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LIBRARY
AUG 0 7
905
• / ^i-l'/uil'MENT
Treas.
HJ
10
.A13P4
v. 262
U.S. Dept. of the Treasury.
t' PRESS RELEASES.
LIBRARY
AUG 0 7 985
TREASURY NEWS
apartment of the Treasury • Washington, D.C. • Telephone 566-2041
For Release Upon Delivery
Expected at 10:00 a.m., E.D.T.
September 26, 1984
STATEMENT OF
DENNIS E. ROSS
ACTING DEPUTY TAX LEGISLATIVE COUNSEL
DEPARTMENT OF THE TREASURY
BEFORE THE SUBCOMMITTEE ON LABOR-MANAGEMENT RELATIONS
OF THE HOUSE COMMITTEE ON EDUCATION AND LABOR
Mr. Chairman and Members of the Subcommittee:
I am pleased to appear before you today to discuss the
Treasury Department's current views on the. social role and
appropriate tax treatment of funded welfare benefit plans
maintained by private employers for their active and retired
employees. In the context of that discussion, I wish also to
report on the present status of the study, mandated by Congress
in the Deficit Reduction Act of 1984 ("DRA"), of the various tax
and benefit issues relating to these welfare plans.
I would like to begin my testimony with a general description
of the principles of taxation applicable to funded welfare
benefit plans; these principles were changed in significant
respects by the DRA. With that as background, I wish to discuss
in general terms some of the tax and benefit issues that must
still be faced with regard to welfare benefit plans. I should
note at the outset that our study of these issues, as mandated by
Congress, has really only begun; we have just started to identify
and outline the relevant empirical and policy questions. Even at
this early stage, however, we are able to report that the
substantive issues are complex, and that reliable data about
funded welfare benefit plans must be developed before these
issues can be dealt with in a responsible and comprehensive
manner. Thus, a study that is fully responsive to the
R-2866
- 2 Congressional mandate will require substantial efforts not merely
by the Treasury Department, but also the Departments of Labor and
of Health and Human Services and other interested Federal
agencies, as well as Congress and the private sector.
Funded Welfare Benefit Plans
Background
The tax law generally requires an employee to include in
income all compensation received during the year for services
performed for his or her employer, including wages, salaries and
property or other in-kind benefits. Compensation that is paid in
the form of certain employee benefits, however, is excepted from
this general rule. For example, a variety of benefits may be
excluded from employees' gross income if they are provided under
qualifying employer-sponsored plans, including: (i) employer
contributions on behalf of an employee to a qualified
profit-sharing or pension plan; (ii) employer-provided coverage
under a group-term life insurance plan providing insurance up to
$50,000, a group legal services plan, an accident (i.e.,
disability) or health plan, or a dependent care assistance
program; and (iii) benefits received under an employer-provided
group-term life insurance plan, group legal services plan, health
plan, and dependent care assistance program.
On the employer's side, a deduction is permitted for ordinary
and necessary business expenses paid or incurred during the
taxable year, including a reasonable allowance for wages,
salaries and other compensation for personal services. "Other
compensation" generally includes ordinary and necessary amounts
paid or accrued with respect to a sickness, accident,
hospitalization, medical expense, or similar welfare benefit
plan. Thus, as a general matter, the year in which an employer
is permitted to deduct compensation paid to its employees, either
in the form of cash or welfare benefits, corresponds to the year
in which the employees include (or, but for an exclusion, would
include) the compensation in income. Moreover, if an employer
prefunds its obligations to pay future employee compensation,
income earned on the amounts set aside for that purpose is
taxable to the employer.
In certain circumstances, the tax law has permitted an
employer far more favorable treatment for amounts used to prefund
future compensation obligations. In such cases, the employer has
been allowed a current deduction for contributions to a fund or
reserve for future compensation, and the fund or reserve has been
permitted to grow on a tax-exempt basis.
- 3 With respect to compensation paid in cash, this favorable
treatment generally has been available only with respect to
profit-sharing and pension plans that comply with the applicable
qualification rules. For example, in order to gain the favorable
tax treatment, a pension plan must satisfy nondiscrimination
rules and various minimum standards relating to participation,
vesting, benefit accrual, and funding. In addition, a qualified
plan must not violate annual limits on the contributions and
benefits for any individual.
With respect to compensation provided in the form of welfare
benefits, the favorable tax treatment described above—both
advance deductions and tax-free accumulation—had been available,
prior to the DRA, with respect to welfare benefit funds,
including voluntary employees1 beneficiary associations ("VEBAs")
and certain funds maintained by insurance companies for the
benefit of employers (e.g., retired lives reserves for life and
medical insurance, and certain experience-rated insurance
arrangements for active employees, retired employees, or both).
Although such welfare benefit funds qualifed for the favorable
tax treatment available to qualified pension and profit-sharing
plans, they were not required to satisfy the minimum standards or
the annual limits on contributions and benefits that are
applicable to such plans. In addition, although VEBAs were,
under regulations, subject to nondiscrimination rules, -no similar
rules limited the favorable tax treatment of funds held by
insurance companies for the benefit of employers.
The Quantification of Tax Benefits: An Example
The combination of the current deduction for deferred welfare
benefits and the tax-exempt growth of funds set aside for such
benefits provides employers with substantial tax benefits. For
example, an employer subject to a 46 percent marginal income tax
rate generally bears about 54 percent of the cost of providing an
employee with a welfare benefit (or other compensation) and the
Federal government (or taxpayers generally), through the tax
system, bears about 46 percent of the cost of the benefit. To
the extent that the employer is able to prefuhd, on a deductible
basis, a deferred benefit through a tax-exempt entity, such as a
VEBA, a portion of the cost of the benefit will be purchased with
tax-exempt income earned by the entity. In such a case, the
Federal government will pick up a greater share of the total cost
of the benefit. If the tax-favored prefunding occurs many years
in advance of when the benefit is provided to the employees, the
government's share of the cost will far exceed the employer's
share due to the greater accumulation of tax-exempt income. It
is important to note that this shifting of costs to the
government occurs even though the funding of the future benefit
is actuarially sound.
- 4 -
One way of illustrating the magnitude of this tax benefit is
by comparing the after-tax amounts generated if the same amounts
are set aside, over a period of years, on a deductible and
tax-exempt basis, on the one hand, and on a non-deductible and
taxable basis, on the other. For example, assume that a
corporation is willing to devote $2,000 at the beginning of each
year for 10 years toward purchasing an employee welfare benefit
at the end of the 10th year. Assume further that the corporation
is in the 46 percent tax bracket for each of these years, and
that the annual interest rate is 10 percent.
If the corporation uses a VEBA to fund the benefit, it will
be allowed to deduct the $2,000 in each year of contribution to
the VEBA. If, however, the corporation merely uses a taxable
bank account to fund the benefit, it will be able to set aside in
each year only the after-tax value o.f $2,000, which is $1,080.
After ten years of accumulation, the VEBA fund will be
$35,062.33, whereas the balance in the bank account will be only
$14,587.83. The bank account balance, however, will support a
benefit of only $27,014.50, which would be financed by the tax
savings attributable to the deduction for this benefit ( .46 x
$27,014.50) and the $14,587.83 account balance. Thus, in this
example, funding the benefit through the VEBA permits the
corporation to provide a 30 percent greater benefit than funding
through the taxable bank account.
Viewing this example from a slightly different perspective, a
corporation using a VEBA would be able to provide, in the 10th
year, a welfare benefit costing $35,062.33 by making
contributions of $2,000 to the VEBA for each of ten years, for a
total contribution cost to the corporation of $20,000. However,
a corporation that was providing the same welfare benefit through
a taxable bank account would be required to make annual
contributions of $2,595.81 for the ten years, for a total
contribution cost of $25,985.10. As the period of tax-favored
deferral extends beyond ten years, a greater portion of the total
cost of the benefit provided is shifted to the Federal
government.
The Development of VEBAs
The historical development of the VEBA rules indicates that
the effectively unlimited tax exemption for VEBAs did not come
about in a considered and deliberate fashion. Indeed, before the
DRA, Congress seems not to have appreciated the potentially
substantial tax benefits that an employer could derive through a
VEBA. Instead, Congress generally viewed VEBAs simply as
vehicles through which employees could join together to provide
certain welfare benefits for themselves without adverse tax
consequences.
- 5 -
Congress originally enacted a statutory tax exemption for
VEBAs in 1928. The exemption was available only for VEBAs with
respect to which at least 85 percent of the income was collected
from members to pay benefits or administrative expenses. Later,
in response to the Internal Revenue Service's argument that
employer contributions, if in excess of 15 percent of a VEBA's
income, destroyed the VEBA's tax-exempt status, Congress provided
that employer contributions would be treated as member
contributions for purposes of the 85 percent test.
Even after the change in treatment of employer contributions,
the 85 percent test, by effectively limiting the investment
income in a VEBA to 15 percent of the VEBA's income, prevented
employer's from using VEBAs to accumulate substantial tax-favored
reserves. The Tax Reform Act of 1969, however, in a move
apparently intended to restrict the tax advantages of VEBAs,
subjected VEBAs to the unrelated business income tax and
eliminated the 85 percent test; Congress appeared to believe that
applying the unrelated business income tax rendered the 85
percent test unnecessary. Under the applicable unrelated
business income tax provisions, however, VEBA income was not
subject to tax if it was "set aside" to provide permissible
benefits. Thus, there were no.longer any limits on the amounts
•that an employer could set aside in a VEBA to pay a permissible
benefit or on the tax-free earnings that could accumulate on the
VEBA reserves.
The Deficit Reduction Act: Deductions and Tax-Free Growth
The DRA adopted rules that, with limited exceptions for
post-retirement life and health benefits, were designed to
subject an employer that uses a welfare benefit fund, such as a
VEBA, to the tax rules applicable to deferred compensation
outside the area of qualified pension and profit-sharing plans:
no current deduction for future benefits and no tax-free
accumulation of income. In setting this objective, Congress
sought to limit the extent to which an employer could use a
welfare benefit fund to shift to the Federal government a greater
portion of the cost of welfare benefits.
In general, the rules adopted in the DRA were designed to
make equivalent the tax treatment of an employer using a welfare
benefit fund to provide current benefits to active employees, and
the employer providing the same benefits through a policy with an
insurance company. An employer that provides health coverage
through a policy with an insurance company is permitted a
deduction only with respect to the cost of the current year's
coverage; the cost of a subsequent year's health coverage is not
deductible until the subsequent year, even if the premium for
- 6 that coverage is paid in an earlier year. Correspondingly, the
DRA generally limits an employer's annual deduction for
contributions to a welfare benefit fund, including a VEBA, to the
sum of the benefits provided during the year plus a reasonable
addition to an actuarially justified reserve to cover benefit
claims incurred but unpaid as of the end of the year. The rules
thus effectively disallow deductions for contributions to prefund
benefits that relate to future years. In addition, if the
reserves in a fund as of the end of a year exceed the permitted
reserve level, the income of the fund will be subject to the
unrelated business income tax. Put another way, the new rules
permit an employer a deduction each year only for the amount that
an insurance company would have charged as a premium (net of
profit) for the benefits for that year if the insurance company
had known all of the facts that were known to the welfare benefit
fund. In this regard, the rules aim at eliminating the tax law
as an important factor in an employer's decision.about whether to
self-insure welfare benefits through a welfare benefit fund or to
insure such benefits under a policy with an insurance company.
The rules adopted in the DRA do provide limited tax-favored
treatment with respect to reserves accumulated to provide
post-retirement life insurance and health benefits. Thus, with
one exception, the treatment available with respect to funds
accumulated in qualified pension and profit-sharing plans—
advance deductions and tax-free growth—is e'xtended, subject to
certain restrictions, to funds accumulated in welfare benefit
funds for these post-retirement benefits.
In the case of post-retirement life insurance, the rules
provide that an employer may deduct contributions to accumulate,
no more rapidly than over its employees' years of service, an
actuarially justified reserve to provide retired employees with
group-term life insurance up to $50,000; this reserve is
permitted to grow on a tax-exempt basis. Similarly, the rules
permit an employer to deduct, generally under the same terms,
contributions to a reserve to provide retired employees with
health benefits. The calculation of the actuarial reserve for
post-retirement health benefits is .limited, however, because the
rules prohibit' consideration of projected increases in the
current cost and current level of such benefits provided by the
employer. More importantly, unlike the retired lives reserve for
life insurance, the funds set aside for post-retirement health
benefits are not permitted to grow on a tax-exempt basis, but
instead are subject to the unrelated business income tax. This
means that, in effect, an employer is permitted a deduction for
contributions to a taxable, rather than a tax-exempt trust in
order to prefund post-retirement health benefits.
- 7 -
The Deficit Reduction Act:
Nondiscrimination
The DRA also imposed eligibility, coverage, and
nondiscrimination rules on VEBAs, and made welfare benefit funds
in general subject to such rules to the extent the funds are used
to provide welfare benefits to retired employees. Specifically
with regard to VEBAs, the Act made satisfaction of
nondiscrimination rules a statutory condition of tax-exempt
status. Thus, for example, if a VEBA is part of a welfare plan
that discriminates in favor of the employees who are highly
compensated, the VEBA is not tax-exempt.
More broadly, the new rules impose on employers an excise tax
equal to 100 percent of any medical or life insurance benefit
provided through a welfare benefit fund with respect to retired
employees if the plan of which the fund is a part fails to
satisfy the new nondiscrimination rules for VEBAs with respect to
such benefit. Thus, the tax benefits previously available with
respect to a fund held by an insurance company for the benefit of
the employer are eliminated if the plan of which the fund is a
part discriminates with respect to medical or life insurance
benefits for retired employees.
Finally,.the DRA contained various rules aimed at limiting
the extent to which an employer may use a VEBA or similar entity
for unintended purposes. For example, funds that are set aside
to provide post-retirement life insurance and health benefits to
a key "employee of the employer must be credited to a separate
account and, to the extent attributable to post-retirement health
benefits, must be counted under the annual limitation on
additions to a qualified defined contribution plan (section
415(c) of the Code). Also, a key employee may receive prefunded
post-retirement medical benefits only out of funds credited to
his or her separate account. Finally, a 100 percent excise tax
is imposed on any employer that receives any portion of any
welfare benefit fund.
* * *
The Treasury Department believes that the rules adopted by
the DRA for welfare benefit funds were an appropriate step in
rationalizing the Federal tax treatment of employer-funded
welfare benefits. The rules effectively introduce greater tax
neutrality with respect to issues such as whether an employer
should provide its employees with compensation in the form of
cash or welfare benefits and whether, in providing welfare
benefits, an employer should self-insure through a welfare
benefit fund, such as a VEBA, or should provide such benefits
through a policy with an insurance company. In addition, the
- 8 rules effectively limit the extent to which employers are able to
shift the costs of welfare benefits to the Federal government by
providing such benefits through a welfare benefit fund.
Minimum Vesting, Benefit Accrual and Funding Standards
The DRA did not require that a welfare benefit fund satisfy
minimum standards with respect to vesting, benefit accrual, and
funding. These standards are appropriate where an employer is
permitted to accumulate amounts on a tax-favored basis for future
benefits, as with qualified pension and profit-sharing plans, but
have little relevance to current welfare benefits based on
current service and funded on a pay-as-you go basis. Thus,
because the DRA generally precluded an employer from accumulating
a tax-favored reserve for future preretirement benefits, and
provided only very limited favorable treatment for the funding of
post-retirement benefits, the DRA did not apply minimum standards
to welfare benefit funds.
Instead, section 560 of the DRA directed the Treasury
Department to make a study of the problems relating to the use of
employee welfare benefit plans for the provision of benefits to
current and retired employees, including a study of the need for
participation, vesting, and funding standards. Regarding the
study, the Conference Report states that Treasury should examine
the possible means of providing minimum standards for employee
participation, vesting, accrual, and funding under welfare
benefit plans for current and retired employees (including
separated employees). In addition, the Report states that the
study should include a review of whether the funding of welfare
benefits is adequate, inadequate, or excessive. Finally, the
Report states that Treasury should make suggestions for minimum
standards where appropriate.
Although we have as yet only begun to outline the study, we
have decided as a threshold matter to focus on the provision of
post-retirement medical benefits through funded arrangements.
This focus is appropriate for a number of reasons. First, it
seems reasonable for employers to treat current welfare benefits
for active employees no differently than current wage or salary
obligations, i.e., as compensation to be funded on a current
basis. There is in any event no basis for the tax system to
provide favorable treatment, either in the form of advance
deductions or tax-exempt growth, to current welfare benefits that
relate to service by active employees. An additional reason for
a focus on post-retirement health benefits is their centrality to
the general scheme of employee benefits. As the very existence
of the Medicare program indicates, the provision of
post-retirement health benefits on a broad and equitable basis is
a substantial social policy objective.
- 9 -
Collection of Data
For purposes of our study, we have grouped the issues
relating to the provision of post-retirement health benefits into
three categories. The first group comprises entirely empirical
issues. Thus far, we have had little success in assembling
meaningful data either on welfare benefit funds in general or on
prefunded post-retirement health benefits in particular. Among
our needs in this respect is information concerning the extent to
which active and retired employees (and their families) have
health coverage; the extent to which health coverage is provided
by the employer; the costs and levels of such coverage and
whether it is provided on a self-insured basis or under a policy
with an insurance company; the existing conditions on the receipt
of employer-provided post-retirement health benefits (e.g., five
years of service and retirement with the employer); the extent to
which current and post-retirement health benefits are prefunded
on a tax-favored basis; the reserves that have been accumulated
in funded current and post-retirement health plans; and the
actuarial soundness of the reserves for existing welfare benefit
funds.
We have not as yet decided how to gather the necessary data
on welfare benefit plans,, but we are considering a variety of
sources both in and out of the Federal government. In the
meantime, we are, of course, continuing to study the policy and
technical issues which are set forth in the balance of my
testimony.
Retirement Policy Issues
The second category of issues identified for purposes of our
study involves the basic policy question of whether the tax
system should be used to create incentives for employers to
provide, on an actuarially sound, prefunded basis, postretirement health benefits. To resolve that issue we need to
consider a variety of related questions. For example, what is
the appropriate level of retirement benefits? What is the
appropriate mix of private and public programs in providing such
benefits? What is the proper mix of the forms of retirement
benefits, and thus to what extent should retirement benefits be
provided in-kind, such as health benefits, rather than in cash?
If the appropriate level of retirement health benefits
exceeds those provided under public health programs, such as
Medicare and Medicaid, it must be determined whether employers,
individuals, or some combination of the two should supply the
additional health benefits. If employers should directly provide
retired employees with additional health benefits, we need to
- 10 address how the benefits are to be funded. Should each
generation bear the cost of its own benefits, as typically occurs
in a private pension plan, or should there be an
intergenerational transfer of funds, as occurs under Social
Secruity? Moreover, how should the cost of post-retirement
health benefits be shared between employer and employee?
Assuming that employers should prefund the additional
post-retirement health benefits over the years of active
employees' service, as occurs in a private pension plan, we must
again address the underlying question of whether the Federal
government through the tax system should create incentives for
employers to prefund such benefits. The absence of such
incentives would not prevent or even necessarily discourage
prefunding of post-retirement health benefits, since an employer
is always free to set aside the necessary amounts in a taxable
bank account. Although both the amounts and earnings set aside
for such purposes would be net of tax, this is consistent with
the general treatment of prefunded deferred compensation.
If a direct tax incentive .for employer prefunding is desired,
however, the rules adopted in the DRA for post-retirement health
benefits may well be an appropriate model. Under these rules,
the employer effectively receives a deduction for contributions
to- an actuarially justified reserve to prefund pos't-retirement
health benefits, but such reserves grow only on a taxable, not a
tax-free basis. The effect is that employers are provided with a
mechanism for prefunding post-retirement benefits, but the tax
benefits and cost shifting to the Federal government that are
generally associated with qualified pension and profit-sharing
plans are not available. This approach was also taken with
respect to costs for nuclear power decommissioning and coal mine
reclamation under the premature accrual rules adopted in the DRA.
Finally, one might conclude that incentives equivalent to the
qualified pension plan incentives are appropriate to encourage
the prefunding of post-retirement health benefits. This means
not only that an employer would receive- an advance deduction .for
contributions to fund future welfare benefits, but also that
accumulations for the post-retirement health benefits would grow
on a tax-free basis.
To the extent retirement policy objectives support
substantial tax benefits for prefunded post-retirement health
benefits, it would seem consistent with those objectives to
implement minimum vesting, benefit accrual, and funding
standards. These minimum standards would perform several
functions. First, they would expand the group of retired persons
that receive health benefits and increase for some the amount of
benefits received. Under benefit accrual and vesting rules an
- 11 employee may have a vested right to some post-retirement health
benefit from an employer even though the employee does not remain
with the employer until retirement. Absent accrual and vesting
standards, an employee will generally not receive post-retirement
health benefits from an,employer unless he or she retires from
the employer.
Second, vesting and accrual standards would provide an
employee with greater security about whether the promised future
benefit would actually be provided. Such standards would
generally prevent an employer from eliminating promised
post-retirement health benefits and would reduce the extent to
which an employer and its key employees could divert to their own
benefit funds set aside for rank-and-file employees.
Third, benefit accrual and funding rules, in conjunction with
appropriate actuarial methods, would regulate the rate at which
the promised benefits are funded. Generally, an employer's
prefunding would be linked to the rate at which employees accrue
or earn future benefits. In terms of assuring employees that
their accrued benefits will be adequately funded when promised, a
minimum funding standard generally should require that the future
benefits be funded, on an actuarial basis, at least as rapidly as
employees accrue the right to such future benefits.
In spite of these generally positive aspects of applying
accrual and vesting standards to prefunded post-retirement health
benefits, the application of such standards could have an adverse
effect on an insurance company's or an employer's willingness or
ability to provide post-retirement health benefits to former
employees who separated from service years before retirement. We
understand that the primary reason that existing post-retirement
health benefit plans limit coverage to employees who retire with
the employer in question is that insurance companies generally
refuse to underwrite coverage for separated employees.
Technical Issues
The third category of matters that should be addressed in the
study of post-retirement health benefits involve more technical
issues concerning the application of vesting, benefit accrual,
and funding concepts. A health plan can be a very complex
benefit, providing a diverse mix of medical goods and services.
For example, a health plan may have distinct deductible and
co-payment requirements for different types of medical claims,
aggregate deductible limits, and no coverage at all for various
types of specific medical claims (such as elective medical care
and catastrophic care). In addition, health plans may also
involve preferred provider organizations and health maintenance
organizations (HMOs).
- 12 -
The complex nature of a health plan and its accompanying
benefits raises a myriad of technical questions that will not
be easily resolved. - For example, what does an employee have if
he or she has accrued or is vested in some portion of the right
to receive coverage under a specific health plan? It is
difficult to imagine how an employee accrues some portion of a
post-retirement right to HMO coverage over each of his or her
years of service. In the pension area, benefits generally are
calculated in terms of dollars? accordingly, it is not difficult
to think in terms of a 50 percent vested right to a dollar
benefit accrued over ten years of plan participation. It is at
least awkward, however, to think in terms of an employee having
accrued a 50 percent vested right to a health benefit with a $500
deductible for type A medical claims and a $200 deductible for
type B claims, and two co-payment requirements, with an overall
employee cost limit for items not covered because of the
deductibles and co-payment requirements. After such an employee
has an additional year of service for vesting purposes, in what
respect will the employee's vested benefit be increased? Also,
what becomes of a separated employee's partially vested right' to
a health benefit based on several years of service?
Issues such as these raise the further question of whether it
might be possible, in designing a system of standards for
prefunded, post-retirement health coverage, to work with dollar
amounts in lieu of health coverage. Of course, it would be
simpler to define an employee's accrued benefit in terms of a
specified dollar amount than to define it in terms of the variety
of different characteristics that typify existing health plans:
one could simply state that an employee had accrued a right.to an
annual health benefit costing $500 for each year after
retirement. The employer then could simply fund for a projected
dollar amount, rather than for the projected cost of a specific
type of health coverage with a variety of particular
characteristics. But while this approach would eliminate most of
the technical problems in applying accrual and vesting concepts
to health benefits, it also would make the post-retirement health
benefit system substantially indistinguishable from the existing
qualified defined benefit plan system under which employees
receive specified dollar amounts.
• * *
In closing, I would like to reaffirm that we are pleased to
play a role in the study of welfare benefit funds. The questions
raised in this area involve fundamental issues of retirement
policy, and should properly be subject to examination on a
regular basis. Indeed, it may well be that the most important
product of this endeavor will be a clearer definition of a
- 13 national retirement policy, relating not-merely to welfare
benefits, but to all forms of retirement benefits, including
Social Security, Medicare, and benefits under qualified pension
and profit-sharing plans. We welcome the aid and cooperation of
the Labor, Commerce and other Departments, this Committee, and
the private sector in this important effort.
"*
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federal financing bank
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WASHINGTON, D.C. 20220
0. U_
FOR IMMEDIATE RELEASE
September 26, 1984
FEDERAL FINANCING BANK ACTIVITY
Francis X. Cavanaugh, Secretary, Federal Financing
Bank (FFB), announced the following activity for the
month of July 1984.
FFB holdings of obligations issued, sold, or guaranteed by other Federal agencies totaled $143.3 billion
on July 31, 1984, posting a net increase of $1.6 billion
from the level on June 30, 1984. This change included
increases in holdings of agency assets of $1.1 billion,
holdinys of agency guaranteed debt of $0.3 billion and
holdings of agency direct debt issues of $0.2 billion.
The FFB made 331 disbursements during the month.
Attached to this release are tables presenting FFB
July loan activity, new FFB commitments to lend entered
into during July and FFB holdings as of July 31, 1984.
# 0 #
R-286C7
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•<1-
Page 2 of 9
FEDERAL FINANCING BANK
JULY 1984 ACTIVITY
DATE
BORROWER
AMOUNT
OF ADVANCE
FINAL
MATURITY
; 15,000,000.00
385,000,000.00
375,000,000.00
115,000,000.00
220,000,000.00
210,000,000.00
7/19/84
7/16/84
7/23/84
8/1/84
8/6/84
8/15/84
5,000,000.00
20,000,000.00
15,000,000.00
- 15,000,000.00
25,000,000.0.0
15,000,000.00
5,000,000.00
25,000,000.00
10.425%
8/31/84
10.435%
10/2/84
10/4/84
10.505%
10.535%
10/9/84
10/11/84 10.555%
10/15/84 10.485%
8/15/84
10.475%
10/18/84 10.655%
INTEREST
RATE
(semiannual)
INTEREST
___RATE____
(other than
semi-annual)
QN-BUDGET AGENCY DEBT
TENNESSEE VALLEY AUTHORITY
Note #369 7/9
Note #370
Note #371
Note #372
Note #373
Note #375
7
/9
7/16
7/23
7/23
7/31
10.515%
10.515%
10.475%
10.675%
10.675%
10.875%
NATIONAL CREDIT UNION ADMINISTRATION
Central Liquidity Facility
Note
Note
+Note
+Note
Note
+Note
-Htote
+Note
#237
#238
#239
#240
#241
#242
#243
#244
7/2
7/2
7/5
7/10
7/13
7/16
7/16
7/20
OFF-BUDGET AGENCY DEBT
UNITED STATES RAILWAY ASSOCIATION
*Note #31 7/2
73,864,508.60
10/1/84
10.435%
120,000,000.00
675,000,000.00
310,000,000.00
95,000,000.00
20,000,000.00
85,000,000.00
165,000,000.00
170,000,000.00
220,000,000.00
50,000,000.00
210,000,000.00
100,000,000.00
7/1/94
7/1/89
7/1/94
7/1/99
7/1/04
7/1/94
7/1/99
7/1/94
7/1/99
7/1/94
7/1/94
7/1/99
13.965%
13.845%
13.965%
13.935%
13.895%
13.925%
13.885%
13.425%
13.435%
13.435%
13.075%
13.095%
AGENCY ASSETS
FARMERS HOME ADMINISTRATION
Certificates of Beneficial Ownership
7/1
7/2
7/2
7/2
7/2
7/5
7/5
7/15
7/15
7/25
7/29
7/29
GOVERNMENT - GUARANTEED LOANS
DEPARTMENT OF DEFENSE
Foreign Military Sales
Egypt 5
Turkey 14
Israel 15
Morocco 12
Niger 1
Philippines 9
Turkey 14
Tunisia 16
Zaire 1
Greece 14
Greece 15
+rollover
•maturity extension
7/2
7/2
7/2
7/3
7/3
7/3
7/3
7/5
7/5
7/6
7/6
321,228.00
5,094,287.09
21,379,689.20
737,136.00
46,353.73
5,865,822.00
35,803,552.52
847,251.42
1,523,479.44
1,567,551.75
539,225.00
6/20/13
13.795%
11/30/12 13.888%
7/10/13
13.786%
9/21/95
14.005%
3/1/88
13.475%
5/15/91
13.873%
11/30/12 13.879%
2/4/96
13.925%
9/22/92
13.849%
4/30/11
13.895%
6/15/12
13.895%
14.453%
14.324%
14.453%
14.420%
14.378%
14.410%
14.367%
13.876%
13.886%
13.886%
13.502%
13.524%
arm
ann
ann
ann
ann
ann
ann
ann
ann
ann
ann
ann
Page 3 of 9
FEDERAL FINANCING BANK
JULY 1984 ACTIVITY
BORROWER
DATE
AMOUNT
OF ADVANCE
FINAL
MATURITY
INTEREST
RATE
(semiannual
INTEREST
RATE
(other than
semi-annual)
DEPARTMENT OF DEFENSE - FOREIGN MILITARY SALES (Cont'd)
Liberia 10
Philippines 9
Israel 15
Greece 14
Philippines 10
Israel 15
El Salvador 6
Indonesia 9
Liberia 10
Turkey 14
Eygpt 5
Somalia 4
Egypt 5
Greece 14
Jordan 12
Morocco 11
Philippines 10
Turkey 14
Israel 15
Botswana 3
El Salvador 6
Greece 14
Jordan 10
Kenya 11
Korea 18
Turkey 13
Portugal 1
Daninican Republic 7
Indonesia 9
Turkey 14
Egypt 5
Philippines 10
Egypt 6
Ecuador 4
Egypt 5
Kenya 11
Niger 1
Turkey 13
7/6
7/6
7/10
7/11
7/11
7/12
7/13
7/13
7/13
7/13
7/16
7/16
7/18
7/18
7/18
7/20
7/20
7/20
7/24
7/24
7/24
7/24
7/24
7/24
7/24
7/24
7/25
7/26
7/26
7/26
7/27
7/27
7/27
7/30
7/30
7/30
7/30
7/31
$
69,453.85
803,991.30
2,561,227.91
27,741.50
1,009,113.61
5,219,547.39
1,656,835.00
5,007,641.13
90,483.00
3,315,358.21
11,358,092.29
33,998.21
1,993,122.82
4,040,985.92
3,262,926.00
253,184.66.
475,620.47
874,479.41
10,863,314.95
121,168.73
699,000.00
1,205,200.00
22,073.42
402,063.08
266,656.00
22,301,279.18
1,769,525.50
1,557,000.00
1,550,808.00
486,015.10
2,247,844.49
1,110,332.54
6,078,745.33
36,069.00
1,201,996.00
331,485.00
171,526.88
275,587.99
5/15/95
5/15/91
7/10/13
4/30/11
7/15/92
7/10/13
5/15/95
5/10/92
5/15/95
11/30/12
6/20/13
11/30/12
6/20/13
4/30/11
2/5/95
9/8/95
7/15/92
11/30/12
7/10/13
3/10/91
5/15/95
4/30/11
3/10/92
5/15/95
12/31/95
11/30/12
9/10/94
9/10/95
5/10/92
11/30/12
6/20/13
7/15/92
4/15/14
7/25/87
6/20/13
5/15/95
3/1/88
3/24/12
13.895%
13.825%
13.425%
13.605%
12.235%
13.475%
13.545%
13.554%
13.555%
13.407%
13.299%
13.405%
13.325%
13.475%
13.305%
13.375%
12.045%
13.295%
13.401%
13.125%
13.475%
13.465%
12.315%
13.475%
13.475%
13.475%
13.335%
13.179%
13.168%
13.138%
13.005%
11.976%
13.015%
12.815%
13.035%
13.075%
12.888%
13.205%
119,500.00
112,000.00
106,000.00
58,000.00
4,000,000.00
6,000,000.00
18,000,000.00
10/1/84
1/2/85
4/1/85
7/1/85
10/1/84
10/1/84
7/1/85
11.115%
12.135%
12.735%
13.235%
11.235%
11.305%
12.605%
60,000.00
5,000.00
500,000.00
110,000.00
$ 97,000.00
75,000.00
250,000.00
8/1/85
10/1/84
6/15/85
5/1/85
5/1/85
12/1/85
2/1/85
12.335%
10.485%
12.165%
11.925%
11.915%
12.695%
11.455%
DEPARTMENT OF ENERGY
Synthetic Fuels - Non--Nuclear Act
Great Plains
Gasification Assoc., #114a
#114b
#114c
#114d
#115
#116
#117
7/2
7/2
7/2
7/2
7/9
7/16
7/31
DEPARTMENT OF HOUSING & URBAN DEVELOPMENT
Community Development
Long Beach, CA
Lincoln, NE
Kansas City, MO
Somerville, MA
Utica, NY
St. Petersburg, FL
Peoria, IL
7/6
7/6
7/6
7/6
7/11
7/11
7/13
12.715% ann.
12.513%
12.203%
12.186%
13.098%
11.517%
ann.
ann.
ann.
ann.
ann.
Page 4 of 9
FEDERAL FINANCING BANK
JULY 1984 ACTIVITY
AMOUNT
OF ADVANCE
DATE
BORROWER
FINAL
MATURITY
INTEREST
RATE
(semiannual)
INTEREST
RATE
(other than ~
semi-annual)
Community Development (Cont'd)
Pittsburgh Urban Red. Auth.
San Buenaventura, CA
Detroit, MI
Sacramento Hsg. & Redev. Ag.
Detroit, MI
7/13
7/15
7/20
7/25
7/27
$
125,000.00
40,449.92
2,592,000.00
72,500.00
1,575,000.00
10/15/03
8/15/84
9/1/84
2/1/85
9/1/84
13.531%
10.555%
10.655%
11.525%
10.785%
13.989% ann
11,374,459.00
5,500,000.00
10/1/92
10/1/92
13.812%
13.256%
14.289% ann
13.695% ann
163,086.01
10/1/92
13.522%
13.301% qtr.
9/30/86
7/2/86
9/30/86
9/30/86
7/2/86
7/2/86
7/2/86
9/30/86
9/30/86
9/30/86
9/30/86
7/2/86
7/2/86
9/30/86
7/2/86
7/2/86
7/2/87
7/2/87
12/31/84
9/30/86
7/2/86
7/2/86
7/2/86
7/2/86
7/2/86
7/2/86
7/2/86
7/2/86
7/2/86
7/2/86
7/2/86
1/31/85
1/31/85
1/31/85
1/31/85
9/30/86
9/30/86
7/2/86
6/30/87
7/2/86
9/30/86
9/30/86
9/30/86
13.394%
13.295%
13.415%
13.413%
13.295%
13.295%
13.295%
13.415%
13.415%
13.415%
13.415%
13.295%
13.295%
13.387%
13.295%
13.295%
13.605%
13.605%
11.315%
13.415%
13.295%
13.295%
13.295%
13.295%
13.295%
13.295%
13.295%
13.295%
13.295%
13.295%
13.295%
11.595%
11.595%
11.595%
11.595%
13.415%
13.415%
13.295%
13.605%
13.295%
13.402%
13.325%
13.325%
13.177% qtr.
13.081% qtr.
13.197% qtr.
13.195% qtr.
13.081% qtr
13.081% qtr.
13.081% qtr.
13.197% qtr.
13.197% qtr.
13.197% qtr.
13.197% qtr.
13.081% qtr.
13.081% qtr.
13.170% qtr.
13.081% qtr.
13.081% qtr.
13.381% qtr.
13.381% qtr.
11.159% qtr.
13.197% qtr.
13.081% qtr.
13.081% qtr.
13.081% qtr.
13.081% qtr.
13.081% qtr.
13.081% qtr.
13.081% qtr.
13.081% qtr.
13.081% qtr.
13.081% qtr.
13.081% qtr.
11.423% qtr.
11.423% qtr.
11.423% qtr.
11.423% qtr.
13.197% qtr
13.197% qtr.
13.081% q t r
13.381% q t r *
13.081% qtr'
13.185% q tr *
13.110% qtr*
13.110% qtr*.
11.550% ann
NATIONAL AERONAUTICS AND SPACE ADMINISTRATION
Space Communications Company
7/2
7/20
DEPARTMENT OF THE NAVY
Defense Production Act
Gila River Indian Com. #15 7/13
RURAL ELECTRIFICATION ADMINISTRATION
Hoosier Energy #286 7/2
Wabash Valley Power #206
Kansas Electric #216
Wolverine Power #274
Brazos Electric #108
Brazos Electric #230
Seminole Electric #141
Big Rivers Electric #91
Big Rivers Electric #143
Big Rivers Electric #179
Saluda River Electric #271
*Saluda River Electric #186
*Plains Electric G&T #158
*South Mississippi #3
*South Mississippi #90
*South Mississippi #171
*Oglethorpe Power #74
*Oglethorpe Power #150
*Big Rivers Electric #179
*Big Rivers Electric #91
*Wabash Valley Power #104
*Wabash Valley Power #206
*Hoosier Energy #107
*New Hampshire Electric #192
•Wolverine Power #182
*Wolverine Power #183
•Allegheny Electric #175
•Allegheny Electric #175
•Allegheny Electric #175
•Allegheny Electric #175
•Allegheny Electric #175
•Arkansas Electric #97
•Arkansas Electric #142
•Arkansas Electric #142
•Arkansas Electric #221
•North Carolina Electric #185
•North Carolina Electric #185
•Kansas Electric #216
•Soyland Power #105
•Taconic Telephone #21
•Allegheny Electric #93
Glacier Highway Electric #262
Kansas Electric #216
•maturity extension
7/2
7/2
7/2
7/2
7/2
7/2
7/2
7/2
7/2
7/2
7/2
7/2
7/2
7/2
7/2
7/2
7/2
7/2
7/2
7/2
7/2
7/2
7/2
7/2
7/2
7/2
7/2
7/2
7/2
7/2
7/2
7/2
7/2
7/2
7/2
7/2
7/2
7/2
7/2
7/2
7/5
7/5
25,000,000.00
337,000.00
5,480,000.00
18,858,000.00
156,000.00
6,407,000.00
56,647,000.00
23,000.00
1,009,000.00
19,614,000.00
12,427,000.00
8,646,000.00
3,517,000.00
597,000.00
136,000.00
12,846,000.00
13,235,000.00
5,391,000.00
6,739,000.00
2,524,000.00
7,681,000.00
347,000.00
24,830,185.68
1,340,000.00
1,723,000.00
3,695,000.00
1,806,000.00
3,341,000.00
6,318,000.00
2,349,000.00
4,133,000.00
3,840,000.00
3,321,000.00
3,951,000.00
214,000.00
13,916,000.00
4,679,000.00
2,067,500.00
5,230,000.00
2,479,750.00
1,298,000.00
1,070,000.00
1,208,000.00
Page 5 of 9
FEDERAL FINANCING BANK
JULY 1984 ACTIVITY
BORROWER
AMOUNT
OF ADVANCE
DATE
FINAL
MATURITY
INTEREST
RATE
(semiannual)
INTEREST
RATE
(other than
semi-annual)
13.205%
13.205%
13.325%
13.325%
13.255%
13.255%
13.255%
13.085%
13.085%
13.085%
13.085%
13.085%
13.125%
13.375%
13.185%
13.185%
13.085%
13.085%
12.975%
12.975%
12.975%
12.975%
12.975%
12.975%
12.975%
13.298%
13.065%
13.015%
12.961%
12.955%
12.955%
11.315%
12.985%
12.985%
12.985%
12.985%
12.985%
13.195%
13.035%
13.035%
13.035%
13.035%
13.035%
13.035%
12.985%
12.985%
13.203%
12.975%
12.985%
12.975%
12.975%
12.765%
12.815%
12.765%
12.765%
12.765%
12.715%
12.715%
12.747%
12.765%
12.765%
12.715%
12.715%
12.994% qtr.
12.994% qtr.
13.110% qtr.
13.110% qtr.
13.042% qtr.
13.042% qtr.
13.042% qtr.
12.878% qtr.
12.878% qtr.
12.878% qtr.
12.878% qtr.
12.878% qtr.
12.916% qtr.
13.159% qtr.
12.975% qtr.
12.975% qtr.
12.878% qtr.
12.878% qtr.
12.771% qtr.
12.771% qtr.
12.771% qtr.
12.771% qtr.
12.771% qtr.
12.771% qtr.
12.771% qtr.
13.084% qtr.
12.858% qtr.
12.810% qtr.
12.758% qtr.
12.752% qtr.
12.752% qtr.
11.179% qtr.
12.781% qtr.
12.781% qtr.
12.781% qtr.
12.781% qtr.
12.781% qtr.
12.984% qtr.
12.829% qtr.
12.829% qtr.
12.829% qtr.
12.829% qtr.
12.829% qtr.
12.829% qtr.
12.781% qtr.
12.781% qtr.
12.992% qtr.
12.771% qtr.
12.781% qtr.
12.771% qtr.
12.771% qtr.
12.568% qtr.
12.616% qtr.
12.568% qtr.
12.568% qtr.
12.568% qtr.
12.519% qtr.
12.519% qtr.
12.550% qtr.
12.568% qtr.
12.568% qtr.
12.519% qtr.
12.519% qtr.
RURAL ELECTRIFICATION ADMINISTRATION (Cont'd.)
•Sunflower Electric #174
•Sunflower Electric #174
New Hampshire Electric #192
New Hampshire Electric #270
Deseret G&T #211
•Deseret G&T #211
•Cajun Electric #197
•Wolverine Power #101
•United Power #67
•United Power #86
•United Power #122
•United Power #129
Wabash Valley Power #206
•Western Illinois Power #99
•Wabash Valley Power #104
•Wabash Valley Power #206
•Oglethorpe Power 23
•Western Illinois Power #225
•Oglethorpe Power #74
•Oglethorpe Power #150
•East Kentucky Power #140
•East Kentucky Power #140
•East Kentucky Power #188
•New Hampshire Electric #192
•Seminole Electric #141
Arizona Electric #242
•South Texas Coop. #109
Oglethorpe Power #246
•South Mississippi #3
•South Texas Coop. #200
•Seminole Electric #141
•Big Rivers Electric #179
•United Power #86
•United Power #145
•United Power #222
•Wolverine Power #101
•Wolverine Power #183
•Brazos Electric #144
•Big Rivers Electric #58
•Big Rivers Electric #91
•Big Rivers Electric #136
•Big Rivers Electric #136
•Big Rivers Electric #143
•Big Rivers Electric #143
•Hcosier Energy #107
•Hcosier Energy #202
Central Power #275
Southern Illinois Power #98
Deseret G&T #211
•United Power #86
•United Power #122
•Soyland Power #226
Kansas Electric #216
Western Farmers Electric #133
Western Farmers Electric #196
Western Farmers Electric #220
North Carolina Electric #268
•Plains Electric #158
•South Mississippi Electric #90
North Carolina Electric #185
Colorado Ute Electric #203
French Broad Electric #245
Tex-La Electric #208
•maturity extension
7/6
7/6
7/9
7/9
7/9
7/9
7/9
7/10
7/10
7/10
7/10
7/10
7/11
7/11
7/12
7/12
7/13
7/13
7/16
7/16
7/16
7/16
7/16
7/16
7/16
7/17
7/18
7/19
7/20
7/20
7/20
7/20
7/23
7/23
7/23
7/23
7/23
7/23
7/23
7/23
7/23
7/23
7/23
7/23
7/23
7/23
7/24
7/25
7/25
7/25
7/25
7/26
7/26
7/26
7/26
7/26
7/27
7/30
7/30
7/30
7/30
7/30
7/30
$
15,000,000.00
1,500,000.00
527,000.00
1,615,000.00
3,621,000.00
22,167,000.00
17,932,000.00
1,854,000.00
200,000.00
2,150,000.00
2,000,000.00
9,300,000.00
61,000.00
3,895,000.00
6,642,000.00
302,000.00
19,740,000.00
8,936,000.00
22,836,000.00
15,295,000.00
267,000.00
900,000.00
6,131,000.00
1,091,000.00
2,730,000.00
2,600,000.00
1,000,000.00
20,457,000.00
28,000.00
206,000.00
14,917,000.00
22,779,000.00
898,000.00
4,062,000.00
814,000.00
79,000.00
39,000.00
1,122,000.00
226,000.00
1,112,000.00
776,000.00
89,000.00
224,000.00
64,000.00
1,542,000.00
31,458,000.00
714,000.00
400,000.00
3,860,000.00
440,000.00
65,000.00
5,630,000.00
1,499,000.00
989,000.00
4,633,000.00
54,000.00
7,207,000.00
13,511,000.00
2,455,000.00
7,051,000.00
7,537,000.00
114,000.00
513,000.00
7/6/86
7/6/86
9/30/86
9/30/86
7/10/86
7/9/86
7/9/86
7/10/86
7/10/86
7/10/86
7/10/86
7/10/86
7/11/86
7/11/87
7/12/86
7/12/86
7/13/86
7/13/86
7/16/86
7/16/86
7/16/86
7/16/86
7/16/86
7/16/86
7/16/86
12/31/18
7/18/86
7/19/86
9/30/86
7/21/86
7/20/86
12/31/84
7/23/86
7/23/86
7/23/86
7/23/86
7/23/86
7/22/87
9/30/86
9/30/86
9/30/86
9/30/86
9/30/86
9/30/86
7/23/86
7/23/86
9/30/87
7/25/86
7/26/86
7/25/86
7/25/86
7/26/86
9/30/86
7/26/86
7/26/86
7/26/86
9/30/86
7/30/86
9/30/86
9/30/86
9/30/86
7/30/86
7/30/86
Page 6 of 9
FEDERAL FINANCING BANK
JULY 1984 ACTIVITY
BORROWER
DATE
AMOUNT
OF ADVANCE
FINAL
MATURITY
INTEREST
INTEREST
RATE
RATE
(other than
(semiannual) semi-annual)
RURAL ELECTRIFICATION ADMINISTRATION (Cont'd)
Seminole Electric #141 7/30 $ 7,745,000.00 7/30/86 12.715% 12.519% qtr.
•Gulf Telephone #50
7/30
544,000.00
7/29/87
•Southern Illinois Power #38
7/30
3,100,000.00
9/30/86
•Basin Electric #87
7/30
1,515,000.00
7/30/86
•Basin Electric #137
7/30
25,000,000.00
7/30/87
•Chugach Electric #204
7/31
1,276,000.00
6/30/88
•Chugach Electric #204
7/31
58,000.00
6/30/88
•Chugach Electric #224
7/31
752,000.00
6/30/88
Arkansas Electric #97
7/31
2,073,000.00
7/31/88
Kamo Electric #266
7/31
11,970,000.00
9/30/86
Corn Belt Power #138
7/31
431,000.00
7/31/86
Basin Electric #272
7/31
611,000.00
9/30/86
Brazos Electric #108
7/31
85,000.00
7/31/86
Brazos Electric #230
7/31
4,648,000.00
7/31/86
South Texas Electric #200
7/31
1,637,000.00
7/31/86
•Allegheny Electric #93
7/31
3,007,000.00
9/30/86
•Allegheny Electric #93
7/31
4,245,000.00
9/30/86
•Allegheny Electric #175
7/31
3,425,000.00
7/31/86
Allegheny Electric #175
7/31
9,948,000.00
6/30/87
Allegheny Electric #175
7/31
3,914,000.00
7/13/87
SMALL BUSINESS ADMINISTRATION
State & Local Development Company Debentures
7/1/99
37,000.00
Northeast Missouri CDC 7/3
50,000.00
7/1/99
The St. Louis Local Dev. Co. 7/3
50,000.00
7/1/99
Ark-Tex Regional Dev. Co., Inc.7/3
55,000.00
7/1/99
Deep East Texas Reg. C.D.C.
7/3
63,000.00
7/1/99
Texas Panhandle Reg. Dev. Corp.7/3
63,000.00
7/1/99
Middlesex County CDC Co.
7/3
64,000.00
7/1/99
Big County Dev. Corp.
7/3
78,000.00
7/1/99
84,000.00
7/1/99
Warren Redev. & Planning Corp. 7/3
138,000.00
7/1/99
Gr. Salt Lake Bus. District
7/3
147,000.00
7/1/99
Business & Industry Dev. Corp. 7/3
169,000.00
7/1/99
Cleveland Area Dev. Fin. Corp. 7/3
213,000.00
7/1/99
Enterprise Development Corp. 7/3
273,000.00
7/1/99
Ark-Tex Reg. Dev. Co., Inc. 7/3
278,000.00
7/1/99
S.W. Michigan Dev. Co., Inc. 7/3
294,000.00
7/1/99
Greater Bakersfield LDC
7/3
300,000.00
7/1/99
420,000.00
7/1/99
Houston-Galveston Area LDC
7/3
472,000.00
7/1/99
Gr. Metro Chicago Dev. Corp. 7/3
47,000.00
7/1/04
Rural Enterprises D.C., Inc. 7/3
67,000.00
7/1/04
BEDCO Development Corp.
7/3
68,000.00
7/1/04
Phoenix Local Dev. Corp.
7/3
69,000.00
7/1/04
Alabama Community Dev. Corp. 7/3
73,000.00
7/1/04
Verd-Ark-Ca Dev. Corp.
7/3
80,000.00
7/1/04
Northeast Louisiana Ind., Inc. 7/3
80,000.00
7/1/04
82,000.00
7/1/04
Toledo Econ. Plan. Coun., Inc. 7/3
84,000.00
7/1/04
The St. Louis County L.D.C.
7/3
90,000.00
7/1/04
Long Island Dev. Corp.
7/3
97,000.00
7/1/04
Mahoning Valley Econ Dev Corp 7/3
101,000.00
7/1/04
Empire State Cert. Dev. Corp. 7/3
105,000.00
7/1/04
CCD Business Dev. Corp.
7/3
105,000.00
7/1/04
The St. Louis County L.D.C.
7/3
108,000.00
7/1/04
Greater Bakersfield LDC
7/3
115,000.00
7/1/04
Bennington County Ind. Corp. 7/3
117,000.00
7/1/04
121,000.00
7/1/04
Wisconsin Bus. Dev. Fin. Corp. 7/3
126,000.00
7/1/04
Chicago Ind. Finance Corp.
7/3
126,000.00
7/1/04
San Diego County LDC
7/3
129,000.00
7/1/04
Metro Growth & Dev. Corp.
7/3
Bay Area Employment Dev. Co. 7/3
Tulsa Economic Dev. Corp.
7/3
The
Corp.
for
Dev.Co. 7/3
•maturity
Minneapolis
extension
503Economic
Econ. Dev.
7/3
12.885%
12.753%
12.715%
12.885%
.13.035%
13.035%
13.035%
12.785%
12.844%
12.785%
12.841%
12.785%
12.785%
12.785%
12.834%
12.834%
12.785%
12.965%
12.965%
13.924%
13.924%
13.924%
13.924%
13.924%
13.924%
13.924%
13.924%
13.924%
13.924%
13.924%
13.924%
13.924%
13.924%
13.924%
13.924%
13.924%
13.924%
13.924%
13.917%
13.917%
13.917%
13.917%
13.917%
13.917%
13.917%
13.917%
13.917%
13.917%
13.917%
13.917%
13.917%
13.917%
13.917%
13.917%
13.917%
13.917%
13.917%
13.917%
13.917%
12.684%
12.556%
12.519%
12.694%
12.829%
12.829%
12.829%
12.587%
12.644%
12.587%
12.641%
12.587%
12.587%
12.587%
12.634%
12.634%
12.587%
12.761%
12.761%
qtr.
qtr.
qtr.
qtr.
qtr.
qtr.
qtr.
qtr.
qtr.
qtr.
qtr.
qtr.
qtr.
qtr.
qtr.
qtr.
qtr.
qtr.
qtr.
Page 7 of 9
FEDERAL FINANCING BANK
JULY 1984 ACTIVITY
BORROWER
DATE
AMOUNT
OF ADVANCE
FINAL
MATURITY
INTEREST
RATE
(semiannual)
State & Local Development Company Debentures (Cont'd)
Grig Aurora & Colorado Dev Co 7/3
Texas Cert. Dev. Co., Inc.
7/3
City-Wide Sm. Bus. Dev. Corp. 7/3
San Diego County LDC
7/3
The St. Louis County LDC
7/3
Texas Cert. Dev. Co., Inc.
7/3
Atlanta Local Dev. Co.
7/3
Texas Cert. Dev. Co., Inc.
7/3
Brockton Reg. Econ. Dev. Corp. 7/3
BEDCO Development Corp.
7/3
N. Puerto Rico L.D.C, Inc.
7/3
Columbus Countywide Dev. Corp. 7/3
Springfield Cert. Dev. Co.
7/3
Texas Panhandle Reg. Dev. Corp.7/3
Gr. Spokane Bus. Dev. Assoc.
7/3
Oakland County Local Dev. Co. 7/3
Bay Area Bus. Dev. Co.
7/3
The St. Louis L.D.C.
7/3
San Antonio L.D.C, Inc.
7/3
Lapeer Dev. Corp.
7/3
Texas Cert. Dev. Co., Inc.
7/3
Evergreen Com. Dev. Assoc.
7/3
Louisville Econ. Dev. Corp.
7/3
Verd-Ark-Ca Dev. Corp.
7/3
Wisconsin Bus. Dev. Fin. Corp. 7/3
Greater S.W. Kansas CDC
7/3
Springfield Cert. Dev. Co.
7/3
Akron Small Bus. Dev. Corp.
7/3
Region Nine Dev. Corp.
7/3
Caprock Local Dev. Co.
7/3
Region Nine Dev. Corp.
7/3
New Haven Com. Investment Corp.7/3
Mid-America Development Corp. 7/3
Verd-Ark-Ca Dev. Corp.
7/3
The St. Louis County L.D.C.
7/3
Coon Rapids Dev. Co.
7/3
Tucson Local Dev. Corp.
7/3
Columbus Countywide Dev. Corp 7/3
Texas Cert. Dev. Co., Inc.
7/3
Econ Dev Corp of Shasta County 7/3
San Diego County L.D.C.
7/3
Railbelt Community Dev. Corp. 7/3
Evergreen Community Dev. Assoc.7/3
Tucson Local Development Corp. 7/3
Ark-Tex Regional Dev. Co., Inc.7/3
La Habra Local Dev. Co., Inc. 7/3
San Diego County L.D.C.
7/3
San Francisco Ind. Dev. Fund
7/3
Mid-America Dev. Corp.
7/3
New Castle County E.D.C
7/3
Bus. Dev. Corp. of Nebraska
7/3.
Greater Bakersfield LDC
7/3
Altoona Enterprises, Inc.
7/3
Garland LDC, Inc.
7/3
143,000.00
162,000.00
172,000.00
174,000.00
186,000.00
186,000.00
193,000.00
213,000.00
238,000.00
245,000.00
263,000.00
281,000.00
290,000.00
292,000.00
297,000.00
300,000.00
325,000.00
339,000.00
346,000.00
378,000.00
403,000.00
462,000.00
500,000.00
500,000.00
500,000.00
19,000.00
24,000.00
39,000.00
48,000.00
62,000.00
67,000.00
72,000.00
76,000.00
84,000.00
92,000.00
96,000.00
97,000.00
116,000.00
127,000.00
130,000.00
133,000.00
137,000.00
154,000.00
155,000.00
161,000.00
166,000.00
197,000.00
213,000.00
227,000.00
236,000.00
298,000.00
394,000.00
500,000.00
500,000.00
7/1/04
7/1/04
7/1/04
7/1/04
7/1/04
7/1/04
7/1/04
7/1/04
7/1/04
7/1/04
7/1/04
7/1/04
7/1/04
7/1/04
7/1/04
7/1/04
7/1/04
7/1/04
7/1/04
7/1/04
7/1/04
7/1/04
7/1/04
7/1/04
7/1/04
7/1/09
7/1/09
7/1/09
7/1/09
7/1/09
7/1/09
7/1/09
7/1/09
7/1/09
7/1/09
7/1/09
7/1/09
7/1/09
7/1/09
7/1/09
7/1/09
7/1/09
7/1/09
7/1/09
7/1/09
7/1/09
7/1/09
7/1/09
7/1/09
7/1/09
7/1/09
7/1/09
7/1/09
7/1/09
13.917%
13.917%
13.917%
13.917%
13.917%
13.917%
13.917%
13.917%
13.917%
13.917%
13.917%
13.917%
13.917%
13.917%
13.917%
13.917%
13.917%
13.917%
13.917%
13.917%
13.917%
13.917%
13.917%
13.917%
13.917%
13.884%
13.884%
13.884%
13.884%
13.884%
13.884%
13.884%
13.884%
13.884%
13.884%
13.884%
13.884%
13.884%
13.884%
13.884%
13.884%
13.884%
13.884%
13.884%
13.884%
13.884%
13.884%
13.884%
13.884%
13.884%
13.884%
13.884%
13.884%
13.884%
7/1/87
7/1/87
7/1/87
7/1/89
7/1/89
7/1/91
7/1/94
7/1/94
7/1/94
13.185%
13.185%
13.185%
13.365%
13.365%
13.445%
13.445%
13.445%
13.445%
Small Business Investment Company Debentures
Advent Atlantic Capital Co. 7/18 2,500,000.00
Northland Capital Corporation 7/18
100,000.00
Winfield Capital Corporation
7/18
300,000.00
Enterprise Venture Cap. Corp. 7/18
550,000.00
Federated Capital Corporation 7/18
300,000.00
Control Data Capital Corp.
7/18
3,000,000.00
Bando-McGlocklin Inv. Co., Inc.7/18
560,000.00
Clinton Capital Corporation
7/18
1,000,000.00
Intercapco West, Inc.
7/18
500,000.00
INTEREST
RATE
(other than
semi-annual)
Page 8 of 9
FEDERAL FINANCING BANK
JULY 1984 ACTIVITY
DATE
BORROWER
AMOUNT
OF ADVANCE
FINAL
MATURITY
INTEREST
RATE
(semiannual)
INTEREST
RATE
(other than
semi-annual)
TENNESSEE VALLEY AUTHORITY
Seven States Energy Corporation
Note A-84-12 7/31 $ 523,601,925.91
10/31/84
10.835%
6/30/06
13.355%
DEPARTMENT OF TRANSPORTATION
Section 511—4R Act
Milwaukee Road #511-2
39,851.00
7/20
FEDERAL FINANCING BANK
JULY 1984 Commitments
BORROWER
Colombia
Dominican Republic
Israel
St. Louis, MO
Waukegan, IL
South Mississippi Electric
South Mississippi Electric
Alabama Electric
AMOUNT
COMMITMENT
EXPIRES
7,000,000.00
2,500,000.00
250,000,000.00
15,000,000.00
1,500,000.00
15,173,500.00
127,283,000.00
20,485,000.00
6/30/85
4/30/86
7/7/88
2/15/86
9/1/85
7/30/89
7/30/95
7/27/89
GUARANTOR
DOD
DOD
DOD
HUD
HUD
REA
REA
REA
$
MATURITY
6/30/91
4/30/96
7/10/14
2/15/86
9/1/85
12/31/15
12/31/18
12/31/15
Page 9 of 9
FINANCING BANK HOLDINGS
(in millions)
Program
July 31, 1984
June 30, 1984
Net Change
7/1/84-7/31/84
Net Change—FY 1984
10/1/83-7/31/84
On-Budget Agency Debt
Tennessee Valley Authority $ 13,345.0
Export-Import Bank
NCUA-Central Liquidity Facility
$ 13,255.0
15,563.4
100.5
$ 90.0
15,563.4
170.5
70.0
$ 230.0
887.4
126.3
51.3
1,087.0
51.3
-0-0-
-67.0
-73.4
58,856.0
116.1
132.0
11.0
3,467.5
40.9
57,701.0
119.5
143.8
11.0
3,467.5
41.8
1,155.0
-3.3
-11.8
2,165.0
-2.7
-11.7
-5.3
-0.9
-7.5
16,562.1
5,000.0
122.0
2,390.8
-0-
Off-Budget Agency Debt
U.S. Postal Service 1,087.0
U.S. Railway Association t
Agency Assets
Farmers Home Administration
DHHS-Health Maintenance Org.
DHHS-Medical Facilities
Overseas Private Investment Corp.
Rural Electrification Admin.-CBO
Small Business Administration
-0-0-
-0-
Government-Guaranteed Lending
DOD-Foreign Military Sales 16,684.2
DEd.-Student Loan Marketing Assn.
DOE-Geothermal Loan Guarantees
DOE-Non-Nuclear Act (Great Plains)
DHUD-Community Dev. Block Grant
DHUD-New Communities
DHUD-Public Housing Notes
General Services Administration
DOI-Guam Power Authority
DOI-Virgin Islands
NASA-Space Communications Co. t
DON-Defense Production Act
Rural Electrification Admin.
SBA-Small Business Investment Cos.
SBA-State/Local Development Cos.
TVA-Seven States Energy Corp.
DOT-Amtrak
DOT-Section 511
DOT-WMATA
TOTALS^
$
•figures may not total due to rounding
tdoes not include capitalized interest
5,000.0
4.3
1,262.5
219.8
33.5
2,178.5
413.3
36.0
28.7
908.2
2.8
20,670.9
861.1
317.2
1,523.6
-0159.4
177.0
143,321.6
4.3
1,176.5
214.7
33.5
2,178.5
413.3
36.0
28.7
891.3
-0-40.7
377.0
42.5
86.0
5.1
-0-0-0-0-0-
-0111.7
-3.9
-0-0.4
-39.1
16.9
2.6
0.2
1.7
20,611.3
853.7
300.9
1,548.3
59.9
1,732.0
56.7
169.5
105.1
-880.0
-24.1
-0$
-0-0-
159.4
177.0
141,733.5
7.4
16.4
-24.7
-0-0-0$ 1,588.1
-0$
7,239.8
'REASURY NEWS
artment of the Treasury • Washington, D.c. • Telephone 566-2041
For Immediate Release
September 27, 1984
Contact:
Alfred H. Kingon
566-8585
REGAN PROPOSAL TO INTERIM AND DEVELOPMENT COMMITTEES
Excerpts from Interventions and Communiques
THE PROPOSAL
For the spring session of the Interim Committee, I
propose that the Committee discuss issues relating to the
adjustment efforts and balance of payments prospects of member
countries in the context of the global financial environment and
in a medium-term framework. I would include in this discussion
external indebtedness, capital flows among countries, exchange
rate developments, trade policies, and the role of IMF
surveillance relative to these issues. (Regan Interim Cmte.
Statement)
— For our spring session, I would suggest that the
Development Committee focus on the keys to economic growth and
sustainable payments positions over the medium and long-term. We
should examine the structural and develoment constraints which
hinder economic development including the question of external
indebtedness. Trade policies and protectionism, obstacles to
direct equity investment and capital flows should be priority
areas to be addressed in the context of sustained growth and
prudent management of debt amortization. (Regan Development
Cmte. Statement)
— ... these issues should include:
o Economic Growth and attendant financing in developing
countries.
o Relative role and realistic prospects for ODA,
commerical bank, and direct investment flows over the
medium and longer term.
o Medium-term prospects for restoration of developing
country creditworthiness and the maintenance/expansion
of the syndicated market for new credits.
R-2868
-2o
Protectionism and recommendations to the GATT for a new
round of trade liberalization and/or for a GATT work
program concerning performance requirements, Voluntary
Restraint Arrangements and the like.
o Realistic prospects for a direct exchange of external
debt in developing countries for direct private
investment to foster employment, economic growth, and
lessen their debt service requirements. (Regan
Development Cmte. Statement)
We cannot approach our discussions in a spirit of
negotiation nor with the ever elusive hope of finding generalized
solutions.... Financial and economic situations vary
operationally...we will need to continue to respond to each
situation on a case by case basis.... (Regan Development Cmte.
Statement)
THE REACTION AND NEXT STEPS
— It was agreed that, at its next meeting, the Interim
Committee will discuss, in a medium term framework and in the
context of global financial environment and the current approaches
toward resolving debt problems, certain issues relating to the
adjustment efforts and balance of payments prospects of member
countries. These will include external indebtedness, international
capital flows, trade policies, and the role of Fund serveillance in
dealing with these issues. In this connection, it called on the
Managing Director to prepare, in the framework of the Fund's
competence, background papers for consideration by the Executive
Board, and to report to the next meeting of the Committee, in order
to provide a basis for its discussion of these issues. (Interim
Committee Communique)
It was agreed that, at an extended meeting in spring 1985,
the Development Committee will discuss, within the context of a
medium- to long-term framework and the current approaches toward
resolving debt problems, the structural and development aspects of
the problems of developing countries in their efforts to achieve
sound economic growth. These include, inter alia, external
indebtedness, protectionism, commodity prices, interest rates, the
structure of capital flows and obstacles to direct investment and
equity capital flows. In this connection, it called on the
Managing Director of the Fund and the President of the World Bank
to prepare in close collaboration, contributing from the
perspective of their respective mandates and competences,
background papers for submission, after consideration by'their
respective Executive Boards, to the next meeting of the Committee.
(Development Committee Communique)
#
#
#
TREASURY NEWS
apartment
or the
Treasury • Washington, ox. • Telephone 566-2M1
FOR IMMEDIATE
RELEASE
RESULTS OF TREASURY'S 52-WEEK
- ' B ^ M f 3 ^ , 1984
B^LL fncpgfti ,M
Tenders for $ 8,285 million of 52-week kM£€KTtoT&*tEifniied
October 4, 1984,
and to mature October 3, 1985,
were accepted
today. The details are as follows:
RANGE OF ACCEPTED COMPETITIVE BIDS:
Discount
Investment Rate
Rate
(Equivalent Coupon-Issue Yield) Price
10.31%
11.35% 89-575
Low
10.32%
11.36%
89.565
High
89.565
11.36%
Average 10.32%
Tenders at the high discount rate were allotted 89%.
Location
TENDERS RECEIVED AND ACCEPTED
(In Thousands)
Accepted
Received
Boston
New York
Philadelphia
Cleveland
Richmond
Atlanta
Chicago
St. Louis
Minneapolis
Kansas City
Dallas
San Francisco
Treasury
TOTALS
Type
Competitive
Noncompetitive
Subtotal, Public
Federal Reserve
Foreign Official
Institutions
TOTALS
R-2869
$ 337,920
18,504,495
13,035
101,925
46,795
17,235
1,146,685
92,515
6,825
27,700
6,105
1,999,255
100,195
$22,400,685
$
49,070
6,915,125
7,035
38,625
28,530
12,235
89,505
50,515
6,825
24,700
6,105
956,505
100,195
$8,284,970
$20,114,970
410,715
$20,525,685
1,800,000
$5,999,255
410,715
$6,r409,,970
1,,800,,000
75,000
$22,400,685
75,,000
$8,284,970
rREASURY NEWS
lartment
of the
Treasury • Washington, D.c. •October
Telephone
1, 1984 566-2041
FOR IMMEDIATE
RELEASE
RESULTS OF TREASURY'S WEEKLY BILL AUCTIONS
Tenders for $ 6,003 million of 13-week bills and for $ 6,015 million
of 26-week bills, both to be issued on October 4, 1984,
were accepted today.
RANGE OF ACCEPTED
COMPETITIVE BIDS:
Low
High
Average
13-week bills
maturing January 3, 1985
Discount Investment
Rate
Rate 1/
Price
26-week bills
maturing
April 4, 1985
Discount Investment
Price
Rate 1/
Rate
10.18%
10.25%
10.23%
10.33%
10.35%
10.35%
10.59%
10.67%
10.65%
97.427
97.409
97.414
11.05%
11.07%
11.07%
94.778
94.768
94.768
Tenders at the high discount rate for the 13-week bills were allotted 54%,
Tenders at the high discount rate for the 26-week bills were allotted 83%
TENDERS RECEIVED AND ACCEPTED
(In Thousands)
Received
Received
Accepted
:
Location
Boston
New York
Philadelphia
Cleveland
Richmond
Atlanta
Chicago
St. Louis
Minneapolis
Kansas City
Dallas
San Francisco
Treasury
TOTALS
•
319,120
14,337,315
26,130
75,150
68,235
57,625
1,290,290
73,965
14,510
55,790
30,230
1,044,000
422,595
$
64,870
4,686,415
26,130
52,450
64,065
53,115
217,320
42,965
14,510
55,480
20,230
294,400
422,595
$6,003,185
:
$17,814,955
$6,014,545
$12,644,835
1,202,140
$13,846,975
$3,361,435
1,202,140
$4,563,575
.
.
.
$14,644,850
1,145,405
$15,790,255
$3,344,440
1,145,405
$4,489,845
1,531,010
1,031,010
.
1,500,000
1,000,000
408,600
408,600
524,700
524,700
$15,786,585
$6,003,185
$17,814,955
$6,014,545
335,780
12,406,830
27,450
93,040
53,385
63,870
1,305,015
71,165
12,010
71,825
71,890
985,455
288,870
$
85,780
4,462,130
27,450
93,040
53,385
63,870
362,015
48,865
12,010
71,825
55,790
378,155
288,870
$15,786,585
$
Type
Competitive
Noncompetitive
Subtotal, Public
Federal Reserve
Foreign Official
Institutions
TOTALS
1/ Equivalent coupon-issue yield.
R-2870
;
Accepted
:
:
:
:
:
$
TREASURY NEWS
spartment of the Treasury • Washington, D.c. • Telephone 566-2041
FOR RELEASE AT 4:00 P.M.
October 2, 1984
TREASURY'S WEEKLY BILL OFFERING
The Department of the Treasury, by this public notice,
invites tenders for two series of Treasury bills totaling approximately $13,200 million, to be issued October 11, 1984. This offering will provide about $700 million of new cash for the Treasury, as
the maturing bills are outstanding in the amount of $12,493 million,
including $1,006 million currently held by Federal Reserve Banks
as agents for foreign and international monetary authorities and
$2,835 million currently held by Federal Reserve Banks for their
own account. The additional $700 million of new cash to be raised
is based on the assumption that Congress will have completed action
to increase the debt limit. The two series offered are as follows:
91-day bills (to maturity date) for approximately $6,600
million, representing an additional amount of bills dated July 12,
1984, and to mature January 10, 1985 (CUSIP No. 912794 GP 3 ) , currently outstanding in the amount of $6,473 million, the additional
and original bills to be freely interchangeable.
182-day bills for approximately $6,600 million, to be dated
October 11, 1984, and to mature April 11, 1985 (CUSIP No. 912794 GZ 1 ) .
Both series of bills will be issued for cash and in exchange
for Treasury bills maturing October 11, 1984. Tenders from Federal
Reserve Banks for themselves and as agents for foreign and international monetary authorities will be accepted at the weighted
average bank discount rates of accepted competitive tenders. Additional amounts of the bills may be issued to Federal Reserve Banks,
as agents for foreign and international monetary authorities, to
the extent that the aggregate amount of tenders for such accounts
exceeds the aggregate amount of maturing bills held by them.
The bills will be issued on a discount basis under competitive
and noncompetitive bidding, and at maturity their par amount will
be payable without interest. Both series of bills will be issued
entirely in book-entry form in a minimum amount of $10,000 and in
any higher $5,000 multiple, on the records either of the Federal
Reserve Banks and Branches, or of the Department of the Treasury.
R-2871
- 2 Tenders will be received at Federal Reserve Banks and
Branches and at the Bureau of the Public Debt, Washington, D. C.
20239, prior to IsOO p.m., Eastern Daylight Saving time, Tuesday,
October 9, 1984.
Form PD 4632-2 (for 26-week series) or Form
PD 4632-3 (for 13-week series) should be used to submit tenders
for bills to be maintained on the book-entry records of the
Department of the Treasury.
Each tender must state the par amount of bills bid for,
which must be a minimum of $10,000. Tenders over $10,000 must
be in multiples of $5,000. Competitive tenders must also show
the yield desired, expressed on a bank discount rate basis with
two decimals, e.g., 7.15%. Fractions may not be used. A single
bidder, as defined in Treasury's single bidder guidelines, shall
not submit noncompetitive tenders totaling more than $1,000,000.
Banking institutions and dealers who make primary markets in
Government securities and report daily to the Federal Reserve Bank
of New York their positions in and borrowings on such securities
may submit tenders for account of customers, if the names of the
customers and the amount for each customer are furnished• Others
are only permitted to submit tenders for their own account. Each
tender must state the amount of any net long position in the bills
being offered if such position is in excess of $200 million. This
information should reflect positions held as of 12:30 pem. Eastern
time on the day of the auction. Such positions would include bills
acquired through "when issued" trading, and futures and forward
transactions as well as holdings of outstanding bills with the same
maturity date as the new offering, e.g., bills with three months to
maturity previously offered as six-month bills. Dealers, who make
primary markets in Government securities and report daily to the
Federal Reserve Bank of New York their positions in and borrowings
on such securities, when submitting tenders for customers, must
submit a separate tender for each customer whose net long position
in the bill being offered exceeds $200 million.
A noncompetitive bidder may not have entered into an agreement,
nor make an agreement to purchase or sell or otherwise dispose of
any noncompetitive awards of this issue being auctioned prior to
the designated closing time for receipt of tenders.
Payment for the full par amount of the bills applied for
must accompany all tenders submitted for bills to be maintained
on the book-entry records of the Department of the Treasury.
A cash adjustment will be made on all accepted tenders for the
difference between the par payment submitted and the actual
issue price as determined in the auction.
No deposit need accompany tenders from incorporated banks
and trust companies and from responsible and recognized dealers
in investment securities for bills to be maintained on the bookentry records of Federal Reserve Banks and Branches. A deposit
- 3 of 2 percent of the par amount of the bills applied for must
accompany tenders for such bills from others, unless an express
guaranty of payment by an incorporated bank or trust company
accompanies the tenders.
Public announcement will be made by the Department of the
Treasury of the amount and yield range of accepted bids. Competitive bidders will be advised of the acceptance or rejection of
their tenders. The Secretary of the Treasury expressly reserves
the right to accept or reject any or all tenders, in whole or in
part, and the Secretary's action shall be final. Subject to these
reservations, noncompetitive tenders for each issue for $1,000,000
or less without stated yield from any one bidder will be accepted
in full at the weighted average bank discount rate (in two decimals)
of accepted competitive bids for the respective issues. The calculation of purchase prices for accepted bids will be carried to three
decimal places on the basis of price per hundred, e.g., 99.923, and
the determinations of the Secretary of the Treasury shall be final.
Settlement for accepted tenders for bills to be maintained
on the book-entry records of Federal Reserve Banks and Branches
must be made or completed at the Federal Reserve Bank or Branch
on October 11, 1984, in cash or other immediately-available funds
or in Treasury bills maturing October 11, 1984.
Cash adjustments
will be made for differences between the par value of the maturing
bills accepted in exchange and the issue price of the new bills.
In addition, Treasury Tax and Loan Note Option Depositaries may
make payment for allotments of bills for their own accounts and
for account of customers by credit to their Treasury Tax and Loan
Note Accounts on the settlement date.
In general, if a bill is purchased at issue after July 18,
1984, and held to maturity, the amount of discount is reportable
as ordinary income in the Federal income tax return of the owner
at the time of redemption. Accrual-basis taxpayers, banks, and
other persons designated in section 1281 of the Internal Revenue
Code must include in income the portion of the discount for the
period during the taxable year such holder held the bill. If the
bill is sold or otherwise disposed of before maturity, the portion
of the gain equal to the accrued discount will be treated as ordinary income. Any excess may be treated as capital gain.
Department of the Treasury Circulars, Public Debt Series Nos. 26-76 and 27-76, Treasury's single bidder guidelines, and this
notice prescribe the terms of these Treasury bills and govern the
conditions of their issue. Copies of the circulars, guidelines,
and tender forms may be obtained from any Federal Reserve Bank or
Branch, or from the Bureau of the Public Debt.
TREASURY NEWS
Department of the Treasury • Washington, D.c. • Telephone 566-204
For Release Upon Delivery
Expected at 10:00 a.m. EDT
October 2, 1984
STATEMENT OF
RONALD A. PEARLMAN
ACTING ASSISTANT SECRETARY (TAX POLICY)
DEPARTMENT OF THE TREASURY
BEFORE THE
COMMITTEE ON WAYS AND MEANS
OF THE
HOUSE OF REPRESENTATIVES
Mr. Chairman and Members of the Committee:
I am pleased to have this opportunity to present the views
of the Treasury Department regarding the generation-skipping
transfer tax. I would like to begin by thanking the Chairman for
calling this hearing and for introducing a bill (H.R. 6260)
embodying the Treasury Department's 1983 Proposal to Simplify and
Improve the Generation-Skipping Transfer Tax. I share the
Chairman's hope that this hearing will be the beginning of a
process that, with the cooperation of all interested parties,
will lead to the resolution of the longstanding, difficult
problem of finding a workable replacement to the current
generation-skipping transfer tax.
Why A Generation-Skipping Transfer Tax Is Essential
Perhaps the best way to appreciate the need for a
generation-skipping transfer ("GST") tax is by analogy to the
gift tax. Just as a gift tax is essential to prevent an
individual from avoiding the estate tax in his own generation, a
GST tax is necessary to prevent an individual from transferring
wealth to his descendants in a form that avoids the estate or
gift tax in succeeding generations. To see that this is so, one
need only to look to the fact that long-term, multi-generational
trusts are so prevalent in the estate plans of wealthy
f-*^
- 2 individuals. Had Congress recognized and acted upon the
generation-skipping problem at the time the gift tax was enacted,
this would not be possible. While we are not suggesting that
Congress should attempt to impose a tax on existing
generation-skipping arrangements, we believe it is essential that
Congress prevent this erosion of the federal transfer tax base
for future generations.
Perhaps a more significant reason for imposing a tax on
generation-skipping transfers is that a transfer tax system
without such a tax is fundamentally unfair. This stems from the
fact that the wealthiest individuals are in the best position to
engage in generation-skipping transfers while those of more
modest wealth may be reluctant to enter into such arrangements.
This has two effects. First, it greatly undermines the
progressivity of the federal transfer tax system. If families of
modest wealth are paying a transfer tax in every generation while
the wealthiest families are paying tax every other generation (or
less frequently), the progressivity of the system is turned
upside-down. Second, an estate tax without a GST tax has the
perverse effect of taxing wealth that an individual has
accumulated during his own lifetime more harshly than wealth that
has been inherited. Newly accumulated wealth generally cannot be
passed to lower generations without the payment of an estate or
gift tax. On the other hand, inherited wealth is often received
in a form that allows it to escape estate tax at the death of the
recipient. Treasury believes that the form in which property is
transmitted from generation to generation should not affect the
transfer tax burden on that property and that inherited wealth
should not be taxed more favorably than assets than an individual
accumulates during his own lifetime.
The final reason for supplementing the federal estate and
gift tax with a GST tax is that, without such a supplement, the
transfer tax system is not neutral, that is, it biases taxpayers'
decisions about how to transfer their property during lifetime
and at death. Without a GST tax, the estate tax encourages those
taxpayers who might otherwise be inclined to leave property
outright to their children to create trusts for the benefit of
their children and lower generations. While there are many
legitimate, nontax reasons for using flexible trusts, the tax
system should not encourage people to enter into such
arrangements purely for tax reasons.
Treasury's 1983 Proposal
Bearing in mind the principles of fairness, neutrality, and
protection of the transfer tax base, Treasury set out to design a
- 3 new tax on generation-skipping transfers. Of course, we were not
writing on a clean slate; Congress adopted such a tax as part of
the Tax Reform Act of 1976 and this tax is still in effect.
Since its enactment, the present GST tax has been the
subject of a good deal of criticism. While Treasury believes
that many of the criticisms of the existing generation-skipping
transfer tax have been greatly overstated, we have concluded that
the 1976 statute does present a number of real problems.
Chief among these problems is the complexity of the current
GST tax. It would appear that, in a well-meaning attempt to
design a system that achieves perfect neutrality between
generation-skipping transfers and transfers that do not skip
generations, Congress enacted a tax system that is too difficult
for many practitioners to understand and, in certain respects,
too complex for Treasury and the IRS to administer.
Second, th'e current GST tax has an impact upon too many
taxpayers. As mentioned above, the generation-skipping problem
is largely confined to wealthy taxpayers. The current GST tax is
not so limited. As a result, even individuals with relatively
modest accumulations of wealth need to take into account the
current GST tax in planning their estates.
Finally, even if the tax could be enforced and administered
as intended by Congress in 1976, it would not cure the
generation-skipping problem. Soon after enactment of the tax, it
was observed that the wealthiest transferors can largely avoid
the impact of the tax by "layering" their estates, that is, by
setting up separate trusts for children and grandchildren. Since
the 1976 tax applies only to trusts that have beneficiaries in
more than one generation, the layering technique effectively
avoids the tax on the assets passing directly to the
grandchildren. Moreover, even for transferors who do not layer
their estates, the tax can be avoided through the use of three
major exceptions built into the 1976 statute: (1) the $250,000
exemption for transfers to grandchildren; (2) the rule that a
power to appoint property among the lineal decedents of the
grantor does not cause the holder of such a power to be treated
as a beneficiary of a trust; and (3) the complete exemption from
the GST tax of distributions out of current trust income.
Putting together the experience under the 1976 statute with
the general principles set forth above, we have reached three
major conclusions:
1. A large exemption is necessary to eliminate the vast
majority of taxpayers from the GST tax system. Such an exemption
would mean that, as a practical matter, most taxpayers and most
- 4 tax practitioners could plan their affairs without regard to the
GST tax. Also, from an administrative standpoint, a tax
affecting a relatively small number of taxpayers would be more
manageable. On the other hand, the exemption level should not be
set higher than necessary to accomplish these goals.
2. The tax should be applied at a flat rate. This change
would make the tax easier to understand and apply for those
taxpayers remaining within the system and would ease further the
problems of administering the system.
3. Finally, a transfer tax must be imposed at each
generation level in order for the tax to be effective, fair and
neutral.
At the outset, I would like to emphasize that the notion
that a transfer tax should be imposed once per generation was not
the starting point for Treasury's analysis; it was the conclusion
that we reached by applying the general principles noted above to
the problem at hand. Since this is clearly the most important
and controversial aspect of Treasury's proposal, I would like to
turn immediately to the reasons for reaching this conclusion.
A Tax on Direct Generation-Skipping Transfers
If a GST tax is to be imposed at all, it seems fairly clear
that it should apply to a situation where a grandparent sets up a
trust for the benefit of his child and his grandchildren, giving
the child an interest in the income and corpus of the trust
during his lifetime and the power to say where the property is
transferred at his death. As noted above, if such a tax is not
imposed, the transfer tax system discriminates heavily against
outright transfers to children and in favor of such
multi-generational trust arrangements since, in the latter case,
it is possible to avoid the estate tax payable at the death of
the child.
Recognition of this fact led to the enactment in 1976 of the
current tax on generation-skipping transfers. The 1976 statute
treats the child, in effect, as if he had been the owner of the
property and had transferred it to his grandchildren.
The question of whether a tax should be imposed at the
child's level becomes harder to answer, though, if the child is
given a smaller bundle of rights with respect to the trust
property. What if the child is given a life income interest but
no power over the trust property at his death? What if the child
has no right to receive trust property himself but is given
complete discretionary power to say who receives the trust
property during his lifetime and at his death? Does it matter
whether the child's power is held as a trustee? What if the
child has no absolute right to receive trust income and no power
- 5 to direct the disposition of trust property but is a permissible
recipient of distributions from the trust if needed for his
health, education, support or maintenance?
The current GST tax answers these questions by providing
that any interest in the trust property held by the child (no
matter how small) will trigger imposition of the tax but that
powers over the disposition of trust property will be ignored as
long as the power is limited to the power to appoint among lineal
descendants of the grantor. This system eliminates the disparity
between giving the child outright ownership of the property and
making him one of several beneficiaries of a flexible trust.
However, the system is far from neutral; it merely substitutes
one disparity for another. If the transferor is willing to
withhold from his child the right to receive property from the
trust during his lifetime but gives the child full control over
disposition of property to the child's children, grandchildren
siblings, nephews and nieces (clearly an important attribute of
ownership), no tax is imposed at the child's death. On the other
hand, if the child is given merely a contingent right to receive
trust corpus, the entire trust is taxed at his death, even if the
child never receives a cent from the trust.
If the child is of a relatively modest wealth, the decision
whether to give a child an interest in a trust may be a difficult
one. In the event of an emergency or a sharp change in economic
circumstances, the child may need or want to have access to the
trust. On the other hand, the child may never need the trust
property. The current GST tax says in effect that if flexibility
is retained, a tax will be imposed; if flexibility is forgone,
the tax can be avoided. Ironically, by imposing the GST tax on
this basis, the 1976 statute replaces the bias that the estate
tax creates in favor of flexible trusts with a strong prejudice
against such arrangements.
Moreover, the current system is inequitable in that the
wealthiest taxpayers are best able to avoid the tax. Consider,
for example, a taxpayer with one child and three grandchildren
and with assets of $3,000,000. The child is a successful
professional with a net worth of several hundred thousand
dollars. The grandchildren are still minors. In planning his
estate, this taxpayer would probably be reluctant to leave any
substantial portion of his wealth in a trust where the child was
given no interest in the property. Absent tax considerations,
the taxpayer would most likely want to leave most of his wealth
outright to his child or in a flexible trust for the benefit of
the child and the three grandchildren. Even though the current
tax system tells him that if he transfers property directly to
his grandchildren, he avoids a tax in his child's estate, he
probably would continue to be reluctant to transfer more than
10-20 percent of his wealth directly to grandchildren.
- 6Now change the example so that the grandparent has a net
worth of $30,000,000 and the child is a millionaire in his own
right. (The family structure is the same.) Absent tax
considerations, this wealthier taxpayer might have plans similar
to those of his less wealthy counterpart for disposition of his
wealth at his death. However, the wealthier taxpayer is likely
to respond quite differently to a GST tax imposed on any property
in which his child has an interest. For example, this transferor
might well divide his wealth into two trusts: (1) a $5,000,000
trust in which the child is given an income interest and limited
rights to receive trust principal (with remainder to the
grandchildren) and a $25,000,000 trust in which the child has no
interest but over which the child is given a complete
discretionary power to determine the timing and amounts of
distributions to the grandchildren. Thus, while it is likely
that a second transfer tax in the child's generation will apply
to 80 to 90 percent of the $3,000,000 accumulation of wealth, as
little as 10 to 20 percent of the $30,000,000 accumulation will
be subject to this second tax. A system that allows such a
result is simply unfair and, as applied to the wealthiest
taxpayers, largely ineffective.
What then is the solution? The lack of neutrality and
unfairness cannot be cured by treating any power of appointment
over property as a taxable ownership interest. This simply moves
the disparity to yet another place. Congress tried this approach
once in 1942, with disastrous results. Under the 1942 law,
property was included in the estate of anyone having a power of
appointment over the property (with certain exceptions). Rather
than collecting any additional tax, this approach merely forced
taxpayers to dispose of their property in rigid and inflexible
ways. Congress recognized this fact in 1951 and revised
retroactively the tax treatment of powers of appointment, so that
?£f P ^?X subject to a power of appointment would be included in
the holder s estate only if the holder had the right to appoint
the property to himself, his estate, his creditors or the
2n^t«?™ 8 °J h l S e S t a t S ( k n ° W n a s a general" power of
appointment).
ft
C
d ra le StUdy of this
difficult problem. Treasury
ha= ^ ?^ rtK ! ^
t?ans?er tav ^hSt'i ? * °ni? W a ? t 0 i n l P o s e a generation-skipping
Ll lllll «JJ ?H i* a " e f f e < r t i v e backstop to the estate and gift
w ! J ^ .
• that results in fairness and neutrality is to
P
of that aeneration C Ll e n e r a t i° n ' r e ^ ^ l e S S of whethe? a member
'
'? eration has an interest in or power over such
property.!./
If a generation-skipping
transfer tax i« i. n „„H nn
y
0
t h a t the A L I
f
r h ^
3 r
fi2«i?
^
"M!
^
" s e s s i o n Draft (H.R.
sk^- !n%h °T
^ndparent °ir^tly toTg'rand'chiil
Alfred
is based
on of
theH.R.
same 6260),
fundamental
conclusion.
skip6261)
in the
language
property
oassina from the
grandparent to the grandchild will alwayfbesubjec^to
- 7 two transfer taxes, whether property passes first outright to the
child, through a flexible trust, or directly to the grandchild.
Thus, the tax incentive for making direct skips disappears.
This makes the system neutral because taxpayers with
accumulations of wealth are free to let nontax considerations
determine how they pass their wealth down to their families. It
makes the system fair because the wealthiest families will pay
tax on the same basis as families of more modest wealth. And the
tax is effective since no amount of clever planning can avoid the
imposition of the second tax in the child's generation.
Before leaving this subject, I would like to respond to two
arguments frequently made against the imposition of a GST tax on
a transfer directly from a grandparent to a grandchild. First,
it is argued that if the property is transferred in a direct skip
from a grandparent to a grandchild, there is only one transfer so
there should be only one tax. This argument has intuitive appeal
but it misses an essential point — imposition of the GST tax on
direct skips is necessary for the transfer tax system to work
properly. Again, the gift tax provides a useful analogy. Before
1932, people were accustomed to thinking of the estate tax as a
tax that applied only at death. This view had to be expanded to
include lifetime transfers to prevent taxpayers from avoiding the
estate tax in their own generation. Similarly, it is necessary
today to expand our thinking about the proper structure of the
transfer tax to prevent taxpayers from avoiding such a tax in
their children's generation. It is no more persuasive to argue
today that one transfer implies one tax than it would have been
to argue in 1932 that a lifetime transfer should not be subject
to a transfer tax because it does not involve a transfer by a
decedent.
Second, it is sometimes argued that a tax on a direct skip
from a grandparent to a grandchild unfairly penalizes such
transfers when compared to transfers to children. In fact, the
tax on direct skips is not a penalty at all; it merely
neutralizes the tax advantage that would otherwise attach to
these transfers. In other words, without a tax on direct skips,
a transfer to a child followed by a retransfer to the grandchild
is penalized since the property received will have been subject
to two transfer taxes by the time the grandchild receives the
property. Property transferred directly to grandchildren will be
subject to only one transfer tax unless a GST tax is imposed on
direct skips.
We recognize, of course, that there are many legitimate,
nontax reasons for wishing to make transfers to grandchildren
instead of (or in addition to) transfers to children. Moreover,
when relatively small amounts are involved, transfer taxes are
- 8 often an insignificant consideration. In part for this reason,
our proposed GST tax would not apply to cumulative transfers of
up to $1 million.
I turn now to issues considerably less complicated and
controversial than whether to impose a tax on direct skips.
When to Impose the Tax
Having decided how many transfer taxes should be imposed,
Treasury next faced the issue of when a tax should be imposed on
a generation-skipping transfer. To answer this question, we
adopted the basic principle that the tax should be imposed as
soon as the fact and amount of the generation-skipping transfer
becomes certain.2/ This works out in the following way:
If an individual creates a trust for the benefit of his
children and grandchildren, neither the fact nor the amount of
the generation-skipping transfer is known when the trust is
created. At one extreme, all of the trust property may be
distributed out to the children, resulting in no
generation-skipping transfer whatsoever. At the other extreme,
the children may receive no income or corpus from the trust, so
that all the trust property passes to grandchildren and skips the
children's generation. In many cases, the result will be
somewhere in-between.
For any property held in a multi-generational, flexible
trust, the fact and amount of a generation-skipping transfer does
not become certain until the interests of all the children in
that property terminates. This can happen either by an actual
distribution of trust property to a grandchild (which is referred
to as a "taxable distribution") or by a complete termination of
all interests in the trust held by children (referred to as a
"taxable termination"). As with the 1976 GST tax, the Treasury
proposal imposes a tax upon taxable distributions and taxable
terminations.
With respect to an outright transfer to a grandchild, the
fact and amount of the generation-skipping, transfer is certain at
the time of the transfer. The same is true of a transfer—to-a
2/
The
ALI Discussion
Draft
adopts
different
— a
trust
exclusively
for the
benefit
of aone
or more principle
of the
tax is imposed when property is distributed or transferred to
a beneficiary two or more generations below the transferor,
but in no event later than the death of the last grandchild.
- 9 -
transferor's grandchildren.3/ Thus, in both of these cases, the
GST tax is imposed at the time of transfer under the Treasury
proposal.
At first, it may seem that this rule results in a more harsh
treatment of direct skips than taxable distributions and taxable
terminations. In fact, this is not so. It has long been
recognized that an early payment of a transfer tax carries with
it a detriment and an offsetting benefit. The detriment is
obvious: the taxpayer must part with his money sooner, thereby
losing the value of the use of that money (the investment income
it would produce). The offsetting benefit is that the transfer
tax base is the value of the property at the time of the earlier
payment; any appreciation in value of the property subsequent to
the transfer is not subject to tax. If the rate at which the
property appreciates in value (or produces income) is equal to
the rate of return the taxpayer could have received on the funds
use to pay the transfer tax, and if the tax rate that would be
applied at both times is the same, the detriment and benefit
offset exactly.
Without this fundamental fact, a unified estate and gift tax
using the same rate schedule would discriminate heavily against
lifetime gifts. Were it not for the possibility of excluding
future appreciation from his transfer tax base, no taxpayer would
ever make a taxable lifetime gift unless he were given a
substantial discount on his gift tax payment. Conversely, the
recently enacted unlimited marital deduction would be unthinkable
from the Government's standpoint. The effect of the unlimited
marital deduction on Government revenues would be intolerable
were it not for the fact that the transfer tax base continues to
grow during the lifetime of the surviving spouse (to the extent
it is not consumed).
This same principle is applicable to the timing of payment
of the GST tax. Accordingly, the fact that a tax on a direct
generation-skipping transfer is paid up-front while the tax on
taxable distributions and taxable terminations is postponed does
not mean that direct skips are treated unfairly. Moreover, as
will
be seen
below,
skips
are imposed
treated until
more actual
favorably in
3/ Under
H.R.
6261,direct
the tax
is not
one distributions
respect than other
generation-skipping
transfers.
to grandchildren
are made,
or until the last
grandchild dies.
- 10 Rate of Tax
As noted above, a fundamental aspect of Treasury's 1983
proposal is that the generation-skipping transfer tax should be
imposed at a flat rate.4/ This decision was motivated primarily
by a desire to achieve simplicity — a major problem with the
1976 GST tax is the difficulty of calculating a tax that is based
on the tax profile of a "deemed transferor." (The difficulties
result from identifying the deemed transferor and accounting for
the fact that his tax profile changes over time.) Moreover,
since the Economic Recovery Tax Act of 1981 significantly
narrowed the range of effective estate tax rates (from 37 to 50
percent, eventually), a flat GST tax rate is justifiable. *
Treasury has suggested that the GST tax rate be 80 percent
of the top estate tax rate. This proposal represents a
compromise between two competing considerations. On the one
hand, the highest transfer tax rate should apply to
generation-skipping transfers by the very wealthiest individuals
to achieve the goals of neutrality and fairness. On the other
hand, we recognized that, even with a $1,000,000 exemption, some
taxpayers would remain in the GST tax system who were not in the
highest transfer tax bracket. Moreover, since the GST tax is a
substitute for the transfer tax in the children's generation, we
had to acknowledge that these children would not invariably be in
the top bracket.
Recognizing that no single flat rate can achieve perfect
fairness and neutrality for every family situation, we have
proposed a flat rate equal to 80 percent of the top estate tax
rate (currently producing a GST tax rate of 44 percent) .5/
Two points should be emphasized. First, this rate cannot be
lowered without seriously compromising the effectiveness of the
proposed GST tax as applied to the wealthiest taxpayers. Just as
Congress recognized in 1976 that gift tax rates must be the same
as estate tax rates in order for the gift tax to be effective, it
must be recognized that if the GST tax rate is significantly
lower than the top estate tax rate, the GST tax will not work
properly.
4/ The ALI Discussion Draft reflects the same conclusion.
5/ The ALI Discussion Draft proposes that the top estate tax
rate be used. This is deceptive, however, since the tax
under H.R. 6261 generally is imposed on a tax exclusive
basis. See the discussion below.
- 11 -
Second, the choice of 80 percent of the top estate tax rate
is clearly linked to the choice of a $1,000,000 exemption. (The
reason for this choice is discussed below.) If for any reason,
Congress decides that a higher exemption level is necessary or
appropriate, the justification for deviating from the top estate
tax rate disappears.
Basis for Imposition of the Tax — "Inclusive" vs. "Exclusive"
The next feature of the Treasury's proposal concerns the
calculation of the tax base upon which the flat rate of tax is
imposed. This issue arises because the estate and gift tax do
not calculate the tax base in a consistent manner. The estate
tax is imposed on the entire amount available for transfer; the
amount that actually goes to pay the tax is not excluded from the
base. To illustrate, if the estate tax were imposed at a flat
rate of 50 percent, and if a decedent died with an estate of
$1,000,000, the tax would be $500,000, leaving $500,000 for the
beneficiaries. Because the tax base includes the amount used to
pay the tax, the estate tax is said to be imposed on a "tax
inclusive" basis.
By contrast, the gift tax is imposed only on the amount
ultimately received by the donee. Thus, if the gift tax were
imposed on this basis at a flat rate of of 50 percent, a transfer
of $500,000 would attract a tax of only $250,000. Looked at
another way, the tax is only 33-1/3% of the total amount
($750,000) that is available to make the transfer and pay the tax
thereon. Since the gift tax base does not include the amount
used to pay the tax, the gift tax is said to be imposed on a "tax
exclusive" basis.
Many have argued that there is no good reason for imposing
the estate and gift tax on different bases, especially in light
of the effort in 1976 to provide a fully unified estate and gift
tax system. While this question is open to debate, the
difference between the estate and gift tax is an undeniable
feature of the present transfer tax system and one that makes the
design of a neutral GST tax system considerably more difficult.
More specifically, in designing a GST tax system to prevent the
avoidance of a transfer tax in the generation below that of the
transferor, one must ask whether the transfer tax being avoided
is an estate tax or a gift tax.
In the case of a classic generation-skipping trust, where a
child of the grantor is given an interest in the trust property
during his entire lifetime, it would seem that the tax being
avoided is an estate tax. Thus, under the current GST tax and
the Treasury proposal, the tax on taxable terminations is imposed
on a tax inclusive basis. If the tax on terminations were
imposed on a tax exclusive basis, the effective rate of tax would
- 12 be reduced significantly and substantial incentives would remain
in the system for people in the top brackets to continue to use
generation-skipping trusts.
At the other extreme, when a grandparent makes a direct skip
to a grandchild, it seems more appropriate to say that a gift tax
is being avoided since the grandparent could have transferred the
property to the child who would make an immediate gift of the
same property to the grandchild. Therefore, the Treasury
proposal imposes the tax on direct skips on a tax exclusive
basis. In reaching this conclusion, we took into account the
fact that many taxpayers would not easily accept the notion that
paying the tax on a direct skip up-front would carry with it an
offsetting benefit of excluding subsequent appreciation from the
tax base. Moreover, imposing the tax on direct skips on a tax
exclusive basis serves to alleviate the hardship arising from
having to pay two transfer taxes at the same time. In fact, the
maximum marginal rate of tax applicable to a lifetime gift to a
grandchild is only 55.2 percent when computed on a tax inclusive
basis. This is insignificantly higher than the maximum rate of
55 percent that would apply to bequests to children.
The basis for taxing distributions from trusts is less
clear. The current GST tax imposes the tax on distributions on a
tax inclusive basis. This creates a highly desirable neutrality
with respect to taxable terminations. On the other hand, it may
be argued that distributions while a child is still alive are
more like gifts by the child, so the tax should be imposed on a
tax exclusive basis.
We have concluded that it is essential that taxable
distributions be taxed on the same basis as taxable terminations.
If this were not the case, then in a flexible trust for children
and grandchildren, the grandchildren of the last child to die
suffer a harsher GST tax than those of all other children.
Moreover, to prevent avoidance of the tax inclusive tax on a
taxable termination, it would be necessary to treat trust
distributions within a short time before a taxable termination as
if the distributions had not been made (similar to section 2035,
involving
gifts
within 3
yearstaxes
of death).
the
6/
The ALI
Discussion
Draft
outright Hence,
skips under
and taxable
-Treasury—propc-sadT-taxable
distributions
are
taxed
on
a
tax
distributions on a tax exclusive basis and taxable terminations
inclusive
basis.6/
on a tax inclusive basis. Unfairness to the beneficiaries of tl
last grandchild to die is avoided by treating any distribution
within 9 months after a taxable termination as a taxable
distribution. Thus, unless the trust continues beyond the deat
of the last grandchild, the GST tax under H.R. 6261 will always
be imposed on a tax exclusive basis.
- 13 A Large Up-Front Exemption
The third major feature of Treasury's GST tax proposal is to
give each individual a $1,000,000 GST tax exemption. The clear
advantage of this approach is that the vast majority of
taxpayers, including all those with modest accumulations of
wealth, are completely shielded from the impact of the GST tax
system. This means that if an individual's transfers during
lifetime and at death total no more than $1,000,000, he can
safely ignore the GST tax in planning his estate — it will never
apply to any transfer made by that individual nor to any trust
created by that individual.
Treasury believes that an up-front exemption is a highly
desirable feature of the GST tax for essentially two reasons.
First, it limits the impact of the GST tax to that class of
taxpayers where generation-skipping is most prevalent: wealthy
individuals. Second, it removes the need for most tax
practitioners and trustees to master and apply the GST tax.
While we believe that Treasury's proposed new GST tax is
considerably simpler than the current GST tax, it is obvious that
certain complexities remain. This is inevitable; any GST tax
that attempts to be reasonably fair and neutral will involve some
complexity. We feel, however, that the remaining complexities
are not unmanageable by those who will be advising the relatively
few wealthy individuals who remain within the system.2/
As to the size of the exemption, the choice of a $1,000,000
figure again represents a compromise. The exemption level cannot
be set too low — otherwise, too many taxpayers would remain
within the system. Perhaps more significantly, given the
decision to impose a flat rate of tax, a relatively low exemption
level would argue for a lower flat rate of tax in order to avoid
unfairness. A lower rate, however, would seriously dilute the
effectiveness of the tax as applied to the wealthiest
individuals.
On the other hand, the exemption level should not be set too
high. Since our proposal involves free transferability of the
exemption
between
spouses,
a $1,000,000
exemption
per rather
individual
7/ The ALI
Discussion
Draft
uses a credit
mechanism
than a
exemption. Treasury acknowledges that a credit produces a more
effective tax since transferors cannot place property in a trust
that shields that property and all future appreciation from the
GST tax. We feel, however, that the need to limit the scope of
the GST tax justifies the use of an exemption.
- 14 effectively becomes a $2,000,000 exemption per married couple.
Moreover, the exemption need not be applied to any portion of the
combined taxable estate that is used to pay federal estate taxes.
An estate of approximately $1.25 million would pay approximately
$250,000 in estate tax after 1986, leaving $1,000,000 of property
which could be completely shielded from the GST tax. Thus, a
combined estate of $2.5 million would be free from the GST tax.8/
We estimate that of the 2,000,000 decedents projected to die
in 1988, only 9,000 will have gross estates in excess of $1.25
million.9/ This represents only 35 percent of those 25,800
decedents whose estates will be large enough to be subject to the
federal estate tax and only 0.45 percent of all decedents dying
in 1988. Of course, the number of decedents having taxable
estates in excess of $1.25 million will be far smaller in light
of extensive use of the charitable deduction and the unlimited
marital deduction.
8/
This assumes the estate is split evenly between the two
spouses. If this is not the case (for example, if the
unlimited marital deduction is fully utilized) , the maximum
combined exempt estate would be even larger.
9/ 1988 was chosen for this illustration since the unified
credit will be fully phased in and the top rate will be
lowered to 50 percent by that time.
- 15 -
The following table shows the impact on the above statistics
of raising or lowering the $1,000,000 exemption level:10/
Exemption
Level
$ 600,000
1,000,000
1,250,000
1,500,000
1,750,000
2,000,000
2,250,000
2,500,000
Maximum
Exempt
Gross
Estate
$ 600,000
1,260,000
1,705,000
2,173,000
2,666,000
3,166,000
3,666,000
4,166,000
No. of
Decedents
Remaining
in System
Percent of
Decedent
Remaining
in System
Percent
of All
Decedents
25,800
9,000
5,300
3,600
2,700
1,900
1,500
1,100
100%
35%
21%
14%
10%
7%
6%
4%
1.30%
0.45%
0.27%
0.18%
0.14%
0.10%
0.08%
0.06%
This table shows that for each additional $250,000 exemption, the
maximum exempt estate increases by approximately $500,000. Thus,
the maximum exempt combined estate increases by $1,000,000.
(This assumes a top rate of 50%; the effect is even greater at a
top rate of 55%.) The table also reveals the astounding fact
that if the GST exemption level is raised to $2.5 million, a
couple with a combined taxable estate of over $8.3 million will
be able to shield their after-tax estate from the GST tax. This
would leave no more than a few hundred decedents subject to the
GST tax each year (taking into account the charitable and marital
deduction).
In light of the above considerations, we strongly urge the
Committee not to deviate significantly from the $1,000,000
exemption level.11/ If the Committee nevertheless decides to
increase the amount of the exemption, we believe that serious
consideration should lpe given to a flat tax imposed at 100
percent of the top estate tax rate.
10/
This table represents a projection forward to 1988 of data
gathered from 1982 estate tax filings. No attempt has been
made to adjust for the probable effect of the changes made by
ERTA (in particular, the unlimited marital deduction) on the
size of gross estates.
11/ The ALI Discussion Draft has a credit of $417,000, which is
equivalent to an exemption of $834,000 (disregarding the
appreciation factor).
- 16 Tax on Distributions of Trust Income
Under the current GST tax, distributions out of current
trust income are completely exempt from tax. The primary
justification for this exception apparently was that applying the
tax to such distributions would be too complex.
While it cannot be denied that exempting distributions out
of current trust income from the GST tax simplifies the system,
it also creates a major loophole. Furthermore, it destroys the
neutrality of the GST tax system.
If an individual transfers property outright to a child, and
if the child regularly transfers all of the income from that
property to his children (grandchildren of the original
transferor), the child would be treated as making taxable gifts
of the income to the grandchildren. If, on the other hand, the
property is transferred to a trust, and if distributions out of
the trust to the grandchildren are free from the GST tax, no
transfer tax is ever paid on the value of the use of the property
during the child's lifetime. In other words, the trust allows
the child, in effect, to make tax-free gifts of the trust income
to the grandchild during his lifetime, with no gift tax
consequences until the child's death. This is the same type of
abuse that the Supreme Court recently held to be impermissible in
the Dickman decision.
Such a result clearly cannot be permitted if the GST tax is
to be at all effective. Moreover, whatever the complexities
would have been of taxing income distributions under the 1976 GST
tax statute, these difficulties are considerably lessened under
the Treasury proposal. From the standpoint of computation, the
calculation is not at all difficult since the GST tax is imposed
at a flat rate. Also, the mechanism for avoiding the imposition
of an income tax and a transfer tax on the same amount is quite
simple: the recipient of the distribution is given an income tax
deduction for any GST tax attributable to the distribution.12/
Finally, from the standpoint of trust administration, the tax on
income distributions should not be overly burdensome on trustees
since relatively few trusts will be subject to the GST tax in
12/ The ALI Discussion Draft also taxes distributions of trust
light of -the_-$T,Q00,000- exemption.
~
income. However, this proposal uses the opposite mechanism
for avoiding double tax: a GST tax deduction is given to
reflect the income tax to be paid by the recipient.
- 17 -
Effective Dates
The Treasury Department has proposed that the current GST
tax be repealed retroactively and that its replacement be applied
on a prospective basis, with the effective date deferred one year
for transfers taking place at death. While we recognize that
this proposal in effect grants a windfall to those
generation-skipping trusts that would be taxable under the
current GST tax as well as under the Treasury proposal, we do not
feel that it is worth keeping the current GST tax alive simply to
govern these trusts. Also, we do not believe it is possible to
devise a fair and simple way of applying the Treasury proposal
retroactively to existing trusts.
We recognize, however, that a bill that would repeal the
current GST tax could create a "window of opportunity" for those
individuals willing to create lifetime generation-skipping
trusts. We believe that it would not be unreasonable for this
Committee to close this window by providing an earlier effective
date for lifetime transfers to generation-skipping trusts.
Specific Issues on Which Public Comment Is Requested
Trusts Skipping More Than One Generation
The Treasury proposal is designed to prevent the avoidance
of a transfer tax in the generation of the transferor's children.
It does not prevent transferors from avoiding transfer taxes in
any lower generations.
For essentially two reasons, Treasury decided not to attempt
to apply the general principles of its proposal to impose
multiple GST taxes on trusts and direct skips that avoid tax in
more than one generation. First, we think that taxing the first
generation skip would largely cure the generation-skipping
problem. In our view, most taxpayers would be willing to tie up
their property in a trust for one generation or make a direct
skip to grandchildren to avoid a transfer tax in their children's
generation, but would not be willing to tie up property for two
or more generations or make direct skips to great-grandchildren
to derive the more remote benefit of avoiding transfer taxes in
those lower generations. Second, a truly neutral tax that
applied once each generation would be exceedingly complex. For
example, under such a system, a distribution from a
multi-generational trust to a great-grandchild before the death
of the last child would have to be treated as a taxable
distribution with respect to the child's generation and a direct
skip with respect to the grandchild's generation. Rules would
have to be provided for the interaction between these two taxes.
- 18 -
In spite of these concerns, we recognize that it seems
anomalous to tax the first generation skip from a trust while
letting all subsequent generation skips escape tax, especially in
jurisdictions where the Rule Against Perpetuities does not limit
the term of the trust. In light of this concern, we do not
believe it would be unreasonable to provide that where property
continues in a multi-generational trust beyond the death of the
last child of the grantor, additional taxes will be imposed on
the termination of the interest of each generation in the trust
and upon distributions to beneficiaries two or more generations
below the level of the last generation to pay a transfer tax on
the property. Since a rule of this type would never result in
more than one GST tax being imposed at the same time, it could be
drafted relatively simply. Statutory language that would
accomplish the desired result is attached to this testimony as
Appendix A.
Transferability of the $1,000,000 Exemption
Treasury believes that transferability of the $1,000,000
exemption between spouses is an essential feature of our
proposal, especially as it applies to transferability of the
exemption at the death of the first spouse. If an individual
could not transfer any unused GST exemption to a surviving
spouse, he would be forced to choose in many cases between
utilizing his GST exemption and maximum use of the unlimited
marital deduction. In such a circumstance, it could hardly be
said that individuals with a combined estate of $2,000,000 or
less could ignore the GST tax in their estate planning.
On the other hand, Treasury generally did not intend for the
transferability of the GST exemption to result in exempt
transfers to the issue of a single marriage in excess of
$2,000,000. While we question whether GST-tax-motivated
marriages would in fact become prevalent, we would be happy to
work with the Committtee to identify legitimate concerns and to
fashion reasonable solutions.
$10,000 Per Year Exemption for Certain Distributions
The Treasury proposaT"would provfde an exemption of up to
$10,000 per year for distributions to certain trust
beneficiaries. This exemption would be available only after the
death of the grantor and during the lifetime of a child of the
grantor and only for distributions to beneficiaries in the
grandchildren's generation.
The origin of this exemption lies in the fact that the
$1,000,000 GST exemption creates an incentive for individuals to
make fully exempt direct skips to grandchildren or to trusts for
- 19 the exclusive benefit of grandchildren. These transfers assure
that no portion of the exemption will be "wasted" on trusts
making distributions to children.
For reasons that have already been discussed, however,
individuals of relatively modest wealth will be reluctant to
transfer $1,000,000 ($2,000,000 in the case of a married couple)
in a form that completely skips their children's generation. The
proposed $10,000 exemption will enable these individuals to
create a single, partially exempt trust for the benefit of
children and grandchildren. If such a trust is created, the
$10,000 exemption for distributions to grandchildren generally
will offset any detriment from diminishing the trust by
distributions to children.
We recognize that the proposed $10,000 exemption is only an
approximate cure to the problem of assuring transferors of modest
wealth that their GST exemption will not be wasted. Hence, we
would be happy to work with the Committee to explore alternative
solutions to this problem. In particular, we believe that the
alternative outlined in the Committee's release of September 18,
1984, allowing for the exemption to be allocated among
distributions to children and grandchildren, is worth exploring
in greater detail.
Credit for State Death Taxes
The Treasury Department proposal would allow a credit
against the revised GST tax for State "GST" taxes. This would
effectively share the revenue raised by the GST tax with the
States. Treasury does not have strong views on whether such a
revenue sharing mechanism should be a part of the GST tax system,
nor on the appropriate level of revenue sharing. It is our view,
however, that if a credit for State death taxes is allowed
against the GST tax, it should be limited (primarily for reasons
of simplicity) to State generation-skipping transfer taxes, that
is, taxes specifically enacted to parallel the federal GST tax.
Comparison of the Treasury Proposal with the ALI Discussion Draft
In closing, I would like to say a few words about the
similarities and differences between the Treasury Department
proposal and the ALI Discussion Draft. The various differences
as to exemption versus credit, timing, rate of tax, basis for
imposing a tax (tax exclusive versus tax inclusive), and other
issues have been footnoted in the preceding text.
I would like to emphasize, however, that in overall
structure and in general philosophy, the similarities of the two
proposals far outweigh these differences. Both proposals abandon
- 20 the notion of a tax and exemption level based on the tax profile
of a "deemed transferor" in favor of a flat rate of tax and an
independent mechanism for removing smaller transfers from the
system. Both proposals would apply a tax to distributions out of
current trust income, unlike the current GST tax. Finally, both
proposals embody the conclusion that a tax must be imposed on
direct skips (outright skips in the ALI terminology) in order to
prevent avoidance of the tax on distributions and terminations.
Concluding Remarks
Again, I would like to thank the Chairman for calling this
hearing. I would also encourage the Committee to take action on
this issue promptly in the next Congress, with a view toward
enacting a new GST tax at the earliest opportunity. Of course,
Treasury would be glad to assist the Committee in whatever way
possible to fashion a simple, fair and effective tax on
generation-skipping transfers.
This concludes my prepared statement. I would be happy to
answer your questions.
Appendix A
To impose multiple GST taxes on successive generation skips, the
Treasury Department Discussion Draft would be amended as follows:
(1) Section 2611(b) would be amended by deleting paragraph
(2) thereof and renumbering paragraph (3) as paragraph (2);
(2) A new section 2653 would be added, to read as follows:
"SEC. 2653. TAXATION OF MULTIPLE SKIPS.
"(a) General Rule.—For purposes of this chapter, if—
"(1) there is a generation-skipping transfer of any
property, and
"(2) immediately after such transfer such property is
held in trust,
for purposes of applying this chapter to subsequent transfers
from such trust, the trust will be treated as if the transferor
of such property were assigned to the 1st generation below that
of the individual who was the transferor immediately before the
transfer .
"(b) Trust Retains Inclusion Ratio.—
"(1) In general.—Except as provided in paragraph
(2), the provisions of subsection (a) shall not affect the
inclusion ratio determined with respect to any trust.
"(2) Special rule for pour-over trust.—
-2-
"(A) In general.—If the generation-skipping
transfer referred to in subsection (a) involves the
transfer of property from 1 trust to another trust
(hereinafter in this paragraph referred to as the
'pour-over trust'), the inclusion ratio for the
pour-over trust shall be determined by treating the
nontax portion of such distribution as if it were a
part of a GST exemption allocated to such trust.
"(B) Nontax portion.—For purposes of
subparagraph (A), the nontax portion of any
distribution is the amount of such distribution
multiplied by the applicable fraction which applies to
such distribution.
TREASURY NEWS
e p a r t m e n t of t h e Treasury • W a s h i n g t o n , D.c. • T e l e p h o n e 566-2041
-iDR/.T.'. ROOM 5310
OCT a (2 en p« «e«J
For Release Upon Delivery
Expected at 10:00 a.m. EDT
October 3, 1984
-- ART.-1L.. :,- THE TuEASl7\Y
STATEMENT OF
MIKEL M. ROLLYSON
ACTING TAX LEGISLATIVE COUNSEL
DEPARTMENT OF THE TREASURY
BEFORE THE
SUBCOMMITTEE ON SELECT REVENUE MEASURES
COMMITTEE ON WAYS AND MEANS
Mr. Chairman and Members of the Subcommittee:
I am pleased to have the opportunity to present the views of
the Treasury Department on the following bills: H.R. 700,
relating to the deduction of travel and transportation expenses
of construction workers; H.R. 907, which would expand the
exclusion for employer-provided meals to cover meals provided off
the premises of the employer; H.R. 1343, relating to the
deduction for bad debts by stock savings banks; H.R. 1773, which
would exempt from unrelated business income tax the income from
the sale or exchange of membership lists; H.R. 2129, relating to
the allocation of property taxes among tenant-stockholders in
cooperative housing corporations; H.R. 2686 relating to the
taxation of business development companies; H.R. 3388, which
would make section 252 of the Economic Recovery Tax Act of 1981
applicable to certain transactions that occurred in 1973; H.R.
3284, and H.R. 3528, relating to the amortization of bus and
freight forwarder operating authorities; H.R. 4167, which would
exempt from unrelated business income the income received by
schools, pension trusts and IRAs from oil and gas limited
partnership investments; H.R. 4507, which would permit section
501(d) organizations to pass-through the investment tax credit to
its members; H.R. 4779, relating to the application of the
windfall profit tax to certain exchanges of crude oil for
residual fuel oil; H.R. 5022, which would deny percentage
depletion with respect to oil and gas lease bonuses and advance
royalties; and H.R. 5199, relating to the application of section
278(b)
R-2873 to inedible fruits and nuts.
I will discuss each biLl in turn.
- 2 H.R. 700
Deduction for Travel and
Transportation Expenses of
Construction Workers
Current Law
In general, a taxpayer is allowed a deduction for ordinary
and necessa-ry expenses paid or incurred in carrying on a trade or
business. No deduction is allowed for personal, living, or
family expenses, including the cost of commuting to and from
work. However, it is sometimes difficult to delineate between
personal transportation and travel expenses which are
non-deductible and those which are properly deductible as
business expenses.
In 1953, the Service ruled that daily transportation costs
incurred by a taxpayer in traveling from the metropolitan area in
which he regularly worked to a temporary job site outside that
metropolitan area were deductible. In 1971, however, the Tax
Court held that daily transportation costs were non-deductible
regardless of the temporary nature of the job or the distance
traveled. The IRS formally adopted the Tax Court's rationale in
1976. Subsequently, Congress imposed a moratorium on the
implementation of the Service's position and required that
expenses paid or incurred in connection with travel between a
taxpayer's residence and place of work for the period beginning
after 1976 and before June 1, 1981, be governed by the rules in
effect prior to 1976.
Current law also provides that taxpayers who are away from
home may deduct business expenses, including the cost of
transportation, incurred in connection with temporary employment
away from the taxpayer's regular or principal place of
employment. Whether employment is temporary, as opposed to
permanent or indefinite, depends upon an analysis of the facts
and circumstances surrounding the employment arrangement. The
Internal Revenue Service recently issued a ruling, Rev. Rul.
83-82, 1983-22 I.R.B. 5, which provides guidelines to determine
whether an employment arrangement is temporary.
Description of H.R. 700
H.R. 700 would amend Code section 162 to provide a special
rule for the travel and transportation expenses incurred by
construction workers. This rule defines as a "temporary" job
site any job at a site located more than 30 miles from the
construction worker's principal place of residence for the first
- 3 two years that the worker is employed at that job site. For
periods of employment after the initial two-year period, whether
or not the job site is temporary would be determined based on an
examination of all the facts and circumstances, except that the
following would not be taken into account:
(a) the fact that the worker has already been employed at the
job site for the past two years;
(b) the fact that the worker's employment at the job site is
of indefinite duration.
In addition, the IRS could not deem, by rule or regulation, that
any length of time either automatically or presumptively makes
the job other than temporary. For purposes of this bill, the
term "construction worker" means any individual employed, whether
as a skilled, semiskilled, or unskilled laborer, in the building
or construction industry, but does not include clerical or
management employees. The proposed amendment would be effective
upon enactment.
Discussion
The apparent intention of the bill is to permit construction
workers to deduct all travel and transportation expenses incurred
in connection with employment at a job site located more than 30
miles from the worker's principal place of business, at least for
the first two years the worker is employed at that site.
Treasury shares this Subcommittee's concern about the fair
treatment of workers who must travel many miles from their
residence to temporary jobs. The difficulties inherent in
distinguishing "temporary" assignments, as is required by current
law, from "indefinite" assignments has lead to significant
uncertainty in this area. However, Treasury must oppose H.R.
700.
We oppose the adoption of a special travel deduction rule
governing the tax liability of a class of taxpayers defined by
occupation without regard to similarly situated taxpayers who
have different occupations. Moreover, any rule adopted to
provide a deduction for workers with a constantly shifting
workplace who must travel long distances to reach their job sites
should be designed to remedy the uncertainty of current law.
Under this bill, the IRS would be precluded from establishing a
bright line for defining temporary employment. We believe such a
rule is desirable to provide guidance to taxpayers and those who
must administer these provisions of the tax law.
- 4 In addition, there is an active regulations project which
addresses the subject of travel expenses incurred in connection
with temporary jobs. We hope that the project will be completed
and that new regulations will be promulgated in proposed form in
the near future. Because this area is now under intensive study
and because we intend to propose rules of general application in
this area, we must oppose the bill.
H.R. 907
Expansion of Exclusion for Employer-Provided
Meals to Cover Certain Off-Premise Meals
Current Law
In general, current law under section 119 provides that the
value of meals furnished to an employee by or on behalf of his
employer is excludable from the employee's gross income if the
meals are furnished on the business premises of the employer and
are furnished for the convenience of the employer. The
long-standing interpretation of section 119 requires that the
meals be furnished at the place of employment of the employee for
a substantial noncompensatory business reason of the employer,
such as to have the employee available for emergency call during
his meal period. The determination of whether a meal is
furnished for the convenience of the employer is made by
examining the relevant facts and circumstances.
Under the Tax Reform Act of 1984, the value of meals provided
to an employee at an eating facility operated by an employer for
employees is treated as a de minimus fringe benefit and excluded
from income if (1) the facility is located on or near the
business premises of the employer, (2) revenue derived from the
facility normally equals or exceeds the direct operating costs of
the facility, and (3) certain discrimination requirements are met
in the case of officers, owners, or highly compensated employees.
Description of H.R. 907
H.R. 907 would amend Code section 119 to extend the scope of
the meals exclusion to cases where meals are furnished off the
business premises of the employer where:
(a) the employer is unable to justify economically the
operation of on-premises eating facilities;
(b) the employer does not provide on-premises eating
facilities at the employee's place of employment;
- 5 (c) meals are provided in kind, not in cash; and
(d) meals are provided within a time frame consistent with
the employer's established meal schedule.
Discussion
Treasury opposes H.R. 907. As a general matter, the value of
property (including meals) received in connection with the
performance of services should be treated as income for purposes
of the income tax provisions and as wages for purposes of the
withholding and employment tax provisions of the Code. Section
119 was enacted as part of the 1954 recodification of the
Internal Revenue Code to clarify the tax status of meals and
lodging furnished to an employee by his employer in circumstances
where the benefits provided were necessary to the functioning of
the employer's business. In enacting section 119, Congress
overruled prior Service regulations which only permitted an
exclusion for meals or lodging furnished to employees for the
convenience of the employee if it was evident from the
circumstances that the meals or lodging did not represent
compensation. Congress rejected this test and instead provided
that the basic test for exclusion is whether the meals or lodging
are furnished primarily for the convenience of the employer.
Consistent with this interpretation, Congress also added an
additional restriction — that meals subject to the exclusion
must be taken on the business premises of the employer. Thus,
the conditions for exclusion under section 119 represent an
attempt to establish objective standards by which the exclusion
is limited to those situations where meals are provided primarily
to enable the employee to perform his job. The requirement that
meals be furnished on the employer's premises is an essential and
logical part of this test.
The amendments proposed by H.R. 907 would change section 119
from an exclusion based on business necessity into a statutory
fringe benefit generally available to a substantially enlarged
number of taxpayers. Such an expansion is not consistent with
the original purpose of section 119 which was to permit a
statutory exclusion where business requirements demanded that an
employee take his meals on the business premises. Moreover,
Congress has recently addressed the taxation of certain
employer-provided meals as fringe benefits in the Tax Reform Act
of 1984. This new provision does not amend section 119.
Instead, it provides a new section 132 of the Code which excludes
from employee income certain fringe benefits, including, in
certain circumstances, the excess of the value of meals provided
to an employee by an employer at an employer-operated eating
facility over the fee charged for the meal. Because Congress has
- 6 just reviewed the taxation of fringe benefits in a comprehensive
way, we do not think this bill represents an appropriate time to
re-open the subject of fringe benefits taxation.
We also are opposed to introducing into section 119 a rule
requiring analysis of the employer's ability to provide
on-premises eating facilities. Requiring the Service to
determine in each case whether or not the employer can
economically justify the operation of an on-premises cafeteria
would, we believe, create a standard that cannot be effectively
administered.
Finally, H.R. 907 would represent a significant erosion of
the tax base. Revenue estimates show that enactment of this
legislation would result in a $320 million annual revenue loss in
the fifth year after enactment.
H.R. 1343
Bad Debt Reserves of Stock Savings Banks
Current Law
A thrift institution may compute the addition to its bad debt
reserve using the percentage of eligible loans method, the
experience method or the percentage of taxable income method.
The percentage of taxable income method is available to a thrift
institution to compute the addition to.its bad debt reserve for
qualifying real property loans if a minimum percentage of its
assets consist of certain eligible investments (primarily
residential mortgages). The more liberal bad debt deduction
available to thrift institutions under the percentage of taxable
income method is essentially a subsidy designed to encourage
investment in residential mortgages.
To claim the maximum deduction (which is generally equal to
40 percent of taxable income), a savings and loan association or
stock savings bank must hold at least 82 percent of its total
assets in eligible investments. The deductible percentage of
taxable income is reduced if fewer than 82 percent of total
assets are eligible investments.
In contrast, a mutual savings bank must hold only 72 percent
of its assets in eligible investments to take advantage of the
maximum deduction. The allowable deduction for a mutual savings
bank is also reduced if the percentage of eligible investments
declines below 72 percent.
- 7 Description of H.R. 1343
H.R. 1343 would equate the bad debt reserve provisions
applicable to a stock savings bank with those applicable to a
mutual savings bank and allow a stock savings bank to claim the
maximum bad debt deduction using the percentage of taxable income
method if at least 72 percent of its assets consist of eligible
investments.
Discussion
Prior to the the Economic Recovery Tax Act of 1981 (ERTA),
Federal and state legislation had been enacted permitting mutual
savings banks to convert to stock ownership to allow such savings
banks to raise new capital and achieve other financial
objectives. Before the enactment of ERTA, though, stock savings
banks were not entitled to claim additions to bad debt reserves
using the percentage of taxable income method. ERTA allowed a
mutual savings bank that converted to a stock savings bank to
compute its bad debt deduction under the percentage of taxable
income method under the same rules applicable to stock savings
and loan associations.
ERTA provided that a stock savings bank is eligible for the
maximum deduction under the percentage of taxable income method
only if it invests 82 percent of its assets in eligible
investments. This requirement is in contrast to the more liberal
72 percent investment standard applicable to mutual savings
banks. The legislative history to ERTA indicates that the
rationale for this distinction is that a stock savings bank is
more like a stock savings and loan association than a mutual
savings bank.
Congress created the distinction between savings banks and
savings and loan associations under Section 593 in 1962 to
recognize historical differences in the investment powers of
savings banks and savings and loan associations. Savings banks
traditionally enjoyed broader investment powers and were
permitted to make more non-mortagage investments than savings and
loan associations. Deregulation of thrift institutions in
general, however, has expanded the investment powers of all types
of thrift institutions. As a result, thrifts have become
increasingly similar to commercial banks.
Increasing deregulation of thrift institutions and the
resulting competition among all sectors of the financial industry
suggests that the policy rationale for the special bad debt
deduction rules for thrifts should be reexamined. Until this
reexamination occurs, Treasury cannot support incremental changes
- 8 to section 593, such as H.R. 1343. Decisions in this area should
be based on a comprehensive review of all of the pertinent tax
and economic policy issues affecting the thrift industry.
H.R. 1773
Exemption from Unrelated Business Income Tax for
Sales, Rentals, or Exchanges of Names from Donor
and Membership Lists
Current Law
The Internal Revenue Code contains numerous special provisions
designed to promote certain activities ("exempt activities") of
nonprofit organizations that provide substantial public benefit.
These special provisions include (i) deductions from income for
amounts contributed to or for the use of specified organizations
that conduct the exempt activities and (ii) exemption from income
taxation for organizations conducting such activities. These two
benefits serve distinct purposes. The deduction allowed for
contributions to the specified organizations is intended to assist
the organizations in obtaining the financial support necessary to
conduct the exempt activities. The income tax exemption for the
organization is intended to permit the organization to conduct
exempt activities without incurring any Federal income tax
liability.
Prior to 1950, the tax exemption of organizations conducting
exempt activities extended to all income received, whether from the
conduct of exempt or nonexempt activities. Furthermore, prior to
1950, it was unclear whether a "feeder" organization that carried
on a trade or business for profit as its primary activity and paid
all its income to a tax-exempt organization could qualify for
exempt status. In 1950, Congress enacted legislation that imposed
a tax on income received by exempt organizations from unrelated
business activities and denied exempt status to "feeder"
organizations. Since the 1950 legislation, it has been clear that
the receipt of income is not entitled to exemption from taxation
solely because the income will be used for exempt purposes.
Rather, exemption of income from taxation depends upon the nature
of the activity that produces the income. For example, income
generated by activities that further exempt purposes and income
generated by certain forms of investment activity traditionally
engaged in by tax-exempt organizations are not subject to taxation.
The tax on unrelated business income, however, distinguishes income
generated by commercial activities from income earned through
exempt purpose activities and traditional forms of investment. The
primary purpose for taxing income from commercial activities of
tax-exempt organizations and income of "feeder" organizations is to
- 9 equalize the tax treatment of commercial, nonexempt activities,
regardless of the type of entity that conducts the activity. This
prevents tax-exempt organizations from gaining unfair advantage
over their taxable competitors by trading on their tax exemptions.
Description of H.R. 1773
H. R. 1773 would exempt from the unrelated business income tax
income from the sale, exchange, or rental by certain tax-exempt
organizations of names of donors to, or members of, the
organizations. The bill accomplishes this by prohibiting the
treatment of such activities as a trade or business for purposes of
defining an unrelated trade or business. The bill applies only to
sales, exchanges, or rentals by organizations, contributions to
which are deductible as charitable contributions.
Discussion
The activity of selling or renting names from mailing lists is
a common commercial practice engaged in by many taxable entities as
well as by tax-exempt organizations. While much of the income
earned by tax-exempt organizations from sales or rentals of their
donor or membership lists may be received from other tax-exempt
organizations, these transactions are conducted in a commercial
manner similar to that by which taxable entities sell or rent
mailing lists. Sales and rentals of donor, membership, and mailing
lists also occur between taxable and tax-exempt organizations. We
consider it appropriate for income from such a common commercial
activity to be subject to taxation. In 1981, the Court of Claims
held that income received by the Disable American Veterans from the
sale of its mailing lists is unrelated business income.
When an organization exchanges its donor or membership lists
with another organization, it is in effect selling or receiving
rent for its list and purchasing or paying rent for the other (
organization's list. The fact that payment is made in kind rather
than in cash does not change the essentially commercial nature of
the sale or rental activity.
The argument made in support of exempting income from sales,
rentals, or exchanges of donor lists from the unrelated business
income tax is that such sales, rentals, or exchanges are necessary
to maintain the lists. We recognize that, because of attrition, an
organization must regularly add new names to maintain its donor
lists. Nevertheless, the sale or rental of the donor lisit to
others does not provide the organization with such new names, of
course, the sale or rental becomes associated with the acquisition
of new names where the income from the commercial activity is used
to buy or rent lists of other organizations or where the sale or
rental is accomplished through an exchange of lists. As discussed
- 10 above, however, the policy is well established that it is the
nature of the activity that produces the income, not the use to
which the income is dedicated, that determines whether exemption
should be granted. Treasury opposes exemption from the unrelated
business income tax of income from the sale, rental, or exchange of
donor or mailing lists because such an( exemption would be directly
contrary to this established principle'. We do not believe the tax
law should be changed to give tax-exempt organizations a
competitive advantage in the business of selling, renting, or
exchanging donor or membership lists.
H.R. 2129
Allocation of Property Taxes among Tenant-Stockholders
in Cooperative Housing Corporations
Current Law
The "owner" of a cooperative housing unit (generally an
apartment in a building containing several apartments) actually
owns shares of stock in a corporation which legally owns or
leases the real estate including the unit. In addition, the
owner enters into an agreement with the corporation entitling him
to occupy the unit and providing for payment of rent (usually
called a "maintenance" payment). The maintenance payments, in
part, cover the corporation's payments of mortgage interest and
real property taxes with respect to the property.
Since the owner of the unit (the "tenant-stockholder" of the
cooperative housing corporation owning the property) would be
entitled to deduct payments of taxes and interest with respect to
his unit if he owned the unit directly, section 216 allows the
tenant-stockholder to deduct his "proportionate share" of: (1)
the real property taxes allowable as a deduction to thee
corporation under section 164 which are paid or incurred by the
corporation on the houses or apartment building and on the land
on which such houses or building are situated, and (2) the
interest allowable as a deduction to the corporation under
section 163 which is paid or incurred by the corporation on its
indebtedness contracted in connection with the acquisition,
construction, alteration, rehabilitation, or maintenance of the
houses or apartment building, or in the acquisition of the land
on which the houses or apartment building are situated.
Under section 216(b)(3), the term "proportionate share"
means the proportion which the tenant-stockholder's stock in the
cooperative housing corporation bears to the corporation's total
outstanding stock. This rule controls a tenant-stockholder's
- 11 allowable deduction for real property taxes even if state law (in
conjunction with the corporation's by-laws) require him to pay a
greater or lesser share of the corporation's real property tax
liability.
However, under the laws of some jurisdictions, a
tenant-stockholder's share of the corporation's real property tax
liability is determined, not by reference to stockholdings, but
by reference to the value of his unit. In particular, in
California, under Proposition 13, if shares in a cooperative
housing corporation that are associated with an apartment are
sold or exchanged, the apartment is appraised for real estate tax
purposes at its value at the time of the sale or exchange
(usually resulting in an increased assessment with respect to the
apartment). In such cases, the new purchaser generally is
required to pay higher maintenance fees reflecting the increase
in the corporation's real property tax payments that is
attributable to the reappraisal of his apartment.
Notwithstanding the manner in which a cooperative housing
corporation's real property tax liability is actually borne by
its stockholders in such jurisdictions, section 216 currently
does not permit new purchasers, who may make larger (or smaller)
maintenance payments per share of stock than other
tenant-stockholders, to deduct a proportionately greater (or
lesser) share of the corporation's real property taxes compared
to other tenant-stockholders whose apartments have not been
reassessed. Rather, each tenant-stockholder is required to
deduct his "proportionate share" (measured by stockholdings) of
the increased real property taxes, even though his maintenance
fee may not reflect the increase.
Description of H.R. 2129
H.R. 2129 would amend section 216(b)(3) to provide that, if
the laws or ordinances of any State (or political subdivision
thereof) require an allocation of taxes based on separate
appraisals of some or all of the units owned by a cooperative
housing corporation, the term proportionate share (with respect
to such taxes) shall mean the amount allocated to those
individual units pursuant to such laws or ordinances.
Under this amendment, a purchaser of an appreciated (or
depreciated) apartment, who is required to pay maintenance fees
proportionately higher (or lower) than his stockholdings to
reflect the individual appraisal of his apartment, would be
allowed a deduction for a share of the corporation's real
property tax liability which takes into account the share of such
liability that he actually bears.
- 12 Discussion
The Treasury Department supports H.R. 2129, with suggestions
for minor technical changes.
Section 216(b)(3) currently does not take into account the
possibility that a tenant-stockholder's actual share of the
cooperative housing corporation's real property tax liability may
differ from the proportion which his stock in the corporation
bears to the corporation's total outstanding stock. Accordingly,
where state or local law (together with the corporation's
by-laws) requires that units be apppraised separately, with the
result that the tenant-stockholder with respect to a separately
appraised unit bears the cost of real property taxes actually
attributable to the unit, the allocation of allowable real
property tax deductions does not reflect economic reality. H.R.
2129 would ensure that section 216(b)(3) reflects the actual tax
burden borne by the cooperative housing corporation's
shareholders.
While we support H.R. 2129, we believe that certain minor
changes should be made to clarify its meaning. Specifically, we
would: (1) replace the term "taxes" with the term "real property
taxes", and (2) clarify that, in the case of a housing
cooperative, some but not all of the units of which have been
separately appraised, the term "proportionate share" with respect
to units which have not been separately appraised must take into
account amounts allocated to units which have been separately
appraised.
H.R. 2686
Tax Treatment of Business Development Companies
Current Law
The Code permits certain corporations that qualify as
"regulated investment companies" to deduct dividends paid to
their shareholders and thereby avoid the double taxation that
would otherwise be imposed on distributed corporate earnings. In
order to qualify as a regulated investment company (or "RIC") for
federal income tax purposes, a domestic corporation must meet
several requirements. The corporation must derive 90 percent of
its gross income from dividends, interest, and the sale of stocks
and securities and must meet certain investment diversification
requirements. In addition, section 851(a) of the Code requires
(i) that the corporation be registered with the Securities and
Exchange Commission at all times during the taxable year as a
- 13 management company or as a unit investment trust under the
Investment Company Act of 1940, or (ii) if the corporation is a
common trust fund or similar fund, that it be excluded from the
definition of "common trust fund" under the Code and from the
definition of "investment company" under the Investment Company
Act of 1940.
The Small Business Incentive Act of 1980 (P.L. 96-477),
amended the Investment Company Act to permit a closed-end company
that provides capital and significant managerial assistance to
small businesses to elect, subject to certain requirements, to
register as a "business development company." A company is
eligible to register as a business development company only if it
would otherwise be required to register as a management company
under the Investment Company Act. An eligible company that
elects to be treated as and registers as a business development
company is no longer required to register under the Investment
Company Act.
Description of H.R. 2686
H.R. 2686 would amend present law to provide that any
domestic corporation that registers as a business development
company under the Investment Company Act of 1940, as amended,
would be eligible for the conduit tax treatment applicable to
RICs, subject to the requirements generally applicable in
determining whether an investment company qualifies as a RIC.
H.R. 2686 would apply to taxable years beginning on or after
October 21, 1980 (the effective date of the 1980 amendments to
the Investment Company Act).
Discussion
We support H.R. 2686 because it will remove federal income
tax treatment as a factor fin the determination by an otherwise
eligible company of whether it will elect to be regulated under
the securities laws as a business development company rather than
as an investment company. The alternative form of regulation
available under the Investment Company Act for business
development companies was specifically designed for such
companies in lieu of registration under the Investment Company
Act and imposes less burdensome regulatory requirements than the
requirements otherwise applicable to corporations required to
register as investment companies. For example, a business
development company is subject to less stringent restrictions
regarding its capital structure and its ability to engage in
transactions with affiliated persons. Thus, a corporation
eligible to register as a business development company would
generally find such registration to be preferable to registration
as an investment company. Because the Code definition of a RIC
- 14 has not been changed to reflect this new type of registration,
however, a corporation can obtain the benefits of registration as
a business development company only if it forgoes the
pass-through treatment available to RICs under the Code. H.R.
2686 would remove this impediment.
We reiterate that a company can qualify as a business
development company for securities law purposes only if it
otherwise would fall within the definition of an investment
company. Hence, H.R. 2686 would not expand the class of
corporations that can elect to be treated as RICs; rather, its
effect would be that a closed-end management company, which is
already eligible to be treated as a RIC for federal income tax
purposes, does not lose that eligibility by electing to be
regulated as a business development company.
Arguably, by providing "significant managerial assistance"
to its portfolio companies, a business development company may
engage in a higher level of activity than the passive investment
companies for which Subchapter M was drafted. We do not- believe,
however, that this concern should necessarily preclude business
development companies from obtaining the same tax treatment as
other investment companies engaged in a similar level of
activity. A better approach would be to consider whether any
company engaging in a significant degree of activity should be
eligible for taxation under Subchapter M.
Although we support H.R. 2686, we would recommend some
changes in the bill as introduced. First, since registration as
a business development company is in lieu of registration as a
management company, we believe that the provisions of Parts I and
III of Subchapter M will apply to a corporation meeting the
definition of a business development company as if it were
registered as a management company. Such a change would clarify
that a business development company can qualify as a RIC only if
it is registered throughout its taxable year as a business
development company or as a management company. This change
would also make it clear that sectin 851(e) could apply to a
business development company. Finally, such a change would help
clarify that a business development company electing conduit tax
treatment under Subchapter M should to be treated as a RIC for
all purposes under the Internal Revenue Code, and not just for
purposes of Subchapter M.
Second, the exception contained in H.R. 2686 for business
development companies that are personal holding companies or that
would be personal holding companies but for the application of
section 542(c)(8) should be deleted. By making such companies
ineligible to become RICs, H.R. 2686 is consistent with section
851(a) as it existed prior to this year. The Tax Reform Act of
- 15 1984, however, amended section 851(a) by deleting the prohibition
against the election of RIC status by a personal holding company
(although a RIC that is a personal holding company is subject to
tax at the maximum corporate rate on its undistributed income).
Since a personal holding company that is registered under the
Investment Company Act as a management company may now elect to
be treated as a RIC if it meets all other requirements, we see no
reason why a personal holding company (or a company that would be
a personal holding company but for section 542(c)(8)) that elects
to be regulated as a business development company should forgo
the opportunity to be taxed as a RIC, as long as its
undistributed income is subject to tax at the highest corporate
rate.
Finally, if enacted H.R. 2686 should be prospective only in
its application. Since this legislation is designed to remove a
tax disincentive to registration as a business development
company, there is no reason to extend its benefits to companies
that have previously decided to forgo RIC status by registering
as business development companies. Accordingly, we would
recommend that this legislation apply only to taxable years
ending after the date of enactment.
H.R. 3388
Application of Section 252 of ERTA
to Certain Transfers in 1973
Current Law
Prior to the ERTA any taxpayer who received stock subject to
section 16(b) of The Securities Exchange Act of 1934, (under
which an "insider's" profit may be recovered by a corporation if
the stock is sold within 6 months of receipt), was required to
treat the value of the stock (less any amount paid) as
compensation when received. Section 252 of ERTA revised this
rule, on the theory that restrictions on transferability which
are mandated by Federal securities laws or accounting principles
should be taken into account in determining the time at which the
value of the stock should be included in income. After ERTA, any
taxpayer who receives stock subject either to section 16(b) or to
the "pooling-of-interest" accounting rules will be treated as
being subject to a substantial risk of forfeiture within the
meaning of Code section 83 for the 6-month period during which
the mandated restrictions apply. Thus, the employee will include
in income, and the employer may deduct at the time the
restriction lapses, the difference between the value of the stock
at that time and the amount paid for the stock (if any). This
provision applies to transfers after December 31, 1981.
- 16 Description of H.R. 3388
H.R. 3388 addresses the effective date of this section and
would apply the above-described change in the restricted stock
transfer rule prior to its effective date in the following
narrowly defined set of circumstances:
° the stock was acquired in November or December of 1973
under stock options granted in November or December of
1971;
° the corporation granting the options was acquired in a
tax-free reorganization occurring in December 1973;
° the fair market value of the stock dropped by 50 percent
during the holding period before sale;
° substantially all the stock was sold in 1975 or 1976.
If these conditions are met, the taxpayer may elect to apply the
provisions of section 252(a) and (b) of ERTA to the extent that
the credits or refunds produced thereby do not exceed $100,000
per taxpayer (disregarding interest).
H.R. 3388 is in substance identical to H.R. 4577, introduced
in 1982. The narrowly defined set of circumstances described in
these bills is meant to describe particular beneficiaries.
Discussion
Treasury opposes H.R. 3388 for a number of reasons. First,
because the bill is intended to grant special tax relief to a few
individuals, it is inequitable and is the antithesis of sound tax
policy. The tax laws cannot be administered fairly if special
exceptions are made for favored individuals.
Second, Treasury has consistently opposed any retroactive
application of the ERTA change in the restricted property rules.
This opposition is consistent with our general opposition to
retroactivity even where, as here, the substantive change in the
law is sound.
Third, retroactivity is particularly inappropriate in this
case because the bill would permit taxpayers to elect to open
years closed by the statute of limitations. The purpose of a
statute of limitations is to prevent both the Internal Revenue
Service and taxpayers from reopening issues after a certain
period of time regardless of how meritorious the position may be.
This legislation would clearly violate that rule.
- 17 H.R. 3528
Deduction for Loss in value of
Freight Forwarder Operating Authorities
H.R. 3284
Deduction for Loss in Value of
Bus Operating Authorities
Current Law
On July 1, 1980, the Motor Carrier Act of 1980 was enacted
to reduce regulation of the interstate motor carrier industry.
The Act made it easier for motor carriers to obtain operating
authorities from the Interstate Commerce Commission. Although
the legislative deregulation of the motor carrier industry
applied only to motor contract carriers and motor common
carriers, and not to freight forwarders, the ICC, on its own
initiative, and concurrently with the enactment of the Motor
Carrier Act, substantially reduced entry restrictions for freight
forwarders as well. As a result of this legislative and
administrative easing of regulation, the value of previously
granted operating authorities held by motor carriers and freight
forwarders has declined.
Similarly, the Bus Regulatory Reform Act of 1982.(enacted on
November 19, 1982), in deregulating the intercity bus industry,
substantially eased entry into the intercity bus business. As a
result of deregulation, the value of previously granted bus
operating authorities has declined.
Under section 165(a) of the Code, a deduction is allowed for
any loss incurred in a trade or business which is evidenced
during the taxable year by a closed and completed transaction and
fixed by an identifiable event. The amount of any deduction
allowed may not exceed the adjusted basis of the property
involved. No deduction is allowed, however, for a mere decline
in value of property. These rules have been applied by the
courts to deny deductions for the diminution in value of an
operating permit or license in circumstances closely comparable
to those presented by the reduced regulation of interstate
freight forwarders and intercity bus operators.
After the interstate motor carrier industry was
legislatively deregulated, Congress enacted section 266 of the
Economic Recovery Tax Act of 1981, as a special relief provision
for taxpayers who held motor carrier operating rights at that
- 18 time. Under section 266, a deduction is allowed ratably over a
60-month period for taxpayers who held one or more motor carrier
operating authorities on July 1, 1980. The term "motor carrier
operating authority" means a "certificate or permit held by a
motor common or contract carrier of property and issued pursuant
to subchapter II of chapter 109 of title 49 of the United States
Code." Section 266 provides no relief for taxpayers which held
operating authorities as freight forwarders.
Description of H.R. 3528
H.R. 3528 would amend section 266 of the Economic Recovery
Tax Act of 1981 to define the term "motor carrier operating
authority" to include a "certificate or permit held by a motor
common or contract carrier of property or a freight forwarder."
Under this amendment, taxpayers holding operating authorities as
freight forwarders on July 1, 1980 would be entitled to deduct
ratably over a 60-month period (commencing with the month of July
1980, or, at the election of the taxpayer, with the first month
of the taxpayer's first taxable year beginning after July 1,
1980) the aggregate adjusted basis of of all motor carrier
operating authorities held by the taxpayer on such date,
including those held as a freight forwarder.
Description of H.R. 3284
Under H.R. 3284, a deduction would be allowed ratably over a
60-month period (generally beginning with the later of the month
of November 1982 or, if later, at the election of the taxpayer,
the first month of the taxpayer's first taxable year beginning
after November 19, 1982) for taxpayers holding one or more bus
operating authorities on November 19, 1982. The amount of the
deduction would be the aggregate adjusted basis of all bus
operating authorities held by the taxpayer on that date or
acquired thereafter under a contract that was binding on that
date, subject to a per-taxpayer limitation of $5 million. The
bill also provides authority for the Treasury Department to
prescribe regulations under which, for purposes of this
deduction, if a controlling stock interest in a corporation
holding eligible bus operating authorities was purchased by a
person or group of noncorporate persons within a 12-month period,
the corporation would be able to elect to allocate to the
operating authorities a ratable portion of the purchaser's basis
in the corporation's stock. This election would be available
only if the stock was acquired on or before November 19, 1982, or
pursuant to a binding contract in effect on that date.
For purposes of the $5 million limitation, a corporation
which is a member of an affiliated group would be treated as a
separate taxpayer.
- 19 Discussion
H.R. 3528 would expand the scope of section 266 of the
Economic Recovery Tax Act of 1981, which allowed taxpayers who
held operating authorities as motor carriers of property to
amortize the adjusted basis of those operating authorities over a
60-month period. H.R. 3284 would enact substantially similar
rules for taxpayers who held bus operating authorities prior to
deregulation of the intercity bus industry.
Treasury opposed the enactment of section 266 on the ground
that even though the deregulation of the trucking industry caused
a decline in the value of the operating rights of motor carriers,
those rights continue to have value, since the ICC continues to
require a taxpayer to secure such rights in order to conduct a
trucking business. We also pointed out that if it was decided
that special tax relief should be given to affected motor carrier
operators, the proper amount of the loss deduction should be the
excess of the taxpayer's basis in the operating rights over the
post-deregulation value of those rights, not the full amount of
the taxpayer's basis in the operating rights.
I would like to emphasize that the deregulation of motor
carriers (including freight forwarders) and intercity bus
operators is not different from any other deregulation that
causes a diminution in value of a license or operating right.
Other industries, most notably the airline industry, have been
deregulated without the grant of any special tax relief for this
reduction in value.
Moreover, our tax system taxes gains and permits a deduction
for losses only when those gains or losses are recognized by an
identifiable event; in the case of gains or losses attributable
to property, this typically occurs upon the sale or exchange of
the property. Permitting a current deduction for a decline in
the value of assets prior to disposition while not taxing
unrealized gains is contrary to our present system of taxation
and sets an unfortunate precedent. While we acknowledge that no
distinctions can be made between the deregulation of motor
carriers, freight forwarders, and bus operators, if H.R. 3528 and
H.R. 3284 are enacted the door will be open for all other
deregulated industries to seek similar relief. Therefore, we
must oppose H.R. 3528 and H.R. 3284 on the same ground as that on
which we opposed section 266 of the Economic Recovery Tax Act of
1981.
Additionally, in the case of H.R. 3284, we are concerned
that treating members of an affiliated group of corporations as
separate taxpayers for purposes of the $5 million per-taxpayer
limitation would create an unwarranted distinction between a
- 20 parent corporation that purchased (before November 19, 1982) a
controlling interest in a single subsidiary holding multiple bus
operating authorities and a parent corporation that purchased
(before November 19, 1982) multiple subsidiaries each of which
held a single bus operating authority. Similarly, an unwarranted
distinction would exist between a corporation which expended
funds to acquire bus operating authorities directly, and one
which acquired operating authorities indirectly by purchasing the
stock of corporations already holding operating authorities. In
both cases, more favorable treatment would be given to the
affiliated group more members of which held operating
authorities. Accordingly, we oppose the provision of H.R. 3284
that provides that members of an affiliated group would be
treated as separate taxpayer for purposes of the $5 million
per-taxpayer limitation.
H.R. 4167
Exemption from Tax on Unrelated Business
Income from Oil and Gas Investments by Schools,
Pension Trusts, and Individual Retirement Accounts
Current Law
As discussed earlier, Congress long ago determined that a tax
should be imposed on income earned by exempt organizations from
business activities that are unrelated to their exempt purposes.
The primary purpose of the tax is to prevent exempt organizations
engaged in commercial activities from having a competitive
advantage over taxable entities. Exemptions from the tax on
unrelated business income are provided for rents, royalties,
dividends, and interest. The legislative history shows that these
particular types of income were exempted because they are "passive"
in character, are unlikely to result in serious competition for
taxable businesses having similar income, and had long been
recognized as a proper source of revenue for educational and
charitable organizations.
The passive income exceptions generally do not apply, however,
if the income is derived from property that is acquired or improved
with borrowed funds. In general, the rules relating to
debt-financed property provide that a share of any income from
debt-financed property, proportional to the ratio of debt on the
property to the adjusted basis of the property, is treated as
income from an unrelated trade or business. An exception to the
debt-financed property rules provides that income from
debt-financed real estate investments of qualified pension trusts
and certain educational institutions are not subject to tax,
provided certain conditions are satisfied.
- 21 The original rules relating to debt-financed property were
developed in response to abusive sale-leaseback transactions
between tax-exempt organizations and taxable owners of active
businesses. These transactions typically involved a tax-exempt
organization's purchase of an active business, financed primarily
by a contingent, nonrecourse note, followed by a lease of the
assets of the business to the seller. The effect of these
transactions was to convert the ordinary income of the business
into capital gains for the seller while allowing the tax-exempt
organization eventually to acquire property with little or no
investment of its own funds. The primary objection to
sale-leaseback arrangements involving borrowed funds was that they
permitted an organization's tax exemption to benefit the taxable
seller, either by conversion of ordinary income to capital gain or
by payment of a higher price for the property than a taxable
purchaser would pay.
Enactment in 1950 of a tax on income from certain leases was
insufficient to prevent abuse because new forms of transactions
involving leveraged investments quickly developed. In response to
these new transactions, the provision was strengthened in 1969 by
subjecting to the unrelated business income tax the income received
from all kinds of debt-financed property. This broad revision
reflected concern not only with existing sale-leaseback
transactions, but with the possibility of other abusive uses of
leveraged investments by tax-exempt organizations.
Description of H.R. 4167
H.R. 4167 would provide an exemption from the tax on unrelated
business income for income received by qualified pension trusts,
individual retirement accounts, and educational organizations from
investments as limited partners in partnerships holding working
interests in domestic oil and gas wells. This exemption would not
apply if the general partner of the limited partnership were
related to one or more of the tax-exempt limited partners. In
addition, the exemption would not apply to income allocated to a
limited partner during a partnership year in which allocations of
deductions, losses, credits, and cash distributions were not
consistent with allocations of income or gain. Use of multi-tier
partnership or other arrangements for the principal purpose of
avoiding these limitations on allocations would be prohibited. The
limitations would not apply to allocations of depreciation,
depletion, or gain or loss with respect to property contributed to
a partnership which are made, in accordance with section 704(c)(2),
on a nondiscriminatory basis between exempt and nonexempt limited
partners.
The bill also would exempt from the debt-financed property
rules a pension trust's, IRA's, or educational institution's share
- 22 of a limited partnership's income from working interests in
domestic oil and gas wells unless—
(1) the acquisition price of the working interest is not a
fixed amount determined as of the date of acquisition;
(2) the amount of indebtedness incurred in acquiring,
developing or operating the working interest or any other
amount payable with respect to such indebtedness, or the
time for making any payment of any such amount, is
dependent, in whole or in part, upon any revenue, income,
or profits derived by or from such limited partnership;
(3) the working interest is at any time after its acquisition
leased by the limited partnership to the person who sold
it to the limited partnership or to certain persons
related to the seller;
(4) the working interest is acquired from, or at any time
after the acquisition is leased by the limited partnership
to, certain persons related to the pension trust or
educational organization; or
(5) the seller of the working interest, certain persons
related to the seller, or certain persons related to the
pension trust, IRA or educational organization provide the
limited partnership, the pension trust, or the educational
organization with nonrecourse financing in connection with
the purchase of the working interest and such financing is
subordinate to any other debt on the property or bears
interest at a rate which is significantly lower than the
rate otherwise available.
However, the last three of these restrictions would not apply to
any acquisition, lease, farmout, or other transfer of working
interests to a person related to the general partner, provided the
terms of such transfer are consistent with the terms of similar
transfers in the geographic area.
Discussion
Treasury opposes H.R. 4167. The exemption provided by H.R.
4167 would apply only to income from working interests in oil and
gas wells received by pension trusts, IRAs, and schools. However,
the rationale given for granting the exemption is that investment
through a limited partnership is "passive" in nature and therefore
should not be subject to the unrelated business income tax. This
rationale would apply equally to investments in any active business
by any tax-exempt organization as long as the investment was made
through a limited partnership. Therefore, adoption of this
- 23 legislation would lead one to conclude that there should be a
repeal of the unrelated business income tax for any investment made
through a limited partnership. Such a repeal, however, would be
inconsistent with the purpose for which the tax was enacted.
Placing an investment in an active business in a limited
partnership does not eliminate the primary problem — unfair
competition — to which the unrelated business income tax is
directed. The competitive advantages available to a business owned
by a tax-exempt entity arise from the fact that the tax-exempt
owner does not pay tax on the income received from its equity
investment in the business. While the degree to which the
tax-exempt organization is involved in the active management of the
business may affect whether the attention of the managers of the
tax-exempt organization is diverted from exempt activities, it is
not relevant to the issue of whether the business obtains a
competitive advantage because of its tax-exempt ownership.
The exemption from the unrelated business income tax for rents,
royalties, dividends, and interest was provided because, in
addition to being "passive," investments producing these types of
income had long been recognized as proper for educational and
charitable organizations and because they did not appear likely to
result in serious competition for taxable businesses having similar
income. Thus, the "passive" nature of investments made through
limited partnerships is not sufficient to justify an exemption from
the unrelated business income tax.
Even if the "passive" nature of an investment were sufficient
to justify exemption from the unrelated business income tax,
limited partners are not necessarily "passive" investors. For
example, under the 1976 Uniform Limited Partnership Act, a limited
partner is permitted to engage in a number of activities relating
to the operation of a business without being considered a general
partner. These permitted activities include, among others,
consulting with and advising a general partner with respect to the
business of the limited partnership and voting on the removal of a
general partner. Clearly, limited partners that can consult with
and advise a general partner on business matters and can remove the
general partner may have substantial active involvement in and
control over the business of the limited partnership.
In addition to our objections to providing a competitive
advantage to an active business by allowing tax-exempt ownership
through a limited partnership, we are concerned that partnership
allocations may be used to transfer tax benefits from tax-exempt
partners to taxable partners. We do not believe that the
limitations on allocations contained in H.R. 4167 are sufficient to
prevent such abuse. Rather, these limitations merely elevate the
level of sophistication required to attain the desired results.
- 24 The allocation provisions of the bill contain certain technical
deficiencies. For example, the bill does not require that
allocations of basis be consistent with allocations of income or
gain. Since the depletion deduction with respect to an oil or gas
property and gain or loss on the disposition of such property are
computed at the partner level rather than the partnership level,
allocation of basis to taxable partners may have the effect of
allocating depletion deductions to taxable partners while
allocating gain to tax-exempt partners. Similarly, the allocation
rules in the bill" do not prohibit the allocation of capital gain to
the taxable partners and ordinary income to the tax-exempt
partners, nor do they prevent distribution schemes under which
tax-exempt partners receive property on which there is substantial
unrealized gain while taxable partners receive property on which
there is little or no unrealized gain.
In addition, the bill fails to preclude potential abuse through
the use of partnership "flip-flops." Although the bill attempts to
ensure that in each partnership taxable year the tax-exempt partner
will be allocated no less a share of partnership loss, deduction,
and credit than its share of partnership income and gain, it does
not prevent the tax-exempt partner from having a disproportionately
large share of all partnership items during partnership taxable
years in which net taxable income is expected, and a
disproportionately small share of all partnership items during
partnership taxable years in which net losses are expected.
We also are concerned that investments by tax-exempt entities
in limited partnerships engaged in active business may be used to
benefit taxable persons in ways other than by the transfer of tax
benefits. Participation in an active business provides numerous
opportunities for subtle forms of self-dealing. For example,
exploratory drilling conducted by a limited partnership on a tract
of land can benefit owners of adjacent land. We see no
justification for allowing tax-exempt income to be used to benefit
taxable persons in this way.
Finally, even if limited partnership interests in working
interests in oil and gas wells were to be exempt from the tax on
unrelated business income, we see no justification for exempting
debt-financed investments in such property from the debt-financed
property rules. As explained earlier, the debt-financed property
rules were intended to prevent use of tax exemptions for the
benefit of taxable persons. For several reasons, we do not believe
the limitations on purchase price and financing provided in H.R.
4167 would prevent the abusive use of exemptions if debt-financed
investments in working interests in oil and gas wells were not
subject to the tax on unrelated business income.
- 25 One possibility for abuse exists because the restrictions on
sale-leasebacks in the bill do not apply to sale-leasebacks between
a limited partnership and a person related to the general partner.
Thus, a tax-exempt organization could enter into a sale-leaseback
with a taxable seller if the seller were a general partner and the
terms of the sale and lease were consistent with the terms of
similar transfers in the geographic area. While we recognize that
the requirement that the terms be consistent with those of similar
transfers in the geographic area is intended to prevent abuse, such
a standard would be difficult and cumbersome, if not impossible, to
administer effectively. Another possibility for benefit to a
taxable person is that a tax-exempt organization may be willing to
pay a higher price for the property than a taxable investor would,
particularly since it could obtain nonrecourse financing from the
seller. In recognition of the potential abuses that exist with
seller financing, the current exception to the debt-financed
property rules for real estate acquisitions was amended by the
Deficit Reduction Act of 1984 to prohibit all seller financing.
Finally, we are concerned that debt-financing would provide
additional tax benefits that might be allocated unequally between
taxable and nontaxable partners.
For the reasons described above, we oppose H.R. 4167.
H.R. 4507
Allowance of Investment Tax Credit
To Members of Section 501(d) Organizations
Current Law
Section 501(d) of the Code provides an exemption from taxation
for religious or apostolic associations or corporations if such
organizations have a common or community treasury. The exemption
is available only if the members of the organizations include in
their gross income their entire pro rata shares, whether
distributed or not, of the taxable income of the organization. Any
amount so included in a member's gross income is treated as a
dividend. Typically, these associations or corporations engage in
a commercial enterprise, such as farming, for the common benefit of
the members.
Prior to the enactment of section 501(d) these organizations
did not qualify for tax exemption under the general rules for
religious organizations because of the presence of commercial
activities and private inurement. The income of the organizations
was subject to the corporate income tax and was also subject to the
- 26 individual income tax if distributed to members. If the
organization's income was not distributed to members, it was
subject to the accumulated earnings tax. The legislative history
of section 501<d) indicates that the single tier of tax at the
member level was intended to provide relief from the accumulated
earnings tax.
Section 38(a) of the Code allows an investment tax credit for
investment in certain depreciable property ("section 38 property").
The credit generally is ten percent of the taxpayer's qualified
investment in section 38 property. The amount of credit allowable
for any taxable year with respect to any taxpayer is limited. Any
excess of credit over the limit may generally be carried back to
the preceding three taxable years and forward to the following
fifteen years.
Some or all of the investment tax credit taken by a taxpayer
with respect to a particular piece of section 38 property is
"recaptured" if such property is disposed of or ceases to be
section 38 property in the hands of the taxpayer before the
expiration of a specified period. In the year of recapture, the
taxpayer's tax is increased by the portion of the credit
recaptured. However, such tax is not increased if the credit was
not used to reduce the taxpayer's tax in a prior year; in that
case, the credit carryforward would be reduced.
Under section 48(a)(4), property used by an exempt organization
does not qualify for the investment tax credit unless the property
is used in a trade or business that is subject to the unrelated
business income tax. Since section 501(d) organizations are not
subject to the tax on unrelated business income, the investment tax
credit is not allowable with respect to the property acquired by
such organizations.
Description of H.R. 4507
For purposes of determining eligibility for the investment tax
credit, H.R. 4507 would treat a business engaged in by an eligible
section 501(d) organization as an unrelated trade or business. The
qualified investment for each taxable year with respect to the
business would be apportioned pro rata among the members in the
same manner as the taxable income of the organization, and the
members would be entitled to claim the investment tax credit with
respect to their portion of the qualified investment. In addition,
the credit under this amendment would not be allowable to
individuals who claimed an investment tax credit without regard to
this amendment.
- 27 The test for determining whether recapture is applicable would
be is applied at the entity level. Thus, recapture would be
triggered only if the section 501(d) organization disposed of the
property or the property ceased to be section 38 property in the
hands of the organization. If recapture is applicable, the
organization would be treated as if it had taken the credit which
would have been allowed to it had the credit been available. The
amount recaptured would not be affected by whether or not the
credit was used to reduce tax in a prior year. Once the amount of
recapture was determined, the total increase in tax would be
allocated among the members in the manner that the organization's
taxable income for such year is allocated.
An eligible section 501(d) organization would be an
organization that elected to be treated as an organization
described in section 501(d) and which either had been in existence
for more than five years, or more than half the members of which
had been members for more than five years of a section 501(d)
organization or of a section 501(c)(3) religious community.
The bill would apply to periods after December 31, 1978, in
taxable years ending after such date.
Discussion
The tax treatment of section 501(d) organizations is unique.
In some ways, such organizations are treated like partnerships and
S corporations. The primary similarity is that the income of a
section 501(d) organization is subject to a single tier of tax at
the member level. However, in other respects, the treatment of
section 501(d) organizations differs significantly from that of
partnerships or S corporations. For example, credits are not
passed through to the members. Moreover, the income, deductions,
gains, and losses of section 501(d) organizations do not retain
their character when passed through to the members. Rather, the
income is taxed to the members as a corporate dividend. As such,
it is not subject to employment taxes. In addition, the section
501(d) rules regarding the allocation of income and loss and
regarding the taxability of distributions differ from the rules
governing partnerships or S corporations. When compared to the
burden imposed on partnerships or S corporations, this unique tax
treatment of section 501(d) organization can be beneficial in some
cases and detrimental in others.
H.R. 4507 would allow the investment tax credit to pass through
to the members of the section 501(d) organization. The argument in
support of this proposal is that out of fairness section 501(d)
organizations should be able to pass through the investment tax
credit to their members as can be done by partnerships and S
corporations. This argument on its own is not convincing, since,
- 28 as noted, there are numerous differences between partnerships and S
corporations, on the one hand, and section 501(d) organizations, on
the other. The issue is better phrased as whether giving section
501(d) organizations this additional benefit could provide tnem a
significant advantage over businesses operating in other forms.
While there is no empirical evidence available on this question,
section 501(d) organization always have the opportunity to operate
as Subchapter C corporations, S corporations, or partnerships, but
at least those pushing for this amendment have chosen not to do so.
Moreover, if H.R. 4507 were to become law, we would anticipate
future requests from section 501(d) organizations for legislation
granting them more of the advantages of partnerships or S
corporations without the additional restrictions. Such extension
of pass-through concepts to section 501(d) organizations goes far
beyond the purpose of section 501(d). Section 501(d) was a
response to a limited problem, the accumulated earnings tax. It
was not intended to create a new pass-through entity and we would
oppose any efforts to create such an entity. For these reasons,
Treasury opposes H.R. 4507.
Even if we favored permitting section 501(d) organizatons to
pass through the investment tax credit to their members, we would
have serious concerns with the way in which H.R. 4507 attempts to
accomplish this objective. Under H.R. 4507, the investment tax
credit recapture provisions are applied solely at the entity level.
Thus, for example, a member of a section 501(d) organization who
had an excess credit as a member of the organization could leave
the organization before the expiration of the recapture period and
retain an unadjusted credit carryforward. This is in contrast to
the basic rule, observed in every other context, that the
determination of whether recapture is appropriate is made with
respect to the taxpayer who took the credit. The application of
this general rule is most clearly illustrated in the context of
partnerships or S corporations. Obviously, if either of these
entities disposes of section 38 property prematurely, recapture is
triggered. In addition, if a partner or an S corporation
shareholder disposes of his interest in the entity before the
expiration of the recapture period, then there is recapture with
respect to that partner or shareholder. The rules are aimed at
preventing any taxpayer from taking advantage of the full credit
with respect to property held only briefly by that taxpayer.
We understand that most members who leave the section 501(d)
organizations leave owning no assets and would not be able to pay a
tax created by recapture. However, there is little reason to allow
such members to take investment tax credit carryforwards with them.
Thus, an appropriate rule for members of section 501(d)
organizations might be to apply recapture rules similar to those
applicable to partners and S corporation shareholders, but also to
- 29 carve out an exception (which would not apply to credit
carryforwards) for departing members who leave owning assets of
relatively little value.
Finally, certain technical problems associated with H.R. 4507
would need to be addressed. One such problem arises with respect
to qualified progress expenditures (generally, amounts paid for the
construction of an asset prior to completion). As drafted, the
bill would allow one member to claim the investment tax credit with
respect to qualified progress expenditures, leave the organization
without recapture, and have the other members of the organization
claim the credit for the same amount after construction was
complete. This double benefit is expressly prohibited in all other
contexts. In addition, it may be necessary to clarify the
application of the at-risk rules to section 501(d) organizations,
and to develop rules — similar to those applicable to partnerships
and S corporations — restricting the availability of the
investment tax credit with respect to property leased to other
entities by section 501(d) organizations.
H.R. 4779
Exemption From the Windfall Profit Tax
to Certain Exchanges of Crude Oil for Residual Fuel Oil
Current Law
Under present law, the windfall profit tax is imposed on all
crude oil removed from the premises unless specifically exempt by
the statute. The term "removal from the premises" includes the
use of the crude oil on the property or the conversion of the oil
into a refined product before the oil is physically removed from
the premises. However, oil returned to or used on the property
from which it came, either by reinjection or through the powering
of production processes or equipment, is not considered sold or
removed from the premises. Thus, for example, no tax is imposed
on the on-site use of oil to generate power for an artificial
lift device, water flood project or a tertiary injection process.
However, oil removed from the premises prior to its use, or oil
used to power refining or manufacturing processes on the premises
is taxed.
Description of H.R. 4779
H.R. 4779 creates a new category of oil exempt from the
windfall profit tax called "exempt production oil". "Exempt
production oil" is defined as the number of barrels of domestic
crude oil that is removed from a property during a calendar
quarter, which would be taxable crude oil (but for this
- 30 provision), and which is exchanged solely for an equal number of
barrels of residual fuel oil used by the producer in an enhanced
recovery process with respect to such property during the quarter
or next succeeding quarter. In order to prevent sheltering of
higher taxed oil, exempt production oil is allocated among tiers
of crude oil produced during the quarter on the basis of removal
prices beginning with the highest of the prices received. In
addition, no deduction for depletion is allowed for exempt
production oil. This conforms to the income tax rule that
applies to oil used on a lease and not sold. Finally, the
exemption is allowed only to holders of working interests in the
property.
Discussion
Treasury does not oppose adoption of H.R. 4779. We
understand that before the enactment of the windfall profit tax
it was the practice of oil producers in certain regions to
provide heavy crude oil to refiners in exchange for equivalent
amounts of residual fuel oil, which the producers would then use
as fuel for enhanced recovery processes. This arrangement
permitted the refiners to extract and market the lighter elements
of the crude oil which otherwise would be lost if the crude oil
was burned by the producer. These exchange arrangements were
generally terminated when the windfall profit tax was enacted
since producers were able to avoid the tax by using their crude
oil directly as a fuel to power production equipment. However,
refiners were deprived of a significant source of crude oil for
their refinery operations.
The termination of exchange agreements between producers and
refiners was an unintended product of the enactment of the
windfall profit tax. H.R. 4779 would restore a beneficial
industry practice. Furthermore, since, in the absence of this
provision, producers would use their crude oil as a fuel on their
property in an exempt use, granting an exemption for such crude
oil when exchanged for residual fuel oil would not result in a
revenue loss.
H.R. 5022
Percentage Depletion Not Allowable for Lease Bonuses and
Advance Royalties With Respect to Oil and Gas Properties
Current Law
In 1975 Congress enacted Section 613A, which essentially
repealed percentage depletion for oil and gas. An exception was
- 31 retained for production by producers and income received by
royalty owners, but only to the extent of a limited volume of
average daily production during the taxable year. Thus, under
current law, independent producers and royalty owners can claim
percentage depletion with respect to an average of 1,000 barrels
of daily production of oil and gas equivalent. Proposed Treasury
regulations under section 613A took the position that the average
daily production requirement of the statute precluded amounts
received in the form of bonus or advance royalties from
qualifying for percentage depletion where there was no production
in the year the bonus or advance royalty was received. However,
in Commissioner v. Engle, 104 S. Ct. 597 (1984), the Supreme
Court held that the adoption of the production limitation by
Congress in 1975 did not indicate an intent on the part of
Congress to terminate percentage depletion for bonuses and
advance royalties, even in the absence of production in the year
of payment.
Following the Supreme Court's action, the Service announced
that lessors of oil and gas properties who receive bonuses or
advance royalties generally will be allowed to deduct percentage
depletion on those amounts in the year the amounts are includible
in gross income. However, in order to meet the production limits
of section 613A, lessors must convert bonuses or advance
royalties to barrels of production. This conversion is to be
based on the representative market or field price. This rule
applies to lease bonuses and advance royalties includible in
income after December 31, 1974.
Description of H.R. 5022
H.R. 5022 would override the Supreme Court's Engle decision
with respect to bonuses and advance royalties paid on or after
January 1, 1984.
Discussion
A lease bonus represents cash consideration paid by a
lessee for the execution of an oil and gas lease by a landowner.
An advance royalty differs from a bonus in that it is a
pre-payment of the landowner's share of anticipated production.
In Burnet v. Harmel, 287 U.S. 193 (1932), the Supreme Court held
that a bonus payment is not taxable as proceeds from the sale of
a capital asset, but rather is ordinary income attributable to
the mineral property. Furthermore, the court held that the
landowner was entitled to a depletion deduction in the year of
receipt even though there was no production in that year because
the bonus was attributable to anticipated production. The Burnet
v. Harmel rule was extended to percentage depletion for bonuses
and advance royalties in the case of Herring v. Commissioner, 293
—
U.S. 322 (1934).
- 32 As a matter of proper tax accounting, the allowance of a
depletion deduction for anticipated depletion of a mineral
deposit is questionable. While the landowner receives an
unconditional payment from the lessee in the form of a bonus and,
accordingly, should be taxed on that amount, he does not suffer
any depletion of his mineral interest. The more appropriate tax
rule would allow recovery of the landowner's basis in the
property through a depletion deduction only when and as
production occurs. Thus, Treasury Department agrees with the
approach taken in H.R. 5022.
Nevertheless, in 1975 Congress determined that the
availability of percentage depletion should continue to a limited
extent for independent producers and royalty owners. The
position adopted by the Service subsequent to the Engle decision
represents a reasonable interpretation of section 613A. In
evaluating H.R. 5022 Congress must reconsider the need for
extending percentage depletion, even to a limited extent, to
advance royalties and bonus payments.
H.R. 5199
Applicability of Farm Syndicate Rules of Section 278(b)
to Inedible Fruits and Nuts
Current Law
In general, under section 278(b), a farming syndicate that is
engaged in planting, cultivating, maintaining, or developing a
grove, orchard, or vineyard in which fruit or nuts are grown is
required to capitalize any amount that is attributable to that
activity and that is incurred in a taxable year prior to the
first taxable year in which the grove, orchard, or vineyard bears
a crop or yield in commercial quantities.
The IRS recently published proposed regulations under section
278(b) that interpret that section as applying to syndicates that
cultivate jojobas. The proposed regulations provide that, for
purposes of section 278(b):
A grove, orchard, or vineyard in which fruit or
nuts are grown includes any group of trees, bushes,
shrubs, or vines which produce a crop or yield of
fruits or nuts. For purposes of this section, a
"fruit" is defined as a fertilized and developed
ovary of a plant, including the seeds, or, in the
case of a plant that does not bear seeds, the
- 33 fertile structure of the plant, and a "nut" is
defined as a hard-shelled fruit. For example,
fruits or nuts include apples, avocados, coffee
beans, grapes, jojoba beans or seeds, pecans,
pistachios and walnuts. (Prop. Reg. section
1.278-2(a)(2)) .
Certain taxpayers have taken the position that the jojoba
bean is not a "fruit or nut" because the bean is not edible, and
that a tract of jojoba plants is not a "grove, orchard, or
vineyard" because those terms generally refer to tracts of trees
or vines, and the jojoba plant is not commonly considered a tree
or vine. (According to Webster's New Collegiate Dictionary
(1984), "jojoba" is defined as: "a shrub or small tree of the
box family of southwestern No. America with edible seeds that
yield a valuable liquid wax.")
Description of H.R. 5199
H.R. 5199 would amend section 278(b) to clarify that the
provisions of that section apply to any farming syndicate engaged
in planting, cultivating, maintaining, or developing a grove,
orchard, vineyard, or other tract of trees, bushes, shrubs, or
vines in which fruit or nuts (whether or not edible) are grown.
Discussion
Section 278(b) was added to the Code in 1976 because Congress
intended that a farming syndicate conducting activities that
result in the creation of long-lived crop-bearing or
yield-bearing plants should not be entitled to deduct the costs
of developing such plants to maturity in advance of the
generation of income from such plants. Senate Report No. 94-938
(94th Cong., 2d Sess.), describing the tax rules underlying
farming-related tax shelters prior to the enactment of section
278(b), explained that:
Capital gain treatment is generally available on the
sale of depreciable assets used in farming (as well as
on the sale of the underlying farmland itself) , even
though these assets or land may have been developed or
improved by expenditures which were deducted against
ordinary income. In effect, a farm investor's income
which is initially sheltered by accelerated farm
deductions is transformed into added capital value of
the farm asset and taxed as part of that value when the
farm capital assets (vineyard, breeding animal,
farmland, etc.) are later sold. . . . Generally, in
farming operations tax losses can be shown in early
years of an investment because of (1) the opportunity to
- 34 deduct, when paid, costs which in nonfarm businesses
would be inventoried and deducted in a later year, [and]
(2) the ability to deduct, when paid, costs which should
properly be capitalized . . . .
The time value of
deferring taxes on nonfarm income remains a strong
attraction for outside investors to invest in farming
and to use as much borrowed money as possible to create
farm "tax losses." . . . The committee believes that
the special farm tax rules should be severely curtailed
for farming syndicates in which a substantial portion of
the interest is held by taxpayers who are motivated, in
very large part, by a desire to shelter other income,
rather than by a desire to make a profit in the
particular farming operation. (Id., at 52-58.)
Because jojoba beans were not produced in substantial
quantities in 1976, the drafters of section 278(b) did not
specifically consider whether the provision should apply to
syndicates that cultivate jojobas. However, the legislative
history of section 278(b) demonstrates that section to be an
application of general tax accounting rules that require the cost
of developing long-lived assets (such as jojoba plants) to be
capitalized and cost recovery deductions to be claimed only after
the asset begins producing income.
We believe that the amendment to section 278(b) proposed by
H.R. 5199 is a correct statement of what is already the law,
namely, that a farming syndicate engaged in the planting,
cultivation, maintenance, or development of a tract of jojoba
plants is required by section 278(b) to capitalize the costs of
such activity for years preceding the first taxable year in which
such tract bears a crop or yield in commercial quantities.
Nonetheless, since some taxpayers take a contrary position, we
support this clarifying amendment, on the ground that it would
resolve any dispute over the application of section 278(b) to
jojoba investments made after the effective date of the
amendment. Moreover, the rule stated in the amendment is correct
— there is no good reason to treat jojobas differently from
other long-lived plants for tax purposes.
TREASURY NEWS
apartment of the Treasury • Washington, D.c. • Telephone 566-2041
FOR RELEASE AT 12:00 NOON
October 4, 1984
TREASURY TO AUCTION $9,500 MILLION
OF 7-YEAR NOTES AND 20-YEAR 1-MONTH BONDS
The Department of the Treasury will auction $5,500 million
of 7-year notes and $4,000 million of 20-year 1-month bonds to
raise new cash. Additional amounts of the securities may be
issued to Federal Reserve Banks as agents for foreign and international monetary authorities at the average price of accepted
competitive tenders.
Previously, Treasury announced its intention to test the
market for a 5-year call feature on a 20-year bond. Current
market conditions would not provide an appropriate test, and this
issue will not be callable.
The Treasury will postpone the auctions unless it has
assurance of Congressional action on legislation to raise the debt
ceiling before the scheduled auction dates.
Details about the new securities are given in the attached
highlights of the offering and in the official offering circulars.
Attachment
oOo
R-2874
HIGHLIGHTS OF TREASURY OFFERINGS TO THE PUBLIC
OF 7-YEAR NOTES AND 20-YEAR 1-MONTH BONDS
October 4, 1984
Amount Offered:
To the public
Description of Security:
Term and type of security
Series and CUSIP designation.
$5,500 million
7-year notes
Series G-1991
(CUSIP No. 912827 RG 9)
Issue date
October 17, 1984
Maturity date
October 15, 1991
Call date
No provision
Interest rate
To be determined based on
the average of accepted bids
Investment yield
To be determined at auction
Premium or discount
To be determined after auction
Interest payment dates
April 15 and October 15 (first
payment on April 15, 1985)
Minimum denomination available.. $1,000
Terms of Sale:
Method of sale
Yield Auction
Competitive tenders
Must be expressed as an
annual yield, with two
decimals, e.g., 7.10%
Noncompetitive tenders
Accepted in full at the
average price up to $1,000,000
Accrued interest payable
by investor
None
Payment through Treasury Tax
and Loan (TT&L) Note Accounts... Acceptable for TT&L Note
Option Depositaries
Payment by non-institutional
investors
Full payment to be submitted
with tender
Deposit guarantee by
designated institutions
Acceptable
Key Dates:
Receipt of tenders
Wednesday, October 10, 1984,
prior to 1:00 p.m., EDST
Settlement
due
a)
tO from
cash
r e a d iinstitutions)
l
or
y(final
Federal
c o l l e payment
c t i bfunds
l e c h e c k . . Wednesday,
Monday, Octo
October
b e r 1 5 , 17,
19i41984
$4,000 million
20-year 1-month bonds
Bonds of 2004
(CUSIP No. 912810 DM 7)
October 18, 1984
November 15, 2004
No provision
To be determined based on
the average of accepted bids
To be determined at auction
To be determined after auction
May 15 and November 15 (first
payment on May 15, 1985)
$1,000
Yield Auction
Must be expressed as an
annual yield, with two
decimals, e.g., 7.10%
Accepted in full at the
average price up to $1,000,000
None
Acceptable for TT&L Note
Option Depositaries
Full payment to be submitted
with tender
Acceptable
Thursday, October 11, 1984,
prior to 1:00 p.m., EDST
T
Thursday,
uesday, Oc
October
tober 16
18,
, 1984
1984
rREASURY NEWS
partment of the Treasury • Washington, D.c. • Telephone 566-2041
FOR IMMEDIATE RELEASE
J3R;.RY.ROO:I 5310
October 9, 1984
0:TI: 3 39PH'B-i
. .. _
C • THE TREASURY
TREASURY REDUCES AMOUNT OF WEEKLY BILL OFFERING
Treasury announced that the weekly bills auctioned today
will be reduced by $.8 billion to avoid exceeding the debt
limit. The amount previously announced of $6.6 billion of
three-month bills and $6.6 billion of six-month bills will
be reduced to $6.2 billion of three-month bills and $6.2
billion of six-month bills.
R-2875
TREASURY NEWS
department of the Treasury • Washington, D.c. • Telephone 566-2041
OCT I i 3 kzftVM
REMARKS BY THE HONORABLE R. T. MCNAMAR
DEPUTY SECRETARY OF THE TREASURY
BEFORE THE
FINANCIAL EXECUTIVES INSTITUTE
NEW ORLEANS, LOUISIANA
October 8, 1984
"" -rr ^ "IETuZABmr
Today, I would like to depart from the standard broad
discussion of general economic issues and instead focus on an
important evolution in international economics; the underlying
causes of the recent years' exchange rate movements, and
appreciation of the dollar and its implications.
As someone who in a previous incarnation struggled with FASB
#8, I know this once was a subject of interest only to financial
executives with international operations. But today all
financial executives have a stake in foreign exchange market
developments, because the floating exchange rate system for
national currencies is the intermediary for today's integrated
worldwide capital market. It affects your export
competitiveness, your raw materials expense and your cost to
raise new capital.
Many articles have been written recently about the reasons
for the strengthened dollar. However, I believe too much of the
discussion fails to analyze the fundamental forces that are
driving the exchange market movements. By understanding the
underlying fundamentals, I think you'll be in a better position
to assess recent events, predict their overall future impact on
your business, and understand the impact of domestic and
international economic policies.
TRADITIONAL EXPLANATIONS
Many theories have been offered to explain the rise of the
dollar. Most center on the behavior of shifts in trade or
current account balances, U.S. interest rates, or inflation
rates. But in my view these and other traditional explanations
fall short, both on a conceptual and an empirical basis, of
explaining the strength of the dollar in the last few years.
First, let's examine the external account balance argument
— the trade and current account balances. In college, we were
all taught that exchange rate movements were linked to shifts in
a country's trade and current account balances.
R-2876
- 3 -
Second, although relative changes in interest rate
differentials are clearly one element influencing exchange
markets, they cannot — and have not — explained the dollar's
persistent strength. Analysis shows that nominal interest rate
differentials have decreased or moved against the dollar between
early 1981 and the present. That is, the nominal interest rate
spread has narrowed.
While interest rate differentials have moved in favor of the
DM by 200 basis points and the French franc by 500 basis points
since early 1981, the dollar has risen against the DM by 54
percent and against the franc by 104 percent. The same is true
for other major currencies.
While differentials moved to favor sterling by 170 points,
the dollar has appreciated against sterling by 92 percent. And
despite a 270 basis point change in favor of Japan, there was a
22 percent dollar rise against the yen.
Pragmatically, if large nominal interest rate differentials
are the sole key, much higher interest rate spreads have existed
between the U.S. and any number of Latin American countries. But
obviously people have not' been selling dollar assets to buy those
currencies. In short, this theory doesn't hold up to even
minimal analytical scrutiny.
Most recently, we have seen a modest easing of U.S. rates,
especially on the longer maturities — and, at the same time, the
dollar continues to appreciate.
Furthermore, the large deficit-high interest rate-high
dollar hypothesis fails to distinguish between increased taxes
and reduced federal spending as alternative policy choices to
reduce the budget deficit. Either raising taxes or cutting
spending will reduce the deficit per se, but each has
significantly different domestic economic (and therefore exchange
rate) effects. Suffice it to say that the large deficit-high
interest rate-high dollar analyses assume a host of other
variables (like monetary policy) are either perfectly anodyne or
exogenous during the year. These seem naive assumptions, which
is why I would label this a simplistic hypothesis.
As you can see, on both theoretical and pragmatic grounds,
the oft-asserted deficit-interest rate relationship is a
derivative and non-determinative one. As such, it is of little
value in terms of explaining anticipated economic performance or
predicting probable future exchange market developments.
- 4 -
MORE COMPLETE EXPLANATION
Instead, I submit that institutional investors alter
exchange rates by shifting their portfolio preferences toward
investments in countries where the anticipated relative
after-tax, real rate of return from investments is higher, given
comparable maturity and financial uncertainty and similar
sovereign risks. And, when investors sense that there are
current or prospective developments that will significantly alter
anticipated relative rates of return to capital, they realign
their investment preferences. Over time,.the resulting
international capital flows help to achieve a more efficient
allocation of resources on a worldwide basis.
After-tax. real rates of return are a function of the overall
economic and political environment impacting the investment
decision. As a result, one must analyze each of the key
components in a country relative to other countries over the term
of the investment. The components are each country's domestic:
— Sustainable economic growth prospects
— Projected inflation rates
Effective tax rates on investments
— Capital market conditions
Government regulations and social rigidity
Sovereign and political risk
It is important to realize that at the margin it is the
aggregate of these factors in each country relative to other
nations that determines present and future exchange rates. The
factors are weighted differently by diverse investors at any
point in time, and are continually changing to reflect disparate
scenarios for the future. It is the daily interaction of
thousands of international institutional and corporate investors'
decisions that determines the collective response to those
factors.
While I cannot present a precise mathematical equation to
calculate or predict exchange rates, I believe this suggested
analytical framework is more comprehensive than most. As such,
it suggests a model for evaluating the dollar's strong
performance in recent years and drawing implications for future
micro-economic policies for your firm and macro-economic policies
for the nation. Let me briefly discuss each element.
- 5 -
Economic Growth and Vitality
The first factor in this framework is the relative overall
economic performance of the major countries. Shifts in
comparative performance do lead to shifts in both the direction
and size of international capital flows. All other things held
constant, a nation with a strong growing economy with relatively
higher rates of return will result in institutional and personal
investors preferring assets denominated in that nation's
currency.
Clearly, in absolute terms there has been a dramatic
improvement in U.S. economic performance over the past two years.
But, we too often forget that relative to other countries, it has
improved even more over the last several years.
The four largest European economic countries will likely
average 2 to 2 1/2 percent growth in 1984, about the same as in
1979-80. Japan's growth is expected to be about 5 1/2 percent
this year, a bit above its 1979-80 average of 5 percent. By
contrast, our projected 7 plus percent real GNP growth this year
compares with a U.S. average of slightly over one percent in
1979.-80. Thus, while major European countries are back only to
the growth rates they achieved in the 1970s, the real growth rate
in the United States has quintupled.
While the United States has grown more rapidly than both
Europe and Japan, the relative U.S. increase is larger vis-a-vis
Europe. Thus it is not surprising that the yen has fallen much
less against the dollar than have the European currencies.
Consequently, since early 1981, the yen has strengthened notably
against European currencies, rising 27 percent to record levels
against the DM.
Inflation
In terms of inflation, the United States looks much better
in both an absolute sense and relative to other major industrial
countries in recent years.
Inflation rates have been cut in half abroad, but by
three-fourths in the U.S.
Our inflation rate was 12-13
percent in 1980 but is projected at about 4 percent this year.
This will likely be below the European average of 6 percent, and
closer to Japan's 2 1/2 percent. The point is that as excellent
as our absolute performance is on inflation, it is even more
impressive relative to the improvements in the rest of the world.
Again, all other things being held constant, the anticipated real
rates of return in the U.S. have improved on a comparative basis
with other SDR countries.
- 6 -
Taxes
A third and too often ignored factor influencing investment
flows is relative tax policies. I needn't tell FEI members that
it is after-tax cash flow, not before-tax returns that count.
You can't reinvest pre-tax earnings.
Again, the environment in the U.S. is relatively more
attractive. The Economic Recovery Tax Act of 1981, more
favorable depreciation allowances and tax credits, lower
effective corporate income tax rates, and more attractive
individual marginal rates and capital gains treatment have
increased cash flow from business and individual investment and
contributed to higher relative after-tax returns from both
American corporate and government bonds as well as direct equity
investments.
The interaction and competitiveness of international tax
policies is well illustrated by the reaction of other governments
to the United States action late this summer to remove our 30
percent withholding tax on interest paid to non-residents. Both
West Germany and France have already announced their repeal of
their withholding taxes on interest paid, to restore their
relative competitive positions to the U.S. And, I expect the
Japanese will consider it in the new Diet.
In announcing this move, the French Finance Ministry stated
that the move has been taken "jointly with the German government
... to protect European financial markets from the negative
effects brought on by the American government's decision...."
Read that as "not further reducing the relative after-tax return
on French franc denominated assets versus U<,S. dollar denominated
assets."
Capital Markets
The U.S. has the largest and deepest capital market in the
world. Investors such as S.A.M.A. who want liquidity can always
find it. Credit is widely available for attractive projects.
Our stock markets are followed daily throughout the world. And,
make no mistake, the anticipated relative performance of the
world's stock markets immediately moves investment capital and
therefore influences exchange rates. Consider the last six
months.
The World Index of stock market performance compiled by
Capital International Perspective demonstrated the recent
comparative advantage of the U.S. stock market. In the second
quarter, the World Index fell by 7.5 percent, with United States'
prices declining only 4 percent. In the third quarter, the World
Index rose 5.8 percent but was outpaced by the United States' 9.3
percent increase. By this measure, over the last six months, the
- 7 -
relative rate of return from being invested in U.S. stock market
was pretax a net 6.5 percent higher than the rest of the world.
Add our lower effective tax rates and inflation performance and
it's no wonder that the demand for dollars continues.
Turning to debt, overseas investors have shown the same
eagerness for corporate dollar denominated bonds. For the first
nine months of this year, over $14 billion, or one-third of all
American corporate bonds, were issued overseas. Is it the
nominal interest rate differentials or the currency appreciation
potential on the principal that attracts them? I would suggest
that U.S. observers too often neglect the latter consideration,
which is often of paramount importance to the foreign investor.
If further examples are needed to demonstrate the interplay
of the world's capital markets, consider the recent years'
experience in the reinsurance markets, where in the late 1970s
and 1980, major Dutch, German and Swiss reinsurers were offering
rates that most American primary lines underwriters thought were
too low to be true. These resinsurance treaties contributed to
the rate war and underwriting bloodbath from which the primary
commercial lines companies are just emerging.
Subsequently, the Europeans, who may have suffered
reinsurance underwriting losses from pricing the business so low
to acquire it, profited handsomely from being invested in dollar
denominated assets matched to their U.S. underwriting
liabilities. First, the European reinsurers had a higher
after-tax real rate of return here than in Europe. Second, when
they reconverted the earnings to their local currency, they had
substantially more guilders, marks, or francs than when they
increased the original liability before the dollar appreciation.
A lucky guess? No, simply a fully explainable shift of portfolio
preferences by institutional money managers.
Government Regulation and Market Rigidities
Another factor in investors' judgments about relative return
opportunities is their assessment of future comparative business
environments. Here again the United States looks strong relative
to other countries. In Europe, the extreme concern for job
security and high levels of social insurance benefits have
reduced the relative attractiveness of new investment and have
contributed to less rather than more new employment. Regardless
of who wins this November's U.S. election, they are viewed as
providing a relatively more attractive investment climate.
- 8 -
Sovereign Risk
Finally, the political risk factor has favored the dollar in
the past several years. Economic and political problems abroad
have impacted investors' views of many non-U.S. investment
opportunities.
These investor concerns have ranged from the impact of East
European debt problems on German banks and the nationalizations
in France following the Socialist victory, to worries about
political instability and turmoil in the Middle East. The LDC
debt situation, especially in some Latin American countries led
to massive capital flight in the 1980-1983 period.
While in some cases investor fears may have been
exaggerated, the perception that the United States is a safe and
secure place for funds is not. These perceptions have certainly
contributed to the capital flight to the dollar observed in some
recent years.
Interplay of Factors
Perhaps the interplay of these factors and the manner in
which they have driven the do-liar in the last few years can best
be illustrated by the actions of foreign investors in the sunbelt
commercial real estate market.
Not long ago, real estate professionals were amazed by
foreign investors' demand for real estate in this region and
their willingness to pay such high prices for the property. From
the foreign investors' perspective, they were willing to
capitalize cash flows at much lower discount rates (as low as 4
percent in many cases) and, thereby, increase the present value
of the investment, due to the relative attractiveness of this
type of opportunity when compared with other opportunities in
other parts of the world. Factors such as relative economic
growth and inflation expectations, a favorable tax situation, and
simply the ability to get their money back drove their
decision-making process. The real estate professionals failed to
understand these underlying factors, how they had changed, and
the new interdependence of markets.
Exchange Market Conclusions
As I stated at the outset, international investors alter
exchange rates by shifting their portfolio preferences toward
investments in countries where the anticipated relative
after-tax, real rate of return from investments is higher, given
- 9 -
comparable maturity and financial uncertainty and similar
sovereign risks. And, when investors sense that there are
current or prospective developments that will significantly alter
future relative rates of return to capital, they react
accordingly. As Business Week says, "America rules again because
it is the mecca for investment capital."
Long term, the dollar and our position in world financial
and investment markets will be tied to our ability to develop
economic policies consistent with the new rules of capital flows.
Today, this means abandoning the artificial bifurcation between
domestic economic policy and international economic policy.
Policy Implications
Against this background, I would ask several admittedly
rhetorical questions of those who complain that the dollar is
"too high" and the government should "bring it down."
How
should we do that and by what policies? Are they suggesting the
U.S. should have both more inflation and lower real economic
growth in absolute terms and relative to other countries? Should
the U.S. consciously decrease the after-tax rate of return from
work, savings, and investment relative to other countries?
Obviously, the answer is not an overhaul of present U.S.
policies, but rather the need for a revision in other countries'
policies to improve their relative investment performance
outlook.
I believe the dollar's strength reflects, not some temporary
interest rate or trade balance factor, but a fundamental
improvement in U.S. economic policies, performance and prospects
relative to the other reserve currencies. And I suggest more and
more observers will begin to believe that the dollar will
continue to be "strong" relative to the 1976-1980 years for the
foreseeable future. Those crisis-mongers who warn of an imminent
collapse simply haven't done their homework.
One caveat is necessary, though. To the extent that other
countries do achieve more sustainable non-inflationary growth
with all other factors being equal, I would expect that the
currencies of these countries will prove more attractive to
investors than they are today. Thus I would not be surprised to
see some moderate downward realignment in the dollar to reflect,
not U.S. weakness, but the greater strength of other countries'
economic performance.
This analysis of the many underlying factors affecting
exchange rates raises a number of important policy issues and
implicatiohs. The international impact of each nation's
individual policy decisions can be well illustrated by a current
effort at Treasury.
- 10 -
As you know, in his State of the Union address the President
commissioned us to develop a proposed reform of the tax system in
this country; to make it fairer, simpler, and revenue neutral.
Today, our tax system is heavily biased toward borrowing and
consumption — in essence creating a disincentive for savings.
This complicates our efforts to raise the capital needed to
ensure sustained non-inflationary growth. Given our tax system
biases, it is not surprising that the U.S. savings rate is low
relative to other countries. But any decision made on U.S. tax
reform will have important implications for the exchange markets.
In effect, U.S. tax policies will be graded by the foreign
exchange markets.
For instance, given the framework we've discussed, what
might be the foreign exchange implications of:
1. Moving to a modified flat-rate tax?
2. Abolishing capital gains taxes?
3. Expensing all capital equipment rather than
depreciating it?
4. Shifting from direct income tax system to an
indirect tax system, say one with a value-added tax
as a major component?
5. Basing the tax system not on income but on
consumption?
These hypothetical questions all illustrate how U.S. tax
policy changes might, all other things being equal, cause the
after-tax rate of return to shift relative to other countries.
This will most certainly be subsequently reflected in the
exchange markets.
CONCLUSION
I hope this more comprehensive framework presents a useful
background to translate the real meaning and underlying reasons
for exchange rate movements. Important economic policy decisions
are facing the nation in this election and during the next four
years.
My conclusion is clear. Corporate treasurers, controllers,
vice presidents of finance, portfolio managers and bank funding
officers around the world have re-evaluated the view they had of
-li-
the United States in 1980 compared with that view today and once
more found the U.S. the most attractive economy in the world.
And if the current polls are right, I don't see that changing for
four more years.
Thank you.
TREASURY NEWS
ipartment of the Treasury • Washington, D.C. • Telephone 566-2041
FOR IMMEDIATE RELEASE
October 9, 1984
RESULTS OF TREASURY'S WEEKLY BILL AUCTIONS
Tenders for $6,201 million of 13-week bills and for $6,202 million
of 26-week bills, both to be issued on October 11, 1984, were accepted today.
RANGE OF ACCEPTED
COMPETITIVE BIDS:
Low
High
Average
13--week bills
maturing January 10, 1985
Discount Investment
Rate
Rate 1/
Price
10.07%
10.15%
10.11%
10.47%
10.56%
10.52%
26--week bills
maturing April 11, 19 85
Discount Investment
Rate 1/
Rate
Price
97.455 : 10.18%
10.22%
97.434
97.444 : 10.21%
10.88%
10.93%
10.92%
94.853
94.833
94.838
Tenders at the high discount rate for the 13-week bills were allotted 02%,
Tenders at the high discount rate for the 26-week bills were allotted 63%,
TENDERS RECEIVED AND ACCEPTED
(In Thousands)
Received
Received
Accepted
:
Location
Boston
New York
Philadelphia
Cleveland
Richmond
Atlanta
Chicago
St. Louis
Minneapolis
Kansas City
Dallas
San Francisco
Treasury
TOTALS
Type
Competitive
Noncompetitive
Subtotal, Public
Federal Reserve
Foreign Official
Institutions
TOTALS
$
296,515
13,603,075
32,325
41,930
55,050
57,880
985,010
41,820
21,860
56,085
67,525
809,590
328,680
$
48,515
5,108,575
32,325
41,930
55,050
57,880
135,610
41,820
21,860
56,085
62,625
210,430
328,680
$
298,385
: 15,811,615
20,720
:
s
43,475
75,910
:
48,855
1,277,505
48,145
25,525
68,395
36,295
808,315
:
496,260
$
48,385
5,053,175
20,720
43,475
74,430
40,690
193,295
23,145
21,825
67,395
26,295
92,505
496,260
$16,397,345
$6,201,385
: $19,059,400
$6,201,595
$13,685,610
1,223,700
$14,909,310
$3,989,650
1,223,700
$5,213,350
: $15,619,370
:
1,222,130
: $16,841,500
$3,261,565
1,222,130
$4,483,695
1,473,035
973,035
:
1,350,000
850,000
15,000
15,000
:
867,900
867,900
$16,397,345
$6,201,385
: $19,059,400
$6,201,595
1/ Equivalent coupon-issue yield.
R-2877
Accepted
:
TREASURY NEWS
apartment of the Treasury • Washington, D.c. • Telephone
L13R/...Y. ROX! 5510
FOR RELEASE AT 4:00 P.M. October 9, 1984
GOT
iG 7 53 AH W
TREASURY'S WEEKLY BILL OFFERING
THE TREASURY
The Department of the Treasury, by this public notice,
invites tenders for two series of Treasury bills totaling approximately $13,200 million, to be issued October 18, 1984. This offering will provide about $500 million of new cash for the Treasury, as
the maturing bills are outstanding in the amount of $12,688 million,
including $1,286 million currently held by Federal Reserve Banks
as agents for foreign and international monetary authorities and
$2,249 million currently held by Federal Reserve Banks for their
own account. The additional $500 million of new cash to be raised
is based on the assumption that Congress will have completed action
to increase the debt limit. The two series offered are as follows:
91-day bills (to maturity date) for approximately $6,600
million, representing an additional amount of bills dated July 19,
1984, and to mature January 17, 1985 (CUSIP No. 912794 GQ 1), currently outstanding in the amount of $6,653 million, the additional
and original bills to be freely interchangeable.
182-day bills (to maturity date) for approximately $6,600 million,
representing an additional amount of bills dated April 19, 1984, and to
mature April 18, 1-985 (CUSIP No. 912794 GK 4 ) , currently outstanding in
the amount of $8,282 million, the additional and original bills to be
freely interchangeable.
Both series of bills will be issued for cash and in exchange for
Treasury bills maturing October 18, 1984. Tenders from Federal Reserve
Banks for themselves and as agents for foreign and international
monetary authorities will be accepted at the weighted average bank
discount rates of accepted competitive tenders. Additional amounts of
the bills may be issued to Federal Reserve Banks, as agents for foreign
and international monetary authorities, to the extent that the aggregate
amount of tenders for such accounts exceeds the aggregate amount of
maturing bills held by them.
The bills will be issued on a discount basis under competitive
and noncompetitive bidding, and at maturity their par amount will be
payable without interest. Both series of bills will be issued entirely
in book-entry form in a minimum amount of $10,000 and in any higher
$5,000 multiple, on the records either of the Federal Reserve Banks and
Branches, or of the Department of the Treasury.
R-2878
- 2 Tenders will be received at Federal Reserve Banks and
Branches and at the Bureau of the-Public Debt, Washington, D. C.
20239, prior to 1:00 p.m., Eastern Daylight Saving time, Monday,
October 15, 1984.
Form PD 4632-2 (for 26-week series) or Form
PD 4632-3 (for 13-week series) should be used to submit tenders
for bills to be maintained on the book-entry records of the
Department of the Treasury.
Each tender must state the par amount of bills bid for,
which must be a minimum of $10,000. Tenders over $10,000 must
be in multiples of $5,000. Competitive tenders must also show
the yield desired, expressed on a bank discount rate basis with
two decimals, e.g., 7.15%. Fractions may not be used. A single
bidder, as defined in Treasury's single bidder guidelines, shall
not submit noncompetitive tenders totaling more than $1,000,000.
Banking institutions and dealers who make primary markets in
Government securities and report daily to the Federal Reserve Bank
of New York their positions in and borrowings on such securities
may submit tenders for account of customers, if the names of the
customers and the amount for each customer are furnished. Others
are only permitted to submit tenders for their own account. Each
tender must state the amount of any net long position in the bills
being offered if such position is in excess of $200 million. This
information should reflect positions held as of 12:30 p.m. Eastern
time on the day of the auction. Such positions would, include bills
acquired through "when issued" trading, and futures and forward
transactions as well as holdings of outstanding bills with the same
maturity date as the new offering, e.g., bills with three months to
maturity previously offered as six-month bills. Dealers, who make
primary markets in Government securities and report daily to the
Federal Reserve Bank of New York their positions in and borrowings
on such securities, when submitting tenders for customers, must
submit a separate tender for each customer whose net long position
in the bill being offered exceeds $200 million.
A noncompetitive bidder may not have entered into an agreement,
nor make an agreement to purchase or sell or otherwise dispose of
any noncompetitive awards of this issue being auctioned prior to
the designated closing time for receipt of tenders.
Payment for the full par amount of the bills applied for
must accompany all tenders submitted for bills to be maintained
on the book-entry records of the Department of the Treasury.
A cash adjustment will be made on all accepted tenders for the
difference between the par payment submitted and the actual
issue price as determined in the auction.
No deposit need accompany tenders from incorporated banks
and trust companies and from responsible and recognized dealers
in investment securities for bills to be maintained on the bookentry records of Federal Reserve Banks and Branches. A deposit
- 3 of 2 percent of the par amount of the bills applied for must
accompany tenders for such bills from others, unless an express
guaranty of payment by an incorporated bank or trust company
accompanies the tenders.
Public announcement will be made by the Department of the
Treasury of the amount and yield range of accepted bids. Competitive bidders will be advised of the acceptance or rejection of
their tenders. The Secretary of the Treasury expressly reserves
the right to accept or reject any or all tenders, in whole or in
part, and the Secretary's action shall be final. Subject to these
reservations, noncompetitive tenders for each issue for $1,000,000
or less without stated yield from any one bidder will be accepted
in full at the weighted average bank discount rate (in two decimals)
of accepted competitive bids for the respective issues. The calculation of purchase prices for accepted bids will be carried to three
decimal places on the basis of price per hundred, e.g., 99.923, and
the determinations of the Secretary of the Treasury shall be final.
Settlement for accepted tenders for bills to be maintained
on the book-entry records of Federal Reserve Banks and Branches
must be made or completed at the Federal Reserve Bank or Branch
on October 18, 1984,
in cash or other immediately-available funds
or in Treasury bills maturing October 18, 1984.
Cash adjustments
will be made for differences between the par value of the maturing
bills accepted in exchange and the issue price of the new bills.
In addition, Treasury Tax and Loan Note Option Depositaries may
make payment for allotments of bills for their own accounts and
for account of customers by credit to their Treasury Tax and Loan
Note Accounts on the settlement date.
In general, if a bill is purchased at issue after July 18,
1984, and held to maturity, the amount of discount is reportable
as ordinary income in the Federal income tax return of the owner
at the time of redemption. Accrual-basis taxpayers, banks, and
other persons designated in section 1281 of the Internal Revenue
Code must include in income the portion of the discount for the
period during the taxable year such holder held the bill. If the
bill is sold or otherwise disposed of before maturity, the portion
of the gain equal to the accrued discount will be treated as ordinary income. Any excess may be treated as capital gain.
Department of the Treasury Circulars, Public Debt Series Nos. 26-76 and 27-76, Treasury's single bidder guidelines, and this
notice prescribe the terms of these Treasury bills and govern the
conditions of their issue. Copies of the circulars, guidelines,
and tender forms may be obtained from any Federal Reserve Bank or
Branch, or from the Bureau of the Public Debt.
TREASURY NEWS
epartment of the Treasury • Washington, D.c. • Telephone 566-2041
FOR IMMEDIATE RELEASE
October 10, 1984
TREASURY POSTPONES AUCTION OF 7-YEAR NOTES
The Department of the Treasury announced that it is postponing
the auction of $5,500 million of 7-year notes originally scheduled
to be held today until Tuesday, October 16, 1984. The issue date
of the 7-year notes shall be October 23, 1984, instead of
October 17, as originally announced. The postponement is necessary
because Congressional action on legislation to raise the debt limit
is not assured at this time.
oOo
R-2879
TREASURY NEWS
apartment of the Treasury • Washington, D.C. • Telephone
FOR RELEASE AT 4:00 P.M. ' ""October 10, 1984
TREASURY TO AUCTION $8,800 MILLION OF "2-YEAR NOTES
;
^ -HE J^^XSU
The Department of the Treasury will auction $8,800 million
of 2-year notes to refund $7,361 million of 2-year notes maturing
October 31, 1984, and to raise $1,450 million new cash. The
additional $1,450 million of new cash to be raised is based on the
assumption that Congress will have completed action to increase the
debt limit. The $7,361 million of maturing 2-year notes are those
held by the public, including $1,314 million currently held by
Federal Reserve Banks as agents for foreign and international
monetary authorities.
The $8,800 million is being offered to the public, and any
amounts tendered by Federal Reserve Banks as agents for foreign and
international monetary authorities will be added to that amount.
Tenders for such accounts will be accepted at the average price of
accepted competitive tenders.
In addition to the public holdings, Government accounts and
Federal Reserve Banks, for their own accounts, hold $529 million of
the maturing securities that may be refunded by issuing additional
amounts of the new notes at the average price of accepted
competitive tenders.
Details about the new security are given in the attached
highlights of the offering and in the official offering circular.
oOo
Attachment
R-2880
HIGHLIGHTS OF TREASURY
OFFERING TO THE PUBLIC
OF 2-YEAR NOTES
TO BE ISSUED OCTOBER 31, 1984
October 10, 1984
Amount Offered:
To the public
Description of Security:
Term and type of security
Series and CUSIP designation
Maturity date
Call date
Interest rate
Investment yield
Premium or discount
Interest payment dates
Minimum denomination available
Terms of Sale:.
Method of sale
Competitive tenders
Noncompetitive tenders
Accrued interest payable
by investor
Payment by non-institutional
investors
Payment through Treasury Tax and
Loan (TT&L) Note Accounts
Deposit guarantee by
designated institutions
Key Dates:
Receipt of tenders
Settlement (final payment
due from institutions)
a) cash or Federal funds
b) readily collectible check
$8,800 million
2-year notes
Series Z-1986
(CUSIP No. 912827 RK 0)
October 31, 1986
No provision
To be determined based on
the average of accepted bids
To be determined at auction
To be determined after auction
April 30 and October 31
$5,000
Yield Auction
Must be expressed as an
annual yield, with two
decimals, e.g., 7.10%
Accepted in full at the average price up to $1,000,000
None
Full payment to be
submitted with tender
Acceptable for TT&L Note
Option Depositaries
Acceptable
Wednesday, October 17, 1984,
prior to 1:00 p.m., EDST
Wednesday, October 31, 1984
Monday, October 29, 1984
TREASURY NEWS
Department of the Treasury • Washington, D.C. • Telephone 566-2041
FOR IMMEDIATE RELEASE
October 11, 1984
TREASURY POSTPONES AUCTION OF 20-YEAR 1-MONTH BONDS
The Department of the Treasury announced that it is postponing
the auction of $4,000 million of 20-year 1-month bonds originally
scheduled to be held today, until Tuesday, October 23, 1984. The
issue date of the bonds shall be October 30, 1984, instead of
October 18, as originally announced. The postponement is necessary
because Congressional action on legislation to raise the debt limit
is not assured at this time.
oOo
R-2881
TREASURY NEWS
Department of the Treasury • Washington, D.C. • Telephone 566-204
FOR RELEASE AT 9 p.m.
October 12, 1984
CONTACT: Art Siddon
566-2041
U.S. Treasury Department Announces
Short-Term Financing Arrangements for the Philippines
The Treasury Department announced today that it has joined
the Bank of Japan and the Bank of Korea in arrangements which
will provide short-term financing totaling $80 million in support
of the economic adjustment program of the Republic of the
Philippines which has been agreed with the management of the
International Monetary Fund (IMF). In this connection, it is
expected that the Philippines will be eligible shortly for
balance of payments financing from the IMF under a new stand-by
arrangement upon approval by the Executive Board.
The short-term financing commitments announced today include
$45 million from the U.S. Treasury through the Exchange
Stabilization Fund, $30 million from the Bank of Japan, and $5
million from the Bank of Korea. Financing will be made available
when the Managing Director of the IMF confirms that the IMF has
received assurances of the availability of adequate financing in
support of the Philippine economic adjustment program and
formally submits the new stand-by arrangement to the Executive
Board. It is expected that the short-term financing provided by
the Treasury, the Bank of Japan and the Bank of Korea will be
repaid through the use of resources drawn by the Philippines from
the IMF.
###
R-2882
TREASURY NEWS
epartment of the Treasury • Washington, D.C. • Telephone 566-2041
FOR RELEASE AT 4:00 P.M.
October 12, 1984
TREASURY ANNOUNCES OFFERINGS OF 3-YEAR 11-MONTH DOMESTIC NOTES
AND 3-YEAR 11-MONTH FOREIGN-TARGETED NOTES
"The Department of the Treasury will auction $6,000 million of
3-year 11-month domestic notes and up to $1,000 million of 3-year
11-month foreign-targeted notes to raise new cash.
The $6,000 million of domestic notes are being offered to the
public, and amounts tendered by Federal Reserve Banks as agents
for foreign and international monetary authorities will be added
to that amount at the average price of accepted competitive tenders. Additional amounts of domestic notes will be provided at
the average price of accepted competitive tenders in exchange for
the $300 million of Treasury bills, issued to Federal Reserve
Banks for their own account on October 1, 1984, for securities
maturing September 30, 1984,. that were not refunded in the 2-year
note auction of September 19, 1984.
The auction of foreign-targeted notes is the first such
Treasury public offering specifically directed to foreign
investors. The foreign-targeted notes will be sold only to
foreign institutions or to foreign branches of United States
financial institutions, and only under competitive bidding. A
maximum of $1,000 million of bids will be accepted, and if less
than $500 million of acceptable bids are received, none will be
accepted. A bidder must certify that, as of the date of issuance,
the notes are not being acquired for, or for offer to resell to, a
United States person. In any event, the issue may not be sold to
United States persons for 45 days (until December 9, 1984).
United States persons who purchase the notes from December 9, 1984
onwards must meet U.S. tax requirements. In addition, such notes
may be exchanged for the companion domestic notes in accordance
with the terms of the circular.
Details about both security offerings are given in the
highlights of the offerings on the reverse side and in the official Offering Circulars. Potential bidders for the foreigntargeted notes should obtain copies of the Offering Circular,
which are available at the Federal Reserve Bank of New York,
Securities Department, Room 835, or at the Treasury Department,
R-2883
Public Affairs, Room 2315, Washington, D.C.
HIGHLIGHTS OF TREASURY OFFERING TO THE PUBLIC OF 3-YEAR 11-MONTH DOMESTIC NOTES
AND OF 3-YEAR 11-MONTH FOREIGN-TARGETED NOTES TO BE ISSUED OCTOBER 31, 1984
October 12, 1984
Domestic
Amount Offered $6,000 million
Eligible Bidders
The Public
Foreign-Targeted
Up to $1,000 million
Foreign institutions or
foreign branches of United
States financial institutions.
Description of Security:
Term and type of security..3-year 11-month notes
Series Series N-1988
CUSIP designation
Maturity Date
Interest Rate
Investment yield
Premium or discount
Interest payment dates
Minimum denomination
available
Terms of Sale:
Method of Sale
Competitive bids
3-year 11-month foreigntargeted notes
Series P-1988
CUSIP No. 912827 RH 7
CUSIP No. 912827 RJ 3
September 30, 1988
September 30, 1988
To be determined based on
Same as the rate established in
the average of accepted bids
the companion domestic auction
To be determined at auction
To be determined at auction
To be determined after auction To be determined after auction
March 31 and September 30
September 30
$1,000
Yield auction
Must be expressed as an annual
yield, with two decimals,
e.g., 7.10%, based on a semiannual interest payment
Noncompetitive bids Accepted in full at the average price up to $1,000,000
Minimum bid
.$1,000
Payment Instructions:
Designation of paying
institution
,No provision
Payment by noninstitutional investors....Full payment to be
submitted with tender
Guarantee by
designated institution
(when required)
Acceptable
Payment through
Treasury Tax and Loan
(TT&L) Note Accounts
$1,000
Yield auction
Must be submitted to the Federal
Reserve Bank (FRB) New York and
expressed as an annual yield, with
two decimals, e.g., 7.10%, based
on an annual interest payment
Not permitted
Aggregate amount at lowest yield
bid for must be at least
$50,000,000. See Section 6 of
Offering Circular.
See Section 6. of Offering Circular.
Not applicable
See Section 6 of Offering
Circular.
Acceptable for TT&L Note
Option Depositaries
No provision
Wednesday, October 24, 1984,
prior to 1:00 p.m., EDST
Wednesday, October 24, 1984, prior
to 1:00 p.m., EDST, at FRB New York
Settlement
a) Funds immediately
available to the
Treasury
Wednesday, October 31, 1984
Wednesday, October 31, 1984, no late1
than 9:00 a.m., EST, at FRB New York
b) Readily-collectible
check
Monday, October 29, 1984
Not applicable
Key Dates:
Receipt of tenders
UNITED STATES OF AMERICA
FOREIGN - T A R G E T E D TREASURY NOTES OF SEPTEMBER 30,1988
SERIES P-1988
Department of the Treasury
Offering Circular
October 10,1984
Outside the United States, this offering circular is for informational purposes and does not constitute an
offer or solicitation, and it m a y not be used for the purpose of or in connection with any offer or solicitation by
any person in any jurisdiction in which such offer or solicitation is not authorized or to any person to w h o m it
is unlawful to m a k e such offer or solicitation.
TABLE OF CONTENTS
Section 1. INVITATION FOR TENDERS 1
Section 2. DEFINITIONS
2
Section 3. FISCAL A G E N T AS REGISTRAR
3
Section 4. DESCRIPTION OF T H E NOTES
4
Section 5. DOMESTIC NOTES
4
Section 6. BIDDING A N D SALE PROCEDURES
4
Section 7. P A Y M E N T FOR NOTES
6
Section 8. BOOK - E N T R Y NOTES
6
Section 9. DEFINITIVE NOTES
7
Section 10. E X C H A N G E FOR DOMESTIC NOTES
8
Section 11. UNITED STATES TAXATION
9
Section 12. SANCTIONS
14
Section 13. G E N E R A L PROVISIONS
14
Attachment A Sample Tender Form
Attachment B
Sample Payment Instructions
Attachment C
Sample Guarantee
Attachment D
Formulas
UNITED STATES OF AMERICA
FOREIGN-TARGETED T R E A S U R Y N O T E S OF S E P T E M B E R 30,1988
SERIES P-1988
DEPARTMENT CIRCULAR
Public Debt Series No. 31-84
D E P A R T M E N T OF THE TREASURY.
OFFICE OF THE SECRETARY.
Washington, D. C , October 10,198J,.
Section 1. INVITATION FOR TENDERS
1.1. Introduction. The Secretary of the Treasury, pursuantto the authority granted him by Chapter
31 of Title 31, United States Code, invites tenders for up to $1,000,000,000 of United States securities
designated Foreign-Targeted Treasury Notes of September 30,1988, Series P-1988 (CUSIP No. 912827 RJ 3)
(collectively the "Notes", individually a "Note"). The Notes will be auctioned in the United States on October
24,1984, by competitive bidding only. Payment must be m a d e as set forth below in United States dollars. The
stated interest rate on the Notes and the price equivalent of each accepted bid will be determined in the
manner described in Section 6.7.
1.2. Targeted Nature of the Notes. Treasury will sell the Notes only to Bidders as defined in Section
2.1. Bidders must acquire the Notes only for themselves or on behalf of, or for sale or other transfer to, United
States Aliens as defined in Section 2.18 or foreign branches of United States Financial Institutions. In
addition, any transfers by Bidders after December 8,1984, to Qualifed Holders as defined in Section 2.14 that
are United States Persons must be consistent with the tax certification described in Section 11.2.
1.3. Transfer Restrictions. Before December 9,1984, the Notes may not be sold or transferred to a
United States Person as defined in Section 2.19, other than a foreign branch of a United States Financial
Institution. Each Bidder for the Notes must certify on the tender form for the Notes that it will not sell,
contract to sell, or otherwise transfer the Notes to a United States Person, other than a foreign branch of a
United States Financial Institution, before December 9, 1984. Each Bidder further agrees that, if it sells,
contracts to sell, or otherwise transfers the Notes before December 9,1984, it will confirm to such purchaser
or transferee in writing that (i) there is a restriction on sale or other transfer to United States Persons other
than foreign branches of United States Financial Institutions and (ii) that such confirmation is required to be
given to any subsequent purchaser or transferee that acquires the Notes before December 9, 1984. The
transfer restriction of this Section 1.3 is in addition to the tax certification of a Bidder described in Section
11.2. A s described in Section 11.2, the Bidder must certify that, as of the date of issuance, Notes acquired by
the Bidder will not be owned by a United States Person, other than a foreign branch of a United States
Financial Institution, and that the Notes are not being acquired on behalf of such a person, or for offer to
resell or for resale to such a person. This tax certification requirement is independent of the transfer
restriction of this Section 1.3.
1.4. Tax Treatment. The Notes are subject to United States federal income tax as provided in the
Internal Revenue Code as defined in Section 2.8. Interest on the Notes paid to a United States Alien is not
subject to United States federal income tax if the conditions of sections 871(h) or 881(c) of the Internal
Revenue Code and the regulations related thereto are satisfied. The discussion in Section 11 is only a
2.12. Paying Institution. A Financial Institution that has a reserve, clearing, or other dollar account
with F R B N Y and that has been designated on the tender form to pay for Notes.
2.13. Primary Dealer. A dealer that makes primary markets in United States Government securities
and reports its positions in and borrowings on such securities daily to F R B N Y .
2.14. Qualified Holder. Before December 9, 1984, a United States Alien or a foreign branch of a
United States Financial Institution and after December 8,1984, a United States Alien or a United States
Person.
2.15. Registered Owner. The Financial Institution specifically identified on the records of FRB NY
maintained for an International Account, or, for Notes held in book-entry form in a book-entry account other
than an International Account, the Holding Institution, or, if a Note is held in definitive form, the person
whose n a m e is inscribed on a Definitive Note and recorded on the books of F R B N Y .
2.16. Secretary. The Secretary of the United States Department of the Treasury, the legal successor of
the Secretary, and delegates of the Secretary or such legal successor.
2.17. Treasury. The United States Department of the Treasury.
2.18. United States Alien. A corporation, partnership, individual, or fiduciary that for United States
federal income tax purposes, as to the United States (including its territories, possessions, all areas subject to
its jurisdiction and the Commonwealth of Puerto Rico), is a foreign corporation, a nonresident alien
individual, a nonresident alien fiduciary of a foreign estate or trust, or a foreign partnership one or more of
the members of which is, for United States federal income tax purposes, a foreign corporation, a nonresident
alien individual, or a nonresident alien fiduciary of a foreign estate or trust.
2.19. United States Person. A citizen, national, or resident of the United States; a corporation,
partnership, or other entity created or organized in or under the laws of the United States or any political
subdivision thereof; or an estate or trust that is subject to United States federal income tax regardless of the
source of its income.
2.20. United States-Related Person. A United States Person, a controlled foreign corporation within
the meaning of section 957(a) of the Internal Revenue Code, or a foreign corporation 50 percent or more of
whose gross income from all sources for the three-year period ending with the close of the taxable year
preceding the subject payment was effectively connected with the conduct of a trade or business in the United
States.
2.21. Withholding Agent. The United States Person that would be required to deduct and withhold
United States federal income tax from interest on the Notes under sections 1441(a) or 1442(a) of the Internal
Revenue Code if such interest were not portfolio interest within the meaning of sections 871(h) and 881(c) of
the Internal Revenue Code.
Section 3. FISCAL AGENT AS REGISTRAR
3.1. Fiscal Agent as Registrar. FRB NY is designated to act on behalf of Treasury as the exclusive
fiscal agent and, as such, registrar for this issue. F R B N Y is authorized to receive tender forms and payment,
-3-
bids are irrevocable. A sample tender form is set forth at Attachment A. Tender forms m a y be obtained at
F R B N Y and at Treasury offices in Washington, D.C. beginning Tuesday, October 9,1984.
6.3. Payment Instructions. Bidders are required to make arrangements to pay for the Notes before
submitting a bid. Each Bidder must designate a Paying Institution on the tender form. Except as set forth
below, each Paying Institution must advise F R B N Y no later than 12:00 noon N e w York time on October 23,
1984, that it has agreed to serve as a Paying Institution for a named Bidder. That advice must be given in the
form set forth at Attachment B to this offering circular. The Attachment B notice is not required if (i) the
Bidder and its designated Paying Institution are the same legal entity or (ii) the Paying Institution is
submitting the tender form as agent for a Bidder, and if the signature of the authorized signer of the Paying
Institution on the tender form is on file with F R B N Y as an authorized signature of the Paying Institution.
The Paying Institution m a y withdraw or modify its agreement to serve as Paying Institution by notifying
F R B N Y in accordance with Attachment B. The withdrawal of a Paying Institution after a bid has been
accepted does not relieve the Bidder of its obligation to pay for the Notes in funds available to Treasury at
F R B N Y no later than 9:00 a.m. N e w York time on October 31,1984.
6.4. Payment Guarantees. A Payment Guarantee is required unless (i) the Bidder and its designated
Paying Institution are the same legal entity or (ii) the Bidder is a foreign branch (not a subsidiary) of a
Primary Dealer. A Payment Guarantee m a y be provided by a Paying Institution or by a Primary Dealer. If
the Payment Guarantee is provided by a Paying Institution or a Primary Dealer that is signing the tender
form, it must be provided on the tender form. If the Payment Guarantee is provided by a Paying Institution
that is not signing the tender form, it must be provided in a letter in the form of Attachment C. If the Payment
Guarantee is provided by a Primary Dealer that is not signing the tender form, it must be submitted in a
L
letter in the form of Attachment C. Payment Guarantees in the form of Attachment C must be received by
F R B N Y no later than 12:00 noon N e w York time on October 23, 1984. In addition to any other remedies
available to the Secretary, the amount of this Payment Guarantee is subject to forfeiture in the Secretary's
sole discretion if full payment for the Notes is not m a d e in funds available to Treasury at F R B N Y no later
than 9:00 a.m. N e w York time on October 31,1984.
6.5. Minimum Bid. The par amount of the bid must be stated on each tender form. Multiple bids by a
single Bidder are permitted. Each bid, however, must be submitted on a separate tender form. All bids must
be in multiples of $ 1,000,000 and the aggregate amount bid at the lowest yield by each Bidder must be at least
$50,000;000. A bid must show the annual yield for which it is submitted to two decimals, e.g., 7.10%, based on
an annual interest payment. Fractions m a y not be used.
6.6. Maximum Awards. A Bidder, whether bidding individually or as a member of one or more
syndicates, will not be awarded Notes with a par value in excess of $350,000,000. A syndicate will not be
awarded Notes in excess of $500,000,000. If a Bidder submits one or more bids with a total par value in excess
of such m a x i m u m awards, the excess (starting at the highest yield bid) will be disregarded for purposes of the
prorated calculations referred to in Section 6.8. A syndicate must disclose: (i) the identity of any syndicate
m e m b e r that is submitting one or more other bids (either individually or as a m e m b e r of another syndicate) if
that member's total bids exceed $350,000,000, and (ii) the amount of Notes included in the syndicate bid for
such disclosed syndicate member. Apart from such disclosures, the identity of syndicate members other than
the head of the syndicate need not be disclosed.
-5-
8.2. Transfer of Book-Entry Notes. Before December 9,1984, F R B N Y will transfer the Notes only
between International Accounts. After December 8, 1984, the Notes m a y be transferred between any
book-entry accounts of any Holding Institutions.
8.3. Book-Entry System. Book-entry records at FRB NY will reflect the aggregate holdings of Notes
of each Holding Institution by account. The Holding Institution, and each subsequent holder in the chain to
the ultimate beneficial owner, will have the responsibility of establishing and maintaining accounts for its
customers. F R B N Y will be responsible only for maintaining the book-entry accounts in its system, effecting
transfers on its books, and ensuring that payments are m a d e to the Holding Institution identified in its
book-entry system. With respect to the Notes, F R B N Y will act only upon instructions of the Holding
Institution holding the Notes.
8.4. FRB NY as Fiscal Agent. FRB NY acts as fiscal agent of Treasury. All other holders in the chain
between F R B N Y and the ultimate beneficial owner act as agents of the beneficial owner or as agents of
intermediary Financial Institutions and not as agents of Treasury.
8.5. Payment of Interest and Principal. Interest on Notes in book-entry form will be paid on the
interest payment date, and Notes will be redeemed at par on the maturity date. Funds for interest or
redemption payments will be credited to the Holding Institution. In the event an interest payment date or the
maturity date is a Saturday, Sunday, or other day on which Treasury in Washington, D.C. or F R B N Y is not
open for business, the interest or principal is payable (without additional interest) on the next day that both
the Treasury in Washington, D.C. and F R B N Y are open for business.
Section 9. DEFINITIVE NOTES
9.1. Definitive Notes. After December 8,1984, book-entry Notes held at FRB NY may be converted to
Definitive Notes. Each Definitive Note will contain on its face the following legend: "This obligation has been
sold at original issuance in accordance with procedures reasonably designed to ensure that it will be sold only
to a person that is not a United States person, other than a foreign branch of a United States financial
institution, pursuant to sections 871(h) and 881(c) of the Internal Revenue Code of 1954, as amended."
9.2. Requests for Conversion to Definitive Notes. The request for conversion of book-entry Notes to
Definitive Notes m a y be m a d e to F R B N Y only by a Holding Institution and must provide the n a m e and
address of the Registered Owner. The Registered O w n e r of a Definitive Note m a y be the beneficial owner or
someone holding the Note on behalf of a beneficial owner. Upon receipt of the appropriate certification as
described in Section 11, F R B N Y will deliver the Definitive Note either over the counter or via registered
mail in accordance with the instructions provided by the Holding Institution submitting the request for a
Definitive Note.
-7-
10.2. Taxation. U p o n exchange for Domestic Notes, the holder of such Domestic Notes will be
required to comply with the tax requirements (including certification requirements) applicable to Domestic
Notes. See also Section 11.
10.3. Adjustment Upon Exchange. At the time of the exchange of Notes for Domestic Notes, an
adjustment will be m a d e for the difference between the present value of the Notes based on the formula in
Attachment D for Treasury notes paying annual interest and the present value of the Notes based on the
formula in Attachment D for Treasury notes paying semiannual interest. This net adjustment consists of the
Exchange Adjustment and accrued interest, if applicable. A s used in this offering circular, "Exchange
Adjustment" means the difference in the present values of the Notes resulting from applying the formulas in
Attachment D, after adjusting for the difference in accrued interest. In determining present values, the
future payments of interest and principal will be discounted by using the weighted average yield of the Notes
at the time of auction in applying the annual formula and by using the semiannual equivalent of that yield in
applying the semiannual formula. Calculation of the present values will be m a d e using the formulas shown in
Attachment D hereto. In the event the present value of the Notes based on semiannual interest payments
exceeds the present value of the Notes based on annual interest payments, the holder must pay to Treasury an
amount equal to the excess before the exchange will be processed. In the event the present value of the Notes
based on the annual interest payments exceeds the present value of the Notes based on the semiannual
interest payments, the holder will receive on the exchange an amount equal to the excess. The net adjustment
will not reflect or take into account any market-based factor.
40.4. Closed-Book Periods. Exchange transactions involving Notes or Domestic Notes in definitive
form will not be accepted during closed-book periods that will be in effect during the period of one calendar
month prior to and ending on an interest payment date and the maturity date. Exchange transactions
involving only Notes and Domestic Notes in book-entry form m a y not be accepted on the last day on which
F R B N Y is open for business preceding an interest payment date and the maturity date. The registration
books for Notes and Domestic Notes in definitive form will be reopened on the first day following an interest
payment date on which F R B N Y is open for business. Except for the closed-book periods, exchange
transactions involving only book-entry securities normally will be processed within one day; all other
exchange transactions normally will be processed within one week of receipt by F R B N Y . N o exchanges will
be allowed after the maturity date of the Notes.
Section 11. UNITED STATES TAXATION
11.1. Taxation of Interest and Principal to United States Aliens. Payments of interest and
principal on the Notes to a United States Alien will not be subject to withholding of United States federal
income tax if the Withholding Agent receives an effective certificate under Sections 11.4,11.5,11.6, or 11.7,
and the other requirements described in the applicable section are satisfied. Failure to satisfy the
requirements described in this Section 11.1 m a y result in imposition of a withholding tax.
-9-
11.6. Interest Certification F o r Beneficial O w n e r s that are United States Persons. A Withholding Agent m a y m a k e a payment of interest on a Note to a Registered O w n e r that is a Financial Institution
at an address outside the United States without withholding United States federal income tax if the
Withholding Agent receives an effective statement, as described below, from the Financial Institution
(relating to beneficial ownership by certain United States Persons), and, if the Financial Institution is not a
United States-Related Person, the Withholding Agent makes the information returns described in Section
11.9. If the Financial Institution is a United States-Related Person, the statement must be signed under the
penalties of perjury by an authorized representative of the Financial Institution and must state that the
institution has received from the beneficial owner a certificate, as described below, and that the institution
will make such information returns and otherwise comply with information reporting required under the
Internal Revenue Code. If the Financial Institution is not a United States-Related Person, the statement must
be signed under penalties of perjury by an authorized representative of the Financial Institution and must
state (i) that the institution has received from the beneficial owner a certificate, as described below, or (ii) that
it has received from another Financial Institution a similar statement that it, or another Financial
Institution acting on behalf of the beneficial owner, has received a certificate, as described below, from the
beneficial owner. In the case of multiple Financial Institutions between the beneficial owner and the person
otherwise required to withhold, this statement must be given by each Financial Institution to the one above it
in the chain. The certificate from the beneficial owner must (i) be signed by the beneficial owner under
penalties of perjury, (ii) provide the n a m e and address of the beneficial owner, (iii) provide the United States
taxpayer identification n u m b e r and state that it is the beneficial owner's correct number, and (iv) state that
the beneficial owner is not subject to backup withholding due to notified payee underreporting. This
certificate m a y be provided on Internal Revenue Service F o r m W - 9 or a substitute form that is substantially
similar to a F o r m W - 9 . N o particular form is required for the statement provided by the Financial
Institutions. However, the statement must provide the n a m e and address of the beneficial owner, and a copy
of the Form W - 9 or substitute form must be attached.
11.7. Interest Certification In Other Cases. A Withholding Agent may make a payment of interest
on a Note to a Registered O w n e r without withholding United States federal income tax if (i) the Withholding
Agent does not have actual knowledge that the beneficial owner of the Note is a United States Person (other
than a foreign branch of a United States Financial Institution), and if (ii) the Withholding Agent receives a
certificate from the Registered O w n e r that (A) is signed by the beneficial owner under penalties of perjury,
(B) certifies that such owner is not a United States Person, or in the case of an individual, that he is neither a
citizen nor a resident of the United States, and (C) provides the n a m e and address of the beneficial owner. The
statement m a y be made, at the option of the Withholding Agent, on Internal Revenue Service F o r m W - 8 or on
^substitute form that is substantially similar to a F o r m W - 8 . A Withholding Agent also m a y m a k e a payment
of interest to a United States Alien Registered O w n e r without withholding United States federal income tax
if an appropriate statement is provided to the Withholding Agent by a Financial Institution. In such case the
statement must describe the obligation, be signed under penalties of perjury by an authorized representative
of the Financial Institution and state (i) that the Financial Institution has received from the beneficial owner
a Form W - 8 or substitute form, or (ii) that it has received from another Financial Institution a similar
statement that it, or another Financial Institution acting on behalf of the beneficial owner, has received the
-11-
11.12. Information Reporting a n d B a c k u p Withholding. Neither information reporting under
sections 6041 or 6049 of the Internal Revenue Code nor backup withholding will apply to interest paid on a
Note to a United States Alien if (i) the conditions of Section 11.1 are satisfied, (ii) the payor of the interest does
not have actual knowledge that the payee is a United States Person, and (iii) if the payor is a United
States-Related Person acting as a custodian, nominee or other agent of the payee, the payor has documentary
evidence in its records that the payee is not a United States citizen or resident. Neither information reporting
under section 6045 of the Internal Revenue Code nor backup withholding will apply to payments of principal
made outside the United States on a Note to a United States Alien (i) if the payor of the principal is not a
United States-Related Person; or (ii) if the payor is a United States-Related Person acting as a custodian,
nominee or other agent of the payee, the payor does not have actual knowledge that the payee is a United
States Person (other than a foreign branch of a United States Financial Institution) and has documentary
evidence in its records that the payee is not such a person. Principal will be considered paid to a Registered
Owner outside the United States if either the Note is recorded in a Holding Institution's International
Account and principal is credited for that account, or principal on a Definitive Note is delivered to the holder
outside the United States.
11.13. Original Issue Discount. The Secretary shall determine whether the Notes will be considered
issued with original issue discount within the meaning of section 1273(a) (1) of the Internal Revenue Code. In
the event the Notes are issued with original issue discount, that fact and the amount of the discount will be
announced in an Internal Revenue Service publication. See also Section 11.15. A United States Alien
described in Section 11.2 that is a holder of a Note will not be subject to United States federal income tax and
no withholding of United States federal income tax will be required as a consequence of the Note having
original issue discount if the conditions of Section 11.1 are satisfied with respect to stated interest on the Note.
A holder of a Note that is a United States Person generally will be required to include in income the portion of
the original issue discount allocable to each day during the year on which the Note is held. A n y such income
will increase such holder's tax basis for the Note.^and any gain or loss on a sale of the Note, determined by
comparing the amount realized in such sale with the holder's basis, as so adjusted, generally will be capital
gain or loss.
11.14. Taxation of Gains to United States Aliens. A holder of a Note that is a United States Alien will
not be subject to the United States federal income tax and no withholding of United States federal income tax
will be required with respect to any gain realized on the sale, redemption or exchange of the Note provided
such gain is not effectively connected with a United States trade or business, and further provided that: (i) if
such United States Alien is a nonresident alien individual, such individual is not present in the United States
for a total of 183 days or more during the taxable year in which such gain is realized, is not subject to tax
under section 877 of the Internal Revenue Code as an expatriate of the United States and is not treated as a
resident of the United States for the taxable year in which the gain is recognized under sections 6013(g) or
6013(h) of the Internal Revenue Code; or (ii) if such United States Alien holder is a foreign corporation, such
foreign corporation will not have a past or present status as a personal holding company with respect to the
United States or as a corporation which accumulates earnings to avoid United States federal income tax.
-13-
13.5. Eligibility for Clearance. The Notes will be eligible for clearance on Euro-Clear and C E D E L .
13.6. Headings. The headings of sections and subsections in this offering circular are inserted for
convenience of reference only and shall not be deemed to be part of this offering circular.
13.7. Attachments Incorporated. Attachments A through D and any terms and conditions set forth
therein are incorporated as part of this offering circular.
13.8. Waiver. The Secretary reserves the right, in his discretion, to waive any provision or provisions
of this offering circular.
13.9. Sale in the United States. The Notes are offered for sale only in the United States. Resale or
reoffering of the Notes outside the United States is authorized only w h e n such resale or reoffering complies
with the securities laws and other applicable laws of jurisdictions in which such resale or reoffering occurs.
Bidders and their agents are responsible for ensuring compliance with the laws of such jurisdictions.
Carole Jones Dineen
Fiscal Assistant Secretary
-15-
Attachment A
TENDER FOR 3- YEAR 11- MONTH FOREIGN • TARGETED
TREASURY NOTES OF SEPTEMBER 30,1988, SERIES P-1988
A NT- ONLY COMPETITIVE TENDERS will, nr A rrrryrrn A vn MI TST Rr prrnvrn RV TH
FEDERAL RESERVE BANK OF NEW YORK BEFORE 1:00 P.M. NEW YORK TIME ON OCTOBER 24.1984.
To:
Federal Reserve Bank of N e w York
Fiscal Agent of the United States
33 Liberty Street
N e w York, N e w York 10045
The undersigned offers to purchase the above-described Notes in the amount indicated below and agrees to make
payment therefor at F R B N Y in accordance with the provisions of the official offering circular (Department Circular,
Public Debt Series No. 31-84). The definitions in the official offering circular apply to this tender form.
The total par amount bid at the lowest yield must be at least $50,000,000. Par amount bid for must be a
multiple of $1,000,000. Bidders m a y submit multiple bids but each bid must be submitted on a separate tender
form.
IMPORT
COMPETITIVE TENDER
PAR AMOUNT
ANNUAL YIELD
$ (United States dollars)
(maturity value)
(Yield must be expressed to two
decimal places, for example, 7.10%)
D Check here if this is a syndicate bid.
DELIVERY AND PAYMENT INSTRUCTIONS
Issue book-entry Notes to be held at F R B N Y in an International Account of
(Name and Address of Holding Institution)
Payment for Notes awarded will be made through
(Name and Address of Paying Institution)
E By charge to reserve account; E By charge to clearing account; O By charge to other dollar account
Authorization for such charge must be on file with F R B N Y in accordance with the provisions of the official offering
circular. If otherwise eligible, the Holding Institution and the Paying Institution m a y be, butdo not have to be, the same.
Bid may be submitted only by or on behalf of Bidders as defined in the official offering circular.
If the tender form is submitted by a United States Person, other than a foreign branch of a United States Financial
Institution, it must be acting solely as agent for a disclosed Bidder.
Bidder.
T E N D E R F O R M IS S U B M I T T E D B Y : (Please print or type)
If acting as agent, Bidder must be identified below.
NAME....
If Bidder is a syndicate, the head of the syndicate
must be identified below.
ADDRESS.
NAME
CITY
STATE... ZIP CODE
ADDRESS
COUNTRY
AREA CODE
TELEPHONE NUMBER
Attachment B
[Letterhead of Paying Institution]
Federal Reserve Bank of New York
33 Liberty Street, R o o m 835
N e w York, N e w York 10045
Attn: Mr. Stuart Zorfas
Chief, Securities Department
Gentlemen:
1.
W e hereby authorize you to debit our (reserve, clearing, or other dollar) account in an amount not to
exceed $__
, as payment for Notes awarded to (name Bidder). Terms used herein shall
have the same meaning as set forth in the official offering circular (Department Circular, Public Debt Series
No. 31-84).
2. We retain the right to modify or withdraw this authority. We understand that any such modification
or withdrawal must be in writing and must be delivered to F R B N Y .
3. We further understand that any Notes paid for by a debit to our (reserve, clearing, or other dollar)
account will be issued to our International Account. (This sentence is not required if the Paying Institution
signing this letter is willing to permit the Notes paid for under this authorization to be issued to another
Holding Institution's International Account.)
4. The following signature^) is (are) a specimen of the authorized signature^) which will appear on the
tender form submitted by (name of Bidder):
Attachment C
[Letterhead of Guarantor]
Federal Reserve Bank of N e w York
33 Liberty Street
N e w York, N e w York 10045
Attn: Mr. Stuart Zorfas
Chief, Securities Department
Gentlemen:
This is to advise you that we guarantee payment to Treasury of an amount equal to 5 % of the par amount,
but not in excess of $
, of any United States securities targeted to foreign investors
("Securities") for which
bids.
(name of Bidder)
W e acknowledge that this guarantee m a y not be withdrawn during any period between the deadline for
submission of bids for Securities and payment for those Securities.
(Name of Guarantor)
By:
(Authorized Signature)
(Name and Title of Authorized Signer)
(Date)
Receipt Acknowledged:
FRB NY
TERMS AND FORM OF THIS LETTER MAY NOT BE ALTERED
Attachment D
Formulas for Calculating the Present Value
(Price Plus Accrued Interest)
of Treasury Notes Paying Semiannual Interest*
A.
Calculation during an initial "short" interest period
(P+A) * (r"/s)(C/2) + (C/2)aa+ 100vn
(1 + i/2)*
and A - l(r" - r)/s](C/2)
B. Calculation where the next payment is for a "full"
seminannual interest period
(P+A) - C/2 + (0/2)8^ +
100vn
(1 + i/27*
and A = [(s - r)/s](C/2)
where:
P = Price in decimals.
A = Accrued interest from original issue date or last interest
payment date to valuation date.
r = Exact number of days from valuation date to next interest
payment date.
r" = Exact number of days from the original issue date to the
first interest payment date.
f = r'/180 where r1 is days from valuation date to next interest
payment date calculated on a 360 days per year basis from
and including the day following the valuation date up to and
including the next interest payment date. A full month will
be counted as thirty days and a date occurring on the thirtyfirst calendar day of a month shall be the same as the first
calendar day of the following month.
s = Exact number of days in current semiannual period.
i = Interest rate, based on semiannual interest payments (expressed
in decimals).
C = Regular annual coupon, payable semiannually.
n = Number of full semiannual periods from valuation date to
maturity.
n
v * 1/(1 + i/2) n • present value of 1 due at the end of n periods.
a-j « (1 - v n )/(i/2) « v + v 2 + v 3 + .... + v n * present value of 1
per period for n periods.
* These formulas will only be used for making calculations
involved in exchanging targeted registered issues for
companion regular Treasury issues.
Attachment D
page 3
S a m p l e E x c h a n g e Values for a Hypothetical 4-Year Note Dated 10/31/84 a n d Maturing 9/30/88
12-1/2% Annual
Coupon @ 12.57%ann
12-1/2% Semi-Annual
Coupon @ 12.20% s/a
Accrued
Interest
Net Adjustment
Exchange
(to Treasury)
Adjustment to Investor
P = 99.781416
A = 1.354167
P+A =101.135583
P = 100.844821
A = 1.373626
P+A =102.218447
(0.019459)
(1.063405)
(1.082864)
P = 99.737099
A = 2.569444
P+A = 102.306543
P = 100.792242
A = 2.609890
P+A = 103.402132
(0.040446)
(1.055143)
(1.095589)
P = 99.713420
A = 8.298611
P+A =108.012031
P = 100.756393
A = 3.107923
P+A = 103.864316
5.190688
(1.042973)
4.147715
P = 99.833505
A = none
P + A = 99.833505
P = 100.735287
A = none
P+A = 100.735287
-0-
(0.901782)
(0.901782)
P = 99.689238
A = 7.812500
P+A = 107.501738
P = 100.593959
A = 1.536885
P+A =102.130844
6.275615
(0.904721)
5.370894
P = 99.848420
A = 10.937500
P+A =110.785920
P = 100.280396
A = 4.678962
P+A = 104.959358
6.258538
(0.431976)
5.826562
P = 99.792783
A = 7.291667
P+A = 107.084450
P = 100.109938
A = 1.024590
P+A = 101.134528
6.267077
(0.317155)
5.949922
Dates of
Exchange
12/10/84
1/15/85
6/30/85
9/30/85
5/15/86
8/15/87
4/30/88
Figures merely illustrate exchange value computations and arc not intended to apply to the Notes offered in this circular.
TREASURY NEWS
epartment of the Treasury • Washington, D.C. • Telephone 566-2041
October 15, 1984
FOR IMMEDIATE RELEASE
RESULTS OF TREASURY'S WEEKLY BILL AUCTIONS
Tenders for $ 6,613 million of 13-week bills and for $6,612 million
of 26-week bills, both to be issued on October 18, 1984, were accepted today.
RANGE OF ACCEPTED
COMPETITIVE BIDS:
13-week bills
maturing January 17, 1985
Discount Investment
Rate
Rate 1/
Price
26-week bills
maturing April 18, 1985
Discount Investment
Price
Rate
Rate 1/
Low
High
Average
9.96% 10.36% 97.482
9.99%
10.39%
97.475
9.98%
10.38%
97.477
10.06%
10.08%
10.08%
10.75%
10.77%
10.77%
94.914
94.904
94.904
Tenders at the high discount rate for the 13-week bills were allotted 30%
Tenders at the high discount rate for the 26-week bills were allotted 87%,
Location
Boston
New York
Philadelphia
Cleveland
Richmond
Atlanta
Chicago
St. Louis
Minneapolis
Kansas City
Dallas
San Francisco
Treasury
TOTALS
Type
Competitive
Noncompetitive
Subtotal, Public
Federal Reserve
Foreign Official
Institutions
TOTALS
TENDERS RECEIVED AND ACCEPTED
(In Thousands)
Received
Accepted
:
Received
292,615
15,064,045
19,670
51,245
58,460
35,035
1,276,540
58,330
13,880
46,435
30,735
1,721,970
428,850
$
41,050
4,849,595
19,670
31,245
55,265
35,035
359,950
33,330
13,685
45,370
30,085
669,130
428,850
$6,612,920
: $19,097,810
$6,612,260
$19,208,435
1,144,305
$20,352,740
$4,259,885
1,144,305
$5,404,190
: $16,335,700
:
1,069,110
: $17,404,810
$3,950,150
1,069,110
$5,019,260
1,149,230
1,049,230
:
1,100,000
1,000,000
159,500
159,500
:
593,000
593,000
$21,661,470
$6,612,920
: $19,097,810
$6,612,260
$
294,085
17,848,180
32,555
86,965
69,690
53,485
1,226,820
72,600
8,165
49,070
62,355
1,531,395
326,105
$ 182,235
5,148,780
32,555
49,965
56,890
51,785
296,620
51,800
8,165
49,070
33,855
325,095
326,105
$21,661,470
1/ Equivalent coupon-issue yield.
R-2884
:
:
:
:
:
$
Accepted
TREASURY NEWS
epartment of the Treasury • Washington, D.C. • Telephone 566-2041
FOR RELEASE AT 4:00 P.M.
October 16, 1984
TREASURY 'S WEEKLY BILL OFFERING
The Department of the Treasury, by this public notice,
invites tenders for two series of Treasury bills totaling approximately $13,200 million, to be issued October 25, 1984.
This
offering will provide about $1,525 million of new cash for the
Treasury, as the maturing bills are outstanding in the amount of
$11,673 million, including $1,264 million currently held by Federal Reserve Banks as agents for foreign and international monetary
authorities and $1,713 million currently held by Federal Reserve
Banks for their own account. The two series offered are as follows:
91-day bills (to maturity date) for approximately $ 6,600
million, representing an additional amount of bills dated
January 26, 1984,
and to mature January 24, 1985
(CUSIP
No. 912794 GG 3 ) , currently outstanding in the amount of $15,134
million, the additional and original bills to be freely
interchangeable.
182-day bills for approximately $6,600 million, to be dated
October 25, 1984,
and to mature April 25, 1985
(CUSIP
No. 912794 HA 5 ) .
Both series of bills will be issued for cash and in exchange
for Treasury bills maturing October 25, 1984.
Tenders from Federal Reserve Banks for themselves and as agents for foreign and
international monetary authorities will be accepted at the weighted
average bank discount rates of accepted competitive tenders. Additional amounts of the bills may be issued to Federal Reserve Banks,
as agents for foreign and international monetary authorities, to
the extent that the aggregate amount of tenders for such accounts
exceeds the aggregate amount of maturing bills held by them.
The bills will be issued on a discount basis under competitive
and noncompetitive bidding, and at maturity their par amount will
be payable without interest. Both series of bills will be issued
entirely in book-entry form in a minimum amount of $10,000 and in
any higher $5,000 multiple, on the records either of the Federal
Reserve Banks and Branches, or of the Department of the Treasury.
R-2885
- 2 Tenders will be received at Federal Reserve Banks and
Branches and at the Bureau of the Public Debt, Washington, D. C.
20239, prior to 1:00 p.m., Eastern Daylight Saving time, Monday,
October 22, 1984.
Form PD 4632-2 (for 26-week series) or Form
PD 4632-3 (for 13-week series) should be used to submit tenders
for bills to be maintained on the book-entry records of the
Department of the Treasury.
Each tender must state the par amount of bills bid for,
which must be a minimum of $10,000. Tenders over $10,000 must
be in multiples of $5,000. Competitive tenders must also show
the yield desired, expressed on a bank discount rate basis with
two decimals, e.g., 7.15%. Fractions may not be used. A single
bidder, as defined in Treasury's single bidder guidelines, shall
not submit noncompetitive tenders totaling more than $1,000,000.
Banking institutions and dealers who make primary markets in
Government securities and report daily to the Federal Reserve Bank
of New York their positions in and borrowings on such securities
may submit tenders for account of customers, if the names of the
customers and the amount for each customer are furnished. Others
are only permitted to submit tenders for their own account. Each
tender must state the amount of any net long position in the bills
being offered if such position is in excess of $200 million. This
information should reflect positions held as of 12:30 p.m. Eastern
time on the day of the auction. Such positions would include bills
acquired through "when issued" trading, and futures and forward
transactions as well as holdings of outstanding bills with the same
maturity date as the new offering, e.g., bills with three months to
maturity previously offered as six-month bills. Dealers, who make
primary markets in Government securities and report daily to the
Federal Reserve Bank of New York their positions in and borrowings
on such securities, when submitting tenders for customers, must
submit a separate tender for each customer whose net long position
in the bill being offered exceeds $200 million.
A noncompetitive bidder may not have entered into an agreement,
nor make an agreement to purchase or sell or otherwise dispose of
any noncompetitive awards of this issue being auctioned prior to
the designated closing time for receipt of tenders.
Payment for the full par amount of the bills applied for
must accompany all tenders submitted for bills to be maintained
on the book-entry records of the Department of the Treasury.
A cash adjustment will be made on all accepted tenders for the
difference between the par payment submitted and the actual
issue price as determined in the auction.
No deposit need accompany tenders from incorporated banks
and trust companies and from responsible and recognized dealers
in investment securities for bills to be maintained on the bookentry records of Federal Reserve Banks and Branches. A deposit
- 3 of 2 percent of the par amount of the bills applied for must
accompany tenders for such bills from others, unless an express
guaranty of payment by an incorporated bank or trust company
accompanies the tenders.
Public announcement will be made by the Department of the
Treasury of the amount and yield range of accepted bids. Competitive bidders will be advised of the acceptance or rejection of
their tenders. The Secretary of the Treasury expressly reserves
the right to accept or reject any or all tenders, in whole or in
part, and the Secretary's action shall be final. Subject to these
reservations, noncompetitive tenders for each issue for $1,000,000
or less without stated yield from any one bidder will be accepted
in full at the weighted average bank discount rate (in two decimals)
of accepted competitive bids for the respective issues. The calculation of purchase prices for accepted bids will be carried to three
decimal places on the basis of price per hundred, e.g., 99.923, and
the determinations of the Secretary of the Treasury shall be final.
Settlement for accepted tenders for bills to be maintained
on the book-entry records of Federal Reserve Banks and Branches
must be made or completed at the Federal Reserve Bank or Branch
on October 25, 1984,
in cash or other immediately-available funds
or in Treasury bills maturing October 25, 1984.
Cash adjustments
will be made for differences between the par value of the maturing
bills accepted in exchange and the issue price of the new bills.
In addition, Treasury Tax and Loan Note Option Depositaries may
make payment for allotments of bills for their own accounts and
for account of customers by credit to their Treasury Tax and Loan
Note Accounts on the settlement date.
In general, if a bill is purchased at issue after July 18,
1984, and held to maturity, the amount of discount is reportable
as ordinary income in the Federal income tax return of the owner
at the time of redemption. Accrual-basis taxpayers, banks, and
other persons designated in section 1281 of the Internal Revenue
Code must include in income the portion of the discount for the
period during the taxable year such holder held the bill. If the
bill is sold or otherwise disposed of before maturity, the portion
of the gain equal to the accrued discount will be treated as ordinary income. Any excess may be treated as capital gain.
Department of the Treasury Circulars, Public Debt Series Nos. 26-76 and 27-76, Treasury's single bidder guidelines, and this
notice prescribe the terms of these Treasury bills and govern the
conditions of their issue. Copies of the circulars, guidelines,
and tender forms may be obtained from any Federal Reserve Bank or
Branch, or from the Bureau of the Public Debt.
TREASURY NEWS
epartment of the Treasury • Washington, D.C. • Telephone 566-2041
FOR IMMEDIATE RELEASE
October 16, 1984
RESULTS OF AUCTION OF 7-YEAR NOTES
The Department of the Treasury has accepted $ 5,513 million
of $11,537 million of tenders received from the public for the
7-year notes, Series G-1991, auctioned today. The notes will be
issued October 23, 1984, and mature October 15, 1991.
The interest rate on the notes will be 12-1/4%. The range
of accepted competitive bids, and the corresponding prices at the
12-1/4% interest rate are as follows:
Yield Price
Low
12.30% 1/
99.770
High
12.35%
99.541
Average
12.34%
99.587
Tenders at the high yield were allotted 94%.
TENDERS RECEIVED AND ACCEPTED (In Thousands)
Location
Received
Accepted
Boston
194,754
29,754
$
$
-New York
9,245,317
4,,711,497
Philadelphia
8,300
7,800
Cleveland
56,094
31,094
Richmond
35,967
16,437
23,434
21,434
Atlanta
801,020
204,650
Chicago
86,788
84,668
St. Louis
19,669
19,549
Minneapolis
38,863
38,333
Kansas City
8,264
8,264
Dallas
1,016,036
336,826
San Francisco
2,513
2,513
Treasury
$11,537,019
$5,,512,819
Totals
The $5,513 million of accepted tenders includes $516
million of noncompetitive tenders and $ 4,997 million of competitive tenders from the public.
In addition to the $5,513 million of tenders accepted in
the auction process, $230 million of tenders was awarded at the
average price to Federal Reserve Banks as agents for foreign and
international monetary authorities.
1/ Excepting 2 tenders totaling $25,000.
R-2880
TREASURY NEWS
epartment of the Treasury • Washington, D.C. • Telephone
FOR IMMEDIATE RELEASE October 17, 1984
RESULTS OF AUCTION OF 2-YEAR NOTES
The Department of the Treasury has accepted $8,800 million of
$ 19,425 million of tenders received from the public for the 2-year
notes, Series Z-1986, auctioned today. The notes will be issued
October 31, 1984, and mature October 31, 1986.
The interest rate on the notes will be 11-5/8%. The range of
accepted competitive bids, and the corresponding prices at the 11-5/8%
interest rate are as follows:
Yield Price
Low
11.69%
99.887
High
11.75%
99.783
Average
11.73%
99.818
Tenders at the high yield were allotted 73%.
TENDERS RECEIVED AND ACCEPTED (In Thousands)
Location
Received
Accepted
Boston
368,280
$
95,260
$
New York
15,,813,965
6,802,270
Philadelphia
29,755
29,755
Cleveland
93,085
89,845
Richmond
120,530
103,290
Atlanta
84,280
78,275
1,,285,055
561,520
Chicago
St. Louis
162,550
140,660
37,615
32,615
Minneapolis
100,420
100,285
Kansas City
17,735
17,735
Dallas
1 ,308,160
745,040
San Francisco
3,625
3,625
Treasury
Totals
$19 ,425,055
$8,800,175
The $ 8,800 million of accepted tenders includes $929
million
of noncompetitive tenders and $ 7,871 million of competitive tenders
from the public.
In addition to the $ 8,800 million of tenders accepted in the
auction process, $375 million of tenders was awarded at the average
price to Federal Reserve Banks as agents for foreign and international
monetary authorities. An additional $529 million of tenders was
also accepted at the average price from Government accounts and Federal
Reserve Banks for their own account in exchange for maturing securities.
R-2887
TREASURY NEWS
Department of the Treasury • Washington, D.C. • Telephone 566-2041
rnMTarT- unarlie Powers
FOR IMMEDIATE RELEASE
October 18, 1984
CONTACT.
(2Q2)
566
_
2Q41
Treasury Department and Internal Revenue Service
Provide Background Information on
Netherlands Antilles Finance Subsidiary Rulings
The Treasury Department and the Internal Revenue Service
provided today background information concerning two recent
Internal Revenue Service rulings (Revenue Rulings 84-152 and
84-153) as they apply to the tax consequences of Netherlands
Antilles finance subsidiaries of United States corporations.
The Internal Revenue Service stated that the rulings describe
the tax law generally applicable to Netherlands Antilles finance
subsidiaries, taking into account the June 22, 1984 grandfather
date adopted by the Congress. In the Tax Reform Act of 1984,
enacted on July 18, 1984, Congress repealed the 30 percent
withholding tax on portfolio interest paid to foreign investors.
As part of the repeal legislation Congress provided protection
for obligations issued through Netherlands Antilles finance
subsidiaries prior to June 22, 1984. The Internal Revenue
Service rulings simply apply the grandfather date contained in
the repeal legislation.
The Internal Revenue Service stated that issuers of, or
investors in, obligations in process prior to June 22, 1984, who
believe that they have a reasonable basis for relief from the
operation of the rulings for obligations of Netherlands Antilles
finance subsidiaries issued during the period between June 22,
1984 and July 18, 1984, should take advantage of existing
procedures to request such relief promptly from the Internal
Revenue Service. Such requests for relief will receive expedited
consideration.
The rulings have no effect on the eligibility for repeal of
the withholding tax for issues after July 18, 1984. The Treasury
Department noted that the tax consequences of the recently
announced Treasury issue of targeted securities, as described in
the Offering Circular previously released, are unaffected by the
Internal Revenue Service rulings.
oOoR-2858
rREASURY NEWS
ipartment of the Treasury • Washington, D.C. • Telephone 566-2041
FOR RELEASE AT 12:0.0 NOON
October 19, 1984
TREASURY'S 52-WEEK BILL OFFERING
The Department of the Treasury, by this public notice, invites
tenders for approximately $8,250 million of 364-day Treasury bills
to be dated November 1, 1984, and to mature October 31, 1985 (CUSIP
No. 912794 HN 7 ) . This issue will provide about $475 million new
cash for the Treasury, as the maturing 52-week bill was originally
issued in the amount of $7,774 million.
The bills will be issued for cash and in exchange for
Treasury bills maturing November 1, 1984. In addition to the
maturing 52-week bills, there are $9,659 million of maturing
13-week and 26-week bills and $2,995 million of 150-day cash
management bills. The disposition of these latter amounts will
be announced next week. Federal Reserve Banks as agents for
foreign and international monetary authorities currently hold
$2,209 million, and Federal Reserve Banks for their own account
hold $2,628 million of the maturing bills. These amounts represent the combined holdings of such accounts for the three issues of
maturing bills. Tenders from Federal Reserve Banks for themselves
and as agents for foreign and international monetary authorities
will be accepted at the weighted average bank discount rate of
accepted competitive tenders. Additional amounts of the bills
may be issued to Federal Reserve Banks, as agents for foreign and
international monetary authorities, to the extent that the aggregate
amount of tenders for such accounts exceeds the aggregate amount of
maturing bills held by them. For purposes of determining such additional amounts, foreign and international monetary authorities are
considered to hold $360 million of the original 52-week issue.
The bills will be issued on a discount basis under competitive
and noncompetitive bidding, and at maturity their par amount will
be payable without interest. This series of bills will be issued
entirely in book-entry form in a minimum amount of $10,000 and in
any higher $5,000 multiple, on the records either of the Federal
Reserve Banks and Branches, or of the Department of the Treasury.
Tenders will be received at Federal Reserve Banks and
Branches and at the Bureau of the Public Debt, Washington, D. C.
20239, prior to 1:00 p.m., Eastern Daylight Saving time, Thursday,
October 25, 1984. Form PD 4632-1 should be used to submit tenders
for bills to be maintained on the book-entry records of the Department of the Treasury.
R-2889
- 2 Each tender must state the par amount of bills bid for,
which must be a minimum of $10,000. Tenders over $10,000 must
be in multiples of $5,000. Competitive tenders must also show
the yield desired, expressed on a bank discount rate basis with
two decimals, e.g., 7.15%. Fractions may not be used. A single
bidder, as defined in Treasury's single bidder guidelines, shall
not submit noncompetitive tenders totaling more than $1,000,000.
Banking institutions and dealers who make primary markets in
Government securities and report daily to the Federal Reserve Bank
of New York their positions in and borrowings on such securities
may submit tenders for account of customers, if the names of the
customers and the amount for each customer are furnished. Others
are only permitted to submit tenders for their own account. Each
tender must state the amount of any net long position in the bills
being offered if such position is in excess of $200 million. This
information should reflect positions held as of 12:30 p.m. Eastern
time on the day of the auction. Such positions would include bills
acquired through "when issued" trading, and futures and forward
transactions. Dealers, who make primary markets in Government
securities and report daily to the Federal Reserve Bank of New
York their positions in and borrowings on such securities, when
submitting tenders for customers, must submit a separate tender
for each customer whose net long position in the bill being offered
exceeds $200 million.
A noncompetitive bidder may not have entered into an agreement, nor make an agreement to purchase or sell or otherwise dispose of any noncompetitive awards of this issue being auctioned
prior to the designated closing time for receipt of tenders.
Payment for the full par amount of the bills applied for
must accompany all tenders submitted for bills to be maintained on
the book-entry records of the Department of the Treasury. A cash
adjustment will be made on all accepted tenders for the difference
between the par payment submitted and the actual issue price as
determined in the auction.
No deposit need accompany tenders from incorporated banks
and trust companies and from responsible and,recognized dealers
in investment securities for bills to be maintained on the bookentry records of Federal Reserve Banks and Branches. A deposit of
2 percent of the par amount of the bills applied for must accompany
tenders for such bills from others, unless an express guaranty of
payment by an incorporated bank or trust company accompanies the
tenders.
Public announcement will be made by the Department of the
Treasury of the amount and yield range of accepted bids. Competitive bidders will be advised of the acceptance or rejection of
their tenders. The Secretary of the Treasury expressly reserves
- 3 the right to accept or reject any or all tenders, in whole or in
part, and the Secretary's action shall be final. Subject to these
reservations, noncompetitive tenders for $1,000,000 or less without
stated yield from any one bidder will be accepted in full at the
weighted average bank discount rate (in two decimals) of accepted
competitive bids. The calculation of purchase prices for accepted
bids will be carried to three decimal places on the basis of price
per hundred, e.g., 99.923, and the determinations of the Secretary
of the Treasury shall be final.
Settlement for accepted tenders for bills to be maintained
on the book-entry records of Federal Reserve Banks and Branches
must be made or completed at the Federal Reserve Bank or Branch
on November 1, 1984,
in cash or other immediately-available funds
or in Treasury bills maturing November 1, 1984.
Cash adjustments
will be made for differences between the par value of the maturing
bills accepted in exchange and the issue price of the new bills.
In addition, Treasury Tax and Loan Note Option Depositaries may
make payment for allotments of bills for their own accounts and
for account of customers by credit to their Treasury Tax and Loan
Note Accounts on the settlement date.
In general, if a bill is purchased at issue after July 18,
1984, and held to maturity, the amount of discount is reportable
as ordinary income in the Federal income tax return of the owner
at the time of redemption. Accrual-basis taxpayers, banks, and
other persons designated in section 1281 of the Internal Revenue
Code must*include in income the portion of the discount for the
period during the taxable year such holder held the bill. If the
bill is sold or otherwise disposed of before maturity, the portion
of the gain equal to the accrued discount will be treated as ordinary income. Any excess may be treated as capital gain.
Department of the Treasury Circulars, Public Debt Series Nos. 26-76 and 27-76, Treasury's single bidder guidelines, and this
notice prescribe the terms of these Treasury bills and govern the
conditions of their issue. Copies of the circulars, guidelines,
and tender forms may be obtained from any Federal Reserve Bank or
Branch, or from the Bureau of the Public Debt.
TREASURY NEWS
epartment of the Treasury • Washington, D.C. • Telf
POR IMMEDIATE RELEASE
October 22, 1984
lone 566-2041
CONTACT: Charles Powers
(202) 566-2041
TREASURY RELEASES REVISED COST RECOVERY RATES FOR REAL PROPERTY
Washington, D.C. — The Treasury Department today announced
the revised cost recovery rates for real property under the
Accelerated Cost Recovery System ("ACRS"). ACRS was enacted as
part of the Economic Recovery Tax Act of 1981 ("ERTA") (P.L.
97-34) and was recently revised by The Tax Reform Act of 1984
("TRA") (P.L. 98-369). The revisions generally apply to property
placed in service by taxpayers after March 15, 1984.
The revisions enacted as part of the TRA require the
Secretary of the Treasury to prescribe tables setting forth
revised recov.ery rates for real property. Further, in
prescribing these tables, for real property other than low-income
housing, Treasury generally is directed to take into account a
mid-month convention. That is, real property placed in service
by the taxpayer at any time during a particular month is to be
treated as placed in service in the middle of such month, thereby
permitting one-half month's cost recovery for the month the
property is placed in service. A similar convention is to be
applied with respect to dispositions at any time during a
particular month prior to the end of the recovery period, thereby
also permitting one-half month's' cost recovery for the month of
disposition. Such mid-month convention, however, is generally
applicable only to property placed in service by taxpayers after
June 22, 1984. For recovery property placed in service prior to
that time, a full-month convention is used. Under the full-month
convention, real property placed in service by the taxpayer at
any time during a particular month is treated as placed in
service on the first day of such month, thereby permitting a full
month's cost recovery for the month the property is placed in
service. In the case of a disposition at any time during a
particular month prior to the end of the recovery period, no cost
recovery is permitted for such month of dispositon.
The revised cost recovery rates for real property are
presented in the attached tables. Table 1 provides the rates to
be used generally with respect to real property (other than
low-income housing) placed in service after June 22, 1984, and is
based on the use of the mid-month convention and the 18-year
R-2890
175-percent declining balance method switching to the straight
- 2 line method at a time to maximize the amounts deductible.
Table 2 provides the rates to be used generally with respect
to real property (other than low-income housing) placed in
service after March 15, 1984, but before June 23, 1984, and is
based on the use of a full-month convention and the 18-year
175-percent declining balance method switching to the
straight line method at a time to maximize the amounts
deductible.
Table 3 provides the rates to be used generally with respect
to real property (other than low-income housing) placed in
service after June 22, 1984, for which an optional 18-year
straight line method is elected and is based on the use of the
mid-month convention.
Table 4 provides the rates to be used generally with respect
to real property placed in service after March 15, 1984, but
before June 23, 1984, for which an optional 18-year straight line
method is elected and is based on the use of a full-month
convention. Table 4 also generally applies to all low-income
housing placed in service after March 15, 1984, for which an
optional 18-year straight line method is elected.
Table 5 provides the rates to be used generally with respect
to real property (other than low-income housing) placed in
service after June 22, 1984, for which an optional 35-year
straight line method is elected and is based on the use of the
mid-month convention. Proposed Treasury Reg.
§ 1.168-2(c)(4)(ii)(B) provides the rates applicable generally to
real property (other than low-income housing) placed in service
before June 23, 1984, and low-income housing placed in service
after December 31, 1980, for which an optional 35-year straight
line method is elected.
Table 6 provides the rates to be used generally with respect
to real property (other than low-income housing) placed in
service after June 22, 1984, for which an optional 45-year
straight line method is elected and is based on the use of the
mid-month convention. Proposed Treasury Reg.
§ 1.168-2(c)(4)(ii)(C) provides the rates applicable generally to
real property (other than low-income housing) placed in service
before June 23, 1984, and low-income housing placed in service
after December 31, 1980, for which an optional 45-year straight
line method is elected.
Table 7 provides the rates to be used generally with respect
to real property used predominantly outside the United States
that is placed in service after June 22, 1984, and is based on
the use of the mid-month convention and the 35-year 150-percent
declining balance method switching to the straight line method at
a time to maximize the amounts deductible. Proposed Treasury
Reg. § 1.168-2(g)(2)(ii) provides the rates applicable generally
to real property used predominantly outside the United States
- 3 that is placed in service after December 31, 1980, but before
June 23, 1984.
In using these tables, there are separate rate schedules
depending on the month in the taxable year that the property is
placed in service by the taxpayer. For example, if a calendar
year domestic taxpayer places 18-year real property in service in
August, 1984, the cost recovery schedule to be used generally
will be table 1, column 8 (e.g., 4 percent for the first recovery
year, 9 percent for the second recovery year, etc.).
Taxpayers with fiscal years beginning in 1983, who have
placed in service 18-year real property, should use the 1983 Form
4562, Depreciation and Amortization. The recovery deduction
should be entered on Line 2(f). In Column D, "18 YRS" should be
entered for the recovery period, unless an alternate period is
elected. The appropriate percentage (as determined from the
attached tables) should be entered in Column F. The 1984
instructions to Form 4562 should be used with these tables.
As indicated above, the tables have already incorporated the
use of either the mid-month or full-month convention for the year
the property is placed in service. In the case of a disposition
prior to the end of the recovery period, taxpayers must
appropriately prorate the table amount to take into account the
mid-month or full-month convention, whichever is applicable.
In the case of a short taxable year, appropriate adjustments must
also be made to the table amounts. See e.g., Proposed Treasury
Reg. § 1.168-2(f), applicable with respect to the full-month
convention.
Examples. The following examples illustrate the application
of the mid-month convention. For the rules relating to the
application of the full-month convention, see Proposed Treasury
Reg. $ 1.168-2(a)(3) and (f).
Example (1). On March 31, 1985, domestic corporation X, a
calendar year taxpayer that has been engaged in the rental real
estate business for 10 years, acquires and places in service
18-year real property that has an unadjusted basis of $100,000.
X does not elect to use the optional recovery percentages under
Internal Revenue Code section 168(b)(3). The recovery allowance
for the 18-year real property for X's 1985 taxable year is
$8,000.00 (i.e., .08 x $100,000).
Example (2). The facts are the same as in example (1)/
with the added fact that on August 1, 1986, X sells the property
for $125,000. In such case, the table amount otherwise
determined for the second year must be prorated by a fraction,
•the numerator of which equals the number of months in the taxable
year that the property is in service in the taxpayer's trade or
business or used for the production of income and the denominator
of which is 12. For purposes of this rule, the property is
treated as disposed of in the middle of the month, regardless of
- 4 the actual date of disposition during that month. The recovery
allowance for the 18-year real property for X's 1986 taxable year
is $5,625.00 (i.e., .09 x $100,000 x 7.5/12.0).
Example (3). The facts are the same as in example (1),
with the added fact that on November 25, 1985, X sells the
property for $110,000. In this case, where the property is
disposed of in the first recovery year, the table amount
otherwise determined for the first recovery year must be prorated
by a fraction, the numerator of which equals the number of months
in the taxable year that the property is in service in the
taxpayer's trade or business or used for the production of income
and the denominator of which is the number of months that the
property would have been in service or used for the production of
income if the property were not disposed of prior to the end of
the first recovery year. For purposes of this rule, the property
is treated as placed in service in the middle of a month,
regardless of the actual date the property is placed in service
during that month. Similarly, the property is treated as
disposed of in the middle of a month, regardless of the actual
date of disposition during that month. The recovery allowance
for the 18-year real property for X's 1985 taxable year is
$6',736.84 (i.e., .08 x $100,000 x 8.0/9.5).
Example (4). The facts are the same as in example (1),
except that X is formed.on February 10, 1985, and, therefore, has
a short taxable year for 1985 within the meaning of Internal
Revenue Code section 168(f)(5). Since the property is 18-year
real property, however, the recovery allowance for 1985, the year
the property is placed in service, is computed as though it were
a full taxable year. Because the recovery property would have
been deemed placed in service in the middle of the third month of
X's normal taxable year, the recovery property is deemed placed
in service in the middle of the third month of X's 1985 short
taxable year. The recovery allowance for the 18-year real
property for X's 1985 taxable year is $8,000.00 (i.e., .08 x
$100,000).
Example (5). (i) The facts are the same as in example (1),
with the added fact that on July 20, 1986, X joins an affiliated
group filing consolidated returns with a September 30 fiscal
year.
(ii) X has a short taxable year within the meaning of
Internal Revenue Code section 168(f)(5) for the taxable year
beginning January 1, 1986, and ending July 20, 1986. Since that
short taxable year is neither the year the property is placed in
service nor disposed of, the table amount otherwise determined
for the second recovery year must be prorated by a fraction, the
numerator of which equals the number of months in the short
taxable year and the denominator of which is 12. Since there are
successive short taxable years, the proration for the short
taxable year ending July 20, 1986, does not include the month of
July under the rules of Proposed Treasury Reg.
- 5 $ 1.168-2(f)(5). The recovery allowance for the 18-year real
property for X's taxable year ending July 20, 1986, is $4,500.00
(i.e., .09 x $100,000 x 6/12).
(iii) X also has a short taxable year for the taxable year
beginning July 21, 1986, and ending September 30, 1986. Since
that short taxable year is neither the year the property is
placed in service nor disposed of, the table amount otherwise
determined for the third recovery year must be prorated by a
fraction, the numerator of which equals the number of months in
the short taxable year and the denominator of which is 12. Since
there are successive short taxable years, the proration for the
short taxable year ending September 30, 1986, does include the
month of July under the rules of Proposed Treasury Reg.
§ 1.168-2(f)(5). The recovery allowance for the 18-year real
property for X's taxable year, ending September 30, 1986, is
$2,000.00 (i.e., .08 x $100,000 x 3/12).
(iv) In the taxable years following the last year in the
recovery period, a recovery allowance will be permitted generally
to the extent of any unrecovered allowance under the rules of
Proposed Treasury Reg. § 1.168-2(f)(3).
Example (6). (i) The facts are the same as in example (5),
with the added fact that on August 1, 1986, X sells the property
for $125,000.
(ii) The recovery allowance for the 18-year real property for
X's short taxable year ending July 20, 1986, is the same as in
example (5).
(iii) X's taxable year beginning July 21, 1986, and ending
September 30, 1986, is now a short taxable year in which the
property is disposed of. Accordingly, the table amount for the
third recovery year need not be prorated for the short taxable
year, but, nevertheless, must be prorated because of the special
rule for the year of disposition in Internal Revenue Code section
168(b)(2)(B). The table amount otherwise determined for the
third recovery year must be prorated by a fraction, the numerator
of which equals the number of months in the taxable year that the
property is in service in the taxpayer's trade or business or
used for the production of income and the denominator of which is
12. For purposes of this rule, the property is treated as
disposed of in the middle of a month, regardless of the actual
date of disposition during that month. Since the month of July
was not counted for X's taxable year ending July 20, 1986, such
month should be counted for X's short taxable year ending
September 30, 1986, under the principles of Proposed Treasury
Reg. $ 1.168-2(f)(5). The recovery allowance for the 18-year
real property for X's taxable year ending August 31, 1986, in
which the property is disposed of is $1,000.00 (i.e., .08 x
$100,000 x 1.5/12.0).
ACRS Cost Recovery Tables for 18-Year Real Property
1.
18-Year Real Property (18-Year 175% Declining Balance)
(Assuming Mid-Month Convention)
If the
Recovery
Year is:
And the Month in the First Recovery Year
the Property is Placed in Service is:
1
2
3
4
5
6
7
8
9
10
u
The applicable percentage is:
1
9
9
8
7
6
5
4
4
3
2
1
0
2
9
9
9
9
9
9
9
9
9
10
10
10
3
8
8
8
8
8
8
8
8
9
9
9
9
4
7
7
7
7
7
8
8
8
8
8
8
8
5
7
7
7
7
7
7
7
7
7
7
7
7
6
6
6
6
6
6
6
6
6
6
6
6
6
7
5
5
5
5
6
6
6
6
6
6
6
6
8
5
5
5
5
5
5
5
5
5
5
5
5
9
5
5
5
5
5
5
5
5
5
5
5
5
10
5
5
5
5
5
5
5
5
5
5
5
5
11
5
5
5
5
5
5
5
5
5
5
5
5
12
5
5
5
5
5
5
5
5
5
5
5
5
13
4
4
4
5
4
4
5
4
4
4
5
5
14
4
4
4
4
4
4
4
4
4
4
4
4
15
4
4
4
4
4
4
4
4
4
4
4
4
16
4
4
4
4
4
4
4
4
4
4
4
4
17
4
4
4
4
4
4
4
4
4
4
4
4
18
4
3
4
4
4
4
4
4
'4
4
4
4
1
1
1
2
2
2
3
3
3
3
3
19
- 7 2.
18-Year Real Property (18-Year 175% Declining Balance)
(Assuming No> Mid-M onthi Conventioni)
If the
Recovery
Year is:
And the Month in the First Recovery ' Year
the Property is Pla ced is Service is:
1
2
3
4
5
6
7
8
9
10-11
12
The applica ble percentage is:
1
10
9
8
7
6
6
5
4
3
2
1
2
9
9
9
9
9
9
9
9
9
10
10
3
8
8
8
8
8
8
8
8
9
9
9
4
7
7
7
7
7
7
8
8
8
8
8
5
6
7
7
7
7
7
7
7
7
7
7
6
6
6
6
6
6
6
6
6
6
6
6
7
5
5
5
5
6
6
6
6
6
6
6
8
5
5
5
5
5
5
5
5
5
5
5
9
5
5
5
5
5
5
5
5
5
5
5
10
5
5
5
5
5
5
5
5
5
5
5
11
5
5
5
5
5
5
5
5
5
5
5
12
5
5
5
5
5
5
5
5
5
5
5
13
4
4
4
5
5
4
4
5
4
4
4
14
4
4
4
4
4
4
4
4
4
4
4
15
4
4
4
4
4
4
4
4
4
4
4
16
4
4
4
4
4
4
4
4
4
4
4
17
4
4
4
4
4
4
4
4
4
4
4
18
4
4
4
4
4
4
4
4
4
4
4
1
1
1
2
2
2
3
3
4
»
19
- 8 3. 18-Year Real Property For Which An Optional
18-Year Straight Line Method is Elected (Assuming
Mid-Month Convention)
If the
Recovery
Year is:
And the Month in the First Recovery Year
the Property is Placed in Service is:
1-2 3-4 5-7 8-9 10-11 12
The applicable percentage is:
15 4 3 2
1
0.2
2 6 6 6 6
6
6.0
3 6 6 6 6
6
6.0
4 6 6 6 6
6
6.0
'5 6 6 6 6
6
6.0
6 6 6 6 6
6
6.0
7 6 6 6 6
6
6.0
8 6 6 6 6
6
6.0
9 6 6 6 6
6
6.0
10 6 6 6 6
6
6.0
11 5 5 V 5 5
5
5.8
12 5 5 5 5
5
5.0
13 5 5 5 5
5
5.0
14 5 5 5 5
5
5.0
15 5 5 5 5
5
5-0
16 5 5 5 5
5
5.0
17 5 5 5 5
5
5.0
18 5 5 5 5
5
5.0
19 1 2 3 4
5
5.0
- 9 -
4. 18-Year Real Property For Which an Optional
18-Year Straight Line Method is Elected (Assuming
No Mid-Month Convention)
If the
Recovery
Year is:
And the Month in the First Recovery Year
the Property is Pla.ced in Service is:
1
2-3
4-5
i
6-7
8-9
10-11
The applicable percentage is:
5
4
3
2
1
0
6
6
6
6
6
6
6
3
6
6
6
6
6
6
6
4
6
6
6
6
6
6
6
5
6
6
6
6
6
6
6
6
' 6
6
6
6
6
6
6
7
6
6
6
6
6
6
6
8
6
6
6
6
6
6
6
9
6
6
6
6
6
6
6
10
6
6
6
6
6
6
6
11
5
5
5
5
5
5
5
12
5
5
5
5
5
5
5
13
5
5
5
5
5
5
5
14
5
5
5
5
5
5
5
15
5
5
5
5
5
5
5
16
5
5
5
5
5
5
5
17
5
5
5
5
5
5
5
18
5
5
5
5
5
5
5
1
2
3
4
. 5
5
1
6
2
19
,
- 10 5. 18-Year Real Property For Which an Optional
35-Year Straight Line Method is Elected (Assuming
Mid-Month Convention)
And the Month in the First Recovery Year
the Property is Placed in Service is:
1-2
3-6
7-10
11
12
The applicable percenitage is:
'
3
2
1
0.4
0.1
3
3
3
3.0
3.0
3
3
3
3.0
3.0
3
3
3
3.0
3.0
3
3
3
3.0
3.0
3
3
3
3.0
3.0
3
3
3
3.0
3.0
3
3
3
3.0
3.0
3
3
3
3.0
3.0
3
3
3
3.0
3.0
3
3
3
3.0
3.0
3
3
3
3.0
3.0
3
3
3
3.0
3.0
3
3
3
3.0
3.0
3
3
3
3.0
3.0
3
3
3
3.0
3.0
3
3
3
3-0
3.0
3
3
3
3.0
3.0
3
3
3
3.0
3.0
- 11 -
20
3
3
21
3
3 3.0 3.0
22
3
3 3.0 3.0
23
3
3 3.0 3.0
24
3
3 3.0 3.0
25
3
3 3.0 3.0
26
3
3 3.0 3.0
27
3
3 3.0 3.0
28
3
3 3.0 3.0
29
3
3 3.0 3.0
30
3
3 3.0 3.0
31
2
2 2.6 2.9
32
2
2 2.0 2.0
33
2
2 2.0 2.0
34
2
2 2.0 2.0
35
2
2 2.0 2.0
36
3.0
2 2.0 2.0
3.0
- 12 6. 18-Year Real Property For Which an Optional
45-Year Straight Line Method is Elected (Assuming
Mid-Month ConventionT
If the
Recovery
Year is:
And the Month in the First Recovery Year
the Property is Placed in Service is:
1
2
3
4
5
6
7
8
9
10
11
12
The applicable percentage is:
1
2.1
1.9
1.8
1.6
1.4
1.2
1.0
0.8
0.6
0.5
0.3
0.1
2
2.3
2.3
2.3
2.3
2.3
2.3
2.3
2.3
2.3
2.3
2.3
2.3
3
2.3
2.3
2.3
2.3
2.3
2.3
2.3
2.3
2.3
2.3
2.3
2.3
4
2.3
2.3
2.3
2.3
2.3
2.3
2.3
2.3
2.3
2.3
2.3
2.3
5
2.3
2.3
2.3
2.3
2.3
2.3
2.3
2.3
2.3
2.3
2.3
2.3
6
2.3
2.3
2.3
2.3
2.3
2.3
2.3
2.3
2.3
2.3
2.3
2.3
7
2.3
2.3
2.3
2.3
2.3
2.3
2.3
2.3
2.3
2.3
2.3
2.3
8
2.3
2.3
2.3
2.3
2.3
2.3
2.3
2.3
2.3
2.3
2.3
2.3
9
2.3
2.3
2.3
2.3
2.3
2.3
2.3
2.3
2.3
2.3
2.3
2.3
10
2.3
2.3
2.3
2.3
2.3
2.3
2.3
2.3
2.3
2.3
2.3
2.3
11
2.3
2.3
2.3
2.3
2.3
2.3
2.3
2.3
2.3
2.3
2.3
2.3
12
2.2
2.2
2.2
2.2
2.2
2.2
2.2
2.2
2.2
2.2
2.2
2.2
13
2.2
2.2
2.2
2.2
2.2
2.2
2.2
2.2
2.2
2.2
2.2
2.2
14
2.2
2.2
2.2
2.2
2.2
2.2
2.2
2.2
2.2
2.2
2.2
2.2
15
2.2
2.2
2.2
2.2
2.2
2.2
2.2
2.2
2.2
2.2
2.2
2.2
16
2.2
2.2
2.2
2.2
2.2
2.2
2.2
2.2
2.2
2.2
2.2
2.2
17
2.2
2.2
2.2
2.2
2.2
2.2
2.2
2.2
2.2
2.2
2.2
2.2
18
2.2
2.2
2.2
2.2
2.2
2.2
2.2
2.2
2.2
2.2
2.2
2.2
19
2.2
2.2
2.2
2.2
2.2
2.2
2.2
2.2
2.2
2.2
2.2
2.2
- 13 20
2.2
2.2
2.2
2.2
2.2
2.2
2.2
2.2
2.2
2.2
2.2
2.2
21
2.2
2.2
2.2
2.2
2.2
2.2
2.2
2.2
2.2
2.2
2.2
2.2
22
2.2
2.2
2.2
2.2
2.2
2.2
2.2
2.2
2.2
2.2
2.5>
2.2
23
2.2
2.2
2.2
2.2
2.2
2.2
2.2
2.2
2.2
2.2
2.2
2.2
24
2.2
2.2
2.2
2.2
2.2
2.2
2.2
2.2
2.2
2.2
2.2
2.2
25
2.2
2.2
2.2
2.2
2.2
2.2
2.2
2.2
2.2
2.2
2.2
2.2
26
2.2
2.2
2.2
2.2
2.2
2.2
2.2
2.2
2.2
2.2
2.2
2.2
27
2.2
2.2
2.2
2.2
2.2
2.2
2.2
2.2
2.2
2.2
2.2
2.2
28
2.2
2.2
2.2
2.2
2.2
2.2
2.2
2.2
2.2
2.2
2.2
2.2
29
2.2
2.2
2.2
2.2
2.2
2.2
2.2
2.2
2.2
2.2
2.2
2.2
30
2.2
2.2
2.2
2.2
2.2
2.2
2.2
2.2
2.2
2.2
2.2
2.2
31
2.2
2.2
2.2
2.2
2.2
2.2
2.2
2.2
2.2
2.2
2.2
2.2
32
2.2
2.2
2.2
2.2
2.2
2.2
2.2
2.2
2.2
2.2
2.2
2.2
33
2.2
2.2
2.2
2.2
2.2
2.2
2.2
2.2
2.2
2.2
2.2
2.2
34
2.2
2.2
2.2
2.2
2.2
2.2
2.2
2.2
2.2
2.2
2.2
2.2
35
2.2
2.2
2.2
2.2
2.2
2.2
2.2
2.2
2.2
2.2 • 2.2
2.2
36
2.2
2.2
2.2
2.2
2.2
2.2
2.2
2.2
2.2
2.2
2.2
2.2
37
2.2
2.2
2.2
2.2
2.2
2.2
2.2
2.2
2.2
2.2
2.2
2.2
38
2.2
2.2
2.2
2.2
2.2
2.2
2.2
2.2
2.2
2.2
2.2
2.2
39
2.2
2.2
2.2
2.2
2.2
2.2
2.2
2.2
2.2
2.2
2.2
2.2
40
2.2
2.2
2.2
2.2
2.2
2.2
2.2
2.2
2.2
2.2
2.2
2.2
41
2.2
2.2
2.2
2.2
2.2
2.2
2.2
2.2
2.2
2.2
2.2
2.2
42
2.2
2.2
2.2
2.2
2.2
2.2
2.2
2.2
2.2
2.2
2.2
2.2
43
2.2
2.2
2.2
2.2
2.2
2.2
2.2
2.2
2.2
2.2
2.2
2.2
44
2.2
2.2
2.2
2.2
2.2
2.2
2.2
2.2
2.2
2.2
2.2
2.2
45
2.2
2.2
2.2
2.2
2.2
2.2
2.2
2.2
2.2
2.2
2.2
2.2
46
0.1
0.3
0.4
0.6
0.8
1.0
1.2
1.4
1.6
1.7
1.9
2.1
- 14 18-Year Real Property Used Predominantly Outside
the U.S. (35-Year 150% Declining Balance) (Assuming
Mid-Month Convention)
m
And the Month in the First Recovery Year
the Property is Placed in Service is:
12 3 4-5 6-8 9-11 12
The applicable percentage is:
4
4
3
3
2
1
0.2
4
4
4
4
4
4
4.0
4
4
4
4
4
4
4.0
4
4
4
4
4
4
4.0
4
4
4
4
4
4
4.0
3
3
3
3
4
4
4.0
3
3
3
3
3
3
3.8
3
3
3
3
3
3
3.0
3
3
3
3
3
3
3.0
3
3
3
3
3 "
3
3.0
3
3
3
3
3
3
3.0
3
3
3
3
3
3
3.0
3
3
3
3
3
3
3.0
3
3
3
3
3
3
3.0
3
3
3
3
3
3
3.0
3
3
3
3
3
3
3.0
3
3
3
3
3
3
3.0
3
3
3
3
3
3
3.0
3
3
3
3
3
3
3.0
3
3
3
3
3.
3
3.0
3
3
3
3
3
3
3.0
- 15 22
3
3
3
3
3
23
3
3
3
3
3 3.0
24
3
3
3
3
3 3.0
25
3
2
2
2
3 3.0
26
2
2
2
2
2 2.0
27
2
2
2
2
2. 2.0
28
2
2
2
2
2 2.0
29
2
2
2
2
2 2.0
30
2
2
2
2
2 2.0
31
2
2
2
2
2 2.0
32
2
2
2
2
2 2.0
33
2
2
2
2
2 2.0
34
2
2
2
2
2 2.0
35
2
2
2
2
2 2.0
1
2
2
2 2.0
36
3.0
rREASURY NEWS
partment of the Treasury • Washington, D.C. • Telephone 566-2041
October 22, 1984
FOR IMMEDIATE RELEASE
RESULTS OF TREASURY'S WEEKLY BILL AUCTIONS
Tenders for $6,603 million of 13-week bills and for $6,603 million
of 26-week bills, both to be issued on October 25, 1984, were accepted today.
RANGE OF ACCEPTED
13-week bills
COMPETITIVE BIDS: maturing January 24, 1985
Discount Investment
Rate
Rate 1/
Price
26-week bills
maturing
April 25, 1985
Discount Investment
Price
Rate
Rate 1/
Low 9.48% 9.85% 97.604
High
9.57%
9.94%
Average
9.54%
9.91%
a/ Excepting 1 tender of $500,000.
9.53% a/ 10.15%
10.25%
9.62%
10.20%
9.57%
97.581
97.589
95.182
95.137
95.162
Tenders at the high discount rate for the 13-week bills were allotted 27%,
Tenders at the high discount rate for the 26-week bills were allotted 41%
TENDERS RECEIVED AND ACCEPTED
(In Thousands)
Received
Accepted
:
Received
Location
Boston
New York
Philadelphia
Cleveland
Richmond
Atlanta
Chicago
St. Louis
Minneapolis
Kansas City
Dallas
San Francisco
Treasury
TOTALS
:
Accepted
341,210
15,281,825
17,400
60,615
57,790
92,035
1,078,945
46,970
36,525
49,250
25,920
1,365,330
415,005
$ 161,710
4,661,825
17,400
60,615
57,790
92,035
314,445
46,970
36,525
48,750
25,920
664,330
415,005
$6,603,085
: $18,868,820
$6,603,320
$14,540,020
1,123,720
$15,663,740
$4,541,530
1,123,720
$5,665,250
: $16,275,840
:
1,040,680
: $17,316,520
$4,010,340
1,040,680
$5,051,020
862,835
862,835
:
850,000
850,000
75,000
75,000
:
702,300
702,300
$16,601,575
$6,603,085
: $18,868,820
$6,603,320
348,665
13,104,595
28,795
114,995
45,995
52,595
1,042,685
77,125
31,855
53,845
36,610
1,358,815
305,000
$ 348,665
4,565,305
28,795
114,995
45,995
52,595
211,685
57,125
31,855
53,845
36,610
750,615
305,000
$16,601,575
$
'•
:
'
:
:
:
:
;
:
$
Type
Competitive
Noncompetitive
Subtotal, Public
Federal Reserve
Foreign Official
Institutions
TOTALS
1/ Equivalent coupon-issue yield.
R-2flQl
TREASURY NEWS
Department of the Treasury • Washington, D.C. • Telephone 566-2041
For Release Upon Delivery
Expected at 1:00 p.m. EDT
Remarks by
Donald T. Regan
Secretary of the Treasury
before the
Detroit Economic Club
October 23, 1984
I'd like to start off my remarks today by offering my
belated congratulations to baseball's new world champions, the
Tigers. Coming from New York, I dimly remember the thrill of
having home-town champs.
As many of you may know, it's also been some time since
Washington had a professional baseball team. We do, however,
have a pretty good amateur softball league made up from the
various government agencies.
The only problem with the games is the pace. You see, first
the catcher has to give the pitcher his signs in triplicate, and
then the whole team votes on the pitch.
You might think — it being exactly two weeks prior to the
election — that I am about to deliver a political speech. A
campaign speech. A rip-snorter.
Well, I think the President has things pretty well in hand,
right now. So, if I may, I'd like to talk about — of all things
to this group — economics and government.
I went to Washington almost four years ago, leaving Wall
Street behind after 35 years. But in those 35 years in New York
I had many occasions to watch what was going on in Washington;
wonder what was going on in Washington; and often, to worry about
what was going on in Washington.
Now, I'll be the first to admit that my attentions at the
time were focused mainly on how action, or inaction, in
Washington would affect Wall Street.
But going to Washington myself, as a player, was an
education. Suddenly I was in a position where my attention was
focused on a much broader picture.
R-2892
-2Far-reaching issues, policies and programs — which
heretofore had served primarily for making conversation in the
lunch room, or at the dinner table — became the essence of my
job.
What's different, however, is that the conversations we have
in the Oval Office, or the Cabinet Room, count.
And realizing this, I have concluded, sometimes painfully,
that all our conversations, our deliberations and our decisions
need to pay heed to a much larger question.
And it is that larger question that I would like to talk
about today. What is the proper role of government in an economy
that we insist is a free market economy? What should
government's role be? Indeed what can it be?
In general, I think there are four legitimate areas for
government to pursue in a free economy and I think it's crucial
they be pursued vigorously in the next four years in Washington.
First and perhaps above all, it is Washington's obligation
to promote an environment that will assure sustained and
significant economic growth with little or no inflation. That,
of course, implies sound fiscal and monetary policies.
It is fair to ask if that is achievable. There are many
cynics, for example, who believe that our forecast of 4 percent
growth and 4 percent inflation is simply not realistic. And I
must admit it's hard to see an answer these days, from both
sides, that isn't suffused with political rhetoric.
But I think if we forget for a moment that this is a
political year- and simply look at the evidence, look at our past
history, look at the current factors at play, we can draw some
conclusions as to whether the projections are achievable.
To begin with, sustained non-inflationary growth, a major
goal of our program, has been achieved in the past. From 1949 to
1959, in spite of two recessions, growth of real GNP averaged 3.9
percent (compounded) with 2.6 percent inflation (GNP deflator).
Between 1960 and 1968 growth averaged 4.6 percent and
inflation 2.3 percent. Within that period, 1961 to 1966 saw
growth averaging 5.4 percent and inflation at 2.1 percent.
I am convinced that sustained non-inflationary growth can be
achieved in the future, given the proper government policies.
-3There is a qualitative as well as a quantitative side of the
argument as well. Remember, just for a moment with me the decade
from 1962 to 1972. The fact of the matter is our real growth in
that period averaged 4 percent. In 1965 and '66 for instance, it
was 6.0 percent; in 1970 it was -*2, but the overall average for
the period was 4 percent. Our inflation was under 4 percent —
on the order of 3.5 percent, [deflator]
Think about those times for a moment. It was the final
years of John Kennedy's presidency, Lyndon Johnson's presidency
and Richard Nixon's first term.
We had some recessions — including a big one in 1969 to
1970. We had the Vietnam War with all its negative and
debilitating economic and social effects. We had the beginnings
of the Great Society programs. We had inflation beginning to
mount seriously.
We had the beginning of imports of major products, like
automobiles, from abroad. We had the beginning of the breakdown
of the monetary system as we then knew it. We went off the gold
standard with a vengeance. And for those who are interested we
had the stock market seesawing back and forth, with the Dow Jones
Industrial Index ranging from around 600 to a high of around
1000.
And we had some of the worst years in Wall Street's history
— with firms failing left and right.
All in all, I think you will have to agree with me that they
were more or less average years with a lot of good and bad
scattered throughout the decade. And yet there are those who
would ask you to believe that those years represent the peak, the
absolute peak, of the American economy. I just don't buy it.
What I am suggesting is that far from being unrealistic our
projections of 4 percent growth with about 4 percent inflation
are quite achievable. The key of course is the promulgation and
the practice of appropriate fiscal and monetary policies, and the
promotion of our natural instincts to form new businesses, bring
to market new products, provide new or better services, open up
new jobs, and establish new industries.
If we keep incentives in the system, if we curtail the
growth of federal spending, if our central bank supplies enough
money and credit to allow the growth that the incentives are
inspiring, yet not allow inflation to return, then we may even
surprise ourselves as to how well we can do.
-4Now those are big "ifs." But it is important to note, and
highly reassuring as well, that non-inflationary growth is a
self-reinforcing process. Once achieved, it can trigger a sort
of "virtuous circle" as opposed to the vicious circle of
inflation-taxation-stagnation, which gripped the country a few
years ago.
Let's be clear about this. This "virtuous circle" is in
place now. The proper macroeconomic policies are in place now.
And augmenting this are a number of other positive economic
trends that presage strong performance for some years yet.
We have moderating wage increases, increasing productivity,
and lower, stable commodity prices which promise to keep
inflation down. We have the obvious benefits of a strong dollar
which is bringing Americans a flood of relatively low-priced
imports. And we have the hidden plus of that strong dollar —
which is the impetus for American industry to revamp, to
modernize, to re-position itself for the growing, competitive
world market.
Witness capital spending. It's running above 15 percent in
the first seven quarters of this recovery. More than double the
rate averaged in other post-Korean War recoveries. American
industry is doing just what Europe and Japan did after World War
II.
And this time, it's the United States which will have the
newer industrial generation, In this decade and the next, it's
the United States which will have the best plants and the best
capacity in the world.
Given all.this, given post-War economic experience, and
given the reversal of the inconsistent, destabilizing and
disincentive policies of the 1970s, we have every reason to
believe that current growth and low inflation projections may
well be modest.
And let's be clear about something else. It doesn't even
take economics let alone politics, but a simple rule of
arithmetic, to compute what economic growth implies for the
budget.
Follow this: Federal spending is currently between
one-fifth and one-fourth of GNP (24 percent in FY 1984).
Consequently, each time the economy grows four or five percent
more in real terms than Federal outlays. Federal spending as a
share of GNP falls by one percentage point.
-5If we could hold the real growth of Federal spending to 1.5
percent (5.5 percent in nominal terms, assuming 4 percent
inflation), and sustain real economic growth of four percent,
then Federal spending would fall as a share of GNP by just over
one percentage point every two years. By 1989, Federal spending
would be just over 21 percent of GNP. Tax revenue at that time
will be just under 20 percent of GNP.
In such a situation, Federal debt would be falling as a
share of GNP and debt service would be falling as a share of the
budget. This would help accelerate the trend toward budget
balance in the years beyond.
Falling deficits through reduced spending and larger GNP
would have several favorable effects. It would ease credit
market conditions and help lower interest rates. Lower outlays
and a broader tax base would enable us to raise more revenue at
lower tax rates. Thus, growth of GNP helps to lower interest
rates and tax rates, and to raise investment and reinforce
growth.
Production of more goods and services in turn helps to hold
down prices for any given money supply. Lower inflation helps
hold down the rates and other costs, and promotes further real
growth.
Now, by this time I'm sure you're way ahead of me and
realize that this all resolves into one key question: can we
hold the line on Federal spending? I believe the answer is yes.
The problem is manageable. We do not need to cut spending to
move toward budget balance, merely restrain its growth.
In my example, over five years, real outlays could grow by
over 6 percent, or by over $64 billion in real 1984 dollars. In
current dollars, outlays would rise by nearly 31 percent, or
about $260 billion assuming 4 percent inflation.
Current dollar revenues are projected to increase by nearly
$400 billion over the same period. Such a path of outlays and
receipts would narrow the deficit to less than 1 percent of GNP
by 1989.
These low spending growth rates are achievable given the
political will and continued non-inflationary growth. With
inflation continuing low, there is ample room for interest rates
to fall, and for interest outlays to come down.
-6With growth continuing strong, employment will rise and
poverty will fall. The fairest way to reduce Federal spending on
the social safety net, the way we would all applaud, is for the
unemployed and the poor not to require such aid because they are
back at work, no longer in poverty, and sharing fully in the
general prosperity.
That is the single best way I know to control spending.
Indeed, I have to confess to you, it's the only lasting way I
know.
A second major role of government in promoting the general
welfare, and this is quite consistent with the first role, is
simply to get out of the way. I don't think it is controversial
any more to take cognizance of the fact that in a free market
system intrusion of government through bureaucracies, through
regulations, through administrative codes and laws, however
well-intentioned, serve ultimately to the disadvantage of those
in business and those who consume the products and services
produced by the economy.
Please understand I am not advocating we dismantle every
federal program. I am saying, however, that there are many many
programs that have more than outlived their intent, and by their
continuation are denying the benefits of competition.
And I don't think that this is a partisan comment. It was,
for example, under the last Administration that airlines were
deregulated, and we are continuing that policy.
Now, as Treasury Secretary, let me indulge myself and get a
little specific here on one aspect of deregulation I am very much
involved in.
We are hurtling towards deregulation of the financial
services industry, but in a very haphazard and potentially
dangerous manner. For two years the Congress has had this issue
before them. For two years they have not acted — while de facto
deregulation continues to occur.
The Glass-Steagall Act is breaking down — "non bank-banks"
proliferate; real estate is being sold by investment banking
firms; brokerage firms are selling annuities; you can write a
check on a money market account virtually anywhere, and you can
get "comprehensive financial planning" at a department store.
Market forces are tearing at the existing out-dated
framework, while the industry — and most importantly, consumers
still wait for government to get out of the way, and let all
participants compete for your business.
-7I think this is a shameful situation, but it's a classic
case of government failing to provide one of its essential
economic roles.
A third role I see for government in the economy involves a
topic I'm sure is familiar to all of you, yet, quite frankly, one
I cannot be too specific about at this point. It is the on-going
Treasury study on comprehensive tax reform which will be
submitted to the President in December. The government's role,
of course, is to see to it that there are incentives in the
system for savings, and investment, for encouragement to
enrepreneurs and risk takers. How else can the government
provide an environment for growth?
While I don't yet know what we will recommend, I can tell
you some of the principles guiding our work. First is to meet
the President's directives in his State of the Union address
early this year that a reformed tax system be fairer, simpler and
incentive-oriented.
Secondly, it has not been lost on any of us in Treasury that
those nations that have been competing most effectively with our
own industries in worldwide markets have tax systems that,
without a doubt, far exceed ours in encouraging savings and
investment and are not biased toward consumption. And yes, that
does mean we are revisiting the very precepts that underly our
national income and corporate tax systems — including every
layer of modification and addition that Americans have witnessed
over a half century.
I can assure you this much now. The tax system that we
recommend to the President will be in keeping with the larger
purposes .and objectives of a sound and beneficial tax system.
And it is not being developed with an eye on any specific revenue
amount. In that respect it will be neutral — that is, it will
raise the same revenues as the tax system in place now raises.
The last role I will discuss today is that of the Federal
government as negotiator, if you will, for the American economy
and its businesses and industries, and consumers in all the
international markets.
I am referring here not just to goods and products, but
services of all sorts and investments as well. Here I believe
government's role is to assure to the best of our ability that
the playing field is level.
-8This entails determining the proper protection or
safeguarding of declining industry and the proper incentives to
foster other industries. We have to walk a fine line here and
remember that the key words are "proper" in relation to
protection, and "incentives," not "policy," in relation to
fostering qrowth.
This role also includes the development and refinement of
our anti-dumping and countervailing duty laws as well as other
unfair trade laws. It involves the improvement of international
organizations like GATT to cover such things as agricultural
products, services, technology and investments, and perhaps even
labor itself. It concerns improving the structure of the
international monetary system so that there is less volatility
and uncertainty.
But I believe this role does not include any more intrusion
by the Federal government to match the subsidies, or non-tariff
barriers, instituted by some of our trading partners. In spite
of subsidized farms, products and export sales, who is
benefitting most from the freest and most open market in the
world. I submit it is us.
I believe the best long range solution, in so far as
government is concerned, lies in allowing all of our industries
to be better able to compete, than trying to stave off the rest
of the world with expedients that derive from putting
government's hands in the taxpayers' pockets.
These four points, in my mind, basically constitute the
proper economic role of government in society. There are others.
Perhaps someone else's list would be different. Certainly, an
entire speech could also be dedicated to the inappropriate
economic role of government.
But if I might defer argument on these points, I would
instead prefer to conclude with this thought:
Even though economics is by no means an exact science, there
can be no such thing in Washington as merely economic policy. I
have decided after four years that the old name of the dismal
science was pretty accurate — politico-economics.
And yet, that is as it should be. Free markets can only
exist in free societies. And in free societies, democracies, all
can raise their voice on every issue.
Yet, even in this environment some aspects of the foundation
will always be bedrock solid.
-9There is our desire that everyone have the opportunity to
share in economic prosperity. There is the recognition that it
is American ingenuity, creativity, energy and entrepreneurship
that really drives our economy.
There is our history of success and our unwillingness to
accept failure in ourselves. And there is the American tradition
of faith in ourselves and in our future.
All of these qualities, these values, so strongly evidenced
in America, can assure that our economy continues to be a marvel
and a model for the world.
And I share with you my deep conviction, after my time in
this office: It can continue, if government's role is
appropriately maintained. And that role never goes beyond the
bounds that we set for it.
Thank you.
TREASURY NEWS
epartment of the Treasury • Washington, D.c. • Telephone 566-2041
FOR RELEASE AT 4:00 P.M.
October 23, 1984
TREASURY'S WEEKLY BILL OFFERING
The Department of the Treasury, by this public notice, invites
tenders for two series of Treasury bills totaling approximately
$13,200 million, to be issued November 1, 1984. This offering will
provide about $550 million of new cash for the Treasury, as the maturing
bills were originally issued in the amount of $12,654 million (including
the 150-day cash management bills issued June 4, 1984, in the amount
of $2,995 million). The two series offered are as follows:
91-day bills (to maturity date) for approximately $6,600
million, representing an additional amount of bills dated August 2,
1984, and to mature January 31, 1985 (CUSIP No. 912794 GR 9 ) , currently outstanding in the amount of $6,650 million, the additional
and original bills to be freely interchangeable.
182-day bills for approximately $6,600 million, to be dated
November 1, 1984, and to mature May 2, 1985 (CUSIP No. 912794 HB 3).
Both series of bills will be issued for cash and in exchange for
Treasury bills maturing November 1, 1984. In addition to the maturing
13-week, 26-week, and 150-day cash management bills, there are $7,774
million of maturing 52-week bills. The disposition of this latter
amount was announced last week. Federal Reserve Banks, as agents for
foreign and international monetary authorities, currently hold $2,214
million, and Federal Reserve Banks for their own account hold $2,613
million of the maturing bills. These amounts represent the combined
holdings of such accounts for the three issues of maturing bills.
Tenders from Federal Reserve Banks for themselves and as agents
for foreign and international monetary authorities will be accepted
at the weighted average bank discount rates of accepted competitive
tenders. Additional amounts of the bills may be issued to Federal
Reserve Banks, as agents for foreign and international monetary
authorities, to the extent that the aggregate amount of tenders for
such accounts exceeds the aggregate amount of maturing bills held by
them. For purposes of determining such additional amounts, foreign
and international monetary authorities are considered to hold $1,854
million of the original 13-week and 26-week issues.
The bills will be issued on a discount basis under competitive
and noncompetitive bidding, and at maturity their par amount will
be payable without interest. Both series of bills will be issued
entirely in book-entry form in a minimum amount of $10,000 and in
any higher $5,000 multiple, on the records either of the Federal
Reserve Banks and Branches, or of the Department of the Treasury.
R-2893
- 2 Tenders will be received at Federal Reserve Banks and
Branches and at the Bureau of the Public Debt, Washington, D. C.
20239, prior to 1:00 p.m., Eastern Standard time, Monday,
October 29, 1984.
Form PD 4632-2 (for 26-week series) or Form
PD 4632-3 (for 13-week series) should be used to submit tenders
for bills to be maintained on the book-entry records of the
Department of the Treasury.
Each tender must state the bar amount of bills bid for,
which must be a minimum of $10,000. Tenders over $10,000 must
be in multiples of $5,000. Competitive tenders must also show
the yield desired, expressed on a bank discount rate basis with
two decimals, e.g., 7.15%. Fractions may not be used. A single
bidder, as defined in Treasury's single bidder guidelines, shall
not submit noncompetitive tenders totaling more than $1,000,000.
Banking institutions and dealers who make primary markets in
Government securities and report daily to the Federal Reserve Bank
of New York their positions in and borrowings on such securities
may submit tenders for account of customers, if the names of the
customers and the amount for each customer are furnished. Others
are only permitted to submit tenders for their own account. Each
tender must state the amount of any net long position in the bills
being offered if such position is in excess of $200 million. This
information should reflect positions held as of 12:30 p.m. Eastern
time on the day of the auction. Such positions would include bills
acquired through "when issued" trading, and futures and forward
transactions as well as holdings of outstanding bills with the same
maturity date as the new offering, e.g., bills with three months to
maturity previously offered as six-month bills. Dealers, who make
primary markets in Government securities and report daily to the
Federal Reserve Bank of New York their positions in and borrowings
on such securities, when submitting tenders for customers, must
submit a separate tender for each customer whose net long position
in the bill being offered exceeds $200 million.
A noncompetitive bidder may not have entered into an agreement,
nor make an agreement to purchase or sell or otherwise dispose of
any noncompetitive awards of this issue being auctioned prior to
the designated closing time for receipt of tenders.
Payment for the full par amount of the bills applied for
must accompany all tenders submitted for bills to be maintained
on the book-entry records of the Department of the Treasury.
A cash adjustment will be made on all accepted tenders for the
difference between the par payment submitted and the actual
issue price as determined in the auction.
No deposit need accompany tenders from incorporated banks
and trust companies and from responsible and recognized dealers
in investment securities for bills to be maintained on the bookentry records of Federal Reserve Banks and Branches. A deposit
- 3 of 2 percent of the par amount of the bills applied for must
accompany tenders for such bills from others, unless an express
guaranty of payment by an incorporated bank or trust company
accompanies the tenders.
Public announcement will be made by the Department of the
Treasury of the amount and yield range of accepted bids. Competitive bidders will be advised of the acceptance or rejection of
their tenders. The Secretary of the Treasury expressly reserves
the right to accept or reject any or all tenders, in whole or in
part, and the Secretary's action shall be final. Subject to these
reservations, noncompetitive tenders for each issue for $1,000,000
or less without stated yield from any one bidder will be accepted
in full at the weighted average bank discount rate (in two decimals)
of accepted competitive bids for the respective issues. The calculation of purchase prices for accepted bids will be carried to three
decimal places on the basis of price per hundred, e.g., 99.923, and
the determinations of the Secretary of the Treasury shall be final.
Settlement for accepted tenders for bills to be maintained
on the book-entry records of Federal Reserve Banks and Branches
must be made or completed at the Federal Reserve Bank or Branch
on November 1, 1984,
in cash or other immediately-available funds
or in Treasury bills maturing November 1, 1984.
Cash adjustments
will be made for differences between the par value of the maturing
bills accepted in exchange and the issue price of the new bills.
In addition, Treasury Tax and Loan Note Option Depositaries may
make payment for allotments of bills for their own accounts and
for account of customers by credit to their Treasury Tax and Loan
Note Accounts on the settlement date.
In general, if a bill is purchased at issue after July 18,
1984, and held to maturity, the amount of discount is reportable
as ordinary income in the Federal income tax return of the owner
at the time of redemption. Accrual-basis taxpayers, banks, and
other persons designated in section 1281 of the Internal Revenue
Code must include in income the portion of the discount for the
period during the taxable year such holder held the bill. If the
bill is sold or otherwise disposed of before maturity, the portion
of the gain equal to the accrued discount will be treated as ordinary income. Any excess may be treated as capital gain.
Department of the Treasury Circulars, Public Debt Series Nos. 26-76 and 27-76, Treasury's single bidder guidelines, and this
notice prescribe the terms of these Treasury bills and govern the
conditions of their issue. Copies of the circulars, guidelines,
and tender forms may be obtained from any Federal Reserve Bank or
Branch, or from the Bureau of the Public Debt.
rREASURY NEWS
apartment
of the Treasury • Washington, D.C.October
• Telephone
566-2041
FOR IMMEDIATE RELEASE
23, 1984
RESULTS OF AUCTION OF 20-YEAR 1-MONTH TREASURY BONDS
The Department of the Treasury has accepted $4,005 million
of $8,260 million of tenders received from the public for the
20-year 1-month bonds auctioned today. The bonds will be issued
October 30, 1984, and mature November 15, 2004.
The interest rate on the bonds will be 11-5/8%. The range of
accepted competitive bids, and the corresponding prices at the 11-5/8%
interest rate are as follows:
Yield Price
Low
High
Average
11.55%
11.75%
11.69%
100.554
99.016
99.473
Tenders at the high yield were allotted 43%.
TENDERS RECEIVED AND ACCEPTED (In Thousands)
Location
Boston
New York
Philadelphia
Cleveland
Richmond
Atlanta
Chicago
St. Louis
Minneapolis
Kansas City
Dallas
San Francisco
Treasury
Totals
Received
136,575
$
7 ,338,388
2,106
22,317
6,534
7,286
571,273
27,595
112
3,980
138
143,111
407
$8 ,259,822
Accepted
6,575
3,r749,298
2,106
22,317
6,534
7,286
85,573
27,593
112
3,980
138
92,861
407
$4,,004,780
$
The $4,005 million of accepted tenders includes $184
million of noncompetitive tenders and $3,821 million of competitive tenders from the public.
R-2894
•*•
o
CM
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CO
mCO
WASHINGTON, D.C. 20220
October 23, 1984
FEDERAL FINANCING BANK ACTIVITY
Francis X. Cavanaugh, Secretary, Federal Financing
Bank (FFB), announced the following activity for the
month of August 1984.
FFB holdings of obligations issued, sold, or guaranteed by other Federal agencies totaled $144.1 billion
on August 31, 1984, posting a net increase of $0.7 billion
from the level on July 31, 1984. This change included
increases in holdings of agency assets of $0.3 billion
and holdings of agency guaranteed debt of $0.4 billion.
Holdings of agency debt issues decreased by less than
$0.1 billion. FFB made 309 disbursements during the
month.
Attached to this release are tables presenting FFB
August loan activity, new FFB commitments to lend during
August and FFB holdings as of August 31, 1984.
# 0 #
R-2895
<<»•
l\J
CD
CD
CO
co CO
federal financing bank
FOR IMMEDIATE RELEASE
00
CO
FEDERAL FINANCING BANK
faye 2 of 8
AUGUST 1984 ACTIVITY
DATE
BORROWER
AMOUNT
OF ADVANCE
FINAL
MATURITY
INTEREST
RATE
(semiannual)
INTEREST
RATE
(other than
serai-annual)
ON-BUDGET AGENCY DEBT
TENNESSEE VALLEY AUTHORITY
Note
Note
Note
Note
Note
Note
Note
Note
Note
#376
#377
#378
#379
#380
#381
#382
#383
#384
8/6 $
8/15
8/15
8/15
8/15
8/20
8/20
8/27
8/31
240,000,000.00
75,000,000.00
35,000,000.00
5,000,000.00
310,000,000.00
35,000,000.00
20,000,000.00
355,000,000.00
130,000,000.00
8/15/84
8/20/84
8/23/84
8/24/84
8/27/84
8/27/84
9/1/84
9/4/84
9/10/84
11.005%
10.845%
10.845%
10.845%
10.845%
10.865%
10.865%
11.025%
11.215%
10/30/84
11/5/84
9/17/84
9/14/84
11/19/84
12/31/84
10/5/84
10/3/8-4
11/29/84
10.955%
11.055%
11.085%
10.845%
10.895%
11.325%
11.215%
11.215%
11.215%
8/1/94
8/1/89
8/1/94
8/1/99
8/1/04
8/1/94
8/1/99
12.855%
12.765%
12.815%
12.845%
12.875%
12.825%
12.785%
6/20/13
4/15/14
5/15/95
6/10/96
7/10/13
7/10/14
6/15/12
7/15/92
7/10/94
9/8/95
9/22/92
5/25/88
6/20/13
4/15/14
11/22/95
7/25/87
4/30/11
11/30/12
9/10/95
12.995%
12.938%
12.945%
12.881%
12.905%
12.945%
12.865%
12.375%
12.885%
12.735%
12.738%
12.699%
12.825%
12.862%
12.786%
12.652%
12.875%
12.785%
12.745%
NATIONAL CREDIT UNION ADMINISTRATION
Central Liquidity Facility
Note
+Note
Note
+Note
Note
Note
•Ktote
Note
Note
#245
#246
#247
#248
#249
#250
#251
#252
#253
8/1
8/6
8/7
8/15
8/20
8/30
8/31
8/31
8/31
7,945,000.00 ;
10,000,000.00
1,000,000.00
5,000,000.00
15,000,000.00
100,000.00
5,000,000.00
500,000.00
15,000,000.00
AGENCY ASSETS
FARMERS HOME ADMINISTRATION
Certificates of Beneficial Ownership
8/7
8/8
8/8
8/8
8/8
8/24
8/24
50,000,000.00
600,000,000.00
550,000,000.00
160,000,000.00
10,000,000.00
55,000,000.00
95,000,000.00
GOVERNMENT - GUARANTEED LOANS
DEPARTMENT OF DEFENSE
Foreign Military Sales
Egypt 5
Egypt 6
El Salvador 6
El Salvador 7
Israel 15
Israel 16
Greece 15
Philippines 10
Thailand 10
Morocco 11
Zaire 1
Ecuador 5
Egypt 5
Egypt 6
Bolivia 2
Ecuador 4
Greece 14
Turkey 14
Dominican Republic 7
•rollover
8/1
8/2
8/2
8/2
8/2
8/2
8/3
8/3
8/3
8/6
8/6
8/7
8/7
8/7
8/7
8/7
8/8
8/9
8/10
4,856,235.80
8,144,848.33
176,251.23
2,993,458.48
11,758,271.85
43,089,715.48
700,072.46
118,250.81
2,676,125.00
370,241.37
429,716.52
331,619.31
309,270.10
10,166,301.08
1,015,036.00
292,303.69
25,020.00
978,232.83
750,000.00
13.,268%
13.,172%
13.,226%
13.,257%
13.,289%
13.,236%
13.,194%
arm
ann
ann,
ann
ann
ann
ann
Page 3 of 8
FEDERAL FINANCING BANK
AUGUST 1984 ACTIVITY
" ~" " " AMOUNT FINAL INTEREST INTEREST
BORROWER
DATE
~"
"
OF ADVANCE
MATURITY
RATE
(semiannual)
RATE
(other than
semi-annual)
DEPARTMENT OF DEFENSE - FOREIGN MILITARY SALES (Cont'd)
Israel 16
Turkey 17
Somalia 4
Liberia 10
Egypt 6
Israel 16
Egypt 6
El Salvador
Jordan 10
Tunisia 16
Israel 8
Israel 16
Tunisia 16
El Salvador
Cameroon 6
Greece 14
Greece 15
Israel 16
Egypt 6
Philippines
Turkey 13
Peru 10
Zaire 1
Philippines
Egypt 6
El Salvador
Israel 16
Thailand 10
Thailand 12
Ecuador 5
Egypt 6
Israel 16
Kenya 11
Malaysia 7
Turkey 15
Turkey 16
El Salvador
Philippines
Thailand 6
8/13
8/13
8/13
8/13
8/13
8/14
8/15
8/16
8/16
8/16
8/17
8/17
8/20
8/20
8/22
8/22
8/22
8/22
8/23
8/23
8/23
8/24
8/27
8/27
8/29
8/29
8/29
8/29
8/29
8/30
8/30
8/30
8/30
8/30
8/30
8/30
8/31
8/31
8/31
7
7
10
9
7
7
10
$
7/10/14
11/30/13
11/30/12
5/15/95
4/15/14
7/10/14
4/15/14
6/10/96
3/10/92
2/4/96
9/1/09
7/10/14
2/4/96
6/10/96
3/15/89
4/30 A 1
6/15/12
7/10/14
4/15/14
7/15/92
3/24/12
4/10/96
9/22/92
5/15/91
4/15/14
6/10/96
7/10/14
7/10/94
3/20/96
5/25/88
4/15/14
7/10/14
5/15/95
3/10/88
5/31/13
7/15/13
6/10/96
7/15/92
9/20/85
12.815%
12.805%
12.753%
12.805%
12.805%
12.885%
12.805%
12.865%
11.895%
12.895%
12.766%
12.835%
12.842%
12.845%
11.748%
12.678%
12.745%
12.722%
12.765%
12.265%
12.755%
12.795%
12.815%
12.825%
12.935%
12.975%
12.750%
12.955%
12.925%
12.855%
12.945%
12.912%
12.985%
11.685%
12.985%
12.975%
13.004%
12.494%
12.165%
4,000,000.00
9,500,000.00
7/1/85
7/1/85
12.515%
12.495%
561,031.82
629,726.63
395,000.00
700,000.00
526,000.00
450,000.00
1,877,000.00
100,000.00
525,675.00
1,544,482.82
250,000.00
8/1/86
8/1/87
8/1/89
8/1/92
8/1/89
2/15/86
9/1/84
8/1/85
9/1/85
9/1/85
2/1/85
12.633%
12.579%
12.967%
12.966%
12.836%
12.365%
11.015%
11.865%
11.945%
12.035%
11.495%
6,513,504.78
100,000.00
479,715.35
377,434.60
704,292.00
9,465,546.35
6,847,836.98
528,503.00
45,000.00
434,317.96
62,050,000.00
6,926,018.00
15,000,000.00
97,647.35
733,459.10
3,032,789.89
2,267,894.92
8,416,810.96
16,273,287.29
1,402,094.44
7,136,081.16
448,390.00
502,964.00
2,500,306.08
4,484,968.60
665,229.20
9,186,500.00
228,012.00
66,697.00
171,897.05
1,032,368.95
39,298,653.05
2,118,500.00
3,706,500.00
386,596.00
30,837.00
1,117,650.00
2,470,419.61
97,543.00
DEPARTMENT OF ENERGY
Synthetic Fuels Guarantees - Non-Nuclear Act
Great Plains
Gasification Assoc.
#118
#119
8/13
8/20
DEPARTMENT OF HOUSING & URBAN DEVELOPMENT
Community Development
*Mayaguez, PR
•Pomona, CA
*Newburgh, NY
•Muskegon, WI
*Maywood, CA
St. Louis, MO
Detroit, MI
Long Beach, CA
Waukegan, IL
Detroit, MI
Indianapolis, IN
•maturity extension
8/1
8/1
8/1
8/1
8/1
8/2
8/3
8/6
8/6
8/8
8/8
13.032%
12.975%
13.387%
13.386%
13.248%
12.747%
ann.
ann.
ann.
ann.
ann.
ann.
12.212% ann.
12.302% ann.
12.397% ann.
Page 4 of 8
FEDERAL FINANCING BANK
AUGUST 1984 ACTIVITY
DATE
BORROWER
FINAL
MATURITY
INTEREST
RATE
(semiannual)
8/1/85
5/1/85
5/1/85
2/15/86
8/15/90
8/15/90
8/15/90
9/1/03
2/1/85
12/1/85
10/1/84
7/1/03
8/1/852/15/86
7/1/03
9/1/04
9/1/04
11.975%
11.695%
11.615%
12.285%
12.666%
12.666%
12.666%
12.827%
11.325%
12.155%
11.225%
12.913%
12.025%
12.455%
12.922%
12.908%
12.908%
13.330%
12.357%
12.843%
13.339%
13.325%
13.325%
7,900,000.00
10/1/92
12.760%
13.167% ann.
164,053.57
10/1/92
12.800%
12.062% qtr.
1,106,000.00
3,782,000.00
21,332,000.00
500,000.00
275,000.00
2,350,000.00
1,900,000.00
6,160,000.00
279,000.00
1,488,000.00
164,000.00
221,000.00
1,850,000.00
2,500,000.00
1,850,000.00
391,000.00
769,000.00
1,205,000.00
700,000.00
1,438,000.00
10,800,000.00
386,000.00
5,591,000.00
131,000.00
2,878,000.00
20,000.00
4,449,000.00
6,421,000.00
1,050,000.00
1,270,000.00
40,000,000.00
20,000,000.00
2,640,000.00
10,006,000.00
5,531,000.00
1/31/85
1/31/85
8/1/86
8/4/86
8/4/86
9/30/86
8/4/86
9/30/86
9/30/86
9/30/86
8/6/87
9/30/86
9/30/86
8/6/86
9/30/86
9/30/86
8/7/86
9/30/86
9/30/86
8/8/86
8/11/86
8 A1/86
8/11/86
8 A1/86
8/11/86
8A1/86
9/30/86
1/31/85
8/13/86
8/13/87
8/13/86
9/30/86
8/15/87
8/6/87
8/6/87
11.525%
11.525%
12.695%
12.615%
12.615%
12.645%
12.615%
12.645%
12.433%
12.445%
12.515%
12.431%
12.445%
12.425%
12.445%
12.433%
12.545%
12.542%
12.555%
12.545%
12.455%
12.455%
12.455%
12.455%
12.455%
12.455%
12.485%
11.325%
12.475%
12.535%
12.475%
12.485%
12.545%
12.525%
12.525%
11.327%
11.327%
12.500%
12.422%
12.422%
12.451%
12.422%
12.451%
12.246%
12.257%
12.325%
12.244%
12.257%
12.238%
12.257%
12.246%
12.354%
12.351%
12.364%
12.354%
12.267%
12.267%
12.267%
12.267%
12.267%
12.267%
12.296%
11.149%
12.286%
12.345%
12.286%
12.296%
12.354%
12.335%
12.335%
AMOUNT
OF ADVANCE
INTEREST
RATE
(other than
semi-annual)
Community Development (Cont'd)
Long Beach, CA
Somerville, MA
Utica, NY
St. Louis, MO
•Lynn, MA
*San Buenaventura, CA
•Baldwin Park, CA
Birminghan, AL
Sacramento, CA
St. Petersburg, FL
Baldwin Park, CA
Albany Ind. Dev. Ag., NY
Long Beach, CA
St. Louis, MO
Albany Ind. Dev. Ag., NY
San Antonio, TX
San Antonio, TX
8/8
8/9
8/10
8/10
8/15
8/15
8/15
8/17
8/17
8/23
8/29
8/29
8/29
8/29
8/31
8/31
8/31
$
518,824.00
75,000.00
219,000.00
750,000.00
604,301.00
1,000,000.00
622,100.00
375,000.00
148,714.22
75,000.00
1,079,000.00
170,000.00
140,000.00
2,000,000.00
75,000.00
478,000.00
328,334.00
12.327%
11.910%
11.825%
12.662%
13.067%
13.067%
13.067%
13.238%
ann.
ann.
ann.
ann.
ann.
ann.
ann.
ann.
12.524% ann.
ann.
ann.
ann.
ann.
ann.
ann.
NATIONAL AERONAUTICS AND SPACE ADMINISTRATION
Space Communications Company
8/20
DEPARTMENT OF THE NAVY
Defense Production Act
Gila River Indian Community 8/17
RURAL ELECTRIFICATION ADMINISTRATION
•Arkansas Electric #97
•Arkansas Electric #142
•Deseret G&T #211
Northwest Electric #176
•Central Electric #131
•Saluda River Electric #186
•South Mississippi Electric #171
•North Carolina Electric #185
•South Mississippi Electric #90
•Kansas Electric #216
•Wolverine Power #101
•South Mississippi Electric #3
•Big Rivers Electric #91
•Sunflower Electric #174
Big Rivers Electric #179
South Mississippi Electric #90
Tex-La Electric #208
•Colorado Ute Electric #78
Saluda River Electric #271
•Seminole Electric #141
•Western Farmers Electric #220
*Wabash Valley Power #206
*Wabash Valley Power #104
•Wolverine Power #101
•Wolverine Power #101
Wabash Valley Power #206
Deseret G&T #211
•Arkansas Electric #221
•Kansas Electric #216
•Brazos Electric #144
•Cajun Electric #147
Cajun Electric #263
•Western Illinois Power #162
•Oglethorpe Power #150
•Oglethorpe Power #74
•maturity extension
8/1
8/1
8/1
8/2
8/2
8/2
8/3
8/3
8/6
8/6
8/6
8/6
8/6
8/6
8/6
8/6
8/7
8/8
8/8
8/8
8/10
8/10
8/10
8/10
8/10
8/10
8/13
8/13
8/13
8/13
8/13
8/15
8/15
8/15
8/15
qtr.
qtr
qtr.
qtr.
qtr.
qtr.
qtr.
qtr.
qtr.
qtr.
qtr.
qtr.
qtr.
qtr.
qtr.
qtr.
qtr.
qtr.
qtr.
qtr.
qtr.
qtr.
qtr.
qtr.
qtr.
qtr.
qtr.
qtr.
qtr.
qtr.
qtr.
qtr.
qtr.
qtr.
qtr.
Page 5 of 8
FEDERAL FINANCING BANK
AUGUST 1984 ACTIVITY
BORROWER
AMOUNT
OF ADVANCE
DATE
FINAL
MATURITY
INTEREST
RATE
(semiannual)
INTEREST
RATE
(other than
semi-annual)
RURAL ELECTRIFICATION ADMINISTRATION (Cont'd)
•United Telephone #25
New Hampshire Electric #270
Old Dominion Electric #267
Dairyland Power #161
Dairlyand Power #173
Quaker State Telephone #92
•East Kentucky Power #140
•East Kentucky Power #188
•New Hampshire Electric #192
•Seminole Electric #141
•Seminole Electric #141
•Seminole Electric #141
•Western Illinois Power #225
•Brazos Electric #108
•Brazos Electric #230
•South Texas Electric #200
•Associated Electric #132
•Big Rivers Electric #58
•Big Rivers Electric #91
•Big Rivers Electric #136
•Big Rivers Electric #143
•Oglethorpe Power #150
•Oglethorpe Power #74
•Central Louisiana Telephone #34
Big Rivers Electric #179
•Plains Electric G&T #158
•San Miguel Electric #110
Tel. Utilities of Oregon #256
•Big Rivers Electric #136
•Big Rivers Electric #143
•Big Rivers Electric #179
Oglethorpe Power #246
Plains Electric G&T #215
Kansas Electric #216
•Basin Electric #137
•Seminole Electric #141
•East Kentucky Power #73
•Western Farmers Electric #133
•East Kentucky Power #140
•South Texas Electric #109
•Arkansas Electric #221
•Wabash Valley Power #206
•Basin Electric #87
•Basin Electric #137
Kansas Electric #216
French Broad Electric #245
North Carolina Electric #268
•Basin Electric #137
•Central Electric #131
•North Carolina Electric #185
East River Electric #117
Kamo Electric #148
Kamo Electric #209
Kano Electric #266
Basin Electric #272
Arkansas Electric #97
•Basin Electric #87
Allegheny Electric #93
Allegheny Electric #175
Allegheny Electric #175
•maturity extension
8/15
8/15
8/15
8/15
8/15
8/16
8/16
8/16
8/16
8/17
8/20
8/20
8/20
8/20
8/20
8/20
8/20
8/20
8/20
8/20
8/20
8/20
8/20
8/20
8/21
8/21
8/22
8/22
8/23
8/23
8/23
8/23
8/23
8/23
8/24
8/24
8/24
8/27
8/27
8/27
8/27
8/27
8/29
8/29
8/29
8/29
8/29
8/30
8/30
8/30
8/30
8/31
8/31
8/31
8/31
8/31
8/31
8/31
8/31
8/31
$
1,231,000.00
1,061,000.00
209,000.00
2,496,000.00
24,000.00
3,000,000.00
430,000.00
4,069,000.00
1,065,000.00
2,678,000.00
2,580,000.00
14,536,000.00
2,203,000.00
903,000.00
8,409,000.00
1,005,000.00
12,500,000.00
40,000.00
910,000.00
182,000.00
30,000.00
5,153,000.00
15,526,000.00
3,191,000.00
2,000,000.00
6,459,000.00
7,759,000.00
2,361,000.00
84,000.00
157,000.00
26,163,000.00
20,129,000.00
411,000.00
884,000.00
9,853,000.00
13,253,272.22
5,782,000.00
9,759,044.00
640,000.00
1,400,000.00
5,209,000.00
477,000.00
1,071,000.00
25,000,000.00
2,500,000.00
356,000.00
10,520,000.00
25,000,000.00
380 ,-000.00
13,097,000.00
2,928,000.00
423,000.00
4,177,000.00
1,903,000.00
166,000.00
1,683,000.00
10,000.00
3,199,000.00
4,940,000.00
5,115,000.00
12/31/12
9/30/86
9/30/86
8 A 5/86
8/15/86
12/31/18
8/18/86
8/18/86
8/18/86
8/17/86
8/20/86
8/20/86
8/20/86
8/20/86
8/20/86
8/20/86
8/20/86
9/30/86
9/30/86
9/30/86
9/30/86
8/20/87
8/20/87
8/20/86
9/30/86
8/21/86
8/22/86
9/30/86
9/30/86
9/30/86
12/31/84
8/24/87
12/31/18
9/30/86
8/25/86
8/25/86
9/30/86
8/27/86
8/27/86
8/27/86
1/31/85
8/27/86
8/31/87
8/31/87
9/30/86
9/30/86
9/30/86
9/2/86
9/2/86
9/30/86
9/2/86
9/2/86
9/2/86
9/2/86
9/2/86
9/2/86
9/2/86
9/30/86
8/10/87
8/10/88
12.765%
12.485%
12.477%
12.465%
12.465%
12.763%
12.525%
12.525%
12.525%
12.545%
12.545%
12.545%
12.545%
12.545%
12.545%
12.545%
12.545%
12.555%
12.555%
12.555%
12.555%
12.565%
12.565%
12.545%
12.565%
12.545%
12.535%
12.535%
12.585%
12.585%
11.145%
12.605%
12.612%
12.585%
12.575%
12.575%
12.588%
12.575%
12.535%
12.535%
11.355%
12.535%
12.715%
12.715%
12.675%
12.675%
12.675%
12.695%
12.695%
12.695%
12.695%
12.695%
12.695%
12.695%
12.691%
12.695%
12.695%
12.686%
12.745%
12.905%
12.568%
12.296%
12.288%
12.277%
12.277%
12.566%
12.335%
12.335%
12.335%
12.354%
12.354%
12.354%
12.354%
12.354%
12.354%
12.354%
12.354%
12.364%
12.364%
12.364%
12.364%
12.374%
12.374%
12.354%
12.374%
12.354%
12.345%
12.345%
12.393%
12.393%
11.054%
12.412%
12.419%
12.393%
12.383%
12.383%
12.396%
12.383%
12.345%
12.345%
qtr.
qtr.
qtr.
qtr.
qtr.
qtr.
qtr.
qtr.
qtr.
qtr.
qtr.
qtr.
qtr.
qtr.
qtr.
qtr.
qtr.
qtr.
qtr.
qtr.
qtr.
qtr.
qtr.
qtr.
qtr.
qtr.
qtr.
qtr.
qtr.
qtr.
qtr.
qtr.
qtr.
qtr.
qtr.
qtr.
qtr.
qtr.
qtr.
qtr.
12.345% qtr.
12.519% qtr.
12.519% qtr.
12.480% qtr.
12.480% qtr.
12.480% qtr.
12.500% qtr.
12.500% qtr.
12.500% qtr.
12.500% qtr.
12.500% qtr.
12.500% qtr.
12.500% qtr.
12.496% qtr.
12.500% qtr.
12.500% qtr.
12.491% qtr.
12.548% qtr.
12.703% qtr.
Page 6 of 8
FEDERAL FINANCING BANK
AUGUST 1984 ACTIVITY
BORROWER
DATE
AMOUNT
OF ADVANCE
FINAL
MATURITY
INTEREST
RATE
(semiannual)
SMALL BUSINESS ADMINISTRATION
State & Local Development Company Debentures
Business Dev. Corp. of Nebraska 8/8
CCD Business Dev. Corp.
8/8
Verd-Ark-CA Dev. Corp.
8/8
The St. Louis Local Dev. Co.
8/8
Phoenix Local Dev. Corp.
8/8
River East Progress, Inc.
8/8
Minneapolis 503 Econ. Dev. Co. 8/8
Gr. Muskegon Indus. Fund, Inc. 8/8
Catawba Regional Dev. Corp.
8/8
Gr. Muskegon Indus. Fund, Inc. 8/8
Providence Indus. Dev. Corp.
8/8
North Texas Cert. Dev. Corp.
8/8
Commonwealth Sm. Bus. Dev. Corp.8/8
Albany Local Dev. Corp.
8/8
River East Progress, Inc.
8/8
Commonwealth Sm. Bus. Dev. Corp.8/8
Catawba Regional Dev. Corp.
8/8
Neuse River Dev. Auth., Inc.
8/8
Inglewood Dev. Company
8/8
Columbus Countywide Dev. Corp. 8/8
Urban Business Dev. Corp.
8/8
BEDCO Development Corp.
8/8
Nine County Dev., Inc.
8/8
Alabama Community Dev. Corp.
8/8
Alabama Community Dev. Corp.
8/8
The St. Louis Local Dev. Co.
8/8
The St. Louis Local Dev. Co.
8/8
Enterprise Development Corp.
8/8
Rural Missouri, Incorporated
8/8
Crossroads EDC of St. Charles
8/8
The St. Louis Local Dev. Co.
8/8
Phoenix Local Dev. Corp.
8/8
San Diego County Loc. Dev. Corp.8/8
San Diego County Loc. Dev. Corp.8/8
San Diego County Loc. Dev. Corp.8/8
The St. Louis Local Dev. Corp. 8/8
The Jacksonville L.D.C, Inc.
8/8
HEDCO Local Development Corp.
8/8
Cert. Dev. Co. of Mississippi
8/8
The St. Louis County L.D.C.
8/8
Gr. Bakersfield Loc. Dev. Corp. 8/8
Commonwealth Sm. Bus. Dev. Corp.8/8
Brattleboro Dev. Credit Corp.
8/8
North Texas Cert. Dev. Corp.
8/8
Cleveland Citywide Dev. Corp.
8/8
The St. Louis Local Dev. Co.
8/8
Hamilton County Dev. Co., Inc. 8/8
Phoenix Local Dev. Corp.
8/8
Jacksonville Loc. Dev. Co., Inc.8/8
Area Investment and Dev. Corp. 8/8
Louisville Econ. Dev. Corp.
8/8
BEDCO Development Corp.
8/8
Rural Enterprises, Inc.
8/8
Alabama Community Dev. Corp.
8/8
Neuse River Dev. Auth., Inc.
8/8
Centralina Dev. Corp., Inc.
8/8
Alabama Community Dev. Corp.
8/8
E.C.I.A. Business Growth, Inc. 8/8
Middle Flint Area Dev. Corp.
8/8
Onondaga Indus. Dev. Second Corp8/8
Columbus Countywide Dev. Corp. 8/8
San Diego County Loc. Dev. Corp.8/8
Lake County Economic Dev. Corp. 8/8
34,000.00
46,000.00
57,000.00
72,000.00
75,000.00
91,000.00
94,000.00
96,000.00
105,000.00
108,000.00
130,000.00
152,000.00
187,000.00
208,000.00
282,000.00
293,000.00
390,000.00
498,000.00
500,000.00
30,000.00
35,000.00
46,000.00
49,000.00
50,000.00
50,000.00
52,000.00
57,000.00
57,000.00
73,000.00
91,000.00
120,000.00
120,000.00
125,000.00
130,000.00
138,000.00
138,000.00
139,000.00
142,000.00
148,000.00
149,000.00
152,000.00
157,000.00
170,000.00
183,000.00
185,000.00
200,000.00
201,000.00
208,000.00
216,000.00
229,000.00
236,000.00
257,000.00
265,000.00
270,000.00
315,000.00
315,000.00
336,000.00
384,000.00
420,000.00
497,000.00
37,000.00
44,000.00
65,000.00
8/1/99
8/1/99
8/1/99
8/1/99
8/1/99
8/1/99
8/1/99
8/1/99
8/1/99
8/1/99
8/1/99
8/1/99
8/1/99
8/1/99
8/1/99
8/1/99
8/1/99
8/1/99
8/1/99
8/1/04
8/1/04
8/1/04
8/1/04
8/1/04
8/1/04
8/1/04
8/1/04
8/1/04
8/1/04
8/1/04
8/1/04
8/1/04
8/1/04
8/1/04
8/1/04
8/1/04
8/1/04
8/1/04
8/1/04
8/1/04
8/1/04
8/1/04
8/1/04
8/1/04
8/1/04
8/1/04
8/1/04
8/1/04
8/1/04
8/1/04
8/1/04
8/1/04
8/1/04
8/1/04
8/1/04
8/1/04
8/1/04
8/1/04
8/1/04
8/1/04
8/1/09
8/1/09
8/1/09
12.857%
12.857%
12.857%
12.857%
12.857%
12.857%
12.857%
12.857%
12.857%
12.857%
12.857%
12.857%
12.857%
12.857%
12.857%
12.857%
12.857%
12.857%
12.857%
12.884%
12.884%
12.884%
12.884%
12.884%
12.884%
12.884%
12.884%
12.884%
12.884%
12.884%
12.884%
12.884%
12.884%
12.884%
12.884%
12.884%
12.884%
12.884%
12.884%
12.884%
12.884%
12.884%
12.884%
12.884%
12.884%
12.884%
12.884%
12.884%
12.884%
12.884%
12.884%
12.884%
12.884%
12.884%
12.884%
12.884%
12.884%
12.884%
12.884%
12.884%
12.883%
12.883%
12.883%
INTEREST
RATE
(other than
semi-annual)
Page 7 of 8
FEDERAL FINANCING BANK
AUGUST 1984 ACTIVITY
BORROWER
DATE
AMOUNT
OF ADVANCE
FINAL
MATURITY
INTEREST
RATE
(semiannual)
INTEREST
RATE
(other than
semi-annual)
State & Local Development Company Debentures (Cont'd)
67,000.00
83,000.00
97,000.00
111,000.00
116,000.00
133,000.00
141,000.00
143,000.00
179,000.00
187,000.00
202,000.00
206,000.00
210,000.00
224,000.00
229,000.00
253,000.00
262,000.00
270,000.00
287,000.00
300,000.00
348,000.00
365,000.00
376,000.00
420,000.00
420,000.00
427,000.00
449,000.00
500,000.00
500,000.00
500,000.00
500,000.00
8/1/09
8/1/09
8/1/09
8/1/09
8/1/09
8/1/09
8/1/09
8/1/09
8/1/09
8/1/09
8/1/09
8/1/09
8/1/09
8/1/09
8/1/09
8/1/09
8/1/09
8/1/09
8/1/09
8/1/09
8/1/09
8/1/09
8/1/09
8/1/09
8/1/09
8/1/09
8/1/09
8/1/09
8/1/09
8/1/09
8/1/09
12.883%
12.883%
12.883%
12.883%
12.883%
12.883%
12.883%
12.883%
12.883%
12.883%
12.883%
12.883%
12.883%
12.883%
12.883%
12.883%
12.883%
12.883%
12.883%
12.883%
12.883%
12.883%
12.883%
12.883%
12.883%
12.883%
12.883%
12.883%
12.883%
12.883%
12.883%
1,000,000.00
1,000,000.00
500,000.00
8/1/87
8/1/91
8/1/94
12.575%
12.865%
12.825%
Eastern Minnesota Ec. Corp.
8/8
Texas Cert. Dev. Co., Inc.
8/8
Louisville Ec. Dev. Corp.
8/8
Columbus Countywide Dev. Corp. 8/8
Columbus Countywide Dev. Corp. 8/8
Columbus Countywide Dev. Corp. 8/8
Texas Cert. Dev. Co., Inc.
8/8
Greater Southwest Kansas CDC
8/8
Bay Colony Dev. Corp.
8/8
New Haven Community Inv. Corp. 8/8
Lompoc Development Corp.
8/8
San Diego County Loc. Dev. Corp.8/8
Bay Colony Dev. Corp.
8/8
Bay Area Employment Dev. Co.
8/8
Washington Community Dev. Corp. 8/8
Evergreen Com. Dev. Assoc.
8/8
Pennyrile Area Dev. Dis., Inc. 8/8
Rural Missouri, Inc.
8/8
San Diego County L.D.C.
8/8
Bar Area Bus. Dev. Co.
8/8
North Shore Bus. Finance Corp. 8/8
Grig. Aurora & Colorado Dev. Co.8/8
Gr. Salt Lake Bus. District
8/8
Bay Area Bus. Dev. Co.
8/8
Fargo-Cass County I.D.C.
8/8
Bay Colony Dev. Corp.
8/8
Wisconsin Bus. Dev. Fin. Corp. 8/8
Wisconsin Bus. Dev. Fin. Corp. 8/8
River East Progress, Inc.
8/8
Nevada State Dev. Corp.
8/8
Bay Area Bus. Dev. Co.
8/8
Small Business Investment Company Debentures
North Star Ventures, Inc.
Frontenac Capital Corp.
Interstate Capital Co., Inc.
8/22
8/22
8/22
TENNESSEE VALLEY AUTHORITY
Seven States Energy Corporation
Note A-84-13 8/31
515,884,127.71
11/30/84 11.245%
DEPARTMENT OF TRANSPORTATION
Section 511—4R Act
Milwaukee Road #511-2
8/17
107,611.00
6/30/06
12.836
FEDERAL FINANCING BANK
August 1984 Commitments
BORROWER
GUARANTOR
Botswana
Colombia
Egypt
Greece
Israel
Lebanon
Morocco
Thailand
Pittsburgh, PA
C o m Belt Power
DOD
DOD
DOD
DOD
DOD
DOD
DOD
DOD
HUD
REA
AMOUNT
EXPIRES
7,000,000
17,500,000
537,000,000
500,000,000
600,000,000
15,000,000
38,750,000
20,000,000
165,000
23,583,000
7/25/86
9/5/85
7/31/86
8/25/86
8/25/86
1/21/86
5/30/86
9/5/86
5/1/85
8/28/91
$
MATURITY
7/25/92
9/5/91
7/31/14
8/25/14
8/25/14
1/25/96
5/31/96
9/5/96
5/1/04
12/31/17
FEDERAL FINANCING BANK HOLDINGS
(in millions)
Program
August 31, 1984
July 31, 1984
Page 8 of 8
Net Change
8/1/84-8/31/84
Net Change-—FY 1984
10/1/83-8/31/84
On-Budget Agency Debt
Tennessee Valley Authority $ 13,305.0
Export-Import Bank
NCUA-Central Liquidity Facility
$ 13,345.0
15,563.4
170.5
$ -40.0
15,563.4
195.0
24.5
$ 190.0
887.5
150.8
1,087.0
51.3
1,087.0
51.3
-0-0-
-67.0
-73.4
58,856.0
116.1
132.0
11.0
3,467.5
40.9
340.0
116.1
132.0
11.0
3,467.5
40.6
2,505.0
-2.7
-11.7
-5.3
16,684.2
5,000.0
292.2
-0-
Off-Budget Agency Debt
U.S. Postal Service
U.S. Railway Association
Agency Assets
Farmers Home Administration 59,196.0
DHHS-Health Maintenance Org.
DHHS-Medical Facilities
Overseas Private Investment Corp.
Rural Electrification Admin.-CBO
Small Business Administration
-0-0-0-0-.3
-0-7.9
Government-Guaranteed Lending
DOD-Foreign Military Sales 16,976.4
DEd.-Student Loan Marketing Assn.
DOE-Geothermal Loan Guarantees
DOE-Non-Nuclear Act (Great Plains)
DHUD-Community Dev. Block Grant
DHUD-New Communities
DHUD-Public Housing Notes
General Services Administration
DOI-Guam Power Authority
DOI-Virgin Islands
NASA-Space Communications Co.
DON-Dafense Production Act
Rural Electrification Admin.
SBA-Small Business Investment Cos.
SBA-State/Local Development Cos.
TVA-Seven States Energy Corp.
DOT-Amtrak
DOT-Section 511
DCT-WMATA
TOTALS^ $ 144,062.7
figures may not total due to rounding
5,000.0
4.3
1,276.0
224.0
33.5
2,178.5
413.3
36.0
28.7
916.1
2.9
20,741.7
854.8
335.7
1,539.5
-0159.5
177.0
-0-0-
4.3
1,262.5
219.8
33.5
2,178.5
413.3
36.0
28.7
908.2
13.5
2.8
4.2
-0-0-0-0-07.9
0.2
20,670.9
861.1
317.2
1,523.6
70.8
-6.3
18.5
15.9
-0-
-00.1
-0-
159.4
177.0
$ 143,321.6
$
741.1
2,683.0
-0-40.7
390.5
46.7
-0111.7
-3.9
-0-0.4
-31.2
1.9
1,802.8
50.4
188.0
121.0
-880.0
-24.1
-0$ 7,980.9
TREASURY NEWS
Department of the Treasury • Washington, D.C. • Telephone 566-2041
Remarks by the Honorable Beryl W. Sprinkel
Under Secretary for Monetary Affairs
United States Treasury Department
before the
Japan Society, New York
Impact of Internationalization of the Yen
and Japanese Financial Liberalization
Thursday, October 25, 1984
It is a pleasure to be here at the Japan Society to discuss
"Japan's Changing Financial Structure." As you know, I spent
many long hours earlier this year discussing this subject with
my colleagues from the Japanese Ministry of Finance. Quite frankly,
there were moments during our discussions when I was more struck
by the "structure" of Japan's financial markets than by the fact
that they were "changing." However, I think the Japane.se .financial
system i_s undergoing fundamental changes which have important consequences for Japan, its bilateral relationship with the United
States and the international financial system. And I am very
pleased to have an opportunity to share my thoughts on these
matters with you today.
Let me begin by explaining how the discussions on Japanese
capital markets came about. The Administration has been concerned
about exchange rate issues since first coming to office. During
his trip to Tokyo last November, President Reagan conveyed his
continuing deep concern about Japan's capital market policies and
the value of the yen to President Nakasone. Following their discussions, the two leaders announced their "mutual commitment toward
specific steps to achieve open capital markets [to] allow the yen
to reflect more fully Japan's underlying political stability and
economic strength as the second largest economy in the free world."
Treasury Secretary Regan and Finance Minister Takeshita consulted
further on the desirability of liberalizing Japan's domestic
market and increasing the international use of the yen. Agreeing
that further progress was required, the Ministers asked Vice
Finance Minister Oba and me to co-chair a Working Group of financial
authorities from the U.S. Treasury and the Japanese Ministry of
Finance. They charged us with monitoring U.S. and Japanese progress
in implementing a number of agreed measures announced in November
and with developing additional steps to internationalize the yen
R-2896
and liberalize Japan's domestic capital markets.
-2After six intensive negotiating sessions between February
and May, the Working Group reached agreement on the "Report on
Yen/Dollar Exchange Rate Issues". This report, which was released
by Treasury Secretary Regan and Japanese Finance Minister Takeshita
on May 29, contained a series of agreed measures designed to:
increase the use of the yen internationally, liberalize Japan's
domestic capital markets, and improve the access of foreign
financial institutions to the Japanese market.
Those who are familiar with the Japanese financial system
will recognize that this agreement may mark the beginning of a new
era in Japanese financial policy. Although some liberalization was
already underway before our discussions took place, the Ministry
of Finance's modus operandi remained essentially to control,
regulate and give "guidance." This report lays the basis for
a fundamentally new approach: letting market forces influence
investor and borrower behavior.
I would like to outline the thinking behind this agreement
and discuss its effect on the U.S.-Japan bilateral economic relationship, as well as its international implications.
background to the Negotiations
As the title of our report suggests, an important incentive
to delve into these- matters was our concern about the yen/dollar
exchange rate. The Administration has been concerned about the
yen/dollar rate since first coming to office.- It was clear that
the Japanese authorities were not directly depressing the value of
their currency. However, it was equally apparent that the yen did
not reflect the underlying strength of the Japanese economy.
Since the 1940s, Japan has been the fastest growing industrialized country. In 1953 the Japanese economy accounted for
about 6 percent of the aggregate GNP of industrialized countries;
last year its share had risen to 14 percent. Japan is now the
second largest Western economy.
However, the yen has yet to assume similar importance in
international transactions. For example, only about 3-1/2 percent
of the world's official reserves were denominated in yen last year.
In addition, only a small percentage of Japan's trade is paid for
in yen. A mere forty percent of Japanese exports are denominated
in national currency, compared to about 90 percent of U.S. exports
and 60-85 percent of the exports of major European countries.
Only about three percent of Japanese imports denominated in yen,
versus 70-85 percent of U.S. imports in domestic currency and
30-45 percent for major European countries. The dearth of Euroyen
bond issues is still another example. In contrast to the large
Eurobond markets in other major currencies, only a handful of
Euroyen bond issues are made each year.
-3-
We concluded that Japan's financial policies were an important
factor in preventing the yen from becoming the strong international
currency befitting the Japanese economy. As many of you are aware,
Japan's domestic capital market has been highly regulated over the
years. For example, most interest rates have been controlled, the
activities of Japanese financial institutions have been closely
circumscribed, access to the Japanese bond market has been curtailed,
and the international use of the yen has been restricted. Because
of these and other limitations, such as the absence of a free Euroyen
market, potential investors have not had access to the broad range
of attractive assets which is available in other currencies. As a
result, there has been little incentive for foreigners to hold assets
in yen and relatively little demand for yen. We believe this is an
important factor in the yen's weakness on the international exchange
markets.
We were also concerned about the broader impact of Japan's
policies on the international economic system. My long study of
markets has led me to conclude that allowing supply and demand to
determine prices is generally the most effective way to ensure
that resources are allocated most efficiently. In response to
the free movement of prices, new factories are opened, old ones
are closed, and labor moves from one job to another. Production
is maximized along the lines which people prefer.
The same applies to the capital markets. If, for example,
interest rates are not permitted to move freely, or if capital
controls are imposed, funds will not be allocated in the most
efficient manner. This is not simply a matter of concern for the
domestic authorities. In today's highly interdependent world, the
policies of one government are quickly transmitted to the rest of
the world, affecting the allocation of resources worldwide. Thus,
financial market policies are an important international concern.
Yen/Dollar Report
As we examined these problems more closely, we identified
three areas where we thought changes in Ministry of Finance policy
were essential: in the liberalization of Japan's domestic capital
market; in the development of a free Euroyen market; and in freer
access to the Japanese market for foreign financial institutions.
The final Yen/Dollar Report contained agreement on major steps in
all three areas.
One of our primary concerns has been the liberalization of
the domestic capital market. Our interest in this area is twofold.
First, we believe it is important to increase the depth and breadth
of market for yen assets. In addition, we hope to improve the
efficiency of resource allocation in Japan and the rest of the
world. On both counts, we considered it essential to eliminate
interest rate ceilings and allow interest rates to be determined
by market forces.
-4-
Under the terms of the agreement, interest rate ceilings on
large deposits will be removed over the next two to three years.
In addition, by April 1985 banks will be allowed to sell new types
of deposit instruments in large denominations and with market
interest rates. Restrictions will also be eased on the issue of
domestic CDs. Among other measures to increase the depth and
breadth of the domestic market, Japan has agreed to allow qualified
foreign banks with offices in Japan to trade GOJ bonds. It has
also agreed to:
remove non-prudential limits on overseas lending
from Japan;
develop a plan for establishing a Banker's Acceptance
market; and,
eliminate swap limitations, thereby enabling foreign
banks to increase their funding sources in yen.
We also attach great importance to development of Euroyen
market, since in our view it offers the most direct way of
establishing a market governed by market forces that will provide foreign investors with attractive assets in yen. In the
Yen/Dollar Report, the Ministry of Finance announced the basic
commitments and decisions necessary to allow for the development
of Euroyen bond and banking markets, where non-Japanese can freely
invest in or- borrow a range of yen-denominated instruments.
Specifically, in the Euroyen bond market, the number and
types of issuers of Euroyen bonds will be expanded significantly
effective December 1, 1984, with the result that any borrower
meeting certain credit criteria can issue. The criteria initially
applied will parallel those in the Samurai market — that is, the
domestic Japanese market for foreign yen bond issues. It is particularly important that for the first time non-Japanese corporations
will be able to issue yen-denominated Eurobonds.
As of April 1, 1985, the credit criteria will be liberalized
to permit any borrower rated AA or better, as well as a reasonable
portion of A-rated corporations, to issue such bonds. There will be
no restrictions on these corporations, or any other foreign issuers
of Euroyen bonds, with regard to the number or size of issues, and no
requirement to use the Samurai market as a pre-requisite for issuing
Euroyen bonds. In addition, all guidance, restrictions or requirements on the choice of lead managers of Euroyen bond issues by both
Japanese residents and non-residents will be removed, effective
December 1, 1984. We believe these characteristics can provide
the framework for the development over time of a fully functioning
Euroyen bond market.
Another important aspect of the development of a Euroyen
market is the development of a Euroyen banking market. Two major
steps are being taken toward this end. First, by the end of 1984
-5foreign and Japanese banks will be authorized to issue short-term
negotiable Euroyen certificates of deposit from their offices
outside of Japan. This will provide an important funding base to
the Euroyen banking market, as well as an attractive short-term
investment instrument. As with the Euroyen bond market, the
report spells out the characteristics of this market, stating
clearly the absence of any restrictions except for a maximum
maturity of six months, and a prohibition on sale to Japanese
residents.
On the lending side, Japanese and non-Japanese banks were
free to extend Euroyen loans to non-residents, as of June 1, 1984.
There are no limits on the amount or timing, and no prior approval
is required. Euroyen loans by Japanese banks must have a maturity
of one year or less, but we understand that no maturity limitations
will apply to Euroyen lending by non-Japanese banks. Thus, we
believe that there is considerable potential under these new
policies for the development of a major Euroyen banking market.
The final section of the report is intended to improve the
access of foreign financial institutions to the Japanese market.
This is important for two reasons. First, greater access for
foreign firms will help ensure that foreign investors have access
to Japanese assets; this will further our goal of increasing the
international use of the yen. It is also consistent with the
principle of "national treatment", to which both the United States
and Japan are committed. This means that U.S. firms in Japan are
to be treated the same way as Japanese firms in Japan, just as we
treat U.S. and foreign firms equally in the United States.
An important means of improving the access of foreign firms
to the Japanese market is to increase the "transparency" of Ministry
of Finance regulatory policies. Previously, the Ministry's system
of informal guidance created great uncertainty for foreign firms and
sometimes appeared to discriminate against them. To correct this
impression, the Ministry of Finance has made a general commitment
to operate in a more transparent fashion.
To carry out this
pledge, it has already made a number of announcements clarifying
its regulatory policies and publicizing the equal treatment provided
to foreign firms.
The Yen/Dollar Agreement also contains specific commitments
that will provide foreign firms new competitive opportunities.
Beginning next year, qualified foreign banks will be licensed for
the first time to manage Japanese trust funds. Previously, this
business has been the exclusive domain of Japanese firms. In
addition, the Ministry of Finance has requested the Tokyo Stock
Exchange to study ways of providing membership opportunities to
foreign firms. In the meantime, the Ministry of Finance is
prepared to assist foreign firms to join under the existing
membership system.
-6Impact on the U.S.- Japan Relationship:
You may wonder what all of these measures, some of which may
seem rather arcane, auger for the United States' bilateral relationship with Japan. In my view, one immediate effect has been greatly
to enhance the understanding between our two countries. The negotiations leading up to the Yen/Dollar Report were not easy. Japan's
system of rules, regulations and official "guidance" is extremely
complex and opaque. We had a long educational process, as did our
counterparts from the Ministry of Finance. However, after six
strenuous meetings, we came to an understanding on most issues,
demonstrating our ability to find mutually acceptable approaches
to some very complex problems.
More importantly, I think our agreement will yield important
benefits for the United States and Japan, which will help keep our
relationship strong. First, it is no secret that both countries
are wrestling with the political implications of the United States'
large trade deficit with Japan. In the United States, there are
worries about its impact on income and employment, while Japan is
concerned about calls for greater trade protection. As a strong
proponent of the free market system, I believe that markets will
adjust to restore equilibrium, if they are permitted to operate
freely. Thus, I have high expectations for the effects of market
forces as Japan liberalizes its financial market policies.
Specifically, we expect that over time the policy changes
outlined in the Yen/Dollar Report will have important consequences
for the yen/dollar exchange rate. With the development of a freely
operating Euroyen market and the deregulation of domestic interest
rates, investors will have access to a wide range of attractive
assets in yen. This should fundamentally alter the underlying
demand for the yen, leading to its appreciation against other
currencies, including the dollar.
We recognize, of course, that there are so many other factors
influencing exchange rates that it may be difficult to discern the
separate effects of the Yen/Dollar Agreement, especially in the
short run. In fact, it is possible that for a time other factors
may offset, or outweigh, the effects of the Yen/Dollar Agreement.
We will also have to wait to see how the markets react as the new
opportunities become available. We are convinced, however, that
permitting market forces gradually to assume a greater role in
determining the value of the yen will help the yen strengthen to
a level which is more in keeping with the underlying strength of
the Japanese economy.
A stronger yen would have important benefits for the United
States. First, it would improve the competitiveness of U.S.
exports and import-competing industries. This would mean more
employment and higher sales in these industries. In addition,
as the yen attains a larger role in the international financial
system, we expect that it will increasingly be used to denominate
-7international trade flows, official reserves and private portfolio investments. These changes, along with the freer access
to the domestic Japanese market, will provide foreign financial
institutions additional opportunities for profit and employment.
The agreement also contains important benefits to Japan.
The measures it contains will help bring about greater efficiency
in the Japanese capital market. The deregulation of domestic
interest rates will help ensure that within Japan, domestic
savings are invested where they will earn the highest rates of
return, thereby maximizing the marginal productivity of capital.
Deregulation will also directly benefit Japanese citizens in the
form of market rates of interest on their savings. Opening the
Japanese market to foreign financial institutions will generate
healthy competition in the provision of financial services in
Japan; this will promote low cost services for Japanese borrowers
and investors.
International Implications of the Agreement
The Yen/Dollar Agreement also has significant international
implications which work to the advantage of Japan, the United
States and the rest of the world. Japan's decision to increase
the international role of the yen and open its domestic financial
markets is a tangible indication of its desire to assume the inter
national financial responsibilities befitting a major economic pow
And as Japan becomes more fully integrated in the world's financia
system, its international stature will continue to grow.
In addition, Japan's liberalization efforts should contribute
significantly to the efficiency of global resource allocation and
increased economic welfare worldwide. As Japan liberalizes its
financial policies, there will be greater scope for foreign entiti
to tap the considerable level of domestic Japanese savings. This
will provide new sources of investment capital and reduce pressure
on other markets. In addition, these policy changes will permit
a more efficient global allocation of Japanese savings, thereby
increasing welfare worldwide.
Conclusion:
In conclusion, I share Treasury Secretary Regan's view,
expressed when he issued the Yen/Dollar Agreement in May, that
this is an "historic document." I believe that it provides the
framework for the yen's development into a truly international
currency and for Japan's full integration into the international
financial system.
month to assess tne progress to date and what additional steps may
be needed. Over the longer term, we will continue to watch how
the market develops and consider what further action should be
taken.
TREASURY NEWS
epartment of the Treasury • Washington, D.C. • Telephone 566-2041
FOR IMMEDIATE RELEASE
October 24, 1984
RESULTS OF AUCTION OF 3-YEAR 11-MONTH DOMESTIC NOTES
The Department of the Treasury has accepted $6,015 million of
$15,962 million of tenders received from the public for the 3-year
11-month notes, Series N-1988, auctioned today. The notes will be
issued October 31, 1984, and mature September 30, 1988.
The interest rate on the notes will be 11-3/8% 1/. The range
of accepted competitive bids, and the corresponding prices at the
11-3/8% interest rate are as follows:
Yield
Price
Low
11.38%
99.985
High
11.44%
99.799
Average
11.42%
99.861
Tenders at the high yield were allotted 25%.
TENDERS RECEIVED AND ACCEPTED (In Thousands)
Location
Received
Accepted
Boston
283,919
$
43,919
$
New York
12 ,847,581
5,146,331
Philadelphia
21,449
20,449
1
Cleveland
142,154
.32,154
Richmond
53,748
36,993
Atlanta
58,020
33,020
Chicago
1 ,138,334
161,834
St. Louis
119,810
87,810
Minneapolis
22,060
16,060
Kansas City
46,563
42,363
7,489
7,489
Dallas
283,724
1 ,218,224
San Francisco
3,056
3,056
Treasury
$15,,962,407
$6,015,202
Totals
The $6,015 million of accepted tenders includes $625
million
of noncompetitive tenders and $5,390 million of competitive tenders
from the public.
In addition to the $6,015 million of tenders accepted in the
auction process, $220 million of tenders was awarded at the average
price to Federal Reserve Banks as agents for foreign and international
monetary authorities. An additional $300 million of tenders was also
accepted at the average price from Federal Reserve Banks for their own
account in exchange for Treasury bills issued on October 1, 1984, for
securities that matured September 30, 1984.
1/ This interest rate, payable on an annual basis, will also be
applied to the 3-year 11-month foreign-targeted notes auctioned
today.
R-2897
TREASURY NEWS
lepartment of the Treasury • Washington, D.C. • Telephone 566-2041
FOR IMMEDIATE RELEASE
October 24, 1984
RESULTS OF AUCTION OF 3-YEAR 11-MONTH FOREIGN-TARGETED NOTES
The Department of the Treasury has accepted $1,001 million
of $3,996
million of tenders received from eligible bidders
for the 3-year 11-month foreign-targeted notes, Series P-1988,
auctioned today. The notes will be issued October 31, 1984, and
mature September 30, 1988.
The interest rate on the notes will be 11-3/8% 1/ per annum,
payable annually. The range of accepted competitive bids and the
corresponding prices at the 11-3/8% interest rate are as follows:
Yield 2/ Price
Low
High
Average
11.30%
11.46%
11.41%
100.271
99.788
99.939
Tenders at the high yield were allotted 92%.
1/ Established in the auction of the companion domestic issue.
2/ Based on an annual interest payment.
R-2898
TREASURY NEWS
department of the Treasury • Washington, D.C. • Telephone 566-2041
FOR IMMEDIATE RELEASE
October 24, 1984
CONTACT:
Thym S. Smith
566-5252
STATEMENT BY SECRETARY DONALD T. REGAN
Secretary Regan stated that he was very gratified with
the results of the auction today of the 3 year-11 month note
targeted to foreign investors.
The $4 billion of foreign tenders
far exceeded the $1 billion amount sought and accepted by the
Treasury, and the strength and diversity of the bidding from
both European and Japanese investors was most encouraging.
The
Treasury will carefully review these results and their implications
for future offerings of foreign targeted securities.
R-2899
TREASURY NEWS
epartment of the Treasury • Washington, D.C. • Telephone 566-2041
Contact: Thym Smith (566-5252)
Edwin L. Dale (395-3080)
FOR IMMEDIATE RELEASE
October 25, 1984
JOINT STATEMENT OF
DONALD T. REGAN, SECRETARY OF THE TREASURY
AND
DAVID A. STOCKMAN,
DIRECTOR OF THE OFFICE OF MANAGEMENT AND BUDGET
ON
BUDGET RESULTS FOR FISCAL YEAR 1984
SUMMARY
The Treasury Department is today releasing the September Monthly Statement of
Receipts and Outlays of the United States Government, which shows the actual
budget totals for the fiscal year that ended on September 30, 1984. The
statement shows:
— receipts of $666.5 billion;
— on-budqet outlays of$841.8 billion;
— total outlays of $851.8 billion;
-- an on-budget deficit of $175.3 billion; and
-- a total deficit of $185.3 billion.
R-2900
2
Table 1.-BUDGET TOTALS
(in billions of dollars)
Outlays Deficit (-)
Receipts
On-budqet
Total
On-budqet
Total
870.0
858.0
851.8
-183.7
-174.3
-175.3
-199.9
-187.3
-185.3
1983 Actual 600.6 795.9 808.3 -195.4 -207.7
1984 Estimates and
Actual:
Februaryl/
Auqust 2/
Actual
670.1
670.7
666.5
853.8
845.0
841.8
1/ February 1984 from the 1985 Budget.
2/ Auqust 1984 from the Mid-Session Review of the 1985 Budget.
Receipts.—Receipts were estimated in the February budget at $670.1 billion,
and were revised upward slightly to $670.7 billion in the August Mid-Session
Review. In contrast, actual receipts were $666.5 billion, $4.2 billion below
the August estimate.
This decrease was the net effect of lower than
anticipated collections of income taxes, partially offset by higher than
anticipated collections of other sources of receipts, as described below.
-- Individual income taxes were $3.6 billion below the August estimate.
This decrease was in large part due to lower than estimated collections
of withheld income taxes, reflecting lower nominal incomes than assumed
in the Mid-Session Review.
-- Lower-than-estimated collections of corporation income taxes, primarily
reflecting lower corporate profits than assumed in Auqust, reduced
receipts by $2.1 billion.
— Other receipts were higher by $1.5 billion, primarily due to higher
than previously assumed collections of unemployment insurance receipts,
excise taxes, and deposits of earnings by the Federal Reserve.
Outlays.—In the February Budget, total outlays were estimated at $870.0
billion. This estimate was reduced by $12.0 billion, to $858.0 billion, in the
Mid-Session Review, reflecting the net impact of technical reestimates, policy
changes, congressional action, and a revised economic forecast. Actual 1984
total outlays were $851.8 billion, $6.2 billion below the August estimate.
This decrease is explained entirely by a shortfall in Defense military
spending. Nondefense SDending in the aggregate was essentially unchanged from
August, although there were sizable revisions for individual programs.
3
ON-BUDGET OUTLAY CHANGES BY AGENCY AND PRQGRAM
The major outlay chanqes since the August Mid-Session Review are described
below.
Table 2, which follows this discussion, displays the estimates for
February and August and the actual levels by aqency and major proqram.
Funds Appropriated to the President
— Outlays for foreign military sales credit were $0.4 billion below the
August estimate because slower than projected deliveries of military
eguipment and services reguired a lower level of loan disbursements.
-- An increase of $0.6 billion above the August estimate in international
monetary programs reflects the impact of exchange rate changes on the
U.S. reserve position in the International Monetary Fund.
Department of Agriculture
--
Outlays for* the Commodity Credit Corporation (CCC) were $1.0 billion
above the Mi
!id-Session Review estimate. This_ difference is attributable
primarily to a shortfall in corn loan repayments because corn prices
were lower than predicted.
—
Farmers Home Administration outlays were $1.4 billion higher than the
August estimate, primarily due to lower interest collections on
outstanding loans caused by the continuing economic problems of the
agriculture industry.
-- Offsetting receipts to the Agriculture Department were $0.4 billion
lower than the Mid-Session estimate largely because the volume of
timber harvested was lower than expected.
Department of Defense - Military
-- Defense outlays were $6.2 billion less than the Mid-Session estimate.
The shortfall consists of $2.6 billion in lower than anticipated costs,
$1.7 billion in programs delays due in part to improved management of
spare parts acquisition, $0.7 billion in later than anticipated
payments, and $1.2 billion in estimating errors, primarily in revolving
funds.
Department of Education
— Net outlays for the Department of Education (ED) were $0.3 billion
below the August estimate.
This change results primarily from
increased college housing loan repayments due to a provision in the
1984 appropriation act that enables colleges to pay off their
outstanding loan amounts on a discounted basis, using rates set by ED
and Treasury at levels that provide a net benefit to the Government.
4
Department of Health and Human Services
— Outlays for Medicare were $1.5 billion below the Mid-Session estimate
($.9 billion in the Hospital Insurance (HI) and $.6 billion in the
Supplementary Medical Insurance (SMI) trust funds). The SMI shortfall
appears larqely due to lags in processing physician and clinical lab
claims associated with implementing recent legislation.
Hospitals
coming under the new Prospective Payment System (PPS) in the final
quarter of 1984 experienced larger than expected delays in processinq
claims, larqer than expected audit disallowances associated with
settinq initial PPS rates, and lower than expected incurred oroqram
costs.
— Outlays for Social Security (OASDI) were $0.4 billion below the Auqust
estimate largely because of lower administrative expenses for the
disability insurance program as a result of the moratorium on
continuing disability investigations, and a decrease in OASI benefits
caused by lower retroactive benefit payments and fewer retired persons.
Department of Housing and Urban Development
— Outlays for low-rent housing loans were $1.0 billion above the August
estimate, reflecting the extension of direct loans from HUD to public
housing authorities (PHAs) to meet unanticipated financing needs.
Recent questions concerninq the tax-exempt status of obligations issued
by PHAs led to a suspension of new obligation sales that would normally
finance public housing.
— Outlays of the GNMA special assistance functions fund were $0.2 billion
below the August estimate due to fewer purchases of GNMA tandem
mortgages.
Construction of housing projects in the pipeline is
proceeding more slowly than was expected.
Department of Transportation
-- Federal Highway Administration outlays were $0.4 billion below the
Mid-Session Review estimate, primarily due to congressional failure to
approve the Interstate Cost Estimate that would have allowed DOT to
apportion $7.0 billion to the States in 1984. States conserved their
apportioned obligation ceiling in anticipation of Interstate funds
until the last guarter, which reduced the expected outlay level.
Department of the Treasury
— Interest on the public debt was $1.7 billion higher than estimated in
the Mid-Session Review. This increase is due larqely to higher than
anticipated interest rates, differences in the timing and composition
of Treasury borrowing from what was previously assumed, and a technical
estimating error in the Mid-Session estimate.
5
Veterans Administration
— Total outlays for several veterans proqrams were $0.3 billion lower
than the Mid-Session estimate. The larqest factors in this change are
lower than anticipated caseloads and lower averaqe benefits in the
compensation and pension programs.
Federal Deposit Insurance Corporation
— FDIC outlays Increased $0.3 billion above the August estimate as a
result of FDIC providing assistance due to a number of unexpected bank
failures.
National Credit Union Administration
— Outlays of the NCUA were $0.3 billion above the Mid-Session estimate
because of increased borrowing by its central liquidity facility (CLF)
due to a greater number of member credit unions. CLF membership has
continued to arow over the oast year, from 25% to nearly 100% of all
credit unions.
Undistributed offsetting receipts
— Receipts from rents and royalties on the Outer Continental Shelf (PCS)
were $0.8 billion lower than estimated in the Mid-Session. Later than
anticipated lease execution" for two sales delayed receipts into
FY 1985, and actual average gas prices were lower than estimated.
OFF-BUDGET OUTLAY CHANGES
Federal Financing Bank outlays were $2.7 billion below the Mid-Session
estimates. The major factors responsible for this change were:
— Farmers Home Administration sales of loan assets to the FFB
decreased $1.1 billion due to lower than estimated demand for
disaster loans;
— Rural Electrification Administration guarantees of FFB loans
decreased $0.7 billion. The expected decline in this loan demand
resulting from existing excess electric capacity was more
pronounced than anticipated; and
— delays in the procurement of military equipment and services for
foreign countries led to lower than projected demand for foreign
military sales loans, resultinq in a $0.3 billion decrease from
Mid-Session.
Net outlays for the Postal Service were $0.2 billion below the Auqust
estimate due to a large volume of business that generated higher than
anticipated receipts.
Table 2.-1984 BUDGET RECEIPTS BY SOURCE AND OUTLAYS BY AGENCY
(fiscal years; in millions of dollars)
1984
1983
Actual
Estimate
August
February
Actual
Receipts by Source
Individual income taxes
Corporation i ncome taxes
Social insurance taxes and contributions:
Employment taxes and contributions
Unemployment insurance
Other retirement contributions
•
Subtotal, Social insurance taxes and contributions
Excise taxes
Estate and gift taxes
Customs
Miscellaneous receipts
Total, Receipts
288,938
37,022
293,260
66,606
299,525
59,016
295,955
56,893
185,766
18,799
4,429
211,692
23,330
4.471
212,001
24,647
4,505
212,184
25,138
4,580
208,994
239,494
241,153
241,902
35,300
6,053
8,655
15,601
38,195
5,922
9,064
17.531
37,164
6,052
11,178
16.577
37,361
6,010
11,370
16,965
600,562
670,071
670,665
666,457
-1217:84
October 25, 1984
Table 2.—1984 BUDGET RECEIPTS BY SOURCE AND OUTLAYS BY AGENCY (continued)
1983
Actual
1984
Estimate
February
August
Actual
On-Budqet Outlays by Major Agency
Legislative branch and the Judiciary
Executive Office of the President
Funds appropriated to the President:
Disaster relief
International security assistance:
Foreign military sales credit
Other
International development assistance
International monetary programs
Military sales programs
Other
Subtotal, Funds appropriated to the President.
2,225
2,578
2,574
2,450
94
112
112
95
202
220
220
243
609
1,616
3,830
3,037
1,416
3,582
2,911
1,060
3,974
2,876
3,068
2,352
—
___
565
-1,216
-878
-578
-389
263
225
210
209
5,427
8,052
7,762
8,538
Agriculture:
Commodity Credit Corporation and foreign assistance
Farmers Home Administration
Food and Nutrition Service
Offsetting receipts
Other
19,850
4,303
17,326
-868
5,775
7,817
4,709
17,121
-1,314
6,417
7,415
4,688
17,625
-1,314
6,396
8,450
6,066
17,579
-943
6,329
Subtotal, Agriculture
46,384
34,750
34,810
37,482
1,929
2,166
1,985>
1,892
61,468
64,915
53,624
20,554
4,450
64,545
68,539
64,450
25,157
8,310
64,545
68,33Q
63,750
23,847
6,520
64,125
67,369
61,879
23,117
4,315
205,011
231,000
227,000
220,805
150
Commerce
Defense-Military:
Military and retired military personnel
Operation and maintenance
Procurement
Research, development, test, and evaluation
Other
Subtotal, Defense-Military ,
-227 7:84
October- 2 5 ,
1984
Table 2.--1984 BUDGET RECEIPTS BY SOURCE AND OUTLAYS BY AGENCY (continued)
1984
1983
Actual
Defense-Civil
Education
Energy
Health and Human Services:
Social security (OASDI)
Medicare
Medicaid
Public Health Service
Other
Subtotal, Health and Human Services
Housing and Urban Development:
Housing payments
Federal Housing Administration fund
Low rent housing - loans and other expenses
Government National Mortgage Association
Community development grants
Other
Interior
Justice
Labor:
Training and employment services
Advances to the unemployment trust fund and other funds
Unemployment trust fund
Other
Intrabudgetary transactions
Subtotal, Labor
State
Actual
2,945
14,567
8,356
3,059
16,074
8,848
3,056
15,767
8,320
3,072
15,494
8,358
172,171
56,841
18,985
7,856
20,600
181,707
66,176
20,237
8,283
19,578
181,306
64,194
20,060
8,273
20,428
180,866
62,669
20,061
8,184
20,444
276,453
295,981
294,261
292,224
7,786
-192
8,584
-753
8,704
-504
125
125
871
8,774
-366
1,111
111
900
Subtotal, Housing and Urban Development
Estimate
February
August
612
3,554
3,156
1,141
3,900
2,898
3,900
2,736
3,819
2.566
15,315
15,895
15,831
16,517
4,569
2,849
4,854
3,437
4,816
3,313
4,889
3,171
3,858
12,043
32,655
2,509
-12,871
3,504
4,418
24,800
1,736
-7,395
3,292
4,282
25,800
1,980
-10,602
3,196
4,182
26,089
1,954
-10.899
38,194
27,062
24,752
24,522
2,267
2,600
2,445
2,428
-3217:84
October 25, 1984
Table 2.—1984 BUDGET RECEIPTS BY SOURCE AND
BY AGENCY (continued)
1983
Actual
Transportation:
Federal Highway Administration
Federal Aviation Administration
Other
Subtotal, Transportation
Treasury:
Interest on the public debt
Offsetti ng receipts
Other
Subtotal, Treasury
Environmental Protection Agency General Services Administration
National Aeronautics and Space Administration
Office of Personnel Management
Small Business Administration
Veterans Administration
District of Columbia
Export-Import Bank
Federal Deposit Insurance Corporation
Federal Emergency Management Agency
Federal Home Loan Bank Board
National Credit Union Administration
Postal Service payment
Railroad Retirement Board
Tennessee Valley Authority
Other (net)
Undistributed offsetting receipts:
Other interest
yy
Federal employer contributions to retirement funds-4Interest received by trust funds
••••••
Rents and royalties on the Outer Continental Shelf
1984
Estimate
February
August
Actual
8,949
3,404
8.263
20,616
11,362
4,096
9.876
25,334
10,956
3,895
9,443
24,294
10,569
3,819
9,517
23,904
128,813
-26,333
13.767
116,248
149,500
-25,437
13.644
137,707
152,100
-26,095
13,402
139,407
153,838
-25,881
13,008
140,964
4,299
145
6,664
21,278
479
24,816
693
578
-613
507
-453
-178
789
3,963
820
-8,122
4,244
-16,952
-10,492
3,958
546
7,068
22,565
443
25,771
567
1,724
-1,424
582
-699
-125
879
3,850
755
-8,844
4,733
-19,396
-8,700
4,088
425
7,068
22,624
336
25,850
567
1,078
-500
577
-700
-125
879
3,734
310
-13
4,712
-8,794
-20,199
-7,453
4,057
277
7,048
22,590
255
25,596
570
1,067
-248
590
-561
193
877
3,647
351
-18
4,489
-8,760
-20,333
-6,694
217:84
October- 25,
1984
Table 2.—1984 BUDGET RECEIPTS BY
AND OUTLAYS BY AGENCY (continued)
1984
Total, On-budget out1 ays
On-budget deficit (-)
Off-budget Federal entitles:
Federal Financing Bank
Strategic petroleum reserve
Postal Service
Other
Total, Off-budget outlays
Total, Outlays (on- and off-budget)
Total, Deficit (-)
1983
Actual
Estimate
February
Auqust
795,916
853,760
844,969
841,800
-195,354
-183,689
-174,303
-175,342
10,404
1,641
322
-10
12,729
2,157
1,209
101
9.946
2,212
575
299
7,277
2,329
360
31
12,357
16.196
13,033
9,996
808,274
869.956
858,001
851.796
-207,711
-199.884
-187,336
-185,339
Actual
NOTE: Detail may not add to totals because of rounding.
217:84
October 25, 1984
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TABLE III—RECEIPTS A N D OUTLAYS—(In millions)
Comparable Period Prior Fiscal Year
Current Fiscal Year to Date
Classification of
RECEIPTS
Individual income taxes:
Withheld
Presidential Election Campaign Fund
Other
Total—Individual income taxes
Gross
Receipts
Refunds
(Deduct)
Total—FOASI trust fund
Gross
Receipts
$21,852
1
11,716
33,568
$2,027
11,325
897
865
$31,541
360,726
11,891
11,325
Federal hospital insurance trust fund:
Federal Insurance Contributions Act taxes
Self-Employment Contributions Act taxes
Receipts from railroad retirement account
Deposits by States
Total—FHI trust fund
349,630
$60,692
74,179
56,893
61,780
24,758
129,090
6,602
14,916
2.132
128,794
6,602
14,916
2,132
110,267
4,999
13,998
293
152,740
152,444
13,451
733
13,412
733
15,646
823
1,618
143
1,618
143
1,931
15,907
18,401
34,557
1,374
308
4,103
)4,476
1,374
30,919
3,366
2%
897
865
13,088
1,241
1,241
2,964
225
2,964
225
3,366
Railroad retirement accounts:
Railroad Retirement Act taxes
Taxes on Railroad Retirement benefits
130
128
38
Total—Unemployment trust fund
934
309
4,103
3,563
40,342
40,262
35,724
3,334
251
3,321
251
2,807
212,184
186,197
428
(**)
130
127
38
19,036
6,052
202
19,036
5,899
202
14,425
4,316
168
(")
295
25,291
25,138
18,909
4,455
38
2
4,455
38
2
4,311
38
2
4,494
4,494
4,351
Other retirement contributions:
Federal employees retirement contributions:
Civil service retirement and disability fund
Foreign service retirement and disability fund
Other
343
3
343
3
(")
(**)
Total—Federal employees retirement contributions .
346
See footnotes on page 3.
$64,771
308
17,990
Total—Employment taxes and contributions
Unemployment insurance:
Unemployment trust fund:
State taxes deposited in Treasury
Federal Unemployment Tax Act taxes
Railroad Unemployment Ins. Act Contributions
$266,010
36
83.585
295,955
Federal disability insurance trust fund:
Federal Insurance Contributions Act taxes
Self-Employment Contributions Act taxes
Receipts from railroad retirement account
Deposits by States
Taxes on benefits
Total—FD1 trust fund
Refunds
(Deduct)
Gross
Receipts
Net
Receipts
Refunds
(Deduct)
$279,345
35
81,346
Corporation income taxes
Social insurance taxes and contributions:
Employment taxes and contributions:
Federal old-age and survivors ins. trust fund:
Federal Insurance Contributions Act taxes
Self-Employment Contributions Act taxes
Deposits by States
Taxes on benefits
Net
Receipts
431
TABLE III—RECEIPTS A N D OUTLAYS—(In millions)
This Month
Classification of
RECEIPTS—Continued
Gross
Receipts
Comparable Period Prior Fiscal Year
Current Fiscal Year to Date
Refunds
(Deduct)
Net
Receipts
Gross
Receipts
Gross
Receipts
Net
Receipts
Refunds
(Deduct)
Refunds
(Deduct)
Net
Receipts
Social insurance taxes and contributions—Continued
Other retirement contributions—Continued
Other retirement contributions:
$8
$8
$86
$86
78
$78
354
354
4,580
4,580
4,429
4,429
18,642
$3
18,639
242,483
$581
241,902
209,535
1,714
236
1,153
45
29
1,686
236
1,153
45
23,019
2,501
11,885
518
418
2
142
22,601
2,499
11,743
518
24,701
2,165
8,364
494
(•*)
3,149
29
3,120
37,923
562
37,361
35,724
424
35,300
459
11
449
6,179
168
6,010
6,226
173
6.053
973
34
939
11,791
421
11,370
9,060
405
8,655
1,314
130
5
1,314
126
15,684
1,303
22
15,684
1,281
14,492
1,135
26
14,492
1,109
$541
208,994
356
24,345
2,165
8,297
Excise taxes:
68
494
Miscellaneous receipts:
All other
1,444
5
1,440
16,987
22
16,965
15,627
26
15,601
70,568
2,549
68,019
750,269
83,812
666,457
687,581
87,019
600,562
Note: Throughout this statement, details may not add to totals due to rounding.
FOOTNOTES
1
This statement contains thefinalfigures showing budget results for thefiscalyear ending September 30, 1984.
2
Based on the Mid-Session Review of the F Y 1984 Budget released by O M B on August 15, 1984.
3
Includes amounts received for windfall profits tax pursuant to P.L. 96-223.
4
Includes an adjustment to prior reporting.
includes F I C A and S E C A tax credits, non-contributory military service credits, special benefits for the
aged, and credit for unnegotiated O A S I benefit checks.
6
Major sources of information used to determine Treasury's operating cash include the Daily Balance Wires
from Federal Reserve Banks, reporting from the Bureau of Public Debt, electronic transfers through the Treasury
Financial Communications System and reconciling wires from Internal Revenue Service Centers. Operating cash
is presented on a modified cash basis: deposits are reflected as received; and withdrawals are reflected as processed.
7
Dollar deposits with the I M F has been decreased and Miscellaneous Asset Accounts correspondingly increased by $4 million. This was done to correct an out-of-balance condition caused by including IMF's administrative account when calculating the U.S. reserve position.
••Less than $500,000.00
CO
TABLE III—RECEIPTS A N D O U T L A Y S—Continued (In millions)
This Month
OUTLAYS—Continued
Comparable Period Prior Fiscal Year
Current Fiscal Year to Date
Applicable
Receipts
Outlays
• *
Net
Outlays
Net
Outlays
Applicable
Receipts
Outlays
Net
Outlays
Applicable
Receipts
Outlays
Legislative Branch:
$23
38
1
1
10
16
Congressional Budget Office
Architect of the Capitol
Library of Congress
Government Printing Office:
Revolving fund (net)
(")
$1
-11
7
23
1
1
General Accounting Office
United States Tax Court
Proprietary receipts from the public
-1
$23
37
1
1
10
16
$256
452
120
16
94
268
-11
7
23
1
1
1
5
102
262
15
16
$6
9
3
-4
110
The Judiciary:
Supreme Court of the United States
1
64
3
(")
$227
$233
409
95
14
91
252
5
102
262
15
16
-3
-4
-1
89
251
13
16
1,584
1,457
14
729
44
(")
14
729
44
(**)
787
5
-4
400
95
14
91
252
-1
89
251
13
16
-5
-4
no
1,602
I
64
3
14
807
46
(**)
14
807
46
(")
866
787
16
37
43
21
35
39
(")
21
35
39
95
94
(**)
94
212
243
264
202
397
609
2,676
402
45
42
158
248
1,060
2,874
928
39
43
-158
491
5,034
4,170
69
<*•)
(**)
69
866
-6
2
3
(**)
-6
2
3
16
37
43
-(••)
(•*)
-(")
95
16
28
212
243
125
100
207
134
1
5
581
1,060
2,874
928
39
43
Other
$6
9
$250
442
120
16
94
268
18
19
1,438
Executive Office of the President:
4
Other
'.
Funds Appropriated to the President:
Appalachian Regional Development Programs
16
28
127
100
207
134
1
5
3
(**)
574
See footnotes on page 3.
3
(**)
571
5,525
(•*)
(*•)
(**)
333
(")
278
264
202
119
608
2,676
402
215
45
42
215
494
3 677
T A B L E III—RECEIPTS A N D OUTLAYS—Continued (In millions)
This Month
OUTLAYS—Continued
Applicable
Receipts
Outlays
Funds Appropriated to the President—Continued
International Development Assistance:
Multilateral Assistance:
Contributions to International Financial Institutions:
International Development Association
Inter-American Development Bank
Other
Total—Multilateral Assistance
Comparable Period Prior Fiscal Year
Current Fiscal Year to Date
Net
Outlays
Applicable
Receipts
Outlays
Net
Outlays
Net
Outlays
Applicable
Receipts
Outlays
$27
15
25
$911
325
155
308
$911
325
155
308
$914
217
110
219
$914
$27
15
25
66
66
1,699
1,699
1,460
1.460
39
26
4
-27
1,234
358
41
221
$32
681
1,234
358
41
188
-681
1,108
331
37
244
1,108
$4
47
39
26
4
-31
-47
41
51
-9
1,853
713
1,140
9
7
3
1
20
1
9
-13
1
1
111
41
22
11
140
8
127
72
861
217
UO
219
Agency for International Development:
Other
Proprietary receipts from the public
Other
Total—International Development Assistance
183
55
3,737
183
565
800
-25
-817
10,936
31
331
37
$27
825
218
-825
1,720
852
868
111
-99
14
11
110
-29
23
4
(**)
2,876
3,289
565
150
119
11,237
10,936
-89
-11,237
-3
12,405
-123
12,709
8,538
20,356
71
487
239
330
56
40
74
1,142
63
469
220
323
50
37
71
1.028
110
72
13
-101
937
2.352
10
4
150
Military Sales Programs:
Other
Proprietary receipts from the public
800
5
30
817
(*•)
1,732
(")
921
-3
811
21,246
2
38
24
30
4
3
6
273
71
487
239
330
56
40
74
1,142
318
13.180
12,405
-441
-13,180
14,929
5.427
-1
Department of Agriculture:
2
38
24
30
4
3
6
273
See footnotes on page 3.
469
220
323
50
37
71
1,028
T A B L E III—RECEIPTS A N D O U T L A Y S — C o n t i n u e d (In millions)
cn
Current Fiscal Year to Date
Classification of
OUTLAYS—Continued
Applicable
Receipts
Outlays
Department of Agriculture—Continued
Agricultural Stabilization and Conservation Service ...
Federal Crop Insurance Corporation
Commodity Credit Corporation:
Price support and related programs
Intragovernmental fund
National Wool Act program
$29
51
Net
Outlays
Applicable
Receipts
Outlays
$29
46
619
-57
2
$275
666
13,968
-57
132
$90
6,736
Total—Commodity Credit Corporation
Rural Electrification Administration
Farmers H o m e Administration:
Public enterprise funds:
Self-help housing land development fund
Rural housing insurance fund
Agricultural credit insurance fund
Rural development insurance fund
Rural water and waste disposal grants
Salaries and expenses
Other
1,295
685
198
14
32
1
Total—Farmers Home Administration
2,226
Soil Conservation Service:
Conservation operations
Watershed and flood prevention operations
Other
Animal and Plant Health Inspection Service
Agricultural Marketing Service:
Funds for strengthening markets, income, and supply
Other
Food Safety and Inspection Service
Food and Nutrition Service:
Food stamp program
Nutrition assistance for Puerto Rico
Child nutrition programs
Special supplemental food programs (WIC)
Other
Total—Food and Nutrition Service
(••)
1,071
704
154
919
67
106
103
9
Comparable Period Prior Fiscal Year
Net
Outlays
Applicable
Receipts
Outlays
$275
576
$250
518
7,232
-57
132
28,169
-36
94
9,405
7,308
28,227
9,405
231
-1
2,340
2,478
753
135
324
37
1
8,748
9,759
2,433
157
293
41
6,920
8,351
1,858
20,526
6,066
21,432
17,129
353
218
76
296
353
218
76
296
327
191
73
231
417
152
339
417
115
339
546
144
325
11,561
814
3,536
1,398
270
11,561
814
3,536
1,398
270
11,839
814
3,278
1,150
245
10,041
12,974
3,081
135
324
37
297
26,592
1,204
(**)
1
7,700
10,497
2,328
225
-19
44
14
32
1
919
67
106
103
9
17,579
17,579
17,326
Forest Service:
Forest research
National Forest system
Construction
Forest Service permanent appropriations
Cooperative work
Other
109
1,057
331
213
135
186
109
1,057
331
213
135
186
110
986
440
200
116
152
Total—Forest Service
2,029
2,029
2,004
Other
Proprietary receipts from the public
Intrabudgetary transactions
Total—Department of Agriculture
See footnotes on page 3.
(")
(*•)
2,512
2,496
$188
65,814
943
28,333
108
-943
(**)
37,482
148
-no
73,927
(**)
32
759
27,543
TABLE III—RECEIPTS A N D OUTLAYS—Continued (In millions)
OUTLAYS—Continued
Net
Outlays
Applicable
Receipts
Outlays
Comparable Period Prior Fiscal Year
Current Fiscal Year to Date
This Month
Net
Outlays
Applicable
Receipts
Outlays
Net
Outlays
Applicable
Receipts
Outlays
Department of Commerce:
-$1
10
5
32
28
$5
-$1
10
5
27
28
$33
161
59
312
253
$33
161
59
219
253
$35
248
62
418
228
1,006
67
118
31
1,033
62
119
38
15
1,222
1,253
65
-65
10
$93
$89
$35
248
62
329
228
Science and Technology:
National Telecommunications and Information Administration
Total—Science and Technology
Proprietary receipts from the public
Intrabudgetary transactions
Total—Department of Commerce
106
5
9
2
1
104
5
9
2
1,021
67
118
31
122
1
121
1,237
3
-1
-3
-1
10
173
1,013
62
119
38
20
1,233
121
-121
230
1,929
-85
-85
2,159
18,327
15,709
13,619
18,327
15,709
13,619
17,439
15,032
13,053
17,439
15,032
13,053
4,111
47,655
47,655
45,523
45,523
1,385
16,471
16,471
15,945
15,945
17,292
22,659
19,106
5,858
17,292
22,659
19,106
5,858
2,065
1,617
1,337
1,157
1,617
1,337
1,157
4,111
1,385
9
20
1,892
186
195
15
Department of Defense—Military:
Military Personnel:
Operation and Maintenance:
epa
_ep
t f th
t f th
Y
N
A" F
1,578
2,002
1,616
522
1,578
2,002
1,616
522
18,362
23,488
19,274
6,245
18,362
23,488
19,274
6,245
5,718
5,718
67,369
67,369
64,915
64,915
1,095
2,023
1,942
65
1,095
2,023
1,942
65
13,577
23,989
23,541
772
13,577
23,989
23,541
772
11,443
21,801
19,886
493
11,443
21,801
19,886
5,125
5,125
61,879
61,879
53,624
53,624
Procurement:
493
See footnotes on page 3.
«»4
00
TABLE III—RECEIPTS A N D OUTLAYS—Continued (In millions)
Comparable Period Prior Fiscal Year
Current Fiscal Year to Date
Classification of
OUTLAYS—Continued
Applicable
Receipts
Outlays
Department of Defense—Military—Continued
Research, Development, Test, and Evaluation:
Department of the Army
Department of the Navy
Department of the Air Force
Defense agencies
Total—Research, Development, Test, and Evaluation .
Military Construction:
Department of the Army
Department of the Navy
Department of the Air Force
Defense agencies
Net
Outlays
Outlays
Total—Department of Defense—Military
Department of Defense—Civil:
Corps of Engineers:
General investigations
Construction, general
Operation and maintenance, general
Flood control
Other
Proprietary receipts from the public
$315
605
870
226
$3,812
6,662
10,353
2,289
$3,812
6,662
10,353
2,289
$3,658
5,854
9,182
1,861
$3,658
5,854
9,182
1,861
2,017
2,017
23,117
23,117
20,554
20,554
98
87
128
7
98
87
128
7
963
1,053
1,314
375
963
1,053
1,314
375
954
992
1,196
382
954
992
1,196
382
3,706
3,706
3,524
3,524
2,413
2,413
2,128
$1
(**)
(")
-57
-106
81
-163
-4
-30
-239
-95
-423
-78
-473
248
-95
-423
-78
-473
-37
-674
-22
18,409
18,354
221,768
15
110
166
42
-29
15
110
166
42
-29
-3
139
1,103
1,287
432
152
139
1,103
1,287
432
152
-73
301
3,112
3,039
(**)
(**)
-57
-106
81
-163
20
(**)
Other
Proprietary receipts from the public
307
Department of Education:
Office of Elementary and Secondary Education:
Compensatory education for the disadvantaged
Impact aid
Special programs and populations
Indian education
143
51
95
4
285
674
962
80
143
51
95
4
2,126
(")
-21
579
-112
1,251
261
-21
267
367
-23
205,648
637
138
1,258
1,103
330
147
579
-112
-1,251
-5
-367
-23
205,011
138
1,258
1,103
330
147
-59
2,917
6
1
Total—Department of Defense—Civil
See footnotes on page 3.
196
2
Total—Corps of Engineers
Total—Office of Elementary and Secondary Education .
Net
Outlays
Applicable
Receipts
Outlays
$315
605
870
226
Total—Military Construction
Family Housing
Revolving and Management Funds:
Public Enterprise Funds
Intragovernmental Funds:
Department of the Army
Department of the Navy
Department of the Air Force
Defense agencies
Other
Proprietary receipts from the public
Intrabudgetary transactions
Net
Outlays
Applicable
Receipts
6
3,072
34
-6
2,945
3,077
578
632
72
3,077
578
632
72
2,726
548
482
70
2,726
548
482
70
4,358
4,358
3,825
3,825
TABLE III—RECEIPTS A N D OUTLAYS—Continued (In millions)
This Month
OUTLAYS—Continued
Applicable
Receipts
Outlays
Department of Education—Continued
Office of Bilingual Education and Minority Languages Affairs ..
Office of Special Education and Rehabilitative Services:
Education for the handicapped
Rehabilitation services and handicapped research
Office of Vocational and Adult Education
Office of Postsecondary Education:
Net
Outlays
Net
Outlays
Applicable
Receipts
Outlays
Net
Outlays
Applicable
Receipts
Outlays
$9
$9
$167
$167
$100
$100
78
194
25
78
194
25
953
1,414
743
953
1,414
743
1,290
949
745
1,290
-158
376
153
37
-15
123
3,743
3,245
419
-I
$362
-239
3,743
3,245
419
-1
161
4,044
2,556
357
21
$178
362
7,168
7,139
178
6,961
218
249
249
41
247
176
309
-41
18
218
249
249
-18
403
15,494
14,763
196
14,567
949
745
-17
-1
376
153
37
-15
$157
551
157
394
7,530
247
176
309
6
-3
58
23
-6
163
1,063
15,897
546
546
6,120
6,120
5,171
61
126
211
26
10
45
13
29
27
61
126
211
26
10
45
13
29
27
650
2,207
1,864
325
136
519
189
271
271
650
2,207
1,864
325
136
519
189
271
271
589
2,276
1,646
403
228
476
215
160
181
547
6,433
6,433
6,173
1,423
362
995
4,516
-40
362
-4,516
1,241
320
875
97
39
-875
3,553
246
320
-3,553
991
355
14,338
5,979
8,358
12,905
4,549
8.356
-3
58
23
Proprietary receipts from the public
1,227
Department of Energy:
Atomic energy defense activities
Comparable Period Prior Fiscal Year
Current Fiscal Year to Date
4,044
2,556
357
21
5,171
Energy programs:
Naval petroleum and oil shale reserves
Strategic petroleum reserve
547
214
39
proprietary receipt
p
1,346
116
1,464
589
2,276
1,646
403
228
476
215
160
181
6,173
CO
TABLE III—RECEIPTS A N D O U T L A Y S—Continued (In millions)
This Month
OUTLAYS—Continued
Applicable
Receipts
Outlays
O
Comparable Period Prior Fiscal Year
Current Fiscal Year to Date
Net
Outlays
Net
Outlays
Applicable
Receipts
Outlays
Net
Outlays
Applicable
Receipts
Outlays
Department of Health and H u m a n Services:
Public Health Service:
Indian health facilities
Other
Centers for Disease Control
National Institutes of Health:
Arthritis, Diabetes, and Digestive and Kidney Diseases
Child Health and H u m a n Development
Other
Total—Public Health Service
$364
$31
$393
$3
$390
$366
$2
2
128
61
2
128
61
27
1,377
788
1
26
1,377
788
5
(**)
(**)
33
33
360
360
47
1,507
692
-2
362
78
53
39
24
24
38
22
41
15
25
78
53
39
24
24
38
22
41
15
25
1,024
647
431
306
293
385
257
496
228
90
1,024
647
431
306
293
385
257
496
228
90
949
578
380
267
244
364
228
434
219
88
949
578
380
267
244
364
228
434
219
88
359
359
4,157
4,157
3,750
3,750
67
19
67
19
911
175
911
175
945
197
945
197
701
8,188
8,184
7,863
1,440
71
22
1,440
71
22
20,061
17,917
125
20,061
17,917
125
18,985
18,779
92
18,985
18,779
92
2,275
46
2,275
46
41,476
632
187
41,476
632
187
38,002
522
38,002
522
2,321
2,321
42,295
42,295
38,524
38,524
1,436
57
1,436
57
19,473
902
19,473
902
17,487
829
17,487
$32
Health Resources and Services Administration:
702
(•*)
(")
(••)
4
42
1,507
692
-2
362
7
7,856
Health Care Financing Administration:
(")
(**)
Federal hospital insurance trust fund:
Federal supplementary medical ins. trust fund:
Total
F S M I trust fund
See footnotes on page 3.
1,493
1,493
20,374
20,374
18,317
18,317
5,346
5,346
100,772
100,772
94,697
94,697
T A B L E III—RECEIPTS A N D OUTLAYS—Continued (In millions)
OUTLAYS—Continued
Applicable
Receipts
Outlays
Department of Health and H u m a n Services—Continued
Social Security Administration:
Payments to social security trust funds
Special benefits for disabled coal miners
Supplemental security income program
L o w income h o m e energy assistance
Payments to states from receipts for child support
Federal old-age and survivors insurance trust fund:
Benefit payments
Comparable Period Prior Fiscal Year
Current Fiscal Year to Date
This Month
Net
Outlays
$573
1
71
597
-4
30
40
$573
1
71
597
-4
30
40
Net
Outlays
Applicable
Receipts
Outlays
$6,878
1,057
8,498
8,346
508
2,026
602
$6,878
1,057
8,498
8,346
508
2,026
602
$21,130
1,079
8,724
7,875
516
1,993
524
1
$21,130
1,079
8,724
7,875
<")
(**)
Net
Outlays
Applicable
Receipts
Outlays
516
1,993
524
I
31
134
31
134
155,852
1,585
2,404
155,852
1,585
2,404
148,642
1,552
2,251
148,642
1,552
2,251
153
153
1,883
683
1,883
683
1,447
1,447
319
319
162,406
162,406
153,892
153,892
121
40
121
40
17,775
585
22
17,775
585
22
17,592
659
28
17,592
77
77
(")
Interest expense on interfund borrowings
Interest on normalized tax transfers
T o t a l — F O A S I trust fund
Federal disability insurance trust fund:
Payment to railroad retirement account
659
28
(*')
(")
161
161
18,459
18,459
18,279
18,279
1,789
1,789
208,780
208,780
214,012
214,012
155
179
60
12
26
1
2,789
1,819
659
265
358
8
$1
2,789
1,819
659
265
358
7
2,508
1,790
410
289
349
-1
2,508
1.790
(")
155
179
60
12
26
1
$1
410
289
349
-2
433
C*)
433
5,897
1
5,896
5.345
1
5,344
273
273
-4,961
266
$59
15
-59
-71
-71
-16,811
-16,811
- 14,238
- 14,238
-524
-50
-524
-50
-153
-6,268
-610
-1,106
-1,925
-6,268
-610
-1,106
-1,925
-18,683
-2,447
-4,541
-1,496
- 18.683
-2.447
-4,541
-1,496
7,428
297,191
292,224
280.779
H u m a n Development Services:
W k
C °
t
ces
1 Mana ement
epar men a
g
the nnblic
15
4,961
266
4,318
- 4,318
Intrabudgetary transactions:
Payments for health insurance for the aged:
Payments for tax and other credits5:
Federal old-age and survivors insurance trust fund
-153
7,487
See footnotes on page 3.
59
4,966
4,326
276,453
TABLE III—RECEIPTS A N D OUTLAYS—Continued (In millions)
This Month
Classification of
OUTLAYS—Continued
Applicable
Receipts
Outlays
Department of Housing and Urban Development:
Housing Programs:
Public enterprise funds:
Federal Housing Administration fund
Housing for the elderly or handicapped fund
Other
Rent supplement payments
Homeownership assistance
Rental housing assistance
Low-rent public housing
College housing grants
Lower income housing assistance
Other
Total—Housing Programs
Public and Indian Housing:
Low rent housing—loans and other expenses
Payments for operation of low income housing projects .
$207
48
4
$240
32
4
(**)
15
30
47
1
444
-1
Applicable
Receipts
Outlays
-$33
16
(")
(")
$2,757
1,036
47
Net
Outlays
Applicable
* Receipts
Outlays
Net
Outlays
$3,123
375
48
-$366
661
-1
110
270
657
1,686
20
6,030
$2,256
1,088
44
188
282
638
1,664
20
4,995
11
$2,448
288
48
-$192
800
-4
188
282
638
1,664
20
4,995
11
3,546
9,068
11,186
2,785
8,402
no
270
657
1,686
20
6,030
(*•)
517
12,614
1,003
102
991
102
1,705
1,135
1,111
1,135
643
1,542
111
1,542
1,093
2,840
2,246
2,185
1,652
-87
-11
-3
-10
-5
2,498
317
75
21
-65
1,680
187
160
206
818
130
-85
-186
-65
3,236
283
98
8
-68
116
2,846
2,233
612
32
300
29
3
133
3,819
454
16
-15
3,819
454
16
123
3,554
451
12
-18
3,554
451
12
364
4,422
4,274
4,139
3,998
281
40
281
37
303
71
303
60
109
14
9
11
Total—Government National Mortgage Association ...
40
300
29
3
Total—Community Planning and Development
Management and Administration
Other
See footnotes on page 3.
Net
Outlays
794
Government National Mortgage Association:
Special -assistance functions fund
Emergency mortgage purchase assistance
Management and liquidating functions fund
Guarantees of mortgage-backed securities
Participation sales fund
Total—Department of Housing and Urban Development
Comparable Period Prior Fiscal Year
Current Fiscal Year to Date
15
30
47
1
444
-1
Total—Public and Indian Housing
Community Planning and Development:
Public enterprise fund
Community development grants
Urban development action grants
Other
IS)
(")
2,304
440
1,865
6,526
2,095
304
97
161
1,142
-21
1
-153
-68
900
21,440
6,125
15,315
T A B L E III—RECEIPTS A N D O U T L A Y S — C o n t i n u e d (In millions)
Net
Outlays
Applicable
Receipts
Outlays
Comparable Period Prior Fiscal Year
Current Fiscal Year to Date
This Month
Classification of
OUTLAYS—Continued
Net
Outlays
Applicable
Receipts
Outlays
Net
Outlays
Applicable
Receipts
Outlays
Department of the Interior:
Land and Minerals Management:
Bureau of Land Management:
Payments in lieu of taxes
Payments to states and counties for general purpose fiscal assistance
Other
Total—Land and Minerals Management
$46
104
43
22
15
21
$46
104
43
22
15
21
$418
104
789
95
157
206
$418
104
789
95
157
206
$408
96
579
80
119
163
$408
251
251
1,770
1,770
1,445
1,445
680
135
139
452
175
$81
665
136
120
440
161
$86
19
600
135
139
452
156
99
1,482
1,522
104
96
579
80
119
163
Water and Science:
Bureau of Reclamation:
Other
579
136
82
10
15
12
15
$5
1
77
10
15
12
14
133
7
127
1,581
40
150
40
150
498
1,111
498
1,111
470
1,008
1,008
190
190
1,609
1,609
1,478
1,478
61
8
34
5
1
61
8
34
4
882
124
434
63
9
882
124
434
54
849
133
458
56
9
849
133
458
48
107
1
106
1,503
9
1,494
1,495
9
78
-4
240
73
240
73
259
72
-7
-1,739
-32
-65
4,889
6,206
61
7
598
29
824
260
485
449
155
2,868
18
120
440
142
1,418
Fish and Wildlife and Parks:
470
Bureau of Indian Affairs:
78
-4
Proprietary receipts from the public:
Receipts from oil and gas leases, national petroleum reserve in Alaska
(*•)
171
-171
<")
7
1,739
-32
755
178
577
6,744
58
7
677
103
916
282
513
528
125
-19
-5
58
7
677
103
916
282
513
505
125
-14
3,188
17
3,171
1,855
(")
1,487
259
1,556
32
-1,556
-65
1,637
4,569
Department of Justice:
ega
.
Enforcement
-7
1
50
45
44
18
36
36
8
-2
-5
-7
1
50
45
44
18
36
34
8
4
229
-3
232
2
22
61
7
485
430
155
(**)
2,849
Sec footnotes on page 3.
Cd
TABLE III—RECEIPTS A N D OUTLAYS—Continued (In millions)
Comparable Period Prior Fiscal Year
Current Fiscal Year to Date
Classification of
OUTLAYS—Continued
Applicable
Receipts
Outlays
Department of Labor:
Employment and Training Administration:
Program administration
Training and employment services
Community service employment for older Americans
Federal unemployment benefits and allowances
State unemployment insurance and employment
service operation
Advances to the unemployment trust fund and other funds ...
Other
Unemployment trust fund:
Federal-State unemployment insurance:
State unemployment benefits
State administrative expenses
Federal administrative expenses
Interest on refunds of taxes
Repayment of advances from the general fund
Interest on advances to the Employment Security
Administration account
Railroad-unemployment insurance:
Railroad unemployment benefits
Administrative expenses
Payment of interest on advances from railroad retirement
account
Total—Unemployment Trust Fund
Net
Outlays
Total—Department of Labor
Department of State:
Administration of Foreign Affairs:
Salaries and expenses
Acquisition, operation, and maintenance of buildings abroad .
Payment to Foreign Service retirement and disability fund
Foreign Service retirement and disability fund
Other
Total—Administration of Foreign Affairs
See footnotes on page 3.
Net
Outlays
Applicable
Receipts
Outlays
Net
Outlays
$3
267
31
2
$3
267
31
2
$77
3,196
321
34
$77
3,196
321
34
$87
3,858
274
233
$87
3,858
274
233
-56
745
'-11
-56
745
-11
21
4,182
-136
21
4,182
-136
10
12,043
46
10
12,043
46
981
220
981
220
16,678
2,311
87
129
6,580
16,678
2,311
87
129
6,580
29,070
2,426
70
6
580
29,070
2,426
70
6
580
1
1
433
15
(")
5,860
11
(**)
5,860
11
(**)
7,152
12
12
433
15
26,089
26,089
32,655
56
-10
51
133
173
223
865
44
207
150
132
120
165
186
851
36
200
151
121
112
218
218
49,206
33,784
Total—Employment and Training Administration
Labor-Management Services Administration
Pension Benefit Guaranty Corporation
Employment Standards Administration:
Salaries and expenses
Special benefits
Black lung disability trust fund
Special workers' compensation expenses
Occupational Safety and Health Administration
Mine Safety and Health Administration
Bureau of Labor Statistics
Departmental Management
Proprietary receipts from the public
Intrabudgetary transactions
Applicable
Receipts
Outlays
4
14
4
11
56
152
12
61
288
3
16
11
11
5
12
61
288
3
16
11
11
5
173
223
865
44
207
150
132
120
-290
6,567
-10,899
-323
10,899
- 12,871
165
186
851
36
200
151
121
112
-4
12,871
1,993
1,700
25,006
24,522
38,341
38,194
74
10
228
20
4
74
10
228
20
4
1,031
1,031
1,052
198
337
212
22
198
337
212
22
176
314
199
15
1,052
176
314
199
15
336
1,800
1,800
1,756
1,756
$161
323
$142
51
-10
TABLE III—RECEIPTS AND OUTLAYS>—Continued (In millions)
Net
Outlays
Applicable
Receipts
Outlays
Comparable Period Prior Fiscal Year
Current Fiscal Year to Date
This Month
Classification of
OUTLAYS—Continued
Net
Outlays
Applicable
Receipts
Outlays
Net
Outlays
Applicable
Receipts
Outlays
Department of State—Continued
Other
Proprietary receipts from the public
Intrabudgetary transactions
Total—Department of State
$12
1
46
5
3
$1
-232
$12
1
46
5
3
-1
-232
$580
23
336
33
13
-$22
-380
$482
$482
27
321
37
5
$580
23
336
33
13
22
-380
-355
$6
27
321
37
5
-6
2,273
6
2.267
-355
170
1
169
2,405
-22
2,428
1,147
-1
23
5
1,147
-6
23
10,227
18
329
5
10,227
13
329
8,718
-15
249
3
8,718
-18
249
1,170
5
1,164
10,574
5
10,569
8,952
3
8,949
3
19
-6
56
140
2
56
140
2
51
130
7
1
24
2
6
132
241
1,957
255
81
50
241
1,957
255
145
296
665
381
80
33
2,584
81
2,503
1,487
80
212
17
169
212
17
169
1,395
233
2,151
1,395
233
2,151
2,361
3
1,345
207
21
207
21
2,313
141
2,313
140
1,427
185
81
29
15
81
29
15
(")
(")
694
268
146
257
694
268
146
257
453
248
71
1,020
1,020
125
125
1,365
1,365
1.792
1.792
353
353
3,819
3,819
3.404
3,404
Department of Transportation:
Federal Highway Administration:
Highway trust fund:
Other
National Highway Traffic Safety Administration:
3
19
-6
Federal Railroad Administration:
9
24
2
6
8
41
8
51
130
7
65
296
665
381
1,407
Urban Mass Transportation Administration:
Federal Aviation Administration:
(")
Airport and airway trust fund:
2,361
3
1,345
1,427
(••)
185
453
248
71
Sec footnotes on page 3.
UI
TABLE III—RECEIPTS AND OUTLAYS—Continued (In millions)
Applicable
Receipts
Outlays
Comparable Period Prior Fiscal Year
Current Fiscal Year to Date
This Month
Classification of
OUTLAYS—Continued
o>
Net
Outlays
Net
Outlays
Applicable
Receipts
Outlays
Net
Outlays
Applicable
Receipts
Outlays
Department of Transportation—Continued
Coast Guard:
Acquisition, construction, and improvements
Retired pay
Other
Total—Coast Guard
$143
72
25
-9
(**)
$143
72
25
-9
$1,657
468
311
97
$1,487
$5
$1,657
468
311
92
$1,487
484
292
149
$5
484
292
143
231
(")
231
2,533
5
2,529
2,411
5
2,406
7
1
80
8
-12
$8
-1
1
80
8
-14
6
199
14
384
87
74
177
125
85
368
87
91
115
9
85
368
87
12
74
80
-74
(**)
-5
22
14
384
87
61
-54
-5
23,904
20,905
Maritime Administration:
Ship construction
Other .
Other
Proprietary receipts from the public
Intrabudgetary transactions
Total—Department of Transportation
1
-6
(**)
2,294
17
13
54
335
-2
-2
289
20,616
2,277
24,239
-32
-63
-63
-448
-448
7
4,567
17
7
4,567
17
6
4,614
16
4,614
223
236
525
16
20
234
563
1,133
15
15
1,133
1,960
Department of the Treasury:
-32
Office of Revenue Sharing:
Salaries and expenses
1
1
Federal Law Enforcement Training Center
2
2
19
22
19
22
1
5
1
5
223
236
525
16
20
47
47
1,020
1,020
1,960
13
43
13
43
(**)
(**)
164
12
164
12
158
695
-17
80
181
158
695
-17
80
181
142
649
-12
50
167
142
649
12
50
167
8
73
97
76
12
92
28
8
73
97
76
12
92
28
96
870
1,251
1,019
1,193
1,301
365
128
893
3
128
893
1,069
817
1,213
1,954
316
2
2
3
6,393
2
Salaries and expenses
Total—Financial Management Service
Internal Revenue Service:
Investigation, collection and taxpayer service
Payment where credit exceeds liability for tax
See footnotes on page 3.
(")
(")
C)
96
870
1,251
1,019
1,193
1,301
365
3
387
(**)
387
6,098
6,095
6
16
234
563
15
15
1,069
1,213
1,954
316
(**)
6,391
T A B L E III—RECEIPTS A N D O U T L A Y S — C o n t i n u e d (In millions)
OUTLAYS—Continued
Applicable
Receipts
Outlays
Department of the Treasury—Continued
United States Secret Service
Comptroller of the Currency
Interest on the public debt:
Public issues (accrual basis)
Total—Interest on the public debt
$23
11
Net
Outlays
$1
Construction grants
Other
Proprietary receipts from the public
Intrabudgetary transactions
$267
161
$267
$160
(**)
Net
Outlays
Applicable
Receipts
Outlays
$232
157
$232
$155
2
108,367
20,446
11,912
432
129,003
24,835
129,003
24,835
108,367
20,446
12,343
12,343
153,838
153,838
128,813
3,331
15,378
-7,172
-3,331
-15,378
-7,172
-8,681
10,572
159,837
18,873
140,964
134,057
46
18
35
234
4
585
164
418
2,623
267
49
585
164
418
2,623
267
49
-4
-44
541
183
455
2,983
134
44
4,057
4,300
-101
76
76
90
-203
119
139
9
78
-2
86
105
140
-139
139
277
58
2,792
2,915
109
1,232
5,316
5,316
108
1,240
108
-499
12,515
Environmental Protection Agency:
Salaries and expenses
$23
10
Net
Outlays
Applicable
Receipts
Outlays
11,912
432
204
1,739
Intrabudgetary transactions
Comparable Period Prior Fiscal Year
Current Fiscal Year to Date
This Month
1,943
46
18
35
234
4
-204
-1,739
-499
(")
(")
(**)
(**)
(")
338
(**)
338
4,061
(**)
9
78
-2
86
105
141
79
119
-57
28
6
14
13
-79
79
44
416
50
340
12
100
2,792
2,915
109
1,232
1
4
-44
4
-40
128,813
3,305
14,347
- 3,305
- 14,347
-8,681
17,809
116,248
541
183
455
2,983
134
1
(•*)
1
43
(*')
-40
4,299
General Services Administration:
119
-57
28
6
14
13
124
(**)
(")
- 101
3
76
76
88
-203
(")
-90
119
90
-87
145
National Aeronautics and Space Administration:
ons rue i
esearc an
m
manaBement
50
340
12
100
pr g
503
See footnotes on page 3.
(*•)
(*•)
(*•)
502
C*)
7,048
(")
<")
7,048
(")
6,664
(••)
(*•)
6,664
TABLE III—RECEIPTS A N D OUTLAYS—Continued (In millions)
Applicable
Receipts
Outlays
Office of Personnel Management:
Salaries and expenses
Government payment for annuitants, employees health benefits
Payment to Civil Service retirement and disability fund
Civil Service retirement and disability fund
Employees health benefits fund
Employees life insurance fund
Retired employees health benefits fund
Other
Intrabudgetary transactions:
Civil Service retirement and disability fund:
General fund contributions
Other
Total—Office of Personnel Management
Small Business Administration:
Public enterprise funds:
Business loan and investment fund
Disaster loan fund
Other
Salaries and expenses
Other
-$14
121
15,357
2,000
532
77
1
Net
Outlays
$534
67
1
(*')
Applicable
Receipts
Outlays
-$14
121
15,357
2,000
-2
10
(**)
4
15,357
-2
•15,357
-2
2,719
2,116
254
30
5
18
106
46
1
148
-15
3
18
(**)
(**)
$99
1,392
15,358
21,891
6,518
753
17
-2
$6,568
1,457
17
(")
•15,358
-34
1,192
404
41
258
802
823
16
(")
Total—Small Business Administration
Veterans Administration:
Public enterprise funds:
Loan guaranty revolving fund
Direct loan revolving fund
Other
Compensation and pensions
Readjustment benefits
Medical care
Medical and prosthetic research
General operating expenses
Construction projects
Post-Vietnam Era Veterans education account
Insurance Funds:
National service life
United States government life
Veterans special life
Other
Proprietary receipts from the public:
National service life
United States government life
Other
Intrabudgetary transactions
Total—Veterans Administration
See footnotes on page 3.
128
2
32
40
36
648
14
45
41
11
99
-4
-18
40
36
648
14
45
41
11
1,523
26
431
13,918
1,470
8,124
186
704
475
156
68
4
5
-1
68
922
4
1
-1
32
(")
15
1,067
Comparable Period Prior Fiscal Year
Current Fiscal Year to Date
This Month
Classification of
OUTLAYS—Continued
1,153
71
480
52
69
84
Net
Outlays
$99
1,392
15,358
21,891
-50
-704
(**)
-3
(**)
-(**)
-4
15,308
-32
22,590
28,519
21,278
390
-419
26
258
1,315
424
42
288
723
854
12
255
2,069
1,589
370
-45
-49
13,918
1,470
8,124
186
704
475
156
1,212
32
401
13,860
1,714
7,602
152
674
429
140
973
172
474
922
891
592
-430
29
288
(**)
52
-58
84
441
(*•)
(•*)
231
-231
-42
2,504
25,596
932
$5,857
1,368
17
$79
1,215
15,308
20,796
-196
-580
15,308
-32
(•*)
-42
$79
1,215
15,308
20,796
5,661
788
16
-4
Net
Outlays
•15,358
-34
-32
-15
-5
Applicable
Receipts
Outlays
239
-140
-74
13,860
1,714
7,602
152
674
429
140
891
60
60
85
-441
60
-56
85
446
1
247
-446
-1
-247
-66
2,429
24,816
-66
T A B L E I I I — R E C E I P T S A N D O U T L A Y S — C o n t i n u e d (In millions)
Comparable Period Prior Fiscal Year
Current Fiscal Year to Date
Classification of
OUTLAYS—Continued
Independent Agencies:
Action
Board for International Broadcasting
Civil Aeronautics Board
Consumer Product Safety Commission
Corporation for Public Broadcasting
District of Columbia:
Federal payment
Loans and repayable advances
Equal Employment Opportunity Commission
Export-Import Bank of the United States
Federal Communications Commission
Federal Deposit Insurance Corporation
Federal Emergency Management Agency:
Public enterprise funds
Salaries and expenses
Emergency management and planning assistance ....
Emergency food distribution and shelter program ...
Federal H o m e Loan Bank Board:
Public enterprise funds:
Federal H o m e Loan Bank Board revolving fund..
Federal Savings and Loan Insurance Corp. fund..
Interest adjustment payments
Federal Trade Commission
Intragovernmental Agencies:
Washington Metropolitan Area Transit Authority...
Other
Interstate Commerce Commission
Legal Services Corporation
Merit Systems Protection Board
National Credit Union Administration:
Central liquidity facility
Other
National Foundation on the Arts and the Humanities:
National Endowment for the Arts
National Endowment for the Humanities
Institute of Museum Services
National Labor Relations Board
National Science Foundation
National Transportation Safety Board
Nuclear Regulatory Commission
Panama Canal Commission
Postal Service (payment to the Postal Service fund) .
See footnotes on page 3.
Net
Outlays
Applicable
Receipts
Outlays
$133
105
62
34
138
(")
(**)
12
678
7
850
1,231
-16
429
7
-381
30
28
1
$28
249
Applicable
Receipts
Outlays
5
23
5
23
(**)
(")
5
132
486
115
152
4,485
87
6,842
(**)
(**)
(**)
$31
9
3,418
(••)
7,089
521
125
248
58
363
75
1,007
74
1,569
Net
Outlays
Applicable
Receipts
Outlays
$133
105
62
34
138
$126
91
78
33
137
486
84
143
1,068
87
-248
427
295
143
4,526
82
3,194
159
125
248
58
476
98
176
79
1
-562
130
856
(**)
$29
-9
3.948
(**)
3,808
323
131
1,308
(**)
66
(")
33
1
4
23
3
(**)
(")
<")
4
23
3
74
81
10
16
14
4
(•*)
16
14
(")
(")
9
123
2
35
31
(")
(••)
(")
(**)
(")
33
1
9
123
2
35
-2
-2
6
56
271
28
8
65
234
26
453
117
225
-32
1.001
72
(")
(")
145
140
17
130
1,198
40
462
-25
877
126
134
9
123
1,055
19
515
418
789
56
271
26
678
85
145
140
17
130
1,198
21
462
381
879
65
50
-19
(")
406
1
1,087
164
(")
19
398
10
TABLE III—RECEIPTS A N D OUTLAYS—Continued (In millions)
o
Comparable Period Prior Fiscal Year
Current Fiscal Year to Date
Classification of
OUTLAYS—Continued
Applicable
Receipts
Outlays
Independent Agencies—Continued
Railroad Retirement Board:
Federal windfall subsidy
Payment to railroad unemployment insurance trust fund
Milwaukee railroad restructuring, administration
Railroad retirement accounts:
Benefits payments and claims
Advances to the railroad retirement account from the F O A S I
trust fund
Advances to the railroad retirement account from the FDI trust
fund
Disbursements for the payment of F O A S I benefits
Disbursements for the payment of FDI benefits
Administrative expenses
Interest on refunds of taxes
Other
Proprietary receipts from the public
Intrabudgetary transactions:
Railroad retirement account:
Payments to railroad retirement trust funds
Interest transferred to federal hospital insurance trust fund
Interest on advances to railroad unemployment insurance
account
$34
-73
1
Applicable
Receipts
Outlays
$413
-73
1
$413
-73
1
$440
126
13
5,681
5,681
5,608
-181
(**)
(")
50
4
3
1
50
4
3
1
(**)
423
(**)
Securities and Exchange Commission
Smithsonian Institution
Tennessee Valley Authority
United States Information Agency
United States Railway Association
Other independent agencies
7
17
456
69
(")
(")
See footnotes on page 3.
Net
Outlays
Applicable
Receipts
Outlays
$34
-73
1
Total—Railroad Retirement Board
Total—Independent agencies
Net
Outlays
(")
$478
(**)
20
3,118
-1
-1
(**)
(•*)
44
4
44
4
7
17
-22
69
(**)
-19
180
19
43
(**)
-1
(**)
17
2,134
-1
-1
-2,392
43
-2,392
43
-2,258
49
3,649
3,647
3,964
34
92
211
351
575
2
340
90
194
5,359
510
4
354
18,386
10,977
26,132
92
211
5,192
574
2
374
29,363
(")
(*•)
4,840
-1
(")
(**)
4,539
2
27
15,782
T A B L E III—RECEIPTS A N D O U T L A Y S — C o n t i n u e d (In millions)
Comparable Period Prior Fiscal Year
Current Fiscal Year to Date
Classification of
OUTLAYS—Continued
Applicable
Receipts
Outlays
Undistributed offsetting receipts:
Other interest
Federal employer contributions to retirement and social insurance funds:
Legislative Branch:
United States Tax Court:
Tax court judges survivors annuity fund
The Judiciary:
Judicial survivors annuity fund
Department of Health and H u m a n Services:
Federal old-age and survivors insurance trust fund
Federal disability insurance trust fund
Federal hospital insurance trust fund
Department of State:
Foreign Service retirement and disability fund
Office of Personnel Management:
Civil Service retirement and disability fund
Receipts from off-budget Federal agencies:
Office of Personnel Management:
Civil Service retirement and disability fund
$2
Subtotal
Applicable
Receipts
Outlays
Net
Outlays
$18
-$2
(")
(**)
-$2
Applicable
Receipts
Outlays
$18
C*)
(*•)
-$2
-2
$167
-17
-106
-167
-17
-106
-1,852
-192
1,306
- 1,852
-192
-1,306
-1,534
-244
-1,054
-3
-3
-37
-37
-36
-275
-275
-3,522
-3,522
3,380
-1,848
-1,848
•1,872
-8,760
-1,557
Subtotal
Interest credited to certain Government Accounts:
The Judiciary:
Judicial survivors annuity fund
Department of Defense:
Civil:
Soldiers' and Airmen's H o m e permanent fund
Department of Health and H u m a n Services:
Federal old-age and survivors insurance trust fund
Federal disability insurance trust fund
Federal hospital insurance trust fund
Federal supplementary medical insurance trust fund
Department of Labor:
Unemployment trust fund
Department of State:
Foreign Service retirement and disability fund
Department of Transportation:
Airport and airway trust fund
Highway trust fund
Environmental Protection Agency:
Post-closure liability trust fund
Office of Personnel Management fund:
Civil Service retirement and disability fund
Veterans Administration:
United States government life insurance fund
National service life insurance fund
Independent Agencies:
Railroad Retirement Board:
Railroad retirement account
Other
Net
Outlays
-23
-23
-18
-24
-2
-7
-6
-24
-2
-7
-6
-2,752
-558
-1,644
-807
-2,752
-558
-1,644
-807
-1,300
-436
-1,580
-680
-32
-32
-781
-781
-887
(")
(")
-178
-178
-137
-3
-49
-3
-49
-546
- 1,116
-546
-1,116
-533
-1,078
(**)
(")
-26
-26
-10,813
10,813
- 9,330
(")
(**)
-23
-806
-25
-754
169
111
-54
-131
-1
-1
-23
-806
-35
-53
-35
-53
169
111
-20,333
16,952
See footnotes on page 3.
to
ro
TABLE III—RECEIPTS A N D OUTLAYS—Continued (In millions)
to
Comparable Period Prior Fiscal Year
Current Fiscal Year to Date
Classification of
OUTLAYS—Continued
Applicable
Receipts
Outlays
Undistributed offsetting receipts—Continued
Rents and royalties on the outer continental shelf lands
<")
Total—Undistributed offsetting receipts
$1,801
Total budget outlays
Total—off-budget Federal entities
Total—outlays
Outlays
$602
-$602
605
-2,405
$29,094
Applicable
Receipts
Net
Outlays
Outlays
$10,492
$25,074
10,492
-35,565
911,889
115,972
795,916
26,667
10,404
1,641
322
-2
59
6,712
-35,805
•14
37,072
1,641
25,804
1,163
163
17
6
25,482
1,165
104
17
72
9,996
65,864
53,507
851,796
977,753
169,479
51,234
960,919
119,119
3,740
165
2,781
201
7
1
38,980
2,329
27,251
1,091
164
19
3
31,703
1,362
278
467
165
1,419
-77
26,890
1,092
119
19
17
7,277
2,329
360
-1
45
6,895
4,921
1,974
69,836
59,840
69,421
16,213
53,208
1,030,755
178,959
Net
Outlays
$10,492
-$6,694
11,292
(**)
Applicable
Receipts
$6,694
841,800
62,525
Off-budget Federal entities:
Federal Financing Bank
Petroleum acquisition and transportation, strategic petroleum reserve
Postal Service
Rural electrification and telephone revolving fund
Rural Telephone Bank
Synthetic Fuels Corporation fund
U.S. Railway Association
Net
Outlays
-67
12,357
808,274
TOTAL BUDGET AND OFF-BUDGET
(Net Totals)
(Net Totals)
(Net Totals)
Budget receipts
68,019
666,457
600,562
Budget outlays
Budget surplus (+) or deficit (-)
-51,234
-841,800
-795,916
+16,785
-175,342
195,354
185,339
-207,711
-12,357
1,974
Off-budget surplus ( + ) or deficit (-)
+ 14,811
Total surplus (+) or deficit (-)
See footnotes on page 3.
MEMORANDUM
Receipts offset against outlays (In millions)
Current
Fiscal Year
to Date
Comparable Period
Prior Fiscal Year
Proprietary receipts
Receipts from off-budget Federal entities
Intrabudgetary transactions
$36,752
15,378
96,795
$39,876
14,347
110,983
Total receipts offset against outlays .
148,926
165,207
23
TABLE IV—MEANS OF FINANCING (In millions)
Classification
(Assets and Liabilities
Directly Related to Budget)
Net Transactions
(-) denotes net reduction of either
liability or asset accounts
Account Balances
Current Fiscal Year
Fiscal Year to Date
Beginning of
Close of
This month
This Month
This Year
Prior Year
This Year
This Month
LIABILITY A C C O U N T S
Borrowing from the public:
Public debt securities, issued under generalfinancialauthorities:
Obligations of the United States, issued by:
$11,618
$195,056
$235,176
$1,377,211
$1,560,649
$1,572,267
1,572.267
('*)
11,618
195,056
235,176
1,377,211
1,560,649
-10
-194
-277
4,675
4,492
4481
Agency securities, issued under special financing authorities (See Schedule B.
11,608
194,862
234,899
1,381,886
1,565,140
1,576,748
7,440
24,045
22,475
240,114
256,719
264,159
4,167
170,817
212,424
1,141,771
1,308,421
1,312,589
8,257
-86
-291
-5,658
9,098
-283
1,930
-1,124
3,052
-76
2,209
2,418
18,260
5,178
10,362
11,817
19,102
4,981
12,583
16,352
27.359
4,895
12,292
10,693
6,389
180,439
220,027
1,187,389
1,361,439
1,367,828
4,485
14,615
-8,043
1,413
5,583
2,311
16,557
20,500
4,029
7,298
8,514
21,913
19,099
-6,631
7,893
37,057
11,327
30,426
-98
-74
819
-400
5,628
-4,618
5,652
-4,618
5,554
-4,618
-98
-74
419
1,010
1,034
936
-316
29
7_29
135
5,528
-951
-2,451
-10
249
-195
3,058
-7
-326
14,171
-847
-5,541
-40
130
19,699
-1,483
-8,021
-21
244
19,699
-1.799
-7,992
-181
2,365
2,530
7,872
10,418
10,237
-34
191
-167
-1,129
589
-1,542
1,531
8,678
1,398
7,357
1.364
7,548
18,978
-5,636
9,889
56,148
31,535
50,512
1,476
3,093
14,611
13,5%
16,088
Deduct:
Federal securities held as investments of government accounts (See
A S S E T A C C O U N T S (Deduct)
Cash and monetary assets:
U.S. Treasury operating cash6:
Special drawing rights:
Reserve position on the U.S. quota in the I M F :
U.S. subscription to International Monetary Fund:
7
2,492
21,469
-4,160
12,981
70,760
45,131
66,600
-15,080
+184,599
+ 207,046
+ 1,116,629
+ 1,316,308
+ 1,301,228
269
740
666
471
740
-14,811
+ 185,339
+ 207,711
+ 1,316,779
+ 1,301,968
Transactions not applied to current year's surplus or deficit (See Schedule A
Total budget and off-budget financing
See footnotes on page 3.
-50
379
+ 1,116,629
24
TABLE IV-SCHEDULE A-ANALYSIS OF CHANGE IN EXCESS OF LIABILITIES (In millions)
Classification
Fiscal Year to Date
This
Month
This Year
Prior Year
Excess of liabilities beginning of period:
Adjustments during currentfiscalyear for changes in composition of
unified budget
Excess of liabilities beginning of period (current basis)
$1,316,308
$1,116,629
$909,583
1,316,308
1,116,629
909,583
Budget surplus (-) or deficit:
Based on composition of unified budget in priorfiscalyear
-16,785
175,342
195,354
Budget surplus (-) or deficit (Table III)
-16,785
175,342
195,354
Off-budget surplus (-) or deficit (Table III)
Total budget surplus (-) or deficit (Table III)
1,974
9,996
12,357
-14,811
185,339
207,711
-28
-498
-477
-242
-242
-188
-269
-740
-666
1,301,228
1,301,228
1,116,629
Transactions not applied to current year's surplus or deficit:
Net gain (- )/loss for I M F loan valuation adjustment
Total—transactions not applied to current year's
v
TABLE IV—SCHEDULE B—AGENCY SECURITIES, ISSUED UNDER SPECIAL
FINANCING AUTHORITIES (In millions)
Net Transactions
(-) denotes net reduction of
liability accounts
Account Balances
Current Fiscal Year
Classification
Fiscal Year to Date
Beginning of
Close of
This month
Prior Year
Agency securities, issued under special financing authorities:
Obligations of the United States, issued by:
Export-Import Bank
Obligations guaranteed by the United States, issued by:
Department of Defense:
Family Housing Mortgages
Department of Housing and Urban Development:
Federal Housing Administration
Department of Interior:
Bureau of Land Management
Department of Transportation:
Coast Guard:
Family Housing Mortgages
Obligations not guaranteed by the United States, issued by:
Department of Defense:
Homeowners Assistance Mortgages
Department of Housing and Urban Development:
Government National Mortgage Association
Independent Agencies:
Postal Services
Tennessee Valley Authority
Total agency securities
See footnotes on page 3.
-$31
-$23
-no
-124
264
162
153
-7
-67
•129
206
146
140
14
14
(**)
(**)
(**)
(**)
(")
(")
(**)
(**)
(*•)
(**)
(**)
(**)
2,165
2,165
2,165
250
1,725
250
1,725
250
1,725
4,492
4,481
-9
$43
$34
14
TABLE IV- -SCHEDULE C (MEMORANDUM)-AGENCY BORROWING FINANCED THROUGH
ISSUE OF PUBLIC DEBT SECURITIES (In millions)
Account Balances
Current Fiscal Year
Transactions
Classification
Fiscal Year to Date
Beginning of
Close of
This month
This Month
This Year
Borrowing from the Treasury:
Commodity Credit Corporation
Commerce, Fishing Vessels N O A A
Export-Import Bank of United States
Federal Emergency Management Agency:
National Insurance Development Fund
National flood insurance fund
Federal Financing Bank
Federal Housing Administration:
General insurance
Special risk insurance
General Services Administration:
Pennsylvania Avenue Development Corporation
Government National Mortgage Association:
Emergency home purchase assistance fund
Special assistance functions
Rural Communication Development Fund
Rural Electrification Administration
Rural Telephone Bank
Secretary of Agriculture, Farmers H o m e Administration:
Rural housing insurance fund
Agricultural credit insurance fund
Rural development insurance fund
Secretary of Education:
College housing loans
Secretary of Energy:
Bonneville Power Administration
Secretary of Housing and Urban Development:
Housing for the Elderly and Handicapped
Low-Rent Public Housing
New communities guaranty:
Title IV
Title VII
Urban Renewal Fund
Secretary of the Interior:
Bureau of Mines, helium fund
Railroad Retirement Account
Secretary of Transportation:
Aircraft Purchase Loan Guarantee Program
Rail Passenger Service Act
Railroad Revitalization and Improvement
Rail Service Assistance
Regional Rail Reorganization
Smithsonian Institution:
John F. Kennedy Center parking facilities
Tennessee Valley Authority
Veterans Administration:
Veterans direct loan program
$264
-$2,798
9
Total Borrowing from the Federal Financing Bank.
This Year
This Month
$21,407
9
$18,345
18
5
163
8,754
20
50
11,725
50
50
136,082
55
213
144,063
-50
-30
-220
-40
-87
10
2,010
2,024
1,840
2,014
56
61
-9
111
134
1,070
4
-21
1,072
7
2,265
8,816
14
7,865
721
2,408
9,775
18
7,865
751
275
760
1,561
241
380
550
230
2,621
2,925
1,275
3,106
4,486
1,471
2,687
2,687
255
1,165
1,195
881
3,711
4,326
50
1,000
665
1,000
27
-50
148
-102
252
2,131
2,279
-79
-1
-6
199
79
-10
68
102
1
6
263
20
150
20
150
1,730
Tola! Agency Borrowing from the Treasury
Financed through issues of Public Debt Securities.
Borrowing from the Federal Financing Bank:
Export-Import Bank of the United States
National Credit Union Administration
Postal Service
Tennessee Valley Authority
U.S. Railway Association
Comparable
Prior Year
$2,599
7
-4
45
25
126
74
17,829
198,638
1,015
226
-67
320
-73
722
-85
-67
830
-69
14,676
44
1,154
13,115
125
15,563
195
1,087
13,305
52
1,421
1,331
29,114
30,202
Note: Includes only amounts loaned to Federal Agencies in lieu of Agency Debt issuance and excludes Federal Financing Bank purchase of loans made or guaranteed by Federal Agencies. The Federal
Financing Bank borrows from Treasury and issues its own securities and in turn may loan these funds to Agencies in lieu of Agencies borrowing directly through Treasury or issuing their own securities.
See footnotes on page 3.
26
TABLE IV-SCHEDULE D-INVESTMENTS OF GOVERNMENT ACCOUNTS
IN FEDERAL SECURITIES (In millions)
Securities Held as Investments
Curent Fiscal Year
Net Purchases or Sales (-)
Classification
Beginning of
Fiscal Year to Date
This Month
Prior Year
This Year
This Year
This Month
Federal Funds:
Department of Agriculture:
Agency securities
Department of Commerce
Department of Energy
Department of Health and H u m a n Services
Department of Housing and Urban Development:
Federal Housing Administration:
Federal housing administration fund:
Public debt securities
Agency securities
Government National Mortgage Association:
Emergency mortgage purchase assistance:
Agency securities
Special assistance function fund:
Public debt securities
Agency securities
Management and liquidating functions fund:
Public debt securities
Agency securities
Guarantees of Mortgage-Backed Securities:
Public debt securities
:
Agency securities
Participation sales fund:
Public debt securities
Agency securities
Housing Management:
Community disposal operations fund:
Agency securities
Department of the Interior
Department of Labor
Department of Transportation
Department of the Treasury
-S3
-SI
$10
'(•*)
2
4
427
-5
-13
2
(**)
Veterans Administration:
Veterans reopened insurance fund
Independent Agencies:
Emergency Loan Guarantee Board
Export-Import Bank of the United States
Federal Emergency Mangement Agency:
National insurance development fund
Federal Savings and Loan Insurance Corporation:
Public debt securities
Agency securities
National Credit Union Administration
Tennessee Valley Authority:
Agency securities
Other
Total public debt securities
Total agency securities
532
67
707
67
1,343
12
1,576
12
-1
-30
823
-1
-1
729
152
1
897
20
4
-497
(")
5,705
285
252
2,514
C*)
6,695
295
250
3,255
617
-335
-4
562
451
32
92
5,609
67
293
6,238
67
329
3,320
-17
1,658
-144
20,776
327
24,431
314
Total Federal funds
Trust Funds:
Legislative Branch:
United States Tax Court
Library of Congress
The Judiciary:
Judicial Survivors Annuity Fund
Funds Appropriated to the President
3,087
142
84
-1
185
1
-167
-11
2
-12
2,638
144
21,103
(*•)
(**)
1
(")
3
(**)
-1
Department of Agriculture
Department of Commerce
Department of Defense
Department of Health and Human Services:
Federal old-age and survirors insurance trust fund:
Public debt securities
Agency securities
Federal disability insurance trust fund
Federal hospital insurance trust fund:
Public debt securities
Agency securities
Federal supplementary medical insurance trust fund.
Other
See footnotes on page 3.
(**)
(**)
-3
42
36
6,114
1,721
395
-633
1,117
3,468
1,153
1
2,159
6
(**)
(•*)
95
140
14,026
-455
-1,464
25,503
21,110
5,288
4,261
-7,740
455
1,084
6
13,059
455
6,958
21
15,410
455
10,270
25
Close of
This month
TABLE IV-SCHEDULE D-INVESTMENTS OF GOVERNMENT ACCOUNTS
IN FEDERAL SECURITIES (In millions)
27
Securities Held as Investments
Curent Fiscal Year
Net Purchases or Sales (-)
Classification
Fiscal Year to Date
Beginning of
This Month
This Year
Trust funds-Continued
Department of the Interior
Department of Labor:
Unemployment trust fund
Other
•
Department of State:
Foreign service retirement and disability fund
Other
Department of Transportation:
Airport and airway trust fund
Highway trust fund
Other
Department of the Treasury
Environmental Protection Agency
General Services Administration
Office of Personnel Management:
Civil Service Retirement and Disability Fund:
Public Debt Securities
Agency Securities
Employees Health Benefits Fund
Employees Life Insurance Fund
Retired Employees Health Benefits Fund
-$187
$66
$401
$205
-1,057
11
4,001
6
1,248
4
8,3%
17
13,454
13
222
-1
424
-1
364
(**)
1,554
1
1,756
1
120
-837
1,640
1,359
925
732
4,794
9,481
6,313
11,677
(")
(")
(•*)
(*•)
-11
57
(")
108
1
84
577
4
3,341
2,468
13,503
-3
-11
59
707
190
579
109,361
175
854
5,259
1
108,488
175
916
5,976
1
(")
(**)
-33
323
298
330
319
8,630
135
817
3
8,994
135
876
6
243
2
618
2
-1
-891
2
13,952
42
18
328
1
13,754
44
17
3,112
1
21,303
216,013
765
227,994
765
21,303
216,778
228,759
2,230
3
3,213
1
(**)
2,768
5
Total public debt securities
Total agency securities
8,715
20,696
Total trust funds
8,715
Off-budget Federal entities:
Federal Financing Bank
Postal Service
Rural electrification and telephone revolving fund ....
47
-2
3,215
Total public debt securities
2,233
Total Off-budget Federal entities
Note: Investments are in Public Debt Secutities unless otherwise noted.
See footnotes on page 3.
628
5
-28
-16
5
Grand Total
<")
94
-5
167
1
Veterans Administration:
Government life insurance fund
National service life insurance fund:
Public debt securities
Agency securities
Veterans special life insurance fund
General Post Fund National H o m e s
Independent Agencies:
Federal Deposit Insurance Corporation
Harry S. Truman Memorial Scholarship Trust Fund
Japan—United States Friendship Commission
Railroad Retirement Board
Other
Prior Year
7,440
24,045
22,475
240,114
3,215
TABLE V-COMPARATIVE STATEMENT OF RECEIPTS AND OUTLAYS
BY MONTHS OF CURRENT FISCAL YEAR (In millions)
28
Classification
Feb.
March
April
May
July
Aug.
Sept.
Fiscal
Year
To
Date
N E T RECEIPTS
Individual income taxes
Corporation income taxes
Social insurance taxes and
contributions:
Employment taxes and
contributions
Unemployment insurance
Other retirement contributions
Excise taxes
Estate and gift taxes
Customs duties
Miscellaneous receipts
Total—Budget receipts this
year
$23,227
468
$22,700
467
$25,577
10,922
$33,881
1,619
$22,190
9
$12,895
7,965
$39,192
9,095
$4,333
280
$32,200
11,315
$22,398
2,063
$25,820
801
$31,541
11,891
$295,955
56,893
14,266
1,100
339
3,143
488
766
1,359
14,254
2,166
357
3,261
453
904
1,640
15,435
289
394
3,014
484
855
1,074
19,924
1,112
425
3,148
488
776
1,165
17,296
2,308
369
2,693
570
839
1,613
17,138
191
373
2,870
523
974
1,535
23,169
2,501
366
3,042
505
937
1,374
17,600
8,457
384
3,322
550
990
1,543
18,976
373
410
3,229
466
1,060
1,253
18,858
2,093
410
3,298
476
1,088
1,333
17,278
4,252
401
3,221
558
1,241
1,637
17,990
295
354
3,120
449
939
1,440
212,184
25,138
4,580
37,361
6,010
11,370
16,965
45,157
46,202
58,044
62,537
44,464
80,180
69,282
52,017
55,209
68,019
666,457
54,498
57,505
43,504
66,234
33,751
66,517
43,948
Total—Budget receipts prior
year
NET OUTLAYS
Legislative Branch
The Judiciary
Executive Office of the President
Funds Appropriated to the President:
International security assistance
International development assistance .
Other
Department of Agriculture:
Foreign assistance, special export
programs and Commodity Credit
Corporation
Other
Department of Commerce
Department of Defense:
Military:
Department of the A r m y
Department of the Navy
Department of Air Force
Defense agencies
Total Military
Civil
Department of Education
Department of Energy
Department of Health and H u m a n
Services:
H u m a n Development Services
Health Care Financing
Administration:
Grants to States for Medicaid
Federal Hospital Ins. Trust Fund ..
Federal Supp. Med. Ins. Trust
Fund
Other
Social Security Adm.:
Assis. Pmts. Program
Federal Old-Age and Survivors Ins.
Trust Fund
Federal Disability Ins. Trust
Fund
Other
Other
121
70
5
156
57
13
62
10
96
84
11
121
89
6
124
63
140
74
134
62
7
110
93
7
144
65
12
142
79
110
69
1,584
866
95
177
544
7
346
88
-144
1,519
89
113
191
118
166
169
433
-37
443
173
-145
280
221
420
221
356
119
211
125
-263
250
339
394
656
335
-188
571
55
185
5,034
2,876
628
1,301
3,144
138
1,012
1,742
179
1,064
2,924
160
1,665
2,600
134
1,035
2,526
159
578
2,454
125
394
2,721
145
159
2,566
147
153
1,897
141
398
2,003
178
442
2,206
201
249
2,248
186
8,450
29,032
1,892
4,161
5,694
4,989
2,104
4,339
5,365
5,847
1,894
4,658
6,002
5,613
2,652
4,507
5,384
5,555
2,335
4,543
5,803
5,493
2,100
4,682
5,863
5,566
2,839
4,643
5,996
5,472
2,099
4,366
6,233
5,757
3,018
4,716
5,947
5,995
2,465
4,800
5,778
5,649
2,069
4,746
6,354
6,154
2,205
4,483
5,887
5,757
2,227
54,643
70,306
67,847
28,009
16,949
17,445
18,925
17,781
17,939
18,950
18,211
19,373
19,123
18,296
19,459
18,354
220,805
285
1,285
662
288
1,375
711
297
1,371
1,000
240
1,495
686
208
1,438
697
212
1,266
839
239
1,354
433
215
1,291
654
222
1,156
789
263
987
759
296
1,413
773
303
1,063
355
3,072
15,494
8,358
595
433
5,896
20,061
42,295
1,646
3,987
1,578
3,474
1,531
3,298
1,670
3,371
1,751
3,318
1,813
3,904
1,747
3,548
1,691
3,807
1,687
3,784
1,680
3,568
1,826
3,916
1,440
2,321
1,852
1,357
1,610
1,284
1,722
1,555
1,678
1,495
1,643
1,364
1,560
2,249
1,811
1,385
1,700
1,386
1,673
1,721
1,750
1,469
1,881
2,682
1,493 20,374
18,042
93
656
705
740
583
597
8,346
12,668
13,083
13,175
13,368
13,244
13,715
13,538
13,334
16,200
13,370
26,391
319
162,406
1,534
284
-1,193
1,491
1,063
-1,130
1,455
2,062
-1,544
1,554
964
-1,574
1,527
1,651
-1,633
1,612
2,152
-2,455
1,532
1,102
-1,883
1,521
1,469
-1,562
1,610
4,920
-4,762
1,548
968
-2,022
2,916
2,224
-3,324
161
712
-140
18,459
19,568
-23,224
776
TABLE V-COMPARATIVE STATEMENT OF RECEIPTS AND OUTLAYS
BY MONTHS OF CURRENT FISCAL YEAR (In millions)-Continued
Oct.
Classification
Jan.
Feb.
March
April
May
29
June
July
Aug.
Sept.
Fiscal
Year
To
Date
Comparable
Period
Prior
FY
OUTLAYS—Continued
Department of Housing and Urban
Development
Department of the Interior
Department of Justice
Department of Labor:
Unemployment trust fund
Other
Department of State
Department of Transportation:
Highway trust fund
Other
Department of the Treasury:
Interest on the public debt
General revenue sharing
Other
Environmental Protection Agency
General Services Administration
National Aeronautics and Space
Administration
Office of Personnel Management
Small Business Administration
Veterans Administration:
Compensation and pensions
National service life
Government service life
Other
Independent Agencies:
Postal Service
Tennessee Valley Authority
Other ind. agencies
Undistributed offsetting receipts:
Federal employer contributions to
retirement fund
Interest credited to certain accounts...
Rents and Royalties on Outer
Continental Shelf Lands
$1,118
506
241
$1,445
412
232
$1,673
419
277
$1,100
260
287
$1,106
356
246
$1,248
349
111
$821
313
248
$1,611
333
254
$1,737
445
286
$1,198
441
350
$1,865
577
232
$16,517
4,889
3.171
$15,315
4,569
2,849
1,493
-82
433
1,570
531
170
1,931
384
182
2,053
361
183
1,802
428
159
2,699
-331
152
1,695
381
180
1,617
430
180
1,385
532
188
1,324
544
229
1,367
709
202
7.152
-5,453
169
26.089
-1.567
2,428
32,655
5,539
2,267
897
2,158
956
1,135
849
905
643
1,254
493
958
565
940
667
983
840
913
949
1,059
1,069
1,185
1,172
1,040
1.141
1,136
10,240
13,664
8,700
11,915
10,038
1,139
-1,566
289
-239
11,011
6
-352
326
156
18,990
11,165
106
-646
305
98
11,210
1
-1,145
384
250
11,423
1,140
-1,038
303
-176
12,062
20,407
-1,089
345
186
-2,839
332
226
11,758
1,140
-2,384
394
-226
12,714
2
-790
335
167
12,343
-1,552
360
118
10,717
1,031
-2,267
345
-328
-1,772
338
44
153,838
4,567
-17,440
4,057
111
128,813
4.614
-17,180
4,299
145
734
1,897
257
632
1,737
43
590
2,028
-39
414
1,841
-100
631
1,768
-27
522
1,917
-21
604
1,950
-6
603
1,789
-18
573
1,947
-15
615
1,911
23
626
1,688
4
502
2,116
154
7,048
22,590
255
6,664
21.278
479
1,146
29
4
757
1,146
30
2,263
43
5
1,022
48
1,147
44
4
905
2,224
54
5
1,011
82
1,173
43
5
979
2,285
38
5
821
42
2,322
40
4
915
40
13,918
481
52
11,145
13,860
445
59
10,452
789
136
-15
61
1,376
26
345
-100
59
-30
1,714
220
97
246
877
23
1,539
23
2,983
72
-374
84
518
-19
348
-22
1,008
351
9,748
820
8,741
-569
-231
-612
-279
-713
-8,179
-559
-72
-640
-197
-690
-710
-681
-309
-626
-504
-714
-9,126
-726
-64
-675
-419
-1,557
-243
-8,760
-20,333
-8,122
16.952
-6,712
-10,492
220
39
4
1,107
220
44
(")
70,226
67,794
74,705
68,052
-25,069
-21,591
16,661
-5,515
-23,623
-22,270
Totals-prior year:
Budget outlays
66,708
66,166
Budget surplus (+) or deficit (-)
26,169
68,267
73,020
68,687
71,391
- 30,282
67,087
64,152
-26,036
-17,938
-3,308
71,283
36
4
852
-2
68,432
88,707
-9,916
1,712
-1,174
1,974
-9,996
18,128
-34,673
+ 14,811
185,339
63,116
•29,285
+ 3,401
-30.476
841,800
1,801
67,160
-21,412
61,610
+ 1,946
-2,019
-24,845
51,234
-3,801
63,040
Off-budget surplus (+) or deficit (-) .
Total surplus (+) or deficit (-)
42
4
1,152
220
Off-budget surplus (+) or deficit (-). + 1,446
Total surplus ( + ) or deficit (-)
(")
1,789
Total-this year:
Budget outlays
Budget surplus (+) or deficit (-)
$1,597
477
241
795,916
-195,354
-12,357
-22,705
18,744
-207,711
TABLE VI-TRUST FUND IMPACT ON BUDGET RESULTS AND INVESTMENT HOLDINGS (In millions)
30
Securities held as Investments
Current Fiscal Year
Fiscal Year to Date
Current M o n t h
Classification
Beginning of
Receipts
Outlays
Excess
Receipts
Outlays
Excess
This Year
Trust receipts, outlays, and investment held:
Airport and airway
Federal
Federal
Federal
Federal
Federal
Federal
Federal
Deposit Insurance Corp
disability insurance
employees life and health benefits
employees retirement
hospital insurance
old-age and survivors insurance
supplementary medical insurance
Highway
Unemployment
Veterans life insurance
All other trust
Trust fund receipts and outlays on the basis
of Table III and investments held from
Table IV-D
Interfund receipts offset against trust fund
outlays
Federal fund receipts and outlays on the basis
of Table III
Interfund receipts offset against Federal fund
outlays
Total Federal fund receipts and outlays
30,565
216,778
228,759
237,474
409,330
615,237
-205,908
7,021
7,021
54,976
6,108
6,108
51,234
3,097
12,397
10,265
1,316
-7,077
47,900
68,019
3,112
13,454
10,303
1,240
30,565
14,775
61,084
10,840
328
8,396
9,904
1,375
304,799
38,636
-24,625
11,677
335,364
18,517
54,008
9,481
23,861
18,517
-24,625
2,478
300
-1,991
3,804
356
-24
73,670
23,861
296
295
14,195
4,656
6,879
114,073
16,982
27,224
9,117
73,670
-3,742
1,153
$6,434
13,754
4,261
6,893
110,508
15,865
21,110
10,270
231,129
20,119
356
3,366
13,088
$6,313
13,952
5,288
6,113
111,171
13,514
25,503
6,958
261,694
42
17
-131
-6,353
-39
41
3,572
25,138
43
1,111
-17
426
6,648
39
2
1,241
$4,794
248
-625
754
14,685
3,437
3,313
2,151
436
$114
-8
381
1,193
-8
15,222
1,271
13,483
-1,363
-7,077
16,785
15,907
4,609
40,262
152,444
4,567
11,743
416,351
622,258
-85,257
-85,257
666,457
841,800
Close of
This Month
$1,680
$819
519
-248
16,532
-754
-10,076
36,825
149,131
-2,151
4,567
9,264
-300
5,563
21,334
-356
460
$2,499
518
$122
54
-381
48
8
-14,866
2,095
-396
1,363
$236
45
This M o n t h
-205,908
- 175,342
.. .
Note: Interfund receipts and outlays are transactions between Federal funds and trust funds, such as, Federal payments and contributions, Federal employer contributions, and interest and profits on
investments in Federal securities. They have no net effect on overall budget receipts and outlays since the receipt side of such transactions is offset against budget outlays. In this table, interfund
receipts are shown as an adjustment to arrive at total receipts and outlays of trust funds and Federal funds respectively. Included in total interfund receipts and outalsy are $4,567 million in Federal
funds transferred to trust funds for general revenue sharing.
TABLE VII-SUMMARY OF RECEIPTS BY SOURCE AND OUTLAYS BY FUNCTION (In millions)
Receipts and Outlays
Classification
This M o n t h
Fiscal Year
T o Date
N E T RECEIPTS
Individual income taxes
Corporation income taxes
Social insurance taxes and contributions:
Employment taxes and contributions
Unemployment insurance
Other retirement contributions
Excise taxes
Ertate and gift taxes
Customs
Miscellaneous receipts
Total
$31,541
11,891
$295,955
56,893
17,990
295
354
3,120
449
939
1,440
212,184
25,138
4,580
37,361
6,010
11,370
16,965
68,019
666,457
18,942
1,698
646
-266
1,293
145
103
2,331
850
1,839
2,337
4,084
7,615
936
396
468
236
9,742
-2,160
227,405
13,313
8,271
2,464
12,677
12,215
5,198
24,705
7,803
26,616
30,435
235,764
96,714
25,640
5,616
4,836
6,577
111,007
- 15,454
51,234
841,800
NET OUTLAYS
National defense
International affairs
General science, space, and technology
Energy
"•
Natural resources and environment
Agriculture
Commerce and housing credit
Transportation
Community and regional development
Education, training, employment and social services
Health
Social security and medicare
Income security
Veterans benefits and services
Administration of justice
General government
General purpose fiscal assistance
Interest
Undistributed offsetting receipts
Total
For sale by the Superintendent of Documents, U.S. Government Printing Office, Washington, D.C. 20402, (202) 783-3238.
Subscription price $125.00 per year (domestic), $156.25 per year (foreign mailing), includes all issues of Daily Treasury Statements,
the Monthly Statement of the Public Debt of the United States and the Monthly Treasury Statement of Receipts
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Comparable Period
Prior Fiscal Year
to Date
31
TREASURY NEWS
Department of the Treasury • Washington, D.C. • Telephone 566-2041
FOR IMMEDIATE RELEASE
October 25, 1984
CONTACT:
Art Siddon
Charles Powers
566-2041
STATEMENT OF SECRETARY OF THE TREASURY DONALD T. REGAN
ON INCOME TAX INDEXING
Under the individual income tax indexing provision of the
Economic Recovery Tax Act of 1981, the personal exemption and the
zero bracket amount will be increased and all marginal tax rate
brackets will be adjusted approximately 4.1 percent for calendar
year 1985.
As a result, American taxpayers will save more than $9
billion in taxes in 1985. Nearly 80 percent of the tax savings
will benefit taxpayers earning less than $50,000 a year.
Under this indexing provision, inflation will no longer push
taxpayers into higher tax brackets and erode the value of the
personal exemption and the zero bracket amount. For years,
Government has used inflation as a silent partner to raise taxes.
With indexing, taxpayers will be protected from these hidden tax
increases.
In 1985, the personal exemption will be increased from the
present level of $1000 to $1040. (For senior citizens 65 and
older, the personal exemption increases from $2000 to $2080.)
The zero bracket amount will be increased from $2300 to $2390 for
single returns and from $3400 to $3540 for joint returns.
Since tax brackets are narrower at low and moderate-income
levels, low and moderate-income taxpayers benefit the most from
indexing. They are the ones who have been pushed into higher tax
brackets without indexing.
The tax saving in 1985 for a median-income family of four
($30,120 in 1984) will be $84. In addition, if inflation stays
at about four'percent over the next few years, this inflation
protection will continue, saving this median-income family $690 a
year in 1989 and a total of $1861 for the years 1985 through
1989.
Other typical tax changes resulting from indexing in 1985
and beyond are shown in the attached tables. Also attached are
the 1985 indexed tax rate schedules for single and joint returns.
R-2901
Tax Changes Due to Indexing
Joint Return, One Earner, Two Dependents
Income
Median income:
Adjusted gross income
Tax after indexing
Tax before indexing
Change due to indexing
Percent change
$10,000 ($84):
Adjusted gross income
Tax after indexing
Tax before indexing
Change due to indexing
percent change .......
$20,000 ($84):
Adjusted gross income
Tax after indexing
Tax before indexing
Change due to indexing
Percent change
$30,000 ($84):
Adjusted gross income
Tax after indexing
Tax before indexing
Change due to indexing
Percent change
$40,000 ($84):
Adjusted gross income
Tax after indexing
Tax before indexing
Change due to indexing
Percent change
$50,000 ($84):
Adjusted gross income
Tax after indexing
Tax before indexing
Change due to indexing
Percent change
: 1984 : 1985
1986
1987
1988
1989
30,120 31,686 33,596 35,745 38,025 40,382
3,023 3,205 3,424 3,684 3,968 4,266
3,023 3,289 3,632 4,046 4,485 4,956
0
0.0
-84
2.6
-208
5.7
-362
8.9
-517
11.5
-690
13.9
10,000 10,471 10,946 11,404 11,853 12,279
291
246
332
340
315
347
291
283
459
518
397
578
0
0.0
113,904
8,818
9,562
-265
12.3
-744
7.8
30,000 31,413 32,837 34,212 35,558 36,837
3,003 3,158 3,295 3,424 3,550 3,665
3,003 3,242 3,486 3,751 4,010 4,256
170,857
17,092
18,745
0
0.0
-1,653
8.8
40,000 41,885 43,782 45,615 47,410 49,115
4,874 5,129 5,349 5,556 5,759 5,945
4,874 5,280 5,689 6,085 6,507 6,940
227,807
27,738
30,501
50,000 52,356 54,728 57,019 59,263 61,394
7,165 7,540 7,862 8,168 8,466 8,740
7,165 7,764 8,366 8,949 9,519 10,104
284,760
40,776
44,702
office of the Secretary of the Treasury
Office of Tax Policy
-504
6.0
-529
8.7
-460
11.5
-2,763
9.1
-224
2.9
-340
6.0
-327
8.7
-995
14.3
0
0.0
-151
2.9
-191
5.5
-207
10.2
-591
13.9
0
0.0
-84
2.6
-147
7.7
-178
34.4
56,953
1,580
2,235'
20,000 20,942 21,891 22,808 23,705 24,558
1,549 1,628 1,699 1,767 1,832 1,892
1,549 1,665 1,787 1,914 2,039 2,157
-88
4.9
-127
27.7
-1,861
9.1
-655
29.3
-37
2.2
-82
20.7
179,434
18,547
20,408
-231
40.0
0
0.0
-37
13.1
1985-89
-748
11.5
-781 -1,053 -1,364
8.7
11.1
13.5
-3,926
8.8
October 25, 1984
Note: Forecasts of nominal incomes are consistent with the Administration's
economic assumptions for the Midsession Review of the Budget. Incomes are
assumed to consist only of wages and salaries. Deductible expenses are
assumed to be 23 percent of adjusted gross income.
Tax Changes Due to Indexing
Joint Return, Two Earners, Two Dependents
Income
Median income:
Adjusted gross income
Tax after indexing
Tax before indexing
Change due to indexing
Percent change
$10,000 ($84):
Adjusted gross income
Tax after indexing
Tax before indexing
Change due to indexing
Percent change •
,
$30,000 ($84):
Adjusted gross income
Tax after indexing
Tax before indexing
Change due to indexing
Percent change •••••••
$50,000 ($84):
Adjusted gross income
Tax after indexing
Tax before indexing
Change due to indexing
Percent change
1985-89
30,120 31,686 33,596 35,745 38,025 40,382
2,825 2,995 3,202 3,448 3,717 3,999
2,825 3,079 3,390 3,778 4,200 4,636
179,434
17,361
19,083
0 ^84 ^T88 ^330 ^483 ^637
0.0
2.7
5.5
8.7
-1,722
9.0
11.5
13.7
10,000 10,471 10,946 11,404 11,853 12,279
297
291
255
208
276
291
297
303
471
418
255
245
358
418
471
526
$20,000 ($84):
Adjusted gross income
Tax after indexing .
Tax before indexing
Change due to indexing
Percent change
$40,000 ($84):
Adjusted gross income
Tax after indexing
Tax before indexing
Change due to indexing
Percent change
x 1984 : 1985 x 1986 x 1987 : 1988 x 1989
j
x
:
x
:
x
5
0.0
=T7
15.1
-82
22.9
=127
^127
30.4
"=T74
=T74
36.9
-223
42.4
56,953
1,3752,018^641
31.9
20,000 20,942 21,891 22,808 23,705 24,558 113,904
8,271
1,453 1,528 1,594 1,657 1,718 1,774
8,968
1,453 1,565 1,677 1,791 1,911 2,024
0 ^37 HB3 :T34 :T93 ::250
0.0
2.4
4.9
7.5
12.4
^697
7.8
30,000 31,413 32,837 34,212 35,558 36,837
2,805 2,951 3,078 3,198 3,315 3,422
2,805 3,035 3,267 3,494 3,743 3,980
170,857
15,964
17,519
10.1
-558
14.0
-1,555
8.9
40,000 41,885 43,782 45,615 47,410 49,115
4,565 4,799 5,007 5,205 5,397 5,575
4,565 4,928 5,322 5,702 6,073 6,454
"=T29 ^315
-879
^497
-676
0.0
2.6
13.6
5.9
8.7
11.1
227,807
25,983
28,479
-2,496
8.8
50,000 52,356 54,728 57,019 59,263 61,39
6,670 7,021 7,321 7,603 7,879 8,13
6,670 7,245 7,824 8,384 8,932 9,45
284,760
37,957
41,837
0 ^224 ^503 :r78l -1,053 -1,31
0.0
3.1
6.4
9.3
11.8
-3,880
9.3
0
0.0
-84
2.8
Oifice of the Secretary of the Treasury
Office of Tax Policy
-189
5.8
-296
8.5
-428
11.4
14.
October 25, 1984
Note: Forecasts of nominal incomes are consistent with the Administration's
•conomic assumptions for the Midsession Review of the Budget. Incomes are
assumed to consist only of wages and salaries. Deductible expenses are
assumed to be 23 percent of adjusted gross income.
Tax Changes Due to Indexing
Single Return, No Dependents
Income
: 1984 : 1985 : 1986 : 1987 : 1988 : 1989 : 1985-89
Median incomes:
Adjusted gross income
Tax after indexing
Tax before indexing
Change due to indexing
Percent phange
"
10,879 11,445 12,135 12,911 13,735 14,586
1,023 1,080 1,149 1,229 1,315 1,404
1,023 1,093 1,178 1,282 1,397 1,515
:
5"
^TJ
-29
-53
HT2
-111
0.0
1.2
2.5
4.1
5.9
7.3
64,812
6,177
6,465
-288
4.5
$10,000 ($84):
Adjusted gross income
Tax after indexing
Tax before indexing
10,000 10,471 10,946 11,404 11,853 12,279
915
960 1,003 1,043 1,081 1,116
915
973 1,031 1,088 1,143 1,196
56,953
5,203
5,431
*
Change due to indexing
Percent change
$20,000 ($84):
Adjusted gross income
Tax after indexing
Tax before indexing
Change due to indexing
Percent change
0
0.0
-13
1.3
-80
6.7
-228
4.2
20,000 20,942 21,891 22,808 23,705 24,558
2,392 2,512 2,622 2,728 2,830 2,926
2,392 2,559 2,727 2,909 3,089 3,259
0
-47
-105
-181
-259
-333
0.0
1.8
3.9
6.2
8.4
10.2
113,904
13,618
14,543
-925
6.4
$30,000 ($84):
Adjusted gross income
Tax after indexing
Tax before indexing
Change due to indexing
Percent change
30,000 31,413 32,837 34,212 35,558 36,837
4,385 4,607 4,808 5,000 5,185 5,359
4,385 4,711 5,040 5,358 5,669 5,999
0
-104
-232
-358
-484
-640
0.0
2.2
4.6
6.7
8.5
10.7
170,857
24,959
26,777
-1,818
6.8
$40,000 ($84):
Adjusted gross income
Tax after indexing
Tax before indexing
Change due to indexing
Percent change
40,000 41,885 43,782 45,615 47,410 49,115
6,827 7,171 7,485 7,784 8,074 8,347
6,827 7,320 7,854 8,390 8,915 9,414
0
-149
-369
-606
-841 -1,067
0.0
2.0
4.7
7.2
9.4
11.3
227,807
38,551
41,893
-3,032
7.2
$50,000 ($84):
Adjusted gross income
Tax after indexing
Tax before indexing
Change due to indexing
Percent change
50,000 52,356 54,728 57,019 59,263
9,673 10,160 10,604 11,028 11,441
9,673 10,367 11,134 11,875 12,601
0
-207
-530
-847 -1,160
0.0
2.0
4.8
7.1
9.2
284,760
55,062
59,267
-4,205
7.1
Office of the Secretary of the Treasury
Office of Tax Policy
-28
2.7
-45
4.1
-62
5.4
61,394
11,829
13,290
-1,461
11.0
October 25, 1984
Note: Forecasts of nominal incomes are consistent with the Administration's
economic assumptions for the Midsession Review of the Budget. Incomes are
assumed to consist only of wages and salaries. Deductible expenses are
assumed to be 23 percent of adjusted gross income.
1231. X&L £a±£ Schedule
Married Taxpayers Filing Joint Returns
(and Qualifying Widows and Widowers)
If TAXABLE INCOME is
over:
but not
over:
0
3,540
5,720
7,910
12,390
16,650
21,020
25,600
31,120
36,630
47,670
62,450
89,090
113,860
169,020
tt
3,540
<r
5,720
t>
7,910
iI
12,390
IJ
16,650
J>
21,020
1r
25,600
(?
31,120
1r
36,630
47,670
i*
62,450
<?
89,090
Jr
J* 113,860
i> 169,020
Then, TAX is
$0.00
$0.00
$239.80
$502.60
$1,129.80
$1,811.40
$2,598.00
$3,605.60
$4,985.60
$6,528.40
$10,171.60
$15,788.00
$26,976.80
$38,123.30
$65,151.70
Office of the Secretary of the Treasury
Office of Tax Analysis
of the
amount
over:
+
+
+
+
+
+
+
+
+
+
+
+
+
•
11%
12%
14%
16%
18%
22%
25%
28%
33%
38%
42%
45%
49%
50%
$
$
$
$
$
$
$
$
$
$
$
$
$
$
3,540
5,720
7,910
12,390
16,650
21,020
25,600
31,120
36,630
47,670
62,450
89,090
113,860
169,020
October 24, 1984
2M1
X&X £a±£ Schedule
Single Taxpayers
If TAXABLE INCOME is
over:
0
2,390
3,540
4,580
6,760
8,850
11,240
13,430
15,610
18,940
24,460
29,970
35,490
43,190
57,550
85,130
Then, TAX is
but not
over:
lF
1r
I>
1>
{r
\>
*r
1>
\>
Jr
tJ
1r
<•
I>
<r
2,390
3,540
4,580
6,760
8,850
11,240
13,430
15,610
18,940
24,460
29,970
35,490
43,190
57,550
85,130
$0.00
$0.00
$126.50
$251.30
$556.50
$870.00
$1,252.40
$1,646.60
$2,082.60
$2,848.50
$4,283.70
$5,936.70
$7,813.50
$10,739.50
$16,770.70
$30,009.10
Office of the Secretary of the Treasury
Office of Tax Analysis
of the
amount
over:
•
+
+
+
+
•
+
+
•
+
+
•
+
4
+
11%
12%
14%
15%
16%
18%
20%
23%
26%
30%
34%
38%
42%
48%
50%
IF
1>
ir
I*
\r
4•
\r
1•
J>
1t
1r
1>
1:
1p
t1
2,390
3,540
4,580
6,760
8,850
11,240
13,430
15,610
.18,940
24,460
29,970
35,490
43,190
57,550
85,130
October 24, 1984
TREASURY NEWS
lepartment of the Treasury • Washington, D.C. • Telephone 566-2041
FOR IMMEDIATE RELEASE CONTACT: Art Siddon
October 25, 1984
566-2041
TREASURY' DEPARTMENT PRESS RELEASE
The Treasury Department today denied a UPI press report that
the fiscal 1984 results were "purposely delayed because of orders
from Departmental officials".
The Treasury Department had issued the 1984 fiscal report on
Thursday, October 25. The report was released late in the day
after completion on it, following preparation and release of a
six-page report on the effects of tax indexing based on the CPI
report issued by the Labor Department yesterday, October 24.
"It is our practice to release full information in as timely
a manner as possible", said Alfred H. Kingon, Assistant Secretary
of the Treasury for Policy Planning and Communications. "I know
of no plans or directives from anyone, in any way, to delay the
issuance of the budget report, or for that matter, any other
report. It should be obvious that there was no reason to delay
the budget figures. The final deficit figure was consistent with
the Administration's earlier estimates and other Treasury
officials' previous comments".
The year end report, a complicated document, required
interagency comments, Kingon noted. Treasury's comments to OMB
were not completed until about 7 p.m. last night, October 24.
There was no way the report could have been finished and ready
until today. He further reported that the printed document was
not delivered until late this afternoon.
R-2902
TREASURY NEWS
department of the Treasury • Washington, D.C. • Telephone 566-2041
FOR IMMEDIATE RELEASE
October 25, 1984
RESULTS OF TREASURY'S 52-WEEK BILL AUCTION
Tenders for $8,256 million of 52-week bills to be issued
November 1, 1984,
and to mature October 31, 1985, were accepted
today. The details are as follows:
RANGE OF ACCEPTED COMPETITIVE BIDS:
Discount
Investment Rate
Rate
(Equivalent Coupon-Issue Yield) Price
•
Low
9. 40%
10,.27%
90..496
High
9. 48%
10 .36%
90..415
Average 9. 45%
10 .33%
90..445
Tenders at the high discount rate were aliiotted 11%.
Location
TENDERS RECEIVED AND ACCEPTED
(In ThousandIs)
Accepted
Received
Boston
New York
PhiladelphiaL
Cleveland
Richmond
Atlanta
Chicago
St. Louis
Minneapolis
Kansas City
Dallas
San Francisco
Treasury
TOTALS
Type
Competitive
Noncompetitive
Subtotal, Public
Federal Reserve
Foreign Official
Institutions
TOTALS
R-2903
33,495
6 ,926,265
18,160
46,470
26,140
68,790
128,910
64,230
8,865
23,545
2,460
808,100
100,620
$8,256,050
$
323,495
16,049,865
21,940
56,470
27,920
78,790
1,029,360
69,900
8,865
23,545
2,460
1,169,250
100,620
$18,962,480
$
$17,443,670
408,810
$17,852,480
1,000,000
$6,737,240
408,810
$7,146,050
1,000,000
110,000
110,000
$18,962,480
$8,256,050
TREASURY NEWS
Department of the Treasury • Washington, D.C. • Telephone 566-2041
. FOR RELEASE UPON DELIVERY
Expected at 12 p.m. M.S.T.
Remarks by Beryl W. Sprinkel
Under Secretary of the Treasury for Monetary Affairs
before
MBA Graduate Students, Anderson School of Management
Albuquerque, New Mexico
October 26, 1984
Here we are, a couple of weeks shy of the election. One
Washington observer I know defined an election as an opportunity
to find out if the polls are right.
Meanwhile, we the voters are bombarded with political
rhetoric. Tax cuts, tax increases, deficits, monetary policy,
the recovery, the strong dollar, the trade deficit — the list
is a long one. One view is that political campaigns are
emotional orgies that endeavor to distract attention from the
real issues involved — that they actually paralyze the voters'
critical judgment.
In all my years in the economics profession and more
recently in government, I have never subscribed to that cynical
view. It is true, however, that the political arena is not
ideally suited to reasoned analysis. Political discussions
range from the realistic to the absurd; facts are distorted and
theories misrepresented, frequently for political gain rather
than to clarify public understanding of an issue.
But in the discussion of public policy there are some old
myths that keep popping up like the proverbial bad penny. Some
of these myths are like locusts — they are reborn every 17
years. Some need but never get a proper burial. If the subject
wasn't so serious, it would be amusing.
Today I would like to try to separate myth from reality
with respect to some important economic policy issues in general,
and with respect to specific Reagan Administration's policies.
MYTH #1:
The Reagan tax cuts hurt the poor.
The 1981 Economic Recovery Tax Act had a very simple
purpose — allow people to keep more of their hard-earned
income, provide increased incentives for individuals to work
harder and save more, and encourage businesses to expand and
engage in capital investment.
R-2904
-2Critics of the tax cuts argue that they have benefitted
the rich and not the poor. But since everyone received an
across-the-board cut in the tax rate, it is inevitable that
those who were paying the most in taxes before the cuts saw the
largest dollar decline in their tax bill; that is simple
arithmetic.
But the real point of the tax cut was more fundamental.
Reducing marginal tax rates in the upper brackets was designed
to draw upper-income individuals out of tax shelters and into
more, taxable investments. Recent analysis of 1982 data
demonstrates that the tax base is responsive to changes in tax
rates, especially in the higher tax brackets.
Individuals in upper incomes shouldered a larger share of
taxes in 1982. For example, the top 1.4% of taxpayers paid
21.8% of the tax burden, up from 20.4% in 1981. In contrast,
the tax burden of individuals in the lower half of income levels
fell from 7.6% in 1981 to 7% in 1982.
Obviously, talk is cheap. Since critics of the tax cuts
will never be able to come up with concrete evidence to support
their claims, talk is all that we'll hear from them. In the
meantime, as more data is forthcoming, their allegations will
only become more foolish.
MYTH #2: The Reagan tax cuts caused the budget deficit.
Everyone agrees that the budget deficit is a serious
problem that must be resolved. However, allegations that the
tax cuts are the root cause of the deficit are simply wrong.
Moreover, such allegations reflect a total misunderstanding of
where deficits come from.
Since 1970, tax receipts as a percentage of GNP have
remained in the narrow range of 18.1% to 20.8%. In the aggregate,
the 1981 and 1982 tax cuts have had the effect of leaving the
average tax rate in 1984 essentially the same as in 1980. This
is because higher Social Security and indirect taxes, and income
tax bracket creep have offset much of the income tax cuts. In
fact, over the 1981-1989 period, only about 9 cents on the
dollar of the original Reagan tax cuts remain.
If tax cuts are not the cause, what is the cause of our
deficit problems? Both the growth of government spending and
slow economic growth during 1980-82 have played roles. The
short-run revenue picture has been affected by two factors: the
recession and the drop in inflation. The recession was temporary
and the drop in inflation is most welcome. As real economic
growth resumes, receipts will recover strongly.
-3But expenditure growth is a predominant factor. I can't
help but be amused when I hear that spending has been "cut to
the bone." Since 1970, Federal expenditures as a percentage of
GNP have been rising at the annual rate of 1.7%. Since 1979,
the annual rate has been an explosive 4.0%. In short, we have
witnessed a growing rate of resource allocation from the private
sector to the government sector.
If the tax cuts did not cause the deficit, then why do
some argue for tax increases? It's actually very simple. It
is in the interests of big spenders to blame the deficit on
undertaxation, rather than on their own spending habits. It is
also in their interest to raise taxes so as to fund more of
their spending binges. Economic growth and a permanent slowdown
in the rate of spending are the only lasting ways to balance
the budget while promoting rising real income and employment.
MYTH #3:
Tight money causes high interest rates.
Despite years of historical evidence that clearly shows
that exactly the opposite is true, the myth that tight money
causes high interest rates continues to lead a life of its own.
Economists can argue theory 'til the cows come home. What
happens in the real world is what's really important.
To understand the money-interest rate puzzle we must recognize that interest rates contain an expected inflation component.
Whenever lenders expect inflation to rise over the term of
their contract, they will charge borrowers a higher interest to
protect the real purchasing power of their investment. That is
just common sense. The key to understanding where inflation
comes from is found in money growth. History has repeatedly
demonstrated that inflation is not something that is imposed
upon us by uncontrolled forces; it is inevitably the result of
excessive money growth. It is no accident that while inflation
rose secularly, money growth increased from an annual average
of 3.5% in the 1961-65 period to an annual average of 7.4% in
the five years ending in 1980. The positive correlation between
money growth and inflation over this period is clear: the
inflation rate rose from an annual average of less than 1.3%
during the 1961-65 period to an annual average of nearly 9% in
the five years ending 1980.
This Administration may not be perfect; but, unlike our
critics, we are smart enough to study and learn from history.
And history teaches us that rapid money growth goes hand-in-hand
with inflation and high interest rates. Those who think that
slow money growth causes high interest rates are simply blind
to the hard-core evidence.
-4MYTH #4:
Deficits cause inflation.
There is no necessary link between deficits and inflation.
The budget deficit is a fiscal problem, not a monetary policy
problem. As I have discussed above, the predominant factor
causing our budget deficit is a lack of fiscal discipline.
While everyone recognizes that large prospective budget deficits
have serious, adverse implications for future capital formation,
productivity, and the size of government, the budget deficit
has no immediate relation to money growth or inflation.
The present and future goal of monetary policy is to
provide stable and moderate money growth at a rate that is
consistent with both price stability and sustainable real
economic growth. That is as true with record-high deficits as
it would be if the budget were balanced.
The only way that deficits would lead to inflation would
be if the Federal Reserve "monetized" the debt. But such a
policy would be short-sighted. Increased money growth generates
inflation and inflationary expectations, and retards real
economic growth as interest rates rise.
We have every reason to believe that the Federal Reserve
will not pursue inflationary money growth to monetize the debt.
The consensus of financial markets suggests the same conclusion.
After rising during the early part of the year, forecasts of
future inflation have been lowered by most analysts.
MYTH #5:
Monetarist and supply-side economics are inconsistent.
Belief in free markets forms the basis of-both monetarist
and supply-side economics. Both schools of thought understand
that the key to long-term economic growth lies in government
policies that promote and facilitate private markets. This is
not a new idea. From Adam Smith's The Wealth of Nations in
1776 to the work of the most recent Nobel-Laureate in economics,
Gerard Debreu, the same conclusion is reached. Maximum efficiency
is brought about by allowing the forces of supply and demand to
operate in competitive markets.
As mentioned above, the Economic Recovery Tax Act provided
incentives to engage in productive activity. When high marginal
tax rates discourage private production and investment, the
nation's output falls below its natural capacity. The success
of the tax cuts demonstrates the premise of supply-side economics:
tax rates affect the public's behavior. The tax cuts are just
one example of where the government has facilitated the private
market process.
Price stability is a goal that is promoted by monetarists
and supply-siders alike. Provision of a sound currency system
is another way the government can facilitate the private economy
-5by maintaining the long-term purchasing power of money and
reducing uncertainty associated with long-term investment and
consumption decisions. There can be no disagreement over the
need for stable and noninflationary monetary policy when the
ultimate goal is for policy to promote the maximum.output
potential of the private market.
Along with a policy of noninflationary money growth,
monetarists and supply-siders agree that money growth should be
stable and predictable. Erratic money growth induces policyrelated fluctuations in economic performance. In contrast,
stable and predictable money growth reduces policy-induced
fluctuations in real economic activity and minimizes uncertainty
about future economic performance. In addition, more predictable
money growth reduces a large element of Uncertainty that surrounds
the long-run outlook for inflation.
By promoting as little interference with private markets
as possible, supply-siders and monetarists believe that government
should take a "back seat" to free markets. Free markets offer
continued prosperity. The responsibility of policymakers is to
make sure that government policy does not destroy that prosperity.
MYTH #6:
A current account deficit causes a weak currency.
Like many myths, this one has some apparent basis in
experience; a current account deficit is often associated with
currency weakness in the exchange markets. However, such an
association does not necessarily signify that one event causes
the other. In the current U.S situation, indeed, a widening
current account deficit has been associated with a very strong
dollar. The missing factor, of course, is the capital account.
Trade and current account balances move in response to various
factors, notably differing growth rates of aggregate demand
here and abroad, developments on the inflation front which
affect price competitiveness, presence or absence of "bottlenecks"
in domestic supply, and so on. Several of these factors —
notably growth and inflation differentials — can influence
financial markets as well. In general, investors will prefer
high growth, low inflation environments to low growth, high
inflation alternatives. Investors will also prefer a climate
which offers stability in terms of politics and policy. Above
all, they will prefer higher to lower rates of return on investment, given all these other factors.
Thus when a country is enjoying strong, well-balanced,
noninflationary growth as is the U.S.; when policy stability
has been established; when there is a positive, incentiveoriented investment climate, we should not be surprised to see
a very strong capital account — the counterpart being a strong
dollar, and a current account deficit. On the other hand, when
an economy is running at or above capacity; when real growth is
possible only with high and rising inflation; where the soundness
-6of domestic policies is in question; we should expect to see
a weak capital account and a weak currency — also with a
current account deficit. The key variable is the capital
account, which, in turn, reflects to a major degree domestic
economic policies and performance.
MYTH #7:
The dollar must drop sharply.
The value of a currency is established by the interaction
of supply and demand in the foreign exchange market. Shifts in
supply and demand reflect many transactions — purchases and
sales of goods and services, international lending and borrowing,
investing and paying off debt -- which are summarized in the
balance of payments. The sheer volume of these can be imagined
when we consider that foreign currency transactions in the
markets are estimated to total on the order of $100 billion per
day. Thus to say with certainty that the dollar "must" depreciate
(or appreciate) is to make a statement about the net effect of
an extremely large number of transactions, involving both trade
and capital flows.
We know that one element often associated with currency
depreciation is present in the U.S. case — i.e., a large and
growing current account deficit. However, that condition has
been present for some time, and the dollar has continued to
strengthen, not to depreciate. A second element often associated
with currency weakness, a decline in U.S. interest rates relative
to interest rates abroad, was present for much of the recent
period of dollar strength. More recently, intere.st rates have
moved down as the dollar rose. Overall, in absolute terms,
U.S. interest rates have fallen sharply from their 1981 peaks,
and have also declined relative to interest rates abroad.
Sharply higher taxes and rapid money growth could cause a
collapse in the dollar. However, since we have no intention to
reverse our tax and monetary policies, these factors make a
sharp collapse in the dollar unlikely.
We expect the trade and current account to continue in
large deficit this year. We also expect further declines in
U.S.interest rates. Other things equal, these would tend to
cause the dollar to weaken unless offset by other factors.
Among the possible offsetting factors are the following:
— U.S. growth and inflation performance, compared with
other industrial countries;
— A perception of policy stability in the U.S.,
— An investment climate which offers increased rewards to
risk-taking and initiative.
-7We expect these to remain basically favorable to investment in
the dollar. However, improvements in conditions abroad —
e.g., continued strengthening in the recoveries abroad — would
make investment in other countries more attractive than before.
In this case, other currencies would enjoy increased demand and
appreciate; the mirror image would be a depreciation of the
dollar in the exchange markets. In such circumstances, an
orderly decline in the value of the dollar would be entirely
appropriate. We don't expect it to drop sharply, but rather to
drift slowly downward.
MYTH #8:
Protectionism creates jobs.
Like many myths, a quick glance seems to confirm the
validity of this proposition. It is only when the less visible
effects are taken into account that just the opposite turns out
to be true: protectionism destroys jobs.
When a domestic industry gains protection from foreign
competition — by a high tariff or a quota excluding foreign
products — it appears that workers' jobs and stockholders'
profits in the protected industry are saved. More often than
not, however, even with protection the industry continues to
decline; foreign competition provides a convenient excuse for
its troubles, while the real causes of decline fail to be
addressed: a dying market demand for the product, outmoded
technology, poor management, excessive labor costs.
But the unfavorable effects of protection are more
widespread. As the Administration pointed out in rejecting
copper and steel requests for protection from foreign competition,
other domestic industries also lose because protectionism raises
costs of their inputs, making it harder for them to compete.
So even if some jobs are saved in the protected industry, jobs
are lost elsewhere in the economy.
More and more often today there are still further
consequences. Trading partners retaliate against the initial
protectionists' action by raising barriers to other products
the country makes. Farm leaders in this country are showing an
increased awareness that protection for U.S. industries means
likely retaliation against U.S. farm exports.
When protectionists' actions multiply, trade and production
are disrupted. Employment falls rather than rises. In the
Great Depression unemployment was made worse all over the world
by round after round of protectionists' actions, all seeking to
"save" jobs at home at the expense of foreigners.
-8Concluding Remarks
The issues that I have raised with you today are brainteasers
that require careful analysis. . The public is not well served
by politicians who seek political gains at the expense of public
understanding. These are issues that deserve their "day in
court," both during the heat of a campaign and in thoughtful
discussion in the months and years ahead.
Oliver Wendell Holmes, Jr., said that the ultimate good is
reached by free trade in ideas. The best test of the truth, he
said, is the power of thought to get itself accepted in the
competition of the market.
The Reagan Administration's economic recovery has proven
itself in the marketplace. Our recovery is the envy of our
friends abroad where our improvement is coming more slowly.
But our job is far from over.
Many of the misguided and "quick-fix" policies of the past
remain with us. Many of the old myths are just "dying to be
reborn" and we can expect our critics to create a few new myths
to obscure the growing successes of our economic program.
But as the expansion continues to separate the myths from
the realities, more and more of the misguided policies of the
past will find their well-deserved and final burial grounds.
The reality is that our policies have fostered our economic
recovery and will continue to support noninflationary, sustained
economic growth.
Thank-you.
0O0
TREASURY NEWS
lepartment of the Treasury • Washington, D.C. • Telephone 566-2041
FOR RELEASE UPON DELIVERY
Expected at 12 p.m. M.S.T.
Remarks by
The Honorable Beryl W. Sprinkel
Under Secretary of the Treasury for Monetary Affairs
before the
Dean's Council of 100
Phoenix, Arizona
Monday, October 29, 1984
Thank you. It's a pleasure to be here to talk with you.
This forum reminds me of some advice a college football player
once gave me. His advice was to pick a subject you know about
and stick with it.
Years ago we took a course together. The course was "New
Testament Survey," reputed to be the easier course in the
curriculum, and was taught by a retired minister with a
reputation for always giving the same final examination question"
— describe and trace the travels of the Apostle Paul.
Naturally everyone had memorized the answer, so you can
imagine the shock and dismay when we were handed the exam
question — discuss and criticize the Sermon on the Mount.
My friend Tiny, the football player, not known for his
academic excellence, immediately began writing while everyone
else in the room got up and walked out.
When the grades were posted Tiny had passed with flying
colors. We asked him what he had written. He had begun his
answer by writing: "Who am I to criticize the words of the
master, but I would like to write about the travels of Saint
Paul."
So today I'd like to talk with you about a subject I know a
great deal about — budget deficits. It is a subject that
frequently causes non-economists' eyes to glaze over. But it is
a subject of immense importance — a serious problem that must be
resolved.
It's a subject that, once whispered among economists,
prompts a barrage of proposals aimed at solving the problem. But
in spite of all the attention the subject has garnered in
academic and journalistic arenas, reasoned public discussion
suffers on at least two fronts.
R-2905
-2_The first, and most
causes of deficits. The
policy vantage point, is
unacceptably high budget
frequently misunderstood, concerns the
second, and more important from a public
how to provide permanent solutions to an
deficit.
Causes of Federal Deficits
Since 1970, the Federal government has operated under
persistent deficits. These deficits are symptoms, not illnesses
in and of themselves. They signal something is fundamentally
wrong with the fiscal posture of a government.
There are those who blame our inability to balance the
Federal books on the Reagan tax cuts. In theory, this is a
possibility. But, anyone with only a passing familiarity with
arithmetic knows that Federal spending growth is the other
plausible explanation. Let's look at the hard facts on tax
revenues and Federal expenditures.
Since 1970, tax receipts as a percentage of GNP have
remained in the relatively narrow range of 18.1 percent to 20.8
percent. Despite many assertions about the erosion of the tax
base, the 1981 and 1982 tax cuts have left the average tax rate
in 1984 at essentially the same point it was in 1980.
The explanation for that phenomenon lies in higher Social
Security and other indirect taxes, and income tax bracket creep
that have offset much of the benefit from the income tax cuts.
In fact, over the eight year period 1981 to 1989, only 9 cents on
the dollar of the original tax cuts remain.
With these facts in mind, it is still difficult-to conclude
either that the tax cuts are the cause of current or future
deficits or that the average American taxpayer is "undertaxed."
The assertion that the tax cuts caused the deficits is a clever
ploy. The politicians that assert that explanation have good
reason to distract attention from the real issue — government
spending.
You have undoubtedly heard claims that government spending
has been "cut to the bone." Our critics purport to show that we
have not succeeded in reversing the trend of rising government
spending as a share of GNP. They are partially correct; we have
succeeded in slowing the rate of rise, but that is all we have
been able to acomplish thus far.
-3The Federal government's share of GNP was one dollar out of
five in 1970. By 1983 that share had risen to one dollar out of
four. Since 1970, Federal spending as a percentage of GNP has
been rising at the annual rate of 1.7 percent. Since 1979, the
annual rate has been an explosive 4.0 percent. I can't help but
be amused when I hear that spending is really not a factor in
deficit growth. I have to admit, also, to some concern about the
lack of public understanding of these relationships. We have to
educate the public, so that they don't buy a politically motivated
bill of goods on this subject.
The short-run deficit picture has also been affected by two
other factors — the recession and the most-welcome drop in
inflation. As a rough rule of thumb, each time growth falls off by
enough to produce a 1 percent increase in the unemployment rate,
the budget deficit widens by $25 billion. We can also estimate
that a one-percentage-point drop in the inflation rate reduces tax
revenues by $122 billion over a five-year period. The recession
was temporary, but the decline in inflation will be sustained by
the sound fiscal and monetary policies of the Reagan
Administration.
Controlling the Causes of Deficits
A moment ago I mentioned the need to educate the public on the
causes of deficits. Only after we recognize the causes of our
deficit can we expect to provide long-term solutions. The key is
to understand the illness, not treat the symptoms. The cause of
our deficit problem is plain to see: federal spending growth.
Are tax increases really our only hope for solving the deficit
problem? Of course not. There are at least three things wrong
with that approach.
First, past tax increases have resulted in more — not less —
government spending. Thus, increasing taxes does not reduce the
deficit dollar-for-dollar. Instead, additional taxes allow
additional government spending. Put simply, it is in the interest
of big spenders to raise taxes. How else can they fund their
spending binges? At Treasury we are exploring a variety of options
for tax reform. The big spenders' idea of tax reform is an
additional chunk of the public's hard-earned money diverted to
Washington.
Second, a tax increase is an anti-growth policy. High taxes
distort incentives for saving and investment. They uniformly
jeopardize long-run economic growth. We have achieved a vigorous
recovery in large part as a result of the stimulative and
incentive-oriented tax cuts. Today, a week before the presidential
election we are urged to return to the high-tax environment of the
past. That is a major threat to our recovery. High tax rates
stifle investment and distort incentives. They do not guarantee
higher tax revenues.
-4Third, those who counsel tax increases implicitly endorse the
idea that the government sector should continue to grow. They
accept, wholesale, the growth of government spending as a
proportion of GNP and they advocate that we collect — at whatever
cost to the economy — the additional tax revenues needed to permit
that growth of the government sector.
Whether we as a society wish to see the government sector
continue to grow is primarily a political, rv>t economic, question.
Nonetheless, that decision has profound economic implications. One
set of premises leads logically to the next: if the Federal
government grows relative to the rest of the economy, we as a
society must f-ace the consequences of higher taxes, higher
government borrowing in the credit markets, added inflation, or
some combination of these options. If government spending absorbs
a larger and larger share of our economic resources, we have no
other way to finance government spending.
You have heard, perhaps, that we should repeal indexing, set
to begin in January. Repeal of indexing is portrayed as a way to
raise revenue. But look more closely. Repealing indexing can only
raise tax revenue through inflation.
The victims of inflation and bracket creep are the very people
our critics claim they want to help — lower income taxpayers.
Their tax burden rises three times faster with inflation than their
middle income counterparts. It rises eighteen times faster than
for taxpayers who are already in the top tax bracket. The repeal
of indexing is "sneaky" politics, proferred by the same people who
tout fairness and public accountability.
It will come as no surprise to you that we do not favor higher
taxes. We have looked at all the available data and we will
continue to do so. Our analysis leads us to a simple message: tax
increases have not succeeded in controlling deficit growth in the
past. There is no reason to believe they can control it today or
in the future. Even if tax increases could control deficits,
rising tax rates are detrimental to long-term economic growth and
prosperity.
Government spending is — by definition — a diversion of
resources from the private sector to the government sector. Can we
in good conscience burden the private sector with the weight of
that policy. It matters not at all if the resources are diverted
directly by taxation, indirectly by inflation, or by borrowing.
The nature and the incidence of that burden may vary with
alternative methods of financing, but the burden remains.
And it is a very heavy burden indeed.
-5When I hear proposals for tax increases I am reminded of
television commercials for antacid tablets that offer temporary
relief of stomach acid distress. To coin a phrase: "Tax increases
provide temporary relief for Federal budget deficits." Can't you
picture in your mind's eye, little bubbles eating up deficit
dollars? But the harsh reality is that the cause of our Federal
budget imbalance cannot be cured by the bitter pill of tax increase
medicine. We need a more thoughtful and permanent solution to
insure long-term success.
Economic growth and a permanent slowdown in the rate of
spending are the only lasting ways to balance the budget while
promoting rising real income and employment. Continuation of
economic growth provides steady tax revenue flows that finance
responsible levels of spending. A permanent slowdown in the rate
of spending insures that spending will be brought back to those
responsible levels.
The Recovery
The U.S. economy has experienced a vigorous recovery from the
1981-82 recession. By most measures our economy today is stronger
than any recovery since World War II. In point of fact, our
recovery is the envy of our friends abroad where improvement has
been slower in coming.
Last year, conventional wisdom among economists was that only
a slow, stunted recovery would be possible in the face of growing
deficits. Those economists are embarrassed by their predictions,
as well they should be. This year, another group of the
gloom-and-doom crowd is making the same misguided forecast.
In the face of all that handwringing, listen to Jack
Albertine, president and chief economist of the American Business
Conference. "By the middle of 1985," he says, "a greater number of
economists will come to the conclusion that the growth potential of
the economy is significantly larger than previously understood."
He continues, "This is the finest recovery since World War II.
The fact that it is a business-investment-led recovery is of great
significance. It means that we are not just creating jobs now, but
for the future. We are putting into place ... increases in
capacity that allow us to have a noninflationary recovery lasting
five, six, even seven years."
He's right, of course. During the first six quarters of this
expansion business capital spending has increased at a rate double
that of previous post-Korean War expansions. Contrary to those
predictions we were talking about a minute ago, the
interest-sensitive sectors of the economy — business capital,
-6outlays, purchases of consumer durables — have led the way in this
expansion and have continued to do so in the first half of this
year. Employment has increased by more than 6 million people since
the end of 1982.
Our recovery has also been characterized by a very low rate of
inflation. The decline in inflation over the past four years is
the largest in more than three decades. Productivity gains are
equally impressive. Rising at a 4.7 percent pace in the second
quarter, productivity has shown its eighth quarterly increase in a
row. This is the longest period of improvement since nine in a row
back in 1971-73.
Mr. Albertine's analysis confirms mine. "That means," he
says, "that the ability of the economy to sustain rates of growth
almost unheard of in American history is very probable."
Those who forecast an aborted recovery with high inflation
misunderstood the reasons behind our dramatic turnaround in
economic growth. Our success is a product of President Reagan's
four-part economic recovery program.
o One, to cut the rate of growth of federal spending by
redirecting government resource allocation to only those
programs which lie within the province of proper
government functions.
o Two, to reduce tax rates so as to provide increased
incentives to work, save, and invest.
o Three, to make the regulatory process more
cost-effective.
o Four, to provide a moderate and stable monetary policy
which creates price stability and facilitates stable
economic growth.
Concluding Remarks
We believed — and still do — that many of the mistakes in
economic policymaking stemmed from a short-run focus — a desire
to maximize short-run gains with too little regard for long-term
consequences.
The size of the Federal budget deficit is a major policy
problem, but we must be careful not to adopt "quick-fix" policies
that will never provide the long-term solutions we need. Tax
increases are just such an unwise policy. Tax increases do not
provide for fiscal discipline. On the contrary, tax increases
validate past overspending and pave the way for more spending.
-7Our aim is long-term, sustainable, noninflationary economic
growth. To achieve that goal will require long-term adherence to
the basic tenets of the Reagan program. At the same time that
our policies continue to rein in spending and promote economic
expansion, we are pursuing the strategy that can solve our budget
deficit problem.
Harry Truman is reported to have asked in sheer frustration
whether he might someday find a one-handed economic adviser —
one who wouldn't advise him by saying "on the one hand, and on
the other hand." One of the distinguishing characteristics of
President Reagan's program is that it is even-handed.
In a second terra, we pledge to vigilantly control Federal
spending. We are pledged to a simple, fair, and economically
efficient income tax system. We will not fail to meet those
commitments.
I urge you to join me in turning aside the threat of solving
our budget deficit problem by turning our back on the very
principles that have led to the expansion we all now enjoy.
Thank you.
0O0
TREASURY NEWS
department of the Treasury • Washington, D.C. • Telephone 566-2041
For Release Upon Delivery
Expected at 11:30 a.m.
Remarks by
Donald T. Regan
Secretary of the Treasury
before the
U.S. League of Savings Institutions
October 29, 1984
Thank you.
I'm glad to be here.
Today as we survey the year ahead we are seeing many
alarmists who are suggesting that 1985 will be a negative one, or
at best a year of low growth. Let me suggest otherwise, and make
the case that an industry closely allied to yours will be a
leader in carrying our current expansion to a very healthy real
growth rate of four percent or so.
As we all know, the construction and building industry is
heavily dependent on interest rates. In 1978 new home mortgages
averaged around 9-1/2 percent based on a blended rating for
26-year mortgages, for the year, and we had just over 2 million
new starts.
But interest rates started up that year, eventually reaching
their peak in 1982 of just over 15.31 percent. Meanwhile starts
were declining, also hitting their low point in 1982. As
interest rates came down in 1983 to average 12.73 on the same
FHLBB rate for the same mortgages; other rates of course for 20
and 30 year mortgages followed a similar path.
As you might expect, as rates declined in 1983 new starts
also picked up, jumping by 70 percent on an interest decline of
some 2-1/2 percentage points!
The current year 1984 has followed the same track — new
starts increasing whenever rates fell, and slowing down
considerably as rates rose.
What's ahead then, since the industry, and a great deal of
your own prosperity, are so dependent on rates? Well, rates in
the government bond market have been declining ever since May.
The decline at first was primarily in the longest end of the
market — our 30 year treasury bonds.
R-2906
-2It was almost on a 14 percent basis at the end of May, and
last week was down to a 11.75 yield basis. The short end of the
market proved to be very stubborn in coming down, in spite of
the fact that short-term borrowings at commercial banks were
practically flat from mid-June to October 1, the prime rate did
not budge.
Other rates such as 90-day CDs and more recently the Fed
funds rate did come down in the meantime. Commercial paper which
large corporations use whenever they think its rate is better
than the banks' rate also started declining.
Short rates, as measured by 3-month Treasury Bills are now
down from around 10.65 at the end of August to about 9.30 today;
they briefly touched 9.05 earlier last week.
The prime has finally started to move, and, in the past two
weeks, has moved down a full point to 12 percent.
Is there room for a further decline in interest rates? To
answer that question we must first look at the economy, and then
at the supply of money. There's no question but what the economy
has slowed down. We forecast that and are not surprised by it.
The pace of the first two quarters was unsustainable — it
averaged a real growth of 8-1/2 percent. But the current quarter
should be a reasonably good one. Automobile production will be
on the upswing, consumers will have money to spend for the
holiday season, if they choose to buy — I think they will, and
that retail sales will be excellent.
Inflation is remaining low, plant and equipment expenditures
are staying up, and confidence of both consumers and business
people remains high.
All of this means that the economy will remain buoyant, but
not overheated. There is still some slack in it. Unemployment
is at 7.3 percent, too high by any standard, and needs to be
brought down. Factory capacity utilization is about where the
average was in the 70's — at 82 percent — so there is more room
for expansion there. Credit is available although demand remains
fairly strong.
The money supply, as measured by M-l, since last June, has
grown only 1.5 percent. In the last 13 weeks it has grown by
less than 1 percent. By anyone's yardstick that's not loose
money. It leaves a lot of room for the Fed to ease.
-3If they did, would inflation return? Again I think not.
The economy is not overly strong. Remember I said some are
talking of a coming recession. I don't believe it, but it does
indicate that an easing of money wouldn't panic the money
markets.
Inflation, as I said is down, wage increases, while rising
recently, are modest. Prices as measured on the wholesale index,
or PPI if you prefer, actually have been negative for the past 2
months. Crude prices, or raw materials, continue to be very
depressed.
Putting all these factors together leads me to the
conclusion that we don't need to fear inflation in the days
ahead.
If the Fed does ease money over the next several months, as
conditions seem to warrant, and many are forecasting, then I
believe interest rates will continue to decline. After all, a 12
percent prime in a time of 4 percent inflation, and 4 percent
real growth, is out of line with any historical perspective.
So I do not feel any qualms about super-inflation, high
interest rates, nor a recession in 1985.
So I think we will have still lower rates of interest rates
in 1985. That's good news for the construction and home building
industry. I believe you'll have a good, if not great year, in
1985. Demand is out there, it's price — the price of money —
that has been holding new starts down.
I believe buyers will return with a decline in mortgage
rates, and that should help everyone — and be one of the lead
engines in continuing our economic growth.
That's not to say that there aren't a lot of problems on our
agenda. We have them — and just to name a few: a strong dollar
that is affecting exports, a high trade, and current account
deficit, a large Federal budget deficit — third-world country
debt problems, and domestic debt problems causing concern for our
commercial banks and thrifts.
These problems require us to have a strong economy and I
believe that we can have such an economy if we are strong in our
pursuit of a sound fiscal program, and a stable, noninflationary
growth-oriented monetary policy.
Our fiscal policy is based at reducing the Federal budget by
reducing spending — not raising taxes. You've heard that
before, of course, but we mean it, and it will be one of our top
priorities in 1985. And a top priority in 1986, '87 and '88.
-4Now, let me turn to your industry for a few thoughts.
Recent events in the financial services industry have
underscored the importance of protecting depositors' savings from
imprudent management and the effects of severe economic
fluctuations.
Just last week, in speaking to the American Bankers
Association convention in New York, FDIC Chairman Bill Isaac
pointed out that there are "serious problems" facing the
insurance funds system, requiring "urgent attention from
Congress."
We believe that most banks are well managed and secure.
Nonetheless we have seen 70 banks and 20 S & Ls fail this year.
And the public deserves reassurance that the mechanics for
dealing with troubled institutions are adequate.
We have a number of options in pursuing the twin goals of
assuring financial stability and protecting small savers. Let me
be quite clear on our approach, however. The means by which we
pursue these goals are just as important as achieving them.
To illustrate my point, we could provide 100 percent deposit
insurance. That would achieve both goals. But the result of
that approach would be to stimulate entirely different and not
necessarily better behavior by individual institutions, and an
entirely different response of the Federal government to that
behavior than we would see with a more narrowly targeted system
of deposit insurance.
So we are now asking some very basic questions. Is the
system able to tolerate individual institution failures? Should
we and how can we effectively protect depository institutions
from macroeconomic fluctuations? And can we do it and still
foster a competitive environment. And fundamentally, do private
institutions or market arrangements improve or impede financial
stability?
We are developing some guidelines that will help us weigh
the various reform proposals. They are not strict requirements,
because the deposit insurance system does not rely fully on the
market system, and we have to leave room for trade-offs.
Our basic principles in arriving at conclusions are along
these lines.
First, we seek to reduce the intrusiveness of the deposit
insurance system, targeting it narrowly to a range of liabilities
sufficient to assure stability and safety for savers.
-5Second, deposit insurance should not encourage risky
behavior by depository institutions. Insured institutions should
not feel less constrained by market forces than their non-insured
competitors. They should not make bad loans on the assumption
that government will bail them out.
Next, large depositors should know something about the
depository institutions they deal with, and should be prepared to
take their business elsewhere if they do not think an institution
is sound. Therefore, if the depository institutions are aware
that their customers are evaluating them more carefully, the
institutions will be more concerned about their financial
conditions.
Another governing principle is that the operation of the
deposit insurance system should be controlled by rules, not
discretion. In that way, the private sector can plan in an
environment of predictabilty and security. Extraordinary
circumstances may demand discretionary actions, but only to
stabilize the financial system.
In addition, deposit insurance should be structured in a
manner that minimizes subsidies provided by the taxpayer. Reform
proposals ought to be and will be held to the test of cost. They
should also be judged on the basis of frequency and magnitude of
payouts.
Minimizing taxpayer subsidies is not necessarily identical
to minimizing the cost to the system. An actuarily sound system
financed by depositors is vastly preferable to a system carried
by taxpayer subsidies.
Additionally, the deposit insurance trust fund should not be
statutorily restricted from increasing in volume and the deposit
insurance premium mechanism should be flexible. Those principles
will give the fund the capacity to expand to meet potential
liabilities or greater systemic risk.
And finally, the system should be sufficiently flexible to
permit experiments with state and private insurance systems.
The Cabinet Council on Economic Affairs, of which I am
chairman, is preparing a study on the deposit insurance system
that will be the basis for our recommendations.
It is too early to say what the recommendations will be or
whether any legislation will be proposed, but we will at least
have ready a comprehensive framework within which we could begin
our task.
-6Now, before concluding, I can't help but mention that we are
just a week and a day from the election. From where I sit it
looks as if the American people are going to give the President
four more years.
I've tried to be non-political today. Still, it should
come as no surprise that I think four more years of this
Administration would be good news for all of us.
If the President is returned to office, I know you can count
on a continuation of what we've started. Cast in the context of
my speech today, you could certainly look forward to emphasis on
free market forces, rather than government direction. You could
expect that we would continue to pursue sensible regulation and
sensible deregulation.
We would hope for, and certainly^work for, keeping inflation
down. Indeed, we would strive to remove it entirely from our
economic system.
And we would pursue policies allowing interest rates to
return to the range and stability we once knew and that were, and
are, so important to the long-term growth that this economy is
capable of.
Thank you.
TREASURY NEWS
Department of the Treasury • Washington, D.C. • Telephone 566-2041
FOR IMMEDIATE RELEASE
October 29, 1984
RESULTS OF TREASURY'S WEEKLY BILL AUCTIONS
Tenders for $6,618 million of 13-week bills and for $6,600 million
of 26-week bills, both to be issued on November 1, 1984, were accepted today.
RANGE OF ACCEPTED
COMPETITIVE BIDS:
Low
High
Average
13-week bills
maturing January 31, 1985
Discount Investment
Rate
Rate 1/
Price
26-week bills
maturing May 2, 1985
Discount Investment
Rate
Rate 1/
Price
9.37%a/
9.39%
9.38%
9.58%
9.60%
9.59%
9.73%
9.75%
9.74%
97.631
97.626
97.629
10.21%
10.23%
10.22%
95.157
95.147
95.152
a/ Excepting 1 tender of $55,000.
Tenders at the high discount rate for the 13-week bills were allotted 05%.
Tenders at the high discount rate for the 26-week bills were allotted 89%.
TENDERS RECEIVED AND ACCEPTED
(In Thousands)
Received
Accepted
:
Received
Location
Boston
New York
Philadelphia
Cleveland
Richmond
Atlanta
Chicago
St. Louis
Minneapolis
Kansas City
Dallas
San Francisco
Treasury
!
$
389,275
17,195,245
18,965
82,740
58,640
48,125
807,470
82,440
22,665
47,665
30,070
1,146,420
377,125
401,520
16,490,615
33,665
137,680
55,320
62,285
934,225
85,435
22,715
52,790
42,600
3,482,925
291,130
$
49,615
3,442,235
33,665
98,180
49,820
57,335
132,925
44,485
12,715
47,790
37,850
2,320,585
291,130
$22,092,905
$6,618,330
:
$20,306,845
$6 ,600,300
Type
Competitive
$19,796,820
Noncompetitive
1,156,425
Subtotal, Public $20,953,245
$4,322,245
1,156,425
$5,478,670
:$17,568,145
:
983,300
:$18,551,445
$3 ,861,600
TOTALS
Federal Reserve
Foreign Official
Institutions
TOTALS
$
Accepted
s
'
:
:
:
:
:
:
:
$
289,275
5,290,585
18,965
70,200
54,530
41,015
175,510
42,440
21,565
44,610
29,520
144,960
377,125
983,300
$4,844,900
812,960
812,960
:
800,000
800,000
326,700
326,700
i
955,400
955,400
$22,092,905
$6,618,330
:$20,306,845
$6 ,600,300
1/ Equivalent coupon-issue yield.
R-2907
:
TREASURY NEWS
lepartment of the Treasury • Washington, D.C. • Telephone 566-2041
FOR RELEASE AT 4:00 P.M.
October 30, 1984
TREASURY *S WEEKLY BILL OFFERING
The Department of the Treasury, by this public notice, invites
tenders for two series of Treasury bills totaling approximately
$13,600 million, to be issued November 8, 1984. This offering will
provide about $925 million of new cash, as the maturing bills total
$12,685 million (including the 168-day cash management bills issued
May 24, 1984, in the amount of $2,005 million).
The $10,680 million of regular maturities includes $1,084
million currently held by Federal Reserve Banks as agents for foreign
and international monetary authorities and $2,266 million currently held
by Federal Reserve Banks for their own account. The two series offered
are as follows:
91-day bills (to maturity date) for approximately $6,800
million, representing an additional amount of bills dated August 9,
1984, and to mature February 7, 1985 (CUSIP No. 912794 GS 7 ) , currently outstanding in the amount of $6,665 million, the additional
and original bills to be freely interchangeable.
182-day bills for approximately $6,800 million, to be dated
November 8, 1984, and to mature May 9, 1985 (CUSIP No. 912794 HC 1).
Both series of bills will be issued for cash and in exchange for
Treasury bills maturing November 8, 1984. Tenders from Federal Reserve
Banks for themselves and as agents for foreign and international
monetary authorities will be accepted at the weighted average bank
discount rates of accepted competitive tenders. Additional amounts of
the bills may be issued to Federal Reserve Banks, as agents for foreign
and international monetary authorities, to the extent that the aggregate
amount of tenders for such accounts exceeds the aggregate amount of
maturing bills held by them.
The bills will be issued on a discount basis under competitive and
noncompetitive bidding, and at maturity their par amount will be payable
without interest. Both series of bills will be issued entirely in
book-entry form in a minimum amount of $10,000 and in any higher $5,000
multiple, on the records either of the Federal Reserve Banks and
Branches, or of the Department of the Treasury.
R-2908
- 2 Tenders will be received at Federal Reserve Banks and
Branches and at the Bureau of the Public Debt, Washington, D. C.
20239, prior to 1:00 p.m., Eastern Standard time, Monday,
November 5, 1984.
Form PD 4632-2 (for 26-week series) or Form
PD 4632-3 (for 13-week series) should be used to submit tenders
for bills to be maintained on the book-entry records of the
Department of the Treasury.
Each tender must state the par amount of bills bid for,
which must be a minimum of $10,000. Tenders over $10,000 must
be in multiples of $5,000. Competitive tenders must also show
the yield desired, expressed on a bank discount rate basis with
two decimals, e.g., 7.15%. Fractions may not be used. A single
bidder, as defined in Treasury's single bidder guidelines, shall
not submit noncompetitive tenders totaling more than $1,000,000.
Banking institutions and dealers who make primary markets in
Government securities and report daily to the Federal Reserve Bank
of New York their positions in and borrowings on such securities
may submit tenders for account of customers, if the names of the
customers and the amount for each customer are furnished. Others
are only permitted to submit tenders for their own account. Each
tender must state the amount of any net long position in the bills
being offered if such position is in excess of $200 million. This
information should reflect positions held as of 12:30 p.m. Eastern
time on the day of the auction. Such positions would include bills
acquired through "when issued" trading, and futures and forward
transactions as well as holdings of outstanding bills with the same
maturity date as the new offering, e.g., bills with three months to
maturity previously offered as six-month bills. Dealers, who make
primary markets in Government securities and report daily to the
Federal Reserve Bank of New York their positions in and borrowings
on such securities, when submitting tenders for customers, must
submit a separate tender for each customer whose net long position
in the bill being offered exceeds $200 million.
A noncompetitive bidder may not have entered into an agreement,
nor make an agreement to purchase or sell or otherwise dispose of
any noncompetitive awards of this issue being auctioned prior to
the designated closing time for receipt of tenders.
Payment for the full par amount of the bills applied for
must accompany all tenders submitted for bills to be maintained
on the book-entry records of the Department of the Treasury.
A cash adjustment will be made on all accepted tenders for the
difference between the par payment submitted and the actual
issue price as determined in the auction.
No deposit need accompany tenders from incorporated banks
and trust companies and from responsible and recognized dealers
in investment securities for bills to be maintained on the bookentry records of Federal Reserve Banks and Branches. A deposit
- 3 of 2 percent of the par amount of the bills applied for must
accompany tenders for such bills from others, unless an express
guaranty of payment by an incorporated bank or trust company
accompanies the tenders.
Public announcement will be made by the Department of the
Treasury of the amount and yield range of accepted bids. Competitive bidders will be advised of the acceptance or rejection of
their tenders. The Secretary of the Treasury expressly reserves
the right to accept or reject any or all tenders, in whole or in
part, and the Secretary's action shall be final. Subject to these
reservations, noncompetitive tenders for each issue for $1,000,000
or less without stated yield from any one bidder will be accepted
in full at the weighted average bank discount rate (in two decimals)
of accepted competitive bids for the respective issues. The calculation of purchase prices for accepted bids will be carried to three
decimal places on the basis of price per hundred, e.g., 99.923, and
the determinations of the Secretary of the Treasury shall be final.
Settlement for accepted tenders for bills to be maintained
on the book-entry records of Federal Reserve Banks and Branches
must be made or completed at the Federal Reserve Bank or Branch
on November 8, 1984, in cash or other immediately-available funds
or in Treasury bills maturing November 8, 1984.
Cash adjustments
will be made for differences between the par value of the maturing
bills accepted in exchange and the issue price of the new bills.
In addition, Treasury Tax and Loan Note Option Depositaries may
make payment for allotments of bills for their own accounts and
for account of customers by credit to their Treasury Tax and Loan
Note Accounts on the settlement date.
In general, if a bill is purchased at issue after July 18,
1984, and held to maturity, the amount of discount is reportable
as ordinary income in the Federal income tax return of the owner
at the time of redemption. Accrual-basis taxpayers, banks, and
other persons designated in section 1281 of the Internal Revenue
Code must include in income the portion of the discount for the
period during the taxable year such holder held the bill. If the
bill is sold or otherwise disposed of before maturity, the portion
of the gain equal to the accrued discount will be treated as ordinary income. Any excess may be treated as capital gain.
Department of the Treasury Circulars, Public Debt Series Nos. 26-76 and 27-76, Treasury's single bidder guidelines, and this
notice prescribe the terms of these Treasury bills and govern the
conditions of their issue. Copies of the circulars, guidelines,
and tender forms may be obtained from any Federal Reserve Bank or
Branch, or from the Bureau of the Public Debt.
TREASURY NEWS
Department of the Treasury • Washington, D.C. • Telephone 566-2041
October 31, 1984
FOR RELEASE WHEN AUTHORIZED AT PRESS CONFERENCE
TREASURY NOVEMBER QUARTERLY FINANCING
The Treasury will raise about $8,325 million of new cash and
refund $9,178 million of securities maturing November 15, 1984, by
issuing $6,500 million of 3-year notes, $5,750 million of 10-year
notes, and $5,250 million of 30-year bonds. The $9,178 million of
maturing securities are those held by the public, including $1,685
million held, as of today, by Federal Reserve Banks as agents for
foreign and international monetary authorities.
The three issues totaling $17,500 million are being offered
to the public, and any amounts tendered by Federal Reserve Banks
as agents for foreign and international monetary authorities
will be added to that amount. Tenders for such accounts will be
accepted at the average prices of accepted competitive tenders.
In addition to the public holdings, Government accounts and
Federal Reserve Banks, for their own accounts, hold $2,815 million
of the maturing securities that may be refunded by issuing additional amounts of the new securities at the average prices of
accepted competitive tenders.
Details about each of the new securities are given in the
attached "highlights" of the offering and in the official offering circulars.
oOo
Attachment
R-2909
HIGHLIGHTS OF TREASURY OFFERINGS TO THE PUBLIC
NOVEMBER 1984 FINANCING TO BE ISSUED NOVEMBER 15, 1984
October 31, 1984
Amount Offered:
To the public
$6,500 million
Description of Security:
Term and type of security
3-year notes
Series and CUSIP designation.... Series Q-1987
(CUSIP No. 912827 RL 8)
Maturity date
Call date
Interest rate
November 15, 1987
No provision
To be determined based on
the average of accepted bids
Inves tment yield
To be determined at auction
Premium or discount
To be determined after auction
Interest payment dates
May 15 and November 15
Minimum denomination available.. $5,000
Terms of Sale;
Method of sale
Competitive tenders
Noncompetitive tenders
Yield Auction
Must be expressed as an
annual yield, with two
decimals, e.g., 7.10%
Accepted in full at the
average price up to $1,000,000
Accrued interest payable
by investor
None
Payment through Treasury Tax
nd Loan (TT&L) Note Accounts... Acceptable for TT&L Note
Option Depositaries
ayment by non-institutional
nvestors
Full payment to be
submitted with tender
Bposit guarantee by
Acceptable
ssignated institutions
ay Dates:
jceipt of tenders
Monday, November 5, 1984,
prior to 1:30 p.m., EST
sttlement (final payment
le from institutions)
Thursday, November 15, 1984
a) cash or Federal funds
b) readily collectible check.. Tuesday, November 13, 1984
$5,750 million
$5,250 million
10-year notes
Series C-1994
(CUSIP No. 912827 RM 6)
30-year bonds
Bonds of 2009-2014
(CUSIP No. 912810 DN 5)
November 15, 1994
No provision
To be determined based on
the average of accepted bids
To be determined at auction
To be determined after auction
May 15 and November 15
$1,000
November 15, 2014
November 15, 2009
To be determined based on
the average of accepted bids
To be determined at auction
To be determined after auction
May 15 and November 15
$1,000
Yield Auction
Must be expressed as an
annual yield, with two
decimals, e.g., 7.10%
Accepted in full at the
average price up to $1,000,000
Yield Auction
Must be expressed as an
annual yield (to maturity),
with two decimals, e.g., 7.10%
Accepted in full at the
average price up to $1,000,000
None
None
Acceptable for TT&L Note
Option Depositaries
Acceptable for TT&L Note
Option Depositaries
Full payment to be
submitted with tender
Full payment to be
submitted with tender
Acceptable
Acceptable
Wednesday, November 7, 1984,
prior to 1:00 p.m., EST
Thursday, November 8, 1984,
prior to 1:00 p.m., EST
Thursday, November 15, 1984
Tuesday, November 13, 1984
Thursday, November 15, 1984
Tuesday, November 13, 1984
TREASURY NEWS
apartment of the Treasury • Washington, D.C. • Telephone 566-2041
October 31, 1984
FOR RELEASE WHEN AUTHORIZED AT PRESS CONFERENCE
TREASURY CHANGES CLOSING TIME FOR WEEKLY BILL OFFERING
The Department of the Treasury announced that it is changing
the closing time for receipt of tenders for the 13- and 26-week
bills to be auctioned Monday, November 5, 1984. The closing
time will be changed from 1:00 p.m., Eastern Standard time, as
originally announced, to 12:30 p.m. Eastern Standard time, on
Monday, November 5, 1984.
This change is necessary because of the scheduling of the
auction of 3-year notes the same day.
oOo
R-2910
TREASURY NEWS
department of the Treasury • Washington, D.C. • Telephone 566-2041
FOR IMMEDIATE RELEASE
November 2, 1984
Contact: Alfred H. Kingon
566-8585
Thym S. Smith
566-5252
STATEMENT BY SECRETARY OF THE TREASURY
DONALD T. REGAN
The Secretary of the Treasury, Donald T. Regan, denied news
reports in the Washington Post and elsewhere that the Treasury
tax study had "approved phasing out the income tax deduction for
state and local taxes and taxing all unemployment compensation
and workmen's compensation."
"It is absolutely untrue," Secretary Regan said, "that we
have made any final decisions. It's a shame to have
uninformed and inaccurate conjectures that arouse unjustified
anxieties."
The Secretary reiterated what has already been said to the
effect that he has now begun to review the information that has
started to come back from a massive computer study analyzing the
financial and economic impact of various possibilities.
The Secretary noted that there would undoubtedly be more
false reports emanating in the next several weeks, but that all
concerned should regard them for what they are, "idle
speculation," until he completes the review of all the options,
makes the final recommendations, and sends them to the President.
R-2911
TREASURY NEWS
Department
of the
Treasury • Washington, D.C. • Telephone
566-2041
FOR IMMEDIATE
RELEASE
November 5, 1984
RESULTS OF TREASURY'S WEEKLY BILL AUCTIONS
Tenders for $ 6,808 million of 13-week bills and for $6,807 million
of 26-week bills, both to be issued on November 8, 1984, were accepted today,
RANGE OF ACCEPTED
COMPETITIVE BIDS:
Low
High
Average
26-week bills
maturing Mav 9j 1985
Discount Investment
Price
Rate 1/
Rate
13-week bills
maturing February 7. IQfiS
Discount Investment
Rate
Rate 1/
Price
8.81%
8.83%
8.82%
9.14%
9.16%
9.14%
9.05%
9.08%
9.07%
97.773
97.768
97.771
9.62%
9.65%
9.64%
95.425
95.410
95.415
Tenders at the high discount rate for the 13-week bills were allotted 58%.
Tenders at the high discount rate for the 26-week bills were allotted 36%
TENDERS RECEIVED AND ACCEPTED
(In Thousands)
Received
Received
Accepted
Location
Boston
New York
Philadelphia
Cleveland
Richmond
Atlanta
Chicago
St. Louis
Minneapolis
Kansas City
Dallas
San Francisco
Treasury
TOTALS
Type
Competitive
Noncompetitive
Subtotal, Public
Federal Reserve
Foreign Official
Institutions
TOTALS
$
387,085
17,295,830
42,320
136,520
46,885
40,850
819,535
64,165
22,705
62,195
73,555
1,384,850
307,395
Accepted
$
37,085
5,976,220
42,320
61,025
40,885
40,265>
101,930
24,165
10,705
57,695
38,555
69,850
307,395
•
396,615
16,432,530
21,865
80,765
54,510
29,595
1,727,455
64,085
25,400
44,195
. 51,690
1,254,250
404,740
$
46,615
5,706,675
21,865
37,325
43,010
29,595
280,855
24,070
25,400
43,195
26,690
117,250
404,740
$20,683,890
$6,808,095
: $20,587,695
$6,807,285
$18,010,605
1,096,440
$19,107,045
$4,134,810
1,096,440
$5,231,250
. $17,846,710
:
967,305
$18,814,015
$4,066,300
967,305
$5,033,605
1,239,925
1,239,925
1,200,000
1,200,000
336,920
336,920
573,680
573,680
$20,683,890
$6,808,095
$20,587,695
$6,807,285
$
'
:
:
An additional $59,480 thousand of 13-week bills and an additional $88,820
thousand of 26-week bills will be issued to foreign official institutions for
new cash.
1/ Equivalent coupon-issue yield.
FREASURY NEWS
partment of the Treasury • Washington, D.C. • Telephone 566-2041
FOR IMMEDIATE RELEASE
November 6, 1984
CONTACT:
Charles Powers
(202) 566-2041
UNITED STATES AND BARBADOS
SIGN AGREEMENT TO EXCHANGE TAX INFORMATION
The Treasury Department announced today that the United
States and Barbados have signed an agreement to exchange tax
information that satisfies the criteria set forth in the
Caribbean Basin Economic Recovery Act of 1983. The Agreement
was signed in Washington, D.C. on November 3, 1984.
As a result of signing the Agreement, Barbados will be
considered part of the "North American area" for purposes of
determining the deductibility by U.S. taxpayers of expenses
incurred in attending conventions, business meetings, and
seminars. Convention expenses incurred by U.S. taxpayers for
meetings in Barbados beginning on or after November 3, 1984,
that are otherwise deductible as ordinary and necessary
business expenses therefore will be allowed without regard to
the additional limitations otherwise applicable to foreign
convention deductions.
In addition, because of the signing of the Agreement,
Barbados qualifies as a foreign country in which a Foreign
Sales Corporation may incorporate and maintain an office as
provided in the Foreign Sales Corporation provisions of the
Tax Reform Act of 1984.
A limited number of copies of the Agreement are available
from the Treasury Public Affairs Office, Treasury Department,
Room 2315, Washington, D.C. 20220,
oOo
R-2913
TREASURY NEWS
apartment of the Treasury • Washington, D.C. • Telephone 566-2041
FOR IMMEDIATE RELEASE
November 6, 1984
CONTACT:
Charles Powers
(202) 566-2041
TREASURY DEPARTMENT ISSUES NOTICE REGARDING
CERTIFICATION OF EXCHANGE OF INFORMATION PROGRAMS
OF TAX TREATY PARTNERS FOR PURPOSES OF THE
FOREIGN SALES CORPORATION LEGISLATION
The Treasury Department has issued a notice regarding
certification of the exchange of information programs of tax
treaty partners for purposes of the Foreign Sales Corporation
("FSC") provisions of the Internal Revenue Code, as amended
by the Tax Reform Act of 1984. The notice includes a list of
treaty partners certified by the Secretary of the Treasury
for FSC purposes.
Sections 801 through 805 of the Tax Reform Act amended
the Code generally to replace the Domestic International
Sales Corporation ("DISC") provisions (sections 991-997 of
the Code) with the FSC provisions (sections 921-927 of the
Code) . A FSC must be organized under the laws of and
maintain an office in a country that (1) is a possession of
the United States (other than Puerto Rico), (2) has entered
into an exchange of information agreement authorized under
the Caribbean Basin Economic Recovery Act (codified at
section 274(h)(6)(C) of the Code), or (3) has a bilateral
income tax treaty with the United States if the Secretary of
the Treasury certifies that the exchange of information
program under the treaty carries out the purposes of the
exchange of information requirements of the FSC legislation.
The Treasury Department has reviewed the exchange of
information program of each of its tax treaty partners. The
countries listed in the notice are certified for purposes of
the FSC legislation. A FSC may incorporate as a company that
is covered by the exchange of information program under the
tax treaty of any country listed below.
The FSC certification procedure has been undertaken to
comply with the intent of the legislation that a FSC be
allowed to incorporate only in a country with which the
United States has a satisfactory overall exchange of
information program. The absence of any tax treaty partner
of the United States from the list is not intended to imply
R-2914
-2that such treaty partner is not fulfilling its exchange of
information obligations under the treaty. The Treasury
Department is having continuing consultations with certain
treaty partners.
Treaty partners not listed below may subsequently be certified at any time upon publication of a
notice to that effect in the Federal Register.
If, following a certification, the information exchange
program with a treaty partner deteriorates significantly, the
Secretary may terminate the certification. Such termination
would be effective six months after the date of the publication of the notice of such termination in the Federal Register. Consultations with the tax officials of the treaty
partner will precede any such termination.
The following treaty countries have been certified for
FSC purposes:
Australia
Austria
Belgium
Canada
Denmark
Egypt
Finland
France
Germany
Iceland
Ireland
Jamaica
Korea
Malta
Morocco
Netherlands
New Zealand
Norway
Pakistan
Philippines
South Africa
Sweden
Trinidad & Tobago
0O0
TREASURY NEWS
ipartment of the Treasury • Washington, D.C. • Telephone 566-2041
FOR IMMEDIATE RELEASE
November 5, 1984
RESULTS OF AUCTION OF 3-YEAR NOTES
The Department of the Treasury has accepted $6,502 million of
$18,106 million of tenders received from the public for the 3-year
notes, Series Q-1987, auctioned today. The notes will be issued
November 15, 1984, and mature November 15, 1987.
The interest rate on the notes will be 11%.
The range of
accepted competitive bids, and the corresponding prices at the 11%
interest rate are as follows:
Yield
Price
11.00%
100.000
Low
11.03%
99.925
High
99.975
11.01%
Average
Tenders at the high yield were allotted 28%.
TENDERS RECEIVED AND ACCEPTED (In Thousands)
Location
Boston
New York
Philadelphia
Cleveland
Richmond
Atlanta
Chicago
St. Louis
Minneapolis
Kansas City
Dallas
San Francisco
Treasury
Totals
Received
369,160
14,r883,930
20,235
242,830
97,410
42,915
1,,141,630
105,075
33,315
98,695
13,025
1 ,054,430
3,245
$18 ,105,895
$
Accepted
$
39,240
5,517,090
20,235
148,830
50,270
36,755
329,750
98,575
33,315
94,705
11,585
117,910
3,245
$6,501,505
The $6,502 million of accepted tenders includes $746
million
of noncompetitive tenders and $ 5,756 million ot competitive tenders
from the public.
In addition to the $ 6,502 million ot tenders accepted in the
auction process, $410 million of tenders was awarded at the average
price to Federal Reserve Banks as agents for foreign and international
monetary authorities. An additional $1,215 million of tenders was
also accepted at the average price from Government accounts and Federal
Reserve Banks for their own account in exchange for maturing securities
R-2915
TREASURY NEWS
lepartment of the Treasury • Washington, D.C. • Telephone 566-2041
FOR RELEASE AT 4:00 P.M.
November 6, 1984
TREASURY'S WEEKLY BILL OFFERING
The Department of the Treasury, by this public notice,
invites tenders for two series of Treasury bills totaling approximately $13,600 million, to be issued November 15, 1984. This
offering will provide about $1,875 million of new cash for the
Treasury, as the maturing bills are outstanding in the amount of
$11,717 million, including $727
million currently held by Federal Reserve Banks as agents for foreign and international monetary
authorities and $2,304 million currently held by Federal Reserve
Banks for their own account. The two series offered are as follows:
91-day bills (to maturity date) for approximately $ 6,800
million, representing an additional amount of bills dated
August 16, 1984,
and to mature February 14, 1985 (CUSIP
No. 912794 GT 5), currently outstanding in the amount of $6,667
million, the additional and original bills to be freely
interchangeable.
182-day bills (to maturity date) for approximately $ 6,800
million, representing an additional amount of bills dated
May 17, 1984,
and to mature May 16, 1985
(CUSIP
No. 912794 GL 2 ) , currently outstanding in the amount of $8,111
million, the additional and original bills to be freely
interchangeable.
Both series of bills will be issued for cash and in exchange
for Treasury bills maturing November 15, 1984. Tenders from Federal Reserve Banks for themselves and as agents for foreign and
international monetary authorities will be accepted at the weighted
average bank discount rates of accepted competitive tenders. Additional amounts of the bills may be issued to Federal Reserve Banks,
as agents for foreign and international monetary authorities, to
the extent that the aggregate amount of tenders for such accounts
exceeds the aggregate amount of maturing bills held by them.
The bills will be issued on a discount basis under competitive
and noncompetitive bidding, and at maturity their par amount will
be payable without interest. Both series of bills will be issued
entirely in book-entry form in a minimum amount of $10,000 and in
any higher $5,000 multiple, on the records either of the Federal
Reserve Banks and Branches, or of the Department of the Treasury.
R-2916
- 2 Tenders will be received at Federal Reserve Banks and
Branches and at the Bureau of the Public Debt, Washington, D. C.
20239, prior to 1:00 p.m., Eastern Standard time, Tuesday,
November 13, 1984.
Form PD 4632-2 (for 26-week series) or Form
PD 4632-3 (for 13-week series) should be used to submit tenders
for bills to be maintained on the book-entry records of the
Department of the Treasury.
Each tender must state the par amount of bills bid for,
which must be a minimum of $10,000. Tenders over $10,000 must
be in multiples of $5,000. Competitive tenders must also show
the yield desired, expressed on a bank discount rate basis with
two decimals, e.g., 7.15%. Fractions may not be used. A single
bidder, as defined in Treasury's single bidder guidelines, shall
not submit noncompetitive tenders totaling more than $1,000,000.
Banking institutions and dealers who make primary markets in
Government securities and report daily to the Federal Reserve Bank
of New York their positions in and borrowings on such securities
may submit tenders for account of customers, if the names of the
customers and the amount for each customer are furnished. Others
are only permitted to submit tenders for their own account. Each
tender must state the amount of any net long position in the bills
being offered if such position is in excess of $200 million. This
information should reflect positions held as of 12:30 p.m. Eastern
time on the day of the auction. Such positions would include bills
acquired through "when issued" trading, and futures and forward
transactions as well as holdings of outstanding bills With the same
maturity date as the new offering, e.g., bills with three months to
maturity previously offered as six-month bills. Dealers, who make
primary markets in Government securities and report daily to the
Federal Reserve Bank of New York their positions in and borrowings
on such securities, when submitting tenders for customers, must
submit a separate tender for each customer whose net long position
in the bill being offered exceeds $200 million.
A noncompetitive bidder may not have entered into an agreement,
nor make an agreement to purchase or sell or otherwise dispose of
any noncompetitive awards of this issue being auctioned prior to
the designated closing time for receipt of tenders.
Payment for the full par amount of the bills applied for
must accompany all tenders submitted for bills to be maintained
on the book-entry records of the Department of the Treasury.
A cash adjustment will be made on all accepted tenders for the
difference between the par payment submitted and the actual
issue price as determined in the auction.
No deposit need accompany tenders from incorporated banks
and trust companies and from responsible and recognized dealers
in investment securities for bills to be maintained on the bookentry records of Federal Reserve Banks and Branches. A deposit
- 3 of 2 percent of the par amount of the bills applied for must
accompany tenders for such bills from others, unless an express
guaranty of payment by an incorporated bank or trust company
accompanies the tenders.
Public announcement will be made by the Department of the
Treasury of the amount and yield range of accepted bids. Competitive bidders will be advised of the acceptance or rejection of
their tenders. The Secretary of the Treasury expressly reserves
the right to accept or reject any or all tenders, in whole or in
part, and the Secretary's action shall be final. Subject to these
reservations, noncompetitive tenders for each issue for $1,000,000
or less without stated yield from any one bidder will be accepted
in full at the weighted average bank discount rate (in two decimals)
of accepted competitive bids for the respective issues. The calculation of purchase prices for accepted bids will be carried to three
decimal places on the basis of price per hundred, e.g., 99.923, and
the determinations of the Secretary of the Treasury shall be final.
Settlement for accepted tenders for bills to be maintained
on the book-entry records of Federal Reserve Banks and Branches
must be made or completed at the Federal Reserve Bank or Branch
on November 15, 1984, in cash or other immediately-available funds
or in Treasury bills maturing November 15, 1984. Cash adjustments
will be made for differences between the par value of the maturing
bills accepted in exchange and the issue price of the new bills.
In addition, Treasury Tax and Loan Note Option Depositaries may
make payment for allotments of bills for their own accounts and
for account of customers by credit to their Treasury Tax and Loan
Note Accounts on the settlement date.
In general, if a bill is purchased at issue after July 18,
1984, and held to maturity, the amount of discount is reportable
as ordinary income in the Federal income tax return of the owner
at the time of redemption. Accrual-basis taxpayers, banks, and
other persons designated in section 1281 of the Internal Revenue
Code must include in income the portion of the discount for the
period during the taxable year such holder held the bill. If the
bill is sold or otherwise disposed of before maturity, the portion
of the gain equal to the accrued discount will be treated as ordinary income. Any excess may be treated as capital gain.
Department of the Treasury Circulars, Public Debt Series Nos. 26-76 and 27-76, Treasury's single bidder guidelines, and this
notice prescribe the terms of these Treasury bills and govern the
conditions of their issue. Copies of the circulars, guidelines,
and tender forms may be obtained from any Federal Reserve Bank or
Branch, or from the Bureau of the Public Debt.
TREASURY NEWS
apartment
of the
Treasury • Washington, D.C. •November
Telephone
566-2041
FOR IMMEDIATE
RELEASE
7, 1984
RESULTS OF AUCTION OF 10-YEAR NOTES
The Department of the Treasury has accepted $5,750 million of
$12,050 million of tenders received from the public for the 10-year
notes, Series C-1994, auctioned today. The notes will be issued
November 15, 1984, and mature November 15, 1994.
The interest rate on the notes will be 11-5/8%. The range of
accepted competitive bids, and the corresponding prices at the 11-5/8%
interest rate are as follows:
Yield
Price
Low
11.64%
99.913
High
11.73%
99.391
Average
11.70%
99.565
Tenders at the high yield were allotted 71%.
TENDERS RECEIVED AND ACCEPTED (In Thousands)
Boston
New York
Philadelphia
Cleveland
Richmond
Atlanta
Chicago
St. Louis
Minneapolis
Kansas City
Dallas
San Francisco
Treasury
Totals
Received
204,575
$
10 ,238,924
2,148
39,665
11,702
20,692
776,380
67,106
13,043
27,189
2,397
645,389
623
$12 ,049,833
Accepted
$
10,545
5,050,374
2,148
38,505
4,702
14,692
243,520
66,606
13,043
27,189
2,397
275,749
623
$5,750,093
The $5,750 million of accepted tenders includes $345
million of noncompetitive tenders and $5,405 million of competitive
tenders from the public.
In addition to the $5,750 million of tenders accepted in
the auction process, $50 million of tenders was awarded at the
averaqe price to Federal Reserve Banks as agents for foreign and
international monetary authorities. An additional $850 million
of tenders was also accepted at the average price from Government
accounts and Federal Reserve Banks for their own account in exchange
for maturing securities.
R-2917
TREASURY NEWS
Department of the Treasury • Washington, D.C. • Telephone 566-2041
FOR IMMEDIATE RELEASE
November 8, 1984
CONTACT:
Charles Powers
(202) 566-2041
UNITED STATES AND COSTA RICA
INITIAL AGREEMENT TO EXCHANGE TAX INFORMATION
The Treasury Department announced today that the
United States and the Republic of Costa Rica have agreed
in principle to the text of an agreement to exchange tax
information that would satisfy the criteria set forth in the
Caribbean Basin Economic Recovery Act of 1983. Officials of
the United States and Costa Rica executed a Memorandum
reflecting agreement to an English language text in
Washington, D.C. on November 2, 1984. It is expected that a
Spanish language text will be agreed upon in the near future
and that a final agreement will be executed at that time.
Because a final agreement must be ratified by Costa Rica, the
final agreement will enter into force upon an exchange of
notes between the two governments indicating that the
agreement has been ratified.
The English language text agreed to in principle is
consistent with standards for an exchange of information
agreement described in section 274(h)(6)(C) of the Internal
Revenue Code (relating to eligibility for deductions for
expenses of attending foreign conventions). Convention
expenses incurred by U.S. taxpayers for meetings in Costa
Rica beginning on or after the date of the final agreement's
entry into force that are otherwise deductible as ordinary
and necessary business expenses would be allowable without
regard to the additional limitations otherwise applicable to
foreign convention deductions.
In addition, upon the final agreement's entry into
force, Costa Rica would qualify as a foreign country in which
a Foreign Sales Corporation may incorporate and maintain an
office as provided in the Foreign Sales Corporation
provisions of the Tax Reform Act
oOoof 1984.
R-2918
^- X
o cr
federal financing bank \
WASHINGTON, D.C. 20220
-L
FOR IMMEDIATE RELEASE
\
AWS
November 8, 1984
FEDERAL FINANCING BANK ACTIVITY
Francis X. Cavanaugh, Secretary, Federal Financing
Bank (FFB), announced the following activity for the
month of September 198 4.
FFB holdings of obligations issued, sold or guaranteed by other Federal agencies totaled $144.8 billion on
September 30, 1984, posting a net increase of $0.8 billion
from the level on August 31, 1984. This change included
increases in holdings of agency assets of $0.4 billion,
holdings of agency-guaranteed debt of $0.1 billion, and
holdings of agency debt issues of $0.3 billion. FFB made
291 disbursements during the month.
On September 6, 1984, the FFB entered into a $3 billion
commitment to finance 18 vessels for the Department of the
Navy Military Sealift Command.
Attached to this release are tables presenting FFB
September loan activity, new FFB commitments to lend
during September and FFB holdings as of September 30, 1984.
# 0 #
R-2919
CVJ
-c
©
w
.O
X
0- UL
Page 2 of 8
FEDERAL FINANCING BANT
SEPTEMBER 1984 ACTIVITY
DATE
BORROWER
INTERESTRATE
(sentiannual)
AMOUNT
OF ADVANCE
FP1AL
MATURITY
260,000,000.00
140,000,000.00
5,000,000.00
375,000,000.00
5,000,000.00
365,000,000.00
70,000,000.00
25,000,000.00
50,000,000.00
175,000,000.00
9/17/84
9/17/84
9/20/84
9/24/84
9/26/84
10/8/84
10/1/84
10/2/84
10/8/84
10/8/84
11.185%
11.105%
11.105%
10.905%
10.905%
10.785%
10.785%
10.785%
10.695%
10.745%
410,000,000.00
126,000,000.00
9/1/94
9/1/94
12.915%
12.881%
10/10/84
10/15/84
12/13/84
12/20/84
12/31/84
12/31/84
11.105%
10.875%
10.875%
10.835%
10.785%
10.785%
9/1/89
9/1/94
9/1/99
9/1/04
9/1/94
9/1/99
9/1/04
9/1/89
9/1/94
9/1/99
9/1/04
12.945%
12.935%
12.865%
12.785%
12.825%
12.785%
12.595%
12.565%
12.605%
12.545%
12.495%
69,200,000.00
9/30/14
12.405%
24,525,739.62
249,900.00
423,543.66
558,194.59
20,909.00
55,140.00
5,679,223.62
3/24/12
11/22/95
9/8/95
7/15/92
4/30/11
6/15/12
4/15/14
12.846%
12.990%
13.005%
12.685%
12.875%
13.045%
12.915%
INTEREST
RATE
(other than
semi-annual)
ON-BUDGET AGENCY DEBT
TENNESSEE VALLEY AUTHORITY
Note
Note
Note
Note
Note
Note
Note
Note
Note
Note
#385
#386
#387
#388
#389
#390
#391
#392
#393
#394
9/4
9/10
9/10
9/17
9/17
9/24
9/24
9/24
9/28
9/30
$
EXPORT--IMPORT BANK
Note #59
Note #60
9/1
9/1
12.713% qtr
12.680% qtr
NATIONAL CREDIT UNION ADMINISTRATION
Central Liquidity Facility
+Note #254
+Note #255
Note #256
Note #257
Note #258
Note #259
AGENCY ASSETS
9/10
9/14
9/14
9/26
9/27
9/28
15,000,000.00
5,000,000.00
9,850,000.00
20,000,000.00
25,000,000.00
20,000,000.00
FARMERS HOME ADMINISTRATION
Certificates of Beneficial Ownership
9/7
9/7
9/7
9/7
9/9
9/9
9/12
9/24
9/30
9/30
9/30
375,000,000.00
325,000,000.00
75,000,000.00
20,000,000.00
30,000,000.00
60,000,000.00
20,000,000.00
400,000,000.00
65,000,000.00
70,000,000.00
10,000,000.00
RURAL ELECTRIFICATION ADMINISTRATION
Certificate of Beneficial Ownership
9/30
GOVERNMENT - GUARANTEED LOANS
DEPARTMENT OF DEFENSE
Foreign Military Sales
Turkey 13
Bolivia 2
Morocco 11
Philippines 10
Greece 14
Greece 15
Egypt 6
•rollover
9/4
9/5
9/5
9/5
9/6
9/6
9/7
13.364% ann,
13.353% ann,
13.279% ann,
13.194% ann
13.236% ann
13.194% ann
12.992% ann
12.960% ann
13.002%' ann
12.938% ann
12.885% ann
Page 3 of 8
FEDERAL FINANCING BANK
SEPTEMBER 1984 ACTTVITY
BOJWDWR
AMOUNT
OF ADVANCE
DATE
FINAL
MATURITY
INTEREST
RATE
(semiannual
INTEREST
RATE
(other than
semi-annual)
Foreign Military sales (Cont'd)
Israel 16
Panajaa 6
SoMlia 4
Turkey 14
Bolivia 2
Botswana 3
Egypt 6
Jordan 10
Bolivia 2
Indonesia 9
Israel 8
Philippines
Egypt 6
Egypt 6
El Salvador
Morocco 11
Philippines
Israel 16
Qnan 6
Turkey 13
Egypt 6
Korea 18
El Salvador
Liberia 10
Thailand 10
Zaire 1
Israel 16
Kenya 11
Malaysia 7
Bolivia 2
Egypt 6
Israel 16
Turkey 13
9/7
10
7
10
7
$
7/10/14
11/25/93
11/30/12
11/30/12
11/22/95
3/10/91
4/15/14
3/10/92
11/22/95
5/10/92
9/1/09
7/15/92
4/15/14
4/15/14
6/10/96
9/8/95
7/15/92
7/10/14
5/25/91
3/24/12
4/15/14
12/31/95
6/10/96
5/15/95
7/10/94
9/22/92
7/10/14
5/15/95
3/10/88
11/22/95
4/15/14
7/10/14
3/24/12
12.805%
12.975%
12.735%
12.680%
12.905%
12.702%
12.804%
11.805%
12.748%
12.646%
12.545%
12.395%
12.655%
12.524%
12.615%
12.545%
12.265%
12.405%
12.545%
12.415%
12.415%
12.456%
12.635%
12.615%
12.615%
12.625%
12.505%
12.651%
11.165%
12.735%
12.635%
12.313%
12.355%
9/10
9/10
9/10
9/12
9/12
9/12
9/13
9/13
9/13
9/17
9/17
9/17
9/17
9/18
9/18
9/18
9/19
9/21
9/24
9/24
9/24
9/24
9/25
9/25
9/25
9/26
9/26
9/28
9/28
3,055,226.33
994,139.49
133,065.20
4,734,764.60
24,850.40
714,589.15
2,702,100.00
1,323.75
749,700.00
4,840,328.00
172,333.18
278,748.00
877,243.90
19,000,000.00
868,391.23
3,673.42
1,107,680.52
12,242,477.10
354,298.98
869,630.91
3,429,921.20
46,128,812.64
209,264.73
60,535.63
4,145,022.00
6,250.00
13,368,257.73
944,674.16
1,091,700.00
299,700.00
2,016,803.55
51,577,044.39
10,637,241.02
9/26
9/26
1,392,000.00
588,000.00
4/1/85
4/1/85
11.370%
11.370%
4,000,000.00
3,500,000.00
6,500,000.00
7/1/85
7/1/85
7/1/85
12.705%
12.695%
12.315%
9/1/89
9/1/88
9/1/88
8/1/85
5/1/85
10/1/84
8/1/03
8/15/85
2/15/85
2/15/86
8/1/85
8/1/85
5/1/85
2/1/85
12.871%
12.734%
12.724%
11.695%
11.495%
10.945%
12.650%
11.755%
11.265%
12.035%
11.625%
11.575%
11.295%
11.025%
9/7
9/7
9/7
DEPARTMENT OF ENERGY
Qaothermal Loan Guarantees
NPN Partnership
Niland Geothermal, Inc.
11.213% qtr.
11.213% qtr.
Synthetic Fuels - Non-Nuclear Act
Great Plains
Gasification Assoc . #120
#121
#122
9/4
9/10
9/17
DEPARTMENT OF HOUSING 6 URBAN DEVELOPMENT
Qawnunity Development
•Grand Rapids, MI
•Lansing, MI
Detroit, MI
Long Beach, CA
Somerville, MA
Lincoln, NE
Buffalo, NY
Simi Valley, CA
Das Moines, IA
St. Louis, MO
San Diego, CA
Provo, UT
Utica, NY
Indianapolis, IN
•maturity extension
9/4
9/4
9/4
9/11
9/12
9/12
9/13
9/13
9/13
9/14
9/14
9/18
9/19
9/24
380,000.00
200,000.00
22,429,866.08
65,000.00
25,000.00
15,000.00
500,000.00
464,416.00
120,000.00
2,300,000.00
265,000.00
1,275,000.00
149,000.00
250,000.00
13.285%
13.139%
13.129%
11.994%
11.637%
ann.
ann.
ann.
ann.
ann.
13.050% ann.
12.071% ann.
12.397%
11.917%
11.860%
11.416%
ann.
ann.
ann.
ann.
Page 4 of 8
FEDERAL FINANCING BANK
SEPTEMBER 1984 ACTIVITY
BORROWER
AMOUNT
OF ADVANCE
DATE
INTEREST
RATE
(semiannual)
INTEREST
RATE
(other than
semi-annual)
6/15/85
2/1/85
8/15/85
10/1/84
2/1/85
12/1/85
12/1/84
10/1/84
2/1/85
10/15/03
11.375%
11.025%
11.505%
10.835%
10.995%
11.675%
10.765%
10.765%
10.895%
12.398%
11.575% ann
10/1/92
10/1/92
10/1/92
12.728%
12.359%
12.396%
FINAL
MATURITY
Community Development (Cont'd)
Kansas City, MO
Sacramento, CA
Simi Valley, CA
Bridgeton, NJ
Peoria, IL
Hialeah, FL
Hialeah, FL
Lincoln, NE
Peoria, IL
Pittsburgh, PA
9/24
9/24
9/24
9/25
9/25
9/27
9/27
9/27
9/27
9/28
$
1,000,000.00
231,124.83
666,043.38
55,000.00
250,000.00
282,086.92
27,913.08
55,475.00
250,000.00
400,000.00
11.796% ann
12.016% ann
12.782% ann,
3MINISTRATION
Space Communications Company
9/11
9/20
9/28
16,844,467.00
8,520,000.00
13,180,000.00
13.133% ann,
12.741% ann,
12.780% ann,
DEPARTMENT OF THE NAVY
Defense Production Act
Gila River Indian Com. #17
9/21
160,159.96
10/1/92
12.415%
12.228% qtr.
RURAL ELECTRIFICATION ADMINISTRATION
*Brazos Electric #108
*Brazos Electric #144
Saluda River Electric #186
S. Mississippi Electric #171
Corn Belt Power #55
Tex-La Electric #208
*Soyland Power #105
*Soyland Power #165
•Oglethorpe Power #74
•Oglethorpe Power #150
•Saluda River Electric #271
Associated Electric #132
•Arkansas Electric #142
Arizona Electric #242
Tex-La Electric #208
•Basin Electric #87
Corn Belt Power #138
•Northeast Mississippi
Deseret G&T #211
\fermont Electric #259
•Basin Electric #137
•Wabash Valley Power #104
•Wabash Valley Power #206
•Wolverine Power #101
•Wolverine Power #101
Wabash Valley Power #206
New Hampshire Electric #270
•Colorado Ute Electric #78
•Gulf Telephone #50
•East Kentucky Power #188
•Wolverine Power #101
•Golden Valley Electric #81
•Colorado Ute Electric #8
•East Kentucky Power #140
•Kansas Electric #216
•Brazos Electric #108
•Brazos Electric #230
•Associated Electric #132
•East Kentucky Power #73
•Oglethorpe Power #74
•maturtity extension
9/4
9/4
9/4
9/4
9/4
9/4
9/4
9/4
9/4
9/4
9/4
9/4
9/4
9/5
9/5
9/6
9/7
9/7
9/10
9/10
9/10
9/10
9/10
9/10
9/10
9/11
9/12
9/12
9/12
9/13
9/13
9/13
9/14
9/14
9/17
9/17
9/17
9/17
9/17
9/17
m
2,831,000.00
2,888,000.00
4,367,000.00
1,400,000.00
185,000.00
1,113,000.00
2,739,000.00
9,661,000.00
54,935,000.00
14,349,000.00
3,525,000.00
3,547,000.00
3,324,000.00
1,200,000.00
1,390,000.00
20,000,000.00
521,000.00
1,893,000.00
22,243,000.00
2,000,000.00
30,000,000.00
5,055,000.00
1,805,000.00
2,841,000.00
100,000.00
295,000.00
627,000.00
3,700,000.00
230,000.00
8,126,000.00
77,000.00
10,000,000.00
9,084,000.00
600,000.00
5,450,000.00
504,000.00
6,000,000.00
31,000,000.00
500,000.00
6,412,000.00
9/4/86
9/4/86
9/30/86
9/4/86
9/4/86
9/4/86
9/4/87
9/4/87
9/4/87
9/4/87
9/30/86
9/4/86
1/31/85
12/31/18
9/5/88
9/8/86
9/8/86
9/9/86
9/10/86
9/30/86
9/10/86
9/10/86
9/10/86
9/10/86
9/10/86
9/30/86
9/30/86
9/30/86
9/12/87
9/15/86
9/15/86
9/30/86
9/30/86
9/15/86
9/17/86
9/17/86
9/17/86
9/17/86
9/30/86
9/3/87
12.665%
12.665%
12.685%
12.665%
12.665%
12.665%
12.735%
12.735%
12.735%
12.735%
12.685%
12.665%
11.475%
12.754%
12.715%
12.755%
12.665%
12.665%
12.585%
12.595%
12.585%
12.585%
12.585%
12.585%
12.655%
12.415%
12.405%
12.390%
12.515%
12.435%
12.435%
12.435%
12.339%
12.345%
12.285%
12.285%
12.285%
12.285%
12.289%
12.355%
\\M\
12.471% qtr.
12.471% qtr.
12.490% qtr.
12.471% qtr.
12.471% qtr
12.471% qtr.
12.538% qtr.
12.538% qtr.
12.538% qtr.
12.538% qtr.
12.490% qtr.
12.471% qtr.
11.330% qtr.
12.557% qtr.
12.519% qtr.
12.558% qtr.
12.471% qtr.
12.471% qtr.
12.393% qtr.
12.403%'qtr.
12.393% qtr.
12.393% qtr.
12.393% qtr.
12.393% qtr.
12.461% qtr.
12.228% qtr.
12.218% qtr.
12.204% qtr.
12.325% qtr.
12.247% qtr.
12.247% qtr.
12.247% qtr.
12.154% qtr.
12.160% qtr.
12.102% qtr.
12.102% qtr.
12.102% qtr.
12.102% qtr.
12.106% qtr.
12.170% qtr.
12.170%
12.102%
Page 5 of 8
FEDERAL FINANCING BANK
SEPTEMBER 1984 ACTIVITY
BORROWER
DATE
AMOUNT
OF ADVANCE
FINAL
MATURITY
INTEREST
RATE
(semiannual)
INTEREST
RATE
(other than
semi-annual)
RURAL ELECTRIFICATION ADMINISTRATION (Cont'd.)
Brazos Electric #230 9/17 $ 2,579,000.00
Northeast Texas Electric #280 9/17
•Dairyland Power #54
9/17
•Seminole Electric #141
9/19
•Soyland Power #226
9/20
•Associated Electric #132
9/20
•Basin Electric #87
9/20
Oglethorpe Power #246
9/20
Chugach Electric #257
9/20
•Seminole Electric #141
9/21
•Big Rivers Electric #143
9/21
•Big Rivers Electric #179
9/21
•Central Electric #131
9/24
Old Dominion Electric #267
9/24
•Big Rivers Electric #58
9/24
•Big Rivers Electric #65
9/24
•Big Rivers Electric #91
9/24
•Big Rivers Electric #136
9/24
•Big Rivers Electric #143
9/24
•Associated Electric #132
9/24
•South Mississippi Electric #3 9/24
•Corn Belt Power #166
9/25
Colorado Ute Electric #96
9/26
Corn Belt Power #94
9/26
Brazos Electric #230
9/27
North Carolina Electric #268
9/27
•Central Electric #131
9/27
•Golden Valley Electric #81
9/27
•Sugar Land Telephone #69
9/28
Vermont Electric #290
9/28
Kamo Electric #266
9/28
Southern Illinois Power #98
9/28
Kansas Electric #216
9/28
Basin Electric #232
9/28
Basin Electric #272
9/28
Central Electric #131
9/28
Tex-La Electric #208
9/28
9/17/86
262,000.00
1,486,000.00
2,536,000.00
13,332,000.00
10,000,000.00
20,000,000.00
54,745,000.00
783,000.00
20,326,000.00
229,000.00
18,442,000.00
250,000.00
1,434,000.00
353,000.00
26,000.00
2,804,000.00
329,000.00
10,000.00
17,253,000.00
138,000.00
2,900,000.00
3,066,000.00
626,000.00
7,206,000.00
33,677,000.00
75,000.00
8,000,000.00
1,411,000.00
1,540,000.00
1,947,000.00
536,000.00
1,248,000.00
23,000.00
618,000.00
40,000.00
3,472,000.00
12.285%
9/30/86
12.293%
9/17/86
12.285%
9/19/86
12.225%
9/22/86
12.075%
9/22/86
12.075%
9/22/86
12.075%
9/21/87
12.255%
3/31/88
12.335%
9/22/86
12.065%
9/30/86
12.065%
12/31/84 10.805%
9/24/86
12.195%
9/30/86
12.197%
9/30/86
12.205%
9/30/86
12.205%
9/30/86
12.205%
9/30/86
12.205%
9/30/86
12.205%
9/24/86
12.195%
9/30/86
12.189%
9/25/86
12.225%
9/30/86
12.245%
9/26/86
12.245%
9/29/86
12.185%
9/30/86
12.185%
9/29/86
12.185%
9/30/86
12.185%
9/28/86
12.085%
9/30/86
12.085%
9/30/86
12.085%
9/28/86
12.085%
9/30/86
12.085%
9/28/86
12.085%
9/30/86
12.081%
9/29/86
12.085%
9/28/86
12.085%
SMALL BUSINESS ADMINISTRATION
State & Local Development Company Debentures
Development Corp. of Mid. GA 9/5
The St. Louis Local Dev. Co.
9/5
Columbus Countywide Dev. Corp. 9/5
Indiana Statewide C.D.C.
9/5
Cleveland Area Dev. Fin. Corp. 9/5
Illinois Sm. Bus. Gr. Corp.
9/5
Tucson L.D.C. of Tucson
9/5
Business Dev. Corp. of Nebraska9/5
Areawide Dev. Corporation
9/5
North Texas Reg. Dev. Corp.
9/5
South Eastern Econ. Dev. Corp. 9/5
Scioto Econ. Development Corp. 9/5
City of Spartanburg Dev. Corp. 9/5
Crossroads EDC of St Charles
9/5
The St. Louis Local Dev. Co.
9/5
Development Corp. of Mid. GA
9/5
Central Ozarks Dev., Inc.
9/5
The Bus. Dev. Corp. of Nebraska9/5
Columbus Countywide Dev. Corp. 9/5
Port Jarvis Development Corp. 9/5
The Bus. Dev. Corp. of Nebraska9/5
Jacksonville L.D.C, Inc.
9/5
Gr. Spokane Bus. Dev. Assoc.
9/5
Central Ozarks Dev., Inc.
9/5
•maturity extension
31,000.00
52,000.00
63,000.00
63,000.00
84,000.00
100,000.00
187,000.00
200,000.00
226,000.00
273,000.00
294,000.00
310,000.00
27,000.00
28,000.00
29,000.00
32,000.00
41,000.00
45,000.00
53,000.00
57,000.00
59,000.00
63,000.00
84,000.00
85,000.00
9/1/99
9/1/99
9/1/99
9/1/99
9/1/99
9/1/99
9/1/99
9/1/99
9/1/99
9/1/99
9/1/99
9/1/99
9/1/04
9/1/04
9/1/04
9/1/04
9/1/04
9/1/04
9/1/04
9/1/04
9/1/04
9/1/04
9/1/04
9/1/04
12.902%
12.902%
12.902%
12.902%
12.902%
12.902%
12.902%
12.902%
12.902%
12.902%
12.902%
12.902%
12.873%
12.873%
12.873%
12.873%
12.873%
12.873%
12.873%
12.873%
12.873%
12.873%
12.873%
12.873%
12.102% qtr.
12.110% qtr.
12.102% qtr.
12.044% qtr.
11.898% qtr.
11.898% qtr.
11.898% qtr.
12.073% qtr.
12.150% qtr.
11.888% qtr.
11.888% qtr.
10.776% qtr.
12.015% qtr.
12.017% qtr.
12.024% qtr.
12.024% qtr.
12.024% qtr.
12.024% qtr.
12.024% qtr.
12.015% qtr.
12.009% qtr.
12.044% qtr.
12.063% qtr.
12.063% qtr.
12.005% qtr.
12.005% qtr.
12.005% qtr.
12.005% qtr.
11.908% qtr.
11.908% qtr.
11.908% qtr.
11.908% qtr.
11.908% qtr.
11.908% qtr.
11.904% qtr.
11.908% qtr.
11.908% qtr.
Page 6 of 8
FEDERAL FINANCING BANK
SEPTEMBER 1984 ACTIVITY
BORROWER
DATE
AMOUNT
OF ADVANCE
FINAL
MATURITY
INTEREST
RATE
(semiannual)
9/1/04
9/1/04
9/1/04
9/1/04
9/1/04
9/1/04
9/1/04
9/1/04
9/1/04
9/1/04
9/1/04
9/1/04
9/1/04
9/1/04
9/1/04
9/1/04
9/1/04
9/1/04
9/1/04
9/1/04
9/1/04
9/1/04
9/1/04
9/1/04
9/1/04
9/1/04
9/1/04
9/1/04
9/1/04
9/1/04
9/1/04
9/1/04
9/1/04
9/1/04
9/1/04
9/1/09
9/1/09
9/1/09
9/1/09
9/1/09
9/1/09
9/1/09
9/1/09
9/1/09
9/1/09
9/1/09
9/1/09
9/1/09
9/1/09
9/1/09
9/1/09
9/1/09
9/1/09
9/1/09
9/1/09
9/1/09
9/1/09
9/1/09
9/1/09
9/1/09
9/1/09
9/1/09
9/1/09
9/1/09
9/1/09
9/1/09
12.873%
12.873%
12.873%
12.873%
12.873%
12.873%
12.873%
12.873%
12.873%
12.873%
12.873%
12.873%
12.873%
12.873%
12.873%
12.873%
12.873%
12.873%
12.873%
12.873%
12.873%
12.873%
12.873%
12.873%
12.873%
12.873%
12.873%
12.873%
12.873%
12.873%
12.873%
12.873%
12.873%
12.873%
12.873%
12.826%
12.826%
12.826%
12.826%
12.826%
12.826%
12.826%
12.826%
12.826%
12.826%
12.826%
12.826%
12.826%
12.826%
12.826%
12.826%
12.826%
12.826%
12.826%
12.826%
12.826%
12.826%
12.826%
12.826%
12.826%
12.826%
12.826%
12.826%
12.826%
12.826%
12.826%
State & Local Development Company Debentures (Cont'd)
Gr. Salt Lake Bus. District
9/5
The Bus. Dev. Corp. of Nebraska9/5
Columbus Countywide Dev. Corp. 9/5
Texas Certified Dev. Co., Inc.9/5
Bristol County Chamber L.D.C. 9/5
9/5
Texas Cert. Dev. Co., Inc.
9/5
Urban County Com. Dev. Corp.
9/5
San Diego County L.D.C.
9/5
Middle Flint Area Dev. Corp.
9/5
Wilmington Indus. Dev. Corp.
Brockton Reg. Econ. Dev. Corp. 9/5
9/5
Rural Missouri, Inc.
9/5
Crossroads EDC of St Charles
9/5
Cincinnati Local Dev. Co.
Empire State Cert. Dev. Corp. 9/5
9/5
Greater Southern Oregon CDC
Econ. Dev. Fdn. of Sacramento 9/5
9/5
Panhandle Area Council, Inc.
9/5
Greater Bakersfield
Toledo Econ. Plan. Coun., Inc. 9/5
9/5
L.D.C. Urban Bus. Dev. Corp.
9/5
Long Island Dev. Corp.
9/5
VERD-ARK-CA Dev. Corp.
No. Community Investment Corp. 9/5
9/5
Long Island Dev. Corp.
Florida First Cap. Fin. Corp. 9/5
9/5
San Diego County L.D.C.
Fulton County Cert. Dev. Corp. 9/5
Long Island Development Corp. 9/5
Long Island Development Corp. 9/5
S.W. 111. Areawide Bus. D.F.C. 9/5
Hamilton County Dev. Co., Inc.9/5
9/5
The St. Louis County L.D.C.
Granite State Econ. Dev. Corp. 9/5
9/5
Cincinnati Local Dev. Co.
9/5
Nine County Dev. Inc.
9/5
Neuse River Dev. Auth., Inc.
Eastern Ohio Dev. Coun., Inc. 9/5
Northern Community Inv. Corp. 9/5
9/5
River East Progress, Inc.
9/5
Clark County Dev. Corp.
9/5
San Diego County L.D.C.
9/5
Tucson L.D.C. of Tucson
Orig Aurora & Colorado Dev Co 9/5
9/5
Jacksonville L.D.C, Inc.
Columbus Countywide Dev. Corp. 9/5
9/5
Washington, D.C. L.D.C.
Oshkosh Com. Dev. Corp., Inc. 9/5
9/5
Peoria Econ. Dev. Assoc.
Columbus Countywide Dev. Corp. 9/5
Long Beach Local Dev. Corp.
9/5
The Mid-Atlantic Cert. Dev. Co.9/5
Bay Area Bus. Dev. Co.
9/5
Columbus Countywide Dev. Corp. 9/5
9/5
Bay Area Business Dev. Co.
9/5
Bay Area Business Dev. Co.
9/5
Bay Area Business Dev. Co.
9/5
The St. Louis Local Dev. Co.
9/5
Bay Area Business Dev. Co.
Phoenix Local Development Corp.9/5
Ocean State Bus Dev Auth, Inc 9/5
Bay Colony Dev. Corp.
9/5
San Diego County L.D.C.
9/5
Area Inv. & Dev. Corp., Inc.
9/5
Wisconsin Bus. Dev. Fin. Corp. 9/5
Railbelt Community Dev. Corp. 9/5
95,000.00
100,000.00
103,000.00
105,000.00
105,000.00
106,000.00
108,000.00
112,000.00
117,000.00
122,000.00
122,000.00
129,000.00
130,000.00
139,000.00
144,000.00
147,000.00
193,000.00
204,000.00
210,000.00
217,000.00
218,000.00
225,000.00
226,000.00
249,000.00
255,000.00
277,000.00
284,000.00
358,000.00
360,000.00
360,000.00
447,000.00
449,000.00
500,000.00
500,000.00
500,000.00
22,000.00
40,000.00
79,000.00
86,000.00
116,000.00
124,000.00
124,000.00
163,000.00
189,000.00
205,000.00
210,000.00
215,000.00
238,000.00
244,000.00
263,000.00
269,000.00
273,000.00
325,000.00
336,000.00
336,000.00
365,000.00
388,000.00
407,000.00
425,000.00
452,000.00
500,000.00
500,000.00
500,000.00
500,000.00
500,000.00
500,000.00
INTEREST
RATE
(other than
semi-annual)
Page 7 of 8
FEDERAL FINANCING BANK
SEPTEMBER 1984 ACTIVITY
BORROWER
Advent III Capital Company
Chestnut Capital Corporation
New West Partners
North Star Ventures, Inc.
North Star Ventures, Inc.
SBIC of Connecticut
Albuquerque Sm. Bus. Inv. Co.
Frontenac Capital Corp.
Round Table Capital Corp.
Seaport Ventures, Inc.
Banc Texas Capital, Inc.
First Midwest Capital Corp.
Hamco Capital Corporation
Midland Venture Cap. Ltd.
RIHT Capital Corp.
S.W. Capital Investments, Inc.
White River Capital Corp.
INTEREST
RATE
(semiannual)
AMOUNT
OF ADVANCE
FINAL
MATURITY
9/26
9/26
9/26
9/26
9/26
9/26
9/26
9/26
9/26
9/26
9/26
9/26
9/26
9/26
9/26
9/26
9/26
3,000,000.00
500,000.00
1,500,000.00
2,000,000.00
1,000,000.00
500,000.00
250,000.00
1,000,000.00
600,000.00
1,000,000.00
500,000.00
500,000.00
1,000,000.00
2,000,000.00
2,000,000.00
1,800,000.00
400,000.00
9/1/87
9/1/87
9/1/87
9/1/87
9/1/87
9/1/87
9/1/89
9/1/91
9/1/91
9/1/91
9/1/94
9/1/94
9/1/94
9/1/94
9/1/94
9/1/94
9/1/94
12.425%
12.425%
12.425%
12.425%
12.425%
12.425%
12.635%
12.705%
12.705%
12.705%
12.645%
12.645%
12.645%
12.645%
12.645%
12.645%
12.645%
9/28
516,051,766.55
12/31/84
10.785%
9/14
87,826.00
6/30/06
12.520%
DATE
INTEREST
RATE
(other than
semi-annual)
TENNESSEE VALLEY AUTHORITY
Seven States Energy Corporation
Note A-84-14
DEPARTMENT OF TRANSPORTATION
Section 511—4R Act
Milwaukee Road #511-2
FEDERAL FINANCING BANK
SEPTEMBER 1984 Commitments
BORROWER
Gabon
Tunisia
Ecuador
Kenya
Malaysia
Indonesia
Portugal
Philippines
Korea
Provo, Utah
Boston, MA
EDIC of Boston, MA
Philadelphia AID, PA
New Haven, CT
Kenosha, WI
Lynn, MA
Pomona, CA
Marias River Electric
Arkansas Electric
Oglethorpe Power
Central Iowa Power
Colorado-Ute Electric
Northern Electric
Plains Electric
Soyland Power
Western Illinois Power
Wilmington Trust Co.*
p = preliminary
trustee
AMOUNT
COMMITMENT
EXPIRES
3,000,000.00
5,000,000.00
6,000,000.00
10,000,000.00
10,000,000.00
20,000,000.00
45,000,000.00
50,000,000.00
100,000,000.00
4,500,000.00
1,800,000.00
3,200,000.00
1,260,810.00
1,077,500.00
57,343.99
9,895,699.00
610,273.65
475,000.00
55,055,000.00
51,946,000.00
36,600,000.00
65,140,000.00
605,000.00
109,402,000.00
143,612,000.00
142,369,000.00
225,000,000.00
8/15/86
9/15/86
7/31/86
7/25/86
8/25/86
8/12/86
4/10/86
9/12/86
9/5/86
8/1/85
10/1/85
10/1/86
10/1/85
9/1/85
6/1/85
8/15/85
8/1/85
10/l/91p
10/1/9lp
10/l/91p
10/1/9lp
10/l/91p
10/1/9lp
10/l/91p
12/31/87
12/31/87
12/7/89
GUARANTOR
DOD
DOD
DOD
DOD
DOD
DOD
DOD
DOD
DOD
HUD
HUD
HUD
HUD
HUD
HUD
HUD
HUD
REA
REA
REA
REA
REA
REA
REA
REA
REA
NAVY
$
MATURITY
2/15/90
9/15/96
7/31/96
7/25/96
8/25/91
8/12/93
4/10/96
9/12/96
6/30/96
8/1/90
10/1/05
10/1/05
10/1/03
9/1/04
6/1/85
8/15/85
8/1/85
12/31/18p
12/31/18p
12/31/18p
12/31/18p
12/31/18p
12/31/18p
12/31/18p
12/31/17
12/31/17
7/15/09
FEDERAL FINANCING BANK HOLDINGS
(in millions)
Program
September 30, 1984
August 31, 1984
Page 8 of 8
Net Change
9/1/84-9/30/84
Net Change—FY 1984
10/1/83-9/30/84
On-Budget Agency Debt
Tennessee Valley Authority $ 13,435.0
Export-Import Bank
NCUA-Central Liquidity Facility
15,689.8
268.9
$ 13,305.0
15,563.4
195.0
$ 130.0
126.5
73.9
$ 320.0
1,014.0
224.7
1,087.0
51.3
1,087.0
51.3
-0-0-
-67.0
-73.4
59,196.0
116.1
132.0
11.0
3,467.5
40.6
315.0
116.1
132.0
11.0
3,536.7
40.1
-.5
2,820.0
-2.7
-11.7
-5.3
69.2
-8.4
16,976.4
5,000.0
134.6
2,817.6
Off-Budget Agency Debt
U.S. Postal Service
U.S. Railway Association
Agency Assets
Farmers Home Administration 59,511.0
DHHS-Health Maintenance Org.
DHHS-Medical Facilities
Overseas Private Investment Corp.
Rural Electrification Admin.-CBO
Small Business Administration
-0-0-069.2
Government-Guaranteed Lending
DOD-Foreign Military Sales 17,110.9
DEd.-Student Loan Marketing Assn.
DOE-Geothermal Loan Guarantees
DOE-Non-Nuclear Act (Great Plains)
'
DHUD-Community Dev. Block Grant
DHUD-New Communities
DHUD-Public Housing Notes
General Services Administration
DOI-Guam Power Authority
DOI-Virgin Islands
NASA-Space Communications Co.
DON-Defense Production Act
Rural Electrification Admin.
SBA-Small Business Investment Cos.
SBA-State/Local Development Cos.
TVA-Seven States Energy Corp.
DOT-Amtrak
DOT-Section 511
DOT-WMATA
TOTALS* $ 144,836.2
"figures may not total due to rounding
5,000.0
6.2
1,290.0
208.3
33.5
2,178.5
413.3
36.0
28.7
954.6
3.1
20,587.1
860.3
354.6
1,555.5
-0159.6
177.0
4.3
-02.0
1,276.0
224.0
33.5
2,178.5
413.3
36.0
28.7
916.1
14.0
-15.7
2.9
0.2
20,741.7
854.8
335.7
1,539.5
-154.6
-0159.5
177.0
-00.1
-0-
$ 144,062.7
$ 773.5
-0-0-0-0-038.5
5.5
18.8
16.1
-0-38.8
404.5
31.0
-0111.7
-3.9
-0-0.4
7.4
2.0
1,648.2
56.0
206.8
137.1
-880.0
-24.0
-0$ 8,754.4
TREASURY NEWS
epartment of the Treasury • Washington, D.C. • Telephone 566-2041
FOR IMMEDIATE RELEASE
November 8, 1984
RESULTS OF AUCTION OF 30-YEAR TREASURY BONDS
The Department of the Treasury has accepted $5,253 million of
$9,740 million of tenders received from the public for the 30-year
bonds auctioned today. The bonds will be issued November 15, 1984,
and mature November 15, 2014.
The interest rate on the bonds will be 11-3/4%. The range of
accepted competitive bids, and the corresponding prices at the 11-3/4%
interest rate are as follows:
Yield
Price
Low
11.79% 1/
99.672
High
11.87%
99.021
Average
11.83%
99.345
Tenders at the high yield were allotted 14%.
TENDERS RECEIVED AND ACCEPTED (In Thousands)
]Received
Accepted
Location
Boston
$ 157,178
$
5,178
New York
8 ,153,928
4,804,763
Philadelphia
205
205
Cleveland
15,036
6,456
Richmond
9,526
7,666
10,737
8,737
Atlanta
725,163
224,283
Chicago
63,386
63,386
St. Louis
2,661
2,661
Minneapolis
Kansas City
10,838
10,838
2,013
2,013
Dallas
589,706
116,806
San Francisco
101
101
Treasury
$9 ,740,478
$5,253,093
Totals
The $5,253 million of accepted tenders includes $305
million of noncompetitive tenders and $4,948 million of competitive tenders from the public.
In addition to the $5,253 million of tenders accepted in
the auction process, $750 million of tenders was accepted at the
average price from Government accounts and Federal Reserve Banks
for their own account in exchange for maturing securities.
1/ Excepting 1 tender of $1,000,000.
R-2920
TREASURY NEWS
Department of the Treasury • Washington, D.C. • Telephone 566-2041
REMARKS BY THE HONORABLE R. T. MCNAMAR
DEPUTY SECRETARY OF THE U.S. TREASURY
BEFORE THE
FGH ANNUAL SYMPOSIUM
THE NETHERLANDS
November 13, 1984
"EUROPE AND THE
ECONOMIC POLICIES OF THE
SECOND REAGAN ADMINISTRATION"
Thank you and good afternoon. It is a pleasure to be with
you to discuss the thrusts of President Reagan's Administration
during the second term. The election is now behind us and the
President has received a clear mandate from the American people
to continue the policies of the past four years which have led to
a stronger and more vibrant United States economy.
The opportunity to discuss with you the plans of the Reagan
Administration as it begins a second term is particularly
important since in our world the political and economic decisions
made in one capital of the world affect not only that country but
all the other countries of the world as well. Therefore, today I
not only want to discuss the actions I see the Administration
taking, but just as importantly the context in which we view the
world.
Indeed, let me suggest that for the major industrialized
nations and all of Europe, the historical distinction between
domestic economic policy and international economic policy simply
no longer exists. They are one and the same.
Today, European domestic economic policy decisions affect
the U.S. and obviously vice versa. Our fiscal and monetary
policy influences yours. Your trade and investment policies
influence ours. The economic destinies of our two continents are
inexorably li.wved and intertwined with those of Japan. And the
accelerating integration of the industrialized and developing
economies of the world promises an even closer dependence
tomorrow. This reality is well understood by the Reagan
Administration .
R-2921
- 2 TRIAD OF INTERDEPENDENCE
Our interdependence and mutual economic prospects are based
on three integrated global systems: (1) our mutual security
arrangements; (2) the international trading system; and (3) the
international financial system. Each of these is dependent on
the others if we are to achieve sustained non-inflationary
economic growth and prosperity for the future. A brief overview
of the importance of each of these three elements in the triad
illustrates this new interdependence and demonstrates the
inherent obligations and responsibilities.
Security System
The first element of the interdependence, and the one that
provides a positive environment for the growth of international
trade and financial transactions, is that of mutual security. We
sometimes envision only threats to our political freedoms.
However, it is readily apparent that there are very real military
threats to our economic system as well.
In the United States? we regard NATO as crucially important
to our mutual security. President Reagan demonstrated our
resolve to ensure mutual security when, at the United Nations
General Assembly, he stated:
"The starting point and the cornerstone of our foreign
policy is our alliance and partnership with our fellow
democracies. For thirty-five years the North Atlantic
Alliance has guaranteed the peace in Europe .... We're
proud of our association with all those countries that
share our commitment to freedom, human rights, the rule
of law and international peace. Indeed, the bulwark of
security that the democratic alliance provides is
essential and remains esssential to the maintenance of
world peace. Every alliance involves burdens and
obligations, but these are far less than the risks and
sacrifices that will result if the peace-loving nations
were divided and neglectful of their common security."
I want to make clear my own view that despite differences on
individual issues, NATO today is stronger and more unified than
ever. This fact provides the crucial security underpinning for
our r tual efforts to manage and build upon the economic
opportunities of interdependence.
Trading System
The .second key system in the triad is the world trading
system. The growth of international trade that we have witnessed
over the last decade has clearly served to integrate the world
- 3 into a more homogeneous marketplace. From 1975 to 1983, trade of
the industrialized countries with all trading partners combined,
doubled from $1.2 trillion to nearly $2.4 trillion. During this
period, trade solely among industrialized countries grew from
$765 billion to $1.6 trillion.
The Reagan Administration clearly recognizes international
trade as a major and growing component of our economy. Our
merchandise trade, exports plus imports, now totals 15 percent of
GNP, compared with only 8 percent in 1970. In most of Europe,
the percentages are higher: Italy 42 percent of GNP now vs. 29
percent in 1970; France 37 percent now vs. 24 percent in 1970;
Belgium 10.7 percent now vs. 6.3 percent in 1970; Netherlands
10.5 percent now vs. 5.8 percent in 1970. Such statistics only
amplify the importance of international trade which each of you
works with on a daily basis.
The growth of any economy is dependent on the economic
prospects in the rest of the world. The growth of the United
States economy and the manner in which it has helped to bolster
the economic prospects of other industrialized countries and LDCs
during the last two years is a perfect example of this point.
Our current trade deficit is the reciprocal of Europe, Japan, and
the L D C s export surge in 1983 and 1984.
Financial System
The third element of this triad of interdependence is the
accelerating integration of worldwide capital markets. There now
exists one worldwide market for a wide spectrum of financial
transactions. As a result of computerized telecommunications, we
now transmit billions of dollars across the world in less time
than it takes to physically present a check or to make a savings
deposit. The inevitable result is this rapidly accelerating
unification of the world's capital markets.
The growth and development of international financial
markets has fundamentally altered the relationship between trade
and capital flows. As I mentioned earlier, currently
international trade in goods and services totals approximately $2
trillion per year. By comparison, capital flows are in the
$20-30 trillion range or 15 times that of goods and services.
With such large financial flows, no nation can ignore its
financial ties with other nations. The interbank market is
exclusively international in character, and it is virtually
homogeneous. Disintermediation is no longer a domestic policy
issue -- it is an international phenomenon in which we are all
participating. Just as it used to be said that the sun never
sets on the British empire, now it can be said that the sun never
- 4 sets when banks and stock exchanges somewhere in the world are
open for business and exchanging telexes with those on the dark
side of the globe.
Obligations of Interdependence
As one reviews these three components of the triad of
economic interdependence, it is important to realize that this
interdependence carries significant opportunities and important
obligations and responsibilities.
To ensure our mutual security, a real commitment of
resources, both monetary and other, is needed. Currently, the
United States commitment to ensuring the security of Europe is
significant. It is important for Europe to realize that part of
the reason for projected United States budget deficits comes from
this Administration's commitment to ensuring mutual security. As
in the other areas of interdependence, it will be increasingly
important for all involved parties to increase their resources to
ensure that stable and secure environment endures.
In the area of trade policies, we must all work to avoid
protectionism. As we all know, protectionism in the long term
will constrain worldwide growth and preclude efficient allocation
of the world's resources. While the United States' record isn't
perfect, during the last four years, the United States has
undertaken numerous efforts to reduce protectionism and open its
borders to international trade. These include: (1) the
President rejecting ITC recommendations for quotas and tariffs on
steel imports; (2) rejection by the United States of all five
petitions for import relief received this year; (3) the call by
the United States for a new international round of trade
negotiations; and (4) the passage of the major new piece of trade
legislation, the Trade and Tariff Act of 1984, which represents a
major victory for liberal trade policies.
As a measurement of the United States' leadership against
protectionism, total U.S. imports have risen 34 percent in 1984
with imports of textiles up 55 percent and steel up 70 percent.
During the next four years, the emphasis in the United States
will be to continue to reduce further protectionism and focus on
fair and free trade arrangements between countries.
Unfortunately, the picture on the international trade front is
not all progress. In particular, tvere are a number of stubborn,
long-standing issues in the trade area between the U.S. and the
EC. Progress in these and other areas is important to our
overall efforts to contain and roll back protectionist measures.
These include:
- 5 o
Problems with the Common Agricultural Policy (CAP)
have led to continual threats to U.S. access to the
EC market for agricultural products, especially
soybeans and corn gluten. At the same time, CAP
export subsidies have tended to hurt U.S. exports in
third markets.
o We have been unable to secure EC cooperation in our
effort to increase discipline and transparency over
use of mixed export credits.
o EC insistence on changes in GATT rules to allow it
to apply quantitative import restrictions on a
"selective" (i.e. discriminatory) basis has blocked
attempts to negotiate a new Safeguard Code in the
GATT. This EC position dates from 1976.
o In response to EC and other complaints, the U.S.
undertook a major overhaul of the DISC tax program,
replacing it with an extraterritorial system.
Nevertheless, we already face threats to challenge
the replacement FSC.
o European restrictions on imports of Japanese
products has led to increased Japanese market
penetration in the U.S., which has increased
domestic political pressures in the U.S.
The very fact that these issues have been unresolved
suggests to me that appropriate action is long overdue. We feel
that an improving economic environment such as we are
experiencing both in the United States and Europe is the best
time to address some of these trade issues.
Again, I cannot emphasize enough the importance of worldwide
interdependence and competition as we attempt to resolve these
trade issues. The very fact that there is a shift of trade and
direct investment from the United States toward the Pacific Basin
and away from the EC addresses the need to resolve these issues
if the long-term position of European countries in the worldwide
trade picture is to be maintained.
In the area of international finance, the unification of
capital markets necessitates strong, stable policies by all
countries. In 1982 and 1983, under the aegis of the IMF and
working with the BIS and European monetary authorities, the
Reagan Administration and our Canadian and Japanese partners
prevented the international debt problems of the developing
countries from becoming an international financial crisis that
could have converted a worldwide recession into a worldwide
- 6 depression. None of us could have done it alone. We were
dependent on each other because of the worldwide financial
market.
Our efforts in this area have also included the removal of
withholding tax paid on interest to foreigners, a foreign
targetted Treasury security, and negotiation for a yen/dollar
agreement to liberalize the domestic Japanese capital market and
to increase the depth and breadth of the market for yen assets.
Just as a liberal trade regime increases economic well-being by
enhancing the efficiency of resource allocation, so do measures
such as these which are designed to improve the efficiency of
international capital markets.
The new order of interdependence places significant
importance on and interest in the Reagan Administration's
economic priorities for the next four years. The efforts of this
Administration in dealing with a myriad of economic and political
situations has an impact far beyond the borders of my country.
Reagan Economic Policies
As this Administration took office, it mapped out an
economic "game plan" which went far beyond individual programs tc
identify a new vision. In the last four years, this
Administration has done much of what it said it would. In the
next four years, the Administration will build on its identified
program, and I feel confident in saying that we will achieve much
more of our agenda.
Let's briefly look at the situation four years ago and the
progress that has been made since then. In 1981, the
President faced a fundamental economic problem: lack of real
growth. The United States had entered a period of slow economic
growth and high inflation primarily due to previous federal
policies obstructing the major sources of growth.
The incentives for productive work and investment were being
eaten up by a combination of taxes and inflation. The federal
government was taking an ever-increasing share of economic
resources with federal spending rising at an annual rate of 17
percent in 1980 alone. And workers found that an hour's work was
not only worth less in real terms because of inflation, but also
that because of inflation they were being forced into higher ar._
higher tax brackets. Periodically, negative real interest rates
existed for depositor and lender alike. Real returns to capital
were minimal or negative. Small wonder the U.S. economy was
faltering .
- 7 To counteract this, President Reagan's economic policy was
then and is now centered around a four-part program announced in
1981. The four interrelated elements are:
1. A stringent budget policy to release resources to
the private sector for investment and growth;
2. An incentive tax reduction policy to increase the
supply and lower the cost of labor and capital,
thereby encouraging work effort, savings, and
investment;
3. A non-inflationary monetary policy to end inflation
and reduce the higher interest rates and
disincentives that inflation and the Tax Code
combined to produce; and
4. A regulatory reform program to reduce the enormous
regulatory inefficiencies and costs that are
holding back production and raising prices.
The objective was to make the American economy once more the
best possible place to work, save, and invest. And, to begin
restoring both the incentives and the flexibility to the American
economy that were lost in the late 1960 's and 1970's.
I am sure you are familiar with the results. Our
prescription was the right one for the ails of the American
economy.
o Contrary to the forecast of most economists who
predicted only a slow recovery, real GNP rose at a
6.4 percent annual rate in the first seven quarters
of the current expansion — faster than in any U.S.
recovery since the Korean War in the 1950's.
Growth has slowed somewhat in the third quarter,
but we believe this is a natural consequence of a
rapid 8 1/2 percent pace in the first half of the
year.
o Employment has risen by about 6.5 million people
during the current recovery, with the unemployment
rate falling from 10.7 percent at the end of 1982
to 7.4 percent, and the proportion of the working
age population that is employed nearly reaching the
all-time peak.
o Expansion has come in an environment of
exceptionally low inflation. Inflation has fallen
from nearly 13 percent in 1979-80 to approximately
- 8 4 percent this year in consumer prices. Our
producer or wholesale prices have fallen three
months in a row, and are rising only at a 1.5
percent rate.
o Productivity growth (essential for raising living
standards or containing inflation) has been rising.
After virtually no growth in the previous five
years, productivity in the non-farm business sector
rose strongly by 4 percent in 1983 and at a 4
percent annual rate in the first half of this year.
The progress that we have made during the last four years
suggests that the fundamentals are right for long-term growth in
the United States. As the President has often said, we have come
a long way but still feel that there are important actions that
remain for sustainable long-term non-inflationary growth. To
achieve this objective, you can look for the President to again
focus on the four key elements of the program first introduced in
1981 with renewed energies and conviction.
Federal Government Spending
First, we will renew our efforts to further cut the rate of
growth in federal spending. From a philosophical view, we feel
it is essential to have the private sector take a greater role if
we are to achieve sustainable non-inflationary growth. From a
practical view, we feel this is clearly the best way to reduce
the budget deficits.
This Administration, just as the governments of Europe and
many constituencies within the U.S., is very concerned about
budget deficits. They are a sign that the government is
over-spending and taking too much of the economy's scarce
resources. It is government spending which tends to crowd out
the private economy, affect monetary policy, and influence
consumer and investor expectations. Consequently, extremely high
real interest rates are induced, which affect the exchange rate,
trade, and therefore sustained non-inflationary real economic
growth.
To understand my Administration's view of fiscal policy, one
needs to view it in the context of classical micro-economic
terms. In essence, government spending is the true tax burden.
Government spending diverts labor, capital, and output from the
private sector to the public sector regardless if it is paid for
by taxing or borrowing. A reduction in government spending is
stimulative because it returns real and financial resources to
the private sector.
- 9 Beyond these philosophical arguments, an analysis of today's
situation in the U.S. indicates that government spending, not tax
cuts, is the source of the deficit. We project that long-term
government revenues will average approximately 19.5 percent of
GNP between 1985-89 under our proposals. This is slightly higher
than the period of 1964-1979* (In fact, peacetime receipts have
seldom been higher when past recessions are excluded.) However,
spending is far above its historical levels. Federal government
spending was 19.8 percent of GNP from 1964-74 and 22 percent from
1975-79. In 1983, it was almost 25 percent of GNP. If major
budget changes are to be made, they will have to be made in the
spending levels, not taxes. We will simply have to make some
very difficult spending decisions with the realization that our
government's resources are limited in the near term.
As a result, we will be proposing further cuts in the rate
of growth of government spending. It is important, however, that
you realize that our political system, in contrast to yours,
presents significant difficulties in implementing spending cuts
proposed by the President. In our system, budgetary
responsibilities are split between the Executive and Legislative
Branches. Unlike European parliamentary systems, the President
does not control his party's votes in the legislative chamber.
In addition, we no longer have the strong tradition of party
discipline that characterizes parliamentary government. In our
Congress, each member is independent to vote based on local
constituencies and influences.
I do want to make it clear, however, that we are thoroughly
committed to reducing the rate of growth of spending and thereby
the deficits. We expect to achieve this in the short term and,
while involved in the process, build structural tools which will
ensure adequate spending controls in the future. Two of the most
important tools which the President has proposed are the balanced
budget amendment and the line item veto. The balanced budget
amendment will provide an institutional force to ensure that
programs of individual constituencies are not passed at the cost
of overall fiscal limits. The line item veto will give the
President authority to review individual components of a spending
bill and thereby provide that spending is in line with the
government's ability to raise revenues. Only in this way can we
ensure that the old tax and spend, stop-go pattern of government
policy will not return to the U.S. and provide a legacy for the
Second, the Administration will continue to reduce personal
global economy as well as the U.S.
come tax rates and thereby create added incentives for work,
Tax Policies
oductivity, saving and investment.
- 10 The tax cut enacted in 1981 has had a significant impact on
the recovery of our economy. Marginal tax rates were reduced by
roughly 25 percent over three years, from the previous range of
14 percent at the bottom and 70 percent at the top to 11 percent
to 50 percent. In addition, starting in 1985, tax brackets will
be adjusted or indexed for inflation to prevent bracket creep in
the future. During the last four years, we have also been
successful in reducing the recovery period for business
investment, which thereby encouraged investment by increasing the
real after-tax rate of return of productive business activities.
However, our tax system remains heavily biased toward
borrowing and consumption — in essence creating a disincentive
for savings. This complicates our efforts to raise the capital
needed to ensure sustained non-inflationary growth. Given our
tax system biases, it is not surprising that the U.S. savings
rate is low relative to other countries.
Attention in the second term will be on further reducing
rates through a broadening of the tax base, which will better
reward saving and investment. We at Treasury are now in the
process of completing a detailed study to recommend broadening
and simplification of the tax system while achieving revenue
neutrality. In other words, our objective has been to generate
the same absolute amount of revenues for the government, but to
do this through lower rates and a broadened base to better
encourage productive economic activity.
This analysis has involved four forms of possible tax
structures: a flat tax, a modified flat tax, consumption taxes
such as sales or VAT, and a consumed income tax. We anticipate
reporting the results to the President in December for his review
prior to his State of the Union message at the end of January.
My personal view is that the recommendation will most likely
involve a modified flat tax with lower rates and reduced tax
deductions. While each of the options studied has relative
advantages and disadvantages, it appears that the modified flat
tax best achieves a marriage between fundamental goals and the
realities of implementing a new system.
After we complete implementation of tax reform, we feel that
the tax system will better encourage savings relative to
consumption and provide the necessary capital to finance
long-term growth. With the .„mbination of the absolute tax cut
in 1981 and the implementation of a reform of our tax system, we
feel that the second objective of the President's program will be
achieved.
- 11 Reducing Structural Rigidities
The third element of the President's program has involved
instituting a far-reaching program of regulatory relief. We, and
this includes Democrats as well as Republicans, have recognized
that highly regulated industries were simply not competitive in
today's world. In essence, regulated firms lose the flexibility
to adapt to changes which are fundamental to remaining
competitive in dynamic, worldwide economic environments.
Consequently, we in the government have sought to provide
greater freedom for private industry. The gradual drift toward
greater and greater concentration of rule-making and
decision-making in Washington is being reversed. This is, of
course, in sharp contrast to many of the recent trends here in
Europe.
In recent years, even going back to the late 1970's, there
have been notable successes in deregulation — of financial
intermediaries, of energy prices, of trucking, and of airlines.
While the transition in these industries has not been easy, we
are confident that a deregulated industry ensures a more
efficient allocation of resources, and better positions individual
firms to adapt to the myriad of changes facing all industries
worldwide. In addition, achievements in the regulatory area
under the Reagan Administration have already resulted in a
one-time cost saving of between $9 and $11 billion and recurring
annual savings of roughly $6 billion each and every year.
Over the next four years, we will continue our efforts to
deregulate particular industries and reduce the involvement of
government in other industries. As examples, we are now in the
midst of and have completed some initial steps toward
deregulating our financial institutions and in the process of
selling Conrail, the large freight carrier in the Northeast, to
private concerns.
At the risk of being controversial, as a friend I should say
to European policymakers that increasing the flexibility and
adaptability of the United States' economy is already paying
handsome dividends for us and has substantial long-term
implications for you. In a world where economic markets are
becoming more unified and homogeneous, if the United States has a
substantial economic advantage over more structurally rigid and
overly regulated European economies, we will in the long run
continue to out-perform you.
In essence, the issue is whether the market allocation of
resources is quicker, more efficient, and provides a better
standard of living than a more dirigisme allocation process.
- 12 Clearly, the rapidly industrialized nations of Asia have followed
the United States' and Japan's market allocation example. If
Europe is to compete in a worldwide marketplace, perhaps it is
time to reconsider those EC and individual country policies that
are currently hindering Europe's initiative, adaptation, and
therefore economic growth.
Monetary Policy
The final element of the President's program involves
renewing the Administration's commitment, in cooperation with the
Federal Reserve, to a monetary policy that will generate a stable
currency and healthy financial market. The Fed, for a variety of
reasons, was within its target ranges for Ml for only 54 of the
156 weeks between January 1981 and January 1984. The goal is a
moderate and steady growth of the money supply at rates
consistent with stable prices.
During the first Reagan Administration, we have consistently
advocated that the Federal Reserve provide a slow steady growth
in the money supply. This is the most apolitical and
non-inflationary approach to monetary policy. We believe it is
therefore the best policy for the United States.
While we do feel free urging the Fed to increase the growth
rate of the money supply when it overstays a too restrictive
growth policy or to reduce the rate of growth in the money supply
when we believe it overstays a too expansionary policy, our
objective is to have the minimum inflation consistent with
maximum sustained real economic growth. Although it is easy to
find much fault with past Fed results, on balance we have been
pleased with past Fed policies and expect to be satisfied with
future Fed performance. In sum, you should anticipate no major
change in United States' monetary policy during a second Reagan
Administration.
CONCLUSION
The cumulative effect of these United States policies and
the progress that follows is the continued gradual shift on our
part to a country and people that increasingly will rely on the
private sector to generate sustainable growth. Deficits, as a
percent of GNP, will be reduced through growth and aggressive
reductions in the rate of growth in spending. Tax rates w.i " 1 be
reduced, not increased, to encouraged productive actions. In
essence, this Administration will continue to reduce the role of
government and ensure that it provides the necessary support
mechanisms for success.
- 13 Last week's election placed an important stamp of approval
on the Reagan Administration's economic policies. I am happy to
convey to you that there is a new sense of confidence in the
United States' economic future and a new burst of entrepreneurial
optimism. We all have reason to look toward the future with
anticipation•
Indeed, we campaigned for reelection on the theme that
"America is back: prouder, stronger, and better." On November
6th, the American people obviously agreed. I would only add
that I think we are also wiser, and the world is better for it.
Thank you.
TREASURY NEWS
apartment of the Treasury • Washington, D.C. • Telephone 566-2041
FOR RELEASE AT 4:00 P.M.
November 13, 1984
TREASURY'S WEEKLY BILL OFFERING
The Department of the Treasury, by this public notice,
invites tenders for two series of Treasury bills totaling approximately $13,600 million, to be issued November 23, 1984. This
offering will provide about $550
million of new cash for the
Treasury, as the maturing bills are outstanding in the amount of
$13,039 million, including $1,319 million currently held by Federal Reserve Banks as agents for foreign and international monetary
authorities and $2,275 million currently held by Federal Reserve
Banks for their own account. The two series offered are as follows:
90-day bills (to maturity date) for approximately $6,800
million, representing an additional amount of bills dated
February 23, 1984,
and to mature February 21, 1985 (CUSIP
No. 912794 GH 1 ) , currently outstanding in the amount of $15,167
million, the additional and original bills to be freely
interchangeable.
181-day bills for approximately $6,800 million, to be dated
November 23, 1984,
and to mature May 23, 1985
(CUSIP
No. 912794 HD 9 ) .
Both series of bills will be issued for cash and in exchange
for Treasury bills maturing November 23, 1984. Tenders from Federal Reserve Banks for themselves and as agents for foreign and
international monetary authorities will be accepted at the weighted
average bank discount rates of accepted competitive tenders. Additional amounts of the bills may be issued to Federal Reserve Banks,
as agents for foreign and international monetary authorities, to
the extent that the aggregate amount of tenders for such accounts
exceeds the aggregate amount of maturing bills held by them.
The bills will be issued on a discount basis under competitive
and noncompetitive bidding, and at maturity their par amount will
be payable without interest. Both series of bills will be issued
entirely in book-entry form in a minimum amount of $10,000 and in
any higher $5,000 multiple, on the records either of the Federal
Reserve Banks and Branches, or of the Department of the Treasury.
R-2922
- 2 Tenders will be received at Federal Reserve Banks and
Branches and at the Bureau of the Public Debt, Washington, D. C.
20239, prior to 1:00 p.m., Eastern Standard time, Monday,
November 19, 1984.
Form PD 4632-2 (for 26-week series) or Form
PD 4632-3 (for 13-week series) should be used to submit tenders
for bills to be maintained on the book-entry records of the
Department of the Treasury.
Each tender must state the par amount of bills bid for,
which must be a minimum of $10,000. Tenders over $10,000 must
be in multiples of $5,000. Competitive tenders must also show
the yield desired, expressed on a bank discount rate basis with
two decimals, e.g., 7.15%. Fractions may not be used. A single
bidder, as defined in Treasury's single bidder guidelines, shall
not submit noncompetitive tenders totaling more than $1,000,000.
Banking institutions and dealers who make primary markets in
Government securities and report daily to the Federal Reserve Bank
of New York their positions in and borrowings on such securities
may submit tenders for account of customers, if the names of the
customers and the amount for each customer are furnished. Others
are only permitted to submit tenders for their own account. Each
tender must state the amount of any net long position in the bills
being offered if such position is in excess of $200 million. This
information should reflect positions held as of 12:30 p.m. Eastern
time on the day of the auction. Such positions would include bills
acquired through "when issued" trading, and futures and forward
transactions as well as holdings of outstanding bills with the same
maturity date as the new offering, e.g., bills with three months to
maturity previously offered as six-month bills. Dealers, who make
primary markets in Government securities and report daily to the
Federal Reserve Bank of New York their positions in and borrowings
on such securities, when submitting tenders for customers, must
submit a separate tender for each customer whose net long position
in the bill being offered exceeds $200 million.
A noncompetitive bidder may not have entered into an agreement,
nor make an agreement to purchase or sell or otherwise dispose of
any noncompetitive awards of this issue being auctioned prior to
the designated closing time for receipt of tenders.
Payment for the full par amount of the bills applied for
must accompany all tenders submitted for bills to be maintained
on the book-entry records of the Department of the Treasury.
A cash adjustment will be made on all accepted tenders for the
difference between the par payment submitted and the actual
issue price as determined in the auction.
No deposit need accompany tenders from incorporated banks
and trust companies and from responsible and recognized dealers
in investment securities for bills to be maintained on the bookentry records of Federal Reserve Banks and Branches. A deposit
- 3 of 2 percent of the par amount of the bills applied for must
accompany tenders for such bills from others, unless an express
guaranty of payment by an incorporated bank or trust company
accompanies the tenders.
Public announcement will be made by the Department of the
Treasury of the amount and yield range of accepted bids. Competitive bidders will be advised of the acceptance or rejection of
their tenders. The Secretary of the Treasury expressly reserves
the right to accept or reject any or all tenders, in whole or in
part, and the Secretary's action shall be final. Subject to these
reservations, noncompetitive tenders for each issue for $1,000,000
or less without stated yield from any one bidder will be accepted
in full at the weighted average bank discount rate (in two decimals)
of accepted competitive bids for the respective issues. The calculation of purchase prices for accepted bids will be carried to three
decimal places on the basis of price per hundred, e.g., 99.923, and
the determinations of the Secretary of the Treasury shall be final.
Settlement for accepted tenders for bills to be maintained
on the book-entry records of Federal Reserve Banks and Branches
must be made or completed at the Federal Reserve Bank or Branch
on November 23, 1984, in cash or other immediately-available funds
or in Treasury bills maturing November 23, 1984. Cash adjustments
will be made for differences between the par value of the maturing
bills accepted in exchange and the issue price of the new bills.
In addition, Treasury Tax and Loan Note Option Depositaries may
make payment for allotments of bills for their own accounts and
for account of customers by credit to their Treasury Tax and Loan
Note Accounts on the settlement date.
In general, if a bill is purchased at issue after July 18,
1984, and held to maturity, the amount of discount is reportable
as ordinary income in the Federal income tax return of the owner
at the time of redemption. Accrual-basis taxpayers, banks, and
other persons designated in section 1281 of the Internal Revenue
Code must include in income the portion of the discount for the
period during the taxable year such holder held the bill. If the
bill is sold or otherwise disposed of before maturity, the portion
of the gain equal to the accrued discount will be treated as ordinary income. Any excess may be treated as capital gain.
Department of the Treasury Circulars, Public Debt Series Nos. 26-76 and 27-76, Treasury's single bidder guidelines, and this
notice prescribe the terms of these Treasury bills and govern the
conditions of their issue. Copies of the ci^julars, guidelines,
and tender forms may be obtained from any Federal Reserve Bank or
Branch, or from the Bureau of the Public Debt.
TREASURY NEWS
lepartment
of the Treasury • Washington, D.C. • November
Telephone
566-2041
13, 1984
FOR IMMEDIATE RELEASE
RESULTS OF TREASURY'S WEEKLY BILL AUCTIONS
Tenders for $ 6,801 million of 13-week bills and for $6,802 million
of 26-week bills, both to be issued on November 15, 1984, were accepted today
RANGE OF ACCEPTED
COMPETITIVE BIDS:
26-week bills
maturing
May 16, 1985
Discount Investment
Price
Rate
Rate 1/
.13-week bills
maturing February 14, 1985
Discount Investment
Rate
Rate 1/
Price
8.98%
9.00%
8.99%
Low
8.71% a/
9.03%
97.798
High
8.75%
9.07%
97.788
Average
8.73%
9.05%
97.793
a/ Excepting 1 tender of $6,000,000.
9.54%
9.56%
9.55%
95.460
95.450
95.455
Tenders at the high discount rate for the 13-week bills were allotted 7%.
Tenders at the high discount rate for the 26-week bills were allotted 66%
TENDERS RECEIVED AND ACCEPTED
(In Thousands)
Received
Accepted
Received
Location
Boston
New York
Philadelphia
Cleveland
Richmond
Atlanta
Chicago
St. Louis
Minneapolis
Kansas City
Dallas
San Francisco
Treasury
TOTALS
Type
Competitive
Noncompetitive
Subtotal, Public
Federal Reserve
Foreign Official
Institutions
TOTALS
$
385,100
16,941,795
27,540
80,390
64,310
46,920
862,950
42,760
33,970
53,910
38,020
1,188,955
312,875
$
38,600
5,734,395
27,540
60,390
48,450
46,920
143,750
42,760
33,970
52,980
33,370
225,390
312,875
$
•
:
Accepted
391,865
13,972,080
.18,200
28,555
79,175
42,415
1,241,275
58,640
37,840
65,060
28,105
1,732,720
400,715
$
41,865
5,321,180
18,200
28,555
47,475
32,415
532,125
38,300
36,840
62,035
26,405
216,380
400,715
$20,079,495
$6,801,390
. $18,096,645
$6,802,490
$17,611,730
1,106,090
$18,717,820
$4,333,625
1,106,090
$5,439,715
. $15,437,605
:
989,600
$16,427,205
$4,143,450
989,600
$5,133,050
1,219,315
1,219,315
1,100,000
1,100,000
142,360
142,360
569,440
569,440
$20,079,495
$6,801,390
: $18,096,645
$6,802,490
:
An additional$30,440 thousand of 13-week bills and an additional $106,360
thousand of 26-week bills will be issued to foreign official institutions for
new cash.
1/ Equivalent coupon-issue yield.
R-292i
JRSI
@FedFRASER