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U1BRARY
ROOM 5030
UUL 1 I <98i
TREASURY DEPARTMENT
H'tJclS.
HJ
10
.A13P4
v. 271
U.S. Dept. of the Treasury
PRESS RELEASES.
LIBRARY
ROOM 5030
UUL 1 i 1986
TREASURY DEPARTMENT
TREASURY NEWS
department of the Treasury • Washington, D.c. • Telephone 566-2041
FOR IMMEDIATE RELEASE
December 6, 198 5
TREASURY TEMPORARILY POSTPONES WEEKLY BILL AUCTIONS
The Department of the Treasury today announced it was
postponing the auction of $7,600 million of 91-day Treasury bills
and $7,600 million of 182-day Treasury bills originally scheduled
for auction December 9, 1985. These postponements are temporary,
pending action on legislation to raise the debt limit.
Interested investors are advised to look for notice of the
rescheduling of these auctions. Non-competitive tenders will be
accepted through the earlier of Wednesday, December 11, 198 5, or the
time of the rescheduled auction.
O — "3 Q O
12-DEC-B5
.-r't i v
17:33 //V' AMEMB TOKYO
-yKx Cone y
PAGE
2
OFFICIALTEXT
#B^tt£tt*tf t33MMRiI« PRESS OFFICE, UNITED STATES INFORMATION SERVICE
AMERICAN EMBASSY, TOKYO TEL. 583-7141 EXT. 7919
Text of Joint Press Conference with David Mulford,
Assistant Secretary of the Treasury,
and Tomomitsu Oba, Vice Minister
ot the Ministry of Finance,
December 9> 1985
MR. MULFORD: We completed today our third set of follow up
discussions to the May 1984 yen-dollar agreement. As always these
zalks have been interesting. Frankly, I have to say that I leave
today's meeting somewhat disappointed.
At the G5 meeting in New York in September, the Ministry of
Finance committed (itself) to intensified implementation of financial
market liberalization and internationalization of the yen. I am sorry
to say that in today's discussions 1 saw little evidence of
intensified efforts. On the Euro-yen markets, and I have in mind
particularly here the Euro-yen note market, we have not seen the
in
development of an active and liquid secondary market, where trading
Euro-yen bonds takes place on a substantial scale. Apparently, the
Japanese securities houses, which compete aggressively for the
management of Euro-yen issues, do not feel the responsibility or
It
obligation for supporting the development of a liquid secondary
market. This lack of commitment to making a market is troubling.
reduces the attractiveness of yen paper and consequently reduces
On the domestic
financial
markets, instruments.
we have seen a number of
international
demand for
yen investment
changes in recent months. New instruments are ndw available and some
Interest rate liberalization has taken place. But the concept of a
free liquid and deep market is still missing.
We had hoped that by now Japanese residents would have a wide
range of attractive ma rket determined instruments available for
raising and investing funds. We have followed closely newspaper
accounts of the forthc oming short- term government bond market. Vie
had beli eved that this would provide a unique opportunity for the
issuance of a truly at tractive short-term government paper market. It
could pr ovide an instr ument which international investors and domestic
It could provide the useful tool to carry out
investor s would desire
monetary policy object ives and offer a real chance for liberalizing
ts.
capital
domestic
It now
seemsmarke
clear to us that the Ministry of Finance has not
maximized this new opportunity. And this we believe is quite
unfortunate. We do see change taking place and we do believe that new
'!!?>=«(d°fglS) X78 35
AMEMB TOKYO
PAGE
3
business opportunities now exist. And that investors are receiving
better*, more market-oriented instruments than they were two or three
years ago.
We feel that real progress has been made in accepting foreign
financial institutions more fully into the Japanese economy. The new
addition of foreign firms to the Tokyo Stock Exchange is a clear
example of this. Nevertheless, some improvements in market access and
transparency are still needed.
Perhaps, the frustration lies in seeing change on the one hand
but still seeing so much that needs to be done on the other hand. So
*:any more opportunities to strengthen the Japanese financial system
still exist and Japanese and foreigners deserve the broadest, deepest
Japanese capital market possible.
QUESTIONS
Q: Dr. Mulford expressed a very candid criticism vis-a-vis the
Japanese explanations during the meeting. I would like to, first of
all, ask Mr. Oba about the Japanese response to those criticisms.
Also, I would like to know what sort of discussions to expect
regarding unitary taxation in the United States.
MR. OBA: First of all Euro-yen bonds issued by residents and
nonresidents: the Japanese side explained recent developments by citing
numbers. We did hear various comments from the U.S. side. The major
ones I remember are (1) a comment from the U.S. side relating to
rating and (2) there is, as you know, the 180-day restriction on the
reflow of bonds into the Japanese market. The U.S. side suggested
that the Japanese side could perhaps take a more flexible attitude.
We also explained our thoughts with regard to the short-term
government bond. For example, we explained that the method of
issuance would be auctioned by way of public offering; that the
interest rate will reflect the actual market rate. The maturity will
be six months or less. The minimum transaction will be a hundred
million to three hundred million yen. (We explain-ed) that only legal
persons or corporations will be allowed to participate in the
trading. The bond will be a discount bond. And that with regard to
taxation, there will be 16 percent withholding tax at issuance. And
the withholding tax will be entirely tax accredited for the purpose of
corporate income tax.
I believe it is better for you to ask Dr. Mulford about U.S.
reaction to that. But in one word, I believe, the U.S. impression is
that this instrument is not a simple one; that it seems to be very
complicated, and the U.S. side seems to be concerned whether this bond
will, in fact, bs an attractive one or not. We, in response, said
that we believe this instrument will sell in the market.- And we hope
that the U.S. side will watch future developments.
Tn the area of interest deregulation, of course, you are all
aware of the developments the Japanese side explained to the U.S. — the
progress in interest deregulation over the past half of year. We
- 2 - on consideration of
explained that we have already embarked
12-DEC-85
17:36
AMEMB TOKYO
deregulation of interest rates on,small denomination deposits and
mentioned that we would like to indicate by spring of 1987 when
deregulation of interests on large deposits completes some prospects
for outlook for interest -deregulation on small deposits.
With regard to inter-bank markets, we took up once again the
questions we discussed in the last round of our follow-up discussions,
namely matters related to interests rates, the question of collateral
and noncollateral, the money market brokers; and the Bank of Japan
explained about these aspects.
As far as the unitary taxation is concerned, the Japanese side
asked the U.S. side how the federal government is addressing this
question and I believe it is better for Dr. Mulford to brief you on
this one.
' DR. MULFORD: Well, we indicated that President Reagan announced
on November 8 that it is appropriate in this case for the federal
government to state its support for the concepts of legislation on
unitary taxation, which would first effect a requirement that
multi-nationals be taxed by states only on income derived from the
*-. -ritory of the United states. That is the so called "water's edge
t>eatment".
A Second concept is to address the question of equitable taxation
of foreign source dividends. The President has instructed Secretary
Baker to initiate the process of designing legislation to incorporate
these principals into law. Secretary Baker will work with Congress
for passage of such legislation where appropriate, and where
appropriate he will enter into negotiations to amend double taxation
arrangements. We expect the legislation to incorporate the
spread-sheet concept, which is designed to promote full taxation
disclosure and accountability in order to provide states with
information for tax enforcement. And we expect that the legislation
will be submitted before the end of the current session of Congress
which means sometime this month.
Q: I would like to know if the timetable was disclosed with
regard to Tokyo Off Shore Market establishment?
MR. OBA: Well, with regard to the off shore market question, we
explained that a relevant bill is being prepared right now, and that
if that bill passes, then the Off Shore Center will be established.
And we explained that when that will be solely depends on how the bill
will be deliberated in the Diet, we explained that we are preparing
the bill with a view to presenting it to the Diet in its next ordinary
session.
Q: With regard to that rating question you referred to,'was the U.S.
suggestion that residents issue Euro-yen bonds also be made possible
on the basis of ratings instead of the current financial criteria?
MR. OBA: Well the U.S. interests view was that the rating system
should be introduced as early as possible for both non-residents
issues as well as resident issues. in response to that, the Japanese
- 3 -
12-DEC-B5
17:37
AMEMB TOKYO
PAGE
side mentioned that what we discussed in the yen-dollar committee was
the question of rating for non-residents issues of Euro-yen bonds, but
we also mentioned that we would also expect progress in the future in
this area, with regards to. residents issues as well.
DR. MULFORD: I should comment on that same question because we
have, perhaps, a slightly different view of what was discussed
originally in the committee, it's true that the discussion of rating
applied to non-resident issues in the Euromarket because we wanted
that market to conform to the international "market in general, where
the use of ratings is common instead of a highly complex set of
criteria.
We also said that we wanted that market to follow international
standards in so far as Japanese resident companies are concerned and,
therefore, we assumed at the time that these companies would also be
subjected to ratings. We would like to see the present system of
complicated criteria for resident companies to use the international
market be replaced by a simple rating system that would greatly expand
the number of resident companies that could use the Euro-yen market.
Q: I would like to ask Dr. Mulford a question. We understand
you mentioned that you question whether the short-term government
bonds will become attractive instrument. I wonder what specific
aspects made you say that?
DR. MULFORD: Well we had an expectation that this opportunity to
create a short-term government bond market in Japan which up until now
did not exist would be used to create a highly-liquid market, usable
by small, medium, and large investors and available also to foreign
investors with cash liquidity to invest in the yen market. Instead,
we now see this will be a very complicated instrument with very large
minimum denomination size which can only be bought by large corporate
investors.
The withholding tax arrangements which have been applied are very
complex. We had hoped that this bon_d would be exempt from withholding
tax and, indeed, the highly complicated system that has been set up is
not designed to collect revenue. It simply is designed to apply
withholding tax to the bond. Therefore, we think the instrument will
lack appeal in Japan because the withholding tax would be applied up
front and only off set for the Japanese investor at the time of
maturity.
So, it will be a very cumbersome process and it will make the
instrument undesirable in the eyes of foreign investors, who if they
buy the bond, we believe will find it difficult to sell it — as they
would have to do so just prior to maturity in order to avoid suffering
the withholding tax -consequences. In other words, the price at the
time of sale would reflect a buyers' market, which would penalize the
foreign investor when it came time to sell the bond.
In the United States, the treasury bill is the comparable
instrument to this short term bond. This is bought by absolutely
everybody in denominations down, I believe, as low as $3000, where as
- 4 -
5
E-DEC-B5
the
and
for
may
17:39
PH(ab
AMEMB TOKYO
b
short-term bond will have a minimum bond of between $500 thousand
oire and a half million dollars. The number of applicants who bid
the treasury bill runs in the hundreds, including individuals who
put in their own bid.
In this market, it will be limited to a small group of qualified
dealing firms. United States treasury bills are issued once a week.
I think the plan for the short-term government bond is perhaps to
issue it maybe four times each year, and treasury bills account for
approximately 40 percent of all U.S. government bonds. The instrument
being discussed here would, as presently constituted and contemplated
for issue, only account for a very minor percentage of all Government
of Japan bonds. I'm correct I think in assuming it would be under one
percent. Finally the treasury bill is free of all withholding tax so
it can be bought freely by foreign investors — and it is as easy to
buy, almost as easy to buy, as a newspaper in the United states.
Q: With regard to the Tokyo Stock Exchange question, six foreign
security houses were accepted as members but several others who had
applied where not included, and I wonder if there is any comment on
that point.
DR. MULFORD: No, I have no comment on that point, except to say
that I believe there will be a continuing interest in the future on
behalf of foreign firms to take part in the Japanese stock market
business and to join the stock exchange, if possible; so I think there
will be a continuing interest and continuing pressure to, on the part
of foreign firms, attempt to join the stock exchange.
Q: I wonder Mr. Oba if you have any response to Dr. Mulford's
explanation with regards to the treasury bills of the United States.
I think Dr. Mulford made very persuasive remarks as to the differences
beLween the U.S. T.B's and the Japanese planned short-term government
bonds. I wonder if Mr. Oba would have equally a persuasive response
to make to that.
MR. OBA: This short term government bond is.a revenue bond and
therefore it can not avoid being subject to withholding tax. Now we
tried to devise various ideas so that withholding tax will not pose
an obstacle to distribution of the instrument. And perhaps these
ideas that we came up with gave the impression that this instrument is
a very complex one. But we hope that the market will judge this
instrument as an attractive one.
Q: The impression of the development of a secondary Euro-Yen
market, Dr. Mulford, you mentioned the aggressive underwriting by the
Japanese houses: do you think that this is a function of the
inability to develop a secondary market? Do you think the bond is
priced in terms that simply do not lead to a secondary market? if so
do you think that this will eventually correct itself as long as they
do not want to take losses in underwriting? Or do you see a real role
for the Japanese government to play in the development of the
secondary market.
- 5 -
12-DEC-85
17:40
AMEMB TOKYO
PAGE
7
T)R. MULFORD: Well the problem is a very complicated one. The
Japanese firms bid aggressively for the business and the result is
that they end up with bonds that are difficult to place initially with
foreign investors. So they tend to find ways to warehouse the bonds,
either themselves or through banks or other mechanisms until after 180
days the bonds can be sold into Japan. This means that their energy
and their capital is tied up in that process and is not made available
to support an active secondary market.
The foreign investor and foreign firms are left in a situation,
where there is insufficient liquidity, in their view, in the yen bond
market. So they are nervous about buying these bonds at present
rates, because they arc worried about the liquidity. I have urged the
Ministry of Finance, not to itself become engaged in making a
secondary market or sponsoring a secondary market. But simply to
encourage the leading Japanese firms to realize that unless they
themselves place more actively with foreign investors and then create
an active and liquid secondary market for these bonds, we will not see
a significant long term growth in the Euro-yen note market.
Qj I would like to ask Dr. Mulford a few questions. I wonder
how you responded to Japanese question related to U.S. budget
deficit. Secondly, I believe that this budget deficit has a lot a
bearing on the exchange rate since the G5 meeting. I would like to
hear your views on the exchange rate situation.
DR. MULFORD: Well, as you know, there is a present legislation
called the Graham, Rudmcn, Hollings amendment. This has been under
consideration and political negotiation for at least eight weeks now.
This legislation -- there was a House and Senate version -- and a
conference group of the House and the Senate negotiating a solution.
On Friday night, this group reached an agreement in principal on the
format of that bill and today (on Monday in the United States) the
full conference is suppose to vote on that solution. And after that,
a bill which will be identical for both the House and the Senate, will
be acted on by both Houses and sent to the President for his signature.
The administration supports this bill, which will call for a
budget deficit ceiling for the present year, fiscal year 1986, and
then a series of declining figures until, in fiscal year 1991, the
budget deficit is removed. In fiscal year 1986 the limit for the
deficit is 172 billion and then it drops in.each year after that. So,
that in this fiscal year there will have to be, I understand,
something like 11 billion dollars of cuts and then in subsequent years
that number is substantially larger. And these must be carried out
under the law.
We believe this bill, if it is enacted and put into law, very
substantially, recognizes the commitment made by the United States in
the G5 accord in September to continue to commit itself to reducing
the U.S. budget deficit, we think it is a very, very important
development and will start a process with a substantial and clearly
visible progression of reductions into the future. We think it is an
important, fundamental economic development that will, among other
things,
thereforeinfluence
will have
thesome
world's
bearing
view
-in6of
due
- ourcourse
economic
on exchange
situation,
rates.
and
12-DEC-B5
17:42
PAGE
AMEMB TOKYO
You asked about exchange rates also. Since the G5 statement in
September, we have not seen any development in exchange rates since
then that has made us unhappy. We think that the progress has been
constructive. We recognize that further progress is goingto be
related to further changes in each country's economic situation and I
would remind you that each country, the United States, Japan, Germany,
France and the U.K. have all made commitments about their future
economic policy intentions which we must all continue to try to
implement and carry out in order to continue this process forward.
Q: Dr. Mulford in your opening comment you said that Japan had
failed to live up to its commitment to liberalize financial markets
and internationalize, to intensify its evidence to liberalize its
financial markets and internationalize the yen. And after that you
mentioned short term government bonds and the secondary market and
Euro bonds. Are there other things you had expected to see the
Japanese side do? Or are those the only two things that you found
disappointing?
DR. MULFORD: Well, I said that a commitment was made to
intensify the effort to liberalize the domestic market and
internationalize the yen and that at today's meeting, we didn't see
evidence of this. And in addition to the two major areas you
mentioned, there are lots of smaller questions that we discussed,
where we think there could be a faster pace of change -- where the
changes are already known but perhaps the timetable could be
accelerated.
For example, interest rate deregulation on large deposits might
be advanced, the changes we have talked about in the inner bank market
to, for example, reduce the 90 day maturity requirement on inner bank
deposits down to over night money, so that there could be a freer
market there for banks who which to raise money in that market.
There are certain areas in government dealing where feel changes
could be, for example, the waiving-of the requirement which says that
after a bank begins to deal in government bonds there is a limit on
dealings to maturities of two years or shorter. We would like to have
seen that waived. We would like to see applications for that market
handled more quickly. We think that there is a need for greater
transparency in the rules that cover the capital leverage 'requirements
for foreign securities houses in Japan, which are much less liberal
than those that are allowed to the Japanese firms. We would like to
see an acceleration of changes in the Euro-yen market, dropping of the
five year maturity requirement, extending the Euro-yen CD maximum
maturity from six months to one year. There are a variety of things
of that type.
Q: Just one last question I would like to ask — with regard
to the future time table of the yen-dollar discussions, I understand
you still have differences of view and I wonder what your are your
future plans for continued discussion.
- 7 -
8
MR. OBA: I'm sorry I forgot to mention that we do have a
consensus that we will continue this meeting in the future, and that
we will meet sometime in the spring of next year — although we did
agree that we must avoid May 2nd, 3rd and 4th.
(laughter. End Text)
OT-85-89
TREASURY NEWS
apartment of the Treasury • Washington, D.c. • Telephone 566-2041
FOR RELEASE AT 4:00 P.M.
December 10, 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 $15,200 million, to be issued December 19, 1985. This offering will provide about $9 25 million of new cash for the Treasury, as
the maturing bills are outstanding in the amount of $14,281 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, December 16, 1985. The
two series offered are as follows:
91-day bills (to maturity date) for approximately $7,600 million,
representing an additional amount of bills dated March 21, 1985, and
to mature March 20, 1986 (CUSIP No. 912794 JX 3 ) , currently outstanding in the amount of $15,762 million, the additional and original
bills to be freely interchangeable.
182-day bills for approximately $7,600 million, to be dated
December 19, 1985, and to mature June 19, 1986 (CUSIP No. 912794 KL 7) .
The Treasury will postpone the auctions unless it has assurance of Congressional action on legislation to raise the statutory
debt limit before the scheduled auction date of December 16, 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. 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 December 19, 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 $892 million as agents for foreign and international monetary authorities, and $3,729 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-399
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 oh 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.
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
Department of the Treasury • Washington, D.C. • Telephone
FOR IMMEDIATE RELEASE
December 1 1 , 1985
Contact:
Phone:
Charles Powers
(202) 566-2041
RONALD A. PEARLMAN
ASSISTANT SECRETARY FOR TAX POLICY
TO LEAVE TREASURY
Ronald A. Pearlman, Assistant Secretary of the Treasury for Tax
Policy, will leave the Treasury Department on December 20 to return to
private law practice as a partner with B r y a n , C a v e , McPheeters &
M c R o b e r t s , St. Loui s , M O .
J. Roger Mentz, Deputy Assistant Secretary (Tax Policy), will
succeed Mr. Pearlman as the Acting Assistant S e c r e t a r y .
Prior to his nomination as Assistant S e c r e t a r y , M r . Pearlman
served as Deputy Assistant Secretary of the Treasury for Tax Policy.
In his capacity as Assistant S e c r e t a r y , M r . Pearlman has been
responsible for the formulation and execution of United States
domestic and international tax p o l i c i e s .
Prior to joining the Treasury, Mr. Pearlman was engaged in the
private practice of law in S t . Louis and served as an adjunct
professor of law at Washington University School of L a w , S t . L o u i s .
Previously, he served in the Office of the Chief Counsel of the
Internal Revenue Service from 1 9 6 5 - 6 9 .
M r . Pearlman is a member of the American Bar A s s o c i a t i o n , the
American Law I n s t i t u t e , and The Missouri B a r .
Mr. Pearlman and his wife Hedy have two children, Steven and
Leslie .
!)-M00
2041
rREASURY NEWS
apartment of the Treasury • Washington, D.c. • Telephone 566-2041
FOR RELEASE AT 10:00 A.M.
December 11, 1985
RESCHEDULING OF TREASURY'S WEEKLY BILL AUCTIONS
The Department of the Treasury hereby amends its offering
announcement of December 3, 1985, to change the auction date,
closing time, and location for receipt of competitive tenders
to Thursday, December 12, 1985, prior to 10:00 a.m., EST, only
at the Federal Reserve Bank of New York.
This rescheduling of the 91-day and 182-day Treasury bill
auctions is contingent upon enactment of pending legislation to
raise the public debt limit.
The announcement of December 3 is further amended as
follows:
Wire and telephone tenders may be received at the
discretion of the Federal Reserve Bank of New York. Each competitive tender for the respective issues must be for a minimum
amount of $10,000,000. Competitive tenders over $10,000,000
must be in multiples of $1,000,000. Competitive 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 received in all Federal Reserve
Districts and at the Treasury in Washington by close of business
local time, December 11, 1985, will be accepted in the two
auctions.
The provision for Treasury Tax and Loan Note Option
Depositaries to make payment by credit to their Treasury Tax
and Loan Note Accounts is rescinded.
All other terms and conditions in the announcement of
December 3 remain the same.
oOo
B-401
TREASURY NEWS
apartment of the Treasury • Washington, D.c. • Telephon
FOR IMMEDIATE RELEASE
December 11, 19 85
TREASURY TO AUCTION 2-YEAR AND 4-YEAR NOTES
TOTALING $16,500 MILLION
The Department of the Treasury will auction $9,500 million
of 2-year notes and $7,000 million of 4-year notes to refund
$11,760 million of securities maturing December 31, 1985, and to
raise $4,700 million new cash. The $11,760 million of maturing
securities are those held by the public, including $684 million
of maturing securities currently held by Federal Reserve Banks
as agents for foreign and international monetary authorities.
The $16,500 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.
In addition to the public holdings, Government accounts and
Federal Reserve Banks, for their own accounts, hold $771 million
of the maturing securities that may be refunded by issuing additional amounts of the new securities at the aveirag:- prices of
accepted competitive tenders.
The Treasury will postpone these auctions unless it has
assurance of Congressional action on legislation to raise the
statutory debt limit before the scheduled auction dates of
December 17 and December 18, 1985.
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-402
HIGHLIGHTS OF TREASURY OFFERINGS TO THE PUBLIC
OF 2-YEAR AND 4-YEAR NOTES TO BE ISSUED DECEMoriR 31, 19 8 5
December 11, 19 85
Amount Offered to the Public $9,500 million $7,000 million
Description of Security;
Term and type of security
2-year notes
4-year notes
Series and CUSIP designation
Series AD-1987
Series P-1989
(CUSIP No. 912827 TA 0)
(CUSIP No. 912827 TB 8)
Maturity date
December 31, 1987
December 31, 1989
Call date
No provision
No provision
Interest Rate
To be determined based on
To be determined based on
the average of accepted bids
the average of accepted bids
Investment yield
To be determined at auction
To be determined at auction
Premium or discount
To be determined after auction To be determined after auction
Interest payment dates June 30 and December 31 June 30 and December 31
Minimum denomination available...$5,000
$1,000
Terms of Sale:
Method of sale
Yield auction
Yield auction
Competitive tenders
Must be expressed as
Must be expressed as
an annual yield, with two
an annual yield, with two
decimals, e.g., 7.10%
decimals, e.g., 7.10%
Noncompetitive tenders
Accepted in full at the aver- Accepted in full at the average price up to $1,000,000
age price up to $1,000,000
Accrued interest payable
by investor
None
None
Payment by non-institutional
investors
Pull payment to be
Full payment to be
submitted with tender
submitted with tender
Payment through Treasury Tax
and Loan (TT&L) Note Accounts
Acceptable for TT&L Note
Acceptable for TT&L Note
Option Depositaries
Option Depositaries
Deposit guarantee by
designated institutions
Acceptable
Acceptable
Kev Dates *
Receipt of tenders
Tuesday, December 17, 1985,
Wednesday, December 18, 1985,
prior to 1:00 p.m., EST
prior to 1:00 p.m., EST
Settlement (final payment
from
institutions):
lftOC
a)
b)due
cash
readily-collectible
or Federal
fundscheck
Tuesday,
Friday, December
December 27,
31,1985
1985
Tuesday,
Friday, December
December 27,
31,1985
1985
TREASURY NEWS
apartment of the Treasury • Washington, D.c. • Telephone 566-204
FOR IMMEDIATE RELEASE
December 11, 1985
SCHEDULING OF 7-YEAR AND 20-YEAR SECURITY AUCTIONS
The Department of the Treasury announced that the
auctions of 7-year notes and 20-year 1-month bonds will be
scheduled for early January 1986.
Details of the offerings
of these securities will be announced later.
3-403
THE SECRETARY OF THfc TREASURY
WASHINGTON
December 6, 1985
Dear Hr. Speaker:
Enclosed is a legislative proposal entitled the "Government
Securities Market Improvement Act of 1985." This Act would
expand the authority of the Secretary of the Treasury to issue
regulations regarding the conditions under which public debt
securities are purchased and traded. The bill would also provide
for registration and regulation of brokers and dealers in both
United States Treasury and other government-related obligations.
The bill includes conforming amendments to the Securities
Exchange Act of 1934.
The genesis of this legislation is two-fold — our concern about
maintaining the integrity of the market for Treasury and other
government-related obligations after the dealer failures earlier—
this year, and Treasury's on-going activities to provide
investors with assurance of the security of the system through
which they hold non-physical or book-entry Treasury obligations.
A careful study of the government securities market has led us,
and other agencies, to conclude that the current regulatory
structure is inadequate and additional regulatory oversight is
necessary. The market for U.S. Treasury securities is the
largest, most liquid, and most efficient financial market in the
world. The Treasury Department, as the issuer of obligations of
the United States and as the agency charged by Congress with the
management of the public debt, is deeply concerned with maintaining the efficiency and integrity of and investor confidence in
this unique market as well as related agency securities markets.
These factors are indispensable to achieving the lowest possible
financing costs.
t
The proposed legislation would require the Secretary of the
Treasury to prescribe standards for all brokers and dealers in
government securities with respect to protection of customer
securities and balances, and for currently unregulated brokers
and dealers in such additional areas as financial responsibility
and financial record-keeping and audit. It also would require
the Secretary to prescribe standards with respect to protection
of customer securities by depository institutions that are not
brokers or dealers. All regulations would be written in consultation with the Federal Reserve Board. Currently unregistered
brokers and dealers would be required to register with the
Securities and Exchange Commission. Broker-dealers now registered under section 15 of the Securities Exchange Act of 1934, as
well as brokers and dealers who are banks or thrifts, would be
required to provide their regulatory agencies with notice of
their status as government securities brokers or dealers. These
agencies would then so notify the Commission, resulting in a
centralized collection of all entities in the market. Inspection
-2of brokers and dealers (as well as of non-dealer depository
institutions) and enforcement of regulations would be done by the
bank regulators for banks and thrifts under their supervision,
and by the Commission (and related self-regulatory organizations)
for all others. The legislation explicitly provides that the
business relationship of the New York Federal Reserve Bank with
brokers and dealers will not be affected.
Pursuant to the public debt statutes, the Treasury issues certain
regulations and may increase its oversight of dealers to assure
the integrity and efficiency of the market for U.S. Government
securities. However, there is a need to broaden the authority of
the Secretary of the Treasury to assure effective compliance with
minimum standards which should be met by all dealers in Treasury
and related securities and depository institutions acting as
book-entry custodians of these securities.
The proposed legislation is consistent with the proposal in ?
outline form that the Federal Reserve Board, the Securities and
Exchange Commission, and the Treasury agreed to earlier this
year. There is no need to subject Treasury or agency securities
to the extensive regulatory regimes established by the securities
laws for other securities, or to establish a new regulatory body
to deal with this unique market. The joint regulatory actions
outlined in this legislation present the most efficient vehicle
for protecting investors in government securities while
eliminating potentially over-lapping regulation and insuring that
the cost of financing government activities is kept to a minimum.
It would be appreciated if you would lay the proposed bill before
the House of Representatives. An identical letter has been sent
to the President of the Senate.
The Office of Management and Budget advises that it has no
objection to the presentation of this legislative proposal to
Congress and that its enactment would be in accord with the
Sincerely,
program of the President.
ames A. Baker, III
The Honorable Thomas P. O'Neill, Jr.
Speaker of the House of Representatives
Washington, D.C. 20515
Enclosure
A BILL
To require the registration and regulation of brokers and
dealers in government securities, and for other purposes.
Be it enacted by the Senate and House of Representatives
of the United States of America in Congress assembled,
Sec. l.(a) That this Act may be cited as the "Government
Securities Market Improvement Act of 1985."
(b) The Congress finds that in order to help protect
the public interest in the government securities markets, it
is necessary to assure that government securities brokers and
government securities dealers are subject to adequate
registration, financial responsibility, reporting,
record-keeping, and other related regulatory requirements
r
designed to assure the protection of customer securities.
Sec. 2.(a)
The Securities and Exchange Commission shall
require that each government securities broker and government
securities dealer (other than (1) a broker or dealer
registered under section 15 of the Securities Exchange Act of
1934 or (2) a depository institution) shall register with the
-2Commission in such form and providing such information and
documents concerning the government securities broker or
government securities dealer and persons associated therewith
as the Commission shall by regulation require.
The Commission
shall grant the registration if it finds that the requirements
of this Act are satisfied.
It shall deny such registration if
it does not make such a finding or if it finds that if the
applicant were so registered its registration would be subject
to suspension or revocation under section 4 of this Act.
Each
government securities broker and government securities dealer
so registered shall be required to become a member of a
national securities exchange registered under section 6 or a
national securities association registered under section 15A
of the Securities Exchange Act of 1934.
(b) Each government securities broker and government
securities dealer that is either a broker or dealer registered
under section 15 of the Securities Exchange Act of 1934 or a
depository institution shall provide notice to the appropriate
regulatory agency in such form as such agency, in consultation
with the Commission, shall prescribe by regulation that the
broker or dealer or depository institution is a government
securities broker or a government securities dealer, and each
-appropriate regulatory agency, other than the Commission,
shall provide a copy of such notice to the Commission.
Sec. 3.(a)(1) The Secretary of the Treasury shall prescribe
-3regulations for the conduct of business as a government
securities broker or a government securities dealer concerning
the safeguarding and use of customer securities, credit
balances and deposits, including in particular regulations
relating to adequate segregation of customer securities and
securities which are the subject of repurchase transactions.
(2) In promulgating regulations under this subsection,
the Secretary shall determine, with respect to government
securities brokers and government securities dealers not
required to register with the Commission pursuant to section
2(a) of this Act, whether any or all of the rules or standards
of the appropriate regulatory agency for such government
securities broker or government securities dealer adequately
meet the purposes of regulations promulgated under this
subsection and, if the Secretary so determines, he shall
exempt any government securities broker or government
securities dealer subject to such rules or standards from any
or all of the regulations promulgated under this subsection.
(b) The Secretary shall in addition prescribe
regulations for the conduct of business by government
securities brokers and government securities dealers required
.to register with the Commission under section 2(a) of this Act
with respect to capital adequacy standards, records to be made
and kept and furnished, reports to be made and disseminated,
and requirements for annual or more frequent filing and/or
-4auditing of financial statements and other information
concerning financial condition and their certification by
independent accountants.
(c) The Secretary shall require that any depository
institution that is not a government securities broker or a
government securities dealer but that holds government
securities other than for its own account, or which holds such
securities as a fiduciary, meet such standards for
safeguarding of government securities held for customers,
including in particular the segregation of such securities, as
the Secretary shall by regulation prescribe.
(d) In promulgating regulations under this section,
the Secretary shall consult with the Board of Governors of the
Federal Reserve System.
Sec. 4.(a) The Commission is authorized, pursuant to section
15(b)(4) of the Securities Exchange Act of 1934, to take
action in such manner and for such purposes as specified in
that section, against any government securities broker or
government securities dealer required to be registered with
the Commission under section 2(a) of this Act, and the
Commission is also authorized, pursuant to section 15(b)(6) of
the Securities Exchange Act of 1934, to take action in such
manner and for such purposes as specified in that section,
against any person associated with a government securities
-5broker or government securities dealer required to be
registered with the Commission under subsection 2(a) of this
Act.
The Commission shall maintain and make available to the
public a record of sanctions imposed under this subsection.
(b) With respect to any government securities broker
or government securities dealer who is not required to
register with the Commission under section 2(a) of this Act,
the appropriate regulatory agency for such government
securities broker or government securities dealer may, in the
manner and for the reasons specified in section 15(b)(4) of
the Securities Exchange Act of 1934, censure, place
limitations on the activities, functions or operations of,
suspend for a period not exceeding twelve months, or bar from
acting as a government securities broker or government
v
securities dealer any such government securities broker or
government securities dealer, and may sanction any person
associated with such government securities broker or
government securities dealer in the manner and for the reasons
specified in section 15(b)(6) of the Securities Exchange Act.
In addition, where applicable, an appropriate regulatory
agency (except the Commission) may, in accordance with section
53 of the National Bank Act (12 U.S.C. 93), section 8 of the
-Federal Deposit Insurance Act (12 U.S.C. 1818), section 5 of
the Home Owners' Loan Act of 1933 (12 U.S.C. 1464), section
407 of the National Housing Act (12 U.S.C. 1730), or section
206 of the Federal Credit Union Act (12 U.S.C. 1786), enforce
-6compliance by such government securities broker or government
securities dealer or any person associated therewith with the
provisions of this Act and the regulations of the Secretary
pertaining to government securities brokers or government
securities dealers, persons associated with government
securities brokers or government securities dealers, and
transactions in government securities.
For purposes of the
preceding sentence, any violation of any such provisions shall
constitute adequate basis for the issuance of any order under
section 53(a) or 53(b) of the National Bank Act, section 8(b)
or 8(c) of the Federal Deposit Insurance Act, section 5(d)(2)
or 5(d)(3) of the Home Owners' Loan Act of 1933, section
407(e) or 407(f) of the National Housing Act or section 206(e)
or 206(f) of the Federal Credit Union Act and the customers of
any such government securities broker or government securities
dealer shall oe deemed, as appropriate, "depositors" as that
term is used in section 8(c) of the Federal Deposit Insurance
i
Act, "saving account holders" as that term is used in section
5(d)(3) of the Home Owners' Loan Act of 1933, or "insured
members" as that term is used in section 407(f) of the
National Housing Act and section 206(f) of the Federal Credit
Union Act.
Nothing in this subsection shall be construed to
affect in any way the powers of such appropriate regulatory
agency to proceed against such government securities broker or
government securities dealer under any other provision of law.
Each appropriate regulatory agency other than the Commission
shall promptly notify the Commission after it has imposed any
-7sanction under this paragraph on a government securities
broker or government securities dealer or a person associated
therewith, and the Commission shall maintain, and make
available to the public, a record of such sanctions and any
sanctions imposed by it under this subsection.
(c)(1) Any government securities broker or government
securities dealer or person associated therewith who is
required to register or give notice under section 2 of this
Act but fails to do so or who otherwise violates this Act or
any regulation prescribed under this Act may be assessed a
civil penalty by the appropriate regulatory agency for such
government securities broker or government securities dealer
of not more than $10,000 for each violation.
Each day a
violation continues shall constitute a separate offense.
(2) Penalties under this subsection shall be
assessed only after appropriate notice and opportunity for a
hearing thereon.
(3) The appropriate regulatory agency (other than
the Commission) shall notify the Commission of any assessment
of a penalty against a government securities broker or
government securities dealer or person associated therewith.
The Commission shall maintain and make available to the public
a record of such penalties.
-8(d)
The appropriate regulatory agency, after
appropriate notice and opportunity for a hearing, may censure
or restrict the activities, functions, or operations relating
to government securities of any depository institution subject
to regulation under section 3(c) of this Act or any person
associated therewith if the appropriate regulatory agency
determines that such depository institution or person
associated therewith has violated this Act or any regulation
prescribed under section 3(c) of this Act.
In addition, where
applicable, the regulatory agency may in accordance with
section 53 of the National Bank Act (12 U.S.C. 93), section 8
of the Federal Deposit Insurance Act (12 U.S.C. 1818), section
5 of the Home Owners' Loan Act of 1933 (12 U.S.C. 1464),
section 407 of the National Housing Act (12 U.S.C. 1730), or
section 206 of the Federal Credit Union Act (12 U.S.C. 1786)
enforce compliance by a depository institution with any
regulation prescribed under section 3(c) of the Act.
For
purposes of the preceding sentence, any violation of any such
regulation shall constitute adequate basis for the issuance of
any order under section 53(a) or 53(b) of the National Bank
Act, section 8(b) or 8(c) of the Federal Deposit Insurance
Act, section 5(d)(2) or 5(d)(3) of the Home Owners' Loan Act
of 1933, section 407(e) or 407(f) of the National Housing Act,
or section 206(e) or 206(f) of the Federal Credit Union Act.
Nothing in this subsection -shall be construed to affect in any
way the powers of such appropriate regulatory agency to
proceed against such depository institution under any other
-9provision of law.
Each appropriate regulatory agency shall
promptly notify the Secretary after it has imposed any
sanction under this subsection on a depository institution.'
The Secretary shall maintain and may make available to the
public a record of such sanctions.
(e) Nothing in this Act shall in any way limit the
discretion of the Federal Reserve Bank of New York to require
reports or to establish terms and conditions in connection
with that Bank's business relationship with any government
securities broker or government securities dealer.
(f) Nothing in this Act shall in any way restrict the
existing authority of the Commission, the Board of Governors
of the Federal Reserve System, the Comptroller of the
Currency, the Federal Deposit Insurance Corporation, the
Federal Home Loan Bank Board, the Federal Savings and Loan
Insurance Corporation, the Department of Housing and Urban
Development and the Government National Mortgage Association
to regulate, examine and supervise the activities (including
activities involving government securities) of any government
securities broker, government securities dealer or depository
institution under their respective jurisdictions, and of any
"subsidiary of such a government securities broker, government
securities dealer or depository institution, or to take any
enforcement action in accordance with section 53 of the
National Bank Act (12 U.S.C. 93), section 8 of the Federal
-10Deposit Insurance Act (12 U.S.C. 1818), section 5 of the Home
Owners' Loan Act of 1933 (12 U.S.C. 1464), section 407 of the
National Housing Act (12 U.S.C. 1730), section 206 of the
Federal Credit Union Act (12 U.S.C. 1786), the Securities Act
of 1933, the Securities Exchange Act of 1934, the Investment
Advisers Act of 1940, the Investment Company Act of 1940, or
title III of the National Housing Act (12 U.S.C. 1716 et seq).
Sec. 5. Any government securities broker or government
securities dealer or person associated therewith and any
depository institution or person associated therewith who
willfully violates this Act or any regulation prescribed under
this Act or any regulation of an appropriate regulatory agency
implementing this Act, including a willful failure to give
notice or register, shall, upon conviction, be fined not more
than $100,000, imprisoned for not more than five years, or
both, for each violation.
Sec. 6. The Secretary may by regulation or order exempt any
government securities broker or government securities dealer
or class of government securities broker or government
securities dealer from registration, and may by regulation or
order exempt any government securities broker or government
securities dealer or class of government securities broker or
government securities dealer or any depository institution or
class of depository institution subject to regulation under
subsection 3(c) from the requirements of any regulation
-11prescribed under this Act if the Secretary finds it
appropriate and consistent with the purposes of this Act to do
so.
Sec. 7. Information relating to possible violations of this
Act and the rules and regulations thereunder received by any
appropriate regulatory agency or the Secretary from or with
respect to any government securities broker or government
securities dealer for which it is not the appropriate
regulatory agency, or with respect to any person associated
therewith shall be made available by the Secretary or the
recipient agency to the Commission, the Secretary, and the
appropriate regulatory agency and, if applicable, the self
regulatory organization for such government securities broker
or government securities dealer.
Sec. 8.(a) For the purposes of investigating whether a person
has violated, is violating, or is about to violate this Act or
any regulation prescribed under this Act, the appropriate
regulatory agency for such person or any officer or employee
of the United States designated by such appropriate regulatory
agency is empowered to administer oaths and affirmations,
subpoena witnesses, compel their attendance, take evidence,
and require the production of any books, papers,
correspondence, memoranda, or other records which the
appropriate regulatory agency deems relevant or material to
the inquiry.
Suoh attendance of witnesses and the production
-12of any such records may be required from any place in the
United States or any State or territory at any designated
place of hearing.
(b) In case of contumacy by, or refusal to obey a
subpoena issued to, any person, the appropriate regulatory
agency may invoke the aid of any court of the United States
within the jurisdiction where such investigation is being
conducted, or where such person resides or carries on
business, in requiring the attendance and testimony of
witnesses and the production of books, papers, correspondence,
memoranda, and other records.
All process in any such case
may be served in the judicial district in which such person is
an inhabitant or wherever he may be found.
(c) When any appropriate regulatory agency believes a
person has violated, is violating, or is about to violate this
Act or a regulation prescribed or order issued under this Act,
such appropriate regulatory agency may, subject to the
approval of the Attorney General if such approval is otherwise
required in order for the agency to bring a civil action to
enforce statutes and regulations under its jurisdiction, bring
a civil action in the appropriate district court of the United
States or in the appropriate United States court of a
territory or possession of -the United States, or in the United
States District Court for the District of Columbia, to enjoin
the violation or to enforce compliance with the regulation or
-13order.
An injunction or temporary restraining order shall be
issued without bond.
Sec. 9. For purposes of this Act—
(a) "appropriate regulatory agency" means with respect
to a depository institution that is not a government
securities broker or government securities dealer
—
(1) the Comptroller of the Currency, in the case
of a national bank or a bank acting under the District of
Columbia Code or a federal branch or federal agency of a
foreign bank (as defined in the International Banking Act of
1978);
(2) the Board of Governors of the Federal Reserve
System, in the case of a State member bank of the Federal
Reserve System or a foreign bank, a state branch or state
agency of a foreign bank, or a commercial lending company
owned or controlled by a foreign bank (as defined in the
International Banking Act of 1978);
(3) the Federal Deposit Insurance Corporation, in
the case of a bank insured by the Federal Deposit Insurance
Corporation (other than a member of the Federal Reserve System
or a Federal savings bank), or eligible to make application to
become so insured;
-14(4)
the Federal Home Loan Bank Board, in the case
of a Federal savings and loan association, Federal savings
bank, or District of Columbia savings and loan association;
(5) the Federal Savings and Loan Insurance
Corporation, in the case of an institution insured by the
Federal Savings and Loan Insurance Corporation (other than a
Federal savings and loan association, Federal savings bank, or
District of Columbia savings and loan association) or eligible
to make application to become so insured; and
t
(6) the National Credit Union Administration in
the case of an institution insured by the National Credit
Union Administration or eligible to make application to become
so insured.
v
(b) "appropriate regulatory agency" means with respect
to a government securities broker or government securities
dealer
—
(1) the Comptroller of the Currency, in the case
of a national bank, a bank acting under the District of
Columbia Code or a federal branch or federal agency of a
foreign bank (as defined in the International Banking Act of
1978);
(2) the Board of Governors of the Federal Reserve
-15System, in the case of a State member bank of the Federal
Reserve System, a foreign bank (other than a broker or dealer
registered under section 15 of the Securities Exchange Act of
1934), a state branch or state agency of a foreign bank, or a
commercial lending company owned or controlled by a foreign
bank (as such terms are defined in the International Banking
Act of 1978);
(3) the Federal Deposit Insurance Corporation, in
the case of a bank insured by the Federal Deposit Insurance
Corporation (other than a member of the Federal Reserve System
or a Federal savings bank);
(4) the Federal Home Loan Bank Board, in the case
of a Federal savings and loan association, Federal savings
bank or District of Columbia savings and loan association;
(5) the Federal Savings and Loan Insurance
Corporation, in the case of an institution insured by the
Federal Savings and Loan Insurance Corporation (other than a
Federal savings and loan association, Federal savings bank, or
District of Columbia savings and loan association);
(6) the National Credit Union Administration in
the case of an institution 'insured by the National Credit
Union Administration; and
-16(7)
the Commission in the case of all other
government securities brokers and government securities
dealers.
(c) "Commission" means the Securities and Exchange
Commission.
(d) "depository institution" has the meaning stated in
clauses (i) through (vi) of subparagraph 19(b)(1)(A) of the
Federal Reserve Act and also includes a foreign bank, a state
agency or state branch of a foreign bank, a commercial lending
company owned or controlled by a foreign bank and a federal
branch or agency of a foreign bank (as such terms are defined
in the International Banking Act of 1978) other than a broker
or dealer registered under section 15 of the Securities
Exchange Act of 1934.
(e) "government securities" means—
(1) securities which are direct obligations of, or
obligations guaranteed as to principal or interest by, the
United States;
(2) securities which are issued or guaranteed by
corporations in which the United States has a direct or
indirect interest (including government-sponsored
corporations) which are either (A) designated as "exempted
-17securities" by the Secretary under paragraph 3(a)(12) of the
Securities Exchange Act of 1934, or (B) otherwise deemed by
statute to constitute exempted securities under the Securities
Exchange Act of 1934; or
(3) any put, call, straddle, option, or privilege
on a security described in paragraph (1) or (2) other than a
put, call, straddle, option, or privilege (A) that is traded
on one or more national securities exchanges; or (B) for which—
quotations are disseminated through an automated quotation
system operated by a registered securities association.
(f) "government securities broker" means any person
regularly engaged in the business of effecting transactions in
government securities for the account of others.
(g) "government securities dealer" means any person
regularly engaged in the business of buying and selling
government securities for his own account, through a broker or
otherwise, but does not include any person insofar as he buys
or sells such securities for his own account either
individually or in some fiduciary capacity, but not as part of
a regular securities business.
(h) "person" means a natural person, corporation,
company, partnership, association, firm, society, or joint
stock company.
-18(i)
"person associated with" a government securities
broker, government securities dealer or depository institution
means any partner, officer, director, or branch manager of
such government securities broker, government securities
dealer or depository institution, and any other employee of
such government securities broker, government securities
dealer or depository institution engaged in the management,
direction, supervision or performance of any activities
relating to government securities, and any person directly or
indirectly controlling, controlled by or under common control
with such government securities broker, government securities
dealer or depository institution.
(j) "Secretary" means the Secretary of the Treasury.
Sec. 10. The Securities Exchange Act of 1934 is amended as
follows -
*(a) Subparagraph (B) of section 3(a)(39) is amended by—
(1) striking out "or municipal securities dealer"
each place it appears and inserting in lieu
thereof "municipal.securities dealer, government
securities broker, or government securities
dealer"; and
(2) inserting before the semicolon at the end
-19thereof "or an order of the Commission or other
appropriate regulatory agency suspending or
barring him from acting as a government
securities broker or government securities
dealer."
(b) Subparagraph (C) of section 3(a)(39) is amended by
striking out "or municipal securities dealer" each place it
appears and inserting in lieu thereof "municipal securities
dealer, government securities broker, or government securities
dealer."
(c) Section 3(a) of the Act is further amended by adding
at the end thereof the following new paragraphs:
"(42) The term 'depository institution' has the
meaning stated in clauses (i) through (vi) of
subparagraph 19(b)(1)(A) of the Federal Reserve Act
and also includes a foreign bank, a state branch or
state agency of a foreign bank, a commercial lending
company owned or controlled by a foreign bank and a
federal branch or federal agency of a foreign bank
(as such terms are defined in the International
Banking Act of 1978) other than a broker or dealer
registered under section 15 of this title.
"(43)
The term 'government securities' means
-20"(A)
securities which are direct obligations of, or
obligations guaranteed as to principal or interest
by, the United States;
"(B) securities which are issued or guaranteed by
corporations in which the United States has a direct
or indirect interest and which are designated as
'exempted securities' by the Secretary of the
Treasury under paragraph (12) of this subsection; or
"(C) securities which are issued or guaranteed by
corporations in which the United States has a direct
or indirect interest (including a government
sponsored corporation) which securities are deemed
by statute to constitute exempted securities under
this title.
"(44) The term 'government securities broker' means
any person engaged in the business of effecting
transactions in government securities for the
account of others.
"(45) The term 'government securities dealer' means
any person regularly engaged in the business of
buying and selling government securities for his own
account, through a broker or otherwise, but does not
include any person insofar as he buys or sells such
-21securities for his own account, either individually
or in some fiduciary capacity, but not as part of a
regular securities business.
"(46) The term 'person associated with a government
securities broker or government securities dealer'
means any partner, officer, director, or branch
manager of such government securities broker or
government securities dealer (or any person
occupying a similar status or performing similar
functions), and any other employee of such
government securities broker or government
securities dealer who is engaged in the management,
direction, supervision or performance of any
activities relating to government securities, and
any person directly or indirectly controlling,
controlled by, or under common control with such
government securities broker or government
securities dealer."
"(47) The term "registered broker or dealer" means a
broker or dealer registered or required to register
pursuant to section 15 or 15B of this title, except
that in paragraph (3) of this subsection and
sections 6 and 15A the term means such a broker or
dealer and a government securities broker or
government securities dealer (other than a
-22depository institution) registered or required to
register pursuant to the Government Securities
Market Improvement Act."
"(48) The term "title" in paragraph (3) of this
subsection and in sections 6, 15, 15A, 17, 19, 21,
and 25 includes the Government Securities Market
Improvement Act of 1985."
(d) Section 15(b)(4) is amended by—
(1) inserting "(including any government securities
broker or government securities dealer)" after
"dealer" the first time it appears and in
subparagraph (F); and
(2) inserting "government securities broker or
government securities dealer," after "dealer,"
in clause (B)(ii) and subparagraph (C);
(e) Section 15(b)(6) is amended by inserting "(including
any person associated with a government securities broker or a
government securities dealer)" after "dealer" each time it
appears.
(f)
Section 15(c)(3) is amended b y —
-23(1) by inserting "(other than a government
securities broker or government securities
dealer, except a registered broker or dealer)"
after "dealer"; and
(2) by inserting "(except a government security)"
after "exempted security."
(g) Section 15A(f) is amended to read as follows:
"(f)(1) Except as provided in paragraph 2 of
this subsection, nothing in this section shall
be construed to apply with respect to any
transaction by a registered broker or dealer,
in any exempted security.
"(2) A registered securities association may
not adopt or enforce any rule or take any other
action with respect to transactions in
government securities or government securities
brokers or government securities dealers,
except that a registered securities association
may adopt and implement rules applicable to
members of such association (A) to enforce
compliance of government securities brokers and
government securities dealers with applicable
provisions of this title, and the rules and
-24regulations thereunder, (B) to provide that its
members and persons associated with its members
shall be appropriately disciplined, in
accordance with subsections (b)(7), (b)(8) and
(h) of this section, for violation of such
provisions or such rules, (C) to provide for
reasonable inspection and examination of the
books and records of government securities
brokers and government securities dealers, (D)
to provide for the matters described in
paragraphs (b)(3), (b)(4), and (b)(5) of this
section, and (E) to implement the provisions of
subsection (g) of this section."
(2) Section 15A(g) is amended by inserting
after paragraph (4) the following new
paragraph:
"(5)(A) A registered securities association
shall not deny membership to or condition the
membership of, or bar any person from becoming
associated with or condition the association of
any person with, a government securities broker
or government securities dealer under
paragraph (3) of this subsection.
W
(B) A registered securities association may
-25deny membership to, or condition the membership
of, a government securities broker or
government securities dealer if such government
securities broker or government securities
dealer (i) does not meet such regulations and
standards as are prescribed by the Secretary of
the Treasury under the Government Securities
Market Improvement Act of 1985 or (ii) has
engaged and there is a reasonable likelihood
that it will again engage in any conduct or
practice which would subject such government
securities broker or government securities
dealer to sanctions under section 15(b)(4) of
this title.
A registered securities
association may examine and verify compliance
with such regulations and standards in
accordance with procedures established by the
rules of the association.
"(C) A registered securities association may
bar any person from becoming associated with a
member or condition the association of a person
with a member (i) if such person has engaged in
any conduct or practice that there is a
reasonable likelihood that such person will
again engage in any conduct or practice which
would subject such person to sanctions under
-26section 15(b)(6) of this title, or (ii) if such
person does not agree to supply such
association with such information with respect
to its relationship and dealing with the member
as may be specified in the rules of the
association and to permit examination of its
books and records to verify the accuracy
thereof."
(h) Section 17(b) is amended by adding "and of every
government securities broker and government
securities dealer (other than a depository
institution)" after "section".
(i) Section 21(a) is amended by adding before the period
at the end of the first sentence, "provided,
however, that the Commission may take no action to
enforce the Government Securities Market Improvement
Act of 1985 or regulations promulgated thereunder
with respect to a depository institution as defined
in section 3 of this title".
Sec. 11. Section 5136 of the Revised Statutes (12 U.S.C. 24)
is amended by adding the following new paragraph:
"Ninth. To engage in the business of government
securities brokers and dealers through the association or
-27a corporation organized under the law of any state:
Provided that, the association shall not invest in the
capital stock of such corporation in an amount in excess
of 15 per centum of the capital and unimpaired surplus of
the association.
Such corporation shall be subject to
the provisions of section 1818 of this title as if such
corporation were an insured bank."
Sec. 12.(a) The Securities and Exchange Commission, in
consultation with the Secretary of Housing and Urban
Development, the Board of Governors of the Federal Reserve
System, the Secretary of the Treasury, and such other agencies
as the Commission may find appropriate, shall prepare and
transmit to Congress a report regarding existing capabilities
and potential future improvements for the clearance and
transfer of the securities of government sponsored enterprises
and of government agencies other than the Department of the
Treasury.
Such study shall in particular consider the means
(including elimination of definitive securities) by which
current costs and failure rates in the transfer of definitive
securities of such entities can be reduced.
(b) The report required by subsection (a) shall be
transmitted to Congress not later than one year after
enactment of this Act.
Sec. 13.(a) The Secretary of the Treasury and each
-28appropriate regulatory agency shall, within 150 days of
enactment of this Act, publish for notice and public comment
such regulations as are initially required to implement this
Act, which regulations shall become effective as temporary
regulations 210 days after the date of enactment of this Act
and as final regulations not later than one year after the
date of enactment of this Act.
(b) No person may continue to act as a government
securities broker or government securities dealer after nine
months after enactment of this Act unless such person has been
registered or has provided notice to the Commission or the
appropriate regulatory agency as provided in section 2 of this
Act.
SECTION-BY-SECTION ANALYSIS
Section 1 states that the short title of the Act shall
be the "Government Securities Market Improvement Act of 1985"
and sets forth findings that registration and regulation of
government securities brokers and government securities
dealers in areas relating to financial responsibility and
protection of customer securities is needed to assure
continued confidence in the integrity of the market.
The Act
establishes a system of registration and limited regulation of
government securities brokers and government securities
dealers in order to provide greater assurance to purchasers,
sellers and other customers for those securities of the
integrity and safety of their transactions.
Section 2 establishes the system of registration.
Subsection (a) provides that each government
securities broker and government securities dealer, other than
those already registered as brokers or dealers with the
Securities and Exchange Commission and brokers or dealers
which are also depository institutions, shall register with
the Commission and shall become a limited member of a
self-regulatory organization registered under Section 15A of
- 2 -
the Securities Exchange Act of 1934 or a national securities
exchange registered under section 6 of the Securities Exchange
Act of 1934.
The Commission is authorized to prescribe
required information and documents and forms for registration.
The terms "government securities," "government
securities broker," and "government securities dealer" are
defined in section 9 of the Act.
In general, government
securities include both direct and guaranteed obligations of
the United States and obligations of corporations, including
for example the Federal National Mortgage Association, in
which the United states has a direct or indirect interest and
whose obligations are exempted securities under the Securities
Exchange Act of 1934 either by statute or by designation of
the Secretary of the Treasury under section 3(a)(12) of that
\
Act.
The definition also includes certain non-standard
options, straddles and similar instruments on government
securities.
A government securities broker is any person
engaged in the business of effecting transactions in
government securities for the account of others.
A government
securities dealer is a person regularly engaged in the
business of buying and selling government securities for its
own account, through a broker or otherwise, but does not
include someone doing so not as part of a regular securities
business.
It is the intent of this definition to include all
persons who hold themselves out as making a market in
government securities, but not to include entities primarily
- 3 -
engaged in other lines of business who buy and sell government
securities for investment or cash management purposes.
Subsection (b) provides that each government
securities broker and government securities dealer who is not
required to register with the Commission under subsection (a)
of this section shall provide notice to its appropriate
regulatory agency of its status as a government securities
broker or government securities dealer, and the appropriate
regulatory agency will in turn provide notice to the
Commission.
"Appropriate regulatory agency" is defined in
section 10 of the act to provide, generally, that the bank
regulatory agencies will serve this function for institutions
otherwise under their supervision.
The Securities and
Exchange Commission will be the appropriate regulatory agency
for all other government securities brokers and government
securities dealers, including those registered with the
Commission under subsection (a) of this section.
Section 3 establishes a limited system of regulation of
government securities brokers, government securities dealers,
and depository institutions that are not government securities
brokers or government securities dealers but that hold
government securities for customers.
Regulations are to be
promulgated by the Secretary of the Treasury, in consultation
with the Board of Governors of the Federal Reserve System.
- 4 -
Subsection (a) provides that the Secretary shall
prescribe regulations for all government securities brokers
and government securities dealers concerning the safeguarding
and use of customer securities, credit balances and deposits.
These regulations shall include regulations relating to
adequate segregation of customer securities and securities
that are the subject of repurchase transactions.
Such rules
shall not include requirements for physical delivery of
securities in circumstances, such as short-term repurchase
agreements, where such a requirement could have significant
adverse market consequences.
Those government securities
brokers and government securities dealers who are not required
to register with the Commission under section 2(a) would be
exempt from some or all of the Secretary's regulations if the
Secretary determined that the rules and standards of the
v
appropriate regulatory agency for such were sufficient to
achieve the purposes of this section.
Subsection (b) provides that the Secretary shall
set additional standards of conduct for those required to
register with the Commission under section 2(a) in the areas
of capital adequacy, records to be made and kept and
furnished, reports to be made and disseminated and
requirements for annual or more frequent filing and/or audit
of financial statements and other information concerning
financial condition and their certification by independent
accountants.
- 5 -
Subsection (c) requires the Secretary to establish
standards for depository institutions that are not government
securities brokers or government securities dealers regarding
safeguarding of government securities held for customers,
including in particular segregation of such securities.
Again, the regulations shall not include requirements for
physical delivery of securities in circumstances where such a
requirement could have significant adverse market
consequences.
Regulations under this subsection are necessary
to assure that book-entry securities, in particular, are
properly safeguarded.
Subsection (d) states that in promulgating
regulations under this section, the Secretary shall consult
with the Federal Reserve Board.
Section 4 establishes sanctions for violations of this
Act, regulations promulgated under this Act and related rules
and regulations.
Subsection (a)(1) parallels the Commission's
current authority to discipline government securities brokers
and government securities dealers registered with the
Commission under this Act and persons associated therewith as
provided in section 15(b)(4) and 15(b)(6) of the Securities
Exchange Act of 1934.
Section 10 of this Act amends the
Securities Exchange Act to include violations of this Act or
- 6 -
regulations promulgated under it a basis for discipline.
The
Commission must keep and make public a record of such
sanctions.
Subsection (b) provides that the appropriate
regulatory agency may, using the procedures and standards of
sections 15(b)(4) and 15(b)(6) of the Securities and Exchange
Act of 1934, discipline any government securities broker or
government securities dealer subject to the agency's
regulation and person associated therewith.
In addition,
violation of this Act and regulations promulgated thereunder
is specifically made a violation of various banking acts.
Any
regulatory agency disciplining a government securities broker,
government securities dealer or person associated therewith
must notify the Commission after it has imposed sanctions.
The Commission must keep and make public a list of such
sanctions.
Subsection (c) provides for civil penalties of up
to $10,000 for violations of this Act or any regulation
promulgated under the Act, which may be assessed after
appropriate notice and opportunity for hearing by any
appropriate regulatory agency.
The appropriate regulatory
agency (other than the Commission) is to notify the Commission
of penalties imposed, and the Commission is to keep and make
public a list of such penalties.
This section is not intended
to create a private right of action to enforce this Act and
- 7 -
regulations promulgated under the Act.
Subsection (d) authorizes the appropriate
regulatory agency, after appropriate notice and opportunity
for hearing, to censure or restrict the government securities
activities, functions or operations of any depository
institution subject to regulation under section 3(c) of this
Act, or any person associated therewith who has violated any
regulation promulgated under section 3(c).
Subsection (e) preserves the right of the Federal
Reserve Bank of New York to require reports of and set terms
and conditions of its business relationships with government
securities brokers and government securities dealers.
Subsection (f) provides that nothing in this Act
shall in any way restrict the authority of the Commission, the
bank regulatory agencies, the Department of Housing and Urban
Development and the Government National Mortgage Association
to regulate, examine and supervise activities, including
government securities activities, of entities otherwise under
their jurisdiction, including subsidiaries of banks and
thrifts.
Under section 1818 of title 12, the enforcement
authority of the bank regulatory agencies extends to
violations of all laws, including this Act.
Section 5 provides criminal penalties of up to $100,000
- 8 -
or up to five years imprisonment or both for willful violations of this Act or any regulation under this Act or any
related regulation of an appropriate regulatory agency.
Section 6 authorizes the Secretary, by regulation or
order, to exempt any government securities broker, government
securities dealer or depository institution or class thereof
from any regulation if he determines that the exemption is
consistent with the purposes of the Act.
Similarly, he may
exempt any government securities broker or government
securities dealer or class thereof from the requirement of
registration.
Section 7 requires that, where appropriate, the
Secretary, appropriate regulatory agencies and, if applicable,
self-regulatory organizations, share information received
about government securities brokers and government securities
dealers and persons associated therewith.
Section 8 provides the appropriate regulatory agencies
with authority to investigate violations of this Act or
regulations promulgated under the Act.
Subsection (a) authorizes the appropriate
regulatory agencies to take the actions necessary, including
in particular the subpoena of witnesses and records, to
conduct investigations into violations of this Act or
- 9 -
regulations promulgated under this Act.
Subsection (b) provides for judicial enforcement of
subpoenas and other orders issued under subsection (a).
Subsection (c) authorizes the appropriate
regulatory agencies to bring civil actions to enjoin
violations of and to enforce this Act and regulations
promulgated under this Act.
Prior approval of the Attorney
General is required if the regulatory agency does not have
independent litigating authority.
Section 9 provides definitions.
Subsection (a) defines "appropriate regulatory
agency" with respect to a depository institution that is not a
government securities broker or government securities dealer
as the bank supervisory agencies.
In keeping with the
definition of "depository institution," the definition also
covers entities eligible to make application for insurance to
the Federal Deposit Insurance Corporation, the Federal Savings
and Loan Insurance Corporation, and the National Credit Union
Administration.
Subsection (b) defines "appropriate regulatory
agency" with respect to a government securities broker or
government securities dealer as the bank supervisory agencies
- 10 -
for all banks, thrifts, and credit unions and the Securities
and Exchange Commission for all others.
Subsection (c) defines "Commission" to mean the
Securities and Exchange Commission.
Subsection (d) defines "depository institution" to
have the meaning provided in the Monetary Control Act of 1980
and also to include certain foreign banks, commercial lending
companies and branches or agencies of foreign banks.
Subsection (e) defines "government securities" as
(i) securities that are direct obligations of, or obligations
guaranteed as to principal or interest by, the United States,
(ii) securities of corporations in which the United States has
a direct or indirect interest (including government-sponsored
corporations) which securities are either deemed to be
"exempted securities" under the Securities Exchange Act of
1934 by statute (for example, securities of the Federal
National Mortgage Association) or by designation by the
Secretary under paragraph 3(a)(12) of the Securities Exchange
Act of 1934 (for example, securities of the Federal Home Loan
Bank System), and (iii) certain non-standardized options and
similar privileges on government securities.
Subsection (f) defines "government securities
broker" as any person engaged in the business of effecting
- 11 -
transactions in government securities for the account of
others.
Subsection (g) defines "government securities
dealer" as any person regularly engaged in the business of
buying and selling government securities for its own account,
through a broker or otherwise, but excluding persons doing so
not as part of a regular securities business.
It is the
intent of this definition to include as government securities
dealers all persons who hold themselves out as making a market
in government securities but not to include entities primarily
engaged in other lines of business who buy and sell government
securities for investment or cash management purposes.
Subsection (h) defines "person" as not only a
natural person, but also a corporation, company, partnership,
association, firm, society, and joint stock company.
This
definition relates to entities subject to the Act and its
sanctions, and not to customers of government securities
brokers or government securities dealers.
Subsection (i) defines "person associated with" a
government securities broker, government securities dealer, or
depository institution, as any partner, officer, director or
branch manager of such entity, and any other employee engaged
in the management, direction, supervision or performance of
any activities relating to government securities, and any
- 12 -
person directly or indirectly controlling, controlled by, or
under common control with such entity.
Subsection (j) defines "Secretary" as the Secretary
of the Treasury.
Section 10'contains conforming amendments to the
Securities Exchange Act of 1934.
Subsections (a) and (b) amend section 3(a)(39) to
add conduct as a government securities broker or government
securities dealer (including a broker or dealer that is a
depository institution) to actions for which statutory
disqualification applies, and to add a bar from acting as a
government securities broker or government securities dealer
by an appropriate regulatory agency to the list of statutory
disqualifications.
Subsection (c) amends section 3(a) by adding new
definitions of "depository institution," "government
securities," "government securities broker," "government
securities dealer" "person associated with a government
securities broker or government securities dealer,"
"registered broker or dealer," and "title."
Except that
non-standardized options (which the Commission has exempted
only by regulation) are excluded from the definition of
"government securities", the first five definitions conform to
- 13 -
those of section 9, with minor technical exceptions to conform
to the style of the Securities Exchange Act.
The definition
of registered broker or dealer is necessary to make provisions
of the Exchange Act relating to self-regulatory organizations
applicable to government securities brokers and government
securities dealers required to register with the Commission.
The definition of "title" makes this Act and regulations
promulgated under it part of the system of laws that are
enforceable under the Exchange Act.
Subsection (d) amends section 15(b)(4) to include
government securities brokers and government securities
dealers as persons subject to sanction.
Subsection (e) amends section 15(b)(6) to include
persons associated with government securities brokers and
government securities dealers as persons subject to sanction.
Subsection (f) amends section 15(c)(3) to make
certain that in the unusual case in which a registered broker
or dealer is dealing only in government securities, the
Commission's financial responsibility regulations will nevertheless apply.
Subsection (q) amends section 15A to provide for
limited membership of government securities brokers and
dealers in national securities associations.
The national
- 14 -
securities associations will not have any authority over
actions by a government securities broker or government
securities dealer relating to other instruments not regulated
under the Act, such as commercial paper.
Subsection (h) amends section 17 of the act to
extend the Commission's investigatory authority explicitly to
government securities brokers and government securities
dealers.
Subsection (i) amends section 21 of the act to make
clear that the Commission's subpoena, injunction and related
powers in investigating and enforcing this Act and the
regulations thereunder are applicable only with respect to
those entities for which the Commission is the appropriate
regulatory agency.
^Section 11 amends the banking laws to provide for the
establishment of statutory subsidiaries engaged in the
government securities business.
Such subsidiaries will be
subject to section 1818 of title 12 as if they were insured
banks.
Section 12 directs the Commission, in consultation with
the Secretary of Housing and Urban Development, Secretary of
the Treasury, the Board of Governors of the Federal Reserve
System, and any other agency the Commission finds appropriate
- 15 -
to study the problems associated with the transfer and
clearing of definitive securities of government sponsored
enterprises and agencies other than the Department of the
Treasury.
The study is to particularly consider the means by
which costs and failure rates in the transfer of these
securities can be reduced.
The study is due one year after
enactment.
Section 13 establishes effective dates. The Secretary
would be required to publish for notice and public comment the
regulations initially required for implementation of the Act
within 120 days of enactment.
The regulations would become
effective as temporary regulations within 180 days of
enactment and as final regulations within one year from the
date of enactment.
Government securities brokers and
government securities dealers not otherwise subject to
regulation would be required to be registered within nine
months after enactment, and others would be required to
provide notice within the same time period.
The civil and
criminal sanctions of sections 4 and 5 of this Act will be
effective with respect to any government securities broker or
government securities dealer required to register or give
notice who has not done so.
rREASURY NEWS
partment of the Treasury • Washington, D.c. • Telephone 566-2041
FOR IMMEDIATE RELEASE
December 12, 1985
SALE OF SAVINGS BONDS AND STATE AND
LOCAL GOVERNMENT SECURITIES RESUMED
Following enactment of legislation to raise the public
debt limit, the Treasury authorized the Federal Reserve Banks
and some 42,000 other issuing agents to resume sales of United
States Savings Bonds, effective today.
The Treasury also authorized the resumption of issues of
State and Local Government Series securities effective today.
Subscribers for these securities who were affected by the sales
suspension and still desire to obtain the securities should
contact the Federal Reserve Bank or Branch for instructions
for filing amended subscriptions, or they may calL the Office
of the Chief Counsel, Bureau of the Public Debt, on 202/376-4320.
B-404
TREASURY NEWS
December 12,
19«s
epartment
FOR IMMEDIATE
of the
RELEASE
Treasury • Washington, D.c. • Telephone
566-2041
RESULTS OF TREASURY'S WEEKLY BILL AUCTIONS
Tenders for $7,606 million of 13-w.-ek bills and for $7,609 million
of 26-week bills, both to be issued on December 12, 1985, were accepted today,
RANGE OF ACCEPTED
COMPETITIVE BIDS:
Low
High
Average
13-week bills
maturing March 13, 1986
Discount Investment
Rate
Rate 1/
Price
7.04%
7.06%
7.05%
7.27%
7.29%
7.28%
26-week bills
maturing June 12, 1986
Discount Investment
Rate
Rate 1/
Price
98.220
98.215
98.218
7.01%
7,03%
7.02%
7.37%
7.39%
7.38%
96.456
96.446
96.451
Tenders at the high discount rate for the 13-week bills were allotted 52%,
Tenders at the high discount rate for the 26-week bills were allotted 66%,
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
Type
Competitive
Noncompetitive
Subtotal, Public
Federal Reserve
Foreign Official
Institutions
TOTALS
$
41,265
19,823,605
30,725
39,350
41,785
41,805
47,540
25,620
13,215
43,475
25,195
88,290
308,975
41,265
6,858,525
30,725
39,350
41,785
41,805
47,540
25,620
13,215
43,475
25,195
88,290
308,975
32,675
18,282,645
16,155
30,530
26,775
27,740
47,540
19,000
16,050
40,305
14,320
46,710
:
282,115
:
$
$20,570,845
$7,605,765
: $18,882,560
$7,608,570
$17,090,000
1,002,815
$18,092,815
$4,124,920
1,002,815
$5,127,735
: $16,080,000
:
731,160
: $16,811,160
$4,806,010
731,160
$5,537,170
1,974,330
1,974,330
:
1,800,000
1,800,000
503,700
503,700
:
271,400
271,400
$20,570,845
$7,605,765
: $18,882,560
$7,608,570
1/ Equivalent coupon-issue yield.
B-405
$
Accepted
$
32,675
7,008,655
16,155
30,530
26,775
27,740
47,540
19,000
16,050
40,305
14,320
46,710
282,115
TREASURY NEWS
Department of the Treasury • Washington, D.c. • Telephone 566-2041
FOR RELEASE AT 12:00 NOON
December 13, 1985
TREASURY'S 52-WEEK BILL OFFERING
The Department of the Treasury, by this public notice,
invites tenders for approximately $9,000 million of 365-day Treasury
bills to be dated December 26, 1985, and to mature December 26, 1986
(CUSIP No. 912794 KU 7 ) . This issue will provide about $425 million
of new cash for the Treasury, as the maturing 52-week bill is outstanding in the amount of $8,587 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, Thursday, December 19, 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 December 26, 1985. In addition to the
maturing 52-week bills, there are $11,574 million of maturing
13-week and 26-week bills and $5,010 million of maturing 78-day
cash management bills. The disposition of these two latter amounts
will be announced next week. Federal Reserve Banks currently hold
$2,39 7 million as agents for foreign and international monetary
authorities, and $4,487 million for their own account. These
amounts represent the combined holdings of such accounts for the
four 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. 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 $185 million of the original
52-week issue. Tenders for bills to be maintained on the bookentry
B-406 records of the Department of the Treasury should be submitted
on Form PD 4632-1.
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
FOR IMMEDIATE
RELEASE
16, 1985566-2041
Department
of the
Treasury • Washington, ox. •December
Telephone
RESULTS OF TREASURY'S WEEKLY BILL AUCTIONS
Tenders for S7,602 million of 13-week bills and for $7,601 million
of 26-week bills, both to be issued on December 19, 1985, were accepted today,
RANGE OF ACCEPTED
COMPETITIVE BIDS:
Low
High
Average
13-week bills
maturing March 20, 1986
Discount Investment
Rate '
Rate 1/
Price
6.95%
7.04%
7.00%
7.17%
7.27%
7.22%
98.243
98.220
98.231
26-week bills
maturing June 19. 1986
Discount Investment
Rate
Rate 1/
Price
6.98%
7.03%
7.01%
7.34% 96.471
7.39%
96.446
7.37%
96.456
Tenders at the high discount rate for the 13-week bills were allotted 18%,
Tenders at the high discount rate for the 26-week bills were allotted 6%.
TENDERS RECEIVED AND ACCEPTED
(In Thousands)
Received
Accepted
:
Received
Location
Accepted
Boston
New York
Philadelphia
Cleveland
Richmond
Atlanta
Chicago
St. Louis
Minneapolis
Kansas City
Dallas
San Francisco
Treasury
$
38,560
16,055,640
28,725
44,990
43,695
33,235
1,607,095
70,630
62,125
49,940
34,195
1,181,500
300,045
; 38,560
6,118,640
28,725
44,990
43,695
33,235
386,595
50,630
62,125
49,940
34,195
411,000
300,045
$
22,840
i5,225,640
15,520
23,790
36,555
71,540
1,716,205
79,410
39,180
83,835
25,995
1,054,745
254,935
1 22,840
6,283,700
15 ,520
23 ,790
36 .555
71 ,540
451 ,765
39 ,710
39 ,180
83 ,835
25 ,995
251 ,805
254 ,935
TOTALS
$19,550,375
$7,602,375
$18,650,190
$7,601,170
Type
Competitive
Noncompetitive
Subtotal, Public
$16,136,020
1,045,220
$17,181,240
$4,188 ,020
1,045 220
$5,233 ,240
$15,652,965
747,105
$16,400,070
$4,603,945
747,105
$5,351,050
1,937 255
1,950,000
1,950,"00
300,120
300,l?i'
$18,650,190
$7,601,170
Federal Reserve
Foreign Official
Institutions
1,937,255
TOTALS
$19,550,375
431,880
431 880
$7,602,375
An additional $4,620 thousand of 13-week bills and an additional $4,580
thousand of 26-week bills will be issued to foreign official institutions for
new cash.
1/ Equivalent coupon-issue yield.
B-407
TREASURY NEWS
Department of the Treasury • Washington, D.c. • Telephone 566-2041
FOR RELEASE AT 4:00 P.M.
December 17, 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
$15,200 million, to be issued December 26, 1985. This offering
will result in a paydown for the Treasury of about $1,375 million, as
the maturing bills total $16,584 million (including the 78-day
cash management bills issued October 9, 1985, in the amount of
$5,010 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,
December 23, 19 85. The two series offered are as follows:
91-day bills (to maturity date) for approximately $7,600
million, representing an additional amount of bills dated
September 26, 1985, and to mature March 27, 1986
(CUSIP No.
912794 JY 1 ) , currently outstanding in the amount of $7,539 million,
the additional and original bills to be freely interchangeable.
132-day bills for approximately $7,600 million, to be dated
December 26, 1985, and to mature June 26, 1986
(CUSI? No.
912794 KM 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 December 26, 1985.
In addition to the maturing
13-week and 26-week bills, there are $8,587
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 $2,145 million of the original 13-week and 26-week
issues. Federal Reserve Banks currently hold $2,330 million as
agents for foreign and international monetary authorities, and $4,523
million for their own account. These amounts represent the combined
holdings of such accounts for the four issues of maturing bills.
Tenders for bills to be maintained on the book-entry records of the
Department
of series)
the Treasury
should
be submitted
on Form
PD 4632-2
B-^0826-week
(for
or Form
PD 4632-3
(for 13-week
series).
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
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
December 26, 1985, in cash or other immediately-available funds or
in Treasury bills maturing December 26, 1985; provided, however,
that settlement for tenders submitted to the Federal Reserve Bank
Branch in Charlotte must be completed at that Branch on December 27,
1985, and must include one day's accrued interest if settlement is
made with other than Treasury bills maturing December 26, 1985. Cash
adjustments will be made for differences between the par value of the
maturing bills accepted in exchange and the issue price of the new
bills. In addition, Treasury Tax and Loan Note Option Depositaries
may make payment for allotments of bills for their own accounts and
for account of customers by credit to their Treasury Tax and Loan
Note Accounts on the settlement date.
In general, if a bill is purchased at issue after July 18,
1984, and held to maturity, the amount of discount is reportable
as ordinary income in the Federal income tax return of the owner
at the time of redemption. Accrual-basis taxpayers, banks, and
other persons designated in section 1281 of the Internal Revenue
Code mast 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 t.-iis
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 Ban* or
12/17/85
Branch, or from the Bureau of the Public Debt.
rREASURY NEWS
apartment of the Treasury • Washington, D.C. • Telephone 566-2041
FOR IMMEDIATE RELEASE
December 17, 19 85
RESULTS OF AUCTION OF 2-YEAR NOTES
The Department of the Treasury has accepted $9,506 million
of $20,904 million of tenders received from the public for the
2-year notes, Series AD-1987, auctioned today. The notes will be
issued December 31, 1985, and mature December 31, 1987.
The interest rate on the notes will be 7-7/8%. The range of
accepted competitive bids, and the corresponding prices at the 7-7/8
interest rate are as follows:
Yield
7.90% 1/
7.96%
7.93%
Tenders at the high yield were allotted 82%.
Low
High
Average
Price
99.955
99.846
99.900
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
$
102,830
17,800,915
21,850
143,620
86,300
62,770
1,318,650
126,130
49,830
106,120
12,870
1,069,010
3,065
$20,903,960
Accepted
$
71,930
8,174,135
21,850
131,820
82,935
48,175
325,850
106,950
49,830
104,030
10,510
375,410
3,065
$9,506,490
The $9,506 million of accepted tenders includes $732
million of noncompetitive tenders and $8,774 million of competitive tenders from the public.
In addition to the $9,506 million of tenders accepted in
the auction process, $330 million of tenders was awarded at the
average price to Federal Reserve Banks as agents for foreign and
international monetary authorities. An additional $600 million
of tenders was also accepted at the average price from Government
accounts and Federal Reserve Banks for their own account in
exchange for maturing securities.
1/ Excepting 1 tender of $185,000.
B-400
TREASURY NEWS
Department of the Treasury • Washington, D.c. • Telephone 566-2041
For Immediate Release
December 1 8 , 1985
Contact
Charles Powers
566-2041
TREASURY DEPARTMENT PROPOSES
LEGISLATION RESTRICTING UNITARY TAXATION
OF CORPORATIONS
The Treasury Department today proposed legislation to
restrict the States' use of the worldwide unitary taxation method
for c o r p o r a t i o n s .
The legislation would also require
corporations to file a domestic disclosure "spreadsheet" with the
Internal Revenue Service to assist states in administering their
corporate income tax l a w s .
On November 8, 1985, the. President , in a statement, said that
it was appropriate for the Federal Government to state its
support for the concept of legislation limiting State taxation of
m u l t i n a t i o n a l s to income derived from the territory of the United
States (the water's edge requirement) and addressing the question
of equitable taxation of foreign source d i v i d e n d s .
Secretary of the Treasury James A. Baker, III, said "The
continued imposition of State corporate income tax on a worldwide
unitary basis has a serious adverse impact on the conduct of the
foreign economic policy of the United States. Limiting the
States' use of the unitary method will provide a more consistent
national policy with respect to the t a x a t i o n , both State and
F e d e r a l , of multinational enterprises."
The 1 egi s l a t ion will p r o h i b i t s t a t e s from r e q u i r i n g t h e
i ncl usio n i n u n i t a r y c o m b i n a t i o n s o f t h o s e c o r p o r a t i o n s w h i c h
have les s th an $ 1 0 m i l l i o n in b u s i n e s s a c t i v i t y or c o n d u c t l e s s
This
than 20 perc e n t o f t h e i r b u s i n e s s w i t h i n t h e U n i t e d S t a t e s .
wa te r's edge u n i t a r y c o m b i n a t i o n l i m i t a t i o n w o u l d e x c l u d e m o s t
fore i gn corp o r a t i o n s and d o m e s t i c " 8 0 / 2 0 " c o r p o r a t i o n s from S t a t e
taxa t i on unl e s s t h e y h a v e s i g n i f i c a n t e c o n o m i c t i e s to
corp ora t ions w i t h i n t h e w a t e r ' s e d g e and a r e n o t s u b j e c t to
Notwithstanding
subs tant ial f o r e i g n t a x on t h e i r n e t i n c o m e .
th is pro h i b it i o n a g a i n s t t h e m a n d a t o r y u s e o f w o r l d w i d e
comb i na t i on , t h e S t a t e s , if t h e y so d e s i r e , m a y o f f e r t h e
taxp ayer an u n c o n d i t i o n a l e l e c t i o n to be t a x e d on a w o r l d w i d e
comb i nat i on b a s i s .
B-410
- 2 -
Th e 1 eg i s 1 a t i on wil 1 f u r t h e r r e q u i re t h a t t h e St a t e s s h a l l
n o t ta x m o r e t h a n an eq u i t a b 1e p o r t i o n o f t h e d i v i d e n d s r e c e i v e d
from t hose c o r p o r a t i o n s excl u ded from the "wat e r ' s e d g e " u n i t a r y
The 1 e g i s1 a t i o n p r o v i d e s t h e S t a t e s w i th
combi n a t i o n .
fl e x i b i l i t y to ado pt a s y s t e m o f f o r e i g n d i v i de n d ta x a t i o n t h a t
m e e t s t h e st a n d a r d o f e q u i t a ble t r e a t m e n t . T w o p e r m i s s i b 1 e
m e t h o d s o f t r e a t i ng s u e h f o r e i g n s o u r ce d i v i d e n d s a r e e x p l ici tl y
s a n c t io n e d : e x c l u d ing a t 1 e a s t 8 5 p e r c e n t o f t he d i v i d e n d f r o m
t h e in c o m e b a s e , a nd ex c 1 u d i ng d i v i d e nds to th e e x t e nt t h a t t h e y
a r e no t s u b j e c t to f e d e r a 1 in c o m e t a x by r e a s o n o f a f o r e i g n tax
credit .
O t h er m e t h o d s o f Sta t e t a x a t ion w h i c h m a y s a t i s f y t h e
e q u i t ab l e tr e a t m e n t o f f o r e i g n d i v i d e nds s t a n d a r d es t a b l i s h e d by
The
t h e Pr e s i d e nt a r e to be t h e s u b j e c t o f r e g u l a t i o n .
S
t
a
t
e
s
under
o
f
t
h
e
he
r
i
g
h
t
s
1 e g i s 1a t i o n d o e s n ot ex p a n d t
i
v
i
d
e
n
d
s
c u r r e n t 1 a w to i m p o s e t ax on f o r e i g n d
In rec o g n i t ion th at Sta t e s c u r r entl y ma y n o t hav e su f f i c i ent
r e s o u r c e s to a u d it tr a n s a c t i o n s b e t w e e n rel a t e d c o r p o r a t i o n s , the
Fede ral go v e r n m e nt wi 11 und e r t a ke c e r t a i n m e a s u r es t o as si st the
Stat es in a d m i n is t e r ing t h e i r c o r p o r a t e i nc o m e t ax 1 a w s . Th e
p r o p o s e d 1 e g i s 1 at i on w o u l d impl e m e n t se v e r a 1 of t h e s e m e a s u r es .
The p r i n c ipal pr o v i s ion w o u Id r e q u i re t h o s e dome s t i c c o r p o r a t i ons
w i t h s i g n if i c a n t f o r e i gn o p e r a t i o n s to f i l e a Fe d e r a 1 in f o r m a t i o n
r e t u rn d e t a i l i n g t h e i r t a x 1 i a b il it y i n eac h of t h e S t a t es . This
d o m e s t i c d i s c l o s u r e " s p r e a d s h e e t" w oul d the n be s h a r e'd w i th the
a p p r o p r i a te S t a t e t a x ing a u t h o r i t i es . Addi t i o n a1 ch a n g e s wi 1 1 be
m a d e by th e 1 e g i s 1 a t ion in t h e i nf o rma t i on d i s c i o s u r e se ct i ons of
t h e I n t e r n al Rev e n u e C o d e i n o r d e r t h a t i n f o r m a t i on o b t a i ned from
c o n s e n t i n g f o r e i gn co u n t r i es un d e r e x c h a n g e o f i nf or m a t i on
woul d
a g r e e m e n t s m a y b e p a s s e d on to t h e S t a t es . T h e 1 eg i si at ion r t a i n
al so e x t e n d t a x p a y e r i n f o r m ati o n di sc 1 os u r e a g r e e m e n ts t o ce ne or
a g e n c i e s co n d u c t ing c o r p o r a te t a x p a yer a u d i ts on b e h a l f of o
more State s .
TREASURY NEWS
epartment of the Treasury • Washington, D.C. •Telephone 566-2041
FOR IMMEDIATE RELEASE
December 18] 1985
RESULTS OF AUCTION OF 4-YEAR NOTES
The Department of the Treasury hag accepted $7,004 million
of $ 14,044 million of tendera received from the public for the
4-year notes, Series P-1989, auctioned today. The notes will be
issued December 31# 1985* and mature December 31, 1989.
The interest rate on the notes will be 8-3/8%. The range of
accepted competitive bidi, and the corresponding prices at the 8-3/8%
interest rate are as follows i
Yield Price
Low
6.38%
99.983
High
8.48%
99.650
Average
8.43%
99.816
Tenders at the high yield were allotted 91%*
TENDERS RECEIVED AND ACCEPTED (In Thousands)
Location Received Accepted
Boston
$
50,364
$
35,364
New York
11,856,619
6,043,369
Philadelphiak
12,450
12,450
Cleveland
50,569
50,569
Richmond
27,708
26,528
Atlanta
71,325
71,325
Chicago
948,952
319,452
St. Louis
60,652
50,472
Minneapolis
23,221
23,221
Kansas City
67,357
67,357
Dallas
12,350
12,350
8an Francisco
861,563
290,563
Treasury
1*318
*'?**
Totals
$14,044,448
$7,004,338
The $7,004 million of accepted tenders includes $495
million of noncompetitive tenders and $6,509 million of competitive tenders from the public.
Zn addition to the $7,004 million of tenders accepted in
the auction process, $280 million of tenders was awarded at the
average price to Federal Reserve Banks as agents for foreign and
international monetary authorities. An additional $171 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.
TREASURY NEWS
2041
Department of the Treasury • Washington, D.c. • Telephone
FOR IMMEDIATE RELEASE
December 19, 1985
RESULTS OF TREASURY'S 52-WEEK BILL AUCTION
Tenders for $9,011 million of 52-week bills to be issued
December 26, 1985, and to mature December 26, 1986, were accepted
today. The details are as follows:
RANGE OF ACCEPTED COMPETITIVE BIDS:
Low
High
Average -
Discount
Rate
7.03%
7.10%
7.06%
Investment Rate
(Equivalent Coupon-Issue Yield) Price
7.53%
92.872
7.61%
92.801
7.57%
92.842
Tenders at the high discount rate were allotted 6%.
Location
Boston
New York
Philadelphia
Cleveland
Richmond
Atlanta
Chicago
St. Louis
Minneapolis
Kansas City
Dallas
San Francisco
Treasury
TOTALS
TENDERS RECEIVED AND ACCEPTED
(In Thousands)
Accepted
Received
Type
Competitive
Noncompetitive
Subtotal, Public
Federal Reserve
Foreign Official
Institutions
TOTALS
$
5,745
15,769,835
4,675
17,215
24,010
1,428,990
8,410
8,935
9,070
21,400
4,840
2,070,350
51,055
$19,424,530
$17,401,225
<238,305
$17,639,530
1,600,000
$
5,745
7,294,635
4,675
17,215
24,010
8,410
688,790
8,935
9,070
21,400
4,840
871,850
51,055
$9,010,630
$6,987,325
238,305
$7,225,630
1,600,000
185,000
$19,424,530
185,000
$9,010,630
An additional$255,000 thousand of the bills will be issued
to foreign official institutions for new cash.
3-412
rREASURY NEWS
partment of the Treasury • Washington, D.c. •Telephone 566-2041
For Immediate Release
Friday, December 20, 1985
Contact: Charley Powers
566-2041
TREASURY DEPARTMENT ASSESSES PENALTY AGAINST
SUN BANKS, INC.
The Department of the Treasury announced today that Sun
Banks, Inc., of Orlando, Florida, has agreed to a settlement of
the civil liability of three bank subsidiaries for failure to
report currency transactions between 1980 and 1985 as required by
the Bank Secrecy Act. The three banks are Sun Bank, N.A.,
Orlando, Florida, Sun Bank of Miami, N.A. (recently merged with
Flagship National Bank), and Sun Bank of Tampa Bay.
The settlement requires Suri Banks, Inc., to pay a civil
penalty of $156,200 based on 710 violations by the three banks.
The maximum penalty that could have been imposed was $1,000 per
violation.
i -.
The settlement.was ^announced by David D. Queen, Acting
Assistant Secretary for Enforcement and Operations. Queen said
that the penalty represented ^a complete settlement of Sun Banks,
Inc.'s civil liability for the violations disclosed to Treasury.
Queen added *that Sun Banks, Inc., brought these violations to
Treasury's attention voluntarily and cooperated with Treasury in
developing the scope of its liability. This cooperation and Sun
Banks' history of assistance to Federal law enforcement
authorities were considered in assessing the amount of the
penalty.
The Department of the Treasury /has no evidence that the
banks knowingly engaged in money laundering in connection with
these reporting violations. Sun Banks, Inc., has instituted
measures to ensure future compliance with the Bank Secrecy Act
throughout its system.
B-413
TREASURY NEWS
Department of the Treasury • Washington, D.C. • Telephone 566-2041
For Immediate R e l e a s e
December 23, 1985
Contact:
FRANCIS A. KEATING, II, CONFIRMED AS
A S S I S T A N T S E C R E T A R Y OF T H E T R E A S U R Y
Charles Powers
566-2041
FOR E N F O R C E M E N T
Francis A . K e a t i n g , I I , w a s c o n f i r m e d by t h e U . S .
Senate as A s s i s t a n t S e c r e t a r y o f the T r e a s u r y on
December 1 7 , 1 9 8 5 . He w a s sworn in D e c e m b e r 2 0 , 1 9 8 5 .
As Assistant Secretary of the Treasury for Enforcement,
M r . Keating c o o r d i n a t e s T r e a s u r y - w i d e e n f o r c e m e n t p o l i c y and
s u p e r v i s e s the f o l l o w i n g T r e a s u r y b u r e a u s : t h e U . S . C u s t o m s
S e r v i c e ; t h e U . S . Secret S e r v i c e ; the B u r e a u o f A l c o h o l ,
Tobacco and F i r e a r m s and the Federal Law E n f o r c e m e n t
Training C e n t e r .
Prior to his October 29, 1985 nomination, Mr. Keating
was a partner" wi th- the law firm of P r a y , W a l k e r ,
W i l l i a m s o n and M a r l a r , T u l s a , O k l a h o m a .
Jackman,
He served as U.S. Attorney, 1981-1983, for the Northern
District o f O k l a h o m a . M r . Keating w a s also t h e C h a i r m a n o f
the A t t o r n e y G e n e r a l ' s A d v i s o r y C o m m i t t e e for U . S .
Attorneys.
During the 1972-1981 period he served as a member of
the O k l a h o m a House o f R e p r e s e n t a t i v e s , f o l l o w e d by s e r v i c e
as a m e m b e r of t h e O k l a h o m a State S e n a t e . He w a s m i n o r i t y
l e a d e r o f the O k l a h o m a S e n a t e . He is also a f o r m e r State
p r o s e c u t o r and FBI a g e n t .
Mr. Keating graduated from Georgetown University,
W a s h i n g t o n , D . C . with a B . A . in 1 9 6 6 . He r e c e i v e d his J . D .
d e g r e e from the U n i v e r s i t y o f O k l a h o m a in 1 9 6 9 . He is
m a r r i e d and has t h r e e c h i l d r e n .
Mr. Keating replaces John M. Walker, Jr., who is now a
U . S . D i s t r i c t Court Judge in New York C i t y .
###
B-414
TREASURY NEWS
2041
epartment of the Treasury • Washington, D.C. • Telephone
FOR IMMEDIATE RELEASE
December 23, 1985
RESULTS OF TREASURY'S WEEKLY BILL AUCTIONS
Tenders for $ 7,602 million of 13-week bills and for $ 7,607 million
of 26-week bills, both to be issued on December 26, 1985, were accepted today,
RANGE OF ACCEPTED
COMPETITIVE BIDS:
Low
High
Average
13-week bills
maturing March 27, 1986
Discount Investment
Rate
Rate 1/
Price
6.98%
7.05%
7.02%
7.20%
7.28%
7.24%
26-week bills
maturing June 26, 1986
Discount Investment
Rate
Price
Rate 1/
98.236
98.218
98.226
7.05%
7.07%
7.05%
7.41%
7.43%
7.41%
96.436
96.426
96.436
Tenders at the high discount rate for the 13-week bills were allotted 26%,
Tenders at the high discount rate for the 26-week bills were allotted 62%,
TENDERS RECEIVED AND ACCEPTED
(In Thousands)
Location
Received
Accepted
:
Boston
New York
Philadelphia
Cleveland
Richmond
Atlanta
Chicago
St. Louis
Minneapolis
Kansas City
Dallas
San Francisco
Treasury
TOTALS
Type
Competitive
Noncompetitive
Subtotal, Public
Federal Reserve
Foreign Official
Institutions
TOTALS
$
38,930
16,679,485
29,935
46,775
39,900
47,005
1,571,145
69,685
14,040
50,955
31,200
515,555
260,800
38,930
6,568,805
29,935
46,775
39,900
45,005
308,545
29,685
14,040
50,955
31,200
137,815
260,800
?
26,055
19,715,035
8,765
20,805
41,420
25,750
1,472,215
93,715
15,635
163,045
15,540
567,545
197,430
$
26,055
6,943,535
8,765
20,805
37,430
25,750
129,715
52,955
15,635
96,635
15,540
36,545
197,430
$19,395,410
$7,602,390
: $22,362,955
$7,606,795
$16,571,510
1,007,250
$17,578,760
$4,778,490
1,007,250
$5,785,740
: $19,227,640
:
648,515
: $19,876,155
$4,471,480
648,515
$5,119,995
1,523,350
1,523,350
:
1,400,000
1,400,000
293,300
293,300
:
1,086,800
1,086,800
$19,395,410
$7,602,390
:
$22,362,955
$7,606,795
1/ Equivalent coupon-issue yield.
n-A l c
$
Accepted
Received
TREASURY NEWS
lepartment of the Treasury • Washington, D.C. • Telephone 566-2041
FOR RELEASE AT 11:00 A.M.
*
December 24, 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
$15,200 million, to be issued January 2, 1986.
This offering
will provide about $1,300 million of new cash for the Treasury, as
the maturing bills are outstanding in the amount of $13,901 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, December 30, 1985.
The two series offered are as follows:
91-day bills (to maturity date) for approximately $7,600
million, representing an additional amount of bills dated
October 3, 1985, . and to mature
April 3, 1986
(CUSIP No.
912794 JZ 8 ) , currently outstanding in 'the amount of $6,860 million,
the additional and original bills to be freely interchangeable.
182-day bills for approximately $7,600 million, to be dated
January 2, 1986,
and to mature
July 3, 1986
(CUSIP No.
912794 KV 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 January 2, 1986.
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 $1,326 million as agents for foreign and international monetary authorities, and $3,239 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-416
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
Monday, December 30, 1985
Contact: Art Siddon
566-5252
TREASURY DEPARTMENT ASSESSES PENALTY AGAINST
NORSTAR BANCORP INC.
The Department of the Treasury announced today that Norstar
Bancorp Inc., of Albany, New York, has agreed to a settlement of
the civil liability of three of its bank subsidiaries for failure
to report currency transactions between 1980 and 1985 as required
by the Bank Secrecy Act. The three banks are Norstar Bank of
Upstate NY, Albany, New York, as successor to Oneida National
Bank, Liberty Norstar, N.A., Buffalo, New York, and Norstar Bank
of Maine, Bangor, Maine.
The settlement requires Norstar Bancorp Inc. to pay. a civil
penalty of $269,904 based on 1227 violations by the three banks.
The maximum penalty that could have been imposed was $1,000 per
violation.
The settlement was announced by David D. Queen, Deputy
Assistant Secretary for Enforcement. Queen said that the penalty
represented a complete settlement of Norstar Bancorp Inc.'s civil
liability for the violations by the three banks disclosed to
Treasury. Queen added that Norstar Bancorp Inc. brought these
violations to Treasury's attention voluntarily and cooperated
with Treasury in developing the scope of its liability.
The Department of the Treasury has no evidence that the banks
knowingly engaged in money laundering in connection with these
reporting violations. Norstar Bancorp has instituted measures to
ensure future compliance with the Bank Secrecy Act throughout its
system.
B-417
TREASURY NEWS
apartment of the Treasury • Washington, D.C. • Telephone 566-2041
FOR IMMEDIATE RELEASE
December 30, 1985
RESULTS OF TREASURY'S WEEKLY BILL AUCTIONS
Tenders for $7,602 million of 13-week bills and for $7,613 million
of 26-week bills, both to be issued on January 2, 1986, vers accepted today.
RANGE OF ACCEPTED 13-week bills : 26-veek bills
COMPETITIVE BIDS: maturing April 3t 1986
i maturing
Discount Investment
: Discount
Rate
Rate 1/
Price t
Rate
July 3, 1986
Investment
Rate 1/
Price
Low 6.98Za/ 7.20X 98.236 I 7,04Zb/ 7.40% 96.441
High
7.05Z
7.282
98.218 s
7.08*
7.44*
96.421
. Average
7.04Z
7.27Z
98.220 :
7.07Z
7.43Z
96.426
BJ Excepting 1 tender of $1,145,000.
b/ Excepting 1 tender of $1,000,000.
\
Tenders at the high discount rate for the 13-week bills were allotted 91Z.
Tenders at the high discount rate for the 26-week bills were allotted 61Z.
TENDERS RECEIVED AND ACCEPTED
(In Thousands)
Received
Accepted
•
Received
Location
Boston
New York
Philadelphia
Cleveland
Richmond
Atlanta
Chicago
St. Louis
Minneapolis
Kansas City
Dallas '
8an Francisco
Treasury
TOTALS
Type
Competitive
Noncompetitive
Subtotal, Public
Federal Reserve
Foreign Official
Institutions
TOTALS
$
$
36,090
6,522,615
58,545
56,560
49,575
5C,630
124,680
54,175
11,390
52,750
27.800
227,400
329,590
: $
30,080
i 18,411,800
*
11,740
»
25,155
55,540
*
92,760
:
1.327,905
t
86,970
i
13,495
2
62,395
•
26,125
•
t
773,505
.
305,430
$
$19,701,900
$7,601,800 ^
1 $21,222,900
$7,613,105
$16,688,490
1,137,600
$17,826,090
$4,588,390
1.137,600
$5,725,990
$4,861,930
820,575
$5,682,505
1,639,210
1,639,210
I $18,471,725
t
820,575
• $19,292,300
»
*
1,600,000
236.600
236,600
$19,701,900
$7,601,800
36,090
16.845,015
58,545
56,560
49,575
50,630
1,247,930
89,625
11,390
52,750
37,800
836,400
329,590
1/ Equivalent coupon-issue yield.>
B-413
Accepted
.
30,080
6,791.055
11,740
25,155
45,540
37,760
177,975
49,240
13,495
62,395
16,125
47,115
305,430
1,600,000
330,600
330,600
• $21,222,900
$7,613,105
•<r CO
oNJ CD
•<fr
C
CD C\i
CD CD
m(0 CD
in
0) CD
federal financing bank
CD
WASHINGTON, D.C. 20220
FOR IMMEDIATE RELEASE
December 30, 1985
FEDERAL FINANCING BANK ACTIVITY
Francis X. Cavanaugh, Secretary, Federal Financing
Bank (FFB)f announced the following activity for the
month of October 1985.
FFB holdings of obligations issued, sold or guaranteed by other Federal agencies totaled $153.6 billion
on October 31, 1985, posting an increase of less than
$0.1 billion from the level on September 30, 1985. A
decline of $0.2 billion in holdings of agency assets
partially offset increases of $0.2 billion in holdings
of agency debt and $0.1 billion in holdings of agencyguaranteed debt. FFB made 289 disbursements durina
October.
Attached to this release are tables presenting FFB
October loan activity and FFB holdings as of October 31,
1985.
# 0#
[•;-'• i<i
FEDERAL FINANCING BANK
OCTOBER 1985 ACTIVITY
DATE
BORROWER
AMOUNT
OF ADVANCE
FINAL
MATURITY
INTFP.FST
RATE
(semiannual)
10/9/85
10/14/85
10/16/85
10/21/85
10/21/85
10/24/85
10/28/85
11/1/85
11/4/85
11/7/85
7.385%
7.335%
7.515%
7.545%
7.545%
7.565%
7.555%
7.585%
7.595%
7.545%
ON-BUDGET AGENCY DEBT
TENNESSEE VALLEY AUTHORITY
Advance
Advance
Advance
Advance
Advance
Advance
Advance
Advance
Advance
Advance
#521
#522
*523
#524
#525
#526
#527
#528
#529
*530
10/2
10/7
10/9
10/14
10/15
10/16
10/21
10/24
10/28
10/31
$ 116,000,000.00
204,000,000.00
231,000,000.00
233,000,000.00
19,000,000.00
192,000,000.00
226,000,000.00
190,000,000.00
244,000,000.00
140,000,000.00
NATIONAL CREDIT UNION ADMINISTRATION
Central Liquidity Facility
+Note #359
+Note #360
+Note #361
+Note #362
-tffote t363
+Note #364
+Note #365
10/9
10/10
10/15
10/21
10/28
10/28
10/29
3,000,000.00
1,500,000.00
40,000,000.00
550,000.00
6,9^5,000.00
5,000,000.00
9,041,000.00
1/7/86
1/8/86
1/13/86
1/17/86
1/27/86
1/27/86
1/27/86
7.515%
7.545%
7.555%
7.565%
7.615%
7.615%
7.585%
10/1
78,250,488.70
12/31/85
7.395%
588,793.24
23,448.00
300,000.00
225,912.00
200,000.00
1,899,060.00
356,900.00
3,539,130.00
2,967,063.20
727,857.96
90,112.18
609,994.00
638,125.00
36,742.69
427,033.60
633,471.02
12,081.40
2,691,678.00
386,310.00
545,008.83
1,163,750.29
8,000,000.00
376,971.60
2,658,805.01
249,161.00
1,899,060.00
1,633,468.00
2,157,258.00
11/15/92
2/5/96
9/5/91
5/15/95
3/20/93
11/15/92
4/30/96
5/31/13
.6/15/12
5/31/13
5/31/13
11/30/13
11/15/92
3/31/94
4/10/96
6/15/12
5/31/96
9/12/96
11/22/95
4/30/11
3/20/93
3/20/96
11/30/13
11/30/13
4/10/96
11/15/92
9/10/94
3/20/93
9.262%
10.425%
7.585%
10.395%
9.345%
9.438%
9.677%
10.865%
10.575%
10.865%
10.975%
10.975%
9.725%
10.415%
10.422%
10.515%
10.105%
9.725%
10.293%
10.745%
9.419%
10.058%
10.765%
10.715%
10.235%
9.r-~
9.815%
9.499%
OFF-BUDGET AGENCY DEBT
UNITED STATES RAILWAY ASSOCIATION
*Note #33
GOVERNMENT - GUARANTEED LOANS
DEPARTMENT OF DEFENSE
Foreign Military Sales
Jordan 11
Tunisia 16
Colombia 7
Liberia 10
Indonesia 10
Jordan 11
Dominican Republic 8
Turkey 17
Greece 15
Turkey 17
Turkey 16
Turkey 17
Jordan 11
Morocco 9
Peru 10
Greece 15
Morocco 13
Philippines 11
Bolivia 2
Greece 14
Indonesia 10
Thailand 12
Turkey 17
Turkey 17
Peru 10
Jordan 11
Portugal 1
Indonesia 10
+rollover
*maturity extension
10/1
10/2
10/2
10/3
10/3
10/3
10/3
10/4
10/4
10/4
10/8
10/8
10/8
10/9
10/9
10/17
10/17
10/17
10/18
10/18
10/18
10/18
10/18
10/21
10/22
10/23
10/23
10/23
INTEPEST
RATE
(other than
semi-annual)
faae 3 of 8
FEDERAL FINANCING BANK
OCTOBER 1985 ACTIVITY
BORROWER
DATE
AMOUNT
OF ADVANCE
10/25
10/25
10/29
10/29
10/29
10/30
10/30
10/31
10/31
$ 771,697.50
1,688,337.50
751,895.00
878,823.13
226,654.09
470,182.00
17,184,545.51
4,567.26
14,420.00
FINAL
MATURITY
INTEREST
RATE
(semiannual
INTEPEST
RATE
(other than
semi-annual)
Foreiqn Military Sales (Cont'd)
Greece 15
Thailand 12
Indonesia 10
Jordan 11
Philippines 10
Thailand 12
Turkey 17
Botswana 2
Jordan 11
6/15/12
3/20/96
3/20/93
11/15/92
7A5/92
3/20/96
11/30/13
1/15/88
11/15/92
10.405%
10.100%
9.722%
9.778%
9.825%
10.135%
10.630%
7.545%
9.475%
1,500,000.00
625,000.00
87,000.00
1,180,700.00
1,533,750.00
500,000.00
32,600.00
189,874.14
166,686.26
166,600.00
1,000,000.00
122,000.00
1,000,000.00
373,500.00
270,000.00
160,000.00
900,000.00
420,000.00
543,000.00
2,500,000.00
10/1/91
10/1/87
2/15/86
5/31/86
8/15/86
1/2/04
5/1/87
8/15/86
8/15/86
5/1/87
11/1/85
2/15/86
2/15/86
2A5/86
5/1/87
8/1/86
2/1/87
8/15/86
9/1/86
10/1/86
9.691%
8.706%
7.575%
7.865%
7.985%
10.595%
8.745%
8.085%
8.055%
8.615%
7.565%
7.675%
7.675%
7.685%
8.685%
8.085%
8.465%
8.095%
8.035%
8.085%
77,215,970.48
10/1/86
8.135%
8.300% ann.
392,688.55
10/1/92
9.846%
9.728% qtr.
1 A 5/86
10/17/85
1/15/86
10/23/85
1A5/86
1A5/86
1A5/86
1 A 5/86
1A5/86
1A5/86
1A5/86
1 A 5/86
1/15/86
1/15/86
1A5/86
1/15/86
1A5/86
1 A 5/86
7.565%
7.545%
7.565%
7.545%
7.565%
7.565%
7.565%
7.565%
7.565%
7.565%
7.565%
7.565%
7.565%
7.565%
7.565%
7.565%
7.565%
7.565%
DEPARTMENT OF HOUSING & URBAN DEVELOPMENT
Community Development
•Saginaw, MI
*Westland, MI
Newport News, VA
Council Bluffs, IA
Santa Ana, CA
Baltimore, MD
Biloxi, MS
Lynn, MA
Lynn, MA
Biloxi, MS
Lorain, OH
Newport News, VA
St. Louis, MO
Newport News, VA
Biloxi, MS
Long Beach, CA
Louisville, KY
Santa Ana, CA
Brownsville, TX
Jersey City, NJ
10/1
10/1
10/4
10/4
10/7
10/7
10/9
10/9
10/17
10/22
10/22
10/22
10/22
10/24
10/25
10/25
10/25
10/25
10/30
10/30
9.926% ann.
8.895% ann.
7.939%
8.118%
10.876%
8.936%
8.220%
8.184%
8.801%
ann.
ann.
ann.
ann.
ann.
ann.
ann.
8.874%
8.200%
8.644%
8.220%
8.165%
8.234%
ann.
ann.
ann.
ann.
ann.
ann.
NATIONAL AERONAUTICS & SPACE ADMINISTRATICI*
+Space Communications Company
10/1
DEPARTMENT OF THE NAVY
Defense Production Act
Gila River Indian Community 10/29
Ship Lease Financing
+Buck
+Buok
+Darnell
+Darnell
+Hauge
+Baugh
+Anderson
+Fisher
+Fisher Container
+Bonnyman
+Bonnyman Container
+Kocak
•Obregon
+Pless
+Pless Container
+Bobo
+Bobo Container
-Williams
•maturity extension
•rollover
10/15
10/15
10/15
10/15
10/15
10/15
10/15
10/15
10/15
10/15
10 A 5
10/15
10/15
10/15
10/15
10/15
10 A 5
10/15
47,642,729.54
20,647,270.46
44,561,684.08
20,746,315.92
127,806,502.52
124,202,449.12
120,680,368.76
117,268,592.12
1,584,418.71
124,086,023.84
1,584,382.08
106,462,912.85
107,879,688.62
105,919,489.26
2,330,000.00
118,839,782.17
2,200,359.00
116,422,407.03
Page 4 of 8
FEDERAL FINANCING BANK
OCTOBER 1985 ACTIVITY
BORROWER
DATE
AMOUNT
OF ADVANCE
FINAL
MATURITY
^TTEREST
RATE
(semiannual)
$ 2,200,359.00
1/15/86
7.565%
11,159,000.00
950,000.00
260,000.00
30,000,000.00
1,369,000.00
355,000.00
3,455,000.00
105,000.00
6,295,000.00
1,600,000.00
548,928.15
6,715,000.00
10,000,000.00
5,775,000.00
1,559,000.00
1,968,000.00
102,000.00
200,000.00
2,600,000.00
466,000.00
6,805,000.00
6,848,000.00
490,000.00
267,957.00
115,000.00
483,000.00
2,595,000.00
3,316,000.00
242,000.00
2,117,000.00
20,000,000.00
8,626,000.00
1,532,000.00
261,000.00
11,563,000.00
15,754,000.00
4,447,000.00
1,250,000.00
19,866,000.00
16,993,000.00
54,000,000.00
13,782,000.00
4,407,000.00
1,790,000.00
2,800,000.00
900,000.00
1,402,000.00
25,000,000.00
632,304.00
40,000,000.00
380,000.00
3,218,000.00
12,645,000.00
2,498,000.00
558,000.00
945,000.00
305,000.00
368,000.00
19,885,000.00
10/1/87
12/31/19
12/31/13
12/31A6
12/31/12
12/31A2
12/31A9
12/31A3
10/6/88
12/31A5
10/8/87
12/31/15
10/9/87
10/9/87
12/31/87
12/31/87
10/15/87
12/31A3
12/31A3
12/31A7
10/13/87
10/31/87
10/15/87
10A5/87
10/15/87
12/31/87
10/13/88
10A3/88
1/2/18
1/2/18
1/2/18
10A5/87
1/2/18
12/31A5
12/31/15
12/31A5
1/2/18
1/2/18
12/31/19
1/2/18
12/31/15
12/31/17
12/31A2
12/31A2
10/21/87
12/31/87
12/31A9
10/23/87
10/26/87
12/3/85
12/31/87
10/29/87
12/31/87
12/31A7
12/3/85
12/31A2
12/31A2
10/30/87
12/3/85
INTEREST
RATE
(other than
semi-annual)
Ship Lease Financing (Cont'd)
••Williams Container 10/15
RURAL ELECTRIFICATION ADMINISTRATION
*S. Mississippi Electric #171
Sho Me Power #164
•Corn Belt Power #94
Cajun Electric #263
*Big Rivers Electric #58
*Big Rivers Electric #91
Tex-La Electric #208
•Corn Belt Power #55
•United Power #67
•East River Electric #117
•Colorado Ute Electric #71
•Western Illinois Power #162
•Sunflower Electric #174
•Wabash valley Power #104
•Wolverine Valley Power #100
•Wolverine Valley Power #101
•Glacier State Telephone #181
United Power #67
United Power #129
New Hampshire Electric #270
•Wabash Valley Power #206
•Wolverine Power #234
•Sho Me Power #164
•Colorado Ute Electric #168
•Central Electric #131
•Wolverine Power #101
•Wolverine Power #182
•Wolverine Power #183
•Brazos Electric #108
•Brazos Electric #230
•Cajun Electric #197
Deseret G&T #211
Vermont Electric #309
•Central Louisiana Tele. #34
•Oglethorpe Power #74
•Oglethorpe Power #150
Central Iowa Power #295
•New Hampshire Electric #192
Oglethorpe Power #246
•Oglethorpe Power #246
•Cajun Electric #180
•Western Illinois Power #225
•Big Rivers Electric #58
•Big Rivers Electric #91
•Sunflower Electric #174
•Colorado Ute Electric #78
Tex-La Electric #208
•Sunflower Electric #174
•Colorado Ute Electric #168
•Basin Electric #137
Wolverine Power #101
•Wabash Valley Power #206
Chugach Electric #257
North Carolina Electric #268
•Basin Electric #87
•Big Rivers Electric #58
•Big Rivers Electric #91
•Upper Missouri G&T #172
Basin Electric #232
•••rollover
•maturity extension
10/1
10/1
10/1
10/2
10/2
10/2
10/4
10/7
10/7
10/8
10/8
10/9
10/9
10/9
10/10
10A0
10/10
10/11
10 A 1
10A1
10/11
10A1
10A5
10 A 5
10/15
10A 5
10/15
10A 5
10/15
10A5
10A5
10A5
10/15
10 A 5
10/15
10 A 5
10/16
10A7
10A7
10/21
10/21
10/21
10/21
10/21
10/21
10/22
10/23
10/23
10/24
10/28
10/28
10/29
10/30
10/30
10/30
10/30
10/30
10/30
10/31
9.005%
10.732%
10.747%
10.661%
10.722%
10.722%
10.742%
10.787%
9.395%
10.844%
9.095%
10.798%
9.085%
9.085%
9.172%
9.172%
9.095%
10.785%
10.785%
10.775%
9.085%
9.085%
9.085%
9.085%
9.085%
9.152%
9.485%
9.485%
10.771%
10.771%
10.771%
9.085%
10.764%
10.776%
10.776%
10.776%
10.724%
10.686%
10.681%
10.599%
10.602%
10.599%
10.599%
10.599%
8.955%
9.016%
10.544%
8.925%
8.965%
7.595%
9.073%
9.035%
9.035%
10.523%
7.575%
10.532%
10.532%
8.945%
7.545%
8.906% qtr.
10.592% qtr.
10.606% qtr.
10.523% qtr.
10.582% qtr.
10.582% qtr.
10.602% qtr.
10.640% qtr.
9.287% qtr.
10.701% qtr.
8.994% qtr.
10.656% qtr.
8.984% qtr.
8.984% qtr.
9.069% qtr.
9.069% qtr.
8.994% qtr.
10.643% qtr.
10.643% qtr.
10.634% qtr.
8.984% qtr.
8.984% qtr.
8.984% qtr.
8.984% qtr.
8.984% qtr.
9.050% qtr.
9.375% qtr.
9.375% qtr.
10.630% qtr.
10.630% qtr.
10.630% qtr.
8.984% qtr.
10.623% qtr.
10.635% qtr.
10.635% qtr.
10.635% qtr.
10.584% qtr.
10.547% qtr.
10.542% qtr.
10.462% qtr.
10.465% qtr.
10.462% qtr.
10.462% qtr.
10.462% qtr.
8.577% qtr.
8.917% qtr.
10.409% qtr.
8.828% qtr.
8.867% qtr.
8.972% qtr.
8.935% qtr.
8.935% qtr.
10.388% qtr.
10.397% qtr.
10.397% qtr.
8.847% qtr.
FEDERAL FINANCING BANK
OCTOBER 1985 ACTIVITY
BORROWER
DATE
AMOUNT
OF ADVANCE
FINAL
MATURITY
INTEREST
RATE
(semiannual)
INTEREST
RATE
(other than
semi-annual)
RURAL ELECTRIFICATION ADMINISTRATION (Cont'd)
Kamo Electric #209
Kamo Electric #266
•Basin Electric #232
•Big Rivers Electric #91
•Corn Belt Power #138
•Central Electric #243
•Tex-La Electric #208
10/31
10/31
10/31
10/31
10/31
10/31
10/31
$ 3,842,000.00
7,952,000.00
1,529,000.00
8,355,000.00
94,000.00
3,235,000.00
650,000.00
12/31/87
12/31/87
12/3/85
12/31/13
10/31/87
10/31/87
1/2/10
8.885%
8.869%
7.545%
10.420%
8.805%
8.805%
10.416%
10/1/00
10/1/00
10/1/00
10/1/00
10/1/00
10/1/00
10/1/00
10/1/00
10/1/00
10/1/00
10/1/00
10/1/00
10/1/00
10/1/00
10/1/00
10/1/00
10/1/00
10/1/00
10/1/00
10/1/00
10/1/00
10/1/00
10/1/00
10/1/05
10/1/05
10/1/05
10/1/05
10/1/05
10/1/05
10/1/05
10/1/05
10/1/05
10/1/05
10/1/05
10/1/05
10/1/05
10/1/05
10/1/05
10/1/05
10/1/05
10/1/05
10/1/05
10/1/05
10/1/05
10/1/05
10/1/05
10/1/05
10/1/05
10/1/05
10/1/05
10/1/05
10.521%
10.521%
10.521%
10.521%
10.521%
10.521%
10.521%
10.521%
10.521%
10.521%
10.521%
10.521%
10.521%
10.521%
10.521%
10.521%
10.521%
10.521%
10.521%
10.521%
10.521%
10.521%
10.521%
10.729%
10.729%
10.729%
10.729%
10.729%
10.729%
10.729%
10.729%
10.729%
10.729%
10.729%
10.729%
10.729%
10.729%
10.729%
10.729%
10.729%
10.729%
10.729%
10.729%
10.729%
10.729%
10.729%
10.729%
10.729%
10.729%
10.729%
10.729%
SMALL BUSINESS ADMINISTRATION
State & Local Development Company Debentures
S. Central Kansas Ec. Dev.
10/9
Area Investment & Dev. Corp.
10/9
Areawide Dev. Corp.
10/9
Region Nine Dev. Corp.
10/9
Iowa Business Growth Go.
10/9
Worcester Business Dev. Corp. 10/9
Mentor Ec. Assistance Corp.
10/9
Central Ozarks Dev., Inc.
10/9
Mid-Atlantic CDC
10/9
Gr. Metro. Chicago Dev. Corp. 10/9
Columbus Countywide Dev. Corp. 10/9
Concord Regional Dev. Corp.
10/9
St. Louis Local Dev. Co.
10/9
Evergreen Community Dev. Assoc.10/9
Wisconsin B.D.F. Corp.
10/9
St. Louis County L.D. Co.
10/9
Ocean State B.D.A., Inc.
10/9
Wisconsin B.D.F. Corp.
10/9
CCD Bus. Dev. Corp.
10/9
Mid City Pioneer Corp.
10/9
Oshkosh Cam. Dev. Corp., Inc. 10/9
San Diego County L.D. Corp.
10/9
Cleveland Area Dev. Fin. Corp. 10/9
Central Ozarks Dev., Inc.
10/9
Green Hills Rural Dev., Inc.
10/9
Crossroads EDC of St Charles
10/9
Verd-Ark-Ca Dev. Corp.
10/9
Capital Region Bus. Corp.
10/9
Largo Progress, Inc.
10/9
Greater Kenosha Dev. Corp.
10/9
Gr. Salt Lake Bus. District
10/9
St. Louis Local Dev. Co.
10/9
City-Wide Sm. Bus. Dev. Corp. 10/9
Tulare County Ec. Dev. Corp.
10/9
Clay County Dev. Corp.
10/9
Panhandle Area Council, Inc.
10/9
Coastal A.D.D. Authority, Inc. 10/9
Panhandle Area Council, Inc.
10/9
Northwest Piedmont Dev. Corp. 10/9
Greater Salt Lake Bus. Dis.
10/9
Butte County Overall E.D., Inc.10/9
Tulare County Ec. Dev. Corp.
10/9
No. Va. LD Co., Inc.
10/9
Granite State Ec. Dev. Corp.
10/9
St. Louis County LD Co.
10/9
Tulare County Ec. Dev. Corp.
10/9
Kansas City Corp. for Ind. Dev.10/9
Ark-Tex Regional Dev. Co., Inc.10/9
Western Wisconsin Dev. Corp.
10/9
Amador Economic Dev. Corp.
10/9
Georgia Mountains R.E.D. Corp. 10/9
•maturity extension
13,000.00
39,000.00
52,000.00
56,000.00
61,000.00
76,000.00
78,000.00
81,000.00
135,000.00
138,000.00
149,000.00
170,000.00
293,000.00
328,000.00
331,000.00
396,000.00
434,000.00
498,000.00
500,000.00
500,000.00
500,000.00
500,000.00
500,000.00
19,000.00
30,000.00
39,000.00
53,000.00
54,000.00
55,000.00
76,000.00
79,000.00
82,000.00
84,000.00
89,000.00
95,000.00
95,000.00
99,000.00
105,000.00
106,000.00
109,000.00
115,000.00
115,000.00
119,000.00
126,000.00
126,000.00
127,000.00
135,000.00
139,000.00
140,000.00
147,000.00
156,000.00
8.788% qtr
8.773% qtr
10.288%
8.710%
8.710%
10.284%
qtr
qtr
qtr
qtr
Page o of- d
FEDERAL FINANCING BANK
OCTOBER 1985 ACTIVITY
BORROWER
DATE
AMOUNT
OF ADVANCE
FINAL
MATURITY
INTEREST
RATE
(semiannual)
State & Local Development Company Debentures (Cont'd)
Wisconsin B.D.F. Corp. 10/9 $ 200,000.00
Ocean State B.D.A., Inc.
10/9
210,000.00
Tucson Local Dev. Corp.
10/9
226,000.00
Central Ozarks Dev., Inc.
10/9
230,000.00
Ohio Statewide Dev. Co.
10/9
231,000.00
Greater Southwest Kansas CDC
10/9
264,000.00
E.D.F. of Sacramento, Inc.
10/9
271,000.00
Gr. Salt Lake Bus. District
10/9
279,000.00
Crossroads EDC of St. Charles 10/9
286,000.00
Bay Colony Development Corp.
10/9
294,000.00
Texas Panhandle Reg. Dev. Corp.10/9
298,000.00
Pioneer Country Dev., Inc.
10/9
300,000.00
East Gen. Michigan Dev. Corp. 10/9
409,000.00
E.D.F. of Sacramento, Inc.
10/9
442,000.00
Minneapolis 503 Ec. Dev. Co.
10/9
458,000.00
Indiana Statewisde CDC
10/9
462,000.00
Eastern Maine Dev. District
10/9
466,000.00
S.C. 111. Reg. P. & D. Camm.
10/9
500,000.00
St. Louis County LD Co.
10/9
500,000.00
Jefferson County LD Corp.
10/9
53,000.00
Central Ozarks Dev., Inc.
10/9
59,000.00
Fayetteville Progress, Inc.
10/9
63,000.00
Louisville Ec. Dev. Corp.
10/9
69,000.00
E.D.C. of Jefferson County
10/9
89,000.00
Warren Redev. & Plan. Corp.
10/9
91,000.00
San Diego County LD Corp.
10/9
96,000.00
La Habra LDCo., Inc.
10/9
120,000.00
Massachusetts CD Corp.
10/9
126,000.00
Evergreen Community Dev. Assoc.10/9
130,000.00
Warren Redev. & Plan. Corp.
10/9
141,000.00
Columbus Countywide Dev. Corp. 10/9
143,000.00
Bay Area Employment Dev. Co.
10/9
143,000.00
Pioneer County Dev., Inc.
10/9
147,000.00
Evergreen Community Dev. Assoc.10/9
161,000.00
Verd-Ark-Ca Dev. Corp.
10/9
161,000.00
Nevada State Dev. Corp.
10/9
174,000.00
Bay Area Employment Dev. Co.
10/9
174,000.00
United Communities CD Corp.
10/9
177,000.00
Granite State Ec. Dev. Corp.
10/9
179,000.00
Columbus Countywide Dev. Corp. 10/9
179,000.00
E.D.F. of Sacramento, Inc.
10/9
182,000.00
No. Va. LDCo., Inc.
10/9
193,000.00
St. Paul 503 Dev. Co.
10/9
198,000.00
San Diego County LD Corp.
10/9
209,000.00
No. Va. LDCo., Inc.
10/9
216,000.00
Gr. Hartford B.D. Center, Inc. 10/9
235,000.00
Bay Area Bus. Dev. Co.
10/9
263,000.00
Evergreen Community Dev. Assoc.10/9
268,000.00
Midland County 503 Corp.
10/9
357,000.00
Old Colorado City Dev. Co.
10/9
358,000.00
Community E.D.C. of Colorado
10/9
373,000.00
Bay Area Bus. Dev. Co.
10/9
422,000.00
Texas Cert. Dev. Co., Inc.
10/9
466,000.00
Ark-Tex Regional Dev. Co., Inc.10/9
500,000.00
Phoenix LD Corp.
io/9
500,000.00
Neuse River Dev. Auth., Inc.
10/9
500,000.00
Small Business Investment Company Debentures
10/1/05
10/1/05
10/1/05
10/1/05
10/1/05
10/1/05
10/1/05
10/1/05
10/1/05
10/1/05
10/1/05
10/1/05
10/1/05
10/1/05
10/1/05
10/1/05
10/1/05
10/1/05
10/1/05
10/1/10
10/1/10
10/1A0
10/1/10
10/1/10
10/1/10
10/1/10
10/1/10
10/1/10
10/1/10
10/1/10
10/1A0
10/1/10
Advent V Capital Co., LP 10A6 6,000,000.00
Edwards Capital Company
10/16
500,000.00
Hamco Capital Corporation
10A6
2,000,000.00
RETT Capital Corporation
10/16
2,000,000.00
Advent Industrial Cap. Co. LP 10/30
1,000,000.00
10/1/88
10/1/95
10/1/95
10/1/95
10/1/90
IO/IAO
10/1/10
IO/IAO
10/1/10
10/1/10
10/1/10
IO/IAO
10/1/10
10/1A0
10/1/10
10/1/10
10/1/10
10/1/10
10/1/10
10/1/10
10/1/10
10/1A0
10/1/10
10/1/10
10/1/10
io/i A o
10/1/10
IO/IAO
IO/IAO
10.729%
10.729%
10.729%
10.729%
10.729%
10.729%
10.729%
10.729%
10.729%
10.729%
10.729%
10.729%
10.729%
10.729%
10.729%
10.729%
10.729%
10.729%
10.729%
10.839%
10.839%
10.839%
10.839%
10.839%
10.839%
10.839%
10.839%
10.839%
10.839%
10.839%
10.839%
10.839%
10.839%
10.839%
10.839%
10.839%
10.839%
10.839%
10.839%
10.839%
10.839%
10.839%
10.839%
10.839%
10.839%
10.839%
10.839%
10.839%
10.839%
10.839%
10.839%
10.839%
10.839%
10.839%
10.839%
10.839%
9.465%
10.465%
10.465%
10.465%
9.865%
INTEREST
RATE
(other than
semi-annual)
Paae 7 of 3
FEDERAL FINANCING BANK
OCTOBER 1985 ACTIVITY
BORROWER
DATE
AMOUNT
OF ADVANCE
FINAL
MATURITY
INTEREST
INTEREST
RATE
RATE
(other than
(semisemi-annual)
annual)
Small Business Investment Company Debentures (Cont'd)
Round Table Capital Corp.
10/30
Advent Atlantic Cap. Co. LP
10/30
Advent Industrial Cap. Co. LP 10/30
Chestnut Capital Int'l. II LP 10/30
Capital Marketing Corporation 10/30
Clarion Capital Corporation
10/30
Clinton Capital Corporation
10/30
Enterprise Fin. Cap. Dev. Corp.10/30
The First Connecticut SBIC
10/30
The Hanover Capital Corp.
10/30
Key Venture Capital Corp.
10/30
Mighty Capital Corporation
10/30
Northland Capital Corporation 10/30
Threshold Ventures, Inc.
10/30
$ 500,000.00
3,500,000.00
1,000,000.00
2,500,000.00
2,500,000.00
2,000,000.00
3,000,000.00
800,000.00
1,500,000.00
525,000.00
1,000,000.00
500,000.00
200,000.00
500,000.00
10/1/90
10/1/92
10/1/92
10/1/92
10/1/95
10/1/95
10/1/95
10/1/95
10/1/95
10/1/95
10/1/95
10/1/95
10/1/95
10/1/95
9.865%
10.285%
10.285%
10.285%
10.405%
10.405%
10.405%
10.405%
10.405%
10.405%
10.405%
10.405%
10.405%
10.405%
475,630,193.83
1/31/86
7.585%
Seven States Energy Corporation
•Note A-85-11 10/31
+rollover
FEDERAL FINANCING BANK
OCTOBER 1985 Commitments
BORROWER
Bellflower, CA
Biloxi, MS
Caguas, PR
Sioux Falls, SD
Rochester, NY
Claremont, CA
Janesville, WI
Roanoke, VA
New Haven, CT
GUARANTOR
HUD
HUD
HUD
HUD
HUD
HUD
HUD
HUD
HUD
AMOUNT
$ 415,000.00
2,100,000.00
452,000.00
1,275,000.00
15,000,000.00
218,400.00
400,000.00
922,300.00
877,500.00
COMMITMENT
EXPIRES
MATURITY
10/1/86
5/1/87
9/1/86
2/15/86
9/1/88
8/1/86
2/1/86
8/1/86
9/1/87
10/1/86
5/1/87
9/1/86
2/15/86
9/1/88
8/1/86
2/1/86
8/1/86
9/1/03
Page 8 of 8
FEDERAI FINANCING BANK H< DINGS
(in millions)
Program
On-Budget Agency Debt
September 30, 1985
Net Change
10/1/85-10/31/85
$ 14,381.0
15,409.0
222.2
$ 93.0
-0-2.9
1,690.0
73.8
1,600.0
73.8
-0-0-
105.9
122.8
6.1
3,724.3
32.4
o4,lo9.G
109.3
122.8
6.1
3,724.3
32.9
-200.0
-3.3
-0-0-0-0.6
18,088.5
5,000.0
280.4
33.5
2,146.2
408.4
35.1
28.2
887.6
1,313.1
5.R
60.0
21,675.5
1,023.9
595.7
1,651.4
153.6
177.0
29.9
-010.3
-0-0-0-0-0-0-41.4
0.4
-0117.0
24.4
20.9
3.7
-0-0-
$ 153,513.3
$ 51.3
October 31, 1985
Tennessee Valley Authority $ 14,474.0
Export-Import Bank
15,409.0
NCUA-Central Liquidity Facility
219.3
Off-Budget Agency Debt
U.S. Postal Service
U.S. Railway Association
Agency Assets
Farmers Home Administration b3,9t>y.O
DHHS-Health Maintenance Org.
DHHS-Medical Facilities
Overseas Private Investment Corp.
Rural Electrification Admin.-CBO
Small Business Administration
Government-Guaranteed Lending
DOD-Foreiqn Military Sales
DEH.-Student Loan Marketing Assn.
DHUD-Community Dev. Block Grant
DHUD-New Canmunities
DHUD-Public Housing Notes
General Services Administration
DOI-Guam Power Authority
DOI-Virgin Islands
NASA-Space Communications Co.
DON-Ship Lease Financing
DON-Defense Production Act
Oregon Veteran's Housing
Rural Electrification Admin.
SBA-Small Business Investment Cos.
SRA-State/Local Development Cos.
TVA-Seven States Energy Corp.
DOT-Section S11
DOT-WMATA
TOTALS* $ 153,564.6
18,118.4
5,000.0
299.6
33.5
2,146.2
408.4
35.1
28.2
887.6
1,271.7
6.2
60.0
21,792.4
1,048.3
616.6
1,655.1
153.6
177.0
* figures may not total due to rounding
treflects adjustment for capitalized interest
TREASURY NEWS
epartment of the Treasury • Washington, D.C. • Telephone 566-2041
FOR IMMEDIATE RELEASE
December 31, 1985
CONTACT:
Art Siddon
566-5252
TREASURY DEPARTMENT ASSESSES PENALTY AGAINST
EQUITABLE BANK, BALTIMORE, MARYLAND, UNDER BANK SECRECY ACT
The Department of the Treasury announced today that
Equitable Bank of Baltimore, Maryland, has agreed to a settlement that requires the bank to pay a civil penalty of $121,750
for failure to report 487 currency transactions between 1980 and
1985 as required by the Bank Secrecy Act.
c
The decision was announced by Francis A. Keating II, newly
appointed Assistant Secretary for Enforcement and Operations.
Keating said that the penalty represented a complete settlement
of Equitable's civil liability on violations disclosed to
Treasury. Keating added that Equitable cooperated with Treasury
in developing the scope of its liability after the compliance
problems were discovered.
The Department of the Treasury has no evidence that
Equitable knowingly engaged in money laundering in connection
with these violations. Equitable Bank has instituted measures
to ensure compliance with reporting requirements in the future.
Keating said, "I am firmly committed to continuing Treasury's
rigorous enforcement of the Bank Secrecy Act in the interest of
full compliance by all financial institutions. Every instance of
non-compliance deprives the Government of potentially useful law
enforcement information."
This year, more than 60 financial institutions have disclosed
reporting violations to Treasury. Since June, penalties ranging
from $157,200 to $2.25 million have been assessed against ten other
banks. The civil liability of the other financial institutions is
under review.
B-420
TREASURY NEWS
epartment of the Treasury • Washington, D.C. • Telephone 566-2041
DEC 31 '85 13148
881
8 PUBLIC DEBT
FOR IMMEDIATE RELEASE
P.82
December 31, 1985
TREASURY TO AUCTION $11,250 MILLION OF
7•YEAR NOTES AND 20-YEAR 1-MONTH BONDS
The Department of the Treasury will auction $6,500 million
of 7-year notes and $4,750 million of 20-year 1-month bonds to
raise new cash. Additional amounts of the securities may be
issued to Federal Reserve Banks as agents for foreign and international monetary authorities at the average price of accepted
competitive tenders.
The 20-year 1-month bond will become eligible for STRIPS
(Separate Trading of Registered Intereat and Principal of
Securities) on August 18, 1986.
Details about the new securities are given in the attached
highlights of the offering and in the official offering circulars.
oOo
Attachment
B-421
ITS OF TREASURY OFFERINGS TO THE PUBLIC
OF 7 -YEAR NOTES AND 20-YEAR 1-MONTH BONDS
$6,500 million
Amount Offered to the Public...
Description of Security;
7-year notes
Terra and type of security-..*•••
Series E-1993
Series and CUSIP designation...
(CUSIP No. 912627 TC 6)
Issue date
January 15, 1986
Maturity date. .
•
January 15, 1993
Call date
No provision
Interest Rate...•••....•.•.•...
To be determined based on
Investment yield • • • • •
the average of accepted bids
Premium or discount
To be determined at auction
Interest payment dates
To be determined after auction
Minimum denomination available.
July 15 and January 15 (first
Terms of Sale;
payment on July 15, 1986)
Method of sale
•
$1,000
Competitive tenders
Yield auction
Noncompetitive tenders ......... Must be expressed as
an annual yield, with two
Accrued interest payable
decimals, e.g., 7.10%
by investor
•
Accepted in full at the averPayment through Treasury Tax
age price up to $1,000,000
and Loan (TT&L) Note Accounts.. None
Payment by non-institutional
Acceptable for TT&L Note
Investors...-.....--...-•--*•••
Option Depositaries
Pull
payment to be
Deposit guarantee by
submitted with tender
designated institutions
Acceptable
Key Dates;
Tuesday, January 7, 1986,
Receipt of tenders
prior to 1:00 p.m., EST
Settlement (final payment
due from institutions)s
Wednesday, January 15, 1986
i) cash or Federal funds.••••..
Mondayr January 13, 1986
&> readily-collectible checlc
December 31, 1985
$4,750 million
20-year 1-month bonds
Bonds of 2006
(CUSIP No. 912810 DU 9)
January 15, 1986
February 15, 2006
No provision
To be determined based on
the average of accepted bids
To be determined at auction
To be determined after auction
August 15 and February 15 (first
payment on August 15, 1986)
$1,000
Yield auction
Must be expressed as
an annual yield, with two
decimals, e.g., 7.10%
Accepted in full at the average price up to $1,000,000
None
Acceptable for TT&L Note
Option Depositaries
Full payment to be
submitted with tender
Acceptable
Wednesday, January 8, 1986,
prior to 1:00 p.m., EST
Wednesday, January 15, 1986
Monday, January 13, 1986
TREASURY NEWS
epartment of the Treasury • Washington, D.C. • Telephone 566-2041
DEC 31 '85 12:34
eel
8 PUBLIC DEBT
FOR IMMEDIATE RELEASE
P.ei
December 31, 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
$14/800 million, to be issued January 9, 1986.
This offering
will provide about $500
million of new cash for the Treasury, as
the maturing bills are outstanding in the amount of $14,293 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, January 6, 1986.
The two series offered are as follows:
«
91-day bills (to maturity date) for approximately $7,400
million, representing an additional amount of bills dated
October 10, 1985,
and to mature April 10, 1986
(CUSIP No.
912794 KA 1), currently outstanding in the amount of $7,035 million,
the additional and original bills to be freely interchangeable.
182-day bills (to maturity date) for approximately $7,400
million, representing an additional amount of bills dated
July 11, 1985,
and to mature
July 10, 1986
(CUSIP No.
912794 KN 3 ), currently outstanding in the amount of $8,514 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 January 9, 198 6.
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 o£ tenders for such accounts exceeds
the aggregate amount of maturing bills held by them. Federal Reserve
Banks currently hold $1,100 million as agents for foreign and international monetary authorities, and $3,314 million for their own
account. Tenders for bills to be maintained on the book-entry
B-422
records
of (for
the Department
of the
submitted
Form
PD 4632-2
26-week series)
orTreasury
Porm PD should
4632-3 be
(for
13-week on
series)
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,
1984, and held to maturity, the amount of discount is reportable
as ordinary income in the Federal income tax return of the owner
at the time of redemption. Accrual-basis taxpayers, banks, and
other persons designated in section 1281 of the Internal Revenue
Code must include in income the portion of the discount for the
period during the taxable year such holder held the bill. If the
bill is sold or otherwise disposed of before maturity, the portion
of the gain equal to the accrued discount will be treated as ordinary income...Any excess may be treated as capital gain.
Department of the Treasury Circulars, Public Debt Series Nos. 26-76 and 27-76, Treasury's single bidder guidelines, and this
notice prescribe the terms of these Treasury bills and govern the
conditions of their issue. Copies of the circulars, guidelines,
and tender forms may be obtained from any Federal Reserve Bank or
Branch, or from the Bureau of the Public Debt.
4/85
TREASURY NEWS
apartment of the Treasury • Washington, D.C. • Telephone 566-204'
REMARKS BY
STEPHEN J. ENTIN
DEPUTY ASSISTANT SECRETARY
FOR ECONOMIC POLICY
U.S. TREASURY DEPARTMENT
Comments on the Critics
Session on — Supply Side Economics: What Remains?
American Economics Association Annual Meeting '
New York City
December 29, 1985
Introduction
Supply side economics is a journalist's term for oldfashioned neo-classical analysis. It includes the study of the
microeconomic impact of taxation on labor and capital markets.
It is grounded in price theory and views the economy as being
driven by relative price changes. None of the papers presented
here today have focused on that area, which is why the varied
descriptions of supply side economics and the mutually inconsistent charges against it presented today remind one so much of
the three blind men and the elephant.
Let me first describe the position of modern neoclassical or
supply side thinking in the recent history of economic thought.
Next, I shall try to give a neoclassical explanation for the
1970s and 1980s as an alternative to the Phillip's curve/budget
deficit/interest rate/payments deficit collage which has been
thrown together again this afternoon.
Framework for Analysis
In the 1960s, Milton Friedman and others questioned the role
of fiscal policy in demand management. They viewed government
spending as the true tax burden, whether financed by taxes or borrowing. A reduction of government spending would be stimulative
because it returns resources to the more productive private sector.
Tax reduction is not a stimulus to demand; it does not
directly increase spending power. In the absence of government
spending reduction, tax reduction is offset dollar-for-dollar by
higher government borrowing. A tax reduction per se is neither
- 2 -
#
inflationary nor stimulative. Only if additional government debt
is purchased by the Federal Reserve, which thereby increases the
money supply, is there any new money injected into the economy.
But that is monetary policy, not fiscal policy. Fiscal policy is
useless for managing demand by itself, and the monetarist views on
the natural rate hypothesis and the evils of fine tuning the
economy with monetary policy are too well known to need repeating. (See, for example, Milton Friedman, "The Role of Monetary
Policy," American Economic Review, March 1968, 58, 1-17.)
Out of this challenge to fiscal policy came the neoclassical
revival and the rational expectations school. Supply-siders share
the rational expectations view that tax rates should be set to
cover long-term outlays, and not be moved to cover short-term
deficits. We believe that something less than 20 percent of GNP is
an appropriate level, have set taxes accordingly, and are working
on the spending side. The real supply side focus, however, is on
the microeconomics of taxation and neoclassical analysis. This
restores a role for the tax side of fiscal policy, that of developing an efficient, broad based, low marginal tax rate revenue system
conducive to economic growth.
The real impact of tax policy is determined by the microeconomic structure of a tax change, not the dollar amount. Tax
rates (as opposed to tax receipts) can affect the relative prices
of various goods, and the relative rewards to various activities.
We seek to raise the after-tax rewards to growth activities such as
labor, savings, and investment relative to leisure and consumption.
Our analysis is straight out of classical price theory. By
lowering the tax wedge, we hope to induce a greater supply of labor
and capital inputs to enter the market, at lower gross costs to the
firm but higher net reward to the suppliers of labor-and capital.
Hence the term supply side economics. A tax on butter and a
subsidy on margarine raise the gross price of butter relative to
margarine to the consumer, and reduce the net price of butter
relative to margarine for the producer. This causes consumers and
producers to shift somewhat, at the margin, away from consumption
and production of butter toward consumption and production of margarine. Behavior changes even if the tax and subsidy exactly
cancel in dollar amounts so that there is no change in the government budget totals.
In precisely the same way, the income tax affects two very
important relative prices: the relative price of goods versus
leisure, and the relative value of current consumption versus
saving for future consumption. An individual may use his limited
time either working for money with which to buy goods, or for
leisure. Rising tax rates on money earnings mean a rising relative
price, in terms of time, of goods compared to leisure. Consumption
of goods, and the work effort put into acquiring them, falls, while
the consumption of leisure increases.
- 3 Similarly, rising tax rates on interest or dividend income, or
on the purchase or future profits of capital goods, reduce the
reward to saving and investment. This raises the cost of shifting
earnings or purchases to the future, increasing the relative price
of future consumption versus current consumption. Saving, investment, and economic growth rates decline
(Cutting marginal tax rates should of course have the opposite
effects, raising work effort, saving and investment. Some critics
have suggested, that the income effect of tax rate reduction might
encourage more leisure, which is a normal good. However, it can be
demonstrated that the income effects of a marginal tax rate reduction wash out across the population, and that only the substitution
effects remain. Higher consumption of leisure must reduce real
output and hence real income thereby negating the income effect and
resolving the paradox.)
It is far more important to analyze what a proposed tax change
does to the reward or rate of return to labor or saving and investment than to look at the dollar amount of the tax change. Our tax
program works by changing incentives and relative prices, not by
injecting purchasing power. In fact, our tax reductions have been
largely offset, in dollar terms, by bracket creep due to inflation
and by previously scheduled payroll tax increases for social insurance programs. Only the incentive effects from the design of the
program remain.
The 1970s
In the mid 1970s, the Fed tried to offset the OPEC shock by
substituting money for oil, which only works if your boiler can
burn money. As the Fed pumped up demand, resulting inflation
reacted with unindexed personal tax brackets and unindexed depreciation allowances to raise marginal tax rates on individuals and
business, adversely shifting aggregate supply, and producing stagflation.
Marginal tax rates on wages, interest, and dividends are part
of the cost of hiring labor or raising capital. Between 1965 and
1981 inflation, bracket creep and payroll tax hikes sharply
increased the pre-tax cost to the firm of giving a worker a one
dollar after-tax wage increase. A typical worker now faces 40 percent to 44 percent tax rates on added income. This is the sum of
social security and Federal marginal income tax rates, plus state
and local taxes at the margin. It is up sharply from the late
1960s, when the marginal rates would have been roughly 26 percent
to 30 percentThe adverse disincentive effects of high marginal tax rates
may appear as refusal to .accept overtime work; as pressure for
shorter hours, longer vacations and sheltered fringe benefits
rather than straight pay increases; as a shift of savings out of
- 4 ordinary investments into less productive tax shelters or into
consumption. Savings incentives and work incentives are both
affected.
Inflation also lowered the return on plant and equipment by
raising its after-tax cost. Corporate profits, after tax and
adjusted to exclude inventory profits and to reflect depreciation
at replacement cost over the economic lives of fixed capital,
declined sharply in the late 1970s. By 1980, real profits were
lower in absolute terms than in 1968. The decline in the rate of
return on investment has been dramatic. (Chart 1)
Money was easy; taxes were rising and deficits were falling;
real interest rates were sharply negative; yet the economy was not
healthy. Rising inflation, falling returns to capital, declining
productivity, falling real wages, and a falling dollar were all
signs of economic malaise.
Implementing the Program
It was our hope to balance a disinflationary monetary policy
with a pro-growth tax cut and spending restraint policy. We wanted
to produce a smooth transition from stagflation to steady noninflationary growth with rising employment. Unfortunately, we were
unable to bring about the necessary coordination of policies.
The recession of 1981-1982 can be traced to high interest
rates and two periods of very tight money in the summer of 1981 and
the first halt of 1982. On no account can it be blamed on a tax
cut not yet enacted or implemented.
The Administration initially called for a very gradual reduction in the rate of growth of money from nearly 8 percent in the
1978 - 1980 period to 7 percent in 1981, 6 percent in 1982 and so
on for four years. Instead, the Federal Reserve, erroneously
assuming that even a non-monetized tax cut would raise inflation,
and egged on by forecasts of high "core inflation" in the major
econometric models, slammed on the brakes. It produced threequarters of the four-year goal for monetary restraint in the first
year, helping to trigger the 1981 recession. In addition, the
erratic behavior of the money supply and money markets kept
interest rates much higher than we would have liked.
We had hoped for a 30 percent tax rate reduction, 10 percent a
year for three years, beginning January 1, 1981. Instead, just as
the 1981 recession was beginning, Congress cut the first stage of
the tax cut to 5 percent and delayed it until October 1, 1981.
This produced only a 1-1/4 percent rate reduction in calendar year
(tax year) 1981. Later installments of the tax cut were delayed
until July 1 of 1982 and 1983.
- 5 This reduction and stretching out of the tax cut reduced its
impact considerably. In fact, bracket creep and payroll tax
increases in 1981 and 1982 resulted in a net tax increase in 1981
over 1980, and a tax cut in 1982 which still left most families
paying more tax in real terms than in 1980. Not until 1983 was
there a net tax cut from 1980 tax levels for most individuals.
The upshot, of course, was that the restrictive portions of
the program came into place early and too forcefully, while the
stimulative aspects of the program were delayed. The result was
recession.
The Economic Recovery
Our critics variously declared that there would not be an
economic recovery because of excessive fiscal stimulus, that it
would be weak, and that it would be unbalanced, favoring consumption over investment. They were wrong on all counts.
GNP rose strongly in the first two years of the recovery,
which was stronger than the post-war average, and which displayed
an earlier than usual increase in capital spending in spite of the
level of interest rates. Fears that high interest rates would
cause the recovery to be unbalanced, with little recovery in
housing, business fixed investment, autos and other consumer
durables, were groundless. Housing, autos and other durables have
been strong. This has been an investment-led recovery with
business fixed investment rising in the first 2 years of the expansion at nearly twice the average rate of the four previous longlived Post-Korean War recoveries. Consumer spending was roughly
average until picking up in the third year of the recovery.
(Chart 2)
How did the critics misjudge the recovery so badly? In part
they underestimated the impact of monetary easing after July
1982. They also completely misunderstood the nature of the real
interest rate situation and underestimated the responsiveness of
labor and capital markets to higher after-tax returns and lower
costs.
Some of the rise in real interest rates since 1979 is a harmful result of unstable monetary policy. This depresses output.
(See below.) However, some of the rise in real interest rates in
the last few years is the result of economic strength, not a cause
of economic weakness.
Indeed, the after tax marginal product of capital (the value
to the investor of an additional machine or building) is the basis
of the real interest rate. As the marginal product rose in the
1980s, many formerly unattractive investment projects became
profitable. Firms willingly bid up the real interest rate to put
the additional plant and equipment into place, sharing these higher
- 6 rewards with savers to attract funds. (Chart 4) Thus, a portion
of the rise in real rates reflects the higher after tax rate of
return on plant and equipment, and a renewed eagerness to invest
which is necessary for real growth.
When interest rates are negative in real terras, as in the late
1970s, it is often a reflection of a negative real return to
capital and a collapse in investment demand. Note the high
positive real interest rates throughout much of U.S. history,
including the positive real rates in the 1950s and the booming
1960s following the Kennedy tax cuts. Compare them to the negative
real interest rates in the high tax, high inflation late 1970s.
(Chart 3)
The level of investment is determined by the real after-tax
rate of return on capital, not by ,the financial market real
interest rate. (Chart 5) Property taxes and federal and state
income taxes have more of an impact on investment than do market
interest rates. It would be futile to raise taxes on capital to
lower interest rates to promote investment. The direct effects of
the tax increase would reduce investment by more than any plausible
indirect effect on financial markets could raise investment.
Indeed, computations of the cost of capital reveal that investment
in equipment is about four times more sensitive to tax rates than
to interest rates. (See the work by Robbins, Aldona E. and Gary
A., and Roberts, Paul Craig, "Supply-Side Economics and the Cost of
Capital," presented at the International Conference on "Adjusting
to Shocks - A North-South Perspective" Milan, Italy, November 21,
1984.) The lower tax rates and lower inflation after 1981 raised
the rate of return on all types of capital investment, and permitted an investment-led recovery in spite of high real interest
rates.
International Developments
The strengthening U.S. economy, falling U.S. inflation and
improved real returns on plant and equipment have all served to
attract capital and strengthen the dollar. The dramatic shift in
the U.S. capital account between 1982 and 1985 has been due overwhelmingly to a drop in the U.S. capital outflow, not to a major
increase in foreign-owned capital inflow. Our own funds have
remained at home. (Table 1) This net capital inflow was followed
of necessity by a current account deficit of equal magnitude. Just
as the domestic expansion was investment led, the surge of imports
has been about one-third investment goods, double the rate of the
previous two expansions.
As the domestic investment boom and the expansion wind down,
and if growth abroad is encouraged by tax rate reductions which
improve foreign investment climates, then the net capital inflow
and the current account deficit will subside.
- 7 Far from reducing U.S. job creation by two million, as some
have claimed, the current account deficit has occurred at a time of
record job creation, over 8 million in the first two years of
recovery. Indeed, the expansion moved so quickly that the Federal
Reserve threatened to choke it off prematurely, being fearful of
rapid growth. The Fed would surely have acted if the economy had
showed signs of creating 10 million jobs.
This whole natural adjustment process has been aggravated by
monetary restraint. One can only wonder what would have happened
had the Federal Reserve kept one eye on the exchange rate. In each
recent period of very slow money growth, the trade weighted dollar
has soared. In each period of ease, the dollar has slowed its
climb or fallen. The dollar has moved inversely with Ml, not
directly with the deficit. (See below.) More domestic credit
creation might well have allowed more U.S. lending abroad, a lower
capital inflow, and less of a rise' in the dollar and the trade
deficit.
The Critics React
The critics of the Administration economic program could not
explain the recovery. Nonetheless, they were quick to seize on the.
one unusual feature of the expansion, the balance of payments, to
unravel the program.
Step one was to label the whole deficit as real and structural, when in fact the high employment deficit adjusted for inflation is not that intractable, and the debt GNP ratio will soon be
falling. Step two was to blame the deficit on tax reduction, when
spending, recession and high interest rates were the true cause.
Step three was to proclaim a link between budget deficits and
interest rates which is certainly not supported by the economic
literature. Treasury's Office of Economic Policy conducted an
exhaustive survey of the literature. We found that the empirical
work in the profession finds at most a weak link between deficits
and either real or nominal interest rates, and even the direction
is unclear. In fact, some observers confirm Friedman's thesis that
it is government spending, not deficits, which is the burden, and
which shows a positive relationship to interest rates. (See, for
example, Plosser, Charles I., Government Financing Decisions and
Asset Returns," Journal of Monetary Economics, May 1982, 9, 325352. )
Step four was to link interest rates to exchange rates and the
current account deficit. The professional literature does not
support such a link. (See Evans, Paul, "Is the Dollar High Because
of Large Budget Deficits," mimeo, University of Houston, June
1985.) Treasury's Office of the Assistant Secretary for International Affairs and Office of Economic Policy both looked at the
relationship, and have found the dollar to be capable of rising or
- 8 falling independently of changes in real or nominal interest rate
differentials across countries.
Once these links were forged, the critics began to campaign to
lower the budget deficit by any means. This was done in the name
of promoting investment. What was the outcome of the deficit
hysteria? First, the possibility of using the deficit to force a
tax increase postponed any serious spending restraint by
Congress. Second, tax increases were enacted on capital. In 1982
Congress passed TEFRA (Tax Equity and Fiscal Responsibility Act).
TEFRA crippled investment in equipment by repealing an incredible
90 percent of the the reduction in the cost of capital enacted in
ACRS, the Accelerated Cost Recovery System which was the business
side of the 1981 tax cut. Congress passed DEFRA (Deficit Reduction
Act) in 1984 and a minor tax amendment in 1985 which hit
structures, repealing about 20 perjcent of the cost of capital
reduction in the 1981 Act. With friends like these, capital formation does not need enemies.
Dealing With the Deficit
Much of the deficit can be traced to the recession, high
interest rates, and Congress's failure to cut spending to match the
slowdown in inflation. The deficit must be redressed by economic
growth and spending reduction.
Federal outlays and receipts are both high by historical
standards. We project long-term receipts averaging 19.4 percent of
GNP between 1988 and 1990. This compares with an historical
average of 18.8 percent from 1964 through 1979. In fact, except
for the peak recession years of 1980 to 1982, peacetime receipts
have seldom been higher. Receipts will be in line with, or even
higher than historical levels. (Chart 6)
Meanwhile, spending, on- and off-budget, is far above its
historical levels. It was 25.1 and 23.8 percent of GNP in 1983 and
1984, respectively. This compares to 20.5 percent from 1964
through 1979. We project on- and off-budget outlays averaging 23.3
percent of GNP between 1985 and 1987 under our proposals, falling
to 20.5 percent between 1988 and 1990, the same as the historical
average. Thus, if major budget changes are to be made, they should
be in spending levels, not taxes.
Obviously, we have not slashed taxes. In fact, most of the
1981 personal tax cut was needed just to offset rising tax rates
caused by bracket creep and by payroll tax increases enacted in
1977. In addition, there were the 1982 tax bill (TEFRA), the
gasoline tax increase, the 1983 social security amendments and the
1984 tax bill (DEFRA). These have just matched the 1981 tax cuts
in dollar amount.
- 9 For the average family, the tax cuts have barely offset ongoing bracket creep and payroll tax hikes. Without the tax cuts,
the total federal tax burden would have risen from less than 16
percent of income in 1978 to over 21 percent of income in 1988.
Instead, the family's long run tax burden will level off at
16.8 percent of income, just above its 1980 level of 16.6 percent
of income. Repeal of indexing would send the tax burden soaring as
under prior law. (Chart 7) Marginal tax rates, including payroll
taxes, were 27.1 percent for this family in 1980, fell only to
24.7 percent in 1984, and will be pushed back up to 25.7 percent in
1990 after the last of the pending payroll tax increases. We have
prevented an increase in the marginal rates to 39.7 percent under
old law, but we have hardly slashed tax rates for most taxpayers.
The budget deficit is reason for concern, but not hysteria.
The deficit is manageable; it can and will be reduced without
destroying the tax incentives needed for growth. There are several
ways of putting the budget deficit into perspective. This is
essential if any sense is to be made of the discussion of deficits
and interest rates.
At a minimum we need to bring the deficit down to about 2 to
2-1/2 percent of GNP, about $110 to $140 billion by the end of the
decade. This is a sustainable level. The debt burden would be
falling relative to GNP, and debt service would be falling relative
to the budget and tax receipts. This reduction in the burden of
debt service cost would then help close the remaining budget gap
over time. Either the Administration FY 86 Budget or the recent
Congressional Budget Resolution would more than achieve this
necessary minimum.
The effects of recession and inflation need to be eliminated
to see the real deficit picture. (On this point, see the articles
by Eisner and Pieper, Barro, and Dewald 1985 cited in the list of
references attached to this paper.) Even before the latest Budget
Resolution's proposed outlay reductions, the real total government
deficit including state and local surpluses was projected at
roughly one percent of GNP near term, and was projected to move
even lower by 1990. (Chart 8 illustrates the process using July
1984 mid-session numbers. More recent estimates would show a
healthy surplus by 1990.)
The high employment budget deficit corrects for the temporary
effect of recession. The recession accounted for over half of the
peak (as a share of GNP) FY-1983 deficit, and is still adding $30
to $40 billion to the FY-1985 deficit.
Inflation exaggerates the deficit by raising interest rates.
Lenders demand an inflation premium to compensate for the decline
in real value of the principal due to inflation. This shows up on
budget as higher interest outlays on government debt, while the
corresponding drop in the real value of the debt is not counted.
-10In 1985 the real value of the debt is rising by about $50 to
$60 billion less than the current deficit implies.
Thus, the 1985 real high employment Federal deficit was about
half the size of the apparent nominal deficit, and was about
40 percent covered by state and local surpluses.
The Federal debt is not high compared to GNP, and will soon
level off as a share of GNP under the budget projections. At the
end of WWII, the Federal debt held by the public and the Federal
Reserve was 119 percent of GNP. It fell to about 25 percent of GNP
in 1974 before rising in the recessions of 1974-75, 1980, and 198182. Under the budget projection, the debt will peak at about 41
percent of GNP, about the same level as in 1964. With the spending
restraint promised in the Budget Resolution, the debt would be
tailing relative to GNP by 1987. (Chart 9)
The Role of Monetary Policy
Although deficits and spending have grabbed much of the
attention lately, one must not forget that inflation and monetary
policy are the primary determinants of interest rates. Inflation
premiums are built into interest rates. For years, interest rates
and inflation have risen and fallen together. However, following
the Federal Reserve's change in operating methods in late 1979,
which was supposed to reduce money supply fluctuations and
financial market uncertainty, interest rates shifted up relative to
inflation. (Chart 10)
This jump in real interest rates began in early 1980, before
the 1980 recession, before the election, before the tax cuts,
before the 1981-82 recession, and before the sharp rise in the
deficits which the recessions produced. Clearly, factors other
than the deficit have been at work in raising interest rates.
In fact, monetary volatility increased after the Fed's 1979
policy change. A number of researchers point to the sharp
increase in volatility of the money supply, bond prices and
interest rates as a cause for the jump in the real interest
rate. This "volatility" or "risk premium" is thought to be
adding two to four percent to nominal and real interest rates.
This is clearly of major concern to the financial markets.
(Chart 11)
As for the real domestic economy, the sharp slowdown in
money growth in the summer of 1981 (1.7 percent annual rate,
April to October) and again in the first half of 1984 (1.3 percent annual rate, January to July) contributed to the 1981-1982
recession. (Chart 12) Another credit squeeze has led to the
recent economic slowdown. The Federal Reserve reduced the ra.te
of growth of money somewhat in the last half of 1983 and the
first half of 1984 to prevent the economy from overheating.
- 11 Impatient for the economy to slow down, the Fed then cut off
nearly all growth in Ml from June to October (0.5 percent annual
rate). As a result, third quarter 1984 GNP grew at only a 2.1
percent annual rate, followed by 0.6 percent in the fourth
quarter, and 3.7 percent and 1.1 percent in the first and second
quarters of 1985. Over the four quarters, real growth averaged
less than 2.0 percent at an annual rate, not fast enough to
reduce unemployment. This excessive tightening was monetary
overkill that could have led to recession, had monetary policy
not eased in the fourth quarter of 1984.
Monetary policy has had a major influence on the dollar
exchange rate and the balance of payments. Monetary instability
has been partially responsible for the wide swings in the dollar
on the foreign exchange markets since the end of the Bretton
Woods system of fixed exchange rates, particularly since 1976.
(Chart 40) From January 1977 to October 1978, the trade-weighted
dollar lost value rapidly (10.9 percent annual rate) as accelerating money growth (8.0 percent annual rate) and a worsening current account balance led to an oversupply of dollars. As inflation accelerated, worldwide demand for the dollar fell, and the
dollar continued weak through 1980.
From October 1980 to July 1982, sharply slower money growth
(4.8 percent annual rate) and lower inflation led to a rapid
climb in the dollar (19.9 percent annual rate), as confidence in
its purchasing power was restored and people worldwide began
trying to rebuild their dollar holdings in the face of- tight
supply. Faster money growth from July 1982 to June 1984 (10.4
percent annual rate) accommodated the worldwide dollar build-up
and slowed the dollar's advance (6.6 percent annual rate). A
renewed slowdown in money growth from June 1984 to December 1984
(4.1 percent annual rate) led to a renewed surge in the dollar
(23.5 percent annual rate).
Faster money growth since December 1984 finally caught up
with the dollar in late February 1985, and the dollar has since
fallen back to the levels of early 1984. This represents a loss
of over 40 percent of the rise in the dollar between 1980 and its
February peak. It is to be hoped that a more stable monetary
policy and a steadier dollar will benefit hard-pressed sectors of
the U.S. economy.
Papers by Feldstein, Chimerine and Young
The papers by Feldstein and Chimerine and Young approach the
1980s with perspectives of the 1960s. A number of flaws appear
in both.
Both make an error they would not allow a supply-sider to
get away with. "Tax cuts alone can't solve the world's
problems. Other factors are important too. Ceteris isn't
- 12 paribus!" they would say. How then, can the effect or lack of
effect of a tax change be so confidently stated when other variables are not held constant? What is required here is a simulation of the economy with and without the tax rate reductions and
their subsequent partial repeal. Alan Sinai has performed such
an experiment and found that the economy would have been weaker,
and saving and investment far weaker, in the absence of the tax
changes. He used a model in which some effort was made to partially incorporate rates of return and relative price effects
into the analysis. (Sinai, et.al., "Taxes, Saving and
Investment: Some Empirical Evidence," National Tax Journal,
September 1983, 36, 321-345.)
Both cite the failure of revenues to rise as the result of
the tax cut as a failure of supply side economics, although (in a
footnote) Feldstein admits the Administration never made the
claim that revenues would rise as a result of the tax cuts.
Indeed, no one would make such a claim for all tax rates or for
the economy as a whole except in very special circumstances. It
may well be that some top tax rates were so high as to be in the
prohibitive range. Indeed, Kennedy's cuts in the top rate from
91 percent to 70 percent, the 1981 cut in the top rate from
70 percent to 50, and recent reductions in the top capital gains
tax rate from about 49 percent to 28 percent in 1978 and then to
20 percent in 1981 all seem to be displaying something of this
characteristic. (Support is provided by the U.S. Treasury Report
on the 1978 capital gains tax reduction and a July 1984 study by
James Gwartney and James Long for the Treasury Department's
Office of Economic Policy.)
The important point in supply side analysis is that taxes
affect behavior through changes in relative prices, and that the
tax base and factor inputs do respond to incentives. Thus, there
is some revenue reflow from a properly designed tax rate reduction, some additional gross private savings, and some need for
spending cuts to cover the difference. The key is that spending
and static revenue estimates need not be reduced in equal
amounts, and that tax rate reduction is a far more productive way
to promote real growth than government spending increases.
Both papers gloss over the impact of the overly tight
monetary policy on the GNP, revenues, and the deficit. Somehow,
Feldstein expects that a modest tax rate reduction should be able
to overcome an overwhelming monetary contraction to prove the
supply side case- Chimerine, on the other hand, asserts that
supply side responses take years to develop. These are inconsistent criticisms, one demanding too much, one expecting too
little.
Both papers rely on completely unsubstantiated links between
budget deficits, interest rates and exchange rates in ways not
supported by the literature. The Chimerine paper carries us back
- 13 to the time of old fashioned fiscal stimulus before the natural
rate hypothesis and the neo-classical and rational expectations
perspectives on the world.
The Feldstein paper has a number of interesting devices,
including the setting up of a group of extreme supply siders to
contrast with more traditional but perhaps less effective
advocates of capital formation. * Dr. Feldstein's claims concerning the exaggerated claims of extreme supply siders are
greatly exaggerated.
Dr. Feldstein admits early in the paper that he is setting
up a straw man by taking statements from a variety of supply
siders, no one of whom may hold all the views he lists. It
should be pointed out that admitting to setting up a straw man
does not excuse one for doing so, nor does it turn the scarecrow
into a creature of flesh and blood. Indeed, the scarecrow goes
beyond caricature, in that many of its features are not traceable
to any supply siders at all. Several of the views attributed to
supply siders are not held by them, but were expressed by other
members of the Administration. And several policies which were
pushed by non-supply siders outside the Administration, and which
were opposed by the Administration, are attributed to the Administration as a whole and supply siders in particular.
The ACRS incentives for investment enacted in ERTA in 1981
have been substantially repealed. Dr. Feldstein should not mock
supply-siders who point out that the tax rate reductions for
capital are not substantial under current law. For evidence, one
need only turn to the 1983 Economic Report of the President,
written by Dr. Feldstein and his CEA staff. On page 93 is a
table (Table 3) which shows that roughly two-thirds of the
incentive for the old 5 year ADR assets was taken back by TEFRA
in 1982. Indeed, the drop in inflation from double-digit levels
to under four percent has improved the value of depreciation
write-offs for equipment by several times as much as the
remaining ACRS provisions.
As mentioned above, this can be generalized to other
assets. Incredibly, roughly 90 percent of the reduction in the
cost of capital for equipment enacted in 1981 in ACRS was
repealed by TEFRA in 1982. About 20 percent of the 1981 reduction in the service price of structures was repealed in TEFRA,
DEFRA and the 1985 reconciliation bill. (Table 2) All the
investment boom is running on are the lower inflation, the
personal rate cuts, and the incentives for structures. That is
not a condemnation of the power of incentives, it is a remarkable
testimonial.
After saying that supply-siders care only for tax policy,
Dr. Feldstein admits and then pooh-poohs supply side concerns
over monetary policy, saying that the Fed, over five years, has
- 14 given us more money growth than we asked for in 1981. One might
as well exonerate the lifeguard who watched a swimmer go under
for the first, second and third time and then threw a dozen life
preservers into the pool (to preserve appearances).
It takes a great deal less than five years for a sudden
deceleration in money growth to trigger an economic downturn.
Six months of 1.7 percent money growth, April to October, 1981,
and seven months of 1.3 percent money growth, January to July,
1982, correspond nicely with the subsequent double dip 1981-1982
recession. This in turn accounted for half of the 1983 budget
deficit, and, cumulatively, has left us with a swollen debt and
an added $30 to $40 billion a year in higher interest outlays.
Feldstein gives much of the credit for the economic recovery
in late 1982 to the Fed, which eas.ed monetary policy in July
1982. He does not credit the personal'rate reductions which by
1983 finally grew to be larger than ongoing bracket creep and
payroll tax increases and which probably deserve some credit,
although on the capital side 1982 saw passage of a major tax
increase. However, after crediting the Fed with all of the good
news, Feldstein does not credit the Fed with the 1981-1982 recession, or at least he excuses them for it as a necessary evil, and
he does not seem to connect the late 1984-early 1985 growth
recession with the 0.5 percent money growth rate between June and
October 1984. These periods of slowdown are credited instead to
the lack of performance of supply-side tax rate reductions which
were significantly scaled back. Anyone extending credit must be
selective, but this is too muchl
Too much has been made by Feldstein and Chimerine of the
failure of the personal saving rate to increase as predicted.
First/ gross private saving, the sum of business and personal
saving, has risen by nearly a. full percent of GNP since 1980, or
by a third the amount of the tax reductions. In 1984, it stood
at 18.4 percent of GNP, the second highest level since 1947. At
worst, supply siders misjudged the components within the total.
Second, there is more to life (as our critics constantly remind
us) than tax rates. Wealth is a well-established independent
variable in the consumption function and, consequently, in the
savings function. In 1983, the stock market gained over
$600 billion, with additional billions added in the bond market,
possibly a reflection of higher real returns to capital and a
stronger economy. Personal consumption rose, and saving fell, by
about one percent of disposable income as a result. In 1985,
another market surge, and a strong year for consumer durables,
notably autos, depressed savings as we measure it, while it
remained strong under broader definitions which include changes
in wealth and a component of spending on durables.
Too much is also made of the failures of the 1981 Administration forecast. It was issued prior to the shift in monetary
- 15 policy which triggered the 1981-1982 recession, and prior to the
disappointing scale-back of the 1981 tax cut. It came during a
quarter of nearly 8 percent real growth following the 1980 recession, and its projection of 4 to 5 percent real growth was in
line with at least two other periods of strong growth in the
postwar period,- 1948-1953 (4.8%) and 1961-1968 (4.6%).
(Table 4) It even allowed for a significant slowdown in 1981,
but not for a credit crunch and two years of recession. And of
course, most other forecasters also missed the downturn.
The chief difficulty with the 1981 forecast when issued was
a too-pessimistic inflation outlook fed by an assumption of a
sharply rising velocity of money. Neither the supply-siders nor
the monetarists at Treasury wished to show such a sharp rise in
velocity or in nominal GNP. This was forced on us by devotees of
the misguided concept of core inflation supported by OMB, which
needed higher nominal GNP to show a balanced budget in 1984.
This rosy nominal outlook was taken to be a threat of continued
inflation. It merely reinforced the Fed's misguided concerns
about the inflationary impact of non-monetized tax cuts, and
encouraged them to over do the monetary tightening.
The most startling forecast error by the Administration was
in the 1983 forecast, directed by the CEA under Dr. Feldstein,
which missed one of the fastest growth years in the postwar
period. That forecast was put together after all the tax and
monetary policy changes affecting 1983 were already in place,
including the tax increase of 1982, which Dr. Feldstein thought
was good for growth, and the monetary easing which began that
summer, which really was good for growth.
Supply side/neo-classical/microeconomic impacts of fiscal
policy on GNP are important issues which deserve serious
research. These are real academic questions, not just political
hype. I hope that the casual empiricism and quasi-political
debate presented here this afternoon does not dissuade anyone
from pursuing more vigorous research into these areas.
Table 1
U.S. Capital Account, 1980 to 1985
($, billions)
First
Half
1984
1985*
(annual rate)
1980
1981
1982
1983
Capital inflow to U.S.
58
83
94
84
97
79
Less Capital outflow from U.S.
86
111
119
55
20
6
-28
-28
-25
29
77
73
Plus Statist leal discrepancy
and other (inflows)
26
22
33
12
25
52
Equala Nat capital inflow to U.S.
-2
-6
8
41
102
124
2
6
-102
-124
Equala Nat identified capital
inflow
Currant account balance
- 8 - 4 1
• preliminary
• laplies inflow, - an outflow
Notei componenta may not add to totals due to rounding.
Sourcei
Conmerca Department, Survey of Current Business, June and September 1985.
Table 2
Cast of Capital Comparisons *
(Individual Arbitrage - "Winfrey* Depreciation Schedules)
,
1986 f
ADR
ADR/
ERTA
Equipaent
Furniture and Fabricated Hetal Products
Machinery and Equipaent
Office and Computing Machinery
Other
Transportation Equipaent
Autos and Trucks
Other
Other Equipaent
4.501
4.891
4.561
2.521
4.761
4.191
3.081
5.061
4.311
4.031
4.421
4.091
1.991
4.291
3.691
2.561
4.581
3.881
3.061
3.671
3.151
1.441
3.321
2.241
1.241
3.021
3.282
3.901
4.381
3.961
2.901
4.061
3.341
2.811
3.751
4.002
2.341
2.971
2.431
0.281
2.641
1.421
0.122
2.431
2.621
28.462
2.582
17.952
1.582
16.372
4.632
2.032
2.602
3.302
Structures
Buildings
Other Structures
Mining
Transportation and Public Utilities
Other
7.941
7.711
B.501 '•
8.871
8.561
7.591
7.421
7.211
7.961
8.301
8.051
6.971
6.021
6.331
5.251
4.751
5.681
4.041
6.291
6.621
5.471
4.751
5.971
4.252
5.911
6.331
4.861
4.751
5.111
3.871
53.922
38.462
15.462
3.482
9.902
2.092
Nonresidential Fixed Investment
6.751
6.251
5.001
5.461
4.681
82.382
Inventories
7.231
6.591
6.591
6.591
6.591
17.622
Total
6.841
6.311
5.2B1
5.661
5.011
100.002
11.432
4.002
4.002
4.002
4.002
3.842
3.932
4.002
10.402
4.002
4.002
4.002
4.002
3.502
3.952
4.002
10.402
4.002
4.002
4.002
4.002
3.502
3.952
4.002
10.402
4.002
4.002
4.002
4.002
3.502
3.952
4.002
10.402
4.002
4.002
4.002
4.002
3.502
3.952
4.002
Yes
No
Yes
No
Yes
No
Yes
No
Yes
No
ASSET A6SRE5ATES
'1981'
Current
LaN
Lai
La«
Heights
Other Variables
Interest Rate
Overall Real Rate of Return
Corporate Real Rate of Return
Noncorporate Real Rate of Return
Nontaxable Real Rate of Return
Corporate Real Discount Rate
Noncorporate Real Discount Rate
Nontaxable Real Discount Rate
Investment Tax Credit
Indexed Depreciation
"ADR/ERTA" is computed assuming full pha se-in of the 23 percent
personal marginal tax rate reductions, s howing the difference
from ADR due to the personal rate reduct ions. Numbers are shown
for corporate and non-corporate capital combined. ERTA is also
assumed for the subsequent three columns
ACRS shortened asset
lives, expanded the ITC, and permitted 1 50 percent declining
balance write-offs in 1981-1984 ("1981" Law), 175 percent
declining balance in 1985, and 200 perce nt declining balance in
1986 and beyond ("1986" Law). "Current Law" includes TEFRA, and
DEFRA and subsequent changes. TEFRA (Ta x Equity and Fiscal
Responsibility Act of 1982) largely affe cted equipment. It
offset part of the ITC with a 5 percent basis adjustment and
froze ACRS at 150 percent declining bala nee. DEFRA (Deficit
Reduction Act of 1984) largely affected structures, lengthening
the write-off period from 15 to 18 years
This was subsequently
raised to 19 years in a 1985 reconciliat ion bill.
Table
3
T A X POLICY A N D I N V E S T M E N T
In 1981 the Congress instituted the accelerated cost recovery
system as part of the Economic Recovery Tax Act. This tax legislation permitted businesses to depreciate most purchases of equipment
according to an accelerated 5-year schedule. It also permitted businesses to depreciate structures over 15 years using a 175 percent declining balance schedule. T h e Economic Recovery Tax Act preserved
the investment tax credit on equipment and called for further accelerations in depreciation schedules in 1985 and 1986.
T h e 1982 Tax Equity and Fiscal Responsibility Act altered the provisions of the Economic Recovery Tax Act by instituting a half-basis
adjustment for investment lax credits in calculating depreciation and
by eliminating the planned further accelerations in depreciation
schedules. Table 4-4 shows the present value of the depreciation deductions and investment tax credits received by a corporation under
the old accelerated depreciation system. Economic Recovery Tax Act
(ERTA) rules and Tax Equity and Fiscal Responsibility Act (TEFRA)
rules. T h e present value is calculated for a variety of hypothetical
combinations of discount and inflation rates.
T A B L E 4 - 4 . — I m m i n e n t inrenlwes ' under different tax laws
J^year property)
InlUtion rate (percent)
! mterest rale
T«IM
6
1 percent .
Pre-ttTA
ERTA
TEfRA
.495
.516
.495
.473
.500
480
454
486
466
436
472
.454
4 percent
Pre-ERTA »...
WTA
TErtA
462
492
.472
.478
.459
.427
465
.446
.412
452
435
7 percent..
Pre-OTA »...
OTA
Ttfltt
435
471
452
.419
.458
440
404
446
428
.390
434
418
10 percent
Pre-ERTA '..
ETTA
TErtA
.412
452
435
.397
440
423
384
429
412
372
418
402
1
Present value ol deprecation deductions and investment tai credits per dollar ot investment
'Assumes depreciation over 9 S years using double-declining balance switching to sum ol years digits
Source: Council ol Economic Advisers
Economic Report of the President
February 19 83 p.93
Table 4
Extended Postwar Periods of Growth
Exceeding 4% and 5%
1948-1953
1950-1953
Real GNP
Percent change,
annual rate
4.8%
6.1%
1961-1968
1962-1966
4.6%
5.4%
Period
Duration
6 yrs.
4 yrs.
8 yrs.
5 yrs.
LONG-TERM SLIDE IN BUSINESS PROFITABILITY*
Percent!
~
~
1952
* Nonfinancial corporations Pretax profits (with nventory valuation ana
capital consumption adjustments) plus net mterest as a share of the
net stock ol reproducible fixed capital at replacement cost.
COMPARISON OF
THIS RECOVERY WITH PREVIOUS RECOVERIES*
Percent Change
Annual Rate
.
Industrial
Production
,
Total
Employment
1
Business Fixed
Investment
Percent
Change,
Annual
Rate
Real Retail
Sales
15
15
10
-10
-5
5-
Past
Present
1
Past
Present
Past
Present
Past
Present
• Recovenes unc* the rmd-1950sexctudug the short-lived 1980 recovery and the recovery commencing <r\ 1958 w h c h lasted for
twenty-four months First thirty-two months for industrial production & real retail sales, first thwty-three months for payroll
employment First ten Quarters for business fixed investment
REAL INTEREST RATES, 1790-1984
Long-Term Interest Rates
Adjusted for Inflation /Deflation*
—20%
1810
1830
1850
1870
1890
1910
1930
* Inflation/deflation level employed based on three-year centered m o v * g average ol annual changes « Consumer Pnce Index
Source. Financial Analysts Journal. January-February. 1981 (updated). _ „
%
Marginal
Product of
Capital
Rate of
Return
HIGHER REAL RETURNS TO CAPITAL,
HIGHER REAL INTEREST RATES FOR SAVERS,
NEEDED FOR GROWTH
(after tax)
"Threshold" Rate of Return
(aftertax)
M P K , (after tax cut)
Capital Stock
1 — Tax cut raises profitability of capital investment.
More capital projects exceed threshold rate of return.
Firms bid up interest rates to attract more savings.
2 — Saving and investment rise; capital stock grows.
3 — Rate of return fails back to normal; expansion ends.
5a
REAL INTEREST RATE AND THE RATE OF INVESTMENT
Deviation from 30 Year Mean
Normalized to Largest Positive VaJue-
(1954—1983)
-0.5-
1950
0.5
1960
1970
1980
REAL AFTER-TAX RETURN TO CAPITAL AND
INVESTMENT'S SHARE
Deviation from 30 Year Mean
Normalized to Largest Positive Value
5b
(1954—1983)
Private Investment
k as a Share of Disposable
f e Private Product
-0.5'-
—1.5
1950
—1.5
1960
1970
1980
OUTLAYS AND RECEIPTS AS
PERCENT OF GNP, 1964-1990
•Percent of GNP
Percent of GNP-
25
Average Outlay*
1994-1979
(20.5)
20
15
1964 1966 1968 1970 1972 1974 1976 1978 1980 1982 1984 1986 1988 1990
Fiscal Years
Projected
Note Outlays nctude oil-budget federal entities.
Mid-Session Review of m e 1966 Budget
Real Tax Burden
Family of Four with a n Income of $25,000
in 1962 with Cost of Living Adjustments
(Average/Marginal Tax Rates)
Tax as
Xof
Income
Income & Employee Payroll Taxes
Real Tax
turden
W 8 2 Potion
21.1/397
5250
extending
I9B0 Low
ferward
5000
4750
• 4500
4250
-»
•
4000
IS.9/27.1
«L
tS.9/24.7
•*
i
i
Current Law
i.
•*
i
i
i,
3750
1978 1879 I960 1981 1982 1983 1984 1986 1986 1987 1988 1989 1990
i
A"»Jfc 22. I9M-A4V
MEASURES OF THE DEFICIT AS SHARES OF GNP
Percent of GNP
Federal Deficit ^
High Employment Budget Deficit u
jr
1981
1982,
Fiscal Year
jr
Real Total Government Deficit 1/
1983
1984
1985
"••—
1986
1987
1988
1969
a Federal otvbudget deficit. Projection* are from Mid- Session Review.
•* High Employment Budget Deficit
Federal deficit adjusted for recession and unemployment
In excess of six percent.
» Real High Employment Budget Deficit
High Employment Budget Federal deficit adjusted for impact of
inflation on value of debt outstanding held by the public and the Federal Reserve.
* Real Total Government Deficit
Real-High Employment Budget Federal deficit less projected
State and local surpluses.
Percent of GNP
FEDERAL DEBT AS PERCENT OF GNP
.Percent of GNP
12CU-
-120
100B - Debt Rite* at Same Rate as G N P
C - Debt Rises at Same Rate as Inflation
D - Administration Budget
100
80
60
H40
-20
1946 1950
Fiscal Year
1955
1960
1965
1970
Note OeOt held by the puofec ncludmg the Federal Reserve
Mid-Session Review ol the 1986 Budget
1975
1980
1985
1990
1995
INTEREST RATES AND INFLATION
10
63
65
67
69
71
73
75
77
79
81
83
85
•Growth from year earlier tn G N P deflator
Plotted quarterly
'«iNiwHti J I'Mb 4,/H
MONTHLY CHANGE IN MONEY SUPPLY
Percent
11
—.5
1978
1979
1980
1981
1982
1983
1984
1985
Mi VERSUS TARGET RANGE*
$B*\
600
Variability of M1 Growth
slnca 1980
580
Oct. 80 to Dec. '80
D e c '80 to Apr. '81
Apr. '81toOct. *81
Oct. '81 to Jan. "82
Jan. "82 to Jul. "82
Jul. '82 to Jun. "83
Jun. 113 to Nov. *83
Nov. "83 to Jun. '84
Jun. '84toOct. "84
Oct. *84 to June "85
560
540
520
500
480
-2.7%
11.8%
1.7%
13.4%
1.3%
13.9%
7.7%
6.9%
0.5%
11.7%
Partodto-periodorowlit. seasonally adjusted com
pound annual isles based on monthly averages
460
440
420
400
380
1080
1981
1982
1983
1984
M l data: weekly avecagea. seasonally adjusted.
Fed target range*: aeaaonaly adjusted simple annuel rales based on quarterly averages.
m 1961 both M l B and M1-8 'shift adjusted" range* *• eho-in: the M l B range Is 6 — 8 % % ; the M l B "ah*! adjustedrange Is 3 K - 6 H Monetary bands are atao shown lor 1866.
1985
te
TRADE-WEIGHTED VALUE OFTHE DOLLAR
March 1973 =
100
• Index
Index
Monetary Growth and the Value of the Dollar
-160
(percent change at an annual rate)
January
October
October
July
June
December
1977 —
1978 —
1980 1982 —
1984 —
1984 —
13a
-150
October 1978
October 1980
Jury 1962
June 1984
December 1984
September 1985
-140
-130
H120
-110
100
1972 73 74 75 76 77 78 79 80 81 82 83 84
85 86
Source Federal lleaarve Board
MONEY GROWTH RATES AND GROWTH RATES FOR THE VALUE
OF THE DOLLAR OVER SELECTED PERIODS, 1977-MID-1985
M 1 Growth Rates
(Percent)
r
•-
r
I
j—Dollar Value Growth Rates
«., I
'
(Percent)
25
20
20
10
15
It 12.9
-10
-10
10
«.o
—-^
y
M1
01
jar. 1977
Source
•e*
4.8
(left scale)
\ i
-20
4.1
-30
Jun Dec
Aug
1964 1964 1985
Federal Reserve Board Dolar value is based on Federal Reserve index or weighted-average exchange value or U S dollar
agamst currencies or other G-10 countries plus Switzerland March 1973 »100
Oct. 197B
Oct 1980
Jul 1962
13b
Additional Comments on the Deficit-Interest Rate Issue
Professor William Dewald, of Ohio State University, Editor
of The Journal of Money, Credit and Banking, writing in the
January 1983 issue of thr? Economic Review of the Federal Reserve
Bank of Atlanta, says:
"These data show no strong historical association between
real interest rates and real deficits ... Other factors offer a
more promising explanation of high real interest rates than budget
deficits, which have been found to account for very little of
recent high real interest rates,"
Professor Charles Webster, of Washington University, in the
May 19,83 issue of the Economic Review of the Federal Reserve Bank
of Kansas City, says:
"Theoretical and empirical evidence does not resolve whether
budget deficits influence interest rates, or how. Empirical
evidence does not necessarily contradict the view that budget
deficits have no effect on interest rates, real or nominal. To
the extent that such an impact occurs, the magnitude appears
small."
Professor Victor Canto and Donald Rapp of USC, in the August
1982 issue of the Economic Review of the Federal Reserve Bank of
Atlanta, say: .
"This evidence calls into question the popularly held view
that higher deficits necessarily have led to higher interest
rates and have "crowded out" private investment. The results
imply that, over the whole 1929-1980 period ... budget deficits
have not been a consistently accurate predictor of interest
rates."
Professor John Makin, of the University of Washington,
writing in the August 1983 issue of Review of Economics and
Statistics attempts to detect an impact upon the real -rate
arising from an exogenous rise in fiscal deficits and concludes
that the possible significance of "crowding out" can only be
judged as "mixed to weak"; and that over the entire sample
period the positive relationship found was only marginally
significant.
Professor Paul Evans, previously of Stanford University now
at the University of Houston, has written that:
"There are three periods [the Civil War, WWI and WWII] during
which the federal deficit has exceeded ten percent of national
income. In none of these periods did interest rates rise
appreciably*"
2
A number of studies point to government spending, not deficits
per se, as the source of crowding out and higher interest rates.
Professor Milton Friedman has expounded that view for years. If
he is correct, we must cut spending, not raise taxes.
That view is expressed also by Professor Charles Plosser, of
the University of Rochester, writing in the May 1982 issue of
the Journal of Monetary Economics:
"The results ... do not support the proposition that ...
increases in government debt drive ... yields up. [But] there is
consistent evidence ... that innovations [i.e., increases] in
government purchases are associated with higher interest rates."
Professor Dudley Johnson, California State University,
Fullerton, summarizes the issue:
"There is neither empirical nor theoretical justification
for the alleged evils of deficits. The mythology of federal
deficits has become so entrenched ... that a simple but fundamental
fact is ignored because the public's attention is distracted:
the true burden of government consists of the resources it uses —
as represented by its expenditures. The expanding size ... of
our federal budget is our central problem."
REFERENCES
Barro, Robert J., "The Deficit is just about Right," Manuscript
(University of Rochester, Rochester, N.Y.), January 1985.
Canto, Victor A. and Rapp, Donald, "The 'Crowding Out'
Controversy: Arguments and Evidence," Economic Review,
Federal Reserve Bank of Atlanta, 33-37.
Dewald, William G., "Federal Deficits and Real Interest Rates:
Theory and Evidence," Economic Review, Federal Reserve Bank
of Atlanta, January 1983, 20-29.
Dewald, William G., "CBO and OMB Projections, Adjusted for
Inflation, Show Federal Budget Deficit under Control,"
Economic Review, Federal Reserve Bank of Richmond,
November/December 1985, 71/6, 15-22.
Eisner, Robert and Pieper, Paul J., "A New View of the Federal
Debt and Budget Deficits," American Economic Review, March
1984, 74, 11-29.
Eisner, Robert and Pieper, Paul J., "How to Make Sense of the
Deficit," Public Interest, Winter 1985, 78, 101-118.
Evans, Paul, "Do Large Deficits Produce High Interest Rates?"
American Economic Review, March 1985, 75, 68-87.
Evans, Paul, "Is the Dollar High Because of Large Budget
Deficits?" Manuscript (Department of Economics, University
of Houston, Houston, Texas), June 1985.
Friedman, Milton, "The Role of Monetary Policy," American
Economic Review, March 1968, 58, 1-17.
Forbes Magazine, "Of course, I'm sure, I read it in...,"
November 19, 1984, pp.39-40.
Gwartney, James and Long, James, "Income Tax Avoidance and an
Empirical Estimation of the Laffer Curve," U.S. Treasury
Research Series, U.S. Treasury Department, Office of the
Assistant Secretary for Economic Policy, July 1984.
Horrigan, Brian, "Sizing Up the Deficit: An Efficient Tax
Perspective," Manuscript (Federal Reserve Bank of Phila.,
Phila, P a . ) , April 1984.
Johnson, Dudley W., "Federal Budget Deficits Do Not Matter,"
Manuscript (Department of Economics, California State
University, Fullerton and on leave from University of
Washington), June 1983.
Makin, John H., "Real Interest, Money Surprises, Anticipated
Inflation and Fiscal Deficits," Review of Economics and
Statistics, Vol LXV, No 3, August 1983, 374-384.
McCaleb, Thomas S., "Federal Budget and Fiscal Policy in the
1980's, " Manuscript (Florida State University, Tallahassee,
Florida), November 1983.
Plosser, Charles I., "Government Financing Decisions and Asset
Returns," Journal of Monetary Economics, May 1982, 9, 325352.
Robbins, Aldona E., Robbins, Gary A., and Roberts, Paul Craig,
"Supply-Side Economics and the Cost of Capital," Presented
at the International Conference on "Adjusting to Shocks - A
North-South Perspective" Milan, Italy, November 21, 1984.
Sinai, Allen, Lin, Andrew and Robins, Russel "Taxes, Saving, and
Investment: Some Empirical Evidence," National Tax Journal,
September 1983, 36, 321-345.
Tatom, John A., "Two Views of the Effects of Government Budget
Deficits in the 1980's," Review, Federal Reserve Bank of St.
Louis, 5-16.
U.S. Department of the Treasury, Office of the Assistant
Secretary for Economic Policy, The Effect of Deficits on
Prices of Financial Assets: Theory and Evidence,
Washington: USGPO, March 1984.
U.S. Department of the Treasury, Office of the Secretary,
Office of Tax Analysis, Report to the Congress on the
Capital Gains Tax Reduction of 1978,, September 1985, 1-199.
Webster, Jr., Charles E., "The Effects of Deficits on Interest
Rates, "Economic Review, Federal Reserve Bank of Kansas
City, May 1983, 19-28.
TREASURY NEWS
-2041
department of the Treasury • Washington, D.C. • Telephone
FOR IMMEDIATE RELEASE January 6, 1986
RESULTS OF TREASURY'S WEEKLY BILL AUCTIONS
Tenders for $7,403 million of 13-week bills and for $7,427 million
of 26-week bills, both to be issued on January 9, 1986,
were accepted today.
RANGE OF ACCEPTED
COMPETITIVE BIDS:
Low
High
Average
13--week bills
maturing April 10, 1986
Discount Investment
Rate 1/
Price
Rate
7.02%
7.06%
7.05%
7.24%
7.29%
7.28%
a/ Excepting 1 tender of $5,000,000.
26--week bills
maturing July 10, 19816
Discount Investment
Rate
Rate 1/
Price
98.226 • 7.09%a/
98.215
7.11%
98.218
7.11%
7.45%
7.48%
7.48%
96.416
96.406
96.406
Tenders at the high discount rate for the 13-week bills were allotted 42%.
Tenders at the high discount rate for the 26-week bills were allotted 66%.
Location
Boston
New York
Philadelphia
Cleveland
Richmond
Atlanta
Chicago
St. Louis
Minneapolis
Kansas City
Dallas
San Francisco
Treasury
TOTALS
Type
Competitive
Noncompetitive
Subtotal, Public
Federal Reserve
Foreign Official
Institutions
TOTALS
TENDERS RECEIVED AND ACCEPTED
(In Thousands)
:
Received
Accepted
Received
$
38,570
6,422,690
17,615
32,180
47,255
58,320
103,425
36,750
18,860
58,865
24,505
179,520
388,680
$7,402,930
: $
42,570
; 18,022,010
17,615
i
j
82,180
61,505
;
:
105,230
:
1,481,215
;
76,750
68,860
l
59,865
j
31,205
;
:
1,279,400
388,680
•
: $21,717,085
$23,524,250
1,299,445
$24,823,695
$4,204,950
1,299,445
$5,504,395
: $18,495,465
976,520
i
' $19,471,985
$4,205,615
976,520
$5,182,135
1,718,535
1,718,535
:
1,650,000
1,650,000
180,000
180,000
:
595,100
595,100
$26,722,230
$7,402,930
: $21,717,085
$7,427,235
$
66,020
22,660,385
41,565
51,535
96,110
65,980
1,559,425
87,725
117,020
68,675
47,535
1,490,815
369,440
$
62,020
6,165,565
41,565
50,820
46,110
53,180
141,620
47,725
38,020
68,675
37,535
280,655
369,440
$26,722,230
1/ Equivalent coupon-issue yield.
B-423
Accepted
$7,427,235
TREASURY NEWS
epartment of the Treasury • Washington, D.C. • Telephone
FOR IMMEDIATE RELEASE January 7, 1986
RESULTS OF AUCTION OF 7-YEAR NOTES
The Department of the Treasury has accepted $6,505 million
of $14,112 million of tenders received from the public for the
7-year notes, Series E-1993, auctioned today* The notes will be
issued January 15/ 1986, and mature January 15, 1993.
The interest rate on the notes will be 8-3/4%. The range of
accepted competitive bids, and the corresponding prices at the 8-3/4%
interest rate are as followst
Yield Price
LOW 8.82% 99.640
High
8.87%
99.384
Average
6.85%
99.486
Tenders at the high yield were allotted 39%.
TENDERS RECEIVED AND ACCEPTED (In Thousands)
Location
Received
6,266
Boston
$
New York
12 ,064,972
5,550
Philadelphia
Cleveland
265,449
32,513
Richmond
33,969
Atlanta
923,440
Chicago
St. Louis
72,146
Minneapolis
11,550
Kansas City
39,621
8,116
Dallas
San Francisco
646,033
Treasury
645
Totals
$i"4',112,270
Accepted
$
8f266
5,590,452
5,550
265,449
24,463
33,969
300,380
54,536
11,550
39,121
8,116
162,153
645
'ti,*6A.t$6
The $6,505 million of accepted tenders includes $434
million of noncompetitive tenders and $6,071 million of competi
tive tenders from the public.
B-424
TREASURY NEWS
epartment of the Treasury • Washington, D.C. • Telephone 566-2041
FOR RELEASE AT 4i00 P.M.
January 7, 1986
TREASURY'S WEEKLY BILL OFFERING
The Department of the Treasury, by this public notice, invites
tenders for two series of Treasury bills totaling approximately
$14,800 million, to be issued January 16, 1986.
This offering
will provide about $475
million of new cash for the Treasury, as
the maturing bills are outstanding in the amount of $14,315 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
It00 p.m., Eastern Standard time, Monday, January 13, 1986.
The two series offered are as follows:
91-day bills (to maturity date) for approximately $7,400
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 $15,400 million,
the additional and original bills to be freely interchangeable*
182-day bills for approximately $7,400 million, to be dated
January 16, 1986,
and to mature July 17, 1986
(CUSIP No.
912794 KW 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 January 16, 1986.
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 $881
million as agents for foreign and international monetary authorities, ana $3,217 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-42r;
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.
4/8 5
TREASURY NEWS
lepartment of the Treasury • Washington, D.C. • Telephone 566-2041
FOR IMMEDIATE RELEASE
January g, 1986
CONTACT:
CHARLES POWERS
(202) 566-2041
U.S.-INCOME TAX TREATIES WITH ITALY AND CYPRUS RATIFIED
The Treasury Department today announced that instruments of
ratification have been exchanged bringing into force new U.S.
income tax treaties with Italy and Cyprus. In addition, the new
income tax treaty with Barbados is expected to be ratified in the
early months of 1986. Two other income tax treaties, with the
People's Republic of China and Denmark, have been reported out
favorably by the Senate Committee on Foreign Relations but have
not yet been considered by the full Senate.
On December 30, 1985, the instruments of ratification were
exchanged of The Convention Between the Government of the United
States of America and the Government of the Republic of Italy for
the Avoidance of Double Taxation with Respect to Taxes on Income
and the Prevention of Fraud or Fiscal Evasion, Together with a
Supplementary Protocol and Exchange of Notes, Signed at Rome on
April 17, 1984 ("the
Italian
treaty").
The Italian treaty
entered into force at that time. Its provisions with respect to
taxes withheld at the source will take effect for amounts paid or
credited on or after February 1, 1986.
Its provisions with
respect to other taxes take effect for taxable periods beginning
on or after January 1, 1985.
On December 31, 1985, the instruments of ratification were
exchanged of The Convention Between the Government of the United
States of America and the Government of the Republic of Cyprus
for the Avoidance of Double Taxation and the Prevention of Fiscal
Evasion with Respect to Taxes in Income, Together with a Related
Exchange of Notes, Signed at Nicosia on March 19, 1984
("the
Cyprus treaty").
The Cyprus treaty entered into force at that
time. Its provisions will take effect for income of calendar or
taxable years beginning (or in the case of taxes payable at the
o 0 oJanuary 1, 1986.
source, payments made) on or after
B-426
TREASURY NEWS
Department of the Treasury • Washington, D.C. • Telephone 566-204!
FOR IMMEDIATE RELEASE
January 8, 1986
CONTACT: ROBERT LEVINE
Phone: (202) 566-2041
TREASURY IMPLEMENTS ECONOMIC SANCTIONS AGAINST LIBYA
The Department of the Treasury announced the issuance
today of the Libyan Sanctions Regulations implementing the
President's Executive Order of January 7, 1986, which imposes
economic sanctions against Libya.
The Executive Order and the Regulations establish a
comprehensive ban on imports into the United States of Libyan
goods or services and on exports to Libya from the United
States of goods, technology, and services. U.S. persons are
barred from extending credits or loans to the Government of
Libya. Also prohibited are the provision of U.S. transportation services such as shipping or air service to Libya and
the provision of such services to the United States by Libyan
carriers. U.S. persons may not perform contracts supporting
projects in Libya, or purchase Libyan goods to be exported to
non-U.S. destinations. Transactions relating to travel to and
activities within Libya by U.S. citizens and resident aliens,
are prohibited, in order to reduce the number of Americans in
Libya.
Limited exceptions will be available for certain transactions. These include exports to Libya of donated articles
intended to relieve human suffering, such as food, clothing,
medicine and medical supplies, and imports and exports of
publications and gift parcels. Also authorized are travel
transactions incident to departure from Libya, and travel by
journalists.
The regulations apply to all U.S. citizens and permanent
resident aliens, entities organized under U.S. law, and
persons within the United States. They do not apply to
foreign subsidiaries of U.S. firms.
The prohibition on credits or loans to the Government of
Libya and on travel transactions are effective as of 8:06 p.m.
Eastern Standard Time, January 7, 1986. The other sanctions
will become effective at 12:01 a.m. Eastern Standard Time,
February 1, 1986.
B-427
TREASURY NEWS
department of the Treasury • Washington, D.C. • Telephone 566-204
January 8, 19 8 6
FOR IMMEDIATE RELEASE
RESULTS OF AUCTION OF 20-YEAR 1-MONTH BONDS
The Department of the Treasury has accepted $4,750 million of
$12,932 million of tenders received from the public for the 20-year
1-month bonds auctioned today. The bonds will be issued January 15,
1986, and mature February 15, 2006.
The interest rate on the bonds 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
9.35%
9.45%
9.43%
100.190
99.295
99.473
Tenders at the high yield were allotted 94
TENDERS RECEIVED AND ACCEPTED (In Thousands)
Accepted
Received
Location
Boston
$ 1,539
1,539
New York
11,756,728
4,499,179
Philadelphia
1,085
1,085
Cleveland
30,416
9,816
Richmond
11,761
5,761
Atlanta
12,635
7,635
953
Chicago
527,193
115 728
St. Louis
77,728
61 337
Minneapolis
7,337
7 880
Kansas City
9,880
9
29 285
Dallas
285
838
San Francisco
495,038
282
$4,750,318
Treasury
282
The Totals
$4,750 million of $12,931,907
accepted tenders includes $299
million of noncompetitive tenders and $4,451 million of competi
tive tenders from the public.
1/ When the bonds become eligible for STRIPS on August 18,
1986, the minimum par amount required will be $64,000.
Larger amounts must be in multiples of that amount.
B-428
FOR IMMEDIATE RELEASE
January 8, 1986
CONTACT: Bob Childers
(202) 634-5248
REVENUE SHARING FUNDS DISTRIBUTED
TO LOCAL GOVERNMENTS
The Department of the Treasury's Office of Revenue
Sharing (ORS) distributed nearly $1.04 billion in Federal
Revenue Sharing funds today to 32,800 local governments
across the country. This is the first quarterly payment
for fiscal year 1986. The Local Government Fiscal Assistance
Amendments of 1983 provide for quarterly Revenue Sharing
payments to local governments through September 30, 1986.
On November 25, 1985, President Reagan signed legislation
(Public Law 99-160) which authorized Revenue Sharing funding
for the current fiscal year at $4,185,000,000—a reduction of
approximately 8.35 percent from the previous year's appropriation. The legislation requires that the entire reduction
be withheld from the final payment.
- 30 -
TREASURY NEWS
Department of the Treasury • Washington, D.C. • Telephone 566-204'
January 10, 1986
Feller Resigns as
Deputy Assistant Secretary for Legislative Affairs
The Department of Treasury today announced the resignation
of Mimi Feller as Deputy Assistant Secretary for Legislative
Affairs, effective December 27, 1985.
Ms. Feller will become Vice President — Government
Relations for Gannett Company, Inc., a media company that
includes USA Today and other newspapers, as well as television
and radio stations and the Lou Harris Poll.
Ms. Feller joined the Legislative Affairs office at
Treasury in November 1983, after six years on the staff of
U.S. Senator John Chafee and several assignments with the
General Services Administration. She earned a doctor of law
degree in 1981 at the Georgetown University Law Center.
While at Treasury, Ms. Feller played an important role in
the passage of tax reform legislation in the House of
Representatives. She was also involved in the Administration's
legislative proposals for international trade, appropriations,
and general economic issues.
A native of Omaha, Nebraska, Ms. Feller is a member of the
D.C. Bar and has been selected an "Outstanding Young Woman of
America."
# # #
B-429
TREASURY NEWS
Department of the Treasury • Washington, D.C. • Telephone 566-2041
FOR RELEASE AT 12:00 NOON
January 10, 1986
TREASURY'S 52-WEEK BILL OFFERING
The Department of the Treasury, by this public notice,
invites tenders for approximately $9,000 million of 364-day Treasury
bills to be dated January 23, 1986, and to mature January 22, 1987
(CUSIP No. 912794 LT 9 ) . This issue will provide about $450 million
of new cash for the Treasury, as the maturing 52-week bill is outstanding in the amount of $8,556 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, Thursday, January 16, 1986.
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 January 23, 1986. In addition to the
maturing 52-week bills, there are $14,230 million of maturing
13-week and 26-week bills and $4,010 million of maturing 69-day
cash management bills. The disposition of these two latter amounts
will be announced next week. Federal Reserve Banks currently hold
$2,129 million as agents for foreign and international monetary
authorities, and $4,516 million for their own account. These
amounts represent the combined holdings of such accounts for the
four 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. 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 $50 million of the original
52-week issue. Tenders for bills to be maintained on the bookentry records of the Department of the Treasury should be submitted
B-430
on Form PD 4632-1.
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
January 13, 1986
MARGERY WAXMAN TO LEAVE TREASURY
Margery Waxman, Deputy General Counsel of the Treasury since
August, 1981, will leave the Treasury Department on January 17 to
become a partner in the Washington office of Sidley and Austin, a
Chicago law firm.
Prior to joining the Treasury Department, Ms. Waxman was
General Counsel of the Office of Personnel Management. She is a
former Executive Director of the Federal Trade Commission. Other
federal government posts in which she has served include Deputy
General Counsel of the Cost of Living Council and Assistant
General Counsel of the White House Office of Consumer Affairs.
Ms. Waxman holds a J.D., with high honors, from George
Washington Law School (1967), where she was editor of the Law
Review, and a B.A., cum laude, in English literature, from Smith
College (1964).
On December 12 President Reagan awarded Ms. Waxman the
Distinguished Rank Award for her work on the Treasury Department's
first foreign-targeted securities issue and the reorganization of
the Continental Illinois National Bank.
# # #
B-431
TREASURY NEWS
Department of the Treasury • Washington, D.C. • Telephone
FOR IMMEDIATE RELEASE
January 13, 1986
RESULTS OF TREASURY'S WEEKLY BILL AUCTIONS
Tenders for $7,423 million of 13-week bills and for $7,431 million
of 26-week bills, both to be issued on January 16, 1986, were accepted today.
RANGE OF ACCEPTED
COMPETITIVE BIDS:
Low
High
Average
13-week bills
maturing April 17, 1986
Discount Investment
Rate
Rate 1/
Price
26-week bills
maturing July 17, 1986
Discount Investment
Rate
Rate 1/
Price
7.18%
7.23%
7.23%
7.28%a/
7.28%
7.28%
7.41%
7.47%
7.47%
98.185
98.172
98.172
7.66%
7.66%
7.66%
96.320
96.320
96.320
a/ Excepting 1 tender of $500,000.
Tenders at the high discount rate for the 13-week bills were allotted 100%
Tenders at the high discount rate for the 26-week bills were allotted 85%.
TENDERS RECEIVED AND ACCEPTED
(In Thousands)
Location
Received
Accepted
:
Boston
New York
Philadelphia
Cleveland
Richmond
Atlanta
Chicago
St. Louis
Minneapolis
Kansas City
Dallas
San Francisco
Treasury
TOTALS
Type
Competitive
Noncompetitive
Subtotal, Public
Federal Reserve
Foreign Official
Institutions
TOTALS
$
39,305
17,952,520
39,280
49,580
66,675
64,490
1,480,700
88,270
55,150
61,765
45,655
1,119,745
364,070
Received
:
Accepted
$
39,305
6,072,520
39,280
49,580
56,675
54,490
307,200
48,270
55,150
61,765
35,655
238,745
364,070
$
27,625
• 20,823,990
'>
21,485
•
32,685
'
42,270
118,225
1,552,660
91,290
26,490
52,830
:
33,300
:
1,002,825
:
403,280
$
27,625
6,607,015
21,485
32,685
34,270
35,185
70,660
51,290
11,490
52,830
23,300
59,725
403,280
$21,427,205
$7,422,705
: $24,228,955
$7,430,840
$18,357,830
1,267,510
$19,625,340
$4,353,330
1,267,510
$5,620,840
: $21,033,490
:
975,000
: $22,008,490
$4,235,375
975,000
$5,210,375
1,616,530
1,616,530
:
1,600,000
1,600,000
185,335
185,335
:
620,465
620,465
$21,427,205
$7,422,705
: $24,228,955
$7,430,840
An additional $59,865 thousand of 13-week bills and an additional $205,935
thousand of 26-week bills will be issued to foreign official institutions for
new cash.
1/ Equivalent coupon-issue yield.
B-432
-2041
TREASURY NEWS
Department of the Treasury • Washington, D.C. • Telephone 566-2
FOR RELEASE AT 4:00 P.M. January 14, 1986
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 January 23, 1986. This offering
will result in a paydown for the Treasury of about $3,850 million,
as the maturing bills total $18,240 million (including the 69-day
cash management bills issued November 15, 1985, in the amount of
$4,010 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, January 21,
1986. 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 October 24, 1985,
and to mature April 24, 1986 (CUSIP No. 912794 KC 7 ) , currently outstanding in the amount of $6,969 million, the additional and original
bills to be freely interchangeable.
182-day bills for approximately $7,200 million, to be dated
January 23, 1986, and to mature July 24, 1986 (CUSIP No. 912794 KX 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 January 23, 1986. In addition to the maturing
13-week and 26-week bills, there are $8,556 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 $2,149 million of the original 13-week and 26-week
issues. Federal Reserve Banks currently hold $2,199 million as
agents for foreign and international monetary authorities, and $4,516
million for their own account. These amounts represent the combined
holdings of such accounts for the four 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
B-433
(for 26-week series) or Form PD 4632-3 (for 13-week series).
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
• < *
o
CM
CO
CO
federal financing bank
m
CO
CD
CD
WASHINGTON, D.C. 20220
• > *
CM
co
co
m
DO
a. u.
FOP IMMEDIATE RELFASF
January 15, 1986
FEDERAL FINANCING BANK ACTIVITY
Francis X. Cavanaugh, Secretary, Federal Financing
Pank (FFP), announced the following activity for the
month of November 1985.
FF*3 holdings of obligations issued, sold or guaranteed by other Federal agencies totaled $154.1 billion on
November 30, 1985, posting an increase of $0.6 billion
from the level on October 31, 1985. This net change was
the result of increases in holdings of agencv assets and
aqency-guaranteed debt of $0.2 billion each and in
holdings of agency debt of $0.1 billion. FFP made 267
disbursements during November.
Attached to this release are tables presenting
FFB November loan activity, commitments entered during
November, and FFB holdings as of November 30, 1^85.
# 0 #
B-434
oo
CD
Page 2 of 8
FEDERAL F I N D I N G riANK
NOVEMBER 1985 ACTIVITY
BORROWER
DATE
AMOUNT
OF ADVANCE
PINAL
MATURITY
IOTFPFST
RATE
(semiannual)
11/1
11/1
11/4
11/7
11/11
11/11
11/14
11/18
11/21
11/25
11/25
11/27
11/30
$ 80,000,000.00
42,000,000.00
259,000,000.00
244,000,000.00
36,000,000.00
280,000,000.00
305,000,000.00
276,000,000.00
285,000,000.00
35,000,000.00
234,000,000.00
290,000,000.00
151,000,000.00
11/7/85
11/11/85
ll/H/85
11/14/85
11/15/85
11/18/85
11/21/85
11/25/85
11/27/85
12/1/85
12/2/85
12/5/85
12/9/85
7.545%
7.545%
7.555%
7.615%
7.585%
7.585%
7.645%
7.715%
7.615%
7.585%
7.585%
7.555%
7.515%
15,000,000.00
1,369,000.00
250,000.00
7,875,000.00
500,000.00
29,650,000.00
2/4/86
2/11/86
2/11/86
2/11/86
2/18/86
2/19/86
7.605%
7.585%
7.585%
7.585%
7.605%
7.615%
11/1
11/25
75,000,000.00
145,000,000.00
1V1/00
11/1/00
10.405%
10.045%
11/1
11/5
11/7
11/7
11/7
11/12
11/12
11/12
11/14
11/14
11/14
11/14
11/14
11/14
11/19
11/19
11/19
11/19
11/20
10,661.00
442,411.00
8,130,282.70
2,102,286.00
117,825.93
1,528,900.00
11,161,826.08
153,038.53
10,631.91
284,214.90
40,894.62
6,522,760.82
6,147.00
6,200.00
28,721.27
50,000.00
249,389.00
17,803,481.52
1,998,478.69
3/25/96
7/15/92
6/15/91
3/20/96
11/30/13
7/25/92
6A5/12
4/10/96
4/30/11
11/15/92
4/10/96
3/25/96
2/5/96
11/30/13
5A5/95
10/15/90
4/10/96
11/30/13
3/20/93
8.765%
9.515%
9.604%
9.855%
10.425%
8.221%
10.147%
9.884%
10.305%
8.364%
9.845%
8.800%
9.925%
10.295%
9.825%
8.235%
9.795%
10.233%
9.229%
INTEREST
RATF
(other than
semi-annual)
ON-BUDGET AGENCY DEBT
TENNESSEE VALLEY AUTHORITY
Advance
Advance
Advance
Advance
Advance
Advance
Advance
Advance
Advance
Advance
Advance
Advance
Advance
#531
#532
#533
#534
#535
#536
#537
#538
#539
#541
#542
#543
#544
NATIONAL CREDIT UNION ADMINISTRATION
Central Liouidity Facility
+Note
+Note
+Note
+Note
•Note
+Note
#366
#367
#368
#369
#370
#371
11/5
11/13
11/13
11/13
11/19
11/21
AGENCY ASSETS
FARMFRS HOMF ADMINISTRATION
Certificates of Beneficial Ownership
GOVERNMENT - GUARANTEED LOANS
DEPARTMENT OF OFFENSE
Foreign Military Sales
Spain 8
Philippines 10
Spain 5
Thailand 12
Turkey 17
Botswana 4
Greece 15
Peru 10
Greece 14
Jordan 11
Peru 10
Spain 8
Tunisia 16
Turkey 17
Liberia 10
Niger 2
Peru 10
Turkey 17
Indonesia 10
+rollover
10.^76% ann.
10.297% ann.
Paae 3 of 8
FEDFRAL FINANCING BANF
NOVEMBER 1985 ACTIVITY
BORROWER
DATE
AMOUNT
OF ADVANCE
FINAL
MATURITY
INTroEST
RATE
(semiannual
INTFPEPT
RATF
(other than
semi-annual)
Foreign Military Sales (Cont'd)
Greece 15
Tunisia 17
Botswana 4
Turkey 17
Colombia 6
Colombia 7
Egypt 6
Turkey 17
$ 882,618.02
277,794.00
164,843.52
1,342,027.07
1,740,000.00
737,134.00
4,005,067.50
447,575.06
6/15/12
9/15/96
7/25/92
11/30/13
6/30/91
9/5/91
4/15/14
11/30/13
10.055%
9.383%
8.647%
10.155%
7.841%
7.555%
10.105%
10.105%
11/1
11/8
11/8
11/13
11/13
11/13
11/13
11/19
11/19
11/19
11/27
11/27
11/27
11/27
11/27
1,000,000.00
22,500.00
72,500.00
133,879.45
285,229.30
125,579.52
15,700.00
61,078.00
300,000.00
320,000.00
6,543.10
602,500.00
220,000.00
2,000,000.00
5,945,000.00
11/1/90
7/1/03
7/1/03
12/1/85
12/1/85
8/15/86
2/15/86
5/31/86
2/1/86
2/1/86
12/1/85
2/15/86
9/2/03
10/1/86
2/1/86
9.232%
10.157%
10.157%
7.575%
7.575%
7.855%
7.595%
7.805%
7.595%
7.595%
7.555%
7.555%
9.943%
7.955%
7.555%
11/15
11/15
11/20
11/20
42,895,000.00
22,000,000.00
113,852,682.12
2,200,359.00
1/15/86
12/10/85
1/15/86
1/15/86
7.685%
7.685%
7.575%
7.575%
11/20
400,887.78
10/1/9?
9.265%
1/2/18
1/2/18
11/4/87
12/31/87
1/2/18
12/31/15
11/2/88
12/31/15
12/31/15
11/4/87
11/4/87
12/31/15
11/6/87
11/7/87
12/31/13
1/3/17
12/31/14
12/31/14
12/31/14
10.429%
10.436%
8.835%
8.905%
10.396%
10.399%
9.165%
10.399%
10.399%
8.835%
8.835%
10.390%
8.815%
8.795%
10.349%
10.335%
10.337%
10.338%
10.338%
11/20
11/20
11/20
11/27
11/29
11/29
11/29
11/29
DEPARTMENT OF HOUSING & URBAN DFVELOPMFNT
Community Development
•Lorain, OH
Syracuse, NY
Syracuse, NY
Hialeah, FL
Hialeah, FL
Lynn, MA
Newport News, VA
Council Bluffs, IA
Indianapolis, iw
Janesville, WI
Hialeah, FL
Newport News, VA
Oakland, CA
Saginaw, MI
Peoria, II.
9.445% ann
10.415% ann
10.415% ann,
7.960% ann
7.822% ann
10.190% ann
8.084% ann
DEPARTMENT OF THE NAVY
Ship Lease Financing
Cobb
Cobb
Lopez
Lopez Container
Defense Production Act
Gila River Indian Community
9.160% qtr
'ION
RURAL ELECTRIFICATION ADMINISTRATION
Saluda River Electric #271
•Saluda River Electric #186
Corn Belt Power #138
Corn Belt Power #292
New Hampshire Electric #270
•Saluda River Electric #186
•United Power #139
•Brazos Electric #108
•Brazos Flectric #144
*S. Mississippi Electric #171
•Colorado Ute Electric #71
•Hoosier Fnergy #107
•Sunflower Electric #174
•Central Flectric #243
•West Virginia Telephone #17
•associated Electric #20
•associated Electric #132
•associated Electric #132
•Associated Flectric #132
•maturity extension
11/1
1V1
11/4
11/4
11/4
11/4
11/4
11/4
11/4
11/4
11/4
1V5
11/6
11/7
11/7
11/8
11/8
11/8
11/8
305,000.00
3,454,000.00
41,000.00
478,000.00
1,225,000.00
1,728,000.00
2,900,000.00
1,555,000.00
1,284,000.00
2,500,000.00
2,387,000.00
20,000,000.00
15,000,000.00
2,138,000.00
1,000,000.00
10,482,149.00
19,400,000.00
12,500,000.00
31,000,000.00
10.296%
10.303%
8.740%
8.808%
10.264%
10.267%
9.062%
10.267%
10.267%
8.740%
8.740%
10.258%
8.720%
8.700%
10.218%
10.205*
10.207%
10.208%
10.708%
otr
qtr
otr
qtr
otr
otr
qtr
qtr
crtr
qtr
otr
otr
otr
otr
qtr
qtr
otr
otr
qtr
Paae 4 of 8
FEDERAL FINANCIKIP BAKF
NOVFMPFP 19 P5 ACTIVITY
AMflTfT FINAL ifTPpppsT i»TPRFST
BORROWER
DATE
OF ADVANCF
MATURITY
RATE
fsemiannual)
RATF _
(other than
semi-annual)
RURAI. ELECTRIFICATION ADMINISTRATION (Cont'd)
•Associated Electric #132
•Associated Flectric #132
•Associated Electric #132
•Associated Flectric #13?
•Associated Electric #132
•Associated Flectric #132
•Associated Electric #132
•Associated Flectric #132
•Cont. Tel. of Kentucky #47
United Power #129
Central Flectric #131
•Western Illinois Power #162
•Oglethorpe Power #74
•Oglethorpe Power #150
•Wabash Valley Power #104
•Cajun Electric #180
•Fast Kentucky Power #140
•Fast Kentucky Power #140
•Fast Kentucky Power #140
•Fast Kentucky Power #188
•Wolverine Power #101
•Wolverine Power #101
•Wolverine Power #1*3
•Wolverine Power #234
•Wolverine Power #100
•Wolverine Power #101
•Brazos Flectric #108
•Cajun Flectric #197
•Colorado Ute Flectric #96
•Plains Flectric #158
•Wabash Valley Power #206
•Central Flectric #131
Upper Missouri G&T #283
•New Hampshire Flectric #192
•Fast Kentucky Power #73
Cooperative Power #156
•East Kentucky Power #73
•Colorado Ute Flectric #152
•Tri-State G&T #37
•Tri-State G&T #37
•Tri-State G&T #37
•Tri-State G&T #37
•Tri-State G&T #37
•Tri-State G&T #37
•Tri-State G&T #37
•Tri-State G&T #37
•Tri-State G & T #37
•Tri-State G&T #37
•Tri-State G&T #79
•Tri-State G&T #79
•Tri-State G & T #79
•Tri-State G&T #89
•Tri-State G&T #89
•Tri-State G&T #89
•Tri-State G&T #89
•Tri-State G&T #89
•Tri-State G&T #250
Colorado Ute Electric #276
Colorado Ute Electric #297
Tex-La Flectric #208
•Big Rivers Flectric #58
•Big Rivers Flectric #91
•maturity extension
11/8
11/8
11/8
11/8
11/R
11/8
11/8
11/8
11/8
11/8
11/8
11/12
11/12
11/12
11/1?
11/12
11/12
11/12
11/12
11/12
11/12
11/12
11/12
11/12
11/13
11/13
11/13
11/13
11/13
11/14
11/14
11/15
11/15
11/15
11/15
11/18
11/18
11/18
11/18
11/18
11/18
11/18
11/18
11/18
11/18
11/18
11/18
11/18
11/18
11/18
11/18
11/18
11/18
11/18
11/18
11/18
11/18
11/19
11/19
11/20
11/20
11/20
$ 7,700,000.00
1,000,000.00
6,000,000.00
10,000,000.00
17,253,000.00
4,243,000.00
3,547,000.00
1,670,000.00
1,500,000.00
2,116,000.00
137,000.00
2,702,000.00
13,625,000.00
14,639,000.00
2,687,000.00
8,974,000.00
267,000.00
1,570,000.00
900,000.00
6,131,000.00
50,000.00
210,000.00
3,447,000.00
3,944,000.00
1,305,000.00
1,668,000.00
2,500,000.00
40,000,000.00
1,486,000.00
6,581,000.00
9,028,000.00
170,000.00
1,700,000.00
1,185,000.00
6,790,000.00
1,639,000.00
2,500,000.00
1,080,000.00
100,000.00
100,000.00
50,000.00
35,000.00
16,000.00
72,000.00
14,000.00
11,000.00
24,000.00
17,000.00
1,377,000.00
7,048,000.00
408,000.00
8,172,000.00
6,429,000.00
12,700,000.00
7,969,000.00
7,484,000.00
10,927,000.00
5,123,000.00
8,475,000.00
1,747,000.00
4,340,000.00
3,780,000.00
1/3/17
1/3/17
1/3/17
1/3/17
1/3/17
12/31/18
12/31/18
12/31/18
12/31/13
12/31/19
11/9/87
12/31/15
12/31/15
12/31/15
11/12/87
1/2/18
12/31/14
12/31/16
12/31/16
12/31/16
12/31/87
12/31/87
11/10/88
11/12/87
12/31/87
12/31/87
12/31/13
11/14/88
11/13/87
1/3/87
1/16/87
12/31/13
12/31/87
1/2/18
12/31/15
11/18/87
12/31/15
11/18/87
12/31/13
12/31/13
12/31/13
12/31/13
12/31/14
12/31/14
12/31/14
12/31/14
12/31/1 4
12/31/14
12/31/14
12/31/14
12/31/14
12/31/13
12/31/13
12/31/13
12/31/13
12/31/13
12/31/19
12/31/87
12/31/87
12/31/19
12/31/12
12/31/12
10.334%
10.334%
10.335%
10.336%
10.336%
10.333%
10.334%
10.335%
10.339%
10.334%
8.795%
10.281%
10.281%
10.281%
8.705%
10.280%
10.280%
10.279%
10.280%
10.280%
8.763%
8.763%
9.035%
8.705%
8.714%
8.714%
10.178%
8.985%
8.655%
10.216%
8.715%
10.279%
8.825%
10.276%
10.278%
8.785%
10.??4%
8.785%
10.339%
10.340%
10.340%
10.340%
10.338%
10.338%
10.339*
10.339%
10.339%
10.339%
10.3*9%
10.339%
10.340%
10.339%
10.339%
10.339%
10.339%
10.339%
10.333%
8.693%
8.693%
10.150%
10.146%
10.146%
10.204%
10.204%
10.205%
10.206%
10.206%
10.203%
10.204%
10.205%
10.209%
10.204%
8.700%
10.152%
10.152%
10.152%
8.«12%
10.151%
10.151%
10.150%
10.151%
10.151%
8.669%
8.669%
8.935%
8.612%
8.621%
8.621%
10.052*
8.886%
8.563%
10.089%
8.6?2%
10.150%
8.730%
10.147%
10.149%
8.691%
10.204%
8.691%
10.209%
10.210%
10.?10%
10.210%
10.208%
10.208%
10.209*
10.209%
10.209%
10.209%
10.209%
10.209%
10.210%
10.209%
10.209%
10.209%
10.209%
10.209%
10.203%
8.601%
8.601%
10.024%
10.020%
10.020%
gtr.
otr.
otr.
qtr.
otr.
otr.
otr.
qtr.
otr.
qtr.
otr.
otr.
otr.
otr.
otr.
otr.
qtr.
otr.
otr.
otr.
otr.
qtr.
qtr.
qtr.
qtr.
otr.
otr.
otr.
otr.
qtr.
otr.
qtr.
qtr.
otr.
otr.
otr.
otr.
qtr.
otr.
qtr.
otr.
otr.
otr.
otr.
qtr.
otr.
otr.
otr.
otr.
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Page 5 of 8
FFPERAL FINANCING BANK
NDVFMBFP 1985 ACTTVI'TY
BORROWER
DATF
AMOUNT
OF ADVANCF
FINAL
MATURITY
JfTTpPPCT
RATF
(semiannual)
PATF
(other than
semi-annual)
10.150%
10.150%
10.148%
10.149%
10.149%
8.665%
8.665%
9.919%
9.919%
10.114%
8.655%
10.119%
8.915%
10.127%
7.585%
10.122%
10.122%
9.947%
10.081%
10.082%
10.07*%
10.075%
10.073%
10.024% otr.
10.024% otr,
10.022% otr.
10.023% qtr.
10.023% otr.
8.573% qtr.
8.573% otr.
9.799% otr.
9.799% otr.
9.989% qtr.
8.563% otr.
9.994% qtr.
8.815% otr.
10.002% qtr.
RURAL ELECTRIFICATION ADMINISTRATION (Cont'd)
•Seminole Flectric #141 11/21 $ 10,548,000.00
•Seminole Flectric #141
11/21
9,126,000.00
•Seminole Flectric #141
11/21
3,533,000.00
Oglethorpe Power #246
11/21
17,291,000.00
Associated Flectric #132
11/21
3,760,000.00
•San Miguel Electric #110
11/21
3,688,000.00
•San Miguel Flectric #205
11/21
4,600,000.00
•S. Mississippi Flectric #4
11/22
824,000.00
•S. Mississippi Flectric #°0
11/22
1,321,000.00
South Texas Flectric #200
11/25
286,000.00
•Wabash Valley Power #206
11/25
694,000.00
•Brazos Flectric #230
11/25
1,788,000.00
•Fast River Electric #117
11/25
1,200,000.00
•Seminole Electric #141
11/25
2,469,000.00
•Sunflower Flectric #174
11/2=;
15,000,000.00
New Hampshire Flectric #270
11/27
924,000.00
North Carolina Flectric #268
11/27
2,398,000.00
•S. Mississippi Flectric #90
11/29
309,000.00
•Sho-Me Power #114
11/29
3,250,000.00
•Sho-Me Power #164
11/29
1,200,000.00
•Sho->'e Power #164
11/29
1,320,000.00
*Sho-Me Power #164
11/29
700,000.00
•Sho-Me Power #164
11/29
l,400,noo.00
12/31/15
12/31/15
12/31/15
12/31/19
12/31/19
11/23/87
11/23/87
12/31/12
12/31/12
12/31/19
11/25/87
1/2/18
11/25/* 8
12/31/14
12/31/85
1/2/18
1/2/18
12/31/12
12/31/12
12/31/14
12/31/15
12/31/17
12/31/18
SMALL BUSINESS ADMINISTRATION
State & local Development Company Debentures
Pioneer Country Dev., Inc.
11/6
Atlanta Local Dev. Co.
11/6
Texas Panhandle Reg. Dev. Corp.11/6
Areawide Dev. Corp.
11/6
St. Touis County LDC
11/6
Georaia Mountains Peg. E.P.C. 11/6
Fast Texas Regional Dev. Co.
11/6
Troup County IDC
11/6
Wisconsin Bus. Dev. Fin. Corp. 11/6
S.C. Kansas Fc. Dev. Dis., Inc.11/6
Columbus Countywide Dev. Corp. 11/6
Cumberland-Alleoheny CIF, Inc. 11/6
St. louis County LDC
11/6
P. Texas Peqional Dev. Co.
11/6
Northeast Louisiana Tnd., Inc. 11/6
Massachusetts CDC
11/6
Mahoning Valley E.D. Corp.
11/6
Texas CDC, Inc.
11/6
Dallas Sm. Bus. Corp., Inc.
11/6
Topeka/Shawnee County Dev Corp 11/6
Greater S.W. Kansas CDC
11/6
1st Imperial Polk F.r.C, Inc. 11/6
lake County Sm. Pus. 503 Corp. 11/6
P.D.C. of Nebraska
11/6
Prince George's County F.S.C. 11/6
Verd-Ark-Ca rev. Corp.
11/6
Texas Panhandle Reo. Dev. Corp.11/6
Historic 25th St. Dev. Co.
11/6
F.r.C of Jefferson County
11/6
Gr. Eastern Oregon Dev. Corp. 11/6
Port Jervis Dev. Corp.
11/6
San Dieao County LDC
11/6
New Castle County F.D.C.
11/6
Opportunities Minnesota, Inc. 11/6
San Dieao County LDC
11/6
•maturity extension
23,000.00
51,000.00
60,000.00
80,000.00
84,000.00
126,000.00
142,000.00
143,000.00
162,000.00
220,000.00
223,000.00
231,000.00
271,000.00
298,000.00
307,000.00
354,000.00
421,000.00
456,000.00
500,000.00
27,000.00
49,000.00
53,000.00
55,000.00
58,000.00
67,000.00
68,000.00
74,000.00
86,000.00
89,000.00
90,000.00
114,000.00
117,000.00
118,000.00
121,000.00
138,000.00
11/1/00
11/1/00
11/1/00
11/1/00
11/1/00
11/1/00
11/1/00
11/1/00
11/1/00
11/1/00
11/1/00
11/1/00
11/1/00
11/1/00
11/1/00
11/1/00
11/1/00
11/1/00
11/1/00
11/1/05
11/1/05
11/1/05
11/1/05
11/1/05
11/1/05
11/1/0S
11/1/05
11/1/05
11/1/05
11/1/05
11/1/0S
11/1/05
11/1/05
11/1/05
11/1/05
10.089%
10.0PQ%
10.089%
10.089%
10.089%
10.0P9%
10.089%
10.089%
10.089%
10.089%
10.089%
10.0*9%
10.089%
10.0*9%
10.089%
10.089%
10.089%
10.0*9%
10.089%
10.294*
10.294%
10.294%
10.294%
10.?O4%
10.294%
10.294%
10.294%
10.294%
10.294%
10.294%
10.294%
10.294%
10.294%
10.294%
10.294%
9.997*
9.997%
9.826%
9.957%
9.958%
9.954%
9.951%
9.949%
otr.
otr.
otr.
otr.
otr.
qtr.
otr.
qtr.
Page 6 of 8
FEDERAL FINANCING BANK
NOVEHBFP 19/85 ACTIVITY
BORROWER
DATE
AMOUNT
OF ADVANCE
FINAL
MATURITY
INTEREST
RATE
(semiannual)
11/1/05
11/1/U5
11/1/05
11/1/05
11/1/05
11/1/05
11/1/05
11/1/05
11/1/05
11/1/05
11/1/05
11/1/05
11/1/05
11/1/05
11/1/05
11/1/05
11/1/05
11/1/05
11/1/05
11/1/05
11/1/05
11/1/05
11/1/05
11/1/10
11/1/10
11/1/10
11/1/10
11/1/10
11/1/10
11/1/10
11/1/10
11/1/10
11/1/10
11/1/10
11/1/10
11/1/10
11/1/10
11/1/10
11/1/10
11/1/10
11/1/10
11/1/10
11/1/10
11/1/10
11/1/10
11/1/10
11/1/10
11/1/10
11/1/10
11/1/10
11/1/10
11/1/10
11/1/10
11/1/10
11/1/10
11/1/10
11/1/10
11/1/10
11/1/10
10.294%
lu.294%
10.294%
10.294%
10.294%
10.294%
10.294%
10.294%
10.294%
10.294%
10.294%
10.294%
10.294%
10.294%
10.294%
10.294%
10.294%
10.294%
10.294%
10.294%
10.294%
10.294%
10.294%
10.388%
10.388%
10.388%
10.388%
10.388%
10.388%
10.388%
10.388%
10.388%
10.388%
10.388%
10.388%
10.388%
10.388%
10.388%
10.388%
10.388%
10.388%
10.388%
10.388%
10.388%
10.388%
10.388%
10.388%
10.388%
10.388%
10.388%
10.388%
10.388%
10.388%
10.388%
10.388%
10.388%
10.388%
10.388%
10.388%
State & Local Development Company Debentures (Cont'd)
11/6
Tucson LDC
li/6
JacKsonville LDC, Inc.
11/6
Indiana Statewide CDC
11/6
St. Louis County LDC
Evergreen Community Dev. Assoc .11/6
11/6
Indiana Statewide CDC
11/6
Troup County LDC
11/6
Tucson LDC
Mid-Ohio valley Area Dev. Corp .11/6
11/6
Community D.C. of Ft. Wayne
11/6
Parkersburg-Wbod C.A.D. Corp
11/6
Minneapolis 503 Ec. Dev. Co.
11/6
long Island Dev. Corp.
Topeka/Shawnee Cnty. Dev. Corp .11/6
Butte County Overall E.D., Inc .11/6
11/6
San Diego County LDC
11/6
San Diego County LDC
11/6
E. Cen. Michigan Dev. Corp.
11/6
Enterprise Dev. Corp.
11/6
Long Island Dev. Corp.
11/6
North Georgia CDC
11/6
Milwaukee Ec. Dev. Corp.
11/6
Long Island Dev. Corp.
11/6
Southern Dev. Council, Inc.
11/6
Big Lakes CDC
11/6
Calexcio Industrial Dev. Co.
11/6
Texas CDC, Inc.
New Haven Community Inv. Corp. 11/6
11/6
Old Colorado City Dev. Co.
11/6
Gr. Southwest Kansas CDC
11/6
Area Investment & Dev. Corp.
11/6
Cascades W. Fin. Srvs., Inc.
11/6
San Diego County LDC
11/6
San Diego County LDC
11/6
Alabama Community Dev. Corp.
Georgia Mountains Reg. E.D.C. 11/6
San Diego County LDC
11/6
Pocono NE Enterprise Dev. Corp ,11/6
Los Medanos Fund
11/6
Gr. Eastern Oregon Dev. Corp. 11/6
San Diego County LDC
11/6
St. Louis County LDC
11/6
Columbia River Dev. Assoc.
11/6
Lake Country Dev. Corp.
11/6
San Francisco Indus. Dev. Fund 11/6
St. Louis LDC
11/6
New Haven Community Inv. Corp. 11/6
Evergreen Community Dev. Assoc, 11/6
Montgomery County B.D.C.
11/6
Bay Area Bus. Dev. Co.
11/6
N. Reg. Planning Com., Inc.
11/6
Bay Area Business Dev. Co.
11/6
Bay Area Business Dev. Co.
11/6
Phoenix LD Corp.
11/6
Areawide Dev. Corp.
11/6
Bay Area Business Dev. Co.
11/6
Union County Ec. Dev. Corp.
11/6
La Habra LD Co., Inc.
11/6
San Diego County LD Corp.
11/6
147,000.00
155,uuu.00
169,000.00
170,000.00
182,000.00
182,000.00
184,000.00
191,000.00
211,000.00
212,000.00
228,000.00
228,000.00
246,000.00
265,000.00
266,000.00
278,000.00
278,000.00
294,000.00
305,000.00
370,000.00
407,000.00
420,000.00
460,000.00
30,000.00
65,000.00
75,000.00
76,000.00
82,000.00
83,000.00
84,000.00
89,000.00
100,000.00
103,000.00
121,1/00.00
121,000.00
124,000.00
131,000.00
133,000.00
150,000.00
163,000.00
172,000.00
175,000.00
177,000.00
210,000.00
242,000.00
256,000.00
279,000.00
293,000.00
336,000.00
378,000.00
387,000.00
392,000.00
406,000.00
410,000.00
420,000.00
428,000.00
480,000.00
500,000.00
500,000.00
INTEREST
RATE
(other than
semi-annual)
Page 7 of 8
FEDEPAI FINANCINC BANK
NOVFMPFP 1985 ACTIVITY
BOPROWFP
PP'AL
MATURITY
AMOUNT
OF ADVANCF
DATF
INTEPFST
RATF
Tsemiannual)
rprFRpcr
RATF _
(other than
semi-annual)
TFNNFSSFF VALLEY AUTHORITY
Seven States Fnerov Corporation
+Note A-86-02
11/29
$ 600,652,205.92
2/28/86
7.565%
+rollover
PFrrPAi F I N A N C I N G
PAN*
NOVFVPFP 19«5 Commitments
BORPOWFR
Wilminaton Trust (Topez)
wilminaton Trust (Iopez Container)
Wilminaton Trust (Cobb)
Medford, MA
Pasadena, CA
Peoria, II
Oakland, CA
Rochester, NY
Syracuse Industrial Dev. Agency
Syracuse Industrial Dev. Agency
GUARANTOR
AMOUNT
COMMITMENT
FYPIPFS
Navy
Navy
Navy
HliT
$ 210,000,000.00
4,000,000.00
75,000,000.00
4,425,000.00
710,000.00
5,945,000.00
2,500,000.00
1,390,000.00
4^6,500.00
22,500.00
2/20/91
2/20/91
2/15/91
8/1/87
2/1/87
2/1/86
9A/86
8/31/86
7/l/8«
7/1/86
HTT
PIT?
HIT:
HUT
Him
HUD
MATURITY
7/15/10
7/15/10
7/15/0*
8/1/87
2/l/«7
2/1/86
9/1/04
8/31/04
7/1/03
7/1/03
Paae 8 of 8
FFDFPAI. FJNANCTW BANK HOLDINGS
(in millions)
Program
November 30, 1985
October 31, 1985
Net Change
11/1/85-11/30/85
Net Chanae—FY 1°85
10A/85-11/30/85
On-Budqet Agency Debt
Tennessee Valley Authority
Export-Import Bank
NCUA-Central Liquidity Facility
$ 14,610.0
15,409.0
219.6
$ 14,474.0
15,409.0
219.3
$ 136.0
$ 229.0
-00.3
-2.5
1,690.0
73.8
1,690.0
73.8
-0-0-
-0-0-
64,1P9.0
105.9
122.8
63,«W*.0
105.9
172.8
220.0
20.0
-3.3
6.1
6.1
3,724.3
31.8
3,774.1
32.4
18,134.7
5,000.0
303.1
33.5
2,111.4
407.4
35.1
28.?
887.6
1,452.6
18,118.4
5,000.0
299.6
33.5
2,146.2
408.4
35.1
28.2
887.6
1,271.7
6.6
6.7
60.0
21,826.0
1,043.6
635.0
1,670.5
150.0
177.0
60.0
21,797.4
$ 154,144.9
$ 153,564.6
-0-
Off-Pudqet Agency Debt
U.S. Postal Service
U.S. Railway Association
Agency Assets
Farmers Home Administration
DHHS-Health Maintenance Org.
DHPS-Medical Facilities
Overseas Private Investment Corp.
Pural Electrification Admin.-CBO
Small Business Administration
-0-0-0-0-
-0-0-0-
-0.5
-1.1
16.3
46.2
-03.5
-0-
13.7
-34.7
-1.0
-34.7
-1.0
-0-0-0-
-0-0-0-
180.9
139.6
0.4
-0-
0.8
-0-
33.6
-4.7
18.4
15.4
-3.6
150.5
19.7
39.4
19.1
-3.6
-0-
-0-
$ 580.4
$ 631.7
Covernment-^uaranteed Lending
DOD-Foreion Military Sales
DM.-Student loan Marketing Assn.
DHUD-Coromunity Pev. Block Grant
DHUD-New Communities
DWin-Public Housinq Notes
General Services Administration
DOT-Aiam Power Authority
DPI-Virqin Islands
PASA-Space Communications Co.
DON-Ship Lease Financing
DON-Defense Production Act
Oregon Veteran's Housing
Rural Electrification Admin.
SBA-Small Business Investment Cos.
SPA-StateAocal Development Cos.
TVA-Seven States Enerqy Corp.
DOT-Section 511
DOT-WMATA
TOTALS^
l,04e.3
616.6
1,655.1
153.6
177.0
-0-0-
TREASURY NEWS
lepartment of the Treasury • Washington, D.C. • Telephone 566-2041
FOR IMMEDIATE RELEASE
January 15, 1986
CONTACT: ROBERT LEVINE
Phone: (202) 566-2041
TREASURY IMPLEMENTS BLOCKING OF LIBYAN GOVERNMENT ASSETS
The Department of the Treasury announced the issuance today
of regulations implementing the President's Executive Order of
January 8, 1986, which blocked Libyan Government property in the
United States or held by U.S. persons. The regulations issued
today amend the Libyan Sanctions Regulations, which were
previously issued by the Treasury Department to implement the
various economic measures included in the President's Executive
Order of January 7, 1986.
The new regulations provide that Libyan property^in the
United States or held by U.S. persons as of 4:10 p.m. on January
8, the time when the President signed the Executive Order, are
blocked and may not be transferred without a Treasury license.
U.S. persons include, among other things, branches in the United
States of foreign banks and foreign branches of U.S. banks, but
not foreign subsidiaries of U.S. banks. Libyan Government;
property includes not only bank accounts, but also such other
things as accounts receivable and goods to which the Libyan
Government has title. Payments to the Libyan Government may be
made only into blocked accounts.
Foreign currency accounts of the Libyan Government are not
blocked, nor is property of private Libyan entities or
individuals.
Limited exceptions will be available for certain
transactions. These include payments from blocked accounts for
goods shipped prior to 4:10 p.m. on January 8 and for certain
checks (or drafts) issued prior to that time. Persons suffering
particular hardship as a result of the imposition of the blocking
may apply to Treasury's Office of Foreign Assets Control, 1331 G
Street, Washington, D.C. 20220, for specific licenses authorizing
exceptions. Licensing inquiries may be directed to Dennis M.
O'Connell (tel. 202-276-0395), Kathryn Mann (202-376-0410), and
Elizabeth Farrow (202-376-0969).
B-435
TREASURY NEWS
Department of the Treasury • Washington, D.C. • Telephone 566-2041
FOR RELEASE AT 4:00 P.M.
January 15, 1986
TREASURY TO AUCTION $9,500 MILLION OF 2-YEAR NOTES
The Department of the Treasury will auction $9,500 million
of 2-year notes to refund $8,632 million of 2-year notes maturing
January 31, 1986, and to raise about $875 million new cash.
The $8,632 million of maturing 2-year notes are those held by the
public, including $566 million currently held by Federal Reserve
Banks as agents for foreign and international monetary authorities.
The $9,500 million is being offered to the public, and any
amounts tendered by Federal Reserve Banks as agents for foreign and
international monetary authorities will be added to that amount.
Tenders for such accounts will be accepted at the average price of
accepted competitive tenders.
In addition to the public holdings, Government accounts and
Federal Reserve Banks, for their own accounts, hold $596 million of
the maturing securities that may be refunded by issuing additional
amounts of the new notes at the average price of accepted competitive tenders.
Details about the new security are given in the attached
•highlights of the offering and in the official offering circular.
oOo
Attachment
B-436
HIGHLIGHTS OF TREASURY
OFFERING TO THE PUBLIC
OF 2-YEAR NOTES
TO BE ISSUED JANUARY 31, 1986
January 15, 1986
Amount Offered:
To the public
$9,500 million
Description of Security:
Term and type of security
2-year notes
Series and CUSIP designation .... V-1988
(CUSIP No. 912827 TD 4)
Maturity Date
January 31, 1988
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
July 31 and January 31
Minimum denomination available .. $5,000
Terms of Sale:
Method of sale
Yield auction
Competitive tenders
Must be expressed as an
annual yield, with two
decimals, e.g., 7.10%
Noncompetitive tenders
Accepted in full at the average price up to $1,000,000
Accrued interest payable
by investor
None
Payment by noninstitutional investors
Full payment to be
submitted with tender
Payment through Treasury Tax
and Loan (TT&L) Note Accounts ... Acceptable for TT&L Note
. Option Depositaries
Deposit guarantee by
designated institutions
Acceptable
Key Dates:
Receipt of tenders
Wednesday, January 22, 1986,
prior to 1:00 p.m., EST
Settlement (final payment
due from institutions)
a) cash or Federal funds
Friday, January 31, 1986
b) readily-collectible check .. Wednesday, January 29, 1986
Statement Released after G-5 Meeting in London
January 18-19, 1986
The meeting was an informal one to take stock of developments
since the meeting in New York on 22 September.
The Finance Ministers and Central Bank Governors were
satisfied with the progress made so far. They agreed that
their co-operation should continue and that the progress which
had been made should not be reversed.
TREASURY NEWS
department of the Treasury • Washington, D.C. • Telephone 566-2041
FOR IMMEDIATE RELEASE
January 21, 1986
CONTACT:
Charles Powers
(202) 566-2041
TREASURY ANNOUNCES PENALTIES AGAINST BANK OF AMERICA
The Department of the Treasury today announced that Bank of
America, NT&SA, has agreed to pay civil penalties of $4.75
million for violations of the Bank Secrecy Act. The violations
consist of failures to file Currency Transaction Reports for cash
transactions exceeding $10,000, as required under the Act. These
violations include failures to report both international and
domestic currency transactions.
In the wake of the publicity surrounding the Bank of Boston
case in early 1985, Bank of America undertook a review of its
past Bank Secrecy Act compliance. Concurrently, extensive
non-compliance with the Act was confirmed by the Comptroller of
the Currency during an examination in Spring 1985. Bank of
America has cooperated fully with Treasury in developing the
scope of its liability.
In announcing the penalty, Francis A. Keating, II, Assistant
Secretary for Enforcement and Operations, stated: "The violations by Bank of America were widespread throughout the units and
branch system of the bank. While Treasury has no information
that the bank engaged in criminal activity in connection with
these violations, it is certain given the volume and nature of
violations that the non-filing of information about cash transactions deprived the Government of timely law enforcement leads
in drug, tax and other investigations. Full compliance with the
Bank Secrecy Act is imperative to effective law enforcement."
The number of violations by all the units of the bank is
estimated to be over 17,000 violations. Mr. Keating stated,
"Based on examinations by the Comptroller of the Currency and a
review of the bank's compliance history, Treasury is confident
that the penalty amount is appropriate." Bank of America has
agreed to conduct a further review of cash transactions and to
late-file additional currency transaction reports as required by
Treasury. Bank of America has taken a number of measures
indicative of its commitment to full compliance in the future.
This is the largest civil penalty Treasury has imposed on a
financial institution for Bank Secrecy Act violations. In the
last year over sixty banks have come forward to Treasury to
discuss past Bank Secrecy Act non-compliance. Since June 1985,
eleven other banks have been fined in amounts ranging from
$121,000 to $2.25 million. The cases of the remaining banks are
under review.
B-438
TREASURY NEWS
Department of the Treasury • Washington, D.C. • Telephone 566-2041
FOR RELEASE AT 4:00 P.M.
January 21, 1986
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 January 30, 1986.
This offering will not provide new cash for the Treasury, as the maturing bills
are outstanding in the amount of $14,412 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, January 27, 1986.
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
October 31, 1985,
and to mature May 1, 1986
(CUSIP No.
912794 KD 5), currently outstanding in the amount of $7,167 million,
the additional and original bills to be freely interchangeable.
182-day bills for approximately $7,200 million, to be dated
January 30, 1986,
and to mature July 31, 1986
(CUSIP No.
912794 KY 9 ) .
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 January 30, 1986.
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 $1,692 million as agents for foreign and international monetary authorities, and $2,993 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-439
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 2
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
Department of the Treasury • Washington, D.C. • Telephone 566-2041
FOR IMMEDIATE RELEASE
January 21, 1986
RESULTS OF TREASURY'S WEEKLY BILL AUCTIONS
Tenders for $7,200 million of 13-week bills and for $7,206 million
of 26-week bills, both to be issued on January 23, 1986, were accepted today.
RANGE OF ACCEPTED
COMPETITIVE BIDS:
Low
High
Average
13--week bills
maturing
Discount
Rate
26-•week bills
April 24, 1986
Investment
Rate 1/
Price
6.96%a/
7.00%
6.98%
7.18%
7.22%
7.20%
98.241
98.231
98.236
maturing
Discount
Rate
:
July 24, 1986
Investment
Rate 1/
Price
7.10%
7.15%
7.14%
:
:
7.47%
7.52%
7.51%
96.411
96.385
96.390
a/ Excepting 1 tender of $615,000.
Tenders at the high discount rate for the 13-week bills were allotted 25%.
Tenders at the high discount rate for the 26-week bills were allotted 20%.
TENDERS RECEIVED AND 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
(In Thousands)
Accepted
Accepted
41,100
16,496,550
32,180
41,765
49,355
120,355
1,451,970
95,455
20,070
56,520
39,250
1,329,945
369,615
$
41,100
5,850,550
32,180
41,765
49,355
119,355
120,570
54,855
20,070
56,520
35,250
414,945
369,615
$7,200,270
: $20,144,130
$7,206,130
$17,267,920
1,281,740
$18,549,660
$4,197,595
1,281,740
$5,479,335
: $16,963,260
1,068,670
:
: $18,031,930
$4,025,260
1,068,670
$5,093,930
1,469,735
1,469,735
:
1,400,000
1,400,000
251,200
251,200
:
712,200
712,200
$20,270,595
$7,200,270
: $20,144,130
$7,206,130
46,590
16,556,830
33,410
55,685
82,945
60,020
1,689,880
83,215
20,260
56,780
47,460
1,185,430
352,090
$
46,590
5,769,555
33,410
55,685
79,945
60,020
353,455
63,215
18,760
54,905
43,710
268,930
352,090
$20,270,595
$
1/ Equivalent coupon-issue yield.
B-44C
Received
$
:
:
:
:
TREASURY NEWS
department of the Treasury • Washington, D.C. • Telephone 566-2041
FOR RELEASE UPON DELIVERY
SCHEDULED FOR 11:10 a.m. EST
January 22, 1986
REMARKS BY
THE HONORABLE JAMES A. BAKER, III
SECRETARY OF THE TREASURY
BEFORE THE BRETTON WOODS COMMITTEE
JANUARY 22, 1986
The International Financial Institutions:
The Challenges Ahead
I am pleased to have this opportunity to join you
here today. The task you have undertaken — to explain
the workings and significance of the Bretton Woods
institutions to our fellow citizens — remains as
important, and as difficult, as ever. But your
activities are needed and appreciated. One of my
reasons for wanting to join you at your annual meeting
is to urge you to keep up the fine work you have done
in the past.
For forty years, since the original Bretto n Woods
meetings, the International Monetary Fund and the
International Bank for Reco nstruction and Deve lopment
have been focal points for the international c ommunity's
efforts to facilitate and p romote soundly base d growth
and development of the worl d economy. Over th ese years,
not only has their role bee n important, but th eir record
has been impressive. Yet i t is in the past do zen years
or so, as the world has exp erienced the oil cr ises of the
1970s and the debt crisis o f the early 1980s, that these
institutions have made thei r greatest contribu tions.
Without the Bretton Woods i nstitutions, we wou Id certainly
have emerged from these cri ses a poorer, more fragmented,
less hopeful world.
B-441
-2Despite the fact that the international financial
institutions have been playing an increasingly critical
role, it must be acknowledged that public support has
declined. One of the reasons may be the increasingly
intense competition for federal budgetary resources.
If so, the climate will hardly be more benign in the
coming years than it has been in the past.
While I can hope the shocks of international
economic crises are behind us, I know the problems
we face are not. We will continue to need these
institutions, and we will continue to need your help
in mobilizing support for them.
The American public must understand that it is not
just the rest of the world (nor just the developing
countries) that would be the poorer without the international financial institutions — the American public
would be poorer, as well. The impact on U.S. exports
of the debt-related economic downturn in Latin America
and other developing countries may have brought this
realization home to many people. Still, the message
that growth in the developing world affects the level
of employment here needs to be more widely understood.
Looking ahead, I see'two main challenges to
which the international financial institutions must
respond. These institutions must play a major role
in implementing the proposed "Program for Sustained
Growth" in developing nations that lies at the heart
of the current phase of our global debt strategy.
Secondly, the International Monetary Fund remains at
the center of our efforts to improve the functioning
and stability of the international monetary system.
Your Committee's recent policy statement is a
welcome contribution to the discussion in these areas,
and I would like to share with you the Administration's
latest thinking.
The Debt Situation
Since the debt crisis emerged in 1982, considerable
progress has been made in reducing the substantial current
account deficits of the major debtor nations. The decline
in growth in most of these countries has been reversed,
and imports are increasing once again. However, progress
in reducing domestic imbalances has been less impressive,
and more needs to be done to assure a firm foundation
for sustainable growth. Net commercial bank lending to
support these efforts in the principal debtor countries
has declined significantly, from $25 billion in 1982 to
virtually no net new lending in 1985.
- 3 As you know, at the Annual Meetings of the Bank
and the Fund in Seoul last October, the United States
proposed a "Program for Sustained Growth" that involved
mutually reinforcing actions by debtor nations, the IMF
and the multilateral development banks, and commercial banks. The response has been very positive and
encouraging. We have received broad statements of support from the U.S. banking community and key foreign
banks, the International Monetary Fund, the World Bank,
and the Inter-American Development Bank, as well as
positive responses' from a number of the debtor nations.
Where do we go from here?
For the multilateral development banks, the next
step will be enactment of reforms to streamline procedures and to enhance disbursements of loans conditioned
for policy reforms.
We expect to see a growing stream of policy-based
structural and sectoral adjustment loans from the World
Bank and a strengthened emphasis on privatization, open
markets, and increased savings and investment. The
suggestion in your policy statement on developing capital
markets should fit well with the Bank's efforts in this
direction. We believe there should be both debt and
equity market development, with the latter designed to
facilitate the privatization process.
Total lending by the Bank in 1986 should be about
$2 billion higher than in 1985, with the share of policybased loans rising substantially, concentrated in the
principal debtor countries. The regional development
banks should provide an additional increment of $1 billion in lending in 1986.
We anticipate that adoption of reforms to support
structural change in borrowing countries, well coordinated
with the IMF, will be a key element in the negotiations for
the Eighth Replenishment of the International Development
Association which begin later this month.
We will also be working closely with the InterAmerican Development Bank to encourage necessary
procedural and policy reforms to support the U.S.
initiative.
The IMF is already considering how to implement the
kinds of reforms we are proposing, including greater
emphasis on supply-side measures to help mobilize domestic
savings and investment and on market-opening measures.
- 4 The banking community will need to devise its own
mechanisms for implementing its commitment to increase
net lending to support growth-oriented measures in the
developing countries. We have a pledge of support from
U.S. banks that account for 95 percent of exposure to
the countries in question. Pledges of support from
the banking industries in other countries have also been
made directly to the World Bank and the International
Monetary Fund.
Finally, and most importantly, we must now look to
the debtor countries themselves to adopt the essential
economic measures to carry out the U.S. proposal. This
won't happen overnight, nor can we expect all of the
principal debtor nations to pursue identical paths in
this regard.
Some nations, such as Argentina and Mexico, have
already begun, or will need, full-fledged negotiations
with the IMF and the World Bank, which may take some
time.
Other countries, such as Ecuador, Colombia, the
Ivory Coast, Morocco and Uruguay, already have new
bank financing, debt rescheduling and IMF programs
in place, and are now in the process of negotiating
additional structural or sectoral loan programs with
the World Bank.
Ecuador, which signed a large World Bank loan
last week, is an excellent example of a country that
is adopting the sound economic policies that are
fundamental to the approach we have proposed, and
we hope others will follow.
We can continue to expect that implementation of
the overall effort will be governed by the pace and
type of negotiations by each individual debtor nation
on economic programs with the IMF and the World Bank.
Improving the International Monetary System
A second challenge lying ahead of us is to advance
our efforts to improve the international monetary system.
The current system, in particular its flexibility, served
us well as we passed through a period of global economic
shocks. Its basic structure remains valid. At the same
time, the system has been less stable than we would have
liked, and exchange rate movements have been one factor —
though not the only one — contributing to protectionist
pressures.
- 5 In approaching the task of improving the international
monetary system, I have found there is a near consensus
that the key to stability is to encourage convergence of
favorable economic performance among the major industrialized nations. The fundamental outstanding issue is how
to encourage sovereign nations to pursue, in the words of
your policy statement, "mutually consistent and reinforcing
policies." At a minimum, we have to develop a more effective
means of assuring that the international implications of
domestic policies are taken into account.
As the center of our framework for international
economic and financial cooperation, the IMF clearly has
a central role to play, and our broad objective is to
make the Fund more effective. The April meeting of its
Interim Committee will have before it the reports of the
Group of Ten and the Group of Twenty-Four on improving
the international monetary system. These reports provide
suggestions for improving the exchange rate system,
international surveillance, arrangements concerning
international liquidity, and the role of the IMF.
While these issues are almost always complex and
often politically difficult, the recent accomplishments
of the Group of Five constitute an encouraging sign that
progress in key areas is possible. The agreement they
reached last September in New York demonstrates the
willingness of these key countries to collaborate
regarding their policy intentions in order to foster
increased and more balanced growth and to ensure that
exchange rates more fully reflect underlying economic
fundamentals.
Since September, the exchange markets have clearly
recognized that better convergence of economic performance
has taken place and is in prospect. For its part, the
U.S. has moved to implement the policy actions set forth
in that agreement. We have begun to put in place a program for reducing our budget deficit, made meaningful
progress on tax reform, and continued to resist protectionist pressures firmly. Even if in some instances
actions have not always been as fast and forceful as one
might hope, the other participants in the G-5 are also
moving to implement the New York agreement.
However, we recognize that work on improving the
international monetary system must continue. We will
patiently pursue our efforts to improve arrangements
for international economic and financial cooperation.
The challenges now facing the Bank and Fund will
make your work in explaining to the American public how
the institutions operate even more important. And we
are very grateful for the important service you are
performing for your country. Thank you.
NEWS
partment of the Treasury • Washington, D.C. • Telephone 566-2041
Jan. 1 3 , 1986
Contact: Bob Levine
(202) 566-2041
PHOTO OP OF BAKER WITH ECUADORIAN
PRESIDENT
Secretary of the Treasury James A. Baker III will have
breakfast with Ecuadorian President Leon Febres-Cordero on
Wednesday, Jan. 15th at the Ritz Carlton Hotel. .There will be a
photo opportunity at 8 am in the Presidential
Suite., room 835.
The hotel is located at 2100 Massachusetts Ave. NW.
TREASURY NEWS
lepartment of the Treasury • Washington, D.C. • Telephone 566-2041
FOR IMMEDIATE RELEASE
January 22, 1986
RESULTS OF AUCTION OF 2-YEAR NOTES
The Department of the Treasury has accepted $9,517 million
of $29,258 million of tenders received from the public for the
2-year notes, Series V-1988, auctioned today. The notes will be
issued January 31, 1986, and mature January 31, 1988.
The interest rate on the notes will be 8-1/8%. The range of
accepted competitive bids, and the corresponding prices at the 8-1/8%
interest rate are as follows:
Yield
8.16%J./
8.17%
8.17%
Tenders at the high yield were allotted 77%.
Low
High
Average
Price
99.937
99.918
99.918
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
$
95,145
26,019,695
21,745
199,395
56,435
107,775
1,308,895
144,025
50,370
172,680
28,835
1,047,275
5,510
$29,257,780
Accepted
$
40,145
8,733,895
20,745
59,395
45,930
47,770
157,895
121,025
50,370
169,680
22,835
42,275
5,510
$9,517,470
The $9,517 million of accepted tenders includes $947
million of noncompetitive tenders and $8,570 million of competitive tenders from the public.
In addition to the $9,517 million of tenders accepted in
the auction process, $305 million of tenders was awarded at the
average price to Federal Reserve Banks as agents for foreign and
•international monetary authorities. An additional $596 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 $10,000.
B-442
TREASURY NEWS
Department of the Treasury • Washington, D.C. • Telephone 566-2041
POR RELEASE AT 10:00 A.M.
JANUARY 23, 1986
CONTACT:
BOB LEVINE
.566-2041
STATEMENT OF THE HONORABLE DAVID C. MULFORD
ASSISTANT SECRETARY OF THE TREASURY
FOR INTERNATIONAL AFFAIRS
BEFORE THE
JOINT ECONOMIC COMMITTEE
SUBCOMMITTEE ON ECONOMIC GOALS AND
INTERGOVERNMENTAL POLICY
THURSDAY, JANUARY 23, 1986
Mr. Chairman, Members of the Subcommittee:
I welcome this opportunity to discuss U.S. proposals for
improving the international debt situation. Last fall, as you
know, the United States undertook two major initiatives. The
first led to the announcement on September 22 by the Group of
Five industrial nations of a number of key macroeconoraic policy
measures designed to"improve the prospects for sustained growth
in the industrial nations, and hence to provide a stronger foundation for renewed growth in the developing world, as well.
The second initiative was the U.S. proposal for a "Program
for Sustained Growth" for the debtor nations, which Secretary Baker
outlined in October during the annual meetings of the IMF and the
World Bank. Although the debtor nations have made major strides
since 1982 in reducing their external imbalances, we were convinced
that more still needs to be done to address domestic imbalances,
to reverse capital flight, and to establish the essential domestic
underpinnings tor stronger growth. The sharp decline in net new
lending by the commercial banks since 1982 also needed to be
addressed, and a positive response developed to the heightened
rhetoric and politicization of the debt issue by a number of debtor
countries.
To respond to these problems, Secretary Baker proposed a
three-point program which builds on the current case-by-case debt
strategy and involves mutually reinforcing actions by the debtor
nations, the international financial institutions and the
5-443
commercial banks to improve the debtors' prospects for growth.
- 2 -
First and foremost, it is essential that the debtor nations
adopt comprehensive macroeconomic and structural policies to
promote growth and balance of payments adjustment, and to reduce
inflation. Such programs should include:
--- increased reliance on the private sector;
— more supply-side actions to mobilize domestic savings
and foster efficient investment; and
— greater emphasis on market-opening measures to
encourage foreign direct and porttolio investment,
capital inflows, and trade.
Second, our proposal recognizes that the International
Monetary Fund has played a central role in the implementation
of the international debt strategy and emphasizes that this
should continue. At the same time, it is also important for
the World Bank and other multilateral development banks (MDBs)
to play a stronger role to supplement that of the IMF.
In particular, we have called for increased and more
effective structural and sector adjustment lending by the MDBs.
We envisage a 50 percent increase over current World Bank and
Inter-American Development Bank (IDB) disbursements to the
principal debtor nations, to $9 billion annually for 1986
through 1988, or a total of $27 billion for the full period.
This would be equivalent to an increase of 20 percent a year in
overall exposure, after scheduled repayments, or $2 0 billion in
net new lending over the three years.
Third, we estimate a need for $20 billion in net new lending
by the commercial banks in support of growth-oriented policies
by the debtor nations^over the next three years. This is
equivalent to a 2.5 to 3 percent annual increase in current bank
exposure.
If each of the participants does its part, and the demand
for quality lending by the World Bank increases, we indicated that
we would also be prepared to look seriously at the timing and
scope of a general capital increase for the World Bank.
Implementation
Implementation of the debt strategy will be a long and
complex process. It will not involve a single event marking
the beginning of operations. Indeed, the process is already
well underway. Nor does the U.S. debt intitiative provide a
rigid "plan" or "blueprint" for action which can be applied in
full to each of the principal debtor nations. Implementation
will be on a case-by-case basis with the initiative providing a
framework for cooperative action to support the debtor nations'
- 3 -
own efforts to improve their growth prospects. This will
depend on the individual situation in each debtor country,
*and each country's decision to implement the additional growthoriented measures which are needed to supplement adjustment
efforts already underway.
It is, therefore, inappropriate to look for "test cases"
of adherence to the "Baker plan", as an example of what we would
expect all of the debtor countries to undertake. No single model
will fit the diverse situations of these countries. Some are
already performing well; others have undertaken some adjustment
measures but have made only limited progress overall or have
recently experienced major setbacks; and still other countries are
just beginning to undertake the necessary reforms.
Within these three broad groupings, it is clear that a few
countries will need to draw on all of the elements of the new
initiative. I would include Argentina and Mexico in this group.
Mexico is now in the process of negotiating a new program with
the support of the IMF, while Argentina continues to work closely
with the IMF under its existing program. In both cases, we believe
it is important that structural measures be given increased attention in the context of IMF programs. These countries will also
be developing structural policy measures in the context of sector
loans with the World Bank. Both will also need major commercial
bank financing packages in 1986. Completion of these complex
negotiations will take a while and should not be expected overnight.
This is particularly the case for those countries that need
to use all of the elements involved in the initiative. These
negotiations will also have to sort out the relationship between
the IMF and World Bank programs and any commercial bank financing,
to be worked out on 'a case-by-case basis, to assure that all three
elements are moving together in support of growth-oriented policy
reforms within the debtor countries. This will require closer
cooperation between the international financial institutions in
assessing the debtor countries' economic policies and financial
needs and supportive financing by the commercial banks.
A second group of countries may only need to exploit a
part of. .the initiative at this point.
Ecuador, for instance, provides an excellent example of a
country that is already adopting the sound economic policies that
are fundamental to the approach we have proposed. It has an IMF
program in effect which is on target. It has recently negotiated
commercial bank financing and debt rescheduling packages. It has
already had considerable success in implementing policies which
will help to increase the incentives for domestic savings and
investment, to open up markets, and to privatize government-owned
enterprises in order to improve economic efficiency and the
stimulus to growth. The sector adjustment loan which Ecuador
signed last week with the World Bank extends this effort further,
- 4 and additional sector loans are expected to be negotiated in the
future, as well. Ecuador clearly aspires in the next phase to
return to a voluntary lending status, which would be a marked
sign qf success.
Other debtor countries are at various stages along this
policy/financial support continuum. Some, such as Colombia, are
already well advanced in policy implementation. Others, such
as the Ivory Coast and Uruguay, similarly have IMF programs and
recent bank tinancing and debt rescheduling packages, and are in
the process of negotiating additional structural adjustment
measures with the World Bank.
Brazil faces yet a different situation. It is currently
enjoying high growth and a strong external position. It will,
however, have to take firm measures in order to sustain solid
growth and reduce inflation. For the time being, Brazil has
indicated that it sees no need to negotiate a formal IMF program.
This poses problems for any rescheduling of official credits
within the Paris Club, which requires adherence to an IMF standby
program. While this issue is being sorted out, any additional
voluntary financing by the commercial banks will depend on their
assessment of Brazil's overall creditworthiness, based in part
on the soundness of its own economic program.
Finally, Peru has chosen quite a different route for the
time being — unilaterally imposing a limit on its debt service
payments as a percentage share of its total export earnings.
Unless Peru adopts a more constructive approach, its unilateral
actions will be counterproductive. More recently, Nigeria has
charted a similar course. The end result, in each case, unless
a more constructive approach is adopted, is likely to be a
reduction in their access to badly needed external finance in
the period ahead.
- •>
I mention these examples to demonstrate the wide divergence
of economic situations and attitudes among the debtor nations.
Most are already participating in the cooperative approach we
have outlined and the question is how effective they will be in
exploiting these new opportunities and adjusting their economies.
For these countries, it isn't a matter of formally "embracing"
the Baker plan in order for it to be implemented — but of
undertaking the necessary domestic reforms to unlock the maximum
potential of their economies.
Role of the Financial Institutions
The response to our proposal by the international financial
institutions and the commercial banking community has been very
positive and encouraging. We have received broad statements of
support from the Managing Director of the International Monetary
Fund, the President of the World Bank, and the President of the
Inter-American Development Bank.
- 5 U.S. banks accounting for 95 percent of U.S. commercial
bank exposure in the principal debtor countries have pledged
their support, as have national bank groups and key individual
banks in all the major creditor countries.
What happens next?
To fulfill their part of this cooperative strategy, it will
be important for the international financial institutions to enact
reforms in their own procedures to increase the emphasis on
structural adjustment measures and to phase disbursement under
agreed programs so that they can monitor performance in the debtor
countries to assure that the changes are being implemented.
We expect to see a growing stream of policy-based structural
and sectoral adjustment loans from the World Bank and a strengthened
emphasis on privatization, open markets, and increased savings and
investment. The development of capital and equity markets in
developing countries, which the World Bank, IFC, and Inter-American
Development Bank are already discussing with the banking community,
will be important, as will the potential for debt/equity swaps
as part of the privatization process.
Public enterprises have been a major drain on public
finances and a significant contributor to budget deficits in
recent years. It is important to reverse this drain on
national resources and to facilitate a strong and growing private
sector as one element of the necessary structural reforms.
Stronger and more open domestic financial markets, tax reform,
and improvement of the environment for investment can also enhance
domestic savings and investment as a stimulus to growth. Trade
liberalization and the rationalization of import regimes would
also benefit both the export sector and the economy as a whole.
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.
These are the kinds of reforms that the World Bank and
the IMF heed to encourage within their lending programs. We
will also be working closely with the IDB to encourage necessary
procedural and policy reforms to support the U.S. initiative.
Finally, the commercial banking community will need to devise
its own mechanisms for implementing its commitment to increase
net lending in support of growth-oriented economic programs in
the debtor nations. A number of ideas are now under discussion.
For our part, however, we have no intention of providing government
guarantees tor this purpose. We firmly believe that this approach
provides a means for improving the quality of outstanding commercial
- 6 bank loans and is therefore strongly in the banks' own interest in
those countries that are undertaking sound, growth-oriented
adjustment.
Conclusion
Are the amounts we have proposed for MDB and commercial
bank lending sufficient for those willing to adopt the necessary
domestic reforms, in light of the recent deterioriation in the
Mexican situation? We tninK so. Kecent global economic developments have not significantly changed the assumptions upon which
our estimates for the 15 major debtors were based. These
included an average OECD growth rate of approximately 3 percent
and the attainment of a 5 percent growth rate during this period
for the participating debtor nations.
Interest rates, in fact, have declined, reducing annual debt
service requirements for these countries by as much as $7 billion
since the beginning of 1985. Declining oil prices, on the other
hand, have somewhat improved the financial picture of some countries
while worsening it for others. On balance, the overall situation
has improved since last summer.
Looking anead, a signiticant decline in oil prices would
clearly be beneficial for the developing countries as a whole.
However, a precipitous decline would cause obvious adjustment
difficulties for those countries dependent on oil exports. We
will need to follow this closely. The "Program for Sustained
Growth" is flexible and adaptable, designed to deal with
distributional problems of this kind. However, it is clear
already that countries such as Mexico and Nigeria will face
increased financing requirements in the near future.
White our proposal includes substantial sums of new money
to assist the debtor nations in making the transition to sustained
growth, no amount of financing will be adequate unless these
countries implement the economic measures which are essential to
establish the foundation for growth. Inflation, which robs
economies of the real benefits of growth, must be brought under
control. Steps must be taken to help mobilize domestic savings
and investment, to reduce the burden of government expenditures,
to enhance competitiveness and efficiency, and to tap the potential
benefits of foreign investment and trade. These alone can provide
the strong domestic economic foundation essential for improved
growth.
TREASURY NEWS
epartment of the Treasury • Washington, D.C. • Telephone 566-2041
FOR IMMEDIATE RELEASE
January 27, 1986
Gerald Murphy Appointed Fiscal Assistant Secretary
of the Treasury
Secretary of the Treasury James A. Baker, III has appointed
Gerald Murphy as the Fiscal Assistant Secretary of the Treasury.
As Fiscal Assistant Secretary, Mr. Murphy will oversee the
Treasury Department's management of the U.S. Government's
financial operations, cash management for the U.S. Government,
raising money to finance government debt, directing the
performance of the fiscal agency functions of the Federal Reserve
Banks, and handling the investments of the multi-billion dollar
trust and other accounts of the U.S. Government. Mr. Murphy
reports to the Secretary and Deputy Secretary through the Under
Secretary for Finance.
Mr. Murphy began a career of Federal Service when he entered
the Department of the Navy in 1957. He joined the Department of
the Treasury in 1959 and has served in a variety of managerial
positions, including Deputy Commissioner of the Financial
Management Service. Since 1979, he has been Deputy Fiscal
Assistant Secretary.
Mr. Murphy is a Certified Public Accountant. He is a member
of the American Institute of Certified Public Accountants, and
past National President of the Association of Government
Accountants. He served six years as a member of the National
Council on Government Accounting, and presently serves on the
Governmental Accounting Standards Advisory Council.
He has received Treasury's Meritorious Service Award, the
Secretary's Honor Award, the Benjamin Franklin University
Distinguished Alumni Award, and AGA's Robert W. King Memorial
Award .
Mr. Murphy graduated from Benjamin Franklin University,
Washington, D . C , with bachelor's and master's degrees in
Commercial Science.
# # #
B-444
TREASURY NEWS
epartment of the Treasury • Washington, D.C. • Telephone
FOR IMMEDIATE RELEASE
January 27, 1986
RESULTS OF TREASURY'S WEEKLY BILL AUCTIONS
Tenders for $7,212 million of 13-week bills and for $7,205 million
of 26-week bills, both to be issued on January 30, 1986,
were accepted today,
RANGE OF ACCEPTED
COMPETITIVE BIDS:
Low
High
Average
13--week bills
maturing Mav 1, 1986
Discount Investment
Rate
Rate 1/
Price
26-iweek bills
maturing July 31. 1986
Discount Investment
Rate 1/
Price
Rate
6.90%
6.92%
6.92%
98.256 •
98.251 '
98.251 :
7.02%
7.03%
7.03%
7.12%
7.14%
7.141
7.38%
7.39%
7.39%
96.451
96.446
96.446
Tenders at the high discount rate for the 13-week bills were allotted
Tenders at the high discount rate for the 26-week bills were allotted
TENDERS RECEIVED AND ACC:EPTED
(In Thousands)
Received
Accepted
:
Received
Location
Boston
New York
Philadelphia
Cleveland
Richmond
Atlanta
Chicago
St. Louis
Minneapolis
Kansas City
Dallas
San Francisco
Treasury
TOTALS
Type
Competitive
Noncompetitive
Subtotal, Public
Federal Reserve
Foreign Official
Institutions
TOTALS
Accepted
36,005
18,466,080
25,375
41,020
42,870
69,830
1,452,835
92,195
39,745
56,080
42,825
1,355,385
340,095
$
36,005
6,248,335
25,375
41,020
42,870
50,865
170,085
52,170
14,745
56,080
37,575
96,885
340,095
34,830
: $
: 19,461,190
25,070
:
28,685
:
77,740
:
100,445
1,789,420
81,475
37,435
61,125
31,925
1,122,585
:
361,275
$
34,830
6,119,915
25,070
28,685
54,840
52,445
276,020
41,475
12,435
61,125
21,925
115,145
361,275
$22,060,340
$7,212,105
: $23,213,200
$7,205,185
$19,151,025
1,165,955
$20,316,980
$4,302,790
1,165,955
$5,468,745
: $19,759,875
:
949,625
: $20,709,500
$3,751,860
949,625
$4,701,485
1,518,460
1,518,460
:
1,475,000
1,475,000
224,900
224,900
:
1,028,700
1,028,700
$22,060,340
$7,212,105
: $23,213,200
$7,205,185
$
1/ Equivalent coupon-issue yield.
95%,
80%,
2041
TREASURY NEWS
Department of the Treasury • Washington, D.c. • Telephone 566-204
FOR RELEASE AT 4:00 P.M. January 28, 1986
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 February 6, 1986.
This offering
will result in a paydown for the Treasury of about $525
million, as
the maturing bills are outstanding in the amount of $14,525 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, February 3, 1986.
The two series offered are as follows:
91-day bills (to maturity date) for approximately $7,000
million, representing an additional amount of bills dated
November 7, 1985,
and to mature May 8, 1986
(CUSIP No.
912794 KE 3), currently outstanding in the amount of $7,239 million,
the additional and original bills to be freely interchangeable.
182-day bills (to maturity date) for approximately $7,000
million, representing an additional amount of bills dated
August 8, 1985,
and to mature August 7, 1986
(CUSIP No.
912794 KP 8 ) , currently outstanding in the amount of $8,778 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 February 6, 1986.
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 $1,075 million as agents for foreign and international monetary authorities, and $3,136 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-44 6
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
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
Department of the Treasury • Washington, D.C. • Telephone 56
FOR RELEASE WHEN AUTHORIZED AT PRESS CONFERENCE January 29, 1986
TREASURY FEBRUARY QUARTERLY FINANCING
The Treasury will raise about $13,200 million of new cash and refund
$9,818 million of securities maturing February 15, 1986, through domestic
issues of $9,000 million of 3-year notes, $7,000 million of 10-year notes,
and $7,000 million of 30-year bonds; in addition, the Treasury will raise
up to $1,000 million by issuing 10-year foreign-targeted notes. The $9,818
million of maturing securities are those held by the public, including $499
million held, as of today, by Federal Reserve Banks as agents for foreign
and international monetary authorities.
The 10-year domestic note and 30-year bond being offered today will be
eligible for exchange in the STRIPS program and, accordingly, may be divided
into their separate Interest and Principal Components and maintained on the
book-entry records of the Federal Reserve Banks and Branches. Once a security
is in the STRIPS form, the components may be maintained and transferred in multiples of $1,000. Financial institutions should consult their local Federal
Reserve Bank or Branch for procedures for requesting securities in STRIPS form.
The 3-year notes, 10-year domestic notes, and 30-year bonds totaling
$23,000 million are being offered to the public, and any amounts tendered by
Federal Reserve Banks as agents for foreign and international monetary authorities will be added to that amount. Tenders for such accounts will be accepted
at the average prices of accepted competitive tenders. Accrued interest will
be payable by investors on the 10-year domestic notes, the 10-year foreigntargeted notes, and the 30-year bonds.
The foreign-targeted notes will be sold only under competitive bidding,
and only to foreign institutions, to foreign branches of United States financial institutions, to central banks or monetary authorities of foreign governments, or to certain public international organizations of which the United
States is a member. A maximum of $1,000 million of bids will be accepted, and
if less than $500 million of acceptable bids is received, none will be accepted.
A bidder must certify that, as of the date of issuance, the notes are not being
acquired for, or for offer to resell to, a United States person. In any event,
the issue may not be sold to United States persons for 45 days (until March 23,
1986). United States persons who purchase the notes from March 23, 1986,
onwards must meet U. S. tax requirements. In addition, such notes may be
exchanged for the companion domestic notes in accordance with the terms of
the circular.
In addition to the public holdings, Government accounts and Federal
Reserve Banks, for their own accounts, hold $1,486 million of the maturing
securities that may be refunded by issuing additional amounts of the new
securities at the average prices of accepted competitive tenders.
Details about each of the new securities are given in the attached "highlights" of the offering and in the official offering circulars. Potential
bidders for the foreign-targeted notes should obtain copies of the Offering
Circular from the Federal Reserve Bank of New York, Securities Department,
Room 835, or at the Treasury Department, Public Affairs, Room 2315, Washington,
D. C. Circulars for securities with the STRIPS feature, which include CUSIP
numbers for their components, can be obtained by contacting the nearest Federal
Reserve Bank or Branch.
oOo (Over)
B-447
HIGHLIGHTS OF TREASURY OFFERINGS OF 3-YEAR NOTES, DOMESTIC AND FOREIGN-TARGETED 10-YEAR NOTES, AND 30-YEAR BONDS
January 29, 1986
Amount offered
Eligible bidders
$9,000 million
..The Public
Description of Security:
Term and type of security
3-year notes
Series and CUSIP designation..Q-1989
(CUSIP No. 912827 TE 2)
CUSIP Numbers for
STRIPS components
Not applicable
$7,000 million
The Public
Up to $1,000 million
See Sections 2.1 and 2.19
of the Offering Circular.
$7,000 million
The Public
10-year notes
A-1996
(CUSIP No. 912827 TF 9)
10-year foreign-targeted notes
B-1996
(CUSIP No. 912827 TG 7)
30-year bonds
Bonds of 2016
(CUSIP No. 912810 DV 7)
Not applicable
Listed in Attachment A
of Offering Circular
February 18, 1986 (to be
dated February 15, 1986)
February 15, 2016
To be determined based on
the average of accepted bids
To be determined at auction
To be determined after auction
August 15 and February 15
Listed in Attachment A
of Offering Circular
February 18, 1986 (to be
dated February 15, 1986)
Maturity date February 15, 1989
February 15, 1996
Interest rate
To be determined based on
To be determined based on
the average of accepted bids
the average of accepted bids
Investment yield
To be determined at auction
To be determined at auction
Premium or discount
To be determined after auction To be determined after auction
Interest payment dates
August 15 and February 15
August 15 and February 15
Minimum denomination
available
$5,000
$1,000
Amount required for STRIPS....Not applicable
To be determined after auction
Terms of Sale;
Yield auction
Method of sale
Yield auction
Competitive tenders
Must be expressed as an annual Must be expressed as an annual
yield, with two decimals,
yield, with two decimals,
e.g., 7.10%, based on a semi- e.g., 7.10%, based on a semiannual interest payment
annual interest payment
Issue date February 18, 1986
Noncompetitive tenders Accepted in full at.the average price up to $1,000,000
Minimum tender....
.-...$5,000
Accrued interest payable
by investor
Payment Terms;
Designation of paying
institution
Payment by noninstitutional investors
$1,000
Not applicable
$1,000
To be determined after auction
Yield auction
Yield auction
Must be submitted to the Federal
Must be expressed as an
Reserve Bank (FRBO New York and
annual yield with two
expressed as an annual yield, with
decimals, e.g., 7.10%, based on
two decimals, e.g., 7.10%, based
a semiannual interest payment
on an annual interest payment
Accepted in full at the aver- Not permitted
Accepted in full at Che average price up to $1,000,000
age price up to $1,000,000
$1,000- Aggregate amount at lowest yield bid$1,000
*r
for must be at least $50,000,000.
See Section 6 of Offering Circular.
None
To be determined after auction To be determined after auction
To be determined after auction
No provision
No provision
See Section 6 of Offering Circular.
No provision
Full payment to be
submitted with tender
Not applicable
Full payment to be
submitted with tender'
Acceptable
See Section 6 of Offering Circular.
Acceptable
Acceptable for TT&L Note
Option Depositaries
-No provision
Acceptable for TT&L Note
Option Depositaries
Wednesday, February 5, 1986,
prior to 1:00 p.m., EST
Wednesday, February 5, 1986, prior
to 1:00 p.m., EST, at FRB New York
Thursday, February 6, 1986,
prior to 1:00 p.m., "EST
Tuesday, February 18, 1986
Tuesday, February 18, 1986, no later Tuesday, February 18, 1986
than 9:00 a.m., EST, at FRB New York
Not applicable
Thursday, February 13, 1986
..Full payment to be
submitted with tender
Guarantee by
designated institution
Acceptable
Payment through Treasury Tax
and Loan (TT&L) Note Accounts.Acceptable for TT&L Note
Option Depositaries
Key Dates;
Receipt of tenders
Tuesday, February 4, 1986*
prior to 1:00 p.m., EST
Settlement:
a) funds immediately
available to the Treasury..Tuesday, February 18, 1986
b) readily-collectible check..Thursday, February 13, 1986
>4~
February 18, 1986 (to be
dated February 15, 1986)
February 15, 1996
Same as the rate established in
the companion domestic auction
To be determined at auction
To be determined after auction
February 15 (first interest
payment February 15, 1987)
Thursday, February 13, 1986
WERT
BOOKBINDING
Cnniville. Pa.
Mat — tune 1986
@FedFRASER