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LIBRARY
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U.S. Dept. of the Treasury.
£. PRESS REIEASES.
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TREASURY NEWS
epartment of the Treasury • Washington, D.C. • Telephone 566-2041
FOR RELEASE AT 4:00 P.M.
November 14, 1984
TREASURY TO AUCTION $9,000 MILLION OF 2-YEAR NOTES
The Department of the Treasury will auction $9,000 million
of 2-year notes to refund $7,023 million of 2-year notes maturing
November 30, 1984, and to raise $1,975 million new cash. The $7,023
million of maturing 2-year notes are those held by the public,
including $659 million currently held by Federal Reserve Banks as
agents for foreign and international monetary authorities.
The $9,000 million is being offered to the public, and any
amounts tendered by Federal Reserve Banks a,s 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 $548 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-2924
HIGHLIGHTS OF TREASURY
OFFERING TO THE PUBLIC
OF 2-YEAR NOTES
TO BE ISSUED NOVEMBER 30, 1984
November 14, 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
$9,000 million
2-year notes
Series AB-1986
(CUSIP No. 912827 RN 4)
November 30, 1986
No provision
To be determined based on
the average of accepted bids
To be determined at auction
To be determined after auction
May 31 and November 30
$5,00iJ
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, November 21, 1984,
prior to 1:00 p.m., EST
Friday, November 30, 1984
Wednesday, November 28, 1984
TREASURY NEWS
lepartment of the Treasury • Washington, D.C. • Telephone 566-2041
FOR RELEASE AT 12:00 NOON
November 15, 1984
TREASURY ANNOUNCES OFFERINGS OF 5-YEAR 2-MONTH DOMESTIC NOTES
AND 5-YEAR 2-MONTH FOREIGN-TARGETED NOTES
The Department of the Treasury will auction $6,750 million of
5-year 2-month domestic notes and up to $1,000 million of 5-year
2-month foreign-targeted notes to raise new cash.
The $6,750 million of domestic notes is 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.
The foreign-targeted notes will be sold only under competitive
bidding, and only to foreign institutions, to foreign branches of
United States financial institutions, to central banks or monetary
authorities of foreign governments, or to certain public international organizations of which the United States is a member.
A maximum of $1,000 million of bids will be accepted, and if less
than $500 million of acceptable bids is 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 January 13, 1985). United
States persons who purchase the notes from January 13, 1985, 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
attached highlights of the offerings and in the official Offering
Circulars. Potential bidders for the foreign-targeted 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, Public Affairs, Room 2315,
Washington, D. C.
Attachment
R-2925
HIGHLIGHTS OF TREASURY OFFERING TO THE PUBLIC OF 5-YEAR 2-MONTH DOMESTIC NOTES
AND OF 5-YEAR 2-MONTH FOREIGN-TARGETED NOTES TO BE ISSUED DECEMBER 3, 1984
November 15, 1984
Domestic
Amount Offered $6,750 million
Eligible Bidders
The Public
Description of Security:
Term and type of security..5-year 2-month notes
Series
G-1990
CUSIP designation
912827 RP 9
Maturity date
February 15, 1990
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
August 15 and February 15
(first interest payment
August 15, 1985)
Minimum denomination
available
$ 1,000
Terms of Sale:
Method of sale
Yield auction
Competitive bids
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
Acceptable for TT&L Note
Option Depositaries
Key Dates:
Receipt of tenders
Wednesday, November 28, 1984,
prior to 1:00 p.m., EST
Settlement
a) Funds immediately
available to the
Treasury
Monday, December 3, 1984
b) Readily-collectible
check
Thursday, November 29, 1984
Foreign-Targeted
Up to $1,000 million
See Sections 2.1 and 2.19
of the Offering Circular.
5-year 2-month foreign-targeted note
H-1990
912827 RQ 7
February 15, 1990
Same as the rate established in
the companion domestic auction
To be determined at auction
To be determined after auction
February 15 (first interest
payment February 15, 1986)
$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,
No provision
Wednesday, November 28, 1984, prior
to 1:00 p.m., EST, at FRB New York
Monday, December 3, 1984, no later
than 9:00 a.m., EST, at FRB New York
Not applicable
UNITED STATES OF AMERICA
FOREIGN - T A R G E T E D TREASURY NOTES OF FEBRUARY 15,1990
SERIES H -1990
Department of the Treasury
Offering Circular
November 15,1984
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 AGENT AS REGISTRAR
4
Section 4. DESCRIPTION OF THE NOTES
4
Section 5. DOMESTIC NOTES
5
Section 6. BIDDING AND SALE PROCEDURES
5
Section 7. PAYMENT FOR NOTES
7
Section 8. BOOK - ENTRY NOTES
7
Section 9. DEFINITIVE NOTES
8
Section 10. EXCHANGE FOR DOMESTIC NOTES
10
Section 11. UNITED STATES TAXATION
11
Section 12. SANCTIONS
15
Section 13. GENERAL PROVISIONS
16
Attachment A Sample Tender Form
Attachment B
Sample Payment Instructions
Attachment C
Sample Guarantee
Attachment D
Formulas
UNITED STATES OF AMERICA
F O R E I G N - T A R G E T E D T R E A S U R Y N O T E S O F F E B R U A R Y 15,1990
SERIES H-1990
DEPARTMENT CIRCULAR
Public Debt Series No. 38-84
DEPARTMENT OF THE TREASURY,
OFFICE OF THE SECRETARY,
Washington, D.C., November 15,1984.
Section 1. INVITATION FOR TENDERS
1.1. Introduction. The Secretary of the Treasury, pursuant to 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 February 15,1990, Series H-1990 (CUSIP No. 912827 R Q 7)
(collectively the "Notes", individually a "Note"). The Notes will be auctioned in the United States on
November 28,1984, 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 2.19 or foreign branches of United States Financial Institutions. In
addition, any transfers by Bidders after January 12,1985, to Qualifed Holders as defined in Section 2.15 that
are United States Persons must be consistent with the tax certification described in Section 11.2.
1.3. Transfer Restrictions. Before January 13, 1985, the Notes may not be sold or transferred to a
United States Person as defined in Section 2.20, 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 January 13, 1985. Each Bidder further agrees that, if it sells,
contracts to sell, or otherwise transfers the Notes before January 13,1985, 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 January 13, 1985. T h e
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. T a x 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
s u m m a r y of the currently applicable tax requirements. The tax consequences of holding the Notes derive
solely from the Internal Revenue Code and regulations n o w or hereafter promulgated thereunder.
Section 2. DEFINITIONS
The following terms, whenever used and capitalized in this offering circular, shall have the meanings
set forth below.
2.1. Bidder, (i) A United States Alien, other than an individual, or (ii) a foreign branch of a United
States Financial Institution.
2.2. Definitive Notes. Notes (as defined in Section 1.1) evidenced by a certificate that is inscribed with
the n a m e of the Registered Owner.
2.3. Domestic Notes. Companion securities sold at auction on November 28, 1984, and designated
Treasury Notes of February 15,1990, Series G-1990 (CUSIP No. 912827 R P 9).
2.4. Exchange Adjustment. A s defined in Section 10.3.
2.5. Financial Institution. A securities clearing organization, a bank, or other financial
institution, other than an International Financial Organization, that holds customers' securities in the
ordinary course of its trade or business, within the meaning of section 871(h) (4) (B) of the Internal Revenue
Code.
. 2.6. FRB NY. The Federal Reserve Bank of New York, located at 33 Liberty Street, New York, New
York.
2.7. Holding Institution. A Financial Institution or an International Financial Organization that has
a book-entry account with F R B N Y .
2.8. Internal Revenue Code. The United States Internal Revenue Code of 1954, as amended from
time to time (Title 26 of the United States Code).
2.9. International Account. A book-entry account of a Holding Institution with FRB NY for which
records are maintained by F R B N Y that specifically identify a foreign Financial Institution, a foreign
branch of a United States Financial Institution, or an International Financial Organization. A United States
branch of a foreign Financial Institution m a y not establish an International Account. A United States
subsidiary of a foreign Financial Institution m a y establish an International Account in accordance with the
requirements of the first sentence of this Section 2.9.
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2.10. International Financial Organization. A central bank or monetary authority of a foreign government
or a public international organization of which the United States is a m e m b e r that is characterized as a
foreign corporation for United States federal income tax purposes to the extent that such central bank,
authority, or organization holds Notes solely for its o w n account and is exempt from United States federal
income tax under sections 892 or 895 of the Internal Revenue Code.
2.11. Note or Notes. As defined in Section 1.1.
2.12. Payment Guarantee. A guarantee of payment to Treasury for an amount equal to 5 percent of
the par amount of Notes for which a tender is submitted by or on behalf of a Bidder.
2.13. 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 the Notes or an International
Financial Organization designated to pay for Notes for which it is the Registered Owner.
2.14. Primary Dealer. A dealer on the list of reporting dealers published by F R B N Y .
2.15. Qualified Holder. Before January 13, 1985, a United States Alien or a foreign branch of a
United States Financial Institution and after January 12,1985, a United States Alien or a United States
Person.
2.16. Registered Owner. The Financial Institution or International Financial Organization specifically identified on the records of F R B N Y maintained for an International Account, or, for Notes held in a
book-entry account other than an International Account, the Holding Institution, or, for a Definitive Note, the
person whose n a m e is inscribed on the Note and recorded on the books of F R B N Y .
2.17. 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.
2.18. Treasury. The United States Department of the Treasury.
2.19. 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; a foreign partnership one or more of the
m e m b e r s 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; or an International Financial
Organization.
2.20. 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.
-3-
2.21. 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.
2.22. 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,
issue the Notes, maintain and service securities accounts, pay principal and interest, conduct exchange and
conversion transactions, redeem the Notes at maturity and otherwise act as necessary in its capacity as fiscal
agent.
Section 4. DESCRIPTION OF THE NOTES
4.1. The Notes. The Notes will be issued as direct obligations of the United States of America. The
Notes will be issued in book-entry form on December 3,1984, and will bear interest in accordance with the
accrual formula for Notes paying annual interest set forth at Attachment D, payable on an annual basis on
February 15,1986, and on February 15 of each subsequent year through the maturity date. The Notes will
mature on February 15,1990, and are not subject to call or redemption prior to maturity. After January 12,
1985, the Notes m a y be converted to Definitive Notes as described in Section 9. Interest and principal on the
Notes will be paid in United States dollars in accordance with the procedures set forth in Sections 8.5 and 9.3.
After January 12,1985, the Notes will be acceptable to secure deposits of public monies of the United States.
4.2. Transfer and Exchange. Ownership of the Notes is transferable as provided in Sections 8 and 9.
The Notes m a y be exchanged for Domestic Notes as provided in Section 10. If the applicable requirements of
Section 11 have been complied with, after January 12, 1985, the Notes m a y be acquired and owned by a
United States Person and Domestic Notes acquired in exchange for the Notes m a y be acquired and owned by
either a United States Alien or a United States Person.
4.3. No Gross-up. There will be no future increase in payments to offset any changes in tax
requirements affecting these Notes.
4.4. Denominations. Definitive Notes will be issued in denominations of $1,000, $5,000, $10 000
$100,000, and $1,000,000. Notes in book-entry form will be issued in multiples of those amounts.
-4-
4.5. Governing Regulations. Treasury's general regulations governing United States securities (Part
306 of Title 31 of the Code of Federal Regulations) apply to the Notes offered in this offering circular, except
as otherwise provided herein.
4.6. L o n g Coupon. There will be no interest payment on February 15,1985, for the interest accrual
period on the Notes from December 3,1984, to February 15,1985. Interest earned during this period will be
added to the annual coupon payable on February 15,1986, and paid on that date. The amount of interest
earned from December 3,1984, to February 15,1985, will be determined using the day count conventions (as
defined in Attachment D ) for securities paying annual interest. Application of these conventions means that
the amount of interest earned during the first interest accrual period will be computed by multiplying the
amount of the regular annual coupon by the fraction 72/360.
Section 5. D O M E S T I C N O T E S
5.1. Domestic Auction. O n November 28,1984, Treasury also will auction Domestic Notes that will be
issued on the same day as the Notes and will have the same maturity date and stated interest rate as the Notes.
After January 12,1985, the Notes m a y be exchanged for Domestic Notes in accordance with the procedures
set forth in Section 10.
Section 6. BIDDING A N D SALE PROCEDURES
6.1. Bidders. Tender forms m a y be submitted only by or on behalf of Bidders. Individuals m a y not be
Bidders. A syndicate must be comprised only of Bidders to be considered a Bidder. Tender forms m a y be
submitted by an agent of a Bidder if the identity of the Bidder is disclosed.
6.2. Tender Submission. Bids must be submitted on the prescribed tender form and must be received
at F R B N Y , First Floor, before 1:00 p.m. N e w York time, Wednesday, November 28, 1984. Persons
submitting tender forms will receive time-stamped receipts. Beginning at 1:00 p.m. N e w York time on
November 28,1984, 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.
6.3. P a y m e n t Instructions. Bidders are required to m a k e 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 November
27,1984, 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
-5-
F R B N Y no later than 9:00 a.m. N e w York time on December 3, 1984. F R B N Y will retain paying
instructions on file and, if not revoked by the Paying Institution, Bidders m a y use such instructions in
subsequent auctions of Treasury foreign-targeted securities.
6.4. P a y m e n t 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
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 November 27,1984. 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 December 3,1984. F R B N Y will retain Payment Guarantees on file and, if
not revoked by the Paying Institution or Primary Dealer providing the Payment Guarantee, Bidders m a y use
such Payment Guarantee in subsequent auctions of Treasury foreign-targeted securities.
6.5. M i n i m u m 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. M a x i m u m A w a r d s . A Bidder, whether bidding individually or as a m e m b e r 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 m e m b e r s other than
the head of the syndicate need not be disclosed.
6.7. Interest Rate and Price of Notes. The stated interest rate established in the auction of the
Domestic Notes also will be appliedtothe Notes. That rate of interest, payable on an annual basis, will be paid
on all of the Notes. Based on such interest rate, the price for each accepted yield (on an annual payment basis)
will be determined and each successful Bidder will be required to pay the price equivalenttothe yield bid.
-6-
Price calculations will be based on a 360-day year using the formula set forth at Attachment D for Treasury
notes paying annual interest. Price calculations will be carriedtothree decimal places on the basis of price
per hundred, e.g., 99.923. The determinations of the Secretary shall be final.
6.8. Announcement of Auction Results. On November 28, 1984, a public announcement of the
amount and yield range of accepted bids for the Notes will be m a d e by 5:00 p.m. N e w York time or as soon
thereafter as possible. Bids for the Notes at yields equaltoor greater than the highest accepted yield in the
auction of the Domestic Notes (adjusted to an annual payment basis) will not be accepted. Subjecttothe
limitations and reservations set forth in this Section 6, bids will be accepted starting with those at the lowest
yield through successively higher yields until thetotalpar amount of Notes offered has been awarded. Bids at
the highest accepted yield will be prorated on a percentage basis, if necessary, taking into account the
m a x i m u m award limitations of Section 6.6. For example, assume that in a $1 billion offering, bids totaling
$900 million have been accepted and that three Bidders have submitted bidstotaling$250 million at the next
yield above those already accepted. Each of the three Bidders would then receive 4 0 % ($100,000,000 divided
by $250,000,000) of the amount of its bid at that yield.
6.9. Notification to Bidders. FRB NY will mail to each successful Bidder notification that its bid has
been accepted. This notification will contain the confirmation described in Section 11.3. Copies of the written
notification also will be available for pick-up by each successful Bidder and by its Paying Institution (and its
Holding Institution, if different) at F R B N Y , First Floor, by 12:00 noon N e w York time on November 29,
1984.
6.10. Reservations. It is the intent of the Secretarytoissue $1,000,000,000 of the Notes. The Secretary
expressly reserves the right to accept or reject any or all of the bids in whole or in part. If acceptable bids of
less than $500,000,000 are submitted, no bids will be accepted. The Secretary's action under this Section 6.10
is final.
Section 7. P A Y M E N T F O R N O T E S
7.1. Payment. Payment for the Notes will be made on December 3,1984, by FRB NY de
account of each successful Bidder's Paying Institution.
Section 8. BOOK-ENTRY N O T E S
8.1. Notes Held in Book-Entry Form. On the books of FRB NY, Notes may be held only by a Holding
Institution. Before January 13,1985, Notes m a y be held only in a Holding Institution's International Account.
After January 12,1985, Notes m a y be held in any book-entry account of a Holding Institution. Holding Notes
in an account other than an International Account m a y affect the certifications required for tax purposes. See
Section 11. A Holding Institution that has more than one available book-entry account with F R B N Y m a y
have more than one International Account. Each Bidder must identify on its tender form a Holding
Institution with an International Account.
-7-
8.2. Transfer of Book-Entry Notes. Before January 13,1985, F R B N Y will transfer the Notes oniy
between International Accounts. After January 12,1985, the Notes m a y be transferred between any bookentry 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. F R B N Y as Fiscal Agent. F R B N Y 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. P a y m e n t 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 creditedtothe Holding Institution. In the case of a Holding Institution that is an
International Financial Organization, interest and redemption payments will be m a d e at a foreign office of
such International Financial Organization. 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. D E F I N I T I V E N O T E S
9.1. Definitive Notes. After January 12,1985, book-entry Notes held at F R B N Y m a y 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 designedtoensure 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 Owner of a Definitive Note m a y be the beneficial owner or
an entity (other than an International Financial Organization) holding the Note on behalf of a beneficial
owner. U p o n 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.
9.3. Payment of Interest and Principal. Interest and maturity payments will be made by check
payabletothe Registered Owner or by credittothe reserve, clearing, or other dollar account of a Financial
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Institution that is the Registered Owner, if that Financial Institution maintains such an account with F R B
N Y . Interest and maturity payments will be mailed or credited on the date such payments are due. 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.
Definitive Notes will be redeemed by F R B N Y at par upon presentment by the Registered O w n e r or by a
Holding Institution on behalf of the Registered Owner on or after the maturity date. Notes will not accrue
interest after the maturity date.
9.4. Conversion to Book-Entry Form. A Registered Owner may convert a Definitive Note to bookentry form by submitting the Definitive NotetoF R B N Y through a Holding Institution. The signature of the
Registered O w n e r must be guaranteed by the Holding Institution or certified by: (1) a United States
diplomatic or consular representative; (2) a manager, assistant manager or other officer of a foreign branch
of a bank or trust company incorporated in the United States, its territories or possessions, or the
Commonwealth of Puerto Rico; or (3) a notary public or other officer authorizedtoadminister oaths, provided
that the official position and authority of any such officer is certified by a United States diplomatic or
consular representative under seal of office. A n International Financial Organization m a y convert a
Definitive Note to book-entry form by submitting the Definitive Note, duly executed by an authorized official
of such International Financial Organization, to F R B N Y .
9.5. Transfer of Ownership. Ownership of Definitive Notes may be transferred by assignment. In
order to reflect the change of ownership on the books of F R B N Y , assigned Definitive Notes must be
submitted for reregistration to F R B N Y ,togetherwith the n a m e and address of the new Registered Owner.
The signatures of all assignors must be guaranteed by an institution that at the time of transfer is eligible to
serve as a Paying Institution or certified by an individual w h o m a y certify signatures for purposes of Section
9.4 above.
9.6. Closed-Book Periods. Transactions involving Definitive Notes will not be accepted by F R B N Y
during closed-book periods. Such transactions include conversions between book-entry and Definitive Notes
and changes in the registration of Definitive Notes. Books for Definitive Notes will be closed for one calendar
month priortoand ending on an interest payment date and the maturity date. The Definitive Note books will
be reopened on the next day that F R B N Y is open for business following an interest payment date. N o
conversions or changes in registration will be allowed after the maturity date. During periods when the books
for Definitive Notes are open, conversions and changes in registration of Definitive Notes generally will be
processed by F R B N Y within one week of receipt.
9.7. N o Fees Imposed. F R B N Y will not impose any fee for the issuance, transfer, exchange or
redemption of Definitive Notes.
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Section 10. EXCHANGE FOR DOMESTIC NOTES
10.1. E x c h a n g e Provision. After January 12,1985, Notes issued under this offering circular m a y be
exchanged for Domestic Notes. Definitive Notes or Notes in book-entry form m a y be exchanged at F R B N Y
for an equal par amount of Domestic Notes in either book-entry or definitive form. Exchanges of Domestic
Notes for Notes will not be permitted.
10.2. Taxation. Upon exchange for Domestic Notes, the holder of such Domestic Notes will be
requiredtocomply with the tax requirements (including certification requirements) applicabletoDomestic
Notes. See also Section 11.
10.3. Adjustment U p o n 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 paytoTreasury an
amount equaltothe 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 equaltothe excess. The net adjustment
will not reflect or take into account any market-based factor.
10.4. 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.
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Section 11. U N I T E D S T A T E S T A X A T I O N
11.1. Taxation of Interest and Principal to United States Aliens. Payments of interest and
principal on the Notestoa United States Alien will not be subjecttowithholding 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 may result in imposition of a withholding tax.
11.2. Certification at Initial Issuance. A Bidder will be required to provide a written ce
the tender form that, as of the date of issuance, none of the Notes acquired by the Bidder will be beneficially
owned by a United States Person, other than a foreign branch of a United States Financial Institution, or is
being acquired on behalf of such a person, or for offertoresell or for resaletosuch a person. This certification
is in additiontoand not limited by the transfer restriction in Section 1.3. A certification made by a clearing
organization must be based on such statements provided to the clearing organization by its member
organizations. (Alternatively, a member organization of a clearing organization may provide the written
certification directlytoF R B NY.)
11.3. Confirmations. FRB NY will include a confirmation in the notification described in S
that it is understood that the purchaser represents that it is not a United States Person or that if it is a United
States Person it is a foreign branch of a United States Financial Institution. If the sale istoa dealer, the
confirmation will state that the dealer is requiredtosend a similar confirmation to its purchaser. Financial
Institutions buying on behalf of or for resaletoothers are consideredtobe dealers and will be requiredtosend
confirmationstotheir customers.
11.4. Interest Certification: Financial Institutions. A Withholding Agent may make a payment of
interest on a Note at an address outside the United States to a Registered Owner that is a Financial
Institution 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), (ii) the Note was sold in accordance with the procedures described in
Sections 11.2 and 11.3, and (iii) the Financial Institution provides a certificatetothe Withholding Agent in
writing that states that the beneficial owner of the Note is not a United States Person (other than a foreign
branch of a United States Financial Institution). No particular form is required for the certificate. If the
Financial Institution does not hold Notes for a beneficial owner that is a United States Person (other than a
foreign branch of a United States Financial Institution), a single certificate may be provided with respect to
all of the Notes held by the Financial Institution. If a Financial Institution that is a Registered Owner
transfers a Note and ceasestobe the Registered Owner of such Note, then, except as described in Section
11.10, the Financial Institution will not be required to provide a certificate under this Section 11.4 with
respecttosuch Note (unless the Financial Institution subsequently becomes the Registered Owner of the
Note). Interest will be considered paidtoa Registered Owner outside the United States if the Note is either
recorded in a Holding Institution's International Account and interest is credited for that account or interest
on a Definitive Note is deliveredtothe holder outside the United States.
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11.5. Interest Certification: Clearing Organizations. A certificate described in Section 11.4 m a y be
provided by a Financial Institution acting in its capacity as a clearing organization only if the clearing
organization has received such a certificate from the m e m b e r organization to which the interest is paid.
11.6. Interest Certification For 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 Notetoa 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
(relatingtobeneficial 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 m a k e 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 Institutiontothe 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 number 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 F o r m 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 Notetoa 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-8or on
a substitute form that is substantially similartoa F o r m W-8. A Withholding Agent also m a y m a k e a payment
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of interesttoa United States Alien Registered O w n e r without withholding United States federal income tax
if an appropriate statement is providedtothe 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 F o r m 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
F o r m W - 8 or substitute form from the beneficial owner. In the case of multiple Financial Institutions
between the beneficial owner and the Withholding Agent, this certificate must be given by each Financial
Institution to the one above it in the chain. 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 F o r m W - 8 or a substitute form provided by the beneficial owner must be attached. The
certification procedures of this Section 11.7 m a y be used in lieu of the procedures in Section 11.4 with respect
to a payment of interest outside the United States on a Note registered in the n a m e of a Financial Institution.
11.8. Prospective Determination. Any determination by the Secretary with respect to certification
requirements pursuant to section 871(h) (4) of the Internal Revenue Code will be published and will be
effective only with respecttopayment of interest m a d e more than one month after the publication of such a
determination.
11.9. Certain Information Reporting. A Withholding Agent that receives a statement described in
Section 11.6 from a Financial Institution that is not a United States-Related Person must m a k e an
information return on Internal Revenue Service F o r m 1099 of the payment with respect to which the
statement (and accompanying certificate) is required for the calendar year in which the payment is made.
The return should be completed as though the payment were m a d e to the beneficial owner of the income.A
Withholding Agent that receives a certificate described in Section 11.7 must m a k e an information return on
Internal Revenue Service F o r m 1042S of the payment with respecttowhich the certificate is required for the
calendar year in which the payment is made. The certificate received with respect to the payment shall be
attached to the F o r m 1042S required to be filed with respect to the payment.
11.10. Timing of Certificates at Interest Payments. The certificates or statements described in
Sections 11.4 through 11.7 are required to be received by the Withholding Agent within the 90-day period
priortothe interest payment date. However, if a certificate is received less than 30 days before that date, the
Withholding Agent, in its discretion, m a y withhold tax. If the information provided on a certificate described
in Section 11.4 or 11.5 changes within the 90-day period prior to the interest payment date, the person
providing the statement must inform the Withholding Agent (or clearing organization) within 30 days of
such change. For example, if during the 90-day period, but subsequenttofurnishing a certificate, beneficial
ownership of a Note is transferred to a United States Person, the person furnishing the certificate described
in Section 11.4 or 11.5 is required to amend its certificate within 30 days of the transfer to inform the
Withholding Agent that the obligation is being held by a United States Person. Except as provided in this
Section 11.10, a certificate described in Section 11.4 or 11.5 does not have to be amended if Notes are
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transferred from one Financial Institution to another Financial Institution. If the information on a
certificate described in Section 11.6 or 11.7 changes, the beneficial owner must notify the Withholding Agent,
or a Financial Institution acting on behalf of the beneficial owner, within 30 days. The Financial Institution
must promptly inform the Withholding Agent (or a Financial Institution holding an interest in the Note on its
behalf) of such notice if the Financial Institution has been informed by the beneficial owner or if it has actual
knowledge of such changes.
11.11. Retention of Certificates. The Withholding Agent is required to retain the written
certifications for a period of four years after the close of the calendar year in which they were, respectively,
obtained.
11.12. Information Reporting and B a c k u p Withholding. Neither information reporting under
section 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 applytopayments of principal m a d e 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 O w n e r 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 respecttostated interest on the Note.
A holder of a Note that is a United States Person generally will be requiredtoinclude in income the portion of
the original issue discount allocabletoeach 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.
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11.14. Taxation of Gains to United States Aliens. A holder of a Note that is a United States Alien will
not be subjecttothe United States federal income tax and no withholding of United States federal income tax
will be required with respecttoany 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 atotalof 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 respecttothe
United States or as a corporation which accumulates earnings to avoid United States federal income tax.
11.15. E x c h a n g e for Domestic Notes. A holder of a Note will not recognize gain or loss on the
exchange of a Note for a Domestic Note under the procedures in Section 10. U p o n the exchange, a holder will
be considered to have received interest accrued on the Note up to the time of the exchange and to have paid to
Treasury the Exchange Adjustment amount. (Actual payments will be only of the net amount. See Section
10.3.) The amount of the Exchange Adjustment will be considered an increase in the original issue price
(which will reduce original issue discount, if any, with respect to the Note).
11.16. Federal Estate Taxation of United States Aliens. Any Note held by an individual who at the
time of his death is not a citizen of or domiciled in the United States will not be included in the decedent's gross
estate for purposes of United States federal estate tax at the time of such individual's death if interest paid on
the Notetothe individual at the time of his death would not have been subjecttowithholding of United States
federal income tax because the conditions described in Section 11.1 are satisfied but without regard to
whether a certificate or statement described in Section 11 has been received by the Withholding Agent since
the last interest payment.
11.17. State and Local Taxation. The Notes are exempt from all taxation now or hereafter imposed
on the obligation or interest thereof by any State, any possession of the United States or any local taxing
authority, except for: (i) a non-discriminatory franchise or other nonproperty tax instead of a franchise tax
imposed on a corporation, or (ii) an estate or inheritance tax. See section 3124 of Title 31 of the United States
Code.
Section 12. SANCTIONS
12.1. Sanctions. In the Secretary's sole discretion, any person found to be in violation of any
requirement or provision set forth in this offering circular m a y be excluded from bidding for or purchasing
some or all future issues of Treasury foreign-targeted securities and m a y be subjecttosuch other sanctions as
determined by the Secretary.
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Section 13. GENERAL PROVISIONS
13.1. Applicable Law. The law governing all matters relating to the terms and conditions of the Notes
is the federal law of the United States.
13.2. Modifications. The Secretary m a y supplement or a m e n d provisions of this offering circular
governing the offering if such supplements or amendments do not adversely affect existing rights of holders
of the Notes. Public announcement of such future changes will be promptly provided.
13.3. Monthly Information. The Secretary will publish the total amount of Notes outstanding in the
Monthly Statement of the Public Debt.
13.4. Listing. The Notes will be listed on the New York Stock Exchange as of December 3,1984.
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
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Attachment A
TENDER FOR 5- YEAR 2- MONTH FOREIGN - TARGETED
TREASURY NOTES OF FEBRUARY 15,1990, SERIES H -1990
IMPORTANT-ONLYCOMPETITIVE TENDERS WILL BEACCEPTED AXD MUST BE RECEIVED BYTHE
FEDERAL RESERVE BANK OF NEW YORK BEFORE 1:00 P.M. NEW YORK TIME ON NOVEMBER 28,1984.
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 m a k e
payment therefor at F R B N Y in accordance with the provisions of the official offering circular (Department Circular,
Public Debt Series No. 38-84). The definitions in the official offering circular apply to this tender form.
T h e total par amount bid at the lowest yield must be at least $50,000,000. P a r 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.
COMPETITIVE TENDER
ANNUAL YIELD
PAR A M O U N T
.(United States dollars)
(Yield must be expressed to two
decimal places, for example, 7.10%)
(maturity value)
LJ 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)
O By charge to reserve account; Ll By charge to clearing account; LD 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, but do 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.
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.
If Bidder is a syndicate, the head of the syndicate
must be identified below.
NAME
NAME.
ADDRESS.
CITY
STATE... ZIPCODE.
ADDRESS
COUNTRY.
AREA CODE
TELEPHONE NUMBER.
BIDS WILL BE CONSIDERED ONLY IF THE REVERSE SIDE IS COMPLETED AND EXECUTED. \
Attachment A
Page 2
CERTIFICATIONS AND GUARANTEE
WE HEREBY CERTIFY that (i) as of December 3,1984, none of the Notes awarded to us will be beneficially
owned by a United States Person, other than a foreign branch of a United States Financial Institution, and (ii)
none of the Notes awarded to us is being acquired on behalf of a United States Person, other than a foreign branch
of a United States Financial Institution, or for offer to resell or for resale to such a person.
WE FURTHER CERTIFY that we will not sell, contract to sell, or otherwise transfer Notes issued to us to a
United States Person, other than a foreign branch of a United States Financial Institution, until after January 12,
1985. W e further agree that if w e sell, contract to sell, or otherwise transfer a Note before January 13,1985, w e
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 Note before
January 13,1985. W e understand that this certification is independent of, and that any transfer must be consistent
with, the certification of the preceding paragraph.
If this is a syndicate bid, W E F U R T H E R C E R T I F Y that, except as identified below, no syndicate m e m b e r is
bidding for Notes in excess of $350,000,000, either through this syndicate, individually, or through another
syndicate. (Supply below the identity of any syndicate bidders whose total bids are in excess of $350,000,000 and
the amount of Notes included in this syndicate bid for each such member.)
E
Check here if entity submitting the bid is eligibletoand does hereby
guarantee payment to Treasury, in accordance with the terms of the
official offering circular, of an amount equalto5 % of the Notes for which
the tender is submitted. If this box is not checked, a payment guarantee in
the form specified in the official offering circular must have been
submitted previouslytoF R B N Y unless the Bidder is exempt from such
guarantee requirement.
If this tender form is submitted by an agent for a Bidder, the above certifications are made by the agent on b
are binding on, that principal.
TENDER IS SUBMITTED BY:
AUTHORIZED SIGNATURE: —
N A M E AND TITLE OF
AUTHORIZED SIGNER:
DATE:
INSERT THIS TENDER FORM IN ENVELOPE M A R K E D
"TENDER FOR FOREIGN - TARGETED TREASURY NOTES"
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: M r . 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 United States Treasury securities targeted to foreign
investors ("Securities") awarded to (name Bidder). Terms used herein shall have the same meaning as set
forth in the official offering circular applicable to the Securities.
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 . W e understand that, unless restricted to
a specific auction, this letter will be retained by F R B N Y and, until modified or withdrawn, m a y be used by
(name Bidder) to pay for any Securities purchased by (name Bidder).
3. We further understand that any Securities paid for by a debit to our (reserve, clearing, or other d
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 Securities paid for under this authorization to be issued to another
Holding Institution's International Account.)
4. The following signature(s) is (are) a specimen of the authorized signature(s) which will appear on
tender form submitted by (name Bidder):
Attachment B
page 2
(Authorized Signature of Bidder
or Bidder's Agent)
(Name of Authorized Signer)
(Title of Authorized Signer)
A T T A C H S E P A R A T E S H E E T FOR ADDITIONAL SIGNATURES
(Name of Paying Institution)
By:
(Authorized Signature)
(Name of Authorized Signer)
(Title of Authorized Signer)
(Date)
Receipt Acknowledged:
FRB NY
TERMS AND FORM OF THIS LETTER MAY NOT BE ALTERED
EXCEPT AS INDICATED IN PARAGRAPH 3
Attachment C
[Letterhead of Guarantor]
Federal Reserve Bank of New 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 w e guarantee payment to Treasury of an amount equal to 5 % of the par amount.
but not in excess of $
, of any United States Treasury 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.
( N a m e of Guarantor)
By:
(Authorized Signature)
( N a m e and Title of Authorized Signer)
(Date)
Receipt Acknowledged:
FRB NY
TERMS AND FORM OF THIS LETTER M A Y NOT BE ALTERED
Attachment D
Formulas for Calculating the Present Value (Price Plus Accrued Interest)
And Yield to Maturity of Treasury Notes Paying Annual Interest 1/
se A: Calculations during an initial "short" interest period for Treasury
notes with long coupons
(r"/360)(C)(v) + (C)a
+ 100v
(P+A) =
(Hi)
and A = [(r"-r)/360](C)
ie B:
Calculations during the first "regular" interest period for Treasury
notes with long coupons (for use beginning with the first coupon
frequency date 2/)
(r"/360)(C) + C + (C)a
+ 100v
(P+A) =
(1 + i)
and A = [(r"/360) + (360-r)/360](C)
e C:
Calculations during an initial "short" period for Treasury notes with
short first coupons
(r"/360)(C) + (C)a
+ 100v
^1
(P+A) =
(1 + i)
and A = [(r"-r)/360](C)
e D:
Calculations when the coupon paid on the next coupon frequency date
is a regular coupon
C + (C)a
+ 100v
(P+A) =
(1 + i)
and A = [(360-r)/360](C)
Attachment D
page 2
where:
P = Price in decimals.
A = Accrued interest from original issue date or last interest payment date
to valuation date.
r = Days from valuation date'to next coupon frequency date calculated on a
360 days per year basis from and including the day following the valuat
date up to and including the next coupon frequency date. A full month «
be counted as thirty days and a date occurring on the thirty-first
calendar day of a month shall be the same as the first calendar day of
the following month. If the valuation date falls on a coupon frequency
date then r will be defined to be equal to 360.
f = r/360
r" = Days from the original issue date of the security to the first coupon
frequency date of the security calculated using the same conventions
used in calculating r.
i = Interest rate (yield to maturity), expressed in decimals and based on
annual interest payments.
C = Regular annual coupon, payable annually.
n = Number of full annual periods from valuation date to maturity except
that if the valuation date occurs on a coupon frequency date n will be
one less than the number of full annual periods remaining to maturity.
v = 1/(1+i)
n
n
v = 1/(1+i)
n
2
3
n
a = (1-v )/i = v + v + v
+
+ v = present value of 1 per
n"] period for n periods.
1/
These formulas are specifically intended only for use with the foreigntargeted notes described in this offering circular.
2/ A coupon frequency date is a coupon payment date except for a note with
an initial long coupon in which case there is no payment on the first
coupon frequency date.
Note: The day count conventions used for determining short and long coup
and accrued interest and for discounting over partial periods for
targeted Notes do not conform to regular Treasury practice for
domestic securities. The conventions for the targeted Notes assui
that each month has thirty days and that a date occurring on the
thirty-first calendar day of a month is the same as the first
calendar day of the following month. Unlike the convention for
corporate bonds in the United States, the last day of February is
not defined to be the thirtieth day of the month. Thus, applicati
of these rules results in three days between February 28th and Ma!
1st and zero days between March 31st and the first of April.
Similarly, a strict application of these rules leads to 181 days
between September 30th and March 31st.
Attachment D
page 3
Formulas for Calculating the Present Value (Price Plus Accrued Interest)
And Yield to Maturity of Treasury Notes Paying Semiannual Interest 1/
se A: Calculations during an initial "short" interest period for Treasury
notes with long coupons
n
(r"/s)(C/2)(v) + (C/2)a
+ 100v
(P+A) =
f
(1+i/2)
and A = [(r"-r)/s](C/2)
3e B: Calculations during the first "regular" interest period for Treasury
notes with long coupons (for use beginning with the first coupon
frequency date 2/)
(r"/s")(C/2) +(C/2) + (C/2)a + 100v
">
(P+A) =
(1+i/2)
•ei
and A r [(r"/s") + (s-r)/s](C/2)
e C: Calculations during an initial "short" period for Treasury notes with
short first coupons
n
(r"/s)(C/2) + (C/2)a
+ 100v
(P+A) =
f
(1+i/2)
and A = [(r"-r)/s](C/2)
e D: Calculations when the coupon paid on the next coupon frequency date
is a regular coupon
n
C/2 + (C/2)a
+ 100v
(P+A) =
f
(1+i/2)
and A = _LLa=xlZs] (C/2)
ere:
P = Price in decimals.
,
, , ,
L . .
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 coupon frequency date.
r" = Exact number of days from the original issue date to the first coupon
frequency date.
f = r'/l80 where r' is the number of days from the valuation date to the
next coupon frequency date calculated on a 360 days per year basis from
and including the day following the valuation date up to and including
the next coupon frequency date. A full month will be counted as thirty
days and a date occurring on the thirty-first calendar day of a month
shall be the same as the first calendar day of the following month. If
the valuation date falls on a coupon frequency date then f will be definj
to be equal to one.
s = Exact number of days in the current semiannual period. On a coupon
frequency date s is the exact number of days to the next coupon frequencj
date.
s" = Exact number of days in the semiannual period containing the issue date.
i = Interest rate (yield to maturity), expressed in decimals and based on
semiannual interest payments.
C = Regular annual coupon, payable semiannually.
n = Number of full semiannual periods from valuation date to maturity except
that if the valuation date occurs on a coupon frequency date n will be
one less than the number of full semiannual periods remaining to maturit;
v = 1/(1+i/2)
n
n
v = 1/(1+i/2)
n
2
3
n
a = (1-v )/(i/2) = v + v + v +
+ v = present value of 1 per
nl period for n periods.
1/
These formulas will only be used for making calculations involved in
exchanging targeted registered issues for companion regular Treasury
issues.
2/ A coupon frequency date is a coupon payment date except for a note with
an initial long-coupon in which case there is no payment on the first
coupon frequency date.
Note: The day count conventions used for pricing domestic Treasury notes
in making exchange calculations do not conform to regular Treasury
practice for domestic securities. The conventions assume that each
month has thirty days and that a date occurring on the thirty-first
calendar day of a month is the same as the first calendar day of thf
following month. Unlike the convention for corporate bonds in the
United States, the last day of February is not defined to be the
thirtieth day of the month. Thus, application of these rules result'
in three days between February 28th and March 1st and zero days
between March 31st and the first of April. Similarly, a strict
application of these rules leads to 181 days between September 30th
and March 31st (but note the definition of f above).
SAMPLE EXCHANGE VALUES FOR A HYPOTHETICAL
DATES OF
EXCHANGE
1/14/85
2/15/65
2/28/85
8/15/85
12/31/85
10/15/87
8/31/88
M.375% ANNUAL
COUPON if M.4t>* ANN
P- 99. 520134
A- I.295486
P+A-100.821620
P- 99.492191
A- 2.275000
P+A-I01.767I9I
P- 99.480592
A- 2.685764
P+A-102.166356
P- 99.473004
A- 7.9625(X)
PtA-107.435504
P- 99.666960
A- 12.259722
P+A- 111.926682
P- 99.715801
A* 7.583333
P+A-I07.299I34
P- 99.751255
A- 6.193056
P+A-I05.9443II
6-YEAR NOTE DATEO 12/ 3/1984 AND MATURING
11.375* SEMIANNUAL
COUPON • 11.14* S/A
P-100.793646
A- 1.298234
P+A-I02.091880
P-100.762021
A- 2.287364
P+A-103.049385
P-100.757728
A- 2.695859
P+A-103.453587
P-1 00.814372
A.000000
P+A-100.814372
P-100.763227
A- 4.265625
P+A-I05.028852
P-100.447621
A- 1.885530
P+A-102.333151
P-l00.306535
A.494565
P+A-100.801100
Attachment
page 5
2/lb/1 W O
ACCRUED
INTEREST
EXCHANGE
ADJUSTMENT
NET ADJUSTMENT
(TO TREASURY)
TO INVESTOR
( .002748)
(1.267512)
11.270260)
(..012364)
(1.269830)
( .0J 0095)
(1.277136)
D
(1.282194)
(1.287231)
7.962500
(1.341368)
6.621132
7.994097
(1.096267)
6.897830
5.697803
( .731820)
4.965983
5.698491
( .555280)
5.143211
FIGURES MERELY ILLUSTRATE EXCHANGE VALUE COMPUTATIONS AND ARE NOT INTENDED TO APPLY TO THE NOTES OFFERED IN THIS CIRCULAR.
TREASURY NEWS
jepartment of the Treasury • Washington, D.C. • Telephone
FOR RELEASE AT 12:00 NOON
November 16, 1984
TREASURY'S 52-WEEK BILL OFFERING
The Department of the Treasury, by this public notice,
invites tenders for approximately $8,500 million of 365-day
Treasury bills to be dated November 29, 1984, and to mature
November 29, 1985 (CUSIP No. 912794 HP 2). This issue will
provide about $500
million new cash for the Treasury, as the
maturing 52-week bill was originally issued in the amount of
$8,006 million.
The bills will be issued for cash and in exchange for
Treasury bills maturing November 29, 1984.
In addition to the
maturing 52-week bills, there are $ 12,935 million of maturing
bills which were originally issued as 13-week and 26-week bills.
The disposition of this latter amount will be announced next week.
Federal Reserve Banks as agents for foreign and international
monetary authorities currently hold $1,688 million, and Federal
Reserve Banks for their own account hold $4,230 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 $210
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 Standard time, Tuesday,
November 27, 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-2926
- 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 29, 1984, in cash or other immediately-available funds
or in Treasury bills maturing November 29, 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, anc 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
November
19, 1984 566-2041
FOR IMMEDIATE
RELEASE
partment
of the
Treasury • Washington, D.c. •
Telephone
RESULTS OF TREASURY1S WEEKLY BILL AUCTIONS
Tenders for $6,805 million of 13-week bills and for $6,804 million
of 26-week bills, both to be issued on November 23, 1984, were accepted today,
RANGE OF ACCEPTED
COMPETITIVE BIDS:
Low
High
Average
13-week bills
maturing February 21, 1985
Discount Investment
Rate 1/
Rate
Price
26-week bills
maturing
May 23, 1985
Discount Investment
Price
Rate 1/
Rate
8.53%
8.63%
8.59%
8.76%
8.81%
8.79%
8.83%
8.94%
8.90%
97.868
97.843
97.853
9.29%
9.35%
9.32%
95.596
95.571
95.581
Tenders at the high discount rate for the 13-week bills were allotted 66%
Tenders at the high discount rate for the 26-week bills were allotted 77%
TENDERS RECEIVED AND ACCEPTED
(In Thousands)
Location
Received
Accepted
:
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
$
391,875
12,182,260
14,260
80,605
54,250
58,180
856,540
20,700
27,700
45,675
36,925
651,225
296,180
$ 156,375
5,190,760
14,260
80,605
47,890
58,180
289,570
20,700
27,700
45,675
36,925
540,225
296,180
$14,716,375
$
Accepted
382,420
13,778,470
12,190
21,165
67,970
77,605
1,537,095
43,410
30,155
50,135
20,135
822,950
367,110
$
31,420
4,600,220
12,190
21,165
41,820
76,455
1,026,795
31,110
30,155
50,135
20,135
495,200
367,110
$6,805,045
: $17,210,810
$6,803,910
$12,295,540
989,425
$13,284,965
$4,384,210
989,425
$5,373,635
: $14,504,330
:
843,480
: $15,347,810
$4,097,430
843,480
$4,940,910
1,197,910
1,197,910
:
1,100,000
1,100,000
233,500
233,500
:
763,000
763,000
$14,716,375
$6,805,045
: $17,210,810
$6,803,910
\J Equivalent coupon-issue yield.
R-2927
Received
i
i
:
TREASURY NEWS
Department of the Treasury • Washington, D.C. • Telephone 566-2041
FOR RELEASE AT 4:00 P.M.
November 20, 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 29, 1984.
This
offering will provide about $675
million of new cash for the
Treasury, as the maturing bills were originally issued in the
amount of $12,935 million. 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 30, 1984,
and to mature February 28, 1985 (CUSIP
No. 912794 GU 2), currently outstanding in the amount of $6,642
million, the additional and original bills to be freely
interchangeable.
182-day bills for approximately $6,800 million, to be
dated November 29, 1984, and to mature May 30, 1985
(CUSIP
No. 912794 HE 7) .
Both series of bills will be issued for cash and in exchange
for Treasury bills maturing November 29, 1984. In addition to the
maturing 13-week and 26-week bills, there are $8,006 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 $1,635
million, and Federal Reserve Banks for their own account hold $4,265
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 $1,425
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
R-2978
Reserve Banks and Branches, or of the Department of the Treasury.
- 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 26, 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 29, 1984, in cash or other immediately-available funds
or in Treasury bills maturing November 29, 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
November 26, 1984
FOR IMMEDIATE RELEASE
RESULTS OF TREASURY'S WEEKLY BILL AUCTIONS
Tenders for $ 6,805 million of 13-week bills and for $ 6,802 million
of 26-week bills, both to be issued on November 29, 1984, were accepted today.
RANGE OF ACCEPTED
13-week bills
COMPETITIVE BIDS: maturing February 28, 1985
Discount Investment
Price
Rate •
Rate 1/
Low
High
Average
8.40%
8.44%
8.43%
8.70%
8.74%
8.73%
26-week bills
maturing May 30, 1985
Discount Investment
Rate
Rate 1/
Price
97.877
97.867
97.869
8.47%
8.52%
8.50%
8.97%
9.03%
9.00%
95.718
95.693
95.703
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 30%,
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
$
378,450
15 ,133,305
12,540
34,660
48,365
39,380
1,325,155
48,190
35,530
46,465
28,695
1,307,525
273,900
28,450
5 283,100
12,540
34,660
48,365
39,380
545,655
48,190
35,530
46,465
28,695
377,525
273,900
390,645
14,093,110
28,130
39,280
38,215
51,975
1,117,735
42,970
39,295
49,120
47,800
2,972,440
265,335
$
40,645
4,040,220
28,130
39,230
38,215
46,345
95,635
22,970
37,295
45,440
35,700
2,069,625
265,335
$19,176,050
$6,804,785
. $18,712,160
$6 ,802,455
$16,407,325
1,007,240
$17,414,565
$4,036,060
1,007,240
$5,043,300
. $16 057,890
731,970
: $16,789,860
$4 ,148,185
731,970
$4 ,880,155
1,323,285
1,323,285
438,200
$19,176,050
1/ Equivalent coupon-issue yield.
R-2923
:
Accented
:
:
s
:
:
$
$
1,300,000
1,300,000
438,200
622,300
622,300
$6,804,785
: $18,712,160
$6 ,802,455
2041
rREASURY NEWS
apartment of the Treasury • Washington, D.C. • Telephone 566-2041
REMARKS BY BERYL W. SPRINKEL
UNDER SECRETARY OP THE TREASURY FOR MONETARY AFFAIRS
BEFORE
KINYU ZAISEI JIJO KENKYU-KAI
(INSTITUTE FOR FINANCIAL AFFAIRS, INC.)
TOKYO, JAPAN
November 16, 1984
It is an honor and a pleasure to be here before this
distinguished group to discuss the liberalization of Japan's
capital markets and the internationalization of the yen.
My trip to Tokyo this week commemorates an important stage in
the evolution of these issues. At this time last year, Prime
Minister Nakasone and President Reagan announced their mutual
commitment to the development of more open capital markets and to
allow the yen to more fully reflect Japan's underlying economic
strength. It was to fulfill this mandate that Finance Minister
Takeshita and Treasury Secretary Regan asked Vice Minister Oba
and me to co-chair the Working Group which produced the "Report
on Yen/Dollar Exchange Rate Issues.
In my view, this report created the basis for a fundamental
change in Japan's financial system. To a much greater extent
than ever before, investors and borrowers will base their
decisions on market forces, rather than government directive.
This will have important consequences for Japan's capital markets
and Japan's role in the international financial system. However,
the full extent of these changes will depend significantly on the
response of economic and financial leaders such as yourselves.
Therefore, I am particularly pleased to have an opportunity to
share with you my thoughts on these matters.
Let me begin by explaining why the United States is so
interested in Japan's financial policies. An important incentive
to discuss these matters was our concern about the yen/dollar
exchange rate. The Reagan Administration has long been concerned
about the rate. We knew that the Japanese authorities were not
R-2930
- 2 directly depressing the value of their currency. Nevertheless,
it was clear that the yen did not reflect the underlying strength
of the Japanese economy.
I know you are aware of Japan's enormous economic growth
during the last four decadess you are responsible for making
Japan the second largest Western economy.
However, the yen has not assumed similar importance in international transactions. Last year, for example, only about 3 1/2
percent of the world's official reserves were held in yen. In
addition, only a small percentage of Japan's trade is denominated
in yen. Not only the U.S. but other European countries, use
their own currencies much more heavily in their international
trade. In addition, the Euroyen bond market is still very small.
Only a handful of Euroyen bond issues is made each year, while
the Eurobond markets in other major currencies are enormous.
We concluded that Japan's financial policies were an
important factor in preventing the yen from becoming a strong
international currency.
Japan's domestic capital market has been highly regulated
over the years in terms of interest rates, the activities of
financial institutions, access to the Japanese market, and
international use of the yen. Because of these and other
limitations 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. This is an important factor in the yen's weakness.
We are 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.
If 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 interdependent world,
the policies of one government are quickly transmitted to the
rest of the world, affecting the allocation of resources
worldwide.
Yen/Dollar Report
As we examined these problems more closely, we identified
three areas where we thought Japanese policy changes were
essential: liberalization of Japan's domestic capital market;
development of a free Euroyen market; and freer access to the
- 3 Japanese market for foreign financial institutions. The
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. We believe it is important
to increase the depth and breadth of the market for yen
assets for residents and nonresidents
In addition, we
hope to improve the efficiency of resource allocation in
Japan and the rest of the world
We also attach great importance to development of a
Euroyen market, since it offers the most direct way of
establishing a market governed by forces of supply and
demand 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 bonds
where non-Japanese can freely invest or borrow
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, on the funding
side, foreign and Japanese banks will be authorized to issue
short-term negotiable Euroyen certificates of deposit from their
offices outside of Japan. On the lending side, Japanese and
non-Japanese banks are free to extend Euroyen loans to nonresidents. 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.
In our view, 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.
Impact on the U.S.-Japan Relationship
You may wonder what all of these measures mean for the United
States relationship with Japan. In my view, one immediate effect
has been to enhance greatly the understanding between our two
countries. The negotiations leading up to the Yen/Dollar
- 4 Report were not easy. To us, Japan's system of rules, regulations and official "guidance" seemed extremely complex and
opaque. We had a long educational process, as did our colleagues
in 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.
Specifically, we expect that over time the policy changes
outlined in the 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 Agreement, in the short-run. 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 to assume a greater role in determining
the value of the yen will help the yen strengthen to a level
which is more in line with the underlying strength of the
Japanese economy.
A strong yen would have important benefits for the United
States in the form of higher sales and employment in export and
import-competing industries. However, the Agreement also
contains important benefits to Japan. First, 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 provide Japanese citizens with 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, promoting its low-cost
services for Japanese borrowers and investors.
- 5 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
international financial responsibilities befitting a major
economic power.
In addition, Japan's liberalization efforts should contribute
significantly to the efficiency of global resource allocation and
increased economic welfare worldwide. There will be greater
scope for foreign entities to tap the considerable level of
domestic Japanese savings. This will provide new sources of
investment capital and reduce pressure on other markets.
Where Do We Stand
I would like to bring you up-to-date on developments since
our May agreement. Ministry of Finance commitments have — to
date — all been implemented on schedule. For example,
developments in the swap and forward foreign exchange markets
have been encouraging. We are very pleased about how these
markets have expanded in the absence of governmental controls and
regulations. But as I said in yesterday's press conference much
more in the way of policy change needs to be done.
We have just completed two days of "follow-up" talks on last
May's agreement. The Ministry of Finance and my Treasury team
had long, detailed talks on these very complex issues. These
frank discussions have cleared up some problems but have also
shown where much further progress is needed.
We are very pleased with the Ministry's implementation of
policy changes in some areas of our agreement. But frankly, in
some other areas much more needs to be done to fully put into
effect the broad range of agreements we reached last May. We
still foresee problems in the following areas:
— licensing requirements for Euro-yen bonds and CDs
— eligibility standards for yen bond issues
— syndicated Euroyen lending
— domestic interest rate deregulation
— new financial market instruments
— BA market development
— dealing in government securities
- 6 —
overseas yen lending from Japan
— trust banking
— financial accounts held abroad by residents.
In some cases our concerns center on eligibility requirements, re-institution of guidance or regulations, or
transparency of procedures. In other areas we believe the
spirit of our Agreement is not being fulfilled.
We see an important opportunity for establishing new markets
free of control and yet we fear that the cautious, step-by-step
approach of the Ministry will miss this very important
opportunity to move ahead boldly.
Conclusion
I know that you are a very key group of individuals in this
process. Your support will be critical to the full implementation of our Agreement. I would urge you to be very active in
urging the Ministry to move ahead quickly. We face great
opportunity and challenge. With your clear support for change and
new freedom from control we will all gain from future policy
changes.
You can help lead Japan into a new era of openness and market
freedom. My counsel is clear. Let's accept the challenge and
move ahead dramatically.
Thank you, I would welcome your questions and comments.
TREASURY NEWS
Department of the Treasury • Washington, D.C. • Telephone 566-2041
BIOGRAPHICAL NOTES
November 19, 1984
R. T. MCNAMAR
DEPUTY SECRETARY OF THE TREASURY
R. T. McNamar was nominated to be the Deputy Secretary of
the Treasury by President Ronald Reagan on January 23, 1981. At
the time of his nomination he was 41 years old, making him the
youngest Deputy Secretary in Treasury's history. His background
includes a wide range of experience gained from executive
positions in both private industry and government.
As Deputy Secretary of the Treasury, Mr. McNamar has been in
the forefront of domestic and international economic policy
formulation. He has taken a lead role in working with foreign
government and private banks to formulate actions to deal with
the international debt situation and has been active in efforts
to modernize the worldwide monetary system, through steps such as
strengthening the International Monetary Fund, improving World
Bank policies, and internationalization of the Japanese yen. On
the domestic side, he is currently involved in the
Administration's program to reduce taxes and build long-term
economic growth.
Mr. McNamar has authored several articles, lectured, and
testified on exchange rate topics including the underlying
rationale for the dollar's recent strength. He is also regarded
as an authority on the world oil situation and has authored and
spoken on this topic extensively as well.
Before joining the Reagan Administration, he was Executive
Vice President and Chief Financial Officer of the Beneficial
Standard Corporation, a diversified financial services holding
company in Los Angeles.
Prior to joining Beneficial Standard, Mr. McNamar served as
Executive Director of the Federal Trade Commission from November
1973 to March 1977, during which time he handled a wide variety
of energy, antitrust, and financial reporting policy issues, as
well as introducing program evaluation concepts into the
Commission
and developing its first program budget.
R-2931
-2During Phase II of the Economic Stabilization Program, he
was Director of the Office of Case Management and Analysis for
the Pay Board. He also served as a management consultant to the
Cost of Living Council, White House, and Federal Energy Office.
From October 1966 until January 1972, Mr. McNamar worked as
a management consultant with McKinsey & Company, Inc., in San
Francisco, New York and Amsterdam. He worked in the
Comptroller's Office of Standard Oil Company of California for
one year after graduation from business school.
He was born April 21, 1939, in Olney, Illinois, and was
raised in Tulsa, Oklahoma. He received an A. B. degree from
Villanova University in 1961, a J.D. degree from the University
of Michigan Law School in 1963, and an M.B.A. degree from the
Amos Tuck School of Business Administration at Dartmouth College
in 1965. He is a member of the California and American Bar
Associations and the Financial Executive Institute.
He has two children: a son, Brendan, 16, and a daughter,
Lindsay, 14.
###
rREASURY NEWS
partment of the Treasury • Washington, D.C. • Telephone 566-2041
FOR IMMEDIATE RELEASE
November 21, 1984
RESULTS OF AUCTION OF 2-YEAR NOTES
The Department of the Treasury has accepted $ 9,013 million of
$25,900 million of tenders received from the public for the 2-year
notes, Series AB-1986, auctioned today. The notes will be issued
November 30, 1984, and mature November 30, 1986.
The interest rate on the notes will be 10-3/8%. The range of
accepted competitive bids, and the corresponding prices at the 10-3/8%
interest rate are as follows:
Yield Price
Low
10.45%
99.868
High
10.48%
99.815
Average
10.47%
99.832
Tenders at the high yield were allotted 65%.
TENDERS RECEIVED AND ACCEPTED (In Thousands)
Location
Received
Accepted
Boston
380,225
$
$
59,975
New York
22 ,291,325
7,620,870
Philadelphia
32,095
32,095
Cleveland
277,995
245,945
Richmond
87,165
51,415
Atlanta
97,905
67,905
Chicago
1 ,367,905
303,305
St. Louis
181,010
141,010
Minneapolis
52,390
48,890
Kansas City
140,845
133,845
Dallas
49,235
22,485
San Francisco
933,380
276,610
Treasury
8,275
8,275
Totals
$25 ,899,750
$9,012,625
The $9,013 million of accepted tenders includes $1,046 million
of noncompetitive tenders and $7,967 million of competitive tenders
from the public.
In addition to the $9,013 million of tenders accepted in the
auction process, $380 million of tenders was awarded at the average
price to Federal Reserve Banks as agents for foreign and international
monetary authorities. An additional $548 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-2932
rREASURY NEWS
partment of the Treasury • Washington, D.C. • Telephone 666-2041
FOR RELEASE AT 1.2:0€ NOON
November 23, 1984
TREASURY OFFERS $10,000 MILLION OF CASH MANAGEMENT BILLS
The Department of the Treasury, by this public notice,
invites tenders for two series of Treasury bills totaling approximately $10,000 million, to be issued December 3, 1984, as follows:
17-day bills (to maturity date) for approximately $5,000
million, representing an additional amount of bills dated June 21,
1984, and to mature December 20, 1984 (CUSIP No. 912794 GF 5 ) , and
45-day bills (to maturity date) for approximately $5,000
million, representing an additional amount of bills dated July 19,
1984, and to mature January 17, 1985 (CUSIP No. 912794 GO 1 ) .
Competitive tenders will be received at all Federal Reserve
Banks and Branches prior to 1:00 p.m., Eastern Standard time,
Thursday, November 29, 1984. Wire and telephone tenders may be
received at the discretion of each Federal Reserve Bank or Branch.
Each tender for the issue must be for a minimum amount of $1,000,000.
Tenders over $1,000,000 must be in multiples of $1,000,000. Tenders
must show the yield desired, expressed on a bank discount rate basis
with two decimals, e.g., 7.15%. Fractions must not be used.
Noncompetitive tenders from the public will not be accepted.
Tenders will not be received at the Department of the Treasury,
Washington.
The bills will be issued on a discount basis under competitive
bidding, and at maturity their par amount will be payable without
interest. The bills will be issued entirely in book-entry form in
a minimum denomination of $10,000 and in any higher $5,000 multiple,
on the records of the Federal Reserve Banks and Branches. Additional
amounts of the bills may be issued to Federal Reserve Banks as'agents
for foreign and international monetary authorities at the average
price of accepted competitive tenders.
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, futures,
R-2933
- 2 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.
No deposit need accompany tenders from incorporated banks
and trust companies and from responsible and recognized dealers
in investment securities. 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. Those
submitting tenders 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. 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.
Settlement for accepted tenders in accordance with the bids must
be made or completed at the Federal Reserve Bank or Branch in cash
or other immediately-available funds on Monday, December 3, 1984.
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, and this notice, prescribe the terms of
these Treasury bills and govern the conditions of their issue.
Copies of the circulars may be obtained from any Federal Reserve
Bank or Branch.
TREASURY NEWS
lepgirtment of the Treasury • Washington, D.C. • Telephone 566-2041
FOR IMMEDIATE RELEASE
November 27, 1984
SECRETARY REGAN STATEMENT AT TREASURY
As you know, this morning I presented to the President, the
Cabinet, and to leading members of Congress, Treasury's proposal
for making our tax system simpler, fairer and more economically
efficient. The President requested us to do this in his State of
the Union message last January.
As a result of our own experience at Treasury and the IRS, as
well as the public hearings that were held earlier this year,
there can be.no question in anyone's mind that the present tax
system in the U.S. is too complicated.
It's unfair, and it retards saving and investment and
economic growth. It must be changed.
At the outset let me underscore that our proposals will
result in the same amount of revenues as the current tax system,
but with lower rates imposed on a broader tax base. It is not, I
repeat not, a tax increase in disguise.
The first mandate from the President was to simplify the tax
system. What we have done by our changes is.to offer more
taxpayers the opportunity to use the simpler forms. And even if
form 1040 itself is used, taxpayers will find it simpler and more
comprehensible -- about 20% of the lines will be removed, the
accompanying schedules will be greatly simplified, and 14 of them
will be eliminated altogether. About 280 million hours are now
spent by Americans in preparing their returns. Our plan will cut
this by almost one third.
Most promising of all in our simplified tax system is that we
are developing the expertise in the IRS, by using modern
computers, so that in a few years approximately two out of three
American taxpayers will be able to have their returns
automatically prepared for them by the IRS. They will not have
to spend their own time, or energy, or pay others to prepare
their tax returns.
Our other mandates were to develop a tax system that was
fairer and more economically efficient. We do this by
eliminating many of the deductions, special credits and loopholes
that relatively few taxpayers have used so that all Americans can
benefit from substantially lower rates.
For individuals, we have proposed a simple 3 bracket system,
replacing the current 14 steps, with rates set at 15-25-35%.
Marginal tax rates would be reduced by an average of 20%.
Individual tax liabilities will be reduced by an average of 8.5%.
R29 34
-2We have proposed doubling the personal exemption to $2,000
for taxpayers, their spouses, and dependents.
We have proposed increasing the zero bracket amount (formerly
known as the standard deduction) to $2,800 for single returns and
$3,800 for joint returns.
By these measures we exempt from taxation families with
incomes below the poverty level. Tax liabilities of families in
the lowest income class will be cut by almost a third. ;
We recommend retaining indexing so that the American
taxpayers can be protected against the hidden taxes of inflation.
We have sought to see to it that all families with a given
income should pay approximately the same amount of tax.,
For business we are recommending a reduction of the corporate
tax rate to 33% from the current 46%.
We have also recommended a number of other changes in the
corporate tax system to see that one industry £s not favored over
another, yet keeping incentives so that business will be able to
contribute to the economy in the fullest measure possible.
Our plan will substantially curtail tax shelters, and we
think our recommendations will go a long way to assure the
average American that the other person is being taxed on the same
basis as he or she is.
Now let me just touch on a few points of great interest.
The home mortgage interest deduction is retained for
principal residences. And all other personal interest deductions
are retained but limited to $5,000 in excess of investment
income.
We retain the deduction for medical expenses, casualty
losses, social security exclusions, earned income credit and
corporate pensions.
We have retained the charitable contribution deduction when
contributions are in excess of 2% of Adjusted Gross Income.
We have folded
blind, as well
elderly, blind
will be better
the extra exemption for the elderly and the
as workers compensation, into a new credit for the
and disabled. Under our plan we project that they
off than under the current law.
-3We have retained the Individual Retirement Account and
increased it to $2,500 per worker including homemaker spouses.
This will allow a married couple to put aside $5,000 per year in
an IRA. At today's interest rates a couple taking maximum
advantage of the new rules will, in 15 years, have an additional
$100,000 accumulated for things like college tuition, retirement,
etc.
Let me conclude by saying that as a result of my own
experience in the private sector, and at Treasury, and after
carefully studying the responses of American taxpayers of all
types at our eight public hearings earlier in the year, I am
convinced that there is broad and growing support for fundamental
tax simplification and reform. I'm also convinced this support
transcends all economic and political boundaries. There is a
belief that our tax system is inherently unfair, unintelligible
and increasingly unworkable.
Now let me warn you that the first reactions will be from all
those special interest groups who will be scrambling to protect
their special tax breaks. They will focus on this recommendation
or that, and they will make it sound like calamity lies just
ahead if this plan goes forward. So let me point out to all
Americans there is only one way to understand what Treasury's
plan is all about — and that's to look at it in its entirety —
to consider it on an overall basis, to see what it does for the
vast majority of taxpayers. The only way we could get individual
and corporate rates substantially down for all, was to take away
the loopholes, deductions and special credits that now belong to
the few. That's the only path to real tax simplification and
reform.
We believe that our proposals are fair in that they treat
everyone alike. They're fair in that they will help the poor,
the disadvantaged, and the middle class. They're fair in that
they tell all Americans, rich and poor alike, that by their
efforts -- be it hard work, creativity or innovation — they can
make more money and keep most of it. And the same holds true for
businesses and industries that are successful without the benefit
of special tax breaks.
Under our proposal, more motivation will be provided for all
American workers, sayers, and investors. The economy should grow
somewhat faster than under current law, which will create more
jobs and a sustained, non-inflationary expansion.
I believe tax simplification and reform is an idea whose
time has come, and we look forward to working with members of the
Congress in a bipartisan effort to see that the United States has
a tax system that is equitable, comprehensible and promotes
economic growth.
rREASURY NEWS
partment of the Treasury • Washington, D.C. • Telephone 566-2041
FOR RELEASE AT 4:00 P.M.
TREASURY 'S WEEKLY BILL OFFERING
November 27, 1984
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 December 6, 1984.
This
offering will provide about $500
million of new cash for the
Treasury, as the maturing bills are outstanding in the amount of
$13,095 million, including $865
million currently held by Federal Reserve Banks as agents for foreign and international monetary
authorities and $3,231 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
September 6, 1984,
and to mature March 7, 1985
(CUSIP
No. 912794 GV 0), currently outstanding in the amount of $6,637
million, the additional and original bills to be freely
interchangeable.
182-day bills for approximately $6,800 million, to be dated
December 6, 1984,
and to mature June 6, 1985
(CUSIP
No. 912794 HF 4).
Both series of bills will be issued for cash and in exchange
for Treasury bills maturing December 6, 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-2935
- 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,
December 3, 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 wil be made on all accepted tenders for the
difference between th€ 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 December 6, 1984, in cash or other immediately-available funds
or in Treasury bills maturing December 6, 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.
PRE ASURY NEWS
lartment of the Treasury • Washington, D.C. • Telephone
FOR IMMEDIATE RELEASE
RESULTS OF TREASURY'S 52-WEEK BILL AUCTION
November 27, 1984
Tenders for $8,525 million of 52-week bills to be issued
November 29, 1984, and to mature November 29, 1985, were accepted
today. The details are as follows:
RANGE OF ACCEPTED COMPETITIVE BIDS:
Discount
Investment Rate
Rate
(Equivalent Coupon-Issue Yield) Price
Low
91.169
8.71%
9.46%
High
8.74%
9.50%
91.139
Average 8.74%
9.50%
91.139
Tenders at the high discount rate were allotted 85!
TENDERS RECEIVED AND ACCEPTED
(In Thousands)
Location
Received
Boston
$
406,565
New York
18,500,935
Philadelphia
5,330
Cleveland
11,325
Richmond
48,220
Atlanta
39,030
Chicago
1,348,430
St. Louis
43,500
Minneapolis
7,700
Kansas City
36,630
11,255
Dallas
San Francisco
993,570
66,020
Treasury
$21,518,510
TOTALS
Type
Competitive
Noncompetitive
Subtotal, Public
Federal Reserve
Foreign Official
Institutions
TOTALS
R-2936
Accepted
$
58,490
7,416,535
5,330
11,325
29,620
34,030
358,605
37,500
7,700
34,630
10,955
454,045
66,020
$8,524,785
$19,408,000
350,510
$19,758,510
1,700,000
$6,414,275
350,510
$6,764,785
1,700,000
60,000
$21,518,510
60,000
$8,524,785
rREASURY NEWS
apartment of the Treasury • Washington, D.C. • Telephone 566-2041
FOR IMMEDIATE RELEASE
November 28, 1984
RESULTS OF AUCTION OF 5-YEAR 2-MONTH DOMESTIC NOTES
The Department of the Treasury has accepted $6,757 million of
$18,977 million of tenders received from the public for the 5-year
2-month notes, Series G-1990, auctioned today. The notes will be
issued December 3, 1984, and mature February 15, 1990.
The interest rate on the notes will be 11%
1/. The range
of accepted competitive bids, and the corresponding prices at the
11 %
interest rate are as follows:
Yield
Price
Low
11.00%
99.887
High
11.03%
99.770
Average
11.02%
99.809
Tenders at the high yield were allotted 63%.
TENDERS RECEIVED AND ACCEPTED (In Thousands)
Location
Received
Accepted
Boston
295,401
$
28,481
$
New York
6,002,412
15,,995,687
Philadelphia
8,609
8,609
Cleveland
219,152
101,902
Richmond
45,642
32,572
Atlanta
74,206
46,991
Chicago
219,382
1,,354,315
St. Louis
106,839
89,839
Minneapolis
19,471
14,731
Kansas City
43,232
42,232
Dallas
5,687
3,687
San Francisco
806,996
163,546
Treasury
2,138
2,138
Totals
$18(r977,375
$6,756,522
The $6,757 million of accepted tenders includes $479
million
of noncompetitive tenders and $6,278 million of competitive tenders
from the public.
In addition to the $6,757 million of tenders accepted in the
auction process, $170 million of tenders was awarded at the average
price to Federal Reserve Banks as agents for foreign and international
monetary authorities.
1/ This interest rate, payable on an annual basis, will also be
applied to the 5-year 2-month foreign-targeted notes auctioned
today.
R-2937
FREASURY NEWS
apartment of the Treasury • Washington, D.C. • Telephone 566-2041
FOR IMMEDIATE RELEASE
November 28, 1984
RESULTS OF AUCTION OF 5-YEAR 2-MONTH FOREIGN-TARGETED NOTES
The Department of the Treasury has accepted a total of
$1,000,400 thousand of the $2,145,000 thousand of tenders received
from eligible bidders for the 5-year 2-month foreign-targeted
notes, Series H-1990, auctioned today. The notes will be issued
December 3, 1984, and mature February 15, 1990.
The interest rate on the notes will be 11% 1/ per annum,
payable annually. The range of accepted competitive bids and the
corresponding prices at the 11% interest rate are as follows:
Yield 2/ Price
Low
High
Average
11.15%
11.30%
11.25%
99.305
98.739
98.927
Tenders at the high yield were allotted 74%.
1/ Established in the auction of the companion domestic issue.
2/ Based on an annual interest payment.
R-2938
J_
FOR IMMEDIATE RELEASE
\
^:ws
November 29, 1984
FEDERAL FINANCING BANK ACTIVITY
Francis X. Cavanaugh, Secretary, Federal Financing
Bank (FFB), announced the following activity for the
month of October 1984.
FFB holdings of obligations issued, sold or guaranteed by other Federal agencies totaled $145.0 billion
on October 31, 1984, posting an increase of $0.1 billion
from the level on September 30, 1984. This $0.1 billion
net change was the result of increases in holdings of
agency-guaranteed debt and in holdings of agency debt
issues of $0.3 billion each and a reduction in holdings
of agency assets of $0.5 billion. FFB made 314 disbursements during the month.
Attached to this release are tables presenting FFB
October loan activity, new FFB commitments to lend
during October and FFB holdings as of October 31, 1984.
# 0 #
R-2939
FFB 566-2468
WASHINGTON, D.C. 20220
Press 566-2041
federal financing bank \
Page 2 of 8
FEDERAL FINANCING BANK
OCTOBER 1984 ACTIVITY
BORROWER
DATE
AMOUNT
OF ADVANCE
FINAL
MATURITY
INTEREST
RATE
(semiannual)
INTEREST
RATE
(other than
semi-annual)
ON-BUDGET AGENCY DEBT
TENNESSEE VALLEY AUTHORITY
Advance
Advance
Advance
Advance
Advance
Advance
Advance
Advance
Advance
Advance
#395
#396
#397
#398
#399
#400
#401
#402
#403
#404
10/1 $ 25,000,000.00
10/8
660,000,000.00
10/8
10,000,000.00
10/10
45,000,000.00
10/15
670,000,000.00
10,000,000.00
10/15
10/22
95,000,000.00
590,000,000.00
10/22
10/29
30,000,000.00
210,000,000.00
10/31
10/8/84
10/15/84
10/18/84
10/22/84
10/22/84
10/25/84
11/1/84
11/7/84
11/12/84
11/12/84
10.745%
10.665%
10.665%
10.605%
10.405%
10.405%
10.045%
10.045%
9.815%
9.665%
400,000.00
5,000,000.00
20,000,000.00
500,000.00
15,000,000.00
15,000,000.00
15,000,000.00
15,000,000.00
25,000,000.00
15,000,000.00
25,000,000.00
7,945,000.00
11/1/84
1/3/85
1/3/85
11/2/84
1/7/85
11/5/84
1/9/85
11/9/84
1/11/85
1/14/85
1/16/85
1/30/85
10.755%
10.775%
10.775%
10.795%
10.725%
10.695%
10.695%
10.605%
10.615%
10.425%
10.385%
9.785%
10/4
10/4
10/24
10/24
260,000,000.00
40,000,000.00
250,000,000.00
50,000,000.00
10/1/94
10/1/99
10/1/89
10/1/99
12.665%
12.615%
11.745%
11.875%
10/2
10/2
10/2
10/2
10/3
10/3
10/3
10/5
10/5
10/9
10/10
10/10
10/10
10/10
10/11
10/11
1,141,526.00
3,984,027.74
7,774,078.24
363,000.00
39,240.00
3,686,670.73
86,590.24
499,800.00
1,599,334.01
7,576,787.08
158,236.87
438,953.00
206,366.50
48,221,000.00
118,442.64
279,807.40
9/15/93
7/10/94
9/10/95
3/20/96
3/10/91
4/15/14
7/15/92
11/12/95
3/24/12
7/10/14
6/10/96
11/15/92
5/25/91
1/15/96
3/10/91
9/10/95
12.695%
12.689%
12.640%
12.625%
12.515%
12.608%
12.135%
12.695%
12.525%
12.355%
12.555%
11.095%
12.435%
12.484%
12.405%
12.487%
NATIONAL CREDIT UNION ADMINISTRATION
Central Liquidity Facility
+Note
+Note
+Note
+Note
+Note
+Note
Note
Note
+Note
+Note
•Note
+Note
#260
#261
#262
#263
#264
#265
#266
#267
#268
#269
#270
#271
10/2
10/2
10/2
10/3
10/4
10/5
10/9
10/10
10/11
10/15
10/18
10/30
AGENCY ASSETS
FARMERS HOME ADMINISTRATION
Certificates of Beneficial Ownership
GOVERNMENT - GUARANTEED LOANS
DEPARTMENT OF DEFENSE
Foreign Military Sales
Thailand 9
Thailand 10
Thailand 11
Thailand 12
Botswana 3
Egypt 6
Philippines 10
Bolivia 2
Turkey 13
Israel 16
El Salvador 7
Jordan 11
Cman 6
Pakistan 5
Botswana 3
Morocco 11
+rollover
13.066%
13.013%
12.090%
12.228%
arm.
ann.
ann.
ann.
» g e 3 of S
FEDERAL FINANCING BANK
OCTOBER 1984 ACTIVITY
BORROWER
DATE
AMOUNT
OF ADVANCE
FINAL
MATURITY
INTEREST
RATE
(semiannual)
INTEREST
RATE
(other than
semi-«nnual)
Foregin Military Sales (Cont'd)
Morocco 12
Peru 10
Somalia 4
Spain 4
Morocco 12
Egypt 6
Peru 10
Bolivia 2
Egypt 6
Israel 16
Greece 14
Greece 15
El Salvador 7
Philippines 10
Thailand 11
Somalia 4
Spain 7
Turkey 17
Turkey 13
Zaire 4
Turkey 14
Korea 18
Bolivia 2
Greece 14
Jordan 10
Jordan 12
Liberia 10
Jordan 10
Peru 10
Spain 7
Spain 8
9/21/95
4/10/96
11/30/12
4/25/90
9/21/95
4/15/14
4/10/96
11/22/95
4/15/14
7/10/14
4/30/11
6/15/12
6/10/96
7/15/92
9/10/95
11/30/12
7/15/95
11/30/13
3/24/12
9/14/95
11/30/12
12/31/95
11/22/95
4/30/11
3/10/92
2/5/95
5/15/95
3/10/92
4/10/96
7/15/95
3/25/96
12.505%
12.458%
12.326%
12.485%
12.442%
12.335%
12.392%
12.505%
12.395%
12.275%
12.245%
12.405%
12.200%
11.680%
12.125%
11.895%
12.055%
12.055%
11.815%
11.710%
11.765%
11.955%
12.105%
11.985%
10.717%
11.755%
12.115%
10.945%
11.796%
11.874%
11.192%
4/1/85
4/1/85
10.970%
10.970%
118,000,000.00
117,500,000.00
10,000,000.00
119,500,000.00
16,500,000.00
4,000,000.00
9,000,000.00
1/2/85
4/1/85
7/1/85
10/1/85
7/1/85
10/1/85
10/1/85
11.455%
10.865%
12.005%
12.205%
12.005%
11.995%
11.195%
1,700,000.00
300,000.00
225,000.00
1,800,000.00
1,465,320.00
254,117.00
2,577,689.54
100,000.00
10/1/90
10/1/90
10/1/89
10/1/90
8/15/86
7/15/85
9/1/85
5/1/86
12.512%
12.512%
12.415%
12.512%
11.955%
11.195%
11.295%
11.815%
10/11
10/11
10/11
10/11
10/12
10/15
10/15
10/16
10/16
10/17
10/18
10/18
10/19
10/19
10/19
10/22
10/22
10/22
10/24
10/24
10/25
10/26
10/29
10/29
10/29
10/29
10/29
10/30
10/30
10/31
10/31
$ 5,800.00
1,512,370.00
22,972.62
40,760.01
891,402.00
499,769.36
679,956.00
499,800.00
18,120.00
8,591,732.43
4,858,245.16
1,985,642.58
1,446,568.63
1,979,795.80
1,313,482.77
30,283.06
41,268,000.00
6,250.00
13,278,309.70
250,000.00
1,087,452.00
414,000.00
295,276.00
404,822.50
177,473.00
51,974.00
148,814.99
19,360.93
24,774.00
51,306,060.00
52,040,742.46
10/16
10/16
1,327,000.00
3,615,000.00
DEPARTMENT OF ENERGY
Geothermal Loan Guarantees
Niland Geothermal, Inc.
NPN Partnership
10.824% qtr.
10.824% qtr.
Synthetic Fuels Guarantees - Non-Nuclear Act
Great Plains
Gasification Assoc.
#123A
#123B
#123C
#123D
#123E
#124
#125
10/1
10/1
10/1
10/1
10/1
10/15
10/29
DEPARTMENT OF HOUSING & URBAN DEVELOPMENT
Community Development
•Baldwin Park, CA
*Bridgeton, NJ
•Lincoln, NE
•Prince Georges, MD
Santa Ana, CA
Dade County, FL
Detroit, MI
Hammond, IN
•maturity extension
10/1
10/1
10/1
10/1
10/10
10/11
10/11
10/11
12.903%
12.903%
12.800%
12.903%
12.312%
11.410%
11.574%
12.164%
ann
ann
ann
ann
ann
ann
ann
ann
Page 4 of 8
FEDERAL FINANCING BANK
OCTOBER 1984 ACTIVITY
BORROWER
DATE
FINAL
MATURITY
INTEREST
RATE
(semiannual)
400,000.00
12,817.80
800,000.00
650,000.00
175,000.00
30,000.00
1,000,000.00
33,959.05
291,300.00
869,540.62
175,500.00
600,000.00
11/1/84
6/1/85
2/1/85
8/1/85
7/1/03
12/1/85
2/15/86
2/1/85
8/15/86
8/15/85
5/1/85
2/1/85
10.485%
11.015%
10.585%
11.105%
11.855%
10.635%
10.775%
9.675%
11.145%
10.345%
10.095%
9.675%
168,316.18
10/1/92
11.742%
AMOUNT
OF ADVANCE
INTEREST
RATE
(other than
semi-annual)
Community Development (Cont'd)
Bell Gardens, CA
Kenosha, WI
Louisviile, KY
Provo, UT
Albany, NY
St. Petersburg, FL
St. Louis, MO
Sacramento, CA
Santa Ana, CA
Simi Valley, CA
Somerville, MA
Louisville, KY
10/12
10/12
10/16
10/16
10/24
10/24
10/26
10/26
10/26
10/26
10/26
10/26
$
11.145% ann.
11.334%
12.206%
10.918%
11.065%
ann.
ann.
ann.
ann.
11.456% ann.
10.548% ann.
10.111% ann.
DEPARTMENT OF THE NAVY
Defense Production Act
Gila River Indian Community
10/31
11.575% qtr,
RURAL ELECTRIFICATION ADMINISTRATION
[ON
Arkansas Electric #142
Big Rivers Electric #136
Big Rivers Electric #179
Wolverine Power #274
New Hampshire Electric #270
N.E. Texas Electric #280
Kansas Electric #216
Saluda River Electric #271
•Big Rivers Electric #179
•Arkansas Electric #97
•Arkansas Electric #142
•Arkansas Electric #142
•Arkansas Electric #221
•Tex-La Electric #208
•Saluda River Electric #186
•Wolverine Power #101
•Basin Electric #87
•Allegheny Electric #175
•Allegheny Electric #175
•Allegheny Electric #175
•Allegheny Electric #175
•Wabash Valley Power #104
•Wabash Valley Power #206
•South Mississippi Electric #171
•Deseret G&T #211
•Big Rivers Electric #91
•Big Rivers Electric #91
•North Carolina Electric #185
•Southern Illinois Power #38
•Basin Electric #87
•San Miguel Electric #110
Wabash Valley Power #206
•Dairyland Power #54
Arkansas Electric #142
Arkansas Electric #271
•Hoosier Energy #107
•Sunflower Electric #174
•Wabash Valley Power #104
•Wabash Valley Power #206
•Wolverineextension
Power #233
•maturity
•Wolverine Power #234
•Wolverine Power #101
•Wolverine Power #107
•Basin Electric #137
10/1
10/1
10/1
10/1
10/1
10/1
10/1
10/1
10/1
10/1
10/1
10/1
10/1
10/1
10/1
10/1
10/1
10/1
10/1
10/1
10/1
10/1
10/1
10/1
10/1
10/1
10/1
10/1
10/1
10/1
10/1
10/3
10/3
10/4
10/4
10/9
10/9
10/9
10/9
10/9
10/9
10/10
10/12
10/12
2,057,000.00
1,961,000.00
24,250,000.00
19,346,000.00
1,834,000.00
2,039,000.00
5,535,000.00
9,400,000.00
9,862,000.00
42,000.00
3,980,000.00
1,722,000.00
11,508,000.00
3,160,000.00
8,892,000.00
2,231,000.00
205,951.46
5,783,000.00
7,269,000.00
6,136,000.00
10,661,000.00
8,704,000.00
422,000.00
12,225,000.00
32,490,000.00
2,758,000.00
1,091,000.00
26,305,000.00
3,000,000.00
835,000.00
5,224,000.00
186,000.00
2,000,000.00
10,109,000.00
7,204,000.00
30,000,000.00
2,000,000.00
8,809,000.00
1,511,000.00
18,236,000.00
26,598,000.00
786,000.00
3,864,000.00
25,000,000.00
10/1/86
12.205%
12/31/86 12.265%
12/31/86 12.265%
12/31/86 12.262%
12/31/86 12.265%
12/31/86 12.262%
12/31/86 12.265%
12/31/86 12.265%
12/31/84 10.775%
10.975%
1/31/85
10.975%
1/31/85
10.975%
1/31/85
10.975%
1/31/85
12.205%
10/1/86
10/1/86
12.205%
10/1/86
12.205%
12.205%
10/1/86
10/1/86
12.205%
10/1/86
12.205%
10/1/86
12.205%
10/1/86
12.205%
12.205%
10/1/86
10/1/86
12.205%
10/1/86
12.205%
10/2/86
12.205%
12/31/86 12.265%
12/31/86 12.265%
12/31/86 12.265%
12/31/86 12.256%
9/30/87
12.415%
9/30/87
12.415%
10/3/86
12.195%
10/3/86
12.195%
10/6/86
12.195%
10/6/86
12.195%
10/9/86
12.065%
10/9/86
12.065%
10/9/86
12.065%
10/9/86
12.065%
10/9/86
12.065%
10/9/86
12.065%
10/10/86 11.995%
10/14/86 11.925%
5/12/87
12.065%
12.024%
12.083%
12.083%
12.080%
12.083%
12.080%
12.083%
12.083%
10.634%
10.900%
10.900%
10.900%
10.900%
12.024%
12.024%
12.024%
12.024%
12.024%
12.024%
12.024%
12.024%
12.024%
12.024%
12.024%
12.024%
12.083%
12.083%
12.083%
12.074%
12.228%
12.228%
12.015%
12.015%
12.015%
12.015%
11.888%
11.888%
11.888%
11.888%
11.888%
11.888%
11.820%
11.752%
11.888%
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
qtr
qtr
qtr
qtr
Page 5 of 8
FEDERAL FINANCING BANK
OCTOBER 1984 ACTIVITY
BORROWER
AMOUNT
OF ADVANCE
DATE
FINAL
MATURITY
INTEREST
RATE
(semiannual)
INTEREST
RATE
(other than
semi-annual)
RURAL ELECTRIFICATION ADMINISTRATION (Cont'd)
10/15
•Brazos Electric #108
•Brazos Electric #144
10/15
•Central Electric #131
10/15
10/15
•Oglethorpe Power #74
10/15
•Oglethorpe Power #150
N.E. Texas Electric #280
10/15
10/15
Deseret G&T #211
•Seminole Electric #141
10/16
10/17
New Hampshire Electric #270
10/19
•Basin Electric #87
10/19
•Central Iowa Power #155
South Mississippi Electric #90 10/22
10/22
Central Electric #131
10/22
•Basin Electric #137
10/22
•Seminole Electric #141
10/22
•Brazos Electric #108
10/22
•Brazos Electric #230
10/22
•Sugar Land Telephone #69
10/22
•Deseret G&T #211
10/22
•South Mississippi Electric #3
10/22
•Big Rivers Electric #65
10/22
•Big Rivers Electric #91
10/22
•Big Rivers Electric #136
10/22
•Big Rivers Electric #136
10/22
•Big Rivers Electric #143
10/22
•Big Rivers Electric #143
10/22
Big Rivers Electric #179
10/23
Washington Electric #269
10/24
French Broad Electric #245
10/24
Sugar Land Telephone #210
10/25
Kansas Electric #216
10/25
Cont. Tele, of Kentucky #254
10/25
Oglethorpe Power #246
10/25
•Wabash Valley Power #206
10/25
•Basin Electric #131
10/25
•Wolverine Power #233
10/26
North Carolina Electric #268
10/26
Brazos Electric #230
10/26
Old Dominion Electric #267
10/29
•Basin Electric #137
10/29
•Colorado Ute Electric #203
10/29
•North Carolina Electric #185
10/29
•Ponderosa Telephone #35
10/30
New Hampshire Electric #270
10/31
Kamo Electric #266
10/31
Arkansas Electric #142
10/31
•Allegheny Electric #93
$
2,626,000.00
951,000.00
60,000.00
12,990,000.00
16,204,000.00
310,000.00
7,210,000.00
3,352,000.00
461,000.00
12,594,216.93
4,000,000.00
537,000.00
78,000.00
20,000,000.00
18,172,000.00
480,000.00
2,333,000.00
1,000,000.00
13,752,000.00
120,000.00
28,000.00
898,000.00
193,000.00
97,000.00
136,000.00
618,000.00
17,600,000.00
2,180,000.00
151,000.00
688,000.00
1,719,000.00
2,000,000.00
17,443,000.00
140,000.00
23,710,000.00
498,000.00
7,462,000.00
271,000.00
1,294,000.00
20,000,000.00
2,019,000.00
7,000,000.00
395,000.00
132,000.00
2,075,000.00
1,934,000.00
2,024,000.00
10/15/86
10/15/86
10/15/86
10/15/86
10/15/86
12/31/86
10/15/86
10/16/86
12/31/86
5/19/87
12/31/18
12/31/86
10/22/86
10/22/86
10/22/86
10/22/86
10/22/86
10/22/86
10/23/86
12/31/86
12/31/86
12/31/86
12/31/86
12/31/86
12/31/86
12/31/86
12/31/84
12/31/86
10/24/86
10/24/86
12/31/86
10/25/86
10/25/86
10/25/86
10/27/86
10/27/86
12/31/86
10/26/86
12/31/86
10/29/86
10/29/86
12/31/86
10/29/86
12/31/86
12/31/86
1/31/85
12/31/86
11.845%
11.845%
11.845%
11.845%
11.845%
11.901%
11.845%
11.905%
11.955%
11.795%
12.027%
11.564%
11.515%
11.515%
11.515%
11.515%
11.515%
11.515%
11.515%
11.564%
11.585%
11.585%
11.585%
11.585%
11.585%
11.585%
10.045%
11.550%
11.295%
11.295%
11.315%
11.235%
11.235%
11.235%
11.235%
11.235%
11.355%
11.255%
11.343%
11.465%
11.465%
11.555%
11.465%
11.525%
11.322%
9.665%
11.310%
10/1/99
10/1/99
10/1/99
10/1/99
10/1/99
10/1/99
10/1/99
10/1/99
10/1/99
10/1/99
10/1/99
10/1/99
12.488%
12.488%
12.488%
12.488%
12.488%
12.488%
12.488%
12.4R8%
12.488%
12.488%
12.488%
12.488%
SMALL BUSINESS ADMINISTRATION
State & Local Development Company Debentures
10/10
St. Louis Local Dev. Corp.
Clark County Dev. Corp.
10/10
Rural Enterprises, Inc.
10/10
S. Cen. 111. Reg. Plan. Dev. Co. 10/10
10/10
Western Virginia Dev. Co.
10/10
Bus. Dev. Corp. of Nebraska
N.E. Louisiana Ind., Inc.
10/10
Tucson Local Dev. Corp.
10/10
CSRA Local Dev. Corp.
10/10
111. Sn. Bus. Growth Corp.
10/10
N.E. Counties of Oklahoma E.D.C. 10/10
Columbus Countywide Dev. Corp. 10/10
•maturity extension
31,000.00
36,000.00
39,000.00
46,000.00
63,000.00
80,000.00
84,000.00
107,000.00
121,000.00
131,000.00
137,000.00
139,000.00
11.675%
11.675%
11.675%
11.675%
11.675%
11.729%
11.675%
11.733%
11.781%
11.626%
11.851%
11.402%
11.354%
11.354%
11.354%
11.354%
11.354%
11.354%
11.354%
11.402%
11.422%
11.422%
11.422%
11.422%
11.422%
11.422%
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.
11.388%
11.140%
11.140%
11.159%
11.082%
11.082%
11.082%
11.082%
11.082%
11.198%
11.102%
11.187%
11.305%
11.305%
11.393%
11.305%
11.364%
11.166%
9.613%
11.154%
qtr.
qtr.
qtr.
qtr.
qtr.
qtr.
qtr.
qtr.
qtr.
qtr.
qtr.
qtr.
qtr.
qtr.
qtr.
qtr.
qtr.
qtr.
qtr.
qtr.
Page 6 of 8
FEDERAL FINANCING BANK
OCTOBER 1984 ACTIVITY
BORROWER
DATE
AMOUNT
OF ADVANCE
FINAL
MATURITY
INTEREST
INTEREST
RATE
RATE
(other than
(semisemi-annual)
annual)
State & Local Development Company Debentures (Cont'd)
Concord Regional Dev. Corp. 10/10 $ 147,000.00 10/1/99
Clark County Dev. Corp.
10/10
158,000.00
Arvin Development Corp.
10/10
168,000.00
N.W. Arkansas Certified Dev. Co.10/10
173,000.00
Florida 1st Cap. Fin. Corp., Incl0/10
288,000.00
C.D.C. of Warren County, Inc.
10/10
294,000.00
Arvin Development Corporation
10/10
369,000.00
East-Central Idaho Dev. Co.
10/10
440,000.00
Dev. Corp. of Middle Georgia
10/10
462,000.00
S.W. 111. Areawide B.D.F. Corp. 10/10
500,000.00
Nine County Dev., Inc.
10/10
30,000.00
Enterprise Development Corp.
10/10
36,000.00
McPherson County S.B.D. Assoc. 10/10
50,000.00
First District Development Co. 10/10
54,000.00
San Diego County L.D.C.
10/10
54,000.00
Indiana Statewide C.D.C.
10/10
63,000.00
Hamilton County Dev. Co., Inc. 10/10
67,000.00
Sowega Economic Dev. Corp.
10/10
68,000.00
Middle Flint Area Dev. Corp.
10/10
72,000.00
C.D.C. of Butler County, Inc.
10/10
73,000.00
Metro Sm. Business Asst. Corp. 10/10
84,000.00
Dev. Corp. of Middle Georgia
10/10
88,000.00
CSRA Local Development Corp.
10/10
100,000.00
The St. Louis Local Dev. Corp. 10/10
105,000.00
Greater Salt Lake Bus. District 10/10
106,000.00
Northern Hills Ccmm. Dev., Inc. 10/10
109,000.00
Gr. S.W. Kansas Cert. Dev. Co. 10/10
115,000.00
Long Island Development Corp.
10/10
120,000.00
Birmingham City Wide L.D.C.
10/10
126,000.00
Empire State Cert. Dev. Corp.
10/10
130,000.00
McPherson County Sm. B.D.A.
10/10
135,000.00
San Diego County L.D.C.
10/10
139,000.00
Parkersburg-Wood County A.D.C. 10/10
167,000.00
Houston-Galveston Area L.D.C.
10/10
168,000.00
Wisconsin Bus. Dev. Fin. Corp. 10/10
168,000.00
Long Island Development Corp.
10/10
175,000.00
N. Texas Certified Dev. Corp.
10/10
185,000.00
Ocean State Bus. Dev. Auth., Incl0/10
193,000.00
Texas Certified Dev. Co., Inc. 10/10
212,000.00
Eau Claire County E.D.C.
10/10
225,000.00
Dallas Sm. Business Corp., Inc. 10/10
226,000.00
Opportunities Minnesota Inc.
10/10
239,000.00
Iowa Business Growth Company
10/10
242,000.00
Wisconsin Bus. Dev. Fin. Corp. 10/10
263,000.00
No. Virginia L.D.C, Inc.
10/10
268,000.00
Rural Missouri, Inc.
10/10
271,000.00
Metroaction
10/10
315,000.00
Long Island Dev. Corp.
10/10
330,000.00
Bay Area Employment Dev.
10/10
354,000.00
Wisconsin Bus. Dev. Fin. Corp. 10/10
357,000.00
The Mid-Atlantic Cert. Dev. Co. 10/10
359,000.00
Louisiana 1st Cert. Dev. Corp. 10/10
364,000.00
Long Island Development Corp.
10/10
374,000.00
CANDO City-Wide Dev. Corp.
10/10
395,000.00
Rural Enterprise, Inc.
10/10
467,000.00
Wisconsin Bus. Dev. Fin. Corp. 10/10
500,000.00
Brownsville Local Dev. Co., Inc.10/10
500,000.00
San Diego County Loc. Dev. Corp.10/10
500,000.00
New River Valley Dev. Corp.
10/10
500,000.00
Evergreen Catmunity Dev. Assoc. 1 0 A 0
500,000.00
Columbus Countywide Dev. Corp. 10/10
30,000.00
Richmond Renaissance Dev. Corp. 10/10
47,000.00
San Diego County Loc. Dev. Corp.10/10
57,000.00
Columbus Countywide Dev. Corp. 10/10
61,000.00
10/1/99
10/1/99
10/1/99
10/1/99
10/1/99
10/1/99
10/1/99
10/1/99
10/1/99
10/1/04
10/1/04
10/1/04
10/1/04
10/1/04
10/1/04
10/1/04
10/1/04
10/1/04
10/1/04
10/1/04
10/1/04
10/1/04
10/1/04
10/1/04
10/1/04
10/1/04
10/1/04
10/1/04
10/1/04
10/1/04
10/1/04
10/1/04
10/1/04
10/1/04
10/1/04
10/1/04
10/1/04
10/1/04
10/1/04
10/1/04
10/1/04
10/1/04
10/1/04
10/1/04
10/1/04
10/1/04
10/1/04
10/1/04
10/1/04
10/1/04
10/1/04
10/1/04
10/1/04
10/1/04
10/1/04
10/1/04
10/1/04
10/1/04
10/1/04
10/1/09
10/1/09
10/1/09
10/1/09
12.488%
12.488%
12.488%
12.488%
12.488%
12.488%
12.488%
12.488%
12.488%
12.488%
12.462%
12.462%
12.462%
12.462%
12.462%
12.462%
12.462%
12.462%
12.462%
12.462%
12.462%
12.462%
12.462%
12.462%
12.462%
12.462%
12.462%
12.462%
12.462%
12.462%
12.462%
12.462%
12.462%
12.462%
12.462%
12.462%
12.462%
12.462%
12.462%
12.462%
12.462%
12.462%
12.462%
12.462%
12.462%
12.462%
12.462%
12.462%
12.462%
12.462%
12.462%
12.462%
12.462%
12.462%
12.462%
12.462%
12.462%
12.462%
12.462%
12.462%
12.424%
12.424%
12.424%
12.424%
Page "7 Of 8
FEDERAL FINANCING BANK
OCTOBER 1984 ACTIVITY
DATE
BORROWER
FINAL
MATURITY
AMOUNT
OF ADVANCE
INTEREST
RATE
(semiannual)
INTEREST
RATE
(other than
semi-annual)
State & Local Development Company Debentures (Cont'd)
Jeffcorp Development Company 10/10 $ 65,000.00
St. Paul 503 Dev. Co.
10/10
79,000.00
Clay County Dev. Corp.
10/10
92,000.00
City-Wide Sm. Bus. Dev. Corp.
10/10
95,000.00
The New Haven Coram. Inv. Corp. 10/10
105,000.00
Warren Redev. & Plan. Corp.
10/10
113,000.00
Evergreen Com. Dev. Assoc.
10/10
131,000.00
Ark-Tex Reg. Dev. Co., Inc.
10/10
139,000.00
The St. Louis County L.D.C.
10/10
149,000.00
San Diego County L.D.C.
10/10
160,000.00
Arizona Enterprise Dev. Corp.
10/10
165,000.00
San Diego County L.D.C.
10/10
- 181,000.00
Texas Cert. Dev. Company, Inc. 10/10
192,000.00
Milwaukee Economic Dev. Corp.
10/10
234,000.00
Columbus Countywide Dev. Corp. 10/10
265,000.00
Scioto Economic Dev. Corp.
10/10
280,000.00
Wisconsin Bus. Dev. Fin. Corp. 10/10
283,000.00
The Mid-America Cert. Dev. Co. 10/10
300,000.00
Evergreen Coram. Dev. Assoc.
10/10
346,000.00
Evergreen Ccmm. Dev. Assoc.
10/10
348,000.00
Bay Area Bus. Dev. Co.
10/10
380,000.00
Wilmington Industrial Dev., Inc.10/10
430,000.00
San Diego County L.D.C.
10/10
479,000.00
Ark-Tex Reg. Dev. Co., Inc.
10/10
500,000.00
Centralina Dev. Corp., Inc.
10/10
500,000.00
10/1/09
10/1/09
10/1/09
10/1/09
10/1/09
10/1/09
10/1/09
10/1/09
10/1/09
10/1/09
10/1/09
10/1/09
10/1/09
10/1/09
10/1/09
10/1/09
10/1/09
10/1/09
10/1/09
10/1/09
10/1/09
10/1/09
10/1/09
10/1/09
10/1/09
12.424%
12.424%
12.424%
12.424%
12.424%
12.424%
12.424%
12.424%
12.424%
12.424%
12.424%
12.424%
12.424%
12.424%
12.424%
12.424%
12.424%
12.424%
12.424%
12.424%
12.424%
12.424%
12.424%
12.424%
12.424%
Small Business Investment Company Debentures
Albuquerque Sm. Bus. Inv. Co.
Enterprise Capital Corporation
Tappan Zee Capital Corporation
Enterprise Capital Corporation
Falcon Capital Corporation
Federated Capital Corporation
Heritage Venture Group
Western Financial Capital Corp.
James River Capital Associates
Mesirow Capital Corporation
Mighty Capital Corporation
Ouestech Capital Corporation
RIHT Capital Corporation
Retzloff Capital Corporation
SBI Capital Corporation
Wood River Capital Corporation
10/24
10/24
10/24
10/24
10/24
10/24
10/24
10/24
10/24
10/24
10/24
10/24
10/24
10/24
10/24
10/24
250,000.00
1,000,000.00
300,000.00
960,000.00
500,000.00
150,000.00
500,000.00
1,000,000.00
500,000.00
1,000,000.00
500,000.00
1,000,000.00
1,000,000.00
2,000,000.00
1,500,000.00
9,000,000.00
10/1/87
10/1/87
10/1/87
10/1/89
10/1/89
10/1/89
10/1/89
10/1/89
10/1/94
10/1/94
10/1/94
10/1/94
10/1/94
10/1/94
10/1/94
10/1/94
11.745%
11.745%
11.745%
11.945%
11.945%
11.945%
11.945%
11.945%
12.025%
12.025%
12.025%
12.025%
12.025%
12.025%
12.025%
12.025%
10/31
513,707,558.05
1/31/85
9.785%
TENNESSEE VALLEY AUTHORITY
Seven States Energy Corporation
Note A-85-01
FEDERAL FINANCING BANK
October 1984 Commitments
BORROWER
GUARANTOR
Santa Ana, CA
Westland, MI
HUD
HUD
AMOUNT
$
13., 500,000.00
650,000.00
EXPIRES
MATURITY
8/16/86
10/1/85
8/16/86
10/1/85
FEDERAL TNANCING BANK HOLDINGS
(in millions)
Program
Page 8 of 8
Net Change
10/1/84-10/31/84
October 31, 1984
September 30, 1984
$ 13,725.0
15,689.8
263.8
$ 13,435.0
15,689.8
268.9
$ 290.0
1,087.0
51.3
1,087.0
51.3
-0-0-
59,021.0
116.1
132.0
11.0
3,536.7
39.4
59,511.0
116.1
132.0
11.0
3,536.7
40.1
-490.0
17,337.3
5,000.0
11.2
1,319.5
217.5
33.5
2,178.5
413.3
36.0
28.7
902.3
3.3
20,693.7
872.8
375.0
1,545.6
159.6
177.0
17,110.9
5,000.0
226.4
On-Budget Agency Debt
Tennessee Valley Authority
Export-Import Bank
NCUA-Central Liquidity Facility
-0-5.1
Off-Budget Agency Debt
U.S. Postal Service
U.S. Railway Association
Agency Assets
Farmers Home Administration
DHHS-Health Maintenance Org.
DHHS-Medical Facilities
Overseas Private Investment Corp.
Rural Electrification Admin.-CEO
Small Business Administration
-0-0-0-0-.7
Government-Guaranteed Lending
DOD-Foreign Military Sales
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-Section 511
DOT-WMATA
TOTALS4 $ 144,978.0
•figures may not total due to rounding
6.2
1,290.0
208.3
33.5
2,178.5
413.3
36.0
28.7
954.6
-04.9
29.5
9.2
-0-0-0-0-0-52.3
3.1
0.2
20,587.1
860.3
354.6
1,555.5
159.6
177.0
106.6
12.6
20.4
-9.9
$ 144,836.2
$ 141.8
-0-0-
FREASURY NEWS
apartment of the Treasury • Washington, D.C. • Telephone 566-2041
FOR IMMEDIATE RELEASE
November 29, 1984
RESULTS OF TREASURY'S AUCTION OF 17-DAY AND 45-DAY
CASH MANAGEMENT BILLS
Tenders for $5,013 million of 17-day Treasury bills and for $5,007
million of 45-day Treasury bills, both to be issued on December 3, 1984, were
accepted at the Federal Reserve Banks today. The details are as follows:
RANGE OF ACCEPTED 17-day bills 45-day bills
COMPETITIVE BIDS
maturing December 20, 1984
Discount Investment
Rate
Rate 1/
Price
Low
High
Average
8.42%
8.49%
8.45%
8.58%
8.64%
8.60%
99.602
99.599
99.601
:
maturing January 17, 1985
: Discount Investment
:
Rate
Rate 1/
Price
8.24%
8.26%
8.25%
8.44%
8.46%
8.45%
98.970
98.968
98.969
Tenders at the high discount rate for the 17-day bills were allotted 40%.
Tenders at the high discount rate for the 45-day bills were allotted 53%.
TOTAL TENDERS RECEIVED AND ACCEPTED
BY FEDERAL RESERVE DISTRICTS
(In Thousands)
Accepted
Received
Received
Location
Boston
New York
Philadelphia
Cleveland
Richmond
Atlanta
Chicago
St. Louis
Minneapolis
Kansas City
Dallas
San Francisco
TOTALS
$
503,000
19,368,000
$
500,000
19,291,000
$5,007,000
—
35,000
1,000
45,000
—
1,114,000
52,000
732,000
—
—
20,000
20,000
—
846,000
50,000
$21,887,000
$5,013,000
1/ Equivalent coupon-issue yield.
R-2940
$ 40,000
4,871,000
Accepted
1,375,000
$21,963,000
$5,007,000
TREASURY NEWS
spartment of the Treasury • Washington, D.C. • Telephone 566-2041
FOR IMMEDIATE RELEASE
Contact: Bob Levine
Dec. 3, 1984 (202) 566-2041
U. S. BRIDGE LOAN FOR ARGENTINA
The Treasury Department announced today that it has entered
into an arrangement to provide short-term bridge financing
through the Exchange Stabilization Fund totaling $500 million in
support of the economic program of Argentina which has been
agreed with the management of the International Monetary Fund
(IMF). In this connection, it is expected that Argentina will be
eligible shortly for balance of payments financing from the IMF
under a new standby arrangement and the Compensatory Financing
Facility (CFF) upon approval by the Executive Board.
The Treasury Department's bridge financing will be made
available when the IMF Managing Director: (a) formally submits
the Argentine requests for a standby arrangement and a purchase
under the CFF to the IMF Executive Board; and (b) confirms that
he has received firm assurances that adequate financing will be
available in support of the Argentine economic program.
R-2941
"REASURY NEWS
artment of the Treasury • Washington, D.c. • Telephone 566-2041
EMBARGOED UNTIL 2:00 p.m.
December 3, 1984
Contact:
Roger Bolton
Art Siddon
(202) 566-5252
Charlie Powers
(202) 566-2041
TREASURY RELEASES VOLUME II OF TAX REFORM
AND SIMPLIFICATION STUDY
The Treasury Department today released Volume II of its
report to the President on tax reform for fairness and simplicity
and economic growth.
This Volume contains details that were not contained in
Volume I. It includes the depreciation tables and other
information that businesses and individuals can use to assess
their tax liabilities under the Treasury's plan.
Treasury Secretary Donald T. Regan said, "Businesses, and
other groups, will now have the details from which they can
calculate how our proposals will affect them. We hope that they
will make these calculations for their industry and for their
companies and share them with us. As I have said before, once
these calculations are made, we will have a basis of fact, not
just assertion, to discuss our plan. We will take cognizance of
the comments of those who will be affected by it".
R-2942
rREASURYNEWS
partment of the Treasury • Washington, D.C. • Telephone 566-2041
December 3, 1984
FOR IMMEDIATE RELEASE
RESULTS OF TREASURY'S WEEKLY BILL AUCTIONS
Tenders for $6,804 million of 13-week bills and for $6,804 million
of 26-week bills, both to be issued on December 6, 1984, were accepted today.
RANGE OF ACCEPTED
COMPETITIVE BIDS:
13-week bills
maturing March 7, 1985
Discount Investment
Price
Rate
Rate 1/
26-week bills
maturing
June 6, 1985
Discount Investment
Price
Rate
Rate 1/
Low
8.47% a/
8.78%
97.859 :
8.65% b/
9.17%
95.627
High
8.55%
8.86%
97.839 :
8.68%
9.20%
95.612
Average
8.52%
8.83%
97.846 :
8.67%
9.19%
95.617
a/ Excepting 2 tenders totaling $3,260,000.
b/ Excepting 1 tender of $4,000,000.
Tenders at the high discount rate for the 13-week bills were allotted 26%.
Tenders at the high discount rate for the 26-week bills were allotted 11%.
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
398,140
12,501,850
23,365
115,305
37,785
53,340
1,096,475
58,015
35,500
50,850
39,750
831,195
295,940
$ 157,640
5,076,850
23,365
100,505
37,785
53,340
446,235
43,015
17,000
50,850
39,750
461,955
295,940
'! $
419,450
!1 15,793,725
!!
19,515
!
64,265
:!
50,775
•
32,600
::
1,305,645
i
64,130
ii
19,605
i
69,380
i
26,325
!:
1,454,425
:
353,530
$
29,450
5,781,755
19,515
44,265
34,995
30,710
334,025
25,230
9,605
64,400
16,875
59,585
353,530
$15,537,510
$6,804,230
: $19,673,370
$6,803,940
$12,648,740
1,047,570
$13,696,310
$3,915,460
1,047,570
$4,963,030
: $16,743,640
i
822,530
: $17,566,170
$3,874,210
822,530
$4,696,740
1,786,100
1,786,100
:
1,600,000
1,600,000
55.100
55,100
:
507,200
507,200
$15,537,510
$6,804,230
: $19,673,370
$6,803,940
$
1/ Equivalent coupon-issue yield.
R-2943
Accepted
TREASURY NEWS
epartment of the Treasury • Washington, D.C. • Telephone 566-2041
For Release Upon Delivery
Expected at 1:00 p.m.
Address by
Donald T. Regan
Secretary of the Treasury
before the
National Press Club
December 3, 1984
A couple of weeks ago I read that by not changing his
Cabinet, or senior staff, President Reagan was dooming his second
Administration to a case of tired blood. We supposedly were out
of fresh ideas, nothing new would be proposed, and Congress would
have to do it all.
Now after first the revelation of the possibility of more
detailed arms talks with the Soviets, the probability of deep
cuts in the budget, and the tax reform proposal, all coming
within weeks after the election, I don't think any one can say
we're out of new ideas, or have hardening of the arteries. I'm
already reading that some in Congress are wondering if we're
trying to do too much all at once. I certainly get that feeling
about the tax proposal.
It was only a week ago today that I briefed the President on
Treasury's tax reform proposals, and just six days since the
study was officially presented and released to the press and
public.
Yet in that short time I've read reams of news accounts and
listened to a plethora of critical comment. Everyone has an
opinion. Everyone has an analysis. But I'll bet that very few
of our critics have completely read our report. I won't ask for
a show of hands from the press present as to whether they have
read the study completely or not.
This is not meant as an evasive answer to the substantive
comments of the critics. I'm merely trying to make a point. The
study is lengthy and, because our current tax system is complex,
our proposals are comprehensive. It is too soon for most to have
totally digested the study, or to have mastered the interaction
of all its aspects. In fact they've barely had time to read it.
R-2944
-2Our proposals form a unified plan — a fabric, if you will,
composed of many interwoven strands. And it is misleading, and
frankly, distortionary, to look at just one strand of that fabric
— and condemn the whole plan.
But in many cases, this is exactly what has happened. And
it's led to an early problem that I'd like to address.
Focusing on just one detail or a few instead of assessing
the plan as a whole, misses the point. And it is the overall
impact on all of us that is far more important than the effect on
this or that group. Its effect on our economy is vital.
What we sought to achieve in our recommendations was, first,
revenue neutrality; that is to neither raise nor reduce the tax
revenues that would be received from the current system.
We also sought:
o to see to it that the tax system should aid, not impede
economic growth.
o to remove the distorting impact of taxes on economic
decision-making, both for individuals and businesses.
o to see to it that all families with a given income pay
approximately the same amount of tax.
o to reduce marginal tax rates so that all Americans know
that if they work harder or longer or are more
innovative or creative, that they can keep most of what
their efforts produce for them.
o to simplify the system so that the average taxpayer can
understand the system, and the process of paying his
taxes should be less costly and less time consuming.
o to have businesses making equal amounts of money pay
approximately the same taxes.
o to eliminate and curtail tax shelters and other
loopholes that in the first instance divert resources
to unproductive areas and, secondly, to make it clear
to all taxpayers that the other fellow is being taxed
on the same basis as he is.
o to eliminate taxation of families with incomes at or
below the poverty level, to reduce the taxes of the
poor, to see that the tax system does not do injury to
the disadvantaged, and to adjust tax liabilities fairly
for families.
-3In short, we have attempted to fulfill the Presidential
mandate to make the system simpler, fairer and more economically
efficient.
These were our guideposts during the 10 months in which we
developed our proposal. And we've been faithful to the
objectives.
But being faithful to one of our goals — revenue neutrality
— has given rise to the recurring question: Why are we even
bothering with tax reform? Why go through all the pain of
fighting all those special interests when no new revenue is
raised and the budget deficit is the paramount economic problem
of the day?
The answer is: because it's the right thing to do. All
polls show most Americans think the system is unfair, and
complicated President Reagan recognized this. He felt as we all
do: The American people deserve a tax system that instills
confidence, that is comprehensible, that is fair and that is
workable. Running a $200 billion deficit or, for that matter, a
$200 billion surplus does nothing to diminish the right of all
Americans to have such a fair tax system.
Deficit reduction is critically important, but it is another
matter completely. We are attending to it and you will be
hearing a lot more about that — even beyond the leaks you've
already publishedl It will have first priority, and it will be
done in the right way — by cutting Federal spending.
But tax simplification, on its own, deserves the fullest and
fairest consideration by the Congress. And if they don't know it
yet, they will soon learn, as we in Treasury already have, that
the people are demanding it.
Now, being one of the few in this room who has read our
study cover to cover, I'd like to elaborate on one aspect of it.
Let me discuss briefly fairness, and what our proposals would
accomplish.
We are releasing today Volume Two of our study. Using the
information you'll find in there, let me give you a few examples.
All of them will be calculated for a 1986 tax year. Remember now
we have reduced 14 tax brackets to three, 15 percent - 25 percent
— and a top bracket of 35 percent.
First, let's look at an elderly couple with no dependents,
pension income of $15,000, interest income of $6,000 dividend
income of $4,000, and no wage income.
-4The couple's itemized deductions under current law include
home mortgage interest, charitable contributions, state and local
taxes, and miscellaneous deductions (such as legal and accounting
fees relating to investments). The couple's $2,000 of home
mortgage interest approximates the interest on an outstanding
mortgage balance of $40,000 at a 5% interest rate.
Under the Treasury Department proposals (once fully phased
in), the couple's tax liability would be essentially the same as
under current law, but the preparation of its tax return would be
simpler because it would no longer itemize deductions.
The couple's taxable income would be slightly higher under
the proposals, but the increase in taxable income would be offset
by the lower income tax rates. In computing taxable income under
the proposals, total income would be lower than under current law
due to the exclusion from income of the inflationary component of
interest receipts, while itemized deductions would also be lower
due to the elimination of the deduction for state and local taxes
and the reduced deduction for charitable contributions. As a
result of the reduced itemized deductions and the increased zero
bracket amount, the proposals would make it unnecessary for the
couple to itemize.
The couple's tax liability under the Treasury Department
proposals would be 0.7 percent higher than under current law ($16
more) but its marginal rate would be reduced from 18% to 15%.
Now let's consider a single-earner couple with two
dependents and making the median income of about $34,000.
In addition to wage income, let's say that family benefits
from employer-provided life and health insurance premiums. The
family's itemized deductions under current law include home
mortgage interest, charitable contributions, and state and local
taxes. If the family had $4,550 of home mortgage interest, that
would approximate an outstanding mortgage balance of $38,000, at
a 12 percent interest rate.
Under the Treasury Department proposals, the deduction for
home mortgage interest would continue to be allowed in full.
However, the proposals would allow a deduction for charitable
contributions only to the extent their contributions exceeded 2
percent of their adjusted gross income, and would eliminate
entirely the deduction for state and local taxes.
Taking into account the increased personal exemptions under
the Treasury Department proposals, they go up from $1000 to $2000
per person, this family's taxable income would be slightly higher
under the proposals than under current law, but due to the lower
income tax rates, under our proposals, the family's tax liability
would be 3 percent lower than under current law, or $109 less.
-5As a final example, we'll look at a high-income, one-earner
couple with no dependents.
There are $600,000 of wage income, $3,000 of
employer-provided life and health insurance premiums, dividend
income of $58,000, itemized deductions (under current law
equaling approximately $94,000, and a share in a real estate
limited partnership that generates rental income of $225,000,
operating expenses of $25,000, depreciation of $200,000, and
interest expense of $200,000.
The couple's $20,250 of home mortgage interest approximates
interest on a $169,000, 30-year mortgage at a 12 percent interest
rate.
Under the Treasury Department proposals, the couple's tax
liability would be 13.5 percent higher than under current law, or
$22,360 more. The increase is attributable to (1) the adjustment
of interest expense for inflation and (2) the limitation on
investment interest expense which, under current law, does not
apply to consumer interest and many real estate tax shelters.
Ronald Reagan is constantly accused of being uncaring and
favoring policies which aren't fair. In his State of the Union
directive to me 10 months ago, he stressed that fairness should
be an overriding guideline for our study. Given the outcome, I
think anyone would be hard pressed to show we haven't been
consistent with the President's objective.
We have taken 2-1/2 million low income people off the tax
rolls. The biggest reduction in tax liabilities falls in the low
income groups under $20,000. We have given the disabled and
disadvantaged the fullest benefit of a fair tax system.
Because of this we have garnered a good deal of support
already from individuals and groups who apparently believe we've
accomplished our goals.
Some of that support has even come from, what one might call
at first glance, unexpected sources. Democratic Governor Bruce
Babbitt of Arizona calls our proposal "superb." Congressman
Charlie Rangel, a New York Democrat usually at odds with the
Administration, is euphoric.
Economists spanning the spectrum from liberal to
conservative have praised the proposals. We've gotten the
support of the National Taxpayers Union and General Motors'
chairman Roger Smith has joined the bandwagon.
-6We welcome them all. Although, I will admit, when Ralph
Nader's Congress Watch Group praised the plan last Wednesday, and
Bart Rowen heaped praise on me Sunday, I paused.
But then, when I see the fierce attacks by those whose only
interest is to, as one of them put it, "maintain our edge," well,
I think I'm on the right side of this issue.
As far as the business lobbyists are concerned, our 10
months of study and the subsequent reform proposals are all
boiled down to how some specific recommendation would affect this
industry or that industry; this investment or that investment;
this business decision or that business decision.
And remarkably they've done it without the benefit of
supporting economic data. Why do I say this? Because they can't
figure out the impact of our proposals they object to without the
depreciation and economic life tables that are first coming out
today.
Let me ask all leaders of industry — especially those whose
representatives in Washington have been quick to scream — to ask
their tax departments to do their homework. Take these
depreciation schedules — that we are giving out today. Do your
calculations and remember that we are also giving a massive —
50 percent — deduction for dividends paid to stockholders.
We're also indexing inventories, depreciation, and interest
charges and we have cut the corporate tax rate from 46 percent to
33 percent. Yes 33 percent — 40 percent was a bad leak! I say
to those businesses work your numbers, analyze them. You may be
very surprised. Then come talk to us — we'll listen.
The criticisms are loud and some might even say persuasive.
But everyone of these contentions begins with insufficient study.
And that goes for Wall Street and the capital gains proposals.
Few if any on Wall Street have had the time, let alone the
documents, to study indexing of assets and then a tax imposed
only on real gain at 15 - 25 - and 35 percent rates.
Our current system promotes some economic sectors over
others; that is not how we want it to be. We have, I believe, an
industrial policy through our tax code. I do not favor that.
So, no part of our new proposal intends to bring any sector
or any investment down. Rather, our proposal, in its entirety,
seeks to bring all sectors and all investments u£ to a fair and
effective level.
-7The removal, or restriction, of what some may call an
incentive is actually the removal or restriction of what is
proving to be a disincentive to the most efficient use of capital
and a distortion in economic growth.
I'm not saying that some in the business and industrial
sector won't suffer adverse effects relative to the current
system. But let me stress, we did not undertake this task to
design a plan for aiding specific industries any more than we set
out to design a plan to raise taxes.
We set out simply to design a fair, sound and durable tax
system for all. And I believe we have succeeded.
Now, lest I come across as pointing the finger only at some
in the business world, let me assure you, parochialism doesn't
stop there.
A good case in point is offered by the battle cries
emanating from New York regarding the proposed elimination of the
state and local tax deduction. Not only are Governor Cuomo and
Senator Moynihan opposing it but they are attempting to mobilize
other governors around the country.
There was a story in the New York Times last week that
calculated the effect of our tax proposals on a mythical New York
City family. The example used an annual family income of
$80,000, and found, after a variety of uncheckable assumptions,
that this family's tax bill would rise by about $600.
I have to ask, is this the "typical" family that they are
concerned about? The $80,000 earner?
A relatively high percentage of New Yorkers do itemize
deductions. Forty-four percent compared to the national average
of 33 percent. Also, tax rates in New York are high.
This combination, say some of the state's officials, would
cause itemizing residents to experience, in effect, a tax
increase if the state and local tax deduction is removed.
Well, what about the 56 percent who don't itemize?
Shouldn't they get lower rates? But to get lower rates without
reducing revenue we have eliminated some tax breaks for the few.
We'do not feel the nation's taxpayers should bear unequal Federal
tax burdens because they live in a low or a high tax state.
-8Now, before finishing up, let me mention one other aspect of
our proposal that shouldn't be underestimated. We are proposing
that Uncle Sam prepare tax forms for the taxpayer — and by April
15 send him the figures together with a check for a refund or a
bill for taxes due. We call this the "return free" system.
Beginning with the tax year 1987, we would focus on the 1040EZ
filing population — single individuals with no dependents and
limited interest income who earn under $50,000. Based on 1983
numbers, this program in 1987 should apply to about 14 million
taxpayers, 15 percent of the total. By 1990, we believe the
program could reach as many as two-thirds of individual
taxpayers.
Would a return-free system be worth the trouble? Think what
it would mean. By 1990, taxpayers would be spared 97 million
hours in return preparation and untold amounts in preparer fees.
There would also be considerably less aggravation for taxpayers.
I think a lot of taxpayers would tell you it's worth the trouble
to develop such a system.
In conclusion, we believe we have created a simpler, fairer
tax system that does not favor a privileged few, or entrenched
special interests. Our proposal changes the status quo —
dramatically.
But the status quo is not what American taxpayers want.
They have asked for relief. I believe we have given them just
that. Relief from complication, and relief from unfairness.
At the current moment the U.S. economy is in an exciting
period of transition from smokestack to high tech — a time when
stability is not necessarily desirable. When the economy goes
through a creative transition, as it is now, you expect to find
lots of daring new innovations and some instability.
As the Economist of London put it last week, "America is
thriving in this creative chaos." I feel it is up to government
to use the tax system to try to foster this "creative chaos" by
not adhering to a tax system that favors the old over the new,
one industry over another.
For years this country has been poking at tax reform. We've
usually never gotten beyond providing lip service. Now, finally,
we have laid a real plan on the table.
It's a good start. And it deserves serious study and
consideration. We welcome that.
Thank you.
"REASURY NEWS
ortment of the Treasury • Washington. D.C. • Telephone 566-2041
December 3,- 1984
TREASURY TAX REFORM PROPOSAL:
TAX BURDEN EXAMPLES WITH NARRATIVES
R-2945
hijefc Return of tn Elderly Couple MIth No Dependents
Current
LIM
(1966)
Dht:
Pension
Interest 1/
Dividends 2/
AL INCOME
Proposed
Change
in Lit*
Treasury
Sept
Proposal
Current
La*
(1986)
Proposed
Change
in Lav
Treasury
Dept
Proposal
15,000.00
.00 15,000.00
6,000.00 -2,400.00 3,600.00
3,800.00
200.00 4,000.00
.-
24,800.00 -2,200.00 22,600.00
USTHENTS:
Miscellaneous Eiployee t IncoaeProducing Expenses 3/
.00
.00
.00
s:T0TAL ADJUSTMENTS .00 .00 .00
JSTED GROSS INCOME
1I2ED DEDUCTIONS:
Writable Contributions 4
tea* Mortgage Interest
State t Local Taxes 5/
liscellaneous Iteaized Deduction 3/
24,800.00 -2,200.00 22,600.00
1,500.00
-452.00
2,000.00
.00
1,400.00 -1,400.00
100.00
-100.00
il Iteaized Deductions 5,000.00 -1,952.00 3,048.00
>: Zero Bracket Aiount
3,710.00
90.00
1,048.00
2,000.00
.00
.00
3,800.00
;:ALLOWABLE ITEMIZED DEDUCTIONS 1,290.00 -1,290.00 .00
;:PERSONAL EXEMPTIONS 6/ 4,360.00 -360.00 4,000.00
IBLE INCOME 19,150.00 -550.00 18,600.00
2,204.10 15.90 2,220.00
:entage Change in Tax
+0.7X
linal Tax Rate 18Z -3X 151
ice of the Secretary of the Treasury
O H ice of Tax Analysis
Deceaber 3, 1984
•nder proposal, a proportion of interest incoae or expense Mill be excluded to approximate effect of inflation.
Inder proposal, dividend exclusion of up to (100 per taxpayer ($200 on joint returns) would be repealed.
nder proposal, current etployee business expense adjustment and miscellaneous iteaized deduction
or expenses incurred in the production of incoae are combined and subject to a floor of 11 of Total Income.
nder proposal, charitable contributions are subject to a floor of 21 of adjusted gross income.
Inder proposal, state and local taxes not directly incurred in the production of income are not deductible.
our exemptions under current Ian including two for age. THO exeaptions under proposal.
: Assuaes 1986 tax rates and brackets but that Treasury proposal is fully phased in.
Example #1
Example #1 involves a joint return of an elderly couple with
no dependents, pension income of $15,000, interest income of
$6,000, dividend income of $4,000, and no wage income. The
couple's itemized deductions under current law include home
mortgage interest, charitable contributions, State and local
taxes, and miscellaneous deductions (such as legal and accounting
fees relating to investments). The couple's $2,000 of home
mortgage interest approximates the interest on an outstanding
mortgage balance of $40,000 at a 5% interest rate.
Under the Treasury Department proposals (once fully
phased in), the couple's tax liability would be essentially the
same as under current law, but the preparation of its tax return
would be simpler because it would no longer itemize deductions.
The couple's taxable income would be slightly higher under the
proposals, but the increase in taxable income would be offset by
the lower income tax rates.
In computing taxable income under the proposals, total
income would be lower than under current law due to the exclusion
from income of the inflationary component of interest receipts,
while itemized deductions would also be lower due to the
elimination of the deduction for State and local taxes and the
reduced deduction for charitable contributions. As a result of
the reduced itemized deductions and the increased zero bracket
amount, the proposals would make it unnecessary for the couple to
itemize. Finally, under the proposals, the couple would be
entitled to two personal deductions (rather than four, as under
current law), but, because each exemption would be higher under
the proposals, the decrease in the total deduction for personal
exemptions would be small.
The couple's tax liability under the Treasury Department
proposals would be 0.7 percent higher than under current law ($16
more) and its marginal rate would be reduced from 18% to 15%.
Thus, any additional income earned by the couple would be taxed
at the reduced rate of 15%.
Return of a Single Individual with No Dependents
Current Proposed Treasury Current Proposed Treasury
LIN
(1986)
Change
in Lau
Dept
Proposal
Lax
(1986)
Change
in LAM
Dept
Proposal
:OHE:
Nages
Employer Paid Life Insurance Premiums 1/
10,000.00
100.00
10,000.00
100.00
WSTED 6R0SS INCOME 10,000.00 100.00 10,100.00
s:PERS0NAL EXEMPTIONS (1 Exemption). . . 1,090.00 910.00 2,000.00
1ABLE INCOME 8,910.00 -810.00 8,100.00
856.40 -61.40 795.00
centage Change in Tax
ginal Tax Rate 151 01 15Z
fice of the Secretary of the Treasury December 3, 1984
Office of Tax Analysis
Under proposal, all employer paid life insurance premiums will be included in employee income.
e: Assumes 1986 tax rates and brackets but that Treasury proposal is fully phased in.
" 7 «2I
Example #2
Return of a Single Individual with no Dependents
Example #2 involves a single individual with $10,000 of wage
income and $100 of employer-paid life insurance premiums, no
other sources of income, no itemized deductions, and no
dependents.
The taxpayer's tax liability would be approximately 7
percent lower under the Treasury Department proposals than under
current law ($61 less). The reduced tax liability results from
the increased personal exemption deduction, which would be $2,000
under the proposals. Thus, while the Treasury Department
proposals would require this individual to include in income the
employer-paid life insurance premiums, this inclusion is more
than offset by the increased deduction.
Example 3
Joint Return of a Hedian-Incoae One-Earner Family lith THO Dependents
Current
LaN
(1986)
Proposed
Change
in Lau
Treasury
Dept
Proposal
200.00
33,600.00
200.00
1,144.00
1,144.00
ADJUSTED 6R0SS INCOME 33,600.00 1,344.00 34,944.00
ITEMIZED DEDUCTIONS:
Charitable Contributions 3/
1,00B.00
-698.88
Home Mortgage Interest
4,550.00
.00
State fc Local Taxes 4
2,1B4.00 -2,184.00
309.12
4,550.00
.00
Total Itemized Deductions 7,742.00 -2,882.86 4,859.12
Less: Zero Bracket Amount
3,710.00
3,800.00
INCOME:
First Earner's Nages
Employer Paid Life Insurance Premiums 1/
Excessive Employer Paid Health
Insurance Premiums 2/
33,600.00
90.00
Current
Law
(1986)
Proposed
Change
in Lau
Treasury
Dept
Proposal
LesslALLONABLE ITEMIZED DEDUCTIONS 4,032.00 -2,972.88 1,059.12
LesslPERSONAL EXEMPTIONS (4 Exeaptions) . . 4,360.00 3,640.00 8,000.00
TAXABLE INCOME 25,208.00 676.88 25.BB4.BE
TAX 3,421.26 -108.53 3,312.73
Percentage Change in Tax
Marginal Tax Rate 222 -71 151
Office of the Secretary of the Treasury Deceaber 3, 1984
Office of Tax Analysis
1/ Under proposal, all employer paid life insurance premiums will be included in employee income.
2/ Under proposal, employer paid medical insurance preaiuas Mill be included in eaployee incoae to the extent
they exceed $70 per month for a single person and $175 per month for a fatily.
3/ Under proposal, charitable contributions are subject to a floor of 2X of adjusted gross incoae.
4/ Under proposal, state and local taxes not directly incurred in the production of income are not deductible.
Note: Assumes 1986 tax rates and brackets but that Treasury proposal is fully phased in.
"3.21
Example #3
Joint Return of a One-Earner Couple with Two Dependents
Example #3 involves a joint return of a median-income,
one-earner couple with two dependents. In addition to wage
income, the family benefits from employer-paid life and health
insurance premiums. The family's itemized deductions under
current'law include home mortgage interest, charitable
contributions, and State and local taxes. The family's $4,550 of
home mortgage interest approximates the interest on an
outstanding mortgage balance of $38,000 at a 12% interest rate.
This family's tax liability would be 3.2 percent lower under
the Treasury Department proposals than under current law ($109
less). The family would continue to deduct home mortgage
interest in full. However, the proposals would cut back on the
deduction for charitable contributions and would eliminate
entirely the deduction for State and local taxes.
Taking into account the increase in the deduction for
personal exemptions under the Treasury Department proposals, this
family's taxable income would be slightly higher under the
proposals than under current law. However, due to the lower
income tax rates under the proposals, its tax liability would be
less. Moreover, the family would pay a tax of only 15% on
additional income, compared to 22% under current law.
Joint Return of a Married Couple «ith No Dependents
Current
Lau
(1986)
ONE:
First Earner's Hages
Second Earner's Hages
Employer Paid Life Insurance Premiums 1/
Excessive Employer Paid Health
Insurance Premiums 2/ "
30,000.00
20,000.00
Proposed
Change
in Lau
Treasury
Dept
Proposal
Current
LIN
(1986)
2,000.00 -2,000.00
4,000.00 1,000.00
.00
.00
.00
6,000.00 -1,000.00
ss:ALL0NABLE ITEMIZED DEDUCTIONS
5,000.00
44,000.00 1,280.00 45,280.00
IUSTED GROSS INCOME.
tal Iteaized Deductions
55: Zero Bracket Amount
280.00 50,280.00
5,000.00
is:TOTAL ADJUSTMENTS.
[HIZED DEDUCTIONS:
Charitable Contributions 6/
Noae Mortgage Interest
Other Consumer Interest
State t Local Taxes 7/
Miscellaneous Itemized Deduction 5/
Treasury
Dept
Proposal
30,000.00
20,000.00
170.00
170.00
110.00
110.00
50,000.00
USTHENTS:
Second Earner Deduction 3/
IRA Contributions 4/
Miscellaneous Employee & IncomeProducing Expenses 5/
Proposed
Change
in Lau
1,000.00
-905.60
8,250.00
.00
440.00
.00
2,860.00 -2,860.00
100.00
-100.00
94.40
8,250.00
440.00
12,650.00 -3,865.60
3,710.00
90.00
8,784.40
3,BOO.00
.00
.00
8,940.00 -3,955.60
4,984.40
sstPERSONAL EXEMPTIONS (2 Exemptions) . .
2,180.00 1,820.00 4,000.00
XA6LE INCOME
32,880.00 3,415.60 36,295.60
X
rcentage Change in Tax
5,297.50
irginal Tax Rate
Office of the Secretary of the Treasury
Office of Tax Analysis
2BZ
26.40
5,323.90
•0.5Z
-31 251
December 3, 1984
' Under proposal, all employer paid life insurance preaiuas will be included in employee income.
' Under proposal, employer paid medical insurance premiums Kill be included in employee income to the extent
they exceed $70 per month for a single person and $175 per month for a faaily.
f The proposal eliminates the second earner deduction.
' Assumes that taxpayer raises IRA contribution to maximum permitted by new proposal. If contribution
remains the same, tax under proposal would be $5,578.90, for an increase of $281.40 or 5.31.
I Under proposal, current employee business expense adjustment and miscellaneous itemized deduction
for expenses incurred in the production of income are combined and subject to a floor of 11 of Total Incoae.
f Under proposal, charitable contributions are subject to a floor of 21 of adjusted gross incoae.
I Under proposal, state and local taxes not directly incurred in the production of income are not deductible.
Die: Assumes 1986 tax rates and brackets but that Treasury proposal is fully phased in.
Example #4
Joint Return of a Two-Earner Couple with no Dependents
Example #4 involves a joint return of a two-earner couple
with no dependents. In addition to wage income, the couple
benefits from employer-paid life and health insurance premiums.
The couple's itemized deductions under current law include home
mortgage interest, consumer interest, charitable contributions,
State and local taxes, and a small amount of miscellaneous
employee expenses (such as expenses for professional journals).
In addition, under current law, the couple is entitled to the
second-earner deduction and makes the maximum allowable IRA
contribution.
Under the Treasury Department proposals, the couple's tax
liability would be essentially the same as under current law.
However, the computation of taxable income would differ markedly.
Under the proposals, the couple would be taxed fairly on all of
its income. The employer-paid life insurance premiums (and
health insurance premiums above a cap) would be included in gross
income, though not taxed under current law. The deductions for
home mortgage interest and consumer interest would be allowed in
full (because consumer interest is less than $5,000), but the
deduction for charitable contributions would be reduced, and the
deductions for State and local taxes and for miscellaneous
employee expenses would be eliminated. The second-earner
deduction would not be allowed, but under the Treasury Department
proposals the couple would be entitled to make a greater
deductible IRA contribution.
Taking into account the increased personal exemptions, the
couple's taxable income under the Treasury Department proposals
would be higher than under .current law, but this increase would
be offset by the reduction in tax rates. The couple's tax
liability would increase by only one-half of one percent ($26).
Moreover, the couple would pay a tax of only 25% on any
additional income, compared to 28% under current law.
Joint lelorn of • Two-Earner Harried Couple with Two Dependents
Current
Law
(1986)
:0HE:
First Earner's Hages
Second Earner's Hages
Employer Paid Life Insurance Premiums 1/
Excessive Employer Paid Health
Insurance Premiums 2/ •
30,000.00
20,000.00
Proposed
Change
in Law
Treasury
Dept
Proposal
50,000.00
2,000.00 -2,000.00
4,000.00 1,000.00
.00
ss:ALLOHABLE ITEMIZED DEDUCTIONS . . . .
280.00 50,280.00
.00
.00
6,000.00 -1,000.00
IUSTED 6R0SS INCOME.
:*1 Itemized Deductions
»: Zero Bracket Amount
Treasury
Dept
Proposal
5,000.00
;s:T0TAL ADJUSTMENTS
IHIZED DEDUCTIONS:
Charitable Contributions 6/
Home Mortgage Interest
Other Consumer Interest
State t Local Taxes 7/
Miscellaneous Itemized Deduction 5/
Proposed
Change
in Law
30,000.00
20,000.00
170.00
170.00
110.00
110.00
AL INCOME
DSTHENTS:
Second Earner Deduction 3/
IRA Contributions 4/
Miscellaneous Employee It IncomeProducing Expenses 5/
Current
Law
(1986)
5,000.00
44,000.00 1,280.00 45,280.00
1,000.00
-905.60
8,250.00
.00
440.00
.00
2,860.00 -2,860.00
100.00
-100.00
94.40
8,250.00
440.00
.00
.00
12,650.00 -3,865.60 8,784.40
3,710.00
90.00 3,800.00
8,940.00 -3,955.60
4,984.40
>s:PERSONAL EXEMPTIONS (4 Exemptions) .
4,360.00 3,640.00 8,000.00
(ABLE INCOME
30,700.00 1,595.60 32,295.60
(
4,745.00 -421.10 4,323.90
rentage Change in Tax
•ginal Tax Rate
Iffice of the Secretary of the Treasury
Office of Tax Analysis
-B.9Z
251
OZ
December 3, 1984
Under proposal, all employer paid life insurance premiums will be included in employee income.
Under proposal, employer paid medical insurance premiums will be included in employee income to the extent
they exceed $70 per month for a single person and $175 per month for a family.
The proposal eliminates the second earner deduction.
Assumes that taxpayer raises IRA contribution to maximum permitted by new proposal. If contribution
reaains the same, tax under proposal would be I4,57B.90, for a decrease of 1166.10 or 3.5Z.
Under proposal, combines employee business expense adjustment and miscellaneous itemized deduction
for expenses incurred in the production of income are coabined and subject to a floor of 1Z of Total Income.
Under proposal, charitable contributions are subject to a floor of 21 of adjusted gross incoae.
Under proposal, state and local taxes not directly incurred in the production of income are not deductible.
te: Assumes 1986 tax rates and brackets but that Treasury proposal is fully phased in.
251
Example #5
Joint Return of a Two-Earner Couple with Two Dependents
Example #5 involves a joint return of a two-earner couple
with two dependents. Except for the nun.ber of dependents claimed
on the return, it is the same as Example #4.
This couple's tax liability would be reduced by 8.9% ($421)
even though its reported income would be somewhat higher than
under current law. When contrasted with Example #4, the couple's
reduced tax is produced by the increase in the dependency
exemptions.
Example 6
Joint Return of a Harried Couple with No Dependents: No Tax Shelters
Current
Law
(1986)
Proposed
Change
in Law
Treasury
Dept
Proposal
300.00
2,700.00
600,000.00
300.00
2,700.00
Current
Law
(1986)
Proposed
Change
in Law
Treasury
Dept
Proposal
INCOME:
First Earner's Hages
Employer Paid Life Insurance Premiums 1/
Excessive Employer Paid Health
Insurance Preaiuas 2/
Dividends 3/
600,000.00
57,800.00
200.00 58,000.00
657,800.00
TOTAL INCOME
IDJUSTHENTS:
IRA Contributions 4/
2,250.00
2,750.00
3,200.00 661,000.00
5,000.00
.ess:TOTAL ADJUSTMENTS
2,250.00 2,750.00 5,000.00
ADJUSTED 6R0SS INCOME
655,550.00 450.00 656,000.00
TEM1ZED DEDUCTIONS:
Charitable Contributions 5/
Noae Mortgage Interest
Other Consumer Interest 6/
State t Local Taxes 7/
19,666.50 -13,120.00 6,546.50
20,250.00
.00 20,250.00
6,555.50
-622.20 5,933.30
47.5B8.75 -47,588.75
.00
otal Iteaized Deductions
ess: Zero Bracket Amount
94,060.75 -61,330.95 32,729.B0
3,710.00
90.00 3,800.00
ess:ALLOWABLE ITEMIZED DEDUCTIONS
ess:PERSONAL EXEMPTIONS
(2 Exemptions) . .
90,350.75 -61,420.95 2B,929.B0
2.1B0.00 1,620.00 4,000.00
AXABLE INCOME
563,019.25 60,050.95 623,070.20
AX
ercentage Change in Tax
261,211.53 -53,266.96 207,944.57
-20.41
arginal Tax Rate . . . .
Office of the Secretary of the Treasury
Office of Tax Analysis
50Z
-15Z
Deceiter 3, 19S4
I Under proposal, all employer paid life insurance preaiuas »_.*be included in eaployee incoae.
/ Under proposal, eaployer paid medical insurance preaiuas will be included in eaployee incoae to the extent
they exceed 170 per month for a single person and $175 per month for a faaily.
I Under proposal, dividend exclusion of up to $100 per taxpayer ($200 on joint returns) would be repealed.
' Assumes that taxpayer raises IRA contribution to aaximua permitted by new proposal.
' Under proposal, charitable contributions are subject to a floor of 21 of adjusted gross income.
' Under proposal, a portion of consumer interest expense in excess of $5,000 which represents impact
of inflation will be disallowed.
' Under proposal, state and local taxes not directly incurred in the production of incoae are not deductible.
)te: Assumes 1986 tax rates and brackets but that Treasury proposal is fully phased in.
352
Example #6
Joint Return of a High-Income One-Earner Couple
with no Dependents and no Tax Shelters
Example 16 involves a joint return of a one-earner couple
with no. dependents, $600,000 of employment income, $3,000 of
employer-paid life and health insurance premiums, dividend income
of $58,000, itemized deductions (under current law) of
approximately $94,000, and no tax shelter activity (i.e., no
business or investment losses). The couple's $20,250 of home
mortgage interest approximates the interest on an outstanding
mortgage balance of $170,000 at a 12% interest rate.
Under the Treasury Department proposals, this couple's tax
liability would be reduced by approximately 20 percent
($53,267). Although the couple's taxable income would increase
under the proposals, the couple would benefit significantly from
the lower tax rates.
Under the proposals, home mortgage interest would continue
to be deductible in full. In other respects, the proposals would
affect the computation of the couple's taxable income in the
following manner: (1) employer-paid life insurance premiums (and
health insurance premiums above a cap) would be included in
income; (2) the inflationary component of consumer interest
expense in excess of $5,000 would not be deductible; (3) the
deduction for charitable contributions would be reduced to the
extent contributions do not exceed 2 percent of adjusted gross
income; (4) the deduction for State and local taxes would be
eliminated; (5) the maximum deductible IRA contribution would be
increased (and would be available on equal terms to the spouse
working in the home); and (6) the personal exemptions would be
increased.
In addition, the couple would pay a tax of only 35% on
additional income, compared to 50% under current law. This
decrease in the marginal tax rate would reduce the tax incentive
for the couple to participate in tax shelters, and would provide
greater incentives for work and productive investment.
CtoapleT
Joint Return ef a Married Couple tit* lo Pependeets: oith To/Shelter
Carrnt
Ua
(1984)
UCOHE:
first Earner's Mages
Eaployer Paid Lift Insurance Preoioes 1/
Excessive Eaployer Paid Health
Proposed
Ouage
it Lau
400,000.0©
300.00
2,700.00
Treasury
fjpt
Proposal
torrent
Urn
U986)
Proposed
Change
ii la.
Treasury
Btpt
Proposal
400,000.00
300.00
2,700.00
ItSUTMCf PreOiiOS 2/
•intends 3/
Uoited Partoership Ret Into** 1/
57.ICC.00
200.00 91,000.00
-200,000.00 142,933.30 -57,046.70
Tim WOKE 457,100.00 14i.133.30 403,933.30
flaJUSTHEKTS:
IRA Contributions 4/
2,250.00
2,750.00
5,000.00
U«:TOTAL aNUSTIEMTS 2,250.00 2,750.00 5,000.00
AtUUSTEA GROSS IMC0HE 455,550.00 143,363.30 598,933.30
ITEMIZED KDUCT10NS:
Charitable Contributions 5/
M O M Mortgage Interest
Other Consuoer laterest 6/
State I Local Tarn 7/
19,464.50 -11,978.67 7,487.83
20,250.00
.00 20,250.00
4,555.50
-422.20
5,933.30
39,588.75 -39,5BB.75
.00
Total United leductiont 16,060.75 -52,189.62 33,871.13
L M S : Zero Iracket Aoount
3,710.00
90.00
3,800.00
LKS:4J1DMABIE ITEMZQ BQUCTIONS 82,350.75 -52,279.62 30,071.13
Ll»:PERS0NAL EIEHPT10NS (2 Emptions) . . 2,180.00 1,820.00 4,000.00
TRIABLE INCUSE 371,019.25 193,842.92 564,862.17
TAI 165,211.53 22,360.23 187,571.76
Percentage Change in Tai
+13.51
marginal Tex Rate 502 -152 351
Mice of the Secretary of the Treasury ttceaber 3, 1934
Office of Tai Analysis
1/ Under proposal, all toployer paid life insurance or Mi us till he included in eaployee incoae.
2/ Under proposal, otployer paid oedical insurance preaiuas •ill he included in eaployee incoae to the extent
they m e e d 170 per oontn for a tingle person and 1175 for a faaily.
3/ Under proposal, dividend exclusion of op to 1100 per taxpayer (1200 on joint returns) wuld he repealed.
4/ Assuees that taxpayer raises IRA contribution to aaxiouo peraitted by ae« proposal.
5/ Under proposal, charitable contributions »rt subject to a floor of 22 of adjusted gross incoae.
4/ Under proposal, a portion of consuoer interest expense in excess of 15,000 onich represents iopact
•f inflation oill he disalloaed.
7/ Under proposal, state and local taxes not directly interred ia the production of iocaae are not deductible.
8/ Met incoae of tax shelter partnership is deterained as folloas:
Corrent
Proposed
La*
Change
fross Rental lacoae 225,000.00 225,000.00
Lots: Operating Expenses
L M S : lepreciation •/
Loss: Interest Expense « /
Treasury
Proposal
25,000.00
25,000.00
200,000.00
200,000.00
200,000.00 -142,933.30 57,066.70
Partnership Incoae •200,000.00 142,933.30 -57,066.70
•/ Any difference in depreciation deductions onder proposal is ignored is order to focus on
adjustaent of interest expense deduction for effects of inflation.
H / The inflationary coaponent of 480,000 is set deductible. In addition, 142,933.30 is not deductible
currently but is carried feruard and oay be deducted in future years.
lote: Assuees 1986 tax rates and brackets but that Treasury proposal is fully phased in.
Example #7
Joint Return of a High-Income, One-Earner Couple
with no Dependents and a Tax Shelter Investment
Example #7 involves a high-income, one-earner couple with no
dependents. It is the same as Example 46 in all respects except
that the couple has a limited partnership interest in a real
estate partnership generating tax losses. The couple's share of
partnership income and expense includes gross rental income of
$225,000, operating expenses of $25,000, depreciation of
$200,000, and interest expense of $200,000. (Due to the net loss
from the partnership, the couple's State and local taxes for the
year are lower than in Example #6.)
Under the Treasury Department proposals, the couple's tax
liability would be 13.5% higher than under current law ($22,360
more). The increase is attributable primarily to the way in
which the proposals reduce the deductions that can be taken on
account of tax shelter investments.
Under the assumed inflation indexing adjustment, 40% (or
$80,000) of the nominal partnership interest expense (as well as
40% of consumer interest in excess of $5,000) would be
disallowed. In addition, under the investment interest
limitation, no deduction would be permitted for the remaining
$120,000 of partnership interest (as well as the couple's indexed
consumer interest of $5,933.30) to the extent it exceeded the
couple's net investment income ($58,000 of dividends) plus
$5,000. Since the disallowance would apply to non-itemized
interest before itemized interest, $62,933.30 of partnership
interest would be disallowed and carried forward.
Finally, the couple would pay a tax of only 35% on
additional income, compared to 50% under current law. This
decrease in the marginal tax rate would further reduce the tax
incentive for the couple to participate in tax shelters, and
would provide greater incentives for work and productive
investment.
EieepleS
Joint Ittorn of a Married Coople oith It itpendentt: nth Tai Shelter
torrent
Loo
U986)
Proposed
Change
it Loo
Treasury
Inst
Proposal
Corrent
Ua
11986)
Proposed
Change
io L M
Treasury
lept
Proposal
nctME:
first Earners Mages
fjployer Paid Lift Insurance Preoioes 1/
Excessive Eaployer Paid Health
Insurance Preaiuas 2/
Dividends 3/
Uoited Partoership Met locooe 0/
100,000.00
300.00
1,700.00
29,800.00
-100,000.00
300,000.00
300.00
1,700.00
200.00 30,000.00
70,000.00 -30,000.00
TOTAL 1MC0NE .' 229,800.00 72,200.00 302,000.00
AWusncwTS:
IRA Contribution! 4/
2,250.00
2,750.00
5,000.00
1,000.00 -5,900.00
12,000.00
.00
5,000.00
.00
17,000.00 -17,000.00
2,060.00
12,000.00
5,000.00
.00
UtsrTOTAl WUSTRERTS 2,250.00 2,750.00 5,000.00
OJJUSTED GROSS INTONE 227,550.00 49,450.00 297,000.00
ITEMIZE* REDUCTIONS:
Charitable Contributions 5/
Moot Mortgage Interest
Other Consuoer Interest 6/
State t Local Taxes 7/
Total Keened Reductions 42,000.00 -22,940.00 19,060.00
Less: Zero Bracket Aoount
3,710.00
90.00
3,800.00
Loss:AUi)HABLE ITEMIZED REDUCTIONS 38,290.00 -23,030.00 15,260.00
Less:PERS0NAl EIWTIDNS (2 Emptions) . . 2,180.00 1,820.00 4,000.00
TAIA6LE MCDKE 187,080.00 90,660.00 277,740.00
TAI 73,241.70 13,837.30 87,079.00
Percentage Change in Tax
416.92
Marginal Tax Rate 502 -152 352
Office of the Secretary of the Treasury Oeceaber 3, 1984
Office of Tax Analysis
1/ Under proposal, all otployer paid life insurance preaiuas oill be included in ooployee incoae.
2/ Under proposal, eaployer paid oedical insurance preaiuas oill be included in ooployee iocooe to the extent
they exceed 170 per oonth for a single person and 1175 for a faaily.
3/ Under proposal, dividend exclusion of op to 1100 per taxpayer 11200 on joint returns) oould be repealed.
4/ Assuoes that taxpayer raises IRA contribution to oaxioua peraitted by ne« proposal.
5/ Under proposal, charitable contributions are subject to a floor of 22 of adjusted gross incoae.
4/ Under proposal, a portion of consuoer interest expense in excess of 15,000 ohich represents iopact
of inflation oill be disallowed.
II Under proposal, state and local taxes not directly incurred in the production of iocooe are not deductible.
8/ Met iocooe of tax shelter partnership is deterained as follow:
Corrent
Proposed
Loo
Change
Oross Rental Incooe 110,000.00 110,000.00
Less: Operating Expenses
Less: appreciation *>
Less: Interest Eipense « /
Treasury
Proposal
10,000.00
10,000.00
100,000.00
100,000.00
100,000.00 -70,000.00 30,000.00
Partnership Incooe -100,000.00 70,000.00 -30,000.00
«/ Any difference in depreciation deductions under proposal is ignored in order to locos on
adjustment of interest expense deduction for effects of inflation.
•«/ The inflationary cooponent of 040,000 is not deductible. In addition, 130,000 is tot deductible
currently but is carried foraard end oay be deducted in future years.
Mote: Assuoes 1986 tax rates and brackets but that Treasury proposal is fully phased io.
Example #8
Joint Return of a High-Income, One-Earner Couple
with no Dependents and a Tax Shelter Investment
Example #8 involves a high-income, one-earner couple with no
dependents and a tax shelter investment. It is the same as
Example-47 in all respects except that the couple's items of
income and and itemized deductions are approximately one-half as
great as in Example #7. In Example 48, the couple's share of
partnership income and expense includes gross rental income of
$110,000, operating expenses of $10,000, depreciation of
$100,000, and interest expense of $100,000.
Under the Treasury Department proposals, the couple's tax
liability would be 18.8% higher than under current law ($13,637
more). The increase is attributable primarily to the way in
which the proposals reduce the deductions that can be taken on
account of tax shelter investments.
Dnder the assumed inflation indexing adjustment, 40% (or
$40,000) of the nominal partnership interest expense would be
disallowed. In addition, under the investment interest
limitation, no deduction would be permitted for the remaining
$60,000 of partnership interest (as well as the couple's consumer
interest of $5,000) to the extent it exceeded the couple's net
investment income ($30,000 of dividends) plus $5,000. Since the
disallowance would apply to non-itemized interest before itemized
interest, $30,000 of partnership interest would be disallowed and
carried forward.
Finally, the couple would pay a tax of only 35% on
additional income, compared to 50% under current law. This
decrease in the marginal tax rate would further reduce the tax
incentive for the couple to participate in tax shelters, and
would provide greater incentives for work and productive
investment.
rREASURY NEWS
partment of the Treasury • Washington, D.C. • Telephone 566-2041
REMARKS BY THE HONORABLE R. T. MCNAMAR
DEPUTY SECRETARY OF THE TREASURY
BEFORE THE
INSTITUTE OF FOREIGN BANKERS
NEW YORK, NEW YORK
December 4, 1984
THE NEW FUNDAMENTALS
OF EXCHANGE RATE MOVEMENTS
Thank you, and it's a pleasure to be with you today. As you
well know, "Managing Currency Risk Exposure" involves the
interaction of many factors and can be viewed at different levels
ranging from the tactical trading decision to the strategic
portfolio realignment.
Mr. Denis, I'm told, will be focusing on several key aspects
of this topic as he presents an overview of a technical trading
model that he has used successfully at Altair.
In addition to the trading aspects, it is important that
anyone attempting to manage currency risk exposure have an
understanding of the macro-economic factors that influence
exchange rate movements. We've all seen numerous articles and
explanations for exchange rate movements in general and the rise
of the dollar over the last few years in particular.
Unfortunately, such discussions tend to rely on outdated theories
and, consequently, fail to analyze "the new fundamental forces"
that are driving exchange rate movements.
Tonight, I would like to suggest a framework for assessing
exchange rate movements which, I believe, better fits the
interdependence of today's investment markets. In addition, I
would like to utilize such a framework to discuss the importance
and potential effect of Treasury's recently released proposal for
improving the American tax system.
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, such as
the tax policy. First, let's analyze the effectiveness of
traditional explanations for exchange rate movements in the
context of the past few years.
E-2946
- 2 -
TRADITIONAL EXPLANATIONS
Many theories have been offered to explain the rise of the
dollar. Most center on the behavior or 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, on both 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.
Countries with growing current account surpluses are
expected to experience appreciation of their currencies.
Countries with growing current account deficits are supposed to
see their currencies fall.
In the past this seemed to be the case. For example,
between 1975 and 1978, the U.S. current account went from a plus
$18 billion to a minus $15 billion. Following the traditional
theory, the dollar depreciated by 9 percent. During the same
period, the Japanese current account went from a $1 billion
deficit to a $17 billion surplus, and the yen appreciated by 41
percent. The German surplus rose by $5 billion and the DM
appreciated by 17 percent.
Unfortunately, the "rules of the game" have changed since
the 1970's and the world is much different than it was even a
decade ago. Today, it is essential to understand the relative
importance of trade transactions and non-trade related capital
flows.
Currently, international trade in goods and services total
approximately $2 trillion per year. By comparison, estimates of
capital flows are usually in the $20-30 trillion range (10 to 15
times goods and services). Recently, the Financial Times
estimated that $200 billion in foreign exchange is traded between
banks every day — or approximately $50 trillion per year.
Given the relative importance of capital flows versus trade
flows today, it seems clear that capital flows, not trade flows,
determine exchange market dynamics.
Another traditional explanation of recent dollar movements
focuses on nominal interest rate differentials between countries.
This conventional wisdom says large U.S. budget deficits have
raised U.S. interest rates, increasing the nominal interest rate
spreads over those offered in Europe. In turn, the theory goes,
- 3 -
these nominal interest rate differentials have driven up the
value of the dollar vis-a-vis European currencies.
Let's examine this theory. First, despite the oft-repeated
assertions of a large budget deficit-interest rate link, Treasury
has not been able to find any consistent statistically
satisfactory correlation between the two. Nor have our requests
to others produced such an analysis.
During the first three quarters of 1984, we saw estimates of
the deficit progressively lowered from $231 billion in last
year's original budget to $174 billion in this summer's
midsession review, a drop of $57 billion or 25 percent. Yet,
during this period the dollar increased 10 percent on a
trade-weighted basis against the OECD currencies.
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 400 basis points and the French franc by almost 700 basis
points since early 1981, the dollar has risen against the DM by
58 percent and against the franc by 109 percent. The same is
true for other major currencies.
Pragmatically, if large nominal interest rate differentials
are the sole key, much higher interest rate spreads existing
between the U.S. and any number of Latin American countries would
have resulted in large sales of the dollar to buy those
currencies. But obviously people have not been selling dollar
assets to buy those currencies.
The most dramatic evidence has occurred in the last few
weeks. During this period, we have seen a significant fall in
both short and long term U.S. interest rates and a narrowing of
differentials with Europe. But, counter to the conventional
wisdom, the dollar strengthened to 3.12 DM to the dollar
yesterday. These recent events may have, finally, laid the old
interest rate-exchange rate argument to rest.
The large deficit-high interest rate-high dollar hypothesis
also fails to distinguish between alternative policy choices to
reduce the U.S. federal budget deficit. Either raising taxes or
cutting spending will reduce the deficit per se, but each has
significantly different domestic economic (and therefore exchange
- 4-
rate) effects. Suffice it to say that the large deficit-high
interest rate-high dollar analysis assumes 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.
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:
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
- 5 -
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 and therefore more
useful than most in making strategic portfolio decisions. 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.
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 6-7 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.
- 6 -
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.
Taxes
A third and too often ignored factor influencing investment
flows is relative tax policies. Let me stress, it is after-tax
cash flow, not before-tax returns that count. You can't reinvest
pre-tax earnings.
Again, the changed environment in the U.S. is relatively
much more attractive today. More favorable depreciation
allowances and credits, combined with lower effective corporate
income tax rates and lower individual marginal rates, 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 as, is versus U.S. dollar denominated
assets."
As mentioned at the outset, I will return to this factor in
the context of Treasury's tax reform proposal to illustrate the
interaction between domestic policies and international financial
markets.
- 7 -
Capital Markets
The next factor to consider is capital market conditions.
Without question, the U.S. has the largest and deepest capital
market in the world. 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.
In the last six months, as measured by the World Index of stock
market performance, the price increase in the U.S. stock market
was a net 6.5 percent higher even before taxes than the rest of
the world.
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.
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. Last week's
Economist article on "Europe's Technology Gap" is a clear
critique of Europe's performance in terms of what my economist
friends call "structural rigidities," which do affect exchange
rates.
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 rise
of the Greens, the metal workers strike and the political
stability of the coalition are all factors in investors' views of
- 8 -
the relative attractiveness of Germany. 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 dollar 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 the foreign investors'
decision-making process. The U.S. real estate professionals
failed to understand these underlying factors, how they had
changed, and the new interdependence of worldwide markets. Those
Europeans who purchased "inflated California real estate" may
have seen a drop in nominal prices, but expressed in today's DM,
guilders, or francs, they are way ahead.
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
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.
- 9 -
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.
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 relative
improvement in U.S. economic policies, performance and prospects
compared 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, until and unless other countries adopt
policies which achieve more sustainable non-inflationary growth
with other factors being equal. Those crisis-mongers who warn of
an imminent collapse simply haven't done their homework.
However, based on this framework, our long-term relative
position will be a function of our ability to adopt domestic
economic policies which increase the relative attraction of the
factors I have discussed. Recent events in the area of tax
policy illustrate the role and impact of one of the components of
this framework.
TREASURY TAX SYSTEM IMPROVEMENT PROPOSAL
A week ago today, the Treasury Department released a
proposal for improving the American tax system by making it more
equitable and simpler. At first blush, many of you may have
viewed this as only a domestic policy issue. However, I hope
that through the framework repesented tonight the impact of such
domestic economic policies of one country on exchange rate
movements and, indeed, international financial markets is
apparent. We will alter the after-tax rate of return on various
types of investments, and the exchange markets will eventually
reflect this.
- 10 -
Our current tax system falls far short in meeting the needs
of this country during the next several decades. It encourages
borrowing and actually provides disincentives for saving. Not
surprisingly, our savings rate is low relative to other
countries. Further, due to its complexity and special
preferences for certain groups, investments, or industries,
capital is oftentimes allocated on the basis of tax implications
rather than true economic returns — viewed, I might say, in the
terms of international investment opportunities. If this country
is to generate the necessary capital, allocate it to those
sectors of the economy most deserving from an economic
perspective and, as a result, ensure competitiveness in world
markets, a change in our tax system is imperative.
Our ability to address these shortcomings through domestic
economic and tax policies has a direct implication on exchange
rate movements. If we can improve capital generation and reduce
overall marginal tax rates, the after-tax rate of return relative
to other countries will improve. Clearly such shifts, as we've
seen from the earlier analysis, will be reflected in exchange
rate markets. In effect, U.S. tax policies will be "graded" by
the foreign exchange markets.
CONCLUSION
I hope this more comprehensive framework and the discussion
of the implications of tax policy reform present a useful
background to translate the real meaning and underlying reasons
for exchange rate movements. Further, we face important economic
policy decisions such as tax reform which have a direct bearing
on our future relative position.
My conclusion is clear. Investors around the world have
re-evaluated the view they had of 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 the degree to which
the United States economy continues to be attractive relative to
other nations is dependent on our ability to make decisions on
difficult domestic economic issues, because domestic and
international economic policies are one and the same for the
United States, and the foreign exchange markets provide an
assessment of our relative performance.
Thank you.
TREASURY NEWS
epartment of the Treasury • Washington, D.C. • Telephone 566-2041
FOR RELEASE AT 4:00 P.M.
December 4, 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 December 13, 1984.
This
offering will provide about $ 525
million of new cash for the
Treasury, as the maturing bills are outstanding in the amount of
$ 13,079 million, including $760
million currently held by Federal Reserve Banks as agents for foreign and international monetary
authorities and $ 3,209 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
September 13, 1984,
and to mature
March 14, 1985
(CUSIP
No. 912794 GW 8), currently outstanding in the amount of $6,648
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
June 14, 1984,
and to mature
June 13, 1985
(CUSIP
No. 912794 GM 0), currently outstanding in the amount of $8,354
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 December 13, 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-2947
- 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,
December 10, 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 December 13, 1984, in cash or other immediately-available funds
or in Treasury bills maturing December 13, 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 incoire 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 tv ir 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
spartment of the Treasury • Washington, D.C. • Telephone 566-2041
IMMEDIATE RELEASE
December 5, 1984
Contact: Art Siddon
(202) 566-5252
PETER J. WALLISON RESIGNS AS TREASURY GENERAL COUNSEL
The Department of the Treasury announced today that General
Counsel Peter J. Wallison will be leaving the Department December
31, 1984, to return to private law practice in Washington, D.C.
Mr. Wallison has been General Counsel since June 19, 1981.
As General Counsel, Mr. Wallison has been responsible for all
legal work in the Department and has served as senior legal
adviser to the Secretary and other senior Department officials.
Before joining the Treasury Department, Mr. Wallison was a
partner in the law firm of Rogers & Wells, New York City. Prior
to that he was Counsel to Vice President Nelson A. Rockefeller.
He received a B.A. degree in 1963 from Harvard College and an
LL.B. degree in 1966 from Harvard Law School.
###
R-2948
TREASURY NEWS
apartment of the Treasury • Washington, D.C. • Telephone 566-2041
FOR IMMEDIATE RELEASE
December 6, 1984
CONTACT:
Brien Bensen
566-2041
TREASURY PRESENTS AWARDS FOR CASH MANAGEMENT SAVINGS
The Department of the Treasury today held a ceremony to
present the first annual Awards for Distinction in Cash
Management.
Thirty-six federal employees, representing 19
agencies, and one private sector representative received honorary
and cash awards amounting to $97,000 for cash management
achievements.
Donald T. Regan, Secretary of the Treasury, said, "The
Department of the Treasury has been in the business of managing
the government's money for almost 200 years. Only recently,
however, has cash management--the coordination of payments,
collections, financial reporting and investments — been recognized
as a critical factor in the financial well-being of the nation."
"The awards received today demonstrate the Administration's
commitment under Reform
'88 to this concept and recognize the
major governmentwide contributions of those who have creatively
applied cash management principles to diverse government
programs.
Without exception, each award recipient has a superior
record of accomplishment in what is now becoming the science of
federal government cash management."
A total of $97,000 in awards, ranging from $2,000 to
$10,000, went to 23 federal employees from the Departments of
Agriculture, Commerce, Defense, Education, Energy, Health and
Human Services, Housing and Urban Development, Interior, Justice,
the Environmental Protection Agency, Federal Deposit
Insurance
Corporation, Federal Home Loan Bank Board, and General Services
Administration.
Joint recipients shared awards equally.
-moreR-2949
-2-
Honorary awards, given to individuals from both the federal
government and the private sector, went to representatives of the
Departments of Agriculture and Housing and Urban Development, and
the DuPont Company. DuPont is a member company of the Private
Sector Council, established to provide corporate executives "pro
bono" to federal departments to assist in implementing
recommendations of the Grace Commission.
The Secretary's Certificate Awards went to 12 federal
employees representing the Departments of Defense, Energy, Labor,
Transportation, the Railroad Retirement Board, Securities and
Exchange Commission, Small Business Administration, and Veterans
AdministrationThe Department of the Treasury sponsors these awards to
"encourage and recognize excellence in endeavors directly or
indirectly associated with the collection of federal government
funds, the disbursement of federal government funds, cash
position management, and the optimum use of funds excess to the
federal government's immediate disbursement needs."
The Reform '88 Cash Management Project, managed by
Treasury's Financial Management Service, involves more than 400
initiatives in federal agencies and is expected to produce
savings of $1.5 billion in interest and operational costs by
fiscal year 1986 and $2 billion in fiscal years 1987 and 1988.
#
Note:
#
#
Photographs will be available upon request in
approximately one week. For information, contact
Charlotte Mehuron at 566-6576.
Recipients of Awards
for
Distinction in Cash Management
December 6, 1984
AWARD FOR DISTINCTION IN CASH MANAGEMENT
The Award for Distinction in Cash Management in 1984 is given to
23 federal employees who, by their outstanding performance, developed
implemented, enhanced, or supported cash management efforts that
collectively saved millions of dollars in interest expense for the
American public. The cash awards range from $2,000 to $10,000 lump
sum.
CAPTAIN JOHN R. HERK0
Staff Finance Officer, U.S. Army
Finance and Accounting Center
Award - $2,000
JAMES V. JOHNSTON
Chief, Accounting Branch
Award - $2,000
U. S. ARMY
Indianapolis, IN
Captain John R. Herko is
recognized for evaluating cash
management initiatives in the
U. S. Army. His work to
establish the worldwide use
of travelers checks in Army
finance offices and test
automated teller machines to p
soldiers has been clearly
exceptional.
U.S. DEPARTMENT OF ENERGY
Oak Ridge, TN
Mr. Johnston is recognized for
significant and continuous
contributions over a period of
several years. He was
instrumental in implementing
the Treasury Financial
Communications System
resulting in $475,000
interest savings per year. He
established a lock box procedure for contractors, and the
Prompt Pay Act requirements.
He is currently involved in a
pilot for the use of the simpj.
intergovernmental billing and
collection system.
-2-
DAVID E. NEVERMAN
Assistant Administrator
Planning, Budgeting, and
Finance, Farmers Home
Administration
Award - $2,000
SAM R. PRESTIANNI
Program Analysis Officer
Social Security Administration
Award - $2,000
MARY A. NUGENT
Cash Management Officer
Award - $3,000
DEPARTMENT OF AGRICULTURE
Washington, D.C.
Under Mr. Neverman's leadership, the
Agency's cash concentration system
was successfully piloted in
four states. When fully
implemented, this
system is expected to net
$16 million in annual
interest savings.
DEPARTMENT OF HEALTH & HUMAN SERVICES
Baltimore, MD
Mr. Prestianni initiated the idea
that the Social Security Trust
Fund should be credited for
uncashed Title II benefit checks.
He developed the legislative
package sent to HHS.
This was ultimately signed into
Public Law in 1983, saving $50
million each year to the Social
Security Trust Fund.
U.S. DEPARTMENT OF JUSTICE
Washington, D.C.
Ms. Nugent established a lock box
facility, which achieved a
17-day acceleration in
processing; accelerated
collections by the Bureau of
Prisons by changing the billing
cycles; and implemented the
government credit card program.
These initiatives have saved $1.7
million through FY 1984 and will
save $1.8 million annually.
-3J.L. PEARRE
Operating Accountant
Naval Supply Systems Command
D.W. WHITE
Systems Accountant
Naval Supply Systems Command
Award - $3,000
SONYA STEWART
Director, Financial Federal
Assistance
Award - $3,000
JAMES B. DEEMER
Controller
Award - $4,000
UNITED STATES NAVY
Washington, D.C.
Mr. Pearre and Mr. White are jointly
recognized for their outstanding
efforts in implementing the cash
management program within the Naval
supply system community, which
in FY 1984 reduced interest
payments by 50% and early
payments by 93%, resulting
in annual savings of approximately
$1 million.
U.S. DEPARTMENT OF COMMERCE
Washington, D.C.
Ms. Stewart is cited for her
outstanding performance in
developing, implementing and administrating a departmentwide program
covering all elements of cash
management in the Department of
Commerce and for substantially
exc-eeding established cash management
goals for savings of $1 .million.
FEDERAL HOME LOAN BANK BOARD
Washington, D.C.
Mr. Deemer has been an instrumental
force in his agency's cash management
efforts. During FY 1984, he significantly lowered the float time for
depositing some $600 million in cash
receipts, reduced the outstanding
cash travel advances and markedly
raised the purchase discount savings
by installing an automated
warehousing system, for
savings of $1 million.
-4GARY B. SARFIELD
Chief, Assessments and Financial
Operations Section
RALPH E. ELOSSER, JR.
Systems Accountant
DENNIS J.CREAMER
Senior Budget and Systems Analyst
FEDERAL DEPOSIT INSURANCE
CORPORATION
Washington, D.C.
This FDIC team is recognized for
their exceptional service in the
development and implementation of the
FDIC liquidation cash
management system, which will
save a total of $3 million per
year.
GARY T. PETERSON
Assessment Auditor
Award - $4,000
MARK D. LOOP
Director, Cash Management and
Funds Control Division
Award - $4,000
RALPH J. 0LM0
Comptroller
Award - $4,000
DEPARTMENT OF ENERGY
Washington, D.C.
From 198 0 to the present, Mr. Loop
has cont inou sly p rovided the
Depa rtme nt o f Ene rgy and the federal
go vernme nt w ith d edicated,
prof essi onal lead ership and sound
judg ment tha t con sistently resulted
in i mpro veme nts i n the department's
cash man agem ent p olicies and
prac tice s . His e fforts have
resu lted in over $50 million
of b enef its to th e government
to d ate, wit h rec urring
bene fits of $5 mi 1 lion annually.
U.S. DEPARTMENT OF EDUCATION
Washington, D.C.
As a result of Mr. Olmo's personal
involvement and aggressive
management, there has been a
profound, long range
impact on the programs and
objectives relating to the
cash management objectives,
practices, policies and
procedures, which have resulted
in estimated interest savings
of over $13 million.
-5HELEN 0. SHERMAN
Staff Assistant to the
Controller
Award - $4,000
DR. WILLIAM L. KENDIG
Director, Office of Financial
Management
Award - $6,000
JOSEPH J. HEIN
Acting Deputy Director
Mortage Insurance Accounting
and Servicing Group
Award - $8,000
DEPARTMENT OF ENERGY
Washington, D.C.
Ms. Sherman has for several years
been a major contributor to improved
federal cash management for
both the Departments of
Transportation and Energy.
She had the lead responsibility
for the development and
nationwide implementation of L0CTFCS and was instrumental in
establishing a controller's office
perspective to improve outlay
forecast ing.
U.S. DEPARTMENT OF THE INTERIOR
Washington, D.C.
Under Dr. Kendig's guidance and
direction, the department's cash
management efforts have saved
between $3.5 and $4.5 million
during. FY 1984, with
longer savings expected during
FY 1985. Moreover, improved
operating practices relating
to cash management were
initiated throughout the department
DEPARTMENT OF HOUSING AND URBAN
DEVELOPMENT
Washington, D.C.
Mr. Hein is an outstanding
leader in cash management.
Working together with Ms.
Evans, who is also cited,
they obtained the first Treasury
approved lock box, added five
additional lock boxes and
initiated wire transfer and
electronic payment systems.
Ongoing interest savings
resulting from their
outstanding achievements and
projected at $26.5 million
annually, in addition to an
initial one-time savings of $60
mill ion.
-6DAVID E. NICHOLS
System Accountant
Agriculture Stabilization
and Conservation Service
Award - $8,000
GORDON M. TAKESHITA
Director, Finanical Management
Division
Award - $8,000
DAVID V. DUKES
Deputy Assistant Secretary,
Finance
Award - $10,000
U.S. DEPARTMENT OF AGRICULTURE
Washington, D.C.
Mr. Nichols directed an interdepartmental team in a
comprehensive cash management
study, and based on this,
drafted more than 22 specific
action plans, coordinated all of them
and personally completed many
of these plans. Savings of
over $1.2 million have already
been realized and an additional
annual savings of $5.6 million
is projected.
U.S. ENVIRONMENTAL PROTECTION
AGENCY
Washington, D.C.
Through Mr. Takeshita's
extraordinary capability and
skill, executive savings
of over $1.9 million in
interest .expense was realized
a result of various initiatives
This surpasses EPA's FY
1984 goal by more than 40%.
Foremost among these
initiatives was the
conversion to EFT for eligible
grant recipients.
DEPARTMENT OF HEALTH & HUMAN
SERVICES
Washington, D.C.
Mr. Dukes is rec ognized for his
sustained superi or leadership,
management, and coordination of
three complex ca sh management
initiatives. His implementation
of a delay-of-dr awdown
technique with t he states
have resulted in governmentwide
interest savings in excess of
$140 million. I n addit ion,
because of Mr. D ukes' diligence
in assigning top priority to
HHS ' s cash management
initiatives, the Department's
target of $60 mi llion was
exceeded by j>14 million in interest
savings.
-7SHIRLEY A. EVANS
Director, Office of Finance
and Accounting
Award - $10,000
LINDA F. VANDENBERG
Director, Office of Finance
and Accounting
Award - $10,000
DEPARTMENT OF HOUSING
DEVELOPMENT
W a s h i n g t o n , D.C.
AND
URBAN
Work ing tog ethe r with Mr. H e i n ,
who is also cit ed, M s . Evans is
an o uts tand ing leader in cash
mana gem ent.
Th ey obta ined the
firs t T reas ury- approve d lock
box, ad ded f i ve additi onal lock
and ini t iat ed w ire tra nsfer and
elec t ro nic paym ent sys terns .
Ongo ing int eres t savin gs
resu lti ng f rom their
outs tan ding ach ievemen ts are
proj ect ed a t $2 6.8 mil lion
annu all y» i n ad dit ion to an
init ial one -t im e savin gs of $60
mill ion
GENERAL SERVICES ADMINISTRATION
Washington, D.C.
M s . Vandenberg contributed
enor mously toward the
impr ovement of the cash
mana gement posture within
She was the co-author of
GSA.
the 0MB Circular, .A-125, Prompt
She was responsible for
Pay.
impl ementing Prompt Pay in GSA,
whic h has resulted in earned
disc ounts of $16.7 million
in F Y 1983 and $11.7 million in
She implemented a
FY 1 9 8 4 .
t rav el and transportation
paym ent system which is
proj ected to save $120 million
when implemented
Gove rnmentwide.
-8HONORARY AWARD FOR DISTINCTION IN CASH MANAGEMENT
The Honorary Award for Distinction in Cash Management in 1984 is
given to three distinguished individuals from both the public and
private community for their highly exceptional contributions to
Treasury's cash management efforts.
THOMPSON KIMMEL
Board Chief, Finance Branch
MERIT SERVICE PROTECTION
Washington, D.C.
Mr. Kimmel received this
honorary award for his
dedicated work in
developing, adopting, and using
state-of-the-art cash
management techniques while
employed at the Department of
Agriculture. Mr. Kimmel was
the focal point in expanding
USDA's Reform '88 plan to
34 initiatives to generate
$7 million in interest savings
over and above USDA's original
plan. Additionally, through the
efforts of a task force which Mr.
Kimmel was actively involved in,
improvements representing $6.8
million were identified (see
David E. Nichols) .
JOHN H. KORENKO
Manager, Cash Operations
PRIVATE SECTOR
COMPANY
COUNCIL/DUPONT
Mr. Korenko, a pro bono
executive provided by the
DuPont Company in conjunction
with the Private Sector
Council, recently completed a
ten-week project with a
Treasury team in the Financial
Management Service.
The project analyzed the
government's collection system
and designed a bank management
system. The project reaffirmed
a Treasury plan which will
save an estimated $120 million
annually and identified
additional savings
opportunities in excess
of $15 million per year.
-9JUDITH L. TARDY
Assistant Secretary
for Administration
DEPARTMENT OF HOUSING & URBAN
DEVELOPMENT
Washington, D.C.
SECRETARY'S CERTIFICATE AWARD
HUD pioneered the use of lock
boxes and electronic funds
transfers to improve its cash
collection processs. In the
area of disbursements, the
department was also on the
forefront of cash management
technology as an early user of wire
transfers for payments. Most
recently, HUD is piloting a
customer-originated automated
system--the first entirely
"paperless" collection/remittance transaction system in the
government. These advances in
HUD ' s cash management
program were a result of the
leadership, encouragement and
vision of Assistant Secretary
for Administration Judith L.
Tardy. Her efforts commenced
in 1981 and have already
achieved an estimated $112
million in.interest savings.
Further, under her leadership,
HUD has institutionalized cash
management programs that are
estimated to save approximately
$26.5 million annually
in the future (see also Joseph
J. Hein and Shirley A. Evans).
The Secretary's Certificate Award in 1984 is given to 12
federal employees in recognition of their outstanding contributions
to the advancement of cash management in their agencies.
DONALD CREMIN
Systems Accountant
U.S. RAILROAD RETIREMENT BOARD
Chicago, IL
Mr. Cremin was instrumental in
developing and implementing the
use of EFT for the collection
of Railroad Retirement taxes.
This initiative has maximized
the use of board funds, eliminated
unnecessary float and significantly
increased the RRB's earnings on
trust fund investments by over
$39 million annually.
-10MICHAEL N. HALL
Accounting Officer
U.S. DEPARTMENT OF ENERGY
San Francisco, CA
Through Mr. Hall's efforts,
stronger monitoring techniques
in the San Francisco Operations
Office for their letter of
credits have been developed,
cash monitoring reports and
procedures have been
developed and extensive
review studies with recommended
actions have been developed and
implemented.
GLENN T. HARDISON
Director, Office of
Administration and Management
U.S. DEPARTMENT OF LABOR
Dallas, TX
LOUIS C. MANGANIELLO
Chief, Accounting Branch
SECURITIES AND EXCHANGE
COMMISSION
Washington, D.C.
Mr. Hardison developed and
implemented the Treasury Financial
Communications Systems letter
of credits for Employment and
Training trainees. During the
course of this application,
Mr. Hardison decided that a similar
approach could be taken
with the states. This
initiative, which was
new to the states, provided
for a timely and efficient
movement of funds to local
governments, with a minimum of
paper.
Mr. Manganiello has developed
and implemented various cash
management techniques to
reduce SEC's voucher payment
and processing time, expedite
the collection of
General Fund fee revenue,
ensure SEC compliance with
Prompt Payment Act mandates
and facilitate the timely
and accurate payment of payroll
obligations.
-11-
ROY A. MEREDITH
Chief, Accounting and
Finance Division
DEFENSE COMMUNICATIONS AGENCY
Washington, D.C.
Mr. Meredith's implementation
of the Prompt Payment Act has
resulted in a near perfect
record for the agency. He
personaly designed an automated
technique for programming an
automated schedule of payments.
In addition, Mr. Meredith
instituted practices
which require a monthly
analysis of the funds in the
hands of cashiers to ensure
the sums are appropriate.
TIMOTHY O'LEARY
Deputy Director
Office of Portfolio Management
Washington, D.C.
CARMAN CELLUCCI
Chief, Administrative
and Accounting Section
Washington, D.C.
JOHN KUSHMAN
Systems Accountant
Accounting Policy and Procedure
Staff
Washington, D.C.
U.S. SMALL BUSINESS
ADMINISTRATION
Washington, D.C. and Denver, CO
The efforts of these individuals
brought an awareness of the
importance of cash management to SBA
and have to led to the examination
and modification of longstanding but
very high dollar cash processing
systems. This new level of cash
management involvement should pave
the way to future cash management
improvement savings in excess of
$1.8 million per year.
DOROTHY WILLIAMS
Director, Office of Financial
Operations
Denver, CO
WILLIAM REASE
Comptoller
U.S. DEPARTMENT OF LABOR
Washington, D.C.
In his role as comptroller, Mr.
Rease has provided leadership
in the development of an
automated system for small
purchases which queues payment
transactions to meet Prompt
Payment Act requirements,
the use of Treasury Financial
Communications System letter of
credits for al1 ' department
grant programs and the
conversion to wire transfer
and lock box systems.
-12-
VERNE L. ZIMBELMAN
Chief, Finance and Centralized
Accounts Receivable Division
VETERANS ADMINISTRATION
St. Paul, MN
Mr. Zimbelman improved
collections processing
amounting to $27,900 in
an average month.
He also took a
leading role to improve the
transfer of funds to the
VA central office for
investment for a monthly
savings of $84,000. Total
savings amount to $1.3
million per year.
JAMES J. Z0K
Deputy Associate Administrator
for Maritime Aids
U.S. DEPARTMENT OF
TRANSPORTATION
Washington, D.C.
Mr. Zok has initiated or
directed the revision of
all the Maritime
Administration's cash
management procedures.
He streamlined the agency's
payroll system and increased
the direct deposit program.
He
improved the administration
of travel funds and introduced EFT
payments mechanisms for fees collection,
rREASURY NEWS
spartment of the Treasury • Washington, D.C. • Telephone 566FOR IMMEDIATE RELEASE Contact: Brien Benson
Thursday, December 6, 1984
566-2041
Issuance of Final Customs Rules Regarding
Operation of the Caribbean Basin Initiative
Treasury Assistant Secretary John M. Walker, Jr. today
announced the release of final Customs Service rules on importation of merchandise from countries covered by the Caribbean
Basin Initiative (CBI). The new rules eliminate some procedural
requirements and generally streamline the present CBI importation
process, which since January 1, 1984 has been governed by
temporary Customs regulations that some Caribbean shippers have
characterized as burdensome.
The Caribbean Basin Initiative, which allows many Caribbean
countries to ship products to the United States without payment
of Customs duties provided country-of-origin and procedural
requirements are met, is one of the chief Reagan Administration
initiatives for strengthening the economies of countries in
that region. According to Mr. Walker, the most important
change that today's rules make in the procedural requirements is
the elimination of detailed statements of manufacturing processes
and costs, which under the interim rules are required to accompany
each shipment. Caribbean manufacturers have complained that
this requirement forces them to disclose confidential business
information to U.S. importers. Under an interim provision in
today's rules, a less detailed certificate of origin will be
required, and the confidential information will be sent directly
to Customs, but only if requested. This and other interim
provisions addressing the documentation requirements for duty-free
shipments will go into effect now, but Treasury will evaluate the
changes in light of public comments received.
Also included in today's rulemaking package are a number of
final CBI rules and a new proposed rule that would waive the
current requirement that a foreign government certification be
submitted with each shipment covered by the Generalized System of
Preferences (GSP). The result of this change, together with other
changes made in the new package, would be the elimination of most
procedural distinctions between GSP duty-free treatment and CBI
duty-free treatment. As for the final CBI rules ^eluded in the
package, Mr. Walker described the changes as "liberalizing and
clarifying the requirements so that CBI will be easier than ever
to use."
"We recognize that Congress expects us to ensure that the
requirements of the law for obtaining duty-free treatment are
met," said Mr. Walker. "At the same time, we are committed to
the success of the CBI, and we shall take whatever steps we can,
consistent
success." with our enforcement responsibility, to ensure its
R-2950
TREASURY NEWS
FOR IMMEDIATE
December 10, 566-2041
1984
Department
of the RELEASE
Treasury • Washington, D.C. • Telephone
RESULTS OF TREASURY'S WEEKLY BILL AUCTIONS
Tenders for S 6,805 million of 13-week bills and for S 6,823 million
of 26-week bills, both to be issued on December 13, 1984, were accepted today,
RANGE OF ACCEPTED
COMPETITIVE BIDS:
Low
High
Average
13-week bills
maturing March 14, 1985
Discount Investment
Rate 1/
Price
Rate
8.37%
8.39%
8.38%
8.67%
8.69%
8.68%
26-week bills
maturing June 13, 1985
Discount Investment
Price
Rate
Rate 1/
97.884
97.879
97.882
8.55%
8.57%
8.57%
9.06%
9.08%
9.08%
95.678
95.667
95.667
Tenders at the high discount rate for the 13-week bills were allotted 48%.
Tenders at the high discount rate for the 26-week bills were allotted 63%.
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
$
398,720
18,820,160
25,370
81,615
63,125
51,110
1,567,585
87,070
51,575
55,450
25,790
1,304,620
281,965
$ 144,330
'5,785,970
$22,814,155
$6 ,804.695
$19,770,160
1,079,940
$20,850,100
$
Accepted
380,945
16,613,665
20,675
73,000
59,205
95,195
1,270,905
79,555
42,175
52,420
21,540
1,468,540
315,060
$ 30,945
5 ,436,555
:
$20,492,880
$6 ,822,950
$3 ,760,700
1,079,940
$4 ,840,640
.
:
:
$17,631,180
861,125
$18,492,305
$3 ,961,250
1,608,830
1,608,830
:
1,600,000
1,600,000
355,225
355,225
:
400,575
400,575
$22,814,155
$6,804,695
$20,492,880
$6,822,950
25,370
48,175
38,125
42,510
108,585
47,070
10,575
54,450
25,790
191,780
281,965
18,675
31,150
42,565
33,455
187,855
34,555
15,175
48,420
21,540
607,000
315,060
861,125
$4 ,822,375
An additional $69,875 thousand of 13-week bills and an additional $ 79,425
thousand of 26-week bills will be'issued to foreign official institutions for
new cash.
1/ Equivalent coupon-issue yield.
R-:9bl
FREASURY NEWS
lartment off the Treasury • Washington, D.C. * Telephone 566-204
FOR IMMEDIATE RELEASE
December 11, 1984
CONTACT: Brian Benson
(202) 566-2041
STATEMENT BY THE DEPARTMENT OF THE TREASURY
The Department of the Treasury announced today that prior to
the December 10 deadline for bid submission, it received two
bids for the stock in Erie Lackawanna Inc. owned by the United
States. The bids are $8,425,103.94 ($81.18 per share) and
$8,058,123.61 ($77.64 per share). The Department is reviewing
the bids to determine whether the bidders are "suitable and
responsible" as provided in -the "Invitation for Bids to Purchase
103,783 Shares of Erie Lackawanna Inc." The Department hopes to
make a decision with regard to accepting a bid by December 21, 1984.
###
R-2952
TREASURY NEWS
lepartment off the Treasury • Washington, D.C. • Telephone 566-2041
FOR RELEASE AT 4:00 P.M.
December 11, 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 December 20, 1984. This
offering will result in a paydown of about $4,500 million, as the
maturing bills total $18,091 million (including the 17-day cash
management bills issued December 3, 1984, in the amount of $5,013
million).
The $13,078 million of regular maturities includes $1,330
million currently held by Federal Reserve Banks as agents for
foreign and international monetary authorities and $3,434 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 March 22,
1984, and to mature March 21, 1985 (CUSIP No. 912794 GJ 7 ) , currently outstanding in the amount of $14,895 million, the additional
and original bills to be freely interchangeable.
182-day bills for approximately $6,800 million, to be
dated December 20, 1984, and to mature June 20, 1985 (CUSIP
No. 912794 HG 2 ) .
Both series of bills will be issued for cash and in exchange
for Treasury bills maturing December 20, 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-2953
- 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,
December 17, 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 December 20, 1984, in cash or other immediately-available funds
or in Treasury bills maturing December 20, 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
partment off the Treasury • Washington, D.C. • Telephone 566-20
FOR RELEASE AT 4:00 P.M.
V
J*j 3 Q^ie&tM 12, 1984
.FF.-.P.IMEHT OF THE TREASURY
TREASURY TO AUCTION $9,000 MILLION OF 2-YEAR NOTES
The Department of the Treasury will auction $9,000 million
of 2-year notes to be issued December 31, 1984. This issue will
provide about $1,625 million new cash, as the maturing 2-year
notes held by the public amount to $7,385 million, including $399
million currently held by Federal Reserve Banks as agents for
foreign and international monetary authorities.
In addition to the maturing 2-year notes, there are $3,310
million of maturing 4-year notes held by the public. The disposition ot this latter amount will be announced next week.
Federal Reserve Banks as agents for foreign and international
monetary authorities currently hold $800 million, and Government
accounts and Federal Reserve Banks for their own accounts hold
$934 million ot maturing 2-year and 4-year notes.
The $9,000 million is being offered to the public, and any
amounts tendered by Federal Reserve Banks for their own accounts,
or 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.
Details about the new security are given in the attached
highlights of the offering and in the official offering circular.
oOo
Attachment
R-2954
HIGHLIGHTS OF TREASURY
OFFERING TO THE PUBLIC
OF 2-YEAR NOTES
TO BE ISSUED DECEMBER 31, 1984
December 12, 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
$9,000 million
2-year notes
Series AC-1986
(CUSIP No. 912827 RR 5)
December 31, 1986
No provision
To be determined based on
the average of accepted bids
To be determined at auction
To be determined after auction
June 30 and December 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, December 19, 1984,
prior to 1:00 p.m., EST
Monday, December 31, 1984
Thursday, December 27, 1984
TREASURY NEWS
lepartment off the Treasury • Washington, D.C. • Telephone 566-2041
FOR RELEASE AT 12:00 NOON
December 14, 1984
TREASURY'S 52-WEEK BILL OFFERING
The Department of the Treasury, by this public notice,
invites tenders for approximately $8,500 million of 364-day
Treasury bills to be dated December 27, 1984, and to mature
December 26, 1985 (CUSIP No. 912794 HQ 0 ) . This issue will provide
about $225 million new cash for the Treasury, as the maturing
52-week bill was originally issued in the amount of
$8,272 million.
The bills will be issued for cash and in exchange for
Treasury bills maturing December 27, 1984. In addition to the
maturing 52-week bills, there are $11,931 million of maturing
bills which were originally issued as 13-week and 26-week bills.
The disposition of this latter amount is also being announced today.
Federal Reserve Banks as agents for foreign and international
monetary authorities currently hold $1,639 million, and Federal
Reserve Banks for their own account hold $4,380 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 $110
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 Bank- and
Branches and at the Bureau of the Public Debt, Washington, D. C.
20239, prior to 1:00 p.m., Eastern Standard time, Thursday,
December 20, 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-2955
- 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 December 27, 1984, in cash or other immediately-available funds
or in Treasury bills maturing December 27, 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 en 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 off the Treasury • Washington, D.C. • Telephone 566-2041
FOR RELEASE AT 12:00 NOON
December 14, 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 December 27, 1984.
This offering will provide about $1,675 million of new cash for
the Treasury, as the maturing bills were originally issued in
the amount of $11,931 million. The two series being offered
are described below.
Because of the holiday season, these bills will be
auctioned on Friday, December 21, 1984, and the weekly bill
auction normally scheduled for Monday, December 31, will be
held on Friday, December 28. Details about that offering will
be announced Friday, December 21.
91-day bills (to maturity date) for approximately
$6,800 million, representing an additional amount, of bills dated
September 27, 1984, and to mature March 28, 1985 (CUSIP No. 912794
GX 6 ) , currently outstanding in the amount of $6,634 million, the
additional and original bills to be freely interchangeable.
182-day bills for approximately $6,800 million, to be
dated December 27, 1984, and to mature June 27, 1985 (CUSIP No.
912794 HH 0 ) .
Both series of bills will be issued for cash and in exchange
for Treasury bills maturing December 27, 1984. In addition to the
maturing 13-week and 26-week bills, there are $8,272 million of
maturing 52-week bills. The disposition of this latter amount is
also being announced today. Federal Reserve Banks, as agents for
foreign and international monetary authorities, currently hold $1,639
million, and Federal Reserve Banks for their own account hold $4,380
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 $1,529
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-29^
- 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, Friday,
December 21, 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 s Lmitted 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 December 27, 1984, in cash or other immediately-available funds
or in Treasury bills maturing December 27, 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. Copito 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.
FREASURY NEWS
apartment off the Treasury • Washington, D.C. • Telephone 566-2041
FOR IMMEDIATE RELEASE
December 17, 1984
Contact: Brien Benson
(202) 566-2041
Treasury Announces Appointment of David Dart Queen
as Deputy Assistant Secretary (Enforcement)
The Department of the Treasury today announced the
appointment, effective January 14, 1985, of David D. Queen
to the position of Deputy Assistant Secretary of the Treasury
for Enforcement. Mr. Queen will report to Assistant Secretary
John M. Walker, Jr. and will be responsible for enforcement
policy and oversight and program management for the United
States Customs Service; the United States Secret Service;
the Bureau of Alcohol, Tobacco and Firearms and the Federal
Law Enforcement Training Center (FLETC). Among other duties,
Mr. Queen will also be responsible for the administration of
the Bank Secrecy Act and will serve as the Co-chairman of
the Advisory Council for the National Center for State and
Local Training at the FLETC.
Mr. Queen, age 37, has served since 1982 as the United
States Attorney for the Middle District of Pennsylvania. From
1975 to 1982, he served as an Assistant U.S. Attorney in that
office and in the office of the U.S. Attorney for the District
of Maryland. He is a 1969 graduate of Ohio Wesleyan University
and a 1973 graduate of the Dickinson School of Law, where he
was on the Law Review and has served as an Adjunct Professor
of Law.
Mr. Queen is a member of the American Bar Association,
Federal Bar Association and Pennsylvania Bar Association.
He is admitted to practice in the United States Supreme Court,
lower federal courts in Maryland and Pennsylvania and in the
Supreme Court of Pennsylvania.
In making the announcement, Assistant Secretary Walker
said: "David Queen brings to Treasury a wealth of law enforcement experience as a lawyer and administrator. He has had
direct day-to-day contact, from the U.S. Attorney's perspective, with the agencies over which he will now have policy
and supervisory oversight. Dave will be a valuable member
of the Treasury Team."
R-2957
TREASURY NEWS
epartment off the Treasury • Washington, D.C. • Telephone 566-2041
FOR IMMEDIATE RELEASE
December 17, 1984
RESULTS OF TREASURY'S WEEKLY BILL AUCTIONS
Tenders for $6,803 million of 13-week bills and for $6,806 million
of 26-week bills, both to be issued on December 20, 1984, were accepted today.
RANGE OF ACCEPTED
COMPETITIVE BIDS:
Low
High
Average
13--week bills
maturing March 21, 1985
Discount Investment
Rate
Rate 1/
Price
7.95%
7.99%
7.97%
8.23%
8.27%
8.25%
26--week bills
maturing June 20, 1985
Discount Investment
Price
Rate
Rate 1/
97.990
97.980 :
97.985 :
8.13%
8.16%
8.15%
8.60%
8.63%
8.62%
95.890
95.875
95.880
Tenders at the high discount rate for the 13-week bills were allotted 29%.
Tenders at the high discount rate for the 26-week bills were allotted 25%.
TENDERS RECEIVED AND ACCEPTED
(In Thousands)
Received
Accepted
:
Received
Location
Accepted
Boston
New York
Philadelphia
Cleveland
Richmond
Atlanta
Chicago
St. Louis
Minneapolis
Kansas City
Dallas
San Francisco
Treasury
$
381,230
16,848,605
25,500
131,095
47,970
44,940
1,199,380
53,850
37,005
84,965
32,170
908,910
258,205
$
31,230
5,738,945
25,500
111,030
47,970
39,940
103,830
33,570
18,545
55,045
32,170
306,740
258,205
$
377,470
15,672,800
14,885
88,115
53,995
31,310
1,077,280
70,250
29,435
44,935
26,215
889,195
271,435
$ 27,470
5,650,050
14,885
63,115
35,245
25,185
256,280
42,750
28,435
43,935
26,215
320,945
271,435
TOTALS
$20,053,825
$6,802,720
$18,647,320
$6,805,945
Type
Competitive
Noncompeti tive
Subtotal, Public
$16,782,730
1,041,235
$17,823,965
$3,531,625
1,041,235
$4,572,860
$15,358,140
755,185
$16,113,325
$3,516,765
755,185
$4,271,950
Federal Reserve
Foreign Official
Institutions
1,740,055
1,740,055
1,700,000
1,700,000
489,805
489,805
833,995
833,995
TOTALS
$20,053,825
$6,802,720
$18,647,320
$6,805,945
An additional $85,795 thousand of 13-week bills and an additional $132,605
thousand of 26-week bills will be issued to foreign official institutions for
new cash.
1/ Equivalent coupon-issue yield.
R-2958
TREASURY NEWS
apartment off the Treasury • Washington, D.C. • Telephone 566-2041
FOR RELEASE AT 4:00 P.M.
December 18, 1984
TREASURY TO AUCTION $6,200 MILLION OF 4-YEAR NOTES
The Department of the Treasury will auction $6,200 million
of 4-year notes to be issuea December 31, 1984. This issue will
provide about $2,925 million new cash, as the maturing 4-year notes
held by the public amount to S3,278 million, including $402 million
currently held by Federal Reserve Banks as agents tor foreign and
international monetary authorities.
In addition to the maturing 4-year notes, there are $7,385
million of maturing 2-year notes held by the public. The disposition of this latter amount was announced last week. Federal
Reserve Banks, as agents tor foreign and international monetary
authorities, currently hold $800 million, and Government accounts
and Federal Reserve Banks tor their own accounts hold $966 million
of maturing 2-year and 4-year notes. The maturing securities held
by Federal Reserve Banks for their own account may be refunded by
issuing additional amounts of the new 2-year and 4-year notes at
the average prices ot accepted competitive tenders.
The $6,200 million is being offered to the public, and any
amounts tendered by Federal Reserve Banks tor their own account,
or as agents for foreign and international monetary authorities,
will be added to that amount.
Details about the new security are given in the attached
highlights ot the ottering and in the official offering circular.
oOo
Attachment
R-2959
HIGHLIGHTS OF TREASURY
OFFERING TO THE PUBLIC
OF 4-YEAR NOTES
TO BE ISSUED DECEMBER 31, 1984
December 18, 1984
Amount Offered:
To the public
Description of Security:
Term and type of security
Series and CUSIP designation
$6,200 million
4-year notes
Series Q-1988
(CUSIP No. 912827 RS 3)
Maturity date
December 31, 198 8
Call date
No provision
Interest rate
To be determined based on
the average ot accepted bids
Investment yield
To be determined at auction
Premium or discount
To be determined after auction
Interest payment dates
June 30 and December 31
Minimum denomination available.... $1,000
Terms of Sale:
Method ot 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 by non-institutional
investors
Full payment to be
submitted with tender
Payment through Treasury Tax
and Loan (TT&L) Note Accounts
Acceptable tor TT&L Note
Option Depositaries
Deposit guarantee by
designated institutions
Acceptable
Key Dates:
Receipt of tenders
Wednesday, December 26, 1984,
prior to 1:00 p.m., EST
Settlement (final payment
due from institutions)
a) cash or Federal funds
Monday, December 31, 1984
b) readily collectible check.... Thursday, December 27, 1984
TREASURY NEWS
epartment off the Treasury • Washington, D.C. • Telephone 566-2041
FOR RELEASE UPON DELIVERY
EXPECTED AT 4:00 P.M. EST
Remarks by
Secretary of the Treasury
Donald T. Regan
at the
Sievers Memorial Lecture Series
New York City
December 19, 1984
Good afternoon. It's a pleasure to be here and an honor to
deliver this year's final lecture in the Harry J. Sievers
Memorial Lecture Series.
Right off the bat I'd like to clarify something. Contrary
to whatever you've read, Governor Cuomo and I are not feuding
over the Treasury Department's tax reform proposals. And I think
the fact that I've gotten 12 traffic tickets since I arrived in
New York two hours ago is simply a run of bad luck.
Today, I'd like to discuss a new idea and make a request.
Actually, to be correct, I'd like to talk about an old idea, but
one that only recently has truly been placed on the table for
discussion.
The idea is tax reform. The request is for an honest
appraisal.
For the benefit of anyone who hasn't watched television in
the past three weeks, or read a newspaper, or talked to another
human being, our recently released tax reform proposal, which
we've sent to the President, has generated quite a bit of
interest.
We welcome the attention. We expected it. And we welcome
the comment of every group, and individual. But so far, judging
from what I've heard, read, and in the comments made directly to
Treasury, I don't think our proposal has always been given a full
appraisal.
Today, I want to give you an understanding of what our plan
will do, and the philosophy that motivated and directed our 10
months of study. I hope that when I'm finished, you will see why
we believe our recommendations are proper, necessary and overdue.
Our first objective was to assure a revenue neutral
proposal. We were, and remain, adamantly opposed to tax reform
being a vehicle for raising taxes.
R-2960
-2In this regard, as the debate continues, we will resist
having tax reform linked with deficit reduction. The issues are
separate.
Yes, deficit reduction is critically important, but it is
another matter completely. We are attending to it and you will
be hearing a lot more about that. It will have first priority,
and it will be done in the right way — by cutting Federal
spending. Remember deficits aren't created by undertaxing,
they're the aftermath of too much spending.
But tax simplification, on its own, deserves the fullest and
fairest consideration by the Congress. And if they don't know it
yet, they will soon learn, as we in Treasury already have, that
the people are demanding it.
In a survey commissioned by the IRS and conducted earlier
this year by the New York firm of Yankelovich, Skelly and White,
some of the demands came across loud and clear.
Here's just a few of the highlights:
o About 3 out of 4 taxpayers believe their income taxes are
much too high for what they get in return.
o Only 1 in 4 taxpayers believes the federal government is
doing a good job in deciding how tax dollars will be
spent.
o 4 out of 5 taxpayers believe the present tax system
benefits the rich and is unfair to the ordinary working
man or woman.
o About 3 in 5 taxpayers believe federal income tax laws
are unfair in their particular income situation.
o A majority of taxpayers believes the federal income tax
laws and rules are complicated for their situation.
o A majority of respondents perceived that over 25% of the
public is cheating on their taxes. In fact, 1 in 4 felt
that more than half the public is cheating on taxes to
some extent.
Our second objective was distributional neutrality That
is, I told my staff to put together a reform package that would
not significantly change the individual tax burdens across income
classes — as well as in total amount.
-3We know there are philosophical arguments for changing the
distribution of tax burden by income class. And the arguments
run the gamut -- from those who would shift the burden upwards to
the rich — after all it's only fair that if you earn more you
should pay a higher rate; to those who contend that a pure flat
tax, that is to say, a single rate, is the only proper method -after all it's only fair that the same rate apply to all.
That debate will always be with us. But for now, we at
Treasury don't want to become embroiled in a philosophical
argument that would interfere with fundamental tax reform.
Therefore, our working assumption was, and is, that the burdens
should not be shifted — and in our plan, they are not.
With one exception — one income class. We proposed that
families living below the poverty level pay no tax at all. We
think compassion dictates this recommendation and, if you will,
excuses the slight deviation from a totally neutral
distributional impact.
Now, in conjunction with these guiding objectives, our
reform goals were fairness, simplicity and the encouragement of
economic growth.
We believe the package we've put together, reconciles
competing requirements and would have positive, far-reaching
effects on our economy, on individual taxpayers, and on
businesses.
One of the most important aspects of our proposal is the
recommendation that all sources and uses of income be taxed in a
uniform and consistent manner. Most Americans would consider
that equitable.
It's fair to collect roughly the same amount of income tax
from two families with equal incomes. Similarly, two businesses
with the same income ought to pay equal amounts of tax.
This treatment is desirable and important in and of itself.
But there's another effect equally desirable, equally important
— the promotion of a free market economy.
In his 1982 book "The Spirit of Democratic Capitalism,"
Michael Novak begins with the following passage: "Of all the
systems of political economy which have shaped our history, none
has so revolutionalized ordinary expectations of human life —
lengthened the life span, made the elimination of poverty and
famine thinkable, enlarged the range of human choice — as
democratic capitalism."
-4I agree with Mr. Novak to the letter. And the United
States, rooted in a free market system, has been the shining
success story of that philosophy.
Yet, anyone looking at our tax system today would never
believe that this country still has a strong commitment to free
market economics. Various deductions, exclusions, credits and
preferential rates guide decisions about consumption, investment,
production and financing.
The result is economic distortion, a de facto industrial
policy, that is totally alien to our founding philosophy, the
philosophy of this Administration, and to the thinking and
beliefs of the American public.
Rather than being determined by economic rates of return,
investment decisions have been driven as much by tax
consequences. As a result, our nation's capital and labor do not
necessarily flow into the most productive uses. Instead they go
where the tax benefits are greatest; even if before-tax return is
low, or even negative.
We have, for example, an explosion of tax shelters in
movies, orchards, pop records, and the like, where the write-off
comes first and economic viability and profit are secondary, if
indeed they even count at all.
Our proposals sit firmly on a fundamental belief that
markets work better than governments in determining the best
allocation of a nation's resources — in determining what should
be produced, how it should be produced, and how the process
should be financed.
It's doubtful that tax influences can ever be totally
removed from the economic decision-making process. But we can go
a long way toward minimizing their interference. Our proposals
put decisions back where they belong — on grounds of economic
rationality. Our recommendations would accomplish this shift
back to market forces by flushing the system of the distorting
factors.
We want to remove all the accummulated clutter — all the
deductions, credits, loopholes, shelters, and everything else
thought up by creative lawyers and accountants. And our goal is
to bring down high tax rates, which also interfere with market
forces by affecting choices about working, saving, investing and
produe ing.
-5We want every American to know that if he works longer, or
harder, if he's more creative, or more innovative, then he is
going to keep more of the fruits of his labor.
This whole idea is so conservative, it's radical. Imagine
in this day and age trying to get the free market to work.
Would our proposals accomplish this? To answer that I asked
Internal Revenue Commissioner Roscoe Egger to work up some
comparisons of tax liability — using current law, and our
proposal.
His staff randomly selected 257 1983 tax returns from some
5000 on hand in his Statistics of Income Inventory. The sample
includes returns filed in January, February and March. It does
not include returns submitted at the end of the filing season,
which tend to be the more complicated and higher-income returns.
Therefore, admittedly, the findings vary somewhat from our
projections in the Tax Reform package. But I still want to cite
this survey because it offers some real, empirical evidence of
our proposals' impact on taxpaying Americans.
The sampling included returns from all the major filing
categories — the 1040EZ, the 1040A and the 1040. The returns
were recomputed for 1986. Here's what was found:
Out of 40 returns using the 1040EZ, 26 would have a lower
tax liability under our proposal. On 3 of the returns where
taxes would be owed under current law, our proposal would wipe
out those tax liabilities. In no case in our comparison did tax
liability increase as a result of our proposal.
For those returns using the form 1040A, 24 out of 35 would
see a reduction in taxes under our proposal, while only 2 would
have increases, and those increases would be very slight.
The sample included 182 returns using the form 1040, which
is utilized by itemizing taxpayers. Under our proposal, 147
taxpayers, or more than 80 percent, would see a reduction in tax
liability. Only 29 taxpayers would see an increase.
Summarizing these computations, we find 198 taxpayers out of
257, or 77 percent, would owe less under our proposal.
Approximately 10-1/2 percent would have no change. And only
thirty-one, or about 12-1/2 percent, would owe more in taxes in
1986.
-6These results come as no surprise to me. Our plan is
clearly in the best interest of the vast majority of American
taxpayers.
Unfortunately, many have grown quite fond of, or more
accurately, quite dependent on, this or that particular aspect of
the tax code.
There are any number of people and industries benefiting
from some provision of our current tax system at the expense of
others and at the expense of a higher degree of economic
efficiency.
As you might expect, some of these present beneficiaries are
screaming over the proposed removal of their pet tax preference.
It's going to be interesting to note some of the arguments.
We will now find out which businesses, individuals and
financiers genuinely believe in the free market, or really want
to have government subsidies.
We will now find out which labor leaders really represent
working Americans, or the poor and the disadvantaged about whom
they talk so much, and which of them are just servants to some
special groups out to preserve a tax break.
We will now find out which Americans, who so loudly complain
about the inequities of the tax system, are really interested in
improvement, and which of them just want to hang on to, as one
put it to me, "our edge."
We will now find out which of our politicians are really
interested in helping all Americans, and which politicians are
merely beholden to special constituencies to which they owe past
and potential electoral triumphs.
They all have their chance now — with Treasury's tax plan
that has drawn support from all those who favor fair and neutral
taxation. And this support comes from across the spectrum. We
have conservative economists joined by liberals. We're supported
on the right and the left. Our plan has been favorably received
by some business groups and there's more to come.
In the political arena we've had favorable comments from
Democratic Senators and Governors, and our plan has been praised
by Congressmen on both sides of the aisle.
Don't let me be misunderstood here. I am not claiming
perfection for our plan nor am I attempting to pre-empt
legitimate comments from those who believe some of our proposals
are harmful.
-7But an individual, or group, or some industry can't come to
us stating simply that one of our proposals would have
undesirable effects on them, or cause their taxes to go up, and
expect us to rewrite the pertinent part of our plan.
Come talk to us. We'll listen and we'll take a close look.
I guarantee that. But remember, there's a difference between an
individual undesirable effect and inequity.
So, even before you come talk to us, do us both a favor.
There's been a lot of rhetoric and loose claims since the plan
was released. I ask that you calculate the effects of the entire
proposal; not simply one aspect that could possibly have negative
effects if considered by itself.
I am convinced that a complete analysis would cause many of
the "reflex critics" to rethink their opposition.
Let me touch on a few of the more visible controversies.
First, a good many businessmen, industry representatives and
some economists are decrying the loss of Accelerated Cost
Recovery, and its replacement with real depreciation, and the
elimination of the Investment Tax Credit.
We're hearing, too, that RCRS will be no help to our
industries with competition aboard and that this proposal is a
reversal of our 1981 tax laws.
Now, I admit that some industries making major use of ACRS
and the ITC would experience adverse tax effects if those
provisions were eliminated. But to gauge the effects in that
light only is to work with only half the equation.
Crank into your computation a sharply reduced top tax rate,
a massive 50 percent deduction on dividends, the indexing of
capital gains, inventories, interest and depreciation, as well.
Concerning international competitiveness, our calculations
— using RCRS and the indexing provisions -- actually show many
businesses and industries would have their positions enhanced.
We calculated two normal depreciation situations -- one with
a ten-year holding period and one with a faster turnaround of
three years. In both cases, the companies find themselves
significantly better off.
-8In all these cases we're waiting to be shown otherwise. But
I submit that when the entire equation is used, many of the
intitial complaints will evaporate. Most industries are going to
find they will come out better under our proposal than under
current law. Some already have found this out and have said so.
As far as being a reversal of 1981 policy, our
recommendation is much more a continuation of a constant
philosophy. Inflation in the 1970s was a tremendous distorting
factor in the economy. ACRS and the ITC were responses to that
problem. They were a form.of tax cuts. But inflation is now
down, and we hope, will continue down. But this is tax
simplification and reform.
That 1981 approach, useful as it was under the
circumstances, can be bettered. Effective tax rates depend on
the rate of inflation, and its impact varies widely across
industries, distorting resource allocation. Frankly, to many
companies not only did we give a tax cut to compensate for
inflation, but we wiped out their taxes altogether. Now, that's
not fair in anybody's book.
What we have proposed in our real cost recovery system is to
address the inflation problem directly by making, through
indexing, the real value of depreciation allowances independent
of the rate of inflation.
Having done that, we can return to a system of depreciation
allowances that tracks much more closely the decline in the value
of assets, and avoid the front loading of deductions and credits.
This is important in an economy that depends on competition
and innovation because many new firms are not immediately
profitable and cannot presently use deductions and credits, while
their established competitors can use those deductions and
credits and are therefore able to artificially out-compete the
new fledgling firms.
Another contention that deserves more than a cursory
examination by the critics is the claim that our proposals would
destroy capital formation. One recommendation at question is our
proposed treatment of capital gains.
First, let me make clear that we are not increasing the tax
rate on real capital gains by 75 percent. True, we are proposing
to tax real capital gains like ordinary income.
-9But note that I said real capital gains. Under present law
you pay tax on the increase in the dollar value of an investment,
without regard to what has happened to prices in the meantime.
Unless inflation is absolutely zero — something even this
Administration does not predict -- real capital gains are
significantly less than nominal capital gains.
Indeed, during much of the 1970s inflation outran increases
in stock prices and investors paid capital gains tax even though
they experienced real losses. Our proposal would not let that
happen. A high income investor would pay up to 35 percent on
real gains, but no one would ever pay tax on real losses.
And depending on the rate of inflation, the real rate of
appreciation, and the period in which the asset is held, the tax
under even a 35 percent rate on real gains could easily be much
less than under the present 20 percent tax on nominal gains.
Let me mention also our proposal to increase the ceiling on
Individual Retirement Accounts, and, once again, the corporate
deduction for half of its dividends paid.
So, quite the contrary to inhibiting capital formation, I
believe our overall plan would prove a stimulus.
Finally, being in New York, where some state officials have
been especially vocal, I can't pass up the opportunity to address
the critics of our proposal to eliminate the deduction for state
and local taxes.
This particular recommendation is being called unfair to
some taxpayers and devastating to state and local governments.
The protests are heard most clearly from some high-tax states,
like New York, which consider an offsetting federal tax break
essential.
In the first place, contrary to being unfair, our proposal
is quite fair, while the current situation in inequitable.
Thirteen states have higher than average deductions for
state and local taxes. The other thirty-seven states have below
average deductions, and thus are subsidizing the cost of the few
high tax states.
Why should the citizens of a low taxing state have to
subsidize the cost of services afforded those of a higher taxing
state?
-10Also, our proposal does not simply redress differences
across state lines, but within state borders. For example, in
this state, 44 percent of taxpayers itemize deductions. The
other 56 percent, who generally are lower-income families, do not
itemize, and are thus subsidizing — in the form of a
higher-than-necessary federal tax — the generally better-off
minority. Is that the fairness that Governor Cuomo wants?
Finally, many of the taxpayers who are able to use the state
and local tax deduction aren't going to lose anything if that
deduction is disallowed.
Let's take New York again as the example. Under current
law, the top federal tax rate is 50 percent and the top state
rate is 10 percent. A wealthy taxpayer who deducts his state
taxes pays a combined effective marginal rate of 55 percent.
Under Treasury's proposal, deductibility is eliminated, but
remember, the top federal rate is slashed — to 35 percent. The
wealthy taxpayer's combined marginal rate is now down to 45
percent — 10 full percentage points lower than under current
law.
So once again, I would ask everyone in New York, from the
top down, to do your arithmetic before you howl.
As to our proposal devastating state coffers, this, as well,
simply isn't necessarily the case.
Thirty-five states use federal adjusted gross income in
determining their tax base. Broadening of the federal income tax
base, as our proposal would do, would initially increase the tax
receipts of these states.
Our proposed changes in the corporate tax base will also
increase tax receipts for many of the 45 states that have
corporate income taxes — a wonderful opportunity for Governor
Cuomo to lead the fight for lowering New York's extraordinarily
high taxes. Why, who knows? Even New York might once again
attract new businesses and investments as it once did.
Our plan also takes 2-1/2 million of the poorest taxpayers
off the tax rolls altogether. This will help ease the pressure
in many states and localities for services to poor residents.
And with our raising of the zero-bracket amount for single
heads of household, we will do something for those citizens who
bear a heavy responsibility in difficult circumstances.
-11All of these should be major considerations to those states
whose tax rates have caused an exodus of high-income taxpayers
and industry.
So these are a few o.f what I earlier termed the more visible
controversies. There are others. But in all these cases, I
truly believe, that our reform proposal holds the high ground.
What we recommend is fair, it's simpler, it's
market-oriented, and it's growth oriented. And we think it is
what the public is demanding.
Our proposal addresses many concerns. It is in the best
interest of the vast majority of American taxpayers, on both an
individual -basis and on the basis of a strong, vibrant economy.
We hope our plan gets the honest appraisal it deserves.
It's time for action. We intend to do everything possible to see
to it that tax reform moves forward.
Thank you.
TREASURY NEWS
Itpartment off the Treasury • Washington, D.C. o Telephone 566-204
EMBARGOED UNTIL 2:45 p.m. EST
Contact: Roger Bolton
December 19, 1984
566-5252
STATEMENT BY SECRETARY DONALD T. REGAN
PRESS CONFERENCE IN NEW YORK CITY
DECEMBER 19, 19 84
I want to thank Dr. Hoxie and Father Doyle for the
opportunity to be here for my first major address outside
Washington since I sent the Treasury Department's tax reform
proposal to President Reagan.
I'm happy to be here in New York this afternoon, where, it's
safe to say, the Treasury Department's tax reform proposal has
generated a great deal of interest. I'll be dealing with some of
the specific New York concerns in my speech later this afternoon
at the Sievers Memorial Lecture Series here at Fordham
University.
You should have copies of that speech available to you and
I'll be glad to take any questions you may have on New York
concerns or other issues in just a minute.
First though, I want to make a statement that I hope will
convey a message that needs to be heard far beyond the Hudson:
We at Treasury took extreme care in the drafting of our
proposal to ensure that no one would be penalized for making
decisions based on current law.
Accordingly, we have drafted extensiye transition rules
including effective dates which would not significantly disrupt
existing investments or current decisions regarding future
investments. These dates are all shown in our report.
We do not want any such disruptions to stem from our
proposals, and are sincerely interested in having brought to our
attention any proposed effective date that can be shown to have
such an effect.
„
In summary, we want to ensure that transition to the
modified flat tax proposal causes as little economic dislocation
as possible, and we stand ready to* modify any proposed effective
date that is demonstrated to be unduly harsh.
Now, I'll be glad to take your questions.
R-2961
TREASURYNEWS
epartment off the Treasury • Washington;:&&. • Telephone 566-2041
FOR IMMEDIATE RELEASE
,n
JftH
n,i VIL December 19, 1984
12 3S PV\ ^
?
RESULTS OF AUCTI0N 0F 2-YEAR NOTES
The Department of the Treasury has accepted $9,009 million of
$21,417 million of tenders received from the public for the 2-year
notes, Series AC-1986, auctioned today. The notes will be issued
December 31, 1984/ and mature December 31, 1986.
The interest rate on the notes will be 9-7/8%. The range of
accepted competitive bids, and the corresponding prices at the 9-7/8!
interest rate are as follows:
Yield
Price
Low
9.87%
100.009
High
9.93%
99.902
9.92%
99.920
Average
Tenders at the high yield were allotted 23%.
TENDERS RECEIVED AND ACCEPTED (In Thousands)
Location .
Received
Accepted
Boston
$
273,510
$
63,510
New York
18,155,165
7,930,695
Philadelphia
32,750
32,750
Cleveland
59,880
58,110
Richmond
79,580
47,580
Atlanta
65,595
50,515
Chicago
1,057,095
310,865
St. Louis
148,620
124,350
Minneapolis
60,920
60,920
Kansas City
103,180
99,950
Dallas
32,345
30,035
San Francisco
1,342,270
193,070
Treasury
6,155
6,155
The $9,009
million of accepted
tenders includes
$851
million
Totals
$21,417,065
$9,008,505
of noncompetitive tenders and $8,158 million of competitive tenders
from the public.
In addition to the $9,009 million of tenders accepted in the
auction process, $396 million of tenders was awarded at the average
price to Federal Reserve Banks as agents for foreign and international
monetary authorities. An additional $600 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-2962
TREASURY NEWS
department off the Treasury • Washington, D.C. • Telephone 566FOR IMMEDIATE RELEASE December 20, 1984
RESULTS OF TREASURY'S 52-WEEK BILL AUCTION
Tenders for $8,501 million of 52-week bills to be issued
December 27, 1984, and to mature December 26, 1985, were accepted
today. The details are as follows:
RANGE OF ACCEPTED
Discount
Rate
Low
High
Average -
COMPETITIVE BIDS:
8 .34%
8 .39%
8 .38%
Investment Rate
(Equivalent Coupon-Issue Yield) Price
9.,03%
91,.567
9.,09%
91..517
9.,08%
91..527
Tenders at the high discount rate were allotted 84%.
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
Noncompe t i t ive
Subtotal, Public
Federal Reserve
Foreign Official
Institutions
TOTALS
$
355,380
16,139,200
4,135
28,450
43,155
10,830
946,720
44,450
6,725
29,655
13,805
835,650
48,165
$18,506,320
$
26,380
7,964,400
4,135
28,450
30,835
10,830
123,960
35,450
6,725
27,655
13,805
179,730
48,165
$8,500,520
$16,440,355
255,965
$16,696,320
1,700,000
$6,434,555
255,965
$6,690,520
1,700,000
110,000
$18,506,320
110,000
$8,500,520
An additional $75,000 thousand of the bills will be issued
to foreign official institutions for new cash.
R-2963
rREASURY NEWS
ipprtment off the Treasury • Washington, D.C. <* Telephone 566-204
FOR IMMEDIATE RELEASE CONTACT: Brien Benson
December 21, 1984
(202) 566-2041
TREASURY ANNOUNCES SALE OF 103,783 SHARES OF ERIE LACKAWANNA INC.
COMMDN STOCK
The Treasury Department announced today that it will
sell the 103,783 shares of Erie Lackawanna Inc. ("Erie")
common stock now held by the United States to United Erie
Partnership, Ltd. ("United Erie") for its bid price of
$8,425,103.94 ($81.18 per share). The Treasury Department
received two bids for this stock and United Erie's bid was
the high bid. The sale is expected to be consummated in the
near future.
R-2964
TREASURY NEWS
apartment off the Treasury • Washington, D.C. • Telephone 566-2041
FOR RELEASE AT 12:00 NOON
December 21, 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 $14,000 million, to be issued January 3, 1985.
This
offering will provide about $1,500 million of new cash for the
Treasury, as the maturing bills are outstanding in the amount of
$12,505 million, including $790
million currently held by Federal Reserve Banks as agents for foreign and international monetary
authorities and $2,562 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 $7,000
million, representing an additional amount of bills dated
October 4, 1984,
and to mature April 4, 1985
(CUSIP
No. 912794 GY 4 ) , currently outstanding in the amount of $6,050
million, the additional and original bills to be freely
interchangeable•
183-day bills for approximately $7,000 million, to be dated
January 3,. 1985,
and to mature July 5, 1985
(CUSIP
No. 912794 HR 8).
Both series of bills will be issued for cash and in exchange
for Treasury bills maturing January 3, 1985.
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-2965
- 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, Friday,
December 28, 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 January 3, 1985,
in cash or other immediately-available funds
or in Treasury bills maturing January 3, 1985.
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 off the Treasury • Washington, D.C. • Telephone 566-2041
FOR IMMEDIATE RELEASE
December 21, 1984
RESULTS OF TREASURY'S WEEKLY BILL AUCTIONS
Tenders for $6,809 million of 13-week bills and for $6,802 million
of 26-week bills, both to be issued on December 27, 1984, were accepted today.
RANGE OF ACCEPTED
COMPETITIVE BIDS:
L°w
*High
Average
13-week bills
maturing March 28, 1985
Discount Investment
Rate
Rate 1/
Price
26-week bills
maturing June 27, 1985
Discount Investment
Price
Rate
Rate 1/
7.74%a/
7.76%
7.75%
8.00%
8.06%
8.04%
8.00%
8.03%
8.01%
98.044
98.038
98.041
8.45%
8.52%
8.50%
95.956
95.925
95.935
a/ Excepting 1 tender of $2,000,000.
Tenders at the high discount rate for the 13-week bills were allotted 78%.
Tenders at the high discount rate for the 26-week bills were allotted 66%.
TENDERS RECEIVED AND ACCEPTED
(In Thousands)
Received
Accepted
:
Received
Location
Accepted
Boston
New York
Philadelphia
Cleveland
Richmond
Atlanta
Chicago
St. Louis
Minneapolis
Kansas City
Dallas
San Francisco
Treasury
$
378,650
13,615,585
22,830
114,955
31,120
41,410
1,587,390
55,360
5,980
42,450
22,340
888,230
241,640
$
28,650
5,803,500
22,830
64,955
31,120
41,385
234,755
34,335
5,980
40,450
22,340
237,510
241,640
$
369,255
12,652,790
14,165
79,980
41,780
31,150
1,289,655
52,975
8,765
43,790
9,215
725,970
223,170
$ 60,755
5,805,590
14,165
78,280
31,780
31,150
254,115
21,275
8,765
43,790
9,215
220,210
223,170
TOTALS
$17,047,940
$6,809,450
$15,542,660
$6,802,260
$14,355,435
878,055
$15,233,490
$4,116,945
878,055
$4,995,000
$12,961,815
596,645
$13,558,460
$4,221,415
596,645
$4,818,060
1,405,150
1,405,150
1,350,000
1,350,000
IXpe
Competitive
Noncompetitive
Subtotal, Public
Federal Reserve
Foreign Official
Institutions
409,300
409,300
634,200
634,200
TOTALS
$17,047,940
$6,809,450
$15,542,660
$6,802,260
1/ Equivalent coupon-issue yield.
R-296&
TREASURY NEWS
epartment off the Treasury • Washington, D.C. • Telephone 566-2041
FOR IMMEDIATE RELEASE
December 24, 1984
TREASURY TO AUCTION $10,000 MILLION
OF 7-YEAR NOTES AND 19-YEAR 10-MONTH BONDS
The Department of the Treasury will auction $5,750 million
of 7-year notes and $4,250 million of 19-year 10-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.
Details about the new securities are given in the attached
highlights of the offering and in the official offering circulars.
Attachment
oOo
R-2967
OF
Amount Offered;
To the public
Description of Security;
Term and type of security
Series and CUSIP designation...
Issue date
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 through Treasury Tax
and Loan (TT&L) Note Accounts..
Payment by non-institutional
investors
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.
-YEAR NOTES AND 19-YEAR 10-MONTH
BONDS
December 24, 1984
S5,750 million
$4,250 million
7-year notes
Series D-1992
(CUSIP No. 912827 RT 1)
January 4, 1985
January 15, 1992
No provision
To be determined based on
the average of accepted bids
To be determined at auction
To be determined after auction
July 15 and January 15 (first
payment on July 15, 1985)
$1,000
19-year 10-month bonds {reopening)
11-5/8% Bonds of 2004
(CUSIP No. 912810 DM 7)
January 8, 1985
November 15, 2004
No provision
11-5/8%
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
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
$22.39551 per $1,000 (from October 30,
1984, to January 8, 1985)
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, January 2, 1985,
prior to 1:00 p.m., EST
Thursday, January 3, 1985,
prior to 1:00 p.m., EST
Friday, January 4, 1985
Wednesday, January 2, 1985
Tuesday, January 8, 1985
Friday, January 4, 1985
rREASURY NEWS
FOR IMMEDIATE
RELEASE
26, 1984
jpartment
of the
Treasury • Washington, D.C. •December
Telephone
566-2041
RESULTS OF AUCTION OF 4-YEAR NOTES
The Department of the Treasury has accepted $6,206 million of
$14,948 million of tenders received from the public for the 4-year
notes, Series Q-1988, auctioned today. The notes will be issued
December 31, 1984, and mature December 31, 1988.
The interest coupon rate on the notes will be 10-5/8%. The
range of accepted competitive bids, and the corresponding prices at
the 10-5/8% coupon rate are as follows:
Low
High
Average
Yield
10.71%
10.74%
10.72%
Price
99.729
99.634
99.697
rs at the high yield were allotted 53% •
TENDERS RECEIVED AND ACCEPTED (In Thousands)
Accepted
Received
Location
Boston
269,893
$
9,,893
$
New York
12 ,570,447
5,400,,117
Philadelphia
9,200
9,,200
Cleveland
173,066
162,,491
21,245
14,,895
Richmond
Atlanta
30,419
21,,539
979,242
235,,532
Chicago
78,782
76,,782
St. Louis
11,068
10,,598
Minneapolis
47,142
44,
,142
Kansas City
7,666
7,,666
Dallas
749,012
212,
,482
San Francisco
1,046
1,,046
Treasury
$6,206,
,383
$14 ,948,228
Totals
The $6,206
million of accepted tenders includes $378
million
of noncompetitive tenders and $5,828
million of competitive tenders
from private investors. It also includes $220 million of tenders at
the average price from Federal Reserve Banks as agents for foreign and
international monetary authorities in exchange for maturing securities
In addition to the $6,206 million of tenders accepted in the
auction process, $366 million of tenders were accepted at the average
price from Governrent accounts and Federal Reserve Banks for their own
account in exchange for maturing securities.
R-2968
TREASURY NEWS
epartrr
c. of the Treasury • Washington, D.C. • Telephone 566-2041
FOR IMMEDIATE RELEASE
December 27, 1984
AMENDED RESULTS OF TREASURY 'S 4-YEAR NOTE AUCTION
The announcement of December 26 of the results of the
4-year note auction inadvertently stated that $220 million of
tenders from Federal Reserve Banks as agents for foreign and
international monetary authorities was included in the accepted
public amount of $6,206 million. In fact, and in accordance
with usual Treasury practice, the $220 million accepted was in
addition to the $6,206 million accepted from the public.
All other particulars in the announcement remain the same.
oOo
R-2969
TREASURY NEWS
epartment of the Treasury • Washington, D.C. • Telephone 566-2
FOR IMMEDIATE RELEASE CONTACT: Brien Benson
566-5252
PRESS RELEASE
December 28, 1984
U.S. PROVIDES BRIDGE LOAN TO ARGENTINA
The Treasury Department announced today that it has provided
$500 million to Argentina in short-term bridge financing through
the Exchange Stabilization Fund. This financing was made
available under an arrangement announced on December 3, 1984,
*
in support of the economic program which Argentina has negotiated
with the International Monetary Fund (IMF).
The Treasury Department's bridge financing will be repaid
in full from balance of payments financing Argentina will
receive from the IMF under a new standby arrangement and the
Compensatory Financing Facility. Disbursements by the IMF are
scheduled to begin in January 1985.
The Argentine economic program was approved by the IMF
Executive Board today. This program is being supported by
financing from the international banking community and multilateral financial institutions.
R-2970
TREASURY NEWS
ipartment of the Treasury • Washington, D.C. • Telephone 566-2041
FOR IMMEDIATE RELEASE
FRIDAY, DECEMBER 28, 1984
CONTACT:
Brien Benson
566-5252
TREASURY ANNOUNCES $4.1 MILLION SETTLEMENT WITH F.A.G. BEARING
Assistant Secretary of the Treasury John M. Walker, Jr.,
today announced that the Treasury Department has agreed to
settle a pending civil penalty case with the payment of
$4.1 million from the F.A.G. Bearings Corporation, of Stamford,
Connecticut; F.A.G. Bearings, Limited, of Ontario, Canada;
and F.A.G. Kugelfischer Georg Schafer KGaA, of West Germany.
This settlement was reached after a Customs Service
investigation discovered that import procedures employed by
F.A.G. had led to the Federal Government's losing over
$1 million in import duties. The Customs investigation
revealed that F.A.G. had given Customs false invoice values
and false descriptions of bearings and components that were
imported during the years 1972 through 1978.
The payment settles all the Federal Government's claims
against F.A.G. for alleged violations of section 592 of the
Tariff Act.
In announcing the settlement, Assistant Secretary Walker
said, "The Customs Service is responsible for protecting the
revenue and is doing so with special vigor in the area of
commercial fraud which remains a priority of the Customs Service and is the focus of activity of Operation Tripwire.
This is one of the largest civil penalties we have ever
collected. We are not going to permit industrial concerns
to deprive the American people of revenues the Congress has
set."
R-2971
TREASURY NEWS
iportment of the Treasury • Washington, D.C. • Telephone 566-2041
FOR IMMEDIATE RELEASE
December 28, 1984
RESULTS OF TREASURY'S WEEKLY BILL AUCTIONS
Tenders for $7,015 million of 13-week bills and for $ 7,008 million
of 26-week bills, both to be issued on January 3, 1985,
were accepted today.
RANGE OF ACCEPTED
COMPETITIVE BIDS:
Low
High
Average
13-week bills
maturing April 4, 1985
Discount Investment
Price
Rate .
Rate 1/
7.81%
7.87%
7.86%
8.08%
8.14%
8.13%
26-week bills
maturing July 5, 1985
Discount Investment
Price
Rate
Rate 1/
98.026
98.011
98.013
8.15%
8.20%
8.19%
8.62%
8.67%
8.66%
95.857
95.832
95.837
Tenders at the high discount rate for the 13-week bills were allotted 89%.
Tenders at the high discount rate for the 26-week bills were allotted 62%.
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
:
Accepted
:
:
:
:
:
376,020
14,451,890
12,455
22,720
57,975
41,140
866,280
85,600
30,490
47,170
26,875
1,261,665
344,250
$
26,020
5,458,330
12,455
22,720
33,885
37,340
259,450
40,900
30,490
45,270
26,875
669,865
344,250
$7,014,760
:
$17,624,530
$7,007,850
$13,526,405
1,116,050
$14,642,455
$4,193,105
1,116,050
$5,309,155
:
:
:
$15,181,740
795,985
$15,977,725
$4,565,060
795,985
$5,361,045
1,395,110
1,395,110
.
1,200,000
1,200,000
310,495
310,495
446,805
446,805
$16,348,060
$7,014,760
$17,624,530
$7,007,850
398,345
13,286,305
31,500
34,495
43,350
59,715
762,465
75,600
48,715
54,350
37,780
1,193,910
321,530
$ 223,345
5,900,565
31,500
34,495
43,350
51,425
145,745
55,600
48,715
54,350
32,230
71,910
321,530
$16,348,060
$
$
:
:
:
An additional $21,305 thousand of 13-week bills and an additional $25,995
thousand of 26-week bills will be issued to foreign official institutions for
new cash.
1/ Equivalent coupon-issue yield.
R-2972
partment of the Treasury • Washington, D.C. • Telephone 566-2041
FOR RELEASE AT 11:00 a.m. JAN 7 (0 32 AH '85 January 2, 1985
JEP,-,il7i-:i;iT OF
THZ T R Z A S U R Y
TREASURY 'S WEEKLY BILL OFFERING
The Department of the Treasury, by this public notice,
invites tenders for two series of Treasury bills totaling approximately $14,000 million, to be issued January 10, 1985.
This
offering will provide about $1,300 million of new cash for the
Treasury, as the maturing bills are outstanding in the amount of
$12,694 million, including $784
million currently held by Federal Reserve Banks as agents for foreign and international monetary
authorities and $2,713 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 $7,000
million, representing an additional amount of bills dated
October 11, 1984,
and to mature April 11, 1985
(CUSIP
No. 912794 GZ 1 ) , currently outstanding in the amount of $6,232
million, the additional and original bills to be freely
interchangeable.
182-day bills (to maturity date) for approximately $7,000
million, representing an additional amount of bills dated
July 12, 1984,
and to mature July 11, 1985
(CUSIP
No. 912794 HJ 6 ) , currently outstanding in the amount of $8,408
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 January 10, 1985.
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-2973
- 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,
January 7, 1985.
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 January 10, 1985, in cash or other immediately-available funds
or in Treasury bills maturing January 10, 1985.
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
Fl)K IMMEDIATE RELEASE
January 2, 1985
RESULTS OF AUCTION OF 7-YEAR NOTES
The Department of the Treasury has accepted $5,752 million of
$12,130 million of tenders received from the public for the 7-year
notes, Series D-1992, auctioned today. The notes will be issued
January 4, 1985, and mature January 15, 1992.
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
11.63%
99.957
High
11.70%
99.628
Average
11.67%
99.769
Tenders at the high yield were allotted 16%.
TENDERS RECEIVED AND ACCEPTED (In Thousands)
Location
Received
Accepted
Boston
229,790
18,590
$
$
New York
10 ,547,016
,159,856
5,
Philadelphia
3,100
3,100
Cleveland
35,764
35,764
Richmond
10,594
5,594
Atlanta
18,797
16,797
Chicago
676,010
274,450
St. Louis
61,604
59,764
Minneapolis
2,453
2,453
Kansas City
35,432
35,432
8,263
5,743
Dallas
San Francisco
500,681
133,401
Treasury
924
924
Totals
$12 ,130,428
$5,r751,868
The $5,752 million of accepted tenders includes $358
million
of noncompetitive tenders and $5,394 million of competitive tenders
from the public.
R-2974
TREASURY NEWS
epartment
of theRELEASE
Treasury • Washington, D.C. •January
Telephone
3, 1985566-2041
FOR IMMEDIATE
RESULTS OF AUCTION OF 19-YEAR 10-MONTH TREASURY BONDS
The Department of the Treasury has accepted $4,283 million of
$12,672 million of tenders received from the public for the 11-5/8%
19-year 10-month Bonds of 2004, auctioned today. The bonds will be
issued January 8, 1985, and mature November 15, 2004.
The range of accepted competitive bids was as follows:
Yield Price
Low
High
Average
11.85%
11.86%
11.86%
98.205
98.130
98.130
Tenders at the high yield were allotted 82%.
TENDERS RECEIVED AND ACCEPTED (In Thousands)
Location
Received
Accepted
Boston
$
1,291
188,291
$
New York
,446,574
4,051,614
11,
Philadelphia
667
667
Cleveland
20,633
2,633
Richmond
8,294
4,294
6,066
3,066
Atlanta
503,852
110,432
Chicago
80,559
80,559
St. Louis
2,201
2,201
Minneapolis
23,236
21,236
Kansas City
3,003
1,003
Dallas
388,612
3,612
San Francisco
127
127
Treasury
$12,
,672,115
$4,282,735
Totals
The $4,283 million of accepted tenders includes $296
million
of noncompetitive tenders and $3,987 million of competitive tenders
from the public.
R-2975
TREASURY NEWS
epartment
of the Treasury • Washington, D.C. • Telephone
566-2041
FOR IMMEDIATE RELEASE
January 7, 1985
RESULTS OF TREASURY'S WEEKLY BILL AUCTIONS
Tenders for $7,009 million of 13-week bills and for $7,062 million
of 26-week bills, both to be issued on January 10, 1985, were accepted today
RANGE OF ACCEPTED
COMPETITIVE BIDS:
Low
High
Average
13-week bills
maturing April 11, 1985
Discount Investment
Rate
Rate 1/
Price
26-week bills
maturing July 11, 1985
Discount Investment
Rate
Rate 1/
Price
7.75%
7.79%
7.78%
8.00%
8.02%
8.02%
8.01%
8.06%
8.05%
98.041
98.031
98.033
8.45%
8.48%
8.48%
95.956
95.945
95.945
Tenders at the high discount rate for the 13-week bills were allotted 47%
Tenders at the high discount rate for the 26-week bills were allotted 54%,
TENDERS RECEIVED AND ACCEPTED
(In Thousands)
Location
Received
Accepted
Boston
New York
Philadelphia
Cleveland
Richmond
Atlanta
Chicago
St. Louis
Minneapolis
Kansas City
Dallas
San Francisco
Treasury
Accented
605,655
15,744,720
36,910
116,970
60,440
86,540
1,153,340
72,270
47,410
78,850
72,965
1,694,550
361,750
$ 255,655
5,249,440
36,910
68,720
53,910
67,445
241,390
52,270
47,410
78,850
45,315
449,550
361,750
$
$20,132,370
$7,008,615
$24,517,305
$7,061,685
Type
Competitive
$17,138,110
Noncompetitive
1,367,330
Subtotal, Public $18,505,440
$4,314,355
1,367,330
$5,681,685
$21,622,525
1,095,935
$22,718,460
$4,466,905
1,095,935
$5,562,840
1,432,935
1,132,935
1,300,000
1,000,000
193,995
193,995
498,845
498,845
$20,132,370
$7,008,615
$24,517,305
$7,061,685
TOTALS
Federal Reserve
Foreign Official
Institutions
TOTALS
$
Received
607,570
19,406,615
21,450
105,230
114,795
119,660
1,321,800
66,790
46,125
76,500
54,470
2,143,765
432,535
$
50,965
5,422,800
21,450
40,230
80,855
44,140
224,540
26,790
20,085
73,500
34,470
589,325
432,535
An additional $56,005 thousand of 13-week bills and an additional $153,455
thousand of 26-week bills will be issued to foreign official institutions for
new cash.
1/ Equivalent coupon-issue yield.
R-2976
TREASURY NEWS
apartment of the Treasury • Washington, D.C. • Telephone
FOR IMMEDIATE RELEASE
January 8, 1985
CONTACT: Roger Bolton
(202) 566-2041
STATEMENT OF THE HONORABLE DONALD T. REGAN
SECRETARY OF THE TREASURY
JANUARY 8, 1985
I'm very honored to be selected by the President
as his Chief of Staff, and I'm positive that Jim Baker
will make a great Secretary of the Treasury. Both of
us will be solving new problems, and accepting new
challenges. Since each of us has had a great deal of
exposure to the other's work, the transition should
go smoothly.
I'm fully committed to the President's programs,
and am dedicated to seeing that they are implemented.
I believe the.next four years can be as eventful as
any in recent history. I look forward to helping
make them years of peace and well-being.
R-2977
rREASURY NEWS
ipartment of the Treasury • Washington, D.C. • Telephone 566-2041
FOR IMMEDIATE RELEASE
January 7, 1985
CONTACT:
Bob Levine
(202) 566-2041
CHANGES IN JAPANESE WITHHOLDING TAX
The officials of the Treasury Department and the Japanese
Ministry of Finance met on January 7, 1985, in Washington, and
had a frank and sincere discussion. The meeting was held under
the co-chairmanship of Assistant Secretaries David Mulford
(International Affairs) and Ronald Pearlman (Tax Policy) and
Director General Setsue Umezawa (Tax Bureau).
The Ministry of Finance indicated its intention to abolish
the withholding tax on non-residents' earnings on Euroyen bonds
issued by Japanese residents.
In order to secure the proper taxation on residents' earnings
on those bonds which reflowed into Japan, these bonds would be
subject to Japanese withholding tax and (the payment records) at
Japanese paying intermediaries.
The Ministry of Finance stated this amendment would be
submitted to the current Diet session as a part of FY 1985 Tax
Reform. The Ministry of Finance underscored that there is no
intention to reconsider the removal of the withholding tax on
non-residents' earnings on Japanese deposits and securities.
The Treasury Department welcomed the decision of the Ministry
of Finance.
The complete text of the Committee's Report will be available
in Washington at 8:00 p.m., January 9, 1985, and in Tokyo at
10:00 a.m., January 10.
###
R-2978
rREASURY NEWS
partment of the Treasury • Washington, D.C. • Telephone 566-2041
FOR RELEASE AT 4:00 P.M.
January 8, 1985
TREASURY 'S WEEKLY BILL OFFERING
The Department of the Treasury, by this public notice,
invites tenders for two series of Treasury bills totaling approximately $14,000 million, to be issued January 17, 1985. This
offering will result in a paydown of about $4,300 million, as the
maturing bills total $18,303 million (including the 45-day cash
management bills issued December 3, 1984, in the amount of $5,008
million) .
The $13,295 million of regular maturities includes $1,760
million currently held by Federal Reserve Banks as agents for
foreign and international monetary authorities and $2,335 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 $7,000
million, representing an additional amount of bills dated April 19,
1984, and to mature April 18, 1985 (CUSIP No. 912794 GK 4 ) , currently outstanding in the amount of $14,934 million, the -additional
and original bills to be freely interchangeable.
182-day bills for approximately $7,000 million, to be
dated January 17, 1985, and to mature July 18, 1985 (CUSIP
No. 912794 HS 6 ) .
Both series of bills will be issued for cash and in exchange
for Treasury bills maturing January 17, 1985. 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-2979
- 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,
January 14, 1985.
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 January 17, 1985,
in cash or other immediately-available funds
or in Treasury bills maturing January 17, 1985.
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
lepartment of the Treasury • Washington, D.C. • Telephone 566-2041
For Immediate Release
January 10, 1985
Contact: Brien Benson
(202) 566-2041
Charlotte Mehuron
(202) 566-6576
TREASURY DEPARTMENT INTRODUCES NEW GOVERNMENT CHECK
In February, 1985 Treasury's Financial Management Service
will begin issuing a new, easier to handle, more counterfeitresistant check, Treasury Secretary Donald T. Regan announced
today. The check, which replaces the familiar 40 year-old green
punched-card check, is made of lightweight paper and is similar to
those now commonly used by the financial and business communities.
Treasury's Philadelphia Financial Center will begin to issue
the new check in February, to five million Internal Revenue
Service tax refund recipients in Delaware, the District of Columbia, Maryland and Pennsylvania. In May approximately 200,000
Social Security recipients in Philadelphia will begin receiving
their payments with the new check.
The new check is multicolored, with pastel hues ranging from
light blue to pale peach. A full-length reproduction of the
Statue of Liberty appears in dark tones on the left side; a
close-up of the head and torch is blended into the background on
the right. The letters "USA" create a faint pattern across the
back of the check.
"There are several reasons for the change," Secretary Regan
explained. "The new check is easier for governments, banks, and
businesses to process. It is more difficult to alter or
counterfeit. And its lightweight paper stock makes it less
expensive to produce and store. When the check is completely
replaced in 1987, it will save taxpayers $6 million per year."
Full nationwide conversion to the new government check will
begin with December 1985 Social Security payments (about 20
million checks per month). Starting in February 1986, all
Internal Revenue Service tax refunds will be made with the new
check. Other payments to be converted include supplemental
security income, civil service retirement, veterans benefits and
compensation, railroad retirement, federal salary and vendor
payments. By early 1987 the green punched card check will be
completely phased out.
R-2980
2
The Department of the Treasury disburses over 500 million
checks per year through the Financial Management Service's seven
regional financial centers. In addition, more than 1,000
non-Treasury disbursing organizations around the world, such as
those of the Department of Defense, each year issue approximately
115 million checks, which will also be converted.
A major public awareness campaign will be conducted.
Approximately 15 thousand packets, including flyers, posters, and
other materials are being sent this week either directly to
financial institutions and retailers or to trade associations
which have agreed to assist in the distribution efforts. Posters
are also being sent to libraries and post offices. Finally,
television and radio public service announcements will be aired.
###
TREASURY NEWS
lepartment of the Treasury • Washington, D.C. • Telephone 566-2041
FOR IMMEDIATE RELEASE
January 10, 1985
CONTACT:
Brian Benson
(202) 566-2041
Charlotte Mehuron
(202)
566-6576
REMARKS BY SECRETARY DONALD T. REGAN
PRESS CONFERENCE FOR NEW TREASURY CHECKS
JANUARY 10, 1985
We're here today to announce a big change — one that will
ultimately involve most Americans in one way or another. For the
first time in almost 40 years, the federal government has a new
check.
Similar to those commonly used by most individuals and
businesses, our new check is attractive, lightweight, easy to
handle, and most important, has greatly improved anti-counterfeit
features .
The full-length representation of the Statue of Liberty on
the left and the muted close-up on the right are both elements to
help defeat alterations and counterfeiting. The gradation of
pastel colors from light blue to pale peach is another
anti-counterfeiting enhancement. Altogether, over a dozen
security features represent the best uses of today's technology.
What's more, the lighter paper stock will be cheaper than the
existing thicker stock—saving the government $6 million a year
when the check conversion is complete.
Also, the new check is easier to store. With over 600
million checks a year, a thinner lightweight check can make a
significant difference.
Because the Financial Management Service's seven regional
financial centers must make extensive equipment and software
changes to print and mail the new check, we'll begin with a
limited check distribution from only one center — the
Philadelphia Financial Center. Starting in February, individuals
who receive tax refunds in Delaware, Maryland, Pennsylvania, and
the District of Columbia will receive the new check. In May the
R-2981
-2new check will be used for Social Security payments to those
living in Philadelphia. Altogether, we expect more than five
million of the new checks to be issued in the Mid-Atlantic area
during the next five months — approximately one percent of
Treasury checks issued annually.
After the first check distribution phase, we'll move to
nationwide use. We expect that all Social Security payments will
be made with the new check in December 1985. In February 1986,
we'll begin using the new check for IRS tax refunds. By early
1987, all federal salary and vendor payments will have been
converted, and the green punched-card will be totally phased out.
Treasury's Financial Management Service issues over 500
million checks per year. Other government disbursing offices,
such as those of the Department of Defense, issue roughly 115
million. While Treasury is converting to the new check,
non-Treasury disbursing offices will be doing the same.
Throughout the conversion, we will work with business and
financial institutions to let them know that their customers will
be presenting the new check for cashing or deposit.
A major public awareness campaign will be conducted.
Approximately 15 thousand packets, including flyers, posters, and
other materials are being sent this week either directly to
financial institutions and retailers or to trade associations
which have agreed to assist in the distribution efforts. Posters
are also being sent to libraries and post offices. Finally,
television and radio public service announcements will be aired.
The packet you've been handed contains samples of the promotional
material we've been using.
The new check has benefits for all.
From the government's point of view, it will be safer, more
efficient, and more economical.
For financial institutions and retail stores which serve as
cashiers for the millions of people who receive government
payments, it will be easier to handle.
Recipients will appreciate the new safety features.
And taxpayers will love the cost savings we achieve.
And now I would like to introduce, and ask to join me at the
pod i urn:
Fiscal Assistant Secretary Carole J. Dineen, who will
oversee distribution of the new check;
Financial Management Service Commissioner William E.
Douglas, whose agency will administer use of the new check;
and Internal Revenue Service commissioner Roscoe L. Egger,
Jr., and acting Social Security Administration Commissioner
-3Martha A. McSteen, whose agencies will be involved in the first
phase of the new check distribution.
SECRETARY DISPLAYS CHECK AND IS JOINED
BY THOSE HE HAS INTRODUCED FOR PHOTO
OPPORTUNITY.
And now I would like to turn this meeting over to Commissioner
Douglas, who will accept questions.
rREASURY NEWS
iportment of the Treasury • Washington, D.C. • Telephone 566-2041
Bnbarqoed until 10:00 p.m.
January 9, 1985
CONTACT: Bob Levine
(202) 566-2041
US-Japanese Report on Withholding Taxes
Secretary of the Treasury Donald T. Regan and Japanese
Finance Minister Noboru Takeshita accepted and released the
report of the Ministry of Finance/Treasury Department Working
Group on Withholding Taxes. The attached report describes the
Ministry of Finance's decision to submit legislation in the
current Diet session to abolish immediately the Japanese withholding tax on the interest paid to nonresidents on Euroyen bonds
issued by Japanese residents. This will be part of the
Ministry's Japan fiscal year 1985 tax legislation, which is
expected to go into effect on April 1, 1985.
The report was concluded on the basis of discussions between
tax and financial officials of the U.S. Treasury and the Japanese
Ministry of Finance, which were mandated in the Report on the
Yen/Dollar Exchange Rate Issues released last May. Two meetings
on the withholding tax issue were held under the co-chairmanship
of Assistant Secretaries David C. Mulford (International Affairs)
and Ronald A. Pearlraan (Tax Policy) and Director General Setsuo
Umezawa (Tax Bureau): the first in Tokyo on October 23, and the
second in Washington on January 7.
Secretary Regan welcomed the decision of the Japanese authorities to abolish this tax as an essential step toward the full
development of the Euroyen bond market. The abolition will allow
Japanese corporations to sell Euroyen bonds to foreign investors
on an equal footing with nonresident corporations, enabling
Japanese corporations to participate fully in the growing Euroyen
bond market. The abolition will thereby help increase the range
of attractive yen-denominated assets available to foreign investors. This will contribute toward greater international use of
the yen, which was one of the fundamental objectives of the
Yen/Dollar Report.
R-298?
January 7, 1985
Minister of Finance Noboru Takeshita
Ministry of Finance
Tokyo
Secretary of the Treasury Donald T. Regan
Department of the Treasury
Washington, D.C.
The Japanese Ministry of Finance - U.S. Department of the
Treasury Working Group Report on Yen/Dollar Exchange Rate Issues
recognized that "steps should be taken for the yen to assume its
proper role in international financial markets," and that
"allowing markets in yen-denominated financial instruments to
develop will result in a more efficient use of scarce capital
resources not only in Japan but internationally as well.
Development of the Euroyen market presents an effective means of
pursuing liberalization since the Euro market already has
established financial, legal, and tax practices followed by
Japanese borrowers in other sectors of the Euro markets."
The Yen/Dollar Report of May of last year also provided for a
study of the application by Japan of withholding tax on Euroyen
issues by Japanese residents. As specified in the Report, the
purpose of the study was to resolve the situation arising from
segmentation of the Euroyen market which results from the
aforementioned withholding tax, while maintaining the integrity
of the Japanese tax system. A group of tax and financial officials, under the co-chairmanship of Director General Umezawa and
Assistant Secretaries Mulford and Pearlman, has undertaken this
study, and we are pleased to present to you the attached official
report which recommends abolition of withholding taxes on
non-resident purchasers of Euroyen
bonds issued by Japanese
Respectfully
residents.
Jfel4,1&miM«
Tomomitsu Oba
Vice Minister for
International Affairs
Ministry of Finance
Tokyo
Beryl W. Sprinkel
Under Secretary for
Monetary Affairs
Department of the Treasury
Washington, D.C.
January 7, 1985
Tomomitsu Oba
Vice Minister for Internationl Affairs
Ministry of Finance
Tokyo
Beryl W. Sprinkel
Under Secretary for Monetary Affairs
Department of the Treasury
Washington, D.C.
We are pleased to transmit to you the attached official
report of our study, mandated by the Yen/Dollar Report of May of
last year, on the Japanese withholding tax on earnings by
non-residents on investment in Euroyen bonds issued by Japanese
residents.
ectfully,
Setsuo Umezawa
Director General
Tax Bureau
Ministry of Finance
David/C. Mulfo:
Assistant Secretary
International Affairs
Department of the Treasury
W&J&U
Ronald A. Pearlman
Assistant Secretary
Tax Policy
Department of the Treasury
January 7, 1985
Report of the
MOF/Treasury Working Group on
Withholding Taxes
1. The Yen/Dollar Report by the Japanese Ministry 6f FinanceU.S. Department of the Treasury Working Group, submitted on
May 29f 1984, sets forth a number of important measures designed
to "help liberalize Japan's domestic capital markets, promote
internationalization of the yen, improve the access of foreign
financial firms to Japan's capital market, and allow the yen
to reflect more fully the underlying strength of the Japanese
economy." In this context, the Working Group agreed to
expedite a study on the withholding tax on Euroyen bonds
issued by Japanese residents, between Japanese*and U.S. tax
and financial officials with the aim of finding an appropriate
solution.
Also in that report it was said that, in the coming study,
due regard shall be paid to:
1.) The internationalization of the yen,
2.) The sound development of domestic and international
capital markets,
3.) Securing tax equality, and,
4.) The maintenance of a well-developed withholding tax
system.
2. Pursuant to that mandate and under the Joint Chairmanship of
Director General Umezawa and Assistant Secretaries Mulford
(International) and Pearlman (Tax Policy), officials met in Tokyo
in October 1984 and in Washington in January 1985.
During these meetings, there was a broad discussion on this
matter including those points listed above.
3. It was recognized that the presence of Japanese resident
issues denominated in yen was a vital part of the free development of the Euroyen bond market. The Treasury Department stressed
that the application of withholding taxes to non-Japanese
purchasers of Euroyen bonds issued by Japanese residents would
create incentives for Japanese residents to issue non-yen Eurobonds which are free of Japanese withholding tax. The presence
of Japanese withholding taxes could also lead to segmentation of
the Euroyen bond market.
4. The Tax Bureau of the Ministry of Finance had stated that the
Japanese tax practices of the growing Euroyen market should not
necessarily be designed similar to the Euro-bond market of other
currencies insofar as Japanese resident issuers are concerned,
-2but rather should conform to the Japanese domestic yen bond
market, where proper taxation on earnings of financial assets
has been maintained by the withholding tax and the payment records
system.
5. During the discussion, the Treasury Department had expressed
its hope that Japan would reconsider the removal of its withholding tax on earnings by nonresidents on Japanese deposits and
securities, which it believes is a barrier to investment by nonjapanese in the principal Japanese financial instruments for
foreign investors.
6. The Ministry of Finance expressed its intent to maintain a
well-developed withholding tax system, and stated that the removal
of its withholding tax on interest earnings by*nonresidents on
Japanese deposits and securities in Japan's domestic financial
system could impair the basic principles of the Japanese tax
system.
7. The Treasury Department understood the intent of the Ministry
of Finance, and stated that its suggestion for the abolition of
withholding tax on earnings by nonresidents was especially related
to Euroyen bonds issued by Japanese residents. The Treasury
pointed out that such a step, to be effective, would have to be
consistent with the established rules and practices of the Eurobond market.
8. The Ministry of Finance explained that withholding tax
system should continue to play a vital role in proper taxation
on interest income and that there is no intention to reconsider
the removal of the withholding tax on nonresidents' earnings on
Japanese deposits and securities. It also explained that the
withholding tax would be applied, in FY 1985 tax reform, to
residents1 earnings on foreign securities, as well as bonds
floated overseas by Japanese issuers which reflowed into Japan.
9. In light of these discussions, and taking into account the
points raised by the Treasury Department, the Ministry of Finance
indicated its intention to abolish the withholding tax on nonresidents' earnings on Euroyen bonds issued by Japanese residents
while securing the proper taxation on residents' earnings on
these bonds which reflowed into Japan by the withholding tax and
the payment records by Japanese paying intermediaries.
•"v.
It also stated that terms and conditions of abolition would
be equivalent of those regarding the measure on the non-yen
denominated bonds issued by Japanese residents, and that a
necessary legislative procedure providing for immediate abolition
will be taken in the current Diet session.
The Treasury Department welcomed the decision of the Ministry
of Finance.
rREASURY NEWS
lartment of the Treasury • Washington, D.C. • Telephone 566-2041
FOR IMMEDIATE RELEASE
January 10, 1985
Contact:
Roger Bolton
(202) 566-5252
STATEMENT OF THE HONORABLE R.T. MCNAMAR
DEPUTY SECRETARY OF THE TREASURY
JANUARY 10, 1985
Last fall, I told Secretary Regan that I did not intend to
continue serving as Deputy Secretary of the Treasury
indefinitely, but wanted to return to California in 1985. So, I
am delighted that the President has announced his intention to
nominate Dick Darman for the position. His intellect, competence
and proven Washington skills, combined with the trust and
confidence Jim has in him, ideally suit him to be Jim's deputy.
Dick and I will work out an exceptionally smooth transition at
the Treasury.
For the forthcoming weeks, my only interest is in serving
the President, Don, and Jim and helping put the Treasury team in
place. Don has asked me to help his transition to the White
House, and of course I will. I have made no secret of my
interest in returning to California during 1985 when my personal
commitments and public obligations were completed in Washington.
R-2983
rREASURY NEWS
partment of the Treasury • Washington, D.C. • Telephone 566-2
FOR RELEASE AT 12:00 NOON
January 11, 1985
TREASURY'S 52-WEEK BILL OFFERING
The Department of the Treasury, by this public notice,
invites tenders for approximately $ 8,500 million of 364-day
Treasury bills to be dated January 24, 1985,
and to mature
January 23, 1986
(CUSIP No. 912794 JP C ) . This issue will not
provide new cash for the Treasury, as the maturing 52-week bill
was originally issued in the amount of $8,481 million.
The bills will be issued for cash and in exchange for
Treasury bills maturing January 24, 1985In addition to the
maturing 52-week bills, there are $13,284 million of maturing
bills which were originally issued as 13-week and 26-week bills.
The disposition of this latter amount will be announced next week.
Federal Reserve Banks as agents for foreign and international
monetary authorities currently hold $1,306 million, and Federal
Reserve Banks for their own account hold $3,044 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 $ 355 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 Standard time, Thursday,
January 17, 1985.
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-2984
- 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
a'nd 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 January 24, 1985, in cash or other immediately-available funds
or in Treasury bills maturing January 24, 1985.
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.
FREASURY NEWS
tpartment of the Treasury • Washington, D.C. • Telephone 566-2041
FOR IMMEDIATE RELEASE
RESULTS OF TREASURY'S WEEKLY BILL AUCTIONS
January 14, 1985
Tenders for $ 7,018 million of 13-week bills and for $ 7,005 million
of 26-week bills, both to be issued on January 17, 1985, were accepted today.
RANGE OF ACCEPTED
COMPETITIVE BIDS:
Low
High
Average
13-week bills
maturing April 18, 1985
Discount Investment
Rate
Rate 1/
Price
7.72%
7.75%
7.74%
7.98%
8.01%
8.00%
26-week bills
maturing July 18, 1985
Discount Investment
Price
Rate
Rate 1/
98.049
98.041
98.044
8.03%
8.05%
8.05%
8.49%
8.51%
8.51%
95.940
95.930
95.930
Tenders at the high discount rate for the 13-week bills were allotted 31%
Tenders at the high discount rate for the 26-week bill6 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
TOTALS
Type
Competitive
Noncompetitive
Subtotal, Public
Federal Reserve
Foreign Official
Institutions
TOTALS
173,710
5,531,570
25,530
45,065
54,165
61,915
189,270
42,060
11,555
56,435
33,535
426,530
366,880
380,735
' $
23,107,565
s
18,775
:
50,535
!
82,020
:
:
112,330
1,643,285
:
:
100,660
:
13,705
:
54,195
:
29,905
:
1,154,910
.
427,555
$
74,235
5,872,515
18,775
46,675
54,250
46,430
220,275
35,660
13,705
50,320
28,805
115,420
427,555
$20,776,235
$7,018,220
: $27,176,175
$7,004,620
$18,342,915
1,218,090
$19,561,005
$4,784,900
1,218,090
$6,002,990
: $24,701,495
:
982,480
: $25,683,975
$4,729,940
982,480
$5,712,420
1,134,830
934,830
:
1,200,000
1,000,000
80,400
80,400
:
292,200
292,200
$20,776,235
$7,018,220
: $27,176,175
$7,004,620
$
400,210
15,957,615
25,530
99,690
65,545
80,815
1,338,895
69,715
11,555
56,435
36,985
2,266,365
366,880
1/ Equivalent coupon-issue yield.
R-2985
Accepted
$
TREASURY NEWS
apartment of the Treasury • Washington, D.C. • Telephone 566-2041
Embargoed until 2:30 p.m.
Contact:
January 15, 1985
Treasury Announces New STRIPS Program
Brien Benson
(202) 566-2041
Secretary of the Treasury Donald T. Regan announced today a
new program to facilitate jSeparate Trading of Registered Interest
and Principal of ^Securities (STRIPS). Treasury's plan to set up
this facility was announced on August 16.
Secretary Regan stated that the STRIPS program exemplifies
the basic public debt management and free market philosophy of
this Administration. It reduces the cost to the government of
financing the public debt by facilitating competitive private
market initiatives with a minimum of direct government involvement.
The STRIPS Program. Under the new STRIPS program, selected
Treasury securities may be maintained in the book-entry system
operated by the Federal Reserve Banks in a manner that permits
separate trading and ownership of the interest and principal payments. This will make it possible for the first time for the
market to trade separate principal and interest components, or zerocoupon instruments, in book-entry form, as direct obligations of
the U.S.
Currently, each Treasury marketable security has a unique
CUSIP number that identifies the security for maintenance and
transfer purposes. Under the STRIPS program, to facilitate identification of the component parts, each principal and interest component will be assigned a separate CUSIP number. For example, a
Treasury 10-year note eligible in STRIPS form could be held either
as the fully constituted note under its own CUSIP number or as 21
separate payments, with 21 separate CUSIP numbers identifying each
of 20 semiannual interest components and the principal component.
Timing. The first securities to be made eligible for STRIPS
will be the 10-year note and 30-year bond to be issued as part of
the quarterly refunding on February 15. Details of these two
securities will be announced on January 30. Shortly thereafter
the Treasury plans to make STRIPS available for the 10- and
30-year securities issued November 15, 1984. The 20-year bond of
November 15, 2004 will become eligible for STRIPS soon after the
first interest payment date on May 15, 1985. As experience with
the program develops and system enhancements are completed to
accommodate a larger volume of requests, other long-term Treasury
securities will be available for STRIPS.
R-2986
-2Call Feature. The 30-year bond to be issued in the February 1985
refunding will not have a call feature. Previous 30-year bond issues
have been callable by the Treasury after 25 years; therefore, separate
trading of the callable interest components has not been possible.
The call feature is being eliminated to accommodate market demand
for the separate trading of longer-term interest components.
Benefits of STRIPS Program. The STRIPS program will provide
a more efficient instrument for the market*that has developed
since 1982 in zero-coupon obligations based on Treasury securities.
Since mid-1982, approximately $45 billion of Treasury securities
(principal value) have been "stripped" to create zero coupons,
either by the issuance of separate instruments based on Treasuries
or by the physical separation of coupons from bearer Treasuries.
Zero-coupon securities, because they provide for a single
payment at a specific date in the future, have become very popular
for those who wish to avoid reinvestment risk or seek greater certainty in matching the maturities of their assets and liabilities.
They have been particularly attractive investments for Individual
Retirement Accounts and pension funds.
The Treasury has realized significant savings in financing
costs from the zero-coupon initiatives of the private market
since 1982, which have broadened the market for Treasury securities.
Secretary Regan stated that STRIPS will greatly reduce market
transaction and financing costs, stimulate competition, and facilitate further expansion of the zero-coupon market. The savings
made possible by STRIPS will be reflected in the competitive bidding
for Treasury securities.
Issuance of Strippable Securities. Treasury will not itself be
issuing zero-coupon securities under this new program. The Treasury
will continue to auction its securities in the same manner; however,
for selected issues, it will be possible for a depository financial
institution that maintains a book-entry account at a Federal Reserve
Bank to request that the securities be separated into their component
parts (principal and interest). Each component will be tradable
separately and thus may be separately owned.
Financial institutions will have the option to obtain the
securities as STRIPS, either on the date of original issue or
thereafter. However, all bids must be for the entire security,
not separate components. Thus the market, not the Treasury, will
decide how much of the securities will be held as STRIPS, based
on market demand.
Minimum Amounts. In order for a book-entry security to be
separated into its component parts, the par amount of the security
must be an amount which, based on the stated interest rate of the
security, will produce a semiannual interest payment of $1,000 or
a multiple of $1,000.
Once a book-entry security has been separated, each interest
-3-
and principal component may be maintained and transferred in multiples of $1,000, regardless of the par amount initially required for
separation or the resulting amount of each interest payment.
Collateral. The Treasury also plans to make STRIPS eligible as
collateral for Treasury Tax and Loan accounts and other public monies
later in 1985, after the system becomes fully automated and the current valuation of STRIPS can be readily determined in a cost-effective
manner.
Questions and Answers on STRIPS
Nature and Purpose of STRIPS
Q. What is the STRIPS program?
A. The STRIPS (Separate Trading of Registered Interest and Principal
of Securities) program is a new facility that will enable depository
financial institutions that maintain book-entry security accounts at
the Federal Reserve Banks to request that eligible securities be
separated into their component parts (principal and interest). When
the components are held separately, each component will be identified
by its own unique CUSIP number, different from the CUSIP number
assigned to the fully constituted security. Each component will
then be tradable separately under its own CUSIP number and marketable
as a zero-coupon instrument in the secondary market. (In the case
of a callable bond, one CUSIP number would be assigned to the components constituting the principal and all interest payments contingent
on the bond not being called.)
Q. What does CUSIP mean?
A. A CUSIP number is a standard numbering method for identifying
securities. It was developed by the American Bankers Association's
Committee on Uniform Securities Identification Procedures (CUSIP).
The assignment of CUSIP numbers is made by the CUSIP Service Bureau,
operated by Standard and Poor's.
0. Will there be different CUSIP numbers for components due on the
same date but stripped from different security .issues?
A. Yes.
Q. Why is the Treasury establishing this new program?
A. The popularity of stripped Treasury securities in recent years
has been a major development in the government securities market.
Since mid-1982, approximately $45 billion (principal value) of
Treasury securities has been stripped either by the issuance of
receipts based on them or by the physical separation of coupons
from bearer securities. This creation of zero-coupon securities
has benefitted the Treasury by broadening the appeal of Treasury
securities. To further build on this progress Treasury decided to
provide STRIPS as a more efficient method for trading for the zerocoupon market and thus lower the cost of financing the public
debt.
0. In the past, Treasury disapproved of stripping Treasury
securities. Now it" is offering the market an improved way to strip
securities. Why the change?
A. Prior to Ju e 1982, the Treasury Department disapproved of coupon
-2-
stripping because taxpayers could maintain that various transactions
involving stripped securities resulted in a lower tax liability. On
June 9, 1982, the Treasury Department announced that it would seek
to amend the Internal'Revenue Code to deal with coupon stripping.
These coupon stripping provisions were incorporated in the Tax Equity
and Fiscal Responsibility Act of 1982. Treasury then withdrew its
objection to coupon stripping and, in fact, viewed the creativity
of the investment community in producing zero-coupon instruments
based on Treasury securities as beneficial to Treasury debt management. As a natural further step to take advantage of the large
new market for zero-coupon securities, the Treasury is now providing
a more efficient mechanism for the secondary market to strip Treasury
securities.
Q.
What are the attractions of zero-coupon securities?
A. The absence of periodic cash payments on zero-coupon securities
is an advantage to those who wish to avoid reinvestment risk and
the necessity of finding an appropriate.reinvestment vehicle for
each interest payment. (This is, of course, a disadvantage to those
needing cash flow in order to meet current expenses, including taxes
on accrued interest.) Zeros are also much more price volatile
than par value bonds of equal maturity, which appeals to speculators.
Because zeros are taxed currently and have a long duration,
the main market for them domestically is composed of long-term
investors with non-taxable or tax deferred accounts. Individuals
have used low denomination zero coupons as investments for their
Individual Retirement Accounts and Keogh Plans and as gifts to
their children. Pension funds have used zero coupons as part of
their immunization strategy with respect to their long-term
liabilities. Zeros are also useful for corporate debt defeasance.
Individuals who have found the $10,000 minimum on Treasury's
short-term bills too high will now be able to purchase through the
secondary market interest components due in the near-term in $1,000
denominations.
Q. Why is the Treasury not selling zero-coupon securities directly?
A. The investment community will be better able to offer zero-coupon
instruments that meet particular needs in a timely manner. The market
for zero-coupon securities is a rapidly changing one. The demand
varies substantially for particular maturities and with changes in
interest rates and in the needs of various investor classes. There
is not always a cost advantage to issuing zero coupons. This changing
demand for zeros will be best accommodated by the STRIPS approach of
making a broad range of maturities eligible for stripping but leaving
it to the market to decide when and how much of an issue it will separate and market as zero-coupon instruments.
-3-
Eligible Institutions
Q. Who will be able to request the separation of a security into
;/i
rfe
STRIPS form?
~
A. Depository institutions with book-entry securities accounts at
Federal Reserve Banks will be able to request that their own securities
and those of their customers that hold book-entry securities through
these institutions be converted into STRIPS form.
Q. Will an individual be able to buy a single interest or principal
component directly from the Treasury?
A. No. The STRIPS program is designed to facilitate the stripping
of Treasury securities by private market participants.
Individuals
and other investors will be able to hold stripped interest or principal
components through a private broker or financial institution that is
directly or indirectly linked to the book-entry accounts maintained
at Federal Reserve Banks.
Q.
Will foreigners be allowed to hold STRIPS?
A. Yes. Foreigners, like U.S. investors, will be able to hold
STRIPS through financial institutions. Foreign financial institutions
will be able to hold STRIPS through a depository institution with
a book-entry securities account at a Federal Reserve Bank.
Procedures
Q. What will be the procedures for a depository institution to
obtain STRIPS?
A. Along with the auction results of a note or bond eligible for
stripping, the Treasury will announce the minimum amount of the
security required in order to hold the security in separate component
parts. This amount is a function of the interest rate and is chosen
so that payments can be further divided for trading purposes into
even $1,000 (final payment value) amounts.
(See attached table.) To
obtain STRIPS, an institution must have the minimum amount specified
for a particular issue, or an integral multiple of that amount.
The table shows that a security with a 12 percent interest rate
requires a minimum amount (par value) of $50,000 in order to result
', in interest components ia even $1,000 amounts. That is, a holder of
$50,000 par amount of Treasury securities could convert them at a
': Federal Reserve Bank for STRIPS obtaining separate interest components
i of $3,000. The holder could then transfer to others on the book-entry
1 system any of the separate $3,000 semiannual interest components, or he
'' could transfer amounts as small as $1,000. As another example, an
11-7/8 percent interest rate requires a minimum exchange of $320,000,
which would produce interest payments of $19,000. These could then
be sold separately as a $19,000 interest component or as 19 separate
-4-
$1,000 interest components. The interest components could also be
sold in integral multiples of $1000. The table shows that, for
interest rates from 5 percent to 20 percent, the range of minimum
exchange amounts runs from $10,000 to $1.6 million.
After the auction, financial institutions that have been awarded
securities may request that, as of the issue date, some or all of
their allotment be held as STRIPS (the amount must conform 'with
the minimum and multiples that have been announced).
In addition, eligible financial institutions may convert their
holdings of eligible Treasury securities to STRIPS subsequent to
the issue date (again, in conformance with the required minimums).
The request for conversion must be made to the Federal Reserve
Bank holding the securities to be converted into STRIPS and must be
in the form specified by that Bank. Depository institutions should
consult their Federal Reserve Bank for more specific information.
The Federal Reserve Bank at which the request is made will inform
the financial institution of the specific date on which the conversion will be accomplished, which will be no later than three business
days after the request is received.
Q. Will STRIPS be available in all Federal Reserve Districts?
A. Yes.
Q. Will there be a fee charged for conversion of Treasury securities
to STRIPS?
A. No. Treasury does not now charge a fee for conversion of
securities, e.g., from definitive to book-entry form, and does not
plan to charge a fee for the STRIPS conversion.
Q. Will there be a fee for each transfer of STRIPS through the
Federal Reserve facilities?
A. Yes. Book entry transfer of interest or principal components
will be subject to the same fee schedule applicable for the transfer
of Treasury securities.
Q. Once a security is in STRIPS form, what is the minimum amount of
principal or interest that can be transferred?
A. The minimum amount will be $1000 (final payment value). Larger
amounts must be in integral multiples of $1000.
Q. Once a security is separated into its component parts, can it
be reassembled and held under the CUSIP number for the fully
constituted security?
-5A. Treasury plans to make such a facility available as the market
and the STRIPS system develops.
Q. Will STRIPS be available in definitive form?
A. No. Only securities in book-entry form will be convertible into
STRIPS form. No provision will be made for converting a STRIPS component once separated on the book-entry system to definitive form.
An important purpose of STRIPS is to reduce the volume of definitive
securities and the related paperwork costs.
Q. Will government securities dealers be able to finance a security
for the time between a request for conversion into STRIPS and
completion of the conversion by a Federal Reserve Bank with repurchase
agreements?
A. A government securities dealer will be able to finance securities
awaiting, conversion with a repurchase agreement but must assure
that the security is returned to the proper account at the Federal
Reserve Bank on the day the conversion is to be done in order for
that conversion to take place.
Eligible Securities
Q. For what Treasury securities will the STRIPS program be available?
A. In general, Treasury plans to make the STRIPS program available
for new securities with 10 or more years of original maturity.
Initially, it will be available for the 10-year and 30-year securities
to be issued as part of the quarterly refunding on February 15, 1985.
Then, Treasury plans to make STRIPS available for the 10-year note
and 30-year bond issued on November 15, 1984. Also, the 20-year bond
maturing November 15, 2004 will become eligible for STRIPS effective
soon after the first interest payment on May 15, 1985. As experience
develops, STRIPS may be made available for other securities that have
already been issued.
Q. When will the CUSIP numbers for the February 15 issues be made
available?
A. At the time of the announcement of these issues on January 30,
198 5.
Q. Why is the STRIPS program not being made available for short-term
securities?
A. There is little market interest at this time in stripping securities with maturities under 10 years.
Will reopened securities be eligible for STRIPS?
-6-
A. Yes. However, we do not plan to reopen notes and bonds issued
before July 1984, because of their different tax treatment due to
the provisions in the Tax Reform Act of 1984 regarding market
discount and the 30% foreign withholding tax.
Q. How will STRIPS be applied to the callable bond issued November
15, 1984?
A. The principal payment of the bond together with all interest payments due after the first call date will be treated as a single
component and will be assigned one CUSIP number. Post-call date interest payments cannot be separated from the principal.
Reporting
Q. Will the amount of securities in STRIPS form be reported?
A. Yes. The Monthly Statement of the Public Debt will report the
amount held in STRIPS form by security issue.
Q.
Will the new STRIPS program affect the debt limit?
A. No. There will be no change in the amounts or timing of Treasury
debt issues and thus no change in the accounting for debt limit
purposes.
Q. Will daily yields on STRIPS be made available, as they are on
Treasury notes and bonds?
A. The availability of quotes will depend on market activity. We
expect that, once a liquid market for STRIPS develops, the Federal
Reserve Bank of New York will collect from government security
dealers price and yield information on the most active maturities.
Collateral
Q. Will the component parts of Treasury securities in the STRIPS
program be eligible collateral for Treasury Tax and Loan accounts?
A. Initially, they will not be. Once a system is in place for the
Treasury to value these component parts at their final payment value
minus an appropriate discount depending on the length of time
until payment is due, then they will become eligible collateral
for TT&L accounts. This should be in place later in 1985.
Q. Will the component parts of Treasury securities in the STRIPS
program be eligible collateral for advances from Federal Reserve Bank
discount windows?
A. This determination will be made by the Federal Reserve.
-7Q. Will the Federal Reserve conduct open market operations with
STRIPS?
A. Initially, they will not. When a liquid market develops for
STRIPS, it will be up to the Federal Reserve to decide whether to
buy and sell STRIPS as part of their conduct of monetary policy.
Q.
Will STRIPS be used in repurchase agreements?
A. Market participants will determine this. The Treasury has no
objection. However, it should be noted that zero-coupon securities
are sold at substantial discounts and their prices are more volatile
than other securities of equal maturity.
Taxation
Q. How are stripped interest and principal components to be taxed?
A. The stripped bond rules of the Internal Revenue Code will be
applicable to STRIPS. In brief, a financial institution that has
obtained all or a portion of its holdings of a Treasury security
in strippable form will be considered to have stripped the amount
of principal allocable to the STRIPS components sold at the time of
disposition of one or more STRIPS components. For example, if a
financial institution has obtained $1.6 million of a 10% Treasury
security in strippable form and it sells a $1,000 interest payment,
the financial institution would be considered to have stripped a
$20,000 Treasury security. In order to compute gain or loss on
the sale of a STRIPS component, the financial institution must
allocate its basis immediately before the disposition among the
components retained by the institution and the components disposed
of on the basis of their respective fair market values. Thus, in
the example the financial institution would recognize gain or loss
on the $1,000 STRIPS component it has sold by allocating an appropriate
portion of its basis in the $1.6 million of the Treasury security
to the $1,000 interest payment sold. The STRIPS components retained
(e.g., the remaining components of the $20,000 Treasury security in
the example above) by the institution with respect to the stripped
security will be considered to be discount obligations; a portion
of this discount, calculated according to a compound interest formula,
must be taken into account each year by the holder. Similarly, a
purchaser of a STRIPS component includes in taxable income each year
a portion of the difference between his purchase price and the maturing value of the obligation. This portion is determined by a compound
interest formula. Capital gains and losses recognized by holders
upon a taxable disposition of STRIPS components are calculated with
reference to the adjusted basis of the STRIPS components, which is
equal to its acquisition price (or in the case of the person stripping
the bond, the allocated portion of the basis in the bond) plus the
portion of the discount that has been included in taxable income for
the holding period. (The holding period for the financial institution
stripping the bond begins when it acquires the bond, whether or not
in STRIPS form.)
-8-
Q. Are short-term STRIPS components (due within one year) taxed
for domestic purposes the same way as Treasury bills?
A. Yes.
Q. How are callable STRIPS to be taxed?
A. Tax regulations covering this subject will be issued in the near
future. It is anticipated that, according to these regulations,
a purchaser of a callable STRIPS will calculate, based on his acquisition price, both the yield to the first call date and the yield
to final maturity. Whichever yield is less will be used to determine
the portion of the difference between the principal value and the
acquisition price that is to be included in taxable income each year.
If all the discount has been included in taxable income by the first
call date and the bond is not called, then subsequent interest payments are taxed in the year they are paid.
Q. How is interest to be reported on STRIPS to the IRS?
A. For purposes of complying with the broker reporting requirements,
Publication 1212 currently supplies brokers and other middlemen with
the amount of discount to be reported for particular original issue
discount securities and for receipts such as CATS and TIGRs. With
CATS and TIGRs discount is calculated for reporting purposes by
referencing the original issue price. Since STRIPS can be created
at any time, rather than issued all at once as are particular CATS
and TIGR series, we plan to promulgate each year for reporting
purposes prices and amount of discount to be reported for all possible
maturity dates. We will initially do this by calculating prices for
a particular date for zero-coupon obligations according to an established Treasury pricing methodology; once a liquid market develops
for these instruments we may subsequently be able to use market
prices as of a particular date. Under this arrangement, the amount
of discount reported for STRIPS will be calculated based on a new
computation of the price each year and without reference to the year
an individual acquired the obligation. It should be emphasized that
the amount of discount being discussed here is for reporting purposes
only, and it will generally not be equal to the amount of discount
includible in income for a particular taxpayer.
Q. Can STRIPS be held in Individual Retirement Accounts or Keogh Plans?
A. Yes, STRIPS are permissible investments for these tax deferred
retirement plans.
Q. Will foreign holdings of STRIPS be eligible for the "portfolio
interest" exemption from the 30 percent withholding tax on interest
paid to foreign persons?
-9A. Discount income on STRIPS from bonds issued after July 18, 1984,
is eligible for the portfolio interest exemption from the 30
percent tax on interest paid to foreign persons if the requirements
for portfolio interest are satisfied with respect to STRIPS held
by a foreign person. Thus, for example, the foreign beneficial
owner must be identified by name. In addition, other applicable
conditions for portfolio interest specified in regulations must be
satisfied.
MINIMUM FACE AMOUNTSrtHICHARE MULTIPLES OF SIOOU REQUIRED IN ORDER TO PRODUCE INTEREST PAYMENTS THAT ARfc MULTIPLES OF :> 1000.
COUPON
'.X)
b.000
b.l2b
5.250
5.375
5.500
5.02b
b.7bO
5.87 5
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MINIMUM
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($)
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1000000.00
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1600000.00
400000.00
320000.00
800000.00
1000000.00
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lo0O0(X).O0
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200000.00
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PAYMENT
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41000.00
2 1 000. 00
43000.00
11000.00
9000.00
23000.00
47000.00
3000.00
49000.00
1000.00
blOOO.OO
13000.00
b3000.00
27000.00
11000.00
7000.00
57000.00
29000.00
59000.00
3000.00
61000.00
31000.00
63000.00
1000.00
13000.00
33000.00
6 7000.00
17000.00
69000.00
7000.00
71000.00
9000.00
73000.00
37000.00
3<XX).00
19000.00
77000.00
39000.00
79000.00
1000.00
COUPON
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10.125
10.250
10.375
10.500
10.625
10.750
10.875
11.000
11.125
Il.2b0
11.375
1.1.500
11.025
11.750
11.875
12.000
12.125
12.250
12.375
12.500
12.025
12.750
12.875
13.000
13.125
13.250
13.3/5
13.500
13.625
13.750
13.875
1 4,000
14.125
14.250
14.3/5
14.500
14.62b
14.750
I4.d/b
lb,000
lb.12b
MINIMUM
FACE
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800000.00
1600000.00
400000.00
320000.00
800000.00
1600000.00
200000.00
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loOOOO.(X)
16 00000. (X)
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10 00000. (X)
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INTEREST
PAYMENT
($)
81000.00
41000.00
83000.00
21000.00
17000.00
430(X).00
87000. 00
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89000.00
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17000.00
137000.00
69000.00
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7000.00
141000.00
71000.00
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TREASURY NEWS
lepartment of the Treasury • Washington, D.C. • Telephone 566-2041
FOR IMMEDIATE RELEASE
January 15, 1985
Contact:
Brien Renson
(202) 566-2041
Deposit Insurance Study Forwarded to CCEA
The Administration's Cabinet Council on Economic Affairs
(CCEA) today received a study and recommendations prepared
by its Working Group on Financial Institutions Reform. The
study entitled "Recommendations for Change in the Federal
Deposit Insurance System" completes several months of work
done in conjunction with the Federal deposit insurance
agencies and other depository institution regulators. The
study should be available in final form in the next few
weeks.
This study represents the first time a modern
Administration has undertaken a full-scale review of the
Federal deposit insurance system.. The system has worked
well since its origins in the 1930s but the American economic
environment has changed significantly. Our financial system
has changed even more dramatically with deregulation, new
competition and more technologically sophisticated systems
for national and international deposit gathering and lending.
Much of this change has occurred during a period ranging
from high interest rates and high inflation declining rates
and moderate inflation. Under the circumstances, a new look
at how the deposit insurance system was bearing up under
these strains seemed appropriate.
The Working Croup was headed by Thomas J. Healey,
Assistant Secretary of the Treasury for Domestic Finance.
The other members included: Gregory Ballentine, Associate
Director for Economic Policy, Office of Management ar\6 Budget,
Richard Breeden, Deputy Counsel to the Vice President,
Sidney Jones, Under Secretary for Economic Affairs, Department
of Commerce, Eugene J. McAllister, Deputy Director for Policy
Development, Office of Policy Development, William Poole,
Member, Council of Economic Advisers, Roger Porter, Deputy
Assistant to the President for Policy Development and J. Michael
Shepherd, Deputy Assistant Attorney General for Legal Policy,
Department of Justice.
R-2987
- 2 The Working Group's study proposes several changes in
the deposit insurance system and the complementary system
of bank regulation to modernize these activities. However,
the proposed changes are moderate and designed to strengthen
what the study regards as the still relevant basic goals and
objectives of the deposit insurance and regulatory systems.
The changes will be evolutionary not revolutionary but will
be important in enhancing the self-regulatory aspects of
financial industry insurance and supervision; thereby,
minimizing government intrusion while modernizing the
stabilizing features of the systems.
The Working Group on Financial Institutions Reform will
work with the deposit insurance agencies and other regulators
to implement the insurance study's recommendations. Some
may require the introduction of legislation; others can be
effected by the insurance agencies and regulators themselves.
All the agencies have indicated an interest in assisting the
Working Group to implement the recommendations which relate
to the following subjects.
1. Risk-related pricing of deposit insurance premiums.
2. Increase capital requirements for insured depository
institutions.
3. Improve accounting and disclosure for insured
depository institutions.
4. Increase the size of deposit insurance funds and
their flexibility.
5. Improve the prudential supervision of depository
institutions.
Attached is an Executive Summary of the study including
a more detailed presentation of the problems and recommendations.
Attachment
RECOMMENDATIONS FOR CHANGE IN THE
FEDERAL DEPOSIT INSURANCE SYSTEM
Executive Summary
January 15, 1985
This study of the federal insurance system is organized
into five chapters and three appendices. The first chapter
discusses the creation of the current system in the 1930s
and highlights the major changes since then. The second
chapter describes the current status of the underlying commercial bank and thrift industries and the insurance funds.
The third chapter lays out the two primary goals of the
insurance system that continue to be relevant today and
describes principles to be applied in reviewing the various
reform options. The fourth chapter describes the major
reform options and analyzes them. The fifth chapter presents
recommendations. Finally, there are three appendices, which
describe the FDIC and FHLRB proposals, deposit insurance
arrangements in other countries, and assess the current Federal
deposit insurance system.
Origins of the System •
The first chapter discusses the creation of the insurance system in the 1930s and highlights the major changes in
the economic environment since then. The immediate impetus
for federal deposit insurance was the rash of bank failures
during the Depression. In passing legislation to reduce
the number of bank insolvencies and to prevent resulting
financial instability, the Congress focused on protecting
against the cause of most runs, by insuring the small depositor. Similar treatment was accorded to thrifts.
Major changes since the 1930s
There have been significant changes affecting the insurance system since the 1930s, the most significant of which
were the advent of high inflation and volatile interest
rates. At the same time, technology permitted increased
competition for funding sources from nondepository institutions. High and volatile interest rates resulted in increased
consumer sophistication and institutional innovation. Substantial external competition from nondepository institutions
is now occurring; today there is no significant financial
service provided by a bank or thrift that is not also offered
by less regulated competition. At the same time, communications technology has allowed funds to be divided into
insurable amounts and transferred around the world in seconds,
giving managers and regulators little time to respond to a
run. These shifts in turn cause potential severe liquidity
-iproblems at depository institutions.
-ii-
- Environmental changes also affected the asset side of
the balance sheet. Borrower sophistication led to the
development of the commercial paper market which reduces
high quality lending opportunities for commercial banks.
At the thrifts, new asset powers have led to the development of adjustable rate mortgages and new types of credit
risk from nonmortgage loans.
Description of the present system
The deposit insurance funds fit within a broader program
of government mechanisms for ensuring the soundness of depository institutions. Three interrelated programs form the
current structure supporting financial system stability.
The first two—the Federal Reserve's lender-of-last resort
capability, and federal deposit insurance—are designed to
ensure the solvency and stability of the entire financial
system. The third program consisting of statutes and regulations
supported by periodic federal examinations and enforcement
authority, acts to reduce the likelihood of failure of any
individual institution. The deposit insurance system study
is necessarily cognizant of the role of the other programs
in providing systemic stability.
While the current insurance system has satisfied the
goal of maintaining stability over the past 50 years, there
is. concern that the economic changes and the potential increase
in riskiness of large institutions may threaten the ability
of the insurance funds to fulfill their goals. Moreover,
the insurance system appears to treat large and small depository institutions differently, raising substantial public
policy questions. These are the concerns that the Administration
undertook to examine.
Incentive for risk-taking
The current system of flat-rate premiums provides little
disincentive against imprudent management of risks in troubled
institutions. To the contrary, with low capital levels, the
flat- (and cheap) rate premium system creates incentives for
managers and owners of troubled institutions to speculate.
They have everything to gain if they win their bets; the
insurer (and in the extreme case, the Treasury) pays if they
lose. For a troubled institution with low or no capital,
even taking modest risks might precipitate failure. But
taking modest risks would also be unlikely to restore a very
troubled institution to financial health quickly enough to
avoid failure. Therefore, there is an incentive to take greater
risks which could lead to either rapid recovery or rapid
failure. Losses in excess of the owners' modest investments
are borne by the insurer, while owners reap all the rewards
of winning bets.
-iiiStatus of the underlying industries and the insurance funds
The second chapter describes the current status of the
underlying commercial banking and thrift industries and the
insurance funds. It would be inappropriate to evaluate the
deposit insurance systems without also analyzing the status
of the industries they insure. Risk in their industries is
clearly a cause of concern for both funds.
Commercial banks
The commerial banking industry is suffering from the
aftermath of a long and deep worldwide recession. Ranks
with credit exposure to the energy and agricultural sectors
and third world borrowers have suffered the most. In 1984,
a modern record of 5 percent of banks were identified as
problem cases. However, available evidence indicates a
growing disparity between strong and weak banks under
deregulation, indicating that the better banks perform well
in a deregulated environment.
The biggest risk to the stability of the financial
system inherently lies in the largest banks. The gradual
trend toward increased concentration of assets in the largest
banks makes the stability of the largest banks even more
important to stability of the entire financial system. The
top ten banks now control 25 percent of the total banking
assets, compared with 20 percent in 1958. Moreover, large
banks tend to fund with more volatile, liabilities, (and
hence riskier) funds on average than the industry. Banks
with over $10 billion in assets fund 60 percent with volatile
liabilities, compared with an industry average of 40 percent.
The largest banks also seem to have invested in some of the
riskier loans. The 24 largest banks accounted for 76.9
percent of all U.S. bank foreign loans. Yet the larger
banks also have lower capital ratios than smaller banks and
therefore, less of a buffer for the insurance fund.
Thrifts
Savings and loan associations and mutual savings banks
continue to face severe problems. Their long-term and historically high quality mortgage assets for the most part were
placed at interest rates on the average much below the cost
of their short-term funding sources, most of which are now
at market rates. Fixed-rate and inexpensive passbook accounts
have dropped from 83 percent of total interest-bearing liabilities
in 1966 to less than 9 percent in June 1984. The effect of the
-ivrise in interest rates on earnings and capital has been
dramatic, and the number of problem thrifts has risen
commensurately. Each year since 1981, over one-third of all
thrifts have reported losses. One of the results has been
a reduction in equity capital, the buffer for the insurance
fund. The industry average equity-to-assets ratio was 4.19
percent at year-end 1983. However, tangible net worth (which
excludes the effects of regulatory accounting and goodwill)
was a meager 0.5 percent.
High growth has become another cause for concern. Savings
and loan associations' average growth rate rose dramatically
to 18 percent in 1983, in part resulting from high risk
strategies which are funded quickly through deposits procured
at above market interest rates. Sharp recent increases in
S&L growth rates, coupled with riskier loans, exacerbate the
potential problems for the FSLIC.
The insurance funds
No recent attempt has been made to relate the size of
the funds to the new economic environment and associated
risks. It seems rational that the funds should be able to
handle at least ongoing operations and the potential failure
of one or two of the largest depository institutions. Yet
the largest depository institutions' deposits are many times
the size of the funds, giving rise to concern about the
funds' adequacy.
For example, as of year-end 1983, 6 FSLICinsured and 13 FDIC-insured institutions' deposits each
exceeded the size of their respective fund.
Goals and principles
The third chapter lays out the two primary goals of a
modern insurance system. The two primary goals are: to
assure the stability of the depository system, and to protect
small depositors (the same conceptual goals as were appropriate
when the FDIC was started 51 years ago).
Seven principles have been selected by which to judge
the appropriateness of changes to the present system. They
are: (1) limiting distortions, (2) relying on market-oriented
arrangements, (3) encouraging market monitoring of risk,
(4) improving predictability, (5) promoting equity, (6) minimizing taxpayer subsidies, and (7) ensuring future flexibility.
-vOptions
The fourth chapter is a systematic review of the advantages and disadvantages of all of the changes in deposit
insurance which merit serious consideration. This leads
onto the recommendations in the final chapter.
Recommendations
Thorough analysis of the various options resulted in
five recommendations concerning risk-related premiums,
capital, accounting and disclosure, the size and flexibility
of the funds and the examination, supervision and enforcement function. These recommendations are viewed as a complement to, but not a substitute for, the Administration's
policies in favor of financial deregulation, (such as expanded
powers for depository institution holding companies, and the
liberalization of geographic restraints on banking organizations) and the vice President's recommendations for reorganization of the federal regulatory agencies.
1. Risk-related pricing— The current flat-rate premium
structure for deposit insurance is inequitable because healthy
institutions subsidize troubled ones; and there is little
economic incentive to control risk-taking. Therefore, introduction of risk-related pricing, although not necessarily
perfect, would clearly be better than the current flat-rate
system in simulating the operation of the free market and,
hence, reducing the inequity and risk-taking.
2. Increase capital — The increased risks faced by financial institutions as a result of changes in the economic
environment argue for a significantly higher capital requirement to serve as a buffer against difficult times for the
institutions and the insurance funds. An increased stake by
long-term capital investors such as unsecured subordinated
debtholders should provide a more stable market discipline
over time than that provided by depositors because, unlike
depositors, long-term capital holders are uninsured and
unsecured, and cannot withdraw their funds quickly.
3. Accounting and disclosure — It is not presently
possible to obtain publicly and consistently reported financial statements for all ddepository institutions.
Moreover, material events are not always required to be
disclosed in a timely fashion, even to regulators;
further, no publicly-available, written explanation by management of its financial results is required for most institutions. Therefore, the differences between regulatory and
-vi-
generally accepted accounting principles would be phased out
to provide consistent reporting; prompt disclosure of material
events would be required; and most managements would explain
annually their financial results.
4. Size of funds and flexibility — Determining
appropriate sizes for the insurance funds is important because
the perceived adequacy of the funds generates confidence in
the system. Therefore, the Administration should work with
the agencies to determine reasonable target sizes for the
funds. As part of this endeavor, additional tools for handling
failure or near-failure of insured institutions should
be developed. Moreover, the insurance premiums should he
extended to cover deposits payable in foreign offices because
such deposits have been effectively insured in the past and
seem to be more volatile than other funding sources.
5. Prudential supervision — Finally, work to improve
the examination, supervision and enforcement functions of
the regulatory agencies should continue. The Administration
should study with the regulators to determine what changes
are needed and whether improved examination capabilities now
would reduce the total cost in the long run by detecting and
resolving problems at an earlier and less expensive stage.
Regulators should continue present initiatives to allocate
resources according to priorities by identifying the institutions which pose the greatest risks, should review options
to improve early warning systems and should develop mechanisms
to ensure prompt accountability of officers and directors as
a way to discourage and prevent unsafe or unsound actions by
managers.
TREASURY NEWS
Department of the Treasury • Washington, D.C. • Telephone 566FOR RELEASE AT 4:00 P.M. January 15, 1985
TREASURY "S WEEKLY BILL OFFERING
The Department of the Treasury, by this public notice,
invites tenders for two series of Treasury bills totaling
approximately $14,000 million, to be issued January 24, 1985.
This offering will provide about $725 million of new cash for
the Treasury, as the maturing bills were originally issued in
the amount of $13,284 million. The two series being offered are
described below.
Due to the partial holiday on Monday, these auctions have
been scheduled for Tuesday, January 22.
•• •
91-day bills (to maturity date) for approximately
$7,000 million, representing an additional amount of bills dated
October 25, 1984, and to mature April 25, 1985 (CUSIP No. 912794
HA 5 ) , currently outstanding in the amount of $6,611 million, the
additional and original bills to be freely interchangeable.
182-day bills for approximately $7,000 million, to be
dated January 24, 1985, and to mature July 25, 1985 (CUSIP No.
912794 HT 4 ) .
Both series of bills will be issued for cash and in exchange
for Treasury bills maturing January 24, 1985. In addition to the
maturing 13-week and 26-week bills, there are $8,481 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 $1,162
million, and Federal Reserve Banks for their own account hold $3,044
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 $807
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 $^,000 multiple, on the records either of the Federal
Reserve Ban1 -s and Branches, or of the Department of the Treasury.
R-2988
- 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,
January 22, 1985.
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 January 24, 1985, in cash or other immediately-available funds
or in Treasury bills maturing January 24, 1985.
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 RELEASE AT 4:00 P.M.
January 16, 1985
TREASURY TO AUCTION $9,000 MILLION OF 2-YEAR NOTES
The Department of the Treasury will auction $9,000 million
of 2-year notes to refund $7,673 million of 2-year notes maturing
January 31, 1985, and to raise $1,325 million new cash. The $7,673
million of maturing 2-year notes are those held by the public,
including $611 million currently held by Federal Reserve Banks as
agents for foreign and international monetary authorities.
The $9,000 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 $625 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-2989
HIGHLIGHTS OF TREASURY
OFFERING TO THE PUBLIC
OF 2-YEAR NOTES
TO BE ISSUED JANUARY 31, 1985
January 16, 1985
Amount Offered:
To the public
$9,000 million
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
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
Payment through Treasury Tax and
Loan (TT&L) Note Accounts
Deposit guarantee by
designated institutions
Key Dates:
Receipt of tenders
2-year notes
Series R-1987
(CUSIP No. 912827 RU 8)
January 31, 1987
No provision
To be determined based on
the average of accepted bids
To be determined at auction
To be determined after auction
July 31 and January 31
$5,000
Acceptable for TT&L Note
Option Depositaries
Acceptable
-
Settlement (final payment
due from institutions)
a) cash or Federal funds
b) readily collectible check
Wednesday, January 23, 1985,
prior to 1:00 p.m., EST
Thursday, January 31, 1985
Tuesday, January 29, 1985
rREASURY NEWS
tartment of the Treasury • Washington, D.C. • Telephone
FOR IMMEDIATE RELEASE January 17, 1985
RESULTS OF TREASURY'S 52-WEEK BILL AUCTION
Tenders for $8,529 million of 52-week bills to be issued
January 24, 1985,
and to mature January 23, 1986,
today. The details are as follows:
were accepted
RANGE OF ACCEPTED COMPETITIVE BIDS:
Discount
Rate
Low
High
Average -
Investment Rate
(Equivalent Coupon--Issue Yield)
8. 36%
8. 40%
8.,39%
9.05%
9.,10%
9.,09%
Price
91.547
91.507
91.517
Tenders at the high discount rate were allotted 17%.
TENDERS RECEIVED AND ACCEPTED
(In Thousands!)
Boston
New York
Philadelphia
Cleveland
Richmond
Atlanta
Chicago
St. Louis
Minneapolis
Kansas City
Dallas
San Francisco
Treasury
TOTALS
Accepted
Received
Location
$
409,545
17,618,775
6,785
22,065
38,640
98,23*6
1,437,725
86,315
28,620
72,785
20,290
1,470,510
112,210
$
79,745
7,047,265
6,785
22,065
27,830
43,110
525,585
59,825
28,620
69,125
13,630
492,960
112,210
$21,422,495
$8,528,755
$19,933,555
638,940
$20,572,495
$7,039,815
638,940
$7,678,755-
Type
Competitive
Noncompetitive
Subtotal, PulDlic
Federal Reserve
Foreign Official
Institutions
TOTALS
R-2990
800,000
800,000
50,000
50,000
$21,422,495
$8,528,755
"REASURY NEWS
epartment
the Treasury • Washington,Contact:
D.C. •BobTelephone
566-2041
FOR PflTDIATEof
RELEASE
Levine
(202) 566-20-n
Jan. 17, 1985
Announcement by G-5 Ministers
and Governors
The Ministers of Finance and Central Bank Governors of
France, Germany, Japan, the United Kingdom, and the United States
announced today that they had met to discuss a range of
international economic and financial issues. The meeting, part
of a regular series of consultations among these countries on
economic and financial matters of mutual interest, also involved
IMF Managing Director de Larosiere for a discussion of the
economic policies and prospects of the major industrial
countries.
The Ministers and Governors, noting the recent developments
in the exchange markets, expressed their commitment to work
toward greater exchange market stability. Toward this end, the
Ministers and Governors:
— Reaffirmed their commitment to pursue monetary and
fiscal policies that promote a convergence of economic
performance at non-inflationary, steady growth;
— Stressed the importance of removing structural rigidities
in their economies to achieving the objectives of
non-inflationary, steady growth and exchange market
stability, and expressed their intent to intensify
efforts in this area; and
— In light of recent developments in foreign exchange
markets, reaffirmed their commitment made at the
Williamsburg Summit to undertake coordinated intervention
in the markets as necessary.
The Ministers and Governors believe that this approach will
provide a solid framework for sustaining recovery, reducing
inflation, increasing employment, and achieving greater exchange
rate stability.
R-2991
January 17, 1985
• *
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federal financing bank
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WASHINGTON, D.C. 20220
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January 18, 1985
FOR IMMEDIATE RELEASE
FEDERAL FINANCING BANK ACTIVITY
Francis X. Cavanaugh, Secretary, Federal Financing
Bank (FFB), announced the following activity for the
month of November 198 4.
FFB holdings of obligations issued, sold or guaranteed by other Federal agencies totaled $145.2 billion on
November 30, 1984, posting an increase of $0.2 billion
from the level on October 31, 1984. This $0.2 billion
net change was the result of increases in holdings of
agency-guaranteed debt of $0.3 billion and in holdings of
agency debt issues of $0.1 billion, while holdings of
agency assets fell by $0.2 billion during the month. FFB
made 293 disbursements during November.
Attached to this release are tables presenting FFB
November loan activity, new FFB commitments to lend
during November and FFB holdings as of November 30, 1984.
# 0 #
R-2992
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Page 2 of 8
FEDERAL FINANCING BANK
NOVEMBER 1984 ACTIVITY
DATE
BORROWER
FINAL
MATURITY
INTEREST
RATE
(semiannual )
$ 420,000,000.00
200,000,000.00
455,000,000.00
400,000,000.00
455,000,000.00
335,000,000.00
35,000,000.00
465,000,000.00
495,000,000.00
11/15/84
11/12/84
11/20/84
11/23/84
11/27/84
11/30/84
12/1/84
12/3/84
12/4/84
9.095%
9.095%
9.065%
9.205%
9.015%
8.975%
8.975%
8.905%
8.775%
5,000,000.00
10,000,000.00
15,000,000.00
8,000,000.00
2,369,000.00
7,205,000.00
15,000,000.00
15,000,000.00
10,000,000.00
12/5/84
2/4/85
12/10/84
12/13/84
2/12/85
2/15/85
2/19/85
2/27/85
2/28/85
9.455%
9.465%
9.195%
9.145%
9.165%
9.105%
9.055%
8.805%
8.775%
AMOUNT
OF ADVANCE
INTEREST
RATE
(other than
semi-annual)
CM-BUDGET AGENCY DEBT
TENNESSEE VALLEY AUTHORITY
Advance #405
Advance #406
Advance #407
Advance #408
Advance #409
Advance #410
Advance #411
Advance #412
Advance #413
11/7
1V7
11/12
11/15
11/20
11/20
11/23
11/27
11/30
NATIONAL CREDIT UNION ADMINISTRATION
Central Liquidity Facility
+Note #272
+Note #273
+Note #274
Note #275
Note #276
Note #277
-i-Note #278
+Note #279
•Note #280
11/5
11/5
11/9
11/14
11/14
11/16
11/19
11/29
11/30
AGENCY ASSETS
FARMERS HOME ADMINISTRATION
Certificates of Beneficial Ownership
11/25
11/26
11/26
11/26
200,000,000.00
150,000,000.00
150,000,000.00
60,000,000.00
11/1/99
11/1/89
11/1/94
11/1/99
11.465%
11.115%
11.365%
11.465%
11/1
11/2
11/5
11/7
11/7
11/7
11/8
11/9
11/9
11/9
11/9
11/9
11/14
11/14
11/16
11/16
11/19
11/19
11/19
11/19
546,082.00
12,000.00
10,366,980.00
558,800.00
776,369.45
997,169.00
268,346.70
505,003.87
579,659.02
17,019,042.24
3,236,500.68
2,047,462.38
81,265.60
447,564.79
992,821.28
26,974.86
3,822,204.27
5,000,000.00
1,422,700.00
742,893.97
11/15/92
5/15/95
2/5/95
11/22/95
3/10/91
9/22/93
7/15/92
6/10/96
3/10/92
7/25/91
7/15/92
3/24/12
5/10/92
7/15/92
6/15/12
11/30/12
3/24/12
7/10/94
9/10/95
4/30/11
10.015%
11.785%
11.416%
11.709%
11.430%
9.828%
10.995%
11.895%
10.575%
11.590%
11.186%
11.975%
11.855%
11.155%
11.865%
11.915%
11.915%
11.788%
11.615%
11.915%
GOVERNMENT - GUARANTEED LOANS
DEPARTMENT OF DEFENSE
Foreign Military Sales
Jordan 11
Kenya 11
Jordan 12
Bolivia 2
Botswana 3
Zaire 2
Philippines
El Salvador
Jordan 10
Lebanon 7
Philippines
Turkey 13
Indonesia 9
Philippines
Greece 15
Somalia 4
Turkey 13
Thailand 10
Thailand 11
Greece 14
+rollover
10
7
10
10
11.794%
11.424%
11.688%
11.794%
ann.
ann.
ann.
ann.
Page 3 of 8
FEDERAL FINANCING BANK
NOVEMBER 1984 ACTIVITY
BORROWER
AMOUNT
OF ADVANCE
DATE
FINAL
MATURITY
INTEREST
RATE
(semiannual
INTEREST
RATE
(other than
semi-annual)
Foreign Military Sales (Cont'd)
Greece 15
Jamaica 2
Ecuador 6
El Salvador 7
Jordan 9
Jordan 12
Philippines 10
Thailand 12
Turkey 14
Zaire 2
Botswana 1
Jordan 11
Turkey 13
Malaysia 6
Malaysia 7
Greece 14
Korea 18
Philippines 10
Turkey 13
Turkey 13
Botswana 3
11/19
11/19
11/20
11/20
11/20
11/20
11/20
11/20
11/20
11/20
11/21
11/21
11/21
11/26
11/26
11/29
11/29
11/29
11/29
11/30
11/30
$ 14,358,240.00
50,266.40
42,524.08
258,995.75
344.13
5,960,149.00
585,259.58
15,000,000.00
950.00
21,555.00
81,725.20
946,900.00
9,017,632.85
2,547,300.00
4,942,000.00
738,637.50
400,000.00
3,265,709.32
1,210,010.00
298,182.03
899,052.08
11.839%
6/15/12
12/20/93 11.775%
6/20/89
11.475%
11.703%
6/10/96
11/25/91 11.665%
11.439%
2/5/95
10.965%
7/15/92
11.519%
3/20/96
11/30/12 11.775%
10.345%
9/22/93
1/15/87
10.702%
9.723%
11/15/92
11.785%
3/24/12
10.300%
9/10/87
10.369%
3/10/88
11.655%
4/30A1
12/31/95 11.505%
10.809%
7/15/92
3/24/12
11.655%
11.695%
3/24/12
3/10/91
11.235%
DEPARTMENT OF ENERGY
Synthetic Fuels - Non-Nuclear Act
Great Plains
Gasification Assoc. #126
#127
11/13
11/26
9,500,000.00
9,000,000.00
10/1/85
10/1/85
10.835%
10.245%
400,000.00
200,000.00
3,015,000.00
60,000.00
203,001.71
170,100.00
665,040.00
450,000.00
13,701.90
2,144,709.00
165,000.00
129,923.00
60,577.00
508,000.00
1,800,000.00
4,284.28
98,273.90
500,000.00
350,000.00
195,000.00
220,000.00
676,507.68
7,720,000.00
11/1/90
2A / 8 5
1/4/85
12/1/85
10/1/85
7/1/03
8/15/86
8/1/85
2/1/85
9/1/85
7/1/03
10/15/03
5/1/04
12/1/85
10/1/05
6/1/85
8/15/86
9/1/85
7/1/85
8/1/85
8/1/85
2/15/85
11/30/92
11.590%
9.465%
9.455%
10.195%
10.055%
11.915%
10.905%
9.805%
9.095%
9.785%
11.838%
11.775%
11.778%
9.665%
11.600%
9.215%
10.335%
9.415%
9.255%
9.325%
9.325%
8.805%
11.237%
DEPARTMENT OF HOUSING & URBAN DEVELOPMENT
Community Development
*Bell Gardens, CA
Peoria, IL
Roanoke, VA
St. Petersburg, FL
Westland, MI
Albany, NY
Santa Ana, CA
Provo, UT
Sacramento, CA
Detroit, MI
Syracuse, NY
Pittsburgh, PA
Pittsburgh, PA
Bristol, VA
Boston, MA
Kenosha, WI
Santa Ana, CA
Waukegan, IL
Albany, NY
Mayaguez, PR
San Diego, CA
South Bend, IN
•Jefferson County, KY
11/1
11/5
1V5
11/7
11/7
11/14
11/15
11/16
11/16
11/19
11/19
11/20
11/20
11/23
11/23
11/23
11/23
11/23
11/29
11/29
11/29
11/29
11/30
11.926% ann.
10.455%
10.279%
12.270%
11.202%
9.947%
ann.
ann.
ann.
ann.
ann.
9.957%
12.188%
12.122%
12.125%
9.899%
11.936%
9.233%
10.602%
9.570%
9.320%
9.438%
9.438%
ann.
ann.
ann.
ann.
ann.
ann.
ann.
ann.
ann.
ann.
ann.
ann.
11.553% ann.
DEPARTMENT OF THE NAVY
Defense Production Act
Gila River Indian Com. #19
"maturity extension
11/16
307,031.58
10/1/92
11.637%
11.472% qtr.
Page 4 of 8
FEDERAL FINANCING BANK
NOVEMBER 1984 ACTIVITY
BORROWER
DATE
AMOUNT
OF ADVANCE
FINAL
MATURITY
INTEREST
'HATE
(semiannual)
INTEREST
RATE
(other than
semi-annual)
RURAL ELECTRIFICATION ADMINISTRATION
Saluda River Electric #271 11/1
*Saluda River Electric #186
11/1
*S. Mississippi Electric #171
11/2
•Tex-La Electric #208
11/5
Golden Valley Electric #81
11/5
Basin Electric #137
11/5
•Colorado Ute Electric #96
11/5
•Seminole Electric #141
11/7
Tex-La Electric #208
11/7
Western Illinois Power #99
11/7
Western Illinois Power #294
11/7
Colorado Ute Electric #203
11/8
•Wolverine Power #100
11/13
•Wolverine Power #101
11/13
•Wolverine Power #182
11/13
•Wolverine Power #233
11/13
•Wolverine Power #234
11/13
•Hoosier Energy #107
11/13
Soyland Power #105
11/13
Soyland Power #165
11/13
Soyland Power #226
11/13
Soyland Power #293
11/13
•Deseret G&T #170
11/14
•Central Electric #131
11/14
•Deseret G&T #211
11/15
•Central Electric #131
11/15
Kansas Electric #216
11/15
N.E. Texas Electric #280
11/15
Old Dominion Electric #267
11/15
Glacier Highway Electric #262 11/16
•Seminole Electric #141
11/19
•Wolverine Power #101
11/19
•Soyland Power #165
11/19
Deseret G&T #211
11/19
New Hampshire Electric #270
11/21
Oglethorpe Power #246
11/21
•S. Mississippi Electric #3
11/21
•Big Rivers Electric #91
11/23
•Big Rivers Electric #143
11/23
•Big Rivers Electric #179
11/23
Cajun Electric #163
11/26
Cajun Electric #249
11/26
•Big Rivers Electric #58
11/26
•Big Rivers Electric #91
11/26
•Big Rivers Electric #136
11/26
•Big Rivers Electric #143
11/26
•Big Rivers Electric #179
11/26
North Carolina Electric #268
11/27
•South Texas Electric #109
11/28
•North Carolina Electric #185
11/29
Arkansas Electric #142
11/30
Kamo Electric #266
11/30
Kansas Electric #216
11/30
•Allegheny Electric #93
11/30
•Allegheny Electric #175
11/30
Tex-La Electric #208
11/30
•maturtity extension
$ 900,000.00
2,250,000.00
2,769,000.00
760,000.00
1,095,000.00
15,000,000.00
1,133,000.00
2,048,000.00
339,000.00
6,138,000.00
41,194,000.00
1,090,000.00
1,989,000.00
2,543,000.00
2,722,000.00
4,380,000.00
5,546,000.00
15,000,000.00
9,306,000.00
80,000.00
143,000.00
54,001,000.00
695,000.00
120,000.00
4,671,000.00
500,000.00
1,100,000.00
560,000.00
325,000.00
702,000.00
4,663,000.00
140,000.00
8,562,000.00
5,089,000.00
411,000.00
12,838,000.00
145,000.00
237,000.00
968,000.00
27,336,000.00
5,000,000.00
20,000,000.00
170,000.00
1,059,000.00
123,000.00
46,000.00
5,500,000.00
9,188,000.00
527,000.00
4,755,000.00
2,069,000.00
9,524,000.00
919,000.00
3,119,000.00
4,384,000.00
800,000.00
12/31/86
12/31/86
11/31/86
11/5/86
12/31/86
11/5/86
11/5/86
11/7/86
11/7/86
12/31/18
V2/18
11/8/86
11/13/86
11/13/86
11/13/86
11/13/86
11/13/86
12/31/16
12/31/18
12/31/18
12/31/18
1/2/18
11/16/87
11/14/86
11/17/86
11/17/86
12/31/86
12/31/86
12/31/86
12/31/86
11/19/86
11/17/87
12/31/14
11/19/86
1/2/18
11/21/86
12/31/86
12/31/86
12/31/86
12/31/84
11/26/86
11/26/86
9/30/87
9/30/87
9/30/87
9/30/87
12/31/84
12/31/86
11/28/86
12/31/86
1/31/85
12/31/86
12/31/86
12/31/86
12/1/86
12/1/86
11.305%
11.305%
11.055%
11.095%
11.145%
11.095%
11.095%
10.915%
10.915%
11.657%
11.660%
10.925%
10.945%
10.945%
10.945%
10.945%
10.945%
11.827%
11.818%
11.818%
11.818%
11.821%
11.225%
11.015%
11.045%
11.045%
11.085%
11.080%
11.074%
10.945%
10.835%
11.105%
11.851%
10.835%
11.719%
10.725%
10.744%
10.555%
10.555%
8.975%
10.425%
10.425%
10.665%
10.665%
10.665%
10.665%
8.865%
10.505%
10.435%
10.515%
8.775%
10.551%
10.555%
10.536%
10.495%
10.495%
11.150% qtr.
11.150% qtr.
10.906% qtr
10.945% qtr.
10.994% qtr.
10.945% qtr.
10.945% qtr.
10.770% qtr.
10.770% qtr.
11.492% qtr.
11.495% qtr.
10.780% qtr.
10.799% qtr.
10.799% qtr.
10.799% qtr.
10.799% qtr.
10.799% qtr.
11.657% qtr.
11.648% qtr.
11.648% qtr.
11.648% qtr.
11.651% qtr.
11.072% qtr.
10.867% qtr.
10.987% qtr.
10.987% qtr.
11.936% qtr.
10.931% qtr.
10.925% qtr.
10.799% qtr.
10.692% qtr.
10.955% qtr.
11.680% qtr.
10.692% qtr.
11.552% qtr.
10.585% qtr.
10.603% qtr.
10.419% qtr.
10.419% qtr.
10.293% qtr.
10.293% qtr.
10.526% qtr.
10.526% qtr.
10.526% qtr.
10.526% qtr.
10.371% qtr.
10.302% qtr.
10.380% qtr.
8.743% qtr.
10.415% qtr.
10.419% qtr.
10.401% qtr.
10.361% qtr.
10.361% qtr.
Page 5 of 8
FEDERAL FINANCING BANK
NOVEMBER 1984 ACTIVITY
BORROWER
DATE
AMOUNT
OF ADVANCE
FINAL
MATURITY
INTEREST
RATE
(semiannual)
SMALL BUSINESS ADMINISTRATION
State & Local Development Company Debentures
Oconee Area Development Corp. 11/7
The St. Louis Local Dev. Co. 11/7
Rural Missouri, Inc.
11/7
E.D.C. of East Kentucky
11/7
Coastal Area Dist Dev Auth, Incll/7
Neuse River Dev. Auth., Inc. 11/7
Texas Cert. Dev. Co., Inc.
11/7
Columbus Countywide Dev. Corp. 11/7
Bus. Dev. Corp. of Nebraska
11/7
The St. Louis Local Dev. Co. 11/7
Rural Enterprises, Inc.
11/7
South Austin/Madison Corp.
11/7
Bus. Dev. Corp. of Nebraska
11/7
Georgia Mountains Reg. E.D.C. 11/7
Central Midlands Dev. Corp.
11/7
Rural Missouri, Inc.
11/7
The St. Louis Local Dev. Co. 11/7
Louisville Economic Dev. Corp. 11/7
Greater Salt Lake Bus. Dist. 11/7
CDC Bus. Development Corp.
11/7
EBDC of Montgomery County, MD 11/7
T. Valley Cert. Dev. Corp.
11/7
C.D.C. of Warren County, Inc. 11/7
Los Angeles LDC, Inc.
11/7
E.D.F. of Sacramento, Inc.
11/7
GA Mountains Reg. E.D.C.
11/7
Long Island Dev. Corp.
11/7
Empire State Cert. Dev. Corp. 11/7
Gr. Metro. Chicago Dev. Corp. 11/7
Rural Missouri, Inc.
11/7
Jacksonville Local Dev. Co.
11/7
FL 1st Cap. Fin. Corp., Inc. 11/7
Nine County Dev., Inc.
11/7
Grand Rapids Loc. Dev. Corp. 11/7
Alabama Com. Dev. Corp.
11/7
Pioneer County Dev., Inc.
11/7
Pennyrile Area Dev. Dis., Inc. 11/7
Gr. Camden Dev. Corp.
11/7
Evergreen Com. Dev. Assoc.
11/7
E.D.C. of E. Kentucky
11/7
The St. Louis Local Dev. Co. 11/7
Forward Development Corp.
11/7
The St. Louis Local Dev. Co. 11/7
Hamilton County Dev. Co., Inc. 11/7
Gr. Salt Lake Business Dist. 11/7
Nine County Development, Inc. 11/7
Commonwealth S.B.D. Corp.
11/7
Long island Development Corp. 11/7
Cen. Mississippi Dev. Co., Inc.11/7
Iowa Business Growth Co.
11/7
Long Island Development Corp. 11/7
Montgomery County B.D.C.
11/7
Cincinnati Local Dev. Co.
11/7
S. Eastern Econ. Dev. Corp.
11/7
Long Island Development Corp. 11/7
Brockton Reg. E.D.C.
11/7
Gr. Metro. Chicago Dev. Corp. 11/7
Milford Progress, Inc.
11/7
Operation Oswego County, Inc. 11/7
Long Beach Local Dev. Corp.
11/7
No.
E.D.F.
Bay
Ocean
Virginia
Colony
State
of Sacramento,
Development
B.D.A.,
L.D.C, Inc.
Inc.
Inc.
Corp. 11/7
H/7
$ 25,000.00
45,000.00
47,000.00
47,000.00
48,000.00
56,000.00
71,000.00
73,000.00
74,000.00
89,000.00
90,000.00
97,000.00
110,000.00
111,000.00
127,000.00
132,000.00
135,000.00
137,000.00
141,000.00
166,000.00
176,000.00
205,000.00
227,000.00
236,000.00
239,000.00
273,000.00
350,000.00
410,000.00
463,000.00
500,000.00
500,000.00
24,000.00
47,000.00
50,000.00
61,000.00
65,000.00
76,000.00
78,000.00
79,000.00
84,000.00
84,000.00
85,000.00
97,000.00
101,000.00
102,000.00
103,000.00
105,000.00
111,000.00
118,000.00
123,000.00
125,000.00
130,000.00
148,000.00
158,000.00
158,000.00
164,000.00
166,000.00
167,000.00
174,000.00
174,000.00
175,000.00
181,000.00
181,000.00
204,000.00
11/1/99
11/1/99
11/1/99
11/1/99
11/1/99
11/1/99
11/1/99
11/1/99
11/1/99
11/1/99
11/1/99
11/1/99
11/1/99
11/1/99
11/1/99
11/1/99
11/1/99
11/1/99
11/1/99
11/1/99
11/1/99
11/1/99
11/1/99
11/1/99
11/1/99
11/1/99
11/1/99
11/1/99
11/1/99
11/1/99
11/1/99
11/1/04
11/1/04
11/1/04
11/1/04
11/1/04
11/1/04
11/1/04
11/1/04
11/1/04
11/1/04
11/1/04
11/1/04
11/1/04
11/1/04
11/1/04
11/1/04
11/1/04
11/1/04
11/1/04
11/1/04
11/1/04
11/1/04
11/1/04
11/1/04
11/1/04
11/1/04
11/1/04
11/1/04
11/1/04
11/1/04
11/1/04
11/1/04
11/1/04
11.673%
11.673%
11.673%
11.673%
11.673%
11.673%
11.673%
11.673%
11.673%
11.673%
11.673%
11.673%
11.673%
11.673%
11.673%
11.673%
11.673%
11.673%
11.673%
11.673%
11.673%
11.673%
11.673%
11.673%
11.673%
11.673%
11.673%
11.673%
11.673%
11.673%
11.673%
11.697%
11.697%
11.697%
11.697%
11.697%
11.697%
11.697%
11.697%
11.697%
11.697%
11.697%
11.697%
11.697%
11.697%
11.697%
11.697%
11.697%
11.697%
11.697%
11.697%
11.697%
11.697%
11.697%
11.697%
11.697%
11.697%
11.697%
11.697%
11.697%
11.697%
11.697%
11.697%
11.697%
INTEREST
RATE
(other than
semi-annual)
Page 6 of 8
FEDERAL FINANCING BANK
NOVEMBER 1984 ACTIVITY
BORROWER
DATE
AMOUNT
OF ADVANCE
FINAL
MATURITY
INTEREST
RATE
(semiannual)
11/1/04
11/1/04
11/1/04
11/1/04
11/1/04
11/1/04
11/1/04
11/1/04
11/1/04
11/1/04
11/1/04
11/1/04
11/1/04
11/1/04
11/1/04
11/1/04
11/1/04
11/1/04
11/1/04
11/1/04
11/1/04
11/1/04
11/1/04
11/1/04
11/1/04
11/1/04
11/1/04
11/1/04
11/1/04
11/1/04
11/1/09
11/1/09
11/1/09
11/1/09
11/1/09
11/1/09
11/1/09
11/1/09
11/1/09
11/1/09
11/1/09
11/1/09
11/1/09
11/1/09
11/1/09
11/1/09
11/1/09
11/1/09
11/1/09
11/1/09
11/1/09
11/1/09
11/1/09
11/1/09
11/1/09
11/1/09
11/1/09
11/1/09
11/1/09
11/1/09
11/1/09
11/1/09
11/1/09
11/1/09
11.697%
11.697%
11.697%
11.697%
11.697%
11.697%
11.697%
11.697%
11.697%
11.697%
11.697%
11.697%
11.697%
11.697%
11.697%
11.697%
11.697%
11.697%
11.697%
11.697%
11.697%
11.697%
11.697%
11.697%
11.697%
11.697%
11.697%
11.697%
11.697%
11.697%
11.698%
11.698%
11.698%
11.698%
11.698%
11.698%
11.698%
11.698%
11.698%
11.698%
11.698%
11.698%
11.698%
11.698%
11.698%
11.698%
11.698%
11.698%
11.698%
11.698%
11.698%
11.698%
11.698%
11.698%
11.698%
11.698%
11.698%
11.698%
11.698%
11.698%
11.698%
11.698%
11.698%
11.698%
State & Local Development Company Debentures (Cont'd)
E.D.C. of Jefferson County
11/7
Lewiston Development Corp.
11/7
Wilmington Ind. Dev., Inc.
11/7
Ocean State Bus. Dev. Auth.,Incl1/7
Long Island Development Corp. 11/7
River East Progress, Inc.
11/7
San Diego County L.D.C.
11/7
Central Ozarks Dev., Inc
11/7
Grand Rapids L.D.C.
11/7
HEDCO Local Development Corp. 11/7
HEDCO Local Development Corp. 11/7
Historic 25th Street Dev. Co. 11/7
La Habra Local Dev. Co., Inc. 11/7
San Diego County L.D.C.
11/7
Wisconsin Bus. Dev. Fin. Corp. 11/7
Bay Colony Development Corp.
11/7
Long Beach Local Dev. Corp.
11/7
Region E Development Corp.
11/7
Metro. Growth & Dev. Corp.
11/7
Greater Salt Lake Bus. Dist.
11/7
Milwaukee Econ. Dev. Corp.
11/7
Ark-La-Tex Inv. & Dev. Corp. 11/7
N.E. Louisiana Indus., Inc.
11/7
Opportunities Minnesota, Inc. 11/7
First District Dev. Co.
11/7
Gr. Metro. Chicago Dev. Corp. 11/7
Long Island Development Corp. 11/7
First District Dev. Co.
11/7
Railbelt Community Dev. Corp. 11/7
C.D.C. of Mississippi, Inc.
11/7
Western Slope Econ. Dev. Co.
11/7
Region IV Development Corp.
11/7
City of Spartanburg D . C , Inc. 11/7
Warren Redev. & Plan. Corp.
11/7
Arrowhead Reg. Dev. Corp.
11/7
Cleveland Area Dev. Fin. Corp. 11/7
Tuscon local Development Corp. 11/7
Bus. Dev. Corp. of Nebraska
11/7
Tuscon Local Development Corp. 11/7
Middle Flint Area Dev. Corp.
11/7
San Diego County L.D.C
11/7
East-Central Idaho Dev. Co.
11/7
Columbus Countywide Dev. Corp. 11/7
La Habra Local Dev. Co., inc. 11/7
Brattleboro Dev. Credit Corp. 11/7
San Diego County L.D.C.
11/7
Gr. Southwest Kansas CDC
11/7
Rural Enterprises, Inc.
11/7
Ocean State Bus Dev Auth, Inc 11/7
San Diego County L.D.C.
11/7
Mahoning Valley Econ Dev Corp 11/7
New Haven Com. Inv. Corp.
11/7
San Francisco Ind. Dev. Fund
11/7
Corp for Bus Asst in New Jerseyll/7
Fort Worth Econ. Dev. Corp.
11/7
Columbus Countywide Dev. Corp. 11/7
San Diego County Loc Dev Corp 11/7
Lake County Econ. Dev. Corp.
11/7
Evergreen Community Dev. Assoc.11/7
E.D. Fnd. of Sacramento, Inc. 11/7
Siouxland Econ. Dev. Corp.
11/7
Opportunities Minnesota, Inc. 11/7
San Diego County Loc Dev Corp 11/7
Mid-Atlantic Certified Dev. Co.11/7
206,000.00
210,000.00
214,000.00
214,000.00
228,000.00
236,000.00
240,000.00
252,000.00
252,000.00
257,000.00
294,000.00
299,000.00
313,000.00
321,000.00
327,000.00
336,000.00
339,000.00
342,000.00
395,000.00
442,000.00
498,000.00
500,000.00
500,000.00
500,000.00
500,000.00
500,000.00
500,000.00
500,000.00
500,000.00
500,000.00
65,000.00
79,000.00
83,000.00
84,000.00
87,000.00
88,000.00
94,000.00
97,000.00
101,000.00
101,000.00
102,000.00
105,000.00
116,000.00
120,000.00
130,000.00
132,000.00
137,000.00
147,000.00
147,000.00
179,000.00
180,000.00
181,000.00
185,000.00
194,000.00
200,000.00
221,000.00
223,000.00
243,000.00
250,000.00
265,000.00
265,000.00
268,000.00
282,000.00
311,000.00
INTEREST
RATE
(other than
semi-annual)
Page 7 of 8
FEDERAL FINANCING BANK
NOVEMBER 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)
Texas Cert. Dev. Co., Inc.
La Habra Local Dev. Co., Inc.
Rural Missouri, Inc.
Warren Redev. & Plan. Corp.
Bay Colony Development Corp.
River East Progress, Inc.
Massachusetts Cert. Dev. Corp.
11/7
11/7
11/7
11/7
11/7
11/7
11/7
312,000.00
389,000.00
399,000.00
406,000.00
445,000.00
500,000.00
500,000.00
11/1/09
11/1/09
11/1/09
11/1/09
11/1/09
11/1/09
11/1/09
11.698%
11.698%
11.698%
11.698%
11.698%
11.698%
11.698%
11/21 500,000.00
11/21
1,500,000.00
11/21
2,000,000.00
11/21
1,000,000.00
11/21
5,000,000.00
11/21
1,500,000.00
11/21
1,000,000.00
11/21
300,000.00
11/21
1,500,000.00
11/21
1,000,000.00
11/21
2,400,000.00
11/1/89
11/1/91
11/1/91
11/1/94
11/1/94
11/1/94
11/1/94
11/1/94
11/1/94
11/1/94
11/1/94
11.535%
11.665%
11.665%
11.735%
11.735%
11.735%
11.735%
11.735%
11.735%
11.735%
11.735%
Small Business Investment Company Debentures
Independence Fin. Servs., Inc.
North Star ventures, Inc.
Sunwestern Capital Corp.
Americap Corporation
BT Capital Corporation
Bay venture Group
Caribank Capital Corporation
Dixie Business Inv. Company
Fluid Capital Corporation
Hamco Capital Corporation
Michigan Cap. & Service, Inc.
TENNESSEE VALLEY AUTHORITY
Seven States Energy Corporation
Note A-85-02
11/30
531,591,692.70
2/28/85
8.805%
FEDERAL FINANCING BANK
NOVEMBER 1984 Commitments
BORROWER
Bristol, VA
Mayaguez, PR
Indianapolis, IN
Jefferson County, KY
Syracuse Ind. Dev. Agency, NY
GUARANTOR
HUD
HUD
HUD
HUD
HUD
AMOUNT
S 508,000.00
505,298.18
14,424,571.00
8,360,000.00
691,500.00
EXPIRES
12/1/87
8/1/87
3/1/86
11/30/92
7/1/85
MATURITY
12/1/87
8/1/87
3/1/86
11/30/92
7/1/03
FEDERAL FINANCING BANK HOLDINGS
(in millions)
Program
Page 8 of 8
Net Change
11/1/84-11/30/84
Net Change—FY 19R5
10/1/84—11/30/84
$ 13,725.0
15,689.8
263.8
$ 70.0
$ 360.0
1,087.0
51.3
November 30, 1984
October 31, 1984
$ 13,795.0
15,689.8
290.5
On-Budget Agency Debt
Tennessee Valley Authority
Export-Import Bank
NCUA-Central Liquidity Facility
-0-
-0-
26.7
21.6
1,087.0
51.3
-0-0-
-0-0-
58,801.0
116.1
132.0
11.0
3,536.7
38.8
59,021.0
116.1
132.0
11.0
3,536.7
39.4
-220.0
-710.0
-0-0-0-0-
-0-0-0-0-
-0.6
-1.3
17,413.9
5,000.0
11.2
1,338.0
227.5
33.5
2,146.1
412.7
36.0
28.7
902.3
17,337.3
5,000.0
11.2
1,319.5
217.5
33.5
2,178.5
413.3
36.0
28.7
902.3
76.6
303.0
-0-0-
-04.9
18.5
48.0
19.2
Off-Budget Agency Debt
U.S. Postal Service
U.S. Railway Association
Agency Assets
Farmers Home Administration
DHHS-Hoalth Maintenance Org.
DHHS-Medical Facilities
Overseas Private Investment Corp.
Rural Electrification Admin,-CBO
Small Business Administration
Government-Guaranteed Lending
DOD-Foreign Military Sales
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.
SEA-Small Business Investment Cos.
SBA-State/Local Development Cos.
TVA-Seven States Energy Corp.
DOT-Section 511
DOT-WMATA
TOTALS*
•figures may not total due to rounding
9.9
-0-
-0-
-32.3
-0.6
-0-0-00.3
-32.3
-0.6
-0.
-0-52.3
3.6
3.3
20,887.9
886.3
402.8
1,561.4
156.4
177.0
20,693.7
872.8
375.0
1,545.6
159.6
177.0
194.3
13.5
27.8
15.7
-3.3
300.8
26.0
48.3
-0-
-0-
$ 145,174.4
$ 144,978.0
$ 196.4
$ 338.3
0.5
5.8
-3.3
TREASURY NEWS
apartment of the Treasury • Washington, D.C. • Telephone 566-2041
FOR IMMEDIATE RELEASE
TAM IQ lac*:
JAN
' 18> 1985 (202) 566-2041
r™+^+. B U T •
Contact: Boh Levme
ARGENTINA REPAYS U. S. BRIDGE LOAN
The Treasury Department announced today that the $500 million
in short-term bridge financing which it provided to Argentina on
December 28, 1984 has been fully repaid. This bridge financing
was made in support of the economic program which Argentina
negotiated with the IMF. Repayment was made from balance of
payments financing Argentina received from the IMF under the
new standby arrangement and the Compensatory Financing Facility.
R-2993
TREASURY NEWS
Upartment of the Treasury • Washington, D.C. • Telephone 566-2041
FOR RELEASE AT 4:00 P.M.
January 22, 1985
TREASURY 'S WEEKLY BILL OFFERING
The Department of the Treasury, by this public notice,
invites tenders for two series of Treasury bills totaling approximately $14,000 million, to be issued January 31, 1985.
This
offering will provide about $725
million of new cash for the
Treasury, as the maturing bills are outstanding in the amount of
$13,285 million, including $1,936 million currently held by Federal Reserve Banks as agents for foreign and international monetary
authorities and $1,385 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 $7,000
million, representing an additional amount of bills dated
November 1, 1984,
and to mature
May 2, 1985
(CUSIP
No. 912794 HB 3), currently outstanding in the amount of $6,630
million, the additional and original bills to be freely
interchangeable.
182-day bills for approximately $7,000 million, to be dated
January 31, 1985,
and to mature August 1, 1985
(CUSIP
No. 912794 HU 1).
Both series of bills will be issued for cash and in exchange
for Treasury bills maturing January 31, 1985.
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-2994
- 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,
January 28, 1985.
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 January 31, 1985, in cash or other immediately-available funds
or in Treasury bills maturing January 31, 1985.
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
lepartment of the Treasury • Washington, D.C. • Telephone 566-2041
FOR IMMEDIATE RELEASE
January 22, 1985
RESULTS OF TREASURY'S WEEKLY BILL AUCTIONS
Tenders for $7,019 million of 13-week bills and for $ 7,030 million
of 26-week bills, both to be issued on January 24, 1985, were accepted today.
RANGE OF ACCEPTED
COMPETITIVE BIDS:
Low
High
Average
13-•week bills
maturing April 25, 1985
Discount Investment
Rate
Rate 1/
Price
7.68%a /
7.69%
7.68%
7.94%
7.95%
7.94%
26-•week bills
maturing July 25, 19 85
Discount Investment
Price
Rate
Rate 1/
7.92%
7.94%
7.93%
98.059
98.056
98.059 :
8.36%
8.39%
8.38%
95.996
95.986
95.991
a/ Excepting 1 tender c)f $750,000.
Tenders at the high discount rate for the 13-week bills were allotted
Tenders at the high discount rate for the 26-week bills were allotted
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
Competitive
Noncompeti tive
Subtotal, Public
Accepted
$
$
392,285
17,014,895
20,835
64,465
60,105
115,720
1,296,170
121,115
35,605
82,900
32,330
1,819,305
377,875
$ 90,285
4,745,915
20,835
34,270
44,245
58,805
141,525
61,245
30,655
82,900
22,380
1,318,835
377,875
$24,060,860
$7,018,920
$21,433,605
$7,029,770
$21,302,730
1,355,500
$22,658,230
$4,460,790
1,355,500
$5,816,290
$18,711,990
1,098,610
$19,810,600
$4,508,155
1,098,610
$5,606,765
1,073,935
873,935
$
396,670
17,101,370
52,960
151,120
61,955
59,385
1,326,935
53,940
21,290
84,275
49,400
4,342,010
359,550
46,670
2,994,445
36,810
55,580
56,955
52,385
130,135
46,140
14,790
75,550
39,400
3,110,510
359,550
1,150,000
71%
1%.
950,000
Federal Reserve
Foreign Official
Institutions
328,695
328,695
473,005
473,005
TOTALS
$24,060,860
$7,018,920
$21,433,605
$7,029,770
An additional $11,305 thousand of 13-week bills and an additional $24,495
thousand of 26-week bills will be issued to foreign official institutions for
new cash.
V
Equivalent coupon-issue yield
R-2995
TREASURY NEWS
lepartment of the Treasury • Washington, D.c. • Telephone 566-2041
FOR IMMEDIATE RELEASE
January 23, 1985
RESULTS OF AUCTION OF 2-YEAR NOTES
The Department of the Treasury has accepted $9,020 million of
$26,791 million of tenders received from the public for the 2-year
notes, Series R-1987, auctioned today. The notes will be issued
January 31, 1985, and mature January 31, 1987.
The interest rate on the notes will be 9-3/4%. The range of
accepted competitive bids, and the corresponding prices at the 9-3/4%
interest rate are as follows:
Yield
Price
Low
9.81%
99.893
9.84%
99.840
High
9.83%
99.858
Average
Tenders at the high yield were allotted 49%.
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
503,280
22 ,684,205
27,100
251,815
103,250
208,840
1 ,253,880
126,100
63,815
140,660
23,250
1 ,400,230
4,910
$26 ,791,335
$
Accepted
$
64,980
7,807,995
27,100
104,685
61,700
81,165
246,835
103,825
61,795
137,760
19,230
298,290
4,910
$9,020,270
The $9,020 million of accepted tenders includes $988
million
of noncompetitive tenders and $8,032 million of competitive tenders
from the public.
In addition to the $9,020 million of tenders accepted in the
auction process, $480 million of tenders was awarded at the average
price to Federal Reserve Banks as agents for foreign and international
monetary authorities. An additional $625 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
S-2996
TREASURY NEWS
Ipartment of the Treasury • Washington, D.C. • Telephone 566-2041
FOR IMMEDIATE RELEASE January 24, 1985
AMENDED RESULTS OF TREASURY'S 13-WEEK BILL AUCTION
During the recording of competitive bids at a Federal
Reserve Bank for the 13-week Treasury bills auctioned on January 22,
a competitive bid was overstated by $599 million.
As a result of
correcting this overstatement, the amount accepted is changed from
$7,019 million to $6,420 million.
This adjustment does not affect
the average bank discount rate, and the range of accepted
m
competitive bids remains as announced on January 22.
R-2997
TREASURY NEWS
lepartment of the Treasury • Washington, D.C. • Telephone 566-2041
EMBARGOED FOR RELEASE
UNTIL 10:45 A.M.
Remarks by
Secretary of the Treasury
Donald T. Regan
before the
Executive Forum
January 25, 1985
Good morning.
Perhaps I should start off by telling you I have a new idea
— all of you swap places with the person next to you. rt will
do wonders in recharging your batteries.
Speaking of possible changes I understand Jack Kemp has been
standing next to Paul Volcker ever since he heard about Jim Baker
and me.
Incidentally the real reason we swapped is because I got
tired of signing all that money. And Jim wanted a bigger office.
The important thing to remember is that — while we might be
changing jobs — we're both still here. And all of you are still
here. Here for a reason.
Today, in this hall, we are celebrating a commitment. A
commitment to a common belief, to a President, to the American
people. We all believe America is a great country; that it can
be greater; and, by the same token, that America can falter if we
don't guard and protect everything that makes it strong and free.
Earlier this week, a great man took the oath of office as
President. He, as much as anyone I know, understands what
America means, what it stands for, what it is, and what it can
be. As Ronald Reagan starts his second term, I'm proud to be
with him. And I'm honored to be part of the team which includes
everyone of you.
We accomplished a lot in the last four years. And each of
you has contributed so much. But I can tell you right now, we've
set our sights even higher for the next four years and we'll be
depending on you even more to help in building the best America
possible.
R-2998
-2When I vacate my office at Treasury, sometime in the near
future, I'll be leaving those responsibilities to one of the
ablest men in government.
But right now, I am still Treasury Secretary, and for the
remainder of my time here I'd like to talk about the next four
years in that capacity. Specifically, what are the major
economic issues and what will the Administration be attempting to
do on the economic front?
About 20 years ago, President Reagan delivered a speech. In
that speech he said he would speak of controversial things. He
did. Much of it was devoted to the growing menace of bigger and
more expensive government.
In that speech, two decades ago, he told the American people
it was a time for choosing. He said that govenment had laid its
hand on health, housing, farming, industry, commerce and
education to an alarming degree. And he said that the hour was
late.
A little over two months ago, meeting with his Cabinet after
the election, the President pulled out a copy of that speech. He
reminded us that we came here to reduce the size and scope of
government.
We've slowed the clock in our time here, but the hour still
has grown later. The menace is bigger. Without question, the
most critical economic issue we face today is federal spending
and its control.
To many Americans big government means big taxes, and what
seems like a constant pressure for legislation to take even more
of their hard-earned income. To others it means federal
involvement — or, often as not, interference — in all sorts of
life's activities.
This is bad and people are fed up. Ronald Reagan's election
and re-election showed us that. But the problem is deep-rooted.
The threat is subtle, but it's real.
The threat is an erosion, and even the possible loss, of the
individual freedoms we enjoy as a democratic nation and a free
economy.
For more than a half-century we underwent a transformation,
sometimes speedy, other times more slowly and less visible. But,
the important point is that this dangerous trend continued
virtually uninterrupted. And the effects were pronounced.
-3Growing paychecks for Americans simply meant a growing amount
of revenue through higher federal taxes. Children grew up, got
out of school, and faced less opportunity than their parents.
When they got jobs, they wondered why they couldn't live as well
as their parents.
Billions were poured into education and social programs, yet
the quality of education fell, poverty increased. Those already
disadvantaged faced ever-tougher odds of bettering themselves and
their families.
More and more of the individual's power to decide was blocked
or usurped, while decision-making grows more centralized in the
hands of those in Washington.
In the 18th century, the Scottish philosopher David Hume
wrote: "It is seldom that liberty of any kind is lost all at
once." Years later in 1912, then New Jersey Governor Woodrow
Wilson said: "The history of liberty is a history of limitation
of government power, not the increase of it."
I think it would serve us all well to give some thought to
those observations.
Is federal spending a demon that needs to be exorcised
completely? Of course not. Much of what we spend is absolutely
necessary. Much is well-spent and provides benefits that
couldn't occur otherwise.
But excessive spending, ever-increasing spending and a
mind-set that we can spend away our problems made and makes for
disastrous policy.
Ronald Reagan knew this when he gave that speech 20 years
ago. He knew this when he came to Washington four years ago.
And he fought. The growth in spending — which, you'll recall,
had reached 17 percent annually — was cut dramatically.
But the fight is far from over. Government growth,
entrenched as it is in our society, is a very formidable force.
That's why, in this second term, we must mount another dedicated,
concerted counter offensive.
Not against the truly needed spending; not against those
legitimate levels necessary for the legitimate functions of a
national government; but against the arbitrary and excessive
spending growth that takes from us all and helps no one in the
long run.
-4What we plan to do, beginning with the budget to be submitted
early next month, is seek major cuts in spending. And fight for
further cutbacks in every subsequent budget through this term.
No program or department will be considered exempt. In fact,
we'll even be seeking to eliminate some things altogether.
As a benchmark, we'11 be looking to reduce the deficit as a
proportion of Gross National Product. But I want you to note
that the words deficit and spending are not interchangable. It's
federal spending that must be controlled. A decreasing deficit
is simply what we will use as a guideline.
If we are going to promote economic growth, opportunity, and
individual freedom to the highest degrees possible, then we have
to come to grips with what still amounts to excessive spending.
And we have to put more incentives back into our economy. I
know of no better way to accomplish this than getting the
government out of the financial affairs of Americans. And I know
of no more distorting factor than the present U.S. income tax
system.
We must move ahead quickly with historic, comprehensive tax
reform. The disincentives have to be removed from the system.
It must be made fairer. And it must be simplified.
We propose to lower marginal tax rates dramatically — with a
tax rate of no more than 35 percent. And we want to rid the
system of all those tax preferences which necessitate higher tax
rates and distort economic decisions.
Americans should be able to keep more of the rewards from
their efforts if they choose to work harder or longer or be more
creative or innovative. And they should be able to conduct their
affairs and plan their futures on the basis of economics, not
taxation.
Americans should also know that their tax system is fair;
that taxpayers and businesses with similar incomes are paying
similar amounts of tax. And that everyone is paying a fair
share.
Lastly, Americans should not have to spend inordinate time
and expense just in order to comply with tax laws.
The Treasury proposal, which will serve as the basis for
President Reagan's tax reform recommendations to Congress, would
correct much of what is wrong with our present system.
-5As I said earlier, progress, good progress has been made in
the first term. We scaled back government growth, unleashed the
world's most powerful economy, and reaped the benefits. But, the
job is unfinished.
There's something very different about this time we're in.
There's a sense that lasting change can be brought by our
efforts. Let's not let the opportunity slip away.
Instead, let us do what is necessary. And in the end, let us
be able to say assuredly, not only did we serve, we also made a
difference.
Thank you.
TREASURY NEWS
lepartment of the Treasury • Washington, D.C. • Telephone 566-2041
REMARKS OF
THE HONORABLE JOHN M. WALKER, JR.
ASSISTANT SECRETARY (ENFORCEMENT AND OPERATIONS)
U.S. DEPARTMENT OF THE TREASURY
AT THE MEETING OF THE
ITALIAN-AMERICAN WORKING GROUP ON ORGANIZED CRIME
AND DRUG TRAFFICKING
ROME, ITALY
WEDNESDAY, JANUARY 16, 1985
The Basis for Cooperation by Our Respective Countries
Against the Problem of Money Laundering
Let me begin by saying how pleased I am at the progress
our two countries have made in increasing our cooperation
in law enforcement. This cooperation will, I am sure, be
of even greater benefit to both of our countries in the
years to come.
This morning, I will be discussing a topic of critical
and growing importance to law enforcement—both in the domestic
law enforcement of each of our countries, and on the international crime front.
The problem is money laundering. As this topic is not
a new one to any of us, I will not dwell on the characteristics of money laundering, by which I mean any of the techniques organized crime uses to conceal the illegal origin of
its criminal proceeds. I would like to take this opportunity,
rather, to provide an update on the problem—from the U.S.
perspective—and on the progress we are making against it.
It is my hope that we can then discuss, as a group, the many
ramifications of money laundering in ways that will enhance
our mutual understanding, and further our cooperation.
We recognize that our efforts against international
money laundering cannot succeed without the cooperation of
other nations. We are particularly gratified to note the
high priority your government has placed on the problem of
money laundering through financial institutions. We look
forward to building upon the excellent basis for cooperation
that our countries have already achieved. We are particularly
R-2999
- 2 interested in the Financial Police activities in this area,
as described at our last working group meeting.
I would like to begin this morning by reflecting on
the seriousness of the money laundering threat. It is both
symptom and disease. As a societal disease, in and of itself,
it seeks to corrupt our financial institutions, with the result that public confidence in them and in our financial system
may be eroded. It makes financial institutions partners,
wittingly or unwittingly, in criminal financial conspiracies.
But money laundering is also the symptom of larger diseases—the underlying criminal activity to which it plays
host. It is part and parcel of organized crime, with devastating consequences to our society. All of us are fully
aware of the pervasiveness of this threat, of the difficulty
of penetrating the facade behind which organized crime hides,
and of the potential it poses for the corruption of justice.
If there is anything favorable about money laundering
as far as law enforcement is concerned, it is this: the
need to launder criminal proceeds is in many, if not most,
instances the weakest link in a criminal enterprise. To the
extent that a syndicate must rely on a financial institution,
it is vulnerable to the reach of law enforcement. Provided,
that is, that law enforcement has the statutory powers and
the analytical and investigative capability to ferret out
the illicit financial activity.
In the United States, this capability to attack money
laundering has developed over the fourteen years since the
enactment of the Bank Secrecy Act, otherwise known as the
Currency and Foreign Transactions Reporting Act. It is only
during the last four to five years, however, that we can
honestly conclude that substantial progress against money
laundering has been made.
Since the U.S. Bank Secrecy Act, as administered by the
Treasury Department, is familiar to you, I will not dwell on
its provisions. But I would like to point out that its passage signified an awareness that law enforcement in the United
States had a critical need for better documentation of financial
transactions, both national and international ones. The Act
was intended to assist law enforcement by providing for retention of records of all significant international transactions
and certain domestic ones, as well as reporting, as defined
by Treasury regulations.
In our regulations, we now require:
° Reports of all cash transactions in excess
of $10,000, to be submitted by financial
institutions to the Internal Revenue Service.
- 3 °
Importations or exportations of $10,000 in
cash or monetary instruments, to be reported
to U.S. Customs.
° Reporting to the Internal Revenue Service of the
ownership or control of a foreign bank account.
These reports are assembled and computerized to provide
a data bank of intelligence on money flows and the individuals
and organizations that can be linked to them.
In 1980, the U.S. Treasury Department began a process
of expanding its enforcement of these reporting requirements.
This expansion was prompted by indications that the problem
of money laundering had grown significantly. The Treasury
Department recognized this trend, for example, when it analyzed broad national currency flows. In the normal instance,
expanding economic activity in a region will result in a net
currency deficit. The central bank, or Federal Reserve
System in the United States, must then increase the money
supply to the region to accommodate the economic growth.
In the Florida region, an area of strong economic growth,
we noted just the opposite: not only was there a currency surplus at the Federal Reserve, but it was expanding. This surplus grew from $1.5 billion in 1976 to $5.8 billion in 1980.
Not all of this money represented crime proceeds. But a substantial portion of the surplus was clearly drug proceeds,
generated from the high level of drug trafficking occurring
in the region of South Florida.
In addition to expanding our enforcement of the reporting
requirements by financial institutions, we have, since 1980,
built up a substantial investigative capability. The Treasury
Department has 30 financial task forces pursuing money laundering
cases.
In addition, the thirteen Organized Crime Drug Enforcement
Task Forces have, as one of their goals, a concentration of
investigative resources on the financial underpinnings of
organized crime. As many as two out of three of their cases
have a financial component.
All of the task forces use the reporting information to
which I have referred. This information allows us to analyze
currency flows, to uncover suspicious financial activity, and
to provide the basis for support to ongoing criminal investigations.
Overall; the Bank Secrecy Act allows us to focus investigative attention on the one element in common to every organized
crime transaction: the money involved.
- 4 °
The money itself is potentially devastating evidence in a criminal trial. Because the Bank
Secrecy Act contains criminal penalties, it is
itself the basis for substantive criminal charges.
0
Cash is essential to the continuity of the enterprise. Money laundering investigations frequently
uncover huge amounts of cash. If we can seize and
forfeit it, we can disrupt, or even destroy, the
operation.
° From the standpoint of justice, the money is illgotten gains. It is the right, and indeed the duty,
of government to take this money back.
° Through the audit trail I have mentioned, an investigation can penetrate the criminal's facade. It
can reach the upper echelons of a criminal enterprise,
whose operatives are too sophisticated to be found
close to the actual source of the proceeds.
° Financial investigations have a critical role to play
in tax enforcement in the United States. Indeed,
enforcement of the Internal Revenue Code, particularly
with respect to international transactions, was one
of the principal reasons for passage of the Bank
Secrecy Act. With each seizure of organized crime
proceeds, we have the potential for a tax liability,
a second basis for forfeiture, and the basis for additional criminal charges. This can be done even
if we cannot prove a direct connection between the
money and drug trafficking.
0
Finally, financial investigations have an intrinsic
appeal as a law enforcement tool. They constitute
investigative work at a highly sophisticated level:
we are matching our ingenuity with that of the highlevel criminal. We can counter his attempts to
conceal his assets and the existence of his criminal
enterprise with our financial investigative and
analytical expertise.
I mentioned a moment ago that our progress against money
laundering has occurred principally in the last several years.
We have used financial investigations to destroy 17 major
money laundering syndicates since 1980. These criminal organizations laundered a documented total of $2.7 billion.
Since 1980, our financial investigations under the Bank
Secrecy Act have produced at least $100 million in currency
seizures and $57 million in seizures of property.
- 5 In addition to the accomplishments of the Organized
Crime Drug Enforcement Task Forces, which I mentioned earlier,
Treasury's financial investigations have so far produced 323
arrests, 389 indictments and 164 convictions.
While it is fair to say that our financial investigations
and our Bank Secrecy Act enforcement efforts in general have
made progress, money laundering continues to be a serious
problem for our country. And we continue to seek new ways
to deal with it.
There are, of course, limitations on the information that
can be reported to law enforcement by financial institutions—
in the United States, and particularly in certain foreign countries that strictly preserve the secrecy of financial information.
In the United States, we are now examining our laws pertaining to bank employees that govern the passing on to law
enforcement of information concerning suspicious transactions.
There are, of course, two important principles conflicting
here--the customer's right to financial privacy, and the government's need for effective weapons to combat money laundering
and organized crime.
On an international scale, the problem is more challenging.
Countries that rigidly preserve bank secrecy are often financially dependent on banking revenues from transactions originating offshore.
Our efforts to lift these restrictions on law enforcement's
ability to obtain information on international transactions
have met with some success. The recent agreement that the
United States has entered into with Great Britain allows U.S.
prosecutors to obtain documents located in the Cayman Islands
that relate to narcotics offenses. We are seeking a similar
agreement with the government of Panama.
We have taken another approach to the problem by proposing
to change our regulations under the Bank Secrecy Act. The
Act gives us the power to require reporting on all international
transactions, provided we balance law enforcement's need for
the information with the financial community's need to avoid
burdensome requirements. Our proposal is to look at selected
classes of transactions between U.S. banks and banks in those
countries that maintain stringent bank secrecy, or at classes
of transactions that have a significant risk of involving
illegal activity. We will, of course, be mindful of the
potential reporting burden on the institutions involved and
impose the requirements in the least burdensome way consistent
with our need for the information.
- 6 Also on the international front, at many INTERPOL conferences we have promoted a dialogue on the value of financial
investigations, and resolutions on financial investigations
have been adopted by that body. Indeed, INTERPOL has taken
a strong interest in the money laundering problem and now
has a financial investigations unit at St. Cloud, France,
in which the U.S. participates. This unit is available to
assist each of our governments by providing support in financial investigations.
In General Chiari's message last fall, he also mentioned
another aspect of the money laundering problem: the possibility
of money laundering through casinos. In the United States,
we have also addressed this problem. We have recently taken
steps to bring casinos under the currency transaction reporting
requirements. A proposed regulation requiring such reporting
is currently out for public comment.
Perhaps most promising, however, will be the possibility
of collaborative investigations, involving both of our countries, that are directed against financial crimes of international scope. The information exchange that we have discussed is a valuable first step in this direction and a
means of furthering our cooperation in the fight against
money laundering.
Let me conclude by thanking you for your kind attention.
We welcome your views on how we might further our cooperation
in this critical law enforcement area.
TREASURY NEWS
lepartment of the Treasury • Washington, D.C. • Telephone 566-2041
FOR IMMEDIATE RELEASE
January 28, 1985
RESULTS OF TREASURY'S WEEKLY BILL AUCTIONS
Tenders for $ 7,001 million of 13-week bills and for $ 7,006 million
of 26-week bills, both to be issued on January 31, 1985, were accepted today,
RANGE OF ACCEPTED
COMPETITIVE BIDS:
Low
High
Average
13-week bills
maturing
May 2, 1985
Discount Investment
Rate
Rate 1/
Price
7.72%
7.79%
7.76%
7.98%
8.06%
8.03%
26-week bills
maturing August 1, 1985
Discount Investment
Rate
Rate 1/
Price
98.049
98.031
98.038
7.94%
7.98%
7.97%
8.39%
8.43%
8.42%
95.986
95.966
95.971
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 36%
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
$
392,270
12,827,700
29,830
44,095
136,445
54,345
1,363,075
48,655
41,595
52,110
43,860
1,134,385
335,065
42,270
5,362,700
29,830
44,095
56,445
49,345
573,075
48,655
41,595
52,110
38,860
327,385
335,065
:
:
:
:
:
:
$
388,645
13,788,490
18,550
49,150
94,620
41,315
1,048,995
83,905
31,115
73,110
29,340
1,102,420
360,125
38,645
$
5 ,727,650
18,550
49,150
68,220
36,315
282,595
49,305
31,115
73,110
24,340
247,180
360,125
$16,503,430
$7,001,430
$17,109,780
$7 ,006,300
$14,500,275
1,167,695
$15,667,970
$5,098,275
1,167,695
$6,265,970
$14,696,870
989,210
$15,686,080
$4 ,693,390
735,460
635,460
:
650,000
550,000
100,000
100,000
:
773,700
773,700
$16,503,430
$7,001,430
$17,109,780
$7 ,006,300
1/ Equivalent coupon-issue yield.
R- 3 0 0 Q
$
Accepted
989,210
$5 ,682,600
rREASURY NEWS
toartment of the Treasury • Washington, D.C. • Telephone 566-2041
FOR RELEASE AT 4:00 P.M.
January 29, 1985
TREASURY'S WEEKLY BILL OFFERING
The Department of the Treasu ry, by this public notice,
invites tenders for two series of Treasury bills totaling approximately $14,000 million, to be is sued February 7, 1985.
This
offering will provide about $450
million of new cash for the
Trtsasury, as the maturing bills a re outstanding in the amount of
$13,554 million, including $1,089 million currently held by Federal Reserve Banks as agents for foreign and international monetary
authorities and $2,762 million cu rrently held by Federal Reserve
Banks for their own account. The two series offered are as follows
91-day bills (to maturity date) for approximately $7,000
million, representing an additional amount of bills dated
November 8, 1984,
and to mature May 9, 1985
(CUSIP
No. 912794 HC 1 ) , currently outstanding in the amount of $6,932
million, the additional and original bills to be freely
interchangeable.
182-day bills (to maturity date) for approximately $7,000
million, representing an additional amount of bills dated
August 9, 1984,
and to mature August 8, 1985
(CUSIP
No. 912794 HK 3), currently outstanding in the amount of $8,482
million, the additional and original bills to be freely
interchangeable.
Both series of bi lis will be issu ed for cash and in exchange
Tenders from Fedfor Treasury bills mat uring February 7 , 1985.
eral Reserve Banks for themselves and as agents for foreign and
international monetary authorities wil 1 be accepted at the weighted
average bank discount rates of accepte d competitive tenders. Additional amounts of the bills may be iss ued to Federal Reserve Banks,
as agents for foreign and internationa 1 monetary authorities, to
the extent that the ag gregate amount o f tenders for such accounts
exceeds the aggregate amount of maturi ng 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-3001
- 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,
February 4, 1985.
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 February 7, 1985,
in cash or other immediately-available funds
or in Treasury bills maturing February 7, 1985.
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 c*ner
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.
and tender forms may be obtained rrom any rtue
Branch, or from the Bureau of the Public Debt.
TREASURY NEWS
lepartment of the Treasury • Washington, D.C. • Telephone 566-2041
January 30, 1985
FOR RELEASE WHEN AUTHORIZED AT PRESS CONFERENCE
TREASURY FEBRUARY QUARTERLY FINANCING
The Treasury will raise about $11,000 million of new cash
and refund $7,998 million of securities maturing February 15,
1985, by issuing $7,250 million of 3-year notes, $6,000 million
of 10-year notes, and $5,750 million of 30-year noncallable bonds.
The $7,998 million of maturing securities are those held by the
public, including $935 million held, as of today, by Federal
Reserve Banks as agents for foreign and international monetary
authorities.
The 10-year note and 30-year bond being offered today may be
divided into their separate Interest and Principal Components and
maintained in that form on the book-entry records of the Federal
Reserve Banks and Branches. This feature, announced on January 15
as the ^Separate Trading of Registered Interest and Principal of
Securities (STRIPS) program, requires a par amount of the security
sufficient to produce a semiannual interest payment of $1,000 or a
multiple of $1,000. Once a security is in the STRIPS form, the components may be maintained and transferred in multiples of $1,000.
Financial institutions should consult their local Federal Reserve
Bank or Branch for procedures for requesting securities in STRIPS
form.
The three issues totaling $19,000 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 $2,09 3 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. The circulars, which include the CUSIP numbers
for components of securities with the STRIPS feature, can be
obtained by contacting the nearest Federal Reserve Bank or Branch.
oOo
Attachment
R-3002
HIGHLIGHTS OF TREASURY OFFERINGS TO THE PUBLIC
FEBRUARY 1985 FINANCING TO BE ISSUED FEBRUARY 15, 1985
Amount Offered to the Public
Description of Security:
Term and type of security
Series and CUSIP designation
$7,250 million
3-year notes
Series R-1988
(CUSIP No. 912827 RV 6)
CUSIP Nos. for STRIPS Components.Not applicable
$6,000 million
10-year notes
Series A-1995
(CUSIP No. 912827 RW 4)
Listed in Attachment A
of offering circular
Maturity date February 15, 1988
February 15, 1995
Interest rate
To be determined based on
To be determined based on
the average of accepted bids
the average of accepted bids
Investment yield
To be determined at auction
To be determined at auction
Premium or discount
To be determined after auction To be determined after auction
Interest payment dates
August 15 and February 15
August 15 and February 15
Minimum denomination available...$5,000
$1,000
Amount Required for STRIPS
Not applicable
To be determined after auction
Terms of Sale:
Method of sale
Yield Auction
Yield Auction
Competitive tenders
Must be expressed as an
Must be expressed as an
annual yield, with two
annual yield, with two
decimals, e.g., 7.10%
decimals, e.g., 7.10%
Accepted in full at the
Noncompetitive tenders
Accepted in full at the
average price up to $1,000,000 average price up to $1,000,000
Accrued interest payable
by investor
None
None None
Payment through Treasury Tax
• ind Loan (TT&L) Note Accounts....Acceptable for TT&L Note
Acceptable for TT&L Note
Option Depositaries
Option Depositaries
D
ayment by non-institutional
Full payment to be
investors
Full payment to be
submitted with tender
submitted with tender
Jeposit guarantee by
Acceptable
lesignated institutions
Acceptable
Cey Dates:
Wednesday, February 6, 1985,
:eceipt of tenders
Tuesday, February 5, 1985,
prior to 1:00 p.m., EST
prior to 1:00 p.m., EST
ettlement
Friday, February 15, 1985
a) cash or Federal funds
Friday, February 15, 1985
Wednesday, February 13, 1985
b) readily collectible check...Wednesday, February 13, 1985
January 30, 1985
$5,750 million
30-year bonds
Bonds of 2015
(CUSIP No. 912810 DP 0)
Listed in Attachment A
of offering circular
February 15, 2015
To be determined based on
the average of accepted bids
To be determined at auction
To be determined after auction
August 15 and February 15
$1,000
To be determined after auction
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
Acceptable for TT&L Note
Option Depositaries
Full payment to be
submitted with tender
Acceptable
Thursday, February 7, 1985,
prior to 1:00 p.m., EST
Friday, February 15, 1985
Wednesday, February 13, 1985
rREASURY NEWS
partment of the Treasury • Washington, D.C. • Telephone 566-2041
FOR IMMEDIATE RELEASE
January 30f 1985
CONTACT:
CHARLES POWERS
(202) 566-2041
UNITED STATES AND BARBADOS SIGN NEW INCOME TAX TREATY
The Treasury Department today announced that a new income tax
treaty was signed with Barbados, in Bridgetown, on December 31,
1984.
The treaty was signed by Kenneth A. Kurze, Charge'
d'Affaires a.i., for the United States, and Louis R. Tull,
Minister of Foreign Affairs and Attorney-General, for Barbados.
The proposed treaty will be sent to the Senate for its advice and
consent to ratification. The proposed treaty, if approved, will
replace an earlier treaty with Barbados, which was terminated as
of January 1, 1984.
The treaty covers the U.S. Federal income tax and certain
Federal excise taxes, and the Barbadian Income Tax, Corporation
Tax and Petroleum Winning Operations Tax.
It provides for
maximum rates of tax at source of 15 percent on dividends, which
is reduced to 5 percent for dividends paid to companies which own
at least 10 percent of the voting power of the company paying the
dividend. Interest will be subject, in general, to a maximum tax
at source of 12.5 percent, except that interest will be exempt at
source if paid with respect to an obligation issued, guaranteed
or insured by the Government of the United States or Barbados, or
by a political subdivision, local authority or instrumentality of
one of the governments. Royalties are subject to a maximum rate
of tax at source of 12.5 percent.
The treaty contains provisions dealing with the taxation of
business profits, personal service income and other types of
income, as well as provisions relating to the administration of
the treaty and the taxes to which it applies.
The treaty
provides for the exchange of information relating to income and
certain other taxes.
There is also currently in effect a
Caribbean Basin Agreement to exchange tax information, signed by
the United States and Barbados on November 3, 1984.
The treaty contains provisions, similar to those found in
other U.S. tax treaties, designed to prevent abuse of the treaty,
by limiting its benefits to persons properly entitled to those
benefits.
R-3003
-2The treaty is subject to ratification.
It will enter into
force on the exchange of instruments of ratification.
The
provisions of the treaty will have effect in respect of U.S.
taxes withheld at source, on the first day of the second month
following entry into force; in respect of other taxes, both U.S.
and Barbadian, it will have effect for taxable periods beginning
on or after January 1, 1984.
A limited number of copies of the treaty are available from
the Public Affairs Office, Treasury Department, Main Treasury
Building, Room 2315, Washington, D.C.
20220, telephone (202)
566-2041.
o 0 o
TREASURY NEWS
Department of the Treasury • Washington, D.C. • Telephone 566-2041
FOR IMMEDIATE RELEASE
January 30, 1985
CONTACT:
Art Siddon
(202) 566-2041
R.T. MCNAMAR DISCUSSES THE DOLLAR AND THE DEFICIT
Deputy Treasury Secretary R.T. McNamar told the National
Foreign Trade Council in New York City today that "cutting the
budget deficit through reduced government spending, all other
things being equal, will further strengthen the dollar."
"The Reagan administration is clearly committed to reducing
the budget deficit through spending reductions, not tax
increases," Mr. McNamar said. "However, the effect of reducing
the deficit should be to strengthen the dollar. A reduced
deficit would reduce federal borrowing requirements, thereby
reducing federal competition with the private sector for
available credit. All other things being equal, this will
improve the perception of sustainable non-inflationary growth in
the United States relative to other countries. Given an
appropriate monetary policy, this will undoubtedly result in a
more attractive U.S. investment environment relative to other
countries."
In a luncheon speech to the council, Mr. McNamar rejected the
theory that a large federal deficit causes high interest rates
which account for the strength of the dollar in relation to other
world currencies.
"Despite the oft-repeated assertions of a large budget
deficit-interest rate link, Treasury has not been able to find
any consistent statistically satisfactory correlation between the
two, "Mr. McNamar said. "Nor have our requests to others
produced such an analysis."
The U.S. dollar is strong today because investors around the
world view this country as the most attractive economy in which
to invest, said Mr. McNamar. The dollar will come down from its
high levels only as the other major economies of the world
strengthen and become more attractive places in which to invest.
###
R-3004
TREASURY NEWS
apartment of the Treasury • Washington, D.C. • Telephone 566-2041
REMARKS BY THE HONORABLE R. T. MCNAMAR
DEPUTY SECRETARY OF THE TREASURY
BEFORE THE
NATIONAL FOREIGN TRADE COUNCIL
NEW YORK, NEW YORK
January 30, 1985
THE PORTFOLIO SHIFT THEORY
OF EXCHANGE RATE MOVEMENTS
Thank you, and it's a pleasure to be with you.
Since 1980 we've seen the dollar rise to new highs on
international markets. As you in world trade related businesses
well know, it has impacted the U.S. position in a variety of
international markets. To explain the reasons for the dollar's
performance, and propose policy changes to deal with the
situation, a vast array of supporting formulas and statistics
have been used.
Listening to the preponderance of hypotheses and numbers is
not unlike the situation Disraeli was in during the course of an
important Parliamentary debate. An opponent of Disraeli's
government was supporting his arguments and charges with a
ponderous and bewildering barrage of statistics. Instead of
scurrying around for similar ammunition to refute these
arguments, Disraeli rose and commented drily, "Gentlemen, there
are three kinds of lies — lies, damned lies, and statistics."
While contemporary discussions and explanations of exchange
rate movements in general, and the dollar's rise in particuilar,
fall somewhat short of Disraeli's classifications, they do tend
to rely on outdated theories and consequently fail to analyze the
"new fundamental forces" that are driving exchange rate
movements.
Today, I would like to suggest a framework for assessing
exchange rate movements which, I believe, better fits the
worldwide interpretation of today's capital markets. For by
understanding the underlying fundamentals, I think we'll be in a
better position to assess recent events, predict their overall
future impact on your business, and understand the impact of
domestic economic policies, such as the United States' tax
policy, on international markets.
R-3005
- 2 -
Initially, let's analyze the effectiveness of traditional
explanations for exchange rate movements in the context of the
past few years.
TRADITIONAL EXPLANATIONS
Many theories have been offered to explain the rise of the
dollar. Most center on the behavior or 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, on both 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.
Countries with growing current account surpluses are
expected to experience appreciation of their currencies.
Countries with growing current account deficits are supposed to
see their currencies fall.
In the past this seemed to be the case. For example,
between 1975 and 1978, the U.S. current account went from a plus
$18 billion to a minus $15 billion. Following the traditional
theory, the dollar depreciated by 9 percent. During the same
period, the Japanese current account went from a $1 billion
deficit to a $17 billion surplus, and the yen appreciated by 41
percent. The German surplus rose by $5 billion and the DM
appreciated by 17 percent.
Bluntly put, I don't think this theory is valid today.
Unfortunately, the "rules of the game" have changed since the
1970's and the world is much different than it was even a decade
ago. Today, it is essential to understand the relative
importance of trade transactions and non-trade related capital
flows.
Currently, international trade in goods and services total
approximately $2 trillion per year. By comparison, estimates of
annual capital flows are usually in the $20-30 trillion range or
10 to 15 times those of goods and services. Recently, the
Financial Times estimated that $200 billion in foreign exchange
is traded between banks every day — or approximately $50
trillion per year. I'm unsure of the number, but confident of
the relative importance of trade and capital flows.
Given the relative importance of capital flows versus trade
flows today, it seems clear that capital flows, not trade flows,
determine exchange market dynamics. In short, today capital
flows do affect exchange flows and alter trade flows, but not
vice versa.
- 3 -
Another traditional explanation of recent dollar movements
focuses on nominal interest rate differentials between countries.
This conventional wisdom says large U.S. budget deficits have
raised U.S. interest rates, increasing the nominal interest rate
spreads over those offered in Europe. In turn, the theory goes,
these nominal interest rate differentials have driven up the
value of the dollar vis-a-vis European currencies.
Let's examine this theory. First, despite the oft-repeated
assertions of a large budget deficit-interest rate link, Treasury
has not been able to find any consistent statistically
satisfactory correlation between the two. Nor have our requests
to others produced such an analysis.
During the first three quarters of 1984, we saw estimates of
the deficit progressively lowered from $231 billion in last
year's original budget to $174 billion in this summer's
midsession review, a drop of $57 billion or 25 percent. Yet,
during this period the dollar increased 10 percent on a
trade-weighted basis against the OECD currencies.
And, 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 between the U.S. and other key currency countries has
narrowed.
While short-term interest rate differentials have moved in
favor of the DM by nearly 500 basis points and the French franc
by over 700 basis points since early 1981, the dollar has risen
against the DM by 61 percent and against the franc by 113
percent. Nominal differentials have moved in favor of the Swiss
franc by over 800 basis points, yet the dollar has risen 50
percent against the Swiss franc. The same is true for other
major currencies.
Pragmatically, if large nominal interest rate differentials
are the sole key, much higher interest rate spreads existing
between the U.S. and any number of Latin American countries would
have resulted in large sales of the dollar to buy those
currencies. But obviously people have not yet been selling
dollar assets to buy fixed income securities denominated in
pesos, bolivars, or cruzeiros.
The most dramatic evidence has occurred since last July.
During this period, we have seen a significant fall in both short
and long term U.S. interest rates and a continued narrowing of
- 4 -
differentials with Europe. But, counter to the conventional
wisdom, the dollar strengthened 12 percent against the DM to a
3.17-3.19 range DM during this period. I hope these events may
have, finally, laid the old nominal interest rate-exchange rate
argument to rest.
The large deficit-high interest rate-high dollar hypothesis
also fails to distinguish between alternative policy choices to
reduce the U.S. federal budget deficit. Either raising taxes $50
billion or cutting spending $50 billion will reduce the deficit
by the same amount, 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
analysis assumes a host of other variables (like monetary policy)
are either perfectly anodyne or exogenous during the year.
To me, these seem naive assumptions, which is why I would
label this a simplistic hypothesis. In essence, it is an attempt
to explain a multiple variant regression with a single variable.
This is so simplistic that even a banker or a Harvard professor
should understand it.
As you can see, I belive that 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.
However, the original question of why the dollar has risen
remains.
MORE COMPLETE EXPLANATION
I submit that exchange rate movements are a function of many
thousands of market investors simply seeking the most attractive
environment for investments, given the array of possibilities.
Accordingly, I submit that the following seems to be a more
complete explanation of the market changes we've seen recently.
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 flows of international capital help to achieve a
more efficient allocation of resources on a worldwide basis.
- 5 -
Exchange rate movements are a function of investment
preferences at a country level. However, the movements are a
product of the relative attractiveness of all of the "portfolio"
options within an individual country. Basic investment options
within a country such as real estate, equity, and fixed income
investments can be further divided by maturity and risk. The
after-tax real rate of return for each investment type within a
country drives the demand, or relative attractiveness, of a given
currency and consequently direct and cross-rate currency exchange
trends.
After-tax real rates of return are a function of the overall
economic and political environment impacting the investment
decision. To understand this fully, one must analyze each of the
individual components in a country relative to other countries
and investment vehicles relative to other Investment vehicles in
a country over the term of the investment.
Several of the key components for major currency countries
are:
— Sustainable economic growth prospects in a country
relative to all others
— Nominal pretax rates of return from equities, real
estate, or fixed income securities relative to all
others
— Projected inflation rate in a country relative to
all others
— Effective tax rates on investments in a country
relative to all others
— Capital market conditions in a country relative to
all others
Government regulations and social rigidity in a
country relative to all others
Sovereign and political risk in a country relative
to all others
I submit that it is the aggregate of these factors in each
country relative to other key currency nations a_t the margin that
determines present and future exchange rates.
At any point in time, the factors are weighted differently
by diverse investors and are continually changing to reflect
their disparate scenarios for the future. It is the daily
- 6 -
interaction of thousands of international institutional and
corporate investors' collective response to those factors that
provides the fundamental levels in exchange rates and the
day-to-day volatility.
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 in making
strategic portfolio decisions. 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.
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 are estimated
to have averaged 2.3 percent growth in 1984, about the same as in
1979-80. Japan's growth is estimated at about 5 1/2 percent, a
bit above its 1979-80 average of 5 percent. By contrast, our 6.8
percent real GNP growth in 1984 compares with a U.S. average of
slightly over one percent in 1979-80. While Japan is virtually
flat and most major European countries are back only to the
growth rates they achieved in the 1970s, the real growth rate in
the United States has sextupled over the same period.
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 28 percent to record levels
against the DM.
Against this background, it is not surprising that on a
relative economic performance basis, the United States currency
has out-performed the rest of the world just as our economy has.
- 7 -
Inflation
In terms of inflation, in recent years the United States
looks much better in both an absolute sense and relative to other
major industrial countries.
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 was down to 3.7 percent in 1984 as measured
by the GNP deflator. This is below the European average of. 6
percent, and closer to Japan's 2 1/2 percent. The point is: 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. And, consistent with my
portfolio theory, the U.S. currency has strengthened against
other currencies to reflect this relative improvement.
Taxes
A third and far too often ignored factor that influences
investment flows is relative national tax policies. Again, let
me stress, it is after-tax results, not before-tax returns that
count. You can't reinvest pre-tax earnings, only after-tax cash
flows.
Again, the changed tax environment in the U.S. is relatively
much more attractive today. More favorable depreciation
allowances and credits, combined with lower effective corporate
income tax rates and lower individual marginal rates, have
increased cash flow from business and individual investment and
contributed to higher after-tax returns from fixed income
investments (CDs, corporate, and government bonds) as well as
direct equity investments, and real estate relative to other SDR
countries.
Capital Markets
The next factor to consider is capital market conditions.
Without question, the U.S. has the largest and deepest capital
market in the world. Credit is widely available for attractive
projects. Our stock markets are followed daily throughout the
world.
Turning to debt, overseas investors have shown the same
eagerness for corporate dollar denominated bonds. Is it the
nominal interest rate differentials or the currency appreciation
- 8 -
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.
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. Last year's Economist article
on "Europe's Technology Gap" is a clear critique of Europe's
performance in terms of what my economist friends call
"structural rigidities," which do affect exchange rates.
Indeed, my portfolio theory suggests that until Europe makes
progress on eliminating its structural rigidities relative to the
United States and the industrializing Asian countries on this
criterion taken alone, one would anticipate continued relative
weakness in European currencies.
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 rise
of the Greens, the metal workers strike and the political
stability of the coalition are all factors in investors' views of
the relative attractiveness of Germany. The LDC debt situation,
especially in some Latin American countries led to massive
capital flight in the 1980-1983 period. For example, a recent
estimate of dollar flight from Mexico alone is $38 billion during
this 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. And relative to any other country in the world,
the United States promises to continue to have an advantage.
- 9 -
Interplay of Factors
Perhaps the interplay of these factors and the manner in
which they have driven the dollar 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, e.g. real estate in the Benelux
countries or south of France where even nominal values have
declined in recent years.
Factors such as relative economic growth and inflation
expectations, a favorable tax situation, and simply the ability
to get their money back drove the foreign investors'
decision-making process. The U.S. real estate professionals
failed to understand these underlying factors, how they had
changed, and the new interdependence of worldwide markets. Those
Europeans who purchased "inflated California real estate" may
have seen a drop in nominal prices, but expressed in today's DM,
guilders, or francs, they are way ahead, and as usual have
out-performed their less sophisticated American counterparts.
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
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.
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.
Against this background, I would ask several admittedly
rhetorical questions of those who complain that the dollar is
- 10 -
"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.
While discussing policy implications against this backdrop,
we should consider the current debate on reducing the deficit.
As I said earlier, many academics, Wall Street types, and
associated rail birds have called for a reduction in the deficit
to reduce U.S. interest rates and thereby weaken the dollar.
Let me reiterate that the Reagan Administration is clearly
committed to reducing the budget deficit through spending
reductions, not tax increases. However, given the framework I've
outlined, the effect of reducing the deficit should be to
strengthen the dollar.
A reduced deficit would reduce federal borrowing
requirements, thereby reducing federal competition with the
private sector for available credit. All other things being
equal, this will improve the perception of sustainable
non-inflationary growth in the United States relative to other
countries. Given an appropriate monetary policy, this will
undoubtedly result in a more attractive U.S. investment
environment relative to other countries. Indeed, I submit that
cutting the budget deficit through reduced government spending,
will further strengthen the dollar based on my portfolio shift
hypothesis.
I believe the dollar's strength reflects, not some temporary
interest rate or trade balance factor, but a fundamental relative
improvement in U.S. economic policies, performance and prospects
compared 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 last half of the 1970's
for the foreseeable future, until and unless other countries
adopt policies which achieve more sustainable non-inflationary
growth with other factors being equal.
CONCLUSION
I hope this more comprehensive portfolio shift framework and
the discussion present a useful background to translate the real
meaning and underlying reasons for both exchange rate levels and
volatility.
- 11 -
My conclusion is clear. Investors around the world have
re-evaluated the view they had of the United States in the late
1970*s relative to the other SDR countries, and today find that
the future U.S. economy is the most attractive in the world. And
the degree to which the United States economy continues to be
relatively attractive to other nations is dependent on our
ability to make decisions on difficult domestic economic issues,
because United States domestic economic policies have
international implications, and the foreign exchange markets
provide a daily assessment of our relative performance.
Thank you.
FREASURY NEWS
partment of the Treasury • Washington, D.C. • Telephone 566-2041
CONTACT: ART SIDDON
(202) 566-2041
FOR IMMEDIATE RELEASE
January 31, 1985
Treasury Secretary Donald T. Regan will deliver a farewell
speech to Treasury Department employees at 11:00 a.m., Friday,
February 1, in the Cash Room in the Main Treasury Building. The
event will be open to accredited press, but the Secretary will not
be available to respond to questions.
###
R-3006
TREASURY NEWS
apartment of the Treasury • Washington, D.C. • Telephone 566-2
FOR IMMEDIATE RELEASE CONTACT: BRIEN BENSON
January 31, 1985
(202) 566-2041
CASINO REGULATIONS FINAL
The Treasury Department announced today that it has issued
final regulations that will require gambling casinos to report
currency transactions over $10,000 and to keep records of certain
transactions. This action is part of the Treasury Department's
program to combat the laundering of money from illegal
activities, such as drug trafficking, and tax evasion. Bank and
other financial institutions have been subject to the same
reporting requirements for several years. The reports will
assist the IRS, Customs, and other Federal law enforcement
agencies in identifying persons engaged in criminal activities.
Since banks have been filing reports of large currency
transactions since 1974, criminals have sought other ways to
launder their money. With the implementation of the new
regulations, they will find that casinos are no longer a viable
substitute for a bank as a vehicle for money laundering.
The final regulations represent the culmination of more than
18 months of analysis and consultation with the gaming industry,
state gaming enforcement officials in Nevada and New Jersey, and
interested Congressional leaders. Since the regulation of
casinos traditionally has been a state responsibility, Treasury's
regulations allow for the option of state implementation of the
regulatory requirements subject to Treasury oversight.
The regulations which will go into effect on May 1, 1985,
are expected to impact casinos in Nevada, New Jersey, and Puerto
Rico. The regulations have been forwarded to the Federal
Register and will be published the middle of next week.
###
R-3007
TREASURY NEWS
department of the Treasury • Washington, D.C. • Telephone 566-2041
FOR IMMEDIATE RELEASE
February 1, 1985
CONTACT:
BRIEN BENSON
(202) 566-2041
REPAYMENT OF SOCIAL SECURITY BORROWING
The Treasury Department announced today that a total of
$4,360 million has been repaid by the Old Age and Survivors
Insurance Trust Fund to the Federal Hospital Insurance Trust Fund
and to the Federal Disability Insurance Trust Fund. This is the
first repayment by the OASI Trust Fund on loans totaling $17,518
million received in 1982 to assure payment of OASI benefit checks.
Under section 201(1) of the Social Security Act, as amended
by the Social Security Amendments of 1983, OASI is requires to
make partial repayment to the loan from the FHI Trust Fund when,
at the end of a calendar year, the combined balance of the OASI
and DI Trust Funds exceeds 15 percent of the estimated
expenditures for the following year. The payment must be made by
the following January 31. At year end 1984, the combined OASI and
DI Trust Fund balance exceeded 15 percent of estimated 1985
expenditures by $1,824 million. Accordingly, this amount is beinrj
repaid to the FHI Trust Fund as payment on its total loans of
$12,437 million.
The Secretary of the Treasury also determined, as provided
by section 201(1) of the Social Security Act, that the OASI Trust
Fund has sufficient assets to repay to the DI Trust Fund $2,540
million of the $5,081 million the OASI Trust Fund borrower from
that fund. This will approximately equalize the relative
financial position of those two trust funds in the near term.
###
R-3009
TREASURY NEWS
Department of the Treasury • Washington, D.C. • Telephone 566-2041
For Release on Delivery
January 28, 1985
STATEMENT OF THE HONORABLE JOHN M. WALKER, JR.
ASSISTANT SECRETARY (ENFORCEMENT & OPERATIONS)
U.S. DEPARTMENT OF THE TREASURY
BEFORE THE
COMMITTEE ON BANKING, HOUSING AND URBAN AFFAIRS
UNITED STATES SENATE
Money Laundering:
The Problem and Law Enforcement's Response
Mr. Chairman, I am pleased to appear before you to report on
steps the Treasury Department has taken, in conjunction with the
initiatives of this Administration, to attack the money laundering that supports drug trafficking and other organized crime.
At the outset, I would like to express Treasury's appreciation for your efforts on behalf of law enforcement in general,
and Treasury law enforcement in particular. You have advanced
our government's fight against crime through your support for the
President's legislative initiatives, which were enacted last
session as the Comprehensive Crime Control Act of 1984. You have
developed additional legislation to fight money laundering by
strengthening the Bank Secrecy Act. In addition, you have
sponsored legislation banning the manufacture of armor-piercing
ammunition, and secured Congressional approval for enhancement
of the enforcement resources of the U.S. Customs Service- In
particular, as a result of your leadership, Customs has increased
its inspectional and investigative forces here in New York to
improve its ability to detect and seize drugs, particularly
heroin, being smuggled into the country.
Mr. Chairman, as shown by a Roper poll reported last year in
USA Today, crime and drugs constitute the number one problem on
the minds of Americans today, ranking ahead of unemployment,
R-3010
-2inflation, health costs and nuclear arms limitation. The menace
of drug abuse simply must be brought under control. This Administration considers law enforcement a top priority and, under
President Reagan's leadership, we have made important strides in
the fight against crime and against drug trafficking in particular. Our major initiatives, including the South Florida Task
Force, the Organized Crime Drug Enforcement Task Forces and the
National Narcotics Border Interdiction System, are achieving
successes every day. But our battle has just started. I am
reminded of the words of Sir Winston Churchill, spoken at the
successful completion of the campaign in North Africa: "Now this
is not the end. It is not even the beginning of the end. But it
is, perhaps, the end of the beginning."
In my testimony today, I will describe a nontraditional
weapon in our arsenal against organized crime and drug trafficking, one that has been vital to the excellent start that we have
made. That weapon is the financial investigation that allows us
to go after the money that is at the heart of every criminal
enterprise. I will also explain problems posed by money laundering and actions taken by Treasury, together with other departments and agencies, to solve them. I will briefly summarize how
Customs and IRS are using the Bank Secrecy Act to uncover and
disrupt criminal organizations. I will then discuss new international and regulatory measures that will further improve our
enforcement in this area.
The Money Laundering Problem
The seriousness of the money laundering problem facing us
cannot be overstated. Just as drug abuse has infiltrated every
group and social stratum in our society, the lure of easy, almost
limitless wealth has drawn previously law abiding individuals
into providing professional financial services to drug trafficking organizations. Professional financial services are essential
to a narcotics organization: they create a protective shield
between those who actually move drugs into this country and the
law enforcement investigators attempting to uncover their operations. They provide this cover by concealing assets, forming
shell corporations, arranging false loans, employing couriers to
carry bales of cash, making wire transfers, and using any other
scheme, limited only by the human imagination, to remove the
assets and profits of the criminal organization from the scrutiny
of law enforcement and the general public.
The money laundering and illicit financing that support the
drug trade are not carried out solely by what is commonly perceived as the criminal underworld. Our financial investigations
have exposed members of a wealthy, highly skilled, professional
-3class, many of whom do not have previous criminal records, some
of whom are highly respected members of their communities. They
are attorneys, accountants, bankers and money brokers.
Nor is money laundering confined to any particular region of
tne country. The problem is a national problem, one that is
nearly as pervasive as the drug abuse problem that underlies it.
wnoily apart from the enormous social costs of the drug trafficking that it supports, money laundering itself seriously cripples
our society. It undermines trust in our financial institutions.
It provides conduits for tax evasion and growth opportunities for
various other organized criminal enterprises — including illegal
gambling, loansharking, prostitution and extortion. But its most
insidious effect is to provide the financial support for further
criminal activity, especially new narcotics ventures.
I mentioned a moment ago that the money launderer uses a
broad array of schemes to conduct his illicit activities.
Commissioner von Raab, in his testimony today, will cite a number
of specific examples of these schemes drawn from actual cases.
Rather than repeat them here, I would like to give a single
illustration of how a money launderer, using a relatively simple
scheme, can frustrate law enforcement efforts. A drug trafficker
provides him, for example, $10,000,000 in cash to be washed. The
launderer sets up a phony company in the United States to
eventually receive the laundered funds. He then has couriers
physically carry the narcotics proceeds to Panama and deposit
them into corporate accounts there. Because Panamanian accounts
are protected by stringent local bank secrecy laws and the
corporate account holders are also protected by attorney
confidentiality, U.S. federal investigators have no means of
determining their true ownership. The launderer then arranges to
have the $10,000,000 wired to a corporation in the Bahamas.
Bahamian law, as you know, provides both secrecy for bank
accounts and corporate secrecy. U.S. law enforcement is not able
to "pierce the corporate veil" to learn the true ownership of the
company or companies involved. Finally, the Bahamian company
pretends to loan the $10,000,000 to the front corporation that
the money launderer established for his criminal client in the
United States. In this way, the money launderer accomplishes his
task of repatriating the funds in the form of a nontaxable loan
which might then be reinvested in a legitimate business, for
example, real estate. In addition, he also creates a pretext for
a tax deduction on the interest paid on the loans. These
interest payments, of course, are fraudulent since, in effect,
they consist of payments to oneself and are in no respect
interest on any actual indebtedness.
In my example, the money launderer, apart from the subsequent
tax offenses, clearly violates the law when he does not report
the transportation of currency as it leaves the country. Without
some hard intelligence regarding this transportation, however,
-4this activity is exceedingly difficult for Customs to detect.
Additionally, the tax violations he orchestrates are difficult
for IRS to uncover and prove, for Bahamian law prevents IRS
investigators from developing evidence that the loan is a sham.
Our Response: The Task Force Concept
Treasury has uncovered schemes similar to the example I have
described by using the tools the Bank Secrecy Act provides.
While foreign bank and corporate secrecy laws hinder the
investigation of offshore money laundering, the Act and its
implementing regulations still make it possible to pursue leads
based upon financial information. In this respect, the Bank
Secrecy Act presents a significant hurdle, perhaps the most
significant hurdle, that the money launderer must overcome.
Another major threat to the money launderer is the Internal
Revenue Code. The Internal Revenue Service targets over 2 5% of
its direct investigative time to the prosecution of drug traffickers for tax violations. The IRS, along with the Customs
Service, also plays a major role in enforcing the Bank Secrecy
Act.
However, it is clear from the spectrum of methods used by
drug traffickers and their financial agents that any single law
enforcement approach - be it tracking the money or tracking the
drugs - is not enough. The Task Force concept, which Treasury
and this Administration have employed to combat money laundering,
has shown substantial promise in part because it combines all of
the statutory weapons we have available, including various narcotics statutes, the Bank Secrecy Act, the Internal Revenue Code
and RICO. Task Force investigations are commonly coordinated by
Federal prosecutors and integrated with the grand jury process.
Task forces are effective because they combine the particular
investigative skills of different law enforcement agencies. IRS,
Customs, DEA, ATF and the FBI all participate in various task
forces now investigating money laundering and organized crime.
Agencies working in combination produce better results because
they can maximize the exchange of information which might otherwise be impeded by agency parochialism. A third advantage is
that financial investigative techniques, focusing on the financial underpinnings of a drug organization, are fully integrated
into the overall investigative process.
The Treasury Department's own financial task forces, of which
there were only two when this Administration began, now number
forty. Situated throughout the United States, they direct the
investigative work of IRS and Customs agents against the financial base of every type of criminal organization. One of the
first task forces, Operation Greenback in Miami, has served as
the model. In his testimony today, Commissioner von Raab will
present some statistics to give you an indication of the effect
that these Treasury task forces have had.
-5-
As you know, Mr. Chairman, financial investigations are an
essential component of a larger, Administration-wide initiative the Organized Crime Drug Enforcement Task Force Program (OCDE).
This is wholly independent of the Treasury financial task forces
to which I just referred. President Reagan announced his intention to create these OCDE Task Forces in October, 1982. Twelve
were in place by early 1983, but have been fully operational for
only 18 months. A thirteenth was added this year. In this short
time the OCDE Task Forces have initiated approximately 800 investigations. They have indicted over 4,000 drug traffickers and
money launderers, of whom more than 1,500 have been convicted.
I hasten to point out that the high defendants-to-cases ratio is
the intended result of a deliberate targeting of criminal organizations rather than individual offenders.
Treasury has played a major role in the OCDE Task Forces from
their initiation. In fact, fully two thirds of the OCDE investigations have a major financial component. IRS has contributed
220 special agents to these Task Forces and Customs has contributed 183. Treasury's Bureau of Alcohol, Tobacco and Firearms
has contributed 84 special agents to investigate the explosives,
firearms and arson violations that result from drug trafficking
and organized crime.
All of the Treasury task forces, as well as all of the
President's OCDE Task Forces, now use the information and investigative support of the Treasury Financial Law Enforcement
Center, or TFLEC, which we created within Customs in 1982. TFLEC
is both a computerized clearinghouse and an analytical center for
information obtained from Bank Secrecy Act reporting. It provides intelligence, generates leads for new investigations, and
provides analytical support for existing ones. Commissioner von
Raab will describe the functions of TFLEC in further detail.
Money Laundering Cases
Mr. Chairman, in addition to the statistics I have mentioned,
the effectiveness of our financial investigations can be demonstrated by the types of cases they have produced.
Treasury's Greenback and El Dorado task forces have, in the
last few years, destroyed or targeted eighteen major moneylaundering organizations. The following major cases are ranked
according to the documented size of the operation involved:
-6-
Cases that have already
resulted in convictions
Isaac Kattan
Dollars
laundered
Time
frame
$500,000,000
3 years
Beno Ghitis
268,000,000
5 months
Orozco
145,000,000
13 months
Armenteros, et al.
130,000,000
8 years
Great American Bank
95,000,000
13 months
Zapata, et al.
17,000,000
8 months
SUBTOTAL! $1,155,000,000
Pending cases
A
$300,000,000
3 years
B
300,000,000
8 years
C
250,000,000
20 months
D
230,000,000
3 years
E
180,000,000
2 years
F
140,000,000
8 months
G
70,000,000
8 months
H
65,000,000
1 year
I
60,000,000
1 year
J
20,000,000
18 months
K
14,000,000
1 year
L
9,000,000
SUBTOTAL
$1,638,000,000
TOTAL
$2,793,000,000
3 months
-7-
The size of these money laundering organizations gives an
indication of the enormous wealth generated by the narcotics
trade. While south Florida remains the area of the highest
concentration of international drug trafficking and money
laundering, the OCDE Task Forces are uncovering major drug and
organized crime cases in New York and elsewhere. Only a fully
coordinated, nationwide approach can be expected to bring the
problem under control.
Here in New York, I am sure many citizens are familiar with
the Orozco investigation, which destroyed a money laundering
organization that had laundered in excess of $145 million and
transported $42 million in currency from Panama to the United
States in a thirteen-month period. It was the largest case of
its kind ever prosecuted in the New York area. Eduardo Orozco
and six of his associates were convicted or pleaded guilty.
Orozco himself was sentenced to eight years imprisonment and
fined $1,035,000. The Orozco case began with financial information generated under the Bank Secrecy Act. It was investigated
jointly by Customs, DEA and IRS, and supported to a great extent
by TFLEC analyses.
Another case in New York attracted national attention last
April when an OCDE Task Force investigation, known as the pizza
connection investigation, resulted in the indictment of 31
individuals on Federal charges stemming from heroin importation
and distribution. In five years, this organization distributed
$1.65 billion worth of heroin and laundered at least $28 million
in heroin proceeds, principally through banks in foreign countries, in a 33 month period. The case is currently scheduled for
trial in June.
A second investigation by the New York OCDE Task Force culminated last June, after a one and one-half year investigation,
in the indictment of the Global Union Bank and a former bank
officer. The charges resulted from alleged reporting violations
under the Bank Secrecy Act in connection with approximately $1.1
million in cash deposits. IRS Special Agent Mike McDonald, who
is the IRS Task Force Coordinator in Miami., will describe this
case in more detail in his testimony today.
Mr. Chairman, cases similar to these are under investigation
all across the United States. For instance, last June 5th, a
coordinated interagency investigation by the President's South
Carolina OCDE Task Force resulted in the indictment of 31
individuals for their alleged operation of a large marijuana
importation scheme. The suspects are believed to have imported
over $100 million worth of marijuana and hashish into East Coast
states over the past six years.
-8On January 9th of this year an OCDE task force investigation
in Virginia resulted in the indictment of 26 individuals for
their alleged participation in a huge marijuana importation
scheme. In addition to charges under Federal drug laws, including Continuing Criminal Enterprise, the indictment includes
charges for currency violations. The operation is believed to
have realized profits of $100 million over a ten-year period and
to have laundered proceeds through retail stores across the
nation that deal in oriental rugs and gems. The government has
seized a $1.7 million farm near Leesburg, Virginia, in connection
with this case and is seeking its forfeiture under the Continuing
Criminal Enterprise law. The government has also sought forfeiture of $13 million in other assets.
Trends in International Money Laundering
Money launderers have reacted to this Administration's crackdown on domestic money laundering by increasing their use of offshore banks in countries with strict bank secrecy laws. We have
responded to this trend by seeking agreements from these offshore
havens to provide the United States disclosure of financial and
banking information for law enforcement purposes. Last July
26th, as a result of the efforts of the Departments of Justice
and Treasury, the United States concluded an agreement with the
United Kingdom allowing U.S. prosecutors to secure documents
located in the Cayman Islands. When implementing legislation by
the Cayman Islands comes into effect, U.S. law enforcement will
have a mechanism to obtain documents relevant to criminal or
civil proceedings arising from narcotics activity. In addition,
we are currently negotiating with law enforcement officials of
the Republic of Panama to secure an agreement for the exchange of
financial information connected with money laundering. We will
continue to push for progress on this front.
Regulatory Amendments to Combat Money Laundering
To respond further to the trend in offshore money laundering,
Treasury has proposed regulations under which the Secretary can
require specified U.S. financial institutions to report to
Treasury their transactions with foreign financial institutions.
In exercising this new authority, Treasury would determine
which foreign financial institutions to make subject to reporting
on the basis of available information indicating unusual transactions. We would require reporting on a selective basis, mindful
of the need to avoid unnecessary interference with legitimate
commercial transactions. Overall, we believe it will allow us to
focus our analytical resources in a way that is more likely to
uncover potential illicit activity for specific investigative
targeting.
-9Another problem we have recently confronted is the use of
casinos to launder illicit cash. Treasury has become aware that
drug traffickers and money launderers are using casinos to
fnCro2HS ^ t r a n s f e r proceeds of illegal activity. Last year,
in response to this concern, we published proposed regulations to
include casinos in the class of financial institutions subject to
reporting and recordkeeping requirements under the Bank Secrecy
Act. Because casinos are also closely regulated by state
agencies, we included a provision under which Treasury will
consider plans submitted by states that would provide for a
system of reporting and recordkeeping within a state regulatory
scheme that meets the objectives of Treasury's proposed rule. If
Treasury considers a state plan fully acceptable, it will exempt
the casinos in that state from the Federal reporting and recordkeeping requirements under Title 31.
We believe these proposed regulatory changes will facilitate
our investigative work and, at the same time, create a stronger
deterrent to the financial crimes associated with drug
trafficking.
Possible Improvements to Our Government's Ability
to Combat Money Laundering
The international efforts and regulatory changes that I have
mentioned will, I believe, increase Treasury's effectiveness in
combating money laundering. But as you know, Mr. Chairman, the
challenge money laundering poses for law enforcement is both
enormous and continuing. We must be vigilant in seeking new
methods of meeting this challenge.
Last October, the President's Commission on Organized Crime
issued an interim report on the money laundering threat. It contained a number of recommendations for enhancing the effectiveness of the Bank Secrecy Act. We have studied carefully the
recommendations dealing with administrative and regulatory
matters, and we have started a program to implement them where
practicable. As you are aware, other recommendations offered by
the Commission call for new legislation. Some of these legislative recommendations were achieved with the passage of the
Comprehensive Crime Control Act of 1984 which you supported.
Still others will await Administration and Congressional
consideration. One such recommendation would involve changes to
the Right to Financial Privacy Act. The Commission concluded
that changes are needed to allow bank employees greater latitude
in informing law enforcement agencies of suspicious financial
transactions. Another recommendation would establish money
laundering as a separate offense under Federal criminal law.
-10In conclusion, I want to express my gratitude to you,
Mr. Chairman, for your support of the amendments to the Currency
and Foreign Transactions Reporting Act which were included in the
President's Comprehensive Crime Control Act. The currency amendments provide long-needed measures for our battle against money
laundering. I would also like to take this opportunity to give
recognition, once again, to your successful efforts to obtain 100
additional Customs inspectors and investigators for the New York
region. This enhanced manpower is particularly valuable in
enabling Customs to be more effective in fighting the smuggling
of heroin, the drug that over the years has had such devastating
consequences for the people of New York. I know I speak for the
entire law enforcement community in expressing appreciation and
thanks for your support in the struggle against crime and drug
abuse in our society.
This concludes my prepared remarks. I would be pleased to
answer any questions that the Committee may have.
JRSI
1985
@FedFRASER