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LIBRAE
ROOM 5030
WftY 28 1986
TREASURY DEPARTMENT
Treas.
HJ
10
•A13P4
v. 269
U.S. Dept. of the Treasury.
PRESS RELEASES.
LIBRARY
nnoi\/| 5030
MAY i* 19BR
TREASutw
ULI-AHTMENT
TREASURY NEWS
lepartment of the Treasury • Washington, D.c. • Telephone 566-2041
FOR RELEASE AT 4:00 P.M.
October 1, 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 October 10, 1985.
This offering will not provide new cash for the Treasury, as the maturing bills
are outstanding in the amount of $14,082 million. Tenders will be
received at Federal Reserve Banks and Branches and at the Bureau of
the Public Debt, Washington, D. C. 20239, prior to 1:00 p.m., Eastern
Daylight Saving time, Monday, October 7, 1985.
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
July 11, 1985,
and to mature January 9, 1986
(CUSIP No.
912794 JM 7 ) , currently outstanding in the amount of $7,248 million,
the additional and original bills to be freely interchangeable.
182-day bills for approximately $7,000 million, to be dated
October 10, 1985,
and to mature April 10, 1986
(CUSIP No.
912794 KA 1 ) .
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.
The bills will be issued for cash and in exchange for Treasury
bills maturing October 10, 1985.
Tenders from Federal Reserve
Banks for their own account 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. Federal Reserve
Banks currently hold $1,103 million as agents for foreign and international monetary authorities, and $3,201 million for their own
account. Tenders for bills to be maintained on the book-entry
records of the Department of the Treasury should be submitted on Form
PD 4632-2 (for 26-week series) or Form PD 4632-3 (for 13-week series).
$-294
TREASURY'S 13-, 26-, AND 52-WEEK BILL OFFERINGS,
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 book-entry
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
4/85
tenders.
TREASURY'S 13-, 26-, AND 52-WEEK BILL OFFERINGS, PAGE 3
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 the issue date, in cash or other immediately-available funds
or in Treasury bills maturing on that date. 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,
19 84, 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.
4/85
rREASURY NEWS
partment of the Treasury • Washington, D.c. • Telephone 566-2041
FOR IMMEDIATE RELEASE
EXPECTED AT 2:00 P.M.
OCTOBER 2, 1985
STATEMENT OF JOHN D. LANGE, JR.
DIRECTOR, OFFICE OF TRADE FINANCE
UNITED STATES TREASURY
BEFORE THE SUBCOMMITTEE ON
INTERNATIONAL ECONOMIC POLICY AND TRADE
COMMITTEE ON FOREIGN AFFAIRS
UNITED STATES HOUSE OF REPRESENTATIVES
We are grateful to the subcommittee and to you, Mr.
Chairman, for permitting us to present the Administration's
initiative for a so-called War Chest to combat tied aid
credits. It is a major offensive in the President's campaign
against foreign unfair trade practices.
The legislation is
designed to foster free and fair trade -- to establish a
balanced competitive environment where U.S. businesses can
compete fairly.
Our initiative is not designed to create a new subsidy
program to promote exports. This legislation purposely avoids
setting up an unfair trade practice of our own to mimic the
unfair trade practices of other countries. On the contrary,
the War Chest will provide the necessary leverage on governments to join the great majority of our industrial nation
trading partners and negotiate an end to the misuse of tied or
partially untied aid credits for predatory commercial purposes.
The Tied Aid Credit Problem
We should recognize at the outset that most of our negotiating objectives have been achieved in the field of export
credits. After several years of negotiations, the 22 OECD
nations revised the Arrangement on Export Credits in November
1983 to reduce greatly and in many instances eliminate export
credit subsidies.
In the last year, we further agreed to essentially eliminate financial subsidies for nuclear power projects and large
commercial aircraft.
Moreover, participating countries,
including France, agreed to prohibit the use of any tied aid
credits whatsoever in these two important sectors. These
Br235
- 2 agreements by OECD member governments are among the most significant recent advances in free trade.
With the reduction of export credit subsidies, however,
tied aid credits, which use aid alone or in combination with
normal export credit financing, have become a more important
problem for U.S. exporters.
The scope of the problem is
revealed by the following:
— A recent OECD study, prepared at the behest of OECD Ministers, concluded that tied aid credits with low levels of
concessionality distort aid and trade more than credits
with high grant elements.
— The number of notified tied aid credits with low grant elements has doubled since 1982.
The OECD predicts that the amount of such offers will
increase to over $6.0 billion in 1985.
Although many other countries have adopted programs to
match France, French tied aid credits still account for
one-third of all tied aid credits with grant elements below
50 percent and more than one-half of all tied aid credits
with grant elements below 35 percent.
These credits, when used for commercial purposes in the
guise of foreign aid, represent an unfair trade practice, have
caused the United States to lose key export sales, and have
diverted funds away from development assistance.
Thus, the
continued use of commercially motivated tied aid' credits
threatens to undermine the Arrangement and increase international trade tensions.
The Negotiating Impasse
The clearest, simplest, and most direct solution to the
problem of commercially motivated tied aid credits is to raise
the minimum permissible grant element from the current 25 percent to 50 percent, a proposal presented by the United States
to the OECD Export Credits Group in December 1983. While it
would not completely eliminate the problem, it would make the
cost of such credits so high that no country's aid budget could
sustain such a diversion from real economic development assistance .
v
Increasing the minimum permissible grant element to 50
percent is not so shocking as it may appear. The most recent
OECD Development Assistance Committee statistics show that the
average grant element of all aid provided, by these countries
- 3 was almost 90 percent in recent years. If one excludes grants,
the average grant element of loans ranged between 56 and 59
percent.
To date, negotiations on tied aid credits have recorded
modest successes. In 1982, OECD governments agreed to ban tied
aid credits with a grant element below 20 percent. In April
1985, OECD Ministers improved discipline by raising the minimum
permissible grant element from 20 to 25 percent and improved
transparency through new prior notification and consultation
procedures.
The Ministers also directed OECD committees to
develop new measures to further improve discipline and transparency. In July the Export Credits Group reached agreement on
defining the tied aid credits which are causing the problem.
The U.S. Government welcomes these interim steps but,
unfortunately, we have now reached an impasse. While most
industrialized countries are prepared to accept greater discipline over tied aid credits, a few countries, notably France,
supported by Italy, are now blocking negotiating progress. At
the September 16-20 meeting of the OECD we were unable to make
progress primarily because the European Community — even with
the Ministerial mandate — had no flexibility to increase the
minimum grant element or to explore alternative solutions.
We need a new initiative to break this logjam. The Trade
Development and Enhancement Act of 1983, which created a tied
aid credit matching program, has not given us sufficient leverage.
Eximbank's ability to match has been limited since it
must draw down its dwindling capital and reserves for this
purpose.
USAID action has been limited by the country
allocation process and the requirement that its activities be
for legitimate development purposes. The U.S. Government has
thus offered only 12 tied aid credits since the bill was
enacted. As a result, selective matching by the United States
and more aggressive matching by other countries has not
deterred France from continuing to offer predatory tied aid
credits, nor has it encouraged France to negotiate.
The War Chest Initiative
To combat these unfair trade practices, the President has
announced the following new initiative:
The Secretary of the Treasury has submitted legislation to
authorize appropriations for a $300 million facility for
grants to mix with Eximbank credits or private sector
loans. The purpose of this program of tied aid grants is
to buttress the Administration's negotiating efforts to
eliminate predatory tied aid credits by other countries.
- 4 —
The Export-Import Bank will begin immediately to draw on
its capital and reserves to offer tied aid credits as a
temporary step until the proposed legislation is enacted.
— The Secretary of the Treasury, who has the lead in the
negotiations, has been directed to control the use of these
funds with the advice of the National Advisory Council on
International Monetary and Financial Policy, on which both
the Export-Import Bank and AID are represented. Since the
initiative is neither for export promotion nor economic
development assistance, the Export-Import Bank and the
Agency for International Development should not be asked to
administer it.
— The War Chest should be dismantled when sufficient negotiating progress has been achieved to restrict commercial use
of tied aid credits with low grant elements.
The Administration's proposal is designed (1) to maximize
negotiating leverage; (2) to avoid an open-ended entitlement
program; and (3) to minimize the budgetary impact.
Leverage: To maximize negotiating leverage, we seek a War
Chest of $300 million which would support up to $1 billion of
exports. The War Chest would be targeted at those sectors and
markets of particular importance to countries impeding negotiations.
The program should be aggressive and preemptive, not a
program of merely matching tied aid credits. Other countries
have matching programs which have not caused the initiators to
agree to further discipline. Initiators retain the commercial
advantage of being sought out first by the customer.
If we
only matched foreign offers, we would perpetuate rather than
eliminate the practice, throwing good money after bad.
Consequently, we are proposing an offensive tied aid
credit program. In particular, we seek the authority to initiate tied aid credits and if necessary to outbid selected foreign tied aid credit offers in deals which are of particular
importance to countries blocking negotiations.
Cautionary Provisions: The proposed bill contains a
clearly defined purpose which ties the War Chest to U.S. negotiating objectives rather than establishing a permanent subsidy
and entitlement program. Treasury would control the fund. in
operating the fund and selecting transactions to be targeted,
however, we would rely heavily on the advice of the agencies in
the National Advisory Council.
in addition to a sunset provision of September 30, 1987, the President would have the
- 5 discretion to end the fund earlier if sufficient negotiating
progress has been achieved.
Budgetary Impact: The budgetary impact would be limited
by authorizing the use of grants rather than low interest loans
(which would require higher appropriations). By appropriating
the fund directly to the Department of the Treasury, we have
tried to ensure that the fund does not taint the objectives of
Eximbank and USAID nor divert funds from other important bilateral and multilateral assistance programs.
Conclusion
Tied aid credits and partially untied aid credits with low
levels of concessionality are increasingly undermining the
international system of trade and finance. Our War Chest initiative will greatly enhance our leverage to negotiate restrictions on the commercial uses of tied aid or partially untied
aid credits. In order to implement the President's attack on
unfair trade practices, we seek speedy enactment of our War
Chest initiative.
This legislation purposely avoids setting up an unfair
trade practice to match unfair trade practices of other countries. Such a course would ultimately injure all parties. Our
effort is to decrease, not increase, international tensions in
the field of trade finance. Our responsibilities lie in leveling the playing field for free and fair trade.
TREASURY NEWS
lepartment of the Treasury • Washington, D.C. • Telephone 566-2041
Statement by Secretary Baker
before the IMF Interim Committee
Sunday, October 6, 1985
(Morning Session)
Mr. Chairman, Mr. Managing Director, fellow Governors:
Last spring we had an important discussion of the policies
which could help improve and sustain growth in all of our
countries over the medium term.
We made no specific commitments
on measures which each of us would take, but our discussions
helped to underscore the importance o£ joint efforts to reach our
common objectives.
Since that meeting, the United States has given considerable
attention to what we could do, in concert with other nations, to
help improve the climate for growth and stability in the global
economy.
Current Outlook
The global community has made considerable progress in the
past few years in reducing inflation, restoring growth, and
dealing with the initial financial strains of the debt problem.
B-296
- 2
The strong U.S. recovery that began in late 1982 has provided a
strong impetus to trade and growth in other nations.
Now the
benefits of growth are spreading more widely, as economic
policies which have been put in place over the past two to three
years are bearing fruit.
This is true not only for other industrial nations, but for
many developing countries as well.
Real growth in the industrial
world will remain above 3 percent this year, despite more
moderate U.S. growth, due to stronger domestic demand outside of
the United States.
It is apparent that Japan and Germany, in
particular, are relying less on export-led growth and are
beginning to generate sustained domestic expansion.
This should
result in stronger industrial country growth next year in the
3-1/2 - 4 percent range.
OECD interest rates on average are only half as high as they
were four years ago.
Inflation rates in the major industrial
countries are at their lowest levels in almost 20 years,
reflecting a firm foundation for a medium-term expansion of
noninflationary growth.
The industrial nations are thus providing a solid framework
for growth in the developing nations.
It is critical, however,
that this growth be reinforced by firm resistance to rising
protectionist pressures in order to ensure that LDC export
markets remain open.
- 3
Domestic policies adopted by the capital-importing nations
also have helped to dramatically reduce their current account
deficits from $104 to $44 billion during the past three years,
and to lay the basis for better growth over the medium term.
Developing country exports have risen significantly and these
nations are now growing at an aggregate rate of approximately 4
percent.
Next Steps
However, some major problems need to be addressed.
First, large trade and current account imbalances in the
industrial world need to be corrected through the continued
convergence of relative growth performance and exchange rates
which more fully reflect underlying economic conditions.
Measures to promote the achievement of these objectives were
announced in New York on September 22 by the SDR currency
countries.
For our part, the United States recognizes its responsibility
in helping to assure a sound world economy.
President Reagan is
firmly committed to continue to reduce government expenditures
and the federal budget deficit as a share of GNP; to implement
fully the deficit reduction measures adopted by Congress, and to
seek further reductions in order to reduce the deficit steadily
in the years ahead.
The President has in fact recently welcomed
- 4 -
proposed legislation that would establish a maximum allowable
deficit ceiling that will reduce the deficit in equal steps to a
balanced budget in 1991.
He is also committed to put in place
revenue-neutral tax reform that will encourage savings and
efficiency.
Furthermore, the President has reiterated our firm
intention to resist protectionist measures; his recent rejection
of import restraints on shoes bears witness to that conviction.
However, our ability to avoid protectionist action depends
critically on other nations opening their markets and eliminating
unfair trading practices.
Further action is also needed to address the continuing debt
problems of the developing nations.
A number of the major debtor
nations, despite considerable progress in their external
accounts, have made less progress and experienced setbacks in
their efforts to reduce domestic imbalances and inflation.
Net
commercial bank lending to the developing nations has also been
declining during the past year and a half, in some cases to
levels that are not adequate to support adjustment efforts.
Addressing these problems will require a strengthening of the
case-by-case debt strategy to include:
o First and foremost, the adoption by principal debtor
countries of comprehensive macroeconomic and structural
policies, supported by the international financial
- 5 -
institutions, to promote growth and balance of payments
adjustment, and to reduce inflation.
o Second, a continued central role for the IMF, in
conjunction with increased and more effective structural
adjustment lending by the multilateral development banks
(MDBs), both in support of the adoption by principal
debtors of market-oriented policies for growth.
o Third, increased lending by the private banks in support
of comprehensive economic adjustment programs.
I will elaborate on these thoughts in my address to the plenary
session of the Annual Meetings.
Access
Permit me to turn now to the issue of the IMF's enlarged
access policy.
At the outset, let me state categorically that
the United States is firmly committed to a strong and effective
IMF.
We are convinced that the IMF has played an essential role
in dealing with LDC debt problems.
Managing Director
de Larosiere and his staff have done an outstanding job and
deserve our deep gratitude.
The IMF can and must remain at the
center of international efforts to promote a sound world economy
and stable international monetary system.
- 6 -
In recent years, the United States has supported a
substantial increase in IMF resources.
We have increased the
U.S. commitments to the IMF by $8.5 billion as part of the
overall expansion in IMF quotas and the General Arrangements to
Borrow.
The United States is the largest creditor to the Fund,
with a reserve position totalling roughly $15 billion.
As part of the increase in IMF quotas, it was agreed that
the policy of enlarged access was temporary.
This Committee
reaffirmed that view and has taken steps to gradually phase out
enlarged access. On the basis of these understandings, and as
part of our achieving for the first time in 15 years full funding
for the MDBs, we committed to Congress that the enlarged access
policy would eventually be eliminated.
The United States believes that this process should now be
continued.
While we recognize that continuing difficulties in a
number of countries warrant an extension of enlarged access to
Fund resources, we nevertheless believe that global circumstances
permit a reduction of access limits in order that we will be seen
as keeping our commitment to gradually phase out enlarged access.
-7-
A modest reduction of the current cumulative and annual
limits would reaffirm and protect the revolving character of the
Fund's resources, while ensuring that the Fund retains sufficient
flexibility to meet the legitimate needs of its members.
Similar
reductions in access to the special facilities should also be
implemented.
We remain open to consideration of precise proposals for
reductions which other members may wish to suggest.
However, we
believe that it is critical to have an adequate reduction to
maintain progress in gradually phasing out enlarged access.
For
our part, we must keep our commitment to Congress.
SDR Allocation
Turning to the question of a further allocation of Special
Drawing Rights, the United States continues to believe that the
basic requirement: for an allocation has not been satisfied.
A
convincing case has not been made that there is a long-term
global need to supplement reserves.
Indeed, global reserves have
increased at an average annual rate of about 11 percent since
1982.
Non-oil developing country reserves have actually grown
even faster.
Other basic indicators, including the ratio of
global reserves to imports and to external debt, have improved or
remained relatively constant.
- 8
Thus, although some developing nations still face difficult
adjustment and liquidity problems, the solution is not simply
creating unconditional liquidity, only a small share of which
would flow to the developing countries.
The key is
implementation of sound economic policies to promote growth and
adjustment, supported by adequate commercial and official support
and a favorable global economic environment.
Our discussion of the allocation question has also raised
basic questions concerning the role of the SDR in a system that
has evolved substantially since the SDR was created.
These
changes make it necessary to review the basic rationale for the
SDR in today's system, and such a review will be undertaken by
the IMF Executive Board.
We should not prejudice that review.
We are confident that there will be a comprehensive treatment of
this issue in the Executive Board.
Conclusion
Achieving the objective of growth and adjustment supported by a
favorable global environment and adequate financial flows will
require determination and mutual effort.
As indicated in the
September 22 statement by the United States and other key
industrial countries, we are committed to help create a global
- 9
environment which will provide a positive contribution to support
the developing countries in their continuing adjustment efforts.
We need to consider further how the other elements can be put in
place, and I will elaborate on our views with respect to that in
my speech at the Annual Meetings.
TREASURY NEWS
epartment of the Treasury • Washington, D.C. • Telephone 566-204:
Statement by Secretary of the Treasury
James A. Baker, III
at the IMF Interim Committee Meeting
on Use of Trust Fund Reflows
October 6, 1985
Mr. Chairman:
Our discussion this morning confirms that in spite of a number of
positive signs in the world economic outlook, the economic
conditions in most of the poorest countries which rely primarily
on concessional financing have not noticeably improved.
The
economic facts bear witness to this situation:
o Economic growth in the poorest countries in recent years
has averaged 1.8 percent annually, and in some countries
living standards are currently at the levels of 15 years
ago.
o Their trade and current account deficits have not improved
despite recovery in the world economy, and are not
projected to improve over the next few years, despite
frequent use of IMF financing by many of these countries
which has led to prolonged use of IMF resources.
B-297
- 2 o Debt servicing difficulties in these countries have
resulted in the imposition and intensification of trade
and payments restrictions and in growing arrears on
financial obligations, both domestic and external,
including arrears to the IMF.
The IMF has provided balance of payments financing and advice in
the context of sconomic programs for many of these countries in
recent years.
The World Bank has also assisted these countries,
through both project, sectoral and structural adjustment lending.
But, these programs have met with only limited success.
In part
this reflects inadequate action by the countries on the
fundamental changes needed to create the conditions for sustained
growth and development.
However, adverse external developments
and natural disasters have also played a role.
Finally, the lack
of success partially stems from the fact that the economic
problems of the poorest countries require a comprehensive
approach involving structural changes as well as sound macro*
economic policies.
The Trust Fund reflows present us with an opportunity to utilize
IMF resources in support of comprehensive economic programs,
order to do this roost effectively, we believe that a new Trust
Fund program should include the following basic elements!
in
- 3
o Eligibility would be based solely on low per capita
income, perhaps the $550 level used by the World Bank
to determine IDA participation.
Actual use of the
resources, however, would be based on an eligible country
having a protracted balance of payments problem and being
willing to implement a comprehensive growth-oriented
economic program.
Access to private markets could also
be taken into account in determining actual use of the
facility.
o Terms on loans would be concessional with low interest
rates, substantial grace periods, and extended
maturities.
o Conditions for participation would include a commitment
to a multi-year growth-oriented economic program in which
funds would be disbursed semi-annually based on
satisfactory performance under the program.
The programs
themselves would be designed to support growth-oriented
adjustment by removing structural impediments to
production, saving, investment and non-inflationary
growth.
- 4 ^
To accomplish these objectives, each program should
contain both macro-economic and structural components,
tailored to meet the individual needs of each country.
Macro-sconomic policies must continue to include sound
monetary and fiscal policies to reduce domestic
imbalances and inflation, as well as free market prices
and exchange rates to encourage production and a more
efficient use of resources.
These measures can help
assure a more stable domestic policy environment within
which to pursue longer term restructuring and growth.
Structural and institutional measures should also be
adopted to enhance the role of the private sector and to
encourage private initiative in order to provide greater
stimulus to domestic growth.
These should include
efforts to improve the efficiency of state-owned
enterprises and privatize the public sector, reducing
government intervention in the economy.
Growth-oriented
tax reform and interest rates designed to stimulate
savings and domestic investment should also be adopted.
Finally, trade liberalization and measures to make
foreign direct investment more attractive are critical to
bring in the resources needed to boost both production
and exports.
Equity investment can be particularly
valuable in supporting growth, since it is not debt
- 5
creating and can generate supportive additional
investment which can have a compounding effect on growth
and help to keep capital at heme.
o Ooerations would be the responsibility of the IMF. It
would be critical, however, to have close cooperation
between the Fund and the Bank to achieve a consistent
policy approach that would help these countries in
creating the fundamental conditions for growth.
We
believe that in some cases this could best be
accomplished by a joint approach by the Fund and the
Bank.
Such an approach could involve, on a case by case
basis, joint Fund/Bank teams to assist the member in
developing a broad range of policies that address both
macroeconomic and structural problems in order to promote
growth.
Bilateral aid flows could be disbursed in close
association with such joint programming.
The U.S. would be prepared to consider a bolder approach
involving more intensive IMF and World Bank collaboration to
provide a framework for development of unified comprehensive
economic programs, and to catalyze additional financing in
support of such programs.
Wte believe that this approach would
help insure that the institutions provide sound, mutually
consistent advice on the full range of policies that can be used
to attack poverty and promote growth.
Moreover, it might
generate substantial additional resources for these countries.
- 6 In fact, the United States (which supported African countries
with $1,7 billion in bilateral aid in 1985) would be prepared to
consider seeking additional resources in support of such a bolder
approach if other donors were prepared to make equitable
contributions.
We recognize that some of you may have reservations about such an
-approach, viewing it as complicated and difficult to implement.
I would agree that this would not be an easy approach to put into
place, but I believe that it offers substantial possibilities for
helping the poorest countries —
and for strengthening the ties
between the Fund and the Bank —
and that we should be prepared
to explore it.
I would welcome hearing the views of other
members on such an approach, and hope that further consideration
could be given to it in the months ahead.
Thank you Mr. Chairman.
rREASURYIMEWS
partment of the Treasury • Washington, D.c. • Telephone 566-2041
6TATEMBNT OF THE HONORABLE JAMES A* BAKER
SECRETARY OF THE TREASURY
OF THE UNITED STATES
BEFORE THE
MEETING OF THE
DEVELOPMENT COMMITTEE OF THE IMF AND THE WORLD BANK
OCTOBER 7, 1985
SEOUL, KOREA
I welcome this opportunity to continue the dialogue we began
at the last meeting of the Development Committee. At that time,
we fostered a greater awareness of our shared interest and the
responsibility to achieve sustained global growth. The
thoughtful preparatory work of our Chairman, the Committee staff,
and the Bank have provided a framework for further fruitful
discussion today.
Policies for Growth
Let me restate my belief that pursuit of sound,
growth-oriented economic policies remains the key to sustained
world economic growth and development. As we discuss today's
agenda, with its focus on official financing, we must remember
that sound growth is simply not possible without a sound policy
framework. Those countries that have been the most successful
performers have pursued such policies. They have permitted their
economies to respond flexibly to changes in world markets and
their private sectors to operate freely.
It is my belief that two current policy initiatives — a new
GATT round of trade negotiations, and the Multilateral Investment
Guarantee Agency, or MIGA — hold great promise for enhancing
future growth and deserve our enthusiastic support.
A free and open trading system is absolutely essential for
sustained economic growth. A new GATT round of trade
negotiations on goods and services is our best hope for halting
protectionism and expanding trade opportunities for all of our
countries.
President Reagan has recently restated the U.S. commitment
to free trade and a new GATT round, but success in the
negotiations depends on the widest possible participation by the
developing countries. The protectionist pressures we are feeling
in Washington means that the failure to launch a GATT round could
increase the likelihood of protectionist legislation and could
spill over into Congressional attitudes toward multilateral
development bank funding, reducing and restricting U.S.
participation. I therefore urge all of you to lend your active
support to the new round.
B-298
-2
There it a pressing need for developing countries to rely
less on borrowing for external capital and more on equity flows,
such as foreign direct investment. In addition to easing the
long-term debt burden, these capital flows also convey the
advantages of technology transfers and managerial know-how —
essential ingredients of economic development. The MIGA should
play an important role in increasing this type of financing for
developing countries, both through promotion of sound investment
policies and direct insurance activities, I hope that all member
governments of the Bank will support opening the MIGA for
j*
membership, and will take the steps necessary to join.
_,
The Role of the Bank and Bank Lending
The United States views the primary role of the Bank as
supporting policies which encourage economic growth and
revitallzation in its developing member countries.
The Bank can achieve these goals primarily by maintaining an
effective lending program in support of growth oriented policies
through effective resource use and by catalyzing other capital
flows.
The central focus of the Bank's lending program remains
soundly based investment project lending, and we encourage all
members to continue to take advantage of the Bank's expertise in
this area. The Bank's introduction of structural and sector
adjustment programs has proved an effective means to help members
both sustain growth and implement policy changes over the
medium-term.
With these policy instruments, the Bank supports members'
efforts to achieve efficiency in their pricing policies, and in
the management of their public sector and their trade, investment
and tax regimes. We believe there is still considerable scope
for expanding the use of structural and sector adjustment
lending, particularly in those countries with major debt
servicing difficulties.
If these countries are to achieve the maximum growth from
increases in this type of lending, other elements must come into
play in an integrated fashion: Industrial countries must sustain
their growth and must keep their markets open; developing
countries must undertake comprehensive adjustment programs; the
IMF should continue to play its traditional role; and the
commercial banks must be willing to provide sufficient net new
resources. I will be providing more details on this in my
plenary address tomorrow.
In today's environment of constrained external finance, the
potential benefits of the Bank's catalytic role assume particular
importance. The Bank's innovative efforts to expand co-financing
with private sources of finance are to be commended and should be
pursued vigorously to increase their effectiveness in attracting
private finance.
3W« also believe the Bank should continue to enhance its role
in the development of the private sector and where appropriate
provide direct assistance to this private sector. In addition,
the Bank should seek to assist, both in a technical and financial
capacity, those countries which wish to divest some of their
state-owned enterprises. The newly expanded IFC can play an
important role in these efforts.
In April, we supported the Development Committee call for an
expansion in Bank lending, provided the Bank maintains its
lending"standards and its prudent financial policies. This
remains our position today. The actual resource requirements of
the Bank will, of course, be dependent upon the extent to which
borrowing countries are willing to work with the Bank in
developing the policy programs to be supported by Bank lending.
As we all are aware, current Bank resources are sufficient to
sustain lending of $13.5 to $14 billion per year, compared to the
1985 lending of $11.4 billion. If the demand for quality lending
were to increase, the IBRD should be encouraged to respond
effectively and resources should be made available to enable it
to do so. We intend to keep the capital needs of the Bank under
close review and we will carefully assess the adequacy of the
Bank's resource base as the demand for quality lending increases.
The Poorest Countries
Some of the Bank's poorest members, especially those in
Sub-Saharan Africa, face severe economic problems. We applaud
the Bank's special efforts to support structural adjustment by
these countries. The United States is itself providing growing
policy-linked bilateral aid — a total of $1.7 billion in 1985 —
at times in close cooperation with the Bank'6 Special Facility
for Sub-Saharan Africa, as are other donors.
However, much more needs to be done, especially in better
coordinating donors' efforts with the economic programs
associated with IMF and with World Bank lending. As I indicated
in the Interim Committee discussions yesterday, I believe the IMF
Trust Fund reflows offer an opportunity to improve coordination
and provide a new significant stimulus for growth.
The United States is also prepared to consider a broader
approach to encompass joint IMF and World Bank programs and
financing to foster adjustment and catalyze additional sources of
financing for these poorest countries.
Task Force on Concessional Flows
We also welcome the work of the Task Force on Concessional
Flows. It charges donors and recipients to ascertain that aid is
used effectively in promoting economic growth, in promoting
structural reform and in promoting development. The Task Force
recogni2es the severe constraints affecting the volume of aid
flows and clearly, in such an environment, only programs which
actively and effectively support appropriate development policies
deserve continued support.
' -4Conclusions ,.
Further action is needed on the part of both developed and
developing countries to promote sustained economic growth, to
maintain necessary flows of capital, and to preserve and expand
open markets. The United States remains committed to this
process, and to institutions like the World Bank that have an
essential role In promoting these goals among the developing
countries.
I look forward to hearing your views on these important
issues, and to working with you to resolve our problems.
TREASURY NEWS
apartment of the Treasury • Washington, D.c. • Telephone 566-2041
October 7, 1985
FOR IMMEDIATE RELEASE
RESULTS OF TREASURY'S WEEKLY BILL AUCTIONS
Tenders for $7,012 million of 13-week bills and for $7,004 million
of 26-week bills, both to be issued on October 10, 1985, were accepted today
RANGE OF ACCEPTED
COMPETITIVE BIDS:
Low
High
Average
13-week bills
maturing
Discount
Rate
26--week bills
ma^uring
Discount
Rate
January 9, 1986
Investment
Rate 1/
Price
7.10%-/
7.14%
7.14%
7.33%
7.37%
7.37%
98.205
98.195
98.195
April 10, 1986
Investment
Rate 1/
Price
7.29%
7.33%
7.32%
7.67%
7.72%
7.71%
96.315
96.294
96.299
a/ Excepting 1 tender of $1,025,000.
Tenders at the high discount rate for the 13-week bills were allotted 83%,
Tenders at the high discount rate for the 26-week bills were allotted 34%
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 Prancisco
Treasury
TOTALS
Type
Competitive
Noncompetitive
Subtotal, Public
Federal Reserve
Foreign Official
Institutions
TOTALS
86,300
16,105,065
32,710
56,685
46,320
75,210
1,326,295
91,815
19,195
74,645
45,575
1,227,330
359,335
56,300
$
5 870,375
$19,546,480
73,615
16,257,965
27,760
35,715
62,160
75,305
1,449,265
92,870
17,580
56,570
36,825
1,317,915
460,345
$
43,615
5,827,305
27,760
35,715
47,160
57,305
181,285
52,870
17,580
51,570
26,825
174,955
460,345
$7 ,012,015
: $19,963,890
$7,004,290
$16,247,065
1,343,680
$17,590,745
$3 ,712,600
1 ,343,680
$5 ,056,280
: $16,812,275
:
1,156,015
: $17,968,290
$3,852,675
1,156,015
$5,008,690
1,601,435
1,601,435
:
1,600,000
1,600,000
354,300
354,300
:
395,600
395,600
$19,546,480
$7,012,015
$19,963,890
$7,004,290
$
1/ Equivalent coupon-issue yield.
r^>A9
:
32,710
56,685
46,320
64,975
248,775
51,815
19,195
69,645
39,725
96,160
359,335
$
Accepted
:
:
=
THE SECRETARY OF THE TREASURY
WASHINGTON
October 7, 1985
Dear Mr. Majority Leader:
In letters dated September 25, October 1, and October 3,
Secretary Baker informed you of our projection that
Treasury's cash balance would be virtually exhausted unless
either the Congress acts to increase the debt limit by
October 7, or we take unprecedented and questionable action
to use Federal Financing Bank authority. This letter is to
inform you of our latest cash projection — and to repeat our
request for Congressional action today.
As you know, we have already had to fail to meet certain
requirements for the full investment of several trust
funds — costing them approximately $8 million per day. As
of this morning, we estimated that cash balances may be zero
or negative tomorrow, and will certainly be negative by
Wednesday.
When we formally determine that the next day's balance is to
be negative, we will need to notify the Federal Reserve. It
is my understanding that, upon such notification, the Federal
Reserve will then have to notify the banking system not to
honor any Government checks or electronic fund transfers.
(It is not appropriate or administratively practicable to
attempt to distinguish among classes of paymentobligations — favoring some at the expense of others.)
Accordingly, all those with federal payment claims — whether
social security recipients or defense contractors or holders
of Government securities with interest payments due — would
then be unable to have those claims honored.
We continue to hope that the Congress will act promptly to
avoid such an unprecedented failure of the U.S. Government to
honor its obligations. If the Congress acts today, we would
inform the financial markets by noon tomorrow of our
intention to offer Treasury bills for sale on Wednesday. In
anticipation of this financing, we and the Federal Reserve
would then be able to manage payments on Tuesday so as to
avoid a default.
In sum, unless a debt limit is passed Promptly by the
Congress or we take the unprecedented and questionable
measure of using Federal Financing Bart borrwing authori^r.
the United States would be in the position of defaulting on
its obligations for the first time in history.
Sincerely,
Richard G. Darman
Acting Secretary
The Honorable Robert Dole
United States Senate
Washington, D. C. 20510
IN ADVANCE OF PRINTED COPY
DEPARTMENT OF THE TREASURY
Office of Foreign Assets Control
31 C-F.R. Part 545
South African Transactions Regulations
AGENCY: Office of Foreign Assets Control
ACTION: Final Rule
SUMMARY: On October 1, 1985, the President issued
Executive Order No. 12535, imposing a ban on the importation of Krugerrands into the United States. In
implementation of that order, the Office of Foreign
Assets Control is issuing the South African Transactions Regulations, prohibiting the importation of
Krugerrands into the United States.
EFFECTIVE DATE: 12:01 a.m. Eastern Daylight Time,
October 11, 1985.
FOR FURTHER INFORMATION CONTACT: Marilyn L. Muench,
Chief Counsel, Office of Foreign Assets Control,
Department of the Treasury, Washington, D.C. 20220;
202/376-0408.
SUPPLEMENTARY INFORMATION: Since the regulations involve a foreign affairs function, the provisions of the
Administrative Procedure Act, 5 U.S.C. 553, requiring
notice of proposed rulemaking, opportunity for public
participation, and delay in effective date, are in-
-2applicable.
Because no notice of proposed rulemaking
is required for this rule, the Regulatory Flexibility
Act, 5 U.S.C- 601, et seq., does not apply.
Because
the regulations are issued with respect to a foreign
affairs function of the United States, they are not
subject to Executive Order 12291 of February 17, 1981,
dealing with Federal Regulations.
The information
collection requests contained in this document are
being submitted to the Office of Management and Budget
under the Paperwork Reduction Act of 1980, 44 U.S.C.
3501 e_t seq.
Notice of OMB action on these requests
will be published in the Federal Register.
New Part 545 is added as follows:
DEPARTMENT OF THE TREASURY
Office of Foreign Assets Control
31 CFR Part 545
South African Transactions Regulations
Subpart A —
Relation of this Part to Other Laws and
Regulations
Section 545.101
Subpart B —
Relation of this part to other laws
and regulations.
Prohibitions
Section 545.201
Prohibition on the importation of
Krugerrands.
Section 545.203 Effective date.
Section 545.204 Evasions.
Subpart C — General Definitions
Section 545.301 Krugerrands.
Section 545.302 United States.
-3Subpart D —
Interpretations
Section 545.401 Reference to amended sections.
Section 545.402 Effect of amendment of sections of
this chapter or of other orders, etc.
Section 545.403 Krugerrand jewelry.
Subpart E — Licenses, Authorizations and Statements of
Licensing Policy
Section 545.501 Effect of subsequent license or
authorization.
Section 545.502 Exclusion from licenses and
authorizations.
Subpart F — Reports
Section 545.601 Required records.
Section 545.602 Reports to be furnished on demand.
Subpart G — Penalties
Section 545.701 Penalties.
Subpart H — Procedures
Section 545.801 Licensing.
Section 545.802 Decisions.
Section 545.803 Amendment, modification, or
revocation.
Section 545.804 Rulemaking.
Section 545.805 Delegation by the Secretary of the
Treasury.
Section 545.806 Rules governing availability of
information.
Subpart A — Relation of this Part to Other Laws and
Regulations
Section 545.101 Relation of this part to other laws
and regulations.
(a)
This part is independent of the other parts of
this chapter and all other provisions of law. No
license or authorization under another part of this
chapter or any other provision of law authorizes any
transaction prohibited by this part.
-4-
(b)
No license or authorization under this part
authorizes any transaction prohibited by one of theother parts of this chapter or any other provision of
law, or relieves the parties involved from complying
with any other applicable laws or regulations.
Subpart B — Prohibitions
Section 545.201 Prohibition on the importation of
Krugerrands.
Except as authorized under this part, the importation into the United States of South African Krugerrands is prohibited.
Section 545.203 Effective date.
(a) The effective date of the prohibition in section 545.201 shall be 12:01 a.m. Eastern Daylight Time,
October 11, 1985.
Section 545.204 Evasions.
Any transaction for the purpose of, or which has
the effect of, evading any of the prohibitions in this
part is prohibited.
-5-
Subpart C —
General Definitions
Section 545.301 Krugerrands.
The term "Krugerrands" includes Krugerrands of all
denominations and sizes, and Krugerrands that have been
modified, as by addition of a clasp or loop, into items
that can be worn as jewelry.
Section 545.302 United States.
The term "United States" means the United States
and all territories under the jurisdiction thereof,
including the Trust Territory of the Pacific Islands.
Subpart D — Interpretations
Section 545.401 Reference to amended sections.
Reference to any section of this chapter or to any
regulation, ruling, order, instruction, direction or
license issued pursuant to this chapter shall be deemed
to refer to the same as currently amended unless otherwise so specified.
-6-
Section 545.402
Effect of amendment of sections of
this chapter or of other orders, etc.
Any modification of this chapter or of any regulation, ruling, order, instruction, direction or license
issued by the Secretary of the Treasury pursuant to
Executive Order No. 12535 shall not, unless otherwise
specifically provided, be deemed to affect any act
performed or omitted, or any civil or criminal proceeding commenced, prior to such modification, and all
penalties, forfeitures, and liabilities under any such
provision shall continue and may be enforced as if such
modification had not been made.
Section 545.403 Krugerrand jewelry.
Section 545.201 prohibits the importation into the
United States of Krugerrands that have been modified,
as by the addition of a clasp or loop, into items that
can be worn as jewelry. For example, importation of a
necklace consisting of a Krugerrand mounted on a chain
would be prohibited. Section 545.201 does not prohibit
the reimportation into the United States of Krugerrand
jewelry which was originally imported into the United
States prior to October 11, 1985.
-7-
Subpart E —
Licenses, Authorizations and Statements of
Licensing Policy
Section 545.501 Effect of subsequent license or
authorization.
No license or other authorization contained in this
chapter or otherwise issued by or under the authority
of the Secretary of the Treasury pursuant to Executive
Order 12535 shall be deemed to authorize or validate
any transaction effected prior to the issuance thereof,
unless such license or other authorization specifically
so provides.
Section 545.502 Exclusion from licenses and
authorizations.
The Secretary of the Treasury reserves the right to
exclude any person or property from the operation of
any license or to restrict the applicability thereof to
any person or property.
upon
all
persons
notice thereof.
Such action shall be binding
receiving
actual
or
constructive
-8-
Subpart F —
Reports
Section 545.601 Required records.
Every person engaging in any transaction subject to
this part shall keep a full and accurate record of each
transaction in which he engages, including any transaction effected pursuant to license or otherwise, and
such records shall be available for examination for at
least two years after the date of such transaction.
Section 545.602 Reports to be furnished on demand.
Every person is required to furnish under oath, in
the form or reports or otherwise, at any time as may be
required, complete information relative to any transaction subject to this part, regardless of whether such
transaction is effected pursuant to license or otherwise.
Such reports may be required to include the
production of any books of account, contracts, letters,
and other papers connected with any transaction in the
custody or control of the persons required to make such
reports.
Reports with respect to transactions may be
required either before or after such transactions are
completed.
The Secretary of the Treasury may, through
any person or agency, conduct investigations, hold
-9hearings, administer oaths, examine witnesses, receive
evidence, take depositions, and require by subpoena the
attendance and testimony of witnesses and the production of all books, papers, and documents relating to
any matter under investigation.
Subpart G — Penalties
Section 545.701 Penalties.
(a) Attention is directed to section 206 of the
International Emergency Economic Powers Act, 50 U.S.C.
1705, which provides in part:
A civil penalty of not to exceed $10,000 may
be imposed on any person who violates any license,
order, or regulation issued under this title.
Whoever willfully violates any license, order,
or regulation issued under this title shall, upon
conviction, be fined not more than $50,000, or, if
a natural person, may be imprisoned for not more
than ten years, or both; and any officer, director,
or agent of any corporation who knowingly participates in such violation may be punished by a
like fine, imprisonment, or both.
-10-
This
section
of
the
International
Emergency
Economic Powers Act is applicable to violations of any
provision of this part and to any license, ruling,
regulation, order, direction, or
instruction
issued
hereunder.
(b) Attention is also directed to 18 U.S.C. 1001,
which provides:
Whoever, in any matter within the jurisdiction
of any department or agency of the the United
States knowingly and willfully falsifies, conceals
or covers up by any trick, scheme, or device a
material fact, or makes any false, fictitious or
fraudulent statements or representation or makes or
uses any false writing or document knowing the same
to contain any false, fictitious or fraudulent
statement or entry, shall be fined not more than
$10,000 or imprisoned not more than five years, or
both.
Subpart H — Procedures
Section 545.801 Licensing.
(a) General licenses. [Reserved]
-11-
(b)
under
Specific
licenses.
Transactions
subpart B may be effected
prohibited
only under
specific
license.
(1) The specific licensing activities of the
Office of Foreign Assets Control are performed by its
Washington
Office
and
by
the Foreign
Assets Control
Division of the Federal Reserve Bank of New York.
(2) Applications for specific licenses. Applications
for specific
licenses to engage
in any trans-
action prohibited under this part are to be filed in
duplicate with the Federal Reserve Bank of New York,
Foreign Assets Control Division, 33 Liberty Street, New
York, N.Y. 10045.
Any person having an interest in a
transaction or proposed transaction may file an application for a license authorizing such transaction, and
there is no requirement that any other person having an
interest
in such transaction shall or should join in
making or filing such application.
(3) Information to be supplied. The applicant
must supply all information specified by the respective
forms and instructions.
Such documents as may be rele-
vant shall be attached to each application except that
documents previously filed with the Office of Foreign
-12Assets Control may, where appropriate, be incorporated
by reference.
Applicants may be required to furnish
such further information as is deemed necessary to a
proper determination by the Office of Foreign Assets
Control.
Failure to furnish necessary information will
not be excused
African law.
because of any provision of South
If an applicant or other party in inter-
est desires to present additional information or discuss or argue the application, he may do so at any time
before or after decision.
Arrangements for oral pre-
sentation should be made with the Office of Foreign
Assets Control.
(4) Effect of denial. The denial of a license
does not preclude the reopening of an application or
the filing of a further application.
The applicant or
any other party in interest may at any time request
explanation of the reasons for a denial by correspondence or personal interview.
(5) Reports under specific licenses. As a condition of the issuance of any license, the licensee may
be required to file reports with respect to the transaction covered by the license, in such form and at such
times and places as may be prescribed in the license or
otherwise.
-13(6) Issuance of license. Licenses will be issued
by the Office of Foreign Assets Control acting on behalf of the Secretary of the Treasury or by the Federal.
Reserve Bank of New York, acting in accordance with
such regulations, rulings, and instructions as the
Secretary of the Treasury or the Office of Foreign
Assets Control may from time to time prescribe, or
licenses may be issued by the Secretary of the Treasury
acting directly or through a designated person, agency,
or instrumentality.
Section 540.802 Decisions.
The Office of Foreign Assets Control or the Federal
Reserve Bank of New York will advise each applicant of
the decision respecting filed applications. The decision of the Office of Foreign Assets Control with respect to an application shall constitute a final agency
action.
Section 545.803 Amendment, modification, or revocation.
The provisions of this part and any rulings, licenses, authorizations, instructions, orders, or forms
issued hereunder may be amended, modified, or revoked
at any time.
-14-
Section 545.804
Rulemaking.
(a) All rules and other public documents are issued by the Secretary of the Treasury upon recommendation of the Director of the Office of Foreign Assets
Control.
Except to the extent that there is involved
any military, naval, or foreign affairs function of the
United States or any matter relating to the agency management or personnel or to public property, loans,
grants, benefits, or contracts, and except when interpretive rules, general statements of policy, or rules
of agency organization, practice, or procedure are involved, or when notice and public procedure are impracticable, unnecessary, or contrary to the public interest, interested persons will be afforded an opportunity
to participate in rulemaking through the submission of
written data, views, or arguments, with oral presentation in the discretion of the Director.
In general,
rulemaking by the Office of Foreign Assets Control involves foreign affairs functions of the United States.
Wherever possible, however, it is the practice to hold
informal consultations with interested groups or persons before the issuance of any rule or other public
document.
-15-
(b)
Any
interested
person
may
petition
the
Director of the Office of Foreign Assets Control in
writing for the issuance, amendment or revocation of
any rule.
Section 545.805 Delegation by the Secretary of the
Treasury.
Any action which the Secretary of the Treasury is
authorized to take pursuant to Executive Order 12535
may be taken by the Director of the Office of Foreign
Assets Control, or by any other person to whom the
Secretary of the Treasury has delegated authority so to
act.
Section 545.806 Rules governing availability of
information.
(a) The records of the Office of Foreign Assets
Control which are required by 5 U.S.C. 552 to be made
available to the public shall be made available in accordance with the definitions, procedures, payment of
fees, and other provisions of the regulations on the
disclosure of records of the Office of the Secretary
-16and of other bureaus and offices of the Department
issued under 5 U.S.C. 552 and published as part 1 of
this Title 31 of the Code of Federal Regulations.
(b) Any form issued for use in connection with
this part may be obtained in person from or by writing
to the Office of Foreign Assets Control, Treasury Department, Washington, D.C. 20220, or the Foreign Assets
Control Division, Federal Reserve Bank of New York, 33
Liberty Street, New York, N.Y. 10045.
Subpart I — Miscellaneous
Dated:
OCT 0 9 1985
Dennis M. O'Connell
Director
Office of Foreign Assets Control
0CT-9S85
Approved:
David D. Queen
Acting Assistant Secretary
Enforcement & Operations
Filed:
OCT. 10, 1985
Published:
OCT. 15, 1985
TREASURY NEWS
Department of the Treasury • Washington, D.c. • Telephone 566-2041
October 7, 1985
Margaret D. Tutwiler
Assistant Secretary of Treasury
for Public Affairs and Public Liaison
Margaret D. Tutwiler was confirmed as Assistant Secretary
of the Treasury for Public Affairs and Public Liaison on
May 15, 1985. Miss Tutwiler was Acting Assistant Secretary in
that position since February 4, 1985.
The responsibilities of her office include ensuring that
constituency groups are represented in Treasury policy making and
that Department decisions are communicated to the public and the
media.
Before coming to Treasury, Miss Tutwiler served as a member
of President Reagan's senior staff at the White House. From 1984
to 1985, she was Deputy Assistant to the President for Political
Affairs. Miss Tutwiler held the position of Special Assistant to
the President and Executive Assistant to the Chief of Staff from
1980 to 1984.
A native of Birmingham, Alabama, Miss Tutwiler graduated
from the University of Alabama in 1973. She worked for the
Alabama Republican Party in 1974 prior to serving in
President Gerald Ford's re-election campaign from 1975-1976.
Miss Tutwiler then became Public Affairs Representative for
the National Association of Manufacturers in Alabama and
Mississippi. From 1978 to 1980, she was Director of Scheduling
for Ambassador George Bush's Presidential and Vice Presidential
campaigns.
In July of 1985, Miss Tutwiler was a member of the official
U.S. delegation to the 1985 World Conference to Review and
Appraise the Achievements of the United Nations Decade for Women
in Nairobi, Kenya.
B-300
TREASURY NEWS
Department of the Treasury • Washington, D.c. • Telephone 566-2041
FOR RELEASE UPON DELIVERY
EXPECTED AT 10:00 A.M. EDT
Tuesday, October 8, 198 5
STATEMENT OF
THE HONORABLE MANUEL H. JOHNSON
ASSISTANT SECRETARY OF THE TREASURY FOR ECONOMIC POLICY
BEFORE THE
JOINT ECONOMIC SUBCOMMITTEE ON MONETARY AND FISCAL POLICY
Mr. Chairman and members of the Subcommittee.
It is a pleasure to be with you today to discuss a proposal
that would amend the Constitution to require a balanced budget.
The Need For An Amendment
The President and the Administration endorse strongly enactment of a balanced budget amendment to help restore fiscal
responsibility to the Federal Government.
The President has reconfirmed repeatedly his strong support
for a constitutional amendment mandating a balanced Federal
budget. In his last State of the Union Message he requested that
the Congress enact such a measure. The last time a vote was
taken in the Congress in 1982, a balanced budget amendment was
approved by more than two-thirds of the Senate and by more than a
majority but less than the necessary two-thirds of the House.
The public is overwhelmingly behind the concept of a balanced
budget. A survey last year revealed that nearly 85 percent of
those polled favored a balanced budget amendment. Thirty-two
State legislatures have approved resolutions calling for a Constitutional Convention to consider the issue, and there are
several more States, particularly Michigan, Connecticut and Ohio
where final action is possible in the near term.
B-301
- 2 -
It is clear to the President and to the public that something
must be done to restrain the upward spiral in Federal spending.
The Federal Government continues to absorb too great a share of
GNP. Between fiscal year 1960 and 1985, the growth of Federal
spending was much faster than the growth of the economy. As a
result, the Federal Government share of total output jumped from
18.5 percent in 1960 to about 25 percent by 1985.
The growth in government spending has been accompanied by
large increases in the Federal tax burden. By 1981, corporate
taxes had more than doubled since the mid-1960's, leaving real
after-tax, after inflation profits below levels reached some
fifteen years ago. In spite of tax reductions, personal income
taxes as a percent of personal income rose from about 10 percent
in 1975 to 11.5 percent by 1980 and had been projected to rise to
over 15 percent by 1985 without any major tax reduction. If we
take account of social security tax increases, the average tax
rates rose from 12.7 percent to 14.5 percent during this period
and would have increased to nearly 19 percent by 1985. Marginal
tax rates rose even faster to sharply higher levels.
Throughout the economy, the rising tax burden seriously
eroded incentives to work, save and invest, and contributed to
the economic decline that we experienced until recently — high
inflation and unemployment, and slow growth which, in turn, have
contributed to higher budget deficits.
Even with the tax reductions in 1981, overall tax receipts of
the Federal Government rose more than $380 billion from
FY 1977 to FY 1985 and still we accumulated deficits of over
$1 trillion.
Mr. Chairman, the only conclusion is that Federal Government
spending continues to grow out of control. Some critics are
quick to put the blame for large deficits on the Administration's
tax reductions and defense spending increases. This is just not
correct, however. The revenue estimates in the August 30 MidSession Review of the Fiscal Year 1986 Budget show that under
Administration policies the government's tax claim on income in
the 1985-1990 period would be between 18.8 percent and 19.4
percent of GNP -- about a full percentage point or more above the
nearly 18.1 percent share of the 1946-1970 period. The national
defense share of the GNP will rise only to 7.6 percent of GNP by
1990, well below the 9.7 percent share during the 1946-1970
period.
The driving force behind the rise in the budget deficit is
not the Administration's tax policy but the combination of the
past recession and the growth of non-defense spending. i n spite
of efforts by the President and some thoughtful members of the
Congress to trim non-defense spending, it continues to grow
significantly.
- 3 -
If the Federal Government did not have such a dismal record
on spending control, I might be more optimistic that we could
move toward a balanced budget. Indeed, favorable Congressional
action on the spending reduction targets included in the first
Budget Resolution for 1986 might change the public's impression
that constitutional restrictions on budget planning are
absolutely necessary. However, a demonstration that the current
budget structure is capable of dealing effectively with' the
spending problem is yet to be seen.
Congressional Budget Reform
I would feel much more confident that the political process
was conducive to dealing head on with the structural budget
problem if we had a balanced budget requirement. Over the years
the Congress has tried to respond to concerns about government
spending, deficits and budgetary control. The most recent
attempt at reform was the Congressional Budget and Impoundment
Control Act of 1974 which was intended to bring about
Congressional control over the budget process. Unfortunately the
reforms implemented by this Act have not been successful in
constraining Federal spending.
Congress has made other attempts to bring about fiscal responsibility. In 1978, for instance, the Congress approved a
statute requiring a balanced budget beginning in 1981. It is
quite evident that this statutory approach for requiring budget
balance has not been successful. Indeed, it was ignored!
Obviously, something is amiss in the budget making process if
the Congress, even after enacting legislation requiring budgetary
discipline, frequently fails to live within its means. It has
not always been this way. For most of our history through the
1920's, Federal spending ranged between 1 and 3 percent of
national output; spending for past or current wars accounted for
the major variations in this share. During most peacetime years
in this period the Federal budget was in surplus. Since 1930, a
period spanning more than 50 years, there has been a budget
surplus on only eight occasions and half of those were shortly
after World War II.
Expansion of Government
The pressure for ever-larger government is intense and very
hard to resist. Those who gain directly of indirectly from
Federal transfer or spending programs perceive the benefits of
such programs very clearly. However, the tax cost to benefit
recipients seems low because taxes to pay for special programs
are distributed throughout the population. Therefore, a net
transfer of wealth from taxpayers to program beneficiaries takes
place. It is only when we total up the bill, and begin to
experience the adverse consequences of overspending and
overtaxing on economic growth, employment, living standards and
- 4 -
interest rates, that the costs become evident. Transfer recipients have become powerful organized lobbyists because the
benefits they receive are highly concentrated and quite
obvious. Unfortunately, taxpayers in general are initially not
organized as effectively because the additional taxes necessary
to pay for these transfer payments are diffused among all
taxpayers. Hence for a while, the burden on any one taxpayer
seems modest, until spending becomes inflationary and incomes are
forced by higher prices into tax brackets once reserved for the
very rich.
In addition, Federal spending has increased rapidly over the
years because of the emphasis on Keynesian countercyclical
stabilization policies. In the past, the government has enacted
spending programs intended to help spend the economy out of a
recession. Although these programs, such as public service
employment, were to be temporary, in fact some turned out to be
permanent. Thus, instead of being phased out after economic
recovery was underway, spending continued indefinitely, expanding
the government expenditure base.
On the revenue side, for too long it had been easy to raise
the tax burden, primarily through inflation and bracket creep.
Revenue increases have been largely automatic, seldom requiring
legislation.
Prior to enactment of the Economic Recovery Tax Act of 1981,
inflation, a progressive tax code, and outmoded depreciation
rules had combined to raise revenues in a particularly damaging
fashion, striking directly at the rewards to saving, work effort
and investment. As inflation drove taxpayers into higher tax
brackets, the rate of return on additional saving and work effort
fell. As inflation crippled the depreciation writeoffs, the
after-tax cost of plant and equipment rose and the rate of return
fell. The reduced supplies of labor and capital retarded economic growth.
Reduced growth has cost the government a large portion of the
revenues it might otherwise have expected, and has required
higher outlays on income support programs. The government has
had more receipts, but it has collected them by driving tax rates
higher on a smaller economy, and has had to spend them relieving
the suffering that slow growth has caused.
Unfortunately, some individuals have not learned a lesson
from our past mistakes. They continue to argue for increasing
tax rates in order to balance the budget. This approach has not
worked in the past and it will not be successful in the future.
Economic growth and restraint on the growth of Federal spending
are the keys to the deficit problem.
- 5 -
This is why we need a balanced budget amendment. Such an
amendment will restrain the size of government as well as reduce
the frequency and size of budget deficits, while maintaining
sufficient flexibility to be workable and to function in a time
of crisis. All these considerations prompted the Administration
to support the adoption of House and Senate Joint Resolutions
during the past several Congresses calling for a balanced budget
and to restate its support for similar resolutions now pending in
the current 99th Congress.
In addition, President Reagan has called for passage of a
constitutional amendment as well as S. 43, Senator Mattingly's
bill, that would permit the Chief Executive to veto individual
items in appropriation bills without having to veto the entire
bill. Regretably, last July the Senate refused three times to
end a filibuster by opponents of Senator Mattingly's bill, but we
continue to support passage of a line item veto authority.
Forty-three of our 50 States grant their governors this right
that works as a powerful tool against wasteful or extravagant
spending. This tool does not work automatically, of course, but
put in the hands of a President that is intent on slowing the
growth of spending it can be very effective.
A Summary of Current Amendments
Currently, S.J. Res. 13 is pending before the Senate and
would amend the Constitution to require a balanced budget. I am
sure that the Subcommittee is familiar with this Resolution,
which is virtually identical to those introduced during previous
sessions of the Congress. Therefore, I will only briefly
summarize what the amendment proposed in the Senate Resolution,
would do.
Section 1 would restrain deficits. It would require Congress
to adopt a budget for each year in which planned Federal spending
could not exceed receipts, except in the case of a super-majority
vote. In other words, the First Congressional Resolution on the
Budget would be required to plan outlays that equal receipts
including so-called off-budget spending. Should Congress decide
to plan a deficit, it would have to approve a specific dollar
amount of deficit spending by a three-fifths vote of the entire
membership of each House of Congress — that is, at least 60 of
the 100 Senators and 261 of the 435 Representatives. The
amendment charges the Congress and the President with ensuring
that actual outlays (including off-budget) do not exceed the
amount of outlays adopted in the budget statement, unless
approved by a three-fifths vote. Language has been included in
this Section to clarify an ambiguity in an earlier version of the
amendment concerning the extent of the President's powers to
ensure that actual outlays do not exceed stated outlays.
Section 2 would limit the growth of government. It would
limit receipts so they could not increase at a rate faster than
- 6 -
the growth of some measure of the previous year's income. That
growth limitation could be overridden only by a bill directed
solely to increasing taxes which was approved by a constitutional
majority (50 percent of the total membership plus one) of both
Houses of Congress and signed by the President.
Section 3 would require the President, prior to each fiscal
year, to transmit to the Congress a proposed statement of
receipts and outlays for that fiscal year consistent with the
provisions of the article amending the Constitution.
Section 4 would allow Congress to waive the amendment for any
fiscal year in which a declaration of war was in effect.
Section 5 defines the terms "outlays" to include all outlays
of the United States except those for repayment of debt principal, and "receipts" to include all receipts of the United States
except those derived from borrowing. These definitions would
apply when Congress adopts the annual statement as required by
Section 1 of the amendment.
Section 6 provides and makes clear that the Congress has the
legislative authority to implement the powers and responsibilities of the amendment.
Section 7 states that the provisions of the amendment shall
be effective as of the second fiscal year beginning after the
amendment is ratified.
How the Amendment Would Work
Section 1 would not require a balanced budget statement. It
simply sets more stringent voting requirements for an unbalanced
budget. Congress can adopt an unbalanced budget statement if
three-fifths of the entire membership of each House vote for
it. Also, the Congress is not restricted in amending the budget
statement during the fiscal year, as long as the voting
requirements—three fifths of the entire membership of each House
for a deficit, and an ordinary majority for a balanced budget—
are met.
Thus, the flexibility of the budget process would be
maintained. If for reasons of great national concern it were
necessary for Federal spending to exceed revenues, Congress could
vote to allow this to happen. However, by requiring Congress to
otherwise "adopt a statement of receipts and outlays for that
year in which total outlays are no greater than total receipts,"
the amendment would establish a balanced budget as the budgetary
"norm," which would be passed by a normal majority vote. An
corrected.
institutional bias in favor of deficit spending would thereby be
(-•nrraptofl _
- 7 -
The Senate Joint Resolution also provides for deficits in
wartime, permitting the Congress to waive its requirements for
any year in which a declaration of war is in effect. A wide
variety of events, not necessarily entailing a declaration of war
may, however, pose threats to national security. The Administration has, therefore, in the past encouraged the Congress to
amend the current language of the amendment to allow a broader
range of events -- unforeseen events posing an imminent threat to
national security — to qualify for a waiver.
Section 2 would limit the growth of Federal revenues to the
rate of growth of some measure of income unless Congress, by a
majority vote of the membership of each chamber, decided to raise
taxes to a higher level. For example, if the GNP rose by ten
percent in the previous calendar year, tax receipts could not
rise by more than ten percent in the succeeding fiscal year
unless a majority of all the members of Congress explicitly voted
otherwise.
This procedure contrasts markedly with the operation of the
tax system in recent years, during which taxes, particularly the
individual income tax, have grown more rapidly than GNP even
without a Congressional vote. For whenever inflation reached a
level of, say, 10 percent, the government collected roughly
15 percent more from personal incomes due to "bracket creep," and
took in further revenue by causing depreciation to be
understated. Indeed, the government profited substantially from
inflation.
To some extent, this problem has been addressed by the
indexation and Accelerated Cost Recovery System provisions of the
Economic Recovery Tax Act of 1981. The indexation proposals in
the Treasury Department's Tax reform package sent to the Congress
earlier this year would help address further this problem.
However, Section 2 would extend this safeguard against
unlegislated tax increases to other forms of taxation as well.
For example, it would prevent backet creep due to real income
gains. There is no justification for the government's share of
GNP to increase automatically as GNP grows, whether the growth is
real or due to inflation. Just because the output of the economy
is expanding is no reason for the government to expand faster
than the economy's output. On the other hand, there is every
reason to encourage the government to pursue sound policies to
induce economic growth, thereby making additional government
spending as well as private spending possible.
The amendment would strengthen further the principle of
accountability by requiring Congress to vote on a specific bill
to increase taxes instead of adding a tax increase as an
amendment to another bill, as is often done now.
- 8 -
The Founding Fathers intended that the people would never be
taxed without their express consent, which is why they required
that all revenue bills originate in the House — at the time the
only chamber directly elected by the people. The Founding
Fathers did not anticipate that a progressive income tax, coupled
with inflation, would negate this principle. This amendment
would restore the clear intent of the creators of the Constitution.*
Section 5 of the pending Senate Joint Resolution addresses
the problem of so-called "off-budget expenditures" -expenditures that are made by the Federal Government and thereby
add to the total public debt burden, but are not included in the
regular budget.
In 1973, when this device was first adopted, off-budget
agencies spent less than 0.1 billion. Such spending peaked at
$21 billion in 1981 and has declined every year since then,
falling to $10 billion in 1984. Off-budget outlays are estimated
to have been $10 billion in the fiscal year just concluded but
the President's 1986 budget reduces such spending sharply after
1985 and the Mid-Session Review shows that in 1988 and later
years off-budget spending would become sizable negative
amounts. Both for the sake of fairness and accurate economic
accounting, this amount of spending should be added to the
deficit. Section 5 of the proposed article would require this
type of treatment, as would, incidentally, legislation proposed
by the Administration. In fact, the 1986 budget treats the
entities that are off-budget under current law as though they
were on- budget. If this proposed change is approved by the
Congress — the Congress has not yet acted upon the
Administration's proposed legislation but the Senate and the
House have tacitly agreed to the proposal in principle by using
in the Budget Resolution total budget outlays, including offbudget spending — or if the constitutional amendment is enacted
and approved, Federal Government expenditures would no longer be
divided into on- and off-budget outlays. The term "outlays"
would mean just that— all government obligations of taxpayer
funds, with the single exception of repayment of debt principal.
Workability of the Amendment
Critics of the balanced budget/tax limitation amendment
object to it on two principal grounds: that the amendment would
be such an "iron commandment" that it might force the United
States into contractionary economic policies or that it would be
so ineffective as to be constantly circumvented.
Those who argue that the amendment is a "formula for economic
decline" claim that the amendment would force drastic spending
cuts during recessions. In fact, the amendment would do no such
thing. Unanticipated revenue declines would not require
immediate offsets in spending. The balanced budget rule would
- 9 -
probably lead to an actual budget deficit when the economy is
weaker than expected in the official Administration economic
forecast and an actual budget surplus when the economy is
stronger than expected.
It should be emphasized, however, that spending restraint per
se does not necessarily constrain the economy. This is an old
Keynesian notion that does not take into consideration other
policy mechanisms that also have an impact on the economy. Thus,
even if spending is restrained, aggregate demand would not fall
if monetary policy is not tightened. If monetary policy is
tightened, maintaining government spending might not prevent
aggregate demand and eventually the economy from slowing. It is
the policy mix that is important for assuring steady, sustainable
economic growth.
In any event, Congress could continue to enact unbalanced
budgets during an economic downturn if three-fifths of the
members of both Houses agreed. While this standard is stringent
-- as it should be -- it is by no means insuperable. If an
economic crisis urgently demanded additional Federal spending,
the mechanism for permitting it would be firmly in place.
Moreover, unforeseen spending needs could be accommodated in
advance through the establishment of a reserve or contingency
fund to cover outlays that exceeded their expected level. During
the past two recessions, the increase in actual 1980 and 1981
outlays resulting from unexpected economic developments, higher
unemployment for instance, was about 5 percent of total outlays
each year. Thus, a reserve of 5 to 8 percent should be
sufficient.
At the same time, economic downturns should not be automatic
justifications for greatly increased spending. While certain
payments, such as those for income support, would rise with
higher unemployment levels, the Congress should be expected to
make up at least part of the difference by further trimming back
lower priority spending. The three-fifths vote requirement would
ensure that this option is given a fair hearing. Similar procedures for prioritizing outlays and contingency funding have
been used by businesses and state and local governments for many
years.
The second major objection, that the amendment would be circumvented, is similarly without foundation. In particular, the
terms "outlays" and "receipts" are explicitly defined both in the
amendment and in the legislative history; there should be no
dispute about their meaning, and thus no successful attempt to
subvert the amendment's intent by redefining its terms.
Similarly, even if the President's proposal to bring offbudget agencies on-budget is not enacted, the amendment also
specifically prohibits the exclusion of off-budget outlays from
- 10 -
the budget statements. Thus, the present tactic of maintaining
high spending levels by shifting programs "off-budget" could not
be used to circumvent the requirement for a balanced budget
statement.
It is true, of course, that the amendment will not eliminate
spending pressures; this is neither possible nor necessary. The
amendment will, however, provide a far more effective means for
coping with these pressures, to ensure that they do not play the
inordinate role they have in recent years in keeping spending
high.
It is also true that adoption of the Amendment would not
solve the deficit problem overnight, but serious supporters of
the amendment have never claimed that it would. It might take
several years before the budget could be brought back completely
into balance. In the meantime, however, members of the Congress
would be required to develop a sense of discipline when
authorizing spending totals.
A final concern is the wisdom of addressing economic matters
in the Constitution. This is a false issue; the Constitution
already applies to many areas of economic activity. For example,
it regulates certain taxing powers, the imposition by States of
tariffs or duties, Congressional appropriation procedures, and
the coinage of money. It also assigns Congress the authority to
regulate interstate commerce. The addition of the balanced
budget/tax limitation amendment to the Constitution, by
establishing a standard for budget-making procedures, merely
follows in this spirit.
Conclusion
The fact that thirty-two State legislatures have aoproved
resolutions calling for a Constitutional convention to*consider a
balanced budget amendment, and several more States are considering such a resolution, shows that the amendment has massive
support in State legislatures. The overwhelming popular support
for a balanced budget amendment stems directly from Americans'
understandable frustrations with years of high inflation, rising
e
1
v ?Le'of ?L r' T ' f " Purchasing power, and a seemingly endless
d S f l C l t s end
live wtthfn ? b ^ r
P ing. Individual Americans who must
thai their aovtrL ^ f M 8 h a V e S V e r y r i ^ h t t o **P^
and demand
that their government do so as well. Therefore, the AdministrapendinTb^for: E?9"" *> ^ ^ ^"itutional amendme^t^ow
FREASURY NEWS
apartment of the Treasury • Washington, D.C. • Telephone 566-2041
EMBARGOED UNT^L DELIVERY
EXPECTED AT 4 H 3 P.M. (LOCAL)
TUESDAY. OCTOBER fl. 1985
STATEMENT OF THE HONORABLE JAMES A. BAKER, III
SECRETARY OF THE TREASURY
OF THE UNITES STATES
BEFORE THE
JOINT ANNUAL MEETING OF
THE INTERNATIONAL MONETARY FUND AND THE WORLD BANK
OCTOBER 8, 1963
SEOUL, KOREA
Chairman Toure, Managing Director de Larosiere, President Clausen,
fallow Governor*, and distinguished guestsi
It is a pleasure to be here for the 40th annual meeting of the
International Monetary Fund and the World Bank. Strong, effective
international financial institutions are as essential to our economic
well being today as they were 40 years ago.
Our host country, Korea, is a nation whose economic success is
surpassed only by its warm hospitality. Korea's market-oriented
approach and strong emphasis on private initiative are a lesson for us
all.
Foundation for Growth
I would like to focus my comments today on policies for growth
within the context of the international debt strategy. Sound policies
and sustained, low-inflation growth in the industrial countries must
provide the essential foundation for a successful debt strategy, and
are a prerequisite for stronger growth in the debtor countries.
The major industrial countries have already made considerable progress
in this direction. Two weeks ago in New York the Finance Ministers
and Central Bank Governors of the Group of Five industrial nations
underscored the progress which had been achieved, particularly with
regard to the convergence of economic performance toward sustained,
low-inflation growth. They also announced a set of policy intentions
that will help to consolidate and extend that progress and to improve
and sustain growth for the longer term.
We emphasized, for our,own countries, the central importance of
reducing struotural rigidities, strengthening inoentives for the
private sector, reducing the size of government, and improving the
investment environment. We also rededicated our governments to
resisting protectionist pressures that threaten our own prosperity and
the opportunities for others. We must jointly accelerate our efforts
to launch a new round of trade negotiations within the GATT.
B-302
- 2 These industrial nations agreed that the significant progress
already achieved in promoting a better convergence of their economic
performance had not been fully reflected in exchange markets and that
some further orderly appreciation of the main non-dollar currencies
against the dollar was desirable. We expressed our willingness to
cooperate more closely to encourage this when to do so would be
helpful•
This package of measures had an immediate, significant impact on
exchange markets which continues to be positive, and reflects the
importance of the commitments made.
I am convinced that if each of the major industrial nations
fulfills its policy intentions and maintains or improves access to its
markets, we will have taken a major step toward more balanced and
sustainable growth, while providing a solid framework for improving
the debt situation in the developing world.
Strengthening the Deb^ Strategy
Fellow Governors, it is essential that we begin the process of
strengthening our international debt strategy.
Three years ago the international financial community developed a
flexible, cooperative, case-by-case strategy to address the debt
problem and lay the basis for growth in the debtor nations. In three
yearsi
— Aggregate current account deficits in developing
countries have been sharply reduced from *104 billion in
1982 to *44 billion this year.
— Growth in developing countries has been restored to
about 4 percent, compared to less than 2 percent in
1982.
— This growth has been fueled by sharp increases in
developing nations' exports, including a 21 percent
increase in their exports to the United States last
year.
These developments reflect improved growth and sharply lower
interest rates in the industrial nations, as well as adoption of
improved policies within most debtor countries. These policies
have been given important support by reschedulings and rollovers
amounting to approximately *210 billion, and by net new
commercial bank lending.
The international financial institutions have also played an
important role in the progress that has been achieved. The IMF
in particular has very capably played a leadership role,
providing guidance on policies and temporary balance of payments
financing., both of which have catalyzed commercial bank flows.
- 3 -
Despite this progress, some serious problems have developed.
A number of principal debtor countries have recently experienced
setbacks in their efforts to improve their economic situations,
particularly with regard to inflation and fiscal imbalances,
undercutting prospects for sustained growth. Bank lending to
debtor nations has been declining, with very little net new
lending anticipated this year. The sense of increasing
reluctance among banks to participate in new money and debt
rescheduling packages has introduced serious uncertainties for
borrowers, in some cases making it more difficult for them to
pursue economic reforms.
These problems need to be addressed, promptly and effectively, by building upon the international debt strategy in order
to improve the prospects for growth in the debtor countries.
This is an enterprise which will require, above all, that we work
together and that we each strengthen our commitment to progress.
Zf the debt problem is to be solved, there must be a
"Program for Sustained Growth", incorporating three essential and
mutually reinforcing elementsi
o First and foremost, the adoption by principal debtor
countries of comprehensive macroeconomic and structural
policies, supported by the international financial
Institutions, to promote growth and balance of payments
adjustment, and to reduce inflation.
o Second, a continued central role for the IMF, in
conjunction with increased and more effective structural
adjustment lending by the multilateral development banks
(MDBs), both in support of the adoption by principal
debtors of market-oriented policies for growth.
o Third, increased lending by the private banks in support
of comprehensive economic adjustment programs.
I want to emphasize that the United States does not support
a departure from the case-by-case debt strategy we adopted three
years ago. This approach has served us well; we should continue
to follow it. It recognizes the inescapable fact that the
particular circumstances of each country are different. Its main
components, fundamental adjustment measures within the debtor
nations and conditionality in conjunction with lending, remain
essential to the restoration of external balance and longer-term
growth.
We need to build upon the current strategy to strengthen its
ability to foster growth. There must be greater emphasis on both
market-oriented economic policies to foster growth and adequate
financing to support it.
4 -
In essence, what I am suggesting is that adequate financing
can be made available through a combination of private creditors
and multilateral institutions working cooperatively, but only
where there are reasonable prospects that growth will occur.
This will depend upon the adoption of proper economic policies by
the developing countries. Financing can only be prudently made
available when and as effective policies to promote economic
efficiency, competitiveness and productivity — the true
foundations of growth — are put in place. We cannot afford to
repeat the mistakes of the past. Adjustment must continue.
Adjustment programs must be agreed before additional funds are
made available, and should be implemented as those funds are
disbursed.
These efforts should be mutually reinforcing. Sound
policies in the principal debtor countries will not only promote
growth, but will also stimulate the needed private bank lending.
And it will be important that these policies be supported by the
IMF, complemented by the MDBs. These institutions can help
encourage and catalyze both needed policies and financing.
In today's highly interdependent world economy, efforts at
economic isolationism are doomed to failure. Countries which are
not prepared to undertake basic adjustments and work within the
framework of the case-by-case debt strategy, cooperating with the
international financial institutions, cannot expect to benefit
from this three-point program. Additional lending will not
occur. Efforts by any country to "go it alone" are likely to
seriously damage its prospects for future growth.
I would like to elaborate on the actions that will be
required by each participant in this three-point program.
Structural Chanocf jn the Principal D?b^pri
The essence of the need for structural change in the
principal debtors is captured in two quotations I would like to
share with you.
Firsti
"The only way to overcome our economic crisis is
to tackle at their root the structural problems
of our economy to make it more efficient and
productive." i,/
1/
President de la Madrid at Mexican Bankers Association
Annual Meeting, July 22, 1983.
- 3 -
And second:
"Economic growth will have solid foundations only
if we reestablish trust and stimulate private
enterprise, which must be the flagship of our
economic development.•• We will promote
authentic institutional change in the economic
sector." £/
These are not the words of a U.S. Secretary of the Treasury.
They are statements made in July of this year by the Presidents
of Mexico and Brazil. I believe they reflect a growing sentiment
in Latin America.
It is essential that the heavily indebted, middle income
developing countries do their part to implement and maintain
sound policies. Indeed, without such policies, needed financing
cannot be expected to materialize. Policy and financing are not
substitutes but essential complements.
For those countries which have implemented measures to
address the imbalances in their economies, a more comprehensive
set of policies can now be put in place, which promises longer
term benefits from stronger growth, higher standards of living,
lower inflation, and more flexible and productive economies.
These must not only include macroeconomic policies, but also
other medium and longer term supply-side policies to promote
growth.
We believe that such institutional and structural policies
should includei
— increased reliance on the private sector, and less
reliance on government, to help increase employment,
production and efficiencyj
— supply-side actions to mobilize domestic savings and
facilitate efficient investment, both domestic and
foreign, by means of tax reform, labor market reform and
development of financial markets; and
— market-opening measures to encourage foreign direct
investment and capital inflows, as well as to liberalize
trade, including the reduction of export subsidies.
2/
President Sarney in a televised address to the nation,
July 23, 1983.
6 -
This broader approach does not mean that policy areas that
have been the focus of efforts to date — in particular fiscal,
monetary, and exchange rate policies — can receive less
attention. Indeed, macroeconomic policies have been central tc
efforts to date and must be strengthened to achieve greater
progress. These policies should consist oft
— market-oriented exchange rate, interest rate, wage and
pricing policies to promote greater economic efficiency
and responsiveness to growth and employment
opportunities; and
— sound monetary and fiscal policies focused on reducing
domestic imbalances and inflation and on freeing up
resources for the private sector.
The cornerstone of sustained growth must be greater domestic
savings, and investment of those savings at home. Macroeconomic
and structural policies which improve economic efficiency,
mobilize domestic resources, and provide incentives to work,
save, and invest domestically will create the favorable economic
environment necessary for this to occur. Such an environment is
also critical to attract supplemental foreign savings.
As a practical matter, it is unrealistic to call upon the
support of voluntary lending from abroad, whether public or
private, when domestic funds are moving in the other direction.
Capital flight must be reversed if there is to be any real
prospect of additional funding, whether debt or equity. If a
country's own citizens have no confidence in its economic system,
how can others?
There are essentially two kinds of capital inflows? loans
and equity investments. Foreign borrowings have to be repaid —
with interest. Equity investment, on the other hand, has a
degree of permanence and is not debt-creating. Moreover, it can
have a compounding effect on growth, bring innovation and
technology, and help to keep capital at home.
We believe that the debtor nations must be willing to commit
themselves to these policies for growth in order that the other
elements of a strengthened debt strategy can come into place.
Instituti^l^^#af1>S °f *** *»f*»»*1nnal "na^le!
im«ft^!^lnt?rnftioa*1 fla*a«i*3. institutions must also play .JZlZZt
u l9 i a •**~C*hsning the debt strategy to promote
?f!!li;,i r ? ! ' W * m u , t * « c o a * i « that the international
111 A if institutions cannot have sufficient resources to m..«.
the debtor nations' financing needs all by themselves. An
*
- 7
approach which .assumes that the IMF and the World Bank are the
sole answer to debt problems is simply a non-starter. For most
developing countries other sources must play a more important
role. These include private sector borrowing, increased export
earnings, foreign equity investment, and repatriation of capital
which has fled abroad. All these routes should be pursued.
Among the international financial institutions, the IMF has
played a major role in advising member nations on the development
of policies necessary to promote adjustment and growth. There
has been a particular focus on monetary, fiscal, and exchange
rate policies, although increasing attention is being paid to
other areas such as trade liberalization, pricing policies, and
the efficiency of government-owned enterprises.
Emphasizing growth does not mean deemphasizing the IMF.
Through both its policy advice and balance of payments financing,
the Fund has played a critical role in encouraging needed policy
changes and catalyzing capital flows. It must continue to do so.
But it must also develop new techniques for catalyzing financing
in support of further progress. "Enhanced surveillance," for
example, can sometimes provide an effective means of continued
IMF involvement.
The Fund should give higher priority to tax reform, marketoriented pricing, the reduction of labor market rigidities, and
to opening economies to foreign trade and investment. This will
help assure that Fund-supported programs are growth-oriented. It
will be particularly important for the Fund to work closely with
the World Bank in this effort.
1 would now like to turn more directly to the role of the
MDBs, which need to be brought into the debt strategy in a
stronger way, without diminishing the role still to be played by
the IMF.
The World Bank, and indeed all MDBs, have considerable scope
to build on current programs and resources, and to provide
additional assistance to debtor nations which is disbursed more
quickly and targeted more effectively to provide the needed
stimulus to growth.
There is ample room to expand the World Bank's fastdisbursing lending to support growth-oriented policies, and
institutional and sectoral reform. An increase in such lending
can serve as a catalyst for commercial bank lending.
A serious effort to develop the programs of the World Bank
and the Inter-American Development Bank (IDB) could increase
their disbursements to principal debtors by roughly 30 percent
from the current annual level of nearly «6 billion.
8 -
Increased disbursements would require greater borrowing by
the MDBs in world capital markets. Their ability to borrow at
low rates is a precious asset which must be preserved.
Therefore, their lending must be in support of sound economic
programs that enhance the borrower's ability to service its debt
and grow.
It should be possible, with a concerted effort by both the
World Bank and borrowers, to streamline World Bank operations ia
order to reduce considerably the time period required to
formulate and implement such assistance programs. This will
expedite the actual disbursement of funds.
The value and role of an indigenous, competitive private
sector needs to be recognized and developed more fully than it
has in the past. The Bank, for its part, should actively promote
-the development of the private sector and, where appropriate,
provide direct assistance to this sector. In addition, the Bank
should seek to assist, both in a technical and financial
capacity, those countries which wish to "privatize" their
state-owned enterprises, which in too many cases aggravate
already serious budget deficit problems.
Given the importance of increasing commercial bank flows to
the principal debtors, there is also an urgent need for efforts
to expand the Bank's co-financing operations. These efforts
should be pursued vigorously to increase the effectiveness of the
Bank in helping its borrowers to attract private finance, and
should have substantial potential in the context of this
three-point program.
The enhanced program of the International Finance
Corporation, with an expanded capital base, and the recently
negotiated Multilateral Investment Guarantee Agency (MIGA) are
two important Bank Group initiatives in support of developing
countries. Both organizations can do much to assist their
members in attracting non-debt capital flows as well as critical
technological and managerial resources. We urge all Bank Members
and particularly the principal debtors to give their full support
to establishment of the MIGA.
If developing countries implement growth-oriented reform; if
commercial banks provide adequate increases in net new lending to
good performers; and if increased demand for quality IBRD lending
demonstrates the need for increased capital resources, we would
be prepared to look seriously at the timing and scope of a
We believe
World Bank's efforts can be supplemented
general
capital the
increase.
actively by the regional development banks. Since some of the
- 9 most serious debt problems are found in Latin America, special
emphasis should be placed on strengthening the IDB's policies to
enable it to be a more effective partner in support of
growth-oriented structural reform.
In the case of an IDB capital increase, it will be critical
to assess the extent to which the institution strengthens its
lending policies. There must be well-defined economic and
country strategies tailored to enhance economic reforms which
encourage growth. Given a firm commitment by the IDB to move in
this direction, we believe that it should be permitted to
introduce a major program of well targeted non-project lending.
In the meantime, such lending could be associated with World Bank
programs until the IDB has implemented the necessary reforms.
Increasing Lending by the International Banking Community
The international banking community has played an important
role during the past three years. I am, however, concerned about
the decline in net bank lending to debtor nations over the past
year and a half, particularly those nations which are making
progress. All of us can appreciate the commercial banks'
concerns, but we believe these concerns would dissipate if the
banks were confident that new lending is in support of policies
for growth in the developing nations.
If creditor governments, in an age of budget austerity, are
to be called upon to support increases in multilateral development bank lending to the debtor nations, and if the recipient
nations are asked to adopt sound economic policies for growth to
avoid wasting that financing, then there must also be a
commitment by the banking community — a commitment to help the
global community make the necessary transition to stronger
growth•
Our assessment of the commitment required by the banks to
the entire group of heavily indebted, middle income developing
countries would be net new lending in the range of *20 billion
for the next three years. In addition, it would be necessary
that countries now receiving adequate financing from banks on a
voluntary basis continue to do so, provided they maintain sound
policies.
I would like to see the banking community make a pledge to
provide these amounts of new lending and make it publicly,
provided the debtor countries also make similar growth-oriented
policy commitments as their part of the cooperative effort. Such
financing could be used to meet both short-term financing and
longer-term investment needs in the developing countries, and
would be available, provided debtors took action and multilateral
Institutions also did their part.
- 10
We would welcome suggestions from the banking community
about arrangements which could be developed in order to ensure
that adequate financing to support growth is available.
The Poorest Countries
Before concluding my statement, I would like to focus
briefly on the problems of another set of debtor countries, the
low-income debtors with protracted balance of payments problems.
Special efforts are being made to assist these countries, but
more can and should be done to improve their longer-term
prospects.
The United States believes that the resources provided by
the Trust Fund reflows provide a unique opportunity to help
address the economic problems of the poorest countries with
protracted balance of payments difficulties. Recent experience
demonstrates that successful resolution of the economic problems
of these countries requires a comprehensive approach, including
fundamental structural policy changes, as well as sound
macroeconomic policies.
The *2.7 billion in Trust Fund reflows present us with an
opportunity to utilize IMF resources, possibly supplemented by
funds from other sources, in support of such comprehensive
economic programs. The effectiveness of such programs would be
enhanced by close cooperation between the Fund and Bank. In some
cases, this could best be accomplished by a joint approach by the
two institutions in support of comprehensive programs.
The United States is also prepared to consider a bolder
approach, involving more intensive IMF and World Bank
collaboration. We believe that this approach would help ensure
that the institutions provide sound, mutually consistent advice
on the full range of policies to promote growth.
The United States, which supported African countries with
•1.7 billion in bilateral aid in 1983, would be prepared to
consider seeking resources in support of such a far-reaching
approach if other donors were prepared to make equitable
contributions.
We recognize that some may have reservations about such an
approach, viewing it as complicated and difficult to implement.
I can understand some of those concerns, and believe they suggest
the need for further reflection on certain aspects of this
proposal. But, we cannot let parochial resistance or unfounded
suspicions block an idea that can significantly help the poorest
countries and strengthen ties between the Fund and the Bank. i
urge you to give this approach further consideration during the
B
months ahead.
"
- 11 -
Conclusion
In conclusion, much has been accomplished in the past few
years in addressing the pressing economic problems of the early
1980s and preparing the foundation for future global growth. We
must now join together to consolidate our progress in building
stronger economies for the future.
Sound policies and growth in the industrial world can
provide a solid foundation for strengthening and adapting the
current international debt strategy. Let us not lose the present
opportunity. I have proposed a three-point "Program for
Sustained Growth" to provide renewed impetus for resolving the
debt problem. We must not deceive ourselves. There are no easy
solutions, and none of us can escape our responsibilities.
The principal debtor nations must make the hard policy
decisions to restructure their economies. The commercial banks
must provide adequate resources to support these efforts. The
MDBs must increase the efficiency and volume of their lending.
Moving from proposal to implementation will be a demanding
exercise and cannot be accomplished overnight. As we adapt our
strategy, we must continue to look to the IMF as the catalyst for
new financial flows. And with these new flows will come new
hope.
We will be building on the efforts of the past. The needs
are clearly recognized by borrowers and creditors alike.
Fundamentally, there is no disparity of interest among our
nations. We have a common interest in growth — sustained growth
that rests on productivity, innovation and investment. Let us
begin our efforts now.
TREASURY NEWS
department of the Treasury • Washington, D.c. • Telephone 566-2041
FOR RELEASE AT 4:00 P.M. October 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 October 17, 1985.
This offering will not provide new cash for the Treasury, as the maturing bills
are outstanding in the amount of $13,963 million. Tenders will be
received at Federal Reserve Banks and Branches and at the Bureau of
the Public Debt, Washington, D. C. 20239, prior to 1:00 p.m., Eastern
Daylight Saving time, Tuesday, October 15, 1985.
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
July 18, 1985,
and to mature January 16, 1986 (CUSIP No.
912794 JN 5), currently outstanding in the amount of $7,283 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
April 18, 1985,
and to mature
April 17, 1986
(CUSIP No.
912794 KB 9 ) , currently outstanding in the amount of $8,362 million,
the additional and original bills to be freely interchangeable.
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.
The bills will be issued for cash and in exchange for Treasury
bills maturing October 17, 1985.
Tenders from Federal Reserve
Banks for their own account 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. Federal Reserve
Banks currently hold $ 1,126 million as agents for foreign and international monetary authorities, and $3,082 million for their own
account. Tenders for bills to be maintained on the book-entry
records of the Department of the Treasury should be submitted on Form
PD 4632-2 (for 26-week series) or Form PD 4632-3 (for 13-week series).
B-303
TREASURY'S 13-, 26-, AND 52-WEEK BILL OFFERINGS, PAGE 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 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 book-entry
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.
4/85
TREASURY'S 13-, 26-, AND 52-WEEK BILL OFFERINGS, PAGE 3
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 the issue date, in cash or other immediately-available funds
or in Treasury bills maturing on that date. 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,
19 84, 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.
4/85
rREASURYNEWS
partment of the Treasury • Washington, D.C. • Telephone 566-2041
For Immediate Release
Tuesday, October 8, 1985
Treasury Department Statement
In hope that the Congress will act promptly to produce a
satisfactory resolution of the current impasse concerning the
statutory debt limit, the Treasury Department is today announcing
its intention to offer $5 billion of Treasury bills to be auctioned
on Wednesday, October 9, at 12:30 p.m.
B-304
THE DEPUTY SECRETARYfOF THE TREASURY
WASHINGTON
October 8, 1985
Dear Senator Byrd:
This note is to provide you with our latest cash projection.
As of this morning, we project an ending balance for October
8 (today) of zero; and — absent remedial action — a
negative ending balance for October 9 (tomorrow).
We continue to hope that the Congress will act promptly to
avoid the undesirable alternatives I referred to in my letter
of October 7 (either unprecedented and questionable use of
Federal Financing Bank authority, or an unprecedented default
by the United States). Accordingly, at noon today Treasury
will release the following public statement:
"In hope that the Congress will act promptly
to produce a satisfactory resolution of the
current impasse concerning the statutory debt
limit, the Treasury Department is today
announcing its intention to offer $5 billion
of Treasury bills to be auctioned on Wednesday,
October 9, at 12:30 p.m."
In anticipation of>action that would allow us to proceed with
this financing, we and the Federal Reserve should be able to
manage payments so as to avoid a default.
For all the obvious reasons, we again urge that the Congress
act promptly to raise the current debt limit.
v. Richard G. Darman
Acting Secretary
The Honorable Robert C. Byrd
United States Senate
Washington, D.C. 20510
THE DEPUTY SECRETARY OF THE TREASURY
WASHINGTON
October 8, 1985
Dear Mr. Majority Leader:
This note is to provide you with our latest cash projection.
As of this morning, we project an ending balance for October
8 (today) of zero; and — absent remedial action — a
negative ending balance for October 9 (tomorrow).
We continue to hope that the Congress will act promptly to
avoid the undesirable alternatives I referred to in my letter
of October 7 (either unprecedented and questionable use of
Federal Financing B«nk authority, or an unprecedented default
by the United States). Accordingly, at noon today Treasury
will release the following public statement:
"In hope that the Congress will act promptly
to produce a satisfactory resolution of the
current impasse concerning the statutory debt
limit, the Treasury Department is today
announcing its intention to offer $5 billion
of Treasury bills to be auctioned on Wednesday,
October 9, at 12:30 p.m."
In anticipation of action that would allow us to proceed with
this financing, we and the Federal Reserve should be able to
manage payments so as to avoid a default.
For all the obvious reasons, we again urge that the Congress
act promptly to raise the current debt limit.
Sincerely,
/
/ GUAS^*»
n A
IN.
Richard G. Darman
Acting Secretary
The Honorable Robert Dole
United States Senate
Washington, D.C. 20510
TREASURY NEWS
Department of the Treasury • Washington, D.c. • Telephone 566-2041
FOR IMMEDIATE RELEASE
October 8, 1985
TREASURY OFFERS $5,000 MILLION OF 78-DAY
CASH MANAGEMENT BILLS
In hope that Congress will act promptly to produce a
satisfactory resolution of the current impasse concerning
the statutory debt limit, the Treasury Department is today
announcing its intention to offer $5,000 million of Treasury
bills to be auctioned on Wednesday, October 9, at 12:30 p.m.
The Department of the Treasury, by this public notice, invites
tenders for approximately $5,000 million of 78-day Treasury bills
to be issued October 9, 1985, representing an additional amount of
bills dated December 27, 1984, maturing December 26, 1985 (CUSIP
No. 912794 HQ 0 ) .
Competitive tenders will be received only at the Federal
Reserve Bank of New York prior to 12:30 p.m., Eastern Daylight
Saving time, Wednesday, October 9, 1985. Wire and telephone tenders
may be received at the discretion of the Federal Reserve Bank of
New York. Each tender for the issue must be for a minimum amount
of $10,000,000. Tenders over $10,000,000 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, or at any Federal Reserve Bank or Branch other than the
Federal Reserve Bank of New York.
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 12:00 noon,
Eastern time, on the day of the auction. Such positions would
B-305
include bills acquired through "when issued" trading, futures,
- 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 of New York in
cash or other immediately-available funds on Wednesday, October 9,
1985. 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.
rREASURY NEWS
partment of the Treasury • Washington, D.C. • Telephone 566-2041
FOR IMMEDIATE RELEASE
October 9, 1985
TREASURY AFFIRMS OFFER OF $5,000 MILLION
OF 78-DAY CASH MANAGEMENT BILLS
The Treasury Department will conduct the auction of 78-day
cash management bills as announced on October 8. We continue
to hope that the Congress will act to raise the debt limit in
order to allow this auction to proceed to closure without the
use of Federal Financing Bank (FFB) authority. If, however, the
Congress fails to raise the debt limit, Treasury will use FFB
borrowing authority (which is not subject to the debt limit) to
issue FFB securities to substitute for existing nonmarketable
Treasury debt. Treasury will redeem the nonmarketable debt in
an amount sufficient to permit issuance of the Treasury bills
being auctioned today. Accordingly, these securities will be
backed by the full faith and credit of the United States and will
be within the current applicable debt limit. Only in the event
that Congress fails to raise the current debt limit today will
this procedure be used in order to ensure that the Government can
raise cash in order to avoid default.
B-306
TREASURY NEWS
epartment of the Treasury • Washington, D.c. • Telephone 566-2041
FOR IMMEDIATE RELEASE
October 9, 1985
RESULTS OF TREASURY'S AUCTION
OF 78-DAY CASH MANAGEMENT BILLS
The Treasury has accepted $5,010 million of the $16,375
million of tenders received at the Federal Reserve Bank of New
York for the 78-day Treasury bills to be issued October 9, 1985,
and to mature December 26, 1985, auctioned today. The range of
accepted bids was as follows:
Discount Investment Rate
Rate
(Equivalent Coupon-Issue Yield)
Price
Low 7.20% 7.42% 98.440
High
7.25%
Average
7.23%
7.47%
7.44%
Tenders at the high discount rate were allotted 48%.
B-3 07
98.429
98.434
rREASURY NEWS
partment
of the Release
Treasury • Washington,
D.C.Charles
• Telephone
For Immediate
Contact:
Powers 566-2041
October 11, 1985
*
566-2041
TREASURY DEPARTMENT ASSESSES PENALTY AGAINST
RIGGS NATIONAL BANK UNDER BANK SECRECY ACT
The Department of the Treasury announced today that Riggs
National Bank of Washington, D . C , has agreed to a settlement
that requires Riggs to pay a civil penalty of $269,750 for
failure to report 1,226 currency transactions between 1980
and 1985 as required by the Bank Secrecy Act.
The maximum penalty that could have been assessed for
violations during the period in question was $1,000 for each
violation.
The decision, announced by David D. Queen, Acting Assistant
Secretary for Enforcement and Operations, said the penalty
represented a complete settlement of Riggs' civil liability
on these 1,226 violations. Queen said Riggs voluntarily and
promptly brought this matter to the attention of the Department
of the Treasury.
In addition, the compliance deficiencies that led to the
violations originated prior to the installation of the current
ownership and management. Upon discovery of the reporting
failures, current management cooperated fully with Treasury, and
conducted a thorough internal investigation of its Bank Secrecy
Act compliance. Riggs has instituted measures to ensure full
compliance with reporting requirements in the future.
The Department of the Treasury has no evidence that Riggs
knowingly engaged in money laundering or criminal behavior in
connection with the 1,226 reporting violations.
Queen said, "We view Bank Secrecy Act reporting failures, for
whatever reason, as extremely serious. Failures to file timely
currency reports deprive Treasury of potentially useful law
enforcement information."
This year more than 60 financial institutions have disclosed
reporting violations to Treasury. Most of the banks have come
forward voluntarily, a few after non-compliance was discovered
by bank regulators. In June, four New York banks agreed to pay
penalties ranging from $210,000 to $360,000; in August, Crocker
National Bank agreed to pay $2.25 million. The possible civil
liability of the other financial institutions is under review.
B-308
rREASURY NEWS
partment of the Treasury • Washington, D.c • Telephone 566-2041
For Immediate Release
Dctober 11, 1985
Contact: Charlie Powers
Phone: (202) 566-2041
TREASURY IMPLEMENTS BAH ON IMPORTATION
OF SOUTH AFRICAN KRUGERRANDS
The Department of Treasury announced the issuance today of
South African Transactions Regulations to Implement Executive
Order Number 12535 of October 1, 1985, prohibiting the
importation into the United States of South African Krugerrands.
The Regulations are effective as of 12:01 a.m. today, Eastern
Daylight Time, and will appear in the Federal Register.
The ban covers Krugerrands in all denominations, and also
Krugerrands that have been modified, as by the addition of a
clasp or hoop, so that they can be worn as jewelry. The
Krugerrands already in the United States are not affected by the
ban.
o 0 o
B-309
rREASURY NEWS
partment of the Treasury
• Washington, D.c. • Telephone 566-2041
ON NEW TIDES AND NEW DAWNS:
THE NEXT PHASE OF ECONOMIC POLICY REFORM
REMARKS BY
RICHARD G. DARMAN
DEPUTY SECRETARY OF THE TREASURY
BEFORE
THE BUSINESS COUNCIL
AT
THE HOMESTEAD
OCTOBER 11, 1985
I.
THE DARK BEFORE DAWN
Through a Glass Darkly
At your last meeting here, I had the opportunity to listen
to your economic advisers' report. It was ominous.
But that report was not alone in its dire forebodings.
Indeed, for the past few years, many conventional economic
analysts — even including some of our own — have been looking
through a glass rather darkly.
Many still are. I expect that today the distinguished
former CEA chairman — who will speak to you shortly — may
continue in the tradition that earned him the nickname
"Dr. Gloom." And just the other day, I noted that my very good
friend, the former budget Director known as "Dr. Pain," was also
still at it. He emerged from bookwriting in his cellar; and, a
little like a groundhog seeing light, he uttered a few sounds and
went back underground. "The joy ride is over," he said.
There was perhaps some irony in this -- coming as it did
from a person of new-found leisure who is about to enjoy the
benefits of entering two of the most highly-paid clubs in the
world:, those of Washington best-seller-writers (at rates of over
$5000 per page), and New York investment bankers (at multiples of
the identifiable value-added that some might judge to be
infinite 1).
Luckily, the gloomsayers have been consistently off the
mark. But I certainly don't mean to make light of dark visions.
B-310
- 2 -
There are obvious reasons for concern. Many important
economic variables are undesirably high: real interest rates,
the fiscal and trade deficits, the dollar, urban unemployment,
LDC debt (in relation to debt service capacity), and
protectionist sentiment. There is, in addition, the ridiculous
and seemingly absurd spectacle of our democratic political
institutions struggling to deal with such straightforward issues
as managing our fiscal affairs so as to avoid default.
II.
DAWN'S EARLY LIGHT
But at the risk of seeming too rosy in. the face of dark
reality, let me focus on what seem to me to be rays of hope —
we look toward the next phase of economic policy reform.
as
De-mythologizing Economics
The first is one that I doubt my economist friends would see
exactly as I do. I would give it this shorthand label:
"de-mythologizing economics."
Let me explain.
It is only since the Kennedy administration that economists
have gained a special place in the decisionmaking circles of
heads of state — like Churchmen at the table of a Jacobean king.
As it has happened, they have had the good fortune to have
enhanced the reputation of their profession by the timeliness of
their arrival at the table: Iz coincided with the decade of
growth stimulated not by economic wisdom, but by the Baby Boom,
the Great Society, and Viet Nam. As a curious consequence, the
presumed power of economic wisdom has risen, in some quarters, to
near mythic proportions.
The field of economics only recently gained for itself the
respectability of the label "science." In my view, that is of
questionable appropriateness.
The practical facts of the matter are these: Yes,
micro-economics is clearly useful — insofar as it is sensibly
applied mathematics. But macro-economics is still primitive.
And to think otherwise can be dangerous.
Macro-economic forecasts are often closer to each other than
they are to being correct. Indeed, respectable forecasters are
sometimes off by as much as plus or minus 2 percent of GNP for
the very quarter they are in. That range of error can be the
difference between healthy growth and recession. A comparable
error in the space program might have accidentally sent
Neil Armstrong toward Mars rather than the Moon.
- 3 -
I don't mean this criticism to be personal. Macroeconomics is handicapped by certain inherent limits upon
experimentation and analysis. These limits make it extremely
difficult for the field to develop reliable*"truths" (other than
those that seem obvious). It is important that these limits be
appreciated.
Nor would I mean to suggest that the Administration is
somehow free from these limits. On the contrary, the divergence
of views among competing schools within the Administration —
supply-siders, monetarists, and traditional austerity
advocates — reinforces my point: We are still a long way from
establishing definitive economic wisdom.
»
The good news, as I see it, is this: Not only have the
traditional gloomsayers been consistently wrong in recent years;
but also, there has been an increasing appreciation of the
fallibility of economics generally.
Why is that a reason for hope? Because excessive confidence
in the validity of any one point of view, when still untested,
can get a society into trouble. A bit less confidence in
pseudo-scientific wisdom can lead to a more prudential reliance
upon common sense. And it seems to me we are moving in that
direction.
Re-politicizing Economics
As economics has fallen from the purity of its claim to
"science," it has again been recognized as inescapably entwined
with politics. To my mind, that is a second hopeful development
(although I know it offends some of my purer friends). For
commonsensical economic wisdom cannot effectively be advanced in
a context of uncompromising hubris about theory: Economic
progress cannot be separated from realpolitik.
To be slightly less abstract:
o A purist's quest for "deregulation" may have much to
recommend it. A pragmatic quest for "regulatory
reasonableness" has the additional virtue of being
politically practicable.
o An absolute monetarist's quest for price stability
reflects a worthy objective. An eclectic approach may
have greater practical chance of achieving the desired
objective — in the real political world.
o "Free" trade may have a better chance of advancement
when combined with pragmatic attention to "fair" trade.
o A healthy floating exchange rate system may have a
better chance of surviving when combined with the
judicious use of intervention.
- 4 -
o
Short-run stabilization programs and market-oriented
changes in developing countries' internal policies may
have a better chance of advancement when combined with
practical sensitivity to the political need for..
sustainable economic growth.
In all these areas, it seems to me that one sees healthy signs of
an increasingly pragmatic connection between commonsense
economics and the dictates of realpolitik.
So, J.n short, I suppose I could say that I am optimistic for
exactly the reasons that make some people worry: I see less
confidence in theoretical absolutism and more attention to
political realism in the advancement of commbnsense economic
policies.
III. MANY SUNS, MANY MOONS
That said with regard to general attitude and approach, the
question remains: What is to be the likely focus in the next
phase of economic policy reform?
Obviously, tax reform is high on Treasury's and the
President's list — and it will be high on the Congress* list for
the weeks immediately ahead. Having spoken here on this subject
before, and having to speak on it every day in the Ways and Means
Committee markup, I take the liberty of passing over it quickly
in these remarks — with the intention of treating the subject in
response to any questions you may have.
Let me offer just four thoughts on this now.
o First: Periodic deathknells notwithstanding, tax
reform is coming. It is coming because the current
system is approaching a danger point in its loss of
public confidence; because the dynamics of the current
system are moving it toward self-destruction; and
because informed opinion is increasingly oriented
toward substantial reform. Exactly when and what
reform may be enacted is a matter of risky prediction.
But whether there will be substantial reform is not:
Significant reform is close to inescapable.
o Second: The Rostenkowski package will be improved as
it moves through the legislative process.
o Third: For those who insist upon linking tax reform
with the issue of U.S. competitiveness, a bit of
perspective may be useful. From the standpoint of
competitiveness, the change in the value of the dollar
on a single recent day, September 23, was more
significant than the elimination of the corporate
income tax would be.
- 5 -
o
Fourth: Though many of you will find Marty Feldstein's
thoughts on tax reform congenial, I suspect I will not.
So if you see me listening quietly as he speaks, please
interpret that as politeness.
In addition to tax reform, there are, of course, many other
significant substantive areas of economic policy reform that will
gain increased attention. These range from defense reforms
necessary to adapt to evident resource constraints, to middle
class entitlement program reforms, to the pursuit of freer trade
arrangements with Canada and the Pacific basin, to the
development of the next phase of the LDC debt strategy. The
substantive issues are, evidently, diverse.
But the general point I would wish to make in these remarks
is not about particular substantive reforms. It is, rather,
about procedural reforms. For it seems to me that a significant
distinguishing characteristic of the next phase of economic
policy reform may well come under the procedural heading.
Domestically, we are beginning to see this in the context of
the debate over the debt ceiling and the associated deficit
reduction amendments. The interesting and obvious thing to
observe in this otherwise bizarre spectacle is that the Congress
is, in effect, confessing that the current budget process is
flawed and must be changed. The existing process clearly lacks
both sufficient capacity to effect a coherent strategy and the
discipline to assure fiscal responsibility.
Deficits now are widely and visibly lamented by politicians
of divergent ideological persuasion and of consistent good will.
But the system has not satisfactorily forced closure on the
problem.
That now being acknowledged, there is a much greater
likelihood of attention to such procedural remedies as: line
item veto, enhanced recision authority, binding deficit targets,
balanced budget requirements, and self-executing deficit
reduction safeguards. A symptom of movement toward the latter —
self-executing deficit reduction safeguards — is the Senate's
recent passage of the Gramm-Rudman-Hollings amendment, on a
strong majority vote that stretched from Senator Kennedy to
Senator Helms.
All such procedural measures involve difficult issues of
balance-of-power between the Legislature and the Executive. But
in their differing ways, they have one politically crucial thing
in common: They provide a greater degree of "cover" — or an
easier excuse — for those who might wish to do what would
otherwise be unpopular.
In an era of seemingly boundless propensity to create debt,
some such cover is essential for effective discipline to be
imposed.
- 6 -
Internationally, I would suggest there is a somewhat
analogous need for procedural reform.
When I last spoke before this group, I suggested that the
annual economic summits of industrialized countries were of
limited substantive utility. I acknowledged and applauded their
symbolic and their interpersonal value. But I noted, as anyone .
who reads their communiques might, that they tend to be abstract,
repetitive, and rather unconnected with operational reality.
Yet since the summits' creation, they have become the
principal, political-level forum for international economic
policy coordination — such as it is.
In an era of increasingly acknowledged interdependence, this
seems anomalous.
I suggest what seems to me to be obvious: There needs to be
a stronger and more continuous means of coordinating the
development of economic policy among the major industrial
countries.
The recent reinvigoration of the so-called "Group of
Five" — most notably reflected in the New York meeting of
September 22nd — marks a useful procedural step forward in this
regard. Indeed, I would suggest that the extension of such
procedural reform could ultimately be of far greater long-term
significance than the move toward intervention that has been
speculated about in the press.
As in the case of domestic procedural reform, international
procedural reform seems clearly necessary to make strategy more
coherent and its implementation more disciplined. I'm inclined
to think its time is coming.
In both the domestic and the international contexts there
is no lack of powerful suns and moons, anxious to offer light.
The procedural trick is to find a way to get the relevant
luminaries into predictable and complementary orbits so that they
might better offer their light to our sometimes darkened world.
Perhaps my glasses are rose colored. But, again, I see rays
of hope.
IV.
NEW TIDE AND NEW DAWN
Indeed, I suppose I may verge on being cast as a veritable
Dr. Pangloss. But it seems to me that, notwithstanding the signs
of darkness, there is a rather bright prospect that one might
view.
- 7 -
In the Reagan era to date, America has stopped its slide
toward a European-style mixed economy; brought hyper-inflation
under control; begun to restore incentives for work,
entrepreneurship, and growth; and renewed confidence in the
American-style market economy. The international debt crisis has
been brought under reasonable management — although there is
obviously much to be done as we enter the next phase. In
differing ways, Europe, the PRC, Japan, and several important
developing countries have established at least the outlines of a
trend toward greater market-orientation in their internal
policies. And, notwithstanding the difficulties of adjustment,
counter-productive protectionist pressures have been resisted.
Admittedly, the twin deficits — fiscal* and trade — are
symptoms of a reform and adjustment process that is not yet
satisfactorily completed. But I would suggest that these two
deficits are themselves encouraging further healthy reform — not
least, in the form of procedural improvements that may bring more
coherence and discipline to both domestic and international
economic policy.
In my view, the reformist tide is still rising. The dark
that some see may be but the sign of yet another new dawn.
The only thing that worries me is that all this talk about
"new tide" and "new dawn" sounds like a soap opera. And in a
daily soap opera, there's no telling what tomorrow may bring.
rREASURY NEWS
partment of the Treasury • Washington, D.c. • Telephone 566-2041
FOR IMMEDIATE RELEASE
EXPECTED AT 10:00 A.M.
OCTOBER 16, 1985
STATEMENT OF ROBERT A. CORNELL
DEPUTY ASSISTANT SECRETARY
INTERNATIONAL TRADE AND INVESTMENT POLICY
UNITED STATES TREASURY
BEFORE THE SUBCOMMITTEE ON
INTERNATIONAL FINANCE, TRADE AND MONETARY POLICY
COMMITTEE ON BANKING, FINANCE AND URBAN AFFAIRS
UNITED STATES HOUSE OF REPRESENTATIVES
We are grateful to the subcommittee and to you, Mr.
Chairman, for permitting us to present the Administration's
initiative for a so-called War Chest to combat tied aid
credits. It is a major offensive in the President's campaign
against foreign unfair trade practices.
The legislation is
designed, to foster free and fair trade -- to establish a
balanced competitive environment where U.S. businesses can
compete fairly.
Our initiative is not designed to create a new subsidy
program to promote exports. This legislation purposely avoids
setting up an unfair^ trade practice of our own to mimic the
unfair trade practices of other countries. On the contrary,
the War Chest will provide the necessary leverage on governments to join the great majority of our industrial nation
trading partners and negotiate an end to the misuse of tied or
partially untied aid credits for predatory commercial purposes.
The Tied Aid Credit Problem
We should recognize at the outset that most of our negotiating objectives have been achieved in the field of export
credits. After several years of negotiations, the 22 OECD
nations revised the Arrangement on Export Credits in November
1983 to reduce greatly and in many instances eliminate export
credit subsidies.
In the last year, we further agreed to essentially eliminate financial subsidies for nuclear power projects and large
commercial aircraft.
Moreover, participating countries,
including France, agreed to prohibit the use of any tied aid
credits whatsoever in these two important sectors. These
B-311
- 2 agreements by OECD member governments are among the most significant recent advances in free trade.
With the reduction of export credit subsidies, however,
tied aid credits, which use aid alone or in combination with
normal export credit financing, have become a more important
problem for U.S. exporters.
The scope of the problem is
revealed by the following:
A recent OECD study, prepared at the behest of OECD Ministers, concluded that tied aid credits with low levels of
concessionality distort aid and trade more than credits
with high grant elements.
— The number of notified tied aid credits with low grant elements has doubled since 1982.
The OECD predicts that the amount of such offers will
increase to over $6.0 billion in 1985.
Although many other countries have adopted programs to
match France, French tied aid credits still account for
one-third of all tied aid credits with grant elements below
50 percent and more than one-half of all tied aid credits
with grant elements below 35 percent.
These credits, when used for commercial purposes in the
guise of foreign aid, represent an unfair trade practice, have
caused the United States to lose key export sales, and have
diverted funds away from development assistance.
Thus, the
continued use of commercially motivated tied aid credits
threatens to undermine the Arrangement and increase international trade tensions.
The Negotiating Impasse
The clearest, simplest, and most direct solution to the
problem of commercially motivated tied aid credits is to raise
the minimum permissible grant element from the current 25 percent to 50 percent, a proposal presented by the United States
to the OECD Export Credits Group in December 1983. While it
would not completely eliminate the problem, it would make the
cost of such credits so high that no country's aid budget could
sustain such a diversion from real economic development assistance.
Increasing the minimum permissible grant element to 50
percent is not so shocking as it may appear. The most recent
OECD Development Assistance Committee statistics show that the
average grant element of all aid provided by these countries
- 3 was almost 90 percent in recent years. If one excludes grants,
the average grant element of loans ranged between 56 and 59
percent.
To date, negotiations on tied aid credits have recorded
modest successes. In 1982, OECD governments agreed to ban tied
aid credits with a grant element below 20 percent. In April
1985, OECD Ministers improved discipline by raising the minimum
permissible grant element from 20 to 25 percent and improved
transparency through new prior notification and consultation
procedures.
The Ministers also directed OECD committees to
develop new measures to further improve discipline and transparency, in July the Export Credits Group reached agreement on
defining the tied aid credits which are causing the problem.
The U.S. Government welcomes these interim steps but,
unfortunately, we have now reached an impasse. While most
industrialized countries are prepared to accept greater discipline over tied aid credits, a few countries, notably France,
supported by Italy, are now blocking negotiating progress. At
the September 16-20 meeting of the OECD we were unable to make
progress primarily because the European Community — even with
the Ministerial mandate — had no flexibility to increase the
minimum grant element or to explore alternative solutions.
We need a new initiative to break this logjam. The Trade
Development and Enhancement Act of 1983, which created a tied
aid credit matching program, has not given us sufficient leverage.
Eximbank's ability to match has been limited since it
must draw down its dwindling capital and reserves for this
purpose.
USAID action has been limited by the country
allocation process and the requirement that its activities be
for legitimate development purposes. The U.S. Government has
thus offered only 12 tied aid credits since the bill was
enacted. As a result, selective matching by the United States
and more aggressive matching by other countries has not
deterred France from continuing to offer predatory tied aid
credits, nor has it encouraged France to negotiate.
The War Chest Initiative
To combat these unfair trade practices, the President has
announced the following new initiative:
The Secretary of the Treasury has submitted legislation to
authorize appropriations for a $300 million facility for
grants to mix with Eximbank credits or private sector
loans. The purpose of this program of tied aid grants is
to buttress the Administration's negotiating efforts to
eliminate predatory tied aid credits by other countries.
- 4 —
The Export-Import Bank will begin immediately to draw on
its capital and reserves to offer tied aid credits as a
temporary step until the proposed legislation is enacted.
— The Secretary of the Treasury, who has the lead in the
negotiations, has been directed to control the use of these
funds with the advice of the National Advisory Council on
International Monetary and Financial Policy, on which both
the Export-Import Bank and AID are represented. Since the
initiative is neither for export promotion nor economic
development assistance, the Export-Import Bank and the
Agency for International Development should not be asked to
administer it.
— The War Chest should be dismantled when sufficient negotiating progress has been achieved to restrict commercial use
of tied aid credits with low grant elements.
The Administration's proposal is designed (1) to maximize
negotiating leverage; (2) to avoid an open-ended entitlement
program; and (3) to minimize the budgetary impact.
Leverage: To maximize negotiating leverage, we seek a War
Chest of $300 million which would support up to $1 billion of
exports. The War Chest would be targeted at those sectors,and
markets of particular importance to countries impeding negotiations.
The program should be aggressive and preemptive, not a
program of merely matching tied aid credits. Other countries
have matching programs which have not caused the initiators to
agree to further discipline. Initiators retain the commercial
advantage of being sought out first by the customer.
If we
only matched foreign offers, we would perpetuate rather than
eliminate the practice, throwing good money after bad.
Consequently, we are proposing an offensive tied aid
credit program. In particular, we seek the authority to initiate tied aid credits and if necessary to outbid selected foreign tied aid credit offers in deals which are of particular
importance to countries blocking negotiations.
Cautionary Provisions: The proposed bill contains a
clearly defined purpose which ties the War Chest to U.S. negotiating objectives rather than establishing a permanent subsidy
and entitlement program. Treasury would control the fund. In
operating the fund and selecting transactions to be targeted,
however, we would rely heavily on the advice of the agencies in
the National Advisory Council.
In addition to a sunset provision of September 30, 1987, the President would have the
- 5 discretion to end the fund earlier if sufficient negotiating
progress has been achieved.
Budgetary Impact: The budgetary impact would be limited
by authorizing the use of grants rather than low interest loans
(which would require higher appropriations). By appropriating
the fund directly to the Department of the Treasury, we have
tried to ensure that the fund does not taint the objectives of
Eximbank and USAID nor divert funds from other important bilateral and multilateral assistance programs.
Conclusion
Tied aid credits and partially untied aid credits with low
levels of concessionality are increasingly undermining the
international system of trade and finance. Our War Chest initiative will greatly enhance our leverage to negotiate restrictions on the commercial uses of tied aid or partially untied
aid credits. In order to implement the President's attack on
unfair trade practices, we seek speedy enactment of our War
Chest initiative.
This legislation purposely avoids setting up an unfair
trade practice to match unfair trade practices of other countries. Such a course would ultimately injure all parties. Our
effort is to decrease, not increase, international tensions in
the field of trade finance. Our responsibilities lie in leveling the playing field for free and fair trade.
TREASURY NEWS
Department of the Treasury • Washington, D.c. • Telephone 566-2041
FOR RELEASE AT 4:00 P.M.
October 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 $13,800 million, to be issued October 24, 1985This offering will not provide new cash for the Treasury, as the maturing bills
are outstanding in the amount of $13,786 million. Tenders will be
received at Federal Reserve Banks and Branches and at the Bureau of
the Public Debt, Washington, D. C. 20239, prior to 1:00 p.m., Eastern
Daylight Saving time, Monday, October 21, 1985.
The two series
offered are as follows:
91-day bills (to maturity date) for approximately $6,900
million, representing an additional amount of bills dated
January 24, 1985,
and to mature January 23, 1986
(CUSIP No.
912794 JP 0), currently outstanding in the, amount of $15,888 million,
the additional and original bills to be freely interchangeable.
182-day bills for approximately $6,900 million, to be dated
October 24, 1985,
and to mature April 24, 1986
(CUSIP No.
912794 KC 7 ) .
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.
The bills will be issued for cash and in exchange for Treasury
bills maturing October 24, 1985.
Tenders from Federal Reserve
Banks for their own account 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. Federal Reserve
Banks currently hold $1,137 million as agents for foreign and international monetary authorities, and $2,413 million for their own
account. Tenders for bills to be maintained on the book-entry
records of the Department of the Treasury should be submitted on Form
PD 4632-2 (for 26-week series) or Form PD 4632-3 (for 13-week series).
B-312
TREASURY'S 13-, 26-, AND 52-WEEK BILL OFFERINGS, PAGE 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 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 book-entry
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.
4/85
TREASURY'S 13-, 26-, AND 52-WEEK BILL OFFERINGS, PAGE 3
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 whore 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 the issue date, in cash or other immediately-available funds
or in Treasury bills maturing on that date. 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,
19 84, 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.
4/85
TREASURY NEWS
apartment of the Treasury • Washington, D.c. • Telephone 566-2041
FOR IMMEDIATE RELEASE
October 15, 1985
RESULTS OF TREASURY'S WEEKLY BILL AUCTIONS
Tenders for $7,008 million of 13-week bills and for $7,015 million
of 26-week bills, both to be issued on October 17, 1985, were accepted today.
RANGE OF ACCEPTED
COMPETITIVE BIDS:
Low
High
Average
13-•week bills
maturing
Discount
Rate
January 16. 1986
J
Investment
Rate 1/
Price :
7.18Z
7.21Z
7.20Z
7.41Z
7.45Z
7.44Z
98.185
98.177 .
98.180 i
26-•week bills
maturing April 17. 1986
Discount Investment
Rate
Rate 1/
Price
7.35Z
7.37Z
7.36Z
7.74Z
7.76Z
7.75Z
96.284
96.274
96.279
Tenders at the high discount rate for the 13-week bills were allotted 12Z.
Tenders at the high discount rate for the 26-week bills were allotted 15Z.
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
$
42,330
16,105,130
28,945
157,645
61,185
73,625
1,650,620
70,605
41,695
77,385
39,080
1,389,920
360,855
42,330
5,808,050
28,945
57,645
48,685
53,105
297,420
50,605
16,695
66,200
29,080
148,160
360,855
$
68,990
24,260,005
:
28,275
33,335
i
:
193,970
69,140
J:
1,379,420
:
68,775
!
40,695
s
:
123,545
30,840
::
1,733,795
.
429,035
$20,099,020
$7,007,775
: $28,459,820
$7,014,855
$16,902,550
1,300,540
$18,203,090
$3,811,305
1,300,540
$5,111,845
i $25,468,175
:
1,086,145
: $26,554,320
1,582,030
1,582,030
:
1,500,000
$4,023,210
1,086,145
$5,109,355
1,500,000
313,900
313,900
:
405,500
405,500
$20,099,020
$7,007,775
$28,459,820
$7,014,855
1/ Equivalent coupon-issue yield
B-313
:
Accepted
$
*
$
38,990
5,915,625
25,690
33,335
78,470
34,140
124,720
47,925
15,695
55,545
20,840
194,845
429,035
TREASURY NEWS
epartment of the Treasury • Washington, D.c. • Telephone
October 16, 1985
DON FULLERTON APPOINTED
DEPUTY ASSISTANT SECRETARY FOR TAX ANALYSIS
Secretary of the Treasury James A. Baker today
announced the appointment of Don Fullerton, Associate
Professor of Economics, University of Virginia, and
Visiting Scholar, The American Enterprise Institute,
as Deputy Assistant Secretary of the Treasury
(Tax Analysis) effective October 3, 1985.
Dr. Fullerton, 32, will serve as chief economic
advisor to Assistant Secretary for Tax Policy
Ronald A. Pearlman, who has principal responsibility for
formulation and execution of United States domestic and
international tax policies. Fullerton replaces
Charles E. McLure Jr., who has returned to the Hoover
Institution at Stanford University.
Prior to joining the University of Virginia in
1984, Dr. Fullerton was Assistant Professor of Economics
and Public Affairs, Woodrow Wilson School and Department
of Economics, Princeton University, and a National
Fellow at the Hoover Institution.
He earned a B.A. economics degree from Cornell
University with distinction in all subjects in 1974.
He received a M.A. degree in economics in 1976 and his
Ph.D. degree in economics in 1978, both at the
University of California, Berkeley. He is the 1979
winner of the Outstanding Doctoral Dissertation Award of
the National Tax Association-Tax Institute of America.
Dr. Fullerton has also worked in the past for the
U.S. Treasury Department and the Department of Justice.
He is a member of the American Economic Association and
the National Tax Association, He is also a member of
the editorial advisory board of the National Tax Journal
and has been a referee for sixteen other economic
publica tions.
Dr. Fullerton is co-author of A General Equilibrium
Model for Tax Policy Evaluation and edited The Taxation
of Income from Capital: A Comparative Study of the
U.S., U.K., Sweden, and West Germany. He has also
published more than thirty articles on the economic
effects of tax policy.
Dr. Fullerton, a native of Virginia, is married to
Jo Worthy.
B-314
2041
TREASURY NEWS
apartment of the Treasury • Washington, D.c. • Telephone 566-2041
For Immediate Release
October 18, 1985
Contact: Art Siddon
Phone: (202) 566-2041
Remarks by Secretary of Treasury
James A. Baker, III
At the Liberty Gold Coin First Striking
West Point, New York
October 18, 1985
I am pleased to be here on behalf of one of the most cherished
symbols of America. To strike a coin in the image of the Statue of
Liberty is to strike a blow for freedom. It echoes the struggles and
triumphs of our past, when millions who "yearned to breathe free" came to
the new world.
In the old world, that yearning was called 'America fever.' It swept
from village to village, across a continent. It was spread by hundreds of
thousands of enthusiastic letters that poured in from relatives and
friends who had become Americans.
What was this 'America fever'? It was certainly a powerful
affliction that drew so many from so far through such hardship. They
summoned their courage and possessions and came across the vast reaches
of the ocean.
They — our own flesh and blood -- came for reasons that still drive
our souls today. They came for liberty, for economic opportunity, for a
chance to participate in the greatest and most successful experiment in
government the world has ever witnessed. As President Reagan summed it up
— "they were captured by the American dream."
Imagine the joy of those courageous voyagers when they first saw the
coastline where we now stand. Picture the sun highlighting a torch held
high by a shining goddess. She beckons. Hearts leap. The destination is
near .
Our duty to our country is to never forget why our ancestors felt
such joy. We must always appreciate the liberty that is the strength of
America .
B-315
-2-
Without freedom, despotism and despondency fill the void.
Spontaneity and innovation wither and die. Our economy no longer could
create millions of jobs and a half million or so new businesses every
year.
Without freedom, we are not America.
To reaffirm our belief in freedom, we preserve its symbols. This
summer, President Reagan signed the Liberty Coin legislation passed by
Congress.
One person today deserves special recognition for his leadership and
efforts in making the Liberty coins a reality.
Congressman Frank
Annunzio, the Chairman of the House Subcommittee on Consumer Affairs and
Coinage, wrote the bill that enables the Treasury Department to mint and
issue these coins.
He then shepherded the legislation through Congress.
We are pleased he could be with us on this important occasion.
As Kay Ortega mentioned, the Liberty coin program not only
commemorates the centennial of the Statue of Liberty, but it will play a
key role in raising money to restore both the Lady herself and Ellis
Island.
The proceeds will help the Foundation finish a job to which many
individuals and corporations have donated a great amount of time and
money .
All Americans, from schoolchildren to grandparents, may buy the
Liberty coins and help this vital restoration. They can follow in a
tradition which began in the 1880's when individuals in America and France
contributed so generously to the building of the statue.
We hope that millions of people will catch 'America fever' once more,
and participate in this historic venture. Then our children, and their
children, can look back, and say, "you know, way back in the 1980's,
Americans joined together to preserve a precious symbol of liberty."
Thank you.
o 0 o
rREASURY NEWS
partment of the Treasury • Washington, D.c. • Telephone 566-2041
For Release Upon Delivery
Expected at 9:30 p.m. EDT
Remarks by
Secretary of the Treasury
James A. Baker, III
At the African Wildlife Foundation Gala
Thursday, October 17, 1985
Vista International Hotel
Good evening, ladies and gentlemen. Susan and I are
delighted to be here with you this evening. We really enjoy
having this opportunity to see so many old friends. And since I
know you are looking forward to the auction, I'm not going to
spoil a pleasant occasion by holding the microphone too long.
I am impressed with the leadership in this room tonight. In
your organization's almost 25-year history, you have established
a distinguished reputation for your contributions to the problems
of natural resource conservation in Africa. That's a reflection
of the energy and attitude that make your organization unique.
Successful private sector initiatives, as well as good
campaigns and good government, come from the efforts of those who
get others to know and care about the public policy process,
whether it be in the United States or Africa.
I'm not a well-known environmentalist, but as an ardent
hunter and fisherman from the time I was six years old I have
become at the very least a closet conservationist. I love the
outdoors. I love clean air, and clean water. In short, I want
to see our natural heritage preserved.
I know we can all agree with the stated purpose of the
African Wildlife Foundation. That is, that the survival of
wildlife lies in a working knowledge of the relationship between
man, his economics and his environment. I'd like to talk for a
few minutes tonight about the application of that guiding
principle, both in Africa and in the United States.
B-316
-2Because I have been to Africa, I have been interested in the
press accounts of the drought. I have been struck by how rarely
the connection is made between the environmental decline and the
economic origins of the drought. Over the past twenty years or
so the economic and environmental situation of the region has
deteriorated dramatically, creating a spiral of crisis.
And according to a Congressional report, no other region of
the world has experienced a steady decline in food production per
capita over the past two decades. Africa's population growth is
the highest in the world and there is scant expectation for rapid
improvement. Food production isn't keeping pace with population
growth, and the current drought has aggravated an already
stressful situation.
Most of you know better than I the factors that contribute to
the problems: environmental limitations, inadequate incentives,
misguided or poorly developed management, insensitivity to
cultural and environmental conditions, failures by local
governments to provide adequate leadership, lack of political
infrastructure, and an underlying inability to evaluate and deal
with immediate problems, not to mention setting long-term
agendas.
One mechanism we in the United States have used to try to
address these problems has been foreign assistance — both
technical and financial. No group could be a better example than
this one of the traditional generosity of the American people in
private giving. And the record of public aid, especially to the
developing countries, is one of which we can all be proud. I
believe, at the risk of partisanship, that under Republican
presidents, our foreign aid programs have grown to reflect our
understanding of the humanitarian, economic, political, and
security benefits they produce.
I also believe that we are at an important crossroads today,
both in terms of private-sector and public-sector giving.
We must improve our assistance programs in ways that
encourage constructive activities within the economies of the
developing nations themselves. Developing countries currently
receive 40 percent of all U.S. exports and are the fastest
growing market, by value, for U.S. goods and services. Twenty
percent of U.S. farm acreage grows crops destined for developing
countries.
Agriculture is the central focus of the publicly funded
portion of American aid to Africa. The Agency for International
Development allocates about 60 percent of its African assistance
to agriculture, or approximately $150 million for the fiscal year
-3just ended. Foreign aid can be used to meet short- and long-term
goals. The short-term aid includes the kinds of projects that
have addressed emergencies such as the famine. Your work tends
to fall more naturally into the long-term category — research,
education, and other actions to promote future well-being.
There is a significant danger of seeking a solution to a
current crisis, without reference to the long-range goals. This
is the "quick-fix" mentality that President Reagan has been so
determined to avoid.
There is no clear-cut, "right" way to proceed. But we can, I
believe, focus the help we provide by recognizing some basic
facts.
o Africa is over twice the size of the United States.
o It is made up of 50 vastly different countries.
o It contains a wide range of climates, environments, and
a diversity of cultural, economic, and political
characteristics.
o About 70 percent of Africa's 400 million people live in
rural areas. They are primarily farmers and herders.
Yet these "low resource" farmers and herders provide
most of Africa's food.
We tend to lose sight of the vast cultural and environmental
differences. In the past, American assistance has been largely
based on western traditions — high technology, capital-intensive
investment, profit maximization. Slowly but surely, a consensus
is emerging that your organization has been supporting all along.
The technology that African economies need should be small-scale,
resource conserving (not capital intensive), locally produced,
adapted to local labor, and consistent with African traditions of
agriculture.
Let me reinforce that point with an analogy to American
political experience. The so-called Reagan Revolution draws its
lifeblood from the concept that political decisionmaking belongs
as close as possible to the people on whom the impact of the
decision will fall. The same is true in Africa. Local people
have an intimate knowledge of their own needs and environment,
and they are likely to be more receptive to development in which
they have a part to play.
Yes, the United States government has a role to play in
helping African countries solve their economic problems. The
current President of the American Association for the Advancement
-4of Science put it very well. "What they require from us is not
advice, but action alongside them in the task of hastening their
economic development. Belonging to the same world population, we
have as large a stake in the outcome as they do."
But national governments in Africa are facing some difficult
pressures. They have generally supported economic policies that
favor urban consumers at the expense of incentives for
low-resource producers. Prices paid to food producers have been
artificially low, while inflation and increased international
borrowing have encouraged imports of relatively inexpensive food
and consumer goods. Many governments are finding it difficult to
meet the standards imposed by the International Monetary Fund and
the World Bank while pursuing their own sometimes contradictory
national priorities.
Furthermore, African governments have shown a limited
commitment to controlling the degradation of Africa's natural
resource base. The problems of environmental degradation in
Africa are quite different from those in industrialized
countries. Development and industrialization are viewed as cures
for poverty rather than causes of environmental problems. And
there is considerable suspicion that by expressing concern for
the environment we are covertly trying to undermine industrial
development. Still, environmental awareness is gaining momentum
among Africa's political leadership.
Many African countries face deep-seated structural problems
associated with their being among the poorest countries in the
world. We are making special efforts to assist these countries.
Our bilateral aid to Africa last year was $1.7 billion! But more
can and should be done to improve their longer-term prospects.
Just recently in Seoul, Korea, at the Annual Meetings of the
International Monetary Fund and the World Bank, I proposed that
the $2.7 billion in IMF Trust Fund reflows be utilized, possibly
supplemented by funds from other sources, in support of
comprehensive economic programs for the poorest countries. The
effectiveness of such programs would be enhanced by close
cooperation between the Fund and Bank.
I would mention that the United States is also prepared to
consider a bolder approach, involving more intensive IMF and
World Bank collaboration. We believe that this apporach would
help ensure that the institutions provide sound, mutually
consistent advice on the full range of policies to promote
growth.
The United States would be prepared to consider seeking
additional resources in support of such a far-reaching approach
if other donors were prepared to make equitable contributions.
-5I'd like to share with you two quotations that capture the
need for structural change in the developing, debtor nations.
First:
"The only way to overcome our economic crisis is to tackle at
their root the structural problems of our economy to make it more
efficient and productive."
And second:
"Economic growth will have solid foundations only if we
reestablish trust and stimulate private enterprise, which must be
the flagship of our economic development.... We will promote
authentic institutional change in the economic sector."
These are not my words, as Secretary of the Treasury. They
are statements made independently in July of this year by the
Presidents of Mexico and Brazil.
The cornerstone of sustained growth for the African nations
must be the operation of the free market. Macroeconomic and
structural policies which improve economic efficiency, mobilize
domestic resources (such as the tourist trade), and provide
incentives to work, save, and invest domestically will create the
favorable economic environment necessary for this to occur.
So let me refocus our attention on the specific issue that
brought us all together here tonight — preserving the natural
environment, both for economic reasons as well as esthetic ones.
In the United States since World War II demand for land for
development has increased as the population has grown. The
pressure on available wilderness land triggered an environmental
revolution in the late 1960s and the early '70s.
According to environmentalist Rice Odell, "Population was
growing inexorably; pollution was increasing dangerously; land
was being desecrated relentlessly. At some point, these excesses
were bound to reach the limits of political endurance." Sounds
like a description of the African case, doesn't it? But Odell
was describing the political pressures that led to the Wilderness
Act of 1964 — the legislation that established today's
classification and management of our wilderness heritage.
So it is very clear that wildlife is both a critical economic
and social resource, hardpressed as it is by population and
agricultural pressures. But wildlife is part of a heritage that
blesses every continent on earth. To preserve this heritage will
require the hard work and the ingenious solutions of all of us.
My hat is off to all of you for the help you are providing to
Africans so that they can develop their own solutions.
-6Ladies and gentlemen, I have a favorite saying. It goes like
this. Destiny is not a matter of chance, it is a matter of
choice. it is not a thing to be waited for, it is a thing to be
achieved.
Well, the way I see it, we have an obligation to make the
choice and achieve. I've tried to live by the principle that we
have not inherited the earth from our fathers but are borrowing
it from our children. Thank you or as they say in East Africa,
asante.
FREASURY NEWS
apartment of the Treasury • Washington, D.c. • Telephone 566-2041
FOR RELEASE ON
October 18, 1985
FOR FUTURE INFORMATION
CALL : (202) 376-0477
FIRST STATUE OF LIBERTY GOLD AND SILVER COINS
STRUCK IN NEW YORK AND CALIFORNIA
Secretary of Treasury, James A. Baker, III today personally struck
the first STATUE OF LIBERTY $5 gold commemorative coin, one of three
commemorative coins that were authorized by Congress to be produced by
the United States Mint. Mintage of these coins is authorized by Public
Law 99-61, sponsored by Congressman Frank Annunzio of Illinois, adopted
by Congress and signed into law by the President on July 9, 1985.
Surcharges from the sale of these coins will be used for the restoration
and renovation of the Statue of Liberty and Ellis Island, and for
establishing an endowment fund for the future maintenance of the
monuments.
At the U.S. Bullion Depository at West Point, New York, Secretary
Baker struck the 90% gold, $5 coins before a group of distinguished
guests and U.S. coinage experts who were on hand to show their support of
the program. Joining him in striking additional gold coins at West Point
were Lee A. Iacocca, Chairman of the Statue of Liberty-Ellis Island
Centennial Commission; Katherine D. Ortega, Treasurer of the United
States; Donna Pope, Director of the United States Mint; and Congressman
Frank Annunzio.
After striking the first coins at West Point, Secretary Baker by
telephone gave the signal to the Deputy Director of the United States
Mint, Eugene Essner, at the U.S. Assay Office in San Francisco to strike
the first State of Liberty silver $1 coin and clad half dollar coin.
The coin production that began today will continue through 1986 at
U.S. Mint facilities in West Point, San Francisco, Denver, and
Philadelphia.
The simultaneous striking ceremonies provided those present with
their first look at the designs for the new coins.
B-317
The $5 gold coin, which contains .242 troy ounces gold, was
designed by Elizabeth Jones, Chief Sculptor Engraver of the United States.
The obverse of the $1 silver coin, which contains .77 troy ounces
silver, was designed by Mint Sculptor Engraver John Mercanti. The
reverse of the silver dollar was designed by Mint Sculptor Engraver
Mathew Peloso.
The cupronickel half dollar obverse was designed by Mint Sculptor
Engraver Edgar Z. Steever. The reverse was designed by Mint Sculptor
Engraver Sherl J. Winter.
Sales will include a surcharge of $35 for each Gold coin, $7 for
each Silver coin, and $2 for each half dollar coin. This surcharge will
be given to the foundation for restoration of the Statue of Liberty-Ellis
Island. Prices of the coins will range from $6.00 for the clad half
dollar to $439.50 for the six coin set in a cherrywood presentation
case. Additional price information and ordering instructions will be
distributed during the first week in November to customers on the
U.S. Mint's mailing list and to contributors to the Statue of Liberty
Foundation.
Others interested in receiving order forms should write to the
following address in order to receive the early November mailing from the
Mint.
The United States Mint
U.S. Liberty Coin Program
633 3rd Street N.W.
Washington, D.C. 20220
Pre-issue discounts will be given in orders received from
November 1, 1985 to December 31, 1985. Coins will be shipped to fill
individual orders in January 1986.
Consignment sales to financial institutions are scheduled to begin
in April 1986. Bulk sales to domestic and international dealers are also
scheduled to begin in April 1986.
TREASURY NEWS
apartment of the Treasury • Washington, D.c. • Telephone 566-2041
FOR RELEASE AT 4:00 P.M.
October 17, 1985
TREASURY TO AUCTION $9 ,250 MILLION OF 2-YEAR NOTES
The Department of the Treasury will auction $9,250 million
of 2-year notes to refund $8,120 million of 2-year notes maturing
October 31, 1985, and to raise about $1,125 million new cash.
The $8,120 million of maturing 2-year notes are those held by the
public, including $738 million currently held by Federal Reserve
Banks as agents for foreign and international monetary authorities.
In addition to the public holdings, Government accounts and
Federal Reserve Banks, for their own accounts, hold $942 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.
Due to the public debt limit and Treasury's need to plan
for the debt level on October 31, additional amounts of the notes
will not be issued to Federal Reserve Banks as agents for foreign
and international monetary authorities in this auction.
Details about the new security are given in the attached
highlights of the offering and in the official offering circular.
oOo
Attachment
B-318
HIGHLIGHTS OF TREASURY
OFFERING TO THE PUBLIC
OF 2-YEAR NOTES
TO BE ISSUED OCTOBER 31, 1985
October 17, 1985
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 .
$9,250 million
2-year notes
AB-1987
(CUSIP No. 912827 ST 0)
October 31, 1987
No provision
To be determined based on
the average of accepted bids
To be determined at auction
To be determined after auction
April 30 and October 31
$5,000
Yield auction
Must be expressed as an
annual yield, with two
decimals, e.g., 7.10%
Accepted in full at the average price up to $1,000,000
None
Accrued interest payable
by investor
Payment by nonFull payment to be
institutional investors
submitted with tender
Payment through Treasury Tax
and Loan (TT&L) Note Accounts ... Acceptable for TT&L Note
Option Depositaries
Deposit guarantee by
Acceptable
designated institution
Key Dates:
Receipt of tenders
Wednesday, October 23, 1985,
prior to 1:00 p.m., EDST
Settlement (final payment
due from institutions)
Thursday, October 31, 1985
a) cash or Federal funds
•
•
b) readily-collectible check .. Tuesday, October 29, 1985
•<*
o
CM
09
CD
WASHINGTON, D.C. 20220
a.
October 18, 1985
FEDERAL FINANCING BANK ACTIVITY
Francis X. Cavanaugh, Secretary, Federal Financing
Bank (FFB), announced the following activity for the
month of August 1985.
FFB ho ldings of obligations issued, sold or guaranteed by o ther Federal agencies totaled $152.9 billion
on August 3 1, 1985, posting a decrease of less than
$0.1 billio n from the level on July 31, 1985. This net
change was the result of an increase in holdings of
agency asse ts of $0.2 billion, a decline of $0.2 billion
in holdings of agency-guaranteed debt and a decline of
less than $ 0.1 billion in holdings of agency debt during
the month. FFB made 267 disbursements during August.
Attached to this release are tables presenting FFB
August loan activity and FFB holdings as of August 31, 1985
FFB did not enter into any new commitments during August.
# 0 #
B-319
• *
CD CM
CD CO
in CO
co m
"ederal financing bank
FOR IMMEDIATE RELEASE
CD
CO
CD
LL
Li.
Page 2 of 7
FEDERAL FINANCING BANK
AUGUST 1985 ACTIVITY
BORROWER
DATE
AMOUNT
OF ADVANCE
FINAL
MATURITY
INTEREST
RATE
(semiannual)
8/8/85
8/12/85
8/15/85
8/20/85
8/23/85
8/26/85
8/28/85
8/28/85
9/1/85
9/2/85
9/3/85
9/6/85
9/6/85
7.645%
7.665%
7.535%
7.515%
7.445%
7.475%
7.475%
7.385%
7.405%
7.405%
7.405%
7.405%
7.495%
10/29/85
11/5/85
11/13/85
11/13/85
11/13/85
9/18/85
11/19/85
11/21/85
7.645%
7.625%
7.535%
7.495%
7.495%
7.455%
7.475%
7.385%
INTEREST
RATE
(other than
semi-annual;
ON-BUDGET AGENCY DEBT
TENNESSEE VALLEY AUTHORITY
Advance
Advance
Advance
Advance
Advance
Advance
Advance
Advance
Advance
Advance
Advance
Advance
Advance
#496
#497
#498
#499
#500
#501
#502
#503
#504
#505
#506
#507
#508
8/1
8/5
8/8
8/12
8/15
8/20
8/20
8/23
8/28
8/28
8/28
8/28
8/31
$ 50,000,000.00
268,000,000.00
232,000,000.00
269,000,000.00
204,000,000.00
14,000,000.00
238,000,000.00
181,000,000.00
31,000,000.00
150,000,000.00
91,000,000.00
164,000,000.00
139,000,000.00
NATIONAL CREDIT UNION ADMINISTRATION
Central Liquidity Facility
+Note
•Note
+Note
Note
•tftote
+Note
-tftote
+Note
#344
#345
#346
#347
#348
#349
#350
#351
8/1
8/7
8/12
8/14
8/14
8/19
8/21
8/23
9,550,000.00
15,000,000.00
1,369,000.00
250,000.00
7,750,000.00
900,000.00
500,000.00
29,200,000.00
AGENCY ASSETS
FARMERS HOME ADMINISTRATION
Certificates of Beneficial Ownership
8/4
8/12
8/24
8/25
8/25
8/27
78,000,000.00
75,000,000.00
100,000,000.00
12,000,000.00
73,000,000.00
35,000,000.00
8/1/90
8/1/95
8/1/00
8/1/90
8/1/95
8/1/05
10.215%
10.495%
10.485%
9.795%
10.265%
10.745%
10.476%
10.770%
10.760%
10.035%
10.528%
11.034%
ann
ann
ann
ann
ann
ann
GOVERNMENT - GUARANTEED LOANS
DEPARTMENT OF DEFENSE
'
Foreign Military Sales
Jordan 10
Jordan 11
Liberia 10
Morocco 11
Egypt 6
Egypt 7
El Salvador
Morocco 11
Morocco 13
Greece 14
Bolivia 2
Egypt 7
Greece 15
Egypt 7
Greece 15
Jordan 10
>- rollover
8/2
8/2
8/2
8/2
8/9
8/9
8/14
8/16
8/16
8/20
8/21
8/21
8/21
8/22
8/22
8/22
6,215,746.15
12,150.60
47,896.15
7,409.54
178,878.70
1,136,145.17
105,951.78
73,202.20
12,327.83
56,950.80
319,069.00
1,566,229.60
1,314,000.00
491,339.42
14,811.49
931,914.85
3/10/92
11/15/92
5/15/95
9/8/95
4/15/14
7/31/14
6/10/96
9/8/95
5/31/96
4/30/11
11/22/95
7/31/14
6/15/12
7/31/14
6/15/12
3/10/92
9.829%
9.525%
10.607%
10.615%
10.815%
10.865%
10.625%
10.465%
10.135%
10.745%
10.272%
10.655%
10.455%
10.585%
10.355%
9.952%
?3ae
FEDERAL FINANCING BANK
AUGUST 1985 ACTIVITY
BORROWER
FDJA1
MATURITY
INTEREST
RATE
(semiannual
INTEREST
RATE
(other thar.
seri.i-anr.uaj.
DATE
AMOUNT
OF ADVANCE
8/22
8/23
8/26
8/26
8/20
8/28
8/30
8/30
$ 50,000.00
134,827.00
535,200.00
258,433.26
1,661,880.00
2,246,786.77
889,200.00
476,754.65
11/15/92
3/24/12
3/10/92
10/15/90
11/30/13
11/30/13
3/20/93
6/15/91
9.195%
10.605%
10.080%
8.170%
10.415%
10.402%
9.315%
9.745%
8/13
8/14
8/15
8/15
8/20
8/20
8/26
8/26
8/28
8/30
85,591.72
3,557,417.00
5,110.15
6,162,255.00
482,000.00
1,202,077.00
255,000.00
23,973.00
168,401.00
400,000.00
202,149.75
3,436,792.64
833,700.00
2,000,000.00
899,687.38
294,500.00
350,000.00
400,000.00
500,000.00
100,000.00
20,968,660.83
8/15/85
8/1/90
8/1/86
8/1/89
8/1/87
8/1/91
8/1/89
2/15/86
9/1/85
8/15/04
10/1/85
9/1/85
2/15/86
8/15/91
8/15/91
9/1/03
12/15/85
10/1/86
8/1/86
2/1/86
9/3/85
7.645%
9.567%
8.245%
9.502%
9.140%
9.915%
9.925%
8.035%
7.665%
10.811%
7.535%
7.445%
7.875%
9.769%
9.769%
10.474%
7.595%
8.175%
7.985%
7.545%
7.395%
8/14
283,987.16
10/1/92
10.014%
9.892% qtr.
12/31/19
8/3/87
1/3/17
12/31/10
8/5/87
12/31/15
8/6/87
8/7/87
12/31/15
9/30/87
1/2/18
12/3/85
9/30/87
8/12/87
8/12/87
8/10/88
12/31/12
8/12/87
8/10/88
8/10/88
8/12/87
10.878%
9.165%
10.927%
10.848%
9.275%
10.961%
9.255%
9.255%
10.961%
9.245%
10.886%
7.635%
9.108%
9.075%
9.075%
9.425%
10.787%
9.075%
9.425%
9.425%
9.075*
10.734% qtr.
9.062% qtr.
10.782% qtr.
10.705% qtr.
9.170% qtr.
10.815% qtr.
9.150% qtr.
9.150% qtr.
10.815% qtr.
9.141% qtr.
10.742% qtr.
7.591% qtr.
9.007% qtr.
8.974% qtr.
8.974% qtr.
9.31-% ctr.
10.645% Qtr.
8.974% atr.
9.317% qtr.
9.317% qtr.
8.9'74% qtr.
Foreign Military Sales (Cont'd)
Jordan 11
Turkey 13
Jordan 10
Niger 2
Turkey 17
Turkey 17
Indonesia 10
Spain 5
DEPARTMENT OF HOUSING & URBAN DEVEIOPMENT
Community Development
Lynn, MA
*Provo, UT
Woonsocket, RI
*Long Beach, CA
*Mayaguez, PR
* Ponce, PR
•Newburgh, NY
Newport News, VA
Detroit, MI
Chicago, IL
Westland, MI
Detroit, MI
Seaside, CA
•Simi Valley, CA
*Lynn, MA
Birmingham, AL
Yonkers, NY
Bellflower, CA
Maiden, MA
Indianapolis, IN
+Detroit, MI
8/1
8/1
8/1
8/1
8/1
8/1
8/1
8/5
8/5
8/8
8/8
9.796%
8.415%
9.728%
9.349%
10.161%
10.171%
8.052%
ann
ann
ann,
ann,
ann,
ann,
ann,
11.103% ann,
7.877%
10.008%
10.008%
10.748%
ann
arm
ann
ann
8.342% ann
8.133% ann
DEPARTMENT OF THE NAVY
Defense Production Act
Gila River Indian Community
?ION
RURAL ELECTRIFICATION ADMINISTRATION
Saluda River Electric #186
*S. Mississippi Electric #171
*Taconic Telephone #21
*S. Mississippi Electric #3
•S. Mississippi Electric #171
•Saluda River Electric #186
N.E. Mississippi Electric #217
Central Electric #131
KEPCO #282
Wolverine Power #274
•Western Illinois Power #225
Basin Electric #232
Central Electric #278
•Colorado Ute Electric #71
•Colorado Ute Electric #168
•Wolverine Valley Power #101
•Wolverine Valley Power #101
•Wabash Valley Power #104
•Wolverine Valley Power #182
•Wolverine Valley Power #183
•Wabash Valley Power #206
•ma>
follover
*ft>l
8/1
8/2
8/5
8/5
8/5
8/5
8/6
8/7
8/7
8/8
8/8
8/12
8/12
8/12
8/12
8/12
8/12
8/12
8/12
8/12
8/12
996,000.00
7,375,000.00
2,479,750.00
6,000.00
2,891,000.00
1,820,227.80
1,227,000.00
62,000.00
660,000.00
379,000.00
16,548,000.00
16,793,000.00
472,000.00
1,045,000.00
441,426.00
350,000.00
20,000.00
3,808,000.00
2,004,000.00
2,533,000.00
7,193,000.00
t^ct.- 4 ?:
FEDERAL FINANCING BANK
AUGUST 1985 ACTIVITY
DATE
BORROWER
.
*..-.
.-
•
AMOUNT
OF ADVANCE
FINAL
MATURITY
INTEREST
RATE
(semiannual)
I>7rEREST
RATE
(other than
seni-annual'
•
RURAL ELECTRIFICATION ADMINISTTtfVHON (Cont'd)
•Wolverine Valley Power #234
•Western Electric Power #i62
•Kansas Electric #216
•French Broad Electric #245
Corn Belt Power #292
•United Power #159
•Oglethorpe Power #74
•Oglethorpe Power #74
•Oglethorpe Power #150
•Oglethorpe Power #150
New Hampshire Electric #270
Associated Electric #132
Deseret G&T #211
East Kentucky Power #140
•Vermont Electric #193
•Cooperative Power #156
•Sam Rayburn G&T #228
•Cajun Electric #180
•Big Rivers Electric #58
•Big Rivers Electric #91
•Big Rivers Electric #143
•Big Rivers Electric #179 •
•Soyland Power #226
Oglethorpe Power #246
•United Power #67
•United Power #129
•United Power #139
•Colorado Ute Electric #203
•S. Mississippi Electric #3
•S. Mississippi Electric #90
KEPCO #282
Brazos Electric #230
•Wolverine Power #191
•East Kentucky Power #188
•Sho-Me Power #164
•Central Electric #128
•Upper Missouri G&T #172
•United Power #67
•United Power #86
•United Power #122
•United Power #129
•North Carolina Electric #268
•M&A Electric #111
•Kamo Electric #209
Colorado Ute Electric #203
Colorado Ute Electric #276
Deseret G&T #211
Plains Electric #300
•Associated Electric #132
•Associated Electric #132
•Associated Electric #132
•Associated Electric #132
•Associated Electric #132
•Associated Electric #132
•Associated Electric #132
•Associated Electric #132
•Associated Electric #132
8/12
8/12
8/12
8/12
8/13
8/15
8/15
8/15
8/15
8/15
8/15
8/15
8/16
8/16
8/19
8/19
8/20
8/21
8/21
8/21
8/22
8/22
8/22
8/22
8/22
8/22
8/22
8/23
8/23
8/23
8/26
8/26
8/26
8/26
8/26
8/27
8/28
8/29
8/29
8/29
8/29
8/29
8/29
8/29
8/30
8/30
8/30
8/30
8/30
8/30
8/30
8/30
8/30
8/30
8/30
8/30
8/30
$ 4,931,000.00
2,761,000.00
1,050,000.00
613,000.00
257,000.00
20,042,000.00
7,846,000.00
12,074,000.00
5,400,000.00
1,768,000.00
688,000.00
10,945,000.00
20,364,000.00
1,000,000.00
2,023,000.00
2,000,000.00
53,500,000.00
30,000,000.00
3,426,000.00
1,948,000.00
775,000.00
1,650,000.00
26,027,000.00
17,743,000.00
900,000.00
10,800,000.00
3,493,000.00
1,125,000.00
125,000.00
822,000.00
450,000.00
1,696,000.00
149,000.00
2,263,000.00
500,000.00
1,803,000.00
185,000.00
200,000.00
2,150,000.00
2,000,000.00
9,300,000.00
4,590,000.00
1,350,000.00
667,000.00
517,000.00
1,189,000.00
17,414,000.00
733,000.00
15,000,000.00
9,600,000.00
14,200,000.00
11,950,000.00
8,000,000.00
8,000,000.00
7,000,000.00
10,000,000.00
9,000,000.00
8/12/87
12/31/15
12/31/16
12/31/17
9/30/87
12/31/14
12/31/15
12/31A5
12/31/15
12/31/15
1/2/18
8/15/87
8/17/87
1/2/18
8/19/87
8/19/87
1/3/17
12/31A5
12/31/12
12/31/12
1/2/18
1/2/18
1/2/18
12/31/19
1/3/17
1/3/17
1/3/17
8/24/87
12/31/10
12/31/12
12/31/15
12/31/19
8/26/88
12/31/15
12/31/17
8/27/87
8/28/87
12/31/14
12/31/14
12/31/14
12/31/14
9/30/87
8/29/87
1/2/18
8/31/87
9/30/87
8/31/87
9/30/87
12/31/13
12/31/13
12/31/13
12/31/13
12/31/15
12/31A5
12/31/15
12/31/15
12/31/15
9.075%
10.782% '
10.779%
10.776%
9.115%
10.793%
10.789%
10.789%
10.789%
10.789%
10.782%
9.095%
9.085%
10.773%
9.035%
9.035%
10.650%
10.623%
10.621%
10.621%
10.577%
10.577%
10.577%
10.574%
10.578%
10.578%
10.578%
8.935%
10.389%
10.412%
10.576%
10.575%
9.325%
10.581%
10.578%
9.005%
8.935%
10.579%
10.579%
10.579%
10.579%
9.035%
8.975%
10.572%
8.945%
8.984%
8.945%
8.966%
10.540%
10.540%
10.540%
10.540%
10.537%
10.537%
10.537%
10.537%
10.537%
8/1/00
8/1/00
10.726%
10.726%
SMALL BUSINESS ADMINISTRATION
State & Local Development Company Debentures
Columbia Cascade CDC
St. Louis County L.D.C.
•maturity extension
8/7
8/7
26,000.00
32,000.00
8.974% qtr.
10.640% qtr.
10.638% qtr.
10.635% qtr.
9.013% qtr.
10.651% qtr.
10.647% qtr.
10.647% qtr.
10.647% qtr.
10.647% qtr.
10.640% qtr.
8.994% qtr.
8.984% qtr.
10.632% qtr.
8.935% qtr.
8.935% qtr.
10.512% qtr.
10.486% qtr.
10.484% qtr.
10.484% qtr.
10.441% qtr.
10.441% qtr.
10.441% qtr.
10.438% qtr.
10.442% qtr.
10.442% qtr.
10.442% qtr.
8.837% qtr.
10.257% qtr.
10.280% qtr.
10.440% qtr.
10.439% qtr.
9.219% qtr.
10.445% qtr.
10.442% qtr.
8.906% qtr.
8.837% qtr.
10.443% qtr.
10.443% qtr.
10.443% qtr.
10.443% qtr.
8.935% qtr.
8.877% qtr.
10.436% qtr.
8.847% qtr.
8.885% qtr.
8.847% qtr.
8.868% qtr.
10.405% qtr.
10.405% qtr.
10.405% qtr.
10.405% qtr,
10.402% qtr,
10.402% qtr
10.402% qtr
10.402% qtr
10.402% qtr
"EDEPAL FINANCING BANK
AUGUST 1985 ACTIVITY
BORROWER
DATE
AMOUNT
OF ADVANCE
FINAL
MATURITY
INTEREST
RATE
(semiannual)
State & Local Development Company Debentures (Cont'd)
Enterprise Dev. Corp.
8/7
Johnstown Area Reg. Indus. CDC 8/7
St. Louis Local Dev. Co.
8/7
Western Wisconsin Dev. Corp.
8/7
St. Louis County Local Dev. Co.8/7
Massachusetts CDC
8/7
Neuse River Dev. Authority, Inc8/7
Alabama Community Dev. Corp.
8/7
Wichita Area Dev., Inc.
8/7
Evergreen Community Dev. Assoc.8/7
San Diego County LDC
8/7
Indiana Statewide CDC
8/7
Milwaukee Economic Dev. Corp. 8/7
Business Gr. Corp. of Georgia 8/7
New Haven Com. Invest. Corp.
8A
Fort Worth Econ. Dev. Corp.
8/7
Boston Local Dev. Corp.
8A
Nine County Development, Inc. 8/7
Indiana Statewide C.D.C.
8A
Southern Dev. Council, Inc.
8/7
Com. Ec. Dev. Co. of Colorado 8 A
Columbus Countywide Dev. Corp. 8/7
Columbus Countywide Dev. Corp. 8 A
Commonwealth S.B.D. Corp.
8/7
E.C.I.A. Bus. Growth, Inc.
8A
Com. Ec. Dev. Co. of Colorado 8/7
Santee-Lynches Reg. Dev. Corp. 8/7
Crater Development Company
8/7
Four Rivers Development, Inc. 8 A
Iowa Business Growth Company
8/7
Business Dev. Go. of Nebraska 8 A
Indiana Statewide C.D.C.
8/7
Charlotte Cert. Dev. Corp.
8A
Cumberland Area Invest. Corp. 8/7
Opportunities Minnesota Inc.
8A
Middlesex County CDC Co.
8/7
Metropolitan Gr. & Dev. Corp. 8 A
Corp. for E.D. in Des Moines
8/7
Columbus Countywide Dev. Corp. 8 A
Cincinnati LDC
8A
East Boston LDC
8/7
Ft. Worth Ec. Dev. Corp.
8/7
Texas Cert. Dev. Co., Inc.
8A
Crown Dev. Corp. of Kings Cnty 8 A
Metro Area Dev. Corp.
8A
Region Eight Dev. Corp.
8A
Indiana Statewide C.D.C.
8A
Centralina Dev. Corp., Inc.
8A
Indiana Statewide C.D.C.
8A
Verd-Ark-Ca Dev. Corp.
8/7
Bay Area Employment Dev. Co.
8A
Long Island Dev. Corp.
8/7
Gold County CDC, Inc.
8/7
Gr. Spokane Bus. Dev. Assoc.
8/7
Neuse River Dev. Authority, Inc8A
Long Island Dev. Corp.
8/7
Alabama Community Dev. Corp.
8A
Columbus Countywide Dev. Corp. 8/7
Massachusetts Cert. Dev. Corp. 8 A
Cert. Dev. Co. of Mississippi 8/7
Long Island Dev. Corp.
8/1
San Diego County L.D.C.
8/7
Opportunities Minnesota Inc.
8A
$ 37,000.00
59 ,000.00
61 ,000.00
61 ,000.00
101 ,000.00
105 ,000.00
140 ,000.00
151 ,000.00
160 ,000.00
166 ,000.00
169 ,000.00
170 ,000.00
304 ,000.00
367 ,000.00
420 ,000.00
442 ,000.00
500 ,000.00
30 ,000.00
32,000.00
33 ,000.00
33 ,000.00
42 ,000.00
55,000.00
56 ,000.00
61 ,000.00
67 ,000.00
73 ,000.00
75 ,000.00
76 ,000.00
82 ,000.00
84 ,000.00
84 ,000.00
86 ,000.00
100 ,000.00
102 ,000.00
105 ,000.00
109 ,000.00
126 ,000.00
130 ,000.00
141 ,000.00
147 ,000.00
151 ,000.00
152 ,000.00
158 ,000.00
165 ,000.00
173,000.00
180 ,000.00
189,000.00
205 ,000.00
225 ,000.00
225 ,000.00
230 ,000.00
243 ,000.00
248 ,000.00
250 ,000.00
305 ,000.00
308 ,000.00
315 ,000.00
336 ,000.00
363 ,000.00
365 ,000.00
375 ,000.00
395 ,000.00
8/1/00
8/1/00
8/1/00
8/1/00
8/1/00
8/1/00
8/1/00
8/1/00
8/1/00
8/1/00
8/1/00
8/1/00
8/1/00
8/1/00
8/1/00
8/1/00
8/1/00
8/1/05
8/1/05
8/1/05
8/1/05
8/1/05
8/1/05
8/1/05
8/1/05
8/1/05
8/1/05
8/1/05
8/1/05
8/1/05
8/1/05
8/1/05
8/1/05
8/1/05
8/1/05
8/1/05
8/1/05
8/1/05
8/1/05
8/1/05
8/1/05
8/1/05
8/1/05
8/1/05
8/1/05
8/1/05
8/1/05
8/1/05
8/1/05
8/1/05
8/1/05
8/1/05
8/1/05
8/1/05
8/1/05
8/1/05
8/1/05
8/1/05
8/1/05
8/1/05
8/1/05
8/1/05
8/1/05
10.726%
10.726%
10.726%
10.726%
10.726%
10.726%
10.726%
10.726%
10.726%
10.726%
10.726%
10.726%
10.726%
10.726%
10.726%
10.726%
10.726%
10.896%
10.896%
10.896%
10.896%
10.896%
10.896%
10.896%
10.896%
10.896%
10.896%
10.896%
10.896%
10.896%
10.896%
10.896%
10.896%
10.896%
10.896%
10.896%
10.896%
10.896%
10.896%
10.896%
10.896%
10.896%
10.896%
10.896%
10.896%
10.896%
10.896%
10.896%
10.896%
10.896%
10.896%
10.896%
10.896%
10.896%
10.896%
10.896%
10.896%
10.896%
10.896%
10.896%
10.896%
10.896%
10.896%
I!tfTER£ST
RATE
'other than
sem-annuai
Paqe 6 o!
FEDERAL FINANCING BANK
AUGUST 1985 ACTIVITY
BORROWER
DATE
AMOUNT
OF ADVANCE
FINAL
MATURITY
INTEREST
RATE
(semiannual)
8/1/05
8/1/05
8/1/05
8/1/05
8/1/05
8/1/05
8/1/05
8/1/05
8/1/10
8/1/10
8/1/10
8/1/10
8/1/10
8/1/10
8/1/10
8/1/10
8/1/10
8/1/10
8/1/10
8/1/10
8/1/10
8/1/10
8/1/10
8/1/10
8/1/10
8/1/10
8/1/10
8/1A0
8/1/10
8/1/10
8/1/10
10.896%
10.896%
10.896%
10.896%
10.896%
10.896%
10.896%
10.896%
10.956%
10.956%
10.956%
10.956%
10.956%
10.956%
10.956%
10.956%
10.956%
10.956%
10.956%
10.956%
10.956%
10.956%
10.956%
10.956%
10.956%
10.956%
10.956%
10.956%
10.956%
10.956%
10.956%
8/1/88
8/1/88
8/1/90
8/1/90
8/1/90
8/1/90
8/1/90
8/1/92
8/1/95
8/1/95
8/1/95
8/1/95
8/1/95
8/1/95
8A / 9 5
8/1/95
8/1/95
8/1/95
8/1/95
9.305%
9.305%
9.855%
9.855%
9.855%
9.855%
9.855%
10.215%
10.345%
10.345%
10.345%
10.345%
10.345%
10.345%
10.345%
10.345%
10.345%
10.345%
10.345%
State & Local Development Company Debentures (Cont'd)
Mid-Atlantic CDC
.
8/7
Metro. Growth & Dev. Corp.
8/7
Massachusetts Cert. Dev. Corp. 8 A
Greater Southwest Kansas CDC
8/7
Metro. Growth & Dev. Corp.
8A
Greater Salt Lake Bus. Dis.
8/7
Dallas Small Bus. Corp., Inc. 8 A
La Habra Local Dev. Co., Inc. 8/7
City of Spartanburg Dev. Corp. 8 A
Region Nine D.C. & Plan. Corp. 8/7
Warren Redev. & Planning Corp. 8A
Centralina Dev. Corp., Inc.
8/7
Columbus Countywide Dev. Corp. 8A
Old Colorado City Dev. Co.
8/7
No. VA Local Dev. Co., Inc.
8A
Evergreen Community Dev. Assoc.8/7
Hamilton County Dev. Co., Inc. 8 A
8/7
Wilmington Local Dev. Corp.
Tucson Local Dev. Corp.
8A
San Diego County LDC
8/7
Charlotte Cert. Dev. Corp.
8A
San Diego County LDC
8/7
Southern Dev. Council, Inc.
8A
Corp. for B.A.,in New Jersey
Tucson Local Dev. Corp.
8/7
La Habra Local Dev. Co., Inc. 8 A
Charlotte CDC.
8/7
Railbelt Community Dev. Corp. 8 A
Greater Kenosha Dev. Corp.
8/7
E.D.F. of Sacramento, Inc.
8A
Quaker State CDC, Inc.
403,000.00
454,000.00
462,000.00
467,000.00
500,000.00
500,000.00
500,000.00
500,000.00
49,000.00
60,000.00
66,000.00
74,000.00
99,000.00
105,000.00
110,000.00
143,000.00
150,000.00
151,000.00
155,000.00
229,000.00
231,000.00
237,000.00
252,000.00
254,000.00
255,000.00
271,000.00
286,000.00
378,000.00
427,000.00
500,000.00
500,000.00
8/7
Small Business Investment Company
8/7Debentures
Chestnut Capital Int'l. II LP
Winfield Capital Corporation
Chestnut Capital Int'l. II LP
Grocers Sm. Bus. Inv. Corp.
Round Table Capital Corp.
Seafirst Capital Corporation
Western Financial Cap. Corp.
Chestnut Capital Int'l. II LP
Allied Investment Corp.
Brittany Capital Company
Clarion Capital Corporation
Clinton Capital Corporation
FAIC Capital Corporation
First SBIC of Alabama
Gill Capital Corporation
MVenture Corporation
Northeast Sm. Bus. Inv. Corp.
Pasadena Capital Corporation
Seafirst Capital Corporation
8/21
8/21
8/21
8/21
8/21
8/21
8/21
8/21
8/21
8/21
8/21
8/21
8/21
8/21
8/21
8/21
8/21
8/21
8/21
2,000,000.00
300,000.00
3,000,000.00
1,000,000.00
500,000.00
1,000,000.00
1,810,000.00
5,000,000.00
2,000,000.00
500,000.00
2,000,000.00
3,000,000.00
1,610,000.00
550,000.00
5,000,000.00
1,000,000.00
400,000.00
1,500,000.00
1,000,000.00
Seven States Energy Corporation
+Note A-85-11 8/30
+rollover
585,214,704.01
11/29/85
7.415%
INTEREST
RATE
(other than
semi-annual)
l>a<if 7 of 7
•KOKRAJ
Program
August 31, 1985
I'INANCING BANK HOLDING".
(in millions)
July 31, 1985
Net Change
8/1/85-8/31/85
Net Change—FY 19H5
10/1/84-8/31/85
On-Budget Agency Debt
'lennessee Valley Authority $ 14,455.0
l:x()ort-Import Bank
NCllA-Central Liquidity Facility
15,728.8
225.8
$ 14,463.0
15,728.8
225.2
720.0
73.8
720.0
73.8
-0-0-
63,779.0
109.0
126.1
6.1
3,536.7
33.3
63,546.0
109.0
126.1
233.0
18,090.0
5,000.0
-01,138.0
294.6
33.5
2,146.2
408.6
35.6
28.2
887.6
1,003.2
5.7
60.0
21,462.5
1,010.8
583.8
1,628.4
153.6
177.0
18,087.3
5,000.0
12.4
1,536.0
297.3
33.5
2,146.2
408.6
35.6
28.2
887.6
1,003.2
$
8.0
-00.6
$ 1,020.0
38.9
-43.1
off-Budget Agency Debt
U.S. Postal Service
U.S. Railway Association
-367.0
22.5t
Agency Assets
Farmers Home Administration
DHHS-Health Maintenance Org.
DHHS-Medical Facilities
Overseas Private Investment Corp.
Rural Electrification Admin.-CBO
Small Business Administration
6.1
3,536.7
33.8
-0-0-0-0-
4,268.0
-7.1
-5.8
-4.8
-0-
-0.6
-6.8
2.7
-0-
979.1
-12.4
-398.0
-2.7
-6.2
-151.1
86.4
Government-Guaranteed Lending
DOD-Foreign Military Sales
Dfid.-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
nOI-Guam Power Authority
DOI-Virgin Islands
NASA-Space Communications Co.
DON-Ship Lease Financing
IXJN-Defense Production Act
Oregon Veteran's Housing
Rural Electrification Admin.
SBA-Small Business Investment Cos.
SBA-State/Local Development Cos.
TVA-Seven States Energy Corp.
DOT-Section 511
DOT-WMATA
TOTALS^ $ 152,940.9
•figures may not total due to rounding
tre fleets adjustment for capitalized interest
5.4
60.0
21,364.1
980.5
565.3
1,611.4
153.6
177.0
$ 152,961.8
-0-0-0-0-0.1
-0-00.3
-098.4
30.4
18.5
17.0
-0-0$ -20.9
-0-
-0-32.3
-4.7
-0.4
-0.5
-67.0
1,003.2
2.6
60.0
875.4
150.5
229.2
72.9
-6.0
-0$ 8,105.6
TREASURY NEWS
Department of the Treasury • Washington, D.c. • Telephone 566-2041
October 18, 1985
Roger M. Cooper Appointed Deputy Assistant Secretary
for Information Systems
Roger M. Cooper was appointed as Deputy Assistant Secretary
for Information Systems for the Department of Treasury on
September 23, 1985. His office oversees computer hardware and
software, office automation, telecommunications support and
imaging technologies.
Since 1982, Mr. Cooper had served in the Veterans
Administration as Director of the Medical Information Resources
Management Office.
From 1974 to. 1982, Mr. Cooper worked for the Office of
Personnel Management (0PM), and its predecessor, the U.S. Civil
Service Commission. His responsibilities included Director of the
Office of Automated Systems Development and directing the
operation and management of the Federal Civil Service Retirement
System.
Mr. Cooper held various positions in the United States Navy
between 1964 to 1973. He was Chief, Automatic Data Processing
(ADP) Section at the Deputy Chief of Naval Operations (AIR), and
Director, Systems and Programming, Naval Security Station,
Washington, D.C.
In the private sector, Mr. Cooper worked in ADP managerial
positions with the California companies of Larwin Group, Inc.
(1973-74), and for Ducomraun, Inc.(1970-71) .
Mr. Cooper holds a BS, an MSA in operations research, and an
MBA from the University of California. He resides with his wife
Erica in Alexandria, Virginia. He was born in Scottsbluff, North
Dakota, on February 25, 1943.
B-320
TREASURY NEWS
department
of the Treasury • Washington, D.c.
• Telephone 566-2041
FOR RELEASE AT 12:00 NOON
October 18, 1985
TREASURY'S 52-WEEK BILL OFFERING
The Department of the Treasury, by this public notice,
invites tenders for approximately $8,300 million of 364-day
Treasury bills to be dated October 31, 1985, and to mature
October 30, 1986 (CUSIP No. 912794 KS 2 ) . This issue will not
provide new cash for the Treasury, as the maturing 52-week bill
is outstanding in the amount of $8,259 million. Tenders will be
received at Federal Reserve Banks and Branches and at the Bureau
of the Public Debt, Washington, D. C. 20239, prior to 1:00 p.m.,
Eastern Daylight Saving time, Thursday, October 24, 1985.
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.
The bills will be issued for cash and in exchange for
Treasury bills maturing October 31, 1985. In addition to the
maturing 52-week bills, there are $14,294 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 currently hold $2,563 million as
agents for foreign and international monetary authorities, and
$4,413 million for their own account. These amounts represent
the combined holdings of such accounts for the three issues of
maturing bills. Tenders from Federal Reserve Banks for their
own account and as agents for foreign and international monetary
authorities will be accepted at the weighted average bank discount rate of accepted competitive tenders. Due to the public
debt limit and Treasury's need to plan for the debt level on
October 31, additional amounts of the bills will not be issued
to Federal Reserve Banks as agents for foreign and international
monetary authorities in this auction. Tenders for bills to be
maintained on the book-entry records of the Department of the
Treasury should be submitted on Form PD 4632-1.
B-321
TREASURY'S 13-, 26-, AND 52-WEEK BILL OFFERINGS, PAGE 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 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 book-entry
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.
4/85
TREASURY'S 13-, 26-, AND 52-WEEK BILL OFFERINGS, PAGE 3
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 the issue date, in cash or other immediately-available funds
or in Treasury bills maturing on that date. 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,
19 84, 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.
4/85
TREASURY NEWS
lepartment of the Treasury • Washington, D.c. • Telephone 566-2041
STATEMENT OF THE HONORABLE DAVID D. QUEEN
ACTING ASSISTANT SECRETARY (ENFORCEMENT § OPERATIONS)
U.S. DEPARTMENT OF THE TREASURY
BEFORE THE SUBCOMMITTEE ON CRIME
COMMITTEE ON THE JUDICIARY
U.S. HOUSE OF REPRESENTATIVES
OCTOBER 17, 1985
Rewards for Information on Attacks Against
Federal Law Enforcement Personnel
Mr. Chairman and members of the Committee:
I sincerely appreciate the opportunity to appear before
you today. I am pleased to express the Treasury Department's
support for the concept of providing legislation that would
grant authority to pay rewards to citizens who provide
information on the killing or kidnapping of specified Federal
law enforcement personnel.
The concept of reward authority is a sound one: by
encouraging those who possess information to come forward, we
can expect that providing these rewards will aid in the
administration of justice. Even more important, it will serve
as a signal and a deterrent to the armed and vicious criminal
element, who have demonstrated time and again that they will
not hesitate to use deadly force against Federal law
enforcement agents.
Mr. Chairman, I would like to commend you and the members
of this Committee for taking up the subject of this legislation
and for expressing a deep concern for the safety of the Federal
officers involved. We welcome the opportunity to lend our
assistance in the development of this legislation.
With regard to specific legislation, both of the bills
before this Committee would fulfill the two basic purposes I
have mentioned. However, it is Treasury's view that House of
Representatives 2768, because of the refinements pointed out
earlier by the Department of Justice and mentioned here today
by Victoria Toensing, is a preferable version for a legislative
measure of this type. Our chief objection to Senate 630 is
that it would not extend the protection of the reward provision
to all law enforcement officers who are now engaged in the war
on drugs.
B-322
- 2
As this Committee is aware, three of Treasury's
bureaus—the Internal Revenue Service, U.S. Customs and the
Bureau of Alcohol, Tobacco and Firearms--have played major
roles in our country's fight against drug-related and organized
crime. Agents, inspectors and patrol officers from these
bureaus are deeply involved in the war on drugs, many of them
serving on the front lines against a vicious criminal underground. With great regularity, Customs agents intercept drug
smuggling aircraft and vessels manned by armed and dangerous
men. ATF confronts an equally dangerous adversary in going
after the weapons violators involved in the drug trade. Our
enemy is heavily armed, frequently with automatic weapons, and
our officers must constantly face the threat that violence
will erupt as they apprehend smugglers and other dangerous
offenders.
We deeply regret that recently we have lost several law
enforcement personnel in this struggle. Ariel Rios, an ATF
special agent, was killed during an undercover operation in
Miami on December 2, 1982. Another ATF agent, Alexander
D'Atri, was seriously wounded in the same incident. Special
Agent Eddie Benitez, also with the Bureau of Alcohol, Tobacco
and Firearms, was killed in Miami in the line of duty on July
8, 1983. Over the years, Customs has also lost officers
because of narcotics related violence.
Incidents such as these confirm the dangerousness of
law enforcement missions. As a nation, we owe much to these
officers, who are vital to our safety and well-being as a
society. We owe it to them to do whatever we can to reduce the
risk that attends their daily responsibilities. The reward
authority would, in my opinion, further this cause.
Mr. Chairman, this concludes my formal testimony. I
would be pleased to answer any questions that you and the
members of the Committee may have.
TREASURY NEWS
department of the Treasury • Washington, D.C. • Telephone 566-2041
FOR IMMEDIATE RELEASE
October 21, 1985
RESULTS OF TREASURY'S WEEKLY BILL AUCTIONS
Tenders for $6,903 million of 13-week bills and for $6,917 million
of 26-week bills, both to be Issued on October 24, 1985, were accepted today.
RANGE OF ACCEPTED
COMPETITIVE BIDS:
Low
High
Average
13-week bills
maturing January 23, 1986
Discount Investment
Rate
Price
Rate 1/
7.16%
7.19%
7.18%
7.39%
7.42%
7.41%
26-•week bills
!
maturing
Discount
Rate
April 24, 1986
Investment
Rate 1/
Price
98.190 !: 7.30%
98.183 ! • 7.33%
98.185 'i 7.32%
7.69%
7.72%
7.71%
96.309
96.294
96.299
Tenders at the high discount rate for the 13-week bills were allotted 13%.
Tenders at the high discount rate for the 26-week bills were allotted 2%.
TENDERS RECEIVED AND ACCEPTED
(In Thousands)
Accepted
Received
Received
Location
Boston
New York
Philadelphia
Cleveland
Richmond
Atlanta
Chicago
St. Louis
Minneapolis
Kansas City
Dallas
San Francisco
Treasury
TOTALS
Accepted
$
148,530
25,362,080
52,385
72,895
107,305
49,795
1,612,420
100,025
41,415
71,620
49,040
1,375,515
350,635
$
48,400
5,869,950
40,775
69,620
49,905
48,795
127,430
80,025
13,675
63,620
39,040
101,190
350,635
167,010
: $
:, 16,684,755
18,965
:
37,940
:
83,810
:
:
49,205
1,572,255
:
:
57,205
27,740
:
:
105,940
:
31,730
1,729,690
J•
:
403,390
$
87,010
5,497,635
18,965
37,940
54,210
33,325
206,775
17,205
16,760
105,940
21,830
415,790
403,390
$29,393,660
$6,903,060
s $20,969,635
$6,916,775
$26,544,260
1,308,065
$27,852,325
$4,053,660
1,308,065
$5,361,725
: $18,293,325
:
990,710
: $19,284,035
$4,240,465
990,710
$5,231,175
1,213,435
1,213,435
:
1,200,000
1,200,000
327,900
327,900
:
485,600
485,600
$29,393,660
$6,903,060
: $20,969,635
$6,916,775
Type
Competitive
Noncompetitive
Subtotal, Public
Federal Reserve
Foreign Official
Institutions
TOTALS
1/ Equivalent coupon-issue yield.
B-323
TREASURY NEWS
epartment of the Treasury • Washington, D.C. • Telephone 566-2041
STATEMENT OF THE HONORABLE
JAMES A. BAKER, III
SECRETARY OF THE TREASURY
BEFORE THE
COMMITTEE ON BANKING, FINANCE AND URBAN AFFAIRS
U.S. HOUSE OF REPRESENTATIVES
OCTOBER 22, 1985
Mr. Chairman, Members of the Committee:
I am pleased to have the opportunity to appear before you this
morning to discuss the annual meetings of the International
Monetary Fund and the World Bank. The recent report by your
Subcommittee on International Development Institutions and
Finance on Dealing with Debt, Rekindling Development contains
a number of ideas that entered into our thinking before the
meetings and provides solid evidence that the Congress and
the Administration are close in their views on international
financial issues.
For forty years, the International Monetary Fund and the World
Bank have been focal points for the international community's
effort to instill soundly based growth and development in the
world economy. These two international financial institutions
have compiled an impressive record of accomplishment, and the
United states remains firmly committed to working with other
members to maintain their strength and effectiveness.
During preparations for the annual meetings, it became clear
to us, as to your Subcommittee, that the key issue before the
world financial community was our ability to foster stronger,
sustained growth in developing nations. Considerable progress
has been made during the past three years in addressing the
immediate debt servicing problems of the developing nations
and in improving growth prospects in the industrial countries —
an essential foundation for growth in the developing world.
Indeed, since 1982 the aggregate current account deficit of the
developing countries has been reduced by more than half; their
growth rate has doubled; and their exports have improved
dramatically. This progress is attributable to adjustment
B-324
- 2 measures within the developing countries themselves, economic
recovery in the industrial nations, and financial support from
the commercial banks and the international financial institutions. The case-by-case international debt strategy adopted
three years ago has contributed significantly to this progress
and, on balance, has worked very well.
However, problems have arisen in certain areas. These include
the slippages in the domestic economic programs of several of
the principal debtor nations, particularly with regard to
their efforts to reduce inflation and to cut government budget
deficits. Net new lending by the commercial banks has also
declined abruptly, despite the significant improvement in
current account positions, reflecting a growing reluctance by
many banks to participate in new money and debt rescheduling
packages. The decline in new lending to nations which are
performing well is especially disturbing, since it undercuts
both their ability and their resolve to pursue essential
economic reforms.
These problems need to be addressed if progress is to be sustained. We must build upon, and strengthen, the current debt
strategy, while continuing to tailor our approach to the
particular circumstances of each individual country. Our
approach must encompass greater emphasis by the debtor nations
on policies which will improve growth prospects for the future,
as well as enhanced policy and financial support from the
international financial institutions and the banking community.
I proposed such an approach in my statement to the Joint
IMF/World Bank Annual Meeting. Our three-point "Program for
Sustained Growth" in the principal debtor nations constitutes,
in essence, the "next phase" of the global debt strategy. It
will require additional, concerted efforts to improve the
prospects for growth in these nations, with long-term benefits
for the entire global community.
I. The U.S. "Program for Sustained Growth"
Our proposed "Program for Sustained Growth" in the principal
debtor nations incorporates three essential and mutually
reinforcing elements:
First and foremost, the adoption by principal debtor
countries of comprehensive macroeconomic and structural
policies to promote growth and balance of payments
adjustment, and to reduce inflation;
Second, a continued central role for the IMF, in conjunction with increased and more effective structural and
sector adjustment lending by the multilateral development
banks (MDBs); and
- 3 Third, increased lending by the private banks.
In short, we believe that there must be greater emphasis on both
market-oriented economic policies to foster growth, and adequate
financing to support it. The concerns we have addressed and the
proposals we have made accord well with the ideas and recommendations in your Subcommittee's report. Permit me to expand
briefly on the actions that would be required by each participant in this three-point approach.
(1) Action by Principal Debtors
An essential prerequisite to resolving the economic difficulties
of the debtor countries is their adoption of sound fiscal,
monetary, and exchange rate policies to reduce both external and
domestic imbalances. For those countries which have implemented
measures to address these imbalances, a more comprehensive set
of policies can now be put in place, including both macroeconomic policies and longer-term supply-side, market oriented,
policies to promote growth.
Sustained growth in these countries will depend in large
measure on their ability to generate greater domestic savings,
to encourage the investment of those savings at home, and to
attract additional investment from abroad. In a number of
these countries, domestic savings have been sent and held
abroad rather than being used at home. In addition,
restrictions on profit remittances have discouraged equity
investment and increased reliance on foreign borrowing, which
increases the debt service burden. And inefficient public
sectors are absorbing resources which could be used more
productively in the private sector.
As a practical matter, it is unrealistic to call upon the
support of voluntary lending from abroad when domestic funds
are moving in the other direction. Capital flight must be
reversed if there is to be any real prospect of additional
funding.
Policies to address these problems should include marketdetermined interest rates, wages and prices as well as further
efforts to reduce inflation and budget deficits. We would also
like to see:
° increased reliance on the private sector, with a reduction in role of governments in the economy, to help
increase employment, production and efficiency;
° more supply-side actions to mobilize domestic savings
and facilitate efficient investment, by means of tax
reform, labor market reform and the development of
financial markets; and
- 4 ° greater emphasis on market-opening measures to
encourage foreign direct investment and capital
inflows, as well as to liberalize trade.
(2) Role of the International Financial Institutions
The IMF and the multilateral development banks have an important
role to play in this process, through encouraging the needed
policies in conjunction with their lending programs, as well as
helping to catalyze private bank financing.
Our debt strategy has emphasized the need to reduce both external
and domestic imbalances to help lay the basis for longer-term
growth. This has required a strong central role for the IMF in
the debt strategy. That central role should continue, as a
means of encouraging needed policy changes and catalyzing
capital flows. In some cases, the use of "enhanced surveillance"
may provide a sound basis for catalyzing financing in support of
good performers. In others, however, formal IMF programs with
greater emphasis on supply-side factors should be implemented.
Increased coordination with the World Bank will also be needed,
and it is appropriate that the MDBs also now play a stronger
role in the enhanced debt strategy.
The World Bank has made a serious effort to spur growth and
facilitate adjustment in a difficult economic environment.
Loans to major debtor countries account for a significant
share of IBRD lending. Fast-disbursing structural and sector
adjustment lending have also increased, and the Bank has
expanded its co-financing program to stimulate commercial
flows that would not otherwise be available.
The IFC with its expanded'capital base and the proposed
Multilateral Investment Guarantee Agency can play important
roles by improving the investment climate in developing
countries and acting as catalysts for non-debt private equity
flows. We believe the draft MIGA convention which we negotiated meets all our critical objectives and we intend to seek
congressional approval for U.S. participation in the FY 87
budget process.
We believe the world Bank, and indeed all MDBs, have considerable scope to build on current programs and resources.
There is ample room to expand the World Bank's structural
and sector adjustment lending in support of growth-oriented
policies, and institutional and sectoral reform. Since some
of the most serious debt problems are found in Latin America,
special emphasis should also be placed on strengthening the
Inter-American Development Bank's policies to enable it to
- 5 be a more effective partner in support of growth-oriented
structural reform. Appropriate debtor country performance
standards would be a pre-requisite for increased MDb adjustment support.
We believe a serious effort to develop the programs of the
World Bank and the IDB could raise their disbursements to
principal debtors to an average of $9 billion annually in the
period 1986-88. This would represent an increase of roughly
50 percent from the current annual level of nearly $6 billion.
Given the importance of increasing commercial bank flows to
the principal debtors, efforts to expand the World Bank's
co-financing operations should be pursued vigorously to help
borrowers attract private finance.
(3) Action by Commercial Banks
If creditor governments are to be called on to support
increases in MDB lending, and if recipient nations are asked
to adopt sound economic policies for growth, then there must
also be a corresponding commitment by the banking community
to help support the principal debtor countries as they make
the transition to stronger, sustained growth.
The commercial banks have rescheduled and rolled over nearly
$200 billion in developing nations' debt since 1982. Net new
bank lending to the principal debtor nations, however, has
declined from about $25 billion in 1982 to only $4 billion in
1984.
This reluctance to participate in new money and debt
rescheduling packages has introduced serious uncertainties for
borrowers, in some cases making it more difficult for them to
pursue economic reforms. Pledges of additional financing to
support growth oriented policies are an essential part of
a comprehensive growth program.
Our assessment of the commitment required by the banks to
principal troubled debtors would be net new lending in the
range of $20 billion for the next three years. In addition,
countries now receiving adequate financing from commercial
banks on a voluntary basis should continue to do so, provided
that they maintain sound policies.
We would like to see the banking community pledge publicly
to provide these amounts of new lending on the condition that
the debtor countries also make similar growth-oriented policy
commitments as their part of the cooperative effort.
- 6 If developing countries implement growth-oriented reform; if
commercial banks provide adequate increases in net new lending to good performers; and if increased demand for quality
IBRD lending demonstrates the need for increased World Bank
capital resources, we would be prepared to look seriously
at the timing and scope of a general capital increase.
Reaction to U.S. Proposal to Strengthen the Debt Strategy
It is clear that there are no easy solutions to the debt
problem, and that the road ahead will be difficult and
challenging.
The reaction to our proposal to strengthen the debt strategy
has been positive and encouraging. Obviously, a proposal of
this scope and magnitude will require further careful consideration by all interested parties. Nevertheless, I believe
there is broad agreement — among the industrial countries,
the debtor countries, the international financial institutions,
and the commercial banking community —- as to soundness of the
U.S. approach. There is also a confluence of interest among
the interested parties to accept their responsibilities and
to work to put in place a workable program which will ease the
financial constraints of the debtor countries while encouraging
sustainable long-term economic growth.
Since we made our proposal in Seoul, Chairman Volcker and I
have held consultations with senior officials of most of the
major U.S. banks which have outstanding loans to the principal
debtor nations. The U.S. banking community generally
recognizes its interest and responsibility in supporting
sustained growth in these nations. I am confident that it
will do its part by significantly increasing net new lending.
The precise mechanisms for doing so should be developed by the
banks themselves, and I am sure there are a number of possibilites which they will be exploring. I would emphasize,
however, that it is essential that banks from other countries —
who have an equally strong interest in these nations — also
participate in this exercise, and that their governments
encourage similar efforts on their part.
Each of the principal debtor nations, in our view, should begin
to consider comprehensive policy packages, which would be
developed on a case-by-case basis with the support of the
international financial institutions. I expect we will have
further discussions with the IMF, the World Bank, and with
some of the key countries involved regarding the possible
nature of such programs and their willingness to move in this
direction. Each country's program, of course, will need to
reflect its individual needs and circumstances.
- 7 We are hopeful that the U.S. proposal provides renewed impetus
for easing the debt problem, and we intend to continue working
with all parties to help improve the climate for growth and
stability in the world economy.
II. The Poorest Countries
Our efforts to strengthen the debt strategy have focussed on the
principal debtors which have access to borrowing in the private
markets. However, as your Subcommittee report stressed, there
is another group of countries — the very low-income developing
nations, primarily in Sub-Saharan Africa — which face severe
economic difficulties and protracted balance of payments
problems and are more dependent on official financing flows.
Special efforts are being made to assist these countries, but
more should be done to improve their longer-term prospects.
The United States believes that the $2.7 billion available from
IMF Trust Fund reflows through 1991 present us with a unique
opportunity to use IMF resources to provide a new significant
stimulus for growth in the poorest countries.
We therefore proposed a new Trust Fund program using the reflows
to provide concessional financing for these countries in support
of comprehensive economic programs. The programs themselves
would be designed to support growth-oriented adjustment through
the adoption of sound macro-economic policies and by removiny
structural impediments to produce, save, and invest. This
would require close Bank/Fund cooperation in the development
and implementation of the program.
Other participants in the Seoul meeting clearly shared the
United States desire to accord priority attention to the
difficulties of the low-income countries. Consequently, the
interim Committee endorsed the U.S. view that Trust Fund reflows
should be used to provide balance of payments support for lowincome countries implementing programs promoting structural
adjustment and growth. There was also a consensus on the
importance of the Fund working in close collaboration with the
World Bank.
However, the United States is prepared to consider a bolder
approach, to encompass joint IMF and World Bank programs and
financing to foster adjustment and catalyze additional sources
of financing for these poorest countries. I noted that we
were prepared to consider seeking resources in support of such
a well-coordinated approach if other donors were also prepared
to make equitable contributions.
- 8 However, a number of countries are concerned about the concept
of joint Fund/Bank operations. Nevertheless, it is our assessment that such joint programs would be a major, practical step
in ensuring consistent policy advice and coordinated financial
support. We continue to believe that this approach has considerable merit.
We will be pursuing this idea in the weeks ahead. As understanding of the proposal increases, I believe that others
will recognize that their initial concerns were unfounded and
that this approach constitutes a realistic and effective means
of addressing the problems of the poorest countries. We would
hope for final agreement along these lines by the end of the
year.
The International Development Association (IDA) is also of
major importance to the poorest and least creditworthy
countries. At a Special Meeting of IDA Deputies in Seoul, the
United States and more than thirty other IDA donors agreed to
continue working on an operational framework intended to
increase the effectiveness of IDA lending. There was also
agreement to begin negotiations on an eighth replenishment
of IDA to fund operations in the period after July 1, 1987.
The Administration will be consulting closely with the
Congress on these important negotiations.
Conclusion
In summary, the Seoul meetings reinforced the international
community's commitment to further action on the part of both
developed and developing countries to promote sustained economic
growth, to maintain necessary flows of capital, and to preserve
and expand open markets.
The approaches recommended by the United States in Seoul have
broad support and form a solid basis from which the international
community will be able to respond positively to the difficult and
complex debt problems we are likely to face over the next few
years.
From this perspective, the Seoul meetings represented a
timely and successful exercise of U.S. leadership in the
international economic arena.
Mr. Chairman, I believe the proposals we made in Seoul accord
well with a number of the key suggestions and ideas in your
Subcommittee's report. The report and the series of hearings
by your Subcommittee over the last seven months have made a
notable contribution to fulfilling our common responsibilities.
With an appreciation of your efforts, I look forward to our
discussion today and to working closely with you in the weeks
and months ahead on this Program for Sustained Growth. Thank
you.
TREASURY NEWS
epartment of the Treasury • Washington, D.C. • Telephone 566-2041
STATEMENT OF THE HONORABLE
JAMES A. BAKER, III
SECRETARY OF THE TREASURY
BEFORE THE
COMMITTEE ON FOREIGN RELATIONS
UNITED STATES SENATE
OCTOBER 23, 1985
Mr. Chairman, Members of the Committee:
I am pleased to have the opportunity to appear before you this
morning to discuss the annual meetings of the International
Monetary Fund and the World Bank and the U.S. proposals for
strengthening the international debt strategy.
For forty years, the International Monetary Fund and the World
Bank have been focal points for the international community's
effort to instill soundly based growth and development in the
world economy. These two international financial institutions
have compiled an impressive record of accomplishment, and the
United States remains firmly committed to working with other
members to maintain their strength and effectiveness.
During preparations for the annual meetings, it became clear
to us that the key issue before the world financial community
was our ability to foster stronger, sustained growth in developing nations. Considerable progress has been made during the
past three years in addressing the immediate debt servicing
problems of the developing nations and in improving growth
prospects in the industrial countries — an essential foundation
for growth in the developing world.
Indeed, since 1982 the aggregate current account deficit of the
developing countries has been reduced by more than half; their
growth rate has doubled; and their exports have improved dramatically. This progress is attributable to adjustment measures
within the developing countries themselves, economic recovery
in the industrial nations, and financial support from the
commercial banks and the international financial institutions.
The case-by-case international debt strategy adopted three
years ago has contributed significantly to this progress and,
on balance, has worked very well.
B-325
-2However, problems have arisen in certain areas. These include
slippages in the domestic economic programs of several of the
principal debtor nations, particularly with regard to their
efforts to reduce inflation and to cut government budget deficits.
Net new lending by the commercial banks has also declined abruptly,
despite the significant improvement in current account positions,
reflecting a growing reluctance by many banks to participate in
new money and debt rescheduling packages. The decline in new
lending to nations which are performing well is especially
disturbing, since it undercuts both their ability and their
resolve to pursue essential economic reforms.
These problems need to be addressed if progress is to be
sustained. We must build upon, and strengthen, the current
debt strategy, while continuing to tailor our approach to the
particular circumstances of each individual country. Our
approach must encompass greater emphasis by the debtor nations
on policies which will improve growth prospects for the future,
as well as enhanced policy and financial support from the
international financial institutions and the banking community.
I proposed such an approach in my statement to the Joint
IMF/World Bank Annual Meeting. Our three-point "Program for
Sustained Growth" in the principal debtor nations constitutes,
in essence, the "next phase" of the global debt strategy. It
will require additional, concerted efforts to improve the
prospects for growth in these nations, with long-term benefits
for the entire global community.
I would like to discuss this proposal in some detail with you
today.
The U.S. "Program for Sustained Growth"
Our proposed "Program for Sustained Growth" in the principal
debtor nations incorporates three essential and mutually
reinforcing elements:
First, and foremost, the adoption by principal debtor
countries of comprehensive macroeconomic and structural
policies to promote growth and balance of payments
adjustment, and to reduce inflation;
Second, a continued central role for the IMF, in
conjunction with increased and more effective structural
and sector adjustment lending by the multilateral
development banks (MDBs); and
Third, increased lending by the private banks.
- 3 In short, we believe that there must be greater emphasis on both
market-oriented economic policies to foster growth, and adequate
financing to support it. Permit me to expand briefly on the
actions that would be required by each participant in this
three-point approach.
(1) Action by Principal Debtors
An essential prerequisite to resolving the economic difficulties
of the debtor countries is their adoption of sound fiscal,
monetary, and exchange rate policies to reduce both external and
domestic imbalances. For those countries which have implemented
measures to address these imbalances, a more comprehensive set
of policies can now be put in place, including both macroeconomic policies and longer-term supply-side, market oriented,
policies to promote growth.
Sustained growth in these countries will depend in large
measure on their ability to generate greater domestic savings,
to encourage the investment of those savings at home, and to
attract additional investment from abroad. In a number of
these countries, domestic savings have been sent and held
abroad rather than being used at home. In addition, restrictions
on profit remittances have discouraged equity investment and
increased reliance on foreign borrowing, which increases the
debt service burden. And inefficient public sectors are absorbing
resources which could be used more productively in the private
sector.
As a practical matter, it is unrealistic to call upon the
support of voluntary lending from abroad when domestic funds
are moving in the other direction. Capital flight must be
reversed if there is to be any real prospect of additional
external financing.
Policies to address these problems should include marketdetermined interest rates, wages and prices as well as further
efforts to reduce inflation and budget deficits. We would also
like to see:
° increased reliance on the private sector, with a reduction
in role of governments in the economy, to help increase
employment, production and efficiency;
° more supply-side actions to mobilize domestic savings and
facilitate efficient investment, by means of tax reform,
labor market reform and the development of financial
markets; and
° greater emphasis on market-opening measures to encourage
foreign direct investment and capital inflows, as well as
to liberalize trade.
- 4 (2) Role of the International Financial Institutions
The IMF and the multilateral development banks have an important
role to play in this process, through encouraging the needed
policies in conjunction with their lending programs, as well as
helping to catalyze private bank financing.
Our debt strategy has emphasized the need to reduce both external
and domestic imbalances to help lay the basis for longer-term
growth. This has required a strong central role for the IMF in
the debt strategy. That central role should continue, as a
means of encouraging needed policy changes and catalyzing
capital flows. In some cases, the use of "enhanced surveillance"
may provide a sound basis for catalyzing financing in support of
good performers. In others, however, formal IMF programs with
greater emphasis on supply-side factors should be implemented.
Increased coordination with the World Bank will also be needed,
and it is appropriate that the MDBs also now play a stronger
role in the enhanced debt strategy.
The World Bank has made a serious effort to spur growth and
facilitate adjustment in a difficult economic environment.
Loans to major debtor countries account for a significant
share of IBRD lending. Fast-disbursing structural and sector
adjustment lending have also increased, and the Bank has
expanded its co-financing program to stimulate commercial
flows that would not otherwise be available.
The IFC with its expanded capital base and the proposed
Multilateral Investment Guarantee Agency can play important
roles by improving the investment climate in developing
countries and acting as catalysts for non-debt private equity
flows. We believe the draft MIGA convention which we negotiated
meets all our critical objectives and we intend to seek congressional approval for U.S. participation in the FY 87 budget
process.
We believe the World Bank, and indeed all MDBs, have considerable
scope to build on current programs and resources. There is
ample room to expand the World Bank's structural and sector
adjustment lending in support of growth-oriented policies,
and institutional and sectoral reform. Since some of the
most serious debt problems are found in Latin America, special
emphasis should also be placed on strengthening the InterAmerican Development Bank's policies to enable it to be a more
effective partner in support of growth-oriented structural
reform. Appropriate debtor country performance standards
would be a pre-requisite,for increased MDB adjustment support.
- 5 We believe a serious effort to develop the programs of the
World Bank and the IDB could raise their disbursements to
principal debtors to an average of $9 billion annually in the
period 1986-88. This would represent an increase of roughly
50 percent from the current annual level of nearly $6 billion.
Given the importance of increasing commercial bank flows to
the principal debtors, efforts to expand the World Bank's
co-financing operations should be pursued vigorously to help
borrowers attract private finance.
(3) Action by Commercial Banks
If creditor governments are to be called on to support increases
in MDB lending, and if recipient nations are asked to adopt
sound economic policies for growth, then there must also be a
corresponding commitment by the banking community to help
support the principal debtor countries as they make the
transition to stronger, sustained growth.
The commercial banks have rescheduled and rolled over
nearly $200 billion in these nations' debt since 1982. Net
new bank lending to the principal debtor nations, however,
has declined from about $25 billion in 1982 to only $4 billion
in 1984.
This reluctance to participate in new money and debt
rescheduling packages has introduced serious uncertainties for
borrowers, in some cases making it more difficult for them to
pursue economic reforms. Pledges of additional financing to
support growth oriented policies are an essential part of
a comprehensive growth program.
Our assessment of the commitment required by the banks to
principal troubled debtors would be net new lending in the
range of $20 billion for the next three years. In addition,
countries now receiving adequate financing from commercial
banks on a voluntary basis should continue to do so, provided
that they maintain sound policies.
We would like to see the banking community pledge publicly
to provide these amounts of new lending on the condition that
the debtor countries also make similar growth-oriented policy
commitments as their part of the cooperative effort.
U.S. regulatory agencies are on record as stating that, in
appropriate circumstances, new lending can help to improve the
quality of outstanding credit. In seeking a commitment from the
commercial banks, I would especially ask their boards of directors
to take a direct interest and a longer term view of the potential
benefits. If the Program for Sustained Growth works, all the
participants — including the banks — will be better off.
- 6 If it does not succeed, the banks as well as the borrowing
countries will be worse off. So, too, will the economies of
the major industrial countries.
If developing countries implement growth-oriented reform; if
commercial banks provide adequate increases in net new lending
to good performers; and if increased demand for quality IBRD
lending demonstrates the need for increased World Bank capital
resources, we would be prepared to look seriously at the timing
and scope of a general capital increase.
Reaction to U.S. Proposal to Strengthen the Debt Strategy
It is clear that there are no easy solutions to the debt
problem, and that the road ahead will be difficult and
challenging.
The reaction to our proposal to strengthen the debt strategy
has been positive and encouraging. Obviously, a proposal of
this scope and magnitude will require further careful consideration by all interested parties. Nevertheless, I believe
there is broad agreement — among the industrial countries,
the debtor countries, the international financial institutions,
and the commercial banking community — as to soundness of the
U.S. approach. There is also a confluence of interest among
the interested parties to accept their responsibilities and
to work to put in place a workable program which will ease the
financial constraints of the debtor countries while encouraging
sustainable long-term economic growth.
Since we made our proposal in Seoul, Chairman Volcker and I
have held consultations with senior officials of most of the
major U.S. banks which have outstanding loans to the principal
debtor nations. The U.S. banking community generally
recognizes, its interest and responsibility in supporting
sustained growth in these nations. I am confident that it
will do its part by significantly increasing net new lending.
The precise mechanisms for doing so should be developed by the
banks themselves, and I am sure there are a number of possibilities which they will be exploring. I would emphasize, however,
that it is essential that banks from other countries — who have
an equally strong interest in these nations — also participate
in this exercise, and that their governments encourage similar
efforts on their part.
Each of the principal debtor nations, in our view, should begin
to consider comprehensive policy packages, which would be developed
on a case-by-case basis with the support of the international
financial institutions. I expect we will have further
discussions with the IMF, the World Bank, and with some of the
key countries involved regarding the possible nature of such
programs and their willingness to move in this direction.
Each country's program, of course, will need to reflect its
individual needs and circumstances.
-7We are hopeful that the U.S. proposal provides renewed impetus
for easing the debt problem, and we intend to continue working
with all parties to help improve the climate for growth and
stability in the world economy.
The Poorest Countries
Our efforts to strengthen the debt strategy have focussed on the
principal debtors which have access to borrowing in the private
markets. However, there is another group of countries — the
very low-income developing nations, primarily in Sub-Saharan
Africa — which face severe economic difficulties and protracted
balance of payments problems and are more dependent on official
financing flows. Special efforts are being made to assist
these countries, but more should be done to improve their
longer-term prospects.
The United States believes that the $2.7 billion available from
IMF Trust Fund reflows through 1991 present us with a unique
opportunity to use IMF resources to provide a new significant
stimulus for growth in the poorest countries.
We therefore proposed in Seoul a new Trust Fund program using
the reflows to provide concessional financing for these countries
in support of comprehensive economic programs. The programs
themselves would be designed to support growth-oriented adjustment
through the adoption of sound macro-economic policies and by
removing structural impediments to produce, save, and invest.
This would require close Fund/Bank cooperation in the development
and implementation of the programs.
Other participants in the Seoul meeting clearly shared the
United States desire to accord priority attention to the difficulties of the low-income countries. Consequently, the Interim
Committee endorsed the U.S. view that Trust Fund reflows should
be used to provide balance of payments support for low-income
countries implementing programs promoting structural adjustment
and growth. There was also a consensus on the importance of
the Fund working in close collaboration with the World Bank.
However, the United States is also prepared to consider a
bolder approach, to encompass joint IMF and World Bank programs
and financing to foster adjustment and catalyze additional
sources of financing for these poorest countries. I noted
that we were prepared to consider seeking resources in support
of such a well-coordinated approach if other donors were also
prepared to make equitable contributions.
However, a number of countries are concerned about the concept
of joint Fund/Bank operations. Nevertheless, it is our assessment
that such joint programs would be a major, practical step in
ensuring consistent policy advice and coordinated financial
support. We continue to believe that this approach has
considerable merit.
-8We will be pursuing this idea in the weeks ahead. As understanding of the proposal increases, I believe that others will recognize
that their initial concerns were unfounded and that this approach
constitutes a realistic and effective means of addressing the
problems of the poorest countries. We would hope for final
agreement along these lines by the end of the year.
The International Development Association (IDA) is also of major
importance to the poorest and least creditworthy countries.
At a Special Meeting of IDA Deputies in Seoul, the United States
and more than thirty other IDA donors agreed to continue working
on an operational framework intended to increase the effectiveness
of IDA lending. There was also agreement to begin negotiations
on an eighth replenishment of IDA to fund operations in the
period after July 1, 1987. The Administration will be consulting
closely with the Congress on these important negotiations.
Conclusion
In summary, the Seoul meetings reinforced the international
community's commitment to further action on the part of both
developed and developing countries to promote sustained economic
growth, to maintain necessary flows of capital, and to preserve
and expand open markets.
The approaches recommended by the United States in Seoul have
broad support and form a solid basis from which the international
community will be able to respond positively to the difficult and
complex debt problems we are likely to face over the next few
years.
From this perspective, the Seoul meetings represented a timely
and successful exercise of U.S. leadership in the international
economic arena.
Once again, Mr. Chairman, I would like to express my appreciation
for this opportunity to appear before this Committee today,
and I look forward to hearing your views on the issues which I
have discussed.
Thank you.
'REASURY NEWS
artment of the Treasury • Washington, D.C. • Telephone 566-2041
October 22, 1985
TREASURY LETTER ON DEBT CEILING
The attached letter was sent October 22, 1985 to all conferees
appointed to House Joint Resolution 372.
I H L SECRETARY OF THE TREASURY
WASHINGTON <
October 22, 1985
Dear Dan:
As you participate in the conference on H.J. Res. 372 to increase
the debt limit, I want to bring you up to date on where we stand
and what actions Treasury will and will not take. We find
ourselves in a position where continued Congressional inaction has
moved the Treasury's position from sound financial management to
unnecessary crisis management. I hope that a full explanation of
^our projections and intentions will allow responsible action to
^void costly continuation of this unseemly situation. By so
acting, the United States will once again be able to raise funds
to meet its lawful obligations without engaging in activities that
'erode confidence in our financial system.
Contrary to some assertions, Treasury's cash and debt projections
and other information provided to the Congress since early
September have been very accurate. In testimony on September 10,
Treasury informed Congress that failure to pass a debt limit
extension would result in our (1) reaching the debt ceiling and
(2) becoming unable to invest fully several trust funds starting
on September 30, with a consequent loss of interest to those
funds. In a series of letters starting September 25, we warned
Congress that our cash balances would be virtually exhausted on
October 7, reaching a zero or negative balance on October 8. The
testimony and letters predicted exactly what actually happened.
In those same letters, we stated our strong reluctance to adopt
the suggestion of Congressional staff that we use the Federal
Financing Bank's non-debt-limit borrowing authority, calling such
an action "unprecedented and questionable." We made clear, also,
that if the Congress failed to act on the debt ceiling, we would
have to choose between the FFB option and an unprecedented United
States government default. Faced with Congressional inaction and
the prospect of certain default on October 9, we used $5 billion
of the FFB authority.
We have taken every action ever used by this Department to raise
cash within the debt limit. Moreover, we have taken the
additional step of using the FFB's borrowing authority to avoid
default. These actions have not been without costs. Since
September, the failure of Congress to increase the debt limit has
resulted in non-investment of trust funds, costly delays of
auctions, and uncertainty throughout the capital markets. Over
$50 billion of financing that would otherwise have taken place
over several months beginning in September is now confronting the
markets. The uncertainty and delay will likely cost the American
LdA^ctyei millions of dollars.
- 2 - •
Our current cash projections indicate that even if we use the
remaining $10 billion FFB borrowing authority, we will have a
negative balance on November 1, widening to a negative balance of
over $5 billion by November 4. I intend to use the FFB borrowing
authority, again reluctantly. But you should be aware that,
subject to estimating error, it cannot get us through November 1.
The negative numbers starting on November 4, moreover, are so
large as to be outside the margin of error.
Some Members of Congress have suggested that, in order to provide
Congress with yet more time, we should take the further extraordinary step of disinvesting trust funds (social security,
military retirement, civil service retirement, and railroad
retirement) in advance of payment of benefits to permit payment of
those benefits starting November 1. (This option was not
available on October 8, as October benefits had already been
paid.) Taking this action will result in additional interest loss
to the funds and further frustration of our financing schedule.
Moreover, it may raise questions in the minds of present and
future recipients of trust fund benefits—principally
pensioners--about why they have become involved in the debt limit
process. Nevertheless, having discussed this matter with the
President and the Attorney General, we are reluctantly prepared
to take this action on October 31 if Congress once again fails to
act to resolve the debt limit impasse.
It is essential that Congress recognize that, even if trust funds
were disinvested to avoid a November 1 default, we would certainly
default on November 15 unless Congress acted before then to
increase the debt limit. That default, which would involve
reneging on the principal and interest of United States securities
held by both Americans and foreigners, would have swift and severe
domestic and international repercussions. No longer would
investors view United States securities as riskfree, and a
substantial financing price would have to be paid. Any increase
in the benchmark Treasury rate would probably adversely affect
general interest rates, with negative effects on both the deficit
and the economy.
I have spent the past week reviewing the known legal and practical
options and have concluded that there are no means available to
avoid default that would not be a stark evasion of the debt limit
statute--with the possible exception of the sale of United States
gold holdings. The President and I are not prepared to take that
step because it would undercut confidence here and abroad based on
the widespread belief that the gold reserve is the foundation of
our financial system, and because the Congress clearly has the
power to prevent a default by assuming its responsibility with
respect to the debt limit.
- z/I sincerely hope you will take prompt action to avoid further
exacerbation of this unnecessary and unfortunate situation.
Sincerely,
Baker, III
The Honorable Dan Rostenkowski
Vice Chairman, Conference on H.J. Res. 372
House of Representatives
Washington, D. C. 20515
TREASURY NEWS
epartment of the Treasury • Washington, D.c. • Telephone 566-2041
STATEMENT OF THE HONORABLE DAVID C. MULFORD
ASSISTANT SECRETARY OF THE TREASURY
FOR INTERNATIONAL AFFAIRS
BEFORE THE
SENATE COMMITTEE ON BANKING, HOUSING, AND URBAN AFFAIRS
SUBCOMMITTEE ON INTERNATIONAL FINANCE
AND MONETARY POLICY
Washington, D.C.
October 23, 1985
The Group of Five Meeting and Announcement:
Context and Perspective
Mr. Chairman, Members of the Committee:
I welcome this opportunity to present the Treasury
Department's views on the important issues your Subcommittee
has under consideration. I appreciate your interest in the
September 22 announcement of the G-5 Finance Ministers and
Central Bank Governors, and how it will work to reduce economic
imbalances, at home arid abroad.
The G-5 Announcement is important for several reasons.
Most significant is the content of the Announcement itself and
its positive implications for future economic policies and
performance. It will promote sustained growth and adjustment of
external imbalances among our countries. The Announcement also
reflects close cooperation and consultations among the major
industrial countries. Along with the President's trade policy
action plan and our initiative in Seoul on the international debt
strategy, it constitutes a key element in our efforts to address
current international economic problems and their effects on the
U.S. economy.
Three features of the Announcement should be highlighted:
1) it draws attention to changes already occurring in
economic fundamentals here and abroad;
2) it affirms the strong prospects for continuing
favorable changes in economic fundamentals;
B-326
- 2 3)
it outlines the intentions of the G-5 governments to
pursue additional, specific policies to sustain and
accelerate the changes in economic performance and
policies.
I will focus on these three areas in my testimony.
Evolution of U.S. Current Account Position and the Strong Dollar
Since our trade and current account deficits and the strength
of the dollar exchange rate reflect the cumulative impact of a
number of forces over the past few years, it is important first to
examine how the present situation arose. In 1980, the beginning
of the period of sustained dollar appreciation, the U.S. had a
merchandise trade deficit of $26 billion. But we had a surplus on
our services balance larger than our trade deficit, so the balance
on goods and services — the current account — was in surplus by
$2 billion. Over the period 1980-84 the trade deficit grew,
reaching $108 billion on a balance of payments basis last year.
At the same time the services surplus fell. As a result the
current account shifted from surplus to deficit in 1982, and
reached a deficit of $102 billion in 1984. Over this same period,
end-1980 to end-1984, the dollar appreciated 41 percent on a
trade-weighted basis against the major (G-10) foreign currencies.
The dollar peaked against major foreign currencies on February 26,
1985.
Underlying this deterioration of our external accounts -and the strong dollar — were two fundamental factors:
strong economic performance in the U.S. relative to
other major industrial countries; and
— the LDC debt situation.
A. Disparities in Economic Performance
You are all well aware of the vigorous U.S. expansion and our
strong gains in employment since 1982. The performance of our
trading partners, however, was relatively weak over this period,
coinciding with the period of dollar appreciation, mid-1980 to
end-February 1985.
For example, at the end of 1984 industrial production in the
United States was 11 percent higher than it was 4 years earlier,
despite a year long recession in 1982. In contrast, industrial
production in Europe at the end of 1984 was essentially unchanged
from its 1980 level. There have also been stark performance
differences in a broader measure of output — real GNP. Our GNP
in the fourth quarter of 1984 was 12 percent higher than during
the recession's trough in 1982. Real GNP in the other major
industrial countries rose only 7 percent over the same period and,
in Europe alone, only 4 percent.
- 3 This was a reversal of historical trends. During the
Sixties, the U.S. economy grew at an average annual rate of 4.2
percent; the rest of the industrial countries grew at a 6.2
percent rate. During the Seventies the growth gap narrowed. We
grew 3.1 percent a year on average and our major partners grew
3.8 percent. During 1982-84, our relative growth rates reversed:
we grew at an average 5.3 percent, while the other industrial
countries grew 2.7 percent. Contrary to patterns in the late
1960s and 1970s when Japanese economic growth was appreciably
stronger than that of the U.S., in 1983 and 1984 the U.S. economy
expanded more rapidly than the Japanese economy.
U.S. inflation performance also improved markedly, relative
to Europe, between 1980 and 1984. The U.S. inflation rate fell
from 13.5 percent in 1980 to 4.3 percent in 1984, an improvement
of over 9 percentage points. Inflation in the four major European
countries fell from an average of 12.8 percent in 1980 to 5.9
percent in 1984, an improvement of 6.9 percentage points.
Why has U.S. performance been so strong relative to Europe in
particular? The answer is found in the economic policies pursued
by the Administration and Congress over the past five years.
Anti-inflation efforts, deregulation, tax reductions, and a shift
both in attitude and behavior towards free markets stimulated
investment and increased rates of return to entrepreneurship. The
dynamic and flexible environment produced by these policies is
reflected in the creation of over 8-1/2 million jobs during the
current expansion.
By contrast, European growth and job creation have been
hampered by policies that, have limited their economies' ability to
adapt to changing economic circumstances. For example, an array
of hiring and firing regulations and generous unemployment benefits have raised the cost to firms of taking on new workers and
reduced the desire of workers to seek new jobs. Europe lost over
half a million jobs during 1982-84 — at a time of positive growth,
These differences in economic performance had a strong impact
on the trade balance and the dollar over the past five years:
Stronger U.S. growth relative to our major trading
partners resulted in strong U.S. import growth and weak
export growth. As a rule of thumb, each one percent of
U.S. GNP growth raises our imports by $9.5 billion; each
one percent of growth by the other major countries
increases U.S. exports by $4.5 billion.
With respect to Japan, a more important factor than the
growth differential in our weak export growth has been
the closed nature of Japan's tradeable goods sector.
Solid expansion of Japanese GNP since 1980 has not
produced much U.S. export growth.
U.S. investors looked at our strong economic performance,
our stable political environment and our high after-tax
- 4 real rates of return on investment, in both absolute
terms and relative to our trading partner countries, and
decided to keep their money at home. Foreign investors
found dollar assets attractive for similar reasons, and
increased their investments in the U.S. Strong net
capital inflows to the United States contributed to the
appreciation of the dollar.
B. LDC Debt Situation
I mentioned earlier that the LDC debt situation was also a
major element in our trade deficit and the strong dollar. In
1980, the non-OPEC LDCs accounted for nearly 30 percent of our
exports. But as their external and domestic economic conditions
deteriorated with the emergence of the international debt problem,
their economic growth fell sharply. As you know, many of our
Latin American trading partners have experienced particularly
serious debt problems, with one of the results being that our
exports to Latin America fell $16 billion between 1981 and 1983.
Last year, as these debtor countries began to see the initial
benefits of adjustment efforts, our exports to Latin America rose
about $4 billion, recouping some of the lost exports. But our
exports to Latin America still were $12 billion below the 1981
level, and our exports to all non-OPEC LDCs in 1984 were about
$7 billion below the 1981 level.
Abstracting for a moment from the current situation gives us
an idea of the impact that large growth differentials and the debt
situation have had on our trade balance. If U.S. exports to LDCs
had grown at a historically reasonable 3 percent per annum in the
1982-84 period instead of falling — due to the debt situation —
then total U.S. exports would have been $25 billion higher than
they were last year. By a similar calculation, our exports to
Europe would also have been some $25 billion higher if their
economies had experienced modest growth. In other words, if
Europe had expanded more rapidly and the LDCs had not experienced
a serious debt crisis, we would be discussing today a trade
deficit of about $50 billion rather than the more than
$100 billion recorded in 1984.
The debt situation also contributed to the stronger dollar,
through its impact on the U.S. capital account. Between L982 and
1984, net U.S. commercial bank lending swung from an outflow of
$45 billion to an inflow of $23 billion. This large swing
reflected in part the preference of U.S. banks to lend
domestically rather than to LDCs after the debt problem emerged
late in 1982. It is also likely that the sizeable difference
between recorded U.S. net capital inflows and our current account
deficit primarily reflects unrecorded capital flows from the
developing world to the U.S. — the safe haven factor. Poor
domestic economic performance and a general lack of confidence in
economic policies encouraged domestic investors in LDCs to send
their money abroad.
- 5 C.
The Strong Dollar
Up to this point, I have treated the trade deficit and the
strong dollar as separate phenomena, both reflecting the common
underlying factors of disparities in performance and the LDC debt
situation. However, I recognize that the strong dollar has
directly contributed to the deterioration in the trade balance by .
making our goods less price competitive abroad and foreign goods
more price competitive here. We estimate that the appreciation of
the dollar may have accounted for one third to one half of our
trade balance deterioration.
I know many will argue that the dollar has been strong
because of high U.S. interest rates. Undoubtedly, interest rates
have been a factor underlying dollar strength over the past four
years. But unlike the fundamental factors we have noted, the
facts do not demonstrate a strong and consistent relationship
between the strength of the dollar and interest rate developments
over the period of dollar strength as a whole.
Changes in Fundamentals
Over the past several months the economic situation of the
main industrial countries and some LDCs has changed significantly.
But it has taken quite some time for these changes to become
visible, and perhaps even longer for the accumulation of positive
signs to become convincing as an indicator of durable changes.
The change has been to more moderate and therefore more
sustainable U.S. growth; to higher growth, abroad, including many
developing countries; to a pattern of foreign growth more based on
domestic sources of demand; and to lower inflation. Thus there
has been economic convergence of the best sort: towards solid,
sustainable real growth and low inflation. Let me be more
specific about these points.
Last year the spread between the highest and lowest growth
rates among the Five was 5.2 percentage points, with the United
States far above the others. This year we expect the spread to
narrow to 3-1/2 points, with the United States in the middle.
Next year a further narrowing to a 2-1/2 point spread is
projected. There is also a convergence in growth rates emerging
between the industrial world and non-OPEC developing countries.
After years of slow growth, LDCs grew over 4 percent last year,
the best performance since 1980. We expect 3-1/2 to 4 percent
aggregate growth in these countries for both this year and next.
Stronger growth in Europe is particularly noteworthy. After
earlier export-led growth, investment demand has been picking up.
In Germany, for example, we expect growth in real domestic demand
to be double last year's rate. Real GNP grew at an annual rate
in excess of 5-1/2 percent in the second quarter, according to
figures released last month. And the tax reduction which will
take effect starting in January 1986 should provide a strong boost
to consumption spending. We are currently observing forecasters
- 6 reacting to these signs of strength by raising their growth
projections. The UK is set to chalk up a strong rise in GDP this
year, with private investment a major source of stimulus. GDP was
up 4-1/2 percent (annual rate) in the second quarter.
In addition to a more positive picture for foreign growth
which has recently emerged, inflation rates have been converging
around a downward trend. The G-5 weighted average this year
should be the lowest in nearly 20 years. The point spread is
declining too. With the big improvement in France, the spread
fell from 7-1/2 points in 1983 to 5 last year. It should be close
to 4 points for 1985 and even less next year. This decline in
inflation — in other industrial countries too — is gradually
creating more optimism about prospects for continued lower
inflation, particularly in countries earlier experiencing poor
price performance.
Some of these changes were hard to see during the first half
of this year. Aggregate real GNP in the seven Summit countries
grew at a seasonally adjusted annual rate of only 0.3 percent in
the first quarter, and included a sharp downturn in Germany and
practically no growth in Japan. In contrast, the second quarter
aggregate growth rate was nearly 4 percent. And of course the
data showing higher GNP and industrial production were available
only with considerable time lags.
Other elements of the picture were also changing. U.S.
interest rates had been coming down sharply since the summer of
1984. U.S. monetary growth had accelerated. An agreement on a
budget deficit reduction package was reached in August. The
dollar had begun to decline substantially from its late winter
peaks, and markets began to recognize the possibility of dollar
decline. In market terms, one could say that the rising dollar
was no longer a one-way street. Indeed, by July the foreign
exchange markets had begun to recognize some of the early signs of
a changing economic situation, which contributed to the rise of
major foreign currencies against the dollar prior to the G-5
meeting. Between the February 26 dollar peak and September 20 the
dollar fell 18 percent against the German mark and French franc, 9
percent against the yen and 24 percent against sterling.
At the G-5 meeting on September 22, Finance Ministers and
Central Bank Governors recognized the improvement in convergence
of favorable economic performance and policies, but noted that
exchange rates were not fully reflective of changing economic
fundamentals. Part of the reason for their Announcement was to
draw attention to their analysis of the visible strengthening in
foreign economic performance and prospects. In addition, it was
agreed that policies here and abroad were the main force working
to sustain this brighter picture. Without repeating all of the
specific policy changes that took place before the September 22
Announcement, I would like to highlight a few: general reduction
in interest rates, the two-stage German tax cuts, the liberalizing
steps in French capital markets, UK proposals to reform wages
councils so as to encourage employment, and Japanese plans to
- 7 strengthen domestic demand and new efforts to open markets for
imports.
G-5 Policy Intentions
More importantly, each country agreed to make specific
additional commitments to future policies which will strengthen
the commitments to strong, noninflationary growth. The breadth,
scope, and importance of these intentions can be demonstrated by
a few examples:
— The United States agreed to continue efforts to reduce
government expenditures and implement fully the
deficit reductions package for FY86. In this regard
we support the major move by Congress to move toward a
balanced budget by cutting spending. We also agreed
to conduct monetary policy conducive to sustained
growth and price stability;
— The U.K. made a commitment to reduce the burden of
taxation, in order to improve incentives and to
increase the efficient use of resources in the
economy.
— Germany stated that the tax cuts due to take effect in
1986 and 1988 form part of the ongoing process of tax
reform and reduction which the Federal Government will
continue in a medium-term framework.
— France agreed that it would take further steps towards
liberalization and modernization of financial markets.
— Japan agreed to efforts to stimulate domestic demand
which will focus on increasing private consumption and
investment through measures to enlarge consumer and
mortgage credit markets. They indicated in addition
that, within the framework of reducing the central
government deficit and providing a pro-growth environment for the private sector, local governments may be
favorably allowed to make additional investments. We
welcome the package to promote domestic demand-led
growth announced by the Japanese Government on
October 15. This package, which provides greater
access to consumer credit and promotes stronger
private investment and expansion of public works
projects, constitutes an important step in
following-up on commitments made in the G-5
Announcement.
It was recognized at the G-5 meeting that these measures wi
promote better economic performance and greater convergence, whi
would contribute to a strengthening of non-dollar currencies and
in turn to adjustment of the large trade imbalances among the
major countries.
- 8 The G-5 Announcement of September 22 had an immediate,
significant impact on exchange markets which continues to be
positive, and reflects the importance of the commitments made.
The dollar has fallen an additional 7 percent against the DM and
French franc, about 9 percent against the yen and 4 percent
against sterling.
The effect overall of this strengthening of foreign
currencies from late February to date has been to reverse much of
the long dollar run-up. About 55 percent of the dollar's rise
against the DM between the end of 1980 and last February's peak
has now been reversed, as has over 40 percent of the rise against
the franc and sterling, and over 75 percent of the rise against
the yen.
The decline of the dollar — which is the counterpart of a
strengthening of other currencies — since the end of February has
taken place under generally orderly market conditions, supporting
our view that the exchange market was basically reacting to better
prospects abroad rather than to any concerns about U.S. economic
performance.
As a result of the confidentiality we were able to maintain
during the three-month period of consultations leading to the
September 22 meeting, the G-5 Announcement surprised the market
and had a strong psychological effect. In accordance with our
long-stated willingness to undertake coordinated intervention in
instances where it is agreed that such intervention would be
helpful or necessary, such intervention has been undertaken.
While I cannot comment on the nature, timing, or amounts, I can
assure you that there has been a high degree of cooperation and
coordination among the various monetary authorities. We have
developed clear, detailed procedures on how intervention operations might be conducted. We have not sought to establish target
zones or target exchange rates. We are determined, however, to
demonstrate our seriousness of intent over a prolonged period —
through policy actions as well as exchange market operations — to
help accelerate the convergence of economic performance among the
major countries and further strengthen non-dollar currencies.
The Announcement also represents a major step forward in
the process of multilateral surveillance and cooperation among
the major industrial countries. It serves as a clear example of
the willingness of governments to recognize the external effects
of their policies and the need for active, ongoing consultations.
The cooperative spirit reflects our deep-seated concerns about
growing protectionist threats. The Announcement is a positive
method of dealing with trade imbalances — it focuses on economic
fundamentals and policies. The implementation of protectionist
policies would be a self-defeating, negative approach to resolving
trade imbalances. Protectionism must be rejected.
- 9 Mr. Chairman, you have asked me to focus on the G-5
Announcement and its implication for the dollar and the trade
deficit. However, I should note that the Announcement, while
significant on its own merits, in its own right constitutes only a
part of our overall approach to the range of issues affecting
trade and the dollar.
Indeed, the Announcement itself has wider implications,
especially for the LDC debt situation.
— As part of the convergence process interest rates are
down across-the-board. OECD interest rates are on
average only half as high as four years ago. Dollar
LIBOR interest rates, of key importance for variable
interest rate LDC bank borrowings, have come down to
levels below the 1978 average, prior to the late 1970s
inflation and sharp run-up of LDC bank debt.
The Announcement emphasizes the crucial importance of
resisting protectionism and keeping markets open, explicitly recognizing the implications for LDC adjustment
efforts.
— Sustained growth in industrial countries complements
market openness in providing needed export demand for
LDCs seeking to service debt and restore
creditworthiness.
As Secretary Baker recently said at the annual meetings of
the IMF and World Bank in Seoul,
"I am convinced that if each of the major industrial nations
fulfills its policy intentions and maintains or improves access to
its markets, we will have taken a major step toward more balanced
and sustainable growth, while providing a solid framework for
improving the debt situation in the developing world."
Conclusion
We believe the G-5 Announcement constitutes a broad-gauge
approach to the fundamental determinants of U.S. trading
performance and the value of the dollar. It addresses each of
the factors I cited in my analysis of the causes of dollar
strength and the trade deficit:
weak domestic demand in other industrial countries;
—• the LDC debt situation;
the slowness of currencies to reflect convergence.
It also stresses the importance of strengthening the open, liberal
international economic system which is basic to our continued
prosperity. This is a positive response to our problems, in
contrast to the negative response of protectionism.
- 10 We recognize that the G-5 measures require time to implement
and take full effect. However, the progress already visible on
convergence of economic growth and inflation and developments in
exchange markets gives us a good down payment.
The substantial dollar depreciation since last spring and
closer convergence of U.S. and foreign growth rates makes our
trade deficit forecast for 1986 $30 billion lower for the year as
a whole than we would be forecasting if the exchange rate had
remained at its February level and U.S. and foreign growth rates
had held to the wider-gap scenario expected in March. 3y the
fourth quarter of next year, the improvement on the trade account
will be running at a $40-50 billion annual rate.
When fully effective, our various initiatives should provide
even greater results.
Mr. Chairman, your letter of invitation asked what can we do
to ensure maximum benefit from our efforts in the shortest time.
I would like to suggest two areas where we need Congress' active
participation:
fulfilling the U.S. policy intentions which were an
integral part of the G-5 Announcement.
— authorizing and appropriating quickly the $300 million
war chest to combat predatory tied aid credits.
In particular, this means:
— implementing the budget deficit reduction package;
— enacting meaningful tax reform; and
— resisting protectionism.
It is through these measures that you can make a direct,
substantial contribution. I will be pleased to resoond to your
fc
questions.
TREASURY NEWS
epartment of the Treasury • Washington, D.c. • Telephone 566-2
FOR RELEASE AT 4:00 P.M.
October 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 $ 14,200 million, to be issued October 31, 1985.
This offering will not provide new cash for the Treasury, as the maturing bills
are outstanding in the amount of $14,294 million. 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
time, Monday, October 28, 1985.
The two series
offered are as follows:
91-day bills (to maturity date) for approximately $7,100
million, representing an additional amount of bills dated
August 1, 1985,
and to mature January 30, 1986
(CUSIP No.
912794 JQ 8), currently outstanding in the amount of $7,239 million,
the additional and original bills to be freely interchangeable.
182-day bills for approximately $7,100 million, to be dated
October 31, 1985,
and to mature
May 1, 1986
(CUSIP No.
912794 KD 5 ) .
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.
The bills will be issued for cash and in exchange for Treasury
bills maturing October 31, 1985.
In addition to the maturing
13-week and 26-week bills, there are $8,25C
million of maturing
52-week bills. The disposition of this latter amount was announced
last week. Tenders from Federal Reserve Banks for their own account
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 $2,446 million of the original 13-week and 26-week
issues. Federal Reserve Banks currently hold $2,556 million as
agents for foreign and international monetary authorities, and $4,413
million for their own account. These amounts represent the combined
holdings of such accounts for the three issues of maturing bills.
Tenders for bills to be maintained on the book-entry records of the
Department of the Treasury should be submitted on Form PD 4632-2
(for 26-week series) or Form PD 4632-3 (for 13-week series).
B-327
TREASURY'S 13-, 26-, AND 52-WEEK BILL OFFERINGS, PAGE 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 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 book-entry
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.
4/85
TREASURY'S 13-, 26-, AND 52-WEEK BILL OFFERINGS, PAGE 3
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 the issue date, in cash or other immediately-available funds
or in Treasury bills maturing on that date. 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,
19 84, 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.
4/85
TREASURY NEWS
epartment of the Treasury • Washington, D.c. • Telephone 566-2041
FOR IMMEDIATE RELEASE
October 23, 1985
RESULTS OF AUCTION OF 2-YEAR NOTES
The Department of the Treasury has accepted $9,257 million
of $22,478 million of tenders received from the public for the
2-year notes, Series AB-1987, auctioned today. The notes will be
issued October 31, 1985, and mature October 31, 1987.
The interest rate on the notes will be 8-7/8%. The range of
accepted competitive bids, and the corresponding prices at the 8-7/8%
interest rate are as follows:
Yield Price
Low
High
Average
Tenders at the high yield were
8.88%1/
8.92%
8.90%
allotted 16%.
99.991
99.919
99.955
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
$
76,365
18,523,515
46,705
275,725
151,115
161,695
1,453,905
149,285
58,770
154,210
22,425
1,393,325
10,830
$22,477,870
Accepted
$
60,340
7,713,515
45,865
209,885
128,275
142,655
435,625
129,285
56,930
150,870
22,425
150,465
10,830
$9,256,965
The $9,257 million of accepted tenders includes $1,436
million of noncompetitive tenders and $7,821 million of competitive tenders from the public.
In addition to the $9,257 million of tenders accepted in
the auction process, $942 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.
1/ Excepting 1 tender of $5,000.
B-328
TREASURY NEWS
apartment of the Treasury • Washington, D.c. • Telephone 566-2041
STATEMENT OF THE HONORABLE
DAVID C. MULFORD
ASSISTANT SECRETARY FOR INTERNATIONAL AFFAIRS
BEFORE THE
SUBCOMMITTEE ON AFRICAN AFFAIRS
COMMITTEE ON FOREIGN RELATIONS
UNITED STATES SENATE
OCTOBER 24, 1985
Madame Chairman and Members of the Subcommittee:
I welcome this opportunity to speak before you on the
difficult economic and financial situation facing the countries
of Sub-Saharan Africa. The Administration's concern for this
region is evident from the size of our bilateral assistance
program and the major emphasis we have placed on Africa in the
lending programs of the multilateral development banks. It is
also reflected in the new ideas Secretary Baker put forward at
the Fund/Bank Annual Meetings in Seoul for enhanced IMF and World
Bank assistance to the poorest debtor countries.
As we review the situation in Sub-Saharan Africa, one point
is clear. The region is suffering from economic problems that
took many years to develop and will require a long and difficult
effort to correct. Nonetheless, this is an effort to which we
are dedicated and we are hopeful that reform efforts now underway
and the proposals we have recently advanced in Seoul represent
a start toward their resolution.
Financial Outlook
Deputy Secretary Whitehead ha^ ^iLcjady outlined for you the
dimensions of the region's economic problems, and the factors
which underlie them. For my part, I would like to focus on the
financial outlook these countries will confront.
Looking ahead over the next few years, the dominant influence
on Sub-Saharan Africa's economic performance will be the region's
own economic reform efforts. However, given the weak economic
situation of these countries, the availability of external finance
will also have an important impact on their growth prospects.
Treasury projections of net financial flows to the region indicate
that financial constraints are likely to be an important factor
in the region for the remainder of the decade.
Over the period 1985 to 1991, gross annual capital inflows
are likely to remain flat while principal repayments on the debt
built up in the 1972-82 period, including repayments to the
B-329
- 2 international financial institutions, rise sharply. The result
will be to reduce projected net annual inflows during the period
to roughly half the 1980-82 annual level. Even with continued
generous official bilateral rescheduling, net inflows would be 30
percent below 1980-82 levels.
Implications for the Region
These very tight financial constraints point up the need for
determined efforts at economic reform in order to improve economic
performance and restore creditworthiness. Fortunately, a consensus has emerged among donors and many countries in the region
that policy reform by Sub-Saharan African countries is a precondition for improvement in the region's economic situation, and
that successful reform requires concerted support from donors.
Furthermore, there is a growing awareness that improving the
quality of external assistance is as important as its volume.
The multilateral institutions and donors are working together
to design aid programs which will provide the greatest possible
impetus for recovery and growth while recognizing the limitations
posed by the region's relatively new institutions, limited
technical manpower, and overall absorptive capacity.
Role of the Multilateral Institutions
You heard earlier this morning about U.S. bilateral efforts
to support policy reform and renewed growth in the region. I
would like to concentrate on the central role of the multilateral
financial institutions, both the IMF and the multilateral
development banks (MDBs), in supporting the recovery process in
Sub-Saharan Africa. We look to the multilateral institutions,
especially the IMF and the World Bank, to take the lead in
formulating and promoting appropriate economic policies, and have
been working closely with all the institutions to ensure that
their resources are used wisely to support reform.
The World Bank
The World Bank is a major economic presence in Sub-Saharan
Africa. The World Bank group provided $10 billion to the region
between 1981 and 1985 for sound investment projects and to provide
policy guidance and technical assistance. Despite these laudable
efforts, however, economic deterioration has accelerated. Both
Bank management and member governments have recognized that major
changes are needed in the overall approach of the financial
institutions and bilateral donors if the decline is to be halted.
The United States has worked closely with Management and
other members to improve the effectiveness of the Bank's assistance
efforts in Africa. We have supported Bank efforts to strengthen
the administration and management of its African operations, and
development of new lending instruments in response to the changing
economic circumstances of its borrowers.
- 3 The principal new instrument is the Structural Adjustment
Lending (SAL) program, which has provided valuable fast disbursing
support for countries willing to implement programs of structural
adjustment (10 SALs have been undertaken by six African countries
since 1980). We have also supported less comprehensive sector
adjustment loans for Sub-Saharan countries where institutional
weaknesses hinder the design and implementation of more comprehensive reform programs, as long as effective conditionality is
maintained. We have similarly welcomed the emphasis placed on
encouraging policy reform under the Bank's Special Facility for
Sub-Saharan Africa as supportive of our broader efforts in the
Bank.
The United States has also taken a leading role in directing
additional Bank group resources to the region. Recognizing the
particular importance of concessional IDA funds to the poorest
countries in Africa, the U.S. was successful in making Sub-Saharan
Africa the highest priority for allocation of IDA resources.
While the current 37 percent share of programming is a great
improvement over the 26 percent share in FY 1980-81, we believe
it should still go higher.
In the IFC, the United States was successful in gaining
agreement to allocate a larger share of resources (24 percent) to
Sub-Saharan Africa under the Corporation's new five-year program.
The IFC will focus on promotional activities and small scale
projects appropriate to the region's economic circumstances in
order to strengthen the role of the private sector.
Finally, the U.S. looks to the World Bank to take the lead
in coordinating the aid efforts of bilateral donors in Africa
through its consultative group process. We are working to
coordinate our bilateral assistance more closely with the World
Bank and other donors and have in selected cases directly associated
our aid with Bank policy reform programs in Africa.
In addition to supporting World Bank efforts, the U.S. has
been a major supporter of the African Development Bank and Fund.
This is the only institution dedicated solely to the development
of Africa, and we would like to see it play a more important role
in addressing the region's problems. The Bank and Fund committed
$3.7 billion to the region over the FY 1980-84 period.
Role of the International Monetary Fund
The IMF has the primary responsibility for addressing the
balance of payments problems afflicting Sub-Saharan Africa, and
has played and will continue to play a major role in the region.
IMF lending to Sub-Saharan countries increased significantly
between 1980 and 1984, providing a total of $6.7 billion in
balance of payments assistance. The IMF's share of total lending
to Sub-Saharan Africa also increased from 7 to 11 percent between
1980 and 1983, as Fund resources were increasingly utilized to
meet short-term financing needs. Outstanding IMF loans to SubSaharan countries currently account for nearly 15 percent of
- 4 total outstanding obligations to the IMF, although their share of
total IMF quotas is only 3 percent.
The Fund has encouraged policy adjustments to help these
countries adapt to changed economic circumstances and position
themselves for sustained growth. However, it has not been possible
to address effectively the long-term structural problems of these
countries through IMF adjustment programs within the short- to
medium-term timeframe that is consistent with the IMF's role and
operations. Therefore, many countries in the region have had
repeated recourse to IMF programs stretching over an extended
period of time. For example, thirteen African countries have had
more than four upper-tranche programs in the last ten years and
have outstanding use of Fund resources over 100 percent of quota.
This "prolonged use" of IMF resources by many countries in the
region weakens the revolving character of Fund financing and may
reduce resources available for other members. Fund resources are
intended to be used for temporary balance of payments financing
— not long-term development lending.
Closely related to the problem of prolonged use is the fact
that an increasing number of countries in the region have fallen
into arrears to the Fund. Seven Sub-Saharan countries are
currently in arrears for a total of SDR 320 million, and arrears
have grown rapidly. Under current rules, countries in arrears
may not draw IMF resources under existing programs nor negotiate
new ones. In the case of persistent arrears (nine months or
more), a member may be declared ineligible to use IMF resources,
a first step toward possible expulsion.
Continuation of such a situation represents a serious problem
for both the countries and the IMF. We must address this problem
and come up with a solution which preserves the financial integrity
of the IMF while being realistic about the ability of the countries
to improve their economic situation, restore their creditworthiness,
and meet their financial obligations.
A New Approach
Despite expanded efforts by the IMF, MDBs, and bilateral
donors to assist the Sub-Saharan countries' reform efforts,
economic recovery remains as elusive as ever. This failure in
part reflects inadequate action by the countries on the fundamental
changes needed to create the conditions for sustained growth and
development. It also springs from adverse external developments,
especially depressed prices for the commodities which are the
region's principal exports, and natural disasters which have
afflicted the region.
Finally, the lack of success arises from the fact that the
economic problems of the poorest countries require comprehensive
reform extending over the longer term that would encompass both
the types of structural changes supported primarily by the World
Bank and sound macroeconomic policies which are the heart of IMF
- 5 programs. The individual efforts of the IMF, the MDBs, and
bilateral donors, even though sound on their own terms, have not
produced this comprehensive result.
A new formula is needed to address the region's economic
problems, based on closer coordination between the IMF and the
MDBs, and supported by bilateral official assistance. The $2.7
billion of repayments flowing back to the IMF Trust Fund through
1991 provides a unique opportunity to launch such a comprehensive
economic reform effort for Africa. In a period of tight financial
constraints, we cannot afford to waste these scarce resources.
It is essential that they be targetted to help those most in
need, and to lay the groundwork for future growth.
The United States therefore proposed at the IMF Interim
Committee's October 6 meeting in Seoul that these reflows be used
to provide concessional financing in support of comprehensive
economic reform for the poorest countries with protracted balance
of payments problems, primarily in Sub-Saharan Africa. Under the
U.S. proposal:
° Eligibility would be based on low per capita income. Actual
use of funds, however, would be based on an eligible country
having a protracted balance of payments problem and being
willing to implement a comprehensive growth-oriented economic
program.
° Terms on loans would be concessional with low interest rates,
substantial grace periods, and extended maturities.
° Conditions for participation would include a commitment
to a multi-year growth-oriented economic program in which
funds would be disbursed semi-annually based on satisfactory
performance under the program.
This approach would seek to remove structural impediments to
production, savings, investment and non-inflationary growth. To
accomplish these objectives, each program would have to include
both macro-economic and structural components, tailored to
individual country needs.
° Macroeconomic policies would aim to provide a stable domestic
policy environment for longer term restructuring and growth.
They would continue to include sound monetary and fiscal
policies to reduce domestic imbalances and inflation, as
well as free market prices and exchange rates to encourage
production and more efficient use of resources.
© Structural measures should reduce the role of government,
give greater scope to private initiative, and provide stimulus
to domestic growth. They would include efforts to privatize
the public sector, improve the efficiency of state-owned
enterprises, and reduce government intervention in the
- 6 economy. Growth-oriented tax reform and interest rates
designed to stimulate savings and domestic investment should
also be adopted.
° Finally, trade liberalization and investment promotion
measures to make foreign direct investment more attractive would
be critical to bring in the resources needed to boost both
growth and exports.
While utilization of Trust Fund resources would be the
responsibility of the IMF, it would be absolutely critical that
the Fund operate in close cooperation with the World Bank to
achieve a consistent policy approach that would help these
countries in creating the fundamental conditions for growth.
Other participants in the Seoul meeting clearly shared our
desire to accord priority attention to the problems of the poorest
countries. Consequently, the Interim Committee endorsed the U.S.
view that Trust Fund reflows should be used to provide concessional
balance of payments support for low-income countries implementing
comprehensive economic programs. There was also a consensus on
the importance of close Fund/Bank cooperation.
The United States is also prepared to consider an even bolder
approach involving joint IMF and World Bank programs and financing
to foster adjustment and catalyze additional financing for these
poorest countries. We believe that such an approach would have a
number of important benefits.
° Joint programming would ensure close coordination of IMF
and World Bank assistance for the poorest countries, and
encourage closer cooperation between the institutions in
general.
° The comprehensive nature of the programs would ensure that
the institutions provide mutually consistent advice on the
full range of macroeconomic policies and structural reforms
necessary to attack poverty and promote growth.
° A joint approach could catalyze substantial additional
resources for Sub-Saharan countries to support economic
reform.
We noted in Seoul that we were prepared to consider seeking
resources in support of such an approach if other donors were
also prepared to make equitable contributions.
However, a number of countries seem to be concerned about
the concept of joint IMF/World Bank programming. New ideas are
rarely accepted overnight. And there has been some understandable
reluctance to move into the uncharted waters of comprehensive
programs which would unify the efforts of the two institutions.
Despite these concerns, I believe it is worth the effort to
ensure that the IMF and World Bank are pulling in the same
- 7 direction, in the most effective manner possible. Joint programs,
based on consistent policy advice and coordinated financial
support, would be more effective, especially if they mobilize
additional resources for reform. We are hopeful that others will
recognize the merit of this approach, and we would hope for final
agreement on it by the end of the year.
Whichever route is taken — continued separate programs with
closer coordination between Fund and Bank, or a bolder joint
program approach -- we will attempt to ensure that the Trust Fund
reflows are targetted to help the poorest countries, and their
use based upon the adoption of macroeconomic and structural policy
reforms which will improve prospects for sustained economic growth
in Sub-Saharan Africa.
Conclusions
In conclusion, it ib clear that additional efforts are needed
to address the economic problems of Sub-Saharan Africa. Secretary
Baker's proposals in Seoul have made a major step in this direction,
and provide a basis for discussion of further, bolder steps in
the future. They have gained the broad support of the global
community.
I welcome the opportunity to discuss these ideas with you,
and to answer your questions on our approach to aiding the poorest
countries.
Thank you.
rREASURY NEWS
apartment
of the Treasury • Washington, D.c. October
• Telephone
566-2041
FOR IMMEDIATE RELEASE
24, 1985
RESULTS OF TREASURY'S 52-WEEK BILL AUCTION
Tenders for $8,305 million of 52-week bills to be issued
October 31, 1985,
and to mature October 30, 1986, were accepted
today. The details are as follows:
RANGE OF ACCEPTED COMPETITIVE BIDS:
Investment Rate Discount
Rate
Low
7.50%
High
7.51%
Average 7.51%
(Equivalent Coupon-Issue Yield)
Price
8.07%
92.417
8.08%
92.407
8.08%
92.407
Tenders at the high discount rate were allotted 74%.
TENDERS RECEIVED AND ACCEPTED
(In Thousands)
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
B-330
$ 44,560
21,370,095
5,940
24,195
49,700
57,045
1,434,635
73,650
7,810
32,735
8,080
2,183,'
92,515
$25,384,415
$
14,560
7,957,975
5,940
21,075
14,700
10,785
81,735
41,650
7,810
30,485
8,080
17,435
92,515
$8,304,745
$23,357,750
376,665
$23,734,415
1,500,000
$6,278,080
376,665
$6,654,745
1,500,000
150,000
150,000
$25,384,415
$8,304,745
TREASURY NEWS
Department of the Treasury • Washington, D.c. • Telephone 566-2041
Contacts
Art Siddon (566-5252)
Edwin L. Dale (395-3080)
FOR IMMEDIATE RELEASE
October 25, 1985
JOINT STATEMENT OF
JAMES A. BAKER III, SECRETARY OF THE TREASURY
AND
JAMES C. MILLER III,
DIRECTOR OF THE OFFICE OF MANAGEMENT AND BUDGET
ON
BUDGET RESULTS FOR FISCAL YEAR 1985
SUMMARY
The Treasury Department is today releasing the September Monthly Statement of
Receipts and Outlays of the United States Government, which shows the actual
budget totals for the fiscal year that ended on September 30, 1985. The
statement shows:
— receipts of $734.0 billion;
— total outlays of $945.9 billion; and
— a total deficit of $211.9 billion.
s
3 X 3
2
Table 1.—BUDGET TOTALS
(in billions of dollars)
Receipts
Outlays 1/
Deficit (-)
736.9
736.0
734.0
959.1
947.3
945.9
-222.2
-211.3
-211.9
1984 Actual 666.5 851.8 -185.3
1985 Estimates and Actual:
February 2/
August 3/7
Actual.?
1/
Includes the outlays of Federal entities that are off-budget under
current law and proposed to be included on-budget.
2/ February 1985 from the 1986 Budget.
1/ August 1985 from the Mid-session Review of the 1986 Budget.
Receipts.--Receipts were estimated in the February budget at $736.9 billion,
and were revised downward slightly to $736.0 billion in the August Mid-Session
Review. Actual receipts for 1985 were $734.0 billion, $2.0 billion below the
August estimate. This decrease was the net effect of lower than anticipated
collections of income taxes, partially offset by higher than estimated
collections of other sources of receipts.
— Individual income taxes were $2.5 billion below the August estimate.
Lower nominal incomes than assumed in August were primarily responsible
for $2.2 billion of this shortfall in individual income tax receipts.
The classification of receipts resulting from the taxation of railroad
retirement benefits as employment taxes and contributions, rather than
as Individual Income taxes as was done in February and August, accounts
for the remaining $0.3 billion decline 1n Individual income tax
receipts.
— Collections of corporation income taxes were $0.6 billion below the
Mid-Session Review, largely because corporate profits were lower than
anticipated.
— Other receipts were higher by $1.0 billion because collections of
social insurance taxes and contributions, excise taxes, and deposits of
earnings by the Federal Reserve were slightly higher than assumed in
August.
3
Outlays.—Total outlays in the February Budget, Including the outlays of
rederal entities that are off-budget under current law and proposed to be
Included on-budget, were estimated at $959.1 billion.
This estimate was
reduced by $11.8 billion, to $947.3 billion, in the Mid-Session Review,
reflecting the net Impact of technical reestimates, policy changes, and a
revised economic forecast.
Actual 1985 outlays were $945.9 billion, $1.4
billion below the August estimate.
OUTLAY CHANGES BY AGENCY AND PROGRAM
The major outlay changes since the August M1d-Sess1on Review are described
below. Table 2, which follows this discussion, displays the estimates for
February and August and the actual levels by agency and major program.
Funds Appropriated to the President
— A decrease of $0.5 billion below the August outlay estimate for
International monetary programs reflects the impact of changes in
exchange rates on tne u.5. reserve position in the International
Monetary Fund.
— Net outlays for military sales programs were $0.5 billion above the
M1d-Sess1on estimate due to higher than expected disbursements and
lower than anticipated offsetting receipts.
Department of Agriculture
— Outlays for the Commodity Credit Corporation and foreign assistance
were $0.7 billion above the August estimate. This difference is
attributable primarily to higher than anticipated commodity loans,
particularly for corn and wheat.
— Food and Nutrition Service outlays were $0.3 billion under the
Mid-session estimate due to lower than anticipated participation in
the food stamp program and changes In caseload composition in the
child nutrition program.
Department of Defense - Military
— Defense outlays were $3.1 billion higher than the Mid-Session
estimate, which assumed a shortfall from the budget request of $5.3
billion.
The actual shortfall from the budget was only $2.2
billion. The shortfall from the budget estimate results primarily
from reprogrammings due to non-enactment of pay supplementals,
delay 1n approval of the MX program, and reduced operation and
maintenance spending.
4
Department of Education
— Net outlays for the Department of Education were $0.3 billion lower
than the August estimate because of lower than usual drawdowns by
States toward the end of the year.
Department of Energy
— Outlays for the Department of Energy were $1.2 billion above the
M1d-Sess1on estimate primarily because the Department paid $1.2
billion to the Federal Financing Bank (FFB) to cover the principal
and Interest on loans made to the Great Plains Gasification
Associates, which are now 1n default.
This payment, which
Increases Department of Energy outlays and decreases outlays for
the FFB, has no net Impact on total outlays or the deficit.
Department of Health and Human Services
— Social security (0ASD1) outlays were $0.6 billion below the
Mid-session
estimate
because
administrative
expenses
retroactive benefit payments were lower than expected.
and
Department of Transportation
— Outlays for Federal Highway Administration were $0.3 billion
greater than ~Une ma-session estimate because of higher than
projected outlays from prior years' funds.
Department of Treasury
— Due to delays 1n the passage of the statutory debt limit increase,
some net market borrowing during the third calendar quarter had to
be deferred. This deferral, combined with slightly lower interest
rates, reduced interest on the public debt outlays by $0.4 billion
from the Mid-Session Review estimate.
~ Federal Financing Bank outlays were $0.5 billion below the
Mid-session estimate. Ret outlays of the Bank were reduced by $1.2
billion because of the payment received from the Department of
Energy for the defaulted loans made to the Great Plains
Gasification Associates.
In addition, lower than expected
procurement of military equipment caused the outlays for foreign
military sales credits to decrease by $0.3 billion.
These
decreases were partly offset by outlays of $1.3 billion for loans
secured by Navy ship leasing, which were not Included in the August
estimates.
5
General Services Administration
— Outlays of the General Services Administration (GSA) were $0.3
billion below the August estimate. This decrease is due to the
transfer of receipts to GSA's National Defense Stockpile
Transaction fund from the Naval Petroleum Reserves In the
Department of Energy.
Federal Deposit Insurance Corporation
— Federal Deposit Insurance Corporation outlays were $0.5 billion
lower than the Mid-session estimate because of fewer than assumed
bank failures.
Federal Home Loan Bank Board
— Outlays of the Federal Home Loan Bank Board were $0.5 billion below
the August estimate Decause of greater use of non-cash techniques
to handle Insolvencies of FSLIC Insured institutions.
Postal Service
— Net outlays of the Postal Service were $0.4 billion under the
Mid-Sess1on estimate. This was due to a combination of improved
operating results and timing differences between Postal Service's
estimates based on Its 4-week accounting cycle and actual calendar
month results reported to Treasury.
Undistributed Offsetting Receipts
— Offsetting collections of Federal employer contributions to
retirement funds were $0.4 billion above the August estimate. This
increase in offsetting collections was caused partly by the Postal
Service contract settled in June, which Included a retroactive pay
raise to Postal employees, and partly by a slightly higher than
assumed civilian payroll.
— Interest received by trust funds was $0.3 billion higher than
projected for the Mid-Session estimate due to higher than estimated
trust fund balances.
Other Outlay Decreases
In addition to the changes described above, outlays for numerous other
agencies were $2.1 billion below the Mid-Session estimates. Among these
agencies were the Legislative branch and the Judiciary, Department of
Commerce, Department of Housing and Urban Development, and Veterans
Administration, each of which declined by $0.2 billion below the
Mid-Sess1on estimate.
Table 2.--1985 BUDGET RECEIPTS BY SOURCE AND OUTLAYS BY AGENCY
(fiscal years; In millions of dollars)
1984
Actual
1985
Estimate
February
August
Actual
Receipts by Source
Individual Income taxes 1/ ,
Corporation Income taxes.
Social Insurance taxes and contributions:
Employment taxes and contributions 1/
Unemployment Insurance
Other retirement contributions
Subtotal, Social insurance taxes and contributions,
Excise taxes
Estate and gift taxes
Customs
Ml seel1aneous recelpts
Total, Receipts
1/ For the February and August estimates,
benefits were classified as Individual Income
collections are classified as employment taxes
affect receipts In total, it does affect the
employment taxes and contributions.
•.,
295,955
56,893
329,677
66,403
333,389
61,916
330,918
61,331
,
,
,
212,184
25,138
4,580
238,058
25,586
4,723
237,808
25,848
4,631
238.288
25,758
4,759
241,902
268,367
268,287
268,805
37,361
6,010
11,370
16,965
666,457
36,995
5,603
11,809
18,004
736,859
35,585
6,303
12,194
18,333
736,007
35,865
6,422
12,079
18,576
733,996
collections resulting from the taxation of railroad retirement
taxes. In the actual data presented In this statement these
and contributions. While this accounting difference does not
distribution of receipts between individual'income taxes and
Table 2.—1985 BUDGET RECEIPTS BY SOURCE AND OUTLAYS BY AGENCY (Cont.)
1985
1984
Actual
Estimate
February
August
Actual
On-Budget Outlays by Major Agency
Legislative branch and the Judiciary
Executive Office of the President
Funds appropriated to the President:
D1saster rellef
International security assistance:
Economic support fund
Other
International development assistance
International monetary programs.
Military sales programs
Other
Subtotal, Funds appropriated to the President
Agriculture:
Commodity Credit Corporation and foreign assistance
Farmers Home Administration
Food and Nutrition Service
Offsetting receipts
.
Other 1/
Subtotal, Agriculture 1/
Commerce
Defense-Military:
Military personnel
Operation and maintenance
Procurement
Research, development, test, and evaluation
Other
Subtotal, Defense-Military.
2,446
95
2,805
117
2,817
117
2,576
111
243
200
236
192
2,874
2,160
2,819
565
-389
209
3,937
3,767
3,190
4,937
3,548
3,227
-213
195
-413
205
4,889
3,429
3,012
-546
85
217
8,481
11,076
11,740
11,277
8,450
6,066
17,579
-998
6,374
16,872
5,134
18,216
-1,456
6,354
18,741
6,216
18,273
-1,167
6,744
19,448
6,435
17,994
-1,035
6,747
37,471
45,120
48,808
49,589
1,893
2,113
2,336
2,140
64,158
67,369
61,879
23,117
4,315
67,546
74,569
69,706
27,786
6,692
220,838
246,300
a • • • •
•
240,995
67,842
72,348
70,381
27,103
6,379
244,054
Table 2.—1985 BUDGET RECEIPTS BY SOURCE AND
AYS BY AGENCY (Cont.)
1985
1984
Actual
Estimate
"
i-ebruary
August
Actual
Defense-C1v1l
Education
Energy 1/
Health and Human Services:
Social security (OASDI)
Medicare
Medicaid
Public Health Service
Other
19,544
15,511
10,617
18,978
17,391
10,957
18,858
17,026
10,565
18,844
16,682
11,807
180,866
62,669
20,061
8,184
20,533
193,607
71,803
22,985
8,895
21,203
191,581
71,378
22,813
8,938
21,760
190,986
71,398
22,655
8,882
21,633
Subtotal, Health and Human Services
292,313
318,493
316,469
315,553
8,774
-366
1,111
612
3,819
2,570
9,362
-802
14,447
-731
3,900
2,747
9,760
-702
13,970
-695
3,900
2,639
9,974
-654
13,885
-891
3,817
2,540
Housing and Urban Development:
Housing payments
Federal Housing Administration fund
Low-rent housing - loans and other expenses
Government National Mortgage Association
Community development grants
Other
Subtotal, Housing and Urban Development
16,520
28,922
28,872
28,671
Interior
Justice
Labor:
Training and employment services
Advances to the unemployment trust fund and other funds
Unemployment trust fund
Other
Intrabudgetary transactions
4,961
3,165
5,009
3,855
4,897
3,604
4,828
3,518
3,196
4,182
26,089
1,954
-10,899
3,638
1,675
22,787
2,117
-6,752
3,499
1,604
23,900
2,257
-6,967
3,415
1,586
23.826
2,115
-7,048
24,522
23,465
24,293
23,893
Subtotal, Labor
-3-
Table 2.—1985 BUDGET RECEIPTS BY SOURCE AND OUTLAYS BY AGENCY (Cont.)
1985
1984
Actual
State
Transportation:
Federal Highway Administration
Federal Aviation Administration
Other
Subtotal, Transportation
Treasury:
Interest on the publ1c debt
Offsetting receipts
Federal Financing Bank 1/
Other
Subtotal, Treasury 1/
Environmental Protection Agency.
General Services Administration
National Aeronautics and Space Administration
Office of Personnel Management
Small Business Administration
Veterans Administration
District of Columbia
Export-Import Bank
Federal Deposit Insurance Corporation..
Federal Emergency Management Agency
Federal Home Loan Bank Board
National Credit Union Administration
Postal Service 1/
Railroad Retirement Board
Tennessee Valley Authority
Other (net) 1/
•«
Allowances, undistributed
.
Estimate
August
February
Actual
2,403
2,703
2,645
2,645
10,569
3,819
9,568
13,110
4,333
8,788
12,574
4,275
8,011
12,883
4,267
7,937
23,956
26,232
24,860
25,087
153,838
-25,740
7,277
13,008
180,300
-27,236
10,442
13,212
179,300
-27,215
7,871
13,194
178,945
-26,896
7,339
12,994
148,382
176,718
173,150
172,382
4,057
4,418
4,506
4,511
-214
7,318
23,727
192
371
86
7,048
22,590
7,317
23,612
7,313
23,627
255
726
328
283
25,593
26,811
26,559
26,333
570
499
237
237
1,068
-248
1,359
-1,000
-252
-1,450
-384
-1,942
591
590
350
520
872
469
415
-822
1,361
4,024
-852
1,733
4,069
-855
1,351
4,129
-561
193
1,239
3,606
351
4,485
678
5,259
1,131
920
914
5,191
4,952
—__
—
Table 2.—1985 BUDGET RECEIPTS BY SOURCE AND OUTLAYS BY AGENCY (Cont.)
Undistributed offsetting receipts:
Other Interest
Federal employer contributions to retirement funds
Interest received by trust funds
Rents and royalties on the Outer Continental Shelf
Total, Outlays
Deficit (-)
Addendum:
Outlays on-budget under current law
Outlays off-budget under current law
1984
Actual
1985
Estimate
February
August
-18
-25,263
-20,376
-6,694
-26,994
-25,554
-5,302
-26,922
-25,722
-5,493
-2
-27,359
-26,070
-5,542
851,796
959,085
947,321
945,927
-185,339
-222,226
-211,314
-211,931
841,800
9,996
946,626
12,459
937,286
10,035
936,809
9,118
Actual
NOTE: Detail may not add to totals because of rounding.
off-budget under current law and proposed to be
1/ Includes the outlays of Federal entitles that are
Included on-budget.
-5-
For Fiscal Year 1985,
Through September 30, 1985,
and Other Periods
1
Final Monthly Treasury Statement
of Receipts and Outlays of
the United States Government
Department of the Treasury
Financial M a n a g e m e n t Service
Summarypage 2
Receipts
page 6
Outlays
page/
Deficit
Financingpage 20
Receipts/
Outlays
by Month page 26
Federal
Trust Funds/
Securitiespage 28
Receipts
by Source/
Outlays by
Function page 29
Explanatory
Notespage 30
'This publication contains the final budget results for fiscal year 1985.
Introduction
of receipts are treated as deductions from gross receipts; revolving and management fund receipts, reimbursements and refunds of monies previously expended
are treated as deductions from gross outlays; and interest on the public debt (public
issues) is recognized on the accrual basis. Major information sources include accounting data reported by Federal entities, disbursing officers, and Federal Reserve
baqks.
The Monthly Treasury Statement of Receipts and Outlays of the United States
Government (MTS) is prepared by the Department of the Treasury, Financial Management Service, and after approval by the Fiscal Assistant Secretary of the Treasury,
is normally released on the 17th workday of the month following the reporting month.
The publication is based on data provided by Federal entities, disbursing officers,
and Federal Reserve banks.
Triad of Publications
The MTS is part of a triad of Treasury financial reports. The Daily Treasury Statement is published each working day of the Federal Government. It provides data
on the cash and debt operations of the Treasury based upon reporting of the
Treasury account balances by Federal Reserve banks. The MTS is a report of
Government receipts and outlays, based on agency reporting. The U.S. Government Annual Report is the official publication of the detailed receipts and outlays
of the Government. It is published annually in accordance with legislative mandates
given to the Secretary of the Treasury.
Audience
The MTS is published to meet the needs of: Those responsible for or interested
in the cash position of the Treasury; Those w h o are responsible for or interested
in the Government's budget results; and individuals and businesses whose operations depend upon or are related to the Government's financial operations.
Disclosure Statement
This statement summarizes the financial activities of the Federal Government
and off-budget Federal entities conducted in accordance with the Budget of the U.S.
Government, i.e., receipts and outlays of funds, the surplus or deficit, and the means
of financing the deficit or disposing of the surplus. Information is presented on a
modified cash basis: receipts are accounted for on the basis of collections; outlays
Data Sources and Information
The Explanatory Notes section of this publication provides information concerning the flow of data into the MTS and sources of information relevant to the MTS.
Table 1. Summary of Receipts, Outlays, and the Deficit/Surplus of the U.S. Government, Fiscal Years 1984 and 1985,
by Month (in millions)
Period
Budget Outlays
Budget Receipts
Budget
Deficit/(Surplus)
FY 1984
October ..
November.
December
January. .
February
March . . .
April
May
June
July
August ...
September
$45,157
46,202
58,044
62,537
47,886
44,464
80,180
37,459
69,282
52,017
55,209
68,019
$70,226
67,794
74,705
68,052
68,267
73,020
68,687
71,391
71,283
68,432
88,707
51,234
$25,069
21,591
16,661
5,515
20,381
28,555
(11,493)
33,932
2,000
16,416
33,498
(16,785)
Total ...
666,457
841,800
175,342
FY 1985
October...
November.
December
January. .
February . .
March .
April
May
June
July . .
August
September
52,251
51,494
62,404
70,454
54,021
49,606
94,593
39,794
72,151
1
57,970
55,776
73,808
81,037
79,956
77,583
76,838
74,851
78,067
82,228
80,245
71,506
1
78,012
83,621
73,191
28,787
28,462
15,179
6,384
20,830
28,461
(12.365)
40,450
(645)
20,042
27,845
(617)
Year-to-date.
733,996
936,809
202,813
Note: Details may not add to totals because of rounding.
Source: Financial Management Service, Department of the Treasury.
'Does not include a prior period adjustment of $326 million. However, the current fiscal year to date figure does include the adjustment.
2
Table 2. Summary of Budget and Off-Budget Results and Financing of the U.S. Government, September 1985 and
Other Periods (in millions)
Actual
Fiscal Year
to Date
Budget
Estimates
Full Fiscal
Year 1985 1
Actual
Previous
Fiscal Year
to Date
(1984)
$73,808
73,191
$733,996
936,809
$736,007
937,286
$666,457
841,800
$779,850
955.293
+ 617
-1,381
-202,813
-9,118
-201,279
-10,035
-175,342
-9,996
-175,444
-2,384
-764
-211,931
-211,314
-185,339
-177,828
5,975
197,269
202,580
170,817
179,507
-6,248
1,038
10,673
3,989
10,426
-1,692
5,636
8,885
-1,679
764
211,931
211,314
185,339
177,828
Current
Month
Classification
Total budget and off-budget results:
Budget receipts
Budget outlays
..
Budget surplus ( + ) or deficit (-) .'.Off-budget surplus ( + ) or deficit (-)
Total surplus ( + ) or deficit (-)...
Means of financing:
By Borrowing from the public
By Reduction of Cash and Monetary
assets, increase (-)
By Other means
Total budget and off-budget financing
1 Based on the Mid-Sesston review of the FY 1985 budget released by the Office of Management and Budget on August 30, 1985.
... No transactions.
Note: Details may not add to totals because of rounding.
Source: Financial Management Service, Department of the Treasury.
Figure 1. Monthly Receipts, Outlays, a n d B u d g e t Deficits/Surplus of the U.S. G o v e r n m e n t , Fiscal Years 1 9 8 4 a n d 1 9 8 5
In billions of dollars
100
Outlays
80
60
40
20
0
_
A
Deficit (-) /Surplus
A
i
J
-20
-40
-60
Oct. Dec. Feb. Apr. Jun. Aug. Oct.Dec. Feb. Apr. Jun. Aug.Sep,
FY
FY
84
85
3
Budget
Estimates
Next Fiscal
Year (1986)1
Figure 2. Monthly Receipts of the U.S. Government, by Source, Fiscal Years 1984 and 1985
In billions of dollars
100
90
Total Receipts
80
70
60
50
Social Security Taxes
40
\»/vyvy •
30
20
Individual Income Taxes
10
Other Taxes and Receipts
0
Oct. Dec. Feb. Apr. Jun. Aug. Oct.Dec. Feb. Apr. Jun Aug. Sep
FY
FY
84
85
Figure 3. Monthly Outlays of the U.S. Government, by Function, Fiscal Years 1984 and 1985
In billions of dollars
100
Total Outlays
80 -
60
Social Security and Medicare
40
20
0
Interest on the Public Debt
Oct. Dec. Feb. Apr. Jun. Aug.Oct. Dec. Feb. Apr. Jun. Aug.Sep
FY
FY
84
85
4
Table 3. S u m m a r y V i Reccfprar and Outlays of the U.S. Government, September 1985 and Other Periods (in millions)
Actual
This M o n t h
Actual
This Fiscal
Year to Date
Actual
Comparable
Prior Period
Budget
Estimates
Full Fiscal Year1
$34,643
10,950
$330,918
61,331
$295,955
56,893
$333,389
61,916
21,325
1,473
238,288
25,758
4,759
35,865
6,422
12,079
18,576
212.184
25,138
4,580
37,361
6,010
11,370
16,965
237,808
25,848
4,631
35,585
6,303
12,194
18,333
,
73,808
733,996
666,457
736,007
Legislative Branch
The Judiciary
Executive Office of the President
Funds Appropriated to the President
Department of Agriculture2
Department of C o m m e r c e
Department of Defense—Military
Department of Defense—Civil
Department of Education
Department of Energy 2
Department of Health and H u m a n Services
Department of Housing and Urban Development
Department of the Interior
Department of Justice
Department of Labor
Department of State
Department of Transportation
Department of the Treasury:
General revenue sharing
Interest on the public debt
Other 2
Environmental Protection Agency
General Services Administration
National Aeronautics and Space Administration
Office of Personnel Management
Small Business Administration
Veterans Administration
Other independent agencies 2
Allowances, undistributed
Undistributed offsetting receipts:
Other interest
Employer share.employee retirement
Interest received by trust funds
Rents and royalties on the Outer Continental Shelf lands.
122
66
8
1,424
3,113
167
21,018
1,761
1,244
1,769
25,091
1,085
584
269
1,741
159
2,456
1,610
966
111
11,277
49,596
2,140
244,054
18,844
16,682
10,186
315,553
28,671
4,828
3,518
23,893
2,645
25,087
1,579
866
95
8,481
37,426
1,893
220,838
19,544
15,511
8,289
292,313
16,520
4,961
3,165
24,522
2,403
23,956
1,792
1,024
117
11,740
48,788
2,336
240,995
18,858
17,026
8,942
316,469
28,872
4,897
3,604
24,293
2,645
24,860
13,207
-2,717
322
56
593
2,090
170
939
1,254
4,584
178,945
-18,486
4,511
-214
7,318
23,727
283
26,333
9,121
4,567
153,838
-17,299
4,057
192
7,048
22,590
255
25,593
10,946
4,610
179,300
-18,631
4,506
86
7,313
23,627
328
26,559
10,467
-1
-3,670
-304
-827
-2
-27,359
- 26,070
-5,542
-18
-25,263
-20,376
-6,694
-25,722
-26,922
-5,493
73,191
936,809
841,800
937,286
+ 617
-202,813
-175,342
-201,279
-1,381
-9,118
-9,996
-10,035
-764
-211,931
-185,339
-211,314
Classification
Budget Receipts
Individual income taxes
Corporation income taxes
Social insurance taxes and contributions:
Employment taxes and contributions..
Unemployment insurance
Other retirement contributions
Excise taxes
Estate and gift taxes
Customs duties
Miscellaneous receipts
Total
275
376
3,331
497
936
Budget Outlays
Total
Budget surplus ( + ) or deficit (-)
Off-budget surplus ( + ) or deficit (-).
Total surplus (+) or deficit (-)
1
Based on the Mid-Session Review of the 1986 Budget estimates released by O M B on August 30,1985. The 1986 Budget includes a proposal to abolish the off-budget status of off-budget entities
and to include these entities in the on-budget totals. While the budget included the off-budget data on-budget (under proposed legislation), the Monthly Treasury Statement is continuing to show them
off-budget in conformity with current law. This presentation will be retained until enactment of the legislation repealing the off-budget status of these entitles. The estimates for 1985 and 1986 in this
document have been adjusted from the published budget totals to show the currently off-budget entitles as still being off-budget in order to make the full fiscal year estimates consistent with the accounting basis for the monthly data.
^ h e outlays of this agency will be effected when the reclassification of all off-budget agencies to on-budget takes place.
... No transactions.
Note: Details may not add to totals because of rounding.
Source: Financial Management Service, Department of the Treasury.
5
Table 4. Receipts of the U.S. Government, September 1985 and Other Periods (in millions)
This Month
Classification
Individual income taxes:
Withheld
Presidential Election Campaign Fund
Other
Total—Individual income taxes
Refunds
(Deduct)
Gross
Receipts
Current Fiscal Year to Date
Gross
Receipts
Receipts
Refunds
(Deduct)
Prior Fiscal Year to Date
Receipts
I $298,941
35
97,685
$22,569
1
13,613
36,183
Gross
Receipts
Refunds
(Deduct)
Receipts
$279,345
35
81,346
$1,539
$34,643
396,661
$65,743
$330,918
360,726
$64,771
$295,955
1,275
10,950
77,413
16,082
61,331
74,179
17,286
56,893
Corporation Income taxes
12,224
Social insurance taxes and contributions:
Employment taxes and contributions:
Federal old-age and survivors ins. trust fund:
Federal Insurance Contributions Act taxes
Self-Employment Contributions Act taxes ..
Deposits by States
Taxes on benefits
12,676
920
2,136
6
12,676
920
2,136
6
144,925
7,718
17,651
3,151
472
144,453
7,718
17,651
3,151
129,090
6,602
14,916
2,132
296
128,794
6,602
14,916
2,132
15,738
15,738
173,445
472
172,973
152,740
296
152,444
1,217
88
96
1,217
88
96
14,031
779
1,587
218
49
13,982
779
1,587
218
13,451
733
1,618
143
39
13,412
733
1,618
143
1,401
1,401
16,615
49
16,566
15,945
39
15,907
3,365
239
3,365
239
129
38,372
1,971
326
4,202
34,557
1,374
308
4,103
81
34,476
1,374
308
4,103
Total—FOASI trust fund
Federal disability insurance trust fund:
Federal Insurance Contributions Act taxes
Self-Employment Contributions Act taxes .
Deposits by States
Taxes on benefits
Total—FDI trust fund
Federal hospital insurance trust fund:
Federal Insurance Contributions Act taxes
Self-Employment Contributions Act taxes .
Receipts from Railroad Retirement Board .
Deposits by States
Total—FHI trust fund
Railroad retirement accounts:
Rail industry pension fund
Railroad social security equivalent benefit.
Taxes on benefits
Total—Employment taxes and contributions .
(**)
(**)
259
259
38,501
1,971
326
4,202
3,863
3,863
44,999
129
44,871
40,342
81
40,262
253
73
250
73
2,235
1,391
21
2,213
1,391
274
3,334
13
3,321
274
21,325
238,959
671
238,288
212,612
428
212,184
12
208
68
(**)
19,969
5,688
235
133
19,969
5,554
235
19,036
6,052
202
153
19,036
5,899
202
12
275
25,892
133
25,758
25,291
153
25,138
4,630
39
2
4,455
38
2
4,455
38
2
4,672
4,494
4,494
21,328
Unemployment insurance:
Unemployment trust fund:
State taxes deposited in Treasury
Federal Unemployment Tax Act taxes
Railroad Unemployment Ins. Act contributions
208
80
Total—Unemployment trust fund
287
Federal employees retirement contributions:
Civil service retirement and disability fund
Foreign service retirement and disability fund
Other
363
5
363
5
(**)
(**)
4,630
39
2
368
368
4,672
Total—Federal employees retirement contributions.
(**)
Other retirement contributions:
Civil service retirement and disability fund
Total—Social insurance taxes and contributions
Excise taxes:
Miscellaneous excise taxes1 ..
Airport and airway trust fund ..
Highway trust fund
Black lung disability trust fund.
Total—Excise taxes
Estate and gift taxes
Customs duties
Miscellaneous receipts:
Deposits of earnings by Federal Reserve banks
All other
Total—Miscellaneous receipts
Total—Budget receipts
251
251
8
86
8
87
87
86
21,992
15
21,977
269,610
804
268,805
242,483
581
241,902
1,581
-177
1,759
19,659
2,856
13,443
242
4
428
19,418
2,851
13,015
23,019
2,501
11,885
418
2
142
22,601
2,499
11,743
37,361
264
(**)
263
1,450
197
1,253
57
581
581
518
3,351
20
3,331
36,539
674
35,865
37,923
562
510
12
497
6,580
157
6,422
6,179
168
6,010
57
972
1,339
135
37
936
12,498
11,791
421
17,059
1,517
15,684
1,303
22
15,684
1,281
18,604
18,576
16,987
22
16,965
817,904
83,908
733,996
750,269
83,812
666,457
1,339
134
17,059
1,545
1,474
1,473
76,707
2,899
73,808,
6
12,079
11,370
28
28
1
1
'includes amounts received for windfall profit tax pursuant to P.L. 96-223.
.... No transactions.
(**) Less than $500,000.
Note: Details may not add to totals because of rounding.
Source: Financial Management Service, Department of the Treasury.
420
518
Table 5. Outlays of the U.S. Government, September 1985 and Other Periods (in millions)
Classification
Legislative Branch:
Senate
House of Representatives
Joint items
Congressional Budget Office
Architect of the Capitol
Library of Congress
Government Printing Office:
Revolving fund (net)
General fund appropriations
General Accounting Office
United States Tax Court
Other Legislative Branch agencies
Proprietary receipts from the public
Intrabudgetary transactions
Total—Legislative Branch
This Month
Current Fiscal Year to Date
Prior Fiscal Year to Date
Gross Applicable Outlays
Outlays Receipts
Gross Applicable
Outlays
Outlays Receipts
Gross Applicable
Outlays
Outlays Receipts
$24
40
7
1
8
16
$1
1
7
-1
26
2
$24
39
7
1
8
16
$271
7
-1
26
2
471
97
16
107
277
(**)
-11
81
290
19
19
-5
-1
-5
-8
124
122
1,630
<**)
1
$7
9
5
The Judiciary:
Supreme Court of the United States
Courts of appeals, district courts, and other
judicial services
Other
61
3
61
3
)00
900
50
Total—The Judiciary
66
66
(66
966
21
$256
463
97
16
107
277
452
120
16
94
268
-11
81
290
19
19
-5
-8
5
102
262
15
13
1,610
1,599
$6
9
5
-4
20
....
442
120
16
94
268
5
102
262
15
13
-5
-4
1,579
900
50
807
46
807
46
966
866
866
41
46
24
41
46
24
$251
14
16
16
Executive Office of the President:
Compensation of the President and the
White House Office
Office of Management and Budget
Other
$265
16
37
43
8
8
111
111
111
95
95
22
16
22
16
201
201
192
201
192
212
243
212
243
173
55
1,231
38
3
6
172
55
1,231
38
3
6
-2
727 336
2,275
4,889
848
37
44
581
1,060
2,874
928
39
43
333
165
390
2,275
4,889
848
37
44
-165
158
248
1,060
2,874
928
39
43
-158
1,506
1,504
8,819
501
8,318
5,525
491
5,034
International development assistance:
Multilateral assistance:
Contributions to international financial institutions:
International Development Association
Inter-American Development Bank
Other
International organizations and programs ..
5
13
12
5
13
12
874
328
225
336
874
328
225
336
911
325
155
308
911
325
155
308
Total—Multilateral assistance
31
31
1,763
1,763
1,699
1,699
-3
-4
1,221
1,216
1,209
1,205
33
33
377
377
358
358
Total—Executive Office of the President
Funds Appropriated to the President:
Appalachian Regional Development programs
Disaster relief
International security assistance:
Guarantee reserve fund
Foreign military sales credit
Economic support fund
Military assistance
Peacekeeping operations
Other
Proprietary receipts from the public
Total—International security assistance
Agency for International Development:
Functional development assistance program
Operating expenses, Agency for
International Development
Payment to Foreign Service retirement and
disability fund
Other
Proprietary receipts from the public
Total—Agency for International Development
2
51
90
-51
365
29
763
42
336
-763
41
92
245
28
738
41
217
-738
123
54
69
2,005
798
1,207
1.853
770
1,083
1
9
-5
13
118
-6
24
3
13
118
-99
6
3
10
111
41
22
1
3,012
3,737
42
1
9
7
2
Trade and development program
Peace Corps
Overseas Private Investment Corporation
Inter-American Foundation
African Development Foundation
(")
Total—International development assistance
173
12
2
68
Table continued on next page.
7
(**)
(")
105
3,921
(")
93
18
909
140
8
918
10
111
-99
14
1
2,819
Table 5. Outlays of the U.S. Government, September 1985 and Other Periods (in millions)—Continued
Current Fiscal Year to Date
This Month
Classification
Funds Appropriated to the President:—Continued
International monetary programs
Military sales programs:
Foreign military sales trust fund
Other
Proprietary receipts from the public
Other
Total—Funds Appropriated to the President
Gross Applicable
Outlays Receipts
$565
$565
877
7
877
-35
9 792
9,792
10,936
10,936
-58
31
$42
863
10
2,400
976
(**)
649
536
115
19
30
2
373
617
103
Total—Farmers Home Administration
1,352
1,093
Other
Proprietary receipts from the public
Intrabudgetary transactions
Total—Department of Agriculture
Applicable
Receipts Outlays
-$546
2
Total—Forest Service
Gross
Outlays
-$546
1,419
Forest Service:
Forest research
National Forests system
Construction
Forest Service permanent appropriations
Cooperative work
Other
Outlays
-$211
5
606
Total—Food and Nutrition Service
Gross Applicable
Outlays Receipts
-$211
Department of Agriculture:
Departmental administration
Agricultural Research Service
Cooperative State Research Service
Extension Service
Statistical Reporting Service
Economic Research Service
Foreign Agricultural Service
Foreign Assistance Programs
Agricultural Stabilization and Conservation Service
Federal Crop Insurance Corporation
Commodity Credit Corporation
Rural Electrification Administration
Farmers H o m e Administration:
Public enterprise funds:
Self-help housing land development fund
Rural housing insurance fund
Agricultural credit insurance fund
Rural development insurance fund
Rural water and waste disposal grants
Salaries and expenses
Other
Soil Conservation Service:
Conservation operations
Watershed and flood prevention operations
Other
Animal and Plant Health Inspection Service
Agricultural Marketing Service:
Funds for strengthening markets, income, and supply.
Other
Food Safety and Inspection Service
Food and Nutrition Service:
Food stamp program
Nutrition assistance for Puerto Rico
Child nutrition programs
W o m e n , infants and children programs
Other
Outlays
Prior Fiscal Year to Date
5
41
22
28
5
4
4
117
71
76
27
27
7
29
3
938
81
172
130
21
1,341
199
12
1
108
1,816
Table continued on next page.
8
16
-3
11,277
21,246
5119
11,237
-89
-11,237
-3
1,424
22,459
5
41
22
28
5
4
4
117
71
71
813
2
89
496
244
338
57
45
76
89
496
244
338
57
45
76
71
487
239
330
56
36
74
71
487
239
330
56
36
74
1,842
1,842
1,142
1,142
293
649
143
293
506
275
666
90
275
576
24,313
B.707
17,606
14,044
6,736
7,308
281
2
279
231
1
231
1
-1
276
-81
13
19
30
2
8,869
13,090
2,898
5,484
10,308
2,174
10,041
12,974
3,081
7,700
10,497
2,328
2,340
2,478
260
25,401
20,526
6,066
27
27
7
29
368
249
74
305
101
6
29
476
166
360
938
81
172
130
21
11,181
(**)
176
340
28
(**)
2,385
2,782
724
176
340
28
12,765
135
324
37
8,481
753
135
324
37
6,435
26,592
368
249
74
305
353
218
76
296
476
133
360
417
152
339
11,701
11,701
11,561
825
825
814
814
3,665
1,538
3,665
1,538
3,536
1,398
3,536
1,398
266
266
270
270
17,994
17,994
17,579
17,579
18,966
33
353
218
76
296
37
417
115
339
11,561
10
113
113
109
109
1_22
1,063
1,063
1,057
1,057
41
6
154
9
316
280
285
185
316
280
285
185
331
213
135
186
331
213
135
186
199
2,242
2,242
2,029
2,029
11
137
13
124
112
1,035
-1,035
-108
(**)
4,929
-9,649
10
1,341
10
-22
41
6
154
9
$121
9,649
16
(**)
(**)
101
9
29
64
-863
3,113
76,494
(**)
26,898
49,596
(**)
998
(")
(")
65,814
112
-998
28,388
37,426
Table 5. Outlays of the U.S. Government, September 1985 and Other Periods (in millions)—Continued
This Month
Current Fiscal Year to Date
Prior Fiscal Year to Date
Gross Applicable
Outlays Receipts Outlays
Gross Applicable
Outlays Receipts Outlays
Gross Applicable
Outlays
Outlays Receipts
Classification
Department of Commerce:
^General administration
Bureau of the Census
Economic and Statistical Analysis
Economic Development Assistance
„
Promotion of Industry and Commerce
Science and technology:
National Oceanic and Atmospheric Administration
Patent and Trademark Office
National Bureau of Standards
National Telecommunications and Information
Administration
Total—Science and technology
Proprietary receipts from the public
Intrabudgetary transactions
Total—Department of C o m m e r c e .
Department of Defense—Military:
Military personnel:
Department of the Army
Department of the Navy
Department of the Air Force
Imputed accruals for retirement...
Total—Military personnel3.
Operation and maintenance:
Department of the Army
Department of the Navy
Department of the Air Force.
Defense agencies
Total—Operation and maintenance
Procurement:
Department of the Army
Department of the Navy
Department of the Air Force
Defense agencies
Total—Procurement.
Research, development, test, and evaluation:
Department of the Army
Department of the Navy
Department of the Air Force
Defense agencies
Total—Research, development, test, and evaluation
Military construction:
Department of the Army
Department of the Navy
Department of the Air Force
Defense agencies
Total—Military construction
Family housing
Revolving and management funds:
Public enterprise funds
Intragovernmental funds:
Department of the Army
Department of the Navy
Department of the Air Force ...
Defense agencies
Other
Proprietary receipts from the public
Intrabudgetary transactions
Total—Department of Defense—Military
(**)
(**)
$11
6
20
20
$11
6
13
20
$34
176
69
452
249
109
8
10
1,091
96
130
$7
110
8
10
$90
....
15
$33
161
59
312
253
$93
$33
161
59
219
253
1,076
96
130
1,021 15
67
118
1,006
67
118
32
31
31
15
1,334
1,237
73
-73
-11
10
2,140
2,065
32
130
$34
176
69
362
249
129
1,349
-10
-1
-11
167
2,318
2,397
1,932
1,669
2,397
1,932
1,669
26,212
22,259
19,371
26,212
22,259
19,371
18,327
15,709
13,619
16,503
18,327
15,709
13,619
2
16,503
5,998
5,998
67,842
67,842
64,158
64,158
1,848
2,506
1,873
600
1,848
2,506
1,873
600
19,452
25,461
20,203
7,232
19,452
25,461
20,203
7,232
18,362
23,488
19,274
6,245
18,362
23,488
19,274
6,245
6,827
6,827
72,348
72,348
67,369
67,369
1,499
2,269
2,664
89
1,499
2,269
2,664
89
15,145
25,750
28,445
1,041
15,145
25,750
28,445
1,041
13,577
23,989
23,541
772
13,577
23,989
23,541
772
6,521
6,521
70,381
70,381
61,879
61,879
346
728
840
319
346
728
840
319
3,950
8,054
11,573
3,527
3,950
8,054
11,573
3,527
3,812
6,662
10,353
2,289
3,812
6,662
10,353
2,289
2,232
2,232
27,103
27,103
23,117
23,117
87
115
166
11
87
115
166
11
1,133
1,267
1,524
1,133
1,267
1,524
963
963
1,053
1,314
1,053
1,314
375
378
245
10
-1
185
(**)
18
(**)
(**)
24
29
-218
-234
20,830
189
Table continued on next page.
9
1.222
63
-63
10
171
1,893
336
336
375
378
4,260
4,260
3,706
244
2,643
1
2,642
2,413
1
2
2
2
2
(**)
-342
-341
-103
-377
-342
-341
-103
-377
178
15
-5
218
(**)
-159
-610
-159
-610
389
397
281
389
397
-8
-234
-21
21,018
244,858
289
512
804
3,706
2,413
(**)
-95
-95
-423
-423
-78
-78
-473
-473
248
-512
-21
-22
244,054
221,800
285
674
-37
-674
-22
962
220,838
Table 5. Outlays of the U.S. Government, September 1985 and Other Periods (in millions)—Continued
Current Fiscal Year to Date
This Month
Classification
Department of Defense—Civil
Corps of Engineers:
General investigations
Construction, general
Operation and maintenance, general.
Flood control
Other
Proprietary receipts from the public..
Total—Corps of Engineers
Military retirement fund:
Payments to military retirement fund
Military retirement fund3
Intrabudgetary transactions
Other
Proprietary receipts from the public ..
Total—Department of Defense—Civil
Department of Education:
Office of Elementary and Secondary Education:
Compensatory education for the disadvantaged .
Impact aid
Special programs
Indian education
Total—Office of Elementary and Secondary Education
Office of Bilingual Education and Minority Languages
Affairs
Office of Special Education and Rehabilitative Services:
Education for the handicapped
Rehabilitation services and handicapped research
Office of Vocational and Adult Education
Office of Postsecondary Education:
College housing loans
Student financial assistance
Guaranteed student loans
Higher education
Higher education facilities loans and insurance
Total—Office of Postsecondary Education
Office of Educational Research and Improvement
Special institutions
Departmental management
Proprietary receipts from the public
Total—Department of Education
Gross Applicable
Outlays Receipts
Outlays
Outlays
Gross
Outlays
$138
1,033
1,315
$138
1,033
1,315
$139
1,103
1,287
368
228
432
152
$71
368
228
-71
315
309
3,081
71
3,010
3,112
1,450
1,450
9,500
15,801
-9,500
1
6
9,500
15,801
-9,500
39
-6
78
18,844
19,622
$6
Applicable
Receipts Outlays
$71
$139
1,103
1,287
432
152
-71
71
3,041
2
16,471
16,471
39
(**)
3
-1
39
1
7
1,761
18,921
430
24
5
430
24
5
(**)
(**)
4,207
647
526
82
4,207
647
526
82
3,077
578
632
72
3,077
578
632
72
460
460
5,463
5,463
4,358
4,358
3
1,768
69
54
48
1,018
798
658
37 8
321
209
20
29
321
209
20
(")
(**)
115
4,163
3,535
405
5
587 8
579
8,222
8 ... .
15
18
114
262
287
4
8
15
18
-4
12
1,244
16,980
7,098
69
54
48
1,255
638
66
139
176
30
23
42
14
37
1,196
66
139
176
30
23
42
14
37
Total—Energy programs
1,724
247
47
2,656
158
158
-4
638
Total—Department of Energy ,
Applicable
Receipts
$15
94
168
39
-1
-6
$15
94
168
39
-1
Department of Energy:
Atomic energy defense activities
Energy programs:
General science and research activities ..
Energy supply, R and D activities
Uranium supply and enrichment activities.
Fossil energy research and development
Naval petroleum and oil shale reserves ..
Energy conservation
Strategic petroleum reserve
Nuclear waste disposal fund
Other
Power Marketing Administration ...
Departmental administration
Proprietary receipts from the public
Gross
Outlays
Prior Fiscal Year to Date
6
38
-6
78
19,544
167
167
1,018
798
658
953
1,414
743
953
1,414
743
279
-164
4,163
3,535
405
5
123 362
3,743
3,245
419
-1
......
-239
3,743
3,245
419
-1
279
7,943
7,530 362
7,168
247
176
309
19
114
262
287
-19
298
16,682
15,897
7,098
6,120
6,120
23
247
176
309
-23
386
15,511
707
707
650
2,106
1,711
2,106
1,711
2,207
1,864
336
153
464
212
317
336
153
464
212
317
1,196
1,895
1,895
325
136
519
189
271
271
650
2,207
1,864
325
136
519
189
271
271
1,724
7,901
7,901
6,433
6,433
1,386
368
5,081
-100
368
5,081
1,423
362
811
171
47
-811
887
1,769
16,753
6,567
10,186
14,338
76
Table continued on next page.
10
1,486
1,464
4,586
6,049
-40
362
-4,586
8,289
Table 5. Outlays of the U.S. Government, September 1985 and Other Periods (in millions)-Continued
This Month
Current Fiscal Year to Date
Prior Fiscal Year to Date
Gross Applicable
Outlays Receipts Outlays
Gross Applicable
Outlays Receipts Outlays
Gross Applicable
Outlays
Outlays Receipts
Classification
Department of Health and Human Services:
Public Health Service:
Food and Drug Administration
Health Resources and Services Administration:
Public enterprise funds
Health resources and services
Indian health and facilities
Centers for Disease Control
National Institutes of Health:
Cancer research
Heart, lung, and blood research
Arthritis, diabetes, and digestive and kidney diseases .
Neurological and communicative disorders and stroke.
Allergy and infectious diseases
General medical sciences
Child health and human development
Other research institutes
Research resources
Other
$36
(**)
$35
$420
$418
$393
-3
104
76
25
20 3
1,419
872
368
16
1,419
872
368
27 1
1,375
790
360
26
1.375
790
360
75
55
30
25
26
39
18
39
23
21
75
55
30
25
26
39
18
39
23
21
1,100
736
483
348
333
447
285
579
264
96
1,100
736
483
348
333
447
285
579
264
96
1,024
647
431
306
293
385
257
496
228
90
1,024
647
431
306
293
385
257
496
228
90
351
351
4,670
4,670
4,157
4,157
Alcohol, Drug Abuse, and Mental Health Administration 73
Office of Assistant Secretary for Health
7
73
7
938
180
938
180
911
175
911
175
668
8,888
8,882
8,188
1,825
1,401
9
1,825
1,401
9
22,655
19,246
60
22,655
19,246
60
20,061
17,917
127
20,061
17,917
127
3,744
58
3,744
58
47,841
813
13
47,841
813
13
41,476
632
187
41,476
632
187
3,802
3,802
48,667
48,667
42,295
42,295
Federal supplementary medical ins. trust fund:
Benefit payments
Administrative expenses and construction
2,059
77
2,059
77
21,808
923
21,808
923
19,473
902
19,473
902
Total—FSMI trust fund
2,137
2,137
22,730
22,730
20,374
20,374
Total—Health Care Financing Administration
9,173
9,173
113,359
113,359
100,775
100,775
410410
86
79
636
49
62
12
410
86
79
636
49
62
12
3,818
1,040
9,606
8,625
599
2,141
442
3,818
1,040
9,606
8,625
599
2,141
442
6,878
1,057
8,498
8,346
508
2,026
602
Total—National Institutes of Health
Total—Public Health Service
Health Care Financing Administration:
Grants to States for Medicaid
Payments to health care trust funds
Program management
Federal hospital insurance trust fund:
Benefit payments
Administrative expenses and construction
Interest on normalized tax transfers
Total—FHI trust fund
Social Security Administration:
Payments to social security trust funds
Special benefits for disabled coal miners
Supplemental security income program
Assistance payments program
Child support enforcement
Low income home energy assistance
Refugee and entrant assistance
Payments to States from receipts for child support .. .
Federal old-age and survivors insurance trust fund:
Benefit payments
Administrative expenses and construction
Payment to railroad retirement account
Interest expense on interfund borrowings
Interest on normalized tax transfers
Total—FOASI trust fund
-1 $2
104
76
25
669
2
(
**)
('*)
(**)
13,984
13,984
105
13,984
105
115115
115
14,204
14,204
Table continued on next page.
11
$3
....
6
.
(**> •
(**)
(**)
$3
4
. .
$390
8,184
6,878
1,057
8,498
8,346
508
2,026
602
(**)
165,422
1,588
2,310
1,571
722
165,422
1,588
2,310
1,571
722
155,852
1,585
2,404
1,883
683
155,852
1,585
2,404
1,883
683
171,614
171,614
162,406
162,406
Table 5. Outlays of the U.S. Government, September 1985 and Other Periods (in millions)
Current Fiscal Year to Date
This Month
Classification
Department of Health and H u m a n Services:—Continued
Social Security Administration:—Continued
Federal disability insurance trust fund:
Benefit payments
Administrative expenses and construction
Payment to railroad retirement account
Interest on normalized tax transfers
Total—FDI trust fund
Total—Social Security Administration
H u m a n Development Services:
Social services block grant..
H u m a n development services
Family social services
Work incentives
Community services
Other
Total—Human Development Services
Departmental management
Proprietary receipts from the public
Intrabudgetary transactions:
Payments for health insurance for the aged:
Federal supplementary medical insurance trust fund
Payments for tax and other credits4:
Federal old-age and survivors insurance trust fund .
Federal disability insurance trust fund
Federal hospital insurance trust fund
Other
Total—Department of Health and H u m a n Services
Department of Housing and Urban Development
Housing Programs:
Public enterprise funds:
Federal Housing Administration fund
Housing for the elderly or handicapped fund
Other
Rent supplement payments
Homeownership assistance
Rental housing assistance . .
Low-rent public housing
College housing grants
Lower income housing assistance
Other
Total—Housing Programs
Public and Indian Housing:
Low-rent housing—loans and other expenses
Payments for operation of low-income housing projects
Total—Public and Indian Housing
Government National Mortgage Association:
Special assistance functions fund
Emergency mortgage purchase assistance .
Management and liquidating functions fund
Guarantees of mortgage-backed securities
Participation sales fund
Total—Government National Mortgage Association
Community Planning and Development:
Public enterprise fund
Community development grants
Urban development action grants
Other
Total—Community Planning and Development
Gross Applicable
Outlays Receipts
Outlays
Gross Applicable
Outlays Receipts
Outlays
Gross
Outlays
Applicable
Receipts Outlays
$1,567
$1,567
$18,657
$18,657
$17,775
$17,775
48
48
603
43
69
603
43
69
585
22
77
585
22
77
. ..
1,615
19,372
19,372
18,459
18,459
. . .
17,153 217,258
217,258
208,780
208,780
2,743
1,910
2,743
1,910
2,789
1,819
2,789
1,819
$3
749
279
376
-1
659
265
358
8
$1
659
265
358
7
3
6,056
5,897
1
5,896
220
273
5,586
- 5,586
4,960
-4,960
1,615
17,153
183
195
42
40
31
183
195
42
40
31
(**)
(")
(**)
749
279
376
2
490
(**)
490
6,059
6
220
$473
- 473
6
273
-1,355
1,355
-17,898
17,898
-16,811
-16,811
-368
-42
-46
-115
-368
-115
-3,488
-330
-1,348
-1,571
-3,488
-330
-1,348
-1,571
- 6,268
-610
-1,106
- 1,840
-6,268
-610
-1,106
-1,840
-42
-46
25,566
475
25,091
321,148
5,595
315,553
297,278
4,966
292,313
266
291
3,959
-654
-366
936
84
66
280
607
435
57
501
28
66
280
607
2,757
1,036
3,123
37
4
-25
7
18
190
31
39
102
-4
326
-11
3,305
44
22
375
48
661
-1
110
270
657
190
31
39
102
-4
326
-11
2,204
2,204
47
110
270
657
1,686
1,686
20
20
6,030
6,030
6,817
6,817
-12
-12
(**)
(*')
1,004
333
671
14,288
4,450
9,837
12,614
3,546
9,068
45
90
21
24
90
14,314
1,205
428
13,885
1,205
1,705
1,135
594
1,111
1,135
135
21
114
15,519
428
15,090
2,840
594
2,246
2,498
1,680
-554
-234
-103
317
75
21
-65
187
160
206
818
130
-85
-891
2,846
2,233
148
(**)
(**)
11
2
-28
28
19
-17
-17
-28
-103
-14
48
-62
493
1,383
8
311
40
7
10
-2
311
40
7
107
138
366
10
356
Management and administration
Other
Total—Department of Housing and Urban Development.
Prior Fiscal Year to Date
568
27
1,122
261
411
Table oaatinued on next page.
12
1,085
-65
612
-15
-31
133
3,817
3,817
3,819
3,819
497
26
497
26
454
16
454
16
4,309
4,422
275
51
283
38
28,671
23,043
4,447
138
275
51
1,497
-186
35,072
6,400
148
4,274
282
38
6,522
16,520
Table 5. Outlays of the U.S. Government, September 1985 and Other Periods (in millions)
This Month
Current Fiscal Year to Date
Prior Fiscal Year to Date
Classification
Gross Applicable
Outlays Receipts
Department of the Interior:
Land and minerals management:
Bureau of Land Management:
Management of lands and resources
Payments in lieu of taxes
Payments to States and counties for general purpose
fiscal assistance
Other
Minerals Management Service
Office of Surface Mining Reclamation and Enforcement
Total—Land and minerals management
Outlays
Gross Applicable
Outlays Receipts
Outlays
Gross Applicable
Outlays Receipts
Outlays
$46
101
$46
101
$449
103
$449
103
$418
104
$418
104
51
10
50
25
51
10
50
25
132
101
699
272
132
101
699
272
53
95
893
206
53
95
893
206
283
283
1,757
1,757
1,770
1.770
79
12
24
25
13
739
141
156
451
169
$83
680
135
139
452
175
$81
24
656
141
156
451
145
19
600
135
139
452
156
154
1,657
106
1,550
1,581
99
1,482
Water and science:
Bureau of Reclamation:
Construction program
Operation and maintenance
Other
Geological Survey
Bureau of Mines
.....
92
12
24
25
15
$12
Total—Water and science .
168
15
Fish and wildlife and parks:
United States Fish and Wildlife Service
National Park Service
33
108
33
108
577
1,071
577
1,071
498
1,111
498
1,111
Total—Fish and wildlife and parks
141
141
1,649
1,649
1,609
1,609
68
11
35
8
68
11
35
6
954
122
348
63
954
122
348
52
883
124
434
63
883
124
434
54
122
120
1,487
1,476
1,503
1,494
66
-5
66
-5
240
88
240
88
240
73
240
73
Bureau of Indian Affairs:
Operation of Indian programs
Construction
Indian tribal funds
Other
Total—Bureau of Indian Affairs
Territorial and International Affairs
Departmental offices
Proprietary receipts from the public:
Receipts from oil and gas leases, national petroleum
reserve in Alaska
Other
Intrabudgetary transactions
Total—Department of the Interior .
Department of Justice:
General administration
United States Parole Commission ...
Legal activities
Interagency law enforcement
Federal Bureau of Investigation
Drug Enforcement Administration
Immigration and Naturalization Service.
Federal Prison System
Office of Justice Programs
Other
Total—Department of Justice.
Department of Labor:
Employment and Training Administration:
Program administration
Training and employment services
Community service employment for older Americans
Federal unemployment benefits and allowances .
State unemployment insurance and employment
service operation
Advances to the unemployment trust fund and other
funds
Other ..
(**)
4
1,900
(**)
175
-175
192
584
6,850
-7
1
79
-7
1
79
(**)
(**)
88
27
42
49
-3
-1
88
27
42
47
-3
-4
71
9
809
75
1,072
332
557
574
114
-6
275
269
3,606
1
294
21
12
1
294
21
12
57
3,415
320
51
-44
-44
-27
304
-3
304
-3
1,586
-18
776
Table continued on next page.
13
11
7
1,667
-4
1,900
-28
-32
4,828
6,744
61
71
9
809
75
1,072
332
557
548
114
-67
58
7
677
103
916
282
513
528
125
-19
87
3,518
3,188
-28
2,022
26
57
77
3,415
3,196
320
51
321
34
27
21
1,586
-18
4,182
-136
-7
1,667
-32
1,783
22
22
4,961
58
7
677
103
916
282
513
505
125
-19
3,165
77
3,196
321
34
21
4,182
-136
Table 5. Outlays of the U.S. Government, September 1985 and Other Periods (in millions)—Continued
Classification
Department of Labor:—Continued
Employment and Training Administration —Continued
Unemployment trust fund:
Federal-State unemployment insurance:
State unemployment benefits
State administrative expenses
Federal administrative expenses
Veterans employment and training
Interest on refunds of taxes
Repayment of advances from the general fund
Interest on advances to the Employment Security
Administration account
Railroad-unemployment insurance:
Railroad unemployment benefits
Administrative expenses
Payment of interest on advances from railroad
retirement account
Total—Unemployment trust fund
Total—Employment and Training Administration
Labor-Management Services
Pension Benefit Guaranty Corporation
Employment Standards Administration:
Salaries and expenses
Special benefits
Black lung disability trust fund
Special workers' compensation expenses
Occupational Safety and Health Administration
Mine Safety and Health Administration
Bureau of Labor Statistics
Departmental management
Proprietary receipts from the public
Intrabudgetary transactions
Total—Department of Labor
Department of State:
Administration of Foreign Affairs:
Salaries and expenses
Acquisition, operation, and maintenance of buildings
abroad
Payment to Foreign Service retirement and disability fund
Foreign Service retirement and disability fund
Other
Total—Administration of Foreign Affairs
International Organizations and Conferences
International Commissions
Migration and Refugee Assistance
International Narcotics Control
Other
Proprietary receipts from the public
Intrabudgetary transactions
Total—Department of State
Department of Transportation:
Federal Highway Administration:
Highway trust fund:
Federal-aid highways
Other
Other programs
Total—Federal Highway Administration
National Highway Traffic Safety Administration:
Operations and research
Trust fund share of highway safety programs
Other
Gross Applicable
Outlays Receipts
210
9
7
7
\ )
Outlays
$1,006
$1,006
210
9
•• •
4,181
(**)
4,181
6,014
6
18
$10
Outlays
$15,899
2,375
114
111
6
5,121
$15,899
2,375
114
111
6
5,121
72
26,089
6,014
29,211
29,211
33,784
6
59
192
59
-19
152
178
201
898
57
210
151
142
136
173
223
865
44
207
150
132
120
-283
-7,048
-10,899
23,893
25,006
1,216
1,031
7
12
228
22
3
12
228
22
3
222
335
210
23
355
355
2
2
2
22
5
3
-1
-229
-379
159
2,646
1,393
1,393
10
25
10
25
12,584
17
282
1,428
1,428
1
1
15
.. .
22
5
3
.. .
-229
.. .
1
159
1
15
(**) •••
(**)
Table continued on next page.
14
$211
178
1,216
2
218
23,826
91
285
1
5
91
2,026
1
129
23,826
24,387
275
-4,499
6,580
12
1,741
11
12
87
129
6,580
72
-7,048
11
$16,678
2,311
5
-275
-4,499
17
...
87
12
898
57
210
151
142
136
4
$16,678
2,311
175
19
12
90
332
4
17
11
11
12
12
90
332
Gross Applicable
Outlays Receipts Outlays
175
19
5,428
5,428
Gross Applicable
Outlays Receipts
218
13
1
13
1
Prior Fiscal Year to Date
Current Fiscal Year to Date
This Month
201
. .
283
494
26,089
....
33,784
56
56
$161
-10
173
223
865
44
207
150
132
120
323
-323
-10,899
485
24,522
1,031
222
335
210
23
198
337
212
22
198
337
212
22
2,006
2,006
1,800
1,800
540
24
358
52
45
540
24
358
52
45
-1
- 379
580
23
336
33
13
580
23
336
33
13
-380
2,645
2,405
12,584
17
282
10,227
12,883
60
141
1
....
1
1
....
2
-2
-380
2
2,403
18
329
5
10,227
13
12 883
10,574
5
60
141
1
56
140
2
329
10,569
56
140
2
Table 5. Outlays of the U.S. Government, September 1985 and Other Periods (in millions)-Continued
This Month
Current Fiscal Year to Date
Prior Fiscal Year to Date
Gross Applicable
Outlays Receipts Outlays
Gross Applicable
Outlays Receipts Outlays
Gross Applicable
Outlays
Outlays Receipts
Classification
Department of Transportation:—Continued
Federal Railroad Administration:
Public enterprise funds
Northeast corridor improvement program
Grants to National Railroad Passenger Corporation
Other
Total—Federal Railroad Administration
Urban Mass Transportation Administration:
Formula grants
Discretionary grants
Other
Federal Aviation Administration:
Operations
Other
Airport and airway trust fund:
Grants-in-aid for airports
Facilities and equipment
Research, engineering and development.
Operations
Total—Airport and airway trust fund .
Total—Federal Aviation Administration
Coast Guard:
Operating expenses
Acquisition, construction, and improvements
Retired pay
Other
Total—Coast Guard
Maritime Administration:
Public enterprise funds
Ship construction
Operating-differential subsidies
Other
Other
Proprietary receipts from the public
Intrabudgetary transactions
Total—Department of Transportation
Department of the Treasury:
Office of the Secretary
Office of Revenue Sharing:
Salaries and expenses
General revenue sharing
Federal Law Enforcement Training Center
Financial Management Service:
Salaries and expenses
Claims, judgements, and relief acts
Advances to the railroad retirement account.
Payments to Synthetic Fuels Corporation ...
Other
Total—Financial Management Service.
Bureau of Alcohol, Tobacco and Firearms
United States Customs Service
Bureau of Engraving and Printing
Bureau of the Mint
Bureau of the Public Debt
<**)
(**)
(**)
$30
153
764
118
$27
$50
241
$3
153
764
118
$132
241
1,957
255
$81
1,065 27
1,038
2,584
81
145
13
111
1,409
507
1,441
1,409
507
1,441
1,395
233
2,151
(**)
1,554
127
1,554
127
2,313
28
108
49
22
187
108
49
22
187
789
425
262
1,110
789
425
262
1,110
694
268
146
257
694
268
146
257
367
367
2,586
2,586
1,365
1,365
(**)
395
4,267
4,267
3,819
1,717
444
299
(")
147
41
26
4
1,717
444
299
116
1,657
468
311
97
1,657
468
311
92
218
2,580 4
2,575
2,533
2,529
242
5
352
87
151
-64
-8
199
14
384
87
136
25,087
24,301
486
-63
63
7
. .. .
4,567 ....
17 ... .
7
4,567
17
$11
1
14
$11
1
14
26 (")
145
13
111
26
... .
(**)
28
(")
395
147
41
26
5
219 (**)
75
$11
2,475
19
1...
1
2
...
..
14
56
-2
-11...
8
.. ..
Table continued on next page.
15
4
475
5
352
87
163
....
-8
(**)
2,456
233
12
64
25,427 340
-88
88
19
14
....
4
-2
35
64
28
5
13
-6
(**)
(**)
121
(**)
28
5
15
(**)
486
1
1
2
8...
4,584
...
18
8
4,584
18
...
. . .
(")
(**)
177
13
65
-5
19
14
242
314
4
-2
35
41
95
692
...
...
...
41
95
692
223
236
525
16
20
1,020
14
56
-2
-11
8
169
755
-35
66
191
...
...
...
...
...
169
755
-35
66
191
158
695
-17
80
181
...
242
314
141
1,957
255
346
....
....
.. .
... .
....
.
2,503
1,395
233
2,151
2,313
140
3,819
22
14
384
87
124
-65
-5
23,956
223
236
525
16
20
1,020
158
695
-17
80
181
Table 5. Outlays of the U.S. G o v e r n m e n t , S e p t e m b e r 1 9 8 5 a n d Other Periods (in millions)—Continued
Classification
Department of the Treasury:—Continued
Internal Revenue Service:
Salaries and expenses
Processing tax returns
Examinations and appeals
Investigation, collection and taxpayer service
Payment where credit exceeds liability for tax
Refunding internal revenue collections, interest
Internal revenue collections for Puerto Rico
Other
Total—Internal Revenue Service
This Month
Current Fiscal Year to Date
Prior Fiscal Year to Date
Gross Applicable
Outlays
Outlays Receipts
Gross Applicable Outlays
Outlays Receipts
Gross Applicable Outlays
Outlays Receipts
$8
74
96
76
19
114
27
(**)
(**)
415
(**)
24
13
$2
United States Secret Service
Comptroller of the Currency
Interest on the public debt:
Public issues (accrual basis)
Special issues (cash basis)
12,455 12,455
752
Total—Interest on the public debt
13,207 13,207
Proprietary receipts from the public
Receipts from off-budget Federal entities
Intrabudgetary transactions
(**) 178 -178
2,378
-625
Total—Department of the Treasury
13,049
2,558
Environmental Protection Agency:
Salaries and expenses
Research and development
Abatement, control, and compliance
Construction grants
Hazardous substance response trust fund
Other
Proprietary receipts from the public
Intrabudgetary transactions
Total—Environmental Protection Agency
General Services Administration:
Real property activities
Personal property activities
Office of Information Resources Management
Federal property resources activities
General activities
Proprietary receipts from the public
Other
Total—National Aeronautics and Space
Administration
Office of Personnel Management:
Salaries and expenses
Government payment for annuitants, employees
health benefits
Payment to civil service retirement and disability fund
Civil service retirement and disability fund
Employees health benefits fund
Employees life insurance fund
Retired employees health benefits fund
Other
Intrabudgetary transactions:
Civil service retirement and disability fund:
General fund contributions
Other
Total—Office of Personnel Management
(**)
1
$106
1,042
1,360
1,055
1,100
1,750
336
3
106
1,042
1,360
1,055
1,100
1,750
336
$3
$96
870
1,251
1,019
1,193
1,301
365
3
6,746
6,098
184
300
-15
267
161
148,151 148,151
30,794
30,794
415
6,749
24
11
300
169
96
870
1,251
1,019
1,193
1,301
365
$3
6,095
160
129,003 129,003
24,835
267
(**)
24,835
178,945 178,945
153,838 153,838
-2,378
-625
(**) 3,060 -3,060
17,574 -17,574
-6,263
-6,263
(**) 3,190 -3,190
15,378
-15,378
-7,172
-7,172
10,491
185,863
165,043
159,837
55
17
36
181
34
631
161
441
631
161
441
585
164
418
585
164
418
2,900
2,900
2,623
2,623
382
49
382
48
267
49
-44
-8
-44
-44
-3
-44
(**)
-1
20,820
1
8
18,732
1
3
141,105
267
48
324
322
4,520
4,511
4,061
4,057
130
-11
25
-184
10
130
-11
25
-205
-205
90
16
90
16
-184
-201
150
9
78
-2
105
140
-6
80
10
6
80
9
78
-2
105
141
86
56
150
183
295
15
100
30
Total—General Services Administration
National Aeronautics and Space Administration:
Research and development
Space flight, control, and data communications
Construction of facilities
Research and program management
Other
(**)
752
55
17
36
181
34
(**)
$8
74
96
76
19
114
27
183
295
15
100
593
593
-23
-23
129 ....
16,090
1,985
533
85
1
8
549
75
1
(**)
8
16,090
-3
2,715
129
16,090
1,985
-16
10
-16,091
-3
625
Table continued on next page.
16
2,090
-201
63
150
-63
(**)
(">
(**)
63
(**)
120
18
-120
138
192
-18
-214
330
2,118
3,707
170
1,322
2,118
3,707
170
1,322
2,792
2,915
109
1,232
2,792
2,915
109
1,232
(**)
(**)
7,318
7,318
7,048
7,048
111
99
99
1,485
16,091
23,092
-260
-674
-4
13
1,392
15,358
21,891
6,518
753
6,568
1,457
1,392
15,358
21,891
-50
-704
17
C*)
16,091
-35
-15,358
-34
23,727
30,633
111
1,485
16,091
23,092
6,573
902
11
13
6,833
1,576
15
-16,091
-35
32,151
8,424
17
-2
-2
•15,358
-34
8,042
22,590
Table 5. Outlays of the U.S. G o v e r n m e n t , S e p t e m b e r 1 9 8 5 a n d Other Periods (in millions)—Continued
This Month
Classification
Small Business Administration:
Public enterprise funds:
Business loan and investment fund
Disaster loan fund
Other
Salaries and expenses
Other
„
Total—Small Business Administration
Veterans Administration:
Public enterprise funds:
Loan guaranty revolving fund
Direct loan revolving fund
Other
Compensation and pensions
Readjustment benefits
Medical care
Medical and prosthetic research
General operating expenses
Construction projects
Post-Vietnam era veterans education account
Insurance funds:
National service life
United States government life
Veterans special life
Other
Proprietary receipts from the public:
National service life..
United States government life
,
Other
Intrabudgetary transactions
Total—Veterans Administration
Independent agencies:
Action
Board for International Broadcasting
Consumer Product Safety Commission
Corporation for Public Broadcasting
District of Columbia:
Federal payment
Loans and repayable advances
Equal Employment Opportunity Commission
Export-Import Bank of the United States
Federal Communications Commission
Federal Deposit Insurance Corporation
.
Federal Emergency Management Agency:
Public enterprise funds
Salaries and expenses
Emergency management and planning assistance.
Emergency food distribution and shelter program .
Other
Federal H o m e Loan Bank Board:
Public enterprise funds:
Federal H o m e Loan Bank Board revolving fund .
Federal Savings and Loan Insurance Corp. fund
Other
Federal Trade Commission
Intragovernmental agencies:
Washington Metropolitan Area Transit Authority.
Other
Interstate Commerce Commission
Legal Services Corporation
Merit Systems Protection Board
National Archives and Record Administration
National Credit Union Administration:
Central liquidity facility
Other
Gross Applicable
Outlays Receipts
S265
27
4
19
$94
49
2
(**)
Current Fiscal Year to Date
Outlays
Gross Applicable
Outlays Receipts
$171
$1,163
$889
-22
2
19
525
31
267
1
798
18
(**)
(**)
Outlays
$275
-273
14
267
1
Prior Fiscal Year to Date
Gross Applicable
Outlays Receipts
$1,192
$802
404
41
258
823
16
Outlays
$390
-419
26
258
315
144
170
1,987
1,704
283
1,896
1,641
255
134
1
30
45
34
715
14
19
40
9
64
5
35
70
-4
-5
45
34
715
14
19
40
9
1,637
22
425
14,217
1,227
8,722
215
724
521
182
1,359
63
454
278
-41
-29
14,217
1,227
8,722
215
724
521
182
1,523
26
431
13,918
1,470
8,124
186
704
475
156
1,153
71
480
370
-45
-49
13,918
1,470
8,124
186
704
475
156
62
956
46
68
97
956
46
-67
97
922
52
69
84
62
2
5
-2
2
1
-2
34
(**)
1,107
135
-34
421
(**)
(**)
26
-28
-1
168
939
-4
-80
28,977
14
14
42
2,644
26,333
28,100
129
97
35
151
133
105
34
138
311
12
623
9
406
13
8
20
284
453
28
12
339
9
-48
158
3,790
94
4,209
-16
8
20
241 346
133
....
372
69
....
4,174
6,151
127
(**)
(*')
-216
-80
548
922
441
-421
212
129
97
35
151
....
....
548
-311
158
-384
94
• 1,942
486
115
152
4,485
87
6,842
-105
133
372
69
521
125
248
58
3
73
(**)
6
84
3,141
84
2,726
65
(**)
3
26
2
8
9
4
(**)
3
26
2
8
12
28
Table continued on next page.
17
-4
-24
8
50
300
23
100
1,079
53
414
65
71
(**)
(**)
71
75
1,007
-441
(**)
235
-235
-42
2,508
25,593
133
105
34
138
31
3,418
7,089
362
(**)
3
79
52
-58
84
486
84
152
1,068
87
-248
159
125
248
58
C*)
75
1.569
1
562
66
66
33
33
(")
6
50
300
23
100
8
56
271
26
86
1,125
861
-47
808
678
85
6
56
271
26
86
453
117
225
-32
Table 5. Outlays of the U.S. Government, September 1985 and Other Periods (in millions)—Continued
Classification
This Month
Current Fiscal Year to Date
Prior Fiscal Year to Date
Gross Applicable Outlays
Outlays Receipts
Gross Applicable
Outlays
Outlays Receipts
Gross Applicable
Outlays
Outlays Receipts
Independent agencies:—Continued
National Foundation on the Arts and the Humanities:
National Endowment for the Arts
National Endowment for the Humanities
Institute of Museum Services
National Labor Relations Board
National Science Foundation
National Transportation Safety Board
Nuclear Regulatory Commission
Panama Canal Commission
Postal Service (payment to the Postal Service fund)
$15
14
$15
14
(**)
(")
10
138
2
36
34
10
138
2
36
-2
$36
(")
(")
Railroad Retirement Board:
Federal windfall subsidy
Payment to railroad unemployment insurance trust fund .
Milwaukee railroad restructuring, administration
Railroad retirement accounts:
Social security equivalent benefit account
Benefits payments and claims
Advances to the railroad retirement account from the
FDI trust fund
Disbursements for the payment of FOASI benefits
Disbursements for the payment of FDI benefits
Administrative expenses
Interest on refunds of taxes ...
Intrabudgetary transactions:
Railroad retirement account:
Payments to railroad retirement trust funds
Interest on advances to railroad unemployment
insurance account
$149
149
19
134
1,313
22
468
413
1,210
$416
413
-73
1
$406
(")
(**)
413
-73
1
311
177
311
177
3,596
2,216
3,596
2,216
5,681
5,681
(**)
(**)
(**)
(**)
(")
(**)
-1
-1
-1
-1
-1
-1
-1
-1
4
4
(**)
(**)
400
-1
(**)
(**)
(**)
(**)
49
7
49
7
44
4
44
4
-2,131
-2,131
-2,392
-2,392
-72
-72
-5
....
-5
. . .
4,129
103
226
914
694
3
374
527
527
4,129
7 7
16
440
75
103
226
5,603
695
3
398
4,688
(**)
30,031
20,910
Subtotal
400
-1
$145
140
17
130
1,198
21
462
-25
879
33
1
1
Securities and Exchange Commission
Smithsonian Institution
Tennessee Valley Authority
United States Information Agency
United States Railway Association
Other independent agencies
Undistributed offsetting receipts:
Other interest
Employer share, employee retirement:
Legislative Branch:
United States Tax Court:
Tax court judges survivors annuity fund
The Judiciary:
Judicial survivors annuity fund
Department of Defense—Military:
Education Benefits fund
Department of Defense—Civil:
Military retirement fund3
Department of Health and Human Services:
Federal old-age and survivors insurance trust fund ...
Federal disability insurance trust fund
Federal hospital insurance trust fund
Department of State:
Foreign Service retirement and disability fund
Office of Personnel Management:
Civil Service retirement and disability fund
Receipts from off-budget Federal agencies:
Office of Personnel Management:
Civil service retirement and disability fund
$145
140
17
130
1,198
21
462
381
879
1
1
33
Total—Railroad Retirement Board
Total—Independent agencies
$149
149
19
134
1,313
22
468
-3
1,210
23
2
7
16
18
74
(**)
21
2,598
1,344
1,254
422
(**)
(**)
24
9,121
3,606
92
211
5,192
574
2
374
4,841
(**)
35
92
211
351
574
2
339
29,344
18,397
10,946
18
18
-2
(")
(**)
3,606
(**)
(**)
n
(**) -2
-2
-17
-17 -61
-61
-1,546
-1,546 -16,964
-16,964
-16,503
2
-207
-20
-128
-207 -2,288
-20
-221
-128
-1,449
-2,288
-221
-1,449
-1,852
-192
-1,306
-1,852
-192
-1,306
-5
-5 -40
-40
-37
-37
-301
-301 -3,873
-3,873
-3,522
-3,522
1,445
-1,445 -2,461
- 2,461
-1,848
-1,848
3,670
3,670 -27,359
27,359
Table continued on next page.
18
-2
-25,263
-2
-16,503
-25,263
Table 5. Outlays of the U.S. Government, September 1985 and Other Periods (in millions)—Continued
This Month
Classification
Gross Applicable
Outlays
Outlays Receipts
Undistributed offsetting receipts:—Continued
Interest received by trust funds:
The Judiciary:
Judicial survivors annuity fund
Department of Defense—Civil:
Education benefits fund
Military retirement fund .
Soldiers' and Airmen's H o m e permanent fund
Corps of Engineers
Department of Health and H u m a n Services:
Federal old-age and survivors insurance trust fund
Federal disability insurance trust fund
Federal hospital insurance trust fund
Federal supplementary medical insurance trust fund .
Department of Labor:
Unemployment trust fund
Department of State:
Foreign Service retirement and disability fund
Department of Transportation:
Airport and airway trust fund
Highway trust fund
Environmental Protection Agency:
Post-closure liability trust fund
Office of Personnel Management fund:
Civil Service retirement and disability fund
Veterans Administration:
United States government life insurance fund
National service life insurance fund
Independent agencies:
Railroad Retirement Board:
Railroad retirement account
Other
Subtotal
Gross
Outlays
Applicable
Outlays
Receipts
$10
-$10
-$8
$8
8
-962
-17
-18
8
-962
-17
-18
-15
-8
-15
-8
-144
-11
-4
-9
-144
-11
-4
-9
-3,537
-580
-2,016
-1,154
-3,537
-580
-2,016
-1,154
-2,752
-558
-1,686
-807
-2,752
-558
-1,686
-807
-12
-12
-1,242
-1,242
-781
-781
(**)
(**)
-245
-245
-178
-178
-3
-26
-3
-26
-746
-1,313
-746
-1,313
-546
-1,116
(**)
(**)
-1
-1
-33
-33
-13,017
-13,017
-10,813
(**)
(**)
-1
-1
-21
-882
-21
-882
-23
-806
-23
-806
-27
-63
-27
-63
-191
-125
-191
-125
-169
-111
169
111
-304
-304
-26,070
-26,070
-20,376
- 20,376
Total—Budget outlays
83,691
10,500
2,792
2,761
32
3,470
222
10
4
2,174
199
12
4
6,531
90,222
5,150
15,650
6,712
- 52,351
936,809
960,919
119,119
841,800
7,339
38,980
31,703
7,277
1,621
142
1
-8
2,329
27,251
1,091
164
19
26,890
1,092
119
19
22
3
17
-14
9,118
69,836
59,840
9,996
945,927 1,030,755
178,959
851,796
5,544
-58,973
73,191 1,057,892
121,083
31
38,496
31,156
32
1,296
24
-2
1,621
30,017
1,514
148
38
29,875
1,512
156
38
27
4
71,859
62,742
1,381
74,572 1,129,751
183,825
-10,813
-45,639
-53,429
-4,802
828
-1
-6,694
-5,542
-827
-546
-1,116
$6,694
$5,542
$827
-3,974
Total—Outlays
Outlays
$3
32
-4
-2
Total—Undistributed offsetting receipts
Total—Off-budget Federal entities
Gross Applicable
Outlays Receipts
$3
32
-4
-2
Rents and royalties on the Outer Continental Shelf lands.
Off-budget Federal entities:
Federal Financing Bank
Petroleum acquisition and transportation, strategic
petroleum reserve
Postal Service
Rural electrification and telephone revolving fund
Rural Telephone Bank
Synthetic Fuels Corporation fund
U.S. Railway Association
Prior Fiscal Year to Date
Current Fiscal Year to Date
2,329
360
-1
45
MEMORANDUM
Receipts offset against outlays (In millions)
Current
Fiscal Year
to Date
Comparable Period
Prior Fiscal Year
Proprietary receipts
Receipts from off-budget Federal entities
Intrabudgetary transactions
$35,320
17,574
124,293
$36,744
15,378
113,307
Total receipts offset against outlays
177,187
165,429
1
1ncludes an adjustment to prior reporting
ln order to make the 1984 data of the Military Retirement Fund as comparable as feasible to the 1985 data, the cash retirement benefits for 1984 are shown in DoD—Civil (and the income securi
function) while imputed accruals are included in the DoD—Military (and the national defense function) outlays and offset in undistributed offsetting receipts.
Effective October 1, 1984 military retirement benefits are being paid from a new retirement trust fund in the Department of Defense, Civil (and in the income security function) The Department
of Defense Military (and national defense function) is being charged for the currently accruing benefits for future retirees. These intrabudgetary charges are paid into an offsetting receipt account
that is included in undistributed offsetting receipts (employer share, employee retirement) in both the agency and functional table
includes FICA and SECA tax credits, non-contributary military service credits, special benefits for the aged, and credit for unnegotiated OASI benefit checks
No transactions.
(")Less
than $500,000.
Note- Details may not add to totals because of rounding^
Source: Financial Management Service, Department of the Treasury.
2
19
Table 6. Means of Financing the Deficit or Disposition of Surplus by the U.S. Government, September 1985 and Other Periods
(in millions)
Assets and Liabilities
Directly Related to
Budget and Off-budget Activity
Net Transactions
(-) denotes net reduction of either
liability or asset accounts
Account Balances
Current Fiscal Year
Beginning of
Fiscal Year to Date
This Month
This Year
Liability accounts
Borrowing from the public:
Public debt securities, issued under general financing authorities:
Obligations of the United States, issued by:
United States Treasury
Federal Financing Bank
Total public debt securities .
$5,090
5,090
Agency securities, issued under special financing authorities
(See Schedule B. For other agency borrowing, see Schedule C.)
$250,837
Prior Year
$195,056
This Year
This Month
$1,572,267
$1,818,013
_T)
(")
Close of
This month
$1,823,103
n
250,837
195,056
1,572,267
1,818,013
1,823,103
-115
194
4,481
4,374
4,366
1,827,470
Total federal securities
5,082
250,722
194,862
1,576,748
1,822,387
Deduct:
Federal securities held as investments of government accounts
(See Schedule D)
-893
53,453
24,045
264,159
318,505
317,612
5,975
197,269
170,817
1,312,589
1,503,882
1,509,857
2,307
-650
118
-2
296
2,093
-727
945
9,098
-283
1,930
-1,124
27,359
4,895
12,292
10,693
24,402
5,073
14,387
12,366
26,709
5,191
14,385
11,639
7,670
199,953
180,439
1,367,828
1,560,110
1,567,780
517
4,701
-4,340
9,027
-8,043
1,413
8,514
21,913
3,656
8,185
4,174
12,886
5,218
-13,367
-6,631
30,426
11,841
17,060
182
1,293
-74
5,554
-4,618
6,665
-4,618
6,847
-4,618
182
1,293
-74
936
2,047
2,229
395
-25
-3
1,082
5,528
-951
2,451
19,699
-1,799
- 7,992
19,699
-1,111
-7,921
-178
Total borrowing from the public
Accrued interest payable to the public
Allocations of special drawing rights
Deposit funds
Miscellaneous liability accounts (includes checks outstanding etc.).
Total liability accounts .
Asset accounts (deduct)
Cash and monetary assets:
U.S. Treasury operating cash1:
Federal Reserve account...
Tax and loan note accounts
Balance
Special drawing rights:
Total holdings
S D R certificates issued to Federal Reserve Banks
Balance
Reserve position on the U.S. quota in the IMF:
U.S. subscription to International Monetary Fund:
Direct quota payments
Maintenance of value adjustments
Letter of credit issued to IMF
Dollar deposits with the IMF
Receivable/payable (-) for interim maintenance of value
adjustments
-10
-50
-49
19,699
-717
-7,946
-51
-922
249
379
-366
-543
189
204
2,365
10,237
10,252
10,442
12
647
-127
1,324
-167
-1,129
1,364
7,548
1,225
8,226
1,236
8,872
6,248
-10,673
-5,636
50,512
33,591
39,839
751
-722
1,476
16,088
14,614
15,365
7,000
-11,396
-4,160
66,600
48,204
55,204
+ 670
+ 211,348
+ 184,599
+ 1,301,228
+ 1,511,906
+ 1,512,576
Transactions not applied to current year's surplus or deficit
(See Schedule A for details)
94
582
740
488
582
Total budget and off-budget financing
[Financing of deficit ( + ) or disposition of surplus (-)]
+ 764
+ 211,931
+ 185,339
+ 1,512,394
+ 1,513,159
Balance
Loans to International Monetary Fund
Other cash and monetary assets ...
Total cash and monetary assets.
Miscellaneous asset accounts
Total asset accounts
Excess of liabilities ( + ) or assets (-)
46
-1
+ 1,301,228
1
Major sources of information used to determine Treasury's operating cash include the Daily Balance Wires from Federal Reserve Banks, reporting from the Bureau of the Public Debt, electronic
transfers through the Treasury Financial Communications System, and reconciling wires from Internal Revenue Service Centers. Operating cash is presented on a modified cash basis, deposits are
reflected, as received: and withdrawals are reflected as processed.
...No transactions.
(••(Less than $500,000
Note: Details may not add to totals because of rounding.
Source: Financial Management Service. Department of the Treasury.
20
Table 6. Schedule A—Analysis of Change in Excess of Liabilities of the U.S. Government, September 1985 and
Other Periods (in millions)
Fiscal Year to Date
Classification
This Month
This Year
Prior Year
$1,511,906
$1,301,228
$1,116,629
1,511,906
1,301,228
1,116,629
-617
202,813
175,342
Budget surplus (-) or deficit (Table 3)
-617
202,813
175,342
Off-budget surplus (-) or deficit (Table 3)
1,381
9,118
9,996
764
211,931
185,339
27
-516
498
-67
67
242
-94
-582
740
1,512,576
1,512,576
1,301,228
Excess of liabilities beginning of period:
Based on composition of unified budget in preceding period
Adjustments during current fiscal year for changes in
composition of unified budget
Excess of liabilities beginning of period (current basis)
Budget surplus (-) or deficit: ....
Based on composition of unified budget in prior fiscal y e a r . . . .
Changes in composition of unified budget
Total budget surplus (-) or deficit (Table 3)
Transactions not applied to current year's surplus or deficit:
Seigniorage
Increment on gold
Proceeds from currency
Profit on sale of gold
Net gain (-)/loss for IMF loan valuation adjustment.
Total—transactions not applied to current year's
surplus or deficit
Excess of liabilities close of period
....No transactions.
(•*)Less than $500,000.
Note: Details may not add to totals because of rounding.
Source: Financial Management Service, Department of the Treasury.
21
._..
Table 6. Schedule B—Securities issued by Federal Agencies Under Special Financing Authorities, September 1985 and
Other Periods (in millions)
Net Transactions
(-) denotes net reduction of
liability accounts
Account Balances
Current Fiscal Year
Classification
Beginning of
Fiscal Year to Date
This Month
Agency securities, issued under special financing authorities:
Obligations of the United States, issued by:
Export-Import Bank
Obligations guaranteed by the United States, issued by:
Department of Defense:
Family housing mortgages
Department of Housing and Urban Development:
Federal Housing Administration
Department of the Interior:
Bureau of Land Management
Department of Transportation:
Coast Guard:
Family housing mortgages
Obligations not guaranteed by the United States, issued by:
Department of Defense:
Homeowners assistance mortgages
Department of Housing and Urban Development:
Government National Mortgage Association
Independent agencies:
Postal Service
Tennessee Valley Authority
Total agency securities
Prior Year
This Year
This Month
$6
-$25
-$31
$34
$15
$9
-7
-71
-110
153
89
82
1
-22
-67
140
116
117
3
3
14
14
15
17
(**)
(**)
(**)
(**)
(**)
1
1
(**)
("")
(**)
1
2,165
2,165
2,165
250
1,725
250
1,725
250
1,725
4,481
4,374
4,366
-8
....No transactions.
(**)Less than $500,000.
Note: Details may not add to totals because of rounding.
Source: Financial Management Service, Department of the Treasury.
22
Close of
This mont
This Year
-115
-194
(**)
Ag
Table 6. S f * " X l r C i i ^
* ? c y B o r r o w i n g Financed Through the Issue of Public Debt Securities,
September 1985 and Other Periods (in millions)
Account Balances
Current Fiscal Year
Transactions
Classification
Fiscal Year to Date
Beginning of
This Month
This Year
Borrowing from the Treasury:
Commodity Credit Corporation
Commerce, Fishing Vessels, N O A A
Federal Emergency Management Agency:
National insurance development fund
Federal Financing Bank
Federal Housing Administration:
General insurance
Special risk insurance
General Services Administration:
Pennsylvania Avenue Development Corporation ....
Rural Communication Development Fund
Rural Electrification Administration
Rural Telephone Bank
Secretary of Agriculture, Farmers H o m e Administration:
Rural housing insurance fund
Agricultural credit insurance fund
Rural development insurance fund
Federal Crop Ins. Corp
Secretary of Education:
Alternative Fuel Production, D O E
College housing loans
Secretary of Energy:
Bonneville Power Administration
Secretary of Housing and Urban Development:
Housing for the elderly or handicapped
Low-Rent Public housing ....
Urban renewal fund
Secretary of the Interior:
Bureau of Mines, helium fund
Railroad retirement account
Railroad retirement social security equivalent fund ...
Secretary of Transportation:
Aircraft purchase loan guarantee program
Federal ship revolving fund
Railroad revitalization and improvement
Rail service assistance
Regional Rail Reorganization
Smithsonian Institution:
John F. Kennedy Center parking facilities
Tennessee Valley Authority
Veterans Administration:
Veterans direct loan program
Total agency borrowing from the Treasury
financed through issues of Public Debt Securities
Prior Year
This Year
This Month
Close of
This month
$1,162
-21
$5,202
-18
-$2,798
9
$18,609
18
$22,649
21
$23,811
757
14
8,166
5
8,754
55
144,909
69
152,317
69
153,075
-80
-15
-260
-75
-220
-40
1,790
1,984
1,610
1,924
1,530
1,909
3
5
-1
4
30
58
23
7,967
759
58
23
8
55
18
7,865
751
405
1,734
210
113
760
1,561
241
3,381
4,486
1,516
3,446
6,220
1,676
113
3,786
6,220
1,726
113
2,687
2,687
1,170
2.625
-102
340
50
1,170
7,865
759
-62
1,170
-62
-65
-65
240
1,405
1,405
1,340
46
425
13,727
-8
665
1,000
8
4,376
1,000
8
4,801
14,681
4,801
14,727
2,279
252
2,279
168
-944
1,717
252
1,335
1,549
252
1,335
1,717
45
13
130
13
85
13
130
20
150
20
150
20
150
1,730
1,730
1,730
64
-79
-1
-6
-199
64
3,393
31,546
12,212
199,408
227,560
230,954
319
-4
970
106
-278
-50
603
1,126
23
1,015
15,690
15,729
226
-67
320
-73
269
1,087
13,435
226
720
51
74
15,410
222
1,690
14,561
74
1,424
1,421
30,532
31,204
31,957
Borrowing from the Federal Financing Bank:
Export-Import Bank of the United States
National Credit Union Administration
Postal Service
Tennessee Valley Authority
U.S. Railway Association
753
Total borrowing from the Federal Financing Bank
14,455
Note: Includes only amounts loaned to Federal agencies in lieu of agency debt issuances and excludes Federal Financing Bank purchase of loans made or guaranteed by Federal agencies. The
Federal Financing Bank borrows from Treasury and issues its own securities and in turn may loan these funds to agencies in lieu of agencies borrowing directly through Treasury or issuing their own securities.
Note: Details may not add to totals because of rounding.
Source: Financial Management Service, Department of the Treasury.
23
Table 6. Schedule D—Investments of Federal Government Accounts in Federal Securities, September 1985 and
Other Periods (in millions)
Securities Held as Investments
Current Fiscal Year
Net Purchases or Sales (-)
Classification
Beginning of
Fiscal Year to Date
This Month
This Year
Prior Year
This Year
-$1
$6
2
427
-5
Federal funds:
Department of Agriculture
Department of Commerce
Department of Energy
Department of Health and H u m a n Services
Department of Housing and Urban Development:
Federal Housing Administration:
Federal Housing Administration fund:
Public debt securities
Agency securities
Government National Mortgage Association:
Emergency mortgage purchase assistance:
Agency securities
Special assistance function fund:
Agency securities
Management and liquidating functions fund:
Public debt securities
Agency securities
Guarantees of mortgage-backed securities:
Public debt securities
Agency securities
Participation sales fund:
Public debt securities
Agency securities
Housing Management:
Community disposal operations fund:
Agency securities
Department of the Interior
Department of Labor
Department of Transportation
Department of the Treasury
Veterans Administration:
Veterans reopened insurance fund
Independent agencies:
Export-Import Bank of the United States
Federal Emergency Mangement Agency:
National insurance development fund
Federal Savings and Loan Insurance Corporation:
Public debt securities
Agency securities
National Credit Union Administration
Other
Total public debt securities
Total agency securities
Total Federal funds
Trust funds:
Legislative Branch:
United States Tax Court
Library of Congress
The Judiciary:
Judicial survivors annuity fund
Funds Appropriated to the President
Department of Agriculture
Department of Commerce
Department of Defense—Military
Department of Defense—Civil
Department of Health and Human Services:
Federal old-age and survivors insurance trust fund:
Public debt securities
Federal disability insurance trust fund
Federal hospital insurance trust fund:
Public debt securities
Agency securities
TableFederal
continued
on next page.
supplementary
medical insurance trust fund.
Other
$6
15
1
-12
$6
102
1,366
5
718
-4
This Month
Close of
This month
4
$6
102
1,382
8
$6
108
1,366
9
3,065
140
3,796
135
3,783
135
11
-11
-11
-13
11
682
84
84
-1
84
1
752
85
766
85
18
299
-64
185
1
717
67
998
3
1,015
3
39
312
433
1,776
12
2,050
12
2,088
12
13
(")
(")
(")
83
-8
1
-53
894
19
-123
-1,163
823
-1
-1
729
6,528
284
252
3,243
7,338
311
128
2,133
7,422
303
129
2,080
-6
3
42
632
641
635
-702
46
-84
27
774
73
16
150
134
150
(**)
-414
562
22
17
806
151
32
87
6,172
67
325
983
5,758
67
1,109
1,117
5,758
67
1,131
1,134
-581
3,858
-7
3,320
-17
24,098
310
28,537
302
27,956
302
3,851
3,303
24,408
28,839
28,258
1
1
2
2
3
11
10
1
91
1
102
1
-12
-57
-48
60
16
(**)
(**)
8
75
(")
64
11,692
42
138
194
11,617
-466
-319
3,744
1,048
1,721
-633
27,224
4,656
31,434
6,023
30,968
5,704
347
4,194
3,468
-254
1,620
6
2,159
6
16,527
455
9,117
25
20,375
455
10,991
31
20,721
455
10.736
31
(**)
-581
(")
-1
(**)
24
(**)
-1
(**)
102
1
n
202
11,692
Table 6. Schedule D-Investments ofFederal Government Accounts in Federal Securities, September 1985 and
Other Periods (in millions)—Continued
Securities Held as Investments
Current Fiscal Year
Net Purchases or Sales (-)
Classification
Fiscal Year to Date
Beginning of
This Month
This Year
Trust f u n d s : — C o n t i n u e d
Department of the Interior
,
Department of Labor:
Unemployment trust fund
Other
Department of State:
Foreign service retirement and disability fund
Other
Department of the Treasury
Environmental Protection Agency
Office of Personnel Management:
Civil service retirement and disability fund:
Public debt securities
Agency securities
Employees health benefits fund
Employees life insurance fund
Retired employees health benefits fund
This Year
This Month
$20
$19
-$187
$214
$175
$195
-1,366
9
4,611
1
4,001
6
12,397
23
18,375
15
17,009
24
484
424
-1
1.978
2,247
2.462
(*')
(*')
(**)
-124
-1,026
977
1,102
1,640
1,359
6,434
10.840
9
20
182
16
(**)
(**)
84
2,803
215
Department of Transportation:
Airport and airway trust fund
Highway trust fund
Other
Prior Year
Close of
This month
(**)
(**)
7.534
12,968
(**)
7.410
11.942
(**)
108
685
256
681
15,449
2,468
11
-11
261
674
4
59
707
111,829
175
913
5,966
1
124,475
175
1,163
6,650
4
127,278
175
1.174
6,640
4
-3
-25
-28
294
272
269
-38
336
330
67
10
59
4
8,960
135
875
7
9,334
135
943
17
9.296
135
942
17
243
2
2
5
1
1,934
3
1
1,135
-5
Total public debt securities
Total agency securities
14
49,518
Total trust funds
14
Off-budget Federal entities:
Postal Service
Rural electrification and telephone revolving fund
,
Veterans Administration:
Government life insurance fund
National service life insurance:
Public debt securities
Agency securities
Veterans special life insurance fund
General Post Fund National H o m e s
„.
Independent agencies:
Federal Deposit Insurance Corporation
Harry S. Truman Memorial Scholarship Trust Fund
Japan-United States Friendship Commission
Railroad Retirement Board
Other
-1
111
265
701
14,195
44
17
3,097
11
16,019
47
17
4,226
5
16,130
47
18
4,232
6
20,696
236,708
765
286,211
765
286,226
765
49,518
20,696
237,473
286,976
286,991
-326
85
47
-2
2,277
1
2,688
1
2,362
1
Total public debt securities
-326
84
45
2,279
2,689
2,363
Total off-budget Federal entities
-326
84
45
2,279
2,689
2,363
Grand total
-893
53,453
24,045
264,159
318,505
317,612
(**)
....No transactions
(")Less than $500,000
Note: Investments are in public debt securities unless otherwise noted
Note: Details may not add to totals because of rounding.
Source: Financial Management Service, Department of the Treasury.
25
(**)
2,768
7
Table 7. Receipts and Outlays of the U.S. Government by Month, Fiscal Year 1985 (in millions)
Classification
Oct.
Nov.
Dec
Jan.
March
Feb.
April
May
June
July
Aug.
Sept.
Fiscal
Year
To
Date
Prior
Fiscal
Year
To
Date
Receipts
Individual income taxes
Corporation income taxes
Social insurance taxes and
contributions:
Employment taxes and
contributions
Unemployment insurance
Other retirement contributions ....
Excise taxes
Estate and gift taxes
Customs duties
Miscellaneous receipts
Total—budget receipts this year ..
Total—budget receipts prior year
$26,252 $25,770 $34,643 $330,918 $295,955
$25,624 $24,792 527,054 $37,852 $23,769 $15,254 $51,533 $3,611 $34,764
1,078 10,950
1,892
61,331
1,230 10,788
56,893
8,417 8,855
1,753
2,779
1,122 11,531
937
19,655 24,649 19,794 20,182 21,136 18,617 21,325
275
1,276 3,928
501
3,062 8,192
515
398
376
441
367
437
391
381
3,331
2,739 2,700 3,235 2,733 3,409 2,544
560
497
614
428
566
671
430
936
1,151
1,125
997
946
939
998
1,473
1,730
1,826
1,391
1,783
1,218 1,793
17,418 16,752 17,328 21,661 20,097
1,328 2,615
397
1,323 2,346
368
406
403
426
366
2,907 3,267 2,585
3,264 3,151
504
605
469
495
582
842
1,085
922
989
1,150
1,488
1,395 1,471
1,421
1,586
52,251
49,606
51,493 62,404 70,454 54,021
94,593
39,794
72,151 1 57,970 55,776
238,288 212,184
25,758 25,138
4,759
4,580
35,865 37,361
6,422
6,010
12,079
11,370
18,576
16,965
73,808 733,996
68,019
45,157 46,203 58,044 62,537 47,886 44,464 80,179 37,460 69,282 52,017 55,209
666,457
Outlays
Legislative Branch
The Judiciary
Executive Office of the President ...
Funds Appropriated to the President:
International security assistance ..
International development assistance
Other
Department of Agriculture:
Foreign assistance, special export
programs and Commodity Credit
Corporation
Other
Department of C o m m e r c e
Department of Defense:
Military:
Department of the Army
Department of the Navy
Department of the Air Force...
Defense agencies
Total Military3
Civil3
Department of Energy
Department of Health and H u m a n
Services:
H u m a n Development Services....
Health Care Financing
Administration:
Grants to States for Medicaid ..
Federal hospital ins. trust fund .
Federal supp. med. ins. trust
Social Security Administration:
Assistant Payments Program ...
Federal old-age and survivors ins.
146
79
11
116
67
9
93
96
10
169
66
11
104
60
8
139
99
7
129
119
10
131
75
9
165
63
7
149
74
14
141
103
9
122
66
8
1,610
966
111
1,579
866
95
1,498
267
-94
433
321
495
733
172
57
640
422
209
595
136
-127
540
110
27
712
289
-313
384
428
119
640
100
-347
346
226
-393
292
436
499
1,504
105
-185
8,318
3,012
-52
5,034
2,819
628
1,742
2,848
177
1,817
2,360
163
2,941
2,206
181
3,414
2,157
201
1,663
2,321
140
1,511
2,374
157
2,172
2,987
170
425
2,797
150
385
2,668
248
1,105
2,717
228
1,343
2,529
158
930
2,183
167
19,448
30,147
2,140
8,450
28,977
1,893
5,121
6,547
5,938
1,101
4,677
6,719
7,501
1,352
5,514
6,649
6,481
875
5,163
6,288
6,036
1,426
5,225
6,701
6,425
864
5,253
6,641
6,575
2,570
5,368
6,716
6,636
877
6,044
7,147
7,049
1,252
5,378
7,032
6,585
1,252
5,952
7,280
7,274
971
6,142
7,087
7,661
1,690
5,713
7,400
7,032
875
65,550
82,207
81,193
15,103
54,644
70,306
67,847
2
28,041
20,247 21,478 22,580 21,018 244,054
220,838
18,707 20,249 19,519 18,912 19,216 21,039 19,597 21,491
Other
19,544
15,511
8,289
1,351
1,733
865
687
1,203
999
1,680
1,572
765
1,620
1,772
797
1,667
1,316
857
1,660
1,478
796
1,681
1,393
943
1,656
1,033
-552
1,754
1,114
841
1,719
1,433
1,226
1,761
1,244
1,769
18,844
16,682
10,186
390
559
497
577
472
484
528
596
435
465
562
490
6,056
5,896
1,929
5,044
1,769
3,634
1,653
3,872
1,869
4,025
1,936
3,770
1,831
4,019
1,989
4,288
2,086
4,337
1,823
3,708
2,030
4,118
1,914
4,049
1,825
3,802
22,655
48,667
20,061
42,295
2,085
1,434
1,637
1,539
1,639
1,561
1,892
1,503
1,698
1,626
1,752
2,272
1,917
1,734
1,960
1,531
1,862
1,512
2,107
1,614
2,044
1,572
2,137
1,409
22,730
19,306
20,374
18,044
713
812
587
840
721
565
870
696
582
855
748
636
8,625
8,346
16,810 14,595 14,183 14,204 171,614
162,406
13,401
Federal disability ins. trust
2
1,602
1,390
879
13,273 14,626
14,045 14,107 14,202 14,105 14,061
18,459
19,372
1,615
1,602
1,714
1,622
1,603
1,643
1,623
1,669
1,539
1,611
1,605
1,526
19,568
17,647
698
990
1,791
1,411
1,290 2,198 2,053
401
1,424
1,744
1,394 2,254
-1,574 - 1,669 -1,947 -1,593 -1,684 -2,251 -2,588 -1,482 -1,460 -1,772 -1,372 -1,725 -21.11S -23,138
Table continued on next page.
26
Table 7. Receipts and Outlays of the U.S. Government by Month, Fiscal Year 1985 (in millions)-Continued
Classification
Sept.
Fiscal
Year
To
Date
Prior
Fiscal
Year
To
Date
$1,085
584
269
$28,671
4,828
3.518
$16,520
4.961
3,165
Oct.
Nov.
Dec
Jan.
Feb.
March
April
May
June
July
Aug.
$4,733
459
145
$3,033
361
450
$3,117
410
239
$2,523
477
394
$1,061
323
234
$2,336
333
254
$4,049
354
311
$1,022
324
277
$2,153
347
256
$2,265
379
399
$1,296
480
291
1,265
1,377 1,571 2,332
14
323
449
91
489
212
93
230
1,828
433
155
2,549 1,830
-307
371
235
206
1,556 1,311 1,429
514
533
512
192
170
245
1,350 5,428 23.826 26,089
821 -3,687
67 -1.567
259
159
2,645
2,403
1.402
1,021 1,049 794
995
1,135
917
1,176
600
842
567
936
975
1,057
938
1,097 1,198
1,128
950
1,239
1,595 1,403 12,601 10,240
13,716
1.017
1,053
12,486
12,507 13,507 23,373 12,513
1,145
1
1
1,136
-1,797 -1,113 -2,174 -1,670
407
392
491
254
-302
113
128
-301
12,951
17
-468
339
200
12,726 12,970
1,149
•1,351 -1,147
354
367
150
-361
13,868 24,724 12,908
1
(**) 1,132
-854
-2,406 -2,099
351
404
397
232
-230
101
13,691 13,207 178.945 153,838
1
4,567
4,584
(**)
- 6 9 4 -2,717 -18,486 -17,299
322
4,057
4,511
433
56
192
-214
1
802
631
613
548
1,964
1,722
1,980
2,038
215
-6
-34
-53
617
2,059
2
643
608
1,870
2,050
-24
4
606
537
571
1,862
2,113
2,029
1
10
9
553
1,949
-5
593
2,090
170
7,318 7,048
23,727
22,590
283
255
1,162
2,261 1,205 53
37
38
39
50
3
3
4
4
904
1,044
1,135
819
1,188
46
3
976
1,205 1,204
60
50
4
4
1,023
1,036
2,324 53
1,184
48
45
47
4
5
4
826
801
1,085
2,333
47
4
1,023
45
28
2
863
14,217 13,918
481
535
52
46
11,142
11,535
Outlays
Department of Housing and Urban
Development
Department of the Interior
Department of Justice
Department of Labor:
Unemployment trust fund
Other
Department of State
...
Department of Transportation:
Highway trust fund
Other
Department of the Treasury:
Interest on the public debt
General revenue sharing
Other
Environmental Protection Agency ...
General Services Administration
National Aeronautics and Space
Administration
Office of Personnel M a n a g e m e n t ...
Small Business Administration
Veterans Administration:
Compensation and pensions
National service life
Government service life
Other
Independent agencies:
Postal Service
Tennessee Valley Authority
Other independent agencies ..
Undistributed offsetting receipts:
Employer share, employee
retirement3
Interest received by trust funds ...
Rents and royalties on Outer
Continental Shelf lands
409
Totals this year:
Budget outlays
265
1,798
210
78
819
1
-84
1,880
103
-291
- 1,957
-356
-2,121 -1,994
- 3 6 5 -11,192
-2,300
-47
1,949
-275
-1,269
-281
-213
-289
-375
81,037 79,956 77,583 76,838 74,851
Budget surplus ( + ) or deficit (-) -28,787 -28,462 -15,179
6,384
20,830
+ 616
1,629
-225
Off-budget surplus (+) or deficit (-)
+ 768
-440
Total surplus (+) or deficit (-) ... -28,019 -28,902
Totals prior year:
Budget outlays
70,226
67,794
Budget surplus <+) or deficit (-) ....
-25,069 -21,592
Off-budget surplus (+) or deficit +1,446
(-).
14,563
74,705
68,052
68,267
16,661 -5,515 -20,381
-246
-678
Total surplus (+) or deficit (-) -23,623 -22,270
8,013 -21,056
16,572
-207
211
211
-31
1,220
151
1,234
-2,140
-254
-2,137
-137
22
-617
240
1,034
169
980
-2,161 -2,327 -2,279
- 6 6 0 -12,185
-39
- 2,325
-254
3,670 -27,359 2 -25,263
- 3 0 4 - 26,070 -20,376
-159
-828
- 2 4 2 -83
-1,209
162
29,504 + 11,386
68,687
71,392
-28,555 +11,493
•1,727
-660
+ 645 - 20,042 -27,845
1,546 -2,014 -1,491
41,997
73,020
1,210 879
914
351
6,997
9,717
(**)
28,461 + 12,365 -40,450
1,043
r)
80
-217
78,067 82,228 80,245 71,506 '78,012 83,621
-5,762 -20,588 -30,282 +10,833
1
114
502
1,369
21,532
71,283
68,432
-33,932 -2,000 -16,416
-1,352
-1,801
•1,712
18
1,237
73,191
8,707
936,809
+ 617 -202,813
+ 247 -1,381
27,597
-5,544 -6,712
764
-9,118
211,931
51,234
841,800
-33,498 + 16,785
175,342
1,974
- 9,996
•1,174
-35,284 -3,801 -18,128 -34,673 +14,811
185,339
Does not include an adjustment to prior reporting of $326 million. However, the current fiscal year to date figure does include the adjustment.
In order to make the 1984 data of the Military Retirement Fund as comparable as feasible to the 1985 data, the cash retirement benefits for 1984 are shown in Department of Defense—Civil
(and the income security function) while imputed accruals are included in the Department of Defense—Military (and the national defense function) outlays and offset in undistributed offsetting receipts.
Effective October 1, 1984, military retirement benefits are being paid from a new retirement trust fund in the Department of Defense, Civil (and in the income security function). The Department
of Defense, Military (and'natiorial defense function) is being charged for the currently accruing benefits for future retirees. These intrabudgetary charges are paid into an offsetting receipt account
that is included in undistributed offsetting receipts (employer share, employee retirement) in both the agency and function table.
• ...No transactions.
(**)Less than $500,000.
Note: Details may not add to totals because of rounding.
Source: Financial Management Service, Department of the Treasury.
2
27
Table 8. Effects of Federal Trust Fund Transactions on Budget Results, and Securities Held as Investments, September 1985
and Other Periods (in millions)
Fiscal Year to Date
Current Month
Securities held as Investments
Current Fiscal Year
Classification
Beginning of
Receipts
Trust receipts, outlays, and investments held:
Airport and airway
Black lung disability
FDIC
Federal disability insurance
Federal employees life and health
Federal employees retirement
Federal hospital insurance
Federal old-age and survivors insurance ....
Federal supplementary medical insurance ...
Revenue sharing
Highways
Military advances
Railroad retirement
Military retirement
Unemployment
Veterans life insurance
All other trust
Outlays
Receipts
Excess
$1,012
19
1,942
-1,267
939
17,636
2,261
12,983
1,846
-17
1,705
-143
-1,947
11,637
4,877
392
-334
290,507
236,967
53,540
103,961
103,961
13,164
394,468
340,928
53,540
-12,547
448,055
704,408
-256,353
-12,547
453,694
51
-$101
5
48
-119
6
16,479
338
2,254
-306
-1
-129
-13
-143
60
- 5,095
-30
-87
Trust fund receipts and outlays on the basis
of Table 3 and investments held from
Table 4-D
23,604
10,440
13,164
Interfund receipts offset against trust fund
outlays
22,203
22,203
Total trust fund receipts and outlays ...
45.807
32,643
50,204
62,751
Federal fund receipts and outlays on the basis
of Table 3
Interfund receipts offset against Federal fund
outlays
1,401
379
3,863
15,738
1,253
323
275
4,475
4,475
Total Federal fund receipts and outlays 54,679
.
67,226
Total interfund receipts and outlays
- 26,678
Net budget receipts and outlays 73,808 73,191
Excess
$1,840
562
-1,942
17,834
16,566
-939
-12,847
4,789
42,610
44,871
159,989
172,973
(**) -1,846
4,584
4,567
11,310
13,015
143
3,944
5,891
-11,637
20,881
25,758
-392
592
926
$364
52
-48
1,520
-6
-16,100
3,525
13,485
306
1
1,382
13
466
- 60
5,370
30
138
$263
57
Outlays
$2,851
581
5,639
- 26,678
Close of
This Month
This Year
This Month
$6,434
$7,534
$7,410
14,195
4,656
6,879
114.073
16,982
27,224
9,117
16,019
6,023
7,818
126,998
20,830
31,434
10,991
16,130
5,704
7,819
130,017
21,176
30,968
10,736
10,840
12,968
11,942
3,097
12,397
10,265
1,314
4,226
11,574
18,375
10,684
1,503
4,232
11,635
17,009
10,642
1,573
237,473
286,976
286,991
BlIlilBISHB^^W
5,639
710,047 -256,353
-114,166 -114,166
617
733,996
936,809 -202,813
....No transactions.
(**)Less than $500,000.
Note: Interfund receipts and outlays are transactions between Federal funds and trust funds such as Federal payments and contributions, and interest and profits on investments in Federal securities.
They have no net effect on overall budget receipts and outlays since the receipt side of such transactions is offset against budget outlays. In this table, interfund receipts are shown as an adjustment
to arrive at total receipts and outlays of trust funds respectively. Included in total interfund receipts and outlays are $4,567 million in Federal funds transferred to trust funds for general revenue sharing
Note: Details may not add to totals because of rounding.
Source: Financial Management Service, Department of the Treasury.
28
Table 9. Summary of Receipts by Source, and Outlays by Function of the U.S. Government, September 1985
and Other Periods (in millions)
Classification
This M o n t h
Fiscal Year
To Date
Comparable Period
Prior Fiscal Year
$34,643
10,950
$330,918
61,331
$295,955
56,893
21,325
275
376
3,331
497
936
1,473
238,288
25,758
4,759
35,865
6,422
12,079
18,576
212,184
25.138
4.580
37,361
6,010
11.370
16,965
73,808
733,996
666,457
RECEIPTS
Individual income taxes
Corporation income taxes
Social insurance taxes and contributions:
Employment taxes and contributions
Unemployment insurance
Other retirement contributions
Excise taxes
Estate and gift taxes
Customs
Miscellaneous
Total
NET OUTLAYS
National defense1
21,498
227.437
251,468
1,995
International affairs
13.231
15.426
8,270
8.700
742
General science, space, and technology ..
1,128
2.467
3,906
Energy
1,083
12,683
13,298
Natural resources and environment
22,780
12,146
978
Agriculture
1,817
5.204
401
Commerce and housing credit
2,524
25,874
24,620
Transportation
7,803
7,748
521
Community and regional development
2,136
28,352
26,632
2,672
33,560
30,433
Education, training, employment and social services
21,170
235,764
254,446
Health
8,574
128,993
113.202
Social security and medicare
26,376
25,636
942
Income security1 —
6,188
5,619
469
Veterans benefits and services
5.483
5,026
788
Administration of justice
6,577
6.140
291
9,773
111,007
General government
129,148
-31,957
-4,495
-32,893
General purpose fiscal assistance
Net Interest
841,800
73,191
936,809
Undistributed offsetting receipts1
Total
1
Effective October 1,1984, military retirement benefits are being paid from a n e w retirement trust fund in the Department of Defense, Civil (and in the income security function). The Department
of Defense, Military (and national defense function) is being charged for the currently accruing benefits for future retirees. These intrabudgetary charges are paid into an offsetting receipt account
that is included in undistributed offsetting receipts (employer share, employee retirement) in both the agency and function table.
Note: Details m a y not add to totals because of rounding.
Source: Financial Management Service, Department of the Treasury.
29
Explanatory Notes
1. Flow of Data Into Monthly Treasury Statement
The Monthly Treasury Statement (MTS) is assembled from data in the
central accounting system. The major sources of data include monthly
accounting reports by Federal entities and disbursing officers, and daily
reports from the Federal Reserve banks. These reports detail accounting transactions affecting receipts and outlays of the Federal Government
and off-budget Federal entities, and their related effect on the assets and 4.
liabilities of the U.S. Government. Information is presented in the MTS
on a modified cash basis.
refunds of money previously expended, and receipts of revolving and
management funds. Interest on the public debt (public issues) is recognized on the accrual basis. Outlays of off-budget Federal entities are excluded from budget outlay totals.
Processing
The data on payments and collections are reported by account symbol into the central accounting system. In turn, the data are extracted from
this system for use in the preparation of the MTS.
2. Notes on Receipts
There are two major checks which are conducted to assure the conReceipts included in the report are classified into the following major
sistency of the data reported:
categories: (1) budget receipts and (2) offsetting collections (also called 1. Verification of payment data. The monthly payment activity reported
applicable receipts). Budget receipts are collections from the public that
by Federal entities on their Statements of Transactions is compared to
result from the exercise of the Government's sovereign or governmental
the payment activity of Federal entities as reported by disbursing officers.
powers, exluding receipts offset against outlays. These collections, also
2. Verification of collection data. Reported collections appearing on
called governmental receipts, consist mainly of tax receipts (including
Statements of Transactions are compared to deposits as reported by
social insurance taxes), receipts from court fines, certain licenses, and
Federal Reserve banks.
deposits of earnings by the Federal Reserve System. Refunds of receipts
are treated as deductions from gross receipts.
5. Other Sources of Information About Federal Government
Offsetting collections are from other Government accounts or the public
Financial Activities
that are of a business-type or market-oriented nature. They are classified
into two major categories: (1) offsetting collections credited to appropria- • Guide to the Monthly Treasury Statement, May 1983 (Available from
the Financial Management Service, U.S. Department of Treasury,
tions or fund accounts, and (2) offsetting receipts (i.e., amounts deposited
Washington, D.C. 20226). This publication describes and explains
in receipt accounts). Collections credited to appropriation or fund accounts
each element within the MTS, including how data are prepared, a
normally can be used without appropriation action by Congress. These
brief history of the publication, and other information.
occur in two instances: (1) when authorized by law, amounts collected
for materials or services are treated as reimbursements to appropriations
• Federal Financial Transactions (Available from GPO, Washington,
and (2) in the three types of revolving funds (public enterprise, intragovernD.C. 20402). This publication provides a detailed description of the
mental, and trust); collections are netted against spending, and outlays
Department of the the Treasury's financial operations.
are reported as the net amount.
Offsetting receipts in receipt accounts cannot be used without being
• A Glossary of Terms Used in the Federal Budget Process, March 1981
appropriated. They are subdivided into two categories: (1) proprietary
(Available from the U.S. General Accounting Office, Gaithersburg,
receipts—these collections are from the public and they are offset against
Md. 20760). This glossary provides a basic reference document of
outlays by agency and by function, and (2) intragovernmental funds—
standardized definitions of terms used by the Federal Government
these are payments into receipt accounts from Governmental appropriain the budgetmaking process.
tion or fund accounts. They finance operations within and between Government agencies and are credited with collections from other Government • Daily Treasury Statement (Available from GPO, Washington,
accounts. The transactions may be intrabudgetary when the payment and
D.C. 20402, on a subscription basis only). The Daily Treasury Statereceipt both occur within the budget or from receipts from off-budget
ment is published each working day of the Federal Government and
Federal entities in those cases where payment is made by a Federal enprovides data on the cash and debt operations of the Treasury.
tity whose budget authority and outlays are excluded from the budget
totals.
• Monthly Statement of the Public Debt of the United States (Available
Intrabudgetary transactions are subdivided into three categories:
from G P O , Washington, D.C. 20402 on a subscription basis only).
(1) interfund transactions, where the payments are from one fund group
This publication provides detailed information concerning the public
(either Federal funds or trust funds) to a receipt account in the other fund
debt.
group; (2) Federal intrafund transactions, where the payments and receipts
both occur within the Federal fund group; and (3) trust intrafund transac- • Treasury Bulletin (Available from GPO, Washington, D.C. 20402).
This quarterly publication provides a summary of statistics concerntions, where the payments and receipts both occur within the trust fund
ing the Federal Government's financial operations, international
group.
statistics, cash management/debt collection, and special reports.
Offsetting receipts are generally deducted from budget authority and
outlays by function, by subfunction, or by agency. There are four types
of receipts, however, that are deducted from budget totals as undistributed • Annual Budget Publications (Available from GPO, Washington,
D.C. 20402). There are five annual publications which provide inoffsetting receipts. They are: (1) agencies' payments (including payments
formation concerning the budget:
by off-budget Federal entities) as employers into employees retirement
funds, (2) interest received by trust funds, (3) rents and royalties on the -The Budget of the United States Government, FY 19_
Outer Continental Shelf lands, and (4) other interest (i.e., interest collected
-Appendix, The Budget of the United States Government, FY 79_
on Outer Continental Shelf money in deposit funds when such money
-7?7e United States Budget in Brief, FY 19_
is transferred into the budget).
-Special Analyses
3. Notes on Outlays
-Historical Tables
Outlays are generally accounted for on the basis of checks issued by
Government disbursing officers, and cash payments made. Certain in- • United States Government Annual Report and Appendix (Available
from Financial Management Service, U.S. Department of the
tragovernmental outlays do not require issuance of checks. An example
Treasury, Washington, D.C. 20226). This annual report presents
would be charges made against appropriations representing a part of
budgetary results at the summary level. The appendix presents the
employees' salaries which are withheld for individual income taxes, and
individual receipt and appropriation accounts at the detail level.
for savings bond allotments. Outlays are stated net of offsetting collections and refunds representing reimbursements as authorized by law, 30
SPECIAL NOTICE
Beginning with the October 1985 Monthly Treasury Statement, the release date of the Statement will be changed
from the 17th workday of the month to the 15th workday. The release date is being changed to make the data
that the Statement contains more timely for its users.
The scheduled release date for the October 1985 Statement will be November 22, 1985.
For sale by the Superintendent of Documents, U.S. Government Printing
Office, Washington, D.C. 20402, (202)783-3238. The subscription price:
$27 per year (domestic), $33.75 per year (foreign).
N o single copies are sold.
TREASURY NEWS
Department of the Treasury • Washington, D.c. • Telephone 566-2041
October 28, 1985
FOR IMMEDIATE RELEASE
RESULTS OF TREASURY'S WEEKLY BILL AUCTIONS
Tenders for $7,130 million of 13-week bills and for $7,106 million
of 26-week bills, both to be issued on October 31, 1985,
were accepted today.
RANGE OF ACCEPTED
COMPETITIVE BIDS:
Low
High
Average
13--week bills
maturing January 30, 1986
Discount Investment
Rate
Rate 1/
Price
7.20%
7.24%
7.24%
7.44%
7.48%
7.48%
:
26--week bills
maturing May 1, 1986
Discount Investment
Rate 1/
Rate
98.180 :
98.170 .
98.170 :
7.35%
7.38%
7.37%
7.74%
7.77%
7.76%
Price
96.284
96.269
96.274
Tenders at the high discount rate for the 13-week bills were allotted 82%,
Tenders at the high discount rate for the 26-week bills were allotted 52%,
TENDERS RECEIVED AND ACCEPTED
(In Thousands)
Received
Received
Accepted
Location
Boston
New York
Philadelphia
Cleveland
Richmond
Atlanta
Chicago
St. Louis
Minneapolis
Kansas City
Dallas
San Francisco
Treasury
TOTALS
Type
Competitive
Noncompetitive
Subtotal, Public
Federal Reserve
Foreign Official
Institutions
TOTALS
$
44,615
17,363,115
24,175
49,155
47,240
67,270
1,508,985
91,335
39,400
85,365
39,110
1,097,340
326,060
$
44,615
6,125,835
24,175
49,155
47,240
56,270
153,905
51,220
34,900
85,365
33,210
98,545
326,060
$20,783,165
$7,130,495
: $21,006,725
$7,105,920
$17,488,315
1,198,590
$18,686,905
$3,835,645
1,198,590
$5,034,235
: $17,382,860
:
1,017,865
: $18,400,725
$3,482,055
1,017,865
$4,499,920
1,562,760
1,562,760
:
1,350,000
1,350,000
533,500
533,500
:
1,256,000
1,256,000
$20,783,165
$7,130,495
: $21,006,725
$7,105,920
1/ Equivalent coupon-issue yield
B-3.T1
Accepted
$
'
:
:
:
:
:
:
:
37,565
17,374,185
22,110
33,510
66,095
84,835
1,601,890
84,635
43,815
56,140
32,105
1,213,020
356,820
$
37,565
6,085,985
22,110
33,510
53,215
47,235
193,770
44,635
31,815
51,615
22,105
125,540
356,820
TREASURY NEWS
Department of the Treasury • Washington, D.c. • Telephone 566-2041
FOR IMMEDIATE RELEASE
October 28, 1985
TREASURY ANNOUNCES NOTE AND BOND OFFERINGS
TOTALING $17,750 MILLION
The Treasury will raise about $17,750 million of new cash by
issuing $6,750 million of 3-year 11-month notes, $6,250 million
of 6-year 11-month notes, and $4,750 million of 10-3/4% 19-year
9-month bonds.
If Congress delays action on the debt limit beyond the
issue dates of the securities announced today, the Treasury will
assure the issuance of the securities by disinvesting Federal
trust funds as necessary to permit payments of benefits. This
would, of course, mean that the issuance of the securities would
not exceed the debt limit.
The $17,750 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 prices of accepted competitive tenders. Additional amounts of the 3-year 11-month notes may be issued to
Federal Reserve Banks at the average price of accepted competitive tenders in exchange for the $350 million of Treasury
bills issued for their own account on September 30, 1985, for
securities maturing on that date that were not refunded in the
2-year note auction of September 18, 1985.
The 10-3/4% 19-year 9-month bond will become eligible for
STRIPS (Separate Trading of Registered Interest and Principal
of Securities) on February 18, 1986.
Details about each of the new securities are given in
the attached "highlights" of the offerings and in the official
offering circulars.
oOo
Attachment
B-332
HIGHLIGHTS OF TREASURY OFFERINGS TO THE PUBLIC
OF 3-YEAR 11-MONTH NOTES, 6-YEAR ll-MONTH NOTES, AND 19-YEAR 9-MONTH BONDS
October 28, 1985
$6,250 million
$4,750 million
6-year 11-month notes
Series G-1992
(CUSIP No. 912827 SV 5)
November 1, 1985
October 15, 1992
No provision
To be determined based on
the average of accepted bids
To be determined at auction
To be determined after auction
April 15 and October 15
(first payment on April 15,
1986)
$1,000
Not applicable
19-year 9-month bonds(reopening)
10-3/4% Bonds of 2005
(CUSIP No. 912810 DR 6)
November 4, 1985
August 15, 2005
No provision
10-3/4%
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
$36.72798 per $1,000 (from
July 2, 1985, to November 4,
1985)
Acceptable for TT&L Note
Option Depositaries
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
Full payment to be
submitted with tender
Acceptable
Acceptable
Acceptable
Tuesday, October 29, 1985,
prior to 1:00 p.m., EST
Wednesday, October 30, 1985, Thursday, October 31, 1985,
prior to 1:00 p.m., EST
prior to 1:00 p.m., EST
Amount Offered to the Public
$6,750 million
Description of Security:
Term and type of security........ 3-year 11-month notes
Series and CUSIP designation
Series N-1989
(CUSIP No. 912827 SU 7)
Issue date
November 1, 1985
Maturity date
September 30, 1989
Call date
No provision
Interest Rate
To be determined based on
the average of accepted bids
Investment yield
To be determined at auction
Premium or discount
To be determined after auction
Interest payment dates
March 31 and September 30
(first payment on March 31,
1986)
Minimum denomination available... $1,000
Amount required for STRIPS
Not applicable
Terms of Sale:
Method of sale
Yield auction
Competitive tenders
Must be expressed as
an annual yield, with two
decimals, e.g., 7.10%
Noncompetitive tenders
Accepted in full at the average price up to $1,000,000
Accrued interest payable
by inves tor
- None
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
Friday, November 1, 1985
Wednesday, October 30, 1985
Friday, November 1, 1985
Wednesday, October 30, 1985
To be determined at auction
To be determined after auction
February 15 and August 15
(first payment on February 15,
1986)
$1,000
$800,000
Monday, November 4, 1985
Thursday, October 31, 1985
TREASURY NEWS
Department of the Treasury • Washington, D.c. • Telephone 566-2041
FOR IMMEDIATE RELEASE
EXPECTED AT 9:30 A.M.
OCTOBER 30, 1985
STATEMENT OF THE HONORABLE DAVID C. MULFORD
ASSISTANT SECRETARY OF THE TREASURY
FOR INTERNATIONAL AFFAIRS
BEFORE THE SUBCOMMITTEE ON
INTERNATIONAL FINANCE AND MONETARY POLICY
COMMITTEE ON BANKING, HOUSING AND URBAN AFFAIRS
UNITED STATES SENATE
We are grateful to the subcommittee and to you, Mr.
Chairman, for permitting us to present the Administration's
initiative for a so-called War Chest to combat tied aid
credits. It is a major offensive in the President's campaign
against foreign unfair trade practices.
The legislation is
designed to foster free and fair trade — to establish a
balanced competitive environment where U.S. businesses can
compete fairly.
Our initiative is not designed to create a new subsidy
program to promote exports. This legislation purposely avoids
setting up an unfair trade practice of our own to mimic the
unfair trade practices of other countries.
On the contrary,
the War Chest will provide the necessary leverage on governments to join the great majority of our industrial nation
trading partners and negotiate an end to the misuse of tied or
partially untied aid credits for predatory commercial purposes.
The Tied Aid Credit Problem
We should recognize at the outset that most of our negotiating objectives have been achieved in the field of export
credits. After several years of negotiations, the 22 OECD
nations revised the Arrangement on Export Credits in November
1983 to reduce greatly and in many instances eliminate export
credit subsidies.
In the last year, we further agreed to essentially eliminate financial subsidies for nuclear power projects and large
commercial aircraft.
Moreover, participating countries,
including France, agreed to prohibit the use of any tied aid
credits whatsoever in these two important sectors.
These
agreements by OECD member governments are among the most significant recent advances in free trade.
B-333
- 2 With the reduction of export credit subsidies, however,
tied aid credits, which use aid alone or in combination with
normal export credit financing, have become a more important
problem for U.S. exporters.
The scope of the problem is
revealed by the following:
A recent OECD study, prepared at the behest of OECD Ministers, concluded that tied aid credits with low levels of
concessionality distort aid and trade more than credits
with high grant elements.
The number of notified tied aid credits with low grant elements has doubled since 1982.
The OECD predicts that the amount of such offers will
increase to over $6.0 billion in 1985.
Although many other countries have adopted programs to
match France, French tied aid credits still account for
one-third of all tied aid credits with grant elements below
50 percent and more than one-half of all tied aid credits
with grant elements below 35 percent.
These credits, when used for commercial purposes in the
guise of foreign aid, represent an unfair trade practice, have
caused the United States to lose key export sales, and have
diverted funds away from development assistance.
Thus, the
continued use of commercially motivated tied aid credits
threatens to undermine the Arrangement and increase international trade tensions.
The Negotiating Impasse
The clearest, simplest, and most direct solution to the
problem of commercially motivated tied aid credits is to raise
the minimum permissible grant element from the current 25 percent to 50 percent, a proposal presented by the United States
to the OECD Export Credits Group in December 1983. While it
would not completely eliminate the problem, it would make the
cost of such credits so high that no country's aid budget could
sustain such a diversion from real economic development assistance.
Increasing the minimum permissible grant element to 50
percent is not so shocking as it may appear. The most recent
OECD Development Assistance Committee statistics show that the
average grant element of all aid provided by these countries
was almost 90 percent in recent years. If one excludes grants,
the average grant element of loans ranged between 56 and 59
percent.
- 3 To date, negotiations on tied aid credits have recorded
modest successes. In 1982, OECD governments agreed to ban tied
aid credits with a grant element below 20 percent. In April
1985, OECD Ministers improved discipline by raising the minimum
permissible grant element from 20 to 25 percent and improved
transparency through new prior notification and consultation
procedures.
The Ministers also directed OECD committees to
develop new measures to further improve discipline and transparency. In July the Export Credits Group reached agreement on
defining the tied aid credits which are causing the problem.
The U.S. Government welcomes these interim steps but,
unfortunately, we have now reached an impasse. While most
industrialized countries are prepared to accept greater discipline over tied aid credits, a few countries, notably France,
supported by Italy, are now blocking negotiating progress. At
the September 16-20 meeting of the OECD we were unable to make
progress primarily because the European Community — even with
the Ministerial mandate — h a d no flexibility to increase the
minimum grant element or to explore alternative solutions.
We need a new initiative to break this logjam. The Trade
and Development Enhancement Act of 1983, which created a tied
aid credit matching program, has not given us sufficient leverage.
Eximbank's ability to match has been limited since it
must draw down its dwindling capital and reserves for this
purpose.
USAID action has been limited by the country
allocation process and the requirement that its activities be
for legitimate development purposes. The U.S. Government has
thus offered only 12 tied aid credits since the bill was
enacted. As a result, selective matching by the United States
and more aggressive matching by other countries has not
deterred France from continuing to offer predatory tied aid
credits, nor has it encouraged France to negotiate.
The War Chest Initiative
To combat these unfair trade practices, the President has
announced the following new initiative:
— The Secretary of the Treasury has submitted legislation to
authorize appropriations for a $300 million facility for
grants to mix with Eximbank credits or private sector
loans. The purpose of this program of tied aid grants is
to buttress the Administration's negotiating efforts to
eliminate predatory tied aid credits by other countries.
The Export-Import Bank will begin immediately to draw on
its capital and reserves to offer tied aid credits as a
temporary step until the proposed legislation is enacted.
- 4 —
The Secretary of the Treasury, who has the lead in the
negotiations, has been directed to control the use of these
funds with the advice of the National Advisory Council on
International Monetary and Financial Policy, on which both
the Export-Import Bank and AID are represented. Since the
initiative is neither for export promotion nor economic
development assistance, the Export-Import Bank and the
Agency for International Development should not be asked to
administer it.
— The War Chest should be dismantled when sufficient negotiating progress has been achieved to restrict commercial use
of tied aid credits with low grant elements.
The Administration's proposal is designed (1) to maximize
negotiating leverage; (2) to avoid an open-ended entitlement
program; and (3) to minimize the budgetary impact.
Leverage: To maximize negotiating leverage, we seek a War
Chest of $300 million which would support up to $1 billion of
exports. The War Chest would be targeted at those sectors and
markets of particular importance to countries impeding negotiations.
The program should be aggressive and preemptive, not a
program of merely matching tied aid credits. Other countries
have matching programs which have not caused the initiators to
agree to further discipline. Initiators retain the commercial
advantage of being sought out first by the customer.
If we
only matched foreign offers, we would perpetuate rather than
eliminate the practice, throwing good money after bad.
Consequently, we are proposing an offensive tied aid
credit program. In particular, we seek the authority to initiate tied aid credits and if necessary to outbid selected foreign tied aid credit offers in deals which are of particular
importance to countries blocking negotiations.
Cautionary Provisions: The proposed bill contains a
clearly defined purpose which ties the War Chest to U.S. negotiating objectives rather than establishing a permanent subsidy
and entitlement program. Treasury would control the fund. In
operating the fund and selecting transactions to be targeted,
however, we would rely heavily on the advice of the agencies in
the National Advisory Council. In addition to a sunset provision of September 30, 1987, the President would have the
discretion to end the fund earlier if sufficient negotiating
progress has been achieved.
- 5 Budgetary Impact: The budgetary impact would be limited
by authorizing the use of grants rather than low interest loans
(which would require higher appropriations). By appropriating
the fund directly to the Department of the Treasury, we have
tried to ensure that the fund does not taint the objectives of
Eximbank and USAID nor divert funds from other important bilateral and multilateral assistance programs.
Since the President's initiative was announced, Eximbank
is in the process of notifying OECD countries of new offers
totaling more than a quarter of a billion dollars in tied aid
credits.
These proposed offers are aggressively targeted
against countries impeding negotiations.
Since these cases
involve either initiation or overmatching, however, they could
not be authorized under the Trade and Development Enhancement
Act of 1983, but instead, under the Bank's residual Charter
authority.
Although
Eximbank
will
issue
preliminary
commitments for these transactions under its own authority, it
anticipates that the actual funding would combine regular
Eximbank credits and grant funds from the War Chest, if enacted
and funded.
Otherwise, the concessionary portion would come
from a , low-interest-rate loan, which would be costly to
Eximbank's capital and reserves.
Conclusion
Tied aid credits and partially untied aid credits with low
levels of concessionality are increasingly undermining the
international system of trade and finance. Our War Chest initiative will greatly enhance our leverage to negotiate restrictions on the commercial uses of tied aid or partially untied
aid credits. In order to implement the President's attack on
unfair trade practices, we seek speedy enactment of our War
Chest initiative.
This legislation purposely avoids setting up an unfair
trade practice to match unfair trade practices of other countries. Such a course would ultimately injure all parties. Our
effort is to decrease, not increase, international tensions in
the field of trade finance. Our responsibilities lie in leveling the playing field for free and fair trade-
TREASURY NEWS
Department of the Treasury • Washington, D.c. • Telephone 566-2041
STATEMENT OF THE HONORABLE DAVID D. QUEEN
ACTING ASSISTANT SECRETARY (ENFORCEMENT AND OPERATIONS)
U.S. DEPARTMENT OF THE TREASURY
BEFORE THE
COMMITTEE ON THE JUDICIARY
UNITED STATES SENATE
October 29, 1985
The Treasury View on Legislation to Combat Money Laundering
Mr. Chairman and members of the Committee:
I appreciate the opportunity to appear before you today
to discuss the views of the Treasury Department on the problem
of money laundering and possible legislative responses to it.
In my testimony today, I will present the Treasury Department's
views on the various bills before the Committee. First, however,
I believe that it would be useful to discuss briefly the problem
of money laundering itself and the history of Treasury's efforts
to suppress it.
Money laundering, as this Committee is fully aware, is an
indispensable element in every criminal organization. Without
a means to convert its illicit cash earnings into other
forms of wealth, organized crime could not maintain the veil
of secrecy that allows it to flourish in our society. It could
not reinvest its illegal proceeds in ways that allow it to
continue and expand its operations. And it could not so readily
spread its corrupting influence.
Because of its unique combination of expertise in financial
matters and law enforcement responsibilities, the Department of
the Treasury has long been engaged in efforts to attack the
financial underpinnings of organized crime, particularly the
drug trade. The passage of the Bank Secrecy Act in 1970 gave
new impetus to this cause and authorized Treasury to obtain
the type of financial reporting that can be useful for law
enforcement in ferreting out organized crime and prosecuting
its criminal operatives. Another example of Treasury's efforts
against the financial base of the criminal underworld is the
Narcotics Trafficker's Tax Project, a program that the Treasury
B-334
- 2 Department initiated in 1971 to use Title 26 sanctions against
major drug traffickers, many of whom were identified by DEA as
well as by IRS special agents and revenue agents. This program
resulted in more than 500 recommendations for prosecution and
over $200 million in additional tax liability. IRS conducts a
similar program today known as the High Level Drug Leaders
project, which also has had considerable success.
Between 1980 and 1983, the High Level Drug Leaders Project opened 2700 cases and produced 594 indictments and 380
convictions. In 1984 Fiscal Year alone, the project opened
1085 cases, produced 516 indictments, and resulted in 353
convictions. The project has expanded since then and has
produced 1188 cases, 673 indictments and 515 convictions in
Fiscal Year 1985.
Among Federal agencies, Treasury stood virtually alone in
the investigation of money laundering throughout the 1960's
and 1970's. In the 1980's, heightened concern over the problem
of drug trafficking, as well as growing recognition that an
attack on money laundering is essential to this struggle, has
lead to a multi-agency attack on money laundering. Today,
task forces composed of agents from bureaus under the Departments
of Justice and Treasury investigate narcotics and other organized
crime offenses, with the benefit of the financial investigative
techniques that Treasury has developed. These techniques were
first used on a large scale in Miami through a Treasury initiative
that became successful as a joint venture with the Justice
Department known as Operation Greenback.
Greenback sought to investigate the reasons for the $5.8
billion currency surplus reported by the Federal Reserve Bank
offices in Florida. Because normal growth in an economic region
ordinarily produces a net currency deficit, the surplus in
Florida suggested the presence of large amounts of drug proceeds
in the local economy.
Encouraged by the success of Greenback, Treasury has since
established approximately 40 task forces in cities across the
nation, which together with Greenback have produced more than
1300 indictments since 1980, as well as $81.8 million in currency
seizures and $34.4 million in properly seizures. Greenback itself
is now part of the Organized Crime Drug Enforcement Task Force
for the Southeast region. As this Committee is aware, thirteen
OCDE Task Forces are now in operation.
The OCDE Task Forces have been an unprecedented success,
and Treasury is proud of the role played by its participating
bureaus—IRS, U.S. Customs, and the Bureau of Alcohol, Tobacco
- 3 and Firearms. Although these Task Forces have been fully
operational only since July of 1983, they have initiated
1054 cases. They have produced indictments of 6454 individuals,
2695 of which have already been convicted. More than two-thirds
of the OCDE Task Force cases have a financial component and many
more were dependent on financial investigations for important
evidence.
Treasury's investigations have had a significant impact on
criminal organizations that launder drug proceeds. Since 1980,
we have destroyed eighteen such organizations, which have
laundered a total of approximately $2.8 billion. The cases
involved are listed below:
Case that have already
Dollars
Time
resulted in convictions
Laundered
Frame
Isaac Kattan
Beno Ghitis
Orozco
Armenteros, et al.
Great American Bank
Zapata, et al.
Pinto
$500,000,000
268,000,000
145,000,000
130,000,000
95,000,000
17,000,000
12,000,000
3
5
13
8
13
8
13
Years
Years
Months
Years
Months
Months
Months
8
20
3
2
8
8
1
1
18
3
Years
Months
Years
Years
Months
Months
Year
Year
Months
Months
Subtotal: $1,167,000,000
Pending Cases
A $300,000,000 3 Years
B
C
D
E
F
G
H
I
J
K
300,000,000
250,000,000
230,000,000
180,000,000
140,000,000
70,000,000
65,000,000
60,000,000
20,000,000
9,000,000
Subtotal: $1,624,000,000
Total: $2,791,000,000
- 4 In addition to our investigative work, Treasury has
directed substantial attention to the regulatory enforcement
of the Bank Secrecy Act, particularly the reporting requirements
that are in place under the Act.
The information collected
under these reporting requirements is essential for our financial
investigations.
Treasury analyzes this information at the Financial Analysis
Division, which is located at U.S. Customs headquarters. By
combining these data with other sources of intelligence, this
Division is able to generate financial intelligence reports,
currency flow charts, and link analyses that probe the
financial connections inside and among illicit enterprises.
The analyses produced there support ongoing financial investigations and can generate leads for new ones. All of the task
forces I have mentioned benefit from this Customs analytical
capability, as do Federal, State and local law enforcement
agencies.
We have taken steps over the past several years to improve
the level of compliance of financial institutions with the reporting requirements, particularly with respect to the regulatory
changes made in 1980 that increased the effectiveness of the
Act as a tool to identify and combat money laundering. Earlier
this year, the media coverage of Bank of Boston case brought
heightened public attention to the matter of compliance
by financial institutions. However, we have been bringing
cases against financial institutions and their employees for
noncompliance since the late 1970's. To date, we have identified
approximately 40 cases that have resulted in criminal convictions
of banks or bank employees. At present, we have approximately
100 active referrals of financial institutions to IRS for
investigation of apparent criminal violations.
As a result of the publicity followinq the Bank of Boston
case, over sixty banks have disclosed Bank Secrecy Act violations,
many on a voluntary basis. On June 18, 1985, Treasury announced
that civil penalties ranging from $210,000 to $360,000 had been
imposed on four of these banks — Chase Manhattan Bank, Manufacturers Hanover Trust, Irving Trust and Chemical Bank. On
August 27, Treasury imposed a civil penalty of $2.25 million
against Crocker National Bank based on over 7800 reporting
violations. This is the largest Bank Secrecy Act civil penalty
imposed by Treasury to date. On October 11, Treasury assessed
a civil penalty of $229,750 against the Riggs National Bank.
The cases of the other banks that have come forward are currently
under review.
- 5 Additionally, we have been working with the financial
institution regulatory agencies to strengthen their Bank Secrecy
Act examination procedures. More rigorous examinations should
lead to improved compliance.
We have strengthened the Treasury Bank Secrecy Act regulations in several respects: On May 7 of this year, regulations
became effective that designated casinos as financial institutions
subject to certain Bank Secrecy Act reporting and recordkeeping
requirements. As evidenced in hearings by the President's
Commission on Organized Crime this summer, money laundering
through casinos may be even more widespread than once thought.
The Treasury regulations will reduce the attractiveness of
the use of casinos for money laundering.
Finally, a regulatory amendment pertaining to international
transactions was published as a final rule in the Federal Register
on July 8 of this year. These regulations do not themselves
impose any reporting requirements. Under the regulations,
however, Treasury will be able in the future to select a financial
institution or a group of financial institutions for reporting
of specified international transactions, including wire transfers,
for defined periods of time. We envision that this will require
reporting of transactions with financial institutions in designated
foreign locations that would produce information especially useful
in identifying individuals and companies involved in money laundering or tax evasion.
This effort reflects Treasury's intention to make further
progress against the problem of international money laundering.
Another aspect of our attack on money laundering offshore is
our negotiation with foreign governments that have stringent
bank secrecy laws. Treasury has worked closely with the
Departments of Justice and State to obtain the cooperation
of these governments for the release of financial information
relevant to possible violations of law. The agreement our
government has reached with Great Britain that provides for
access by U.S. prosecutors to information located in the
Cayman Islands that is relevant to narcotics violations is a
direct result of this endeavor.
Now, I would like to turn to the bills before the Committee,
Senate bills 571, 572, 1385 and 1335. Senate 1335, the "Money
Laundering and Related Crimes Act of 1985," was developed jointly
by the Departments of Justice and Treasury.
In my remarks today, I will concentrate on the amendments
in these bills that would enhance Treasury's enforcement authority of the Bank Secrecy Act and on the amendments in S. 1335
to the Right to Financial Privacy Act. Mr. Trott will address
the provisions in the bills establishing a criminal offense
- 6 for money laundering. Let me just note that Treasury believes
that the need for a money laundering offense is beyond debate.
As I have discussed, the Bank Secrecy Act is an effective law
enforcement tool, but in and of itself, it is not enough to stop
money laundering. As long as the requisite reports of currency
transactions are filed under the Bank Secrecy Act, money
laundering transactions may now take place without risk of
sanction under the Bank Secrecy Act.
Both of Senator D'Amato's bills (S. 571 and S. 572) and
Senator DeConcini's bill (S. 1385) have much to commend them
and contain valuable amendments to Treasury's Bank Secrecy Act
enforcement authority. Nevertheless, Treasury believes that
the more comprehensive amendments to Title 31 in S. 1335 are
needed at this time.
Also, only S. 1335 among the bills under consideration
includes essential amendments to the Right to Financial Privacy
Act. These amendments would greatly facilitate efforts to curb
money laundering and related criminal activity by allowing
financial institutions to fulfill their civil duty to cooperate
with federal law enforcement authorities without fear of civil
liability to those whom they suspect of criminal activity.
With respect to Treasury's enforcement of the Bank Secrecy
Act, the most important provision in all three of the bills
before the Committee is the provision that would give the
Secretary for the first time summons authority both for financial
institution witnesses and documents in connection with Bank
Secrecy Act violations. This authority was among the legislative recommendations in the October 1984 report of the
President's Commission on Organized Crime. I would add that
long before the PCOC report, Senator D'Amato advanced the idea
of this summons authority and introduced legislation to accomplish
it in the last Congress.
Under the summons authority in S. 1335, the Secretary would
be able to summon a financial institution officer, employee,
former officer, former employee, or custodian of records who may
have knowledge of a violation of the Act and require production
of relevant documents. This authority is essential both to
investigate violations and to assess the appropriate level of
civil penalties once a violation is discovered.
Section 5(c) of S. 1335 contains amendments to 31 U.S.C.
§ 5321, to strengthen the civil penalty provisions of the Bank
Secrecy Act. Under current law, the civil penalty for willful
violations of reporting requirements under the Act is $10,000
per violation, with an additional penalty for the failure to
- 7 report the international transportation of monetary instruments.
S. 1335 provides for a new penalty of not more than the amount
of the transaction up to $1,000,000, or $25,000, whichever is
greater, for all reporting violations.
For instance, if a financial institution failed to report
a transaction of $12,000, the maximum civil penalty that could
be imposed would be $25,000. If a financial institution failed
to report a transaction of $2 million, the maximum civil penalty
that could be imposed would be $1 million. For violations that
do not involve the reporting requirements, the maximum penalty
would continue to be $10,000. These increased penalties will
make clear to financial institutions that proper reporting is
extremely important to law enforcement and that the financial
consequences of non-compliance could be severe. S. 571 and
S. 1385 also would increase the amount of civil penalties for reporting violations; they would do so by establishing a maximum
penalty of the amount of the transaction in all cases.
The Administration's bill provides a new penalty for negligent violations of the recordkeeping and reporting requirements.
Under current law, civil penalties may be imposed only for
willful violations, which encompass violations done with
reckless disregard of the law or with specific intent to violate
the law. Mere negligent non-filing by banks deprives the
Government of important law enforcement information to the same
extent as do willful violations. This provision would subject
violators to a $10,000 civil penalty in cases where the facts
do not support a finding of willfulness.
All three bills would impose a new civil penalty on
individuals who fail to report information about foreign bank
accounts and foreign bank account transactions under 31 U.S.C.
§ 5314 and the regulations thereunder.
S. 1335 also amends the civil penalty provision, 31 U.S.C.
S 5321, to clarify that criminal penalties under «? 5322 and civil
penalties under § 5321 are cumulative. This provision makes
explicit that if the Secretary of the Treasury assesses a civil
penalty in a case and then refers the case to the Department of
Justice for criminal prosecution, a court should impose criminal
penalties without reference to whether a civil penalty has been
imposed (except to the extent that the prior penalty affects
the defendant's ability to pay). Similarly, if a criminal conviction occurs before assessment of a civil penalty, the
Secretary of the Treasury is free to impose the full measure of
civil penalties available.
- 8 Subsection 5(d) of S. 1335 establishes a six-year statute
of limitations for actions to enforce civil penalties under the
Bank Secrecy Act. Bank Secrecy Act civil penalty enforcement
actions are now governed by the general five-year statute of
limitations for all civil fines and penalties, 28 U.S.C. 5 2462.
This change is needed because civil penalty cases are frequently
subject to related criminal actions which may take many months to
conclude. There may be a stay of civil proceedings pending the
criminal proceedings, or a decision to await assessment of a civil
penalty until the conclusion of the criminal proceedings. The
six-year statute of limitations ordinarily would allow Treasury
to retain the right to impose a civil penalty on all the transactions
that were within the statute of limitations when the matter
was referred for criminal action.
Section 5(b) of S. 1335 revises 31 U.S.C. § 5319 relating
to disclosure by the Secretary of the Treasury of information
reported under the Bank Secrecy Act. Currently, the Secretary
is required to make such information available to a federal
agency upon request. The amendment clarifies that the Secretary
may also make this information available to a state or local
agency and may make disclosure to any federal agency if he has
"reason to believe" the information would be useful to a matter
within the receiving agency's jurisdiction, with or without a
request. Disclosure may also be made to the intelligence community
for national security purposes.
Section 5(f) amends the Bank Secrecy Act definition of "monetary
instrument" to eliminate any possibility that the current definition
could be viewed as a bar to the defining of the term "monetary
instrument" by regulation to include, for example, cashier's checks
and checks drawn to fictitious payees.
Section 3 of S. 1335 sets forth several amendments to the
Right to Financial Privacy Act of 1976 (Title XI of Public Law
95-630) ("RFPA"). Many of these amendments are intended to define
the extent to which financial institutions may cooperate in Federal
law enforcement efforts without risking civil liability under the
RFPA. These amendments would not compromise any legitimate privacy
interests. Several of the amendments are variations of
recommendations made by the President's Commission on Organized
Crime which appear in H.R. 1367.
In viewing these amendments, it is important to bear in
mind that the Right to Financial Privacy Act does not confer any
rights on the part of an aggrieved customer to recover damages
from a bank for that bank's release of information to state law
enforcement authorities, to private parties, or even to foreign
governments. The Act provides for penalties only in the case
of disclosure to the federal government, and the prospect of
- 9 liability under the Act has had an overly inhibiting effect on the
disclosure of information related to criminal activity. Treasury
urges that the Congress not continue to allow the Act to be used
as a shield to prevent banks from voluntarily making timely
disclosure of ongoing criminal activity to federal law enforcement
authorities.
Treasury's experience with numerous banks of every size,
across the country, shows that banks want to assist federal
law enforcement authorities. Bankers often have expressed
regret that they must make a business decision to restrict
their disclosure of suspicious activity to federal authorities
given the risk of civil action under the RFPA by those whom
they suspect of criminal activity.
In my view, the most important change the bill would make to
the Right to Financial Privacy Act is the amendment to subsection
1103(c), 12 U.S.C. § 3403(c). Currently, § 3403(c) provides
that nothing in the Act shall preclude a financial institution
form notifying a Government authority that the institution has
information which may be relevant to a possible violation of
any statute or regulation. The provision has created much
confusion among financial institutions regarding how much
information relating to the possible violations of law can be
given to a Government authority without the risk of civil
liability.
For effective enforcement against money laundering, it is
critical that financial institutions be free to divulge enough
information about the nature of the possible violation and
parties involved so that the Government authority may proceed
with a summons, subpoena or search warrant for additional information. Therefore, in order to define the extent of permissible
disclosure, subsection 3(c) makes explicit that the information
a financial institution may provide to law enforcement, without
customer notification, includes the name or names and other
identifying information concerning the individuals or account
involved, as well as the nature of the suspected illegal activity.
This provision would not authorize full disclosure of all information and records in the financial institution's possession.
Another proposed amendment would allow a financial institution
to make full disclosure in certain narrowly defined situations.
Subsection 1113 of the Right to Financial Privacy Act, 12 U.S.C.
§ 3413, would be amended to allow a financial institution to provide
the Government, without customer notice or fear of civil liability,
all information and records which it has reason to believe may
be relevant to certain possible crimes — crimes by or against
a financial institution or financial institution supervisory
agency, Bank Secrecy Act violations, violations of the proposed
money laundering offense, or enumerated drug-related crimes.
- 10 The bill provides two additional protections to financial
institutions that cooperate in disclosing suspected criminal
activity. First, the "good faith" defense that financial
institutions may raise in civil actions by customers whose
records have been disclosed (12 U.S.C. § 3417(c)) is expanded.
Also, the bill adds a new provision that makes it explicit that
the Right to Financial Privacy Act preempts any state financial
privacy law or court decision that is more restrictive of disclosure
to the government of a possible violation of law without customer
notice.
The bill also amends 12 U.S.C. § 3412 to eliminate the
requirement of certification and notice to the customer when an
agency that has received financial records in accordance with the
provisions of the RFPA transfers the records to another agency,
as long as the transferring agency believes the records may be
relevant to a matter within the jurisdiction of the receiving
agency. The eliminated notice of further transfer provides little
if any further privacy protection to the affected bank customers.
Treasury opposes a provision in S. 1385 that would provide
that every Bank Secrecy Act reporting exemption be approved by
the Secretary on a quarterly basis. Currently under the regulations,
a bank may exempt from reporting certain cash deposits and
withdrawals of accounts of retail businesses in amounts consistent
with the lawful, customary conduct of such a business. The
bank has a continuing duty to monitor the qualifications for
such exemptions. It would be unwise, in our view, to shift
away from the bank the burden of monitoring the eligibility of
bank customers for exemptions. The bank is in the best position
to know its customers and changes in their status. Accordingly,
the provision is unnecessary and overly burdensome to the
Government and to the financial community.
Other measures can more effectively ensure against inappropriate exemptions. For instance, we are considering instead a
regulation that would provide IRS with copies of all exempt
list applications, the truthfulness of which would be compelled
under the sanction of 18 U.S.C. 5 1001. Also, in our work
concludes
my prepared
remarks.
I would
with Mr.
the Chairman,
financial this
institution
regulatory
agencies,
we are
be
happy
to
answer
any
questions
from
the
Committee.
addressing the matter of review of exemption procedures.
TREASURY NEWS
department of the Treasury • Washington, D.C. • Telephone 566-2041
FOR RELEASE AT 4:00 P.M.
October 29, 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 $14,400 million, to be issued November 7, 1985.
This offering will not provide new cash for the Treasury, as the maturing bills
are outstanding in the amount of $14,318 million. 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 4, 198 5.
The two series
offered are as follows:
91-day bills (to maturity date) for approximately $7,200
million, representing an additional amount of bills dated
August 8, 1985,
and to mature February 6, 1986
(CUSIP No.
912794 JR 6 ) , currently outstanding in the amount of $7,277 million,
the additional and original bills to be freely interchangeable.
182-day bills for approximately $7,200 million, to be dated
November 7, 1985,
and to mature
May 8, 1986
(CUSIP No.
912794 KE 3 ) .
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.
The bills will be issued for cash and in exchange for Treasury
bills maturing November 7, 1985.
Tenderi from Federal Reserve
Banks for their own account 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. Federal Reserve
Banks currently hold $1,192 million as agents for foreign and international monetary authorities, and $2,868 million for their own
account. Tenders for bills to be maintained on the book-entry
records of the Department of the Treasury should be submitted on Form
PD 4632-2 (for 26-week series) or Form PD 4632-3 (for 13-week series).
B-335
TREASURY'S 13-, 26-, AND 52-WEEK BILL OFFERINGS, PAGE 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 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 book-entry
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.
4/85
TREASURY'S 13-, 26-, AND 52-WEEK BILL OFFERINGS, PAGE 3
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 the issue date, in cash or other immediately-available funds
or in Treasury bills maturing on that date. 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,
19 84, 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.
4/85
TREASURY NEWS
)epartment of the Treasury • Washington, u . • Telephone 566-2041
FOR IMMEDIATE RELEASE
October 29, .1985
RESULTS OF AUCTION OF 3-YEAR 11-MONTH NOTES
The Department of the Treasury has accepted $6,782 million
of $34,352 million of tenders received from the public for the
3-year 11-month notes, Series N-1989, auctioned today. The notes
will be issued November 1, 1985, and mature September 30, 1989.
The interest rate on the notes will be 9-3/8%. The range of
accepted competitive bids, and the corresponding prices at the 9-3/8%
interest rate are as follows:
Yield
Price
Low
High
Average
9.47%
9.47%
9.47%
99.695
99.695
99.695
Tenders at the high yield were allotted 67%.
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
b
58,730
30,870,012
13,000
145,007
42,927
49,618
1,229,614
184,716
62,909
96,525
9 npr
1, 58' ,*±Z
1,083
$34,351,541
Accepted
$
22,730
6,177,138
13,000
41,007
39,927
24,618
158,614
162,716
23,909
93,025
5,988
18,412
1,083
$6,782,167
The $6,782 million o^ <, -cepted tenders includes $792
million of noncompetitive renders and $5,990 million of competitive tenders from the public.
In addition to the $6,782 million of tenders accepted in
the auction process, $140 million of tenders was awarded at the
average price to Federal Reserve Banks as agents for foreign and
international monetary authorities. An additional $350 million
of tenders was also accepted at the average price from Federal
Reserve Banks for their own account in exchange for Treasury bills
issued on September 30, 1985, for securities that matured on that
date.
B-336
TREASURY NEWS
Department of the Treasury • Washington, D.c. • Telephone 566-2041
FOR IMMEDIATE RELEASE
October 30, 1985
RESULTS OF AUCTION OF 6-YEAR 11-MONTH NOTES
The Department of the Treasury has accepted $ 6,274 million
of $19,972 million of tenders received from the public for the
6-year 11-month notes, Series G-199 2, auctioned today. The notes
will be issued November 1, 1985, and mature October 15, 199 2.
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 9.75% 100.000
High
Average
9.75%
9.75%
100.000
100.000
Tenders at the high yield were allotted 76%.
TENDERS RECEIVED AND ACCEPTED (In Thousands)
Location
Received
Accepted
Boston
$
19,606
$
17,606
New York
17,862,443
5,805,827
Philadelphia
11,100
11,100
Cleveland
73,143
23,143
Richmond
20,661
15,661
Atlanta
40,180
32,180
Chicago
919,581
146,581
St. Louis
141,928
139,928
Minneapolis
16,033
14,033
Kansas City
53,943
51,293
Dallas
9,929
3,929
San Francisco
802,797
11,792
Treasury
957
957
Totals
$19,972,301
$6,274,030
The $6,274 million of accepted tenders includes $651
million of noncompetitive tenders and $5,623 million of competitive tenders from the public.
B-337
TREASURY NEWS
Department of the Treasury • Washington, D.c. • Telephone 566FOR IMMEDIATE RELEASE October 31, 1985
RESULTS OF AUCTION OF 19-3/4-YEAR BONDS
The Department of the Treasury has accepted $4,755 million
of $12,386 million of tenders received from the public for the
10-3/4% 19-3/4-year Bonds of 2005 1/ auctioned today. The bonds
will be issued November 4, 1985, and mature August 15, 2005.
The range of accepted competitive bids was as follows:
Yield Price
Low
10.40%
High
10.49%
Average
10.47%
Tenders at the high yield were allotted 49%.
102.809
102.046
102.215
TENDERS RECEIVED AND ACCEPTED (In Thousands)
Location Received Accepted
Boston
543
$
543
$
New York
10,801,r636
4 r403<,206
437
Philadelphia
437
26,
,500
26,,500
Cleveland
2,,578
11-,578
Richmond
10,,369
8,,859
Atlanta
881,,952
159,,442
Chicago
49,,549
49,,549
13,,149
13,,149
St. Louis
12,
,780
H
i ,780
Minneapolis
4,,520
3,,010
Kansas City
572,,981
75,,981
Dallas
325
325
$4,,755, 359
San Francisco
Treasury
Totals
$12,386,319
The $4,755 million of accepted tenders includes $304
million of noncompetitive tenders and $4,451 million of competi
tive tenders from the public.
1/ When the bonds become eligible for STRIPS on February 18,
19 86, the minimum par amount required will be $800,000.
Larger amounts must be in multiples of that amount.
Br338
TREASURY NEWS
Department of the Treasury • Washington, D.C. • Telephone 566-2041
FOR RELEASE ON DELIVERY
EXPECTED AT 9:30 A.M.
October 30, 1985
STATEMENT OF JOHN J. NIEHENKE
ACTING ASSISTANT SECRETARY OF THE TREASURY
(DOMESTIC FINANCE)
BEFORE THE SUBCOMMITTEE ON SOCIAL SECURITY
OF THE HOUSE WAYS AND MEANS COMMITTEE
Mr. Chairman and Members of the Subcommittee:
My purpose here today is to discuss the impact of the current
debt limit crisis on the investments of the social security funds.
I would like to begin by explaining our policy for investing
and disinvesting the social security trust funds under normal
circumstances, the departures from our normal policy which have
been made during the current debt limit crisis, and our plans to
accelerate the disinvestment of the social security trust funds,
beginning November 1, 1985, if Congress does not act by that date
on debt limit legislation.
Since 1960, investment policy has been to invest daily trust
fund receipts in special non-marketable Treasury obligations which
mature on the upcoming June 30.
On June 30, these maturing securi-
ties are redeemed and reinvested in longer term securities.
in
order to meet current benefit payments, securities maturing on
the upcoming June 30 are redeemed, lowest interest rate first.
B-339
- 2 When the current June 30 maturities are exhausted, the policy is
to redeem securities maturing on the following June 30, lowest
interest rate first, and so on.
The Social Security Amendments of 1983 require that the
estimated amount of tax receipts which would otherwise be credited
to the Federal Old Age and Disability Insurance trust funds as
received during the month be credited to the trust funds on the
first day of the month. These so-called "normalized tax transfers"
are normally immediately invested in Treasury securities, resulting
in a like increase in debt subject to limit and an overpayment of
interest to the trust funds which by law must be reimbursed to
the Treasury. On several occasions since enactment of the 1983
Amendments the Department has delayed investment of the normalized
tax transfers in order to avoid exceeding the debt limit. Such
delays do not result in a net loss of interest earnings to the
trust funds since the trust funds simply reduce their reimbursements
to the Treasury at the end of the year. Beginning with September,
we have not been able to invest fully the normalized tax transfers.
Unlike the normalized tax transfers, the current debt limit
impasse has resulted in an actual loss of interest to several trust
funds. As I advised the Subcommittee on Taxation and Debt Management of the Senate Finance Committee in testimony on September 10,
beginning September 30 we were unable to fully invest amounts
credited to the Civil Service Retirement and Disability Fund, the
Military Retirement Fund, and the Federal Supplementary Medical
Insurance Trust Fund. Cumulative loss of interest to these funds
amounts to about $70 million through October 31.
- 3 In the current situation, unless the debt limit is increased
or we take extraordinary actions we will run out of cash on
November 1. Some members of Congress have suggested that, in
order to provide more time for the debt limit debate, we take
the extraordinary step of disinvesting trust funds in advance of
payment of benefits to permit payment of those benefits starting
November 1. Secretary Baker, in the October 22, 1985 letter
attached to my statement, advised the conferees on the debt limit
bill that we are reluctantly prepared to take this action if
Congress fails to act to resolve the debt limit impasse. While
this will result in a loss of interest to the trust funds, we
concluded that this would be preferable to defaulting on social
security and other benefit payments.
The maximum amount of trust fund disinvestments in early
November is about $17 billion, which is the estimated amount of
benefit payments in early November for social security old age
and disability benefits (about $15 billion) and civil service and
railroad retirement (about $2 billion).
Normally, as Treasury cash is drawn down, from Treasury's
total operating cash balance, to make benefit payments, trust fund
holdings of Treasury securities are redeemed, or disinvested, by
equal amounts. This occurs largely during the first week of the
month, although some checks come in later.
Because of the debt limit, however, Treasury is unable to
borrow to obtain cash to make benefit payments, or any other
payments, beginning November 1, the date on which we expect a
- 4 negative cash balance.
By disinvesting the Old Age and Disability
trust funds on November 1, in advance of benefit payments, Treasury
would reduce debt subject to limit (held by the trust funds) and
thus be able to issue a like amount of debt in the market, which
would raise the cash necessary to make the benefit payments.
Accelerated disinvestment of the two social security trust funds
on November 1 will result in a loss of interest to the funds of
about $9 million, as compared to normal redemption policy.
As I indicated earlier, under normal circumstances in order
to make benefit payments we would redeem those trust fund investments which mature on the upcoming June 30, lowest interest rate
first, then those maturing June 30, 1987, lowest interest rate
first, and so on. Because of our inability to invest fully the
normalized tax transfers, the amount of social security investments
which mature on June 30, 1986 is insufficient to cover the November
benefit payments. Thus it will be necessary to redeem securities
maturing in later years. Following our normal redemption policy
would mean redeeming some of the 13-3/4 percent bonds held by the
social security funds while leaving unredeemed bonds bearing lower
interest rates. In order to minimize the adverse impact of the
debt limit impasse on these funds, we plan to depart from our
policy of redeeming the earliest maturities first. Instead, we
plan to redeem the investments with the lowest interest rates
first, in which case the 13-3/4 percent bonds, and some of the
other high coupon bonds, will not be disinvested.
- 5 That concludes my prepared statement, Mr. Chairman.
be happy to respond to your questions.
Attachment
0O0
I will
THE SECRETARY OF THE TREASURY
WASHINGTON
October 22, 1985
Dear Bill:
As you participate in the conference on H.J. Res. 372 to increase
the debt limit, Z want to bring you up to date on where we stand
and what actions Treasury will and will not take. We find
ourselves in a position where continued Congressional inaction
has moved the Treasury's position from sound financial management
to unnecessary crisis management. I hope that a full explanation
of our projections and intentions will allow responsible action
to avoid a costly continuation of this unseemly situation. By so
acting, the United States will once again be able to raise funds
to meet its lawful obligations without engaging in activities
that erode confidence in our financial system.
Contrary to some assertions, Treasury's cash and debt projections
and other information provided to the Congress since early
September have been very accurate. In testimony on September 10,
Treasury informed Congress that failure to pass a debt limit
extension would result in our (1) reaching the debt ceiling and
(2) becoming unable to invest fully several trust funds starting
on September 30, with a consequent loss of interest to those
funds. Zn a series of letters starting September 25, ve warned
Congress that our cash balances would be virtually exhausted on
October 7. reaching a zero or negative balance on October 8. The
testimony and letters predicted exactly what actually happened.
In those same letters, we stated our strong reluctance to adopt
the suggestion of Congressional staff that we use the Federal
Financing Bank's non-debt-limit borrowing authority, calling such
an action "unprecedented and questionable." We made clear, also,
that if the Congress failed to act on the debt ceiling, we would
have to choose between the FFB option and an unprecedented United
States government default. Faced with Congressional inaction and
the prospect of certain default on October 9, we used $5 billion
of the FFB authority.
We have taken every action ever used by this Department to raise
cash within the debt limit. Moreover, we have taken the
additional step of using the FFB's borrowing authority to avoid
default. These actions have not been without costs. Since
September, the failure of Congress to increase the debt limit has
resulted in non-investment of trust funds, costly delays of
auctions, and uncertainty throughout the capital markets. Over
$50 billion of financing that would otherwise have taken place
over several months beginning in September is now confronting the
markets. The uncertainty and delay will likely cost the American
taxpayer millions of dollars.
Our current"*cash projections indicate that even if we use the
remaining $10 billion FFB borrowing authority, we will have a
negative balance on November 1, widening to a negative balance of
over $5 billion by November 4. I intend to use the FFB borrowing
authority, again reluctantly. But you should be aware that,
subject to estimating error, it cannot get us through November 1.
The negative numbers starting on November 4, moreover, are so
large as to be outside the margin of error.
Some Members of Congress have suggested that, in order to provide
Congress with yet more time, we should take the further
extraordinary step of disinvesting trust funds (social security,
military retirement, civil service retirement, and railroad
retirement) in advance of payment of benefits to permit payment
of those benefits starting November 1. (This option was not
available on October 8, as October benefits had already been
paid.) Taking this action will result in additional interest
loss to the funds and further frustration of our financing
schedule. Moreover, it may raise questions in the minds of
present and future recipients of trust fund benefits—principally
pensioners—about why they have become involved in the debt limit
process. Nevertheless, having discussed this matter with the
President and the Attorney General, ve are reluctantly prepared
to take this action on October 31 if Congress once again fails to
act to resolve the debt limit impasse.
Zt is essential that Congress recognize that, even if trust funds
were disinvested to avoid a November 1 default, ve would
certainly default on November 15 unless Congress acted before
then to increase the debt limit. That default, which would
involve reneging on the principal and interest of United States
securities held by both Americans and foreigners, would have
swift and severe domestic and international repercussions. No
longer would investors view United States securities as riskfree,
and a substantial financing price would have to be paid. Any
increase in the benchmark Treasury rate would probably adversely
affect general interest rates, with negative effects on both the
deficit and the economy.
Z have spent the past week reviewing the known legal and
practical options and have concluded that there are no means
available to avoid default that would not be a stark evasion of
the debt limit statute—with the possible exception of the sale
of United States gold holdings. The President and Z are not
prepared to take that step because it would undercut confidence
here and abroad based on the widespread belief that the gold
reserve is the foundation of our financial system, and because
the Congress clearly has the power to prevent a default by
assuming its responsibility with respect to the debt limit.
Z since re ly~-*hope you will take prompt action to avoid further
exacerbation of this unnecessary and unfortunate situation.
Sincerely,
James A. Baker, ZZZ
The Honorable William H. Gray, ZZI
U.S. House of Representatives
Washington, D. C. 20515
TREASURY NEWS
department of the Treasury • Washington, D.c. • Telephone 566-2041
FOR RELEASE ON DELIVERY
EXPECTED AT 9:30 A.M.
October 31, 1985
STATEMENT OF JOHN J. NIEHENKE
ACTING ASSISTANT SECRETARY OF THE TREASURY
(DOMESTIC FINANCE)
BEFORE THE SUBCOMMITTEE ON ECONOMIC STABILIZATION
OF THE HOUSE BANKING, FINANCE AND URBAN AFFAIRS COMMITTEE
Mr. Chairman and Members of the Subcommittee:
It is a pleasure to be here this morning to discuss the use
of the Federal Financing Bank to keep the Federal Government within
the statutory ceiling on the public debt. You have asked for a
discussion of the transactions which were made to stay within the
debt limit, the reasons for using the FFB, the other alternatives
that were considered, and the consequences of a possible default.
I would like to begin by briefly describing the statutory
framework governing the borrowing operations of the Federal
Government, including the borrowing activities of the FFB.
Treasury securities are issued under the authority of the
public debt statutes (Chapter 31 of Title 31, United States Code).
Treasury issues these securities to finance both budget and offbudget deficits, including the borrowing needs of the FFB, and
to refund maturing debt. Treasury also issues securities to the
various Government investment accounts and trust funds. The Act
places a ceiling on the amount of outstanding obligations issued
under the Act, certain obligations fully guaranteed as to principal
and interest by the United States (largely debentures issued by the
Federal Housing Administration in settlement of default claims on
FHA-insured mortgages), and participation certificates issued in
fiscal year 1968 by the predecessor of the Government National
Mortgage Association.
The FFB conducts its borrowing activities under the authority
of section 9 of the Federal Financing Bank Act of 1973. Section 9(a)
authorizes the Bank to issue its obligations publicly, up to $15
billion outstanding at any one time. Since these obligations are
not issued under the public debt Act or guaranteed within the
meaning of that Act they are not subject to the public debt limit.
B-340
- 2 Section 9(b) of the FFB Act authorizes the Bank to issue
obligations to the Treasury, and, in turn, authorizes the Treasury
to use the proceeds from the sale of securities under the public
debt Act to finance its purchases of FFB obligations. Thus, FFB
borrowings from the Treasury, funded by Treasury's issuance of its
own obligations, increase the debt subject to limit.
The original thinking, as evidenced by the legislative history
of the FFB Act, for providing the FFB with dual borrowing authorities
was that FFB would normally issue its obligations publicly under
section 9(a), and that the authority to borrow from the Treasury
under section 9(b) would be used as a backup or for interim financing
between market borrowings. However, the initial FFB issue under
section 9(a), an 8-month bill in the amount of $1.5 billion in
July 1974, was not well received by the market, despite an extensive
selling effort. It was then decided that the Bank would henceforth finance its activities by borrowing from the Treasury under
section 9(b), thereby reducing the Government's overall interest
outlays. As a result, all FFB borrowing from 1975 until this
October has been financed by debt subject to the debt limit.
Turning now to the use of the FFB section 9(a) borrowing
authority to alleviate the debt limit crisis earlier this month,
such use was prompted by inquiries from Congressional staff as to
the possibility of having the FFB issue its own securities in the
market to raise cash. Yet, our use of the FFB borrowing authority
under section 9(a) was reluctant.
First, in letters of October 1, 1985 to the Senate leadership
urging prompt action on the debt limit legislation, Secretary Baker
advised that use of the FFB for this purpose would raise two significant problems:
— such action might be contrary to the intent of
Congress that the FFB not be used to evade the
purpose of the debt limit statute, and
— an FFB issue in the market would be a very costly
means of financing compared to Treasury borrowing.
We concluded that use of the FFB should be avoided for this purpose.
Next, in a letter of October 3 to the Senate Majority Leader,
Secretary Baker warned that "unless a debt limit is passed by the
Congress and signed into law by the President on or before October 7,
1985 or we take unprecedented and costly measures such as using the
Federal Financing Bank borrowing authority, the United States could
be in a position of defaulting on its obligations for the first time
in history."
- 3 Again, in a letter of October 7 to the Senate Majority Leader
urging action on the debt limit, Acting Secretary Darman repeated
this warning, characterizing use of the FFB as "unprecedented and
questionable."
On October 8, the Department advised the Senate leadership
of our projection of a zero cash balance for the end of that day,
and, absent remedial action, a negative cash balance at the end of
the following day, October 9. We also advised that the Department
would announce its intention to offer $5 billion of Treasury bills
to be auctioned on October 9.
Finally, on October 9, the Department advised the Senate that
we would affirm our offer of $5 billion of bills for that day, and
that we would use the FFB borrowing authority if necessary to
facilitate this transaction. The announcement stated: "Only in
the event that Congress fails to raise the current debt limit
today will this procedure be used — in order to assure that the
Government can raise cash in order to avoid default."
Mr. Chairman, for your reference, I have attached copies of
these letters and announcements to my prepared statement.
The actual use of the FFB borrowing authority was in the
nature of a swap — $5 billion of non-marketable public debt
securities held by the Civil Service Retirement and Disability
Fund were redeemed. This freed up a like amount of debt limit
authority, allowing the issuance of the marketable bills auctioned
and issued that day without exceeding the debt limit. The FFB
obligations were issued to the fund later that day, without any
loss of interest to the fund. Since the interest rate (10.375%)
and maturity (June 30, 1986) of the FFB securities issued to the
Civil Service Fund are identical to the interest rate and maturity
of the redeemed non-marketable securities, and since the rate on
FFB obligations redeemed from the Treasury is the same 10.375
percent, there will be no gain or loss to the Civil Service Fund
or the FFB as a result of this transaction.
As to other alternatives considered, on October 22 Secretary
Baker advised the conferees on the debt limit legislation of the
actions taken by this Department to avoid breaching the debt limit,
including non-investment of new transfers to the trust funds and
costly delays of auctions of marketable Treasury securities.
Secretary Baker also advised that we are reluctantly prepared to
take the extraordinary step of disinvesting trust funds in advance
of payment of benefits to permit payment of those benefits starting
November 1. Finally, we have considered, and rejected, sale of
United States gold holdings.
- 4 As to consequences of default, in testimony on September 10
and in the previously mentioned letters, Treasury has advised
Congress that default would mean that recipients of checks for
social security, payroll, unemployment, defense contract and
other payments, including principal and interest on Treasury
securities, would be unable to cash these checks. The full
consequences of a default by the United States are impossible
to predict and awesome to anticipate.
That concludes my prepared statement, Mr. Chairman. I will
be happy to respond to your questions.
Attachments
oOo
THE SECRETARY OF THE TPF^URY
WASHINGTON
October 1, 1985
Dear Bob:
As I promised in my letter to you of September 25, this
letter vill update you on our current cash and debt estimates
- and thus our need for action by the Senate on legislation to
increase the public debt limit.
Our current estimates still show that Treasury's cash balance
will be virtually exhausted by October 7, and the situation
will deteriorate 'sharply thereafter* Consequently, it is
imperative that the Senate act on the debt limit bill by
October 7. Also, as we informed you earlier, as of yesterday
we have been unable to comply with statutory requirements to
fully invest several trust funds, thus costing them interest
earnings*
Congressional staff have inquired as to the possibility of
having the Federal Financing Bank issue its own securities
directly in the market as a means of raising cash while
avoiding direct Treasury issues subject to the debt limit*
1 believe this approach presents two significant problems*
First, the legislative history of the Federal Financing Bank
Act of 1973 raises questions as to whether such action
would be contrary to the intent of Congress that the FFB
not be used to evade the purpose of the debt limit statute*
Second, it is clear that an FFB issue in the market would
be a very costly means of financing, compared to Treasury
borrowing, especially if such an FFB issue were required to
be done on short notice without adequate market preparation*
Thus a failure to act by October 7 would cost the taxpayers
just as our inability to fully invest the trust funds is
costing these funds right now* Hence, 1 believe we should
avoid using the Federal Financing Bank borrowing authority
for this purpose.
Accordingly, I continue to urge the Senate to act on the
debt limit by October 7.
Sincerely^
aroes A* Baker, III
The Honorable Robert Dole
Majority Leader
United States Senate
Washington, D.C* 20510
THE SECRETARY OF THE TREASURY
WASHINGTON
October 1, 1985
Dear Senator Byrd:
As z promised in my letter to you of September 25, this
letter will update you on our current cash and debt estimates
and thus our need for action by the Senate on legislation to
increase the public debt limit.
•
Our current estimates still show that Treasury's cash balance
will be virtually exhausted by October 7, and the situation
will deteriorate sharply thereafter* Consequently, it is
imperative that the Senate act on the debt limit bill by
October 7* Also, as we informed you earlier, as of yesterday
we have been unable to comply with statutory requirements to
fully invest several trust funds, thus costing them interest
earnings*
Congressional staff have inquired as to the possibility of
having the Federal Financing Bank issue its own securities
directly in the market as a means of raising cash while
avoiding direct Treasury issues subject to the debt limit*
1 believe this approach presents two significant problems*
First, the legislative history of the Federal Financing Bank
Act of 1973 raises questions as to whether such action
would be contrary to the intent of Congress that the FFB
not be used to evade the purpose of the debt limit statute*
Second, it is clear that an FFB issue in the market would
be a very costly means of financing, compared to Treasury
borrowing, especially if such an FFB issue were required to
be done on short notice without adequate market preparation.
Thus a failure to act by October 7 would cost the taxpayers
just as our inability to fully invest the trust funds is
costing these funds right now. Hence, I believe we should
avoid using-the Federal Financing Bank borrowing authority
for this purpose*
Accordingly, I continue to urge the Senate to act on the
debt limit by October 7.
Sincerely,
QC
James A* Baker, III
The Honorable Robert C. Byrd
Minority Leader
United States Senate
Washington, D.C. 20510
p>m)-w?'io
THE SECRETARY OF THE TREASURY
WASHINGTON
October 3, 1985
Dear Bob:
1 am writing to emphasize the need for final action by the
Congress on debt limit legislation no later than October 7*
As 1 indicated in my letter to you on October 1, current projections indicate that Treasury's cash balance will be virtually
exhausted by October 7 and the situation will deteriorate
sharply thereafter*
This means that, unless a debt limit is passed by the Congress
and signed into law by the President on or before October 7, 1985
or we take unprecedented and costly measures such as using
Federal Financing Bank borrowing authority, the United States
could be in the position of defaulting on its obligations for
the first time in history*
If the debt' limit is not increased by October 7, the Government
likely will be unable to meet all of its essential obligations
when they fall due including social security checks, payroll
checks, unemployment checks, defense contracts, and principal
and interest on its securities. The full consequences of a default
by the United States are impossible to predict and awesome to
anticipate*
1 urge the Congress to pass this legislation at the earliest
possible date but under no circumstances later than October 7,
1985.
Sincerely,
Lines A. Baker, III
The Honorable Robert Dole
Majority Leader
United States Senate
Washington, DC 20510
THE SECRETARY OF THE TREASURY
WASHINGTON
October 7, 1985
Dear Mr* Majority Leader:
In letters dated September 25, October 1, arid October 3,
Secretary Baker informed you of our projection that
Treasury'8 cash balance would be virtually exhausted unless
either the Congress acts to increase the debt limit by
October 7, or we take unprecedented and questionable action
to use Federal Financing Bank authority. This letter is to
inform you of our latest cash projection — and to repeat our
request for Congressional action today*
As you know, we have already had to fail to meet certain
requirements for the full investment of several trust
funds -- costing them approximately $8 million per day* As
of this morning, we estimated that cash balances may be zero
or negative tomorrow, and will certainly be negative by
Wednesday.
When we formally determine that the next day's balance is to
be negative, we will need to notify the Federal Reserve** It
is my understanding that, upon such notification, the Federal
Reserve will then have to notify the banking system not to
honor any Government checks or electronic fund transfers*
(It is not appropriate or administratively practicable to
attempt to distinguish among classes of payment
obligations -- favoring some at the expense of others.)
Accordingly, all those with federal payment claims -- whether
social security recipients or defense contractors or holders
of Government securities with interest payments due — would
then be unable to have those claims honored*
We continue to hope that the Congress will act promptly to
avoid such an unprecedented failure of the U.S. Government to
honor its obligations* If the Congress acts today, we would
inform the financial markets by noon tomorrow of our
intention to offer Treasury bills for sale on Wednesday. In
anticipation of this financing, we and the Federal Reserve
would then be able to manage payments on Tuesday so as to
avoid a default*
Page 2
In sum, unless a debt limit is passed promptly by the
Congress or we take the unprecedented and questionable
measure of using Federal Financing Bank borrowing authority,
the United States would be in the position of defaulting on
its obligations for the first time in history*
Sincerely,
AtJU^A C-. <TPU~
Richard G* Darman
Acting Secretary
The Honorable Robert Dole
United States Senate
Washington, D. C. 20510
THE DEPUTY SECRETARY OF THE TREASURY
WASHINGTON
October 8, 1985
Dear Mr. Majority Leader:
This note is to provide you with our latest cash projection.
As of this morning, we project an ending balance for October
8 (today) of zero; and — absent remedial action — a
negative ending balance for October 9 (tomorrow).
We continue to hope that the Congress will act promptly to
avoid the undesirable alternatives I referred to in my letter
of October 7 (either unprecedented and questionable use of
Federal Financing Bank authority, or an unprecedented default
by the United States). Accordingly, at noon today Treasury
will release the following public statement:
"In hope that the Congress will act promptly
to produce a satisfactory resolution of the
current impasse concerning the statutory debt
limit, the Treasury Department is today
announcing its intention to offer $5 billion
of Treasury bills to be auctioned on Wednesday,
October 9, at 12:30 p.m."
In anticipation of action that would allow us to proceed with
this financing, we and the Federal Reserve should be able to
manage payments so as to avoid a default.
For all the obvious reasons, we again urge that the Congress
act promptly to raise the current debt limit.
Sincerely,
/7/civWc ^. ^
Richard G. Darman
Acting Secretary
The Honorable Robert Dole
United States Senate
Washington, D.C. 20510
*0R IMMEDIATE RELEASE
October I, 1985
TREASURY OFFERS $5,000 MILLION OF 78-DAY
CASH MANAGEMENT BILLS
In hope that Congress will act promptly to produce a
satisfactory resolution of the current Impasse concerning
the statutory debt limit, the Treasury Department it today
announcing its intention to offer 15,000 Billion of Treasury
bills to bo auctioned on Wednesday, October 9, at 12:30 p.m.
The Department of the Treasury, by this public notice, invites
tenders for approximately 15,000 Billion of 78-day Treasury bills
to be issued October 9, 1985, representing an additional amount of
bills dated December 27, 1984, maturing December 26, 1985 (CUSIP
No. 912794 BQ 0 ) .
Competitive tenders will be received only at the Federal
Reserve Bank of New York prior to 12:30 p.m., Eastern Daylight
Saving time, Wednesday, October 9, 1985. Wire and telephone tenders
may be received at the discretion of the Federal Reserve Bank of
New York* Bach tender for the issue must be for a minimum amount
of $10,000,000. Tenders over $10r000,000 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*151. 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, or at any Federal Ressrve Bank or Branch other than the
Federal Reserve Bank of New York*
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 Ressrve 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 12:00 noon,
Eastern time, on the day of the auction. Buch positions'would
include bills acquired through "when issued" trading, futures.
THE SECRETARY OF THE TREASURY
WASHINGTON
October 9, 1985
Dear Bob:
The Federal Government's ending balance fdr October 8
was approximately three (3) million dollars. As of this
morning, we project an ending cash balance for
October 9 (today) that — absent remedial action —
would be negative. This is exactly consistent with the
forecasts provided to you in our letters of October 7
and 8*
We continue to hope that the Congress will act promptly
to provide debt ceiling relief* Faced now, however,
with the obviously undesirable possibility of an
unprecedented default, we feel obliged to proceed with
an auction of Treasury bills on the basis outlined by
the following statement, which we intend to make public
at 11:00 a.m. this morning:
"The Treasury Department will conduct the auction
of 78-day cash management bills as announced on
October 8. We continue to hope that the Congress
will act to raise the debt limit in order to allow
this auction to proceed to closure without the use
of Federal Financing Bank (FFB) authority. If,
however, the Congress fails to raise the debt
limit, Treasury will use FFB borrowing authority
(which is not subject to debt limit) to issue FFB
securities to substitute for existing
non-marketable Treasury debt* Treasury will
redeem the non-marketable debt in an amount
sufficient to permit issuance of the Treasury
bills being auctioned today* Accordingly, these
securities will be backed by the full faith and
credit of the United States and will be within the
current applicable debt limit* Only in the event
that Congress fails to raise the current debt
limit today will this procedure be used — in
order to assure that the Government can raise cash
in order to avoid default*"
2 -
As I indicated in my October 1 letter to you, we are reluctant to
use the Federal Financing Bank authority in the manner that will
be required — in order to avoid default — if the Congress does
not raise the debt ceiling today. We appreciate that some
members of Congress are similarly reluctant to see this FFB
authority used* So, I again respectfully urge that the Congress
act to relieve the current debt limit today*
Sincerely,
James A* Baker, III
The Honorable Robert Dole
United States Senate
Washington, D.C* 20510
FOR IMMEDIATE RELEASE
October 9, 1985
TREASURY AFFIRMS OFFER OF $5,000 MILLION
OF 78-DAY CASE MANAGEMENT BILLS
The Treasury Department will conduct the auction of 78-day
cash management bills as announced on October 8* We continue
to hope that the Congress will act to raise the. debt limit in
order to allow this auction to proceed to closure without the
use of Federal Financing Bank (FFB) authority. If, however, the
Congress falls to raise the debt limit, Treasury will use FFB
borrowing authority (which is not subject to the debt limit) to
issue FFB securities to substitute for existing nonmarketable
Treasury debt. Treasury will redeem the nonmarketable debt in
an amount sufficient to permit issuance of the Treasury bills
being auctioned today. Accordingly, these securities will be
backed by the full faith and credit of the United States and will
be within the current applicable debt limit. Only in the event
that Congress fails to raise the current debt limit today will
U*i» procedure be used in order to ensure that the Government can
raise cash in order to avoid default*
FOR IMMEDIATE RELEASE
October 9, 1985
RESULTS OF TREASURY'S AUCTION
OF 7 8-DAY CASH MANAGEMENT BILLS
The Treasury has accepted $5,010 million of the $16,375
million of tenders received at the Federal Reserve Bank of New
York for the 78-day Treasury bills to be issued October 9, 1985,
and to mature December 26, 1985, auctioned today. The range of
accepted bids was as follows:
Discount Investment Rate
Rate
(Equivalent Coupon-Issue Yield)
Price
Low 7.20% 7.42% 98.440
Sigh
7.25%
Average
7.23%
7.47%
7.44%
Tenders at the high discount rate were allotted 48%.
98.429
98.434
THE SECRETARY OF THE TREASURY
WASHINGTON
October 22, 1985
Dear Bill:
As you participate in the conference on H.J. Res. 372 to increase
the debt limit, 1 want to bring you up to date on where we stand
and what actions Treasury will and will not take. We find
ourselves in a position where continued Congressional inaction
has moved the Treasury's position from sound financial management
to unnecessary crisis management. Z hope that a full explanation
of our projections and intentions will allow responsible action
to avoid a costly continuation of this unseemly situation. By so
acting, the United States will once again be able to raise funds
to meet its lawful obligations without engaging in activities
that erode confidence in our financial system.
Contrary to some assertions, Treasury's cash and debt projections
and other information provided to the Congress since early
September have been very accurate. Zn testimony on September 10,
Treasury informed Congress that failure to pass a debt limit
extension would result in our (1) reaching the debt ceiling and
(2) becoming unable to invest fully several trust funds starting
on September 30, with a consequent loss of interest to those
funds. Zn a series of letters starting September 25, we warned
Congress that our cash balances would be virtually exhausted on
October 7. reaching a zero or negative balance on October 8. The
testimony and letters predicted exactly what actually happened.
Zn those same letters, we stated our strong reluctance to adopt
the suggestion of Congressional staff that we use the Federal
Financing Bank's non-debt-limit borrowing authority, calling such
an action "unprecedented and questionable." We made clear, also,
that if the Congress failed to act on the debt ceiling, we would
have to choose between, the FFB option and an unprecedented United
States government default. Faced with Congressional inaction and
the prospect of certain default on October 9, we used $5 billion
of the FFB authority.
We have taken every action ever used by this Department to raise
cash within the debt limit. Moreover, we have taken the
additional step of using the FFB's harrowing authority to avoid
default. These actions have not been without costs. Since
September, the failure of Congress to increase the debt limit has
resulted in non-investment of trust funds, costly delays of
auctions, and uncertainty throughout the capital markets. Over
$50 billion of financing that would otherwise have taken place
over several months beginning in September is now confronting the
markets. The uncertainty and delay will likely cost the American
taxpayer millions of dollars.
Our current^cash projections indicate that even if we use the
remaining $10 billion FFB borrowing authority, we will have a
negative balance on November 1, widening to a negative balance of
over $5 billion by November 4. Z intend to use the FFB borrowing
authority, again reluctantly. But you should be aware that,
subject to estimating error, it cannot get us through November 1.
The negative numbers starting on November 4, moreover, are so
large as to be outside the margin of error*
Some Members of Congress have suggested that, in order to provide
Congress with yet more time, we should take the further
extraordinary step of disinvesting trust funds (social security,
military retirement, civil service retirement, and railroad
retirement) in advance of payment of benefits to permit payment
of those benefits starting November 1. (This option was not
available on October 8, as October benefits had already been
paid.) Taking this action will result in additional interest
loss to the funds and further frustration of our financing
schedule. Moreover, it may raise questions in the minds of
present and future recipients of trust fund benefits—principally
pensioners—about why they have become involved in the debt limit
process. Nevertheless, having discussed this matter with the
President and the Attorney General, we are reluctantly prepared
to take this action on October 31 if Congress once again fails to
act to resolve the debt limit impasse.
Zt is essential that Congress recognize that, even if trust funds
were disinvested to avoid a November 1 default, we would
certainly default on November 15 unless Congress acted before
then to increase the debt limit. That default, which would
involve reneging on the principal and interest of United States
securities held by both Americans and foreigners, would have
swift and severe domestic and international repercussions. No
longer would investors view United States securities as riskfree,
and a substantial financing price would have to be paid. Any
increase in the benchmark Treasury rate would probably adversely
affect general interest rates, with negative effects on both the
deficit and the economy.
Z have spent the past week reviewing the known legal and
practical options and have concluded that there are no means
available to avoid default that would not be a stark evasion of
the debt limit statute—with the possible exception of the sale
of United States gold holdings. The President and I are not
prepared to take that step because it would undercut confidence
here and abroad based on the widespread belief that the gold
reserve is the foundation of our financial system, and because
the Congress clearly has the power to prevent a default by
assuming its responsibility with respect to the debt limit.
Z since reiy-'hope you will take prompt action to avoid further
exacerbation of this unnecessary and unfortunate situation.
Sincerely,
James A. Baker, ZZZ
The Honorable William H. Gray, ZZI
U.S. House of Representatives
Washington, D. C. 20515
TREASURY NEWS
Department of the Treasury • Washington, D.c. • Telephone 566-2041
FOR IMMEDIATE RELEASE
November 5, 1985
"""
Contact:
Andy Montgomery
566-2780
REVISED MEDIA ADVISORY
Secretary James A. Baker, III, will announce the nationwide
conversion of U.S. government checks from punched-card checks
to multicolored paper checks on November 8 at 11:00 a.m. (Please
note time change.)
The Secretary will announce for the first time new security
features of the check which will reduce check alterations and
counterfeiting.
A press briefing by Financial Management Service officials
will follow immediately. The announcement and briefing will be
held in the Cash Room of Main Treasury.
#
6~>^<
#
#
TREASURY NEWS
spartment of the Treasury • Washington, D.c. • Telephone 566-204'
FOR IMMEDIATE RELEASE
November 1, 1985
CONTACT:
Art Siddon
566-5252
STATEMENT OF TREASURY SECRETARY JAMES A. BAKER, III
Secretary of the Treasury James A. Baker, III said today:
"The. Social Security Act designates the Secretary of the
Treasury as Managing Trustee of the Social Security Trust
Funds, and by its terms, provides that 'public debt
obligations [held by the Trust Funds] may be redeemed' by the
Managing Trustee in order to produce funds used to pay
recipients. Consistent with these statutory authorities, and
as I stated in an October 22 letter to all House and Senate
debt limit conferees, if Congress fails to act on the debt
limit today, I will reluctantly accelerate redemption of trust
fund securities to ensure that recipients receive their
November payments. Redemptions of trust fund securities will
be in an amount equal to November payments from those trust
funds.
"I recognize that accelerated redemption of these
obligations, while clearly within my legal authority, will
disadvantage the trust funds because it will result in a loss
of interest to these funds. However, I am prepared to
authorize this action in order to assure that all who are
scheduled to receive payments from the trust funds are paid
and that the federal government does not default. I hope that
Congress meets its obligations and passes a debt limit today."
B-342
TREASURY NEWS
Department of the Treasury • Washington, D.c. • Telephone 566-2041
FOR IMMEDIATE RELEASE
November 4, 1985
RESULTS OF TREASURY'S WEEKLY BILL AUCTIONS
Tenders for $7,209 million of 13-week bills and for $7,208 million
of 26-week bills, both to be issued on November 7, 1985, were accepted today,
RANGE OF ACCEPTED
COMPETITIVE BIDS:
26-week bills
maturing May 8, 1986
Discount Investment
Price
Rate
Rate 1/
13-week bills
maturing February 6, 1986
Discount Investment
Rate
Rate 1/
Price
Low
High
Average
a/ Excepting 1
7.16% a/
7.39%
98.190
7.23%
7.47%
98.172
7.21%
7.45%
98.177
tender of $5,000,000.
7.25%
7.31%
7.30%
7.63%
7.70%
7.69%
96.335
96.304
96.309
Tenders at the high discount rate for the 13-week bills were allotted 9%.
Tenders at the high discount rate for the 26-week bills were allotted 85%,
TENDERS RECEIVED AND ACCEPTED
(In Thousands)
Accepted
Received
Received
Location
Boston
New York
Philadelphia
Cleveland
Richmond
Atlanta
Chicago
St. Louis
Minneapolis
Kansas City
Dallas
San Francisco
Treasury
TOTALS
JSpe
Competitive
Noncompetitive
Subtotal, Public
Federal Reserve
Foreign Official
Institutions
TOTALS
:
Accepted
42,930
15,917,430
21,005
63,825
79,715
85,365
1,543,835
81,630
43,100
84,025
36,200
1,776,980
386,445
$
42,930
5,646,280
21,005
60,075
68,965
82,365
414,035
41,630
39,350
83,725
26,200
295,430
386,445
$7,209,155
: $20,162,485
$7,208,435
$17,788,105
1,218,195
$19,006,300
$4,393,935
1,218,195
$5,612,130
: $17,012,425
:
995,660
: $18,008,085
$4,058,375
995,660
$5,054,035
1,418,025
1,418,025
:
1,450,000
1,450,000
179,000
179,000
:
704,400
704,400
$20,603,325
$7,209,155
: $20,162,485
$7,208,435
47,670
16,873,675
37,465
60,725
48,660
55,195
1,425,375
91,485
39,640
72,225
51,335
1,456,655
343,220
$
47,670
6,087,525
37,465
60,725
48,660
55,195
132,025
51,485
14,640
72,225
41,785
216,535
343,220
$20,603,325
$
1/ Equivalent coupon-issue yield.
J
:
*
:
i
:
!
:
:
$
TREASURY NEWS
epartment of the Treasury • Washington, D.c. • Telephone 566-2041
FOR RELEASE AT 11:00 A.M.
November 4, 1985
TREASURY OFFERS $3,000 MILLION OF 142-DAY CASH MANAGEMENT BILLS
The Department of the Treasury, by this public notice, invites
tenders for approximately $3,000 million of 142-day Treasury bills
to be issued November 5, 1985, representing an additional amount of
bills dated September 26, 1985, maturing March 27, 1986 (CUSIP No.
912794 JY 1 ) .
We continue to hope that the Congress will act to raise the
debt limit in order to allow this auction to proceed to closure
without the use of Federal Financing Bank (FFB) authority. If, however, the Congress fails to raise the debt limit, Treasury will use
FFB borrowing authority (which is not subject to the debt limit) to
issue FFB securities to substitute for existing nonmarketable Treasury debt. Treasury will redeem the nonmarketable debt in an amount
sufficient to permit issuance of the Treasury bills being auctioned
tomorrow. Accordingly, these securities will be backed by the full
faith and credit of the United States and will be within the current
applicable debt limit. Only in the event that Congress fails to
raise the current debt limit by Tuesday, November 5, 1985, will this
procedure
be used^tenders will be received only at the Federal
Competitive
Reserve Bank of New York prior to 11:00 a.m., Eastern Standard
time, Tuesday, November 5, 1985. Wire and telephone tenders may be
received at the discretion of the Federal Reserve Bank of New York.
Each tender for the issue must be for a minimum amount of $10,000,000.
Tenders over $10,000,000 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, or at any Federal Reserve Bank or Branch other than
the Federal Reserve Bank of New York.
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.
B-344
- 2 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 10:30 a.m.,
Eastern time, on the day of the auction. Such positions would
include bills acquired through "when issued" trading, futures,
and forward transactions as well as holdings of outstanding bills
with the same maturity date as the new offering, e.g., bll}s 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 of New York in
cash or other immediately-available funds on Tuesday, November 5,
1985. 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 g a m 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.
Bankeor°BranchCirCU "** ** obtained from anY Federal Reserve
TREASURY NEWS
epartment of the Treasury • Washington, D.C. # Telephone 566-2041
FOR RELEASE AT 4:00 P.M.
November 5, 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 $14,400 million, to be issued November 14, 1985.
This offering will not provide new cash for the Treasury, as the maturing bills
are outstanding in the amount of $14,350 million. 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 12, 1985.
The two series
offered are as follows:
91-day bills (to maturity date) for approximately $7,200
million, representing an additional amount of bills dated
August 15, 1985,
and to mature February 13, 1986
(CUSIP No.
912794 JS 4 ) , currently outstanding in the amount of $7,459 million,
the additional and original bills to be freely interchangeable.
182-day bills (to maturity date) for approximately $7,200
million, representing an additional amount of bills dated
May 16, 1985,
and to mature May 15, 1986
(CUSIP No.
912794 KF 0 ) , currently outstanding in the amount of $8,550 million,
the additional and original bills to be freely interchangeable.
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.
The bills will be issued for cash and in exchange for Treasury
bills maturing November 14, 1985.
Tenders from Federal Reserve
Banks for their own account 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. Federal Reserve
Banks currently hold $1,576 million as agents for foreign and international monetary authorities, and $2,803 million for their own
account. Tenders for bills to be maintained on the book-entry
records of the Department of the Treasury should be submitted on Form
PD 4632-2 (for 26-week series) or Form PD 4632-3 (for 13-week series).
B-345
TREASURY'S 13-, 26-, AND 52-V7EEK BILL OFFERINGS, PAGE 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 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 book-entry
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.
4/85
TREASURY'S 13-, 26-, AND 52-WEEK BILL OFFERINGS, PAGE 3
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 the issue date, in cash or other immediately-available funds
or in Treasury bills maturing on that date. 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,
19 84, 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.
4/85
TREASURY NEWS
lepartment of the Treasury • Washington, D.c. • Telephone 566-2041
FOR IMMEDIATE RELEASE
November 5, 1985
RESULTS OF TREASURY'S AUCTION
OF 142-DAY CASH MANAGEMENT BILLS
The Treasury has accepted $3,004 million of the $11,765
million of tenders received at the Federal Reserve Bank of New
York for the 142-day Treasury bills to be issued November 5,
1985, and to mature March 27, 1986, auctioned today. The range
of accepted bids was as follows:
Discount Investment Rate
Rate
(Equivalent Coupon-Issue Yield)
Price
Low
High
Average
7.22%
7.28%
7.25%
7.54%
7.60%
7.57%
Tenders at the high discount rate were allotted 46%.
B-346
97.152
97.128
97.140
TREASURY NEWS
apartment of the Treasury • Washington, D.c. • Telephone 566-2041
?€>r Release: 11:00 a.m., EST
November 8, 1985
Contact:
Art Siddon
566-5252
Andy Montgomer
566-2780
TREASURY SECRETARY BAKER ANNOUNCES GOVERNMENT
CHECK CONVERSION AND INCREASED CHECK SECURITY
WASHINGTON, D . C , November 8, 1985— Secretary of the Treasury
James A. Baker, III, announced plans today for nationwide conversion
of the 40-year-old green punched card check to a new multi-colored
paper check that will save the taxpayers $6 million annually and be
far more difficult to alter or counterfeit.
The first major phase of the conversion will take place December
3, Secretary Baker said, when more than 20 million Social Security
beneficiaries who receive their payments by mail will receive the
new check. Ultimately, some 115 million Americans who receive
checks will be affected. The conversion of some 600 million checks
will be completed during 1986.
"We're changing the check because the punched card .echnology is
obsolete, and punched cards are no longer consistent with modern
banking practices," Baker explained. "We also wanted a more secure
check—one that is more difficult to alter or counterfeit."
The Secretary said the conversion embodies the Administration's
goals of modernizing Government, cutting costs, and embracing
public-private sector initiatives.
Baker said the new check, featuring the Statue of Liberty, will
contain numerous new security features, "which will help put check
counterfeiters and alterers out of business." Among the features:
1. The back of the check contains a pattern of "USA"
repeated over the entire check in non-reproducible blue
ink, except for the area above the endorsement line. The
endorsement line itself is a series of "USA" when
magnified. The pattern on the back of the check becomes
invisible when microfilmed. The hidden word "VOID"
appears when the check is photocopied.
B-347
-2m
2.
Safety paper used in the check will show a positive and
obvious chemical reaction upon any attempt at alteration
of writing on the paper surface, using ink eradicators,
mechanical erasures, etc.
3. Stains will appear in the name of the payee or in the
amount printed on the check if an attempt is made to
alter the check in these areas.
Baker said the security aspects of the new check had been
under study for several years.
Baker said the paper check conversion is good news for
taxpayers. Because of lower paper and storage costs, the new
check will save taxpayers $6 million annually.
The paper check conversion is being conducted by the
Treasury's Financial Management Service, headed by Commissioner
W. E. Douglas. Baker said the Treasury Department is making the
announcement of the national conversion to the new check to avoid
confusion on the part of check recipients and persons working in
financial and retail institutions which cash the checks.
"We don't want anybody to be confused by the change, or be
skeptical about the check's authenticity," he said.
Douglas said that following the Social Security conversion in
December, Internal Revenue Service tax refunds will be issued on
the new checks beginning in February. On April 1, 1986, checks
disbursed for Supplemental Security Income, Civil Service
Retirement, Railroad Retirement, and Veterans benefits will
change, as well as most payments for Federal employees and
vendors.
Douglas said the Financial Management Service has the
responsibility for issuing 500 million Government checks; an
additional 100 million are issued by more than 1,000 non-Treasury
disbursing offices, such as the Department of Defense.
The new check's colors range from light blue to pale peach.
It features two illustrations of the Statue of Liberty, a
full-length engraving on the left and a muted close-up of her
head and torch on the right.
TREASURY NEWS
Department of the Treasury • Washington, D.c. • Telephone 566-2041
FOR RELEASE ON DELIVERY
EXPECTED AT 10:00 A.M.
November 6, 1985
STATEMENT OF JOHN J. NIEHENKE
DEPUTY ASSISTANT SECRETARY OF THE TREASURY (FEDERAL FINANCE)
BEFORE THE SUBCOMMITTEE ON COMPENSATION AND EMPLOYEE BENEFITS
OF THE HOUSE COMMITTEE ON POST OFFICE AND CIVIL SERVICE
Madame Chair and Members of the Subcommittee:
I welcome this opportunity to appear before you this morning
to discuss the continuing efforts of the Treasury Department and
of the Secretary of the Treasury to assure persons receiving
beneJEits and other payments from the United States that their
payments will be made and honored notwithstanding Congressional
failure to agree on a debt limit increase.
I must emphasize
that we can continue to provide such assurances only through
November 14, by which date Congress must act on the debt limit
bill to avoid default.
On September 10, when I testified before the Senate Finance
Committee urging that the debt limit bill, H.J. Res. 372, as
passed by the House, be enacted prior to September 30, I stated
that "without an increase in the debt limit by that date,
investment of the Civil Service Retirement and Disability Fund in
Treasury securities will have to be delayed to avoid exceeding
the debt limit."
I estimated that the cost of the delay to the
Civil Service and two other funds would total approximately $8
million per day.
B-348
2
As the Chair is aware, funds other than Civil Service have
also been adversely affected, and, moreover, our ability to
operate the finances of the United States on a routine and
predictable basis has been sorely strained.
It is the obligation
of the Secretary of the Treasury to reconcile his responsibility
not to issue debt in excess of the debt limit with his concurrent
obligation to manage responsibly the finances of the United
States, including in particular the timely payment of benefits
for a number of programs for which he serves as fund manager.
In
balancing these responsibilities, the Secretary has made
decisions based on four guidelines?
(1) avoid an unprecedented
default on obligations of the United States; (2) ensure that
recipients of benefit payments receive their payments when
expected; (3) minimize, to the extent possible, the costs to the
various funds administered by Treasury of actions taken, and (4)
stay within the debt limit.
I can report to you today that, in spite of numerous and
complex problems, Treasury has, to date, managed to avoid a
default, ensured that recipients of monthly payments have been
paid on time, minimized the cost of actions necessary to make
payments on time, and stayed within the debt limit.
I must
caution, however, that we are running out of time.
Continued
delay in passing a debt limit bill is unacceptable.
I trust
today's testimony, and testimony I will give tomorrow, will
clarify what we have done and reassure you and the American
public that our actions have not jeopardized the solvency of any
- 3 trust funds.
But I must point out that only a prompt passage of
a debt limit bill will relieve the unnecessary and unfortunate
anxiety that recipients'of payments from these funds are
experiencing.
The Civil Service Retirement and Disability Fund is
established by section 8348 of title 5, United States Code.
The
Secretary of the Treasury is directed to take certain actions
with respect to the fund, including receiving monies and
investing "such currently available portions of the Fund as are
not'immediately required for payments from the Fund."
The
investments are to be made in special obligations of the
Treasury, at an interest rate set monthly on the basis of a
statutory formula.
Unlike other trust fund statutes, the Civil
Service fund statute does not explicitly provide for redemption
of Fund investments in order to pay benefits.
However, the
statute does appropriate monies in the Fund for payment of
benefits and administrative expenses.
Since benefits cannot be
paid unless investments either mature or are redeemed, it is
obvious that the Secretary's authority to invest also
contemplates redemption.
The Civil Service fund has two major sources of
income—periodic payments from agencies in respect of employee
salaries and lump sum payments at the end of the fiscal year in
respect of unfunded liabilities.
When Treasury is unconstrained
in its ability to issue new debt to the Fund, all this income is
- 4 immediately invested in Treasury securities. At the same time,
both benefit payments and repayments of contributions to
departing employees must be made from the Fund. The payments vary
from month to month, but are generally on the order of $2
billion per month.
When payment checks or electronic funds
transfers are presented to Treasury for payment, payment is made
from the Treasury general cash account and investments of the
Fund are redeemed to reimburse the Treasury.
The vast bulk of
these redemptions occur during the first ten days of each month.
Throughout August and in September until September 30, the Fund
was invested and redeemed as usual; there were no non-investments
or early redemptions.
Because of the relatively small scale of the daily
transfers, and the concurrent redemptions, we have until now been
able fully to invest the daily transfers.
However, as I warned
in my September 10 testimony, the failure to enact an increased
debt limit by September 30 has meant that a portion of the annual
lump sum payment to the Civil Service fund has not been invested.
Treasury transferred to the Fund approximately $17 billion in
respect of unfunded liabilities on September 30, on which date
Treasury was already at the debt limit.
invest the $17 billion at that time.
Therefore, we could not
I want to emphasize that
the transfer was made, it was only the investment that was
delayed.
Except for the interest loss discussed below, the
principal amount of the fund is fully as large as it would have
been had the increased debt limit been passed before September 30.
- 5 The Civil Service fund, unlike the Social Security Trust
Funds, does not operate under an advance investment "normalized
tax transfer" system.
Therefore, as I stated in September and as
Secretary Baker reiterated in an October 1 letter, when the Fund
is uninvested, it loses interest.
Because of this interest loss,
as debt limit capacity became available during October (through
redemptions to pay benefits), the Fund, along with other
interest-losing funds, was partially invested.
By the end of
October, over $12 billion of the $17 billion transferred on
September 30 (in addition to the daily transfers) had been
invested.
Moreover, because of the structure of the Fund's
portfolio, redemptions to pay benefits during October were able
to be made fully out of short-term and low-yield longer term
obligations, avoiding the redemption of any higher-yielding longterra obligations.
We estimate that the October interest loss to
the Civil Service fund because of delayed investments and
non-investment was approximately $55 million.
In September and October, Treasury's cash balances were
sufficient to permit the payment of benefits followed by
redemption of obligations held by the Fund, as is normal Treasury
operating practice.
However, as of the close of business on
October 31, Treasury's cash balance was only $1.8 billion
(compared to a normal cash balance on that date of between $10
and $20 billion and a minimum desirable level of $5 billion).
Treasury estimated that checks and electronic funds transfers
presented for payment the next day would be in excess of $10
- 6 billion, including approximately $1.4 billion of Civil Service
benefit payments and $6.9 billion of Social Security benefit
payments.
billion.
November 1 revenues were estimated to be less than $3
A similar situation was projected for November 4.
In order to raise the necessary cash to make sure benefits
could be paid, on October 29 and 30 Treasury auctioned obligations in the amount of $13 billion to be issued on November 1,
and on October 31, Treasury auctioned an additional $4.75 billion
in obligations to be issued on November 4.
Although Treasury
hoped that the new debt could be issued under an increased debt
limit, an increase was not enacted.
Therefore, Treasury pro-
ceeded to redeem fund obligations only in an amount equal to
November benefit payments in order to be able to raise cash by
issuing the new obligations while staying under the debt limit.
Because cash flows are uncertain within a wide margin, Treasury
needed to accelerate the redemptions.
Thus, $1,513 billion in
securities were redeemed from the Fund on November 1, $198
million was redeemed on November 4, and $52 million is expected
to be redeemed on November 8.
Under normal circumstances, $1.4
billion would have been redeemed on November 1, $225 million on
November 7 and $151 million on November 8.
We estimate that the
interest loss to the Fund from the early redemption is
approximately $404,000.
I wish to assure you that the securities redeemed on
November 1 and 4 were short-term securities.
Therefore, the
- 7 redemption will have no adverse consequence for the Fund's
portfolio.
Finally, I wish to assure you that Treasury will of
course comply with section 273 of H.J. Res. 372 if it is enacted
into law. That section provides for issuance of securities and
transfers of funds to relieve the Civil Service and other funds
of losses since September 1 resulting from the debt limit
impasse.
The debt limit impasse has put us all in the position of
facing choices we would rather not face. The Secretary has
recently been faced with choosing between defaulting on all
United States obligations, including beneficiary payments, or
advancing the redemption of trust fund obligations to pay those
benefits.
He chose the latter course to ensure that millions of
Americans would continue to receive their benefits in a timely
fashion.
That completes my formal statement. I will be happy to
answer any questions you may have.
8 9*4
WERT
BOOKBINDING
Grintvllle. Pa
Mar — Apr 1986
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@FedFRASER