Once Congress
has acted on this request, we shall then be in a position to
look further at the ordinary capital needs of the Bank.
It is my firm hope that the Bank will continue to enjoy
the full support of the United States.
I believe that it will.
At the same time it is always necessary -- particularly for me
as I view the scene from my perspective in the Treasury -to be keenly aware of the many factors that bear on our
support for economic development overseas, and on the way in
which that support can be expressed.

Let me share with you some of the things that we must
take into account.
Most obviously, the strength and direction
of our domestic economic growth will always be an important
factor in our ability to provide resources for external
assistance.
The United States economic picture is now very bright.
We are expanding in a balanced and sustainable pattern.
The
official expectation is that the U. S. economy will grow bv
$100 billion this year.
I personally feel that we will exceed
the $100 billion goal.
At the same time we are making progress in the battle
against inflation.
We anticipated a bulge in the battle against
inflation.
We anticipated a bulge in the economic indicators
of price levels following the 90-day freeze on prices and wages.
We have had the bulge. However, it is significant to note that
the industrial commodities component of our wholesale price
index -- the most meaningful current indicator of price behavior
rose by .3 percent in March which was only half the increase
registered in the three preceding months.
We will continue to
take whatever steps are necessary to dampen inflationary expectation.
As the economy grows and we return to a more stable pricing
system, unemployment will drop.
Since the middle of 1971 the
United States has increased employment by close to 2-1/2 million
jobs. That is a remarkable performance. Yet, because of the
rapid growth of our labor force, the unemployment rate has
remained at unacceptably high levels. We expect our unemployment
rate to drop to 5 percent by the end of this year.
In short, the outlook for the U. S. economy is very good.
We are expanding .. We are winning the fight against inflation.
And we will reduce the level of unemployment.
Even if our most optimistic expectations are fulfilled,
however, it should be clear that requests for foreign assistance
funds, including those for international institutions; will be
competing against domestic needs that cannot be deferred.
There is, too, a sharply heightened feeling in the United
States today that the economic interests of our country have
not been given sufficient weight in international policy" making.
What follows from this is that financial and other burdens
traditionally accepted without question by the United States can
no longer be automatically accepted on that basis.
The new
international economic environment is radically different from
the familiar "post war period" that must now be regarded as
definitively ended.
Now, the United States is-compelled to
weigh its actions in terms of the benefits and the burdens
that will result, as we presume others have done and still do.
Some examples of the way these broad factors relate to the
international financial institutions come readily to mind.

Tne United States clearly favors an international trade and
payments system that provides maximum freedom in the interchange
of goods, services and investment capital.
Ne have accepted the
premises on ~hich regional financial institutions were brought
into being in the belief that our larger goals could be served
thereby. As a regional institution, the Asian Bank is in a
position to encourage an outward-looking constructive regional
spirit that is fully consistent with the world system toward
which I hope we are all striving.
To the extent the Bank's
activities are oriented in this direction, they serve as a
positive factor in the total equation of our foreign assistance
effort.
Likewise, the support of the business community in the
United States is an important component of what ultimately
emerges as the political will to support overseas development.
Th':"s is) I am SU.l.~e, true of other donor countries as ~vell.
I
think there is a special responsibility on the part of international institutions to ensure that the benefits of the business
generat~d by the development process do not accrue disproportionately to some while the burdens fall disproportionately on
others.
The problems involved here are as varied as the mix of
goods and services that go into a development project.
But
whether they involve tariffs, or bidding procedures, or
contractor qualifications requirements, or any other such
factor, they are surely capable of solution -- if the fundamentaJ
approach is one of achieving absolute fairness among supplier
nations.
Yesterday the distinguished President of the Bank noted
with g~od reason that in 1971 " ... the spectre of protectionism
·,:as ralsed after 30 years of restless slumber ... " I must be
frank to state that such forces are especially strong among
organized lajor grou~s in the United States.
These forces
have recently been manifested in the introduction of o~~ibus
.trade legislation which, if enacted, would turn the clock back
many years and surely damage severely the interests of all
Free World nations.

Following President Nixon's announcement of new economic
policies last August, and related to international negotiations
that then ensued, many observers both in the United States and
abroad attributed similar protectionist sentiment to the Nixon
administration.
I categorically deny that this is true.
It is a mistake
to identify a fir~ resolve to achieve fairness in international
trade with protectionism. To a man, the policymakers in the
Nixon administration are strongly dedicated to liberal and
Sxpanding multilateral trade, with minimum hindrances.
B~t
the simple fact is that, to many U.S. working men, my country's
trade deficit appears, rightly or wrongly, to translate into
export of jobs. This is one fundamental reason for the spreading
protectionist sentiment in the United States.
President Nixon
and his policymakers are therefore confronted with a difficult
challenge to the exercise of political statesmanship--defined
as the act of making possible what is indeed necessary.
In
this instance, the absolute necessity is to first blunt and then
turn back domestic pressures toward economic isolation in the
United States, and to do so through actions which will expand
rather than contract world trade.
You can be sure that this approach lies at the very heart
of the international thrust of the New Economic Policy.
In
retrospect, it is quite clear that, as we always intended, the
import surcharge was a temporary means of protecting our position
while achieving by other means, including a successful exchange
rate realignment, a strengthening of the U.S. balance of payments
position, which is surely in everyone's interest.
And you can also be sure that in continuing negotiations
in the inseparable fields of trade and money we shall strive
for solutions that will contribute to the rising standards of
living which grow out of truly liberal trading relationships.
Mr. Chairman, it is one of the hallmarks of President
'Watanabe's distinguished guidance of the affairs of the Bank
that he looks to the future.
I would like to offer some ideas
for the future that seem to us worthy of attention by the Bank
as it continues to serve the development needs of Asia.
First, the requirements for basic infrastructure in many
of the countries of the region remain great and must, in the
nature of development assistance, absorb a substantial amount
of funds.
The Bank must scrutinize its activities carefully,
however, to ensure that appropriate consideration is also given

to lending for such purposes as education, and credit and other
facilities for small farmers.
Second, it is clear that environmental problems are not
confined to the developed countries. The cessation of growth
cannot be the solution for such problems, either for developed
or developing countries.
I doubt that the Bank's resources
permit it to playa significant role in regard to existing
industrial pollution problems, but the Bank can certainly
insist in connection with its lending that the environment
not be further impaired.
Third, as I noted earlier, the Bank is moving toward the
role of principal international lender in many countries of
the region.
With this role will come new responsibilities.
For example, the Bank will have to go beyond consideration of
the economics of the particular project or sector and give far
greater consideration to the economic policy and performance of
the borrowing country itself -- ensuring while doing so that
there is full coordination with other international lending
agencles.
And there is as well the need to make further progress
toward equipping the Bank with a means for systematically and
independently appraising the effectiveness of its operations.
Modern program evaluation techniques are a management tool of
proven utility.
The precise way to do this is less important
than the resolve to establish it at an early date.
Mr. Chairman, the Bank's record in the past has been
commendable.
Its agenda for the future is a full one. Meeting
the challenges facing it will require great energy on the part
of its management, as well as continuing faith by all of us in
what cooperative international action can accomplish.
Let this
annual meeting serve as an occasion for the renewal of that
faith.

- 0 -

The Department 01 the TREASURY
WASHINGTON. D.C. 20220

TelEPHONE W04·2041

FOR IMMEDIATE RELEASE

April 21, 1972

WARREN F. BRECHT IS NAMED ASSISTANT
SECRETARY OF TREASURY FOR ADMINISTRATION
Secretary of the Treasury John B. Connally today announced
the appointment of Warren F. Brecht to be Assistant Secretary
of the Treasury for Administration. He succeeds Ernest C.
Betts, Jr., who resigned from the Treasury post earlier this
year.

Mr. Brecht, 39, has been Deputy Assistant Secretary of
the Interior for Management and Budget since last July. In
his Treasury position Mr. Brecht will direct the Department's
administrative functions including personnel, budget and
finance, audit, management and organization, planning and
program evaluation, administrative programs, and central
services.
Prior to his Interior Department appointment, Mr. Brecht
had been a principal with Peat, Marwick, Mitchell & Co., a
New York-based international public accounting and consulting
firm. His home was in Darien, Connecticut. Between 1965 and
1969 he had been Partner in Charge of Administration. for Peat,
Marwick, Livingston & Co. of Boston, Massachusetts. During
1961, when associated with Management Systems Corporation of
Cambridge, Massachusetts, Mr. Brecht was a member of the
original project team that designed the cost system for the
Navy Polaris p'roj ect.
A native of Detroit, Michigan, Mr. Brecht is a graduate
of DePauw University, where he was elected to Phi Beta Kappa.
He holds a Master's Degree in Business Administration from
Harvard Business School where he was graduated with distinction.

C-294

(OVER)

- 2 -

During the 1960's, Mr. Brecht resided in Lexington,
Massachusetts, and was active in church and community affairs.
From 1955 to 1957, he served as an Air Force officer assigned
to the Headquarters, Air Materiel Command.
Mr. Brecht resides in Rockville, Maryland, with his wife,
the former Joyce Southard of Toledo, Ohio, and their four
chi1dren--Amy, Stephen, David, and Peter.

000

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THE DEPARTMENT OF THE TREASURY

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REMARKS OF

HONORABLE JOHN B. CONNALLY,

SECRETARY OF THE TREASURY

BEFORE THE

FOR'I' WORTH BAR ASSOCIATION

DINNER HONORABLE JUSTICE CALVERT

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April 14, 1972
Fort Worth, Texas

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[This transcript was prepared from a tape recording.]

MR. KELLY

President Bill Dean, Chief

Justice Calvert, distinguished members of the Supreme Court,

Lieutenant Governor Ben Barnes, Attorney General Crawford

Mardon, Senator Wayne Connally, other honored guests, ladies

and gentlemen.
There is one facet of Secretary Connally's multi-

talented personality that has thus far failed to receive proper

recognition.

of his favorite sports is golf and, considering the fact he

He is, believe it or not, quite an athlete.

One

only gets to playa few times a year, he is pretty good at it.

He hits quite a long ball off the tee, but he has been known

to hook it occasionally.
Last New Year's Day the Secretary was kind enough to

13
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invite me for a round of golf.

up as the Secretary's opponent and my partner, a weak pluyer

to begin with, turned out to be, of all people, the Trea3urer

of the Democratic National Committee.

assigned one caddie and, as you would naturally expect, lIe was

considerably more attentive to the Secretary than the rest of

us.

As luck would have it, I wound

The foursome was

One thing occurred during the course of play t1at

struck us as rather odd.

The Secretary and the caddie were

frequently engaged in serious conversation, but we attributed

no special significance to it at the time.

close and everything was at stake on the last hole.

The match was
The

finishing hole in this particular course was a long par five,

with water on the left of the fairway.
in part by a large billowing palm tree.

The water was shielded
My partner and I

managed to get off the tee and into play on the last hole.

The Secretary then stepped up to hit.

look that has become so familiar to

world, he took a mighty swing.

Sure

With that tenacious

econom~.sts

throughout the

enough, the ball went towering to the right,

but then it began to hook

trying desperately to muffle a laugh, said to me, "I think

the Secretary is in the water."

partner's f,indings, having thought I saw the ripples caused

a~d

come back left.

My partner,

I quickly confirmed my

by the explosion of the ball hitting the water.

We then quickly drove to our own balls, still'trying

to conceal from the Secretary our pleasure in his seeming

dilemma.

standing beside this large billowing palm tree and pointing up

into it.

then proceeded to drop a ball squarely in the middle of the

fairway.

Suddenly, as we looked around, the Secret.ary was

His caddie began to nod his head vigorously anj

My partner and I quickly drove over and discr€.e'tly

inquired what the problem seemed to be.

The caddie promptly

informed us that the Secretary's ball was lodged in the top

of the palm tree and that under the winner rules of this

course the Secretary was entitled to a free or unpenalized

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drop.

any further questions.

The Secretary then glared at us and asked if there were

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Realizing the improvidence of appeal, we -agreed that

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it was, after all, a very good rule indeed.

then proceeded to par the hole but still shaking with this

unforeseen turn of events, and my partner and I each had

double bogies and we lost the match.

The Secretary

The next morning, bright and early, my partner carne

running into my room and asked me if I remembered those serious

conversations that had taken place between the Secretary and

the caddie in the previous day's match.

page 74 of the Los Angeles Times, and down at the bottom of the

page, in small print, there was a little story under the

following caption, and I quote:

Local Caddie Extension of Time to Pay Federal Income Taxes."

He then handed me

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"Treasury Department Grants

[Laughter, applmlse.]

Mr. Secretary, for the sake of the international

press that follows you around, J. should point out that I did

take certain minor liberties with that story.

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Ladies and gentlemen, 1 proudly present to you the

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former Governor of Texas, the fc·rmer Secretary of the Navy,

the Secretary of the Treasury of the united States, an

advisor, counserlor and friend of three Presidents, a business-

man and lawyer of distinction and achievement, and a man who

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has demonstrated to the world his capacity to occupy any office:

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of public trust in this land, one of the great Texans of all

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times, John Connally.

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Thank you very much.

Please be

seated.

Dr. Mardon, Chief Justice Calverl:, Chairman Dean,

Mr. Moore, Miss Calvert, other distinguished head table

guests, and Mr. Kelly.

SECRETARY CONNALLY:

,:1

[Applause. ]

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[Laughter. ]

I trust that you realize that the real significance

of that story was in one short slurred sentence, in which Mr.

Kelly informed this distinguished audience that he and his

partner on the last hole remained in play.

was a rather significant change from their past behavior.

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I assure you that

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[Laughter.]

Now, Dee, if you had told them that I stclrted to the

left and wound up on the right, it might have been a believable

story, but very few in this audience will believe the ccntrary,

that I started out to the right and veer left.

(I)

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[Laughter, applause.]

c·

Judge Walker, I do indeed bring you glad

·•

about your income taxes.

aer permitted to claim an additional exemption, and for those

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of us our age that is something.

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an additional exemption this year, and if you don't really know I

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tidi~gs

Be sure to file your W-4 form.

You

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But you are entitled to claim.
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how to fill out your form, we have assigned 15,000 Internal

Revenue Agents throughout the Nation to help the less gifted

;)

in advice and assistance in the preparation of their forms,

so I know it will bring indeed great tidings to many here

tonight.

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Mr. Chairman, it is very obvious to me that you haven ~,d

at least in recent days sought public office._ Perhaps you

never intend to.

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Your behavior would indicate such.

[Laughter. ]

But if I may be privileged to do so, I would like to

make amends for an oversight or two on your part, without being

unduly critical.

in which we live and the movements that are now sweeping the

country, but because I have always believed -- and if I hadn't

thought of it myself, I assure you Nellie would have planted

the thought -- that very few of us, from Judge Calvert on

down, ever accomplished much without the undying devotion and

help of our wonderful wives.

of the justices who are here tonight, and Martha Greenhjll,

will you please stand.

And I don't do this just because of the times

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And I want to introduce

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[Applause.]

And Mrs. Denton, will you please stand.

[Applause ]

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And Mrs. Sears McGee, will you please stand.

[Applause. ]

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wives

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And Mrs. Torn Reevely.

[Applause. ]

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And Mrs. Price Daniel .

Mrs. Jean Daniel, the former

First Lady of Texas.

[Laughter. ]

Zollie, I believe I am correct, your wife is not with

you b)night.

Is that correct?

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I believe the other wives of the justices have been

introduced and I want you to know that a few of us are aware

of your presence, and I don't want the press to misunderstand

this in any sense.

about Mr. Dean not having sought nor intending to seek public

office does not in any way -- should be interpreted as a

reflection of my own plans, one way or the other.

The mere fact that I made the comment

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[Laughter. ]

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for me, a personal privilege for me to be here, to pay tribute

not only to him but to his lovely wife, because they have been

a magnificent team in all of their endeavors.

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Few men, I think, have ever had a greater influence

on me than the Chief Justice whom we honor tonight, in my

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formative years.

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are a year or two older than I am and you did start a

;

And forgive me, Mr. Chief Justice, but you

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distinguished career at a very early age.

But in my formative

years, the Chief Justice was already embarked on a distinguishe1i

career, in the law, as Speaker of the House, where he rendered

great service, where he manifested great courage, where he

demonstrated a love of the state, of this Nation, and where he

time and again exhibited the courage to bespeak that devotion

and that courage.

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Courage I think has been the hallmark of his long

life and his long and productive life, because he has always,

as Judge Walker said a moment ago, he has had the inner

strength, he has had the

to do what he thought was right, without really stopping to

pause and think about the costs or whether it was going to be

popular or whether it was going to be unpopular.

confidence~

he .has had the serenity

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And in the final analysis I don't know of a greater

tribute that you can pay a man in public life than to say that

about him, because indeed his life has been an example for all

to follc)w.

It has been dedicated, all of his efforts, all of

his work, his opinions are scholarly opinions, yet they are

not only legalistically scholarly, they are always tempered

with a I!ompassion and a concern, always reflecting a sense of

tolerance, of understanding, of reason, good sense, and good

judgment.

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Calvert's life.

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And those things have all been a part of Bob

And so for one who has always admired him, for one

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who has tried to learn by his actions and his behavior and his

example, I count it a great personal privilege to be here on

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this podium this evening, because he manifests and symbolizes

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the strength of this democracy.

in this land of free men and free \'mmen.

started in the most humble beginnings, witt,out the advantages

that many today think they must insist

He symbolizes all its good
Here is one who

upon~

But he was aware of what this country was, of the

opportunities that it afforded.

He had a determination to use

his God given talents to develop them to their fullest, not

just to use them for his own selfish~urposes but to try to

use them for the benefit of others, to try to see that others

might have the opportunity that had been his.

indeed a man among men, because he has done more with less

opportunity than so many of us have ever done, and he

symbolizes again the strength of \'lhat this American democracy

real.ly is.

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And he is

And in these turbulent times of the 1970's, let me

tell you that I think'it is well that we pause and that we

look at those like Robert W. Calvert who sit on this platform

tonight, and that we think for a moment.

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[Applause. ]

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And look at these other distinguished judges.

known many of them.

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as much about anyone of them, about Roy Walker and his lovely

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I know all of them.

I have

I could say almost

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wife, Joe Greenhill and his, Jim Denton, Sears McGee, Tom

Reevely, Governor Price Daniel, who has a unique career among

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all the men who ever served this state.

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No man to my

knowledge, and I am sure I am right, ever served before as

Speaker of the House, Attorney General, United states Senator,

three times Governor, and now Justice of the Supreme Court.

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I This is
I Texas~

the type of people you have on the Supreme Court of
Zollie Stakely, the former justices that you have seen

introduced, Gordon Simpson, Jim Hart, and the others, Bob

Harwood, Jim Hamilton, Abner !'-1cCall, Judge Culver -- all men

of distinguished professional capacity butt more than that,

men of rare ability, men of integrity, men of honesty, men of

concern, men who are willing to give of themselves in order

that they might expand opportunities for people and to try to

preserve and to protect this democracy that permitted them to

flourish and their talents to be recognized.

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I think it is fair to say that today we are a

troublej Nation, we are a troubled world.

that this is the first and the only period of time in which

this Nation has been troubled or when this state has been

uncertain about its own future.

But I am not sure

'I'here are times in the affairs of all ages, of all
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generat ;ons, and of all centurl.'es when there are doubts, when

there a:e uncertainties, when there is instability, when there

is unrest, when there have been great changes in the structure

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of society, in the political system, in the economic system,

the social structure, and even the religious institutions that

men use.

is such unrest in this Nation now.

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And we are in such a period of time, because there

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All of our systems are under attack.

Our political

systems are.

questioned, their honor and their integrity is being whispered

about when there is not one shred of evidence to support it.

You have men in this hall tonight who have been introduced,

the distinguished Attorney General, the Lieutenant Governor

of the state who have been indeed questioned in terms of their

own moral standards and their own ethics and their own honesty

and their integrity.

Those who serve in public office are being

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Why?

Because they happen to serve in a time and a

place where indeed there was wrongdoing.

has been indeed ferreted out, it has been punished, and yet

there are those in this society today who would smear all

with a brush of guilt by association.

.•

There are those not only in this

But that wrongdoing

sta~e

but throughout

this Nation who go from city to city to try to create unrest,

who try to create questions, who try to create suspicions and

disturbances, and even anger in the minds of the people against

those who would serve them in political office and in public

life at all levels of government.

nothing more dangerous can be done in this Nation than to try

And I submit to you that

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to destroy the confidence of the American people in this

political system, because if indeed --

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[Applause. ]

If indeed this political system does not enjoy the

confidence of the American people, then I assure you that the

democracy of the united States says are nunbered.

is to follow it?

And what

If indeed this democracy does not survive, and it

cannot survive without public confidence, if it does not sur-

vive, what then?

Is it enough just to say that all of you who hold

public office are a bunch of crooks?

Is it enough to say that

those ",rho would serve in public office ,have no regard for the

people of this country, that they have no honor, that they

have no integrity, that they have no compassion or concern for

the people whom they purportedly serve?

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Is it enough just to say that?

destructive force in this country?

down?

discriminating?

class?

Is it enough to be a

Is it enough just to tear

Do we really realize what we are doing, without being

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Can we indict a people?

Can we indict a

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I don't know of any profession in which there are

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not some who are guilty of indiscretions, at times even mal-

feasance.

A pastor or treasurer of a church or synagogue will depart with

It is true in the ministry.

You read about it often~

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all the funds.

•

to destroy a banking system because of it.

,•

occasionally engage in wrongdoing, but we ought not to destroy

•

a democracy because of it.

what we do.

Banks occasionally embezzle, but we ought not
Politicians

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We ought to be discriminating in

[Applause.]

We should be intelligent enough to distinguish right

from ,.,rong, and that is what Bob Calvert has always done.

has al.ways distinguished between right and wrong.

has to make a decision, somebody has to decide, somebody has

to stand up and have courage.

Somebody

Today our educational systems are under attack.

The

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courts say that we can't sustain them financially as we

to.

that yO'll can't let the children go to the schools of their

choice, they have to be bused, and that is not a very popular

decision.

The property tax is unconstitutional.

other courts say

There are other questions raised about the educationa

system and its abilities to survive.

The economic system of

this country is certainly under question.

media

of ours is evil, that business is inherently so, that it has

no concern for people, that it

ment, that these soulless corporations are created for the

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purpose of exploiting and eroding and destroying this land and

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Every day in every

hear nothing but the fact that this economic system

has.~o

concern for its environ-

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all that is bountiful and beautiful in it.

But it isn't just the economic system, the business

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system, and the business institutions that are under attack •

The religious system certainly is, all the faiths, the

Protestants, the Jews, the Catholics.

They are all in revolution.

herent principles in which we all believe.

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They are all in revolt.

They are all questioning the inwith what results?

There are times when we all think that somehow,

somewhere, without assuredly any divine assistance, that we

have been endowed with infinite wisdom to be able to perceive

all of the problems that others have-been blinded to, that we

alone have the courage to speak of them, and that in our

generation we are going to cure the ills of mankind.

is an intellectual arrogance without parallel in the history

of this Nation, and it is an intellectual arrogance that

surely contains the seeds of destruction of a democracy, becaus

we are not that wise.

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And this

We are the product of a long line of men and women

in all areas of this world who have for generation after

generation, for century after century, engaged

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every conce1V1

able type of experiement, in developing a system of society

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where people can live in a compatible atmosphere, one with

another.

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There have been vast changes throughout the centuries
in that type of system, and there will be more changes in that

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type of system.

system which we know in this land.

And there will be vast changes perhaps in the

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We shortly ...till celebrate

the 200th Anniversary of the creation and the founding of

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this system.

perspective, this is -- we are youngsters.

a very short peritd of time.

tion counts its time and its age.

And yet when we look at it, to put it into

We have been here

We are youngsters, as civiliza-

We have done very little really in terms of what

opportunities we have to do.

You have but to go to other

countires around the world.

the Sahara.

you can see the great creations, the great architectural

inventi V'eness of a Ramses II, of the Pharos of Egypt, you can

go into the Garden of Eden, as we knmV' it, the Valley of the

Mesopotamian, you can see the remains of the canals and the

irrigation system that 1,500 years before Christ were so

efficient, so productive ttlat it sustained 17 million people

and fed them well.

You can go and visit the sands of

You can visit the upper reaches of the Nile.

And

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19 .

And then you consider that because those people be-

came peaceful in their pursuits, because they became satisfied

with their affluence that they':hought their prosperity and

their well-being was never-ending.

of the north and overran them.

the irrigation system nor what it meant, so they were permitted

to be destroyed and clogged, and not in 3,500 years have those

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And the Nomads came out

The-Nomads didn't understand

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same lands ever been able to sustain more than three million

people since.

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Now, it may be that we have an inevitable destiny to

survive, but I wouldn't be willing to steak everything on it

unless we have men and women of courage, men and women of

capacity, men like Bob Calvert, who gave his whole life, all

of his productive life, not to garner great riches, not to

amass material affluance, but to lead a productive, creative,

constructive life, to leave an influence, to leave deep prints

in the sands of time in his profession, and in the history of

this democracy, in the halls of the legislature, and in the

books that record the decisions of the courts.

Calvert will long remain as a name that all aspiring young

professionals can utter with awe, that all of us can emulate

with great satisfaction, that all of us can admire with great

gratitude, because he cont:ributed, he gave.

Robert

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He was not a destructive force, he was a creative
He

un~erstood

force.

that in this democracy that each has to

do his part, that none can really run from the role of respon-

sibility or the duties that he has as a citizen, because he

can't shirk it.

.•

It can only survive with those who understand that each of us

owes

to enlarge, and to enrich the freedoms, the freedoms of man,

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This society cannot survive populated by shirkers.

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a duty and an obligation to build, to expand, to create,

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so that man's mind might forever generate more and more, so

that man's genius can create.

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We sometimes get a bit blaze, it seems to me.

little over ten years ago, the President of the united States

said in the decade of the sixties we will go to the moon, and

it was an incredible unbelievable thought, but \.;e did.

went to the moon.

even to the point where the American people began to bE! bored

by landing men on the moon.

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We landed men on it, time and time again,

How self-satisfied can \'Y'e be?

How selfish can we

become?

How unaware can we be that-in these changing times

that this economic system is going to evolve into sOI.1ething

different 'from what it is today, that this political system

surely will change, and that each of our rights and our

privileges may well be altered.

But of one thing we can be sure, that if we do not

strive, each of us I day by day, protect-ing as best ''Ie rni::Jht,

preserving it as fully as we can, the privileges and rignts

which we have, through a judicial system that creates a Bob

Calvert, that permits a Bob Calvert to have such a profound

influence on this State and on this Nation.

,.,

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If we don't contribute to that type of preservation,

then surely we are all in trouble, and surely within a very

short span of time things will change.

tonight that every single one of you, whatever your feelings,

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And I submit to you

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whatever your proclivities, whatever your ideologies, whatever

your personal choice, that you have a profound duty and obli-

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gation to support this system of free men and free women, that

you have a profound duty to talJ< and defend this system of

free men and free women, and you have a profound duty --

[Applause. ]

And you have a duty to point out its weaknesses, yes;

but you also, in all fairness and in a-l equity, need to put

into perspective that this system, with all of its weaknesses

and with all of its shortcomings, with all of its failings,

is a system that permits a Bob Calvert to be raised in an

orphan home and to become Chief Justice of the

of this great state, that this state is a system.

Supren~e

Court

[Applause.]

That this state does enjoy a system, that. this

American democracy is a civilization and a society of men and

women that has done more for more people, we have fed mO:L'e,

more fully, we have clothed more, more adequately, we ha'le

cared for more, more professionally, we have given assistance

o
~

to more, not only inour own land but around the world, $150

Ii
ci
C

billion in dollars alone, since World War II, to

and to rebuild nations which we helped destroy in times of

anger and war.

I')

o
o

rehabil.~tate

;

•

And is this wrong?
this a decadent society?

Is this a decadent system?

I submit to you it was great, on a

19
0
0
0
~
~

III

1
2

recent sojourn with the President of the united states to a
foreign land to see 200,000 people out on a cold morning with

N
~

•

;)

,•
0

brooms in their hands sweeping the street.

But I wouldn't

have liked to have been one of them, and I don't think you

would, either.

[

[Applause. ]

Now, it is great to see such discipline, it is grp.at

to see such discipline, but it is awesome to fear and to think

and to be aware of such regimentation.

It was wonderful to see

it.

have read your history books.

dictatorship, one government of tyranny in all of the pages

of the recorded history of man where there wasn't discipline?

It looked like a very orderly society, and it was.

You

Can you point out to me one

We are an undisciplined society, but we can't be a

wreckless society.

And if we are going to be a sustainable

system af government, it has to be a government that recognizes

that we live under a system of laws and that, above all else,

we have to have a political system that permits freedoms to

flouriBh.

a jUdiciary that is unafraid, and Bob Calvert is a man

through)ut his long and distinguished career who has been a

·•

man committed to the enhancement of the society of which he

iii

was a part, and he undertook each day to carry out his

responsibilities unafraid.

And the very foundation of that political system is

I')

o
o

;

c
c

~
~

·•
··•
~

,..
a

Thank you very mnch.

The Deportment of the

TREASURY

WASHINGTON, D.C. 20220

TElEPHONE W04·2041

REMARKS OF THE HONORABLE EUGENE T. ROSSIDES
ASSISTANT SECRETARY OF THE TREASURY
(ENFORCEMENT, TARIFF AND TRADE AFFAIRS, AND OPERATIONS)
before the
ROCHESTER SALES EXECUTIVES CLUB
ROCHESTER CLUB, ROCHESTER, NEW YORK
April 24, 1972

1:00 p.m.

PRESIDENT NIXON'S NEW ECONOMIC POLICY AND THE
DOCTRINE OF FAIRNESS IN INTERNATIONAL TRADE
president Nixon's New Economic Policy, announced on
August 15, 1971, marked a watershed in world history, not
just U. S. history. The President's actions marked the
end of one era -- "the end of the post-war ·world" as
Secretary Connally said last month -- and the dawn of a
new era in international economic relationships.
The President's goals were three -- to curb inflation,
to generate jobs by stimulating responsible economic growth,
and to strengthen the position of the United States in the
international trade and financial community.
Today, I shall talk primarily about the U. S. position
in international trade -- a Doctrine of Fairness -- with
special emphasis on Treasury's role and responsibilities in
this area, and the need to perfect international organization
and procedures for effective solutions of trade problems.
Why Are We in a New Era?
At the end of World War II, the United States was the
wealthiest, most powerful nation on earth. A large part of
the world was in ruins, physically, politically, and

- 2 -

economically, after the holocaust that it had just experienced
The United States exhibited truly unselfish and generous
leadership in an effort to bring these ravaged areas back
to normal. We did this in our own long-range national
interest but at considerable sacrifice.
It made sense for the United States to do everything
possible to assist both our former allies and enemies to
regain their feet. And so, we literally showered U. S.
dollars and expertise on these countries. The American
taxpayer accepted the burden of the nearly $150 billion in
economic and military aid that was made available over the
past 25 years, for he understood the relationship between
a prosperous world economy and his own well-being.
But conditions have changed and we now find ourselves
confronted with an entirely different picture. Although
the United States is still the most important free worla
power, it is no longer the only free world power~ Other
nations are again in a position to challenge us economically
and politically. The United States is nO"w one giant among
several.
The Long-Run Task
What does this new era signify for the United States and
the rest of the trading world? Essentially, the'long-run
task facing the United States and the world community is
the creation of an international economic system which,
on the basis of mutual advantage, will stimulate international
trade and freer competition, draw nations and people together,
and thus form the basis for a lasting peace with prosperity.
Progress Made Since August 15, 1971
In his policy role as Chief Economic Spokesman for the
President, Secretary Connally has already sketched in broad
outline form the new policies to be followed. The domestic
and international fronts,which cannot be separated, have
seen considerable progress in the eight months since
August 15, 1971.

- 3 On the domestic side, economists are virtually
unanimous that activity is expanding vigorously. Industrial
production rose strongly in March, the seventh consecutive
monthly advance. The other two economic indicators for
March presently available -- total employment and retail
sales -- also showed strong gains. Employment rose by
620,000 to 81.2 million -- the largest gain for a month
since mid-1967. These indicators are further evidence
that the economy is in a strong expansionary phase.
the international side, the Smithsonian Agreement
of December 18, 1971, was a significant breakthrough and
has given the new era a subs,tantial forward thrust. That
agreement included a multilateral realignment of exchange
rates, commitments to discuss more general reforms of the
international monetary system, and commitments to begin discussions to reduce trade barriers, including some most harmful to the United States. For its part, the Unit'ed States
agreed to recommend to the Congress that the price of gold
in dollars be raised when progress had been made in trade
liberalization.
On

On February 9, Secretary Connally transmitted to the
Congress a draft bill providing for devaluation of the dollar
by 8.57% to $38 per ounce of gold. In signing that bill
into law on Monday, April 3, the president said that the basic
significance of the Smithsonian Agreement and the legislation is:
" ••• that it provides for continued cooperation
among our allies and ourselves--and thus
strengthens our unity--as we work toward an
'open world' based on a more balanced monetary
system and a more equitable international
trading environment."
Simultaneously with the Smithsonian Agreement, commitments
were made by some of our allies to assume a larger share of
the costs of common defense.

- 4 Substantive agreements have also been reached with
the European Community and with Japan to remove or lower
certain barriers against U. S. products and to support
multilateral and comprehensive trade negotiations in 1973,
meanwhile solving more immediate problems in 1972 through
the GATT.
The Administration will seek the necessary
legislative authority for these comprehensive negotiations.
Doctrine of Fairness in International Trade -Abroad and at Home
Abroad
These are some of the accomplishments to date on the
international trade front. All of the United States' efforts
in international discussions have been dedicated to one
objective--the establishment of a Doctrine of Fairness in
International Trade.
The president and Secretary Connally have served notice
that the United States is no longer going to compete with
one hand behind its back. To compete fairly abroad, we must
have fair access to the markets of Europe, Asia, South
America, Africa, and the rest of the world.
I do not mean to imply that the United States is
expecting to obtain something for nothing. We recognize
that some of our practices are regarded by other countries
as discriminatory.
But in our trade negotiations we do have
a right to demand a fair bargain. We insist only on the
right to compete fairly abroad.
As Secretary Connally said in Munich last May:
" ... no longer will the American people permit
their government to engage in international
actions in which the true long-run interests of
the U. S. are not just as clearly recognized
as those of the nations with which we deal."

- 5 -

The point he conveyed to all is that the United States
can no longer stand by complacently when markets are closed
to us or where the "rules of the game" seem to be rigged
against us.
When our foreign friends complained about the
temporary 10% additional duty adopted as part of the
President's new economic program, they did not mention
in their complaints the barriers they maintain against
U. S. exports to their countries.
These barriers take various forms--quotas no longer
justified by economic factors, discriminatory taxes such
as progressive taxes on horsepower directed at the export
of U. S. automobiles, discriminatory tariff arrangements
such as the Common Market preferences and reverse preferences,
which establish a lower tariff on the exports of Common
Market members than on those of the U. S. and others into
third markets, both in developing and developed countries.
These barriers were not 'wiped out by the Smithsonian
Agreement. Moreover, I regret to say that some new actions
have been taken since the date of that agreement. For
instance, the Netherlands has put a quota on electronic goods
from Japan. That action has the effect of putting further
pressure on our own market. We have a long way to go in
order to achieve a fair break in international trade for
American industry and agriculture.
Since the post-war years, the United Kingdom has
maintained quotas for balance of payments reasons on
imports from the dollar area of fresh, frozen, and canned
grapefruit, or~ge juice, and rum--this despite the fact
that the balance of payments justification for these quotas
has long since passed. Indeed, the British are now in balance
of payments surplus, and removal of these quotas, which the
United States has been seeking for over 20 years, is
certainly long overdue. Is this fair trade?

- 6 Similarly, France imposed quotas several years ago
for balance of payments reasons on imports of semiconductors. Although the French authorities have liberalized
these quotas over the years, an intricate licensing system
inhibits our exporters from supplying the French market.
The balance of payments justification for protection has
long since ceased and this obstacle to trade should have
been eliminated years ago.
Is this fair trade?
In the past few weeks, the European Community has
instituted a new system of compensatory duties so as to contin{
to protect its domestic agricultural markets from more
efficient foreign production in the face of the recent
currency realignments.
In so doing, the European Community
did not hesitate to break the negotiated rates (to which
all negotiating parties are supposedly bound) on some
40 million dollars' worth of trade. They did this despite
the fact that it was a clear violation of the GATT. The
United States has some interest in the EC's actions, for
our cost of production for basic agricultural commodities
approximates half of that in the Common Market.
Is this
fair trade?
The Community's regulations have restricted Japanese
imports to 6 percent of that country's overall exports-this in contrast to the 30 percent which Japan exports to
the United States. By restrictions such as these, the
Common Market has literally forced the Japanese to concentrate their export drive on the United States.
Is this fair
trade?
Japan no\.;' has $17 billion in foreign assets reserves.
We have approximately $12.5 billion. While the United States
had a balance of payments deficit last year--and has had
one for over 20 years--and our first trade deficit since
l888--Japan hada trade surplus last year of 7.9 billion
dollars, the highest in the world. This year's balance
for them will be even larger since their exports are likely
to run 20% above 1971. 3.2 billion dollars of Japan's
trade surplus in 1971 was with the United States.

- 7 -

Many factors, in addition to U.S. policy, contributed
to Japan's economic success. Japan, which was allowed to
maintain quotas for balance of payments reasons when it
entered GATT, still retains many of these quotas, this despite
an economic recovery which is commonly referred to as the
Japanese miracle. "Administrative guidance" by Japan which
impedes our exports and focuses on their export drive to
the U.S. is a central factor in Japan's economic success.
Is this fair trade?
We have heard from our good and valued neighbors to the
north in great detail about the "unfairness" of the New Economic
Policy from their standpoint.
What our Canadian neighbors fail to mention, however, is
that their basic balance of payments surplus has averaged 1.2
billion dollars annually over the last five years.
What they also tend to overlook is that the patently onesided automobile agreement contributed to a swing of over
800 million dollars in our trade balance. While we impose no
tariffs or barriers on Canadian exports of automobiles, Canada
imposes a 15 percent tariff on individual purchases of U.s.
automobiles. Although Canadian manufacturers may import American
automobiles duty-free, this is only if they meet certain minimum
Canadian production requirements.
These provisions of the automobile agreement were intended
as "temporary" safe~uards for our Canadian friends, which may
have been appropriate at the time the agreement was negotiated.
For the past three years we have been negotiating for the removal
of these "temporary" safeguards, but to no avail . . . this despite
Canada's continuing large balance of trade surplus with the United
States -- a huge $1,880 million in 1971. Is this fair trade?
Also, notwithstanding the balance of trade which is now so
favorable to Canada, our friends to the north continue to be
considerably less liberal than the United States in granting
exemptions to returning tourists. Here again we have an example
of a measure which might have been "temporarily" justified at the
time it was introduced, but which is no longer supportable in the
light of today's realities. Is this consistent with a Doctrine
of Fairness?

- 8 The Canadians likewise continue to insist on retaining
other trade advantages which are a carryover from a bygone
era when we were in a position to, and did, assist unstintingly
our northern friends.
Is this consistent with a Doctrine of Fairness?
At Home--Treasury's Role in Combatting
Unfair Trade Practices
Against this backdrop, there are very positive measures
this Administration has already taken at home to rectify our
trade imbalance and protect jobs in the U.s.
From the inception of President Nixon's Administration, the
Treasury Department has vigorously attacked discriminatory
pricing techniques of foreign exporters. Treasury and its
Bureau of Customs have accelerated and expanded the use of
statutes specifically designed to protect U.S. industry
against unfair foreign competition. We have institutionalized
the supervision of the administration of the Antidumping Act
and the countervailing duty statute and other aspects of
tariff and trade relations by setting up an Office of Tariff
and Trade Affairs in the Office of the Secretary.
The Antidumping Act is designed to prevent injurious
international price discrimination--typically, selling in
the U.s. market at prices lower than in the foreign home
market. The countervailing duty statute is designed to
counteract and prevent foreign subsidies on exports to the

U.S.
The Treasury, under this Administration, has rejuvenated
what was largely a moribund Antidumping Statute. We have
significantly increased actions under this statute in the
past three years. We have eliminated loopholes. And we have
expedited consideration of complaints from domestic
manufacturers by adding manpower and streamlining procedures.

- 9 -

In short, Treasury is now administering the Antidumping Act
more nearly in the manner intended by Congress. This is
what industry has a right to expect. But more is needed.
Perhaps, criticism from abroad had to be expected.
But, the point is that these actions are taken and justified
in defense of fair trade--and without a sense of fairness,
the prospects for freer trade would be bleak.
Now, we are studying possible refinements and expansions
of the use of these measures which protect U.S. industry
against unfair competition. In new proposed antidumping
regulations which were published last week, we moved one step
further in our plan to clarify and tighten further the procedures
of the Antidumping Act.
Amendments of our Antidumping Act and countervailing duty
statute may be required to achieve freer and fairer competition
in international trade. And, once the long-range adjustments
of tariffs, quotas, and other barriers are accomplished, these
same measures can serve to maintain the integrity of those
agreements.
International Reforms
In analyzing what we can do to enable U. S. producers
to compete more effectively under fair rules of international
trade, we must of necessity examine closely the implementation
of those rules and even question the nature of the rules
themselves.
We face a situation in which such basic GATT rules as
most-favored-nation treatment are increasingly violated.
We are also concerned that foreign dumping and subsidizing
of exports to third countries have the effe.ct of freezing
U.S. manufacturers out of these markets. Moreover, while
we favor U. S. capital investment abroad on as liberal terms
as our balance of payments allows, we cannot continue to
permit U. S. capital to create jobs abroad if domestic U. S.
manufacturers are prevented by discriminatory barriers from
selling in these markets on equal terms.

- 10 If the GATT itself proves unable to face up to the
realities of today's world, and we hope that it can measure
up to its responsibilities, we may have to give thought to
other ways of meeting the needs.
If we are to reach our
goal of a bright new international future, the rules and
procedures of the past must be adapted to the world of the
1970's.
There is clearly a need for an international forum
or forums in which the interrelationship of all the factors
affecting international economic matters--monetary, tax,
and trade--can be discussed, not piece-meal, but as part
of a whole problem of economic health for all participating
nations.
secretary Connally, in his March 15 remarks, stressed
the need to recognize such links in the international economy
when approaching the issue of monetary reform.
Indeed, the international discussions of last fall,
following the president's declaration of his New Economic
Policy, were successful in achieving the recognition of the
interrelationship between international monetary and trade
matters. Accordingly, the President placed in the hands
of Secretary Connally, his Chief Economic Spokesman, the
broad responsibility and negotiating authority to do the job.
secretary Connally has commissioned Under Secretary
Volcker to discuss with our principal trading partners the
development of an appropriate forum or forums.
Under
Secretary Volcker has recently talked with his colleagues
in Europe and Japan regarding this matter.
Implementation Versus Policy-Making
It has often been said,
"Important as it is to make
policy, it is even more important to implement it."

- 11 -

It could very ·well be that more forceful administration
of the Antidumping Act and countervailing duty law in
earlier years ·would have eased our problems today. I can
well remember my confirmation hearing when each and every
question of the Senate Finance Committee dealt with these
two statutes and whether I intended to enforce them. For
months thereafter, the same Senators were telling me,
"You have those statutes, use them." Well, this Administration
has used the Antidumping Act effectively, and as I
mentioned, is reviewing the countervailing duty law.
But, there are other aspects of implementing trade
policy in day-to-day operations which strongly affect
our international trade and our balance of payments.
The main day-to-day operating bureau in the U. S.
Government affecting international trade is the Bureau of
Customs. Secretary Connally has directed that the trade and
tariff aspects of that Bureau's operations be given the
highest priority. This included not only the operating
responsibilities of the Bureau of Customs in the area of
antidumping and countervailing duty, but also its role in
classification and valuation of imported merchandise,
administration of quotas and marking requirements, prevention
of smuggling, monitoring voluntary restraint arrangements,
and investigation of commercial frauds.
We also have underway a Treasury study to analyze the
data that is available in international trade matters. Here
again, the Bureau of Customs is the prime source for data
regarding trade matters and yet, for analyzing and
interpreting that data, its resources have not heretofore
been fully utilized. This also we are moving to correct.
The Future
In summary, President Nixon's Administration has moved
forcefully to improve our international trade and monetary
position. We have given our anti-price discrimination tools
the most vigorous exercise they have ever had. We have
negotiated the removal of various trade barriers and set the
stage for an overhaul of the international trade mechanisms
in the near future.

- 12 Secretary Connally has demonstrated what can be
accomplished by a single chief economic spokesman for the
President. We are seeking an international forum which will
enable us to deal with the problems in their full depth
and perspective. And we have identified the need within
the Executive Branch to institutionalize these capabilities.
The President has made it clear that he intends to meet
the challenge of the future by stimulating our economy to
ensure our continued efficient and competitive position in
the world. This means that inflation and unemployment in
the United States will be reduced while investment in new
plants and equipment by the private sector are stimulated.
While building this stronger economy at home,we
must remain outward looking and international in our
initiatives overseas. This Administration is committed to
such a course. Of course, our foreign friends and trading
partners must be equally outward looking and international
in their approach to their problems.
As Secretary Connally said when he addressed the
Economic Club of New York last fall:
"We do not intend to become provincial.
We shall not resort to protectionism. We
shall carry our burdens on the international
scene.
But to do so it is essential to
attain an equilibrium in our overall financial
balance with the rest of the world. We seek
no advantage of others. We propose to suffer
no disadvantage. We seek a balance which will
be to the benefit of all the nations."
"At stake are not narrow or selfish
economic goals; beyond a fair balance of
opportunity, we seek none. The basic issue
is much broader.
It is nothing less than
rebuilding the economic foundation for
promoting economic development, military
security, and the free flow of commerce.

- 13 -

"To fail in our effort would be to
fail not only as an Administration, nor
even as a Nation. At stake is nothing
less than the foundation for the freedom
and security of this generation, and
those that follow."
All Americans and all countries must be willing to
make the necessary sacrifices and, as a result, all Americans
and all countries will be beneficiaries.
What we seek are the conditions that will encourage
freer and fairer trade throughout the entire world, develop
growing domestic enterprise and employment, and insure
these gains against the erosion of inflation.
The President's New Economic Policy advances these
goals by laying the foundation for peace with prosperity
throughout the world.

000

The Deportment of the

TREASURY

WASHINGTON, D.C. 20220

TElEPHONE W04·2041

_TION:

FINANCIAL EDITOR

lOR RELEASE 6::30 P.M.

April 24, 1972

RESULTS OF TREASURY I S WEEKLY

BILL OFFERING

The Treasury Department announced that the tenders for two series of Treasury
January 27, 1972 , and
~eother series to be da.ted April 27,1872
, which were offered on A~ril 18,1972,
~re opened at the Federal Reserve Banks today.
Tenders were invited for ~ 2,300,000,000
orthereabouts, of 91 -day bills and for $ 1,800,000,000 or thereabouts, of 182 -d~
bills. The details of the two series are as follows:
bills, one series to be an add1 tional. issue of the bills da.ted

RAOOE OF ACCEPTED
91-day Treasury bills
COMPETITIVE BIDS: _ _.;;.m;.;.;a..;..tur=-i;;.;ngw.-....;J""":Ulz
___.-2;..;.7""',....;1:=;9;..;.7~2__

High

Low
Average
ll~

Price
99.122
99.098
99.112

Approx. Equiv •
Annual Rate
3.473%
:3.568%
:3.51:3%

182-day Treasury bills
maturing October 26, 1972
Approx. Equi v .
Price
Annual Rate
97.988
97.959
97.976

:3.980%
4.0:37%
4.004%

of the amount of 91-da¥ bills bid for at the low price was accepted

'37% of the amount of 182-da¥ bills bid for at the low price was accepted
roTAL TENDERS APPLIED FOR AND ACCEPTED BY FEDERAL RESERVE DISTRICTS:

District
Boston
New York
Rlilade1phia
Cleveland
Rirlunond
Atlanta
Chicago
St. Louis
Minneapolis
Kansas City
Dallas
San Francisco
TOTALS

Accepted
Applied For
$ 19,415,000 $ 7,415,000
1,86:3,075,000
2,976,275,000
15,405,000
15,405,000
21,180,000
21,180,000
1:3,235,000
22,685,000
31,955,000
48,740,000
167,125,000
212,065,000
50,:320,000
59,820,000
24,2:30,000
:32,010.,000
22,255,000
32,520,000
22,250,000
42,250,000
61,675,000
102,675,000
$3,585,040,000

$2,:300,120,000~

Applied For
$ 17,7:30,000
2,59:3,7:30,000
2:3,445,000
21,510,000
5,070,000
27,350,000
187,465,000
37,290,000
32,020,000
22,855,000
28,775,000
125,535 ,000

Accepted
$ 2,0:30,000
1,570,245,000
3,445,000
8,350,000
4,070,000
10,225,000
12:3 ,415 ,000
25,290,000
9,020,000
9,250,000
6,775,000
28,185,000

$3,122,775,000

$1,800,:300,000£1

YmCludes $176,515,000 noncompetitive tenders accepted at
Wmcludes $ 89,160,000 noncompetitive tenders accepted at
Y lhese rates are on a bank discount basis. 'ilie equivalent

the average price of 99.112
the average price of 97.976.
coupon issue yields are
3.59 % for the 91 -day bills, and 4.14% for the 182 -day bills.

The Department of the

TREASURY

WASHINGTON, D.C. 20220

TElEPHONE W04·2041

FOR IMMEDIATE RELEASE

April 25, 1972

TREASURY I S WEEKLY BILL OFFERING
The Treasury Department, by this public notice, invites tenders
for two series of Treasury bills to the aggregate amount of
$4,100,000,000 J or thereabouts, for cash and in exchange for Treasury
bills maturing May 4, 1972,
in the amount of $4,106,755,000,
as follows:
91-day bills (to maturity date) to be issued May 4, 1972,
1n the amount of $2,300,000,000, or thereabouts, representing an
additional amount of bills dated February 3, 1972,
and to mature
August 3, 1972
(CUSIP No. 912793 NXO),originally issued in
~e amount of $1,600,025,000, the additional and original bills to be
freely interchangeable.
182- day bills, for $1,800,000,000, or thereabouts, to be dated
4, 1972,
and to mature November 2, 1972
(CUSIP No. 912793 PK6).

May

The bills of both series will be issued on a discount basis under
competitive and noncompetive bidding as hereinafter provided, and at
~turity their face amount will be payable without interest.
They will
be issued in bearer form only, and in denominations of $10,000,
$15,000, $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 clos ing hour, one-thirty p. m., Eastern Daylight Saving
time, Monday, May 1, 1972.
Tenders will not be received
at the Treasury Department, Washington. Each tender must be for a
minimum'of $10,000. Tenders over $10,000 must be in mUltiples of
$5,000. In the case of competitive tenders the price offered must be
expressed on the basis of 100, with not moce than three decimals,
e.g., 99.925. Fractions may not be used. It is urged that tenders be
made on the printed forms and forwarded in the special envelopes which
will be supplied by Federal Reserve Banks or Branches on application
therefor.
Banking institutions generally may submit tenders for account of
CUstomers provided the names of the customers are set forth in such
tenders. Others than banking institutions will not be permitted to
(OVER)

- 2 submit tenders except for their own account.
Tenders will be received
without deposit from incorporated banks and trust companies and from
responsible and recognized dealers in investment securities. Tenders
from others must be accompanied by payment of 2 percent of the face
amount of Treasury bills applied for, unless the tenders are accompanil
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.
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 reiect 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 decimalE
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 May 4, 1972,
in cash or other immediately available funds or in a" like face amount c
Treasury bills maturing May 4, 1972.
Cash and exchange tender
will receive equal treatment.
Cash adjustments will be made for
differences between the par value of maturing bills accepted in
exchange and the issue price of the new bills.
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 considered to accrue when the bills are sold, redeemed or otherwise
disposed of, and the bills are excluded from consideration as capital
assets. Accordingly, the owner of Treasury bills (other than life
insurance companies) issued hereunder must include in his income tax
return, as ordinary gain or loss, the difference between the price paid
for the 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.
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 fraIT
any Federal Reserve Bank or Branch.

000

The Department of the

TREASURY

WASHINGTON, D.C. 20220

TElEPHONE W04·2041

FOR IMMEDIATE RELEASE

April 25, 1972

WITHHOLDING OF APPRAISEMENT ON CAST IRON SOIL
PIPE FITTINGS FROM POLAND
The Treasury Department announced today that the Bureau of
Customs is instructing Customs field officers to withhold appraisement of cast iron soil pipe fittings from Poland pending a determination as to whether this merchandise is being sold at less than
fair value within the meaning of the Antidumping Act, 1921, as
amended (19 U.S.C. 160 et seq.).
Under the Antidumping Act, the Secretary of the Treasury is
required to withhold appraisement whenever he has reasonable cause
to believe or suspect that sales at less than fair value may be
taking place.
A final Treasury decision in this investigation will be made
within 3 months. Appraisement will be withheld for a period not to
exceed 6 months from the date of publication of the "Withholding of
Appraisement Notice" in the Federal Register.
Under the Antidumping Act, a determination of sales in the
United States at less than fair value requires that the case be referred to the Tariff Commission, which would then consider whether
an American industry was being injured. Both dumping margins and
injury must be shown to justify a finding of dumping under the law.
During the two-year period from January 1970 through December
1971, imports of cast iron soil pipe fittings from Poland were valued
at approximately $250,000.

000

The Department of the

TREASURY

WASHINGTON, D.C. 20220

TElEPHONE W04·2041

ATTENTION:
FOR

F INA..l\JC IAL ED ITOR

RELEASE 6: 30 P.M.

April 25, 1972

RESULTS OF TREASURY '~; MONTHLY BILL OFFERING
The Treasury Department announced that the tenders for two series of Treasury
bills, one series to b~ an additional issue of the bills dated January 31, 1972 , and
the other series to be dated
April 30, 1972
,which were offered on April 19, 1972,
were opened at the Federal Reserve Banks today. Tenders were invited for $500 ,COO ,000,
or thereabouts, of 275-day bills and for $1,200,000,000, or thereabouts, of
365-day
bills. The details of the hro series are as follows:
RANGE OF ACCEPTED
COMPETITIVE BIDS:

High
Low
Average

275-day Treasury bills
maturing January 31, 1973
Approx. Equiv.
Price
Annual Rate
96.780
96.737
96.766

365-day Treasury bills
maturing April 30 , 1973
Approx. Equi v .
Price
Annual Rate
95.593
95.554
95.577

4.215%
4.272%
4.234%

4.347%
4.385%
4.362%

84% of the amount of 275-day bills bid for at the low price was accepted
2% of the amount of 365-day bills bid for at the low price was accepted
ruTAL 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

AEElied For
$ 12,715,000
1,208,140,000
12,735,000
445,000
5,395,000
13,000,000
92,925,000
14,605,000
12,550,000
3,385,000
23,350,000
68,500,000

AcceEted
1,715,000
$
404,340,000
2,735,000
445,000
395,000
3,000,000
46,725,000
3,605,000
10,550,000
2,285,000
3,350,000
20,900,000

$1,467,745,000

$ 500,045,000

AEElied For
12,550,000
2,070,400,000
12,260,000
9,730,000
1,415,000
24,780,000
149,055,000
30,990,000
15,700,000
18,150,000
24,480,000
86,455,000

AcceEted
550,000
$
1,098,900,000
2,260,000
730,000
1,415,000
7,780,000
32,100,000
14,980,000
3,700,000
5,750,000
2,480,000
30,315,000

~ $2,455,965,000

$1,200,960,000

yfucludes $16,015,000
noncompetitive tenders accepted at the average price of 96.766
b/fucludes $29,255,000
noncompetitive tenders accepted at the average price of 95.577
DThese rates are on a bank discount basis. 1he equivalent coupon issue yields are
4.40% for the 275-day bills, and 4.58% for the 365-day bills.

The Department of the

TREASURY

WASHINGTON, D.C. 20220

TElEPHONE W04·2041

@ IMMEDIATE RELEASE

April 26, 1972

TREASURY ANNOUNCES PAYDOWN ON MAY REFINANCING
The Treasury announced today that it will auction $1-1/4 billion of I-year notes and
to $500 million of 9-year 9-month bonds to the public to partially refund $2.4 billion
notes maturing on May 15. The Treasury also said that it will use $700 million of
its available cash to handle the balance of the maturities. Addi tional amounts of the
notes and bonds will be allotted to Government accounts and the Federal Reserve Banks
mexchange for their holdings of the maturing notes, which total $2.6 billion.

up
of

The securities to be auctioned to the public will be:
$1.25 billion of 4-3/4% Treasury Notes of Series E-1973, dated
May 15, 1972, due May 15, 1973, (CUSIP NO. 912827 CRl) with
interest payable on November 15,1972, and May 15, 1973; and up to
An additional $500 million of 6-3/8% Treasury Bonds of 1982, dated

February 15, 1972, due February 15, 1982, (CUSIP NO. 912810 BLl) with
interest payable on February 15 and August 15.

The notes and bonds will be issued in registered and bearer form in denominations of $1,000, $5,000, $10,000, $100,000 and $1,000,000.
Tenders for the notes and bonds will be received up to 1:30 p.m., Eastern
Daylight Saving time, Tuesday, May 2, 1972, at any Federal Reserve Bank or Branch
and at the Office of the Treasurer of the United States, Washington, D. C. 20220;
provided, however, that noncompetitive tenders will be considered timely received if
they are mailed to any such agency under a postmark no later than May 1.
Each tender must be in the amount of $1,000 or a multiple thereof, and must
state the price offered, if it is a competitive tender, or the term "noncompetitive",
if it is a noncompetitive tender. The price on competitive tenders must be expressed
on the basis of 100, with two decimals, e.g., 100.00. Tenders at a price less than
99.76 for the notes and 97.76 for the bonds will not be accepted. Fractions may not
be used. 'I'he notation "TENDER FOR TREASURY NOTES" or TENDER FOR TREASURY BONDS"
should be printed at the bottom of the envelopes in which the tenders are SUbmitted.
Public announcement will be made of the amount and price range of accepted
tenders. 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 $ -::00 ,000
or less for the notes and $ 50 ,000 or less for the bonds will be accepted in full at
the average price (in two decimals) of accepted competi ti ve tenders. The prices may
be 100 .00, or more or less than 100 .00.
(OVER)

-2Commercial banks, which for this purpose are defined as banks accepting demand
deposits, may submit tenders for account of customers provided the names of the
customers are set forth in such tenders. others than commercial banks will not be
permitted to submit tenders except for their own account.
Tenders will be received without deposit from commercial and other banks for
their own account, Federally-insured savings and loan associations, States, politica
subdivisions or instrumentalities thereof, public pension and retirement and other
public funds, international organizations in which the United States holds membershi
foreign central banks and foreign States, dealers who make primary markets in Govern
ment securities and report daily to the Federal Reserve Bank of New York their
positions with respect to Government securities and borrowings thereon, Federal ReseJ
Banks, and Government accounts. Tenders from others must be accompanied by p~ent
5 percent of the face amount of securities applied for.
Payment for accepted tenders must be completed on or before Monday, May 15, 197;
at the Federal Reserve Bank or Branch or at the Office of the Treasurer of the Unitec
States in cash, 4-3/4% Treasury Notes of Series B-1972 or 6-3/4% Treasury Notes of
Series D-1972, which will be accepted at par, or other fUnds immediately available
to the Treasury by that date. Any qualified depositary will be permitted to make
settlement by credit in its Treasury tax and loan account for the amount of securitiE
allotted to it for itself and its customers. Where full payment is not completed in
funds available by the payment date, the allotment will be canceled and the deposit
with the tender up to 5 percent of the amount of securities allotted will be subject
forfeiture to the United States.
The Treasury will construe as timely payment any check payable to the Federal
Reserve Bank or the Treasurer of the United States that is received at such bank or
office by Wednesday, May 10, 1972, provided the check is drawn on a bank in the Federa
Reserve District of the bank or office to which the tender is submitted. Other checks
will constitute payment only if they are fully and finally collected by the payment da
Monday, May 15, 1972. Checks not so collected will subject the investor's deposit to
forfeiture as set forth in the preceding paragraph. A check payable other than at a
Federal Reserve Bank received on the payment date will not constitute immediately
available funds on that date.
Commercial banks are prohibited from making unsecured loans, or loans
collateralized in whole or in part by the securities bid for, to cover the deposits
required to be paid when tenders are entered, and they will be required to make the
usual certification to that effect. Other lenders are requested to refrain from
making such loans.
All bidders are required to agree not to purchase or to sell, or to make any
agreements with respect to the purchase or sale or other disposition of the securitie
bid for unaer this offering at a specific rate or price, until after 1:30 p.m., Easte
DayJight Saving time, Tuesday, May 2, 1972.

The Department 01 the TREASURY
WASHINGTON, D.C. 20220

TElEPHONE W04·2041

FOR RELEASE UPON DELIVERY
REMARKS OF THE HONORABLE EDGAR R. FIEDLER
ASSISTANT SECRETARY OF THE TREASURY FOR ECONOMIC POLICY
BEFORE THE MID-YEAR ECONOMIC OUTLOOK CONFERENCE
OF THE CONFERENCE BOARD
SAN FRANCISCO, CALIFORNIA
THURSDAY, APRIL 27, 1972, 2:30 P.M.
Those of us involved in the financial markets on
a day-to-day basis necessarily and understandably center
our attention heavily on short-term developments. Events
like the latest success or failure of a bond underwriting
and the most-recent 20-basis-point wiggle in the Treasury
bill rate come to be the main focus of our work. Accordingly, anticipating or avoiding or exploiting those
events becomes the purpose of our efforts.
Unfortunately, in this hubbub of our workaday
world, the longer run purposes of the financial system
are frequently lost sight of. We tend to forget that
the basic function of the credit markets is to bring
lenders and borrowers together at minimum cost and with
maximum benefits, not only to the lenders and borrowers
but also to society as a whole. We tend to forget also
that the lenders and borrowers are not merely the government and large private institutions that most of us
represent directly, but include the millions and millions
of individuals who now have or want mortgage loans,
savings accounts, and so on.
As we look back over the past half decade, it is
clear that our financial system has not always served
these longer run purposes well. The most dramatic
examples were the severe disruptions experienced by
the financial markets in 1966 and 1969-70.

C-295

2 -

Looking Ahead
As we look ahead to the next five or ten years,
it is equally clear that we must avoid repeating this
kind of experience.
Both the demand for and the supply
of credit will increase sharply.
To meet our private
and national objectives for housing, pollution control,
productivity enhancement, etc., we will need a financial
system that can channel enormous flows of savings to
a multitude of investors smoothly and efficiently -and without the large and frequent swings in interest
rates that have so dominated the past half-dozen years.
To help us achieve this important function,
I believe we will want to consider carefully the work
of the Hunt Commission (known formally as the President's
Commission on Financial Structure and Regulation), which
was appointed by the President early in 1970 and submitted
its report at the end of 1971.
Without commenting on all
of the Hunt Commission's recommendations, I believe that
some of their proposals can make a very useful contribution to the financial environment in which we will be
living for the balance of this decade.
We have to plan for a financial structure that
will not only have the capacity to accommodate extremely
large flows of credit in the years ahead, but will at
the same time have the flexibility to cope with monetary
restraint -- should it again be necessary -- without
putting undue strain on the mortgage or municipal
securities markets.
We need to keep two primary objectives in mind for
the proper functioning of our financial markets:
1)

As the Hunt Commission recommends, we
must make changes in the financial
structure and its regulatory system in
order to avoid the pressures on some
financial institutions, as well as on
whole sectors of the economy, that are
produced during prolonged periods of
monetary restraint.

- 3 -

We should increase competition among
financial units and broaden the powers
of the thrift institutions. We want
a financial structure that permits more
branching than is now the case. We want
financial institutions to be free to
offer a wide variety of services in
a highly competitive environment so that
the cost to the consumer is reduced at
the same time that the institutions gain
additional safety through a diversification of assets.

In my view, some of the Hunt Commission's recommendations go a long way toward fulfilling these objectives.
Several of the Commission's recommendations, for example,
would increase competition among financial institutions
by granting thrift institutions the power to offer
several financial services, including checking accounts,
that are now the exclusive functions of commercial banks.
In return, however, those thrift institutions would have
to shoulder the same tax burden and the same regulation
that are now carried by the commercial banking system.
I also think the Commission's recommendation of
empowering financial institutions to branch state-wide
is a sound longer run goal that would have strong procompetitive effects, although the state-by-state impact
would, of course, vary. If adopted, as I believe it
should be, the state-wide branching provision would
broaden the package of financial services available to
the public and to small businesses -- especially in small
communities of such states as Illinois. Entry into local
markets by a number of competing financial institutions
should lower the cost and improve the quality of
financial services.
The Hunt Commission also recommended a number of
worthwhile changes in the regulatory environment. It
would be helpful to place all commercial banks -- whether
national, state, or nonmember banks -- on a common footing,
and also to close the regulatory gap that exists now
between various types of banks and thrift institutions.

- 4 -

These changes would reduce the disruption that IS produced during periods of policy restraint.
As significant as these changes are, however, we
must remember the overriding importance of avoiding the
economic excesses that were responsible for the prolonged
periods of monetary restraint in the latter half of the
1960s.
It is doubtful that any financial structure can
be designed that would not develop a few cracks under
the stress conditions of 1966 and 1969-70.
Accordingly, as we now move into an era of increasing demands for credit, we must be sure that economic
growth remains orderly and balanced, and that it is accompanied by an appropriate mix of monetary and fiscal
policies.
We have seen quite clearly that monetary
restraint, by itself, without supportive budget policies,
requires a great deal of time to work and produces many
hardships and distortions.
A key to the achievement of
our economic objectives is the efficient allocation of
credit by free markets.
This can be attained, however,
only by avoiding the need for excessive monetary restraint.
The business expansion of 1971 and 1972 has, I believe,
been built on a foundation of sound monetary and fiscal
policy stimulus, and it is important that these policies
be kept in tune with the course of economic development
in the future.
The Great Overwithholding Caper
In the context of these longer run goals, the
credit conditions with which we are dealing in 1972 are
unusual in several ways.
One special feature of the
current situation is the swing that has taken place in
expectations for Federal demands on the financial markets.
We started the year anticipating a budget deficit for
fiscal 1972 of $38.8 billion, a level that startled
quite a few people.
Today, however, just three months
later, we are looking for a much lower deficit.
This
development has come to be known in the Treasury (with
a wry and slightly embarrassed smile) as "The Great
Overwithholding Caper."

- 5 -

This situation is a direct outgrowth of the underwithholding of taxes that developed out of the 1969 Tax
Reform Act. To correct this, the December 1971 tax
legislation changed the withholding schedule in an
attempt to bring taxes withheld closer to the actual
tax liability. First, the schedule was changed to
correct the underwithholding that had been taking place
for two-earner families. Second, an additional withholding bracket was added at the upper end of the income
range. And third, where the old schedule had utilized
a straight 13 percent deduction at all levels of income,
the new schedule provides for a maximum deduction of
$2,000.
These changes meant that a majority of workers -almost all who are the only earner in the family and
most high-bracket taxpayers -- would have to adjust their
withholding allowances by filing revised W-4 forms with
their employers. Despite an intense campaign by the
Internal Revenue Service to make this requirement known,
and despite the actual increase in taxes withheld that
almost every employee felt in late January (and it was
this that we expected to have a big impact), the number
of revised W-4 forms submitted was surprisingly small.
The arithmetic of the overwithholding situation,
as best we can estimate it, is as follows: if no taxpayers were to change their withholding allowances, the
revised schedules would result in an increase in taxes
withheld by some $10 or $11 billion annually. Approximately $6 billion of this relates to the single-earner
factor, and the remainder relates to the two changes
that primarily affect higher bracket taxpayers. The
revenue estimates included in the Budget allow $2 billion
for the impact of the new withholding schedules. That
is, it was assumed that most taxpayers would change their
W-4 withholding forms as required, which would neutralize
$8-$9 billion of the maximum $10-$11 billion impact.
It is now clear that our assumption
of the mark. Our experience to date and
suggest that overwithholding in calendar
i.e., for the full year -- will run some
above the Budget estimates.

was far wide
special surveys
year 1972 -$6 to $7 billion

- 6 -

Art Buchwald had a clever article recently that
may give us a clue to the lack of taxpayer response.
Buchwald's column, which was in the form of a prayer to
our Heavenly Father, included the statement,
Those of Your humble servants on
straight salary beg Thee to withhold more
than we owe, so at the end of the fiscal
year we will be granted a much.deserved
refund.
And, dear God, make sure that which
is refunded by the Federal Government is not
taken away from us by the state, and that
which is refunded by the State is not taken
away from us by the county, and that which
is refunded to us by the county is not
taken away by the town.
Evidently there are quite a number of taxpayers who
share Buchwald's point of view, and who are happy to have
a tax reserve accumulate in their friendly IRS "bank
account", despite the fact that they receive no interest.
Fortunately, from the standpoint of economic policy,
there are some built-in offsets to the overwithholding.
First, many taxpayers may have filed new W-4 forms just
these past couple of weeks, after they calculated their
final 1971 tax return and looked at their particular
situation for 1972.
Second, many higher income taxpayers
file quarterly estimated tax returns, and they are likely
to make the needed corrections by making smaller estimated
tax payments, or none at all, while continuing the higher
withholding from their paychecks.
Third, those taxpayers
who have chosen not to file new W-4 forms, and who realize
they are being overwithheld, are not likely to reduce
their consumption patterns downward accordingly.
For
these three reasons, the economic impact of "The Great
Overwithholding Caper" of 1972 will be much less than
might otherwise be expected.
In addition to the tax revenues that have been
generated by the overwithholding, Treasury receipts are
higher than expected.
Both individual and corporate
income tax collections have been coming in stronger than
budgeted.
In total, as we view it today, this increase

- 7 -

in receipts will reduce the Federal Budget deficit for
fiscal 1972 by more than $6 billion compared to our
expectations in January
On the expenditure side of the Budget, I have no
news to report. We are still using the expenditure totals
contained in the Budget last January. The uncertainties
about legislative actions that affect the Budget, notably
the timing of revenue sharing, are still with us. But
however this works out -- whether revenue-sharing funds
(or any others) are disbursed in June or in August -makes little real difference. The only place that there
will be a noticeable difference will be in the Federal
Government's accounting records.
This difference is merely a matter of which fiscal
year the disbursements are recorded in. As to what I would
regard as the important question -- the effect on the
economy and the financial markets -- it appears to me that
there is practically no difference in the impact between
June and August.
The Stabilization Program
Another special feature of the current situation and
a more crucial matter for the behavior of our financial
markets during the remainder of 1972 is the Economic
Stabilization Program and the outlook for inflation.
A successful fight against the price disease will encourage
saving and lending and will eliminate much of the large
inflation premium that is now built into our interest rate
structure.
It is too early to say with any assurance how
successful the stabilization program will prove to be.
The evidence that will enable us to judge the underlying
impact of Phase II is simply not yet available. What
evidence we have for the economy as a whole is summarized
in the table below. From that, I think we can say with
confidence that inflation has been lower since the stabilization program began than it was previously. We cannot,
however, judge what the eventual impact of Phase II will be.

- 8 -

Price and Wage Changes Before and
During the Stabilization Program
(Percent chanze, seasonally adiusted annual rate)

Price or Wage Measure

Six months prior
to the Program:
Feb. to Aug. 1971

During the Program: Aug. 1971
to March 1972

Consumer Price Index
All items
Food
Commodities less food
Services
1/
Rent
I/

2.8
4.9

4.1
5.4
3.7
4.5
3.9

1.2

4.6

3.1

2.3
5.7

1.8

3.5
2.8

Wholesale Price Index
All Commodities
Farm products, processed
foods and feeds
2/
Industrial commodities

6.7

Earnings of Private Nonfarm
Production Workers
Earnings in current dollars
Adjusted hourly
3/
Gross weekly
Spendable weekly 4/
Earnings in constant dollars
Adjusted hourly
3/
Gross weekly
Spendable weekly 4/
1/

7/
~/

6.8
6.1
5.4

2.6
1.9
1.3

6.1

7.0
8.8

3.1

4.1
5.9

Not seasonally adjusted; data contain almost no seasonal movement
Raw agricultural products are exempt from price controls.
Adjusted for overtime (manufacturing only) and for interindustry
employment shifts.
Worker with three dependents.

Source:

Department of Labor, Bureau of Labor Statistics.

- 9 -

It may be useful to review the basic arithmetic
of the economic stabilization program. The Pay Board
started with a general standard of 5.5 percent and the
Price Commission selected a goal of 2.5 percent. These,
coupled with the 3 percent historical trend growth of
productivity, make for a happy combination of consistent
standards -- consistent with one another and consistent
with the goals of the program.
What has happened since then at both the Pay Board
and the Price Commission appears to be in line with their
general goals. Despite some highly publicized wage increases that far exceeded the general standard, and
despite some loosening of that standard by the Pay Board,
the Tier I settlements acted upon by the Board to date
have averaged about 5 percent. From what we hear about
the backlog of cases now at the Pay Board, this figure
may rise slightly, but the best guess at the moment is
that Tier I settlements will remain within or close to
the general standard.
The Price Commission's decisions to date for Tier I
firms have permitted increases that have averaged 3.2
percent of applicable sales. When total sales of those
firms are included in the calculation, the average price
increase drops to 1.6 percent. Moreover, when the sales
of those Tier I firms that have not yet been granted any
price increases are added, the average price increase
is only about 1 percent.
What the underlying impact
of the Commission's action on Tier I firms will eventually
be is thus still difficult to say. Presumably it is
somewhat higher than 1 percent but smaller than 3.2 percent.
More significant for the overall stabilization
program, however, is the forthcoming impact of two recent
developments at the Price Commission. First, the Commission's profit margin rule is taking effect. This rule,
which was always thought of by the Commission as its basic
second line of defense, limits the profit margin of any
company that has been granted a price increa~e to i~s
.
base period level. Thus, if a company's proflt margln rlses
above its base-period level, and if the increase is not

- 10 -

explainable in terms
special factors, the
received may have to
first-quarter profit
this process has now

of a seasonal pattern or other
price increases that the company
be cut back.
With the filing of
reports at the Price Commission,
begun.

The second recent development at the Price Commission will have an even greater impact.
The Price
Commission's rules require that productivity gains be
subtracted from cost increases before any price increase
is permitted.
Until just recently, the Price.C?mmi~sion
has been using company projections on productIvIty In
their calculations.
They found, however, that these . .
figures were too low compared to the kind of productIvIty
performance that we have seen in America~ industry on
average in the past.
Thus, many of the Increases g:anted
by the Price Commission were probably too generous In
terms of the Commission's basic goal.
Accordingly, the Commission is changing its rules.
Instead of using company productivity figures, they are
going to use industry calculations made by the Bureau of
Labor Statistics from data for the past ten years.
This,
they estimate, will reduce the average price increase
that is approved by about one full percentage point -a very constructive change that will contribute importantly
toward meeting our goal for inflation.
These two developments at the Price Commission,
coupled with the pay and price actions taken thus far for
Tier I firms, suggest, to me at least, that the stabilization program will achieve its interim target of cutting the
rate of inflation below 3 percent by the end of the year.
This prospect will, I believe, become more widely accepted
in the months ahead as the indicators of prices and wages
begin to home in on our goal.
I want to emphasize, however, that should we find
that the program is not headed for its target, we will
not hesitate to make whatever alterations in the program
may be necessary.
The Price Commission's action on its
productivity rule is a fine example of how the program
will be changed to make sure that the goal is met.

• 11 -

Current Financial Prospects
Over the remainder of the year, developments in
the financial markets are likely to reflect most importantly two features of the current situation. First,
although business activity is rising rapidly, there is
still a significant volume of unused resources -- both
labor and capital -- available in the economy. Accordingly, the flow of new money and credit into the economy
can and will be relatively larger than would be appropriate in more normal circumstances, and credit conditions
generally can be more accommodative.
Second, despite the stabilization program the financial markets are still feeling the hangover brought on by
the monetary overindulgences and other economic excesses of
the middle and late 19605. Accordingly, long-term bond
yields still retain a large inflationary premium.
The implication of these two features of the present
situation is, it seems to me, that large flows of credit
should continue to flow smoothly through the financial
markets this year without wide movements in the general
level of interest rates, particularly long-term yields.
Normally, a vigorous business expansion brings with it a
marked rise in interest rates. In the present situation,
however, the fact that the economy is still a considerable
ways from full employment -- in the financial markets as
well as the labor markets -- and the prospect that inflation will slow suggest a noticeable absence of upward
pressures on long-term yields.

000

The Department of the

TREASURY

WASHINGTON, D.C. 20220

TElEPHONE W04·2041

MEMORANDUM TO CORRESPONDENTS:

Ap r i 1 27, 197 2

Attached is a letter from Treasury General Counsel
Samuel R. Pierce, Jr. to Senator William Proxmire in
response to a request by the Senator that Secretary
John B. Connally, Chairman of the Emergency Loan
Guarantee Board, appear before the Senate Committee
on Banking, Housing and Urban Affairs to discuss the
question which has been raised concerning the authority
of the General Accounting Office to review the decisions
of the Board.

000

Attachment

C-297

THE GENERAL COUNSEL OF THE TREASURY
WASH I NGTON. D.C.

20220

April 27, 1972

Dear Senator Proxmire:
This is in response to your request that Secretary Connally,
as Chairman of the Emergency Loan Guarantee Board, appear before
the Senate Committee on Banking, Housing and Urban Affairs to
discuss the question which has been raised concerning the authority
of the General Accounting Office to review the decisions of the
Board.
Contrary to Mr. Staats' statement of April 12, 1972 that the
Board has denied the General Accounting Office access to its books
and records, the Board has cooperated with the GAO in permitting
it to review all of the Board's financial records involving its
receipts and expenditures. Thus, the statement that the Board has
denied the GAO access to any of its records is simply inaccurate,
and we are anxious that the record that has been developed to date
in this matter be clarified. I should also add that the GAO has
complete and total access to all of Lockheed's records, including
all documents furnished to the Guarantee Board and to the participating banks. The GAO has a copy of the Credit Agreement, the
Security and Pledge Agreement, and the Guarantee Agreement, which
cover every aspect of the loan guarantee. These documents are also
publicly available from the SEC.
The only thing that has been denied to the GAO is access to
the Board's records pertaining to its decision making process.
These include the Board's minutes, containing expressions of
judgments of the three-man Board and related internal memoranda
and correspondence. In November, 1971, the Emergency Loan
Guarantee Board requested and received my advice on whether the
GAO has authority to review the Board's records pertaining to its
decision making process. I advised the Board at that time -- and
continue to believe -- that the GAO has no such authority.
This advice was based on legal research, including a review
of the pertinent legislation and its legislative history. In my
opinion, Congress did not intend for the Board's decision making

- 2 -

process to be reviewed by the GAO when it enacted the Emergency
Loan Guarantee Act. It vested this authority solely in a highly
responsible three-man board consisting of Secretary Connally,
Chairman Burns of the Federal Reserve Board, and Chairman Casey
of the Securities and Exchange Commission. As required by the
Guarantee Act, the Board will fully disclose its operations and
the bases for its decisions when it reports to Congress in August
of this year.
Since the Board's action in this matter was based on my legal
advice, the Chairman of the Board has asked me, in my capacities
as Executive Director of the Board and as its General Counsel, to
appear and explain the legal basis for the Board's position. I
shall be happy to do so on May 4, 1972, or on a later mutually
convenient date.

SAMUEL R. PIERCE, JR.

The Honorable
William Proxmire
United States Senate
Washington, D.C. 20510

The Department of the

TREASURY

WASHINGTON, D.C. 20220

TElEPHONE W04·2041

FOR RELEASE ON DELIVERY
STATEMENT BY THE HONORABLE CHARLS E. WALKER
UNDER SECRETARY OF THE TREASURY
BEFORE
THE SUBCOMMITTEE ON MANPOWER OF THE HOUSE COMMITTEE
ON POST OFFICE AND CIVIL SERVICE
THURSDAY, APRIL 27, 1972, 10:00 A.M., EST
Mr. Chairman and Members of the Subcommittee:
It is a pleasure to appear before you today in support of
H.R. 3807 regarding executives in the Executive Branch of the
Government.
I will not describe the proposed Federal Ex~cutive Service.
Chairman Hampton of the Civil Service Commission has done this
admirably both here and in the Senate. In his statements he
also discussed major advantages of the proposed system. I
agree with his discussion and wish only to add my own
observations at this time.
The management of any organization is only as effective as
the managers who direct its operations. And I can say through
hard-earned experience that flexibility is one of the most
important assets of anyone who heads an organization and has to
meet the needs of the moment. The proposed plan, in its
various provisions affecting the Federal Executive Service, has
just the flexibility that a good manager needs
0

I would like to endorse some of these flexible features as
they relate to a large Cabinet Department such as the Treasury
Department.

C"296

First, I like the idea of a system which recognizes that
cream comes to the top -- that the word "executive" means a
person at the top levels of government regardless of the
particular position he holds in the organization. I look
forward to the prospect of being able to utilize virtually any
executive on almost any kind of job that needs to be done. I
don't want to worry about preparing documents, especially a
position description, to try to find someone to do a particular
job, and then prepare other documents to justify to the CSC
the someone who is selected. I would like instead to feel free

- 2 -

to call on a "pool"of competent executives and utilize any of them
as needed without the delays now experienced in trying to "qualify"
someone for a particular job which is fixed in the "concrete" of a
position description.
Second, I think it is a good idea to assure those who have
made careers of the government service that they will be given the
opportunity, through a truly merit process, to reach the top levels
of government and be assigned to work which in many cases was
given only to noncareer executives in the past. And it is
especially desirable that executives can be given a variety of
assignments that will challenge and stimulate them.
In this connection, I also favor the proposed provision for
temporary "noncareer" executives who will be selected from
industry and universities to take short-term specialized assignments without endangering the tenure of the career executives and
without going through the long processes now involved in
selection, even with the excellent cooperation of the CSC. And,
finally, I applaud the provision to have also on board noncareer
executives who reflect prevailing Presidential and Congressional
policy. The ability to use career or noncareer executives on jobs
simply because they ~ executives would provide maximum
flexibility to agency heads.
In our experience in Treasury in the last few years we have
had constant changes in program emphasis. From the gold drain to
today's economic stabilization program, we have had serious
economic problems to face but we have had to struggle to get
qualified people quickly or to get supergrade slots easily at the
particular moment of need. The kind of system proposed here which
provides for annual identification of anticipated needs would have
made it much easier to furnish successive Secretaries of the
Treasury with qualified people almost immediately. As it is, we
have frequently had to juggle supergrade slots and have often had
to "rob Peter to pay Paul." We have taken important supergrade
slots from one office when they became vacant and placed them in
another office because an unnatural priority system was necessary
to get a particular program started, or because we might lose a
likely candidate.
For example, when the Bureau of Customs was reorganized and
regional offices set up in 1964, we had to drop several supergrade
jobs in the headquarters office and place them in the regional
offices in order to get them started. But the people who worked in
the headquarters office were over the field offices -- except in
grade. It was an inequitable situation and not all the inequities
have been cleared up yet. Such a practice is disruptive and timeconsumiag as well as inequitable to the people whose expected
supergrade jobs are snatched away from them.
In the proposed FES, agencies would have more freedom to base
supergrade need! un ~isting and foreseeable programs.

- 3 -

I recognize the need of having always on board,
knowledgeable, experienced career employees who are
available to furnish background information needed to
develop administration policies or to take actiono The
proposed Federal Executive Service provides for a
reasonable ratio between career and noncareer employees
which will help assure continuity for those actions and
programs that do not reflect party preferenceso This,
too, is an excellent feature because in Treasury so many
of our jobs require background knowledge and expertise
acquired through experience over a period of timeo
Another feature of the proposed system which I like
because it would be most useful to the Secretary and others
in the Treasury Department is the appointment procedureo
Those of us responsible for carrying out Presidential
and Congressional programs have got to be able to get people
working immediately - before they can change their minds or
before someone can change their minds for th ern
By being
able to appoint noncareer executives comparatively freely,
essential programs can get started fastero
0

As a manager, I am particularly pleased with the proposed contractual aspects of the proposed serviceo It is
a businesslike approach to holding competent career executives o
Unfortunately, from tUne to tUne, persons get into executive
positions through accident or sheer longevity, but they are
not able to carry out their assignments effectivelyo The
proposed 3-year employment agreement would at least help to
remove the less competent person from an executive position
more easily and more humanely than at present. Furthermore,
the group of executives who have their contracts renewed will
stand out as a nucleus of demonstrably informed, competent
career-civil servants available to undertake any kind of
assignment and provide invaluable background experienceo
Certainly one of the most attractive features of the
proposed plan is the flexible pay system which is geared to
the individual himself, to his availability on the labor
market, and to his contribution to governmento Frankly, from
a management point of view, I would like to see it even more
flexi~le than proposed, but, being in the Treasury Department,

- 4 -

I recognize that there is a need for some fiscal control
Therefore, I cannot object too much to having the esc and
Office of Management and Budget fix an average executive
salary which cannot be exceeded but which can be adjusted
from time to time for emergencies - within established
minimum and maximum rateso
0

Provisions for (1) maximum utilization of executive
skills to meet any needs rather than those particularized
in organization charts and other documents; (2) obligatory
training and development opportunities and (3) appeal rights
of career executives who may object to certain assignments,
are also desirable but not only from the point of view of
management: they are desirable from the point of view of the
executive himselfo Such provisions are, in fact, essential
to a well-rounded executive employment system o
One provision which I strongly favor is the annual requirement to analyze agency needs for executives based on
present and anticipated agency programs, budget, staffing
and legis1ation o This will compel all heads of agencies
to look at their agencies critically and analytically in
order to assure the necessary executive help in the ensuing
year o It should also help to reduce the number of frantic
requests for executives on an emergency basis throughout
the yearo
I believe that the creators of the proposed system
deserve much praiseo They have provided a plan which carefully blends a manager's dream of efficiency with an
individual's image of achievement -- by permitting maximum
flexibility in getting a job done while at the same time
allowing maximum opportunity for self-development o

The Deportment of the

TREASURY

WASHINGTON, D.C. 20220

TElEPHONE W04·2041

FOR IMMEDIATE RELEASE

April 27, 1972

TREASURY ANNOUNCES IMF DRAWING
The Treasury annoo nced today that, in a unique transact:Lon
related to repayment of indebtedness by the United Kingdom to
the International Monetary Fund, the United States on April 28
will draw approximately 83 million pounds sterling from the
International Monetary Fund. The drawing is in an amount
equivalent to $217 million at the prospective new dollar
parity, and equivalent to SDR 200 million.
The technical effect of this U. S. drawing is to reduce
the Fund's holdings of sterling and, thereby, to reduce, by
an equivalent amount, the repurchase obligation of the United
Kingdom to the Fund. In this manner, the transaction contributes to the total repayment by the United Kingdom of approximately $1.1 billion owed to the Fund by that country prior to
this drawing.
Pending its ultimate disposition, the sterling acquired
by the United States enters into our monetary reserves.

000

C-298

The Deportment of the

TREASURY

WASHINGTON, D.C. 20220

TElEPHONE W04·2041

FOR RELEASE UPON DELIVERY
REMARKS OF THE HONORABLE EDWIN S. COHEN
ASSISTANT SECRETARY OF THE TREASURY FOR TAX POLICY
BEFORE THE
FEDERAL TAX INSTITUTE OF NEW ENGLAND
JOHN HANCOCK HALL, BOSTON, MASSACHUSETTS
SATURDAY, APRIL 29, 1972, 12:15 P.M.
It is a great personal pleasure to me to return to Boston
to review with this distinguished audience the status of our
work at the Treasury on some important tax matters and to
share with you a few thoughts on tax issues that are currently
being discussed.
Two years ago you were kind enough to invite me to speak
to you at this luncheon, and the program indicated that I was
to give a half-hour talk to end at 2:15.
duction I was given ended at 2:12.

The gracious intro-

It was not easy for a

fellow with a Southern drawl to compress a half-hour speech
into three minutes, and I am grateful to you for inviting me
back for my remaining 27 minutes.
There has been a good deal said of late in the political
campaigns and elsewhere on the subject of taxes and the need

C-299

- 2 for further changes.

It is scarcely necessary to say that we

must constantly be watchful of the operation of our tax system,
and use our best efforts, research and debate to make it as
fair and equitable as possible and make it best serve the
economic and social well-being of the Nation.
Undoubtedly changes can be made and should be made to
correct some deficiencies in the tax system, to continue the
process of improving its equity, and particularly to simplify
this grievously complex law.

To accomplish this end, however,

we need to make calm and objective appraisals of available
data, and to weigh carefully the alternatives and the practical consequences of possible revisions.

On a matter so

vital we cannot afford to fall prey to political promises and
rhetoric uttered in the heat of a campaign year.
Three months after taking office, the President sent to
Congress in 1969 wide-ranging tax reform proposals.

Almost

the entire year 1969 was spent in public hearings, executive
sessions, debates and drafting on the Tax Reform Act of 1969.
On December 30, 1969 the President signed the bill into law.
As the Congressional Committee reports stated, there was "no
prior tax reform bill of equal substantive scope."

- 3 -

Another major tax bill, the Revenue Act of 1971, was
signed into law last December 10.

In addition to restoring

the Job Development Investment Credit and affirming with some
modifications the Asset Depreciation Range System established
in Treasury regulations earlier in the year, the bill made
important individual income tax and excise tax reductions.
Effect of Extensive 1969-1971 Tax Changes
A charge has recently been made that the changes in the
tax laws and regulations since the beginning of 1969 have
favored corporations to the disadvantage of individuals.
is not so.

This

Treasury estimates show that the tax reform and

relief provisions of the 1969 Act, the ADR regulations and
the 1971 Act in combination have had the following effect:
For the four calendar years 1969-1972 they will have
increased corporate income taxes by an aggregate
of $4.9 billion;
decreased individual income taxes by an aggregate
of $18.9 billion; and
decreased excise taxes on automobiles and telephones,
mostly affecting individuals, by $3.5 billion.

- 4 -

For the current calendar year 1972 they will have -decreased corporate income taxes by $0.4 billion;
decreased individual income taxes by $12.0 billion;
decreased excise taxes by $2.6 billion.
For the l2-year span from 1969 through 1980, assuming
economic growth, they will have -decreased corporate income taxes by an aggregate
of $8.1 billion, an average of $0.7 billion a
year;
decreased individual income taxes by an aggregate
of $140.7 billion, an average of about $11.7
billion a year;
decreased excise taxes by $19.7 billion, an average
of about $1.6 billion a year.
Thus it cannot properly be said that the benefits of the
1969-1971 changes have
viduals.

f~vored

corporations as against indi-

Substantially all the reductions have gone to indi-

viduals.
I think it interesting to observe that the general reductions in the individual income tax levels made periodically
in the past decade (1964, 1969 and 1971) have had the overall

- 5 -

effect of keeping the effective federal individual income
tax level at about 10.6 percent of total adjusted personal
income, roughly the level which it has averaged for the past
15 years.

(It has varied from a low of 10.0 percent in 1965

to a high of 11.6 percent in 1969, averaging just below 10.9
percent).

Had these reductions not been made, the effective

income tax rate would today have risen to 14.7 percent of
total personal income, almost a third higher than had previously existed.

This would have occurred because of the

operation of our progressive income tax structure on the
increasing personal incomes that have resulted from inflation and rising standards of living and education.

The tax

reductions have counterbalanced these factors, leaving the
net effective rate roughly the same.
In considering the fairness of the changes made since
the beginning of 1969 it is particularly important to note
how the individual income tax reductions they produced have
been distributed among the different income classes.
is shown in the table below:

This

- 6 -

Effect on Individual Income Tax Liability of Tax Reform
Act of 1969, ADR and the Revenue Act of 1971
Full-year Effect at Calendar Year 1971 Levels of Income
Adjusted
gross
income
class
($000)

Tax
under
1968
law

Tax
Change under 1972
under
law from 1968 law
.
1972
Amount
: Percent
law
1/
( .............. $ millions .......... ) ( ... %••• )

0-3
3 5

1,469
3,488

265
1,995

-1,204
-1,493

-82.0
-42.8

5 -

5,543

4,025

-1,518

-27.4

7 -

12,263

10,112

-2,151

-17.5

10 -

22,065

19,202

-2,863

-13.0

15 -

15,287

13,891

-1,396

-9.1

20 -

19,375

18,377

-998

-5.2

50 - 100

7,344

7,217

-127

-1.7

100 and over

7,131

7,658

+527

+7.4

93,965

82,743

-11~222

-11.9

Total

Office of the Secretary of the Treasury
Office of Tax Analysis

April 26, 1972

1/ Excluding surcharge.
Note:

Figures are rounded and will not necessarily add to
totals.

- 7 Taking into account all the changes for these three
years, we find from this table that the income tax burden
has been reduced in all of the income classes below the
level of $100,000.

The greatest percentage reduction of

tax liability is 82 percent in the zero to $3,000 income
class; and taxes have been reduced in gradually decreasing
percentages in each higher income class to the $50,000 to
$100,000 income level, where the reduction is only 1.7
percent.
But the 1969-1971 changes have increased the tax
liability of the income class above $100,000 by 7.4 percent.
Thus in these three years from 1969 to date the greatest
percentage reductions have been made in the low income groups,
substantial reductions have been made in the middle income
groups and yet significant increases have been made in the
income levels above $lOO;OOO.These

results reflect major

achievements in eliminating previous inequities and producing
a fairer system.
The large decreases in tax on the low income groups occurred primarily because of the President's 1969 recommendation to Congress of the Low Income Allowance to remove from

- 8 the federal income tax rolls substantially all persons below
the poverty levels.

This principle was adopted and has

been followed and updated in the 1971 Act.

Thus for 1972

and subsequent years single persons earning less than $2,050
will pay no federal income tax nor will a family of four pay
tax if it earns less than $4,300.

I think this principle is

a major step forward in achieving equity in the federal income
tax structure.
Persons With High Adjusted Gross Income
Much has been said recently about the fact that about
100 individuals in the United States in 1970 had "adjusted
gross incomes" above $200,000 without paying any tax.
have argued that this handful

Some

of cases shows that the system

is unfair and that the rich do not pay taxes.

I shall talk

further about those few cases in a moment.
But I do not think we should let that small group of
individuals obscure the fact that, according to our preliminary data, there were in 1970 a total of some 15,300 persons
in the country with adjusted gross incomes above $200,000,
and that some 15,200 of them paid an average federal individual income tax of $177,000 each -- a total of some $2.7 billion.

- 9 -

This is an effective rate of 44.1 percent of their adjusted
gross income and 59.5 percent of their taxable income.
From this it is perfectly clear that in general the
rich are paying federal income taxes in large amounts.

And

they are paying more than they were in 1968 while other
taxpayers are paying less.
Let me now refer to the cases of the few nontaxable
persons with adjusted gross income above $200,000.

The

statistical data now shows that there were 106 such persons.
The number of these nontaxable persons was down from 300 in
1969.

The adjusted gross income on these 106 returns was

less than 17 percent of that on the 300 returns in 1969.
We have now done some further analysis of these returns
and have classified them according to the five principal
causes of nontaxability:

foreign tax credit, deductions for

taxes paid, deductions for charitable contributions, deductions for interest payments, and miscellaneous deductions.
As to the seven cases in which nontaxabi1ity was due
primarily to the foreign tax credit, it is interesting to
note that these seven taxpayers paid income tax to foreign
countries of about $1.5 million, an average of more than

- 10 $200,000 tax per taxpayer.

This represented an effective

foreign income tax rate of 62 percent of their adjusted gross
income and 70 percent of their taxable income.

It is clear

that while these individuals were not required to pay U. S.
income tax, they were subjected to heavy income taxes abroad.
Another group of 12 individuals whose adjusted gross
income aggregated $4.1 million, paid no 1970 federal income
tax because their deductions for state and local taxes exceeded $4.1 million.

Substantially all these deductions were

for state income taxes.

A review of these returns suggested

that these individuals had large amounts of nonrecurring
income in 1969 on which they paid substantial state income
taxes in the spring of 1970, which were deductible on their
1970 federal income tax returns.

To check out this hypothesis,

we have now obtained data as to the 1969 federal income tax
returns of 11 of these 12 individuals and have found that the
11 persons paid 1969 federal income tax totalling about $18
million, an average of more than $1.6 million of tax per
individual.

The fact that they paid no federal tax for 1970

after paying huge taxes for 1969 is simply a result of the
cash basis of accounting which is used by most individuals,

- 11 -

and the fact that the state taxes on their large
1969 income were paid in the spring of 1970.

To change the

tax laws to overcome this result for these dozen individuals
would produce undue complexities and require additional expense for many thousands or millions of other taxpayers.
This would not be worth the effort.

No tax system can achieve

perfection, certainly not without incredible complexities and
expense.
Another 12 cases involved individuals with adjusted gross
income of $8.5 million whose principal deductions consisted
of charitable contributions aggregating $4.2 million.

The

1969 Act terminated the "unlimited charitable contribution
deduction" provision of prior law and set the contribution
deduction limit at 50 percent of adjusted gross income.

was recognized that if charitably inclined individuals can
deduct their contributions up to one-half of their adjusted
gross income, there will necessarily be a few cases in which
other deductions for interest, taxes, medical expense, etc.,
will exceed the other half of adjusted gross income and
result in nontaxability.
In 55 of the cases interest paid was the principal deduction, aggregating $17.3 million.

But in these returns dividends

- 12 and interest received aggregated $16.5 million.

In general,

when interest is paid to borrow money needed to make investments on which dividends and interest income is received ,
the interest paid should be charged against the interest and
dividends received and only the net profit should be reflected
in adjusted gross income.

If a man pays interest in his

business, only the net profit goes into adjusted gross income.
But for simplicity sake, the tax law for many years has said
that where this occurs in an investment situation, the gross
dividend and interest income is reflected in his adjusted
gross income -- and makes him appear on the surface to be
in a high income category -- while the offsetting interest
expense that he incurs is classed as a personal deduction
along with taxes, charitable contributions, casualty losses,
alimony, etc.

Possibly we should change the definition of

"adjusted gross income" so that net investment income is
treated like net business income.
There are, however, some cases in this group in which
the interest paid exceeds the investment income by substantial
amounts.

In these cases, as well as some others, there are

indications that the minimum tax may be due for 1970 and may
be assessed on audit.

For 1972 and subsequent years, investment

- 13 interest paid that exceeds by more than $25,000 the taxpayer's
investment income may be disallowed as a deduction under the
1969 Tax Reform Act.
The final category consists of 20 cases in which the
principal deduction was miscellaneous deductions, aggregating
$10.5 million.

Of this total, more than $5.5 million represents

items described in the returns generally as loss of securities
pledged to secure loans, losses on guarantees of loans, and
payments in settlement of litigation.

Another $2.2 million of

miscellaneous deductions represents an aggregate of accounting,
bookkeeping and professional fees, and investment counsel and
management fees.

If these items are properly deductible --

and this can only be determined after audit

it is because

they represent expenses of earning business or investment income and may indicate that we should change the definition of
"adjusted gross income" to drop these people out of the high
income category.
To illustrate, consider one of the returns that reported
as the only income more than $400,000 of gambling gains and
reported an equal amount as gambling losses under miscellaneous
deductions, for a net income of zero.

This return, too, will

- 14 be audited; but if the return stands up under audit, we might
consider levying an amusement tax, but the income tax is
supposed to apply only to the successful gamblers.
Now I do not mean to imply from this review of the 106
cases that there is not a constant need for vigilance and
improvement in the tax laws.
definite need.

Most assuredly there is a

I mean only to indicate that there is rel-

atively little guidance to be gained from these particular
returns in relation to major issues of tax policy, and the
attention that has been devoted to them is unwarranted and
unwise.
Revenue and Other Effects of Recent Proposals
There have been a number of proposals and bills introduced in the Congress to change the tax laws.
deserve serious consideration.

Some of these

But many of them have been

advanced with claims that by closing so-called "loopholes"
in the tax law we can immediately raise vast sums of additional revenue.

These claims, I submit, are quite exaggerated.

Moreover, in many instances sudden tax changes made without
substitution of other programs would damage the economy and
endanger important social goals.

- 15 Let me illustrate.

One of the proposals made in a

number of the bills recently introduced in the Congress is
to tax capital gains at death.

It has been asserted that

this will raise in the first year some $2 to $3 billion in
revenue, and that this was recommended in 1968 by the then
Treasury staff.

While the previous staff headed by my

distinguished predecessor, Stanley Surrey, did recommend
taxing capital gains at death, it also recommended (as do
most of the pending bills) that only the gains accruing
after the enactment of the new law would be taxed.

As a

result there would be relatively little revenue effect for
some years to come.
Moreover, the previous Treasury staff proposals recommended that the revenue gains in future years from taxing
capital gains at death be used to reduce the burden of the
estate tax, so that the total tax burden on persons dying
would not be increased but would be reallocated among them.
All of this requires careful thought and attention and a
balanced program.

In any event, it is not likely to produce

signif.icant short-term revenue yields.
Consider the proposals made in some of the bills with
respect to the taxation of interest on state and local

- 16 obligations.

One of these bills would permit state and

local governments at their option to issue taxable securities, with some amount -- ranging from 25 percent to
50 percent of the interest payments

to be reimbursed to

the states by the federal government.

There may well be

merit in this proposal, and indeed a form of this proposal
was contained in the 1969 House bill; but it is clear that
it will not raise any net revenue for the federal government
in the short term at least, since it would only apply to
future issues.

Moreover any proposal would inevitably re-

quire an alternative subsidy, which also would prevent any
substantial net revenue gain.
On the same subject, many of the proposed revisions of
the minimum tax would include in the list of preferences
subject to that tax interest on state and local bonds.

The

Congress concluded in 1969 that this should not be done, and
my impression was that this was a very firm conclusion.

But

even if it were done, it is unlikely that such a rule would
be applied to existing obligations; and the short-run revenue
yield from including interest on future obligations under a
minimum tax would be negligible.

- 17 Again, there are various proposals to limit the tax
benefits accorded to real estate investments.

In 1969 we

cut back extensively on these benefits to the extent of
almost $1 billion in estimated long-run annual revenue yield,
but we exempted from the new restrictions investments in
housing.

The housing exception was made because the Housing

Act of 1968, which set as a goal the production of some
2-1/2 million housing units a year, was built around the
then existing income tax incentives for housing construction.
We have recently exceeded the 2-1/2 million housing unit
goal for the first time in history, and it is a bright spot
in the current economic recovery.
Granted that there are problems with respect to the tax
treatment of housing, it would be unwise at this point to
remove these tax incentives without having a new governmental
program as a substituteo

If changes are to be made, they

require a careful evaluation of the effect of the 1969 Tax
Reform Act in the nonhousing field and the development of
carefully designed substitute housing programs.

These are

difficult and time-consuming matters.
There are further tax proposals to collect additional
revenue by repealing the recently approved Asset Depreciation

- 18 Range System and/or the Job Development Investment Credit.
We have just been through a long period of analysis and
debate on both ADR and the investment credit, and both were
approved by the Congress.
Before these depreciation and investment credit changes
were made in 1971, our Treasury estimates showed that our
income tax laws made the capital cost of business equipment
higher than that of any other major industrialized nation
in the Western World.

The 1971 changes restored American

business in this regard to a position somewhat more favorable
than Canada, France and the Netherlands, but still behind
West Germany, Japan, the United Kingdom and others of our
principal competitors in the world markets.
Moreover, a recent Department of Commerce-SEC survey
showed a very encouraging 10-1/2 percent rise in business
expenditures for plant and equipment for 1972 over 1971.
An even more recent McGraw-Hill survey just released shows
a 14 percent rise.

These are most encouraging developments

another strong force in the economic recovery -- and I think
it is far too early to consider changing this successful
policy agreed upon only last year after so much careful
deliberation.

- 19 There are the usual round of proposals to reduce the
tax incentives with respect to oil and gas.

After a long

series of debates in 1969, the Tax Reform Act increased the
taxes on the oil and gas industry by more than $600 million.
With the energy shortage that is facing us and the dire need
for a coordinated energy policy, we should be sure that we
move cautiously and intelligently with a coordinated energy
resource program.
Among the proposals for a quick increase in revenue
yield is to change the minimum tax in various ways.

One of

the major minimum tax proposals is to eliminate the deduction for the regular income tax paid by the taxpayer in
computing the amount subject to minimum tax.

If the deduc-

tion for the regular income tax were eliminated, the minimum
tax would simply be a tax on items of preference income,
regardless of the amount of regular income tax which the
taxpayer is paying on his nonpreference income.

Neither the

1968 Treasury staff proposals for a minimum tax, nor our
1969 proposal for a Limit on Tax Preferences (LTP) nor the
current minimum tax law, would apply when the taxpayer has
a relatively small proportion of tax preferences in relation ·to his total income.

- 20 -

To convert the minimum tax into a direct income tax
on preference income without regard to nonpreference income
would simply reduce the effect of tax incentives that the
Congress has introduced in various parts of the tax law
for purposes that it has deemed desirable.

If those pur-

poses are not desirable or the incentives are too great,
they should be modified or eliminated, but there is no point
in merely whittling them down by a complex separate tax on
the allowed preferences.

The point of the 1969 law and

both sets of Treasury proposals was to impose an additional
tax burden only when a taxpayer had so concentrated on
taking advantage of the preferences that he was sheltering
too high a proportion of his income.

I would hope, there-

fore, that before any such transformation of the minimum tax
would be made, it would be given thorough consideration.
The issues are far too important for hasty action.
I believe these illustrations show that the claims that
vast sums of immediate revenue can be raised from "loophole"
closing are vastly exaggerated.

Moreover, it shows, I believe,

that in each important area there are serious problems that
require calm, deliberative reflection; and that, in many

- 21 -

instances, such as housing, extensive consideration would
have to be given to substitute programs that in themselves
would involve serious questions of equity and practicality.
This was the lesson we learned in the lengthy

study and

debate that occurred in the development and passage of the
Tax Reform Act of 1969.

It is a lesson that I think stands

us in good stead today.
There is one other lesson from the 1969 Act that I learned
and I am sure you experts in the tax field, as well as the
taxpaying public, will appreciate.

That lesson is that we

are in desperate need of simplifying the federal income tax
law.

I hope we can bend every effort toward that goal of

simplification and eliminate attenuated distinctions and
intricacies that confuse us all.
Regulations Under the 1969 Act
It is with great pleasure that I report to you today that
we have substantially completed the job of drafting and publishing in proposed form for comment the extensive regulations
under the Tax Reform Act of 1969.

We had divided the regula-

tions work under the 1969 Act into 179 different projects.
We have made an intensive drive to finish this work, realizing

- 22 the importance to the public of knowing the positions the
Treasury proposes to take on the many important questions
of interpretation that are involved.
We have now published, or sent to the Federal Register
for publication shortly, all but eight of these proposed regulations.

Of the remaining eight, some had been deferred tempo-

rarily because they will not have practical effect until a
future date (such as the tax on excess business holdings of
private foundations); some are being withheld from publication
until other related proposed regulations have been finalized
(such as the disallowance of deductions for excess investment
interest, which depends upon interpretations proposed under
the minimum tax); and some are procedural or of limited
application.
The only two regulations still to be proposed that I think
will be of general interest are those relating to so-called
"arbitrage bonds" issued by state and local governments and
those under the new Section 385 that would establish guidelines for distinguishing indebtedness from stock.

The arbitrage

bond regulations have reached their final stages, but we have
held up publication until we have had opportunity to confer

- 23 further with representatives of state and local governments
aboD

of the problems that are involved.
As to the regulations regarding the distinctions between

indebtedness and stock, we have devoted considerable time and
discussion to this difficult subject.

But as you all know,

we have gone almost 60 years without significant regulations
in this area, and much as I would like to see that project
brought to a conclusion, we have thought that other pressing
matters deserve a higher priority.
It is difficult to appreciate the several hundred thousand
man-hours of time devoted by talented and dedicated men and
women in the government service that have been required to
analyze the problems, assemble the necessary information,
reach decisions on so many difficult issues, and draft and
review all these many regulations.

As a rough guess, I would

estimate that the proposed regulations under the Tax Reform
Act of 1969 cover at least 8,500 typewritten pages.

No other

country in the world makes an effort to pUblish extensive
regulations of this kind.

To have accomplished this task

under the 1969 Act within a period of two and a third years
is a record heretofore unmatched, and I am sure you will agree

- 24 -

that the many persons on the staffs of the Commissioner and
the Chief Counsel of the Internal Revenue Service and of the
Treasury deserve the greatest praise for their untiring and
dedicated work on these projects.
We are anxious to press onward to promulgating in final
form all the regulations that have been proposed for public
comment.

We receive many helpful comments and criticisms,

and review all of these before making final decisions.

is important that this process go forward to provide answers
to the taxpaying public as soon as possible.
We must also proceed with regulations under the Revenue
Act of 1971, which the President signed into law on December 10,
1971.

We have already issued proposed regulations under the

Job Development Investment Credit and the Asset Depreciation
Range amendments made by the 1971 Act, published an extensive
pamphlet regarding the new Domestic International Sales
Corporation (DISC) and issued guidelines under the new provision for deduction or credit for political contributions.
But there are numerous other provisions under the 1971 Act,
such as the deduction for expenses of working mothers, for
which regulations must be provided.

- 25 -

Statistical Data re Effect of 1969 Act
It is also of great importance to obtain statistical
data upon which to base judgements as to the effects which
have flowed from the many tax reform provisions of the 1969
Act.

Most of the 1969 Act reforms became effective as of

January 1, 1970, although some of them go into effect gradually over a period of years.

Thus the 1970 income tax returns

provide the first statistical information that we can obtain
about the practical effect of the 1969 reforms.
With respect to individual returns, this statistical data
is obtained from transcripts made of a large sample of the
approximately 75 million individual income tax returns.

The

data from the transcripts is then fed into a computer, and
the first preliminary runs from the computer became available
toward the end of last November.

We now anticipate that the

complete statistical report on 1970 individual returns will
be available by mid-July and that printed copies will be
publicly available about two months later.
It is also quite important to obtain statistical data
regarding the effect of the 1969 Act on corporations.

Because

of the time required to prepare the voluminous returns of

- 26 -

major corporations, most of them file estimated returns on
March 15 and obtain extensions of time to September 15 for
filing their final detailed returns.

Hence the process of

extracting the statistical data from 1970 calendar year corporation returns could not start until after September 15, 1971,
and it is a much more complex task than is involved for
individual returns.
We expect the preliminary report from the corporate data
to become available in August.

Tables from the final 1970

corporate report will become available beginning in October.
With all the extensive changes made by the 1969 Tax Reform
Act, I think we should carefully review the individual and
corporate data from the 1970 returns before we embark upon
another round of individual and corporate tax reform.

This

data should be available in time for action in 1973, but it
will not be available in time for action by Congress this
year.

Moreover, we should finish the process of finalizing

the regulations under the 1969 Act this year in order that
necessary and desirable legislative changes can be made
intelligently.

- 27 -

A New Tax Reform Proposal
I thought I should tell you today about a deep-seated
division of opinion within the Treasury , heretofore unrevealed ,
regarding an important tax reform proposal.

I had ordered

that there be no internal memoranda written about it that
might be leaked or subpoenaed, and until now the entire subject has been dealt with by magnetic tapes that self-destruct.
For some time I have been looking for a simplified,
equitable tax revision program.

There is considerable research

to indicate that, in general, tall people have a great economic
advantage over short people and are far more successful as
leaders in the business and political world.

I have maintained,

therefore, that the tax law should provide compensation for
the inequities thrust upon the short people of the world.
I would draw the line at a height of 5 feet 6 inches and
provide half rates of tax for those below that level and the
regular rates for those above.

Because of the notch problem

that might be involved at the dividing line, I would be willing
to consider a sliding scale between 5 feet 6 inches and 6 feet.
This proposal is easily administered by an objective
standard and provides in my judgment a high degree of equity
and fairness in the tax structure.

I must confess, however,

- 28 -

that all those over 5 feet 6 inches in the Treasury -- and
this represents a high percentage of the male personnel -- are
opposed to my proposal.

My research, however, discloses that

most of the ladies in the Treasury will qualify and strongly
support the proposal.
Because of this division I have become a charter member
of an organization to sponsor the proposal.

It will probably

be known as the Association of Short People -- or ASP's.

The

motto will be "Ad Astra per ASPera."
We expect that there will be immediately created a competing organization to be known as the Association of Long
People

or ALP's.

But standing firmly on our platform, we

expect to look the ALP's right in the eye.
To administer this system the ASP's are advocating the
restoration of the old Form I040-A so that we can once again
have the short form and the long form tax return.
I have been asked what I would do about a joint return
of a tall husband and a short wife (or the few vice versas).
But I only deal with tax policy, and this seems to me an
administrative matter that should be easily handled by the
able Commissioner of Internal Revenue.

- 29 I hope you will forgive me for ending my discussion of
this most serious subject on a note of levity.

I have tried

to retain a sense of humor and proportion throughout my more
than three years in office.

In particular, I have tried to

bear constantly in mind the words of the President in his
Inaugural Address on January 20, 1969, when he advised us:
"To lower our voices would be a
simple thing.

"We cannot learn from one another until
we stop shouting at one another -- until we
speak quietly enough so that our words can
be heard as well as our voices."

000

u.s.

Treas.

Treasury Dept.

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